<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ TO _______________________
Commission File Number 1-13232
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
(Exact name of registrant as specified in its charter)
MARYLAND 84-1259577
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1873 S. BELLAIRE STREET, SUITE 1700, DENVER, COLORADO 80222-4348
(Address of principal executive offices) (Zip Code)
(303) 757-8101
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address, and former fiscal year, if changed since
last report)
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 / /
The number of shares of Class A Common Stock outstanding as of
November 7, 1997: 35,594,939
The number of shares of Class B Common Stock outstanding as of
November 7, 1997: 325,000
1
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APARTMENT INVESTMENT AND MANAGEMENT COMPANY
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1997
(unaudited) and December 31, 1996 3
Consolidated Statements of Income for the Three and Nine
Months Ended September 30, 1997 and 1996 (unaudited) 4
Consolidated Statements of Cash Flow for the Nine
Months Ended September 30, 1997 and 1996 (unaudited) 5
Notes to Consolidated Financial Statements
(unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 18
Item 3. Quantitative and Qualitative Disclosures about Market Risk 28
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 28
Item 2. Changes in Securities 29
Item 5. Other Information 30
Item 6. Exhibits and Reports on Form 8-K 30
Signatures 35
2
<PAGE>
PART I. FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
---- ----
<S> <C> <C>
ASSETS (Unaudited)
Real estate, net of accumulated depreciation of $142,694
and $120,077 $1,107,545 $745,145
Property held for sale 25,580 6,769
Investments held for sale 25,025 -
Investments in and notes receivable from unconsolidated subsidiaries 19,960 -
Investment in and notes receivable from real estate partnerships 174,777 -
Investment in NHP Incorporated 123,078 -
Cash and cash equivalents 45,775 13,170
Restricted cash 22,019 15,831
Accounts receivable 24,328 4,344
Deferred financing costs 7,682 11,053
Other assets 32,426 31,361
---------- --------
Total assets $1,608,195 $827,673
---------- --------
---------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Secured notes payable $492,977 $242,110
Secured tax-exempt bond financing 74,441 75,497
Secured short-term financing 94,297 192,039
Unsecured short-term financing - 12,500
---------- --------
Total indebtedness 661,715 522,146
---------- --------
Accounts payable, accrued and other liabilities 72,533 16,299
Accrued management contract liability 106,615 -
Resident security deposits and prepaid rents 8,919 4,316
---------- --------
Total liabilities 849,782 542,761
---------- --------
Commitments and contingencies - -
Minority interest in other partnerships 19,355 10,386
Minority interest in Operating Partnership 111,632 58,777
Stockholders' equity:
Unrealized gain on investments 1,175 -
Class A Common Stock, $.01 par value, 150,000,000 shares
authorized, 28,274,739 and 12,346,812 shares issued
and outstanding 283 150
Class B Common Stock, $.01 par value, 425,000 shares
authorized, 325,000 shares issued and outstanding 3 3
Non-voting Preferred Stock, $0.01 par value, 9,250,000
shares authorized, none issued and outstanding - -
Class B Cumulative Convertible Preferred stock, $.01 par value,
750,000 shares authorized, issued and outstanding 75,000 -
Additional paid-in capital 606,799 236,791
Distributions in excess of earnings (25,375) (14,055)
Notes due on Common Stock purchases (30,459) (7,140)
---------- --------
Total stockholders' equity 627,426 215,749
---------- --------
Total liabilities and stockholders' equity $1,608,195 $827,673
---------- --------
---------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
-------------------------------------- --------------------------------------
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
RENTAL PROPERTY OPERATIONS
Rental and other property revenues $47,364 $24,140 $127,083 $70,392
Property operating expenses (19,577) (8,960) (50,737) (27,111)
Owned property management expense (1,610) (658) (4,344) (1,999)
------- ------- -------- -------
Income from property operations before depreciation 26,177 14,522 72,002 41,282
Depreciation (8,802) (4,656) (23,848) (13,716)
------- ------- -------- -------
Income from property operations 17,375 9,866 48,154 27,566
------- ------- -------- -------
------- ------- -------- -------
SERVICE COMPANY BUSINESS
Management fees and other income 3,568 1,717 9,173 5,442
Management and other expenses (2,386) (990) (5,029) (3,449)
Corporate overhead allocation (147) (147) (441) (443)
Amortization of management company goodwill (237) (114) (711) (344)
Other assets depreciation and amortization (75) (62) (236) (154)
------- ------- -------- -------
Income from service company business 723 404 2,756 1,052
Minority interests in service company business 50 (3) 48 (10)
------- ------- -------- -------
------- ------- -------- -------
Company's share of income from service company business 773 401 2,804 1,042
------- ------- -------- -------
GENERAL AND ADMINISTRATIVE EXPENSES (624) (394) (1,408) (943)
INTEREST EXPENSE (12,755) (5,850) (33,359) (16,775)
INTEREST INCOME 3,117 31 4,458 242
MINORITY INTEREST IN OTHER PARTNERSHIPS (212) - (777) -
EQUITY IN LOSSES OF UNCONSOLIDATED PARTNERSHIPS (84) - (463) -
EQUITY IN EARNINGS OF UNCONSOLIDATED SUBSIDIARIES 542 - 456 -
------- ------- -------- -------
INCOME BEFORE EXTRAORDINARY ITEM, GAIN (LOSS) ON DISPOSITION
OF PROPERTIES AND MINORITY INTEREST IN OPERATING
PARTNERSHIP 8,132 4,054 19,865 11,132
Extraordinary item - early extinguishment of debt - - (269) -
Gain (loss) on disposition of properties (169) 64 (169) 64
------- ------- -------- -------
INCOME BEFORE MINORITY INTEREST IN OPERATING PARTNERSHIP 7,963 4,118 19,427 11,196
Minority interest in Operating Partnership (996) (722) (2,612) (1,845)
------- ------- -------- -------
NET INCOME $6,967 $3,396 $16,815 $9,351
------- ------- -------- -------
------- ------- -------- -------
Net income attributable to preferred stockholder $835 - $835 -
------- ------- -------- -------
------- ------- -------- -------
Net income attributable to common stockholders $6,132 $3,396 $15,980 $9,351
------- ------- -------- -------
------- ------- -------- -------
NET INCOME PER COMMON SHARE AND COMMON
SHARE EQUIVALENT
Income before extraordinary item, gain (loss) on
disposition of properties net of minority interest
in Operating Partnership and income attributable to
preferred stockholder $0.26 $0.26 $0.79 $0.76
Extraordinary item - early extinguishment of debt - - (0.01) -
Gain (loss) on disposition of properties (0.01) 0.01 (0.01) 0.01
------- ------- -------- -------
Net Income $0.25 $0.27 $0.77 $0.77
------- ------- -------- -------
------- ------- -------- -------
DIVIDENDS PAID PER COMMON SHARE $0.4625 $0.425 $1.3875 $1.275
------- ------- -------- -------
------- ------- -------- -------
WEIGHTED AVERAGE SHARES AND COMMON SHARE
EQUIVALENTS OUTSTANDING 24,609 12,398 20,629 12,127
------- ------- -------- -------
------- ------- -------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOW
(In Thousands)
(Unaudited)
<TABLE>
For the For the
Nine Months Ended Nine Months Ended
September 30, 1997 September 30, 1996
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 16,815 $ 9,351
--------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 26,595 14,801
Loss (gain) on disposition of properties 169 (64)
Minority interest in Operating Partnership 2,612 1,845
Minority interests in other partnerships 777 -
Equity in losses of unconsolidated partnerships 463 -
Equity in earnings of unconsolidated subsidiary (456) -
Extraordinary loss on early extinguishment of debt 269 -
(Increase) decrease from changes in operating assets:
Restricted cash (137) 9,039
Accounts receivable (7,241) (580)
Other assets (7,308) (3,299)
Increase (decrease) from changes in operating liabilities:
Accounts payable, accrued and other liabilities 17,299 (707)
Resident security deposits and prepaid rents 3,578 479
--------- --------
Total adjustments 36,620 21,514
--------- --------
Net cash provided by operating activities 53,435 30,865
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of real estate - 17,167
Purchase of real estate (86,205) (10,998)
Purchase of note receivable - (2,893)
Purchase of general and limited partnership interests (67,393) -
Additions to property held for sale (139) -
Capital replacements (5,166) (4,008)
Initial capital expenditures (5,650) (3,681)
Construction in progress and capital enhancements (6,143) (6,475)
Purchase of office equipment and leasehold improvements (1,113) (300)
Proceeds from sale of property held for sale 231 -
Purchase of NHP mortgage loans (39,918) -
Purchase of NHP common stock (121,437) -
Purchase of Ambassador common stock (19,881) -
Dividends received 38,000 -
--------- --------
Net cash used in investing activities (314,814) (11,188)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of Class A Common Stock,
net of underwriting and offering costs 268,960 45
Principal repayments received on notes due from
Officers on Class A Common Stock purchases 10,323 -
Proceeds from issuance of Class B Preferred Stock 75,000 -
Repurchase of common stock - (3,543)
Proceeds from secured notes payable borrowings 94,111 -
Proceeds from secured tax-exempt bond financing - 58,010
Net borrowings on Credit Facility 153,180 -
Repayments from unsecured short-term financing (12,500) -
Net proceeds from secured short-term financing - 23,300
Principal repayments on secured notes payable (4,451) (28,599)
Principal repayments on secured tax-exempt bond financing (1,056) (48,363)
Principal repayments on secured short-term financing (258,922) -
Payment of loan costs, net of proceeds from interest
rate hedge 1,346 (3,022)
Payment of common stock dividends (28,135) (15,456)
Payment of distributions to minority interest in
Operating Partnership (3,872) (2,656)
Payment of additional offering costs related to 1995
common stock offering, dividend reinvestment plan
and stock option plan - (657)
--------- --------
Net cash provided by (used in) financing activities 293,984 (20,941)
--------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 32,605 (1,264)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 13,170 2,379
--------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 45,775 $ 1,115
--------- --------
--------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Consolidated Statements of Cash Flow
(In Thousands Except Share and Operating Partnership Unit Data)
NON CASH INVESTING AND FINANCING ACTIVITIES
PURCHASE OF REAL ESTATE
Secured notes payable assumed in connection
with purchase of real estate $ 63,446
Real estate purchased in exchange for
1,897,794 Operating Partnership Units 55,906
--------
$119,352
--------
--------
PURCHASE OF 53.3% INTEREST IN NHP INCORPORATED In May 1997, the Company
acquired 2,866,071 shares of NHP Incorporated's ("NHP") common stock in
exchange for 2,142,857 shares of AIMCO Class A Common Stock with a recorded
value of $57,321. Subsequent to the purchase, the Company contributed the NHP
common stock to AIMCO/NHP Holdings, Inc. ("ANHI"), an unconsolidated
subsidiary formed in April 1997, in exchange for all of the shares of ANHI's
nonvoting preferred stock, representing a 95% economic interest in ANHI.
Concurrent with this contribution, ANHI obtained a loan in the amount of
$72,600, and used the proceeds from the loan to purchase 3,630,002 additional
shares of NHP common stock. In August and September 1997, AIMCO purchased
5,717,000 shares of NHP common stock from ANHI for an aggregate purchase price
of $114,397, and purchased an additional 434,049 shares from third parties,
pursuant to the stock purchase agreement. Upon the completion of these
transactions, AIMCO and ANHI owned a combined total of 6,930,122 shares of NHP
common stock, representing 53.3% of NHP's outstanding common stock as of
September 30, 1997 (see Note 8).
PURCHASE OF GENERAL AND LIMITED PARTNERSHIP INTERESTS, CAPTIVE INSURANCE
SUBSIDIARY AND OTHER ASSETS
The historical cost of the assets and the liabilities assumed in connection
with the purchase of NHP Partners, Inc., NHP Partners Two Limited Partners
and their subsidiaries (the NHP Real Estate Companies) (see Note 7) were as
follows:
Real estate, net $ 174,545
Investment in real estate partnerships 89,526
Restricted cash 6,051
Accounts receivable 12,743
Other assets 3,347
Secured notes payable (140,270)
Accounts payable, accrued and other liabilities (50,153)
Accrued management contract liability (106,615)
Resident security deposits and prepaid rent (1,025)
REDEMPTION OF OPERATING PARTNERSHIP UNITS
During the nine months ended September 30, 1997, 558,601 Operating
Partnership units with a recorded value of $8,555 were redeemed in exchange
for an equal number of shares of Class A Common Stock.
PROPERTY HELD FOR SALE
In the third quarter of 1997, the Company entered into contracts to sell five
apartment communities with a net book value of $19.1 million. These assets,
which were reclassified to Property held for sale (see Note 4), were sold in
October 1997 (see Note 18).
ISSUANCE OF NOTES RECEIVABLE DUE FROM OFFICERS
During the nine months ended September 30, 1997, the Company issued notes
receivable from officers for a total of $33.7 million in connection with the
purchase of 1,125,000 shares of Class A Common Stock.
OTHER
During the nine months ended September 30, 1997, the Company reclassified
$1,323 of Other assets to Real estate as a purchase price allocation
adjustment. In addition, the Company wrote off $4,065 of Other assets
allocable to limited partners in partnerships controlled by the Company, to
Minority interest in other partnerships.
During the nine months ended September 30, 1997, the Operating Partnership
issued an additional 198,218 Operating Partnership units with a recorded value
of $6,653 in connection with the purchase of certain partnership interests.
During the nine months ended September 30, 1997 the Company recorded
unrealized gains on investments held for sale of $1,175.
See accompanying notes to consolidated financial statements.
6
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Notes to Consolidated Financial Statements
September 30, 1997
(Unaudited)
NOTE 1 - ORGANIZATION
Apartment Investment and Management Company, a Maryland corporation
incorporated on January 10, 1994 ("AIMCO" and together with its
subsidiaries and other controlled entities, the "Company") acts as
sole general partner of AIMCO Properties, L.P. (the "Operating
Partnership") through AIMCO-GP, Inc. and AIMCO-LP, Inc., wholly-owned
subsidiaries which hold all of the Company's general and limited
partnership interests in and a majority ownership of the Operating
Partnership.
At September 30, 1997, AIMCO had 28,274,739 shares of Class A Common
Stock outstanding and the Operating Partnership had 4,936,230
Partnership Common Units ("OP Units") outstanding, for a combined
total of 33,210,969 shares and OP Units in the Operating Partnership.
The Company held an 85% interest in the Operating Partnership as of
September 30, 1997.
As of September 30, 1997, the Company, through its subsidiaries,
owned or controlled 28,773 units in 109 apartment communities and had
an equity interest in 87,182 units in 526 apartment communities. In
addition, the Company manages 71,038 units in 394 apartment
communities for third parties and affiliates, bringing the total owned
and managed portfolio to 186,993 units in 1,029 apartment communities.
The apartment communities are located in 42 states, the District of
Columbia and Puerto Rico.
NOTE 2 - BASIS OF PRESENTATION
The accompanying consolidated financial statements include the
accounts of AIMCO, the Operating Partnership, majority owned
subsidiaries and controlled real estate limited partnerships. The
Company operates its service company business through Property Asset
Management Services, L.P. ("PAMS, L.P."). The Operating Partnership
owns a 1% general partnership interest in PAMS, L.P., which provides
the Operating Partnership with control of PAMS, L.P. The 99% limited
partner of PAMS, L.P. is Property Asset Management Services, Inc.
("PAMS, Inc."). The Operating Partnership owns all of the non-voting
preferred stock of PAMS, Inc., representing a 95% economic interest.
As a result of the control held by the Operating Partnership in PAMS,
L.P., the service company business is consolidated.
Interests held by holders of OP Units are reflected as Minority
interest in Operating Partnership. Interests held by limited partners
in real estate partnerships controlled by the Company are reflected as
Minority interest in other partnerships.
AIMCO/NHP Holdings, Inc. ("ANHI") is an unconsolidated subsidiary of
the Company which owns 779,073 shares of common stock of NHP
Incorporated ("NHP"), representing 6.0% of the shares outstanding as
of September 30, 1997 (see Note 6). The Operating Partnership owns a
95% economic interest in ANHI through its ownership of 100% of the
non-voting preferred stock of ANHI (the "ANHI Preferred Stock").
Certain directors and officers of AIMCO own a 5% economic interest in
ANHI through their ownership of all of its outstanding shares of
common stock. As a result of the controlling ownership interest in
ANHI held by such directors and officers, the Company accounts for its
interest in ANHI on the equity method.
7
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Notes to Consolidated Financial Statements (continued)
NOTE 2 - BASIS OF PRESENTATION (CONTINUED)
In connection with the purchase of the NHP Real Estate Companies, and
through the acceptance of tender offers made to various limited
partners, the Company purchased controlling interests in 3,176 units
located in 14 apartment communities, which are presented on a
consolidated basis (see Notes 3 and 7). In addition, the Company
purchased non-controlling interests in partnerships which own 84,483
units in 520 apartment communities (see Note 7). The Company believes
that it does not possess the power to control these partnerships in
which it holds a general partner interest but owns less than a 50%
interest in the partnership. The terms of these partnership
agreements specify that the general partner must obtain the prior
approval of a majority of the limited partners in order to implement
major decisions regarding the disposal of real estate owned by the
partnership. Therefore, the Company uses the equity method of
accounting for these partnerships. The Company's interest in these
properties is reflected as Investment in real estate partnerships.
The acquisition of the NHP Real Estate Companies was accounted for as
a purchase whereby the assets and liabilities were adjusted to
estimated fair market value, based upon preliminary estimates, which
are subject to change as additional information is obtained.
The accompanying unaudited consolidated financial statements of the
Company as of September 30, 1997 and for the three and nine months
ended September 30, 1997 and 1996 have been prepared in accordance
with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation have been
included and all such adjustments are of a recurring nature.
The consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto
included in the Annual Report on Form 10-K for the year ended December
31, 1996. It should be understood that accounting measurements at
interim dates inherently involve greater reliance on estimates than at
year end. The results of operations for the interim periods presented
are not necessarily indicative of the results for the entire year.
Certain reclassifications have been made in the December 31, 1996
balance sheet to conform to the current period presentation.
NOTE 3 - REAL ESTATE
During the nine months ended September 30, 1997, the Company purchased
or acquired control of 21 apartment communities as described below.
The cash portions of the acquisitions were funded with short-term
unsecured financings, borrowings under the Company's Credit Facility
or with working capital.
The Company acquired the following apartment communities in unrelated
transactions during the nine months ended September 30, 1997. The
aggregate consideration paid by the Company of $191.5 million
consisted of $72.2 million in cash, 1,897,794 OP Units with a total
recorded value of $55.9 million and the assumption of $63.4 million of
secured long-term indebtedness.
8
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Notes to Consolidated Financial Statements (continued)
NOTE 3 - REAL ESTATE (CONTINUED)
Date Number
Acquired Property Location of Units
-------- -------- -------- --------
4/97 Bay Club Aventura, FL 702
6/97 Stonebrook Orlando, FL 244
6/97 Tustin Woods/Californian* Tustin, CA 292
6/97 The Vinings at the Waterways Aventura, FL 180
7/97 Sawgrass Orlando, FL 208
9/97 Los Arboles Chandler, AZ 232
9/97 Morton Towers Miami Beach, FL 1,277
-----
3,135
-----
-----
*The Company acquired a 45,000 square foot retail complex as part of
the Tustin Woods/Californian acquisition.
In connection with the acquisition of the NHP Real Estate Companies
(see Note 7) and the acceptance of subsequent tender offers to limited
partners, the Company acquired a controlling interest in 14
partnerships (the "Controlled NHP Partnerships"), which own 3,176
units located in 14 apartment communities. The portion of the
aggregate purchase price for the NHP Real Estate Companies allocated
to these general and limited partnership interests was approximately
$174.5 million, including the assumption of approximately $140.3
million of mortgage indebtedness. Through its ownership, the Company
has the ability to refinance or sell the properties held by the
Controlled NHP Partnerships.
Date Number
Acquired Property Location of Units
-------- -------- -------- --------
5/97 Elm Creek Chicago, IL 372
5/97 Arbor Crossing Atlanta, GA 240
5/97 Sandpiper Cove West Palm Beach, FL 416
5/97 Lake Crossing Atlanta, GA 300
5/97 Tara Bridge Atlanta, GA 220
5/97 Cambridge Heights Natchez, MS 94
5/97 Newberry Park Chicago, IL 84
5/97 Pride Gardens Jackson, MS 76
5/97 Summer Chase Fort Smith, AR 72
5/97 Lakehaven I Carol Stream, IL 144
5/97 Lakehaven II Carol Stream, IL 348
5/97 Point West Lenexa, KS 172
5/97 Greens of Naperville Naperville, IL 400
5/97 100 Forest Place Oak Park, IL 238
-----
3,176
-----
-----
NOTE 4 - PROPERTY HELD FOR SALE
Property held for sale primarily represents five apartment communities
with a net book value of $19.1 million, which were under contract for
sale as of September 30, 1997, and $6.5 million of other assets.
These properties were classified as Real Estate in the prior year.
Property held for sale is recorded at the lower of cost or fair value
less estimated selling costs. The five apartment communities were sold
during October 1997 for $22.7 million, resulting in a net gain after
closing costs of $2.8 million (See Note 18).
9
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Notes to Consolidated Financial Statements (continued)
NOTE 5 - INVESTMENTS HELD FOR SALE
In September 1997, the Company acquired 886,600 shares of Ambassador
Apartments, Inc. ("Ambassador") common stock, a publicly traded real
estate investment trust ("REIT"), for $19.8 million in cash. The
shares acquired represent 8.45% of the Ambassador shares outstanding,
as reported in Ambassador's Form 10-Q for the quarter ended June 30,
1997. The shares are being held for investment purposes, and are
carried at their estimated market value as of September 30, 1997 and
includes an unrealized gain of $1.2 million, which is included as a
component of Stockholders' equity.
NOTE 6 - INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
In May 1997, the Company acquired 2,866,073 shares of NHP common stock
from Demeter Holdings ("Demeter"), Capricorn Investors, L.P.
("Capricorn") and certain of Capricorn's limited partners
(collectively, the "NHP Sellers") in exchange for 2,142,857 shares of
the Company's Class A Common Stock with a recorded value of $57.3
million. Subsequent to the purchase, the Company contributed the NHP
common stock to ANHI, in exchange for all of the shares of ANHI's
non-voting preferred stock, representing a 95% economic interest in
ANHI. Concurrently, ANHI obtained a loan in the amount of $72.6
million (the "ANHI Credit Facility") and used the proceeds from the
loan to purchase 3,630,000 additional shares of NHP common stock from
the NHP Sellers. Upon the completion of this transaction, ANHI owned
6,496,073 shares of NHP common stock, representing 51.3% of NHP's
outstanding common stock as of May 31, 1997.
In two separate transactions, occurring in August and September 1997,
ANHI sold to AIMCO 5,717,000 shares of NHP common stock for an
aggregate purchase price of $114.4 million. ANHI used $74.3 million
of the proceeds from the sale to repay the principal and accrued
interest outstanding under the ANHI Credit Facility and distributed
$40.0 million to the Operating Partnership and other shareholders. As
of September 30, 1997, ANHI owns 779,073 shares of NHP common stock,
which represents 6.0% of the NHP common stock outstanding.
Summarized balance sheet and statement of operations information for
ANHI as of September 30, 1997 and for the period from April 14, 1997
(inception) through September 30, 1997 (representing operations for
the period from May 3, 1997, the date of purchase of 51.3% of NHP
common stock to September 30, 1997) follows (in thousands):
SUMMARIZED BALANCE SHEET INFORMATION SEPTEMBER 30, 1997
------------------
Total assets $20,464
Stockholders' equity 20,464
10
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Notes to Consolidated Financial Statements (continued)
NOTE 6 - INVESTMENT IN UNCONSOLIDATED SUBSIDIARY (Continued)
FOR THE PERIOD FROM
APRIL 14 (INCEPTION) TO
SUMMARIZED STATEMENT OF OPERATIONS SEPTEMBER 30, 1997
-----------------------
Income from property operations $1,654
Income from property management activities 7,450
Interest expense, net of interest income (5,079)
------
Income before income taxes and minority interest 4,025
Income tax provision (1,882)
Minority interest in NHP (2,819)
------
Loss from continuing operations (676)
Discontinued operations, net of tax 602
------
Net loss $(74)
------
------
Loss attributable to preferred stockholder $(70)
------
------
Loss attributable to common stockholders $(4)
------
------
NOTE 7 - INVESTMENT IN AND NOTES RECEIVABLE FROM REAL ESTATE PARTNERSHIPS
In June 1997, the Company completed the acquisition of the NHP Real
Estate Companies from entities owned by Demeter, Phemus Corporation
(an affiliate of Demeter), Capricorn and Mr. J. Roderick Heller, III,
the Chairman, President and CEO of NHP, for $54.8 million in cash and
warrants to purchase 399,999 shares of AIMCO Class A Common Stock at
an exercise price of $36 per share. The NHP Real Estate Companies own
interests in partnerships that own 87,659 conventional and affordable
units in 534 apartment communities (the "NHP Properties"), a captive
insurance company and other related assets. A substantial majority of
the NHP Properties are currently managed by NHP pursuant to a long-term
agreement.
During the nine months ended September 30, 1997, the Company has made
offers to the limited partners of 25 NHP partnerships to acquire their
limited partnerships interests for cash or OP units. The Company
has accepted tenders from certain limited partners, in exchange for
$26.0 million and 198,218 OP units, valued at $6.7 million, resulting
in the Company having a weighted average ownership in these
partnerships of 47% as of September 30, 1997. In addition, during
September 1997, the Company purchased the existing mortgages on three
properties for an aggregate purchase price of $39.9 million, and land
leases for two properties for $12.6 million. As a result of these
transactions, 3,176 units located in 14 apartment communities are
presented on a consolidated basis due to the control held by the
Company. The remaining 84,483 units, located in 520 apartment
communities, are presented under the equity method.
The purchase price of the NHP Real Estate Companies includes the
assumption of an unfavorable contract allocating cash flow to NHP in
the event the property management contracts between NHP and the
general partners of the property-owning partnerships are modified or
terminated prior to maturity (see Note 12).
The Company is currently engaged in a reorganization of its interests
in the NHP Real Estate Companies, which will result in the majority of
the assets of the NHP Real Estate Companies being owned by an
unconsolidated limited partnership, in which the Operating Partnership
will hold a 99% limited partnership interest, and certain directors and
officers of AIMCO will, directly or indirectly, hold a 1% general
partnership interest.
11
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Notes to Consolidated Financial Statements (continued)
NOTE 8 - INVESTMENT IN NHP INCORPORATED
In two separate transactions, occurring in August and September 1997,
the Company purchased 5,717,000 shares of NHP common stock from ANHI
for an aggregate purchase price of $114.4 million. In a separate
transaction, occurring in September 1997, the Company acquired an
additional 434,049 shares of NHP common stock for $7.0 million in
cash and the issuance of 61,364 shares of AIMCO Class A Common Stock,
bringing the aggregate number of shares of NHP common stock owned by
AIMCO to 6,151,049, which represents a 47.3% ownership interest
in NHP as of September 30, 1997.
NOTE 9 - SECURED LONG-TERM FINANCING
In April 1997, 23 partnerships controlled by the Company completed a
$108 million refinancing of its secured, short-term, floating rate
indebtedness with secured, 20-year, all-in fixed interest rate of
7.6%, fully amortizing debt (see Note 10). The loans are secured by
27 multifamily apartment communities owned by such partnerships. In
connection with this refinancing, the Company received proceeds of
$3.4 million from two interest rate swaps accounted for as a hedge.
The gain on the swaps was deferred and will be amortized over the 20
year life of the debt.
During the nine months ended September 30, 1997, the Company assumed
$63.4 million in notes payable secured by first trust deeds in
connection with the purchases of the Bay Club, Stonebrook and The
Vinings apartments.
In connection with the acquisition of the NHP Real Estate Companies,
the Company has consolidated long-term indebtedness totaling $105.7
million, which is secured by 14 properties held by partnerships in
which the Company purchased a controlling interest. The indebtedness
bears interest at fixed rates ranging from 6.05% to 9.50% and matures
at various dates through 2029.
NOTE 10 - SECURED SHORT-TERM FINANCING
The Company utilizes a variety of secured short-term financing
instruments to manage its working capital needs and to fund real
estate investments, including a variable rate revolving credit
facility with Bank of America (the "Credit Facility") as well as
various fixed and floating rate term loans. As of December 31, 1996,
the Company has secured short-term borrowings outstanding totaling
$192.0 million. During the nine months ended September 30, 1997, the
Company borrowed an additional $174.0 million and repaid $271.7
million under these borrowing arrangements, resulting in $94.3 million
of secured short-term borrowings outstanding as of September 30, 1997,
of which $74.0 million were repaid in October 1997 with proceeds from
the issuance of AIMCO Class A Common Stock (see Note 13).
In May 1997, the Company increased its maximum amount available under
the Credit Facility from $50 million to $100 million. The interest
rate is LIBOR plus 1.45% unless borrowings exceed 60% of the aggregate
collateral value, in which case, the interest rate is LIBOR plus
1.70%. The Credit Facility matures in August 1998 and, subject to
certain customary conditions, the outstanding balance may be converted
to a three year term loan. As borrowings exceeded 60% of the
aggregate collateral value during the quarter ended September 30,
1997, the interest rate charged on the outstanding borrowings was
LIBOR plus 1.70% (7.33% at September 30, 1997). The outstanding
balance under the Credit Facility as of September 30, 1997 was $74.0
million which, as noted above, was repaid in October 1997 with
proceeds received from the sale of 7,000,000 shares of Class A Common
Stock (see Note 13).
12
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Notes to Consolidated Financial Statements (continued)
NOTE 10 - SECURED SHORT-TERM FINANCING (Continued)
In March 1997, the Company entered into an interest rate swap
agreement with a major investment banking company, having a
notional principal amount of $100 million, in anticipation of
refinancing certain floating rate indebtedness to expected 15 year
fixed-rate indebtedness in the fourth quarter of 1997. A second
interest rate swap agreement was executed in September 1997, having
a notional principal amount of $75 million. The interest rate
swap agreements mature on December 3, 1997 and fix the twelve and
ten year treasury rates at 7.019% and 6.179%, respectively. Based
on the fair value of the interest rate swaps at September 30, 1997,
the Company has a potential loss of approximately $7.9 million, which
is expected to be amortized over the life of the refinanced debt.
NOTE 11 - UNSECURED SHORT-TERM FINANCING
The Company repaid $12.5 million incurred in connection with the
1996 purchase of interests in limited partnerships with proceeds
from a public offering of shares of Class A Common Stock completed in
February 1997 (see Note 13).
NOTE 12 - ACCRUED MANAGEMENT CONTRACT LIABILITY
Pursuant to a Master Property Management Agreement among NHP and
certain NHP Real Estate Companies, the NHP Real Estate Companies have
agreed to cause NHP to be retained as property manager for most of the
NHP Properties throughout the 25 year term of the Master Property
Management Agreement. As a result, the Master Property Management
Agreement contractually allocates the cash flow stream of the
underlying properties. If NHP is not retained as manager for any
property, the NHP Real Estate Companies are generally obligated to
pay a termination fee equal to 200% of the annualized fees previously
received by NHP from the property. Therefore, in recording the
acquisition of the NHP Real Estate Companies, the Company has accrued
a liability for the management contract in the amount of $106,615 as
of September 30, 1997, which is fully offset by increases in Real
estate and Investments in and notes receivable from real estate
partnerships.
NOTE 13 - STOCKHOLDERS' EQUITY
In February 1997, the Company completed a public offering of 2,015,000
shares of AIMCO Class A Common Stock (including 15,000 shares subject
to the underwriter's overallotment option) at a public offering price
of $26.75 per share. The net proceeds of approximately $51.0 million
were used to repay a portion of the Company's indebtedness incurred in
connection with acquisitions completed in November and December 1996.
In March 1997, certain executive officers of the Company (or entities
controlled by them) repaid $11.4 million of their $18.6 million in
notes payable to the Company which were executed for the purchase in
1996 of 895,250 shares of AIMCO Class A Common Stock by these
executive officers.
In May 1997, the Company sold 2,300,000 million shares of AIMCO Class
A Common Stock at an average price of $28 per share in two public
offerings. The net proceeds of approximately $63.0 million were used
to repay the then outstanding indebtedness under the Company's Credit
Facility of $56 million and to provide working capital of $7 million.
13
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Notes to Consolidated Financial Statements (continued)
NOTE 13 - STOCKHOLDERS' EQUITY (Continued)
In July 1997, the Company sold 1,100,000 newly issued shares of AIMCO
Class A Common Stock at a price of $30 per share, the closing price of
the stock on the date of purchase, to certain members of the Company's
senior management. In payment for the stock, such members of senior
management executed notes payable to AIMCO totaling $33.0 million (of
which, $9.9 million has been repaid), bearing interest at 7.25% per
annum, payable quarterly, and due in ten years. The stock purchase
notes are secured by the stock purchased and are recourse as to 25% of
the original amount borrowed.
In August 1997, the Company sold 750,000 shares of newly issued AIMCO
Class B Cumulative Convertible Preferred Stock ("AIMCO Class B
Preferred Stock") for gross proceeds of $75.0 million in cash to
an institutional investor, in a private transaction. Holders of the
AIMCO Class B Preferred Stock are entitled to receive, when, as and if
declared by the Board of Directors, quarterly cash dividends per share
equal to the greater of $1.78125 or the cash dividends declared on the
number of shares of AIMCO Class A Common Stock into which one share of
AIMCO Class B Preferred Stock is convertible. Each share of AIMCO
Class B Preferred Stock is convertible at the option of the holder,
beginning in August 1998, into 3.28407 shares of AIMCO Class A Common
Stock, subject to certain anti-dilution adjustments. The AIMCO Class
B Preferred Stock is senior to the AIMCO Class A Common Stock as to
dividends and liquidation. The proceeds from the sale of the AIMCO
Class B Preferred Stock were used to repay borrowings outstanding
under the Credit Facility and to provide working capital.
In August and September 1997, the Company issued an aggregate of
5,052,418 shares of AIMCO Class A Common Stock to institutional
investors for aggregate net proceeds of approximately $156.9 million.
AIMCO used $114.4 million of such proceeds to purchase 5,717,000
shares of NHP Common Stock from ANHI, used $7.0 million to purchase
351,974 additional shares of NHP Common Stock from a third party
pursuant to a stock purchase agreement, and contributed the remaining
$35.5 million to the Operating Partnership. An additional 61,364
shares of AIMCO Class A Common Stock were issued in exchange for
82,074 shares of NHP common stock.
An additional 7,000,000 shares of AIMCO Class A Common Stock were
issued during October 1997, at a price of $36.50 per share, resulting
in net proceeds of $242.5 million (See Note 18).
NOTE 14 - EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per
Share" ("Statement 128") which specifies the computation, presentation
and disclosure requirements for basic earnings per share and diluted
earnings per share.
Management believes that adoption of Statement 128 will not have a
material effect on earnings per share of the Company.
NOTE 15 - REGISTRATION STATEMENTS
In April 1997, AIMCO filed a shelf registration statement with the
Securities and Exchange Commission ("the "SEC") which provides for the
offering on a delayed or continuous basis of debt securities,
preferred stock and AIMCO Class A Common Stock with an aggregate value
of up to $1 billion. The shelf registration statement was declared
effective in May 1997. Subsequent to the shelf registration, the
Company has issued 14,352,418 shares of newly issued AIMCO Class A
Common Stock in exchange for cash proceeds of $462.4 million.
14
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Notes to Consolidated Financial Statements (continued)
NOTE 16 - COMMITMENTS
On April 21, 1997, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with NHP and AIMCO/NHP Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of AIMCO
("Merger Sub"). Pursuant to the Merger Agreement, the Merger Sub will
be merged with and into NHP (the "Merger"), with NHP being the
surviving corporation after the Merger and becoming a wholly owned
subsidiary of the Company. Upon consummation of the Merger, each
outstanding share of NHP common stock, other than the NHP common stock
held by NHP, the Company or Merger Sub, will be converted into the
right to receive, at the election of the holder, either: (i) 0.74766
shares of AIMCO Class A Common Stock ("Stock Consideration"); or
(ii) a combination of 0.37383 shares of AIMCO Class A Common Stock
and $10 in cash ("Mixed Consideration"). The Merger requires the
affirmative vote of: (i) a majority of the outstanding shares of NHP
common stock and (ii) at least 66 2/3% of the outstanding shares of
NHP common stock, excluding shares deemed to be owned by the Company
or its affiliates. In addition, under the rules of the New York
Stock Exchange, the issuance of shares of AIMCO Class A Common Stock
in the Merger requires the affirmative vote of a majority of the
votes cast at a meeting of the Company at which the total votes cast
represent over 50% of all shares of AIMCO Class A Common Stock
entitled to vote thereon. A special meeting of shareholders to
approve the merger with NHP has been scheduled for December 8, 1997.
In accordance with the Merger Agreement, on May 9, 1997, NHP
distributed to each stockholder of record as of May 2, 1997, one right
("Right") for each outstanding share of NHP common stock. Each Right
entitles the holder thereof to receive, subject to certain conditions,
on the earlier of the effective time of the Merger or December 1,
1997, if the Merger has not yet occurred, subject to deferral if any
required consents, filings or approvals have not yet been obtained
(the "Maturity Time"), one third of a share of the WMF Group, Ltd., a
wholly-owned subsidiary of NHP ("WMF") (the "WMF Spin-off"). If the
distribution of WMF stock has not occurred by December 1, 1997, the
holders of the Rights may receive an additional cash amount equal to
$3.05 for each share of NHP common stock held by them.
The Merger Agreement provides that NHP will contribute cash to WMF,
forgive indebtedness of WMF or any combination thereof, in an
aggregate amount equal to NHP's best estimate (subject to AIMCO's
reasonable approval) of the amount, if any, by which (i) NHP's
earnings before interest, taxes, depreciation and amortization,
less the amount of cash payments made or obligated to be made in
respect of taxes and interest during the period from February 1, 1997
to the Maturity Time and less $500,000 per month (or a ratable
portion thereof) included in such period, exceeds (ii) the
termination, severance and transaction costs incurred by NHP with
respect to the Merger and the WMF Spin-Off during that same period.
NOTE 17 - PRO FORMA FINANCIAL STATEMENTS
During the nine months ended September 30, 1997, the Company purchased
the NHP Real Estate Companies and, together with an unconsolidated
subsidiary, purchased a 53.3% interest in NHP. The following
unaudited Pro Forma Condensed Consolidated Statements of Operations
for the nine months ended September 30, 1997 and 1996 have been
prepared as if the above described transactions had occurred at the
beginning of the periods being reported. The following Pro Forma
Financial Information is based, in part, on the following historical
financial statements:
15
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Notes to Consolidated Financial Statements (continued)
NOTE 17 - PRO FORMA FINANCIAL STATEMENTS (Continued)
(i) the unaudited financial data of the Company for the nine months
ended September 30, 1997 and 1996; (ii) the unaudited Consolidated
Financial Statements of NHP for the nine months ended September 30,
1997 and 1996 (which have been restated to reflect NHP's
subsidiary, WMF Group, Ltd., as a discontinued operation); and
(iii) the unaudited Combined Financial Statements of the NHP Real
Estate Companies for the five months ended May 31, 1997 and the nine
months ended September 30, 1996.
The pro forma financial statements are not necessarily indicative
of what the Company's results of operations would have been
assuming the completion of the described transactions at the
beginning of the periods indicated, nor does it purport to project
the Company's results of operations for any future period.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -------------
RENTAL PROPERTY OPERATIONS
Rental and other property revenues $133,742 $82,281
Property operating expenses (53,679) (33,560)
Owned property management expense (4,626) (2,493)
-------- -------
Income from property operations before
depreciation 75,437 46,228
Depreciation (25,194) (16,010)
-------- -------
Income from property operations 50,243 30,218
-------- -------
SERVICE COMPANY BUSINESS
Management fees and other income 10,578 10,711
Management and other expenses (7,950) (9,718)
Corporate overhead allocation (441) (443)
Amortization of management company goodwill (711) (344)
Other assets depreciation and amortization (236) (154)
-------- -------
Income from service company business 1,240 52
Minority interests in service company business 48 (10)
-------- -------
Company's share of income from service
company business 1,288 42
-------- -------
GENERAL AND ADMINISTRATIVE EXPENSES (1,408) (943)
INTEREST EXPENSE (38,381) (25,572)
INTEREST INCOME 4,998 1,312
MINORITY INTEREST IN OTHER
PARTNERSHIPS (777) 3,774
EQUITY IN LOSSES OF UNCONSOLIDATED
PARTNERSHIPS (3,683) (3,882)
EQUITY IN EARNINGS OF UNCONSOLIDATED
SUBSIDIARY 1,169 176
-------- -------
INCOME BEFORE EXTRAORDINARY ITEM AND
MINORITY INTEREST IN OPERATING PARTNERSHIP 13,449 5,125
Extraordinary item - early extinguishment of
debt (269) -
Gain (loss) on disposition of properties (169) 64
-------- -------
INCOME BEFORE MINORITY INTEREST IN OPERATING
PARTNERSHIP 13,011 5,189
Minority interest in Operating Partnership (1,735) (732)
-------- -------
NET INCOME $11,276 $4,457
-------- -------
-------- -------
Net income attributable to preferred stockholder $ 835 $ -
-------- -------
-------- -------
Net income attributable to common stockholders $10,441 $4,457
-------- -------
-------- -------
NET INCOME PER COMMON SHARE AND COMMON SHARE
EQUIVALENT $0.48 $0.31
-------- -------
-------- -------
WEIGHTED AVERAGE COMMON SHARES AND COMMON
SHARE EQUIVALENTS OUTSTANDING 21,625 14,332
-------- -------
-------- -------
16
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Notes to Consolidated Financial Statements (continued)
NOTE 18 - SUBSEQUENT EVENTS
INVESTMENT IN REAL ESTATE
On October 3, 1997, the Company purchased the debt secured by the
first lien deed of trust on the Elm Creek property for $20.7 million
in cash.
PURCHASE OF WINDWARD APARTMENTS
On October 15, 1997, the Company purchased Windward at the Villages
Apartments, a 196-unit apartment community located in West Palm
Beach, Florida, for $10.8 million in cash.
DIVIDEND DECLARED
On October 24, 1997, the AIMCO Board of Directors declared a cash
dividend of $0.4625 per share of AIMCO Class A Common Stock for the
quarter ended September 30, 1997, payable on November 14, 1997 to
stockholders of record on November 7, 1997.
SALE OF COMMON STOCK
The Company issued 7,000,000 million shares of AIMCO Class A Common
Stock on October 27, 1997 under its existing shelf registration
(see Note 15). The net proceeds from the sale totaled $242.5
million, which were used to fund certain property acquisitions, as
discussed below, repay the $74.0 million outstanding balance on the
Credit Facility and provide working capital.
PURCHASE OF WINTHROP PORTFOLIO
On October 31, 1997, the Company purchased 8,175 units in 35
apartment communities from sellers affiliated with Winthrop
Financial Associates. The aggregate purchase price of
approximately $263.5 million (including $10.0 million of
transaction costs) was comprised of $255.2 million in cash and the
assumption of $8.3 million in existing mortgage indebtedness. The
purchase price was based on arms-length negotiations between the
Company and the sellers. The Company financed a portion of the cash
purchase price through the issuance of 33 mortgage notes to GMAC
Commercial Mortgage Corporation, in an aggregate amount of $120.0
million, each of which is secured by one of the properties acquired,
and $19.1 million in bridge loan financing from GMAC Commercial
Mortgage Corporation, secured by one of the properties. None of the 33
mortgage notes or bridge financing is cross collateralized or subject
to any cross default provisions. The apartment communities acquired
are income generating apartment properties. The Company intends to
continue to utilize the assets acquired in the same manner as they
were employed prior to the acquisition.
SALE OF PROPERTIES
In October 1997, the Company sold five apartment communities
totaling 916 apartment units for $22.7 million in cash, resulting
in a $2.8 million gain. These properties are classified as
Property held for sale on the September 30, 1997 consolidated
balance sheet.
17
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OVERVIEW
As of September 30, 1997, the Company owned or managed 186,993 apartment
units, comprised of 28,773 units in 109 apartment communities owned or
controlled by the Company (the "Owned Properties"), 87,182 units in 526
apartment communities in which the Company has an equity interest and 71,038
units in 394 apartment communities which the Company manages for third parties
and affiliates. The apartment communities are located in 42 states, the
District of Columbia and Puerto Rico.
On April 21, 1997, the Company entered into a Merger Agreement with NHP,
pursuant to which the Company and NHP have agreed to merge. In May 1997, the
Company acquired 2,866,073 shares of NHP common stock in exchange for
2,142,857 shares of the Company's Class A Common Stock. Subsequent to the
purchase, the Company contributed the NHP common stock to ANHI in exchange
for all of the shares of ANHI's non-voting Preferred Stock. Concurrently,
ANHI obtained a loan in the amount of $72.6 million and used the proceeds to
purchase 3,630,000 additional shares of NHP common stock. Upon the
completion of this transaction, ANHI owned 6,496,073 shares of NHP common
stock representing 51.3% of NHP's outstanding common stock as of May 31, 1997.
In two separate transactions, occurring in August and September 1997, the
Company purchased 5,717,000 shares of NHP common stock from ANHI, for an
aggregate purchase price of $114.4 million. ANHI used $74.3 million of the
proceeds from the sale to repay the principal and accrued interest outstanding
under the ANHI Credit Facility and distributed $40.0 million to the Operating
Partnership and other shareholders. In September 1997, the Company acquired
an additional 434,049 shares of NHP common stock pursuant to the purchase
agreement, bringing the aggregate number of shares of NHP common stock owned
by the Company and ANHI at September 30, 1997 to 6,930,122, which represents a
53.3% ownership interest in NHP.
NHP provides a broad array of real estate services, including property
management and asset management as well as a group of related services
including equity investments, purchasing, risk management and home health
care. NHP also has controlling interests in partnerships which own 2,905
units in 12 apartment communities.
In June 1997, the Company acquired the NHP Real Estate Companies, which own
general and limited partnership interests in 534 conventional and affordable
multifamily apartment communities containing 87,659 apartment units, a captive
insurance subsidiary and certain related assets, for $54.8 million in cash and
warrants to purchase 399,999 shares of AIMCO Class A Common Stock at an
exercise price of $36 per share. Subsequent to the purchase, the Company has
tendered for the unaffiliated limited partnership interests in certain
partnerships in which the Company itself, or through its purchase of the NHP
Real Estate Companies, holds general or limited partnership interests. As of
September 30, 1997, the Company has a weighted average ownership interest of
47% in the real estate partnerships. As a result of these transactions, the
Company consolidates the results of operations of 14 of these partnerships,
which own 14 apartment properties, consisting of 3,176 apartment units, due to
the extent of the Company's control over these partnerships. The operations
of the remaining 520 apartment communities consisting of 84,483 units are
presented using the equity method.
The following discussion contains forward-looking statements that are subject
to significant risks and uncertainties. There are several important factors
that could cause actual results to differ materially from the results
anticipated by the forward-looking statements contained in the following
discussion. Such factors and risks include, but are not limited to:
financing risks, including the risk that the Company's cash flow from
operations may be insufficient to meet required payments of principal and
interest on its debt; real estate risks, including variations of real estate
values and the general economic climate in local markets
18
<PAGE>
and competition for tenants in such markets; acquisition and development
risks, including failure of such acquisitions to perform in accordance with
projections; and possible environmental liabilities, including costs which may
be incurred due to necessary remediation of contamination of properties
presently owned or previously owned by the Company. In addition, the
Company's continued qualification as a REIT involves the application of highly
technical and complex provisions of the Internal Revenue Code. Readers should
carefully review the financial statements and the notes thereto, as well as
the risk factors described in documents the Company files from time to time
with the Securities and Exchange Commission.
RESULTS OF OPERATIONS
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1997 TO THE NINE MONTHS
ENDED SEPTEMBER 30, 1996
NET INCOME
The Company recognized net income of $16,815,000 for the nine months ended
September 30, 1997 compared to $9,351,000 for the nine months ended
September 30, 1996. The increase in net income of $7,464,000, or 79.8%, was
primarily the result of the following:
- - the acquisition of 9,909 units located in 40 apartment communities during
the period from April 1996 to December 1996 (the "1996 Acquisitions");
- - the acquisition of 3,135 units located in seven apartment communities in
the second and third quarters of 1997 (the "1997 Acquisitions);
- - the acquisition, through an unconsolidated subsidiary, of 53.3% of the
shares of common stock of NHP in May 1997; and
- - the acquisition of the NHP Real Estate Companies in June 1997, and
subsequent third quarter tender offers.
The increase in net income is partially offset by the sale of four properties
in August 1996 (the "1996 Sold Properties"), increased real estate
depreciation and increased interest expense associated with indebtedness
which was assumed or incurred in connection with the 1996 Acquisitions, the
1997 Acquisitions and the acquisition of the NHP Real Estate Companies.
These factors are discussed in more detail in the following paragraphs.
RENTAL PROPERTY OPERATIONS
Rental and other property revenues from the Company's Owned Properties
totaled $127,083,000 for the nine months ended September 30, 1997, compared to
$70,392,000 for the nine months ended September 30, 1996, an increase of
$56,691,000, or 80.5%. Rental and other property revenues consisted of the
following (in thousands):
Nine months Nine months
ended ended
September 30, September 30,
1997 1996
------------- -------------
"Same store" properties $59,558 $57,611
1996 Acquisitions 51,273 5,752
1997 Acquisitions 6,141 -
Controlled NHP Partnerships acquired in
connection with the acquisition of the NHP
Real Estate Companies 5,234 -
Properties in lease-up after the completion
of an expansion or renovation 4,877 3,666
1996 Sold Properties - 3,363
-------- -------
Total $127,083 $70,392
-------- -------
-------- -------
19
<PAGE>
Average monthly rent per occupied unit for the same store properties at
September 30, 1997 and 1996 was $557 and $562, respectively, reflecting a
decrease of 0.9%. Weighted average physical occupancy for the properties
decreased to 94.85% at September 30, 1997 from 94.95% at September 30, 1996,
reflecting a decrease of 0.1%.
Property operating expenses, consisting of on-site payroll costs, utilities
(net of reimbursements received from tenants), contract services, turnover
costs, repairs and maintenance, advertising and marketing, property taxes and
insurance, totaled $50,737,000 for the nine months ended September 30, 1997,
compared to $27,111,000 for the nine months ended September 30, 1996, an
increase of $23,626,000 or 87.1%. Operating expenses consisted of the
following (in thousands):
Nine months Nine months
ended ended
September 30, September 30,
1997 1996
------------- -------------
"Same store" properties $23,029 $22,465
1996 Acquisitions 21,308 1,639
1997 Acquisitions 2,268 -
Controlled NHP Partnerships acquired in
connection with the acquisition
of the NHP Real Estate Companies 2,252 -
Properties in lease-up after the completion
of an expansion or renovation 1,880 1,218
1996 Sold Properties - 1,789
-------- -------
Total $50,737 $27,111
-------- -------
-------- -------
Owned property management expenses, representing the costs of managing the
Company's Owned Properties, totaled $4,344,000 for the nine months ended
September 30, 1997, compared to $1,999,000 for the nine months ended September
30, 1996, an increase of $2,345,000, or 117.3%. The increase resulted from
the acquisition of properties in 1996 and 1997 and the acquisition of the NHP
Real Estate Companies.
SERVICE COMPANY BUSINESS
The Company's share of income from the Service Company Business was
$2,804,000 for the nine months ended September 30, 1997, compared to
$1,042,000 for the nine months ended September 30, 1996. The increase of
$1,762,000 is due to the acquisition by the Company of property management
businesses in August and November 1996, the acquisition of partnership
interests which provide for certain partnership and administrative fees, and
a captive insurance subsidiary acquired in connection with the acquisition of
the NHP Real Estate Companies in June 1997, offset by decreased commercial
asset management revenues. The commercial asset management contracts expired
on March 31, 1997.
INTEREST EXPENSE
Interest expense totaled $33,359,000 for the nine months ended September 30,
1997, compared to $16,775,000 for the nine months ended September 30, 1996.
Interest expense, which includes amortization of deferred financing costs,
for the nine months ended September 30, 1997, increased by $16,584,000, or
98.9%, from the nine months ended September 30, 1996. The increase consists
of the following (in thousands):
20
<PAGE>
Interest expense on secured short-term and long-term
indebtedness incurred in connection with the 1996
Acquisitions $8,839
Interest expense on secured and unsecured short-term
and long-term indebtedness incurred in connection
with the 1997 Acquisitions 3,042
Interest expense on secured and unsecured short-term
and long-term indebtedness incurred in connection
with the acquisition of the NHP Real Estate Companies 2,588
Write-off of unamortized loan costs upon the
prepayment of bridge financing incurred in connection
with the 1996 Acquisitions 623
Increase in interest expense on the Credit Facility
due to borrowings used in connection with the
refinancing of short-term indebtedness in April 1997
and the purchase of the NHP Real Estate Companies in
June 1997, net of decreased interest expense on
existing indebtedness due to principal amortization 1,492
-------
Total increase $16,584
-------
-------
INTEREST INCOME
Interest income totaled $4,458,000 for the nine months ended September 30,
1997, compared to $242,000 for the nine months ended September 30, 1996. The
increase of $4,216,000 is primarily due to interest earned on notes receivable
from certain partnerships acquired in connection with the 1996 Acquisitions
and the acquisition of the NHP Real Estate Companies in June 1997.
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1997 TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1996
NET INCOME
The Company recognized net income of $6,967,000 for the three months ended
September 30, 1997, compared to $3,396,000 for the three months ended
September 30, 1996. The increase in net income of $3,571,000, or 105.2% was
primarily the result of the 1996 Acquisitions, the 1997 Acquisitions, the
acquisition of 53.3% of the common stock of NHP in May and September 1997 and
the acquisition of the NHP Real Estate Companies.
The increase in net income is partially offset by the sale of the 1996 Sold
Properties in August 1996, increased real estate depreciation and increased
interest expense associated with indebtedness which was assumed or incurred
in connection with the acquisitions described above. These factors are
discussed in more detail in the following paragraphs.
RENTAL PROPERTY OPERATIONS
Rental and other property revenues from the Company's Owned Properties
totaled $47,364,000 for the three months ended September 30, 1997, compared
to $24,140,000 for the three months ended September 30, 1996, an increase of
$23,224,000, or 96.2%. Rental and other property revenues consisted of the
following (in thousands):
21
<PAGE>
Three months Three months
ended ended
September 30, September 30,
1997 1996
------------- --------------
"Same store" properties $20,054 $19,564
1996 Acquisitions 17,587 2,767
1997 Acquisitions 4,177 -
Controlled NHP Partnerships acquired in
connection with the acquisition of the
NHP Real Estate Companies 3,918 -
Properties in lease-up after the
completion of an expansion or renovation 1,628 1,321
1996 Sold Properties - 488
------- -------
Total $47,364 $24,140
------- -------
------- -------
Property operating expenses, consisting of on-site payroll costs, utilities
(net of reimbursements received from tenants), contract services, turnover
costs, repairs and maintenance, advertising and marketing, property taxes and
insurance, totaled $19,577,000 for the three months ended September 30, 1997,
compared to $8,960,000 for the three months ended September 30, 1996, an
increase of $10,617,000 or 118.5%. Operating expenses consisted of the
following (in thousands):
Three months Three months
ended ended
September 30, September 30,
1997 1996
------------- -------------
"Same store" properties $8,144 $7,619
1996 Acquisitions 7,554 691
1997 Acquisitions 1,451 -
Controlled NHP Partnerships acquired in
connection with the acquisition of the NHP
Real Estate Companies 1,689 -
Properties in lease-up after the completion
of an expansion or renovation 739 420
1996 Sold Properties - 230
------- ------
Total $19,577 $8,960
------- ------
------- ------
Owned property management expenses, representing the costs of managing the
Company's Owned Properties, totaled $1,610,000 for the three months ended
September 30, 1997, compared to $658,000 for the three months ended September
30, 1996, an increase of $952,000, or 144.7%. The increase resulted from the
acquisition of properties in 1996 and 1997 and the acquisition of the NHP
Real Estate Companies.
SERVICE COMPANY BUSINESS
The Company's share of income from the service company business was $773,000
for the three months ended September 30, 1997, compared to $401,000 for the
three months ended September 30, 1996. The increase in income of $372,000
was due to increased revenues from the acquisition by the Company of property
management businesses in August and November 1996, the acquisition of
partnership interests, which provide for certain partnership and
administrative fees, and the acquisition of a captive insurance subsidiary in
connection with the acquisition of the NHP Real Estate Companies in June
1997. The increase in revenues was offset by the loss of commercial asset
management revenues as a result of the scheduled termination of asset
management contracts at March 31, 1997.
22
<PAGE>
INTEREST EXPENSE
Interest expense totaled $12,755,000 for the three months ended September 30,
1997, compared to $5,850,000 for the three months ended September 30, 1996.
Interest expense, which includes amortization of deferred financing costs, for
the three months ended September 30, 1997, increased by $6,905,000, or 118.0%,
from the three months ended September 30, 1996. The increase consists of the
following (in thousands):
Interest expense on secured short-term and long-term
indebtedness incurred in connection with the 1996
Acquisitions $2,755
Interest expense on secured and unsecured short-term and
long-term indebtedness incurred in connection with the
1997 Acquisitions 1,821
Interest expense on secured and unsecured short-term and
long-term indebtedness incurred in connection with the
acquisition of the NHP Real Estate Companies 1,849
Increase in interest expense on the Credit Facility due to
borrowings used in connection with the refinancing of
short-term indebtedness in April 1997 and the purchase of
the NHP Real Estate Companies in June 1997, net of
decreased interest expense on existing indebtedness due to
principal amortization 480
------
Total increase $6,905
------
------
INTEREST INCOME
Interest income totaled $3,117,000 for the three months ended September 30,
1997, compared to $31,000 for the three months ended September 30, 1996. The
increase of $3,086,000, is primarily due to interest earned on notes
receivable from certain partnerships acquired in connection with the 1996
Acquisitions and the acquisition of the NHP Real Estate Companies in June
1997.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Company had $45,775,000 in cash and cash
equivalents. In addition, the Company had $22,019,000 of restricted cash
primarily consisting of reserves and impounds held by lenders for capital
expenditures, property taxes and insurance. The Company's principal demands
for liquidity include normal operating activities, payments of principal and
interest on outstanding debt, capital improvements, acquisitions of or
investments in properties, dividends paid to its stockholders and
distributions paid to minority limited partners in the Operating Partnership.
The Company considers its cash provided by operating activities, and funds
available under its Credit Facility, to be adequate to meet short-term
liquidity demands. The Company utilizes the Credit Facility for general
corporate purposes and to fund investments on an interim basis. In May 1997,
the Company increased the maximum amount available under the Credit Facility
from $50 million to $100 million. The outstanding borrowings under the
Credit Facility bear interest at LIBOR plus 1.45%, if the outstanding
borrowings do not exceed 60% of the collateral value, or LIBOR plus 1.70%, if
outstanding borrowings are greater than 60% of the collateral value. The
Credit Facility matures in August 1998 and, subject to certain customary
conditions, the outstanding balance may be converted to a three year term
loan. As borrowings made during the quarter
23
<PAGE>
ended September 30, 1997 exceeded 60% of the collateral value, the interest
rate charged on the outstanding borrowings was LIBOR plus 1.70% (7.33% at
September 30, 1997). The Company had outstanding borrowings under the Credit
Facility at September 30, 1997 of $74.0 million, which were repaid in October
1997 with proceeds received from the sale of 7,000,000 shares of AIMCO Class
A Common Stock.
During the nine months ended September 30, 1997, the Company repaid $25.6
million of secured short-term indebtedness, $12.5 million of unsecured
short-term indebtedness and $125.2 million of the balance outstanding from
time to time under the Credit Facility with proceeds from private offerings
of AIMCO Class A Common Stock, funds received in connection with the
repayment of notes due to the Company from certain executive officers of the
Company (or entities controlled by them) related to their purchase of AIMCO
Class A Common Stock and the private placement of AIMCO Class B Preferred
Stock.
In March 1997, the Company entered into an interest rate swap agreement with
a major investment banking company, having a notional principal amount of
$100 million, in anticipation of refinancing certain floating rate
indebtedness to expected 15 year fixed-rate indebtedness in the fourth quarter
of 1997. A second interest swap agreement was executed in September 1997,
having a notional principal amount of $75 million. The interest rate swap
agreements mature on December 3, 1997 and fix the twelve and ten year
treasury rates at 7.019% and 6.179% respectively. Unrealized losses of
approximately $7.9 million relating to the hedges have been deferred, and
will be amortized over the life of the refinanced debt.
In April 1997, 23 partnerships controlled by the Company borrowed an aggregate
of $108 million from an institutional lender on a fully amortizing, fixed rate
basis with a term of 20 years. The loans have a weighted average effective
interest rate of 7.6% per year. The loans are secured by 27 apartment
communities owned by such partnerships. The net proceeds of the borrowings,
and $7.5 million of additional borrowings under the Company's Credit Facility,
were used to repay approximately $115.5 million of secured, short term debt.
Pursuant to the Merger Agreement, if all NHP stockholders other than AHNI elect
to receive Stock Consideration and all NHP Stock Options are exercised, the
number of shares of AIMCO Class A Common Stock to be issued in the Merger
would be approximately 5.4 million shares of AIMCO Class A Common Stock
(including 291,240 shares issued to ANHI), and the Company will pay
approximately $7.8 million in cash to ANHI. If all of the NHP stockholders
elect to receive the Mixed Consideration and all NHP stock options are
exercised, the number of shares of AIMCO Class A Common Stock to be issued in
the Merger would be approximately 3.2 million shares (including 291,240
shares issued to ANHI) and the Company would pay approximately $7.8 million
in cash to ANHI and $60.7 million in cash to the other NHP stockholders.
From time to time, the Company has offered to acquire and, in the future, may
offer to acquire the unaffiliated limited partnership interests in
certain limited partnerships whose general partnership interests were acquired
by the Company, including certain partnerships acquired in 1996 and certain
partnerships in which the NHP Real Estate Companies own interests. Any such
acquisitions will require funds to pay the purchase price for such interests.
Cash payments made in connection with such acquisitions totaled $26.0 for
the nine months ended September 30, 1997.
The Company expects to meet its short-term liquidity requirements, including
the proposed Merger with NHP as well as property acquisitions, refinancings
of short-term debt, and tender offers, with long-term, fixed rate, fully
amortizing debt, secured or unsecured indebtedness, the issuance of debt
securities, OP Units or equity securities and cash generated from operations.
In April 1997, the Company filed a shelf registration statement with the SEC
which registered $1 billion of securities for sale on a delayed or continuous
basis. The shelf registration statement was declared effective in May 1997.
Since that time, the Company has issued 14,352,418 shares of Class A common
stock, and received net proceeds of $462.4 million.
24
<PAGE>
As of September 30, 1997, the Company had consolidated outstanding
indebtedness totaling $661.7 million including $493.0 million of secured
long-term financing, $20.3 million in secured short-term financing, $74.4
million of secured tax-exempt bonds and $74.0 million outstanding under its
Credit Facility. At September 30, 1997 the weighted average interest rate on
the Company's long-term secured notes payable and secured tax-exempt
financing was 8.0% with a weighted average maturity of 10 years. The
weighted average interest rate on the Company's secured and unsecured
short-term financing was 7.6%.
At September 30, 1997, NHP had outstanding indebtedness totaling $134.0
million, consisting of $62.9 million of unsecured indebtedness under NHP's
credit facility (the "NHP Credit Facility") and other short-term indebtedness
and $71.1 million of indebtedness secured by real estate wholly owned by NHP.
The NHP Credit Facility bears interest at a rate which ranges from LIBOR plus
75 basis points to LIBOR plus 125 basis points, depending on NHP's ratio of
debt to income from continuing operations before interest expense, income
taxes, depreciation and amortization ("EBITDA"). The weighted average interest
rate on the NHP unsecured short-term financing at September 30, 1997 was 6.7%.
The indebtedness secured by real estate wholly owned by NHP bears interest at
fixed rates ranging from 7.95% to 12.6% and mature at various dates through
2016.
CAPITAL EXPENDITURES
For the nine months ended September 30, 1997, the Company spent $5.2 million
for capital replacements and $5.7 million for initial capital expenditures.
In addition, in the nine months ended September 30, 1997, the Company spent an
aggregate $6.2 million for capital enhancements and the renovation of two
properties owned by the Company. These expenditures were funded by working
capital reserves, borrowings under the Credit Facility and net cash provided
by operating activities. The Company budgets for capital replacements of $300
per apartment unit per annum, or $5.6 million, for the nine months ended
September 30, 1997. The Company has $0.8 million of budgeted but unspent
amounts remaining from prior periods that can be used for future capital
replacements. The Company expects to incur initial capital expenditures and
capital enhancements (spending to increase a property's revenue potential
including renovations, developments and expansions) of approximately $4.0
million during the balance of the year ended December 31, 1997. Initial
capital expenditures and capital enhancements are expected to be funded with
cash from operating activities and borrowings under the Credit Facility.
FUNDS FROM OPERATIONS
The Company measures its economic profitability based on Funds From Operations
("FFO"). The Company intends to pay regular dividends to its stockholders
based on several primary factors, including FFO and the annual REIT
distribution requirements. Retained FFO is also available to make new
investments, make reinvestments in existing properties, repay debt and
repurchase shares of the Company's Stock. The Company believes that the
presentation of Funds From Operations, as hereafter defined, when considered
with the financial data determined in accordance with generally accepted
accounting principles, provide a useful measure of the Company's performance.
However, FFO does not represent cash flow and is not necessarily indicative of
cash flow or liquidity available to the Company, nor should it be considered
as an alternative of net income or as an indicator of operating performance.
The Board of Governors of the National Association of Real Estate Investment
Trusts ("NAREIT") defines FFO as net income (loss), computed in accordance
with generally accepted accounting principles, excluding gains and losses from
debt restructuring and sales of property, plus real estate depreciation and
amortization (excluding amortization of financing costs), and after
adjustments for unconsolidated partnerships and joint ventures. In addition,
the Company adjusts FFO for minority interest in the Operating Partnership,
amortization of management company goodwill and the non-cash deferred portion
of the income tax provision for unconsolidated subsidiaries.
25
<PAGE>
The Company believes that presentation of FFO provides investors with an
industry-accepted measurement which helps facilitate understanding of the
Company's ability to meet required dividend payments, capital expenditures,
and principal payments on its debt. There can be no assurance that the
Company's basis for computing FFO is comparable with that of other real
estate investment trusts.
For the three and nine months ended September 30, 1997 and 1996, FFO was as
follows (amounts in thousands):
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Income before minority interest in Operating
Partnership $7,963 $4,118 $19,427 $11,196
Extraordinary item - - 269 -
(Gain) loss on disposition of properties 169 (64) 169 (64)
Real estate depreciation, net of minority
interests in other partnerships 7,802 4,656 21,052 13,716
Amortization of management company goodwill 237 114 711 344
Equity in earnings of other partnerships:
Real estate depreciation 2,084 - 2,781 -
Equity in earnings of unconsolidated
subsidiaries:
Real estate depreciation 1,426 - 2,689 -
Deferred income taxes 1,290 - 2,164 -
Amortization of recoverable amount of
management contracts 280 - 430 -
------- ------ ------- -------
Funds From Operations (FFO) $21,251 $8,824 $49,692 $25,192
------- ------ ------- -------
------- ------ ------- -------
Weighted average common shares, common share
equivalents, preferred stock convertible into
common stock and OP Units outstanding 29,679 15,035 24,347 14,517
------- ------ ------- -------
------- ------ ------- -------
</TABLE>
For the nine months ended September 30, 1997 and 1996, net cash flow were as
follows (amounts in thousands):
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -------------
<S> <C> <C>
Cash provided by operating activities $ 53,435 $ 30,865
Cash provided by (used for) investing activities (314,814) (11,188)
Cash provided by (used for) financing activities 293,984 (20,941)
--------- ---------
Net cash flow $ 32,605 $ (1,264)
--------- ---------
--------- ---------
</TABLE>
CONTINGENCIES
Certain of the Company's Owned Properties are, and some of the other
properties managed by the Company or NHP may be, located on or near properties
that have contained underground storage tanks or on which activities have
occurred which could have released hazardous substances into the soil or
groundwater. There can be no assurances that such hazardous substances have
not been released or have not migrated, or in the future will not be released
or will not migrate, onto the properties. Such hazardous substances have been
released at certain Owned Properties and, in at least one case, have migrated
from an off-site location onto an Owned Property. In addition, the Company's
Montecito property in Austin, Texas, is located adjacent to, and may be
partially on, land that was used as a landfill. Low levels of methane and
other landfill gas have been detected at Montecito. The City of Austin (the
"City"), the former landfill operator, has assumed responsibility for
conducting all remedial activities to date associated with the methane and
other landfill gas. The remediation of the landfill gas is now substantially
complete and the Texas Natural Resources Conservation Commission ("TNRCC") has
preliminarily approved the methane gas remediation efforts. Final approval of
the site and the remediation process is contingent upon the results of
continued methane gas monitors to confirm the effectiveness of the remediation
efforts. Should further actionable levels of methane gas be detected, a
proposed contingency plan of passive methane gas venting may be implemented by
the City. The City has also conducted testing at Monetcito to determine
whether, and to what extent, groundwater has been impacted. Based on test
reports received to date by the Company, the groundwater does not appear to be
contaminated at actionable levels. The Company has not
26
<PAGE>
incurred, and does not expect to incur, liability for the landfill
investigation and remediation; however, the Company has relocated some of its
tenants and has installed a venting system according to the TNRCC's
specifications under the buildings slabs, in connection with raising four of
its buildings in order to install stabilizing piers thereunder, at an
estimated total cost of approximately $573,000, which is primarily the cost for
the restabilization. The Company anticipates that the restabilization will be
completed in January 1998. The City will be responsible for monitoring the
conditions of Montecito.
LEGISLATIVE ACTION REGARDING PROPOSED HUD REORGANIZATION AND RESTRUCTURING OF
HUD PROGRAMS
The Company, primarily through NHP, manages approximately 44,000 units that
are subsidized under Section 8 of the United States Housing Act of 1937, as
amended ("Section 8"). These subsidies are generally provided pursuant to
project-based contracts with the owners of the properties or, with respect to
a limited number of units managed by NHP, pursuant to vouchers received by
tenants. A substantial number of the Section 8 subsidies are scheduled to
expire prior to 2005, unless renewed. On October 27, 1997, The President
signed into law the Multifamily Assisted Housing Reform and Affordability Act
of 1997 (the "1997 Housing Act"). Under the 1997 Housing Act, certain
properties assisted under Section 8, with rents above market levels and
financed with mortgage loans insured by the United States Department of
Housing and Urban Development ("HUD") will be restructured by reducing
subsidized rents to market levels, thereby reducing rent subsidies and
lowering required debt service costs as needed to ensure financial viability
at the reduced rents and rent subsidies. The 1997 Housing Act retains
project-based subsidies for most properties (properties in tight rental
markets, properties serving the elderly and certain other properties). The
1997 Housing Act phases out project-based subsidies on selected properties
serving families not located in the rental markets with limited supply,
converting such subsidies to a tenant-based subsidy. Under a tenant based
system, rent vouchers would be issued to qualified tenants who then could
elect to reside at a property of their choice, provided the tenant has the
financial ability to pay the difference between the selected property's
monthly rent and the value of the voucher, which would be established based
on HUD's regulated fair market rent for the relevant geographical areas. The
1997 Housing Act provides that properties will begin the restructuring
process in federal fiscal year 1999 (beginning October 1, 1998), and that HUD
will issue final regulations implementing the 1997 Housing Act on or before
October 27, 1998. With respect to Housing Assistance Payments Contracts
("HAP Contracts") expiring on or before October 1, 1998, Congress has elected
to renew expiring HAP Contracts for one year terms, generally at existing
rents, so long as the properties remain in compliance with the HAP Contracts.
While the Company does not expect the provisions of the 1997 Housing Act to
result in a significant number of tenants relocating from properties managed
by the Company, there can be no assurance that the provisions will not
significantly affect the Company's management portfolio. Furthermore, there
can be no assurance that other changes in Federal housing subsidy will not
occur. Any such changes could have an adverse effect on the Company's
property management revenues.
INFLATION
Substantially all of the leases at the Company's apartment properties are for
a period of six months or less, allowing, at the time of renewal, for
adjustments in the rental rate and the opportunity to re-lease the apartment
unit at the prevailing market rate. The short term nature of these leases
generally serves to minimize the risk to the Company of the adverse effect of
inflation and the Company does not believe that inflation has had a material
adverse impact on its revenues.
LITIGATION
See PART II. OTHER INFORMATION - ITEM 1. LEGAL PROCEEDINGS elsewhere in this
Report for a discussion of certain legal proceedings.
In addition, the Company is a party to various legal actions resulting from
its operating activities. These actions are routine litigation and
administrative proceedings arising in the ordinary course of business, some
of which are covered by liability insurance, and none of which are expected
to have a material adverse effect on the consolidated financial condition or
results of operations of the Company.
27
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In November 1996, Apartment Investment and Management Company, a
Maryland Corporation ("AIMCO") and together with its subsidiaries and
other controlled entities, the "Company"), acquired (the "English
Acquisition") certain partnerships interests, real estate and related
assets owned by J.W. English, a Houston, Texas-based real estate
syndicator and developer, and certain affiliated entities
(collectively, the "J.W. English Companies"). In the English
Acquisition, the Company purchased all of the general and limited
partnership interests in 22 limited partnerships which act as the
general partner to 31 limited partnerships (the "English
Partnerships") that own 22 mulitfamily apartment properties and other
assets and interest related to the J.W. English Companies and assumed
management of the properties owned by the English Partnerships. The
Company made separate tender offers (the "English Tender Offers") to
the limited partners of 25 of the English Partnerships (the "Tender
Offer English Partnerships").
In November 1996, purported limited partners of certain of the Tender
Offer English Partnerships filed a purported class action lawsuit
against the Company and J.W. English in the U.S. District Court for
the Northern District of California (the "Federal Action"), alleging,
among other things, that the Company conspired with J.W. English to
breach his fiduciary duty to the plaintiffs, and that the offering
materials used by the Company in connection with the English Tender
Offers contained misleading statements or omissions. The plaintiffs
in the Federal Action filed a motion to voluntarily dismiss the
Federal Action, without prejudice, in favor of another purported class
action. The Federal Action was dismissed without prejudice in July
1997.
In May 1997, limited partners of the Tender Offer English Partnerships
and the six remaining English Partnerships filed two complaints in the
Superior Court of the State of California (the "California Actions")
against the Company, J.W. English Companies and Houlihan, Lukey, Howard
and Zukin, Inc. alleging, among other things, that the consideration
the Company offered in the English Tender Offers was inadequate and
designed to benefit the J.W. English Companies at the expense of the
limited partners, that certain misrepresentations and omissions were
made in connection with the English Tender Offers, that the Company
receives excessive fees in connection with its management of the
properties owned by the English Partnerships', that the Company
continues to refuse to liquidate the English Partnerships and that the
English Acquisition violated the partnerships agreements governing the
English Partnerships and constituted a breach of fiduciary duty. The
California Actions seek monetary damages and injunctive and
declarative relief. In addition to such monetary damages, the
complaints seek an accounting, a constructive trust of the assets and
monies acquired by the J.W. English Companies in connection with the
English Acquisition, a court order removing the Company from
management of the English Partnerships and/or ordering the sale of the
properties and attorney's fees, expert fees and other costs.
28
<PAGE>
The Company believes all of the foregoing allegations against it are
without merit and intends to vigorously defend itself in connection
with these actions. The Company believes it is entitled to indemnity
from the J.W. English Companies, subject to certain exceptions. On
August 4, 1997, the Company filed demurrers to both complaints in the
California Actions. A hearing on the demurrers was rescheduled for
December 19, 1997.
ITEM 2. CHANGE IN SECURITIES
On August 4, 1997, AIMCO issued 750,000 shares of its Class B
Cumulative Convertible Preferred Stock, Par value $.01 per share (the
"Class B Preferred Stock"), to an institutional investor (the
"Preferred Share Investor") for $75 million in a private transaction
exempt from registration under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to Section 4(2) thereof. The Class B
Preferred Stock ranks prior to AIMCO's Class A Common Stock with
respect to dividends, liquidation, dissolution, and winding-up, and
has an aggregate liquidation value of $75,000,000. Holders of the
Class B Preferred Stock are entitled to receive, when, as and if
declared by AIMCO's Board of Directors, quarterly cash dividends per
share equal to the greater of (i) $1.78125 (the "Base Rate") and (ii)
the cash dividends declared on the number of shares of Class A Common
Stock into which one share of Class B Preferred Stock is convertible.
On or after August 4, 1998, each share of Class B Preferred Stock may
be converted at the option of the holder into the number of shares of
Class A Common Stock determined by dividing the $100 liquidation
preference per share by $30.45, subject to certain anti-dilution
adjustments. AIMCO may redeem any or all of the Class B Preferred
Stock on or after August 4, 2002, at a redemption price of $100 per
share, plus unpaid dividends accrued on the shares redeemed.
Holders of Class B Preferred Stock, voting as a class with the holders
of all AIMCO capital stock that ranks on a parity with the Class B
Preferred Stock with respect to the payment of dividends or upon
liquidation, dissolution, winding up or otherwise ("Parity Stock"),
will be entitled to elect (i) two directors of AIMCO if six quarterly
dividends (whether or not consecutive) on the Class B Preferred Stock
or any Parity Stock are in arrears, and (ii) one director of AIMCO if
for two consecutive quarterly dividend periods AIMCO fails to pay at
least $0.4625 in dividends on the Class A Common Stock. The
affirmative vote of the holders of 66-2/3% of the outstanding shares
of Class B Preferred Stock will be required to amend AIMCO's Charter
in any manner that would adversely affect the rights of the holders of
Class B Preferred Stock, and to approve the issuance of any capital
stock that ranks senior to the Class B Preferred Stock with respect to
payment of dividends or upon liquidation, dissolution, winding up or
otherwise. If the Internal Revenue Service were to make a final
determination that AIMCO does not qualify as a real estate investment
trust in accordance with Section 856 through 860 of the Internal
Revenue Code of 1986, as amended (the "Code"), the Base Rate for
quarterly cash dividends on the Class B Preferred Stock would be
increased to $3.03125 per share. The terms of the Class B Preferred
Stock are set forth in AIMCO's Charter, which is included as Exhibit
3.1 to this Report and incorporated herein by this reference.
The agreement pursuant to which AIMCO issued the Class B Preferred
Stock (the "Preferred Share Purchase Agreement") provides that the
Preferred Share Investor may require AIMCO to repurchase such
investor's Class B Preferred Stock in whole or in part at a price of
$105 per share, plus accrued and unpaid dividends on the purchased
shares, if (i) AIMCO shall fail to continue to be taxed as a real
estate investment trust pursuant to Sections 856 through 860 of the
Code, or (ii) upon the occurrence of a change of control (as defined
in the Preferred Share Purchase Agreement). The Preferred Share
Purchase Agreement also provides that, so long as the Preferred Share
Investor owns Class B Preferred Stock with an aggregate liquidation
preference of at least $18.75 million, neither AIMCO, AIMCO
Properties, L.P. nor any subsidiary of AIMCO may issue preferred
securities or incur indebtedness for borrowed money if immediately
following
29
<PAGE>
such issuance and after given effect thereto and the application
of the net proceeds therefrom, AIMCO's ratio of (i) aggregate
consolidated earnings before interest, taxes, depreciation
and amortization, to (ii) aggregate consolidated fixed charges, for
the four fiscal quarters immediately preceding such issuance would be
less than 1.5 to 1.
ITEM 5. OTHER INFORMATION.
Effective November 4, 1997, AIMCO's Board of Directors appointed
Troy D. Butts Senior Vice President and Chief Financial Officer,
replacing Leeann Morein, who became Senior Vice President of Investor
Services.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed with this report (1):
Exhibit
Number Description
- ------- -----------
1.1 Underwriting Agreement, dated as of October 22, 1997, by and among
Apartment Investment and Management Company, AIMCO Properties L.P.,
Smith Barney Inc., BT Alex Brown Incorporated, Lehman Brothers Inc.,
Merrill Lynch, Pierce Fenner & Smith Incorporated, Raymond James &
Associates, Inc., and the Robinson-Humphrey Company LLC, as
Representatives of the Several Underwriters named in Schedule I
thereto
2.1 Amendment No. 2 to Real Estate Acquisition Agreement, dated as of
July 14, 1997, by and among Apartment Investment and Management
Company, AIMCO Properties, L.P., Demeter Holdings Corporation
("Demeter"), Phemus Corporation ("Phemus"), Capricorn Investors L.P.
("Capricorn"), J. Roderick Heller, III ("Heller"), and NHP
Partners Two LLC (together with Demeter, Phemus, Capricorn, and
Heller, the "Sellers") (Exhibit 2.3 to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 1997,
is incorporated herein by this reference)
2.2 Amendment No. 3 to Real Estate Acquisition Agreement, dated as of
August 14, 1997, by and among Apartment Investment and Management
Company, AIMCO Properties, L.P., and the Sellers
2.3 Amendment No. 4 to Real Estate Acquisition Agreement, dated as of
September 4, 1997, by and among Apartment Investment and Management
Company, AIMCO Properties, L.P., and the Sellers
2.4 Amendment No. 5 to Real Estate Acquisition Agreement, dated as of
September 11, 1997, by and among Apartment Investment and Management
Company, AIMCO Properties, L.P., and the Sellers
3.1 Charter
3.2 Bylaws
10.1 Second Amended and Restated Agreement of Limited Partnership of AIMCO
Properties, L.P., dated as of July 29, 1994, among AIMCO-GP, Inc., as
general partner, AIMCO-LP, Inc., as special limited partner , and
AIMCO-GP, Inc., as attorney-in-fact for the limited partners
(Exhibit 10.17 to the Company's Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 1997, is incorporated herein by
this reference)
10.2 First Amendment to the Second Amended and Restated Agreement of
Limited Partnership of AIMCO Properties, L.P., dated as of July 29,
1997, by AIMCO-GP, Inc. (Exhibit 10.18 to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 1997, is
incorporated herein by this reference)
10.3 Common Stock Purchase Agreement made as of August 26, 1997, by and
between Apartment Investment and Management Company, a Maryland
corporation, and ABKB/LaSalle Securities Limited Partnership, a
registered investment advisor (Exhibit 99.1 to the Company's
Current Report on Form 8-K, dated August 26, 1997, is incorporated
herein by this reference)
10.4 Purchase and Sale Agreement and Joint Escrow Instructions, made and
entered into as of August 22, 1997, by and between AIMCO Properties,
L.P., and each of the parties identified on Exhibit "A" attached
thereto (collectively, the "Winthrop Sellers") (Exhibit 99.3 to the
Company's Current Report on Form 8-K, dated October 15, 1997, is
incorporated herein by this reference)
10.5 Letter Agreement, dated October 6, 1997, by and between AIMCO
Properties, L.P. and the Winthrop Sellers (Exhibit 99.4 to the
Company's Current Report on Form 8-K, dated October 15, 1997, is
incorporated herein by this reference)
30
<PAGE>
10.6 Letter Agreement, dated October 13, 1997, by and between AIMCO
Properties, L.P. and the Winthrop Sellers (Exhibit 99.5 to the
Company's Current Report on Form 8-K dated October 15, 1997, is
incorporated herein by this reference)
10.7 Letter Agreement, dated October 15, 1997, by and between AIMCO
Properties, L.P. and the Winthrop Sellers (Exhibit 99.6 to the
Company's Current Report on Form 8-K dated October 15, 1997, is
incorporated herein by this reference)
10.8 Multifamily Note, dated as of October 31, 1997, by AIMCO/Wickertree,
L.P., a Delaware limited partnership ("Wickertree"), payable to GMAC
Commercial Mortgage Corporation, a California corporation ("GMAC"), in
the principal sum of $4,231,700
10.9 Multifamily Deed of Trust, Assignment of Rents and Security Agreement,
dated as of October 31, 1997, by Wickertree to Transnation Title
Insurance Company for the benefit of GMAC
10.10 Exceptions to Non-Recourse Guaranty, dated as of October 31, 1997, by
Apartment Investment and Management Company and AIMCO Properties,
L.P., with respect to Wickertree
10.11 Restricted Stock Agreement (1997 Stock Award and Incentive Plan)
dated as of July 25, 1997, by and between Apartment Investment and
Management Company, and R. Scott Wesson
27.1 Financial Data Schedule
(1) Schedules and supplemental materials to the exhibits have been
omitted but will be provided to the SEC upon request.
(b) During the quarter for which this report is filed, the Company filed the
following Reports on Form 8-K:
31
<PAGE>
Current Report on Form 8-K, dated August 26, 1997, relating to the proposed
merger of NHP Incorporated into one of the Company's subsidiaries; and the
acquisition by the Company of common stock of NHP Incorporated.
Current Report on Form 8-K, dated September 19, 1997, relating to the
acquisition by the Company of common stock of NHP Incorporated; the
acquisition by the Company of the Morton Towers apartments and adjacent
land through two subsidiary limited partnerships; the probable acquisition
by the Company of a multifamily residential apartment property for an
aggregate cash purchase price of approximately $260 million; the potential
sale by the Company of its interests in the Hall Properties to unaffiliated
joint venture partners; and the completion by the Company of the acquisition
of the Los Arboles Apartments located in Chandler, Arizona, including
certain pro forma financial information and the Historical Summary of Gross
Income and Direct Operating Expenses of Morton Towers for the year ended
December 31, 1996 and the six months ended June 30, 1997 (unaudited).
Current Report on Form 8-K, dated October 15, 1997, and Amendment 1
thereto, relating to the acquisition by the Company of 35 multifamily
residential properties located in seven states from 27 limited partnerships
affiliated with Winthrop Financial Associates, including certain pro forma
financial information and the Combined Statement of Revenues and Certain
Expenses of the Thirty-five Acquisition Properties for the year ended
December 31, 1996 and the six months ended June 30, 1997 (unaudited).
During the quarter for which this report is filed, the Company filed
the following Amendments to its Current Report on Form 8-K, dated
June 3, 1997: Amendment No. 2, filed August 14, 1997; Amendment No. 3,
filed September 5, 1997; Amendment No. 4, filed October 6, 1997; and
Amendment No. 5, filed October 22, 1997.
During the quarter for which this report is filed, the Company filed
the following Amendments to its Current Report on Form 8-K, dated
April 16, 1997: Amendment No. 1, filed April 30, 1997; and Amendment
No. 2, filed October 6, 1997; and Amendment No. 3, filed October 22,
1997.
32
<PAGE>
SCHEDULE 1
Documents substantially identical to Exhibits 10.8 through 10.10, except as
to the borrower, loan amount and subject property, have been omitted in
reliance on Rule 12b-31 under the Securities Exchange Act of 1934. Set forth
below are the material details in which such documents differ from Exhibits
10.8 through 10.10.
BORROWER SUBJECT PROPERTY LOAN AMOUNT
- -------- ---------------- -----------
AIMCO/Grovetree, L.P Grovetree (The Arbors) $3,916,538
AIMCO/Blossomtree, L.P. Blossomtree 2,147,420
AIMCO/Colonnade, L.P. Colonnade 2,901,250
AIMCO/Hazeltree, L.P. Hazeltree 4,140,761
AIMCO/Orchidtree, L.P. Orchidtree 7,417,850
AIMCO/Quailtree, L.P. Quailtree 2,256,308
AIMCO/Shadetree, L.P. Shadetree 2,102,161
AIMCO/Silktree, L.P. Silktree 1,587,911
AIMCO/Timbertree, L.P. Timbertree 8,050,350
AIMCO/Foxtree, L.P. Foxtree 9,079,651
AIMCO/Foothills, L.P. Foothills 3,936,350
AIMCO/Fox Bay, L.P. Fox Bay 3,260,278
AIMCO/Rivercrest, L.P. Rivercrest 2,874,703
AIMCO/Twinbridge, L.P. Twinbridge 1,160,988
AIMCO/Brant Rock, L.P. Brant Rock 1,241,625
AIMCO/Sand Castles, L.P. Sand Castles 3,162,500
AIMCO/Tall Timbers, L.P. Tall Timbers 4,188,250
AIMCO/Woodhollow, L.P. Woodhollow 2,137,086
AIMCO/Olmos, L.P. Olmos Club 1,274,814
AIMCO/Polo Park, L.P. Polo Park 2,328,419
AIMCO/Wildflower, L.P. Wildflower 2,119,735
AIMCO/Wydewood, L.P. Wydewood 1,674,017
AIMCO/Sand Pebble, L.P. Sand Pebble 2,761,550
AIMCO/Surrey Oaks, L.P. Surrey Oaks 2,350,700
AIMCO/Freedom Place, L.P. Freedom Place Club 7,118,100
AIMCO/Beacon Hill, L.P. Beacon Hill 3,685,000
AIMCO/Windsor Landing, L.P. Windsor Landing 5,564,448
AIMCO/Islandtree, L.P. Island Tree 4,301,550
AIMCO/Yorktree, L.P. Yorktree 6,778,609
AIMCO/Hiddentree, L.P. Hiddentree 4,505,728
AIMCO/Pine Creek, L.P. Pine Creek 2,442,550
AIMCO/Shadow Lake, L.P. Shadow Lake 3,301,100
33
<PAGE>
SCHEDULE 2
Documents substantially identical to Exhibit 10.11, except as to the
recipient, the number of shares, the borrower and the note amount, have been
omitted in reliance on Rule 12b-31 under the Securities Exchange Act of 1934.
Set forth below are the material details in which such documents differ from
Exhibit 10.11.
Recipient And Borrower Number Of Shares Note Amount
- ---------------------- ---------------- -----------
Terry Considine (Titahothree
Limited Partnership RLLLP) 691,578 $20,747,340
Peter Kompaniez 210,526 6,315,780
Tom Toomey 52,632 1,578,960
Steven Ira 52,632 1,578,960
David Williams 52,632 1,578,960
Harry Alcock 10,000 300,000
Martha Carlin 10,000 300,000
Leann Morein 4,000 120,000
Patricia Heath 4,000 120,000
Carla Stoner 3,000 90,000
34
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REGISTRANT:
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
Date: November 14, 1997 /s/ TROY D. BUTTS
-------------------------------
Troy D. Butts
Senior Vice President and
Chief Financial Officer
(duly authorized officer and principal
financial officer)
/s/ PATRICIA K. HEATH
---------------------
Patricia K. Heath
Vice President and
Chief Accounting Officer
(principal accounting officer)
35
<PAGE>
CONFORMED COPY
7,000,000 Shares
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
Class A Common Stock
UNDERWRITING AGREEMENT
October 22, 1997
SMITH BARNEY INC.
BT ALEX. BROWN INCORPORATED
LEHMAN BROTHERS INC.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
RAYMOND JAMES & ASSOCIATES, INC.
THE ROBINSON-HUMPHREY COMPANY, LLC
As the Several Underwriters
c/o SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
Apartment Investment and Management Company, a Maryland corporation (the
"COMPANY"), proposes to issue and sell an aggregate of 7,000,000 shares (the
"FIRM SHARES") of its Class A Common Stock, $0.01 par value per share (the
"COMMON STOCK") , to the several Underwriters named in Schedule I hereto (the
"UNDERWRITERS"). The Company also proposes to sell to the Underwriters, upon
the terms and conditions set forth in Section 2 hereof, up to an additional
<PAGE>
1,050,000 shares (the "ADDITIONAL SHARES") of Common Stock. The Firm Shares
and the Additional Shares are hereinafter collectively referred to as the
"SHARES".
The Company through wholly-owned subsidiaries is the sole general
partner and the principal limited partner (with an aggregate approximate
85.0% ownership interest as of the date hereof) of AIMCO Properties, L.P., a
Delaware limited partnership (the "OPERATING PARTNERSHIP"). The Company's
business of owning and managing multifamily apartment properties and its
third-party property management and other businesses are principally
conducted through the Operating Partnership and other direct and indirect
subsidiaries of the Company identified in Schedule II hereto (together with
the Operating Partnership, each a "SUBSIDIARY" and collectively, the
"SUBSIDIARIES").
The Company wishes to confirm as follows its agreement with you (the
"REPRESENTATIVES") and the other several Underwriters on whose behalf you are
acting, in connection with the several purchases of the Shares by the
Underwriters.
1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has filed with
the Securities and Exchange Commission (the "COMMISSION") a "shelf"
registration statement on Form S-3 (File No. 333-26415, including a
prospectus relating to debt securities, preferred stock, common stock and
warrants, and will promptly file with the Commission a prospectus supplement
specifically relating to the Shares pursuant to Rule 424 under the Securities
Act of 1933, as amended (together with the rules and regulations of the
Commission thereunder, the "ACT"). As used in this Agreement, (i) the term
"Registration Statement" means such registration statement, including
exhibits, financial statements, schedules and documents incorporated by
reference therein, as amended to the date hereof, and (ii) the term
"Prospectus" collectively refers to the basic prospectus dated May 22, 1997,
(the "BASIC PROSPECTUS") and prospectus supplement (the "PROSPECTUS
SUPPLEMENT") dated October 22, 1997 in the forms first used to confirm sales
of the Shares. The term "Preliminary Prospectus" means the preliminary
prospectus supplement dated October 6, 1997 specifically relating to the
Shares, together with the preliminary basic prospectus dated May 22, 1997
relating to the securities registered on the Registration Statement. As used
herein, the terms "Registration Statement", "Prospectus" and "Preliminary
Prospectus" shall in each case include the material, if any, incorporated by
reference therein pursuant to Item 12 of Form S-3 under the Act or deemed to
be a part thereof pursuant to Rule 430A under the Act. The terms
"supplement" and "amendment" or "amend" as used herein shall include all
documents deemed to be incorporated by reference in the Prospectus that are
filed by the Company with the Commission pursuant to the Securities Exchange
Act of 1934, as amended (together with the rules and regulations of the
Commission thereunder, the "EXCHANGE ACT"), subsequent to the date of the
Prospectus. As used herein, the term "Incorporated Documents" means the
2
<PAGE>
documents which at the time are incorporated by reference in the Registration
Statement, the Prospectus, the Preliminary Prospectus, or any amendment or
supplement thereto.
2. AGREEMENTS TO SELL AND PURCHASE. The Company hereby agrees,
subject to all the terms and conditions set forth herein, to issue and sell
to each Underwriter and, upon the basis of the representations, warranties
and agreements of the Company and the Operating Partnership herein contained
and subject to all the terms and conditions set forth herein, each
Underwriter agrees, severally and not jointly, to purchase from the Company,
at a purchase price of $34.64 per Share (the "PURCHASE PRICE PER SHARE"), the
number of Firm Shares set forth opposite the name of such Underwriter in
Schedule I hereto (or such number of Firm Shares increased as set forth in
Section 10 hereof).
The Company also agrees, subject to all the terms and conditions set
forth herein, to sell to the Underwriters, and, upon the basis of the
representations, warranties and agreements of the Company and the Operating
Partnership herein contained and subject to all the terms and conditions set
forth herein, the Underwriters shall have the right to purchase from the
Company, at the purchase price per share, pursuant to an option (the
"OVER-ALLOTMENT OPTION") which may be exercised at any time (but not more
than once) by notice to the Company given prior to 9:00 P.M., New York City
time, on the 30th day after the date of the Prospectus (or, if such 30th day
shall be a Saturday or Sunday or a holiday, on the next business day
thereafter when the New York Stock Exchange is open for trading), up to an
aggregate of 1,050,000 Additional Shares. Additional Shares may be purchased
only for the purpose of covering over-allotments made in connection with the
offering of the Firm Shares. Upon any exercise of the over-allotment option,
each Underwriter, severally and not jointly, agrees to purchase from the
Company the number of Additional Shares (subject to such adjustments as you
may determine in order to avoid fractional shares) which bears the same
proportion to the number of Additional Shares to be purchased by the
Underwriters as the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule I hereto (or such number of Firm Shares increased as
set forth in Section 10 hereof) bears to the aggregate number of Firm Shares.
3. TERMS OF PUBLIC OFFERING. The Company has been advised by you that
the Underwriters propose to make a public offering of their respective
portions of the Shares as soon after the Registration Statement and this
Agreement have become effective as in your judgment is advisable and
initially to offer the Shares upon the terms set forth in the Prospectus.
4. DELIVERY OF THE SHARES AND PAYMENT THEREFOR. Delivery to the
Underwriters of and payment for the Firm Shares shall be made at the office
of
3
<PAGE>
Smith Barney Inc., 388 Greenwich Street, New York, NY 10013, at 10:00 A.M.,
New York City time, on October 27, 1997 (the "CLOSING DATE"). The place of
closing for the Firm Shares and the Closing Date may be varied by agreement
between you and the Company.
Delivery to the Underwriters of and payment for any Additional Shares to
be purchased by the Underwriters shall be made at the aforementioned office
of Smith Barney Inc. at such time on such date (the "OPTION CLOSING DATE"),
which may be the same as the Closing Date but shall in no event be earlier
than the Closing Date nor earlier than two nor later than ten business days
after the giving of the notice hereinafter referred to, as shall be specified
in a written notice from you on behalf of the Underwriters to the Company of
the Underwriters' determination to purchase a number, specified in such
notice, of Additional Shares. The place of closing for any Additional Shares
and the Option Closing Date for such Shares may be varied by agreement
between you and the Company.
Certificates for the Firm Shares and for any Additional Shares to be
purchased hereunder shall be registered in such names and in such
denominations as you shall request prior to 9:30 A.M., New York City time, on
the second business day preceding the Closing Date or any Option Closing
Date, as the case may be. Such certificates shall be made available to you
in New York City for inspection and packaging not later than 9:30 A.M., New
York City time, on the business day next preceding the Closing Date or the
Option Closing Date, as the case may be. The certificates evidencing the
Firm Shares and any Additional Shares to be purchased hereunder shall be
delivered to you on the Closing Date or the Option Closing Date, as the case
may be, against payment to the Company of the purchase price therefor in
immediately available funds.
5. AGREEMENTS OF THE COMPANY AND THE OPERATING PARTNERSHIP. The
Company and the Operating Partnership agree with the several Underwriters as
follows:
(a) If, at the time this Agreement is executed and delivered, it
is necessary for the Registration Statement or a post-effective
amendment thereto to be declared effective before the offering of the
Shares may commence, the Company will endeavor to cause the Registration
Statement or such post-effective amendment to become effective as soon
as possible and will advise you promptly and, if requested by you, will
confirm such advice in writing, when the Registration Statement or such
post-effective amendment has become effective.
(b) The Company will advise you promptly and, if requested by you,
will confirm such advice in writing:(i) of any request by the
4
<PAGE>
Commission for amendment of or a supplement to the Registration
Statement, the Prospectus, the Preliminary Prospectus or for additional
information;(ii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the
suspension of qualification of the Shares for offering or sale in any
jurisdiction or the initiation of any proceeding for such purpose; and
(iii) within the period of time referred to in paragraph (f) below, of
any change in the Company's financial condition, business, properties or
results of operations, or of the happening of any event, which makes any
statement of a material fact made in the Registration Statement or the
Prospectus (as then amended or supplemented) untrue or which requires
the making of any additions to or changes in the Registration Statement
or the Prospectus (as then amended or supplemented) in order to state a
material fact required by the Act or the regulations thereunder to be
stated therein or necessary in order to make the statements therein not
misleading, or of the necessity to amend or supplement the Prospectus
(as then amended or supplemented) to comply with the Act or any other
law. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, the Company
will make every reasonable effort to obtain the withdrawal of such order
at the earliest possible time.
(c) The Company will furnish to you, without charge (i) one signed
copy of the registration statement as originally filed with the
Commission and of each amendment thereto, including financial statements
and all exhibits to the registration statement, which shall be delivered
to counsel for the Underwriters,(ii) such number of conformed copies of
the registration statement as originally filed and of each amendment
thereto, but without exhibits, as you may reasonably request,(iii) such
number of copies of the Incorporated Documents, without exhibits, as you
may reasonably request, and (iv) up to six copies of the exhibits to the
Incorporated Documents, as you may request.
(d) Prior to the end of the period of time referred to in the
first sentence in subsection (f) below, the Company will inform you of
its intent to file any amendment to the Registration Statement or make
any amendment or supplement to the Prospectus or file any document
which, upon filing becomes an Incorporated Document, and the Company
will furnish you with copies of any such amendment, supplement or
document in advance of filing; PROVIDED, the Company will not file any
such amendment, supplement or document to which you shall reasonably
object unless such amendment, supplement or document is required to be
filed by applicable law.
5
<PAGE>
(e) Prior to the execution and delivery of this Agreement, the
Company has delivered to you, without charge, in such quantities as you
have requested, copies of each form of Preliminary Prospectus. The
Company consents to the use, in accordance with the provisions of the
Act and with the securities or Blue Sky or real estate syndication laws
of the jurisdictions in which the Shares are offered by the several
Underwriters and by dealers, prior to the date of the Prospectus, of
each Preliminary Prospectus so furnished by the Company.
(f) As soon after the execution and delivery of this Agreement as
possible and thereafter from time to time for such period as in the
opinion of counsel for the Underwriters a prospectus is required by the
Act to be delivered in connection with sales by any Underwriter or
dealer, the Company will expeditiously deliver to each Underwriter and
each dealer, without charge, as many copies of the Prospectus (and of
any amendment or supplement thereto) as you may reasonably request. The
Company consents to the use of the Prospectus (and of any amendment or
supplement thereto) in accordance with the provisions of the Act and
with the securities or Blue Sky or real estate syndication laws of the
jurisdictions in which the Shares are offered by the several
Underwriters and by all dealers to whom Shares may be sold, both in
connection with the offering and sale of the Shares and for such period
of time thereafter as the Prospectus is required by the Act to be
delivered in connection with sales of Shares by any Underwriter or
dealer. If during such period of time any event shall occur as a result
of which it is necessary in the judgment of the Company or in the
opinion of counsel for the Underwriters and counsel for the Company to
amend or supplement the Prospectus (as then amended or supplemented) in
order that the Prospectus will not include any untrue statement of
material fact or omit to state a fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, or if it is necessary to supplement or amend
the Prospectus (or to file under the Exchange Act any document which,
upon filing, becomes an Incorporated Document) in order to comply with
the Act or any other law, the Company will forthwith prepare and,
subject to the provisions of paragraph (d) above, file with the
Commission an appropriate supplement or amendment thereto (or to such
document), and will expeditiously furnish to the Underwriters and
dealers a reasonable number of copies thereof.
(g) The Company will cooperate with you and with counsel for the
Underwriters in connection with the registration or qualification of the
Shares for offering and sale by the several Underwriters and by dealers
under the securities or Blue Sky or real estate syndication laws of such
jurisdictions as you may designate and will file such consents to
service of
6
<PAGE>
process or other documents necessary or appropriate in order to effect
such registration or qualification; PROVIDED that in no event shall the
Company be obligated to qualify to do business in any jurisdiction where
it is not now so qualified or to take any action which would subject it
to taxation or to service of process in suits, other than those arising
out of the offering or sale of the Shares, in any jurisdiction where it
is not now so subject.
(h) The Company will make generally available to its security
holders an earnings statement, which need not be audited, covering a
twelve-month period commencing after the effective date of the
Registration Statement and ending not later than 15 months thereafter,
as soon as practicable after the end of such period, which earnings
statement shall satisfy the provisions of Section 11(a) of the Act.
(i) During the period of three years hereafter, the Company will
furnish to you as soon as available, a copy of each report of the
Company mailed to stockholders or filed with the Commission.
(j) If this Agreement shall terminate or shall be terminated after
execution pursuant to any provisions hereof (otherwise than pursuant to
the second paragraph of Section 10 hereof or by notice given by you
terminating this Agreement pursuant to Section 10 or Section 11 hereof)
or if this Agreement shall be terminated by the Underwriters because of
any failure or refusal on the part of the Company or the Operating
Partnership to comply with the terms or fulfill any of the conditions of
this Agreement, the Company agrees to reimburse the Representatives for
all out-of-pocket expenses (including the reasonable fees and expenses
of counsel for the Underwriters) incurred by you in connection herewith.
(k) The Company will contribute the net proceeds from the sale of
the Shares to the Operating Partnership and the Company and the
Operating Partnership will apply such net proceeds substantially in
accordance with the description set forth under the caption "Use of
Proceeds" in the Prospectus Supplement.
(l) The Company will use its best efforts to meet the requirements
to maintain its qualification for the fiscal year ending December 31,
1997 (and each fiscal quarter of such year), as a "real estate
investment trust" (a "REIT") under the Internal Revenue Code of 1986, as
amended (the "CODE").
7
<PAGE>
(m) Except as stated in this Agreement and in the Preliminary
Prospectus and Prospectus, the Company has not taken, nor will it take,
directly or indirectly, any action designed to or that might reasonably
be expected to cause or result in stabilization or manipulation of the
price of the Common Stock to facilitate the sale or resale of the Shares
in violation of Regulation M under the Exchange Act.
(n) The Company will use its reasonable efforts to accomplish the
listing of the Shares on the New York Stock Exchange.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE OPERATING
PARTNERSHIP. The Company and the Operating Partnership represent and warrant
to each Underwriter that:
(a) Each prospectus or preliminary prospectus included as part of
the registration statement as originally filed, or as part of any
amendment or supplement thereto that is related to the Shares, or filed
pursuant to Rule 424 under the Act that is related to the Shares,
complied when so filed in all material respects with the provisions of
the Act, except that this representation and warranty does not apply to
statements in or omissions from the Registration Statement or the
Prospectus made in reliance upon and in conformity with information
relating to any Underwriter furnished to the Company in writing by or on
behalf of any Underwriter through you expressly for use therein. The
Commission has not issued any order preventing or suspending the use of
the Prospectus or any Preliminary Prospectus.
(b) The Company and the transactions contemplated by this
Agreement meet the requirements for using Form S-3 under the Act. The
Registration Statement in the form in which it became or becomes
effective and also in such form as it may be when any post-effective
amendment thereto shall become effective and the Prospectus and any
supplement or amendment thereto when filed with the Commission under
Rule 424(b) under the Act, complied or will comply in all material
respects with the provisions of the Act and will not at any such times
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, except that this representation and
warranty does not apply to statements in or omissions from the
Registration Statement or the Prospectus made in reliance upon and in
conformity with information relating to any Underwriter furnished to the
Company in writing by or on behalf of any Underwriter through you
expressly for use therein.
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(c) The Incorporated Documents heretofore filed, when they were
filed (or, if any amendment with respect to any such document was filed,
when such amendment was filed), complied in all material respects with
the requirements of the Exchange Act and the rules and regulations
thereunder, and any further Incorporated Documents so filed will, when
they are filed, comply in all material respects with the requirements of
the Exchange Act and the rules and regulations thereunder; no such
document when it was filed (or, if an amendment with respect to any such
document was filed, when such amendment was filed), contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein not misleading; and no such further document, when it
is filed, will contain an untrue statement of a material fact or will
omit to state a material fact required to be stated therein or necessary
in order to make the statements therein not misleading.
(d) All the outstanding shares of common stock of the Company
(including Class B Common Stock of the Company) have been duly
authorized and validly issued, are fully paid and nonassessable and are
free of any preemptive or similar rights; the Shares have been duly
authorized and, when issued and delivered to the Underwriters against
payment therefor in accordance with the terms hereof, will be validly
issued, fully paid and nonassessable and free of any preemptive or
similar rights; and the capital stock of the Company conforms in all
material respects to the description thereof in the Registration
Statement and the Prospectus. Except as described in the Registration
Statement and the Prospectus, there are no outstanding options,
convertible or exchangeable securities, warrants or other rights calling
for the issuance of Common Stock or Class B Common Stock of the Company
or equity, partnership, membership or beneficial interests in the
Subsidiaries.
(e) The Company is a corporation duly organized and validly
existing in good standing under the laws of the State of Maryland with
full corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Registration
Statement and the Prospectus, and is duly qualified to conduct its
business and is in good standing in each jurisdiction or place where the
nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to qualify
does not have a material adverse effect on the financial condition,
business, properties or results of operations of the Company and the
subsidiaries taken as a whole.
(f) Each Subsidiary is a corporation, limited partnership, limited
liability company or trust, as the case may be, duly organized or formed
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and validly existing under the laws of its jurisdiction of organization
or formation, with corporate, limited partnership, limited liability
company or trust power and authority, as the case may be, to own, lease
and operate its properties and to conduct its business as described in
the Registration Statement and the Prospectus, and is duly qualified to
conduct its business in each jurisdiction or place where the nature of
its properties or the conduct of its business requires such
qualification, except where the failure so to qualify does not have a
material adverse effect on the financial condition, business, properties
or results of operations of the Company and the subsidiaries taken as a
whole.
(g) All of the shares of capital stock, partnership interests,
limited liability company membership interests or trust beneficial
interests, as the case may be, issued by the Subsidiaries or created by
agreements to which the Subsidiaries are parties,(i) have been duly and
validly issued or created (and in the case of capital stock are fully
paid and nonassessable) and (ii) are owned or held, directly or
indirectly through Subsidiaries, by the Company in the percentage
amounts set forth on Schedule II hereto free and clear of any security
interest, lien, adverse claim, equity or other encumbrance (each of the
foregoing, a "LIEN"), except for such Liens as (i) are described in the
Registration Statement or the Prospectus or, (ii) are set forth in
Schedule II, or (iii) would not have a material adverse effect on the
financial condition, business, properties or results of operations of
the Company and its subsidiaries taken as a whole.
(h) As of September 30, 1997, the Company indirectly owned an
aggregate approximate 85.0% partnership interest in the Operating
Partnership free and clear of all Liens. A wholly-owned subsidiary of
the Company is the sole general partner of the Operating Partnership.
(i) The Company has corporate power and authority to enter into
this Agreement and to issue, sell and deliver the Shares to the
Underwriters as provided herein. This Agreement has been duly
authorized, executed and delivered by the Company and the Operating
Partnership.
(j) There are no legal or governmental proceedings pending or, to
the knowledge of the Company, threatened, against the Company or any of
the Subsidiaries, or to which the Company or any of the Subsidiaries, or
to which any of their respective properties is subject, that are
required to be described in the Registration Statement or the Prospectus
but are not described as required, and there are no agreements,
contracts, indentures, leases or other instruments that are required to
be described in the Registration Statement or the Prospectus or to be
filed as an exhibit to the
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Registration Statement or any Incorporated Document that are not
described or filed as required by the Act or the Exchange Act.
(k) Neither the Company nor any of the Subsidiaries is (i) in
violation of its certificate or articles of incorporation or by-laws or
certificates or agreements of limited partnership, limited liability
company or trust or other organizational documents, or (ii) in violation
of any law, ordinance, administrative or governmental rule or regulation
applicable to the Company or the Subsidiaries or of any decree of any
court or governmental agency or body having jurisdiction over the
Company or the Subsidiaries, or (iii) in default in any material respect
in the performance of any obligation, agreement or condition contained
in any bond, debenture, note or any other evidence of indebtedness or in
any material agreement, indenture, lease or other instrument to which
the Company or any of the Subsidiaries is a party or by which any of
them or any of their respective properties is bound, except, with
respect of clauses (ii) and (iii) above, for any defaults which, singly
or in the aggregate, would not have a material adverse effect on the
financial condition, business, properties or results of operations of
the Company and its subsidiaries taken as a whole.
(l) Neither the issuance and sale of the Shares, the execution,
delivery or performance of this Agreement by the Company or the
Operating Partnership nor the consummation by the Company or the
Operating Partnership of the transactions contemplated hereby (i)
requires any consent, approval, authorization or other order of or
registration or filing with, any court, regulatory body, administrative
agency or other governmental body, agency or official (except such as
may be required for the registration of the Shares under the Act and the
Exchange Act and compliance with the securities or Blue Sky or real
estate syndication laws of various jurisdictions, to the extent
applicable, all of which have been or will be effected in accordance
with this Agreement) or conflicts or will conflict with or constitutes
or will constitute a breach of, or a default under, the certificate or
articles of incorporation or bylaws or certificates or agreements of
limited partnership, limited liability company or trust or other
organizational documents of the Company or the Subsidiaries or (ii)
conflicts or will conflict with or constitutes or will constitute a
breach of, or a default under, any agreement, indenture, lease or other
instrument to which the Company or the Subsidiaries is a party or by
which any of them or any of their respective properties may be bound, or
violates or will violate any statute, law, regulation or filing or
judgment, injunction, order or decree applicable to the Company or the
Subsidiaries or any of their respective properties, or will result in
the creation or imposition of any Lien upon any property or assets of
the Company or the Subsidiaries pursuant to the terms of any agreement
or instrument to which any of them is a party or
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by which any of them may be bound or to which any of the property or
assets of any of them is subject.
(m) Ernst & Young LLP and Arthur Andersen LLP who have certified
the financial statements included or incorporated by reference in the
Registration Statement and the Prospectus (or any amendment or
supplement thereto) are independent public accountants with respect to
the Company as required by the Act.
(n) The financial statements, together with related schedules and
notes, of the Company and of any properties acquired by the Company
included or incorporated by reference in the Registration Statement and
the Prospectus (and any amendment or supplement thereto), present fairly
(i) the consolidated financial position, results of operations and
changes in financial position of the Company and its subsidiaries and
(ii) the combined revenues and certain expenses of the properties
acquired by the Company, as the case may be, on the basis stated in the
Registration Statement at the respective dates or for the respective
periods to which they apply; such statements and related schedules and
notes have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods
involved, except as disclosed therein; and the other financial and
statistical information and data included or incorporated by reference
in the Registration Statement and the Prospectus (or any amendment or
supplement thereto) are accurately presented and prepared on a basis
consistent with such financial statements and the books and records (i)
of the Company and its subsidiaries and (ii) the properties acquired by
the Company, as the case may be. The selected historical financial data
of the Company set forth under the caption "Selected Pro Forma and
Historical Financial Information" in the Prospectus Supplement, present
fairly, on the basis stated in the Prospectus Supplement, the historical
financial information of the Company included therein. The unaudited
pro forma financial statements included in the Prospectus Supplement
comply in all material respects with the applicable accounting
requirements of Rule 11-02 of Regulation S-X and the pro forma
adjustments have been properly applied to the historical amounts in the
compilation of that data.
(o) Except as disclosed in or contemplated by the Registration
Statement and the Prospectus (or any amendment or supplement thereto),
subsequent to the respective dates as of which such information is given
in the Registration Statement and the Prospectus (or any amendment or
supplement thereto), neither the Company nor any of the Subsidiaries has
incurred any liability or obligation, direct or contingent, or entered
into any transaction, not in the ordinary course of business, that is
material to the
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Company and the Subsidiaries taken as a whole, and there has not been
any change in (or repurchase or declaration of dividends or
distributions on) the capital stock, or material increase in the
short-term debt or long-term debt, of the Company or any of its
subsidiaries, or any material adverse change, or any development
involving or which may reasonably be expected to involve, a prospective
material adverse change, in the financial condition, business,
properties or results of operations of the Company and its subsidiaries
taken as a whole.
(p) The Company and each Subsidiary (i) is in compliance with all
applicable federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("ENVIRONMENTAL
LAWS"),(ii) has received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) is in compliance with all terms and
conditions of any such permit, license or approval, except, with respect
to clauses (i), (ii) and (iii) above, where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or
other approvals or failure to comply with the terms and conditions of
such permits, licenses or approvals are otherwise disclosed in or
contemplated by the Prospectus or would not, singly or in the aggregate,
have a material adverse effect on the financial condition, business,
properties or results of operations of the Company and its subsidiaries
taken as a whole.
(q) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or
operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any permit, license or approval,
any related constraints on operating activities and any potential
liabilities to third parties or in connection with off-site disposal of
hazardous substances) that would, singly or in the aggregate, have a
material adverse effect on the financial condition, business, properties
or results of operations of the Company and its subsidiaries taken as a
whole.
(r) (i)The Company and the Subsidiaries have good and marketable
title in fee simple to all parcels of real property (except for those
easement parcels that are appurtenant to the real property owned in fee
simple by the Company and its subsidiaries) and good and marketable
title to all personal property owned by them which is material to the
business of the Company and its subsidiaries taken as a whole, in each
case free and clear of all Liens, except such as are described in the
Prospectus or such as do not, singly or in the aggregate, materially
affect the value of
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such real and personal property taken as a whole and do not materially
interfere with the use made and proposed to be made of such real and
personal property by the Company and the Subsidiaries,(ii) any real
property and buildings held under lease by the Company and the
Subsidiaries are held under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the
use made and proposed to be made of such property and buildings by the
Company and the Subsidiaries, in each case except as described in the
Prospectus, (iii)the construction, management or operation of the
buildings, fixtures and other improvements located on the Company's
"Owned Properties" (as such term is defined in the Prospectus
Supplement) as presently conducted or existing is not in violation of
any applicable building code, zoning ordinance or other law or
regulation, except where any such violation would not, singly or in the
aggregate, have a material adverse effect on the Company and the
Subsidiaries taken as a whole, (iv)neither the Company nor any
Subsidiary has received notice of any proposed special assessment or any
proposed change in any property tax, zoning or land use laws affecting
all or any portion of the Owned Properties, except where any such
assessment or change would not, singly or in the aggregate, have a
material adverse effect on the Company and the Subsidiaries taken as a
whole,(v) there do not exist any violations of any declaration of
covenants, conditions and restrictions with respect to any of the Owned
Properties, nor is there any existing state of facts or circumstances or
condition or event which could, with the giving of notice or passage of
time, or both, constitute such a violation, except where any such
violation would not, singly or in the aggregate, have a material adverse
effect on the Company and the Subsidiaries taken as a whole, and (vi)
the improvements comprising any portion of the Owned Properties (the
"IMPROVEMENTS") are free of any and all material physical, mechanical,
structural, design and construction defects and the mechanical,
electrical and utility systems servicing the Improvements (including,
without limitation, all water, electric, sewer, plumbing, heating,
ventilation, gas and air conditioning) are in good condition and proper
working order and are free of material defects, except for any such
defects or failures to be in good condition or proper working order
which do not, singly or in the aggregate, have a material adverse effect
on the value of the Owned Properties taken as a whole.
(s) The direct and indirect subsidiaries of the Company have
obtained Extended Coverage Owner's Policies of Title Insurance, to the
extent available in the pertinent jurisdiction (other than in connection
with real property located in Texas, with respect to which the Company
and the Subsidiaries have obtained Texas Form T-1 Policies of Title
Insurance)
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from title insurers of recognized financial responsibility on all of the
Owned Properties and such policies are in full force and effect.
(t) The Company and the Subsidiaries self-insure or are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are customary in the businesses in which
they are engaged; and neither the Company, nor any Subsidiary has any
reason to believe that it will not be able to renew that coverage as and
when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that
would not materially and adversely affect the financial condition,
business or results of operations of the Company and its subsidiaries
taken as a whole, except as described in or contemplated by the
Prospectus.
(u) The Company has not distributed and, prior to the later to
occur of (i) the Closing Date and (ii) completion of the distribution of
the Shares, will not distribute any offering material in connection with
the offering and sale of the Shares other than the Registration
Statement, the Preliminary Prospectus, the Prospectus or other
materials, if any, permitted by the Act.
(v) (i)The Company and each of the Subsidiaries has such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("PERMITS") as are necessary to own its respective
properties and to conduct its business in the manner described in the
Prospectus, subject to such qualifications as may be set forth in the
Prospectus,(ii) the Company and each of the Subsidiaries has fulfilled
and performed all its material obligations with respect to such permits
and to the Company's knowledge no event has occurred which allows, or
after notice or lapse of time would allow, revocation or termination
thereof or results in any other material impairment of the rights of the
holder of any such permit, subject in each case to such qualification as
may be set forth in the Prospectus and (iii) except as described in the
Prospectus, none of such permits contains any restriction that is
materially burdensome to the Company or any of the Subsidiaries, except,
with respect to clauses (i), (ii) and (iii) above, for any such failure
to obtain permits or failure to fulfill or perform obligations, or the
occurrence of events, or such restriction that would, singly or in the
aggregate, not have a material adverse effect on the financial
condition, business, properties or results of operations of the Company
and its subsidiaries taken as a whole.
(w) The Company and each of the Subsidiaries have filed all tax
returns required to be filed and have paid all taxes shown thereon as
due
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and there is no tax deficiency that has been or to the knowledge of the
Company, is threatened to be asserted that could reasonably be expected
to have a material adverse effect on the financial condition, business,
properties or results of operations of the Company and its subsidiaries
taken as a whole.
(x) No holder of any security of the Company or the Operating
Partnership has any unwaived right to require registration of shares of
Common Stock or any other security of the Company or OP Units because of
the filing of the Registration Statement or consummation of the
transactions contemplated by this Agreement.
(y) The Company and the Subsidiaries are not now, and after the
sale of the Shares to be sold hereunder and application of the net
proceeds from such sale as described in the Prospectus Supplement under
the caption "Use of Proceeds," none of them will be, an "investment
company" or an entity "controlled" by an "investment company" as such
terms are defined in the Investment Company Act of 1940, as amended.
(z) The Company has complied with all provisions of Florida
Statutes, Section 517.075, relating to issuers doing business in Cuba.
(aa) The Company has since July 29, 1994 been organized and
qualified as a REIT under Sections 856 through 860 of the Code, has
elected to be taxed as a REIT under the Code for the taxable year ended
December 31, 1994, and currently expects to continue to be organized and
to operate in a manner so as to qualify as a REIT in the taxable year
ending December 31, 1997 and succeeding taxable years.
(bb) Except for this Agreement, there are no contracts, agreements
or understandings between the Company and any person that would give
rise to a valid claim against the Company or any Underwriter for a
brokerage commission, finders fee or other like payment with respect to
the consummation of the transactions contemplated by this Agreement.
(cc) The Shares have been approved for listing on the New York
Stock Exchange, subject to notice of issuance.
(dd) The Agreement and Plan of Merger, dated as of April 21, 1997
by and among AIMCO, AIMCO/NHP Acquisition Corp., and NHP Incorporated,
as amended, is in full force and effect, subject to the conditions set
forth therein.
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7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company and the Operating Partnership agree, jointly and
severally, to indemnify and hold harmless each of you and each other
Underwriter and each person, if any, who controls any Underwriter within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act
from and against any and all losses, claims, damages, liabilities and
expenses (including reasonable costs of investigation) arising out of or
based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, the Prospectus or
any Preliminary Prospectus, or in any amendment or supplement thereto,
or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or expenses arise out of or are
based upon any untrue statement or omission or alleged untrue statement
or omission which has been made therein or omitted therefrom in reliance
upon and in conformity with the information relating to such Underwriter
furnished in writing to the Company by or on behalf of any Underwriter
through you expressly for use in connection therewith; PROVIDED,
however, that the indemnification contained in this paragraph (a) with
respect to any Preliminary Prospectus shall not inure to the benefit of
any Underwriter (or to the benefit of any person controlling such
Underwriter) on account of any such loss, claim, damage, liability or
expense arising from the sale of the Shares by such Underwriter to any
person if a copy of the Prospectus shall not have been delivered or sent
to such person within the time required by the Act and the regulations
thereunder, and the untrue statement or alleged untrue statement or
omission or alleged omission of a material fact contained in such
Preliminary Prospectus was corrected in the Prospectus, PROVIDED that
the Company has delivered the Prospectus to the several Underwriters in
requisite quantity on a timely basis to permit such delivery or sending.
The foregoing indemnity agreement shall be in addition to any liability
which the Company may otherwise have.
(b) If any action, suit or proceeding shall be brought against any
Underwriter or any person controlling any Underwriter in respect of
which indemnity may be sought against the Company or the Operating
Partnership, such Underwriter or such controlling person shall promptly
notify the Company and the Operating Partnership and the Company and the
Operating Partnership shall assume the defense thereof, including the
employment of counsel and payment of all reasonable fees and expenses.
Such Underwriter or any such controlling person shall have the right to
employ separate counsel in any such action, suit or proceeding and to
17
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participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Underwriter or such controlling
person unless (i) the Company and the Operating Partnership have agreed
in writing to pay such reasonable fees and expenses,(ii) the Company and
the Operating Partnership have failed to assume the defense and employ
counsel, or (iii) the named parties to any such action, suit or
proceeding (including any impleaded parties) include such Underwriter or
such controlling person, the Company and the Operating Partnership, and
such Underwriter or such controlling person shall have been advised by
its counsel that representation of such indemnified party, the Company
and the Operating Partnership by the same counsel would be inappropriate
under applicable standards of professional conduct (whether or not such
representation by the same counsel has been proposed) due to actual or
potential differing interests between them (in which case the Company
and the Operating Partnership shall not have the right to assume the
defense of such action, suit or proceeding on behalf of such Underwriter
or such controlling person). It is understood, however, that the
Company and the Operating Partnership shall, in connection with any one
such action, suit or proceeding or separate but substantially similar or
related actions, suits or proceedings in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of only one separate firm of attorneys (in
addition to any local counsel) at any time for all such Underwriters and
controlling persons, which firm shall be designated in writing by Smith
Barney Inc., and that all such reasonable fees and expenses shall be
reimbursed as they are incurred. The Company and the Operating
Partnership shall not be liable for any settlement of any such action,
suit or proceeding effected without its written consent, but if settled
with such written consent, or if there be a final judgment for the
plaintiff in any such action, suit or proceeding, the Company and the
Operating Partnership agree to indemnify and hold harmless any
Underwriter, to the extent provided in the preceding paragraph, and any
such controlling person from and against any loss, claim, damage,
liability or expense by reason of such settlement or judgment.
(c) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company and the Operating Partnership,
the Company's directors, the Company's officers who sign the
Registration Statement, and any person who controls the Company or the
Operating Partnership within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, to the same extent as the foregoing
indemnity from the Company and the Operating Partnership to each
Underwriter, but only with respect to information relating to such
Underwriter furnished in writing by or on behalf of such Underwriter
through you expressly for use in the Registration Statement, the
Prospectus or any Preliminary Prospectus, or
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any amendment or supplement thereto. If any action, suit or proceeding
shall be brought against the Company and the Operating Partnership, any
of the Company's directors, any such officer, or any such controlling
person based on the Registration Statement, the Prospectus or any
Preliminary Prospectus, or any amendment or supplement thereto, and in
respect of which indemnity may be sought against any Underwriter
pursuant to this paragraph (c), such Underwriter shall have the rights
and duties given to the Company and the Operating Partnership by
paragraph (b) above (except that if the Company and the Operating
Partnership shall have assumed the defense thereof such Underwriter
shall not be required to do so, but may employ separate counsel therein
and participate in the defense thereof, but the fees and expenses of
such counsel shall be at such Underwriter's expense), and the Company
and the Operating Partnership, the Company's directors, any such
officer, and any such controlling person shall have the rights and
duties given to the Underwriters by paragraph (b) above. The foregoing
indemnity agreement shall be in addition to any liability which the
Underwriters may otherwise have.
(d) If the indemnification provided for in this Section 7 is
applicable in accordance with its terms but is determined to be legally
unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or expenses referred to therein, then an
indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (i)
in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Operating Partnership on the one hand
and the Underwriters on the other hand from the offering of the Shares,
or (ii) if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the
relative fault of the Company and the Operating Partnership on the one
hand and the Underwriters on the other in connection with the statements
or omissions that resulted in such losses, claims, damages, liabilities
or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Operating
Partnership on the one hand and the Underwriters on the other shall be
deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company and the
Operating Partnership bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in
the table on the cover page of the Prospectus. The relative fault of
the Company and the Operating Partnership on the one hand and the
Underwriters on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
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material fact or the omission or alleged omission to state a material
fact relates to information supplied by the Company and the Operating
Partnership on the one hand or by the Underwriters on the other hand and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
(e) The Company, the Operating Partnership and the Underwriters
agree that it would not be just and equitable if contribution pursuant
to this Section 7 were determined by a pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in paragraph (d) above. The amount paid or
payable by an indemnified party as a result of the losses, claims,
damages, liabilities and expenses referred to in paragraph (d) above
shall be deemed to include, subject to the limitations set forth above,
any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating any claim or defending any such
action, suit or proceeding. Notwithstanding the provisions of this
Section 7, no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price of the Shares underwritten
by it and distributed to the public exceeds the amount of any damages
which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute pursuant to this Section 7 are
several in proportion to the respective numbers of Firm Shares set forth
opposite their names in Schedule I hereto (or such numbers of Firm
Shares increased as set forth in Section 10 hereof) and not joint.
(f) No indemnifying party shall, without the prior written consent
of the indemnified party, effect any settlement of any pending or
threatened action, suit or proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have
been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such action, suit or
proceeding.
(g) Any losses, claims, damages, liabilities or expenses for which
an indemnified party is entitled to indemnification or contribution
under this Section 7 shall be paid by the indemnifying party to the
indemnified party as such losses, claims, damages, liabilities or
expenses are incurred. The indemnity and contribution agreements
contained in this Section 7 and the
20
<PAGE>
representations and warranties of the Company and the Operating
Partnership set forth in this Agreement shall remain operative and in
full force and effect, regardless of (i) any investigation made by or on
behalf of any Underwriter or any person controlling any Underwriter, the
Company, the Operating Partnership, the Company's directors or officers,
or any person controlling the Company or the Operating Partnership,(ii)
acceptance of any Shares and payment therefor hereunder, and (iii) any
termination of this Agreement. A successor to any Underwriter or any
person controlling any Underwriter, or to the Company, the Operating
Partnership, the Company's directors or officers, or any person
controlling the Company or the Operating Partnership, shall be entitled
to the benefits of the indemnity, contribution and reimbursement
agreements contained in this Section 7.
8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations
of the Underwriters to purchase the Firm Shares hereunder are subject to the
following conditions:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for a post-effective amendment to the Registration Statement to
be declared effective before the offering of the Shares may commence, such
post-effective amendment to the Registration Statement shall have become
effective not later than 5:30 P.M., New York City time, on the date hereof,
or at such later date and time as shall be consented to in writing by you,
and all filings, if any, required by Rules 424 and 430A under the Act shall
have been timely made; no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceeding for that
purpose shall have been instituted or, to the knowledge of the Company or
any Underwriter, threatened by the Commission, and any request of the
Commission for additional information (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been complied with to
your satisfaction.
(b) Subsequent to the effective date of this Agreement, there
shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting the financial condition, business,
properties or results of operations of the Company and its subsidiaries
taken as a whole, not contemplated by the Prospectus, which in your
opinion, as Representatives of the several Underwriters, would
materially adversely affect the market for the Shares, or (ii) any event
or development relating to or involving the Company which makes any
statement made in the Prospectus untrue or which, in the opinion of the
Company and its counsel or the Underwriters and their counsel, requires
the making of any
21
<PAGE>
addition to or change in the Prospectus in order to state a material
fact required by the Act or any other law to be stated therein or
necessary in order to make the statements therein not misleading, if
amending or supplementing the Prospectus to reflect such event or
development would, in your opinion, as Representatives of the several
Underwriters, materially adversely affect the market for the Shares.
(c) You shall have received on the Closing Date, an opinion of
Skadden, Arps, Slate, Meagher & Flom, Piper & Marbury LLP, and other
counsel for the Company reasonably satisfactory to you, dated the
Closing Date and addressed to you, as the several Underwriters, to the
effect set forth in Exhibit A hereto.
(d) You shall have received on the Closing Date (i) an opinion of
Davis Polk & Wardwell, counsel for the Underwriters, dated the Closing
Date and addressed to you, as the several Underwriters, to the effect
set forth in Exhibit B hereto, and (ii) such other opinions of such
counsel with respect to such other related matters as you may reasonably
request.
(e) You shall have received letters addressed to you, as the
several Underwriters, and dated the date hereof and the Closing Date
from (i) Ernst & Young LLP,(ii) Arthur Andersen LLP, and (iii) Deloitte
& Touche, independent certified public accountants, substantially in the
forms heretofore approved by you.
(f) (i)There shall not have been any material change in the
capital stock of the Company nor any material increase in the short-term
or long-term debt of the Company (other than in the ordinary course of
business) from that set forth or contemplated in the Registration
Statement or the Prospectus (or any amendment or supplement
thereto);(ii) there shall not have been, since the respective dates as
of which information is given in the Registration Statement and the
Prospectus (or any amendment or supplement thereto), except as may
otherwise be stated in the Registration Statement and Prospectus (or any
amendment or supplement thereto), any material adverse change in the
financial condition, business, properties or results of operations of
the Company and its subsidiaries taken as a whole; (iii)the Company and
the Subsidiaries shall not have incurred any liabilities or obligations,
direct or contingent (whether or not in the ordinary course of
business), that are material to the Company and the Subsidiaries, taken
as a whole, other than those reflected in or contemplated by the
Registration Statement or the Prospectus (or any amendment or supplement
thereto); and (iv) all the representations and warranties of the Company
and the Operating Partnership contained in this Agreement shall be true
and correct on and as of the date hereof and on
22
<PAGE>
and as of the Closing Date as if made on and as of the Closing Date, and
you shall have received a certificate, dated the Closing Date and signed
by the chief executive officer and the chief financial officer of the
Company (or such other officers as are acceptable to you), to the effect
set forth in this Section 8(f) and in Section 8(g) hereof.
(g) Each of the Company and the Operating Partnership shall not
have failed at or prior to the Closing Date to have performed or
complied with any of its agreements herein contained and required to be
performed or complied with by it hereunder at or prior to the Closing
Date.
(h) The Shares shall have been listed, subject to notice of
issuance, on the New York Stock Exchange.
(i) The Company shall have furnished or caused to be furnished to
you such further certificates and documents as you shall have reasonably
requested.
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to you and your counsel.
Any certificate or document signed by any officer of the Company or
authorized representative of the Operating Partnership and delivered to you,
as Representatives of the Underwriters, or to counsel for the Underwriters,
on the Closing Date or any Option Closing Date shall be deemed a
representation and warranty by the Company or the Operating Partnership, as
the case may be, to each Underwriter as to the statements made therein.
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the satisfaction on and as of any Option
Closing Date of the conditions set forth in this Section 8, except that, if
any Option Closing Date is other than the Closing Date, the certificates,
opinions and letters referred to in paragraphs (c) through (f) shall be dated
the Option Closing Date in question and the opinions called for by paragraphs
(c) and (d) shall be revised to reflect the sale of Additional Shares.
9. EXPENSES. The Company agrees to pay the following costs and
expenses and all other costs and expenses incident to the performance by it
of its obligations hereunder:(i) the preparation, printing or reproduction,
and filing with the Commission of the Registration Statement (including
financial statements and exhibits thereto), each Preliminary Prospectus, the
Prospectus, and each amendment or supplement to any of them;(ii) the printing
(or reproduction) and
23
<PAGE>
delivery (including postage, air freight charges and charges for counting and
packaging) of such copies of the Registration Statement, each Preliminary
Prospectus, the Prospectus, the Incorporated Documents, and all amendments or
supplements to any of them, as may be reasonably requested for use in
connection with the offering and sale of the Shares;(iii) the preparation,
printing, authentication, issuance and delivery of certificates for the
Shares, including any stamp taxes in connection with the original issuance
and sale of the Shares;(iv) the printing (or reproduction) and delivery of
this Agreement, the Blue Sky Memorandum (if any) and all other agreements or
documents printed (or reproduced) and delivered in connection with the
offering of the Shares;(v) the listing of the Shares on the New York Stock
Exchange;(vi) the registration or qualification of the Shares for offer and
sale under the securities or Blue Sky or real estate syndication laws of the
several states as provided in Section 5(g) hereof (including the reasonable
fees, expenses and disbursements of counsel for the Underwriters relating to
the preparation, printing or reproduction, and delivery of the Blue Sky
Memorandum and such registration and qualification);(vii) the filing fees and
the fees and expenses of counsel for the Underwriters in connection with any
filings required to be made with the National Association of Securities
Dealers, Inc.;(viii) the transportation and other reasonable expenses
incurred by or on behalf of Company representatives in connection with
presentations to prospective purchasers of the Shares; and (ix) the
reasonable fees and expenses of the Company's accountants and the reasonable
fees and expenses of counsel (including local and special counsel) for the
Company.
10. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective:(i) upon the execution and delivery hereof by the parties hereto;
or (ii) if, at the time this Agreement is executed and delivered, it is
necessary for a post-effective amendment to the Registration Statement to be
declared effective before the offering of the Shares may commence, when
notification of the effectiveness of such post-effective amendment to the
Registration Statement has been released by the Commission. Until such time
as this Agreement shall have become effective, it may be terminated by the
Company, by notifying you, or by you, as Representatives of the several
Underwriters, by notifying the Company.
If any one or more of the Underwriters shall fail or refuse to purchase
Shares which it or they are obligated to purchase hereunder on the Closing
Date, and the aggregate number of Shares which such defaulting Underwriter or
Underwriters are obligated but fail or refuse to purchase is not more than
one-tenth of the aggregate number of Shares which the Underwriters are
obligated to purchase on the Closing Date, each non-defaulting Underwriter
shall be obligated, severally, in the proportion which the number of Firm
Shares set forth opposite its name in Schedule I hereto bears to the
aggregate number of Firm Shares set forth opposite the names of all
non-defaulting Underwriters or in such
24
<PAGE>
other proportion as you may specify in accordance with Section 20 of the
Master Agreement Among Underwriters of Smith Barney Inc., to purchase the
Shares which such defaulting Underwriter or Underwriters are obligated, but
fail or refuse, to purchase. If any one or more of the Underwriters shall
fail or refuse to purchase Shares which it or they are obligated to purchase
on the Closing Date and the aggregate number of Shares with respect to which
such default occurs is more than one-tenth of the aggregate number of Shares
which the Underwriters are obligated to purchase on the Closing Date and
arrangements satisfactory to you and the Company for the purchase of such
Shares by one or more non-defaulting Underwriters or other party or parties
approved by you and the Company are not made within 36 hours after such
default, this Agreement will terminate without liability on the part of any
non-defaulting Underwriter or the Company. In any such case which does not
result in termination of this Agreement, either you or the Company shall have
the right to postpone the Closing Date, but in no event for longer than seven
days, in order that the required changes, if any, in the Registration
Statement and the Prospectus or any other documents or arrangements may be
effected. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any such default of any
such Underwriter under this Agreement. The term "Underwriter" as used in
this Agreement includes, for all purposes of this Agreement, any party not
listed in Schedule I hereto who, with your approval and the approval of the
Company, purchases Shares which a defaulting Underwriter is obligated, but
fails or refuses, to purchase.
Any notice under this Section 10 may be given by telegram, telecopy or
telephone but shall be subsequently confirmed by letter.
11. TERMINATION OF AGREEMENT. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Company by notice to the Company, if prior to the Closing
Date or any Option Closing Date (if different from the Closing Date and then
only as to the Additional Shares), as the case may be,(i) trading in
securities generally on the New York Stock Exchange, the American Stock
Exchange or the Nasdaq National Market shall have been suspended or
materially limited, (ii)a general moratorium on commercial banking activities
in New York shall have been declared by either federal or state authorities,
or (iii) there shall have occurred any outbreak or escalation of hostilities
or other international or domestic calamity, crisis or change in political,
financial or economic conditions, the effect of which on the financial
markets of the United States is such as to make it, in your judgment,
impracticable or inadvisable to commence or continue the offering of the
Shares at the offering price to the public set forth on the cover page of the
Prospectus or to enforce contracts for the resale of the Shares by the
Underwriters. Notice of such termination may be given to the Company by
25
<PAGE>
telegram, telecopy or telephone and shall be subsequently confirmed by
letter. Upon any such termination, the obligations of the Company and the
Operating Partnership to the Underwriters hereunder shall also terminate,
except for the obligations set forth in Sections 7 and 9 hereof.
12. INFORMATION FURNISHED BY THE UNDERWRITERS. The statements set
forth in the last paragraph on the cover page, the stabilization legend on
page S-2, and the statements in the first, third and fifth paragraphs under
the caption "Underwriting" in any Preliminary Prospectus and in the
Prospectus, constitute the only information furnished in writing by or on
behalf of the Underwriters through you as such information is referred to in
Sections 6(b) and 7 hereof.
13. MISCELLANEOUS. Except as otherwise provided in Sections 5, 10 and
11 hereof, notice given pursuant to any provision of this Agreement shall be
in writing and shall be delivered (i) if to the Company or the Operating
Partnership, at the office of the Company at 1873 South Bellaire Street, 17th
Floor, Denver, Colorado 80222, Attention: Mr. Terry Considine, Chairman of
the Board of Directors; or (ii) if to you, as Representatives of the several
Underwriters, care of Smith Barney Inc., 388 Greenwich Street, New York, New
York 10013, Attention: Manager, Investment Banking Division.
This Agreement has been and is made solely for the benefit of the
several Underwriters, the Company, the Operating Partnership, the Company's
directors and officers, and the other controlling persons referred to in
Section 7 hereof and their respective successors and assigns, to the extent
provided herein, and no other person shall acquire or have any right under or
by virtue of this Agreement. Neither the term "successor" nor the term
"successors and assigns" as used in this Agreement shall include a purchaser
from any Underwriter of any of the Shares in his status as such purchaser.
14. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable
to contracts made and to be performed within the State of New York.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
26
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Operating Partnership and the several Underwriters.
Very truly yours,
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
By: /s/ Peter Kompaniez
--------------------
Name: Peter Kompaniez
Title: President
AIMCO PROPERTIES, L.P.
By AIMCO-GP, Inc., its General Partner
By: /s/ Peter Kompaniez
--------------------
Name: Peter Kompaniez
Title: Vice President
Confirmed as of the date first above
mentioned on behalf of themselves and
the other several Underwriters named
in Schedule I hereto.
SMITH BARNEY INC.
BT ALEX. BROWN INCORPORATED
LEHMAN BROTHERS INC.
MERRILL LYNCH, PIERCE FENNER & SMITH
INCORPORATED
RAYMOND JAMES & ASSOCIATES, INC.
THE ROBINSON-HUMPHREY COMPANY, LLC
As Representatives of the Several Underwriters
By SMITH BARNEY INC.
By: /s/ John Herbert
-------------------------
Name: John Herbert
Title: Managing Director
27
<PAGE>
SCHEDULE I
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
Number of
Underwriter Firm Shares
-----------
Smith Barney Inc. . . . . . . . . . . . . . . . . . . . . . 1,166,700
BT Alex. Brown Incorporated . . . . . . . . . . . . . . . . 1,166,660
Lehman Brothers Inc . . . . . . . . . . . . . . . . . . . . 1,166,660
Merrill Lynch, Pierce, Fenner & Smith
Incorporated . . . . . . . . . . . . . . . . . . 1,166,660
Raymond James & Associates, Inc. . . . . . . . . . . . . . 1,166,660
The Robinson-Humphrey Company, LLC . . . . . . . . . . . . 1,166,660
-----------
Total . . . . . . . . . . . . . . . . . 7,000,000
-----------
-----------
<PAGE>
SCHEDULE II
1. AIMCO-LP, Inc.(1)
2. Property Asset Management Services, Inc.(2)
3. AIMCO/NHP Holdings, Inc.(2)
4. NHP Incorporated (3)
5. AIMCO Properties, L.P.(4)
6. Property Asset Management Services, L.P.(5)
7. AIMCO/NHP Partners, L.P.(6)
8. AIMCO-GP, Inc.(1)
9. NHP Partners, Inc.(2)
- -----------------------------
(1) Owned 100% by the Company
(2) The Operating partnership holds a 95% economic non-voting preferred
stock interest and certain officers of the Company hold a 5% economic
interest and hold all of the common voting interest.
(3) The company holds approximately 47% of the common shares and
AIMCO/NHP Holdings, Inc. holds approximately 6% of the common shares.
(4) AIMCO-GP, Inc. is the sole general partner with a 1% interest and
AIMCO-LP, Inc. holds an approximate 84% limited partnership interest.
(5) The Operating Partnership is the sole general partner with a 1%
interest and Property Asset Management Services, Inc. is the sole
limited partner with a 99% limited partnership interest.
(6) The Operating Partnership holds a 99% limited partnership interest
and CK Properties, L.L.C., a limited liability company whose members are
officers of the Company, is the sole general partner and holds a 1%
general partnership interest.
<PAGE>
10. NHP Management Company (7)
- ------------------------
(7) Owned 100% by NHP Incorporated
2
<PAGE>
EXHIBIT A
OPINIONS OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM,
PIPER & MARBURY LLP AND OTHER COUNSEL
FOR THE COMPANY
The opinions of Skadden, Arps, Slate, Meagher & Flom, Piper & Marbury
LLP, and other counsel for the Company satisfactory to the Representatives,
to be delivered pursuant to Section 8(c) of the Apartment Investment and
Management Company Underwriting Agreement shall be, in the aggregate,
substantially to the effect that on the Closing Date:
(i) The Company is a corporation duly organized and validly existing
in good standing under the laws of the jurisdiction of its incorporation
with full corporate power and authority to own, lease and operate its
properties or properties proposed to be acquired by it and to conduct
its business as described in the Registration Statement and the
Prospectus. Such counsel shall identify, based solely upon certificates
of public officials, those states in which the Company is qualified to
do business.
(ii) Each Specified Subsidiary (as defined on Schedule II hereto) is
a corporation, limited partnership, limited liability company or trust,
as the case may be, duly organized or formed and validly existing under
the laws of its jurisdiction of organization or formation, with
corporate, limited partnership, limited liability company or trust power
and authority, as the case may be, to own, lease and operate its
properties or any properties proposed to be acquired by it and to
conduct its business as described in the Registration Statement and the
Prospectus.
(iii) The authorized and outstanding capital stock of the Company is
as set forth under the caption "Capitalization" in the Prospectus
Supplement. The authorized capital stock of the Company conforms in all
material respects as to legal matters to the description thereof
contained in the Prospectus under the captions "Description of Common
Stock" and "Description of Preferred Stock".
(iv) All shares of common stock of the Company (including Class B
Common Stock) outstanding prior to the issuance of the Shares have been
duly authorized and are validly issued, fully paid and nonassessable.
(v) The Shares have been duly authorized and, when issued and
delivered to the Underwriters against payment therefor in accordance
with
<PAGE>
the terms hereof, will be validly issued, fully paid and nonassessable
and free of any preemptive, or to the best knowledge of such counsel
after reasonable inquiry, similar rights that entitle or will entitle
any person to acquire any Shares upon the issuance thereof by the
Company.
(vi) (i) All of the shares of capital stock issued by AIMCO,
AIMCO-GP, Inc., AIMCO-LP, Inc.
[Insert additional Subsidiaries defined in Schedule II as appropriate]
and (ii) all of the partnership interests in AIMCO Properties, L.P.
(subsequent to July 29, 1994),
[Insert additional Subsidiaries defined in Schedule II as appropriate]
issued by such limited partnerships or created by agreements to which
such limited partnerships are parties have been duly and validly issued
(and in the case of capital stock have been duly authorized and are
fully paid and nonassessable) and, except for minority limited
partnership interests in AIMCO Properties, L.P., to the best knowledge
of such counsel after reasonable inquiry (including a review of
ownership and transfer records for shares of capital stock, partnership
interests or membership interests, to the extent maintained by such
entities), such shares of capital stock or partnership interests are
owned by the Company directly or through Subsidiaries (except for
indirect ownership interests held by certain trusts in which Messrs.
Considine, Kompaniez, Ira and Lacey collectively hold aggregate 5%
beneficial interests) free and clear of any security interest, lien,
adverse claim, equity or other encumbrance.
(vii) The form of certificates for the Shares conforms to the
requirements of the Maryland General Corporation Law.
(viii) The Company has corporate power and authority to enter into this
Agreement and to issue, sell and deliver the Shares to the Underwriters
as provided herein. This Agreement has been duly authorized, executed
and delivered by the Company and the Operating Partnership.
(ix) To the best knowledge of such counsel after reasonable inquiry,
there are no legal or governmental proceedings pending or threatened
against the Company of any the Specified Subsidiaries, or to which the
Company or any of the Specified Subsidiaries, or to which any of their
respective properties is subject, that are required to be described in
the Registration Statement or the Prospectus but are not described as
required, and there are no agreements, contracts, indentures, leases or
other instruments that are required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement or any Incorporated Document that are not
described or filed as required by the Act or the Exchange Act.
2
<PAGE>
(x) Neither the issuance and sale of the Shares, the execution,
delivery or performance of this Agreement by the Company or the
Operating Partnership nor the consummation by the Company or the
Operating Partnership of the transactions contemplated hereby (1)
requires any consent, approval, authorization or other order of, or
registration or filing with, any court, regulatory body, administrative
agency or other governmental body, agency or official (except such as
may be required for the registration of the Shares under the Act and the
Exchange Act and compliance with the securities or Blue Sky or real
estate syndication laws of various jurisdictions, all of which have been
or will be effected in accordance with this Agreement) or (2) conflicts
or will conflict with or constitutes or will constitute a breach of, or
a default under, the certificate or articles of incorporation or bylaws
of the Company, AIMCO-GP, Inc. or AIMCO-LP, Inc. or the Certificate of
Limited Partnership or Agreement of Limited Partnership of AIMCO
Properties, L.P., as amended, or (3) to the best knowledge of such
counsel after reasonable inquiry, violates or will violate any statute,
law, regulation or filing or judgment, injunction, order or decree
applicable to the Company or the Subsidiaries or any of their respective
properties or (4) to the best knowledge of such counsel after reasonable
inquiry, conflicts or will conflict with or constitutes or will
constitute a breach of or a default under any Material Agreement (as
such term shall be defined in the opinion of such counsel).
(xi) To the best knowledge of such counsel after reasonable inquiry,
no holder of any security of the Company or the Operating Partnership
has any unwaived right to require registration of shares of Common Stock
or any other security of the Company or OP Units because of the filing
of the Registration Statement or consummation of the transactions
contemplated by this Agreement.
(xii) The Company and the Specified Subsidiaries are not now, and
after the sale of the Shares to be sold hereunder and application of the
net proceeds from such sale as described in the Prospectus Supplement
under the caption "Use of Proceeds," none of them will be, an
"investment company" as such terms are defined in the Investment Company
Act of 1940, as amended.
(xiii) The Registration Statement and all post-effective amendments, if
any, have become effective under the Act and, to the best knowledge of
such counsel after reasonable inquiry,(1) no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose are pending before or contemplated by the
Commission and (2) any required filing of the Prospectus pursuant to
Rule 424(b) has been made in accordance with Rule 424(b).
3
<PAGE>
(xiv) The statements (1) in the Basic Prospectus under the caption
"Description of Common Stock"; and (2) in the Prospectus Supplement
under "Certain Federal Income Tax Considerations," in each case insofar
as such statements constitute summaries of the legal matters, documents,
or proceedings referred to therein, are accurate and present fairly the
information required to be shown.
(xv) Such counsel confirms as of the Closing Date the opinion filed
as Exhibit 8.1 to the Registration Statement.
(xvi) The Registration Statement and the Prospectus and any
supplements or amendments thereto (except for the financial statements
and the notes thereto and the schedules and other financial and
statistical data included therein, as to which such counsel need not
express any opinion) comply as to form in all material respects with the
requirements of the Act. Each of the Incorporated Documents (except for
the financial statements and the notes thereto and the schedules and
other financial and statistical data included therein, as to which
counsel need not express any opinion) complies as to form in all
material respects with the Exchange Act and the rules and regulations of
the Commission thereunder.
(xvii) Although such counsel has not undertaken, except as otherwise
indicated in their opinion, to determine independently, and does not
assume any responsibility for, the accuracy or completeness of the
statements in the Registration Statement, such counsel has participated
in the preparation of the Registration Statement and the Prospectus,
including review and discussion of the contents thereof (including
review and discussion of the contents of all Incorporated Documents),
and nothing has come to the attention of such counsel that has caused
them to believe that the Registration Statement (including the
Incorporated Documents) at the time the Registration Statement became
effective, or the Prospectus, as of its date and as of the Closing Date
or the Option Closing Date, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading or that any amendment or supplement to the
Prospectus, as of its respective date, and as of the Closing Date or the
Option Closing Date, as the case may be, contained any untrue statement
of a material fact or omitted to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading (it being understood that
such counsel need express no opinion with respect to the financial
statements and the notes thereto and the schedules and other financial
and statistical data
4
<PAGE>
included in the Registration Statement or the Prospectus or any
Incorporated Document).
In rendering the foregoing opinions (i) such counsel may state that they
have relied as to factual matters upon certificates of public officials or
one or more officers of the Company or its Subsidiaries, (ii) Skadden, Arps,
Slate, Meagher & Flom may state that their opinion relates only to the
federal laws of the United States and the laws of the State of Delaware and
California, and (iii) Piper & Marbury LLP may state that their opinion
relates only to the laws of the State of Maryland.
5
<PAGE>
EXHIBIT B
OPINION OF DAVIS POLK & WARDWELL,
COUNSEL FOR THE UNDERWRITERS
The opinion of Davis Polk & Wardwell, counsel for the Underwriters, to
be delivered pursuant to Section 8(d) of the Apartment Investment and
Management Company Underwriting Agreement shall be to the effect that on the
Closing Date:
(i) The Shares have been duly authorized and, when issued and
delivered to the Underwriters against payment therefor in accordance
with the terms hereof, will be validly issued, fully paid and
nonassessable and free of any preemptive, or to the best knowledge of
such counsel after reasonable inquiry, similar rights that entitle or
will entitle any person to acquire any Shares upon the issuance thereof
by the Company.
(ii) The Registration Statement and all post-effective
amendments, if any, have become effective under the Act and, to the best
knowledge of such counsel after reasonable inquiry,(1) no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose are pending before or
contemplated by the Commission and (2) any required filing of the
Prospectus pursuant to Rule 424(b) has been made in accordance with Rule
424(b).
(iii) This Agreement has been duly authorized, executed and
delivered by the Company.
(iv) The statements in the Prospectus Supplement under the
caption "Underwriting" insofar as such statements constitute summaries
of the legal matters and documents referred to therein fairly present
the information called for with respect to such legal matters and
documents and fairly summarize the matters referred to therein.
(v) The Registration Statement and the Prospectus and any
supplements or amendments thereto (except for the financial statements
and the notes thereto and the schedules and other financial and
statistical data included therein, as to which such counsel need not
express any opinion) comply as to form in all material respects with the
requirements of the Act.
(vi) Although such counsel has not undertaken, except as
otherwise indicated in their opinion, to determine independently, and
does not assume any responsibility for, the accuracy or completeness of
the
<PAGE>
statements in the Registration Statement, such counsel has participated
in the preparation of the Registration Statement and the Prospectus,
including review and discussion of the contents thereof (including
review and discussion of the contents of all Incorporated Documents),
and nothing has come to the attention of such counsel that has caused
them to believe that the Registration Statement (including the
Incorporated Documents) at the time the Registration Statement became
effective, or the Prospectus, as of its date and as of the Closing Date
or the Option Closing Date, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading or that any amendment or supplement to the
Prospectus, as of its respective date, and as of the Closing Date or the
Option Closing Date, as the case may be, contained any untrue statement
of a material fact or omitted to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading (it being understood that
such counsel need express no opinion with respect to the financial
statements and the notes thereto and the schedules and other financial
and statistical data included in the Registration Statement or the
Prospectus or any Incorporated Document).
In rendering their opinion as aforesaid, such counsel may rely upon an
opinion or opinions, each dated the Closing Date, of other counsel retained
by them or the Company as to laws of any jurisdiction other than the United
States or the State of New York, provided that counsel shall state in their
opinion that they believe that they and the Underwriters are justified in
relying thereon.
<PAGE>
AMENDMENT NO. 3
TO
REAL ESTATE ACQUISITION AGREEMENT
AMENDMENT NO. 3 TO REAL ESTATE ACQUISITION AGREEMENT, dated as of
August 14, 1997 (this "AMENDMENT"), by and among Apartment Investment and
Management Company, a Maryland corporation ("AIMCO"), AIMCO Properties, L.P.,
a Delaware limited partnership ("AIMCO OP" and, together with AIMCO, the
"BUYERS"), Demeter Holdings Corporation, a Massachusetts corporation
("DEMETER"), Phemus Corporation, a Massachusetts corporation ("PHEMUS"),
Capricorn Investors, L.P., a Delaware limited partnership ("CAPRICORN"), J.
Roderick Heller, III, an individual ("HELLER"), and NHP Partners Two LLC, a
Delaware limited liability company ("PARTNERS TWO LLC" and, together with
Demeter, Phemus, Capricorn and Heller, the "SELLERS"). Capitalized terms
used, but not otherwise defined herein, shall have the respective meanings
ascribed to them in the Real Estate Acquisition Agreement, dated as of May
22, 1997, by and among the Buyers and the Sellers, as amended by (i)
Amendment No. 1 to Real Estate Acquisition Agreement, dated as of June 13,
1997 by and among the Buyers and the Sellers, and (ii) Amendment No. 2 to
Real Estate Acquisition Agreement, dated as of July 14, 1997 by and among the
Buyers and the Sellers (as so amended, the "ACQUISITION AGREEMENT").
WHEREAS, the parties hereto desire to amend the Acquisition
Agreement to extend the date for exercise of the Buyers' Property Put Right
for certain assets.
NOW, THEREFORE, in consideration of the foregoing, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. AMENDMENT OF SECTION 5.15(b). Section 5.15(b) of the
Acquisition Agreement is hereby amended and restated in its entirety to read
as follows:
"(b) The Buyer's Property Put Right may be exercised, at any time or
from time to time, (1) no later than September 5, 1997, with respect to (A)
the 1% general partnership interest and 15.715% limited partnership
interest in each of Lakehaven Associates One and Lakehaven Associates Two,
or (B) the .01% limited partnership interest in River Loft Apartments
Limited Partnership, and the 0.9% general partnership interest, the 0.1%
<PAGE>
general partnership interest and the 4% limited partnership interest in
River Loft Associates, and (2) no later than June 16, 1997, with respect to
any other assets, in each case, by AIMCO's delivery of a written notice to
the Sellers specifying (i) the assets that are requested to be repurchased
by the Sellers pursuant to the Buyers' Property Put Right, (ii) the basis
on which the Buyers are entitled to exercise the Buyers' Property Put
Right, and (iii) the date and time at which the closing (the "BUYERS'
PROPERTY PUT CLOSING") of the repurchase of such assets is to occur. The
date of the Buyers' Property Put Closing shall be at least 30 days after
the date (the "Notice Date") such notice is given; provided, however, that
if (x) it is not possible for the Sellers to cure, at least 5 Business Days
prior to the 30th day after the Notice Date, the breach, liability or
defect that entitles the Buyers to exercise the Buyers' Property Put Right,
or (y) AIMCO determines, in its reasonable discretion, that it is necessary
to consummate the Buyers' Property Put Closing earlier in order to avoid
jeopardizing AIMCO's REIT Status, then the date of the Buyers' Property Put
Closing may be on an earlier date, but not earlier than 5 Business Days
after the Notice Date."
2. GOVERNING LAW. This Amendment and the legal relations among
the parties hereto shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware, without regard to its
principles of conflicts of law.
3. ENTIRE AGREEMENT. This Amendment, together with the
Acquisition Agreement, including the exhibits and schedules attached thereto,
constitutes the entire agreement among the parties pertaining to the subject
matter hereof and supersedes all prior agreements, understandings, letters of
intent, negotiations and discussions, whether oral or written, of the
parties, including the Letter Agreement, and there are no warranties,
representations or other agreements, express or implied, made to any party by
any other party in connection with the subject matter hereof except as
specifically set forth herein or in the documents delivered pursuant hereto
or in connection herewith.
4. ACQUISITION AGREEMENT IN FULL FORCE. Except as expressly
modified hereby, the Acquisition Agreement remains in full force and effect.
5. MODIFICATION; WAIVER. No supplement, modification, waiver or
termination of this Amendment shall be binding unless executed in writing by
the party to be bound thereby. No waiver of any provision of this Amendment
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not
2
<PAGE>
similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
6. SEVERABILITY. Any provision or part of this Amendment which is
invalid or unenforceable in any situation in any jurisdiction shall, as to
such situation and such jurisdiction, be ineffective only to the extent of
such invalidity and shall not affect the enforceability of the remaining
provisions hereof or the validity or enforceability of any such provision in
any other situation or in any other jurisdiction.
7. COUNTERPARTS. This Amendment may be executed in as many
counterparts as may be deemed necessary and convenient, and by the different
parties hereto on separate counterparts each of which, when so executed,
shall be deemed an original, but all such counterparts shall constitute one
and the same instrument.
8. NEGOTIATION OF AMENDMENT. Each of the parties acknowledges
that it has been represented by independent counsel of its choice throughout
all negotiations that have preceded the execution of this Amendment and that
it has executed the same with consent and upon the advice of said independent
counsel. Each party and its counsel cooperated in the drafting and
preparation of this Amendment and the documents referred to herein, and any
and all drafts relating thereto shall be deemed the work product of the
parties and may not be construed against any party by reason of its
preparation. Accordingly, any rule of law or any legal decision that would
require interpretation of any ambiguities in this Amendment against the party
that drafted it is of no application and is hereby expressly waived. The
provisions of this Amendment shall be interpreted in a reasonable manner to
effect the intentions of the parties and this Amendment.
[SIGNATURE PAGES FOLLOW]
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as of the date first above written.
APARTMENT INVESTMENT
AND MANAGEMENT COMPANY
By: /s/ Peter Kompaniez
----------------------------
Name: Peter Kompaniez
Its: Vice Chairman
AIMCO PROPERTIES, L.P.
By: AIMCO-GP, Inc.,
its general partner
By: /s/ Peter Kompaniez
----------------------------
Name: Peter Kompaniez
Its: Vice President
DEMETER HOLDINGS CORPORATION
By: /s/ Michael R. Eisenson
----------------------------
Name: Michael R. Eisenson
Its: Authorized Signatory
By: /s/ Tim R. Palmer
----------------------------
Name: Tim R. Palmer
Its: Authorized Signatory
<PAGE>
PHEMUS CORPORATION
By: /s/ Michael R. Eisenson
----------------------------
Name: Michael R. Eisenson
Its: Authorized Signatory
By: /s/ Tim R. Palmer
----------------------------
Name: Tim R. Palmer
Its: Authorized Signatory
CAPRICORN INVESTORS, L.P.
By: Capricorn Holdings, G.P.,
its General Partner
By: Winokur Holdings, Inc.,
its General Partner
By: /s/ Herbert S. Winokur, Jr.
-----------------------------
Name: Herbert S. Winokur, Jr.
Its: President
/s/ J. Roderick Heller, III
----------------------------
J. Roderick Heller, III
NHP PARTNERS TWO LLC
By: /s/ Michael R. Eisenson
----------------------------
Name: Michael R. Eisenson
Its: Authorized Signatory
<PAGE>
AMENDMENT NO. 4
TO
REAL ESTATE ACQUISITION AGREEMENT
AMENDMENT NO. 4 TO REAL ESTATE ACQUISITION AGREEMENT, dated as of
September 4, 1997 (this "AMENDMENT"), by and among Apartment Investment and
Management Company, a Maryland corporation ("AIMCO"), AIMCO Properties, L.P.,
a Delaware limited partnership ("AIMCO OP" and, together with AIMCO, the
"BUYERS"), Demeter Holdings Corporation, a Massachusetts corporation
("DEMETER"), Phemus Corporation, a Massachusetts corporation ("PHEMUS"),
Capricorn Investors, L.P., a Delaware limited partnership ("CAPRICORN"), J.
Roderick Heller, III, an individual ("HELLER"), and NHP Partners Two LLC, a
Delaware limited liability company ("PARTNERS TWO LLC" and, together with
Demeter, Phemus, Capricorn and Heller, the "SELLERS"). Capitalized terms
used, but not otherwise defined herein, shall have the respective meanings
ascribed to them in the Real Estate Acquisition Agreement, dated as of May
22, 1997, by and among the Buyers and the Sellers, as amended by (i)
Amendment No. 1 to Real Estate Acquisition Agreement, dated as of June 13,
1997, by and among the Buyers and the Sellers, (ii) Amendment No. 2 to Real
Estate Acquisition Agreement, dated as of July 14, 1997, by and among the
Buyers and the Sellers, and (iii) Amendment No. 3 to Real Estate Acquisition
Agreement, dated as of August 14, 1997, by and among the Buyers and the
Sellers (as so amended, the "ACQUISITION AGREEMENT").
WHEREAS, the parties hereto desire to amend the Acquisition
Agreement to extend the date for exercise of the Buyers' Property Put Right
for certain assets.
NOW, THEREFORE, in consideration of the foregoing, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. AMENDMENT OF SECTION 5.15(b). Section 5.15(b) of the
Acquisition Agreement is hereby amended and restated in its entirety to read
as follows:
"(b) The Buyer's Property Put Right may be exercised, at any time or
from time to time, (1) no later than September 19, 1997, with respect to
(A) the 1% general partnership interest and 15.715% limited
<PAGE>
partnership interest in each of Lakehaven Associates One and Lakehaven
Associates Two, or (B) the .01% limited partnership interest in River Loft
Apartments Limited Partnership, and the 0.9% general partnership interest,
the 0.1% general partnership interest and the 4% limited partnership
interest in River Loft Associates, and (2) no later than June 16, 1997,
with respect to any other assets, in each case, by AIMCO's delivery of a
written notice to the Sellers specifying (i) the assets that are requested
to be repurchased by the Sellers pursuant to the Buyers' Property Put
Right, (ii) the basis on which the Buyers are entitled to exercise the
Buyers' Property Put Right, and (iii) the date and time at which the
closing (the "BUYERS" PROPERTY PUT CLOSING") of the repurchase of such
assets is to occur. The date of the "Buyers' Property Put Closing shall
be at least 30 days after the date (the "Notice Date") such notice is
given; provided, however, that if (x) it is not possible for the Sellers
to cure, at least 5 Business Days prior to the 30th day after the Notice
Date, the breach, liability or defect that entitles the Buyers to exercise
the Buyers' Property Put Right, or (y) AIMCO determines, in its reasonable
discretion, that it is necessary to consummate the Buyers' Property Put
Closing earlier in order to avoid jeopardizing AIMCO's REIT Status, then
the date of the Buyers' Property Put Closing may be on an earlier date, but
not earlier than 5 Business Days after the Notice Date."
2. GOVERNING LAW. This Amendment and the legal relations among
the parties hereto shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware, without regard to its
principles of conflicts of law.
3. ENTIRE AGREEMENT. This Amendment, together with the
Acquisition Agreement, including the exhibits and schedules attached thereto,
constitutes the entire agreement among the parties pertaining to the subject
matter hereof and supersedes all prior agreements, understandings, letters of
intent, negotiations and discussions, whether oral or written, of the
parties, including the Letter Agreement, and there are no warranties,
representations or other agreements, express or implied, made to any party by
any other party in connection with the subject matter hereof except as
specifically set forth herein or in the
2
<PAGE>
documents delivered pursuant hereto or in connection herewith.
4. ACQUISITION AGREEMENT IN FULL FORCE. Except as expressly
modified hereby, the Acquisition Agreement remains in full force and effect.
5. MODIFICATION; WAIVER. No supplement, modification, waiver or
termination of this Amendment shall be binding unless executed in writing by
the party to be bound thereby. No waiver of any provision of this Amendment
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar), nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided.
6. SEVERABILITY. Any provision or part of this Amendment which is
invalid or unenforceable in any situation in any jurisdiction shall, as to
such situation and such jurisdiction, be ineffective only to the extent of
such invalidity and shall not affect the enforceability of the remaining
provisions hereof or the validity or enforceability of any such provision in
any other situation or in any other jurisdiction.
7. COUNTERPARTS. This Amendment may be executed in as many
counterparts as may be deemed necessary and convenient, and by the different
parties hereto on separate counterparts each of which, when so executed,
shall be deemed an original, but all such counterparts shall constitute one
and the same instrument.
8. NEGOTIATION OF AMENDMENT. Each of the parties acknowledges
that it has been represented by independent counsel of its choice throughout
all negotiations that have preceded the execution of this Amendment and that
it has executed the same with consent and upon the advice of said independent
counsel. Each party and its counsel cooperated in the drafting and
preparation of this Amendment and the documents referred to herein, and any
and all drafts relating thereto shall be deemed the work product of the
parties and may not be construed against any party by reason of its
preparation. Accordingly, any rule of law or any legal decision that would
require interpretation of any ambiguities in this Amendment against the party
that drafted it is of no application and is hereby expressly waived. The
provisions of this Amendment shall be
3
<PAGE>
interpreted in a reasonable manner to effect the intentions of the parties
and this Amendment.
[SIGNATURE PAGES FOLLOW]
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as of the date first above written.
APARTMENT INVESTMENT
AND MANAGEMENT COMPANY
By: /s/ Peter Kompaniez
----------------------------
Name: Peter Kompaniez
Its: Vice Chairman
AIMCO PROPERTIES, L.P.
By: AIMCO-GP, Inc.,
its general partner
By: /s/ Peter Kompaniez
----------------------------
Name: Peter Kompaniez
Its: Vice President
DEMETER HOLDINGS CORPORATION
By: /s/ Michael Thonis
----------------------------
Name: Michael Thonis
Its: Authorized Signatory
By: /s/ Tim R. Palmer
----------------------------
Name: Tim R. Palmer
Its: Authorized Signatory
<PAGE>
PHEMUS CORPORATION
By: /s/ Michael Thonis
----------------------------
Name: Michael Thonis
Its: Authorized Signatory
By: /s/ Tim R. Palmer
----------------------------
Name: Tim R. Palmer
Its: Authorized Signatory
CAPRICORN INVESTORS, L.P.
By: Capricorn Holdings, G.P.,
its General Partner
By: Winokur Holdings, Inc.,
its General Partner
By: /s/ Herbert S. Winokur, Jr.
----------------------------
Name: Herbert S. Winokur, Jr.
Its: President
/s/ J. Roderick Heller, III
----------------------------
J. Roderick Heller, III
NHP PARTNERS TWO LLC
By: /s/ Michael R. Eisenson
----------------------------
Name: Michael R. Eisenson
Its: Authorized Signatory
<PAGE>
AMENDMENT NO. 5
TO
REAL ESTATE ACQUISITION AGREEMENT
AMENDMENT NO. 5 TO REAL ESTATE ACQUISITION AGREEMENT, dated as of
September 11, 1997 (this "AMENDMENT"), by and among Apartment Investment and
Management Company, a Maryland corporation ("AIMCO"), AIMCO Properties, L.P.,
a Delaware limited partnership ("AIMCO OP" and, together with AIMCO, the
"BUYERS"), Demeter Holdings Corporation, a Massachusetts corporation
("DEMETER"), Phemus Corporation, a Massachusetts corporation ("PHEMUS"),
Capricorn Investors, L.P., a Delaware limited partnership ("CAPRICORN"), J.
Roderick Heller, III, an individual ("HELLER"), and NHP Partners Two LLC, a
Delaware limited liability company ("PARTNERS TWO LLC" and, together with
Demeter, Phemus, Capricorn and Heller, the "SELLERS"). Capitalized terms
used, but not otherwise defined herein, shall have the respective meanings
ascribed to them in the Real Estate Acquisition Agreement, dated as of May
22, 1997, by and among the Buyers and the Sellers, as amended by (i)
Amendment No. 1 to Real Estate Acquisition Agreement, dated as of June 13,
1997, by and among the Buyers and the Sellers, (ii) Amendment No. 2 to Real
Estate Acquisition Agreement, dated as of July 14, 1997, by and among the
Buyers and the Sellers, (iii) Amendment No. 3 to Real Estate Acquisition
Agreement, dated as of August 14, 1997, by and among the Buyers and the
Sellers, and (iii) Amendment No. 4 to Real Estate Acquisition Agreement,
dated as of September 4, 1997, by and among the Buyers and the Sellers (as so
amended, the "ACQUISITION AGREEMENT").
WHEREAS, the parties hereto desire to amend the Acquisition
Agreement to extend the date for exercise of the Buyers' Property Put Right
for certain assets.
NOW, THEREFORE, in consideration of the foregoing, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. AMENDMENT OF SECTION 5.15(b). Section 5.15(b) of the
Acquisition Agreement is hereby amended and restated in its entirety to read
as follows:
"(b) The Buyers' Property Put Right may be exercised, at any time or
from time to time, (1) no later
<PAGE>
than October 31, 1997, with respect to (A) the 1% general partnership
interest and 15.715% limited partnership interest in each of Lakehaven
Associates One and Lakehaven Associates Two, or (B) the .01% limited
partnership interest in River Loft Apartments Limited Partnership, and
the 0.9% general partnership interest, the 0.1% general partnership
interest and the 4% limited partnership interest in River Loft
Associates, and (2) no later than June 16, 1997, with respect to any
other assets; provided, however, that the Buyers shall not have the right
to exercise the Buyers' Property Put Right with respect to any of the
assets described in clause (1) of this Section 5.15(b) if the Sellers
wire transfer funds to such account or accounts as the Buyers shall
specify in an aggregate amount equal to $492,847 on or prior to October
31, 1997. The Buyers' Property Put Right may be exercised by AIMCO's
delivery of a written notice to the Sellers specifying (i) the assets
that are requested to be repurchased by the Sellers pursuant to the
Buyers' Property Put Right, (ii) the basis on which the Buyers are
entitled to exercise the Buyers' Property Put Right, and (iii) the date
and time at which the closing (the "BUYERS' PROPERTY PUT CLOSING") of the
repurchase of such assets is to occur. The date of the Buyers' Property
Put Closing shall be at least 30 days after the date (the "Notice Date")
such notice is given; provided, however, that if (x) it is not possible
for the Sellers to cure, at least 5 Business Days prior to the 30th day
after the Notice Date, the breach, liability or defect that entitles the
Buyers to exercise the Buyers' Property Put Right, or (y) AIMCO
determines, in its reasonable discretion, that it is necessary to
consummate the Buyers' Property Put Closing earlier in order to avoid
jeopardizing AIMCO's REIT Status, then the date of the Buyers' Property
Put Closing may be on an earlier date, but not earlier than 5 Business
Days after the Notice Date."
2. GOVERNING LAW. This Amendment and the legal relations among
the parties hereto shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware, without regard to its
principles of conflicts of law.
3. ENTIRE AGREEMENT. This Amendment, together with the
Acquisition Agreement, including the exhibits and
2
<PAGE>
schedules attached thereto, constitutes the entire agreement among the
parties pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, letters of intent, negotiations and discussions,
whether oral or written, of the parties, including the Letter Agreement, and
there are no warranties, representations or other agreements, express or
implied, made to any party by any other party in connection with the subject
matter hereof except as specifically set forth herein or in the documents
delivered pursuant hereto or in connection herewith.
4. ACQUISITION AGREEMENT IN FULL FORCE. Except as expressly
modified hereby, the Acquisition Agreement remains in full force and effect.
5. MODIFICATION; WAIVER. No supplement, modification, waiver or
termination of this Amendment shall be binding unless executed in writing by
the party to be bound thereby. No waiver of any provision of this Amendment
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar), nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided.
6. SEVERABILITY. Any provision or part of this Amendment which is
invalid or unenforceable in any situation in any jurisdiction shall, as to
such situation and such jurisdiction, be ineffective only to the extent of
such invalidity and shall not affect the enforceability of the remaining
provisions hereof or the validity or enforceability of any such provision in
any other situation or in any other jurisdiction.
7. COUNTERPARTS. This Amendment may be executed in as many
counterparts as may be deemed necessary and convenient, and by the different
parties hereto on separate counterparts each of which, when so executed,
shall be deemed an original, but all such counterparts shall constitute one
and the same instrument.
8. NEGOTIATION OF AMENDMENT. Each of the parties acknowledges
that it has been represented by independent counsel of its choice throughout
all negotiations that have preceded the execution of this Amendment and that
it has executed the same with consent and upon the advice of said independent
counsel. Each party and its
3
<PAGE>
counsel cooperated in the drafting and preparation of this Amendment and the
documents referred to herein, and any and all drafts relating thereto shall
be deemed the work product of the parties and may not be construed against
any party by reason of its preparation. Accordingly, any rule of law or any
legal decision that would require interpretation of any ambiguities in this
Amendment against the party that drafted it is of no application and is
hereby expressly waived. The provisions of this Amendment shall be
interpreted in a reasonable manner to effect the intentions of the parties
and this Amendment.
[SIGNATURE PAGES FOLLOW]
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as of the date first above written.
APARTMENT INVESTMENT
AND MANAGEMENT COMPANY
By: /s/ Peter Kompaniez
----------------------------
Name: Peter Kompaniez
Its: Vice Chairman
AIMCO PROPERTIES, L.P.
By: AIMCO-GP, Inc.,
its general partner
By: /s/ Peter Kompaniez
----------------------------
Name: Peter Kompaniez
Its: Vice President
DEMETER HOLDINGS CORPORATION
By: /s/ Michael R. Eisenson
----------------------------
Name: Michael R. Eisenson
Its: Authorized Signatory
By: /s/ Tim R. Palmer
----------------------------
Name: Tim R. Palmer
Its: Authorized Signatory
<PAGE>
PHEMUS CORPORATION
By: /s/ Michael R. Eisenson
----------------------------
Name: Michael R. Eisenson
Its: Authorized Signatory
By: /s/ Tim R. Palmer
----------------------------
Name: Tim R. Palmer
Its: Authorized Signatory
CAPRICORN INVESTORS, L.P.
By: Capricorn Holdings, G.P.,
its General Partner
By: Winokur Holdings, Inc.,
its General Partner
By: /s/ Herbert S. Winokur, Jr.
----------------------------
Name: Herbert S. Winokur, Jr.
Its: President
/s/ J. Roderick Heller, III
----------------------------
J. Roderick Heller, III
NHP PARTNERS TWO LLC
By: /s/ Michael R. Eisenson
----------------------------
Name: Michael R. Eisenson
Its: Authorized Signatory
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
ARTICLES OF RESTATEMENT
APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation,
having its principal office in Baltimore City, Maryland (hereinafter referred
to as the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: The Corporation desires to and does hereby restate its Charter
as currently in effect. The Charter as currently in effect is found in
Articles of Amendment and Restatement dated July 13, 1994 and filed on July
15, 1994 (as corrected by Certificate of Correction dated November 6, 1997
and filed on November 6, 1997), Articles of Amendment dated July 27, 1994 and
filed July 28, 1994 at 11:33 a.m. (as corrected by Certificate of Correction
dated November 6, 1997 and filed on November 6, 1997), Articles of Amendment
dated July 27, 1994 and filed July 28, 1994 at 11:35 a.m. (as corrected by
Certificate of Correction dated November 6, 1997 and filed on November 6,
1997), Articles Supplementary dated May 20, 1997 and filed May 21, 1997, and
Articles Supplementary dated August 1, 1997 and filed August 4, 1997. The
Charter of the Corporation is hereby restated in its entirety as follows:
ARTICLE I
NAME
The name of the corporation (the "Corporation") is Apartment Investment
and Management Company.
ARTICLE II
PURPOSE
The purpose for which the Corporation is formed is to engage in any
lawful act or activity for which corporations may be organized under the
general laws of the State of Maryland authorizing the formation of
corporations as now or hereafter in force.
ARTICLE III
PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT
The post office address of the principal office of the Corporation in
the State of Maryland is c/o The Prentice-Hall Corporation System, Maryland,
11 East Chase Street, Baltimore, Maryland 21202. The name and address of the
resident agent of the Corporation in the State of Maryland is The
Prentice-Hall Corporation System, Maryland, 11 East Chase Street, Baltimore,
Maryland 21202. The resident agent is a Maryland corporation located in the
State of Maryland.
<PAGE>
ARTICLE IV
STOCK
SECTION 1. AUTHORIZED SHARES
1.1 CLASS AND NUMBER OF SHARES. The total number of shares of stock
that the Corporation from time to time shall have authority to issue is
160,750,000 shares of capital stock having a par value of $.01 per share,
amounting to an aggregate par value of $1,607,500, consisting of 150,000,000
shares initially classified as Class A Common Stock having a par value of
$.01 per share ("Class A Common Stock"), 750,000(1) shares initially classified
as Class B Common Stock having a par value of $.01 per share (the "Class B
Common Stock") (the Class A Common Stock and Class B Common Stock being
referred to collectively herein as the "Common Stock") and 10,000,000(2) shares
initially classified as Preferred Stock having a par value of $.01 per share
("Preferred Stock").
1.2 CHANGES IN CLASSIFICATION AND PREFERENCES. The Board of Directors
by resolution or resolutions from time to time may classify and reclassify
any unissued shares of capital stock by setting or changing in any one or
more respects the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications or terms or
conditions of redemption of such shares of capital stock, including, but not
limited to, ownership restrictions consistent with the Ownership Restrictions
with respect to each such class or subclass of capital stock, and the number
of shares constituting each such class or subclass, and to increase or
decrease the number of shares of any such class or subclass.
SECTION 2. NO PREEMPTIVE RIGHTS. No holder of shares of stock of the
Corporation shall, as such holder, have any preemptive right to purchase or
subscribe for any additional shares of the stock of the Corporation or any
other security of the Corporation that it may issue or sell.
SECTION 3. COMMON STOCK.
3.1 DIVIDEND RIGHTS. The holders of shares of Common Stock shall be
entitled to receive such dividends as may be declared by the Board of
Directors of the Corporation out of funds legally available therefor.
3.2 RIGHTS UPON LIQUIDATION. Subject to the preferential rights of
Preferred Stock, if any, as may be determined by the Board of Directors
pursuant to Section 1 of this Article IV, in the event of any voluntary or
involuntary liquidation, dissolution or winding up of, or any distribution of
the assets of the Corporation, each holder of shares of Common Stock shall be
entitled to receive, ratably with each other holder of Common Stock, that
portion of the assets of the Corporation available for distribution to its
shareholders as the number of shares of the Common Stock held by such holder
bears to the total number of shares of Common Stock then outstanding.
3.3 VOTING RIGHTS. The holders of shares of Common Stock shall be
entitled to vote on all matters (on which a holder of shares of Common Stock
shall be entitled to vote) at the meetings of the shareholders of the
Corporation, and shall be entitled to one vote for each share of Common Stock
entitled to vote at such meeting.
3.4 RESTRICTION ON OWNERSHIP AND TRANSFERS. The Beneficial Ownership
and Transfer of Common Stock shall be subject to the restrictions set forth
in this Section 3.4 of this Article IV.
3.4.1 RESTRICTIONS.
(A) LIMITATION ON BENEFICIAL OWNERSHIP. Except as provided in
Section 3.4.8 of this Article IV, from and after the date of the Initial
Public Offering, no Person (other than the Initial Holder or a Look-Through
Entity) shall Beneficially Own shares of Common Stock in excess of the
Ownership Limit, the Initial Holder shall not Beneficially Own shares of
Common Stock in excess of the Initial Holder Limit and no Look-Through Entity
shall Beneficially Own shares of Common Stock in excess of the Look-Through
Ownership Limit.
- ---------------------------
See Article SIXTH.
See Article SEVENTH.
<PAGE>
(B) TRANSFERS IN EXCESS OF OWNERSHIP LIMIT. Except as provided
in Section 3.4.8 of this Article IV, from and after the date of the Initial
Public Offering (and subject to Section 3.4.12 of this Article IV), any
Transfer (whether or not such Transfer is the result of transactions entered
into through the facilities of the NYSE or other securities exchange or an
automated inter-dealer quotation system) that, if effective, would result in
any Person (other than the Initial Holder or a Look-Through Entity)
Beneficially Owning shares of Common Stock in excess of the Ownership Limit
shall be void AB INITIO as to the Transfer of such shares of Common Stock
that would be otherwise Beneficially Owned by such Person in excess of the
Ownership Limit, and the intended transferee shall acquire no rights in such
shares of Common Stock.
(C) TRANSFERS IN EXCESS OF INITIAL HOLDER LIMIT. Except as
provided in Section 3.4.8 of this Article IV, from and after the date of the
Initial Public Offering (and subject to Section 3.4.12 of this Article IV),
any Transfer (whether or not such Transfer is the result of transactions
entered into through the facilities of the NYSE or other securities exchange
or an automated inter-dealer quotation system) that, if effective, would
result in the Initial Holder Beneficially Owning shares of Common Stock in
excess of the Initial Holder Limit shall be void AB INITIO as to the Transfer
of such shares of Common Stock that would be otherwise Beneficially Owned by
the Initial Holder in excess of the Initial Holder limit, and the Initial
Holder shall acquire no rights in such shares of Common Stock.
(D) TRANSFERS IN EXCESS OF LOOK-THROUGH OWNERSHIP LIMIT. Except
as provided in Section 3.4.8 of this Article IV from and after the date of
the Initial Public Offering (and subject to Section 3.4.12 of this Article
IV), any Transfer (whether or not such Transfer is the result of transactions
entered into through the facilities of the NYSE or other securities exchange
or an automated inter-dealer quotation system) that, if effective, would
result in any Look-Through Entity Beneficially Owning shares of Common Stock
in excess of the Look-Through Ownership limit shall be void AB INITIO as to
the Transfer of such shares of Common Stock that would be otherwise
Beneficially Owned by such Look-Through Entity in excess of the Look-Through
Ownership Limit and such Look-Through Entity shall acquire no rights in such
shares of Common Stock.
(E) TRANSFERS RESULTING IN OWNERSHIP BY FEWER THAN 100 PERSONS.
Except as provided in Section 3.4.8 of this Article IV, from and after the
date of the Initial Public Offering (and subject to Section 3.4.12 of this
Article IV), any Transfer (whether or not such Transfer is the result of
transactions entered into through the facilities of the NYSE or other
securities exchange or an automated inter-dealer quotation system) that, if
effective, would result in the Common Stock being Beneficially Owned by less
than 100 Persons (determined without reference to any rules of attribution)
shall be void AB INITIO as to the Transfer of such shares of Common Stock
that would be otherwise Beneficially Owned by the transferee and the intended
transferee shall acquire no rights in such shares of Common Stock.
(F) TRANSFERS RESULTING IN "CLOSELY HELD" STATUS. From and after
the date of the Initial Public Offering, any Transfer that, if effective
would result in the Corporation being "closely held" within the meaning of
Section 856(h) of the Code, or would otherwise result in the Corporation
failing to qualify as a REIT (including, without limitation, a Transfer or
other event that would result in the Corporation owning (directly or
constructively) an interest in a tenant that is described in Section
856(d)(2)(B) of the Code if the income derived by the Corporation from such
tenant would cause the Corporation to fail to satisfy any of the gross income
requirements of Section 856(c) of the Code) shall be void AB INITIO as to the
Transfer of shares of Common Stock that would cause the Corporation (i) to be
"closely held" within the meaning of Section 856(h) of the Code or (ii)
otherwise fail to qualify as a REIT, as the case may be, and the intended
transferee shall acquire no rights in such shares of Common Stock.
(G) SEVERABILITY ON VOID TRANSACTIONS. A Transfer of a share of
Common Stock that is null and void under Sections 3.4.1(B), (C), (D), (E) or
(F) of this Article IV because it would, if effective, result in (i) the
ownership of Common Stock in excess of the Initial Holder Limit, the
Ownership Limit, or the Look-Through Ownership Limit, (ii) the Common Stock
being Beneficially Owned by less than 100 Persons (determined without
reference to any rules of attribution), (iii) the Corporation being "closely
held" within the meaning of Section 856(h) of the Code or (iv) the
Corporation otherwise failing to qualify as a REIT, shall not adversely
affect the validity of the Transfer of any other share of Common Stock in the
same or any other related transaction.
3.4.2 REMEDIES FOR BREACH. If the Board of Directors or a committee
thereof shall at any time determine
<PAGE>
in good faith that a Transfer or other event has taken place in violation of
Section 3.4.1 of this Article IV or that a Person intends to acquire or has
attempted to acquire Beneficial Ownership of any shares of Common Stock in
violation of Section 3.4.1 of this Article IV (whether or not such violation
is intended), the Board of Directors or a committee thereof shall be
empowered to take any action as it deems advisable to refuse to give effect
to or to prevent such Transfer or other event, including, but not limited to,
refusing to give effect to such Transfer or other event on the books of the
Corporation, causing the Corporation to redeem such shares at the then
current Market Price and upon such terms and conditions as may be specified
by the Board of Directors in its sole discretion (including, but not limited
to, by means of the issuance of long-term indebtedness for the purpose of
such redemption), demanding the repayment of any distributions received in
respect of shares of Common Stock acquired in violation of Section 3.4.1 of
this Article IV or instituting proceedings to enjoin such Transfer or to
rescind such Transfer or attempted Transfer; PROVIDED, HOWEVER, that any
Transfers or attempted Transfers (or in the case of events other than a
Transfer, Beneficial Ownership) in violation of Section 3.4.1 of this Article
IV, regardless of any action (or non-action) by the Board of Directors or
such committee, (a) shall be void AB INITIO or (b) shall automatically result
in the transfer described in Section 3.4.3 of this Article IV; PROVIDED,
FURTHER, that the provisions of this Section 3.4.2 shall be subject to the
provisions of Section 3.4.12 of this Article IV; PROVIDED, FURTHER, that
neither the Board of Directors nor any committee thereof may exercise such
authority in a manner that interferes with any ownership or transfer of
Common Stock that is expressly authorized pursuant to Section 3.4.8(d) of
this Article IV.
3.4.3. TRANSFER IN TRUST.
(A) ESTABLISHMENT OF TRUST. If, notwithstanding the other
provisions contained in this Article IV, at any time after the date of the
Initial Public Offering there is a purported Transfer (an "EXCESS TRANSFER")
(whether or not such Transfer is the result of transactions entered into
through the facilities of the NYSE or other securities exchange or an
automated inter-dealer quotation system) or other change in the capital
structure of the Corporation (including, but not limited to, any redemption
of Preferred Stock) or other event such that (a) any Person (other than the
Initial Holder or a Look-Through Entity) would Beneficially Own shares of
Common Stock in excess of the Ownership Limit, or (b) the Initial Holder
would Beneficially Own shares of Common Stock in excess of the Initial Holder
Limit, or (c) any Person that is a Look-Through Entity would Beneficially Own
shares of Common Stock in excess of the Look-Through Ownership Limit (in any
such event, the Person, Initial Holder or Look-Through Entity that would
Beneficially Own shares of Common Stock in excess of the Ownership Limit, the
Initial Holder Limit or the Look-Through Entity Limit is referred to as a
"PROHIBITED TRANSFEREE"), then, except as otherwise provided in Section 3.4.8
of this Article IV, such shares of Common Stock in excess of the Ownership
Limit, the Initial Holder Limit or the Look-Through Ownership Limit, as the
case may be, (rounded up to the nearest whole share) shall be automatically
transferred to a Trustee in his capacity as trustee of a Trust for the
exclusive benefit of one or more Charitable Beneficiaries. Such transfer to
the Trustee shall be deemed to be effective as of the close of business on
the business day prior to the date of the Excess Transfer, change in capital
structure or another event giving rise to a potential violation of the
Ownership Limit, the Initial Holder Limit or the Look Through Entity
Ownership Limit.
(B) APPOINTMENT OF TRUSTEE. The Trustee shall be appointed by
the Corporation and shall be a Person unaffiliated with either the
Corporation or any Prohibited Transferee. The Trustee may be an individual
or a bank or trust company duly licensed to conduct a trust business.
(C) STATUS OF SHARES HELD BY THE TRUSTEE. Shares of Common Stock
held by the Trustee shall be issued and outstanding shares of capital stock
of the Corporation. Except to the event provided in Section 3.4.3(E), the
Prohibited Transferee shall have no rights in the Common Stock held by the
Trustee, and the Prohibited Transferee shall not benefit economically from
ownership of any shares held in trust by the Trustee, shall have no rights to
dividends and shall not possess any rights to vote or other rights
attributable to the shares held in the Trust.
(D) DIVIDEND AND VOTING RIGHTS. The Trustee shall have all
voting rights and rights to dividends with respect to shares of Common Stock
held in the Trust, which rights shall be exercised for the benefit of the
Charitable Beneficiary. Any dividend or distribution paid prior to the
discovery by the Corporation that the shares of Common Stock have been
transferred to the Trustee shall be repaid to the Corporation upon demand,
and any dividend or distribution declared but unpaid shall be rescinded as
void AB INITIO with respect to such shares of Common Stock. Any dividends or
distributions so disgorged or rescinded shall be paid over to the Trustee and
held
<PAGE>
in trust for the Charitable Beneficiary. Any vote cast by a Prohibited
Transferee prior to the discovery by the Corporation that the shares of
Common Stock have been transferred to the Trustee will be rescinded as AB
INITIO and shall be recast in accordance with the desires of the Trustee
acting for the benefit of the Charitable Beneficiary. The owner of the shares
at the time of the Excess Transfer, change in capital structure or other
event giving rise to a potential violation of the Ownership Limit, Initial
Holder Limit or Look-Through Entity Ownership Limit shall be deemed to have
given an irrevocable proxy to the Trustee to vote the shares of Common Stock
for the benefit of the Charitable Beneficiary.
(E) RESTRICTIONS ON TRANSFER. The Trustee of the Trust may
transfer the shares held in the Trust to a person, designated by the Trustee,
whose ownership of the shares will not violate the Ownership Restrictions.
If such a transfer is made, the interest of the Charitable Beneficiary shall
terminate and proceeds of the sale shall be payable to the Prohibited
Transferee and to the Charitable Beneficiary as provided in this Section
3.4.3(E). The Prohibited Transferee shall receive the lesser of (1) the
price paid by the Prohibited Transferee for the shares or, if the Prohibited
Transferee did not give value for the shares (through a gift, devise or other
transaction), the Market Price of the shares on the day of the event causing
the shares to be held in the Trust and (2) the price per share received by
the Trustee from the sale or other disposition of the shares held in the
Trust. Any proceeds in excess of the amount payable to the Prohibited
Transferee shall be payable to the Charitable Beneficiary. If any of the
transfer restrictions set forth in this Section 3.4.3(E) or any application
thereof is determined in a final judgment to be void, invalid or
unenforceable by any court having jurisdiction over the issue, the Prohibited
Transferee may be deemed, at the option of the Corporation, to have acted as
the agent of the Corporation in acquiring the Common Stock as to which such
restrictions would, by their terms, apply, and to hold such Common Stock on
behalf of the Corporation.
(F) PURCHASE RIGHT IN STOCK TRANSFERRED TO THE TRUSTEE. Shares
of Common Stock transferred to the Trustee shall be deemed to have been
offered for sale to the Corporation, or its designee, at a price per share
equal to the lesser of (i) the price per share in the transaction that
resulted in such transfer to the Trust (or, in the case of a devise or gift,
the Market Price at the time of such devise or gift) and (ii) the Market
Price on the date the Corporation, or its designee, accepts such offer. The
Corporation shall have the right to accept such offer for a period of 90 days
after the later of (i) the date of the Excess Transfer or other event
resulting in a transfer to the Trust and (ii) the date that the Board of
Directors determines in good faith that an Excess Transfer or other event
occurred.
(G) DESIGNATION OF CHARITABLE BENEFICIARIES. By written notice
to the Trustee, the Corporation shall designate one or more nonprofit
organizations to be the Charitable Beneficiary of the interest in the Trust
relating to such Prohibited Transferee if (i) the shares of Common Stock held
in the Trust would not violate the Ownership Restrictions in the hands of
such Charitable Beneficiary and (ii) each Charitable Beneficiary is an
organization described in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of
the Code.
3.4.4 NOTICE OF RESTRICTED TRANSFER. Any Person that acquires or
attempts to acquire shares of Common Stock in violation of Section 3.4.1 of
this Article IV, or any Person that is a Prohibited Transferee such that
stock is transferred to the Trustee under Section 3.4.3 of this Article IV,
shall immediately give written notice to the Corporation of such event and
shall provide to the Corporation such other information as the Corporation
may request in order to determine the effect, if any, of such Transfer or
attempted Transfer or other event on the Corporation's status as a REIT.
Failure to give such notice shall not limit the rights and remedies of the
Board of Directors provided herein in any way.
3.4.5 OWNERS REQUIRED TO PROVIDE INFORMATION. From and after the date
of the Initial Public Offering certain record and Beneficial Owners and
transferees of shares of Common Stock will be required to provide certain
information as set out below.
(A) ANNUAL DISCLOSURE. Every record and Beneficial Owner of more
than 5% (or such other percentage between 0.5% and 5%, as provided in the
applicable regulations adopted under the Code) of the number of Outstanding
shares of Common Stock shall, within 30 days after January 1 of each year,
give written notice to the Corporation stating the name and address of such
record or Beneficial Owner, the number of shares of Common Stock Beneficially
Owned, and a full description of how such shares are held. Each such record
or Beneficial Owner
<PAGE>
of Common Stock shall, upon demand by the Corporation, disclose to the
Corporation in writing such additional information with respect to the
Beneficial Ownership of the Common Stock as the Board of Directors, in its
sole discretion, deems appropriate or necessary to (i) comply with the
provisions of the Code regarding the qualification of the Corporation as a
REIT under the Code and (ii) ensure compliance with the Ownership Limit, the
Initial Holder Limit or the Look-Through Ownership Limit, as applicable.
Each shareholder of record, including without limitation any Person that
holds shares of Common Stock on behalf of a Beneficial Owner, shall take all
reasonable steps to obtain the written notice described in this Section 3.4.5
from the Beneficial Owner.
(B) DISCLOSURE AT THE REQUEST OF THE CORPORATION. Any Person
that is a Beneficial Owner of shares of Common Stock and any Person
(including the shareholder of record) that is holding shares of Common Stock
for a Beneficial Owner, and any proposed transferee of shares, shall provide
such information as the Corporation, in its sole discretion, may request in
order to determine the Corporation's status as a REIT, to comply with the
requirements of any taxing authority or other governmental agency, to
determine any such compliance or to ensure compliance with the Ownership
Limit, the Initial Holder Limit and the Look-Through Ownership Limit, and
shall provide a statement or affidavit to the Corporation setting forth the
number of shares of Common Stock already Beneficially Owned by such
shareholder or proposed transferee and any related persons specified, which
statement or affidavit shall be in the form prescribed by the Corporation for
that purpose.
3.4.6 REMEDIES NOT LIMITED. Nothing contained in this Article IV shall
limit the authority of the Board of Directors to take such other action as it
deems necessary or advisable (subject to the provisions of Section 3.4.12 of
this Article IV) (i) to protect the Corporation and the interests of its
shareholders in the preservation of the Corporation's status as a REIT and
(ii) to insure compliance with the Ownership Limit, the Initial Holder Limit
and the Look-Through Ownership Limit.
3.4.7 AMBIGUITY. In the case of an ambiguity in the application of any
of the provisions of Section 3.4 of this Article IV, or in the case of an
ambiguity in any definition contained in Section 4 of this Article IV, the
Board of Directors shall have the power to determine the application of the
provisions of this Article IV with respect to any situation based on its
reasonable belief, understanding or knowledge of the circumstances.
3.4.8 EXCEPTIONS. The following exceptions shall apply or may be
established with respect to the limitations of Section 3.4.1 of this Article
IV.
(A) WAIVER OF OWNERSHIP LIMIT. The Board of Directors, upon
receipt of a ruling from the Internal Revenue Service or an opinion of tax
counsel or other evidence or undertaking acceptable to it, may waive the
application, in whole or in part, of the Ownership Limit to a Person subject
to the Ownership Limit, if such person is not an individual for purpose of
Section 542(a) of the Code and is a corporation, partnership, estate or
trust; PROVIDED, HOWEVER, that in no event may any such exception cause such
Person's ownership, direct or indirect (without taking into account such
Person's ownership of interests in any partnership of which the Corporation
is a partner), to exceed 9.8% of the number of Outstanding shares of Common
Stock. In connection with any such exemption, the Board of Directors may
require such representations and undertakings from such Person and may impose
such other conditions as the Board deems necessary, in its sole discretion,
to determine the effect, if any, of the proposed Transfer on the
Corporation's status as a REIT.
(B) PLEDGE BY INITIAL HOLDER. Notwithstanding any other
provision of this Article IV, the pledge by the Initial Holder of all or any
portion of the Common Stock directly owned at any time or from time to time
shall not constitute a violation of Section 3.4.1 of this Article IV and the
pledgee shall not be subject to the Ownership Limit with respect to the
Common Stock so pledged to it either as a result of the pledge or upon
foreclosure.
(C) UNDERWRITERS. For a period of 270 days following the
purchase of Common Stock by an underwriter that (i) is a corporation or a
partnership and (ii) participates in an offering of the Common Stock, such
underwriter shall not be subject to the Ownership Limit with respect to the
Common Stock purchased by it as a part of or in connection with such offering
and with respect to any Common Stock purchased in connection with market
making activities.
<PAGE>
(D) OWNERSHIP AND TRANSFERS BY THE CMO TRUSTEE. The Ownership
Limit shall not apply to the initial holding of Common Stock by the "CMO
Trustee" (as that term is defined in the "Glossary" to the Prospectus) for
the benefit of "HF Funding Trust" (as that term is defined in the "Glossary"
to the Prospectus), to any subsequent acquisition of Common Stock by the CMO
Trustee in connection with any conversion of Preferred Stock or to any
transfer or assignment of all or any part of the legal or beneficial interest
in the Common Stock to the CMO Trustee, "ESA" (as that term is defined in the
"Glossary" to the Prospectus), any entity controlled by ESA, or any direct or
indirect creditor of HF Funding Trust (including without limitation any
reinsurer of any obligation of HF Funding Trust) or any acquisition of Common
Stock by any such person in connection with any conversion of Preferred Stock.
3.4.9 LEGEND. Each certificate for Common Stock shall bear the following
legend: "The shares of Common Stock represented by this
certificate are subject to restrictions on transfer. No person may
Beneficially Own shares of Common Stock in excess of the Ownership
Restrictions, as applicable, with certain further restrictions and
exceptions set forth in the Corporation's Amended and Restated Certificate
of Incorporation ("Certificate"). Any Person that attempts to Beneficially
Own shares of Common Stock in excess of the applicable limitation must
immediately notify the Corporation. All capitalized terms in this
legend have the meanings ascribed to such terms in the Corporation's
Certificate, as the same may be amended from time to time, a copy of
which, including the restrictions on transfer, will be sent without
charge to each shareholder that so requests. If the restrictions on
transfer are violated, the shares of Common Stock represented hereby
will be either (i) void in accordance with the Certificate or (ii)
automatically transferred to a Trustee of a Trust for the benefit of
one or more Charitable Beneficiaries."
3.4.10 SEVERABILITY. If any provision of this Article IV or any
application of any such provision is determined in a final and unappealable
judgment to be void, invalid or unenforceable by any Federal or state court
having jurisdiction over the issues, the validity and enforceability of the
remaining provisions shall not be affected and other applications of such
provision shall be affected only to the extent necessary to comply with the
determination of such court.
3.4.11 BOARD OF DIRECTORS DISCRETION. Anything in this Article IV to
the contrary notwithstanding, the Board of Directors shall be entitled to
take or omit to take such actions as it in its discretion shall determine to
be advisable in order that the Corporation maintain its status as and
continue to qualify as a REIT, including, but not limited to, reducing the
Ownership Limit, the Initial Holder Limit and the Look-Through Ownership
Limit in the event of a change in law.
3.4.12 SETTLEMENT. Nothing in this Section 3.4 of this Article IV shall
be interpreted to preclude the settlement of any transaction entered into
through the facilities of the NYSE or other securities exchange or an
automated inter-dealer quotation system.
SECTION 4. DEFINITIONS. The terms set forth below shall have the
meanings specified below when used in this Article IV or in Article V of
these Articles of Amendment and Restatement.
4.1 BENEFICIAL OWNERSHIP. The term "BENEFICIAL OWNERSHIP" shall mean,
with respect to any Person, ownership of shares of Common Stock equal to the
sum of (i) the shares of Common Stock directly owned by such Person, (ii) the
number of shares of Common Stock indirectly owned by such Person (if such
Person is an "individual" as defined in Section 542(a)(2) of the Code) taking
into account the constructive ownership rules of Section 544 of the Code, as
modified by Section 856(h)(1)(B) of the Code, and (iii) the number of shares
of Common Stock that such Person is deemed to beneficially own pursuant to
Rule 13d-3 under the Exchange Act or that is attributed to such Person
pursuant to Section 318 of the Code, as modified by Section 856(d)(5) of the
Code, PROVIDED that when applying this definition of Beneficial Ownership to
the Initial Holder, clause (iii) of this definition, and clause (b) of the
definition of "Person" shall be disregarded. The terms "BENEFICIAL OWNER,"
- --------------------------
See Article FOURTH
<PAGE>
"BENEFICIALLY OWNS" and "BENEFICIALLY OWNED" shall have the correlative
meanings.
4.2 CHARITABLE BENEFICIARY. The term "CHARITABLE BENEFICIARY" shall
mean one or more beneficiaries of the Trust as determined pursuant to Section
3.4.3 of this Article IV, each of which shall be an organization described in
Section 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code.
4.3 CODE. The term "CODE" shall mean the Internal Revenue Code of 1986,
as amended from time to time, or any successor statute thereto. Reference to
any provision of the Code shall mean such provision as in effect from time to
time, as the same may be amended, and any successor thereto, as interpreted
by any applicable regulations or other administrative pronouncements as in
effect from time to time.
4.4 COMMON STOCK. The term "COMMON STOCK" shall mean all shares now or
hereafter authorized of any class of Common Stock of the Corporation and any
other capital stock of the Corporation, however designated, authorized after
the Issue Date, that has the right (subject always to prior rights of any
class of Preferred Stock) to participate in the distribution of the assets
and earnings of the Corporation without limit as to per share amount.
4.5 EXCESS TRANSFER. The term "EXCESS TRANSFER" has the meaning set
forth in Section 3.4.3(A) of this Article IV.
4.6 EXCHANGE ACT. The term "EXCHANGE ACT" shall mean the Securities
Exchange Act of 1934, as amended.
4.7 INITIAL HOLDER. The term "INITIAL HOLDER" shall mean Terry
Considine.
4.8 INITIAL HOLDER LIMIT. The term "INITIAL HOLDER LIMIT" shall mean
15% of the number of Outstanding shares of Common Stock applied, in the
aggregate, to the Initial Holder. From the date of the Initial Public
Offering, the secretary of the Corporation, or such other person as shall be
designated by the Board of Directors, shall upon request make available to
the representative(s) of the Initial Holder and the Board of Directors, a
schedule that sets forth the then-current Initial Holder Limit applicable to
the Initial Holder.
4.9 INITIAL PUBLIC OFFERING. The term "INITIAL PUBLIC OFFERING" shall
mean the first underwritten public offering of Class A Common Stock
registered under the Securities Act of 1933, as amended, on a registration
statement on Form S-11 filed with the Securities and Exchange Commission.
4.10 LOOK-THROUGH ENTITY. The term "LOOK-THROUGH ENTITY" shall mean a
Person that is either (i) described in Section 401(a) of the Code as provided
under Section 856(h)(3) of the Code or (ii) registered under the Investment
Company Act of 1940.
4.11 LOOK-THROUGH OWNERSHIP LIMIT. The term "LOOK-THROUGH OWNERSHIP
LIMIT" shall mean 15% of the number of Outstanding shares of Common Stock.
4.12 MARKET PRICE. The term "MARKET PRICE" on any date shall mean the
Closing Price on the Trading Day immediately preceding such date. The term
"CLOSING PRICE" on any date shall mean the last sale price, regular way, or,
in case no such sale takes place on such day, the average of the closing bid
and asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed
or admitted to trading on the NYSE or, if the Common Stock is not listed or
admitted to trading on the NYSE, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, the last quoted price, or if not
so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System or, if such system is no
longer in use, the principal other automated quotations system that may then
be in use or, if the Common Stock is not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Common Stock selected by the Board of
Directors of the Company. The term "TRADING DAY" shall mean a day on which
the principal national securities exchange on which the Common Stock is
listed or admitted to trading is open for the transaction of business or, if
the Common Stock is not listed or admitted to trading on any national
securities
<PAGE>
exchange, shall mean any day other than a Saturday, a Sunday or a day on
which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
4.13 NYSE. The term "NYSE" shall mean the New York Stock Exchange, Inc.
4.14 OUTSTANDING. The term "OUTSTANDING" shall mean issued and
outstanding shares of Common Stock of the Corporation, PROVIDED that for
purposes of the application of the Ownership Limit, the Look-Through
Ownership Limit or the Initial Holder Limit to any Person, the term
"OUTSTANDING" shall be deemed to include the number of shares of Common Stock
that such Person alone, at that time, could acquire pursuant to any options
or convertible securities.
4.15 OWNERSHIP LIMIT. The term "OWNERSHIP LIMIT" shall mean, for any
Person other than the Initial Holder or a Look-Through Entity, 8.7% of the
number of the Outstanding shares of Common Stock of the Corporation.
4.16 OWNERSHIP RESTRICTIONS. The term "OWNERSHIP RESTRICTIONS" shall
mean collectively the Ownership Limit as applied to Persons other than the
Initial Holder or Look-Through Entities, the Initial Holder Limit as applied
to the Initial Holder and the Look-Through Ownership Limit as applied to
Look-Through Entities.
4.17 PERSON. The term "PERSON" shall mean (A) an individual,
corporation, partnership, estate, trust (including a trust qualifying under
Section 401(a) or 501(c) of the Code), association, private foundation within
the meaning of Section 509(a) of the Code, joint stock company or other
entity, and (B) also includes a group as that term is used for purposes of
Section 13(d)(3) of the Exchange Act.
4.18 PROHIBITED TRANSFEREE. The term "PROHIBITED TRANSFEREE" has the
meaning set forth in Section 3.4.3(A) of this Article IV.
4.19 REIT. The term "REIT" shall mean a "real estate investment trust"
as defined in Section 856 of the Code.
4.20 TRANSFER. The term "TRANSFER" shall mean any sale, transfer, gift,
assignment, devise or other disposition of a share of Common Stock (including
(i) the granting of an option or any series of such options or entering into
any agreement for the sale, transfer or other disposition of Common Stock or
(ii) the sale, transfer, assignment or other disposition of any securities or
rights convertible into or exchangeable for Common Stock), whether voluntary
or involuntary, whether of record or Beneficial Ownership, and whether by
operation of law or otherwise (including, but not limited to, any transfer of
an interest in other entities that results in a change in the Beneficial
Ownership of shares of Common Stock). The term "TRANSFERS" and "TRANSFERRED"
shall have correlative meanings.
4.21 TRUST. The term "TRUST" shall mean the trust created pursuant to
Section 3.4.3 of this Article IV.
4.22 TRUSTEE. The term "TRUSTEE" shall mean the Person unaffiliated
with either the Corporation or the Prohibited Transferee that is appointed by
the Corporation to serve as trustee of the Trust.
4.23 PROSPECTUS. The term "PROSPECTUS" shall mean the prospectus that
forms a part of the registration statement filed with the Securities and
Exchange Commission in connection with the Initial Public Offering, in the
form included in the registration statement at the time the registration
statement becomes effective; PROVIDED, HOWEVER, that, if such prospectus is
subsequently supplemented or amended for use in connection with the Initial
Public Offering, "PROSPECTUS" shall refer to such prospectus as so
supplemented or amended.
<PAGE>
ARTICLE V
GENERAL REIT PROVISIONS
SECTION 1. TERMINATION OF REIT STATUS. The Board of Directors shall
take no action to terminate the Corporation's status as a REIT until such
time as (i) the Board of Directors adopts a resolution recommending that the
Corporation terminate its status as a REIT, (ii) the Board of Directors
presents the resolution at an annual or special meeting of the shareholders
and (iii) such resolution is approved by the vote of a majority of the shares
entitled to be cast on the resolution.
SECTION 2. EXCHANGE OR MARKET TRANSACTIONS. Nothing in Article IV or
this Article V shall preclude the settlement of any transaction entered into
through the facilities of the NYSE or other national securities exchange or
an automated inter-dealer quotation system. The fact that the settlement of
any transaction is permitted shall not negate the effect of any other
provision of this Article V or any provision of Article IV, and the
transferee, including but not limited to any Prohibited Transferee, in such a
transaction shall remain subject to all the provisions and limitations of
Article IV and this Article V.
SECTION 3. SEVERABILITY. If any provision of Article IV or this Article
V or any application of any such provision is determined to be invalid by any
federal or state court having jurisdiction over the issues, the validity of
the remaining provisions shall not be affected and other applications of such
provision shall be affected only to the extent necessary to comply with the
determination of such court.
SECTION 4. WAIVER. The Corporation shall have authority at any time to
waive the requirement that the Corporation redeem shares of Preferred Stock
if, in the sole discretion of the Board of Directors, any such redemption
would jeopardize the status of the Corporation as a REIT for federal income
tax purposes.
ARTICLE VI
BOARD OF DIRECTORS
SECTION 1. MANAGEMENT. The business and the affairs of the Corporation
shall managed under the direction of its Board of Directors.
SECTION 2. NUMBER. The number of directors that will constitute the
entire Board of Directors shall be fixed by, or in the manner provided in,
the Bylaws but shall in no event be less than three. Any increases or
decreases in the size of the board shall be apportioned equally among the
classes of directors to prevent stacking in any one class of directors.
There are currently six directors in office whose names are as follows:
Terry Considine, Peter K. Kompaniez, Richard S. Ellwood, J. Landis Martin,
Thomas L. Rhodes and John D. Smith.(4)
SECTION 3. INTENTIONALLY DELETED.
SECTION 4. VACANCIES. Except as otherwise provided in these Articles of
Amendment and Restatement(5), newly created directorships resulting from any
increase in the number of directors may be filled by the majority vote of the
Board of Directors, and any vacancies on the Board of Directors resulting
from death, resignation, removal or other cause shall be filled by the
affirmative vote of a majority of the remaining directors then in office,
even if less than a quorum of the Board of Directors, or, if applicable, by a
sole remaining director. Any director elected in accordance with the
preceding sentence shall hold office until the next annual meeting of the
Corporation at which time a successor shall be elected to fill the remaining
term of the position filled by such director.
SECTION 5. REMOVAL. Except as otherwise provided in these Articles of
Amendment and Restatement(6), any director may be removed from office only for
cause and only by the affirmative vote of two-thirds of the aggregate number
of votes then entitled to be cast generally in the election of directors.
For purposes of this Section 5, "CAUSE"
- ---------------------
See Article THIRD.
See Article FOURTH.
See Article FOURTH.
<PAGE>
shall mean the willful and continuous failure of a director to substantially
perform the duties to the Corporation of such director (other than any such
failure resulting from temporary incapacity due to physical or mental
illness) or the willful engaging by a director in gross misconduct materially
and demonstrably injurious to the Corporation.
SECTION 6. BYLAWS. The Board of Directors shall have power to adopt,
amend, alter, change and repeal any Bylaws of the Corporation by vote of the
majority of the Board of Directors then in office. Any adoption, amendment,
alteration, change or repeal of any Bylaws by the shareholders of the
Corporation shall require the affirmative vote of a majority of the aggregate
number of votes then entitled to be cast generally in the election of
directors. Notwithstanding anything in this Section 6 to the contrary, no
amendment, alteration, change or repeal of any provision of the Bylaws
relating to the removal of directors or repeal of the Bylaws shall be
effected without the vote of two-thirds of the aggregate number of votes
entitled be cast generally in the election of Directors.
SECTION 7. POWERS. The enumeration and definition of particular powers
of the Board of Directors included elsewhere in these Articles of Amendment
and Restatement(7) shall in no way be limited or restricted by reference to or
inference from the terms of any other clause of this or any other Article of
these Articles of Amendment and Restatement(8), or construed as excluding or
limiting, or deemed by inference or otherwise in any manner to exclude or
limit, the powers conferred upon the Board of Directors under the Maryland
General Corporation Law ("MGCL") as now or hereafter in force.
ARTICLE VII
LIMITATION OF LIABILITY
No director or officer of the Corporation shall be liable to the
Corporation or its shareholders for money damages to the maximum extent that
Maryland law in effect from time to time permits limitation of the liability
of directors and officers. Neither the amendment nor repeal of this Article
VII, nor the adoption or amendment or any other provision of the charter or
Bylaws of the Corporation inconsistent with this Article VII, shall apply to
or affect in any respect the applicability of the preceding sentence with
respect to any act or failure to act that occurred prior to such amendment,
repeal or adoption.
- -------------------------
See Article FOURTH.
See Article FOURTH.
<PAGE>
ARTICLE VIII
INDEMNIFICATION
The Corporation shall indemnify, to the fullest extent permitted by
Maryland law, as applicable from time to time, all persons who at any time
were or are directors or officers of the Corporation for any threatened,
pending or completed action, suit or proceeding (whether civil, criminal,
administrative or investigative) relating to any action alleged to have been
taken or omitted in such capacity as a director or an officer. The
Corporation shall pay or reimburse all reasonable expenses incurred by a
present or former director or officer of the Corporation in connection with
any threatened, pending or completed action, suit or proceeding (whether
civil, criminal, administrative or investigative) in which the present or
former director or officer is a party, in advance of the final disposition of
the proceeding, to the fullest extent permitted by, and in accordance with
the applicable requirements of, Maryland law, as applicable from time to
time. The Corporation may indemnify any other persons permitted but not
required to be indemnified by Maryland law, as applicable from time to time,
if and to extent indemnification is authorized and determined to be
appropriate, in each case in accordance with applicable law, by the Board of
Directors, the majority of the shareholders of the Corporation entitled to
vote thereon or special legal counsel appointed by the Board of Directors.
No amendment of these Articles of Amendment and Restatement of the
Corporation or repeal of any of its provisions shall limit or eliminate any
of the benefits provided to directors and officers under this Article VIII in
respect of any act or omission that occurred prior to such amendment or
repeal.
ARTICLE IX
WRITTEN CONSENT OF SHAREHOLDERS
Any corporate action upon which a vote of shareholders is required or
permitted may be taken without a meeting or vote of shareholders with the
unanimous written consent of shareholders entitled to vote thereon.
ARTICLE X
AMENDMENT
The Corporation reserves the right to amend, alter or repeal any
provision contained in this charter upon (i) adoption by the Board of
Directors of a resolution recommending such amendment, alteration, or repeal,
(ii) presentation by the Board of Directors to the shareholders of a
resolution at an annual or special meeting of the shareholders and (iii)
approval of such resolution by the affirmative vote of the holders of a
majority (or, as applicable, a two-thirds vote) of the aggregate number of
votes entitled to be case generally in the election of directors. All rights
conferred upon shareholders herein are subject to this reservation.
ARTICLE XI
EXISTENCE
The Corporation is to have a perpetual existence.
ARTICLE XII
CLASS B COMMON STOCK
GENERAL. The holders of the Class B Common Stock shall have the same
rights and privileges as, and shall be subject to the same restrictions and
limitations contained in the Charter as apply to, the holders of the Class A
Common Stock, except as set forth below.
SECTION 1. DEFINITIONS. Capitalized terms used in these Articles
Supplementary shall have the meanings ascribed to them in the Charter or
elsewhere in these Articles Supplementary, except that the terms set forth
below shall have the meanings specified below when used in this Article.
- --------------------
See Article FOURTH.
See Article FOURTH.
<PAGE>
"ADJUSTED FUNDS FROM OPERATIONS" shall have the same meaning as the
term "Adjusted Funds from Operations" used in the Prospectus and shall be
calculated in the manner specified in the Prospectus and based on generally
accepted accounting principles. Adjusted Funds from Operations shall be
determined from the Corporation's financial statements audited and certified
by an independent public accountant.
"ADJUSTED FUNDS FROM OPERATIONS PER SHARE" when used with respect to
any period shall mean the Adjusted Funds from Operations for such period
DIVIDED by the sum of (a) the number of shares of the Class A Common Stock
outstanding on the last day of such period (excluding any shares of the Class
A Common Stock into which shares of the Class B Common Stock shall have been
converted as a result of the conversion of shares of the Class B Common Stock
on the last day of such period) and (b) the number of shares of the Class A
Common Stock issuable to acquire units of limited partnership that (i) may be
tendered for redemption in any limited partnership in which the Corporation
serves as general partner and (ii) are outstanding on the last day of such
period.
"AVERAGE MARKET PRICE" for a period shall mean the average of the
Closing Prices for a share of the Class A Common Stock for the Trading Days
in such period.
"CAUSE" shall mean the termination of employment of an individual
with an Employer as a result of (a) the performance by such individual of any
activity involving fraud or dishonesty, (b) the conviction of the individual
of a felony or a crime involving moral turpitude, (c) the failure or refusal
of such individual to reasonably or satisfactorily perform any material
duties or responsibilities reasonably required of such individual by an
Employer, (d) the gross negligence or willful neglect or malfeasance by the
individual in the performance or non-performance of such individual's duties
or responsibilities to the Employer, or (e) any unauthorized act or omission
by such individual that is injurious in any material respect to the financial
condition or business reputation of any Employer.
"CHANGE IN CONTROL" shall mean the occurrence of any of the
following events:
(a) An acquisition (other than directly from the Corporation) of
any voting securities of the Corporation (the "VOTING SECURITIES") by any
"person" (as the term "person" is used for purposes of Section 13(d) or
Section 14(d) of the Securities Exchange Act of 1934, as amended (the "1934
ACT")) immediately after which such person has "beneficial ownership" (within
the meaning of Rule 13d-3 promulgated under the 1934 Act) ("BENEFICIAL
OWNERSHIP") of 20% or more of the combined voting power of the Corporation's
then outstanding Voting Securities; PROVIDED, HOWEVER, in determining whether
a Change in Control has occurred. Voting Securities that are acquired in a
Non-Control Acquisition (as hereinafter defined) shall not constitute an
acquisition that would cause a Change in Control. "NON-CONTROL ACQUISITION"
shall mean an acquisition by (1) an employee benefit plan (or a trust forming
a part thereof) maintained by (a) the Corporation or (b) any corporation,
partnership or other Person of which a majority of its voting power or its
equity securities or equity interest is owned directly or indirectly by the
Corporation or in which the Corporation serves as a general partner or
manager (a "SUBSIDIARY"), (2) the Corporation or any Subsidiary, or (3) any
Person in connection with a Non-Control Transaction (as hereinafter defined);
(b) The individuals who are named in the Prospectus as constituting
the Board of Directors of the Corporation following the Initial Public
Offering (the "INCUMBENT BOARD") cease for any reason to constitute at least
two-thirds (2/3rds) of the Board of Directors; PROVIDED, HOWEVER, that if the
election, or nomination for election by the Corporation's stockholders, of
any new director was approved by a vote of at least two-thirds (2/3rds) of
the Incumbent Board, such new director shall be considered as a member of the
Incumbent Board; PROVIDED, FURTHER, that no individual shall be considered a
member of the Incumbent Board if such individual initially assumed office as
a result of either an actual or threatened "election contest" (as described
in Rule 14a-11 promulgated under the 1934 Act) (an "ELECTION CONTEST") or
other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board of Directors (a "PROXY CONTEST")
including by reason of any agreement intended to avoid or settle any Election
Contest or Proxy Contest; or
(c) Approval by stockholders of the Corporation of:
(1) A merger, consolidation, share exchange or reorganization
involving the Corporation, unless
<PAGE>
(A) the stockholders of the Corporation, immediately before
such merger, consolidation, share exchange or reorganization, own, directly
or indirectly immediately following such merger, consolidation, share
exchange or reorganization, at least 80% of the combined voting power of the
outstanding voting securities of the corporation that is the successor in
such merger, consolidation, share exchange or reorganization (the "SURVIVING
CORPORATION") in substantiality the same proportion as their ownership of the
Voting Securities immediately before such merger, consolidation, share
exchange or reorganization,
(B) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for such
merger, consolidation, share exchange or reorganization constitute at least
two-thirds (2/3rds) of the members of the board of directors of the Surviving
Corporation, and
(C) no Person (other than the corporation or any subsidiary,
any employee benefit plan (or any trust forming a part thereof) maintained by
the Corporation, the Surviving Corporation or any Subsidiary, or any Person
who, immediately prior to such merger, consolidation, share exchange or
reorganization had Beneficial Ownership of 15% or more of the then
outstanding Voting Securities) has Beneficial Ownership of 15% or more of the
combined voting power of the Surviving Corporation's then outstanding voting
securities (a transaction described in clauses (i) through (iii) is referred
to herein as a "NON-CONTROL TRANSACTION");
(2) A complete liquidation or dissolution of the Corporation,
or
(3) An agreement for the sale or other disposition of all or
substantially all of the assets of the Corporation to any Person (other than
a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any Person (a "SUBJECT PERSON") acquired Beneficial
Ownership of more than the permitted amount of the outstanding Voting
Securities as a result of the acquisition of Voting Securities by the
Corporation that, by reducing the number of Voting Securities outstanding,
increases the proportional number of shares Beneficially Owned by such
Subject Person, provided that if a Change in Control would occur (but for the
operation of this sentence) as a result of the acquisition of Voting
Securities by the Corporation, and after such share acquisition by the
Corporation, such subject Person becomes the Beneficial Owner of any
additional Voting Securities that increases the percentage of the then
outstanding Voting Securities Beneficially Owned by such Subject Person, then
a Change in Control shall occur.
"CLOSING PRICE" on any date shall mean the last sale price, regular
way, or, in case that no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either case as reported in
the principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the NYSE or, if shares of the
Class A Common Stock are not listed or admitted to trading on the NYSE, as
reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities exchange on
which shares of the Class A Common Stock are listed or admitted to trading
or, if shares of the Class A Common Stock are not listed or admitted to
trading on any national securities exchange, the last quoted price, or if not
so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System or, if such system is no
longer in use, the principal other automated quotations system that may then
be in use or, if shares of the Class A Common Stock are not quoted by any
such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in shares of the
Class A Common Stock selected by the Board of Directors of the Corporation.
"CONVERTIBLE CLASS B SHARES" shall mean Eligible Class B Shares that
shall have become subject to automatic conversion into shares of the Class A
Common Stock, subject to Article IV, Section 3.4 of the Charter, pursuant to
Sections 3 and 4 of this Article.
"DISABILITY" shall mean the mental or physical illness or disability
of an individual that substantially impairs the ability of the individual to
perform substantially all of his duties as an employee of an Employer in a
satisfactory manner for a period in excess of ninety (90) days in any
consecutive 12-month period.
"ELIGIBLE CLASS B SHARES" shall mean the following percentages
(subject to modification as provided
<PAGE>
in Section 3(c) of this Article) of the Outstanding Class B Shares as of the
Year-End Testing Dates indicated.
PERCENTAGE OF OUTSTANDING
CLASS B SHARES
YEAR-END TESTING DATE
--------------------------------------------------
December 31, 1994 10.0000%
December 31, 1995 22.2222%
December 31, 1996 28.5714%
December 31, 1997 50.0000%
December 31, 1998 100.0000%
"EMPLOYER" shall mean (a) the Corporation, (b) any partnership in
which the Corporation serves as a general partner, (c) any corporation
directly or indirectly controlled by or under common control with the
Corporation, (d) any partnership or company in which any of the foregoing may
own, directly or indirectly, an equity interest or (e) any limited liability
company in which any of the foregoing may be a member.
"INITIAL HOLDER" shall refer to each person holding Outstanding
Class B Shares on the date of the closing of the Initial Public Offering,
whether such Outstanding Class B Shares result from designation of
outstanding common stock or from new issuance by the Corporation.
"OP UNITS" shall mean units of limited partnership interest in the
Operating Partnership.
"OPERATING PARTNERSHIP" shall mean AIMCO Properties, L.P., a
Delaware limited partnership in which the Corporation holds a general
partnership interest.
"OUTSTANDING CLASS B SHARES" shall mean issued and outstanding
shares of the Class B Common Stock of the Corporation, excluding any
Convertible Class B Shares that have been converted into shares of the Class
A Common Stock.
"PROSPECTUS" shall mean the prospectus that forms a part of the
registration statement filed with the Securities and Exchange Commission in
connection with the Initial Public Offering, in the form included in the
registration statement at the time the registration statement becomes
effective; PROVIDED, HOWEVER, that, if such prospectus is subsequently
supplemented or amended for use in connection with the Initial Public
Offering, "PROSPECTUS" shall refer to such prospectus as so supplemented or
amended.
"TRADING DAY" shall mean a day on which the principal national
securities exchange on which shares of the Class A Common Stock are listed or
admitted to trading is open for the transaction of business or, if shares of
the Class A Common Stock are not listed or admitted to trading on any
national securities exchange, "TRADING DAY" shall mean any day other than a
Saturday, a Sunday or a day on which banking institutions in the State of New
York are authorized or obligated by law or executive order to close.
"YEAR-END TESTING DATE" shall mean each of December 31, 1994,
December 31, 1995, December 31, 1996, December 31, 1997 and December 31,
1998; PROVIDED, HOWEVER, that December 31, 1999 shall be substituted in place
of December 31, 1998 each place such earlier date appears in this Article if,
as of December 31, 1998, either the Annual Growth Target requirement or the
Compounded Cumulative Growth Target requirement set forth in Section 3(a) of
this Article in respect of the Year-End Testing Date of December 31, 1998 is
not satisfied as of December 31, 1998.
SECTION 2. RESTRICTIONS ON DIVIDENDS AND VOTING RIGHTS.
(a) NO DIVIDENDS. No dividends shall accrue or be paid on any
shares of the Class B Common Stock.
(b) No Voting Rights; Exception for Convertible Class B Shares.
Holders of shares of the Class B Common Stock shall not have the right to
vote on any matter, including, but not limited to, the election of
<PAGE>
directors, the merger of the Corporation, the sale or other disposition of
the Corporation's assets, or the dissolution or liquidation of the
Corporation; PROVIDED, HOWEVER, that holders of Convertible Class B Shares
shall have the right to one (1) vote per share on all matters for which
holders of shares of the Class A Common Stock shall have the right to vote.
SECTION 3. CONVERTIBILITY OF OUTSTANDING CLASS B SHARES.
(a) IN GENERAL. The Eligible Class B Shares as of a Year-End
Testing Date shall automatically become Convertible Class B Shares according
to the Adjusted Funds from Operations Per Share and the Average Market Values
of a share of the Class A Common Stock for the periods indicated, provided
that (i) the "Annual Growth Target" requirement set forth below in this
Section 3(a) is satisfied, (ii) the "Compounded Cumulative Growth Target"
requirement set forth below in this Section 3(a) is satisfied AND (iii) the
"MARKET VALUE" requirement set forth in Section 3(b) of this Article is
satisfied; PROVIDED, HOWEVER, that, if in any calendar year an applicable
Annual Growth Target requirement is not satisfied, the Eligible Class B
Shares becoming Convertible Class B Shares in the following calendar year or
years shall include, as a carryforward from year to year, the Eligible Class
B Shares otherwise applicable to the first year provided that in the later
year (which need not immediately follow the first year) the Annual Growth
Target requirement, the Cumulative Compounded Growth Target requirement and
the Market Value requirement for such later year are all satisfied:
YEAR-END TESTING COMPOUNDED CUMULATIVE
DATE. ANNUAL GROWTH TARGET GROWTH TARGET
- ------------------------------------------------------------------------------
December 31, 1994 Adjusted Funds from Adjusted Funds from
Operations Per Share for the Operations Per Share for
period beginning on the the period beginning on the
Initial Public Offering and Initial Public Offering and
ending on the Year-End ending on the Year-End
Testing Date is at least Testing Date is at least
$0.864 $0.864
December 31, 1995 ANNUALIZED Adjusted Funds ANNUALIZED Adjusted Funds
from Operations Per Share from Operations Per Share
for the period beginning on for the period beginning on
the Initial Public Offering the Initial Public Offering
and ending on the Year-End and ending on the Year-End
Testing Date is at least Testing Date is at least
$2.161 $2.161
December 31, 1996 Adjusted Funds from ANNUALIZED Adjusted Funds
Operations Per Share for the from Operations Per Share
calendar year ending on the for the period beginning on
Year-End Testing Date is at the Initial Public Offering
least 108.5% of the Adjusted and ending on the Year-End
Funds from Operations Per Testing Date is at least
Share for the calendar year $2.345
ending on the previous
Year-End Testing Date
December 31, 1997 Adjusted Funds from ANNUALIZED Adjusted Funds
Operations Per Share for the from Operations Per Share
calendar year ending on the for the period beginning on
Year-End Testing Date is at the Initial Public Offering
least 108.5% of the Adjusted and ending on the Year-End
Funds from Operations Per Testing Date is at least
Share for the calendar year $2.544
ending on the previous
Year-End Testing Date
<PAGE>
December 31, 1998 Adjusted Funds from ANNUALIZED Adjusted Funds
Operations Per Share for the from Operations Per Share
calendar year ending on the for the period beginning on
Year-End Testing Date is at the Initial Public Offering
least 108.5% of the Adjusted and ending on the Year-End
Funds from Operations Per Testing Date is at least
Share for the calendar year $2.760
ending on the previous
Year-End Testing Date
(b) MARKET VALUE REQUIREMENT. The Market Value requirement shall
be satisfied as to any Year-End Testing Date if the Average Market Value of a
share of the Class A Common Stock shall equal or exceed the amount set forth
in the following table for any 90 calendar day period (whether or not a
calendar quarter or an exact three-month period) beginning on any day
(whether or not a Trading Day) on or after October 1 immediately preceding
the applicable Year-End Testing Date:
YEAR-END TESTING DATE AVERAGE MARKET PRICE
-------------------------------------------
December 31, 1994 $19.030
December 31, 1995 $20.648
December 31, 1996 $22.403
December 31, 1997 $24.307
December 31, 1998 $26.373
By way of illustration, the Market Value requirement for the Year-End Testing
Date of December 31, 1996 would be satisfied if the Average Market Value of a
share of the Class A Common Stock equaled or exceeded $22.403 for (i) the
90-day period beginning on October 1, 1986 and ending on December 30, 1996,
(ii) the 90-day period beginning on April 17, 1997 and ending on July 16,
1997 OR (iii) the 90-day period beginning on November 20, 1997 and ending on
February 18, 1998.
(c) MODIFICATIONS TO ELIGIBILITY AND CONVERTIBILITY SCHEDULES.
Notwithstanding the provisions of Section 3(a) of this Article, in or as to
any calendar year the Corporation's Board of Directors shall have the
authority, upon consideration of factors and financial performance criteria
that it shall in its sole and absolute discretion consider relevant, to
declare a greater or lesser percentage of (i) Outstanding Class B Shares as
of a Year-End Testing Date to be Eligible Class B Shares and (ii) Eligible
Class B Shares to be Convertible Class B Shares; PROVIDED, HOWEVER, that no
such declaration shall decrease the number of Eligible Class B Shares or
Convertible Class B Shares held by any person without such person's consent.
SECTION 4. CONDITIONAL CONVERSION OF CLASS B COMMON STOCK.
(a) CONVERSION OF CONVERTIBLE CLASS B SHARES. Subject to Section
4(c) of this Article and to the limitations set forth in Article IV, Section
3.4 of the Charter, upon becoming a Convertible Class B Share, each
Convertible Class B Share shall be converted automatically into the number of
shares of the Class A Common Stock that results from dividing $18.50 by the
Conversion Price in effect at the time of conversion (the "CONVERSION
PRICE"). Subject to the limitations set forth in Article IV, Section 3.4 of
the Charter, such conversion shall occur and be effective as of the
applicable Year-End Testing Date or, if later, the satisfaction of the Market
Price requirement set forth in Section 3(b) of this Article. The initial
Conversion Price shall be $18.50 per share and shall be subject to adjustment
as provided in Section 7 of this Article.
(b) CONVERSION UPON OCCURRENCE OF OTHER EVENTS. Notwithstanding
the foregoing provisions of this Section 4, but nevertheless subject to the
limitations set forth in Article IV, Section 3.4 of the Charter:
(1) all Outstanding Class B Shares (whether or not Eligible
Class B Shares) that have not previously converted into shares of the Class A
Common Stock shall convert automatically upon any Change in Control of the
Corporation.
<PAGE>
(2) all Outstanding Class B Shares (whether or not Eligible
Class B Shares) held by an Initial Holder and any transferee of such Initial
Holder shall convert automatically into shares of the Class A Common Stock on
the date on which employment of such Initial Holder by an Employer is
terminated by the Employer (and not voluntarily by such Initial Holder) for
any reason other than Cause if following termination such Initial Holder is
no longer employed as an employee by any Employer, and
(3) the Board of Directors of the Corporation may, by
resolution duly adopted by the Board of Directors (and, if there shall be a
duly constituted compensation committee of the Board of Directors at the
time, only with the approval of the compensation committee), accelerate the
conversion of Outstanding Class B Shares (whether or not Eligible Class B
Shares) into shares of the Class A Common Stock at such time and in such
amount as it may determine to be appropriate from time to time.
The conversion of any Outstanding Class B Share pursuant to this Section 4(b)
shall be into the number of shares of the Class A Common Stock that results
from dividing $18.50 by the Conversion Price then in effect.
(c) IDENTIFICATION OF CLASS B COMMON STOCK CONVERTED. Whenever
shares of the Class B Common Stock are converted into shares of the Class A
Common Stock pursuant to Section 4(a), Section 4(b)(1) or Section 4(b)(3) of
this Article, the shares converted shall be allocated among all the record
holders of such shares of the Class B Common Stock in proportion to their
record ownership.
(d) DELAYED CONVERSION. If the conversion of any shares of Class B
Common Stock into shares of the Class A Common Stock shall be limited or
restricted by reason of the provisions of Article IV, Section 3.4 of the
Charter, such shares shall automatically be so converted at such later time,
if any, and to such extent as such limitations and restrictions do not apply.
(e) NO FRACTIONAL SHARES. No fractional shares of the Class A
Common Stock shall be issued upon conversion of any shares of the Class B
Common Stock. Rather, the Corporation shall pay to the record holder cash for
such fractional shares at a rate equal to the Conversion Price per share.
SECTION 5. MANDATORY REPURCHASE OR STOCKHOLDER PURCHASE OF OUTSTANDING
CLASS B SHARES.
(a) REPURCHASE FOLLOWING THE FIFTH YEAR-END TESTING DATE. Subject
to the limitations set forth in Article IV, Section 3.4 of the Charter, each
Outstanding Class B Share (whether or not an Eligible Class B Share) that has
not converted into shares of the Class A Common Stock in respect of the
Year-End Testing Date of December 31, 1998 shall be subject to mandatory
repurchase by the Corporation at a price of $.10 per Outstanding Class B
Share. Such mandatory repurchase shall close upon the determination, no
earlier than March 31, 2000, that such Outstanding Class B Share is not
convertible into shares of the Class A Common Stock pursuant to Section 3 of
this Article.
(b) INITIAL HOLDER PURCHASE UPON CERTAIN TERMINATIONS OF
EMPLOYMENT. Subject to the limitations set forth in Article IV, Section 3.4
of the Charter, each Outstanding Class B Share (whether or not an Eligible
Class B Share), other than a Convertible Class B Share, held by the Initial
Holder of such Outstanding Class B Share, or by any holder who acquired such
Outstanding Class B Share directly or indirectly from such Initial Holder,
that has neither converted nor become convertible into shares of the Class A
Common Stock or prior to either (i) the date of termination of employment of
such Initial Holder by an Employer for Cause or (ii) the date of such Initial
Holder's voluntary termination of employment with an Employer shall be
subject to mandatory purchase, at the time of such termination of employment,
by the other Initial Holders that are at that time employed by an Employer.
The purchase price shall be $.10 per Outstanding Class B Share. The purchase
of such Outstanding Class B Shares shall be made, by the Initial Holders that
are at that time employed by an Employer, proportionate to the following
percentages:
INITIAL HOLDER PERCENTAGE
-----------------------------------
Terry Considine 68.33%
Peter K. Kompaniez 13.50%
Steven D. Ira 13.67%
<PAGE>
Robert P. Lacy 4.50%
(c) REPURCHASE UPON CERTAIN TERMINATIONS OF EMPLOYMENT FOLLOWING
CONVERSION. Subject to the limitations set forth in Article IV, Section 3.4
of the Charter, each share of the Class A Common Stock, whether held by an
Initial Holder of any other person who acquired such share of the Class A
Common Stock directly or indirectly from an Initial Holder, into which an
Outstanding Class B Share was originally converted pursuant to Section 4 of
this Article shall be subject to mandatory repurchase by the Corporation, at
a price of $.10 per share of the Class A Common Stock, upon such Initial
Holder's termination of employment with an Employer, other than (i) by reason
of death, disability or a Change in Control or (ii) the involuntary
termination of employment of such Initial Holder by an Employer without
Cause, within 12 months following such conversion of an Outstanding Class B
Share into such share of the Class A Common Stock; PROVIDED, HOWEVER, that
nothing in this Section 5(c) shall be interpreted or applied to preclude the
settlement of any transaction entered into through the facilities of the NYSE
or other securities exchange or an automated inter-dealer quotation system.
(d) DELAYED REPURCHASE OR PURCHASE. If either the limitations or
restrictions of Article IV, Section 3.4 of the Charter shall apply to (i) a
mandatory repurchase under Section 5(a) or Section 5(c) of this Article or
(ii) a mandatory purchase by the Initial Holders under Section 5(b) of this
Article, or if the Corporation cannot then lawfully effect a repurchase of
its shares, then the repurchase or purchase, as the case may be, shall be
deferred until, and then only to the extent that, such repurchase or purchase
can be lawfully effected within such limitations and restrictions.
(e) PROCEDURES UPON REPURCHASE OR PURCHASE. Any repurchase of
Outstanding Class B Shares as provided by Section 5(a) or Section 5(c) of
this Article shall be effected by delivery by the Corporation to the record
holder of such Outstanding Class B Shares of a certified or cashier's check
in the amount of the aggregate repurchase price. Upon such payment by the
Corporation in repurchase of Outstanding Class B Shares, the certificates
evidencing such repurchased Outstanding Class B Shares shall be canceled.
Any purchase of Outstanding Class B Shares as provided by Section 5(b) of
this Article shall be effected by delivery of the Initial Holders then
employed by an Employer to the record holder of such Outstanding Class B
Shares of a certified or cashier's check in the amount of the aggregate
purchase price.
(f) CHANGE IN CONTROL. The provisions of Sections 5(a), 5(b) and
5(c) of this Article shall not apply following any Change in Control.
SECTION 6. REDUCTION IN AUTHORIZED SHARES. The number of authorized
shares of the Class B Common Stock shall be reduced automatically by (a) the
number of shares of the Class B Common Stock converted into shares of the
Class A Common Stock pursuant to Section 4 of this Article and (b) the number
of shares of the Class B Common Stock repurchased by the Corporation pursuant
to Section 5(a) or Section 5(c) of this Article.
SECTION 7. ADJUSTMENTS. The Conversion Price and the number of shares
of the Class A Common Stock issuable upon the conversion of each share of the
Class B Common Stock shall be subject to adjustment from time to time as
provided in this Section 7.
(a) ADJUSTMENT UPON CERTAIN EVENTS. In case that the Corporation
shall at any time after the date of the Initial Public Offering (i) pay a
dividend in shares of the Class A Common Stock or make a distribution in
shares of the Class A Common Stock, (ii) subdivide the outstanding shares of
the Class A Common Stock, (iii) combine the outstanding Class A Common Stock
into a smaller number of shares of the Class A Common Stock, or (iv) issue
any shares of its capital stock or other securities by reclassification of
the Class A Common Stock, the Conversion Price in effect at the time of the
record date for such dividend or distribution or of the effective date of
such subdivision, combination or reclassification shall be proportionately
adjusted so that each holder of shares of the Class B Common Stock converted
after such time shall be entitled to receive the aggregate number and kind of
the Class A Common Stock or other securities of the Corporation that, if such
shares of the Class B Common Stock had been converted immediately prior to
such time, he would have owned upon such conversion and been entitled to
receive by virtue of such dividend, distribution, subdivision, combination or
reclassification. Such adjustment shall
<PAGE>
be made successively whenever any event listed above shall occur.
(b) ISSUANCE OF RIGHTS, OPTIONS OR WARRANTS. If after the Initial
Public Offering the Corporation issues any rights, options or warrants to all
holders of its Class A Common Stock entitling them for a period expiring
within 60 days after the record date mentioned below to purchase shares of
the Class A Common Stock (or securities convertible into or exchangeable for
shares of the Class A Common Stock) at a price per share less than the
current market price per share on that record date, the Conversion Price
shall be adjusted in accordance with the formula:
A equals the adjusted Conversion Price.
C equals the then current Conversion Price.
O equals the number of shares of the Class A Common Stock
outstanding on the record date.
N equals the number of additional shares of the Class A Common
Stock offered or initially issuable upon conversion or exchange
of the convertible or exchangeable securities offered.
P equals the offering price or conversion price or exchange per
share of the additional shares.
M equals the current market price per share of the Class A Common
Stock on the record date.
The adjustment shall be made successively whenever any such rights, options
or warrants are issued and shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
rights, options or warrants. If all of the shares of the Class A Common
Stock or securities convertible into or exchangeable for shares of the Class
A Common Stock subject to such rights, options or warrants have not been
issued when such rights, options or warrants expire, then the Conversion
Price shall be immediately readjusted to what it would have been if "N" in
the above formula had been the number of shares of the Class A Common Stock
actually issued upon the exercise of such rights, options or warrants or
initially issuable based upon the number of convertible securities or
exchangeable securities actually issued upon the exercise of such rights or
warrants.
(c) DISTRIBUTION OF ASSETS AND DEBT SECURITIES. If after the
Initial Public Offering the Corporation distributes to all holders of its
Class A Common Stock any of its assets or debt securities or any rights or
warrants to purchase debt securities, assets or other securities of the
Corporation (including shares of the Class A Common Stock), the Conversion
Price shall be adjusted in accordance with the formula:
where
A equals the adjusted Conversion Price.
C equals the then current Conversion Price.
M equals the current market price per share of the Class A Common
Stock on the record date mentioned below.
F equals the fair market value on the record date of the assets,
securities, rights or warrants applicable to one share of the
Class A Common Stock. The Board of Directors shall determine, in
good faith, such fair market value, which determination shall be
conclusive.
This Section 7(c) does not apply to any rights, options or warrants referred
to in Section 7(b) of this Article.
This Section 7(c) does not apply to cash dividends or cash distributions paid
in respect of the Class A Common Stock for any period if the cash dividends
or cash distributions paid in respect of the Class A Common Stock and OP
Units for that period, when added to the amount of all other cash dividends
or cash distributions paid in respect to the Class A Common Stock and OP
Units for the twelve (12) month period ending on the last day of such period,
does not exceed 100% of Cash Available for Distribution for such twelve (12)
month period. "CASH AVAILABLE FOR DISTRIBUTION" shall mean "Funds from
Operations" (as that term is defined in the "Glossary" of the Prospectus but
computed at the Operating Partnership level) minus (i) the amount of any
dividend on Preferred Stock accrued during such twelve (12) month period,
whether or not declared or paid, and (ii) an annual reserve for capital
replacements of $300 per apartment unit for the weighted average number of
apartment units owned by the Corporation during such twelve (12) month
period. By way of example, Cash Available for Distribution for the twelve
(12) month
<PAGE>
period ending June 15, 1995 as set forth in the Prospectus is projected on a
PRO FORMA basis to be $18,476,000.
(d) ISSUANCE OF DISCOUNTED SHARES. If after the Initial Public
Offering the Corporation issues shares of the Class A Common Stock for a
consideration per share less than the current market price per share, on the
date that the Corporation fixes the offering price of such additional shares,
the Conversion Price shall be adjusted in accordance with the formula:
where
A equals the adjusted Conversion Price.
C equals the then current Conversion Price.
O equals the number of shares of the Class A Common Stock
outstanding immediately prior to the issuance of such additional
shares.
P equals the aggregate consideration received for the issuance of
such additional shares.
M equals the current market price per share of the Class A Common
Stock on the date of issuance of such additional shares.
S equals the number of shares outstanding immediately after the
issuance of such additional shares.
The adjustment shall be made successively whenever any such issuance is made,
and shall become effective immediately after such issuance.
This Section 7(d) does not apply to (i) any of the transactions described in
Section 7(b) or Section 7(c) of this Article, (ii) the conversion or exchange
of shares of the Class B Common Stock or other securities convertible into or
exchangeable for shares of the Class A Common Stock, (iii) shares of the
Class A Common Stock issued by the Corporation upon, and as consideration
for, the purchase of OP Units, (iv) shares of the Class A Common Stock issued
to the Corporation's employees (other than upon the exercise of options of
the type referred to in clause (v) below) under BONA FIDE employee benefit
plans adopted by the Board of Directors, if such Class A Common Stock would
otherwise be covered by this Section 7(d), (v) the Class A Common Stock
issued upon the exercise of options granted to employees at an exercise price
equal to at least 85% of the fair market value of such Class A Common Stock
at the time that such options were granted, (vi) the Class A Common Stock
issued to stockholders of any person that merges into the Corporation, or
with a subsidiary of the Corporation, in proportion to their stock holdings
in such Person immediately prior to such merger, upon such merger, (vii) the
Class A Common Stock issued in a BONA FIDE public offering pursuant to a firm
commitment or best efforts underwriting, or (viii) the Class A Common Stock
issued in a BONA FIDE private placement through a placement agent that is a
member firm of the National Association of Securities Dealers, Inc. (except
to the extent that any discount from the current market price attributable to
restrictions on transferability of the Class A Common Stock, as determined in
good faith by the Board of Directors, shall exceed 10% of the then current
market price).
(e) ISSUANCE OF CONVERTIBLE DISCOUNTED SECURITIES. If after the
Initial Public Offering the Corporation issues any securities convertible
into or exchangeable for shares of the Class A Common Stock (other than
securities issued in transactions described in Section 7(b) or Section 7(c))
of this Article for a consideration per share of the Class A Common Stock
initially deliverable upon conversion or exchange of such securities less
than the current market price per share of the Class A Common Stock on the
date of issuance of such securities, the Conversion Price shall be adjusted
in accordance with the formula:
where
A equals the adjusted Conversion Price.
C equals the then current Conversion Price.
O equals the number of shares of the Class A Common Stock
outstanding immediately prior to the issuance of such securities.
P equals the aggregate consideration received for the issuance of
such securities.
M equals the current market price per share of the Class A Common
Stock on the date of issuance of such securities.
<PAGE>
D equals the maximum number of shares deliverable upon conversion
or in exchange for such securities at the initial conversion or
exchange rate.
The adjustment shall be made successively whenever any such issuance is made,
and shall become effective immediately after such issuance. If all of the
Class A Common Stock deliverable upon conversion or exchange of such
securities have not been issued when such securities are no longer
outstanding, then the Conversion Price shall promptly be readjusted to the
conversion price that would then be in effect had the adjustment upon the
issuance of such securities been made on the basis of the actual number of
shares of the Class A Common Stock issued upon conversion or exchange of such
securities.
This Section 7(e) does not apply to (i) convertible securities issued to
stockholders of any Person that merges into the Corporation, or with a
subsidiary of the Corporation, in proportion to their stock holdings in such
Person immediately prior to such merger, upon such merger, (ii) convertible
securities issued in a BONA FIDE public offering pursuant to a firm
commitment or best efforts underwriting, or (iii) convertible securities
issued in a BONA FIDE private placement through a placement agent that is a
member firm of the National Association of Securities Dealers, Inc. (except
to the extent that any discount from the current market price attributable to
restrictions on transferability of the Class A Common Stock issuable upon
conversion, as determined in good faith by the Board of Directors and
described in a Board resolution, shall exceed 20% of the then current market
price).
(f) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS.
If at any time or from time to time there is a capital reorganization of the
Corporation (other than a recapitalization, subdivision, combination,
reclassification or exchange of shares provided for elsewhere in this Section
7 or Section 4 of this Article) or a merger or consolidation of the
Corporation with or into another corporation, or the sale of all or
substantially all of the Corporation's properties and assets to any other
person then, each share of the Class B Common Stock then outstanding shall
thereafter be convertible into, in lieu of the Class A Common Stock issuable
upon such conversion prior to consummation of such reorganization, merger,
consolidation or sale, the kind and amount of shares of stock and other
securities and property receivable (including cash) upon the consummation of
such reorganization, merger, consolidation or sale by a holder of that number
of shares of Class A Common Stock into which one share of the Class B Common
Stock was convertible immediately prior to such reorganization, merger,
consolidation or sale (including, on a PRO RATA basis, the cash, securities
or property received by holders of Class A Common Stock in any tender or
exchange offer that is a step in such transaction). In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 7 and Section 4 of this Article with respect to the rights of
the holders of the shares of the Class B Common Stock after the
reorganization, merger, consolidation or sale to the end that the provisions
of this Section 7 (including adjustment of the Conversion Price then in
effect and the number of shares issuable upon conversion of the shares of the
Class B Common Stock) shall be applicable after that event and be as nearly
equivalent as may be practicable.
(g) COMPUTATION OF CONSIDERATION. For purposes of any computation
respecting consideration received pursuant to Sections 7(d) and 7(e) of this
Article, the following shall apply:
(1) In the case of the issuance of shares of the Class A
Common Stock for cash, the consideration shall be the amount of such cash,
provided that in no case shall any deduction be made for any commissions,
discounts or other expenses incurred by the Corporation for any underwriting
of the issue or otherwise in connection therewith;
(2) In the case of the issuance of shares of the Class A
Common Stock for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair market value
thereof as determined in good faith by the Board of Directors (irrespective
of the accounting treatment thereof), whose determination shall be
conclusive, and described in a Board resolution; and
(3) In the case of the issuance of securities convertible into
or exchangeable for shares, the aggregate consideration received therefor
shall be deemed to be the consideration received by the Corporation for the
issuance of such securities plus the additional minimum consideration if any,
to be received by the Corporation upon the conversion of exchange thereof
(the consideration in each case to be determined in the same manner
<PAGE>
provided in Sections 7(g)(1) and 7(g)(2) of this Article.
(h) COMPUTATION OF CURRENT MARKET PRICE. For the purpose of any
computation pursuant to Sections 7(b), 7(c), 7(d) and 7(e) of this Article,
the current market price per share of the Class A Common Stock on any date
shall be deemed to be the average of the Closing Prices for 15 consecutive
Trading Days commencing 30 Trading Days before that date. However, if the
Class A Common Stock is not publicly listed or publicly traded, current
market price shall mean the fair market value per share of Class A Common
Stock, as determined in good faith by the Board of Directors, based on the
opinion of an independent investment banking firm.
(i) EXCEPTIONS. No adjustment in the Conversion Price need be made:
(1) unless the adjustment would require an increase or
decrease of at least 1% in the Conversion Price. Any adjustments that are
not made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 7 shall be made to the
nearest cent or to the nearest one hundredth (1/100th) of a share, as the
case may be. The Conversion Price shall not be adjusted upward except in the
event of a combination of the outstanding shares of the Class A Common Stock
into a smaller number of shares of Common Stock or in the event of a
readjustment of the Conversion Price pursuant to Section 7(b) or Section 7(e)
of this Article;
(2) for a transaction referred to in Section 7(a), Section
7(b), Section 7(c), Section 7(d) or Section 7(e) of this Article if holders
of the Class B Common Stock are to participate in the transaction on a basis
and with notice that the Board of Directors determines to be fair and
appropriate in light of the basis and notice on which holders of the Class A
Common Stock participate in the transaction;
(3) for rights to purchase shares of the Class A Common Stock
pursuant to a plan for reinvestment of dividends or interest;
(4) for a change in the part value or no par value of the
Class A Common Stock; or
(5) to the extent that the Class B Common Stock becomes
convertible into cash, as to such cash. Interest will not accrue on any such
cash.
(j) NOTICE. Whenever the Conversion Price is adjusted or reduced,
the Corporation shall promptly mail, at least 12 days prior to the record
date of the distribution triggering the adjustment or reduction, to holders
of the Class B Common Stock and file with the transfer agent therefor a
notice of the adjustment or reduction and, in the case of an adjustment, file
with the transfer agent for the Class B Common Stock an officer's certificate
briefly stating the facts requiring the adjustment and the manner of
computing it. The certificate shall be conclusive evidence that the
adjustment is correct.
(k) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its authorized but
unissued shares of the Class A Common Stock, solely for the purpose of
effecting the conversion of the shares of the Class B Common Stock, such
number of its shares of the Class A Common Stock as shall from time to time
be sufficient to effect the conversion of all outstanding shares of the Class
B Common Stock; and if at any time the number of authorized but unissued
shares of the Class A Common Stock shall not be sufficient to effect the
conversion of all then outstanding shares of the Class B Common Stock, the
Corporation will take such corporate and other action as may, in the opinion
of its counsel, be necessary to increase its authorized but unissued shares
of the Class A Common Stock to such number of shares as shall be sufficient
for such purpose.
(l) DISCRETIONARY ADJUSTMENTS. The Board of Directors may (but
shall not be required to) make such adjustments in the Conversion Price, in
addition to those required by this Section 7, as shall be determined by the
Board of Directors, as evidenced by a Board resolution, to be advisable in
order that any event that would otherwise be treated for federal income tax
purposes as a dividend of stock or stock rights will, to the extent
practicable, not be so treated or not be taxable to all the recipients.
<PAGE>
(m) AMBIGUITY. The Board of Directors may interpret the provisions
of this Section 7 to resolve any inconsistency or ambiguity that may arise or
be revealed in connection with the adjustment procedures provided herein, and
if such inconsistency or ambiguity reflects an inaccurate provision hereof,
the Board of Directors may, in appropriate circumstances, authorize the
filing of additional articles supplementary or a certificate of designation.
SECTION 8. RESTRICTION ON ADDITIONAL ISSUANCES. Upon the filing of
these Articles of Amendment, there shall be authorized 750,000 shares and
issued and outstanding 650,000 shares of the Class B Common Stock. No
additional shares of the Class B Common Stock shall be issued without the
affirmative consent or vote of a majority of the Corporation's Board of
Directors other than employees of an Employer.
ARTICLE XIII
CLASS B PREFERRED STOCK
The terms of the Class B Cumulative Convertible Preferred Stock
(including the preferences, conversions or other rights, voting powers,
restrictions, limitations as to dividends and other distributions,
qualifications, or terms or conditions of redemption) as set by the Board of
Directors are as follows:
1. NUMBER OF SHARES AND DESIGNATION.
This class of Preferred Stock shall be designated as Class B Cumulative
Convertible Preferred Stock (the "Class B Preferred Stock") and Seven Hundred
Fifty Thousand (750,000) shall be the authorized number of shares of such
Class B Preferred Stock constituting such class.
2. DEFINITIONS.
For purposes of the Class B Preferred Stock, the following terms shall
have the meanings indicated:
"ACT" shall mean the Securities Act of 1933, as amended.
"affiliate" of a Person means a Person that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is
under common control with, the Person specified.
"AGGREGATE VALUE" shall mean, with respect to any block of Equity Stock,
the sum of the products of (i) the number of shares of each class of
Equity Stock within such block multiplied by (ii) the corresponding
Market Price of one share of Equity Stock of such class.
"BASE COMMON STOCK DIVIDEND" shall have the meaning set forth in
paragraph (a) of Section 9 of this Article.
"BENEFICIAL OWNERSHIP" shall mean, with respect to any Person, ownership
of shares of Equity Stock equal to the sum of (i) the number of shares
of Equity Stock directly owned by such Person, (ii) the number of shares
of Equity Stock indirectly owned by such Person (if such Person is an
"individual" as defined in Section 542(a)(2) of the Code) taking into
account the constructive ownership rules of Section 544 of the Code, as
modified by Section 856(h)(1)(B) of the Code, and (iii) the number of
shares of Equity Stock that such Person is deemed to beneficially own
pursuant to Rule 13d-3 under the Exchange Act or that is attributed to
such Person pursuant to Section 318 of the Code, as modified by Section
856(d)(5) of the Code, PROVIDED that when applying this definition of
Beneficial Ownership to the Initial Holder, clause (iii) of this
definition, and clause (ii) of the definition of "Person" shall be
disregarded. The terms "BENEFICIAL OWNER," "BENEFICIALLY OWNS" and
"BENEFICIALLY OWNED" shall have the correlative meanings.
"BOARD OF DIRECTORS" shall mean the Board of Directors of the Corporation
or any committee authorized by such Board of Directors to perform any of
its responsibilities with respect to the Class B Preferred Stock.
- --------------------------
See Article FIFTH.
<PAGE>
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a day
on which state or federally chartered banking institutions in New York,
New York are not required to be open.
"CALL DATE" shall have the meaning set forth in paragraph (b) of Section
5 of this Article.
"CHARITABLE BENEFICIARY" shall mean one or more beneficiaries of the
Trust as determined pursuant to Section 11.3 of this Article, each of
which shall be an organization described in Section 170(b)(1)(A),
170(c)(2) and 501(c)(3) of the Code.
"CLASS B PREFERRED STOCK" shall have the meaning set forth in Section 1
of this Article.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time, or any successor statute thereto. Reference to any provision
of the Code shall mean such provision as in effect from time to time, as
the same may be amended, and any successor thereto, as interpreted by
any applicable regulations or other administrative pronouncements as in
effect from time to time.
"COMMON STOCK" shall mean the Class A Common Stock, $.01 par value per
share, of the Corporation or such shares of the Corporation's capital
stock into which outstanding shares of Common Stock shall be
reclassified.
"CONVERSION PRICE" shall mean the conversion price per share of Common
Stock for which each share of Class B Preferred Stock is convertible, as
such Conversion Price may be adjusted pursuant to paragraph (d) of
Section 7 of this Article. The initial Conversion Price shall be $30.45
(equivalent to an initial conversion rate of 3.28407 shares of Common
Stock for each share of Class B Preferred Stock).
"CURRENT MARKET PRICE" of publicly traded shares of Common Stock or any
other class or series of capital stock or other security of the
Corporation or of any similar security of any other issuer for any day
shall mean the closing price, regular way on such day, or, if no sale
takes place on such day, the average of the reported closing bid and
asked prices regular way on such day, in either case as reported on the
principal national securities exchange on which such securities are
listed or admitted for trading, or, if such security is not quoted on
any national securities exchange, on the National Market of the National
Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") or, if such security is not quoted on the NASDAQ National
Market, the average of the closing bid and asked prices on such day in
the over-the-counter market as reported by NASDAQ or, if bid and asked
prices for such security on such day shall not have been reported
through NASDAQ, the average of the bid and asked prices on such day as
furnished by any New York Stock Exchange or National Association of
Securities Dealers, Inc. member firm regularly making a market in such
security selected for such purpose by the Chief Executive Officer or the
Board of Directors or if any class or series of securities are not
publicly traded, the fair value of the shares of such class as
determined reasonably and in good faith by the Board of Directors of the
Corporation.
"DISTRIBUTION" shall have the meaning set forth in paragraph (d)(iii) of
Section 7 of this Article.
"DIVIDEND PAYMENT DATE" shall mean, with respect to each Dividend Period,
(a) the date that cash dividends are paid on the Common Stock with
respect to such Dividend Period; or (b) if such dividends have not been
paid on the Common Stock by 9:00 a.m., New York City time, on the
sixtieth day from and including the last day of such Dividend Period,
then on such day; provided, further, that if any Dividend Payment Date
falls on any day other than a Business Day, the dividend payment payable
on such Dividend Payment Date shall be paid on the Business Day
immediately following such Dividend Payment Date.
"DIVIDEND PERIODS" shall mean the Initial Dividend Period and each
subsequent quarterly dividend period commencing on and including January
1, April 1, July 1 and October 1 of each year and ending on and
including the day preceding the first day of the next succeeding
Dividend Period, other than the Dividend Period during which any Class B
Preferred Stock shall be redeemed pursuant to Section 5 hereof, which
shall end on and include the Call Date with respect to the Class B
Preferred Stock being redeemed.
<PAGE>
"EQUITY STOCK" shall mean one or more shares of any class of capital
stock of the Corporation.
"EXCESS TRANSFER" has the meaning set forth in Section 11.3(A) of this
Article.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"FAIR MARKET VALUE" shall mean the average of the daily Current Market
Prices of a share of Common Stock during five (5) consecutive Trading
Days selected by the Corporation commencing not more than twenty (20)
Trading Days before, and ending not later than, the earlier of the day
in question and the day before the "ex" date with respect to the
issuance or distribution requiring such computation. The term "'ex'
date," when used with respect to any issuance or distribution, means the
first day on which the share of Common Stock trades regular way, without
the right to receive such issuance or distribution, on the exchange or
in the market, as the case may be, used to determine that day's Current
Market Price.
"ISSUE DATE" shall mean August 4, 1997.
"INITIAL DIVIDEND PERIOD" shall mean the period commencing on and
including the Issue Date and ending on and including September 30, 1997.
"INITIAL HOLDER" shall mean Terry Considine.
"INITIAL HOLDER LIMIT" shall mean a number of the Outstanding shares of
Class B Preferred Stock of the Corporation having an Aggregate Value not
in excess of the excess of (x) 15% of the Aggregate Value of all
Outstanding shares of Equity Stock over (y) the Aggregate Value of all
shares of Equity Stock other than Class B Preferred Stock that are
Beneficially Owned by the Initial Holder. From the Issue Date, the
secretary of the Corporation, or such other person as shall be
designated by the Board of Directors, shall upon request make available
to the representative(s) of the Initial Holder and the Board of
Directors, a schedule that sets forth the then-current Initial Holder
Limit applicable to the Initial Holder.
"JUNIOR STOCK" shall have the meaning set forth in paragraph (c) of
Section 8 of this Article.
"LOOK-THROUGH ENTITY" shall mean a Person that is either (i) described in
Section 401(a) of the Code as provided under Section 856(h)(3) of the
Code or (ii) registered under the Investment Company Act of 1940.
"LOOK-THROUGH OWNERSHIP LIMIT" shall mean, for any Look-Through Entity, a
number of the Outstanding shares of Class B Preferred Stock of the
Corporation having an Aggregate Value not in excess of the excess of (x)
15% of the Aggregate Value of all Outstanding shares of Equity Stock over
(y) by the Aggregate Value of all shares of Equity Stock other than
Class B Preferred Stock that are Beneficially Owned by the Look-Through
Entity.
"MARKET PRICE" on any date shall mean, with respect to any share of
Equity Stock, the Closing Price of a share of that class of Equity Stock
on the Trading Day immediately preceding such date. The term "CLOSING
PRICE" on any date shall mean the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing
bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the NYSE or, if the Equity
Stock is not listed or admitted to trading on the NYSE, as reported in
the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which
the Equity Stock is listed or admitted to trading or, if the Equity
Stock is not listed or admitted to trading on any national securities
exchange, the last quoted price, or if not so quoted, the average of the
high bid and low asked prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc.
Automated Quotation System or, if such system is no longer in use, the
principal other automated quotations system that may then be in use or,
if the Equity Stock is not quoted by any such organization, the average
of the closing bid and asked prices as furnished by a professional
market maker making a market in the Equity Stock selected by the Board
of Directors of the Company.
<PAGE>
"NYSE" shall mean the New York Stock Exchange, Inc.
"OUTSTANDING" shall mean issued and outstanding shares of Equity Stock of
the Corporation, PROVIDED that for purposes of the application of the
Ownership Limit, the Look-Through Ownership Limit or the Initial Holder
Limit to any Person, the term "OUTSTANDING" shall be deemed to include
the number of shares of Equity Stock that such Person alone, at that
time, could acquire pursuant to any options or convertible securities.
"OWNERSHIP LIMIT" shall mean, for any Person other than the Initial
Holder or a Look-Through Entity, a number of the Outstanding shares of
Class B Preferred Stock of the Corporation having an Aggregate Value not
in excess of the excess of (x) 8.7% of the Aggregate Value of all
Outstanding shares of Equity Stock over (y) the Aggregate Value of all
shares of Equity Stock other than Class B Preferred Stock that are
Beneficially Owned by the Person.
"OWNERSHIP RESTRICTIONS" shall mean collectively the Ownership Limit as
applied to Persons other than the Initial Holder or Look-Through
Entities, the Initial Holder Limit as applied to the Initial Holder and
the Look-Through Ownership Limit as applied to Look-Through Entities.
"PARITY STOCK" shall have the meaning set forth in paragraph (b) of
Section 8 of this Article.
"PERSON" shall mean (a) for purposes of Section 11 of this Article, (i)
an individual, corporation, partnership, estate, trust (including a
trust qualifying under Section 401(a) or 501(c) of the Code),
association, private foundation within the meaning of Section 509(a) of
the Code, joint stock company or other entity, and (ii) also includes a
group as that term is used for purposes of Section 13(d)(3) of the
Exchange Act and (b) for purposes of the remaining Sections of this
Article, any individual, firm, partnership, corporation or other entity
and shall include any successor (by merger or otherwise) of such entity.
"PROHIBITED TRANSFEREE" has the meaning set forth in Section 11.3(A) of
this Article.
"REIT" shall mean a "real estate investment trust" as defined in Section
856 of the Code.
"SENIOR STOCK" shall have the meaning set forth in paragraph (a) of
Section 8 of this Article.
"SET APART FOR PAYMENT" shall be deemed to include, without any action
other than the following, the recording by the Corporation in its
accounting ledgers of any accounting or bookkeeping entry which
indicates, pursuant to a declaration of dividends or other distribution
by the Board of Directors, the allocation of funds to be so paid on any
series or class of capital stock of the Corporation; provided, however,
that if any funds for any class or series of Junior Stock or any class
or series of Parity Stock are placed in a separate account of the
Corporation or delivered to a disbursing, paying or other similar agent,
then "set apart for payment" with respect to the Class B Preferred Stock
shall mean placing such funds in a separate account or delivering such
funds to a disbursing, paying or other similar agent.
"TRADING DAY", as to any securities, shall mean any day on which such
securities are traded on the principal national securities exchange on
which such securities are listed or admitted or, if such securities are
not listed or admitted for trading on any national securities exchange,
the NASDAQ National Market or, if such securities are not listed or
admitted for trading on the NASDAQ National Market, any day other than a
Saturday, a Sunday or a day on which banking institutions in the State
of New York are authorized or obligated by law or executive order to
close.
"TRANSACTION" shall have the meaning set forth in paragraph (e) of
Section 7 of this Article.
"TRANSFER" shall mean any sale, transfer, gift, assignment, devise or
other disposition of a share of Class B Preferred Stock (including (i)
the granting of an option or any series of such options or entering into
any agreement for the sale, transfer or other disposition of Class B
Preferred Stock or (ii) the sale, transfer,
<PAGE>
assignment or other disposition of any securities or rights convertible
into or exchangeable for Class B Preferred Stock), whether voluntary or
involuntary, whether of record or Beneficial Ownership, and whether by
operation of law or otherwise (including, but not limited to, any
transfer of an interest in other entities that results in a change in
the Beneficial Ownership of shares of Class B Preferred Stock). The term
"TRANSFERS" and "TRANSFERRED" shall have correlative meanings.
"TRANSFER AGENT" means such transfer agent as may be designated by the
Board of Directors or their designee as the transfer agent for the Class
B Preferred Stock; provided, that if the Corporation has not designated a
transfer agent then the Corporation shall act as the transfer agent for
the Class B Preferred Stock.
"TRUST" shall mean the trust created pursuant to Section 11.3 of this
Article.
"TRUSTEE" shall mean the Person unaffiliated with either the Corporation
or the Prohibited Transferee that is appointed by the Corporation to
serve as trustee of the Trust.
"VOTING PREFERRED STOCK" shall have the meaning set forth in Section 9 of
this Article.
3. DIVIDENDS.
(a) The holders of Class B Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors out of funds legally
available for that purpose, cumulative dividends payable in cash in an amount
per share of Class B Preferred Stock equal to the greater of (i) the base
dividend of $1.78125 per quarter (the "Base Rate") or (ii) the cash dividends
declared on the number of shares of Common Stock, or portion thereof, into
which a share of Class B Preferred Stock is convertible. The dividends
payable with respect to the Initial Dividend Period shall be determined
solely by reference to the Base Rate. The amount referred to in clause (ii)
of this paragraph (a) with respect to each succeeding Dividend Period shall
be determined as of the applicable Dividend Payment Date by multiplying the
number of shares of Common Stock, or portion thereof calculated to the fourth
decimal point, into which a share of Class B Preferred Stock would be
convertible at the opening of business on such Dividend Payment Date (based
on the Conversion Price then in effect) by the aggregate cash dividends
payable or paid for such Dividend Period in respect of a share of Common
Stock outstanding as of the record date for the payment of dividends on the
Common Stock with respect to such Dividend Period. If (A) the Corporation
pays a cash dividend on the Common Stock after the Dividend Payment Date for
the corresponding Dividend Period and (B) the dividend on the Class B
Preferred Stock for such Dividend Period calculated pursuant to clause (ii)
of this paragraph (a), taking into account the Common Stock dividend
referenced in clause (A), exceeds the dividend previously declared on the
Class B Preferred Stock for such Dividend Period, the Corporation shall pay
an additional dividend to the holders of the Class B Preferred Stock on the
date that the Common Stock dividend referenced in clause (A) is paid, in an
amount equal to the difference between the dividend calculated pursuant to
clause (B) and the dividends previously declred on the Class B Preferred
Stock with respect to such Dividend Period. Such dividends shall be
cumulative from the Issue Date, whether or not in any Dividend Period or
Periods such dividends shall be declared or there shall be funds of the
Corporation legally available for the payment of such dividends, and shall be
payable quarterly in arrears on the Dividend Payment Dates, commencing on the
first Dividend Payment Date after the Issue Date. Each such dividend shall
be payable in arrears to the holders of record of the Class B Preferred
Stock, as they appear on the stock records of the Corporation at the close of
business on a record date fixed by the Board of Directors which shall be not
more than 60 days prior to the applicable Dividend Payment Date and, within
such 60 day period, shall be the same date as the record date for the regular
quarterly dividend payable with respect to the Common Stock for the Dividend
Period to which such Dividend Payment Date relates (or, if there is no such
record date for Common Stock, then such date as the Board of Directors may
fix). Accumulated, accrued and unpaid dividends for any past Dividend
Periods may be declared and paid at any time, without reference to any
regular Dividend Payment Date, to holders of record on such date, which date
shall not precede by more than 45 days the payment date thereof, as may be
fixed by the Board of Directors.
Upon a final administrative determination by the Internal Revenue
Service that the Corporation does not qualify as a real estate investment
trust in accordance with Section 856 of the Code, the Base Rate set forth in
(a)(i) will be increased to $3.03125 until such time as the Corporation
regains its status as a real estate investment
<PAGE>
trust; provided, however, that if the Corporation contests its loss of real
estate investment trust status in Federal Court, following its receipt of an
opinion of nationally recognized tax counsel to the effect that there is a
reasonable basis to contest such loss of status, the Base Rate shall not be
increased during the pendency of such judicial proceeding; provided further,
however, that upon a final judicial determination in Federal Tax Court,
Federal District Court or the Federal Claims Court that the Corporation does
not qualify as a real estate investment trust, the Base Rate will be
increased as stated above from the date of such judicial determination.
(b) The amount of dividends payable per share of Class B Preferred
Stock for the Initial Dividend Period, or any other period shorter than a
full Dividend Period, shall be computed ratably on the basis of twelve 30-day
months and a 360-day year. Holders of Class B Preferred Stock shall not be
entitled to any dividends, whether payable in cash, property or stock, in
excess of cumulative dividends, as herein provided, on the Class B Preferred
Stock. No interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on the Class B Preferred Stock
that may be in arrears.
(c) So long as any of the shares of Class B Preferred Stock are
outstanding, except as described in the immediately following sentence, no
dividends shall be declared or paid or set apart for payment by the
Corporation and no other distribution of cash or other property shall be
declared or made directly or indirectly by the Corporation with respect to
any class or series of Parity Stock for any period unless dividends equal to
the full amount of accumulated, accrued and unpaid dividends have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof has been or contemporaneously is set apart for such
payment on the Class B Preferred Stock for all Dividend Periods terminating
on or prior to the Dividend Payment Date with respect to such class or series
of Parity Stock. When dividends are not paid in full or a sum sufficient for
such payment is not set apart, as aforesaid, all dividends declared upon the
Class B Preferred Stock and all dividends declared upon any other class or
series of Parity Stock shall be declared ratably in proportion to the
respective amounts of dividends accumulated, accrued and unpaid on the Class
B Preferred Stock and accumulated, accrued and unpaid on such Parity Stock.
(d) So long as any of the shares of Class B Preferred Stock are
outstanding, no dividends (other than dividends or distributions paid in
shares of or options, warrants or rights to subscribe for or purchase shares
of Junior Stock) shall be declared or paid or set apart for payment by the
Corporation and no other distribution of cash or other property shall be
declared or made directly or indirectly by the Corporation with respect to
any shares of Junior Stock, nor shall any shares of Junior Stock be redeemed,
purchased or otherwise acquired (other than a redemption, purchase or other
acquisition of Common Stock made for purposes of an employee incentive or
benefit plan of the Corporation or any subsidiary) for any consideration (or
any moneys be paid to or made available for a sinking fund for the redemption
of any shares of any such stock) directly or indirectly by the Corporation
(except by conversion into or exchange for Junior Stock), nor shall any other
cash or other property otherwise be paid or distributed to or for the benefit
of any holder of shares of Junior Stock in respect thereof, directly or
indirectly, by the Corporation unless in each case (i) the full cumulative
dividends (including all accumulated, accrued and unpaid dividends) on all
outstanding shares of Class B Preferred Stock and any other Parity Stock of
the Corporation shall have been paid or such dividends have been declared and
set apart for payment for all past Dividend Periods with respect to the Class
B Preferred Stock and all past dividend periods with respect to such Parity
Stock and (ii) sufficient funds shall have been paid or set apart for the
payment of the full dividend for the current Dividend Period with respect to
the Class B Preferred Stock and the current dividend period with respect to
such Parity Stock.
<PAGE>
4. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, before any payment or
distribution of the Corporation (whether capital or surplus) shall be made to
or set apart for the holders of Junior Stock, the holders of shares of Class
B Preferred Stock shall be entitled to receive One Hundred Dollars ($100) per
share of Class B Preferred Stock (the "Liquidation Preference"), plus an
amount equal to all dividends (whether or not earned or declared)
accumulated, accrued and unpaid thereon to the date of final distribution to
such holders; but such holders shall not be entitled to any further payment.
Until the holders of the Class B Preferred Stock have been paid the
Liquidation Preference in full, plus an amount equal to all dividends
(whether or not earned or declared) accumulated, accrued and unpaid thereon
to the date of final distribution to such holders, no payment will be made to
any holder of Junior Stock upon the liquidation, dissolution or winding up of
the Corporation. If, upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation, or proceeds thereof,
distributable among the holders of Class B Preferred Stock shall be
insufficient to pay in full the preferential amount aforesaid and liquidating
payments on any other shares of any class or series of Parity Stock, then
such assets, or the proceeds thereof, shall be distributed among the holders
of Class B Preferred Stock and any such other Parity Stock ratably in the
same proportion as the respective amounts that would be payable on such Class
B Preferred Stock and any such other Parity Stock if all amounts payable
thereon were paid in full. For the purposes of this Section 4, (i) a
consolidation or merger of the Corporation with one or more corporations,
(ii) a sale or transfer of all or substantially all of the Corporation's
assets, or (iii) a statutory share exchange shall not be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntar, of the
Corporation.
(b) Upon any liquidation, dissolution or winding up of the
Corporation, after payment shall have been made in full to the holders of
Class B Preferred Stock and any Parity Stock, as provided in this Section 4,
any other series or class or classes of Junior Stock shall, subject to the
respective terms thereof, be entitled to receive any and all assets remaining
to be paid or distributed, and the holders of the Class B Preferred Stock and
any Parity Stock shall not be entitled to share therein.
5. REDEMPTION AT THE OPTION OF THE CORPORATION.
(a) Shares of Class B Preferred Stock shall not be redeemable by
the Corporation prior to August 4, 2002. On and after August 4, 2002, the
Corporation, at its option, may redeem shares of Class B Preferred Stock, in
whole or from time to time in part, at a redemption price payable in cash
equal to 100% of the Liquidation Preference thereof, plus all accrued and
unpaid dividends to the Call Date.
(b) Shares of Class B Preferred Stock shall be redeemed by the
Corporation on the date specified in the notice to holders required under
paragraph (d) of this Section 5 (the "Call Date"). The Call Date shall be
selected by the Corporation, shall be specified in the notice of redemption
and shall be not less than 30 days nor more than 60 days after the date
notice of redemption is sent by the Corporation.
(c) If full cumulative dividends on all outstanding shares of Class
B Preferred Stock and any other class or series of Parity Stock of the
Corporation have not been paid or declared and set apart for payment, no
shares of Class B Preferred Stock may be redeemed unless all outstanding
shares of Class B Preferred Stock are simultaneously redeemed and neither the
Corporation nor any affiliate of the Corporation may purchase or acquire
shares of Class B Preferred Stock, otherwise than pursuant to a purchase or
exchange offer made on the same terms to all holders of shares of Class B
Preferred Stock.
(d) If the Corporation shall redeem shares of Class B Preferred
Stock pursuant to paragraph (a) of this Section 5, notice of such redemption
shall be given to each holder of record of the shares to be redeemed. Such
notice shall be provided by first class mail, postage prepaid, at such
holder's address as the same appears on the stock records of the Corporation.
Neither the failure to mail any notice required by this paragraph (d), nor
any defect therein or in the mailing thereof to any particular holder, shall
affect the sufficiency of the notice or the validity of the proceedings for
redemption with respect to the other holders. Any notice which was mailed in
the manner herein provided shall be conclusively presumed to have been duly
given on the date mailed whether or not the holder receives the notice. Each
such notice shall state, as appropriate: (1) the Call Date; (2) the number of
<PAGE>
shares of Class B Preferred Stock to be redeemed and, if fewer than all such
shares held by such holder are to be redeemed, the number of such shares to
be redeemed from such holder; (3) the place or places at which certificates
for such shares are to be surrendered for cash; and (4) the then-current
Conversion Price. Notice having been mailed as aforesaid, from and after the
Call Date (unless the Corporation shall fail to make available the amount of
cash necessary to effect such redemption), (i) except as otherwise provided
herein, dividends on the shares of Class B Preferred Stock so called for
redemption shall cease to accumulate or accrue on the shares of Class B
Preferred Stock called for redemption (except that, in the case of a Call
Date after a dividend record date and prior to the related Dividend Payment
Date, holders of Class B Preferred Stock on the dividend record date will be
entitled on such Dividend Payment Date to receive the dividend payable on
such shares), (ii) said shares shall no longer be deemed to be outstanding,
and (iii) all rights of the holders thereof as holders of Class B Preferred
Stock of the Coporation shall cease (except the rights to receive the cash
payable upon such redemption, without interest thereon, upon surrender and
endorsement of their certificates if so required and to receive any dividends
payable thereon). The Corporation's obligation to make available the
redemption price in accordance with the preceding sentence shall be deemed
fulfilled if, on or before the Call Date, the Corporation shall deposit with
a bank or trust company (which may be an affiliate of the Corporation) that
has, or is an affiliate of a bank or trust company that has, a capital and
surplus of at least $50,000,000, such amount of cash as is necessary for such
redemption, in trust, with irrevocable instructions that such cash be applied
to the redemption of the shares of Class B Preferred Stock so called for
redemption. No interest shall accrue for the benefit of the holders of
shares of Class B Preferred Stock to be redeemed on any cash so set aside by
the Corporation. Subject to applicable escheat laws, any such cash unclaimed
at the end of two years from the Call Date shall revert to the general funds
of the Corporation, after which reversion the holders of shares of Class B
Preferred Stock so called for redemption shall look only to the general funds
of the Corporation for the payment of such cash.
As promptly as practicable after the surrender in accordance with such
notice of the certificates for any such shares of Class B Preferred Stock to
be so redeemed (properly endorsed or assigned for transfer, if the
Corporation shall so require and the notice shall so state), such
certificates shall be exchanged for cash (without interest thereon) for which
such shares have been redeemed in accordance with such notice. If fewer than
all the outstanding shares of Class B Preferred Stock are to be redeemed,
shares to be redeemed shall be selected by the Corporation from outstanding
shares of Class B Preferred Stock not previously called for redemption by lot
or, with respect to the number of shares of Class B Preferred Stock held of
record by each holder of such shares, pro rata (as nearly as may be) or by
any other method as may be determined by the Board of Directors in its
discretion to be equitable. If fewer than all the shares of Class B
Preferred Stock represented by any certificate are redeemed, then a new
certificate representing the unredeemed shares shall be issued without cost
to the holders thereof.
6. STATUS OF REACQUIRED STOCK.
All shares of Class B Preferred Stock which shall have been issued and
reacquired in any manner by the Corporation (including shares of Class B
Preferred Stock which have been surrendered for conversion into Common Stock)
shall be returned to the status of authorized, but unissued shares of Class B
Preferred Stock.
7. CONVERSION.
At any time on or after August 4, 1998. Holders of shares of Class B
Preferred Stock shall have the right to convert all or a portion of such
shares into shares of Common Stock, as follows:
(a) Subject to and upon compliance with the provisions of this
Section 7, a holder of shares of Class B Preferred Stock shall have the
right, at such holder's option, at any time on or after August 4, 1998 to
convert such shares, in whole or in part, into the number of fully paid and
non-assessable shares of authorized but previously unissued shares of Common
Stock per each share of Class B Preferred Stock obtained by dividing the
Liquidation Preference (excluding any accumulated, accrued and unpaid
dividends) per share of Class B Preferred Stock by the Conversion Price (as
in effect at the time and on the date provided for in the last subparagraph
of paragraph (b) of this Section 7) and by surrendering such shares to be
converted, such surrender to be made in the manner provided in paragraph (b)
of this Section 7; provided, however, that the right to convert shares of
Class B Preferred Stock called for redemption pursuant to Section 5 shall
terminate at the close of business on the Call Date fixed for such
redemption, unless the Corporation shall default in making payment of cash
payable upon such
<PAGE>
redemption under Section 5 of this Article.
(b) In order to exercise the conversion right, the holder of each
share of Class B Preferred Stock to be converted shall surrender the
certificate representing such share, duly endorsed or assigned to the
Corporation or in blank, at the office of the Transfer Agent, accompanied by
written notice to the Corporation that the holder thereof elects to convert
such share of Class B Preferred Stock. Unless the shares issuable on
conversion are to be issued in the same name as the name in which such share
of Class B Preferred Stock is registered, each share surrendered for
conversion shall be accompanied by instruments of transfer, in form
satisfactory to the Corporation, duly executed by the holder or such holder's
duly authorized attorney and an amount sufficient to pay any transfer or
similar tax (or evidence reasonably satisfactory to the Corporation
demonstrating that such taxes have been paid).
Holders of shares of Class B Preferred Stock at the close of business on
a dividend payment record date shall be entitled to receive the dividend
payable on such shares on the corresponding Dividend Payment Date
notwithstanding the conversion thereof following such dividend payment record
date and prior to such Dividend Payment Date. Except as provided above, the
Corporation shall make no payment or allowance for unpaid dividends, whether
or not in arrears, on converted shares or for dividends on the shares of
Common Stock issued upon such conversion.
As promptly as practicable after the surrender of certificates for shares
of Class B Preferred Stock as aforesaid, the Corporation shall issue and
shall deliver at such office to such holder, or send on such holder's written
order, a certificate or certificates for the number of full shares of Common
Stock issuable upon the conversion of such shares of Class B Preferred Stock
in accordance with provisions of this Section 7, and any fractional interest
in respect of a share of Common Stock arising upon such conversion shall be
settled as provided in paragraph (c) of this Section 7.
Each conversion shall be deemed to have been effected immediately prior
to the close of business on the date on which the certificates for shares of
Class B Preferred Stock shall have been surrendered and such notice received
by the Corporation as aforesaid, and the Person or Persons in whose name or
names any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares represented thereby at such time on such date
and such conversion shall be at the Conversion Price in effect at such time
on such date unless the stock transfer books of the Corporation shall be
closed on that date, in which event such Person or Persons shall be deemed to
have become such holder or holders of record at the close of business on the
next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date on which
such shares shall have been surrendered and such notice received by the
Corporation. If the dividend payment record date for the Class B Preferred
Stock and Common Stock do not coincide, and the preceding sentence does not
operate to ensure that a holder of shares of Class B Preferred Stock whose
shares are converted into Common Stock does not receive dividends on both the
shares of Class B Preferred Stock and the Common Stock into which such shares
are converted for the same Dividend Period, then notwithstanding anything
herein to the contrary, it is the intent, and the Transfer Agent is
authorized to ensure that no conversion after the earlier of such record
dates will be accepted until after the latter of such record dates.
(c) No fractional share of Common Stock or scrip representing
fractions of a share of Common Stock shall be issued upon conversion of the
shares of Class B Preferred Stock. Instead of any fractional interest in a
share of Common Stock that would otherwise be deliverable upon the conversion
of shares of Class B Preferred Stock, the Corporation shall pay to the holder
of such share an amount in cash based upon the Current Market Price of the
Common Stock on the Trading Day immediately preceding the date of conversion.
If more than one share shall be surrendered for conversion at one time by
the same holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate number of
shares of Class B Preferred Stock so surrendered.
(d) The Conversion Price shall be adjusted from time to time as
follows:
(i) If the Corporation shall after the Issue Date (A) pay a
dividend or make a distribution on its capital stock in shares of Common
Stock, (B) subdivide its outstanding Common Stock into a greater number
<PAGE>
of shares, (C) combine its outstanding Common Stock into a smaller number of
shares or (D) issue any shares of capital stock by reclassification of its
outstanding Common Stock, the Conversion Price in effect at the opening of
business on the day following the date fixed for the determination of
stockholders entitled to receive such dividend or distribution or at the
opening of business on the day following the day on which such subdivision,
combination or reclassification becomes effective, as the case may be, shall
be adjusted so that the holder of any share of Class B Preferred Stock
thereafter surrendered for conversion shall be entitled to receive the number
of shares of Common Stock (or fraction of a share of Common Stock) that such
holder would have owned or have been entitled to receive after the happening
of any of the events described above had such share of Class B Preferred
Stock been converted immediately prior to the record date in the case of a
dividend or distribution or the effective date in the case of a subdivision,
combination or reclassification. An adjustment made pursuant to this
paragraph (d)(i) of this Section 7 shall become effective immediately after
the opening of business on the day next following the record date (except as
provided in paragraph (h) below) in the case of a dividend or distribution
and shall become effective immediately after the opening of business on the
day next following the effective date in the case of a subdivision,
combination or reclassification.
(ii) If the Corporation shall issue after the Issue Date
rights, options or warrants to all holders of Common Stock entitling them
(for a period expiring within 45 days after the record date described below
in this paragraph (d)(ii) of this Section 7) to subscribe for or purchase
Common Stock at a price per share less than the Fair Market Value per share
of the Common Stock on the record date for the determination of stockholders
entitled to receive such rights, options or warrants, then the Conversion
Price in effect at the opening of business on the day next following such
record date shall be adjusted to equal the price determined by multiplying
(A) the Conversion Price in effect immediately prior to the opening of
business on the day following the date fixed for such determination by (B) a
fraction, the numerator of which shall be the sum of (X) the number of shares
of Common Stock outstanding on the close of business on the date fixed for
such determination and (Y) the number of shares that could be purchased at
such Fair Market Value from the aggregate proceeds to the Corporation from
the exercise of such rights, options or warrants for Common Stock, and the
denominator of which shall be the sum of (XX) the number of shares of Common
Stock outstanding on the close of business on the date fixed for such
determination and (YY) the number of additional shares of Common Stock
offered for subscription or purchase pursuant to such rights, options or
warrants. Such adjustment shall become effective immediately after the
opening of business on the day next following such record date (except as
provided in paragraph (h) below). In determining whether any rights, options
or warrants entitle the holders of Common Stock to subscribe for or purchase
Common Stock at less than such Fair Market Value, there shall be taken into
account any consideration received by the Corporation upon issuance and upon
exercise of such rights, options or warrants, the value of such
consideration, if other than cash, to be determined in good fith by the Board
of Directors.
(iii) If the Corporation shall after the Issue Date make a
distribution on its Common Stock other than in cash or shares of Common Stock
(including any distribution in securities (other than rights, options or
warrants referred to in paragraph (d)(ii) of this Section 7)) (each of the
foregoing being referred to herein as a "distribution"), then the Conversion
Price in effect at the opening of business on the next day following the
record date for determination of stockholders entitled to receive such
distribution shall be adjusted to equal the price determined by multiplying
(A) the Conversion Price in effect immediately prior to the opening of
business on the day following the record date by (B) a fraction, the
numerator of which shall be the difference between (X) the number of shares
of Common Stock outstanding on the close of business on the record date and
(Y) the number of shares determined by dividing (aa) the aggregate value of
the property being distributed by (bb) the Fair Market Value per share of
Common Stock on the record date, and the denominator of which shall be the
number of shares of Common Stock outstanding on the close of business on the
record date. Such adjustment shall become effective immediately after the
opening of business on the day next following such record date (except as
provided below). The value of the property being distributed shall be as
determined in good faith by the Board of Directors; provided, however, if the
property being distributed is a publicly traded security, its value shall be
calculated in accordance with the procedure for calculating the Fair Market
Value of a share of Common Stock (calculated for a period of five consecutive
Trading Days commencing on the twentieth Trading Day after the distribution).
Neither the issuance by the Corporation of rights, options or warrants to
subscribe for or purchase securities of the Corporation nor the exercise
thereof shall be deemed a distribution under this paragraph.
(iv) If after the Issue Date the Corporation shall acquire,
pursuant to an issuer or self tender
<PAGE>
offer, all or any portion of the outstanding Common Stock and such tender
offer involves the payment of consideration per share of Common Stock having
a fair market value (as determined in good faith by the Board of Directors),
at the last time (the "Expiration Time") tenders may be made pursuant to such
offer, that exceeds the Current Market Price per share of Common Stock on the
Trading Day next succeeding the Expiration Time, then the Conversion Price in
effect on the opening of business on the day next succeeding the Expiration
Time shall be adjusted to equal the price determined by multiplying (A) the
Conversion Price in effect immediately prior to the Expiration Time by (B) a
fraction, the numerator of which shall be (X) the number of shares of Common
Stock outstanding (including the shares acquired in the tender offer (the
"Acquired Shares")) immediately prior to the Expiration Time, multiplied by
(Y) the Current Market Price per share of Common Stock on the Trading Day
next succeeding the Expiration Time, and the denominator of which shall be
the sum of (XX) the fair market value (determined as aforesaid) of the
aggregate consideration paid to acquire the Acquired Shares and (YY) the
product of (I) the number of shares of Common Stock outstanding (less any
Acquired Shares) at the Expiration Time, multiplied by (II) the Current
Market Price per share of Common Stock on the Trading Day next succeeding the
Expiration Time.
(v) No adjustment in the Conversion Price shall be required
unless such adjustment would require a cumulative increase or decrease of at
least 1% in such price; provided, however, that any adjustments that by
reason of this paragraph (d)(v) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment until made; and
provided, further, that any adjustment shall be required and made in
accordance with the provisions of this Section 7 (other than this paragraph
(d)(v)) not later than such time as may be required in order to preserve the
tax-free nature of a distribution to the holders of shares of Common Stock.
Notwithstanding any other provisions of this Section 7, the Corporation shall
not be required to make any adjustment of the Conversion Price for the
issuance of (A) any shares of Common Stock pursuant to any plan providing for
the reinvestment of dividends or interest payable on securities of the
Corporation and the investment of optional amounts in shares of Common Stock
under such plan or (B) any options, rights or shares of Common Stock pursuant
to any stock option, stock purchase or other stock-based plan maintained by
the Corporation. All calculations under this Section 7 shall be made to the
nearest cent (with $.005 being rounded upward) or to the nearest one-tenth of
a share (with .05 of a share being rounded upward), as the case may be.
Anything in this paragraph (d) of this Section 7 to the contrary
notwithstanding, the Corporation shall be entitled, to the extent permitted
by law, to make such reductions in the Conversion Price, in addition to those
required by this paragraph (d), as it in its discretion shall determine to be
advisable in order that any stock dividends, subdivision of shares,
reclassification or combination of shares, distribution of rights or warrants
to purchase stock or securities, or a distribution of other assets (other
than cash dividends) hereafter made by the Corporation to its stockholders
shall not be taxable, or if that is not possible, to diminish any income
taxes that are otherwise payable because of such event.
(e) If the Corporation shall be a party to any transaction
(including without limitation a merger, consolidation, statutory share
exchange, issuer or self tender offer for at least 30% of the shares of
Common Stock outstanding, sale of all or substantially all of the
Corporation's assets or recapitalization of the Common Stock, but excluding
any transaction as to which paragraph (d)(i) of this Section 7 applies) (each
of the foregoing being referred to herein as a "Transaction"), in each case
as a result of which shares of Common Stock shall be converted into the right
to receive stock, securities or other property (including cash or any
combination thereof), each share of Class B Preferred Stock which is not
converted into the right to receive stock, securities or other property in
connection with such Transaction shall thereupon be convertible into the kind
and amount of shares of stock, securities and other property (including cash
or any combination thereof) receivable upon such consummation by a holder of
that number of shares of Common Stock into which one share of Class B
Preferred Stock was convertible immediately prior to such Transaction
(without giving effect to any Conversion Price adjustment pursuant to Section
7(d)(iv) of this Article). The Corporation shall not be a party to any
Transaction unless the terms of such Transaction are consistent with the
provisions of this paragraph (e), and it shall not consent or agree to the
occurrence of any Transaction until the Corporation has entered into an
agreement with the successor or purchasing entity, as the case may be, for
the benefit of the holders of the Class B Preferred Stock that will contain
provisions enabling the holders of the Class B Preferred Stock that remain
outstanding after such Transaction to convert into the consideration received
by holders of Common Stock at the Conversion Price in effect immediately
prior to such Transaction. The provisions of this paragraph (e) shall
similarly apply to successive Transactions.
(f) If:
<PAGE>
(i) the Corporation shall declare a dividend (or any other
distribution) on the Common Stock (other than cash dividends and cash
distributions); or
(ii) the Corporation shall authorize the granting to all
holders of the Common Stock of rights or warrants to subscribe for or
purchase any shares of any class or series of capital stock or any other
rights or warrants; or
(iii) there shall be any reclassification of the outstanding
Common Stock or any consolidation or merger to which the Corporation is a
party and for which approval of any stockholders of the Corporation is
required, or a statutory share exchange, an issuer or self tender offer shall
have been commenced for at least 30% of the outstanding shares of Common
Stock (or an amendment thereto changing the maximum number of shares sought
or the amount or type of consideration being offered therefor shall have been
adopted), or the sale or transfer of all or substantially all of the assets
of the Corporation as an entirety; or
(iv) there shall occur the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation,
then the Corporation shall cause to be filed with the Transfer Agent and
shall cause to be mailed to each holder of shares of Class B Preferred Stock
at such holder's address as shown on the stock records of the Corporation, as
promptly as possible, a notice stating (A) the record date for the payment of
such dividend, distribution or rights or warrants, or, if a record date is
not established, the date as of which the holders of Common Stock of record
to be entitled to such dividend, distribution or rights or warrants are to be
determined or (B) the date on which such reclassification, consolidation,
merger, statutory share exchange, sale, transfer, liquidation, dissolution or
winding up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, statutory
share exchange, sale, transfer, liquidation, dissolution or winding up or (C)
the date on which such tender offer commenced, the date on which such tender
offer is scheduled to expire unless extended, the consideration offered and
the other material terms thereof (or the material terms of any amendment
thereto). Failure to give or receive such notice or any defect therein shall
not affect the legality or validity of the proceedings described in this
Section 7.
(g) Whenever the Conversion Price is adjusted as herein provided,
the Corporation shall promptly file with the Transfer Agent an officer's
certificate setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment which
certificate shall be conclusive evidence of the correctness of such
adjustment absent manifest error. Promptly after delivery of such
certificate, the Corporation shall prepare a notice of such adjustment of the
Conversion Price setting forth the adjusted Conversion Price and the
effective date such adjustment becomes effective and shall mail such notice
of such adjustment of the Conversion Price to each holder of shares of Class
B Preferred Stock at such holder's last address as shown on the stock records
of the Corporation.
(h) In any case in which paragraph (d) of this Section 7 provides
that an adjustment shall become effective on the day next following the
record date for an event, the Corporation may defer until the occurrence of
such event (A) issuing to the holder of any share of Class B Preferred Stock
converted after such record date and before the occurrence of such event the
additional Common Stock issuable upon such conversion by reason of the
adjustment required by such event over and above the Common Stock issuable
upon such conversion before giving effect to such adjustment and (B) paying
to such holder any amount of cash in lieu of any fraction pursuant to
paragraph (c) of this Section 7.
(i) There shall be no adjustment of the Conversion Price in case of
the issuance of any capital stock of the Corporation in a reorganization,
acquisition or other similar transaction except as specifically set forth in
this Section 7.
(j) If the Corporation shall take any action affecting the Common
Stock, other than action described in this Section 7, that in the opinion of
the Board of Directors would materially adversely affect the conversion
rights of the holders of Class B Preferred Stock, the Conversion Price for
the Class B Preferred Stock
<PAGE>
may be adjusted, to the extent permitted by law, in such manner, if any, and
at such time as the Board of Directors, in its sole discretion, may determine
to be equitable under the circumstances.
(k) The Corporation shall at all times reserve and keep available,
free from preemptive rights, out of the aggregate of its authorized but
unissued Common Stock solely for the purpose of effecting conversion of the
Class B Preferred Stock, the full number of shares of Common Stock
deliverable upon the conversion of all outstanding shares of Class B
Preferred Stock not theretofore converted into Common Stock. For purposes of
this paragraph (k), the number of shares of Common Stock that shall be
deliverable upon the conversion of all outstanding shares of Class B
Preferred Stock shall be computed as if at the time of computation all such
outstanding shares were held by a single holder (and without regard to the
Ownership Limit set forth in the Charter of the Corporation).
The Corporation covenants that any shares of Common Stock issued upon
conversion of the shares of Class B Preferred Stock shall be validly issued,
fully paid and nonassessable.
The Corporation shall use its best efforts to list the shares of Common
Stock required to be delivered upon conversion of the shares of Class B
Preferred Stock, prior to such delivery, upon each national securities
exchange, if any, upon which the outstanding shares of Common Stock are
listed at the time of such delivery.
(l) The Corporation will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery
of shares of Common Stock or other securities or property on conversion or
redemption of shares of Class B Preferred Stock pursuant hereto; provided,
however, that the Corporation shall not be required to pay any tax that may
be payable in respect of any transfer involved in the issue or delivery of
shares of Common Stock or other securities or property in a name other than
that of the holder of the shares of Class B Preferred Stock to be converted
or redeemed, and no such issue or delivery shall be made unless and until the
Person requesting such issue or delivery has paid to the Corporation the
amount of any such tax or established, to the reasonable satisfaction of the
Corporation, that such tax has been paid.
(m) In addition to any other adjustment required hereby, to the
extent permitted by law, the Corporation from time to time may decrease the
Conversion Price by any amount, permanently or for a period of at least
twenty Business Days, if the decrease is irrevocable during the period.
(n) Notwithstanding anything to the contrary contained in this
Section 7, conversion of Class B Preferred Stock pursuant to this Section 7
shall be permitted only to the extent that such conversion would not result
in a violation of the Ownership Restrictions (as defined in the Charter),
after taking into account any waiver of such limitation granted to any holder
of the shares of Class B Preferred Stock.
8. RANKING.
Any class or series of capital stock of the Corporation shall be deemed
to rank:
(a) prior or senior to the Class B Preferred Stock, as to the
payment of dividends and as to distribution of assets upon liquidation,
dissolution or winding up, if the holders of such class or series shall be
entitled to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in preference or
priority to the holders of Class B Preferred Stock ("Senior Stock");
(b) on a parity with the Class B Preferred Stock, as to the payment
of dividends and as to distribution of assets upon liquidation, dissolution
or winding up, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share thereof be different from those of
the Class B Preferred Stock, if the holders of such class of stock or series
and the Class B Preferred Stock shall be entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding up in
proportion to their respective amounts of accrued and unpaid dividends per
share or liquidation preferences, without preference or priority one over the
other ("Parity Stock"); and
(c) junior to the Class B Preferred Stock, as to the payment of
dividends or as to the distribution
<PAGE>
of assets upon liquidation, dissolution or winding up, if such stock or
series shall be Common Stock or if the holders of Class B Preferred Stock
shall be entitled to receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in preference or
priority to the holders of shares of such class or series ("Junior Stock").
9. VOTING.
(a) If and whenever (i) six quarterly dividends (whether or not
consecutive) payable on the Class B Preferred Stock or any series or class of
Parity Stock shall be in arrears (which shall, with respect to any such
quarterly dividend, mean that any such dividend has not been paid in full),
whether or not earned or declared, or (ii) for two consecutive quarterly
dividend periods the Corporation fails to pay dividends on the Common Stock
in an amount per share at least equal to $0.4625 (subject to adjustment
consistent with any adjustment of the Conversion Price pursuant to Section
7(d) of this Article) (the "Base Common Stock Dividend") the number of
directors then constituting the Board of Directors shall be increased by two
(in the case of an arrearage in dividends described in clause (i)) or one
additional director (in the case of an arrearage in dividends described in
clause (ii)) (in each case if not already increased by reason of similar
types of provisions with respect to Voting Preferred Stock (as defined
below)) and the holders of shares of Class B Preferred Stock, together with
the holders of shares of every other series or class of Parity Stock (any
other such series, the "Voting Preferred Stock"), voting as a single class
regardless of series, shall be entitled to elect the two additional directors
(in the case of an arrearage in dividends described in clause (i)) or one (in
the case of an arrearage in dividends described in clause (ii)) to serve on
the Board of Directors at any annual meeting of stockholders or special
meeting held in place thereof, or at a special meeting of the holders of the
Class B Preferred Stock and the Voting Preferred Stock called as hereinafter
provided. Whenever (1) in the case of an arrearage in dividends described in
clause (i), all arrears in dividends on the Class B Preferred Stock and the
Voting Preferred Stock then outstanding shall have been paid and dividends
thereon for the current quarterly dividend period shall have been paid or
declared and set apart for payment, or 2) in the case of an arrearage in
dividends described in clause (ii), the Corporation makes a quarterly
dividend payment on the Common Stock in an amount per share equal to or
exceeding the Base Common Stock Dividend, then the right of the holders of
the Class B Preferred Stock and the Voting Preferred Stock to elect such
additional two directors (in the case of an arrearage in dividends described
in clause (i)) or one additional director (in the case of an arrearage in
dividends described in clause (ii)) shall cease (but subject always to the
same provision for the vesting of such voting rights in the case of any
similar future arrearages), and the terms of office of all Persons elected as
directors by the holders of the Class B Preferred Stock and the Voting
Preferred Stock shall forthwith terminate and the number of directors
constituting the Board of Directors shall be reduced accordingly. At any
time after such voting power shall have been so vested in the holders of
Class B Preferred Stock and the Voting Preferred Stock, if applicable, the
Secretary of the Corporation may, and upon the written request of any holder
of Class B Preferred Stock (addressed to the Secretary at the principal
office of the Corporation) shall, call a special meeting of the holders of
the Class B Preferred Stock and of the Voting Preferred Stock for the
election of the two directors (in the case of an arrearage in dividends
described in clause (i)) or one director (in the case of an arrearage in
dividends described in clause (ii)) to be elected by them as herein provided,
such call to be made by notice similar to that provided in the Bylaws of the
Corporation for a special meeting of the stockholders or as required by law.
If any such special meeting required to be called as above provided shall not
be called by the Secretary within 20 days after receipt of any such request,
then any holder of Class B Preferred Stock may call such meeting, upon the
notice above provided, and for that purpose shall have access to the stock
books ofthe Corporation. The directors or director elected at any such
special meeting shall hold office until the next annual meeting of the
stockholders or special meeting held in lieu thereof if such office shall not
have previously terminated as above provided. If any vacancy shall occur
among the directors elected by the holders of the Class B Preferred Stock and
the Voting Preferred Stock, a successor shall be elected by the Board of
Directors, upon the nomination of the then-remaining director elected by the
holders of the Class B Preferred Stock and the Voting Preferred Stock or the
successor of such remaining director, to serve until the next annual meeting
of the stockholders or special meeting held in place thereof if such office
shall not have previously terminated as provided above.
(b) So long as any shares of Class B Preferred Stock are
outstanding, in addition to any other vote or consent of stockholders
required by law or by the Charter of the Corporation, the affirmative vote of
at least 66-2/3% of the votes entitled to be cast by the holders of the Class
B Preferred Stock, given in Person or by proxy, either in writing without a
meeting or by vote at any meeting called for the purpose, shall be necessary
for effecting
<PAGE>
or validating:
(i) Any amendment, alteration or repeal of any of the
provisions of these Articles Supplementary, the Charter or the By-Laws of the
Corporation that materially adversely affects the voting powers, rights or
preferences of the holders of the Class B Preferred Stock; provided, however,
that the amendment of the provisions of the Charter so as to authorize or
create, or to increase the authorized amount of, any Junior Stock or any
shares of any class of Parity Stock shall not be deemed to materially
adversely affect the voting powers, rights or preferences of the holders of
Class B Preferred Stock; or
(ii) The authorization, creation of, the increase in the
authorized amount of, or issuance of , any shares of any class of Senior
Stock or any security convertible into shares of any class of Senior Stock
(whether or not such class of Senior Stock is currently authorized);
provided, however, that no such vote of the holders of Class B Preferred
Stock shall be required if, at or prior to the time when such amendment,
alteration or repeal is to take effect, or when the issuance of any such
prior shares or convertible security is to be made, as the case may be,
provision is made for the redemption of all shares of Class B Preferred Stock
at the time outstanding to the extent such redemption is authorized by
Section 5 of this Article.
For purposes of the foregoing provisions and all other voting rights
under these Articles Supplementary, each share of Class B Preferred Stock
shall have one (1) vote per share, except that when any other class or series
of preferred stock shall have the right to vote with the Class B Preferred
Stock as a single class on any matter, then the Class B Preferred Stock and
such other class or series shall have with respect to such matters one (1)
vote per $100 of stated liquidation preference. Except as otherwise required
by applicable law or as set forth herein, the Class B Preferred Stock shall
not have any relative, participating, optional or other special voting rights
and powers other than as set forth herein, and the consent of the holders
thereof shall not be required for the taking of any corporate action.
10. RECORD HOLDERS.
The Corporation and the Transfer Agent may deem and treat the record
holder of any share of Class B Preferred Stock as the true and lawful owner
thereof for all purposes, and neither the Corporation nor the Transfer Agent
shall be affected by any notice to the contrary.
11.1 RESTRICTIONS ON OWNERSHIP AND TRANSFERS.
(A) LIMITATION ON BENEFICIAL OWNERSHIP. Except as provided in
Section 11.8, from and after the Issue Date, no Person (other than the
Initial Holder or a Look-Through Entity) shall Beneficially Own shares of
Class B Preferred Stock in excess of the Ownership Limit, the Initial Holder
shall not Beneficially Own shares of Class B Preferred Stock in excess of the
Initial Holder Limit and no Look-Through Entity shall Beneficially Own shares
of Class B Preferred Stock in excess of the Look-Through Ownership Limit.
(B) TRANSFERS IN EXCESS OF OWNERSHIP LIMIT. Except as provided
in Section 11.8, from and after the Issue Date (and subject to Section
11.12), any Transfer (whether or not such Transfer is the result of
transactions entered into through the facilities of the NYSE or other
securities exchange or an automated inter-dealer quotation system) that, if
effective, would result in any Person (other than the Initial Holder or a
Look-Through Entity) Beneficially Owning shares of Class B Preferred Stock in
excess of the Ownership Limit shall be void AB INITIO as to the Transfer of
such shares of Class B Preferred Stock that would be otherwise Beneficially
Owned by such Person in excess of the Ownership Limit, and the intended
transferee shall acquire no rights in such shares of Class B Preferred Stock.
(C) TRANSFERS IN EXCESS OF INITIAL HOLDER LIMIT. Except as
provided in Section 11.8, from and after the Issue Date (and subject to
Section 11.12), any Transfer (whether or not such Transfer is the result of
transactions entered into through the facilities of the NYSE or other
securities exchange or an automated inter-dealer quotation system) that, if
effective, would result in the Initial Holder Beneficially Owning shares of
Class B Preferred Stock in excess of the Initial Holder Limit shall be void
AB INITIO as to the Transfer of such shares of Class B Preferred Stock that
would be otherwise Beneficially Owned by the Initial Holder in excess of the
Initial Holder
<PAGE>
limit, and the Initial Holder shall acquire no rights in such shares of Class
B Preferred Stock.
(D) TRANSFERS IN EXCESS OF LOOK-THROUGH OWNERSHIP LIMIT. Except as
provided in Section 11.8 from and after the Issue Date (and subject to
Section 11.12), any Transfer (whether or not such Transfer is the result of
transactions entered into through the facilities of the NYSE or other
securities exchange or an automated inter-dealer quotation system) that, if
effective, would result in any Look-Through Entity Beneficially Owning shares
of Class B Preferred Stock in excess of the Look-Through Ownership limit
shall be void AB INITIO as to the Transfer of such shares of Class B
Preferred Stock that would be otherwise Beneficially Owned by such
Look-Through Entity in excess of the Look-Through Ownership Limit and such
Look-Through Entity shall acquire no rights in such shares of Class B
Preferred Stock.
(E) TRANSFERS RESULTING IN "CLOSELY HELD" STATUS. From and after
the Issue Date, any Transfer that, if effective would result in the
Corporation being "closely held" within the meaning of Section 856(h) of the
Code, or would otherwise result in the Corporation failing to qualify as a
REIT (including, without limitation, a Transfer or other event that would
result in the Corporation owning (directly or constructively) an interest in
a tenant that is described in Section 856(d)(2)(B) of the Code if the income
derived by the Corporation from such tenant would cause the Corporation to
fail to satisfy any of the gross income requirements of Section 856(c) of the
Code) shall be void AB INITIO as to the Transfer of shares of Class B
Preferred Stock that would cause the Corporation (i) to be "closely held"
within the meaning of Section 856(h) of the Code or (ii) otherwise fail to
qualify as a REIT, as the case may be, and the intended transferee shall
acquire no rights in such shares of Class B Preferred Stock.
(F) SEVERABILITY ON VOID TRANSACTIONS. A Transfer of a share of
Class B Preferred Stock that is null and void under Sections 11.1(B), (C),
(D), or (E) of this Article because it would, if effective, result in (i) the
ownership of Class B Preferred Stock in excess of the Initial Holder Limit,
the Ownership Limit, or the Look-Through Ownership Limit, (ii) the
Corporation being "closely held" within the meaning of Section 856(h) of the
Code or (iii) the Corporation otherwise failing to qualify as a REIT, shall
not adversely affect the validity of the Transfer of any other share of Class
B Preferred Stock in the same or any other related transaction.
11.2 REMEDIES FOR BREACH. If the Board of Directors or a committee
thereof shall at any time determine in good faith that a Transfer or other
event has taken place in violation of Section 11.1 of this Article or that a
Person intends to acquire or has attempted to acquire Beneficial Ownership of
any shares of Class B Preferred Stock in violation of Section 11.1 of this
Article (whether or not such violation is intended), the Board of Directors
or a committee thereof shall be empowered to take any action as it deems
advisable to refuse to give effect to or to prevent such Transfer or other
event, including, but not limited to, refusing to give effect to such
Transfer or other event on the books of the Corporation, causing the
Corporation to redeem such shares at the then current Market Price and upon
such terms and conditions as may be specified by the Board of Directors in
its sole discretion (including, but not limited to, by means of the issuance
of long-term indebtedness for the purpose of such redemption), demanding the
repayment of any distributions received in respect of shares of Class B
Preferred Stock acquired in violation of Section 11.1 of this Article or
instituting proceedings to enjoin such Transfer or to rescind such Transfer
or attempted Transfer; PROVIDED, HOWEVER, that any Transfers or attempted
Transfers (or in the case of events other than a Transfer, Beneficial
Ownership) in violation of Section 11.1 of this Article, regardless of any
action (or non-action) by the Board of Directors or such committee, (a) shall
be void AB INITIO or (b) shall automatically result in the transfer described
in Section 11.3 of this Article; PROVIDED, FURTHER, that the provisions of
this Section 11.2 shall be subject to the provisions of Section 11.12 of this
Article; PROVIDED, FURTHER, that neither the Board of Directors nor any
committee thereof may exercise such authority in a manner that interferes
with any ownership or transfer of Class B Preferred Stock that is expressly
authorized pursuant to Section 11.8(d) of this Article.
<PAGE>
11.3. TRANSFER IN TRUST.
(A) ESTABLISHMENT OF TRUST. If, notwithstanding the other
provisions contained in this Article, at any time after the Issue Date there
is a purported Transfer (an "EXCESS TRANSFER") (whether or not such Transfer
is the result of transactions entered into through the facilities of the NYSE
or other securities exchange or an automated inter-dealer quotation system)
or other change in the capital structure of the Corporation (including, but
not limited to, any redemption of Preferred Stock) or other event (including,
but not limited to, any acquisition of any share of Equity Stock) such that
(a) any Person (other than the Initial Holder or a Look-Through Entity) would
Beneficially Own shares of Class B Preferred Stock in excess of the Ownership
Limit, or (b) the Initial Holder would Beneficially Own shares of Class B
Preferred Stock in excess of the Initial Holder Limit, or (c) any Person that
is a Look-Through Entity would Beneficially Own shares of Class B Preferred
Stock in excess of the Look-Through Ownership Limit (in any such event, the
Person, Initial Holder or Look-Through Entity that would Beneficially Own
shares of Class B Preferred Stock in excess of the Ownership Limit, the
Initial Holder Limit or the Look-Through Entity Limit, respectively, is
referred to as a "PROHIBITED TRANSFEREE"), then, except as otherwise provided
in Section 11.8 of this Article, such shares of Class B Preferred Stock in
excess of the Ownership Limit, the Initial Holder Limit or the Look-Through
Ownership Limit, as the case may be, (rounded up to the nearest whole share)
shall be automatically transferred to a Trustee in his capacity as trustee of
a Trust for the exclusive benefit of one or more Charitable Beneficiaries.
Such transfer to the Trustee shall be deemed to be effective as of the close
of business on the business day prior to the Excess Transfer, change in
capital structure or another event giving rise to a potential violation of
the Ownership Limit, the Initial Holder Limit or the Look Through Entity
Ownership Limit.
(B) APPOINTMENT OF TRUSTEE. The Trustee shall be appointed by the
Corporation and shall be a Person unaffiliated with either the Corporation or
any Prohibited Transferee. The Trustee may be an individual or a bank or
trust company duly licensed to conduct a trust business.
(C) STATUS OF SHARES HELD BY THE TRUSTEE. Shares of Class B
Preferred Stock held by the Trustee shall be issued and outstanding shares of
capital stock of the Corporation. Except to the extent provided in Section
11.3(E), the Prohibited Transferee shall have no rights in the Class B
Preferred Stock held by the Trustee, and the Prohibited Transferee shall not
benefit economically from ownership of any shares held in trust by the
Trustee, shall have no rights to dividends and shall not possess any rights
to vote or other rights attributable to the shares held in the Trust.
(D) DIVIDEND AND VOTING RIGHTS. The Trustee shall have all voting
rights and rights to dividends with respect to shares of Class B Preferred
Stock held in the Trust, which rights shall be exercised for the benefit of
the Charitable Beneficiary. Any dividend or distribution paid prior to the
discovery by the Corporation that the shares of Class B Preferred Stock have
been transferred to the Trustee shall be repaid to the Corporation upon
demand, and any dividend or distribution declared but unpaid shall be
rescinded as void AB INITIO with respect to such shares of Class B Preferred
Stock. Any dividends or distributions so disgorged or rescinded shall be
paid over to the Trustee and held in trust for the Charitable Beneficiary.
Any vote cast by a Prohibited Transferee prior to the discovery by the
Corporation that the shares of Class B Preferred Stock have been transferred
to the Trustee will be rescinded as void AB INITIO and shall be recast in
accordance with the desires of the Trustee acting for the benefit of the
Charitable Beneficiary. The owner of the shares at the time of the Excess
Transfer, change in capital structure or other event giving rise to a
potential violation of the Ownership Limit, Initial Holder Limit or
Look-Through Entity Ownership Limit shall be deemed to have given an
irrevocable proxy to the Trustee to vote the shares of Class B Preferred
Stock for the benefit of the Charitable Beneficiary.
(E) RESTRICTIONS ON TRANSFER. The Trustee of the Trust may sell
the shares held in the Trust to a person, designated by the Trustee, whose
ownership of the shares will not violate the Ownership Restrictions. If such
a sale is made, the interest of the Charitable Beneficiary shall terminate
and proceeds of the sale shall be payable to the Prohibited Transferee and to
the Charitable Beneficiary as provided in this Section 11.3(E). The
Prohibited Transferee shall receive the lesser of (1) the price paid by the
Prohibited Transferee for the shares or, if the Prohibited Transferee did not
give value for the shares (through a gift, devise or other transaction), the
Market Price of the shares on the day of the event causing the shares to be
held in the Trust and (2) the price per share received by the Trustee from
the sale or other disposition of the shares held in the Trust. Any proceeds
in excess of the amount payable to the Prohibited Transferee shall be payable
to the Charitable Beneficiary. If any of the transfer
<PAGE>
restrictions set forth in this Section 11.3(E) or any application thereof is
determined in a final judgment to be void, invalid or unenforceable by any
court having jurisdiction over the issue, the Prohibited Transferee may be
deemed, at the option of the Corporation, to have acted as the agent of the
Corporation in acquiring the Class B Preferred Stock as to which such
restrictions would, by their terms, apply, and to hold such Class B Preferred
Stock on behalf of the Corporation.
(F) PURCHASE RIGHT IN STOCK TRANSFERRED TO THE TRUSTEE. Shares of
Class B Preferred Stock transferred to the Trustee shall be deemed to have
been offered for sale to the Corporation, or its designee, at a price per
share equal to the lesser of (i) the price per share in the transaction that
resulted in such transfer to the Trust (or, in the case of a devise or gift,
the Market Price at the time of such devise or gift) and (ii) the Market
Price on the date the Corporation, or its designee, accepts such offer. The
Corporation shall have the right to accept such offer for a period of 90 days
after the later of (i) the date of the Excess Transfer or other event
resulting in a transfer to the Trust and (ii) the date that the Board of
Directors determines in good faith that an Excess Transfer or other event
occurred.
(G) DESIGNATION OF CHARITABLE BENEFICIARIES. By written notice to
the Trustee, the Corporation shall designate one or more nonprofit
organizations to be the Charitable Beneficiary of the interest in the Trust
relating to such Prohibited Transferee if (i) the shares of Class B Preferred
Stock held in the Trust would not violate the Ownership Restrictions in the
hands of such Charitable Beneficiary and (ii) each Charitable Beneficiary is
an organization described in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3)
of the Code.
11.4 NOTICE OF RESTRICTED TRANSFER. Any Person that acquires or
attempts to acquire shares of Class B Preferred Stock in violation of Section
11.1 of this Article, or any Person that is a Prohibited Transferee such that
stock is transferred to the Trustee under Section 11.3 of this Article, shall
immediately give written notice to the Corporation of such event and shall
provide to the Corporation such other information as the Corporation may
request in order to determine the effect, if any, of such Transfer or
attempted Transfer or other event on the Corporation's status as a REIT.
Failure to give such notice shall not limit the rights and remedies of the
Board of Directors provided herein in any way.
11.5 OWNERS REQUIRED TO PROVIDE INFORMATION. From and after the Issue
Date certain record and Beneficial Owners and transferees of shares of Class
B Preferred Stock will be required to provide certain information as set out
below.
(A) ANNUAL DISCLOSURE. Every record and Beneficial Owner of more
than 5% (or such other percentage between 0.5% and 5%, as provided in the
applicable regulations adopted under the Code) of the number of Outstanding
shares of Class B Preferred Stock shall, within 30 days after January 1 of
each year, give written notice to the Corporation stating the name and
address of such record or Beneficial Owner, the number of shares of Class B
Preferred Stock Beneficially Owned, and a full description of how such shares
are held. Each such record or Beneficial Owner of Class B Preferred Stock
shall, upon demand by the Corporation, disclose to the Corporation in writing
such additional information with respect to the Beneficial Ownership of the
Class B Preferred Stock as the Board of Directors, in its sole discretion,
deems appropriate or necessary to (i) comply with the provisions of the Code
regarding the qualification of the Corporation as a REIT under the Code and
(ii) ensure compliance with the Ownership Limit, the Initial Holder Limit or
the Look-Through Ownership Limit, as applicable. Each stockholder of record,
including without limitation any Person that holds shares of Class B
Preferred Stock on behalf of a Beneficial Owner, shall take all reasonable
steps to obtain the written notice described in this Section 11.5 from the
Beneficial Owner.
(B) DISCLOSURE AT THE REQUEST OF THE CORPORATION. Any Person that
is a Beneficial Owner of shares of Class B Preferred Stock and any Person
(including the stockholder of record) that is holding shares of Class B
Preferred Stock for a Beneficial Owner, and any proposed transferee of
shares, shall provide such information as the Corporation, in its sole
discretion, may request in order to determine the Corporation's status as a
REIT, to comply with the requirements of any taxing authority or other
governmental agency, to determine any such compliance or to ensure compliance
with the Ownership Limit, the Initial Holder Limit and the Look-Through
Ownership Limit, and shall provide a statement or affidavit to the
Corporation setting forth the number of shares of Class B Preferred Stock
already Beneficially Owned by such stockholder or proposed transferee and any
related
<PAGE>
persons specified, which statement or affidavit shall be in the form
prescribed by the Corporation for that purpose.
11.6 REMEDIES NOT LIMITED. Nothing contained in this Article shall
limit the authority of the Board of Directors to take such other action as it
deems necessary or advisable (subject to the provisions of Section 11.12 of
this Article) (i) to protect the Corporation and the interests of its
stockholders in the preservation of the Corporation's status as a REIT and
(ii) to insure compliance with the Ownership Limit, the Initial Holder Limit
and the Look-Through Ownership Limit.
11.7 AMBIGUITY. In the case of an ambiguity in the application of any
of the provisions of Section 11 of this Article, or in the case of an
ambiguity in any definition contained in Section 11 of this Article, the
Board of Directors shall have the power to determine the application of the
provisions of this Article with respect to any situation based on its
reasonable belief, understanding or knowledge of the circumstances.
11.8 EXCEPTIONS. The following exceptions shall apply or may be
established with respect to the limitations of Section 11.1 of this Article.
(A) WAIVER OF OWNERSHIP LIMIT. The Board of Directors, upon
receipt of a ruling from the Internal Revenue Service or an opinion of tax
counsel or other evidence or undertaking acceptable to it, may waive the
application, in whole or in part, of the Ownership Limit to a Person subject
to the Ownership Limit, if such person is not an individual for purposes of
Section 542(a) of the Code and is a corporation, partnership, estate or
trust. In connection with any such exemption, the Board of Directors may
require such representations and undertakings from such Person and may impose
such other conditions as the Board deems necessary, in its sole discretion,
to determine the effect, if any, of the proposed Transfer on the
Corporation's status as a REIT.
(B) PLEDGE BY INITIAL HOLDER. Notwithstanding any other provision
of this Article, the pledge by the Initial Holder of all or any portion of
the Class B Preferred Stock directly owned at any time or from time to time
shall not constitute a violation of Section 11.1 of this Article and the
pledgee shall not be subject to the Ownership Limit with respect to the Class
B Preferred Stock so pledged to it either as a result of the pledge or upon
foreclosure.
(C) UNDERWRITERS. For a period of 270 days following the purchase
of Class B Preferred Stock by an underwriter that (i) is a corporation or a
partnership and (ii) participates in an offering of the Class B Preferred
Stock, such underwriter shall not be subject to the Ownership Limit with
respect to the Class B Preferred Stock purchased by it as a part of or in
connection with such offering and with respect to any Class B Preferred Stock
purchased in connection with market making activities.
11.9 LEGEND. Each certificate for Class B Preferred Stock shall bear
the following legend:
"The shares of Class B Preferred Stock represented by this
certificate are subject to restrictions on transfer. No person may
Beneficially Own shares of Class B Preferred Stock in excess of the
Ownership Restrictions, as applicable, with certain further
restrictions and exceptions set forth in the Corporation's Charter
(including the Articles Supplementary setting forth the terms of the
Class B Preferred Stock). Any Person that attempts to Beneficially
Own shares of Class B Preferred Stock in excess of the applicable
limitation must immediately notify the Corporation. All capitalized
terms in this legend have the meanings ascribed to such terms in the
Corporation's Charter (including the Articles Supplementary setting
forth the terms of the Class B Preferred Stock), as the same may be
amended from time to time, a copy of which, including the restrictions
on transfer, will be sent without charge to each stockholder that so
requests. If the restrictions on transfer are violated, the shares of
Class B Preferred Stock represented hereby will be either (i) void in
accordance with the Certificate or (ii) automatically transferred to a
Trustee of a Trust for the benefit of one or more Charitable
Beneficiaries."
11.10 SEVERABILITY. If any provision of this Article or any application
of any such provision is determined in a final and unappealable judgment to be
void, invalid or unenforceable by any Federal or state court having jurisdiction
over the issues, the validity and enforceability of the remaining provisions
shall not be affected and other
<PAGE>
applications of such provision shall be affected only to the extent necessary
to comply with the determination of such court.
11.11 BOARD OF DIRECTORS DISCRETION. Anything in this Article to the
contrary notwithstanding, the Board of Directors shall be entitled to take or
omit to take such actions as it in its discretion shall determine to be
advisable in order that the Corporation maintain its status as and continue
to qualify as a REIT, including, but not limited to, reducing the Ownership
Limit, the Initial Holder Limit and the Look-Through Ownership Limit in the
event of a change in law.
11.12 SETTLEMENT. Nothing in this Section 11 of this Article shall be
interpreted to preclude the settlement of any transaction entered into
through the facilities of the NYSE or other securities exchange or an
automated inter-dealer quotation system.
* * * * * *
SECOND: The Board of Directors of the Corporation at a meeting or by a
unanimous consent in writing in lieu of a meeting under Section 2-408 of the
Maryland General Corporation Law, as of October 23, 1997, adopted a
resolution that set forth and approved the foregoing restatement of the
Charter.
THIRD: The Charter of the Corporation is not amended by these Articles
of Restatement; PROVIDED, HOWEVER, consistent with Section 2-608(b)(7) of the
Maryland General Corporation Law, the current number and names of directors
are provided in Section 2 of Article VI of the restated Charter of the
Corporation.
FOURTH: References to "these Articles of Amendment and Restatement" have
been retained in Section 4 of Article IV, in Section 4, Section 5, and
Section 7 of Article VI, and in Article VIII of the restated Charter and to
"these Articles Supplementary" have been retained in Section 1 of Article XII
of the restated Charter to conform to the original text of the provisions.
In the context of these Articles of Restatement the term "these Articles of
Amendment and Restatement" should be read as "the Charter" and the term
"these Articles Supplementary" should be read as "this Article".
FIFTH: The sentence "Upon the filing of these Articles of Amendment,
there shall be authorized 750,000 shares and issued and outstanding 650,000
shares of the Class B Common Stock" has been retained in Section 8 of Article
XII of the restated Charter to conform to the original text of the provision.
In the context of these Articles of Restatement the sentence is not
necessary.
SIXTH: The number of shares of Class B Common Stock shown as "750,000"
has been retained in Section 1.1 of Article IV of the restated Charter to
conform to the original text of the provision. As of August 11, 1997 a total
of 325,000 shares of Class B Common Stock have been converted which causes
the number of authorized shares of Class B Common Stock to be reduced from
750,000 shares to 425,000 shares as provided in Sections 6(a) and 8 of
Article XII of the restated Charter.
SEVENTH: The number of shares of Preferred Stock shown as "10,000,000"
has been retained in Section 1.1 of Article IV of the restated Charter to
conform to the original text of the provision. As of August 4, 1997 a total
of 750,000 shares of Preferred Stock were reclassified as Class B Cumulative
Convertible Preferred Stock, par value $.01 per share (the "Class B Preferred
Stock"), which causes the number of authorized shares of Preferred Stock to
be reduced from 10,000,000 shares to 9,250,000 shares and the number of
authorized shares of Class B Preferred Stock to be increased from zero shares
to 750,000 shares as provided in Sections 1 Article XIII of the restated
Charter.
<PAGE>
IN WITNESS WHEREOF, APARTMENT INVESTMENT AND MANAGEMENT COMPANY has
caused these presents to be signed in its name and on its behalf by its
President and witnessed by its Secretary on November 7, 1997.
WITNESS: APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
/s/ LEEANN MOREIN By: /s/ PETER K. KOMPANIEZ
Leeann Morein, Secretary Peter K. Kompaniez, President
THE UNDERSIGNED, President of APARTMENT INVESTMENT AND MANAGEMENT
COMPANY, who executed on behalf of the Corporation the foregoing Articles of
Restatement of which this certificate is made a part, hereby acknowledges in
the name and on behalf of said Corporation the foregoing Articles of
Restatement to be the corporate act of said Corporation and hereby certifies
that to the best of his knowledge, information, and belief the matters and
facts set forth therein with respect to the authorization and approval
thereof are true in all material respects under the penalties of perjury.
/s/ PETER K. KOMPANIEZ
Peter K. Kompaniez, President
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I OFFICES . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Registered Office . . . . . . . . . . . . . . . . . . . 1
Section 2. Other Offices . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II STOCK . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Certificates Representing Stock. . . . . . . . . . . . 1
Section 2. Fractional Share Interests or Scrip. . . . . . . . . . 2
Section 3. Share Transfers. . . . . . . . . . . . . . . . . . . . 2
Section 4. Record Date for Stockholders. . . . . . . . . . . . . . 3
Section 5. Meaning of Certain Terms. . . . . . . . . . . . . . . . 3
ARTICLE III STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . 4
Section 1. Stockholder Meetings. . . . . . . . . . . . . . . . . . 4
Section 2. Informal Action. . . . . . . . . . . . . . . . . . . . 7
ARTICLE IV BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . 7
Section 1. Functions and Definition. . . . . . . . . . . . . . . . 7
Section 2. Qualifications and Number. . . . . . . . . . . . . . . 8
Section 3. Election and Term. . . . . . . . . . . . . . . . . . . 8
Section 4. Meetings. . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 5. Removal of Directors. . . . . . . . . . . . . . . . . . . 9
Section 6. Committees. . . . . . . . . . . . . . . . . . . . . . . 10
Section 7. Informal Action. . . . . . . . . . . . . . . . . . . . 10
ARTICLE V OFFICERS . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1. Officers. . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2. Election of Officers. . . . . . . . . . . . . . . . . . 10
Section 3. Subordinate Officers. . . . . . . . . . . . . . . . . . 11
Section 4. Compensation of Officers. . . . . . . . . . . . . . . . 11
Section 5. Term of Office; Removal and Vacancies. . . . . . . . . 11
Section 6. Chairman of the Board. . . . . . . . . . . . . . . . . 11
i
<PAGE>
Section 7. Vice Chairman of the Board. . . . . . . . . . . . . . . 11
Section 8. President. . . . . . . . . . . . . . . . . . . . . . . 11
Section 9. Vice President. . . . . . . . . . . . . . . . . . . . . 12
Section 10. Secretary. . . . . . . . . . . . . . . . . . . . . . . 12
Section 11. Assistant Secretaries. . . . . . . . . . . . . . . . . 12
Section 12. Treasurer. . . . . . . . . . . . . . . . . . . . . . . 12
Section 13. Assistant Treasurer. . . . . . . . . . . . . . . . . . 13
ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER
AGENTS . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VII STOCK LEDGER . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VIII GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . 14
Section 1. Dividends. . . . . . . . . . . . . . . . . . . . . . . 14
Section 2. Payment of Dividends. . . . . . . . . . . . . . . . . . 14
Section 3. Checks. . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4. Fiscal Year. . . . . . . . . . . . . . . . . . . . . . 14
Section 5. Corporate Seal. . . . . . . . . . . . . . . . . . . . . 14
Section 6. Manner of Giving Notice. . . . . . . . . . . . . . . . 15
Section 7. Waiver of Notice. . . . . . . . . . . . . . . . . . . . 15
Section 8. Annual Statement. . . . . . . . . . . . . . . . . . . . 15
Section 9. Record Keeping. . . . . . . . . . . . . . . . . . . . . 15
ARTICLE IX AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . 15
ii
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE. The address of the initial
principal office of the corporation in the State of Maryland and the name and
the address of the initial resident agent of the corporation in the State of
Maryland are set forth in the Articles of Incorporation.
Section 2. OTHER OFFICES. The corporation may also have
offices at such other places both within and without the State of Maryland as
the Board of Directors may from time to time determine or the business of the
corporation may require.
ARTICLE II
STOCK
Section 1. CERTIFICATES REPRESENTING STOCK. Certificates
representing shares of stock shall set forth thereon the statements
prescribed by Section 2-211 of the Maryland General Corporation Law and by
any other applicable provision of law and shall be signed by the President or
the Chairman of the Board, if any, or a Vice-President and countersigned by
the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer and may be sealed with the corporate seal or a facsimile of it or
in any other form. The signatures of any such officers may be either manual
or facsimile signatures. In case any such officer who has signed manually or
by facsimile any such certificate ceases to be such officer before the
certificate is issued, it may nevertheless be issued by the corporation with
the same effect as if the officer had not ceased to be such officer as of the
date of its issue.
No certificate representing shares of stock shall be issued for any
share of stock until such share is fully paid, except as otherwise authorized
by the provisions of Section 2-210 of the Maryland General Corporation Law.
1
<PAGE>
The corporation may issue a new certificate of stock in place of
any certificate theretofore issued by it, alleged to have been lost, stolen,
or destroyed, and the Board of Directors may, in its discretion, require the
owner of any such certificate to give bond, with sufficient surety, to the
corporation to indemnify it against any loss or claim that may arise by
reason of the issuance of a new certificate.
Upon compliance with the provisions of Section 2-514 of the
Maryland General Corporation Law, the Board of Directors of the corporation
may adopt by resolution a procedure by which a stockholder of the corporation
may certify in writing to the corporation that any shares registered in the
name of the stockholder are held for the account of a specified person other
than the stockholder.
Section 2. FRACTIONAL SHARE INTERESTS OR SCRIP. The
corporation may, but shall not be obliged to, issue fractional shares of
stock, eliminate a fractional interest by rounding off to a full share of
stock, arrange for the disposition of a fractional interest by the person
entitled to it, pay cash for the fair value of a fractional share of stock
determined as of the time when the person entitled to receive it is
determined, or issue scrip or other evidence of ownership which shall entitle
its holder to exchange such scrip or other evidence of ownership aggregating
a full share for a certificate which represents the share; but such scrip or
other evidence of ownership shall not, unless otherwise provided, entitle the
holder to exercise any voting right, or to receive dividends thereon or to
participate in any of the assets of the corporation in the event of
liquidation. The Board of Directors may impose any reasonable condition on
the issuance of scrip or other evidence of ownership, and may cause such
scrip or evidence of ownership to be issued subject to the condition that it
shall become void if not exchanged for a certificate representing a full
share of stock before a specified date or subject to the condition that the
shares for which such scrip or evidence of ownership is exchangeable may be
sold by the corporation and the proceeds thereof distributed to the holders
of such scrip or evidence of ownership, or subject to a provision for
forfeiture of such proceeds to the corporation if not claimed within a period
of not less than three years from the date the scrip or other evidence of
ownership was originally issued.
Section 3. SHARE TRANSFERS. Upon compliance with provisions
restricting the transferability of shares of stock, if any, transfers of
shares of stock of the corporation shall be made only on the stock transfer
books of the corporation by the record holder thereof, or by his attorney
thereunto authorized by power of attorney duly executed and filed with the
Secretary of the corporation or with a transfer agent or a registrar, if any,
and on surrender of the certificate or certificates
2
<PAGE>
for such shares of stock properly endorsed and the payment of all taxes due
thereon, if any.
Section 4. RECORD DATE FOR STOCKHOLDERS. The Board of
Directors may set a record date or direct that the stock transfer books be
closed for a stated period for the purpose of making any proper determination
with respect to stockholders, including which stockholders are entitled to
notice of a meeting, to vote at a meeting, to receive a dividend, or to be
allotted other rights; provided, that, except as may be otherwise provided
herein, any such record date may not be prior to the close of business on the
day the record date is fixed, shall be not more than ninety days before the
date on which the action requiring the determination will be taken, that any
such closing of the transfer books may not be for a period longer than twenty
days, and that, in the case of a meeting of stockholders, any such record
date or any such closing of the transfer books shall be at least ten days
before the date of the meeting. If a record date is not set, and, if the
stock transfer books are not closed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders
shall be the later of either the close of business on the day on which notice
of the meeting is mailed or the thirtieth day before the meeting, and the
record date for determining stockholders entitled to receive payment or a
dividend or an allotment of any rights shall be the close of business on the
date on which the resolution of the Board of Directors declaring the dividend
or allotment of rights is adopted, by any such payment of a dividend or
allotment of rights shall not be made more than sixty days after the date on
which the resolution is adopted; and a meeting of stockholders convened on
the date for which it was called may be adjourned from time to time without
further notice to a date not more than one hundred and twenty days after the
original record date.
Section 5. MEANING OF CERTAIN TERMS. As used herein in respect
of the right to notice of a meeting of stockholders or a waiver thereof or to
participate or vote thereat or to consent or dissent in writing in lieu of a
meeting, as the case may be, the term "share of stock" or "shares of stock"
or "stockholder" or "stockholders" refers to an outstanding share or shares
of stock and to a holder or holders of record of outstanding shares of stock
when the corporation is authorized to issue only one class of shares of
stock. Said reference is also intended to include any outstanding share or
shares of stock and any holder or holders of record of outstanding shares of
stock of any class or series upon which or upon whom the Articles of
Incorporation confer such rights where there are two or more classes or
series of shares or upon which or upon whom the provisions of the Maryland
General Corporation Law may confer such rights or the right of dissent
notwithstanding that the Articles of Incorporation may provide for more than
one class or
3
<PAGE>
series of shares of stock, one or more of which are limited or denied such
rights thereunder.
ARTICLE III
STOCKHOLDERS
Section 1. STOCKHOLDER MEETINGS.
(a) TIME.
(i) ANNUAL MEETINGS. The corporation shall hold an
annual meeting of its stockholders to elect directors and transact any other
business within its powers, either at 9:00 a.m. on the second Tuesday of May
in each year if not a legal holiday, or at such other time or such other day
falling on or before the 30th day thereafter as shall be set by the Board of
Directors.
(ii) SPECIAL MEETINGS. At any time in the interval
between annual meetings, a special meeting of the stockholders may be called
by the Chairman of the Board or the Vice-Chairman of the Board or the
President or by a majority of the Board of Directors by vote at a meeting or
in writing (addressed to the Secretary of the corporation) with or without a
meeting. Special meetings of the stockholders shall be called as may be
required by law.
(b) PLACE. Annual meetings and special meetings shall be
held at such place, either within the State of Maryland or at such other
place within the United States, as the directors may, from time to time, set.
Whenever the directors shall fail to set such place, or, whenever
stockholders entitled to call a special meeting shall call the same, and a
place of meeting is not set, the meeting shall be held at the principal
office of the corporation in the State of Maryland.
(c) CALL. Annual meetings may be called by the directors
or the President or by any officer instructed by the directors or the
President to call the meeting. Except as may be otherwise provided by the
provisions of the Maryland General Corporation Law, special meetings may be
called in like manner. Special meetings shall also be called by the Secretary
whenever the holders of shares entitled to at least twenty-five percent of
all the votes entitled to be cast at such meeting shall make a written
request that such meeting be called.
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(d) NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER OF NOTICE.
Written notice of all meetings shall be given by the Secretary and shall
state the time and place of the meeting. The notice of an annual meeting
shall state that the meeting is called for the election of directors and for
the transaction of other business which may properly come before the meeting,
and shall (if any other action which could be taken at a special meeting is
to be taken at such annual meeting) contain any additional statements
required in a notice of a special meeting, and shall include a copy of any
requisite statements or provisions prescribed by the provisions of the
Maryland General Corporation Law; provided, however, that any business of the
corporation may be transacted at any annual meeting without being specially
noticed unless the provisions of the Maryland General Corporation Law provide
otherwise. The notice of a special meeting shall in all instances state the
purpose or purposes for which the meeting is called and shall include a copy
of any requisite statements or provisions prescribed by the provisions of the
Maryland General Corporation Law. Written notice of any meeting shall be
given to each stockholder either by mail at the address as it appears on the
records of the corporation or by personal delivery to such stockholder or by
leaving such notice at his residence or usual place of business not less than
ten days and not more than ninety days before the date of the meeting, unless
any provision of the Maryland General Corporation Law shall prescribe a
different period of time. If mailed, notice shall be deemed to be given when
deposited in the United States mail addressed to the stockholder at his
address as it appears on the records of the corporation with postage thereon
prepaid. Whenever any notice of the time, place or purpose of any meeting of
stockholders is required to be given under the provisions of the Articles of
Incorporation, these Bylaws or of the provisions of the Maryland General
Corporation Law, such notice may be waived by a writing signed by the
stockholder and filed with records of the meeting, whether before or after
the holding thereof, or by his presence in person or by proxy at the meeting.
The foregoing requirements of notice shall also apply, whenever the
corporation shall have any class of stock which is not entitled to vote, to
holders of stock who are not entitled to vote at the meeting, but who are
entitled to notice thereof and to dissent from any action taken thereat.
(e) STATEMENT OF AFFAIRS. The President of the
corporation, or, if the Board of Directors shall determine otherwise, some
other executive officer thereof, shall prepare or cause to be prepared
annually a full and correct statement of the affairs of the corporation,
including a balance sheet and a financial statement of operations for the
preceding fiscal year, which shall be submitted at the Annual Meeting and
placed on file within twenty days thereafter at the principal office of the
corporation in the State of Maryland.
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(f) CONDUCT OF MEETINGS. Meetings of the stockholders
shall be presided over by one of the following officers in the order of
seniority and if present and acting: the Chairman of the Board, if any, the
Vice-Chairman of the Board, if any, the President, a Vice-President, or, if
none of the foregoing is in office and present and acting, by a chairman to
be chosen by the stockholders. The Secretary of the corporation, or in his
absence, an Assistant Secretary, shall act as secretary of every meeting, but
if neither the Secretary nor an Assistant Secretary is present the Chairman
of the meeting shall appoint a secretary of the meeting.
(g) ADJOURNMENT. Whether or not a quorum is present, a
meeting of stockholders convened on the date for which it was called may be
adjourned from time to time without further notice by the Chairman of the
meeting, or by a majority vote of the stockholders present in person or by
proxy, to a date not more than 120 days after the original record date. Any
business which might have been transacted at the meeting as originally
notified may be deferred and transacted at any such adjourned meeting at
which a quorum shall be present.
(h) PROXY REPRESENTATION. Every stockholder may authorize
another person or persons to act for him by proxy in all matters in which a
stockholder is entitled to participate, whether for the purposes of
determining his presence at a meeting, or whether by waiving notice of any
meeting, voting or participating at a meeting, or expressing consent or
dissent without a meeting, or otherwise. Every proxy shall be executed in
writing by the stockholder or by his duly authorized attorney in fact, and
filed with the Secretary of the corporation. No proxy shall be valid more
than eleven months from the date of its execution, unless the proxy provides
otherwise.
(i) INSPECTORS OF ELECTION. The directors, in advance of
any meeting, may, but need not, appoint one or more inspectors to act at the
meeting or any adjournment thereof. If an inspector or inspectors are not
appointed, the person presiding at the meeting may, but need not, appoint one
or more inspectors. In case any person who may be appointed as an inspector
fails to appear or act, the vacancy may be filled by appointment made by the
directors in advance of the meeting or at the meeting, by the person
presiding thereat. Each inspector, if any, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute
the duties of inspector at such meeting with strict impartiality and
according to the best of his ability. The inspectors, if any, shall
determine the number of shares outstanding and the voting power of each, the
shares presented at the meeting, the existing of a quorum, the validity and
effect of proxies,
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and shall receive votes, ballots or consents, hear and determine all
challenges and questions arising in connection with the right to vote, count
and tabulate all votes, ballots or consents, determine the result, and do
such acts as are proper to conduct the election or vote with fairness to all
stockholders. On request of the person presiding at the meeting or any
stockholder, the inspector or inspectors, if any, shall make a report in
writing of any challenge, question or matter determined by him or them and
execute a certificate of any fact found by him or them.
(j) QUORUM. Except as may otherwise be required by the
provisions of the Maryland General Corporation Law, the Articles of
Incorporation, or these Bylaws, the presence in person or by proxy at a
meeting of the stockholders entitled to cast at least a majority of the votes
entitled to be cast at the meeting shall constitute a quorum.
(k) VOTING. Each share of stock shall entitle the holder
thereof to one vote on each matter submitted to a vote at a meeting of
stockholders except in the election of directors, at which each share of
stock may be voted for as many individuals as there are directors to be
elected and for whose election the share is entitled to be voted may be cast
for as many persons as there are directors to be elected. Except as may
otherwise be provided in the provisions of the Maryland General Corporation
Law, the Articles of Incorporation or these Bylaws, a majority of all the
votes cast at a meeting of stockholders at which a quorum is present shall be
sufficient to approve any matter which may properly come before the meeting.
A plurality of all the votes cast at a meeting of stockholders at which a
quorum is present is sufficient to elect a director.
Section 2. INFORMAL ACTION. Any action required or permitted
to be taken at any meeting of stockholders may be taken without a meeting if
the following are filed with the records of the meeting: an unanimous written
consent which sets forth the action and is signed by each stockholder
entitled to vote on the matter, and, as applicable, a written waiver of any
right to dissent signed by each stockholder entitled to notice of the meeting
but not entitled to vote at it.
ARTICLE IV
BOARD OF DIRECTORS
Section 1. FUNCTIONS AND DEFINITION. The business and affairs
of the corporation shall be managed by or under the direction of its Board of
Directors. All powers of the corporation may be exercised by or under
authority of said Board
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of Directors. The use of the phrase "entire board" herein refers to the
total number of directors which the corporation would have if there were no
vacancies.
Section 2. QUALIFICATIONS AND NUMBER. Each director shall be a
natural person at least 18 years of age. A director need not be a
stockholder, a citizen of the United States, or a resident of the State of
Maryland. The initial Board of Directors shall consist of the persons set
forth in the Articles of Incorporation. Thereafter the number of directors
constituting the entire board shall consist of not less than three (3) nor
more than nine (9) persons who shall be chosen by the stockholders. Each
member of the Board of Directors shall serve for a period of one (1) year.
Section 3. ELECTION AND TERM. The first Board of Directors
shall consist of the directors named in the Articles of Incorporation and
shall hold office until the first annual meeting of stockholders or until
their successors have been elected and qualified. Thereafter, directors who
are elected at an annual meeting of stockholders, and directors who are
elected in the interim to fill vacancies and newly created directorships,
shall hold office until the next annual meeting of stockholders and until
their successors have been elected and qualified. In the interim between
annual meetings of stockholders or of special meetings of stockholders called
for the election of directors, newly created directorships and any vacancies
in the Board of Directors, including vacancies resulting from the removal of
directors by the stockholders which have not been filled by said
stockholders, may be filled by the Board of Directors. Newly created
directorships shall be filled by action of a majority of the entire Board of
Directors. All other vacancies to be filled by the Board of Directors may be
filled by a majority of the remaining members of the Board of Directors,
whether or not sufficient to constitute a quorum. A director elected by the
Board of Directors to fill a vacancy serves until the next annual meeting of
stockholders and until his successor is elected and qualified.
Section 4. MEETINGS.
(a) TIME. Meetings shall be held at such time as the Board
shall set, except that the first meeting of a newly elected Board shall be
held as soon after its election as the directors may conveniently assemble.
(b) PLACE. Meetings shall be held at such place within or
without the State of Maryland as shall be set by the Board.
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(c) CALL. No call shall be required for regular meetings
for which the time and place have been fixed. Special meetings may be called
by or at the direction of the Chairman of the Board, if any, of the
President, or of a majority of the directors in office.
(d) NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice
shall be required for regular meetings for which the time and place have been
fixed. Written, oral or any other mode of notice of the time and place shall
be given for special meetings in sufficient time for the convenient assembly
of the directors thereat. The notice of any meeting need not specify the
business to be transacted or the purpose of the meeting. Whenever any notice
of the time, place, or purpose of any meeting of directors or any committee
thereof is required to be given under the provisions of the Maryland General
Corporation Law or of these Bylaws, such notice may be waived by a writing
signed by the director or committee member entitled to such notice and filed
with the records of the meeting, whether before or after the meeting, or by
presence at the meeting.
(e) QUORUM AND ACTION. A majority of the entire Board of
Directors shall constitute a quorum except when a vacancy or vacancies
prevents such majority, whereupon a majority of the directors in office shall
constitute a quorum, provided such majority shall constitute at least
one-third of the entire Board and, in no event, less than two directors
(provided, that whenever the entire Board of Directors consists of one
director, that one director shall constitute a quorum). Except as in the
Articles of Incorporation and herein otherwise provided and, except as in
provisions of the Maryland General Corporation Law otherwise provided, the
action of a majority of the directors present at a meeting at which a quorum
is present shall be the action of the Board of Directors. Members of the
Board of Directors or of a committee thereof may participate in a meeting by
means of a conference telephone or similar communications equipment if all
persons participating in the meeting can hear each other at the same time;
and participation by such means shall constitute presence in person at a
meeting.
(f) CHAIRMAN OF THE MEETING. The Chairman of the Board, if
any and if present and acting, shall preside at all meetings. Otherwise, the
President, if present and acting, or any other director chosen by the Board,
shall preside.
Section 5. REMOVAL OF DIRECTORS. Any or all of the directors
may be removed, with or without cause by the affirmative vote of a majority
of all the votes entitled to be cast for the election of directors.
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Section 6. COMMITTEES. The Board of Directors may appoint
from among its members an Executive Committee and other committees composed
of two or more directors, and may delegate to such committee or committees
any of the powers of the Board of Directors except such powers as may not be
delegated under the provisions of the Maryland General Corporation Law. In
the absence of any member of any such committee, the members thereof present
at any meeting, whether or not they constitute a quorum, may appoint a member
of the Board of Directors to act in the place of such absent member.
Section 7. INFORMAL ACTION. Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if a written consent to
such action is signed by all members of the Board of Directors or any such
committee, as the case may be, and such written consent is filed with the
minutes of proceedings of the Board or any such committee.
ARTICLE V
OFFICERS
Section 1. OFFICERS. The corporation shall have a
President, a Secretary, and a Treasurer, and may have a Chairman of the
Board, a Vice-Chairman of the Board and one or more Vice-Presidents, who
shall be elected by the Board of Directors, and may also have any such other
officers, assistant officers, and agents as the Board of Directors shall
authorize from time to time, each of whom shall be elected or appointed in
the manner prescribed by the Board of Directors. Any two or more offices,
except those of President, Vice-Chairman and Vice-President, may be held by
the same person, but no person shall execute, acknowledge or verify any
instrument in more than one capacity, if such instrument is required by law
to be executed, acknowledged or verified by more than one officer. Unless
otherwise provided in the resolution of election or appointment, each officer
shall hold office until the meeting of the Board of Directors following the
next annual meeting of stockholders and until his successor has been elected
or appointed or qualified. The officers and agents of the corporation shall
have the authority and perform the duties in the management of the
corporation as determined by the resolution electing or appointing them.
Section 2. ELECTION OF OFFICERS. The Board of Directors,
at its first meeting after each annual meeting of stockholders, shall choose
the officers of the corporation.
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Section 3. SUBORDINATE OFFICERS. The Board of Directors
may appoint such other officers and agents as it shall deem necessary who
shall hold their offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by the Board.
Section 4. COMPENSATION OF OFFICERS. The salaries of all
officers and agents of the corporation shall be fixed by the Board of
Directors.
Section 5. TERM OF OFFICE; REMOVAL AND VACANCIES. The
officers of the corporation shall hold office until their successors are
chosen and qualify in their stead. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors whenever, in its judgment, the best
interests of the corporation will be served thereby. If the office of any
officer or officers becomes vacant for any reason, the vacancy shall be
filled by the Board of Directors.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the
Board shall be the Chief Executive Officer of the corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and affairs of the corporation. If
present, he shall preside at all meetings of the stockholders and at all
meetings of the Board of Directors. He shall be an ex-officio member of all
committees and shall have the general powers and duties of management usually
vested in the office of President and Chief Executive Officer of the
corporation, and shall have such other powers and duties as may be prescribed
by the Board of Directors or these Bylaws.
Section 7. VICE CHAIRMAN OF THE BOARD. The Vice Chairman
of the Board, if such an officer be elected, shall preside in the absence or
disability of the Chairman of the Board at all meetings of the stockholders
and at all meetings of the Board of Directors, and shall exercise and perform
such other powers and duties as may be from time to time assigned to him by
the Board of Directors or prescribed by these Bylaws.
Section 8. PRESIDENT. In the absence or disability of the
Chairman of the Board, the President shall perform all of the duties of the
Chief Executive Officer of the corporation, and when so acting shall have all
the powers of and be subject to all the restrictions upon the Chief Executive
Officer. The President shall have such other duties as from time to time may
be prescribed for him by the Board of Directors.
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Section 9. VICE PRESIDENT. In the absence or disability
of the President, the Vice Presidents in order of their rank as fixed by the
Board of Directors, or if not ranked, the Vice President designated by the
Board of Directors, shall perform all the duties of the President, and when
so acting shall have all the powers of and be subject to all the restrictions
upon the President. The Vice President shall have such other duties as from
time to time may be prescribed for them, respectively, by the Board of
Directors.
Section 10. SECRETARY. The Secretary shall attend all
sessions of the Board of Directors and all meetings of the stockholders and
record all votes and the minutes of all proceedings in a book to be kept for
that purpose; and shall perform like duties for the standing committees when
required by the Board of Directors. He shall give, or cause to be given,
notice of all meetings of the stockholders and of the Board of Directors, and
shall perform such other duties as may be prescribed by the Board of
Directors or these Bylaws. He shall keep in safe custody the seal of the
corporation, and when authorized by the Board, affix the same to any
instrument requiring it, and when so affixed it shall be attested by his
signature or by the signature of an Assistant Secretary. The Board of
Directors may give general authority to any other officer to affix the seal
of the corporation and to attest to the seal by his signature.
Section 11. ASSISTANT SECRETARIES. The Assistant
Secretary, or if there be more than one, the Assistant Secretaries in the
order determined by the Board of Directors, or if there be no such
determination, the Assistant Secretary designated by the Board of Directors,
shall, in the absence or disability of the Secretary, perform the duties and
exercise the powers of the Secretary and shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe.
Section 12. TREASURER. The Treasurer shall have the
custody of the corporate funds and securities and shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
corporation and shall deposit all moneys, and other valuable effects in the
name and to the credit of the corporation, in such depositories as may be
designated by the Board of Directors. He shall disburse the funds of the
corporation as may be ordered by the Board of Directors, taking proper
vouchers for such disbursements, and shall render to the Board of Directors,
at its regular meetings, or when the Board of Directors so requires, an
account of all his transactions as Treasurer and of the financial condition
of the corporation. If required by the Board of Directors, he shall give the
corporation a bond, in such sum and with such surety or sureties as shall be
satisfactory to the
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Board of Directors, for the faithful performance of the duties of his office
and for the restoration of the corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or
under his control belonging to the corporation.
Section 13. ASSISTANT TREASURER. The Assistant Treasurer,
of if there shall be more than one, the Assistant Treasurers in the order
determined by the Board of Directors, or if there be no such determination,
the Assistant Treasurer designated by the Board of Directors, shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
ARTICLE VI
INDEMNIFICATION OF
DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS
The corporation shall, to the maximum extent permitted by the
Maryland General Corporation Law indemnify each of its directors and officers
against expenses, judgments, fines, settlements and other amounts actually
and reasonably incurred in connection with any proceeding arising by reason
of the fact any such person is or was a director or officer of the
corporation and shall advance to such director or officer expenses incurred
in defending any such proceeding to the maximum extent permitted by such law.
For purposes of this Article VI, a "director" or "officer" of the
corporation includes any person who is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, or other enterprise, or was a
director or officer of a corporation which was a predecessor corporation of
the corporation or of another enterprise at the request of such predecessor
corporation. The Board of Directors may in its discretion provide by
resolution for such indemnification of, or advance of expenses to, other
agents of the corporation, and likewise may refuse to provide for such
indemnification or advance of expenses except to the extent such
indemnification is mandatory under the Maryland General Corporation Law.
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ARTICLE VII
STOCK LEDGER
The corporation shall maintain, at its principal office in the
State of Maryland or at a business office or an agency of the corporation an
original or duplicate stock ledger containing the name and address of each
stockholder and the number of shares of each class held by each stockholder.
Such stock ledger may be in written form or any other form capable of being
converted into written form within a reasonable time for visual inspection.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. DIVIDENDS. Dividends upon the capital stock of the
corporation, subject to the provisions of the Certificate of Incorporation,
if any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
Section 2. PAYMENT OF DIVIDENDS. Before payment of any
dividend there may be set aside out of any funds of the corporation available
for dividends such sum or sums as the directors from time to time, in their
absolute discretion, think proper as a reserve fund to meet contingencies, or
for equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the directors shall think conducive
to the interests of the corporation, and the directors may abolish any such
reserve.
Section 3. CHECKS. All checks or demands for money and notes
of the corporation shall be signed by such officer or officers as the Board
of Directors may from time to time designate.
Section 4. FISCAL YEAR. The fiscal year of the corporation
shall be fixed by resolution of the Board of Directors.
Section 5. CORPORATE SEAL. The corporate seal shall have
inscribed thereon the name of the corporation and shall be in such form and
contain such other words and/or figures as the Board of Directors shall
determine or the law require.
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Section 6. MANNER OF GIVING NOTICE. Whenever, under the
provisions of the statutes or of the Certificate of Incorporation or of these
Bylaws, notice is required to be given to any director or stockholder, it
shall not be construed to mean personal notice, but such notice may be given
in writing, by mail, addressed to such director or stockholder, at his
address as it appears on the records of the corporation, with postage thereon
prepaid, and such notice shall be deemed to be given at the time when the
same shall be deposited in the United States mail. Notice to directors may
also be given by telegram.
Section 7. WAIVER OF NOTICE. Whenever any notice is required
to be given under the provisions of the statutes or of the Certificate of
Incorporation or of these Bylaws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed to be equivalent.
Section 8. ANNUAL STATEMENT. The Board of Directors shall
present at each annual meeting, and at any special meeting of the
stockholders when called for by vote of the stockholders, a full and clear
statement of the business and condition of the corporation.
Section 9. RECORD KEEPING. The corporation shall keep at its
principal office in the State of Maryland the original or a certified copy of
the Bylaws, including all amendments thereto, and shall duly file thereat the
annual statements of affairs of the corporation.
ARTICLE IX
AMENDMENTS
These Bylaws may be altered, amended or repealed or new Bylaws may
be adopted by the stockholders or by the Board of Directors, when such power
is conferred upon the Board of Directors by the Articles of Incorporation, at
any regular meeting of the stockholders or of the Board of Directors or at
any special meeting of the stockholders or of the Board of Directors if
notice of such alteration, amendment, repeal or adoption of new Bylaws be
contained in the notice of such special meeting. If the power to adopt,
amend or repeal Bylaws is conferred upon the Board of Directors by the
Articles of Incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal Bylaws.
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I HEREBY CERTIFY that the foregoing is a full, true and correct
copy of the Amended and Restated Bylaws of Apartment Investment and
Management Company, a Maryland corporation, as in effect on the date hereof.
WITNESS my hand and seal of the corporation.
Date: October 23, 1997.
/s/ LEEANN MOREIN
------------------------
Leeann Morein, Secretary
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MULTIFAMILY NOTE
(Wickertree)
$4,231,700.00 As of October 31, 1997
FOR VALUE RECEIVED, AIMCO/WICKERTREE, L.P., a Delaware limited partnership,
having its principal place of business at 1873 S. Bellaire Street, 17th Floor,
Denver Colorado 80222 (hereinafter referred to as "Borrower"), promises to pay
to the order of GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation,
having its principal place of business at 650 Dresher Road, Horsham,
Pennsylvania 19055-8015 (hereinafter referred to as "Lender"), the principal sum
of FOUR MILLION TWO HUNDRED THIRTY-ONE THOUSAND SEVEN HUNDRED AND NO/100 DOLLARS
($4,231,700.00), with interest on the unpaid principal balance to be computed
from the date of this Multifamily Note (together with the Addendum to
Multifamily Note attached hereto and made a part hereof, the "Note") at
the Applicable Interest Rate (hereinafter defined), in lawful money of the
United States of America which shall at the time of payment be legal tender in
payment of all debts and dues, public and private.
1. PAYMENT OF PRINCIPAL AND INTEREST.
A. The principal and interest under this Note shall be payable at
the office of Lender as set forth above, Attn: Mr. Barry Moore, or at such other
place as Lender may from time to time designate in writing, in equal
consecutive monthly installments of $32,856.60 each, on the first day of
December, 1997, and on the first day of each calendar month thereafter up to and
including the first day of October, 2017 (or if such day is not a Business Day
(hereinafter defined) the next Business Day thereafter); and the balance of said
principal sum together with accrued and unpaid interest and any other amounts
due under this Note, the Instrument and the other Loan Documents (each as
hereinafter defined) shall be due and payable on the 1st day of November, 2017
(the "Maturity Date"). The term "Business Day" shall mean a day other than a
Saturday, a Sunday or any other day on which Lender is not open for business.
B. Interest on the principal sum of this Note shall accrue in
arrears and be calculated on the basis of a three hundred sixty (360) day year
composed of twelve (12) months of thirty (30) days each except that interest due
and payable for a period less than a full month shall be calculated by
multiplying the actual number of days elapsed in such period by a daily rate
based on said 360 day year. In computing the number of days during which
interest accrues, the day on which funds are initially advanced shall be
included regardless of the time of day such advance is made, and the day on
which funds are repaid shall be included unless repayment is credited prior to
close of business. Payments in federal funds immediately available in the place
designated for payment which are received by Lender prior to 2:00 p.m. local
time at said place of payment shall be credited prior to close of business,
while other payments may, at the option of Lender, not be credited until
immediately available to Lender in federal funds in the place designated for
payment prior to 2:00 p.m. local time at said place of payment on a day on which
Lender is open for business. On the date of the closing of the loan evidenced by
this Note, Borrower shall pay to Lender an interest payment equal to the product
of the number of days remaining in the month from the date on which the loan is
closed multiplied by the interest per diem. Payments under this Note shall be
applied first to the payment of interest and other costs and charges due in
connection with this Note or the Debt (as hereinafter defined), as Lender may
determine in its sole discretion, and the balance applied toward the reduction
of the principal sum in inverse order of maturity (but
<PAGE>
such application shall not reduce the amount of the fixed monthly installments
required to be paid pursuant to Section 1.A above). All amounts due under this
Note shall be payable without set off, counterclaim or any other deduction
whatsoever.
C. The term "Applicable Interest Rate" as used in this Note shall
mean a rate of 7.09% per annum.
2. DEFAULT.
A. If any sum payable under this Note is not paid within five (5)
calendar days after the date on which it is due, Borrower shall pay to Lender
upon demand an amount equal to the lesser of five percent (5%) of such unpaid
sum or the maximum amount permitted by applicable law to defray the expenses
incurred by Lender in handling and processing such delinquent payment and to
compensate Lender for the loss of the use of such delinquent payment and such
amount shall be secured by the Instrument and the other Loan Documents.
B. The entire outstanding principal sum of this Note, together with
all interest accrued and unpaid thereon and all other sums due under the
Instrument, the other Loan Documents and this Note (all such sums hereinafter
collectively referred to as the "Debt"), or any portion thereof, shall without
notice become immediately due and payable if (i) any payment required under this
Note or the Debt is not paid within five (5) calendar days after the date when
due; or (ii) any representation or warranty of Borrower or any Key Principal, or
any member, general partner, principal or beneficial owner of any of the
foregoing, made herein or in any guaranty, or in any certificate, report,
financial statement or other instrument or document furnished to Lender shall
have been false or misleading in any material respect when made; or (iii) except
for the specific defaults set forth in this Section B, any other default
hereunder or under any of the other Loan Documents by Borrower, which default is
not cured (a) in the case of any default which can be cured by the payment of a
sum of money, within ten (10) days after written notice from Lender to Borrower,
or (b) in the case of any other default, within thirty (30) days after written
notice from Lender to Borrower; provided that if such default cannot reasonably
be cured within such thirty (30) day period and Borrower shall have commenced to
cure such default within such thirty (30) day period and thereafter diligently
and expeditiously proceeds to cure the same, such thirty (30) day period shall
be extended for so long as it shall require Borrower in the exercise of due
diligence to cure such default, it being agreed that no such extension shall be
for a period in excess of one hundred twenty (120) days, unless, only in the
case of cures that require construction or remedial work, such cure cannot with
diligence be completed within such one hundred twenty (120 day period, in which
case such period shall be extended for an additional one hundred twenty (120)
days; or (iv) the Borrower breaches or fails to comply with (a) Paragraph J of
the Rider to Multifamily Instrument (the "Rider") as amended by Section D of the
Supplemental Rider to the Multifamily Instrument (the "Supplemental Rider"), or
(b) Paragraph F of the Rider as amended by Section H of the Supplemental Rider;
or (v) Borrower or any Key Principal shall make an assignment for the benefit of
creditors or if Borrower shall generally not be paying its debts as they become
due; or (vi) the Policies (defined in the Supplemental Rider to Multifamily
Instrument) are not kept in full force and effect, or; (vii) (a) Borrower or any
Key Principal shall commence any case, proceeding or other action (A) under any
existing or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, conservatorship or relief of debtors,
seeking to have an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other relief
with respect to it or its
2
<PAGE>
debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator
or other similar official for it or for all or any substantial part of its
assets, or the Borrower or any Key Principal shall make a general assignment for
the benefit of its creditors'; or (b) there shall be commenced against Borrower
or any Key Principal any case, proceeding or other action of a nature referred
to in clause (a) above which (A) results in the entry of an order for relief or
any such adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of ninety (90) days; or (c) there shall be commenced
against the Borrower or any Key Principal any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results in the
entry of any order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within ninety (90) days from the
entry thereof; or (d) the Borrower or any Key Principal shall take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence in,
any of the acts set forth in clause (a), (b), or (c) above; or (e) the Borrower
or any Key Principal shall generally not, or shall be unable to, or shall admit
in writing its inability to, pay its debts as they become due (hereinafter each
an "Event of Default"). Time is of the essence in this Note, the Instrument, and
the other Loan Documents. All of the terms, covenants and conditions contained
in the Instrument and the other Loan Documents are hereby made part of this Note
to the same extent and with the same force as if they were fully set forth
herein. In the event that Lender employs counsel to collect the Debt or to
protect or foreclose the security hereof, Borrower also agrees to pay on demand
all reasonable costs of collection incurred by Lender, including reasonable
attorneys' fees for the services of counsel whether or not suit be brought.
C. Borrower does hereby agree that upon the occurrence of an Event
of Default or upon the failure of Borrower to pay the Debt in full on the
Maturity Date, or upon the failure of Borrower to pay the Debt on the date
specified in any notice given pursuant to Section A of the attached Addendum to
Multifamily Note, Lender shall be entitled to receive and Borrower shall pay
interest on the entire unpaid principal sum at the Applicable Interest Rate plus
five percent (5%) (the "Default Rate"); provided, however, that in the event
Lender permits Borrower to cure such Event of Default after expiration of any
applicable notice or grace period, then the rate of interest on the unpaid
principal balance of this Note shall be the Applicable Interest Rate and shall
be computed at the Applicable Interest Rate from and after the date such Event
of Default is cured. The Default Rate shall be applicable from the occurrence of
the Event of Default until the earlier to occur of the actual receipt and
collection of the Debt or, if permitted by Lender, the date such Event of
Default is cured. This charge shall be added to the Debt, and shall be deemed
secured by the Instrument. This clause, however, shall not be construed as an
agreement or privilege to extend the date of the payment of the Debt, nor as a
waiver of any other right or remedy accruing to Lender by reason of the
occurrence of any Event of Default. In the event the Default Rate would
otherwise exceed the maximum rate permitted by applicable law, the Default Rate
shall be the maximum rate permitted by applicable law. Borrower agrees to an
effective rate of interest stated above plus any additional rate of interest
resulting from any other charges in the nature of interest to be paid by or on
behalf of Borrower, or any other benefit received or to be received by Lender,
in connection with the Note.
3. SECURITY. This Note is secured by the Instrument and the other Loan
Documents. The terms "Instrument" and other "Loan Documents" have the meanings
ascribed to those terms in the Addendum to Multifamily Note attached hereto
and incorporated herein by this referenced.
3
<PAGE>
4. GENERAL
A. This Note is subject to the express condition that at no time
shall Borrower be obligated or required to pay interest on the Debt or any
portion thereof at a rate which could subject Lender to either civil or criminal
liability as a result of being in excess of the maximum interest rate which
Borrower is permitted by applicable law to contract or agree to pay. If by the
terms of this Note, Borrower is at any time required or obligated to pay
interest on the Debt or any portion thereof at a rate in excess of such maximum
rate, the rate of interest under this Note shall be deemed to be immediately
reduced to such maximum rate and the interest payable shall be computed at such
maximum rate and all prior interest payments in excess of the maximum rate shall
be deemed to have been payments in reduction of principal and not on account of
the interest due hereunder.
B. This Note may not be modified, amended, waiver, extended,
changed, discharged or terminated orally or by any act or failure to act on the
part of Borrower or Lender, but only by an agreement in writing signed by the
party against whom enforcement of any modification, amendment, waiver,
extension, change, discharge or termination is sought.
C. Borrower and all others who may become liable for the payment of
all or any part of the Debt do hereby severally waive presentment and demand for
payment, notice of dishonor, protest and notice of protest, notice of non-
payment and notice of intent to accelerate the maturity hereof (and of such
acceleration). Borrower hereby waives the benefits of the right to assert any
defense, affirmative defense, or file a cause of action based on the failure of
the Lender to comply with Section 44-6852, Arizona Revised Statutes. No release
of any security for the Debt or extension of time for payment of this Note or
any installment hereof, and no alteration, amendment or waiver of any provision
of this Note, the Instrument and the other Loan Documents made by agreement
between Lender and any other person or party shall release, modify, amend,
waive, extend, change, discharge, terminate or affect the liability of Borrower,
and any other who may become liable for the payment of all or any part of the
Debt, under this Note, the Instrument and the other Loan Documents. Lender may
release any guarantor or indemnitor of the Debt from liability, in every
instance without the consent of the Borrower hereunder, and without waiving any
rights the Lender may have hereunder or by virtue of the laws of the State in
which the Property (as defined in the Instrument) is located or any other state
of the United States.
D. Borrower is and shall be obligated to pay principal, interest and
any and all other amounts which become payable hereunder or under the other Loan
Documents absolutely and unconditionally and without any abatement,
postponement, diminution or deduction and without any reduction for counterclaim
or setoff. In the event that at any time any payment received by Lender
hereunder shall be deemed by a court of competent jurisdiction to have been a
voidable preference or fraudulent conveyance under any bankruptcy, insolvency or
other debtor relief law, then the obligation to make such payment shall survive
any cancellation or satisfaction of this Note or return thereof to Borrower and
shall not be discharged or satisfied with any prior payment thereof or
cancellation of this Note, but shall remain a valid and binding obligation
enforceable in accordance with the terms and provisions hereof, and such payment
shall be immediately due and payable upon demand.
E. This Note shall be interpreted, construed and enforced according
to the laws of the State where the Property is located. The terms and
provisions hereof shall be binding upon and inure to the benefit of Borrower and
Lender and their respective
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<PAGE>
heirs, executors, legal representatives, successors, successors-in-title and
assigns, whether by voluntary action of the parties or by operation of law. As
used herein, the terms "Borrower" and "Lender" shall be deemed to include their
respective heirs, executors, legal representatives, successors, successors-in-
title and assigns, whether by voluntary action of the parties or by operation of
law. If Borrower consists of more than one person or entity, each shall be
jointly and severally liable to perform the obligations of Borrower under this
Note. All personal pronouns used herein, whether used in the masculine,
feminine or neuter gender, shall include all other genders; the singular shall
include the plural and vice versa. Title or articles and sections are for
convenience only and in no way define, limit, amplify or describe the scope or
intent of any provisions hereof. This Note, the Instrument and the other Loan
Documents contain the entire agreements between the parties hereto relating to
the subject matter hereof and thereof and all prior agreements relative hereto
and thereto which are not contained herein or therein are terminated.
F. BORROWER HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER IN
CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE LOAN
EVIDENCED BY THIS NOTE, THE APPLICATION FOR THE LOAN EVIDENCED BY THIS NOTE,
THIS NOTE, THE INSTRUMENT OR THE OTHER LOAN DOCUMENTS OR ANY ACTS OR OMISSIONS
OF LENDER, ITS OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION THEREWITH.
G. If any term of this Note or any application thereof shall be
invalid or unenforceable, the remainder of this Note and any other application
of the term shall not be affected thereby.
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<PAGE>
IN WITNESS WHEREOF, Borrower has duly executed this Note the day and year
first above written.
BORROWER:
AIMCO/WICKERTREE, L.P.,
a Delaware limited partnership
By: AIMCO/WICKERTREE, INC., a
Delaware corporation
By: /s/ Harry Alcock
--------------------------------
Harry Alcock
Vice President
<PAGE>
ADDENDUM TO MULTIFAMILY NOTE
(FOR USE WITH EXCEPTIONS TO NON-RECOURSE GUARANTY)
THIS ADDENDUM TO MULTIFAMILY NOTE (the "Addendum") is made as of the
31st day of October, 1997, and is incorporated into and shall be deemed to
amend and supplement the Multifamily Note (the "Multifamily Note") made by
the undersigned (the "Borrower") to GMAC COMMERCIAL MORTGAGE CORPORATION and
its successors, assigns and transferees (the "Lender"), dated the same date
as this Addendum (the Multifamily Note as amended and supplemented by this
Addendum, any other addendum to the Multifamily Note, and any future
amendments to the Multifamily Note is referred to as the "Note"). The debt
evidenced by the Note is secured by a Multifamily Mortgage, Deed of Trust or
Deed to Secure Debt of the same date (the "Multifamily Instrument"), covering
the property described in the Multifamily Instrument and defined therein as
the "Property".
This Property is located entirely within the state identified in Exhibit A to
the Multifamily Instrument (the "Property Jurisdiction"). The Multifamily
Instrument is amended and supplemented by the Rider to Multifamily Instrument
(the "Rider") and any other rider to Multifamily Instrument given by Borrower to
Lender and dated the same date as the Multifamily Instrument. (The Multifamily
Instrument as amended and supplemented by the Rider and any other rider to the
Multifamily Instrument and any future amendments to the Instrument is referred
to as the "Instrument".)
The term "Loan Documents" when used in this Addendum shall mean, collectively,
the following documents: (i) the Instrument, (ii) the Note, and (iii) all other
documents or agreements, including any Collateral Agreements (as defined in the
Rider) or O&M Agreement (as defined in the Rider), arising under, related to, or
made in connection with, the loan evidenced by the Note, as such Loan Documents
may be amended.
The covenants and agreements of this Addendum, and the covenants and agreements
of any other addendum to the Multifamily Note, shall be incorporated into and
shall amend and supplement the covenants and agreements of the Multifamily Note
as if this Addendum and the other addenda were a part of the Multifamily Note,
and all references to the Note in the Loan Documents shall mean the Note as so
amended and supplemented. Any conflict between the provisions of the Multifamily
Note and this Addendum shall be resolved in favor of this Addendum.
ADDITIONAL COVENANTS. In addition to the covenants and agreements made in
the Multifamily Note Borrower and Lender further covenant and agree as follows:
A. PREPAYMENTS
1. YIELD MAINTENANCE PERIOD
During the first 19.0 years of the Note term beginning with the date of the
Note and upon giving Lender 60 days prior written notice, Borrower may prepay
the entire unpaid principal balance of the Note on the last Business Day before
a scheduled monthly payment date by paying, in addition to the entire unpaid
principal balance, accrued interest and any other sums due Lender at the time of
prepayment, a prepayment premium equal to the greater of:
(a) 1% of the entire unpaid principal balance of the Note, or
(b) The product obtained by multiplying (1) the entire unpaid principal
balance of the Note at the time of prepayment, times (2) the
difference obtained by subtracting from the interest rate on the Note
the Applicable Treasury Yield, as such yield is reported on the
Bloomberg display page (hereinafter "Bloomberg") as the bid side yield
at 4:00pm New York City time on the fifth Business Day preceding (x)
the date notice of prepayment is given to Lender where prepayment is
voluntary, or (y) the date Lender accelerates the loan, times (3) the
present value factor calculated using the following formula:
n
1 - (1 + r)
-----------
r
[r = Applicable Treasury Yield
n = the number of years, and any fraction thereof, remaining
between the prepayment date and the maturity date]
Applicable Treasury Yield: Shall mean the bid side yield on interpolated
U.S. Treasury Security for the average life of the loan calculated using the
interest rate on the Note, the scheduled remaining payments on the Note from and
after the date of prepayment to and including the maturity date of the loan, and
the principal balance of the loan being prepaid.
If the Applicable Treasury Yield is no longer available on Bloomberg,
Lender shall determine such Applicable Treasury Yield from another source
selected by Lender.
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Except as provided in paragraph A.3 of this Addendum, no partial
prepayments are permitted. Such prepayment premium shall be due and payable if
the Loan is prepaid for any reason during the first 19.0 years of the Note,
including without limitation, a prepayment arising because of an acceleration of
the Loan.
2. AFTER YIELD MAINTENANCE PERIOD
After the expiration of the Yield Maintenance Period and upon giving Leader
60 days prior written notice, Borrower may prepay the entire unpaid principal
balance of the Note on the last Business Day before a scheduled monthly payment
date by paying, in addition to the entire unpaid principal balance, accrued
interest and any other sums due Lender at the time of prepayment. No prepayment
premium shall be due for any prepayment in full after the expiration of the
Yield Maintenance Period.
Except as provided in paragraph A.3 of this Addendum, no partial
prepayments are permitted.
3. PARTIAL PREPAYMENTS
Borrower shall have no right to make a partial prepayment of the
outstanding indebtedness during the Note term. However, in the event that
Lender shall require a partial prepayment of the outstanding indebtedness
after a default under the Note, the Instrument or any of the other Loan
Documents, by applying funds held by Lender pursuant to any Collateral
Agreement (as defined in Uniform Covenant 2B of the Instrument) against the
indebtedness secured by the Instrument, or, if Lender shall for any other
reason accept a partial prepayment by Borrower of the outstanding
indebtedness, except as otherwise provided in paragraph A.4 of this Addendum,
a prepayment premium shall be due and payable to Lender as follows:
(a) AFTER YIELD MAINTENANCE PERIOD. No prepayment premium shall be due for
any partial prepayment made by Borrower in accordance with the
provisions of the preceding sentence after the expiration of the Yield
Maintenance Period.
(b) DURING YIELD MAINTENANCE PERIOD. If Lender shall require or accept a
partial prepayment during the Yield Maintenance Period, the partial
prepayment shall be made on the last Business Day before a scheduled
monthly payment date and a prepayment premium shall be due and payable
to Lender equal to the greater of:
(i) 1% of the amount of principal being prepaid, or
(ii) the product obtained by multiplying (A) the amount of the
principal which is being prepaid, times (B) the difference
obtained by subtracting from the interest rate on the Note the
yield rate (the "Partial Prepayment Yield Rate") on the Specified
U.S. Treasury Security, as the Partial Prepayment Yield Rate is
reported in the WALL STREET JOURNAL on the fifth Business Day
preceding (1) the day Lender accelerates the loan (in connection
with any partial prepayment made in connection with an
acceleration of the loan), or (2) the day Lender applies funds
held under any Collateral Agreement (other than in connection
with an acceleration of the loan), times (C) the present value
factor calculated using the following formula:
n
l -(1 + y)
---------
y
[y = Partial Prepayment Yield Rate
n = the number of years, and any fraction thereof,
remaining between the prepayment date and the
expiration of the Yield Maintenance Period]
When the total amount to be applied toward the unpaid principal balance of
the loan and the prepayment premium is known, but the amounts to be allocated
toward the unpaid principal balance of the loan and the prepayment premium,
respectively, are unknown, the Lender shall determine the allocation between the
prepaid principal amount and the prepayment premium as follows:
Given: a = total amount to be applied
b = prepaid principal amount
c = prepayment premium
N = note rate
n
F = present value factor = 1 - (1 + y)
------------
y
["y" and "n" have the same meanings as set forth in subparagraph
(ii) above]
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<PAGE>
Then: a = b + c
b = a
-----------
F (N-y) + l
c = a-b
Except as provided in the next sentence, any partial prepayment of the
outstanding indebtedness shall not extend the due date of any subsequent monthly
installments or change the amount of such installments, unless Lender shall
otherwise agree in writing. Upon any partial prepayment, Lender shall have the
option, in its sole and absolute discretion, to recast the monthly installment
due under the Note so that the maturity date of the Note shall remain the same.
4. PREMIUM DUE WHETHER VOLUNTARY OR INVOLUNTARY PREPAYMENT; INSURANCE
AND CONDEMNATION PROCEEDS
Borrower shall pay the prepayment premium due under this paragraph A
whether the prepayment is voluntary or involuntary (in connection with Lender's
acceleration of the unpaid principal balance of the Note) or the Instrument is
satisfied or released by foreclosure (whether by power of sale or judicial
proceeding), deed in lieu of foreclosure or by any other means. Notwithstanding
any other provision herein to the contrary, Borrower shall not be required to
pay any prepayment premium in connection with any prepayment occurring as a
result of the application of insurance proceeds or condemnation awards under the
Instrument.
5. NOTICE; BUSINESS DAY
Any notice to Lender provided for in this Addendum shall be given in the
manner provided in the Instrument. The term "Business Day" means any day other
than a Saturday, a Sunday, or any other day on which Lender is not open for
business.
B. BORROWER'S EXCULPATION
Subject to the provisions of paragraph C and notwithstanding any other
provision in the Note or Instrument, the personal liability of Borrower, any
general partner of Borrower (if the Borrower is a partnership), and any "Key
Principal" (collectively, the entities defined as Key Principal in Uniform
Covenant 19(a)( 1) of the Security Instrument) to pay the principal of and
interest on the debt evidenced by the Note and any other agreement evidencing
Borrower's obligations under the Note and the Instrument shall be limited to (1)
the real and personal property described as the "Property" in the Instrument,
(2) the personal property described in or pledged under any Collateral Agreement
(as defined in Uniform Covenant 2B of the Instrument) executed in connection
with the loan evidenced by the Note, (3) the rents, profits, issues, products
and income of the Property received or collected by or on behalf of Borrower
(the "Rents and Profits") to the extent such receipts are necessary first, to
pay the reasonable expenses of operating, managing, maintaining and repairing
the Property, including but not limited to real estate taxes, utilities,
assessments, insurance premiums, repairs, replacements and ground rents, if any
(the "Operating Expenses") then due and payable as of the tine of receipt of
such Rents and Profits, and then, to pay the principal and interest due under
the Note and any other sums due under the Instrument or any other Loan Document
(including but not limited to deposits or reserves due under any Collateral
Agreement), except to the extent that Borrower did not have the legal right,
because of a bankruptcy, receivership or similar judicial proceeding, to direct
the disbursement of such sums.
Except as provided in paragraph C, Lender shall not seek (a) any judgment
for a deficiency against Borrower, any general partner of Borrower (if Borrower
is a partnership) or any Key Principal, or Borrower's or any general partner's
or Key Principal's heirs, legal representatives, successors or assigns, in any
action to enforce any right or remedy under the Instrument, or (b) any judgment
on the Note except as may be necessary in any action brought under the
Instrument to enforce the lien against the Property or to exercise any remedies
under any Collateral Agreement.
C. EXCEPTIONS TO NON-RECOURSE LIABILITY
If, without obtaining the Lender's prior written consent, (i) a Transfer
shall occur which, pursuant to Uniform Covenant 19 of the Instrument, gives
Lender the right, at its option, to declare all sums secured by the
Instrument immediately due and payable, (ii) Borrower shall encumber the
Property with the lien of any subordinate instrument in connection with any
financing by Borrower, in violation of the terms of the Instrument or,
(iii) Borrower shall violate the single asset covenant of paragraph J of the
Rider, any of such events shall constitute a default by Borrower under the
Note, the Instrument and the other Loan Documents, and if such event shall
continue for 30 days, paragraph B shall not apply from and after the date
which is 30 days after such event and the Borrower, any general partner of
Borrower (if Borrower is a partnership) and Key Principal (each individually
on a joint or several basis if more than one) shall be personally liable on a
joint and several basis for full recourse liability under the Note and the
other Loan Documents.
Notwithstanding paragraph B, Borrower, any general partner of Borrower (if
Borrower is a partnership) and Key Principal (each individually on a joint and
several basis if more than one) shall be personally liable on a joint and
several basis, in the amount of any loss, damage or cost (including but not
limited to attorneys fees) resulting from (A) fraud or material
misrepresentation by Borrower or Borrower's agents or employees or any Key
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<PAGE>
Principal or general partner of Borrower in connection with obtaining the loan
evidenced by the Note, or in complying with any of Borrower's obligations under
the Loan Documents, (B) insurance proceeds, condemnation awards, security
deposits from tenants or other sums or payments received by or on behalf of the
Borrower in its capacity as owner of the Property and not applied in accordance
with the provisions of the Instrument (except to the extent that Borrower did
not have the legal right because of a bankruptcy, receivership or similar
judicial proceeding, to direct disbursement of such sums or payments, (C) all
Rents and Profits, (except to the extent that Borrower did not have the legal
right, because of a bankruptcy, receivership or similar judicial proceeding, to
direct the disbursement of such sums), and not applied, first, to the payment of
the reasonable Operating Expenses as such Operating Expenses become due and
payable, and then, to the payment of principal and interest then due and payable
under the Note and any other sums due under the Instrument and all other Loan
Document (including but not limited to deposit or reserves payable under any
Collateral Agreement), (D) Borrower's failure to pay transfer fees and charges
due Lender under paragraph 19(c) of the Instrument, (E) Borrower's failure
following a default under any of the Loan Documents to deliver to Lender on
demand all Rents and Profits, security deposits (except to the extent that
Borrower did not have the legal right because of a bankruptcy, receivership or
similar judicial proceeding to direct the disbursement of such sums), books and
records relating to the Property, (F) or relating to Hazardous Materials or
compliance with Hazardous Materials Laws to the full extent of any losses or
damages (including those resulting from diminution in value of the Property)
incurred by Lender as a result of the existence of such Hazardous Materials or
failure to comply with Hazardous Materials Laws or the obligations of Borrower
hereunder relating thereto, (G) intentional damage to the Property or (H)
failure of Borrower to pay taxes or other liens with priority over the
Multifamily Instrument.
No provision of paragraphs B or C shall (i) affect any guaranty or similar
agreement executed in connection with the debt evidenced by the Note, (ii)
release or reduce the debt evidenced by the Note, (iii) impair the right of
Lender to enforce the provisions of paragraph D of the Rider, (iv) impair the
lien of the Instrument, or (v) impair the right of Lender to enforce the
provisions of any Collateral Agreement.
D. BUSINESS, COMMERCIAL OR INVESTMENT PURPOSE
Borrower represents that the Loan evidenced by the Note is being made
solely for business, commercial or investment purposes.
E. GOVERNING LAW
1. CHOICE OF LAW
The validity of the Note, and the other Loan Documents, each of their terms
and provisions, and the rights and obligations of Borrower under the Note, and
the other Loan Documents shall be governed by, interpreted, construed, and
enforced pursuant to and in accordance with the laws of the Property
Jurisdiction.
2. CONSENT TO JURISDICTION
Borrower irrevocably consents to the exclusive jurisdiction of any and all
state and federal courts with jurisdiction in the Property Jurisdiction over
Borrower and Borrower's assets. Borrower agrees that such assets shall be used
to first satisfy all claims of creditors organized or domiciled in the United
States of America ("USA") and that no assets of the Borrower in the USA shall be
considered part of any foreign bankruptcy estate.
Borrower agrees that any controversy arising under or in relation to the
Note, the Instrument or any of the other Loan Documents shall be litigated
exclusively in the Property Jurisdiction. The state and federal courts and
authorities with jurisdiction in the Property Jurisdiction shall have exclusive
jurisdiction over ail controversies which may arise under or in relation to the
Note, including without limitation those controversies relating to the
execution, interpretation, breach, enforcement, or compliance with the Note, the
Instrument, or any other issue arising under, related to, or in connection with
any of the Loan Documents. Borrower irrevocably consents to service,
jurisdiction, and venue of such courts for any litigation arising from the Note,
the Instrument or any of the other Loan Documents, and waives any other venue to
which it might be entitled by virtue of domicile, habitual residence, or
otherwise.
F. SUCCESSORS AND ASSIGNS
The provisions of the Note, the Instrument, and all other Loan Documents
shall be binding on the successors and assigns, including, but not limited to,
any receiver, trustee, representative or other person appointed under foreign or
domestic bankruptcy, receivership, or similar proceedings of Borrower and any
person having an interest in Borrower.
Page 4
<PAGE>
BY SIGNING BELOW, Borrower accepts and agrees to the covenants and
agreements contained in this Addendum.
AIMCO/WICKERTREE, L.P.,
a Delaware limited partnership
By: AIMCO/Wickertree, Inc., a
Delaware corporation
By: /s/ Harry Alcock
------------------------------------------
Harry Alcock
Vice President
Page 5
<PAGE>
WHEN RECORDED MAIL TO
Allan R. Winn, Esq.
Ballard Spahr Andrews & Ingersoll
601 13th Street, N.W.
Suite 1000 South
Washington, D.C. 20005-3807
SPACE ABOVE THIS LINE FOR RECORDER'S USE
- --------------------------------------------------------------------------------
MULTIFAMILY DEED OF TRUST,
ASSIGNMENT OF RENTS AND SECURITY AGREEMENT
(Wickertree)
THIS DEED OF TRUST (herein "Instrument") is made as of the 31st day of
October 1997, among the Trustor/Grantor, AIMCO/WICKERTREE, L.P., a Delaware
limited partnership whose address is 1873 S. Bellaire Street, 17th Floor,
Denver, Colorado 80222 (herein "Borrower"), TRANSNATION TITLE INSURANCE
COMPANY, an Arizona corporation whose address is (herein
"Trustee"), and the Beneficiary, GMAC COMMERCIAL MORTGAGE CORPORATION, a
corporation organized and existing under the laws of the State of California
whose address is 650 Dresher Road, P.O. Box 1015, Horsham, PA
19044-8015 (herein "Lender").
BORROWER, in consideration of the indebtedness herein recited and the
trust herein created, irrevocably grants, conveys and assigns to Trustee, in
trust, with power of sale, the following described property located in
Phoenix, Maricopa County, State of Arizona:
See EXHIBIT "A" attached hereto and incorporated herein.
This Instrument has been amended and supplemented in certain respects as set
forth in (i) Rider to Multifamily Instrument and (ii) Supplemental Rider to
Multifamily Instrument (collectively, the "Riders"), annexed hereto and
incorporated herein by this reference. In the event of any inconsistencies
between the printed portions of this Instrument and the provisions of the
Riders, the provisions of the Riders shall control.
(Page 1 of 9 Pages)
<PAGE>
TOGETHER with all buildings, improvements and tenements now or hereafter
erected on the property, and all heretofore or hereafter vacated alleys and
streets abutting the property, and all easements, rights, appurtenances,
rents (subject however to the assignment of rents to Lender herein),
royalties, mineral, oil and gas rights and profits, water, water rights, and
water stock appurtenant to the property, and all fixtures, machinery,
equipment, engines, boilers, incinerators, building materials, appliances and
goods of every nature whatsoever now or hereafter located in, or on, or used,
or intended to be used in connection with the property, including but not
limited to, those for the purposes of supplying or distributing heating,
cooling, electricity, gas, water, air and light; and all elevators, and
related machinery and equipment, fire prevention and extinguishing apparatus,
security and access control apparatus, plumbing, bath tubs, water heaters,
water closets, sinks, ranges, stoves, refrigerators, dishwashers, disposals,
washers, dryers, awnings, storm windows, storm doors, screens, blinds,
shades, curtains and curtain rods, mirrors, cabinets, panelling, rugs,
attached floor coverings, furniture, pictures, antennas, trees and plants,
and any and all other additional items of personal property described in
EXHIBIT "B" attached hereto and incorporated herein; all of which, including
replacements and additions thereto, shall be deemed to be and remain a part
of the real property covered by this Instrument; and all of the foregoing,
together with said property (or the leasehold estate in the event this
Instrument is on a leasehold) are herein referred to as the "Property".
TO SECURE TO LENDER (a) the repayment of the indebtedness evidenced by
Borrower's note dated as of October 31, 1997 (herein "Note") in the principal
sum of Four Million Two Hundred Thirty One Thousand Seven Hundred And No/100
Dollars, with interest thereon, with the balance of the indebtedness, if not
sooner paid, due and payable on November 1, 2017, and all renewals,
extensions and modifications thereof; (d) the payment of all other sums,
with interest thereon, advanced in accordance herewith to protect the
security of this Instrument; and (e) the performance of the covenants and
agreements of Borrower herein contained.
Borrower covenants that Borrower is lawfully seised of the estate hereby
conveyed and has the right to grant, convey and assign the Property (and, if
this Instrument is on a leasehold, that the ground lease is in full force and
effect without modification except as noted above and without default on the
part of either lessor or lessee thereunder), that the Property is
unencumbered, and that Borrower will warrant and defend generally the title
to the Property against all claims and demands, subject to any easements and
restrictions listed in a schedule of exceptions to coverage in any title
insurance policy insuring Lender's interest in the Property.
UNIFORM COVENANTS. Borrower and Lender covenant and agree as follows:
1. PAYMENT OF PRINCIPAL AND INTEREST. Borrower shall promptly pay when due
the principal of and interest on the indebtedness evidenced by the Note, any
prepayment and late charges provided in the Note and all other sums secured
by this Instrument.
2. FUNDS FOR TAXES, INSURANCE AND OTHER CHARGES. Subject to applicable law or
to a written waiver by Lender, Borrower shall pay to Lender on the day
monthly installments of principal or interest are payable under the Note (or
on another day designated in writing by Lender), until the Note is paid in
full, a sum (herein "Funds") equal to one-twelfth of (a) the yearly water and
sewer rates and taxes and assessments which may be levied on the Property,
(b) the yearly ground rents, if any, (c) the yearly premium installments for
fire and other hazard insurance, rent loss insurance and such other insurance
covering the Property as Lender may require pursuant to paragraph 5 hereof,
(d) the yearly premium installments for mortgage insurance, if any, and (e)
if this Instrument is on a leasehold, the yearly fixed rents, if any, under
the ground lease, all as reasonably estimated initially and from time to time
by Lender on the basis of assessments and bills and reasonable estimates
thereof. Any waiver by Leader of a requirement that Borrower pay such Funds
may be revoked by Lender, in Lender's sole discretion, at any time upon
notice in writing to Borrower. Lender may require Borrower to pay to Lender,
in advance, such other Funds for other taxes, charges, premiums, assessments
and impositions in connection with Borrower or the Property which Lender
shall reasonably deem necessary to protect Lender's interests (herein "Other
Impositions"). Unless otherwise provided by applicable law, Lender may
require Funds for Other Impositions to be paid by Borrower in a lump sum or
in periodic installments, at Lender's option.
The Funds shall be held in an institution(s) the deposits or accounts of
which are insured or guaranteed by a Federal or state agency (including
Lender if Lender is such an institution). Lender shall apply the Funds to pay
said rates, rents, taxes, assessments, insurance premiums and Other
Impositions so long as Borrower is not in breach of any covenant or agreement
of Borrower in this Instrument. Lender shall make no charge for so holding
and applying the Funds, analyzing said account or for verifying and compiling
said assessments and bills, unless Lender pays Borrower interest, earnings or
profits on the Funds and applicable law permits Lender to make such a charge.
Borrower and Lender may agree in writing at the time of execution of this
Instrument that interest on the Funds shall be paid to Borrower, and unless
such agreement is made or applicable law requires interest, earnings or
profits to be paid, Lender shall not be required to pay Borrower any
interest, earnings or profits on the Funds. Lender shall give to Borrower,
without charge, an annual accounting of the Funds in Lender's normal format
showing credits and debits to the Funds and the purpose for which each debit
to the Funds was made. The Funds are pledged as additional security for the
sums secured by this Instrument.
If the amount of the Funds held by Lender at the time of the annual
accounting thereof shall exceed the amount deemed necessary by Lender to
provide for the payment of water and sewer rates, taxes, assessments,
insurance premiums, rents and Other Impositions, as they fall due, such
excess shall be credited to Borrower on the next monthly installment or
installments of Funds due. If at any time the amount of the Funds held by
Lender shall be less than the amount deemed necessary by Lender to pay water
and sewer rates, taxes, assessments, insurance premiums, rents and Other
Impositions, as they fall due, Borrower shall pay to Lender any amount
necessary to make up the deficiency within thirty days after notice from
Lender to Borrower requesting payment thereof.
Upon Borrower's breach of any covenant or agreement of Borrower in this
Instrument, Lender may apply, in any amount and in any order as Lender shall
determine in Lender's sole discretion, any Funds held by Lender at the time
of application (i) to pay rates, rents, taxes, assessments, insurance
premiums and Other Impositions which are now or will hereafter become due, or
(ii) as a credit against sums secured by this Instrument. Upon payment in
full of all sums secured by this Instrument, Lender shall promptly refund to
Borrower any Funds held by Lender.
(Page 2 of 9 Pages)
<PAGE>
4. CHARGES; LIENS. Borrower shall pay all water and sewer rates, rents,
taxes, assessments, premiums, and Other Impositions attributable to the
Property at Lender's option in the manner provided under paragraph 2 hereof
or, if not paid in such manner, by Borrower making payment, when due,
directly to the payee thereof, or in such other manner as Lender may
designate in writing. Borrower shall promptly furnish to Lender all notices
of amounts due under this paragraph 4, and in the event Borrower shall make
payment directly, Borrower shall promptly furnish to Lender receipts
evidencing such payments. Borrower shall promptly discharge any lien which
has, or may have, priority over or equality with, the lien of this
Instrument, and Borrower shall pay, when due, the claims of all persons
supplying labor or materials to or in connection with the Property. Without
Lender's prior written permission, Borrower shall not allow any lien inferior
to this Instrument to be perfected against the Property.
SEE ATTACHED SUPPLEMENTAL RIDER TO MULTIFAMILY INSTRUMENT AND RIDER TO
MULTIFAMILY INSTRUMENT
6. PRESERVATION AND MAINTENANCE OF PROPERTY; LEASEHOLDS. Borrower (a) shall
not commit waste or permit impairment or deterioration of the Property, (b)
shall not abandon the Property, (c) shall restore or repair promptly and in a
good and workmanlike manner all or any part of the Property to the equivalent
of its original condition, or such other condition as Lender may approve in
writing, in the event of any damage, injury or loss thereto, whether or not
insurance proceeds are available to cover in whole or in part the costs of
such restoration or repair, (d) shall keep the Property, including
improvements, fixtures, equipment, machinery and appliances thereon in good
repair and shall replace fixtures, equipment, machinery and appliances on the
Property when necessary to keep such items in good repair, (e) shall comply
with all laws, ordinances, regulations and requirements of any governmental
body applicable to the Property, (f) shall provide for professional
management of the Property by a residential rental property manager
satisfactory to Lender pursuant to a contract approved by Lender in writing,
unless such requirement shall be waived by Lender in writing, (g) shall
generally operate and maintain the Property in a manner to ensure maximum
rentals, and (h) shall give notice in writing to Lender of and, unless
otherwise directed in writing by Lender, appear in and defend any action or
proceeding purporting to affect the Property, the security of this Instrument
or the rights or powers of Lender. Neither Borrower nor any tenant or other
person shall remove, demolish or alter any improvement now existing or
hereafter erected on the Property or any fixture, equipment, machinery or
appliance in or on the Property except when incident to the replacement of
fixtures, equipment, machinery and appliances with items of like kind.
(Page 3 of 9 Pages)
<PAGE>
If this Instrument is on a leasehold, Borrower (i) shall comply with the
provisions of the ground lease, (ii) shall give immediate written notice to
Lender of any default by lessor under the ground lease or of any notice
received by Borrower from such lessor of any default under the ground lease
by Borrower, (iii) shall exercise any option to renew or extend the ground
lease and give written confirmation thereof to Lender within thirty days
after such option becomes exercisable, (iv) shall give immediate written
notice to Lender of the commencement of any remedial proceedings under the
ground lease by any party thereto and, if required by Lender shall permit
Lender as Borrower's attorney-in-fact to control and act for Borrower in any
such remedial proceedings and (v) shall within thirty days after request by
Lender obtain from the lessor under the ground lease and deliver to Lender
the lessor's estoppel certificate required thereunder, if any. Borrower
hereby expressly transfers and assigns to Lender the benefit of all covenants
contained in the ground lease, whether or not such covenants run with the
land, but Lender shall have no liability with respect to such covenants nor
any other covenants contained in the ground lease.
Borrower shall not surrender the leasehold estate and interests herein
conveyed nor terminate or cancel the ground lease creating said estate and
interests, and Borrower shall not, without the express written consent of
Lender, alter or amend said ground lease. Borrower covenants and agrees that
there shall not be a merger of the ground lease, or of the leasehold estate
created thereby, with the fee estate covered by the ground lease by reason of
said leasehold estate or said fee estate, or any part of either, coming into
common ownership, unless Lender shall consent in writing to such merger; if
Borrower shall acquire such fee estate, then this Instrument shall
simultaneously and without further action be spread so as to become a lien on
such fee estate.
7. USE OF PROPERTY. Unless required by applicable law or unless Lender has
otherwise agreed in writing, Borrower shall not allow changes in the use for
which all or any part of the Property was intended at the time this
Instrument was executed. Borrower shall not initiate or acquiesce in a change
in the zoning classification of the Property without Lender's prior written
consent.
8. PROTECTION OF LENDER'S SECURITY. If Borrower fails to perform the
covenants and agreements contained in this Instrument, or if any action or
proceeding is commenced which affects the Property or title thereto or the
interest of Lender therein, including, but not limited to, eminent domain,
insolvency, code enforcement, or arrangements or proceedings involving a
bankrupt or decedent, then Lender at Lender's option may make such
appearances, disburse such sums and take such action as Lender deems
necessary, in its sole discretion, to protect Lender's interest, including,
but not limited to, (i) disbursement of attorney's fees, (ii) entry upon the
Property to make repairs, (iii) procurement of satisfactory insurance as
provided in paragraph 5 hereof, and (iv) if this Instrument is on a
leasehold, exercise of any option to renew or extend the ground lease on
behalf of Borrower and the curing of any default of Borrower in the terms and
conditions of the ground lease.
Any amounts disbursed by Leader pursuant to this paragraph 8, with
interest thereon, shall become additional indebtedness of Borrower secured by
this Instrument. Unless Borrower and Lender agree to other terms of payment,
such amounts shall be immediately due and payable and shall bear interest
from the date of disbursement at the rate stated in the Note unless
collection from Borrower of interest at such rate would be contrary to
applicable law, in which event such amounts shall bear interest at the
highest rate which may be collected from Borrower under applicable law.
Borrower hereby covenants and agrees that Lender shall be subrogated to the
lien of any mortgage or other lien discharged, in whole or in part, by the
indebtedness secured hereby. Nothing contained in this paragraph 8 shall
require Lender to incur any expense or take any action hereunder.
9. INSPECTION. Lender may make or cause to be made reasonable entries upon
and inspections of the Property.
10. BOOKS AND RECORDS.
SEE ATTACHED RIDER TO MULTIFAMILY INSTRUMENT
11. CONDEMNATION. Borrower shall promptly notify Lender of any action or
proceeding relating to any condemnation or other taking, whether direct or
indirect, of the Property, or part thereof, and Borrower shall appear in and
prosecute any such action or proceeding unless otherwise directed by Lender
in writing. Borrower authorizes Lender, at Lender's option, as
attorney-in-fact for Borrower, to commence, appear in and prosecute, in
Lender's or Borrower's name, any action or proceeding relating to any
condemnation or other taking of the Property, whether direct or indirect, and
to settle or compromise any claim in connection with such condemnation or
other taking. The proceeds of any award, payment or claim for damages, direct
or consequential, in connection with any condemnation or other taking,
whether direct or indirect, of the Property, or part thereof, or for
conveyances in lieu of condemnation, are hereby assigned to and shall be paid
to Lender subject, if this Instrument is on a leasehold, to the rights of
lessor under the ground lease.
Borrower authorizes Lender to apply such awards, payments, proceeds or
damages, after the deduction of Lender's expenses incurred in the collection
of such amounts, at Lender's option, to restoration or repair of the Property
or to payment of the sums secured by this Instrument, whether or not then
due, in the order of application set forth in paragraph 3 hereof, with the
balance, if any, to Borrower. Unless Borrower and Lender otherwise agree in
writing, any application of proceeds to principal shall not extend or
postpone the due date of the monthly installments referred to in paragraphs 1
and 2 hereof or change the amount of such installments. Borrower agrees to
execute such further evidence of assignment of any awards, proceeds, damages
or claims arising in connection with such condemnation or taking as Lender
may require.
12. BORROWER AND LIEN NOT RELEASED. From time to time, Lender may, at
Lender's option, without giving notice to or obtaining the consent of
Borrower, Borrower's successors or assigns or of any junior lienholder or
guarantors, without liability on Lender's part and notwithstanding Borrower's
breach of any covenant or agreement of Borrower in this Instrument, extend
the time for payment of said indebtedness or any part tbereof, reduce the
payments thereon, release anyone liable on any of said indebtedness, accept a
renewal note or notes therefor, modify the terms and time of payment of said
indebtedness, release from the lien of this
(Page 4 of 9 Pages)
<PAGE>
Instrument any part of the Property, take or release other or additional
security, reconvey any part of the Property, consent to any map or plan of
the Property, consent to the granting of any easement, join in any extension
or subordination agreement, and agree in writing with Borrower to modify the
rate of interest or period of amortization of the Note or change the amount
of the monthly installments payable thereunder. Any actions taken by Lender
pursuant to the terms of this paragraph 12 shall not affect the obligation of
Borrower or Borrower's successors or assigns to pay the sums secured by this
Instrument and to observe the covenants of Borrower contained herein, shall
not affect the guaranty of any person, corporation, partnership or other
entity for payment of the indebtedness secured hereby, and shall not affect
the lien or priority of lien hereof on the Property. Borrower shall pay
Lender a reasonable service charge, together with such title insurance
premiums and attorney's fees as may be incurred at Lender's option, for any
such action if taken at Borrower's request.
13. FORBEARANCE BY LENDER NOT A WAIVER. Any forbearance by Lender in
exercising any right or remedy hereunder, or otherwise afforded by applicable
law, shall not be a waiver of or preclude the exercise of any right or
remedy. The acceptance by Lender of payment of any sum secured by this
Instrument after the due date of such payment shall not be a waiver of
Lender's right to either require prompt payment when due of all other sums so
secured or to declare a default for failure to make prompt payment. The
procurement of insurance or the payment of taxes or other liens or charges by
Lender shall not be a waiver of Lender's right to accelerate the maturity of
the indebtedness secured by this Instrument, nor shall Lender's receipt of
any awards, proceeds or damages under paragraphs 5 and 11 hereof operate to
cure or waive Borrower's default in payment of sums secured by this
Instrument.
14. ESTOPPEL CERTIFICATE. Borrower shall within ten days of a written request
from Lender furnish Lender with a written statement, duly acknowledged,
setting forth the sums secured by this Instrument and any right of set-off,
counterclaim or other defense which exists against such sums and the
obligations of this Instrument.
15. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. This Instrument is intended
to be a security agreement pursuant to the Uniform Commercial Code for any of
the items specified above as part of the Property which, under applicable
law, may be subject to a security interest pursuant to the Uniform Commercial
Code, and Borrower hereby grants Lender a security interest in said items.
Borrower agrees that Lender may file this Instrument, or a reproduction
thereof, in the real estate records or other appropriate index, as a
financing statement for any of the items specified above as part of the
Property. Any reproduction of this Instrument or of any other security
agreement or financing statement shall be sufficient as a financing
statement. In addition, Borrower agrees to execute and deliver to Lender,
upon Lender's request, any financing statements, as well as extensions,
renewals and amendments thereof, and reproductions of this Instrument in such
form as Lender may require to perfect a security interest with respect to
said items. Borrower shall pay all costs of filing such financing statements
and any extensions, renewals, amendments and releases thereof, and shall pay
all reasonable costs and expenses of any record searches for financing
statements Lender may reasonably require. Without the prior written consent
of Lender, Borrower shall not create or suffer to be created pursuant to the
Uniform Commercial Code any other security interest in said items, including
replacements and additions thereto. Upon Borrower's breach of any covenant or
agreement of Borrower contained in this Instrument, including the covenants
to pay when due all sums secured by this Instrument, Lender shall have the
remedies of a secured party under the Uniform Commercial Code and, at
Lender's option, may also invoke the remedies provided in paragraph 27 of
this Instrument as to such items. In exercising any of said remedies, Lender
may proceed against the items of real property and any items of personal
property specified above as part of the Property separately or together and
in any order whatsoever, without in any way affecting the availability of
Lender's remedies under the Uniform Commercial Code or of the remedies
provided in paragraph 27 of this Instrument.
16. LEASES OF THE PROPERTY. As used in this paragraph 16, the word "lease"
shall mean "sublease" if this Instrument is on a leasehold. Borrower shall
comply with and observe Borrower's obligations as landlord under all leases
of the Property or any part thereof. Borrower will not lease any portion of
the Property for non-residential use except with the prior written approval
of Lender. Borrower, at Lender's request, shall furnish Lender with executed
copies of all leases now existing or hereafter made of all or any part of the
Property, and all leases now or hereafter entered into will be in form and
substance subject to the approval of Lender. All leases of the Property shall
specifically provide that such leases are subordinate to this Instrument;
that the tenant attorns to Lender, such attornment to be effective upon
Lender's acquisition of title to the Property; that the tenant agrees to
execute such further evidences of attornment as Lender may from time to time
request; that the attornment of the tenant shall not be terminated by
foreclosure; and that Lender may, at Lender's option, accept or reject such
attornments. Borrower shall not, without Lender's written consent, execute,
modify, surrender or terminate, either orally or in writing, any lease now
existing or hereafter made of all or any part of the Property providing for a
term of three years or more, permit an assignment or sublease of such a lease
without Lender's written consent, or request or consent to the subordination
of any lease of all or any part of the Property to any lien subordinate to
this Instrument. If Borrower becomes aware that any tenant proposes to do, or
is doing, any act or thing which may give rise to any right of set-off against
rent, Borrower shall (i) take such steps as shall be reasonably calculated to
prevent the accrual of any right to a set-off against rent, (ii) notify Lender
thereof and of the amount of said set-offs, and (iii) within ten days after
such accrual, reimburse the tenant who shall have acquired such right to
set-off or take such other steps as shall effectively discharge such set-off
and as shall assure that rents thereafter due shall continue to be payable
without set-off or deduction.
Upon Lender's request, Borrower shall assign to Lender, by written
instrument satisfactory to Lender, all leases now existing or hereafter made
of all or any part of the Property and all security deposits made by tenants
in connection with such leases of the Property. Upon assignment by Borrower
to Lender of any leases of the Property, Lender shall have all of the rights
and powers possessed by Borrower prior to such assignment and Lender shall
have the right to modify, extrend or terminate such existing leases and to
execute new leases, in Lender's sole discretion.
17. REMEDIES CUMULATIVE. Each remedy provided in this Instrument is distinct
and cumulative to all other rights or remedies under this Instrument or
afforded by law or equity, and may be exercised concurrently, independently,
or successively, in any order whatsoever.
18. ACCELERATION IN CASE OF BORROWER'S INSOLVENCY. If Borrower shall
voluntarily file a petition under the Federal Bankruptcy Act, as such Act may
from time to time be amended, or under any similar or successor Federal
statute relating to bankruptcy, insolvency, arrangements or reorganizations,
or under any state bankruptcy or insolvency act, or file an answer in an
involuntary proceeding admitting insolvency or inability to pay debts, or if
Borrower shall fail to obtain a vacation or stay of involuntary proceedings
(Page 5 of 9 Pages)
<PAGE>
brought for the reorganization, dissolution or liquidation of Borrower, or if
Borrower shall be adjudged a bankrupt, or if a trustee or receiver shall be
appointed for Borrower or Borrower's property, or if the Property shall
become subject to the jurisdiction of a Federal bankruptcy court or similar
state court, or if Borrower shall make an assignment for the benefit of
Borrower's creditors, of if there is an attachment, execution or other
judicial seizure of any portion of Borrower's assets and such seizure is not
discharged within ten days, then Lender may, at Lender's option, declare all
of the sums secured by this Instrument to be immediately due and payable
without prior notice to Borrower, and Lender may invoke any remedies
permitted by paragraph 27 of this Instrument. Any attorney's fees and other
expenses incurred by Lender in connection with Borrower's bankruptcy or any
of the other aforesaid events shall be additional indebtedness of Borrower
secured by this Instrument pursuant to paragraph 8 hereof.
19. SEE ATTACHED RIDER TO MULTIFAMILY INSTRUMENT
20. SEE ATTACHED RIDER TO MULTIFAMILY INSTRUMENT
21. SUCCESSORS AND ASSIGNS BOUND; JOINT AND SEVERAL LIABILITY; AGENTS;
CAPTIONS. The covenants and agreements herein contained shall bind, and the
rights hereunder shall inure to, the respective successors and assigns of
Lender and Borrower, subject to the provisions of paragraph 19 hereof. All
covenants and agreements of Borrower shall be joint and several. In
exercising any rights hereunder or taking any actions provided for herein,
Lender may act through its employees, agents or independent contractors as
authorized by Lender. The captions and headings of the paragraphs of this
Instrument are for convenience only and are not to be used to interpret or
define the provisions hereof.
22. UNIFORM MULTIFAMILY INSTRUMENT; GOVERNING LAW; SEVERABILITY. This form of
multifamily instrument combines uniform covenants for national use and
non-uniform covenants with limited variations by jurisdiction to constitute a
uniform security instrument covering real property and related fixtures and
personal property. This Instrument shall be governed by the law of the
jurisdiction in which the Property is located. In the event that any
provision of this Instrument or the Note conflicts with applicable law, such
conflict shall not affect other provisions of this Instrument or the Note
which can be given effect without the conflicting provisions, and to this end
the provisions of this Instrument and the Note are declared to be severable.
In the event that any applicable law limiting the amount of interest or other
charges permitted to be collected from Borrower is interpreted so that any
charge provided for in this Instrument or in the Note, whether considered
separately or together with other charges levied in connection with this
Instrument and the Note, violates such law, and Borrower is entitled to the
benefit of such law, such charge is hereby reduced to the extent necessary to
eliminate such violation. The amounts, if any, previously paid to Lender in
excess of the amounts payable to Lender pursuant to such charges as reduced
shall be applied by Lender to reduce the principal of the indebtedness
evidenced by the Note. For the purpose of determining whether any applicable
law limiting the amount of interest or other charges permitted to be
collected from Borrower has been violated, all indebtedness which is secured
by this Instrument or evidenced by the Note and which constitutes interest,
as well as all other charges levied in connection with such indebtedness
which constitute interest, shall be deemed to be allocated and spread over
the stated term of the Note. Unless otherwise required by applicable law,
such allocation and spreading shall be effected in such a manner that the
rate of interest computed thereby is uniform throughout the stated term of
the Note.
23. WAIVER OF STATUTE OF LIMITATIONS. Borrower hereby waives the right to
assert any statute of limitations as a bar to the enforcement of the lien of
this Instrument or to any action brought to enforce the Note or any other
obligation secured by this Instrument.
24. WAIVER OF MARSHALLING. Notwithstanding the existence of any other
security interests in the Property held by Lender or by any other party,
Lender shall have the right to determine the order in which any or all of the
Property shall be subjected to the remedies provided herein. Lender shall
have the right to determine the order in which any or all portions of the
indebtedness secured hereby are satisfied from the proceeds realized upon the
exercise of the remedies provided herein. Borrower, any party who consents to
this Instrument and any party who now or hereafter acquires a security
interest in the Property and who has actual or constructive notice hereof
hereby waives any and all right to require the marshalling of assets in
connection with the exercise of any of the remedies permitted by applicable
law or provided herein.
25.
(Page 6 of 9 Pages)
<PAGE>
26. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION. As
part of the consideration for the indebtedness evidenced by the Note,
Borrower hereby absolutely and unconditionally assigns and transfers to
Lender all the rents and revenues of the Property, including those now due,
past due, or to become due by virtue of any lease or other agreement for the
occupancy or use of all or any part of the Property, regardless of to whom
the rents and revenues of the Property are payable. Borrower hereby
authorizes Lender or Lender's agents to collect the aforesaid rents and
revenues and hereby directs each tenant of the Property to pay such rents to
Lender or Lender's agents; provided, however, that prior to written notice
given by Lender to Borrower of the breach by Borrower of any covenant or
agreement of Borrower in this Instrument, Borrower shall collect and receive
all rents and revenues of the Property as trustee for the benefit of Lender
and Borrower, to apply the rents and revenues so collected to the sums
secured by this Instrument in the order provided in paragraph 3 hereof with
the balance, so long as no such breach has occurred, to the account of
Borrower, it being intended by Borrower and Lender that this assignment of
rents constitutes an absolute assignment and not an assignment for additional
security only. Upon the occurrence of an Event of Default (as defined in the
Note), and without the necessity of Lender entering upon and taking and
maintaining full control of the Property in person, by agent or by a
court-appointed receiver, Lender shall immediately be entitled to possession
of all rents and revenues of the Property as specified in this paragraph 26
as the same become due and payable, including but not limited to rents then
due and unpaid, and all such rents shall immediately upon delivery of such
notice be held by Borrower as trustee for the benefit of Lender only;
provided, however, that the written notice by Lender to Borrower of the
breach by Borrower shall contain a statement that Lender exercises its rights
to such rents. Borrower agrees that upon the occurrence of an Event of
Default (as defined in the Note) each tenant of the Property shall make such
rents payable to and pay such rents to Lender or Lender's agents on Lender's
written demand to each tenant therefor, delivered to each tenant personally,
by mail or by delivering such demand to each rental unit, without any
liability on the part of said tenant to inquire further as to the existence
of a default by Borrower.
Borrower hereby covenants that Borrower has not executed any prior
assignment of said rents, that Borrower has not performed, and will not
perform, any acts or has not executed, and will not execute, any instrument
which would prevent Lender from exercising its rights under this paragraph
26, and that at the time of execution of this Instrument there has been no
anticipation or prepayment of any of the rents of the Property for more than
two months prior to the due dates of such rents. Borrower covenants that
Borrower will not hereafter collect or accept payment of any rents of the
Property more than two months prior to the due dates of such rents. Borrower
further covenants that Borrower will execute and deliver to Lender such
further assignments of rents and revenues of the Property as Lender may from
time to time request.
Upon the occurrence of an Event of Default (as defined in the Note),
Lender may in person, by agent or by a court-appointed receiver, regardless
of the adequacy of Lender's security, enter upon and take and maintain full
control of the Property in order to perform all acts necessary and
appropriate for the operation and maintenance thereof including, but not
limited to, the execution, cancellation or modification of leases, the
collection of all rents and revenues of the Property, the making of repairs
to the Property and the execution or termination of contracts providing for
the management or maintenance of the Property, all on such terms as are
deemed best to protect the security of this Instrument. In the event Lender
elects to seek the appointment of a receiver for the Property upon Borrower's
breach of any covenant or agreement of Borrower in this Instrument, Borrower
hereby expressly consents to the appointment of such receiver. Lender or the
receiver shall be entitled to receive a reasonable fee for so managing the
Property.
All rents and revenues collected subsequent to the occurrence of an Event
of Default (as defined in the Note) shall be applied first to the costs, if
any, of taking control of and managing the Property and collecting the rents,
including, but not limited to, attorney's fees, receiver's fees, premiums on
receiver's bonds, costs of repairs to the Property, premiums on insurance
policies, taxes, assessments and other charges on the Property, and the costs
of discharging any obligation or liability of Borrower as lessor or landlord
of the Property and then to the sums secured by the Instrument. Lender or the
receiver shall have access to the books and records used in the operation and
maintenance of the Property and shall be liable to account only for those
rents actually received. Lender shall not be liable to Borrower, anyone
claiming under or through Borrower or anyone having an interest in the
Property by reason of anything done or left undone by Lender under this
paragraph 26.
If the rents of the Property are not sufficient to meet the costs, if any,
of taking control of and managing the Property and collecting the rents, any
funds expended by Lender for such purposes shall become indebtedness of
Borrower to Lender secured by this Instrument pursuant to paragraph 8 hereof.
Unless Lender and Borrower agree in writing to other terms of payment, such
amounts shall be payable upon notice from Lender to Borrower requesting
payment thereof and shall bear interest from the date of disbursement at the
rate stated in the Note unless payment of interest at such rate would be
contrary to applicable law, in which event such amounts shall bear interest
at the highest rate which may be collected from Borrower under applicable
law.
(Page 7 of 9 Pages)
<PAGE>
Any entering upon and taking and maintaining of control of the Property
by Lender or the receiver and any application of rents as provided herein
shall not cure or waive any default hereunder or invalidate any other right
or remedy of Lender under applicable law or provided herein. This assignment
of rents of the Property shall terminate at such time as this Instrument
ceases to secure indebtedness held by Lender.
NON-UNIFORM COVENANTS. Borrower and Lender further covenant and agree as
follows:
27. ACCELERATION: REMEDIES. Upon the occurrence of an Event of Default,
including, but not limited to, the covenants to pay when due any sums secured
by this Instrument, Lender at Lender's option may declare all of the sums
secured by this Instrument to be immediately due and payable without further
demand, and may invoke the power of sale and any other remedies permitted by
applicable law or provided herein. Borrower acknowledges that the power of
sale herein granted may be exercised by Lender without prior judicial
hearing. Borrower has the right to bring an action to assert the
non-existence of a breach or any other defense of Borrower to acceleration
and sale. Lender shall be entitled to collect all costs and expenses incurred
in pursuing such remedies, including, but not limited to, attorney's fees and
costs of documentary evidence, abstracts and title reports.
If Lender invokes the power of sale, Lender shall give written notice to
Trustee of the occurrence of an event of default and of Lender's election to
cause the Property to be sold. Trustee shall record a notice of sale in each
county in which the Property or some part thereof is located and shall mail
copies of such notices in the manner prescribed by applicable law to Borrower
and to the other persons prescribed by applicable law. Trustee shall give
public notice of sale and shall sell the Property according to the laws of
Arizona. Trustee may sell the Property at the time and place and under the
terms designated in the notice of sale in one or more parcels and in such
order as Trustee may determine. Trustee may postpone sale of all or any
parcel of the Property by public announcement at the time and place of any
previously scheduled sale. Lender or Lender's designee may purchase the
Property at any sale.
Trustee shall deliver to the purchaser Trustee's deed conveying the
Property so sold without any covenant or warranty, expressed or implied. The
recitals in the Trustee's deed shall be prima facie evidence of the truth of
the statements made therein. Trustee shall apply the proceeds of the sale in
the following order: (a) to all costs and expenses of the sale, including,
but not limited to, Trustee's and attorney's fees and costs of title
evidence; (b) to all sums secured by this Instrument in such order as Lender,
in Lender's sole discretion, directs; and (c) the excess, if any, to the
person or persons legally entitled thereto, or to the clerk of the superior
court of the county in which the sale took place.
28. RELEASE. Upon payment of all sums secured by this Instrument, Lender
shall release this Instrument. Borrower shall pay Lender's reasonable costs
incurred in releasing this Instrument.
29. SUBSTITUTE TRUSTEE. Lender, at Lender's option, may from time to time
remove Trustee and appoint a successor trustee to any Trustee appointed
hereunder. Without conveyance of the Property, the successor trustee shall
succeed to all the title, power and duties conferred upon the Trustee herein
and by applicable law.
30. TIME OF ESSENCE. Time is of the essence of each covenant of this
Instrument.
31. MAILING ADDRESS. Borrower's mailing address is Borrower's address stated
below.
32. WAIVERS BY SURETY. Any party who has signed this Instrument as a surety
or accommodation party, or who has subjected his property to this Instrument
to secure the indebtedness of another, hereby expressly waives the benefits
of the provision of Arizona Revised Statutes Sections 12-1641 and 12-1642, as
now existing and hereafter amended.
IN WITNESS WHEREOF, Borrower has executed this Instrument or has caused the
same to be executed by its representatives thereunto duly authorized.
WITNESS: BORROWER:
AIMCO/WICKERTREE, L. P.,
a Delaware limited partnership
By: AIMCO/Wickertree, Inc., a
Delaware corporation
/s/ Stacie Taylor
- ------------------------------
By: /s/ Harry Alcock
--------------------------------
Harry Alcock
Vice President
Borrower's Address:
1873 S. Bellaire Street, 17th Floor
Denver, Colorado 80222
(Page 8 of 9 Pages)
<PAGE>
CORPORATE LIMITED PARTNERSHIP ACKNOWLEDGMENT
STATE OF New York New York County ss:
....................
The foregoing instrument was acknowledged before me this October 31, 1997
......................
(date)
by Harry Alcock , Vice President of
................................. .........................................
(name of officer) (office)
AIMCO/WICKERTREE, INC. , a Delaware corporation,
........................... ..................................
(name of corporation) (state)
general partner on behalf of AIMCO/WICKERTREE, L.P., a limited partnership.
...........................,
(name of partnership)
My Commission Expires: /s/ Vernaliz Y. Co
...................................
VERNALIZ Y. CO Notary Public
Notary Public, State of New York
No. 01005085381
Qualified in New York County
Commission Expires Sept. 22, 1999
This instrument was prepared by Allan R. Winn, Esq., Ballard Spahr Andrews &
Ingersoll
.............................................
601 13th Street, N.W., Suite 1000 South,
Washington, D.C. 20005
(Page 9 of 9 Pages)
<PAGE>
RIDER TO MULTIFAMILY INSTRUMENT
(Wickertree)
THIS RIDER TO MULTIFAMILY INSTRUMENT (the "Rider") is made as of the
31st day of October, 1997, and is incorporated into and shall be deemed to
amend and supplement the Multifamily Deed of Trust of the same date (the
"Instrument"), given by the undersigned AIMCO/WICKERTREE, L.P. a Delaware
limited partnership (the "Borrower"), to secure Borrower's Multifamily Note
of the same date (the "Note") with Addendum to Multifamily Note of the same
date (the "Addendum") to GMAC Commercial Mortgage Corporation, a California
corporation, 650 Dresher Road, P.O. Box 1015, Horsham, PA. 19044-8015
[INSERT ADDRESS OF LENDER], and its successors, assigns and transferees (the
"Lender"), covering the property described in the Instrument and defined
therein as the "Property."
The Property is located entirely within the State of Arizona [INSERT NAME
OF STATE IN WHICH THE PROPERTY IS LOCATED] (the "Property Jurisdiction").
The term "Loan Documents" when used in this Rider shall mean, collectively,
the following documents: (i) the Instrument, as modified by this Rider and any
other riders to the Instrument given by Borrower to Lender and covering the
Property; (ii) the Note, as modified by the Addendum and any other addendum to
the Note; and (iii) all other documents or agreements, including any Collateral
Agreements (as defined below) or O&M Agreements (as defined below), arising
under, related to, or made in connection with, the loan evidenced by the Note,
as such Loan Documents may be amended from time to time. Any conflict between
the provisions of the Instrument and the Rider shall be resolved in favor of the
Rider.
The covenants and agreements of this Rider, and the covenants and
agreements of any other riders to the Instrument given by Borrower to Lender
and covering the Property, shall be incorporated into and shall amend and
supplement the covenants and agreements of the Instrument as if this Rider
and the other riders were a part of the Instrument and all references to the
Instrument in the Loan Documents shall mean the Instrument as so amended and
supplemented.
ADDITIONAL COVENANTS. In addition to the covenants and agreements made
in the Instrument, Borrower and Lender further covenant and agree as follows:
A. FUNDS FOR TAXES, INSURANCE AND OTHER CHARGES
Uniform Covenant 2 of the Instrument ("Funds for Taxes, Insurance and Other
Charges") is amended to change the title to "Funds for Taxes, Insurance and
Other Charges; Collateral Agreements." Existing Uniform Covenant 2 is amended to
become Uniform Covenant 2A. The following new Uniform Covenant 2B is added at
the end of Uniform Covenant 2A:
2B REPLACEMENT RESERVE AGREEMENT, COMPLETION/REPAIR AGREEMENT, ACHIEVEMENT
AGREEMENT AND OTHER COLLATERAL AGREEMENTS
(a) REPLACEMENT RESERVE AGREEMENT
Borrower shall deposit with Lender the amounts required by the
Replacement Reserve and Security Agreement (the "Replacement Reserve
Agreement") between Borrower and Lender, dated the date of the Note, at the
times required by the Replacement Reserve Agreement, and shall perform all
other obligations as and when required pursuant to the Replacement Reserve
Agreement.
(b) COMPLETION/REPAIR AGREEMENT
Borrower shall deposit with Lender the amount required by the
Completion/Repair and Security Agreement (the "Completion/Repair Agreement")
between Borrower and Lender (if any), dated the date of the Note, at the time
required by the Completion/Repair Agreement, and shall perform all other
obligations as and when required pursuant to the Completion/Repair Agreement.
(c) ACHIEVEMENT AGREEMENT
Borrower shall perform all of its obligations as and when required pursuant
to the Achievement Agreement between Borrower and Lender (if any), dated the
date of the Note.
(d) COLLATERAL AGREEMENTS
As used herein, the term "Collateral Agreement" shall mean any of the
Replacement Reserve Agreement, the Completion/Repair Agreement, the Achievement
Agreement and any similar agreement which has been entered into between Borrower
and Lender in connection with the loan evidenced by the Note.
B. APPLICATION OF PAYMENTS
Uniform Covenant 3 of the Instrument ("Application of Payments") is amended
to add the following sentence at the end thereof:
Notwithstanding the preceding sentence, (i) Lender shall be permitted to
apply any partial payment received from Borrower in any manner determined by
Lender and in any order of priority of application as determined by Lender,
in Lender's sole discretion, and (ii) upon any breach of any covenant or
agreement of Borrower in the Instrument, the Note or any other Loan Document.
Lender shall be permitted to apply any funds held pursuant to any Collateral
Agreement in any manner which is permitted pursuant to such Collateral
Agreement and in any order of priority of application as determined by
Lender, in Lender's sole discretion.
<PAGE>
C. HAZARD INSURANCE; RESTORATION OF PROPERTY
Uniform Covenant 5 of the Instrument ("Hazard Insurance") is amended to add
the following sentence at the end thereof:
Lender shall not exercise Lender's option to apply insurance proceeds to
the payment of the sums secured by the Instrument if all of the following
conditions are met: (i) Borrower is not in breach or default of any provision of
the Instrument, the Note or any other Loan Document; (ii) Lender determines that
there will be sufficient funds to restore and repair the Property to a condition
approved by Lender; (iii) Lender determines that the rental income of the
Property, after restoration and repair of the Property to a condition approved
by Lender, will be sufficient to meet all operating costs and other expenses,
payments for reserves and loan repayment obligations relating to the Property;
and (iv) Lender determines that restoration and repair of the Property to a
condition approved by Lender will be completed prior to the earlier of either
(1) the maturity date of the Note or (2) within one year of the date of the loss
or casualty to the Property.
D. ENVIRONMENTAL HAZARD PROVISION
In addition to Borrower's covenants and agreements under Uniform Covenant 6
of the Instrument ("Preservation and Maintenance of Property; Leaseholds"),
Borrower further covenants and agrees that Borrower shall not:
(a) cause or permit the presence, use, generation, manufacture,
production, processing, installation, release, discharge, storage
(including aboveground and underground storage tanks for petroleum or
petroleum products), treatment, handling, or disposal of any
Hazardous Materials (as defined below) (excluding the safe and lawful
use and storage of quantities of Hazardous Materials customarily used
in the operation and maintenance of comparable multifamily properties
or for normal household purposes) on or under the Property, or in any
way affecting the Property or its value, or which may form the basis
for any present or future demand, claim or liability relating to
contamination, exposure, cleanup or other remediation of the Property
or;
(b) cause or permit the transportation to, from or across the Property of
any Hazardous Material (excluding the safe and lawful use and storage
of quantities of Hazardous Materials customarily used in the operation
and maintenance of comparable multifamily properties or for normal
household purposes); or
(c) permit, cause or exacerbate any occurrence or condition on the
Property that is or may be in violation of Hazardous Materials
Law (as defined below).
(The matters described in (a), (b) and (c) above are referred to collectively
below as "Prohibited Activities or Conditions.")
Except with respect to any matters which have been disclosed in writing by
Borrower to Lender prior to the date of the Instrument, or matters which have
been disclosed in an environmental hazard assessment report of the Property
received by Lender prior to the date of the Instrument, Borrower represents and
warrants that it has not at any time caused or permitted any Prohibited
Activities or Conditions and to the best of its knowledge, no Prohibited
Activities or Conditions exist or have existed on or under the Property.
Borrower shall take all appropriate steps (including but not limited to
appropriate lease provisions) to prevent its employees, agents, and contractors,
and all tenants and other occupants on the Property, from causing, permitting or
exacerbating any Prohibited Activities or Conditions. Borrower shall not lease
or allow the sublease of all or any portion of the Property for non-residential
use to any tenant or subtenant that, in the ordinary course of its business,
would cause, permit or exacerbate any Prohibited Activities or Conditions, and
all non-residential leases and subleases shall provide that tenants and
subtenants shall not cause, permit or exacerbate any Prohibited Activities or
Conditions.
If any Prohibited Activities or Conditions exist on the Property,
Borrower shall comply in a timely manner with, and cause all employees,
agents, and contractors of Borrower and any other persons present on the
Property to so comply with, (1) any program of operations and maintenance
("O&M Program") relating to the Property that is acceptable to Lender with
respect to one or more Hazardous Materials (which O&M Program may be set
forth in an agreement of Borrower (an "O&M Agreement")) and all other
obligations set forth in any 0&M Agreement(1) and (2) all Hazardous Materials
Laws. Any 0&M Program shall be performed by qualified personnel. All costs
and expenses of the O&M Program shall be paid by Borrower, including without
limitation Lender's fees and costs incurred in connection with the monitoring
and review of the O&M Program and Borrower's performance thereunder. If
Borrower fails to timely commence or diligently continue and complete the O&M
Program and comply with any O&M Agreement, then Lender may, at Lender's
option, declare all of the sums secured by the Instrument to be immediately
due and payable, and Lender may invoke any remedies permitted by paragraph 27
of the Instrument. Without limiting the foregoing, Borrower shall take prompt
remedial action in the event of the discovery of any Prohibited Activities
or(2).
Borrower represents that Borrower has not received, and has no knowledge of
the issuance of, any claim, citation or notice of any pending or threatened
suits, proceedings, orders, or governmental inquiries or opinions involving the
Property that allege the violation of any Hazardous Materials Law ("Governmental
Actions").
Borrower shall promptly notify Lender in writing of: (i) the occurrence of
any Prohibited Activity or Condition on the Property; (ii) Borrower's actual
knowledge of the presence on or under any adjoining property of any Hazardous
Materials which can reasonably be expected to have a material adverse impact on
the Property or the value of the Property, discovery of any occurrence or
condition on the Property or any adjoining real property that could cause any
restrictions on the ownership, occupancy, transferability or use of the Property
under Hazardous Materials Law. Borrower shall cooperate with any governmental
inquiry, and shall comply with any governmental or judicial order which arises
from any alleged Prohibited Activities or Conditions; (iii) any Governmental
Action; and (iv) any claim made or threatened by any third party against
Borrower, Lender, or the Property relating to loss or injury resulting from any
Hazardous Materials. Any such notice by Borrower shall not relieve Borrower of,
or result in a waiver of any obligation of Borrower under this paragraph D.
(1) or other remedial action requested by Lender
(2) Conditions and obtain Lender's prior written approval of such remedial
action.
<PAGE>
Borrower shall pay promptly the costs of any environmental audits, studies
or investigations (including but not limited to advice of legal counsel) and the
removal of any Hazardous Materials from the Property required by Lender as a
condition of its consent to any sale or transfer under paragraph 19 of the
Instrument of all or any part of the Property or any transfer occurring upon a
foreclosure or a deed in lieu of foreclosure or any interest therein, or
required by Lender following a reasonable determination by Lender that there may
be Prohibited Activities or Conditions on or under the Property. Borrower
authorizes Lender and its employees, agents and contractors to enter onto the
Property for the purpose of conducting such environmental audits, studies and
investigations. Any such costs and expenses incurred by Lender (including but
not limited to fees and expenses of attorneys and consultants, whether incurred
in connection with any judicial or administrative process or otherwise) which
Borrower fails to pay promptly shall become immediately due and payable and
shall become additional indebtedness secured by the Instrument pursuant to
Uniform Covenant 8 of the Instrument.
Borrower shall hold harmless, defend and indemnify Lender and its officers,
directors, trustees, employees, and agents from and against all proceedings
(including but not limited to Government Actions), claims, damages, penalties,
costs and expenses (including without limitation fees and expenses of attorneys
and expert witnesses, investigatory fees, and cleanup and remediation expenses,
whether or not incurred within the context of the judicial process), arising
directly or indirectly from (i) any breach of any representation, warranty, or
obligation of Borrower contained in this paragraph D or (ii) the presence or
alleged presence of Hazardous Materials on or under the Property.
The term "Hazardous Materials," for purposes of this paragraph D, includes
petroleum and petroleum products, flammable explosives, radioactive materials
(excluding radioactive materials in smoke detectors), polychlorinated biphenyls,
lead, asbestos in any form that is or could become friable, hazardous waste,
toxic or hazardous substances or other related materials whether in the form of
a chemical, element, compound, solution, mixture or otherwise including, but not
limited to, those materials defined as "hazardous substances," "extremely
hazardous substances," "hazardous chemicals," "hazardous materials," "toxic
substances," "solid waste," "toxic chemicals," "air pollutants," "toxic
pollutants," "hazardous wastes," "extremely hazardous waste," or "restricted
hazardous waste" by Hazardous Materials Law or regulated by Hazardous Materials
Law in any manner whatsoever.
The term "Hazardous Materials Law," for the purposes of this paragraph D,
means all federal, state, and local laws, ordinances and regulations and
standards, rules, policies and other binding governmental requirements and any
court judgments applicable to Borrower or to the Property relating to industrial
hygiene or to environmental or unsafe conditions or to human health including,
but not limited to, those relating to the generation manufacture, storage,
handling, transportation, disposal, release, emission or discharge of Hazardous
Materials, those in connection with the construction, fuel supply, power
generation and transmission, waste disposal or any other operations or processes
relating to the Property, and those relating to the atmosphere, soil, surface
and ground water, wetlands, stream sediments and vegetation on, under, in or
about the Property.
The representations, warranties, covenants, agreements, indemnities and
undertakings of Borrower contained in this paragraph D shall be in addition to
any and all other obligations and liabilities that Borrower may have to Lender
under applicable law.
The representations, warranties, covenants, agreements, indemnities and
undertakings of Borrower contained in this paragraph D shall continue and
survive notwithstanding the satisfaction, discharge, release, assignment,
termination, subordination or cancellation of the Instrument or the payment in
full of the principal of and interest on the Note and all other sums payable
under the Loan Documents or the foreclosure of the Instrument or the tender or
delivery of a deed in lieu of foreclosure or the release of any portion of the
Property from the lien of the Instrument, except with respect to any Prohibited
Activities or Conditions or violation of any of the Hazardous Materials Laws
which first commences and occurs after the satisfaction, discharge, release,
assignment, termination or cancellation of the Instrument following the payment
in full of the principal of and interest on the Note and all other sums payable
under the Loan Documents or which first commences or occurs after the actual
dispossession from the entire Property of the Borrower and all entities which
control, are controlled by, or are under common control with the Borrower (each
of the foregoing persons or entities is hereinafter referred to as a
"Responsible Party") following foreclosure of the Instrument or acquisition of
the Property by a deed in lieu of foreclosure. Nothing in the foregoing sentence
shall relieve the Borrower from any liability with respect to any Prohibited
Activities or Conditions or violation of Hazardous Materials Laws where such
Prohibited Activities or Conditions or violation of Hazardous Materials Laws
commences or occurs, or is present as a result of, any act or omission by any
Responsible Party or by any person or entity acting on behalf of a Responsible
Party.
E. BOOKS, RECORDS AND FINANCIAL INFORMATION
Uniform Covenant 10 of the Instrument ("Books and Records") is amended to
read as follows:
Borrower shall keep and maintain at all times and upon Lender's request.
Borrower shall make available at the Property address, complete and accurate
books of accounts and records in sufficient detail to correctly reflect the
results of the operation of the Property and copies of all written contracts,
leases and other instruments which affect the Property (including but not
limited to all bills, invoices and contracts for electrical service, gas
service, water and sewer service, waste management service, telephone service
and management services). These books, records, contracts, leases and other
instruments shall be subject to examination and inspection at any reasonable
time by Lender. Borrower shall furnish to Lender the following:
<PAGE>
(iv) *promptly upon Borrower's receipt, copies of any complaint filed against
the Borrower or the Property management alleging any violation of fair
housing law, handicap access or the Americans with Disabilities Act and any
final administrative or judicial dispositions of such complaints. If Borrower
shall fail to timely provide the financial statements required by clause (i)
above, Lender shall have the right to have the Borrower's books and records
audited in order to obtain such financial statements, and any such costs and
expenses incurred by Lender which Borrower fails to pay promptly shall become
immediately due and payable and shall become additional indebtedness secured
by the Instrument pursuant to paragraph 8 of the Instrument. *SEE ATTACHED
SUPPLEMENTAL RIDER TO MULTIFAMILY INSTRUMENT
F. TRANSFERS OF THE PROPERTY OR SIGNIFICANT INTERESTS IN BORROWER; TRANSFER
FEES
Uniform Covenant 19 of the Instrument ("Transfers of the Property or
Beneficial Interests in Borrower, Assumption") is amended to read as set forth
below:
TRANSFERS OF THE PROPERTY OR SIGNIFICANT INTERESTS IN BORROWER; TRANSFER FEES
(a) DEFINITIONS
For purposes of the Instrument (and the Rider), the following terms have
the respective meanings set forth below:
(1) The term "Key Principal" means the entities that execute the
Exceptions to Non-Recourse Guaranty or any entity that becomes a Key
Principal after the date of the Note and are identified as such in an
amendment or supplement to the Loan Documents.
(2) The term "Transfer" means a sale, assignment, transfer substitution
or other disposition (whether voluntary or by operation of law) of, or
the granting or creating of a lien, encumbrance or security interest
in, the Property or in ownership interests, and the issuance or other
creation of ownership interests in an entity and the reconstitution of
one type of entity to another type of entity.
(3) A "Significant Interest" in any entity shall mean the following:
(i) if the entity is a general partnership or a joint venture, (A)
any partnership interest in the general partnership, or (B) any
interest of a joint venturer in joint venture;
(ii) if the entity is a limited partnership, (A) any limited
partnership interest in the entity which, together with all other
limited partnership interests in the entity Transferred since the
date of the Note, exceeds 49% of all of the limited partnership
interests in the entity, or (B) any general partnership interest
in the entity;
(iii) if the entity is a limited liability company, (A) any membership
interest which, together with all other membership interest in
the limited liability company Transferred since the date of the
Note, exceeds 49% of all of the membership interests in the
limited liability company;**
(iv) if the entity is a corporation, any voting stock in the
corporation which, together with all other voting stock of the
corporation Transferred since the date of the Note, exceeds 49%
of all of the voting stock of the corporation; or
(v) if the entity is a trust, any beneficial interest in such trust
which, together with all other beneficial interest in the trust
Transferred since the date of the Note, exceeds 49% of all of the
beneficial interests in the trust.
SEE ATTACHED SUPPLEMENTAL RIDER TO MULTIFAMILY INSTRUMENT
(b) ACCELERATION OF THE LOAN UPON TRANSFERS OF THE PROPERTY OR SIGNIFICANT
INTERESTS
Lender may, at Lender's option, declare all sums secured by the Instrument
immediately due and payable and Lender may invoke any remedies permitted by
paragraph 27 of the Instrument if, without the Lender's prior written consent,
any of the following shall occur:
(1) a Transfer of all or any part of the Property or any interest in
the Property;
(2) a Transfer of any Significant Interest in Borrower;
(3) a Transfer of any Significant Interest in a corporation,
partnership, limited liability company, joint venture, or trust
which owns a Significant Interest in the Borrower;
(4) if the Borrower is a trust, or if any trust owns a Significant
Interest in the Borrower, the addition, deletion or substitution
of a trustee of such trust, which addition, deletion or
substitution has not been approved by Lender; or
(5) a Transfer of all or any part of any Key Principal's ownership
interest (other than limited partnership interests) in the
Borrower, or in any other entity which owns, directly or
indirectly, through one or more intermediate entities, an
ownership interest in the Borrower.
SEE ATTACHED SUPPLEMENTAL RIDER TO MULTIFAMILY INSTRUMENT
(c) TRANSFER PERMITTED WITH LENDER'S PRIOR CONSENT
Lender shall consent to a Transfer which would otherwise violate this
paragraph 19 if, prior to the Transfer:
(1) Borrower causes to be submitted to Lender all information
required by Lender to evaluate the transferee and the Property
as if a new loan were being made to the transferee and secured
by the Property, in the case of a Transfer of all or any part
of the Property or an interest therein, or to the Borrower
(as reconstituted after the proposed Transfer), in the case of
a Transfer of Significant Interests;
** or (B) any merger in the entity
<PAGE>
(2) The transferee, in the case of a Transfer of all or any part
of the Property or an interest therein, or the Borrower (as
reconstituted after the proposed Transfer), in the case of a
Transfer of Significant Interests, meet the eligibility,
credit, management and other standards, and the Property meets
the physical maintenance and replacement reserve requirements,
customarily applied by Lender for approval of new borrowers
and properties for loans secured by liens on multifamily
properties;
(3) In the case of a Transfer of all or any part of the Property,
the proposed transferee (i) executes an agreement acceptable
to Lender pursuant to which the proposed transferee agrees,
upon consummation of the Transfer, to assume and to pay and
perform all obligations of the Borrower under the Note, the
Instrument and the other Loan Documents, (ii) causes one or
more individuals acceptable to Lender to execute and deliver
to Lender an amendment or supplement to the Loan Documents as
"Key Principal," and (iii) executes such documents and
otherwise provides such documents and information as required
by Lender in connection with the Transfer;
(4) In the case of a Transfer of a Key Principal's ownership
interest pursuant to paragraph 19(b)(5), (i) the Borrower (as
reconstituted after the proposed Transfer) executes an
agreement acceptable to Lender that ratifies and confirms the
obligations of Borrower under the Note, the Instrument and the
other Loan Documents, (ii) one or more individuals acceptable
to Lender execute and deliver to Lender an amendment or
supplement to the Loan Documents as "Key Principal," and (iii)
the Borrower executes such documents and otherwise provides
such documents and information as required by Lender in
connection with the Transfer; and
(5) Borrower pays to Lender a $3000 non-refundable application fee
and a transfer fee equal to one percent (1%) of the sums
secured by the Instrument. In addition, Borrower shall be
required to reimburse Lender for all of Lender's out of pocket
expenses incurred in connection with the assumption, to the
extent such expenses exceed $3000.
SEE ATTACHED SUPPLEMENTAL RIDER TO MULTIFAMILY INSTRUMENT
(d) NO ACCELERATION OF THE LOAN FOR TRANSFERS CAUSED BY CERTAIN EVENTS
Notwithstanding the foregoing provisions of this covenant, Lender shall not
be entitled to declare sums secured by the Instrument immediately due and
payable or to invoke any remedy permitted by paragraph 27 of the Instrument
solely upon the occurrence of any of the following:
(1) A Transfer that occurs by inheritance, devise, or bequest or
by operation of law upon the death of a natural person who is
an owner of the Property or the owner of a direct or indirect
ownership interest in the Borrower.
(2) The grant of a leasehold interest in individual dwelling units
for a term of two years or less and leases for commercial uses
as long as commercial leases do not exceed 20 percent of the
rentable space of the Property (measured as required by
Lender) and provided that all such leasehold interests do not
contain an option to purchase the Property.
(3) A sale or other disposition of obsolete or worn out personal
property which is contemporaneously replaced by comparable
personal property of equal or greater value which is free and
clear of liens, encumbrances and security interests other than
those created by the Loan Documents.
(4) The creation of a mechanic's or materialmen's lien or judgment
lien against the Property which is released of record or
otherwise remedied to Lender's satisfaction, within 30 days of
the date of creation.
(5) The grant of an easement, if prior to the granting of the
easement the Borrower causes to be submitted to Lender all
information required by Lender to evaluate the easement, and
if Lender determines that the easement will not materially
affect the operation of the Property or Lender's interest in
the Property and Borrower pays to Lender, on demand, all cost
and expenses incurred by Lender in connection with reviewing
Borrower's request.
(e) OTHER PROVISIONS REGARDING TRANSFERS. SEE ATTACHED SUPPLEMENTAL RIDER
TO MULTIFAMILY INSTRUMENT
G. NOTICE
Uniform Covenant 20 of the Instrument ("Notice") is amended to read as
follows:
Each notice, demand, consent, or other approval (collectively, "notices"
and singly, "notice") given under the Note, the Instrument, and any other Loan
Document, shall be in writing to the other party, and if to Borrower, at its
address set forth below Borrower's signature on the Instrument, and if to Lender
at its address set forth at the beginning of the Rider, or at such other address
as such party may designate by notice to the other party and shall be deemed
given (a) three (3) Business Days after mailing, by certified or registered U.S.
mail, return receipt requested, postage prepaid, (b) one (1) Business Day after
delivery, fee prepaid, to a national overnight delivery service, or (c) when
delivered, if personally delivered with proof of delivery thereof.
Borrower and Lender each agrees that it will not refuse or reject delivery
of any notice given hereunder, that it will acknowledge, in writing, the receipt
of the same upon request by the other party and that any notice rejected or
refused by it shall be deemed for all purposes of this Agreement to have been
received by the rejecting party on the date so refused or rejected, as
conclusively established by the records of the U.S. Postal Service or the
courier service. As used in the Instrument, the term "Business Day" means any
day other than a Saturday, a Sunday or any other day on which Lender is not open
for business.
Lender shall not be required to deliver notice to Key Principal in
connection with any notice given to Borrower. However, if Lender shall deliver
notice to Key Principal, such notice shall be given in the manner provided in
this Uniform Covenant 20, at Key Principal's address set forth at the foot of
the Rider.
<PAGE>
H. GOVERNING LAW
In addition to the governing law provision of Uniform Covenant 22 of the
Instrument ("Uniform Multifamily Instrument; Governing Law; Severability"), the
Borrower and Lender covenant and agree as follows:
(a) CHOICE OF LAW
The validity of the Instrument and the other Loan Documents, each of their
terms and provisions, and the rights and obligations of Borrower under the
Instrument and the other Loan Documents, shall be governed by, interpreted,
construed, and enforced pursuant to and in accordance with the laws of the
Property Jurisdiction.
(b) CONSENT TO JURISDICTION
Borrower consents to the exclusive jurisdiction of any and all state and
federal courts with jurisdiction in the Property Jurisdiction over Borrower and
the Borrower's assets. Borrower agrees that such assets shall be used first to
satisfy all claims of creditors organized or domiciled in the United States of
America ("USA") and that no assets of the Borrower in the USA shall be
considered part of any foreign bankruptcy estate.
Borrower agrees that any controversy arising under or in relation to the
Note, the Instrument or any of the other Loan Documents shall be litigated
exclusively in the Property Jurisdiction. The state and federal courts and
authorities with jurisdiction in the Property Jurisdiction shall have exclusive
jurisdiction over all controversies which may arise under or in relation to the
Note, and any security for the debt evidenced by the Note, including without
limitation those controversies relating to the execution, interpretation,
breach, enforcement, or compliance with the Note, the Instrument, or any other
issue arising under, related to, or in connection with any of the Loan
Documents. Borrower irrevocably consents to service, jurisdiction, and venue of
such courts for any litigation arising from the Note, the Instrument or any of
the other Loan Documents, and waives any other venue to which it might be
entitled by virtue of domicile, habitual residence or otherwise.
I. ACCELERATION; REMEDIES
Covenant 27 of the Instrument ("Acceleration; Remedies") is amended to add
the following at the end of the first paragraph:
Upon the occurrence of an Event of Default, (including, but not limited to,
the failure to pay when due sums secured by the Instrument) or any other Loan
Document, Lender, at Lender's option may, in addition to any remedies specified
in this covenant, invoke any other remedies provided in any Collateral
Agreement.
If Borrower is in default under any promissory note (other than the Note)
evidencing a loan (the "Subordinate Loan") secured by a security instrument
(other than the Instrument) covering all or any portion of the Property (the
"Subordinate Instrument") or under any Subordinate Instrument or other loan
document executed in connection with the Subordinate Loan, (and whether or not
the Borrower has obtained the prior approval of Lender to the placement of such
Subordinate Instrument on the Property) which default remains uncured after any
applicable cure period, Borrower also then will be in default under the Note
and the Instrument. In that event, the entire unpaid principal balance of the
Note, accrued interest and any other sums due Lender secured by the Instrument
then will become due and payable, at Lender's option. If Lender exercises this
option to accelerate, Lender will do so in accordance with the provisions of the
Note and the Instrument, and the Lender may invoke any and all remedies
permitted by applicable law, the Note, the Instrument, or any of the other Loan
Documents.
J. SINGLE ASSET BORROWER
Until the debt evidenced by the Note is paid in full, Borrower shall not
(1) acquire any real or personal property other than the Property and assets
(such as accounts) related to the operation and maintenance of the Property, or
(2) operate any business other than the management and operation of the
Property.
SEE ATTACHED SUPPLEMENTAL RIDER TO MULTIFAMILY INSTRUMENT
K. NON-RECOURSE LIABILITY
Subject to the provisions of paragraph L and notwithstanding any other
provision in the Note or Instrument, the personal liability of Borrower, any
general partner of Borrower (if Borrower is a partnership), and any Key
Principal to pay the principal of and interest on the debt evidenced by the
Note and any other agreement evidencing Borrower's obligations under the Note
and the Instrument shall be limited to (1) the real and personal property
described as the "Property" in the Instrument, (2) the personal property
described in and pledged under any Collateral Agreement executed in
connection with the loan evidenced by the Note, (3) the rents, profits,
issues, products and income of the Property received or collected by or on
behalf of Borrower (the "Rents and Profits") to the extent such receipts are
necessary, first, to pay the reasonable expenses of operating, managing,
maintaining and repairing the Property, including but not limited to real
estate taxes, utilities, assessments, insurance premiums, repairs,
replacements and ground rents, if any (the "Operating Expenses") then due and
payable as of the time of receipt of such Rents and Profits, and then, to pay
the principal and interest due under the Note, and any other sums due under
the Instrument or any other Loan Document (including but not limited to
deposits or reserves due under any Collateral Agreement), except to the
extent that Borrower did not have the legal right, because of a bankruptcy,
receivership or similar judicial proceeding, to direct the disbursement of
such sums.
Except as provided in paragraph L, Lender shall not seek (a) any judgment
for a deficiency against Borrower, any general partner of Borrower (if Borrower
is a partnership) or any Key Principal, or Borrower's or any such general
partner's or Key Principal's heirs, legal representatives, successors or
assigns, in any action to enforce any right or remedy under the Instrument, or
(b) any judgment on the Note except as may be necessary in any action brought
under the Instrument to enforce the lien against the Property or to exercise any
remedies under any Collateral Agreement.
<PAGE>
L. EXCEPTIONS TO NON-RECOURSE LIABILITY
If, without obtaining Lender's prior written consent, (i) a Transfer
shall occur which, pursuant to Uniform Covenant 19 of the Instrument, gives
Lender the right, at its option, to declare all sums secured by the
Instrument immediately due and payable, (ii) Borrower shall encumber the
Property with the lien of any Subordinate Instrument in connection with any
financing by Borrower or (iii) Borrower shall violate the single asset
covenants in paragraph J of the Rider and in paragraph D of the Supplemental
Rider any of such events shall constitute a default by Borrower under the
Note, the Instrument and the other Loan Documents and if such event shall
continue for 30 days, paragraph K shall not apply from and after the date
which is 30 days after such event and the Borrower, any general partner of
Borrower (if Borrower is a partnership) and Key Principal (each individually
on a joint and several basis if more than one) shall be personally liable on
a joint and several basis for full recourse liability under the Note and the
other Loan Documents.
Notwithstanding paragraph K, Borrower, any general partner of Borrower
(if Borrower is a partnership) and Key Principal (each individually on a
joint and several basis if more than one), shall be personally liable on a
joint and several basis, in the amount of any loss, damage or cost (including
but not limited to attorneys' fees) resulting from (A) fraud or material
misrepresentation by Borrower or Borrower's agents or employees or any Key
Principal or general partner of Borrower in connection with obtaining the
loan evidenced by the Note, or in complying with any of Borrower's
obligations under the Loan Documents, (B) insurance proceeds, condemnation
awards, security deposits from tenants and other sums or payments received by
or on behalf of Borrower in its capacity as Owner of the Property and not
applied in accordance with the provisions of the Instrument (except to the
extent that Borrower did not have the legal right, because of a bankruptcy,
receivership or similar judicial proceeding, to direct disbursement of such
sums or payments), (C) all Rents and Profits (except to the extent that
Borrower did not have the legal right, because of a bankruptcy, receivership
or similar judicial proceeding, to direct the disbursement of such sums), and
not applied, first, to the payment of the reasonable Operating Expenses as
such Operating Expenses become due and payable, and then, to the payment of
principal and interest then due and payable under the Note and all other sums
due under the Instrument and all other Loan Documents (including but not
limited to deposits or reserves payable under any Collateral Agreement),
(D) Borrower's failure to pay transfer fees and charges due under
paragraph 19(c) of the Instrument, (E) Borrower's failure following a default
under any of the Loan Documents to deliver to Lender on demand all Rents and
Profits, and security deposits (except to the extent that Borrower did not
have the legal right because of a bankruptcy, receivership or similar judicial
proceeding to direct disbursement of such sums), books and records relating to
the Property, or (F) relating to Hazardous Materials or compliance with
Hazardous Materials Laws to the full extent*
No provision of paragraphs K or L shall (i) affect any guaranty or
similar agreement executed in connection with the debt evidenced by the Note,
(ii) release or reduce the debt evidenced by the Note, (iii) impair the right
of Lender to enforce the provisions of paragraph D of Rider, (iv) impair the
lien of the Instrument or (v) impair the right of Lender to enforce the
provisions of any Collateral Agreement.
M. WAIVER OF JURY TRIAL
Borrower and Key Principal (each for himself if more than one) (i) covenant
and agree not to elect a trial by jury with respect to any issue arising under
any of the Loan Documents triable by a jury and (ii) waive any right to trial by
jury to the extent that any such right shall now or hereafter exist. This
waiver of right to trial by jury is separately given, knowingly and voluntarily
with the benefit of competent legal counsel by the Borrower and Key Principal,
and this waiver is intended to encompass individually each instance and each
issue as to which the right to a jury trial would otherwise accrue. Further,
Borrower and Key Principal hereby certify that no representative or agent of the
Lender (including, but not limited to, the Lender's counsel) has represented,
expressly or otherwise, to Borrower of Key Principal that Lender will not seek
to enforce the provisions of this Paragraph M.
* of any losses or damages (including those resulting from diminution in
value of the Property) incurred by Lender as a result of the existence of
such Hazardous Materials or failure to comply with Hazardous Materials Laws
or the obligations of Borrower hereunder relating thereto, (G) intentional
damage to the Property, or (H) failure of Borrower to pay taxes or other
liens with priority over the Multifamily Instrument.
BY SIGNING BELOW, Borrower accepts and agrees to the covenants
and agreements contained in this Rider.
WITNESS: BORROWER:
AIMCO/WICKERTREE, L.P.,
a Delaware limited partnership
By: AIMCO/Wickertree, Inc., a
Delaware corporation
/s/ Stacie Taylor By: /s/ Harry Alcock
------------------------- ---------------------------
Harry Alcock
Vice President
<PAGE>
CORPORATE LIMITED PARTNERSHIP ACKNOWLEDGMENT
State of New York New York County ss:
.....................
The foregoing instrument was acknowledged before me this October 31, 1997
......................
(date)
by Harry Alcock Vice President of
............................................. .........................
(name of officer) (office)
AIMCO/WICKERTREE, INC. , a Delaware corporation,
............................... ..............................
(name of corporation) (state)
general partner on behalf of AIMCO/WICKERTREE, L.P., a limited partnership.
.........................
(name of partnership)
My Commission Expires: /s/ Vernaliz Y. Co
...................................
VERNALIZ Y. CO Notary Public
Notary Public, State of New York
No. 01005085381
Qualified in New York County
Commission Expires Sept. 22, 1999
This instrument was prepared by Allan R. Winn, Esq., Ballard Spahr Andrews &
Ingersoll
............................................
601 13th Street, N.W., Suite 1000 South,
Washington, D.C. 20005
<PAGE>
SUPPLEMENTAL RIDER TO MULTIFAMILY INSTRUMENT
THIS SUPPLEMENTAL RIDER TO MULTIFAMILY INSTRUMENT (the "Supplemental
Rider") is made as of this 31st day of October, 1997, and is incorporated into
and shall be deemed to amend and supplement the Multifamily Mortgage, Deed of
Trust or Deed to Secure Debt as of the same date (the "Instrument") as modified
by the Rider to Multifamily Instrument dated as of the same date (the "Rider"),
given by the undersigned (the "Borrower"), to secure Borrower's Multifamily Note
as of the same date (the "Note") with Addendum to Multifamily Note as of the
same date to GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation,
whose address is 650 Dresher Road, P.O. Box 1015, Horsham, Pennsylvania 19044-
8015 and its successors, assigns and transferees (the "Lender"), covering the
property described in the Instrument and defined therein as the "Property". The
Property is located entirely within the State identified in EXHIBIT A attached
hereto (the "Property Jurisdiction").
The term "Loan Documents" when used in this Supplemental Rider shall
mean, collectively, the following documents: (i) the Instrument as modified
by the Rider, this Supplemental Rider and any other riders to the Instrument
given by Borrower to Lender and covering the Property; (ii) the Note, as
modified by the Addendum; and (iii) all other documents or agreements,
including any Collateral Agreements (as defined in the Rider), or O&M
Agreements (as defined in the Rider), arising under, related to, or made in
connection with, the loan evidenced by the Note, as such loan documents may
be amended from time to time. Any conflict between the provisions of this
Instrument, the Rider and the Supplemental Rider shall be resolved in favor
of the Supplemental Rider.
The term "Net Operating Income" shall mean, during any period, "Gross
Revenues" (as hereinafter defined) less "Operating Expenses". "Gross
Revenues" shall mean all rental received from tenants occupying units in the
Property and receipts from vending machines, recreational facilities and any
and all other operating revenues received from the Property. Gross Revenues
shall not include any cash or other proceeds received by reason of fire or
other casualty insurance, proceeds of rental loss or business interruption
insurance (except to the extent that such proceeds replace the rental payment
which otherwise would have been due to Borrower from tenants of the
Property), forfeited security or other deposits or payments made by tenants
to cancel their leases, proceeds from a taking by eminent domain or
conveyance in lieu thereof, proceeds from a loan or advance, or proceeds from
sale, transfer, assignment or other disposition of any part of the Property
or any interest therein. Gross Revenues shall be determined on the basis of
sound cash basis accounting practices applied on a consistent basis and shall
be adjusted by excluding items of extraordinary, unusual and nonrecurring
income. "Operating Expenses" shall mean all reasonable, ordinary and
necessary expenses actually incurred by Borrower in respect of the ownership,
operation, renting, maintenance, and occupancy of the Property determined on
<PAGE>
the basis of sound cash basis accounting practices applied on a consistent
basis, excluding however, federal, state or local income taxes or other taxes
based on the income of Borrower, depreciation and any other non-cash
expenditures, capital improvements or reserves for such items, other than
underwritten reserves (whether or not collected) required by the Replacement
Reserve and Security Agreement, including deposits which are deferred under such
Agreement), any expense paid or incurred in connection with the sale of all or
any part of the Property or any interest therein, any payment of principal or
interest under the Note and shall be adjusted for extraordinary, unusual, and
nonrecurring expenses.
The covenants and agreements of this Supplemental Rider, and the covenants
and agreements of any other riders to the Instrument given by Borrower to Lender
and covering the Property, shall be incorporated into and shall amend and
supplement the covenants and agreements of the Instrument as if this
Supplemental Rider and the other riders were a part of the Instrument and all
reference to the Instrument in the Loan Documents shall mean the Instrument as
so amended and supplemented.
ADDITIONAL COVENANTS. In addition to the covenants and agreements made in
the Instrument and the Rider, Borrower and Lender further covenant and agree as
follows:
A. SUBSTITUTION OF COLLATERAL.
On and after November 1, 2007, the Borrower may substitute
collateral for the collateral securing the Loan; provided, the substituted
collateral meets or exceeds all of the terms and conditions set forth in
subparagraphs (i) through (vi), inclusive, below: (i) the original principal
balance of the Note shall not exceed 55% of the appraised value (as
determined by an appraisal reasonably satisfactory to Lender) of the proposed
substitution collateral; (ii) the Net Operating Income of the proposed
substitution collateral for the preceding twelve months is not less than 1.75
times the amount of the annual constant payment of principal and interest due
and payable on the Note; (iii) no Event of Default or event which, with the
giving of notice or the passage of time, or both, would constitute an Event
of Default under the Loan Documents shall have occurred and be continuing;
(iv) the proposed substitution collateral and the Borrower meet all the then
applicable underwriting standards and guidelines of Lender for loans on
substantially comparable property with substantially similar loan to value
ratios and debt service coverage ratios as determined by Lender in its sole
but reasonable discretion; (v) if requested by Lender, the Borrower shall
have provided Lender with an opinion of nationally recognized tax counsel, in
form and substance reasonably satisfactory to Lender, that the proposed
substitution does not constitute a "significant modification of a debt
instrument" for purposes of Section 1.1001-3 of the Treasury Regulations
under the Internal Revenue Code (1986) and (vi) the Borrower pays to Lender a
non-refundable application and collateral review fee in connection with such
substitution in the amount of $5,000 plus 25/100ths of one percent (.25%) of
the unpaid principal balance of the Note on the date of substitution, and
reimburses Lender for all of Lender's out of pocket costs and expenses,
including reasonable attorneys' fees and expenses, incurred in connection
with the substitution of collateral. The Borrower's right to substitute
collateral shall terminate during any Substitution Period (defined below)
after two substitutions of collateral have occurred among the transactions
2
<PAGE>
described on Exhibit C attached hereto. The Borrower's right to substitute
collateral on the terms and conditions set forth in this Paragraph A shall be
reinstated on the first day of the next succeeding Substitution Period. Other
than the substitution of collateral permitted above, any substitution of
collateral shall be in the sole and absolute discretion of the Lender.
"Substitution Period" means the one year period from November 1, 2007 to
and including October 31, 2008 and each succeeding one-year period thereafter.
B. LOCKBOX.
(i) Not later than thirty (30) days after the end of each fiscal
quarter of the Borrower (including the fourth fiscal quarter in each year),
Borrower shall deliver to Lender a statement of the Gross Revenues, Operating
Expenses and Net Operating Income for the preceding fiscal quarter and for the
preceding four fiscal quarters for the Property. Each such statement shall be
in form and substance reasonably satisfactory to Lender, and shall be certified
by the chief financial officer or comptroller of Borrower to be true, accurate
and complete in all material respects.
(ii) In the event that (a) a default under the Loan Documents shall
have occurred or (b) Lender shall determine that the Net Operating Income of
the Property was, for the preceding twelve (12) months as reasonably determined
by Lender, less than 1.50 times the amount of the annual constant payment of
principal and interest due and payable on the Note calculated in accordance with
the definition of Net Operating Income on page one of this Supplemental Rider
(the "Debt Service"), then Borrower shall, following demand by Lender,
thereafter cause all Gross Revenues from the Property to be directly deposited
in a lockbox bank account (the "Lockbox") established, administered and
controlled solely by Lender. Such test may be performed by Lender no more
frequently than quarterly. Lender shall hold all funds deposited in the Lockbox
as additional security for the indebtedness secured by the Instrument. All funds
on deposit in the Lockbox shall be held by Lender free of any liens or claims on
the part of creditors of Borrower other than Lender. Borrower shall complete
such forms as may be provided by Lender to Borrower in order to notify the
Postal Service of the Lockbox arrangement. Borrower acknowledges that in such
event, Lender shall have exclusive and unrestricted access to the Lockbox,
including all mail which is delivered thereto. In the event that Lender elects
to establish a Lockbox, Borrower shall notify and direct all tenants of the
Property, and other parties obligated to make any payments to Borrower with
respect to the Property, to make such payments directly into the Lockbox with
Lender in accordance with this Supplemental Rider (such notices are hereinafter
referred to collectively as the "Payment Notices"). The Payment Notices shall
also require that such payments not be made in cash and that such obligors only
send payments and related invoices or statements to the Lockbox (but not other
correspondence). Borrower agrees to execute and deliver to Lender such Payment
Notices as may be requested by Lender to notify such tenants of the Property and
such other parties that may become obligated to make payments to Borrower of the
provisions of this paragraph. Borrower does hereby designate and appoint Lender
its agent and attorney-in-fact for the purpose of executing in the name of
Borrower, addressing and forwarding such notices to such tenants and such other
parties obligated to make any such payments or any portion thereof, which power
of attorney is coupled with an
3
<PAGE>
interest and irrevocable by dissolution or otherwise. After the giving of the
Payment Notices by Lender, Borrower shall not communicate with any such tenant
or any such other party obligated to pay any sums to Borrower for the purpose
of cancelling such notice or directing any such party to make payments
other than in accordance with such notices. Borrower does hereby acknowledge
and agree that the forwarding of such notices by Lender to such tenants and such
other parties constitutes all actions, if any, required to be taken by Lender to
exercise, invoke or perfect its rights to collect the rents, issues and profits
of the Property. Borrower agrees that, after the establishment of the Lockbox,
any Gross Revenues received by Borrower will be promptly delivered by Borrower
to Lender for deposit in the Lockbox, and pending such delivery will be held by
Borrower in trust for Lender.
(iii) Provided no Event of Default or event which, with the
giving of notice or the passage of time or both, would constitute an Event of
Default under the Loan Documents shall have occurred and be continuing, Lender
shall remit to Borrower all funds on deposit in the Lockbox at such time as the
funds on deposit in the Lockbox are sufficient to pay for such month (A) the
principal and interest due and payable on the Note, (B) any deposits payable
pursuant to Uniform Covenant 2 of the Instrument, and (C) any monthly deposits
required pursuant to any Collateral Agreement (collectively the "Payments") .
Lender shall withdraw from the Lockbox any amounts on deposit in the Lockbox to
pay the Payments. The right of Lender to cause all Gross Revenues to be
deposited into the Lockbox shall be suspended at such time as the Borrower
establishes to the satisfaction of Lender that the Net Operating Income of the
Property for the preceding twelve (12) months equals or exceeds 1.50 times the
Debt Service, until such time as the Net Operating Income again falls below such
threshold. The collection of Gross Revenues by Lender under this Section F is
not intended to modify Borrower's obligations under the Loan Documents.
(iv) Upon the occurrence and during the continuance of any Event of
Default, Lender may at any time, without notice or demand, withdraw all or any
amount of funds on deposit in the Lockbox and apply such funds to the payment
of the indebtedness secured hereby in such order as Lender may determine in its
sole discretion.
(v) The forwarding of the Payment Notices to tenants of the Property
and such other parties obligated to make any payments to Borrower directing such
parties to make payments directly into the Lockbox shall not be deemed or
construed to constitute a waiver by Lender or any right or remedy Lender may
have under the Loan Documents to direct such tenants or other parties to make
payments directly to Lender after the occurence of an event of default.
(vi) Borrower hereby irrevocably appoints Lender as its true and
lawful agent and attorney-in-fact for purposes of collecting all items from the
Lockbox, making any and all endorsements on such items as are necessary or
appropriate, and withdrawing funds on deposit in the Lockbox to be applied as
provided in this Instrument.
(vii) Borrower agrees that it shall have no right to use any
amounts on deposit from time to time in the Lockbox except as specifically
provided herein, and that none of the funds on deposit in the Lockbox may be
withdrawn by Borrower from the Lockbox without the prior written consent of
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Lender. No items or funds on deposit in the Lockbox shall at any time be
deemed to be trust funds. All or any of the Lockboxes created pursuant to the
Loan Documents may be maintained by Lender as a single account, and all funds
maintained in such accounts may be commingled, provided that the amounts
credited to and debited from each of such accounts shall be accounted for
separately.
(viii) Borrower agrees to indemnify Lender and its agents from
and against any and all claims, expenses, losses and liabilities growing out of
or resulting from the enforcement of the provisions herein concerning the
Lockbox, except claims, expenses, losses or liabilities resulting from Lender's
gross negligence or willful misconduct. Borrower upon demand shall pay to
Lender or its agent administering the Lockbox a monthly fee in the amount of
one-quarter of one percent (.25%) of the average deposits to the Lockbox during
the immediately preceding month for the administration of the Lockbox. Lender
or its agent shall be entitled to withdraw from the Lockbox after ten (10) days
prior written notice to Borrower, such amounts as and when due; provided,
however, that Borrower shall remain liable for the payment of such amounts in
the event that the amounts on deposit in the Lockbox are not sufficient to pay
such amounts in full as and when due.
(ix) Lender's election to establish a Lockbox in accordance with the
provisions of this paragraph D shall not be deemed an election in lieu of any
other right or remedy under the Loan Documents or otherwise afforded by law or
equity but may be exercised concurrently, independently, or successively, in any
order whatsoever, with any other right or remedy so provided.
C. INSURANCE. Without limitation of the terms and provisions of the
Instrument, Borrower shall, at its expense, procure and maintain, or cause to be
maintained, for the benefit of Borrower and Lender, insurance policies issued
by such insurance companies, in such amounts, in such form and substance, and
with such coverages, endorsements, deductibles and expiration dates as are
acceptable to Lender, providing the following types of insurance covering the
Property:
(i) Borrower shall obtain and maintain, or cause to be maintained,
insurance for Borrower and the Property providing at least the following
coverages:
(a) PROPERTY INSURANCE. Insurance with respect to the Property and
building equipment insuring against any peril included within the classification
"All Risks of Physical Loss" in amounts at all times sufficient to
prevent Lender from becoming a coinsurer within the terms of the applicable
policies and under applicable law, but in any events such insurance shall be
maintained in an amount equal to the full insurable value of the Property and
building equipment, the term "full insurable value" to mean the actual
replacement cost of the Property and building equipment (without taking into
account any depreciation, and exclusive of excavations, footings and
foundations, landscaping and paving) determined annually by an insurer, a
recognized independent insurance broker or an independent appraiser selected
and paid by Borrower and in no event less than the coverage required pursuant
to the terms of any lease. Absent such annual adjustment, each policy shall
contain inflation guard coverage insuring that the policy limit will be
increased over time to reflect the effect of
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inflation. Borrower shall also maintain insurance against loss or damage to
such furniture, furnishings, fixtures, equipment and other items (whether
personalty or fixtures) included in the Property and owned by Borrower from time
to time, to the extent applicable, in the amount of the cost of replacing
the same, in each case, with inflation guard coverage to reflect the effect of
inflation, or annual valuation. Each policy or policies shall contain a
replacement cost endorsement and either an agreed amount endorsement (to avoid
the operation of any co-insurance provisions) or a waiver of any coinsurance
provisions, all subject to Lender's approval. The maximum deductible shall be
$10,000.00;
(b) LIABILITY INSURANCE. Comprehensive general liability insurance,
including personal injury, bodily injury, death and property damage liability,
insurance against any and all normally insurable claims, including all legal
liability to the extent insurable and imposed upon Lender and all court costs
and attorneys' fees and expenses, arising out of or connected with the
possession, use, leasing, operation, maintenance or condition of the Property in
such amounts as are generally available at commercially reasonable premiums and
are generally required by institutional Lenders for properties comparable to the
Property but in no event for a combined single limit of less than
$10,000,000.00. During any construction of the Property, Mortgagor's general
contractor for such construction shall also provide the insurance required in
this Subsection (b). Lender hereby retains the right to periodically review
the amount of said liability insurance being maintained by Borrower and to
require an increase in the amount of said liability insurance should Lender deem
an increase to be reasonably prudent under then existing circumstances;
(c) WORKERS' COMPENSATION INSURANCE. Statutory workers' compensation
insurance with respect to any work on or about the Property covering all persons
subject to the workers' compensation laws of the state in which the Property is
located;
(d) BUSINESS INTERRUPTION. Business interruption and/or loss of
"rental income" insurance in an amount sufficient to avoid any co-insurance
penalty and to provide proceeds which will cover a period of not less than one
(1) year from the date of casualty or loss, the term "rental income" to mean the
sum of (A) the total then ascertainable Rents payable under the leases and (B)
the total ascertainable amount of all other amounts to be received by Borrower
from third parties which are the legal obligation of the tenants, reduced to the
extent such amounts would not be received because of operating expenses not
incurred during a period of non-occupancy of that portion of the Property then
not being occupied. The amount of coverage shall be adjusted annually to reflect
the rents payable during the succeeding twelve (12) month period.
(e) BOILER AND MACHINERY INSURANCE. Broad form boiler and machinery
insurance (without exclusion for explosion) covering all boilers or other
pressure vessels, machinery, and equipment located in, on or about the Property
and insurance against loss of occupancy or use arising from any breakdown in
such amount per accident equal to the replacement value of the improvements
housing the machinery or $2,000,000.00 or such other amount reasonably
determined by Lender. If one or more large HVAC units is in operation at the
Property, "System Breakdowns" coverage shall be required, as
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determined by Lender. Minimum liability coverage per accident must equal the
value of such unit(s);
(f) FLOOD INSURANCE. If required by Lender, flood insurance in an
amount at least equal to the lesser of (A) the minimum amount required, under
the terms of coverage, to compensate for any damage or loss on a replacement
basis (or the unpaid balance of the indebtedness secured hereby if replacement
cost coverage is not available for the type of building insured); or (B) the
maximum insurance available under the appropriate National Flood Insurance
Administration program. The maximum deductible shall be $3,000.00 per building
or a higher minimum amount as required by the Federal Emergency Management
Agency or other applicable law.
(g) During the period of any construction, renovation or alteration
of the Property which exceeds the lesser of 10% of the principal amount of the
Note or $500,000.00, at Lender's request, a completed value, "All Risk"
Builder's Risk form, or "Course of Construction" insurance policy in
non-reporting form for any improvements of the Property under construction,
renovation or alteration in an amount approved by Lender may be required. During
the period of any construction of any addition to the existing Property,
a completed value, "All Risk" Builder's Risk form or "Course of Construction"
insurance policy in non-reporting form, in an amount approved by Lender, shall
be required.
(h) OTHER INSURANCE. Such other insurance with respect to the
Property or on any replacements or substitutions thereof or additions thereto as
may from time to time be required by Lender against other insurable hazards or
casualties which at the time are commonly insured against in the case of
property similarly situated, including, without limitation, sinkhole, mine
subsidence, earthquake and environmental insurance, due regard being given to
the height and type of buildings, their construction, location, use and
occupancy.
(ii) All insurance provided for in Subsection C(i) hereof shall be
obtained under valid and enforceable policies (the "Policies" or in the
singular, the "Policy"), and shall be issued by one or more domestic primary
insurer(s) licensed to do business in the State where the policy issued and
also in the states where the Property is located and having a general policy
rating equal to or greater than the rating required by Fannie Mae as
published from time to time for Delegated Underwriting and Servicing
multifamily loans (each such insurer shall be referred to below as a
"Qualified Insurer"). All insurers providing insurance required by this
Instrument shall be authorized to issue insurance in the state in which the
Property is located. The Policy referred to in Subsection C(i)(b) above shall
name Lender as an additional named insured and the Policy referred to in
Subsection C(i)(a) above shall provide that all proceeds be payable to
Lender. The Policies referred to in Subsection C(i)(a) shall also contain (1)
a standard "non-contributory mortgagee" endorsement or its equivalent
relating, INTER ALIA, to recovery by Lender notwithstanding the negligent or
willful acts or omission of Borrower or Lender and shall name Lender as
mortgagee and loss payee, shall be first payable in case of loss to Lender,
and such mortgagee clauses and lender's loss payable endorsements shall be in
form and substance acceptable to Lender; (2) to the extent available at
commercially reasonable rates, a waiver of subrogation endorsement as to
Lender; and (iii) an endorsement providing for a deductible per loss of an
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<PAGE>
amount not more than that which is customarily maintained by prudent owners of
similar properties in the general vicinity of the Property, but in no event in
excess of $250,000.00. All Policies described in Subsection C(a) above shall
contain (i) a provision that such Policies shall not be cancelled, modified or
terminated, nor shall they expire, without at least thirty (30) days' prior
written notice to Lender in each instance; and (ii) include effective waivers by
the insurer of all claims for Insurance Premiums (defined below) against any
loss payees, additional insureds and named insureds (other than Borrower). In
the event that the Property constitutes a legal non-conforming use under
applicable building, zoning or land use laws or ordinances, the policy shall
include an ordinance or law coverage endorsement which will contain Coverage A:
"Loss Due to Operation of Law" (with a minimum liability limit equal to
Replacement Cost With Agreed Value Endorsement), Coverage B: "Demolition Cost"
and Coverage C: "Increased Cost of Construction" coverages. Certificates of
insurance with respect to all renewal and replacement Policies shall be
delivered to Lender not less than thirty (30) days prior to the expiration date
of any of the Policies required to be maintained hereunder which certificates
shall bear notations evidencing payment of applicable premiums (the "Insurance
Premiums"). Originals or certificates of such replacement Policies shall be
delivered to Lender promptly after Borrower's receipt thereof but in any case
within thirty (30) days after the effective date thereof. If Borrower fails to
maintain and deliver to Lender the original Policies or certificates of
insurance required by this Instrument, upon ten (10) days' prior notice to
Borrower, Lender may procure such insurance at Borrower's sole cost and expense.
(iii) Borrower shall comply with all insurance requirements and shall not
bring or keep or permit to be brought or kept any article upon any of the
Property or cause or permit any condition to exist thereon which would be
prohibited by an insurance requirement, or would invalidate the insurance
coverage required hereunder to be maintained by Borrower on or with respect to
any part of the Property pursuant to this Section C.
(iv) If the Property shall be damaged or destroyed, in whole or in part,
by fire or other casualty, Borrower shall give prompt notice of such damage to
Lender and provided that Borrower shall have received the Net Proceeds, Borrower
shall promptly commence and diligently prosecute the completion of the repair
and restoration of the Property as nearly as possible in the exercise of
commercially reasonable efforts to the condition the Property was in immediately
prior to such fire or other casualty, with such alterations as may be approved
by Lender (the "Restoration") and otherwise in accordance with of this
Instrument.
(v) The insurance coverage required under Section C(i)(a) may be
effected under a blanket policy or policies covering the Property and other
properties and assets not constituting a part of the security hereunder;
provided that any such blanket policy shall specify, except in the case of
public liability insurance, the portion of the total coverage of such policy
that is allocated to the Property, and any sublimit in such blanket policy
applicable to the Property, and shall in any case comply in all other
respects with the requirements of this Section C.
(vi) The insurance coverage required under Subsection C(i)(b) may be
satisfied by a layering of Comprehensive General Liability, Umbrella and Excess
Liability Policies, but in no event will the Comprehensive General
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<PAGE>
Liability policy be written for an amount less than $5,000,000 combined single
limit for bodily injury and property damage liability.
(vii) The delivery to Lender of the insurance policies or the
certificates of insurance as provided above shall constitute an assignment of
all proceeds payable under such insurance as relating to the Property by
Borrower to Lender as further security for the indebtedness secured hereby. In
the event of foreclosure of this Instrument, or other transfer of title to the
Property in extinguishment in part of the secured indebtedness, all right, title
and interest of Borrower in and to all proceeds payable under such policies then
in force concerning the Property shall thereupon vest in the purchaser at such
foreclosure, or in Lender or other transferee in the event of such other
transfer of title if and to the extent Lender retains an insurable interest
therein. Approval of any insurance by Lender shall not be a representation of
the solvency of any insurer or the sufficiency of any amount of insurance.
(viii) Lender shall not be responsible for nor incur any liability for
the insolvency of the insurer or other failure of the insurer to perform, even
though Lender has caused the insurance to be placed with the insurer after
failure of Borrower to furnish such insurance. Borrower shall not obtain
insurance for the Property in addition to that required by Lender without the
prior written consent of Lender, which consent will not be unreasonably withheld
provided that (i) Lender is named insured on such insurance, (ii) Lender
receives complete copies of all policies evidencing such insurance, and (iii)
such insurance complies with all of the applicable requirements set forth
herein.
D. SINGLE ASSET BORROWER. Paragraph J of the Rider is amended to add the
following provisions:
(i) Borrower represents and warrants that is has not and covenants and
agrees that it shall not:
(a) engage in any business or activity other than the ownership,
operation and maintenance of the Property, and activities incidental thereto;
(b) acquire or own any material assets other than (A) the Property,
and (B) such incidental Personal Property as may be necessary for the operation
of the Property;
(c) merge into or consolidate with any person or entity or dissolve,
terminate or liquidate in whole or in part, transfer or otherwise dispose of all
or substantially all of its assets or change its legal structure, without in
each case Lender's consent;
(d) fail to preserve its existence as an entity duly organized,
validly existing and in good standing (if applicable) under the laws of the
jurisdiction of its organization or formation, or without the prior written
consent of Lender, amend, modify, terminate or fail to comply with the
provisions of Borrower's Partnership Agreement, Articles or Certificate
Incorporation, Operating Agreement or similar organizational documents, as the
case may be, as same may be further amended or supplemented, if such amendment,
modification, termination or failure to comply would adversely
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<PAGE>
affect ability of Borrower to perform its obligations hereunder, under the Note
or under the Other Security Documents;
(e) own any subsidiary or make any investment in, any person or
entity without the consent of Lender;
(f) commingle its assets with the assets of any of its general
partners, members, shareholders, affiliates, principals or of any other person
or entity; notwithstanding the foregoing, after depositing Gross Revenues and
all other cash or proceeds received in connection with the Property into an
account owned and controlled exclusively by the Borrower, the Borrower shall be
entitled to deposit funds into, and to cause or permit funds to be disbursed
from, an account maintained by an affiliate of Borrower, provided that such
deposits and disbursements are made substantially in accordance with the terms
of the cash management system disclosed by Borrower to Lender on or before the
date hereof;
(g) incur any debt, secured or unsecured, direct or contingent
(including guaranteeing any obligation), other than the Debt and trade payables
and other obligations incurred in the ordinary course of business, provided same
are paid prior to delinquency;
(h) fail to maintain its records, books of account and bank accounts
separate and apart from those of the general partners, members, shareholders,
principals and affiliates of Borrower, the affiliates of a general partner or
member, or shareholder of Borrower, and any other person or entity;
(i) enter into any contract or agreement with any general partner,
member, shareholder, principal or affiliate of Borrower, Guarantor or
Indemnitor, or any general partner, member, principal or affiliate thereof,
except upon terms and conditions that are intrinsically fair and
substantially similar to those that would be available on an arms-length
basis with third parties other than any general partner, member, shareholder,
principal or affiliate of Borrower, Guarantor or Indemnitor, or any general
partner, member, principal or affiliate thereof;
(j) seek the dissolution or winding up in whole, or in part, of
Borrower;
(k) maintain its assets in such a manner that it will be costly or
difficult to segregate, ascertain or identify its individual assets from those
of any general partner, member, shareholder, principal or affiliate of Borrower,
or any general partner, member, shareholder, principal or affiliate thereof or
any other person;
(l) hold itself out to be responsible for the debts of another
person;
(m) make any loans or advances to any third party, including any
general partner, member, shareholder, principal or affiliate of Borrower, or any
general partner, principal or affiliate thereof;
(n) agree to, enter into or consummate any transaction which would
render Borrower unable to furnish the certification or other evidence that:
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(1) Borrower is not an "employee benefit plan" as defined in
Section 3(3) of Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), which is subject to Title I of ERISA, or a
"governmental plan" within the meaning of Section 3(3) of ERISA;
(2) Borrower is not subject to state statutes regulating
investments and fiduciary obligations with respect to governmental
plans; and
(3) one or more of the following circumstances is true:
(A) Equity interests in Borrower are publicly offered
securities, within the meaning of 29 C.F.R. Section
2510.3-101(b)(2);
(B) Less than 25 percent of each outstanding class of
equity interests in Borrower are held by "benefit plan investors"
within the meaning of 29 C.F.R. Section 2510.3-101(f)(2); or
(C) Borrower qualifies as an "operating company" or a
"real estate operating company" within the meaning of 29 C.F.R.
Section 2510.3-101(c) or (e) or an investment company registered
under The Investment Company Act of 1940.
(o) fail either to hold itself out to the public as a legal entity
separate and distinct from any other entity or person or to conduct its business
solely in its own name in order not (A) to mislead others as to the identity
with which such other party is transacting business, or (B) to suggest that
Borrower is responsible for the debts of any third party (including any general
partner, principal or affiliate of Borrower, or any general partner, principal
or affiliate thereof); notwithstanding the foregoing, Lender acknowledges that
the Borrower may operate the Property through a management agent approved by
Lender which may be an affiliate of the Borrower;
(p) fail to maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations; or
(q) file or consent to the filing of any petition, either voluntary or
involuntary, to take advantage of any applicable insolvency, bankruptcy,
liquidation or reorganization statute, or make an assignment for the benefit of
creditors.
(ii) If Borrower is a limited partnership or a limited liability company,
each general partner or at least one member (the "SPE Member") of Borrower, as
applicable, is a corporation whose sole asset is its interest in Borrower and
each general partner or the SPE Member of Borrower, as applicable, will at all
times comply, and will cause Borrower to comply, with each of the covenants,
terms and provisions contained in Section D(i) as if such representation,
warranty or covenant was made directly by such general partner or SPE Member.
Only the SPE Member may be designated as a manager under the law where the
Borrower is organized.
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E. CONSENT TO RELIEF FROM AUTOMATIC STAY. Borrower hereby agrees that,
in consideration of the making of the loan by Lender to Borrower evidenced by
the Notes, and as a material inducement to Lender to make such loan and to
the Federal National Mortgage Association to acquire such loan from Lender,
in the event Borrower shall (i) file with any bankruptcy court of competent
jurisdiction or be the subject of any petition under the United States
Bankruptcy Code (the "Bankruptcy Code"), (ii) be the subject of any order for
relief issued under the Bankruptcy Code, (iii) file or be the subject of any
petition seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution, or similar relief under any present or future
federal or state act or law relating to bankruptcy, insolvency, or other
relief for debtors, (iv) have sought or consented to or acquiesced in the
appointment of any trustee, receiver, conservator, or liquidator, or (v) be
the subject of any order, judgment, or decree entered by any court of
competent jurisdiction approving a petition filed against such party for any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any present or future federal or state
act or law relating to bankruptcy, insolvency, or relief for debtors, then
(a) Lender shall thereupon be entitled and Borrower irrevocably consents to
relief from any automatic stay imposed by Section 362 of the Bankruptcy Code,
or otherwise, on or against the exercise of the rights and remedies otherwise
available to Lender as provided in the Note and/or Instrument or the Other
Loan Documents, and as otherwise provided by law, and Borrower hereby
irrevocably waives its right to object to such relief and acknowledges that
no reorganization in bankruptcy is feasible; (b) Borrower waives its
exclusive right pursuant to Section 1121(b) of the Bankruptcy Code to file a
plan of reorganization and irrevocably consents to the Lender filing a plan
immediately upon the entry of an order for relief if any involuntary petition
is filed against Borrower or upon the filing of a voluntary petition by the
Borrower; (c) in the event that Lender shall move pursuant to Section 1121(d)
of the Bankruptcy Code for an order reducing the 120 day exclusive period,
Borrower shall not object to any such motion; and (d) Borrower irrevocably
waives its right to demand a turnover of the Property from a receiver
appointed at the request of Lender, and agrees that it is in the best
interest of the creditors pursuant to Section 543(d) of the Bankruptcy Code
for the receiver to continue in possession, custody and control of the
Property.
F. ACCELERATION; REMEDIES. Non-Uniform Covenant 27 of the Instrument
("Acceleration; Remedies") is amended to add the following:
(i) DEFAULT. Upon the occurrence of an Event of Default (as defined in
the Note), Lender may exercise any and all remedies provided under this
Instrument and under any of the other Loan Documents, or any other remedies
available under applicable law, or any one or more of such remedies.
(ii) REMEDIES. Upon the occurrence of any Event of Default and at any
time thereafter:
(a) INDEBTEDNESS DUE. All indebtedness secured by this Instrument
in its entirety shall, at the option of Lender become immediately due and
payable without presentment, demand, notice of intention to accelerate or notice
of acceleration, or other notice of any kind except as otherwise expressly set
forth herein, all of which are hereby expressly WAIVED, and the liens and
security interests created or intended to be
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<PAGE>
created hereby shall be subject to foreclosure, repossession and sale in any
manner provided for herein or provided for by law, as Lender may elect, and
Lender may exercise any and all of its rights under this Instrument, the Note
and the Loan Documents.
(b) LEGAL PROCEEDINGS. Lender shall have the right and power to
proceed by suit or suits in equity or at law, whether for the specific
performance of any covenant or agreement of Borrower contained herein or in aid
of the execution of the powers herein granted, or for foreclosure or the sale of
the Property or any part thereof under the judgment or decree of any court of
competent jurisdiction, or for the enforcement of any other appropriate legal or
equitable remedy.
(c) FORECLOSURE SALE. Lender shall be entitled to institute an
action to foreclose this Instrument as to the total amount declared due and
payable by Lender, together with all of the costs, expenses and disbursements of
the Lender, including, without limitation, a reasonable fee for Lender's
attorneys at all trial and appellate levels, as hereinafter set forth. The
Property may be sold in one parcel, several parcels or groups of parcels, and
Lender shall be entitled to bid at the sale and, if Lender is the highest bidder
for the Property or any part or parts thereof, Lender shall be entitled to
purchase the same. Lender shall have the right, after paying or accounting for
all costs of said sale or sales, to credit the amount of the bid at the
foreclosure sale upon the amount of the obligations (in the order of priority
set forth below) in lieu of cash payment. In case of a foreclosure and sale of
the Property and of the obligations hereby secured, the Lender shall be entitled
to enforce payment of and to receive all amounts then remaining due and unpaid
upon the indebtedness secured by this Instrument from any and all security for
said amounts and from any and all persons or entities (including the Borrower)
under any agreement, guaranty or collateral undertaking to pay any portion of
said amount. The proceeds of any foreclosure sale of the Property shall be
distributed and applied in the order of priority set forth below.
Upon any such foreclosure sale pursuant to the judicial proceedings, the
Lender may bid for and purchase the Property and, upon compliance with the terms
of said sale, may hold, retain and possess and dispose of the Property in its
own absolute right without further accountability to the Borrower.
In any civil action to foreclose the lien hereof, there shall be allowed
and included as part of the indebtedness secured by this Instrument in the order
of judgment for foreclosure and sale all expenditures and expenses which may be
paid or incurred by or on behalf of the Lender for reasonable attorneys' fees,
appraisers' fees, outlays for documentary and expert evidence, stenographers'
charges, publication costs, and costs (which may be estimated as to items to be
expended after entry of said order or judgement) of procuring all such abstracts
of title, title searches and examinations, title insurance policies and similar
data and insurance with respect to the title as the Lender may deem reasonably
necessary either to prosecute such civil action or to evidence to bidders at any
sale which may be had pursuant to such order or judgment the true condition of
the title to, or the value of, the Property.
(iii) APPLICATION OF PROCEEDS, RENTS, ETC. The proceeds of any sale
of, and any rents and other amounts generated by the holding, leasing,
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<PAGE>
operation or other use of the Property shall be applied by the Lender (or the
receiver, if one is appointed) to the extent that funds are so available
therefrom, in the order of priority set forth in the Note.
G. BOOKS AND RECORDS. In addition to the obligations of the Borrower under
paragraph E of the Rider to Multifamily Instrument amending Uniform Covenant 10
of the Instrument ("Books and Records"), the Borrower shall provide the Lender
the following:
(i) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in any
event within 120 days after the close of each fiscal year of any Key
Principal during the term of this Agreement, its audited balance sheet as of
the end of such fiscal year, its audited statement of income, partners'
equity and retained earnings for such fiscal year and its audited statement
of cash flows for such fiscal year, all in reasonable detail and stating in
comparative form the respective figures for the corresponding date and period
in the prior fiscal year, prepared in accordance with GAAP, consistently
applied, and accompanied by a certificate of its independent certified public
accountants to the effect that such financial statements have been prepared
in accordance with GAAP, consistently applied, and that such financial
statements fairly present the results of its operations and financial
condition for the periods and dates indicated, with such certification to be
free of exceptions and qualifications as to the scope of the audit or as to
the going concern nature of the business.
(ii) QUARTERLY FINANCIAL STATEMENTS. As soon as available, and in
any event within 45 days after each of the first three fiscal quarters of any
fiscal year of any Key Principal during the term of this Agreement, its
unaudited balance sheet as of the end of such fiscal quarter and its
unaudited statement of income and retained earnings and its unaudited
statement of cash flows for the portion of the fiscal year ended with the
last day of such quarter, all in reasonable detail and stating in comparative
form the respective figures for the corresponding date and period in the
previous fiscal year, accompanied by a certificate of each Key Principal to
the effect that such financial statements have been prepared in accordance
with GAAP, consistently applied, and that such financial statements fairly
present the results of its operations and financial condition for the periods
and dates indicated.
(iii) MONTHLY PROPERTY STATEMENT. Upon Lender's request, on a
monthly basis within 15 days of the last day of the prior month, a statement
of income and expenses of the Property accompanied by a certificate of
Borrower to the effect that each such statement of income and expenses
fairly, accurately and completely presents the operations of the Property for
the period indicated.
(iv) QUARTERLY PROPERTY STATEMENT. A quarterly operating statement
of the Property detailing the total revenues received, total expenses
incurred, total cost of all capital improvements, total debt service and
total cash flow, together with a balance sheet for such quarter, to be
prepared and certified by Borrower in the form required by Lender, and if
available, any quarterly operating statement and/or balance sheet prepared by
an independent certified public accountant within thirty (30) days after the
close of each fiscal quarter.
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(v) BORROWER'S FINANCIALS. An annual balance sheet and profit
and loss statement of Borrower, in the form required by Lender, prepare and
certified by the respective Borrower, Guarantor and/or Indemnitor, as
applicable, within ninety (90) days after the close of each fiscal year.
(vi) ANNUAL PROPERTY STATEMENTS. On an annual basis within 15 days
of the end of the fiscal year, an annual statement of income and expenses of
the Property accompanied by a certificate of Borrower to the effect that each
such statement of income and expenses fairly, accurately and completely
presents the operations of the Property for the period indicated.
(vii) ANNUAL RENT ROLL. An annual certified rent roll presented on
a quarterly basis consistent with the quarterly certified rent rolls
described above within ninety (90) days after the close of each fiscal year.
(viii) UPDATED RENT ROLLS. Upon Lender's request, a current rent
roll for the Property, showing the name of each tenant, and for each tenant,
the space occupied, the lease expiration date, the rent payable, the rent
paid and any other information requested by Lender and in the form required
by Lender and accompanied by a certificate of Borrower to the effect that
each such rent roll fairly, accurately and completely presents the
information required therein.
(ix) OPERATING BUDGET. An annual operating budget presented on a
monthly basis consistent with the annual operating statement described above
for the Property and all proposed capital replacements and improvements at
least thirty (30) days prior to the start of each calendar year.
(x) SECURITY DEPOSIT INFORMATION. Upon Lender's request, an
accounting of all security deposits held in connection with any lease of any
part of the Property, including the name and identification number of the
accounts in which such security deposits are held, the name and address of
the financial institutions in which such security deposits are held and the
name of the person to contact at such financial institution, along with any
authority or release necessary for Lender to access information regarding
such accounts.
(xi) SECURITY LAW REPORTING INFORMATION. Promptly upon the
mailing thereof to the partners or shareholders of Borrower or any Key
Principal, copies of all financial statements, reports and proxy statements
so mailed and promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements
on Form S-8 or its equivalent) and annual, quarterly or monthly reports
(excluding Form 4, Statement of Changes in Beneficial Ownership, or its
equivalent, unless they reflect a change in control in Owner) which Borrower
or any Key Principal shall have filed with the United States Securities and
Exchange Commission or other Governmental Authorities.
(xii) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, copies
of any reports or management letters submitted to Borrower by its independent
certified public accountants in connection with the examination of its
financial statements made by such accountants (except for reports otherwise
provided pursuant to clause (i) above).
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(xiii) CONDITION OF APARTMENT INVESTMENT AND MANAGEMENT COMPANY.
Borrower shall promptly notify the Lender of any report, event or condition
known to the Borrower that the status of Apartment Investment and Management
Company as a real estate investment trust under Subchapter M of the Internal
Revenue Code has been terminated or brought into question.
(xiv) OTHER INFORMATION. Such other financial statements, including
monthly operating statements and rent rolls, as Lender may reasonably request.
H. TRANSFERS OF THE PROPERTY. Paragraph F of the Rider is amended to add
the following: Until such time as (1) the Loan is assumed by and the Property
transferred to a new borrower who is wholly unrelated to Borrower, (2) Borrower
has received the prior written approval of Lender to such assumption and
transfer and (3) such assumption and transfer have been completed, clauses (a)
(2), (a) (3), (b), (c) (4) and (d) of Section F of the Rider to Multifamily
Instrument shall be of no force and effect and are replaced by and read as set
forth below. At such time as clauses (1), (2) and (3) of the preceding sentence
have been fulfilled, Sections (a) through (e) of this Section H of the
Supplemental Rider to Multifamily Instrument shall be of no further force and
effect and clauses (a) (2), (a) (3), (b), (c) (4) and (d) of Section F of the
Rider to Multifamily Instrument shall be operative and controlling.
(a) DEFINITIONS
For purposes of this Instrument, the following terms have the respective
meanings set forth below:
(i) The term "TRANSFER" means (A) a sale, assignment, pledge,
transfer or other disposition (whether voluntary or by
operation of law) of, or the granting or creating of a lien,
encumbrance or security interest in, any of Borrower's
estate, rights, title or interest in the Property, or any
portion thereof, or (B) a sale, assignment, pledge, transfer
or other disposition of any interest in Borrower, its
General Partner, AIMCO REIT or in AIMCO OP, or (C) the
issuance or other creation of new ownership interests in
Borrower, its General Partner, AIMCO REIT or in AIMCO OP, or
(D) a merger or consolidation of Borrower, its General
Partner, AIMCO REIT or AIMCO OP or (E) the reconstitution of
Borrower, its General Partner, AIMCO REIT or AIMCO OP from
one type of entity to another type of entity.
(ii) A "CHANGE OF CONTROL" shall mean the earliest to occur of:
(A) the date an Acquiring Person becomes (by acquisition,
consolidation, merger or otherwise), directly or indirectly,
the beneficial owner of more than forty percent (40%) of
the total Voting Equity Capital of AIMCO REIT then
outstanding, or (B) the date on which AIMCO REIT shall cease
to hold (whether directly or indirectly through a wholly
owned intermediary entity such as AIMCO-LP, Inc. or AIMCO-GP,
Inc.) at least 50.1% of the limited partnership interests
in AIMCO OP or (C) the date on which AIMCO REIT shall cease
for any reason to own 100% of the Voting Equity Capital
(whether directly or
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indirectly through a wholly owned intermediary entity) (or
any other securities) of the General Partner, or (D) the
date on which the General Partner shall cease for any reason
to be the sole general partner of the Borrower or (E) the
replacement (other than solely by reason of retirement at
age sixty-five or older, death or disability) of more than
50% (or such lesser percentage as is required for
decision-making by the board of directors or trustees, if
applicable) of the members of the board of directors (or
trustees, if applicable) of AIMCO REIT over a one-year
period where such replacement shall not have been approved
by a vote of at least a majority of the board of directors
(or trustees, if applicable) of AIMCO REIT then still in
office who either were members of such board of directors
(or trustees, if applicable) at the beginning of such
one-year period or whose election as members of the board of
directors (or trustees, if applicable) was previously so
approved.
(iii) An "ACQUIRING PERSON" shall mean a "PERSON" or group of
"PERSONS" within the meaning of Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended; PROVIDED,
HOWEVER, that notwithstanding the foregoing, "ACQUIRING
PERSON" shall not be deemed to include any member of the
Borrower Control Group unless such member has, directly or
indirectly, disposed of, sold or otherwise transferred to,
or encumbered or restricted (whether by means of voting
trust agreement or otherwise) for the benefit of an
Acquiring Person, all or any portion of the Voting Equity
Capital of AIMCO REIT directly or indirectly owned or
controlled by such member or such member directly or
indirectly votes all or any portion of the Voting Equity
Capital of AIMCO REIT, directly or indirectly, owned or
controlled by such member for the taking of any action
which, directly or indirectly, constitutes or would result
in a Change of Control, in which event such member of the
Borrower Control Group shall be deemed to constitute an
Acquiring Person to the extent of the Voting Equity Capital
of AIMCO REIT owned or controlled by such member.
(iv) "BORROWER CONTROL GROUP" shall mean Terry Considine, Peter K.
Kompaniez, Richard S. Ellwood, J. Landis Martin, Thomas L.
Rhodes and John D. Smith.
(v) A "PERSON" shall mean an individual, an estate, a trust, a
corporation, a partnership, a limited liability company or
any other organization or entity (whether governmental or
private).
(vi) "SECURITY" shall have the same meaning as in Section 2(1) of
the Securities Act of 1933, as amended.
(vii) "VOTING EQUITY CAPITAL" shall mean Securities of any class or
classes, the holders of which are ordinarily, in the absence
of contingencies, entitled to elect a majority of the board
of directors (or Persons performing similar functions).
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(viii) "AIMCO REIT" shall mean Apartment Investment and Management
Company, a corporation organized and existing under the laws
of the State of Maryland.
(ix) "AIMCO OP" shall mean AIMCO Properties, L.P., a limited
partnership organized and existing under the laws of the
State of Delaware.
(x) "GENERAL PARTNER" shall mean the corporation executing the
Instrument on behalf of the Borrower, which corporation is
organized and existing under the laws of the State
of Delaware.
(b) ACCELERATION OF THE LOAN UPON TRANSFERS OF THE PROPERTY OR SIGNIFICANT
INTERESTS
Subject to clause (c) hereof, Lender may, at Lender's option, declare all
sums secured by this Instrument immediately due and payable and Lender may
invoke any remedies permitted by paragraph 27 of this Instrument if, without
Lender's prior written consent, any of the following shall occur:
(i) a Transfer; or
(ii) a Change in Control.
(c) NO ACCELERATION OF THE LOAN FOR TRANSFERS CAUSED BY CERTAIN EVENTS
Notwithstanding the foregoing provisions of this covenant, Lender shall not
be entitled to declare sums secured by this Instrument immediately due and
payable or to invoke any remedy permitted by paragraph 27 of this Instrument
solely upon the occurrence of any of the following:
(i) A Transfer that occurs by inheritance, devise, or bequest or
by operation of law upon the death of a natural person who
is an owner of an indirect ownership interest in the
Borrower.
(ii) The grant of a leasehold interest in individual dwelling
units for a term of two years or less and leases for
commercial uses provided that (A) commercial leases do not
exceed 5 percent (5%) of (1) the rentable space of the
Property (measured as required by Lender) or (2) the
rental income from the Property, (B) no such commercial
leasehold interest contains an option to purchase the
Property, and (C) all such commercial leasehold
interests, in the aggregate, (1) do not adversely affect
the value of the Property and (2) are coincidental
to the current use of the Property for multifamily
residential purposes.
(iii) A sale or other disposition of obsolete or worn out personal
property which is contemporaneously replaced by comparable
personal property of equal or greater value which is free
and clear of liens, encumbrances and security interests
other than those created by the Loan Documents.
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(iv) The creation of a mechanic's or materialmen's lien or
judgment lien against the Property which is released of
record or otherwise remedied to Lender's satisfaction,
within thirty (30) days of the date of creation.
(v) The grant of an easement, if prior to the granting of the
easement Borrower causes to be submitted to Lender all
information required by Lender to evaluate the easement, and
if Lender determines that the easement will not materially
affect the operation of the Property or Lender's interest in
the Property and Borrower pays to Lender on demand, all
costs and expenses incurred by Lender in connection with
reviewing Borrower's request. Lender shall not unreasonably
withhold its consent to (A) the grant of a utility easement
serving the Property to a publicly operated utility, or (B)
the grant of an easement related to expansion or widening of
roadways, provided that such easement is in form and
substance reasonably acceptable to Lender and does not
materially and adversely affect the access, use or
marketability of the Property.
(vi) The transfer of limited partnership interests in Borrower
provided no Change of Control occurs as a result of such
Transfer.
(vii) The Transfer of shares of common stock, limited partnership
interests or other beneficial or ownership interests or
other forms of securities in AIMCO REIT or AIMCO OP,
and the issuance of all varieties of convertible debt,
equity and other similar securities of AIMCO REIT or AIMCO
OP, and the subsequent Transfer of such securities;
provided, however, that no Change of Control occurs as a
result of such Transfer, either upon such Transfer or upon
the subsequent conversion to equity of such convertible debt
or other securities.
(viii) The issuance by AIMCO REIT or AIMCO OP of additional common
stock, limited partnership interests or other beneficial or
ownership interests, convertible debt, equity and
other similar securities, and the subsequent Transfer
of such convertible debt or securities; provided, however,
that no Change in Control occurs as the result of such
Transfer, either upon such Transfer or upon the subsequent
conversion to equity of such convertible debt or other
securities.
(ix) So long as AIMCO REIT owns 100% of the stock of AIMCO-LP,
Inc., a Transfer of limited partnership interests that
results in AIMCO-LP, Inc. owning not less than 50.1% of the
limited partnership interests in AIMCO OP.
(d) SECONDARY FINANCING. Notwithstanding the foregoing, provided Borrower
is not otherwise in default under this Instrument or under any of the other Loan
Documents, Lender will consent to Borrower obtaining bona fide third party
subordinate debt, either secured or unsecured (the "Secondary Financing") and
the granting of a subordinate lien on the Property to secure such debt so long
as: (i) the unpaid principal balance of the loan and the
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principal balance of the Secondary Financing does not exceed 55% of the then
current appraised value of the Property as confirmed by Lender; (ii) the
combined debt service coverage for both the Loan and the Secondary Financing is
not less than 1.75; and (iii) the Secondary Financing is used solely for the
purposes of renovating and/or making capital improvements to the Property as
approved by Lender. At least 10 days prior to the date Borrower anticipates
obtaining such Secondary Financing, Borrower shall submit to Lender full and
complete copies of any documents to be executed by Borrower to evidence or
secure such Secondary Financing, together with a detailed statement of the
renovation and/or capital improvements to be funded with proceeds of such
Secondary Financing, along with such other matters as Lender, in its reasonable
discretion, shall deem necessary to confirm satisfaction of the foregoing
conditions. Lender may require the Borrower and the subordinate debt holder
(whether secured or unsecured Secondary Financing) to execute a standstill
Subordination Agreement in form and substance satisfactory to Lender in its sole
discretion. Secondary Financing shall not include ordinary trade indebtedness.
(e) OTHER PROVISIONS REGARDING TRANSFERS. The parties acknowledge and
agree that pursuant to the provisions of the this Instrument, Lender may permit
a transfer of an indirect interest in the Borrower where Lender approves the
transferee's creditworthiness. Lender will approve such proposed transferee's
creditworthiness in connection with a transfer of indirect interests in the
Borrower so long as there is no transfer of a direct interest in Borrower or its
General Partner and so long as no "Change of Control" occurs. So long as there
is no transfer of a direct interest in Borrower or its General Partner and so
long as no Change in Control occurs, Lender's consent to the transferee's
creditworthiness in connection with a transfer of indirect interests in the
Borrower shall be deemed automatic and Borrower shall not be required to come to
Lender for consent. Alternatively, if a transfer of either a direct interest in
Borrower or its General Partner or a Change in Control is contemplated, Borrower
must obtain Lender's prior written consent. Nothing contained in this paragraph
is intended to permit, authorize or confer consent to a transfer of all or any
part of any property encumbered by the Instrument.
Lender will not unreasonably withhold its consent to a "Change of Control",
provided that Borrower gives Lender not less than forty-five (45) days prior
written notice of such Change of Control. Borrower acknowledges and agrees that
time is of the essence with respect to such notice and that the remaining
provisions of this paragraph shall be null and void unless such notice is timely
given by Borrower. Lender will not withhold its consent under this paragraph if
Lender determines in its discretion that (A) such acquiring person or entity has
a creditworthiness at least equal to that of Borrower, (B) that such acquiring
person or entity is of sufficient size and sophistication to own, operate and
manage the properties securing the Mortgages and (C) that such acquiring person
or entity has experience that is at least equal to that of Borrower in the
ownership, operation and management of a portfolio of Multifamily Residential
Property that is at least equal in value to the value of the property securing
the Instrument. Lender shall provide Borrower written notice of its decision to
consent or refuse to consent to a Change in Control under this paragraph within
thirty (30) days from the date that Lender determines that it has received all
of the information required by Lender to make the determinations described in
the preceding sentence.
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I. COMMON FACILITIES DISTRICT. Without obtaining the prior written consent
of Lender, Borrower shall not consent to, or vote in favor of, the inclusion of
all or any part of the Property in any Community Facilities District formed
pursuant to the Community Facilities District Act, A.R.S. Section 48-701, ET
SEQ., as amended from time to time. Borrower shall immediately give notice to
Lender of any notification or advice that Borrower may receive from any
municipality or other third party of any intent or proposal to include all or
any part of the Property in a Community Facilities District. Lender shall have
the right to file a written objection to the inclusion of all or any part of the
Property in a Community Facilities District, either in its own name or in the
name of Borrower, and to appear at, and participate in, any hearing with respect
to the formation of any such district.
J. APPOINTMENT OF RECEIVER. Upon an Event of Default and after
obtaining the prior written consent of the Lender, Borrower shall apply for and
obtain, without regard to the adequacy of any security for the Note or the
solvency of the Borrower or any other person or entity, a receiver by any court
of competent jurisdiction to take charge of all the Property, to manage, operate
and carry on any business then being conducted or that could be conducted on the
Property, to carry on, protect, preserve, replace and repair the Property, and
receive and collect all rents and to apply the same to pay the receiver's
expenses for the operation of the Property. Upon appointment of said receiver,
Borrower shall immediately deliver possession of all of the Property to such
receiver. Neither the appointment of a receiver for the Property by any court
at the request of Lender or by agreement with Borrower nor the entering into
possession of all or any part of the Property by such receiver shall constitute
Lender a "mortgagee in possession" or otherwise make Lender responsible or
liable in any manner with respect to the Property or the occupancy, operation or
use thereof. Borrower agrees that Lender shall have the absolute and
unconditional right to the appointment or a receiver in any independent and/or
separate action brought by Lender regardless of whether Lender seeks any relief
in such action other than the appointment of a receiver. In that respect,
Borrower waives any express or implied requirement under common law or A.R.S.
Section 12-1241 that a receiver may be appointed only ancillary to other
judicial or non-judicial relief.
K. ADDITIONAL REMEDIES; FORECLOSURE. In addition to any remedies
provided herein for an Event of Default, Lender shall have all other legal or
equitable remedies allowed under applicable law (including specifically that of
foreclosure of this Instrument as though it were a mortgage). No failure on the
part of Lender to exercise any of its rights hereunder arising upon any Event of
Default shall be construed to prejudice its rights upon the occurrence of any
other or subsequent Event of Default. No delay on the part of Lender in
exercising any such rights shall be construed to preclude it from the exercise
thereof at any time while that Event of Default is continuing. Lender may
enforce any one or more remedies or rights hereunder successively or
concurrently. By accepting payment or performance of any of the obligations
under the Instrument or the Loan Documents after its due date, Lender shall not
thereby waive the agreement contained herein that time is of the essence, nor
shall Lender waive either its right to require prompt payment or performance
when due of the remainder of the obligations under the Loan Documents or its
right to consider the failure to so pay or perform an Event of Default. In any
action by Lender to recover a deficiency judgment
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for any balance due under the Note upon the foreclosure of this Instrument or in
any action to recover obligations secured hereby, and as a material inducement
to making the loan evidenced by the Note, Borrower acknowledges and agrees that
the successful bid amount made at any judicial or nonjudicial foreclosure sale,
if any, shall be conclusively deemed to constitute the fair market value of the
Property, that such bid amount shall be binding against Borrower in any
proceeding seeking to determine or contest the fair market value of the Property
and that such bid amount shall be the preferred alternative means of determining
and establishing the fair market value of the Property. Borrower hereby waives
and relinquishes any right to have the fair market value of the Property
determined by a judge or jury in any action seeking a deficiency judgment or any
action to enforce the obligations pursuant to the Loan Documents secured hereby,
including, without limitation, a hearing to determine fair market value pursuant
to A.R.S. Section 12-1566, Section 33-814, Section 33-725 or Section 33-727.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Supplemental
Rider or have caused the same to be executed by their respective representatives
thereunto duly authorized.
BORROWER:
AIMCO/WICKERTREE, L.P.,
a Delaware limited partnership
By: AIMCO/Wickertree, Inc., a
Delaware corporation
By: /s/ Harry Alcock
-------------------------------------
Harry Alcock
Vice President
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EXHIBIT A
Order Number: 201862
LEGAL DESCRIPTION
That portion of the Northwest quarter of the Northeast quarter of Section 25,
Township 4 North, Range 2 East of the Gila and Salt River Base and Meridian,
Maricopa County, Arizona, described as follows:
COMMENCING at the North quarter corner of said Section 25;
THENCE due South along the centerline of 23rd Avenue 380.03 feet;;
THENCE South 89 DEG. 42' 41" East 33.00 feet to the POINT OF BEGINNING;
THENCE South 89 DEG.42' 41" East 777 feet to the West line of Rose Garden Place,
according to Book 201 of Maps, page 30, records of Maricopa County, Arizona;
THENCE South 00 DEG. 00' 04" East along West line 430.00 feet to the North line
of said subdivision;
THENCE North 89 DEG. 42' 41" West along said North line 777.00 feet;
THENCE North 430.00 feet to the POINT OF BEGINNING;
EXCEPT that portion condemned unto the State of Arizona by judgement entered in
the Arizona Superior Court, in and for the County of Maricopa, a certified copy
of which was recorded in Document No. 93-403106, records of Maricopa County,
Arizona, described as follows:
COMMENCING at the North quarter corner of said Section 25;
THENCE South 00 DEG. 13' 19" East 699.95 feet along the assumed mid-Section
line of said Section 25;
THENCE North 89 DEG. 46' 41" East 33.00 feet to the POINT OF BEGINNING in the
existing East line of the 66.00 foot right-of-way of 23rd Avenue;
THENCE North 05 DEG. 43' 56" East 163.88 feet;
THENCE North 00 DEG. 13' 19" West 107.86 feet;
THENCE North 49 DEG. 24' 47" East 73.56 feet to the North line of the above
described property;
THENCE along said North line North 89 DEG. 59' 51" West 73.04 feet to the
aforesaid East right-of-way line of 23rd Avenue;
THENCE along said East right-of-way line South 00 DEG. 13' 19" East 318.79 feet
to the POINT OF BEGINNING.
<PAGE>
EXHIBIT "B" TO MULTIFAMILY MORTGAGE, DEED OF TRUST OR
DEED TO SECURE DEBT AND FINANCING STATEMENTS
As used herein., the term "Debtor" shall mean and include the terms
"Mortgagor", "Grantor" and "Borrower"; and the term "Creditor" shall mean and
include the terms "Lender", "Mortgagee" and "Secured Party".
This Exhibit "B" is attached to, incorporated by reference in, and forms a
part of, certain documents (collectively, the "Security Documents"), executed
and delivered by Debtor in connection with the refinancing of the Project (as
hereinafter defined), including: (i) a Multifamily Mortgage, Deed of Trust or
Deed to Secure Debt; and (ii) Financing Statements.
This Exhibit "B" refers to the following collateral, which may be now or
hereafter located on the premises of, relate to, or be used in connection with,
the acquisition or refinancing, construction, equipping, repair, ownership,
management or operation of a multifamily rental housing project (the "Project"),
located on the property named and described on Exhibit "A" (the "Property").
l. All materials now owned or hereafter acquired by the Debtor and
intended for construction, reconstruction, alteration and repair of any
building, structure or improvement now or hereafter erected or placed on the
Property, all of which materials shall be deemed to be included within the
Project immediately upon the delivery thereof to the Project.
2. All of the walks, fences, plants, trees, shrubbery, driveways,
fixtures, machinery, apparatus, equipment, appliances, fittings, and other goods
and other personal property of every kind and description whatsoever, now owned
or hereafter acquired by the Debtor and attached to or contained in and used or
usable in connection with any present or future operation of the Project,
including, by way of example rather than of limitation, all lighting, laundry,
incinerating and power equipment; all engines, boilers, machines, motors,
furnaces, compressors and transformers; all generating equipment; all pumps,
tanks, ducts, conduits, wire, switches, electrical equipment and fixtures, fans
and switchboards; all telephone equipment; all piping, tubing, plumbing
equipment and fixtures; all heating, refrigeration, air conditioning, cooling,
ventilating, sprinkling, water, gas, power and communications equipment, systems
and apparatus; all water coolers, water heaters and water closets; all fire
prevention, alarm and extinguishing systems and apparatus; all security and
access control systems and apparatus; all cleaning equipment; all lift, elevator
and escalator equipment and apparatus; all partitions, shades, blinds, awnings,
screens, screen doors, storm doors, storm windows, exterior and interior signs,
antennas, gas fixtures, bathtubs, washers, dryers, sinks, stoves, ranges, ovens,
refrigerators, garbage disposals, dishwashers, cabinets, mirrors, mantles,
pictures, panelling, floor coverings, carpets, rugs, curtains, curtain rods,
draperies and other furnishings and furniture installed or to be installed or
used or usable in the operation of any part of the Project or facilities erected
or to be erected in or upon the Property; and every renewal or replacement
thereof or articles in substitution therefor, whether or not the same are now or
hereafter attached to the Property in any manner; all except for any right,
title or interest therein owned by any tenant (it being agreed that all personal
property owned by the Debtor and placed by it on the Property shall, so far as
permitted by law, be deemed to be affixed to the Property, appropriated to its
use, and covered by each of the Security Documents to which this Exhibit "B" is
attached).
<PAGE>
3. All of the Debtor's right, title and interest in and to any and
all judgments, awards of damages (including but not limited to severance and
consequential damages), payments, proceeds, settlements or other compensation
(collectively, the "Awards") heretofore or hereafter made, including interest
thereon, and the right to receive the same, as a result of, in connection with,
or in lieu of (i) any taking of the Property or any part thereof by the exercise
of the power of condemnation or eminent domain, or the police power, (ii) any
change or alteration of the grade of any street, or (iii) any other injury to or
decrease in the value of the Property or any part thereof (including but not
limited to destruction or decrease in value by fire or other casualty), all of
which Awards, rights thereto and shares therein are hereby assigned to the
Creditor, who is hereby authorized to collect and receive the proceeds thereof
and to give proper receipts and acquittances therefor and to apply, at its
option, the net proceeds thereof, after deducting expenses of collection, as a
credit upon any portion, as selected by the Creditor, of the indebtedness
secured by the Security Documents.
4. All of the Debtor's right, title and interest in and to any and
all payments, proceeds, settlements or other compensation heretofore or
hereafter made, including any interest thereon, and the right to receive the
same from any and all insurance policies covering the Property or any portion
thereof, or any of the other property described herein.
5. The interest of the Debtor in and to all of the rents,
royalties, mineral, oil and gas rights and profits, water, water rights and
water stock appurtenant to the Property, issues, profits, revenues, income,
tenant assistance payments, if any, and other benefits of the Property, or
arising from the use or enjoyment of all or any portion thereof, or from any
lease, agreement or tenant assistance payment contract, if any, pertaining
thereto, and all right, title and interest of the Debtor in and to, and
remedies under, all contract rights, accounts receivable and general
intangibles arising out of or in connection with any and all leases and
subleases of the Property, or any part thereof, and of the other property
described herein, or any part thereof, both now in existence or hereafter
entered into, together with all proceeds (cash and non-cash) thereof; and
including, without limitation, to the extent permitted by law, all cash or
securities deposited thereunder to secure performance by the lessees of their
obligations thereunder.
6. All of the Debtor's rights, options, powers and privileges in
and to (but not the Debtor's obligations and burdens under) any construction
contract, architectural and engineering agreements and management contract
pertaining to construction, development, ownership, equipping and management
of the Property and all of the Debtor's right, title and interest in and to
(but not the Debtor's obligations and burdens under) all architectural,
engineering and similar plans, specifications, drawings, reports, surveys,
plats, permits and the like, contracts for construction, operation and
maintenance of, or provision of services to, the Property or any of the other
property described herein, and all sewer taps and allocations, agreements for
utilities, bonds and the like, all relating to the Property.
7. All intangible personal property, accounts, licenses, permits,
instruments, contract rights, and chattel paper of the Debtor derived from,
or generated or required by, the Property, including but not limited to cash;
accounts receivable; bank accounts; certificates of deposit; securities;
promissory notes; rents; tenant assistance payments (if any; rights (if any)
to amounts held in escrow; insurance proceeds; condemnation rights; deposits;
judgments, liens and causes of
2
<PAGE>
action; warranties and guarantees (but not including syndication proceeds
generated by sale of interests in the Debtor).
8. The interest of the Debtor in and to any cash escrow fund and
in and to any and all funds, securities, instruments, documents and other
property which are at any time paid to, deposited with, under the control of,
or in the possession of the Creditor, or any of its agents, branches,
affiliates, correspondents or others acting on its behalf, which rights shall
be in addition to any right of set-off or right of lien that the Creditor may
otherwise enjoy under applicable law, regardless of whether the same arose
out of or relate in any way, whether directly or indirectly, to the Project
located upon the Property.
9. All inventory, including raw materials, components,
work-in-process, finished merchandise and packing and shipping materials.
10. Proceeds, products, returns, additions, accessions and
substitutions of and to any or all of the above.
11. Any of the above arising or acquired by the Debtor or to which
the Debtor may have a legal or beneficial interest in on the date hereof and at
any time in the future.
12. Any of the above which may become fixtures by virtue of
attachment to the Property.
13. All of the records and books of account now or hereafter
maintained by or on behalf of the Debtor in connection with the Project.
14. All names now or hereafter used in connection with the Project
and the goodwill associated therewith.
3
<PAGE>
EXCEPTIONS TO NON-RECOURSE GUARANTY
(WICKERTREE)
This Exceptions to Non-Recourse Guaranty is entered into as of October 31,
1997, by the undersigned (collectively, the "Key Principal whether one or more),
in order to induce GMAC COMMERCIAL MORTGAGE CORPORATION, a California
corporation (the "Lender") to make a loan to AIMCO/WICKERTREE, L.P., a Delaware
limited partnership (the "Borrower") in the amount of $ 4,231,700.00 (the
"Loan").
RECITALS
A. The Loan is evidenced by a Multifamily Note from Borrower to Lender as
of even date herewith (the "Multifamily Note"), as modified by an Addendum to
Multifamily Note of even date herewith (the "Addendum"). The Loan is secured by
a Multifamily Mortgage, Deed of Trust or Deed to Secure Debt of even date
herewith (the "Multifamily Instrument"), covering the property described in the
Multifamily Instrument (the "Property"). The Multifamily Instrument is amended
and supplemented by a Rider to Multifamily Instrument and a Supplemental Rider
to Multifamily Instrument each as of even date herewith (collectively, the
"Rider").
B. The Multifamily Note, as modified by the Addendum and as further
amended from time to time, shall be referred to in this Exceptions to Non-
Recourse Guaranty as the "Note." The Multifamily Instrument, as modified by the
Rider and as further amended from time to time, shall be referred to in this
Exceptions to Non-Recourse Guaranty as the "Instrument." The term "Loan
Documents" when used in this Exceptions to Non-Recourse Guaranty, shall mean,
collectively, the following documents: (i) the Note, (ii) the Instrument, and
(iii) all other documents or agreements, including any Collateral Agreements (as
defined in the Rider) or O&M Agreement (as defined in the Rider), executed in
connection with the Loan, whether presently existing or hereinafter entered
into, as such Loan Documents may be amended from time to time.
C. Lender is unwilling to make the Loan unless the undersigned Key
Principal executes this Exceptions to Non-Recourse Guaranty.
NOW, THEREFORE, in order to induce Lender to make the Loan evidenced by the
Note and secured by the Instrument, and in consideration thereof, Key Principal
hereby (i) irrevocably and unconditionally guarantees the full and prompt
payment to Lender of all amounts which may from time to time while the Note is
outstanding and unpaid become due and owing by Borrower, whether principal,
interest or other sums, for which Borrower may from time to time, or at any time
be personally liable for payment to Leader under the Note and the Instrument
(due to the applicability of the exceptions to non-recourse liability provisions
as contained in paragraph C of the Addendum and paragraph L of the Rider) (the
"Guaranteed Obligations"), and (ii) agrees to pay, on demand, all costs and
expenses, including reasonable attorneys' fees and disbursements, incurred by
Lender in enforcing its rights under this Exceptions to Non-Recourse Guaranty.
All obligations of Key Principal under the Exceptions to Non-Recourse Guaranty
shall be joint and several among all persons (if more than one) included as a
Key Principal. This Exceptions to Non-Recourse Guaranty is an unconditional
guaranty of payment, and not a guaranty of collection, and may be enforced by
Lender directly against Key Principal without any requirement that Lender must
first exercise its rights against Borrower or any general partner of Borrower or
any collateral or other security for payment of the Note.
The obligations of Key Principal under this Exceptions to Non-Recourse
Guaranty shall be performed without demand by Lender and shall be
unconditional irrespective of the genuineness, validity, regularity or
enforceability of the Note, the Instrument, or any other circumstance which
might otherwise constitute a legal or equitable discharge of a surety or a
guarantor. Key Principal hereby waives the benefit of all principles or
provisions of law, statutory or otherwise, which are or might be in conflict
with the terms of this Exceptions to Non-Recourse Guaranty, and agrees that
the obligations of Key Principal shall not be affected by any circumstances,
whether or not referred to in this Exceptions to Non-Recourse Guaranty, which
might otherwise constitute a legal or equitable discharge of a surety or
guarantor. Key Principal hereby waives the benefits of any right of discharge
under any and all statutes or other laws relating to guarantors or sureties
and any other rights of sureties and guarantors thereunder. Without limiting
the generality of the foregoing, Key Principal hereby waives diligence,
presentment, demand for payment, protest, all notices which may be required
by statute, rule of law or otherwise to preserve intact Lender's rights
against Key Principal under this Exceptions to Non-Recourse Guaranty,
including, but not limited to, notice of acceptance, notice of any amendment
of the Loan Documents, notice of the occurrence of any default, notice of
intent to accelerate, notice of acceleration, notice of dishonor, notice of
foreclosure, notice of protest, notice of the incurring by Borrower of any of
the Guaranteed Obligations, and, generally, all demands, notices and other
formalities of every kind in connection with this Exceptions to Non-Recourse
Guaranty, and all rights to require Lender to (a) proceed against Borrower
or, if Borrower is a partnership, any general partner of Borrower, (b)
proceed against or exhaust any collateral held by Lender to secure the
payment of the Loan, or (c) pursue any other remedy it may now or hereafter
have against Borrower, or, if Borrower is a partnership, any general partner
of Borrower.
Key Principal hereby agrees that, at any time or from time to time and any
number of times, without notice to Key Principal and without affecting the
liability of Key Principal, (a) the time for payment of the principal of or
interest on the Note may be extended or the Note may be renewed in whole or in
part one or more times; (b) the time for Borrower's performance of or compliance
with any covenant or agreement contained in the Note, the
(Page 1 of 3)
<PAGE>
Instrument or any other Loan Document evidencing, securing or governing the
Loan, whether presently existing or hereinafter entered into, may be extended or
such performance or compliance may be waived; (c) the maturity of the Note may
be accelerated as provided therein or in the Instrument, or any other Loan
Document; (d) the Note, the Instrument, or any other Loan Document, may be
modified or amended by Lender and Borrower in any respect, including, but not
limited to, an increase in the principal amount; and (e) any security for the
Loan may be modified, exchanged, surrendered or otherwise dealt with or
additional security may be pledged or mortgaged for the Loan.
If any payment by Borrower is held to constitute a preference under any
applicable bankruptcy or similar laws, or if for any reason Lender is required
to refund any sums to Borrower, such amounts shall not constitute a release of
any liability of Key Principal hereunder. It is the intention of Lender and Key
Principal that Key Principal's obligations hereunder shall not be discharged
except by Key Principal's performance of such obligations and then only to the
extent of such performance.
Key Principal agrees that any indebtedness of Borrower now or hereafter
held by Key Principal is hereby and shall be subordinated to all indebtedness of
Borrower to Lender and any such indebtedness of Borrower shall be collected,
enforced and received by Key Principal, as trustee for Lender, but without
reducing or affecting in any manner the liability of Key Principal under the
other provisions of this Exceptions to Non-Recourse Guaranty.
Key Principal agrees that Lender, in its sole and absolute discretion, may
(a) bring suit against Key Principal, or any one or more of the individuals
constituting Key Principal, and any other guarantor of the Note, jointly and
severally, or against any one or more of them; (b) compromise or settle with any
one or more of the individuals constituting Key Principal for such consideration
as Lender may deem proper; (c) release one or more of the individuals
constituting Key Principal, or any other guarantors of the Note, from liability
thereunder; and (d) otherwise deal with Key Principal and any other guarantor of
the Note, or any one or more of them, in any manner whatsoever, and that no such
action shall impair the rights of Leader to collect the Guaranteed Obligations
from Key Principal. Nothing contained in this paragraph shall in any way affect
or impair the rights or obligations of the Key Principal with respect to any
other guarantor of the Note.
Lender may assign its rights under this Exceptions to Non-Recourse Guaranty
in whole or in part and upon any such assignment, all the terms and provisions
of this Exceptions to Non-Recourse Guaranty shall inure to the benefit of such
assignee to the extent so assigned. The terms used to designate any of the
parties herein shall be deemed to include the heirs, legal representatives,
successors and assigns of such parties; and the term "Lender" shall include, in
addition to Lender, any lawful owner, holder or pledgee of the Note.
Key Principal shall have no right of, and hereby waives any claim for,
subrogation or reimbursement against the Borrower or any general partner of
Borrower by reason of any payment by Key Principal under this Exceptions to
Non-Recourse Guaranty, whether such right or claim arises at law or in equity or
under any contract or statute.
Key Principal hereby waives trial by jury in any action or proceeding
commenced by Lender against Key Principal under this Exceptions to Non-Recourse
Guaranty.
Key Principal hereby waives and agrees not to assert, INTER ALIA: (a) the
benefits of any statutory provision limiting the liability of a surety,
including without limitation the provisions of Sections 12-164 ET SEQ., Arizona
Revised Statutes; and (b) the benefits of any statutory provision limiting the
right of the Lender to recover a deficiency judgment, or to otherwise proceed
against any person or entity obligated for payment of the Note, after any
foreclosure or trustee's sale of any security for the Note, including without
limitation the benefits, if any to a Surety of Arizona Revised Statutes Section
33-814.
THIS EXCEPTIONS TO NON-RECOURSE GUARANTY AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. ALL PRIOR OR CONTEMPORANEOUS
AGREEMENTS, UNDERSTANDINGS, REPRESENTATIONS, AND STATEMENTS, ORAL OR WRITTEN,
ARE MERGED INTO THIS EXCEPTIONS TO NON-RECOURSE GUARANTY AND THE OTHER LOAN
DOCUMENTS. NEITHER THIS EXCEPTIONS TO NON-RECOURSE GUARANTY NOR ANY PROVISION
HEREOF MAY BE WAIVED, MODIFIED, AMENDED, DISCHARGED, OR TERMINATED EXCEPT BY AN
AGREEMENT IN WRITING SIGNED BY THE PARTY AGAINST WHICH THE ENFORCEMENT OF SUCH
WAIVER, MODIFICATION, AMENDMENT, DISCHARGE, OR TERMINATION IS SOUGHT, AND THEN
ONLY TO THE EXTENT SET FORTH IN SUCH AGREEMENT.
Each of the terms and provisions, and rights and obligations of Key
Principal hereunder shall be governed by, interpreted, construed and enforced
pursuant to and in accordance with the laws of the State in which the Property
is located (the "Property Jurisdiction") and the applicable laws of the United
States of America. Key Principal agrees that any controversy arising under or in
relation to this Exceptions to Non-Recourse Guaranty shall be, except as
otherwise provided herein, litigated in the Property Jurisdiction. The local and
federal courts and authorities with jurisdiction in the Property Jurisdiction
shall, except as otherwise provided herein, have jurisdiction over all
controversies which may arise under or in relation to this Exceptions to Non-
Recourse Guaranty, including without limitation those controversies relating to
the execution, jurisdiction, breach, enforcement or compliance with this
Exceptions to Non-Recourse Guaranty. Key Principal irrevocably consents to
service, jurisdiction and venue of such courts for any litigation arising from
the Exceptions to Non-Recourse Guaranty, and waives any other venue
(Page 2 of 3)
<PAGE>
to which it might be entitled by virtue of domicile, habitual residence or
otherwise. Nothing contained herein, however, shall prevent Lender from bringing
any suit, action or proceeding or exercising any rights against Key Principal in
any other jurisdiction. Initiating such suit, action or proceeding or taking
such action in any other jurisdiction shall in no event constitute a waiver of
the agreement contained herein that the laws of the Property Jurisdiction and
the applicable laws of the United States of America shall govern the rights and
obligations of Key Principal and Lender as provided herein or the submission
herein by Key Principal to personal jurisdiction within the Property
Jurisdiction.
Key Principal:
APARTMENT INVESTMENT AND MANAGEMENT
COMPANY, A MARYLAND CORPORATION
By: /s/ Harry Alcock
-------------------------------------
Harry Alcock
Vice President
Address: 1873 S. Bellaire Street
17th Floor
Denver, Colorado 80222
AIMCO PROPERTIES, L.P., A DELAWARE
LIMITED PARTNERSHIP
By: AIMCO-GP, INC., a Delaware
corporation, its General Partner
By: /s/ Harry Alcock
--------------------------------
Harry Alcock
Vice President
Address: 1873 S. Bellaire Street
17th Floor
Denver, Colorado 80222
(Page 3 of 3)
<PAGE>
RESTRICTED STOCK AGREEMENT
(1997 STOCK AWARD AND INCENTIVE PLAN)
RESTRICTED STOCK AGREEMENT, dated as of July 25, 1997 (the
"Agreement"), by and between Apartment Investment and Management Company, a
Maryland corporation (the "Company"), and R. Scott Wesson (the "Recipient").
Capitalized terms used but not otherwise defined in this Agreement shall have
the respective meanings set forth in the Apartment Investment and Management
Company 1997 Stock Award and Incentive Plan (the "Plan").
WHEREAS, on July 25, 1997 (the "Date of Grant") the Compensation
Committee (the "Committee") of the Board of Directors (the "Board") of the
Company granted the Recipient a Restricted Stock Award, pursuant to which the
Recipient shall have the right to purchase shares of the Company's Class A
Common Stock, par value $.01 per share ("Common Stock"), pursuant to and
subject to the terms and conditions of the Plan.
NOW, THEREFORE, in consideration of the Recipient's services to the
Company and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. NUMBER OF SHARES AND PURCHASE PRICE. The Company hereby
grants the Recipient a Restricted Stock Award (the "Stock Award") to purchase
9,000 shares of Common Stock (the "Restricted Shares") at a purchase price
per share equal to $30.00 (the "Purchase Price"), pursuant to the terms of
this Agreement and the provisions of the Plan.
2. PERIOD OF STOCK AWARD AND PURCHASE OF SHARES.
(a) Unless the Stock Award is previously terminated pursuant to
this Agreement or the Plan, the Stock Award shall terminate 60 days from the
Date of Grant (the "Expiration Date"). On the Expiration Date, all rights of
the Recipient hereunder shall cease.
(b) The Recipient shall make payment for the Restricted Shares in
an amount equal to the Purchase Price; PROVIDED THAT, the Company shall loan
to the Recipient the amount set forth on the Recipient's Signature Page to
this
<PAGE>
Agreement, and the Recipient's obligation to pay for the Restricted Shares
may be satisfied by the proceeds of such loan. The obligation of the
Recipient to repay such loan shall be evidenced by the execution and delivery
to the Company of a Secured Promissory Note in the form of Exhibit A hereto
(the "Note") for the amount of such loan and a Security and Pledge Agreement
in the form of Exhibit B hereto (the "Pledge Agreement"). Stock certificates
representing the Restricted Shares, registered in the name of the Recipient,
will be delivered to the Recipient as soon as practicable and immediately
redelivered by the Recipient to the Company pursuant to such Pledge Agreement.
3. NONTRANSFERABILITY OF AWARD. Awards shall not be transferable
by a Participant except by will or the laws of descent and distribution or,
if then permitted under Rule 16b-3, pursuant to a qualified domestic
relations order as defined under the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder,
and shall be exercisable during the lifetime of a Participant only by such
Participant or his guardian or legal representative.
4. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement and the Plan contain the
entire understanding and agreement of the Company and the Recipient
concerning the subject matter hereof, and supersede all earlier negotiations
and understandings, written or oral, between the parties with respect thereto.
(b) CAPTIONS. The captions and section numbers appearing in this
Agreement are inserted only as a matter of convenience. They do not define,
limit, construe or describe the scope or intent of the provisions of this
Agreement.
(c) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which when signed by the Company or the Recipient will be deemed an
original and all of which together will be deemed the same agreement.
(d) NOTICES. Any notice or communication having to do with this
Agreement must be given by personal delivery or by certified mail, return
receipt requested,
2
<PAGE>
addressed, if to the Company or the Committee, to the attention of the Chief
Financial Officer of the Company at the principal office of the Company and,
if to the Recipient, to the Recipient's last known address contained in the
personnel records of the Company.
(e) SUCCESSION AND TRANSFER. Each and all of the provisions of
this Agreement are binding upon and inure to the benefit of the Company and
the Recipient and their successors, assigns and legal representatives;
provided, however, that the Stock Award granted hereunder shall not be
transferable by the Recipient (or the Recipient's successor or legal
representative) other than by will or by the laws of descent and distribution
and may be exercised during the lifetime of the Recipient, only by the
Recipient or by his or her guardian or legal representative.
(f) AMENDMENTS. Subject to the provisions of the Plan, this
Agreement may be amended or modified at any time by an instrument in writing
signed by the parties hereto.
(g) GOVERNING LAW. This Agreement and the rights of all persons
claiming hereunder will be construed and determined in accordance with the
laws of the State of Maryland without giving effect to the choice of law
principles thereof.
(h) PLAN CONTROLS. This Agreement is made under and subject to
the provisions of the Plan, and all of the provisions of the Plan are hereby
incorporated by reference into this Agreement. In the event of any conflict
between the provisions of this Agreement and the provisions of the Plan, the
provisions of the Plan shall govern. By signing this Agreement, the
Recipient confirms that he or she has received a copy of the Plan and has had
an opportunity to review the contents thereof.
(i) NO GUARANTEE OF CONTINUED SERVICE. The Recipient acknowledges
and agrees that nothing herein, including the opportunity to make an equity
investment in the Company, shall be deemed to create any implication
concerning the adequacy of the Recipient's services to the Company or any of
its subsidiaries or shall be construed as an agreement by the Company or any
of its subsidiaries, express or implied, to employ the Recipient or contract
for the Recipient's services, to restrict the right of the
3
<PAGE>
Company or any of its subsidiaries to discharge the Recipient or cease
contracting for the Recipient's services or to modify, extend or otherwise
affect in any manner whatsoever, the terms of any employment agreement or
contract for services that may exist between the Recipient and the Company or
any of its subsidiaries.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
By: /s/ Leann Morein
-----------------------------------
Name: Leann Morein
---------------------------------
Title: Senior Vice President and
Chief Financial Officer
--------------------------------
Recipient:
R. Scott Wesson
---------------------------------------
(Print Name of Recipient)
4
<PAGE>
RECIPIENT SIGNATURE PAGE
By: /s/ R. Scott Wesson
------------------------------
Name of Recipient: R. Scott Wesson
Position in the Company: Senior Vice President - Chief Information Officer
Address:
No. of Shares: 9,000
Purchase Price: $270,000
Loan: $270,000
I, the undersigned, being the spouse of the above signed
Recipient, hereby represent that I have read and understand this Agreement,
the Pledge Agreement and the Stock Subscription Agreement, and hereby agree
to be bound by the provisions hereof and thereof and of the agreements and
instruments executed by the Recipient pursuant hereto or thereto. Without
limiting the foregoing, I consent to the Recipient's subscription, purchase
and payment for Common Stock pursuant hereto.
/s/ R. Scott Wesson
-------------------
5
<PAGE>
EXHIBIT A
SECURED PROMISSORY NOTE
$270,000 Denver, Colorado
- --------- July 25, 1997
FOR VALUE RECEIVED, R. Scott Wesson (the "Borrower"), hereby
promises to pay to the order of Apartment Investment and Management Company,
a Maryland corporation (the "Lender"), the principal sum of TWO HUNDRED
SEVENTY THOUSAND DOLLARS ($270,000) in lawful money of the United States of
America, on July 24, 2007 (the "Repayment Date"), together with accrued and
unpaid interest thereon from the date hereof.
1. INTEREST RATE. The outstanding principal amount of this Note,
together with all accrued and unpaid interest thereon, shall bear interest at
a rate per annum equal to 7.25%; provided, however, that if the Borrower is
not an employee of the Lender or one of its affiliates on the date on which
any principal payment is made, such principal amount, together with all
accrued and unpaid interest thereon, shall bear interest at a rate per annum
equal to 9.00% from the date hereof.
2. INTEREST PAYMENTS. Interest payments on the Note shall be
payable quarterly on March 1, June 1, September 1 and December 1 of each year
through the Repayment Date. Interest shall be calculated on the basis of a
year comprised of twelve (12) thirty (30) day months. Each payment on this
Note shall be credited first to interest on past due interest, then to past
due interest, then to accrued interest and then to principal.
3. METHOD OF PAYMENT. All payments hereunder shall be made by
certified or bank cashier's check at 1873 South Bellaire Street, Denver,
Colorado 80222, or at such other place as the Lender shall designate to the
Borrower in writing. If any payment of principal or interest on this Note is
due on a day which is not a Business Day, such payment shall be due on the
next succeeding Business Day, and such extension of time shall be taken into
account in calculating the amount of interest payable under this Note.
"Business Day" means any day other than a Saturday, Sunday or legal holiday
in the State of Colorado.
4. PREPAYMENT. The Borrower shall have the right to prepay the
principal amount hereof in full or in part, together with all accrued
interest on the amount prepaid to the date of such prepayment, at any time
without penalty.
<PAGE>
5. TERMINATION OF EMPLOYMENT. Upon the occurrence of the
termination for any reason of the Borrower's employment with the Lender or
its affiliates (a "Termination Event"), the Lender shall, by notice in
writing to the Borrower, declare this Note and the principal of and accrued
interest on this Note and all other charges owing to the Lender to be, and
the same shall upon such notice forthwith become, due and payable on the
thirtieth day following such Termination Event; provided, however, that, if
such Termination Event occurs on or after a Change in Control (as defined
herein), such amounts shall not be due and payable prior to the last day of
the twelve (12) month period following such Termination Event.
6. SECURITY. Pursuant to the Security and Pledge Agreement,
dated as of the date hereof (the "Security Agreement"), by and between the
Lender and the Borrower, the obligations of the Borrower hereunder are
secured by the Collateral (as defined in the Security Agreement), and the
holder of this Note is entitled to the benefits of the Collateral.
7. LIMITED RECOURSE. Except for recourse against the Collateral
as provided in the Security and Pledge Agreement, recourse for the payment of
the principal of or interest on this Note or for any claim based hereon
(including costs of collection) against the Borrower shall be limited to an
amount equal to (a) 25% of the original principal amount of this Note, less
(b) any prepayments of the principal amount of this Note, all liability in
excess of such amount being, by the acceptance hereof and as part of the
consideration for the issue hereof, expressly waived and released.
8. EVENTS OF DEFAULT. Each of the following events shall
constitute an "Event of Default" hereunder (whether it shall be voluntary or
involuntary or occur or be effected by operation of law or otherwise): (i)
the Borrower's failure to pay, within 15 days after the date when such
payment is due, any payment of principal or interest on this Note; (ii) the
Borrower's failure to observe or perform any covenant or agreement contained
in this Note (other than that set forth in clause (i) above) or the Security
Agreement; (iii) if any representation, warranty, certification or statement
made by the Borrower in this Note, the Security Agreement or in any
certificate or other document delivered pursuant to this Note or the Security
Agreement shall prove to have been incorrect in any material respect when
made or deemed made; (iv) the insolvency of the Borrower; (v) the appointment
of a receiver or a trustee of all or part of the Borrower's property; (vi) an
assignment for the benefit of the Borrower's creditors; (vii) the filing of a
petition in bankruptcy by or against the Borrower; (viii) the commencement of
any proceeding by or against the Borrower under any bankruptcy or insolvency
law or any law relating to the relief of debtors or readjustment of
indebtedness; (ix) the appointment of a receiver, custodian, trustee or
liquidator for any part of the assets or property of the Borrower; (x) the
failure of the Borrower generally to pay his or her debts as they become due;
and (xi) the failure of the Lender to have a first priority security interest
in the Collateral.
9. REMEDIES.
(a) Upon the occurrence of any Event of Default, the holder of
this Note may, by notice in writing to the Borrower, declare this Note and
the principal of and accrued interest
2
<PAGE>
on this Note and all other charges owing to the Lender to be, and the same
shall upon such notice forthwith become, due and payable. Upon the
occurrence of an Event of Default, the holder of this Note may, in addition
to all rights and remedies available to it at law, exercise any or all of its
rights under the Security Agreement.
(b) No failure or delay by the holder of this Note in exercising
any remedy, right, power or privilege under this Note or the Security
Agreement shall operate as a waiver of such remedy, right, power or
privilege, nor shall any single or partial exercise of such remedy, right,
power or privilege preclude any other or further exercise of such remedy,
right, power or privilege. No remedy, right, power or privilege conferred
upon or reserved to the holder of this Note by this Note or the Security
Agreement is intended to be exclusive of any other remedy, right, power or
privilege provided or permitted by this Note, the Security Agreement or by
law, but each shall be cumulative and in addition to every other remedy,
right, power or privilege so provided or permitted and each may be exercised
concurrently or independently from time to time and as often as may be deemed
expedient by the holder of this Note. Any provision of this Note which is
prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
of this Note.
(c) The holder of this Note shall have the right, at its option,
to declare the entire unpaid principal balance of this Note, irrespective of
the maturity date of this Note, immediately due and payable, together with
accrued interest, if the Borrower (or any affiliate of the Borrower) sells,
transfers or disposes of any portion of the Collateral identified in the
Security Agreement.
Notwithstanding the above, if an Event of Default first occurs on
or prior to the end of the twelve (12) month period following a Change in
Control, the holder of this Note may not cause the Note or the principal of
or the accrued interest on this Note to become due and payable prior to the
second anniversary of a Change in Control, or the Repayment Date, if earlier.
10. COSTS OF COLLECTION. Upon the failure of the Borrower to pay
any amount due hereunder as and when due, the Borrower shall pay on demand
any and all costs and expenses (including, without limitation, all court
costs and attorneys' fees) incurred by the holder hereof in connection with
the collection of any outstanding principal balance and interest accrued
hereunder (whether or not suit is filed to enforce the terms hereof), and in
connection with the enforcement of any rights or remedies provided for
pursuant to this Note and the Security Agreement. If not paid on demand, all
such costs and expenses automatically shall be added to the remaining
principal balance hereunder as of the date immediately following the date of
such demand.
11. CHANGE IN CONTROL. For purposes of this Note, "Change in
Control" shall mean the occurrence of any of the following events:
3
<PAGE>
(a) an acquisition (other than directly from the Lender) of
any voting securities of the Lender (the "Voting Securities) by any "person"
(as the term "person" is used for purposes of Section 13(d) or Section 14(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
immediately after which such person has "beneficial ownership" (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) ("Beneficial
Ownership") of 20% or more of the combined voting power of the Lender's then
outstanding Voting Securities; provided, however, in determining whether a
Change in Control has occurred, Voting Securities that are acquired in a
Non-Control Acquisition (as hereinafter defined) shall not constitute an
acquisition that would cause a Change in Control. "Non-Control Acquisition"
shall mean an acquisition by (A) an employee benefit plan (or a trust forming
a part thereof) maintained by (1) the Lender or (2) any corporation,
partnership or other person of which a majority of its voting power or its
equity securities or equity interest is owned directly or indirectly by the
Lender or in which the Lender serves as a general partner or manager (a
"Subsidiary"), (B) the Lender or any Subsidiary, or (C) any person in
connection with a Non-Control Transaction (as hereinafter defined);
(b) the individuals who constitute the Board of Directors of
the Lender as of the date hereof (the "Incumbent Board") cease for any reason
to constitute at least two-thirds (2/3) of the Board of Directors; provided,
however, that if the election, or nomination for election by the Lender's
stockholders, of any new director was approved by a vote of at least
two-thirds (2/3) of the Incumbent Board, such new director shall be
considered as a member of the Incumbent Board; provided, further, that no
individual shall be considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an actual or
threatened "election contest" (as described in Rule 14a-11 promulgated under
the Exchange Act) (an "Election Contest") or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than
the Board of Directors (a "Proxy Contest") including by reason of any
agreement intended to avoid or settle any Election Contest or Proxy Contest;
or
(c) approval by stockholders of the Lender of: (A) a merger,
consolidation, share exchange or reorganization involving the Lender, unless
(1) the stockholders of the Lender, immediately before such merger,
consolidation, share exchange or reorganization, own, directly or indirectly
immediately following such merger, consolidation, share exchange or
reorganization, at least 80% of the combined voting power of the outstanding
voting securities of the corporation that is the successor in such merger,
consolidation, share exchange or reorganization (the "Surviving Company") in
substantially the same proportion as their ownership of the Voting Securities
immediately before such merger, consolidation, share exchange or
reorganization, (2) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for such
merger, consolidation, share exchange or reorganization constitute at least
two-thirds (2/3) of the members of the board of directors of the Surviving
Company, and (3) no persons (other than the Lender or any Subsidiary, any
employee benefit plan (or any trust forming a part thereof) maintained by the
Lender, the Surviving Company or any Subsidiary, or any person who,
immediately prior to such merger, consolidation, share exchange or
reorganization had Beneficial Ownership of 15% or more of the then
outstanding Voting Securities has Beneficial Ownership of 15% or more of the
4
<PAGE>
combined voting power of the Surviving Company's then outstanding voting
securities (a transaction described in clauses (1) through (3) is referred to
herein as "Non-Control Transaction"); (B) a complete liquidation or
dissolution of the Lender; or (C) an agreement for the sale or other
disposition of all or substantially all of the assets of the Lender to any
person (other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur solely because any person (a "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the outstanding Voting
Securities as a result of the acquisition of Voting Securities by the Lender
that, by reducing the number of Voting Securities outstanding, increases the
proportional number of shares Beneficially Owned by such Subject Person,
provided that if a Change in Control would occur (but for the operation of
this sentence) as a result of the acquisition of Voting Securities by the
Lender, and after such share acquisition by the Lender, such Subject Person
becomes the Beneficial Owner of any additional Voting Securities that
increases the percentage of the then outstanding Voting Securities
Beneficially Owned by such Subject Person, then a Change in Control shall
occur.
12. WAIVER. The Borrower hereby waives any right it might
otherwise have to require notice or acceptance by any other person of its
obligations or liabilities under this Note which are unconditional and
absolute and waives diligence, presentment, demand of payment, protest and
notice with respect to all of the obligations of the Borrower under this Note
and with respect to any action under this Note and all other notices and
demands whatsoever, except as specifically provided for in this Note. This
Note may be amended, and the observance of any term of this Note may be
waived, with (and only with) the written consent of the Lender.
13. GOVERNING LAW. This Note shall be governed by and construed
in accordance with the laws of the State of Colorado.
14. ASSIGNMENT OR PLEDGE OF NOTE. The Lender shall promptly
notify the Borrower of any endorsement, assignment, pledge or hypothecation
of this Note to a person not affiliated with the Lender.
15. LOSS, MUTILATION, ETC. Upon notice from the holder of this
Note to the Borrower of the loss, theft, destruction or mutilation of this
Note, and upon receipt of an indemnity reasonably satisfactory to the
Borrower from the holder of this Note or, in the case of mutilation hereof,
upon surrender of the mutilated Note, the Borrower will make and deliver a
new note of like tenor in lieu of this Note.
16. NOTICES. All notices and other communications required or
permitted under this Note shall be in writing and shall be personally
delivered or sent by certified first class United States mail, postage
prepaid, return receipt requested, and if mailed and shall be deemed to have
been received on the third business day after deposit in the mail, addressed
to the Lender, Apartment Investment and Management Company, 1873 South
Bellaire Street, 17th Floor, Denver, Colorado 80222, Attention: Chief
Financial Officer, or to the Borrower at the
5
<PAGE>
address set forth below the Borrower's signature. Notice of any change of
either party's address shall be given by written notice in the manner set
forth in this paragraph.
6
<PAGE>
IN WITNESS WHEREOF, the Borrower has executed this Note on the date
first above written.
BORROWER:
___________________________
(Signature of Borrower)
___________________________
(Print or Type Name)
___________________________
(Address)
___________________________
(City, State, Zip Code)
___________________________
(Telephone Number)
7
<PAGE>
EXHIBIT B
SECURITY AND PLEDGE AGREEMENT
SECURITY AND PLEDGE AGREEMENT, dated as of July 25, 1997 (the
"Agreement"), by and between R. Scott Wesson (the "Pledgor") and Apartment
Investment and Management Company, a Maryland corporation (the "Pledgee").
WHEREAS, in consideration for the Pledgee's loan of $270,000 to
the Pledgor, the Pledgor is delivering to the Pledgee a duly executed
promissory note, dated the date hereof (such note as it may be amended,
modified or supplemented from time to time together with any replacement
thereof, the "Note"), in the principal amount of $270,000 in favor of the
Pledgee; and
WHEREAS, the Pledgor has agreed to pledge the Pledged Shares (as
defined below) to the Pledgee to secure the Pledgor's obligations under the
Note.
NOW, THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. GRANT OF SECURITY INTEREST IN COLLATERAL. The Pledgor hereby
grants to the Pledgee, as security for all present and future obligations and
liabilities of all kinds of the Pledgor to the Pledgee under the Note and
this Agreement (collectively referred to as the "Obligations"), a first
priority security interest in the following described property (collectively
referred to as the "Collateral"):
(a) 9,000 shares of Apartment Investment and Management
Company Class A Common Stock, par value $.01 per share (the "Pledged
Shares"), as more fully described in SCHEDULE 1 hereto, and the certificates
representing the Pledged Shares and all of the Pledgor's rights and
privileges with respect thereto, together with stock powers executed in
blank, each of which has been delivered to the Pledgee concurrently with the
execution hereof; and
(b) the proceeds and accessions of the Pledged Shares (the
"Proceeds").
2. PLEDGOR'S COVENANTS.
(a) The Pledgor agrees hereafter not to encumber or grant a
security interest in or a lien or other encumbrance on the Collateral.
(b )The Pledgor agrees not to dispose of any of the Collateral
except in accordance with the terms of this Agreement.
<PAGE>
(c) The Pledgor agrees: (i) at any time and from time to time,
upon request of the Pledgee, to give, execute, file and/or record any notice,
financing statement, continuation statement, instrument, document or
agreement that the Pledgee shall consider reasonably necessary or desirable
to create, preserve, continue, perfect or validate any security interest
granted hereunder or which the Pledgee may consider reasonably necessary or
desirable to exercise or enforce its rights hereunder with respect to such
security interest; (ii) to give the Pledgee notice of any litigation filed or
claim asserted against the Pledgor relating to or potentially affecting the
Collateral; (iii) if requested by the Pledgee, to receive and collect the
Proceeds, in trust and as the property of the Pledgee, and to immediately
endorse as appropriate and deliver such Proceeds to the Pledgee when
requested by the Pledgee in the exact form in which they are received; (iv)
not to commingle the Proceeds or collections thereunder with other property;
(v) to keep complete and accurate records regarding all of the Proceeds; and
(vi) to provide any service and do other acts or things necessary to keep the
Collateral and the Proceeds free and clear of all defenses, rights of offset
and counterclaim.
(d) The Pledgor agrees to: (i) pay promptly the Obligations
secured hereby when due; (ii) indemnify the Pledgee against all loss, claims,
demands and liabilities of every kind arising from the Collateral and the
transactions and other agreements and undertakings contemplated hereby; and
(iii) pay all expenses, including reasonable attorneys' fees, incurred by the
Pledgee in the preservation, realization, enforcement and exercise of its
rights, powers and remedies hereunder.
3. PAYMENT OF TAXES, CHARGES, LIENS AND ASSESSMENTS. The Pledgor
agrees to pay, prior to delinquency, all taxes, charges, liens and
assessments against the Collateral and the Proceeds, and upon the failure of
the Pledgor to do so, the Pledgee, at its option, may pay any of them. Any
such payments made by the Pledgee shall be obligations of the Pledgor to the
Pledgee, due and payable immediately without demand and shall be secured by
the Collateral and the Proceeds, subject to all of the terms and conditions
of this Agreement.
4. POWERS OF PLEDGEE. The Pledgor appoints the Pledgee his true
attorney in fact to perform any of the following powers, which are coupled
with an interest, are irrevocable until termination of this Agreement and may
be exercised from time to time by the Pledgee's officers and employees, or
any of them, whether or not the Pledgor is in default: (a) to perform any
obligations of the Pledgor hereunder in the Pledgor's name or otherwise; (b)
to give notice of Pledgee's right under the Collateral to enforce the same;
(c) to release security; (d) to resort to security; (e) to prepare, execute,
file, record or deliver notes, assignments, schedules, designation
statements, financing statements, continuation statements, termination
statements, statements of assignment, applications for registration or like
papers to perfect, preserve or release the Pledgee's interest in the
Collateral; (f) to verify facts concerning the Collateral by inquiry of
obligors thereon, or otherwise, in its own name or fictitious name; (g) after
an Event of
2
<PAGE>
Default, to endorse, collect, deliver and receive payment under instruments
for the payment of money constituting or relating to the Collateral; (h)
after an Event of Default, to preserve or release the interest evidenced by
chattel paper to which the Pledgee is entitled hereunder and to endorse and
deliver evidences of title incidental thereto; (i) after an Event of Default,
to exercise all rights, powers and remedies which the Pledgor would have, but
for this Agreement, under all Collateral subject to this Agreement; and (j)
to do all acts and things and execute all documents in the name of the
Pledgor otherwise, deemed by the Pledgee as necessary, proper and convenient
in connection with the preservation, perfection or enforcement of its rights
hereunder.
5. VOTING RIGHTS. The Pledgor hereby grants to the Pledgee an
irrevocable proxy, effective upon the occurrence of an Event of Default and
so long as such Event of Default shall continue, to vote the Pledged Shares
in such manner and for such purposes as the Pledgee shall, in its sole
discretion, determine. Such proxy is coupled with an interest and shall
continue in full force and effect until all of the Obligations shall be paid
in full.
6. EVENTS OF DEFAULT; REMEDIES.
(a) Each of the following shall constitute an event of default
("Event of Default") hereunder: (i) the Pledgor's failure to pay, within 15
days after the date when such payment is due, any payment of principal or
interest on the Note; (ii) the Pledgor's failure to observe or perform any
covenant or agreement contained in the Note (other than that set forth in
clause (i) above) or this Agreement; (iii) if any representation, warranty,
certification or statement made by the Pledgor in the Note, this Agreement or
in any certificate or other document delivered pursuant to the Note or this
Agreement shall prove to have been incorrect in any material respect when
made or deemed made; (iv) the insolvency of the Pledgor; (v) the appointment
of a receiver or a trustee of all or part of the Pledgor's property; (vi) an
assignment for the benefit of the Pledgor's creditors; (vii) the filing of a
petition in bankruptcy by or against the Pledgor; (viii) the commencement of
any proceeding by or against the Pledgor under any bankruptcy or insolvency
law or any law relating to the relief of debtors or readjustment of
indebtedness; (ix) the appointment of a receiver, custodian, trustee or
liquidator for any part of the assets or property of the Pledgor; (x) the
failure of the Pledgor generally to pay his or her debts as they become due;
and (xi) the failure of the Pledgee to have a first priority security
interest in the Collateral.
(b) In case an Event of Default shall have occurred and be
continuing, the Pledgee shall be entitled to exercise all of the rights,
powers and remedies (whether vested in it by this Agreement, the Note or by
law and including, without limitation, all rights and remedies of a secured
party of a debtor in default under the Uniform Commercial Code as in force in
the State of Colorado) for the protection and enforcement of its rights in
respect of the Collateral.
7. NO WAIVER. The failure of the Pledgee to exercise any right
or remedy under this Agreement or the Note, or delay by the Pledgee in
exercising same, will not operate as a waiver thereof. No waiver by the
Pledgee will be effective unless and until it is in writing and signed by the
Pledgee. No waiver of any condition or performance will operate as a waiver
of any subsequent condition or obligation. The Pledgee shall have no
obligation to resort to the Collateral or any other security which is or may
become available to it.
3
<PAGE>
8. MISCELLANEOUS.
(a) This Agreement, any amendments or replacement hereof, and
the legality, validity and performance of the terms hereof, shall be governed
by and enforced and construed in accordance with the laws of the State of
Colorado without regard to conflicts of laws and principles thereof.
(b) This Agreement and the rights, powers and duties set forth
herein shall be binding upon the Pledgor, its agents, representatives and
successors and shall inure to the benefit of the Pledgee and its successors
and assigns and, in the event of any transfer or assignment of rights by the
Pledgee, the rights and privileges herein conferred upon the Pledgee shall
automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions hereof. This Agreement and the rights and
privileges herein conferred upon the Pledgee may be assigned by the Pledgee
without the consent of the Pledgor. This Agreement may not be transferred or
assigned by the Pledgor without the written consent of the Pledgee.
(c) In the event that any provision of this Agreement is
invalid or unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be modified to conform with such statute or rule of law.
Any provision hereof which may prove invalid or unenforceable under any
applicable law shall not effect the validity or enforceability of any other
provisions hereof.
(d) Notices required or permitted to be given under this
Agreement shall be in writing and may be delivered personally or sent to a
party by airmail or first class mail, postage prepaid and addressed to such
party, as follows, or to such other address furnished by notice given in
accordance with this paragraph:
If to the Pledgor:
c/o Apartment Investment and Management Company
1873 South Bellaire Street, 17th Floor
Denver, Colorado 80222
If to the Pledgee:
Apartment Investment and Management Company
1873 South Bellaire Street, 17th Floor
Denver, Colorado 80222
Attention: Chief Financial Officer
Any such notice shall be deemed to have been given, (i) if sent by mail, five
days after the date mailed, and (ii) if delivered personally, on the date of
delivery.
4
<PAGE>
(e) This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
shall together constitute one and the same document.
(f) This Agreement and the security interest and pledge
hereunder shall terminate upon the full and final performance of all
Obligations of the Pledgor and payment of all indebtedness secured hereby. At
such time, the Pledgee shall promptly reassign to the Pledgor all of the
Collateral hereunder which has not been sold, disposed of, retained or
applied by the Pledgee in accordance with the terms hereof.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to
be executed as of the date first written above.
PLEDGOR:
______________________________
(Signature of Pledgor)
PLEDGEE:
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
By: ______________________________
Name:
Title:
5
<PAGE>
SCHEDULE 1
Description of Pledged Shares
CERTIFICATE NUMBER NUMBER OF SHARES
9,000
6
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 45,775
<SECURITIES> 0
<RECEIVABLES> 24,328
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 92,122<F1>
<PP&E> 1,250,239
<DEPRECIATION> 142,694
<TOTAL-ASSETS> 1,608,195
<CURRENT-LIABILITIES> 175,749<F2>
<BONDS> 0
0
75,000
<COMMON> 286
<OTHER-SE> 597,264
<TOTAL-LIABILITY-AND-EQUITY> 1,608,195
<SALES> 47,364
<TOTAL-REVENUES> 50,932<F3>
<CGS> (23,573)<F4>
<TOTAL-COSTS> (24,032)<F5>
<OTHER-EXPENSES> (624)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (12,755)
<INCOME-PRETAX> 6,967
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,967
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,967
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.25
<FN>
<F1>INCLUDES CASH, RESTRICTED CASH, ACCOUNTS RECEIVABLE.
<F2>INCLUDES SECURED SHORT-TERM FINANCING, ACCOUNTS PAYABLE AND ACCRUED
LIABILITIES, RESIDENT SECURITY DEPOSITS, PREPAID RENTS AND UNSECURED SHORT-TERM
FINANCING.
<F3>INCLUDES RENTAL AND OTHER PROPERTY REVENUES, MANAGEMENT FEES AND OTHER INCOME.
<F4>INCLUDES PROPERTY OPERATING EXPENSES, OWNED PROPERTY MANAGEMENT EXPENSE AND
MANAGEMENT AND OTHER EXPENSES.
<F5>INCLUDES CGS, DEPRECIATION, CORPORATE OVERHEAD ALLOCATION, AMORTIZATION OF
MANAGEMENT COMPANY GOODWILL AND OTHER ASSETS DEPRECATION AND AMORTIZATION.
</FN>
</TABLE>
