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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-13232
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
(Exact name of registrant as specified in its charter)
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MARYLAND 84-1259577
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1873 SO. BELLAIRE STREET, SUITE 1700, DENVER, 80222-4348
CO (Zip Code)
(Address of principal executive offices)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (303) 757-8101
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Class A Common Stock New York Stock Exchange
Class C Cumulative Preferred Stock New York Stock Exchange
Class D Cumulative Preferred Stock New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
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 / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10K. / /
As of March 18, 1998, there were 41,417,376 shares of Class A Common Stock
and 162,500 shares of Class B Common Stock outstanding. The aggregate market
value of the voting and non-voting common stock held by non-affiliates of the
registrant, was approximately $1,377 million as of March 18, 1998.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the registrant's 1998 annual meeting of
stockholders are incorporated by reference into Part III of this Annual Report.
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APARTMENT INVESTMENT AND MANAGEMENT COMPANY
TABLE OF CONTENTS
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
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ITEM PAGE
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PART I
1. Business............................................................................................ 1
Recent Developments................................................................................. 2
Financial Information About Industry Segments....................................................... 9
Growth Strategies................................................................................... 9
Operating Strategies................................................................................ 10
Taxation of the Company............................................................................. 11
Competition......................................................................................... 12
Regulation.......................................................................................... 12
Environmental Matters............................................................................... 13
Insurance........................................................................................... 13
Employees........................................................................................... 13
2. Properties.......................................................................................... 13
3. Legal Proceedings................................................................................... 14
4. Submission of Matters to a Vote of Security Holders................................................. 16
PART II
5. Market for the Registrant's Common Equity and Related Stockholder Matters........................... 16
6. Selected Financial Data............................................................................. 18
7. Management's Discussion and Analysis of Financial Condition and Results of Operations............... 19
7a. Quantitative and Qualitative Disclosures About Market Risk.......................................... 31
8. Financial Statements and Supplementary Data......................................................... 31
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................ 31
PART III
10. Directors and Executive Officers of the Registrant.................................................. 31
11. Executive Compensation.............................................................................. 36
12. Security Ownership of Certain Beneficial Owners and Management...................................... 37
13. Certain Relationships and Related Transactions...................................................... 37
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K..................................... 37
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PART I
INTRODUCTION
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements in certain circumstances. Certain
information included in this Report, the Company's (as defined hereafter) Annual
Report to Shareholders and other Company filings (collectively "SEC Filings")
under the Securities Act of 1933, as amended, and the Securities Exchange Act of
1934, as amended (as well as information communicated orally or in writing
between the dates of such SEC Filings) contains or may contain information that
is forward looking, including, without limitation, statements regarding the
effect of acquisitions, the Company's future financial performance and the
effect of government regulations. Actual results may differ materially from
those described in the forward looking statements and will be affected by a
variety of risks and factors including, without limitation, national and local
economic conditions, the general level of interest rates, terms of governmental
regulations that affect the Company and interpretations of those regulations,
the competitive environment in which the Company operates, financing risks,
including the risk that the Company's cash flows from operations may be
insufficient to meet required payments of principal and interest, 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 failure of such acquisitions to
perform in accordance with projections, and possible environmental liabilities,
including costs which may be incurred due to necessary remediation of
contamination of properties presently owned or previously owned by the Company.
In addition, the Company's continued qualification as a real estate investment
trust involves the application of highly technical and complex provisions of the
Internal Revenue Code. Readers should carefully review the Company's financial
statements and the notes thereto, as well as the risk factors described in the
SEC filings.
ITEM 1. BUSINESS
Apartment Investment and Management Company, a Maryland corporation formed
on January 10, 1994 ("AIMCO" and, together with its subsidiaries and other
entities in which it owns an equity interest, the "Company"), is a
self-administered and self-managed real estate investment trust (a "REIT")
engaged in the ownership, acquisition, development, expansion and management of
mulit-family apartment properties. On July 24, 1994, AIMCO completed its initial
public offering and engaged in a business combination and consummated a series
of related transactions which enabled it to continue and expand the property
management and related businesses of Property Asset Management, L.L.C., Limited
Liability Company, and its affiliated companies, and PDI Realty Enterprises,
Inc. (collectively, the "AIMCO Predecessors"). Through its controlling interests
in AIMCO Properties, L.P. a Delaware limited partnership (the "AIMCO Operating
Partnership"), other limited partnerships and subsidiary corporations, the
Company owned or controlled 40,039 units in 147 apartment properties (the "Owned
Properties"), held an equity interest in 83,431 units in 515 apartment
properties (the "Equity Properties") and managed 69,587 units in 374 apartment
properties for third party owners and affiliates (the "Managed Properties" and,
together with the Owned Properties and Equity Properties, the "AIMCO
Properties"), bringing the total portfolio to 193,057 units in 1,036 apartment
properties as of December 31, 1997. The AIMCO Properties are located in 42
states, the District of Columbia and Puerto Rico. As of December 31, 1997, AIMCO
held an 88% ownership interest in the AIMCO Operating Partnership.
The Company's principal executive offices are located at 1873 So. Bellaire
Street, Suite 1700, Denver, Colorado 80222-4348 and its telephone number is
(303) 757-8101.
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1997 DEVELOPMENTS
NHP ACQUISITION
In a series of transactions in 1997, the Company acquired NHP Incorporated
("NHP"), a nationwide real estate services company engaged in property and asset
management, as well as related services, including equity investments,
purchasing, risk management and home healthcare.
On May 5, 1997, pursuant to a Stock Purchase Agreement dated as of April 16,
1997, AIMCO acquired 2,866,073 shares of common stock ("NHP Common Stock") of
NHP Incorporated ("NHP") from Demeter Holdings ("Demeter"), Capricorn Investors,
L.P. ("Capricorn") and certain of Capricorn's limited partners (collectively,
the "NHP Sellers") in exchange for 2,142,857 shares of AIMCO Class A Common
Stock, par value $0.01 per share ("Class A Common Stock"), with a recorded value
of $57.3 million.
NHP provides a broad array of real estate services nationwide, including
property management and asset management as well as a group of related services,
including equity investments, purchasing, risk management and home health care.
Subsequent to the purchase, AIMCO contributed the NHP Common Stock to the
AIMCO Operating Partnership in exchange for additional Partnership Common Units
("OP Units") of the AIMCO Operating Partnership. The AIMCO Operating Partnership
then contributed the NHP Common Stock to the Company's unconsolidated
subsidiary, AIMCO/NHP Holdings, Inc. ("ANHI") in exchange for all of the shares
of ANHI's non-voting preferred stock, representing a 95% economic interest in
ANHI. Concurrently, ANHI obtained a loan in the amount of $72.6 million (the
"ANHI Credit Facility") and used the proceeds from the loan to purchase an
additional 3,630,000 shares of NHP Common Stock from the NHP Sellers. Upon the
completion of this transaction, ANHI owned 6,496,073 shares of NHP Common Stock,
representing 51.3% of the NHP Common Stock outstanding as of May 31, 1997.
In separate transactions, occurring in August and September 1997, ANHI sold
to AIMCO 5,717,000 shares of NHP Common Stock for an aggregate purchase price of
$114.4 million. ANHI used $74.3 million of the proceeds from the sale to repay
the principal and accrued interest outstanding under the ANHI Credit Facility
and distributed $40.0 million to the AIMCO Operating Partnership and its other
shareholders. In addition, AIMCO acquired an additional 434,049 shares of NHP
Common Stock from the NHP Sellers, bringing the total number of shares of NHP
Common Stock owned by AIMCO and ANHI to 6,930,122.
On December 8, 1997, AIMCO/NHP Acquisition Corp., a wholly-owned subsidiary
of AIMCO merged with and into NHP, with NHP being the surviving corporation and
becoming a wholly owned subsidiary of AIMCO (the "NHP Merger"). As a result of
the NHP Merger, each outstanding share of NHP Common Stock, other than the
shares owned by ANHI, was converted into the right to receive either (i) 0.74766
shares of AIMCO Class A Common Stock or (ii) at the election of the holder,
0.37383 shares of AIMCO Class A Common Stock and $10.00 in cash. The conversion
of the NHP Common Stock resulted in the issuance of an additional 4,554,827
shares of AIMCO Class A Common Stock and cash payments of $0.3 million,
excluding cash paid to ANHI of $7.8 million.
Immediately following the NHP Merger, the Company completed a reorganization
(the "NHP Reorganization") of the assets and operations of NHP. As a result of
the NHP Reorganization, the former operations of NHP are now primarily conducted
through unconsolidated subsidiaries of AIMCO (the "Unconsolidated
Subsidiaries"). The Unconsolidated Subsidiaries have ownership structures
similar in which the Company holds a 95% economic interest through ownership of
shares of non-voting preferred stock, and certain directors and officers of
AIMCO hold a 5% economic interest through direct or indirect ownership of all of
the outstanding shares of common stock.
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NHP REAL ESTATE PARTNERSHIPS
In June 1997, the Company purchased from Demeter, Capricorn, Phemus
Corporation, J. Roderick Heller, III and NHP Partners Two LLC, a group of
companies (the "NHP Real Estate Companies") affiliated with NHP that hold
general and limited partnership interests in partnerships (the "NHP
Partnerships") that own 534 conventional and affordable apartment properties
(the "NHP Properties") containing 87,659 units, a captive insurance subsidiary
and certain related assets. "Affordable Units" are units benefitting from some
sort of interest rate or rental subsidy or otherwise subject to governmental
programs aimed at providing low and moderate income housing. The Company paid
aggregate consideration of $54.8 million in cash and warrants to purchase
399,999 shares of Class A Common Stock at an exercise price of $36.00 per share.
As a result of the NHP Reorganization, the Master Property Management Agreement,
pursuant to which NHP managed the NHP Properties, was terminated.
As of December 31, 1997, the Company had made offers to the limited partners
of 25 NHP Partnerships to acquire their limited partnerships interests. The
Company has accepted tenders from certain limited partners, in exchange for
$34.2 million in cash and Partnership Common Units ("OP Units") of the AIMCO
Operating Partnership, valued at $7.3 million. In addition, during September and
October 1997, the Company purchased the existing mortgages on four NHP
Properties for an aggregate of $60.6 million in cash, and land leases for two
NHP Properties for $12.9 million in cash transactions.
INDIVIDUAL PROPERTY ACQUISITIONS
During the year ended December 31, 1997, the Company purchased or acquired
control of 59 properties (including 15 NHP Properties) consisting of 17,191
apartment units and disposed of five properties consisting of 916 apartment
units, as described below. The cash portions of the acquisitions were funded
from proceeds raised through public offerings, private offerings, borrowings
under the Company's revolving credit facility, other short-term and long-term
financings or with working capital. The cash proceeds from the property
dispositions was used to repay outstanding indebtedness or fund working capital
requirements.
FOXCHASE. In December 1997, the Company purchased Foxchase Apartments
("Foxchase"), a 2,113-unit apartment complex built in 1947 and located in
Alexandria, Virginia, for approximately $107.7 million, consisting of
approximately $70 million in assumed mortgage obligations and the remainder in
OP Units. The Company purchased Foxchase from a limited partnership for which
the Company serves as general partner and majority limited partner.
FISHERMAN'S LANDING. In December 1997, the Company acquired Fisherman's
Landing, a 200-unit apartment complex built in 1984 and located in Tampa,
Florida, for approximately $8.5 million, including the assumption of outstanding
indebtedness.
WINDWARD AT THE VILLAGES. In October 1997, the Company purchased Windward
at the Villages Apartments ("Windward"), a 196-unit apartment community built in
1988 and located in West Palm Beach, Florida, for approximately $10.8 million.
Windward is adjacent to the Bear Lakes Country Club and Golf Course in the
Villages of Palm Beach Lakes, a master planned golf course community.
MORTON TOWERS. In September 1997, the Company, through two subsidiary
limited partnerships in which the Company is the sole general partner and has an
aggregate ownership interest of approximately 77%, acquired the Morton Towers
Apartments, a 1,277-unit, twin tower high rise apartment complex built in 1960
and located in Miami Beach, Florida, for $63.0 million, including approximately
1.4 million OP Units valued at $42.0 million. The Company expects to undertake a
major renovation of the complex at an estimated total cost of $35.0 million.
LOS ARBOLES. In September 1997, the Company acquired Los Arboles
Apartments, a 232-unit apartment community built in 1985 and located in
Chandler, Arizona, for approximately $11.3 million. Los
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Arboles is adjacent to Vista del Lagos, a 200-unit apartment community in which
the Company has an equity interest.
SAWGRASS. In July 1997, the Company purchased Sawgrass Apartments, a
208-unit apartment community built in 1989 and located in Orlando, Florida, for
approximately $9.6 million. Sawgrass was formerly a Managed Property.
TUSTIN EAST VILLAGE/THE CALIFORNIAN. In June 1997, the Company acquired
Tustin East Village and The Californian, two garden-style apartment communities
consisting of 292 units built in 1970, and Red Hill Plaza, an adjacent shopping
plaza built in 1970 and located in Tustin, California, for $21.4 million,
including approximately 0.5 million OP Units valued at $13.9 million. These
properties are contiguous to Brookside Apartments, another Owned Property,
consisting of 336 units, purchased in April 1996 from the same seller, and are
operated with Brookside as one property.
THE VININGS. In June 1997, the Company acquired The Vinings at the
Waterways, a 180-unit luxury garden-style apartment community built in 1991 and
located in Aventura, Florida, for approximately $16.4 million. The Vinings is
located by a yacht basin and marina directly accessing the Intracoastal Waterway
and is also adjacent to a commercial center. Aventura is a coastal city located
near North Miami Beach.
STONEBROOK. In May 1997, the Company acquired the Stonebrook Apartments, a
244-unit apartment community built in 1991 and located in Orlando, Florida, for
approximately $11.0 million. Stonebrook is less than a mile from the location of
a proposed interchange on a beltway around Orlando and is near a regional
airport being expanded for commercial aviation.
BAY CLUB. In April 1997, the Company acquired The Bay Club at Aventura, a
702-unit luxury high rise apartment complex, consisting of two towers built in
1990, located in Aventura, Florida, for approximately $71.0 million. The
property includes approximately 3.5 acres of land with permits to construct a
third tower, consisting of 225 units.
WINTHROP ACQUISITION
In October 1997, the Company acquired a portfolio of 35 residential
apartment properties (the "Winthrop Portfolio"). The 35 garden-style apartment
communities comprising the Winthrop Portfolio are located in seven states, have
an average age of 17 years and contain a total of 8,175 apartment units. Fifteen
of the apartment communities are located in Arizona, with 2,602 units in Phoenix
and 816 units in Tucson; eleven apartment communities with 2,075 units are
located throughout Texas; two apartment communities with 1,223 units are located
in Florida; two apartment communities with 494 units are located in Michigan;
three apartment communities with 536 units are located in Georgia; one apartment
community with 293 units is located in Illinois; and one apartment community
with 136 units is located in North Carolina.
The aggregate purchase price for the Winthrop Portfolio, including
transactions costs, was approximately $263.0 million. The Company paid aggregate
consideration of $115.6 million in cash to the sellers, assumed $8.3 million in
mortgage indebtedness and incurred $139.1 million of new indebtedness secured by
the properties, to complete the purchase. The Company has also budgeted an
additional $16.0 million in initial capital expenditures related to the Winthrop
Portfolio.
ENGLISH TENDER OFFERS
During 1997, the Company made separate offers (the "English Tender Offers")
to the limited partners of 25 partnerships, acquired in November 1996 (the
"Tender Offer English Partnerships"), to acquire their limited partnerships
interests. Various limited partners accepted tenders representing, in the
aggregate,
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approximately 46% of all outstanding limited partnership interests in the Tender
Offer English Partnerships subject to the offers. The Company paid $16.0 million
in cash and issued OP Units valued at $1.7 million, for the interests tendered
in the English Tender Offers. The remaining limited partners have elected to
continue as limited partners in the Tender Offer English Partnerships.
PROPERTY DISPOSITIONS
In October 1997, the Company sold the Meadowbrook, Ashwood, Parkside,
Chimney Ridge and Cobble Creek apartment properties, which consisted of an
aggregate of 916 units located in Texas and Arizona, to an unaffiliated third
party. Cash proceeds from the sale of approximately $22.7 million were used to
repay a portion of the Company's outstanding short-term indebtedness. The
Company recognized a gain of approximately $2.8 million on the disposition of
these five properties.
DEBT ASSUMPTIONS AND FINANCINGS
In order to reduce the impact of changes in interest rates prior to the
refinancing, the Company routinely enters into interest rate lock agreements
that are accounted for as anticipatory hedges.
In April 1997, 23 partnerships controlled by the Company completed a $108.0
million refinancing of secured, short term, floating rate indebtedness with
secured, 20-year, fixed rate, fully amortizing debt. The new debt is secured by
27 apartment properties owned by such partnerships. In connection with this
refinancing, the Company received proceeds of $3.4 million from two interest
rate lock agreements accounted for as hedges. The aggregate gain on the interest
rate lock agreements was deferred and will be amortized over the life of the
debt.
During 1997, the Company assumed $220.4 million of mortgage indebtedness in
connection with purchases of 39 apartment properties. In addition, in connection
with the acquisition of the NHP Real Estate Companies, the Company assumed
fixed-rate mortgage indebtedness totaling $212.3 million, which is secured by 15
properties held by partnerships in which the Company acquired controlling
interests.
In December 1997, the Company refinanced certain mortgage indebtedness
secured by 27 properties, of which five are Owned Properties. The new notes,
which have an aggregate outstanding principal balance of $91.5 million as of
December 31, 1997, have an aggregate weighted average fixed interest rate of
6.71%. The new notes are fully amortizing, require monthly principal and
interest payments and mature in December 2012. In anticipation of the
refinancing, the Company entered into an interest rate lock agreement with an
investment banking company. Upon the settlement of the interest rate lock
agreement, the Company realized a loss of $10.9 million, which will be amortized
over the life of the new debt.
In May 1997, the Company increased its maximum amount available under its
revolving credit facility (the "Credit Facility") with Bank of America National
Trust and Savings Association ("Bank of America") from $50.0 million to $100.0
million. The outstanding balance under the Credit Facility was $33.5 million at
December 31, 1997. As of December 31, 1997 the Company was in compliance with
all debt covenants associated with the Credit Facility.
In January 1998, the Company replaced the Credit Facility with a new
unsecured $50 million revolving credit facility (the "New Credit Facility") with
Bank of America and BankBoston, N.A. The AIMCO Operating Partnership is the
borrower under the New Credit Facility, but all obligations thereunder are
guaranteed by AIMCO and certain of its subsidiaries. The interest rate under the
New 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 New Credit Facility
expires on January 26, 2000 unless extended for successive one-year periods, at
the discretion of the lenders. The New Credit Facility provides for the
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conversion of the revolving facility into a three year term loan. The
availability of funds to the Company under the New Credit Facility is subject to
certain borrowing base restrictions and other customary restrictions, including
compliance with financial and other covenants thereunder.
In February 1998, the AIMCO Operating Partnership, as borrower, and AIMCO
and certain single asset wholly-owned subsidiaries of the Operating Partnership
(the "Owners"), as guarantors, entered into a five year $50 million secured
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 base loan 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 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 FNMA mortgage-backed securities 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 base 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, an
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 anticipates that it will refinance a portion of its floating
rate indebtedness with fixed rate indebtedness during 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 million. The interest
rate lock agreement matures on March 19, 1998, and fixes the ten year treasury
rate at 6.211%. Based on the fair value of the interest rate lock at December
31, 1997, the Company has a potential loss of approximately $2.6 million, which
will be amortized over the life of the new debt and included in interest
expense.
EQUITY OFFERINGS
In February 1997, AIMCO completed a public offering of 2,015,000 shares of
Class A Common Stock at a public offering price of $26.75 per share. The net
proceeds of approximately $51.0 million were used to repay a portion of the
Company's indebtedness incurred in connection with 1996 acquisitions.
In May 1997, AIMCO sold 2,300,000 shares of Class A Common Stock at an
average price of $28.00 per share in two public offerings. The net proceeds of
approximately $63.0 million were used to repay outstanding indebtedness under
the Credit Facility and to provide working capital.
In August 1997, AIMCO sold 750,000 shares of newly created Class B
Cumulative Convertible Preferred Stock, par value $.01 per share ("Class B
Preferred Stock") for gross proceeds of $75.0 million in cash to an
institutional investor in a private transaction. The proceeds from the sale of
the Class B Preferred Stock were used to repay borrowings outstanding under the
Credit Facility and to provide working capital.
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In August and September 1997, AIMCO issued an aggregate of 5,052,418 shares
of Class A Common Stock to institutional investors for aggregate net proceeds of
$156.9 million. The Company used $114.4 million of such proceeds to purchase
6,068,974 shares of NHP Common Stock from ANHI, repaid $7.0 million of
indebtedness and contributed the remaining $35.5 million to the AIMCO Operating
Partnership.
In October 1997, AIMCO issued 7,000,000 shares of Class A Common Stock. Net
proceeds from the sale of approximately $242.5 million were used to fund certain
property acquisitions, repay outstanding indebtedness under the Credit Facility
and provide working capital.
In December 1997, AIMCO issued 2,400,000 shares of newly created Class C
Cumulative Preferred Stock, par value $.01 per share ("Class C Preferred Stock")
in a public offering. The net proceeds of $58.1 million were used to repay
borrowings outstanding under the Credit Facility and to provide working capital.
Subsequent to December 31, 1997, AIMCO issued 4,200,000 shares of newly
created Class D Cumulative Preferred Stock, par value $0.01 per share (the
"Class D Preferred Stock") in a public offering. The net proceeds of $101.7
million were used to repay indebtedness under the New Credit Facility and to
provide working capital.
MANAGEMENT STOCK ACQUISITION
In July 1997, AIMCO sold 1,100,000 newly issued shares of Class A Common
Stock to certain members of the Company's senior management, at a price of
$30.00 per share, the closing price of the stock on the date of purchase. In
exchange for the shares purchased, such members of senior management executed
notes payable to the Company totaling $33.0 million, of which $15.8 million has
been repaid as of February 28, 1998. The notes bear interest at 7.25% 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.
As of December 31, 1997, members of the Company's management and Board of
Directors own 3,003,056 shares of Class A Common Stock and 905,232 OP Units,
which represents an 8.5% ownership interest in the Company. Based on the closing
price of AIMCO's Class A Common Stock, management's investment in the Company
has increased from $65.1 million as of December 31, 1996 to $143.6 million as of
December 31, 1997.
PENDING ACQUISITIONS
On December 23, 1997, AIMCO and Ambassador Apartments, Inc., a Maryland
corporation that has elected to be taxed as a REIT ("Ambassador"), entered into
an Agreement and Plan of Merger (the "Ambassador Merger Agreement") pursuant to
which Ambassador will be merged with and into AIMCO, with AIMCO being the
surviving corporation (the "Ambassador Merger"). The Ambassador Merger Agreement
also provides that, unless otherwise agreed by the parties, Ambassador
Apartments, L.P., a Delaware limited partnership (the "Ambassador Operating
Partnership"), will be merged with and into the AIMCO Operating Partnership (the
"Ambassador Reorganization") and all outstanding Ambassador Operating
Partnership interests will be converted into AIMCO OP Units based on the
Conversion Ratio, as defined below. In the Ambassador Merger Agreement,
Ambassador's Common Stock, par value $0.01 per share, (the "Ambassador Common
Stock"), is valued at $21 per share. In the Ambassador Merger, holders of
Ambassador Common Stock will receive for each share of Ambassador Common Stock a
number of shares of AIMCO Class A Common Stock equal to the Conversion Ratio.
The "Conversion Ratio" means the quotient determined by dividing $21 by the
"AIMCO Index Price," which is the aggregate of the average of the high and low
sales prices for Class A Common Stock on each of the twenty consecutive New York
Stock Exchange ("NYSE") trading days ending on the fifth NYSE trading day
immediately preceding the closing of the Ambassador Merger, divided by 20. If
the AIMCO Index Price is
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less than $36 (i.e. the Conversion Ratio is greater than 0.583), then AIMCO may
elect to fix the Conversion Ratio at 0.583 and pay to each holder of Ambassador
Common Stock cash sufficient to provide $21 in value for each share of
Ambassador Common Stock. Any outstanding options to purchase Ambassador Common
Stock may be converted, at the election of the option holder, into cash or
options to purchase Class A Common Stock at the Conversion Ratio. The Ambassador
Merger Agreement provides that Ambassador's outstanding preferred stock, par
value $0.01 per share (the "Ambassador Preferred Stock"), shall be redeemed,
subject to the right of holders of shares of Ambassador Preferred Stock to
convert such shares into Ambassador Common Stock, immediately prior to the
Ambassador Merger. Assuming a conversion ratio of 0.583, the Company will issue
up to an aggregate of 7,205,739 shares of Class A Common Stock in the Ambassador
Merger, based upon the number of shares of Ambassador Common Stock, options to
purchase Ambassador Common Stock and other securities currently convertible into
shares of Ambassador Common Stock outstanding as of December 31, 1997.
Ambassador is a self-administered and self-managed REIT engaged in the
ownership and management of garden-style apartment properties leased primarily
to middle income tenants. As of December 31, 1997, Ambassador owned 52 apartment
communities with a total of 15,728 units located in Arizona, Colorado, Florida,
Georgia, Illinois, Tennessee and Texas. In addition, Ambassador manages one
property containing 252 units for an unrelated third party. Ambassador conducts
substantially all of its operations through the Ambassador Operating Partnership
and its subsidiaries. As of December 31, 1997, Ambassador held approximately 94%
of the outstanding common units and 100% of the outstanding preferred units of
the Ambassador Operating Partnership.
Consummation of the Ambassador Merger is subject to the affirmative vote of
the holders of at least two-thirds of the outstanding shares of Ambassador
Common Stock, the approval of all appropriate governmental and regulatory
authorities and other customary conditions. The closing of the transaction is
expected to occur during the second quarter of 1998.
On March 17, 1998, AIMCO entered into a definitive merger agreement (the
"Insignia Merger Agreement") to acquire the multi-family apartment management
operations and certain property holdings, of Insignia Financial Group, Inc.
("Insignia"). Insignia is one of the largest managers of multi-family
residential properties in the United States. The acquisition of Insignia will
add approximately 192,000 apartment units to AIMCO's management portfolio,
including approximately 115,000 units in which AIMCO will own an equity interest
and approximately 77,000 units which will be managed for unaffiliated third
parties. Pursuant to the Insignia Merger Agreement, the Company anticipates
issuing approximately $303.0 million in convertible preferred stock to Insignia
shareholders, the payment of a $50 million special dividend to Insignia
shareholders and the assumption of $457.0 million of existing indebtedness. In
addition, the Company will offer to purchase the 25% interest in Insignia
Properties Trust, which is not owned by Insignia, for a price not less than
$13.25 per share of beneficial ownership interest.
The Insignia shareholders will receive shares of AIMCO preferred stock based
on an exchange ratio that fluctuates based on the average high and low sales
price of AIMCO Class A Common Stock for 20 trading days prior to the fifth
trading day preceding the closing of the transaction (the "Index Price"). If the
Index Price is greater than $38.00 per share, then the Index Price will be
$38.00 per share for the exchange ratio. If the Index Price is below $36.50 per
share, then AIMCO may pay a portion of the purchase price in cash to the extent
the Index Price is less than $36.50 per share.
Consummation of the transactions contemplated by the Insignia Merger
Agreement is subject to the affirmative vote of the holders of the outstanding
shares of Insignia, the approval of all appropriate governmental and regulatory
authorities and other customary conditions.
In the ordinary course of business, the Company engages in discussions and
negotiations regarding the acquisition of apartment properties (including
interests in entities that own apartment properties). The Company frequently
enters into contracts and nonbinding letters of intent with respect to the
purchase of properties. These contracts are typically subject to certain
conditions and permit the Company to
8
<PAGE>
terminate the contract in its sole and absolute discretion if it is not
satisfied with the results of its due diligence investigation of the properties.
The Company believes that such contracts essentially result in the creation of
an option on the subject properties and give the Company greater flexibility in
seeking to acquire properties. As of March 18, 1998, the Company had under
contract or letter of intent an aggregate of 21 multi-family apartment
properties with a maximum aggregate purchase price of $223.9 million, including
estimated capital improvements, which, in some cases, may be paid in the form of
assumption of existing debt. All such contracts are subject to termination by
the Company as described above. No assurance can be given that any of these
possible acquisitions will be completed or, if completed, that they will be
accretive on a per share basis.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company operates in one industry segment, the ownership and management
of real estate properties. See the consolidated financial statements and notes
thereto included elsewhere in this Annual Report on Form 10-K for financial
information relating to the Company.
GROWTH STRATEGIES
The Company's primary objective is to maximize shareholder value by
increasing the amount and predictability of its Funds From Operations ("FFO") on
a per share basis. The Company seeks to achieve this objective primarily by
improving net operating income from its Owned Properties and by acquiring
additional properties at values that are accretive on a per share basis. The
Company's operating and financial strategies include: (i) maintaining a
geographically diversified portfolio of properties; (ii) providing a minimum of
$300 per apartment unit per year for capital replacements to maintain its
properties; (iii) emphasizing long-term, fixed rate, fully amortizing debt; and
(iv) maintaining a dividend payout ratio of less than 80% of FFO. See "Item
7--Management's Discussion and Analysis of Financial Condition and Results of
Operations--Funds From Operations."
ACQUISITIONS
During 1997, the Company directly acquired 44 apartment properties
containing 11,706 units for total consideration of $467.4 million, consisting of
$191.0 million in cash, approximately 1.9 million OP units valued at $56.0
million and the assumption or incurrence of $220.4 million of indebtedness. In
addition, the Company acquired a controlling interest in 15 partnerships which
own 5,285 units located in 15 apartment communities as a result of the
acquisition of the NHP Real Estate Companies, subsequent tender offers made to
investors in certain NHP Partnerships, and the purchase of mortgage debt and
land leases. As a result of these transactions, the Company increased the number
of apartment units it owns or controls to 40,039 units as of December 31, 1997,
a net increase of approximately 68% from the 23,764 units number of units owned
or controlled as of December 31, 1996.
The Company intends to continue to expand its portfolio of Owned Properties
by: (i) acquiring properties in markets familiar to the Company's management;
(ii) developing and expanding its Owned Properties; and (iii) acquiring
controlling interests in companies that own or manage multi-family properties.
MANAGED PROPERTIES
The Company believes its property management operations are integral to its
overall business strategy. The economies of scale realized from managing more
than 193,000 apartment units enable the Company to more efficiently operate its
properties. In addition, the Company believes that managing properties for third
parties improves the performance of its Owned Properties by subjecting property
managers to market-based pricing and service standards. The Company's property
management operations
9
<PAGE>
also support the Company's acquisition activities by enhancing its ability to
identify and evaluate acquisition and development opportunities in its markets.
The Company's local and regional personnel maintain first-hand knowledge of
local market conditions and often obtain early notification of Managed
Properties and other properties that may be offered for sale.
REDEVELOPMENT AND EXPANSION PROPERTIES
The Company has a cautious strategy concerning new development of properties
and intends to develop only in situations in which it believes it has a
significant advantage. The Company believes that redevelopment of selected
properties in superior locations can provide advantages over the development of
new properties because, compared with new development, redevelopment generally
can be accomplished with relatively lower financial risk, in less time and with
reduced delays attributable to governmental approval procedures. The Company
believes that expansion within, or adjacent to, existing properties will provide
growth opportunities at lower risks than are associated with new development,
and may offer certain cost advantages to the extent common area amenities and
on-site management personnel can be utilized.
Recently, the Company acquired and redeveloped Sun Katcher Apartments, a
360-unit apartment property located in Jacksonville, Florida, at a cost of $8.9
million, including $4.9 million in redevelopment costs. The Company also
recently commenced the renovation and upgrading of Bay West Apartments, a
376-unit apartment property located in Tampa, Florida, for a projected cost of
$4.8 million (of which $0.9 million has already been spent), to reposition the
property in the marketplace.
The Company expects to undertake a major renovation of the Morton Towers
Apartments, a 1,277-unit apartment property located in Miami Beach, Florida, at
an estimated cost of $35 million. Pending zoning approval and economic
feasibility studies, the Company intends to construct a third high rise tower on
undeveloped land adjacent to the property, which will add an additional 521
units at an estimated cost of $60.0 million.
The Company believes that expansion within or adjacent to existing AIMCO
Properties also provides growth opportunities at lower risk than new
development. Such expansion can offer cost advantages to the extent common area
amenities and on-site management personnel can service the expanded property.
Recently, the Company constructed 92 additional units at Fairways, an apartment
property located in Phoenix, Arizona, at a cost of $6.5 million. The Company is
planning the construction of 42 additional units at the Township Apartments,
located in Littleton, Colorado, for a projected cost of approximately $3.0
million. In addition, the Company owns or controls 136 acres of vacant land,
adjacent to existing Owned Properties or Equity Properties, which management
believes is suitable for the development of approximately 1,300 apartment units.
The Company generally finances redevelopment and expansion activities initially
with short-term indebtedness, and subsequently arranges permanent financing.
OPERATING STRATEGIES
INTERNAL GROWTH STRATEGY
The Company's strategy for internal growth and to increase cash flow is to
continually: (i) seek higher net rental revenues by enhancing and maintaining
the competitiveness of properties through periodic property upgrades which
typically include cable television, selective refurbishment and the addition of
other amenities; (ii) provide a high level of service to residents; (iii) manage
expenses through a system of detailed management reporting and accountability;
and (iv) provide training programs, orientation workshops and technical courses
for on-site marketing, maintenance and management personnel.
In pursuing its internal growth strategy, the Company's policy is to: (i)
provide on-site management trained to respond promptly to residents' needs; (ii)
conduct annual resident satisfaction surveys;
10
<PAGE>
(iii) respond to maintenance calls within 24 hours; and (iv) maintain the
quality and appearance of its properties with an annual provision of $300 per
apartment unit for capital replacements.
PROPERTY MANAGEMENT
The Company's property management strategy is to achieve improvements in
operating results by combining centralized financial control and uniform
operating procedures with localized property management decision making and
market knowledge. The Company is organized into geographically diversified
Regional Operating Centers ("ROC"). Each ROC is served by local offices of
regional property managers and is supervised by a Regional Vice President.
DIVERSIFIED MARKETS
The Company seeks to operate primarily in markets: (i) where population and
employment growth rates are expected to exceed the national averages; (ii) where
it believes it can become one of the regionally significant owners and managers
of multi-family apartment properties; and (iii) that will enable the Company to
maintain a geographically diversified portfolio or otherwise gain significant
financial benefits. The distribution of the Owned Properties reflects the
Company's focus on growth markets and its belief that geographic diversification
will help to insulate the portfolio from regional and local economic
fluctuations. The Company also seeks to create concentrations of properties
within each of its markets in order to achieve economies of scale in management
and operations. The Company owns or manages apartment units in 18 principal
markets, including in excess of 5,000 apartment units in the Chicago, Dallas,
Houston, Indianapolis, New York, Philadelphia, Phoenix, Tampa and Washington,
D.C. metropolitan areas, and more than 2,000 apartment units in the Albuquerque,
Atlanta, Austin, Baltimore, Ft. Lauderdale, Norfolk, Orlando, San Antonio and
St. Louis metropolitan areas.
TAXATION OF THE COMPANY
The Company has elected to be taxed as a REIT under the Internal Revenue
Code of 1986, as amended (the "Code"), commencing with its taxable year ended
December 31, 1994, and the Company intends to continue to operate in such a
manner. The Company's current and continuing qualification as a REIT depends on
its ability to meet the various requirements imposed by the Code, through actual
operating results, distribution levels and diversity of stock ownership.
If the Company qualifies for taxation as a REIT, it will generally not be
subject to U.S. federal corporate income tax on its net income that is currently
distributed to stockholders. This treatment substantially eliminates the "double
taxation" (at the corporate and stockholder levels) that generally results from
investment in a corporation. If the Company fails to qualify as a REIT in any
taxable year, its taxable income will be subject to U.S. federal income tax at
regular corporate rates (including any applicable alternative minimum tax). Even
if the Company qualifies as a REIT, it may be subject to certain state and local
income taxes and to U.S. federal income and excise taxes on its undistributed
income.
If in any taxable year the Company fails to qualify as a REIT and incurs
additional tax liability, the Company may need to borrow funds or liquidate
certain investments in order to pay the applicable tax and the Company would not
be compelled to make distributions under the Code. Unless entitled to relief
under certain statutory provisions, the Company would also be disqualified from
treatment as a REIT for the four taxable years following the year during which
qualification is lost. Although the Company currently intends to operate in a
manner designed to qualify as a REIT, it is possible that future economic,
market, legal, tax or other considerations may cause the Company to fail to
qualify as a REIT or may cause the Board of Directors to revoke the REIT
election.
The Company and its stockholders may be subject to state or local taxation
in various state or local jurisdictions, including those in which it or they
transact business or reside. The state and local tax treatment of the Company
and its stockholders may not conform to the Federal income tax treatment.
11
<PAGE>
COMPETITION
There are numerous housing alternatives that compete with the Company's
Owned Properties and Managed Properties in attracting residents. The Company's
properties compete directly with other multi-family rental apartments and single
family homes that are available for rent in the markets in which the Company's
properties are located. The Company's properties also compete for residents with
new and existing homes and condominiums. The number of competitive properties in
a particular area could have a material effect on the Company's ability to lease
apartment units at its properties and on the rents charged. The Company competes
with numerous real estate companies in acquiring, developing and managing
multi-family apartment properties and seeking tenants to occupy the AIMCO
Properties. In addition, the Company competes with numerous property management
companies in the markets where the Managed Properties are located.
REGULATION
GENERAL
Multifamily apartment properties are subject to various laws, ordinances and
regulations, including regulations relating to recreational facilities such as
swimming pools, activity centers and other common areas. Changes in laws
increasing the potential liability for environmental conditions existing on
properties or increasing the restrictions on discharges or other conditions, as
well as changes in laws affecting development, construction and safety
requirements, may result in significant unanticipated expenditures, which would
adversely affect the Company's cash flows from operating activities. In
addition, future enactment of rent control or rent stabilization laws or other
laws regulating multi-family housing may reduce rental revenue or increase
operating costs in particular markets.
RESTRICTIONS IMPOSED BY LAWS BENEFITING DISABLED PERSONS
Under the Americans with Disabilities Act of 1990 (the "ADA"), all places of
public accommodation are required to meet certain Federal requirements related
to access and use by disabled persons. These requirements became effective in
1992. A number of additional Federal, state and local laws exist which also may
require modifications to the Owned Properties, or restrict certain further
renovations thereof, with respect to access thereto by disabled persons. For
example, the Fair Housing Amendments Act of 1988 (the "FHAA") requires apartment
properties first occupied after March 13, 1990 to be accessible to the
handicapped. Noncompliance with the ADA or the FHAA could result in the
imposition of fines or an award of damages to private litigants and also could
result in an order to correct any non-complying feature, which could result in
substantial capital expenditures. Although management of the Company believes
that the Owned Properties are substantially in compliance with present
requirements, if the Owned Properties are not in compliance, the Company is
likely to incur additional costs to comply with the ADA and the FHAA.
HUD ENFORCEMENT AND LIMITED DENIALS
A significant number of the affordable units included in the AIMCO
Properties are subject to regulation by the U.S. Department of Housing and Urban
Development ("HUD"). HUD has the authority 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. See "Item 7-- Management's Discussion and Analysis of
Financial Condition and Results of Operations-- Contingencies."
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<PAGE>
ENVIRONMENTAL MATTERS
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 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 and 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
and 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. See "Item 7--Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Environmental."
INSURANCE
Management believes that the Owned Properties are covered by adequate fire,
flood and property insurance provided by reputable companies and with
commercially reasonable deductibles and limits.
EMPLOYEES
The Company has a staff of employees performing various acquisition,
redevelopment and management functions. The Company, through the AIMCO Operating
Partnership and related service company businesses, has approximately 7,000
employees, most of whom are employed at the property level. None of the
employees are represented by a union, and the Company has never experienced a
work stoppage. The Company believes it maintains satisfactory relations with its
employees.
ITEM 2. PROPERTIES
The AIMCO Properties are located in 42 states, Puerto Rico and the District
of Columbia. A significant portion of the AIMCO Properties are concentrated in
or around 9 metropolitan areas in which the Company owns, controls or manages
more than 5,000 units. The following table sets forth certain market information
for the AIMCO Properties as of December 31, 1997:
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL
UNITS
NUMBER OF NUMBER OF OWNED/CONTROLLED
PROPERTIES UNITS OR MANAGED
----------- ----------- ---------------------
<S> <C> <C> <C>
Chicago, IL................................................. 23 5,463 3%
Dallas, TX.................................................. 35 7,518 4%
Houston, TX................................................. 38 8,064 4%
Indianapolis, IN............................................ 22 6,074 3%
New York, NYv 44 6,729 3%
Philadelphia, PA............................................ 30 8,587 4%
Phoenix, AZ................................................. 27 5,958 3%
Tampa/St. Petersburg, FL.................................... 18 6,242 3%
Washington, DC.............................................. 34 9,249 5%
----- ----------- ---
Principal markets total................................... 271 63,884 32%
Other markets............................................... 765 129,173 68%
----- ----------- ---
Total..................................................... 1,036 193,057 100%
----- ----------- ---
----- ----------- ---
</TABLE>
The AIMCO Properties average 186 apartment units each, with the largest
property containing 2,113 apartment units.
13
<PAGE>
The Owned Properties are located in 19 states, primarily located in the
Sunbelt regions of the United States. A significant portion of the Owned
Properties are concentrated in or around 12 metropolitan areas in which the
Company owns or controls more than 1,000 units. The following table sets forth
certain market information for Owned Properties as of December 31, 1997:
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL
NUMBER OF NUMBER OF UNITS
PROPERTIES UNITS OWNED OR CONTROLLED
----------- ----------- ---------------------
<S> <C> <C> <C>
Atlanta, GA................................................. 9 2,100 5%
Chicago, IL................................................. 7 1,875 5%
Denver, CO.................................................. 5 1,255 3%
Dallas, TX.................................................. 10 2,525 6%
Houston, TX................................................. 22 5,365 13%
Miami/Ft. Lauderdale, FL.................................... 6 3,737 9%
Orlando, FL................................................. 4 1,072 3%
Phoenix, AZ................................................. 18 4,514 11%
San Antonio, TX............................................. 7 1,414 4%
Tampa/St. Petersburg, FL.................................... 4 1,530 4%
Tuscon, AZ.................................................. 5 1,088 3%
Washington, DC.............................................. 1 2,113 5%
----- ----------- ---
Principal markets total................................... 98 28,588 71%
Other markets............................................... 49 11,451 29%
----- ----------- ---
Total..................................................... 147 40,039 100%
----- ----------- ---
----- ----------- ---
</TABLE>
At December 31, 1997, the Company owned or controlled 147 properties
containing 40,039 units. The Owned Properties average 272 apartment units each,
with the largest property containing 2,113 apartment units.
The Owned Properties offer residents a range of amenities. Many of the Owned
Properties include a swimming pool and clubhouse, spas, fitness centers, tennis
courts and saunas. Many of the apartment units offer design and appliance
features such as vaulted ceilings, fireplaces, washer and dryer hook-ups, cable
television, balconies and patios.
Substantially all of the Owned Properties are encumbered by mortgage
indebtedness or serve as collateral for the Company's indebtedness. At December
31, 1997, the Company had aggregate mortgage indebtedness totaling $774.5
million, which was secured by 129 Owned Properties with a combined net book
value of $1,246.3 million, having an aggregate weighted average interest rate of
8.1%. At December 31, 1997, the Company had borrowings of $33.5 million
outstanding under its Credit Facility which were collateralized by seven Owned
Properties with a combined net book value of $82.8 million. See the financial
statements included elsewhere in this Annual Report for additional information
about the Company's indebtedness.
ITEM 3. LEGAL PROCEEDINGS
In November 1996, the Company completed the acquisition (the "English
Acquisition") of certain partnership interests, real estate and related assets
from J.W. English, a Houston, Texas-based real estate syndicator and developer,
and certain affiliated entities (collectively, the "J.W. English Companies"). In
the English Acquisition, the Company purchased all of the general and limited
partnerships interests owned by the J.W. English Companies in 22 limited
partnerships which act as the general partner to 31 limited partnerships (the
"English Partnerships") that own 22 multi-family apartment properties and other
assets and interests related to the J.W. English Companies, and assumed
management of the properties owned by the English Partnerships. The Company made
separate tender offers (the "English Tender Offers") to the limited partners of
25 of the English Partnerships (the "Tender Offer English Partnerships").
14
<PAGE>
In November 1996, purported limited partners of certain of the Tender Offer
English Partnerships filed a class action lawsuit against the Company and J.W.
English in the U.S. District Court for the Northern District of California (the
"Federal Action"), alleging among other things, that the Company conspired with
J.W. English to breach his fiduciary duty to the plaintiffs, and that the
offering materials used by the Company in connection with the English Tender
Offers contained misleading statements or omissions. The Federal Action was
voluntarily dismissed, without prejudice, in favor of another purported class
action filed in May 1997 by limited partners of certain of the Tender Offer
English Partnerships and six additional English Partnerships. Two complaints
were filed in Superior Court of the State of California (the "California
Actions") against the Company and the J.W. English Companies, alleging, among
other things, that the consideration the Company offered in the English Tender
Offers was inadequate and designed to benefit the J.W. English Companies at the
expense of the limited partners, that certain misrepresentations and omissions
were made in connection with the English Tender Offers, that the Company
receives excessive fees in connection with its management of the properties
owned by the English Partnerships, that the Company continues to refuse to
liquidate the English Partnerships and that the English Acquisition violated the
partnership agreements governing the English Partnerships and constituted a
breach of fiduciary duty.
In addition to unspecified compensation and exemplary damages, the original
complaints in the California Actions sought an accounting, a constructive trust
on the assets and monies acquired by the English defendants in connection with
the English Acquisition, a court order removing the Company from management of
the English Partnerships and/or ordering disposition of the properties and
attorneys fees, expert fees and other costs. The Company intends to vigorously
defend itself in connection with these actions. The Company also believes it is
entitled to indemnification from the J.W. English Companies, subject to certain
exceptions. Failure by the Company to prevail in the California Actions or to
receive indemnification could have a material adverse effect on the Company's
financial condition and results of operations.
On August 4, 1997, the Company filed demurrers to both complaints in the
California Actions. At a hearing on the demurrers on January 9, 1998, the court
granted the Company's demurrers to each of the three causes of action against it
in the two complaints, with leave to amend. On February 25, 1998, the plaintiffs
filed a consolidated amended class and derivative complaint for damages (the
"Consolidated Amended Complaint"). The Consolidated Amended Complaint has added
as defendants the general partners of the English Partnerships and dropped
certain defendants, including AIMCO/PAM Properties, L.P. The Consolidated
Amended Complaint seeks compensatory and punitive damages and alleges six causes
of action for breach of fiduciary duty (two separate causes of action), for an
accounting, breach of the implied covenant of good faith and fair dealing, and
for inducing breach of contract. Plaintiffs have also added allegations of
alleged wrongful conduct in connection with the Company's second group of tender
offers commenced in late 1997. The Company will likely file a demurrer. The date
to move, answer or otherwise respond to the Consolidated Amended Complaint with
respect to all of the defendants is March 27, 1998.
The Company is a party to various legal actions resulting from its operating
activities. These actions are routine litigation and administrative proceedings
arising in the ordinary course of business, some of which are covered by
liability insurance, and none of which are expected to have a material adverse
effect on the consolidated financial condition or results of operations of the
Company.
15
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
AIMCO held a special meeting of stockholders on December 8, 1997 to consider
the issuance by AIMCO of up to 5,433,695 shares of Class A Common Stock in
connection with the NHP Merger. The matter was approved by the following vote:
<TABLE>
<CAPTION>
VOTES
VOTES FOR AGAINST ABSTENTIONS
- ------------ --------- -----------
<S> <C> <C>
19,997,613 163,073 134,247
</TABLE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
AIMCO's Class A Common Stock has been listed and traded on the NYSE under
the symbol "AIV" since July 22, 1994. The following table sets forth the
quarterly high and low sales prices of the Class A Common Stock, as reported on
the NYSE, and the dividends paid by the Company for the periods indicated.
<TABLE>
<CAPTION>
DIVIDENDS
PAID
QUARTER ENDED HIGH LOW (PER SHARE)
- ------------------------------------------------------------------------------ ----- --- -----------
<S> <C> <C> <C>
1995
March 31, 1995................................................................ $ 181/2 $ 171/8 $ 0.415
June 30, 1995................................................................. 201/4 177/8 0.415
September 30, 1995............................................................ 211/8 191/2 0.415
December 31, 1995............................................................. 20 18 0.425
1996
March 31, 1996................................................................ 211/8 193/8 0.425
June 30, 1996................................................................. 21 183/8 0.425
September 30, 1996............................................................ 22 183/8 0.425
December 31, 1996............................................................. 283/8 211/8 0.425
1997
March 31, 1997................................................................ 301/2 251/2 0.4625
June 30, 1997................................................................. 293/4 26 0.4625
September 30, 1997............................................................ 363/16 281/8 0.4625
December 31, 1997............................................................. 38 32 0.4625
1998
March 31, 1998 (through March 15, 1998)....................................... 0.5625(1)
</TABLE>
- ------------------------
(1) On January 22, 1998, the Company's Board of Directors declared a cash
dividend of $0.5625 per share of Common Stock, paid on February 13, 1998 to
stockholders of record on February 6, 1998.
On March 18, 1998, there were 41,417,376 shares of Class A Common Stock
outstanding, held by 328 stockholders of record.
The Company, as a REIT, is required to distribute annually to holders of
common stock at least 95% of its "real estate investment trust taxable income,"
which, as defined by the Code and Treasury regulations, is generally equivalent
to net taxable ordinary income. The Company measures its economic profitability
and intends to pay regular dividends to its stockholders based on FFO during the
relevant period. However, the future payment of dividends by the Company will be
at the discretion of the Board of Directors and will depend on numerous factors
including the Company's financial condition, its capital
16
<PAGE>
requirements, the annual distribution requirements under the provisions of the
Code applicable to REITs and such other factors as the Board of Directors deems
relevant.
From time to time, AIMCO issues shares of Class A Common Stock in exchange
for OP Units tendered to the AIMCO Operating Partnership for redemption in
accordance with the terms and provisions of the agreement of limited partnership
of the AIMCO Operating Partnership. Such shares are issued based on an exchange
ratio of one share for each OP Unit. The shares are issued in exchange for OP
Units in private transactions exempt from registration under the Securities Act
of 1933, as amended (the "Securities Act"), pursuant to Section 4(2) thereof.
During 1997, a total of 563,426 shares were issued in exchange for OP Units.
On June 3, 1997, AIMCO issued warrants (the "NHP Warrants") exercisable to
purchase an aggregate of 399,999 shares of Class A Common Stock at $36 per share
at any time prior to June 3, 2002. The NHP Warrants were issued as part of the
consideration for the NHP Real Estate Companies in a private transaction exempt
from registration under the Securities Act pursuant to Section 4(2) thereof.
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
arrangements 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 issued in a
private transaction exempt from registration under the Securities Act pursuant
to Section 4(2) thereof.
17
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The historical selected financial data for AIMCO for the years ended
December 31, 1997, 1996 and 1995 is based on audited financial statements. This
information should be read in conjunction with such financial statements,
including the notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included herein. The historical
selected financial data for AIMCO for the period from January 10, 1994 (the date
of inception) through December 31, 1994 and for the AIMCO Predecessors for the
period January 1, 1994 through July 28, 1994 and for the year ended December 31,
1993 is based on audited financial statements.
<TABLE>
<CAPTION>
THE COMPANY AIMCO PREDECESSORS
--------------------------------------------------------- ----------------------------
FOR THE FOR THE
PERIOD PERIOD
JANUARY 10, JANUARY 1,
FOR THE YEAR FOR THE YEAR FOR THE YEAR 1994 1994 FOR THE YEAR
ENDED ENDED ENDED THROUGH THROUGH ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, JULY 28, DECEMBER 31,
1997 1996 1995 1994 1994 1993
------------ ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.............. $ 193,006 $ 100,516 $ 74,947 $ 24,894 $ 5,805 $ 8,056
Property operating expenses.......... (76,168) (38,400) (30,150) (10,330) (2,263) (3,200)
Owned property management expenses... (6,620) (2,746) (2,276) (711) -- --
------------ ------------- ------------- ------------- ------------- -------------
110,218 59,370 42,521 13,853 3,542 4,856
Depreciation......................... (37,741) (19,556) (15,038) (4,727) 1,151) (1,702)
------------ ------------- ------------- ------------- ------------- -------------
72,477 39,814 27,483 9,126 2,391 3,154
------------ ------------- ------------- ------------- ------------- -------------
SERVICE COMPANY BUSINESS:
Management fees and other income..... 13,937 8,367 8,132 3,217 6,533 8,069
Management and other expenses........ (9,910) (5,352) (4,953) (2,047) (5,823) (6,414)
Corporate overhead allocation........ (588) (590) (581) -- -- --
Owner and seller bonuses............. -- -- -- -- (204) (468)
Amortization of management company
goodwill........................... (948) (500) (428) -- -- --
Depreciation and amortization........ (453) (218) (168) (150) (146) (204)
------------ ------------- ------------- ------------- ------------- -------------
2,038 1,707 2,002 1,020 360 983
------------ ------------- ------------- ------------- ------------- -------------
Minority interests in service company
business........................... (10) 10 (29) (14) -- --
------------ ------------- ------------- ------------- ------------- -------------
Company's shares of income from
service company business........... 2,028 1,717 1,973 1,006 360 983
------------ ------------- ------------- ------------- ------------- -------------
General and administrative
expenses........................... (5,396) (1,512) (1,804) (977) -- --
Interest income...................... 8,676 523 658 123 -- --
Interest expense..................... (51,385) (24,802) (13,322) (1,576) (4,214) (3,510)
Minority interest in other
partnerships....................... 1,008 (111) -- -- -- --
Equity in losses of unconsolidated
partnerships....................... (1,798) -- -- -- -- --
Equity in earnings of unconsolidated
subsidiaries....................... 4,636 -- -- -- -- --
Income from operations............... 30,246 15,629 14,988 7,702 (1,463) 627
Gain on disposition of properties.... 2,720 44 -- -- -- --
Provision for income taxes........... -- -- -- -- (36) (336)
------------ ------------- ------------- ------------- ------------- -------------
Income (loss) before extraordinary
item and minority interest in
Operating Partnership.............. 32,966 15,673 14,988 7,702 (1,499) 291
Extraordinary item--early
extinguishment of debt............. (269) -- -- -- -- --
------------ ------------- ------------- ------------- ------------- -------------
Income (loss) before minority
interest in Operating
Partnership........................ 32,697 15,673 14,988 7,702 (1,499) 291
Minority interest in Operating
Partnership........................ (4,064) (2,689) (1,613) (559) -- --
------------ ------------- ------------- ------------- ------------- -------------
Net income (loss).................... $ 28,633 $ 12,984 $ 13,375 $ 7,143 $ (1,499) $ 291
------------ ------------- ------------- ------------- ------------- -------------
------------ ------------- ------------- ------------- ------------- -------------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
THE COMPANY AIMCO PREDECESSORS
--------------------------------------------------------- ----------------------------
FOR THE FOR THE
PERIOD PERIOD
JANUARY 10, JANUARY 1,
FOR THE YEAR FOR THE YEAR FOR THE YEAR 1994 1994 FOR THE YEAR
ENDED ENDED ENDED THROUGH THROUGH ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, JULY 28, DECEMBER 31,
1997 1996 1995 1994 1994 1993
------------ ------------- ------------- ------------- ------------- -------------
OTHER INFORMATION:
<S> <C> <C> <C> <C> <C> <C>
Total owned properties (end of
period)............................ 147 94 56 48 4 4
Total owned apartment units (end of
period)............................ 40,039 23,764 14,453 12,513 1,711 1,711
Units under management (end of
period)............................ 69,587 19,045 19,594 20,758 29,343 28,422
Basic earnings per common share
(1)................................ $ 1.09 $ 1.05 $ 0.86 $ 0.42 N/A N/A
Diluted earnings per common share
(1)................................ $ 1.08 $ 1.04 $ 0.86 $ 0.42 N/A N/A
Dividends paid per common share...... $ 1.85 $ 1.70 $ 1.66 $ 0.29 N/A N/A
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation....................... $1,659,763 $ 865,222 $ 477,162 $ 406,067 $ 47,500 $ 46,819
Total assets......................... 2,103,066 834,813 480,361 416,739 39,042 38,914
Total mortgages and notes payable.... 808,530 522,146 268,692 141,315 40,873 41,893
Mandatorily redeemable 1994
Cumulative Senior Preferred
Stock.............................. -- -- -- 96,600 -- --
Stockholders' equity................. 1,045,301 222,889 169,032 140,319 (9,345) (7,556)
</TABLE>
- ------------------------
(1) Earnings per share figures for all periods prior to 1997 have been restated
to reflect the application of Financial Accounting Standards Board Statement
of Financial Accounting Standards No. 128, Earnings Per Share.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
The following discussion and analysis of the results of operations and
financial condition of the Company should be read in conjunction with the
financial statements incorporated by reference in Item 8 of this Annual Report
on Form 10-K.
RESULTS OF OPERATIONS
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1997 TO THE YEAR ENDED DECEMBER 31,
1996
NET INCOME
The Company recognized net income of $28.6 million and net income
attributable to common shareholders of $26.3 million for the year ended December
31, 1997 compared to net income and net income attributable to common
shareholders of $13.0 million for the year ended December 31, 1996. Net income
attributable to common shareholders represents net income less a provision for
accrued dividends on the Company's Class B Preferred Stock and Class C Preferred
Stock. The Class B Preferred Stock and Class C Preferred Stock were issued in
August and December 1997, respectively. There was no preferred stock outstanding
during 1996. The increase in net income allocable to common shareholders of
$13.3 million, or 102.3%, was primarily the result of the following:
- the acquisition of 10,484 units in 42 apartment communities primarily
during November and December 1996 (the "1996 Acquisitions");
- the acquisition of 11,706 units in 44 apartment communities during 1997
(the "1997 Acquisitions");
- the acquisition of interests in the NHP Partnerships during the period
June through December 1997; and
- the acquisition of NHP in December 1997.
19
<PAGE>
- interest income on general partner loans to unconsolidated real estate
partnerships.
The effect of these acquisitions on net income was partially offset by the
sale of four properties in August 1996 (the "1996 Dispositions") and five
properties in October 1997 (the "1997 Dispositions"). These factors are
discussed in more detail in the following paragraphs.
RENTAL PROPERTY OPERATIONS
Rental and other property revenues from the Company's Owned Properties
totaled $193.0 million for the year ended December 31, 1997, compared to $100.5
million for the year ended December 31, 1996, an increase of $92.5 million, or
92.0%. Rental and other property revenues consisted of the following (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
"Same store" properties.......................................... $ 78,724 $ 75,069
1996 Acquisitions................................................ 68,505 14,970
1997 Acquisitions................................................ 22,163 --
Acquisition of interests in the NHP Partnerships................. 15,592 --
1996 Dispositions................................................ -- 3,363
1997 Dispositions................................................ 4,092 4,719
Properties in lease-up after the completion of an expansion or
renovation..................................................... 3,930 2,395
------------ ------------
Total............................................................ $ 193,006 $ 100,516
------------ ------------
------------ ------------
</TABLE>
Average monthly rent per occupied unit for the same store properties
increased to $571 at December 31, 1997 from $560 at December 31, 1996, an
increase of 2.0%. Weighted average physical occupancy for the properties
increased to 94.8% at December 31, 1997 from 94.5% at December 31, 1996, an
increase of 0.3%.
Property operating expenses consist 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. Property operating expenses totaled $76.2 million for the year ended
December 31, 1997, compared to $38.4 million for the year ended December 31,
1996, an increase of $37.8 million, or 98.4%. Property operating expenses
consisted of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
"Same store" properties.......................................... $ 28,009 $ 28,234
1996 Acquisitions................................................ 28,911 5,258
1997 Acquisitions................................................ 8,402 --
Acquisition of interests in the NHP Partnerships................. 7,304 --
1996 Dispositions................................................ 1,793
1997 Dispositions................................................ 1,972 2,300
Properties in lease-up after the completion of an expansion or
renovation..................................................... 1,570 815
------------ ------------
Total............................................................ $ 76,168 $ 38,400
------------ ------------
------------ ------------
</TABLE>
Owned Property management expenses, representing the costs of managing the
Company's Owned Properties, totaled $6.6 million for the year ended December 31,
1997, compared to $2.7 million for the
20
<PAGE>
year ended December 31, 1996, an increase of $3.9 million, or 144.4%. The
increase resulted from the acquisition of properties in 1996 and 1997 and the
acquisition of interests in the NHP Partnerships.
SERVICE COMPANY BUSINESS
The Company's share of income from the service company business was $2.0
million for the year ended December 31, 1997, compared to $1.7 million for the
year ended December 31, 1996, an increase of $0.3 million or 17.6%. The increase
is due to the acquisition by the Company of property management businesses in
August and November 1996, the acquisition of partnership interests which provide
for certain partnership and administrative fees, and a captive insurance
subsidiary acquired in connection with the acquisition of the NHP Real Estate
Companies in June 1997, which were offset by the expiration of the Company's
commercial asset management contracts on March 31, 1997. The Company's share of
income from service company businesses consisted of the following (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Properties managed for third parties and affiliates
Management fees and other income............................... $ 9,353 $ 5,679
Management and other expenses.................................. (9,045) (4,405)
------------ ------------
308 1,274
------------ ------------
Commercial asset management
Management and other income.................................... 245 1,026
Management and other expenses.................................. (275) (339)
------------ ------------
(30) 687
------------ ------------
Reinsurance operations
Revenues....................................................... 4,228 1,267
Expenses....................................................... (360) (282)
------------ ------------
3,868 985
------------ ------------
Brokerage and other
Revenues....................................................... 111 395
Expenses....................................................... (230) (326)
------------ ------------
(119) 69
------------ ------------
$ 4,027 $ 3,015
------------ ------------
------------ ------------
</TABLE>
Income from the management of properties for third parties and affiliates
was $0.3 million for the year ended December 31, 1997, compared to $1.3 million
for the year ended December 31, 1996, a decrease of $1.0 million, or 76.9%.
Losses from commercial asset management were $30,000 for the year ended
December 31, 1997 compared to income of $0.7 million for the year ended December
31, 1996. The decrease is primarily due to the expiration of certain commercial
management contracts in March 1997.
Income from the reinsurance operations for the year ended December 31, 1997
increased by $2.9 million from the year ended December 31, 1996, due to
increased premiums collected from a larger work force, improved loss experience
and the closure of claims for less than the amounts previously reserved, as well
as the acquisition of the NHP Real Estate Companies, which included the
acquisition of a captive insurance company.
21
<PAGE>
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses totaled $5.4 million for the year ended
December 31, 1997 compared to $1.5 million for the year ended December 31, 1996,
an increase of $3.9 million, or 260.0%. The increase in general and
administrative expenses is primarily due to the payment of incentive
compensation to members of senior management and other employees.
INTEREST EXPENSE
Interest expense, which includes the amortization of deferred finance costs,
totaled $51.4 million for the year ended December 31, 1997, compared to $24.8
million for the year ended December 31, 1996, an increase of $26.6 million or
107.3%. The increase consists of the following (in thousands):
<TABLE>
<S> <C>
Interest expense on secured short-term and long-term indebtedness
incurred in connection with the 1996 Acquisitions................ $ 11,054
Interest expense on secured and unsecured short-term and long-term
indebtedness incurred in connection with the 1997 Acquisitions... 7,082
Interest expense on secured and unsecured short-term and long-term
indebtedness incurred in connection with the acquisition of
interests in the NHP Partnerships................................ 6,924
Increase in interest expense on the Credit Facility due to
borrowings used in connection with the refinancing of short-term
indebtedness and the acquisition of the NHP Real Estate Companies
in June 1997, net of decreased interest expense on existing
indebtedness due to principal amortization....................... 1,523
---------
Total increase..................................................... $ 26,583
---------
---------
</TABLE>
INTEREST INCOME
Interest income totaled $8.7 million for the year ended December 31, 1997,
compared to $0.5 million for the year ended December 31, 1996. The increase is
primarily due to interest earned on general partner loans to unconsolidated real
estate partnerships acquired in 1997.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1996 TO THE YEAR ENDED DECEMBER 31,
1995
The Company recognized net income of $13.0 million for the year ended
December 31, 1996, all of which was attributable to common shareholders. For the
year ended December 31, 1995, the Company recognized net income of $13.4
million, of which $5.2 million was attributable to the holder of AIMCO's
mandatorily redeemable 1994 Cumulative Convertible Senior Preferred Stock
("Convertible Preferred Stock") and $8.2 million was attributable to common
shareholders. The increase in net income allocable to the common shareholders in
1996 of 58.5% was primarily the result of the 1996 Acquisitions offset by the
1996 Dispositions. The increase in net income is partially offset by increased
interest expense associated with debt which was incurred in June 1995 and
September 1995 upon the redemption of the Convertible Preferred Stock, increased
interest expense attributable to indebtedness assumed or incurred in connection
with the 1996 Acquisitions offset by decreased interest expense after the pay
down of the Credit Facility with proceeds from the 1996 Dispositions. These
factors are discussed in more detail in the following paragraphs.
RENTAL PROPERTY OPERATIONS
Rental and other property revenues from the Company's Owned Properties
totaled $100.5 million for the year ended December 31, 1996, compared to $74.9
million for the year ended December 31, 1995, an
22
<PAGE>
increase of $25.6 million, or 34.2%. Rental and other property revenues
consisted of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
"Same store" properties................................ $ 69,268 $ 67,058
1996 Acquisitions...................................... 25,929 517
1996 Dispositions...................................... 3,363 5,272
Properties in lease-up after the completion of an
expansion or renovation.............................. 1,956 2,100
-------- -------
Total.................................................. $ 100,516 $ 74,947
-------- -------
-------- -------
</TABLE>
Average monthly rent per occupied unit for these 42 properties at December
31, 1996 and 1995 was $546 and $531, respectively, an increase of 2.8%. Weighted
average physical occupancy for the 42 properties increased from 94.2% at
December 31, 1995 to 94.9% at December 31, 1996, a 0.7% increase.
Property operating expenses totaled $38.4 million for the year ended
December 31, 1996, compared to $30.2 million for the year ended December 31,
1995, an increase of $8.2 million, or 27.2%. Property operating expenses
consisted of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
"Same store" properties................................ $ 26,103 $ 25,615
1996 Acquisitions...................................... 9,652 218
1996 Dispositions...................................... 1,793 3,146
Properties in lease-up after the completion of an
expansion or renovation.............................. 852 1,171
-------- -------
Total.................................................. $ 38,400 $ 30,150
-------- -------
-------- -------
</TABLE>
Owned property management expenses totaled $2.7 million for the year ended
December 31, 1996, compared to $2.3 million for the year ended December 31,
1995, an increase of $0.4 million or 17.4%. The increase is primarily due to the
acquisition of properties in 1996.
SERVICE COMPANY BUSINESS
The Company's share of income from the service company business was $1.7
million for the year ended December 31, 1996 compared to $2.0 million for the
year ended December 31, 1995. Management fees and other income totaled $8.4
million for the year ended December 31, 1996 compared to $8.1 million for the
year ended December 31, 1995, reflecting an increase of $0.3 million, or 3.7%.
Management and other expenses totaled $5.4 million for the year ended December
31, 1996 compared to $5.0 million for the year ended December 31, 1995,
reflecting an increase of $0.4 million, or 8.0%. Major sources of revenue
23
<PAGE>
and expense before amortization of management company goodwill, corporate
overhead allocations, depreciation and amortization and minority interest are
described below.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
Properties managed for third parties and affiliates
Management fees and other income..................... $ 5,679 $ 4,878
Management and other expenses........................ (4,405) (3,620)
------- -------
1,274 1,258
------- -------
Commercial asset management
Management and other income.......................... 1,026 1,564
Management and other expenses........................ (339) (562)
------- -------
687 1,002
------- -------
Reinsurance operations
Revenues............................................. 1,267 1,193
Expenses............................................. (282) (432)
------- -------
985 761
------- -------
Brokerage and other
Revenues............................................. 395 497
Expenses............................................. (326) (339)
------- -------
69 158
------- -------
$ 3,015 $ 3,179
------- -------
------- -------
</TABLE>
Income from the management of properties for third parties and affiliates
was $1.3 million for the years ended December 31, 1996 and 1995. Management fee
revenues increased from $4.9 million for the year ended December 31, 1995 to
$5.7 million for the year ended December 31, 1996, an increase of $0.8 million
or 16.4%, primarily as a result of the acquisition of properties in 1996. A
comparable increase in management expenses was also experienced in 1996.
Income from commercial asset management was $0.7 million for the year ended
December 31, 1996 compared to $1.0 million for the year ended December 31, 1995,
a decrease of $0.3 million or 30.0%. Commercial management revenues declined
from $1.6 million in 1995 to $1.0 million in 1996, primarily due to the
reduction in the number of properties managed. Commercial management expenses
declined from $0.6 million to $0.3 million as a result of fewer managed
properties. The asset management contracts expired on March 31, 1997.
Income from the reinsurance operations for the year ended December 31, 1996
increased by $0.2 million, or 29.4%, from the year ended December 31, 1995, due
to increased premiums collected from a larger work force, improved loss
experience and the closure of claims for less than the amounts previously
reserved.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses totaled $1.5 million for the year ended
December 31, 1996 compared to $1.8 million for the year ended December 31, 1995,
a decrease of $0.3 million or 16.7%. The amount presented for 1996 included $1.5
million for payroll, overhead and other costs associated with operating a public
company and $0.6 million for payroll and other costs incurred in the development
of new business offset by a corporate overhead allocation of $0.6 million to the
service company business. The amount presented for 1995 included $1.6 million
for payroll, overhead and other costs associated with
24
<PAGE>
operating a public company, and $0.8 million for payroll and other costs
incurred in the development of new business offset by a corporate overhead
allocation of $0.6 million to the service company business. The net decrease in
general and administrative expenses for the year ended December 31, 1996 is
attributable to fewer personnel and a decrease in state income taxes paid in
1996 as a result of the restructuring in early 1995.
INTEREST EXPENSE
Interest expense totaled $24.8 million for the year ended December 31, 1996
compared to $13.3 million for the year ended December 31, 1995, an increase of
$11.5 million or 86.5%. The increase consists primarily of $5.7 million of
interest expense on secured long-term debt incurred in connection with
refinancings completed in June 1995 and September 1995 to refinance certain
secured notes payable, redeem the Convertible Preferred Stock and repurchase
513,514 unregistered shares of Class A Common Stock, and $5.6 million of
interest expense on long-term and short-term indebtedness incurred or assumed in
connection with the 1996 Acquisitions. Interest expense on secured tax-exempt
bond financing increased by $1.0 million, or 13.5%, due to an increase in
interest rate on the $48.1 million of tax-exempt bonds refinanced in June 1996
and the borrowing of $9.9 million in June 1996 (proceeds of which were used to
pay down the Company's Credit Facility). During the year ended December 31,
1996, the Company capitalized interest of $0.8 million as a result of increased
construction and renovation activities compared to $0.1 million which was
capitalized during the year ended December 31, 1995. Interest expense,
amortization of deferred financing costs and unused commitment fees on the
Credit Facility were $1.6 million for the years ended December 31, 1996 and
1995.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, the Company had $37.1 million in cash and cash
equivalents and $24.2 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 to be adequate to meet short-term liquidity demands.
In May 1997, the Company increased its maximum amount available under the
Credit Facility from $50.0 million to $100.0 million. The outstanding balance
under the Credit facility was $33.5 million at December 31, 1997.
In January 1998, the Company replaced the Credit Facility with a new
unsecured $50 million revolving credit facility with Bank of America and
BankBoston, N.A. The interest rate under the New Credit Facility is based on
LIBOR or Bank of America's reference rate at the election of the Company, plus
an applicable margin, ranging from 0.6% to 1.0% for LIBOR based loans and 0.0%
to 0.5% for loans based on Bank of America's reference rate. The New Credit
Facility expires on January 26, 2000 unless extended for successive one-year
periods at the discretion of the lenders. The Company utilizes the New Credit
Facility for general corporate purposes and to fund investments on an interim
basis. As of March 18, 1998, there were no borrowings outstanding under the New
Credit Facility.
In February 1998, the Company entered into a five year secured credit
facility agreement with Washington Mortgage, which provides for a $50 million
revolving credit facility, a portion or all of which may be converted into a
base loan facility. At the AIMCO Operating Partnership's request, the commitment
amount may be increased to an amount not to exceed $250 million, subject to
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 their obligations under the WMF Credit
Facility. The guarantees of the Owners are secured by assets of the Owners,
including four
25
<PAGE>
apartment properties and two mortgage notes. The interest rate on each advance
is determined by investor bids for such mortgage backed securities plus a fee
spread 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 base facility mature at a date, selected by the
AIMCO Operating Partnership between ten and twenty years from the date of the
advance. The outstanding balance under the WMF Credit Faculty was $36.9 million
as of March 18, 1998.
The Company expects to meet its long-term liquidity requirements, such as
refinancing debt and property acquisitions, through long-term borrowings, both
secured and unsecured, the issuance of debt, OP Units or equity securities and
cash generated from operations. In May 1997, the Company filed a shelf
registration statement with the Securities and Exchange Commission with respect
to an aggregate of $1.0 billion of debt and equity securities. As of March 18,
1998, the amount remaining available under the shelf registration was $419.4
million. The Company expects to finance the pending acquisition of Ambassador
and other real estate interests, discussed previously in this report, with the
issuance of equity securities and debt.
As of December 31, 1997, 95% of the Company's Owned Properties and 67% of
its total assets were encumbered by debt, and the Company had total outstanding
indebtedness of $808.5 million, all of which was secured by Owned Properties and
other assets. The Company's indebtedness is comprised of $681.4 million of
secured long-term financing, $53.1 in secured short-term financing and $74.0
million of secured tax-exempt bonds. As of December 31, 1997, approximately 8%
of the Company's indebtedness bears interest at variable rates. General Motors
Acceptance Corporation has made 89 loans (the "GMAC Loans"), with an aggregate
outstanding principal balance of $398.6 million as of December 31, 1997, to
property owning partnerships of the Company, each of which is secured by the
underlying Owned Property of such partnership. Certain GMAC Loans are
cross-collateralized with certain other GMAC Loans. Other than certain GMAC
Loans, none of the Company's debt is subject to cross-collateralization
provisions. The weighted average interest rate on the Company's long-term
secured tax-exempt financing and secured notes payable was 8.1% with a weighted
average maturity of 9.7 years. The weighted average interest rate on the
Company's secured short-term financing was 7.5%.
CAPITAL EXPENDITURES
For the year ended December 31, 1997, the Company spent $7.4 million for
capital replacements (expenditures for routine maintenance of a property), $9.1
million for initial capital expenditures (expenditures at a property that have
been identified, at the time the property is acquired, as expenditures to be
incurred within one year of the acquisition), and $8.5 million for construction
and capital enhancements (amenities that add a material new feature or revenue
source at a property). These expenditures were funded by borrowings under the
Credit Facility, working capital reserves and net cash provided by operating
activities. During 1998, the Company will provide an allowance for capital
replacements of $300 per apartment unit. Initial capital expenditures and
capital enhancements will primarily be funded by cash from operating activities
and borrowings under the New Credit Facility.
26
<PAGE>
The Company's accounting treatment of various capital and maintenance costs
is detailed in the following table:
<TABLE>
<CAPTION>
DEPRECIABLE
ACCOUNTING LIFE IN
EXPENDITURE TREATMENT YEARS
- ------------------------------------------------------------------------- ---------------- -----------
<S> <C> <C>
Initial capital expenditures capitalize 5 to 30
Capital enhancements capitalize 5 to 30
Capital replacements:
Carpet/vinyl replacement capitalize 5
Carpet cleaning expense N/A
Major appliance replacement (refrigerators, stoves, dishwashers, capitalize 5
washers/dryers)
Cabinet replacement capitalize 5
Major new landscaping capitalize 5
Seasonal plantings and landscape replacements expense N/A
Roof replacements capitalize 30
Roof repairs expense N/A
Model furniture capitalize 5
Office equipment capitalize 5
Exterior painting, significant capitalize 5
Interior painting expense N/A
Parking lot repairs expense N/A
Parking lot repaving capitalize 30
Equipment repairs expense N/A
General policy for capitalization capitalize various
amounts in
excess of $250
</TABLE>
FUNDS FROM OPERATIONS
The Company measures its economic profitability based on 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 preferred stock. FFO should not be considered 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.
27
<PAGE>
For the years ended December 31, 1997, 1996 and 1995, the Company's FFO is
calculated as follows (amounts in thousands):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Income before minority interest in Operating Partnership.............. $ 32,697 $ 15,673 $ 14,988
Extraordinary item.................................................... 269 -- --
Gain on disposition of properties..................................... (2,720) (44) --
Real estate depreciation, net of minority interests................... 33,751 19,056 15,038
Amortization of management company goodwill........................... 948 500 428
Equity in earnings of other partnerships:
Real estate depreciation............................................ 6,280 -- --
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation............................................ 3,584 -- --
Deferred taxes...................................................... 4,894 -- --
Amortization of management contracts................................ 1,587 -- --
Preferred Stock dividends............................................. (135) -- (5,169)
------------ ------------ ------------
Funds From Operations (FFO)........................................... $ 81,155 $ 35,185 $ 25,285
------------ ------------ ------------
------------ ------------ ------------
Weighted average number of common shares, common share equivalents and
OP Units outstanding:
Common stock...................................................... 24,055 12,411 9,571
Common stock equivalents.......................................... 381 16 8
Preferred stock convertible into common stock..................... 1,006 -- --
OP Units.......................................................... 3,677 2,567 1,882
------------ ------------ ------------
29,119 14,994 11,461
------------ ------------ ------------
------------ ------------ ------------
CASH FLOW INFORMATION:
Cash flow provided by operating activities............................ $ 73,032 $ 38,806 $ 25,911
Cash flow used in investing activities................................ (717,663) (88,144) (60,821)
Cash flow provided by financing activities............................ 668,549 60,129 30,145
</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 HUD. Under its regulations, HUD has the authority
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 an 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. Three HUD field offices have recently issued three LDPs to
NHP as a result of physical inspections and mortgage defaults at four properties
owned by the NHP Real Estate Companies, two of which are managed by the Company.
One LDP was subsequently withdrawn and another was terminated in December 1997
after a reinspection of the property. The one remaining LDP, unless lifted,
suspends the Company's ability to manage or acquire additional HUD-assisted
properties in eastern Missouri until June 24, 1998. The Company has proposed a
settlement agreement with HUD which includes aggregate payments to HUD of
approximately $0.5 million, and is awaiting HUD's response. The Company cannot
determine whether HUD will accept the proposed settlement. 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
28
<PAGE>
the Company currently manages in the subject regions. 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 HUD-assisted properties.
In this regard, since July 1988, 29 HUD-assisted properties owned or managed by
the NHP Real Estate Companies or NHP 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 the Company have
received unsatisfactory performance ratings. As a result of the defaults and
unsatisfactory ratings, the national HUD office must review any field office
approval of the Company to act as property manager for a HUD-assisted property.
The national HUD office has consistently approved NHP's applications to manage
new properties, and the Company received HUD clearance to acquire NHP and the
NHP Real Estate 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,
including NHP'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 multi-family projects in exchange for or in connection with
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.
Although the Inspector General has not initiated any action 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 results of operations of the Company.
ENVIRONMENTAL
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. AIMCO 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
29
<PAGE>
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 an Owned Property.
In addition, the Company's Montecito property in Austin, Texas, is located
adjacent to, and may be partially on, land that was used as a landfill. Low
levels of methane and other landfill gas have been detected at Montecito. The
City of Austin (the "City"), the former landfill operator, has assumed
responsibility for conducting all 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, a proposed contingency plan of passive methane gas
venting may be implemented by the City. The City 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, the Company has relocated some of its tenants and has
installed a venting system according to the TNRCC's specifications under the
buildings slabs, in connection with the present raising of four of its buildings
in order to install stabilizing piers thereunder, at a total cost of
approximately $550,000, which is primarily the cost for the restabilization. The
restabilization was substantially completed in January 1998. The City 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. The Managed Properties may
not have been subject to Phase I or similar environmental audits by independent
environmental consultants. However, the Company is not aware of any
environmental liability that would have a material adverse effect on its
business, financial condition or results of operations relating to the Managed
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
Protection 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 has agreed to pay a fine of less than $100,000, 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.
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
30
<PAGE>
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 after 1999. 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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The independent auditor's reports, consolidated financial statements and
schedule listed in the accompanying index are filed as part of this report and
incorporated herein by this reference. See "Index to Financial Statements" on
page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information regarding the Company's Directors required by this item is
presented under the caption "Board of Directors and Officers" in AIMCO's proxy
statement for its 1998 annual meeting of stockholders and is incorporated herein
by reference.
31
<PAGE>
The directors and executive officers of the Company as of March 18, 1998
are:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ----------------------- --- -------------------------------------------------------------------------
<S> <C> <C>
Terry Considine 50 Chairman of the Board of Directors and Chief Executive Officer
Peter K. Kompaniez 52 Vice Chairman, President and Director
Joel F. Bonder 49 Executive Vice President, General Counsel and Secretary
Robert Ty Howard 40 Executive Vice President--Ancillary Services
Steven D. Ira 47 Executive Vice President and Co-Founder
Thomas W. Toomey 37 Executive Vice President--Finance and Administration
David L. Williams 52 Executive Vice President--Property Operations
Harry G. Alcock 34 Senior Vice President--Acquisitions
Troy D. Butts 33 Senior Vice President and Chief Financial Officer
Martha Carlin 35 Senior Vice President--Ancillary Services
Joseph DeTuno 52 Senior Vice President--Property Redevelopment
Jack W. Marquardt 41 Senior Vice President--Accounting
Herbert Meistrich 55 Senior Vice President--Asset Management
Leeann Morein 43 Senior Vice President--Investor Services
David O'Leary 43 Senior Vice President--Buyers Access
R. Scott Wesson 34 Senior Vice President and Chief Information Officer
Roberta Ujakovich 45 Senior Vice President--Asset Management
Patricia K. Heath 43 Vice President and Chief Accounting Officer
Richard S. Ellwood 65 Director, Chairman, Audit Committee
J. Landis Martin 51 Director, Chairman, Compensation Committee
Thomas L. Rhodes 58 Director
John D. Smith 69 Director
</TABLE>
TERRY CONSIDINE. Mr. Considine has been Chairman of the Board of Directors
and Chief Executive Officer of the Company since July 1994. He is the sole owner
of Considine Investment Co. and prior to July 1994 was owner of approximately
75% of Property Asset Management, L.L.C., Limited Liability Company, a Colorado
limited liability company, and its related entities (collectively, "PAM"), one
of the Company's predecessors. On October 1, 1996, Mr. Considine was appointed
Co-Chairman and director of Asset Investors Corp. and Commercial Asset
Investors, Inc., two other public real estate investment trusts, and appointed
as a director of Financial Assets Management, LLC, a real estate investment
trust manager. Mr. Considine has been and remains involved as a principal in a
variety of real estate activities, including the acquisition, renovation,
development and disposition of properties. Mr. Considine has also controlled
entities engaged in other businesses such as television broadcasting, gasoline
distribution and environmental laboratories. Mr. Considine received a B.A. from
Harvard College, a J.D. from Harvard Law School and is admitted as a member of
the Massachusetts Bar.
Mr. Considine has had substantial multifamily real estate experience. From
1975 through July 1994, partnerships or other entities in which Mr. Considine
had controlling interests invested in approximately 35 multifamily apartment
properties and commercial real estate properties. Six of these real estate
assets (four of which were multifamily apartment properties and two of which
were office properties) did not generate sufficient cash flow to service their
related indebtedness and were foreclosed upon by their lenders, causing pre-tax
losses of approximately $11.9 million to investors and losses of approximately
$2.7 million to Mr. Considine.
PETER K. KOMPANIEZ. Mr. Kompaniez has been Vice Chairman and a director of
AIMCO since July 1994 and was appointed President in July 1997. Mr. Kompaniez
has also served as Chief Operating Officer of NHP and President of NHP Partners
since June 1997. Since September 1993, Mr. Kompaniez has owned 75% of PDI Realty
Enterprises, Inc., a Delaware corporation ("PDI"), one of AIMCO's predecessors,
and serves as its President and Chief Executive Officer. From 1986 to 1993, he
served as
32
<PAGE>
President and Chief Executive Officer of Heron Financial Corporation ("HFC"), a
United States holding company for Heron International, N.V's real estate and
related assets. While at HFC, Mr. Kompaniez administered the acquisition,
development and disposition of approximately 8,150 apartment units (including
6,217 units that have been acquired by AIMCO) and 3.1 million square feet of
commercial real estate. Prior to joining HFC, Mr. Kompaniez was a senior partner
with the law firm of Loeb and Loeb where he had extensive real estate and REIT
experience. Mr. Kompaniez received a B.A. from Yale College and a J.D. from the
University of California (Boalt Hall).
JOEL F. BONDER. Mr. Bonder was appointed Executive Vice President and
General Counsel of AIMCO effective December 1997. Prior to joining AIMCO, Mr.
Bonder served as Senior Vice President and General Counsel of NHP from April
1994 until December 1997. Mr. Bonder served as Vice President and Deputy General
Counsel of NHP from June 1991 to March 1994 and as Associate General Counsel of
NHP from1986 to 1991. From 1983 to 1985, Mr. Bonder was with the Washington,
D.C. law firm of Lane & Edson, PC. From 1979 to 1983, Mr. Bonder practiced with
the Chicago law firm of Ross and Hardies. Mr. Bonder received an A.B. from the
University of Rochester and a J.D. from Washington University School of Law.
ROBERT TY HOWARD. Mr. Howard was appointed Executive Vice
President--Ancillary Services in February 1998. Prior to joining AIMCO, Mr.
Howard served as an officer and director of four affiliated companies, Hecco
Ventures, Craig Corporation, Reading Company and Decurion Corporation. Mr.
Howard was responsible for financing, mergers and acquisitions activities,
investments in commercial real estate, both nationally and internationally,
cinema development and interest rate risk management. From 1983 to 1988, he was
employed by Spieker Properties. Mr. Howard received a B.A. from Amherst College,
a J.D. from Harvard Law School and an M.B.A. from Stanford University Graduate
School of Business.
STEVEN D. IRA. Mr. Ira has served as Executive Vice President and
Co-Founder of AIMCO since July 1994. From 1987 until July 1994, he served as
President of PAM. Prior to merging his firm with PAM in 1987, Mr. Ira acquired
extensive experience in property management. Between 1977 and 1981 he supervised
the property management of over 3,000 apartment and mobile home units in
Colorado, Michigan, Pennsylvania and Florida, and in 1981 he joined with others
to form the property management firm of McDermott, Stein and Ira. Mr. Ira served
for several years on the National Apartment Manager Accreditation Board and is a
former president of both the National Apartment Association and the Colorado
Apartment Association. Mr. Ira is the sixth individual elected to the Hall of
Fame of the National Apartment Association in its 54-year history. He holds a
Certified Apartment Property Supervisor (CAPS) and a Certified Apartment Manager
designation from the National Apartment Association, a Certified Property
Manager (CPM) designation from the National Institute of Real Estate Management
(IREM) and is a member of the Boards of Directors of the National Multi-Housing
Council, the National Apartment Association and the Apartment Association of
Metro Denver. Mr. Ira received a B.S. from Metropolitan State College in 1975.
THOMAS W. TOOMEY. Mr. Toomey has served as Senior Vice President--Finance
and Administration of AIMCO since January 1996 and was promoted to Executive
Vice President--Finance and Administration in March 1997. From 1990 until 1995,
Mr. Toomey served in a similar capacity with Lincoln Property Company ("LPC") as
Vice President/Senior Controller and Director of Administrative Services of
Lincoln Property Services where he was responsible for LPC's computer systems,
accounting, tax, treasury services and benefits administration. From 1984 to
1990, he was an audit manager with Arthur Andersen & Co. where he served real
estate and banking clients. From 1981 to 1983, Mr. Toomey was on the audit staff
of Kenneth Leventhal & Company Mr. Toomey received a B.S. in Business
Administration/Finance from Oregon State University and is a Certified Public
Accountant.
DAVID L. WILLIAMS. Mr. Williams has been Executive Vice
President-Operations of AIMCO since January 1997. Prior to joining AIMCO, Mr.
Williams was Senior Vice President of Operations at Evans
33
<PAGE>
Withycombe Residential, Inc. from January 1996 to January 1997. Previously, he
was Executive Vice President at Equity Residential Properties Trust from October
1989 to December 1995. He has served on National Multi-Housing Council Boards
and NAREIT committees. Mr. Williams also served as Senior Vice President of
Operations and Acquisitions of US Shelter Corporation from 1983 to 1989. Mr.
Williams has been involved in the property management, development and
acquisition of real estate properties since 1973. Mr. Williams received his B.A.
in education and administration from the University of Washington in 1967.
HARRY G. ALCOCK. Mr. Alcock has served as a Vice President since July 1996,
and was promoted to Senior Vice President--Acquisitions in October 1997, with
responsibility for acquisition and financing activities since July 1994. From
June 1992 until July 1994, Mr. Alcock served as Senior Financial Analyst for PDI
and HFC. From 1988 to 1992, Mr. Alcock worked for Larwin Development Corp., a
Los Angeles based real estate developer, with responsibility for raising debt
and joint venture equity to fund land acquisitions and development. From 1987 to
1988, Mr. Alcock worked for Ford Aerospace Corp. He received his B.S. from San
Jose State University.
TROY D. BUTTS. Mr. Butts has served as Senior Vice President and Chief
Financial Officer of AIMCO since November 1997. Prior to joining AIMCO, Mr.
Butts served as a Senior Manager in the audit practice of the Real Estate
Services Group for Arthur Andersen LLP in Dallas, Texas. Mr. Butts was employed
by Arthur Andersen LLP for ten years and his clients were primarily
publicly-held real estate companies, including office and multi-family real
estate investment trusts. Mr. Butts holds a Bachelor of Business Administration
degree in Accounting from Angelo State University and is a Certified Public
Accountant.
MARTHA CARLIN. Ms. Carlin has served as Vice President since September 1996
and was promoted to Senior Vice President--Ancillary Services in December 1997.
From December 1995 until September 1996, Ms. Carlin served as Chief Financial
Officer for Wentwood Investment Partners. Ms. Carlin was employed by Arthur
Andersen LLP for six years, with a primary focus in real estate. Ms. Carlin was
also employed by MCI Communications and Lincoln Property Company. Ms. Carlin
received a B.S. from the University of Kentucky and is a Certified Public
Accountant.
JOSEPH DETUNO. Mr. DeTuno has been Senior Vice President--Property
Redevelopment of AIMCO since September 1997. Mr. DeTuno was president and
founder of JD Associates, his own full service real estate consulting, advisory
and project management company which he founded in 1990. JD Associates provided
development management, financial analysis, business plan preparation and
implementation services. Previously, Mr. DeTuno served as President/Partner of
Gulfstream Commercial Properties, President and Co managing Partner of Criswell
Development Company, Vice President of Crow Hotel and Company and Project
Director with Perkins & Will Architects and Planners. Mr. DeTuno received his
B.A. in architecture and is a registered architect in Illinois and Texas.
JACK W. MARQUARDT. Mr. Marquardt has been Senior Vice President--Accounting
of AIMCO since September 1997. Mr. Marquardt brings over 17 years of real estate
accounting experience to AIMCO. From October 1992 through August 1997, Mr.
Marquardt served as Vice President/Corporate Controller and Manager of Data
Processing for Transwestern Property Company, where he was responsible for
corporate accounting, tax, treasury services and computer systems. From August
1986 through September 1992, Mr. Marquardt worked in the real estate accounting
area of Aetna Realty Investors, Inc. serving as Regional Controller from April
1990 through September 1992. Mr. Marquardt received a B.S. in Business
Administration/Finance from Ohio State University.
HERBERT MEISTRICH. Mr. Meistrich has served as a Regional Vice President of
AIMCO since March 1995 and was promoted to Senior Vice President in September
1997, with responsibility for acquisitions and conversions of properties. Mr.
Meistrich has been involved in property management, development and acquisition
of all types of real estate properties since 1972. From 1982 to 1993, Mr.
Meistrich was President of Continental American Capital Corp., an affiliate of
ConAm Properties,
34
<PAGE>
Ltd., and was responsible for acquisition and financing of apartments and
hotels. From 1966 to 1982, Mr. Meistrich practiced law, specializing in real
estate development and management. He was an Adjunct Assistant Professor at NYU
and has taught advanced real estate courses at NYU, as well as at other
professional seminars. He has authored articles in various real estate
publications. Mr. Meistrich received a B.A. from Rutgers University and a J.D.
from Columbia University Law School.
LEEANN MOREIN. Ms. Morein has served as Senior Vice President-- lnvestor
Services of AIMCO since November 1997. Ms. Morein served as Secretary from July
1994 to December 1997. From July 1994 until October 1997, Ms. Morein also served
as Chief Financial Officer. From September 1990 to March 1994, Ms. Morein served
as Chief Financial Officer of the real estate subsidiaries of California Federal
Bank, including the general partner of CF Income Partners, L.P, a publicly
traded master limited partnership. Ms. Morein joined California Federal in
September 1988 as Director of Real Estate Syndications Accounting and became
Vice President-Financial Administration in January 1990. From 1983 to 1988, Ms.
Morein was Controller of Storage Equities, Inc., a real estate investment trust,
and from 1981 to 1983, she was Director of Corporate Accounting for Angeles
Corporation, a real estate syndication firm. Ms. Morein worked on the audit
staff of Price Waterhouse from 1979 to 1981. Ms. Morein received a B.A. from
Pomona College and is a Certified Public Accountant.
DAVID O'LEARY. Mr. O'Leary has been President of Property Services Group,
Inc., an AIMCO subsidiary since December 1997. Property Services Group, Inc.
administers the Buyers Access program. From 1993 until 1997, Mr. O'Leary served
as Regional Vice President and Senior Vice President for Property Services
Group, Inc., with responsibility for program marketing and sales. From 1981 to
1993 Mr. O'Leary served as Vice President and Executive Vice President for
Commonwealth Pacific Inc., a privately held real estate investment and
management firm based in Seattle, Washington. During his tenure with
Commonwealth Pacific, Inc., Mr. O'Leary was responsible for acquisitions,
dispositions, development, and asset management from offices located in Houston
and Dallas, Texas, Atlanta, Georgia and Seattle, Washington. Mr. O'Leary also
served as Vice President for Johnstown American Companies, directing acquisition
activities for the Northeast United States. Mr. O'Leary received his B.A. Degree
from the University of Utah in 1979.
R. SCOTT WESSON. Mr. Wesson has been Senior Vice President-Chief
Information Officer of AIMCO since July 1997. From 1994 until 1997, Mr. Wesson
served as Vice President of Information Services at Lincoln Property Company,
where he was responsible for information systems infrastructure, technology
planning and business process re-engineering. From 1992 to 1994, Mr. Wesson
served in the role of Director of Network Services for Lincoln Property Company,
where he was responsible for the design and deployment of the company's Wide
Area Network and Local Area Networks, comprising over 2,500 workstations in over
40 locations nationwide. From 1988 to 1992, he was a systems consultant with
Automatic Data Processing involved in design, planning and deployment of
financial and human resources systems for several major, multi-national
organizations. From 1984 to 1987, he was a Senior Analyst with Federated
Department Stores, Inc. involved in planning and distribution. Mr. Wesson
received his B.S. from the University of Texas in 1984.
ROBERTA UJAKOVICH. Ms. Ujakovich has served as Senior Vice President since
July, 1997. She is responsible for transactions in the portfolio of over 380
AIMCO and NHP properties. Prior to joining AIMCO, Ms. Ujakovich was Vice
President of NHP serving as the Director of Transactions in NHP's Asset
Management Department. Previously, Ms. Ujakovich worked as a developer for three
successive, affiliated real estate development companies: The Cafritz / Freeman
Group, The Investment Group and Rosenberg, Freeman and Associates. She holds a
B.A. from Allegheny College and a Masters in Public Policy from the John F.
Kennedy School of Government at Harvard University.
PATRICIA K. HEATH. Ms. Heath has served as Vice President and Chief
Accounting Officer of the Company since July 1994. From 1992 to July 1994, Ms.
Heath served as Manager of Accounting, then Chief Financial Officer, of HFC, and
effective September 1993, as Chief Financial Officer of PDI. She had
35
<PAGE>
responsibility for all internal and external financial reporting, cash
management and budgeting for HFC, its subsidiaries, related joint ventures and
partnerships and for PDI. Ms. Heath served as Controller for the real estate
investment, development and syndication firms of Guilford Glazer & Associates
from 1990 to 1992, Ginarra Holdings, Inc. from 1984 to 1990, and Fox & Carskadon
Financial Corporation from 1980 to 1983. Ms. Heath worked from 1978 to 1980 as
an auditor with Deloitte, Haskins and Sells. She received her B.S. in Business
from California State University at Chico and is a Certified Public Accountant.
RICHARD S. ELLWOOD. Mr. Ellwood was appointed a director of AIMCO in July
1994 and is currently Chairman of the Audit Committee. Mr. Ellwood is the
founder and President of R.S. Ellwood & Co., Incorporated, a real estate
investment banking firm. Prior to forming R.S. Ellwood & Co., Incorporated in
1987, Mr. Ellwood had 31 years experience as an investment banker, serving as:
Managing Director and Senior Banker at Merrill Lynch Capital Markets from 1984
to 1987; Managing Director at Warburg Paribas Becker from 1978 to 1984; general
partner and then Senior Vice President and a director at White, Weld & Co. from
1968 to 1978; and in various capacities at J.P Morgan & Co. from 1955 to 1968.
Mr. Ellwood currently serves as a director of Corporate Realty Income Trust and
FelCor Suite Hotels, Inc. He is a registered investment advisor.
J. LANDIS. MARTIN. Mr. Martin was appointed a director of AIMCO in July
1994 and is currently Chairman of the Compensation Committee. Mr. Martin has
served as President, Chief Executive Officer and a director of NL Industries,
Inc., a manufacturer of specialty chemicals, since 1987. Since 1988, he has
served as the President and Chief Executive Officer of Tremont Corporation, an
integrated producer of titanium metals. Mr. Martin has also served as a director
and the Chairman of the Board of Directors of Tremont Corporation since August
1990. From December 1988 until January 1994, he served as Chairman of the Board
of Directors of Baroid Corporation, an oilfield services company. In January
1994, Baroid Corporation became a wholly owned subsidiary of Dresser Industries,
Inc. and Mr. Martin currently serves as a director of Dresser Industries, Inc.
Mr. Martin also serves as Chairman of the Board and Chief Executive Officer of
Titanium Metals Corporation, an integrated producer of titanium.
THOMAS L. RHODES. Mr. Rhodes was appointed a director of AIMCO in July
1994. Mr. Rhodes has served as the President and a director of National Review
since 1992. From 1976 to 1992, he held various positions at Goldman, Sachs & Co.
and was elected a General Partner in 1986. He also served as a director of
Underwriters Reinsurance Company from 1987 to 1993 and was a member of the
Advisory Board of TransTerra Co. during 1993. He currently serves as Co-Chairman
and director of Financial Assets Management, LLC and its subsidiaries, and as a
director of Delphi Financial Group, Inc. and The Lynde and Harry Bradley
Foundation. Mr. Rhodes is Chairman of the Empire Foundation for Policy Research,
a Trustee of The Heritage Foundation, a Trustee of The Manhattan Institute and a
Member of the Council on Foreign Relations.
JOHN D. SMITH. Mr. Smith was appointed a director of AIMCO in November
1994. Mr. Smith is Principal and President of John D. Smith Developments. Mr.
Smith has been a shopping center developer, owner and consultant for over 8.6
million square feet of shopping center projects including Lenox Square in
Atlanta, Georgia. Mr. Smith is a Trustee and former President of the
International Council of Shopping Centers and was selected to be a member of the
American Society of Real Estate Counselors. Mr. Smith served as a director for
Pan-American Properties, Inc. (National Coal Board of Great Britain) formerly
known as Continental Illinois Properties. He also serves as a director of
American Fidelity Assurance Companies and is retained as an advisor by Shop
System Study Society, Tokyo, Japan.
Information required by this item is presented under the caption "Other
Matters--Section 16(a) Compliance" in the Company's proxy statement for its 1998
annual meeting of stockholders and is incorporated herein by reference.
36
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is presented under the captions
"Summary Compensation Table", "Option/SAR Grants in Last Fiscal Year" and
"Aggregate Option/SAR Exercises in Last Fiscal Year and Fiscal Year-end
Options/SAR Values" in AIMCO's proxy statement for its 1998 annual meeting of
stockholders and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is presented under the caption
"Security Ownership of Certain Beneficial Owners and Management" in AIMCO's
proxy statement for its 1998 annual meeting of stockholders and is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is presented under the caption
"Certain Relationships and Transactions" in AIMCO's proxy statement for its 1998
annual meeting of stockholders and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) The financial statements listed in the Index to Financial Statements
on Page F-1 of this report are filed as part of this report and incorporated
herein by reference.
(a)(2) The financial statement schedule listed in the Index to Financial
Statements on Page F-1 of this report is filed as part of this report and
incorporated herein by reference.
(a)(3) The Exhibit Index is included on page 39 of this report and
incorporated herein by reference.
(b) Reports on Form 8-K for the quarter ended December 31, 1997:
Current Report on Form 8-K, dated September 19, 1997, relating to the
acquisition by the Company of common stock of NHP Incorporated; the
acquisition by the Company of the Morton Towers apartments and adjacent land
through two subsidiary limited partnerships; the probable acquisition by the
Company of a multi-family residential apartment property for an aggregate
cash purchase price of approximately $260 million; the potential sale by the
Company of its interests in the Hall Properties to affiliated joint venture
partners; and the completion by the Company of the acquisition of the Los
Arboles Apartments located in Chandler, Arizona, including certain pro forma
financial information and the Historical Summary of Gross Income and Direct
Operating Expenses of Morton Towers for the year ended December 31, 1996 and
the six months ended June 30, 1997 (unaudited).
Current Report on Form 8-K, dated October 15, 1997, and Amendment No. 1
thereto, relating to the acquisition by the Company of 35 multi-family
residential properties located in seven states from 27 limited partnerships
affiliated with Winthrop Financial Associates, including certain pro forma
financial information and the Combined Statement of Revenues and Certain
Expenses of the Thirty-five Acquisition Properties for the year ended
December 31, 1996 and the six months ended June 30, 1997 (unaudited).
Current Report on Form 8-K, dated December 1, 1997, relating to the
acquisition by the Company of the Foxchase Apartments from First Alexandria
Associates Limited Partnership, a Virginia Limited partnership ("First
Alexandria"); the acquisition by the Company of approximately 53.95% of the
limited partnership interests in Country Lake Associates Two ("Country
Lakes"); the acquisition by the Company of 61.88% of the limited partnership
interest in Point West Limited
37
<PAGE>
Partnership ("Point West"); the acquisition by AIMCO Properties, L.P. of
approximately 72.05% of the limited partnership interest in the Oak Park
Partnership ("Oak Park"), including the Financial Statement and Independent
Auditors' Report for First Alexandria for the Years Ended December 31, 1996,
1995 and 1994, the Financial Statement and Independent Auditors' Report for
Country Lakes for the years ended December 31, 1996, 1995 and 1994, the
Financial Statement and Independent Auditors' Report for Point West, for the
Years Ended December 31, 1996, 1995 and 1994, the Statements of Revenues and
Certain Expenses for Oak Park for the Years Ended December 31, 1996, 1995
and 1994, and certain pro forma financial information.
Current Report on Form 8-K, dated December 23, 1997 and Amendment No. 1
thereto, relating to the Company's entering into an Agreement and Plan of
Merger with Ambassador Apartments, Inc., a Maryland corporation
("Ambassador"), including Financial Statements, Schedule and Report of
Independent Auditors for Ambassador as of December 31, 1996 and 1995 and for
the Years Ended December 31, 1996, 1995 and 1994, the Financial Statement
for Ambassador as of September 30, 1997 and December 31, 1996 and for the
Three and Nine Months ended September 30, 1997 and 1996 (unaudited), and
certain pro forma financial information.
Amendment No. 2 to Current Report on Form 8-K, dated April 16, 1997
(filed October 6, 1997).
Amendment No. 3 to Current Report on Form 8-K, dated April 16, 1997
(filed October 22, 1997).
Amendment No. 4 to Current Report on Form 8-K, dated June 3, 1997 (filed
October 6, 1997).
Amendment No. 5 to Current Report on Form 8-K, dated June 3, 1997 (filed
October 22, 1997).
38
<PAGE>
EXHIBIT INDEX (1)
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- ------------------------------------------------------------------------------------------
<C> <S> <C>
2.1 Agreement and Plan of Merger, dated as of April 21, 1997, by and among Apartment
Investment and Management Company, AIMCO/NHP Acquisition Corp. and NHP Incorporated (2)
2.2 Agreement of Plan of Merger, dated as of December 23, 1997, by and between Apartment
Investment and Management Company and Ambassador Apartments, Inc. (3)
3.1 Charter
3.2 Bylaws (4)
10.1 Credit Agreement, dated as of May 5, 1997, by and among AIMCO/NHP Holdings, Inc., the
lenders from time to time party thereto, Bank of America National Trust and Savings
Association, as one of the Lenders, Smith Barney Mortgage Capital Group, Inc., as one of
the Lenders and Bank of America National Trust and Savings Association, as Agent (5)
10.2 Promissory Note, dated as of May 5, 1997, by AIMCO/NHP Holdings, Inc. in favor of Smith
Barney Mortgage Capital Group, Inc. (5)
10.3 Promissory Note, dated of May 5, 1997, by AIMCO/NHP Holdings, Inc., in favor of Bank of
America National Trust and Savings Association (5)
10.4 Payment Guaranty, dated as of May 5, 1997, by the Company and AIMCO Properties, L.P., in
favor of Bank of America National Trust and Savings Association, as the agent (5)
10.5 Pledge Agreement, dated as of May 5, 1997, by AIMCO Properties, L.P. and Terry Considine
and Peter K. Kompaniez and the Bank of America National Trust and Savings Association,
as Agent, for Bank of America National Trust and Savings Association and Smith Barney
Mortgage Capital Group, Inc. (5)
10.6 Amended and Restated Credit Agreement (Secured Revolver-to-Term Facility), dated as of May
5, 1997, by and among AIMCO Properties, L.P., the lenders from time to time party
thereto, Bank of America National Trust and Savings Association, as one of the Lenders
and as the Issuing Lender, and Bank of America National Trust and Savings Association,
as Agent (5)
10.7 Promissory Note, dated as of May 5, 1997, by AIMCO Properties, L.P., in favor of Bank of
America National Trust and Savings Association (5)
10.8 Payment Guaranty, dated as of May 5, 1997, by the Company, AIMCO-LP, Inc., AIMCO-GP, Inc.,
AIMCO Holdings QRS, Inc., AIMCO Somerset, Inc. and AIMCO/OTC QRS, Inc. in favor of Bank
of America National Trust and Savings Association, as the agent. (5)
10.9 Amended and Restated Credit Agreement (Bridge Loan Facility), dated as of May 5, 1997, by
and among AIMCO Properties, L.P., the lenders from time to time party thereto, Bank of
America National Trust and Savings Association, as one of the Lenders, and Bank of
America National Trust and Savings Association, as Agent (5)
10.10 Promissory Note, dated as of May 5, 1997, by AIMCO Properties, L.P., in favor of Bank of
America National Trust and Savings Association (5)
10.11 Second Amended and Restated Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated as of July 29, 1994, among AIMCO-GP, Inc., as general partner, AIMCO-LP, Inc., as
special limited partner, and AIMCO-GP, Inc., as attorney-in-fact for the limited
partners (6)
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- ------------------------------------------------------------------------------------------
<C> <S> <C>
10.12 First Amendment to the Second Amended and Restated Agreement of Limited Partnership of
AIMCO Properties, L.P., dated as of July 29, 1997, by AIMCO-GP, Inc. (6)
10.13 Common Stock Purchase Agreement made as of August 26, 1997, by and between Apartment
Investment and Management Company, a Maryland corporation, and ABKB/LaSalle Securities
Limited Partnership, a registered investment advisor (7)
10.14 Purchase and Sale Agreement and Joint Escrow Instructions, made and entered into as of
August 22, 1997, by and between AIMCO Properties, L.P., and each of the parties
identified on Exhibit "A" attached thereto (collectively, the "Winthrop Sellers") (8)
10.15 Letter Agreement, dated October 15, 1997, by and between AIMCO Properties, L.P. and the
Winthrop Sellers (8)
10.16 Restricted Stock Agreement (1997 Stock Award and Incentive Plan), dated as of July 25,
1997, by and between Apartment Investment and Management Company, and R. Scott Wesson
(4) (9)
10.17 Contribution Agreement and Joint Escrow Instructions, dated as of January 1, 1996, by and
between AIMCO Properties, L.P. and Peachtree Park 94, L.P. (10)
10.18 Acquisition Agreement, dated as of April 30, 1996, by and among the Company, AIMCO
Somerset, Inc., AIMCO Properties, L.P., Somerset REIT, Inc., RJ Holdings, Ltd., Somerset
PAM Partnership and RJ Equities, Inc. (11)
10.19 Credit Agreement, dated as of August 12, 1996, by and among AIMCO Properties, L.P., the
banks from time to time party to this Agreement, Bank of America National Trust and
Savings Association, as one of the Banks, and Bank of America National Trust and Savings
Association, as Agent (12)
10.20 Promissory Note, dated as of August 12, 1996, by AIMCO Properties, L.P., in favor of Bank
of America National Trust and Savings Association (12)
10.21 Payment Guaranty, dated as of August 12, 1996, by the Company, AIMCO-GP, Inc., AIMCO-LP,
Inc., AIMCO Holdings, L.P., AIMCO Holdings QRS, Inc., AIMCO Somerset, Inc. and AIMCO/OTC
QRS, Inc. in favor of Bank of America National Trust and Savings Association, as the
agent (12)
10.22 Credit Agreement (Bridge Loan) entered into as of August 12, 1996, among AIMCO Properties,
L.P., the National Trust and Savings Association and Bank of America National Trust and
Savings Association, as Agent (12)
10.23 Promissory Note by AIMCO Properties, L.P. in favor of Bank of America National Trust and
Savings Association (12)
10.24 Payment Guaranty dated as of August 12, 1996, by the Company, AIMCO-GP, Inc., AIMCO-LP,
Inc., AIMCO Holdings, L.P., AIMCO Holdings QRS, Inc., AIMCO Somerset, Inc. and AIMCO/OTC
QRS, Inc., in favor of Bank of America National Trust and Savings Association (12)
10.25 Acquisition Agreement, dated as of July 26, 1995, among the Company, AIMCO Properties,
L.P., AIMCO/PAM Properties, L.P., John W. English, J.W. English Real Estate, Inc., J.W.
English Development Co., J.W. English Investments Co., J.W. English Management Co.,
Easton Falls Partners, Ltd. and English Income Fund I, a Texas Limited Partnership (12)
10.26 Apartment Investment and Management Company Non-Qualified Employee Stock Option Plan,
adopted August 29, 1996 (9) (13)
10.27 Apartment Investment and Management Company 1996 Stock Award and Incentive Plan, adopted
April 25, 1996 (9) (14)
10.28 Summary of Arrangement for Sale of Stock to Executive Officers (9) (14)
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- ------------------------------------------------------------------------------------------
<C> <S> <C>
10.29 Employment Contract executed on July 29, 1994 by and between AIMCO Properties, L.P. and
Peter Kompaniez (9) (15)
10.30 Employment Contract executed on July 29, 1994 by and between AIMCO Properties, L.P. and
Terry Considine (9) (15)
10.31 Employment Contract executed on July 29, 1994 by and between AIMCO Properties, L.P. and
Steven D. Ira (9) (15)
10.32 Stock Purchase Agreement, dated as of April 16, 1997, by and among Apartment Investment
and Management Company, Demeter Holdings Corporation and Capricorn Investors, L.P. (2)
10.33 Real Estate Acquisition Agreement, dated as of May 22, 1997, by and among Apartment
Investment and Management Company, AIMCO Properties, L.P., Demeter Holdings Corporation,
Phemus Corporation, Capricorn Investors, L.P., J. Roderick Heller, III and NHP Partners
LLC (16)
10.34 Contribution Agreement, dated as of January 31, 1998, by and between Apartment Investment
and Management Company and Terry Considine and Peter K. Kompaniez (17)
10.35 Second Amendment to the Second Amended and Restated Agreement of Limited Partnership of
AIMCO Properties, L.P., dated as of December 22, 1997 by AIMCO-GP, Inc.
10.36 Third Amendment to the Second Amended and Restated Agreement of Limited Partnership of
AIMCO Properties, L.P., dated as of February 19, 1998 by AIMCO-GP, Inc.
21.1 List of Subsidiaries
23.1 Consent of Ernst & Young LLP
27.1 Financial Data Schedule
99.1 Agreement re: disclosure of long-term debt instruments.
</TABLE>
- ------------------------
(1) Schedules and supplemental materials to the exhibits have been omitted but
will be provided to the Securities and Exchange Commission upon request.
(2) Incorporated by reference from the Company's Current Report on Form 8-K,
dated April 16, 1997.
(3) Incorporated by reference from the Company's Current Report on Form 8-K
dated December 23, 1997.
(4) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarterly period ending September 30, 1997.
(5) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarterly period ending March 31, 1997.
(6) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarterly period ending June 30, 1997.
(7) Incorporated by reference from the Company's Current Report on Form 8-K,
dated August 26, 1997.
(8) Incorporated by reference from the Company's Current Report on Form 8-K,
dated October 15, 1997.
(9) Management contract or compensatory plan or arrangement.
(10) Incorporated by reference from the Company's Current Report on Form 8-K,
dated January 1, 1996.
(11) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarterly period ending June 30, 1996.
41
<PAGE>
(12) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarterly period ending September 30, 1996.
(13) Incorporated by reference from the Company's Quarterly Report on Form
10-Q/A for the quarterly period ending September 30, 1996.
(14) Incorporated by reference from the Company's Annual Report on Form 10-K
for the fiscal year 1996.
(15) Incorporated by reference from the Company's Annual Report on Form 10-K
for the fiscal year 1994.
(16) Incorporated by reference from the Company's Current Report on Form 8-K
dated June 3, 1997.
(17) Incorporated by reference from the Company's Current Report on Form 8-K,
dated January 31, 1998.
42
<PAGE>
SCHEDULE 1
Documents substantially identical to Exhibit 10.16, except as to the
recipient, the number of shares, the borrower and the note amount, have been
omitted in reliance on Rule 12b-31 under the Securities Exchange Act of 1934.
Set forth below are the material details in which such documents differ from
Exhibit 10.16.
<TABLE>
<CAPTION>
RECIPIENT AND BORROWER NUMBER OF SHARES NOTE AMOUNT
- ----------------------------------------------------------- ----------------- -------------
<S> <C> <C>
Terry Considine (Titahothree Limited Partnership RLLLP).... 691,578 $ 20,747,340
Peter Kompaniez............................................ 210,526 6,315,780
Tom Toomey................................................. 52,632 1,578,960
Steven Ira................................................. 52,632 1,578,960
David Williams............................................. 52,632 1,578,960
Troy D. Butts.............................................. 30,435 1,050,000
Harry Alcock............................................... 10,000 300,000
Martha Carlin.............................................. 10,000 300,000
Leeann Morein.............................................. 4,000 120,000
Patricia Heath............................................. 4,000 120,000
Carla Stoner............................................... 3,000 90,000
</TABLE>
43
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on the 20th day of
March, 1998.
<TABLE>
<S> <C> <C>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
/s/ TERRY CONSIDINE
-----------------------------------------
Terry Considine, CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ TERRY CONSIDINE
- ------------------------------ Chairman of the Board and March 20, 1998
Terry Considine Chief Executive Officer
/s/ PETER K. KOMPANIEZ
- ------------------------------ Vice Chairman, President March 20, 1998
Peter K. Kompaniez and Director
/s/ THOMAS W. TOOMEY Executive Vice President--
- ------------------------------ Finance and March 20, 1998
Thomas W. Toomey Administration
/s/ TROY D. BUTTS
- ------------------------------ Senior Vice President and March 20, 1998
Troy D. Butts Chief Financial Officer
/s/ PATRICIA K. HEATH
- ------------------------------ Vice President and Chief March 20, 1998
Patricia K. Heath Accounting Officer
/s/ RICHARD S. ELLWOOD
- ------------------------------ Director March 20, 1998
Richard S. Ellwood
/s/ J. LANDIS MARTIN
- ------------------------------ Director March 20, 1998
J. Landis Martin
/s/ THOMAS L. RHODES
- ------------------------------ Director March 20, 1998
Thomas L. Rhodes
/s/ JOHN D. SMITH
- ------------------------------ Director March 20, 1998
John D. Smith
44
<PAGE>
INDEX TO FINANCIAL STATEMENTS
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
FINANCIAL STATEMENTS:
Report of Independent Auditors........................................................................... F-2
Consolidated Balance Sheets as of December 31, 1997 and 1996............................................. F-3
Consolidated Statements of Income for the Years ended December 31, 1997, 1996 and 1995................... F-4
Consolidated Statements of Stockholders' Equity for the Years ended December 31, 1997, 1996 and 1995..... F-5
Consolidated Statements of Cash Flow for the Years ended December 31, 1997, 1996 and 1995................ F-6
Notes to Consolidated Financial Statements............................................................... F-9
FINANCIAL STATEMENT SCHEDULE:
Schedule III--Real Estate and Accumulated Depreciation................................................... F-39
All other schedules are omitted because they are not applicable or the required information is shown in
the financial statements or notes thereto.
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
Apartment Investment and Management Company
We have audited the accompanying consolidated balance sheets of Apartment
Investment and Management Company as of December 31, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1997. Our audits
also included the consolidated financial statement schedule listed in the Index
at Item 14(a)(2). These financial statements and schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Apartment Investment and Management Company at December 31, 1997 and 1996, and
the consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles. Also, in our opinion, the related consolidated
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Dallas, Texas
March 6, 1998,
except for Note 25, as to which
the date is March 17, 1998
F-2
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS 1997 1996
--------- -----------
<S> <C> <C>
Real Estate, net of accumulated depreciation of $153,285, and $120,077 (see
Note 3)...................................................................... $1,503,922 $ 745,145
Property held for sale......................................................... 6,284 6,769
Investments in securities (see Note 4)......................................... 22,144 --
Investments in and notes receivable from unconsolidated subsidiaries (see Note
5)........................................................................... 84,459 --
Investments in and note receivable from unconsolidated real estate partnerships
(see Note 6)................................................................. 212,150 --
Cash and cash equivalents...................................................... 37,088 13,170
Restricted cash................................................................ 24,229 15,831
Accounts receivable............................................................ 28,656 4,344
Deferred financing costs....................................................... 12,793 11,053
Goodwill....................................................................... 125,239 --
Other assets................................................................... 43,546 31,361
--------- -----------
Total assets................................................................... $2,100,510 $ 827,673
--------- -----------
--------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Secured notes payable (see Note 7)............................................. $ 681,421 $ 242,110
Secured tax-exempt bond financing (see Note 9)................................. 74,010 75,497
Secured short-term financing (see Note 8)...................................... 53,099 192,039
Unsecured short-term financing (see Note 10)................................... -- 12,500
--------- -----------
Total indebtedness............................................................. 808,530 522,146
--------- -----------
Accounts payable, accrued and other liabilities................................ 88,170 16,299
Resident security deposits and prepaid rents................................... 10,213 4,316
--------- -----------
Total liabilities.............................................................. 906,913 542,761
--------- -----------
Commitments and contingencies (see Note 12) -- --
Minority interest in other partnerships (see Note 13).......................... 36,335 10,386
Minority interest in Operating Partnership (see Note 14)....................... 111,962 58,777
Stockholder's equity (see Note 16)
Class A Common Stock, $.01 par value, 150,000,000 shares authorized,
40,439,218 and 14,980,441 shares issued and outstanding.................... 403 150
Class B Common Stock, $.01 par value, 262,500 and 425,000 shares authorized,
162,500 and 325,000 shares issued and outstanding.......................... 2 3
Non-voting preferred stock, $0.01 par value, 6,490,000 shares authorized,
none issued and outstanding................................................ -- --
Class B Cumulative Convertible Preferred Stock, $.01 par value, 750,000
shares authorized, 750,000 and 0 shares issued and outstanding............. 75,000 --
Class C Cumulative Preferred Stock, $.01 par value, 2,760,000 shares
authorized, 2,400,000 and 0 shares issued and outstanding.................. 60,000 --
Additional paid-in capital................................................... 977,601 236,791
Notes receivable on common stock purchases................................... (35,095) (7,140)
Distributions in excess of earnings.......................................... (30,928) (14,055)
Unrealized loss on investments............................................... (1,683) --
--------- -----------
1,045,300 215,749
--------- -----------
$2,100,510 $ 827,673
--------- -----------
--------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- -----------
<S> <C> <C> <C>
RENTAL PROPERTY OPERATIONS
Rental and other property revenues.............................................. $ 193,006 $ 100,516 $ 74,947
Property operating expenses..................................................... (76,168) (38,400) (30,150)
Owned property management expense............................................... (6,620) (2,746) (2,276)
--------- --------- -----------
Income from property operations before depreciation............................. 110,218 59,370 42,521
Depreciation.................................................................... (37,741) (19,556) (15,038)
--------- --------- -----------
Income from property operations................................................. 72,477 39,814 27,483
--------- --------- -----------
SERVICE COMPANY BUSINESS
Management fees and other income................................................ 13,937 8,367 8,132
Management and other expenses................................................... (9,910) (5,352) (4,953)
Corporate overhead allocation................................................... (588) (590) (581)
Amortization of management company goodwill..................................... (948) (500) (428)
Depreciation and amortization................................................... (453) (218) (168)
--------- --------- -----------
Income from service company business............................................ 2,038 1,707 2,002
Minority interests in service company business.................................. (10) 10 (29)
--------- --------- -----------
Company's share of income from service company business......................... 2,028 1,717 1,973
--------- --------- -----------
General and administrative expenses............................................. (5,396) (1,512) (1,804)
Interest expense................................................................ (51,385) (24,802) (13,322)
Interest income................................................................. 8,676 523 658
Minority interest in other partnerships......................................... 1,008 (111) --
Equity in losses of unconsolidated partnerships................................. (1,798) -- --
Equity in earnings of unconsolidated subsidiaries............................... 4,636 -- --
--------- --------- -----------
Income from operations.......................................................... 30,246 15,629 14,988
Gain on disposition of properties............................................... 2,720 44 --
--------- --------- -----------
Income before extraordinary item and minority interest in Operating
Partnership................................................................... 32,966 15,673 14,988
Extraordinary item--early extinguishment of debt................................ (269) -- --
--------- --------- -----------
Income before minority interest in Operating Partnership........................ 32,697 15,673 14,988
Minority interest in Operating Partnership...................................... (4,064) (2,689) (1,613)
--------- --------- -----------
Net income...................................................................... 28,633 12,984 13,375
Net income attributable to preferred shareholders............................... 2,315 -- 5,169
--------- --------- -----------
Net income attributable to common shareholders.................................. $ 26,318 $ 12,984 $ 8,206
--------- --------- -----------
--------- --------- -----------
Basic earnings per common share................................................. $ 1.09 $ 1.05 $ 0.86
--------- --------- -----------
--------- --------- -----------
Diluted earnings per common share............................................... $ 1.08 $ 1.04 $ 0.86
--------- --------- -----------
--------- --------- -----------
Weighted average common shares outstanding...................................... 24,055 12,411 9,571
--------- --------- -----------
--------- --------- -----------
Weighted average common shares and common share equivalents outstanding......... 24,436 12,427 9,579
--------- --------- -----------
--------- --------- -----------
Dividends paid per common share................................................. $ 1.85 $ 1.70 $ 1.66
--------- --------- -----------
--------- --------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS B
COMMON STOCK COMMON STOCK PREFERRED STOCK
------------------------ ------------------------ ----------------------
SHARES SHARES SHARES
ISSUED AMOUNT ISSUED AMOUNT ISSUED AMOUNT
----------- ----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1994............................. 9,589 $ 96 650 $ 7 -- $ --
Net proceeds from issuance of Class A Common Stock in
public offering..................................... 2,706 27
Repurchase of unregistered Class A Common Stock....... (514) (5)
Conversion of Class B Common Stock to Class A Common
Stock............................................... 65 (65) (1)
Conversion of Operating Partnership Units to Class A
Common Stock........................................ 1
Net income............................................
Dividends paid--Convertible Preferred Stock...........
Dividends paid--Class A Common Stock..................
----------- ----- --- ----- --- ---------
BALANCE DECEMBER 31, 1995............................. 11,847 118 585 6 -- --
Net proceeds from issuance of Class A Common Stock.... 1,265 13
Conversion of Class B Common Stock to Class A Common
Stock............................................... 260 3 (260) (3)
Conversion of Operating Partnership Units to Class A
Common Stock........................................ 212 2
Class A Common Stock issued as consideration for real
estate acquired..................................... 704 7
Purchase of stock by officers......................... 895 9
Repurchase of Class A Common Stock.................... (206) (2)
Stock options exercised............................... 3
Net income............................................
Dividends paid--Class A Common Stock..................
----------- ----- --- ----- --- ---------
BALANCE DECEMBER 31, 1996............................. 14,980 150 325 3 -- --
Net proceeds from issuance of Class A Common Stock.... 16,367 164
Net proceeds from issuance of Class B Preferred
Stock............................................... 750 75,000
Net proceeds from issuance of Class C Preferred
Stock...............................................
Repurchase of Class A Common Stock from officer.......
Conversion of Class B Common Stock to Class A Common
Stock............................................... 163 1 (163) (1)
Conversion of Operating Partnership Units to Class A
Common Stock........................................ 562 6
Purchase of stock by officers......................... 1,149 11
Repayment of notes receivable from officers...........
Stock options exercised............................... 442 4
Warrants exercised.................................... 16
Class A Common Stock issued as consideration for NHP
Common Stock........................................ 6,760 67
Net income............................................
Dividends paid--Class A Common Stock..................
Dividends paid--Class B Preferred stock...............
Unrealized loss on investments........................
----------- ----- --- ----- --- ---------
BALANCE DECEMBER 31, 1997............................. 40,439 $ 403 162 $ 2 750 $ 75,000
----------- ----- --- ----- --- ---------
----------- ----- --- ----- --- ---------
<CAPTION>
CLASS C
PREFERRED STOCK NOTES
---------------------- ADDITIONAL RECEIVABLE
SHARES PAID-IN FROM ACCUMULATED
ISSUED AMOUNT CAPITAL OFFICERS DEFICIT
----------- --------- ----------- ----------- -------------
<S> <C> <C>
BALANCE DECEMBER 31, 1994............................. -- $ -- $ 138,968 $ -- $ 1,248
Net proceeds from issuance of Class A Common Stock in
public offering..................................... 46,847
Repurchase of unregistered Class A Common Stock....... (10,623)
Conversion of Class B Common Stock to Class A Common
Stock............................................... 1
Conversion of Operating Partnership Units to Class A
Common Stock........................................ 18
Net income............................................ 13,375
Dividends paid--Convertible Preferred Stock........... (5,169)
Dividends paid--Class A Common Stock.................. (15,757)
----- --------- ----------- ----------- -------------
BALANCE DECEMBER 31, 1995............................. -- -- 175,211 -- (6,303)
Net proceeds from issuance of Class A Common Stock.... 28,123
Conversion of Class B Common Stock to Class A Common
Stock...............................................
Conversion of Operating Partnership Units to Class A
Common Stock........................................ 3,797
Class A Common Stock issued as consideration for real
estate acquired..................................... 15,287
Purchase of stock by officers......................... 18,568 (7,140)
Repurchase of Class A Common Stock.................... (4,253)
Stock options exercised............................... 58
Net income............................................ 12,984
Dividends paid--Class A Common Stock.................. (20,736)
----- --------- ----------- ----------- -------------
BALANCE DECEMBER 31, 1996............................. -- -- 236,791 (7,140) (14,055)
Net proceeds from issuance of Class A Common Stock.... 509,950
Net proceeds from issuance of Class B Preferred
Stock...............................................
Net proceeds from issuance of Class C Preferred
Stock............................................... 2,400 60,000 (1,890)
Repurchase of Class A Common Stock from officer....... (67) 67
Conversion of Class B Common Stock to Class A Common
Stock...............................................
Conversion of Operating Partnership Units to Class A
Common Stock........................................ 8,615
Purchase of stock by officers......................... 34,704 (33,517)
Repayment of notes receivable from officers........... 14,540
Stock options exercised............................... 8,411 (9,045)
Warrants exercised.................................... 303
Class A Common Stock issued as consideration for NHP
Common Stock........................................ 180,784
Net income............................................ 28,633
Dividends paid--Class A Common Stock.................. (44,660)
Dividends paid--Class B Preferred stock............... (846)
Unrealized loss on investments........................
----- --------- ----------- ----------- -------------
BALANCE DECEMBER 31, 1997............................. 2,400 $ 60,000 $ 977,601 $ (35,095) $ (30,928)
----- --------- ----------- ----------- -------------
----- --------- ----------- ----------- -------------
<CAPTION>
UNREALIZED
GAIN (LOSS)
ON
INVESTMENTS TOTAL
------------- -----------
BALANCE DECEMBER 31, 1994............................. $ -- $ 140,319
Net proceeds from issuance of Class A Common Stock in
public offering..................................... 46,874
Repurchase of unregistered Class A Common Stock....... (10,628)
Conversion of Class B Common Stock to Class A Common
Stock............................................... --
Conversion of Operating Partnership Units to Class A
Common Stock........................................ 18
Net income............................................ 13,375
Dividends paid--Convertible Preferred Stock........... (5,169)
Dividends paid--Class A Common Stock.................. (15,757)
------------- -----------
BALANCE DECEMBER 31, 1995............................. -- 169,032
Net proceeds from issuance of Class A Common Stock.... 28,136
Conversion of Class B Common Stock to Class A Common
Stock............................................... --
Conversion of Operating Partnership Units to Class A
Common Stock........................................ 3,799
Class A Common Stock issued as consideration for real
estate acquired..................................... 15,294
Purchase of stock by officers......................... 11,437
Repurchase of Class A Common Stock.................... (4,255)
Stock options exercised............................... 58
Net income............................................ 12,984
Dividends paid--Class A Common Stock.................. (20,736)
------------- -----------
BALANCE DECEMBER 31, 1996............................. -- 215,749
Net proceeds from issuance of Class A Common Stock.... 510,114
Net proceeds from issuance of Class B Preferred
Stock............................................... 75,000
Net proceeds from issuance of Class C Preferred
Stock............................................... 58,110
Repurchase of Class A Common Stock from officer....... --
Conversion of Class B Common Stock to Class A Common
Stock............................................... --
Conversion of Operating Partnership Units to Class A
Common Stock........................................ 8,621
Purchase of stock by officers......................... 1,198
Repayment of notes receivable from officers........... 14,540
Stock options exercised............................... (630)
Warrants exercised.................................... 303
Class A Common Stock issued as consideration for NHP
Common Stock........................................ 180,851
Net income............................................ 28,633
Dividends paid--Class A Common Stock.................. (44,660)
Dividends paid--Class B Preferred stock............... (846)
Unrealized loss on investments........................ (1,683) (1,683)
------------- -----------
BALANCE DECEMBER 31, 1997............................. $ (1,683) $ 1,045,300
------------- -----------
------------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income................................................................ $ 28,633 $ 12,984 $ 13,375
------------ ------------- ------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization........................................... 43,520 21,209 15,859
Gain on disposition of property......................................... (2,720) (44) --
Minority interest in Operating Partnership.............................. 4,064 2,689 1,613
Minority interests in other partnerships................................ (1,008) 111 --
Equity in losses of unconsolidated partnerships......................... 1,798 -- --
Equity in earnings of unconsolidated subsidiaries....................... (4,636) -- --
Extraordinary loss on early extinguishment of debt...................... 269 -- --
(Increase) decrease in restricted cash.................................. (7,421) 6,678 (6,072)
Increase in other operating assets, net................................. (15,799) (4,785) (1,567)
Increase (decrease) in operating liabilities, net....................... 26,332 (36) 2,703
------------ ------------- ------------
Total adjustments................................................... 44,399 25,822 12,536
------------ ------------- ------------
Net cash provided by operating activities........................... 73,032 38,806 25,911
------------ ------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of real estate....................................... 21,792 17,147 --
Purchase of real estate................................................. (376,315) (26,032) (52,419)
Purchase of NHP common stock, notes receivable, general and limited
partnership interests and other assets................................ (199,146) (53,878) --
Note receivable and investment in unconsolidated subsidiary............. (59,787) -- --
Advances to unconsolidated partnerships................................. (42,879) -- --
Additions to property held for sale..................................... (247) (5,718) --
Capital replacements.................................................... (7,350) (5,133) (2,865)
Initial capital expenditures............................................ (9,108) (6,194) (4,879)
Construction in progress and capital enhancements....................... (8,477) (7,629) (639)
Proceeds from sale of property held for sale............................ 303 -- --
Purchase of NHP mortgage loans.......................................... (60,575) -- --
Purchase of Ambassador common stock..................................... (19,881) -- --
Dividends received from unconsolidated subsidiary....................... 45,791 -- --
Purchase of office equipment and leasehold improvements................. (1,784) (707) (19)
------------ ------------- ------------
Net cash used in investing activities................................. (717,663) (88,144) (60,821)
------------ ------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of Class A Common Stock and Class B Common Stock,
net of underwriting and offering costs................................ 510,114 28,136 46,792
Principal payments received on notes due from Officers on Class A Common
Stock purchases....................................................... 25,957 -- --
Proceeds from exercises of employee stock options and warrants.......... 871 -- --
Proceeds from issuance of Class B Preferred Stock....................... 75,000 -- --
Proceeds from issuance of Class C Preferred Stock....................... 58,110 -- --
Proceeds from secured tax-exempt bond financing......................... -- 58,010 --
Proceeds from secured notes payable borrowings.......................... 225,436 -- 155,401
Principal paydowns on secured tax-exempt bond financing................. (1,487) (48,703)
Principal paydowns on secured notes payable............................. (12,512) (28,463) (43,666)
Principal paydowns on unsecured short-term note payable................. (79)
Net borrowings (paydowns) on Credit Facility............................ (162,008) 40,800 (17,600)
Proceeds from secured short-term financing.............................. 19,050 30,119 25,000
Proceeds (payoff) from unsecured short-term financing................... (12,500) 12,500 --
Payment of loan costs, including proceeds and costs from interest rate
hedges................................................................ (6,387) (3,464) (4,703)
Redemption of mandatorily redeemable 1994 Cumulative Convertible Senior
Preferred Stock and repurchase of unregistered Class A Common Stock... -- -- (107,228)
Payment of dividend on mandatorily redeemable 1994 Cumulative
Convertible Senior Preferred Stock.................................... -- -- (5,169)
Repurchase of common stock.............................................. -- (4,255) --
Payment of common stock dividends....................................... (44,660) (20,736) (15,757)
Payment of distributions to minority interest in Operating
Partnership........................................................... (5,510) (3,815) (2,925)
Payment of preferred stock dividends.................................... (846) -- --
------------ ------------- ------------
Net cash provided by financing activities............................. 668,549 60,129 30,145
------------ ------------- ------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........................ 23,918 10,791 (4,765)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.............................. 13,170 2,379 7,144
------------ ------------- ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................................... $ 37,088 $ 13,170 $ 2,379
------------ ------------- ------------
------------ ------------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOW
(IN THOUSANDS EXCEPT SHARE AND OPERATING PARTNERSHIP UNIT DATA)
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid....................................................................... $ 51,076 $ 22,869 $ 12,170
</TABLE>
NON CASH INVESTING AND FINANCING ACTIVITIES
PURCHASE OF REAL ESTATE, CASH COLLATERAL AND PROPERTY MANAGEMENT BUSINESSES
<TABLE>
<CAPTION>
1997 1996 1995
---------- --------- ---------
<S> <C> <C> <C>
Secured notes payable assumed in connection with purchase of real estate............. $ 140,451 $ 31,796 $ 8,242
Secured short-term financing assumed in connection with purchase of real estate...... 9,600 5,072 --
Real estate, restricted cash, cash collateral and property management businesses
contributed in exchange for Partnership Common Units ("OP Units") of AIMCO
Properties, L.P. (the "AIMCO Operating Partnership")............................... 55,906 15,279 2,626
Common Stock issued in consideration for purchase of real estate..................... -- 15,294 --
---------- --------- ---------
$ 205,957 $ 67,441 $ 10,868
---------- --------- ---------
---------- --------- ---------
</TABLE>
PURCHASE OF NHP AND REAL ESTATE COMPANIES
In 1997, the Company acquired NHP Partners, Inc., NHP Partners Two Limited
Partners and their subsidiaries (collectively, the "NHP Real Estate Companies")
and all of the common stock of NHP Incorporated ("NHP") in exchange for
6,759,148 shares of AIMCO Class A Common Stock with a recorded value of $180.9
million, $141.3 million in cash and warrants to purchase 399,999 shares of Class
A Common Stock in a series of related transactions (see Notes 5 and 6).
The aggregate purchase price consisted of the following:
<TABLE>
<S> <C>
Assets purchased................................................... $ 638,944
Liabilities assumed................................................ 312,555
Cash paid.......................................................... 141,328
Stock issued....................................................... 180,851
Stock options issued............................................... 4,210
</TABLE>
PURCHASE OF ENGLISH PORTFOLIO
In 1996, the Company issued 789,039 OP Units with a recorded value of
$16,877 and assumed $1,051 in secured short-term financing in connection with
the purchase of certain partnership interests, real estate and related assets
(the "English Portfolio") owned by J.W. English and certain affiliated entities.
The aggregate purchase price consisted of the following:
<TABLE>
<S> <C>
Assets purchased................................................... $ 218,268
Liabilities assumed................................................ 172,154
Cash paid.......................................................... 29,237
OP Units issued.................................................... 16,877
</TABLE>
REPAYMENT OF SECURED NOTE PAYABLE
In 1996, 63,152 OP Units with a recorded value of $1,168 were issued in
connection with the repayment of the second deed of trust on a property
purchased in 1996.
F-7
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOW (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AND OPERATING PARTNERSHIP UNIT DATA)
NON CASH INVESTING AND FINANCING ACTIVITIES (CONTINUED)
RECEIPT OF NOTES RECEIVABLE DUE FROM OFFICERS
In 1997, the Company received promissory notes from officers for a total of
$42.6 million in connection with the sale of 1,462,735 shares of Class A Common
Stock (of which $14,664 was repaid in 1997 and an additional $5.7 million was
repaid in February and March 1998).
In 1996, the Company received promissory notes due from officers for a total
of $18,557 in connection with the sale of 895,250 shares of Class A Common Stock
(of which $11,440 was repaid in March 1997).
REDEMPTION OF OP UNITS
In 1997, 565,101 OP Units with a recorded value of $8,621 were redeemed in
exchange for an equal number of shares of Class A Common Stock.
In 1996, 211,392 OP Units with a recorded value of $3,799 were redeemed in
exchange for an equal number of shares of Class A Common Stock.
In 1995, 1,145 OP Units with a recorded value of $18 were redeemed in
exchange for an equal number of shares of Class A Common Stock.
CONVERSION OF CLASS B COMMON STOCK
In 1997, 162,500 shares of Class B Common Stock were converted to Class A
Common Stock upon achievement of the 1995 and 1996 target results for a total
recorded value of $2.
In 1996, 260,000 shares of Class B Common Stock were converted to Class A
Common Stock upon achievement of the 1995 and 1996 target results (130,000
shares respectively for each year) for a total recorded value of $3 (See Note
16).
In 1995, 65,000 shares of Class B Common Stock with a recorded value of $1
were converted to Class A Common Stock upon achievement of the 1994 target
results.
OTHER
In 1997, the AIMCO Operating Partnership issued an additional 216,564 OP
Units with a recorded value of $7,469 in connection with the purchase of certain
partnership interests.
F-8
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996, AND 1995
NOTE 1--ORGANIZATION
Apartment Investment and Management Company, a Maryland corporation
incorporated on January 10, 1994 ("AIMCO" and together with its subsidiaries and
other controlled entities, the "Company") acts as sole general partner of AIMCO
Properties, L.P. (the "AIMCO Operating Partnership") through its wholly owned
subsidiary, AIMCO-GP, Inc. The Company held an 88% interest in the AIMCO
Operating Partnership as of December 31, 1997.
Prior to February 1996, four of the Company's executive officers
collectively held a 5% beneficial interest in each of four regional business
trusts (the "Service Trusts"). The Service Trusts owned four corresponding
regional limited liability companies (the "Service LLCs") through which the
Company's third party property and asset management business was then
principally conducted. In February 1996, the AIMCO Operating Partnership and the
four executive officers contributed their respective interests in the Service
Trusts to Property Asset Management Services, Inc. ("PAMS, Inc."), a newly
formed non-controlled subsidiary of the AIMCO Operating Partnership. In April
1996, the Service Trusts were dissolved and their interests in the Service LLCs
were distributed to PAMS, Inc. In May 1996, the four Service LLCs were merged
into Property Asset Management Services, L.P. ("PAMS, LP") with PAMS, LP as the
surviving entity.
In December 1997, AIMCO acquired all of the outstanding stock of NHP in a
purchase transaction. NHP provides a broad array of real estate services
nationwide, including property management and asset management. As of December
31, 1997, substantially all of the Company's property and asset management
business is conducted through PAMS, Inc., PAMS, LP and unconsolidated
subsidiaries of AIMCO.
At December 31, 1997, AIMCO had 40,439,218 shares of Class A Common Stock
outstanding and the AIMCO Operating Partnership had 5,362,879 Partnership Common
Units ("OP Units") outstanding, for a combined total of 45,802,097 shares and OP
Units.
At December 31, 1997, the Company owned or controlled 40,039 units in 147
apartment properties (the "Owned Properties"), held an equity interest in 83,431
units in 515 apartment properties (the "Equity Properties") and managed 69,587
units in 374 apartment properties for third party owners and affiliates (the
"Managed Properties" and, together with the Owned Properties and Equity
Properties, the "AIMCO Properties"), bringing the total managed portfolio to
193,057 units in 1,036 apartment properties. The AIMCO Properties are located in
42 states, the District of Columbia and Puerto Rico.
NOTE 2--BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
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. Interests held by limited partners
in real estate partnerships controlled by the Company are reflected as Minority
Interests in Other Partnerships.
All significant intercompany balances and transactions have been eliminated
in consolidation.
F-9
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996, AND 1995
NOTE 2--BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
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
earnings (losses) from 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 earnings (losses) from unconsolidated partnerships (see Note 6).
REAL ESTATE AND DEPRECIATION
Real estate is recorded at cost, less accumulated depreciation, unless
considered impaired. If events or circumstances indicate that the carrying
amount of a property may be impaired, the Company will make an assessment of its
recoverability by estimating the future undiscounted cash flows, excluding
interest charges, of the property. If the carrying amount exceeds the aggregate
future cash flows, the Company would recognize an impairment loss to the extent
the carrying amount exceeds the fair value of the property. As of December 31,
1997, management believes that no impairments exist based on periodic reviews.
No impairment losses were recognized for the years ended December 31, 1997, 1996
and 1995.
Expenditures in excess of $250 that maintain an existing asset which has a
useful life of more than one year are capitalized as capital replacement
expenditures and depreciated over the estimated useful life of the asset.
Depreciation is calculated on the straight-line method based on a fifteen to
thirty year life for buildings and improvements and five years for furniture,
fixtures and equipment.
Initial capital expenditures are those costs considered necessary by the
Company in its investment decision to correct deferred maintenance or improve a
property. Capital enhancements are costs incurred that add a material new
feature or increase the revenue potential of a property. Initial capital
expenditures and capital enhancement costs are capitalized and depreciated over
the estimated useful lives of the related assets.
The Company capitalizes direct and indirect costs (including interest, taxes
and other costs) in connection with the development or redevelopment of its
Owned Properties and land under development. Direct costs associated with the
acquisition of Owned Properties are capitalized as a cost of the assets
acquired, and are depreciated over the estimated useful lives of the related
assets.
Expenditures for ordinary repairs, maintenance and apartment turnover costs
are expensed as incurred.
F-10
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996, AND 1995
NOTE 2--BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
PROPERTY HELD FOR SALE
Property held for sale is recorded at the lower of cost, less accumulated
depreciation, or estimated sales proceeds less selling costs. Upon management's
determination that a property is to be sold, the Company ceases deprecation of
the property's assets.
CASH EQUIVALENTS
The Company considers highly liquid investments with an original maturity of
three months or less to be cash equivalents.
RESTRICTED CASH
Restricted cash includes capital replacement reserves, completion repair
reserves, bond sinking fund amounts, and tax and insurance impound accounts held
by lenders.
GOODWILL
The Company records goodwill in connection with purchase business
combinations where the aggregate purchase price exceeds the fair value of the
assets acquired. Goodwill is amortized on a straight-line basis over a period of
20 years, which represents its useful life.
DEFERRED FINANCING COSTS
Fees and costs incurred in obtaining financing are capitalized. Such costs
are amortized over the terms of the related loan agreements and are charged to
interest expense.
OTHER ASSETS
Intangible assets are included in other assets and consist of costs
associated with the purchase of property management businesses, including
property management contracts, legal and other acquisition costs. These costs
are amortized on a straight-line basis over terms ranging from five to twenty
years.
COMPENSATED ABSENCES
The Company's employees earn vacation time ratably throughout the calendar
year. The rate at which vacation time is earned is based primarily on an
employee's length of service. An employee may accrue up to the maximum number of
hours for which he/she is eligible to take in any one calendar year. The
Company's policy is to compensate employees for all vacation time earned, but
not taken, upon the employee's termination. As of December 31, 1997, the Company
has not accrued vacation pay earned, but not yet taken by its employees.
Management does not believe that the accrual of earned vacation compensation
would have a material effect on the consolidated financial statements.
F-11
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996, AND 1995
NOTE 2--BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
REVENUE RECOGNITION
The AIMCO Properties have operating leases with apartment residents with
terms generally of six months or less. Rental revenues and property management
and asset management fees are recognized when earned.
INTEREST RATE LOCK AGREEMENTS
Interest rate lock agreements related to planned refinancings 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 (see Note 11).
INCOME TAXES
AIMCO has elected to be taxed as a real estate investment trust ("REIT") as
defined under the Internal Revenue Code of 1986, as amended (the "Code"). In
order for AIMCO to qualify as a REIT, at least 95% of AIMCO's gross income in
any year must be derived from qualifying sources. The activities of PAMS, Inc.,
PAMS, LP and other unconsolidated subsidiaries engaged in the service company
business are not qualifying sources.
As a REIT, AIMCO generally will not be subject to U.S. federal income taxes
at the corporate level if it distributes at least 95% of its REIT taxable income
to its shareholders. REITs are also subject to a number of other organizational
and operational requirements. If AIMCO fails to qualify as a REIT in any taxable
year, its taxable income will be subject to U.S. federal income tax at regular
corporate rates (including any applicable alternative minimum tax). Even if
AIMCO qualifies as a REIT, it may be subject to certain state and local income
taxes and to U.S. federal income and excise taxes on its undistributed income.
For income tax purposes, distributions paid to shareholders consist of
ordinary income, capital gains, return of capital or a combination thereof.
Earnings and profits, which determine the taxability of dividends to
shareholders, differ from net income reported for financial reporting purposes
due to differences for U.S. federal tax purposes in the estimated useful lives
used to compute depreciation and the carrying value (basis) of the investments
in the Owned Properties.
For the years ended December 31, 1997, 1996 and 1995, distributions paid per
share were taxable as follows:
<TABLE>
<CAPTION>
1997 % 1996 % 1995 %
--------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Ordinary income.................................... $ 1.74 94% $ 1.45 85% $ 1.48 89%
Return of capital.................................. -- -- 0.25 15% 0.18 11%
Capital Gains...................................... 0.04 2% -- -- -- --
Depreciation Recapture............................. 0.07 4% -- -- -- --
--------- --- --------- --- --------- ---
$ 1.85 100% $ 1.70 100% $ 1.66 100%
--------- --- --------- --- --------- ---
--------- --- --------- --- --------- ---
</TABLE>
F-12
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996, AND 1995
NOTE 2--BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
EARNINGS PER SHARE
Earnings per share is calculated based on the weighted average number of
shares of common stock, common stock equivalents and dilutive convertible
securities outstanding during the period (see Note 19).
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated aggregate fair value of the Company's cash and cash
equivalents, receivables, payables and short-term secured and unsecured
financing as of December 31, 1997 is assumed to approximate their carrying value
due to their relatively short terms. Management further believes that, after
consideration of interest rate agreements, the fair market value of the
Company's secured tax-exempt bond financing and secured long-term financing
approximates their carrying value, based on market comparisons to similar types
of debt instruments having similar maturities.
In valuing its investments in securities at their quoted market price, the
Company has recognized unrealized losses on investments of $1.7 million as of
December 31, 1997, which are included as a component of stockholders' equity.
INSURANCE SUBSIDIARY
Reinsurance premiums written are earned on a monthly pro rata basis over the
terms of the policies. A reserve for outstanding losses and loss-related
expenses of $14.8 million has been provided at December 31, 1997. The reserve
includes estimates for insurance losses incurred but not reported, as well as
losses pending settlement. Reserves are based on Management's estimates and are
believed to be adequate.
RECLASSIFICATIONS
Certain items included in the 1996 consolidated financial statements have
been reclassified to conform with the 1997 presentation.
USE OF ESTIMATES
The preparation of the Company's consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts included in the
financial statements and accompanying notes thereto. Actual results could differ
from those estimates.
F-13
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996, AND 1995
NOTE 3--REAL ESTATE
Real estate at December 31 is as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Land............................................................... $ 265,570 $ 118,031
Buildings and improvements......................................... 1,391,637 747,191
------------ -----------
1,657,207 865,222
Accumulated depreciation........................................... (153,285) (120,077)
------------ -----------
$ 1,503,922 $ 745,145
------------ -----------
------------ -----------
</TABLE>
During the years ended December 31, 1997 and 1996, the Company purchased or
acquired control of 59 properties (17,191 units) and 42 properties (10,484
units), respectively, and disposed of five properties (916 units) and four
properties (1,265 units), respectively, as described below.
The Company directly acquired nine apartment communities in unrelated
transactions during 1997 (the "1997 Acquisitions"). The aggregate consideration
paid by the Company of $204.3 million consisted of $75.4 million in cash, 1.9
million OP Units with a total recorded value of $55.9 million and the assumption
of $73.0 million of secured long-term indebtedness.
As a result of acquisition of the NHP Real Estate Companies (see Note 6) and
related tender offers to limited partners, the Company acquired a controlling
interest in 15 partnerships (the "Controlled NHP Partnerships"), which own 5,285
units located in 15 apartment communities. The portion of the aggregate purchase
price for the NHP Real Estate Companies allocated to the Controlled NHP
Partnerships was approximately $269.3 million, including the assumption of
approximately $212.3 million of mortgage indebtedness.
In October 1997, the Company acquired a portfolio of 35 residential
apartment properties (the "Winthrop Portfolio"). The aggregate purchase price of
$263.0 million, including transaction costs, was comprised of $115.6 million in
cash, the assumption of $8.3 million in mortgage indebtedness and the creation
of $139.1 million of new indebtedness secured by the properties. The Company has
also budgeted an additional $16.0 million in initial capital expenditures
related to the Winthrop Portfolio.
During 1997, the Company sold five apartment properties containing 916 units
to an unaffiliated third party (the "1997 Dispositions"). Cash proceeds from the
sale of approximately $22.7 million were used to repay a portion of the
Company's outstanding indebtedness. The Company recognized a gain of
approximately $2.8 million on the disposition on these five properties.
The Company acquired 100% ownership in seven apartment properties in
unrelated transactions in 1996 (the "1996 Acquisitions"). The aggregate
consideration paid by the Company of $93.1 million consisted of $26.0 million in
cash, 704,220 shares of Class A Common Stock with a total recorded value of
$15.3 million, 745,183 in OP Units with a total recorded value of $15.0 million
and the assumption of $31.7 million of secured long-term indebtedness and $5.1
million of secured short-term indebtedness. Each transaction, with the exception
of Peachtree Park and Somerset Village (see Note 21), was with an unaffiliated
third party.
F-14
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996, AND 1995
NOTE 3--REAL ESTATE (CONTINUED)
In November 1996, the Company completed the acquisition (the "English
Portfolio Acquisition") of certain partnership interests, real estate and
related assets owned by J.W. English, a Houston, Texas-based real estate
syndicator and developer, and certain affiliated entities (collectively, the
"J.W. English Companies"). The English Portfolio Acquisition included the
purchase of all of the general and some of the limited partnership interests in
22 limited partnerships which act as the general partner to 31 limited
partnerships (the "English Partnerships") that own 22 multi-family apartment
properties, aggregating 5,230 apartment units, and four commercial properties,
primarily in Houston, Texas; title to a 104-unit apartment property in Houston,
Texas; certain assets of J. W. English Management Company which provided
management services to the apartment properties; and other real estate interests
related to the J.W. English Companies' operations. The aggregate purchase price
of the English Portfolio Acquisition was $23.1 million, consisting of $15.2
million in OP Units and $7.9 million in cash. The English Partnerships are
subject to approximately $95.4 million of mortgage debt.
The Company also made separate offers (the "English Tender Offers") to the
limited partners of 25 of the English Partnerships (the "Tender Offer English
Partnerships") to acquire their limited partnerships interests. The various
limited partners accepted tenders representing, in the aggregate, approximately
46% of all outstanding limited partnership interests in the Tender Offer English
Partnerships. The Company paid $16.0 million in cash and $1.7 million in OP
Units for the interests tendered in the English Tender Offers. The remaining
limited partners elected to continue as limited partners in the Tender Offer
English Partnerships.
In a series of related transactions completed in November and December 1996,
the Company acquired general partnership interests in 21 limited partnerships
which own twelve multi-family apartment properties (collectively, the "Dallas
Acquisition Properties") aggregating 2,839 apartment units, primarily in the
Dallas, Texas metropolitan area, and loans made by the general partners and
their affiliates to such partnerships, for an aggregate price of $26.7 million
in cash (collectively, the "Dallas Portfolio Acquisition"). The Dallas
Acquisition Properties are subject to approximately $60.7 million of mortgage
debt. The existing limited partners retained their interest in such limited
partnerships.
During 1996, the Company disposed of four properties (the "1996
Dispositions"). The properties were sold to one unaffiliated third party. The
cash proceeds from the disposition of approximately $17.1 million were used to
pay down $9.2 million of the Company's outstanding indebtedness and to provide
funds available for future investment purposes. The Company recognized a total
gain of approximately $44,000 on the disposition of these four properties.
In the fourth quarter of 1996, the Company completed construction of a 92
apartment unit expansion within the Fairways Apartments in Phoenix, Arizona for
a cost of approximately $6.0 million.
In 1996, the Company acquired Sun Katcher Apartments, a 360-unit apartment
property located in Jacksonville, Florida, at a cost of $4.0 million. In 1997,
the redevelopment of Sun Katcher was completed at a cost of $4.9 million. The
Company also recently commenced the renovation and upgrading of Bay West
Apartments, a 376-unit apartment property located in Tampa, Florida, for a
projected cost of $4.8 million (of which $0.9 million has already been spent),
to reposition the property in the marketplace. In addition, the Company expects
to undertake a major renovation of the Morton Towers Apartments, a 1,277-unit
apartment property located in Miami Beach, Florida, at an estimated cost of
$35.0 million. Approximately $0.4 million has been spent on the Morton Towers
redevelopment as of December 31, 1997.
F-15
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996, AND 1995
NOTE 3--REAL ESTATE (CONTINUED)
Interest of $1.3 million, $0.8 million and $0.1 million was capitalized for
the years ended December 31, 1997, 1996 and 1995, respectively.
NOTE 4--INVESTMENT IN AMBASSADOR APARTMENTS, INC.
In September 1997, the Company acquired 886,600 shares of common stock
("Ambassador Common Stock") of Ambassador Apartments, Inc. ("Ambassador"), a
publicly traded REIT, 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. As of December 31, 1997, the fair market value of the Ambassador stock
is $18.2 million. Accordingly, the Company has recognized an unrealized loss on
the Ambassador investment of $1.7 million, which is included as a component of
stockholders' equity.
On December 23, 1997, AIMCO and Ambassador entered into an Agreement and
Plan of Merger (the "Ambassador Merger Agreement") pursuant to which Ambassador
will be merged with and into AIMCO, with AIMCO being the surviving corporation
(the "Ambassador Merger"). The Ambassador Merger Agreement also provides that,
unless otherwise agreed by the parties, Ambassador Apartments, L.P., a Delaware
limited partnership (the "Ambassador Operating Partnership"), will be merged
with and into the AIMCO Operating Partnership (the "Ambassador Reorganization")
and all outstanding Ambassador Operating Partnership interests will be converted
into AIMCO OP Units at the Conversion Ratio, as defined below. In the Ambassador
Merger Agreement, the Ambassador Common Stock is valued at $21 per share.
Holders of Ambassador Common Stock will receive for each share an amount of
Class A Common Stock equal to the Conversion Ratio. The "Conversion Ratio" means
the quotient determined by dividing $21 by the "AIMCO Index Price," which is the
aggregate of the average of the high and low sales prices for Class A Common
Stock on each of the twenty consecutive NYSE trading days ending on the fifth
NYSE trading day immediately preceding the closing of the Ambassador Merger,
divided by 20. If the AIMCO Index Price is less than $36 (i.e. the Conversion
Ratio is greater than 0.583), then the AIMCO may elect to fix the Conversion
Ratio at 0.583 and pay to each holder of Ambassador Common Stock cash sufficient
to provide $21 in value for each share of Ambassador Common Stock.
The Ambassador Merger Agreement provides that any outstanding options to
purchase Ambassador Common Stock may be converted, at the election of the option
holder, into cash or options to purchase Class A Common Stock at the Conversion
Ratio. The Ambassador Merger Agreement further states that Ambassador's
outstanding preferred stock, par value $0.01 per share (the "Ambassador
Preferred Stock"), shall be redeemed, subject to the right of holders of shares
of Ambassador Preferred Stock to convert such shares into Ambassador Common
Stock, immediately prior to the Ambassador Merger. Assuming a conversion ratio
of 0.583, the Company will issue up to an aggregate of 7,205,739 shares of Class
A Common Stock in the Ambassador Merger, based upon the number of shares of
Ambassador Common Stock, options to purchase Ambassador Common Stock and other
securities currently convertible into shares of Ambassador Common Stock
outstanding as of December 31, 1997.
The Ambassador Merger Agreement contains certain penalties to be incurred by
either AIMCO or Ambassador should the agreement be terminated by either party.
The maximum penalty to be paid by either AIMCO or Ambassador in the event that
the Ambassador Merger Agreement is terminated is approximately $9.4 million.
F-16
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996, AND 1995
NOTE 4--INVESTMENT IN AMBASSADOR APARTMENTS, INC. (CONTINUED)
Ambassador is a self-administered and self-managed REIT engaged in the
ownership and management of garden-style apartment properties leased primarily
to middle income tenants. As of December 31, 1997, Ambassador owned 52 apartment
communities with a total of 15,728 units located in Arizona, Colorado, Florida,
Georgia, Illinois, Tennessee and Texas. In addition, Ambassador manages one
property containing 252 units for an unrelated third party. Ambassador conducts
substantially all of its operations through the Ambassador Operating Partnership
and its subsidiaries. As of December 31, 1997, Ambassador held approximately 94%
of the outstanding common units and 100% of the outstanding preferred units of
the Ambassador Operating Partnership.
Consummation of the Ambassador Merger is subject to the affirmative vote of
the holders of at least two-thirds of the outstanding shares of Ambassador
Common Stock, the approval of all appropriate governmental and regulatory
authorities and other customary conditions. The closing of the transaction is
expected to occur during the second quarter of 1998.
NOTE 5-- INVESTMENTS IN AND NOTES RECEIVABLE FROM UNCONSOLIDATED SUBSIDIARIES
In order to satisfy certain requirements of the 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 of AIMCO hold, directly or indirectly, all of
the voting common stock, representing a 5% economic interest. As a result of the
controlling ownership interest in the Unconsolidated Subsidiariers held by
others, AIMCO accounts for its interest in the Unconsolidated Subsidiaries on
the equity method. As of December 31, 1997, the Unconsolidated Subsidiaries
included PAMS, Inc., AIMCO/NHP Holdings, Inc. ("ANHI"), AIMCO/NHP Properties,
Inc. ("ANPI"), NHP Property Management Company ("NHPMC"), and NHP A&R Services,
Inc. ("NHPA&R").
In May and September of 1997, the Company acquired an aggregate of 6,930,122
shares of common stock ("NHP Common Stock") of NHP. On December 8, 1997, the
Company acquired the remaining shares of NHP Common Stock in a merger
transaction accounted for as a purchase (the "NHP Merger"). Pursuant to the NHP
Merger, each outstanding share of NHP Common Stock was converted into either (i)
0.74766 shares of Class A Common Stock or (ii) at the shareholder's option,
0.37383 shares of Class A Common Stock and $10.00 in cash. As a result of the
NHP Merger, AIMCO issued 6,759,148 shares of Class A Common Stock, valued at
$180.8 million, and paid $86.5 million in cash. The total cost of the purchase
was $349.5 million.
In connection with NHP the merger, AIMCO recorded approximately $125 million
in goodwill, which is being amortized using the straight line method over a
period of 20 years.
In addition, in connection with the NHP Merger, the Company executed a plan
to close NHP's headquarters in Vienna, Virginia. Concurrent with this plan,
certain employees of NHP were either terminated or relocated to the
Indianapolis, Indiana office. The Company incurred $2.7 million in severance and
relocation costs, which were capitalized as a cost of the acquisition.
In connection with the purchase of NHP, the Company acquired NHP's property
management business, as well as several other businesses, including a membership
purchasing organization, home health
F-17
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996, AND 1995
NOTE 5-- INVESTMENTS IN AND NOTES RECEIVABLE FROM UNCONSOLIDATED SUBSIDIARIES
(CONTINUED)
care services, and insurance services. Immediately following the purchase, AIMCO
completed a reorganization which resulted in those businesses being conducted by
ANHI, ANPI, NHPMC and NHPA&R.
As of December 31, 1997, AIMCO's investment in the unconsolidated
subsidiaries totaled $84.5 million, which consisted of $50.0 million in notes
receivable from, and $34.5 million in preferred stock of, the unconsolidated
subsidiaries.
See selected combined financial information for the Company's unconsolidated
subsidiaries and unconsolidated partnerships at Note 6.
NOTE 6-- INVESTMENT IN AND NOTES RECEIVABLE FROM UNCONSOLIDATED REAL ESTATE
PARTNERSHIPS
In connection with the purchase of the NHP Real Estate Companies, the
Company acquired general and limited partnership interests in partnerships that
own 82,374 conventional and affordable apartment units in 519 apartment
properties. The Company's ownership interests in these partnerships ranges from
1% to 100%, and the provisions of the partnership agreements give the Company
varying degrees of control.
Subsequent to the acquisition of the NHP Real Estate Companies, AIMCO
contributed interests in certain of the limited partnerships which it controlled
to AIMCO/NHP Partners, L.P. ("ANPLP"), a partnership in which the Company owns a
99% limited partnership interest. 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.
At December 31, 1997, AIMCO's investment in unconsolidated partnerships
totaled $212.1 million.
F-18
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996, AND 1995
NOTE 6-- INVESTMENT IN AND NOTES RECEIVABLE FROM UNCONSOLIDATED REAL ESTATE
PARTNERSHIPS (CONTINUED)
The following table provides selected combined financial information for
both the Company's unconsolidated subsidiaries and unconsolidated partnerships
as of and for the year ended December 31, 1997 (in thousands):
<TABLE>
<S> <C>
Real estate, net of accumulated depreciation............................ $2,252,702
Management contracts.................................................... 51,441
Goodwill................................................................ 45,494
Total assets............................................................ 2,827,264
Secured notes payable................................................... 2,951,989
Stockholders' equity.................................................... (767,201)
Total liabilities and stockholders' equity.............................. 2,827,264
Rental and other property revenues...................................... 501,384
Property operating expenses............................................. (303,547)
Depreciation expense.................................................... (63,384)
Service company revenues................................................ 23,776
Service company expenses................................................ (11,733)
Interest expense........................................................ 156,929
Net loss before gain on disposition of properties and discontinued
operations............................................................. (7,589)
Net income.............................................................. 11,536
</TABLE>
NOTE 7--SECURED NOTES PAYABLE
In April 1997, 23 partnerships controlled by the Company completed a $108.0
million refinancing of secured, short term, floating rate indebtedness with
secured, 20-year, fixed rate, fully amortizing debt. The new notes are secured
by 27 apartment properties owned by such partnerships. In connection with this
refinancing, the Company received proceeds of $3.4 million from two interest
rate lock agreements accounted for as hedges. The gain on the interest rate lock
agreements was deferred and will be amortized over the life of the debt.
During 1997, the Company assumed $220.4 million in mortgage indebtedness in
connection with the purchase of 39 apartment properties. In addition, in
connection with the acquisition of the NHP Real Estate Companies (see Note 6),
the Company assumed fixed-rate indebtedness totaling approximately $209.8
million, which is secured by 15 properties held by NHP Partnerships in which the
Company acquired controlling interests.
In December 1997, the Company refinanced certain notes payable secured by 27
properties, of which, five are Owned Properties and are consolidated. The new
notes have an aggregate outstanding principal balance of $91.5 million as of
December 31, 1997 and carry fixed interest rates ranging from 6.6% to 6.8%. The
new notes are fully amortizing, requiring monthly principal and interest
payments, and mature in December 2012. In anticipation of the refinancing, the
Company entered into an interest rate lock agreement with an investment banking
company ("the March Hedge"). The March Hedge had a notional value of $100.0
million and fixed the interest rate of the anticipated refinancing at 7.053%.
The March Hedge was settled in connection with the refinancing, at which time
the Company realized a loss on the
F-19
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996, AND 1995
NOTE 7--SECURED NOTES PAYABLE (CONTINUED)
hedge of approximately $10.9 million. The loss on the hedge will be amortized
over the life of the refinanced debt (see Note 11).
The following table summarizes the Company's long-term secured notes payable
at December 31, 1997 and 1996, all of which are non-recourse to the Company (in
thousands):
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Fixed rate, ranging from 5.0% to 10.1%, or a weighted average all-in
rate of 8.10%, fully-amortizing notes maturing at various dates
through 2029........................................................ $ 561,056 $ 165,762
Fixed rate, ranging from 7.25% to 9.5%, or a weighted average all-in
rate of 8.73%, non-amortizing notes maturing at various dates
through 2001........................................................ 106,424 57,198
Floating rate, ranging from 6.7% to 7.4% at December 31, 1997, or a
weighted average all-in rate of 7.7%, non-amortizing notes maturing
at various dates through 2005....................................... 13,941 19,150
---------- ----------
$ 681,421 $ 242,110
---------- ----------
---------- ----------
</TABLE>
Real estate assets which secure the first trust deeds for these secured
notes payable had a net book value of $1,117.6 million at December 31, 1997.
As of December 31, 1997, the scheduled principal payments for the Company's
secured notes payable are as follows (in thousands):
<TABLE>
<S> <C>
1998.............................................. $ 125,879
1999.............................................. 34,285
2000.............................................. 20,178
2001.............................................. 75,967
2002.............................................. 14,750
Thereafter........................................ 410,362
---------
$ 681,421
---------
---------
</TABLE>
NOTE 8--SECURED SHORT-TERM FINANCING
The Company utilizes a variety of secured short-term financing instruments
to manage its working capital needs and to fund real estate investments. In
1994, the Company obtained a variable rate revolving credit facility (the
"Credit Facility") with Bank of America National Trust and Savings Association
("Bank of America"). In August 1996, the Credit Facility was extended through
August 1998, the interest rate was reduced from LIBOR plus 1.75% to LIBOR plus
1.625% and the commitment was increased from $40.0 million to $50.0 million. In
May 1997, the Company increased its maximum amount available under the Credit
Facility from $50.0 million to $100.0 million. Interest on the Credit Facility
was payable monthly at the variable interest rate of LIBOR plus 1.45% unless
borrowings exceed 60% of the aggregate collateral value, in which case, the
interest rate was LIBOR plus 1.70%. Commitment fees of 0.125% per
F-20
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996, AND 1995
NOTE 8--SECURED SHORT-TERM FINANCING (CONTINUED)
annum on the remaining availability were payable quarterly. The outstanding
balance under the Credit facility was $33.5 million at December 31, 1997.
The following table summarizes the Company's secured short-term financing at
December 31, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
1997 1996
--------- ----------
<S> <C> <C>
Floating rate interest only note, having a stated interest rate of
7.67% at December 31, 1997............................................ $ 19,050 $ 115,499
Floating rate interest only notes...................................... -- 25,615
Floating rate interest only notes secured by property held for sale.... -- 1,051
9.25% fixed rate, non-amortizing note.................................. 549 5,074
Floating rate Credit Facility, interest at 7.33% at December 31, 1997,
expiring August 1998.................................................. 33,500 44,800
--------- ----------
$ 53,099 $ 192,039
--------- ----------
--------- ----------
</TABLE>
Real estate assets, which secure the Company's short-term financing, had a
net book value of $104.0 million at December 31, 1997.
Secured short-term indebtedness totaling $33.5 million is guaranteed by the
Company and certain of its affiliates and secured by an assignment of the
Company's general partnership interests in 12 of the English Partnerships.
The Company replaced the Credit Facility with a new $50 million unsecured
revolving credit facility in January 1998, and a new $50 million secured
revolving credit facility in February 1998 (see Note 25).
NOTE 9--SECURED TAX-EXEMPT BOND FINANCING
The following table summarizes the Company's secured tax-exempt bond
financing at December 31, 1997 and 1996, which is non-recourse to the Company
(in thousands):
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
7.0% fully-amortizing bonds, effective rate of 7.3%, due July 2016................ $ 46,498 $ 47,674
6.9% fully-amortizing bonds due, effective rate of 7.3% July 2016................. 9,529 9,773
4.2% interest only bonds, effective rate of 6.7%, due July 2016................... 5,958 6,000
6.0% interest only bonds, effective rate of 6.7%, secured by a letter of credit in
the amount of $5,350, due September 1998......................................... 5,325 5,350
5.4% interest only bonds due December 2002........................................ 6,700 6,700
--------- ---------
Total............................................................................. $ 74,010 $ 75,497
--------- ---------
--------- ---------
</TABLE>
Real estate assets securing the tax-exempt bond financing had a net book
value of $107.5 million at December 31, 1997.
F-21
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996, AND 1995
NOTE 9--SECURED TAX-EXEMPT BOND FINANCING (CONTINUED)
As of December 31, 1997, the scheduled principal payments for the Company's
secured tax-exempt bonds are as follows (in thousands):
<TABLE>
<S> <C>
1998............................................... $ 7,031
1999............................................... 1,827
2000............................................... 1,956
2001............................................... 2,096
2002............................................... 2,244
Thereafter......................................... 58,856
---------
$ 74,010
---------
---------
</TABLE>
NOTE 10--UNSECURED SHORT-TERM FINANCING
In November 1996, the Company borrowed $12.5 million in conjunction with the
purchase of limited partnership interests in the English Partnerships. The loan
was repaid in February 1997 with proceeds from a public offering of shares of
Class A Common Stock (see Note 16).
NOTE 11--INTEREST RATE LOCK AGREEMENTS
In 1996, in anticipation of refinancing certain indebtedness, the Company
entered into two interest rate lock agreements with a major New York investment
banking company (the "1996 Hedges"). The 1996 Hedges had an aggregate notional
value of $100.0 million and fixed the interest rate of the anticipated
refinancings at 6.2% and 6.3%. The 1996 Hedges were settled in April 1997 in
connection with the refinancing, at which time the Company realized aggregate
gains of approximately $3.4 million (see Note 7).
In March 1997, the Company entered into an interest rate lock agreement with
an investment banking company (the "March Hedge"). The March Hedge had a
notional value of $100.0 million and fixed the interest rate of the anticipated
refinancing at 7.053%. The March Hedge was settled December 1997, in connection
with the refinancing, at which time the Company realized a loss on the hedge of
approximately $10.9 million (see Note 7).
In September 1997, the Company entered into an interest rate lock agreement
(the "September Hedge") in anticipation of refinancing certain other long-term
indebtedness. The September Hedge has a notional principal amount of $75.0
million, matures on March 19, 1998, and fixes the ten year treasury rate at
6.211%. Based on the fair value of the interest rate lock agreement at December
31, 1997, the Company has a potential loss on the September Hedge of
approximately $2.6 million. Management anticipates that the debt will be
refinanced during the first quarter of 1998.
In October 1997, the Company entered into an interest rate lock agreement
(the "October Hedge") in anticipation of incurring indebtedness in connection
with the acquisition of the Foxchase Apartments. The October Hedge had a
notional value of $70.0 million and fixed the interest rate of the anticipated
indebtedness at 6.13%. The October Hedge was settled in December 1997 when the
Foxchase acquisition was completed, at which time the Company realized a loss of
$1.4 million.
F-22
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996, AND 1995
NOTE 11--INTEREST RATE LOCK AGREEMENTS (CONTINUED)
The Company is exposed to credit risk in the event of nonperformance by the
other parties to the interest rate lock agreements. However, the Company does
not anticipate nonperformance by the counterparties. In addition, since the
variable rate in the interest rate lock agreements is not on the same basis as
the variable rate indebtedness, the Company is exposed to losses to the extent
that the LIBOR rate and the Treasury rate change independently of each other.
The Company does not anticipate that inconsistent changes in the LIBOR rate and
the Treasury rate will have a material effect.
NOTE 12--COMMITMENTS AND CONTINGENCIES
LEGAL
In November 1996, purported limited partners of certain of the Tender Offer
English Partnerships filed a class action lawsuit against the Company and J.W.
English in the U.S. District Court for the Northern District of California (the
"Federal Action"), alleging among other things, that the Company conspired with
J.W. English to breach his fiduciary duty to the plaintiffs, and that the
offering materials used by the Company in connection with the English Tender
Offers contained misleading statements or omissions. The Federal Action was
voluntarily dismissed, without prejudice, in favor of another purported class
action filed in May 1997 by limited partners of certain of the Tender Offer
English Partnerships and six additional English Partnerships. Two complaints
were filed in Superior Court of the State of California (the "California
Actions") against the Company and the J.W. English Companies, alleging, among
other things, that the consideration the Company offered in the English Tender
Offers was inadequate and designed to benefit the J.W. English Companies at the
expense of the limited partners, that certain misrepresentations and omissions
were made in connection with the English Tender Offers, that the Company
receives excessive fees in connection with its management of the properties
owned by the English Partnerships, that the Company continues to refuse to
liquidate the English Partnerships and that the English Acquisition violated the
partnership agreements governing the English Partnerships and constituted a
breach of fiduciary duty.
In addition to unspecified compensation and exemplary damages, the original
complaints in the California Actions sought an accounting, a constructive trust
on the assets and monies acquired by the English defendants in connection with
the English Acquisition, a court order removing the Company from management of
the English Partnerships and/or ordering disposition of the properties and
attorneys fees, expert fees and other costs. The Company intends to vigorously
defend itself in connection with these actions. The Company believes it is
entitled to indemnity from the J.W. English Companies, subject to certain
exceptions. Failure by the Company to prevail in the California Actions or to
receive indemnification could have a material adverse effect on the Company's
financial condition and results of operations.
On August 4, 1997, the Company filed demurrers to both complaints in the
California Actions. At a hearing on the demurrers on January 9, 1998, the court
granted the Company's demurrers to each of the three causes of action against it
in the two complaints, with leave to amend. On February 25, 1998, the plaintiffs
filed a consolidated amended class and derivative complaint for damages (the
"Consolidated Amended Complaint"). The Company's has until March 27, 1998 to
file a demurrer on behalf of the AIMCO defendants.
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
F-23
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996, AND 1995
NOTE 12--COMMITMENTS AND CONTINGENCIES (CONTINUED)
which are covered by liability insurance, and none of which are expected to have
a material adverse effect on the consolidated financial condition or results of
operations of the Company.
HUD ENFORCEMENT AND LIMITED DENIALS
A significant number of the affordable units included in the AIMCO
Properties are subject to regulation by the U.S. Department of Housing and Urban
Development ("HUD"). HUD has the authority 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. Three HUD field offices have recently issued LDPs to NHP
as a result of physical inspections and mortgage defaults at four NHP
Properties, two of which are managed by the Company. One LDP was subsequently
withdrawn and another was terminated in December 1997 after a reinspection of
the property. The one remaining LDP, unless lifted, suspends the Company's
ability to manage or acquire additional HUD-assisted properties in eastern
Missouri until June 24, 1998. The Company has requested that HUD terminate the
one remaining LDP, but HUD has so far refused to do so, and the Company cannot
determine whether HUD will reverse that decision with respect to the affected
region. 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 otherwise to affect properties that the Company currently manages in the
subject regions. 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 HUD-assisted properties.
In this regard, since July 1988, 29 HUD-assisted properties owned or managed by
the NHP Real Estate Companies or NHP 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 the Company have
received unsatisfactory performance ratings. As a result of the defaults and
unsatisfactory ratings, a national HUD office must review any field office
approval of the Company to act as property manager for a HUD-assisted property.
The national HUD office has consistently approved NHP's applications to manage
new properties, and the Company received HUD clearance to acquire NHP and the
NHP Real Estate 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,
including the NHP Properties, 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 multi-family projects in exchange for or in connection with
management of a HUD project. The Company believes that other owners and managers
of HUD
F-24
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996, AND 1995
NOTE 12--COMMITMENTS AND CONTINGENCIES (CONTINUED)
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. Although the
Inspector General has not initiated any action 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 results of operations of the Company.
ENVIRONMENTAL
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
assurance 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 an Owned Property. In addition, the Company's Montecito property in Austin,
Texas, is located adjacent to, and may be partially on, land that was used as a
landfill. Low levels of methane and other landfill gas have been detected at
Montecito. The City of Austin (the "City"), the former landfill operator, has
assumed responsibility for conducting all 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, a proposed contingency plan of passive methane gas
venting may be implemented by the City. The City 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, the Company has relocated some of its tenants and has
installed a venting system according to the TNRCC's specifications under the
buildings slabs, in connection with the present raising of four of its buildings
in order to install stabilizing piers thereunder, at a total cost of
approximately $550,000, which is primarily the cost for the restabilization. The
restabilization was substantially completed in January 1998. The City 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. The Managed Properties may
not have been subject to Phase I or similar environmental audits by independent
environmental consultants. However, the Company is not aware of any
environmental liability that would have a material adverse effect on its
business, financial condition or results of operations relating to the Managed
Properties.
F-25
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996, AND 1995
NOTE 12--COMMITMENTS AND CONTINGENCIES (CONTINUED)
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
Protection 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. An agreement in principle between the Company and the EPA has been
reached, whereby the Company has agreed to pay a fine of approximately $0.1
million, 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.
LEASE COMMITMENTS
Minimum payments under the terms of all noncancellable operating leases in
which the Company is the lessee, principally for office space, at December 31,
1997 are as follows (in thousands):
<TABLE>
<S> <C>
1998..................................................... $ 541
1999..................................................... 376
2000..................................................... 211
2001..................................................... 170
2002..................................................... 127
---------
$ 1,425
---------
---------
</TABLE>
Total rent expense for the years ended December 31, 1997, 1996 and 1995 was
$0.7 million, $0.6 million and $0.6 million, respectively.
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 OPERATING PARTNERSHIP
Interests in the AIMCO Operating Partnership held by limited partners are
represented by OP Units. The AIMCO Operating Partnership's income is allocated
to holders of OP Units based on the weighted average number of OP Units
outstanding during the period. The AIMCO Operating Partnership 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 at the date of execution
of the purchase contract. The holders of the OP Units receive distributions,
prorated from the date of admittance, in an amount equivalent to the dividends
paid to holders of Class A Common Stock. During 1997, 1996 and 1995, the
weighted average ownership interest in the AIMCO Operating Partnership held by
the OP Unit holders (other than the Company) was 13.2%, 17.1% and 16.4%,
respectively. At December 31, 1997, the ownership interest of the OP Unit
holders (other than the Company) was 11.7%.
F-26
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996, AND 1995
NOTE 14--MINORITY INTEREST IN OPERATING PARTNERSHIP (CONTINUED)
After holding the OP Units for one year, the limited partners generally have
the right to redeem their OP Units for cash. Notwithstanding that right, AIMCO
may elect to acquire some or all of the OP Units tendered for redemption in
exchange for shares of Class A Common Stock in lieu of cash.
NOTE 15--REGISTRATION STATEMENTS
In April 1997, the Company filed a shelf registration statement with the
Securities and Exchange Commission which provides for the offering of, on a
delayed or continuous basis, debt securities, Class A Common Stock, preferred
stock and warrants with an aggregate value of up to $1.0 billion. The shelf
registration statement was declared effective in May 1997. As of December 31,
1997, the Company has issued 12,052,418 shares of Class A Common Stock and
3,150,000 shares of preferred stock under the shelf registration, the aggregate
gross proceeds of which was $475.6 million. As of December 31, 1997, up to
$524.4 million of additional securities may be sold under the shelf
registration.
In February 1998, AIMCO issued 4,200,000 shares of newly created AIMCO Class
D Cumulative Preferred Stock ("Class D Preferred Stock") for gross proceeds of
$105.0 million (see Note 25). After giving effect to the sale of the Class D
Preferred Stock, up to $419.4 million of additional securities may be sold under
the shelf registration.
NOTE 16--STOCKHOLDERS' EQUITY
During 1996, AIMCO issued 895,250 shares of Class A Common Stock to certain
executive officers (or entities controlled by them) at $20.75 per share,
pursuant to the exercise of stock options issued under the Apartment Investment
and Management Company 1996 Stock Award and Incentive Plan. In exchange for the
shares purchased, the executive officers (or entities controlled by them)
executed notes payable totaling $18.6 million to the Company, of which $11.9
million was repaid during 1997.
In September 1996, the Company's Board of Directors authorized the
repurchase of up to 500,000 shares of Class A Common Stock in open market and
privately negotiated purchase transactions. The stock may be purchased from time
to time as market conditions warrant.
In February 1997, AIMCO completed a public offering of 2,015,000 shares of
Class A Common Stock at a public offering price of $26.75 per share. The net
proceeds of approximately $51.0 million were used to repay a portion of the
Company's indebtedness incurred in connection with 1996 acquisitions.
In May 1997, AIMCO sold 2,300,000 shares of Class A Common Stock at an
average price of $28 per share in two public offerings. The net proceeds of
approximately $63.0 million were used to repay $56.0 million of outstanding
indebtedness under the Credit Facility and to provide working capital of $7.0
million. In addition, the Company issued 2,142,857 shares of Class A Common
Stock in connection with the acquisition of 2,866,073 shares of NHP Common Stock
(see Note 5).
In July 1997, AIMCO sold 1,100,000 shares of Class A Common Stock to certain
members of the Company's senior management at a price of $30 per share, the
closing price of the stock on the date of purchase. In exchange for the shares
purchased, such members of senior management executed notes payable to the
Company totaling $33.0 million, of which $15.8 million has been repaid as of
February 28, 1998. The notes bear interest at 7.25% per annum, payable
quarterly, and mature in 2007. The notes are secured by the stock purchased and
are recourse as to 25% of the original amount borrowed.
F-27
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996, AND 1995
NOTE 16--STOCKHOLDERS' EQUITY (CONTINUED)
In August 1997, AIMCO sold 750,000 shares of newly created Class B
Cumulative Convertible Preferred Stock ("Class B Preferred Stock") for gross
proceeds of $75.0 million in cash to an institutional investor in a private
transaction. Holders of the Class B Preferred Stock are entitled to receive,
when, as and if declared by the Board of Directors, quarterly cash dividends per
share equal to the greater of $1.78125 or the cash dividends declared on the
number of shares of Class A Common Stock into which one share of Class B
Preferred Stock is convertible. Each share of Class B Preferred Stock is
convertible at the option of the holder, beginning in August 1998, into 3.28407
shares of Class A Common Stock, subject to certain anti-dilution adjustments.
The agreement pursuant to which AIMCO issued the Class B Preferred Stock
provides that the holders of such stock may require AIMCO to repurchase the
Class B Preferred Stock at a price of $105 per share, plus accrued and unpaid
dividends, if (i) at any time AIMCO fails to qualify as a REIT; or (ii) upon the
occurrence of a change of control of AIMCO, as defined by the aforementioned
agreement. The Class B Preferred Stock is senior to the Class A Common Stock as
to dividends and liquidation, and is non-voting. The proceeds from the sale of
the Class B Preferred Stock were used to repay outstanding indebtedness under
the Credit Facility and to provide working capital.
In August and September 1997, AIMCO issued an aggregate of 5,052,418 shares
of Class A Common Stock to institutional investors for aggregate net proceeds of
$156.9 million. The Company used $114.4 million of such proceeds to purchase
5,717,000 shares of NHP Common Stock from ANHI, used $7.0 million to purchase
351,974 additional shares of NHP Common Stock from a third party pursuant to a
stock purchase agreement, and contributed the remaining $35.5 million to the
AIMCO Operating Partnership (see Note 5). An additional 61,364 shares of Class A
Common Stock were subsequently issued in exchange for 82,074 shares of NHP
Common Stock.
In October 1997, AIMCO issued 7,000,000 shares of Class A Common Stock. Net
proceeds from the sale of approximately $242.5 million were used to fund certain
property acquisitions, repay outstanding indebtedness under the Credit Facility
and provide working capital.
In December 1997, AIMCO issued 4,554,873 shares of Class A Common Stock in
connection with the NHP Merger (see Note 5).
In December 1997, AIMCO issued 2,400,000 shares of newly created Class C
Cumulative Preferred Stock ("Class C Preferred Stock") for net proceeds of $58.1
million. Holders of the Class C Preferred Stock are entitled to receive, when,
as and if declared by the Board of Directors, annual cash dividends equal to
$2.25 per share. The Class C Preferred Stock is senior to the Class A Common
Stock as to dividends and liquidation, and is non-voting. Upon any liquidation,
dissolution or winding up of AIMCO, before payment or distributions by AIMCO
shall be made to any holders of Class A Common Stock, the holders of the Class C
Preferred Stock shall be entitled to receive a liquidation preference of $25 per
share, plus accrued and unpaid dividends. The proceeds from the sale of the
Class C Preferred Stock were used to repay indebtedness outstanding under the
Credit Facility and to provide working capital.
In February 1998, AIMCO issued 4,200,000 shares of Class D Cumulative
Preferred Stock in a public offering (see Note 25).
Concurrent with the IPO in July 1994, 650,000 shares of AIMCO common stock
held by four of the Company's executive officers were reclassified as AIMCO
Class B Common Stock ("Class B Common Stock"). The Class B Common Stock is
convertible into Class A Common Stock, subject to certain conditions. In 1997,
1996 and 1995, respectively, 162,500, 260,000 and 65,000 shares of Class B
Common
F-28
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996, AND 1995
NOTE 16--STOCKHOLDERS' EQUITY (CONTINUED)
Stock were converted into Class A Common Stock upon the satisfaction of the
requisite financial conditions for 1994 through 1997.
NOTE 17--STOCK OPTION PLANS AND STOCK WARRANTS
The Company has elected to follow Accounting Principles Board Opinion No.
25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES ("APB 25") and related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under
Statement of Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION ("SFAS 123"), requires use of option valuation models that were not
developed for use in valuing employee stock options. Under APB 25, because the
exercise price of the Company's employee stock options equals the market price
of the underlying stock on the date of grant, no compensation expense is
recognized.
The Company has adopted the 1994 Stock Option Plan of Apartment Investment
and Management Company (the "1994 Plan"), the Apartment Investment and
Management Company 1996 Stock Award and Incentive Plan (the "1996 Plan"), the
Apartment Investment and Management Company 1997 Stock Award and Incentive Plan
(the "1997 Plan") and the Apartment Investment and Management Company
Non-Qualified Employee Stock Option Plan (the "Non-Qualified Plan") to attract
and retain officers, key employees and independent directors. The 1994 Plan
provides for the granting of a maximum of 150,000 options to purchase common
shares. The 1996 Plan provides for the granting of a maximum of 500,000 options
to purchase common shares. The 1997 Plan provides for the granting of a maximum
of 20,000,000 options to purchase common shares. The Non-Qualified Plan provides
for the granting of a maximum of 500,000 options to purchase common shares. The
1994 Plan, the 1996 Plan, the 1997 Plan and the Non-Qualified Plan allow for the
grant of incentive and non-qualified stock options, and are administered by the
Compensation Committee of the Board of Directors. The 1994 Plan also provides
for a formula grant of the non-qualified stock options to the independent
directors to be administered by the Board of Directors to the extent necessary.
The exercise price of the options granted may not be less than the fair market
value of the common stock at the date of grant. The term of the incentive and
non-qualified options is ten years from the date of grant. The non-qualified
options vest 20% per year over a five-year period with initial vesting one year
from the date of grant. Terms may be modified at the discretion of the
Compensation Committee of the Board of Directors.
Pro forma information regarding net income and earnings per share is
required by SFAS 123, which also requires that the information be determined as
if the Company had accounted for its employee stock options granted subsequent
to December 31, 1994 under the fair value method of that statement. The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted average assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
Range of risk free interest rates.................. 5.2% to 7.5% 5.2% to 7.5% 5.2% to 7.5%
Expected dividend yield............................ 6.0% 7.8% 7.8%
Volatility factor of the expected market price of
the Company's common stock....................... 0.175 0.194 0.194
Weighted average expected life of options.......... 4.5 years 4.5 years 4.5 years
</TABLE>
F-29
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996, AND 1995
NOTE 17--STOCK OPTION PLANS AND STOCK WARRANTS (CONTINUED)
The Black-Scholes option valuation model was developed for use in estimating
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's stock options have characteristics significantly different from
those of traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the fair
value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized over the options' vesting period. The Company's pro forma
information for the options is as follows (in thousands except per share
information):
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Pro forma income attributable to common shareholders.......... $ 26,096 $ 12,201 $ 8,191
Pro forma basic earnings per common share..................... $ 1.00 $ 0.98 $ 0.86
</TABLE>
The effects of applying SFAS 123 in calculating pro forma income
attributable to common shareholders and pro forma basic earnings per share may
not necessarily be indicative of the effects of applying SFAS 123 to future
years' earnings.
The following table summarizes the option activity for the years ended
December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Outstanding at beginning of year.................... 505,000 108,000 86,000
AIMCO options granted............................... 127,000 803,000 27,000
AIMCO options exercised............................. (342,000) (383,000) --
AIMCO options forfeited............................. (6,000) (23,000) (5,000)
NHP options assumed................................. 595,000 -- --
NHP options exercised............................... (95,000) -- --
---------- ---------- ----------
Outstanding at end of year.......................... 784,000 505,000 108,000
---------- ---------- ----------
---------- ---------- ----------
Stock options exercisable at the end of year........ 690,000 425,000 26,000
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
<TABLE>
<S> <C> <C> <C>
Weighted average fair value of options
granted during the year................. $ 3.24 $ 1.01 $ 1.75
Weighted average exercise price........... $ 30.01 $ 20.74 $ 17.69
Exercise prices........................... $12.36-$35.00 $20.25-$20.75 $17.12-$18.37
Weighted average remaining contractual
life.................................... 8.12 years 9.57 years 9.21 years
</TABLE>
At December 31, 1997, the outstanding options consisted of: (i) 500,000 NHP
options assumed, with exercise prices ranging from $12.36 to $22.74 and a
weighted average exercise price of $17.79, all immediately exercisable; (ii)
234,000 AIMCO options (190,000 exercisable) with exercise prices ranging from
$17.125 to $27.75, a weighted average exercise price of $22.13 and a weighted
average life of 8.0
F-30
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996, AND 1995
NOTE 17--STOCK OPTION PLANS AND STOCK WARRANTS (CONTINUED)
years; and (iii) 50,000 AIMCO options (none exercisable) with an exercise price
of $35.00 and remaining life of 9.7 years.
On June 3, 1997, AIMCO issued warrants (the "NHP Warrants") exercisable to
purchase an aggregate of 399,999 shares of Class A Common Stock at $36 per share
at any time prior to June 3, 2002. The NHP Warrants were issued as part of the
consideration for the NHP Real Estate Companies in a private transaction exempt
from registration under the Securities Act pursuant to Section 4(2) thereof.
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
arrangements 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 issued in a
private transaction exempt from registration under the Securities Act pursuant
to Section 4(2) thereof.
NOTE 18--DIVIDEND REINVESTMENT PLAN
Effective August 21, 1995, AIMCO implemented a dividend reinvestment plan to
permit stockholders to reinvest dividends and make voluntary cash investments to
purchase additional shares of Class A Common Stock. In May 1996, the Company
filed a registration statement relating to 1,000,000 shares of Class A Common
Stock to be made available for issuance under the dividend reinvestment plan. On
February 19, 1998, the Company terminated its dividend reinvestment plan
effective March 19, 1998 (see Note 25).
NOTE 19--EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, EARNINGS PER SHARE ("SFAS 128") which
replaced Accounting Principles Board Opinion No. 15 ("APB 15"). As required, the
Company adopted SFAS 128 as of December 31, 1997 and restated earnings per share
information for prior interim and annual periods.
The Class B Common Stock is not included in the computation of earnings per
share until such time as all the conditions required for conversion into Class A
Common Stock have been met. The Class B Preferred Stock is convertible (see Note
16). The Class C Preferred Stock is not convertible.
F-31
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996, AND 1995
NOTE 19--EARNINGS PER SHARE (CONTINUED)
The following table illustrates the calculation of basic and diluted
earnings per share for the years ended December 31, 1997, 1996 and 1995 (in
thousands, except per share data):
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Numerator:
Net income.................................................. $ 28,633 $ 12,984 $ 13,375
Preferred stock dividends................................... (2,315) -- (5,169)
------------ ------------ ------------
Numerator for basic and diluted earnings per share-- income
attributable to common shareholders....................... $ 26,318 $ 12,984 $ 8,206
------------ ------------ ------------
------------ ------------ ------------
Denominator:
Denominator for basic earnings per share--weighted average
number of shares of common stock outstanding.............. 24,055 12,411 9,571
Effect of dilutive securities:
Employee stock options...................................... 381 14 6
Warrants.................................................... -- 2 2
------------ ------------ ------------
Dilutive potential common shares............................ 381 16 8
------------ ------------ ------------
Denominator for diluted earnings per share.................. 24,436 12,427 9,579
------------ ------------ ------------
------------ ------------ ------------
Basic earnings per common share:
Operations................................................ $ 0.99 $ 1.05 $ 0.86
Gain on disposition of properties......................... 0.11 -- --
Extraordinary item........................................ (0.01) -- --
------------ ------------ ------------
Total..................................................... $ 1.09 $ 1.05 $ 0.86
------------ ------------ ------------
------------ ------------ ------------
Diluted earnings per common share:
Operations................................................ $ 0.98 $ 1.04 $ 0.86
Gain on dispositions of properties........................ 0.11 -- --
Extraordinary item........................................ (0.01) -- --
------------ ------------ ------------
Total..................................................... $ 1.08 $ 1.04 $ 0.86
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
NOTE 20--RECENT ACCOUNTING DEVELOPMENTS
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 will be required to present comprehensive income and its
components on the face of the income statement or in a separate financial
statement that is displayed with the same prominence. The Company has elected
not to adopt the provisions of SFAS 130 as of December 31, 1997.
F-32
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996, AND 1995
NOTE 20--RECENT ACCOUNTING DEVELOPMENTS (CONTINUED)
In June, 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION ("SFAS 131") which redefines how business
segments are identified and stipulates the content and nature of segment
information to be presented in the financial statements. The Company has elected
not to adopt the provisions of SFAS 131 as of December 31, 1997.
NOTE 21--TRANSACTIONS WITH AFFILIATES
The Company serves as property manager for certain apartment properties
owned by entities in which certain officers of the Company have an ownership
interest. Compensation for these services is 3% to 6% of gross receipts from the
properties and were $5.4 million, $0.6 million and $1.3 million for the years
ending December 31, 1997, 1996 and 1995, respectively. In addition, the Company
received consulting fees from affiliates of $0.1 million for the year ended
December 31, 1995. No consulting fees from affiliates were received for 1997 or
1996.
In 1996, the Company acquired the Peachtree Park Apartments in Atlanta,
Georgia and the Somerset Village Apartments in Salt Lake City, Utah from
entities controlled by officers of the Company. The aggregate consideration paid
of $39.6 million consisted of $3.8 million in cash, 372,678 shares of Class A
Common Stock, 121,447 OP Units with a total recorded value of $9.9 million, and
the assumption of $25.9 million of secured short-term indebtedness. In addition,
the Company acquired the cable equipment at the Peachtree Park Apartments from
an entity controlled by an officer of the Company in exchange for 8,243 shares
of Class A Common Stock with a recorded value $0.2 million.
On December 1, 1997, the Company purchased the Foxchase Apartments for
approximately $107.7 million from First Alexandria Associates, Limited
Partnership. The purchase price consisted of approximately $70.0 million in
assumed mortgage obligations and the remainder in OP Units. The Company serves
as the general partner and a limited partner in First Alexandria Associates,
Limited Partnership and has a 54% interest in the partnership.
During 1997, in order to preserve the Company's REIT status, the Company
transferred the following assets to certain unconsolidated subsidiaries of
AIMCO: (i) partnerships interests with an estimated value of approximately $0.4
million; (ii) partnership interests, a $50.0 million promissory note and certain
management agreements with an aggregate estimated value of approximately $53.7
million; and (iii) the stock of certain corporations with an estimated value of
$25.0 million.
During July 1997, the Company sold 1,100,000 shares of Class A Common Stock
to certain members of the Company's senior management at a price of $30.00 per
share, the closing price of the stock on the date of the purchase. In exchange
for the shares purchased, such members of senior management executed notes
payable to the Company totaling $33.0 million, of which approximately $10.1
million has been repaid as of December 31, 1997 (see Note 16).
On August 15, 1997, the AIMCO Operating Partnership contributed stock of a
captive insurance subsidiary to PAMS Inc. Certain members of the Company's
senior management are shareholders in PAMS Inc. In order to maintain their
aggregate 5% ownership interest in PAMS Inc., these individuals contributed an
aggregate of $0.2 million to PAMS Inc.
F-33
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
NOTE 21--TRANSACTIONS WITH AFFILIATES (CONTINUED)
On January 21, 1998, the AIMCO Operating Partnerships sold an aggregate of
15,000 High Performance Units to a limited liability company formed by certain
members of the Company's senior management and to AIMCO's non-employee
directors, for $2.1 million in cash (see Note 25).
On January 31, 1998, the Company entered into a Contribution Agreement with
CK Services, Inc. ("CK") and the stockholders of CK to cause certain assets to
be transferred to CK and to distribute all outstanding stock of CK to the
stockholders of AIMCO. CK is a corporation wholly-owned by Terry Considine,
AIMCO's Chairman and Chief Executive Officer, and by Peter Kompaniez, AIMCO's
President and Vice Chairman (see Note 25).
NOTE 22--EMPLOYEE BENEFIT PLANS
The Company offers medical, dental, life and long-term disability benefits
to employees of the Company through insurance coverage of Company-sponsored
plans. The medical and dental plans are self-funded and are administered by
independent third parties. In addition, the Company also participates in a
401(k) defined-contribution employee savings plan. Employees who have completed
six months of service are eligible to participate. The Company matches 50% of
the participant's contributions to the plan up to a maximum of 6% of the
participant's prior year compensation.
NOTE 23--UNAUDITED SUMMARIZED CONSOLIDATED QUARTERLY INFORMATION
Summarized unaudited consolidated quarterly information for 1997 and 1996 is
provided below (amounts in thousands except per share amounts).
<TABLE>
<CAPTION>
QUARTER
------------------------------------------
YEAR ENDED DECEMBER 31, 1997 FIRST SECOND THIRD FOURTH
- ---------------------------------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenue from property operations...................................... $ 38,040 $ 41,679 $ 47,364 $ 65,923
Income from property operations....................................... 14,808 15,971 17,375 24,323
Revenue from service company business................................. 2,444 3,161 3,568 4,764
Company's share of income from service company business............... 551 1,480 773 (776)
Income before extraordinary item and minority interest in Operating
Partnership......................................................... 5,694 6,039 7,963 13,270
Net income............................................................ 4,584 5,264 6,967 11,818
Basic earnings per common share....................................... $ 0.28 $ 0.26 $ 0.25 $ 0.30
Diluted earnings per common share..................................... $ 0.28 $ 0.26 $ 0.25 $ 0.29
Weighted average common shares outstanding............................ 16,454 20,366 24,425 34,771
Weighted average common shares and common share equivalents
outstanding......................................................... 16,586 20,504 24,609 35,190
</TABLE>
F-34
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
NOTE 23--UNAUDITED SUMMARIZED CONSOLIDATED QUARTERLY INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
QUARTER
------------------------------------------
YEAR ENDED DECEMBER 31, 1996 FIRST SECOND THIRD FOURTH
- ---------------------------------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenue from property operations...................................... $ 22,451 $ 23,801 $ 24,140 $ 30,124
Income from property operations....................................... 8,617 9,083 9,866 12,248
Revenue from service company business................................. 1,848 1,877 1,717 2,925
Company's share of income from service company business............... 291 350 401 675
Income before minority interest in Operating Partnership.............. 3,304 3,774 4,118 4,477
Net income............................................................ 2,810 3,145 3,396 3,633
Basic earnings per share.............................................. $ 0.24 $ 0.26 $ 0.27 $ 0.27
Diluted earnings per share............................................ $ 0.24 $ 0.26 $ 0.27 $ 0.27
Weighted average common shares outstanding............................ 11,848 12,210 12,391 13,280
Weighted average common shares and common share equivalents
outstanding......................................................... 11,860 12,217 12,398 13,309
</TABLE>
NOTE 24--PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
The unaudited pro forma condensed consolidated statements of operation for
the years ended December 31, 1997 and 1996 have been prepared as if each of the
following transactions had occurred on January 1, 1996: (i) the 1996
Acquisitions; (ii) the English Portfolio Acquisition; (iii) the Dallas Portfolio
Acquisition; (iv) the 1996 Dispositions; (v) the NHP stock purchases and the NHP
Merger (see Note 5); (vi) the acquisition of the NHP Real Estate Companies (see
Note 6); (vii) a reorganization of the interests held by the NHP Real Estate
Companies (see Note 5); (viii) the (a) 1997 Acquisitions, (b) the acquisition of
the Controlled NHP Partnerships, (c) the acquisition of the Winthrop Portfolio,
the related issuance of Class A Common Stock and OP Units, the incurrence of
indebtedness to finance such acquisitions, and the refinancing of such
indebtedness; (ix) the 1997 Dispositions; (x) the sale of (a) 2,015,000 shares
of Class A Common Stock in February 1997, (b) 2,300,000 shares of Class A Common
Stock in May 1997, (c) 5,052,418 shares in August and September 1997, and (d)
7,000,000 shares of Class A Common Stock in October 1997, and the application of
the aggregate net proceeds thereof to repay indebtedness and fund the purchase
of additional shares of NHP Common Stock; (xi) the sale of 750,000 shares of
Class B Preferred Stock in August 1997, and the application of the net proceeds
thereof to repay indebtedness; (xii) the sale of 2,400,000 shares of Class C
Preferred Stock in December 1997, and the application of the net proceeds
thereof to repay indebtedness, (xiii) the Company's receipt of a dividend from
ANHI from proceeds ANHI received from ANHI stock transfers; (xiv) the purchase
of 886,600 shares of Ambassador Common Stock in September 1997; (xv) the
purchase of third-party notes payable secured by four properties in which the
NHP Real Estate Companies own an interest, and the conversion of such notes
payable into loans from the general partner; and (xvi) the purchase of land
leased by two partnerships in which the NHP Real Estate Companies own an
interest.
The pro forma information is 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.
F-35
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
NOTE 24--PRO FORMA FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
RENTAL PROPERTY OPERATIONS
Rental and other property revenues...................................................... $ 284,174 $ 272,871
Property operating expenses............................................................. (121,274) (126,748)
Owned property management expenses...................................................... (10,002) (9,652)
----------- -----------
Income from property operations before depreciation..................................... 152,898 136,471
Depreciation............................................................................ (55,542) (52,874)
----------- -----------
Income from property operations......................................................... 97,356 83,597
----------- -----------
SERVICE COMPANY BUSINESS
Company's share of income from Service Company Business................................. (1,353) (2,902)
General and administrative expenses..................................................... (5,396) (1,512)
Interest expense........................................................................ (64,361) (57,710)
Interest income......................................................................... 10,576 2,773
Minority interest in other partnerships................................................. 1,803 4,703
Equity in losses of unconsolidated partnerships......................................... (9,703) (11,123)
Equity in earnings of unconsolidated subsidiaries....................................... 4,938 13,421
----------- -----------
Income before minority interest in Operating Partnership................................ 33,860 31,247
Minority interest in Operating Partnership.............................................. (3,578) (4,461)
----------- -----------
Net income.............................................................................. $ 30,282 $ 26,786
----------- -----------
----------- -----------
Net income attributable to preferred shareholders....................................... $ 10,744 $ 10,744
----------- -----------
----------- -----------
Net income attributable to common shareholders.......................................... $ 19,538 $ 16,042
----------- -----------
----------- -----------
Basic earnings per share................................................................ $ 0.49 $ 0.42
Diluted earnings per share.............................................................. $ 0.49 $ 0.41
Weighted average number of common shares outstanding--basic............................. 40,106 38,398
Weighted average number of common shares and common share equivalents
outstanding--diluted.................................................................. 40,257 38,686
</TABLE>
NOTE 25--SUBSEQUENT EVENTS
DIVIDEND DECLARED
On January 22, 1998, the Board of Directors declared a cash dividend of
$0.5625 per share (equivalent to $2.25 on an annualized basis, an increase of
21.6% per share from the 1997 annualized dividend rate) of Class A Common Stock
for the quarter ended December 31, 1997, payable on February 13, 1998 to
stockholders of record on February 6, 1998.
F-36
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
NOTE 25--SUBSEQUENT EVENTS (CONTINUED)
CREATION OF NEW CREDIT FACILITY
In January 1998, the Company replaced the existing Credit Facility with a
new $50 million unsecured revolving credit facility (the "New Credit Facility")
with Bank of America and BankBoston, N.A. The AIMCO Operating Partnership is the
borrower under the New Credit Facility, but all obligations thereunder are
guaranteed by AIMCO and certain of its subsidiaries. The interest rate under the
New 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 New Credit Facility
expires on January 26, 2000 unless extended for successive one-year periods at
the discretion of the lenders. The New Credit Facility provides for the
conversion of the revolving facility into a three-year term loan. The financial
covenants contained in the New Credit Facility require the Company to maintain a
ratio of debt to gross asset value of no more than 0.55 to 1.0, an interest
coverage ratio of 2.25 to 1.0 and a debt service coverage ratio of at least 2.0
to 1.0. In addition, the New Credit Facility limits the Company from
distributing more than 80% of its Funds From Operations (as defined) to
stockholders, imposes minimum net worth requirements and provides other
financial covenants related to certain unencumbered assets.
In February 1998, the AIMCO Operating Partnership, as borrower, and AIMCO
and certain single asset wholly-owned subsidiaries of the Operating Partnership
(the "Owners"), as guarantors, entered into a five year secured credit facility
agreement (the "WMF Credit Facility") with Washington Mortgage Financial Group,
Ltd. ("Washington Mortgage"), which provides for a $50 million revolving credit
facility and conversion of all or a portion of such revolving credit facility to
a base loan 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 may be increased to an amount not to exceed $250 million,
subject to 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 FNMA mortgage backed securities 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 fee spread 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 base 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, an 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 ratios that are specifically related to the collateral.
F-37
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
NOTE 25--SUBSEQUENT EVENTS (CONTINUED)
CONTRIBUTION AGREEMENT
On January 31, 1998, the Company entered into a Contribution Agreement with
CK Services, Inc. ("CK") and the stockholders of CK to cause certain assets to
be transferred to CK and to distribute all outstanding stock of CK to the
stockholders of AIMCO. CK is a corporation wholly-owned by Terry Considine,
AIMCO's Chairman and Chief Executive Officer, and by Peter Kompaniez, AIMCO's
President and Vice Chairman.
CK was created as a vehicle for holding property and performing services
that the Company is limited or prohibited from holding or providing due to its
election to be taxed as a REIT. The Company is finalizing which assets will be
contributed to CK. Any transfer of assets or services to CK will be at market
rates and approved by the independent members of the Company's Board of
Directors, and if market rates are difficult to ascertain, the pricing will
favor AIMCO.
Pursuant to the Contribution Agreement, AIMCO will contribute certain assets
to CK and, in return, the stock of CK will be contributed to the Company or one
of its subsidiaries. Following the contribution of CK stock, the Company will
agree to contribute additional assets to CK with the intent of creating a stand-
alone entity meeting the requirements for listing on the NYSE or NASDAQ National
Market, and if the Company is successful in doing so, the stock of CK will be
distributed to the stockholders of AIMCO. If the Company is unable to list the
CK stock on the NYSE or NASDAQ National Market, CK will remain a direct or
indirect subsidiary of AIMCO and the Company will pay to the former stockholders
of CK an amount necessary to compensate the former CK stockholders for the value
of such stock on January 31, 1998. Consummation of the transaction is subject to
the approval of the independent members of the Company's board of directors.
STOCK OFFERING
On February 19, 1998, the Company issued 4,200,000 shares of 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 as to dividends and liquidation. Upon any
liquidation, dissolution or winding up of AIMCO, before payment or distributions
by AIMCO shall be made to any holders of Class A Common Stock, the holders of
the Class D Preferred Stock shall be entitled to receive a liquidation
preference of $25 per share, plus accrued and unpaid dividends. The net proceeds
of $101.7 million were used to repay indebtedness under the New Credit Facility
and to fund working capital requirements.
PROPERTY ACQUISITION
On February 4, 1998, the Company purchased Steeplechase Apartments, an
apartment community containing 484 units, located in Tyler, Texas, for $9.8
million plus closing costs. The acquisition was funded with short-term
borrowings under the New Credit Facility.
TERMINATION OF DIVIDEND REINVESTMENT PLAN
On February 19, 1998, the Company terminated its dividend reinvestment plan,
effective March 19, 1998 (the "Effective Date"). Under the terms of the
termination, voluntary cash investments received by
F-38
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
NOTE 25--SUBSEQUENT EVENTS (CONTINUED)
the plan administrator on or after February 6, 1998 will be returned to the
participants. Subsequent to the Effective Date, each participant will receive
(i) a stock certificate representing the whole number of shares credited to
their account as of the Effective Date, and (ii) a cash payment equal to the
value of any remaining fractional shares credited to their account, based upon
the sale price received by the plan administrator on the open market.
ISSUANCE OF HIGH PERFORMANCE UNITS
On January 21, 1998, the AIMCO Operating Partnerships sold an aggregate of
15,000 High Performance Units to a limited liability company formed by certain
members of the Company's senior management and to AIMCO's non-employee
directors, for $2.1 million in cash.
PENDING ACQUISITION
On March 17, 1998, AIMCO entered into a definitive merger agreement to
acquire the multi-family apartment management operations, and certain property
holdings, of Insignia Financial Group, Inc. ("Insignia") for approximately $910
million, including the assumption of debt. Insignia is one of the largest
managers of multi-family residential properties in the United States, having a
management portfolio consisting of approximately 192,000 units as of December
31, 1997.
F-39
<PAGE>
SCHEDULE III
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS EXCEPT UNIT DATA)
<TABLE>
<CAPTION>
INITIAL COST
-------------------------
DATE NUMBER OF BUILDINGS AND
PROPERTY NAME ACQUIRED LOCATION YEAR BUILT UNITS LAND IMPROVEMENTS
- ----------------------------- ----------- --------------------- ---------- ----------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
100 Forest Place 10/97 Oak Park, IL 1986 234 $ 3,463 $ 19,624
40th North 07/94 Phoenix, AZ 1970 556 2,546 14,437
Anchorage 11/96 League City, TX 1985 264 523 9,097
Arbor Crossing 05/97 Atlanta, GA 1988 240 1,879 10,647
Arbors 10/97 Tempe, AZ 1971 200 1,092 6,189
Ashford Plantation 12/95 Atlanta, GA 1975 211 2,770 9,956
Bay Club 04/97 Aventura, FL 1990 702 10,530 60,830
Bay West 12/96 Tampa, FL 1975 376 1,500 7,085
Beacon Hill 10/97 Chamblee, GA 1978 120 928 5,261
Blossomtree 10/97 Scottsdale, AZ 1970 125 535 3,029
Bluffs 09/83 Boulder, CO 1971 232 696 7,779
Boardwalk 12/95 Tamarac, FL 1986 291 3,350 8,196
Brandywine 04/83 St. Petersburg, FL 1971 477 1,423 11,336
Brant Rock 10/97 Houston, TX 1984 84 337 1,908
Brentwood 11/96 Lake Jackson, TX 1980 104 200 3,092
Bridgewater 11/96 Tomball, TX 1978 206 333 4,033
Brookside Village 4/96 Tustin, CA 1970 336 2,498 14,180
Cambridge Heights 05/97 Natchez, MS 1979 94 249 1,413
Chesapeake 12/96 Houston, TX 1983 320 775 7,317
Colonnade Gardens 10/97 Phoenix, AZ 1973 196 765 4,337
Copperfield 11/96 Houston, TX 1983 196 702 7,003
Copper Chase 12/96 Katy, TX 1982 316 1,484 11,530
Coral Gardens 04/93 Las Vegas, NV 1983 670 3,190 12,745
Country Club 07/94 Amarillo, TX 1984 282 1,049 5,951
Coventry Square 11/96 Houston, TX 1983 270 975 6,355
Crows Nest 11/96 League City, TX 1984 176 795 5,400
Cypress Landing 12/96 Savannah, GA 1984 200 386 7,911
Dolphin's Landing 12/96 Corpus Cristi, TX 1980 218 1,740 5,589
Dunwoody 07/94 Atlanta, GA 1980 318 1,838 10,538
Easton Village 11/96 Houston, TX 1983 146 440 6,584
Eden Crossing 11/94 Pensacola, FL 1985 200 1,111 6,332
Elm Creek 05/97 Chicago, IL 1986 372 5,339 30,253
Fairways 07/94 Phoenix, AZ 1986 260 1,830 10,403
Fairways II 09/96 Phoenix, AZ 1996 92 -- --
Fisherman's Landing 12/97 Bradenton, FL 1984 200 1,275 7,225
Fishermans Wharf 11/96 Clute, TX 1981 360 830 9,969
Fondren Court 11/96 Houston, TX 1979 429 1,349 9,355
Foothills 10/97 Tuscon, AZ 1982 270 1,203 6,817
Foxbay 10/97 Tuscon, AZ 1983 232 700 3,966
Foxchase 05/97 Alexandria, VA 1947 2,113 39,390 68,354
Foxtree 10/97 Tempe, AZ 1976 487 2,505 14,194
Frankford Place 07/94 Dallas, TX 1982 274 1,125 6,382
Freedom Place Club 10/97 Jacksonville, FL 1988 352 2,289 12,970
Garden Terrace 07/94 Bowie, TX 1978 20 49 280
Greens of Naperville 05/97 Naperville, IL 1986 400 3,756 21,284
<CAPTION>
DECEMBER 31, 1997
-----------------------------------------------------------------------------------
COST TOTAL COST TOTAL COST
CAPITALIZED ------------------------------------- NET OF
SUBSEQUENT TO BUILDINGS AND ACCUMULATED ACCUMULATED
PROPERTY NAME ACQUISITION LAND IMPROVEMENTS TOTAL DEPRECIATION DEPRECIATION ENCUMBRANCES
- ----------------------------- --------------- --------- -------------- ---------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
100 Forest Place 35 $ 3,463 $ 19,659 $ 23,122 $ 232 $ 22,890 $ 15,600
40th North 1,198 2,546 15,635 18,181 2,250 15,931 10,818
Anchorage 123 523 9,220 9,743 2,951 6,792 4,923
Arbor Crossing 36 1,879 10,683 12,562 287 12,275 5,410
Arbors 23 1,092 6,212 7,304 40 7,264 3,909
Ashford Plantation 464 2,770 10,420 13,190 865 12,325 7,463
Bay Club 1,060 10,530 61,890 72,420 1,493 70,927 49,000
Bay West 1,063 1,500 8,148 9,648 241 9,407 (A)
Beacon Hill 20 928 5,281 6,209 34 6,175 3,678
Blossomtree 16 535 3,045 3,580 19 3,561 2,143
Bluffs 364 696 8,143 8,839 4,919 3,920 6,192
Boardwalk 886 3,350 9,082 12,432 779 11,653 9,529
Brandywine 1,436 1,423 12,772 14,195 4,547 9,648 6,584
Brant Rock 11 337 1,919 2,256 12 2,244 1,239
Brentwood 210 200 3,302 3,502 87 3,415 1,827
Bridgewater 155 333 4,188 4,521 1,112 3,409 --
Brookside Village 1,051 2,498 15,231 17,729 250 17,479 --
Cambridge Heights 14 249 1,427 1,676 35 1,641 1,589
Chesapeake 668 775 7,985 8,760 285 8,475 (A)
Colonnade Gardens 16 765 4,353 5,118 28 5,090 2,893
Copperfield 275 702 7,278 7,980 1,090 6,890 3,533
Copper Chase 514 1,484 12,044 13,528 6,124 7,404 5,666
Coral Gardens 1,594 3,190 14,339 17,529 3,092 14,437 11,306
Country Club 535 1,049 6,486 7,535 883 6,652 4,064
Coventry Square 127 975 6,482 7,457 2,466 4,991 3,077
Crows Nest 22 795 5,422 6,217 1,527 4,690 2,922
Cypress Landing 880 386 8,791 9,177 2,472 6,705 4,377
Dolphin's Landing 2,943 1,740 8,532 10,272 255 10,017 (A)
Dunwoody 678 1,838 11,216 13,054 1,545 11,509 7,545
Easton Village 377 690 6,711 7,401 1,266 6,135 2,931
Eden Crossing 400 1,111 6,732 7,843 858 6,985 5,959
Elm Creek 56 5,339 30,309 35,648 836 34,812 (C)
Fairways 6,592 1,830 16,995 18,825 1,565 17,260 6,405
Fairways II 5,952 -- 5,952 5,952 -- 5,952 --
Fisherman's Landing -- 1,275 7,225 8,500 -- 8,500 --
Fishermans Wharf 131 830 10,100 10,930 3,482 7,448 3,575
Fondren Court 423 1,349 9,778 11,127 5,044 6,083 5,528
Foothills 19 1,203 6,836 8,039 44 7,995 3,929
Foxbay 22 700 3,988 4,688 25 4,663 3,254
Foxchase 890 39,390 69,244 108,634 1,169 107,465 68,796
Foxtree 30 2,505 14,224 16,729 91 16,638 9,062
Frankford Place 673 1,125 7,055 8,180 967 7,213 4,003
Freedom Place Club 24 2,289 12,994 15,283 83 15,200 7,104
Garden Terrace 23 49 303 352 41 311 --
Greens of Naperville 60 3,756 21,344 25,100 249 24,851 16,182
</TABLE>
F-40
<PAGE>
SCHEDULE III
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS EXCEPT UNIT DATA)
<TABLE>
<CAPTION>
INITIAL COST
-------------------------
DATE NUMBER OF BUILDINGS AND
PROPERTY NAME ACQUIRED LOCATION YEAR BUILT UNITS LAND IMPROVEMENTS
- --------------------------- ----------- ----------------------- ---------- ----------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Green Tree 12/96 Carrollton, TX 1983 365 1,909 14,842
Hampton Hill 11/96 Houston, TX 1984 332 1,574 8,408
Hastings Place 11/96 Houston, TX 1984 176 734 3,382
Hazeltree 10/97 Phoenix, AZ 1970 310 997 5,650
Heather Ridge 12/96 Arlington, TX 1983 180 655 5,455
Hiddentree 10/97 East Lansing, MI 1966 261 1,470 8,330
Highland Park 12/96 Ft. Worth, TX 1985 500 3,234 19,536
Hillmeade 11/94 Nashville, TN 1985 288 2,872 16,066
Hills 10/97 Austin, TX 1983 329 1,367 7,747
Islandtree 10/97 Whitemarsh Island, GA 1985 216 1,267 7,181
Jefferson Place 11/94 Baton Rouge, LA 1985 234 2,696 15,115
Lake Crossing 05/97 Atlanta, GA 1988 300 2,046 11,596
Lakehaven I 05/97 Carol Stream, IL 1984 144 1,071 6,069
Lakehaven II 05/97 Carol Stream, IL 1985 348 2,680 15,189
Las Brisas 07/94 Casa Grande, AZ 1985 132 573 3,260
Las Brisas 12/95 San Antonio, TX 1983 176 1,100 5,454
Lexington 07/94 San Antonio, TX 1981 72 311 1,764
Los Arboles 09/97 Chandler, AZ 1985 432 1,662 9,418
Meadowcreek 04/85 Boulder, CO 1972 332 1,387 10,027
Meadows 12/96 Austin, TX 1983 100 417 4,563
Montecito 07/94 Austin, TX 1985 268 1,268 7,194
Morton Towers 09/97 Miami Beach, FL 1960 1,277 8,736 49,774
Newberry Park 05/97 Chicago, IL 1985 84 181 1,027
Newport 07/94 Phoenix, AZ 1986 204 800 4,554
Oak Falls 11/96 Spring, TX 1983 144 514 3,585
Olmos Club 10/97 San Antonio, TX 1983 134 322 1,825
Olympiad 11/94 Montgomery, AL 1986 176 1,046 5,958
Orchidtree 10/97 Scottsdale, AZ 1971 278 2,314 13,112
Paradise Palms 07/94 Phoenix, AZ 1970 130 647 3,684
Park at Cedar Lawn 11/96 Galveston, TX 1985 192 769 5,073
Parliament Bend 07/94 San Antonio, TX 1980 232 765 4,342
Peachtree Park 1/96 Atlanta, GA 1962/1995 295 4,681 12,957
Penn Square 12/94 Albuquerque, NM 1982 210 1,128 6,478
Peppermill Place 11/96 Houston, TX 1983 224 406 3,957
Pine Creek 10/97 Clio, MI 1978 233 852 4,830
Pleasant Ridge 11/94 Little Rock, AR 1982 200 1,660 9,464
Pleasant Valley 11/94 Little Rock, AR 1985 112 907 5,069
Point West 05/97 Lenexa, KS 1985 172 979 5,548
Polo Park 10/97 Midland, TX 1983 184 800 4,532
Prairie Hills 07/94 Albuquerque, NM 1985 260 1,680 9,633
Pride Gardens 05/97 Jackson, MS 1975 76 265 1,502
Quailtree 10/97 Phoenix, AZ 1978 184 659 3,735
Randol Crossing 12/96 Ft. Worth, TX 1984 160 782 5,742
Ridge Crest 12/96 Denton, TX 1983 152 612 5,642
Rillito Village 07/94 Tuscon, AZ 1985 272 1,220 6,947
<CAPTION>
DECEMBER 31, 1997
-----------------------------------------------------------------------------------
COST TOTAL COST TOTAL COST
CAPITALIZED ------------------------------------- NET OF
SUBSEQUENT TO BUILDINGS AND ACCUMULATED ACCUMULATED
PROPERTY NAME ACQUISITION LAND IMPROVEMENTS TOTAL DEPRECIATION DEPRECIATION ENCUMBRANCES
- --------------------------- --------------- --------- -------------- ---------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Green Tree 398 1,909 15,240 17,149 4,524 12,625 7,534
Hampton Hill 773 2,130 8,625 10,755 3,840 6,915 4,188
Hastings Place 312 734 3,694 4,428 1,068 3,360 2,689
Hazeltree 18 997 5,668 6,665 36 6,629 4,133
Heather Ridge (4) 655 5,451 6,106 1,994 4,112 2,630
Hiddentree 16 1,470 8,346 9,816 53 9,763 4,497
Highland Park 261 3,234 19,797 23,031 8,089 14,942 9,492
Hillmeade 1,214 2,872 17,280 20,152 2,151 18,001 11,091
Hills 22 1,367 7,769 9,136 50 9,086 8,247
Islandtree 18 1,267 7,199 8,466 46 8,420 4,293
Jefferson Place 1,215 2,696 16,330 19,026 2,023 17,003 9,543
Lake Crossing 45 2,046 11,641 13,687 312 13,375 11,628
Lakehaven I 21 1,071 6,090 7,161 69 7,092 (C)
Lakehaven II 53 2,680 15,242 17,922 172 17,750 (C)
Las Brisas 131 573 3,391 3,964 468 3,496 (B)
Las Brisas 311 1,100 5,765 6,865 480 6,385 3,382
Lexington 75 311 1,839 2,150 260 1,890 1,067
Los Arboles 67 1,662 9,485 11,147 95 11,052 --
Meadowcreek 692 1,387 10,719 12,106 3,458 8,648 7,928
Meadows 151 417 4,714 5,131 1,273 3,858 2,111
Montecito 1,180 1,268 8,374 9,642 1,064 8,578 5,030
Morton Towers 285 8,736 50,059 58,795 670 58,125 --
Newberry Park 13 181 1,040 1,221 26 1,195 8,621
Newport 394 800 4,948 5,748 680 5,068 2,601
Oak Falls 201 514 3,786 4,300 1,097 3,203 2,767
Olmos Club 13 322 1,838 2,160 12 2,148 1,272
Olympiad 415 1,046 6,373 7,419 802 6,617 5,325
Orchidtree 20 2,314 13,132 15,446 84 15,362 7,404
Paradise Palms 300 647 3,984 4,631 550 4,081 2,335
Park at Cedar Lawn (15) 769 5,058 5,827 1,227 4,600 2,781
Parliament Bend 405 765 4,747 5,512 655 4,857 (B)
Peachtree Park 1,355 4,684 14,309 18,993 1,065 17,928 (A)
Penn Square 488 1,128 6,966 8,094 854 7,240 4,224
Peppermill Place 208 406 4,165 4,571 1,063 3,508 3,615
Pine Creek 14 852 4,844 5,696 31 5,665 2,438
Pleasant Ridge 580 1,660 10,044 11,704 1,265 10,439 6,700
Pleasant Valley 708 907 5,777 6,684 709 5,975 3,465
Point West 26 979 5,574 6,553 64 6,489 5,650
Polo Park 17 800 4,549 5,349 29 5,320 2,324
Prairie Hills 391 1,680 10,024 11,704 1,379 10,325 7,333
Pride Gardens 12 265 1,514 1,779 38 1,741 912
Quailtree 17 659 3,752 4,411 24 4,387 2,252
Randol Crossing 18 782 5,760 6,542 1,878 4,664 2,485
Ridge Crest 159 612 5,801 6,413 1,906 4,507 2,507
Rillito Village 225 1,220 7,172 8,392 995 7,397 4,062
</TABLE>
F-41
<PAGE>
SCHEDULE III
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS EXCEPT UNIT DATA)
<TABLE>
<CAPTION>
INITIAL COST
-------------------------
DATE NUMBER OF BUILDINGS AND
PROPERTY NAME ACQUIRED LOCATION YEAR BUILT UNITS LAND IMPROVEMENTS
- ----------------------------- ----------- --------------------- ---------- ----------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Rivercrest 10/97 Tuscon, AZ 1984 210 751 4,253
Riverside 07/94 Denver, CO 1987 248 1,553 8,828
Riverwalk 12/95 Little Rock, AR 1988 262 1,075 9,295
Royal Palms 07/94 Phoenix, AZ 1985 152 832 4,730
Sand Castles 10/97 League City, TX 1987 138 978 5,541
Sand Pebble 10/97 El Paso, TX 1983 208 861 4,879
Sandpiper Cove 05/97 West Palm Beach, FL 1987 416 4,006 22,701
Sawgrass 07/97 Orlando, FL 1986 208 1,443 8,157
Seaside Point 11/96 Galveston, TX 1985 102 295 2,994
Seasons 10/95 San Antonio, TX 1976 280 974 5,749
Shadetree 10/97 Tempe, AZ 1965 123 591 3,349
Shadow Lake 10/97 Greensboro, NC 1988 136 1,054 5,972
Signature Point 11/96 League City, TX 1994 304 2,160 13,627
Silktree 10/97 Phoenix, AZ 1979 86 421 2,383
Snug Harbor 12/95 Las Vegas, NV 1990 64 750 2,966
Somerset Village 5/96 Salt Lake City, UT 1985 486 4,375 17,600
South Willow 07/94 Salt Lake City, UT 1987 440 2,218 12,612
Southridge 12/96 Greenville, TX 1984 160 565 5,787
Spectrum Pointe 07/94 Atlanta, GA 1984 196 1,029 5,903
Stirling Court 11/96 Houston, TX 1984 228 946 5,958
Stonebrook 06/97 Orlando, FL 1991 244 1,583 9,046
Stonehaven 11/96 Houston, TX 1972 337 1,197 11,236
Stoney Brook 11/96 Houston, TX 1972 113 579 3,871
Summer Chase 05/97 Fort Smith, AR 1974 72 170 962
Sun Grove 07/94 Phoenix, AZ 1986 86 659 3,749
Sun Katcher 12/95 Jacksonville, FL 1972 360 578 3,440
Sun Valley 07/94 Salt Lake City, UT 1985 430 1,306 7,434
Sunbury Downs 11/96 Houston, TX 1982 240 565 4,380
Sunchase-Clearwater 11/94 Clearwater, FL 1985 461 2,177 19,641
Sunchase-East 11/94 Orlando, FL 1985 296 927 8,361
Sunchase-North 11/94 Orlando, FL 1985 324 1,013 9,142
Sunchase-Tampa 11/94 Tampa, FL 1985 216 757 6,831
Surry Oaks 10/97 Bedford, TX 1983 152 628 3,560
Swiss Village 11/96 Houston, TX 1972 360 1,011 11,310
Tall Timbers 10/97 Houston, TX 1982 256 1,238 7,016
Tara Bridge 05/97 Atlanta, GA 1988 220 1,610 9,124
Timbermill 10/95 San Antonio, TX 1982 296 778 4,674
Timbertree 10/97 Phoenix, AZ 1980 387 2,334 13,229
Township at Highlands 11/96 Denver, CO 1986 119 1,058 11,166
Tustin Woods 06/97 Tustin, CA 1971 292 6,279 15,373
Twinbridge 10/97 Tuscon, AZ 1982 104 310 1,757
Villa Ladera 1/96 Albuquerque, NM 1985 280 1,765 10,013
Village Creek 07/94 Denver, CO 1987 324 2,446 13,901
Village Park Towers 10/97 North Miami, FL 1979 871 3,173 17,978
Vinings 06/97 Aventura, FL 1991 180 4,504 11,702
<CAPTION>
DECEMBER 31, 1997
-----------------------------------------------------------------------------------
COST TOTAL COST TOTAL COST
CAPITALIZED ------------------------------------- NET OF
SUBSEQUENT TO BUILDINGS AND ACCUMULATED ACCUMULATED
PROPERTY NAME ACQUISITION LAND IMPROVEMENTS TOTAL DEPRECIATION DEPRECIATION ENCUMBRANCES
- ----------------------------- --------------- --------- -------------- ---------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Rivercrest 10 751 4,263 5,014 27 4,987 2,869
Riverside 752 1,553 9,580 11,133 1,308 9,825 6,046
Riverwalk 333 1,075 9,628 10,703 841 9,862 5,688
Royal Palms 165 832 4,895 5,727 687 5,040 3,561
Sand Castles 16 978 5,557 6,535 36 6,499 3,156
Sand Pebble 25 861 4,904 5,765 31 5,734 2,756
Sandpiper Cove 63 4,006 22,764 26,770 627 26,143 16,068
Sawgrass 73 1,443 8,230 9,673 160 9,513 4,980
Seaside Point 188 295 3,182 3,477 793 2,684 --
Seasons 453 982 6,194 7,176 512 6,664 4,534
Shadetree 18 591 3,367 3,958 21 3,937 2,098
Shadow Lake 19 1,054 5,991 7,045 38 7,007 3,295
Signature Point 53 2,160 13,680 15,840 1,671 14,169 7,472
Silktree 16 421 2,399 2,820 15 2,805 1,585
Snug Harbor 253 750 3,219 3,969 268 3,701 2,076
Somerset Village 526 4,375 18,126 22,501 1,104 21,397 8,537
South Willow 783 2,218 13,395 15,613 1,827 13,786 8,379
Southridge 70 565 5,857 6,422 2,212 4,210 2,132
Spectrum Pointe 356 1,029 6,259 7,288 816 6,472 4,357
Stirling Court 283 946 6,241 7,187 2,709 4,478 3,598
Stonebrook 147 1,583 9,193 10,776 225 10,551 6,374
Stonehaven (2,550) 1,197 8,686 9,883 675 9,208 4,160
Stoney Brook 279 579 4,150 4,729 953 3,776 741
Summer Chase 11 170 973 1,143 23 1,120 694
Sun Grove 132 659 3,881 4,540 546 3,994 (B)
Sun Katcher 5,620 578 9,060 9,638 142 9,496 (A)
Sun Valley 328 1,306 7,762 9,068 939 8,129 5,600
Sunbury Downs 183 565 4,563 5,128 1,001 4,127 2,491
Sunchase-Clearwater 845 2,177 20,486 22,663 1,377 21,286 17,550
Sunchase-East 679 927 9,040 9,967 1,126 8,841 9,210
Sunchase-North 610 1,013 9,752 10,765 1,218 9,547 12,354
Sunchase-Tampa 523 757 7,354 8,111 945 7,166 7,384
Surry Oaks 18 628 3,578 4,206 23 4,183 2,346
Swiss Village (941) 1,011 10,369 11,380 3,655 7,725 4,596
Tall Timbers 17 1,238 7,033 8,271 45 8,226 4,180
Tara Bridge 33 1,610 9,157 10,767 246 10,521 7,694
Timbermill 501 778 5,175 5,953 431 5,522 (A)
Timbertree 25 2,334 13,254 15,588 85 15,503 8,035
Township at Highlands 418 1,058 11,584 12,642 2,187 10,455 9,019
Tustin Woods 1,614 6,279 16,987 23,266 1,251 22,015 (A)
Twinbridge 11 310 1,768 2,078 11 2,067 1,159
Villa Ladera 738 1,765 10,751 12,516 855 11,661 5,646
Village Creek 843 2,446 14,744 17,190 2,014 15,176 (B)
Village Park Towers 38 3,173 18,016 21,189 -- 21,189 (A)
Vinings 97 4,504 11,799 16,303 275 16,028 7,956
</TABLE>
F-42
<PAGE>
SCHEDULE III
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS EXCEPT UNIT DATA)
<TABLE>
<CAPTION>
INITIAL COST
-------------------------
DATE NUMBER OF BUILDINGS AND
PROPERTY NAME ACQUIRED LOCATION YEAR BUILT UNITS LAND IMPROVEMENTS
- ----------------------------- ----------- --------------------- ---------- ----------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Walnut Springs 12/96 San Antonio, TX 1983 224 851 8,076
Waterford 11/96 Houston, TX 1984 312 533 5,692
Wickertree 10/97 Phoenix, AZ 1983 226 1,225 6,944
Wildflower 10/97 Midland, TX 1982 264 705 3,996
Williams Cove 07/94 Dallas, TX 1984 260 1,227 6,972
Windsor Landing 10/97 Morrow, GA 1991 200 1,641 9,298
Windward at the Villages 10/97 West Palm Beach, FL 1988 196 1,595 9,037
Woodhill 12/96 Denton, TX 1985 352 1,578 13,199
Woodhollow 10/97 Austin, TX 1974 108 658 3,728
Woodland Ridge 12/96 Irving, TX 1984 130 1,021 4,507
Woodlands-Odessa 07/94 Odessa, TX 1982 232 676 3,835
Woodlands-Tyler 07/94 Tyler, TX 1984 256 1,029 5,845
Wydewood 10/97 Midland, TX 1982 218 519 2,943
Yorktree 10/97 Carol Stream, IL 1972 293 1,968 11,151
1,029
----------- --------- --------------
Sub-total 40,039 257,534 1,329,755
----------- --------- --------------
Properties under development
or held for development:
Fairways III land 07/94 2,303 --
Morton Towers land 9/97 4,446 --
Villa Ladera land 03/96 470 9
----------- --------- --------------
Total 40,039 $ 264,753 $ 1,329,764
----------- --------- --------------
----------- --------- --------------
<CAPTION>
DECEMBER 31, 1997
-----------------------------------------------------------------------------------
COST TOTAL COST TOTAL COST
CAPITALIZED ------------------------------------- NET OF
SUBSEQUENT TO BUILDINGS AND ACCUMULATED ACCUMULATED
PROPERTY NAME ACQUISITION LAND IMPROVEMENTS TOTAL DEPRECIATION DEPRECIATION ENCUMBRANCES
- ----------------------------- --------------- --------- -------------- ---------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Walnut Springs 176 851 8,252 9,103 2,329 6,774 4,859
Waterford 127 533 5,819 6,352 1,582 4,770 4,068
Wickertree 25 1,225 6,969 8,194 45 8,149 4,224
Wildflower 25 705 4,021 4,726 26 4,700 2,116
Williams Cove 409 1,227 7,381 8,608 1,052 7,556 3,928
Windsor Landing 20 1,641 9,318 10,959 60 10,899 5,554
Windward at the Villages 15 1,595 9,052 10,647 91 10,556 4,810
Woodhill 408 1,578 13,607 15,185 4,782 10,403 5,903
Woodhollow 12 658 3,740 4,398 24 4,374 2,133
Woodland Ridge 78 1,021 4,585 5,606 1,542 4,064 2,109
Woodlands-Odessa 532 676 4,367 5,043 574 4,469 (B)
Woodlands-Tyler 405 1,029 6,250 7,279 868 6,411 4,255
Wydewood 15 519 2,958 3,477 19 3,458 1,671
Yorktree 23 1,968 11,174 13,142 72 13,070 6,766
1,029 1,029 1,029 88
--------------- --------- -------------- ---------- ------------- ------------- --------------
Sub-total 62,251 258,351 1,391,189 1,649,540 153,285 1,496,255 755,431
--------------- --------- -------------- ---------- ------------- ------------- --------------
Properties under development
or held for development:
Fairways III land -- 2,303 2,303 2,303
Morton Towers land 401 4,446 401 4,847 4,847
Villa Ladera land 38 470 47 517 517
--------------- --------- -------------- ---------- ------------- ------------- --------------
Total $ 62,690 $ 265,570 $ 1,391,637 $1,657,207 $ 153,285 $ 1,503,922 $ 755,431
--------------- --------- -------------- ---------- ------------- ------------- --------------
--------------- --------- -------------- ---------- ------------- ------------- --------------
</TABLE>
- ----------------------------------------
(A) Pledged as security for the Credit Facility.
(B) Pledged as additional colleratal for secured tax-exempt financing.
(C) Debt is owned by AIMCO and is therefore eliminated in consolidation.
F-43
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
REAL ESTATE AND ACCUMULATED DEPRECIATION
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
------------ ---------- ----------
<S> <C> <C> <C>
REAL ESTATE
Balance at beginning of year............................................. $ 865,222 $ 477,162 $ 406,067
Additions during the year:
Real estate acquisitions............................................... 786,571 388,574 63,351
Additions.............................................................. 26,808 17,993 7,744
Dispositions........................................................... (21,394) (18,507) --
------------ ---------- ----------
Balance at end of year................................................... $ 1,657,207 $ 865,222 $ 477,162
------------ ---------- ----------
------------ ---------- ----------
ACCUMULATED DEPRECIATION
Balance at beginning of year............................................. $ 120,077 $ 28,737 $ 13,699
Additions during the year:
Depreciation........................................................... 37,741 19,556 15,038
Additions.............................................................. -- 73,189 --
Dispositions........................................................... (4,533) (1,405) --
------------ ---------- ----------
Balance at end of year................................................... $ 153,285 $ 120,077 $ 28,737
------------ ---------- ----------
------------ ---------- ----------
</TABLE>
See Report of Independent Auditors and accompanying notes to consolidated
financial statements.
F-44
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
ARTICLES OF RESTATEMENT
APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation,
having its principal office in Baltimore City, Maryland (hereinafter referred
to as the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: The Corporation desires to and does hereby restate its Charter
as currently in effect. The Charter as currently in effect is found in
Articles of Amendment and Restatement dated July 13, 1994 and filed on July
15, 1994 (as corrected by Certificate of Correction dated November 6, 1997
and filed on November 6, 1997), Articles of Amendment dated July 27, 1994 and
filed July 28, 1994 at 11:33 a.m. (as corrected by Certificate of Correction
dated November 6, 1997 and filed on November 6, 1997), Articles of Amendment
dated July 27, 1994 and filed July 28, 1994 at 11:35 a.m. (as corrected by
Certificate of Correction dated November 6, 1997 and filed on November 6,
1997), Articles Supplementary dated May 20, 1997 and filed May 21, 1997, and
Articles Supplementary dated August 1, 1997 and filed August 4, 1997. The
Charter of the Corporation is hereby restated in its entirety as follows:
ARTICLE I
NAME
The name of the corporation (the "Corporation") is Apartment Investment
and Management Company.
ARTICLE II
PURPOSE
The purpose for which the Corporation is formed is to engage in any
lawful act or activity for which corporations may be organized under the
general laws of the State of Maryland authorizing the formation of
corporations as now or hereafter in force.
ARTICLE III
PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT
The post office address of the principal office of the Corporation in
the State of Maryland is c/o The Prentice-Hall Corporation System, Maryland,
11 East Chase Street, Baltimore, Maryland 21202. The name and address of the
resident agent of the Corporation in the State of Maryland is The
Prentice-Hall Corporation System, Maryland, 11 East Chase Street, Baltimore,
Maryland 21202. The resident agent is a Maryland corporation located in the
State of Maryland.
<PAGE>
ARTICLE IV
STOCK
SECTION 1. AUTHORIZED SHARES
1.1 CLASS AND NUMBER OF SHARES. The total number of shares of stock
that the Corporation from time to time shall have authority to issue is
160,750,000 shares of capital stock having a par value of $.01 per share,
amounting to an aggregate par value of $1,607,500, consisting of 150,000,000
shares initially classified as Class A Common Stock having a par value of
$.01 per share ("Class A Common Stock"), 750,000(1) shares initially classified
as Class B Common Stock having a par value of $.01 per share (the "Class B
Common Stock") (the Class A Common Stock and Class B Common Stock being
referred to collectively herein as the "Common Stock") and 10,000,000(2) shares
initially classified as Preferred Stock having a par value of $.01 per share
("Preferred Stock").
1.2 CHANGES IN CLASSIFICATION AND PREFERENCES. The Board of Directors
by resolution or resolutions from time to time may classify and reclassify
any unissued shares of capital stock by setting or changing in any one or
more respects the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications or terms or
conditions of redemption of such shares of capital stock, including, but not
limited to, ownership restrictions consistent with the Ownership Restrictions
with respect to each such class or subclass of capital stock, and the number
of shares constituting each such class or subclass, and to increase or
decrease the number of shares of any such class or subclass.
SECTION 2. NO PREEMPTIVE RIGHTS. No holder of shares of stock of the
Corporation shall, as such holder, have any preemptive right to purchase or
subscribe for any additional shares of the stock of the Corporation or any
other security of the Corporation that it may issue or sell.
SECTION 3. COMMON STOCK.
3.1 DIVIDEND RIGHTS. The holders of shares of Common Stock shall be
entitled to receive such dividends as may be declared by the Board of
Directors of the Corporation out of funds legally available therefor.
3.2 RIGHTS UPON LIQUIDATION. Subject to the preferential rights of
Preferred Stock, if any, as may be determined by the Board of Directors
pursuant to Section 1 of this Article IV, in the event of any voluntary or
involuntary liquidation, dissolution or winding up of, or any distribution of
the assets of the Corporation, each holder of shares of Common Stock shall be
entitled to receive, ratably with each other holder of Common Stock, that
portion of the assets of the Corporation available for distribution to its
shareholders as the number of shares of the Common Stock held by such holder
bears to the total number of shares of Common Stock then outstanding.
3.3 VOTING RIGHTS. The holders of shares of Common Stock shall be
entitled to vote on all matters (on which a holder of shares of Common Stock
shall be entitled to vote) at the meetings of the shareholders of the
Corporation, and shall be entitled to one vote for each share of Common Stock
entitled to vote at such meeting.
3.4 RESTRICTION ON OWNERSHIP AND TRANSFERS. The Beneficial Ownership
and Transfer of Common Stock shall be subject to the restrictions set forth
in this Section 3.4 of this Article IV.
3.4.1 RESTRICTIONS.
(A) LIMITATION ON BENEFICIAL OWNERSHIP. Except as provided in
Section 3.4.8 of this Article IV, from and after the date of the Initial
Public Offering, no Person (other than the Initial Holder or a Look-Through
Entity) shall Beneficially Own shares of Common Stock in excess of the
Ownership Limit, the Initial Holder shall not Beneficially Own shares of
Common Stock in excess of the Initial Holder Limit and no Look-Through Entity
shall Beneficially Own shares of Common Stock in excess of the Look-Through
Ownership Limit.
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(1) See Article SIXTH.
(2) See Article SEVENTH.
<PAGE>
(B) TRANSFERS IN EXCESS OF OWNERSHIP LIMIT. Except as provided in
Section 3.4.8 of this Article IV, from and after the date of the Initial Public
Offering (and subject to Section 3.4.12 of this Article IV), any Transfer
(whether or not such Transfer is the result of transactions entered into
through the facilities of the NYSE or other securities exchange or an automated
inter-dealer quotation system) that, if effective, would result in any Person
(other than the Initial Holder or a Look-Through Entity) Beneficially Owning
shares of Common Stock in excess of the Ownership Limit shall be void AB INITIO
as to the Transfer of such shares of Common Stock that would be otherwise
Beneficially Owned by such Person in excess of the Ownership Limit, and the
intended transferee shall acquire no rights in such shares of Common Stock.
(C) TRANSFERS IN EXCESS OF INITIAL HOLDER LIMIT. Except as
provided in Section 3.4.8 of this Article IV, from and after the date of the
Initial Public Offering (and subject to Section 3.4.12 of this Article IV), any
Transfer (whether or not such Transfer is the result of transactions entered
into through the facilities of the NYSE or other securities exchange or an
automated inter-dealer quotation system) that, if effective, would result in
the Initial Holder Beneficially Owning shares of Common Stock in excess of the
Initial Holder Limit shall be void AB INITIO as to the Transfer of such shares
of Common Stock that would be otherwise Beneficially Owned by the Initial
Holder in excess of the Initial Holder limit, and the Initial Holder shall
acquire no rights in such shares of Common Stock.
(D) TRANSFERS IN EXCESS OF LOOK-THROUGH OWNERSHIP LIMIT. Except as
provided in Section 3.4.8 of this Article IV from and after the date of the
Initial Public Offering (and subject to Section 3.4.12 of this Article IV), any
Transfer (whether or not such Transfer is the result of transactions entered
into through the facilities of the NYSE or other securities exchange or an
automated inter-dealer quotation system) that, if effective, would result in
any Look-Through Entity Beneficially Owning shares of Common Stock in excess of
the Look-Through Ownership limit shall be void AB INITIO as to the Transfer of
such shares of Common Stock that would be otherwise Beneficially Owned by such
Look-Through Entity in excess of the Look-Through Ownership Limit and such
Look-Through Entity shall acquire no rights in such shares of Common Stock.
(E) TRANSFERS RESULTING IN OWNERSHIP BY FEWER THAN 100 PERSONS.
Except as provided in Section 3.4.8 of this Article IV, from and after the date
of the Initial Public Offering (and subject to Section 3.4.12 of this Article
IV), any Transfer (whether or not such Transfer is the result of transactions
entered into through the facilities of the NYSE or other securities exchange or
an automated inter-dealer quotation system) that, if effective, would result in
the Common Stock being Beneficially Owned by less than 100 Persons (determined
without reference to any rules of attribution) shall be void AB INITIO as to
the Transfer of such shares of Common Stock that would be otherwise
Beneficially Owned by the transferee and the intended transferee shall acquire
no rights in such shares of Common Stock.
(F) TRANSFERS RESULTING IN "CLOSELY HELD" STATUS. From and after
the date of the Initial Public Offering, any Transfer that, if effective would
result in the Corporation being "closely held" within the meaning of Section
856(h) of the Code, or would otherwise result in the Corporation failing to
qualify as a REIT (including, without limitation, a Transfer or other event
that would result in the Corporation owning (directly or constructively) an
interest in a tenant that is described in Section 856(d)(2)(B) of the Code if
the income derived by the Corporation from such tenant would cause the
Corporation to fail to satisfy any of the gross income requirements of Section
856(c) of the Code) shall be void AB INITIO as to the Transfer of shares of
Common Stock that would cause the Corporation (i) to be "closely held" within
the meaning of Section 856(h) of the Code or (ii) otherwise fail to qualify as
a REIT, as the case may be, and the intended transferee shall acquire no rights
in such shares of Common Stock.
(G) SEVERABILITY ON VOID TRANSACTIONS. A Transfer of a share of
Common Stock that is null and void under Sections 3.4.1(B), (C), (D), (E) or
(F) of this Article IV because it would, if effective, result in (i) the
ownership of Common Stock in excess of the Initial Holder Limit, the Ownership
Limit, or the Look-Through Ownership Limit, (ii) the Common Stock being
Beneficially Owned by less than 100 Persons (determined without reference to
any rules of attribution), (iii) the Corporation being "closely held" within
the meaning of Section 856(h) of the Code or (iv) the Corporation otherwise
failing to qualify as a REIT, shall not adversely affect the validity of the
Transfer of any other share of Common Stock in the same or any other related
transaction.
3.4.2 REMEDIES FOR BREACH. If the Board of Directors or a committee
thereof shall at any time determine
<PAGE>
in good faith that a Transfer or other event has taken place in violation of
Section 3.4.1 of this Article IV or that a Person intends to acquire or has
attempted to acquire Beneficial Ownership of any shares of Common Stock in
violation of Section 3.4.1 of this Article IV (whether or not such violation
is intended), the Board of Directors or a committee thereof shall be
empowered to take any action as it deems advisable to refuse to give effect
to or to prevent such Transfer or other event, including, but not limited to,
refusing to give effect to such Transfer or other event on the books of the
Corporation, causing the Corporation to redeem such shares at the then
current Market Price and upon such terms and conditions as may be specified
by the Board of Directors in its sole discretion (including, but not limited
to, by means of the issuance of long-term indebtedness for the purpose of
such redemption), demanding the repayment of any distributions received in
respect of shares of Common Stock acquired in violation of Section 3.4.1 of
this Article IV or instituting proceedings to enjoin such Transfer or to
rescind such Transfer or attempted Transfer; PROVIDED, HOWEVER, that any
Transfers or attempted Transfers (or in the case of events other than a
Transfer, Beneficial Ownership) in violation of Section 3.4.1 of this Article
IV, regardless of any action (or non-action) by the Board of Directors or
such committee, (a) shall be void AB INITIO or (b) shall automatically result
in the transfer described in Section 3.4.3 of this Article IV; PROVIDED,
FURTHER, that the provisions of this Section 3.4.2 shall be subject to the
provisions of Section 3.4.12 of this Article IV; PROVIDED, FURTHER, that
neither the Board of Directors nor any committee thereof may exercise such
authority in a manner that interferes with any ownership or transfer of
Common Stock that is expressly authorized pursuant to Section 3.4.8(d) of
this Article IV.
3.4.3. TRANSFER IN TRUST.
(A) ESTABLISHMENT OF TRUST. If, notwithstanding the other
provisions contained in this Article IV, at any time after the date of the
Initial Public Offering there is a purported Transfer (an "EXCESS TRANSFER")
(whether or not such Transfer is the result of transactions entered into
through the facilities of the NYSE or other securities exchange or an
automated inter-dealer quotation system) or other change in the capital
structure of the Corporation (including, but not limited to, any redemption
of Preferred Stock) or other event such that (a) any Person (other than the
Initial Holder or a Look-Through Entity) would Beneficially Own shares of
Common Stock in excess of the Ownership Limit, or (b) the Initial Holder
would Beneficially Own shares of Common Stock in excess of the Initial Holder
Limit, or (c) any Person that is a Look-Through Entity would Beneficially Own
shares of Common Stock in excess of the Look-Through Ownership Limit (in any
such event, the Person, Initial Holder or Look-Through Entity that would
Beneficially Own shares of Common Stock in excess of the Ownership Limit, the
Initial Holder Limit or the Look-Through Entity Limit is referred to as a
"PROHIBITED TRANSFEREE"), then, except as otherwise provided in Section 3.4.8
of this Article IV, such shares of Common Stock in excess of the Ownership
Limit, the Initial Holder Limit or the Look-Through Ownership Limit, as the
case may be, (rounded up to the nearest whole share) shall be automatically
transferred to a Trustee in his capacity as trustee of a Trust for the
exclusive benefit of one or more Charitable Beneficiaries. Such transfer to
the Trustee shall be deemed to be effective as of the close of business on
the business day prior to the date of the Excess Transfer, change in capital
structure or another event giving rise to a potential violation of the
Ownership Limit, the Initial Holder Limit or the Look Through Entity
Ownership Limit.
(B) APPOINTMENT OF TRUSTEE. The Trustee shall be appointed by
the Corporation and shall be a Person unaffiliated with either the
Corporation or any Prohibited Transferee. The Trustee may be an individual
or a bank or trust company duly licensed to conduct a trust business.
(C) STATUS OF SHARES HELD BY THE TRUSTEE. Shares of Common Stock
held by the Trustee shall be issued and outstanding shares of capital stock
of the Corporation. Except to the event provided in Section 3.4.3(E), the
Prohibited Transferee shall have no rights in the Common Stock held by the
Trustee, and the Prohibited Transferee shall not benefit economically from
ownership of any shares held in trust by the Trustee, shall have no rights to
dividends and shall not possess any rights to vote or other rights
attributable to the shares held in the Trust.
(D) DIVIDEND AND VOTING RIGHTS. The Trustee shall have all
voting rights and rights to dividends with respect to shares of Common Stock
held in the Trust, which rights shall be exercised for the benefit of the
Charitable Beneficiary. Any dividend or distribution paid prior to the
discovery by the Corporation that the shares of Common Stock have been
transferred to the Trustee shall be repaid to the Corporation upon demand,
and any dividend or distribution declared but unpaid shall be rescinded as
void AB INITIO with respect to such shares of Common Stock. Any dividends or
distributions so disgorged or rescinded shall be paid over to the Trustee and
held
<PAGE>
in trust for the Charitable Beneficiary. Any vote cast by a Prohibited
Transferee prior to the discovery by the Corporation that the shares of Common
Stock have been transferred to the Trustee will be rescinded as AB INITIO and
shall be recast in accordance with the desires of the Trustee acting for the
benefit of the Charitable Beneficiary. The owner of the shares at the time of
the Excess Transfer, change in capital structure or other event giving rise to
a potential violation of the Ownership Limit, Initial Holder Limit or
Look-Through Entity Ownership Limit shall be deemed to have given an
irrevocable proxy to the Trustee to vote the shares of Common Stock for the
benefit of the Charitable Beneficiary.
(E) RESTRICTIONS ON TRANSFER. The Trustee of the Trust may
transfer the shares held in the Trust to a person, designated by the Trustee,
whose ownership of the shares will not violate the Ownership Restrictions. If
such a transfer is made, the interest of the Charitable Beneficiary shall
terminate and proceeds of the sale shall be payable to the Prohibited
Transferee and to the Charitable Beneficiary as provided in this Section
3.4.3(E). The Prohibited Transferee shall receive the lesser of (1) the price
paid by the Prohibited Transferee for the shares or, if the Prohibited
Transferee did not give value for the shares (through a gift, devise or other
transaction), the Market Price of the shares on the day of the event causing
the shares to be held in the Trust and (2) the price per share received by the
Trustee from the sale or other disposition of the shares held in the Trust.
Any proceeds in excess of the amount payable to the Prohibited Transferee shall
be payable to the Charitable Beneficiary. If any of the transfer restrictions
set forth in this Section 3.4.3(E) or any application thereof is determined in
a final judgment to be void, invalid or unenforceable by any court having
jurisdiction over the issue, the Prohibited Transferee may be deemed, at the
option of the Corporation, to have acted as the agent of the Corporation in
acquiring the Common Stock as to which such restrictions would, by their terms,
apply, and to hold such Common Stock on behalf of the Corporation.
(F) PURCHASE RIGHT IN STOCK TRANSFERRED TO THE TRUSTEE. Shares of
Common Stock transferred to the Trustee shall be deemed to have been offered
for sale to the Corporation, or its designee, at a price per share equal to the
lesser of (i) the price per share in the transaction that resulted in such
transfer to the Trust (or, in the case of a devise or gift, the Market Price at
the time of such devise or gift) and (ii) the Market Price on the date the
Corporation, or its designee, accepts such offer. The Corporation shall have
the right to accept such offer for a period of 90 days after the later of (i)
the date of the Excess Transfer or other event resulting in a transfer to the
Trust and (ii) the date that the Board of Directors determines in good faith
that an Excess Transfer or other event occurred.
(G) DESIGNATION OF CHARITABLE BENEFICIARIES. By written notice to
the Trustee, the Corporation shall designate one or more nonprofit
organizations to be the Charitable Beneficiary of the interest in the Trust
relating to such Prohibited Transferee if (i) the shares of Common Stock held
in the Trust would not violate the Ownership Restrictions in the hands of such
Charitable Beneficiary and (ii) each Charitable Beneficiary is an organization
described in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code.
3.4.4 NOTICE OF RESTRICTED TRANSFER. Any Person that acquires or attempts
to acquire shares of Common Stock in violation of Section 3.4.1 of this Article
IV, or any Person that is a Prohibited Transferee such that stock is
transferred to the Trustee under Section 3.4.3 of this Article IV, shall
immediately give written notice to the Corporation of such event and shall
provide to the Corporation such other information as the Corporation may
request in order to determine the effect, if any, of such Transfer or attempted
Transfer or other event on the Corporation's status as a REIT. Failure to give
such notice shall not limit the rights and remedies of the Board of Directors
provided herein in any way.
3.4.5 OWNERS REQUIRED TO PROVIDE INFORMATION. From and after the date of
the Initial Public Offering certain record and Beneficial Owners and
transferees of shares of Common Stock will be required to provide certain
information as set out below.
(A) ANNUAL DISCLOSURE. Every record and Beneficial Owner of more
than 5% (or such other percentage between 0.5% and 5%, as provided in the
applicable regulations adopted under the Code) of the number of Outstanding
shares of Common Stock shall, within 30 days after January 1 of each year, give
written notice to the Corporation stating the name and address of such record
or Beneficial Owner, the number of shares of Common Stock Beneficially Owned,
and a full description of how such shares are held. Each such record or
Beneficial Owner
<PAGE>
of Common Stock shall, upon demand by the Corporation, disclose to the
Corporation in writing such additional information with respect to the
Beneficial Ownership of the Common Stock as the Board of Directors, in its sole
discretion, deems appropriate or necessary to (i) comply with the provisions of
the Code regarding the qualification of the Corporation as a REIT under the
Code and (ii) ensure compliance with the Ownership Limit, the Initial Holder
Limit or the Look-Through Ownership Limit, as applicable. Each shareholder of
record, including without limitation any Person that holds shares of Common
Stock on behalf of a Beneficial Owner, shall take all reasonable steps to
obtain the written notice described in this Section 3.4.5 from the Beneficial
Owner.
(B) DISCLOSURE AT THE REQUEST OF THE CORPORATION. Any Person that
is a Beneficial Owner of shares of Common Stock and any Person (including the
shareholder of record) that is holding shares of Common Stock for a Beneficial
Owner, and any proposed transferee of shares, shall provide such information as
the Corporation, in its sole discretion, may request in order to determine the
Corporation's status as a REIT, to comply with the requirements of any taxing
authority or other governmental agency, to determine any such compliance or to
ensure compliance with the Ownership Limit, the Initial Holder Limit and the
Look-Through Ownership Limit, and shall provide a statement or affidavit to the
Corporation setting forth the number of shares of Common Stock already
Beneficially Owned by such shareholder or proposed transferee and any related
persons specified, which statement or affidavit shall be in the form prescribed
by the Corporation for that purpose.
3.4.6 REMEDIES NOT LIMITED. Nothing contained in this Article IV shall
limit the authority of the Board of Directors to take such other action as it
deems necessary or advisable (subject to the provisions of Section 3.4.12 of
this Article IV) (i) to protect the Corporation and the interests of its
shareholders in the preservation of the Corporation's status as a REIT and (ii)
to insure compliance with the Ownership Limit, the Initial Holder Limit and the
Look-Through Ownership Limit.
3.4.7 AMBIGUITY. In the case of an ambiguity in the application of any of
the provisions of Section 3.4 of this Article IV, or in the case of an
ambiguity in any definition contained in Section 4 of this Article IV, the
Board of Directors shall have the power to determine the application of the
provisions of this Article IV with respect to any situation based on its
reasonable belief, understanding or knowledge of the circumstances.
3.4.8 EXCEPTIONS. The following exceptions shall apply or may be
established with respect to the limitations of Section 3.4.1 of this Article IV.
(A) WAIVER OF OWNERSHIP LIMIT. The Board of Directors, upon
receipt of a ruling from the Internal Revenue Service or an opinion of tax
counsel or other evidence or undertaking acceptable to it, may waive the
application, in whole or in part, of the Ownership Limit to a Person subject to
the Ownership Limit, if such person is not an individual for purpose of Section
542(a) of the Code and is a corporation, partnership, estate or trust;
PROVIDED, HOWEVER, that in no event may any such exception cause such Person's
ownership, direct or indirect (without taking into account such Person's
ownership of interests in any partnership of which the Corporation is a
partner), to exceed 9.8% of the number of Outstanding shares of Common Stock.
In connection with any such exemption, the Board of Directors may require such
representations and undertakings from such Person and may impose such other
conditions as the Board deems necessary, in its sole discretion, to determine
the effect, if any, of the proposed Transfer on the Corporation's status as a
REIT.
(B) PLEDGE BY INITIAL HOLDER. Notwithstanding any other provision
of this Article IV, the pledge by the Initial Holder of all or any portion of
the Common Stock directly owned at any time or from time to time shall not
constitute a violation of Section 3.4.1 of this Article IV and the pledgee
shall not be subject to the Ownership Limit with respect to the Common Stock so
pledged to it either as a result of the pledge or upon foreclosure.
(C) UNDERWRITERS. For a period of 270 days following the purchase
of Common Stock by an underwriter that (i) is a corporation or a partnership
and (ii) participates in an offering of the Common Stock, such underwriter
shall not be subject to the Ownership Limit with respect to the Common Stock
purchased by it as a part of or in connection with such offering and with
respect to any Common Stock purchased in connection with market making
activities.
<PAGE>
(D) OWNERSHIP AND TRANSFERS BY THE CMO TRUSTEE. The Ownership
Limit shall not apply to the initial holding of Common Stock by the "CMO
Trustee" (as that term is defined in the "Glossary" to the Prospectus) for the
benefit of "HF Funding Trust" (as that term is defined in the "Glossary" to the
Prospectus), to any subsequent acquisition of Common Stock by the CMO Trustee
in connection with any conversion of Preferred Stock or to any transfer or
assignment of all or any part of the legal or beneficial interest in the Common
Stock to the CMO Trustee, "ESA" (as that term is defined in the "Glossary" to
the Prospectus), any entity controlled by ESA, or any direct or indirect
creditor of HF Funding Trust (including without limitation any reinsurer of any
obligation of HF Funding Trust) or any acquisition of Common Stock by any such
person in connection with any conversion of Preferred Stock.
3.4.9 LEGEND. Each certificate for Common Stock shall bear the following
legend: "The shares of Common Stock represented by this certificate are
subject to restrictions on transfer. No person may Beneficially Own
shares of Common Stock in excess of the Ownership Restrictions, as
applicable, with certain further restrictions and exceptions set forth in
the Corporation's Amended and Restated Certificate of Incorporation
("Certificate"). Any Person that attempts to Beneficially Own shares of
Common Stock in excess of the applicable limitation must immediately
notify the Corporation. All capitalized terms in this legend have the
meanings ascribed to such terms in the Corporation's Certificate, as the
same may be amended from time to time, a copy of which, including the
restrictions on transfer, will be sent without charge to each shareholder
that so requests. If the restrictions on transfer are violated, the shares
of Common Stock represented hereby will be either (i) void in accordance
with the Certificate or (ii) automatically transferred to a Trustee of a
Trust for the benefit of one or more Charitable Beneficiaries."
3.4.10 SEVERABILITY. If any provision of this Article IV or any
application of any such provision is determined in a final and unappealable
judgment to be void, invalid or unenforceable by any Federal or state court
having jurisdiction over the issues, the validity and enforceability of the
remaining provisions shall not be affected and other applications of such
provision shall be affected only to the extent necessary to comply with the
determination of such court.
3.4.11 BOARD OF DIRECTORS DISCRETION. Anything in this Article IV to the
contrary notwithstanding, the Board of Directors shall be entitled to take or
omit to take such actions as it in its discretion shall determine to be
advisable in order that the Corporation maintain its status as and continue to
qualify as a REIT, including, but not limited to, reducing the Ownership Limit,
the Initial Holder Limit and the Look-Through Ownership Limit in the event of a
change in law.
3.4.12 SETTLEMENT. Nothing in this Section 3.4 of this Article IV shall
be interpreted to preclude the settlement of any transaction entered into
through the facilities of the NYSE or other securities exchange or an automated
inter-dealer quotation system.
SECTION 4. DEFINITIONS. The terms set forth below shall have the meanings
specified below when used in this Article IV or in Article V of these Articles
of Amendment and Restatement.(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
13d-3 under the Exchange Act or that is attributed to such Person pursuant to
Section 318 of the Code, as modified by Section 856(d)(5) of the Code, PROVIDED
that when applying this definition of Beneficial Ownership to the Initial
Holder, clause (iii) of this definition, and clause (b) of the definition of
"Person" shall be disregarded. The terms "BENEFICIAL OWNER,"
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(3) See Article FOURTH
<PAGE>
"BENEFICIALLY OWNS" and "BENEFICIALLY OWNED" shall have the correlative
meanings.
4.2 CHARITABLE BENEFICIARY. The term "CHARITABLE BENEFICIARY" shall mean
one or more beneficiaries of the Trust as determined pursuant to Section 3.4.3
of this Article IV, each of which shall be an organization described in Section
170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code.
4.3 CODE. The term "CODE" shall mean the Internal Revenue Code of 1986,
as amended from time to time, or any successor statute thereto. Reference to
any provision of the Code shall mean such provision as in effect from time to
time, as the same may be amended, and any successor thereto, as interpreted by
any applicable regulations or other administrative pronouncements as in effect
from time to time.
4.4 COMMON STOCK. The term "COMMON STOCK" shall mean all shares now or
hereafter authorized of any class of Common Stock of the Corporation and any
other capital stock of the Corporation, however designated, authorized after
the Issue Date, that has the right (subject always to prior rights of any class
of Preferred Stock) to participate in the distribution of the assets and
earnings of the Corporation without limit as to per share amount.
4.5 EXCESS TRANSFER. The term "EXCESS TRANSFER" has the meaning set forth
in Section 3.4.3(A) of this Article IV.
4.6 EXCHANGE ACT. The term "EXCHANGE ACT" shall mean the Securities
Exchange Act of 1934, as amended.
4.7 INITIAL HOLDER. The term "INITIAL HOLDER" shall mean Terry Considine.
4.8 INITIAL HOLDER LIMIT. The term "INITIAL HOLDER LIMIT" shall mean 15%
of the number of Outstanding shares of Common Stock applied, in the aggregate,
to the Initial Holder. From the date of the Initial Public Offering, the
secretary of the Corporation, or such other person as shall be designated by
the Board of Directors, shall upon request make available to the
representative(s) of the Initial Holder and the Board of Directors, a schedule
that sets forth the then-current Initial Holder Limit applicable to the Initial
Holder.
4.9 INITIAL PUBLIC OFFERING. The term "INITIAL PUBLIC OFFERING" shall
mean the first underwritten public offering of Class A Common Stock registered
under the Securities Act of 1933, as amended, on a registration statement on
Form S-11 filed with the Securities and Exchange Commission.
4.10 LOOK-THROUGH ENTITY. The term "LOOK-THROUGH ENTITY" shall mean a
Person that is either (i) described in Section 401(a) of the Code as provided
under Section 856(h)(3) of the Code or (ii) registered under the Investment
Company Act of 1940.
4.11 LOOK-THROUGH OWNERSHIP LIMIT. The term "LOOK-THROUGH OWNERSHIP
LIMIT" shall mean 15% of the number of Outstanding shares of Common Stock.
4.12 MARKET PRICE. The term "MARKET PRICE" on any date shall mean the
Closing Price on the Trading Day immediately preceding such date. The term
"CLOSING PRICE" on any date shall mean the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the NYSE or, if the Common Stock is not listed or
admitted to trading on the NYSE, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Common Stock is listed or admitted to
trading or, if the Common Stock is not listed or admitted to trading on any
national securities exchange, the last quoted price, or if not so quoted, the
average of the high bid and low asked prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or, if such system is no longer in use, the principal other
automated quotations system that may then be in use or, if the Common Stock is
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the
Common Stock selected by the Board of Directors of the Company. The term
"TRADING DAY" shall mean a day on which the principal national securities
exchange on which the Common Stock is listed or admitted to trading is open for
the transaction of business or, if the Common Stock is not listed or admitted
to trading on any national securities
<PAGE>
exchange, shall mean any day other than a Saturday, a Sunday or a day on which
banking institutions in the State of New York are authorized or obligated by
law or executive order to close.
4.13 NYSE. The term "NYSE" shall mean the New York Stock Exchange, Inc.
4.14 OUTSTANDING. The term "OUTSTANDING" shall mean issued and
outstanding shares of Common Stock of the Corporation, PROVIDED that for
purposes of the application of the Ownership Limit, the Look-Through Ownership
Limit or the Initial Holder Limit to any Person, the term "OUTSTANDING" shall
be deemed to include the number of shares of Common Stock that such Person
alone, at that time, could acquire pursuant to any options or convertible
securities.
4.15 OWNERSHIP LIMIT. The term "OWNERSHIP LIMIT" shall mean, for any
Person other than the Initial Holder or a Look-Through Entity, 8.7% of the
number of the Outstanding shares of Common Stock of the Corporation.
4.16 OWNERSHIP RESTRICTIONS. The term "OWNERSHIP RESTRICTIONS" shall mean
collectively the Ownership Limit as applied to Persons other than the Initial
Holder or Look-Through Entities, the Initial Holder Limit as applied to the
Initial Holder and the Look-Through Ownership Limit as applied to Look-Through
Entities.
4.17 PERSON. The term "PERSON" shall mean (A) an individual, corporation,
partnership, estate, trust (including a trust qualifying under Section 401(a)
or 501(c) of the Code), association, private foundation within the meaning of
Section 509(a) of the Code, joint stock company or other entity, and (B) also
includes a group as that term is used for purposes of Section 13(d)(3) of the
Exchange Act.
4.18 PROHIBITED TRANSFEREE. The term "PROHIBITED TRANSFEREE" has the
meaning set forth in Section 3.4.3(A) of this Article IV.
4.19 REIT. The term "REIT" shall mean a "real estate investment trust"
as defined in Section 856 of the Code.
4.20 TRANSFER. The term "TRANSFER" shall mean any sale, transfer, gift,
assignment, devise or other disposition of a share of Common Stock (including
(i) the granting of an option or any series of such options or entering into
any agreement for the sale, transfer or other disposition of Common Stock or
(ii) the sale, transfer, assignment or other disposition of any securities or
rights convertible into or exchangeable for Common Stock), whether voluntary or
involuntary, whether of record or Beneficial Ownership, and whether by
operation of law or otherwise (including, but not limited to, any transfer of
an interest in other entities that results in a change in the Beneficial
Ownership of shares of Common Stock). The term "TRANSFERS" and "TRANSFERRED"
shall have correlative meanings.
4.21 TRUST. The term "TRUST" shall mean the trust created pursuant to
Section 3.4.3 of this Article IV.
4.22 TRUSTEE. The term "TRUSTEE" shall mean the Person unaffiliated
with either the Corporation or the Prohibited Transferee that is appointed by
the Corporation to serve as trustee of the Trust.
4.23 PROSPECTUS. The term "PROSPECTUS" shall mean the prospectus that
forms a part of the registration statement filed with the Securities and
Exchange Commission in connection with the Initial Public Offering, in the form
included in the registration statement at the time the registration statement
becomes effective; PROVIDED, HOWEVER, that, if such prospectus is subsequently
supplemented or amended for use in connection with the Initial Public Offering,
"PROSPECTUS" shall refer to such prospectus as so supplemented or amended.
<PAGE>
ARTICLE V
GENERAL REIT PROVISIONS
SECTION 1. TERMINATION OF REIT STATUS. The Board of Directors shall take
no action to terminate the Corporation's status as a REIT until such time as
(i) the Board of Directors adopts a resolution recommending that the
Corporation terminate its status as a REIT, (ii) the Board of Directors
presents the resolution at an annual or special meeting of the shareholders and
(iii) such resolution is approved by the vote of a majority of the shares
entitled to be cast on the resolution.
SECTION 2. EXCHANGE OR MARKET TRANSACTIONS. Nothing in Article IV or this
Article V shall preclude the settlement of any transaction entered into through
the facilities of the NYSE or other national securities exchange or an
automated inter-dealer quotation system. The fact that the settlement of any
transaction is permitted shall not negate the effect of any other provision of
this Article V or any provision of Article IV, and the transferee, including
but not limited to any Prohibited Transferee, in such a transaction shall
remain subject to all the provisions and limitations of Article IV and this
Article V.
SECTION 3. SEVERABILITY. If any provision of Article IV or this Article V
or any application of any such provision is determined to be invalid by any
federal or state court having jurisdiction over the issues, the validity of the
remaining provisions shall not be affected and other applications of such
provision shall be affected only to the extent necessary to comply with the
determination of such court.
SECTION 4. WAIVER. The Corporation shall have authority at any time to
waive the requirement that the Corporation redeem shares of Preferred Stock if,
in the sole discretion of the Board of Directors, any such redemption would
jeopardize the status of the Corporation as a REIT for federal income tax
purposes.
ARTICLE VI
BOARD OF DIRECTORS
SECTION 1. MANAGEMENT. The business and the affairs of the Corporation
shall managed under the direction of its Board of Directors.
SECTION 2. NUMBER. The number of directors that will constitute the
entire Board of Directors shall be fixed by, or in the manner provided in, the
Bylaws but shall in no event be less than three. Any increases or decreases in
the size of the board shall be apportioned equally among the classes of
directors to prevent stacking in any one class of directors. There are
currently six directors in office whose names are as follows: Terry Considine,
Peter K. Kompaniez, Richard S. Ellwood, J. Landis Martin, Thomas L. Rhodes and
John D. Smith.(4)
SECTION 3. INTENTIONALLY DELETED.
SECTION 4. VACANCIES. Except as otherwise provided in these Articles of
Amendment and Restatement(5), newly created directorships resulting from any
increase in the number of directors may be filled by the majority vote of the
Board of Directors, and any vacancies on the Board of Directors resulting from
death, resignation, removal or other cause shall be filled by the affirmative
vote of a majority of the remaining directors then in office, even if less than
a quorum of the Board of Directors, or, if applicable, by a sole remaining
director. Any director elected in accordance with the preceding sentence shall
hold office until the next annual meeting of the Corporation at which time a
successor shall be elected to fill the remaining term of the position filled by
such director.
SECTION 5. REMOVAL. Except as otherwise provided in these Articles of
Amendment and Restatement(6), any director may be removed from office only for
cause and only by the affirmative vote of two-thirds of the aggregate number of
votes then entitled to be cast generally in the election of directors. For
purposes of this Section 5, "CAUSE"
- ---------------------
(4) See Article THIRD.
(5) See Article FOURTH.
(6) See Article FOURTH.
<PAGE>
shall mean the willful and continuous failure of a director to substantially
perform the duties to the Corporation of such director (other than any such
failure resulting from temporary incapacity due to physical or mental illness)
or the willful engaging by a director in gross misconduct materially and
demonstrably injurious to the Corporation.
SECTION 6. BYLAWS. The Board of Directors shall have power to adopt,
amend, alter, change and repeal any Bylaws of the Corporation by vote of the
majority of the Board of Directors then in office. Any adoption, amendment,
alteration, change or repeal of any Bylaws by the shareholders of the
Corporation shall require the affirmative vote of a majority of the aggregate
number of votes then entitled to be cast generally in the election of
directors. Notwithstanding anything in this Section 6 to the contrary, no
amendment, alteration, change or repeal of any provision of the Bylaws relating
to the removal of directors or repeal of the Bylaws shall be effected without
the vote of two-thirds of the aggregate number of votes entitled be cast
generally in the election of Directors.
SECTION 7. POWERS. The enumeration and definition of particular powers of
the Board of Directors included elsewhere in these Articles of Amendment and
Restatement(7) shall in no way be limited or restricted by reference to or
inference from the terms of any other clause of this or any other Article of
these Articles of Amendment and Restatement(8), or construed as excluding or
limiting, or deemed by inference or otherwise in any manner to exclude or
limit, the powers conferred upon the Board of Directors under the Maryland
General Corporation Law ("MGCL") as now or hereafter in force.
ARTICLE VII
LIMITATION OF LIABILITY
No director or officer of the Corporation shall be liable to the
Corporation or its shareholders for money damages to the maximum extent that
Maryland law in effect from time to time permits limitation of the liability of
directors and officers. Neither the amendment nor repeal of this Article VII,
nor the adoption or amendment or any other provision of the charter or Bylaws
of the Corporation inconsistent with this Article VII, shall apply to or affect
in any respect the applicability of the preceding sentence with respect to any
act or failure to act that occurred prior to such amendment, repeal or adoption.
- -------------------------
(7) See Article FOURTH.
(8) See Article FOURTH.
<PAGE>
ARTICLE VIII
INDEMNIFICATION
The Corporation shall indemnify, to the fullest extent permitted by
Maryland law, as applicable from time to time, all persons who at any time were
or are directors or officers of the Corporation for any threatened, pending or
completed action, suit or proceeding (whether civil, criminal, administrative
or investigative) relating to any action alleged to have been taken or omitted
in such capacity as a director or an officer. The Corporation shall pay or
reimburse all reasonable expenses incurred by a present or former director or
officer of the Corporation in connection with any threatened, pending or
completed action, suit or proceeding (whether civil, criminal, administrative
or investigative) in which the present or former director or officer is a
party, in advance of the final disposition of the proceeding, to the fullest
extent permitted by, and in accordance with the applicable requirements of,
Maryland law, as applicable from time to time. The Corporation may indemnify
any other persons permitted but not required to be indemnified by Maryland law,
as applicable from time to time, if and to extent indemnification is authorized
and determined to be appropriate, in each case in accordance with applicable
law, by the Board of Directors, the majority of the shareholders of the
Corporation entitled to vote thereon or special legal counsel appointed by the
Board of Directors. No amendment of these Articles of Amendment and
Restatement(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 two-thirds vote) of the aggregate number of votes entitled to be
case generally in the election of directors. All rights conferred upon
shareholders herein are subject to this reservation.
ARTICLE XI
EXISTENCE
The Corporation is to have a perpetual existence.
ARTICLE XII
CLASS B COMMON STOCK
GENERAL. The holders of the Class B Common Stock shall have the same
rights and privileges as, and shall be subject to the same restrictions and
limitations contained in the Charter as apply to, the holders of the Class A
Common Stock, except as set forth below.
SECTION 1. DEFINITIONS. Capitalized terms used in these Articles
Supplementary(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>
"ADJUSTED FUNDS FROM OPERATIONS" shall have the same meaning as the
term "Adjusted Funds from Operations" used in the Prospectus and shall be
calculated in the manner specified in the Prospectus and based on generally
accepted accounting principles. Adjusted Funds from Operations shall be
determined from the Corporation's financial statements audited and certified by
an independent public accountant.
"ADJUSTED FUNDS FROM OPERATIONS PER SHARE" when used with respect to
any period shall mean the Adjusted Funds from Operations for such period
DIVIDED by the sum of (a) the number of shares of the Class A Common Stock
outstanding on the last day of such period (excluding any shares of the Class A
Common Stock into which shares of the Class B Common Stock shall have been
converted as a result of the conversion of shares of the Class B Common Stock
on the last day of such period) and (b) the number of shares of the Class A
Common Stock issuable to acquire units of limited partnership that (i) may be
tendered for redemption in any limited partnership in which the Corporation
serves as general partner and (ii) are outstanding on the last day of such
period.
"AVERAGE MARKET PRICE" for a period shall mean the average of the
Closing Prices for a share of the Class A Common Stock for the Trading Days in
such period.
"CAUSE" shall mean the termination of employment of an individual with
an Employer as a result of (a) the performance by such individual of any
activity involving fraud or dishonesty, (b) the conviction of the individual of
a felony or a crime involving moral turpitude, (c) the failure or refusal of
such individual to reasonably or satisfactorily perform any material duties or
responsibilities reasonably required of such individual by an Employer, (d) the
gross negligence or willful neglect or malfeasance by the individual in the
performance or non-performance of such individual's duties or responsibilities
to the Employer, or (e) any unauthorized act or omission by such individual
that is injurious in any material respect to the financial condition or
business reputation of any Employer.
"CHANGE IN CONTROL" shall mean the occurrence of any of the
following events:
(a) An acquisition (other than directly from the Corporation) of any
voting securities of the Corporation (the "VOTING SECURITIES") by any "person"
(as the term "person" is used for purposes of Section 13(d) or Section 14(d) of
the Securities Exchange Act of 1934, as amended (the "1934 ACT")) immediately
after which such person has "beneficial ownership" (within the meaning of Rule
13d-3 promulgated under the 1934 Act) ("BENEFICIAL OWNERSHIP") of 20% or more
of the combined voting power of the Corporation's then outstanding Voting
Securities; PROVIDED, HOWEVER, in determining whether a Change in Control has
occurred. Voting Securities that are acquired in a Non-Control Acquisition (as
hereinafter defined) shall not constitute an acquisition that would cause a
Change in Control. "NON-CONTROL ACQUISITION" shall mean an acquisition by (1)
an employee benefit plan (or a trust forming a part thereof) maintained by (a)
the Corporation or (b) any corporation, partnership or other Person of which a
majority of its voting power or its equity securities or equity interest is
owned directly or indirectly by the Corporation or in which the Corporation
serves as a general partner or manager (a "SUBSIDIARY"), (2) the Corporation or
any Subsidiary, or (3) any Person in connection with a Non-Control Transaction
(as hereinafter defined);
(b) The individuals who are named in the Prospectus as constituting
the Board of Directors of the Corporation following the Initial Public
Offering (the "INCUMBENT BOARD") cease for any reason to constitute at least
two-thirds (2/3rds) of the Board of Directors; PROVIDED, HOWEVER, that if the
election, or nomination for election by the Corporation's stockholders, of
any new director was approved by a vote of at least two-thirds (2/3rds) of
the Incumbent Board, such new director shall be considered as a member of the
Incumbent Board; PROVIDED, FURTHER, that no individual shall be considered a
member of the Incumbent Board if such individual initially assumed office as
a result of either an actual or threatened "election contest" (as described
in Rule 14a-11 promulgated under the 1934 Act) (an "ELECTION CONTEST") or
other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board of Directors (a "PROXY CONTEST")
including by reason of any agreement intended to avoid or settle any Election
Contest or Proxy Contest; or
(c) Approval by stockholders of the Corporation of:
(1) A merger, consolidation, share exchange or reorganization
involving the Corporation, unless
<PAGE>
(A) the stockholders of the Corporation, immediately before such
merger, consolidation, share exchange or reorganization, own, directly or
indirectly immediately following such merger, consolidation, share exchange or
reorganization, at least 80% of the combined voting power of the outstanding
voting securities of the corporation that is the successor in such merger,
consolidation, share exchange or reorganization (the "SURVIVING CORPORATION")
in substantiality the same proportion as their ownership of the Voting
Securities immediately before such merger, consolidation, share exchange or
reorganization,
(B) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for such merger,
consolidation, share exchange or reorganization constitute at least two-thirds
(2/3rds) of the members of the board of directors of the Surviving Corporation,
and
(C) no Person (other than the corporation or any subsidiary, any
employee benefit plan (or any trust forming a part thereof) maintained by the
Corporation, the Surviving Corporation or any Subsidiary, or any Person who,
immediately prior to such merger, consolidation, share exchange or
reorganization had Beneficial Ownership of 15% or more of the then outstanding
Voting Securities) has Beneficial Ownership of 15% or more of the combined
voting power of the Surviving Corporation's then outstanding voting securities
(a transaction described in clauses (i) through (iii) is referred to herein as
a "NON-CONTROL TRANSACTION");
(2) A complete liquidation or dissolution of the Corporation,
or
(3) An agreement for the sale or other disposition of all or
substantially all of the assets of the Corporation to any Person (other than a
transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
solely because any Person (a "SUBJECT PERSON") acquired Beneficial Ownership of
more than the permitted amount of the outstanding Voting Securities as a result
of the acquisition of Voting Securities by the Corporation that, by reducing
the number of Voting Securities outstanding, increases the proportional number
of shares Beneficially Owned by such Subject Person, provided that if a Change
in Control would occur (but for the operation of this sentence) as a result of
the acquisition of Voting Securities by the Corporation, and after such share
acquisition by the Corporation, such subject Person becomes the Beneficial
Owner of any additional Voting Securities that increases the percentage of the
then outstanding Voting Securities Beneficially Owned by such Subject Person,
then a Change in Control shall occur.
"CLOSING PRICE" on any date shall mean the last sale price, regular
way, or, in case that no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the NYSE or, if shares of the Class A Common
Stock are not listed or admitted to trading on the NYSE, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which shares of the
Class A Common Stock are listed or admitted to trading or, if shares of the
Class A Common Stock are not listed or admitted to trading on any national
securities exchange, the last quoted price, or if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as reported
by the National Association of Securities Dealers, Inc. Automated Quotation
System or, if such system is no longer in use, the principal other automated
quotations system that may then be in use or, if shares of the Class A Common
Stock are not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker making a market in
shares of the Class A Common Stock selected by the Board of Directors of the
Corporation.
"CONVERTIBLE CLASS B SHARES" shall mean Eligible Class B Shares that
shall have become subject to automatic conversion into shares of the Class A
Common Stock, subject to Article IV, Section 3.4 of the Charter, pursuant to
Sections 3 and 4 of this Article.
"DISABILITY" shall mean the mental or physical illness or disability
of an individual that substantially impairs the ability of the individual to
perform substantially all of his duties as an employee of an Employer in a
satisfactory manner for a period in excess of ninety (90) days in any
consecutive 12-month period.
"ELIGIBLE CLASS B SHARES" shall mean the following percentages
(subject to modification as provided
<PAGE>
in Section 3(c) of this Article) of the Outstanding Class B Shares as of the
Year-End Testing Dates indicated.
PERCENTAGE OF OUTSTANDING
CLASS B SHARES
YEAR-END TESTING DATE
--------------------------------------------------
December 31, 1994 10.0000%
December 31, 1995 22.2222%
December 31, 1996 28.5714%
December 31, 1997 50.0000%
December 31, 1998 100.0000%
"EMPLOYER" shall mean (a) the Corporation, (b) any partnership in
which the Corporation serves as a general partner, (c) any corporation
directly or indirectly controlled by or under common control with the
Corporation, (d) any partnership or company in which any of the foregoing may
own, directly or indirectly, an equity interest or (e) any limited liability
company in which any of the foregoing may be a member.
"INITIAL HOLDER" shall refer to each person holding Outstanding
Class B Shares on the date of the closing of the Initial Public Offering,
whether such Outstanding Class B Shares result from designation of
outstanding common stock or from new issuance by the Corporation.
"OP UNITS" shall mean units of limited partnership interest in the
Operating Partnership.
"OPERATING PARTNERSHIP" shall mean AIMCO Properties, L.P., a
Delaware limited partnership in which the Corporation holds a general
partnership interest.
"OUTSTANDING CLASS B SHARES" shall mean issued and outstanding
shares of the Class B Common Stock of the Corporation, excluding any
Convertible Class B Shares that have been converted into shares of the Class
A Common Stock.
"PROSPECTUS" shall mean the prospectus that forms a part of the
registration statement filed with the Securities and Exchange Commission in
connection with the Initial Public Offering, in the form included in the
registration statement at the time the registration statement becomes
effective; PROVIDED, HOWEVER, that, if such prospectus is subsequently
supplemented or amended for use in connection with the Initial Public
Offering, "PROSPECTUS" shall refer to such prospectus as so supplemented or
amended.
"TRADING DAY" shall mean a day on which the principal national
securities exchange on which shares of the Class A Common Stock are listed or
admitted to trading is open for the transaction of business or, if shares of
the Class A Common Stock are not listed or admitted to trading on any
national securities exchange, "TRADING DAY" shall mean any day other than a
Saturday, a Sunday or a day on which banking institutions in the State of New
York are authorized or obligated by law or executive order to close.
"YEAR-END TESTING DATE" shall mean each of December 31, 1994,
December 31, 1995, December 31, 1996, December 31, 1997 and December 31,
1998; PROVIDED, HOWEVER, that December 31, 1999 shall be substituted in place
of December 31, 1998 each place such earlier date appears in this Article if,
as of December 31, 1998, either the Annual Growth Target requirement or the
Compounded Cumulative Growth Target requirement set forth in Section 3(a) of
this Article in respect of the Year-End Testing Date of December 31, 1998 is
not satisfied as of December 31, 1998.
SECTION 2. RESTRICTIONS ON DIVIDENDS AND VOTING RIGHTS.
(a) NO DIVIDENDS. No dividends shall accrue or be paid on any
shares of the Class B Common Stock.
(b) No Voting Rights; Exception for Convertible Class B Shares.
Holders of shares of the Class B Common Stock shall not have the right to
vote on any matter, including, but not limited to, the election of
<PAGE>
directors, the merger of the Corporation, the sale or other disposition of
the Corporation's assets, or the dissolution or liquidation of the
Corporation; PROVIDED, HOWEVER, that holders of Convertible Class B Shares
shall have the right to one (1) vote per share on all matters for which
holders of shares of the Class A Common Stock shall have the right to vote.
SECTION 3. CONVERTIBILITY OF OUTSTANDING CLASS B SHARES.
(a) IN GENERAL. The Eligible Class B Shares as of a Year-End
Testing Date shall automatically become Convertible Class B Shares according
to the Adjusted Funds from Operations Per Share and the Average Market Values
of a share of the Class A Common Stock for the periods indicated, provided
that (i) the "Annual Growth Target" requirement set forth below in this
Section 3(a) is satisfied, (ii) the "Compounded Cumulative Growth Target"
requirement set forth below in this Section 3(a) is satisfied AND (iii) the
"MARKET VALUE" requirement set forth in Section 3(b) of this Article is
satisfied; PROVIDED, HOWEVER, that, if in any calendar year an applicable
Annual Growth Target requirement is not satisfied, the Eligible Class B
Shares becoming Convertible Class B Shares in the following calendar year or
years shall include, as a carryforward from year to year, the Eligible Class
B Shares otherwise applicable to the first year provided that in the later
year (which need not immediately follow the first year) the Annual Growth
Target requirement, the Cumulative Compounded Growth Target requirement and
the Market Value requirement for such later year are all satisfied:
YEAR-END TESTING COMPOUNDED CUMULATIVE
DATE. ANNUAL GROWTH TARGET GROWTH TARGET
- ------------------------------------------------------------------------------
December 31, 1994 Adjusted Funds from Adjusted Funds from
Operations Per Share for the Operations Per Share for
period beginning on the the period beginning on the
Initial Public Offering and Initial Public Offering and
ending on the Year-End ending on the Year-End
Testing Date is at least Testing Date is at least
$0.864 $0.864
December 31, 1995 ANNUALIZED Adjusted Funds ANNUALIZED Adjusted Funds
from Operations Per Share from Operations Per Share
for the period beginning on for the period beginning on
the Initial Public Offering the Initial Public Offering
and ending on the Year-End and ending on the Year-End
Testing Date is at least Testing Date is at least
$2.161 $2.161
December 31, 1996 Adjusted Funds from ANNUALIZED Adjusted Funds
Operations Per Share for the from Operations Per Share
calendar year ending on the for the period beginning on
Year-End Testing Date is at the Initial Public Offering
least 108.5% of the Adjusted and ending on the Year-End
Funds from Operations Per Testing Date is at least
Share for the calendar year $2.345
ending on the previous
Year-End Testing Date
December 31, 1997 Adjusted Funds from ANNUALIZED Adjusted Funds
Operations Per Share for the from Operations Per Share
calendar year ending on the for the period beginning on
Year-End Testing Date is at the Initial Public Offering
least 108.5% of the Adjusted and ending on the Year-End
Funds from Operations Per Testing Date is at least
Share for the calendar year $2.544
ending on the previous
Year-End Testing Date
<PAGE>
December 31, 1998 Adjusted Funds from ANNUALIZED Adjusted Funds
Operations Per Share for the from Operations Per Share
calendar year ending on the for the period beginning on
Year-End Testing Date is at the Initial Public Offering
least 108.5% of the Adjusted and ending on the Year-End
Funds from Operations Per Testing Date is at least
Share for the calendar year $2.760
ending on the previous
Year-End Testing Date
(b) MARKET VALUE REQUIREMENT. The Market Value requirement shall
be satisfied as to any Year-End Testing Date if the Average Market Value of a
share of the Class A Common Stock shall equal or exceed the amount set forth
in the following table for any 90 calendar day period (whether or not a
calendar quarter or an exact three-month period) beginning on any day
(whether or not a Trading Day) on or after October 1 immediately preceding
the applicable Year-End Testing Date:
YEAR-END TESTING DATE AVERAGE MARKET PRICE
-------------------------------------------
December 31, 1994 $19.030
December 31, 1995 $20.648
December 31, 1996 $22.403
December 31, 1997 $24.307
December 31, 1998 $26.373
By way of illustration, the Market Value requirement for the Year-End Testing
Date of December 31, 1996 would be satisfied if the Average Market Value of a
share of the Class A Common Stock equaled or exceeded $22.403 for (i) the
90-day period beginning on October 1, 1986 and ending on December 30, 1996,
(ii) the 90-day period beginning on April 17, 1997 and ending on July 16,
1997 OR (iii) the 90-day period beginning on November 20, 1997 and ending on
February 18, 1998.
(c) MODIFICATIONS TO ELIGIBILITY AND CONVERTIBILITY SCHEDULES.
Notwithstanding the provisions of Section 3(a) of this Article, in or as to
any calendar year the Corporation's Board of Directors shall have the
authority, upon consideration of factors and financial performance criteria
that it shall in its sole and absolute discretion consider relevant, to
declare a greater or lesser percentage of (i) Outstanding Class B Shares as
of a Year-End Testing Date to be Eligible Class B Shares and (ii) Eligible
Class B Shares to be Convertible Class B Shares; PROVIDED, HOWEVER, that no
such declaration shall decrease the number of Eligible Class B Shares or
Convertible Class B Shares held by any person without such person's consent.
SECTION 4. CONDITIONAL CONVERSION OF CLASS B COMMON STOCK.
(a) CONVERSION OF CONVERTIBLE CLASS B SHARES. Subject to Section
4(c) of this Article and to the limitations set forth in Article IV, Section
3.4 of the Charter, upon becoming a Convertible Class B Share, each
Convertible Class B Share shall be converted automatically into the number of
shares of the Class A Common Stock that results from dividing $18.50 by the
Conversion Price in effect at the time of conversion (the "CONVERSION
PRICE"). Subject to the limitations set forth in Article IV, Section 3.4 of
the Charter, such conversion shall occur and be effective as of the
applicable Year-End Testing Date or, if later, the satisfaction of the Market
Price requirement set forth in Section 3(b) of this Article. The initial
Conversion Price shall be $18.50 per share and shall be subject to adjustment
as provided in Section 7 of this Article.
(b) CONVERSION UPON OCCURRENCE OF OTHER EVENTS. Notwithstanding
the foregoing provisions of this Section 4, but nevertheless subject to the
limitations set forth in Article IV, Section 3.4 of the Charter:
(1) all Outstanding Class B Shares (whether or not Eligible
Class B Shares) that have not previously converted into shares of the Class A
Common Stock shall convert automatically upon any Change in Control of the
Corporation.
<PAGE>
(2) all Outstanding Class B Shares (whether or not Eligible
Class B Shares) held by an Initial Holder and any transferee of such Initial
Holder shall convert automatically into shares of the Class A Common Stock on
the date on which employment of such Initial Holder by an Employer is
terminated by the Employer (and not voluntarily by such Initial Holder) for
any reason other than Cause if following termination such Initial Holder is
no longer employed as an employee by any Employer, and
(3) the Board of Directors of the Corporation may, by
resolution duly adopted by the Board of Directors (and, if there shall be a
duly constituted compensation committee of the Board of Directors at the
time, only with the approval of the compensation committee), accelerate the
conversion of Outstanding Class B Shares (whether or not Eligible Class B
Shares) into shares of the Class A Common Stock at such time and in such
amount as it may determine to be appropriate from time to time.
The conversion of any Outstanding Class B Share pursuant to this Section 4(b)
shall be into the number of shares of the Class A Common Stock that results
from dividing $18.50 by the Conversion Price then in effect.
(c) IDENTIFICATION OF CLASS B COMMON STOCK CONVERTED. Whenever
shares of the Class B Common Stock are converted into shares of the Class A
Common Stock pursuant to Section 4(a), Section 4(b)(1) or Section 4(b)(3) of
this Article, the shares converted shall be allocated among all the record
holders of such shares of the Class B Common Stock in proportion to their
record ownership.
(d) DELAYED CONVERSION. If the conversion of any shares of Class B
Common Stock into shares of the Class A Common Stock shall be limited or
restricted by reason of the provisions of Article IV, Section 3.4 of the
Charter, such shares shall automatically be so converted at such later time,
if any, and to such extent as such limitations and restrictions do not apply.
(e) NO FRACTIONAL SHARES. No fractional shares of the Class A
Common Stock shall be issued upon conversion of any shares of the Class B
Common Stock. Rather, the Corporation shall pay to the record holder cash for
such fractional shares at a rate equal to the Conversion Price per share.
SECTION 5. MANDATORY REPURCHASE OR STOCKHOLDER PURCHASE OF OUTSTANDING
CLASS B SHARES.
(a) REPURCHASE FOLLOWING THE FIFTH YEAR-END TESTING DATE. Subject
to the limitations set forth in Article IV, Section 3.4 of the Charter, each
Outstanding Class B Share (whether or not an Eligible Class B Share) that has
not converted into shares of the Class A Common Stock in respect of the
Year-End Testing Date of December 31, 1998 shall be subject to mandatory
repurchase by the Corporation at a price of $.10 per Outstanding Class B
Share. Such mandatory repurchase shall close upon the determination, no
earlier than March 31, 2000, that such Outstanding Class B Share is not
convertible into shares of the Class A Common Stock pursuant to Section 3 of
this Article.
(b) INITIAL HOLDER PURCHASE UPON CERTAIN TERMINATIONS OF
EMPLOYMENT. Subject to the limitations set forth in Article IV, Section 3.4
of the Charter, each Outstanding Class B Share (whether or not an Eligible
Class B Share), other than a Convertible Class B Share, held by the Initial
Holder of such Outstanding Class B Share, or by any holder who acquired such
Outstanding Class B Share directly or indirectly from such Initial Holder,
that has neither converted nor become convertible into shares of the Class A
Common Stock or prior to either (i) the date of termination of employment of
such Initial Holder by an Employer for Cause or (ii) the date of such Initial
Holder's voluntary termination of employment with an Employer shall be
subject to mandatory purchase, at the time of such termination of employment,
by the other Initial Holders that are at that time employed by an Employer.
The purchase price shall be $.10 per Outstanding Class B Share. The purchase
of such Outstanding Class B Shares shall be made, by the Initial Holders that
are at that time employed by an Employer, proportionate to the following
percentages:
INITIAL HOLDER PERCENTAGE
-----------------------------------
Terry Considine 68.33%
Peter K. Kompaniez 13.50%
Steven D. Ira 13.67%
<PAGE>
Robert P. Lacy 4.50%
(c) REPURCHASE UPON CERTAIN TERMINATIONS OF EMPLOYMENT FOLLOWING
CONVERSION. Subject to the limitations set forth in Article IV, Section 3.4
of the Charter, each share of the Class A Common Stock, whether held by an
Initial Holder of any other person who acquired such share of the Class A
Common Stock directly or indirectly from an Initial Holder, into which an
Outstanding Class B Share was originally converted pursuant to Section 4 of
this Article shall be subject to mandatory repurchase by the Corporation, at
a price of $.10 per share of the Class A Common Stock, upon such Initial
Holder's termination of employment with an Employer, other than (i) by reason
of death, disability or a Change in Control or (ii) the involuntary
termination of employment of such Initial Holder by an Employer without
Cause, within 12 months following such conversion of an Outstanding Class B
Share into such share of the Class A Common Stock; PROVIDED, HOWEVER, that
nothing in this Section 5(c) shall be interpreted or applied to preclude the
settlement of any transaction entered into through the facilities of the NYSE
or other securities exchange or an automated inter-dealer quotation system.
(d) DELAYED REPURCHASE OR PURCHASE. If either the limitations or
restrictions of Article IV, Section 3.4 of the Charter shall apply to (i) a
mandatory repurchase under Section 5(a) or Section 5(c) of this Article or
(ii) a mandatory purchase by the Initial Holders under Section 5(b) of this
Article, or if the Corporation cannot then lawfully effect a repurchase of
its shares, then the repurchase or purchase, as the case may be, shall be
deferred until, and then only to the extent that, such repurchase or purchase
can be lawfully effected within such limitations and restrictions.
(e) PROCEDURES UPON REPURCHASE OR PURCHASE. Any repurchase of
Outstanding Class B Shares as provided by Section 5(a) or Section 5(c) of
this Article shall be effected by delivery by the Corporation to the record
holder of such Outstanding Class B Shares of a certified or cashier's check
in the amount of the aggregate repurchase price. Upon such payment by the
Corporation in repurchase of Outstanding Class B Shares, the certificates
evidencing such repurchased Outstanding Class B Shares shall be canceled.
Any purchase of Outstanding Class B Shares as provided by Section 5(b) of
this Article shall be effected by delivery of the Initial Holders then
employed by an Employer to the record holder of such Outstanding Class B
Shares of a certified or cashier's check in the amount of the aggregate
purchase price.
(f) CHANGE IN CONTROL. The provisions of Sections 5(a), 5(b) and
5(c) of this Article shall not apply following any Change in Control.
SECTION 6. REDUCTION IN AUTHORIZED SHARES. The number of authorized
shares of the Class B Common Stock shall be reduced automatically by (a) the
number of shares of the Class B Common Stock converted into shares of the
Class A Common Stock pursuant to Section 4 of this Article and (b) the number
of shares of the Class B Common Stock repurchased by the Corporation pursuant
to Section 5(a) or Section 5(c) of this Article.
SECTION 7. ADJUSTMENTS. The Conversion Price and the number of shares
of the Class A Common Stock issuable upon the conversion of each share of the
Class B Common Stock shall be subject to adjustment from time to time as
provided in this Section 7.
(a) ADJUSTMENT UPON CERTAIN EVENTS. In case that the Corporation
shall at any time after the date of the Initial Public Offering (i) pay a
dividend in shares of the Class A Common Stock or make a distribution in
shares of the Class A Common Stock, (ii) subdivide the outstanding shares of
the Class A Common Stock, (iii) combine the outstanding Class A Common Stock
into a smaller number of shares of the Class A Common Stock, or (iv) issue
any shares of its capital stock or other securities by reclassification of
the Class A Common Stock, the Conversion Price in effect at the time of the
record date for such dividend or distribution or of the effective date of
such subdivision, combination or reclassification shall be proportionately
adjusted so that each holder of shares of the Class B Common Stock converted
after such time shall be entitled to receive the aggregate number and kind of
the Class A Common Stock or other securities of the Corporation that, if such
shares of the Class B Common Stock had been converted immediately prior to
such time, he would have owned upon such conversion and been entitled to
receive by virtue of such dividend, distribution, subdivision, combination or
reclassification. Such adjustment shall
<PAGE>
be made successively whenever any event listed above shall occur.
(b) ISSUANCE OF RIGHTS, OPTIONS OR WARRANTS. If after the Initial
Public Offering the Corporation issues any rights, options or warrants to all
holders of its Class A Common Stock entitling them for a period expiring
within 60 days after the record date mentioned below to purchase shares of
the Class A Common Stock (or securities convertible into or exchangeable for
shares of the Class A Common Stock) at a price per share less than the
current market price per share on that record date, the Conversion Price
shall be adjusted in accordance with the formula:
A equals the adjusted Conversion Price.
C equals the then current Conversion Price.
O equals the number of shares of the Class A Common Stock
outstanding on the record date.
N equals the number of additional shares of the Class A Common
Stock offered or initially issuable upon conversion or exchange
of the convertible or exchangeable securities offered.
P equals the offering price or conversion price or exchange per
share of the additional shares.
M equals the current market price per share of the Class A Common
Stock on the record date.
The adjustment shall be made successively whenever any such rights, options or
warrants are issued and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the rights,
options or warrants. If all of the shares of the Class A Common Stock or
securities convertible into or exchangeable for shares of the Class A Common
Stock subject to such rights, options or warrants have not been issued when
such rights, options or warrants expire, then the Conversion Price shall be
immediately readjusted to what it would have been if "N" in the above formula
had been the number of shares of the Class A Common Stock actually issued upon
the exercise of such rights, options or warrants or initially issuable based
upon the number of convertible securities or exchangeable securities actually
issued upon the exercise of such rights or warrants.
(c) DISTRIBUTION OF ASSETS AND DEBT SECURITIES. If after the
Initial Public Offering the Corporation distributes to all holders of its
Class A Common Stock any of its assets or debt securities or any rights or
warrants to purchase debt securities, assets or other securities of the
Corporation (including shares of the Class A Common Stock), the Conversion
Price shall be adjusted in accordance with the formula:
where
A equals the adjusted Conversion Price.
C equals the then current Conversion Price.
M equals the current market price per share of the Class A Common
Stock on the record date mentioned below.
F equals the fair market value on the record date of the assets,
securities, rights or warrants applicable to one share of the
Class A Common Stock. The Board of Directors shall determine, in
good faith, such fair market value, which determination shall be
conclusive.
This Section 7(c) does not apply to any rights, options or warrants referred
to in Section 7(b) of this Article.
This Section 7(c) does not apply to cash dividends or cash distributions paid
in respect of the Class A Common Stock for any period if the cash dividends or
cash distributions paid in respect of the Class A Common Stock and OP Units for
that period, when added to the amount of all other cash dividends or cash
distributions paid in respect to the Class A Common Stock and OP Units for the
twelve (12) month period ending on the last day of such period, does not exceed
100% of Cash Available for Distribution for such twelve (12) month period.
"CASH AVAILABLE FOR DISTRIBUTION" shall mean "Funds from Operations" (as that
term is defined in the "Glossary" of the Prospectus but computed at the
Operating Partnership level) minus (i) the amount of any dividend on Preferred
Stock accrued during such twelve (12) month period, whether or not declared or
paid, and (ii) an annual reserve for capital replacements of $300 per apartment
unit for the weighted average number of apartment units owned by the
Corporation during such twelve (12) month period. By way of example, Cash
Available for Distribution for the twelve (12) month
<PAGE>
period ending June 15, 1995 as set forth in the Prospectus is projected on a
PRO FORMA basis to be $18,476,000.
(d) ISSUANCE OF DISCOUNTED SHARES. If after the Initial Public
Offering the Corporation issues shares of the Class A Common Stock for a
consideration per share less than the current market price per share, on the
date that the Corporation fixes the offering price of such additional shares,
the Conversion Price shall be adjusted in accordance with the formula:
where
A equals the adjusted Conversion Price.
C equals the then current Conversion Price.
O equals the number of shares of the Class A Common Stock
outstanding immediately prior to the issuance of such additional
shares.
P equals the aggregate consideration received for the issuance of
such additional shares.
M equals the current market price per share of the Class A Common
Stock on the date of issuance of such additional shares.
S equals the number of shares outstanding immediately after the
issuance of such additional shares.
The adjustment shall be made successively whenever any such issuance is made,
and shall become effective immediately after such issuance.
This Section 7(d) does not apply to (i) any of the transactions described in
Section 7(b) or Section 7(c) of this Article, (ii) the conversion or exchange
of shares of the Class B Common Stock or other securities convertible into or
exchangeable for shares of the Class A Common Stock, (iii) shares of the Class
A Common Stock issued by the Corporation upon, and as consideration for, the
purchase of OP Units, (iv) shares of the Class A Common Stock issued to the
Corporation's employees (other than upon the exercise of options of the type
referred to in clause (v) below) under BONA FIDE employee benefit plans adopted
by the Board of Directors, if such Class A Common Stock would otherwise be
covered by this Section 7(d), (v) the Class A Common Stock issued upon the
exercise of options granted to employees at an exercise price equal to at least
85% of the fair market value of such Class A Common Stock at the time that such
options were granted, (vi) the Class A Common Stock issued to stockholders of
any person that merges into the Corporation, or with a subsidiary of the
Corporation, in proportion to their stock holdings in such Person immediately
prior to such merger, upon such merger, (vii) the Class A Common Stock issued
in a BONA FIDE public offering pursuant to a firm commitment or best efforts
underwriting, or (viii) the Class A Common Stock issued in a BONA FIDE private
placement through a placement agent that is a member firm of the National
Association of Securities Dealers, Inc. (except to the extent that any discount
from the current market price attributable to restrictions on transferability
of the Class A Common Stock, as determined in good faith by the Board of
Directors, shall exceed 10% of the then current market price).
(e) ISSUANCE OF CONVERTIBLE DISCOUNTED SECURITIES. If after the
Initial Public Offering the Corporation issues any securities convertible
into or exchangeable for shares of the Class A Common Stock (other than
securities issued in transactions described in Section 7(b) or Section 7(c))
of this Article for a consideration per share of the Class A Common Stock
initially deliverable upon conversion or exchange of such securities less
than the current market price per share of the Class A Common Stock on the
date of issuance of such securities, the Conversion Price shall be adjusted
in accordance with the formula:
where
A equals the adjusted Conversion Price.
C equals the then current Conversion Price.
O equals the number of shares of the Class A Common Stock
outstanding immediately prior to the issuance of such securities.
P equals the aggregate consideration received for the issuance of
such securities.
M equals the current market price per share of the Class A Common
Stock on the date of issuance of such securities.
<PAGE>
D equals the maximum number of shares deliverable upon conversion
or in exchange for such securities at the initial conversion or
exchange rate.
The adjustment shall be made successively whenever any such issuance is made,
and shall become effective immediately after such issuance. If all of the
Class A Common Stock deliverable upon conversion or exchange of such securities
have not been issued when such securities are no longer outstanding, then the
Conversion Price shall promptly be readjusted to the conversion price that
would then be in effect had the adjustment upon the issuance of such securities
been made on the basis of the actual number of shares of the Class A Common
Stock issued upon conversion or exchange of such securities.
This Section 7(e) does not apply to (i) convertible securities issued to
stockholders of any Person that merges into the Corporation, or with a
subsidiary of the Corporation, in proportion to their stock holdings in such
Person immediately prior to such merger, upon such merger, (ii) convertible
securities issued in a BONA FIDE public offering pursuant to a firm
commitment or best efforts underwriting, or (iii) convertible securities
issued in a BONA FIDE private placement through a placement agent that is a
member firm of the National Association of Securities Dealers, Inc. (except
to the extent that any discount from the current market price attributable to
restrictions on transferability of the Class A Common Stock issuable upon
conversion, as determined in good faith by the Board of Directors and
described in a Board resolution, shall exceed 20% of the then current market
price).
(f) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS.
If at any time or from time to time there is a capital reorganization of the
Corporation (other than a recapitalization, subdivision, combination,
reclassification or exchange of shares provided for elsewhere in this Section
7 or Section 4 of this Article) or a merger or consolidation of the
Corporation with or into another corporation, or the sale of all or
substantially all of the Corporation's properties and assets to any other
person then, each share of the Class B Common Stock then outstanding shall
thereafter be convertible into, in lieu of the Class A Common Stock issuable
upon such conversion prior to consummation of such reorganization, merger,
consolidation or sale, the kind and amount of shares of stock and other
securities and property receivable (including cash) upon the consummation of
such reorganization, merger, consolidation or sale by a holder of that number
of shares of Class A Common Stock into which one share of the Class B Common
Stock was convertible immediately prior to such reorganization, merger,
consolidation or sale (including, on a PRO RATA basis, the cash, securities
or property received by holders of Class A Common Stock in any tender or
exchange offer that is a step in such transaction). In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 7 and Section 4 of this Article with respect to the rights of
the holders of the shares of the Class B Common Stock after the
reorganization, merger, consolidation or sale to the end that the provisions
of this Section 7 (including adjustment of the Conversion Price then in
effect and the number of shares issuable upon conversion of the shares of the
Class B Common Stock) shall be applicable after that event and be as nearly
equivalent as may be practicable.
(g) COMPUTATION OF CONSIDERATION. For purposes of any computation
respecting consideration received pursuant to Sections 7(d) and 7(e) of this
Article, the following shall apply:
(1) In the case of the issuance of shares of the Class A
Common Stock for cash, the consideration shall be the amount of such cash,
provided that in no case shall any deduction be made for any commissions,
discounts or other expenses incurred by the Corporation for any underwriting
of the issue or otherwise in connection therewith;
(2) In the case of the issuance of shares of the Class A
Common Stock for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair market value
thereof as determined in good faith by the Board of Directors (irrespective
of the accounting treatment thereof), whose determination shall be
conclusive, and described in a Board resolution; and
(3) In the case of the issuance of securities convertible into
or exchangeable for shares, the aggregate consideration received therefor
shall be deemed to be the consideration received by the Corporation for the
issuance of such securities plus the additional minimum consideration if any,
to be received by the Corporation upon the conversion of exchange thereof
(the consideration in each case to be determined in the same manner
<PAGE>
provided in Sections 7(g)(1) and 7(g)(2) of this Article.
(h) COMPUTATION OF CURRENT MARKET PRICE. For the purpose of any
computation pursuant to Sections 7(b), 7(c), 7(d) and 7(e) of this Article,
the current market price per share of the Class A Common Stock on any date
shall be deemed to be the average of the Closing Prices for 15 consecutive
Trading Days commencing 30 Trading Days before that date. However, if the
Class A Common Stock is not publicly listed or publicly traded, current
market price shall mean the fair market value per share of Class A Common
Stock, as determined in good faith by the Board of Directors, based on the
opinion of an independent investment banking firm.
(i) EXCEPTIONS. No adjustment in the Conversion Price need be made:
(1) unless the adjustment would require an increase or
decrease of at least 1% in the Conversion Price. Any adjustments that are
not made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 7 shall be made to the
nearest cent or to the nearest one hundredth (1/100th) of a share, as the
case may be. The Conversion Price shall not be adjusted upward except in the
event of a combination of the outstanding shares of the Class A Common Stock
into a smaller number of shares of Common Stock or in the event of a
readjustment of the Conversion Price pursuant to Section 7(b) or Section 7(e)
of this Article;
(2) for a transaction referred to in Section 7(a), Section
7(b), Section 7(c), Section 7(d) or Section 7(e) of this Article if holders
of the Class B Common Stock are to participate in the transaction on a basis
and with notice that the Board of Directors determines to be fair and
appropriate in light of the basis and notice on which holders of the Class A
Common Stock participate in the transaction;
(3) for rights to purchase shares of the Class A Common Stock
pursuant to a plan for reinvestment of dividends or interest;
(4) for a change in the part value or no par value of the
Class A Common Stock; or
(5) to the extent that the Class B Common Stock becomes
convertible into cash, as to such cash. Interest will not accrue on any such
cash.
(j) NOTICE. Whenever the Conversion Price is adjusted or reduced,
the Corporation shall promptly mail, at least 12 days prior to the record
date of the distribution triggering the adjustment or reduction, to holders
of the Class B Common Stock and file with the transfer agent therefor a
notice of the adjustment or reduction and, in the case of an adjustment, file
with the transfer agent for the Class B Common Stock an officer's certificate
briefly stating the facts requiring the adjustment and the manner of
computing it. The certificate shall be conclusive evidence that the
adjustment is correct.
(k) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its authorized but
unissued shares of the Class A Common Stock, solely for the purpose of
effecting the conversion of the shares of the Class B Common Stock, such
number of its shares of the Class A Common Stock as shall from time to time
be sufficient to effect the conversion of all outstanding shares of the Class
B Common Stock; and if at any time the number of authorized but unissued
shares of the Class A Common Stock shall not be sufficient to effect the
conversion of all then outstanding shares of the Class B Common Stock, the
Corporation will take such corporate and other action as may, in the opinion
of its counsel, be necessary to increase its authorized but unissued shares
of the Class A Common Stock to such number of shares as shall be sufficient
for such purpose.
(l) DISCRETIONARY ADJUSTMENTS. The Board of Directors may (but
shall not be required to) make such adjustments in the Conversion Price, in
addition to those required by this Section 7, as shall be determined by the
Board of Directors, as evidenced by a Board resolution, to be advisable in
order that any event that would otherwise be treated for federal income tax
purposes as a dividend of stock or stock rights will, to the extent
practicable, not be so treated or not be taxable to all the recipients.
<PAGE>
(m) AMBIGUITY. The Board of Directors may interpret the provisions
of this Section 7 to resolve any inconsistency or ambiguity that may arise or
be revealed in connection with the adjustment procedures provided herein, and
if such inconsistency or ambiguity reflects an inaccurate provision hereof,
the Board of Directors may, in appropriate circumstances, authorize the
filing of additional articles supplementary or a certificate of designation.
SECTION 8. RESTRICTION ON ADDITIONAL ISSUANCES. Upon the filing of
these Articles of Amendment, there shall be authorized 750,000 shares and
issued and outstanding 650,000 shares of the Class B Common Stock.(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 13d-3 under the Exchange Act or that is attributed to
such Person pursuant to Section 318 of the Code, as modified by Section
856(d)(5) of the Code, PROVIDED that when applying this definition of
Beneficial Ownership to the Initial Holder, clause (iii) of this
definition, and clause (ii) of the definition of "Person" shall be
disregarded. The terms "BENEFICIAL OWNER," "BENEFICIALLY OWNS" and
"BENEFICIALLY OWNED" shall have the correlative meanings.
"BOARD OF DIRECTORS" shall mean the Board of Directors of the Corporation
or any committee authorized by such Board of Directors to perform any of
its responsibilities with respect to the Class B Preferred Stock.
- --------------------------
(11) See Article FIFTH.
<PAGE>
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a day
on which state or federally chartered banking institutions in New York,
New York are not required to be open.
"CALL DATE" shall have the meaning set forth in paragraph (b) of Section
5 of this Article.
"CHARITABLE BENEFICIARY" shall mean one or more beneficiaries of the
Trust as determined pursuant to Section 11.3 of this Article, each of
which shall be an organization described in Section 170(b)(1)(A),
170(c)(2) and 501(c)(3) of the Code.
"CLASS B PREFERRED STOCK" shall have the meaning set forth in Section 1
of this Article.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time, or any successor statute thereto. Reference to any provision
of the Code shall mean such provision as in effect from time to time, as
the same may be amended, and any successor thereto, as interpreted by
any applicable regulations or other administrative pronouncements as in
effect from time to time.
"COMMON STOCK" shall mean the Class A Common Stock, $.01 par value per
share, of the Corporation or such shares of the Corporation's capital
stock into which outstanding shares of Common Stock shall be
reclassified.
"CONVERSION PRICE" shall mean the conversion price per share of Common
Stock for which each share of Class B Preferred Stock is convertible, as
such Conversion Price may be adjusted pursuant to paragraph (d) of
Section 7 of this Article. The initial Conversion Price shall be $30.45
(equivalent to an initial conversion rate of 3.28407 shares of Common
Stock for each share of Class B Preferred Stock).
"CURRENT MARKET PRICE" of publicly traded shares of Common Stock or any
other class or series of capital stock or other security of the Corporation
or of any similar security of any other issuer for any day shall mean the
closing price, regular way on such day, or, if no sale takes place on such
day, the average of the reported closing bid and asked prices regular way on
such day, in either case as reported on the principal national securities
exchange on which such securities are listed or admitted for trading, or, if
such security is not quoted on any national securities exchange, on the
National Market of the National Association of Securities Dealers, Inc.
Automated Quotations System ("NASDAQ") or, if such security is not quoted
on the NASDAQ National Market, the average of the closing bid and asked
prices on such day in the over-the-counter market as reported by NASDAQ or,
if bid and asked prices for such security on such day shall not have been
reported through NASDAQ, the average of the bid and asked prices on such
day as furnished by any New York Stock Exchange or National Association of
Securities Dealers, Inc. member firm regularly making a market in such
security selected for such purpose by the Chief Executive Officer or the
Board of Directors or if any class or series of securities are not publicly
traded, the fair value of the shares of such class as determined reasonably
and in good faith by the Board of Directors of the Corporation.
"DISTRIBUTION" shall have the meaning set forth in paragraph (d)(iii) of
Section 7 of this Article.
"DIVIDEND PAYMENT DATE" shall mean, with respect to each Dividend Period,
(a) the date that cash dividends are paid on the Common Stock with respect
to such Dividend Period; or (b) if such dividends have not been paid on the
Common Stock by 9:00 a.m., New York City time, on the sixtieth day from and
including the last day of such Dividend Period, then on such day; provided,
further, that if any Dividend Payment Date falls on any day other than a
Business Day, the dividend payment payable on such Dividend Payment Date
shall be paid on the Business Day immediately following such Dividend
Payment Date.
"DIVIDEND PERIODS" shall mean the Initial Dividend Period and each
subsequent quarterly dividend period commencing on and including January 1,
April 1, July 1 and October 1 of each year and ending on and including the
day preceding the first day of the next succeeding Dividend Period, other
than the Dividend Period during which any Class B Preferred Stock shall be
redeemed pursuant to Section 5 hereof, which shall end on and include the
Call Date with respect to the Class B Preferred Stock being redeemed.
<PAGE>
"EQUITY STOCK" shall mean one or more shares of any class of capital
stock of the Corporation.
"EXCESS TRANSFER" has the meaning set forth in Section 11.3(A) of this
Article.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"FAIR MARKET VALUE" shall mean the average of the daily Current Market
Prices of a share of Common Stock during five (5) consecutive Trading
Days selected by the Corporation commencing not more than twenty (20)
Trading Days before, and ending not later than, the earlier of the day
in question and the day before the "ex" date with respect to the
issuance or distribution requiring such computation. The term "'ex'
date," when used with respect to any issuance or distribution, means the
first day on which the share of Common Stock trades regular way, without
the right to receive such issuance or distribution, on the exchange or
in the market, as the case may be, used to determine that day's Current
Market Price.
"ISSUE DATE" shall mean August 4, 1997.
"INITIAL DIVIDEND PERIOD" shall mean the period commencing on and
including the Issue Date and ending on and including September 30, 1997.
"INITIAL HOLDER" shall mean Terry Considine.
"INITIAL HOLDER LIMIT" shall mean a number of the Outstanding shares of
Class B Preferred Stock of the Corporation having an Aggregate Value not
in excess of the excess of (x) 15% of the Aggregate Value of all
Outstanding shares of Equity Stock over (y) the Aggregate Value of all
shares of Equity Stock other than Class B Preferred Stock that are
Beneficially Owned by the Initial Holder. From the Issue Date, the
secretary of the Corporation, or such other person as shall be
designated by the Board of Directors, shall upon request make available
to the representative(s) of the Initial Holder and the Board of
Directors, a schedule that sets forth the then-current Initial Holder
Limit applicable to the Initial Holder.
"JUNIOR STOCK" shall have the meaning set forth in paragraph (c) of
Section 8 of this Article.
"LOOK-THROUGH ENTITY" shall mean a Person that is either (i) described in
Section 401(a) of the Code as provided under Section 856(h)(3) of the
Code or (ii) registered under the Investment Company Act of 1940.
"LOOK-THROUGH OWNERSHIP LIMIT" shall mean, for any Look-Through Entity, a
number of the Outstanding shares of Class B Preferred Stock of the
Corporation having an Aggregate Value not in excess of the excess of (x)
15% of the Aggregate Value of all Outstanding shares of Equity Stock over
(y) by the Aggregate Value of all shares of Equity Stock other than
Class B Preferred Stock that are Beneficially Owned by the Look-Through
Entity.
"MARKET PRICE" on any date shall mean, with respect to any share of
Equity Stock, the Closing Price of a share of that class of Equity Stock
on the Trading Day immediately preceding such date. The term "CLOSING
PRICE" on any date shall mean the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing
bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the NYSE or, if the Equity
Stock is not listed or admitted to trading on the NYSE, as reported in
the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which
the Equity Stock is listed or admitted to trading or, if the Equity
Stock is not listed or admitted to trading on any national securities
exchange, the last quoted price, or if not so quoted, the average of the
high bid and low asked prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc.
Automated Quotation System or, if such system is no longer in use, the
principal other automated quotations system that may then be in use or,
if the Equity Stock is not quoted by any such organization, the average
of the closing bid and asked prices as furnished by a professional
market maker making a market in the Equity Stock selected by the Board
of Directors of the Company.
<PAGE>
"NYSE" shall mean the New York Stock Exchange, Inc.
"OUTSTANDING" shall mean issued and outstanding shares of Equity Stock of
the Corporation, PROVIDED that for purposes of the application of the
Ownership Limit, the Look-Through Ownership Limit or the Initial Holder
Limit to any Person, the term "OUTSTANDING" shall be deemed to include
the number of shares of Equity Stock that such Person alone, at that
time, could acquire pursuant to any options or convertible securities.
"OWNERSHIP LIMIT" shall mean, for any Person other than the Initial
Holder or a Look-Through Entity, a number of the Outstanding shares of
Class B Preferred Stock of the Corporation having an Aggregate Value not
in excess of the excess of (x) 8.7% of the Aggregate Value of all
Outstanding shares of Equity Stock over (y) the Aggregate Value of all
shares of Equity Stock other than Class B Preferred Stock that are
Beneficially Owned by the Person.
"OWNERSHIP RESTRICTIONS" shall mean collectively the Ownership Limit as
applied to Persons other than the Initial Holder or Look-Through
Entities, the Initial Holder Limit as applied to the Initial Holder and
the Look-Through Ownership Limit as applied to Look-Through Entities.
"PARITY STOCK" shall have the meaning set forth in paragraph (b) of
Section 8 of this Article.
"PERSON" shall mean (a) for purposes of Section 11 of this Article, (i)
an individual, corporation, partnership, estate, trust (including a
trust qualifying under Section 401(a) or 501(c) of the Code),
association, private foundation within the meaning of Section 509(a) of
the Code, joint stock company or other entity, and (ii) also includes a
group as that term is used for purposes of Section 13(d)(3) of the
Exchange Act and (b) for purposes of the remaining Sections of this
Article, any individual, firm, partnership, corporation or other entity
and shall include any successor (by merger or otherwise) of such entity.
"PROHIBITED TRANSFEREE" has the meaning set forth in Section 11.3(A) of
this Article.
"REIT" shall mean a "real estate investment trust" as defined in Section
856 of the Code.
"SENIOR STOCK" shall have the meaning set forth in paragraph (a) of
Section 8 of this Article.
"SET APART FOR PAYMENT" shall be deemed to include, without any action
other than the following, the recording by the Corporation in its
accounting ledgers of any accounting or bookkeeping entry which
indicates, pursuant to a declaration of dividends or other distribution
by the Board of Directors, the allocation of funds to be so paid on any
series or class of capital stock of the Corporation; provided, however,
that if any funds for any class or series of Junior Stock or any class
or series of Parity Stock are placed in a separate account of the
Corporation or delivered to a disbursing, paying or other similar agent,
then "set apart for payment" with respect to the Class B Preferred Stock
shall mean placing such funds in a separate account or delivering such
funds to a disbursing, paying or other similar agent.
"TRADING DAY", as to any securities, shall mean any day on which such
securities are traded on the principal national securities exchange on
which such securities are listed or admitted or, if such securities are
not listed or admitted for trading on any national securities exchange,
the NASDAQ National Market or, if such securities are not listed or
admitted for trading on the NASDAQ National Market, any day other than a
Saturday, a Sunday or a day on which banking institutions in the State
of New York are authorized or obligated by law or executive order to
close.
"TRANSACTION" shall have the meaning set forth in paragraph (e) of
Section 7 of this Article.
"TRANSFER" shall mean any sale, transfer, gift, assignment, devise or
other disposition of a share of Class B Preferred Stock (including (i)
the granting of an option or any series of such options or entering into
any agreement for the sale, transfer or other disposition of Class B
Preferred Stock or (ii) the sale, transfer,
<PAGE>
assignment or other disposition of any securities or rights convertible
into or exchangeable for Class B Preferred Stock), whether voluntary or
involuntary, whether of record or Beneficial Ownership, and whether by
operation of law or otherwise (including, but not limited to, any transfer
of an interest in other entities that results in a change in the
Beneficial Ownership of shares of Class B Preferred Stock). The term
"TRANSFERS" and "TRANSFERRED" shall have correlative meanings.
"TRANSFER AGENT" means such transfer agent as may be designated by the
Board of Directors or their designee as the transfer agent for the Class
B Preferred Stock; provided, that if the Corporation has not designated a
transfer agent then the Corporation shall act as the transfer agent for
the Class B Preferred Stock.
"TRUST" shall mean the trust created pursuant to Section 11.3 of this
Article.
"TRUSTEE" shall mean the Person unaffiliated with either the Corporation
or the Prohibited Transferee that is appointed by the Corporation to
serve as trustee of the Trust.
"VOTING PREFERRED STOCK" shall have the meaning set forth in Section 9 of
this Article.
3. DIVIDENDS.
(a) The holders of Class B Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors out of funds legally
available for that purpose, cumulative dividends payable in cash in an amount
per share of Class B Preferred Stock equal to the greater of (i) the base
dividend of $1.78125 per quarter (the "Base Rate") or (ii) the cash dividends
declared on the number of shares of Common Stock, or portion thereof, into
which a share of Class B Preferred Stock is convertible. The dividends payable
with respect to the Initial Dividend Period shall be determined solely by
reference to the Base Rate. The amount referred to in clause (ii) of this
paragraph (a) with respect to each succeeding Dividend Period shall be
determined as of the applicable Dividend Payment Date by multiplying the number
of shares of Common Stock, or portion thereof calculated to the fourth decimal
point, into which a share of Class B Preferred Stock would be convertible at
the opening of business on such Dividend Payment Date (based on the Conversion
Price then in effect) by the aggregate cash dividends payable or paid for such
Dividend Period in respect of a share of Common Stock outstanding as of the
record date for the payment of dividends on the Common Stock with respect to
such Dividend Period. If (A) the Corporation pays a cash dividend on the
Common Stock after the Dividend Payment Date for the corresponding Dividend
Period and (B) the dividend on the Class B Preferred Stock for such Dividend
Period calculated pursuant to clause (ii) of this paragraph (a), taking into
account the Common Stock dividend referenced in clause (A), exceeds the
dividend previously declared on the Class B Preferred Stock for such Dividend
Period, the Corporation shall pay an additional dividend to the holders of the
Class B Preferred Stock on the date that the Common Stock dividend referenced
in clause (A) is paid, in an amount equal to the difference between the
dividend calculated pursuant to clause (B) and the dividends previously declred
on the Class B Preferred Stock with respect to such Dividend Period. Such
dividends shall be cumulative from the Issue Date, whether or not in any
Dividend Period or Periods such dividends shall be declared or there shall be
funds of the Corporation legally available for the payment of such dividends,
and shall be payable quarterly in arrears on the Dividend Payment Dates,
commencing on the first Dividend Payment Date after the Issue Date. Each such
dividend shall be payable in arrears to the holders of record of the Class B
Preferred Stock, as they appear on the stock records of the Corporation at the
close of business on a record date fixed by the Board of Directors which shall
be not more than 60 days prior to the applicable Dividend Payment Date and,
within such 60 day period, shall be the same date as the record date for the
regular quarterly dividend payable with respect to the Common Stock for the
Dividend Period to which such Dividend Payment Date relates (or, if there is no
such record date for Common Stock, then such date as the Board of Directors may
fix). Accumulated, accrued and unpaid dividends for any past Dividend Periods
may be declared and paid at any time, without reference to any regular Dividend
Payment Date, to holders of record on such date, which date shall not precede
by more than 45 days the payment date thereof, as may be fixed by the Board of
Directors.
Upon a final administrative determination by the Internal Revenue
Service that the Corporation does not qualify as a real estate investment
trust in accordance with Section 856 of the Code, the Base Rate set forth in
(a)(i) will be increased to $3.03125 until such time as the Corporation
regains its status as a real estate investment
<PAGE>
trust; provided, however, that if the Corporation contests its loss of real
estate investment trust status in Federal Court, following its receipt of an
opinion of nationally recognized tax counsel to the effect that there is a
reasonable basis to contest such loss of status, the Base Rate shall not be
increased during the pendency of such judicial proceeding; provided further,
however, that upon a final judicial determination in Federal Tax Court,
Federal District Court or the Federal Claims Court that the Corporation does
not qualify as a real estate investment trust, the Base Rate will be
increased as stated above from the date of such judicial determination.
(b) The amount of dividends payable per share of Class B Preferred
Stock for the Initial Dividend Period, or any other period shorter than a
full Dividend Period, shall be computed ratably on the basis of twelve 30-day
months and a 360-day year. Holders of Class B Preferred Stock shall not be
entitled to any dividends, whether payable in cash, property or stock, in
excess of cumulative dividends, as herein provided, on the Class B Preferred
Stock. No interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on the Class B Preferred Stock
that may be in arrears.
(c) So long as any of the shares of Class B Preferred Stock are
outstanding, except as described in the immediately following sentence, no
dividends shall be declared or paid or set apart for payment by the
Corporation and no other distribution of cash or other property shall be
declared or made directly or indirectly by the Corporation with respect to
any class or series of Parity Stock for any period unless dividends equal to
the full amount of accumulated, accrued and unpaid dividends have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof has been or contemporaneously is set apart for such
payment on the Class B Preferred Stock for all Dividend Periods terminating
on or prior to the Dividend Payment Date with respect to such class or series
of Parity Stock. When dividends are not paid in full or a sum sufficient for
such payment is not set apart, as aforesaid, all dividends declared upon the
Class B Preferred Stock and all dividends declared upon any other class or
series of Parity Stock shall be declared ratably in proportion to the
respective amounts of dividends accumulated, accrued and unpaid on the Class
B Preferred Stock and accumulated, accrued and unpaid on such Parity Stock.
(d) So long as any of the shares of Class B Preferred Stock are
outstanding, no dividends (other than dividends or distributions paid in
shares of or options, warrants or rights to subscribe for or purchase shares
of Junior Stock) shall be declared or paid or set apart for payment by the
Corporation and no other distribution of cash or other property shall be
declared or made directly or indirectly by the Corporation with respect to
any shares of Junior Stock, nor shall any shares of Junior Stock be redeemed,
purchased or otherwise acquired (other than a redemption, purchase or other
acquisition of Common Stock made for purposes of an employee incentive or
benefit plan of the Corporation or any subsidiary) for any consideration (or
any moneys be paid to or made available for a sinking fund for the redemption
of any shares of any such stock) directly or indirectly by the Corporation
(except by conversion into or exchange for Junior Stock), nor shall any other
cash or other property otherwise be paid or distributed to or for the benefit
of any holder of shares of Junior Stock in respect thereof, directly or
indirectly, by the Corporation unless in each case (i) the full cumulative
dividends (including all accumulated, accrued and unpaid dividends) on all
outstanding shares of Class B Preferred Stock and any other Parity Stock of
the Corporation shall have been paid or such dividends have been declared and
set apart for payment for all past Dividend Periods with respect to the Class
B Preferred Stock and all past dividend periods with respect to such Parity
Stock and (ii) sufficient funds shall have been paid or set apart for the
payment of the full dividend for the current Dividend Period with respect to
the Class B Preferred Stock and the current dividend period with respect to
such Parity Stock.
<PAGE>
4. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, before any payment or
distribution of the Corporation (whether capital or surplus) shall be made to
or set apart for the holders of Junior Stock, the holders of shares of Class B
Preferred Stock shall be entitled to receive One Hundred Dollars ($100) per
share of Class B Preferred Stock (the "Liquidation Preference"), plus an amount
equal to all dividends (whether or not earned or declared) accumulated, accrued
and unpaid thereon to the date of final distribution to such holders; but such
holders shall not be entitled to any further payment. Until the holders of the
Class B Preferred Stock have been paid the Liquidation Preference in full, plus
an amount equal to all dividends (whether or not earned or declared)
accumulated, accrued and unpaid thereon to the date of final distribution to
such holders, no payment will be made to any holder of Junior Stock upon the
liquidation, dissolution or winding up of the Corporation. If, upon any
liquidation, dissolution or winding up of the Corporation, the assets of the
Corporation, or proceeds thereof, distributable among the holders of Class B
Preferred Stock shall be insufficient to pay in full the preferential amount
aforesaid and liquidating payments on any other shares of any class or series
of Parity Stock, then such assets, or the proceeds thereof, shall be
distributed among the holders of Class B Preferred Stock and any such other
Parity Stock ratably in the same proportion as the respective amounts that
would be payable on such Class B Preferred Stock and any such other Parity
Stock if all amounts payable thereon were paid in full. For the purposes of
this Section 4, (i) a consolidation or merger of the Corporation with one or
more corporations, (ii) a sale or transfer of all or substantially all of the
Corporation's assets, or (iii) a statutory share exchange shall not be deemed
to be a liquidation, dissolution or winding up, voluntary or involuntar, of the
Corporation.
(b) Upon any liquidation, dissolution or winding up of the
Corporation, after payment shall have been made in full to the holders of
Class B Preferred Stock and any Parity Stock, as provided in this Section 4,
any other series or class or classes of Junior Stock shall, subject to the
respective terms thereof, be entitled to receive any and all assets remaining
to be paid or distributed, and the holders of the Class B Preferred Stock and
any Parity Stock shall not be entitled to share therein.
5. REDEMPTION AT THE OPTION OF THE CORPORATION.
(a) Shares of Class B Preferred Stock shall not be redeemable by
the Corporation prior to August 4, 2002. On and after August 4, 2002, the
Corporation, at its option, may redeem shares of Class B Preferred Stock, in
whole or from time to time in part, at a redemption price payable in cash
equal to 100% of the Liquidation Preference thereof, plus all accrued and
unpaid dividends to the Call Date.
(b) Shares of Class B Preferred Stock shall be redeemed by the
Corporation on the date specified in the notice to holders required under
paragraph (d) of this Section 5 (the "Call Date"). The Call Date shall be
selected by the Corporation, shall be specified in the notice of redemption
and shall be not less than 30 days nor more than 60 days after the date
notice of redemption is sent by the Corporation.
(c) If full cumulative dividends on all outstanding shares of Class
B Preferred Stock and any other class or series of Parity Stock of the
Corporation have not been paid or declared and set apart for payment, no
shares of Class B Preferred Stock may be redeemed unless all outstanding
shares of Class B Preferred Stock are simultaneously redeemed and neither the
Corporation nor any affiliate of the Corporation may purchase or acquire
shares of Class B Preferred Stock, otherwise than pursuant to a purchase or
exchange offer made on the same terms to all holders of shares of Class B
Preferred Stock.
(d) If the Corporation shall redeem shares of Class B Preferred
Stock pursuant to paragraph (a) of this Section 5, notice of such redemption
shall be given to each holder of record of the shares to be redeemed. Such
notice shall be provided by first class mail, postage prepaid, at such
holder's address as the same appears on the stock records of the Corporation.
Neither the failure to mail any notice required by this paragraph (d), nor
any defect therein or in the mailing thereof to any particular holder, shall
affect the sufficiency of the notice or the validity of the proceedings for
redemption with respect to the other holders. Any notice which was mailed in
the manner herein provided shall be conclusively presumed to have been duly
given on the date mailed whether or not the holder receives the notice. Each
such notice shall state, as appropriate: (1) the Call Date; (2) the number of
<PAGE>
shares of Class B Preferred Stock to be redeemed and, if fewer than all such
shares held by such holder are to be redeemed, the number of such shares to be
redeemed from such holder; (3) the place or places at which certificates for
such shares are to be surrendered for cash; and (4) the then-current Conversion
Price. Notice having been mailed as aforesaid, from and after the Call Date
(unless the Corporation shall fail to make available the amount of cash
necessary to effect such redemption), (i) except as otherwise provided herein,
dividends on the shares of Class B Preferred Stock so called for redemption
shall cease to accumulate or accrue on the shares of Class B Preferred Stock
called for redemption (except that, in the case of a Call Date after a dividend
record date and prior to the related Dividend Payment Date, holders of Class B
Preferred Stock on the dividend record date will be entitled on such Dividend
Payment Date to receive the dividend payable on such shares), (ii) said shares
shall no longer be deemed to be outstanding, and (iii) all rights of the
holders thereof as holders of Class B Preferred Stock of the Coporation shall
cease (except the rights to receive the cash payable upon such redemption,
without interest thereon, upon surrender and endorsement of their certificates
if so required and to receive any dividends payable thereon). The
Corporation's obligation to make available the redemption price in accordance
with the preceding sentence shall be deemed fulfilled if, on or before the Call
Date, the Corporation shall deposit with a bank or trust company (which may be
an affiliate of the Corporation) that has, or is an affiliate of a bank or
trust company that has, a capital and surplus of at least $50,000,000, such
amount of cash as is necessary for such redemption, in trust, with irrevocable
instructions that such cash be applied to the redemption of the shares of Class
B Preferred Stock so called for redemption. No interest shall accrue for the
benefit of the holders of shares of Class B Preferred Stock to be redeemed on
any cash so set aside by the Corporation. Subject to applicable escheat laws,
any such cash unclaimed at the end of two years from the Call Date shall revert
to the general funds of the Corporation, after which reversion the holders of
shares of Class B Preferred Stock so called for redemption shall look only to
the general funds of the Corporation for the payment of such cash.
As promptly as practicable after the surrender in accordance with such
notice of the certificates for any such shares of Class B Preferred Stock to be
so redeemed (properly endorsed or assigned for transfer, if the Corporation
shall so require and the notice shall so state), such certificates shall be
exchanged for cash (without interest thereon) for which such shares have been
redeemed in accordance with such notice. If fewer than all the outstanding
shares of Class B Preferred Stock are to be redeemed, shares to be redeemed
shall be selected by the Corporation from outstanding shares of Class B
Preferred Stock not previously called for redemption by lot or, with respect to
the number of shares of Class B Preferred Stock held of record by each holder
of such shares, pro rata (as nearly as may be) or by any other method as may be
determined by the Board of Directors in its discretion to be equitable. If
fewer than all the shares of Class B Preferred Stock represented by any
certificate are redeemed, then a new certificate representing the unredeemed
shares shall be issued without cost to the holders thereof.
6. STATUS OF REACQUIRED STOCK.
All shares of Class B Preferred Stock which shall have been issued and
reacquired in any manner by the Corporation (including shares of Class B
Preferred Stock which have been surrendered for conversion into Common Stock)
shall be returned to the status of authorized, but unissued shares of Class B
Preferred Stock.
7. CONVERSION.
At any time on or after August 4, 1998. Holders of shares of Class B
Preferred Stock shall have the right to convert all or a portion of such
shares into shares of Common Stock, as follows:
(a) Subject to and upon compliance with the provisions of this
Section 7, a holder of shares of Class B Preferred Stock shall have the right,
at such holder's option, at any time on or after August 4, 1998 to convert such
shares, in whole or in part, into the number of fully paid and non-assessable
shares of authorized but previously unissued shares of Common Stock per each
share of Class B Preferred Stock obtained by dividing the Liquidation
Preference (excluding any accumulated, accrued and unpaid dividends) per share
of Class B Preferred Stock by the Conversion Price (as in effect at the time
and on the date provided for in the last subparagraph of paragraph (b) of this
Section 7) and by surrendering such shares to be converted, such surrender to
be made in the manner provided in paragraph (b) of this Section 7; provided,
however, that the right to convert shares of Class B Preferred Stock called for
redemption pursuant to Section 5 shall terminate at the close of business on
the Call Date fixed for such redemption, unless the Corporation shall default
in making payment of cash payable upon such
<PAGE>
redemption under Section 5 of this Article.
(b) In order to exercise the conversion right, the holder of each
share of Class B Preferred Stock to be converted shall surrender the
certificate representing such share, duly endorsed or assigned to the
Corporation or in blank, at the office of the Transfer Agent, accompanied by
written notice to the Corporation that the holder thereof elects to convert
such share of Class B Preferred Stock. Unless the shares issuable on
conversion are to be issued in the same name as the name in which such share
of Class B Preferred Stock is registered, each share surrendered for
conversion shall be accompanied by instruments of transfer, in form
satisfactory to the Corporation, duly executed by the holder or such holder's
duly authorized attorney and an amount sufficient to pay any transfer or
similar tax (or evidence reasonably satisfactory to the Corporation
demonstrating that such taxes have been paid).
Holders of shares of Class B Preferred Stock at the close of business on
a dividend payment record date shall be entitled to receive the dividend
payable on such shares on the corresponding Dividend Payment Date
notwithstanding the conversion thereof following such dividend payment record
date and prior to such Dividend Payment Date. Except as provided above, the
Corporation shall make no payment or allowance for unpaid dividends, whether
or not in arrears, on converted shares or for dividends on the shares of
Common Stock issued upon such conversion.
As promptly as practicable after the surrender of certificates for shares
of Class B Preferred Stock as aforesaid, the Corporation shall issue and
shall deliver at such office to such holder, or send on such holder's written
order, a certificate or certificates for the number of full shares of Common
Stock issuable upon the conversion of such shares of Class B Preferred Stock
in accordance with provisions of this Section 7, and any fractional interest
in respect of a share of Common Stock arising upon such conversion shall be
settled as provided in paragraph (c) of this Section 7.
Each conversion shall be deemed to have been effected immediately prior
to the close of business on the date on which the certificates for shares of
Class B Preferred Stock shall have been surrendered and such notice received
by the Corporation as aforesaid, and the Person or Persons in whose name or
names any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares represented thereby at such time on such date
and such conversion shall be at the Conversion Price in effect at such time
on such date unless the stock transfer books of the Corporation shall be
closed on that date, in which event such Person or Persons shall be deemed to
have become such holder or holders of record at the close of business on the
next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date on which
such shares shall have been surrendered and such notice received by the
Corporation. If the dividend payment record date for the Class B Preferred
Stock and Common Stock do not coincide, and the preceding sentence does not
operate to ensure that a holder of shares of Class B Preferred Stock whose
shares are converted into Common Stock does not receive dividends on both the
shares of Class B Preferred Stock and the Common Stock into which such shares
are converted for the same Dividend Period, then notwithstanding anything
herein to the contrary, it is the intent, and the Transfer Agent is
authorized to ensure that no conversion after the earlier of such record
dates will be accepted until after the latter of such record dates.
(c) No fractional share of Common Stock or scrip representing
fractions of a share of Common Stock shall be issued upon conversion of the
shares of Class B Preferred Stock. Instead of any fractional interest in a
share of Common Stock that would otherwise be deliverable upon the conversion
of shares of Class B Preferred Stock, the Corporation shall pay to the holder
of such share an amount in cash based upon the Current Market Price of the
Common Stock on the Trading Day immediately preceding the date of conversion.
If more than one share shall be surrendered for conversion at one time by
the same holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate number of
shares of Class B Preferred Stock so surrendered.
(d) The Conversion Price shall be adjusted from time to time as
follows:
(i) If the Corporation shall after the Issue Date (A) pay a
dividend or make a distribution on its capital stock in shares of Common
Stock, (B) subdivide its outstanding Common Stock into a greater number
<PAGE>
of shares, (C) combine its outstanding Common Stock into a smaller number of
shares or (D) issue any shares of capital stock by reclassification of its
outstanding Common Stock, the Conversion Price in effect at the opening of
business on the day following the date fixed for the determination of
stockholders entitled to receive such dividend or distribution or at the
opening of business on the day following the day on which such subdivision,
combination or reclassification becomes effective, as the case may be, shall be
adjusted so that the holder of any share of Class B Preferred Stock thereafter
surrendered for conversion shall be entitled to receive the number of shares of
Common Stock (or fraction of a share of Common Stock) that such holder would
have owned or have been entitled to receive after the happening of any of the
events described above had such share of Class B Preferred Stock been converted
immediately prior to the record date in the case of a dividend or distribution
or the effective date in the case of a subdivision, combination or
reclassification. An adjustment made pursuant to this paragraph (d)(i) of this
Section 7 shall become effective immediately after the opening of business on
the day next following the record date (except as provided in paragraph (h)
below) in the case of a dividend or distribution and shall become effective
immediately after the opening of business on the day next following the
effective date in the case of a subdivision, combination or reclassification.
(ii) If the Corporation shall issue after the Issue Date
rights, options or warrants to all holders of Common Stock entitling them (for
a period expiring within 45 days after the record date described below in this
paragraph (d)(ii) of this Section 7) to subscribe for or purchase Common Stock
at a price per share less than the Fair Market Value per share of the Common
Stock on the record date for the determination of stockholders entitled to
receive such rights, options or warrants, then the Conversion Price in effect
at the opening of business on the day next following such record date shall be
adjusted to equal the price determined by multiplying (A) the Conversion Price
in effect immediately prior to the opening of business on the day following the
date fixed for such determination by (B) a fraction, the numerator of which
shall be the sum of (X) the number of shares of Common Stock outstanding on the
close of business on the date fixed for such determination and (Y) the number
of shares that could be purchased at such Fair Market Value from the aggregate
proceeds to the Corporation from the exercise of such rights, options or
warrants for Common Stock, and the denominator of which shall be the sum of
(XX) the number of shares of Common Stock outstanding on the close of business
on the date fixed for such determination and (YY) the number of additional
shares of Common Stock offered for subscription or purchase pursuant to such
rights, options or warrants. Such adjustment shall become effective
immediately after the opening of business on the day next following such record
date (except as provided in paragraph (h) below). In determining whether any
rights, options or warrants entitle the holders of Common Stock to subscribe
for or purchase Common Stock at less than such Fair Market Value, there shall
be taken into account any consideration received by the Corporation upon
issuance and upon exercise of such rights, options or warrants, the value of
such consideration, if other than cash, to be determined in good fith by the
Board of Directors.
(iii) If the Corporation shall after the Issue Date make a
distribution on its Common Stock other than in cash or shares of Common Stock
(including any distribution in securities (other than rights, options or
warrants referred to in paragraph (d)(ii) of this Section 7)) (each of the
foregoing being referred to herein as a "distribution"), then the Conversion
Price in effect at the opening of business on the next day following the record
date for determination of stockholders entitled to receive such distribution
shall be adjusted to equal the price determined by multiplying (A) the
Conversion Price in effect immediately prior to the opening of business on the
day following the record date by (B) a fraction, the numerator of which shall
be the difference between (X) the number of shares of Common Stock outstanding
on the close of business on the record date and (Y) the number of shares
determined by dividing (aa) the aggregate value of the property being
distributed by (bb) the Fair Market Value per share of Common Stock on the
record date, and the denominator of which shall be the number of shares of
Common Stock outstanding on the close of business on the record date. Such
adjustment shall become effective immediately after the opening of business on
the day next following such record date (except as provided below). The value
of the property being distributed shall be as determined in good faith by the
Board of Directors; provided, however, if the property being distributed is a
publicly traded security, its value shall be calculated in accordance with the
procedure for calculating the Fair Market Value of a share of Common Stock
(calculated for a period of five consecutive Trading Days commencing on the
twentieth Trading Day after the distribution). Neither the issuance by the
Corporation of rights, options or warrants to subscribe for or purchase
securities of the Corporation nor the exercise thereof shall be deemed a
distribution under this paragraph.
(iv) If after the Issue Date the Corporation shall acquire,
pursuant to an issuer or self tender
<PAGE>
offer, all or any portion of the outstanding Common Stock and such tender offer
involves the payment of consideration per share of Common Stock having a fair
market value (as determined in good faith by the Board of Directors), at the
last time (the "Expiration Time") tenders may be made pursuant to such offer,
that exceeds the Current Market Price per share of Common Stock on the Trading
Day next succeeding the Expiration Time, then the Conversion Price in effect on
the opening of business on the day next succeeding the Expiration Time shall be
adjusted to equal the price determined by multiplying (A) the Conversion Price
in effect immediately prior to the Expiration Time by (B) a fraction, the
numerator of which shall be (X) the number of shares of Common Stock
outstanding (including the shares acquired in the tender offer (the "Acquired
Shares")) immediately prior to the Expiration Time, multiplied by (Y) the
Current Market Price per share of Common Stock on the Trading Day next
succeeding the Expiration Time, and the denominator of which shall be the sum
of (XX) the fair market value (determined as aforesaid) of the aggregate
consideration paid to acquire the Acquired Shares and (YY) the product of (I)
the number of shares of Common Stock outstanding (less any Acquired Shares) at
the Expiration Time, multiplied by (II) the Current Market Price per share of
Common Stock on the Trading Day next succeeding the Expiration Time.
(v) No adjustment in the Conversion Price shall be required
unless such adjustment would require a cumulative increase or decrease of at
least 1% in such price; provided, however, that any adjustments that by reason
of this paragraph (d)(v) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment until made; and provided,
further, that any adjustment shall be required and made in accordance with the
provisions of this Section 7 (other than this paragraph (d)(v)) not later than
such time as may be required in order to preserve the tax-free nature of a
distribution to the holders of shares of Common Stock. Notwithstanding any
other provisions of this Section 7, the Corporation shall not be required to
make any adjustment of the Conversion Price for the issuance of (A) any shares
of Common Stock pursuant to any plan providing for the reinvestment of
dividends or interest payable on securities of the Corporation and the
investment of optional amounts in shares of Common Stock under such plan or (B)
any options, rights or shares of Common Stock pursuant to any stock option,
stock purchase or other stock-based plan maintained by the Corporation. All
calculations under this Section 7 shall be made to the nearest cent (with $.005
being rounded upward) or to the nearest one-tenth of a share (with .05 of a
share being rounded upward), as the case may be. Anything in this paragraph
(d) of this Section 7 to the contrary notwithstanding, the Corporation shall be
entitled, to the extent permitted by law, to make such reductions in the
Conversion Price, in addition to those required by this paragraph (d), as it in
its discretion shall determine to be advisable in order that any stock
dividends, subdivision of shares, reclassification or combination of shares,
distribution of rights or warrants to purchase stock or securities, or a
distribution of other assets (other than cash dividends) hereafter made by the
Corporation to its stockholders shall not be taxable, or if that is not
possible, to diminish any income taxes that are otherwise payable because of
such event.
(e) If the Corporation shall be a party to any transaction (including
without limitation a merger, consolidation, statutory share exchange, issuer or
self tender offer for at least 30% of the shares of Common Stock outstanding,
sale of all or substantially all of the Corporation's assets or
recapitalization of the Common Stock, but excluding any transaction as to which
paragraph (d)(i) of this Section 7 applies) (each of the foregoing being
referred to herein as a "Transaction"), in each case as a result of which
shares of Common Stock shall be converted into the right to receive stock,
securities or other property (including cash or any combination thereof), each
share of Class B Preferred Stock which is not converted into the right to
receive stock, securities or other property in connection with such Transaction
shall thereupon be convertible into the kind and amount of shares of stock,
securities and other property (including cash or any combination thereof)
receivable upon such consummation by a holder of that number of shares of
Common Stock into which one share of Class B Preferred Stock was convertible
immediately prior to such Transaction (without giving effect to any Conversion
Price adjustment pursuant to Section 7(d)(iv) of this Article). The
Corporation shall not be a party to any Transaction unless the terms of such
Transaction are consistent with the provisions of this paragraph (e), and it
shall not consent or agree to the occurrence of any Transaction until the
Corporation has entered into an agreement with the successor or purchasing
entity, as the case may be, for the benefit of the holders of the Class B
Preferred Stock that will contain provisions enabling the holders of the Class
B Preferred Stock that remain outstanding after such Transaction to convert
into the consideration received by holders of Common Stock at the Conversion
Price in effect immediately prior to such Transaction. The provisions of this
paragraph (e) shall similarly apply to successive Transactions.
(f) If:
<PAGE>
(i) the Corporation shall declare a dividend (or any other
distribution) on the Common Stock (other than cash dividends and cash
distributions); or
(ii) the Corporation shall authorize the granting to all
holders of the Common Stock of rights or warrants to subscribe for or
purchase any shares of any class or series of capital stock or any other
rights or warrants; or
(iii) there shall be any reclassification of the outstanding
Common Stock or any consolidation or merger to which the Corporation is a
party and for which approval of any stockholders of the Corporation is
required, or a statutory share exchange, an issuer or self tender offer shall
have been commenced for at least 30% of the outstanding shares of Common
Stock (or an amendment thereto changing the maximum number of shares sought
or the amount or type of consideration being offered therefor shall have been
adopted), or the sale or transfer of all or substantially all of the assets
of the Corporation as an entirety; or
(iv) there shall occur the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation,
then the Corporation shall cause to be filed with the Transfer Agent and shall
cause to be mailed to each holder of shares of Class B Preferred Stock at such
holder's address as shown on the stock records of the Corporation, as promptly
as possible, a notice stating (A) the record date for the payment of such
dividend, distribution or rights or warrants, or, if a record date is not
established, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distribution or rights or warrants are to be
determined or (B) the date on which such reclassification, consolidation,
merger, statutory share exchange, sale, transfer, liquidation, dissolution or
winding up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, statutory share
exchange, sale, transfer, liquidation, dissolution or winding up or (C) the
date on which such tender offer commenced, the date on which such tender offer
is scheduled to expire unless extended, the consideration offered and the other
material terms thereof (or the material terms of any amendment thereto).
Failure to give or receive such notice or any defect therein shall not affect
the legality or validity of the proceedings described in this Section 7.
(g) Whenever the Conversion Price is adjusted as herein provided,
the Corporation shall promptly file with the Transfer Agent an officer's
certificate setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment which
certificate shall be conclusive evidence of the correctness of such
adjustment absent manifest error. Promptly after delivery of such
certificate, the Corporation shall prepare a notice of such adjustment of the
Conversion Price setting forth the adjusted Conversion Price and the
effective date such adjustment becomes effective and shall mail such notice
of such adjustment of the Conversion Price to each holder of shares of Class
B Preferred Stock at such holder's last address as shown on the stock records
of the Corporation.
(h) In any case in which paragraph (d) of this Section 7 provides
that an adjustment shall become effective on the day next following the
record date for an event, the Corporation may defer until the occurrence of
such event (A) issuing to the holder of any share of Class B Preferred Stock
converted after such record date and before the occurrence of such event the
additional Common Stock issuable upon such conversion by reason of the
adjustment required by such event over and above the Common Stock issuable
upon such conversion before giving effect to such adjustment and (B) paying
to such holder any amount of cash in lieu of any fraction pursuant to
paragraph (c) of this Section 7.
(i) There shall be no adjustment of the Conversion Price in case of
the issuance of any capital stock of the Corporation in a reorganization,
acquisition or other similar transaction except as specifically set forth in
this Section 7.
(j) If the Corporation shall take any action affecting the Common
Stock, other than action described in this Section 7, that in the opinion of
the Board of Directors would materially adversely affect the conversion
rights of the holders of Class B Preferred Stock, the Conversion Price for
the Class B Preferred Stock
<PAGE>
may be adjusted, to the extent permitted by law, in such manner, if any, and
at such time as the Board of Directors, in its sole discretion, may determine
to be equitable under the circumstances.
(k) The Corporation shall at all times reserve and keep available,
free from preemptive rights, out of the aggregate of its authorized but
unissued Common Stock solely for the purpose of effecting conversion of the
Class B Preferred Stock, the full number of shares of Common Stock
deliverable upon the conversion of all outstanding shares of Class B
Preferred Stock not theretofore converted into Common Stock. For purposes of
this paragraph (k), the number of shares of Common Stock that shall be
deliverable upon the conversion of all outstanding shares of Class B
Preferred Stock shall be computed as if at the time of computation all such
outstanding shares were held by a single holder (and without regard to the
Ownership Limit set forth in the Charter of the Corporation).
The Corporation covenants that any shares of Common Stock issued upon
conversion of the shares of Class B Preferred Stock shall be validly issued,
fully paid and nonassessable.
The Corporation shall use its best efforts to list the shares of Common
Stock required to be delivered upon conversion of the shares of Class B
Preferred Stock, prior to such delivery, upon each national securities
exchange, if any, upon which the outstanding shares of Common Stock are
listed at the time of such delivery.
(l) The Corporation will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery
of shares of Common Stock or other securities or property on conversion or
redemption of shares of Class B Preferred Stock pursuant hereto; provided,
however, that the Corporation shall not be required to pay any tax that may
be payable in respect of any transfer involved in the issue or delivery of
shares of Common Stock or other securities or property in a name other than
that of the holder of the shares of Class B Preferred Stock to be converted
or redeemed, and no such issue or delivery shall be made unless and until the
Person requesting such issue or delivery has paid to the Corporation the
amount of any such tax or established, to the reasonable satisfaction of the
Corporation, that such tax has been paid.
(m) In addition to any other adjustment required hereby, to the
extent permitted by law, the Corporation from time to time may decrease the
Conversion Price by any amount, permanently or for a period of at least
twenty Business Days, if the decrease is irrevocable during the period.
(n) Notwithstanding anything to the contrary contained in this
Section 7, conversion of Class B Preferred Stock pursuant to this Section 7
shall be permitted only to the extent that such conversion would not result
in a violation of the Ownership Restrictions (as defined in the Charter),
after taking into account any waiver of such limitation granted to any holder
of the shares of Class B Preferred Stock.
8. RANKING.
Any class or series of capital stock of the Corporation shall be deemed
to rank:
(a) prior or senior to the Class B Preferred Stock, as to the
payment of dividends and as to distribution of assets upon liquidation,
dissolution or winding up, if the holders of such class or series shall be
entitled to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in preference or
priority to the holders of Class B Preferred Stock ("Senior Stock");
(b) on a parity with the Class B Preferred Stock, as to the payment
of dividends and as to distribution of assets upon liquidation, dissolution
or winding up, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share thereof be different from those of
the Class B Preferred Stock, if the holders of such class of stock or series
and the Class B Preferred Stock shall be entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding up in
proportion to their respective amounts of accrued and unpaid dividends per
share or liquidation preferences, without preference or priority one over the
other ("Parity Stock"); and
(c) junior to the Class B Preferred Stock, as to the payment of
dividends or as to the distribution
<PAGE>
of assets upon liquidation, dissolution or winding up, if such stock or
series shall be Common Stock or if the holders of Class B Preferred Stock
shall be entitled to receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in preference or
priority to the holders of shares of such class or series ("Junior Stock").
9. VOTING.
(a) If and whenever (i) six quarterly dividends (whether or not
consecutive) payable on the Class B Preferred Stock or any series or class of
Parity Stock shall be in arrears (which shall, with respect to any such
quarterly dividend, mean that any such dividend has not been paid in full),
whether or not earned or declared, or (ii) for two consecutive quarterly
dividend periods the Corporation fails to pay dividends on the Common Stock in
an amount per share at least equal to $0.4625 (subject to adjustment consistent
with any adjustment of the Conversion Price pursuant to Section 7(d) of this
Article) (the "Base Common Stock Dividend") the number of directors then
constituting the Board of Directors shall be increased by two (in the case of
an arrearage in dividends described in clause (i)) or one additional director
(in the case of an arrearage in dividends described in clause (ii)) (in each
case if not already increased by reason of similar types of provisions with
respect to Voting Preferred Stock (as defined below)) and the holders of shares
of Class B Preferred Stock, together with the holders of shares of every other
series or class of Parity Stock (any other such series, the "Voting Preferred
Stock"), voting as a single class regardless of series, shall be entitled to
elect the two additional directors (in the case of an arrearage in dividends
described in clause (i)) or one (in the case of an arrearage in dividends
described in clause (ii)) to serve on the Board of Directors at any annual
meeting of stockholders or special meeting held in place thereof, or at a
special meeting of the holders of the Class B Preferred Stock and the Voting
Preferred Stock called as hereinafter provided. Whenever (1) in the case of an
arrearage in dividends described in clause (i), all arrears in dividends on the
Class B Preferred Stock and the Voting Preferred Stock then outstanding shall
have been paid and dividends thereon for the current quarterly dividend period
shall have been paid or declared and set apart for payment, or 2) in the case
of an arrearage in dividends described in clause (ii), the Corporation makes a
quarterly dividend payment on the Common Stock in an amount per share equal to
or exceeding the Base Common Stock Dividend, then the right of the holders of
the Class B Preferred Stock and the Voting Preferred Stock to elect such
additional two directors (in the case of an arrearage in dividends described in
clause (i)) or one additional director (in the case of an arrearage in
dividends described in clause (ii)) shall cease (but subject always to the same
provision for the vesting of such voting rights in the case of any similar
future arrearages), and the terms of office of all Persons elected as directors
by the holders of the Class B Preferred Stock and the Voting Preferred Stock
shall forthwith terminate and the number of directors constituting the Board of
Directors shall be reduced accordingly. At any time after such voting power
shall have been so vested in the holders of Class B Preferred Stock and the
Voting Preferred Stock, if applicable, the Secretary of the Corporation may,
and upon the written request of any holder of Class B Preferred Stock
(addressed to the Secretary at the principal office of the Corporation) shall,
call a special meeting of the holders of the Class B Preferred Stock and of the
Voting Preferred Stock for the election of the two directors (in the case of an
arrearage in dividends described in clause (i)) or one director (in the case of
an arrearage in dividends described in clause (ii)) to be elected by them as
herein provided, such call to be made by notice similar to that provided in the
Bylaws of the Corporation for a special meeting of the stockholders or as
required by law. If any such special meeting required to be called as above
provided shall not be called by the Secretary within 20 days after receipt of
any such request, then any holder of Class B Preferred Stock may call such
meeting, upon the notice above provided, and for that purpose shall have access
to the stock books ofthe Corporation. The directors or director elected at any
such special meeting shall hold office until the next annual meeting of the
stockholders or special meeting held in lieu thereof if such office shall not
have previously terminated as above provided. If any vacancy shall occur among
the directors elected by the holders of the Class B Preferred Stock and the
Voting Preferred Stock, a successor shall be elected by the Board of Directors,
upon the nomination of the then-remaining director elected by the holders of
the Class B Preferred Stock and the Voting Preferred Stock or the successor of
such remaining director, to serve until the next annual meeting of the
stockholders or special meeting held in place thereof if such office shall not
have previously terminated as provided above.
(b) So long as any shares of Class B Preferred Stock are
outstanding, in addition to any other vote or consent of stockholders
required by law or by the Charter of the Corporation, the affirmative vote of
at least 66-2/3% of the votes entitled to be cast by the holders of the Class
B Preferred Stock, given in Person or by proxy, either in writing without a
meeting or by vote at any meeting called for the purpose, shall be necessary
for effecting
<PAGE>
or validating:
(i) Any amendment, alteration or repeal of any of the
provisions of these Articles Supplementary, the Charter or the By-Laws of the
Corporation that materially adversely affects the voting powers, rights or
preferences of the holders of the Class B Preferred Stock; provided, however,
that the amendment of the provisions of the Charter so as to authorize or
create, or to increase the authorized amount of, any Junior Stock or any
shares of any class of Parity Stock shall not be deemed to materially
adversely affect the voting powers, rights or preferences of the holders of
Class B Preferred Stock; or
(ii) The authorization, creation of, the increase in the
authorized amount of, or issuance of , any shares of any class of Senior
Stock or any security convertible into shares of any class of Senior Stock
(whether or not such class of Senior Stock is currently authorized);
provided, however, that no such vote of the holders of Class B Preferred
Stock shall be required if, at or prior to the time when such amendment,
alteration or repeal is to take effect, or when the issuance of any such
prior shares or convertible security is to be made, as the case may be,
provision is made for the redemption of all shares of Class B Preferred Stock
at the time outstanding to the extent such redemption is authorized by
Section 5 of this Article.
For purposes of the foregoing provisions and all other voting rights
under these Articles Supplementary, each share of Class B Preferred Stock
shall have one (1) vote per share, except that when any other class or series
of preferred stock shall have the right to vote with the Class B Preferred
Stock as a single class on any matter, then the Class B Preferred Stock and
such other class or series shall have with respect to such matters one (1)
vote per $100 of stated liquidation preference. Except as otherwise required
by applicable law or as set forth herein, the Class B Preferred Stock shall
not have any relative, participating, optional or other special voting rights
and powers other than as set forth herein, and the consent of the holders
thereof shall not be required for the taking of any corporate action.
10. RECORD HOLDERS.
The Corporation and the Transfer Agent may deem and treat the record
holder of any share of Class B Preferred Stock as the true and lawful owner
thereof for all purposes, and neither the Corporation nor the Transfer Agent
shall be affected by any notice to the contrary.
11.1 RESTRICTIONS ON OWNERSHIP AND TRANSFERS.
(A) LIMITATION ON BENEFICIAL OWNERSHIP. Except as provided in
Section 11.8, from and after the Issue Date, no Person (other than the
Initial Holder or a Look-Through Entity) shall Beneficially Own shares of
Class B Preferred Stock in excess of the Ownership Limit, the Initial Holder
shall not Beneficially Own shares of Class B Preferred Stock in excess of the
Initial Holder Limit and no Look-Through Entity shall Beneficially Own shares
of Class B Preferred Stock in excess of the Look-Through Ownership Limit.
(B) TRANSFERS IN EXCESS OF OWNERSHIP LIMIT. Except as provided
in Section 11.8, from and after the Issue Date (and subject to Section
11.12), any Transfer (whether or not such Transfer is the result of
transactions entered into through the facilities of the NYSE or other
securities exchange or an automated inter-dealer quotation system) that, if
effective, would result in any Person (other than the Initial Holder or a
Look-Through Entity) Beneficially Owning shares of Class B Preferred Stock in
excess of the Ownership Limit shall be void AB INITIO as to the Transfer of
such shares of Class B Preferred Stock that would be otherwise Beneficially
Owned by such Person in excess of the Ownership Limit, and the intended
transferee shall acquire no rights in such shares of Class B Preferred Stock.
(C) TRANSFERS IN EXCESS OF INITIAL HOLDER LIMIT. Except as
provided in Section 11.8, from and after the Issue Date (and subject to
Section 11.12), any Transfer (whether or not such Transfer is the result of
transactions entered into through the facilities of the NYSE or other
securities exchange or an automated inter-dealer quotation system) that, if
effective, would result in the Initial Holder Beneficially Owning shares of
Class B Preferred Stock in excess of the Initial Holder Limit shall be void
AB INITIO as to the Transfer of such shares of Class B Preferred Stock that
would be otherwise Beneficially Owned by the Initial Holder in excess of the
Initial Holder
<PAGE>
limit, and the Initial Holder shall acquire no rights in such shares of Class
B Preferred Stock.
(D) TRANSFERS IN EXCESS OF LOOK-THROUGH OWNERSHIP LIMIT. Except as
provided in Section 11.8 from and after the Issue Date (and subject to
Section 11.12), any Transfer (whether or not such Transfer is the result of
transactions entered into through the facilities of the NYSE or other
securities exchange or an automated inter-dealer quotation system) that, if
effective, would result in any Look-Through Entity Beneficially Owning shares
of Class B Preferred Stock in excess of the Look-Through Ownership limit
shall be void AB INITIO as to the Transfer of such shares of Class B
Preferred Stock that would be otherwise Beneficially Owned by such
Look-Through Entity in excess of the Look-Through Ownership Limit and such
Look-Through Entity shall acquire no rights in such shares of Class B
Preferred Stock.
(E) TRANSFERS RESULTING IN "CLOSELY HELD" STATUS. From and after
the Issue Date, any Transfer that, if effective would result in the
Corporation being "closely held" within the meaning of Section 856(h) of the
Code, or would otherwise result in the Corporation failing to qualify as a
REIT (including, without limitation, a Transfer or other event that would
result in the Corporation owning (directly or constructively) an interest in
a tenant that is described in Section 856(d)(2)(B) of the Code if the income
derived by the Corporation from such tenant would cause the Corporation to
fail to satisfy any of the gross income requirements of Section 856(c) of the
Code) shall be void AB INITIO as to the Transfer of shares of Class B
Preferred Stock that would cause the Corporation (i) to be "closely held"
within the meaning of Section 856(h) of the Code or (ii) otherwise fail to
qualify as a REIT, as the case may be, and the intended transferee shall
acquire no rights in such shares of Class B Preferred Stock.
(F) SEVERABILITY ON VOID TRANSACTIONS. A Transfer of a share of
Class B Preferred Stock that is null and void under Sections 11.1(B), (C),
(D), or (E) of this Article because it would, if effective, result in (i) the
ownership of Class B Preferred Stock in excess of the Initial Holder Limit,
the Ownership Limit, or the Look-Through Ownership Limit, (ii) the
Corporation being "closely held" within the meaning of Section 856(h) of the
Code or (iii) the Corporation otherwise failing to qualify as a REIT, shall
not adversely affect the validity of the Transfer of any other share of Class
B Preferred Stock in the same or any other related transaction.
11.2 REMEDIES FOR BREACH. If the Board of Directors or a committee
thereof shall at any time determine in good faith that a Transfer or other
event has taken place in violation of Section 11.1 of this Article or that a
Person intends to acquire or has attempted to acquire Beneficial Ownership of
any shares of Class B Preferred Stock in violation of Section 11.1 of this
Article (whether or not such violation is intended), the Board of Directors or
a committee thereof shall be empowered to take any action as it deems advisable
to refuse to give effect to or to prevent such Transfer or other event,
including, but not limited to, refusing to give effect to such Transfer or
other event on the books of the Corporation, causing the Corporation to redeem
such shares at the then current Market Price and upon such terms and conditions
as may be specified by the Board of Directors in its sole discretion
(including, but not limited to, by means of the issuance of long-term
indebtedness for the purpose of such redemption), demanding the repayment of
any distributions received in respect of shares of Class B Preferred Stock
acquired in violation of Section 11.1 of this Article or instituting
proceedings to enjoin such Transfer or to rescind such Transfer or attempted
Transfer; PROVIDED, HOWEVER, that any Transfers or attempted Transfers (or in
the case of events other than a Transfer, Beneficial Ownership) in violation of
Section 11.1 of this Article, regardless of any action (or non-action) by the
Board of Directors or such committee, (a) shall be void AB INITIO or (b) shall
automatically result in the transfer described in Section 11.3 of this Article;
PROVIDED, FURTHER, that the provisions of this Section 11.2 shall be subject to
the provisions of Section 11.12 of this Article; PROVIDED, FURTHER, that
neither the Board of Directors nor any committee thereof may exercise such
authority in a manner that interferes with any ownership or transfer of Class B
Preferred Stock that is expressly authorized pursuant to Section 11.8(d) of
this Article.
<PAGE>
11.3. TRANSFER IN TRUST.
(A) ESTABLISHMENT OF TRUST. If, notwithstanding the other
provisions contained in this Article, at any time after the Issue Date there
is a purported Transfer (an "EXCESS TRANSFER") (whether or not such Transfer
is the result of transactions entered into through the facilities of the NYSE
or other securities exchange or an automated inter-dealer quotation system)
or other change in the capital structure of the Corporation (including, but
not limited to, any redemption of Preferred Stock) or other event (including,
but not limited to, any acquisition of any share of Equity Stock) such that
(a) any Person (other than the Initial Holder or a Look-Through Entity) would
Beneficially Own shares of Class B Preferred Stock in excess of the Ownership
Limit, or (b) the Initial Holder would Beneficially Own shares of Class B
Preferred Stock in excess of the Initial Holder Limit, or (c) any Person that
is a Look-Through Entity would Beneficially Own shares of Class B Preferred
Stock in excess of the Look-Through Ownership Limit (in any such event, the
Person, Initial Holder or Look-Through Entity that would Beneficially Own
shares of Class B Preferred Stock in excess of the Ownership Limit, the
Initial Holder Limit or the Look-Through Entity Limit, respectively, is
referred to as a "PROHIBITED TRANSFEREE"), then, except as otherwise provided
in Section 11.8 of this Article, such shares of Class B Preferred Stock in
excess of the Ownership Limit, the Initial Holder Limit or the Look-Through
Ownership Limit, as the case may be, (rounded up to the nearest whole share)
shall be automatically transferred to a Trustee in his capacity as trustee of
a Trust for the exclusive benefit of one or more Charitable Beneficiaries.
Such transfer to the Trustee shall be deemed to be effective as of the close
of business on the business day prior to the Excess Transfer, change in
capital structure or another event giving rise to a potential violation of
the Ownership Limit, the Initial Holder Limit or the Look Through Entity
Ownership Limit.
(B) APPOINTMENT OF TRUSTEE. The Trustee shall be appointed by the
Corporation and shall be a Person unaffiliated with either the Corporation or
any Prohibited Transferee. The Trustee may be an individual or a bank or
trust company duly licensed to conduct a trust business.
(C) STATUS OF SHARES HELD BY THE TRUSTEE. Shares of Class B
Preferred Stock held by the Trustee shall be issued and outstanding shares of
capital stock of the Corporation. Except to the extent provided in Section
11.3(E), the Prohibited Transferee shall have no rights in the Class B
Preferred Stock held by the Trustee, and the Prohibited Transferee shall not
benefit economically from ownership of any shares held in trust by the
Trustee, shall have no rights to dividends and shall not possess any rights
to vote or other rights attributable to the shares held in the Trust.
(D) DIVIDEND AND VOTING RIGHTS. The Trustee shall have all voting
rights and rights to dividends with respect to shares of Class B Preferred
Stock held in the Trust, which rights shall be exercised for the benefit of
the Charitable Beneficiary. Any dividend or distribution paid prior to the
discovery by the Corporation that the shares of Class B Preferred Stock have
been transferred to the Trustee shall be repaid to the Corporation upon
demand, and any dividend or distribution declared but unpaid shall be
rescinded as void AB INITIO with respect to such shares of Class B Preferred
Stock. Any dividends or distributions so disgorged or rescinded shall be
paid over to the Trustee and held in trust for the Charitable Beneficiary.
Any vote cast by a Prohibited Transferee prior to the discovery by the
Corporation that the shares of Class B Preferred Stock have been transferred
to the Trustee will be rescinded as void AB INITIO and shall be recast in
accordance with the desires of the Trustee acting for the benefit of the
Charitable Beneficiary. The owner of the shares at the time of the Excess
Transfer, change in capital structure or other event giving rise to a
potential violation of the Ownership Limit, Initial Holder Limit or
Look-Through Entity Ownership Limit shall be deemed to have given an
irrevocable proxy to the Trustee to vote the shares of Class B Preferred
Stock for the benefit of the Charitable Beneficiary.
(E) RESTRICTIONS ON TRANSFER. The Trustee of the Trust may sell
the shares held in the Trust to a person, designated by the Trustee, whose
ownership of the shares will not violate the Ownership Restrictions. If such
a sale is made, the interest of the Charitable Beneficiary shall terminate
and proceeds of the sale shall be payable to the Prohibited Transferee and to
the Charitable Beneficiary as provided in this Section 11.3(E). The
Prohibited Transferee shall receive the lesser of (1) the price paid by the
Prohibited Transferee for the shares or, if the Prohibited Transferee did not
give value for the shares (through a gift, devise or other transaction), the
Market Price of the shares on the day of the event causing the shares to be
held in the Trust and (2) the price per share received by the Trustee from
the sale or other disposition of the shares held in the Trust. Any proceeds
in excess of the amount payable to the Prohibited Transferee shall be payable
to the Charitable Beneficiary. If any of the transfer
<PAGE>
restrictions set forth in this Section 11.3(E) or any application thereof is
determined in a final judgment to be void, invalid or unenforceable by any
court having jurisdiction over the issue, the Prohibited Transferee may be
deemed, at the option of the Corporation, to have acted as the agent of the
Corporation in acquiring the Class B Preferred Stock as to which such
restrictions would, by their terms, apply, and to hold such Class B Preferred
Stock on behalf of the Corporation.
(F) PURCHASE RIGHT IN STOCK TRANSFERRED TO THE TRUSTEE. Shares of
Class B Preferred Stock transferred to the Trustee shall be deemed to have been
offered for sale to the Corporation, or its designee, at a price per share
equal to the lesser of (i) the price per share in the transaction that resulted
in such transfer to the Trust (or, in the case of a devise or gift, the Market
Price at the time of such devise or gift) and (ii) the Market Price on the date
the Corporation, or its designee, accepts such offer. The Corporation shall
have the right to accept such offer for a period of 90 days after the later of
(i) the date of the Excess Transfer or other event resulting in a transfer to
the Trust and (ii) the date that the Board of Directors determines in good
faith that an Excess Transfer or other event occurred.
(G) DESIGNATION OF CHARITABLE BENEFICIARIES. By written notice to
the Trustee, the Corporation shall designate one or more nonprofit
organizations to be the Charitable Beneficiary of the interest in the Trust
relating to such Prohibited Transferee if (i) the shares of Class B Preferred
Stock held in the Trust would not violate the Ownership Restrictions in the
hands of such Charitable Beneficiary and (ii) each Charitable Beneficiary is
an organization described in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3)
of the Code.
11.4 NOTICE OF RESTRICTED TRANSFER. Any Person that acquires or
attempts to acquire shares of Class B Preferred Stock in violation of Section
11.1 of this Article, or any Person that is a Prohibited Transferee such that
stock is transferred to the Trustee under Section 11.3 of this Article, shall
immediately give written notice to the Corporation of such event and shall
provide to the Corporation such other information as the Corporation may
request in order to determine the effect, if any, of such Transfer or
attempted Transfer or other event on the Corporation's status as a REIT.
Failure to give such notice shall not limit the rights and remedies of the
Board of Directors provided herein in any way.
11.5 OWNERS REQUIRED TO PROVIDE INFORMATION. From and after the Issue
Date certain record and Beneficial Owners and transferees of shares of Class B
Preferred Stock will be required to provide certain information as set out
below.
(A) ANNUAL DISCLOSURE. Every record and Beneficial Owner of more
than 5% (or such other percentage between 0.5% and 5%, as provided in the
applicable regulations adopted under the Code) of the number of Outstanding
shares of Class B Preferred Stock shall, within 30 days after January 1 of
each year, give written notice to the Corporation stating the name and
address of such record or Beneficial Owner, the number of shares of Class B
Preferred Stock Beneficially Owned, and a full description of how such shares
are held. Each such record or Beneficial Owner of Class B Preferred Stock
shall, upon demand by the Corporation, disclose to the Corporation in writing
such additional information with respect to the Beneficial Ownership of the
Class B Preferred Stock as the Board of Directors, in its sole discretion,
deems appropriate or necessary to (i) comply with the provisions of the Code
regarding the qualification of the Corporation as a REIT under the Code and
(ii) ensure compliance with the Ownership Limit, the Initial Holder Limit or
the Look-Through Ownership Limit, as applicable. Each stockholder of record,
including without limitation any Person that holds shares of Class B
Preferred Stock on behalf of a Beneficial Owner, shall take all reasonable
steps to obtain the written notice described in this Section 11.5 from the
Beneficial Owner.
(B) DISCLOSURE AT THE REQUEST OF THE CORPORATION. Any Person that is
a Beneficial Owner of shares of Class B Preferred Stock and any Person
(including the stockholder of record) that is holding shares of Class B
Preferred Stock for a Beneficial Owner, and any proposed transferee of shares,
shall provide such information as the Corporation, in its sole discretion, may
request in order to determine the Corporation's status as a REIT, to comply
with the requirements of any taxing authority or other governmental agency, to
determine any such compliance or to ensure compliance with the Ownership Limit,
the Initial Holder Limit and the Look-Through Ownership Limit, and shall
provide a statement or affidavit to the Corporation setting forth the number of
shares of Class B Preferred Stock already Beneficially Owned by such
stockholder or proposed transferee and any related
<PAGE>
persons specified, which statement or affidavit shall be in the form
prescribed by the Corporation for that purpose.
11.6 REMEDIES NOT LIMITED. Nothing contained in this Article shall
limit the authority of the Board of Directors to take such other action as it
deems necessary or advisable (subject to the provisions of Section 11.12 of
this Article) (i) to protect the Corporation and the interests of its
stockholders in the preservation of the Corporation's status as a REIT and
(ii) to insure compliance with the Ownership Limit, the Initial Holder Limit
and the Look-Through Ownership Limit.
11.7 AMBIGUITY. In the case of an ambiguity in the application of any
of the provisions of Section 11 of this Article, or in the case of an
ambiguity in any definition contained in Section 11 of this Article, the
Board of Directors shall have the power to determine the application of the
provisions of this Article with respect to any situation based on its
reasonable belief, understanding or knowledge of the circumstances.
11.8 EXCEPTIONS. The following exceptions shall apply or may be
established with respect to the limitations of Section 11.1 of this Article.
(A) WAIVER OF OWNERSHIP LIMIT. The Board of Directors, upon
receipt of a ruling from the Internal Revenue Service or an opinion of tax
counsel or other evidence or undertaking acceptable to it, may waive the
application, in whole or in part, of the Ownership Limit to a Person subject
to the Ownership Limit, if such person is not an individual for purposes of
Section 542(a) of the Code and is a corporation, partnership, estate or
trust. In connection with any such exemption, the Board of Directors may
require such representations and undertakings from such Person and may impose
such other conditions as the Board deems necessary, in its sole discretion,
to determine the effect, if any, of the proposed Transfer on the
Corporation's status as a REIT.
(B) PLEDGE BY INITIAL HOLDER. Notwithstanding any other provision
of this Article, the pledge by the Initial Holder of all or any portion of
the Class B Preferred Stock directly owned at any time or from time to time
shall not constitute a violation of Section 11.1 of this Article and the
pledgee shall not be subject to the Ownership Limit with respect to the Class
B Preferred Stock so pledged to it either as a result of the pledge or upon
foreclosure.
(C) UNDERWRITERS. For a period of 270 days following the purchase
of Class B Preferred Stock by an underwriter that (i) is a corporation or a
partnership and (ii) participates in an offering of the Class B Preferred
Stock, such underwriter shall not be subject to the Ownership Limit with
respect to the Class B Preferred Stock purchased by it as a part of or in
connection with such offering and with respect to any Class B Preferred Stock
purchased in connection with market making activities.
11.9 LEGEND. Each certificate for Class B Preferred Stock shall bear
the following legend:
"The shares of Class B Preferred Stock represented by this
certificate are subject to restrictions on transfer. No person may
Beneficially Own shares of Class B Preferred Stock in excess of the
Ownership Restrictions, as applicable, with certain further
restrictions and exceptions set forth in the Corporation's Charter
(including the Articles Supplementary setting forth the terms of the
Class B Preferred Stock). Any Person that attempts to Beneficially
Own shares of Class B Preferred Stock in excess of the applicable
limitation must immediately notify the Corporation. All capitalized
terms in this legend have the meanings ascribed to such terms in the
Corporation's Charter (including the Articles Supplementary setting
forth the terms of the Class B Preferred Stock), as the same may be
amended from time to time, a copy of which, including the restrictions
on transfer, will be sent without charge to each stockholder that so
requests. If the restrictions on transfer are violated, the shares of
Class B Preferred Stock represented hereby will be either (i) void in
accordance with the Certificate or (ii) automatically transferred to a
Trustee of a Trust for the benefit of one or more Charitable
Beneficiaries."
11.10 SEVERABILITY. If any provision of this Article or any application
of any such provision is determined in a final and unappealable judgment to be
void, invalid or unenforceable by any Federal or state court having jurisdiction
over the issues, the validity and enforceability of the remaining provisions
shall not be affected and other
<PAGE>
applications of such provision shall be affected only to the extent necessary
to comply with the determination of such court.
11.11 BOARD OF DIRECTORS DISCRETION. Anything in this Article to the
contrary notwithstanding, the Board of Directors shall be entitled to take or
omit to take such actions as it in its discretion shall determine to be
advisable in order that the Corporation maintain its status as and continue
to qualify as a REIT, including, but not limited to, reducing the Ownership
Limit, the Initial Holder Limit and the Look-Through Ownership Limit in the
event of a change in law.
11.12 SETTLEMENT. Nothing in this Section 11 of this Article shall be
interpreted to preclude the settlement of any transaction entered into
through the facilities of the NYSE or other securities exchange or an
automated inter-dealer quotation system.
* * * * * *
SECOND: The Board of Directors of the Corporation at a meeting or by a
unanimous consent in writing in lieu of a meeting under Section 2-408 of the
Maryland General Corporation Law, as of October 23, 1997, adopted a
resolution that set forth and approved the foregoing restatement of the
Charter.
THIRD: The Charter of the Corporation is not amended by these Articles
of Restatement; PROVIDED, HOWEVER, consistent with Section 2-608(b)(7) of the
Maryland General Corporation Law, the current number and names of directors
are provided in Section 2 of Article VI of the restated Charter of the
Corporation.
FOURTH: References to "these Articles of Amendment and Restatement" have
been retained in Section 4 of Article IV, in Section 4, Section 5, and
Section 7 of Article VI, and in Article VIII of the restated Charter and to
"these Articles Supplementary" have been retained in Section 1 of Article XII
of the restated Charter to conform to the original text of the provisions.
In the context of these Articles of Restatement the term "these Articles of
Amendment and Restatement" should be read as "the Charter" and the term
"these Articles Supplementary" should be read as "this Article".
FIFTH: The sentence "Upon the filing of these Articles of Amendment,
there shall be authorized 750,000 shares and issued and outstanding 650,000
shares of the Class B Common Stock" has been retained in Section 8 of Article
XII of the restated Charter to conform to the original text of the provision.
In the context of these Articles of Restatement the sentence is not
necessary.
SIXTH: The number of shares of Class B Common Stock shown as "750,000"
has been retained in Section 1.1 of Article IV of the restated Charter to
conform to the original text of the provision. As of August 11, 1997 a total
of 325,000 shares of Class B Common Stock have been converted which causes
the number of authorized shares of Class B Common Stock to be reduced from
750,000 shares to 425,000 shares as provided in Sections 6(a) and 8 of
Article XII of the restated Charter.
SEVENTH: The number of shares of Preferred Stock shown as "10,000,000"
has been retained in Section 1.1 of Article IV of the restated Charter to
conform to the original text of the provision. As of August 4, 1997 a total
of 750,000 shares of Preferred Stock were reclassified as Class B Cumulative
Convertible Preferred Stock, par value $.01 per share (the "Class B Preferred
Stock"), which causes the number of authorized shares of Preferred Stock to
be reduced from 10,000,000 shares to 9,250,000 shares and the number of
authorized shares of Class B Preferred Stock to be increased from zero shares
to 750,000 shares as provided in Sections 1 Article XIII of the restated
Charter.
<PAGE>
IN WITNESS WHEREOF, APARTMENT INVESTMENT AND MANAGEMENT COMPANY has
caused these presents to be signed in its name and on its behalf by its
President and witnessed by its Secretary on November 7, 1997.
WITNESS: APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
/s/ LEEANN MOREIN By: /s/ PETER K. KOMPANIEZ
Leeann Morein, Secretary Peter K. Kompaniez, President
THE UNDERSIGNED, President of APARTMENT INVESTMENT AND MANAGEMENT
COMPANY, who executed on behalf of the Corporation the foregoing Articles of
Restatement of which this certificate is made a part, hereby acknowledges in
the name and on behalf of said Corporation the foregoing Articles of
Restatement to be the corporate act of said Corporation and hereby certifies
that to the best of his knowledge, information, and belief the matters and
facts set forth therein with respect to the authorization and approval
thereof are true in all material respects under the penalties of perjury.
/s/ PETER K. KOMPANIEZ
Peter K. Kompaniez, President
<PAGE>
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>
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 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 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>
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 then-current Initial Holder Limit applicable to the
Initial Holder.
7
<PAGE>
"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 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 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>
"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
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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 30-day months
and a 360-day
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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.
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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 Twenty-Five 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.
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(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.
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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").
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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 then-remaining 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 66-2/3% of the votes entitled to be cast by the holders of the Class
C Preferred Stock voting as a single class
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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 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.
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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.
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(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 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 inter-dealer 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 inter-dealer 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
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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 long-term 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 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 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 inter-dealer quotation system)
or other change in the capital structure of the Corporation (including, but
not limited to, any redemption of Preferred Stock) or other event (including,
but not limited to, any acquisition of any share of Equity Stock) such that
(a) any Person (other than the Initial Holder or a Look-Through Entity) would
Beneficially Own shares of Class 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
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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
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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
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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.
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(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 inter-dealer 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.
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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
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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>
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 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 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.
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"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
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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 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 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
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
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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.
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"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.
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"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 30-day
months and a 360-day 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
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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 Twenty-Five 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
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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 Debruary 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
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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
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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");
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(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
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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 66-2/3% 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 By-Laws 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
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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 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 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
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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 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 inter-dealer 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
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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 long-term 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 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
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 inter-dealer quotation system)
or other change in the capital structure of the Corporation (including, but
not limited to, any redemption of Preferred Stock) or other event (including,
but not limited to, any acquisition of any share of Equity Stock) such that
(a) any Person (other than the Initial Holder or a Look-Through Entity) would
Beneficially Own shares of Class 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
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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>
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.
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<PAGE>
(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.
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<PAGE>
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
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<PAGE>
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 inter-dealer 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.
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<PAGE>
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>
SECOND AMENDMENT TO THE SECOND
AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF AIMCO PROPERTIES, L.P.
This SECOND AMENDMENT TO THE SECOND AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF AIMCO PROPERTIES, L.P., dated as of December 22, 1997
(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 December 23, 1997, the Previous General Partner issued
2,400,000 shares of its Class C Cumulative Convertible Preferred Stock, par
value $.01 per share (the "Class C 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 2,400,000 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 C 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 H," 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>
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: Vice President
<PAGE>
EXHIBIT H
PARTNERSHIP UNIT DESIGNATION OF THE
CLASS C 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 C
Partnership Preferred Units," and the number of Partnership Preferred Units
constituting such class shall be Two Million Seven Hundred Sixty Thousand
(2,760,000).
2. DEFINITIONS.
For purposes of the Class C 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 C 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 H. It is the intention of the General Partner that each Class C
Partnership Preferred Unit shall be substantially the economic equivalent
of one share of Class C Preferred Stock.
"CLASS C PREFERRED STOCK" means the Class C 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
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<PAGE>
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 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 C 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 C
Partnership Preferred Units shall be entitled to receive distributions
payable in cash in an amount per Class C Partnership Preferred Unit equal to
the per share dividend payable on the Class C Preferred Stock on such
Distribution Payment Date. Each such distribution shall be payable to the
holders of record of the Class C 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 C Preferred Stock on such
Distribution Payment Date. Holders of Class C Partnership Preferred Units
shall not be entitled to any distributions on the Class C 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
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<PAGE>
the Partnership (whether capital or surplus) shall be made to or set apart
for the holders of Junior Partnership Units, the holders of Class C
Partnership Preferred Units shall be entitled to receive Twenty Five Dollars
($25) per Class C Partnership Preferred Unit (the "Liquidation Preference"),
plus an amount equal to all dividends (whether or not earned) accumulated,
accrued and unpaid on each share of Class C 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 C 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 C 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 C 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 C 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 C 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 C 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 C Partnership Preferred Units and any Parity Partnership
Units shall not be entitled to share therein.
5. REDEMPTION.
Class C 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 C Preferred Stock, the
General Partner may cause the Partnership to redeem an equal number of Class
C Partnership
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<PAGE>
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 C Preferred Stock to the date fixed
for redemption (the "Call Date"), in the manner set forth herein.
(b) If the Partnership shall redeem Class C 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 C 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 C 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 C 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 C Partnership Preferred Units to be redeemed on any cash
set aside by the Partnership.
If fewer than all the outstanding Class C Partnership Preferred Units
are to be redeemed, units to be redeemed shall be selected by the Partnership
from outstanding Class C 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 C 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 C 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
H-4
<PAGE>
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 C Partnership Preferred Units ("Senior Partnership
Units");
(b) on a parity with the Class C 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 C
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 C 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 C 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 C 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 C Partnership Preferred Units for any Fiscal Year (and, if
necessary, subsequent Fiscal Years) to the extent that the holders of Class C
Partnership Preferred Units receive a distribution on any Class C 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 C 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 C
Partnership Preferred Units to the extent that the redemption amounts paid or
payable with respect to the Class C Partnership Preferred Units so redeemed
exceeds the aggregate Capital Contributions (net of liabilities assumed or
H-5
<PAGE>
taken subject to by the Partnership) per Class C Partnership Preferred Unit
allocable to the Class C 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 C
Partnership Preferred Units to the extent that the aggregate Capital
Contributions (net of liabilities assumed or taken subject to by the
Partnership) per Class C Partnership Preferred Unit allocable to the Class C
Partnership Preferred Units so redeemed exceeds the redemption amount paid or
payable with respect to the Class C Partnership Preferred Units so redeemed.
9. RESTRICTIONS ON OWNERSHIP.
The Class C 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 C 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 C Partnership
Preferred Units.
(b) The rights of the General Partner and the Special Limited
Partner, in their capacity as holders of the Class C 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 C
Partnership Preferred Units.
H-6
<PAGE>
THIRD AMENDMENT TO THE SECOND
AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF AIMCO PROPERTIES, L.P.
This THIRD AMENDMENT TO THE SECOND AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF AIMCO PROPERTIES, L.P., dated as of February 19, 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 February 19, 1998, the Previous General Partner issued
4,200,000 shares of its Class D Cumulative Convertible Preferred Stock, par
value $.01 per share (the "Class D 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 4,200,000 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 D 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 I," 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>
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: Vice President
<PAGE>
EXHIBIT I
PARTNERSHIP UNIT DESIGNATION OF THE
CLASS D 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 D
Partnership Preferred Units," and the number of Partnership Preferred Units
constituting such class shall be Four Million Six Hundred Thousand (4,600,000).
2. DEFINITIONS.
For purposes of the Class D 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 D 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 I. It is the intention of the General Partner that each Class D
Partnership Preferred Unit shall be substantially the economic equivalent
of one share of Class D Preferred Stock.
"CLASS D PREFERRED STOCK" means the Class D 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.
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"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 D 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 D
Partnership Preferred Units shall be entitled to receive distributions
payable in cash in an amount per Class D Partnership Preferred Unit equal to
the per share dividend payable on the Class D Preferred Stock on such
Distribution Payment Date. Each such distribution shall be payable to the
holders of record of the Class D 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 D Preferred Stock on such
Distribution Payment Date. Holders of Class D Partnership Preferred Units
shall not be entitled to any distributions on the Class D 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 D Partnership Preferred Units shall be entitled to receive Twenty Five
Dollars ($25) per Class D Partnership
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Preferred Unit (the "Liquidation Preference"), plus an amount equal to all
dividends (whether or not earned) accumulated, accrued and unpaid on each
share of Class D 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 D 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 D
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 D 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 D 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 D 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 D 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 D Partnership Preferred Units and any Parity Partnership
Units shall not be entitled to share therein.
5. REDEMPTION.
Class D 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 D Preferred Stock, the
General Partner may cause the Partnership to redeem an equal number of Class
D 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
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each share of Class D Preferred Stock to the date fixed for redemption (the
"Call Date"), in the manner set forth herein.
(b) If the Partnership shall redeem Class D 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 D 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 D 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 D 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 D Partnership Preferred Units to be redeemed on any cash
set aside by the Partnership.
If fewer than all the outstanding Class D Partnership Preferred Units
are to be redeemed, units to be redeemed shall be selected by the Partnership
from outstanding Class D 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 D 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 D 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
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<PAGE>
winding up, as the case may be, in preference or priority to the holders of
Class D Partnership Preferred Units ("Senior Partnership Units");
(b) on a parity with the Class D 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 D
Partnership Preferred Units if such Class or series of Partnership Units
shall be Class B Partnership Preferred Units, Class C Partnership Preferred
Units or if the holders of such class or series of Partnership Units and the
Class D 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 D 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 D 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 D Partnership Preferred Units for any Fiscal Year (and, if
necessary, subsequent Fiscal Years) to the extent that the holders of Class D
Partnership Preferred Units receive a distribution on any Class D 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 D 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 D
Partnership Preferred Units to the extent that the redemption amounts paid or
payable with respect to the Class D Partnership Preferred Units so redeemed
exceeds the aggregate Capital Contributions (net of liabilities assumed or
taken subject to by the Partnership) per Class D Partnership Preferred Unit
allocable
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to the Class D 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 D Partnership
Preferred Units to the extent that the aggregate Capital Contributions (net
of liabilities assumed or taken subject to by the Partnership) per Class D
Partnership Preferred Unit allocable to the Class D Partnership Preferred
Units so redeemed exceeds the redemption amount paid or payable with respect
to the Class D Partnership Preferred Units so redeemed.
9. RESTRICTIONS ON OWNERSHIP.
The Class D 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 D 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 D Partnership
Preferred Units.
(b) The rights of the General Partner and the Special Limited
Partner, in their capacity as holders of the Class D 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 D
Partnership Preferred Units.
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APARTMENT INVESTMENT AND MANAGEMENT COMPANY
LIST OF SUBSIDIARIES
1. 62ND STREET LTD PARTNERSHIP (ILLINOIS)
2. 107-145 WEST 135TH STREET ASSOCIATES LTD PARTNERSHIP (NEW YORK)
3. 630 EAST LINCOLN AVENUE ASSOCIATES LTD PARTNERSHIP (NEW YORK)
4. 1133 FIFTEENTH STREET FOURTH ASSOCIATES, (MARYLAND)
5. 1133 FIFTEENTH STREET ASSOCIATES (DISTRICT OF COLUMBIA)
6. 2900 VAN NESS ASSOCIATES (DISTRICT OF COLUMBIA)
7. 7400 ROOSEVELT CORP. (MASSACHUSETTS)
8. 7400 ROOSEVELT INVESTORS (PENNSYLVANIA)
9. ABBOTT ASSOCIATES LTD PARTNERSHIP (NEW YORK)
10. ACADEMY GARDENS ASSOCIATES LP (NEW YORK)
11. ADIRONDACK APARTMENTS SARANAC ASSOCIATES LP (NEW YORK)
12. AIMCO ANCHORAGE, L.P.(DELAWARE)
13. AIMCO ARBOR STATION, L.P.(DELAWARE)
14. AIMCO BAY CLUB, L.P. (DELAWARE)
15. AIMCO BAY CLUB II, L.P. (DELAWARE)
16. AIMCO/BEACON HILL, INC. (DELAWARE)
17. AIMCO/BEACON HILL, L.L.C. (DELAWARE)
18. AIMCO/BEACON HILL, L.P. (DELAWARE)
19. AIMCO/BLOSSOMTREE, INC. (DELAWARE)
20. AIMCO/BLOSSOMTREE L.L.C.(DELAWARE)
<PAGE>
21. AIMCO/BLOSSOMTREE L.P. (DELAWARE)
22. AIMCO/BLUFFS, L.L.C. (DELAWARE)
23. AIMCO/BOARDWALK, L.P. (DELAWARE)
24. AIMCO/BOARDWALK FINANCE, L.P. (DELAWARE)
25. AIMCO/BRANDYWINE, L.P. (DELAWARE)
26. AIMCO/BRANT ROCK, INC. (DELAWARE)
27. AIMCO/BRANT ROCK, L.L.C. (DELAWARE)
28. AIMCO/BRANT ROCK, L.P. (DELAWARE)
29. AIMCO BRIDGEWATER, L.P. (DELAWARE)
30. AIMCO CASA ANITA, L.P. (DELAWARE)
31. AIMCO CHESAPEAKE, L.P. (DELAWARE)
32. AIMCO COBBLE CREEK, L.P. (DELAWARE)
33. AIMCO/COLONNADE, INC. (DELAWARE)
34. AIMCO/COLONNADE, L.L.C. (DELAWARE)
35. AIMCO/COLONNADE, L.P. (DELAWARE)
36. AIMCO COPPERFIELD, L.P. (DELAWARE)
37. AIMCO CROWS NEST, L.P. (DELAWARE)
38. AIMCO/EASTON FALLS, L.P. (DELAWARE)
39. AIMCO ELM CREEK, L.P. (DELAWARE)
40. AIMCO FONDREN COURT, L.P. (DELAWARE)
41. AIMCO/FOOTHILLS, INC. (DELAWARE)
42. AIMCO/FOOTHILLS, L.L.C. (DELAWARE)
43. AIMCO/FOOTHILLS, L.P. (DELAWARE)
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44. AIMCO/FOX BAY, INC. (DELAWARE)
45. AIMCO/FOX BAY, L.L.C. (DELAWARE)
46. AIMCO/FOX BAY, L.P. (DELAWARE)
47. AIMCO FOXCHASE, L.P. (DELAWARE)
48. AIMCO/FOXTREE, INC. (DELAWARE)
49. AIMCO/FOXTREE, L.L.C. (DELAWARE)
50. AIMCO/FOXTREE, L.P. (DELAWARE)
51. AIMCO/FREEDOM PLACE, INC. (DELAWARE)
52. AIMCO/FREEDOM PLACE, L.L.C. (DELAWARE)
53. AIMCO/FREEDOM PLACE, L.P. (DELAWARE)
54. AIMCO GALLERIA OFFICE, L.P. (DELAWARE)
55. AIMCO GROUP, L.P. (DELAWARE)
56. AIMCO/GROVETREE, INC. (DELAWARE)
57. AIMCO/GROVETREE, L.L.C. (DELAWARE)
58. AIMCO/GROVETREE, L.P. (DELAWARE)
59. AIMCO HAMPTON HILL, L.P. (DELAWARE)
60. AIMCO HASTINGS GREEN, L.P. (DELAWARE)
61. AIMCO HASTINGS PLACE, L.P. (DELAWARE)
62. AIMCO/HAZELTREE, INC. (DELAWARE)
63. AIMCO/HAZELTREE, L.L.C. (DELAWARE)
64. AIMCO/HAZELTREE, L.P. (DELAWARE)
65. AIMCO/HIDDENTREE, INC. (DELAWARE)
66. AIMCO/HIDDENTREE, L.L.C. (DELAWARE)
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67. AIMCO/HIDDENTREE, L.P. (DELAWARE)
68. AIMCO/HIL, L.L.C. (DELAWARE)
69. AIMCO HOLDINGS, L.P. (DELAWARE)
70. AIMCO HOLDINGS QRS, INC. (DELAWARE)
71. AIMCO/ISLANDTREE, INC. (DELAWARE)
72. AIMCO/ISLANDTREE, L.L.C. (DELAWARE)
73. AIMCO/ISLANDTREE, L.P. (DELAWARE)
74. AIMCO LAKEHAVEN, L.P. (DELAWARE)
75. AIMCO LOS ARBOLES, L.P. (DELAWARE)
76. AIMCO LT, L.P. (DELAWARE)
77. AIMCO/MONTECITO, L.P. (DELAWARE)
78. AIMCO/NHP PARTNERS, L.P. (DELAWARE)
79. AIMCO/NHP PROPERTIES, INC. (DELAWARE)
80. AIMCO/NHP HOLDINGS, INC. (DELAWARE)
81. AIMCO OF FLORIDA, INC. (FLORIDA)
.
82. AIMCO OAK FALLS, L.P. (DELAWARE)
83. AIMCO/OLMOS, INC. (DELAWARE)
84. AIMCO/OLMOS, L.L.C. (DELAWARE)
85. AIMCO/OLMOS, L.P. (DELAWARE)
86. AIMCO/ORCHIDTREE, INC. (DELAWARE)
87. AIMCO/ORCHIDTREE, L.L.C. (DELAWARE)
88. AIMCO/ORCHIDTREE, L.P. (DELAWARE)
89. AIMCO/OTC QRS, INC. (DELAWARE)
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90. AIMCO/OTC, L.L.C. (DELAWARE)
91. AIMCO/OTC, L.P. (DELAWARE)
92. AIMCO/PAM PROPERTIES, L.P. (DELAWARE)
93. AIMCO PARK AT CEDAR LAWN, L.P. (DELAWARE)
94. AIMCO/PENN SQUARE, L.L.C. (DELAWARE)
95. AIMCO PEPPERMILL PLACE, L.P. (DELAWARE)
96. AIMCO/PINE CREEK, INC. (DELAWARE)
97. AIMCO/PINE CREEK, L.L.C. (DELAWARE)
98. AIMCO/PINE CREEK, L.P. (DELAWARE)
99. AIMCO/POLO PARK, INC. (DELAWARE)
100. AIMCO/POLO PARK, L.L.C. (DELAWARE)
.
101. AIMCO/POLO PARK, L.P. (DELAWARE)
102. AIMCO PROPERTIES, L.P. (DELAWARE)
103. AIMCO PROPERTIES FINANCE CORP. (DELAWARE)
104. AIMCO PROPERTIES FINANCE PARTNERSHIP, L.P. (DELAWARE)
105. AIMCO/QUAILTREE, INC. (DELAWARE)
106. AIMCO/QUAILTREE, L.L.C. (DELAWARE)
107. AIMCO/QUAILTREE, L.P. (DELAWARE)
108. AIMCO/RALS, L.P. (DELAWARE)
109. AIMCO RECOVERY FUND, L.P. (DELAWARE)
110. AIMCO RIO CANCION, L.P. (DELAWARE)
111. AIMCO/RIVERCREST, INC. (DELAWARE)
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112. AIMCO/RIVERCREST, L.L.C. (DELAWARE)
113. AIMCO/RIVERCREST, L.P. (DELAWARE)
114. AIMCO/SA, L.L.C. (DELAWARE)
115. AIMCO/SAND CASTLES, INC. (DELAWARE)
116. AIMCO/SAND CASTLES, L.L.C. (DELAWARE)
117. AIMCO/SAND CASTLES, L.P. (DELAWARE)
118. AIMCO/SAND PEBBLE, INC. (DELAWARE)
119. AIMCO/SAND PEBBLE, L.L.C. (DELAWARE)
120. AIMCO/SAND PEBBLE, L.P. (DELAWARE)
121. AIMCO SANDPIPER, L.P. (DELAWARE)
122. AIMCO SAN MARINA, L.P. (DELAWARE)
123. AIMCO SEASIDE POINT, L.P. (DELAWARE)
124. AIMCO/SHADETREE, INC. (DELAWARE)
125. AIMCO/SHADETREE, L.L.C. (DELAWARE)
126. AIMCO/SHADETREE, L.P. (DELAWARE)
127. AIMCO/SHADOW LAKE, INC. (DELAWARE)
128. AIMCO/SHADOW LAKE, L.L.C. (DELAWARE)
129. AIMCO/SHADOW LAKE, L.P. (DELAWARE)
130. AIMCO SIGNATURE POINT, L.P. (DELAWARE)
131. AIMCO/SILKTREE, INC. (DELAWARE)
132. AIMCO/SILKTREE, L.L.C. (DELAWARE)
133. AIMCO/SILKTREE, L.P. (DELAWARE)
134. AIMCO SOMERSET INC. (DELAWARE)
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135. AIMCO STEEPLECHASE, L.P. (DELAWARE)
136. AIMCO/STONEGATE, L.P. (DELAWARE)
137. AIMCO SUNBURY, L.P. (DELAWARE)
138. AIMCO SUNDOWN, L.P. (DELAWARE)
139. AIMCO/SURREY OAKS, INC. (DELAWARE)
140. AIMCO/SURREY OAKS, L.L.C. (DELAWARE)
141. AIMCO/SURREY OAKS, L.P. (DELAWARE)
142. AIMCO/TALL TIMBERS, INC. (DELAWARE)
143. AIMCO/TALL TIMBERS, L.L.C. (DELAWARE)
144. AIMCO/TALL TIMBERS, L.P. (DELAWARE)
145. AIMCO/TEAL POINTE, L.P. (DELAWARE)
146. AIMCO/THE HILLS, INC. (DELAWARE)
147. AIMCO/THE HILLS, L.L.C. (DELAWARE)
148. AIMCO/THE HILLS, L.P. (DELAWARE)
149. AIMCO/TIMBERTREE, INC. (DELAWARE)
150. AIMCO/TIMBERTREE, L.L.C. (DELAWARE)
151. AIMCO/TIMBERTREE, L.P. (DELAWARE)
152. AIMCO TOWNSHIP AT HIGHLANDS, L.P. (DELAWARE)
153. AIMCO TUSTIN, L.P. (DELAWARE)
154. AIMCO/TWINBRIDGE, INC. (DELAWARE)
155. AIMCO/TWINBRIDGE, L.L.C. (DELAWARE)
156. AIMCO/TWINBRIDGE, L.P. (DELAWARE)
157. AIMCO UT, L.P. (DELAWARE)
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158. AIMCO/VILLA LADERA, L.P. (DELAWARE)
159. AIMCO WEST TRAILS, L.P. (DELAWARE)
160. AIMCO WESTCHASE MIDRISE, L.P. (DELAWARE)
161. AIMCO/WICKERTREE, INC. (DELAWARE)
162. AIMCO/WICKERTREE, L.L.C. (DELAWARE)
163. AIMCO/WICKERTREE, L.P. (DELAWARE)
164. AIMCO/WILDFLOWER, INC. (DELAWARE)
165. AIMCO/WILDFLOWER, L.L.C. (DELAWARE)
166. AIMCO/WILDFLOWER, L.P. (DELAWARE)
167. AIMCO/WILLIAMS COVE, L.P. (DELAWARE)
168. AIMCO/WINDSOR LANDING, INC. (DELAWARE)
169. AIMCO/WINDSOR LANDING, L.L.C. (DELAWARE)
170. AIMCO/WINDSOR LANDING, L.P. (DELAWARE)
171. AIMCO/WOODHOLLOW, INC. (DELAWARE)
172. AIMCO/Woodhollow, L.L.C. (DELAWARE)
173. AIMCO/WOODHOLLOW, L.P. (DELAWARE)
174. AIMCO/WOODLANDS-TYLER, L.P. (DELAWARE)
175. AIMCO WOODWAY OFFICES, L.P. (DELAWARE)
176. AIMCO/WYDEWOOD, INC. (DELAWARE)
177. AIMCO/WYDEWOOD, L.L.C. (DELAWARE)
178. AIMCO/WYDEWOOD, L.P. (DELAWARE)
179. AIMCO/YORKTREE, INC. (DELAWARE)
180. AIMCO/YORKTREE, L.L.C. (DELAWARE)
181. AIMCO/YORKTREE, L.P. (DELAWARE)
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182. AIMCO-GP, INC. (DELAWARE)
183. AIMCO-LP, INC. (DELAWARE)
184. AIV PROPERTIES, L.P. (DELAWARE)
185. ALGONQUIN TOWER LTD PARTNERSHIP (CONNECTICUT)
186. ALL HALLOWS ASSOCIATES (DISTRICT OF COLUMBIA)
187. ALLENTOWN TOWNE HOUSE LTD PARTNERSHIP (PENNSYLVANIA)
188. ANCHORAGE PARTNERS (TEXAS)
189. ANDERSON MILL ASSOCIATES (ILLINOIS)
190. ANGLERS MANOR ASSOCIATES LP (ILLINOIS)
191. ANTIOCH APARTMENTS LTD (OHIO)
192. APTEK MANAGEMENT COMPANY LLC (DELAWARE)
193. APTEK MAINTENANCE SERVICES COMPANY LLC (DELAWARE)
194. ARGUS LAND COMPANY, INC. (ALABAMA)
195. ARVADA HOUSE LTD PARTNERSHIP (COLORADO)
196. ASPEN STRATFORD APARTMENTS COMPANY B (NEW JERSEY)
197. ASPEN STRATFORD APARTMENTS COMPANY C (NEW JERSEY)
198. ATHENS ARMS ASSOCIATES (GEORGIA)
199. AUDOBON PARK ASSOCIATES (NEW JERSEY)
200. BAISLEY PARK ASSOCIATES LP (NEW YORK)
201. BALCOR/SPORTVEST-II (ILLINOIS)
202. BALDWIN OAKS ELDERLY LTD (NEW JERSEY)
203. BALDWIN TOWERS ASSOCIATES (PENNSYLVANIA)
204. BASSWOOD MANOR LTD PARTNERSHIP (TEXAS)
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205. BAYVIEW HUNTERS POINT APARTMENTS (DISTRICT OF COLUMBIA)
206. BEAUTIFUL VILLAGE ASSOCIATES LP REDEVELOPMENT COMPANY (NEW YORK)
207. BENJAMIN BANNEKER PLAZA ASSOCIATES (PENNSYLVANIA)
208. BENSALEM GARDENS ASSOCIATES LTD (PENNSYLVANIA)
209. BENSALEM GARDENS ASSOCIATES LTD PARTNERSHIP (PENNSYLVANIA)
210. BENTON SQUARE PARTNERSHIP (MISSOURI)
211. BERKLEY LTD PARTNERSHIP (VIRGINIA)
212. BLOOMSBURG ELDERLY ASSOCIATES (PENNSYLVANIA)
213. BOYNTON SANDPIPER LIMITED PARTNERSHIP (FLORIDA)
214. BRANCHWOOD TOWERS LTD PARTNERSHIP (MARYLAND)
215. BRIARWOOD APARTMENTS (ARKANSAS)
216. BRIDGEWATER PARTNERS, LTD. (TEXAS)
217. BRIGHTWOOD LTD PARTNERSHIP (VIRGINIA)
218. BRIGHTWOOD MANOR ASSOCIATES (PENNSYLVANIA)
219. BRINTON MANOR NO. 1 ASSOCIATES (PENNSYLVANIA)
220. BRINTON TOWERS ASSOCIATES (PENNSYLVANIA)
221. BROAD STREET MANAGEMENT, INC. (OHIO)
222. BROOKSIDE APARTMENTS ASSOCIATES (PENNSYLVANIA)
223. BROOKVIEW APARTMENTS CO LTD (ALABAMA)
224. BRUNSWICK VILLAGE LIMITED PARTNERSHIP (NEW JERSEY)
225. BUCKINGHAM HALL ASSOCIATES LTD PARTNERSHIP (NEW YORK)
226. BUENA VISTA APARTMENTS LTD (OKLAHOMA)
227. BUFFALO VILLAGE ASSOCIATES (NEW YORK)
228. CABELL ASSOCIATES OF LAKEVIEW (VIRGINIA)
10
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229. CALIFORNIA SQUARE II LTD PARTNERSHIP (KENTUCKY)
230. CALIFORNIA SQUARE LTD PARTNERSHIP (KENTUCKY)
231. CAMBRIDGE HEIGHTS APARTMENTS LTD (MISSISSIPPI)
232. CAMPBELL HEIGHTS ASSOCIATES LTD PARTNERSHIP (DISTRICT OF COLUMBIA)
233. CANTERBURY GARDENS ASSOCIATES LTD PARTNERSHIP (MICHIGAN)
234. CAPITAL COMMERCIAL, INC. (MARYLAND)
235. CAPITAL PARK LIMITED PARTNERSHIP (OHIO)
236. CAROLINE ARMS LIMITED PARTNERSHIP (FLORIDA)
237. CAROLINE ASSOCIATES I LTD PARTNERSHIP (MISSOURI)
238. CARTER ASSOCIATES LTD PARTNERSHIP (MASSACHUSETTS)
239. CASA DEL MAR ASSOCIATES LIMITED PARTNERSHIP (FLORIDA)
240. CASA DEL MAR, INC. (FLORIDA)
241. CASTLE ROCK JOINT VENTURE (TEXAS)
242. CB L-2 C ASSOCIATES (FLORIDA)
243. CB L-2 B ASSOCIATES (FLORIDA)
244. CB ASSOCIATES (FLORIDA)
245. CENTER SQUARE ASSOCIATES (PENNSYLVANIA)
246. CENTRAL VILLAGE ASSOCIATES LTD PARTNERSHIP (TEXAS)
247. CENTRAL WOODLAWN LP (ILLINOIS)
248. CHAPEL HOUSING LTD PARTNERSHIP (MARYLAND)
249. CHATEAU GARDENS L.P. (CALIFORNIA)
250. CHEEK ROAD LTD PARTNERSHIP (NORTH CAROLINA)
251. CHESTERFIELD HOUSING ASSOCIATES (SOUTH CAROLINA)
252. CHEYENNE VILLAGE APARTMENTS LTD PARTNERSHIP (TEXAS)
11
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253. CHRISTOPHER COURT HOUSING COMPANY LTD PARTNERSHIP (NEW YORK)
254. CHURCH STREET ASSOCIATES (ILLINOIS)
255. CHURCHVIEW GARDENS LTD PARTNERSHIP (PENNSYLVANIA)
256. CITRUS PARK ASSOCIATES LTD (FLORIDA)
257. CLAY COURTS ASSOCIATES LTD PARTNERSHIP (MARYLAND)
258. CLEAR LAKE LAND PARTNERS, LTD. (TEXAS)
259. CLOVER RIDGE EAST LTD PARTNERSHIP (ILLINOIS)
260. CLUB APARTMENTS ASSOCIATES (DELAWARE)
261. COLLEGE HEIGHTS LTD PARTNERSHIP (MISSISSIPPI)
262. COLLEGE PARK ASSOCIATES (PENNSYLVANIA)
263. COLLEGE PARK ASSOCIATES LTD PARTNERSHIP (DISTRICT OF COLUMBIA)
264. COLONIAL TERRACE I ASSOCIATES (GEORGIA)
265. COLONIAL TERRACE II ASSOCIATES (GEORGIA)
266. COLONY APARTMENTS COMPANY LTD (ALABAMA)
267. COLUMBUS SQUARE ASSOCIATES I LTD PARTNERSHIP (MISSOURI)
268. COLUMBUS SQUARE ASSOCIATES II LTD PARTNERSHIP (MISSOURI)
269. COMMUNITY CIRCLE II LTD (OHIO)
270. COMMUNITY DEVELOPERS OF HIGH POINT LTD PARTNERSHIP (NORTH CAROLINA)
271. COMMUNITY DEVELOPERS OF PRINCEVILLE LTD PARTNERSHIP (NORTH CAROLINA)
272. CONCORD HOUSES ASSOCIATES (MASSACHUSETTS)
273. CONGRESS PARK ASSOCIATES II LTD PARTNERSHIP (DISTRICT OF COLUMBIA)
274. CONGRESS PARK ASSOCIATES LTD PARTNERSHIP (DISTRICT OF COLUMBIA)
12
<PAGE>
275. CONGRESS REALTY CORP. (MASSACHUSETTS)
276. CONGRESS REALTY COMPANIES LIMITED PARTNERSHIP (MASSACHUSETTS)
277. CONGRESS MANAGEMENT COMPANY LIMITED PARTNERSHIP (MASSACHUSETTS)
278. CONNECTICUT COLONY ASSOCIATES (GEORGIA)
279. COPPER CHASE ASSOCIATES (ILLINOIS)
280. COPPER CHASE PARTNERS (ILLINOIS)
281. COPPERFIELD PARTNERS, LTD. (TEXAS)
282. COPPERWOOD II LTD PARTNERSHIP (TEXAS)
283. COPPERWOOD LTD PARTNERSHIP (TEXAS)
284. COTTONWOOD APARTMENTS (CALIFORNIA)
285. COUNTRY VILLA ASSOCIATES (DELAWARE)
286. COUNTRY LAKE ASSOCIATES TWO LIMITED PARTNERSHIP (ILLINOIS)
287. COUNTRYBROOK ASSOCIATES (DELAWARE)
288. COVENTRY SQUARE PARTNERS (TEXAS)
289. CRA INVESTORS, LTD. (TEXAS)
290. CRC CONGRESS REALTY CORP. (MASSACHUSETTS)
291. CRC SCOTCH LANE CORP. (MASSACHUSETTS)
292. CROSLAND HOUSING ASSOCIATES (SOUTH CAROLINA)
293. CROSS CREEK LIMITED PARTNERSHIP (GEORGIA)
294. THE CROSSINGS II LIMITED PARTNERSHIP (GEORGIA)
295. CROWS NEST PARTNERS, LTD. (TEXAS)
296. CUMBERLAND COURT ASSOCIATES (PENNSYLVANIA)
297. CYPRESS LANDING ASSOCIATES (ILLINOIS)
13
<PAGE>
298. CYPRESS LANDING LIMITED PARTNERSHIP (ILLINOIS)
299. DARBY TOWNHOUSES ASSOCIATES (PENNSYLVANIA)
300. DARBYTOWN DEVELOPMENT ASSOCIATES LP (VIRGINIA)
301. DELCAR-S LTD (TEXAS)
302. DELCAR T LTD PARTNERSHIP (TEXAS)
303. DIAKONIA ASSOCIATES (RHODE ISLAND)
304. DIP LIMITED PARTNERSHIP (VIRGINIA)
305. DIP LIMITED PARTNERSHIP II (VIRGINIA)
306. DIP LIMITED PARTNERSHIP III (VIRGINIA)
307. DISCOVERY LIMITED PARTNERSHIP (MASSACHUSETTS)
308. MORAL GARDENS ASSOCIATES (PENNSYLVANIA)
309. DOWNING APARTMENTS (OKLAHOMA)
310. DUKE MANOR ASSOCIATES (PENNSYLVANIA)
311. DUQUESNE ASSOCIATES NO. 1 (PENNSYLVANIA)
312. EAST HAMPTON LTD PARTNERSHIP (GEORGIA)
313. EAST WINDSOR 255, INC. (DELAWARE)
314. EAST WINDSOR 255 LIMITED PARTNERSHIP (DELAWARE)
315. EASTCOURT VILLAGE PARTNERS (ILLINOIS)
316. EASTON TERRACE I ASSOCIATES LTD PARTNERSHIP (TEXAS)
317. EASTON TERRACE II ASSOCIATES LTD PARTNERSHIP (TEXAS)
318. EASTRIDGE APARTMENTS (PENNSYLVANIA)
319. EDGEWOOD II ASSOCIATES (GEORGIA)
320. EDMOND ESTATES LIMITED PARTNERSHIP (ALABAMA)
14
<PAGE>
321. ELDEN LIMITED PARTNERSHIP (VIRGINIA)
322. ELDERLY HOUSING ASSOCIATES LTD PARTNERSHIP (MARYLAND)
323. ELM CREEK LIMITED PARTNERSHIP (ILLINOIS)
324. EMORY GROVE LIMITED PARTNERSHIP (MARYLAND)
325. ENGLISH MANOR PARTNERS (TEXAS)
326. ENGLISH MANOR JOINT VENTURE (TEXAS)
327. ESBRO LIMITED PARTNERSHIP (ARIZONA)
328. EUSTIS APARTMENTS LTD (FLORIDA)
329. EVEREST INVESTORS 5, L.L.C. (CALIFORNIA)
330. FAIRBURN & GORDON ASSOCIATES PHASE I (GEORGIA)
331. FAIRBURN & GORDON ASSOCIATES PHASE II (GEORGIA)
332. FAIRFAX ASSOCIATES (VIRGINIA)
333. FAIRMEADOWS LIMITED PARTNERSHIP (TEXAS)
334. FAIRMONT #1 LTD PARTNERSHIP (DISTRICT OF COLUMBIA)
335. FAIRMONT #2 LTD PARTNERSHIP (DISTRICT OF COLUMBIA)
336. FAIRVIEW HOMES ASSOCIATES (NEW JERSEY)
337. FAIRWOOD ASSOCIATES (DISTRICT OF COLUMBIA)
338. FEDERAL SQUARE VILLAGE LTD PARTNERSHIP (COLORADO)
339. FERNCLIFF LIMITED PARTNERSHIP (VIRGINIA)
340. FIELD ASSOCIATES (RHODE ISLAND)
341. FIRST ALEXANDRIA ASSOCIATES (VIRGINIA)
342. FISHERMAN'S WHARF PARTNERS (TEXAS)
343. FLATBUSH NSA ASSOCIATES LTD PARTNERSHIP (NEW YORK)
15
<PAGE>
344. FMI LIMITED PARTNERSHIP (PENNSYLVANIA)
345. THE FONDREN COURT JOINT VENTURE (TEXAS)
346. FONDREN COURT PARTNERS, LTD. (TEXAS)
347. FOREST APARTMENTS ASSOCIATES (MICHIGAN)
348. FOREST GREEN LIMITED PARTNERSHIP (FLORIDA)
349. FORRESTER GARDENS LTD (ALABAMA)
350. FORST PARK ELDERLY ASSOCIATES LTD PARTNERSHIP (MISSOURI)
351. FORT CARSON ASSOCIATES LTD PARTNERSHIP (COLORADO)
352. FRANKLIN CHANDLER ASSOCIATES (PENNSYLVANIA)
353. FRANKLIN CHAPEL HILL ASSOCIATES (PENNSYLVANIA)
354. FRANKLIN EAGLE ROCK ASSOCIATES (PENNSYLVANIA)
355. FRANKLIN HOUSING ASSOCIATES (PENNSYLVANIA)
356. FRANKLIN HUNTSVILLE ASSOCIATES (PENNSYLVANIA)
357. FRANKLIN NEW YORK AVENUE ASSOCIATES (PENNSYLVANIA)
358. FRANKLIN PARK LTD PARTNERSHIP (PENNSYLVANIA)
359. FRANKLIN PARTNERSHIP LIQUIDATING TRUST (PENNSYLVANIA)
360. FRANKLIN PINE RIDGE ASSOCIATES (PENNSYLVANIA)
361. FRANKLIN PHEASANT RIDGE ASSOCIATES (PENNSYLVANIA)
362. FRANKLIN MOUNTAIN RUN ASSOCIATES LIQUIDATING TRUST (PENNSYLVANIA)
363. FRANKLIN RIDGEWOOD ASSOCIATES (PENNSYLVANIA)
364. FRANKLIN SQUARE SCHOOL ASSOCIATES LTD PARTNERSHIP (MARYLAND)
365. FRANKLIN VICTORIA ASSOCIATES I (TEXAS)
366. FRANKLIN WOODS ASSOCIATES (PENNSYLVANIA)
16
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367. FRIENDSET HOUSING CO LTD PARTNERSHIP (NEW YORK)
368. FRIO HOUSING LTD PARTNERSHIP (TEXAS)
369. FRP LIMITED PARTNERSHIP (PENNSYLVANIA)
370. GALION LIMITED PARTNERSHIP (OHIO)
371. GALLERIA OFFICE PARTNERS, LTD. (TEXAS)
372. GARFIELD HILL ASSOCIATES LTD PARTNERSHIP (DISTRICT OF COLUMBIA)
373. GATE MANOR APARTMENTS LTD (TENNESSEE)
374. GATES MILLS I LIMITED PARTNERSHIP (OHIO)
375. GATEWAY VILLAGE ASSOCIATES (MICHIGAN)
376. GENESEE GARDENS ASSOCIATES LTD PARTNERSHIP (NEW YORK)
377. GLADYS HAMPTON HOMES ASSOCIATES LTD PARTNERSHIP (NEW YORK)
378. GOLDEN APARTMENTS I (NEVADA)
379. GOLDEN APARTMENTS II (NEVADA)
380. GRANDLAND REALTY ASSOCIATES (GEORGIA)
381. GRANDVIEW APARTMENTS (ARKANSAS)
382. GREATER HARTFORD ASSOCIATES (CONNECTICUT)
383. GREATER MT. CALVARY TERRACE LTD (GEORGIA)
384. GREATER RICHMOND COMMUNITY DEVELOPMENT CORP.
#1 & ASSOCIATES (DISTRICT OF COLUMBIA)
385. GREATER RICHMOND COMMUNITY DEVELOPMENT CORP.
#2 & ASSOCIATES (DISTRICT OF COLUMBIA)
386. GREEN MOUNTAIN MANOR LTD PARTNERSHIP (COLORADO)
387. GREENFIELD APARTMENTS LTD PARTNERSHIP (VIRGINIA)
388. GREENFIELD NORTH APARTMENTS LTD PARTNERSHIP (VIRGINIA)
389. GREENTREE ASSOCIATES (ILLINOIS)
17
<PAGE>
390. GRIFFITH LIMITED PARTNERSHIP (CALIFORNIA)
391. GROSVENOR HOUSE ASSOCIATES LIMITED PARTNERSHIP (MASSACHUSETTS)
392. GROVE PARK VILLAS, LTD (FLORIDA)
393. GUILFORD COMPANY, INC. (ALABAMA)
394. GULFWAY LIMITED PARTNERSHIP (TEXAS)
395. GULFGATE PARTNERS, LTD. (TEXAS)
396. GW CARVER LTD (FLORIDA)
397. HAILI ASSOCIATES (HAWAII)
398. HAINES ASSOCIATES LTD PARTNERSHIP (WASHINGTON)
399. HAMILTON HOUSE ASSOCIATES (FLORIDA)
400. HAMILTON HOUSE, INC. (FLORIDA)
401. HAMPTON HILL PARTNERS (TEXAS)
402. HAROLD HOUSE LIMITED PARTNERSHIP (FLORIDA)
403. HARRIS PARK LTD PARTNERSHIP (NEW YORK)
404. HASTINGS PLACE PARTNERS (TEXAS)
405. HASTINGS GREEN PARTNERS, LTD. (TEXAS)
406. HATILLO HOUSING ASSOCIATES (MASSACHUSETTS)
407. HEATHER ASSOCIATES (ILLINOIS)
408. HEIGHTS ASSOCIATES LTD PARTNERSHIP (NEW YORK)
409. HEMINGWAY HOUSING ASSOCIATES LTD PARTNERSHIP (SOOUTH CAROLINA)
410. HERITAGE VILLAGE LIMITED PARTNERSHIP (CONNECTICUT)
411. HICKORY RIDGE ASSOCIATES LTD (FLORIDA)
412. HIGHLAND PARK PARTNERS (ILLINOIS)
413. HIGHLANDS VILLAGE II LTD (FLORIDA)
18
<PAGE>
414. HILLCREST GREEN APARTMENTS LTD (OKLAHOMA)
415. HILLSIDE VILLAGE ASSOCIATES (PENNSYLVANIA)
416. HILLTOP APARTMENTS ASSOCIATES (PENNSYLVANIA)
417. HILLTOP LIMITED PARTNERSHIP (NORTH CAROLINA)
418. HOLLOWS ASSOCIATES LTD PARTNERSHIP (NEW YORK)
419. HOLLYWOOD GARDENS (DISTRICT OF COLUMIBA)
420. HOMECORP INVESTMENTS, LTD. (ALABAMA)
421. HOUSING ASSISTANCE OF MT. DORA LTD (FLORIDA)
422. HOUSING ASSISTANCE OF ORANGE CITY LTD (FLORIDA)
423. HOUSING ASSISTANCE OF VERO BEACH LTD (FLORIDA)
424. HOUSING ASSISTANCE SEBRING LTD (FLORIDA)
425. HOUSTON ARISTOCRAT APARTMENTS LTD PARTNERSHIP (TEXAS)
426. THE HOUSTON RECOVERY FUND (TEXAS)
427. HPI, LTD. (BERMUDA)
428. HRH PROPERTIES, LTD. (OHIO)
429. HUDSON TERRACE ASSOCIATES LTD PARTNERSHIP (NEW YORK)
430. HUNTERS RUN PARTNERS LTD. (GEORGIA)
431. HUNTERS RUN PROPERTIES CORPORATION (GEORGIA)
432. HURBELL I LIMITED PARTNERSHIP (SOUTH CAROLINA)
433. HURBELL II LIMITED PARTNERSHIP (SOUTH CAROLINA)
434. HURBELL III LTD PARTNERSHIP (NORTH CAROLINA)
435. HURBELL IV LIMITED PARTNERSHIP (ALABAMA)
436. IDA TOWER (PENNSYLVANIA)
19
<PAGE>
437. INDIAN VALLEY I LIMITED PARTNERSHIP (OHIO)
438. INDIAN VALLEY II LIMITED PARTNERSHIP (OHIO)
439. INDIAN VALLEY III LIMITED PARTNERSHIP (OHIO)
440. INGRAM SQUARE APARTMENTS LTD (TEXAS)
441. INTOWN WEST ASSOCIATES LTD PARTNERSHIP (CONNECTICUT)
442. IVANHOE ASSOCIATES LIMITED PARTNERSHIP (PENNSYLVANIA)
443. IVANHOE CORPORATION (MASSACHUSETTS)
444. JAMESTOWN VILLAGE ASSOCIATES (PENNSYLVANIA)
445. JERSEY PARK ASSOCIATES LTD PARTNERSHIP (VIRGINIA)
446. JFK ASSOCIATES (NORTH CAROLINA)
447. JOHNSTON SQUARE ASSOCIATES LTD PARTNERSHIP (MARYLAND)
448. JVL 18 ASSOCIATES LTD PARTNERSHIP VERIFIED (MISSOURI)
449. JVL 19 ASSOCIATES LTD PARTNERSHIP VERIFIED (MISSOURI)
450. JVL LIMITED PARTNERSHIP (MISSOURI)
451. JVL SIXTEEN LIMITED PARTNERSHIP (MISSOURI)
452. J.W. ENGLISH SWISS VILLAGE PARTNERS, LTD. (TEXAS)
453. J.W. ENGLISH, CAMELOT APARTMENTS (TEXAS)
454. J.W. ENGLISH, FONDREN COURT PARTNERS (TEXAS)
455. KAPUNA ASSOCIATES (HAWAII)
456. KEMAR TOWNHOUSES ASSOCIATES (DELAWARE)
457. KENNEDY HOMES LIMITED PARTNERSHIP (FLORIDA)
458. KENNETH ARMS (DISTRICT OF COLUMBIA)
459. KEY PARKWAY WEST ASSOCIATES (MASSACHUSETTS)
20
<PAGE>
460. KIMBERLY ASSOCIATES LIMITED PARTNERSHIP (MARYLAND)
461. KIMBERTON APARTMENTS ASSOCIATES LIMITED PARTNERSHIP (DELAWARE)
462. KING BELL ASSOCIATES (OREGON)
463. KNOLLCREST APARTMENTS LTD PARTNERSHIP (TENNESSEE)
464. KOOLAU HOUSING ASSOCIATES (HAWAII)
465. LAKE CROSSING (GEORGIA)
466. LAKEHAVEN ASSOCIATES ONE (ILLINOIS)
467. LAKEHAVEN ASSOCIATES TWO (ILLINOIS)
468. LAKELAND EAST LIMITED PARTNERSHIP (CONNECTICUT)
469. LA SALLE APARTMENTS (CALIFORNIA)
470. LA VISTA ASSOCIATES (DISTRICT OF COLUMBIA)
471. LAFAYETTE MANOR ASSOCIATES LTD PARTNERSHIP (VIRGINIA)
472. LAFAYETTE TOWNE ELDERLY LTD PARTNERSHIP (MISSOURI)
473. LAFAYETTE TOWNE FAMILY LTD PARTNERSHIP (MISSOURI)
474. LAING VILLAGE LTD PARTNERSHIP (SOUTH CAROLINA)
475. LAKE AVENUE ASSOCIATES (OHIO)
476. LAKE FOREST APARTMENTS (PENNSYLVANIA)
477. LAKE WALES VILLAS LTD (FLORIDA)
478. LAKEVIEW ARMS ASSOCIATES LTD PARTNERSHIP (NEW YORK)
479. LAKEVIEW VILLAS LTD (FLORIDA)
480. LAS AMERICAS HOUSING ASSOCIATES (MASSACHUSETTS)
21
<PAGE>
481. LASSEN ASSOCIATES (DISTRICT OF COLUMBIA)
482. LAUREL GARDENS, A PARTNERSHIP IN COMMENDAM (LOUISIANA)
483. LEE HY MANOR ASSOCIATES LTD PARTNERSHIP (VIRGINIA)
484. LEWISBURG ASSOCIATES (WEST VIRGINIA)
485. LEWISBURG ELDERLY ASSOCIATES (PENNSYLVANIA)
486. LINCMAR ASSOCIATES (CALIFORNIA)
487. LINCOLN PARK ASSOCIATES (COLORADO)
488. LINDEN COURT ASSOCIATES LTD PARTNERSHIP (NEW YORK)
489. LOCK HAVEN ELDERLY ASSOCIATES (PENNSYLVANIA)
490. LOCK HAVEN GARDENS ASSOCIATES (PENNSYLVANIA)
491. LORING TOWERS APARTMENTS LIMITED PARTNERSHIP (MINNESOTA)
492. LORING TOWERS ASSOCIATES (MASSACHUSETTS)
493. LOUDOUN HOUSE LTD PARTNERSHIP (VIRGINIA)
494. LUCERNE FLORIDA DEVELOPMENT CORPORATION (FLORIDA)
495. LYNCSTAR INTEGRATED COMMUNICATIONS LLC (COLORADO)
496. LYTLE PLACE COMMUNITY URBAN REDEVELOPMENT CORP. (OHIO)
497. M&P DEVELOPMENT CO. (PENNSYLVANIA)
498. MANZANITA ARMS (DISTRICT OF COLUMBIA)
499. MAPLE HILL ASSOCIATES (PENNSYLVANIA)
500. MAPLE PARK WEST LTD PARTNERSHIP (COLORADO)
501. MARTEN MANOR REALTY ASSOCIATES (INDIANA)
502. MAYFAIR MANOR LIMITED PARTNERSHIP (ARIZONA)
503. MCCOLL HOUSING ASSOCIATES (SOUTH CAROLINA)
22
<PAGE>
504. MEADOWBROOK DRIVE LIMITED PARTNERSHIP (ILLINOIS)
505. MEADOWS LIMITED PARTNERSHIP (ILLINOIS)
506. MEADOWOOD TOWNHOUSES I LIMITED PARTNERSHIP (MARYLAND)
507. MEADOWOOD TOWNHOUSES III LIMITED PARTNERSHIP (MARYLAND)
508. THE MEADOWS APARTMENTS (SOUTH CAROLINA)
509. MEADOWS APARTMENTS LIMITED PARTNERSHIP (NEVADA)
510. MEADOWS EAST APARTMENTS LIMITED PARTNERSHIP (NEVADA)
511. MENLO LIMITED PARTNERSHIP (ARIZONA)
512. MERCED COMMONS (DISTRICT OF COLUMBIA)
513. MERCED COMMONS II (DISTRICT OF COLUMBIA)
514. MIAMI ELDERLY ASSOCIATES LTD PARTNERSHIP (OHIO)
515. MILL STREET ASSOCIATES LTD PARTNERSHIP (ILLINOIS)
516. MILLIKEN APARTMENTS COMPANY (MASSACHUSETTS)
517. MIRAMAR HOUSING ASSOCIATES LTD PARTNERSHIP (DISTRICT OF COLUMBIA)
518. MONACO ARMS ASSOCIATES I (FLORIDA)
519. MONACO ARMS ASSOCIATES II LTD (FLORIDA)
520. MONMOUTH ASSOCIATES LTD PARTNERSHIP (WASHINGTON)
521. MONTBLANC GARDENS APARTMENTS ASSOCIATES (MASSACHUSETTS)
522. MONTBLANC HOUSING ASSOCIATES (MASSACHUSETTS)
523. MONROEVILLE DEVELOPMENT CORPORATION (MASSACHUSETTS)
524. MONUMENT STREET LTD PARTNERSHIP (MARYLAND)
525. MORRISANIA TOWERS HOUSING COMPANY LTD PARTNERSHIP (NEW YORK)
526. MORTON TOWERS EXPANSION, L.P. (DELAWARE)
23
<PAGE>
527. MORTON TOWERS APARTMENTS, L.P. (DELAWARE)
528. MOSS GARDENS LTD, A PARTNERSHIP IN COMMENDAM (LOUISIANA)
529. MRR LTD PARTNERSHIP (ILLINOIS)
530. MURPHY BLAIR ASSOCIATES III ASSOCIATES LTD PARTNERSHIP (MISSOURI)
531. MUSKE LTD PARTNERSHIP (MICHIGAN)
532. NATICK ASSOCIATES (RHODE ISLAND)
533. NATIONAL CORPORATION FOR HOUSING PARTNERSHIPS (A DISTRICT OF COLUMBIA)
534. NATIONAL CORPORATION FOR HOUSING PARTNERSHIPS/DEVELOPMENT CORPORATION
(DISTRICT OF COLUMBIA)
535. NATIONAL HOUSING PARTNERSHIP, L.P. (DISTRICT OF COLUMBIA)
536. NATIONAL HOUSING PARTNERSHIP REALTY FUND IV (MARYLAND)
537. NATIONAL HOUSING PARTNERSHIP REALTY FUND I (MARYLAND)
538. NATIONAL HOUSING PARTNERSHIP REALTY FUND TWO (MARYLAND)
539. NATIONAL HOUSING PARTNERSHIP REALTY FUND III (MARYLAND)
540. NATIONAL HOUSING PARTNERSHIP REALTY FUND IV (MARYLAND)
541. NEIGHBORHOODS OF THE UNIVERSITIES LOCK STREET APARTMENTS COMPANY
(NEW JERSEY)
542. NEIGHBORHOOD REINVESTMENT RESOURCES CORPORATION (ILLINOIS)
543. NEW VISTAS APARTMENTS ASSOCIATES PHASE II (ILLINOIS)
544. NEW VISTAS APARTMENTS LTD PARTNERSHIP (ILLINOIS)
545. NEW WEST 111TH STREET HOUSING COMPANY LTD PARTNERSHIP (NEW YORK)
546. NEW WEST 111TH STREET TWO ASSOCIATES LTD PARTNERSHIP (NEW YORK)
547. NEWTON HILL LIMITED PARTNERSHIP (OHIO)
548. NHP TOWNHOUSE ASSOCIATES LP (DELAWARE)
549. NHP ACQUISITION CORPORATION (DELAWARE)
24
<PAGE>
550. NHP A&R SERVICES, INC. (VIRGINIA)
551. NHP ASSET MANAGEMENT SERVICES, INC. (VIRGINIA)
552. NHP BAYBERRY ASSOCIATES LP (DELAWARE)
553. NHP CAPITAL CORPORATION (VIRGINIA)
554. NHP CARRIAGE ASSOCIATES LP (DELAWARE)
555. NHP CASH MANAGEMENT SERVICES, INC. (VIRGINIA)
556. NHP CENTER ASSOCIATES LP (DELAWARE)
557. NHP CHAPPARAL ASSOCIATES LP (DELAWARE)
558. NHP COACH ASSOCIATES LP (DELAWARE)
559. NHP/CONGRESS MANAGEMENT LIMITED PARTNERSHIP (VIRGINIA)
560. NHP CORNERSTONE ASSOCIATES, LP (DELAWARE)
561. NHP COUNTRY CLUB WOODS ASSOCIATES LP (DELAWARE)
562. NHP DOVE ASSOCIATES, LP (DELAWARE)
563. NHP ELK ASSOCIATES, LP (DELAWARE)
564. NHP EMPLOYEE LIMITED PARTNERSHIP (DISTRICT OF COLUMBIA)
565. NHP EQUITY SERVICES, INC. (VIRGINIA)
566. NHP FINANCIAL SERVICES, LTD. (DELAWARE)
567. NHP FLORIDA MANAGEMENT COMPANY (FLORIDA)
568. NHP FOREST II ASSOCIATES, LP (DELAWARE)
569. NHP FOREST IV ASSOCIATES, LP (DELAWARE)
570. NHP GATES OF ARLINGTON ASSOCIATES LP (DELAWARE)
571. NHP GREEN ASSOCIATES LP (DELAWARE)
572. NHP GREENBRIAR ASSOCIATES LP (DELAWARE)
573. NHP-HDV, INC. (DELAWARE)
25
<PAGE>
574. NHP-HDV Two, Inc. (DELAWARE)
575. NHP-HDV THREE, INC. (DELAWARE)
576. NHP-HDV FOUR, INC. (DELAWARE)
577. NHP-HDV FIVE, INC. (DELAWARE)
578. NHP-HDV SIX, INC. (DELAWARE)
579. NHP-HDV SEVEN, INC. (DELAWARE)
580. NHP-HDV EIGHT, INC. (DELAWARE)
581. NHP-HDV NINE, INC. (DELAWARE)
582. NHP-HDV TEN, INC. (DELAWARE)
583. NHP-HDV ELEVEN, INC. (DELAWARE)
584. NHP-HDV TWELVE, INC. (DELAWARE)
585. NHP-HDV FOURTEEN, INC. (DELAWARE)
586. NHP-HDV FIFTEEN, INC., (VIRGINIA)
587. NHP-HDV SIXTEEN, INC. (DELAWARE)
588. NHP-HDV SEVENTEEN, INC. (DELAWARE)
589. NHP-HDV EIGHTEEN, INC. (DELAWARE)
590. NHP-HDV NINETEEN, INC. (DELAWARE)
591. NHP-HDV 20, INC. (VIRGINIA)
592. NHP-HDV 21, INC. (VIRGINIA)
593. NHP HEATHER I ASSOCIATES LP (DELAWARE)
594. NHP HEATHER II ASSOCIATES, LP (DELAWARE)
595. NHP HESSIAN HILLS ASSOCIATES LP (DELAWARE)
596. NHP-HG, INC. (VIRGINIA)
26
<PAGE>
597. NHP-HG III, INC. (VIRGINIA)
598. NHP-HG FOUR, INC. (VIRGINIA)
599. NHP-HG FIVE, INC. (VIRGINIA)
600. NHP-HG SIX, INC. (VIRGINIA)
601. NHP-HG TEN, INC. (DELAWARE)
602. NHP/HG TEN, L.P. (DELAWARE)
603. NHP-HG ELEVEN, INC. (DELAWARE)
604. NHP-HG TWELVE, INC. (DELAWARE)
605. NHP-HG FOURTEEN, INC. (DELAWARE)
606. NHP-HG 15, INC. (VIRGINIA)
607. NHP-HG 16, INC. (VIRGINIA)
608. NHP-HG 17, INC. (VIRGINIA)
609. NHP-HS, INC. (DELAWARE)
610. NHP-HS TWO, INC. (DELAWARE)
611. NHP-HS THREE, INC. (DELAWARE)
612. NHP-HS FOUR, INC. (DELAWARE)
613. NHP-HS FIVE, INC. (DELAWARE)
614. NHP-HS SIX, INC. (DELAWARE)
615. NHP HIGH RIVER ASSOCIATES LP (DELAWARE)
616. NHP JOINT VENTURES, INC. (DELAWARE)
617. NHP JOINT VENTURES, INC. (DELAWARE)
618. NHP LANE ASSOCIATES LP (DELAWARE)
619. NHP LAUREL III LP (DELAWARE)
27
<PAGE>
620. NHP LONGFELLOW ASSOCIATES, LP (DELAWARE)
621. NHP MAINTENANCE SERVICES COMPANY (DELAWARE)
622. NHP MANAGEMENT COMPANY (DISTRICT OF COLUMBIA)
623. NHP MATTAPONY, LP (DELAWARE)
624. NHP MID-ATLANTIC PARTNERS ONE LIMITED PARTNERSHIP (DELAWARE)
625. NHP MID-ATLANTIC PARTNERS TWO LIMITED PARTNERSHIP (DELAWARE)
626. NHP MID-ATLANTIC PARTNERS THREE LIMITED PARTNERSHIP (DELAWARE)
627. NHP MIDLAND ASSOCIATES LP (DELAWARE)
628. NHP MILL CREEK ASSOCIATES LP (DELAWARE)
629. NHP MULTI-FAMILY CAPITAL CORPORATION (DELAWARE)
630. NHP OAK ASSOCIATES LP (DELAWARE)
631. NHP PARADISE BAY ASSOCIATES, LP (DELAWARE)
632. NHP PARK ASSOCIATES LP (DELAWARE)
633. NHP PARKVIEW ASSOCIATES LP (DELAWARE)
634. NHP PARTNERS TWO LIMITED PARTNERSHIP (DELAWARE)
635. NHP PEMBROKE ASSOCIATES LP (DELAWARE)
636. NHP PINE CREEK MANOR ASSOCIATES, LP (DELAWARE)
637. NHP PORT RICHEY ASSOCIATES LP (DELAWARE)
638. NHP/PRC MANAGEMENT COMPANY LLC (DELAWARE)
639. NHP PUERTO RICO MANAGEMENT COMPANY (DELAWARE)
640. NHP REAL ESTATE CORPORATION (DELAWARE)
641. NHP REAL ESTATE SECURITIES, INC. (DISTRICT OF COLUMBIA)
28
<PAGE>
642. NHP REGAL ASSOCIATES LP (DELAWARE)
643. NHP RIDGEWOOD, INC. (DELAWARE)
644. NHP RIDGEWOOD PARTNERS, L.P. (DELAWARE)
645. NHP SERVICING, INC. (VIRGINIA)
646. NHP SOUTHEAST PARTNERS, L.P. (DELAWARE)
647. NHP SOUTHWARK HA, INC. (VIRGINIA)
648. NHP SOUTHWEST PARTNERS, L.P. (DELAWARE)
649. NHP SPRING LAKE MANOR ASSOCIATES LP (DELAWARE)
650. NHP SUMMER ASSOCIATES LP (DELAWARE)
651. NHP SUMMIT ASSOCIATES LP (DELAWARE)
652. NHP SUNRIDGE ASSOCIATES LP (DELAWARE)
653. NHP TEXAS MANAGEMENT COMPANY (TEXAS)
654. NHP THREE CHOPT WEST ASSOCIATES LP (DELAWARE)
655. NHP TIMBERVIEW ASSOCIATES LP (DELAWARE)
656. NHP TOWN & COUNTRY/COUNTRY PLACE, LP (DELAWARE)
657. NHP TWIN ASSOCIATES LP (DELAWARE)
658. NHP TWIN GATES EAST ASSOCIATES LP (DELAWARE)
659. NHP VILLA ASSOCIATES LP (DELAWARE)
660. NHP WILL-O-WISP ARMS ASSOCIATES LP (DELAWARE)
661. NHP WOODCREEK ASSOCIATES LP (DELAWARE)
662. NORCO ASSOCIATES (PENNSYLVANIA)
663. NORTH LAKE TERRACE ASSOCIATES LTD PARTNERSHIP (TEXAS)
664. NORTH WASHINGTON PARK PARTNERSHIP (ILLINOIS)
29
<PAGE>
665. NORTHGATE VILLAGE LIMITED PARTNERSHIP (GEORGIA)
666. NORTHWEST TERRACE ASSOCIATES LTD PARTNERSHIP (TEXAS)
667. OAK FALLS PARTNERS (TEXAS)
668. OAK HOLLOW SOUTH ASSOCIATES (PENNSYLVANIA)
669. OAK PARK PARTNERSHIP (ILLINOIS)
670. OAK WEST LTD PARTNERSHIP (OKLAHOMA)
671. OAKLAND CITY WEST END ASSOCIATES LTD (GEORGIA)
672. OAKLAND VILLAGE TOWNHOUSE ASSOCIATES LTD PARTNERSHIP (DISTRICT OF
COLUMBIA)
673. OAK PARK PARTNERSHIP (ILLINOIS)
674. OAKWOOD LIMITED PARTNERSHIP (MICHIGAN)
675. OCALA PLACE LTD (FLORIDA)
676. OFA PARTNERS (PENNSYLVANIA)
677. OLD FARM ASSOCIATES (PENNSYLVANIA)
678. OLDE RIVERTOWN VENTURE (INDIANA)
679. ONE LYTLE PLACE (OHIO)
680. ONE WEST CONWAY ASSOCIATES LTD PARTNERSHIP (MARYLAND)
681. ORANGE CITY VILLAS II LTD (FLORIDA)
682. ORANGE VILLAGE ASSOCIATES (PENNSYLVANIA)
683. ORANGEBURG MANOR (SOUTH CAROLINA)
684. ORCHARD MEWS ASSOCIATES LTD PARTNERSHIP (MARYLAND)
685. ORLANDO-LAKE CONWAY LIMITED PARTNERSHIP (CONNECTICUT)
686. OTC APARTMENTS LIMITED PARTNERSHIP (FLORIDA)
687. OVERBROOK PARK LTD (OHIO)
30
<PAGE>
688. OXFORD OAKS INVESTORS LTD PARTNERSHIP (OKLAHOMA)
689. OXFORD PLACE ASSOCIATES (RHODE ISLAND)
690. P.A.C. LAND II LIMITED PARTNERSHIP (OHIO)
691. PAM CONSOLIDATED ASSURANCE COMPANY, LTD. (BERMUDA)
692. PALM HOUSE LTD PARTNERSHIP (OHIO)
693. PALMER SQUARE APARTMENTS ASSOCIATES (ILLINOIS)
694. THE PARK AT CEDAR LAWN, LTD. (TEXAS)
695. PARK AVENUE WEST I LIMITED PARTNERSHIP (OHIO)
696. PARK AVENUE WEST II LIMITED PARTNERSHIP (OHIO)
697. PARK CREEK LTD PARTNERSHIP (COLORADO)
698. PARKVIEW APARTMENTS LTD PARTNERSHIP (SOUTH CAROLINA)
699. PARKVIEW ARMS ASSOCIATES I LTD PARTNERSHIP (OHIO)
700. PARKVIEW ARMS ASSOCIATES II LTD PARTNERSHIP (OHIO)
701. PARKVIEW ASSOCIATES LTD PARTNERSHIP VERIFIED (NEW YORK)
702. PARKWAYS ASSOCIATES LTD PARTNERSHIP (ILLINOIS)
703. PAVILION ASSOCIATES (PENNSYLVANIA)
704. PEBBLEPOINT 55, INC. (DELAWARE)
705. PENDLETON RIVERSIDE APARTMENTS OREGON LTD (OREGON)
706. PENN HALL ASSOCIATES LTD PARTNERSHIP (WASHINGTON)
707. PEPPERMILL PLACE PARTNERS (TEXAS)
708. PEPPERTREE VILLAGE OF AVON PARK LTD (FLORIDA)
709. PERSHING WATERMAN PHASE I LTD PARTNERSHIP (MISSOURI)
710. PITTSFIELD NEIGHBORHOOD ASSOCIATES (MASSACHUSETTS)
31
<PAGE>
711. PLACE ONE LTD PARTNERSHIP (VIRGINIA)
712. PLACID LAKE ASSOCIATES, LTD. (FLORIDA)
713. PLANTATION PARTNERS LTD. (FLORIDA)
714. PLEASANT HILL 287, INC. (DELAWARE)
715. PLEASANT VALLEY APARTMENTS LTD PARTNERSHIP (TEXAS)
716. POINT WEST LIMITED PARTNERSHIP (KANSAS)
717. PORTFOLIO PROPERTIES EIGHT ASSOCIATES (DISTRICT OF COLUMBIA)
718. PORTLAND PLAZA LTD PARTNERSHIP (KENTUCKY)
719. PORTNER PLACE ASSOCIATES LTD PARTNERSHIP (DISTRICT OF COLUMBIA)
720. POST STREET ASSOCIATES LTD PARTNERSHIP (NEW YORK)
721. PREFERRED HOME HEALTH, INC. (FLORIDA)
722. PREFERRED HOME HEALTH LIMITED PARTNERSHIP (FLORIDA)
723. PRIDE GARDENS (MISSISSIPPI)
724. PRINCE STREET TOWERS LTD PARTNERSHIP (PENNSYLVANIA)
725. PROPERTY ASSET BROKERAGE OF FLORIDA (FLORIDA)
726. PROPERTY ASSET MANAGEMENT SERVICES, L.P. (DELAWARE)
727. PROPERTY SERVICES GROUP, INC. (DISTRICT OF COLUMBIA)
728. PROPERTY ASSET MANAGEMENT SERVICES, INC. (DELAWARE)
729. PROPERTY ASSET MANAGEMENT SERVICES-CALIFORNIA, L.L.C. (CALIFORNIA)
730. PUEBLO LTD PARTNERSHIP (COLORADO)
731. P W III ASSOCIATES LTD PARTNERSHIP (MISSOURI)
732. P W IV ASSOCIATES LTD PARTNERSHIP (MISSOURI)
733. P W V ASSOCIATES LTD PARTNERSHIP (MISSOURI)
32
<PAGE>
734. P W VI ASSOCIATES LTD PARTNERSHIP (MISSOURI)
735. QUEENSTOWN APARTMENTS LTD PARTNERSHIP (MISSOURI)
736. RANCHO ARMS (DISTRICT OF COLUMBIA)
737. RANCHO TOWNHOUSE ASSOCIATES (DISTRICT OF COLUMBIA)
738. RANDOL CROSSING INVESTORS (ILLINOIS)
739. RANDOL CROSSING PARTNERS (ILLINOIS)
740. RC ASSOCIATES (ILLINOIS)
741. REGISTRY SQUARE LTD PARTNERSHIP (MISSOURI)
742. RESCORP DEVELOPMENT, INC. (ILLINOIS)
743. RESCORP REALTY, INC. (ILLINOIS)
744. RETIREMENT MANOR ASSOCIATES (CALIFORNIA)
745. RI-15 LIMITED PARTNERSHIP (DISTRICT OF COLUMBIA)
746. RICHLIEU ASSOCIATES (PENNSYLVANIA)
747. RIDGE CARLTON ASSOCIATES (MASSACHUSETTS)
748. RIDGE CARLTON CORP. (MASSACHUSETTS)
749. RIDGECREST ASSOCIATES (ILLINOIS)
750. THE RISK SPECIALIST GROUP, INC. (DISTRICT OF COLUMBIA)
751. RIVER LOFT APARTMENTS LIMITED PARTNERSHIP (PENNSYLVANIA)
752. RIVER LOFT ASSOCIATES (MASSACHUSETTS)
753. RIVER WOODS ASSOCIATES LTD PARTNERSHIP (ILLINOIS)
754. RIVERFRONT APARTMENTS LTD PARTNERSHIP (PENNSYLVANIA)
755. RIVERVIEW II ASSOCIATES LTD PARTNERSHIP (NEW YORK)
756. ROCKWELL LIMITED PARTNERSHIP (TEXAS)
757. RODEO DRIVE LIMITED PARTNERSHIP (CALIFORNIA)
33
<PAGE>
758. THE ROGERS PARK PARTNERSHIP (ILLINOIS)
759. ROLLING MEADOWS OF ADA LTD (OKLAHOMA)
760. ROYAL TOWERS LIMITED PARTNERSHIP (MISSOURI)
761. RUFFIN ROAD ASSOCIATES LTD PARTNERSHIP (VIRGINIA)
762. RUSCOMBE GARDENS LTD PARTNERSHIP (MARYLAND)
763. RUTHERFORD PARK TOWNHOUSES ASSOCIATES (PENNSYLVANIA)
764. S.A. APARTMENTS, LTD. (ALABAMA)
765. SAHF I LIMITED PARTNERSHIP (DELAWARE)
766. SAHF FUNDING CORP. (DELAWARE)
767. SAHF II LIMITED PARTNERSHIP (DELAWARE)
768. SAINT GEORGE VILLAS LTD PARTNERSHIP (SOUTH CAROLINA)
769. SAN JOSE LIMITED PARTNERSHIP (TEXAS)
770. SAN JUAN APARTMENTS (DISTRICT OF COLUMBIA)
771. SAN JUAN DEL CENTRO LIMITED PARTNERSHIP (COLORADO)
772. SANDY SPRINGS ASSOCIATES LTD (GEORGIA)
773. SCOTCH LANE ASSOCIATES (PENNSYLVANIA)
774. SCOTCH ASSOCIATES LIMITED PARTNERSHIP (PENNSYLVANIA)
775. SCOTCH LANE CORP. (MASSACHUSETTS)
776. SEASIDE POINT PARTNERS, LTD. (TEXAS)
777. SEASONS APARTMENTS, L.P. (TEXAS)
778. SEASONS APARTMENTS, L.L.C. (TEXAS)
779. SENCIT JACKSONVILLE COMPANY, LTD (FLORIDA)
34
<PAGE>
780. SENCIT KELLY TOWNSHIP ASSOCIATES (PENNSYLVANIA)
781. SENCIT LEBANON COMPANY (PENNSYLVANIA)
782. SENCIT F/G METROPOLITAN ASSOCIATES (NEW JERSEY)
783. SENCIT NEW YORK AVENUE ASSOCIATES (PENNSYLVANIA)
784. SENCIT SELINSGROVE ASSOCIATES (PENNSYLVANIA)
785. SENCIT TOWNE HOUSE LP (PENNSYLVANIA)
786. SHERMAN TERRACE ASSOCIATES (PENNSYLVANIA)
787. SHOREVIEW APARTMENTS (DISTRICT OF COLUMBIA)
788. SIGNATURE POINT PARTNERS, LTD. (TEXAS)
789. SIGNATURE POINT JOINT VENTURE (TEXAS)
790. SITE 10 COMMUNITY ALLIANCE ASSOCIATES LTD PARTNERSHIP (NEW YORK)
791. SLEEPY HOLLOW APARTMENTS LTD PARTNERSHIP (ARIZONA)
792. SNAP IV LTD PARTNERSHIP (GEORGIA)
793. SNI DEVELOPMENT COMPANY LTD PARTNERSHIP (NEW YORK)
794. SOMERSET UTAH, L.P. (COLORADO)
795. SOUTH HIAWASSEE VILLAGE LTD (FLORIDA)
796. SOUTH MOUNTAIN TERRACE LTD (ARIZONA)
797. SOUTHMONT APARTMENTS (ARKANSAS)
798. SOUTHRIDGE APARTMENTS LIMITED PARTNERSHIP (TEXAS)
799. SOUTHRIDGE ASSOCIATES (ILLINOIS)
800. SOUTHRIDGE INVESTORS (ILLINOIS)
801. SOUTHWARD LIMITED PARTNERSHIP (TEXAS)
802. SPRING MEADOW LIMITED PARTNERSHIP (MASSACHUSETTS)
35
<PAGE>
803. SPRUCE LTD PARTNERSHIP (PENNSYLVANIA)
804. ST. NICHOLAS ASSOCIATES LTD PARTNERSHIP (NEW YORK)
805. STAFFORD APARTMENTS LTD PARTNERSHIP (MARYLAND)
806. STANDART WOODS ASSOCIATES LIMITED PARTNERSHIP (DELAWARE)
807. STIRLING COURT PARTNERS (TEXAS)
808. STOCK ISLAND LTD PARTNERSHIP (FLORIDA)
809. STOREY MANOR ASSOCIATES LTD PARTNERSHIP (ILLINOIS)
810. STRAWBRIDGE SQUARE ASSOCIATES LTD PARTNERSHIP (VIRGINIA)
811. SUMMERSONG TOWNHOUSE LTD PARTNERSHIP (COLORADO)
812. SUNBURY PARTNERS, LTD. (TEXAS)
813. SUNRISE ASSOCIATES LTD PARTNERSHIP (ILLINOIS)
814. SUNSET PLAZA APARTMENTS (MISSISSIPPI)
815. SUSQUEHANNA VIEW LP (PENNSYLVANIA)
816. TAHF FUNDING CORP. (DELAWARE)
817. TAHF II LIMITED PARTNERSHIP (DELAWARE)
818. TARA BRIDGE LIMITED PARTNERSHIP (GEORGIA)
819. TAMARAC PINES II LTD PARTNERSHIP (TEXAS)
820. TAMARAC PINES LTD PARTNERSHIP (TEXAS)
821. TAUNTON GREEN ASSOCIATES (MASSACHUETTS)
822. TAUNTON II ASSOCIATES (MASSACHUSETTS)
823. TEXAS AFFORDABLE HOUSING INVESTMENT FUND I LIMITED PARTNERSHIP (NORTH
CAROLINA)
824. TIFFANY REHAB ASSOCIATES LTD PARTNERSHIP (MISSOURI)
825. TIMBERHILL ASSOCIATES LP (TEXAS)
36
<PAGE>
826. TIMBERLAKE APARTMENTS LTD PARTNERSHIP (TEXAS)
827. TIMUQUANA PARK ASSOCIATES (FLORIDA)
828. TINKER CREEK LIMITED PARTNERSHIP (VIRGINIA)
829. TOMPKINS TERRACE ASSOCIATES (NEW YORK)
830. TOP OF THE WORLD 735, INC. (DELAWARE)
831. TOWN NORTH, A LIMITED PARTNERSHIP (ARKANSAS)
832. TOWNSHIP AT HIGHLANDS PARTNERS, LTD. (TEXAS)
833. TOWNVIEW TOWERS I PARTNERSHIP, LTD. (TENNESSEE)
834. TREESLOPE APARTMENTS LIMITED PARTNERSHIP (SOUTH CAROLINA)
835. TRINITY HILLS VILLAGE APARTMENTS LTD PARTNERSHIP (TENNESSEE)
836. TRINITY TOWERS 14TH STREET ASSOCIATES LTD PARTNERSHIP (DISTRICT OF
COLUMBIA)
837. TUMAST ASSOCIATES (DISTRICT OF COLUMBIA)
838. TWIN GABLES ASSOCIATES LTD PARTNERSHIP
839. TWIN TOWERS ASSOCIATES (CONNECTICUT)
840. TWO BRIDGES ASSOCIATES LTD PARTNERSHIP (NEW YORK)
841. TYEE ASSOCIATES (ARKANSAS)
842. UNITED FRONT HOMES (MASSACHUSETTS)
843. UNITED HANDICAP FEDERATION APARTMENTS ASSOCIATES (MINNESOTA)
844. UNITED HOUSE ASSOCIATES (PENNSYLVANIA)
845. UNITED HOUSING PARTNERS-CUTHBERT LTD (GEORGIA)
846. UNITED HOUSING PARTNERS ELMWOOD LTD (ALABAMA)
847. UNITED HOUSING PARTNERS MORRISTOWN LTD PARTNERSHIP (TENNESSEE)
848. UNITED HOUSING PARTNERS WELCH LTD (WEST VIRGINIA)
849. UNITED HOUSING PARTNERSHIP CARBONDALE LTD (TENNESSEE)
850. UNITED REDEVELOPMENT ASSOCIATES LTD PARTNERSHIP (NEW YORK)
851. UNIVERSITY PLAZA ASSOCIATES (PENNSYLVANIA)
37
<PAGE>
852. URBANIZACION MARIA LOPEZ HOUSING COMPANY LTD PARTNERSHIP (NEW YORK)
853. VANTAGE '78 LTD PARTNERSHIP (NORTH CAROLINA)
854. VERDES DEL ORIENTE (DISTRICT OF COLUMBIA)
855. VILLA DE GUADALUPE ASSOCIATES (DISTRICT OF COLUMBIA)
856. VILLAGE CIRCLE APARTMENTS LTD PARTNERSHIP (TEXAS)
857. VILLAGE GREEN APARTMENTS COMPANY LTD (ALABAMA)
858. VILLAGE GREEN LIMITED PARTNERSHIP (FLORIDA)
859. VINEVILLE TOWERS ASSOCIATES LTD (GEORGIA)
860. VISTAS DE SAN JUAN ASSOCIATES LTD PARTNERSHIP (PUERTO RICO)
861. VISTULA HERITAGE VILLAGE (OHIO)
862. WAICO APARTMENTS ASSOCIATES LTD PARTNERSHIP (WISCONSIN)
863. WAICO PHASE II ASSOCIATES LTD PARTNERSHIP (WISCONSIN)
864. WAIPAHU ASSOCIATES (HAWAII)
865. WALDEN OAKS ASSOCIATES LTD PARTNERSHIP (ILLINOIS)
866. WALMSLEY TERRACE ASSOCIATES LTD PARTNERSHIP (VIRGINIA)
867. WALNUT HILLS ASSOCIATES LTD (OHIO)
868. WALNUT SPRINGS LIMITED PARTNERSHIP (ILLINOIS)
869. WALNUT SPRINGS ASSOCIATES (ILLINOIS)
870. WALTERS/PROPERTY ASSET MANAGEMENT SERVICES, L.P. (DELAWARE)
871. WASH-WEST PROPERTIES (PENNSYLVANIA)
872. WASHINGTON CHINATOWN ASSOCIATES LTD PARTNERSHIP (DISTRICT OF COLUMBIA)
38
<PAGE>
873. WASHINGTON MANOR LTD PARTNERSHIP (TEXAS)
874. WATERMAN LTD PARTNERSHIP (CALIFORNIA)
875. WATERS TOWERS ASSOCIATES LTD PARTNERSHIP (MARYLAND)
876. WEST OAK VILLAGE LIMITED PARTNERSHIP
877. WESTGATE APARTMENTS (GEORGIA)
878. WEST LAKE ARMS LIMITED PARTNERSHIP (DELAWARE)
879. WESTMINSTER LTD PARTNERSHIP (MARYLAND)
880. WEST TRAILS PARTNERS, LTD. (TEXAS)
881. WESTCHASE MIDRISE OFFICE PARTNERS, LTD. (TEXAS)
882. WHITEFIELD PLACE LTD PARTNERSHIP (TEXAS)
883. WIGAR LTD PARTNERSHIP (MISSOURI)
884. WILBUR AND COMPANY, INC. (DELAWARE)
885. WINDSOR APARTMENTS ASSOCIATES LIMITED PARTNERSHIP (DELAWARE)
886. WINDSOR CROSSINGS LIMITED PARTNERSHIP (NEW JERSEY)
887. WINTER PARK ASSOCIATES LP (DELAWARE)
888. WOLLASTON MANOR ASSOCIATES (MASSACHUSETTS)
889. WOODCREST APARTMENTS LTD PARTNERSHIP (TEXAS)
890. WOODHILL ASSOCIATES (ILLINOIS)
891. WOODLAND RIDGE II PARTNERS (ILLINOIS)
892. WOODLAND RIDGE ASSOCIATES (ILLINOIS)
893. WOODMARK LIMITED PARTNERSHIP (VIRGINIA)
894. WOODS MORTGAGE ASSOCIATES (PENNSYLVANIA)
39
<PAGE>
895. WOODSIDE VILLAGE (ARKANSAS)
896. WOODSIDE VILLAS OF ARCADIA LTD (FLORIDA)
897. WOODWAY OFFICE PARTNERS, LTD. (TEXAS)
898. WORCESTER EPISCOPAL HOUSING COMPANY (MASSACHUSETTS)
899. WYNTRE BROOK ASSOCIATES (PENNSYLVANIA)
900. YADKIN ASSOCIATES LTD PARTNERSHIP (NORTH CAROLINA)
40
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Company's Registration
Statement on Form S-3 (No. 333-828), the Company's Registration Statement on
Form S-3 (No. 333-4546), the Company's Registration Statement on Form S-3
(No. 333-8997), the Company's Registration Statement on Form S-3
(No. 333-17431), the Company's Registration Statement on Form S-3
(No. 333-20755), the Company's Registration Statement on Form S-3
(No. 333-26415), the Company's Registration Statement on Form S-3
(No. 333-36531), the Company's Registration Statement on Form S-3
(No. 333-36537), the Company's Registration Statement on Form S-8
(No. 333-36803), the Company's Registration Statement on Form S-3 (No.
333-4542), the Company's Registration Statement on Form S-8 (No. 333-4550),
the Company's Registration Statement on Form S-8 (No. 333-4548), the Company's
Registration Statement on Form S-8 (No. 333-14481) and the Company's
Registration Statement on Form S-8 (No. 333-41719), of our report dated March 6,
1998, except for Note 25, as to which the date is March 17, 1998 with respect to
the consolidated financial statements and schedule of Apartment Investment and
Management Company included in its Annual Report on Form 10-K for the year ended
December 31, 1997.
ERNST & YOUNG LLP
Dallas, Texas
April 10, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 61,317
<SECURITIES> 22,144
<RECEIVABLES> 28,656
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,657,207
<DEPRECIATION> (153,285)
<TOTAL-ASSETS> 2,100,510
<CURRENT-LIABILITIES> 0
<BONDS> 74,010
0
135,000
<COMMON> 405
<OTHER-SE> 909,895
<TOTAL-LIABILITY-AND-EQUITY> 2,100,510
<SALES> 206,943
<TOTAL-REVENUES> 222,975
<CGS> 132,438
<TOTAL-COSTS> 142,688
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,385
<INCOME-PRETAX> 28,633
<INCOME-TAX> 0
<INCOME-CONTINUING> 28,633
<DISCONTINUED> 0
<EXTRAORDINARY> (269)
<CHANGES> 0
<NET-INCOME> 28,633
<EPS-PRIMARY> 1.09
<EPS-DILUTED> 1.08
</TABLE>
<PAGE>
Agreement Regarding Disclosure of Long-Term Debt Instruments
In reliance upon Item 601(b)(4)(iii)(A), of Regulation S-K, Apartment
Investment and Management Company, a Maryland corporation (the "Company") has
not filed as an exhibit to its Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, any instrument with respect to long-term debt not
being registered where the total amount of securities authorized thereunder
does not exceed 10 percent of the total assets of the Company and its
subsidiaries on a consolidated basis. Pursuant to Item 601(b)(4)(iii)(A), of
Regulation S-K, the Company hereby agrees to furnish a copy of any such
agreement to the Securities Exchange Commission upon request.
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
By: /s/ PETER KOMPANIEZ
-----------------------------------
Peter Kompaniez
President
