<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
Commission file number: 33-67866
A I M MANAGEMENT GROUP INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 76-0528004
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
</TABLE>
11 Greenway Plaza, Suite 100, Houston, Texas 77046
(Address of principal executive offices, including zip code)
(713) 626-1919
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---------- ----------
<TABLE>
<CAPTION>
Outstanding at
Class March 31, 1997
--------------- --------------
<S> <C> <C>
Common Stock, $0.01 par value 1,000
</TABLE>
<PAGE> 2
A I M MANAGEMENT GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-------- --------
(unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents (primarily affiliated registered investment
companies) ........................................................................... $ 50,535 $ 97,452
Accounts receivable:
Due from dealers for sales of capital stock of affiliated
registered investment companies ................................................ 1,014 1,723
Management fees due from affiliated registered investment companies .................. 26,541 25,071
Management fees due from managed accounts ............................................ 342 428
Due from parent company .............................................................. 36,566 --
Other, primarily due from affiliated registered investment companies ................. 21,149 31,916
-------- --------
Total accounts receivable ...................................................... 85,612 59,138
-------- --------
Prepaid expenses ......................................................................... 1,599 1,329
Deferred income tax ...................................................................... 771 5,115
Investments in affiliated registered investment companies ................................ 28,957 5,514
Furniture, equipment and leasehold improvements, at cost, less
accumulated depreciation and amortization of $23,061 in 1997
and $20,673 in 1996 .................................................................. 31,485 29,336
Acquisition and organization costs, net of accumulated amortization of
$16,219 in 1997 and $15,383 in 1996 ................................................. 38,562 39,299
Financing costs, net of accumulated amortization of $7,021 in 1997
and $ 6,736 in 1996 ................................................................. 5,465 5,733
Deferred sales commissions, net of accumulated amortization of
$25,732 in 1997 and $23,908 in 1996 .................................................. 24,814 27,487
Deferred charges and other assets ........................................................ 11,429 10,255
-------- --------
Total assets ................................................................... $279,229 $280,658
======== ========
</TABLE>
2
<PAGE> 3
A I M MANAGEMENT GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-------- --------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Liabilities:
Payables to affiliated registered investment companies for sales of
capital stock ..................................................................... $ 1,012 $ 1,715
Accounts payable and accrued expenses ................................................ 33,512 41,115
Dividends payable .................................................................... -- 13,737
Interest payable ..................................................................... 3,444 1,208
Taxes payable ........................................................................ 2,099 4,466
Compensation payable ................................................................. 25,780 40,142
Credit facility to finance deferred sales commissions ................................ 26,467 30,130
Notes payable ........................................................................ 97,250 97,250
--------- ---------
Total liabilities ........................................................ 189,564 229,763
--------- ---------
Stockholders' equity:
Common stock of $.01 par value per share in 1997 and $.0025 par value
per share in 1996:
authorized 1,000 in 1997 and 4,240,000 shares in 1996, issued and
outstanding 1,000 in 1997 and 2,400,323 shares in 1996 ................... -- 6
Class B common stock of $.0025 par value per share:
authorized, issued and outstanding 1,037,100 shares in 1996 .............. -- 35,000
Additional paid-in capital ...................................................... 56,436 10,330
Retained earnings ............................................................... 33,291 5,447
Net unrealized appreciation (depreciation) of marketable equity
securities, net of applicable taxes ..................................... (8) 62
Translation gain (loss) ......................................................... (54) 50
--------- ---------
Total stockholders' equity ............................................... 89,665 50,895
--------- ---------
Total liabilities and stockholders' equity ............................... $ 279,229 $ 280,658
========= =========
</TABLE>
See accompanying notes to unaudited interim consolidated financial statements.
3
<PAGE> 4
A I M MANAGEMENT GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS))
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Management and advisory fees .......................... $ 77,407 $ 51,403
Commission income ..................................... 6,341 11,253
Distribution fee income ............................... 8,669 6,643
Transfer Agent Fees ................................... 10,012 6,981
Other operating revenues .............................. 3,512 2,284
-------- --------
Total operating revenues .......................... 105,941 78,564
-------- --------
Compensation and related expenses ..................... 36,018 27,395
Other administrative expenses ......................... 18,953 11,936
Interest and amortization of financing costs .......... 3,068 3,669
Depreciation and amortization ......................... 3,275 2,131
Other expenses ........................................ 762 937
-------- --------
Total operating expenses .......................... 62,076 46,068
-------- --------
Income before tax expense ............................. 43,865 32,496
Income tax expense .................................... 16,027 11,944
-------- --------
Net income ............................................ $ 27,838 $ 20,552
======== ========
</TABLE>
See accompanying notes to unaudited interim consolidated financial statements.
4
<PAGE> 5
A I M MANAGEMENT GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income ...................................................................... $ 27,838 $ 20,552
Adjustments to reconcile net income to net cash (used in) provided by
operating activities:
Depreciation and amortization ................................................... 5,289 4,739
Deferred income tax ............................................................. 4,365 3,490
Gain on sales of investments .................................................... (72) --
Changes in assets and liabilities:
Increase in accounts receivable .............................................. (25,929) (5,172)
Increase in prepaid expenses ................................................. (270) (32)
Increase in financing costs .................................................. (17) --
Decrease in deferred sales commissions ....................................... 849 857
(Increase) decrease in other assets .......................................... (1,162) 4,368
Decrease in payables to affiliated registered investment companies ........... (703) (42)
Decrease in accounts payable and accrued expenses ............................ (14,603) (2,781)
Increase in interest payable ................................................. 2,236 2,563
Increase in taxes payable .................................................... 8,211 3,086
Decrease in compensation payable ............................................. (14,362) (20,565)
-------- --------
Total adjustments ............................................................ (36,168) (9,489)
-------- --------
Net cash (used in) provided by operating activities ........................ (8,330) 11,063
-------- --------
Cash flows from investing activities:
Sales of investments ........................................................... 155 --
Purchases of investments ....................................................... (17,174) (579)
Purchases of furniture, equipment and leasehold improvements ................... (4,591) (3,087)
Acquisition costs paid ......................................................... (99) --
-------- --------
Net cash used in investing activities ...................................... (21,709) (3,666)
-------- --------
Cash flows from financing activities:
Principal repayments of long-term debt ......................................... (3,663) (3,979)
Payment of common stock cash dividends ......................................... (13,737) --
Proceeds from exercise of stock options ........................................ 522 93
-------- --------
Net cash used in financing activities ...................................... (16,878) (3,886)
-------- --------
Net (decrease) increase in cash and cash equivalents ....................... (46,917) 3,511
Cash and cash equivalents at beginning of year ...................................... 97,452 42,148
-------- --------
Cash and cash equivalents at end of period .......................................... $ 50,535 $ 45,659
======== ========
Supplemental cash flow disclosure:
Cash paid for interest ......................................................... $ 397 $ 578
Cash paid for taxes ............................................................ $ 3,335 $ 5,213
</TABLE>
See accompanying notes to unaudited interim consolidated financial statements.
5
<PAGE> 6
A I M MANAGEMENT GROUP INC. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(1) General
The consolidated financial statements of A I M Management Group Inc.,
its predecessor and its subsidiaries (collectively, the "Company") have been
prepared without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission and in accordance with generally accepted accounting
principles, and reflect all normal recurring adjustments which, in the opinion
of management, are necessary to present fairly the results of the interim
periods presented. These financial statements do not include all disclosures
associated with annual financial statements and, accordingly, should be read in
conjunction with the financial statements and notes contained in the Form 10-K
of A I M Management Group Inc. for the year ended December 31, 1996 File Number
33-67866. Certain reclassifications have been made to conform prior year
amounts to the 1997 presentation.
(2) Merger
On February 28, 1997, the Company's predecessor merged with and into
AVZ Inc., a subsidiary of INVESCO PLC, with AVZ Inc. as the surviving
corporation (the "Merger"). Immediately after the Merger, AVZ Inc. contributed
all of the assets and liabilities received in connection with the Merger to the
Company, a direct wholly-owned subsidiary of AVZ Inc. Effective March 3, 1997,
the name of INVESCO PLC was changed to AMVESCO PLC, and it is expected that the
name will be further changed to AMVESCAP PLC in the first half of 1997.
In connection with the Merger, the Company assumed the obligations of
its predecessor entity and became the obligor under the Notes. Additionally, in
connection with the Merger and pursuant to the indenture for the Notes, the
Company commenced a tender offer for the purchase of the Notes from the holders
thereof for an amount equal to 101% of the principal amount plus accrued and
unpaid interest to the date the Notes are accepted for purchase by the Company.
As of April 30, 1997, no Notes had been tendered pursuant to the Company's
tender offer. The Company's tender offer expired on May 5, 1997.
As a result of the Merger, earnings per share as of March 31, 1997 is
not applicable. The earnings per share information for March 31 and December
31, 1996 is not comparable and therefore is not presented.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
A I M Management Group Inc.'s largest sources of revenues are mutual
fund management and advisory fees, distribution fee income, transfer agent
fees, and commission income earned from underwriting and distributing retail
mutual fund shares. Other sources of operating revenues include accounting
service fees and interest income. The term "Company," as used herein, unless
the context otherwise requires, refers to A I M Management Group Inc., its
predecessor and its direct and indirect subsidiaries.
The Company sponsors, markets and provides investment advisory,
distribution and administrative services to the AIM Family of Funds, a family
of retail mutual funds that consists of 23 portfolios reflecting a broad range
of investment objectives and strategies. In addition, the Company manages and
distributes a retail mutual fund sold exclusively through a contractual plan
arrangement and co-sponsors a variable annuity product which gives investors
the ability to invest in nine separate portfolios. These specialized retail
fund products and the AIM Family of Funds are together herein referred to as
the "AIM Retail Funds."
Certain retail classes of shares of the AIM Retail Funds are sold with
a front-end sales charge ("Class A Shares"). Commission income earned by the
Company on sales of Class A Shares is based on the amount of such shares which
are sold, and is paid from the customer-funded sales charge less an applicable
concession to the selling dealer. The Company also earns a fee from several
insurance companies for services performed in connection with certain sales of
units of the variable annuity product. Certain AIM Retail Funds also offer
classes of shares which are sold without a front-end sales charge, but which
are generally subject to a contingent deferred sales charge ("CDSC") at the
time of their redemption ("Class B Shares"). The Company pays commissions at
the time of sale to financial intermediaries which sell Class B Shares.
The Company also sponsors and provides investment advisory and related
administrative services to a number of institutional mutual funds (or classes
of funds) sold primarily to banks and their trust departments and other
financial institutions (collectively, the "AIM Institutional Funds"). Sales of
the AIM Institutional Funds do not generate sales commission revenue to the
Company. The AIM Retail Funds and the AIM Institutional Funds are collectively
referred to herein as the "AIM Funds." The Company also provides investment
advisory services to individuals, corporations, pension plans and other private
investment advisory accounts (the "Managed Accounts"), provides investment
sub-advisory services to one portfolio of an open-end registered investment
company that is offered to separate accounts of variable insurance companies
(collectively, the "Sub-Advised Funds") and manages two offshore investment
companies domiciled in Ireland (the "Offshore Funds"). As of March 31, 1997,
total assets under the Company's management were approximately $64.7 billion.
Mutual fund management and advisory fees are based on the average
daily net assets of the AIM Funds. Such fees are accrued daily by each AIM
Fund and paid to the Company monthly. The Company's management and advisory
fees fluctuate due to changes in the total value of the net assets under
management. Variations in the level of assets under management result from
both sales and redemptions of AIM Fund shares and changes in the market value
of the investments of the AIM Funds.
From time to time, the Company may waive all or a portion of its
management fees or 12b-1 Plan (as hereinafter defined) service or distribution
fees and/or assume all or a portion of the operating expenses of an AIM Fund
for competitive reasons and in response to commitments made to the directors of
such fund. In some cases, the Company may waive all or a portion of its
management fees and 12b-1 Plan distribution fees for new funds or to reflect
economies of scale at higher asset levels. Such waivers and assumptions have
been made for the sole purpose of reducing the operating expenses of such AIM
Funds and have not been made for the purposes of mitigating any losses from
investments in derivative securities or other portfolio securities. It is
difficult to measure the effect such waivers and assumptions have had and will
have in the future on the Company's results of operations because the Company
believes they enhance its ability to retain the assets under its management and
to attract additional investments in the AIM Funds.
7
<PAGE> 8
Certain AIM Funds pay service fees and distribution fees pursuant to
distribution plans ("12b-1 Plans") adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended. These distribution and service
fees are based on the value of the net assets of the applicable funds or
classes and are subject to certain limits imposed under rules of the National
Association of Securities Dealers, Inc. See "Capital Resources and Liquidity"
for a discussion of the Company's ability to sell the right to receive future
12b-1 Plan distribution fees and CDSCs attributable to certain Class B Shares.
Pursuant to administrative service agreements, the Company is reimbursed for
all or a portion of the expenses, including salary, general and administrative
and office lease expenses, incurred by the Company in providing certain
administrative services (such as fund accounting) to the AIM Funds. Fund
accounting reimbursements paid to the Company by an AIM Fund are based on the
Company's costs of providing such service. Transfer agent fees paid to the
Company by the AIM Retail Funds are based on the number of shareholder accounts
outstanding during a calendar month, and transfer agent fees paid by the AIM
Institutional Funds are based on the average daily net assets in the
institutional shareholder accounts.
The Company's largest expenses are compensation and related expenses
and other administrative expenses, which include expenses related to mutual
fund sales promotion.
8
<PAGE> 9
NET ASSETS UNDER MANAGEMENT
The following table sets forth the Company's net assets under
management at March 31, 1997 and 1996, and at December 31, 1996, 1995 and 1994.
NET ASSETS UNDER MANAGEMENT
(in millions)
<TABLE>
<CAPTION>
March 31, December 31,
------------- --------------------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Retail:
Equity $41,624 $31,097 $41,847 $26,461 $13,777
Money Market 1,083 682 748 656 605
Fixed Income 4,079 3,072 3,893 2,784 1,859
Closed-End -- 69 -- 68 64
------- ------- ------- ------- -------
Total Retail 46,786 34,920 46,488 29,969 16,305
------- ------- ------- ------- -------
Institutional:
Money Market 15,546 12,395 13,579 10,827 10,664
Other 425 421 458 383 221
------- ------- ------- ------- -------
Total Institutional 15,971 12,816 14,037 11,210 10,885
------- ------- ------- ------- -------
Managed Accounts 1,301 669 1,272 268 284
------- ------- ------- ------- -------
Sub-Advised Funds 144 86 133 60 --
------- ------- ------- -------
Offshore Funds 449 46 405 39 --
------- ------- ------- ------- -------
Total Net Assets $64,651 $48,537 $62,335 $41,546 $27,474
======= ======= ======= ======= =======
</TABLE>
The net assets of the AIM Retail Funds increased to $46.8 billion at
March 31, 1997 from $46.5 billion at December 31, 1996 and $34.9 billion at
March 31, 1996. The net assets of the AIM Retail Funds increased $0.3 billion,
or 0.7%, from December 31, 1996 to March 31, 1997. Although the AIM Retail
Funds experienced strong net sales during the first quarter of 1997, the cash
flows resulting from such sales were substantially offset by the depreciation
in the market value of the securities held in such funds' portfolios during the
first quarter of 1997. The increase in net assets of the AIM Retail Funds of
$11.9 billion, or 34.1%, from March 31, 1996 to March 31, 1997 was attributable
to a number of factors, including increases in the market value of the assets
held in the AIM Retail Funds' portfolios during 1996 resulting from generally
improving equity markets and sales of AIM Retail Fund shares. The net assets
of the AIM Institutional Funds increased 14.3% from December 31, 1996 to March
31, 1997, and 25.0% from March 31, 1996 to March 31, 1997. These increases
were primarily due to sales of such funds which were related to (i) performance
of certain of the AIM Institutional Funds and changes in the interest rate
environment which increased cash flows into these funds and (ii) the Company's
focus on new distribution channels for the shares of the AIM Institutional
Funds. Total net assets under management increased by $2.3 billion, or 3.7%,
from December 31, 1996 to March 31, 1997, and by $16.1 billion, or 33.2%, from
March 31, 1996 to March 31, 1997.
9
<PAGE> 10
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Total Operating Revenues. Total operating revenues increased to
$105.9 million for the first quarter of 1997 from $78.6 million for the first
quarter of 1996. This increase of $27.3 million, or 34.7%, was primarily due
to an increase in the total amount of management and advisory fees received
from the AIM Retail Funds. Certain reclassifications have been made in the
Company's consolidated financial statements to conform 1996 amounts to the 1997
presentation.
Management and Advisory Fees. Revenues from management and advisory
fees increased to $77.4 million for the first quarter of 1997 from $51.4
million for the first quarter of 1996. This increase of $26.0 million, or
50.6%, was primarily due to growth in net assets under management in the AIM
Retail Funds, as discussed above.
Commission Income. Revenues from retained portions of AIM Retail Fund
sales commissions decreased to $6.3 million for the first quarter of 1997 from
$11.3 million for the first quarter of 1996. This decrease of $5.0 million, or
44.3%, was primarily due to a decrease in commissionable sales of Class A
Shares during the first quarter of 1997. Sales of Class A Shares decreased
23.0% to $2.3 billion for the first quarter of 1997 from $3.0 billion for the
first quarter of 1996, due primarily to a decrease in sales of the Company's
equity and fixed income mutual funds during the first quarter of 1997 as
compared to the first quarter of 1996.
Distribution Fee Income. Distribution fee income increased to $8.7
million for the first quarter of 1997 from $6.6 million for the first quarter
of 1996. This increase of $2.1 million, or 31.8%, was primarily due to
appreciation of the assets attributable to Class A Shares and an increase in
sales of Class A Shares and Class B Shares during recent periods. Distribution
fee income includes both service fees and distribution fees received by the
Company. The Company retains service fees on Class A Shares sold in amounts of
$1.0 million or more and all Class B Shares for 12 months after the sale of
such shares. Additionally, the Company receives distribution fees from certain
other Class A Shares. Distribution fees related to sales of Class B Shares on
or after April 1, 1995 are not recognized as income by the Company since the
Company has sold these distribution fees to Citibank, N.A. ("Citibank"), as
discussed below. See "Capital Resources and Liquidity." During the first
quarter of 1997, distribution fees in the amount of $15.3 million related to
Class B Shares sold since April 1, 1995 were sold to Citibank and thus were not
recognized as income by the Company. If the Company had not sold such
distribution fees to Citibank, the related distribution fee income that would
have been recognized by the Company generally would have been offset by the
amortization expense incurred by the Company. The Company retains distribution
fees related to sales of Class B Shares prior to April 1, 1995.
Transfer Agent Fees. Transfer agent fees increased to $10.0 million
for the first quarter of 1997 from $7.0 million for the first quarter of 1996.
This increase of $3.0 million, or 42.9%, was primarily due to an increase in
the number of shareholder accounts in the AIM Retail Funds.
Other Operating Revenues. Other operating revenues increased to $3.5
million for the first quarter of 1997 from $2.3 million for the first quarter
of 1996. This increase of $1.2 million, or 52.2%, was primarily due to an
increase in interest income during the first quarter of 1997.
Total Operating Expenses. Total operating expenses increased to $62.1
million for the first quarter of 1997 from $46.1 million for the first quarter
of 1996. This increase of $16.0 million, or 34.7%, was primarily due to
increases in compensation and related expenses and other administrative
expenses for the first quarter of 1997.
Compensation and Related Expenses. Compensation and related expenses
increased to $36.0 million for the first quarter of 1997 from $27.4 million for
the first quarter of 1996. This increase of $8.6 million, or 31.4%, was
primarily due to (i) growth in the size of the Company's operations and the
number of the Company's employees due to the growth in assets under the
Company's management and increases in the
10
<PAGE> 11
number of shareholder accounts in the AIM Funds and (ii) an increase in bonus
expense relating to increases in the Company's income.
Other Administrative Expenses. Other administrative expenses
increased to $19.0 million for the first quarter of 1997 from $11.9 million for
the first quarter of 1996. This increase of $7.1 million, or 59.7%, was
primarily due to an increase in business promotional costs related to the
Company's expansion of its retail distribution system.
Net Income. Net income increased to $27.8 million for the first
quarter of 1997 from $20.6 million for the first quarter of 1996. This
increase of $7.2 million, or 35.0%, was due to the changes in the Company's
revenues and expenses discussed above.
CAPITAL RESOURCES AND LIQUIDITY
The net decrease in cash and cash equivalents was $46.9 million during
the three months ended March 31, 1997. At March 31, 1997, the Company had
liquid assets of $166.7 million, including $50.5 million in unrestricted cash
and cash equivalents. Payables and accrued expenses due within 12 months
totaled $60.5 million at March 31, 1997.
Net cash used in operating activities was $8.3 million during the
three months ended March 31, 1997, which represented a substantial change from
$11.1 million net cash provided by operating activities during the three months
ended March 31, 1996. This difference was primarily due to the Company's
payment of certain costs related to the Merger (as defined below) during the
three months ended March 31, 1997, which costs are recorded on the Company's
books as a receivable from the Parent Company (as defined below).
Net cash used in investing activities was $21.7 million during the
three months ended March 31, 1997, which represented a 486.5% increase over the
$3.7 million net cash used in investing activities during the three months
ended March 31, 1996. This difference was primarily due to the Company's
investment in a new portfolio of one of the Offshore Funds during the three
months ended March 31, 1997.
Net cash used in financing activities was $16.9 million during the
three months ended March 31, 1997, which represented a 333.3% increase over the
$3.9 million net cash used in financing activities during the three months
ended March 31, 1996. This difference was primarily due to the payment of
common stock dividends during the three months ended March 31, 1997.
Outstanding borrowings under the Company's credit facilities and the
9% Senior Notes due 2003 (the "Notes") issued by the Company in 1993 in
connection with the recapitalization totaled $123.7 million at March 31, 1997.
This amount includes approximately $97.2 million of outstanding Notes which
bear interest at a rate of 9% per annum. Such interest is payable in
semiannual installments of approximately $4.4 million.
Currently, the Company has two methods available to fund the payment
of sales commissions to financial intermediaries who sell Class B Shares ("B
Share Commissions"): the Program (as defined below) and the B Share Facility
(as defined below).
Program. In May 1995, the Company entered into agreements
establishing a program (the "Program") with Citibank to provide additional
funding for payment of B Share Commissions once amounts available to fund such
commissions under the credit facility entered into by the Company in August
1993 (the "Bank Facility") had been substantially utilized. Pursuant to the
Program, during the second quarter of 1995, the Company began selling to
Citibank the right to receive future distribution fees under the 12b-1 Plans
and CDSCs (the "Fees") attributable to certain Class B Shares sold on or after
April 1, 1995 for a purchase price equal to a percentage of the price at which
each Class B Share is sold. The Program has been amended several times since
May 1995 to increase the total amount of financing for B Share Commissions
payable by the Company. The amount of financing under the Program can be
further increased from time to time in connection with securitization
transactions closed by Citibank. Future increases in the amount of financing
11
<PAGE> 12
under the Program will depend upon the amount of each securitization
transaction closed by Citibank. As of March 31, 1997, the total amount of the
Program was approximately $373.3 million, of which approximately $52.4 million
remained available to the Company. The remaining $52.4 million would fund B
Share Commissions on the sale of approximately $1.3 billion of Class B Shares.
During the first quarter of 1997, the Company received an average of
approximately $14.5 million per month from Citibank for the sale of Fees under
the Program. The Company intends to continue utilizing the Program to finance
the payment of B Share Commissions for the near future; however, as discussed
below, it may fund the payment of such commissions under the B Share Facility.
B Share Facility. On June 26, 1996, the Company entered into
agreements establishing a credit facility (the "B Share Facility") with
Citibank and other financial institutions to provide a method of financing the
payment of B Share Commissions as an alternative to the Program. The aggregate
amount of financing available under the B Share Facility is $200.0 million.
The Company may increase such amount to $250.0 million if certain conditions
are met. On June 27, 1996, approximately $37.0 million under the B Share
Facility was used to repay borrowings under the Bank Facility to finance the
payment of B Share Commissions. The B Share Facility is secured only by the
Fees attributable to Class B Shares which have not been sold under the Program.
The terms of the B Share Facility provide that the Company must prepay each
month an amount equal to the 12b-1 Plan distribution fees for certain Class B
Shares and the CDSCs paid by shareholders for early redemption of certain Class
B Shares. Such mandatory prepayments are credited toward the amount required
to be paid by the Company if the outstanding principal balance under the B
Share Facility exceeds a computed amount.
As of March 31, 1997, approximately $44.7 million was available as a
series of term loans to the Company for working capital purposes under the Bank
Facility.
B Share Commissions that are financed under the B Share Facility are
capitalized and amortized over a period of six years (the period of time during
which the investor is subject to a CDSC at the time of redemption of Class B
Shares) for accounting purposes and are currently expensed for tax purposes.
CDSC payments received by the Company related to Class B Shares sold before
April 1, 1995 currently reduce unamortized B Share Commissions. A CDSC paid to
the Company is generally greater than the related unamortized portion of the B
Share Commission.
Stockholders' equity increased 76.2% to $89.7 million at March 31,
1997 from $50.9 million at December 31, 1996. The increase in stockholders'
equity was primarily due to the increase in the Company's net income discussed
above. As a result of the Merger, the Company's outstanding and authorized
capital consists solely of Common Stock, $0.01 par value per share.
The Company has several subsidiaries which are registered in various
jurisdictions as broker-dealers or investment managers. At March 31, 1997, the
Company's ability to obtain dividends from such subsidiaries was limited by net
capital requirements in the aggregate amount of $0.9 million designed to ensure
the liquidity of such subsidiaries.
MERGER
On February 28, 1997, the Company's predecessor merged with and into
AVZ Inc., a subsidiary of INVESCO PLC, with AVZ Inc. as the surviving
corporation (the "Merger"). Immediately after the Merger, AVZ Inc. contributed
all of the assets and liabilities received in connection with the Merger to the
Company, a direct wholly-owned subsidiary of AVZ Inc. Effective March 3, 1997,
the name of INVESCO PLC was changed to AMVESCO PLC, and it is expected that the
name will be further changed to AMVESCAP PLC in the second quarter of 1997
(INVESCO PLC and AMVESCO PLC are sometimes referred to herein as the "Parent
Company").
The Parent Company is one of the world's largest independent
investment management groups and has a major presence in the institutional
investment management and retail mutual fund businesses in the
12
<PAGE> 13
United States and Europe, and a growing presence in the Pacific region. The
businesses of the Parent Company and the various subsidiaries of the Company
have continued to operate under their existing names since the Merger. The
Ordinary Shares and the American Depositary Shares of the Parent Company are
listed on the London Stock Exchange and the New York Stock Exchange,
respectively.
In connection with the Merger, the Company assumed the obligations of
its predecessor entity and became the obligor under the Notes. Additionally,
in connection with the Merger and pursuant to the indenture for the Notes, the
Company commenced a tender offer for the purchase of the Notes from the holders
thereof for an amount equal to 101% of the principal amount plus accrued and
unpaid interest to the date the Notes are accepted for purchase by the Company.
As of April 30, 1997, no Notes had been tendered pursuant to the Company's
tender offer. The Company's tender offer expired on May 5, 1997.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
A legal action, Saltzberg v. AIM Equity Funds, Inc., et al., Case No.
H96-3657 (S.D. Tex. filed Oct. 25, 1996), has been brought against certain
subsidiaries of the Company and AIM Equity Funds, Inc., and, as a nominal
defendant, AIM Aggressive Growth Fund, a portfolio of AIM Equity Funds, Inc.
The action was instituted under section 36(b) of the Investment Company Act of
1940 and seeks to recover damages allegedly suffered by AIM Aggressive Growth
Fund, a portfolio of AIM Equity Funds, Inc., in connection with fees paid for
marketing and shareholder services after the fund was closed to new investors.
The Company believes that its legal defenses against such action are sound and
continues to defend itself vigorously.
ITEM 2. CHANGES IN SECURITIES
The information required by this item was provided in the Company's
Annual Report on Form 10-K (file no. 33- 67866) for the year ended December 31,
1996.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The information required by this item was provided in the Company's
Annual Report on Form 10-K (file no. 33- 67866) for the year ended December 31,
1996.
ITEM 5. OTHER INFORMATION
Not applicable.
13
<PAGE> 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
10.1 Amendment No. 7, dated as of March 28, 1997, among
the Company, as seller and as servicer, Citibank,
N.A., as purchaser and Citicorp North America, Inc.,
to the Purchase and Sale Agreement, dated May 2,
1995, among the Company, Citibank, N.A. and Citicorp
North America, Inc. (the "Purchase and Sale
Agreement").
10.2 Take-Out Notice, dated as of March 19, 1997, pursuant
to the Purchase and Sale Agreement.
10.3 Amendment No. 28, dated February 20, 1997, to the
Lease Contract for premises located at 11 and 12
Greenway Plaza, Houston, Texas.
27 Financial Data Schedule.
b. Reports on Form 8-K
A report on Form 8-K was filed on March 10, 1997 to report the
merger of the Company's predecessor with and into AVZ Inc., a
subsidiary of the Parent Company.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized on May 1, 1997.
A I M MANAGEMENT GROUP INC.
/s/ Robert H. Graham
---------------------------------------
Robert H. Graham
Chief Executive Officer and President
/s/ John J. Arthur
---------------------------------------
John J. Arthur
Vice President and Treasurer
(Chief Accounting Officer)
15
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------ ----------------------
<S> <C>
10.1 Amendment No. 7, dated as of March 28, 1997, among the Company, as seller and as servicer, Citibank,
N.A., as purchaser and Citicorp North America, Inc., to the Purchase and Sale Agreement, dated May 2,
1995, among the Company, Citibank, N.A. and Citicorp North America, Inc. (the "Purchase and Sale
Agreement")
10.2 Take-Out Notice, dated as of March 19, 1997, pursuant to the Purchase and Sale Agreement
10.3 Amendment No. 28, dated February 20, 1997, to the Lease Contract for premises located at 11 and 12
Greenway Plaza, Houston, Texas
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.1
AMENDMENT
Dated as of March 28, 1997
Reference is made to that certain Purchase and Sale Agreement dated as
of May 2, 1995 (as amended and supplemented, the "Purchase Agreement") among
A I M Management Group Inc., Citibank, N.A. (the "Purchaser") and Citicorp
North America, Inc., as agent for the Purchaser (the "Program Agent").
Each of the undersigned agree that effective as of the date hereof,
the definition of "Purchaser Limit" set forth in Section 1.01 of the Purchase
Agreement is hereby amended by replacing the dates "March 31, 1997" and "April
1, 1997" set forth therein with the dates "May 31, 1997" and "June 1, 1997",
respectively.
This Amendment may be executed in any number of counterparts and by
different parties hereto on separate counterparts, each of which counterparts,
when so executed and delivered, shall be deemed to be an original, and all of
which counterparts, when taken together, shall constitute but one and the same
amendment.
THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of the date first above written.
A I M MANAGEMENT GROUP INC.
By: /s/ CAROL F. RELIHAN
--------------------------------
Authorized Signatory
CITIBANK, N.A.,
as Purchaser
By: ILLEGIBLE
--------------------------------
Authorized Signatory
CITICORP NORTH AMERICA, INC.,
as Program Agent
By: ILLEGIBLE
--------------------------------
Authorized Signatory
<PAGE> 1
EXHIBIT 10.2
TAKE-OUT NOTICE
March 19, 1997
AIM Management Group, Inc.
AIM Distributors, Inc.
AIM Advisors, Inc.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046
Ladies and Gentlemen:
Pursuant to that certain Purchase and Sale Agreement dated as of May 2, 1995
(as amended and supplemented, the Purchase Agreement) among AIM Management
Group Inc., Citibank, N.A. and the undersigned Citicorp North America, Inc., we
hereby deliver this Take-out Notice advising you that on January 31, 1997 the
Purchaser completed a Take-out Transaction in connection with the Series 1997-1
Asset Backed Certificates issued by the Mutual Fund Fee Trust III. The
"Take-out Adjustment Amount" in connection with such Take-out Transaction is
$44,900,000. Capitalized terms used herein and which are not otherwise defined
herein shall have the meanings assigned to such terms in the Purchase
Agreement.
Very truly yours,
CITICORP NORTH AMERICA, INC.,
as Program Agent
By: ILLEGIBLE
-----------------------------
Authorized Signatory
<PAGE> 2
Page 2
Take-Out Notice
March 19, 1997
Acknowledged and agreed as of the date
first written above:
AIM MANAGEMENT GROUP, INC.
By: /s/ CAROL F. RELIHAN
------------------------------
Authorized Signatory
AIM DISTRIBUTORS, INC.
By: /s/ CAROL F. RELIHAN
------------------------------
Authorized Signatory
AIM ADVISORS, INC.
By: /s/ CAROL F. RELIHAN
------------------------------
Authorized Signatory
<PAGE> 1
EXHIBIT 10.3
TWENTY-EIGHTH AMENDMENT OF LEASE CONTRACT
-----------------------------------------
THIS TWENTY-EIGHTH AMENDMENT OF LEASE CONTRACT ("Twenty-Eighth
Amendment") is entered into between CRESCENT REAL ESTATE FUNDING III, L.P., a
Delaware limited partnership ("Landlord"), and A I M MANAGEMENT GROUP INC., a
Delaware corporation ("Tenant"), with reference to the following:
A. Nine Greenway Venture (predecessor in interest to Landlord)
and Tenant entered into a Lease Contract dated April 14, 1980, First Amendment
of Lease Contract dated January 29, 1981, Second Amendment of Lease Contract
dated November 12, 1982, Third Amendment of Lease Contract dated August 17,
1984, Fourth Amendment of Lease Contract dated April 28, 1986, Fifth Amendment
of Lease Contract dated December 11, 1986, Sixth Amendment of Lease Contract
dated August 6, 1987, Seventh Amendment of Lease Contract dated February 4,
1988, and Eighth Amendment of Lease Contract dated January 6, 1989; and Nine
Greenway, Ltd. (predecessor in interest to Landlord) and Tenant entered into a
Ninth Amendment of Lease Contract dated March 27, 1990, Tenth Amendment of
Lease Contract dated June 12, 1990, Eleventh Amendment of Lease Contract dated
August 27, 1990, Twelfth Amendment of Lease Contract dated July 15, 1991,
Thirteenth Amendment of Lease Contract dated January 13, 1992, Fourteenth
Amendment of Lease Contract dated July 17, 1992, Fifteenth Amendment of Lease
Contract dated July 17, 1992, Sixteenth Amendment of Lease Contract dated
August 10, 1992, Seventeenth Amendment of Lease Contract dated February 25,
1993, Eighteenth Amendment of Lease Contract dated April 22, 1994, Nineteenth
Amendment of Lease Contract dated March 31, 1995, Twentieth Amendment of Lease
Contract dated July 31, 1995, Twenty-First Amendment of Lease Contract dated
August 1, 1995 and Twenty-Second Amendment of Lease Contract dated December 1,
1995, Twenty-Third Amendment of Lease Contract dated March 18, 1996,
Twenty-Fourth Amendment of Lease Contract dated March 18, 1996, Twenty-Fifth
Amendment of Lease Contract dated June 29, 1996; and Landlord and Tenant
entered into a Twenty-Sixth Amendment of Lease Contract dated November 29, 1996
and Twenty-Seventh Amendment of Lease Contract dated January 16, 1997 (as
amended, the "Lease") covering approximately 284,226 square feet of Rentable
Area consisting of approximately 9,671 square feet of Rentable Area on the
Concourse Level; approximately 4,607 square feet of Rentable Area on the first
(1st) floor, approximately 23,399 square feet of Rentable Area being the
entirety of the sixth (6th) floor; approximately 23,399 square feet of Rentable
Area being the entirety of the seventh (7th) floor; approximately 17,741 square
feet of Rentable Area on the eleventh (11th) floor [of which approximately
10,940 square feet of Rentable Area shall become effective on or about November
16, 1996]; approximately 23,399 square feet of Rentable Area on the twelfth
(12th) floor; approximately 23,829 square feet of Rentable Area being the
entirety of the thirteenth (13th) floor; approximately 14,320 square feet of
Rentable Area on the seventeenth (17th) floor; approximately 23,782 square feet
of Rentable Area being the entirety of the eighteenth (18th) floor;
approximately 23,782 square feet of Rentable Area being the entirety of the
nineteenth (19th) floor; approximately 12,054 square feet of Rentable Area on
the twenty-first (21st) floor; approximately 24,113 square feet of Rentable
Area being the entirety of the twenty-third (23rd) floor; approximately 24,113
square feet of Rentable Area being the entirety of the twenty-fourth (24th)
floor; approximately 24,113 square feet of Rentable Area being the entirety of
the twenty-fifth (25th) floor; and approximately 16,459 square feet of
Rentable Area on the twenty-sixth (26th) floor of the building known as Summit
Tower, Eleven Greenway, Houston, Texas (the "Building").
B. Tenant wishes to lease from Landlord additional space located
in Summit Plaza West, Twelve Greenway Plaza, Houston, Texas ("Building-12").
C. Landlord and Tenant now desire to enter into this
Twenty-Eighth Amendment to lease additional space as outlined herein; adjust
the Base Rental; and incorporate certain new provisions regarding Tenant's
payment of its share of Project Operating Cost and other matters, all as
provided below. Unless otherwise expressly provided herein, capitalized terms
used herein shall have the same meanings as in the Lease.
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which are acknowledged, the parties agree as follows:
1
<PAGE> 2
1. Additional Space.
a. Landlord leases to Tenant and Tenant leases from Landlord
approximately 55,860 square feet of Rentable Area being the entirety of the
third (3rd), fourth (4th) and fifth (5th) floors of Building-12, as shown
outlined and hatched on Exhibits "A-1", "A-2" and "A-3" attached hereto
("Expansion Space FF").
b. The lease term for Expansion Space FF shall commence upon
Substantial Completion (as defined in the Construction Agreement described in
Paragraph 5 below) of Expansion Space FF (the "FF Commencement Date") and shall
expire on December 31, 2003, the date of expiration of the Fourth Extension
Period. Commencing on the FF Commencement Date, the term "Leased Premises" as
used herein shall mean and include approximately 340,086 square feet of
Rentable Area, being approximately 284,226 square feet of Rentable Area then
leased and occupied by Tenant, plus approximately 55,860 square feet of
Rentable Area in Expansion Space FF leased hereunder.
c. The parties anticipate that the FF Commencement Date will
occur on or before June 1, 1997. If Expansion Space FF has not been
Substantially Completed by such date for any reason, Landlord shall not be
liable or responsible for any claims, damages or liabilities in connection
therewith or by reason thereof; and the FF Commencement Date shall occur upon
the earlier of; (i) the time that the entirety of the Expansion Space FF is
Substantially Completed; (ii) the date that Substantial Completion of the
entirety of the Expansion Space FF would have been achieved but for Tenant
Delays (if any); or (iii) Tenant's occupancy of the entirety of the Expansion
Space FF. In such event, Landlord and Tenant shall, promptly upon request,
execute an agreement specifying the FF Commencement Date, with a corresponding
adjustment to the schedule of Base Rental set forth below. In addition to the
foregoing, if any portion of Expansion Space FF is Substantially Completed and
occupied by Tenant prior to the actual FF Commencement Date, then Tenant shall,
upon demand, pay Landlord a prorated amount of Base Rental, together with all
other charges payable by Tenant under the Lease, attributable to the space so
early occupied.
2. Base Rental.
a. Commencing on the FF Commencement Date and continuing through
March 31, 2002, Tenant shall pay Landlord Base Rental for Expansion Space FF in
the sum of Sixty-Two Thousand Eight Hundred Forty-Two and 52/100 Dollars
($62,842.50) per month. Commencing April 1, 2002 and continuing through
December 31, 2003, Tenant shall pay Landlord Base Rental for Expansion Space FF
in the sum of Seventy-Six Thousand Eight Hundred Seven and 50/100 Dollars
($76,807.50) per month.
b. Commencing on the FF Commencement Date, the rent schedule set
forth in Paragraph 4 of the Twenty-Seventh Amendment is deleted in its entirety
and the following rent schedule, which takes into consideration Expansion Space
FF leased hereunder, shall be substituted in lieu thereof:
<TABLE>
<CAPTION>
FROM TO MONTHLY BASE RENTAL
---- -- -------------------
<S> <C> <C>
June 1, 1997* December 31, 1997 $387,269.08
January 1, 1998 May 31, 1998 $414,635.82
June 1, 1998 June 9, 2000 $415,622.74
June 10, 2000 December 31, 2000 $427,383.77
January 1, 2001 March 31, 2002 $452,498.39
April 1, 2002 December 31, 2003 $466,463.39
</TABLE>
* Anticipated FF Commencement Date
2
<PAGE> 3
3. Additions and Fixtures. The following shall be added at the end of the
last sentence of Paragraph 10.B. of the Lease:
"unless, at the time of Landlord's review and approval of Tenant's
installation of any such alteration, addition, fixture, equipment or
property in Expansion Space FF (or any additional space subsequently
leased by Tenant in Building-12), Landlord specifically agrees in
writing, following Tenant's written request, that Tenant may abandon
such item upon the expiration or earlier termination of Tenant's lease
with respect to its applicable premises in Building-12."
4. Project Operating Cost. Tenant agrees to pay to Landlord, as
additional rent calculated in accordance with Paragraph 13 of the Lease (as
previously amended), its pro rata share of increases in operating expenses
attributable to Expansion Space FF and any other space leased in Building-12
(including any renewals or extensions), subject to the following modifications:
a. The term "Building Operating Cost" shall be amended to refer to
"Project Operating Cost." The term "Project" refers to Building-12 and the land
upon which it is constructed, including without limitation all landscaping,
driveways, sidewalks, service areas and other improvements located on such
land, and together with the pro rata share of the parking garages servicing
such building.
b. Tenant's Base Year for Building-12 shall be calendar year 1997.
c. Operating expenses may include the cost of goods and services
purchased by Landlord from its subsidiaries or other affiliated parties to the
extent generally consistent with competitive "market" rates charged by
unaffiliated third parties for similar qualities and quantities (unless
otherwise required in an emergency).
d. The Project Operating Cost for the Base Year shall be equal to
actual operating costs for Building-12 for that calendar year, adjusted upward
to reflect the costs of operating Building-12 at an occupancy level of 95%;
however, if the occupancy level of Building-12 for the Base Year equals or
exceeds 95%, there shall be no upward adjustment. Likewise, the Project
Operating Cost for subsequent calendar years shall be adjusted upward to
reflect a 95% occupancy level; however, if the occupancy level of Building-12
for any calendar year after the Base Year equals or exceeds 95%, there shall be
no such upward adjustment and the actual operating costs for Building-12 shall
be used for such year.
5. Condition of Premises. Landlord will tender and Tenant agrees to
accept Expansion Spaces FF in an "as-is" condition. Any construction of
leasehold improvements necessary for the Leased Premises shall be accomplished
and the cost of such construction shall be paid in accordance with a separate
"Construction Agreement" between Landlord and Tenant attached hereto as Exhibit
"C". Except as expressly provided in this Twenty-Eighth Amendment or in the
Construction Agreement Tenant acknowledges that Landlord has not undertaken to
perform any modification, alteration or improvement to the Leased Premises.
6. Parking. Notwithstanding anything to the contrary contained in the
Lease, the following shall govern Tenant's rights and obligations with respect
to parking facilities applicable to Expansion Space FF and any additional space
leased by Tenant in Building-12 pursuant to the provisions of the Preferential
Right to Lease set forth below:
a. For each 1,000 square feet of Rentable Area leased and occupied in
Building-12 by Tenant, Landlord shall provide the following:
(i) Up to two and one-half (2.5) unreserved parking permits
providing access to the garage known as the North Richmond Garage
located to the north of Building across Colquitt Street in areas
determined by Landlord, in its sole discretion.
3
<PAGE> 4
(ii) Up to one-and-one-half (1.5) additional unreserved
permits providing access to other garages or parking areas located in
Phase I or II of the Greenway Plaza or which Landlord may contract for
Tenant's use in reasonable proximity to Greenway Plaza or Phase III of
Greenway Plaza, excluding the Phoenix Tower parking garage and any
parking areas south of the Southwest Freeway (Highway 59).
(iii) Tenant shall pay 70% of the then-current quoted monthly
contract rates for the use of all of such permits located in garages
and/or areas owned by Landlord. For any garages and or areas
contracted for Tenant's use which are not owned by Landlord, except as
provided below, Tenant shall pay Landlord at rates per permit equal to
the actual rate charged by the provider plus Tenant's pro rata share
(on a per-space-rented basis) of Landlord's reasonable overhead,
reasonable administration and other directly related costs. However,
for any parking permits located in any existing or future parking
garages or areas in or adjacent to the Innova Building, 20 Greenway
Plaza, Houston, Texas, Tenant shall pay for such permits at rates
comparable to Landlord's then-quoted monthly contract rates in
Greenway Plaza.
b. Landlord shall have the right, at any time and from time to
time, to change or re-arrange the location of Tenant's parking permits within
the applicable parking garage and/or parking areas designated in Paragraph 6.a.
above. At such time, Landlord shall have the option to reissue all or a portion
of Tenant's permits to reflect the changes in parking locations. Tenant and its
employees shall use such parking garage only in accordance with Landlord's
Rules and Regulations. Neither Tenant nor its employees shall use any parking
spaces designated for visitors, other occupants of the Project or otherwise
without Landlord's prior written consent. The number of parking spaces
available for Tenant's use shall not exceed that specified above.
c. Tenant shall, within ten (10) days of Landlord's request,
furnish to Landlord a complete list of the license plate numbers of all
vehicles operated by Tenant and Tenant's employees and agents. Landlord shall
not be liable for any damage of any nature whatsoever to, or any theft of,
vehicles, or contents therein, in or about such parking garage, except to the
extent caused by Landlord's gross negligence or willful misconduct. If, for any
reason, Landlord fails or is unable to provide, or Tenant is not permitted to
use, all or any portion of the parking spaces to which Tenant is entitled
hereunder, then Tenant's obligation to pay for such spaces shall be abated for
so long as Tenant does not have the use thereof. In addition, Landlord shall
use commercially reasonable efforts to (i) restore such parking spaces to
Tenant as soon as reasonably possible, and (ii) subject to availability,
provide temporary alternative parking facilities to Tenant in close proximity
to Greenway Plaza.
7. Preferential Right to Lease.
a. At any time prior to December 31, 2001, Tenant shall have a
Preferential Right to Lease space located on the sixth (6th), seventh (7th) or
twelfth (12th) floor(s) of Building-12 (the "Preferential Space"), at such time
as such space becomes "Available", as defined below, for direct lease to a new
tenant; provided that there is no uncured event of default under the Lease by
Tenant and Tenant remains in occupancy of the Leased Premises. For purposes
hereof, the Preferential Space shall be deemed "Available" at such time as such
space is no longer (i) ]eased; (ii) assigned or subleased by the current tenant
of the space; (iii) re-leased, renewed or extended by the current tenant, or
any assignee or sublessee thereof, pursuant to a formal lease provision in
their lease executed prior to the date of this Twenty-Eighth Amendment; (iv)
re-leased, renewed or extended by the then-current tenant, or any assignee or
sublessee thereof, pursuant to a formal lease provision in their lease executed
after Tenant has declined to exercise its preferential rights under Paragraph
7.b. below with respect to such space; or (v) subject to a specific expansion
right, right of first refusal or preferential right existing under any other
tenant leases for the Project as of the date of this Twenty-Eighth Amendment.
With respect to any space which may be subject to specific options as outlined
in clauses (iv) and (v) above, then Tenant shall have a subordinate preferential
right to lease such space under the provisions outlined herein.
b. At such time as any Preferential Space becomes Available and
again prior to leasing such space to a new tenant pursuant to a bona fide
offer, Landlord shall first offer such space in writing to Tenant. Each such
offer notice shall specify the amount and location of such space, the date of
Availability or proposed lease, as applicable, and the rental rate based on
Fair
4
<PAGE> 5
Market Value (as defined in Paragraph 26.C. the Lease) payable for such space.
The rental rate based on Fair Market Value shall be based on the assumption of
Landlord providing, at Tenant's option, a construction allowance consistent
with Fair Market Value (but not less than Five Dollars ($5.00) per square foot
of Rentable Area) amortized into the rental rate. The Preferential Space shall
be tendered by Landlord and accepted by Tenant in an "as-is" condition, plus
the allowance requested by Tenant pursuant to the immediately preceding
sentence. Any Preferential Space shall be leased for the period commencing upon
the earlier of Tenant's occupancy of the Preferential Space or 45 days after
the date of Landlord's tender of possession and expiring upon the last day of
the Fourth Extension Period, as it may be extended or renewed.
c. Tenant shall have ten (10) days from receipt within which to accept
or reject Landlord's offer. If Tenant accepts Landlord's offer, Tenant shall,
no later than twenty (20) days after Landlord's submission of such offer,
execute an amendment of the Lease, adding the Preferential Space to the Leased
Premises on the terms specified in Landlord's offer. If Tenant rejects the
offer contained in Landlord's first notice of Availability or fails to accept
such first offer within the applicable ten (10) day period, then, Landlord
shall be entitled to place such space on the market. If Tenant rejects
Landlord's second offer contained in Landlord's notice of its intention to
lease such space pursuant to a bona fide third-party offer or fails to accept
such second offer within the applicable ten (10) day period, then Landlord
shall have one hundred fifty (150) days from the date of Landlord's second
offer within which to lease the offered space to any third-party tenant. If
Landlord has not entered into a new lease for the offered space within such one
hundred fifty (150) days, such space shall again deemed "Available".
8. Hazardous Materials. Based on a study performed by McClelland
Management Services on June 25, 1990, Building-12's mechanical rooms and
penthouse contain limited amounts of asbestos. The asbestos material is
primarily found in the thin white mud on the insulation of certain piping and
ductwork. Some 12" x 12" floor tiles and associated mastics in several service
corridors also contain small amounts of asbestos.
9. Cabling Right of Way. Landlord grants Tenant the right, at no
additional charge to Tenant, to install its electronic communications cables in
the plenum of the existing skywalk over Richmond Avenue between the Building
(i.e., Summit Tower) and Building-12 (i.e., Summit Plaza West). However, Tenant
shall pay all costs of installing its cable across such skywalk, including the
cost of preparing plans and obtaining any required permits or licenses in
connection therewith. Upon expiration or earlier termination of the Lease, or
Tenant's vacating of all of its premises in either the Building or Building-12,
Tenant shall, at its expense, promptly remove all of its cabling from the
vacated building(s) and the skywalk, and repair any damage caused thereby.
Prior to any such installation, Tenant shall submit to Landlord plans and
specifications showing its proposed installation methods and other necessary
details for Landlord's review and written approval.
10. Broker. Tenant represents and warrants that it has not been
represented by any broker or agent in connection with the negotiation or
execution of this Twenty-Eighth Amendment, except Mike Boehler of The Staubach
Company. Tenant shall indemnify and hold harmless Landlord and Landlord's
designated property management, construction and marketing firms from and
against all claims (including costs of defense and investigation) of any other
broker or agent or similar party claiming by, through or under Tenant in
connection with this Second Amendment.
11. Time of the Essence. Time is of the essence with respect to Tenant's
execution and delivery of this Twenty-Eighth Amendment to Landlord. If Tenant
fails to execute and deliver a signed copy hereof to Landlord by 5:00 p.m.,
February 28, 1997, it shall be deemed null and void and shall have no force or
effect, unless otherwise agreed in writing by Landlord. Landlord's acceptance,
execution and return of this document shall constitute Landlord's agreement to
waive Tenant's failure to meet the foregoing deadline.
12. Binding Effect. Except as modified by this Twenty-Eighth Amendment,
the terms and provisions of the Lease shall remain in full force and effect,
and the Lease, as modified hereby, shall be binding upon the parties hereto,
their successors and assigns. This document shall become effective only after
the full execution and delivery hereof by Landlord and Tenant.
5
<PAGE> 6
Landlord and Tenant enter into this Twenty-Eighth Amendment as of
February 20, 1997.
CRESCENT REAL ESTATE FUNDING III, L.P.,
a Delaware limited partnership
By: CRE Management III Corp., a Delaware
corporation, its General Partner
By: /s/ HOWARD W. LOVETT
--------------------------------
Howard W. Lovett, Vice President
Corporate Leasing
LANDLORD
A I M MANAGEMENT GROUP INC., a Delaware
corporation
By: /s/ GARY T. CRUM
-------------------------------
Gary T. Crum, Senior Vice President
TENANT
6
<PAGE> 7
Floor Status FLOOR 3
11 Nov 1994
12 GREENWAY PLAZA
SENTERRA DEVELOPMENT
[FLOOR PLAN]
A I M MANAGEMENT GROUP INC.
EXHIBIT "A-1"
<PAGE> 8
Floor Status FLOOR 4
11 Nov 1994
12 GREENWAY PLAZA
SENTERRA DEVELOPMENT
[FLOOR PLAN]
A I M MANAGEMENT GROUP INC.
EXHIBIT "A-2"
<PAGE> 9
Floor Status FLOOR 5
11 Nov 1994
12 GREENWAY PLAZA
SENTERRA DEVELOPMENT
[FLOOR PLAN]
A I M MANAGEMENT GROUP INC.
EXHIBIT "A-3"
<PAGE> 10
EXHIBIT "C"
CONSTRUCTION AGREEMENT
This Construction Agreement is executed by and between CRESCENT REAL
ESTATE FUNDING III, L.P. ("Landlord") and A I M MANAGEMENT GROUP INC., a
Delaware corporation ("Tenant"), in connection with that certain Twenty-Eighth
Amendment (the "Twenty-Eighth Amendment") executed by the parties on even date
herewith (the "Effective Date") relating to the lease by Landlord to Tenant of
certain Leased Premises in Twelve Greenway Plaza, Houston, Texas. All defined
terms used herein, unless otherwise defined herein, shall have the same meanings
given to such terms in the Lease.
1. Approved Construction Documents. No later than March 1, 1997, Tenant
shall submit to Landlord complete, finished and detailed architectural,
mechanical, electrical and plumbing drawings and specifications to include
Tenant's partition layout, reflected ceiling, telephone and electrical outlets
and equipment rooms, doors (including hardware and keying schedule), glass
partitions, windows and doors, critical dimensions, heavy equipment
requirements, millwork and finish schedules, air conditioning and heating
systems, ductwork, and electrical facilities, together with all supporting
information and delivery schedules ("Approved Construction Documents"). If
Tenant fails to deliver all of Approved Construction Documents by such date,
each calendar day of such delay shall be one day of "Tenant Delay".
2. Competitive Bids. Within seven (7) business days after receipt of the
Approved Construction Documents, Landlord shall seek and obtain three (3)
competitive bids from general contractors from Landlord's approved bidding
list. Tenant shall have the option of submitting the names of not more than two
(2) general contractors which it would like to include in the bidding process
so long as such contractors meet Landlord's requirements for selection of
contractors. Only subcontractors from Landlord's approved subcontractor list
shall be allowed to work on the Project. Tenant shall be invited to the bid
opening and allowed to participate in the selection of the successful bidder
and Landlord shall enter into a contract with the successful bidder. Within
three (3) business days after receipt, Tenant shall review the bids and return
written approval thereof to Landlord. If Tenant fails to return the approved
bids within such period, each calendar day of such delay shall be one day of
Tenant Delay.
3. Landlord's Contributions.
(a) Construction Allowance. Landlord will tender and Tenant agrees
to accept the Leased Premises in an "as-is" condition; however, Landlord will
contribute the sum of One Million Five Thousand Four Hundred Eighty and 00/100
Dollars ($1,005,480.00 [$18.00 per square foot of Rentable Area]) [the
"Construction Allowance"] towards the cost of furnishing and installing
permanent leasehold improvements in the Leased Premises in accordance with this
Construction Agreement. Payments shall be made directly to Landlord's
contractor performing the Work. Tenant acknowledges and agrees that a portion
of the Base Rental constitutes repayment of the foregoing allowance, which has
been given to Tenant as partial consideration for Tenant's execution and
performance of the Twenty-Eighth Amendment.
(b) Special Leasehold Allowance. At Tenant's election, Landlord
shall contribute an additional sum not to exceed One Hundred Sixty-Seven
Thousand Five Hundred Eighty and 00/100 Dollars ($167,580.00 [$3.00 per square
foot of Rentable Area]) [the "Special Leasehold Allowance"] towards additional
permanent leasehold improvements Tenant elects to install in the entire Leased
Premises. Tenant's election to use all or a portion of the Special Leasehold
Allowance shall be made no later than thirty (30) days following approved
pricing, at which time Landlord and Tenant will promptly execute an amendment
modifying the Base Rental accordingly. The amount of the Special Leasehold
Allowance actually utilized by Tenant shall be amortized as a additional Base
Rental over the remainder of the Fourth Extension Period at twelve percent
(12.0%) per annum.
1
<PAGE> 11
4. Construction.
(a) The Work. Subject to the provisions of this Construction
Agreement, Landlord agrees to construct leasehold improvements (the "Work") in
a good and workmanlike manner in and upon the Leased Premises in accordance
with the Approved Construction Documents. The cost of all space planning and
construction drawings shall not be included in the cost of the Work but shall
be paid directly by Tenant.
(b) General Construction Terms. Landlord will employ an
experienced, licensed contractor to construct the Work and will require in the
construction contract that such contractor construct the Work in a good and
workmanlike manner and in compliance with all Applicable Laws, except as
otherwise provided herein, in the Twenty-Eighth Amendment or in the Lease.
The parties acknowledge that Landlord is not an architect, engineer or
contractor, and that the Work will be performed by independent contractors.
Accordingly, Landlord does not guarantee or warrant that the Work will be
free from defects, and Landlord will have no liability therefor. In the event
of any such defects, Landlord will use reasonable efforts to cooperate in any
action Tenant desires to bring against such parties.
(c) Substantial Completion. All work shall be deemed
"Substantially Completed" when completed in accordance with this Exhibit and
the Approved Construction Documents, to the extent that Tenant would have
access to the Leased Premises and be able to conduct its business in a
reasonable manner and Landlord has obtained final inspection approval from the
City of Houston, even though adjustments or corrections may be necessary and
minor "punch-list" items remain to be completed. As a courtesy, and not as a
condition to Substantial Completion, Landlord shall provide Tenant with a copy
of the final Certificate of Occupancy for Expansion Space FF promptly following
receipt thereof from the City of Houston.
(d) ADA Compliance. Landlord shall be responsible for costs and
implementation associated with compliance with the Americans with Disabilities
Act (the "ADA") for the Project and all points of access into the Project ("the
Landlord's ADA Work"). Tenant shall be responsible for all costs and
implementation associated with ADA compliance within Expansion Space FF,
including all restrooms since each floor comprising Expansion Space FF will be
taken by Tenant as a "Single Tenant Floor", as defined in the Lease. Landlord
shall not be responsible for determining whether Tenant is a public
accommodation under The Americans with Disabilities Act ("ADA") or whether the
Approved Plans comply with such laws and the regulations thereunder. Such
determinations, if desired by Tenant, shall be the sole responsibility of
Tenant.
5. Cost Overruns. Costs incurred by Landlord in excess of any allowance
shall be paid by Tenant to Landlord promptly within thirty (30) calendar days
following delivery of Landlord's invoice. Change orders requested by Tenant and
approved by Landlord which increase the cost of construction over eighteen
dollars ($18) per square foot of Rentable Area shall be paid by Tenant to
Landlord promptly upon demand.
6. Delays. If Landlord is delayed in completing construction of the Work
for any reason other than Tenant Delays, the delay in commencement of Tenant's
obligation to pay rent under the Twenty-Eighth Amendment shall constitute full
settlement of all claims that Tenant may have against Landlord based on the
delay. If Landlord is delayed in completing the Work due to a delay caused by
Tenant or for any other cause related to Tenant's acts or omissions,
Substantial Completion will be deemed to have occurred under the Twenty-Eighth
Amendment on the date upon which Landlord would have delivered possession of
the Leased Premises to Tenant absent such delay.
2
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