<PAGE> 1
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 June 30, 1998
-------------------------------------------------
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 [ ]
<TABLE>
<S> <C>
The number of shares of Class A Common Stock outstanding as of July 31, 1998: 48,106,837
The number of shares of Class B Common Stock outstanding as of July 31, 1998: 162,500
</TABLE>
1
<PAGE> 2
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
----
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1998
(unaudited) and December 31, 1997 3
Consolidated Statements of Income for the Three and Six
Months Ended June 30, 1998 and 1997 (unaudited) 4
Consolidated Statements of Cash Flow for the Three and
Six Months Ended June 30, 1998 and 1997 (unaudited) 5
Notes to Consolidated Financial Statements
(unaudited) 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 20
Item 3. Quantitative and Qualitative Disclosures about Market Risk 33
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 34
Item 4. Submission of Matters to a Vote of Security Holders 35
Item 6. Exhibits and Reports on Form 8-K 36
Signatures 37
</TABLE>
2
<PAGE> 3
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Consolidated Balance Sheets
As of June 30, 1998 and December 31, 1997
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------- -------------
(unaudited)
<S> <C> <C>
ASSETS
Real Estate, net of accumulated depreciation of $297,895 and $153,285 $ 2,287,309 $ 1,503,922
Property held for sale 35,695 6,284
Investments held for sale 5,767 22,144
Investments in and notes receivable from unconsolidated subsidiaries 108,105 84,459
Investments in and notes receivable from unconsolidated real estate partnerships 243,799 212,150
Cash and cash equivalents 49,320 37,088
Restricted cash 75,123 24,229
Accounts receivable 26,201 28,656
Deferred financing costs 22,629 12,793
Goodwill, net of accumulated amortization of $3,171 and $522 122,068 125,239
Other assets 78,725 43,546
------------- -------------
Total assets $ 3,054,741 $ 2,100,510
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Secured notes payable $ 751,337 $ 681,421
Secured tax-exempt bond financing 394,662 74,010
Unsecured short-term financing 118,476 --
Secured short-term financing 50,000 53,099
------------- -------------
Total indebtedness 1,314,475 808,530
------------- -------------
Accounts payable, accrued and other liabilities 155,129 88,170
Resident security deposits and prepaid rents 12,882 10,213
------------- -------------
Total liabilities 1,482,486 906,913
------------- -------------
Commitments and contingencies -- --
Minority interests in other partnerships 43,167 36,335
Minority interest in AIMCO Operating Partnership 134,694 111,962
Stockholder's equity
Class A Common Stock, $.01 par value, 150,000,000 shares
authorized, 48,078,738 and 40,418,789 shares issued and outstanding 481 403
Class B Common Stock, $.01 par value, 262,500 shares authorized,
162,500 shares issued and outstanding 2 2
Class B Cumulative Convertible Preferred Stock, $.01 par value,
750,000 shares authorized, 750,000 shares issued and outstanding 75,000 75,000
Class C Cumulative Preferred Stock, $.01 par value, 2,760,000 shares
authorized, 2,400,000 shares issued and outstanding 60,000 60,000
Class D Cumulative Preferred Stock, $.01 par value, 4,600,000 shares
authorized, 4,200,000 and 0 shares issued and outstanding 105,000 --
Additional paid-in capital 1,247,839 977,601
Notes due on common stock purchases (45,508) (35,095)
Distributions in excess of earnings (48,203) (30,928)
Accumulated other comprehensive losses (217) (1,683)
------------- -------------
Total stockholders' equity 1,394,394 1,045,300
------------- -------------
Total liabilities and stockholders' equity $ 3,054,741 $ 2,100,510
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
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 Six Months Ended
----------------------------- -----------------------------
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
RENTAL PROPERTY OPERATIONS
Rental and other property revenues $ 89,928 $ 41,679 $ 161,264 $ 79,719
Property operating expenses (33,334) (16,704) (59,643) (31,160)
Owned property management expense (2,581) (1,413) (4,713) (2,734)
Depreciation (20,312) (7,591) (34,289) (15,046)
---------- ---------- ---------- ----------
Income from property operations 33,701 15,971 62,619 30,779
---------- ---------- ---------- ----------
SERVICE COMPANY BUSINESS
Management fees and other income 4,741 3,161 9,562 5,605
Management and other expenses (3,509) (1,223) (5,470) (2,643)
Corporate overhead allocation (49) (147) (196) (294)
Other assets depreciation and amortization -- (73) (3) (161)
---------- ---------- ---------- ----------
Income from service company business 1,183 1,718 3,893 2,507
Minority interests in service company business -- (1) (1) (2)
---------- ---------- ---------- ----------
Company's share of income from service company business 1,183 1,717 3,892 2,505
---------- ---------- ---------- ----------
General and administrative expenses (2,129) (433) (4,103) (784)
Interest expense (19,337) (11,152) (34,778) (20,604)
Interest income 5,274 834 11,350 1,341
Minority interest in other partnerships 66 (196) (516) (565)
Equity in losses of unconsolidated partnerships (4,028) (379) (4,681) (379)
Equity in earnings (losses) of unconsolidated subsidiaries 1,541 (86) 5,609 (86)
Amortization of goodwill (1,677) (237) (3,394) (474)
---------- ---------- ---------- ----------
Income from operations 14,594 6,039 35,998 11,733
Extraordinary item - early extinguishment of debt -- -- -- (269)
Gain on disposition of properties -- -- 2,526 --
---------- ---------- ---------- ----------
Income before minority interest in AIMCO Operating Partnership 14,594 6,039 38,524 11,464
Minority interest in AIMCO Operating Partnership (974) (775) (3,262) (1,616)
---------- ---------- ---------- ----------
Net income $ 13,620 $ 5,264 $ 35,262 $ 9,848
========== ========== ========== ==========
Net income attributable to preferred shareholders $ 4,969 $ -- $ 8,650 $ --
========== ========== ========== ==========
Net income attributable to common shareholders $ 8,651 $ 5,264 $ 26,612 $ 9,848
========== ========== ========== ==========
Net income $ 13,620 $ 5,264 $ 35,262 $ 9,848
Other comprehensive income:
Net unrealized gains on investment in securities 1,626 -- 1,466 --
---------- ---------- ---------- ----------
Comprehensive income $ 15,246 $ 5,264 $ 36,728 $ 9,848
========== ========== ========== ==========
Basic earnings per common share $ 0.19 $ 0.26 $ 0.62 $ 0.53
========== ========== ========== ==========
Diluted earnings per common share $ 0.19 $ 0.26 $ 0.61 $ 0.53
========== ========== ========== ==========
Weighted average common shares outstanding 45,298 20,366 43,206 18,424
========== ========== ========== ==========
Weighted average common shares and common share
equivalents outstanding 45,539 20,504 43,409 18,559
========== ========== ========== ==========
Dividends paid per common share $ 0.5625 $ 0.4625 $ 1.125 $ 0.925
========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOW
For the Six Months Ended June 30, 1998 and 1997
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Six For the Six
Months Ended Months Ended
June 30, 1998 June 30, 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 35,262 $ 9,848
------------ ------------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 38,666 17,067
Gain on disposition of properties (2,526) --
Minority interest in Operating Partnership 3,262 1,616
Minority interests in other partnerships 516 565
Equity in losses of unconsolidated partnerships 4,681 379
Equity in earnings of unconsolidated subsidiaries (5,609) 86
Extraordinary loss on early extinguishment of debt -- 269
(Increase) decrease from changes in operating assets:
Restricted cash (15,375) 814
Accounts receivable 12,310 (1,742)
Other assets (22,735) (8,707)
Increase (decrease) from changes in operating liabilities:
Accounts payable, accrued and other liabilities (36,385) 3,219
Resident security deposits and prepaid rents (6,229) 1,621
------------ ------------
Total adjustments (29,424) 15,187
------------ ------------
Net cash provided by operating activities 5,838 25,035
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of real estate 11,206 --
Purchase of real estate (30,405) (52,195)
Purchase of or advances on notes receivable (64,914) --
Cash received in connection with Ambassador Merger 4,492 --
Proceeds from repayments of notes receivable 18,087 --
Purchase of general and limited partnership interests (10,894) (45,426)
Additions to property held for sale (1,886) (354)
Capital replacements (13,538) (2,915)
Initial capital expenditures (7,965) (2,716)
Construction in progress and capital enhancements (5,263) (3,766)
Purchase of office equipment and leasehold improvements -- (762)
Proceeds from sale of property held for sale 411 --
------------ ------------
Net cash used in investing activities (100,669) (108,134)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of Class A Common Stock,
net of underwriting and offering costs and from exercise of options 9,004 114,335
Proceeds from issuance of Class D Preferred Stock,
net of underwriting and offering costs 100,294 --
Proceeds from issuance of High Performance Units 1,978 --
Principal repayments received on notes due from Officers on
Class A Common Stock purchases 5,730 11,619
Repurchase of common stock (5,982) --
Proceeds from secured notes payable borrowings 32,284 86,111
Net proceeds from unsecured short-term financing -- 20,500
Net borrowings on the Company's revolving credit facilities 100,913 26,100
Principal repayments on secured notes payable (51,582) (2,554)
Principal repayments on secured tax-exempt bond financing (979) (698)
Repayments on secured short-term financing (19,099) (146,261)
Payment of loan costs, net of proceeds from interest rate hedge (6,659) 2,214
Payment of common stock dividends (46,672) (17,424)
Payment of distributions to minority interest in AIMCO Operating Partnership (6,283) (2,492)
Payment of preferred stock dividends (5,884) --
------------ ------------
Net cash provided by (used in) financing activities 107,063 91,450
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 12,232 8,351
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 37,088 13,170
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 49,320 $ 21,521
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Consolidated Statements of Cash Flow
(In Thousands Except Share and Operating Partnership Unit Data)
1998 NON CASH INVESTING AND FINANCING ACTIVITIES
PURCHASE OF REAL ESTATE
<TABLE>
<S> <C>
Secured notes payable assumed in connection with purchase of real estate $ 48,157
Real estate purchased in exchange for 794,210 Partnership Common Units
("OP Units") of AIMCO Properties, L.P. 26,767
--------
$ 74,924
========
</TABLE>
PURCHASE OF AMBASSADOR APARTMENTS, INC.
In May 1998, the Company acquired all of the common stock of Ambassador
Apartments, Inc., ("Ambassador"), in exchange for 6,578,833 shares of AIMCO
Class A Common Stock with a recorded value of $251.3 million (see Note 4).
The aggregate purchase price consisted of the following:
<TABLE>
<S> <C>
Real estate $ 713,596
Investment in real estate partnerships 2,290
Restricted cash 35,523
Accounts receivable 7,953
Deferred financing costs 4,359
Other assets 2,319
Secured notes payable 37,162
Secured tax-exempt bond financing 334,881
Unsecured short-term financing 31,550
Accounts payable, accrued and other liabilities 2,513
Resident security deposits and prepaid rents 8,898
Minority interests in other partnerships 5,752
Minority interest in AIMCO Operating Partnership 146
Stockholders' equity 251,274
</TABLE>
REDEMPTION OF OPERATING PARTNERSHIP UNITS
During the six months ended June 30, 1998, 239,465 OP Units with recorded values
of $4,595 were redeemed in exchange for an equal number of shares of Class A
Common Stock.
PROPERTY HELD FOR SALE
During the six months ended June 30, 1998, the Company entered into contracts to
sell two multifamily properties with a net book value of $27.9 million. These
assets were reclassified to property held for sale.
RECEIPT OF NOTES PAYABLE FROM OFFICERS
During the six months ended June 30, 1998, the Company issued notes receivable
from officers for a total of $16.1 million in connection with their purchase of
437,653 shares of Class A Common Stock.
OTHER
During the six months ended June 30, 1998, AIMCO Properties, L.P. issued an
additional 108,528 OP units with a recorded value of $3,041 in connection with
the purchase of certain partnership interests.
During the six months ended June 30, 1998, AIMCO obtained control of real estate
partnerships which became consolidated. The non-cash effects are as follows:
<TABLE>
<S> <C>
Real estate $ 3,802
Secured notes payable 3,395
Accounts payable, accrued and other liabilities 407
</TABLE>
6
<PAGE> 7
During the six months ended June 30, 1998, AIMCO contributed certain assets and
liabilities to unconsolidated subsidiaries and unconsolidated partnerships
as follows:
<TABLE>
<S> <C>
Investment in unconsolidated subsidiaries $ 18,925
Investment in unconsolidated partnerships 1,989
Accounts receivable 966
Accounts payable, accrued and other liabilities 21,880
</TABLE>
1997 NON CASH INVESTING AND FINANCING ACTIVITIES
PURCHASE OF REAL ESTATE
<TABLE>
<S> <C>
Secured notes payable assumed in connection with purchase of real estate $ 55,446
Real estate purchased in exchange for 497,794 OP Units 13,876
--------
$ 69,322
========
</TABLE>
PURCHASE OF 51.3% 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. Upon the completion of these transactions, AIMCO and
ANHI owned a combined total of 6,496,073 shares of NHP common stock,
representing 51.3% of NHP's outstanding common stock as of May 31, 1997.
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") were as follows:
<TABLE>
<S> <C>
Real estate, net $ 102,455
Investment in real estate partnerships 96,119
Restricted cash 2,946
Accounts receivable 12,784
Other assets 3,495
Secured notes payable (83,667)
Accounts payable, accrued and other liabilities (37,482)
Accrued management contract liability 106,615
Resident security deposits and prepaid rent (416)
</TABLE>
REDEMPTION OF OPERATING PARTNERSHIP UNITS
During the six months ended June 30, 1997, 544,694 OP Units with a recorded
value of $8,447 were redeemed in exchange for an equal number of shares of Class
A Common Stock.
PROPERTY HELD FOR SALE
In the second quarter of 1997, the Company entered into contracts to sell
multifamily properties with a net book value of $19,072. These assets, were
reclassified to property held for sale.
ISSUANCE OF NOTES RECEIVABLE DUE FROM OFFICERS
During the six months ended June 30, 1997, the Company issued notes receivable
from officers for a total of $665 in connection with their purchase of 25,000
shares of Class A Common Stock.
OTHER
During the six months ended June 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 six months ended June 30, 1997, AIMCO Properties, L.P. issued an
additional 1,333 OP Units with a recorded value of $36 in connection with the
purchase of certain partnership interests in 1996.
7
<PAGE> 8
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Notes to Consolidated Financial Statements
June 30, 1998 (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"), owns a
majority of the ownership interests in AIMCO Properties, L.P. (the
"AIMCO Operating Partnership") through its wholly owned subsidiaries,
AIMCO-GP, Inc. and AIMCO-LP, Inc. The Company held an approximate 89%
interest in the AIMCO Operating Partnership as of June 30, 1998.
AIMCO-GP, Inc. is the sole general partner of the AIMCO Operating
Partnership.
At June 30, 1998, AIMCO had 48,078,738 shares of Class A Common Stock
outstanding and the AIMCO Operating Partnership had 6,034,652
Partnership Common Units ("OP Units") outstanding, for a combined total
of 54,113,390 shares and OP Units outstanding.
As of June 30, 1998, the Company, through its subsidiaries, owned or
controlled 58,345 units in 210 apartment communities and had an equity
interest in 74,318 units in 478 apartment communities. In addition, the
Company managed 68,248 units in 357 apartment communities for third
parties and affiliates, bringing the total owned and managed portfolio
to 200,911 units in 1,045 apartment communities. The apartment
communities are located in 42 states, the District of Columbia and
Puerto Rico.
NOTE 2 - BASIS OF PRESENTATION
Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of AIMCO, the AIMCO Operating Partnership, majority owned subsidiaries
and controlled real estate limited partnerships and limited liability
companies. Interests held by limited partners in real estate limited
partnerships and limited liability companies controlled by the Company
are reflected as Minority Interests in Other Partnerships. All
significant intercompany balances and transactions have been eliminated
in consolidation. The assets of property-owning limited partnerships
and limited liability companies owned or controlled by AIMCO or the
AIMCO Operating Partnership (including, without limitation, AIMCO
Citrus Sunset, L.L.C., AIMCO Sunset Village, L.L.C., and AIMCO Sunset
Escondido, L.L.C.) are not available to pay creditors or secure the
obligations of AIMCO or the AIMCO Operating Partnership.
Investments in Unconsolidated Subsidiaries
The Company has investments in numerous subsidiaries. Investments in
entities in which the Company does not have control are accounted for
under the equity method. Under the equity method, the Company's
pro-rata share of the earnings or losses of the entity for the periods
being presented is included in equity in earnings (losses) of
unconsolidated subsidiaries (see Note 5).
Investments in and Notes Receivable from Real Estate Partnerships
The Company owns general and limited partnership interests in numerous
partnerships that own multi-family apartment properties. Investments in
real estate partnerships in which the Company does not have control are
accounted for under the equity method. Under the equity method, the
Company's pro-rata share of the earnings or losses of the entity for
the periods being presented is included in equity in losses of
unconsolidated partnerships (see Note 6).
8
<PAGE> 9
Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, Reporting Comprehensive
Income ("SFAS 130"), which provides guidance with respect to the
calculation and presentation of comprehensive income. Comprehensive
income includes all transactions affecting stockholders' equity,
including the traditional measure of net income, and excluding
contributions from and distributions to stockholders. Under SFAS 130,
companies are required to present comprehensive income and its
components on the income statement and as a component of stockholders'
equity on the balance sheet. As required, the Company adopted SFAS 130
as of January 1, 1998 and restated the components of stockholders'
equity for the prior periods presented.
Earnings per Share
Earnings per share for the three and six months ended June 30, 1997
have been restated to comply with Statement of Financial Accounting
Standards No. 128, Earnings Per Share (see Note 16).
Interim Information
The accompanying unaudited consolidated financial statements of the
Company as of June 30, 1998 and for the three and six months ended June
30, 1998 and 1997 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/A for the year ended
December 31, 1997. 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.
Reclassifications
Certain reclassifications have been made to prior period financial
statements to conform to the current period presentation.
NOTE 3 - REAL ESTATE
During the six months ended June 30, 1998, in addition to the merger
with Ambassador Apartments, Inc. (see Note 4), the Company purchased 12
apartment communities containing 3,008 apartment units, as described
below:
<TABLE>
<CAPTION>
Date Number
Acquired Property Location of Units
-------- -------- -------- --------
<S> <C> <C> <C>
1/98 Crossings at Bell Amarillo, TX 160
2/98 Steeplechase Tyler, TX 484
3/98 Casa Anita Phoenix, AZ 224
3/98 San Marina Phoenix, AZ 399
3/98 Cobble Creek Tuscon, AZ 301
3/98 Rio Cancion Tuscon, AZ 379
3/98 Sundown Village Tuscon, AZ 330
4/98 Arbor Station Montgomery, AL 264
4/98 Heather Ridge Arlington, TX 72
5/98 Landmark Albuquerque, NM 101
6/98 Citrus Grove Redlands, CA 198
6/98 Villa La Paz Sun City, CA 96
-----
3,008
=====
</TABLE>
9
<PAGE> 10
The aggregate consideration paid by the Company of $105.4 million
consisted of $30.4 million in cash, 794,210 OP Units valued at $26.8
million and the assumption of $48.2 million of secured long-term
indebtedness. The cash portions of the acquisitions were funded with
borrowings under the Company's revolving credit facilities.
In January 1998, the Company sold the Sun Valley Apartments, an
apartment community containing 430 apartment units located in Salt Lake
City, Utah, for $11.5 million, less selling costs of $0.3 million. The
Company recognized a $3.3 million gain on the sale.
As of June 30, 1998, the Company's management has indicated its intent
to sell the Rillito Village and Village Park properties. Accordingly,
the underlying assets of these properties have been reclassified from
real estate to property held for sale on the consolidated balance
sheet.
NOTE 4 - INVESTMENT IN AMBASSADOR APARTMENTS, INC.
In September 1997, the Company acquired 886,600 shares of common stock
("Ambassador Common Stock") of Ambassador for $19.9 million in cash.
The shares acquired represented 8.4% of the shares of Ambassador Common
Stock outstanding as of the date of the purchase. Ambassador was a
self-administered and self-managed real estate investment trust
("REIT") engaged in the ownership and management of garden-style
apartment properties leased primarily to middle income tenants.
Ambassador owned 52 apartment communities with a total of 15,728 units
located in Arizona, Colorado, Florida, Georgia, Illinois, Tennessee and
Texas, and managed one property containing 252 units for an unrelated
third party.
On December 23, 1997, AIMCO and Ambassador entered into an Agreement
and Plan of Merger (the "Ambassador Merger Agreement") providing for
the merger of Ambassador with and into AIMCO, with AIMCO being the
surviving corporation (the "Ambassador Merger"), and that, unless
otherwise agreed, the parties would use their reasonable best efforts
to effect a business combination of Ambassador Apartments, L.P., a
Delaware limited partnership (the "Ambassador Operating Partnership")
and the AIMCO Operating Partnership. Subsequent to the execution of the
Ambassador Merger Agreement, the AIMCO Operating Partnership and
Ambassador Operating Partnership entered into an Agreement and Plan of
Merger (the "OP Merger Agreement) with AIMCO MergerSub, L.P., a
Delaware limited partnership and 99.9% owned subsidiary partnership of
the AIMCO Operating Partnership ("MergerSub"), providing for MergerSub
to be merged with and into the Ambassador Operating Partnership, with
the Ambassador Operating Partnership surviving (the "OP Merger).
On May 8, 1998, holders of a majority of the outstanding shares of
Ambassador Common Stock voted to approve the merger with AIMCO. The
Ambassador Merger was completed the same day. Pursuant to the
Ambassador Merger Agreement, all outstanding shares of Ambassador
Common Stock were converted into the right to receive AIMCO Class A
Common Stock, at a conversion ratio of 0.553, resulting in the issuance
of up to 6,578,833 shares of AIMCO Class A Common Stock. Concurrently,
all outstanding options to purchase Ambassador Common Stock were
converted into options to purchase AIMCO Class A Common Stock, at the
same conversion ratio, or cash. Contemporaneously with the consummation
of the Ambassador Merger, the OP Merger was consummated and each
outstanding unit of limited partnership interest in the Ambassador
Operating Partnership was converted into the right to receive 0.553 OP
Units. As a result, the Ambassador Operating Partnership became a 99.9%
owned subsidiary partnership of the AIMCO Operating Partnership.
10
<PAGE> 11
NOTE 5 - INVESTMENT IN AND NOTES RECEIVABLE FROM UNCONSOLIDATED SUBSIDIARIES
In order to satisfy certain requirements of the Internal Revenue Code
applicable to AIMCO's status as a REIT, certain assets of the Company
are held through corporations (the "Unconsolidated Subsidiaries") in
which the AIMCO Operating Partnership holds non-voting preferred stock
that represents a 95% economic interest, and certain officers and/or
directors hold, directly or indirectly, all of the voting common stock,
representing a 5% economic interest. As a result of the controlling
interest held by others in the Unconsolidated Subsidiaries, the Company
accounts for its interest in the Unconsolidated Subsidiaries on the
equity method. As of June 30, 1998, the Unconsolidated Subsidiaries
included Property Asset Management Services, Inc., AIMCO/NHP Holdings,
Inc. ("ANHI"), AIMCO/NHP Properties, Inc., NHP Property Management
Company and NHP A&R Services, Inc.
As of June 30, 1998, the Company's investment in the Unconsolidated
Subsidiaries totaled $108.1 million, which consisted of a $50.0 million
note receivable from, $18.9 million in advances to, and $39.2 million
of preferred stock of, the Unconsolidated Subsidiaries.
NOTE 6 - INVESTMENT IN AND NOTES RECEIVABLE FROM UNCONSOLIDATED REAL ESTATE
PARTNERSHIPS
AIMCO/NHP Partners, L.P. ("ANPLP") owns general and limited partnership
interests in partnerships that own conventional and affordable
apartment units. ANPLP's ownership interests in these partnerships
range from 1% to 100%, and the provisions of the partnership agreements
give ANPLP varying degrees of control. The Company owns a 99% limited
partnership interest in ANPLP. A limited liability company owned by
certain officers of the Company is the 1% general partner of ANPLP.
Based on the provisions of the partnership agreement for ANPLP, the
Company does not possess control of the partnership. As of June 30,
1998, the Company's investment in unconsolidated partnerships,
including ANPLP, totaled $243.8 million.
The following table provides selected combined financial information
for both the Company's unconsolidated subsidiaries and unconsolidated
real estate partnerships as of June 30, 1998 and for the three and six
months ended June 30, 1998 (dollars in thousands):
<TABLE>
<CAPTION>
BALANCE SHEET DATA
June 30, 1998
---------------
<S> <C>
Real estate, net of accumulated depreciation $2,017,854
Management contracts 50,320
Goodwill 44,252
Other Assets 449,657
Total assets 2,564,450
Accounts payable and accrued liabilities 666,410
Secured notes payable 2,749,673
Stockholders' and partners' equity (deficit) (851,633)
Total liabilities and stockholders' equity (deficit) 2,564,450
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
INCOME STATEMENT DATA June 30, 1998 June 30, 1998
------------------ -----------------
<S> <C> <C>
Rental and other property revenues $ 182,784 $ 369,549
Property operating expenses (122,173) (229,947)
Depreciation expense (29,472) (55,682)
Service company revenues 16,806 37,585
Service company expenses (11,338) (23,673)
Interest expense, net (46,778) (99,515)
Net loss (11,421) (4,803)
</TABLE>
11
<PAGE> 12
NOTE 7 - SECURED NOTES PAYABLE
The following table summarizes the Company's secured notes payable as
of June 30, 1998 and December 31, 1997, all of which are non-recourse
to the Company (dollars in thousands):
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
Fixed rate, fully-amortizing notes $653,423 $561,056
Fixed rate, non-amortizing notes 84,096 106,424
Floating rate, non-amortizing notes 13,818 13,941
-------- --------
Total $751,337 $681,421
======== ========
</TABLE>
NOTE 8 - SECURED TAX-EXEMPT BOND FINANCING
The following table summarizes the Company's secured tax-exempt bond
financing at June 30, 1998 and December 31, 1997 (dollars in
thousands):
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
Fixed rate, fully-amortizing bonds $ 55,302 $ 56,027
Fixed rate, non-amortizing bonds 17,823 17,983
Floating rate, fully-amortizing bonds 289,824 --
Floating rate, non-amortizing bonds 31,713 --
--------- --------
Total $ 394,662 $ 74,010
========= ========
</TABLE>
NOTE 9 - SECURED AND UNSECURED 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 variable rate revolving credit facilities, as
well as various fixed and floating rate term loans.
In January 1998, the Company replaced its $100 million revolving credit
facility with Bank of America National Trust and Savings Association
("Bank of America") with an unsecured $50 million revolving credit
facility with Bank of America and Bank Boston, N.A. (the "BOA Credit
Facility"). The AIMCO Operating Partnership is the borrower under the
BOA Credit Facility, and all obligations thereunder are guaranteed by
AIMCO and certain subsidiaries. In May 1998, the Company amended the
BOA Credit Facility to increase its borrowing capacity thereunder to
$155.0 million for a six-month period. At the conclusion of the
six-month period, the maximum borrowing capacity returns to its
original $50.0 million. The additional borrowing capacity was used to
facilitate the closing of the Ambassador Merger (see Note 4) and will
be further utilized to complete the Insignia Merger (see Note 12).
The interest rate under the BOA Credit Facility is based on either
LIBOR or Bank of America's reference rate, at the election of the
Company, plus an applicable margin (the "Margin"). The Margin ranges
between 0.6% and 1.0% in the case of LIBOR-based loans, and between 0%
and 0.5% in the case of loans based on Bank of America's reference
rate, depending upon the credit rating of the AIMCO Operating
Partnership's senior unsubordinated unsecured long-term indebtedness.
The BOA Credit Facility expires on January 26, 2000, unless extended
for successive one-year periods, at the discretion of the lenders. The
BOA Credit Facility provides for the conversion of the revolving
facility into a three-year term loan.
The availability of funds to the Company under the BOA Credit Facility
is subject to certain borrowing base restrictions and other customary
restrictions, including compliance with financial and other covenants
thereunder. The Company had outstanding borrowings under the BOA Credit
Facility of $118.5 million as of June 30, 1998.
12
<PAGE> 13
In February 1998, the AIMCO Operating Partnership, as borrower, and
AIMCO and certain single asset wholly-owned subsidiaries of the AIMCO
Operating Partnership (the "Owners"), as guarantors, entered into a
five year, $50 million secured revolving credit facility agreement (the
"WMF Credit Facility") with Washington Mortgage Financial Group, Ltd.
("Washington Mortgage"), which provides for the conversion of all or a
portion of such revolving credit facility to a term facility. The WMF
Credit Facility provides that all of the rights of Washington Mortgage
are assigned to Federal National Mortgage Association ("FNMA"), but
FNMA does not assume Washington Mortgage's obligations under the WMF
Credit Facility. At the AIMCO Operating Partnership's request, the
commitment amount under the WMF Credit Facility may be increased to an
amount not to exceed $250 million, subject to the consent of Washington
Mortgage and FNMA in their sole and absolute discretion. The AIMCO
Operating Partnership and affiliates have pledged their ownership
interests in the Owners as security for its obligations under the WMF
Credit Facility. The guarantees of the Owners are secured by assets of
the Owners, including four apartment properties and two mortgage notes.
The interest rate on each advance is determined by investor bids for
FNMA mortgage-backed securities, plus a margin presently equal to 0.5%.
The maturity date of each advance under the revolving portion of the
WMF Credit Facility is a date between three and nine months from the
closing date of the advance, as selected by the AIMCO Operating
Partnership. Advances under the term facility mature at a date,
selected by the AIMCO Operating Partnership, between ten and twenty
years from the date of the advance. The WMF Credit Facility was fully
utilized as of June 30, 1998.
NOTE 10- INTEREST RATE LOCK AGREEMENTS
From time to time, the Company enters into interest rate lock
agreements with major investment banking firms, in anticipation of
refinancing debt. Interest rate lock agreements related to planned
refinancing of identified variable rate indebtedness are accounted for
as anticipatory hedges. Upon the refinancing of such indebtedness, any
gain or loss associated with the termination of the interest rate lock
agreement is deferred and recognized over the life of the refinanced
indebtedness. In order for the interest rate lock to qualify as an
anticipatory hedge, the following criteria must be met: (a) the
refinance being hedged exposes the Company to interest rate risk; (b)
the interest rate lock is designated as a hedge; (c) the significant
characteristics and expected terms of the refinance are identified; and
(d) it is probable that the refinance will occur. The Company believes
that all four of the above qualifications have been met for interest
rate lock agreements previously entered into. In the event that any of
the above qualifications are not met, the interest rate lock agreement
will not qualify as an anticipatory hedge, and any gain or loss
realized on the interest rate lock agreement will be recognized in the
current period's earnings.
In September 1997, the Company entered into an interest rate lock
agreement having a notional principal amount of $75.0 million, in
anticipation of refinancing certain floating rate indebtedness. The
interest rate lock agreement fixed the ten-year treasury rate at 6.32%.
During 1998, the Company refinanced certain mortgage indebtedness
relating to ten real estate partnerships and realized losses of
approximately $3.9 million, which have been deferred and will be
amortized over the life of the refinanced debt. These losses, when
amortized, will result in effective interest rates of 7.7% over the
life of the refinanced debt.
NOTE 11- INTEREST RATE SWAP AGREEMENTS
On May 8, 1998, in connection with the consummation of the merger with
Ambassador, the Company assumed six interest rate swap agreements,
having termination dates between October 3, 2003, and March 3, 2004,
with several major investment banking firms.
The swap agreements modify the interest characteristics of a portion of
the Company's outstanding debt. Each interest rate swap agreement is
designated with all or a portion of the principal balance and term of a
specific debt obligation. These agreements involve the exchange of
amounts based on a fixed interest rate for amounts based on variable
interest rates over the life
13
<PAGE> 14
of the agreement without an exchange of the notional amount upon which
the payments are based. The differential to be paid or received as
interest rates change is accrued and recognized as adjustment of
interest expense related to the debt. The related interest amount
payable to or receivable from counterparties is included in other
liabilities or assets. The fair value of the swap agreements and
changes in the fair value as a result of changes in market interest
rates are not recognized in the financial statements.
Gains and losses on the termination of interest-rate swap agreements
are deferred as an adjustment to the carrying amount of the outstanding
debt and amortized as an adjustment to interest expense related to the
debt over the remaining term of the underlying debt. In the event of
the early extinguishment of a designated debt obligation, any realized
or unrealized gain or loss from the swap would be recognized in income
coincident with the extinguishment gain or loss.
Pursuant to the terms of the swap and related credit support
agreements, the Company is required to post collateral to the swap
providers for an amount equal to their exposure, as defined, in each
case to the extent that a specified threshold is exceeded. The
collateral posted by the Company may be in the form of cash or
governmental securities, as determined by the Company. At June 30,
1998, the Company had posted approximately $6.6 million in cash
collateral under its swap agreements. The Company estimates that for
every 0.25% decrease in the LIBOR interest rate yield, it will be
required to post approximately $2 million of additional collateral with
the swap providers. If interest rates rise, the Company estimates that
for every 0.25% increase in the LIBOR interest rate yield curve,
recovery of the posted collateral of a similar amount will be received
up to the outstanding collateral balances.
On June 2, 1998, the Company settled one of the swap agreements. It is
the intent of the Company to terminate the remaining swap agreements in
December, 1998. Based on the market value of the outstanding swap
agreements at June 30, 1998, the Company had an unrealized loss of $1.9
million.
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement Of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which is required to be
adopted in years beginning after June 15, 1999. As the Company has only
minimal use of derivatives, management does not anticipate that this
new statement will have a material effect on its financial statements.
NOTE 12- COMMITMENTS
High Performance Units
In January 1998, the Company agreed to sell 15,000 Class I High
Performance Partnership Units ("the "High Performance Units") to a
partnership owned by fourteen members of AIMCO's senior management, and
to three of its independent directors for $2.1 million in cash. The
High Performance Units have nominal value unless the Company's total
return, defined as distribution income plus share price appreciation,
over the three year period ending December 31, 2000, is at least 30%
and exceeds the industry average, as determined by a peer group index,
by at least 15% (the "Total Return"). At the conclusion of the three
year period, if the Company's Total Return satisfies these criteria,
the holders of the High Performance Units will receive distributions
and allocations of income and loss from the AIMCO Operating Partnership
in the same amounts and at the same times as would holders of a number
of OP Units equal to the quotient obtained by dividing (i) the product
of (a) 15% of the amount by which the Company's cumulative Total Return
over the three year period exceeds the greater of 115% of a peer group
index or 30% (such excess being the "Excess Return"), multiplied by (b)
the weighted average market value of the Company's outstanding Common
Stock and OP Units, by (ii) the market value of one share of Class A
Common Stock at the end of the three year period. The three year
measurement period will be shortened in the event of a change of
control of the Company. Unlike OP Units, the High Performance Units are
not redeemable or convertible into Class A Common Stock unless a change
14
<PAGE> 15
of control of the Company occurs. Because there is substantial
uncertainty that the High Performance Units will have more than nominal
value due to the required Total Return over the three year term, the
Company has not recorded any value to the High Performance Units. If
the measurement period would have ended June 30, 1998, the Excess
Return would have been $114.9 million and the value of the High
Performance Units would have been $17.2 million, and such High
Performance Units would represent no dilutive effect on net income per
share.
Insignia Merger
On March 17, 1998, AIMCO, the AIMCO Operating Partnership and Insignia
Financial Group, Inc. ("Insignia") and its subsidiary, Insignia/ESG,
Inc. entered into a definitive merger agreement as amended and restated
as of May 26, 1998, (the "Insignia Merger Agreement"), which provides
for the merger (the "Insignia Merger") of Insignia with and into AIMCO,
with AIMCO being the surviving corporation. Upon the completion of the
Insignia merger, the Company will assume property management of
approximately 185,000 apartment units, consisting of 113,000 units
owned by partnerships which will be controlled by AIMCO and 72,000
units owned by third parties. In addition, the Company will acquire an
ownership interest of approximately 61% in Insignia Properties Trust
("IPT"), which owns general and limited partnership interests of
approximately 32% (on a weighted average basis) in approximately 51,000
apartment units. The total transaction value of the Insignia Merger is
approximately $811.0 million, which includes the issuance of
approximately $303.0 million of AIMCO preferred stock, the assumption
of approximately $308.0 million of mortgage indebtedness and the
assumption of approximately $149.5 million of indebtedness represented
by preferred convertible securities of an Insignia subsidiary. The
AIMCO preferred stock issued in the Insignia Merger will generally (i)
entitle the holders thereof to receive a special cash dividend (the
"Special Dividend"), when and if declared by AIMCO's Board of
Directors, of approximately $50.0 million in the aggregate (which is
expected to be paid prior to January 15, 1999), and (ii) automatically
convert into shares of AIMCO's Class A Common Stock upon payment in
full of the Special Dividend. The Company has agreed to offer to
acquire the outstanding shares of beneficial interest in IPT not held
by Insignia at a price of at least $13.25 per IPT share, or
approximately $100.0 million. In addition, IPT is party to a merger
agreement with Angeles Mortgage Investment Trust ("AMIT"), which, if
approved by AMIT's stockholders and consummated, will result in the
issuance of additional IPT shares and, therefore, the payment by
AIMCO in a merger with IPT of an additional approximate $51.2 million
at an assumed price of $13.25 per IPT share.
Consummation of the Insignia Merger is subject to the affirmative vote
of the holders of a majority of the outstanding shares of Insignia
common stock, the approval of all appropriate governmental and
regulatory authorities and other customary conditions.
NOTE 13- MINORITY INTERESTS IN OTHER PARTNERSHIPS
Interests held by limited partners (other than the Company) in real
estate partnerships controlled by the Company are reflected as minority
interests in other partnerships. Net income is allocated based on the
percentage interest owned by these limited partners in each respective
real estate partnership.
NOTE 14- MINORITY INTEREST IN AIMCO OPERATING PARTNERSHIP
The AIMCO Operating Partnership's income for each period is allocated
between the Company and the outside limited partners, whose interests
are represented by OP Units, based on their respective weighted-average
ownership interests in the AIMCO Operating Partnership for the period.
The Company records the issuance of OP Units and the assets acquired in
purchase transactions based on the market price of the Company's Class
A Common Stock immediately prior to the date of execution of the
purchase contract. The holders of OP Units receive distributions,
pro-rated from the date of admittance, in an amount equivalent to the
dividends paid to holders of Class A Common Stock. During the six
months ended June 30, 1998, the weighted-average ownership interest in
the AIMCO Operating Partnership held by outside limited partners was
11.4%. At June 30, 1998, the ownership interest in the AIMCO Operating
Partnership held by outside limited partners was 11.4%.
15
<PAGE> 16
After a one-year holding period, the limited partners generally have
the right to redeem each OP Unit in exchange for a cash amount equal to
the market value of the Class A Common Stock at the time of redemption
or, at AIMCO's option, a share of Class A Common Stock (in either case,
subject to antidilution adjustments).
NOTE 15- STOCKHOLDERS' EQUITY
In February 1998, AIMCO issued 4,200,000 shares of 8 3/4% Class D
Cumulative Preferred Stock, par value $0.01 per share ("Class D
Preferred Stock") in a public offering. Holders of the Class D
Preferred Stock are entitled to receive, when, as and if declared by
the Board of Directors, annual cash dividends equal to $2.1875 per
share. The Class D Preferred Stock is senior to the Class A Common
Stock, and ranks on a parity with the Class B Cumulative Convertible
Preferred Stock, the Class C Cumulative Preferred Stock, the Class G
Cumulative Preferred Stock (see Note 18) and, the Class H Cumulative
Preferred Stock (see Note 18) as to dividends and upon liquidation.
Upon any liquidation, dissolution or winding up of AIMCO, before
payments or distributions are made by AIMCO to any holders of Class A
Common Stock, the holders of the Class D Preferred Stock are entitled
to receive a liquidation preference of $25 per share, plus accumulated,
accrued and unpaid dividends. The net proceeds of $100.3 million were
used to repay indebtedness under the BOA Credit Facility.
On December 2, 1997, AIMCO issued warrants (the "Oxford Warrants")
exercisable to purchase up to an aggregate of 500,000 shares of Class A
Common Stock at $41 per share. The Oxford Warrants were issued to
affiliates of Oxford Realty Financial Group, Inc., a Maryland
corporation ("Oxford"), in connection with the amendment of certain
agreements pursuant to which the Company manages properties controlled
by Oxford or its affiliates. The actual number of shares of Class A
Common Stock for which the Oxford Warrants will be exercisable is based
on certain performance criteria with respect to the Company's
management arrangement with Oxford for each of the five years ending
December 31, 2001. The Oxford Warrants are exercisable for six years
after the determination of such criteria for each of the five years.
The Oxford Warrants were valued at $1.2 million using the
"Black-Scholes" model and are being amortized over the vesting period.
The Oxford Warrants were issued in a private transaction exempt from
registration under the Securities Act pursuant to Section 4(2).
During the six months ended June 30, 1998, the Company sold 437,653
shares of Class A Common Stock to certain members of the Company's
management, at an average price of $36.77 per share. In payment for the
stock, such members of management executed notes payable to AIMCO
totaling $16.1 million, which bear interest at a fixed rate of 7.0% per
annum, payable quarterly, and are due in ten years. The notes are
secured by the stock purchased and are recourse as to 25% of the
original amount borrowed.
In March 1998, the Company repurchased 163,600 shares of Class A Common
Stock on the open market for $6.0 million, or an average price of
$36.55 per share.
In July 1998, the Company issued 4,050,000 shares of 9-3/8% Class G
Cumulative Preferred Stock, par value $0.01 per share ("Class G
Preferred Stock") in a public offering (see Note 18).
In August 1998, the Company issued 2,000,000 shares of 9-1/2% Class H
Cumulative Preferred Stock, par value $0.01 per share ("Class H
Preferred Stock") in a public offering (see Note 18).
NOTE 16- EARNINGS PER SHARE
The following table illustrates the calculation of basic and diluted
earnings per share for the three and six months ended June 30, 1998 and
1997 (in thousands, except per share data):
16
<PAGE> 17
<TABLE>
<CAPTION>
Three Months Three Months
Ended June 30, Ended June 30,
1998 1997
---------- ----------
<S> <C> <C>
Numerator:
Net income $ 13,620 $ 5,264
Preferred stock dividends (4,969) --
---------- ---------
Numerator for basic and diluted earnings per share - income
attributable to common shareholders $ 8,651 $ 5,264
========== =========
Denominator:
Denominator for basic earnings per share - weighted average
number of shares of common stock outstanding 45,298 20,366
Effect of dilutive securities 241 138
---------- ---------
Denominator for dilutive earnings per share 45,539 20,504
========== =========
Basic earnings per common share:
Operations $ 0.19 $ 0.26
Gain on disposition of properties -- --
Extraordinary item -- --
---------- ---------
Total $ 0.19 $ 0.26
========== =========
Diluted earnings per common share:
Operations $ 0.19 $ 0.26
Gain on disposition of properties -- --
Extraordinary item -- --
---------- ---------
Total $ 0.19 $ 0.26
========== =========
</TABLE>
<TABLE>
<CAPTION>
Six Months Six Months
Ended June 30, Ended June 30,
1998 1997
------------ ------------
<S> <C> <C>
Numerator:
Net income $ 35,262 $ 9,848
Preferred stock dividends (8,650) --
------------ ------------
Numerator for basic and diluted earnings per share - income
attributable to common shareholders $ 26,612 $ 9,848
============ ============
Denominator:
Denominator for basic earnings per share - weighted average
number of shares of common stock outstanding 43,206 18,424
Effect of dilutive securities 203 135
------------ ------------
Denominator for dilutive earnings per share 43,409 18,559
============ ============
Basic earnings per common share:
Operations $ 0.56 $ 0.55
Gain on disposition of properties 0.06 --
Extraordinary item -- (0.02)
------------ ------------
Total $ 0.62 $ 0.53
============ ============
Diluted earnings per common share:
Operations $ 0.55 $ 0.55
Gain on disposition of properties 0.06 --
Extraordinary item -- (0.02)
------------ ------------
Total $ 0.61 $ 0.53
============ ============
</TABLE>
17
<PAGE> 18
NOTE 17- PRO FORMA FINANCIAL STATEMENTS
During the six months ended June 30, 1998, the Company purchased
Ambassador Apartments, Inc. Also, during the six months ended June 30,
1997, the Company purchased the NHP Real Estate Companies and, through
an unconsolidated subsidiary, purchased a 51.3% interest in NHP. The
following unaudited Pro Forma Consolidated Statements of Operations for
the six months ended June 30, 1998 and 1997, have been prepared as if
the above described transactions had occurred at the beginning of the
period being reported on. The following Pro Forma Financial information
is based, in part, on the following historical financial statements:
(i) the unaudited financial data of the Company for the six months
ended June 30, 1998 and 1997; (ii) the unaudited Consolidated Financial
Statements of Ambassador for the four months ended April 30, 1998 and
the six months ended June 30, 1997; (iii) the unaudited Consolidated
Financial Statements of NHP for the six months ended June 30, 1997
(which have been restated to reflect NHP's subsidiary, WMF Group Ltd.,
(as a discontinued operation), and (iv) the unaudited Combined
Financial Statements of the NHP Real Estate Companies for the five
months ended May 31, 1997.
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 CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1997
------------- -------------
<S> <C> <C>
RENTAL PROPERTY OPERATIONS
Rental and other property revenues $ 195,509 $ 132,387
Property operating expenses (72,445) (51,495)
Owned property management expense (4,713) (3,016)
Depreciation (42,979) (28,777)
---------- ----------
Income from property operations 75,372 49,099
---------- ----------
SERVICE COMPANY BUSINESS
Management fees and other income 9,562 7,618
Management and other expenses (5,470) (6,046)
Corporate overhead allocation (196) (294)
Other assets depreciation and amortization (3) (161)
---------- ----------
Income from service company business 3,893 1,117
Minority interests in service company business (1) (2)
---------- ----------
Company's share of income from service company business 3,892 1,115
---------- ----------
GENERAL AND ADMINISTRATIVE EXPENSES (4,103) (406)
INTEREST EXPENSE (43,847) (39,189)
INTEREST INCOME 11,350 1,881
MINORITY INTEREST IN OTHER PARTNERSHIPS (516) (1,327)
EQUITY IN LOSSES OF UNCONSOLIDATED PARTNERSHIPS (4,692) (3,200)
EQUITY IN EARNINGS OF UNCONSOLIDATED SUBSIDIARY 5,609 (549)
AMORTIZATION OF GOODWILL (3,394) (474)
---------- ----------
INCOME BEFORE EXTRAORDINARY ITEM AND MINORITY
INTEREST IN OPERATING PARTNERSHIP 39,671 6,950
Extraordinary item - early extinquishment of debt -- (269)
Gain (loss) on disposition of properties 2,526 --
---------- ----------
INCOME BEFORE MINORITY INTEREST IN OPERATING 42,197 6,681
PARTNERSHIP
Minority interest in Operating Partnership (3,506) (677)
---------- ----------
NET INCOME $ 38,691 $ 6,004
========== ==========
NET INCOME ATTRIBUTABLE TO PREFERRED SHAREHOLDERS $ 8,650 --
========== ==========
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 30,041 $ 6,004
========== ==========
BASIC EARNINGS PER SHARE $ 0.63 $ 0.23
========== ==========
DILUTED EARNINGS PER SHARE $ 0.63 $ 0.22
========== ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 47,822 26,468
========== ==========
WEIGHTED AVERAGE COMMON SHARES AND COMMON SHARE
EQUIVALENTS OUTSTANDING 48,025 26,864
========== ==========
</TABLE>
18
<PAGE> 19
NOTE 18- SUBSEQUENT EVENTS
Sunset Village Acquisition
On July 2, 1998, the Company purchased Sunset Village Apartments, a
114-unit apartment community located in Oceanside, California. Total
consideration paid of $7.5 million was comprised of $1.8 million in
cash, the issuance of 1,985 OP Units valued at $0.1 million, and the
assumption of $5.6 million of mortgage indebtedness.
Sunset Citrus Acquisition
On July 2, 1998, the Company purchased Sunset Citrus Apartments, a
97-unit apartment community located in Vista, California. Total
consideration paid of $4.4 million was comprised of $0.7 million in
cash, the issuance of 1,110 OP Units valued at $0.04 million, and the
assumption of $3.6 million of mortgage indebtedness.
Rancho Escondido Acquisition
Also on July 2, 1998, the Company purchased Rancho Escondido
Apartments, a 334-unit apartment community located in Escondido,
California. Total consideration paid of $20.7 million was comprised of
$6.6 million in cash, the issuance of 5,491 OP Units valued at $0.3
million, and the assumption of $13.8 million of mortgage indebtedness.
Dividend Declared
On July 23, 1998, the AIMCO Board of Directors declared a cash dividend
of $0.5625 per share of AIMCO Class A Common Stock for the quarter
ended June 30, 1998, payable on August 14, 1998 to stockholders of
record on August 7, 1998.
Issuance of Preferred Stock
In July 1998, AIMCO issued 4,050,000 shares of Class G Preferred Stock
in a public offering. Holders of the Class G Preferred Stock are
entitled to receive, when, as and if declared by the Board of
Directors, annual cash dividends equal to $2.34375 per share. The Class
G Preferred Stock is senior to the Class A Common Stock, and ranks on a
parity with the Class B Cumulative Convertible Preferred Stock, Class C
Cumulative Preferred Stock, Class D Cumulative Preferred Stock and
Class H Preferred Stock as to dividends and upon liquidation. Upon any
liquidation, dissolution or winding up of AIMCO, before payments or
distributions are made by AIMCO to any holders of Class A Common Stock,
the holders of the Class G Preferred Stock are entitled to receive a
liquidation preference of $25 per share, plus accumulated, accrued and
unpaid dividends. The net proceeds of approximately $98.0 million were
used to repay $83.0 million of outstanding indebtedness under the BOA
Credit Facility, to fund acquisitions and for general corporate
purposes.
In August 1998, AIMCO issued 2,000,000 shares of Class H Preferred
Stock in a public offering. Holders of the Class H Preferred Stock are
entitled to receive, when, as and if declared by the Board of
Directors, annual cash dividends equal to $2.375 per share. The Class G
Preferred Stock is senior to the Class A Common Stock, and ranks on a
parity with the Class B Cumulative Convertible Preferred Stock, Class C
Cumulative Preferred Stock, Class D Preferred Stock and Class G
Preferred Stock as to dividends and upon liquidation. Upon any
liquidation, dissolution or winding up of AIMCO, before payments or
distributions are made by AIMCO to any holders of Class A Common Stock,
the holders of the Class H Preferred Stock are entitled to receive a
liquidation preference of $25 per share, plus accumulated, accrued and
unpaid dividends. The net proceeds of approximately $48.1 million were
used to repay indebtedness under the BOA Credit Facility.
19
<PAGE> 20
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OVERVIEW
As of June 30, 1998, the Company owned or managed 200,911 apartment units,
comprised of 58,345 units in 210 apartment communities owned or controlled by
the Company (the "Owned Properties"), 74,318 units in 478 apartment communities
in which the Company has an equity interest (the "Equity Properties") and 68,248
units in 357 apartment communities which the Company manages for third parties
and affiliates (the "Managed Properties" and together with the Owned Properties
and the Equity Properties, the "AIMCO Properties"). The apartment communities
are located in 42 states, the District of Columbia and Puerto Rico.
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 and competition for tenants in such markets; acquisition and
development risks, including the failure of 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 SIX MONTHS ENDED JUNE 30, 1998 TO THE SIX MONTHS ENDED
JUNE 30, 1997
NET INCOME
The Company recognized net income of $35.3 million for the six months ended June
30, 1998, compared to $9.8 million for the six months ended June 30, 1997. The
increase in net income of $25.5 million, or 260%, was primarily the result of a
significant increase in the number of owned properties and a significant
increase in investments in unconsolidated subsidiaries and real estate
partnerships during 1997 (the "1997 Acquisitions"), and the acquisition of
Ambassador and the purchase of twelve properties in the first six months of 1998
(the "1998 Acquisitions"). The increase in net income was partially offset by
the sale of five properties in 1997 (the "1997 Sold Properties") and one
property in 1998 (the "1998 Sold Property"), increased real estate depreciation,
increased goodwill amortization 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.
20
<PAGE> 21
RENTAL PROPERTY OPERATIONS
Rental and other property revenues from the Company's Owned Properties totaled
$161.3 million for the six months ended June 30, 1998, compared to $79.7 million
for the six months ended June 30, 1997, an increase of $81.6 million, or 102%.
Rental and other property revenues consisted of the following (dollars in
thousands):
<TABLE>
<CAPTION>
Six months ended Six months ended
June 30, 1998 June 30, 1997
------------- -------------
<S> <C> <C>
"Same store" properties $ 68,133 $65,146
1997 Acquisitions 68,305 4,639
1998 Acquisitions 18,850 --
1997 Sold Properties -- 2,460
1998 Sold Property 103 1,061
Properties in lease-up after the completion of an
expansion or renovation 5,873 6,413
-------- -------
Total $161,264 $79,719
======== =======
</TABLE>
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 $59.6 million for the six months ended June 30, 1998,
compared to $31.2 million for the six months ended June 30, 1997, an increase of
$28.4 million or 91%. Operating expenses consisted of the following (dollars in
thousands):
<TABLE>
<CAPTION>
Six months ended Six months ended
June 30, 1998 June 30, 1997
------------- -------------
<S> <C> <C>
"Same store" properties $26,578 $26,073
1997 Acquisitions 24,886 1,674
1998 Acquisitions 5,970 --
1997 Sold Properties -- 978
1998 Sold Property 197 373
Properties in lease-up after the completion of an
expansion or renovation 2,012 2,062
------- -------
Total $59,643 $31,160
======= =======
</TABLE>
Owned property management expenses, representing the costs of managing the
Company's Owned Properties, totaled $4.7 million for the six months ended June
30, 1998, compared to $2.7 million for the six months ended June 30, 1997, an
increase of $2.0 million, or 74%. The increase resulted from the acquisition of
properties in 1997 and 1998.
21
<PAGE> 22
SERVICE COMPANY BUSINESS
The Company's share of income from the service company business was $3.9 million
for the six months ended June 30, 1998, compared to $2.5 million for the six
months ended June 30, 1997. The increase in service company business income of
$1.4 million was due to increased management and other fees from the acquisition
of partnership interests and properties, and the acquisition of a captive
insurance subsidiary in connection with the acquisition of the NHP Real Estate
Companies in June 1997.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased from $0.8 million for the six
months ended June 30, 1997 to $4.1 million for the six months ended June 30,
1998, a 412% increase. The increase is primarily due to additional corporate
costs and additional employee salaries associated with the purchase of NHP Real
Estate Companies in June 1997. In addition, due to the growth of the Company,
several new departments have been added including legal, tax, and tender
coordination, as well as increased levels of personnel in the accounting and
finance departments.
INTEREST EXPENSE
Interest expense, which includes the amortization of deferred financing costs,
totaled $34.8 million for the six months ended June 30, 1998, compared to $20.6
million for the six months ended June 30, 1997, an increase of $14.2 million, or
69%. The increase consists of the following (dollars in thousands):
<TABLE>
<S> <C>
Interest expense on secured short-term and long-term
indebtedness incurred in connection with the 1997
Acquisitions $10,599
Interest expense on secured and unsecured short-term and
long-term indebtedness incurred in connection with the 1998
Acquisitions 3,480
Increase in interest expense on the Company's other
indebtedness 95
-------
Total increase $14,174
=======
</TABLE>
INTEREST INCOME
Interest income totaled $11.4 million for the six months ended June 30, 1998,
compared to $1.4 million for the six months ended June 30, 1997. The increase of
$10.0 million is primarily due to interest earned on loans made by the Company
to partnerships in which the Company acts as the general partner.
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1998 TO THE THREE MONTHS ENDED
JUNE 30, 1997
The Company recognized net income of $13.6 million for the three months ended
June 30, 1998, compared to $5.3 million for the three months ended June 30,
1997. The increase in net income of $8.3 million, or 156%, was primarily the
result of a significant increase in the number of owned properties and a
significant increase in investments in unconsolidated subsidiaries and real
estate partnerships during 1997 (the "1997 Acquisitions"), and the acquisition
of Ambassador and the purchase of twelve properties in the first six months of
1998 (the "1998 Acquisitions"). The increase in net income was partially offset
by the sale of five properties in 1997 (the "1997 Sold Properties") and one
property in 1998 (the "1998 Sold Property"), increased real estate depreciation,
increased goodwill amortization 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.
22
<PAGE> 23
RENTAL PROPERTY OPERATIONS
Rental and other property revenues from the Company's Owned Properties totaled
$89.9 million for the three months ended June 30, 1998, compared to $41.7
million for the three months ended June 30, 1997, an increase of $48.2 million,
or 116%. Rental and other property revenues consisted of the following (dollars
in thousands):
<TABLE>
<CAPTION>
Three months ended Three months ended
June 30, 1998 June 30, 1997
------------- -------------
<S> <C> <C>
"Same store" properties $34,198 $32,755
1997 Acquisitions 34,439 3,935
1998 Acquisitions 18,524 --
1997 Sold Properties -- 1,260
1998 Sold Property -- 541
Properties in lease-up after the completion of an
expansion or renovation 2,767 3,188
------- -------
Total $89,928 $41,679
======= =======
</TABLE>
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 $33.3 million for the three months ended June 30, 1998,
compared to $16.7 million for the three months ended June 30, 1997, an increase
of $16.6 million or 99%. Operating expenses consisted of the following (dollars
in thousands):
<TABLE>
<CAPTION>
Three months ended Three months ended
June 30, 1998 June 30, 1997
------------- -------------
<S> <C> <C>
"Same store" properties $13,900 $13,480
1997 Acquisitions 12,605 1,466
1998 Acquisitions 5,815 --
1997 Sold Properties -- 510
1998 Sold Property -- 187
Properties in lease-up after the completion of an
expansion or renovation 1,014 1,061
------- -------
Total $33,334 $16,704
======= =======
</TABLE>
Owned property management expenses, representing the costs of managing the
Company's Owned Properties, totaled $2.6 million for the three months ended June
30, 1998, compared to $1.4 million for the three months ended June 30, 1997, an
increase of $1.2 million, or 86%. The increase resulted from the acquisition of
properties in 1997 and 1998.
SERVICE COMPANY BUSINESS
The Company's share of income from the service company business was $1.2 million
for the three months ended June 30, 1998, compared to $1.7 million for the three
months ended June 30, 1997. The decrease in service company business income of
$0.5 million was due to increased management and other expenses from the
acquisition of partnership interests, and properties, and the acquisition of a
captive insurance subsidiary in connection with the acquisition of the NHP Real
Estate Companies in June 1997.
23
<PAGE> 24
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased from $0.4 million for the three
months ended June 30, 1997 to $2.1 million for the three months ended June 30,
1998, a 425% increase. The increase is primarily due to additional corporate
costs and additional employee salaries associated with the purchase of NHP Real
Estate Companies in June 1997. In addition, due to the growth of the Company,
several new departments have been added including legal, tax, and tender
coordination, as well as increased levels of personnel in the accounting and
finance departments.
INTEREST EXPENSE
Interest expense, which includes the amortization of deferred financing costs,
totaled $19.3 million for the three months ended June 30, 1998, compared to
$11.2 million for the three months ended June 30, 1997, an increase of $8.1
million, or 72%. The increase consists of the following (dollars in thousands):
<TABLE>
<S> <C>
Interest expense on secured short-term and long-term
indebtedness incurred in connection with the 1997
Acquisitions $4,654
Interest expense on secured and unsecured short-term and
long-term indebtedness incurred in connection with the 1998
Acquisitions 3,394
Increase in interest expense on the Company's other
indebtedness 137
------
Total increase $8,185
======
</TABLE>
INTEREST INCOME
Interest income totaled $5.3 million for the three months ended June 30, 1998,
compared to $0.8 million for the three months ended June 30, 1997. The increase
of $4.5 million is primarily due to interest earned on loans made by the Company
to partnerships in which the Company acts as the general partner.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company had $49.3 million in cash and cash equivalents. In
addition, the Company had $75.1 million 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 AIMCO Operating Partnership. The Company considers its cash
provided by operating activities, and funds available under its credit
facilities, to be adequate to meet short-term liquidity demands. The Company
utilizes its revolving credit facilities for general corporate purposes and to
fund investments on an interim basis.
In January 1998, the Company replaced its previous $100 million revolving credit
facility with a new $50 million unsecured credit facility with Bank of America
and BankBoston, N.A. (the "BOA Credit Facility"). The AIMCO Operating
Partnership is the borrower under the BOA Credit Facility, but all obligations
thereunder are guaranteed by AIMCO and certain subsidiaries. The interest rate
under the BOA Credit Facility is based on either LIBOR or Bank of America's
reference rate, at the election of the AIMCO Operating Partnership, plus an
applicable margin (the "Margin"). The Margin ranges between 0.6% and
24
<PAGE> 25
1.0% in the case of LIBOR-based loans, and between 0% and 0.5% in the case of
loans based on Bank of America's reference rate, depending upon the credit
rating of the AIMCO Operating Partnership's senior unsubordinated unsecured
long-term indebtedness. The BOA Credit Facility expires on January 26, 2000,
unless extended for successive one-year periods, at the discretion of the
lenders. The BOA Credit Facility provides for the conversion of the revolving
facility into a three-year term loan. The availability of funds to the Company
under the BOA Credit Facility is subject to certain borrowing base restrictions
and other customary restrictions, including compliance with financial and other
covenants thereunder. The Company had outstanding borrowings under the BOA
Credit Facility of $118.5 million as of June 30, 1998.
In May 1998, the Company amended the BOA Credit Facility, to increase its
borrowing capacity thereunder to $155.0 million for a six-month period. At the
conclusion of the six-month period, the maximum borrowing capacity returns to
its original $50.0 million. The interest rate to be applied to the incremental
borrowings is based on either LIBOR plus a margin of 0.9% or the aforementioned
Bank of America reference rate.
In February 1998, the AIMCO Operating Partnership, as borrower, and AIMCO and
certain single asset wholly-owned subsidiaries of the AIMCO Operating
Partnership (the "Owners"), as guarantors, entered into a five year, $50 million
secured revolving credit facility agreement (the "WMF Credit Facility") with
Washington Mortgage Financial Group, Ltd. ("Washington Mortgage"), which
provides for the conversion of all or a portion of such revolving credit
facility to a term facility. The WMF Credit Facility provides that all the
rights of Washington Mortgage are assigned to the Federal National Mortgage
Association ("FNMA"), but FNMA does not assume Washington Mortgage's obligations
under the WMF Credit Facility. At the AIMCO Operating Partnership's request, the
commitment amount under the WMF Credit Facility may be increased to an amount
not to exceed $250 million, subject to the consent of Washington Mortgage and
FNMA in their sole and absolute discretion. The AIMCO Operating Partnership and
affiliates have pledged their ownership interests in the Owners as security for
its obligations under the WMF Credit Facility. The guarantees of the Owners are
secured by assets of the Owners, including four apartment properties and two
mortgage notes. Advances to the AIMCO Operating Partnership under the WMF Credit
Facility are funded with the proceeds of the sale to investors of
mortgage-backed securities issued by FNMA, that are secured by the advance and
an interest in the collateral. The interest rate on each advance is determined
by investor bids for such mortgage-backed securities, plus a margin presently
equal to 0.5%. The maturity date of each advance under the revolving portion of
the WMF Credit Facility is a date between three and nine months from the closing
date of the advance, as selected by the AIMCO Operating Partnership. Advances
under the term facility mature at a date, selected by the AIMCO Operating
Partnership, between ten and twenty years from the date of the advance. Subject
to certain conditions, the AIMCO Operating Partnership has the right to add or
substitute collateral. The WMF Credit Facility requires the Company to maintain
a ratio of debt to gross asset value of no more than 0.55 to 1.0, and interest
coverage ratio of at least 2.25 to 1.0, and a debt service coverage ratio of at
least 2.0 to 1.0, imposes minimum net worth requirements and also provides other
financial covenants and interest coverage ratio requirements that are
specifically related to the collateral. The Company had outstanding borrowings
under the WMF Credit Facility of $50.0 million as of June 30, 1998.
In September 1997, the Company entered into an interest rate lock agreement with
a major investment banking company, having a notional principal amount of $75.0
million, in anticipation of refinancing certain floating rate indebtedness. The
interest rate lock agreement fixed the ten-year treasury rate at 6.32%. During
1998, the Company refinanced certain mortgage indebedness relating to ten real
estate partnerships and realized losses of approximately $3.9 million, which
have been deferred and will be amortized over the life of the refinanced debt.
These losses, when amortized, will result in effective interest rates of 7.7%
over the life of the refinanced debt.
On May 8, 1998, in connection with the consummation of the merger with
Ambassador, the Company assumed six interest rate swap agreements, having
termination dates between October 3, 2003, and March 3, 2004, with several major
investment banking firms.
25
<PAGE> 26
The swap agreements modify the interest characteristics of a portion of the
Company's outstanding debt. Each interest rate swap agreement is designated with
all or a portion of the principal balance and term of a specific debt
obligation. These agreements involve the exchange of amounts based on a fixed
interest rate for amounts based on variable interest rates over the life of the
agreement without an exchange of the notional amount upon which the payments are
based. The differential to be paid or received as interest rates change is
accrued and recognized as adjustment of interest expense related to the debt.
The related interest amount payable to or receivable from counterparties is
included in other liabilities or assets. The fair value of the swap agreements
and changes in the fair value as a result of changes in market interest rates
are not recognized in the financial statements.
Pursuant to the terms of the swap and related credit support agreements, the
Company is required to post collateral to the swap providers for an amount equal
to their exposure, as defined, in each case to the extent that a specified
threshold is exceeded. The collateral posted by the Company may be in the form
of cash or governmental securities, as determined by the Company. At June 30,
1998, the Company had posted approximately $6.6 million in cash collateral under
its swap agreements. The Company estimates that for every 0.25% decrease in the
LIBOR interest rate yield, it will be required to post approximately $2 million
of additional collateral with the swap providers. If interest rates rise, the
Company estimates that for every 0.25% increase in the LIBOR interest rate yield
curve, recovery of the posted collateral of a similar amount will be received up
to the outstanding collateral balances.
On June 2, 1998, the Company settled one of the swap agreements. It is the
intent of the Company to terminate the remaining swap agreements in December,
1998. Based on the market value of the outstanding swap agreements at June 30,
1998, the Company had an unrealized loss of $1.9 million.
From time to time, the Company has offered to acquire and, in the future, may
offer to acquire the interests held by third party investors in certain limited
partnerships for which the Company acts as general partner. Any such
acquisitions will require funds to pay the purchase price for such interests.
Cash payments made in connection with such acquisitions totaled $10.9 million
for the six months ended June 30, 1998.
The Company expects to meet its short-term liquidity requirements, including
property acquisitions, refinancings of short-term debt, and tender offers, with
long-term, fixed rate, fully amortizing debt, secured or unsecured short-term
indebtedness (including indebtedness under the BOA Credit Facility and the WMF
Credit Facility), the issuance of debt securities, OP Units or equity securities
in public offerings or private placements, and cash generated from operations.
In April 1997, the Company filed a shelf registration statement with the SEC
that registered $1.0 billion of securities for sale on a delayed or continuous
basis. The shelf registration statement was declared effective in May 1997. As
of July 31, 1998, the Company had issued common and preferred stock thereunder
and received net proceeds of approximately $678.7 million.
As of June 30, 1998, 94% of the Company's Owned Properties and 43% of its total
assets were encumbered by debt, and the Company had total outstanding
indebtedness of $1,314.5 million, of which $1,196.0 was secured by Owned
Properties and other assets. The Company's indebtedness is comprised of $751.3
million of secured, long-term financing, $50.0 million of secured, short-term
financing, $394.7 million of secured, tax-exempt bonds and $118.5 million
outstanding under the BOA Credit Facility, which is unsecured. As of June 30,
1998, approximately 14% of the Company's indebtedness bears interest at variable
rates. General Motors Acceptance Corporation has made 93 loans (the "GMAC
Loans"), with an aggregate outstanding principal balance of $420.1 million as of
June 30, 1998, to property-owning partnerships of the Company, each of which is
secured by the underlying Owned Property of such partnership. GMAC Loans with an
aggregate outstanding principal balance of $163.8 as of June 30, 1998, are
cross-collateralized with certain other GMAC Loans, and certain loans held by
FNMA, having an aggregate principal balance of $303.9 as of June 30, 1998, are
cross-collateralized and cross-defaulted with certain other FNMA loans to the
Company. Other than certain GMAC Loans, FNMA loans and loans under the BOA
Credit Facility and the WMF Credit Facility, none of the Company's debt is
subject to cross-collateralization or cross-default provisions.
26
<PAGE> 27
At June 30, 1998 the weighted average interest rate on the Company's
consolidated indebtedness was 7.9%, with a weighted average maturity of 13
years.
CAPITAL EXPENDITURES
For the six months ended June 30, 1998, the Company spent $13.5 million for
capital replacements and $8.0 million for initial capital expenditures. In
addition, the Company spent an aggregate of $5.3 million for capital
enhancements and the renovation of four properties owned by the Company. These
expenditures were funded by working capital reserves, borrowings under the
Company's credit facilities and cash provided by operating activities. The
Company reserves $300 per apartment unit per annum for capital replacements,
which totaled $6.6 million for the six months ended June 30, 1998. The Company
has $2.4 million of reserved 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 $56 million during the balance of the year ended December 31,
1998. Initial capital expenditures and capital enhancements will be funded with
cash from operating activities and borrowings under the Company's revolving
credit facilities.
FUNDS FROM OPERATIONS
The Company measures its economic profitability based on Funds From Operations
("FFO"). The Company's management believes that FFO provides investors with an
understanding of the Company's ability to incur and service debt and make
capital expenditures. 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 ("GAAP"), excluding
gains and losses from debt restructuring and sales of property, plus real estate
related depreciation and amortization (excluding amortization of financing
costs), and after adjustments for unconsolidated partnerships and joint
ventures. The Company calculates FFO in a manner consistent with the NAREIT
definition, which includes adjustments for minority interest in the AIMCO
Operating Partnership, plus amortization of management company goodwill, the
non-cash, deferred portion of the income tax provision for unconsolidated
subsidiaries and less the payment of dividends on perpetual preferred stock. FFO
should not be considered as an alternative to net income or net cash flows from
operating activities, as calculated in accordance with GAAP, as an indication of
the Company's performance or as a measure of liquidity. FFO is not necessarily
indicative of cash available to fund future cash needs. In addition, there can
be no assurance that the Company's basis for computing FFO is comparable with
that of other real estate investment trusts.
27
<PAGE> 28
For the three and six months ended June 30, 1998 and 1997, the Company's FFO was
as follows (dollars in thousands):
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Income before minority interest in Operating
Partnership $ 14,594 $ 6,039 $ 38,524 $ 11,464
Extraordinary item - early extinguishment of
debt -- -- -- 269
Gain on disposition of properties -- (2,526) --
Company's share of real estate depreciation 19,644 7,591 32,423 15,046
Minority Interest in other partnerships
share of real estate depreciation -- (922) -- (1,796)
Amortization of goodwill 2,338 237 4,727 474
Equity in earnings of other partnerships:
Real estate depreciation 5,938 697 9,131 697
Equity in earnings of unconsolidated
subsidiaries:
Real estate depreciation -- 1,263 -- 1,263
Deferred taxes 3,982 874 4,291 874
Amortization of management company goodwill
and management contracts 1,709 472 3,088 472
Less amortization of management contracts
where the recorded values of certain
contracts are not expected to be
recovered through future cash flows -- (322) -- (322)
Class C Preferred Stock dividend (1,346) -- (2,678) --
Class D Preferred Stock dividend (2,301) -- (3,323) --
-------- -------- -------- --------
Funds From Operations (FFO) $ 44,558 $ 15,929 83,657 28,441
======== ======== ======== ========
Weighted average common shares, common share
equivalents, preferred stock convertible
into common stock and OP Units
outstanding 53,863 23,525 51,478 21,590
======== ======== ======== ========
</TABLE>
For the six months ended June 30, 1998 and 1997, net cash flows were as follows
(dollars in thousands):
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Cash provided by operating activities $ 5,838 $ 25,035
Cash flow used in investing activities (100,669) (108,134)
Cash flow provided by (used in) financing activities 107,063 91,450
</TABLE>
CONTINGENCIES
HUD Enforcement and Limited Denials of Participation
A significant number of affordable units included in the AIMCO Properties are
subject to regulation by the U.S. Department of Housing and Urban Development
("HUD"). Under its regulations, HUD has the authority
28
<PAGE> 29
to suspend or deny property owners and managers from participation in HUD
programs with respect to additional assistance within a geographic region
through imposition of a Limited Denial of Participation ("LDP") by any HUD
office or nationwide for violations of HUD regulatory requirements. In March
1997, HUD announced its intention to step up enforcement against property owners
and managers who violate their agreements with HUD, and, in July 1997, HUD
announced the creation of a new department-wide enforcement division. In June
1997, the St. Louis HUD field office issued three LDPs to NHP Incorporated, a
company acquired by AIMCO in December 1997 ("NHP"), as a result of physical
inspections and mortgage defaults at one property owned and managed by
NHP-related companies (two of which properties are managed by NHP). The LDP
suspended NHP's ability to manage or acquire additional HUD-assisted properties
in eastern Missouri until June 24, 1998. Although the LDP has expired by its
terms, the Company has proposed a settlement agreement with HUD which includes
aggregate payments to HUD of approximately $485,000 and withdrawal of the LDP as
of its date of issuance. The Company believes a settlement will be expected in
the near future. Because an LDP is prospective, existing HUD agreements are not
affected, so an LDP is not expected to result in the loss of management service
revenue from or to otherwise affect properties that the Company currently
manages in the subject regions. In addition, the Company has resolved concerns
raised by two other HUD field officers. If HUD were to disapprove the Company as
property manager for one or more affordable properties, the Company's ability to
obtain property management revenues from new affordable properties may be
impaired.
HUD monitors the performance of properties with HUD-insured mortgage loans. HUD
also monitors compliance with applicable regulations, and takes performance and
compliance into account in approving management of additional HUD-assisted
properties. In this regard, since July 1988, 29 HUD-assisted properties owned or
managed by NHP or NHP-related companies have defaulted on non-recourse
HUD-insured mortgage loans. Eight of these 29 properties are also currently
managed by the Company. An additional six properties owned or managed by NHP
have received unsatisfactory performance ratings. As a result of the defaults
and unsatisfactory ratings, the national HUD office must review any application
by the Company to act as property manager or owner for additional HUD-assisted
properties. The national HUD office has consistently approved NHP's applications
to manage new properties, and the Company received HUD clearance to acquire its
interests in NHP and the NHP-related companies. The Company believes that it
enjoys a good working relationship with HUD and that the national office will
continue to apply the clearance process to large management portfolios such as
the Company's with discretion and flexibility. While there can be no assurance,
the Company believes that the unsatisfactory reviews and the mortgage defaults
will not have a material impact on its results of operations or financial
condition.
In October 1997, NHP received a subpoena from the Inspector General of HUD (the
"Inspector General") requesting documents relating to any arrangement whereby
NHP or any of its affiliates provides or has provided compensation to owners of
HUD multifamily projects in exchange for or in connection with property
management of a HUD project. The Company believes that other owners and managers
of HUD projects have received similar subpoenas. Documents relating to certain
of the Company's acquisitions of property management rights for HUD projects,
may be responsive to the subpoena. The Company is in the process of complying
with the subpoena and has provided certain documents to the Inspector General,
without conceding that they are responsive to the subpoena. The Company believes
that its operations are in compliance, in all material respects, with all laws,
rules and regulations relating to HUD-assisted or HUD-insured properties.
Effective February 13, 1998, counsel for the Company and the U.S. Attorney for
the Northern District of California entered into a Tolling Agreement related to
certain civil claims the government may have against the Company. Although no
action has been initiated against the Company or, to the Company's knowledge,
any owner of a HUD property managed by the Company, if any such action is taken
in the future, it could ultimately affect existing arrangements with respect to
HUD projects or otherwise have a material adverse effect on the Company's
results of operations.
Environmental
Under Federal, state and local environmental laws and regulations, a current or
previous owner or operator of real property may be required to investigate and
clean up a release of hazardous substances at such
29
<PAGE> 30
property, and may, under such laws and common law, be held liable for property
damage and other costs incurred by third parties in connection with such
releases. The liability under certain of these laws has been interpreted to be
joint and several unless the harm is divisible or there is a reasonable basis
for allocation of responsibility. The failure to remediate the property properly
may also adversely affect the owner's ability to sell or rent the property or to
borrow using the property as collateral. In connection with its ownership,
operation or management of the AIMCO Properties, the Company could be
potentially liable for environmental liabilities or costs associated with its
properties or properties it may in the future acquire or manage.
Certain Federal, state and local laws and regulations govern the removal,
encapsulation or disturbance of asbestos-containing materials ("ACMs") when
those materials are in poor condition or in the event of building remodeling,
renovation or demolition; impose certain worker protection and notification
requirements and govern emissions of and exposure to asbestos fibers in the air.
These laws also impose liability for a release of ACMs and may enable third
parties to seek recovery from owners or operators of real properties for
personal injury associated with ACMs. In connection with the ownership,
operation or management of properties, the Company could be potentially liable
for those costs. There are ACMs at certain of the Owned Properties, and there
may be ACMs at certain of the other AIMCO Properties. The Company has developed
and implemented operations and maintenance programs, as appropriate, that
establish operating procedures with respect to the ACMs at most of the Owned
Properties, and intends to develop and implement, as appropriate, such programs
at AIMCO Properties that do not have such programs.
Certain of the Company's Owned Properties, and some of the other AIMCO
Properties, are located on or near properties that contain or 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
AIMCO 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 AIMCO's 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 former landfill operator, has assumed
responsibility for conducting all investigation and 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, the City of Austin may implement a proposed contingency
plan of passive methane gas venting. The City of Austin has also conducted
testing at Montecito 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 incurred, and does not expect to incur, liability for the landfill
investigation and remediation. However, in connection with the present raising
of four of its buildings, the Company has relocated some of its tenants and has
installed a venting system according to the TNRCC's specifications. The
restabilization was substantially completed as of January 1998, at a total cost
of approximately $550,000. The City of Austin will be responsible for monitoring
the conditions of Montecito.
All of the Owned Properties were subject to Phase I or similar environmental
audits by independent environmental consultants prior to acquisition. The audits
did not reveal, nor is the Company aware of, any environmental liability
relating to such properties that would have a material adverse effect on the
Company's business, assets or results of operations. However, such audits
involve a number of judgements and it is possible that such audits did not
reveal all environmental liabilities or that there are material environmental
liabilities of which the Company is unaware. In addition, the Managed Properties
may not have been subject to Phase I or similar environmental audits by
independent environmental consultants. While the Company is not aware of any
environmental liability that it believes would have a material
30
<PAGE> 31
adverse effect on its business, financial condition or results of operations
relating to the Managed Properties, for which audits are not available, there
can be no assurance that material environmental liabilities of which the Company
is unaware do not exist at such properties.
In October 1997, NHP received a letter ("the EPA Letter") from the U.S.
Department of Justice ("DOJ") which stated that the U.S. Environmental
Protections Agency ("EPA") has requested that the DOJ file a lawsuit against NHP
alleging, among other things, that NHP violated the Clean Air Act, the National
Recycling and Emissions Reduction Programs and associated regulations in
connection with the employment of certain unlicensed personnel, maintenance and
disposal of certain refrigerants, and record-keeping practices at two
properties. A settlement in principle between NHP and the EPA has been reached
whereby NHP agreed to pay a fine of $99,900, permit the EPA to audit the
maintenance records and technical staffing at 40 NHP properties and continue to
provide training to all maintenance workers with respect to the disposal of
refrigerants. A formal settlement agreement is expected to be executed in 1998.
It is possible that the future EPA audits agreed to in the settlement could
result in additional allegations by EPA of violations at the properties audited.
However, based on the terms of the settlement in principle with the EPA, the
Company anticipates that the fines, if any, resulting from any such violations
will be nominal.
UNCERTAINTIES REGARDING STATUS OF FEDERAL SUBSIDIES
The Company owns and/or 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 Housing
Assistance Payment Contracts ("HAP Contracts") between HUD and the owners of the
properties or, with respect to a limited number of units managed by the Company,
pursuant to vouchers received by tenants. On October 27, 1997, the President of
the United States signed into law the Multifamily Assisted Housing Reform and
Affordability Act of 1997 (the "1997 Housing Act"). Under the 1997 Housing Act,
the mortgage financing and HAP Contracts of certain properties assisted under
Section 8, with rents above market levels and financed with HUD-insured mortgage
loans, will be restructured by reducing subsidized rents to market levels,
thereby reducing subsidy levels, and lowering required debt service payments as
needed to ensure financial viability at the reduced rents and subsidy levels.
The 1997 Housing Act retains project-based subsidies for most properties
(properties in rental markets with limited supply, 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. Congress has
elected to renew HAP Contracts expiring before October 1, 1998 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.
HIGH PERFORMANCE UNITS
In January 1998, the Company agreed to sell 15,000 Class I High Performance
Partnership Units ("the "High Performance Units") to a partnership owned by
fourteen members of AIMCO's senior management, and to three of its independent
directors for $2.1 million in cash. The High Performance Units have nominal
value unless the Company's total return, defined as distribution income plus
share price appreciation, over the three year period ending December 31, 2000,
is at least 30% and exceeds the
31
<PAGE> 32
industry average, as determined by a peer group index, by at least 15% (the
"Total Return"). At the conclusion of the three year period, if the Company's
Total Return satisfies these criteria, the holders of the High Performance Units
will receive distributions and allocations of income and loss from the AIMCO
Operating Partnership in the same amounts and at the same times as would holders
of a number of OP Units equal to the quotient obtained by dividing (i) the
product of (a) 15% of the amount by which the Company's cumulative Total Return
over the three year period exceeds the greater of 115% of a peer group index or
30% (such excess being the "Excess Return"), multiplied by (b) the weighted
average market value of the Company's outstanding Common Stock and OP Units, by
(ii) the market value of one share of Class A Common Stock at the end of the
three year period. The three year measurement period will be shortened in the
event of a change of control of the Company. Unlike OP Units, the High
Performance Units are not redeemable or convertible into Class A Common Stock
unless a change of control of the Company occurs. Because there is substantial
uncertainty that the High Performance Units will have more than nominal value
due to the required Total Return over the three year term, the Company has not
recorded any value to the High Performance Units. If the measurement period
would have ended June 30, 1998, the Excess Return would have been $114.9 million
and the value of the High Performance Units would have been $17.2 million, and
such High Performance Units would represent no dilutive effect on net income per
share.
YEAR 2000 COMPLIANCE
The Company's management has determined that it will be necessary to modify or
replace certain accounting and operational software and hardware to enable its
computer systems to operate properly subsequent to December 31, 1999. As a
result, management has appointed a team of internal staff to research and manage
the conversion or replacement of existing systems to comply with year 2000
requirements. The team's activities are designed to ensure that there is no
adverse effect on the Company's core business operations, and that transactions
with tenants, suppliers and financial institutions are fully supported.
The Company utilizes numerous accounting and reporting software packages and
computer hardware to conduct its business, some of which already comply with
year 2000 requirements. Management estimates that the modification or
replacement of non-compliant accounting and reporting software and hardware will
total approximately $0.3 million.
The Company's management also believes that certain of the Owned Properties
possess operational systems (e.g. elevators, fire alarm and extinguishment
systems and security systems) which also must be modified or replaced in order
to function properly in the 21st century. Management is currently engaged in the
identification of all non-compliant operational systems, and has not yet
determined the estimated cost of replacing or modifying such systems.
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
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
32
<PAGE> 33
consolidated financial condition or results of operations of the Company and its
subsidiary, taken as a whole.
In connection with the Company's acquisition of interests in limited
partnerships that own or manage apartments properties, through tender offers or
otherwise, from time to time, the Company is subject to legal actions arising
from such activities, including allegations that such activities may involve
breaches of fiduciary duties to the limited partners of such partnerships or may
violate the relevant partnership agreements. The Company intends to comply with
its fiduciary obligations to its limited partners and with the partnership
agreements to which it is a party, and does not expect such claims to have a
material adverse effect on the consolidated financial conditions or results of
operations of the Company and its subsidiaries taken as a whole.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
33
<PAGE> 34
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On February 13, 1998, AIMCO issued 4,200,000 shares of Class D Preferred Stock
in an underwritten public offering, for net proceeds of approximately $101.5
million. The Class D Preferred Stock (a) ranks prior to Class A Common Stock and
Class B Common Stock, and will rank prior to Class E Preferred Stock, if any, to
be issued in the Insignia Merger, and any other class or series of capital stock
of AIMCO if the holders of the Class D Preferred Stock are to be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution,
and winding-up in preference or priority to the holders of shares of such class
or series ("Class D Junior Stock"), (b) ranks on parity with Class B Preferred
Stock, Class C Preferred Stock and Class G Preferred Stock and will rank on a
parity with Class F Preferred Stock, if any, to be issued in the Insignia
Merger, and Class H Preferred Stock, and with any other class or series of
capital stock of AIMCO if the holders of such class of stock or series and the
Class D 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
("Class D Parity Stock") and (c) ranks junior to any class or series of capital
stock of AIMCO if the holders of such class or series shall be entitled to
receipt of dividends or amounts distributable upon liquidation, dissolution or
winding up in preference or priority to the holders of the Class D Preferred
Stock ("Class D Senior Stock").
Holders of Class D Preferred Stock are entitled to receive cash dividends at
the rate of 8 3/4% per annum of the $25 liquidation preference (equivalent to
$2.1875 per annum per share). Such dividends are cumulative from the date of
original issue, and are payable quarterly on or before January 15, April 15,
July 15 and October 15 of each year. Upon any liquidation, dissolution or
winding up of AIMCO, before payment or distribution by AIMCO shall be made to
or set apart for the holders of any shares of Class D Junior Stock, the holders
of Class D Preferred Stock shall be entitled to receive a liquidation
preference of $25 per share (the "Class D Liquidation Preference"), plus an
amount equal to all accumulated, accrued and unpaid dividends to the date of
final distribution to such holders; but such holders shall not be entitled to
any further payment. If proceeds available for distribution shall be
insufficient to pay the preference described above and any liquidating payments
on any other shares of any class or series of Class D Parity Stock, then such
proceeds shall be distributed among the holders of Class D Preferred Stock and
any such other Class D Parity Stock ratably in the same proportion as the
respective amounts that would be payable on such Class D Preferred Stock and
any such other Class D Parity Stock if all amounts payable thereon were paid in
full.
Holders of shares of Class D Preferred Stock have no voting rights, except that
if distributions on Class D Preferred Stock or any series or class of Class D
Parity Stock shall be in arrears for six or more quarterly periods, the number
of directors constituting the AIMCO Board of Directors shall be increased by two
(if not already increased by reason of similar types of provisions with respect
to shares of Class D Parity Stock) and the holders of Class D Preferred Stock
(voting together as a single class with all other shares of Class D Parity Stock
which are entitled to similar voting rights) will be entitled to vote for the
election of the two additional directors of AIMCO at any annual meeting of
stockholders or at a special meeting of the holders of the Class D Preferred
Stock called for the purpose.
34
<PAGE> 35
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its annual meeting of stockholders on May 8, 1998. At the
meeting, the stockholders approved the six proposals set forth below:
1. Proposal to elect six directors, for a term for one year each, until the next
annual meeting of stockholders and until their successors are elected and
qualify
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
VOTES FOR VOTES AGAINST INSTRUCTED BROKER NON VOTES
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
32,929,828 1,424,750 16,445 0
- --------------------------------------------------------------------------------
</TABLE>
VOTES CAST FOR EACH DIRECTOR
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
VOTES VOTES
FOR WITHHELD
- ----------------------------------------------------------------
<S> <C> <C>
Terry Considine 32,929,828 1,424,750
Richard S. Ellwood 32,930,164 1,424,414
Peter K. Kompaniez 32,945,173 1,409,405
J. Landis Martin 32,946,273 1,408,305
Thomas L. Rhodes 32,932,528 1,422,050
John D. Smith 32,945,728 1,408,850
- ----------------------------------------------------------------
</TABLE>
2. Proposal to approve an amendment to the Apartment Investment and Management
Company 1997 Stock and Incentive Plan:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
VOTES FOR VOTES AGAINST ABSTENTIONS BROKER NON VOTES
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
25,347,697 8,886,243 125,806 0
- --------------------------------------------------------------------------------
</TABLE>
35
<PAGE> 36
3. Proposal to ratify the sale of an aggregate of 15,000 Class I High
Performance Partnership Units of the AIMCO Operating Partnership:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
VOTES FOR VOTES AGAINST ABSTENTIONS BROKER NON VOTES
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
23,072,713 5,048,846 136,398 6,427,632
- --------------------------------------------------------------------------------
</TABLE>
4. Proposal to approve the Apartment Investment and Management Company 1998
Incentive Compensation Plan:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
VOTES FOR VOTES AGAINST ABSTENTIONS BROKER NON VOTES
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
21,157,536 6,958,084 142,338 6,427,631
- --------------------------------------------------------------------------------
</TABLE>
5. Proposal to approve an amendment to the Charter of AIMCO to increase the
authorized capital stock of AIMCO from 160,750,000 to 510,750,000 shares:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
VOTES FOR VOTES AGAINST ABSTENTIONS BROKER NON VOTES
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
21,783,964 5,964,741 2,352,197 4,584,686
- --------------------------------------------------------------------------------
</TABLE>
6. Proposal to ratify the selection of Ernst & Young LLP, to serve as
independent auditors for the Company for the fiscal year ended December 31,
1998:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
VOTES FOR VOTES AGAINST ABSTENTIONS BROKER NON VOTES
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
34,115,409 183,195 61,142 0
- --------------------------------------------------------------------------------
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS. The following exhibits are filed with this report (1):
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
2.1 Amended and Restated Agreement and Plan of Merger, dated as of
May 26, 1998, by and among Apartment Investment and Management
Company, AIMCO Properties, L.P., Insignia Financial Group, Inc.,
and Insignia/ESG Holdings, Inc. (Exhibit 2.1 to Amendment No. 2,
filed June 22, 1998, to the Company's Current Report on Form 8-K,
dated March 17, 1998)
3.1 Charter of Apartment Investment and Management Company
3.2 Bylaws of Apartment Investment and Management Company (Exhibit 3.2
to the Company's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1997, is incorporated herein by this
reference)
10.1 First Amendment to Credit Agreement, dated as of May 8, 1998, by
and among AIMCO Properties, L.P., the financial institutions
listed on the signature pages thereof and Bank of America
(Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 1998 is incorporated herein
by this reference)
10.2 Payment Guaranty, dated as of May 8, 1998, by Ambassador II, L.P.,
in favor of Bank of America (Exhibit 10.5 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended June
30, 1998 is incorporated herein by this reference)
10.3 Second Amendment to Credit Agreement, dated as of May 21, 1998,
by and among AIMCO Properties, L.P., the financial institutions
listed on the signature pages thereof and Bank of America
10.4 Payment Guaranty, dated as of May 21, 1998 by Ambassador X, L.P.
in favor of Bank of America
10.5 Payment Guaranty, dated as of May 21, 1998, by Ambassador I, Inc.,
Ambassador II, Inc., Ambassador IV, Inc., Ambassador V, Inc.,
Ambassador VI, Inc., Ambassador VII, Inc., Ambassador VIII, Inc.,
Ambassador IX, Inc., Ambassador X, Inc., Ambassador XI, Inc.,
Ambassador XII, Inc., Ambassador Florida Partners, Inc., A.J.
One, Inc., and A.J., Two, Inc. in favor of Bank of America
10.6 Fifth Amendment, dated as of July 15, 1998, to the Second Amended
and Restated Agreement of Limited Partnership of AIMCO Properties,
L.P., dated as of July 29, 1994.
10.7 Sixth Amendment dated as of August 14, 1998 to the Second
Amended and Restated Agreement of Limited Partnership of AIMCO
Properties, L.P., dated as of July 29, 1994
10.8 Payment Guaranty, dated as of May 8, 1998, by AIMCO Properties,
L.P. for the benefit of Federal National Mortgage Association.
27.1 Financial Data Schedule
99.1 Form of Underwriters Agreement
</TABLE>
(1) Scheduled and supplemental materials to the exhibits have been
omitted but will be provided to the SEC upon request.
(b) Reports on Form 8-K.
During the quarter for which this report is filed, the Company filed Amendment
No. 1 on April 3, 1998, and Amendment No. 2 on June 22, 1998, to its Current
Report on Form 8-K, dated March 17, 1998, relating to the proposed merger of
Insignia Financial Group, Inc. with and into Apartment Investment and Management
Company.
The Company filed Amendment No. 2 on May 22, 1998, to its Current Report on Form
8-K, dated December 23, 1997, relating to the merger of Ambassador Apartments,
Inc. with and into Apartment Investment and Management Company.
36
<PAGE> 37
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.
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
Date: August 14, 1998 /s/ Troy D. Butts
----------------------------------------
Troy D. Butts
Senior Vice President and
Chief Financial Officer
(duly authorized officer and principal
financial officer)
37
<PAGE> 38
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
2.1 Amended and Restated Agreement and Plan of Merger, dated as of
May 26, 1998, by and among Apartment Investment and Management
Company, AIMCO Properties, L.P., Insignia Financial Group, Inc.,
and Insignia/ESG Holdings, Inc. (Exhibit 2.1 to Amendment No. 2,
filed June 22, 1998, to the Company's Current Report on Form 8-K,
dated March 17, 1998)
3.1 Charter of Apartment Investment and Management Company
3.2 Bylaws of Apartment Investment and Management Company (Exhibit 3.2
to the Company's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1997, is incorporated herein by this
reference)
10.1 First Amendment to Credit Agreement, dated as of May 8, 1998, by
and among AIMCO Properties, L.P., the financial institutions
listed on the signature pages thereof and Bank of America
(Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 1998 is incorporated herein
by this reference)
10.2 Payment Guaranty, dated as of May 8, 1998, by Ambassador II, L.P.,
in favor of Bank of America (Exhibit 10.5 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended June
30, 1998 is incorporated herein by this reference)
10.3 Second Amendment to Credit Agreement, dated as of May 21, 1998,
by and among AIMCO Properties, L.P., the financial institutions
listed on the signature pages thereof and Bank of America
10.4 Payment Guaranty, dated as of May 21, 1998 by Ambassador X, L.P.
in favor of Bank of America
10.5 Payment Guaranty, dated as of May 21, 1998, by Ambassador I, Inc.,
Ambassador II, Inc., Ambassador IV, Inc., Ambassador V, Inc.,
Ambassador VI, Inc., Ambassador VII, Inc., Ambassador VIII, Inc.,
Ambassador IX, Inc., Ambassador X, Inc., Ambassador XI, Inc.,
Ambassador XII, Inc., Ambassador Florida Partners, Inc., A.J.
One, Inc., and A.J., Two, Inc. in favor of Bank of America
</TABLE>
<PAGE> 39
10.6 Fifth Amendment, dated as of July 15, 1998, to the Second Amended
and Restated Agreement of Limited Partnership of AIMCO Properties,
L.P., dated as of July 29, 1994.
10.7 Sixth Amendment dated as of August 14, 1998 to the Second
Amended and Restated Agreement of Limited Partnership of AIMCO
Properties, L.P., dated as of July 29, 1994
10.8 Payment Guaranty, dated as of May 8, 1998, by AIMCO Properties,
L.P. for the benefit of Federal National Mortgage Association.
27.1 Financial Data Schedule
99.1 Form of Underwriters Agreement
<PAGE> 1
EXHIBIT 3.1
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 PrenticeHall 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 PrenticeHall
Corporation System, Maryland, 11 East Chase Street, Baltimore, Maryland 21202.
The resident agent is a Maryland corporation located in the State of Maryland.
<PAGE> 2
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.
(1) See Article SIXTH.
(2) See Article SEVENTH.
<PAGE> 3
(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
interdealer 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
interdealer 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 interdealer 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 interdealer 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> 4
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
longterm 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 nonaction) 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 interdealer 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> 5
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> 6
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> 7
(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
interdealer 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.(3)
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 13d3 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,"
(3) See Article FOURTH
<PAGE> 8
"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
thencurrent 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 S11
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 overthecounter 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> 9
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> 10
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
interdealer 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 twothirds of the aggregate number of
votes then entitled to be cast generally in the election of directors. For
purposes of this Section 5, "CAUSE"
(4) See Article THIRD.
(5) See Article FOURTH.
(6) See Article FOURTH.
<PAGE> 11
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 twothirds 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.
(7) See Article FOURTH.
(8) See Article FOURTH.
<PAGE> 12
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(9) 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 twothirds
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(10) 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.
(9) See Article FOURTH.
(10) See Article FOURTH.
<PAGE> 13
"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 nonperformance 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
13d3 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 NonControl Acquisition (as
hereinafter defined) shall not constitute an acquisition that would cause a
Change in Control. "NONCONTROL 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 NonControl 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 twothirds
(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 twothirds (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 14a11
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> 14
(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 twothirds
(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
"NONCONTROL 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 overthecounter 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 12month period.
"ELIGIBLE CLASS B SHARES" shall mean the following percentages
(subject to modification as provided
<PAGE> 15
in Section 3(c) of this Article) of the Outstanding Class B Shares as of the
Year-End Testing Dates indicated.
<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING
CLASS B SHARES
YEAR-END TESTING DATE
-----------------------------------------------------------
<S> <C>
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%
</TABLE>
"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.
"YEAREND 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 YearEnd 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> 16
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:
<TABLE>
<CAPTION>
YEAR-END TESTING COMPOUNDED CUMULATIVE
DATE. ANNUAL GROWTH TARGET GROWTH TARGET
- -------------------------------------------------------------------------------
<S> <C> <C>
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 YearEnd ending on the YearEnd
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 YearEnd and ending on the YearEnd
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
YearEnd Testing Date is at the Initial Public Offering
least 108.5% of the Adjusted and ending on the YearEnd
Funds from Operations Per Testing Date is at least
Share for the calendar year $2.345
ending on the previous
YearEnd 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
YearEnd Testing Date is at the Initial Public Offering
least 108.5% of the Adjusted and ending on the YearEnd
Funds from Operations Per Testing Date is at least
Share for the calendar year $2.544
ending on the previous
YearEnd Testing Date
</TABLE>
<PAGE> 17
<TABLE>
<S> <C> <C>
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
YearEnd Testing Date is at the Initial Public Offering
least 108.5% of the Adjusted and ending on the YearEnd
Funds from Operations Per Testing Date is at least
Share for the calendar year $2.760
ending on the previous
YearEnd Testing Date
</TABLE>
(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 YearEnd
Testing Date:
<TABLE>
<CAPTION>
YEAR-END TESTING DATE AVERAGE MARKET PRICE
-----------------------------------------------
<S> <C> <C>
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
</TABLE>
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 90day
period beginning on October 1, 1986 and ending on December 30, 1996, (ii) the
90day period beginning on April 17, 1997 and ending on July 16, 1997 OR (iii)
the 90day 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 YearEnd 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 YearEnd 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> 18
(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 YEAREND 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 YearEnd
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:
<TABLE>
<CAPTION>
INITIAL HOLDER PERCENTAGE
---------------------------------------
<S> <C> <C>
Terry Considine 68.33%
Peter K. Kompaniez 13.50%
Steven D. Ira 13.67%
Robert P. Lacy 4.50%
</TABLE>
<PAGE> 19
(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
interdealer 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> 20
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> 21
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> 22
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> 23
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> 24
(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.(11) 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 13d3 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.
(11) See Article FIFTH.
<PAGE> 25
"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 overthecounter 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> 26
"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 thencurrent
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 overthecounter
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> 27
"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> 28
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 declared 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> 29
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 30day months
and a 360day 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> 30
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> 31
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 thencurrent 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 Corporation 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 nonassessable 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 redemption under Section 5 of this Article.
<PAGE> 32
(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> 33
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 faith 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> 34
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 taxfree 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 stockbased 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
onetenth 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.
<PAGE> 35
(f) If:
(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> 36
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> 37
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 of the
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
thenremaining 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 662/3% 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 or validating:
<PAGE> 38
(i) Any amendment, alteration or repeal of any of the provisions
of these Articles Supplementary, the Charter or the ByLaws 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 interdealer 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 interdealer 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> 39
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 interdealer 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 longterm 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 nonaction) 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> 40
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 interdealer 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> 41
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> 42
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> 43
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
interdealer 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 2408 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 2608(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> 44
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> 45
ARTICLES SUPPLEMENTARY
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CLASS C CUMULATIVE PREFERRED STOCK
(PAR VALUE $.01 PER SHARE)
APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation
(hereinafter called the "Corporation"), having its principal office in Baltimore
City, Maryland, hereby certifies to the Department of Assessments and Taxation
of the State of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Directors of
the Corporation by Section 1.2 of Article IV of the Charter of the Corporation,
the Board of Directors has duly divided and classified 2,760,000 authorized but
unissued shares of the capital stock of the Corporation into a class designated
as Class C Cumulative Preferred Stock and has provided for the issuance of such
class.
SECOND: The reclassification increases the number of shares classified as
Class C Cumulative Preferred Stock, par value $.01 per share, from no shares
immediately prior to the reclassification to 2,760,000 shares immediately after
the reclassification. The reclassification decreases the number of shares
classified as Preferred Stock, par value $.01 per share, from 9,250,000 shares
immediately prior to the reclassification to 6,490,000 shares immediately after
the reclassification. The number of shares classified as Class C Cumulative
Preferred Stock may be decreased pursuant to Section 6 of Article Third of these
Articles Supplementary upon reacquisition thereof in any manner, or by
retirement thereof, by the Corporation.
THIRD: The terms of the Class C Cumulative 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 C Cumulative
Preferred Stock (the "Class C Preferred Stock") and Two Million Seven Hundred
Sixty Thousand (2,760,000) shall be the authorized number of shares of such
Class C Preferred Stock constituting such class.
5
<PAGE> 46
2. DEFINITIONS.
For purposes of the Class C 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.
"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 13d3 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 C Preferred Stock.
"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.
"CHARITABLE BENEFICIARY" shall mean one or more beneficiaries of the Trust
as determined pursuant to Section 10.3 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 C 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
6
<PAGE> 47
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.
"DIVIDEND PAYMENT DATE" shall mean January 15, April 15, July 15 and October
15 of each year; 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 and no interest shall accrue on such dividend from such
date to such Dividend Payment Date.
"DIVIDEND PERIODS" shall mean the Initial Dividend Period and each
subsequent quarterly dividend period commencing on and including January 15,
April 15, July 15 and October 15 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 Redemption Date
with respect to the Class C Preferred Stock being redeemed.
"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 10.3(A) of this
Article.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"ISSUE DATE" shall mean December 23, 1997(1).
"INITIAL DIVIDEND PERIOD" shall mean the period commencing on and including
the Issue Date and ending on and including April 14, 1998.
"INITIAL HOLDER" shall mean Terry Considine.
"INITIAL HOLDER LIMIT" shall mean a number of the Outstanding shares of
Class C 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 thencurrent Initial Holder Limit applicable to the
Initial Holder.
7
<PAGE> 48
"JUNIOR STOCK" shall mean the Common Stock and any other class or series of
capital stock of the Corporation over which the shares of Class C Preferred
Stock have preference or priority in the payment of dividends or in the
distribution of assets on any liquidation, dissolution or winding up of the
Corporation.
"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 C 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 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 overthecounter 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. The term "TRADING DAY" shall mean a day on which the
principal national securities exchange on which the Equity Stock is listed or
admitted to trading is open for the transaction of business or, if the Equity
Stock is not listed or admitted to trading on any national securities 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.
"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.
8
<PAGE> 49
"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 C
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 C 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
7 of this Article. The Class B Preferred Stock shall be a Parity Stock.
"PERSON" shall mean (a) for purposes of Section 10 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 10.3(A) of
this Article.
"REDEMPTION DATE" shall have the meaning set forth in paragraph (b) of
Section 5 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
7 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 C 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
9
<PAGE> 50
National Market or, if such securities are not listed or admitted for trading on
the NASDAQ National Market, in the securities market in which such securities
are traded.
"TRANSFER" shall mean any sale, transfer, gift, assignment, devise or other
disposition of a share of Class C 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 C Preferred Stock or (ii) the sale,
transfer, assignment or other disposition of any securities or rights
convertible into or exchangeable for Class C 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 C 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 C 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 C Preferred
Stock.
"TRUST" shall mean the trust created pursuant to Section 10.3 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 8 of
this Article.
3. DIVIDENDS.
(a) The holders of Class C 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 C Preferred Stock equal to $2.25 per annum. 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 each Dividend Payment Date, commencing on April
15, 1998. Each such dividend shall be payable in arrears to the holders of
record of the Class C Preferred Stock, as they appear on the stock records of
the Corporation at the close of business on the January 1, April 1, July 1 or
October 1, as the case may be, immediately preceding such Dividend Payment Date.
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.
(b) The amount of dividends payable per share of Class C 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 30day months
and a 360day
10
<PAGE> 51
year. Holders of Class C 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 C 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 C Preferred Stock that may be in arrears.
(c) So long as any of the shares of Class C 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 C 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 C 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 C Preferred Stock and accumulated,
accrued and unpaid on such Parity Stock.
(d) So long as any of the shares of Class C 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 shares of, or options, warrants or rights to
subscribe for or purchase shares of, 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 the full cumulative dividends (including all
accumulated, accrued and unpaid dividends) on all outstanding shares of Class C
Preferred Stock 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 C
Preferred Stock.
Notwithstanding the provisions of this Section 3(d), the Corporation
shall not be prohibited from (i) declaring or paying or setting apart for
payment any dividend or distribution on any shares of Parity Stock or (ii) or
redeeming, purchasing or otherwise acquiring any Parity Stock, in each case, if
such declaration, payment, redemption, purchase or other acquisition is
necessary in order to maintain the continued qualification of the Corporation as
a REIT under Section 856 of the Code.
11
<PAGE> 52
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 by the Corporation (whether of capital or surplus) shall be made to
or set apart for the holders of Junior Stock, the holders of shares of Class C
Preferred Stock shall be entitled to receive TwentyFive Dollars ($25) per share
of Class C 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 C 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 C
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 C Preferred Stock and any such other Parity Stock
ratably in the same proportion as the respective amounts that would be payable
on such Class C 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 involuntary, 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 C 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 C 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 C Preferred Stock shall not be redeemable by the
Corporation prior to December 23, 2002(2) except as set forth in Section 10.2 of
this Article. On and after December 23, 2002(3), the Corporation, at its option,
may redeem shares of Class C 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 date fixed for
redemption (the "Redemption Date"). In connection with any redemption pursuant
to this Section 5(a), the redemption price of the Class C Preferred Stock (other
than any portion thereof consisting of accrued and unpaid dividends) shall be
payable solely with the proceeds from the sale by the Corporation or AIMCO
Properties, L.P., a Delaware limited partnership (the "Operating Partnership")
of other capital shares of the Corporation or the Operating Partnership (whether
or not such sale occurs concurrently with such redemption). For purposes of the
preceding sentence, 'capital shares' means any common stock, preferred stock,
depositary shares, partnership or other interests, participations or other
ownership interests (however designated) and any rights (other than debt
securities convertible into or exchangeable at the option of the holder for
equity securities (unless and to the extent such debt securities are
subsequently converted into capital shares)) or options to purchase any of the
foregoing of or in the Corporation or the Operating Partnership.
12
<PAGE> 53
(b) The Redemption 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 C
Preferred Stock have not been paid or declared and set apart for payment, no
shares of Class C Preferred Stock may be redeemed unless all outstanding shares
of Class C Preferred Stock are simultaneously redeemed and neither the
Corporation nor any affiliate of the Corporation may purchase or acquire shares
of Class C Preferred Stock, otherwise than pursuant to a purchase or exchange
offer made on the same terms to all holders of shares of Class C Preferred
Stock.
(d) If the Corporation shall redeem shares of Class C 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 Redemption Date; (2) the number of shares
of Class C 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; and (3) the place or places at which certificates for such
shares are to be surrendered for cash. Notice having been mailed as aforesaid,
from and after the Redemption 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 C Preferred Stock so
called for redemption shall cease to accumulate or accrue on the shares of Class
C Preferred Stock called for redemption (except that, in the case of a
Redemption Date after a dividend record date and prior to the related Dividend
Payment Date, holders of Class C 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 C Preferred
Stock of the Corporation 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 C Preferred Stock so called for redemption. No interest shall
accrue for the benefit of the holders of shares of Class C 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
Redemption Date shall revert to the general funds of the Corporation, after
which reversion the holders of shares of Class C Preferred Stock so called for
redemption shall look only to the general funds of the Corporation for the
payment of such cash.
13
<PAGE> 54
As promptly as practicable after the surrender in accordance with such
notice of the certificates for any such shares of Class C 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 C Preferred Stock are to be redeemed, shares to be redeemed
shall be selected by the Corporation from outstanding shares of Class C
Preferred Stock not previously called for redemption by lot or, with respect to
the number of shares of Class C 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 C 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 C Preferred Stock which shall have been issued and
reacquired in any manner by the Corporation shall be returned to the status of
authorized, but unissued shares of Class C Preferred Stock.
7. RANKING.
Any class or series of capital stock of the Corporation shall be deemed to
rank:
(a) prior or senior to the Class C 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 C Preferred Stock ("Senior Stock");
(b) on a parity with the Class C 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 C Preferred Stock, if the holders of such class of stock or series and
the Class C 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 C Preferred Stock, as to the payment of
dividends or as to the distribution of assets upon liquidation, dissolution or
winding up, if such stock or series shall be Common Stock or if the holders of
Class C 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").
14
<PAGE> 55
8. VOTING.
(a) If and whenever six quarterly dividends (whether or not
consecutive) payable on the Class C 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, the number of directors then constituting the
Board of Directors shall be increased by two (if not already increased by reason
of similar types of provisions with respect to shares of Parity Stock of any
other class or series which is entitled to similar voting rights (the "Voting
Preferred Stock")) and the holders of shares of Class C Preferred Stock,
together with the holders of shares of all other Voting Preferred Stock then
entitled to exercise similar voting rights, voting as a single class regardless
of series, shall be entitled to elect the two additional directors 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 C
Preferred Stock and the Voting Preferred Stock called as hereinafter provided.
Whenever all arrears in dividends on the Class C 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, then the right of the holders of the Class C Preferred Stock
and the Voting Preferred Stock to elect such additional two directors 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 C 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 C 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 C Preferred Stock (addressed to the Secretary at the principal office of
the Corporation) shall, call a special meeting of the holders of the Class C
Preferred Stock and of the Voting Preferred Stock for the election of the two
directors 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 C
Preferred Stock may call such meeting, upon the notice above provided, and for
that purpose shall have access to the stock books of the Corporation. The
directors 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 C
Preferred Stock and the Voting Preferred Stock, a successor shall be elected by
the Board of Directors, upon the nomination of the thenremaining director
elected by the holders of the Class C 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 C 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 662/3% of the
votes entitled to be cast by the holders of the Class C Preferred Stock voting
as a single class
15
<PAGE> 56
with the holders of all other classes or series of Preferred Stock entitled to
vote on such matters, 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 or validating:
(i) Any amendment, alteration or repeal of any of the provisions
of these Articles Supplementary, the Charter or the ByLaws of the Corporation
that materially adversely affects the voting powers, rights or preferences of
the holders of the Class C 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, or issue 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 C 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 C 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 C 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 C 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 C Preferred Stock as a single
class on any matter, then the Class C Preferred Stock and such other class or
series shall have with respect to such matters one quarter of one (.25) vote per
$25 of stated liquidation preference. Except as otherwise required by applicable
law or as set forth herein, the Class C 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.
9. RECORD HOLDERS.
The Corporation and the Transfer Agent may deem and treat the record holder
of any share of Class C 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.
16
<PAGE> 57
10.1 RESTRICTIONS ON OWNERSHIP AND TRANSFERS.
(A) LIMITATION ON BENEFICIAL OWNERSHIP. Except as provided in Section 10.8,
from and after the Issue Date, no Person (other than the Initial Holder or a
Look-Through Entity) shall Beneficially Own shares of Class C Preferred Stock in
excess of the Ownership Limit, the Initial Holder shall not Beneficially Own
shares of Class C Preferred Stock in excess of the Initial Holder Limit and no
Look-Through Entity shall Beneficially Own shares of Class C Preferred Stock in
excess of the Look-Through Ownership Limit.
17
<PAGE> 58
(B) TRANSFERS IN EXCESS OF OWNERSHIP LIMIT. Except as provided in
Section 10.8, from and after the Issue Date (and subject to Section 10.12), 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 interdealer 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 C Preferred Stock in excess of the Ownership Limit shall
be void AB INITIO as to the Transfer of such shares of Class C 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 C Preferred Stock.
(C) TRANSFERS IN EXCESS OF INITIAL HOLDER LIMIT. Except as provided in
Section 10.8, from and after the Issue Date (and subject to Section 10.12), 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 interdealer quotation system) that, if effective, would result in the
Initial Holder Beneficially Owning shares of Class C Preferred Stock in excess
of the Initial Holder Limit shall be void AB INITIO as to the Transfer of such
shares of Class C Preferred 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 Class C Preferred Stock.
(D) TRANSFERS IN EXCESS OF LOOK-THROUGH OWNERSHIP LIMIT. Except as
provided in Section 10.8 from and after the Issue Date (and subject to Section
10.12), 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 interdealer quotation system) that, if effective, would result in
any Look-Through Entity Beneficially Owning shares of Class C Preferred Stock in
excess of the Look-Through Ownership limit shall be void AB INITIO as to the
Transfer of such shares of Class C 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 C 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 C 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 C
Preferred Stock.
(F) SEVERABILITY ON VOID TRANSACTIONS. A Transfer of a share of Class
C Preferred Stock that is null and void under Sections 10.1(B), (C), (D), or (E)
of this Article because it would, if effective, result in (i) the ownership of
Class C 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
18
<PAGE> 59
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 C Preferred Stock in the same or any other related
transaction.
10.2 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 10.1 of this Article or that a Person
intends to acquire or has attempted to acquire Beneficial Ownership of any
shares of Class C Preferred Stock in violation of Section 10.1 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 longterm indebtedness for the purpose of
such redemption), demanding the repayment of any distributions received in
respect of shares of Class C Preferred Stock acquired in violation of Section
10.1 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 10.1 of this Article,
regardless of any action (or nonaction) 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 10.3 of this Article; PROVIDED, FURTHER, that the
provisions of this Section 10.2 shall be subject to the provisions of Section
10.12 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 C Preferred Stock that is
expressly authorized pursuant to Section 10.8(d) of this Article.
10.3. 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 interdealer 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 C Preferred Stock in excess of the Ownership Limit, or (b) the Initial
Holder would Beneficially Own shares of Class C 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 C 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 C 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 10.8 of this Article, such shares of Class C
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
19
<PAGE> 60
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 C 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 10.3(E), the
Prohibited Transferee shall have no rights in the Class C 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 C 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 C 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 C 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 C
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 C 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 10.3(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 10.3(E) or any
application thereof is determined in a final judgment to be void, invalid or
unenforceable by any court
20
<PAGE> 61
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 C Preferred Stock as to which such restrictions would, by
their terms, apply, and to hold such Class C Preferred Stock on behalf of the
Corporation.
(F) PURCHASE RIGHT IN STOCK TRANSFERRED TO THE TRUSTEE. Shares of
Class C 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 C 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.
10.4 NOTICE OF RESTRICTED TRANSFER. Any Person that acquires or attempts to
acquire shares of Class C Preferred Stock in violation of Section 10.1 of this
Article, or any Person that is a Prohibited Transferee such that stock is
transferred to the Trustee under Section 10.3 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.
10.5 OWNERS REQUIRED TO PROVIDE INFORMATION. From and after the Issue Date
certain record and Beneficial Owners and transferees of shares of Class C
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
C 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 C Preferred Stock Beneficially
Owned, and a full description of how such shares are held. Each such record or
Beneficial Owner of Class C 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 C 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
21
<PAGE> 62
without limitation any Person that holds shares of Class C Preferred Stock on
behalf of a Beneficial Owner, shall take all reasonable steps to obtain the
written notice described in this Section 10.5 from the Beneficial Owner.
(B) DISCLOSURE AT THE REQUEST OF THE CORPORATION. Any Person that is a
Beneficial Owner of shares of Class C Preferred Stock and any Person (including
the stockholder of record) that is holding shares of Class C 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 C
Preferred Stock already Beneficially Owned by such stockholder or proposed
transferee and any related persons specified, which statement or affidavit shall
be in the form prescribed by the Corporation for that purpose.
10.6 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 10.12 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.
10.7 AMBIGUITY. In the case of an ambiguity in the application of any of the
provisions of Section 10 of this Article, or in the case of an ambiguity in any
definition contained in Section 10 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.
10.8 EXCEPTIONS. The following exceptions shall apply or may be established
with respect to the limitations of Section 10.1 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 C
Preferred Stock directly owned at any time or from time to time shall not
constitute a violation of Section 10.1 of this Article and the pledgee shall not
be subject to the Ownership Limit with respect to the Class C Preferred Stock so
pledged to it either as a result of the pledge or upon foreclosure.
22
<PAGE> 63
(C) UNDERWRITERS. For a period of 270 days following the purchase of
Class C Preferred Stock by an underwriter that (i) is a corporation or a
partnership and (ii) participates in an offering of the Class C Preferred Stock,
such underwriter shall not be subject to the Ownership Limit with respect to the
Class C Preferred Stock purchased by it as a part of or in connection with such
offering and with respect to any Class C Preferred Stock purchased in connection
with market making activities.
10.9 LEGEND. Each certificate for Class C Preferred Stock shall bear the
following legend:
"The shares of Class C Cumulative Preferred Stock represented by
this certificate are subject to restrictions on transfer. No person may
Beneficially Own shares of Class C Cumulative 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 C Cumulative
Preferred Stock). Any Person that attempts to Beneficially Own shares of
Class C Cumulative 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 C
Cumulative 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 C Cumulative 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."
10.10 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 applications of such provision shall be affected
only to the extent necessary to comply with the determination of such court.
10.11 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.
10.12 SETTLEMENT. Nothing in this Section 10 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
interdealer quotation system.
FOURTH: The terms of the Class C Cumulative Preferred Stock set forth in
Article Third hereof shall become Article XIV of the Charter.
23
<PAGE> 64
IN WITNESS WHEREOF, the Corporation has caused these presents to be signed
in its name and on its behalf by its Chairman and witnessed by its Secretary on
December 19, 1997.
WITNESS: APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
/s/ Leeann Morein /s/ Terry Considine
- ----------------------- --------------------------
Leeann Morein, Terry Considine
Secretary Chairman
THE UNDERSIGNED, Chairman of APARTMENT INVESTMENT AND MANAGEMENT COMPANY,
who executed on behalf of the Corporation the Articles Supplementary of which
this Certificate is made a part, hereby acknowledges in the name and on behalf
of said Corporation the foregoing Articles Supplementary to be the corporate act
of said Corporation and hereby certifies that the matters and facts set forth
herein with respect to the authorization and approval thereof are true in all
material respects under the penalties of perjury.
/s/ Terry Considine
Terry Considine
-----------------------
Chairman
24
<PAGE> 65
CERTIFICATE OF CORRECTION
TO
ARTICLES SUPPLEMENTARY
CLASS C CUMULATIVE PREFERRED STOCK
(PAR VALUE $.01 PER SHARE)
OF
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
(A MARYLAND CORPORATION)
APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation (the
"Corporation"), having its principal office in Baltimore City, Maryland, hereby
certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: Articles Supplementary, dated December, 1997, of the Corporation
relating to its Class C Cumulative Preferred Stock (par value $.01 per share)
were filed with the State Department of Assessments and Taxation of Maryland on
December 22, 1997, and said Articles Supplementary require correction as
permitted by Section 1-207 of the Corporations and Associations Article of the
Annotated Code of Maryland.
SECOND: ARTICLE FIRST of the Articles Supplementary as previously filed
and to be corrected hereby read as follows:
FIRST: Pursuant to authority expressly vested in the Board of
Directors of the Corporation by Section 1.2 of Article IV of the Charter of
the Corporation, the Board of Directors has duly divided and classified
2,300,000 authorized but unissued shares of the capital stock of the
Corporation into a class designated as Class C Cumulative Preferred Stock
and has provided for the issuance of such class.
THIRD: ARTICLE FIRST of the Articles Supplementary as corrected hereby is
as follows:
FIRST: Pursuant to authority expressly vested in the Board of
Directors of the Corporation by Section 1.2 of Article IV of the Charter of
the Corporation, the Board of Directors has duly divided and classified
2,760,000 authorized but unissued shares of the capital stock of the
Corporation into a class designated as Class C Cumulative Preferred Stock
and has provided for the issuance of such class.
FOURTH: The inaccuracy or defect in ARTICLE FIRST of the Articles
Supplementary as previously filed is that ARTICLE FIRST contained the wrong
number of shares classified as Class C Cumulative Preferred Stock.
<PAGE> 66
FIFTH: ARTICLE SECOND of the Articles Supplementary as previously filed
and to be corrected hereby reads as follows:
SECOND: The reclassification increases the number of shares
classified as Class C Cumulative Preferred Stock, par value $.01 per share,
from no shares immediately prior to the reclassification to 2,300,000 shares
immediately after the reclassification. The reclassification decreases the
number of shares classified as Preferred Stock, par value $.01 per share, from
9,250,000 shares immediately prior to the reclassification to 6,950,000
shares immediately after the reclassification. The number of shares classified
as Class C Cumulative Preferred Stock may be decreased pursuant to Section 6 of
Article Third of these Articles Supplementary upon reacquisition thereof in any
manner, or by retirement thereof, by the Corporation.
SIXTH: ARTICLE SECOND of the Articles Supplementary as corrected
hereby is as follows:
SECOND: The reclassification increases the number of shares
classified as Class C Cumulative Preferred Stock, par value $.01 per share,
from no shares immediately prior to the reclassification to 2,760,00 shares
immediately after the reclassification. The reclassification decreases the
number of shares classified as Preferred Stock, par value $.01 per share, from
9,250,000 shares immediately prior to the reclassification to 6,490,000 shares
immediately after the reclassification. The number of shares classified as
Class C Cumulative Preferred Stock may be decreases pursuant to Section 6 of
Article Third of these Articles Supplementary upon reacquisition thereof in any
manner, or by retirement thereof, by the Corporation.
SEVENTH: The inaccuracies or defects in ARTICLE SECOND of the Articles
Supplementary as previously filed are that ARTICLE SECOND contained the wrong
number of shares classified as Class C Cumulative Preferred Stock immediately
after the reclassification and the wrong number of shares classified as
Preferred Stock, par value $.01 per share, immediately after the
reclassification.
EIGHTH: Section 1 of ARTICLE THIRD of the Articles Supplementary as
previously filed and to be corrected hereby reads as follows:
1. Number of Shares and Designation.
This class of Preferred Stock shall be designated as Class C
Cumulative Preferred Stock (the "Class C Preferred Stock") and Two Million
Three Hundred Thousand (2,300,000) shall be the authorized number of shares of
such Class C Preferred Stock constituting such class.
-2-
<PAGE> 67
NINTH: The first paragraph of Section 1 of ARTICLE THIRD of the Articles
Supplementary as corrected hereby is as follows:
1. Number of Shares and Designation.
This class of Preferred Stock shall be designated as Class C
Cumulative Preferred Stock (the "Class C Preferred Stock") and Two Million
Seven Hundred Sixty Thousand (2,760,000) shall be the authorized number of
shares of such Class C Preferred Stock constituting such class.
TENTH: The inaccuracy or defect in Section 1 of ARTICLE THIRD of the
Articles Supplementary as previously filed is that Section 1 of ARTICLE FIRST
contained the wrong number of shares classified as Class C Cumulative Preferred
Stock.
ELEVENTH: The definition of "Dividend Periods" contained in Section 2 of
ARTICLE THIRD of the Articles Supplementary as previously filed and to be
corrected hereby reads as follows:
"DIVIDEND PERIODS" shall mean the Initial Dividend Period and each
subsequent quarterly dividend period commencing on and including January
15, April 15, July 15 and October 15 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 Redemption Date with respect to the Class C Preferred Stock
being redeemed.
TWELFTH: The definition of "Dividend Periods" contained in Section 2 of
ARTICLE THIRD of the Articles Supplementary as corrected hereby is as follows:
"DIVIDEND PERIODS" shall mean the Initial Dividend Period and each
subsequent quarterly dividend period commencing on and including January
15, April 15, July 15 and October 15 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 C Preferred
Stock shall be redeemed pursuant to Section 5 hereof, which shall end on
and include the Redemption Date with respect to the Class C Preferred Stock
being redeemed.
THIRTEENTH: The inaccuracy or defect in the definition of "Dividend
Periods" contained in Section 2 of ARTICLE THIRD of the Articles Supplementary
as previously filed is that the reference to "Class B Preferred Stock" in the
fifth line thereof should be to "Class C Preferred Stock."
FOURTEENTH: The definition of "Initial Holder Limit" contained in Section
2 of ARTICLE THIRD of the Articles Supplementary as previously filed and to be
corrected hereby reads as follows:
-3-
<PAGE> 68
"INITIAL HOLDER LIMIT" shall mean a number of the Outstanding shares of
Class C 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.
FIFTEENTH: The definition of "Initial Holder Limit" contained in Section 2
of ARTICLE THIRD of the Articles Supplementary as corrected hereby is as
follows:
"INITIAL HOLDER LIMIT" shall mean a number of the Outstanding shares of
Class C 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 C 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.
SIXTEENTH: The inaccuracy or defect in the definition of "Initial Holder
Limit" contained in Section 2 of ARTICLE THIRD of the Articles Supplementary as
previously filed is that the reference to "Class B Preferred Stock" in the
fourth and fifth lines thereof should be to "Class C Preferred Stock."
SEVENTEENTH: The definition of "Look-Through Ownership Limit" contained in
Section 2 of ARTICLE THIRD of the Articles Supplementary as previously filed
and to be corrected hereby reads as follows:
"LOOK-THROUGH OWNERSHIP LIMIT" shall mean, for any Look-Through Entity, a
number of the Outstanding shares of Class C 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.
EIGHTEENTH: The definition of "Look-Through Ownership Limit" contained in
Section 2 of ARTICLE THIRD of the Articles Supplementary as corrected hereby is
as follows:
"LOOK-THROUGH OWNERSHIP LIMIT" shall mean, for any Look-Through Entity, a
number of the Outstanding shares of Class C Preferred Stock of the
Corporation
-4-
<PAGE> 69
having an Aggregate Value not in excess of the (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 C Preferred Stock that
are Beneficially Owned by the Look-Through Entity.
NINETEENTH: The inaccuracy or defect in the definition of "Look-Through
Ownership Limit" contained in Section 2 of ARTICLE THIRD of the Articles
Supplementary as previously filed is that the reference to "Class B Preferred
Stock" in the fifth line thereof should be to "Class C Preferred Stock."
TWENTIETH: The provision in the Articles Supplementary as previously filed
and to be corrected hereby reads as follows:
IN WITNESS WHEREOF, the Corporation has caused these presents to be
signed in its name and on its behalf by its Chairman and witnessed by its
Secretary on December ____, 1997.
TWENTY-FIRST: The provision in the Articles Supplementary as corrected
hereby is as follows:
IN WITNESS WHEREOF, the Corporation has caused these presents to be
signed in its name and on its behalf by its Chairman and witnessed by its
Secretary on December 22, 1997.
TWENTY-SECOND: The inaccuracy or defect in the provision of the Articles
Supplementary as previously filed is that such statement failed to state
correctly the date such Articles were signed.
-5-
<PAGE> 70
IN WITNESS WHEREOF, Apartment Investment and Management Company has caused
this Certificate of Correction to be signed in its name and on its behalf by its
Chairman and witnessed by its Secretary on February 17, 1998.
WITNESS: APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
/s/ LEEANN MOREIN By: TERRY CONSIDINE
- ----------------------------- -----------------------------
Leeann Morein, Secretary Terry Considine, Chairman
The undersigned, Chairman of APARTMENT INVESTMENT AND MANAGEMENT COMPANY,
with respect to the foregoing Certificate of Correction of which this
certificate is made a part, hereby acknowledges, in the name and on behalf of
said Corporation, the foregoing Certificate of Correction to be the act of said
Corporation and further 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/ TERRY CONSIDINE
-----------------------------
Terry Considine, Chairman
-6-
<PAGE> 71
ARTICLES SUPPLEMENTARY
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CLASS D CUMULATIVE PREFERRED STOCK
(PAR VALUE $.01 PER SHARE)
APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation
(hereinafter called the "Corporation"), having its principal office in Baltimore
City, Maryland, hereby certifies to the Department of Assessments and Taxation
of the State of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Directors of
the Corporation by Section 1.2 of Article IV of the Charter of the Corporation,
the Board of Directors has duly divided and classified 4,600,000 authorized but
unissued shares of the capital stock of the Corporation into a class designated
as Class D Cumulative Preferred Stock and has provided for the issuance of such
class.
SECOND: The reclassification increases the number of shares classified as
Class D Cumulative Preferred Stock, par value $.01 per share, from no shares
immediately prior to the reclassification to 4,600,000 shares immediately after
the reclassification. The reclassification decreases the number of shares
classified as Preferred Stock, par value $.01 per share, from 6,490,000 shares
immediately prior to the reclassification to 1,890,000 shares immediately after
the reclassification. The number of shares classified as Class D Cumulative
Preferred Stock may be decreased pursuant to Section 6 of Article Third of these
Articles Supplementary upon reacquisition thereof in any manner, or by
retirement thereof, by the Corporation.
THIRD: The terms of the Class D Cumulative 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 D Cumulative
Preferred Stock (the "Class D Preferred Stock") and Four Million Six Hundred
Thousand (4,600,000) shall be the authorized number of shares of such Class D
Preferred Stock constituting such class.
<PAGE> 72
2. DEFINITIONS.
For purposes of the Class D 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.
"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 13d3 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 D Preferred Stock.
"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.
"CHARITABLE BENEFICIARY" shall mean one or more beneficiaries of the Trust
as determined pursuant to Section 10.3 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.
2
<PAGE> 73
"CLASS D 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.
"DIVIDEND PAYMENT DATE" shall mean January 15, April 15, July 15 and
October 15 of each year; 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 and no interest shall
accrue on such dividend from such date to such Dividend Payment Date.
"DIVIDEND PERIODS" shall mean the Initial Dividend Period and each
subsequent quarterly dividend period commencing on and including January
15, April 15, July 15 and October 15 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 D Preferred
Stock shall be redeemed pursuant to Section 5 hereof, which shall end on
and include the Redemption Date with respect to the Class D Preferred Stock
being redeemed.
"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 10.3(A) of this
Article.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"ISSUE DATE" shall mean February 19, 1998.
"INITIAL DIVIDEND PERIOD" shall mean the period commencing on and including
the Issue Date and ending on and including April 14, 1998.
"INITIAL HOLDER" shall mean Terry Considine.
"INITIAL HOLDER LIMIT" shall mean a number of the Outstanding shares of
Class D Preferred Stock of the Corporation having an Aggregate Value not in
excess
3
<PAGE> 74
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 D 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 thencurrent
Initial Holder Limit applicable to the Initial Holder.
"JUNIOR STOCK" shall mean the Common Stock and any other class or series of
capital stock of the Corporation over which the shares of Class D Preferred
Stock have preference or priority in the payment of dividends or in the
distribution of assets on any liquidation, dissolution or winding up of the
Corporation.
"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 D 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 D
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 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
overthecounter 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
4
<PAGE> 75
Directors of the Company. The term "TRADING DAY" shall mean a day on which
the principal national securities exchange on which the Equity Stock is
listed or admitted to trading is open for the transaction of business or,
if the Equity Stock is not listed or admitted to trading on any national
securities 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.
"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 D
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 D 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
7 of this Article. The Class B Preferred Stock and the Class C Preferred
Stock shall each be a Parity Stock.
"PERSON" shall mean (a) for purposes of Section 10 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 10.3(A) of
this Article.
5
<PAGE> 76
"REDEMPTION DATE" shall have the meaning set forth in paragraph (b) of
Section 5 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
7 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 D 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, in the securities market in
which such securities are traded.
"TRANSFER" shall mean any sale, transfer, gift, assignment, devise or other
disposition of a share of Class D 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 D Preferred
Stock or (ii) the sale, transfer, assignment or other disposition of any
securities or rights convertible into or exchangeable for Class D 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 D 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 D
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 D Preferred Stock.
6
<PAGE> 77
"TRUST" shall mean the trust created pursuant to Section 10.3 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 8 of
this Article.
3. DIVIDENDS.
(a) The holders of Class D 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 D Preferred Stock equal to $2.1875 per annum. 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 each Dividend Payment Date, commencing on April
15, 1998. Each such dividend shall be payable in arrears to the holders of
record of the Class D Preferred Stock, as they appear on the stock records of
the Corporation at the close of business on the January 1, April 1, July 1 or
October 1, as the case may be, immediately preceding such Dividend Payment Date.
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.
(b) The amount of dividends payable per share of Class D 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 30day months
and a 360day year. Holders of Class D 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 D 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 D Preferred Stock that may be in
arrears.
(c) So long as any of the shares of Class D 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
7
<PAGE> 78
such payment on the Class D 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 D
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 D Preferred Stock and
accumulated, accrued and unpaid on such Parity Stock.
(d) So long as any of the shares of Class D 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 shares of, or options, warrants or rights to
subscribe for or purchase shares of, 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 the full cumulative dividends (including all
accumulated, accrued and unpaid dividends) on all outstanding shares of Class D
Preferred Stock 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 D
Preferred Stock.
Notwithstanding the provisions of this Section 3(d), the Corporation
shall not be prohibited from (i) declaring or paying or setting apart for
payment any dividend or distribution on any shares of Parity Stock or (ii) or
redeeming, purchasing or otherwise acquiring any Parity Stock, in each case, if
such declaration, payment, redemption, purchase or other acquisition is
necessary in order to maintain the continued qualification of the Corporation as
a REIT under Section 856 of the Code.
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 by the Corporation (whether of capital or surplus) shall be made to
or set apart for the holders of Junior Stock, the holders of shares of Class D
Preferred Stock shall be entitled to receive TwentyFive Dollars ($25) per share
of Class D 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
8
<PAGE> 79
distribution to such holders; but such holders shall not be entitled to any
further payment. Until the holders of the Class D 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 D 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 D Preferred Stock and
any such other Parity Stock ratably in the same proportion as the respective
amounts that would be payable on such Class D 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 involuntary, 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
D 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 D 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 D Preferred Stock shall not be redeemable by the
Corporation prior to February 19, 2003, except as set forth in Section 10.2 of
this Article. On and after February 19, 2003, the Corporation, at its option,
may redeem shares of Class D 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 date fixed for
redemption (the "Redemption Date"). In connection with any redemption pursuant
to this Section 5(a), the redemption price of the Class D Preferred Stock (other
than any portion thereof consisting of accrued and unpaid dividends) shall be
payable solely with the proceeds from the sale by the Corporation or AIMCO
Properties, L.P., a Delaware limited Partnership (the "Operating Partnership"),
of other capital shares of the Corporation or the Operating Partnership (whether
or not such sale occurs concurrently with such redemption). For purposes of the
preceding sentence, 'capital shares' means any common stock, preferred stock,
depositary shares, partnership or other interests, participations or other
ownership interests (however designated) and any rights (other than debt
securities convertible into or exchangeable at the option of the holder for
equity securities (unless
9
<PAGE> 80
and to the extent such debt securities are subsequently converted into capital
shares)) or options to purchase any of the foregoing of or in the Corporation or
the Operating Partnership.
(b) The Redemption 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 D
Preferred Stock have not been paid or declared and set apart for payment, no
shares of Class D Preferred Stock may be redeemed unless all outstanding shares
of Class D Preferred Stock are simultaneously redeemed and neither the
Corporation nor any affiliate of the Corporation may purchase or acquire shares
of Class D Preferred Stock, otherwise than pursuant to a purchase or exchange
offer made on the same terms to all holders of shares of Class D Preferred
Stock.
(d) If the Corporation shall redeem shares of Class D 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 Redemption Date; (2) the number of shares of Class D
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; and (3) the place or places at which certificates for such shares are to
be surrendered for cash. Notice having been mailed as aforesaid, from and after
the Redemption 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 D Preferred Stock so called
for redemption shall cease to accumulate or accrue on the shares of Class D
Preferred Stock called for redemption (except that, in the case of a Redemption
Date after a dividend record date and prior to the related Dividend Payment
Date, holders of Class D 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 D Preferred Stock of the
Corporation 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
10
<PAGE> 81
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
D Preferred Stock so called for redemption. No interest shall accrue for the
benefit of the holders of shares of Class D 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 Redemption Date shall
revert to the general funds of the Corporation, after which reversion the
holders of shares of Class D 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 D 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 D Preferred Stock are to be redeemed, shares to be redeemed
shall be selected by the Corporation from outstanding shares of Class D
Preferred Stock not previously called for redemption by lot or, with respect to
the number of shares of Class D 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 D 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 D Preferred Stock which shall have been issued and
reacquired in any manner by the Corporation shall be returned to the status of
authorized, but unissued shares of Class D Preferred Stock.
7. RANKING.
Any class or series of capital stock of the Corporation shall be deemed to
rank:
(a) prior or senior to the Class D 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 D Preferred Stock ("Senior Stock");
11
<PAGE> 82
(b) on a parity with the Class D 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 D Preferred Stock, if the holders of such class of stock or series and
the Class D 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 D Preferred Stock, as to the payment of
dividends or as to the distribution of assets upon liquidation, dissolution or
winding up, if such stock or series shall be Common Stock or if the holders of
Class D 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").
8. VOTING.
(a) If and whenever six quarterly dividends (whether or not
consecutive) payable on the Class D 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, the number of directors then constituting the
Board of Directors shall be increased by two (if not already increased by reason
of similar types of provisions with respect to shares of Parity Stock of any
other class or series which is entitled to similar voting rights (the "Voting
Preferred Stock")) and the holders of shares of Class D Preferred Stock,
together with the holders of shares of all other Voting Preferred Stock then
entitled to exercise similar voting rights, voting as a single class regardless
of series, shall be entitled to elect the two additional directors 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 D
Preferred Stock and the Voting Preferred Stock called as hereinafter provided.
Whenever all arrears in dividends on the Class D 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, then the right of the holders of the Class D Preferred Stock
and the Voting Preferred Stock to elect such additional two directors 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 D 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 D 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 D Preferred
12
<PAGE> 83
Stock (addressed to the Secretary at the principal office of the Corporation)
shall, call a special meeting of the holders of the Class D Preferred Stock and
of the Voting Preferred Stock for the election of the two directors 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 D Preferred Stock
may call such meeting, upon the notice above provided, and for that purpose
shall have access to the stock books of the Corporation. The directors 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 D 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 D 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 D 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 662/3% of the
votes entitled to be cast by the holders of the Class D Preferred Stock voting
as a single class with the holders of all other classes or series of Preferred
Stock entitled to vote on such matters, 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 or validating:
(i) Any amendment, alteration or repeal of any of the provisions
of these Articles Supplementary, the Charter or the ByLaws of the Corporation
that materially adversely affects the voting powers, rights or preferences of
the holders of the Class D 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, or issue 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 D 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 D 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
13
<PAGE> 84
is made for the redemption of all shares of Class D 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 D 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 D Preferred Stock as a single
class on any matter, then the Class D Preferred Stock and such other class or
series shall have with respect to such matters one quarter of one (.25) vote per
$25 of stated liquidation preference. Except as otherwise required by applicable
law or as set forth herein, the Class D 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.
9. RECORD HOLDERS.
The Corporation and the Transfer Agent may deem and treat the record holder
of any share of Class D 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.
10.1 RESTRICTIONS ON OWNERSHIP AND TRANSFERS.
(A) LIMITATION ON BENEFICIAL OWNERSHIP. Except as provided in Section
10.8, from and after the Issue Date, no Person (other than the Initial Holder or
a Look-Through Entity) shall Beneficially Own shares of Class D Preferred Stock
in excess of the Ownership Limit, the Initial Holder shall not Beneficially Own
shares of Class D Preferred Stock in excess of the Initial Holder Limit and no
Look-Through Entity shall Beneficially Own shares of Class D Preferred Stock in
excess of the Look-Through Ownership Limit.
(B) TRANSFERS IN EXCESS OF OWNERSHIP LIMIT. Except as provided in
Section 10.8, from and after the Issue Date (and subject to Section 10.12), 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 interdealer 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 D Preferred Stock in excess of the Ownership Limit shall
be void AB INITIO as to the Transfer of such shares of Class D 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 D Preferred Stock.
(C) TRANSFERS IN EXCESS OF INITIAL HOLDER LIMIT. Except as provided in
Section 10.8, from and after the Issue Date (and subject to Section 10.12), any
Transfer (whether or not such Transfer is the result of transactions entered
into
14
<PAGE> 85
through the facilities of the NYSE or other securities exchange or an automated
interdealer quotation system) that, if effective, would result in the Initial
Holder Beneficially Owning shares of Class D Preferred Stock in excess of the
Initial Holder Limit shall be void AB INITIO as to the Transfer of such shares
of Class D Preferred 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 Class D Preferred Stock.
(D) TRANSFERS IN EXCESS OF LOOK-THROUGH OWNERSHIP LIMIT. Except as
provided in Section 10.8 from and after the Issue Date (and subject to Section
10.12), 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 interdealer quotation system) that, if effective, would result in
any Look-Through Entity Beneficially Owning shares of Class D Preferred Stock in
excess of the Look-Through Ownership limit shall be void AB INITIO as to the
Transfer of such shares of Class D 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 D 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 D 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 D
Preferred Stock.
(F) SEVERABILITY ON VOID TRANSACTIONS. A Transfer of a share of Class
D Preferred Stock that is null and void under Sections 10.1(B), (C), (D), or (E)
of this Article because it would, if effective, result in (i) the ownership of
Class D 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 D Preferred Stock in the same or any
other related transaction.
10.2 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 10.1 of this Article or that a Person
intends to acquire or has
15
<PAGE> 86
attempted to acquire Beneficial Ownership of any shares of Class D Preferred
Stock in violation of Section 10.1 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 longterm indebtedness for the purpose of such redemption),
demanding the repayment of any distributions received in respect of shares of
Class D Preferred Stock acquired in violation of Section 10.1 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 10.1 of this Article, regardless of any action (or
nonaction) 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
10.3 of this Article; PROVIDED, FURTHER, that the provisions of this Section
10.2 shall be subject to the provisions of Section 10.12 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 D Preferred Stock that is expressly authorized pursuant to
Section 10.8(d) of this Article.
10.3. 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 interdealer 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 D Preferred Stock in excess of the Ownership Limit, or (b) the Initial
Holder would Beneficially Own shares of Class D 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 D 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 D 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 10.8 of this Article, such shares of Class D
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
16
<PAGE> 87
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 D
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
10.3(E), the Prohibited Transferee shall have no rights in the Class D 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 D 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 D 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 D 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 D
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 D 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 10.3(E). The Prohibited Transferee shall
receive the lesser of (1) the price
17
<PAGE> 88
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 10.3(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 D Preferred Stock as to which such restrictions would, by
their terms, apply, and to hold such Class D Preferred Stock on behalf of the
Corporation.
(F) PURCHASE RIGHT IN STOCK TRANSFERRED TO THE TRUSTEE. Shares of
Class D 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 D 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.
10.4 NOTICE OF RESTRICTED TRANSFER. Any Person that acquires or attempts to
acquire shares of Class D Preferred Stock in violation of Section 10.1 of this
Article, or any Person that is a Prohibited Transferee such that stock is
transferred to the Trustee under Section 10.3 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.
10.5 OWNERS REQUIRED TO PROVIDE INFORMATION. From and after the Issue Date
certain record and Beneficial Owners and transferees of shares of Class D
Preferred Stock will be required to provide certain information as set out
below.
18
<PAGE> 89
(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 D 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 D Preferred Stock
Beneficially Owned, and a full description of how such shares are held. Each
such record or Beneficial Owner of Class D 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 D 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 D Preferred
Stock on behalf of a Beneficial Owner, shall take all reasonable steps to obtain
the written notice described in this Section 10.5 from the Beneficial Owner.
(B) DISCLOSURE AT THE REQUEST OF THE CORPORATION. Any Person that is
a Beneficial Owner of shares of Class D Preferred Stock and any Person
(including the stockholder of record) that is holding shares of Class D
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 D Preferred Stock already Beneficially Owned by such stockholder or
proposed transferee and any related persons specified, which statement or
affidavit shall be in the form prescribed by the Corporation for that purpose.
10.6 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 10.12 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.
10.7 AMBIGUITY. In the case of an ambiguity in the application of any of
the provisions of Section 10 of this Article, or in the case of an ambiguity in
any definition contained in Section 10 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.
19
<PAGE> 90
10.8 EXCEPTIONS. The following exceptions shall apply or may be established
with respect to the limitations of Section 10.1 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 D Preferred Stock directly owned at any time or from time to time shall
not constitute a violation of Section 10.1 of this Article and the pledgee shall
not be subject to the Ownership Limit with respect to the Class D 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 D Preferred Stock by an underwriter that (i) is a corporation or a
partnership and (ii) participates in an offering of the Class D Preferred Stock,
such underwriter shall not be subject to the Ownership Limit with respect to the
Class D Preferred Stock purchased by it as a part of or in connection with such
offering and with respect to any Class D Preferred Stock purchased in connection
with market making activities.
10.9 LEGEND. Each certificate for Class D Preferred Stock shall bear the
following legend:
"The shares of Class D Cumulative Preferred Stock represented by
this certificate are subject to restrictions on transfer. No person may
Beneficially Own shares of Class D Cumulative 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
D Cumulative Preferred Stock). Any Person that attempts to Beneficially Own
shares of Class D Cumulative 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 D Cumulative Preferred Stock), as the same may be
amended from time to time, a copy of which, including the restrictions on
transfer, will be sent
20
<PAGE> 91
without charge to each stockholder that so requests. If the restrictions on
transfer are violated, the shares of Class D Cumulative 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."
10.10 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 applications of such provision shall be affected
only to the extent necessary to comply with the determination of such court.
10.11 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.
10.12 SETTLEMENT. Nothing in this Section 10 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
interdealer quotation system.
FOURTH: The terms of the Class D Cumulative Preferred Stock set forth
in Article Third hereof shall become Article XV of the Charter.
21
<PAGE> 92
IN WITNESS WHEREOF, the Corporation has caused these presents to be signed
in its name and on its behalf by its Senior Vice President and Chief Financial
Officer and witnessed by its Secretary on February 17, 1998.
WITNESS: APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
/s/ Leeann Morein /s/ Troy D. Butts
- --------------------------- ------------------------------
Leeann Morein, Troy D. Butts
Secretary Senior Vice President and
Chief Financial Officer
THE UNDERSIGNED, Senior Vice President and Chief Financial Officer of
APARTMENT INVESTMENT AND MANAGEMENT COMPANY, who executed on behalf of the
Corporation the Articles Supplementary of which this Certificate is made a part,
hereby acknowledges in the name and on behalf of said Corporation the foregoing
Articles Supplementary to be the corporate act of said Corporation and hereby
certifies that the matters and facts set forth herein with respect to the
authorization and approval thereof are true in all material respects under the
penalties of perjury.
/s/ Troy D. Butts
-----------------------------------
Troy D. Butts
Senior Vice President and
Chief Financial Officer
<PAGE> 93
ARTICLES OF MERGER
BETWEEN
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
(a Maryland corporation)
AND
AMBASSADOR APARTMENTS, INC.
(a Maryland corporation)
APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a corporation duly organized
and existing under the laws of the State of Maryland ("AIMCO"), and AMBASSADOR
APARTMENTS, INC., a corporation duly organized and existing under the laws of
the State of Maryland ("AAI"), do hereby certify that:
FIRST: AIMCO and AAI have agreed to merge.
SECOND: The name and place of incorporation of each party to these
Articles are APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland
corporation, and AMBASSADOR APARTMENTS, INC., a Maryland corporation. AIMCO
shall survive the merger and shall continue under the name "APARTMENT
INVESTMENT AND MANAGEMENT COMPANY" as a corporation of the State of Maryland.
THIRD: AIMCO has its principal office in Baltimore City, Maryland. AAI has
its principal office in Baltimore City, Maryland and does not own an interest
in land in the State of Maryland.
FOURTH: The terms and conditions of the transaction set forth in these
Articles were advised, authorized, and approved by each corporation party to
the Articles in the manner and by the vote required by its Charter and the laws
of the state of its incorporation. The manner of approval was as follows:
(a) The Board of Directors of AIMCO at meetings held on December 21,
1997 and May 7, 1998 adopted resolutions (by a vote of a majority of the entire
Board of Directors) which declared that the proposed merger was advisable on
substantially the terms and conditions set forth or referred to in the
resolutions and approved the proposed merger.
(b) The Board of Directors of AAI at meetings held on, or by
unanimous consents dated, December 23, 1997, March 9, 1998, and March 13, 1998
adopted resolutions (by a vote of a majority of the entire Board of Directors)
which declared that the proposed merger was advisable on substantially the
terms and conditions set forth or referred to in the resolutions and directed
that the proposed merger be submitted for consideration at a special meeting of
the stockholders of AAI.
-1-
<PAGE> 94
(c) Notice which stated that a purpose of the meeting was to act on
the proposed merger was given by AAI to AAI's stockholders of record as
required by law.
(d) The proposed merger was approved by the stockholders of AAI at a
special meeting of stockholders held May 8, 1998, by the affirmative vote of
two-thirds of all the votes entitled to be cast on the matter.
FIFTH: No amendment to the Charter of AIMCO is to be effected as a part of
the merger. The merger does not reclassify or change the outstanding capital
stock of AIMCO. The number of shares of Class A Common Stock, par value $.01
per share, of AIMCO to be issued or delivered in the proposed merger is not
more than 20 percent of the number of shares of Class A Common Stock, par value
$.01 per share, of AIMCO outstanding immediately before the proposed merger
becomes effective.
SIXTH: (a) The total number of shares of capital stock of all classes
which AIMCO has authority to issue is 160,262,500 shares, currently classified
as follows:
150,000,000 shares of Class A Common Stock, par value $.01 per share;
262,500 shares of Class B Common Stock, par value $.01 per share;
1,890,000 shares of Preferred Stock, par value $.01 per share;
750,000 shares of Class B Cumulative Convertible Preferred Stock, par
value $.01 per share;
2,760,000 shares of Class C Cumulative Preferred Stock, par value
$.01 per share; and
4,600,000 shares of Class D Cumulative Preferred Stock, par value
$.01 per share.
The aggregate par value of all the shares of stock of all classes of AIMCO is
$1,602,625.00.
(b) The total number of shares of capital stock of all classes which
AAI has authority to issue is 240,000,000 shares, currently classified as
follows:
100,000,000 shares of Common Stock, par value $.01 per share;
18,648,649 shares of Preferred Stock, par value $.01 per share;
1,351,351 shares of Class A Senior Cumulative Convertible Preferred
Stock, par value $.01 per share;
100,000,000 shares of Excess Common Stock, par value $.01 per share;
18,648,649 shares of Excess Preferred Stock, par value $.01 per
share; and
1,351,351 shares of Excess Class A Preferred Stock, par value $.01 per
share.
-2-
<PAGE> 95
The aggregate par value of all the shares of stock of all classes of AAI is
$2,400,000.00.
SEVENTH: The merger does not increase the authorized stock of AIMCO.
EIGHTH: The manner and basis of converting or exchanging issued stock of
the merging corporations into different stock of a corporation, for other
consideration and the treatment of any issued stock of the merging corporations
not to be converted or exchanged are as follows:
(a) Each issued and outstanding share of the capital stock of AIMCO
at the effective time of the merger shall continue, without change as to class,
series or otherwise, to be an issued and outstanding share of capital stock of
AIMCO.
(b) Each issued and outstanding share of Common Stock, par value $.01
per share, of AAI at the effective time of the merger, other than shares of
Common Stock, par value $.01 per share, of AAI held by AAI or AIMCO, shall upon
effectiveness and without further act be converted into and become 0.553 shares
of Class A Common Stock, par value $.01 per share, of AIMCO. In lieu of
issuance of fractional shares of Class A Common Stock, par value $.01 per
share, of AIMCO, cash will be paid at the rate of $38.00 per share. Each issued
and outstanding share of Common Stock, par value $.01 per share, of AAI at the
effective time of the merger held by AAI or AIMCO shall upon effectiveness and
without further act be canceled. There will be no issued and outstanding shares
of Preferred Stock, par value $.01 per share, Class A Senior Cumulative
Convertible Preferred Stock, par value $.01 per share, Excess Common Stock, par
value $.01 per share, Excess Preferred Stock, par value $.01 per share, or
Excess Class A Preferred Stock, par value $.01 per share, of AAI at the
effective time of the merger.
(c) As soon as practicable following the effective time of the
merger, each holder of issued and outstanding shares of Common Stock, par value
$.01 per share, of AAI shall be entitled to surrender to AIMCO the certificates
representing the shares of Common Stock, par value $.01 per share, of AAI held
by such holder immediately prior to the effective time of the merger, and, upon
such surrender, shall be entitled to receive in exchange therefor a certificate
or certificates representing the number of whole shares of Class A Common
Stock, par value $.01 per share, of AIMCO deliverable in respect thereof,
together with cash, without interest, in lieu of any fractional shares of Class
A Common Stock, par value $.01 per share, of AIMCO and in respect of any
dividends withheld on Class A Common Stock, par value $.01 per share, of AIMCO
with record and payment dates after the effective time.
NINTH: The merger shall become effective upon acceptance for record by the
Maryland State Department of Assessments and Taxation.
-3-
<PAGE> 96
IN WITNESS WHEREOF, APARTMENT INVESTMENT AND MANAGEMENT COMPANY and
AMBASSADOR APARTMENTS, INC. have caused these presents to be signed in their
respective names and on their respective behalves by their respective
presidents or chairmen and witnessed by their respective secretaries on May 8,
1998.
WITNESS: APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
(a Maryland corporation)
/s/ JOEL F. BONDER By: /s/ PETER K. KOMPANIEZ
- --------------------------------- -------------------------------
Joel F. Bonder, Secretary Peter K. Kompaniez, President
WITNESS: AMBASSADOR APARTMENTS, INC.
(a Maryland corporation)
/s/ THOMAS J. COORSH By: /s/ DAVID M. GLICKMAN
- --------------------------------- -------------------------------
Thomas J. Coorsh, Secretary David M. Glickman, Chairman of the Board
-4-
<PAGE> 97
THE UNDERSIGNED, the President of APARTMENT INVESTMENT AND MANAGEMENT
COMPANY, who executed on behalf of the Corporation the foregoing Articles of
Merger of which this certificate is made a part, hereby acknowledges in the name
and on behalf of said Corporation the foregoing Articles of Merger 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
THE UNDERSIGNED, the Chairman of the Board of AMBASSADOR APARTMENTS, INC.,
who executed on behalf of the Corporation the foregoing Articles of Merger of
which this certificate is made a part, hereby acknowledges in the name and on
behalf of said Corporation the foregoing Articles of Merger 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/ DAVID M. GLICKMAN
----------------------------------------
David M. Glickman, Chairman of the Board
-5-
<PAGE> 98
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
ARTICLES OF AMENDMENT
APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation,
having its principal office in Baltimore City, Maryland (which is hereinafter
called the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: Article IV, Section 1.1 of the Charter of the Corporation is hereby
amended in its entirety to read as follows:
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
510,750,000 shares of capital stock having a par value of $.01 per share
amounting to an aggregate par value of $5,107,500, consisting of 502,377,500
shares currently classified as Class A Common Stock, par value $.01 per share
(the "Class A Common Stock"), 262,500 shares currently classified as Class B
Common Stock, par value $.01 per share (the "Class B Common Stock") (the Class A
Common Stock and Class B Common Stock being referred to collectively herein as
"Common Stock"), 750,000 shares currently classified as Class B Cumulative
Convertible Preferred Stock, par value $.01 per share (the "Class B Preferred
Stock"), 2,760,000 shares currently classified as Class C Cumulative Preferred
Stock, par value $.01 per share (the "Class C Preferred Stock"), and 4,600,000
shares currently classified as Class D Cumulative Preferred Stock, par value
$.01 per share (the "Class D Preferred Stock")(the Class B Preferred Stock, the
Class C Preferred Stock, the Class D Preferred Stock, and all other classes or
series of preferred stock hereafter classified being referred to collectively
herein as the "Preferred Stock").
SECOND: (a) As of immediately before the amendment the total number of
shares of stock of all classes which the Corporation has authority to issue is
160,262,500(1) shares of capital stock, which are currently classified as
follows:
150,000,000 shares of Class A Common Stock, par value $.01 per share;
262.500 shares of Class B Common Stock, par value $.01 per share;(2)
- -----------------------
(1) The number of shares of authorized capital stock has been reduced since the
last amendment of the Charter of the Corporation from 160,750,000 shares to
160,262,500 shares through the cancellation of 487,500 shares of Class B
Common Stock, par value $.01 per share, that were converted into shares of
Class A Common Stock, par value $.01 per share.
-1-
<PAGE> 99
1,890,000 shares of Preferred Stock, par value $.01 per share;
750,000 shares of Class B Cumulative Convertible Preferred Stock, par value
$.01 per share;
2,760,000 shares of Class C Cumulative Preferred Stock, par value $.01 per
share; and
4,600,000 shares of Class D Cumulative Preferred Stock, par value $.01 per
share.
(b) As amended the total number of shares of stock of all classes which
the Corporation has authority to issue is 510,750,000 shares of capital stock,
which, as amended, are currently classified as follows:
502,377,500 shares of Class A Common Stock, par value $.01 per share;
262,500 shares of Class B Common Stock, par value $.01 per share;
750,000 shares of Class B Cumulative Convertible Preferred Stock, par
value $.01 per share;
2,760,000 shares of Class C Cumulative Preferred Stock, par value $.01 per
share; and
4,600,000 shares of Class D Cumulative Preferred Stock, par value $.01 per
share.
(c) The aggregate par value of all shares having a par value is
$1,602,625(3) before the amendment and $5,107,500 as amended.
(d) The shares of stock of the Corporation are divided into classes, but
the descriptions of each class of capital stock of the Corporation are not
changed by the amendment.
THIRD: The foregoing amendment to the Charter of the Corporation has been
advised by the Board of Directors and approved by the stockholders of the
Corporation.
- ------------------------------------------------------------------------------
(2) The number of shares of Class B Common Stock, par value $.01 per share, has
been reduced since the last amendment of the Charter of the Corporation from
750,000 shares to 262,500 shares through the cancellation of 487,500 shares of
Class B Common Stock, par value $.01 per share, that were converted into shares
of Class A Common Stock, par value $.01 per share.
(3) The aggregate par value of shares having a par value before the amendment
has been reduced since the last amendment of the Charter of the Corporation
from $1,607,500 to $1,602,625 through the cancellation of 487,500 shares of
Class B Common Stock, par value $.01 per share, that were converted into shares
of Class A Common Stock, par value $.01 per share.
-2-
<PAGE> 100
IN WITNESS WHEREOF, APARTMENT INVESTMENT AND MANAGEMENT COMPANY has caused
these presents to be signed in its name and on its behalf by its Chairman of
the Board and witnessed by its Secretary on June 16, 1998.
WITNESS: APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
/s/ JOEL F. BONDER By:/s/ TERRY CONSIDINE
- ----------------------- ---------------------
Joel F. Bonder Terry Considine
Secretary Chairman of the Board
THE UNDERSIGNED, Chairman of the Board of APARTMENT INVESTMENT AND
MANAGEMENT COMPANY, who executed on behalf of the Corporation the foregoing
Articles of Amendment of which this certificate is made a part, hereby
acknowledges in the name and on behalf of said Corporation the foregoing
Articles of Amendment 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/ TERRY CONSIDINE
---------------------
Terry Considine
Chairman of the Board
-3-
<PAGE> 101
ARTICLES SUPPLEMENTARY
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CLASS G CUMULATIVE PREFERRED STOCK
(PAR VALUE $.01 PER SHARE)
APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation
(hereinafter called the "Corporation"), having its principal office in
Baltimore City, Maryland, hereby certifies to the Department of Assessments and
Taxation of the State of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Directors
of the Corporation by Section 1.2 of Article IV of the Charter of the
Corporation, as amended to date (the "Charter"), the Board of Directors has
duly divided and classified 4,050,000 authorized but unissued shares of Class A
Common Stock of the Corporation, par value $.01 per share (the "Class A Common
Stock"), into a class designated as Class G Cumulative Preferred Stock, par
value $.01 per share, and has provided for the issuance of such class.
SECOND: The reclassification increases the number of shares classified as
Class G Cumulative Preferred Stock, par value $.01 per share, from no shares
immediately prior to the reclassification to 4,050,000 shares immediately after
the reclassification. The reclassification decreases the number of shares
classified as Class A Common Stock from 502,377,500 shares immediately prior to
the reclassification to 498,327,500 shares immediately after the
reclassification.
THIRD: The terms of the Class G Cumulative 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 G Cumulative
Preferred Stock, par value $.01 per share (the "Class G Preferred Stock") and
Four Million Fifty Thousand (4,050,000) shall be the authorized number of
shares of such Class G Preferred Stock constituting such class.
<PAGE> 102
2. DEFINITIONS.
For purposes of the Class G 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.
"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 G Preferred Stock.
"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.
"Charitable Beneficiary" shall mean one or more beneficiaries of the Trust
as determined pursuant to Section 10.3 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.
2
<PAGE> 103
"Class G 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.
"Dividend Payment Date" shall mean January 15, April 15, July 15 and October 15
of each year; 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 and no interest shall accrue on such dividend from such
date to such Dividend Payment Date.
"Dividend Periods" shall mean the Initial Dividend Period and each subsequent
quarterly dividend period commencing on and including January 15, April 15,
July 15 and October 15 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 G Preferred Stock shall be redeemed
pursuant to Section 5 hereof, which shall end on and include the Redemption
Date with respect to the Class G Preferred Stock being redeemed.
"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 10.3(A) of this Article.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Issue Date" shall mean July 15, 1998.
"Initial Dividend Period" shall mean the period commencing on and including the
Issue Date and ending on and including October 15, 1998.
"Initial Holder" shall mean Terry Considine.
"Initial Holder Limit" shall mean a number of the Outstanding shares of Class G
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
3
<PAGE> 104
Equity Stock over (y) the Aggregate Value of all shares of Equity Stock other
than Class G 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 mean the Common Stock and any other class or series of
capital stock of the Corporation over which the shares of Class G Preferred
Stock have preference or priority in the payment of dividends or in the
distribution of assets on any liquidation, dissolution or winding up of the
Corporation.
"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 G 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 G 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 share of that class of Equity Stock on the Trading
Day immediately preceding such date. The term "Closing Price" on any date
shall mean that 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. The term "Trading Day" shall mean a day on
which the principal national securities exchange on which
4
<PAGE> 105
the Equity Stock is listed or admitted to trading is open for the
transaction of business or, if the Equity Stock is not listed or admitted to
trading on any national securities 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.
"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 G 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 G
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 7
of this Article. The Class B Preferred Stock, the Class C Preferred Stock and
the Class D Preferred Stock shall each be a Parity Stock.
"Person" shall mean (a) for purposes of Section 10 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 10.3(A) of this
Article.
"Redemption Date" shall have the meaning set forth in paragraph (b) of Section
5 of this Article.
5
<PAGE> 106
"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 7
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 G
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, in the securities market in which such securities are
traded.
"Transfer" shall mean any sale, transfer, gift, assignment, devise or other
disposition of a share of Class G 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 G Preferred Stock or (ii) the
sale, transfer, assignment or other disposition of any securities or rights
convertible into or exchangeable for Class G 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 G 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 G 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 G Preferred
Stock.
"Trust" shall mean the trust created pursuant to Section 10.3 of this Article.
6
<PAGE> 107
"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 8 of
this Article.
3. DIVIDENDS.
(a) The holders of Class G 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 G Preferred Stock equal to $2.34375 per annum. 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 each Dividend Payment Date,
commencing on October 15, 1998. Each such dividend shall be payable in arrears
to the holders of record of the Class G Preferred Stock, as they appear on the
stock records of the Corporation at the close of business on the January 1,
April 1, July 1 or October 1, as the case may be, immediately preceding such
Dividend Payment Date. 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.
(b) Any dividend payable on the Class G Preferred Stock for any
partial dividend period shall be computed ratably on the basis of twelve 30-day
months and a 360-day year. Holders of Class G 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 G 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 G Preferred Stock that may be in
arrears.
(c) So long as any of the shares of Class G 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 G 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 G Preferred Stock and all
dividends declared upon any
7
<PAGE> 108
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 G Preferred Stock and accumulated, accrued and unpaid on such Parity
Stock.
(d) So long as any of the shares of Class G 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 shares of, or options, warrants or
rights to subscribe for or purchase shares of, 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 the full cumulative
dividends (including all accumulated, accrued and unpaid dividends) on all
outstanding shares of Class G Preferred Stock 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 G Preferred Stock.
Notwithstanding the provisions of this Section 3(d), the Corporation
shall not be prohibited from (i) declaring or paying or setting apart for
payment any dividend or distribution on any shares of Parity Stock or (ii) or
redeeming, purchasing or otherwise acquiring any Parity Stock, in each case, if
such declaration, payment, redemption, purchase or other acquisition is
necessary in order to maintain the continued qualification of the Corporation
as a REIT under Section 856 of the Code.
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 by the Corporation (whether of capital or surplus) shall be made
to or set apart for the holders of Junior Stock, the holders of shares of Class
G Preferred Stock shall be entitled to receive Twenty-Five Dollars ($25) per
share of Class G 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 G 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
8
<PAGE> 109
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 G 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 G Preferred
Stock and any such other Parity Stock ratably in the same proportion as the
respective amounts that would be payable on such Class G 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 involuntary, 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
G 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 G 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 G Preferred Stock shall not be redeemable by the
Corporation prior to July 15, 2008, except as set forth in Section 10.2 of this
Article. On and after July 15, 2008, the Corporation, at its option, may redeem
shares of Class G 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 date fixed for redemption
(the "Redemption Date"). In connection with any redemption pursuant to this
Section 5(a), the redemption price of the Class G Preferred Stock (other than
any portion thereof consisting of accrued and unpaid dividends) shall be payable
solely with the proceeds from the sale by the Corporation or AIMCO Properties,
L.P., a Delaware limited Partnership (the "Operating Partnership"), of other
capital shares of the Corporation or the Operating Partnership (whether or not
such sale occurs concurrently with such redemption). For purposes of the
preceding sentence, "capital shares" means any common stock, preferred stock,
depositary shares, partnership or other interests, participations or other
ownership interests (however designated) and any rights (other than debt
securities convertible into or exchangeable at the option of the holder for
equity securities (unless and to the extent such debt securities are
subsequently converted into capital shares)) or options to purchase any of the
foregoing of or in the Corporation or the Operating Partnership.
(b) The Redemption 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.
9
<PAGE> 110
(c) If full cumulative dividends on all outstanding shares of Class G
Preferred Stock have not been paid or declared and set apart for payment, no
shares of Class G Preferred Stock may be redeemed unless all outstanding shares
of Class G Preferred Stock are simultaneously redeemed and neither the
Corporation nor any affiliate of the Corporation may purchase or acquire shares
of Class G Preferred Stock, otherwise than pursuant to a purchase or exchange
offer made on the same terms to all holders of shares of Class G Preferred
Stock.
(d) If the Corporation shall redeem shares of Class G 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 of 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 Redemption Date; (2) the number of shares of Class G
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; and (3) the place or places at which certificates for such shares are
to be surrendered for cash. Notice having been mailed as aforesaid, from and
after the Redemption 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 G Preferred Stock
so called for redemption shall cease to accumulate or accrue on the shares of
Class G Preferred Stock called for redemption(except that, in the case of a
Redemption Date after a dividend record date and prior to the related Dividend
Payment Date, holders of Class G Preferred Stock on the dividend record date
will be entitled to 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 G Preferred
Stock of the Corporation 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 G Preferred Stock so called for redemption. No interest shall
accrue for the benefit of the holders of shares of Class G 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
Redemption Date shall revert to the general funds of the Corporation, after
which reversion the holders of shares of Class G Preferred
10
<PAGE> 111
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 G 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 G Preferred Stock are to be redeemed, shares to be redeemed
shall be selected by the Corporation from outstanding shares of Class G
Preferred Stock not previously called for redemption by lot or, with respect to
the number of shares of Class G 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 G 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 G Preferred Stock which shall have been issued and
reacquired in any manner by the Corporation shall be returned to the status of
authorized, but unissued shares of Class G Preferred Stock.
7. Ranking.
Any class or series of capital stock of the Corporation shall be deemed to
rank:
(a) prior or senior to the Class G 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 G Preferred Stock ("Senior Stock");
(b) on a parity with the Class G 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 G Preferred Stock, if the holders of such class of stock or series and
the Class G 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
11
<PAGE> 112
(c) junior to the Class G Preferred Stock, as to the payment of
dividends or as to the distribution of assets upon liquidation, dissolution or
winding up, if such stock or series shall be Common Stock or if the holders of
Class G 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").
8. VOTING.
(a) If and whenever six quarterly dividends (whether or not
consecutive) payable on the Class G 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, the number of directors then constituting the
Board of Directors shall be increased by two (if not already increased by reason
of similar types of provisions with respect to shares of Parity Stock of any
other class or series which is entitled to similar voting rights (the "Voting
Preferred Stock")) and the holders of shares of Class G Preferred Stock,
together with the holders of shares of all other Voting Preferred Stock then
entitled to exercise similar voting rights, voting as a single class regardless
of series, shall be entitled to elect the two additional directors 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 G
Preferred Stock and the Voting Preferred Stock called as hereinafter
provided. Whenever all arrears in dividends on the Class G 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, then the right of the holders of the Class G
Preferred Stock and the Voting Preferred Stock to elect such additional two
directors 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
G 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 G 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 G Preferred Stock (addressed to the Secretary at the
principal office of the Corporation) shall, call a special meeting of the
holders of the Class G Preferred Stock and of the Voting Preferred Stock for the
election of the two directors 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 G Preferred Stock may call such meeting, upon the notice
above provided, and for that purpose shall have access to the stock books of the
Corporation. The directors 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
12
<PAGE> 113
previously terminated as above provided. If any vacancy shall occur among the
directors elected by the holders of the Class G 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 G 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 G 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 G
Preferred Stock voting as a single class with the holders of all other classes
or series of Preferred Stock entitled to vote on such matters, 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 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 G 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, or issue 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 G 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 G 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 G 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 G 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 G Preferred Stock as a single
class on any matter, then the Class G Preferred Stock and such other class or
series shall have with respect to such matters one quarter of one(.25) vote per
$25 of stated liquidation preference. Except as otherwise required by
applicable law or as set forth herein, the Class G 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.
13
<PAGE> 114
9. RECORD HOLDERS.
The Corporation and the Transfer Agent may deem and treat the record holder
of any share of Class G 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.
10.1 RESTRICTIONS ON OWNERSHIP AND TRANSFERS.
(A) LIMITATION ON BENEFICIAL OWNERSHIP. Except as provided in
Section 10.8, from and after the Issue Date, no Person (other than the Initial
Holder or a Look-Through Entity) shall Beneficially Own shares of Class G
Preferred Stock in excess of the Ownership Limit, the Initial Holder shall not
Beneficially Own shares of Class G Preferred Stock in excess of the Initial
Holder Limit and no Look-Through Entity shall Beneficially Own shares of Class G
Preferred Stock in excess of the Look-Through Ownership Limit.
(B) TRANSFERS IN EXCESS OF OWNERSHIP LIMIT. Except as provided in
Section 10.8, from and after the Issue Date (and subject to Section 10.12), 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
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 G Preferred Stock in excess of the Ownership Limit shall
be void ab initio as to the Transfer of such shares of Class G 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 G Preferred Stock.
(C) TRANSFERS IN EXCESS OF INITIAL HOLDER LIMIT. Except as provided
in Section 10.8, from and after the Issue Date (and subject to Section 10.12),
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 G Preferred Stock in excess
of the Initial Holder Limit shall be void ab initio as to the Transfer of such
shares of Class G Preferred 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 Class G Preferred Stock.
(D) TRANSFERS IN EXCESS OF LOOK-THROUGH OWNERSHIP LIMIT. Except as
provided in Section 10.8 from and after the Issue Date (and subject to Section
10.12), any Transfer (whether or not such Transfer is the result of transactions
entered into through 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 G Preferred Stock in
excess of the Look-Through Ownership limit shall be void ab initio as to the
Transfer of such shares of Class G
14
<PAGE> 115
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 G 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 G 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 G
Preferred Stock.
(F) SEVERABILITY ON VOID TRANSACTIONS. A Transfer of a share of Class G
Preferred Stock that is null and void under Sections 10.1(B), (C), (D), or (E)
of this Article because it would, if effective, result in (i) the ownership of
Class G 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 G Preferred Stock in the same or
any other related transaction.
10.2 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 10.1 of this Article or that a Person
intends to acquire or has attempted to acquire Beneficial Ownership of any
shares of Class G Preferred Stock in violation of Section 10.1 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 G Preferred Stock
acquired in violation of Section 10.1 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 10.1 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 10.3 of this
15
<PAGE> 116
Article; provided, further, that the provisions of this Section 10.2 shall be
subject to the provisions of Section 10.12 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 G
Preferred Stock that is expressly authorized pursuant to Section 10.8(d) of
this Article.
10.3. 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 interdealer 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 G Preferred Stock in excess of the Ownership Limit, or (b) the Initial
Holder would Beneficially Own shares of Class G 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 G 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 G 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 10.8 of this Article, such shares of Class G
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 G
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
10.3(E), the Prohibited Transferee shall have no rights in the Class G
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.
16
<PAGE> 117
(D) DIVIDEND AND VOTING RIGHTS. The Trustee shall have all voting rights
and rights to dividends with respect to shares of Class G 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 G 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 G 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 G
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 G 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 10.3(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 10.3(E) or any application thereof is determined in a final judgement
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 G Preferred Stock as to which such restrictions would, by their terms,
apply, and to hold such Class G Preferred Stock on behalf of the Corporation.
(F) PURCHASE RIGHT IN STOCK TRANSFERRED TO THE TRUSTEE. Shares of
Class G 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
17
<PAGE> 118
(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 G 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.
10.4 NOTICE OF RESTRICTED TRANSFER. Any Person that acquires or
attempts to acquire shares of Class G Preferred Stock in violation of Section
10.1 of this Article, or any Person that is a Prohibited Transferee such that
stock is transferred to the Trustee under Section 10.3 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 Corporations'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.
10.5 OWNERS REQUIRED TO PROVIDE INFORMATION. From and after the Issue
Date certain record and Beneficial Owners and transferees of shares of Class G
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 G 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 G Preferred
Stock Beneficially Owned, and a full description of how such shared are held.
Each such record or Beneficial Owner of Class G 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 G
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 G Preferred
Stock on behalf of a Beneficial Owner, shall take all reasonable steps to
obtain the written notice described in this Section 10.5 from the Beneficial
Owner.
(B) DISCLOSURE AT THE REQUEST OF THE CORPORATION. Any Person
that is a Beneficial Owner of shares of Class G Preferred Stock and any Person
(including the stockholder of record) that is holding shares of Class G
Preferred Stock for a Beneficial
18
<PAGE> 119
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 G Preferred Stock
already Beneficially Owned by such stockholder or proposed transferee and any
related persons specified, which statement or affidavit shall be in the form
prescribed by the Corporation for that purpose.
10.6 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 10.12 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.
10.7 AMBIGUITY. In the case of an ambiguity in the application of any
of the provisions of Section 10 of this Article, or in the case of an ambiguity
in any definition contained in Section 10 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.
10.8 EXPECTATIONS. The following exceptions shall apply or may be
established with respect to the limitations of Section 10.1 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 of Directors 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 G Preferred Stock directly owned at any time or from time
to time shall not constitute a violation of Section 10.1 of this Article and the
pledgee shall not be subject to the Ownership Limit with respect to the Class G
Preferred Stock so pledged to it either as a result of the pledge or upon
foreclosure.
19
<PAGE> 120
(C) UNDERWRITERS. For a period of 270 days following the purchase
of Class G Preferred Stock by an underwriter that (i) is a corporation or a
partnership and (ii) participates in an offering of the Class G Preferred
Stock, such underwriter shall not be subject to the Ownership Limit with
respect to the Class G Preferred Stock purchased by it as a part of or in
connection with such offering and with respect to any Class G Preferred Stock
purchased in connection with market making activities.
10.9 LEGEND. Each certificate for Class G Preferred Stock shall bear the
following legend:
"The shares of Class G Cumulative Preferred Stock
represented by this certificate are subject to restrictions on transfer.
No person may Beneficially Own shares of Class G Cumulative Preferred
Stock in excess of the Ownership Restrictions, as applicable, with certain
further restrictions and exceptions set forth in the Charter (including
the Articles Supplementary setting forth the terms of the Class G
Cumulative Preferred Stock). Any Person that attempts to Beneficially
Own shares of Class G Cumulative 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 Charter (including the Articles Supplementary setting forth the
terms of the Class G Cumulative 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 (i) the transfer of the
shares of Class G Cumulative Preferred Stock represented hereby will be
void in accordance with the Charter (including the Articles Supplementary
setting forth the terms of the Class G Cumulative Preferred Stock) or (ii)
the shares of Class G Cumulative Preferred Stock represented hereby will
automatically be transferred to a Trustee of a Trust for the benefit of one
or more Charitable Beneficiaries."
10.10 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 applications of such
provision shall be affected only to the extent necessary to comply with the
determination of such court.
10.11 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.
20
<PAGE> 121
10.12 SETTLEMENT. Nothing in this Section 10 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.
FOURTH: The terms of the Class G Cumulative Preferred Stock set forth in
Article Third hereof shall become Article XVI of the Charter.
21
<PAGE> 122
IN WITNESS WHEREOF, the Corporation has caused these presents to be signed
in its name and on its behalf by its Senior Vice President and Chief Financial
Officer and witnessed by its Secretary on July 13, 1998.
WITNESS: APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
/s/ JOEL BONDER /s/ TROY D. BUTTS
- ------------------------------ -----------------------------
Joel Bonder Troy D. Butts
Secretary Senior Vice President and
Chief Financial Officer
THE UNDERSIGNED, Senior Vice President and Chief Financial Officer of
APARTMENT INVESTMENT AND MANAGEMENT COMPANY, who executed on behalf of the
Corporation the Articles Supplementary of which this Certificate is made a
part, hereby acknowledges in the name and on behalf of said Corporation the
foregoing Articles Supplementary to be the corporate act of said Corporation
and hereby certifies that the matters and facts set forth herein with respect
to the authorization and approval thereof are true in all material respects
under the penalties of perjury.
/s/ TROY D. BUTTS
-----------------------------
Troy D. Butts
Senior Vice President and
Chief Financial Officer
22
<PAGE> 123
ARTICLES SUPPLEMENTARY
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CLASS H CUMULATIVE PREFERRED STOCK
(PAR VALUE $.01 PER SHARE)
APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation
(hereinafter called the "Corporation"), having its principal office in
Baltimore City, Maryland, hereby certifies to the Department of Assessments and
Taxation of the State of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of
Directors of the Corporation by Section 1.2 of Article IV of the Charter of the
Corporation, as amended to date (the "Charter"), the Board of Directors has
duly divided and classified 2,300,000 authorized but unissued shares of Class A
Common Stock of the Corporation, par value $.01 per share (the "Class A Common
Stock"), into a class designated as Class H Cumulative Preferred Stock, par
value $.01 per share, and has provided for the issuance of such class.
SECOND: The reclassification increases the number of shares classified
as Class H Cumulative Preferred Stock, par value $.01 per share, from no shares
immediately prior to the reclassification to 2,300,000 shares immediately after
the reclassification. The reclassification decreases the number of shares
classified as Class A Common Stock from 498,327,500 shares immediately prior to
the reclassification to 496,027,500 shares immediately after the
reclassification.
THIRD: The terms of the Class H Cumulative 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 H Cumulative
Preferred Stock, par value $.01 per share (the "Class H Preferred Stock") and
Two Million Three Hundred Thousand (2,300,000) shall be the authorized number
of shares of such Class H Preferred Stock constituting such class.
2. DEFINITIONS.
For purposes of the Class H Preferred Stock, the following terms shall
have the meanings indicated:
<PAGE> 124
"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.
"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 (a) (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 H
Preferred Stock; provided that, for purposes of paragraph (a) of
Section 8 of this Article, the term "Board of Directors" shall not
include any such committee.
"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.
"Charitable Beneficiary" shall mean one or more beneficiaries of the
Trust as determined pursuant to Section 10.3 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 H Preferred Stock" shall have the meaning set forth in Section
1 of this Article.
2
<PAGE> 125
"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, and the Class B Common Stock, $.01 par
value per share, of the Corporation and such other shares of the
Corporation's capital stock into which outstanding shares of such
Class A Common Stock or Class B Common Stock shall be reclassified.
"Dividend Payment Date" shall mean January 15, April 15, July 15 and
October 15 of each year; provided, 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 and no interest
shall accrue on such dividend from such date to such Dividend Payment
Date.
"Dividend Periods" shall mean the Initial Dividend Period and each
subsequent quarterly dividend period commencing on and including
January 15, April 15, July 15 and October 15 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 H Preferred Stock shall be redeemed pursuant to
Section 5 hereof, which shall end on and include the Redemption Date
with respect to the Class H Preferred Stock being redeemed.
"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 10.3(A) of this
Article.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Issue Date" shall mean August 14, 1998.
"Initial Dividend Period" shall mean the period commencing on and
including the Issue Date and ending on and including October 14, 1998.
"Initial Holder" shall mean Terry Considine.
"Initial Holder Limit" shall mean a number of the Outstanding shares
of Class H 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
3
<PAGE> 126
Equity Stock over (y) the Aggregate Value of all shares of Equity
Stock other than Class H 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 7 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 H 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 H 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," when used with respect to a share of any Equity Stock
and for 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 Corporation. The term "Trading Day,"
when used with respect to the Closing Price of a share of any Equity
Stock, shall mean (i) if the Equity Stock is listed or admitted to
trading on the NYSE, a day on which the NYSE is open for the
4
<PAGE> 127
transaction of business, (ii) if the Equity Stock is not listed or
admitted to trading on the NYSE but is listed or admitted to trading
on another national securities exchange or automated quotation system,
a day on which the principal national securities exchange or automated
quotation system, as the case may be, on which the Equity Stock is
listed or admitted to trading is open for the transaction of business,
or (iii) if the Equity Stock is not listed or admitted to trading on
any national securities exchange or automated quotation system, 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.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Operating Partnership" shall mean AIMCO Properties, L.P., a Delaware
limited partnership.
"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 H 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 H 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 7 of this Article.
"Person" shall mean (a) for purposes of Section 10 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
5
<PAGE> 128
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 10.3(A)
of this Article.
"Redemption Date" shall have the meaning set forth in paragraph (a) of
Section 5 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 7 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 H Preferred Stock shall mean placing such funds in a separate
account or delivering such funds to a disbursing, paying or other
similar agent.
"Transfer" shall mean any sale, transfer, gift, assignment, devise or
other disposition of a share of Class H 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 H Preferred Stock or (ii) the sale, transfer, assignment or
other disposition of any securities or rights convertible into or
exchangeable for Class H 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 H 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 H 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 H Preferred Stock.
"Trust" shall mean the trust created pursuant to Section 10.3 of this
Article.
6
<PAGE> 129
"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 8
of this Article.
3. DIVIDENDS.
(a) The holders of Class H 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 H Preferred Stock equal to $2.375 per annum
(equivalent to 9 1/2% per annum of the per share Liquidation Preference (as
hereinafter defined)). 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 each
Dividend Payment Date, commencing on October 15, 1998. Each such dividend
shall be payable in arrears to the holders of record of the Class H Preferred
Stock, as they appear on the stock records of the Corporation at the close of
business on the January 1, April 1, July 1 or October 1, as the case may be,
immediately preceding such Dividend Payment Date. 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.
(b) Any dividend payable on the Class H Preferred Stock
for any partial dividend period shall be computed ratably on the basis of
twelve 30-day months and a 360-day year. Holders of Class H Preferred Stock
shall not be entitled to any dividends, whether payable in cash, property or
stock, in excess of full cumulative dividends, as herein provided, on the Class
H 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 H Preferred
Stock that may be in arrears.
(c) So long as any of the shares of Class H 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 shares of Parity Stock unless, in each case, dividends equal to the full
amount of accumulated, accrued and unpaid dividends on all outstanding shares
of Class H Preferred Stock 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 payment of such dividends on the Class H
Preferred Stock for all Dividend Periods ending on or prior to the date such
dividend
7
<PAGE> 130
or distribution is declared, paid, set apart for payment or made, as the case
may be, with respect to such shares 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 H Preferred Stock and all
dividends declared upon any shares of Parity Stock shall be declared ratably in
proportion to the respective amounts of dividends accumulated, accrued and
unpaid on the Class H Preferred Stock and accumulated, accrued and unpaid on
such Parity Stock.
(d) So long as any of the shares of Class H 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 shares of, or options, warrants or
rights to subscribe for or purchase shares of, 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, dividends equal to the
full amount of all accumulated, accrued and unpaid dividends on all outstanding
shares of Class H Preferred Stock have been declared and paid, or such
dividends have been declared and a sum sufficient for the payment thereof has
been set apart for such payment, on all outstanding shares of Class H Preferred
Stock for all Dividend Periods ending on or prior to the date such dividend or
distribution is declared, paid, set apart for payment or made with respect to
such shares of Junior Stock, or the date such shares of Junior Stock are
redeemed, purchased or otherwise acquired or monies paid to or made available
for any sinking fund for such redemption, or the date any such cash or other
property is paid or distributed to or for the benefit of any holders of Junior
Stock in respect thereof, as the case may be.
Notwithstanding the provisions of this Section 3, the
Corporation shall not be prohibited from (i) declaring or paying or setting
apart for payment any dividend or distribution on any shares of Parity Stock or
(ii) or redeeming, purchasing or otherwise acquiring any Parity Stock, in each
case, if such declaration, payment, redemption, purchase or other acquisition
is necessary in order to maintain the continued qualification of the
Corporation as a REIT under Section 856 of the Code.
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 by
8
<PAGE> 131
the Corporation (whether of capital, surplus or otherwise) shall be made to or
set apart for the holders of Junior Stock, the holders of shares of Class H
Preferred Stock shall be entitled to receive Twenty-Five Dollars ($25) per
share of Class H 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 H 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 H
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 H Preferred Stock and any such other
Parity Stock ratably in the same proportion as the respective amounts that
would be payable on such Class H 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 involuntary, 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 H 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 H 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 H Preferred Stock shall not be
redeemable by the Corporation prior to August 14, 2003, except as set forth in
Section 10.2 of this Article. On and after August 14, 2003, the Corporation,
at its option, may redeem shares of Class H 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 accumulated, accrued and unpaid
dividends to the date fixed for redemption (the "Redemption Date"); provided,
however, that in the event of a redemption of shares of Class H Preferred
Stock, if the Redemption Date occurs after a dividend record date and on or
prior to the related Dividend Payment Date, the dividend payable on such
Dividend Payment Date in respect of such shares called for redemption shall be
payable on such Dividend Payment Date to the holders of record at the close of
9
<PAGE> 132
business on such dividend record date, and shall not be payable as part of the
redemption price for such shares. In connection with any redemption pursuant
to this Section 5(a), the redemption price of the Class H Preferred Stock
(other than any portion thereof consisting of accumulated, accrued and unpaid
dividends) shall be payable solely with the proceeds from the sale by the
Corporation or the Operating Partnership, of other capital shares of the
Corporation or the Operating Partnership (whether or not such sale occurs
concurrently with such redemption). For purposes of the preceding sentence,
"capital shares" means any common stock, preferred stock, depositary shares,
partnership or other interests, participations or other ownership interests
(however designated) and any rights (other than debt securities convertible
into or exchangeable at the option of the holder for equity securities (unless
and to the extent such debt securities are subsequently converted into capital
shares)) or options to purchase any of the foregoing of or in the Corporation
or the Operating Partnership.
(b) The Redemption 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 H Preferred Stock have not been declared and paid, or declared and set
apart for payment, no shares of Class H Preferred Stock may be redeemed unless
all outstanding shares of Class H Preferred Stock are simultaneously redeemed
and neither the Corporation nor any affiliate of the Corporation may purchase
or acquire shares of Class H Preferred Stock, otherwise than pursuant to a
purchase or exchange offer made on the same terms to all holders of shares of
Class H Preferred Stock.
(d) If the Corporation shall redeem shares of Class H
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 Redemption Date; (2) the
number of shares of Class H 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
redemption price payable on such Redemption Date, including, without
limitation, a statement as to whether or not accumulated, accrued and unpaid
dividends will be (x) payable as part of the redemption price, or (y) payable
on the next Dividend Payment Date to the record holder at the close of business
on the relevant record date as described in the next succeeding sentence.
10
<PAGE> 133
Notice having been mailed as aforesaid, from and after the Redemption Date
(unless the Corporation shall fail to make available the amount of cash
necessary to effect such redemption), (i) dividends on the shares of Class H
Preferred Stock so called for redemption shall cease to accumulate or accrue on
the shares of Class H Preferred Stock called for redemption, (ii) said shares
shall no longer be deemed to be outstanding, and (iii) all rights of the
holders thereof as holders of Class H Preferred Stock of the Corporation 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; provided, however, that if the Redemption Date for any shares
of Class H Preferred Stock occurs after any dividend record date and on or
prior to the related Dividend Payment Date, the full dividend payable on such
Dividend Payment Date in respect of such shares of Class H Preferred Stock
called for redemption shall be payable on such Dividend Payment Date to the
holders of record of such shares at the close of business on the corresponding
dividend record date notwithstanding the prior redemption of such shares. 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
applicable Redemption Date, the Corporation shall irrevocably deposit in trust
with a bank or trust company (which may not 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 plus, if such Redemption Date occurs after any dividend record date
and on or prior to the related Dividend Payment Date, such amount of cash as is
necessary to pay the dividend payable on such Dividend Payment Date in respect
of such shares of Class H Preferred Stock called for redemption, with
irrevocable instructions that such cash be applied to the redemption of the
shares of Class H Preferred Stock so called for redemption and, if applicable,
the payment of such dividend. No interest shall accrue for the benefit of the
holders of shares of Class H 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 Redemption Date shall revert to the
general funds of the Corporation, after which reversion the holders of shares
of Class H 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 H 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 H Preferred Stock are to be redeemed, shares to be redeemed
shall be selected by the Corporation from outstanding shares of Class H
Preferred Stock not previously called for redemption by lot or, with respect to
the number of shares of Class H 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 H Preferred Stock represented by any
certificate are redeemed,
11
<PAGE> 134
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 H Preferred Stock which shall have been issued and
reacquired in any manner by the Corporation shall be returned to the status of
authorized, but unissued shares of Class H Preferred Stock.
7. RANKING.
Any class or series of capital stock of the Corporation shall be deemed
to rank:
(a) prior or senior to the Class H 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 and of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in preference or
priority to the holders of Class H Preferred Stock ("Senior Stock");
(b) on a parity with the Class H 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 H Preferred Stock, if (i) such capital stock is Class B
Cumulative Convertible Preferred Stock, Class C Cumulative Preferred Stock,
Class D Cumulative Preferred Stock, or Class G Cumulative Preferred Stock of
the Corporation, or (ii) the holders of such class of stock or series and the
Class H 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 of one over the other
(the capital stock referred to in clauses (i) and (ii) of this paragraph being
hereinafter referred to, collectively, as "Parity Stock"); and
(c) junior to the Class H Preferred Stock, as to the
payment of dividends and as to the distribution of assets upon liquidation,
dissolution or winding up, if (i) such capital stock or series shall be Common
Stock or (ii) the holders of Class H 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 (the capital stock referred to in clauses (i)
and (ii) of this paragraph being hereinafter referred to, collectively, as
"Junior Stock").
12
<PAGE> 135
8. VOTING.
(a) If and whenever six quarterly dividends (whether or
not consecutive) payable on the Class H 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, the number of directors then constituting
the Board of Directors shall be increased by two (if not already increased by
reason of similar types of provisions with respect to shares of Parity Stock of
any other class or series which is entitled to similar voting rights (the
"Voting Preferred Stock")) and the holders of shares of Class H Preferred
Stock, together with the holders of shares of all other Voting Preferred Stock
then entitled to exercise similar voting rights, voting as a single class
regardless of series, shall be entitled to elect the two additional directors
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 H Preferred Stock and the Voting Preferred Stock called as
hereinafter provided. Whenever all arrears in dividends on the Class H
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 declared and paid, or declared and set apart for payment, then the right
of the holders of the Class H Preferred Stock and the Voting Preferred Stock to
elect such additional two directors 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 H 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 H 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 H Preferred Stock
(addressed to the Secretary at the principal office of the Corporation) shall,
call a special meeting of the holders of the Class H Preferred Stock and of the
Voting Preferred Stock for the election of the two directors 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 H Preferred Stock
may call such meeting, upon the notice above provided, and for that purpose
shall have access to the stock books of the Corporation. The directors 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 H 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 H 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.
13
<PAGE> 136
(b) So long as any shares of Class H 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 H
Preferred Stock voting as a single class with the holders of all other classes
or series of Parity Stock entitled to vote on such matters, 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 or validating:
(i) Any amendment, alteration or repeal of any of
the provisions of, or the addition of any provision to, 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 H 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, or issue 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 H Preferred Stock; or
(ii) The authorization, creation of, increase in
the authorized amount of, or issuance of any shares of any class or series of
Senior Stock or any security convertible into shares of any class or series of
Senior Stock (whether or not such class or series of Senior Stock is currently
authorized);
provided, however, that no such vote of the holders of Class H 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 Senior Stock or
convertible or exchangeable security is to be made, as the case may be,
provision is made for the redemption of all shares of Class H 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 H Preferred Stock shall
have one (1) vote per share, except that when any other class or series of
preferred stock of the Corporation shall have the right to vote with the Class
H Preferred Stock as a single class on any matter, then the Class H Preferred
Stock and such other class or series shall have with respect to such matters
one quarter of one (.25) vote per $25 of stated liquidation preference. Except
as otherwise required by applicable law or as set forth herein or in the
Charter, the Class H 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.
9. RECORD HOLDERS.
The Corporation and the Transfer Agent may deem and treat the record
holder of any share of Class H Preferred Stock as the true and lawful owner
thereof for all
14
<PAGE> 137
purposes, and neither the Corporation nor the Transfer Agent shall be affected
by any notice to the contrary.
10.1 RESTRICTIONS ON OWNERSHIP AND TRANSFERS.
(A) LIMITATION ON BENEFICIAL OWNERSHIP. Except as provided
in Section 10.8, from and after the Issue Date, no Person (other than the
Initial Holder or a Look-Through Entity) shall Beneficially Own shares of Class
H Preferred Stock in excess of the Ownership Limit, the Initial Holder shall
not Beneficially Own shares of Class H Preferred Stock in excess of the Initial
Holder Limit and no Look-Through Entity shall Beneficially Own shares of Class
H Preferred Stock in excess of the Look-Through Ownership Limit.
(B) TRANSFERS IN EXCESS OF OWNERSHIP LIMIT. Except as
provided in Section 10.8, from and after the Issue Date (and subject to Section
10.12), 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 H Preferred Stock in
excess of the Ownership Limit shall be void ab initio as to the Transfer of
such shares of Class H 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 H Preferred Stock.
(C) TRANSFERS IN EXCESS OF INITIAL HOLDER LIMIT. Except as
provided in Section 10.8, from and after the Issue Date (and subject to Section
10.12), 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 H Preferred Stock in excess of the Initial Holder Limit shall be void ab
initio as to the Transfer of such shares of Class H Preferred 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
Class H Preferred Stock.
(D) TRANSFERS IN EXCESS OF LOOK-THROUGH OWNERSHIP LIMIT.
Except as provided in Section 10.8 from and after the Issue Date (and subject
to Section 10.12), 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 H Preferred Stock in excess of the Look-Through Ownership limit shall
be void ab initio as to the Transfer of such shares of Class H 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 H Preferred Stock.
15
<PAGE> 138
(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 H 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 H Preferred Stock.
(F) SEVERABILITY ON VOID TRANSACTIONS. A Transfer of a share
of Class H Preferred Stock that is null and void under Sections 10.1(B), (C),
(D), or (E) of this Article because it would, if effective, result in (i) the
ownership of Class H 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 H Preferred
Stock in the same or any other related transaction.
10.2 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 10.1 of this Article or that a
Person intends to acquire or has attempted to acquire Beneficial Ownership of
any shares of Class H Preferred Stock in violation of Section 10.1 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 H Preferred Stock
acquired in violation of Section 10.1 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 10.1 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 10.3 of this Article;
provided, further, that the provisions of this Section 10.2 shall be subject to
the provisions of Section 10.12 of this Article; provided, further, that
neither the Board of Directors nor any committee thereof may
16
<PAGE> 139
exercise such authority in a manner that interferes with any ownership or
transfer of Class H Preferred Stock that is expressly authorized pursuant to
Section 10.8(C) of this Article.
10.3. 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 Equity 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 H Preferred Stock in excess of the Ownership
Limit, or (b) the Initial Holder would Beneficially Own shares of Class H
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 H 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 H 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 10.8
of this Article, such shares of Class H 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 H
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
10.3(E), the Prohibited Transferee shall have no rights in the Class H
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.
17
<PAGE> 140
(D) DIVIDEND AND VOTING RIGHTS. The Trustee shall have all
voting rights and rights to dividends with respect to shares of Class H
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 H 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 H 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 H 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 H
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 10.3(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 10.3(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 H Preferred Stock as to which such restrictions would, by their terms,
apply, and to hold such Class H Preferred Stock on behalf of the Corporation.
(F) PURCHASE RIGHT IN STOCK TRANSFERRED TO THE TRUSTEE.
Shares of Class H 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
18
<PAGE> 141
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 H 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.
10.4 NOTICE OF RESTRICTED TRANSFER. Any Person that acquires or
attempts to acquire shares of Class H Preferred Stock in violation of Section
10.1 of this Article, or any Person that is a Prohibited Transferee such that
stock is transferred to the Trustee under Section 10.3 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.
10.5 OWNERS REQUIRED TO PROVIDE INFORMATION. From and after the
Issue Date certain record and Beneficial Owners and transferees of shares of
Class H 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 H 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 H Preferred
Stock Beneficially Owned, and a full description of how such shares are held.
Each such record or Beneficial Owner of Class H 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 H
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 H Preferred
Stock on behalf of a Beneficial Owner, shall take all reasonable steps to
obtain the written notice described in this Section 10.5 from the Beneficial
Owner.
19
<PAGE> 142
(B) DISCLOSURE AT THE REQUEST OF THE CORPORATION. Any Person
that is a Beneficial Owner of shares of Class H Preferred Stock and any Person
(including the stockholder of record) that is holding shares of Class H
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 H Preferred Stock already Beneficially Owned by such
stockholder or proposed transferee and any related persons specified, which
statement or affidavit shall be in the form prescribed by the Corporation for
that purpose.
10.6 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 10.12 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.
10.7 AMBIGUITY. In the case of an ambiguity in the application of
any of the provisions of Section 10 of this Article, or in the case of an
ambiguity in any definition contained in Section 10 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.
10.8 EXCEPTIONS. The following exceptions shall apply or may be
established with respect to the limitations of Section 10.1 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 of Directors 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 H Preferred Stock directly owned at any time or from time
to time shall not constitute a violation of Section 10.1 of this Article and
the pledgee shall not be subject to the
20
<PAGE> 143
Ownership Limit with respect to the Class H Preferred Stock so pledged to it
either as a result of the pledge or upon foreclosure.
(C) UNDERWRITERS. For a period of 270 days (or such longer
period of time as any underwriter described below shall hold an unsold
allotment of Class H Preferred Stock) following the purchase of Class H
Preferred Stock by an underwriter that (i) is a corporation, partnership or
other legal entity and (ii) participates in an offering of the Class H
Preferred Stock, such underwriter shall not be subject to the Ownership Limit
with respect to the Class H Preferred Stock purchased by it as a part of or in
connection with such offering and with respect to any Class H Preferred Stock
purchased in connection with market making activities.
10.9 LEGEND. Each certificate for Class H Preferred Stock shall
bear substantially the following legend:
"The shares of Class H Cumulative Preferred Stock
represented by this certificate are subject to restrictions on
transfer. No person may Beneficially Own shares of Class H Cumulative
Preferred Stock in excess of the Ownership Restrictions, as
applicable, with certain further restrictions and exceptions set forth
in the Charter (including the Articles Supplementary setting forth the
terms of the Class H Cumulative Preferred Stock). Any Person that
attempts to Beneficially Own shares of Class H Cumulative 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 Charter (including the Articles
Supplementary setting forth the terms of the Class H Cumulative
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 (i) the transfer of the shares of Class H
Cumulative Preferred Stock represented hereby will be void in
accordance with the Charter (including the Articles Supplementary
setting forth the terms of the Class H Cumulative Preferred Stock) or
(ii) the shares of Class H Cumulative Preferred Stock represented
hereby will automatically be transferred to a Trustee of a Trust for
the benefit of one or more Charitable Beneficiaries."
10.10 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 applications of such
provision shall be affected only to the extent necessary to comply with the
determination of such court.
21
<PAGE> 144
10.11 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.
10.12 SETTLEMENT. Nothing in this Section 10 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.
FOURTH: The terms of the Class H Cumulative Preferred Stock set forth
in Article Third hereof shall become Article XVII of the Charter.
22
<PAGE> 145
IN WITNESS WHEREOF, the Corporation has caused these presents to be
signed in its name and on its behalf by its Senior Vice President and Chief
Financial Officer and witnessed by its Assistant Secretary on August 12,
1998.
WITNESS: APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
/s/ KATHLEEN HARVEY /s/ TROY D. BUTTS
- ---------------------------------- -------------------------------------
Kathleen Harvey Troy D. Butts
Assistant Secretary Senior Vice President and
Chief Financial Officer
THE UNDERSIGNED, Senior Vice President and Chief Financial Officer of
APARTMENT INVESTMENT AND MANAGEMENT COMPANY, who executed on behalf of the
Corporation the Articles Supplementary of which this Certificate is made a
part, hereby acknowledges in the name and on behalf of said Corporation the
foregoing Articles Supplementary to be the corporate act of said Corporation
and hereby certifies that the matters and facts set forth herein with respect
to the authorization and approval thereof are true in all material respects
under the penalties of perjury.
/s/ TROY D. BUTTS
-------------------------------------
Troy D. Butts
Senior Vice President and
Chief Financial Officer
<PAGE> 1
EXHIBIT 10.3
AIMCO PROPERTIES, L.P.
SECOND AMENDMENT
TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT") is
dated as of May __, 1998 (the "Amendment Effective Date") and entered into by
and among AIMCO PROPERTIES, L.P., a Delaware limited partnership ("BORROWER"),
the financial institutions listed on the signature pages hereof ("LENDERS") and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as agent for Lenders
("AGENT"), and BANKBOSTON, N.A. as one of the Lenders and the Documentation
Agent and is made with reference to that certain Credit Agreement dated as of
January 26, 1998, (as amended by that certain First Amendment to Credit
Agreement dated as of May 8, 1998 (the "FIRST AMENDMENT") and by this
Amendment, the "CREDIT AGREEMENT"), by and among Borrower, Lenders and Agent.
Capitalized terms used in this Amendment without definition are used as defined
in the Credit Agreement. The Guarantor Subsidiaries set forth on pages S-6
through S-9 are only a party to this Amendment for the purposes of Section 5
and are not a party to the Credit Agreement.
RECITAL
WHEREAS, Borrower and Lenders desire to amend the Credit
Agreement to (a) provide for an increase in the Aggregate Commitment to
$155,000,000 until November 1, 1998 and thereafter reduce the Aggregate
Commitment to $50,000,000, (b) to modify the calculation of Total Available
Commitments to include certain value attributable to certain bonds owned by a
Subsidiary of Borrower until November 1, 1998, and (c) make certain other
amendments as more specifically set forth below;
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the parties hereto agree
as follows:
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT
1.1 AMENDMENTS TO SECTION 1: PROVISIONS RELATING TO DEFINED
TERMS
A. Subsection 1.1 of the Credit Agreement is hereby amended
by adding thereto the following definitions, which shall be inserted into
subsection 1.1 in the proper alphabetical order:
1
<PAGE> 2
"BORROWING RATIO" means the quotient of 1 divided by 1.75, multiplied by
100 and expressed as a percentage.
"PALENCIA BOND" means that certain bond titled "State of Florida Housing
Finance Agency Multifamily Housing Revenue Refunding Bond 1994 Series A
(Palencia Apartments Project)", dated March 31, 1994 with a maturity of March
1, 2024 and in the original principal amount of $13,250,000. As of the date
hereof, the registered owner of the Palencia Bond is Ambassador X, L.P., a
Delaware limited partnership.
"PALENCIA BOND DOCUMENTS" means the documents and instruments evidencing
the Palencia Bond, including the following: (1) Loan Agreement, dated as
of March 1, 1994 between the Florida Housing Financing Agency ("AGENCY") and
FPI Palencia, Ltd., ("DEVELOPER"); (2) $13,250,000 Promissory Note, dated March
31, 1994; (3) Amended and Restated Land Use Restriction Agreement, dated as of
March 1, 1994, among the Agency, the Developer and Sun Bank, National
Association ("TRUSTEE"); (4) First Mortgage and Security Agreement, dated as of
March 1, 1994, from the Developer to the Trustee for the benefit of the Agency;
(5) Assignment of Rents and Leases, dated as of March 1, 1994, from the
Developer to the Agency; (6) Environmental Indemnity Agreement, dated as of
March 1, 1994, from the Developer, Avron B. Fogelman and Fogelman Enterprises,
L.P. to the Agency, the Trustee, and General Electric Capital Corporation; and
(7) together with all other related documents and agreements executed in
connection with and evidencing or securing the Palencia Bonds.
"PALENCIA BOND VALUE" means, as of any date, if the Palencia Property is
in the Unencumbered Asset Pool, an amount equal to the product of (X) the
Borrowing Ratio times (Y) the lesser of (a) the outstanding principal amount of
the Palencia Bond as of such date or (b) $13,250,000; provided, however, that
from and after the Reduction Date, the Palencia Bond Value shall be zero ($0).
"PALENCIA PROPERTY" means the multifamily apartment Property owned by
Ambassador X, L.P. which is located in Hillsborough County, Florida and
commonly known as "Palencia Apartments."
B. SUBSECTION 1.1 of the Credit Agreement is hereby further
amended by deleting each of the following definitions:
(a) Aggregate Commitment;
(b) Guarantor Subsidiaries; and
(c) Tranche B.
therefrom in their entirety and substituting the following therefor:
2
<PAGE> 3
"Aggregate Commitment" means the combined Commitments of the Lenders in
respect of Tranche A and Tranche B which is $155,000,000; provided, however,
that in all events and from and after the Reduction Date, the Aggregate
Commitment shall only include the Commitments of the Lenders in respect of
Tranche A, the amount of which shall not exceed $50,000,000.
"Guarantor Subsidiaries" means AIMCO Holdings QRS, Inc., a Delaware
corporation, AIMCO/OTC QRS, Inc., a Delaware corporation, AIMCO Holdings, L.P.,
a Delaware limited partnership, AIMCO-GP, Inc., a Delaware corporation,
AIMCO-LP, Inc., a Delaware corporation, AIMCO Properties Finance Corp., a
Delaware corporation, AIMCO Somerset, Inc., a Delaware corporation, NHP
Management Company, a District of Columbia corporation, Property Asset
Management Services, L.P., a Delaware limited partnership, Property Asset
Management Services, Inc., a Delaware corporation, Property Asset Management
Services-CA, LLC, a California limited liability company, Ambassador II, L.P.,
a Delaware limited partnership, and Ambassador X, L.P., a Delaware limited
partnership, together with such other Persons that execute and deliver to the
Agent for the ratable benefit of the Lenders a guaranty of the Obligations in
the form of Exhibit F1 if the Person is a qualified REIT subsidiary or Exhibit
F2 if the Person is not a qualified REIT subsidiary.
"Tranche B" means the $105,000,000 portion of the Aggregate Commitments,
of which $30,000,000 shall not be available until May __, 1998. Tranche B
Funds may only be borrowed if Tranche A is fully disbursed. Availability under
Tranche B shall terminate on the Business Day prior to the Reduction Date.
C. Subsection 1.1 of the Credit Agreement is hereby further
amended by adding to the definition of "Total Available Commitments" the
following clause (AA) after Clause (Z) thereof:
PLUS (AA) an amount equal to the Palencia Bond Value;
1.2 AMENDMENTS TO SECTION 7: BORROWER'S NEGATIVE COVENANTS
A. Section 7.1 of the Credit Agreement is hereby amended by
adding thereto the following subsection 7.1(j):
(j) Palencia Bond. Any Lien pursuant to the Palencia
Bond Documents existing on the date hereof, together with the Lien created and
evidenced by the Pledge and Security Agreement dated as of April 14, 1998 as in
effect on the date hereof by and between Borrower, as lender, and Ambassador X,
L.P., as pledgor.
B. Section 7.2 of the Credit Agreement is hereby amended by
adding thereto the following subsection 7.2(i):
3
<PAGE> 4
(i) Palencia Bond. The Indebtedness evidenced by the
Palencia Bond and the obligation to repay the Palencia Bonds.
C. Section 7.5 Disposition of Properties is hereby amended by
deleting Section 7.5(a) therefrom and substituting the following as Section
7.5(a):
(a) make any Disposition of any Unencumbered Asset Pool
Property or enter into any agreement to do so, provided, however, so long as no
Default or Event of Default is then continuing, Borrower may (i) sell or
refinance a Property in the Unencumbered Asset Pool or (ii) make a Disposition
of the Palencia Bonds, in either case by paying to the Agent for distribution
to the Lenders an amount equal to the amount which would be required to be paid
to the Lenders so that the Outstanding Amount of the Loans immediately after
such Disposition would not exceed the Total Available Commitment (calculated
without including the Property so sold or refinanced or the Palencia Bond
Value, as applicable);
D. Section 7.8 Investments is hereby amended by deleting
therefrom subsection 7.8(i) and substituting the following:
(i) cash, Cash Equivalents and, until the Reduction
Date, the Palencia Bonds;
1.3 SUBSTITUTION OF SCHEDULES
SCHEDULE 2.1(A)(I): LENDERS' COMMITMENTS. Schedule 2.1(a)(i) to
the Credit Agreement is hereby deleted from the Credit Agreement and replaced
with the substituted Schedule 2.1(a)(i)-1 attached hereto and from and after
the Reduction Date Schedule 2.1(a)(i)-1 shall be replaced with Schedule
2.1(a)(i)-2 attached hereto.
1.4 UNENCUMBERED ASSET POOL; ADDITIONS AND EXCLUSIONS OF
PROPERTIES
SECTION 2.13 of the Credit Agreement is hereby amended by adding
thereto the following as subsection 2.13(a)(iv):
(iv) Palencia Property. The Palencia Property is hereby
added to the Unencumbered Asset Pool for purposes of compliance with Articles,
V, VI and VII of the Credit Agreement, notwithstanding the Liens encumbering
such Property which Liens shall constitute Permitted Liens; provided, however,
that it shall be excluded from the Unencumbered Asset Pool upon the occurrence
of (i) any event described in Section 2.13(b) or (ii) any pledge, transfer,
sale, exchange, remarking or refunding of the Palencia Bond. Any calculations
in respect of Unencumbered Asset Pool Value shall not take into account any
amount whatsoever in respect of the Palencia Property, other than the Palencia
Bond Value.
4
<PAGE> 5
1.5 AMENDMENT TO SECTION 5: REPRESENTATIONS AND WARRANTIES
SECTION 5 of the Credit Agreement is hereby amended by adding
thereto the following as subsection 5.27:
5.27 Palencia Bond. Ambassador X, L.P. is the sole
owner of the Palencia Bond. The Palencia Bond is not encumbered by any Liens
other than the Lien of that certain Pledge and Security Agreement dated as of
April 16, 1998 by and between Ambassador X, L.P. and Borrower, as in effect on
the date hereof. Notwithstanding Section 5.6, the Liens on the Palencia
Property existing on the date hereof constitute Permitted Liens.
SECTION 2. ADDITIONAL NOTES
Borrower agrees to execute and deliver to Agent for Lenders an
additional Note (each an "ADDITIONAL NOTE" and collectively the "ADDITIONAL
NOTES"), in the form of the Note with appropriate insertions, to evidence Loans
in excess of the Aggregate Commitment as in effect prior to the Amendment
Effective Date. Each of the parties hereto hereby acknowledges and agrees that
each Additional Note is a Note for all purposes under the Credit Agreement and
the other Loan Documents and that the loans evidenced by the Additional Notes
shall constitute Loans for all purposes under the Credit Agreement and the
other Loan Documents. Loans in respect of Tranche A or Tranche B shall be
evidenced by separate Notes, notwithstanding that the same Lender may be making
such Loans.
SECTION 3. CONDITIONS TO EFFECTIVENESS
This Amendment shall become effective on the Amendment Effective
Date, if each of the following conditions are satisfied:
A. Borrower has delivered to Lenders (or to Agent for Lenders
with sufficient originally executed copies, where appropriate, for each Lender
and its counsel) the following, each, unless otherwise noted, dated as of the
Amendment Effective Date:
1. A good standing certificate from the Secretary of
State of the State of organization of the REIT and Borrower and each of
the Guarantor Subsidiaries, each dated a recent date prior to or on the
Amendment Effective Date;
2. A certificate of the secretary of the REIT
certifying that except as disclosed therein, the Organizational
Documents of the REIT, Borrower and, the Guarantor Subsidiaries have not
been modified in any material respect since May 8, 1998.
5
<PAGE> 6
3. Resolutions and certificates conforming to the
requirements of Sections 4.1(iv)(A) and (B) of the Credit Agreement
authorizing and approving the Amendment and the other documents to be
delivered hereunder and the borrowing of the Loans in respect of the
$30,000,000 increase in Tranche B evidenced by this Amendment and the
First Amendment; and
4. Executed copies of this Amendment and the
Additional Notes and any required guaranties from the additional
Guarantor Subsidiaries.
B. Lenders and their respective counsel shall have received
originally executed copies of one or more favorable written opinions of counsel
for Borrower and the Guarantor Subsidiaries in form and substance satisfactory
to Agent and its counsel, dated as of the Amendment Effective Date with respect
to the validity, binding effect and enforceability of the Credit Agreement and
due authorization, execution and delivery thereof, and as to such other matters
as Agent acting on behalf of Lenders may reasonably request.
C. Concurrently with the due execution and delivery of this
Agreement by Borrower, the Agent and each of the Lenders which are the initial
Lenders party to the Credit Agreement, Borrower shall pay to BofA an
arrangement fee in respect of the $30,000,000 increase in Tranche B as set
forth in a separate letter agreement dated as of the Amendment Effective Date
between Borrower and BofA.
D. Borrower shall pay all amounts which it is required to pay
pursuant to Section 6(B) of this Amendment.
SECTION 4. BORROWER'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to
amend the Credit Agreement in the manner provided herein, Borrower represents
and warrants to each Lender that the following statements are true, correct and
complete:
A. CORPORATE POWER AND AUTHORITY. Borrower has all requisite
corporate power and authority to enter into this Amendment and any other
agreements, guaranties or other operative documents to be delivered by Borrower
pursuant to the Amendment, to issue the Additional Notes and to carry out the
transactions contemplated by, and perform its obligations under, the Credit
Agreement.
B. AUTHORIZATION OF AGREEMENTS. The execution and delivery
of this Amendment and the Additional Notes and the performance of the Credit
Agreement and the issuance, delivery and payment of the Additional Notes have
been duly authorized by all necessary corporate action on the part of Borrower
and the other parties delivering any of such documents, as the case may be.
6
<PAGE> 7
C. NO CONFLICT. The execution and delivery by Borrower and
the Guarantor Subsidiaries of this Amendment and the performance by Borrower of
the Credit Agreement and the issuance, delivery and payment of the Additional
Notes by Borrower do not and will not (i) violate any provision of any law or
any governmental rule or regulation applicable to Borrower or any of its
Subsidiaries, their respective Organizational Documents or any order, judgment
or decree of any court or other agency of government binding on Borrower, the
REIT or any of their Subsidiaries, (ii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of Borrower, the REIT or any of their Subsidiaries,
(iii) result in or require the creation or imposition of any Lien upon any of
the properties or assets of Borrower, the REIT or any of their Subsidiaries, or
(iv) require any approval of stockholders or any approval or consent of any
Person under any Contractual Obligation of Borrower, the REIT or any of their
Subsidiaries.
D. GOVERNMENTAL CONSENTS. The execution and delivery by
Borrower and the Guarantor Subsidiaries of this Amendment and the performance
by Borrower and the Guarantor Subsidiaries of the Credit Agreement and the
issuance, delivery and payment of the Additional Notes by Borrower do not and
will not require any registration with, consent or approval of, or notice to,
or other action to, with or by, any federal, state or other governmental
authority or regulatory body.
E. BINDING OBLIGATION. This Amendment and the Credit
Agreement have been duly executed and delivered by Borrower and the Guarantor
Subsidiaries, as applicable, and are, and the Additional Notes, when executed
and delivered, will be the legally valid and binding obligations of Borrower
and the Guarantor Subsidiaries, as applicable, enforceable against Borrower
and/or the Guarantor Subsidiaries, as applicable, in accordance with their
respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally or by equitable principles relating to enforceability.
F. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM
CREDIT AGREEMENT. The representations and warranties contained in Section 5 of
the Credit Agreement are and will be true, correct and complete in all material
respects on and as of the date hereof to the same extent as though made on and
as of that date, except Section 5.5 and other representations and warranties
solely to the extent such representations and warranties specifically relate to
an earlier date, in which case they were true, correct and complete in all
material respects on and as of such earlier date.
G. ABSENCE OF DEFAULT. No event has occurred and is
continuing or will result from the consummation of the transactions
contemplated by this Amendment that would constitute an Event of Default or a
Default.
7
<PAGE> 8
SECTION 5. ACKNOWLEDGEMENT AND CONSENT
Guarantor Subsidiaries are party to the Guaranties, in each case
as amended through the date hereof, pursuant to which Guarantor Subsidiaries
have guarantied the Obligations. Nothing in this Section 5 shall be construed
to make the Guarantor Subsidiaries a party to the Credit Agreement or to create
any obligation in respect thereof except pursuant to each Guaranty.
Each Guarantor Subsidiary hereby acknowledges that it has
reviewed the terms and provisions of the Credit Agreement and this Amendment
and consents to the amendment of the Credit Agreement effected pursuant to this
Amendment. Each Guarantor Subsidiary hereby confirms that each Guaranty to
which it is a party or otherwise bound will continue to guaranty or secure, as
the case may be, to the fullest extent possible the payment and performance of
all of the "Indebtedness" (as defined in the applicable Guaranty), including
without limitation the payment and performance of all such "Indebtedness," as
the case may be, in respect of the Obligations of Borrower now or hereafter
existing under or in respect of the Credit Agreement and the Notes defined
therein. Without limiting the generality of the foregoing, each Guarantor
Subsidiary hereby acknowledges and confirms the understanding and intent of
such party that, upon the effectiveness of this Amendment, and as a result
thereof, the definition of "Obligations" contained in the Credit Agreement
includes the obligations of Borrower under the Additional Notes.
Each Guarantor Subsidiary acknowledges and agrees that any
Guaranty to which it is a party or otherwise bound shall continue in full force
and effect and that all of its obligations thereunder shall be valid and
enforceable and shall not be impaired or limited by the execution or
effectiveness of this Amendment. Each Guarantor Subsidiary represents and
warrants that all representations and warranties contained in the Credit
Agreement and the Guaranty to which it is a party or otherwise bound are true,
correct and complete in all material respects on and as of the Amendment
Effective Date to the same extent as though made on and as of that date, except
to the extent such representations and warranties specifically relate to an
earlier date, in which case they were true, correct and complete in all
material respects on and as of such earlier date.
Each Guarantor Subsidiary other than Borrower acknowledges and
agrees that (i) notwithstanding the conditions to effectiveness set forth in
this Amendment, such Guarantor Subsidiary is not required by the terms of the
Credit Agreement or any other Loan Document to consent to the amendments to the
Credit Agreement effected pursuant to this Amendment and (ii) nothing in the
Credit Agreement, this Amendment or any other Loan Document shall be deemed to
require the consent of such Guarantor Subsidiary to any future amendments to
the Credit Agreement.
8
<PAGE> 9
SECTION 6. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
(i) On and after the Amendment Effective Date, each reference
in the Credit Agreement to "this Agreement", "hereunder", "hereof",
"herein" or words of like import referring to the Credit Agreement, and
each reference in the other Loan Documents to the "Credit Agreement",
"thereunder", "thereof" or words of like import referring to the Credit
Agreement shall mean and be a reference to the Credit Agreement, as
amended by this Amendment.
(ii) Except as specifically amended by this Amendment, the
Credit Agreement and the other Loan Documents shall remain in full force
and effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment
shall not, except as expressly provided herein, constitute a waiver of
any provision of, or operate as a waiver of any right, power or remedy
of Agent or any Lender under, the Credit Agreement or any of the other
Loan Documents.
B. FEES AND EXPENSES. Borrower acknowledges that all costs,
fees and expenses incurred by Agent and its counsel with respect to this
Amendment and the documents and transactions contemplated hereby shall be for
the account of Borrower.
C. HEADINGS. Section and subsection headings in this
Amendment are included herein for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose or be given any
substantive effect.
D. COUNTERPARTS; EFFECTIVENESS. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one
and the same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document. This Amendment shall become
effective upon the execution of a counterpart hereof by Borrower and the
Requisite Lenders, and receipt by Borrower and Agent of written, facsimile or
telephonic notification of such execution and authorization of delivery
thereof.
[Signatures on Attached Pages S-1 through S-8]
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered as of the day and year first written above.
BORROWER
AIMCO PROPERTIES, L.P.,
a Delaware limited partnership
By: AIMCO -GP, Inc., a Delaware
corporation, its general
partner
By: /s/ PETER K. KOMPANIEZ
-------------------------
Peter K. Kompaniez
Vice President
Notices to be sent to:
1873 South Bellaire Street
17th Floor
Denver, Colorado 80222
Attention: Peter K. Kompaniez,
Vice President
Facsimile: (303) 757-8735
S-1
<PAGE> 11
B OF A
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as a Lender and as the Issuing Lender
By: /s/ MARY BOWMAN
--------------------------------
Name: Mary Bowman
------------------------------
Title: Vice President
-----------------------------
Notices to be sent to:
Bank of America National Trust
and Savings Association
CRES #1313
555 South Flower Street, 6th Floor
Los Angeles, CA 90071
Attention: M. Harvey
Telephone: 213/228-4013
Facsimile: 213/228-5389
Payments to be made to:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
333 S. Beaudry Ave.
Loan Accounting Dept #1503
Los Angeles, CA 90017
ABA #: 121 000 358
Credit Account #: 15033-00401
Attention: Unit Representative
Ref: AIMCO Unsecured Revolver
S-2
<PAGE> 12
AGENT
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
By: /s/ MARY BOWMAN
--------------------------------
Name: Mary Bowman
------------------------------
Title: Vice President
-----------------------------
Notices to be sent to:
Bank of America National Trust and
Savings Association
CRES #1313
555 South Flower Street, 6th Floor
Los Angeles, CA 90071
Attention: M. Harvey
Telephone: 213/228-4013
Facsimile: 213/228-5389
Payments to be made to:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
ABA #: 121 000 358
Credit Account #: 15033-00401
Attention: Unit Representative
Ref: AIMCO Unsecured Revolver
S-3
<PAGE> 13
BANKBOSTON, N.A., LENDER AND
DOCUMENTATION AGENT
BANKBOSTON, N.A.
By: /s/ KATHLEEN M. AHERN
--------------------------------
Name: Kathleen M. Ahern
Title: Vice President
Notices to be sent to:
BankBoston, N.A.
100 Federal Street
Mail Stop 01-32-04
Boston, MA 02110
Attention: Andrea Martingnetti
Telephone: (617) 434-2835
Facsimile: (617) 434-0645
Payments to be made to:
BANKBOSTON, N.A.
ABA #: 011-000-390
Credit Loan #: 1102655
Attention: Linda Wheeler/CLS
Ref: AIMCO Unsecured Revolver
S-4
<PAGE> 14
NATIONSBANK, N.A.
By: /s/ WILL T. BOWERS, JR.
------------------------------
Name: Will T. Bowers, Jr.
----------------------------
Title: Vice President
---------------------------
Notices to be sent to:
NationsBank, N.A.
901 Main Street, Dallas, TX 75202
Attn: Will Bowers, Vice President
Telephone: 214-508-0276
Facsimile: 214-508-0276
Payments to be made to:
ABA No.: 111 000 025
Account No.: Credit GL #136621105 2
At: NationsBank Texas Credit
Support Real Estate
Credit
Reference: Aimco Properties, L.P.
Note #5404751
Attn: Betty Bowers
S-5
<PAGE> 15
GUARANTOR SUBSIDIARIES
Address Where Notices to Guarantors
are to be Sent:
1873 South Bellaire Street
17th Floor
Denver, Colorado 90071
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY,
a Maryland corporation
By: /s/ PETER K. KOMPANIEZ
-----------------------------
Peter K. Kompaniez
Vice Chairman
AIMCO-GP, INC.,
a Delaware corporation
By: /s/ PETER K. KOMPANIEZ
-----------------------------
Peter K. Kompaniez
Vice President
AIMCO-LP, INC.,
a Delaware corporation
By: /s/ PETER K. KOMPANIEZ
-----------------------------
Peter K. Kompaniez
Vice President
S-6
<PAGE> 16
AIMCO HOLDINGS, LP,
a Delaware limited partnership
By: AIMCO HOLDINGS QRS, INC.,
a Delaware corporation,
General Partner
By: /s/ PETER K. KOMPANIEZ
-----------------------------
Peter K. Kompaniez
Vice President
AIMCO HOLDINGS QRS, INC.,
a Delaware corporation
By: /s/ PETER K. KOMPANIEZ
-----------------------------
Peter K. Kompaniez
Vice President
AIMCO SOMERSET, INC.,
a Delaware corporation
By: /s/ PETER K. KOMPANIEZ
-----------------------------
Peter K. Kompaniez
Vice President
AIMCO PROPERTIES FINANCE CORP.,
a Delaware corporation
By: /s/ PETER K. KOMPANIEZ
-----------------------------
Peter K. Kompaniez
Vice President
S-7
<PAGE> 17
AIMCO PROPERTIES
FINANCE PARTNERSHIP, L.P.,
a Delaware limited partnership
By: /s/ PETER K. KOMPANIEZ
-----------------------------
Peter K. Kompaniez
Vice President
AIMCO/OTC QRS, INC.,
a Delaware corporation
By: /s/ PETER K. KOMPANIEZ
-----------------------------
Peter K. Kompaniez
Vice President
PROPERTY ASSET MANAGEMENT SERVICES,
INC.,
a Delaware corporation
By: /s/ PETER K. KOMPANIEZ
-----------------------------
Name:
Its:
PROPERTY ASSET MANAGEMENT SERVICES,
L.P.
By: /s/ PETER K. KOMPANIEZ
-----------------------------
Name:
Its:
NHP MANAGEMENT COMPANY,
a District of Columbia corporation
By: /s/ PETER K. KOMPANIEZ
-----------------------------
Name:
Its:
S-8
<PAGE> 18
PROPERTY MANAGEMENT SERVICES-
CALIFORNIA, LLC,
a California limited liability
company
By: /s/ PETER K. KOMPANIEZ
-----------------------------
Name:
Its:
AMBASSADOR II, L.P.,
a Delaware limited partnership
By: AMBASSADOR II, Inc.,
a Delaware corporation
By: /s/ PETER K. KOMPANIEZ
-----------------------------
Name:
Its:
AMBASSADOR X, L.P.,
a Delaware limited partnership
By: AMBASSADOR X, Inc.,
a Delaware corporation
By: /s/ PETER K. KOMPANIEZ
-----------------------------
Name:
Its:
S-9
<PAGE> 1
EXHIBIT 10.4
PAYMENT GUARANTY
This Payment Guaranty ("Guaranty") is made as of May 21, 1998,
by Ambassador X, L.P., a Delaware limited partnership ("Guarantor") in favor of
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("BofA"), as the agent
for itself and the lenders ("Lenders") from time to time party to the Credit
Agreement (as hereinafter defined) (in such capacity, the "Agent").
Factual Background
The Lenders intend to make a $155,000,000 unsecured revolver to
term credit facility available to AIMCO Properties L.P., a Delaware limited
partnership (the "Borrower") in accordance with the Credit Agreement (the
"Credit Agreement"), dated as of January 26, 1998, amended as of May 8, 1998
pursuant to that First Amendment to Credit Agreement and as of the date
herewith pursuant to that Second Amendment to Credit Agreement, by and among
Borrower, BofA (as Agent and as a Lender) and the other Lenders from time to
time party thereto. In connection with the Credit Agreement, the Borrower has
obtained this Guaranty from the Guarantor, and the Guarantor has provided this
Guaranty in return for Borrower's payment of a guarantee fee. Capitalized
terms used but not defined herein will have the meanings set forth in the
Credit Agreement. As used herein, the term "Facility" shall refer individually
to each of the credit facilities available to the Borrower under the Credit
Agreement.
Guaranty
1. Guaranty of Loan. Guarantor absolutely, unconditionally
and irrevocably guaranties to Agent and the Lenders the full payment of the
Indebtedness (as hereinafter defined), and unconditionally agrees to pay to
Agent and the Lenders the full amount of the Indebtedness. This is a guaranty
of payment, not of collection. If Borrower defaults in the payment when due of
the Indebtedness or any part of it, Guarantor will in lawful money of the
United States pay to Agent and the Lenders, on demand, all sums due and owing
on the Indebtedness, including all interest, charges, fees and other sums,
costs and expenses.
2. Loan. In this Guaranty, the term "Indebtedness" is
broadly defined to mean and include all primary, secondary, direct, indirect,
fixed and contingent obligations of Borrower to pay principal, interest,
prepayment charges, breakage costs, late charges, loan fees and any other fees,
charges, sums, costs and expenses that may be owing at any time under the Loan
Documents (as such term is defined in the Credit Agreement), and shall include,
without limitation, all liabilities and obligations of the Borrower with
respect to Letters of Credit issued under the Credit Agreement, as any or all
of such obligations may
1
<PAGE> 2
from time to time be modified, amended, extended or renewed. If the amount
outstanding under the Indebtedness is determined by a court of competent
jurisdiction or in any arbitration proceeding described in Section 10.17 of the
Credit Agreement, that determination shall be conclusive and binding on
Guarantor, regardless of whether Guarantor was a party to the proceeding in
which the determination was made or not.
3. Rights of Agent and the Lenders. Guarantor authorizes
Agent or any Lender to perform any or all of the following acts at any time in
its sole discretion, all without notice to Guarantor and without affecting
Guarantor's obligations under this Guaranty:
(a) Agent or the Requisite Lenders may alter any terms
of the Indebtedness or any part of it, including renewing, compromising,
extending or accelerating, or otherwise changing the time for payment of, or
increasing or decreasing the rate of interest on, the Indebtedness or any part
of it.
(b) Agent or any Lender may take and hold security for
the Indebtedness or this Guaranty, accept additional or substituted security
for either, and subordinate, exchange, enforce, waive, release, compromise,
fail to perfect and sell or otherwise dispose of any such security in
accordance with the terms of the Indebtedness.
(c) Agent or any Lender may direct the order and manner
of any sale of all or any part of any security now or later to be held for the
Indebtedness or this Guaranty, and Agent or any Lender may also bid at any such
sale.
(d) Agent or any Lender may apply any payments or
recoveries from Borrower, Guarantor or any other source, and any proceeds of
any security, to Borrower's obligations under the Loan Documents in such
manner, order and priority as Agent or such Lender may elect, whether or not
those obligations are guarantied by this Guaranty or secured at the time of the
application.
(e) Agent or any Lender may release Borrower of its
liability for the Indebtedness or any part of it.
(f) Agent or any Lender may substitute, add or release
any one or more Guarantors, other guarantors or endorsers.
(g) In addition to the Indebtedness, Agent or any
Lender may extend other credit to Borrower, and may take and hold security for
the credit so extended, all without affecting Guarantor's liability under this
Guaranty.
2
<PAGE> 3
4. Guaranty to be Absolute. Guarantor expressly agrees that
until the Indebtedness is paid and performed in full and each and every term,
covenant and condition of this Guaranty is fully performed, Guarantor shall not
be released by or because of:
(a) Any act or event which might otherwise discharge,
reduce, limit or modify Guarantor's obligations under this Guaranty;
(b) Any waiver, extension, modification, forbearance,
delay or other act or omission of Agent or any Lender, or its failure to
proceed promptly or otherwise as against Borrower, Guarantor or any security;
(c) Any action, omission or circumstance that might
increase the likelihood that Guarantor may be called upon to perform under this
Guaranty or that might affect the rights or remedies of Guarantor as against
Borrower;
(d) Any dealings occurring at any time between Borrower
and Agent or any Lender, whether relating to the Indebtedness or otherwise; or
(e) Any action of Agent or any Lender described in
Section 3 above.
Guarantor hereby acknowledges that absent this Section 4,
Guarantor might have a defense to the enforcement of this Guaranty as a result
of one or more of the foregoing acts, omissions, agreement, waivers or matters.
Guarantor hereby expressly waives and surrenders any defense to its liability
under this Guaranty based upon any of the foregoing acts, omissions,
agreements, waivers or matters. It is the purpose and intent of this Guaranty
that the obligations of Guarantor under it shall be absolute and unconditional
under any and all circumstances.
5. Guarantor's Waivers. Guarantor waives:
(a) All statutes of limitations as a defense to any
action or proceeding brought against Guarantor by Agent or any Lender, to the
fullest extent permitted by law;
(b) Any right it may have to require Agent or any
Lender to proceed against Borrower, proceed against or exhaust any security
held from Borrower, or pursue any other remedy in Agent's or any Lender's power
to pursue;
(c) Any defense based on any claim that Guarantor's
obligations exceed or are more burdensome than those of Borrower;
3
<PAGE> 4
(d) Any defense based on: (i) any legal disability of
Borrower, (ii) any release, discharge, modification, impairment or limitation
of the liability of Borrower to Agent or any Lender from any cause, whether
consented to by Agent or any Lender or arising by operation of law or from any
bankruptcy or other voluntary or involuntary proceeding, in or out of court,
for the adjustment of debtor-creditor relationships ("Insolvency Proceeding"),
and (iii) any rejection or disaffirmance of the Indebtedness, or any part of
it, or any security held for it, in any such Insolvency Proceeding;
(e) Any defense based on any action taken or omitted by
Agent or any Lender in any Insolvency Proceeding involving Borrower, including
any election to have Agent's or that Lender's claim allowed as being secured,
partially secured or unsecured, any extension of credit by Lender to Borrower
in any Insolvency Proceeding, and the taking and holding by Agent or any Lender
of any security for any such extension of credit;
(f) All presentments, demands for performance, notices
of nonperformance, protests, notices of protest, notices of dishonor, notices
of acceptance of this Guaranty and of the existence, creation, or incurring of
new or additional indebtedness, and demands and notices of every kind except
for any demand or notice by Agent or any Lender to Guarantor expressly provided
for in Section 1;
(g) Any defense based on or arising out of any defense
that Borrower may have to the payment or performance of the Indebtedness or any
part of it; and
(h) Any defense based on or arising out of any action
of Agent or any Lender described in Sections 3 or 4 above.
6. Waivers of Subrogation and Other Rights.
(a) During the existence of an Event of Default by
Borrower, Agent or any Lender, without prior notice to or consent of Guarantor,
may elect to: (i) foreclose either judicially or nonjudicially against any real
or personal property security it may hold for the Indebtedness, (ii) accept a
transfer of any such security in lieu of foreclosure, (iii) compromise or
adjust the Indebtedness or any part of it or make any other accommodation with
Borrower or Guarantor, or (iv) exercise any other remedy against Borrower or
any security. No such action by Agent or any Lender shall release or limit the
liability of Guarantor, who shall remain liable under this Guaranty after the
action, even if the effect of the action is to deprive Guarantor of any
subrogation rights, rights of indemnity, or other rights to collect
reimbursement from Borrower for any sums paid to Agent or any Lender, whether
contractual or arising by operation of law or otherwise. Guarantor expressly
agrees that under no circumstances shall it be deemed to have any right, title,
interest or claim in or to any real or personal property to be held by Agent or
any Lender or any third party after any foreclosure or transfer in lieu of
foreclosure of any security for the Indebtedness.
4
<PAGE> 5
(b) Regardless of whether Guarantor may have made any
payments to Lender, Guarantor hereby waives: (i) all rights of subrogation, all
rights of indemnity, and any other rights to collect reimbursement from
Borrower for any sums paid to Agent or any Lender, whether contractual or
arising by operation of law (including the United States Bankruptcy Code or any
successor or similar statute) or otherwise, (ii) all rights to enforce any
remedy that Lender may have against Borrower, and (iii) all rights to
participate in any security now or later to be held by Agent or any Lender for
the Indebtedness, in each case until the full and indefeasible payment and
performance of all Indebtedness, and all obligations of the Guarantors
hereunder.
(c) Guarantor waives all rights and defenses arising
out of an election of remedies by the Agent or any Lender, even though that
election of remedies may affect Guarantor's rights of subrogation and
reimbursement against the Borrower by the operation of law or otherwise. In
addition, Guarantor waives all rights and defenses that Guarantor may have
because the Borrower's indebtedness is secured by real property. This means,
among other things:
(1) Agent and the Lenders may collect from Guarantor
without first foreclosing on any real or personal property collateral pledged
by the Borrower.
(2) If Agent forecloses on any real property collateral
pledged by the Borrower:
(A) The amount of the indebtedness may be
reduced only by the price for which that collateral is sold at the foreclosure
sale, even if the collateral is worth more than the sale price.
(B) Agent and the Lenders may collect from
Guarantor even if Agent or any Lender, by foreclosing on the real property
collateral, has destroyed or affected any right Guarantor may have to collect
from the Borrower.
This is an unconditional and irrevocable waiver of any rights and
defenses Guarantor may have because the Borrower's indebtedness is secured by
real property.
7. Revival and Reinstatement. If Agent or any Lender is
required to pay, return or restore to Borrower or any other person any amounts
previously paid on the Indebtedness because of any Insolvency Proceeding of
Borrower, any stop notice or any other reason, the obligations of Guarantor
shall be reinstated and revived and the rights of Agent and such Lender shall
continue with regard to such amounts, all as though they had never been paid.
5
<PAGE> 6
8. Information Regarding Owner. Before signing this
Guaranty, Guarantor investigated the financial condition and business
operations of Borrower and such other matters as Guarantor deemed appropriate
to assure itself of Borrower's ability to discharge its obligations under the
Loan Documents. Guarantor assumes full responsibility for that due diligence,
as well as for keeping informed of all matters that may affect Borrower's
ability to pay and perform its obligations to the Agent and the Lenders.
Neither Agent nor any Lender has any duty to disclose to Guarantor any
information which such party may have or receive about Borrower's financial
condition, business operations, or any other circumstances bearing on its
ability to perform.
9. Subordination. Any rights of Guarantor, whether now
existing or later arising, to receive payment on account of any indebtedness
(including interest) owed to it by Borrower or any Subsidiary thereof or to
receive any payment from Borrower or any such Subsidiary other than those
payments or distributions permitted under Sections 7.9(b) and 7.10 of the
Credit Agreement shall at all times be subordinate as to lien and time of
payment and in all other respects to the full and prior repayment of the
Indebtedness. Guarantor shall not be entitled to enforce or receive payment of
any sums hereby subordinated until the Indebtedness has been paid and performed
in full and any such sums received in violation of this Guaranty shall be
received by Guarantor in trust for the Agent and the Lenders.
10. Financial Information. Guarantor shall keep true and
correct financial books and records, using generally accepted accounting
principles consistently applied, or such other accounting principles as the
Requisite Lenders in their reasonable judgment may find acceptable from time to
time. Guarantor represents, warrants and covenants to Agent and the Lenders
that all financial information with respect to the Guarantor delivered or to be
delivered to Agent and the Lenders by the Borrower with respect to Guarantor
under Section 6.1 of the Credit Agreement is or shall be true and correct and
fairly presents or will fairly present the financial position of the Guarantor
for the applicable period. Guarantor shall promptly provide Agent and the
Lenders with any additional audited financial information that Guarantor may
obtain, and such other information concerning its affairs and properties as
Agent or any Lender may reasonably request, including, without limitation,
signed copies of any tax returns if requested by Agent or the Lenders.
11. Guarantor's Representations and Warranties. Guarantor
represents and warrants that:
(a) All financial statements delivered to Agent or the
Lenders were or will be prepared in accordance with generally accepted
accounting principles, or such other accounting principles as may be acceptable
to the Requisite Lenders at the time of their preparation, consistently
applied;
6
<PAGE> 7
(b) There has been no material adverse change in
Guarantor's financial condition since the dates of the statements most recently
furnished to Agent and the Lenders; and
(c) All representations and warranties given on behalf
of or with respect to Guarantor contained in Article V of the Credit Agreement
and in any other Loan Document or certification made in connection with the
Credit Agreement are true and correct.
12. Covenants of Guarantor. Guarantor covenants and agrees
that it shall comply with and perform all covenants given on behalf of or with
respect to Guarantor (whether expressly or as a Subsidiary) contained in
Articles VI and VII of the Credit Agreement and in all other Loan Documents.
13. Intentionally Omitted.
14. Reference and Arbitration.
(a) Mandatory Arbitration. Any controversy or claim
between or among the parties, including those arising out of or relating to
this Guaranty or the Loan Documents and any claim based on or arising from an
alleged tort, shall at the request of any party be determined by arbitration.
The arbitration shall be conducted in Los Angeles, California, in accordance
with the United States Arbitration Act (Title 9, U.S. Code), notwithstanding
any choice of law provision in this Guaranty, and under the Commercial Rules of
the American Arbitration Association (the "AAA"). The arbitrator(s) shall give
effect to statutes of limitation in determining any claim. Any controversy
concerning whether an issue is arbitrable shall be determined by the
arbitrator(s). Judgment upon the arbitration award may be entered in any court
having jurisdiction. The institution and maintenance of an action for judicial
relief or pursuit of a provisional or ancillary remedy shall not constitute a
waiver of the right of any party, including the plaintiff, to submit the
controversy or claim to arbitration if any other party contests such action for
judicial relief.
(b) Provisional Remedies, Self-Help and Foreclosure.
No provision of this Section 14 shall limit the right of any party to exercise
self-help remedies such as setoff, foreclosure against or sale of any real or
personal property collateral or security, or to obtain provisional or ancillary
remedies from a court of competent jurisdiction before, after, or during the
pendency of any arbitration.
15. Authorization; No Violation. Guarantor is authorized to
execute, deliver and perform under this Guaranty, which is a valid, binding,
and enforceable obligation of Guarantor in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws affecting creditor's rights generally. The
execution, delivery and performance of this Guaranty are not in
7
<PAGE> 8
violation of any applicable law, regulation or ordinance, or any order or
ruling of any court or governmental agency applicable to the Guarantor. The
Guaranty does not conflict with, or constitute a breach or default under, any
agreement to which Guarantor is a party.
16. Additional and Independent Obligations. Guarantor's
obligations under this Guaranty are in addition to its obligations under any
future guaranties, each of which shall remain in full force and effect until it
is expressly modified or released in a writing signed by Agent and consented to
by the Lenders. Guarantor's obligations under this Guaranty are independent of
those of Borrower on the Indebtedness. Agent or the Lenders may bring a
separate action, or commence a separate arbitration proceeding against
Guarantor without first proceeding against Borrower, any other person or any
security that Agent or any Lender may hold, and without pursuing any other
remedy. None of Agent's or any Lender's rights under this Guaranty shall be
exhausted by any action by Agent or any Lender until the Indebtedness has been
paid and performed in full in cash.
17. No Waiver; Consents; Cumulative Remedies. Each waiver by
Agent or the Lenders must be in writing, and no waiver shall be construed as a
continuing waiver. No waiver shall be implied from Agent's or any Lender's
delay in exercising or failure to exercise any right or remedy against
Borrower, Guarantor or any security. Consent by Agent or the Lenders to any
act or omission by Borrower or Guarantor shall not be construed as a consent to
any other or subsequent act or omission, or as a waiver of the requirement for
Agent's or the Lenders' consent to be obtained in any future or other instance.
All remedies of Agent and each Lender against Borrower and Guarantor are
cumulative.
18. No Release. Except as otherwise provided in Section 1,
Guarantor shall not be released, in whole or in part, from its obligations
under this Guaranty except by a writing signed by Agent and all the Lenders.
19. Heirs, Successors and Assigns; Participations. The terms
of this Guaranty shall bind and benefit the heirs, legal representatives,
successors and assigns of Agent, the Lenders and Guarantor; provided, however,
that Guarantor may not assign this Guaranty, or assign or delegate any of its
rights or obligations under this Guaranty, without the prior written consent of
Agent in each instance. Without notice to or the consent of Guarantor, Agent
and any Lender may disclose any and all information in its possession
concerning Guarantor, this Guaranty and any security for this Guaranty to any
actual or prospective purchaser of any securities issued or to be issued by
Agent or such Lender, and to any actual or prospective purchaser or assignee of
any participation or other interest in the Indebtedness and this Guaranty.
8
<PAGE> 9
20. Notices.
(a) Delivery. All notices, requests and other communications
provided for hereunder shall be in writing (including, unless the context
expressly otherwise provides, telegraphic, telex, facsimile transmission or
cable communication) and mailed, telegraphed, telexed or delivered to its
address specified on the signature pages hereof, or to such other address as
shall be designated by such party in a written notice to the other party.
(b) Receipt. All such notices and communications shall, when
transmitted by overnight delivery, telegraphed, telecopied by facsimile,
telexed or cabled, be effective when delivered for overnight delivery or to the
telegraph company, transmitted by telecopier, confirmed by telex answerback or
delivered to the cable company, respectively, or if delivered, upon delivery.
(c) Reliance. Agent and each Lender shall be entitled to rely
on the authority of any person purporting to be a person authorized by
Guarantor to give such notice, and neither Agent nor any Lender shall have any
liability to Guarantor or any other person on account of any action taken or
not taken by Agent or such Lender in reliance upon such telephonic or facsimile
notice. The obligation of Guarantor hereunder shall not be affected in any way
or to any extent by any failure by Lender to receive written confirmation of
any telephonic or facsimile notice or the receipt by Agent or a Lender of a
confirmation which is at variance with the terms understood by Agent or such
Lender to be contained in the telephonic or facsimile notice.
21. Rules of Construction. In this Guaranty, the word
"Borrower" includes both the named Borrower and any other person who at any
time assumes or otherwise becomes primarily liable for all or any part of the
obligations of the named Borrower on the Indebtedness. The word "person"
includes any individual, company, trust or other legal entity of any kind. If
this Guaranty is executed by more than one person, the word "Guarantor"
includes all such persons. The word "include(s)" means "include(s), without
limitation," and the word "including" means "including, but not limited to."
When the context and construction so require, all words used in the singular
shall be deemed to have been used in the plural and vice versa. No listing of
specific instances, items or matters in any way limits the scope or generality
of any language of this Guaranty. All headings appearing in this Guaranty are
for convenience only and shall be disregarded in construing this Guaranty.
22. Governing Law. This Guaranty shall be governed by, and
construed in accordance with, the laws of the State of Colorado, without regard
to its choice of law rules.
9
<PAGE> 10
23. Costs and Expenses. If any lawsuit or arbitration is
commenced which arises out of, or which relates to this Guaranty, the Loan
Documents or the Indebtedness, the prevailing party shall be entitled to
recover from each other party such sums as the court or arbitrator may adjudge
to be reasonable attorneys' fees (including allocated costs for services of
in-house counsel) in the action or proceeding, in addition to costs and
expenses otherwise allowed by law. In all other situations, including any
Insolvency Proceeding, Guarantor agrees to pay all of the Agent's and each
Lender's costs and expenses, including attorneys' fees (including allocated
costs for services of the Agent's and each Lender's in-house counsel) which may
be incurred in any effort to collect or enforce the Indebtedness or any part of
it or any term of this Guaranty. Without limiting any rights of the Agent or
Lenders under the Credit Agreement, all amounts of any kind due and payable
under this Guaranty (whether for principal, interest, and other costs under the
Indebtedness, or for costs, fees, and expenses for which the Guarantors are
directly responsible hereunder, or otherwise) shall accrue interest from the
time the Agent or the Lenders make demand therefor hereunder until paid in full
in cash to such Agent or the Lenders at the Base Rate, as defined in the Credit
Agreement, plus three (3%) percentage points, except to the extent that any
such amounts are then accruing interest under the Indebtedness, in which case
such Base Rate plus 3% interest rate shall not be applied if the effect would
be to compound the interest to which such obligations are subject to under the
Indebtedness.
24. Covenant. Each Guarantor hereby agrees that it will make
dividend payments on its outstanding preferred stock with its excess cash to
the extent such cash is not required by the Guarantor for its business,
consistent with prudent business practices and its cash requirements.
25. Integration; Modifications. This Guaranty (a) integrates
all the terms and conditions mentioned in or incidental to this Guaranty, (b)
supersedes all oral negotiations and prior writings with respect to its subject
matter, and (c) is intended by Guarantor, Agent and the Lenders as the final
expression of the agreement with respect to the terms and conditions set forth
in this Guaranty and as the complete and exclusive statement of the terms
agreed to by Guarantor, Agent and the Lenders. No representation,
understanding, promise or condition shall be enforceable against any party
hereto unless it is contained in this Guaranty. This Guaranty may not be
modified except in a writing signed by both Agent (with the consent of the
Requisite Lenders) and Guarantor. No course of prior dealing, usage of trade,
parol or extrinsic evidence of any nature shall be used to supplement, modify
or vary any of the terms hereof. As between Agent and the Lenders only,
nothing contained in this Guaranty shall alter the rights and obligations among
Agent and the Lenders set forth in the Credit Agreement.
10
<PAGE> 11
26. Miscellaneous. The illegality or unenforceability of one
or more provisions of this Guaranty shall not affect any other provision. Time
is of the essence in the performance of this Guaranty by Guarantor.
[Rest of Page Intentionally Left Blank]
11
<PAGE> 12
IN WITNESS WHEREOF, the undersigned has executed and delivered
this Guaranty as of the date on the first page.
Guarantor:
AMBASSADOR X, L.P.,
a Delaware limited partnership
By: Ambassador X, Inc.,
a Delaware corporation
By: /s/ PETER KOMPANIEZ
------------------------------
Name:
-------------------------
Its:
--------------------------
Address Where Notices to Guarantor are to be
Sent:
1873 South Bellaire Street
17th Floor
Denver, Colorado 90071
Address Where Notices to Agent are to
be Sent:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
555 South Flower Street, 6th Floor
Los Angeles, California 90071
Att'n: Manager - Unit #1357
Addresses Where Notices to the
Lenders
are to be sent:
Per the Credit Agreement
S-1
<PAGE> 1
EXHIBIT 10.5
PAYMENT GUARANTY
OF QUALIFIED REIT SUBSIDIARIES
This Payment Guaranty ("Guaranty") is made as of May 21, 1998, by Ambassador
Apartments Texas, Inc., a Delaware corporation, Ambassador I, Inc., a Delaware
corporation, Ambassador II, Inc., a Delaware corporation, Ambassador IV, Inc., a
Delaware corporation, Ambassador V, Inc., a Delaware corporation, Ambassador VI,
Inc., a Delaware corporation, Ambassador VII, Inc., a Delaware corporation,
Ambassador VIII, Inc., a Delaware corporation, Ambassador IX, Inc., a Delaware
corporation, Ambassador X, Inc., a Delaware corporation, Ambassador XI, Inc., a
Delaware corporation, Ambassador XII, Inc., a Delaware corporation, Ambassador
Florida Partners, Inc., a Delaware corporation, A.J. One, Inc., a Delaware
corporation, and A.J. Two, Inc., a Delaware corporation (each a "Guarantor") in
favor of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("BofA"), as the
agent for itself and the lenders ("Lenders") from time to time party to the
Credit Agreement (as hereinafter defined) (in such capacity, the "Agent").
Factual Background
The Lenders intend to make a $155,000,000 unsecured revolver to term credit
facility available to AIMCO Properties L.P., a Delaware limited partnership (the
"Borrower") in accordance with the Credit Agreement (the "Credit Agreement"),
dated as of January 26, 1998 (as amended by that certain First Amendment to
Credit Agreement dated as of May 8, 1998), amended as of the date herewith, by
and among Borrower, BofA (as Agent and as a Lender) and the other Lenders from
time to time party thereto. In connection with the Credit Agreement, the
Borrower has obtained this Guaranty from the Guarantor, and the Guarantor has
provided this Guaranty in return for Borrower's payment of a guarantee fee.
Capitalized terms used but not defined herein will have the meanings set forth
in the Credit Agreement. As used herein, the term "Facility" shall refer
individually to each of the credit facilities available to the Borrower under
the Credit Agreement.
Guaranty
1. Guaranty of Loan.
(a) Absolute Guaranty. Guarantor absolutely, unconditionally and
irrevocably guaranties to Agent and the Lenders the full payment of the
Indebtedness (as hereinafter defined), and unconditionally agrees to pay to
Agent and the Lenders the full amount of the Indebtedness. This is a guaranty of
payment, not of collection. If Borrower defaults in the payment when due of the
Indebtedness or any part of it, Guarantor will in lawful money of the United
States pay to Agent and the Lenders, on demand, all sums due and owing on the
Indebtedness, including all interest, charges, fees and other sums, costs and
expenses.
<PAGE> 2
(b) Guaranty Prohibition. If, in accordance with Section 6.13(c) of the
Credit Agreement, any Guarantor is prohibited from providing this Guaranty under
its existing financing arrangements, current as of even date herewith , such
Guarantor shall have no obligation under this Guaranty.
2. Loan. In this Guaranty, the term "Indebtedness" is broadly defined
to mean and include all primary, secondary, direct, indirect, fixed and
contingent obligations of Borrower to pay principal, interest, prepayment
charges, breakage costs, late charges, loan fees and any other fees, charges,
sums, costs and expenses that may be owing at any time under the Loan Documents
(as such term is defined in the Credit Agreement), and shall include, without
limitation, all liabilities and obligations of the Borrower with respect to
Letters of Credit issued under the Credit Agreement, as any or all of such
obligations may from time to time be modified, amended, extended or renewed. If
the amount outstanding under the Indebtedness is determined by a court of
competent jurisdiction or in any arbitration proceeding described in Section
10.17 of the Credit Agreement, that determination shall be conclusive and
binding on Guarantor, regardless of whether Guarantor was a party to the
proceeding in which the determination was made or not.
3. Rights of Agent and the Lenders. Guarantor authorizes Agent or any
Lender to perform any or all of the following acts at any time in its sole
discretion, all without notice to Guarantor and without affecting Guarantor's
obligations under this Guaranty:
(a) Agent or the Requisite Lenders may alter any terms of the
Indebtedness or any part of it, including renewing, compromising, extending or
accelerating, or otherwise changing the time for payment of, or increasing or
decreasing the rate of interest on, the Indebtedness or any part of it.
(b) Agent or any Lender may take and hold security for the
Indebtedness or this Guaranty, accept additional or substituted security for
either, and subordinate, exchange, enforce, waive, release, compromise, fail to
perfect and sell or otherwise dispose of any such security in accordance with
the terms of the Indebtedness.
(c) Agent or any Lender may direct the order and manner of any sale
of all or any part of any security now or later to be held for the Indebtedness
or this Guaranty, and Agent or any Lender may also bid at any such sale.
(d) Agent or any Lender may apply any payments or recoveries from
Borrower, Guarantor or any other source, and any proceeds of any security, to
Borrower's obligations under the Loan Documents in such manner, order and
priority as Agent or such Lender may elect, whether or not those obligations are
guarantied by this Guaranty or secured at the time of the application.
2
<PAGE> 3
(e) Agent or any Lender may release Borrower of its liability for
the Indebtedness or any part of it.
(f) Agent or any Lender may substitute, add or release any one or
more Guarantors, other guarantors or endorsers.
(g) In addition to the Indebtedness, Agent or any Lender may extend
other credit to Borrower, and may take and hold security for the credit so
extended, all without affecting Guarantor's liability under this Guaranty.
4. Guaranty to be Absolute. Guarantor expressly agrees that until the
Indebtedness is paid and performed in full and each and every term, covenant and
condition of this Guaranty is fully performed, Guarantor shall not be released
by or because of:
(a) Any act or event which might otherwise discharge, reduce, limit
or modify Guarantor's obligations under this Guaranty;
(b) Any waiver, extension, modification, forbearance, delay or other
act or omission of Agent or any Lender, or its failure to proceed promptly or
otherwise as against Borrower, Guarantor or any security;
(c) Any action, omission or circumstance that might increase the
likelihood that Guarantor may be called upon to perform under this Guaranty or
that might affect the rights or remedies of Guarantor as against Borrower;
(d) Any dealings occurring at any time between Borrower and Agent or
any Lender, whether relating to the Indebtedness or otherwise; or
(e) Any action of Agent or any Lender described in Section 3 above.
Guarantor hereby acknowledges that absent this Section 4, Guarantor might have a
defense to the enforcement of this Guaranty as a result of one or more of the
foregoing acts, omissions, agreement, waivers or matters. Guarantor hereby
expressly waives and surrenders any defense to its liability under this Guaranty
based upon any of the foregoing acts, omissions, agreements, waivers or matters.
It is the purpose and intent of this Guaranty that the obligations of Guarantor
under it shall be absolute and unconditional under any and all circumstances.
5. Guarantor's Waivers. Guarantor waives:
(a) All statutes of limitations as a defense to any action or
proceeding brought against Guarantor by Agent or any Lender, to the fullest
extent permitted by law;
3
<PAGE> 4
(b) Any right it may have to require Agent or any Lender to proceed
against Borrower, proceed against or exhaust any security held from Borrower, or
pursue any other remedy in Agent's or any Lender's power to pursue;
(c) Any defense based on any claim that Guarantor's obligations
exceed or are more burdensome than those of Borrower;
(d) Any defense based on: (i) any legal disability of Borrower, (ii)
any release, discharge, modification, impairment or limitation of the liability
of Borrower to Agent or any Lender from any cause, whether consented to by Agent
or any Lender or arising by operation of law or from any bankruptcy or other
voluntary or involuntary proceeding, in or out of court, for the adjustment of
debtorcreditor relationships ("Insolvency Proceeding"), and (iii) any rejection
or disaffirmance of the Indebtedness, or any part of it, or any security held
for it, in any such Insolvency Proceeding;
(e) Any defense based on any action taken or omitted by Agent or any
Lender in any Insolvency Proceeding involving Borrower, including any election
to have Agent's or that Lender's claim allowed as being secured, partially
secured or unsecured, any extension of credit by Lender to Borrower in any
Insolvency Proceeding, and the taking and holding by Agent or any Lender of any
security for any such extension of credit;
(f) All presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, notices of
acceptance of this Guaranty and of the existence, creation, or incurring of new
or additional indebtedness, and demands and notices of every kind except for any
demand or notice by Agent or any Lender to Guarantor expressly provided for in
Section 1;
(g) Any defense based on or arising out of any defense that Borrower
may have to the payment or performance of the Indebtedness or any part of it;
and
(h) Any defense based on or arising out of any action of Agent or
any Lender described in Sections 3 or 4 above.
6. Waivers of Subrogation and Other Rights.
(a) During the existence of an Event of Default by Borrower, Agent
or any Lender, without prior notice to or consent of Guarantor, may elect to:
(i) foreclose either judicially or nonjudicially against any real or personal
property security it may hold for the Indebtedness, (ii) accept a transfer of
any such security in lieu of foreclosure, (iii) compromise or adjust the
Indebtedness or any part of it or make any other accommodation with Borrower or
Guarantor, or (iv) exercise any other remedy against Borrower or any security.
No such action
<PAGE> 5
by Agent or any Lender shall release or limit the liability of Guarantor, who
shall remain liable under this Guaranty after the action, even if the effect of
the action is to deprive Guarantor of any subrogation rights, rights of
indemnity, or other rights to collect reimbursement from Borrower for any sums
paid to Agent or any Lender, whether contractual or arising by operation of law
or otherwise. Guarantor expressly agrees that under no circumstances shall it be
deemed to have any right, title, interest or claim in or to any real or personal
property to be held by Agent or any Lender or any third party after any
foreclosure or transfer in lieu of foreclosure of any security for the
Indebtedness.
(b) Regardless of whether Guarantor may have made any payments to
Lender, Guarantor hereby waives: (i) all rights of subrogation, all rights of
indemnity, and any other rights to collect reimbursement from Borrower for any
sums paid to Agent or any Lender, whether contractual or arising by operation of
law (including the United States Bankruptcy Code or any successor or similar
statute) or otherwise, (ii) all rights to enforce any remedy that Lender may
have against Borrower, and (iii) all rights to participate in any security now
or later to be held by Agent or any Lender for the Indebtedness, in each case
until the full and indefeasible payment and performance of all Indebtedness, and
all obligations of the Guarantors hereunder.
(c) Guarantor waives all rights and defenses arising out of an
election of remedies by the Agent or any Lender, even though that election of
remedies may affect Guarantor's rights of subrogation and reimbursement against
the Borrower by the operation of law or otherwise. In addition, Guarantor waives
all rights and defenses that Guarantor may have because the Borrower's
indebtedness is secured by real property. This means, among other things:
(1) Agent and the Lenders may collect from Guarantor without first
foreclosing on any real or personal property collateral pledged by the Borrower.
(2) If Agent forecloses on any real property collateral pledged by
the Borrower:
(A) The amount of the indebtedness may be reduced only by the
price for which that collateral is sold at the foreclosure sale, even if the
collateral is worth more than the sale price.
(B) Agent and the Lenders may collect from Guarantor even if
Agent or any Lender, by foreclosing on the real property collateral, has
destroyed or affected any right Guarantor may have to collect from the Borrower.
This is an unconditional and irrevocable waiver of any rights and
defenses Guarantor may have because the Borrower's indebtedness is secured by
real property.
5
<PAGE> 6
7. Revival and Reinstatement. If Agent or any Lender is required to
pay, return or restore to Borrower or any other person any amounts previously
paid on the Indebtedness because of any Insolvency Proceeding of Borrower, any
stop notice or any other reason, the obligations of Guarantor shall be
reinstated and revived and the rights of Agent and such Lender shall continue
with regard to such amounts, all as though they had never been paid.
<PAGE> 7
8. Information Regarding Owner. Before signing this Guaranty, Guarantor
investigated the financial condition and business operations of Borrower and
such other matters as Guarantor deemed appropriate to assure itself of
Borrower's ability to discharge its obligations under the Loan Documents.
Guarantor assumes full responsibility for that due diligence, as well as for
keeping informed of all matters that may affect Borrower's ability to pay and
perform its obligations to the Agent and the Lenders. Neither Agent nor any
Lender has any duty to disclose to Guarantor any information which such party
may have or receive about Borrower's financial condition, business operations,
or any other circumstances bearing on its ability to perform.
9. Subordination. Any rights of Guarantor, whether now existing or
later arising, to receive payment on account of any indebtedness (including
interest) owed to it by Borrower or any Subsidiary thereof or to receive any
payment from Borrower or any such Subsidiary other than those payments or
distributions permitted under Sections 7.9(b) and 7.10 of the Credit Agreement
shall at all times be subordinate as to lien and time of payment and in all
other respects to the full and prior repayment of the Indebtedness. Guarantor
shall not be entitled to enforce or receive payment of any sums hereby
subordinated until the Indebtedness has been paid and performed in full and any
such sums received in violation of this Guaranty shall be received by Guarantor
in trust for the Agent and the Lenders.
10. Financial Information. Guarantor shall keep true and correct
financial books and records, using generally accepted accounting principles
consistently applied, or such other accounting principles as the Requisite
Lenders in their reasonable judgment may find acceptable from time to time.
Guarantor represents, warrants and covenants to Agent and the Lenders that all
financial information with respect to the Guarantor delivered or to be delivered
to Agent and the Lenders by the Borrower with respect to Guarantor under Section
6.1 of the Credit Agreement is or shall be true and correct and fairly presents
or will fairly present the financial position of the Guarantor for the
applicable period. Guarantor shall promptly provide Agent and the Lenders with
any additional audited financial information that Guarantor may obtain, and such
other information concerning its affairs and properties as Agent or any Lender
may reasonably request, including, without limitation, signed copies of any tax
returns if reques ted by Agent or the Lenders.
11. Guarantor's Representations and Warranties. Guarantor represents
and warrants that:
(a) All financial statements delivered to Agent or the Lenders were
or will be prepared in accordance with generally accepted accounting principles,
or such other accounting principles as may be acceptable to the Requisite
Lenders at the time of their preparation, consistently applied;
(b) There has been no material adverse change in Guarantor's
financial condition since the dates of the statements most recently furnished to
Agent and the Lenders; and
7
<PAGE> 8
(c) All representations and warranties given on behalf of or with
respect to Guarantor contained in Article V of the Credit Agreement and in any
other Loan Document or certification made in connection with the Credit
Agreement are true and correct.
12. Covenants of Guarantor. Guarantor covenants and agrees that it
shall comply with and perform all covenants given on behalf of or with respect
to Guarantor (whether expressly or as a Subsidiary) contained in Articles VI and
VII of the Credit Agreement and in all other Loan Documents.
13. Intentionally Omitted.
14. Reference and Arbitration.
(a) Mandatory Arbitration. Any controversy or claim between or
among the parties, including those arising out of or relating to this Guaranty
or the Loan Documents and any claim based on or arising from an alleged tort,
shall at the request of any party be determined by arbitration. The arbitration
shall be conducted in Los Angeles, California, in accordance with the United
States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law
provision in this Guaranty, and under the Commercial Rules of the American
Arbitration Association (the "AAA"). The arbitrator(s) shall give effect to
statutes of limitation in determining any claim. Any controversy concerning
whether an issue is arbitrable shall be determined by the arbitrator(s).
Judgment upon the arbitration award may be entered in any court having
jurisdiction. The institution and maintenance of an action for judicial relief
or pursuit of a provisional or ancillary remedy shall not constitute a waiver of
the right of any party, inc luding the plaintiff, to submit the controversy or
claim to arbitration if any other party contests such action for judicial
relief.
(b) Provisional Remedies, SelfHelp and Foreclosure. No provision of
this Section 14 shall limit the right of any party to exercise selfhelp remedies
such as setoff, foreclosure against or sale of any real or personal property
collateral or security, or to obtain provisional or ancillary remedies from a
court of competent jurisdiction before, after, or during the pendency of any
arbitration.
15. Authorization; No Violation. Guarantor is authorized to execute,
deliver and perform under this Guaranty, which is a valid, binding, and
enforceable obligation of Guarantor in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws affecting creditor's rights generally. The
execution, delivery and performance of this Guaranty are not in violation of any
applicable law, regulation or ordinance, or any order or ruling of any court or
governmental agency applicable to the Guarantor. The Guaranty does not conflict
with, or constitute a breach or default under, any agreement to which Guarantor
is a party.
16. Additional and Independent Obligations. Guarantor's obligations
under this Guaranty are in addition to its obligations under any future
guaranties, each of which shall remain in full force and effect until it is
expressly modified or released in a writing signed by Agent and consented to by
the Lenders. Guarantor's obligations under this Guaranty are
8
<PAGE> 9
independent of those of Borrower on the Indebtedness. Agent or the Lenders may
bring a separate action, or commence a separate arbitration proceeding against
Guarantor without first proceeding against Borrower, any other person or any
security that Agent or any Lender may hold, and without pursuing any other
remedy. None of Agent's or any Lender's rights under this Guaranty shall be
exhausted by any action by Agent or any Lender until the Indebtedness has been
paid and performed in full in cash.
17. No Waiver; Consents; Cumulative Remedies. Each waiver by Agent or
the Lenders must be in writing, and no waiver shall be construed as a continuing
waiver. No waiver shall be implied from Agent's or any Lender's delay in
exercising or failure to exercise any right or remedy against Borrower,
Guarantor or any security. Consent by Agent or the Lenders to any act or
omission by Borrower or Guarantor shall not be construed as a consent to any
other or subsequent act or omission, or as a waiver of the requirement for
Agent's or the Lenders' consent to be obtained in any future or other instance.
All remedies of Agent and each Lender against Borrower and Guarantor are
cumulative.
18. No Release. Except as otherwise provided in Section 1, Guarantor
shall not be released, in whole or in part, from its obligations under this
Guaranty except by a writing signed by Agent and all the Lenders.
19. Heirs, Successors and Assigns; Participations. The terms of this
Guaranty shall bind and benefit the heirs, legal representatives, successors and
assigns of Agent, the Lenders and Guarantor; provided, however, that Guarantor
may not assign this Guaranty, or assign or delegate any of its rights or
obligations under this Guaranty, without the prior written consent of Agent in
each instance. Without notice to or the consent of Guarantor, Agent and any
Lender may disclose any and all information in its possession concerning
Guarantor, this Guaranty and any security for this Guaranty to any actual or
prospective purchaser of any securities issued or to be issued by Agent or such
Lender, and to any actual or prospective purchaser or assignee of any
participation or other interest in the Indebtedness and this Guaranty.
9
<PAGE> 10
20. Notices.
(a) Delivery. All notices, requests and other communications provided
for hereunder shall be in writing (including, unless the context expressly
otherwise provides, telegraphic, telex, facsimile transmission or cable
communication) and mailed, telegraphed, telexed or delivered to its address
specified on the signature pages hereof, or to such other address as shall be
designated by such party in a written notice to the other party.
(b) Receipt. All such notices and communications shall, when
transmitted by overnight delivery, telegraphed, telecopied by facsimile, telexed
or cabled, be effective when delivered for overnight delivery or to the
telegraph company, transmitted by telecopier, confirmed by telex answerback or
delivered to the cable company, respectively, or if delivered, upon delivery.
(c) Reliance. Agent and each Lender shall be entitled to rely on the
authority of any person purporting to be a person authorized by Guarantor to
give such notice, and neither Agent nor any Lender shall have any liability to
Guarantor or any other person on account of any action taken or not taken by
Agent or such Lender in reliance upon such telephonic or facsimile notice. The
obligation of Guarantor hereunder shall not be affected in any way or to any
extent by any failure by Lender to receive written confirmation of any
telephonic or facsimile notice or the receipt by Agent or a Lender of a
confirmation which is at variance with the terms understood by Agent or such
Lender to be contained in the telephonic or facsimile notice.
21. Rules of Construction. In this Guaranty, the word "Borrower"
includes both the named Borrower and any other person who at any time assumes or
otherwise becomes primarily liable for all or any part of the obligations of the
named Borrower on the Indebtedness. The word "person" includes any individual,
company, trust or other legal entity of any kind. If this Guaranty is executed
by more than one person, the word "Guarantor" includes all such persons. The
word "include(s)" means "include(s), without limitation," and the word
"including" means "including, but not limited to." When the context and
construction so require, all words used in the singular shall be deemed to have
been used in the plural and vice versa. No listing of specific instances, items
or matters in any way limits the scope or generality of any language of this
Guaranty. All headings appearing in this Guaranty are for convenience only and
shall be disregarded in construing this Guaranty.
22. Governing Law. This Guaranty shall be governed by, and construed in
accordance with, the laws of the State of Colorado, without regard to its choice
of law rules.
10
<PAGE> 11
23. Costs and Expenses. If any lawsuit or arbitration is commenced
which arises out of, or which relates to this Guaranty, the Loan Documents or
the Indebtedness, the prevailing party shall be entitled to recover from each
other party such sums as the court or arbitrator may adjudge to be reasonable
attorneys' fees (including allocated costs for services of inhouse counsel) in
the action or proceeding, in addition to costs and expenses otherwise allowed by
law. In all other situations, including any Insolvency Proceeding, Guarantor
agrees to pay all of the Agent's and each Lender's costs and expenses, including
attorneys' fees (including allocated costs for services of the Agent's and each
Lender's inhouse counsel) which may be incurred in any effort to collect or
enforce the Indebtedness or any part of it or any term of this Guaranty. Without
limiting any rights of the Agent or Lenders under the Credit Agreement, all
amounts of any kind due and payable under this Guaranty (whether for principal,
intere st, and other costs under the Indebtedness, or for costs, fees, and
expenses for which the Guarantors are directly responsible hereunder, or
otherwise) shall accrue interest from the time the Agent or the Lenders make
demand therefor hereunder until paid in full in cash to such Agent or the
Lenders at the Base Rate, as defined in the Credit Agreement, plus three (3%)
percentage points, except to the extent that any such amounts are then accruing
interest under the Indebtedness, in which case such Base Rate plus 3% interest
rate shall not be applied if the effect would be to compound the interest to
which such obligations are subject to under the Indebtedness.
24. Covenant. Each Guarantor hereby agrees that it will make dividend
payments on its outstanding preferred stock with its excess cash to the extent
such cash is not required by the Guarantor for its business, consistent with
prudent business practices and its cash requirements.
25. Integration; Modifications. This Guaranty (a) integrates all the
terms and conditions mentioned in or incidental to this Guaranty, (b) supersedes
all oral negotiations and prior writings with respect to its subject matter, and
(c) is intended by Guarantor, Agent and the Lenders as the final expression of
the agreement with respect to the terms and conditions set forth in this
Guaranty and as the complete and exclusive statement of the terms agreed to by
Guarantor, Agent and the Lenders. No representation, understanding, promise or
condition shall be enforceable against any party hereto unless it is contained
in this Guaranty. This Guaranty may not be modified except in a writing signed
by both Agent (with the consent of the Requisite Lenders) and Guarantor. No
course of prior dealing, usage of trade, parol or extrinsic evidence of any
nature shall be used to supplement, modify or vary any of the terms hereof. As
between Agent and the Lenders only, nothing contained in this Guaranty shall
alter the rights and obligations among Agent and the Lenders set forth in the
Credit Agreement.
11
<PAGE> 12
26. Miscellaneous. The illegality or unenforceability of one or more
provisions of this Guaranty shall not affect any other provision. Time is of the
essence in the performance of this Guaranty by Guarantor.
[Rest of Page Intentionally Left Blank]
12
<PAGE> 13
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Guaranty as of the date on the first page. Guarantor:
AMBASSADOR APARTMENTS TEXAS, INC.
a Delaware corporation
By: /s/ PATRICIA HEATH
-----------------------------------
Name: Patricia Heath
------------------------------
Title: Vice President and Treasurer
-----------------------------
AMBASSADOR I, INC.
a Delaware corporation
By: /s/ PATRICIA HEATH
-----------------------------------
Name: Patricia Heath
------------------------------
Title: Vice President and Treasurer
-----------------------------
AMBASSADOR II, INC.
a Delaware corporation
By: /s/ PATRICIA HEATH
-----------------------------------
Name: Patricia Heath
------------------------------
Title: Vice President and Treasurer
-----------------------------
AMBASSADOR IV, INC.
a Delaware corporation
By: /s/ PATRICIA HEATH
-----------------------------------
Name: Patricia Heath
------------------------------
Title: Vice President and Treasurer
-----------------------------
13
<PAGE> 14
AMBASSADOR V, INC.
a Delaware corporation
By: /s/ PATRICIA HEATH
-----------------------------------
Name: Patricia Heath
------------------------------
Title: Vice President and Treasurer
-----------------------------
AMBASSADOR VI, INC.
a Delaware corporation
By: /s/ PATRICIA HEATH
-----------------------------------
Name: Patricia Heath
------------------------------
Title: Vice President and Treasurer
-----------------------------
AMBASSADOR VII, INC.
a Delaware corporation
By: /s/ PATRICIA HEATH
-----------------------------------
Name: Patricia Heath
------------------------------
Title: Vice President and Treasurer
-----------------------------
AMBASSADOR VIII, INC..
a Delaware corporation
By: /s/ PATRICIA HEATH
-----------------------------------
Name: Patricia Heath
------------------------------
Title: Vice President and Treasurer
-----------------------------
AMBASSADOR IX, INC.
a Delaware corporation
By: /s/ PATRICIA HEATH
-----------------------------------
Name: Patricia Heath
------------------------------
Title: Vice President and Treasurer
-----------------------------
14
<PAGE> 15
AMBASSADOR X, INC.
a Delaware corporation
By: /s/ PATRICIA HEATH
-----------------------------------
Name: Patricia Heath
------------------------------
Title: Vice President and Treasurer
-----------------------------
AMBASSADOR XI, INC.
a Delaware corporation
By: /s/ PATRICIA HEATH
-----------------------------------
Name: Patricia Heath
------------------------------
Title: Vice President and Treasurer
-----------------------------
AMBASSADOR XII, INC.
a Delaware corporation
By: /s/ PATRICIA HEATH
-----------------------------------
Name: Patricia Heath
------------------------------
Title: Vice President and Treasurer
-----------------------------
AMBASSADOR FLORIDA PARTNERS, INC.
a Delaware corporation
By: /s/ PATRICIA HEATH
-----------------------------------
Name: Patricia Heath
------------------------------
Title: Vice President and Treasurer
-----------------------------
A.J. ONE, INC.
a Delaware corporation
By: /s/ PATRICIA HEATH
-----------------------------------
Name: Patricia Heath
------------------------------
Title: Vice President and Treasurer
-----------------------------
15
<PAGE> 16
A.J. TWO, INC.
a Delaware corporation
By: /s/ PATRICIA HEATH
-----------------------------------
Name: Patricia Heath
------------------------------
Title: Vice President and Treasurer
-----------------------------
Address Where Notices to Guarantor are to be Sent:
1873 South Bellaire Street
17th Floor
Denver, Colorado 90071
Address Where Notices to Agent are to be Sent:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
555 South Flower Street, 6th Floor
Los Angeles, California 90071
Att'n: Manager Unit #1357
Addresses Where Notices to the Lenders
are to be sent:
Per the Credit Agreement
16
<PAGE> 1
EXHIBIT 10.6
FIFTH AMENDMENT TO THE SECOND
AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF AIMCO PROPERTIES, L.P.
This FIFTH AMENDMENT TO THE SECOND AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF AIMCO PROPERTIES, L.P., dated as of July 15, 1998 (this
"Amendment"), is being executed by AIMCO-GP, Inc., a Delaware corporation (the
"General Partner"), as the general partner of AIMCO Properties, L.P., a
Delaware limited partnership (the "Partnership"), pursuant to the authority
conferred on the General Partner by Section 7.3.C(7) of the Second Amended and
Restated Agreement of Limited Partnership of AIMCO Properties, L.P., dated as
of July 29, 1994 (the "Agreement"). Capitalized terms used, but not otherwise
defined herein, shall have the respective meanings ascribed thereto in the
Agreement.
WHEREAS, on July 15, 1998, the Previous General Partner issued 3,600,000
shares of its Class G Cumulative Convertible Preferred Stock, par value $.01
per share (the "Class G Preferred Stock"), and in accordance with Section 4.3.E
of the Agreement, contributed the cash proceeds from such issuance to the
Special Limited Partner, which contributed such cash proceeds to the
Partnership in exchange for 3,600,000 Partnership Preferred Units with
designations, preferences and other rights, terms and provisions that are
substantially the same as the designations, preferences and other rights, terms
and provisions of the Class G Preferred Stock;
WHEREAS, pursuant to Section 4.2.A of the Agreement, the General Partner
is authorized to determine the designations, preferences and relative,
participating, optional or other special rights, powers and duties of such
Partnership Preferred Units.
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. The Agreement is hereby amended by the addition of a new exhibit,
entitled "Exhibit J," in the form attached hereto, which shall be attached to
and made a part of the Agreement.
2. Except as specifically amended hereby, the terms, covenants,
provisions and conditions of the Agreement shall remain unmodified and continue
in full force and effect and, except as amended hereby, all of the terms,
covenants, provisions and conditions of the Agreement are hereby ratified and
confirmed in all respects.
<PAGE> 2
IN WITNESS WHEREOF, this Amendment has been executed as of the date
first written above.
GENERAL PARTNER:
AIMCO-GP, INC.
By: /s/ PETER KOMPANIEZ
----------------------------------------
Name: Peter Kompaniez
Title: President and Vice Chairman
<PAGE> 3
EXHIBIT J
PARTNERSHIP UNIT DESIGNATION OF THE
CLASS G PARTNERSHIP PREFERRED UNITS
OF AIMCO PROPERTIES, L.P.
1. NUMBER OF UNITS AND DESIGNATION.
A class of Partnership Preferred Units is hereby designated as "Class G
Partnership Preferred Units," and the number of Partnership Preferred Units
constituting such class shall be Four Million Fifty Thousand (4,050,000).
2. DEFINITIONS.
For purposes of the Class G Partnership Preferred Units, the following
terms shall have the meanings indicated in this Section 2. Capitalized terms
used and not otherwise defined herein shall have the meanings assigned thereto
in the Agreement.
"Agreement" shall mean the Second Amended and Restated Agreement of
Limited Partnership of the Partnership, as amended.
"Call Date" shall have the meaning set forth in paragraph (a) of Section
5 of this Article.
"Class G Partnership Preferred Unit" means a Partnership Preferred Unit
with the designations, preferences and relative, participating, optional
or other special rights, powers and duties as are set forth in this
Exhibit J. It is the intention of the General Partner that each Class G
Partnership Preferred Unit shall be substantially the economic
equivalent of one share of Class G Preferred Stock.
"Class G Preferred Stock" means the Class G Cumulative Preferred Stock,
par value $0.01 per share, of the Previous General Partner.
"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.
J-1
<PAGE> 4
"Common Stock" shall mean the Class A Common Stock, $.01 par value per
share, of the Previous General Partner or such shares of the Previous
General Partner's capital stock into which outstanding shares of Common
Stock shall be reclassified.
"Distribution Payment Date" shall mean any date on which cash dividends
are paid on the Class G Preferred Stock.
"Junior Partnership Units" shall have the meaning set forth in paragraph
(c) of Section 7 of this Article.
"Parity Partnership Units" shall have the meaning set forth in paragraph
(b) of Section 7 of this Article.
"Partnership" shall mean AIMCO Properties, L.P., a Delaware limited
partnership.
"Senior Partnership Units" shall have the meaning set forth in paragraph
(a) of Section 7 of this Article.
3. DISTRIBUTIONS.
On every Distribution Payment Date, the holders of Class G
Partnership Preferred Units shall be entitled to receive distributions payable
in cash in an amount per Class G Partnership Preferred Unit equal to the per
share dividend payable on the Class G Preferred Stock on such Distribution
Payment Date. Each such distribution shall be payable to the holders of record
of the Class G Partnership Preferred Units, as they appear on the records of
the Partnership at the close of business on the record date for the dividend
payable with respect to the Class G Preferred Stock on such Distribution
Payment Date. Holders of Class G Partnership Preferred Units shall not be
entitled to any distributions on the Class G Partnership Preferred Units,
whether payable in cash, property or stock, except as provided herein.
4. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up
of the Partnership, whether voluntary or involuntary, before any payment or
distribution of the Partnership (whether capital or surplus) shall be made to
or set apart for the holders of Junior Partnership Units, the holders of Class
G Partnership Preferred Units shall be entitled to receive Twenty Five Dollars
($25) per Class G Partnership Preferred Unit (the "Liquidation Preference"),
plus an amount equal to all dividends (whether or not
J-2
<PAGE> 5
earned) accumulated, accrued and unpaid on each share of Class G Preferred
Stock 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 G
Partnership Preferred Units have been paid the Liquidation Preference in full,
plus an amount equal to all dividends (whether or not earned) accumulated,
accrued and unpaid on the Class G Preferred Stock to the date of final
distribution to such holders, no payment will be made to any holder of Junior
Partnership Units upon the liquidation, dissolution or winding up of the
Partnership. If, upon any liquidation, dissolution or winding up of the
Partnership, the assets of the Partnership, or proceeds thereof, distributable
among the holders of Class G Partnership Preferred Units shall be insufficient
to pay in full the preferential amount aforesaid and liquidating payments on
any Parity Partnership Units, then such assets, or the proceeds thereof, shall
be distributed among the holders of Class G Partnership Preferred Units and any
such Parity Partnership Units ratably in the same proportion as the respective
amounts that would be payable on such Class G Partnership Preferred Units and
any such other Parity Partnership Units if all amounts payable thereon were
paid in full. For the purposes of this Section 4, (i) a consolidation or
merger of the Partnership with one or more partnerships, or (ii) a sale or
transfer of all or substantially all of the Partnership's assets shall not be
deemed to be a liquidation, dissolution or winding up, voluntary or invol-
untary, of the Partnership.
(b) Upon any liquidation, dissolution or winding up of the
Partnership, after payment shall have been made in full to the holders of Class
G Partnership Preferred Units and any Parity Partnership Units, as provided in
this Section 4, any other series or class or classes of Junior Partnership
Units 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 G Partnership Preferred Units and any Parity Partnership Units shall not
be entitled to share therein.
5. REDEMPTION.
Class G Partnership Preferred Units shall be redeemable by the
Partnership as follows:
(a) At any time that the Previous General Partner exercises
its right to redeem all or any of the shares of Class G Preferred Stock, the
General Partner may cause the Partnership to redeem an equal number of Class G
Partnership Preferred Units, at a redemption price payable in cash equal to
100% of the Liquidation Preference thereof, plus an amount equal to all accrued
and unpaid dividends on each share of Class G Preferred Stock to the date fixed
for redemption (the "Call Date"), in the manner set forth herein.
J-3
<PAGE> 6
(b) If the Partnership shall redeem Class G Partnership
Preferred Units pursuant to paragraph (a) of this Section 5, from and after the
Call Date (unless the Partnership shall fail to make available the amount of
cash necessary to effect such redemption), (i) except for payment of the
redemption price, the Partnership shall not make any further distributions on
the Class G Partnership Preferred Units so called for redemption (except that,
in the case of a Call Date after a distribution record date and prior to the
related Distribution Payment Date, holders of Class G Partnership Preferred
Units on the distribution record date will be entitled on such Distribution
Payment Date to receive the distribution payable thereon), (ii) said units
shall no longer be deemed to be outstanding, and (iii) all rights of the
holders thereof as holders of Class G Partnership Preferred Units of the
Partnership shall cease (except the rights to receive the cash payable upon
such redemption, without interest thereon, and to receive any distributions
payable thereon). No interest shall accrue for the benefit of the holders of
Class G Partnership Preferred Units to be redeemed on any cash set aside by the
Partnership.
If fewer than all the outstanding Class G Partnership Preferred Units
are to be redeemed, units to be redeemed shall be selected by the Partnership
from outstanding Class G Partnership Preferred Units not previously called for
redemption by any method determined by the General Partner in its discretion.
Upon any such redemption, the General Partner shall amend Exhibit A to the
Agreement as appropriate to reflect such redemption.
6. STATUS OF REACQUIRED UNITS.
All Class G Partnership Preferred Units which shall have been issued and
reacquired in any manner by the Partnership shall be deemed cancelled.
7. RANKING.
Any class or series of Partnership Units of the Partnership shall be
deemed to rank:
(a) prior or senior to the Class G Partnership Preferred
Units, as to the payment of distributions and as to distributions of assets
upon liquidation, dissolution or winding up, if the holders of such class or
series shall be entitled to the receipt of distributions or of amounts
distributable upon liquidation, dissolution or winding up, as the case may be,
in preference or priority to the holders of Class G Partnership Preferred Units
("Senior Partnership Units");
J-4
<PAGE> 7
(b) on a parity with the Class G Partnership Preferred Units,
as to the payment of distributions and as to distribution of assets upon
liquidation, dissolution or winding up, whether or not the distribution rates,
distribution payment dates or redemption or liquidation prices per unit or
other denomination thereof be different from those of the Class G Partnership
Preferred Units if such Class or series of Partnership Units shall be Class B
Preferred Partnership Units or if the holders of such class or series of
Partnership Units and the Class G Partnership Preferred Units shall be entitled
to the receipt of distributions and of amounts distributable upon liquidation,
dissolution or winding up in proportion to their respective amounts of accrued
and unpaid distributions per unit or other denomination or liquidation
preferences, without preference or priority one over the other ("Parity
Partnership Units"); and
(c) junior to the Class G Partnership Preferred Units, as to
the payment of distributions or as to the distribution of assets upon
liquidation, dissolution or winding up, if such class or series of Partnership
Units shall be Partnership Common Units or if the holders of Class G Preferred
Partnership Units shall be entitled to receipt of distributions or of amounts
distributable upon liquidation, dissolution or winding up, as the case may be,
in preference or priority to the holders of such class or series of Partnership
Units ("Junior Partnership Units").
8. SPECIAL ALLOCATIONS.
(a) Gross income and, if necessary, gain shall be allocated to
the holders of Class G Partnership Preferred Units for any Fiscal Year (and, if
necessary, subsequent Fiscal Years) to the extent that the holders of Class G
Partnership Preferred Units receive a distribution on any Class G Partnership
Preferred Units (other than an amount included in any redemption pursuant to
Section 5 hereof) with respect to such Fiscal Year.
(b) If any Class G Partnership Preferred Units are redeemed
pursuant to Section 5 hereof, for the Fiscal Year that includes such redemption
(and, if necessary, for subsequent Fiscal Years) (a) gross income and gain (in
such relative proportions as the General Partner in its discretion shall
determine) shall be allocated to the holders of Class G Partnership Preferred
Units to the extent that the redemption amounts paid or payable with respect to
the Class G Partnership Preferred Units so redeemed exceeds the aggregate
Capital Contributions (net of liabilities assumed or taken subject to by the
Partnership) per Class G Partnership Preferred Unit allocable to the Class G
Partnership Preferred Units so redeemed and (b) deductions and losses (in such
relative proportions as the General Partner in its discretion shall determine)
shall be allocated to the holders of Class G
J-5
<PAGE> 8
Partnership Preferred Units to the extent that the aggregate Capital
Contributions (net of liabilities assumed or taken subject to by the
Partnership) per Class G Partnership Preferred Unit allocable to the Class G
Partnership Preferred Units so redeemed exceeds the redemption amount paid or
payable with respect to the Class G Partnership Preferred Units so redeemed.
9. RESTRICTIONS ON OWNERSHIP.
The Class G Partnership Preferred Units shall be owned and held solely
by the General Partner or the Special Limited Partner.
10. GENERAL.
(a) The ownership of Class G Partnership Preferred Units may
(but need not, in the sole and absolute discretion of the General Partner) be
evidenced by one or more certificates. The General Partner shall amend Exhibit
A to the Agreement from time to time to the extent necessary to reflect
accurately the issuance of, and subsequent conversion, redemption, or any other
event having an effect on the ownership of, Class G Partnership Preferred
Units.
(b) The rights of the General Partner and the Special Limited
Partner, in their capacity as holders of the Class G Partnership Preferred
Units, are in addition to and not in limitation of any other rights or
authority of the General Partner or the Special Limited Partner, respectively,
in any other capacity under the Agreement or applicable law. In addition,
nothing contained herein shall be deemed to limit or otherwise restrict the
authority of the General Partner or the Special Limited Partner under the
Agreement, other than in their capacity as holders of the Class G Partnership
Preferred Units.
J-6
<PAGE> 1
EXHIBIT 10.7
SIXTH AMENDMENT TO THE SECOND
AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF AIMCO PROPERTIES, L.P.
This SIXTH AMENDMENT TO THE SECOND AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF AIMCO PROPERTIES, L.P., dated as of August 14, 1998
(this "Amendment"), is being executed by AIMCO-GP, Inc., a Delaware corporation
(the "General Partner"), as the general partner of AIMCO Properties, L.P., a
Delaware limited partnership (the "Partner- ship"), pursuant to the authority
conferred on the General Partner by Section 7.3.C(7) of the Second Amended and
Restated Agreement of Limited Partnership of AIMCO Properties, L.P., dated as
of July 29, 1994 (the "Agreement"). Capitalized terms used, but not otherwise
defined herein, shall have the respective meanings ascribed thereto in the
Agreement.
WHEREAS, on August 13, 1998, the Previous General Partner filed
Articles Supplementary amending its Charter to reclassify 2,300,000 shares of
authorized but unissued shares of its Class A Common Stock, par value $.01 per
share, as shares of its Class H Cumulative Convertible Preferred Stock, par
value $.01 per share (the "Class H Preferred Stock");
WHEREAS, in accordance with Section 4.3.E of the Agreement, upon the
issuance of any such shares of Class H Preferred Stock, the Previous General
Partner will contribute the net cash proceeds from such issuance to the Special
Limited Partner, which will contribute such net cash proceeds to the
Partnership in exchange for a number of Partnership Preferred Units equal to
the number of shares of Class H Preferred Stock so issued, which Partnership
Preferred Units shall have designations, preferences and other rights, terms
and provisions that are substantially the same as the designations, preferences
and other rights, terms and provisions of the Class H Preferred Stock; and
WHEREAS, pursuant to Section 4.2.A of the Agreement, the General
Partner is authorized to determine the designations, preferences and relative,
participating, optional or other special rights, powers and duties of such
Partnership Preferred Units.
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. The Agreement is hereby amended by the addition of a new
exhibit, entitled "Exhibit K," in the form attached hereto, which shall be
attached to and made a part of the Agreement.
<PAGE> 2
2. Except as specifically amended hereby, the terms, covenants,
provisions and conditions of the Agreement shall remain unmodified and continue
in full force and effect and, except as amended hereby, all of the terms, cove-
nants, provisions and conditions of the Agreement are hereby ratified and
confirmed in all respects.
2
<PAGE> 3
IN WITNESS WHEREOF, this Amendment has been executed as of the date
first written above.
GENERAL PARTNER:
AIMCO-GP, INC.
By: /s/ Peter Kompaniez
-----------------------------------
Name: Peter Kompaniez
Title: President and Vice Chairman
<PAGE> 4
EXHIBIT K
PARTNERSHIP UNIT DESIGNATION OF THE
CLASS H PARTNERSHIP PREFERRED UNITS
OF AIMCO PROPERTIES, L.P.
1. NUMBER OF UNITS AND DESIGNATION.
A class of Partnership Preferred Units is hereby designated as "Class
H Partnership Preferred Units," and the number of Partnership Preferred Units
constituting such class shall be Two Million Three Hundred Thousand
(2,300,000).
2. DEFINITIONS.
For purposes of the Class H Partnership Preferred Units, the following
terms shall have the meanings indicated in this Section 2, and capitalized
terms used and not otherwise defined herein shall have the meanings assigned
thereto in the Agreement:
"Agreement" shall mean the Second Amended and Restated Agreement of
Limited Partnership of the Partnership, dated as of July 29, 1994, as
amended.
"Call Date" shall have the meaning set forth in paragraph (a) of
Section 5 of this Exhibit K.
"Class H Partnership Preferred Unit" means a Partnership Preferred
Unit with the designations, preferences and relative, participating,
optional or other special rights, powers and duties as are set forth
in this Exhibit K. It is the intention of the General Partner that
each Class H Partnership Preferred Unit shall be substantially the
economic equivalent of one share of Class H Preferred Stock.
"Class H Preferred Stock" means the Class H Cumulative Preferred
Stock, par value $0.01 per share, of the Previous General Partner.
"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.
K-1
<PAGE> 5
"Distribution Payment Date" shall mean any date on which cash
dividends are paid on the Class H Preferred Stock.
"Junior Partnership Units" shall have the meaning set forth in
paragraph (c) of Section 7 of this Exhibit K.
"Parity Partnership Units" shall have the meaning set forth in
paragraph (b) of Section 7 of this Exhibit K.
"Partnership" shall mean AIMCO Properties, L.P., a Delaware limited
partnership.
"Senior Partnership Units" shall have the meaning set forth in
paragraph (a) of Section 7 of this Exhibit K.
3. DISTRIBUTIONS.
On every Distribution Payment Date, the holders of Class H
Partnership Preferred Units shall be entitled to receive distributions payable
in cash in an amount per Class H Partnership Preferred Unit equal to the per
share dividend payable on the Class H Preferred Stock on such Distribution
Payment Date. Each such distribution shall be payable to the holders of record
of the Class H Partnership Preferred Units, as they appear on the records of
the Partnership at the close of business on the record date for the dividend
payable with respect to the Class H Preferred Stock on such Distribution
Payment Date. Holders of Class H Partnership Preferred Units shall not be
entitled to any distributions on the Class H Partnership Preferred Units,
whether payable in cash, property or stock, except as provided herein.
4. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or
winding up of the Partnership, whether voluntary or involuntary, before any
payment or distribution of the Partnership (whether capital, surplus or
otherwise) shall be made to or set apart for the holders of Junior Partnership
Units, the holders of Class H Partnership Preferred Units shall be entitled to
receive Twenty Five Dollars ($25) per Class H Partnership Preferred Unit (the
"Liquidation Preference"), plus an amount per Class H Partnership Preferred
Unit equal to all dividends (whether or not declared or earned) accumulated,
accrued and unpaid on one share of Class H Preferred Stock 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 H Partnership Preferred Units
have been paid the Liquidation Preference in full, plus an amount equal to all
dividends (whether or not declared or earned)
K-2
<PAGE> 6
accumulated, accrued and unpaid on the Class H Preferred Stock to the date of
final distribution to such holders, no payment shall be made to any holder of
Junior Partnership Units upon the liquidation, dissolution or winding up of the
Partnership. If, upon any liquidation, dissolution or winding up of the
Partnership, the assets of the Partnership, or proceeds thereof, distributable
among the holders of Class H Partnership Preferred Units shall be insufficient
to pay in full the preferential amount aforesaid and liquidating payments on
any Parity Partnership Units, then such assets, or the proceeds thereof, shall
be distributed among the holders of Class H Partnership Preferred Units and any
such Parity Partnership Units ratably in the same proportion as the respective
amounts that would be payable on such Class H Partnership Preferred Units and
any such other Parity Partnership Units if all amounts payable thereon were
paid in full. For the purposes of this Section 4, (i) a consolidation or
merger of the Partnership with one or more partnerships, or (ii) a sale or
transfer of all or substantially all of the Partnership's assets shall not be
deemed to be a liquidation, dissolution or winding up, voluntary or
involuntary, of the Partnership.
(b) Upon any liquidation, dissolution or winding up of
the Partnership, after payment shall have been made in full to the holders of
Class H Partnership Preferred Units and any Parity Partnership Units, as
provided in this Section 4, any other series or class or classes of Junior
Partnership Units 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 H Partnership Preferred Units and any Parity Partnership
Units shall not be entitled to share therein.
5. REDEMPTION.
Class H Partnership Preferred Units shall be redeemable by the
Partnership as follows:
(a) At any time that the Previous General Partner
exercises its right to redeem all or any of the shares of Class H Preferred
Stock, the General Partner may cause the Partnership to redeem an equal number
of Class H Partnership Preferred Units, at a redemption price per Class H
Partnership Preferred Unit payable in cash equal to 100% of the Liquidation
Preference per share of Class H Preferred Stock, plus an amount equal to all
accumulated, accrued and unpaid dividends on one share of Class H Preferred
Stock to the date fixed for redemption (the "Call Date"), in the manner set
forth herein; provided, however, that in the event of a redemption of Class H
Partnership Preferred Units, if the Call Date occurs after a dividend record
date for the Class H Preferred Stock and on or prior to the related
Distribution Payment Date, the distribution payable on such Distribution
Payment Date in respect of such Class H Partnership Preferred Units called for
redemption shall be payable on such Distribution Payment
K-3
<PAGE> 7
Date to the holders of record of such Class H Partnership Preferred Units on
the applicable dividend record date, and shall not be payable as part of the
redemption price for such Class H Partnership Preferred Units.
(b) If the Partnership shall redeem Class H Partnership
Preferred Units pursuant to paragraph (a) of this Section 5, from and after the
Call Date (unless the Partnership shall fail to make available the amount of
cash necessary to effect such redemption), (i) except for payment of the
redemption price, the Partnership shall not make any further distributions on
the Class H Partnership Preferred Units so called for redemption, (ii) said
units shall no longer be deemed to be outstanding, and (iii) all rights of the
holders thereof as holders of Class H Partnership Preferred Units of the
Partnership shall cease except the rights to receive the cash payable upon such
redemption, without interest thereon; provided, however, that if a Call Date
occurs after a dividend record date for the Class H Preferred Stock and on or
prior to the related Distribution Payment Date, the full distribution payable
on such Distribution Payment Date in respect of such Class H Partnership
Preferred Units called for redemption shall be payable on such Distribution
Payment Date to the holders of record of such Class H Partnership Preferred
Units on the applicable dividend record date notwithstanding the prior
redemption of such Class H Partnership Preferred Units. No interest shall
accrue for the benefit of the holders of Class H Partnership Preferred Units to
be redeemed on any cash set aside by the Partnership.
If fewer than all the outstanding Class H Partnership Preferred Units
are to be redeemed, units to be redeemed shall be selected by the Partnership
from outstanding Class H Partnership Preferred Units not previously called for
redemption by any method determined by the General Partner in its discretion.
Upon any such redemption, the General Partner shall amend Exhibit A to the
Agreement as appropriate to reflect such redemption.
6. STATUS OF REACQUIRED UNITS.
All Class H Partnership Preferred Units which shall have been issued
and reacquired in any manner by the Partnership shall be deemed cancelled.
7. RANKING.
Any class or series of Partnership Units of the Partnership shall be
deemed to rank:
(a) prior or senior to the Class H Partnership Preferred
Units, as to the payment of distributions and as to distributions of assets
upon liquidation,
K-4
<PAGE> 8
dissolution or winding up, if the holders of such class or series shall be
entitled to the receipt of distributions and of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in preference or
priority to the holders of Class H Partnership Preferred Units ("Senior
Partnership Units");
(b) on a parity with the Class H Partnership Preferred
Units, as to the payment of distributions and as to distribution of assets upon
liquidation, dissolution or winding up, whether or not the distribution rates,
distribution payment dates or redemption or liquidation prices per unit or
other denomination thereof be different from those of the Class H Partnership
Preferred Units if (i) such class or series of Partnership Units shall be Class
B Partnership Preferred Units, Class C Partnership Preferred Units, Class D
Partnership Preferred Units or Class G Partnership Preferred Units or (ii) the
holders of such class or series of Partnership Units and the Class H
Partnership Preferred Units shall be entitled to the receipt of distributions
and of amounts distributable upon liquidation, dissolution or winding up in
proportion to their respective amounts of accrued and unpaid distributions per
unit or other denomination or liquidation preferences, without preference or
priority one over the other (the Partnership Units referred to in clauses (i)
and (ii) of this paragraph being hereinafter referred to, collectively, as
"Parity Partnership Units"); and
(c) junior to the Class H Partnership Preferred Units, as
to the payment of distributions and as to the distribution of assets upon
liquidation, dissolution or winding up, if (i) such class or series of
Partnership Units shall be Partnership Common Units or Class I High Performance
Partnership Units or (ii) the holders of Class H Partnership Preferred Units
shall be entitled to receipt of distributions or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in preference or
priority to the holders of such class or series of Partnership Units (the
Partnership Units referred to in clauses (i) and (ii) of this paragraph being
hereinafter referred to, collectively, as "Junior Partnership Units").
8. SPECIAL ALLOCATIONS.
(a) Gross income and, if necessary, gain shall be
allocated to the holders of Class H Partnership Preferred Units for any Fiscal
Year (and, if necessary, subsequent Fiscal Years) to the extent that the
holders of Class H Partnership Preferred Units receive a distribution on any
Class H Partnership Preferred Units (other than an amount included in any
redemption pursuant to Section 5 hereof) with respect to such Fiscal Year.
(b) If any Class H Partnership Preferred Units are
redeemed pursuant to Section 5 hereof, for the Fiscal Year that includes such
redemption (and, if necessary,
K-5
<PAGE> 9
for subsequent Fiscal Years) (a) gross income and gain (in such relative
proportions as the General Partner in its discretion shall determine) shall be
allocated to the holders of Class H Partnership Preferred Units to the extent
that the redemption amounts paid or payable with respect to the Class H
Partnership Preferred Units so redeemed exceeds the aggregate Capital
Contributions (net of liabilities assumed or taken subject to by the
Partnership) per Class H Partnership Preferred Unit allocable to the Class H
Partnership Preferred Units so redeemed and (b) deductions and losses (in such
relative proportions as the General Partner in its discretion shall determine)
shall be allocated to the holders of Class H Partnership Preferred Units to the
extent that the aggregate Capital Contributions (net of liabilities assumed or
taken subject to by the Partnership) per Class H Partnership Preferred Unit
allocable to the Class H Partnership Preferred Units so redeemed exceeds the
redemption amount paid or payable with respect to the Class H Partnership
Preferred Units so redeemed.
9. RESTRICTIONS ON OWNERSHIP.
The Class H Partnership Preferred Units shall be owned and held solely
by the General Partner or the Special Limited Partner.
10. GENERAL.
(a) The ownership of Class H Partnership Preferred Units
may (but need not, in the sole and absolute discretion of the General Partner)
be evidenced by one or more certificates. The General Partner shall amend
Exhibit A to the Agreement from time to time to the extent necessary to reflect
accurately the issuance of, and subsequent conversion, redemption, or any other
event having an effect on the ownership of, Class H Partnership Preferred
Units.
(b) The rights of the General Partner and the Special
Limited Partner, in their capacity as holders of the Class H Partnership
Preferred Units, are in addition to and not in limitation of any other rights
or authority of the General Partner or the Special Limited Partner,
respectively, in any other capacity under the Agreement or applicable law. In
addition, nothing contained herein shall be deemed to limit or otherwise
restrict the authority of the General Partner or the Special Limited Partner
under the Agreement, other than in their capacity as holders of the Class H
Partnership Preferred Units.
K-6
<PAGE> 1
EXHIBIT 10.8
PAYMENT GUARANTY
THIS PAYMENT GUARANTY (this "GUARANTY") is made and entered
into as of this 8th day of May 1998, by AIMCO PROPERTIES, L.P., a Delaware
limited partnership (the "Guarantor"), for the benefit of FEDERAL NATIONAL
MORTGAGE ASSOCIATION, a corporation duly organized and existing under the
Federal National Mortgage Association Charter Act, 12 U.S.C. Section 1716 et.
seq. ("FANNIE MAE"), with reference to the following facts:
R E C I T A L S
A. Reference is made to the following agreements, and
the transactions described therein:
1. That certain Second Amended and Restated
Master Reimbursement Agreement (Pool- 1 Properties) dated as of
September 1, 1997 (the "AMBASSADOR POOL-1 MRA"), the Multifamily Notes,
Multifamily Deeds of Trust, Assignments of Rents and Security
Agreements, and Multifamily Mortgages, Assignments of Rents and
Security Agreements described therein, and the indentures and other
bond documents, servicing agreements, swap and other hedge agreements,
pledge agreements, security agreements, cash management agreements and
other collateral agreements executed in connection therewith (such
instruments, as the same have been or may be amended, supplemented, or
otherwise modified or amended and restated from time to time in
accordance with their respective terms, are referred to collectively
herein as the "AMBASSADOR POOL-1 TRANSACTION DOCUMENTS"), executed by
Ambassador VIII, L.P., a Delaware limited partnership ("AMBASSADOR
POOL-1 BORROWER");
2. That certain Master Reimbursement Agreement
(Pool-2 Properties) dated as of December 1, 1996 (the "AMBASSADOR
POOL-2 MRA"), the Multifamily Notes, Multifamily Deeds of Trust,
Assignments of Rents and Security Agreements, and Multifamily
Mortgages, Assignments of Rents and Security Agreements described
therein, and the indentures and other bond documents, servicing
agreements, swap and other hedge agreements, pledge agreements,
security agreements, cash management agreements and other collateral
agreements executed in connection therewith (such instruments, as the
same have been or may be amended, supplemented, or
<PAGE> 2
otherwise modified or amended and restated from time to time in
accordance with their respective terms, are referred to collectively
herein as the "AMBASSADOR POOL-2 TRANSACTION DOCUMENTS" and, together
with the Ambassador Pool-1 Transaction Documents, the "AMBASSADOR
DOCUMENTS"), executed by Ambassador I, L.P., an Illinois limited
partnership ("AMBASSADOR POOL-2 BORROWER");
3. Those certain Multifamily Notes, Multifamily
Deeds of Trust Assignments of Rents and Security Agreements, and
Multifamily Mortgages, Assignments of Rents and Security Agreements
relating to or encumbering the Properties (hereinafter defined)
described on Schedule 1 attached to this Guaranty and by this reference
incorporated herein, and the servicing agreements, swap and other hedge
agreements, pledge agreements, security agreements, cash management
agreements and other collateral agreements executed in connection
therewith (such instruments, as the same have been or may be amended,
supplemented, or otherwise modified or amended and restated from time
to time in accordance with their respective terms, are referred to
collectively herein as the "AIMCO POOL I TRANSACTION DOCUMENTS"),
executed by AIMCO/Brandywine, L.P., a Delaware limited partnership
("AIMCO POOL I BORROWER");
4. That certain Master Reimbursement Agreement
dated as of July 1, 1996 (the "AIMCO POOL II MRA"), and the Multifamily
Notes, Multifamily Deeds of Trust, Assignments of Rents and Security
Agreements, and Multifamily Mortgages, Assignments of Rents and
Security Agreements described therein, and the indentures and other
bond documents, servicing agreements, swap and other hedge agreements,
pledge agreements, security agreements, cash management agreements and
other collateral agreements executed in connection therewith (such
instruments, as the same have been or may be amended, supplemented, or
otherwise modified or amended and restated from time to time in
accordance with their respective terms, are referred to collectively
herein as the "AIMCO POOL II TRANSACTION DOCUMENTS"), executed by OTC
Apartments Limited Partnership, a Florida limited partnership ("AIMCO
POOL II BORROWER");
5. Those certain Multifamily Notes, Multifamily
Deeds of Trust, Assignments of Rents and Security Agreements, and
Multifamily Mortgages, Assignments of Rents and Security Agreements
relating to or encumbering the Properties described on Schedule 2
attached to this Guaranty
2
<PAGE> 3
and by this reference incorporated herein, and the servicing
agreements, swap and other hedge agreements, pledge agreements,
security agreements, cash management agreements and other collateral
agreements executed in connection therewith (such instruments, as the
same have been or may be amended, supplemented, or otherwise modified
or amended and restated from time to time in accordance with their
respective terms, are referred to collectively herein as the "AIMCO
POOL III TRANSACTION DOCUMENTS"), executed by AIMCO Properties Finance
Partnership, L.P., a Delaware limited partnership ("AIMCO POOL III
BORROWER");
6. Those certain Multifamily Notes, Multifamily
Deeds of Trust, Assignments of Rents and Security Agreements, and
Multifamily Mortgages, Assignments of Rents and Security Agreements
relating to or encumbering the Properties described on Schedule 3
attached to this Guaranty and by this reference incorporated herein,
and the servicing agreements, swap and other hedge agreements, pledge
agreements, security agreements, cash management agreements and other
collateral agreements executed in connection therewith (such
instruments, as the same have been or may be amended, supplemented, or
otherwise modified or amended and restated from time to time in
accordance with their respective terms, are referred to collectively
herein as the "AIMCO POOL IV TRANSACTION DOCUMENTS"), executed by the
entities identified on Schedule 3 (collectively, "AIMCO POOL IV
BORROWERS"); and
7. That certain Master Credit Facility Agreement
dated as of February 4, 1998, and the Multifamily Notes, Multifamily
Deeds of Trust, Assignments of Rents and Security Agreements, and
Multifamily Mortgages, Assignments of Rents and Security Agreements
described therein, and the servicing agreements, swap and other hedge
agreements, pledge agreements, security agreements, cash management
agreements and other collateral agreements executed in connection
therewith (such instruments, as the same have been or may be amended,
supplemented, or otherwise modified or amended and restated from time
to time in accordance with their respective terms, are referred to
collectively herein as the "AIMCO CREDIT FACILITY TRANSACTION
DOCUMENTS"), executed by, among other entities, AIMCO/Bluffs, L.L.C., a
Delaware limited liability company, AIMCO Chesapeake, L.P., a Delaware
limited partnership, AIMCO Elm Creek, L.P., a Delaware limited
partnership, AIMCO Lakehaven, L.P., a Delaware limited
3
<PAGE> 4
partnership, and AIMCO Los Arboles, L.P., a Delaware limited
partnership (such entities collectively, "AIMCO CREDIT FACILITY
PARTIES").
B. Pursuant to that certain Agreement and Plan of Merger
dated as of December 23, 1997 (as the same has been or may be amended,
supplemented, or otherwise modified or amended and restated from time to time),
by and between Apartment Investment and Management Company, a Maryland
corporation ("AIMCO REIT"), and Ambassador Apartments, Inc., a Maryland
corporation ("AMBASSADOR"), AIMCO REIT and Ambassador intend to consummate a
transaction in which (i) Ambassador would merge with and into AIMCO REIT (with
AIMCO REIT being the surviving corporation), and (ii) Guarantor (which is the
operating partnership of AIMCO REIT) and Ambassador Apartments, L. P., a
Delaware limited partnership ("AMBASSADOR OP") (which is the operating
partnership of Ambassador), will effect a business combination in which, through
one or more steps, Guarantor will become a 98.9% limited partner and the 1 %
general partner in Ambassador OP, and AIMCO Holdings, L.P., a Delaware
corporation ("HOLDINGS"), will be a .1% limited partner in Ambassador OP
(collectively, the "PROPOSED MERGER"). As required by the provisions of the
Ambassador Documents, AIMCO REIT, Guarantor, Ambassador, Ambassador OP and
Borrowers (defined below) have requested Fannie Mae's consent to the Proposed
Merger. After reviewing the information regarding the Proposed Merger provided
by AIMCO REIT, Guarantor, Ambassador, Ambassador OP and Borrowers, Fannie Mae
has notified AIMCO REIT, Guarantor, Ambassador, Ambassador OP and Borrowers that
it is willing to consent to the Proposed Merger only if Guarantor agrees to
guaranty the obligations of the Borrowers under the Transaction Documents
(hereinafter defined).
C. Guarantor has (or by virtue of the Proposed Merger will
have) an indirect ownership interest in, or is otherwise financially interested
in, each of Borrowers, and will receive a direct and material benefit from
Fannie Mae's consent to the Proposed Merger.
NOW THEREFORE, in order to induce Fannie Mae to consent to the
Proposed Merger and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Guarantor hereby agrees as follows:
1. DEFINITIONS. As used in this Guaranty, the following terms
shall have the respective meanings set forth below:
4
<PAGE> 5
"AFFILIATE", as applied to any person or entity, means a
person or entity directly or indirectly controlling, controlled by or under
common control with the subject person or entity (and, for purposes of this
definition, "control", including the terms "controlling", "controlled by" and
"under common control with", as applied to any person or entity, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person or entity, whether
through the ownership of voting securities, partnership interests or by
contract or otherwise).
"AMBASSADOR POOL-3 MRA" means that certain Master
Reimbursement Agreement (Pool-3 Property) dated as of December 1, 1996 (as the
same has been or may be amended, supplemented or otherwise modified or amended
and restated from time to time in accordance with its terms), by and between
Williamsburg Limited Partnership, an Illinois limited partnership ("WLP"), and
Fannie Mae.
"BORROWER" means, individually, the Ambassador Pool-I
Borrower, the Ambassador Pool-2 Borrower, the AIMCO Pool I Borrower, the AIMCO
Pool II Borrower, the AIMCO Pool III Borrower, each of the AIMCO Pool IV
Borrowers, and each of the AIMCO Credit Facility Parties, and the term
"BORROWERS" means, collectively, all of such entities. Notwithstanding the
foregoing, the terms "Borrower" and "Borrowers" shall not include or be deemed
to refer to any of the foregoing entities from and after the date on which (i)
all of the Properties owned by any such entity have been released from the lien
of the Transaction Documents relating to those Properties in accordance with
the terms thereof, (ii) all of the Properties owned by any such entity have
been transferred to one or more third parties which are not Affiliates of such
Borrower, AIMCO or Guarantor, and such third party has assumed that Borrower's
obligations under the Transaction Documents relating to those Properties in
accordance with the terms thereof, or (iii) Fannie Mae has sold or assigned all
of its interest in the Transaction Documents applicable to such Borrower. "Debt
Service" means the scheduled principal, interest, trustee's fees, remarketing
fees, and all other amounts payable monthly by a Borrower under its respective
Transaction Documents.
"EXCESS CASH FLOW" means, at any time and from time to time
with respect to each Pool then owned by the Borrowers, an amount equal to Gross
Cash Flow for such Pool, less (i) Operating Expenses for such Pool payable by
the respective Borrower, (ii) Debt Service for such Pool payable by the
respective Borrower, and (iii) expenditures for such Pool made or to be made by
the respective
5
<PAGE> 6
Borrower in accordance with the Transaction Documents for items that would be
treated as capital expenses under GAAP consistently applied.
"GAAP" means generally accepted accounting principles in
effect in the United States from time to time.
"GRANTOR EXCESS CASH FLOW" has the meaning given such term
in the Pledge and LOC Agreement.
"GROSS CASH FLOW" means, for any period, with respect to
each Pool then owned by the Borrowers, all gross rents collected from or on
behalf of tenants at the Properties in such Pool (other than unforfeited tenant
security deposits), any other income, receipts or reserves (but only to the
extent such reserves were included as Operating Expenses at the time they were
set aside) derived from such Properties (including from the use or operation
thereof) without regard to its source, including tenant reimbursements for
utilities, services and supplies, security deposit forfeitures, parking rents or
fees, concessions and vending fees and laundry income and proceeds from rental
interruption insurance but excluding (i) insurance proceeds, damages, claims and
rights of action and the right thereto under any insurance policies insuring and
relating to any portion of such Properties with respect to any damage to, or
destruction or loss of, all or any portion of such Properties, whether by fire
or other cause (other than proceeds from rental interruption insurance), (ii)
proceeds of any action or proceeding for the taking of such Properties, or any
part thereof or interest therein, for public or quasi-public use under the power
of eminent domain, by reason of any public improvement or condemnation
proceeding, or in any other similar manner, or the conveyancing of such
Properties under the threat or contemplation of any such action or proceeding,
(iii) if any such Property is one of the Properties described in the Ambassador
Pool-1 MRA, the Ambassador Pool-2 MRA or the AIMCO Pool II MRA, proceeds from
the sale of the Related Bonds (as defined in the respective MRA), if any, (iv)
the unearned portion of prepaid rent, (v) other refundable items, (vi) interest
on any account established for the deposit of refundable items, and (vii)
proceeds from the sale or other disposition of all or any portion of such
Properties.
"GUARANTY PERIOD" means the period commencing on the date
hereof and ending ninety-one (91) days after the first date on which (i) all
indebtedness governed by the terms of the Ambassador Documents (including, by
virtue of the cross-default and cross-collateralization provisions in the
Ambassador Documents, the indebtedness governed by the Ambassador Pool-3 MRA)
has been indefeasibly discharged and satisfied in full and (ii) the credit
facility governed by the terms of the Credit Facility Transaction Documents is
terminated and all indebtedness thereunder has been indefeasibly discharged and
satisfied in full; provided, however, if an "Event of Default" under any of the
Transaction Documents exists at
6
<PAGE> 7
the time the events described in the foregoing clauses (i) and (ii) have
occurred, the Guaranty Period shall continue until such time as that Event of
Default has been cured pursuant to the applicable Transaction Document.
"LETTER OF CREDIT" means the letter of credit issued to
Fannie Mae concurrently herewith pursuant to the Pledge and LOC Agreement.
"MASTER LOCKBOX" means the lockbox established pursuant to
the Master Lockbox Agreement.
"MASTER LOCKBOX AGREEMENT" means that certain Master Cash
Management, Security, Pledge and Assignment Agreement to be entered into by and
among Guarantor, Fannie Mae and Master Servicer in accordance with the
provisions of the Term Sheet, as such agreement may be amended, supplemented,
or otherwise modified or amended and restated from time to time in accordance
with its terms.
"MASTER SERVICER" means the independent contractor engaged
to service the Master Lockbox and the Master Lockbox Agreement for Fannie Mae,
and any replacement or successor thereto engaged by Fannie Mae.
"MATERIAL ADVERSE EFFECT" as applied to Guarantor means any
circumstance, act, condition or event of whatever nature (including any adverse
determination in any litigation, arbitration or governmental investigation or
proceeding), whether singly or in conjunction with any other event or events,
act or acts, condition or conditions, or circumstance or circumstances, whether
or not related, that could reasonably be expected to have a material adverse
change in or a materially adverse effect upon any of (i) the business,
operations, property or condition (financial or otherwise) of Guarantor, (ii)
the present or future ability of Guarantor to perform its obligations under this
Guaranty, the Pledge and LOC Agreement or any document executed in accordance
with the Term Sheet, (iii) the validity, priority, perfection or enforceability
of this Guaranty, the Pledge and LOC Agreement or any document executed in
accordance with the Term Sheet, or (iv) the value of, or Fannie Mae's ability to
have recourse against, any collateral for the Guaranteed Obligations.
"OPERATING EXPENSES" means, for any period, with respect to
each Pool then owned by the Borrowers, the aggregate of all direct, ordinary,
normal, recurring and necessary expenses thereof including, without
duplication, (a) all real estate and personal property taxes, water, sewer and
vault charges and all other taxes, levies, assessments, common charges and
other similar charges, general and special, ordinary and extraordinary,
foreseen and unforeseen, of every kind and nature whatsoever, which at any time
may be assessed, levied or
7
<PAGE> 8
imposed by, in each case, any state or other political subdivision thereof (or
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government) or any other person,
upon the Properties in such Pool or the rents or the ownership, use, occupancy
or enjoyment thereof, and any interest, costs or penalties with respect to any
of the foregoing, (b) property and liability insurance premiums, (c) wages,
salaries and benefits of personnel employed on site to manage, lease, maintain
and operate such Properties, (d) costs or expenses of utility services to such
Properties and to tenant spaces to the extent payable by the respective
Borrower, (e) costs and expenses of providing security services to such
Properties, if any, (D costs or expenses of in-house or outside service
arrangements for landscaping, janitorial, window washing and cleaning, trash,
debris, make ready units, cable and satellite television and other services,
(g) expenses of maintaining, repairing and cleaning the grounds, parking,
amenities, exterior and interior spaces of such Properties, (h) expenses of
repairing and maintaining in good operable condition the mechanical,
structural, electrical, elevator, heating, ventilating, air conditioning and
plumbing systems, (i) property management fees payable to parties other than
the respective Borrower, (j) administrative expenses including advertising
incurred at the site of such Properties, (k) legal fees associated with lease
documentation and tenant matters and legal, accounting and other professional
fees relating to the operation of such Properties, (l) the replacement and
repair amount with respect to such Properties, (m) costs for water and sewage
fees, and (n) any other items that are treated as noncapital expenses under
GAAP. All of the foregoing (including the impositions described under clause
(a) above) shall be computed on an accrual basis and in accordance with GAAP
consistently applied. For the purposes of calculating Excess Cash Flow, (i) the
management fees included in Operating Expenses with respect to each Pool shall
be equal to the lesser of four percent (4%) of the Gross Cash Flow of such Pool
or the actual fees payable under the terms of the management agreements
approved by Fannie Mae, and (ii) any fees or expenses paid to in-house or
Affiliate service providers shall not exceed the amount that would be payable
to an outside third-party service provider in an arms-length transaction for
the materials or services in question. In addition, Operating Expenses shall
exclude (i) Debt Service, (ii) depreciation and amortization, (iii) all legal,
accounting and professional fees not included in clause (k) above, and (iv)
items that would be treated as capital expenses under GAAP consistently
applied.
"PLEDGE AND LOC AGREEMENT" means that certain Pledge and
Security Agreement and Agreement Regarding Letter of Credit of even date
herewith, by and between Guarantor and Fannie Mae, as~te same may be amended,
supplemented or otherwise modified or amended and restated from time to time in
accordance with its terms.
"POOL" means, individually, each of the following pools of
Properties: (i) all of the Properties owned by the Ambassador Pool-1 Borrower,
(ii) all of the Properties owned by the Ambassador Pool-2 Borrower, (iii) all
of the Properties owned by the AIMCO Pool l
8
<PAGE> 9
Borrower, (iv) all of the Properties owned by the AIMCO Pool II Borrower, (v)
all of the Properties owned by the AIMCO Pool III Borrower, (vi) all of the
Properties owned by AIMCO/RALS, L.P. (one of the AIMCO Pool IV Borrowers),
(vii) the Property owned by AIMCO/Woodlands-Tyler, L.P. (the other AIMCO Pool
IV Borrower), and (viii) all of the Properties owned by the AIMCO Credit
Facility Parties, and the term "Pools" means, collectively, all of such Pools.
"PROPERTY" means, individually, each of the multifamily
residential properties now or hereafter encumbered by any of the Transaction
Documents, and the term
"PROPERTIES" means, collectively, all of such Properties.
Notwithstanding the foregoing, the terms "Property" and "Properties" shall not
include or be deemed to refer to any Property from and after the date on which
(i) such Property has been released from the lien of the Transaction Documents
relating to such Property in accordance with the terms thereof, (ii) such
Property has been transferred to a third party which is not an Affiliate of the
Borrower which owns that Property, AIMCO or Guarantor, and such third party has
assumed that Borrower's obligations under the Transaction Documents relating to
such Property in accordance with the terms thereof, or (iii) Fannie Mae has
sold or assigned all of its interest in the Transaction Documents applicable to
such Property.
"SERVICERS" means, collectively, the independent contractors
engaged to service the respective Transaction Documents and the loans evidenced
thereby for Fannie Mae, and any replacements or successors engaged by Fannie
Mae.
"TERM SHEET" means the global Agreement Term Sheet attached
to this Guaranty as Exhibit A and by this reference incorporated herein.
"TRANSACTION DOCUMENT" means, individually, each of the
Ambassador Documents, each of the AIMCO Pool I Transaction Documents, each of
the AIMCO Pool Il Transaction Documents, each of the AIMCO Pool III Transaction
Documents, each of the AIMCO Pool IV Transaction Documents, and each of the
AIMCO Credit Facility Transaction Documents, and the term "Transaction
Documents" means, collectively, all of such agreements.
"TRIGGERING EVENT" means the occurrence of one or more of
the following:
(i) an "Event of Default" under
any of the Transaction Documents, provided, however, that
with respect to the AIMCO Pool I Transaction Documents, the
AIMCO Pool III Transaction Documents and the AIMCO Pool IV
Transaction Documents only, an Event of Default thereunder
9
<PAGE> 10
not relating to the payment of money shall not constitute a
Triggering Event hereunder unless and until the specified
Event of Default shall not have been cured on or before the
date that is thirty (30) days after delivery of written
notice to the applicable Borrower of the occurrence of such
Event of Default;
(ii) a breach by Guarantor with
respect to its covenant to establish the Master Lockbox, and
deliver the other documents and take the other steps
described in the Term Sheet, in accordance with Section 24
hereof; and
(iii) a breach by Guarantor of any
of its obligations under this Guaranty, the Pledge and LOC
Agreement or the Master Lockbox Agreement, subject to any
applicable notice and grace period hereunder or thereunder.
2. GUARANTY.
2.1 GUARANTEED OBLIGATIONS.
(a) Subject to the express limitations
set forth in subsection 2.2, Guarantor irrevocably, absolutely and
unconditionally guarantees to Fannie Mae, as primary obligor and not
merely as surety, the full, due and punctual payment of all
obligations of each of the Borrowers to Fannie Mae when the same shall
become due (whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise, including amounts that
would become due but for the operation of the automatic stay under
Section 362(a) of the United States Bankruptcy Code (the "BANKRUPTCY
CODE"), 11 U.S.C. Section 362(a)), now or hereafter made, incurred or
created, whether absolute or contingent, liquidated or unliquidated
and however arising under or in connection with the respective
Transaction Documents to which such Borrower is a party (collectively,
the "BORROWER OBLIGATIONS"), including (i) those obligations arising
under successive transactions under such Transaction Documents which
shall either continue the respective Borrower Obligations or from time
to time renew them after they have been satisfied and (ii) interest
which, but for the filing of a petition in bankruptcy with respect to
the respective Borrower, would have accrued on such Borrower
Obligations, whether or not a claim is allowed against such Borrower
for such interest in the related bankruptcy proceeding. This Guaranty
is an unconditional guaranty of payment and not of collection, and is
in no way conditioned upon any attempt by Fannie Mae to collect from
Borrowers or any of them. This Guaranty is a continuing guaranty which
shall remain in full force and effect during and until the expiration
of the Guaranty Period, and Guarantor shall not be released from any
obligations to Fannie Mae under this Guaranty prior to the expiration
of the
10
<PAGE> 11
Guaranty Period. Guarantor's obligations under this Section are
referred to in this Guaranty as the "GUARANTEED OBLIGATIONS".
(b) In addition to the Ambassador
Documents, reference also is made to the Ambassador Pool-3 MRA between
Fannie Mae and WLP. Guarantor acknowledges that, as of the date
hereof, (i) an "Event of Default" under the Ambassador Pool-1 MRA or
the Ambassador Pool-2 MRA also is an "Event of Default" under the
Ambassador Pool-3 MRA, and vice versa (i. e., such documents are
cross-defaulted), and (ii) the property owned by WLP also is
collateral for the obligations under the Ambassador Documents, and the
properties owned by the Ambassador Pool-1 Borrower and the Ambassador
Pool-2 Borrower also are collateral for the obligations under the
Ambassador Pool-3 MRA (i. e., the Ambassador Documents and the
Ambassador Pool-3 MRA are cross-collateralized). Accordingly, although
the property owned by WLP is not considered a "Property" for purposes
of determining Excess Cash Flow under this Guaranty, and the
obligations of WLP under the Ambassador Pool-3 MRA are not included
within the definition of Borrower Obligations, an "Event of Default"
under the Ambassador Pool-3 MRA will constitute an Event of Default"
under the Ambassador Documents that will (x) be a Triggering Event
under this Guaranty, and (y) entitle Fannie Mae to use Grantor Excess
Cash Flow in the Master Lockbox and proceeds from a draw on the Letter
of Credit to cure such Event of Default.
2.2 LIMITATION ON AMOUNT GUARANTEED.
(a) Notwithstanding any other
provision in this Guaranty to the contrary, but subject to subsection
2.2(b) hereof, the liability of Guarantor to pay and perform the
Borrower Obligations shall be limited to the amount (the "Maximum
Guaranteed Amount") determined at any time and from time to time as the
sum of (i) the cumulative Excess Cash Flow from the Pools from and
after the occurrence and during the continuance of a Triggering Event
plus (ii) an amount equal to the face amount of the Letter of Credit at
such time. As collateral and security for the Maximum Guaranteed
Amount, Guarantor shall (x) cause the Letter of Credit to be issued in
favor of Fannie Mae pursuant to the Pledge and LOC Agreement and (y)
pursuant to Pledge and LOC Agreement, pledge to and for the benefit of
Fannie Mae amounts held in the Master Lockbox, proceeds from a draw on
the Letter of Credit in accordance with Section 2.4 of the Pledge and
LOC Agreement, Guarantor's right to receive Grantor Excess Cash Flow
from entities in which Guarantor is a partner or member, and proceeds
of the foregoing.
11
<PAGE> 12
(b) Notwithstanding the first sentence
of subsection 2.2(a), Guarantor's obligations under this Guaranty
shall not be limited to the Maximum Guaranteed Amount, but instead
shall be in the full amount of the Guaranteed Obligations, from and
after the occurrence of any of the following events: (i) Guarantor's
failure to deposit (or cause to be deposited) into the Master Lockbox
all Grantor Excess Cash Flow, as required pursuant to the Master
Lockbox Agreement (including, without limitation, as a result of any
depository bank disbursing Grantor Excess Cash Flow to Guarantor from
and after the date on which Fannie Mae instructs such depository bank
to cease transferring Grantor Excess Cash Flow to Guarantor as a
result of a Triggering Event, rather than depositing such Grantor
Excess Cash Flow into the Master Lockbox); (ii) a challenge by
Guarantor or any of its Affiliates regarding the validity,
enforceability or priority of the security interests granted to Fannie
Mae pursuant to (or in connection with) the Pledge and LOC Agreement
or the Master Lockbox Agreement, or any other action by Guarantor or
any of its Affiliates that impairs the validity, enforceability or
priority of such security interests (including a challenge to
Guarantor's right to receive Grantor Excess Cash Flow or to pledge and
deliver the Grantor Excess Cash Flow to Fannie Mae pursuant to the
Master Lockbox Agreement); (iii) a determination that the
representations and warranties set forth in Section 8(h) hereof were
untrue as of the date hereof, or a breach of the covenants set forth
in Section 23(d) hereof after the date hereof; (iv) from and after the
occurrence and during the continuance of a Triggering Event,
Guarantor's failure to pay or apply to Debt Service and Operating
Expenses amounts disbursed to Guarantor (or to Borrowers or Affiliates
of Guarantor or Borrowers) from the Master Lockbox for the payment of
Debt Service or Operating Expenses; or (v) a challenge by Guarantor
regarding Fannie Mae's right to draw on the Letter of Credit or use
the proceeds therefrom in accordance with the Pledge and LOC
Agreement. If any of the foregoing events occur, and Guarantor
thereafter cures such matter, and Guarantor also cures any other Event
of Default that then may exist under the Transaction Documents,
Guarantor's obligations under this Guaranty from and after such cure
shall once again be limited to the Maximum Guaranteed Amount as
provided in subsection 2.2(a).
(c) Anything contained in this
Guaranty to the contrary notwithstanding, Fannie Mae shall look solely
to Guarantor and the assets of Guarantor (including, without
limitation, the Letter of Credit and the collateral described in the
Pledge and LOC Agreement and the Master Lockbox Agreement) for the
payment of any amount or the performance of any obligation under this
Guaranty, and Fannie Mae shall not look to the partners of Guarantor,
or seek recourse against the partners of Guarantor, for the payment of
any such amount or the performance of any such obligation.
12
<PAGE> 13
(d) Anything contained in this
Guaranty to the contrary notwithstanding, if any Fraudulent Transfer
Law (as hereinafter defined) is determined by a court of competent
jurisdiction to be applicable to the obligations of Guarantor under
this Guaranty, such obligations of Guarantor hereunder shall be limited
to a maximum aggregate amount equal to the largest amount that would
not render its obligations hereunder subject to avoidance as a
fraudulent transfer or conveyance under Section 548 of Title 11 of the
United States Code or any applicable provisions of comparable state law
(collectively, the "FRAUDULENT TRANSFER LAWS"), in each case after
giving effect to all other liabilities of Guarantor, contingent or
otherwise, that are relevant under the Fraudulent Transfer Laws
(specifically excluding, however, any liabilities of Guarantor (i) in
respect of intercompany indebtedness to the Borrowers or Affiliates of
the Borrowers to the extent that such indebtedness would be discharged
in an amount equal to the amount paid by Guarantor hereunder and (ii)
under any guaranty of subordinated indebtedness which guaranty contains
a limitation as to maximum amount similar to that set forth in this
section 2.2(d), pursuant to which the liability of Guarantor hereunder
is included in the liabilities taken into account in determining such
maximum amount), and after giving effect as assets to the value (as
determined under the applicable provisions of the Fraudulent Transfer
Laws) of any rights to subrogation, reimbursement, indemnification or
contribution of Guarantor pursuant to applicable law- or pursuant to
the terms of any agreement.
(e) No provision of this subsection
2.2 shall affect any other guaranty or similar agreement executed by
any person or entity in connection with the Borrower Obligations,
release or reduce all or any part of the Borrower Obligations or the
debt evidenced by the Transaction Documents, impair the lien of any
Transaction Documents, or impair the right of Fannie Mae to enforce the
provisions of any Transaction Documents.
3. FORM OF PAYMENT. Subject to the provisions of
subsection 2.2 hereof, in furtherance of the foregoing and not in limitation of
any other right which Fannie Mae may have at law or in equity against Guarantor
by virtue hereof, Guarantor agrees that upon the occurrence and during the
continuance of a Triggering Event, Guarantor will upon demand pay, or cause to
be paid, in cash, to Fannie Mae an amount equal to the sum of the unpaid
principal amount of all Borrower Obligations then due, accrued and unpaid
interest on such Borrower Obligations (including, without limitation, interest
which, but for the filing of a petition in bankruptcy with respect to such
Borrower, would have accrued on such Borrower Obligations, whether or not a
claim is allowed against such Borrower for such interest in the related
bankruptcy proceeding) and all other Guaranteed Obligations then owed to Fannie
Mae as aforesaid. All such payments shall be applied promptly from time to time
by Fannie Mae:
13
<PAGE> 14
First, to the payment of the costs and expenses of
any collection or other realization under this Guaranty,
including reasonable compensation to Fannie Mae and its agents
and counsel, and all expenses, liabilities and advances made
or incurred by Fannie Mae in connection therewith; and
Second, to the payment of all other Guaranteed
Obligations in such order as Fannie Mae shall elect.
All payments under this Guaranty shall be made to Fannie Mae in immediately
available funds, without reduction by any recoupment, set-off, counterclaim or
cross-claim against Fannie Mae at such address as directed by Fannie Mae.
Notwithstanding the foregoing provisions of this Section 3, if Grantor Excess
Cash Flow is then on deposit in the Master Lockbox and otherwise available for
such purpose, Fannie Mae will, at the direction of Guarantor, allow the use of
such Grantor Excess Cash Flow to cure or satisfy the default or event giving
rise to the Triggering Event.
4. GUARANTOR'S OBLIGATIONS ARE ABSOLUTE. Subject
to subsection 2.2 hereof, the obligations of Guarantor under this Guaranty
shall be absolute and unconditional, shall not be subject to any counterclaim,
set-off, recoupment, deduction or defense based upon any claim Guarantor may
have against Fannie Mae or any Borrower and shall remain in full force and
effect without regard to, and shall not be released, discharged or terminated
or in any other way affected by, any circumstance or condition (whether or not
Guarantor shall have any knowledge or notice thereof), including without
limitation:
(a) any amendment or modification
of, or extension of time for payment of any of the principal of,
interest on or other amounts payable under, any Transaction Documents
(except that the liability of Guarantor hereunder shall be deemed to
apply to such documents as so amended or modified or to the payment of
all amounts so extended);
(b) any exercise or non-exercise by
Fannie Mae of any right, power or remedy taken or in respect of any
Transaction Documents, or any waiver, consent, forbearance, indulgence
or other action, inaction or omission by Fannie Mae under or in
respect of any Transaction Documents;
(c) any assignment, sale or other
transfer of any Borrower's interest in all or any part of the real or
personal property which at any time constitutes collateral for the
payment of the Guaranteed Obligations including without limitation a
14
<PAGE> 15
conveyance of such property by a Borrower to Fannie Mae by deed in
lieu of foreclosure;
(d) any bankruptcy, insolvency,
reorganization, adjustment, dissolution, liquidation or other like
proceeding involving or affecting any Borrower or Fannie Mae or their
respective properties or creditors, or any action taken with respect
to any Transaction Documents by any trustee or receiver of Fannie Mae
or any Borrower, or by any court, in any such proceeding;
(e) any invalidity or
unenforceability, in whole or in part, of any term or provision of any
Transaction Documents or any Borrower's incapacity or lack of authority
to enter into its respective Transaction Documents;
(f) any release, compromise,
settlement or discharge with respect to all or any portion of any
Borrower's obligations under its respective Transaction Documents;
(g) any acceptance of additional or
substituted collateral for payment of the Guaranteed Obligations or
any release or subordination of any collateral held at any time by
Fannie Mae as security for the payment of the Guaranteed Obligations;
(h) any resort to Guarantor for
payment of all or any portion of the Guaranteed Obligations, whether or
not Fannie Mae shall have resorted to any collateral securing the
Guaranteed Obligations or shall have proceeded against any Borrower or
any other person or entity primarily or secondarily liable for the
Borrower Obligations, it being intended that Fannie Mae may pursue its
rights hereunder at any time or times; or
(i) any waiver by Fannie Mae of any
breach of any Transaction Documents by any Borrower.
No exercise, delay in exercise or non-exercise by Fannie Mae
of any right hereby given it, no dealing by Fannie Mae with any Borrower,
Guarantor or any other person or entity, no change, impairment or suspension of
any right or remedy of Fannie Mae, and no act or thing which, but for this
provision, could act as a release or exoneration of the liabilities of
Guarantor hereunder, shall in any way affect, decrease, diminish or impair any
of the obligations of Guarantor hereunder or give Guarantor or any other person
or entity any recourse or defense against Fannie Mae.
15
<PAGE> 16
5. WAIVER. Guarantor unconditionally waives, for the
benefit of Fannie Mae, the following:
(a) notice of acceptance of this
Guaranty and notice of any of the matters referred to in Section 4
hereof;
(b) all notices to Guarantor which may
be required by statute, rule of law or otherwise to preserve intact
any rights which Fannie Mae may have against Guarantor under this
Guaranty, including without limitation, any demand, proof or notice to
Guarantor of non-payment of any of the principal of, interest on or
other amounts payable under the Transaction Documents, and notice to
Guarantor of any failure on the part of any Borrower to perform and
comply with any covenant, agreement, term or condition of the
applicable Transaction Documents;
(c) any right to the enforcement,
assertion or exercise of any right, power or remedy conferred in any
Transaction Documents or otherwise;
(d) any requirement that Fannie Mae act
with diligence in enforcing its rights under any Transaction Documents
or this Guaranty;
(e) any right to require Fannie Mae to
proceed against or exhaust its recourse against any Borrower, any
guarantor under other guarantees in favor of Fannie Mae with respect
to the Guaranteed Obligations, or any security or collateral held by
Fannie Mae at any time for the payment of the Guaranteed Obligations
or to pursue any other remedy in its power before being entitled to
payment from Guarantor under this Guaranty or before proceeding
against Guarantor (except as otherwise provided in Section 3 hereof);
(f) any failure by Fannie Mae to file or
enforce a claim against the estate (either in administration,
bankruptcy or any other proceeding) of any Borrower or any other
person or entity;
(g) any defense based upon an election
of remedies by Fannie Mae which destroys or otherwise impairs the
subrogation rights of Guarantor or the right of Guarantor (after
payment of the Guaran- teed Obligations) to proceed against any
Borrower or any other person or entity for reimbursement, or both;
(h) any defense based upon any taking,
modification or release of any collateral for the Guaranteed
Obligations, or any failure to perfect any security
16
<PAGE> 17
interest in, or the taking of, or failure to take any other action
with respect to, any collateral securing payment of the Guaranteed
Obligations;
(i) any defense based upon the addition,
substitution or release, in whole or in part, of any person or entity,
including without limitation another guarantor, primarily or
secondarily liable for or in respect of the Guaranteed Obligations;
(j) any rights or defenses based upon an
offset by Guarantor against any obligation now or hereafter owed to
Guarantor by any Borrower or any other person or entity;
(k) any defense of the statute of
limitations in any action against Guarantor under this Guaranty;
(l) any defense based upon any statute
or rule of law which provides that the obligation of a surety must be
neither larger in amount nor in other respects more burdensome than
that of the principal;
(m) any principles or provisions of law,
statutory or otherwise, which are or might be in conflict with the
terms of this Guaranty and any legal or equitable discharge of
Guarantor's obligations hereunder;
(n) all other notices to Guarantor which
may or might be lawfully waived by Guarantor; it being the intention
hereof that Guarantor shall remain liable as principal, to the extent
set forth in this Guaranty, during and until the expiration of the
Guaranty Period, notwithstanding any act, omission or thing which
might otherwise operate as a legal or equitable discharge of Guarantor
other than the payment in full of the Guaranteed Obligations. No
delay by Fannie Mae in exercising any rights and/or powers hereunder
or in taking any action to enforce any of the Borrower Obligations
shall operate as a waiver as to such rights or powers or in any manner
prejudice any and all of Fannie Mae's rights and powers hereunder
against Guarantor. It is the intention of Guarantor under this
Guaranty that during and until the expiration of the Guaranty Period,
the obligations of Guarantor hereunder shall not be discharged except
by performance and then only to the extent of such performance.
6. ELECTION OF REMEDIES. This Guaranty may be enforced
from time to time, as often as occasion therefor may arise, and without any
requirement that Fannie Mae must first exercise any rights against any Borrower
or any other person or entity or exhaust any remedies available to it against
any Borrower under its Transaction Documents or against
17
<PAGE> 18
any other person or entity or, except to the extent provided in Section 3
hereof, resort to any collateral at any time held by it for performance of the
Guaranteed Obligations or any other source or means of obtaining payment of any
of the Guaranteed Obligations.
7. EXPENSES. Guarantor agrees to pay all costs and
out-of-pocket expenses, including court costs and expenses and the reasonable
fees and disbursements of legal counsel incurred by or on behalf of Fannie Mae
or the Servicers in connection with the preparation and negotiation of this
Guaranty and the other documents described in the Term Sheet (and the costs and
out-of-pocket expenses incurred in implementing the various steps described in
the Term Sheet), the enforcement of Guarantor's obligations under this Guaranty
and such other documents, or the protection of Fannie Mae's rights under this
Guaranty and such other documents. The covenant contained in this Section shall
survive the payment and satisfaction in full of the Guaranteed Obligations.
8. REPRESENTATIONS AND WARRANTIES. In order to induce
Fannie Mae to accept this Guaranty and consent to the Proposed Merger,
Guarantor represents and warrants to Fannie Mae as follows:
(a) Guarantor is a duly formed limited
partnership, validly existing and in good standing under the laws of
the State of Delaware, and is qualified as a foreign limited
partnership and, except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect, is in good
standing under the laws of each jurisdiction in which such
qualification and/or standing is necessary to the conduct of its
business. Guarantor has the requisite power and authority to own its
assets and to carry on its business as now conducted and to execute
and deliver this Guaranty and to perform its obligations hereunder.
(b) The execution, delivery and performance of
this Guaranty and the transactions contemplated hereby have been duly
authorized by all necessary action and proceedings by and on behalf of
Guarantor, and no further consents, approvals or filings of any kind,
including any consent or approval of or filing with any governmental
authority, are required by or on behalf of Guarantor as a condition to
the valid execution, delivery and performance by Guarantor of this
Guaranty.
(c) This Guaranty has been duly authorized,
executed and delivered by Guarantor and constitutes the legal, valid
and binding obligation of Guarantor, enforceable against Guarantor in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
18
<PAGE> 19
similar laws or equitable principles affecting the enforcement of
creditors' rights generally or by equitable principles or by the
exercise of discretion by any court.
(d) Guarantor is fully aware of the financial
condition of each of the Borrowers and is executing and delivering
this Guaranty based solely upon Guarantor's own independent
investigation of all matters pertinent hereto and is not relying in
any manner upon any representation or statement made by Fannie Mae or
Servicers (except for any agreements or statements expressly made by
Fannie Mae in this Guaranty or in any of the documents executed by
Fannie Mae in accordance with the Term Sheet). Guarantor is in a
position to obtain, and Guarantor hereby assumes full responsibility
for obtaining, any additional information concerning Borrowers'
financial condition and any other matters pertinent hereto as
Guarantor may desire and Guarantor is not relying upon or expecting
Fannie Mae or Servicers to furnish to Guarantor any information now or
hereafter in Fannie Mae's or Servicers' possession concerning the same
or any other matter. By executing this Guaranty, Guarantor knowingly
accepts the full range of risks encompassed within a contract of this
type, which risks Guarantor acknowledges.
(e) Neither the execution and delivery of this
Guaranty, nor Guarantor's performance of its obligations hereunder:
(i) does or will conflict with or result
in a breach or violation of any law, rule or regulation
enacted or issued by any governmental authority or other
agency having jurisdiction over Guarantor, Borrowers or any of
the Properties, or any judgment or order applicable to
Guarantor, Borrowers or any of the Properties or to which
Guarantor, Borrowers or any of the Properties are subject,
except for such breaches or violations that, singly or in the
aggregate, have not had, and are not reasonably expected to
cause, a Material Adverse Effect; or
(ii) does or will conflict with or result
in a breach or violation of, or constitute a default under,
any of the terms, conditions or provisions of Guarantor's
organizational documents, or, except for any such breach or
violation that could not reasonably be expected to have a
Material Adverse Effect, any indenture, existing agreement or
other instrument to which Guarantor is-a party or to which
Guarantor, Borrowers or any of the Properties are subject.
(f) Guarantor is not insolvent and will not be
rendered insolvent by the execution, delivery and performance of this
Guaranty, nor will Guarantor have
19
<PAGE> 20
incurred, have intended to incur, or believe that it has incurred,
debts beyond its ability to pay such debts as they mature. Guarantor
did not receive less than a reasonably equivalent value in exchange
for incurrence of the Guaranteed Obligations. There is no
contemplated, pending or, to the best of Guarantor's knowledge,
threatened bankruptcy, reorganization, receivership, insolvency or
like proceeding, whether voluntary or involuntary, affecting
Guarantor, any of the Borrowers or any of the Properties, and there
has been no assertion or exercise of jurisdiction over Guarantor,
Borrowers or any of the Properties by any court empowered to exercise
bankruptcy powers.
(g) Guarantor is the owner of (directly or
through one or more subsidiaries) or has a financial interest in
(directly or through one or more subsidiaries), each of the Borrowers,
and Fannie Mae's agreement to the Proposed Merger is of substantial
and material benefit to Guarantor. Guarantor has reviewed and
approved copies of the Transaction Documents and is fully informed of
the remedies Fannie Mae may pursue upon the occurrence of an event of
default under the Transaction Documents.
(h) As of the date hereof, AIMCO REIT's right to
receive Excess Cash Flow is derived solely from the following
interests owned by AIMCO REIT:
(i) AIMCO REIT's indirect ownership of
the .96% general partnership interest in Guarantor (through
AIMCO REIT's ownership of AIMCO-GP, Inc. a Delaware
corporation), and AIMCO REIT's indirect ownership of a limited
partnership interest in Guarantor (through AIMCO REIT's
ownership of AIMCO LP, Inc., a Delaware corporation);
(ii) AIMCO REIT's indirect ownership of a
2% general partnership interest in Holdings (through AIMCO
Holdings QRS, Inc., a Delaware corporation ("QRS"));
(iii) with respect to the AIMCO Pool II
Borrower, AIMCO REIT's ownership of (A) AIMCO/OTC QRS, Inc., a
Delaware corporation ("OTC QRS"), which is the sole general
partner (holding a I % general partnership interest) of such
Borrower, (B) QRS, which is a 2% general partner in Holdings,
which is a general partner or managing member in AIMCO/OTC,
L.L.C., AIMCO/Boardwalk, L.P. and HomeCorp Investments, Ltd.,
each of which is a limited partner in such Borrower, (C)
AIMCO/HIL, L.L.C., which is a general partner of HomeCorp
Investments, Ltd. ("HOMECORP") and (D) Guarantor, which is a
limited partner in such Borrower;
20
<PAGE> 21
(iv) with respect to the AIMCO Pool III
Borrower, AIMCO REIT's ownership of (A) AIMCO Properties
Finance Corp., a Delaware corporation ("FINANCE CORP."), which
is the sole general partner (holding a 1 % general partnership
interest) of such Borrower, (B) QRS, which is a 2 % general
partner in Holdings, which is a 1 % managing member in
AIMCO/HIL, L.L.C., which is a general partner in HomeCorp
Investments, Ltd., which is a limited partner in such
Borrower, (C) Holdings, which is a general partner of HomeCorp
which is a limited partner in such Borrower and (D) Guarantor,
which is a limited partner in such Borrower;
(v) with respect to the Ambassador
Pool-1 Borrower, AIMCO REIT's ownership of Ambassador VIII,
Inc., a Delaware corporation, which is the sole general
partner (holding a 1 % general partnership interest) of such
Borrower; and (vi) with respect to the Ambassador Pool-2
Borrower, AIMCO REIT's ownership of (x) Ambassador I, Inc., a
Delaware corporation, which is the sole general partner
(holding a 1 % general partnership interest) of such Borrower,
and (y) AJ One Inc., a Delaware corporation, which is the sole
general partner (holding a 1 % general partnership interest)
in AJ One Limited Partnership, a Delaware limited partnership,
which entity is the sole general partner (holding a 49.6%
general partnership interest) in Jupiter-1, L.P., a Delaware
limited partnership, which entity is the sole limited partner
(holding a 99% limited partnership interest) in such Borrower
9. FURTHER ASSURANCES. Guarantor agrees at any time and
from time to time upon reasonable request by Fannie Mae to take or cause to be
taken any action and to execute and deliver any additional documents which in
the opinion of Fannie Mae may be necessary in order to assure to Fannie Mae the
full benefits of this Guaranty.
10. GUARANTOR'S RIGHTS OF SUBROGATION CONTRIBUTION, ETC.
During the Guaranty Period and for a period of thirteen (13) months after the
expiration thereof, Guarantor hereby waives any claim, right or remedy, direct
or indirect, that Guarantor now has or may hereafter have against any Borrower
or any of their respective assets in connection with this Guaranty or the
performance by Guarantor of its obligations hereunder, in each case whether
such claim, right or remedy arises in equity, under contract, by statute, under
common law or otherwise and including without limitation (a) any right of
subrogation, reimbursement or indemnification that Guarantor now has or may
hereafter have against any Borrower, (b) any right to enforce, or participate
in, any claim, right or remedy that Fannie Mae now has or may hereafter have
against any Borrower, and (c) any benefit of, and any right to participate in,
any collateral or security now or hereafter held by Fannie Mae. In addition,
until the
21
<PAGE> 22
expiration of the Guaranty Period, Guarantor shall withhold exercise of any
right of contribution Guarantor may have against any other guarantor of the
Guaranteed Obligations. Guarantor further agrees that, to the extent the waiver
or agreement to withhold the exercise of its rights of subrogation,
reimbursement, indemnification and contribution as set forth herein is found by
a court of competent jurisdiction to be void or voidable for any reason, any
rights of subrogation, reimbursement or indemnification Guarantor may have
against any Borrower or against any collateral or security, and any rights of
contribution Guarantor may have against any such other guarantor, shall be
junior and subordinate to any rights Fannie Mae may have against such Borrower,
to all right, title and interest Fannie Mae may have in any such collateral or
security, and to any right Fannie Mae may have against such other guarantor. If
any amount shall be paid to Guarantor on account of any such subrogation,
reimbursement, indemnification or contribution rights at any time when all
Guaranteed Obligations shall not have been paid in full, such amount shall be
held in trust for Fannie Mae and shall forthwith be paid over to Fannie Mae to
be credited and applied against the Guaranteed Obligations, whether matured or
unmatured, in accordance with the terms hereof.
11. SUBORDINATION OF OTHER OBLIGATIONS. Any indebtedness
of any Borrower now or hereafter held by Guarantor is hereby subordinated in
right of payment to the Guaranteed Obligations, and any such indebtedness of
any Borrower to Guarantor collected or received by Guarantor after an event of
default has occurred and is continuing under any of the Transaction Documents
shall be held in trust for Fannie Mae and shall forthwith be paid over to
Fannie Mae to be credited and applied against the Guaranteed Obligations but
without affecting, impairing or limiting in any manner the liability of
Guarantor under any other provision of this Guaranty.
12. INSOLVENCY AND LIABILITY OF BORROWERS. So long as
this Guaranty is in effect, Guarantor agrees to file all claims against the
Borrowers in any bankruptcy or other proceeding in which the filing of claims
is required by law in connection with indebtedness owed by any Borrower to
Guarantor and to assign to Fannie Mae all rights of Guarantor thereunder up to
the amount of such indebtedness. In all such cases the person or entity
authorized to pay such claims shall pay to Fannie Mae the full amount thereof
to the full extent necessary to pay the Guaranteed Obligations and Guarantor
hereby assigns to Fannie Mae all of Guarantor'.s rights to all such payments to
which Guarantor would otherwise be entitled. Notwithstanding the foregoing and
except to the extent that any sums owed by any Borrower to Fannie Mae under its
respective Transaction Documents shall have been fully satisfied thereby, the
liability of Guarantor hereunder shall in no way be affected by:
(a) the release or discharge of any Borrower in
any creditors', receivership, bankruptcy or other proceedings; or
22
<PAGE> 23
(b) the impairment, limitation or modification of
the liability of any Borrower or the estate of any Borrower in
bankruptcy resulting from the operation of any present or future
provisions of the Bankruptcy Code or other statute or from the decision
in any court.
13. PREFERENCES FRAUDULENT CONVEYANCES ETC. If Fannie Mae
is required to refund, or voluntarily refunds, any payment received from any
Borrower because such payment is or may be avoided, invalidated, declared
fraudulent, set aside or determined to be void or voidable as a preference,
fraudulent conveyance, impermissible setoff or a diversion of trust funds under
the bankruptcy laws or for any similar reason, including without limitation any
judgment, order or decree of any court or administrative body having
jurisdiction over Fannie Mae or any of its property, or any statement or
compromise of any claim effected by Fannie Mae with any Borrower or any other
claimant (a "RESCINDED PAYMENT"), then Guarantor's liability to Fannie Mae
shall continue in full force and effect (subject to the limitations set forth
in subsection 2.2 hereof), or Guarantor's liability to Fannie Mae shall be
reinstated (subject to the limitations set forth in subsection 2.2 hereof), as
the case may be, with the same effect and to the same extent as if the
Rescinded Payment had not been received by Fannie Mae, notwithstanding the
cancellation or termination of any Transaction Documents. In addition,
Guarantor shall pay, or reimburse Fannie Mae for, all expenses (including all
reasonable attorneys' fees, court costs and related disbursements) incurred by
Fannie Mae in the defense of any claim that a payment received by Fannie Mae in
respect of all or any part of the Guaranteed Obligations must be refunded. The
provisions of this Section shall survive the termination of this Guaranty and
any satisfaction and discharge of the Borrowers by virtue of any payment, court
order or any federal or state law.
14. WAIVER. Neither this Guaranty nor any term hereof
may be changed, waived, discharged or terminated except by an instrument in
writing signed by Fannie Mae and Guarantor expressly referring to this Guaranty
and to the provisions so changed or limited. No such waiver shall extend to or
affect any obligation not expressly waived or impair any right consequent on
any obligation not expressly waived. No course of dealing or delay or omission
on the part of Fannie Mae in exercising any right under this Guaranty shall
operate as a waiver thereof otherwise be prejudicial thereto.
15. NOTICES. Any demand or notice required or permitted
to be given by Fannie Mae to Guarantor under this Guaranty shall be given by
certified or registered mail, return receipt requested, or by overnight courier
or by telecopy addressed to the appropriate notice address set forth below. Any
of the parties hereto may, by a notice to the other party specifically
captioned "Notice of Change of Address pursuant to Section 15 of the Payment
Guaranty", designate any further or different address to which subsequent
notices, certificates or other communications shall be sent without any
requirement of execution of any amendment
23
<PAGE> 24
to this Guaranty. Any such notice, certificate or communication shall be deemed
to have been given as of the date of actual delivery or the date of failure to
deliver by reason of refusal to accept delivery or changed address of which no
notice was given pursuant to this Section. The notice addresses are as follows:
(a) if to Guarantor:
c/o Apartment Investment and Management Company
1873 South Bellaire Street, 17th Floor
Denver, Colorado 80222-4348
Attention: Vice Chairman
Telecopy: (303) 757-8735
with copies to:
Apartment Investment and Management Company
28200 Highway 189
Suite F-240
Lake Arrowhead, California 92352
Attention: Peter K. Kompaniez, President
Telecopy: (909) 336-4826
and
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Attention: Allan G. Mutchnik, Esq.
Telecopy: (213) 687-5600
(b) if to Fannie Mae:
if by mail, overnight courier, or telecopy:
Fannie Mae
3900 Wisconsin Avenue, N.W.
Drawer AM
Washington, D.C. 20016
Attention: Director, Multifamily Operations
24
<PAGE> 25
Re: AIMCO/Ambassador Payment Guaranty
Telecopy: (202) 752-3542
if by messenger:
Fannie Mae
4000 Wisconsin Avenue, N.W.
Washington, D.C. 2016
Attention: Director, Multifamily Operations
Re: AIMCO/Ambassador Payment Guaranty
in each case, with copies to:
Fannie Mae
3900 Wisconsin Avenue, N.W.
Washington, D.C. 20016
Attention: Vice President, Multifamily Asset
Management
Re: AIMCO/Ambassador Payment Guaranty
Telecopy: (202) 752-5016
and to:
Fannie Mae
3939 Wisconsin Avenue, N.W.
Washington, D.C. 20016
Attention: Vice President, Multifamily Asset
Management
Re: AIMCO/Ambassador Payment Guaranty
Telecopy: (202) 752-4231
and with copies to the applicable Servicer for the Property (or Properties) to
which such notice relates.
16. JURISDICTION CONSENT TO SERVICE WAIVER OF JURY TRIAL.
A. GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR
ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF
ANY DISTRICT OF COLUMBIA COURT OR FEDERAL COURT OF THE UNITED
STATES OF AMERICA SITTING IN THE DISTRICT OF COLUMBIA, AND ANY
APPELLATE COURT
25
<PAGE> 26
FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS GUARANTY OR FOR RECOGNITION OR ENFORCEMENT OF
ANY JUDGEMENT, AND EACH OF GUARANTOR AND FANNIE MAE HEREBY
IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN
RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH DISTRICT OF COLUMBIA COURT OR, TO THE EXTENT
PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF GUARANTOR AND
FANNIE MAE AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW. NOTHING IN THIS GUARANTY SHALL AFFECT ANY
RIGHT THAT FANNIE MAE MAY OTHERWISE HAVE TO BRING ANY ACTION OR
PROCEEDING RELATING TO THIS GUARANTY AGAINST GUARANTOR OR ITS
PROPERTIES IN THE COURTS OF ANY JURISDICTION.
B. GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO
THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS GUARANTY IN ANY DISTRICT OF COLUMBIA OR
FEDERAL COURT. EACH OF GUARANTOR AND FANNIE MAE HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF
SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.
C. EACH OF GUARANTOR AND FANNIE MAE IRREVOCABLY CONSENTS TO
SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN
SECTION 15. NOTHING IN THIS GUARANTY WILL AFFECT THE RIGHT OF
EITHER GUARANTOR OR FANNIE MAE TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW.
D. GUARANTOR AND FANNIE MAE HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS GUARANTY AND FOR ANY COUNTERCLAIM
THEREIN.
26
<PAGE> 27
17. WAIVER OF HOMESTEAD OR EXEMPTION RIGHTS. Guarantor
waives any and all homestead or exemption rights Guarantor may have under or by
virtue of any Constitution or laws of any State of the United States or the
District of Columbia with respect to the liability and obligation arising under
this Guaranty. Guarantor hereby transfers, conveys, and assigns to Fannie Mae a
sufficient amount of any homestead or exemption rights that may be allowed to
Guarantor, including any such homestead or exemption rights that may be set
apart in bankruptcy, to pay the obligations created by this Guaranty in full,
with all costs or collection. Guarantor hereby directs any party having
possession of such homestead of exemption rights, including a trustee in
bankruptcy to deliver to Fannie Mae a sufficient amount of property or money
set apart as exempt to pay Guarantor's obligations arising under this Guaranty.
18. ASSIGNABILITY BY FANNIE MAE. Fannie Mae may, without
notice to Guarantor, assign or transfer any of the Borrower Obligations owed to
Fannie Mae under the Transaction Documents, in whole or in part. In such
event, each and every immediate and successive assignee, transferee or holder
of all or any part of the Borrower Obligations under the Transaction Documents
shall have the right to enforce this Guaranty, by legal action or otherwise, as
fully as if such assignee, transferee, or holder were by name specifically
given such right and power in this Guaranty. Fannie Mae shall have an
unimpaired right to enforce this Guaranty for its benefit as to so much of the
Borrower Obligations under the Transaction Documents as Fannie Mae has not
sold, assigned or transferred.
19. GUARANTOR BOUND BY JUDGMENT AGAINST BORROWER.
Guarantor shall be conclusively bound in any jurisdiction by the judgment in
any action by Fannie Mae against Borrowers (or any of them) in connection with
the Transaction Documents (wherever instituted) as if Guarantor were a party to
such action even if not so joined as a party.
20. RELEASE. Promptly after the expiration of the
Guaranty Period, Fannie Mae (or, if any person or entity has succeeded to all
or any portion of Fannie Mae's interest hereunder, then such successor or
assign) shall execute and deliver to Guarantor a release under applicable law
releasing Fannie Mae's interest in this Guaranty and the Pledge and LOC
Agreement, and shall deliver to Guarantor any and all original copies of this
Guaranty then in the custody or possession of Fannie Mae (or such successor or
assign), all without recourse to or any warranty whatsoever by Fannie Mae (or
such successor or assign), and at the cost and expense of Guarantor. Without
in any way limiting the obligations of Fannie Mae and any successor or assign
pursuant to the preceding sentence, Fannie Mae acknowledges that the
satisfaction, termination and/or reconveyance (as applicable) of all of the
Ambassador Documents encumbering the Properties described therein, and the
termination of the credit facility governed by the AIMCO Credit Facility
Transaction Documents, all in accordance with the respective terms of such
documents, and the passing of ninety-one (91) days after all of the foregoing
have
27
<PAGE> 28
occurred, shall constitute conclusive evidence of the expiration of the
Guaranty Period (provided that no "Event of Default" then exists under any of
the Transaction Documents).
21. GOVERNING LAW. This Guaranty shall be construed and
enforced in accordance with, and the rights and remedies of the parties hereto
shall be governed by, the laws of the District of Columbia without regard to
conflicts of law, principles, except to the extent that Federal laws may
prevail.
22. INVALID PROVISIONS. Any provision of this Guaranty
that is prohibited, unenforceable or not authorized in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or nonauthorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction and the remaining portion of such provision
and all other remaining provisions will be construed to render them enforceable
to the fullest extent. Guarantor and Fannie Mae shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
23. GUARANTOR'S COVENANTS. Guarantor agrees and
covenants with Fannie Mae that, at all times that this Guaranty is in effect:
(a) Guarantor shall at all times preserve and
keep in full force and effect its existence and all rights and
franchises material to its business.
(b) Guarantor shall comply in all material
respects with all applicable laws, rules, regulations and orders, such
compliance to include, without limitation, paying when due all taxes,
assessments and governmental charges imposed upon it or upon any of
its properties or assets or in respect of any of its franchises,
businesses, income or property before any penalty or interest accrues
thereon.
(c) Guarantor shall keep and maintain books of
record and account with respect to its operations in accordance with
generally accepted accounting principles and, to the extent permitted
by law (including, without limitation, the Securities Exchange Act of
1933, as amended), shall permit Fannie Mae and its officers, employees
and authorized agents, to the extent Fannie Mae in good faith deems
necessary for the proper administration of this Guaranty, to examine,
copy and make excerpts from the books and records of Guarantor and its
Affiliates (excluding any and all legally privileged materials) and to
inspect the properties of Guarantor and the Borrowers, both real and
personal, at such reasonable times during normal business hours as
Fannie Mae may request. Fannie Mae covenants, for itself and its
successors, assigns, agents and representa- tives, to (i)
28
<PAGE> 29
keep confidential all confidential, proprietary and/or non-public
information, identified in writing as such by Guarantor and provided
by Guarantor or its Affiliates to Fannie Mae or its successors,
assigns, agents or representatives pursuant to, or in connection with,
this Guaranty, and (ii) comply with all applicable securities laws in
connection therewith. Guarantor acknowledges that such information
may be delivered to the successors, assigns, agents and
representatives of Fannie Mae, provided that such successors, assigns,
agents and representatives agree to be bound by the provisions of this
Section 23(c).
(d) Guarantor shall not agree to, permit or
acquiesce in any amendment, modification, supplement or amendment and
restatement (for purposes of this Section 23(d), an "AMENDMENT") of
any of the following agreements:
(i) the partnership agreement for
Holdings, if such Amendment would have the effect of
decreasing Guarantor's partnership interest in, or right to
receive proceeds or distributions with respect to, Holdings to
less than 98 %;
(ii) the partnership agreement for
Ambassador OP, if such Amendment would have the effect of
decreasing Guarantor's partnership interest in, or right to
receive proceeds or distributions with respect to, Ambassador
OP to less than 99.9%;
(iii) (iii) the respective partnership
agreements for the AIMCO Pool I Borrower, the AIMCO Pool II
Borrower and the AIMCO Pool III Borrower, if such Amendment
would have the effect of decreasing Guarantor's partnership
interest in, or right to receive proceeds or distributions
with respect to, such Borrowers to less than 98.42%, 90.7% and
74.27%, respectively, or, with respect to the AIMCO Pool 11
Borrower and the AIMCO Pool III Borrower, if such Amendment
would have the effect of increasing Finance Corp. 's or OTC
QRS' partnership interest in, or right to receive proceeds or
distributions with respect to, such entities to more than 1 %;
(iv) the respective partnership
agreements for the AIMCO Pool IV Borrowers, if such Amendment
would have the effect of decreasing Guarantor's partnership
interest in, or right to receive proceeds or distributions
with respect to, such Borrowers to less than 99% (or, with
respect to the AIMCO Pool IV Borrower which owns the Property
known as Woodlands, to less than 98.42 %);
29
<PAGE> 30
(v) the respective partnership or
limited liability company agreements for the AIMCO Credit
Facility Parties, if such Amendment would have the effect of
decreasing Guarantor's partnership interest in, or right to
receive proceeds or distributions with respect to, such
Borrowers to less than 99 % (or, with respect to the AIMCO
Credit Facility Party known as AIMCO Bluffs, L.L.C., to less
than 98.42%);
(vi) the respective partnership
agreements for the Ambassador Pool-Borrower and the Ambassador
Pool-2 Borrower, if such Amendment would have the effect of
decreasing Guarantor s partnership interest in, or right to
receive proceeds or distributions with respect to, such
Borrowers to less than 99 %; or
(vii) the partnership agreement with
respect to any other partner in any of the Borrowers, if such
Amendment would have the effect of decreasing Guarantor's
respective partnership interests in, or right to receive
proceeds or distributions with respect to, such partnerships
to less than the percentages or amounts as they exist as of
the date hereof.
In addition to the foregoing, Guarantor shall not agree to,
permit or acquiesce in (i) any Amendment to the partnership agreement of
AIMCO-GP, Inc., a Delaware corporation ("GP INC."), if such Amendment would
have the effect of permitting GP Inc. to directly or indirectly own any assets
other than partnership interests in Guarantor, or (ii) GP, Inc. directly or
indirectly owning any assets other than partnership interests in Guarantor,
except, in either case, the temporary ownership of other assets in connection
with an acquisition prior to contributing such assets to Guarantor.
24. SATISFACTION OF OTHER MERGER CONDITIONS. Guarantor
shall establish the Master Lockbox and shall execute and deliver, or shall
cause its Affiliates identified in the Term Sheet to execute and deliver, all
of the agreements and documents described in the Term Sheet at the time(s)
specified therein. Guarantor acknowledges that Fannie Mae's consent to the
Proposed Merger is conditioned on Guarantor's agreement to timely comply with
the foregoing covenant, and that Fannie Mae has materially relied on such
covenant. Guarantor's failure to comply with the foregoing covenant shall be a
material default of its obligations under this Guaranty, and in the event of
such a default, Fannie Mae immediately may draw on the Letter of Credit as
provided in the Pledge and LOC Agreement.
25. RIGHTS CUMULATIVE. The rights, powers and remedies
given to Fannie Mae by this Guaranty are cumulative and shall be in addition to
and independent of all rights, powers and remedies given to Fannie Mae by
virtue of any statute or rule of law or in any of the Transaction Documents or
any other agreement between Guarantor and Fannie Mae or between
30
<PAGE> 31
any Borrower and Fannie Mae. Any forbearance or failure to exercise, and any
delay by Fannie Mae in exercising, any right, power or remedy hereunder shall
not impair any such right, power or remedy or be construed to be a waiver
thereof, nor shall it preclude the further exercise of any such right, power or
remedy.
26. GENERAL PROVISIONS. This Guaranty shall be binding
upon the respective heirs, legal representatives, successors and assigns of
Guarantor, and shall inure to the benefit of Fannie Mae and its successors and
assigns. The descriptive headings of the sections of this Guaranty have been
inserted herein for convenience of reference only and shall not define or limit
the provisions hereof. Terms used in this Guaranty include the singular as
well as the plural.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
<PAGE> 32
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be
signed under seal as of the date first above written by its officer duly
authorized.
GUARANTOR:
AIMCO PROPERTIES, L.P.,
a Delaware limited partnership
By: AIMCO-GP, INC.,
a Delaware corporation,
its sole general partner
By: /s/ PATTI K. FIELDING
-------------------------------------------
Name:
----------------------------------
Title:
----------------------------------
S-1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 49,320
<SECURITIES> 5,767
<RECEIVABLES> 26,201
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 150,644
<PP&E> 2,620,899
<DEPRECIATION> 297,895
<TOTAL-ASSETS> 3,054,741
<CURRENT-LIABILITIES> 0
<BONDS> 1,314,475
0
240,000
<COMMON> 483
<OTHER-SE> 1,153,911
<TOTAL-LIABILITY-AND-EQUITY> 3,054,741
<SALES> 0
<TOTAL-REVENUES> 94,669
<CGS> 0
<TOTAL-COSTS> 59,785
<OTHER-EXPENSES> 1,927
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,337
<INCOME-PRETAX> 13,620
<INCOME-TAX> 0
<INCOME-CONTINUING> 13,620
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,620
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.19
</TABLE>
<PAGE> 1
EXHIBIT 99.1
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
2,000,000 Shares
9 1/2% Class H Cumulative Preferred Stock
(Liquidation Preference $25.00 Per Share)
UNDERWRITING AGREEMENT
August 11, 1998
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
As Representatives of the Several Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center, North Tower
New York, New York 10281-1209
Ladies and Gentlemen:
Apartment Investment and Management Company, a Maryland corporation
(the "Company"), proposes to issue and sell an aggregate of 2,000,000 shares
(the "Firm Shares") of its 9 1/2% Class H Cumulative Preferred Stock, $0.01 par
value per share (the "Preferred Stock"), to the several underwriters named in
Schedule I hereto (collectively, the "Underwriters"), for whom Merrill Lynch &
Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"),
Prudential Securities Incorporated and Smith Barney Inc. are acting as
representatives (in such capacity, the "Representatives"). The Company also
proposes to sell to the Underwriters, upon the terms and conditions set forth in
Section 2 hereof, up to an additional 300,000 shares (the "Additional Shares")
of Preferred 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 88%
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, directly or
indirectly, through the Operating Partnership.
<PAGE> 2
The Company wishes to confirm as follows its agreement with the
Underwriters, in connection with the several purchases of the Shares by the
Underwriters.
1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has prepared and
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"). Such registration statement (as amended, if applicable) was declared
effective by the Commission on May 23, 1997. As used in this Agreement, (i) the
term "Registration Statement" means such registration statement, including
exhibits, financial statements and schedules, as amended to the date hereof,
(ii) the term "Prospectus" collectively refers to the basic prospectus dated May
22, 1997 (the "Basic Prospectus"), as supplemented by the prospectus supplement
dated August 11, 1998 (the "Prospectus Supplement"), in the form first used to
confirm sales of the Shares and (iii) the term "preliminary prospectus"
collectively refers to the Basic Prospectus, as supplemented by the preliminary
prospectus supplement dated July 30, 1998. As used herein, the terms
"Registration Statement", "Prospectus" and "preliminary prospectus" shall in
each case include the documents incorporated or deemed to be incorporated by
reference therein pursuant to Item 12 of Form S-3 under the Act which are filed
by the Company with the Commission pursuant to the Exchange Act (as defined
below) on or prior to the date of the Prospectus Supplement. 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
Supplement. As used herein, the term "Incorporated Documents" means the
documents which at the time are incorporated or deemed to be incorporated by
reference in the Registration Statement, the Prospectus, the preliminary
prospectus, or any amendment or supplement thereto.
2. AGREEMENTS TO SELL AND PURCHASE.
A. 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 $24.2125 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).
B. 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
2
<PAGE> 3
Share, pursuant to an option (the "Over-allotment Option") which may be
exercised at any time in whole or from time to time in part 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 Supplement (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 300,000 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 the Underwriters 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 at such
time 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 the
Representatives that the Underwriters propose to make a public offering of their
respective portions of the Shares as soon after this Agreement has been entered
into and, if necessary, any post-effective amendment to the Registration
Statement has become effective as in the Representatives' 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
Brown & Wood llp, 555 California Street, San Francisco, California 94104, at
9:00 A.M.. New York City time, on August 14, 1998 (the "Closing Date"). The
place of closing for the Firm Shares and the Closing Date may be varied by
agreement between the Representatives 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 Brown & Wood llp, at such time on such date (each, an "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 the Representatives 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 any Option Closing
Date for such Shares may be varied by agreement between the Representatives 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 the Representatives shall request at least one full business day preceding
the Closing Date or any Option Closing Date, as the case may be. Such
certificates shall be made available to the Underwriters 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 such 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 the Underwriters on the
Closing Date or the relevant Option Closing Date, as the
3
<PAGE> 4
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, jointly and severally, with the several
Underwriters as follows:
A. To file the Prospectus Supplement in a form approved by the
Representatives with the Commission within the applicable time period
prescribed for filing by Rule 424 under the Act.
B. The Company will advise the Representatives promptly and,
if requested by the Representatives, will confirm such advice in
writing: (i) of any request by the Commission for amendment of or
supplement to the Registration Statement or the 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 the first
sentence of paragraph (E) 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 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 the Representatives, 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 the
Representatives may reasonably request, (iii) such number of copies of
the Incorporated Documents, without exhibits, as the Representatives
may reasonably request, and (iv) up to six copies of the exhibits to
the Incorporated Documents, as the Representatives may request.
D. Prior to the end of the period of time referred to in the
first sentence in subsection (E) below, the Company will inform the
Representatives 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 the Representatives with copies of any such
amendment, supplement or document a reasonable amount of time in
advance of
4
<PAGE> 5
filing; provided, the Company will not file any such amendment,
supplement or document to which the Representatives shall reasonably
object unless such amendment, supplement or document is required to be
filed by applicable law.
E. 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
the amendment or supplement thereto) as the Underwriters 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 and 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 or 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 a
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.
F. The Company will cooperate with the Representatives 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 the Underwriters may
designate and will file such consents to service of 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.
G. The Company will timely file such reports pursuant to the
Exchange Act as are necessary in order to make generally available to
its security holders as soon as practicable an earnings statement for
the purposes of, and to provide the benefits contemplated by, the last
paragraph of Section 11(a) of the Act.
H. During the period of three years hereafter, the Company
will
5
<PAGE> 6
furnish to the Underwriters as soon as available, a copy of each report
of the Company mailed to stockholders or filed with the Commission.
I. 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 the Representatives terminating this Agreement pursuant to
Section 10 or Section 11 hereof) or if this Agreement shall be
terminated by the Representatives 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 Underwriters for all out-of-pocket expenses
(including the reasonable fees and expenses of counsel for the
Underwriters) incurred by them in connection herewith.
J. The Company will contribute the net proceeds from the sale
of the Shares to the Operating Partnership (directly or through one or
more of its wholly-owned subsidiaries) 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. In exchange for the contribution of such net
proceeds, on the Closing Date, the Operating Partnership will issue
preferred units (the "Preferred Units") of the Operating Partnership to
the Company (or one or more of its wholly-owned subsidiaries). The
terms of such Preferred Units will be substantially equivalent to the
economic terms of the Firm Shares. In addition, if any Additional
Shares are purchased by the several Underwriters, on the relevant
Option Closing Date, the Operating Partnership will issue a number of
additional Preferred Units based upon the number of such Additional
Shares purchased by the Underwriters.
K. The Company will use its best efforts to meet the
requirements to maintain its qualification for the fiscal year ending
December 31, 1998 (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").
L. 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
Preferred Stock to facilitate the sale or resale of the Shares in
violation of Regulation M under the Exchange Act.
M. The Company will use its reasonable efforts to (i)
accomplish the listing of the Shares on the New York Stock Exchange
within the 30 day period after the Closing Date and (ii) maintain the
listing of the Shares on the New York Stock Exchange or on any other
national securities exchange on which the Company's class A common
stock, par value $.01 per share (the "Class A Common Stock"), is
listed, for a period of three years after the Closing Date, unless
Merrill Lynch consents to the termination of such listing, which
consent shall not be unreasonably withheld.
7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE OPERATING
PARTNERSHIP. The Company and the Operating Partnership represent and
6
<PAGE> 7
warrant, jointly and severally, 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 Merrill Lynch expressly for use
therein. The Commission has not issued any order preventing or
suspending the use of the 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, as the case may be,
in all material respects with the provisions of the Act and did not or
will not, as the case may be, 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 Merrill Lynch expressly for use
therein.
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 any further
Incorporated Documents so filed will, when they are filed, comply in
all material respects with the requirements of the Exchange Act; 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 capital 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 authorized and outstanding
capital stock of the Company conforms
7
<PAGE> 8
in all material respects to the description thereof in the Registration
Statement and the Prospectus. The Preferred Units, when issued to the
Company (or one or more of its wholly-owned subsidiaries), will have
been duly authorized and validly issued by the Operating Partnership.
Except as described in, or contemplated by, the Registration Statement
and the Prospectus, there are no outstanding options, convertible or
exchangeable securities, warrants or other rights calling for the
issuance of capital stock of the Company or equity, partnership,
membership or beneficial interests in the subsidiaries of the Company
identified in Schedule II hereto (individually, a "Subsidiary" and,
collectively, 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 its 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 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 its
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 the date hereof, the Company indirectly owned, in the
aggregate, approximately an 88% 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
8
<PAGE> 9
Operating Partnership.
I. The Company has the corporate power and authority to enter
into this Agreement and to issue, sell and deliver the Shares to the
Underwriters as provided herein. The Operating Partnership has the
power and authority to enter into this Agreement and to issue and
deliver the Preferred Units to the Company or one or more of its
wholly-owned subsidiaries 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 and the Operating Partnership,
threatened, against the Company or any of the Subsidiaries, or to which
the Company or any of the Subsidiaries or any of their respective
properties is subject, that are required to be described in the
Registration Statement, or the Prospectus or the Incorporated Documents
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.
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 any of the Subsidiaries or of
any decree of any court or governmental agency or body having
jurisdiction over the Company or any of the Subsidiaries or any of
their respective properties 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 to 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. None of the issuance and sale of the Shares by the Company,
the issuance of the Preferred Units by the Operating Partnership, the
execution, delivery or performance of this Agreement by the Company and
the Operating Partnership, or the consummation by the Company and 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, and the filing of the preliminary prospectus supplement and
the Prospectus Supplement with the Commission pursuant to Rule 424(b)
under the Act, all of which have been or will be effected in accordance
with this Agreement, and except for the filing of the Articles
9
<PAGE> 10
Supplementary (as hereinafter defined) with the SDAT (as hereinafter
defined), which filing with the SDAT will be made prior to the Closing
Date) 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 any of 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 any of 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 any of 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 any of the Subsidiaries pursuant to the terms of any
agreement or instrument to which any of them is a party or 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, Arthur Andersen LLP, and Deloitte &
Touche 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 (or were)
independent public accountants with respect to the entities covered by
their respective audit reports included or incorporated by reference in
the Registration Statement and the Prospectus, as required by the Act.
N. The financial statements, together with related schedules
and notes, of (A) the Company included or incorporated by reference in
the Registration Statement or the Prospectus (or any amendment or
supplement thereto), (B) the other entities whose financial statements
are included or incorporated by reference in the Registration Statement
or the Prospectus (or any amendment or supplement thereto) and (C) if
applicable, any properties whose financial statements are included or
incorporated by reference in the Registration Statement or the
Prospectus (or 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, (ii) the
financial position, results of operations and changes in financial
position (on a consolidated or combined basis, if applicable), or the
combined revenues and certain expenses, as the case may be, of such
other entities, and (iii) the combined revenues and certain expenses of
any such properties, as the case may be, on the basis stated or
incorporated by reference in the Registration Statement or the
Prospectus, as the case may be, 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 or 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
or entities, as the case may be, whose financial statements are
included or incorporated by reference in the Registration Statement or
the Prospectus. The selected historical financial
10
<PAGE> 11
data of the Company (and its predecessors) set forth under the captions
"Summary Historical Financial Information of AIMCO" and "Summary Pro
Forma Financial and Operating Information of AIMCO" in the Prospectus
Supplement present fairly, on the basis stated in the Prospectus
Supplement, the historical financial information of the Company (and
its predecessors) included therein. The selected historical and pro
forma financial data of any other entity or property included or
incorporated by reference in the Registration Statement or the
Prospectus present fairly, on the basis stated or incorporated by
reference in the Registration Statement or the Prospectus, as the case
may be, the historical or pro forma, as the case may be, financial
information of such entity or property, as the case may be. The
unaudited pro forma financial statements included, or incorporated by
reference, in the Prospectus 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. The selected pro forma
financial data of the Company set forth under the caption "Summary Pro
Forma Financial and Operating Information of AIMCO" and "Capitalization
of AIMCO" in the Prospectus Supplement present fairly, on the basis
stated in the Prospectus Supplement, the pro forma financial
information of the Company included therein and have been compiled on a
basis consistent with that of the unaudited pro forma financial
statements included, or incorporated by reference, in the Prospectus.
O. Except as disclosed in or contemplated by the Registration
Statement and the Prospectus, subsequent to the respective dates as of
which such information is given in the Registration Statement and the
Prospectus, 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 Company and its 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.
11
<PAGE> 12
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 the 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 as otherwise
described in the Prospectus or such as do not, singly or in the
aggregate, materially affect the value of 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 and 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 its subsidiaries taken as a whole, (iv) neither the
Company nor any of the Subsidiaries 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 its
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 its
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,
12
<PAGE> 13
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 its subsidiaries have obtained Texas Form T-1 Policies
of Title Insurance) from title insurers of recognized financial
responsibility on all of the Owned Properties and such policies are in
full force and effect, except where the failure to obtain such title
insurance would not, singly or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
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 of the
Subsidiaries 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, properties 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 Prospectus and the preliminary prospectus.
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 and there is no tax deficiency that has been or, to the knowledge
of the Company, is threatened to be
13
<PAGE> 14
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 right to require registration of shares of capital
stock or any other security of the Company or limited partnership units
or any other security of the Operating Partnership 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 its initial taxable year ended
December 31, 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, 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, 1998 and
succeeding taxable years and, after consummation of the Insignia Merger
(as defined in the Prospectus), will take such action as may be
necessary to qualify as a REIT for the taxable year ending December 31,
1998.
AB. 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, finder's fee or other like payment with
respect to the consummation of the transactions contemplated by this
Agreement.
AC. The Company has applied to have the Shares listed on the
New York Stock Exchange.
AD. In connection with the offering of the Shares, neither the
Company nor any of its subsidiaries has, directly or indirectly, bid
for, purchased or attempted to influence any person to bid for or
purchase securities of the Company in violation of Regulation M under
the Exchange Act.
7. INDEMNIFICATION AND CONTRIBUTION.
A. The Company and the Operating Partnership agree, jointly
and severally, to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of
Section 15 of the Act or Section 20 of the
14
<PAGE> 15
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, any preliminary prospectus, or any amendment or
supplement to any of the foregoing, 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 such Underwriter through Merrill Lynch
expressly for use in connection therewith. The foregoing indemnity
agreement shall be in addition to any liability which the Company or
the Operating Partnership 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 participate in the defense thereof, but the fees and
expenses of such separate 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 and the
Company or the Operating Partnership, and such Underwriter or such
controlling person shall have been advised by its counsel that
representation of such indemnified party and the Company or the
Operating Partnership, as the case may be, 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 Merrill Lynch,
and that all such reasonable fees and expenses shall be reimbursed as
they are incurred. Neither the Company nor the Operating Partnership
shall be liable for any settlement of any such action, suit or
proceeding effected without its
15
<PAGE> 16
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, jointly
and severally, 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 signed 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 untrue statements or omissions or
alleged untrue statements or omissions made in the Registration
Statement, the Prospectus, the preliminary prospectus or any amendment
or supplement to any of the foregoing in reliance upon and in
conformity with information relating to such Underwriter furnished in
writing to the Company by or on behalf of such Underwriter through
Merrill Lynch expressly for use in the Registration Statement, the
Prospectus, the preliminary prospectus or any amendment or supplement
to any of the foregoing. 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, any preliminary
prospectus or any amendment or supplement to any of the foregoing 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, as incurred, (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
16
<PAGE> 17
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 discount 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 material fact or the omission
or alleged omission to state a material fact relates to information
supplied by the Company or 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 (i) 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 and (ii) such settlement does not include a
statement as to, or an omission of, fault, culpability or a failure to
act by or on behalf of such indemnified party.
G. Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or
contribution under this Section 7 shall
17
<PAGE> 18
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 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, the
Company's officers who signed the Registration Statement 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 the Representatives, 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 the Representatives' 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 the opinion of the Representatives, would materially
adversely affect the market for the Shares, or (ii) any event or
development relating to or involving the Company or any of its
subsidiaries 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 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 the opinion of the Representatives, materially adversely
affect the market for the Shares,
C. The Representatives shall have received on the Closing Date
(i)
18
<PAGE> 19
an opinion of Skadden, Arps, Slate, Meagher & Flom LLP, dated the
Closing Date and addressed to the Underwriters, to the effect set forth
in Exhibit A hereto, provided, that the opinions set forth in
paragraphs 8 and 9 thereof may be set forth in a separate opinion of
such counsel, (ii) an opinion of Piper & Marbury L.L.P., dated the
Closing Date and addressed to the Underwriters, to the effect set forth
in Exhibit B hereto, and (iii) an opinion of the General Counsel of the
Company, dated the Closing Date and addressed to the Underwriters, to
the effect set forth in Exhibit C. In addition, the Representatives
shall also have been furnished with a copy of the opinion dated October
18, 1995 and reliance letter dated the Closing Date of Florida counsel
and a copy of the opinions of Altheimer & Gray dated May 8, 1998 (or
any subsequent opinions issued in lieu of such opinions dated May 8,
1998) and any related reliance letters delivered to Skadden, Arps,
Slate, Meagher & Flom LLP, all delivered in connection with the opinion
referred to in clause (i) of this paragraph.
D. The Underwriters shall have received on the Closing Date an
opinion of Brown & Wood LLP, counsel for the Underwriters, dated the
Closing Date and addressed to the Underwriters, with respect to the
Registration Statement, the Prospectus and this Agreement, which
opinion shall be satisfactory in all respects to the Representatives,
and such counsel shall have been provided by the Company with such
documents and information as they may reasonably request to enable them
to pass on such matters. In rendering such opinion, such counsel may
rely, as to matters of Maryland law, on the opinion of Piper & Marbury
L.L.P.
E. The Representatives shall have received letters addressed
to the Underwriters, dated the date hereof and the Closing Date, from
Ernst & Young LLP, independent certified public accountants,
substantially in the forms heretofore approved by the Representatives.
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; (ii) there shall not have
been, since the respective dates as of which information is given in
the Registration Statement and the Prospectus, except as may otherwise
be stated in the Registration Statement and Prospectus, 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 its 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
its subsidiaries, taken as a whole, other than those reflected in or
contemplated by the Registration Statement or the Prospectus; 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 and as of the Closing Date as if made
on and as of the Closing Date, and the Representatives 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 the Representatives) to the
effect set forth in this Section 8(F)
19
<PAGE> 20
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 respective agreements herein contained and
required to be performed or complied with by it hereunder at or prior
to the Closing Date.
H. The Company shall have duly filed the articles
supplementary (the "Articles Supplementary") designating the Preferred
Stock with the State Department of Assessments and Taxation of Maryland
(the "SDAT").
I. At the Closing Date, the Shares shall have a rating of at
least "BB" by Duff & Phelps Credit Rating Co. and "ba3" by Moody's
Investors Service, Inc., and the Company shall have delivered to the
Representatives a letter, dated as of such date, from each such rating
organization, or other evidence satisfactory to the Representatives,
confirming that the Shares have such ratings. Since the date hereof,
there shall not have occurred a downgrading in the rating assigned to
the Shares or any of the Company's other securities by any such rating
organization, and no such rating organization shall have publicly
announced that it has under surveillance or review, with possible
negative implications, its rating of the Shares or any of the Company's
other securities.
J. The Company shall have furnished or caused to be furnished
to the Representatives such further certificates and documents as the
Representatives shall have reasonably requested.
K. In connection with the Offering, the Company has not,
directly or indirectly, bid for, purchased or attempted to influence
any person to bid for or purchase securities of the Company in
violation of Regulation M under the Exchange Act.
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 the Representatives and to counsel for the
Underwriters.
Any certificate or document signed by any officer of the Company or
authorized representative of the Operating Partnership or its general partner
and delivered to the Representatives or to counsel for the Underwriters on the
Closing Date or any Option Closing Date, shall be deemed a joint and several
representation and warranty by the Company and the Operating Partnership to each
Underwriter as to the statements made therein.
The several obligations of the Underwriters to purchase any Additional
Shares hereunder are subject to the satisfaction on and as of the relevant
Option Closing Date of the conditions set forth in this Section 8, except that,
if such 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. Without
limitation to the foregoing, the several
20
<PAGE> 21
obligations of the Underwriters to purchase Additional Shares hereunder on any
Option Closing Date are subject to the conditions set forth in paragraph (I)
above.
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), the Prospectus, the preliminary prospectus,
and each amendment or supplement to any of them, (ii) the printing (or
reproduction) and delivery (including postage, air freight charges and charges
for counting and packaging) of such copies of the Registration Statement, the
Prospectus, the preliminary 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 the
Representatives, or by the Representatives, 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
or on an Option 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 such 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, to purchase the Shares which such defaulting
Underwriter or Underwriters are obligated, but fail or refuse, to purchase. If
any one or more of
21
<PAGE> 22
the Underwriters shall fail or refuse to purchase Shares which it or they are
obligated to purchase on the Closing Date or on an Option 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 such date and arrangements satisfactory to the
Underwriters and the Company for the purchase of such Shares by one or more
non-defaulting Underwriters or other party or parties approved by the
Underwriters and the Company are not made within 36 hours after such default,
this Agreement or, with respect to any Option Closing Date which occurs after
the Closing Date, the obligations of the several Underwriters to purchase and of
the Company to sell the Additional Shares to be purchased and sold on such
Option Closing Date, 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 or, in the case of any Option Closing
Date which is after the Closing Date, which does not result in a termination of
the obligations of the several Underwriters to purchase and of the Company to
sell the relevant Additional Shares, as the case may be, either the
Representatives or the Company shall have the right to postpone the Closing Date
or the relevant Option Closing Date, as the case may be, 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 the Representatives' 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 the Representatives' 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
any securities of the Company shall have been suspended or materially limited,
or 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 the Representatives' 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 Supplement or to enforce contracts for the resale of the Shares by
the Underwriters. Notice of such termination may be given to the Company by
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.
22
<PAGE> 23
12. INFORMATION FURNISHED BY THE UNDERWRITERS. The statements set forth
in the third sentence of the third paragraph and the last paragraph on the cover
page of the Prospectus Supplement, the stabilization legend on page S-2 of the
Prospectus Supplement, and the statements in the second, fifth (fourth sentence
only), sixth, seventh, eighth and tenth (solely insofar as relates to the
Underwriters and the Representatives) paragraphs under the caption
"Underwriting" in the Prospectus Supplement, constitute the only information
furnished in writing by or on behalf of the Underwriters, through Merrill Lynch,
as such information is referred to in Sections 6(A), 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 the Underwriters, care of Merrill Lynch,
Pierce, Fenner & Smith Incorporated, 10877 Wilshire Boulevard, Suite 1900, Los
Angeles, California 90024, Attention: Paul Meurer.
This Agreement has been and is made solely for the benefit of the
several Underwriters, the Company, the Operating Partnership, the Company's
directors, the Company's officers who signed the Registration Statement, 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. Please confirm that the foregoing correctly sets
forth the agreement among the Company, the Operating Partnership and the several
Underwriters.
[SIGNATURES ON FOLLOWING PAGE]
23
<PAGE> 24
Very truly yours,
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
By:
Name: Peter Kompaniez
Title: President
AIMCO PROPERTIES, L.P.
By: AIMCO-GP, Inc., its General Partner
By:
Name: Peter Kompaniez
Title: Vice President
Confirmed as of the date first above mentioned.
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
As Representatives of the Several Underwriters
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
Authorized Signatory
Form themselves and as representatives of the
Underwriters named in Schedule I hereto.
