<PAGE> 1
As filed with the Securities and Exchange Commission on January 12, 2001
Registration No. 333-51154
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
MARYLAND 6798 84-1259577
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employee
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
COLORADO CENTER, TOWER TWO
2000 SOUTH COLORADO BOULEVARD
SUITE 2-1000
DENVER, COLORADO 80222
(303) 757-8101
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
---------------------
PETER K. KOMPANIEZ
COLORADO CENTER, TOWER TWO
2000 SOUTH COLORADO BOULEVARD
SUITE 2-1000
DENVER, COLORADO 80222
(303) 757-8101
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
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Copies to:
ROBERT B. ROBBINS, ESQ.
SHAW PITTMAN
2300 N STREET, N.W.
WASHINGTON, D.C. 20037
(202) 663-8000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(2) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Class A Common Stock, par value $.01....... 2,415,040 $38.83 $ 93,770,365 (4)
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Class P Convertible Cumulative Preferred
Stock, par value $.01.................... 4,000,000 22.05 88,208,792 (4)
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Class A Common Stock, par value $.01(3).... 1,785,715 (3) (3) (3)
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Total...................................... 181,979,157 (4)
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</TABLE>
(1) Based upon 7,311,845 units of beneficial assignment of limited partnership
interests, or BACs, of Oxford Tax Exempt Fund II Limited Partnership, or
OTEF, and 3,900 BACs issuable upon the cashless exercise of in-the-money
options, that were not held by an affiliate of Apartment Investment and
Management Company, or AIMCO, and were outstanding as of November 30, 2000.
Upon consummation of the merger between AIMCO/OTEF, LLC, a subsidiary of
AIMCO and OTEF, each outstanding BAC will convert into the right to receive
a maximum of approximately 0.330 shares of Class A common stock and a
maximum of approximately 0.547 shares of Class P preferred stock of AIMCO.
(2) Estimated pursuant to Rules 457(f)(1) and 457(c) of the Securities Act of
1933, as amended, and solely for purposes of calculating the registration
fee.
(3)Class A common stock of AIMCO into which the Class P preferred stock is
convertible. Pursuant to Rule 457(i) under the Securities Act, no additional
registration fee is required to be paid in respect of the Class A common
stock into which the Class P preferred stock is convertible.
(4)In connection with its initial filing of this Registration Statement, AIMCO
paid a registration fee of $24,756 with respect to the Class A common stock
to be registered and a registration fee of $23,287 with respect to the Class
P preferred stock to be registered. As a result, no additional registration
fee is required to be paid at this time.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS/INFORMATION STATEMENT IS NOT COMPLETE
AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE.
THIS PROSPECTUS/INFORMATION STATEMENT IS NOT AN OFFER TO SELL THESE
SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS/INFORMATION STATEMENT DATED JANUARY 11, 2001
OXFORD TAX EXEMPT FUND II LIMITED PARTNERSHIP INFORMATION STATEMENT
---------------------
APARTMENT INVESTMENT AND MANAGEMENT COMPANY PROSPECTUS
---------------------
PROPOSED MERGER BETWEEN OXFORD TAX EXEMPT FUND II LIMITED PARTNERSHIP
AND AIMCO/OTEF, LLC, A SUBSIDIARY OF APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Oxford Tax Exempt Fund II Limited Partnership, or OTEF, has entered into a
merger agreement with Apartment Investment and Management Company, or AIMCO,
AIMCO Properties, L.P., AIMCO's operating partnership, and AIMCO/OTEF, LLC, a
subsidiary of AIMCO's operating partnership. Pursuant to the merger agreement,
AIMCO/OTEF, LLC will be merged into OTEF, and OTEF will be a subsidiary of
AIMCO. The board of directors of Oxford Tax Exempt Fund II Corporation, OTEF's
managing general partner, consists of five members, two of whom are non-employee
directors. The board, including the two non-employee directors, has unanimously
approved the merger and unanimously determined that it is fair to OTEF and the
holders of OTEF's beneficial assignments of limited partnership interests, or
BACs. The managing general partner also has obtained an opinion from OTEF's
independent real estate consultant, Marshall & Stevens Incorporated, that the
merger is fair to OTEF and the BAC holders. Pursuant to OTEF's partnership
agreement, OTEF may consummate the merger without the vote of its BAC holders.
Prior to the merger, OTEF also will declare a special distribution to BAC
holders of $50 million, or $6.21 per BAC. For purposes of the merger, each BAC
is valued at $28.20.
In the merger, each BAC, except any BAC held by AIMCO or by OTEF II
Associates Limited Partnership, the associate general partner of OTEF, will be
converted into the right to receive 0.547 shares of 9% Class P preferred stock
and 0.299 shares of Class A common stock. AIMCO will issue 4,000,000 shares of
9% Class P preferred stock in the merger. Because the 9% Class P preferred stock
has a deemed value of $25 per share in the merger, each BAC will convert into
the right to receive $13.675 of 9% Class P preferred stock. The 9% Class P
preferred stock has a liquidation preference and deemed value of $25 per share.
The value of a share of Class A common stock for purposes of the merger
will be $48.509, which is the average of the high and low reported sale prices
of the Class A common stock on the New York Stock Exchange for the 20 trading
days beginning on December 4, 2000, the third full trading day following the
first public announcement of the merger. As a result, each BAC will also convert
into the right to receive $14.525 of Class A common stock. Upon consummation of
the merger, BAC holders will no longer have rights to hold BACs and as a group
will hold the right to receive approximately 3.1% of the issued and outstanding
shares of 9% Class A common stock and all of the issued and outstanding shares
of Class P preferred stock. After the merger, the Class A common stock and 9%
Class P preferred stock could trade at prices higher or lower than their values
for purposes of the merger. Marshall & Stevens has advised OTEF's managing
general partner that the fair market value of the 9% Class P preferred stock is
$25 per share.
In September 2000, AIMCO acquired substantially all of the economic
interests in OTEF's managing general partner, options to purchase approximately
8.53% of the BACs that would be outstanding were the options to be exercised,
and interests in the partnerships that own the properties financed by OTEF's
mortgage revenue bonds. In 1997, AIMCO acquired substantially all of the
economic interests in the manager of 165 properties then owned by affiliates of
OTEF, and indirectly acquired interests in some of the entities that owned those
properties.
BACs are traded on the American Stock Exchange (AMEX: OTF). On January 10,
2001, the last closing sale price of the BACs on the American Stock Exchange was
$32.50 per BAC. The net book value per BAC as of September 30, 2000 was $37.54.
The Class A common stock is traded on the New York Stock Exchange (NYSE: AIV).
On January 10, 2001, the last closing sale price of the Class A common stock on
the New York Stock Exchange was $47.375 per share. There are currently no
outstanding shares of 9% Class P preferred stock. AIMCO has applied to list the
9% Class P preferred stock on the New York Stock Exchange but cannot assure you
that these shares will be accepted for listing.
We expect to consummate the merger in the first quarter of 2001.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR THE MERGER, PASSED
UPON THE MERITS OR FAIRNESS OF THE MERGER OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS/INFORMATION STATEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This prospectus/information statement is dated January [ ], 2001 and is
first being mailed to BAC holders on or about January [ ], 2001.
OTEF IS NOT ASKING YOU FOR A PROXY, AND YOU ARE REQUESTED NOT TO SEND OTEF
A PROXY.
<PAGE> 3
WHERE YOU CAN FIND MORE INFORMATION
OTEF and AIMCO are subject to the informational requirements of the
Securities Exchange Act of 1934 and, therefore, file reports, proxy statements
and other information with the Securities and Exchange Commission, or SEC. You
may read and copy any document so filed at the SEC's public reference room at
450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference room. OTEF's and
AIMCO's filings are also available to the public at the SEC's web site at
http://www.sec.gov.
We are incorporating by reference the information that OTEF and AIMCO file
with the SEC, which means that we are disclosing important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus/information statement, except for any
information superseded by information in this prospectus/information statement.
We incorporate by reference the documents listed below and all future filings
made by OTEF and AIMCO with the SEC under Section 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934 through the date of the Merger:
- Proxy Statement for Annual Meeting of Stockholders of Apartment
Investment and Management Company held on April 20, 2000;
- Apartment Investment and Management Company's Annual Report on Form 10-K
for the year ended December 31, 1999;
- Apartment Investment and Management Company's Quarterly Reports on Form
10-Q for the quarters ended March 31, 2000, June 30, 2000 and September
30, 2000;
- Apartment Investment and Management Company's Current Reports on Form
8-K, filed on February 1, 2000, February 23, 2000, March 13, 2000, March
15, 2000, July 13, 2000 and October 5, 2000 and its Form 8-K/A filed on
December 4, 2000;
- the description of Apartment Investment and Management Company's capital
stock contained in its Registration Statement on Form 8-A (File No.
1-13232) filed July 19, 1994, including any amendment or reports filed for
the purpose of updating this description;
- Oxford Tax Exempt Fund II Limited Partnership's Annual Report on Form
10-K for the year ended December 31, 1999;
- Oxford Tax Exempt Fund II Limited Partnership's Quarterly Reports on Form
10-Q for the quarters ended March 31, 2000, June 30, 2000 and September
30, 2000; and
- Oxford Tax Exempt Fund II Limited Partnership's Current Reports on Form
8-K, filed on July 13, 2000, September 20, 2000, October 5, 2000 and
November 30, 2000.
OTEF has supplied all information contained or incorporated by reference in
this prospectus/information statement relating to OTEF, and AIMCO or its
affiliates has supplied all information contained in this prospectus/information
statement relating to AIMCO or its affiliates.
If you are a BAC holder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through us or the SEC.
Documents incorporated by reference are available from us without charge,
excluding all exhibits, unless we have specifically incorporated by reference an
exhibit in this prospectus/information statement. BAC holders may obtain
documents incorporated by reference in this prospectus/information statement by
requesting them in writing or by telephone at the following address:
Oxford Tax Exempt Fund II Limited Partnership
7200 Wisconsin Avenue, 11th Floor
Bethesda, Maryland 20814
Telephone: (888) 321-OTEF
Attn: OTEF Investor Services
You should rely only on the information contained in or incorporated by
reference in this prospectus/information statement with respect to the merger.
We have not authorized anyone to provide you with information that is different
from what is contained in this prospectus/information statement. This
prospectus/information statement is dated January [ ], 2001. You should not
assume that the information contained in this prospectus/information statement
is accurate as of any date other than January [ ], 2001, and the mailing of
this prospectus/information statement to BAC holders shall not create any
implication to the contrary.
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<PAGE> 4
QUESTIONS AND ANSWERS ABOUT THE MERGER OF
OTEF AND A SUBSIDIARY OF AIMCO
Q: WHAT IS AIMCO?
A: Apartment Investment and Management
Company, or AIMCO, is a real estate investment trust, or a REIT, that owns,
acquires, redevelops, expands and manages multi-family apartment
properties. AIMCO believes that it is the largest owner and manager of
multi-family apartment properties in the United States.
Q: WHAT IS AIMCO'S RELATIONSHIP WITH OTEF?
A: AIMCO acquired approximately 99% of the
economic interests in OTEF's managing general partner, Oxford Tax Exempt
Fund II Corporation, in September 2000. In addition, AIMCO holds options to
purchase approximately 8.53% of the BACs that would be outstanding were the
options to be exercised. AIMCO also owns interests in the partnerships that
own the properties financed by OTEF's mortgage revenue bonds.
Q: WHAT HAVE AIMCO AND OTEF AGREED TO DO?
A: On November 29, 2000, AIMCO and Oxford
Tax Exempt Fund II Limited Partnership, or OTEF, entered into a merger
agreement pursuant to which OTEF would merge with a subsidiary of AIMCO.
After the merger AIMCO will own all of the beneficial assignments of
limited partnership interests, or BACs, that it does not already own. OTEF
also agreed to declare a special distribution of $6.21 per BAC to holders
of BACs prior to the merger. OTEF has not yet set the record or payment
dates for the special distribution, but OTEF expects the record date to be
soon before the closing of the merger.
Q: WHAT WILL I GET FOR MY BACS IN THE MERGER?
A: In the merger, all of your BACs will be
converted into the right to receive shares of AIMCO's Class A common stock and
Class P preferred stock. The Class A common stock is listed on the New York
Stock Exchange, or NYSE, and AIMCO has applied to list the Class P
preferred stock on the NYSE.
Q: WHAT IS THE VALUE OF MY BACS IN THE MERGER?
A: We have valued the BACs at $28.20 for
purposes of the merger. When this value is considered together with the $6.21
special distribution that will be declared by OTEF, the BACs are valued at
$34.41, which is a 36.6% premium over the closing price of the BACs on the
American Stock Exchange on November 29, 2000, the day before the first
public announcement of the merger and the special distribution. The closing
price of the BACs on January 10, 2001 was $32.50. The value of the
consideration you receive may be more or less than the value of your BACs
in the merger, depending on the trading price of the Class A common stock
and the Class P preferred stock after the merger. The deemed value of the
Class P preferred stock is $25 per share; however, the Class P preferred
stock could trade at a price higher or lower than $25 per share after the
merger. The value of the Class A common stock has been set at $48.509 per
share for purposes of the merger, but the Class A common stock could trade
at a higher or lower price on the date of and following the merger.
Q: HOW WAS THE VALUE OF THE BACS FOR PURPOSES
OF THE MERGER DETERMINED?
A: The value of the BACs was determined based
on discussions between the non-employee directors of OTEF's managing
general partner and representatives of AIMCO. When AIMCO initially acquired
its interests in OTEF's managing general partner in September 2000, it
agreed that if it acquired OTEF at any time prior to September 20, 2003 it
would pay to BAC holders consideration of at least 90% of the fully diluted
book value per BAC reported by OTEF for the preceding calendar quarter.
OTEF's publicly reported book value per BAC as of September 30, 2000 was
$37.54. The value of the BACs in the merger, taken together with the
special distribution, represents 91.7% of that fully diluted book value per
BAC, and 90% of the book value per BAC after payment of the special
distribution.
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Q: HOW WILL YOU DETERMINE THE NUMBER OF SHARES
OF STOCK I WILL RECEIVE IN THE MERGER?
A: AIMCO will issue 4,000,000 shares of Class P
preferred stock in the merger. Each BAC will be converted into the right to
receive 0.547 shares of Class P preferred stock. Because the Class P
preferred stock has a deemed value of $25 per share in the merger, each BAC
will convert into the right to receive $13.675 of Class P preferred stock.
You will also receive, for each BAC, 0.299 shares of Class A common stock.
The value of a share of the Class A common stock for purposes of the merger
will be $48.509, which is the average of the high and low reported sale
prices of the Class A common stock on the NYSE for the 20 trading days
beginning on December 4, 2000. As a result, for each BAC, you will receive
Class A common stock valued at $14.525.
Q: WHAT WILL I DO WITH MY BAC CERTIFICATES?
A: The majority of BAC holders do not have
physical certificates representing their BACs. If you do have BAC
certificates, soon after the closing of the merger you will receive a
letter from Equiserve, which is acting as the exchange agent for the
merger. The letter will instruct you as to how to deliver your certificates
to the exchange agent so that you can receive your merger consideration.
You will not receive any merger consideration until you forward your
certificates to the exchange agent in accordance with the instructions you
will receive.
Q: WHAT ARE THE TERMS OF THE CLASS P PREFERRED
STOCK?
A: As a holder of Class P preferred stock, you will
have the right to receive an annual preferred dividend of $2.25 per share.
You will also have the right to convert your shares of Class P preferred
stock into Class A common stock at a rate of $56 per share of Class A
common stock. AIMCO will have the right to buy back your Class P preferred
stock under certain circumstances.
Q: WHAT IS THE CURRENT DIVIDEND ON THE CLASS A
COMMON STOCK, AND WHAT IS AIMCO'S DIVIDEND POLICY?
A: AIMCO's current dividend rate is $2.80 per
share of Class A common stock. AIMCO's current policy is to increase
annually at its January board of directors meeting its distributions by 50%
of the rate of growth of AIMCO's adjusted funds from operations for the
prior year. If this policy were maintained, AIMCO expects to pay dividends
of approximately $3.10 per share of Class A common stock in 2001. However,
the future payment of distributions by AIMCO, and AIMCO's distribution
policy, will be at the discretion of the AIMCO board of directors and will
depend on numerous factors, including AIMCO's financial condition and
results of operations, distribution requirements applicable to REITs and
other factors the AIMCO board of directors deems relevant.
Q: WHAT RIGHTS DO HOLDERS OF CLASS A COMMON
STOCK AND CLASS P PREFERRED STOCK HAVE?
A: As a holder of Class A common stock, you will
have the right to receive dividends declared on the Class A common stock,
as well as the right to participate in any increase in the value of the
Class A common stock. You will also have the right to vote for directors of
AIMCO.
As a holder of Class P preferred stock, you will have the dividend and
other rights described above. You will not vote for directors of AIMCO.
The rights associated with the Class A common stock and the Class P
preferred stock are described in the attached prospectus/information
statement under the captions "Description of AIMCO Capital Stock" and
"Description of AIMCO Class P Convertible Cumulative Preferred Stock." In
addition, the comparative rights of BAC holders and AIMCO stockholders are
set forth in the prospectus/information statement under the caption
"Comparative Rights of Stockholders of AIMCO and BAC Holders of OTEF."
Q: HOW WAS THE MERGER APPROVED?
A: The board of directors of OTEF's managing
general partner, including the two non-employee directors on the board,
voted unanimously to approve the merger. The board of directors determined
that the merger is fair to and in the best interests of OTEF and the BAC
holders. In reaching this determination, the board of directors relied in
part on the
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opinion of Marshall & Stevens Incorporated,
OTEF's independent real estate consultant, that the merger is fair to OTEF,
that the merger is fair to the BAC holders from a financial point of view,
and that the fair market value of the Class P preferred stock is $25 per
share.
Q: WILL I BE ASKED TO VOTE ON THE MERGER?
A: No. OTEF's partnership agreement provides
that OTEF's managing general partner may merge OTEF with another entity,
including an affiliate, without the vote of the BAC holders, provided that
OTEF's managing general partner obtains a fairness opinion from OTEF's
independent real estate consultant that the merger is fair to OTEF and
provided that the merger respects any appraisal rights the BAC holders may
have.
OTEF's managing general partner has received from OTEF's independent real
estate consultant, Marshall & Stevens, an opinion to the effect that the
merger is fair to OTEF. Under Maryland law and OTEF's partnership
agreement, BAC holders do not have appraisal rights.
As a result, a vote of the BAC holders is not required to consummate the
merger.
Q: WILL I HAVE APPRAISAL RIGHTS IN CONNECTION WITH
THE MERGER?
A: No. Under Maryland law and OTEF's
partnership agreement, BAC holders are not entitled to appraisal rights in
connection with the merger.
Q: WILL I HAVE TO PAY TAXES AS A RESULT OF THE
SPECIAL DISTRIBUTION?
A: The special distribution should generally be
treated as a return of capital to you. As a result, you should not have to
pay taxes on the cash you receive in the special distribution. However,
your tax basis in your BACs will be lowered by the amount of the special
distribution, which will have an impact on whether or not you owe taxes (or
have a loss) in connection with the merger.
Q: WILL I HAVE TO PAY TAXES AS A RESULT OF THE
MERGER?
A: Different BAC holders will have different tax
results. Your BACs will be purchased in the merger, and you will recognize
gain or loss equal to the difference between (i) the fair market value of
AIMCO's common and preferred stock and any cash you receive and (ii) your
basis in the BACs on the date the merger is consummated. Based on
information available to OTEF, we believe that the majority of BAC holders
will recognize a capital loss for tax purposes in connection with the
merger, rather than a taxable gain. You should therefore consult your tax
advisor to determine whether you will have tax liability as a result of the
merger.
Q: ARE THERE ANY OTHER TAX CONSEQUENCES OF THE
MERGER TO ME?
A: Approximately 90% of the distributions you
currently receive on your BACs are federally tax-exempt. After the merger,
you will be taxed on the dividends you receive on the Class A common stock,
except for any portions of dividends on the Class A common stock that are
deemed to be a return of capital, and on the dividends you receive on the
Class P preferred stock.
Q: WHEN WILL THE MERGER BE COMPLETED?
A: We expect to complete the merger in the first
quarter of 2001.
Q: ARE THERE ANY RISKS ASSOCIATED WITH THE
MERGER?
A: The prospectus/information statement,
beginning on page 11, details several risks of which you should be aware that
relate to the merger. These risks include:
- OTEF's managing general partner and its officers, directors and
employees may have interests different from yours in the merger;
- the non-employee directors of OTEF's managing general partner have an
interest in the merger as BAC holders and option holders;
- the merger consideration will not change if the nature of OTEF's assets
changes or if OTEF's book value increases;
- approximately 90% of the distributions on BACs are federally
tax-exempt, while all of the dividends on the Class P preferred stock
and substantially all of
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the dividends on the Class A common stock are likely to be taxable;
- We have set a value of $48.509 per share for the Class A common stock
for purposes of the merger, but you may not be able to sell the Class A
common stock for that price;
- we have deemed the value of the Class P preferred stock to be $25 per
share for purposes of the merger, but you may not be able to resell the
Class P preferred stock at that price;
- former BAC holders may not be able to convert their shares of Class P
preferred stock into Class A common stock worth $25, which may reduce
the value of the Class P preferred stock; and
- the merger will increase the number of freely tradable shares of Class
A common stock, which could result in a decline in the price of the
stock.
Q: WHO CAN I CALL FOR INFORMATION ABOUT THE
MERGER?
A: For information about the merger, you may
call OTEF Investor Services at (888) 321-OTEF.
v
<PAGE> 8
TABLE OF CONTENTS
<TABLE>
<S> <C>
WHERE YOU CAN FIND MORE INFORMATION......................... i
QUESTIONS AND ANSWERS ABOUT THE MERGER OF OTEF AND A
SUBSIDIARY OF AIMCO....................................... ii
SUMMARY..................................................... 1
RISK FACTORS................................................ 12
SPECIAL FACTORS REGARDING THE MERGER........................ 22
THE MERGER AGREEMENT AND TERMS OF THE MERGER................ 38
SELECTED HISTORICAL FINANCIAL INFORMATION OF AIMCO.......... 45
SELECTED HISTORICAL FINANCIAL INFORMATION OF OTEF........... 47
SELECTED PRO FORMA FINANCIAL AND OPERATING INFORMATION OF
AIMCO..................................................... 49
PRO FORMA CAPITALIZATION OF AIMCO........................... 50
MANAGEMENT OF AIMCO AND OTEF................................ 53
DESCRIPTION OF AIMCO CAPITAL STOCK.......................... 57
DESCRIPTION OF AIMCO CLASS P CONVERTIBLE CUMULATIVE
PREFERRED STOCK........................................... 64
FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS..... 74
FEDERAL INCOME TAXATION OF AIMCO CLASS P PREFERRED
STOCKHOLDERS.............................................. 85
OTHER TAX CONSEQUENCES...................................... 87
COMPARATIVE RIGHTS OF STOCKHOLDERS OF AIMCO AND BAC HOLDERS
OF OTEF................................................... 88
LEGAL MATTERS............................................... 93
EXPERTS..................................................... 93
INDEX TO PRO FORMA FINANCIAL STATEMENTS..................... F-1
</TABLE>
ANNEX A.............................................Agreement and Plan of Merger
ANNEX B...............................Opinion of Marshall & Stevens Incorporated
ANNEX C..............................Description of Oxford Transaction Documents
ANNEX
D... OTEF
Mortgage Revenue Bonds
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<PAGE> 9
SUMMARY
This summary highlights selected information from this
prospectus/information statement and may not contain all of the information that
is important to you. To fully understand the merger, and for a description of
the terms of the merger, you should read carefully this entire
prospectus/information statement and the documents to which we have referred you
in "Where You Can Find More Information" on the inside front cover of this
prospectus/information statement.
THE ENTITIES
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AIMCO PROPERTIES, L.P.
AIMCO/OTEF, LLC
Colorado Center, Tower Two
2000 South Colorado Boulevard
Suite 2-1000
Denver, Colorado 80222
(303) 757-8101
Apartment Investment and Management Company, or AIMCO, a Maryland
corporation incorporated on January 10, 1994, is a self-administered and
self-managed real estate investment trust, or REIT, engaged in the ownership,
acquisition, development, expansion and management of multi-family apartment
properties. Based on apartment unit data compiled as of January 1, 1999 by the
National Multi Housing Council, AIMCO believes that it is the largest owner and
manager of multi-family apartment properties in the United States. As of
September 30, 2000, AIMCO:
- owned or controlled (consolidated) 137,419 units in 500 apartment
properties;
- held an equity interest in (unconsolidated) 132,909 units in 769
apartment properties; and
- managed 63,458 units in 487 apartment properties for third-party owners
and affiliates.
AIMCO conducts substantially all of its operations through its operating
partnership, AIMCO Properties, L.P., a Delaware limited partnership. Through a
wholly-owned subsidiary, AIMCO acts as the sole general partner of its operating
partnership. As of September 30, 2000, AIMCO owned approximately a 90% interest
in its operating partnership. AIMCO/OTEF, LLC is a subsidiary of AIMCO's
operating partnership that AIMCO formed for the purpose of entering into the
merger.
Generally, when we refer to "AIMCO" in this prospectus/information
statement, we are referring to AIMCO, AIMCO's operating partnership and their
respective subsidiaries, including AIMCO/ OTEF, LLC.
OXFORD TAX EXEMPT FUND II LIMITED PARTNERSHIP
7200 Wisconsin Avenue, 11th Floor
Bethesda, Maryland 20814
(888) 321-6833
OTEF is a publicly traded Maryland limited partnership that invests
primarily in tax-exempt bonds issued to finance high quality apartment and
senior living/health care communities, the majority of which were owned by
affiliates of OTEF, including Oxford Realty Financial Group. We call these
affiliates the Oxford entities, and we call the properties they owned, including
the properties financed by OTEF's bonds, the Oxford properties. None of the
Oxford properties financed by OTEF's bonds receive project subsidies from the
U.S. Department of Housing and Urban Development. A description of OTEF's
mortgage revenue bonds is set forth in Annex D to this prospectus/information
statement. The average monthly rent for the residential Oxford properties that
are financed by OTEF's bonds is approximately $790.
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<PAGE> 10
AIMCO and its affiliates now own interests in substantially all of the
Oxford entities. OTEF was formed under the laws of the state of Maryland in
1995, in connection with a plan to restructure Oxford Tax Exempt Fund Limited
Partnership. Oxford Tax Exempt Fund II Corporation, a Maryland corporation, is
the managing general partner of OTEF, and OTEF II Associates Limited
Partnership, a Maryland limited partnership, is the associate general partner of
OTEF. AIMCO owns a 99% economic interest in OTEF's managing general partner and
slightly more than one half of the general partner interests in the associate
general partner.
RECENT DEVELOPMENTS
On September 20, 2000, AIMCO acquired all of the stock and other interests
of the Oxford entities that were held by six executive officers and directors of
the Oxford entities, whom we refer to as the Oxford principals. We call this the
Oxford acquisition. The Oxford properties, which are owned by 166 separate
partnerships, are 167 apartment communities including 36,949 units, located in
18 states, and include properties financed by mortgage revenue bonds held by
OTEF. We call them Oxford properties, because all of the properties are owned by
partnerships controlled by Oxford entities. AIMCO, through an affiliate, has
since 1997 managed 165 of the 167 Oxford properties.
As part of the Oxford acquisition, AIMCO acquired its interests in OTEF's
managing general partner and in OTEF's associate general partner. AIMCO also
acquired an option to purchase 32,580 BACs held by the Oxford principals and
stock options held by the Oxford principals and other directors, officers and
employees of OTEF's managing general partner to purchase 652,125 BACs. As a
result, AIMCO currently holds options to acquire approximately 8.53% of the BACs
that would be outstanding were the options to be exercised.
The material provisions of the agreements between AIMCO and its affiliates
and the Oxford principals and other directors, officers and employees of OTEF's
managing general partner that relate to OTEF and its securities are set forth in
Annex C to this prospectus/information statement.
ORGANIZATIONAL STRUCTURE
After the transactions described in "Recent Developments" above, the
current relationship between AIMCO and OTEF is depicted below. In the chart,
general partnership interests are indicated by the designation "GP," BAC
interests are indicated by the designation "BAC" and arrows running from one
entity to another indicate an equity ownership by the entity at which the arrow
originates in the entity to which the arrow points. The legal names of the
entities are set forth above under "-- The Entities."
[Chart]
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<PAGE> 11
[Diagram depicting AIMCO/OTEF relationship prior to the Merger. OTEF's security
holders are depicted as: Unaffiliated BAC Holders with a 98% BAC interest, AIMCO
Operating Partnership with options to purchase an 8.53% BAC interest, the OTEF
Associate General Partner with a 1.998% general partnership interest and the
OTEF Managing General Partner with a 0.002% general partnership interest. AIMCO
Operating Partnership, which is depicted as a subsidiary of AIMCO, is depicted
as owning 100% of AIMCO/OTEF, LLC and a 99% non-voting preferred interest in
AIMCO intermediate subsidiaries, which, in turn, own 100% of the OTEF Managing
General Partner and 40.299% of the OTEF Associate General Partner.]
After the merger between AIMCO/OTEF, LLC and OTEF described below, the
relationship between AIMCO and OTEF will be as depicted below:
[Chart]
[Diagram depicting AIMCO/OTEF relationship after the Merger. OTEF's security
holders are depicted as AIMCO Operating Partnership with a 99% BAC interest and
the OTEF Managing General Partner with a 1% general partnership interest. AIMCO
Operating Partnership, which is depicted as a subsidiary of AIMCO, is depicted
as owning a 99% non-voting preferred interest in AIMCO intermediate
subsidiaries, which, in turn, own 100% of the OTEF Managing General Partner and
40.299% of the OTEF Associate General Partner. Former BAC Holders are depicted
as owning 3.1% of the Class A common stock and 100% of the Class P preferred
stock of AIMCO, and the OTEF Associate General Partner is depicted as owning 10
shares of Class A common stock and 19 shares of Class P preferred stock.]
SUMMARY OF THE MERGER
The merger agreement is attached to this prospectus/information statement
as Annex A. The merger agreement is the legal document that governs the merger,
and we encourage you to read it.
Pursuant to the merger, AIMCO/OTEF, LLC, a subsidiary of AIMCO's operating
partnership, will be merged into OTEF. OTEF will be the surviving entity after
the merger, and AIMCO's operating partnership will own substantially all of the
outstanding partnership interests in OTEF. The partnership interests not held by
AIMCO will be held by a company that is controlled by two members of the board
of directors of AIMCO. The partnership interests in OTEF will reflect a 1%
general partner interest held by OTEF's managing general partner and a 99%
limited partner interest held by AIMCO's operating partnership.
We expect to consummate the merger in the first quarter of 2001. BAC
holders will not be required to take any action for the merger to be
consummated. The effective time of the merger will be when it is consummated,
and AIMCO and OTEF will issue a press release announcing the merger.
EFFECTS OF THE MERGER
At the effective time, all the properties, rights, privileges, powers and
franchises of AIMCO/OTEF, LLC and OTEF will vest in the surviving entity, and
all debts, liabilities and duties of AIMCO/OTEF, LLC and OTEF will become the
debts, liabilities and duties of the surviving entity.
WHAT BAC HOLDERS WILL RECEIVE IN THE MERGER
As of the effective time of the merger, by virtue of the merger and without
any action on the part of the OTEF general partners or any BAC holder, each
issued and outstanding BAC, including its related BAC right, except any BAC held
by AIMCO or by OTEF's associate general partner, will be converted into the
right to receive 0.547 shares of Class P preferred stock and 0.299 shares of
Class A common stock. Because the Class P preferred stock has a deemed value of
$25 per share in the merger, each BAC will convert into the right to receive
$13.675 of Class P preferred stock. The value of a share of Class A
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<PAGE> 12
common stock for purposes of the merger will be $48.509, which is the average of
the high and low reported sale prices of the Class A common stock on the New
York Stock Exchange for the 20 trading days beginning on December 4, 2000, the
third full trading day following the first public announcement of the merger. As
a result, each BAC will also convert into the right to receive $14.525 of Class
A common stock. The Class A common stock could trade at a price higher or lower
than $48.509 at the time of and following the merger. Upon consummation of the
merger, BAC holders will no longer have rights to hold BACs and as a group will
hold the right to receive approximately 3.1% of the issued and outstanding
shares of Class A common stock and all of the issued and outstanding shares of
Class P preferred stock.
The deemed value of the Class P preferred stock is $25 per share. The Class
P preferred stock could trade at a price higher or lower than $25 per share
after the merger. Marshall & Stevens has advised OTEF's managing general partner
that the fair market value of the Class P preferred stock is $25 per share.
However, we cannot give you any assurance as to the trading price or liquidity
of the Class P preferred stock.
AIMCO will not issue any fractional shares of Class A common stock or Class
P preferred stock in the merger. AIMCO will pay any holder having a right to a
fractional share cash equal to the value of the fractional share based on
$48.509 per share of the Class A common stock and $25 per share of the Class P
preferred stock.
In the merger agreement, OTEF agreed to declare a special distribution of
$50 million, or $6.21 per BAC, prior to the merger. The record and payment dates
for the special distribution have not been set. OTEF expects to use partnership
funds and funds obtained by securitizing some of the mortgage revenue bonds it
holds to pay the special distribution.
The merger consideration of $28.20, considered along with the special
distribution to BAC holders of $6.21 per BAC to be declared by OTEF, represents
a 36.6% premium over the closing price of the BACs on the American Stock
Exchange on November 29, 2000, the day before we announced the merger and the
special distribution, and a 39.0% premium over the closing price of the BACs on
June 27, 2000, the day before we announced the Oxford acquisition.
In connection with the Oxford acquisition, AIMCO agreed that if it
completed an acquisition of OTEF before September 20, 2003, it would pay to BAC
holders consideration of at least 90% of the fully diluted book value per BAC as
reported by OTEF for the calendar quarter immediately preceding the date of the
acquisition. The merger consideration of $28.20 per BAC, taken together with the
$6.21 per BAC special distribution that will be declared by OTEF, equals 91.7%
of the fully diluted book value for the quarter ended September 30, 2000 of
$37.54 per BAC. Based in part on the opinion from Marshall & Stevens
Incorporated, OTEF's managing general partner concluded that the merger
consideration is fair to BAC holders and permits them to realize greater value
than they would receive under other scenarios.
In addition, OTEF's associate general partner will have all of its
interests in OTEF converted into shares of Class A common stock and Class P
preferred stock. We have valued the interests of OTEF's associate general
partner at $1,000 for purposes of the merger. The associate general partner
interest will be converted into the right to receive (i) 19 shares of Class P
preferred stock with a deemed value of $25 per share and (ii) 10.823 shares of
Class A common stock valued at $48.509 per share, or $525 of Class A common
stock, which is the difference between $1,000 and the value of the Class P
preferred stock to be received.
INTERESTS OF OTEF'S MANAGING GENERAL PARTNER IN THE MERGER
The board of directors of OTEF's managing general partner has unanimously
determined that the merger is fair to OTEF and the BAC holders and is in the
best interests of OTEF, and has approved the merger agreement and the
transactions contemplated in the merger agreement. Because AIMCO owns
substantially all of the economic interests in OTEF's managing general partner,
the managing general partner may have interests that differ from the interests
of BAC holders generally. For example, after the merger, AIMCO intends to cause
the partnerships that own the properties financed by OTEF's mortgage
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<PAGE> 13
revenue bonds to refinance those bonds with a loan from one or more third-party
lenders. The result of this plan would be that OTEF's mortgage revenue bonds
would no longer be outstanding, and the property-owning partnerships would incur
lower interest expense. If AIMCO does not take this action, it may cause OTEF to
engage in other transactions such as selling some or all of OTEF's assets or
other financing, total return swap or other arrangements.
INTERESTS OF OXFORD PRINCIPALS AND OTEF AFFILIATES IN THE MERGER
In connection with the Oxford acquisition, AIMCO purchased from the Oxford
principals and other directors, officers and employees of OTEF's managing
general partner options to purchase 652,125 BACs under option sale agreements.
Pursuant to the agreements, AIMCO agreed to pay the sellers the difference
between the implied value of $31.88 assigned to the BACs at the time AIMCO
purchased the options and the per BAC value of the consideration in a merger
completed before September 20, 2003. Taking the merger consideration and the
special distribution together, the BAC holders will receive a total of $34.41
per BAC. As a result, in connection with the merger, the Oxford principals and
other directors, officers and employees of OTEF's managing general partner will
at the time of the merger receive from AIMCO a cash payment equal to $2.53 per
BAC subject to the options, or a total of approximately $1.65 million.
Also in connection with the Oxford acquisition, AIMCO acquired from the
Oxford principals an option to purchase 32,580 BACs that are issued and
outstanding and are held by the Oxford principals. This option is exercisable at
a price equal to the per BAC price paid by AIMCO in a subsequent purchase of
OTEF, such as the merger, or 90% of the fully diluted book value per BAC
reported by OTEF for the quarter immediately preceding the exercise of the
option in any other case. On November 30, 2000, when we announced the execution
of the merger agreement, this option was deemed to be exercised by AIMCO. As a
result, at the time of the closing of the merger, AIMCO will purchase from the
Oxford principals 32,580 BACs for a total purchase price of approximately
$919,000 in cash. Prior to the option exercise, the Oxford principals will have
the right to receive the special distribution on the BACs that will be declared
by OTEF. In connection with the special distribution, the Oxford principals will
receive a total of approximately $202,000.
Pursuant to the merger agreement, AIMCO and the partnership that survives
the merger have agreed to indemnify all of the directors, officers and employees
of OTEF's managing general partner against all liabilities related to actions
they have taken in connection with the merger agreement or the closing of the
transactions contemplated by the merger agreement, all liabilities arising from
any claim or investigation by a federal or state authority based on any actions
or omissions on the part of AIMCO prior to the closing of the merger, and all
liabilities arising as a result of any of their actions as a director, officer
or employee of OTEF's managing general partner, AIMCO, the general partner of
AIMCO's operating partnership or the managing member of AIMCO/OTEF, LLC,
relating to OTEF prior to the effective time of the merger.
ROLE AND INTERESTS OF NON-EMPLOYEE DIRECTORS
The board of directors of OTEF's managing general partner is comprised of
Mr. Terry Considine, Mr. Peter K. Kompaniez, Mr. Patrick J. Foye, Mr. Stephen P.
Gavula, Jr. and Mr. Scot B. Barker. Messrs. Gavula and Barker are not employees
of OTEF's managing general partner or its affiliates. At the request of and on
behalf of Messrs. Gavula and Barker, OTEF's managing general partner retained
Kirkpatrick & Lockhart LLP to provide legal advice and PricewaterhouseCoopers
LLP to provide analyses and other services to Messrs. Gavula and Barker in
connection with the merger. Messrs. Gavula and Barker have used this advice and
information, together with the fairness opinion and other information available
to them, to conduct their evaluation of the terms of the merger.
Each of Messrs. Gavula and Barker own 25,000 BACs and will participate in
the merger consideration as BAC holders.
Each of the non-employee directors sold options to purchase 3,261 BACs to
AIMCO in connection with the Oxford acquisition, on the same terms as the Oxford
principals, as described above in
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<PAGE> 14
"-- Interests of Oxford Principals and OTEF Affiliates in the Merger." As a
result, upon the closing of the merger, each of Messrs. Gavula and Barker will
receive approximately $8,250 in connection with the option sale.
In addition, effective November 7, 2000, OTEF's managing general partner
granted to each of Messrs. Gavula and Barker options to purchase 25,000 BACs at
an exercise price of $26.00 per BAC. These options are immediately exercisable,
and will be cancelled when the holder ceases to be a director of OTEF's managing
general partner. Because all outstanding options will be cancelled in the merger
and because the directors have the right to receive cash distributions on the
underlying BACs as if they held the BACs directly, each director's options have
a value of approximately $210,000 immediately prior to the effective time of the
merger. This grant of options was completed after merger discussions had
commenced and was in consideration of past, present and anticipated future
services as non-employee directors of OTEF's managing general partner.
Each of Messrs. Gavula and Barker received $5,000 compensation for each
meeting he attended in connection with the proposed merger. In connection with
the merger discussions, Messrs. Gavula and Barker were compensated for attending
16 meetings.
Messrs. Gavula and Barker are also covered by the indemnification
provisions of the merger agreement described above under "-- Interests of Oxford
Principals and OTEF Affiliates in the Merger."
FAIRNESS OPINION OF INDEPENDENT REAL ESTATE CONSULTANT
OTEF's partnership agreement requires that the managing general partner
obtain a fairness opinion from OTEF's independent real estate consultant,
Marshall & Stevens Incorporated, in order to consummate the merger without a
vote of the BAC holders. OTEF's managing general partner has received an opinion
from Marshall & Stevens that the merger was fair to OTEF and was fair to the BAC
holders and OTEF's associate general partner from a financial point of view,
that OTEF's publicly reported book value per BAC for the quarter ended September
30, 2000 was fairly computed, and that the fair market value of the Class P
preferred stock was $25 per share. A copy of that opinion is attached to this
prospectus/information statement as Annex B, and we describe the basis for the
opinion under "Special Factors Regarding the Merger -- Opinion of OTEF's
Independent Real Estate Consultant." We encourage you to read this opinion.
Marshall & Stevens has served as OTEF's independent real estate consultant
since 1988. During that time, Marshall & Stevens has rendered consulting
services to OTEF and since 1997 has received from OTEF consulting fees totaling
approximately $111,000. OTEF paid Marshall & Stevens additional fees and
expenses totaling approximately $100,000 in connection with the fairness
opinions related to the merger and the redemption by OTEF of its status quo
BACs. OTEF and Marshall & Stevens determined the fee to be paid by OTEF in
connection with the fairness opinions by negotiations between the parties after
an initial fee proposal by Marshall & Stevens.
NO VOTE OF THE BAC HOLDERS IS REQUIRED TO CONSUMMATE THE MERGER
Under OTEF's partnership agreement, OTEF's managing general partner is
authorized to merge OTEF with another entity, including an affiliate, and to
take all actions, including negotiating and entering into an agreement of
merger, that OTEF's managing general partner determines are necessary or
appropriate to effect the merger, without the vote of the BAC holders, provided
that the managing general partner obtains an opinion from OTEF's independent
real estate consultant that the merger is fair to OTEF and provided that the
merger respects any applicable appraisal rights of OTEF's security holders.
Marshall & Stevens, OTEF's independent real estate consultant, has rendered its
opinion that the merger is fair to OTEF and to the BAC holders. Accordingly, a
vote of the BAC holders is not required in order to consummate the merger. Under
Maryland law and OTEF's partnership agreement, BAC holders do not have appraisal
rights.
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<PAGE> 15
SUMMARY RISK FACTORS
You should be aware of risks relating to the merger and to AIMCO's
business. For example:
- OTEF's managing general partner and its officers, directors and employees
may have interests in the merger that are different from BAC holders;
- the non-employee directors of OTEF's managing general partner have an
interest in the merger as BAC holders and option holders;
- the merger consideration will not change if the nature of OTEF's assets
changes or if OTEF's book value increases;
- approximately 90% of the distributions on the BACs are federally
tax-exempt, while all of the dividends on the Class P preferred stock and
substantially all of the dividends on the Class A common stock are likely
to be taxable;
- we have set a value of $48.509 per share for the Class A common stock for
purposes of the merger, but you may not be able to sell the Class A common
stock for that price;
- we have deemed the value of the Class P preferred stock to be $25 per
share for purposes of the merger, but former BAC holders may not be able
to resell the Class P preferred stock at that price;
- former BAC holders may not be able to convert their shares of Class P
preferred stock into Class A common stock worth $25, which may reduce the
value of the Class P preferred stock;
- the merger will increase the number of freely tradable shares of Class A
common stock which could result in a decline in the price of the stock;
- AIMCO may not be able to profitably acquire, redevelop or expand
properties in the future;
- AIMCO has significant amounts of debt outstanding, some of which bears
interest at variable rates; and
- AIMCO is subject to various risks associated with investments in and
management of real estate assets.
PLEASE SEE THE MATTERS SET FORTH UNDER "RISK FACTORS" BELOW.
CONDITIONS TO THE MERGER
The merger will be completed only if a number of conditions are met or
waived, including the following:
- no law, regulation, injunction or order restrains or prohibits completion
of the merger;
- Marshall & Stevens has not withdrawn its fairness opinion;
- OTEF has paid or provided for the special distribution; and
- there has been no material adverse change with respect to AIMCO or OTEF.
TERMINATION OF THE MERGER AGREEMENT
AIMCO and OTEF's managing general partner may agree in writing to terminate
the merger agreement without completing the merger. The parties may also
terminate the merger agreement in other circumstances. OTEF has agreed to pay to
AIMCO a termination fee of $5 million and expenses of $1 million if AIMCO
terminates the merger agreement because OTEF breaches its agreement not to seek
other merger partners or if OTEF terminates the merger agreement because it has
received an alternative acquisition proposal, and if OTEF closes on the
alternative proposal within one year of the termination.
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This provision is described below under "The Merger Agreement and Terms of the
Merger -- Response to Other Offers."
If the market price of the Class A common stock falls below $40, as
determined pursuant to the merger agreement, the non-employee directors of
OTEF's managing general partner may cause OTEF to terminate the merger agreement
and AIMCO may terminate the merger agreement.
If the merger is not completed, AIMCO will continue to own substantially
all of the economic interests in OTEF's managing general partner.
U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
For Federal income tax purposes, the merger will constitute a taxable
purchase of the interests of the BAC holders. BAC holders will recognize gain or
loss equal to the difference between the fair market value of the Class A common
stock, Class P preferred stock and cash they receive and their basis on the date
of the consummation of the merger in the BACs they hold. We expect the exchange
to produce a long-term capital loss for tax purposes in the case of a BAC holder
who has held a BAC from the formation of OTEF. A BAC holder's capital gain or
loss will be short- or long-term depending on whether the holder's holding
period for the BACs exceeds one year. BAC holders will receive a basis in the
Class A common stock and Class P preferred stock equal to the fair market value
of the stock at the time of the merger.
The special distribution should be treated as a return of capital to BAC
holders. As a result, BAC holders will not have to pay taxes on the cash they
receive in the special distribution, except to the extent the cash exceeds the
holder's tax basis in the BACs, at the time of the special distribution.
However, each BAC holder's tax basis in his or her BACs will be lowered by the
amount of the special distribution, which will have an impact on whether the BAC
holder will owe taxes or have a loss in connection with the merger.
WE URGE BAC HOLDERS TO CONSULT WITH THEIR TAX ADVISORS REGARDING THE
PERSONAL TAX CONSEQUENCES OF THE MERGER AND SPECIAL DISTRIBUTION AND TO REVIEW
THE DISCUSSION UNDER "SPECIAL FACTORS REGARDING THE MERGER -- U.S. FEDERAL
INCOME TAX CONSEQUENCES TO BAC HOLDERS."
At present, approximately 90% of the distributions that BAC holders receive
from OTEF are federally tax-exempt, because they are derived primarily from
interest payments on tax-exempt bonds. After the merger, BAC holders will hold
Class A common stock and Class P preferred stock and will be taxed on the
dividends they receive on the Class A common stock and Class P preferred stock,
except for any portions of distributions that are deemed to be a return of
capital. In 1999, 1998 and 1997, approximately 6.4%, 58.7% and 0% of the
distributions on Class A common stock were deemed to be a return of capital. The
percentage of any distribution on the Class A common stock that is deemed to be
a return of capital changes from year to year, so the percentage of future
distributions that is considered a return of capital may not be similar to that
of past distributions. All of the distributions on the Class P preferred stock
will be taxable.
APPRAISAL RIGHTS
Under Maryland law and OTEF's partnership agreement, BAC holders will not
be entitled to appraisal or dissenters' rights in connection with the merger.
AIMCO DISTRIBUTION POLICY FOLLOWING THE MERGER
Because AIMCO has elected to be taxed for Federal income tax purposes as a
real estate investment trust, or REIT, it is required to distribute annually to
its stockholders at least 90% of its real estate investment trust taxable
income. AIMCO's current policy is to increase annually at its January board of
directors meeting its distributions by 50% of the rate of growth of AIMCO's
adjusted funds from operations for the prior year. If this policy were
maintained, AIMCO expects to pay dividends of approximately $3.10 per share of
Class A common stock in 2001. However, the future payment of
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distributions by AIMCO, and AIMCO's distribution policy, will be at the
discretion of the AIMCO board of directors and will depend on numerous factors,
including AIMCO's financial condition and results of operations for the prior
year, capital requirements, the annual distribution requirements under the
provisions of the Federal tax code applicable to REITs, limitations under credit
agreements to which AIMCO or its corporate or partnership subsidiaries are a
party, preferred stock requirements and any other factors that the AIMCO board
of directors deems relevant.
Upon issuance, AIMCO Class P preferred stock will pay preferred dividends
at a rate of 9%, or $2.25, per year.
COMPARATIVE RIGHTS OF STOCKHOLDERS OF AIMCO AND BAC HOLDERS OF OTEF
As a result of the merger, holders of BACs will become stockholders of
AIMCO. For a description of the material differences between the rights of
holders of BACs and the rights of holders of Class A common stock and Class P
preferred stock, see "Comparative Rights of Stockholders of AIMCO and BAC
Holders of OTEF."
ACCOUNTING TREATMENT
The merger will be accounted for by AIMCO and AIMCO's operating partnership
and their subsidiaries under the purchase method of accounting. Under this
method of accounting, the purchase price will be allocated to the assets these
entities acquire and the liabilities they assume based on their estimated fair
values.
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COMPARATIVE PER SHARE DIVIDEND INFORMATION
Since the beginning of 1996, the average annual growth rate of the annual
distributions on Class A common stock has been 13.4%, while the average annual
growth rate of annual distributions on BACs has been 3.6%. Dividends or
distributions paid on the Class A common stock and the BACs from 1996 through
2000 were as follows:
<TABLE>
<CAPTION>
AIMCO CLASS A OTEF
CALENDAR QUARTERS COMMON STOCK BAC
----------------- ------------- ------
<S> <C> <C>
2000
Fourth Quarter............................................ 0.7000 --
Third Quarter............................................. 0.7000 0.5650
Second Quarter............................................ 0.7000 0.5400
First Quarter............................................. 0.7000 0.5400
1999
Fourth Quarter............................................ 0.6250 0.5400
Third Quarter............................................. 0.6250 0.5200
Second Quarter............................................ 0.6250 0.5200
First Quarter............................................. 0.6250 0.5100
1998
Fourth Quarter............................................ 0.5625 0.5100
Third Quarter............................................. 0.5625 0.5100
Second Quarter............................................ 0.5625 0.5100
First Quarter............................................. 0.5625 0.4950
1997(1)
Fourth Quarter............................................ 0.4625 0.4950
Third Quarter............................................. 0.4625 0.4950
Second Quarter............................................ 0.4625 0.4760
First Quarter............................................. 0.4625 0.4760
1996(1)
Fourth Quarter............................................ 0.4250 0.4760
Third Quarter............................................. 0.4250 0.4760
Second Quarter............................................ 0.4250 0.4760
First Quarter............................................. 0.4250 0.4760
</TABLE>
---------------
(1)Data for OTEF BACs gives effect to a 25-for-1 BAC split, which was effected
on July 1, 1997.
There are currently no shares of Class P preferred stock outstanding. Upon
issuance, the Class P preferred stock will pay a preferred dividend of $0.5625
per quarter, or $2.25 per year.
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COMPARATIVE PER SHARE MARKET PRICE INFORMATION
BACs are traded on the American Stock Exchange under the symbol "OTF," and
Class A common stock is traded on the New York Stock Exchange under the symbol
"AIV." On June 27, 2000, the last full trading day prior to the public
announcement of the Oxford acquisition, on November 29, 2000, the last full
trading day prior to the public announcement of the merger and the $50 million
special distribution, and on January 10, 2001, the closing sale price per BAC on
the American Stock Exchange and the closing sale price per share of the Class A
common stock on the New York Stock Exchange were as follows:
<TABLE>
<CAPTION>
AIMCO
CLASS A OTEF
COMMON STOCK BAC
------------ --------
<S> <C> <C>
June 27, 2000............................................... $43.63 $24.75
November 29, 2000........................................... $44.6875 $25.1875
January 10, 2001............................................ $47.375 $32.50
</TABLE>
AIMCO has applied to list the Class P preferred stock on the New York Stock
Exchange, but cannot assure you that the Class P preferred stock will be
accepted for listing.
BAC MARKET PRICE INFORMATION AND COMPARISON TO NET BOOK VALUE
Set forth below are the high and low reported sale prices per BAC on the
American Stock Exchange, OTEF's average book value per BAC, the average closing
price per BAC on the American Stock Exchange, and the average closing price per
BAC as a percentage of the average book value per BAC for the periods indicated.
<TABLE>
<CAPTION>
OTEF CLOSING PRICE AS A
BOOK VALUE AVERAGE CLOSING % OF BOOK VALUE
CALENDAR QUARTERS HIGH LOW PER BAC PRICE PER BAC PER BAC
----------------- ------ ------ ---------- --------------- ------------------
<S> <C> <C> <C> <C> <C>
2000
Third Quarter............ $27.44 $24.50 $37.54 $25.75 69%
Second Quarter........... 24.88 23.19 36.50 23.93 66
First Quarter............ 24.44 22.44 36.28 23.87 66
1999
Fourth Quarter........... 24.88 22.44 35.97 23.94 67
Third Quarter............ 25.88 23.88 35.47 24.42 69
Second Quarter........... 25.00 23.50 35.59 24.47 69
First Quarter............ 26.00 23.63 35.44 24.06 68
1998
Fourth Quarter........... 25.88 22.50 34.62 26.62 77
</TABLE>
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<PAGE> 20
RISK FACTORS
The merger entails the risks described below. Additional information is
contained in this prospectus/ information statement and in the documents to
which we have referred you in "Where You Can Find More Information."
RISKS RELATING TO THE MERGER
OTEF'S MANAGING GENERAL PARTNER AND ITS OFFICERS, DIRECTORS AND EMPLOYEES MAY
HAVE INTERESTS IN THE MERGER THAT ARE DIFFERENT FROM BAC HOLDERS
AIMCO owns 99% of the economic interests in OTEF's managing general
partner. As a result, OTEF's managing general partner may have interests in the
merger that are different from or in addition to those of BAC holders generally.
For example, because it owns interests in the partnerships that own the Oxford
properties that were financed by OTEF's mortgage revenue bonds, AIMCO has an
interest in refinancing at lower interest rates and on more favorable terms the
mortgage revenue bonds that the BAC holders, who purchased BACs in order to
receive tax-exempt income, may not have. These different interests could cause
OTEF's managing general partner to make decisions or act in ways with which BAC
holders may disagree.
Pursuant to the merger agreement, AIMCO and the partnership that survives
the merger have agreed to indemnify all of the directors, officers and employees
of OTEF's managing general partner against all liabilities related to actions
they have taken in connection with the merger agreement or the closing of
transactions contemplated by the merger agreement, all liabilities arising from
any claim or investigation by a federal or state authority based on any actions
or omissions on the part of AIMCO prior to the closing of the merger, and all
liabilities arising as a result of any of their actions as a director, officer
or employee of OTEF's managing general partner, AIMCO, the general partner of
AIMCO's operating partnership or the manager of AIMCO/OTEF, LLC relating to OTEF
prior to the effective time of the merger. As a result of these indemnification
rights, the officers, directors and employees of OTEF's managing general partner
may not act in accordance with the best interests of the BAC holders.
THE NON-EMPLOYEE DIRECTORS OF OTEF'S MANAGING GENERAL PARTNER HAVE AN
INTEREST IN THE MERGER AS BAC HOLDERS AND OPTION HOLDERS
Each of Messrs. Gavula and Barker own 25,000 BACs and will participate in
the merger consideration as BAC holders. In connection with the Oxford
acquisition and the sale by the Oxford principals and other OTEF affiliates of
their options to purchase BACs, each of Stephen P. Gavula, Jr. and Scot B.
Barker, the non-employee directors of OTEF's managing general partner, sold
options to purchase 3,261 BACs to AIMCO. Pursuant to the sale agreement, in
connection with the merger, each of Messrs. Gavula and Barker will receive from
AIMCO a payment equal to $2.53 per BAC subject to the options, or a total of
approximately $8,250. In addition, effective November 7, 2000, OTEF granted to
each of Messrs. Gavula and Barker options to purchase 25,000 BACs at an exercise
price of $26.00 per BAC. These options are immediately exercisable, and will be
cancelled when the holder ceases to be a director of OTEF's managing general
partner. Because all outstanding options will be cancelled in the merger and
because the directors have the right to receive cash distributions on the
underlying BACs as if they held the BACs directly, each director's options have
a value of approximately $210,000 immediately prior to the effective time of the
merger. This grant of options was completed after merger discussions had
commenced and was in consideration of past, present and anticipated future
services as non-employee directors of OTEF's managing general partner.
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<PAGE> 21
MERGER CONSIDERATION WILL NOT CHANGE IF THE NATURE OF OTEF'S ASSETS CHANGES OR
IF OTEF'S BOOK VALUE INCREASES
Among the Oxford entities in which AIMCO owns interests are four entities
which each own a senior living facility that was financed by one of OTEF's
mortgage revenue bonds. These four entities are currently attempting to sell the
senior living facilities. If the facilities are sold, OTEF will sell to the
purchaser of the properties the mortgage revenue bonds that financed the
properties. We cannot assure you that the sales of the senior living facilities
will occur. If OTEF sells the bonds associated with the senior living
facilities, it expects to receive approximately $63 million in cash. In
addition, it is possible that OTEF's operations could result in an increase in
book value per BAC prior to the closing of the merger. However, whether or not
OTEF sells the senior living facility mortgage revenue bonds or any other assets
or increases its book value before the closing of the merger, the value of the
BACs for purposes of the Merger will not change and BAC holders will receive no
more or less consideration, or more or less cash consideration, in the merger
than they would have received had the sales or increase not occurred.
APPROXIMATELY 90% OF THE DISTRIBUTIONS ON THE BACS ARE FEDERALLY TAX-EXEMPT,
WHILE ALL OF THE DIVIDENDS ON THE CLASS P PREFERRED STOCK AND SUBSTANTIALLY ALL
OF THE DIVIDENDS ON THE CLASS A COMMON STOCK ARE LIKELY TO BE TAXABLE
OTEF's current annual distribution is $2.26 per BAC. Because OTEF's
portfolio is made up primarily of tax-exempt mortgage revenue bonds,
approximately 90% of the distributions that BAC holders receive from OTEF are
federally tax-exempt. In contrast, BAC holders will generally be taxed on any
dividends they received from AIMCO as holders of Class A common stock and Class
P preferred stock, except for any distributions that are deemed to be a return
of capital. AIMCO expects to pay dividends of approximately $3.10 per share of
Class A common stock in 2001, as described in "Summary -- AIMCO Distribution
Policy following the Merger." Upon issuance, the Class P preferred stock will
pay preferred dividends at a rate of $2.25 per year. Based on the conversion
rate for BACs in the merger and the value of Class A common stock and Class P
preferred stock in the merger, and assuming the BAC holder held the AIMCO stock
for all of 2001, a BAC holder will receive an annual dividend from AIMCO of
$2.37 for each BAC now held. This would represent after-tax proceeds of about
$1.42 per BAC now held, as compared to the current after-tax proceeds BAC
holders receive from OTEF of about $2.17 per BAC, assuming taxation at the
maximum federal tax rate. As a result, even taking into account potential
investment income on the $6.21 per BAC special distribution, BAC holders are
likely to experience a substantial reduction in after-tax proceeds after the
merger.
WE HAVE SET A VALUE OF $48.509 PER SHARE FOR THE CLASS A COMMON STOCK FOR
PURPOSES OF THE MERGER, BUT YOU MAY NOT BE ABLE TO SELL THE CLASS A COMMON STOCK
FOR THAT PRICE
The value of a share of Class A common stock for purposes of the merger
will be $48.509, which is the average of the high and low reported sale prices
of the Class A common stock on the New York Stock Exchange for the 20 trading
days beginning on December 4, 2000, the third full trading day following the
first public announcement of the merger. As a result, each BAC will convert into
the right to receive $14.525 of Class A common stock. The Class A common stock
could trade at a price higher or lower than $48.509 at the time of and following
the merger. Therefore, former BAC holders may not be able to resell their Class
A common stock at or above $48.509 per share after the merger.
WE HAVE DEEMED THE VALUE OF AIMCO'S CLASS P PREFERRED STOCK TO BE $25 PER SHARE
FOR PURPOSES OF THE MERGER, BUT FORMER BAC HOLDERS MAY NOT BE ABLE TO RESELL THE
CLASS P PREFERRED STOCK AT THAT PRICE
The Class P preferred stock has no trading history. The deemed value of $25
per share of the Class P preferred stock was based on the liquidation value of
the Class P preferred stock, the $2.25 per share dividend and the conversion
price of the Class P preferred stock. The price of the Class P preferred stock
that will prevail in the market after the merger may be higher or lower than $25
per share. The price could be subject to fluctuations in response to many
factors, including prevailing interest rates, the price of the Class A common
stock, AIMCO's results of operations and other factors, which may be beyond
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<PAGE> 22
AIMCO's control. In addition, AIMCO cannot predict how many former BAC holders
may elect to sell their shares of Class P preferred stock soon after the merger.
If holders of Class P preferred stock elect to sell a significant number of
shares, due to the fact that they do not want to hold preferred stock that pays
taxable distributions or to other factors, the market price of the Class P
preferred stock following the merger may decline.
AIMCO has applied to list the Class P preferred stock on the New York Stock
Exchange. However, AIMCO cannot assure you that the Class P preferred stock will
be accepted for trading on the New York Stock Exchange or, if it is accepted,
that an active market will develop in the stock. If the Class P preferred stock
is not accepted for trading on the New York Stock Exchange or if an active
market for the stock does not develop, former BAC holders may not be able to
resell their Class P preferred stock at or above $25 per share.
FORMER BAC HOLDERS MAY NOT BE ABLE TO CONVERT THEIR SHARES OF CLASS P PREFERRED
STOCK INTO CLASS A COMMON STOCK WORTH $25, WHICH MAY REDUCE THE VALUE OF THE
CLASS P PREFERRED STOCK
Almost one-half of the merger consideration is made up of Class P preferred
stock. The Class P preferred stock has a deemed value of $25 per share and is
convertible into shares of Class A common stock at a rate of $56 per share of
Class A common stock. As a result, until the market price of the Class A common
stock reaches $56 per share, former BAC holders will be unable to convert a
share of Class P preferred stock into Class A common stock with a value of $25.
For example, if the market price of the Class A common stock is $48 per share,
each share of Class P preferred stock is convertible into $2.43 of Class A
common stock. As a result of the conversion rate of the Class P preferred stock,
the market price of the Class P preferred stock may decline if the market price
of the Class A common stock is less than $56 per share.
THE MERGER WILL INCREASE THE NUMBER OF FREELY TRADABLE SHARES OF CLASS A COMMON
STOCK WHICH COULD RESULT IN A DECLINE IN THE PRICE OF THE STOCK
As a result of the merger, the former BAC holders will hold Class A common
stock and Class P preferred stock convertible into Class A common stock equal to
up to approximately 5.6% of the outstanding number of shares of Class A common
stock of AIMCO, based on the number of shares of AIMCO Class A common stock
outstanding on October 31, 2000, and assuming immediate conversion of all shares
of Class P preferred stock. Sales in the public market of a substantial number
of these shares during a short time period, or the perception that large sales
might occur, could adversely affect the market price of the Class A common
stock. All of the shares issued in the merger will be freely tradable in the
public market as a result of being registered pursuant to this registration
statement. If former BAC holders sell a significant number of shares, due to the
fact that they do not want to hold stock that pays distributions the majority of
which are likely to be taxable or to other factors, the market price of the
Class A common stock may decline.
RISKS RELATING TO AIMCO'S BUSINESS
An investment in Class A common stock and Class P preferred stock following
the merger will involve various risks associated with AIMCO's business. In
addition to general investment risks and those factors set forth elsewhere in
this prospectus/information statement, BAC holders should be aware of the
following risk factors related to AIMCO's business.
AIMCO MAY NOT BE ABLE TO SUCCESSFULLY ACQUIRE, REDEVELOP AND EXPAND APARTMENT
PROPERTIES
Generally. The selective acquisition, redevelopment and expansion of
apartment properties is one component of AIMCO's growth strategy. However, AIMCO
can make no assurance as to its ability to complete transactions in the future.
Although AIMCO seeks to acquire, develop and expand properties only when such
activities are accretive on a per share basis, such transactions may fail to
perform in
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<PAGE> 23
accordance with AIMCO's expectations. When AIMCO redevelops properties, it is
subject to the risks that:
- costs may exceed original estimates;
- projected occupancy and rental rates at the property may not be realized;
- financing may not be available on favorable terms;
- construction and lease-up may not be completed on schedule; and
- it may experience difficulty or delays in obtaining necessary zoning,
land-use, building, occupancy and other governmental permits and
authorizations.
AIMCO may have difficulty managing its rapid growth. AIMCO has grown
rapidly. Since its initial public offering in July 1994, AIMCO has completed
numerous acquisition transactions, expanding its portfolio of owned or managed
properties from 132 apartment properties with 29,343 units to 1,756 apartment
properties with 333,786 units as of September 30, 2000, which includes the
Oxford properties. These acquisitions have included purchases of properties and
interests in entities that own or manage properties, as well as corporate
mergers. AIMCO's ability to successfully integrate acquired businesses and
properties depends on its ability to:
- attract and retain qualified personnel;
- integrate the personnel and operations of the acquired businesses;
- maintain uniform standards, controls, procedures and policies; and
- maintain adequate accounting and information systems.
AIMCO can provide no assurance that it will be able to accomplish these
goals and successfully integrate any acquired businesses or properties. If AIMCO
fails to successfully integrate such businesses, its results of operations could
be adversely affected.
AMICO is subject to litigation associated with partnership acquisitions,
which could increase its expenses and prevent the completion of beneficial
transactions. AIMCO has engaged in, and intends to continue to engage in, the
selective acquisition of interests in limited partnerships that own apartment
properties. In some cases, AIMCO has acquired the general partner of a
partnership and then made an offer to acquire the limited partners' interests in
the partnership. In these transactions, including the merger with OTEF and
AIMCO's pending tender offers for limited partner interests in other Oxford
entities, AIMCO may be subject to litigation based on claims that the general
partner has breached its fiduciary duty to its limited partners or that the
transaction violates the relevant partnership agreement. Although AIMCO intends
to comply with its fiduciary obligations and relevant partnership agreements,
AIMCO may incur additional costs in connection with the defense or settlement of
such litigation. In some cases, such litigation may adversely affect AIMCO's
desire to proceed with, or ability to complete, a particular transaction. Such
litigation could also have a material adverse effect on AIMCO's results of
operations.
RISKS ASSOCIATED WITH DEBT FINANCING
AIMCO's strategy is generally to incur debt to increase the return on its
equity while maintaining acceptable interest coverage ratios. AIMCO seeks to
maintain a ratio of free cash flow to combined interest expense and preferred
stock dividends of between 2:1 and 3:1. However, AIMCO's board of directors
could change this strategy at any time and increase its leverage. AIMCO's
organizational documents do not limit the amount of debt that it may incur, and
AIMCO has significant amounts of debt outstanding. Payments of principal and
interest may leave AIMCO with insufficient cash resources to operate its
properties or pay distributions required to be paid in order to maintain its
qualification as a REIT. AIMCO is also subject to the risk that its cash flow
from operations will be insufficient to make
15
<PAGE> 24
required payments of principal and interest, and the risk that existing
indebtedness may not be refinanced or that the terms of any refinancing will not
be as favorable as the terms of existing indebtedness. If AIMCO fails to make
required payments of principal and interest on any debt, its lenders could
foreclose on the properties securing such debt with a consequential loss of
income and asset value to AIMCO. As of September 30, 2000, 95.9% of the
properties that AIMCO owned or controlled were encumbered by debt. As of
September 30, 2000, AIMCO had approximately $3,825 million of indebtedness
outstanding on a consolidated basis, of which approximately $3,419 million was
secured, including $231 million that AIMCO borrowed in connection with the
acquisition of the Oxford entities.
INCREASES IN INTEREST RATES MAY INCREASE AIMCO'S INTEREST EXPENSE
As of September 30, 2000, approximately $553 million of AIMCO's debt,
including the debt incurred in connection with the acquisition of the Oxford
entities, which represents approximately 14.5% of AIMCO's outstanding debt, was
subject to variable interest rates. An increase in interest rates could increase
AIMCO's interest expense and adversely affect its cash flow and its ability to
service its indebtedness and make distributions.
AIMCO MAY INCUR LOSSES DUE TO INTEREST RATE HEDGING ARRANGEMENTS
From time to time, in anticipation of refinancing debt, AIMCO enters into
agreements to reduce the risks associated with increases in short term interest
rates. Although these agreements provide AIMCO with some protection against
rising interest rates, these agreements also reduce the benefits to AIMCO when
interest rates decline. These agreements involve the following risks:
- interest rate movements during the term of the agreement may result in a
loss to AIMCO;
- AIMCO may be exposed to losses if the hedge is not indexed to the same
rate as the debt anticipated to be incurred; and
- AIMCO may incur a loss if the counterparty to the agreement fails to pay.
COVENANT RESTRICTIONS MAY LIMIT AIMCO'S ABILITY TO MAKE PAYMENTS TO ITS
INVESTORS
Some of AIMCO's debt and other securities contain covenants that restrict
its ability to make distributions or other payments to its investors unless
certain financial tests or other criteria are satisfied. In some cases, AIMCO's
subsidiaries are subject to similar provisions, which may restrict their ability
to make distributions to AIMCO. AIMCO's credit facility provides that it may
make distributions to its investors during any 12-month period in an aggregate
amount that does not exceed the greater of 80% of its funds from operations for
that period or such amount as may be necessary to maintain its REIT status. The
credit facility prohibits all distributions if certain financial ratios and
tests are not satisfied. AIMCO's outstanding classes of preferred stock and
preferred partnership units prohibit the payment of dividends on its common
stock or common partnership units if it fails to pay the dividends or
distributions to which the holders of the preferred stock or preferred units are
entitled, the amounts of which are detailed in "Description of AIMCO Capital
Stock -- Preferred Stock." If AIMCO is unable to pay dividends, it may fail to
qualify as a REIT. This would subject AIMCO to corporate taxation and reduce its
ability to make distributions to its stockholders.
AIMCO DEPENDS ON DISTRIBUTIONS AND OTHER PAYMENTS FROM ITS SUBSIDIARIES, WHICH
MAY BE RESTRICTED FROM MAKING PAYMENTS TO AIMCO
All of AIMCO's properties are owned, and all of its operations are
conducted, by the AIMCO operating partnership and its other subsidiaries. As a
result, AIMCO depends on distributions and other payments from the subsidiaries
in order to satisfy its financial obligations and make payments to its
investors. The ability of the subsidiaries to make distributions and other
payments is dependent upon their earnings and may be subject to statutory or
contractual limitations. As an equity investor in the subsidiaries, AIMCO's
right to receive assets upon their liquidation or reorganization will be
effectively
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<PAGE> 25
subordinated to the claims of their creditors. To the extent that AIMCO is
recognized as a creditor of such subsidiaries, its claims would still be
subordinate to any security interest in or other lien on their assets and to any
of their debt or other obligations that are senior to the obligations to AIMCO.
CHANGES IN THE REAL ESTATE MARKET MAY LIMIT AIMCO'S ABILITY TO GENERATE FUNDS
FROM OPERATIONS
AIMCO's ability to make payments to its investors depends on its ability to
generate funds from operations in excess of required debt payments and capital
expenditure requirements. Funds from operations and the value of AIMCO's
properties may be adversely affected by events or conditions beyond its control.
These events or conditions could include:
- the general economic climate;
- competition from other apartment communities and alternative housing;
- local conditions, such as an increase in unemployment or an oversupply of
apartments, that might adversely affect apartment occupancy or rental
rates;
- changes in governmental regulations and the related cost of compliance;
- increases in operating costs (including real estate taxes) due to
inflation and other factors, which may not necessarily be offset by
increased rents;
- changes in tax laws and housing laws, including the enactment of rent
control laws or other laws regulating multifamily housing;
- changes in interest rate levels and the availability of financing; and
- the relative illiquidity of real estate investments.
AIMCO MAY BE SUBJECT TO COSTLY ENVIRONMENTAL LIABILITIES
Various Federal, state and local laws subject property owners or operators
to liability for the costs of removal or remediation of certain hazardous
substances released on a property. Such laws often impose liability without
regard to whether the owner or operator knew of, or was responsible for, the
release of the hazardous substances. The presence of, or the failure to properly
remediate, hazardous substances may adversely affect occupancy at contaminated
apartment communities and AIMCO's ability to sell or borrow against contaminated
properties. In addition to the costs associated with investigation and
remediation actions brought by governmental agencies, the presence of hazardous
wastes on a property could result in personal injury or similar claims by
private plaintiffs. Various laws also impose liability for the cost of removal
or remediation of hazardous or toxic substances at the disposal or treatment
facility. Anyone who arranges for the disposal or treatment of hazardous or
toxic substances is potentially liable under these laws. These laws often impose
liability whether or not the person arranging for the disposal ever owned or
operated the disposal facility.
LAWS BENEFITING DISABLED PERSONS MAY RESULT IN UNANTICIPATED EXPENSES
Under the Americans with Disabilities Act of 1990, or the ADA, all places
of public accommodation are required to meet 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 may also require
modifications to AIMCO's properties, or restrict certain further renovations of
the properties, with respect to access thereto by disabled persons. For example,
the Fair Housing Amendments Act of 1988 or the FHAA, requires apartment
properties first occupied after March 13, 1990 to be accessible to the
handicapped. Noncompliance with these laws 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 we believe that our properties are in substantial
compliance with present requirements, we may incur unanticipated expenses to
comply with the ADA and the FHAA.
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<PAGE> 26
RISKS RELATING TO REGULATION OF AFFORDABLE HOUSING
As of September 30, 2000, AIMCO owned or controlled 54 properties, held an
equity interest in 442 properties and managed for third parties and affiliates
99 properties that benefit from governmental programs intended to provide
housing to people with low or moderate incomes. These programs, which are
usually administered by the United States Department of Housing and Urban
Development, or HUD, or state housing finance agencies, typically provide
mortgage insurance, favorable financing terms or rental assistance payments to
the property owners. As a condition to the receipt of assistance under these
programs, the properties must comply with various requirements, which typically
limit rents to pre-approved amounts. If permitted rents on a property are
insufficient to cover costs, a sale of the property may become necessary, which
could result in the loss of management fee revenue. AIMCO usually needs to
obtain the approval of HUD in order to manage, or acquire a significant interest
in, a HUD-assisted property. AIMCO can make no assurance that it will always
receive such approval.
THE LOSS OF PROPERTY MANAGEMENT CONTRACTS WOULD REDUCE AIMCO'S REVENUES
AIMCO manages some properties owned by third parties. In 1999, AIMCO
received $48 million of revenue from the management of such properties,
including $15 million from the Oxford entities. AIMCO will continue to receive
property management fees from the Oxford entities after the merger. AIMCO may
suffer a loss of revenue if it loses its right to manage these properties or if
the rental revenues upon which its management fees are based decline. In
general, management contracts may be terminated or otherwise lost as a result
of:
- a disposition of the property by the owner in the ordinary course or as a
result of financial distress of the property owner;
- the property owner's determination that AIMCO's management of the
property is unsatisfactory;
- willful misconduct, gross negligence or other conduct that constitutes
grounds for termination; or
- with respect to certain affordable housing properties, termination of
such contracts by HUD or state housing finance agencies, generally at
their discretion.
AIMCO IS DEPENDENT ON ITS CHIEF EXECUTIVE OFFICER AND ITS PRESIDENT
Although AIMCO has entered into employment agreements with its Chairman and
Chief Executive Officer, Terry Considine, and its President, Peter K. Kompaniez,
the loss of any of their services could have an adverse effect on AIMCO's
operations.
AIMCO MAY HAVE CONFLICTS OF INTEREST AND MAY ENGAGE IN TRANSACTIONS WITH
AFFILIATES
AIMCO has been, and continues to be, involved in various transactions with
a number of its affiliates, including executive officers, directors and entities
in which they own interests. For example, in order to satisfy certain REIT
requirements, Messrs. Considine and Kompaniez directly or indirectly control the
management companies, which manage properties for third parties and affiliates.
Although AIMCO owns a 99% non-voting interest in these management companies, it
has no control over them or their operations. As a result, the management
companies could implement business decisions or policies that are not in AIMCO's
best interests. AIMCO has adopted policies designed to minimize or eliminate the
conflicts of interest inherent in these transactions, including a requirement
that a majority of its disinterested directors approve certain transactions with
affiliates. However, there can be no assurance that these policies will be
successful in eliminating the influence of conflicts of interest. Furthermore,
such policies are subject to change without the approval of AIMCO's
stockholders.
AS A REIT, AIMCO IS SUBJECT TO SUBSTANTIAL RISKS RELATED TO ITS COMPLIANCE WITH
THE TAX LAWS
AIMCO may fail to qualify as a REIT. AIMCO believes that it operates in a
manner that enables it to meet the requirements for qualification as a REIT for
Federal income tax purposes; however, future economic, market, legal, tax or
other considerations may cause it to fail to qualify as a REIT, or its board
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<PAGE> 27
of directors may determine to revoke its REIT status. If AIMCO fails to qualify
as a REIT, it will not be allowed a deduction for dividends paid to its
stockholders in computing its taxable income, and AIMCO will be subject to
Federal income tax at regular corporate rates. This would substantially reduce
the funds available for payment to AIMCO's investors. See "Federal Income
Taxation of AIMCO and AIMCO Stockholders" for more detail.
In addition, the failure of AIMCO to qualify as a REIT would trigger the
following consequences:
- AIMCO would be obligated to repurchase a material amount of its preferred
stock, plus accrued and unpaid dividends to the date of repurchase, and
- AIMCO would be in default under its primary credit facilities and certain
other loan agreements.
REIT distribution requirements limit AIMCO's available cash. As a REIT,
AIMCO is subject to annual distribution requirements, which limit the amount of
cash it has available for other business purposes, including amounts to fund its
growth.
Legislative or other actions affecting REITs could have a negative impact
on AIMCO. The rules dealing with Federal income taxation are constantly under
review by persons involved in the legislative process and by the IRS and the
U.S. Treasury Department. Changes to the tax laws (which may have retroactive
application), could adversely affect AIMCO's investors. AIMCO cannot predict how
changes in the tax law might affect it or its investors.
AIMCO may be subject to other tax liabilities. Even if AIMCO qualifies as
a REIT, AIMCO and its subsidiaries may be subject to certain Federal, state and
local taxes on its income and property. Any such taxes would reduce AIMCO's
operating cash flow.
POSSIBLE ADVERSE CONSEQUENCES OF LIMITS ON OWNERSHIP OF SHARES
AIMCO's articles of incorporation limit ownership of its common stock by
any single stockholder to 8.7% of the outstanding shares, or 15% in the case of
certain pension trusts, registered investment companies and Mr. Considine.
AIMCO's articles of incorporation also limit ownership of its common stock and
preferred stock by any single stockholder to 8.7% of the value of the
outstanding common stock and preferred stock, or 15% in the case of certain
pension trusts, registered investment companies and Mr. Considine. The articles
of incorporation also prohibit anyone from buying shares if the purchase would
result in AIMCO losing its REIT status. This could happen if a share transaction
results in fewer than 100 persons owning all of AIMCO's shares or results in
five or fewer persons, applying certain attribution rules of the Internal
Revenue Code, owning 50% or more of the value of all of AIMCO's shares. If you
or anyone else acquires shares in excess of the ownership limit or in violation
of the ownership requirements of the Internal Revenue Code for REITs:
- the transfer will be considered null and void;
- AIMCO will not reflect the transaction on its books;
- AIMCO may institute legal action to enjoin the transaction;
- AIMCO may demand repayment of any dividends received by the affected
person on those shares;
- AIMCO may redeem the shares;
- the affected person will not have any voting rights for those shares; and
- the shares (and all voting and dividend rights of the shares) will be
held in trust for the benefit of one or more charitable organizations
designated by AIMCO.
AIMCO may purchase the shares held in trust at a price equal to the lesser
of the price paid by the transferee of the shares or the then-current market
price. If the trust transfers any of the shares, the
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affected person will receive the lesser of the price paid for the shares or the
then-current market price. An individual who acquires shares that violate the
above rules bears the risk that the individual:
- may lose control over the power to dispose of such shares;
- may not recognize profit from the sale of the shares if the market price
of the shares increases;
- may be required to recognize a loss from the sale of the shares if the
market price decreases; and
- may be required to repay AIMCO any distributions received from AIMCO as a
result of his ownership of the shares.
AIMCO'S ARTICLES OF INCORPORATION AND MARYLAND LAW MAY LIMIT THE ABILITY OF A
THIRD PARTY TO ACQUIRE CONTROL OF AIMCO
Ownership Limit. The 8.7% ownership limit discussed above may have the
effect of precluding acquisition of control of AIMCO by a third party without
the consent of AIMCO's board of directors.
Preferred Stock. AIMCO's articles of incorporation authorize its board of
directors to issue up to 510,587,500 shares of capital stock. As of October 31,
2000, 468,432,738 shares were classified as Class A common stock, and 42,154,762
shares were classified as preferred stock. Under the articles of incorporation,
AIMCO's board of directors has the authority to classify and reclassify any of
its unissued shares of capital stock into shares of preferred stock with any
preferences, rights, powers and restrictions that AIMCO's board of directors may
determine. The authorization and issuance of preferred stock could have the
effect of delaying or preventing someone from taking control of AIMCO, even if a
change in control were in AIMCO stockholders' best interests.
Maryland Business Statutes. As a Maryland corporation, AIMCO is subject to
Maryland laws which may have the effect of discouraging offers to acquire AIMCO
and of increasing the difficulty of consummating any such offers, even if an
acquisition of AIMCO would be in its stockholders' best interests. The Maryland
General Corporation Law restricts mergers and other business combination
transactions between AIMCO and any person who acquires beneficial ownership of
shares of its stock representing 10% or more of the voting power without its
board of directors' prior approval. Any such business combination transaction
could not be completed until five years after the person acquired such voting
power, and generally only with the approval of stockholders representing 80% of
all votes entitled to be cast and 66% of the votes entitled to be cast,
excluding the interested stockholder, or upon payment of a fair price. Maryland
law also provides that a person who acquires shares of AIMCO's stock that
represent 20% or more of the voting power will have no voting rights in the
election of directors unless approved by a vote of two-thirds of the shares
eligible to vote. Additionally, recent changes to Maryland law may make it more
difficult for someone to acquire AIMCO. Maryland law now provides, among other
things, that the board of directors has broad discretion in adopting
stockholders' rights plans and has the sole power to fix the record date, time
and place for special meetings of the stockholders. In addition, Maryland law
provides that corporations which:
- have three directors who are not employees of the entity or related to an
acquiring person, and
- are subject to the reporting requirements of the Securities Exchange Act
of 1934, may elect in their articles of incorporation or bylaws or by
resolution of the board of directors to be subject to all or part of a
special subtitle which provides that:
- the corporation will have a staggered board of directors;
- any director may be removed only for cause and by the vote of two-thirds
of the votes entitled to be cast in the election of directors generally,
even if a lesser proportion is provided in the articles of incorporation
or bylaws;
- the number of directors may only be set by the board of directors, even
if the procedure is contrary to the articles of incorporation or bylaws;
- vacancies may only be filled by the remaining directors, even if the
procedure is contrary to the articles of incorporation or bylaws; and
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- the secretary of the corporation may call a special meeting of
stockholders at the request of stockholders only on the written request
of the stockholders entitled to cast at least a majority of all the votes
entitled to be cast at the meeting, even if the procedure is contrary to
the articles of incorporation or bylaws.
AIMCO'S AND OTEF'S ACTUAL RESULTS MAY DIFFER FROM FORWARD-LOOKING STATEMENTS
THEY MAKE IN THIS PROSPECTUS/INFORMATION STATEMENT
AIMCO and OTEF have made statements and projections in this
prospectus/information statement, and in documents that are incorporated into
this prospectus/information statement by reference, that are forward-looking
statements relating to future events and future performance within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements are not guarantees of
performance. We caution you not to place undue reliance on these forward-looking
statements. Forward-looking statements include the information concerning
AIMCO's and OTEF's possible or assumed results of operations. Also, when AIMCO
and OTEF use words such as "may," "will," "believe," "expect," "anticipate,"
"estimate," "could," "plan," "potential," or similar expressions, they are
making forward-looking statements.
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SPECIAL FACTORS REGARDING THE MERGER
BACKGROUND OF THE MERGER
Oxford Realty Financial Group, or ORFG, is a real estate company that,
acting through its affiliates, owned interests in and managed apartment and
senior living/healthcare communities. We refer to the ORFG affiliates that owned
interests in and managed the properties as the Oxford entities, and we refer to
the properties they owned and managed as the Oxford properties. The Oxford
properties are 167 apartment communities including 36,949 units, located in 18
states. The Oxford properties are owned by 166 separate partnerships. One of the
Oxford entities is OTEF's managing general partner. OTEF was formed in 1985 to
purchase the mortgage revenue bonds that financed the construction of some of
the Oxford properties. Since its formation, these mortgage revenue bonds have
represented a substantial majority of OTEF's assets. None of the Oxford
properties financed by OTEF's bonds receive project subsidies from the U.S.
Department of Housing and Urban Development. A description of OTEF's mortgage
revenue bonds is set forth in Annex D to this prospectus/information statement.
The average monthly rent for the residential Oxford properties that are financed
by OTEF's bonds is approximately $790.
Until December 1993, ORFG and its affiliates provided property management
services for the Oxford Properties. Thereafter, NHP Incorporated, NHP Partners,
Inc. and their related entities, to which we refer together as NHP, acquired
interests in ORFG and its affiliates and purchased the property management
services business from ORFG and its affiliates. NHP and its affiliates began
providing property management services to the Oxford properties.
In a series of transactions in 1997, AIMCO acquired NHP and acquired
indirectly interests in some of the Oxford entities. At that time, NHP managed
165 Oxford properties owned by the Oxford entities. After AIMCO's acquisition of
NHP, NHP continued to manage the Oxford properties. In consideration for its
management of the properties, Oxford entities paid to NHP the net sums of
approximately $11,910,000, $12,148,000, $12,567,000 and $9,686,000 in 1997,
1998, 1999 and the first nine months of 2000, respectively. In addition, the
Oxford entities participated in a bulk purchasing program known as Buyers
Access, which is a corporation substantially all of the economic interests in
which are owned by AIMCO. Buyer's Access earned approximately $268,000,
$254,000, $273,000 and $198,000, and Oxford entities received program dividends
of approximately $263,000, $341,000, $361,000 and $280,000, in 1997, 1998, 1999
and the first nine months of 2000, respectively, from the Oxford entities'
participation in the program. ORFG also paid preferred stock dividends to NHP in
the amounts of approximately $33,000, $59,000 and $235,000 in 1997, 1998 and
1999, respectively.
In September 1999, AIMCO initiated contact with and began discussions with
the principals of ORFG to acquire their interests in the Oxford entities. The
principles of ORFG, to whom we refer as the Oxford principals, are Leo E.
Zickler, Francis P. Lavin, Robert B. Downing, Mark E. Schifrin, Marc B. Abrams
and Richard R. Singleton. These discussions continued intermittently for several
months. On June 28, 2000, AIMCO, AIMCO's operating partnership and some of their
affiliates entered into an acquisition agreement with the Oxford principals.
Pursuant to the acquisition agreement, the Oxford principals agreed to sell to
AIMCO and its affiliates their interests in ORFG and the other Oxford entities,
including all of their interests in OTEF's managing general partner. The Oxford
acquisition closed on September 20, 2000. The purchase price was $328 million,
paid through a combination of cash and AIMCO common operating partnership units.
In addition, AIMCO amended and re-issued previously outstanding warrants held by
the Oxford principals to purchase 500,000 shares of AIMCO Class A common stock.
AIMCO incurred approximately $25 million in transaction costs. The material
provisions of the agreements between AIMCO and its affiliates and the Oxford
principals that relate to OTEF and its securities are set forth in Annex C to
this prospectus/information statement.
In connection with the Oxford acquisition, AIMCO agreed that if it
completed an acquisition of OTEF before September 20, 2003, it would pay to BAC
holders consideration of at least 90% of the fully diluted book value per BAC as
reported by OTEF for the calendar quarter immediately preceding the date of the
acquisition.
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As part of the Oxford acquisition, AIMCO acquired a 99% economic interest
in OTEF's managing general partner and slightly more than one-half of the
general partner interests in OTEF's associate general partner. AIMCO also
acquired an option to purchase 32,580 BACs that are issued and outstanding and
held by the Oxford principals, and options under OTEF's stock option plan to
purchase 652,125 BACs. The option to purchase 32,580 BACs is exercisable at a
price equal to the per BAC price paid by AIMCO in a subsequent purchase of OTEF,
such as the merger, or 90% of the fully diluted book value per BAC reported by
OTEF for the quarter immediately preceding the exercise of the option. AIMCO
paid $8 for each of the options to acquire the 652,125 BACs issued under OTEF's
stock option plan. These options have an exercise price of $23.88 per BAC. AIMCO
also agreed to pay additional amounts for each of these options if it acquired
OTEF for a price per BAC in excess of $31.88 at any time prior to September 20,
2003. As a result, AIMCO currently holds options to acquire approximately 8.53%
of the BACs that would be outstanding were the options to be exercised.
On September 20, 2000, Messrs. Zickler, Lavin and Downing, the three Oxford
principals who were directors, resigned from the board of directors of OTEF's
managing general partner, and AIMCO appointed three of its executive officers,
Mr. Terry Considine, Mr. Peter K. Kompaniez and Mr. Patrick J. Foye, to fill the
vacancies. Messrs. Gavula and Barker, the two non-employee directors of OTEF's
managing general partner, continued to hold their positions. None of the
officers or directors of OTEF's managing general partner prior to the Oxford
acquisition, other than the two non-employee directors of the managing general
partner, are currently officers or directors of OTEF's managing general partner.
AIMCO initiates tender offers from time to time to buy limited partnership
interests in partnerships controlled by its affiliates. Since the closing of the
Oxford acquisition, AIMCO has initiated tender offers for and may from time to
time in the future initiate tender offers for limited partnership interests in
the Oxford entities that own the Oxford properties financed by OTEF's mortgage
revenue bonds.
On October 4, 2000, the board of directors of OTEF's managing general
partner met for the first time since the acquisition of the managing general
partner by AIMCO. The members of the board considered several alternatives for
the future of OTEF to enhance the value of the BACs, including:
- Continuation of the current business plan. Prior to the announcement of
the merger, the BACs traded at a significant discount to OTEF's book
value, as described in "Summary -- BAC Market Price Information and
Comparison to Net Asset Value." The board noted that OTEF had not been
able to reduce this discount by following its historical business plan,
and the board questioned whether the discount would be reduced if OTEF
continued to follow its historical business plan;
- Expansion of OTEF's operations to allow OTEF to underwrite loans from
additional third-party borrowers. The board believed that such a
business plan would require substantial additional capital which might be
priced at an unacceptably high cost and involve substantial additional
lender risk and possible conflicts of interest, while not necessarily
reducing OTEF's trading discount;
- Liquidation of OTEF. The board believed that a liquidation of OTEF was
not likely to result in distributions to the BAC holders equal to the
amounts to be offered by AIMCO in the merger, because OTEF's mortgage
revenue bonds might be required to be sold at a discount if separated
from the underlying properties. In addition, the board noted that a
liquidation could be costly and could generate uncertain results and
that, in some cases, a liquidation would require action on the part of
affiliated partnerships that are not controlled by OTEF; and
- A merger with AIMCO. The board believed that a merger would be the most
immediate and effective approach to allow BAC holders to realize a value
for their BACs closer to the book value of OTEF. This plan also did not
involve some of the risks of the other options considered.
The board believed that the alternatives to a merger that it considered did
not have advantages over a merger because they were not likely to provide
greater value to BAC holders than a merger; however, the board did not determine
a course of action for OTEF's future at this meeting, but determined to study
the matter further. To this end, OTEF's managing general partner retained
Marshall & Stevens Incorporated
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as OTEF's independent real estate consultant, as provided for in OTEF's
partnership agreement, and consulted with counsel regarding a possible merger of
OTEF with a subsidiary of AIMCO. At this meeting, the board decided to use $27.1
million of the total of $35.6 million in proceeds from the sale of the bonds
that financed the San Bruno property to pay down outstanding debt owed to an
unaffiliated lender.
On October 10, 2000, Messrs. Kompaniez and Foye met with accounting,
financial and legal advisers, including representatives of Marshall & Stevens,
to discuss issues related to a merger of OTEF with a subsidiary of AIMCO.
Beginning with this meeting, representatives of Marshall & Stevens began
analyzing the value of OTEF's assets and comparable acquisitions. From October
10, representatives of Marshall & Stevens were informed of the course of the
merger discussions and any contemplated transaction terms and received copies of
the drafts of all relevant transactions documents.
AIMCO originally proposed to consummate a merger with OTEF in which OTEF
would merge with a subsidiary of AIMCO's operating partnership, and OTEF's BAC
holders would receive $33.79 per BAC, which represented 90% of the publicly
reported book value of $37.54 per BAC, in Class A common stock. Mr. Foye on
behalf of AIMCO and Messrs. Gavula and Barker, as the non-employee directors of
OTEF's managing general partner, then actively discussed over a number of weeks
the advisability and feasibility of a merger of OTEF and an affiliate of AIMCO
and the terms of a possible merger.
Messrs. Gavula and Barker expressed concern about potential conflicts of
interest inherent in OTEF's limited partnership structure that might be
heightened if substantially all of the interests in OTEF's managing general
partner and the properties financed by OTEF's mortgage revenue bonds were owned
by a publicly traded REIT. They also expressed concern about maximizing the
value of the merger consideration to the BAC holders and that the short-term
trading price of the Class A common stock might be adversely affected by sales
by former BAC holders following the merger. Messrs. Gavula and Barker sought,
among other things, to increase the amount of merger consideration, and to
confirm that the merger consideration amount and form were in the best interests
of the BAC holders. PricewaterhouseCoopers advised and assisted Messrs. Gavula
and Barker in gathering and understanding additional information with respect to
these and similar issues throughout the course of the merger discussions.
On October 31, 2000, the board of directors of OTEF's managing general
partner met telephonically to discuss the proposed merger and to consider
alternatives to a merger, such as a liquidation or another acquisition
transaction. The board also discussed the possibility of effecting an
extraordinary dividend of OTEF's cash to its BAC holders prior to a merger. The
board did not reach any decisions at this meeting.
On November 3, 2000, Messrs. Foye, Gavula and Barker met telephonically to
discuss the proposed merger. The parties did not reach any decisions at this
meeting.
On November 7, 2000, Messrs. Gavula and Barker met with their financial and
legal advisors to discuss issues related to a possible merger of OTEF with a
subsidiary of AIMCO. They discussed alternatives to the proposed merger,
including effecting an extraordinary dividend to BAC holders prior to a merger,
continuing to operate OTEF in accordance with its current business plan,
liquidating OTEF and other acquisition transactions.
On November 8 and 9, 2000, Messrs. Foye, Gavula and Barker met together
with their financial and legal advisors, including representatives of Marshall &
Stevens, to discuss issues related to a possible merger of OTEF with a
subsidiary of AIMCO. Messrs. Gavula and Barker proposed that OTEF make a cash
distribution of $100 million prior to the merger and distribute a smaller amount
of Class A common stock. Because the merger consideration was to be AIMCO
securities, Messrs. Gavula and Barker reviewed AIMCO's business strategy.
On November 15, 2000, Mr. Barker and representatives of
PricewaterhouseCoopers visited AIMCO's offices in Denver, and Mr. Gavula
participated by telephone in discussions with senior AIMCO officials concerning
AIMCO's business, results of operations and financial condition.
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On November 15 and 16, 2000, Messrs. Foye, Gavula and Barker met
telephonically together with their financial and legal advisers, including
representatives of Marshall & Stevens, to discuss issues related to a possible
merger of OTEF with a subsidiary of AIMCO, including valuation of the BACs and
matters to be considered by Marshall & Stevens in rendering a fairness opinion
with respect to the transaction. PricewaterhouseCoopers provided advice to
Messrs. Gavula and Barker in connection with their review of the valuation
methodology employed by Marshall & Stevens. Messrs. Gavula and Barker proposed
that a portion of the merger consideration be paid in convertible preferred
stock that would pay a fixed dividend, on the grounds that the preferred stock
would have less equity security risk and a higher dividend yield than would the
Class A common stock and would permit former BAC holders to participate in the
growth of AIMCO. AIMCO proposed that OTEF would make a special distribution to
its BAC holders in the amount of $25 million prior to the merger, and AIMCO
would pay approximately one-half of the merger consideration in the form of a
new class of preferred stock of AIMCO, Class P convertible cumulative preferred
stock.
On November 20 and 21, 2000, Messrs. Foye, Gavula and Barker met together
with their financial and legal advisers to discuss the terms of the proposed
merger. Based on these discussions, AIMCO prepared a merger agreement among
AIMCO, AIMCO's operating partnership, AIMCO/OTEF, LLC and OTEF pursuant to which
AIMCO/OTEF, LLC would be merged with and into OTEF, and OTEF would be the
surviving entity. Under the terms of the merger agreement, the BACs would be
valued at $27.03 per BAC. In the merger, each BAC and its associated right would
be converted into the right to receive 0.543 shares of AIMCO Class P preferred
stock deemed to be valued at $25 per share, or $13.58 of Class P preferred stock
per BAC, and the number of shares of AIMCO Class A common stock equal in value
to $13.45, which is the difference between $27.03 and the value of the Class P
preferred stock to be received. The value per share of the AIMCO Class A common
stock would be the average of the high and low reported sale prices of the Class
A common stock on the New York Stock Exchange for the 20 trading days beginning
on the third full trading day following the first public announcement of the
merger. However, in no case would a share of Class A common stock be valued in
excess of $50 per share or less than $44 per share. The Class P preferred stock
would have the terms described under "Description of AIMCO Class P Convertible
Cumulative Preferred Stock." Simultaneous with the announcement of the merger,
OTEF's managing general partner would disclose OTEF's plan to make a cash
distribution to the BAC holders of $50 million payable to holders of record
prior to the consummation of the merger. The special distribution, considered
together with the $27.03 per BAC of merger consideration, would equal or exceed
90% of OTEF's publicly reported book value per BAC for the quarter ended
September 30, 2000. These transaction terms were included in drafts of the
transaction documents and were described to and analyzed by Marshall & Stevens.
On November 22, 2000, Messrs. Gavula and Barker determined not to approve
the merger as described above due to concerns about the total value of the
transaction and issues concerning the mix of consideration to be received by the
BAC holders in the proposed merger. In particular, Messrs. Gavula and Barker
were concerned that the merger consideration was being determined by calculating
90% of the value of OTEF's September 30, 2000 net book value and subtracting
from that amount the special distribution. In addition, Messrs. Gavula and
Barker were concerned that AIMCO intended to exercise its options to purchase
BACs prior to the record date for the special distribution. As a result, AIMCO,
as a BAC holder, would receive a pro rata share of the special distribution. At
that point, merger discussions temporarily ceased.
On November 27 and 28, 2000, Messrs. Foye, Gavula and Barker met together
with their financial and legal advisers to resume discussions to seek to resolve
the remaining issues affecting the value of the proposed merger to the BAC
holders. In those meetings, the parties preliminarily agreed to the terms of the
merger as described in this section and "The Merger Agreement and Terms of the
Merger." Execution of the merger agreement was made subject to a further meeting
of the board of directors and confirmation from Marshall & Stevens that the
transaction was fair to OTEF and the BAC holders. The concerns expressed by
Messrs. Gavula and Barker on November 22 were addressed by calculating the value
of the merger consideration by subtracting from OTEF's net book value the amount
of the special distribution
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and multiplying the resulting amount by 90%. By calculating the amount of merger
consideration in this manner, each BAC holder will receive merger consideration
of $28.20 per BAC, as opposed to $27.03 per BAC as proposed on November 22. With
respect to whether AIMCO could exercise its options to purchase BACs prior to
the record date for the special distribution, Messrs. Gavula and Barker were
advised that an exercise by AIMCO of its options in these circumstances was in
accordance with the terms of the options.
On November 29, 2000, Marshall & Stevens made a presentation to the board
of directors of OTEF's managing general partner regarding the proposed final
terms of the merger and advised the board that it would deliver its opinion
stating that the merger, as described in this section and "The Merger Agreement
and Terms of the Merger," was fair to OTEF and was fair to the BAC holders and
OTEF's associate general partner from a financial point of view, that OTEF's
publicly reported book value per BAC for the quarter ended September 30, 2000
was fairly computed, and that the fair market value of the Class P preferred
stock was $25 per share. After receiving the Marshall & Stevens opinion, the
non-employee directors and the full board of directors of OTEF's managing
general partner determined, for the reasons set forth below, that the merger was
in the best interests of OTEF and the BAC holders and unanimously approved the
merger. The board also decided to redeem each of OTEF's 97 status quo BACs for
$860.25 per status quo BAC in cash, or a total of $83,445. Status quo BACs are
BACs that have interests in only some of OTEF's assets.
As of November 29, 2000, the executive committee of the board of directors
of AIMCO, acting by unanimous written consent, determined that the proposed
merger was in the best interests of AIMCO and its stockholders, that it was in
the best interests of AIMCO's operating partnership, and to effect the merger.
On December 1, 2000, OTEF's managing general partner notified all holders
of the status quo BACs that OTEF was redeeming each status quo BAC for $860.25
in cash.
OTEF'S REASONS FOR THE MERGER
The board of directors of OTEF's managing general partner is comprised of
Mr. Terry Considine, Mr. Peter K. Kompaniez, Mr. Patrick J. Foye, Mr. Stephen P.
Gavula, Jr. and Mr. Scot B. Barker. In reaching its determination that the
merger is fair to OTEF and the BAC holders and to approve the merger, the board
of directors considered a number of factors, including those set forth below.
This discussion of the factors considered by the board is not intended to be
exhaustive, but includes all material factors considered by the board. In light
of the variety of factors considered in connection with its evaluation of the
merger, the board of directors of OTEF's managing general partner did not find
it practicable to, and therefore did not, quantify or otherwise assign relative
weights to the specific factors considered in reaching its determination.
Rather, the board views its decision as being based on the totality of the
information presented to and considered by it.
- Realization of Significant Premium Over Market Price. Since their
listing on the American Stock Exchange, the BACs have traded at a
substantial discount to OTEF's book value. In 1997, OTEF adopted a new
business plan to pursue asset growth, which OTEF believed would result in
greater value for the BAC holders. While the trading prices of OTEF's
BACs have increased along with its net income and total assets, BACs have
continued to trade at a substantial discount to book value per BAC. The
board of directors of OTEF's managing general partner concluded that even
if OTEF were to continue to implement its growth plan successfully, it
was likely that the trading prices of the BACs would continue to
represent a substantial discount from their book values. The board also
concluded that there were no viable alternatives to OTEF's current
business plan that would permit OTEF's BAC holders to realize greater
values for their interests. In the merger, the BAC holders will receive
Class A common stock and Class P preferred stock with a value that, taken
together with the special distribution, is $34.41, which is substantially
greater than the $25.19 market value of the BACs before the merger was
announced, and that is closer to OTEF's book
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value of $37.54 than the value that BAC holders could have realized by
selling their BACs, or that they could have received if OTEF had pursued
its existing business plan.
- Realization of Value in the Merger Relative to Liquidation Value. In
addition, the board of directors of OTEF's managing general partner
concluded that BAC holders would be unlikely to realize an amount equal
to the merger consideration, taken together with the special
distribution, if OTEF's assets were sold in a liquidation of OTEF. The
mortgage revenue bonds and taxable securities that make up OTEF's
portfolio are non-customary, specifically tailored arrangements between
OTEF and affiliated partnerships. As a result, they are unrated and
illiquid, and therefore would be likely to be sold at a discount in a
liquidation. In addition, it was possible that a liquidation would be
subject to higher transactions costs than a merger and might require the
approval of the general partners of the borrower partnerships, which
could not be guaranteed.
- Marshall & Stevens Opinion. The board of directors of OTEF's managing
general partner considered the opinion delivered by Marshall & Stevens,
dated November 29, 2000, which stated that, as of the date of the
opinion, the merger is fair to OTEF and is fair to the BAC holders and
OTEF's associate general partner from a financial point of view, that
OTEF's publicly reported book value per BAC for the quarter ended
September 30, 2000 was fairly computed, and that the fair market value of
the Class P preferred stock is $25 per share. The opinion is attached to
this prospectus/information statement as Annex B.
- Diversification. By becoming shareholders of AIMCO, the holders of BACs
will own an interest in a real-estate owning entity with a much larger
and more diversified portfolio of investments than that of OTEF.
- Liquidity. While the merger will result in OTEF ceasing to be a publicly
traded entity, BAC holders will receive AIMCO Class A common stock and
Class P preferred stock in the merger. The Class A common stock is traded
on the New York Stock Exchange, and AIMCO has applied to list the Class P
preferred stock on the New York Stock Exchange. Because the Class A
common stock has an average trading volume of approximately 135,000
shares per day, compared to the average volume of approximately 4,000
BACs per day on the American Stock Exchange, it is likely that the Class
A common stock and Class P preferred stock, if it is accepted for
listing, will be at least as liquid as the BACs are now.
- Tax Treatment of Distributions. Because OTEF's portfolio is made up
primarily of tax-exempt mortgage revenue bonds, approximately 90% of the
distributions that BAC holders receive from OTEF are federally
tax-exempt. In contrast, BAC holders will generally be taxed on any
dividends they received from AIMCO as holders of Class A common stock and
Class P preferred stock, except for any distributions that are deemed to
be a return of capital. Based on the current annual distribution per BAC
of $2.26, approximately 90% of which is tax-exempt, the conversion rate
of the BACs in the merger, AIMCO's expected annual dividend per share of
Class A common stock for 2001 of $3.10 as described in "Summary -- AIMCO
Distribution Policy Following the Merger," the majority of which is
likely to be taxable, and the dividend rate on the Class P preferred
stock, all of which will be taxable, after the merger BAC holders are
likely to experience a substantial reduction in the amount of
distributions they would retain after tax. Potential investment income on
the $6.21 special distribution would offset only a part of this
reduction.
However, the board also considered that the value of the Class A common
stock has risen more rapidly than the value of BACs, and the dividend rate
on the Class A common stock has risen more rapidly than the distribution
rate on BACs, as described in "Summary -- Comparative Per Share Dividend
Information," "Summary -- BAC Market Price Information and Comparison to
Net Price Value" and "Description of AIMCO Capital Stock." As a result,
the board of directors of OTEF's managing general partner concluded that
the substantial premium being received by the BAC holders, the $50 million
special distribution to be declared, the chance of continued appreciation
of the Class A common stock and the 9% dividend to be paid on the Class P
preferred stock outweighed the decrease in after-tax distributions that
will be experienced by BAC holders.
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- Calculation of Book Value per BAC. The board of directors of OTEF's
managing general partner has been advised by Marshall & Stevens that
OTEF's publicly reported book value per BAC for the quarter ended
September 30, 2000, which was used to determine whether AIMCO had met its
obligation to pay consideration of at least 90% of OTEF's publicly
reported book value per BAC in the merger, was fairly computed. AIMCO has
agreed to report OTEF's book value on a basis consistent with past
practice.
- Terms and Certainty of Transaction. The board of directors of OTEF's
managing general partner viewed favorably the terms and conditions of the
merger agreement, and the likelihood of the consummation of the merger.
BAC holders should be aware that executive officers of AIMCO hold three of
the five positions on the board of directors of OTEF's managing general partner.
No third party was appointed to represent the holders of the BACs in connection
with the merger, and no provision was made to give the BAC holders access to any
corporate files. However, the board of directors of OTEF's managing general
partner, at the request of and on behalf of Messrs. Gavula and Barker, retained
independent legal and financial advisors to advise Messrs. Gavula and Barker in
connection with the merger. If a third-party representative had represented the
holders of the BACs, the terms of the merger may have been different.
Although from time to time OTEF has in the past received from other
entities indications of their interest in engaging in a transaction with OTEF,
no indication of interest or proposal other than the merger was considered by
the board of directors of OTEF's managing general partner during the period
immediately prior to November 29, 2000. In addition, in the past two years,
OTEF's managing general partner has not received any other firm offers for the
acquisition of OTEF or its assets. The board of directors of OTEF's managing
general partner did not choose to solicit proposals from other parties. OTEF's
mortgage revenue bonds receive substantially all of the economic benefit from
the operation of the properties that secure the bonds. For this reason, a holder
of the bonds that did not also control the properties could not be assured that
the properties would be operated in a way that would maximize value for the
bondholder. Accordingly, the board of directors of OTEF's managing general
partner believed that other parties would be unlikely to offer consideration
equal to that offered by AIMCO. Further, because AIMCO owns substantially all of
the economic interests in OTEF's managing general partner, the board of
directors of OTEF's managing general partner believed that solicitations from
third parties were unlikely.
FOR THE REASONS SET FORTH ABOVE, THE BOARD OF DIRECTORS OF OTEF'S MANAGING
GENERAL PARTNER UNANIMOUSLY DETERMINED THAT THE MERGER IS FAIR TO AND IN THE
BEST INTERESTS OF OTEF AND THE BAC HOLDERS AND OTEF'S ASSOCIATE GENERAL PARTNER
AND UNANIMOUSLY APPROVED THE MERGER.
AIMCO'S REASONS FOR THE MERGER
One of AIMCO's reasons for entering into the Oxford acquisition was to give
it the flexibility necessary to acquire, if AIMCO so chose, and maximize the
value of OTEF's assets. AIMCO decided to acquire OTEF because AIMCO owns
substantial interests in the partnerships that are OTEF's debtors, and AIMCO
believed that it could realize value by consolidating the ownership of the
equity and debt of these partnerships, because it would then have the
opportunity to dispose of the bonds held by OTEF and realize the discount to net
book value at which the BACs have been trading. AIMCO also believed that the
acquisition of OTEF would benefit AIMCO and the partnerships. Once AIMCO decided
to acquire all of the OTEF interests, AIMCO chose to effect a merger since it is
the most direct way to acquire all of the outstanding BACs. If AIMCO tendered
for the securities, it likely would still have to effect a merger to acquire all
of the securities. Further, under OTEF's partnership agreement, OTEF's managing
general partner can effect a merger of OTEF without the vote of the BAC holders
provided that it receives an opinion from OTEF's independent real estate
consultant to the effect that the merger is fair to OTEF. This independent
consultant was retained by OTEF and its prior officers and directors and is
identified in OTEF's partnership agreement.
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AIMCO believes that the terms of the merger agreement and the merger and
the other transactions contemplated thereby are in the best interests of AIMCO
and its stockholders. Accordingly, AIMCO has approved the merger agreement and
the merger. In reaching its decision, AIMCO considered a number of factors and
consulted with its legal and other advisors. AIMCO did not engage a financial
advisor or seek a fairness opinion from any financial advisor in connection with
its consideration of the merger. The merger of AIMCO/OTEF, LLC into OTEF is
consistent with AIMCO's operating, financial and growth strategies. The
principal reasons for AIMCO's approval of the merger agreement and the merger
are set forth below. This discussion of the information and factors considered
by AIMCO is not intended to be exhaustive. In view of the variety and nature of
the factors considered, AIMCO did not consider it practicable to, and did not,
quantify or assign relative weights to the factors it considered in approving
the merger. Rather, AIMCO views its decision as being based on the totality of
the information presented to and considered by it.
- Ability to Refinance Mortgage Revenue Bonds. AIMCO has considered and
currently intends, after the merger is consummated, to cause the
partnerships that own the properties financed by OTEF's mortgage revenue
bonds to refinance those bonds with a loan from one or more third-party
lenders, although it currently does not have any understandings with
purchasers or refinancing sources. Upon refinancing, OTEF's mortgage
revenue bonds would no longer be outstanding, and the property-owning
partnerships would incur lower interest expense. AIMCO intends to cause
the partnerships to refinance the bonds if the AIMCO affiliate that
serves as the general partner of each partnership determines that this
type of action is in the best interests of the partnership. Because the
property-owning partnerships will initiate and carry out the refinancing,
OTEF will not be involved in the refinancing process.
- Increase of Interests in Underlying Properties. AIMCO determined that
the merger will increase AIMCO's interests in and profits and revenues
from the properties underlying the mortgage revenue bonds and will
consolidate AIMCO's control over these properties. The mortgage revenue
bonds are generally structured to enable the holder to participate in any
growth in the net operating income and appreciation of the underlying
properties. By acquiring the mortgage revenue bonds in the merger, AIMCO
will obtain the rights represented by the bonds to the income and
appreciation in the underlying properties.
- Acquisition Using Equity. AIMCO considered that the merger allowed it to
acquire OTEF's assets, including the mortgage revenue bonds, using
equity, as opposed to cash or other consideration. This type of issuance
of AIMCO's equity securities would deleverage AIMCO slightly.
- Elimination of Conflicts. Consummation of the merger would also
eliminate the actual and potential conflicts of interest between OTEF's
managing general partner, substantially all of which is owned by AIMCO,
and the partnerships, in which AIMCO also holds interests, that own the
properties financed by OTEF's mortgage revenue bonds. Because OTEF's
managing general partner is substantially owned by AIMCO, which also has
interests in the properties financed by OTEF's mortgage revenue bonds,
OTEF's managing general partner may have interests different from those of
OTEF's public BAC holders. If AIMCO acquires all of the outstanding BACs,
OTEF's managing general partner will no longer have a conflict of
interest, because AIMCO will be the only BAC holder.
- Immaterial Additional Costs of Operation. Acquiring the mortgage revenue
bonds owned by OTEF will not materially increase AIMCO's costs of managing
the property portfolio, because AIMCO already manages substantially all of
the underlying properties.
AIMCO also noted that there are no benefits to the directors and executive
officers of AIMCO as a result of the merger, other than in their capacity as
stockholders of AIMCO. AIMCO also believes there are no substantial potential
negative factors and risks to AIMCO that could arise or do arise from the
merger.
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FOR THE REASONS SET FORTH ABOVE, AIMCO DETERMINED THAT THE MERGER IS FAIR TO AND
IN THE BEST INTERESTS OF AIMCO AND ITS STOCKHOLDERS.
OPINION OF OTEF'S INDEPENDENT REAL ESTATE CONSULTANT
Marshall & Stevens Incorporated has acted as independent real estate
consultant to OTEF since 1988. Pursuant to OTEF's partnership agreement, OTEF's
managing general partner requested an opinion from Marshall & Stevens, in its
capacity as OTEF's independent real estate consultant, to the effect that the
merger is fair to OTEF, the merger is fair to the BAC holders and OTEF's
associate general partner from a financial point of view, OTEF's publicly
reported book value per BAC for the quarter ended September 30, 2000 was fairly
computed, and the fair market value of the Class P preferred stock is $25 per
share. On November 29, 2000, Marshall & Stevens delivered a written opinion to
the board of directors of OTEF's managing general partner to the effect that, as
of that date, and based on the assumptions made, matters considered and limits
of review set forth in the opinion, the merger was fair to OTEF, the merger is
fair to the BAC holders and OTEF's associate general partner, OTEF's publicly
reported book value per BAC for the quarter ended September 30, 2000 was fairly
computed, and the fair market value of the Class P preferred stock was $25.
OTEF's managing general partner has not requested that Marshall & Stevens, and
Marshall & Stevens does not expect to, update its opinion prior to the closing
of the merger.
THE FULL TEXT OF THE MARSHALL & STEVENS OPINION, WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE SCOPE OF REVIEW, IS
ATTACHED TO THIS PROSPECTUS/INFORMATION STATEMENT AS ANNEX B. WE ENCOURAGE YOU
TO READ THE OPINION IN ITS ENTIRETY. THE MARSHALL & STEVENS OPINION WAS INTENDED
FOR THE USE OF THE BOARD OF DIRECTORS OF OTEF'S MANAGING GENERAL PARTNER AND WAS
DIRECTED ONLY TO THE FAIRNESS OF THE MERGER TO OTEF, THE FAIRNESS OF THE MERGER
TO THE BAC HOLDERS AND OTEF'S ASSOCIATE GENERAL PARTNER, THE FAIRNESS OF THE
COMPUTATION OF OTEF'S PUBLICLY REPORTED BOOK VALUE PER BAC, AND THE FAIR MARKET
VALUE OF THE CLASS P PREFERRED STOCK. THE OPINION DID NOT ADDRESS THE MERITS OF
THE DECISION BY OTEF'S MANAGING GENERAL PARTNER TO ENGAGE IN THE MERGER.
MARSHALL & STEVENS DID NOT EXPRESS ANY OPINION AS TO THE PRICES AT WHICH THE
CLASS A COMMON STOCK AND CLASS P PREFERRED STOCK WILL TRADE FOLLOWING THE
ANNOUNCEMENT OR CONSUMMATION OF THE MERGER. THE SUMMARY OF THE MARSHALL &
STEVENS OPINION SET FORTH BELOW INCLUDES THE MATERIAL TERMS OF THE OPINION.
In arriving at its opinion, Marshall & Stevens, among other things,
received and reviewed information concerning the proposed transaction, OTEF and
AIMCO. Marshall & Stevens had received drafts of the proposed merger agreement
as it was revised to reflect the negotiations as described above, and reviewed a
draft of the proposed merger agreement that was to become the final agreement.
In addition, Marshall & Stevens received and reviewed an OTEF management
presentation setting forth financial projections for OTEF prepared prior to
consideration of the merger, OTEF agreements governing payments to OTEF as the
holder of mortgage revenue bonds, financial information related to partnerships
that own the properties financed by OTEF's mortgage revenue bonds and that make
payments on the bonds, publicly available business and financial information
concerning OTEF and AIMCO and a draft of this prospectus/ information statement.
In addition, Marshall & Stevens:
- Considered the nature of the business and the history of OTEF, the
economic outlook in general and the outlook for the industry in which
OTEF competes, in particular;
- Reviewed OTEF's historical net book value and total assets, the outlook
for OTEF's future earnings, and OTEF's financial condition and
dividend-paying capacity;
- Analyzed financial statements and other materials regarding guidelines
for publicly traded companies in the same or similar industries as OTEF
and required rates of return on debt and equity capital for OTEF and
comparable companies in the same or similar industries;
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- Reviewed and analyzed data relative to acquisitions for companies in the
same or similar industries as OTEF and prices at which public companies
in related lines of business are selling, both on a minority and control
basis;
- Analyzed prior transactions in BACs, as well as the historical trading
prices and volume of OTEF's publicly traded interests;
- Analyzed the total consideration to be received by BAC holders pursuant
to the merger agreement;
- Reviewed the comparative rights of AIMCO stockholders and BAC holders, as
detailed in this prospectus/information statement; and
- Conducted interviews with OTEF's management and participated in
discussions among representatives of AIMCO and OTEF and their financial
and legal advisers.
Marshall & Stevens completed an analysis comparing the total merger
consideration to be received by BAC holders and the special distribution to the
market value of the BACs. In their analysis Marshall & Stevens used three
separate indicators of value -- a market transaction approach, a market
comparable approach and a discounted cash flow analysis.
The market transaction approach involved an analysis of the historical
trading prices and volume of the BACs. Marshall & Stevens advised that public
trading prices are illustrative of third party valuations of the BACs. Marshall
& Stevens reviewed the daily high, low and closing trading prices over a one
month period prior to the proposed transaction and weekly high, low and closing
prices over a one year period prior to the proposed transaction. Based on this
analysis, Marshall & Stevens determined the total consideration to be received
by BAC holders in the proposed transaction was superior to the value of the BACs
as determined by the historical trading prices.
The market comparable approach involved a comparison of OTEF to publicly
traded comparable companies. In this instance, an indicative ratio such as price
to book value was computed and used to determine the value of OTEF. Based on
this analysis, Marshall & Stevens determined the total consideration to be
received by BAC holders in the proposed transaction was superior to the value of
the BACs as determined by the market comparable approach.
The discounted cash flow analysis involved a calculation of the present
value of OTEF's future income generating ability. The discounted cash flow was
based upon projections OTEF typically prepares for the board of directors of its
managing general partner. Operating income was adjusted for working capital
needs and discounted to present value at a risk-adjusted rate of return. Based
on this analysis, Marshall & Stevens determined the total consideration to be
received by BAC holders in the proposed transaction was superior to the value of
the BACs as determined by the discounted cash flow analysis.
Marshall & Stevens also reviewed the comparative rights of AIMCO
stockholders and BAC holders and concluded that BAC holders are being adequately
compensated for the change in their rights.
In preparing its opinion, Marshall & Stevens did not undertake any
independent verification of the accuracy or completeness of any information
concerning OTEF or AIMCO that it considered in its review, and relied upon and
assumed the accuracy and completeness of all of this information and data.
Marshall & Stevens' opinion is based on economic and other conditions as in
effect on November 29, 2000, and the information made available to that firm as
of that date.
The Marshall & Stevens opinion assumes there are no undisclosed or
unexpected conditions associated with OTEF that might adversely affect the value
of its securities. Further, Marshall & Stevens assumes no responsibility to
update the opinion to reflect changes in market conditions or other
circumstances occurring after the date of the opinion.
Marshall & Stevens also assumed that the substantive terms of the final
forms of the transaction documents would be substantially similar to the drafts
it reviewed and to the terms provided to it of documents not yet prepared.
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Consideration of Capital Structure of OTEF and AIMCO
Marshall & Stevens reviewed OTEF's capital structure. This included a
review of the rights and obligations associated with OTEF's associate general
partner interest, the BACs and Affiliated BACs. Affiliated BACs are BACs that
are subordinated in right of payment and liquidation to the other BACs. Marshall
& Stevens considered that:
- the BACs, which originally were issued at a price of $1,000 per BAC, were
split on a 25-for-1 basis in connection with the listing of the BACs on
the American Stock Exchange;
- OTEF received no capital contributions in connection with the issuance of
the Affiliated BACs or the associate general partner interest;
- BACs are traded on the American Stock Exchange;
- there is no public market for the Affiliated BACs or the associate
general partner interest, and neither the Affiliated BACs nor the
associate general partner interest are listed on any securities exchange;
- there are 37,500 Affiliated BACs outstanding, compared to 7,306,925
outstanding non-Affiliated BACs; and
- OTEF intends to declare a $50 million, or $6.21 per BAC, special
distribution to its BAC holders prior to the merger.
Marshall & Stevens has advised OTEF's managing general partner that its
consideration of Affiliated BACs did not affect its opinion.
Marshall & Stevens also reviewed OTEF's calculation of its publicly
reported book value. Based on the materials it reviewed, Marshall & Stevens
determined that the value of $28.20 per BAC and $1,000 for the associate general
partner interest for purposes of the merger was fair to OTEF and was fair to the
BAC holders and OTEF's associate general partner from a financial point of view.
Marshall & Stevens also concluded that OTEF's publicly reported book value per
BAC for the quarter ended September 30, 2000 was fairly computed, and that the
fair market value of the Class P preferred stock was $25 per share.
In evaluating the fairness of the merger, Marshall & Stevens considered
whether the contemplated actions are fair to OTEF, the BAC holders and OTEF's
associate general partner taking into account the reasons for the contemplated
actions, the alternatives available to OTEF, including liquidation, any
advantages, disadvantages or other consequences of the actions, as well as such
other matters as Marshall & Stevens considered material relating to the actions
or their possible consequences. Marshall & Stevens evaluated whether the
contemplated actions, taking into account all relevant considerations, are
reasonable and fair, from an economic perspective, to OTEF, the BAC holders and
OTEF's associate general partner. In accordance with the terms of its agreement
with OTEF, Marshall & Stevens is to consider a transaction to be fair to OTEF if
Marshall & Stevens believed that OTEF would enter into such a transaction on the
terms proposed if all other parties involved were unaffiliated with OTEF's
managing general partner. Marshall & Stevens did not consider this assumption to
be material to its opinion, and did not receive any indication from OTEF or
AIMCO principals that they would engage in the merger with unaffiliated
entities. Marshall & Stevens did not determine whether the contemplated actions
are the best possible out of all courses of action that might be considered, but
only that the contemplated actions are within the range of actions that would
reflect a fair arrangement between unaffiliated parties.
Marshall & Stevens is a recognized real estate consulting firm with
substantial experience in valuing real estate assets. Marshall & Stevens has
been OTEF's independent real estate consultant since 1988 and is identified in
OTEF's partnership agreement as OTEF's independent real estate consultant. As a
result, Marshall & Stevens is familiar with OTEF's business and its assets. The
board of directors of OTEF's managing general partner selected Marshall &
Stevens to render the fairness opinion based on its expertise and specific
experience with OTEF.
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Since 1988, Marshall & Stevens has rendered consulting services to OTEF and
since 1997 has received from OTEF consulting fees totaling approximately
$111,000. Pursuant to a letter agreement dated November 10, 2000, as amended,
OTEF's managing general partner agreed to pay Marshall & Stevens additional fees
and expenses totalling approximately $100,000 in connection with the fairness
opinions related to the merger and the redemption by OTEF of its status quo
BACs. OTEF and Marshall & Stevens determined the fee to be paid by OTEF in
connection with the fairness opinions by negotiations between the parties after
an initial fee proposal by Marshall & Stevens.
NO VOTE OF THE BAC HOLDERS IS REQUIRED TO CONSUMMATE THE MERGER
Under OTEF's partnership agreement, OTEF's managing general partner is
authorized to merge OTEF with another entity, including an affiliate, and to
take all actions, including negotiating and entering into an agreement of
merger, that OTEF's managing general partner determines are necessary or
appropriate to effect the merger, without the vote of the BAC holders, provided
that the managing general partner obtains an opinion from OTEF's independent
real estate consultant that the merger is fair to OTEF and provided that the
merger respects any applicable appraisal rights of OTEF's security holders. As
described in this section, Marshall & Stevens, OTEF's independent real estate
consultant, has given its opinion that the merger is fair to OTEF and to the BAC
holders. Accordingly, a vote of the BAC holders is not required in order to
consummate the merger. Under Maryland law and OTEF's partnership agreement, BAC
holders do not have appraisal rights.
INTERESTS OF OTEF'S MANAGING GENERAL PARTNER IN THE MERGER
The board of directors of OTEF's managing general partner unanimously
concluded that the merger is fair to OTEF and the BAC holders and is in the best
interests of OTEF, and has approved the merger agreement and the transactions
contemplated in the merger agreement. Because AIMCO owns substantially all of
the economic interests in OTEF's managing general partner, it may have interests
that differ from the interests of BAC holders generally. For example, after the
merger, AIMCO intends to cause the partnerships that own the properties financed
by OTEF's mortgage revenue bonds to refinance those bonds with a loan from one
or more third-party lenders. The result of this plan would be that OTEF's
mortgage revenue bonds would no longer be outstanding, and the property-owning
partnerships would incur lower interest expense. If AIMCO does not take this
action, it may cause OTEF to engage in other transactions such as selling some
or all of OTEF's assets or other financing, total return swap or other
arrangements.
INTERESTS OF OXFORD PRINCIPALS AND OTEF AFFILIATES IN THE MERGER
In connection with the Oxford acquisition, AIMCO purchased from the Oxford
principals and other directors, officers and employees of OTEF's managing
general partner options to purchase 652,125 BACs under option sale agreements.
Pursuant to the agreements, AIMCO agreed to pay the sellers the difference
between the implied value of $31.88 assigned to the BACs at the time AIMCO
purchased the options and the per BAC value of the consideration in a merger
completed before September 20, 2003. Taking the merger consideration and the
special distribution together, the BAC holders will receive a total of $34.41
per BAC. As a result, in connection with the merger, the Oxford principals and
other directors, officers and employees of OTEF's managing general partner will
at the time of the merger receive from AIMCO a cash payment equal to $2.53 per
BAC subject to the options, or a total of approximately $1.65 million.
Also in connection with the Oxford acquisition, AIMCO acquired from the
Oxford principals an option to purchase 32,580 BACs that are issued and
outstanding and are held by the Oxford principals. This option is exercisable at
a price equal to the per BAC price paid by AIMCO in a subsequent purchase of
OTEF, such as the merger, or 90% of the fully diluted book value per BAC
reported by OTEF for the quarter immediately preceding the exercise of the
option in any other case. On November 30, 2000, when we announced the execution
of the merger agreement, this option was deemed to be exercised by AIMCO. As a
result, at the time of the closing of the merger, AIMCO will purchase from the
Oxford principals 32,580 BACs for a total purchase price of approximately
$919,000 in cash. Prior to the option exercise, the
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Oxford principals will have the right to receive the special distribution on the
BACs that will be declared by OTEF. In connection with the special distribution,
the Oxford principals will receive a total of approximately $202,000.
Pursuant to the merger agreement, AIMCO and the partnership that survives
the merger have agreed to indemnify all of the directors, officers and employees
of OTEF's managing general partner against all liabilities related to actions
they have taken in connection with the merger agreement or the closing of the
transactions contemplated by the merger agreement, all liabilities arising from
any claim or investigation by a federal or state authority based on any actions
or omissions on the part of AIMCO prior to the closing of the merger, and all
liabilities arising as a result of any of their actions as a director, officer
or employee of OTEF's managing general partner, AIMCO, the general partner of
AIMCO's operating partnership or the managing member of AIMCO/OTEF, LLC,
relating to OTEF prior to the effective time of the merger. This obligation
includes agreed compensation for the value of the indemnitees' time in the event
of a claim, which for the non-employee directors of OTEF's managing general
partner will be $5,000 per day.
ROLE AND INTERESTS OF NON-EMPLOYEE DIRECTORS
The board of directors of OTEF's managing general partner is comprised of
Messrs. Considine, Kompaniez, Foye, Gavula and Barker. Messrs. Gavula and Barker
are not employees of OTEF's managing general partner or its affiliates. At the
request of and on behalf of Messrs. Gavula and Barker, OTEF's managing general
partner retained Kirkpatrick & Lockhart LLP to provide legal advice and
PricewaterhouseCoopers LLP to provide analyses and other services to Messrs.
Gavula and Barker in connection with the merger. Messrs. Gavula and Barker have
used this advice and information, together with the fairness opinion and other
information available to them, to conduct their evaluation of the terms of the
merger.
Each of Messrs. Gavula and Barker own 25,000 BACs and will participate in
the merger consideration as BAC holders.
Each of the non-employee directors sold options to purchase 3,261 BACs to
AIMCO in connection with the Oxford acquisition, on the same terms as the Oxford
principals, as described above in "-- Interests of Oxford Principals and OTEF
Affiliates in the Merger." As a result, upon the closing of the merger, each of
Messrs. Gavula and Barker will receive approximately $8,250 in connection with
the option sale.
In addition, effective November 7, 2000, OTEF's managing general partner
granted to each of Messrs. Gavula and Barker options to purchase 25,000 BACs at
an exercise price of $26.00 per BAC. These options are immediately exercisable,
and will be cancelled when the holder ceases to be a director of OTEF's managing
general partner. Because all outstanding options will be cancelled in the merger
and because the directors have the right to receive cash distributions on the
underlying BACs as if they held the BACs directly, each director's options have
a value of approximately $210,000 as of the effective time of the merger. This
grant of options was completed after merger discussions had commenced and was in
consideration of past, present and anticipated future services as non-employee
directors of OTEF's managing general partner.
Each of Messrs. Gavula and Barker received $5,000 compensation for each
meeting he attended in connection with the proposed merger. In connection with
the merger discussions, Messrs. Gavula and Barker were compensated for attending
16 meetings.
Messrs. Gavula and Barker are also covered by the indemnification
provisions of the merger agreement described above under "-- Interests of Oxford
Principals and OTEF Affiliates in the Merger."
STRUCTURE OF THE MERGER
In light of relevant financial, legal, tax and other considerations, the
acquisition has been structured as a merger pursuant to which, AIMCO/OTEF, LLC,
a subsidiary of AIMCO's operating partnership, will
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be merged with and into OTEF and all of the outstanding BACs, other than BACs
held directly or indirectly by AIMCO or by the OTEF associate general partner,
will be converted into the right to receive the merger consideration.
U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a discussion of what Shaw Pittman, AIMCO's merger tax
counsel, believes are the material U.S. Federal income tax consequences of the
merger to holders of BACs. This discussion is based on the Internal Revenue
Code, regulations promulgated by the U.S. Treasury Department, administrative
rulings and pronouncements, and judicial decisions all as of the date hereof and
all of which are subject to change, possibly with retroactive effect. This
discussion assumes that BAC holders hold their BACs as capital assets within the
meaning of Section 1221 of the Internal Revenue Code (generally, property held
for investment). This discussion does not address all aspects of U.S. Federal
taxation that may be relevant to particular holders of BACs in light of their
personal investment circumstances or to holders of common stock subject to
special treatment under the Internal Revenue Code, including financial
institutions, tax-exempt organizations, insurance companies, broker-dealers,
regulated investment companies, holders who received common stock through the
exercise of employee stock options or otherwise as compensation, and persons
holding common stock as part of a "straddle," "hedge," "conversion transaction,"
"synthetic security" or other integrated investment, who may be subject to tax
rules that differ significantly from those described below. This discussion does
not discuss the U.S. Federal income tax consequences of the merger to a BAC
holder who, for U.S. Federal income tax purposes, is a non-resident alien
individual, a foreign corporation, a foreign partnership or a foreign estate or
trust, nor does it discuss any foreign, state or local tax consequences of the
merger.
WE URGE BAC HOLDERS TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE
PARTICULAR TAX CONSEQUENCES OF THE MERGER AND SPECIAL DISTRIBUTION TO THEM,
INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS AND
OF CHANGES IN APPLICABLE TAX LAWS.
In the opinion of Shaw Pittman, for Federal income tax purposes, the merger
will constitute a taxable purchase of the interests of the BAC holders. BAC
holders will recognize gain or loss equal to the difference between the fair
market value of the AIMCO Class A common stock, Class P preferred stock and cash
they receive and their basis on the date of the consummation of the merger in
the BACs they hold. It is likely that the exchange will produce a long-term
capital loss for tax purposes in the case of a BAC holder who has held a BAC
from the formation of OTEF. A BAC holder's capital gain or loss will be short-
or long-term depending on whether the holder's holding period for the BACs
exceeds one year. BAC holders will receive a basis in the AIMCO Class A common
stock and Class P preferred stock equal to the fair market value of the stock at
the time of the merger.
The special distribution should be treated as a return of capital to BAC
holders. As a result, BAC holders will not have to pay taxes on the cash they
receive in the special distribution, except to the extent the cash exceeds the
holder's tax basis in the BAC, at the time of the special distribution. However,
each BAC holder's tax basis in his or her BACs will be lowered by the amount of
the special distribution, which will have an impact on whether the BAC holder
will owe taxes or have a loss in connection with the merger.
Shaw Pittman's opinion is filed as an exhibit to the registration statement
of which this prospectus/ information statement forms a part.
At present, approximately 90% of the distributions that BAC holders receive
from OTEF are federally tax-exempt, because they are derived primarily from
interest payments on tax-exempt bonds. After the merger, BAC holders will hold
Class A common stock and Class P preferred stock and will be taxed on the
dividends they receive on the Class A common stock and Class P preferred stock,
except for any distributions that are deemed to be a return of capital. In 1999,
1998 and 1997, approximately 6.4%, 58.7% and 0% of the distributions on Class A
common stock were deemed to be a return of capital. The percentage of any
distribution on the Class A common stock that is deemed to be a return of
capital changes from year to year, so the percentage of future distributions
that is considered a return of capital
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<PAGE> 44
may not be similar to that of past distributions. All of the distributions on
the Class P preferred stock will be taxable.
ACCOUNTING TREATMENT
The merger will be accounted for by AIMCO, AIMCO's operating partnership
and their subsidiaries under the "purchase" method of accounting, in accordance
with generally accepted accounting principles. After the merger, the results of
OTEF's operations will be included in the consolidated financial statements of
AIMCO and AIMCO's operating partnership. The purchase price will be allocated
based on the fair values at the effective time of the assets acquired and
liabilities assumed. These allocations will be made based upon valuations and
other studies that have not yet been finalized.
APPRAISAL RIGHTS
Under Maryland law and OTEF's partnership agreement, BAC holders will not
have appraisal or dissenters' rights in connection with the merger.
NEW YORK STOCK EXCHANGE LISTING
AIMCO has applied to have the shares of Class A common stock to be issued
in connection with the merger listed on the New York Stock Exchange, subject to
official notice of issuance.
AIMCO has applied to list the Class P preferred stock on the New York Stock
Exchange, but cannot assure you that the Class P preferred stock will be
accepted for listing.
EFFECTS OF THE MERGER AND PLANS FOR OTEF AFTER THE MERGER
At the effective time, all the properties, rights, privileges, powers and
franchises of AIMCO/ OTEF, LLC and OTEF will vest in the surviving entity, and
all debts, liabilities and duties of AIMCO/ OTEF, LLC and OTEF will become the
debts, liabilities and duties of the surviving entity.
Following the effective time of the merger, AIMCO will own substantially
all of the interests in OTEF. At that time, the partnership interests in OTEF
will reflect a 1% general partner interest held by OTEF's managing general
partner and a 99% limited partner interest held by AIMCO's operating
partnership. AIMCO's operating partnership will be the beneficiary of
substantially all future earnings and growth of OTEF's business after the
effective time and will have the ability to benefit from any sale of OTEF's
assets in the future.
At the effective time, BAC holders will cease to have any ownership
interests in, or rights as assignees of limited partnership interests in, OTEF.
Following the effective time, BAC holders who receive shares of Class A common
stock and Class P preferred stock in the merger will benefit from any increase
in the value of AIMCO or any payment of dividends on the Class A common stock
and Class P preferred stock and will bear the risk of any decrease in the value
of the Class A common stock and Class P preferred stock.
As a result of the merger, OTEF will continue to exist but there will be no
public market for the BACs. At the effective time, the BACs will cease to be
quoted on the American Stock Exchange and price quotations with respect to sales
of BACs in the public market will no longer be available. In addition, AIMCO
will terminate the registration of BACs under the Securities Exchange Act of
1934, or the Exchange Act. After the effective time, OTEF will no longer be
required to file periodic reports with the Securities and Exchange Commission in
connection with BACs.
The directors of AIMCO at the effective time will be the directors of AIMCO
after the merger and will hold office from the effective time until the next
annual meeting of the stockholders of AIMCO and until their successors are
elected or appointed and are duly qualified.
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<PAGE> 45
The officers of AIMCO at the effective time will be the officers of AIMCO
following the merger and will hold office from the effective time until their
successors are duly elected or appointed and qualified in the manner provided in
AIMCO's articles of incorporation and by-laws, or as otherwise provided by law.
AIMCO has considered and currently intends, after the merger is
consummated, to cause the partnerships that own the properties financed by
OTEF's mortgage revenue bonds to refinance those bonds with a loan from one or
more third-party lenders. The result of this plan would be that OTEF's mortgage
revenue bonds would no longer be outstanding, and the property-owning
partnerships would incur lower interest expense. AIMCO will cause the
partnerships to refinance the bonds if the AIMCO affiliate that serves as the
general partner of each partnership determines that this type of action is in
the best interests of the partnership. If AIMCO does not refinance the mortgage
revenue bonds, it intends to seek alternative ways to maximize the value of
OTEF's portfolio, which may include the sale of some or all of the assets or
other financing, total return swap or other arrangements.
If AIMCO refinances OTEF's mortgage revenue bonds or otherwise sells some
or all of OTEF's assets, OTEF's operations will be limited and may cease.
Otherwise, OTEF's operations will be substantially similar following the merger
to its operations prior to the merger.
RISK THAT THE MERGER WILL NOT BE CONSUMMATED
Consummation of the merger is subject to various conditions. If the merger
is not completed, AIMCO will continue to own substantially all of the economic
interests in OTEF's managing general partner.
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<PAGE> 46
THE MERGER AGREEMENT AND TERMS OF THE MERGER
The following is a brief summary of the material provisions of the merger
agreement, a copy of which is included as Annex A to this prospectus/information
statement. We urge all BAC holders to read the merger agreement in its entirety.
THE MERGER
The merger agreement provides that, upon the terms and subject to the
conditions set forth therein, at the effective time, AIMCO/OTEF, LLC, a Maryland
limited liability company and subsidiary of AIMCO's operating partnership, will
be merged into OTEF. OTEF will be the surviving entity in the merger and will
continue its existence under the laws of the State of Maryland.
THE EFFECTIVE TIME
The merger agreement provides that on the closing date, articles of merger
will be executed and filed by the parties to the merger agreement with the
Maryland State Department of Assessments and Taxation. The effective time of the
merger will be on the date of filing, which we expect to be in the first quarter
of 2001, or on another date on which the parties agree.
CERTIFICATE OF LIMITED PARTNERSHIP AND PARTNERSHIP AGREEMENT
The merger agreement provides that at the effective time: (i) the
Certificate of Limited Partnership of OTEF, as in effect immediately prior to
the effective time, will be the Certificate of Limited Partnership of the
partnership after the merger, which we call the surviving partnership; and (ii)
the OTEF limited partnership agreement, as in effect immediately prior to the
effective time, will be the limited partnership agreement of the surviving
partnership.
THE CLOSING
Pursuant to the merger agreement, the closing of the merger will take place
at 10:00 a.m., Washington, D.C. time, on a date to be specified by the parties,
which will be no later than the fifth business day following the date on which
all of the conditions set forth in the merger agreement are first fulfilled or
have been waived, at the offices of Shaw Pittman, 2300 N Street, N.W.,
Washington, D.C. 20037, unless another date, time or place is agreed to in
writing by the parties.
MANNER AND BASIS OF CONVERTING THE BACS
As of the effective time of the merger, by virtue of the merger and without
any action on the part of the OTEF general partners or any security holder, each
issued and outstanding BAC, including its related BAC right, except any BAC held
by AIMCO or by OTEF's associate general partner, will be converted into the
right to receive 0.547 shares of Class P preferred stock and 0.299 shares of
Class A common stock. Because the Class P preferred stock has a deemed value of
$25 per share in the merger, each BAC will convert into the right to receive
$13.675 of Class P preferred stock. The value of a share of Class A common stock
for purposes of the merger will be $48.509, which is the average of the high and
low reported sale prices of the Class A common stock on the New York Stock
Exchange for the 20 trading days beginning on December 4, 2000, the third full
trading day following the first public announcement of the merger. As a result,
each BAC will also convert into the right to receive $14.525 of Class A common
stock. The Class A common stock could trade at a price higher or lower than
$48.509 at the time of and following the merger. Upon consummation of the
merger, BAC holders will no longer have rights to hold BACs and as a group will
hold the right to receive approximately 3.1% of the issued and outstanding
shares of Class A common stock and all of the issued and outstanding shares of
Class P preferred stock.
The deemed value of the Class P preferred stock is $25 per share. The Class
P preferred stock could trade at a price higher or lower than $25 per share
after the merger. Marshall & Stevens has advised OTEF's managing general partner
that the fair market value of the Class P preferred stock is $25
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<PAGE> 47
per share. However, we cannot give you any assurance as to the trading price or
liquidity of the Class P preferred stock.
The merger consideration of $28.20, considered along with the special
distribution to BAC holders of $6.21 per BAC to be declared by OTEF, represents
a 36.6% premium over the closing price of the BACs on the American Stock
Exchange on November 29, 2000, the day before we announced the merger and the
special distribution, and a 39.0% premium over the closing price on June 27,
2000, the day before we announced the Oxford acquisition.
In connection with the Oxford acquisition, AIMCO agreed that if it
completed an acquisition of OTEF before September 20, 2003, it would pay
consideration of at least 90% of the fully diluted book value per BAC as
reported by OTEF for the calendar quarter immediately preceding the date of the
acquisition. The merger consideration of $28.20 per BAC, taken together with the
$6.21 per BAC special distribution that will be declared by OTEF, equals 91.7%
of the fully diluted book value for the quarter ended September 30, 2000 of
$37.54 per BAC. Based in part on the opinion from Marshall & Stevens, OTEF's
managing general partner concluded that the merger consideration is fair to BAC
holders and permits them to realize greater value than they would receive under
other scenarios.
In addition, OTEF's associate general partner will have all of its
interests in OTEF converted into shares of Class A common stock and Class P
preferred stock. We have valued the interests of OTEF's associate general
partner at $1,000 for purposes of the merger. The associate general partner
interest will be converted into the right to receive (i) 19 shares of Class P
preferred stock with a deemed value of $25 per share and (ii) the number of
shares of Class A common stock valued at $48.509 per share, or $525 of Class A
common stock, which is the difference between $1,000 and the value of the Class
P preferred stock to be received.
As a result of the merger and without any action on the part of the
holders, at the effective time all of the BACs will no longer be outstanding and
will automatically be cancelled and retired and will cease to exist, and each
BAC holder (other than AIMCO, OTEF's managing general partner and the OTEF
initial limited partner) will cease to have any rights with respect to the BACs,
except the right to receive, without interest, shares of Class A common stock,
Class P preferred stock and cash in lieu of fractional shares of Class A common
stock and Class P preferred stock. In addition, as a result of the merger and
without any action on the part of the holders of any OTEF interest, at the
effective time, all BAC rights will, in accordance with their terms, no longer
be outstanding and will automatically be cancelled and retired and will cease to
exist, and each holder of BAC rights will cease to have any rights with respect
to BAC rights.
No fractional shares of Class A common stock or Class P preferred stock
will be issued in connection with the merger. All fractional shares of Class A
common stock and Class P preferred stock that a BAC holder would otherwise be
entitled to receive will be aggregated and, if a fractional share results from
the aggregation, the holder will be entitled to receive, in lieu thereof, an
amount in cash equal to:
$48.509 X (fraction of a share of Class A common stock to which
holder is entitled)
plus
$25.00 X (fraction of a share of Class P preferred stock to which
holder is entitled)
For example, if a BAC holder holds only 1 BAC, that BAC will convert into the
right to receive 0.299 fractional shares of Class A common stock and 0.547
fractional shares of Class P preferred stock. As a result, the BAC holder will
hold only fractional shares and instead of receiving fractional shares, will
receive the following in cash:
($48.509 X 0.299) + ($25.00 X 0.547)
No interest will be paid or will accrue on any cash paid or payable in lieu
of any fractional shares of Class A common stock or Class P preferred stock. In
no event will AIMCO be obligated to issue shares of Class A common stock or
Class P preferred stock to any person if the issuance would result in a
violation
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<PAGE> 48
of AIMCO's ownership limit described in "Description of AIMCO's Capital
Stock -- Restrictions on Transfer of Class A common stock" and "Description of
AIMCO Class P Convertible Cumulative Preferred Stock -- Restrictions on
Ownership and Transfer." In lieu of issuing any excess shares, AIMCO will pay
cash in an amount equal to the number of excess shares that would be issued to a
holder multiplied by the market price of the Class A common stock or $25, with
respect to Class P preferred stock, as appropriate.
At the effective time, each option to purchase BACs will be terminated.
EXCHANGE OF CERTIFICATES
At the closing of the merger, AIMCO will transfer to AIMCO's operating
partnership the total number of shares of Class A common stock and Class P
preferred stock to be issued in the Merger, and AIMCO's operating partnership
will deposit with a bank or trust company to be designated by AIMCO and
reasonably acceptable to OTEF, which we call the exchange agent, for the benefit
of the BAC holders (i) certificates representing the total number of shares of
Class A common stock and Class P preferred stock that may be issued in respect
of BACs in the merger and (ii) cash in an amount sufficient to pay the total
amount of cash payable in lieu of fractional shares of Class A common stock and
Class P preferred stock.
As soon as reasonably practicable after the effective time, AIMCO will
cause the exchange agent to mail to each record holder of BACs immediately prior
to the effective time (i) a letter of transmittal indicating that the BAC
certificates will only be considered delivered and the risk of loss will only be
transferred upon delivery of the certificates to the exchange agent and shall be
in such form and have such other customary provisions, including signature
guarantee provisions, as AIMCO may reasonably specify, and (ii) instructions for
use in surrendering the BAC certificates in exchange for the shares of Class A
common stock and Class P preferred stock issuable to the BAC holders in the
merger along with cash in lieu of fractional shares.
Upon surrender of a BAC certificate for cancellation to the exchange agent,
together with a letter of transmittal, duly executed with signature guarantees,
and the other documents AIMCO or the exchange agent reasonably requests, the
former BAC holder will be entitled to receive as soon as reasonably practicable
after the effective time, (i) certificates representing the number of shares of
Class A common stock and Class P preferred stock that the former BAC holder has
the right to receive in the merger and (ii) a check in an amount equal to the
cash that the former BAC holder has the right to receive in lieu of fractional
shares of Class A common stock and Class P preferred stock pursuant to the
merger agreement, and the BAC certificate surrendered by the holder will be
cancelled. After the effective time and until surrendered each BAC certificate
will be deemed to represent only the right to receive the shares of Class A
common stock and Class P preferred stock and cash in lieu of fractional shares
payable with respect to the BAC formerly represented by the certificate.
DIVIDENDS
Dividends or other distributions declared after the effective time on the
Class A common stock will be paid to an escrow established for the benefit of
holders of unsurrendered BAC certificates and no cash payment in lieu of
fractional shares of Class A common stock or Class P preferred stock will be
paid to any holders until their certificates are surrendered for exchange as
provided under "-- Exchange of Certificates" above. Subject to the effect of any
applicable Federal or state laws, following the surrender of any BAC
certificate, AIMCO will pay or have released from escrow, as the case may be,
without interest, to the registered owner of the certificates representing the
shares of the Class A common stock and Class P preferred stock into which the
applicable BACs were converted are registered,
- at the time of the surrender, the amount of all dividends and other
distributions with a record date after the effective time payable and not
yet paid with respect to the whole shares of Class A common stock or
Class P preferred stock, less the amount of any withholding taxes that
were required on the dividends or distributions; and
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<PAGE> 49
- at the appropriate payment date, the amount of dividends or other
distributions, with a record date after the effective time but prior to
surrender and a payment date subsequent to surrender, payable with
respect to such whole shares of Class A common stock or Class P preferred
stock, less the amount of any withholding taxes which may be required on
the dividends or distributions.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains customary representations and warranties.
Each of AIMCO, AIMCO's operating partnership, AIMCO/OTEF, LLC and OTEF has made
representations and warranties to the other regarding, among other things:
- its organization;
- its capitalization;
- its authority to enter into, and perform its obligations under, the
merger agreement;
- the compliance of the transactions contemplated by the merger agreement
with its organizational documents, applicable agreements and applicable
laws;
- its compliance with applicable laws and applicable agreements;
- the accuracy and completeness of its Exchange Act filings with the
Securities and Exchange Commission;
- the absence of material adverse changes;
- litigation;
- the accuracy of the information supplied by it, or on its behalf, for
inclusion or incorporation by reference in the Securities Act or Exchange
Act filings contemplated by the merger agreement; and
- brokers' fees.
Additionally, OTEF has made representations and warranties to AIMCO,
AIMCO's operating partnership and AIMCO/OTEF, LLC regarding (i) OTEF's
compliance with applicable Federal and state tax laws and (ii) the receipt of a
fairness opinion from its independent real estate consultant.
CONDUCT OF BUSINESS PENDING THE MERGER
The merger agreement provides that, prior to the merger, OTEF will carry on
its ordinary course of business and use its commercially reasonable efforts to
keep available the services of its present officers and key employees and to
preserve the good will and business relationships with all customers, suppliers
and others having business relationships with it. In addition, OTEF will make a
quarterly distribution of at least $0.565 per BAC on each regularly scheduled
distribution date occurring during the first two quarters of 2001 if the
distribution payment date occurs before the merger closes.
RESPONSE TO OTHER OFFERS
The merger agreement contains several provisions governing how OTEF must
treat alternative proposals to acquire OTEF. These proposals include any offer,
or any indication of interest to make an offer, that is:
- structured to permit the potential acquiror to acquire beneficial
ownership of all or a substantial portion of the assets or businesses of,
or at least 20% of the equity interest in, OTEF pursuant to any
transaction or series of transactions similar to a merger, in any case
other than the merger between AIMCO and OTEF; or
- relates to any other transaction the consummation of which would delay
the merger between AIMCO and OTEF.
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The merger agreement prohibits OTEF or its agents from participating in any
way in any discussions with, or directly or indirectly providing any information
to, any potential acquiror other than AIMCO concerning an alternative
acquisition proposal. The merger agreement also requires OTEF to cease any
current discussions of this nature. The agreement does not prohibit these
discussions if the board of directors of OTEF's managing general partner
determines that failing to entertain an alternative acquisition proposal could
result in a breach of the board's fiduciary duty to OTEF's security holders
under applicable state law. In addition, the board of directors must determine
that it is reasonably likely that:
- from a financial point of view, OTEF's security holders, other than
AIMCO, would benefit more from the alternative proposal than from the
merger with AIMCO;
- the potential acquiror has the financial ability to carry out the
transaction; and
- there are no substantial impediments to closing the transaction.
In making its determinations regarding these matters, OTEF's managing general
partner must consider the advice of independent advisers to the board of
directors.
If OTEF's managing general partner receives an alternative acquisition
proposal, it must notify AIMCO of the proposal and deliver to AIMCO any
communications received from the potential acquiror, unless OTEF's managing
general partner is prohibited from doing so. OTEF's managing general partner
must also advise AIMCO on a current basis of any developments with respect to
the alternative acquisition proposal.
CONDITIONS TO THE MERGER
Under the merger agreement, the obligations of AIMCO, AIMCO's operating
partnership, AIMCO/ OTEF, LLC and OTEF to effect the merger are subject to the
satisfaction of the following conditions:
- no action shall have been taken, and no statute, rule, regulation,
executive order, judgment, decree, or injunction shall have been enacted,
entered, promulgated or enforced, and not repealed, superseded, lifted or
otherwise made inapplicable, by any court of competent jurisdiction or
governmental authority which restrains, enjoins or otherwise prohibits
the consummation of the transactions contemplated by the merger
agreement;
- the shares of Class A common stock and Class P preferred stock shall have
been approved for listing on the New York Stock Exchange, subject only to
official notice of issuance;
- OTEF's independent real estate consultant shall not have withdrawn its
fairness opinion;
- OTEF shall have redeemed its status quo BACs;
- OTEF shall have paid or provided for the $50 million special
distribution;
- AIMCO shall have filed the articles supplementary for the Class P
preferred stock with the Maryland State Department of Assessments and
Taxation; and
- each party shall have taken such corporate or limited partnership action
as may be necessary to allow such entity to comply in all material
respects with its obligations under the merger agreement.
The obligation of OTEF to effect the merger is subject to the satisfaction
or waiver of the following additional conditions:
- the representations and warranties of AIMCO and AIMCO/OTEF, LLC contained
in the merger agreement that are qualified as to materiality shall be
accurate, and those not so qualified shall be materially accurate, in
each case, at and as of the effective time, except as contemplated by the
merger agreement;
- AIMCO, AIMCO's operating partnership and AIMCO/OTEF, LLC shall have
performed, in all material respects, all of their obligations and
complied, in all material respects, with all covenants
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required by the merger agreement to be performed or complied with by them
prior to the effective time;
- AIMCO shall have delivered to OTEF a certificate, signed by its Chairman
of the Board and Chief Executive Officer or President, certifying as to
its, the AIMCO operating partnership's and AIMCO/OTEF, LLC's compliance
with the first two conditions set forth above; and
- AIMCO shall have transferred to AIMCO's operating partnership the shares
of the Class A common stock and Class P preferred stock to be issued in
the merger, and AIMCO's operating partnership shall have transferred to
the exchange agent the shares of Class A common stock, Class P preferred
stock and cash to be paid in lieu of fractional shares that will be
consideration for the merger.
The obligation of AIMCO, AIMCO's operating partnership and AIMCO/OTEF, LLC
to effect the merger is subject to the satisfaction or waiver of the following
additional conditions:
- the representations and warranties of OTEF contained in the merger
agreement that are qualified as to materiality shall be accurate, and
those not so qualified shall be accurate in all material respects, in
each case at and as of the effective time, except as contemplated by the
merger agreement;
- OTEF shall have performed, in all material respects, all of its
obligations and complied, in all material respects, with all covenants
required by the merger agreement to be performed or complied with by it
prior to the effective time;
- OTEF shall have delivered to AIMCO a certificate, signed by the OTEF
managing general partner, certifying as to its compliance with the first
two conditions set forth above; and
- OTEF shall have receive an opinion of counsel to the effect that the
merger may be consummated without a vote of the BAC holders.
TERMINATION
The merger agreement provides that it may be terminated and abandoned prior
to the effective time:
- by the mutual written consent of OTEF and AIMCO, AIMCO's operating
partnership and AIMCO/OTEF, LLC;
- by OTEF, AIMCO, or AIMCO's operating partnership, if:
(i) the effective time shall not have occurred on or before June 30,
2001;
(ii) any governmental authority, the consent of which is a condition
to the obligations of OTEF, AIMCO, AIMCO's operating partnership and
AIMCO/OTEF, LLC to consummate the transactions contemplated by the merger
agreement, shall have determined not to grant its consent and all appeals
of that determination shall have been taken and have been unsuccessful; or
(iii) any court of competent jurisdiction shall have issued an order,
judgment or decree restraining, enjoining or otherwise prohibiting the
merger and that order, judgment or decree shall have become final and
nonappealable;
provided, however, that the right to terminate the merger agreement
pursuant to clause (i) will not be available to any party whose failure to
fulfill any obligation under the merger agreement has been the cause of, or
resulted in, the failure of the effective time to occur on or before June
30, 2001;
- by OTEF, if there has been a material breach by AIMCO or AIMCO's
operating partnership of any representation, warranty, covenant or
agreement set forth in the merger agreement that has not been cured
within ten business days following receipt by AIMCO or AIMCO's operating
partnership of notice of the breach from OTEF; provided, however, that
the right to terminate the merger agreement pursuant to this provision
will not be available to OTEF if OTEF, at the time, is
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in material breach of any representation, warranty, covenant or agreement set
forth in the merger agreement;
- by AIMCO or AIMCO's operating partnership if there has been a material
breach by OTEF of any representation, warranty, covenant or agreement set
forth in the merger agreement that has not been cured within ten business
days following receipt by OTEF of notice of the breach from AIMCO or
AIMCO's operating partnership; provided, however, that the right to
terminate the merger agreement pursuant to this provision will not be
available to AIMCO or AIMCO's operating partnership if either AIMCO or
AIMCO's operating partnership at the time, are in material breach of any
representation, warranty, covenant or agreement set forth in the merger
agreement; and
- by AIMCO or AIMCO's operating partnership if a calculated market price of
the Class A common stock is less than $40 per share or by OTEF upon the
direction of the non-employee directors of OTEF's managing general
partner, acting together in their capacities as such, if a calculated
market price of the Class A common stock is less than $40 per share.
OTEF has agreed to pay to AIMCO a termination fee of $5 million and
expenses of $1 million if AIMCO terminates the merger agreement because OTEF
breaches its agreement not to seek other merger partners, as described in
"-- Response to Other Offers," or if OTEF terminates the merger agreement
because it has received a qualifying alternative acquisition proposal, and if
OTEF closes on a qualifying alternative acquisition proposal within one year of
the termination.
AMENDMENT
The merger agreement may be amended by the parties thereto. However, no
amendment of the merger agreement will be binding unless it is executed in
writing by the party which will be bound by its terms.
EXPENSES OF THE MERGER
AIMCO expects to incur the following expenses in connection with the
merger:
<TABLE>
<S> <C>
SEC Registration Fee..................................... $ 48,043
NYSE Listing Fee......................................... 81,200
Legal Fees............................................... 925,000
Accounting Fees.......................................... 550,000
Printing Expenses........................................ 200,000
Miscellaneous............................................ 45,757
----------
Total.......................................... $1,850,000
</TABLE>
OTEF expects to incur the following expenses in connection with the merger:
<TABLE>
<S> <C>
Fairness Opinion Fees..................................... $100,000
Non-Employee Director Counsel Fees........................ 160,000
Non-Employee Director Advisor Fees........................ 400,000
Accounting Fees........................................... 12,000
Non-Employee Director Expenses............................ 160,000
Miscellaneous............................................. 18,000
--------
Total........................................... $850,000
</TABLE>
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SELECTED HISTORICAL FINANCIAL INFORMATION OF AIMCO
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following table sets forth selected historical financial and operating
information for AIMCO. The selected historical financial information for the
five years ended December 31, 1999 is based on the audited financial statements
of AIMCO incorporated by reference in this prospectus/information statement or
previously filed by AIMCO with the Securities and Exchange Commission. The
selected historical financial information for AIMCO for the nine months ended
September 30, 2000 and 1999 is based on the unaudited financial statements of
AIMCO incorporated by reference in this prospectus/information statement. In the
opinion of the management of AIMCO, the operating data for the nine months ended
September 30, 2000 and 1999 include all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the information set forth in
the data. The results for the nine months ended September 30, 2000 are not
necessarily indicative of AIMCO's results for the year ending December 31, 2000.
The following information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the historical financial statements of AIMCO and notes to the financial
statements incorporated by reference in this prospectus/information statement.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------- ----------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Income from rental property
operations....................... $ 218,187 $ 129,355 $ 172,042 $ 133,950 $ 72,477 $ 39,814 $ 27,483
Income from service company
business......................... 13,262 (1,738) 17,985 7,143 2,976 1,717 1,973
Income from operations............. 60,837 58,727 85,497 64,982 30,246 15,629 14,988
Net income (loss).................. 67,940 53,986 80,959 64,474 28,633 12,984 13,375
PER SHARE DATA:
Basic earnings per common share.... $ 0.35 $ 0.23 $ 0.39 $ 0.84 $ 1.09 $ 1.05 $ 0.86
Diluted earnings per common
share............................ $ 0.34 $ 0.23 $ 0.38 $ 0.80 $ 1.08 $ 1.04 $ 0.86
Weighted average number of common
shares outstanding............... 66,641 61,054 62,242 45,187 24,055 12,411 9,571
Weighted average number of common
shares and common share
equivalents outstanding.......... 68,478 62,472 63,446 47,624 24,436 12,427 9,579
Dividends paid per common share.... $ 2.100 $ 1.875 $ 2.50 $ 2.25 $ 1.85 $ 1.70 $ 1.66
BALANCE SHEET DATA (END OF PERIOD):
Real estate, before accumulated
depreciation..................... $6,121,674 $3,076,974 $4,512,697 $2,802,598 $1,657,207 $865,222 $477,162
Real estate, net of accumulated
depreciation..................... 5,471,364 2,757,218 4,096,200 2,573,718 1,503,922 745,145 448,425
Cash and cash equivalents.......... 106,544 56,203 101,604 71,305 37,088 13,170 2,379
Total assets.............. 7,156,784 4,507,168 5,684,471 4,248,800 2,100,510 827,673 480,361
Total indebtedness........ 3,825,203 1,692,888 2,584,289 1,660,715 808,530 522,146 268,692
Minority interest in AIMCO
Operating Partnership............ 297,631 132,688 225,381 148,847 111,962 58,777 30,376
Company-obligated mandatory
redeemable convertible preferred
securities....................... 35,330 149,500 149,500 149,500 -- -- --
Stockholders' equity............... 2,528,429 2,297,349 2,262,348 1,902,564 1,045,300 215,749 169,032
CASH FLOW DATA:
Cash provided by operating
activities....................... $ 281,185 $ 162,729 $ 253,257 $ 148,414 $ 73,032 $ 38,806 $ 25,911
Cash used in investing
activities....................... (563,026) (189,062) (281,106) (328,321) (717,663) (88,144) (60,821)
Cash provided by (used in)
financing activities............. 286,781 11,231 58,148 214,124 668,549 60,129 30,145
</TABLE>
45
<PAGE> 54
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------- ----------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Funds From Operations available to
common shares and AIMCO OP
Units(1)......................... $ 315,910 $ 230,540 $ 321,359 $ 194,746 $ 81,155 $ 35,185 $ 25,285
Weighted average number of common
shares, common share equivalents
and AIMCO OP Units outstanding... 89,396 76,653 78,673 56,819 29,119 14,994 11,461
Ratio of earnings to fixed
charges.......................... 1.8:1 2.4:1 2.3:1 1.8:1 1.5:1 1.6:1 2.1:1
Ratio of earnings to combined fixed
charges and preferred stock
dividends........................ 1.4:1 1.7:1 1.6:1 1.4:1 1.5:1 1.6:1 1.5:1
</TABLE>
---------------
(1) AIMCO measures its economic profitability based on funds from operations, or
FFO, less a reserve for capital replacements of $300 per apartment unit.
AIMCO's management believes that FFO, less such a reserve, provides
investors with an understanding of AIMCO's ability to incur and service debt
and make capital expenditures. The Board of Governors of the National
Association of Real Estate Investment Trusts, or NAREIT, defines FFO as net
income (loss), computed in accordance with U.S. generally accepted
accounting principles, or 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. AIMCO
calculates FFO available to common shares and AIMCO operating partnership
units based on the NAREIT definition, as adjusted for minority interest in
AIMCO's operating partnership, amortization, the non-cash deferred portion
of the income tax provision for unconsolidated subsidiaries, and the effect
of dilutive convertible preferred stock and convertible debt securities. You
should not consider FFO an alternative to net income or net cash flows from
operating activities, as calculated in accordance with GAAP, as an
indication of AIMCO's performance or as a measure of liquidity. FFO is not
necessarily indicative of cash available to fund future cash needs. In
addition, there can be no assurance that AIMCO's basis for computing FFO is
comparable with that of other real estate investment trusts.
The following is a reconciliation of income before minority interest in
AIMCO's operating partnership to FFO:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- -------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Income before minority
interest in Operating
Partnership................. $ 75,071 $ 59,057 $ 83,712 $ 69,656 $32,697 $15,673 $14,988
Extraordinary item.......... -- -- -- -- 269 -- --
Real estate depreciation,
net of minority
interest.................. 206,298 79,565 121,689 80,369 33,751 19,056 15,038
Real estate depreciation
related to unconsolidated
entities.................. 51,235 73,960 104,764 34,840 9,864 -- --
Amortization of
intangibles............... 6,171 39,492 36,731 26,177 2,535 500 428
Deferred tax (benefit)
provision................. 2,675 3,102 1,763 9,215 4,894 -- --
Preferred stock dividends
and distributions......... (19,590) (26,735) (33,943) (20,837) (135) -- (5,169)
Interest expense on
convertible preferred
securities................ 8,284 2,429 4,858 -- -- -- --
Gain on disposition of
properties................ (14,234) (330) 1,785 (4,674) (2,720) (44) --
-------- -------- -------- -------- ------- ------- -------
Funds From Operations......... $315,910 $230,540 $321,359 $194,746 $81,155 $35,185 $25,285
======== ======== ======== ======== ======= ======= =======
</TABLE>
46
<PAGE> 55
SELECTED HISTORICAL FINANCIAL INFORMATION OF OTEF
(IN THOUSANDS, EXCEPT BAC AND PER BAC DATA)
The following table sets forth selected historical financial and operating
information for OTEF, restated for the 25-for-1 BAC split which occurred on July
1, 1997. The selected historical financial information for the four years ended
December 31, 1999 is based on the audited financial statements of OTEF
incorporated by reference in this prospectus/information statement or previously
filed by OTEF with the Securities and Exchange Commission. The selected
historical financial information for OTEF for the nine months ended September
30, 2000 and 1999 is based on the unaudited financial statements of OTEF
incorporated by reference in this prospectus/information statement. In the
opinion of the managing general partner of OTEF, the operating data for the nine
months ended September 30, 2000 and 1999 include all adjustments, consisting
only of normal recurring adjustments, necessary to present fairly the
information set forth therein. The results for the nine months ended September
30, 2000 are not necessarily indicative of OTEF's results for the year ending
December 31, 2000. The following information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical financial statements of OTEF and notes to the
financial statements incorporated by reference in this prospectus/information
statement.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
2000 1999 1999 1998 1997 1996 1995(2)
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Assets.............................. $334,172 $318,350 $321,698 $309,086 $270,663 $228,733 $174,034
Investment in Tax-Exempt Securities....... $184,406 $200,701 $208,216 $213,900 $217,159 $215,529 $164,000
Investment in Tax-Exempt Securities Held
in Trust................................ $ 76,245 $ 76,765 $ 76,765 $ 62,565 $ 38,820 $ 0 $ 0
Total Revenue..................... $ 42,038 $ 18,178 $ 24,607 $ 23,151 $ 19,130 $ 19,762 $ 12,062
Net Income................................ $ 38,156 $ 14,841 $ 19,974 $ 19,283 $ 16,642 $ 14,912 $ 10,646
Net Income Allocated to BAC Holders(5).... $ 37,412 $ 14,534 $ 19,571 $ 18,509 $ 15,893 $ 14,614 $ 10,434
Net Income per BAC(5)..................... $ 5.098 $ 1.983 $ 2.670 $ 2.576 $ 2.188 $ 1.948 $ 1.392
Net Income per BAC -- assuming
dilution(6)............................. $ 5.086 $ 1.978 $ 2.665 $ 2.556 $ 2.180 N/A N/A
Municipal Income (Tax Basis).............. N/A N/A $ 26,278 $ 18,168 $ 16,983 $ 14,644 $ 16,210
Municipal Income Allocated to BAC Holders
(Tax Basis)(4).......................... N/A N/A $ 25,917 $ 17,422 $ 16,041 $ 14,351 $ 15,889
Municipal Income per BAC (Tax Basis)(4)... N/A N/A $ 3.535 $ 2.425 $ 2.233 $ 1.914 $ 2.12
Cash Distributions per BAC................ N/A N/A $ 2.090 $ 2.025 $ 1.942 $ 1.904 $ 1.90
Weighted Average OTEF II BACs
Outstanding(7).......................... [N/A] [N/A] 7,331 7,185 7,264 7,500 7,500
Number of BAC Holders..................... [N/A] [N/A] 13,785 15,075 16,009 15,678 15,061
RECONCILIATION OF NET INCOME TO MUNICIPAL
INCOME
Net Income per financial statements
(GAAP).................................. N/A N/A $ 19,974 $ 19,283 $ 16,642 $ 14,912 $ 10,646
Add:
Equity method adjustments:
Equity Income(1)...................... N/A N/A 0 0 0 0 (2,305)
Interest received(1).................. N/A N/A 0 0 0 0 7,869
Taxable interest income(8)................ N/A N/A (2,652) (837) 0 0 0
Accrued base
interest/(reduction)/other(3)........... N/A N/A $ 9,148 $ (278) $ 0 $ (268) $ 0
Municipal income, net for tax reporting
purposes................................ N/A N/A $ 26,470 $ 18,168 $ 16,983 $ 14,644 $ 16,210
STATEMENTS OF CASH FLOWS:
Net income................................ $ 38,156 $ 14,841 $ 19,974 $ 19,283 $ 16,642 $ 14,912 $ 10,646
Net cash provided by operating
activities.............................. 14,340 14,820 19,792 18,266 16,002 16,945 8,699
Net cash (used in) provided by investing
activities.............................. 34,282 (15,984) (21,844) (17,298) (28,883) 0 9,925
Net cash (used in) provided in financing
activities.............................. (12,764) (6,557) (10,459) 5,349 12,503 (14,571) (16,263)
Net (decrease) increase in cash and cash
equivalents............................. 35,858 (7,721) (12,511) 6,317 (378) 2,374 2,361
Cash and cash equivalents, beginning of
period.................................. 5,500 18,011 18,011 11,694 12,072 9,698 7,337
Cash and cash equivalents, end of
period.................................. $ 41,358 $ 10,290 $ 5,500 $ 18,011 $ 11,694 $ 12,072 $ 9,698
</TABLE>
---------------
(1) Effective June 1, 1995, with the transfer of all units of OTEF's predecessor
to OTEF, OTEF began accounting for its investments in its existing mortgage
revenue bonds in accordance with Statement of Financial Accounting Standards
No. 115-Accounting for Certain Debt and Equity Securities ("SFAS No. 115"),
as more fully described in the Notes to Financial Statements. For federal
income tax purposes, OTEF is considered a continued entity. Prior to June 1,
1995, OTEF accounted for its
47
<PAGE> 56
investments in the operating partnerships under the equity method, which
treated interest paid by the operating partnerships as a reduction in its
investment. Under this method, OTEF also recorded as an increase or
reduction in its investment its equity interest in the aggregate income or
losses of the operating partnerships.
(2) In mid 1995, OTEF changed its method of accounting from the equity method to
the revenue recognition method under SFAS 115. Actual 1995 results reflect 5
months of activity (January 1 through May 31, 1995) while under the equity
method and 7 months (June 1 through December 31, 1995) while under SFAS 115.
(3) For 1996, represents (i) payment of legal fees in connection with the
settlement of class action litigation totaling $2.5 million expensed in
1996, but capitalized for income tax purposes in 1997; (ii) a portion of
OTEF's 1996 expenses totaling approximately $1 million that was not expensed
in 1996 for income tax purposes; and (iii) write-off of prior years' tax
accrual totaling $3.8 million. For 1997, this amount represents the tax
capitalization of class action litigation costs in conjunction with the
appeal. For 1998, this represents the reimbursement of 1996 and 1997 bond
refunding costs which had been expensed for financial statement purposes and
deferred for income tax purposes. For 1999, this represents income
recognized for tax purposes on the San Bruno demand note but not for
financial statement purposes. (These items are discussed in Note 7 to OTEF's
financial statements which are incorporated by reference in this
prospectus/information statement.)
(4) Municipal income reflects OTEF's tax basis income consisting of tax-exempt
interest income less non-deductible expenses. Municipal income does not
reflect capital losses of $3.6 million and $3.8 million in 1998 and 1997,
respectively, nor 1999 capital gains of $0.1 million resulting from
financing transactions.
(5) Following receipt of an Information Memorandum furnished on December 2, 1996
to BAC holders, approximately 4.2% of the BAC holders made a timely election
to convert their BACs to status quo BACs, or SQBs. The SQBs are designed to
replicate, to the extent possible, the economic interest that SQB holders
would have received if the partnership agreement for OTEF's predecessor had
continued to govern. SQB holders do not share in the assets acquired by OTEF
after April 1, 1997. On April 1, 1997, 314,675 BACs were converted into
12,587 SQBs. Amounts presented for 1999, 1998 and 1997 are for BACs only. Of
the increase in net income per BAC for the nine months ended September 30,
2000, approximately $23.0 million or $3.774 per BAC is associated with the
gain on the sale of the San Bruno Bond and San Bruno Demand Note.
(6) Options granted but not exercised in 1997 are dilutive. The weighted average
BACs outstanding assuming dilution is 7,344,499 in 1999, 7,241,414 in 1998
and 7,283,795 in 1997.
(7) Restated to reflect OTEF's 25-for-1 BAC split effective July 1, 1997.
(8) Taxable interest income earned in 1999 on OTEF's new acquisitions from
taxable interest on loans in the amount of approximately $2.7 and $0.8
million, respectively, for 1999 and 1998, is not included in municipal
income.
48
<PAGE> 57
SELECTED PRO FORMA FINANCIAL AND OPERATING INFORMATION OF AIMCO
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth summary pro forma financial and operating
information of AIMCO for the nine months ended September 30, 2000 and for the
year ended December 31, 1999. The pro forma financial and operating information
gives effect to the merger and a number of other transactions completed by AIMCO
prior to the merger, including the Oxford acquisition and the Oxford
reorganization. The pro forma financial and operating information set forth
below should be read in conjunction with, and is qualified in its entirety by,
the historical and pro forma financial statements and notes thereto of AIMCO and
OTEF, which are incorporated by reference in this prospectus/information
statement. See "Pro Forma Financial Information (Merger)."
<TABLE>
<CAPTION>
PRO FORMA
FOR
PRO FORMA FOR THE YEAR
THE NINE MONTHS ENDED
ENDED SEPTEMBER 30, DECEMBER 31,
2000 1999
------------------- ------------
(IN THOUSANDS)
<S> <C> <C>
OPERATING DATA
Income from rental property operations...................... $228,207 $202,994
Income from service company business........................ 11,866 17,671
Income before minority interest in AIMCO Properties, L.P.... 91,082 56,006
Net income (loss)........................................... 81,238 47,955
Net income allocable to preferred stockholders.............. 51,593 65,885
Net income (loss) allocable to common stockholders.......... 29,645 (17,930)
PER SHARE DATA
Basic earnings (loss) per common share...................... $ (0.43) $ (0.28)
Diluted earnings (loss) per common share.................... $ 0.42 $ (0.28)
Weighted average number of common shares outstanding........ 68,832 64,433
Weighted average number of common shares and common share
equivalents outstanding................................... 70,669 64,433
Dividends paid per common share............................. $ 2.10 $ 2.80
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA AS OF
SEPTEMBER 30,
2000
---------------
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA
Real estate, before accumulated depreciation................ $6,121,674
Real estate, after accumulated depreciation................. 5,471,364
Investments in unconsolidated real estate partnerships...... 798,158
Investments in unconsolidated subsidiaries.................. 91,358
Notes receivable from unconsolidated real estate
partnerships.............................................. 145,587
Notes receivable from and advances to unconsolidated
subsidiaries.............................................. 213,991
Investments in bonds and notes receivable................... 92,916
Cash and cash equivalents................................... 107,820
Total assets................................................ 7,247,029
Total mortgages and notes payable........................... 3,699,655
Minority interest in AIMCO Properties, L.P.................. 297,631
Company-obligated mandatorily redeemable convertible
securities................................................ 35,330
Stockholders' equity........................................ 2,734,734
</TABLE>
49
<PAGE> 58
PRO FORMA CAPITALIZATION OF AIMCO
The following table sets forth the capitalization of AIMCO at September 30,
2000: (i) on a historical basis; and (ii) on a pro forma basis to reflect the
merger, applying the assumptions described above with respect to the Pro Forma
Financial Information of AIMCO (Merger). The information set forth in the
following table should be read in connection with the financial statements and
notes thereto incorporated by reference and the pro forma financial information
and notes thereto included elsewhere in this prospectus/information statement.
See "Pro Forma Financial Information of AIMCO (Merger)."
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA (1)
---------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Secured notes payable....................................... $2,836,097 $2,836,097
Secured tax-exempt bond financing........................... 583,106 392,744
Unsecured short-term financing.............................. 406,000 470,814
Mandatorily redeemable convertible preferred securities..... 35,330 35,330
Minority interest in other entities......................... 194,006 194,006
Minority interest in Operating Partnership.................. 297,631 297,631
Class B Cumulative Convertible Preferred Stock, $.01 par
value, 750,000 shares authorized, 419,471 shares issued
and outstanding (2)....................................... 41,947 41,947
Class C Cumulative Preferred Stock, $.01 par value,
2,400,000 shares authorized, 2,400,000 shares issued and
outstanding............................................... 59,845 59,845
Class D Cumulative Preferred Stock, $.01 par value,
4,200,000 shares authorized, 4,200,000 shares issued and
outstanding............................................... 105,000 105,000
Class G Cumulative Preferred Stock, $.01 par value,
4,050,000 shares authorized, 4,050,000 shares issued and
outstanding............................................... 101,000 101,000
Class H Cumulative Preferred Stock, $.01 par value,
2,000,000 shares authorized, 2,000,000 shares issued and
outstanding............................................... 49,925 49,925
Class K Convertible Cumulative Preferred Stock, $.01 par
value, 5,000,000 shares authorized, 5,000,000 shares
issued and outstanding (3)................................ 125,000 125,000
Class L Convertible Cumulative Preferred Stock, $.01 par
value, 5,000,000 shares authorized, 5,000,000 shares
issued and outstanding (4)................................ 125,000 125,000
Class M Convertible Cumulative Preferred Stock, $.01 par
value, 1,600,000 shares authorized, 1,200,000 shares
issued and outstanding (5)................................ 30,000 30,000
Class N Convertible Cumulative Preferred Stock, $.01 par
value, 4,000,000 shares authorized, 4,000,000 shares
issued and outstanding (6)................................ 100,000 100,000
Class O Cumulative Convertible Preferred Stock, $.01 par
value, 1,904,762 shares authorized, 1,904,762 shares
issued and outstanding (7)................................ 100,000 100,000
Class P Convertible Cumulative Preferred Stock, $.01 par
value, 4,000,000 shares authorized, 0 shares issued and
outstanding on a historical basis and 4,000,000 shares
issued and outstanding on a pro forma basis(8)............ -- 100,000
AIMCO Class A Common Stock, 468,432,738 authorized,
71,177,247 issued and outstanding on a historical basis,
and 73,368,696 issued and outstanding on a pro forma
basis..................................................... 712 734
Additional paid-in capital.................................. 2,065,618 2,171,901
Notes receivable on common stock purchases.................. (44,795) (44,795)
Distributions in excess of earnings......................... (330,823) (330,823)
---------- ----------
Total stockholders' equity........................ 2,528,429 2,734,734
---------- ----------
Total Capitalization.............................. $6,880,599 $6,961,356
========== ==========
</TABLE>
---------------
(1)The pro forma capitalization information is presented as if the transactions
detailed above occurred on September 30, 2000.
(2)Each share is convertible into approximately 3.28 shares of Class A common
stock.
50
<PAGE> 59
(3)Each share is convertible into approximately 0.59524 shares of Class A common
stock.
(4)Each share is convertible into approximately 0.5379 shares of Class A common
stock.
(5)Each share is convertible into approximately 0.5681818 shares of Class A
common stock.
(6)Each share is convertible into approximately 0.4762 shares of Class A common
stock.
(7)Each share is convertible into approximately one share of Class A common
stock.
(8)Each share is convertible into approximately 0.4464 shares of Class A common
stock.
51
<PAGE> 60
COMPARATIVE PER SHARE DATA
Set forth below are historical and pro forma earnings per common share,
cash dividends per common share and book value per common share data of AIMCO
and historical and pro forma earnings per BAC, cash distributions per BAC and
OTEF's book value per BAC data. The data set forth below should be read in
conjunction with AIMCO's and OTEF's audited financial statements and unaudited
interim financial statements, including the notes to the financial statements,
which are incorporated by reference in this prospectus/information statement.
The data should also be read in conjunction with the unaudited pro forma
financial statements, including the notes to the pro forma financial statements,
included in this prospectus/information statement. The pro forma data are not
necessarily indicative of the actual financial position that would have
occurred, or future operating results that will occur, upon consummation of the
merger.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, 2000 DECEMBER 31, 1999
------------------ -----------------
<S> <C> <C>
HISTORICAL -- AIMCO
Basic earnings per share.................................. $ 0.35 $ 0.39
Diluted earnings per share................................ 0.34 0.38
Cash dividends per share.................................. 2.10 2.50
HISTORICAL -- OTEF
Basic net income per BAC.................................. 5.10 2.67
Diluted net income per BAC................................ 5.09 2.67
Cash dividends per BAC.................................... 1.65 2.09
PRO FORMA COMBINED NET INCOME (LOSS)
Per AIMCO share(1)........................................ 0.42 (0.28)
Equivalent per BAC(3)..................................... 0.26(4) (0.07)
BOOK VALUE PER SHARE/BAC
Historical AIMCO.......................................... 23.75 24.27
Historical OTEF per BAC(2)................................ 37.54 35.97
Pro forma combined per AIMCO share(1)..................... 24.49 25.04
Equivalent pro forma combined per BAC(3).................. 13.72 14.04
</TABLE>
---------------
(1) The pro forma combined per share data for AIMCO has been prepared as if the
merger and other transactions had occurred as of January 1, 1999 and
resulted in weighted average Class A common stock outstanding of
approximately 68,832,000 shares for the nine months ended September 30, 2000
and approximately 64,433,000 shares for the year ended December 31, 1999.
(2) OTEF's book value per BAC is calculated as the sum of a BAC capital account
plus the BAC's allowable share of accumulated comprehensive income, divided
by the fully diluted shares outstanding as of the determination date.
(3)The equivalent pro forma amounts are determined by multiplying the pro forma
combined loss per share and pro forma combined book value per share by the
share exchange ratio (each BAC being equivalent to 0.573 shares of AIMCO
Class A common stock, assuming conversion of the AIMCO Class P preferred
stock into approximately 1,786,000 AIMCO Class A common shares).
(4)On a pro forma basis, assuming the AIMCO Class P preferred stock was
converted into AIMCO Class A common stock, there is pro forma net income
attributable to common shareholders, as a result of no income allocable to
the AIMCO Class P preferred stock that is assumed to be converted.
52
<PAGE> 61
MANAGEMENT OF AIMCO AND OTEF
The executive officers and directors of AIMCO are set forth below.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Terry Considine.............................. Chairman of the Board of Directors and Chief
Executive Officer
Peter K. Kompaniez........................... Vice Chairman, President and Director
Thomas W. Toomey............................. Chief Operating Officer
Harry G. Alcock.............................. Executive Vice President and Chief Investment
Officer
Joel F. Bonder............................... Executive Vice President, General Counsel and
Secretary
Patrick J. Foye.............................. Executive Vice President
Lance J. Graber.............................. Executive Vice President -- Acquisitions
Steven D. Ira................................ Co-Founder and Executive Vice President
Paul J. McAuliffe............................ Executive Vice President and Chief Financial
Officer
James N. Bailey.............................. Director
Richard S. Ellwood........................... Director
J. Landis Martin............................. Director
Thomas L. Rhodes............................. Director
</TABLE>
The executive officers and directors of Oxford Tax Exempt Fund II
Corporation, OTEF's managing general partner, are set forth below.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Terry Considine.............................. Chairman of the Board of Directors and Chief
Executive Officer
Peter K. Kompaniez........................... Vice Chairman, President and Director
Patrick J. Foye.............................. Executive Vice President and Director
Paul J. McAuliffe............................ Executive Vice President and Chief Financial
Officer
Martha Long.................................. Chief Accounting Officer
Stephen P. Gavula, Jr........................ Non-Employee Director
Scot B. Barker............................... Non-Employee Director
</TABLE>
The following is a biographical summary of the experience of the current
directors and executive officers of AIMCO for the past five years or more.
Terry Considine. Mr. Considine has been Chairman of the Board of Directors
and Chief Executive Officer of AIMCO since July 1994. Mr. Considine serves as
Chairman and director of American Land Lease, Inc. ("American Land"), a public
real estate investment trust that is the surviving entity of the merger between
Asset Investors Corporation and Commercial Assets, Inc., two other public real
estate investment trusts. Mr. Considine has been and remains involved as a
principal in a variety of other business activities.
Peter K. Kompaniez. Mr. Kompaniez has been Vice Chairman of the Board of
Directors since July 1994 and was appointed President in July 1997. Mr.
Kompaniez has also served as Chief Operating Officer of NHP Incorporated
("NHPI"), which was acquired by the company in December 1997. From 1986 to 1993,
he served as 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.
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<PAGE> 62
Thomas W. Toomey. Mr. Toomey served as Senior Vice President -- Finance
and Administration of AIMCO from January 1996 to March 1997, when he was
promoted to Executive Vice President -- Finance and Administration. Mr. Toomey
served as Executive Vice President -- Finance and Administration until December
1999, when he was appointed Chief Operating Officer. 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. Mr. Toomey received a B.S. in Business
Administration/Finance from Oregon State University.
Harry G. Alcock. Mr. Alcock served as a Vice President of AIMCO from July
1996 to October 1997, when he was promoted to Senior Vice President
-- Acquisitions. Mr. Alcock served as Senior Vice President -- Acquisitions
until October 1999, when he was promoted to Executive Vice President and Chief
Investment Officer. Mr. Alcock has had responsibility for acquisition and
financing activities of AIMCO 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.
Joel F. Bonder. Mr. Bonder was appointed Executive Vice President, General
Counsel and Secretary of AIMCO effective December 1997. Prior to joining AIMCO,
Mr. Bonder served as Senior Vice President and General Counsel of NHPI from
April 1994 until December 1997. Mr. Bonder served as Vice President and Deputy
General Counsel of NHPI from June 1991 to March 1994 and as Associate General
Counsel of NHPI from 1986 to 1991. From 1983 to 1985, Mr. Bonder practiced with
the Washington, D.C. law firm of Lane & Edson, P.C. and from 1979 to 1983
practiced with the Chicago law firm of Ross and Hardies. Mr. Bonder received a
B.A. from the University of Rochester and a J.D. from Washington University
School of Law.
Patrick J. Foye. Mr. Foye was appointed Executive Vice President of AIMCO
in May 1998. He is responsible for acquisitions of partnership securities,
consolidation of minority interests, and corporate and other acquisitions. Prior
to joining AIMCO, Mr. Foye was a Merger and Acquisitions Partner in the law firm
of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to 1998 and was Managing
Partner of the firm's Brussels, Budapest and Moscow offices from 1992 through
1994. Mr. Foye is also Deputy Chairman of the Long Island Power Authority and
serves as a member of the New York State Privatization Council. He received a
B.A. from Fordham College and a J.D. from Fordham Law School and was Associate
Editor of the Fordham Law Review.
Lance J. Graber. Mr. Graber was appointed Executive Vice President
-- Acquisitions of AIMCO in October 1999. His principal business function is
acquisitions. Prior to joining AIMCO, Mr. Graber was an Associate from 1991
through 1992 and then a Vice President from 1992 through 1994 at Credit Suisse
First Boston engaged in real estate financial advisory services and principal
investing. He was a Director there from 1994 to May 1999, during which time he
supervised a staff of seven in the making of principal investments in hotel,
multi-family and assisted living properties. Mr. Graber received a B.S. and an
M.B.A. from the Wharton School of the University of Pennsylvania.
Steven D. Ira. Mr. Ira is a Co-Founder of AIMCO and has served as
Executive Vice President -- Property Operations of AIMCO since July 1994. From
1987 until July 1994, he served as President of Property Asset Management
("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.
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<PAGE> 63
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 he
is a member of the Boards of Directors of the National Multi-Housing Council,
the National Apartment Association and the Apartment Association of Greater
Orlando. Mr. Ira received a B.S. from metropolitan State College in 1975.
Paul J. McAuliffe. Mr. McAuliffe has been Executive Vice President of
AIMCO since February 1999 and was appointed Chief Financial Officer in October
1999. Prior to joining AIMCO, Mr. McAuliffe was Senior Managing Director of
Secured Capital Corp and prior to that time had been a Managing Director of
Smith Barney, Inc. from 1993 to 1996, where he was senior member of the
underwriting team that lead AIMCO's initial public offering in 1994. Mr.
McAuliffe was also a Managing Director and head of the real estate group at CS
First Boston from 1990 to 1993 and he was a Principal in the real estate group
at Morgan Stanley & Co., Inc. where he worked from 1983 to 1990. Mr. McAuliffe
received a B.A. from Columbia college and an M.B.A. from University of Virginia,
Darden School.
James N. Bailey. Mr. Bailey has served on the Board of Directors since
June 5, 2000. Mr. Bailey is the co-founder of Cambridge Associates, Inc., an
investment consulting firm for nonprofit, endowed institutions and wealthy
family groups. Cambridge's clients include Harvard University, for whom the
company conducted a thorough study of endowment practices, which lead to the
creation of Harvard Management Company, Inc. Mr. Bailey's other business
experience includes serving as co-founder, Treasurer and Director of the
Plymouth Rock Company, Direct Response Corporation, and Homeowner's Direct
Corporation, all U.S. personal lines insurance companies. In addition, he is a
Trustee and member of the Investment Committee of the New England Aquarium and
is a member of numerous Harvard University alumni affairs committees, including
the Harvard Endowment Committee. Mr. Bailey holds an M.B.A. from Harvard
Business School and a J.D. from Harvard Law School. He is a member of the
Massachusetts and American Bar Associations.
Richard S. Ellwood. Mr. Ellwood was appointed a director of AIMCO in July
1994. Mr. Ellwood is currently Chairman of the Audit Committee and a member of
the Compensation 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 on Wall Street 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 Felcor Lodging Trust, Incorporated and Florida
East Coast Industries, Inc.
J. Landis Martin. Mr. Martin was appointed a director of AIMCO in July
1994 and became Chairman of the Compensation Committee on March 19, 1998. Mr.
Martin is a member of the Audit Committee. Mr. Martin has served as President
and Chief Executive Officer of NL Industries, Inc., a manufacturer of titanium
dioxide since 1987. Mr. Martin has served as Chairman of Tremont Corporation
("Tremont"), a holding company operating through its affiliates Titanium Metals
Corporation ("TIMET") and NL Industries, Inc. ("NL"), since 1990 and as Chief
Executive Officer and a director of Tremont since 1988. Mr. Martin has served as
Chairman of TIMET, an integrated producer of titanium since 1987 and Chief
Executive Officer since January, 1995. From 1990 until its acquisition by a
predecessor of Halliburton Company ("Halliburton") in 1994, Mr. Martin served as
Chairman of the Board and Chief Executive Officer of Baroid Corporation, an
oilfield services company. In addition to Tremont, NL and TIMET, Mr. Martin is a
director of Halliburton, which is engaged in the petroleum services, hydrocarbon
and engineering industries, and Crown Castle International Corporation, a
communications company.
Thomas L. Rhodes. Mr. Rhodes was appointed a Director of AIMCO in July
1994 and is currently a member of the Audit and Compensation Committees. Mr.
Rhodes has served as the President and
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<PAGE> 64
Director of National Review magazine since November 1992, where he has also
served as a Director since 1988. From 1976 to 1992, he held various positions at
Goldman, Sachs & Co. and was elected a General Partner in 1986 and served as a
General Partner from 1987 until November 1992. He is currently Co-Chairman of
the Board, Co-Chief Executive Officer and a Director of American Land. He also
serves as a Director of Delphi Financial Group and its subsidiaries, Delphi
International Ltd., Oracle Reinsurance Company and The Lynde and Harry Bradley
Foundation.
The address of each of AIMCO's current officers and directors is c/o
Apartment Investment and Management Company, Colorado Center, Tower Two, 2000
South Colorado Boulevard, Suite 2-1000, Denver, Colorado 80222. Messrs.
Considine and Kompaniez are the directors of AIMCO-GP, Inc., a Delaware
corporation, which is the general partner of and holds a 1% general partnership
interest in AIMCO Properties, L.P., AIMCO's operating partnership. The executive
officers of AIMCO-GP, Inc. are the officers of AIMCO, each of whom holds the
same position with AIMCO-GP, Inc. that he holds with AIMCO.
INFORMATION CONCERNING AIMCO AND ITS DIRECTORS AND EXECUTIVE OFFICERS
Neither AIMCO, its operating partnership, nor AIMCO-GP, Inc. was, during
the past five years, convicted in a criminal proceeding or a party to any
judicial or administrative proceeding that resulted in a judgment, decree or
final order enjoining the entity from future violations of, or prohibiting
activities subject to, federal or state securities laws, or a finding of any
violation of federal or state securities laws.
Each of AIMCO's directors and executive officers is a U.S. citizen. None of
the AIMCO directors or executive officers was, during the past five years,
convicted in a criminal proceeding or a party to any judicial or administrative
proceeding that resulted in a judgment, decree or final order enjoining the
person from future violations of, or prohibiting activities subject to, federal
or state securities laws, or a finding of any violation of federal or state
securities laws.
Patrick J. Foye, an executive officer of AIMCO, owns 200 BACs. No other
director or executive officer owns any of OTEF's securities.
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<PAGE> 65
DESCRIPTION OF AIMCO CAPITAL STOCK
GENERAL
As of October 31, 2000, AIMCO's articles of incorporation authorize the
issuance of up to 510,587,500 shares of capital stock with a par value of $.01
per share, of which 468,432,738 shares are classified as Class A common stock
and 42,154,762 shares are classified as preferred stock. As of October 31, 2000,
there were 71,267,359 shares of Class A common stock issued and outstanding. The
Class A common stock is traded on the NYSE under the symbol "AIV." BankBoston,
N.A. serves as transfer agent and registrar of the Class A common stock. On
January 10, 2001, the closing sale price of the Class A common stock on the NYSE
was $47.375. The following table shows the high and low reported sales prices
per share of Class A common stock for the periods indicated.
<TABLE>
<CAPTION>
CALENDAR QUARTERS HIGH LOW
----------------- -------- -------
<S> <C> <C>
2000
Fourth Quarter............................................ $49.938 $42.625
Third Quarter............................................. 49.375 43.688
Second Quarter............................................ 45.250 37.750
First Quarter............................................. 39.938 36.313
1999
Fourth Quarter............................................ 40.188 34.063
Third Quarter............................................. 42.625 37.250
Second Quarter............................................ 44.125 35.250
First Quarter............................................. 41.625 35.000
1998
Fourth Quarter............................................ 37.375 30.000
Third Quarter............................................. 41.000 30.938
Second Quarter............................................ 39.875 36.500
First Quarter............................................. 38.625 34.250
1997
Fourth Quarter............................................ 38.000 32.000
Third Quarter............................................. 36.188 28.125
Second Quarter............................................ 29.750 26.000
First Quarter............................................. 30.500 25.500
1996
Fourth Quarter............................................ 28.375 21.125
Third Quarter............................................. 22.000 18.375
Second Quarter............................................ 21.000 18.375
First Quarter............................................. 21.125 19.375
</TABLE>
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<PAGE> 66
As of October 31, 2000, there were 71,267,359 shares of Class A common
stock issued and outstanding. In addition, AIMCO has reserved the following
number of shares of Class A common stock for issuance under its stock plans:
<TABLE>
<CAPTION>
NO. OF SHARES
PLAN RESERVED FOR ISSUANCE
---- ---------------------
<S> <C>
1994 Stock Option Plan of Apartment Investment and
Management Company and Affiliates....................... Up to 150,000
Apartment Investment and Management Company 1996 Stock
Award and Incentive Plan................................ Up to 500,000
Apartment Investment and Management Company's Nonqualified
Stock Option Plan....................................... Up to 500,000
Apartment Investment and Management Company 1997 Stock
Award and Incentive Plan................................ Up to 20,000,000(1)
Insignia 1992 Stock Incentive Plan........................ Up to 4,666,666
1994 Stock Incentive Plan for Officers, Directors and Key
Employees of Ambassador Apartments, Inc., Ambassador
Apartments, L.P. and Subsidiaries....................... Up to 100,000
1996 Stock Incentive Plan for Officers, Directors and Key
Employees of Ambassador Apartments, Inc., Ambassador
Apartments, L.P. and Subsidiaries....................... Up to 100,000
Apartment Investment and Management Company Share Up to 8.7% of outstanding shares of
Repurchase Plan......................................... Class A common stock
</TABLE>
---------------
(1) Under the plan, AIMCO may issue up to 10% of the shares of Class A common
stock outstanding as of the first day of the fiscal year during which any
award is made, but in no event more than 20,000,000 shares of Class A common
stock in the aggregate.
CLASS A COMMON STOCK
Holders of the Class A common stock are entitled to receive dividends, when
and as declared by the AIMCO board of directors, out of funds legally available
therefor. The holders of shares of Class A common stock, upon any liquidation,
dissolution or winding up of AIMCO, are entitled to receive ratably any assets
remaining after payment in full of all liabilities of AIMCO and the liquidation
preferences of preferred stock. The shares of Class A common stock possess
ordinary voting rights for the election of directors and in respect of other
corporate matters, each share entitling the holder thereof to one vote. Holders
of shares of Class A common stock do not have cumulative voting rights in the
election of directors, which means that holders of more than 50% of the shares
of Class A common stock voting for the election of directors can elect all of
the directors if they choose to do so and the holders of the remaining shares
cannot elect any directors. Holders of shares of Class A common stock do not
have preemptive rights, which means they have no right to acquire any additional
shares of Class A common stock that may be issued by AIMCO at a subsequent date.
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<PAGE> 67
PREFERRED STOCK
As of October 31, 2000, AIMCO's articles of incorporation authorized
42,154,762 shares of preferred stock with a par value of $.01 per share. AIMCO
is authorized to issue shares of preferred stock in one or more classes or
subclasses, with such designations, preferences, conversion and other rights,
voting powers, restriction, limitations as to dividends, qualifications and
terms and conditions of redemption, in each case, if any as are permitted by
Maryland law and as the AIMCO board of directors may determine by resolution. As
of September 30, 2000, AIMCO had issued and outstanding the following classes of
preferred stock:
<TABLE>
<CAPTION>
LIQUIDATION
SHARES SHARES QUARTERLY PREFERENCE
CLASS AUTHORIZED OUTSTANDING DIVIDEND (PER SHARE)
----- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Class B Convertible Cumulative Preferred
Stock(1)................................... 750,000 419,471 $ 1.78125(2) $100.00
Class C Cumulative Preferred Stock........... 2,400,000 2,400,000 0.5625 25.00
Class D Cumulative Preferred Stock........... 4,200,000 4,200,000 0.546875 25.00
Class G Cumulative Preferred Stock........... 4,050,000 4,050,000 0.5859375 25.00
Class H Cumulative Preferred Stock........... 2,000,000 2,000,000 0.59375 25.00
Class I Cumulative Preferred Stock........... 10,000,000 0 0.50(3) 25.00
Class J Cumulative Convertible Preferred
Stock...................................... 1,250,000 0 2.25(4) 100.00
Class K Convertible Cumulative Preferred
Stock(5)................................... 5,000,000 5,000,000 0.50(6) 25.00
Class L Convertible Cumulative Preferred
Stock(7)................................... 5,000,000 5,000,000 0.50625(8) 25.00
Class M Convertible Cumulative Preferred
Stock(9)................................... 1,600,000 1,200,000 0.53125(10) 25.00
Class N Convertible Cumulative Preferred
Stock(11).................................. 4,000,000 4,000,000 0.5625(12) 25.00
Class O Cumulative Convertible Preferred
Stock(13).................................. 1,904,762 1,904,762 1.18125(14) 52.50
</TABLE>
---------------
(1) Each share is convertible into approximately 3.28 shares of Class A common
stock.
(2) The shares entitle the holder to receive the greater of $1.78125 per share
or the dividends then payable on the Class A common stock into which the
Class B cumulative preferred stock is then convertible.
(3) Subject to adjustment on or after March 1, 2005.
(4)The shares entitle the holder to receive preferred quarterly cash
distributions of (i) 9% per annum of the per share liquidation preference
for the period beginning on and including November 15, 1999 and lasting
until November 15, 2000; and (ii) 9.5% per annum of the per share
liquidation preference thereafter. Each share is convertible into one share
of Class A common stock.
(5) Each share is convertible into approximately 0.59524 shares of Class A
common stock.
(6) The shares entitle the holder to receive preferred quarterly cash
distributions of (i) from February 17, 1999 through February 17, 2002, the
greater of $0.50 or the dividends then payable on the Class A common stock
into which the Class K Convertible Cumulative preferred stock is then
convertible, and (ii) from and after February 18, 2002, the greater of
$0.625 or the dividends then payable on Class A common stock into which the
Class K Convertible Cumulative preferred stock is then convertible.
(7) Each share is convertible into approximately 0.5379 shares of Class A
common stock.
(8) The shares entitle the holder to receive preferred quarterly cash
distributions of (i) from May 27, 1999 through May 27, 2002, the greater of
$0.50625 or the dividends then payable on the Class A common stock into
which the Class L Cumulative Convertible preferred stock is then
convertible,
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and (ii) from and after May 28, 2002, the greater of $0.625 or the dividends
then payable on Class A common stock into which the Class L Convertible
Cumulative preferred stock is then convertible.
(9) Each share is convertible into approximately 0.5681818 shares of Class A
common stock.
(10) The shares entitle the holder to receive preferred quarterly cash
distributions of (i) from January 13, 2000 through January 13, 2003, the
greater of $0.53125 or the dividends then payable on the Class A common
stock into which the Class M Cumulative preferred stock is then
convertible, and (ii) from and after January 13, 2003, the greater of
$0.578125 or the dividends then payable on Class A common stock into which
such Class M Convertible Cumulative preferred stock is then convertible.
(11) Each share is convertible into approximately 0.4762 shares of Class A
common stock.
(12) The shares entitle the holder to receive preferred quarterly cash
distributions equal to the greater of (i) $2.25 per year (equivalent to 9%
per annum of the $25.00 liquidation preference), subject to increase in the
event of a change in control of AIMCO, or (ii) the cash dividends payable
on the number of shares of Class A common stock (or portion thereof) into
which a share of Class N Convertible Cumulative preferred stock is
convertible.
(13) Each share is convertible into approximately one share of Class A common
stock.
(14) The shares entitle the holder to receive preferred quarterly cash
distributions equal to the greater of (i) $4.25 per year (equivalent to 9%
per annum of the $52.50 liquidation preference), subject to increase in the
event of a change in control of AIMCO, or (ii) the cash dividends payable
on the number of shares of Class A common stock (or portion thereof) into
which a share of Class O Cumulative Convertible preferred stock is
convertible.
HIGH PERFORMANCE UNITS
In January 1998, AIMCO's operating partnership sold an aggregate of 15,000
of its Class I High Performance Partnership Units (the "High Performance Units")
to a joint venture comprised of members of AIMCO's senior management, including
a family partnership controlled by Mr. Considine, and including Mr. Kompaniez,
and to three of its independent directors for a total of $2.1 million in cash.
The other members of senior management who acquired High Performance Units were
Messrs. Toomey, Alcock, Bonder, Foye, Ira, and McAuliffe, as well as Ms. Patti
Fielding, Mr. Les Boeckel, Ms. Leeann Morein and Mr. Scott Wesson. The
independent directors who acquired High Performance Units were Mr. J. Landis
Martin, Mr. Thomas L. Rhodes and Mr. John D. Smith. Mr. Considine controls 70%
of the joint venture through the family partnership, and Mr. Kompaniez controls
14% of the joint venture, giving them beneficial ownership of 80% of the High
Performance Units. The High Performance Units would have had nominal value
unless AIMCO's total return over the three-year period ending December 31, 2000,
was at least 30% and exceeded the industry average, as determined by the Morgan
Stanley Dean Witter REIT Index, by at least 15%.
The High Performance Units were not convertible into Class A common stock.
However, in the event of a change of control of AIMCO, holders of High
Performance Units had redemption rights similar to those of holders of common
operating partnership units. Upon the occurrence of a change of control, any
holder of High Performance Units could, subject to certain restrictions, require
AIMCO's operating partnership to redeem all or a portion of the High Performance
Units held by the party in exchange for a cash payment per unit equal to the
liquidation value of a unit at the time of redemption. However, in the event
that any High Performance Units were tendered for redemption, the operating
partnership's obligation to pay the redemption price is subject to the prior
right of AIMCO to acquire those High Performance Units in exchange for an equal
number of shares of Class A common stock with a market value equivalent to the
liquidation value of the units.
Because AIMCO's total return over the measurement period exceeded 115% of
the total return of the Morgan Stanley Dean Witter REIT Index and exceeded the
minimum return of 30% over the period, the
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High Performance Units represent 2,376,794 operating partnership units, and
AIMCO's future earnings per share of Class A common stock have been
proportionally diluted by approximately 2.4%.
On November 29, 2000, AIMCO announced plans, which are subject to approval
of the holders of Class A common stock, to adopt a new modified High Performance
Unit program in the following respects:
- Three-Year Valuation Period. Initially, there will be three classes of
High Performance Units, with the Class II Units having a one-year
determination period ending December 31, 2001; the Class III units having
a two-year determination period ending December 31 2002; and the Class IV
Units having a three-year determination period ending December 31, 2003.
In 2002 and each future year a new class of High Performance Units will be
created with a three-year valuation period;
- Minimum Total Returns. The High Performance Units will have no value
unless the AIMCO total return, which equals dividend income plus share
price appreciation, exceeds 115% of the cumulative total return of the
Morgan Stanley Dean Witter REIT Index and, at a minimum, has the following
fixed total returns: 11% for the one-year program; 23.2% for the two-year
program; and 36.8% for the three year program. The minimum three-year
return will increase from 30% to 36.8%;
- Additional Distributions and Allocations. If the minimum total returns
are exceeded, the High Performance Units will receive distributions and
allocations of income and loss at the same time and in the same amount as
those received by the AIMCO Class A common stock;
- Anti-Dilution. For each new High Performance Unit program, AIMCO will
limit dilution to AIMCO's fully diluted share count to 1%;
- Determination of Security Price. The initial security price for the new
High Performance Unit programs will be the security price which determines
the final value of the existing High Performance Units program. The
existing High Performance Units program's security price at the end of the
period will be based on an average of the volume-weighted daily trading
price of the Class A common stock for the 20 trading days immediately
preceding the end of the period on December 31, 2000; and
- It is expected that the aggregate investment of the participants for the
three new programs will be approximately $4 million although final amounts
have not yet been determined. The price will be established by AIMCO's
independent directors with advice from independent financial advisors.
RESTRICTIONS ON TRANSFER OF CLASS A COMMON STOCK
For AIMCO to qualify as a REIT under the Internal Revenue Code, not more
than 50% in value of its outstanding capital stock may be owned, directly or
indirectly, by five or fewer individuals (as defined in the Internal Revenue
Code to include certain entities) during the last half of a taxable year and the
shares of Class A common stock must be beneficially owned by 100 or more persons
during at least 335 days of a taxable year of 12 months or during a
proportionate part of a shorter taxable year. Because the AIMCO board of
directors believes that it is essential for AIMCO to meet the REIT requirements,
the AIMCO board of directors has adopted, and the stockholders have approved,
provisions of the AIMCO articles of incorporation restricting the acquisition of
shares of Class A common stock.
Subject to certain exceptions specified in AIMCO's articles of
incorporation, no holder may own, or be deemed to own by virtue of various
attribution and constructive ownership provisions of the Internal Revenue Code
and Rule 13d-3 under the Exchange Act, more than 8.7% (or 15% in the case of
certain pension trusts described in the Internal Revenue Code, investment
companies registered under the Investment Company Act of 1940 and Mr. Considine)
of the outstanding shares of Class A common stock. We call this the ownership
limit. The AIMCO board of directors may waive the ownership limit if evidence
satisfactory to the AIMCO board of directors and AIMCO's tax counsel is
presented that the ownership will not then or in the future jeopardize AIMCO's
status as a REIT. However, in no event may that holder's direct or indirect
ownership of Class A common stock exceed 9.8% of the total outstanding
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<PAGE> 70
shares of Class A common stock. As a condition of such waiver, AIMCO's board of
directors may require opinions of counsel satisfactory to it and/or an
undertaking from the applicant with respect to preserving the REIT status of
AIMCO. These restrictions on transferability and ownership will not apply if
AIMCO's board of directors determines that it is no longer in the best interests
of AIMCO to attempt to qualify, or to continue to qualify as a REIT and if a
resolution terminating AIMCO's status as a REIT and amending the AIMCO articles
of incorporation to remove the foregoing restrictions is adopted by the AIMCO
board of directors and a majority of AIMCO's stockholders.
If shares of Class A common stock in excess of the ownership limit, or
shares of Class A common stock which would cause the REIT to be beneficially
owned by fewer than 100 persons, or which would result in AIMCO being "closely
held," within the meaning of Section 856(h) of the Internal Revenue Code, or
which would otherwise result in AIMCO failing to qualify as a REIT, are issued
or transferred to any person, such issuance or transfer will be null and void to
the intended transferee, and the intended transferee would acquire no rights to
the stock.
Shares of Class A common stock transferred in excess of the ownership limit
or other applicable limitations will automatically be transferred to a trust for
the exclusive benefit of one or more qualifying charitable organizations to be
designated by AIMCO. Shares transferred to such trust will remain outstanding,
and the trustee of the trust will have all voting and dividend rights pertaining
to such shares. The trustee of such trust may transfer such shares to a person
whose ownership of such shares does not violate the ownership limit or other
applicable limitation.
Upon a sale of such shares by the trustee, the interest of the charitable
beneficiary will terminate, and the sales proceeds would be paid, first, to the
original intended transferee, to the extent of the lesser of (a) such
transferee's original purchase price (or the original market value of such
shares if purportedly acquired by gift or devise) and (b) the price received by
the trustee, and, second, any remainder to the charitable beneficiary. In
addition, shares of stock held in such trust are purchasable by AIMCO for a
90-day period at a price equal to the lesser of the price paid for the stock by
the original intended transferee (or the original market value of such shares if
purportedly acquired by gift or devise) and the market price for the stock on
the date that AIMCO determines to purchase the stock. The 90-day period
commences on the date of the violative transfer or the date that the AIMCO board
of directors determines in good faith that a violative transfer has occurred,
whichever is later. All certificates representing shares of Class A common stock
bear a legend referring to the restrictions described above.
All persons who own, directly or by virtue of the attribution provisions of
the Internal Revenue Code and Rule 13d-3 under the Exchange Act, more than a
specified percentage of the outstanding shares of Class A common stock must file
an affidavit with AIMCO containing the information specified in the AIMCO
articles of incorporation within 30 days after January 1 of each year. In
addition, each stockholder shall upon demand be required to disclose to AIMCO in
writing such information with respect to the direct, indirect and constructive
ownership of shares as the AIMCO board of directors deems necessary to comply
with the provisions of the Internal Revenue Code applicable to a REIT or to
comply with the requirements of any taxing authority or governmental agency.
The ownership limitations may have the effect of precluding acquisition of
control of AIMCO by certain third parties unless the AIMCO board of directors
determines that maintenance of REIT status is no longer in the best interests of
AIMCO.
BUSINESS COMBINATIONS
Maryland law places restrictions on business combinations between a
Maryland corporation and Interested Stockholders. These stockholders are either
persons that beneficially own 10% or more of the voting power of the
corporation's shares, or affiliates of the corporation who, at any time within
the two-year period prior to the date in question, beneficially owned 10% or
more of the voting power of the then-outstanding voting stock of the
corporation. Under Maryland law, a corporation may not engage in a business
combination with an Interested Stockholder for five years after the most recent
date on which the Interested Stockholder attained that status. Thereafter, this
type of business combination must be
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recommended by the board of directors of the corporation and approved by the
affirmative vote of at least (a) 80% of the votes entitled to be cast by holders
of outstanding voting shares of the corporation, voting together as a single
voting group, and (b) two-thirds of the votes entitled to be cast by holders of
outstanding voting shares of the corporation other than shares held by the
Interested Stockholder or an affiliate of the Interested Stockholder with whom
the business combination is to be effected, unless, among other conditions, the
corporation's stockholders receive a minimum price (as defined in the Maryland
General Corporation Law) for their shares and the consideration is received in
cash or in the same form as previously paid by the Interested Stockholder for
its shares. For purposes of determining whether a person is an Interested
Stockholder, ownership of common operating partnership units will be treated as
beneficial ownership of the shares of Class A common stock for which the common
operating partnership units may be redeemed.
The business combination statute could have the effect of discouraging
offers to acquire AIMCO and of increasing the difficulty of consummating any
such offer. These provisions of the Maryland law do not apply, however, to
business combinations that are approved or exempted by the board of directors of
the corporation prior to the time that the Interested Stockholder becomes an
Interested Stockholder. The AIMCO board of directors has not passed such a
resolution.
CONTROL SHARE ACQUISITIONS
Maryland law limits the voting rights of "control shares" of a Maryland
corporation acquired in a "control share acquisition." This is an acquisition by
virtue of which the acquirer, but for the operation of the statute, would cross
one of three voting thresholds: 20%, 33 1/3% or 50%. For example, a purchase of
4% of a company's shares by an 18% holder would be subject to the Maryland
General Corporation Law, while a purchase of 18% of a company's shares by a
person who until then had owned no stock would not.
A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions, including an undertaking to pay expenses,
may compel the corporation's board of directors to call a special meeting of
stockholders, to be held within 50 days of demand, to consider the voting rights
of the shares. If no request for a meeting is made, the corporation may itself
present the question at any stockholders meeting. Shares acquired in a control
share acquisition may only exercise voting rights if the voting rights are
granted by a majority vote of disinterested shareholders.
If voting rights are not approved at the meeting or if the acquiring person
does not deliver an "acquiring person statement" as required by the statute,
then, subject to certain conditions and limitations, the corporation may redeem
any or all of the control shares (except those for which voting rights have
previously been approved) for fair value, without regard to the absence of
voting rights, as of the date of the last control share acquisition or of any
meeting of stockholders at which the voting rights of such shares were
considered and not approved. If voting rights for control shares are approved at
a stockholders meeting and the acquiror becomes entitled to vote a majority of
the shares entitled to vote, all other stockholders may exercise appraisal
rights. The fair value of the shares as determined for purposes of the appraisal
rights may not be less than the highest price per share paid in the control
share acquisition, and certain limitations and restrictions otherwise applicable
to the exercise of dissenters' rights do not apply in the context of a control
share acquisition.
The control share acquisition statute does not apply to shares acquired in
a merger, consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions approved or exempted by the corporation's
articles of incorporation or bylaws prior to the control share acquisition. No
such exemption appears in AIMCO's articles of incorporation or in the bylaws.
The control share acquisition statute could have the effect of discouraging
offers to acquire AIMCO and of increasing the difficulty of consummating any
such offer.
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DESCRIPTION OF AIMCO CLASS P CONVERTIBLE CUMULATIVE
PREFERRED STOCK
The following summary of the terms and provisions of the Class P preferred
stock does not purport to be complete and is qualified in its entirety by
reference to the pertinent sections of AIMCO's articles of incorporation and to
the form of articles supplementary to the AIMCO articles of incorporation
establishing the Class P preferred stock, each of which is filed as an exhibit
to this registration statement. This description of the particular terms of the
Class P preferred stock supplements, and to the extent inconsistent therewith,
replaces, the description of the general terms and provisions of AIMCO's
preferred stock set forth under "Description of AIMCO Capital Stock -- Preferred
Stock."
GENERAL
Under its articles of incorporation, AIMCO is authorized to issue up to
510,587,500 shares of its capital stock, including common stock and preferred
stock. As of October 31, 2000, 468,432,738 shares were classified as Class A
common stock.
AIMCO is authorized to issue shares of preferred stock in one or more
classes or subclasses, with these designations, preferences, conversion and
other rights, voting powers, restriction, limitations as to dividends,
qualifications and terms and conditions of redemption, in each case, if any as
are permitted by Maryland law and as the AIMCO board of directors may determine
by resolution. The Class P preferred stock will be a class of AIMCO's preferred
stock. Four million shares of Class P preferred stock are authorized. Except for
the class and shares of preferred stock described under "Description of AIMCO
Capital Stock -- Preferred Stock," there are currently no other classes or
series of authorized preferred stock. The Class P preferred stock will be
convertible into shares of AIMCO Class A common stock as described below.
RANKING
The Class P preferred stock ranks, with respect to dividend rights and
rights upon liquidation, dissolution or winding up of AIMCO, (a) prior or senior
to AIMCO Class A common stock and any other class or series of capital stock of
AIMCO if the holders of Class P preferred stock are entitled to the receipt of
dividends or of amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of shares of such class or series,
which we refer to as Class P Junior Stock; (b) on a parity with AIMCO's Class B
Cumulative Convertible Preferred Stock, Class C Cumulative Preferred Stock,
Class D Cumulative Preferred Stock, Class G Cumulative Preferred Stock, Class H
Cumulative Preferred Stock, Class I Cumulative Preferred Stock, Class J
Cumulative Convertible Preferred Stock, Class K Convertible Cumulative Preferred
Stock, Class L Convertible Cumulative Preferred Stock, Class M Convertible
Cumulative Preferred Stock and Class N Convertible Cumulative Preferred Stock,
Class O Cumulative Convertible Preferred Stock and with any other class or
series of capital stock of AIMCO if the holders of such class or series of stock
and the Class P preferred stock shall be entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding up in
proportion to their respective amounts of accrued and unpaid dividends per share
or liquidation preferences, without preference or priority of one over the
other, which we refer to as Class P Parity Stock; and (c) junior to any class or
series of capital stock of AIMCO if the holders of such class or series shall be
entitled to the receipt of dividends and amounts distributable upon liquidation,
dissolution or winding up in preference or priority to the holders of the Class
P preferred stock, which we refer to as Class P Senior Stock.
DIVIDENDS
Holders of Class P preferred stock are entitled to receive, when and as
declared by the AIMCO board of directors, out of funds of AIMCO legally
available for payment, cash dividends in an amount per share equal to the
greater of (i) the Base Rate (as defined below) or (ii) the cash dividends
declared on the number of shares of Class A common stock, or portion thereof,
into which a share of Class P preferred
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stock is convertible. The amount referred to in clause (ii) above payable for
each full Dividend Period (as defined below) on the Class P preferred stock will
be computed by multiplying the number of shares of Class A common stock, or
portion thereof calculated to the fourth decimal point, into which a share of
Class P preferred stock would be convertible at the opening of business on such
Dividend Payment Date (as defined below) (based on the conversion price then in
effect) by the aggregate cash dividends payable or paid for such Dividend Period
on a share of Class A common stock outstanding as of the record date for the
payment of dividends on the Class A common stock with respect to such Dividend
Period. "Base Rate" means a quarterly dividend payment in an amount per share
equal to $0.5625 provided, however, that, if, following a change of control of
AIMCO, AIMCO elects not to make an offer to repurchase the Class P preferred
stock, then, from and after the date of such election, the "Base Rate" shall
mean a quarterly dividend payment in an amount per share equal to (i) for all
dividend periods commencing after the date of such election, the greater of (a)
$0.75 or (b) the product of (x) $6.25 and (y) the sum of 800 basis points plus
the greater of (x) the annual yield to maturity of U.S. Treasury securities with
a five year maturity and (y) the annual yield to maturity of U.S. Treasury
securities with a ten year maturity, in each case as compiled by and published
in the most recent Federal Reserve Statistical Release H.15(519) which has
become publicly available at least two business days prior to the date of such
notice (or, if such Statistical Release is no longer published, any publicly
available source of similar data), and (ii) for the dividend period in which
such notice is given, a weighted average (based on the number of days in such
dividend period occurring before and after the date of such notice) of (a) the
Base Rate in effect prior thereto and (b) the Base Rate determined in accordance
with the foregoing clause (i).
If (A) AIMCO pays a cash dividend on its Class A common stock after the
Dividend Payment Date for the corresponding Dividend Period and (B) the dividend
on the Class P preferred stock for such Dividend Period calculated pursuant to
clause (ii) above, taking into account the Class A common stock dividend
referenced in clause (A), exceeds the dividend previously declared on the Class
P preferred stock for such Dividend Period, AIMCO will pay an additional
dividend to the holders of Class P preferred stock on the date that the Class A
common stock dividend referenced in clause (A) is paid, in an amount equal to
the difference between the dividend calculated pursuant to clause (B) and the
dividends previously declared on the Class P preferred stock with respect to
such Dividend Period. Such dividends shall be cumulative from the date of
original issue, whether or not in any Dividend Period or Dividend Periods such
dividends shall be declared or there shall be funds of AIMCO legally available
for payment of such dividends, and shall be payable quarterly in arrears on the
Dividend Payment Dates. Dividends will be payable in arrears to holders of
record as they appear on the stock records of AIMCO at the close of business on
a record date fixed by AIMCO's 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 Class A common stock for the Dividend Period to
which such Dividend Payment Date relates (or, if there is no such record date
for Class A common stock, then such date as AIMCO's board of directors may fix).
Any dividend payable on the Class P preferred stock for any partial
dividend period will be computed ratably on the basis of twelve 30-day months
and a 360-day year. Holders of Class P preferred stock are not entitled to
receive any dividends in excess of the cumulative cash dividends described
above. No interest, or sum of money in lieu of interest, will be payable in
respect of any dividend payment or payments on the Class P preferred stock that
may be in arrears.
So long as any of the shares of Class P preferred stock are outstanding,
except as described in the immediately following sentence, no dividends may be
declared or paid or set apart for payment by AIMCO and no other distribution of
cash or other property may be declared or made directly or indirectly by AIMCO
with respect to any class or series of Class P 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 P preferred stock for all Dividend Periods
terminating on or prior to the Dividend Payment Date with respect to such class
or series of Class P Parity Stock. When dividends are not paid in full or a sum
sufficient for such payment is not set apart, as
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aforesaid, all dividends declared upon the Class P preferred stock and all
dividends declared upon any other class or series of Class P Parity Stock must
be declared ratably in proportion to the respective amounts of dividends
accumulated, accrued and unpaid on the Class P preferred stock and accumulated,
accrued and unpaid on such Class P Parity Stock.
So long as any of the shares of Class P 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 Class P Junior Stock)
may be declared or paid or set apart for payment by AIMCO and no other
distribution of cash or other property may be declared or made directly or
indirectly by AIMCO with respect to any shares of Class P Junior Stock, nor
shall any shares of Class P Junior Stock be redeemed, purchased or otherwise
acquired (other than a redemption, purchase or other acquisition of Class A
Common Stock made for purposes of an employee incentive or benefit plan of AIMCO
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 AIMCO (except by conversion into or exchange for Class
P 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 Class P Junior
Stock in respect thereof, directly or indirectly, by AIMCO unless in each case
(i) the full cumulative dividends (including all accumulated, accrued and unpaid
dividends) on all outstanding shares of Class P preferred stock and any other
Class P Parity Stock have been paid or such dividends have been declared and set
apart for payment for all past Dividend Periods with respect to the Class P
preferred stock and all past dividend periods with respect to such Class P
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 P preferred stock and the current dividend period with respect to such
Class P Parity Stock.
AIMCO's credit facilities contain restrictive covenants which may limit,
among other things, the ability of AIMCO to pay dividends or make other
restricted payments. In particular, the credit agreement with Bank of America
National Trust and Savings Association provides that AIMCO may make
distributions during any 12-month period in an amount in the aggregate which
does not exceed the greater of 80% of funds from operations for such period or
such amount as may be necessary to maintain REIT status, provided that no event
of default exists as a result of a breach of certain financial ratios and tests
that AIMCO is required to meet. A failure of AIMCO to comply with these or other
conditions and obligations contained in the credit facilities could result in
adverse consequences to holders of the Class P preferred stock, could render
AIMCO unable to pay required dividends or make redemptions, and could result in
an event of default under AIMCO's credit facilities. In addition, AIMCO's 6 1/2%
convertible debentures prohibit the payment of dividends on AIMCO's capital
stock if AIMCO elects to defer payments of interest on such convertible
debentures, which it will have the right, under certain circumstances, to do for
periods of up to 60 months. Other securities of AIMCO that may be issued in the
future may also contain financial or other covenants more restrictive than those
applicable to AIMCO's existing credit facilities or the convertible debentures.
"Dividend Period" means each 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; however, the Dividend Period during which any Class P preferred stock
may be redeemed or converted as described below, will end on and include the
redemption date with respect to the Class P preferred stock being redeemed.
"Dividend Payment Date" means, with respect to each Dividend Period, (a) the
date that cash dividends are paid on the Class A common stock with respect to
such Dividend Period, or (b) if such dividends have not been paid on the Class A
common stock by 11:00 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 will be
paid on the business day immediately following such Dividend Payment Date and no
interest will accrue on such dividend from such date to such Dividend Payment
Date.
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LIQUIDATION PREFERENCES
Upon any voluntary or involuntary liquidation, dissolution or winding up of
AIMCO, before any payment or distribution by AIMCO may be made to or set apart
for the holders of any shares of Class P Junior Stock, the holders of shares of
Class P preferred stock will be entitled to receive a liquidation preference of
$25.00 per share, which we refer to as the Class P Liquidation Preference, plus
an amount equal to all accumulated, accrued and unpaid dividends (whether or not
earned or declared) 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 P preferred stock have been paid the Class P Liquidation Preference in
full, plus an amount equal to all accumulated, accrued and unpaid dividends
(whether or not earned or declared) to the date of final distribution to such
holders, no payment may be made to any holder of Class P Junior Stock upon the
liquidation, dissolution or winding up of AIMCO. If upon any liquidation,
dissolution or winding up of AIMCO, the assets of AIMCO, or proceeds thereof,
distributable among the holders of Class P preferred stock are insufficient to
pay in full the above described preferential amount and liquidating payments on
any other shares of any class or series of Class P Parity Stock, then such
assets, or the proceeds thereof, will be distributed among the holders of Class
P preferred stock and any such other Class P Parity Stock ratably in the same
proportion as the respective amounts that would be payable on such Class P
preferred stock and any such other Class P Parity Stock if all amounts payable
thereon were paid in full. For this purpose, a consolidation or merger of AIMCO
with one or more corporations, a sale or transfer of all or substantially all of
AIMCO's assets, or a statutory share exchange will not be deemed a voluntary or
involuntary liquidation, dissolution or winding up of AIMCO.
Upon any liquidation, dissolution or winding up of AIMCO, after payment has
been made in full to the holders of Class P preferred stock and any Class P
Parity Stock, as described above, any other series or class or classes of Class
P Junior Stock will be entitled to receive any and all assets remaining to be
paid or distributed, and the holders of the Class P preferred stock and any
Class P Parity Stock will not be entitled to share therein.
REDEMPTION
Shares of Class P preferred stock are redeemable by AIMCO prior to the
third anniversary of the original date of issue, if the closing market price of
the Class A common stock has equaled or exceeded $56 per share, in which case
the Class P preferred stock is redeemable for six months after any date on which
the closing market price has equaled or exceeded such level, or as provided
under "-- Restrictions on Ownership and Transfer," below. On and after the third
anniversary of the original date of issue, AIMCO may, at its option, redeem
shares of Class P preferred stock, in whole or from time to time in part. All
redemptions, other than those referenced under "-- Restrictions on Ownership and
Transfer," shall be at a cash redemption price equal to the applicable
Redemption Price. "Redemption Price" means, with respect to any share of Class P
preferred stock to be redeemed, 100% of the liquidation preference thereof,
plus, all accumulated, accrued and unpaid dividends (whether or not earned or
declared), if any, to the date of redemption. The date of redemption will be
selected by AIMCO and will be not less than 30 days nor more than 60 days after
the date notice of redemption is sent by AIMCO. If full cumulative dividends on
all outstanding shares of Class P preferred stock have not been declared and
paid or declared and set apart for payment, no shares of Class P preferred stock
may be redeemed unless all outstanding shares of Class P preferred stock are
simultaneously redeemed. Neither AIMCO nor any of its affiliates may purchase or
acquire shares of Class P preferred stock other than pursuant to a purchase or
exchange offer made on the same terms to all holders of Class P preferred stock.
Notice of redemption of the Class P preferred stock will be mailed to each
holder of record of the shares to be redeemed by recognized overnight courier at
such holder's address as the same appears on the stock records of AIMCO. Any
notice which was mailed as described above will be conclusively presumed to have
been duly given on the day after the date mailed whether or not the holder
receives the notice. The notice sent to each holder of Class P preferred stock
will state: (i) the date of redemption; (ii) the number of shares of Class P
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; (iii) the
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place or places where certificates for such shares of Class P preferred stock
are to be surrendered for cash; (iv) the then-current conversion price, or the
Conversion Price, per share of Class A common stock for which each share of
Class P preferred stock is convertible; (v) the Redemption Price payable on such
date of redemption; and (vi) a statement as to whether or not accumulated,
accrued and unpaid dividends will be payable as part of the Redemption Price, or
payable on the next Dividend Payment Date to the record holder at the close of
business on the relevant record date. From and after the date of redemption,
dividends on the shares of Class P preferred stock to be redeemed will cease to
accumulate or accrue, such shares will no longer be deemed to be outstanding and
all rights of the holders thereof will cease (except (a) the right to receive
the cash payable upon such redemption without interest thereon, and (b), if the
Date of redemption occurs after a dividend record date and prior to the related
Dividend Payment Date, the right of record holders at the close of business on
such record date to receive the dividend payable on such Dividend Payment Date).
The Class P preferred stock has no stated maturity and is not subject to
any sinking fund or mandatory redemption provisions (except as provided under
"-- Restrictions on Ownership and Transfer").
CONVERSION
Each share of Class P preferred stock will, at the option of the holder
thereof, be convertible at any time (unless such share is called for redemption,
then to and including but not after the close of business on the date
immediately prior to the date of redemption, unless AIMCO defaults in payment
due upon redemption thereof), in whole or in part, into the number of fully paid
and non-assessable shares of Class A common stock (calculated as to each
conversion to the nearest 1/100th of a share) obtained by dividing the $25.00
Class P Liquidation Preference (excluding any accumulated, accrued and unpaid
dividends) per share of Class P preferred stock by the Conversion Price then in
effect. The Conversion Price is currently $56.00. In the case of shares of Class
P preferred stock called for redemption, conversion rights will terminate at the
close of business on the date of redemption fixed for such redemption, unless
AIMCO shall default in making payment of cash payable upon such redemption.
To convert shares of Class P preferred stock, the holder of the shares to
be converted must surrender the certificate representing such shares at the
office of AIMCO's transfer agent, accompanied by the funds, if any, required to
be paid by such holder, and will give written notice of conversion in the form
provided on such certificate representing shares of Class P preferred stock (or
such other notice as is reasonably acceptable to the AIMCO) to AIMCO at such
office or agency that the holder elects to convert the shares of Class P
preferred stock specified in such notice. Such notice must also state the name
or names, together with address or addresses, in which the certificate or
certificates for shares of Class A common stock issuable on such conversion are
to be issued. Unless the shares issuable on conversion are to be issued in the
same name as the name in which such share of Class P preferred stock is
registered, each certificate representing a share of Class P preferred stock
surrendered for conversion must be accompanied by instruments of transfer, in
form satisfactory to AIMCO, 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 AIMCO that such taxes have been paid).
Each conversion will be deemed to have been effected immediately prior to
the close of business on the date on which the holder surrenders certificates
representing shares of Class P preferred stock and AIMCO receives notice and any
applicable instruments of transfer and any required taxes. The person or persons
in whose name or names any certificate or certificates for shares of Class A
common stock are issuable upon such conversion will be deemed to have become the
holder or holders of record of the shares represented thereby at such time on
such date. The conversion will be at the Conversion Price in effect at such time
and on such date unless the stock transfer books of AIMCO are closed on that
date, in which event such person or persons will 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 will be at the
Conversion Price in effect on the date on which such shares were surrendered and
such notice received by AIMCO.
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No fractional shares of Class A common stock or scrip representing
fractions of a share of Class A common stock will be issued upon conversion of
shares of Class P preferred stock. Instead of any fractional interest in a share
of Class A common stock that would otherwise be deliverable upon the conversion
of any share of Class P preferred stock, AIMCO will pay to the holder of such
shares an amount in cash based upon the closing price of the Class A common
stock on the trading day immediately preceding the date of conversion. If more
than one share of Class P preferred stock is surrendered for conversion at one
time by the same holder, the number of full shares of Class A common stock
issuable upon conversion thereof will be computed on the basis of the aggregate
number of shares of Class P preferred stock so converted.
Except as otherwise required, AIMCO will make no payment or allowance for
unpaid dividends, whether or not in arrears, on converted shares or for
dividends (other than dividends on the Class A common stock the record date for
which is after the conversion date and which AIMCO shall pay in the ordinary
course to the record holder as of the record date) on the Class A common stock
issued upon such conversion. Holders of Class P preferred stock at the close of
business on a record date for the payment of dividends on the Class P preferred
stock will be entitled to receive an amount equal to the dividend payable on
such shares on the corresponding Dividend Payment Date notwithstanding the
conversion of such shares following such record date. If the Dividend Adjustment
Amount (as defined below) with respect to any shares of Class P preferred stock
surrendered for conversion is positive, the holders of such shares shall, as of
the date of conversion, be entitled to receive a cash payment equal to such
Dividend Adjustment Amount. If the Dividend Adjustment Amount with respect to
any shares of Class P preferred stock surrendered for conversion is negative,
such shares must be accompanied by payment of a cash amount equal to the
absolute value of such Dividend Adjustment Amount. "Dividend Adjustment Amount"
means, with respect to any share of Class P preferred stock that has been
surrendered for conversion, the sum of:
(i) the aggregate amount of any dividends (whether or not earned or
declared) that are accumulated, accrued and unpaid on such share as of the
time of such conversion; minus
(ii) if such share has been surrendered for conversion during the
period between the close of business on any dividend record date and the
opening of business on the corresponding Dividend Payment Date, the amount
of the dividend payable thereon on such Dividend Payment Date; minus
(iii) an amount equal to the product of (A) the number of shares of
Class A common stock (or fraction thereof) into which such share of Class P
preferred stock has been converted, (B) the quarterly cash dividend per
share that was most recently declared on the Class A common stock,
determined as of the date of conversion, and (C) a fraction, the numerator
of which is the number of days in the period from and including the date of
the most recent dividend payment date for the Class A common stock to but
excluding the date of such conversion, and the denominator of which is 90.
Adjustments to Conversion Price
The Conversion Price is subject to adjustment upon the occurrence of any of
the following events:
i. If AIMCO (A) pays a dividend or makes a distribution on its capital
stock in shares of Class A common stock, (B) subdivides its
outstanding Class A common stock into a greater number of shares, (C)
combines its outstanding Class A common stock into a smaller number of
shares or (D) issues any shares of capital stock by reclassification
of its outstanding Class A common stock (including a reclassification
pursuant to a merger or consolidation in which AIMCO is the continuing
entity and in which the Class A common stock outstanding immediately
prior to the merger or consolidation is not exchanged for cash, or
securities or other property of another entity).
ii. If AIMCO issues rights, options or warrants to all holders of Class A
common stock entitling them (for a period expiring within 45 days
after the record date described below) to subscribe for
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or purchase Class A common stock at a price per share less than the
fair market value per share of the Class A common stock on the record
date for the determination of stockholders entitled to receive such
rights, options or warrants.
iii. If AIMCO makes a distribution on its Class A common stock other than
in cash or shares of Class A common stock (including any distribution
in securities (other than rights, options or warrants described in
(ii) above)).
iv. If AIMCO shall acquire, pursuant to an issuer or self tender offer,
all or any portion of the outstanding Class A common stock and such
tender offer involves the payment of consideration per share of Class
A common stock having a fair market value (as determined in good faith
by AIMCO's board of directors), at the last time, or the Expiration
Time, tenders may be made pursuant to such offer, that exceeds the
current market price per share of Class A common stock on the trading
day next succeeding the Expiration Time.
No adjustment in the conversion price will be required unless such
adjustment would require a cumulative increase or decrease of at least 1% in
such price. However, any adjustments that by reason of the immediately preceding
sentence are not required to be made will be carried forward and taken into
account in any subsequent adjustment until made. Any adjustment will be required
and made in accordance with the provisions herein (other than this paragraph)
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 Class A common stock. AIMCO
will not be required to make any adjustment of the Conversion Price for the
issuance of (A) any shares of Class A common stock pursuant to any plan
providing for the reinvestment of dividends or interest payable on securities of
AIMCO and the investment of optional amounts in shares of Class A common stock
under such plan or (B) any options, rights or shares of Class A common stock
pursuant to any stock option, stock purchase or other stock-based plan
maintained by AIMCO.
If AIMCO is 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 Class A common stock outstanding, sale of all or
substantially all of AIMCO's assets or recapitalization of the Class A common
stock, but excluding certain stock dividends, subdivisions, combinations and
reclassifications) in which shares of Class A common stock are converted into
the right to receive stock, securities or other property (including cash or any
combination thereof), each share of Class P preferred stock which is not
converted into the right to receive stock, securities or other property in
connection with such transaction will thereupon be convertible into the kind and
amount of shares of stock, securities and other property (including cash or any
combination thereof) receivable upon consummation of such transaction by a
holder of that number of shares of Class A common stock into which one share of
Class P preferred stock was convertible immediately prior to such transaction.
AIMCO may not be a party to any transaction unless the terms of such transaction
are consistent with the provisions of this paragraph, and it may not consent or
agree to the occurrence of any transaction until AIMCO 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 P preferred stock that contains provisions
enabling the holders of the Class P preferred stock that remain outstanding
after such transaction to convert into the consideration received by holders of
Class A common stock at the Conversion Price in effect immediately prior to such
transaction.
If:
i. AIMCO declares a dividend (or any other distribution) on the Class A
common stock (other than cash dividends and cash distributions); or
ii. AIMCO authorizes the granting to all holders of the Class A 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 is any reclassification of the outstanding Class A common stock
or any consolidation or merger to which AIMCO is a party and for which
approval of any stockholders of AIMCO is
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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 Class A 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 AIMCO as an
entirety; or
iv. any voluntary or involuntary liquidation, dissolution or winding up of
AIMCO occurs,
then AIMCO will cause to be filed with the transfer agent and mailed to each
holder of shares of Class P preferred stock at such holder's address as shown on
the stock records of AIMCO, as promptly as possible, a notice stating (A) the
holders of Class A 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 Class A
common stock of record will be entitled to exchange their shares of Class A
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).
Whenever the Conversion Price is adjusted, AIMCO will 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 will be conclusive evidence of the
correctness of such adjustment absent manifest error. Promptly after delivery of
such certificate, AIMCO will 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 will mail such notice of such
adjustment of the Conversion Price to each holder of shares of Class P preferred
stock at such holder's last address as shown on the stock records of AIMCO.
Conversion of Class P preferred stock will be permitted only to the extent
that such conversion would not result in a violation of the ownership
restrictions set forth in AIMCO's articles of incorporation, after taking into
account any waiver of such limitation granted to any holder of the shares of
Class P preferred stock.
VOTING RIGHTS
If and whenever (a) dividends on any shares of Class P preferred stock or
any series or class of Class P Parity Stock are in arrears for six or more
quarterly periods (whether or not consecutive), or (b) dividends on the Class A
common stock are not paid in an amount per share at least equal to $0.595
(subject to certain adjustments), or the Base Common Stock Dividend, for two
consecutive quarterly periods, the number of directors then constituting the
AIMCO board of directors will be increased by two (in the case of an arrearage
in dividends described in clause (a)) or one additional director (in the case of
an arrearage of dividends described in clause (b)) (in each case if not already
increased by reason of similar types of provisions with respect to shares, of
any other class or series of Parity Stock which is entitled to similar voting
rights Class P preferred stock, or Voting Preferred Stock, and the holders of
shares of Class P preferred stock, together with the holders of shares of all
other Voting Preferred Stock, voting as a single class regardless of series,
will be entitled to elect the two additional directors (in the case of an
arrearage in dividends described in clause (a)) or one additional director (in
the case of arrearage of dividends described in clause (b)) of AIMCO at any
annual meeting of stockholders or special meeting held in place thereof, or at a
special meeting of the holders of the Class P preferred stock and the Voting
Preferred Stock called for that purpose. AIMCO must call such special meeting
upon the written request of any holder of shares of Class P preferred stock.
Whenever, (i) in the case of an arrearage in dividends described in clause (a),
all arrears in dividends on outstanding shares of the Class P preferred stock
and the Class P Parity Stock shall have been paid and dividends thereon for the
current quarterly dividend period shall have been declared and paid or declared
and set apart for payment, or
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(ii) in the case of an arrearage in dividends described in clause (b), AIMCO
makes a quarterly dividend payment on the Class A 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 P preferred stock and the Voting Preferred Stock to
elect such additional director or directors shall cease, and the terms of office
of all persons elected as directors by the holders of the Class P preferred
stock and Voting Preferred Stock will then terminate and the number of directors
constituting the AIMCO board of directors will be reduced accordingly.
So long as any shares of Class P preferred stock are outstanding, in
addition to any other vote or consent of stockholders required by law or by
AIMCO's articles of incorporation, the affirmative vote or consent of at least
66 2/3% of the votes entitled to be cast by the holders of the outstanding
shares of Class P preferred stock, voting as a single class, will be required to
(i) amend, alter or repeal any provision of, or the addition of any provision
to, AIMCO's articles of incorporation (including the articles supplementary
creating the Class P preferred stock), or the by-laws of AIMCO, if such action
would materially adversely affect the voting powers, rights or preferences of
the holders of the Class P preferred stock; (including any amendment, alteration
or repeal effected pursuant to a merger, consolidation or similar transaction)
or would convert the Class P preferred stock into cash or any other security
other than a preferred stock with terms and provisions equivalent to those set
forth in the articles supplementary relating to the Class P preferred stock;
provided, however, that the amendment of AIMCO's articles of incorporation to
authorize, create or increase the authorized amount of, or issue any Class P
Junior Stock or any shares of any class of Class P Parity Stock will not be
deemed to materially adversely affect the voting powers, rights or preferences
of the holders of Class P preferred stock, or (ii) authorize, create, increase
the authorized amount of, or issue any shares of any class or series of Class P
Senior Stock or any security convertible into shares of any class or series of
Class P Senior Stock; provided, however, that no such vote of the holders of
Class P preferred stock will be required if, at or prior to the time such
amendment, alteration or repeal is to take effect or when the issuance of any
such Class P Senior Stock or convertible security is to be made, as the case may
be, provision is made for the redemption of all outstanding shares of Class P
preferred stock.
With respect to the exercise of the above-described voting rights, each
share of Class P preferred stock will have one (1) vote per share, except that
when any other class or series of preferred stock will have the right to vote
with the Class P preferred stock as a single class, then the Class P preferred
stock and such other class or series will have one vote per $25 of stated
liquidation preference.
RESTRICTIONS ON OWNERSHIP AND TRANSFER
Pursuant to AIMCO's Articles Supplementary with respect to the Class P
preferred stock, no person may hold shares of Class P preferred stock that would
cause the holder to exceed the "Ownership Limit." Under the restrictions imposed
by the Ownership Limit, the total value of all AIMCO capital stock, including
all shares of Class P preferred stock, owned directly or constructively by a
person may not exceed 8.7% of the total value of all outstanding shares of AIMCO
capital stock. The only exceptions are that some pension trusts, registered
investment companies and Terry Considine may not hold AIMCO capital stock with a
total value in excess of 15% of the total value of all outstanding shares of
AIMCO capital stock. Although subject to exceptions, any effective sale,
transfer, gift, assignment, devise or other disposition of a share of Class P
preferred stock (a "Transfer") that would result in a violation of the Ownership
Limit, or cause AIMCO to loose its status as a REIT, will be void. The intended
transferee will not acquire any rights in the Class P preferred stock that would
cause the Ownership Limit to be violated.
If AIMCO's board of directors or a committee thereof determines that a
Transfer or other event has taken place that violates the Ownership Limit or
certain other provisions of AIMCO's articles of incorporation prohibiting
Transfers which may have the effect of causing AIMCO to lose its REIT status,
AIMCO's board of directors or a committee thereof is empowered to take any
action it deems advisable to refuse to give effect to or to prevent such
Transfer, including causing AIMCO to redeem such shares at the then current
market price and on such other terms and conditions as AIMCO's board of
directors may
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determine (including 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 such shares or instituting proceedings to enjoin such
Transfer or rescind such Transfer or attempted Transfer. If any Transfer occurs,
which, if effective, would result in any person beneficially or constructively
owning Class P preferred stock in violation of the Ownership Limit, which person
we refer to as a Prohibited Transferee, such shares in excess of the Ownership
Limit will be automatically transferred to a trustee in his capacity as trustee
of a trust for the exclusive benefit of one or more charitable beneficiaries
designated by AIMCO. Such automatic transfer to the trust will be deemed to be
effective as of the close of business on the business day prior to the date of
such violative Transfer. Shares of Class P preferred stock held in the trust
will be issued and outstanding shares of AIMCO. The Prohibited Transferee will
not benefit economically from ownership of any shares of Class P preferred stock
held in the trust, will have no rights to dividends and shall not possess any
rights to vote or other rights attributable to the shares of Class P preferred
stock held in the trust. The trustee will have all voting rights and rights to
dividends with respect to shares of Class P preferred stock held in the trust,
which rights will be exercised for the benefit of the charitable beneficiaries.
Any dividend or other distribution paid prior to the discovery by AIMCO that
shares of Class P preferred stock have been transferred to the trustee will be
repaid to AIMCO upon demand, and any dividend or other distribution declared but
unpaid with respect to such shares will be rescinded as void. Any dividend or
distribution so disgorged or rescinded will be paid to the trustee and held in
trust for the charitable beneficiaries.
The trustee may sell the Class P preferred stock held in the trust to a
person, designated by the trustee, whose ownership of the Class P preferred
stock will not violate the Ownership Limit. Upon such sale, the interest of the
charitable beneficiaries in the shares sold will terminate and the trustee will
distribute the net proceeds of the sale to the Prohibited Transferee and to the
charitable beneficiary as described below. The Prohibited Transferee will
receive the lesser of (i) the price paid by the Prohibited Transferee for the
shares or, if the Prohibited Transferee did not give value for the shares in
connection with the event causing the shares to be held in the trust (e.g., a
gift, devise or other such transaction), the market price of such shares on the
day of the event causing the shares to be held in the trust and (ii) 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 will be payable to the charitable beneficiaries.
In addition, shares of Class P preferred stock held in the trust will be
deemed to have been offered for sale to AIMCO, 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 AIMCO or its designee accepts such offer.
Any person who acquires or attempts to acquire beneficial or constructive
ownership of Class P preferred stock that will or may violate the Ownership
Limit, or any person who would have owned shares of Class P preferred stock
except for the transfer of such shares to the trust as described above, is
required to give notice immediately to AIMCO of such event, and provide AIMCO
with such other information as AIMCO may request in order to determine the
effect of such Transfer or attempted Transfer or other event on AIMCO's status
as a REIT.
Every record and beneficial owner of shares of Class P preferred stock
convertible into more than 5% (or such lesser percentage prescribed in
regulations under the Internal Revenue Code) of the outstanding shares of equity
stock is required, if requested by AIMCO to do so, within 30 days after January
1 of each year, to give written notice to AIMCO stating the name and address of
such owner, the number of shares of Class P preferred stock which the owner
beneficially owns and a description of the manner in which such shares are held.
Each such record or beneficial owner must provide to AIMCO such additional
information as AIMCO may request in order to determine the effect, if any, of
such ownership on AIMCO's status as a REIT and to ensure compliance with the
Ownership Limit. In addition, every record or beneficial owner of shares of
Class P preferred stock, and every proposed transferee of such shares, must
provide AIMCO with such information as AIMCO may request, in its sole
discretion, in order to determine AIMCO's status as a REIT and to comply with
the requirements of any taxing authority or governmental agency to determine any
such compliance or to ensure compliance with the Ownership Limit.
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FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS
The following is a discussion of certain Federal income tax consequences
resulting from the acquisition of, holding, exchanging, and otherwise disposing
of AIMCO Class A common stock. This discussion is based upon the Internal
Revenue Code, the Regulations, rulings issued by the IRS, and judicial
decisions, all in effect as of the date of this prospectus/information statement
and all of which are subject to change or differing interpretations, possibly
retroactively. This discussion is also based on the assumptions that the
operation of AIMCO, the AIMCO operating partnership and the limited liability
companies and limited partnerships in which they own controlling interests
(collectively, the "Subsidiary Partnerships") will be in accordance with their
respective organizational documents and partnership agreements. This discussion
is for general information only and does not purport to discuss all aspects of
Federal income taxation which may be important to a particular investor in light
of its investment or tax circumstances, or to certain types of investors subject
to special tax rules (including financial institutions, broker-dealers,
insurance companies, and except to the extent discussed below, tax-exempt
organizations and foreign investors, as determined for Federal income tax
purposes). This discussion assumes that investors will hold their AIMCO stock as
capital assets (generally, property held for investment). No advance ruling has
been or will be sought from the IRS regarding any matter discussed in this
prospectus/information statement. AIMCO's counsel has not rendered any legal
opinion regarding the status of AIMCO as a REIT, or the tax consequences
relating to AIMCO or an investment in AIMCO stock in connection with the merger.
No assurance can be given that the IRS would not assert, or that a court would
not sustain, a position contrary to any of the tax aspects set forth below.
THE FEDERAL INCOME TAX TREATMENT OF HOLDERS OF AIMCO STOCK DEPENDS IN SOME
INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF COMPLEX PROVISIONS OF
FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR AUTHORITY MAY BE
AVAILABLE. ACCORDINGLY, EACH BAC HOLDER SHOULD CONSULT ITS TAX ADVISOR REGARDING
THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF ACQUIRING, HOLDING,
EXCHANGING, OR OTHERWISE DISPOSING OF AIMCO CLASS A COMMON STOCK AND OF AIMCO'S
ELECTION TO BE SUBJECT TO TAX, FOR FEDERAL INCOME TAX PURPOSES, AS A REAL ESTATE
INVESTMENT TRUST.
General. The REIT provisions of the Internal Revenue Code are highly
technical and complex. The following summary sets forth certain aspects of the
provisions of the Internal Revenue Code that govern the Federal income tax
treatment of a REIT and its stockholders. This discussion is based upon the
applicable Internal Revenue Code provisions, Regulations, and administrative and
judicial interpretations thereof, all of which are subject to change, possibly
retroactively.
AIMCO has elected to be taxed as a REIT under the Internal Revenue Code
commencing with its taxable year ended December 31, 1994, and AIMCO intends to
continue such election. Although AIMCO believes that, commencing with AIMCO's
initial taxable year ended December 31, 1994, AIMCO was organized in conformity
with the requirements for qualification as a REIT, and its actual method of
operation has enabled, and its proposed method of operation will enable, it to
meet the requirements for qualification and taxation as a REIT under the
Internal Revenue Code, no assurance can be given that AIMCO has been or will
remain so qualified. Such qualification and taxation as a REIT depends upon
AIMCO's ability to meet, through actual annual operating results, distribution
levels requirements regarding diversity of stock ownership, and the various
qualification tests imposed under the Internal Revenue Code as discussed below.
No assurance can be given that the actual results of AIMCO's operation for any
one taxable year will satisfy such requirements. See "-- Failure to Qualify." No
assurance can be given that the IRS will not challenge AIMCO's eligibility for
taxation as a REIT.
AIMCO has, however, previously received an opinion on December 22, 2000
from the law firm of Skadden, Arps, Slate, Meagher & Flom LLP to the effect
that, beginning with its initial taxable year ended December 31, 1994, AIMCO was
organized in conformity with the requirements for qualification as a REIT under
the Internal Revenue Code and that its actual method of operation has enabled,
and its
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proposed method of operation will enable, AIMCO to meet the requirements for
qualification and taxation as a REIT. The opinion is expressed as of its date
and Skadden, Arps, Slate, Meagher & Flom LLP has no obligation to advise AIMCO
of any change in applicable law or of any change in matters stated, represented
or assumed after the date of such opinion.
You should be aware that opinions of counsel are not binding on the IRS or
any court. AIMCO's opinion of counsel is based upon certain representations and
covenants made by AIMCO regarding its properties and the past, present and
future conduct of its business operations. Furthermore, AIMCO's opinion of
counsel is conditioned on, and its qualification and taxation as a REIT depend
on, AIMCO's ability to meet, through actual annual operating results, the
various REIT qualification tests, the results of which are not reviewed by
Skadden, Arps, Slate, Meagher & Flom LLP. Accordingly, no assurance can be given
that the actual results of AIMCO's operations for any taxable year satisfy such
requirements. Such requirements are discussed in more detail under the heading
"Requirements for Qualification."
As a REIT, AIMCO will generally not be subject to Federal corporate income
tax on its net income that is currently distributed to its stockholders. This
treatment substantially eliminates the "double taxation" (at the corporate and
stockholder levels) that generally results from investment in a corporation.
However, notwithstanding AIMCO's qualification as a REIT, AIMCO will be subject
to Federal income tax as follows:
- First, AIMCO will be taxed at regular corporate rates on any
undistributed REIT taxable income, including undistributed net capital
gains.
- Second, under certain circumstances, AIMCO may be subject to the
"alternative minimum tax" on its items of tax preference.
- Third, if AIMCO has net income from prohibited transactions (which are,
in general, certain sales or other dispositions of property held
primarily for sale to customers in the ordinary course of business other
than foreclosure property), such income will be subject to a 100% tax.
- Fourth, if AIMCO should fail to satisfy the 75% gross income test or the
95% gross income test (as discussed below), but has nonetheless
maintained its qualification as a REIT because certain other requirements
have been met, it will be subject to a 100% tax on an amount equal to (a)
the gross income attributable to the greater of the amount by which AIMCO
fails the 75% or 95% test multiplied by (b) a fraction intended to
reflect AIMCO's profitability.
- Fifth, if AIMCO should fail to distribute during each calendar year at
least the sum of (i) 85% of its REIT ordinary income for such year, (ii)
95% of its REIT capital gain net income for such year (other than certain
long-term capital gains that AIMCO elects to retain and pay the tax
thereon), and (iii) any undistributed taxable income from prior periods,
AIMCO would be subjected to a 4% excise tax on the excess of such
required distribution over the amounts actually distributed.
- Sixth, if AIMCO acquires assets from a corporation that is not a REIT (a
"subchapter C corporation") in a transaction in which the adjusted tax
basis of the assets in the hands of AIMCO is determined by reference to
the adjusted tax basis of such assets in the hands of the subchapter C
corporation, under recently issued Temporary Treasury Regulations, the
subchapter C corporation would be required to recognize any net Built-In
Gain (as defined below) that would have been realized if the Subchapter C
corporation had liquidated on the day before the date of the transfer.
Pursuant to Treasury Regulations, AIMCO may elect, in lieu of the
treatment described above, to be subject to tax at the highest regular
corporate tax rate on any gain it recognizes on the disposition of any
such asset during the ten-year period beginning on the day on which AIMCO
acquires such asset to the extent of the excess, if any, of the fair
market value over the adjusted basis of such asset as of its acquisition
date ("Built-in Gain"). AIMCO intends to make such an election and,
therefore, will be taxed at the highest regular corporate rate on such
Built-in Gain if, and to the extent, such assets are sold within the
specified ten-year period. It should be noted that AIMCO has acquired
(and may acquire in the future) a significant amount of assets with
Built-in
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Gain and a taxable disposition by AIMCO of any of these assets within ten
years of their acquisitions would subject AIMCO to tax under the
foregoing rule.
- Seventh, AIMCO could be subject to foreign taxes on investments and
activities in foreign jurisdictions. In addition, AIMCO could also be
subject to tax in certain situations and on certain transactions not
presently contemplated.
Requirements for Qualification. The Internal Revenue Code defines a REIT
as a corporation, trust or association:
- that is managed by one or more trustees or directors;
- the beneficial ownership of which is evidenced by transferable shares, or
by transferable certificates of beneficial interest;
- which would be taxable as a domestic corporation, but for the special
Internal Revenue Code provisions applicable to REITs;
- that is neither a financial institution nor an insurance company subject
to certain provisions of the Internal Revenue Code;
- the beneficial ownership of which is held by 100 or more persons;
- in which, during the last half of each taxable year, not more than 50% in
value of the outstanding stock is owned, directly or indirectly, by five
or fewer individuals (as defined in the Internal Revenue Code to include
certain entities); and
- which meets certain other tests described below (including with respect
to the nature of its income and assets).
The Internal Revenue Code provides that the first four conditions must be met
during the entire taxable year, and that the fifth condition must be met during
at least 335 days of a taxable year of 12 months, or during a proportionate part
of a taxable year of less than 12 months. The articles of incorporation provide
certain restrictions regarding transfers of its shares, which provisions are
intended to assist AIMCO in satisfying the share ownership requirements
described in the fifth and sixth conditions above.
To monitor AIMCO's compliance with the share ownership requirements, AIMCO
is required to maintain records regarding the actual ownership of its shares. To
do so, AIMCO must demand written statements each year from the record holders of
certain percentages of its stock in which the record holders are to disclose the
actual owners of the shares (i.e., the persons required to include in gross
income the REIT dividends). A list of those persons failing or refusing to
comply with this demand must be maintained as part of AIMCO's records. A
stockholder who fails or refuses to comply with the demand must submit a
statement with its tax return disclosing the actual ownership of the shares and
certain other information.
In addition, a corporation may not elect to become a REIT unless its
taxable year is the calendar year. AIMCO satisfies this requirement.
Ownership of Partnership Interests. In the case of a REIT that is a
partner in a partnership, the Regulations provide that the REIT is deemed to own
its proportionate share of the partnership's assets and to earn its
proportionate share of the partnership's income. In addition, the assets and
gross income of the partnership retain the same character in the hands of the
REIT for purposes of the gross income and asset tests applicable to REITs as
described below. Thus, AIMCO's proportionate share of the assets, liabilities
and items of income of the Subsidiary Partnerships will be treated as assets,
liabilities and items of income of AIMCO for purposes of applying the REIT
requirements described herein. A summary of certain rules governing the Federal
income taxation of partnerships and their partners is provided below in "Tax
Aspects of AIMCO's Investments in Partnerships."
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Income Tests. In order to maintain qualification as a REIT, AIMCO annually
must satisfy two gross income requirements:
- First, at least 75% of AIMCO's gross income (excluding gross income from
"prohibited transactions," i.e., certain sales of property held primarily
for sale to customers in the ordinary course of business) for each
taxable year must be derived directly or indirectly from investments
relating to real property or mortgages on real property (including "rents
from real property" and, in certain circumstances, interest) or from
certain types of temporary investments.
- Second, at least 95% of AIMCO's gross income (excluding gross income from
prohibited transactions) for each taxable year must be derived from such
real property investments, and from dividends, interest and gain from the
sale or disposition of stock or securities (or from any combination of
the foregoing).
Rents received by AIMCO through the Subsidiary Partnerships will qualify as
"rents from real property" in satisfying the gross income requirements described
above, only if several conditions are met, including the following. If rent
attributable to personal property leased in connection with a lease of real
property is greater than 15% of the total rent received under the lease, then
the portion of rent attributable to such personal property will not qualify as
"rents from real property." Moreover, for rents received to qualify as "rents
from real property," the REIT generally must not furnish or render services to
the tenants of such property, other than through an "independent contractor"
from which the REIT derives no revenue or a taxable REIT subsidiary. AIMCO (or
its affiliates) is permitted to directly perform services that are "usually or
customarily rendered" in connection with the rental of space for occupancy only
and are not otherwise considered rendered to the occupant of the property. In
addition, AIMCO (or its affiliates) may provide non-customary services to
tenants of its properties without disqualifying all of the rent from the
property if the payment for such services does not exceed 1% of the total gross
income from the property. For purposes of this test, the income received from
such non-customary services is deemed to be at least 150% of the direct cost of
providing the services.
The management companies receive management fees and other income. A
portion of such fees and other income accrue to AIMCO through distributions from
the management companies that are classified as dividend income to the extent of
the earnings and profits of the management companies. Such distributions will
generally qualify under the 95% gross income test but not under the 75% gross
income test.
If AIMCO fails to satisfy one or both of the 75% or 95% gross income tests
for any taxable year, it may nevertheless qualify as a REIT for such year if it
is entitled to relief under certain provisions of the Internal Revenue Code.
These relief provisions will be generally available if AIMCO's failure to meet
such tests was due to reasonable cause and not due to willful neglect, AIMCO
attaches a schedule of the sources of its income to its return, and any
incorrect information on the schedule was not due to fraud with intent to evade
tax. It is not possible, however, to state whether in all circumstances AIMCO
would be entitled to the benefit of these relief provisions. If these relief
provisions are inapplicable to a particular set of circumstances involving
AIMCO, AIMCO will not qualify as a REIT. As discussed above in "-- General,"
even where these relief provisions apply, a tax is imposed with respect to the
excess net income.
Asset Tests. AIMCO, at the close of each quarter of its taxable year, must
also satisfy three tests relating to the nature of its assets:
- First, at least 75% of the value of AIMCO's total assets must be
represented by real estate assets (including its allocable share of real
estate assets held by the Subsidiary Partnerships), certain stock or debt
instruments purchased by AIMCO with new capital, cash, cash items and
U.S. government securities.
- Second, not more than 25% of AIMCO's total assets may be represented by
securities other than those in the 75% asset class.
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- Third, of the investments included in the 25% asset class, the value of
any one issuer's securities owned by AIMCO may not exceed 5% of the value
of AIMCO's total assets, AIMCO may not own more than 10% of any one
issuer's outstanding voting securities, and AIMCO may not own more than
10% of the total value of the outstanding securities of any one issuer.
The 5% and 10% asset limitations described above do not apply to electing
"taxable REIT subsidiary" corporations. The value of the stock held by AIMCO in
taxable REIT subsidiaries may not, however, exceed, in the aggregate, 20% of the
value of AIMCO's total assets.
AIMCO indirectly owns interests in the management companies. As set forth
above, the ownership of more than 10% of the voting securities of any one issuer
by a REIT or the investment of more than 5% of the REIT's total assets in any
one issuer's securities is prohibited by the asset tests. AIMCO believes that
its indirect ownership interests in the management companies qualify under the
asset tests set forth above. Furthermore, as noted above, after January 1, 2001,
AIMCO may not own more than 10% of the total value of the outstanding securities
of any one issuer, except for electing "taxable REIT subsidiary" corporations.
AIMCO believes that the value of the stock held by AIMCO in such taxable REIT
subsidiaries will not exceed, in the aggregate, 20% of the value of AIMCO's
total assets. However, no independent appraisals have been obtained to support
AIMCO's conclusions as to the value of the AIMCO operating partnership's total
assets and the value of the AIMCO operating partnership's interest in the
management companies and these values are subject to change in the future.
Furthermore, under legislation effective January 1, 2001, the operation or
management of a health care or lodging facility precludes qualification as a
taxable REIT subsidiary, and therefore precludes the REIT from relying upon this
exception to the 10% ownership restriction. Consequently, if any of the
management companies were deemed to operate or manage a health care or lodging
facility, such management companies would fail to qualify as taxable REIT
subsidiaries, and AIMCO would fail to qualify as a REIT. AIMCO believes that, as
of January 1, 2001, none of the management companies operate or manage any
health care or lodging facilities. However, the statute provides little guidance
as to the definition of a health care or lodging facility. Accordingly, there
can be no assurance that the IRS will not contend that any of the management
companies operate or manage a health care or lodging facility, disqualifying it
from treatment as a taxable REIT subsidiary, thereby resulting in the
disqualification of AIMCO as a REIT.
AIMCO's indirect interests in the AIMCO operating partnership and other
Subsidiary Partnerships are held through wholly owned corporate subsidiaries of
AIMCO organized and operated as "qualified REIT subsidiaries" within the meaning
of the Internal Revenue Code. Qualified REIT subsidiaries are not treated as
separate entities from their parent REIT for Federal income tax purposes.
Instead, all assets, liabilities and items of income, deduction and credit of
each qualified REIT subsidiary are treated as assets, liabilities and items of
AIMCO. Each qualified REIT subsidiary therefore is not subject to Federal
corporate income taxation, although it may be subject to state or local
taxation. In addition, AIMCO's ownership of the voting stock of each qualified
REIT subsidiary does not violate the general restriction against ownership of
more than 10% of the voting securities of any issuer.
Annual Distribution Requirements. In order for AIMCO to qualify as a REIT,
AIMCO is required to distribute dividends (other than capital gain dividends) to
its stockholders in an amount at least equal to:
- the sum of:
(i) 90% of AIMCO's "REIT taxable income" (computed without regard to the
dividends paid deduction and AIMCO's net capital gain i.e., the excess
of net long-term capital gain over net short-term capital loss)) and
(ii) 90% of the net income (after tax), if any, from foreclosure property,
minus
- the sum of certain items of noncash income.
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Such distributions must be paid in the taxable year to which they relate, or in
the following taxable year if declared before AIMCO timely files its tax return
for such year and if paid with or before the first regular dividend payment
after such declaration. To the extent that AIMCO distributes at least 90%, but
less than 100%, of its "REIT taxable income," as adjusted, it will be subject to
tax thereon at ordinary corporate tax rates. In any year, AIMCO may elect to
retain, rather than distribute, its net capital gain and pay tax on such gain.
In such a case, AIMCO's stockholders would include their proportionate share of
such undistributed capital gain in income and receive a credit for their share
of the tax paid by AIMCO. AIMCO's stockholders would then increase the adjusted
basis of their AIMCO shares by the difference between the designated amounts
included in their long-term capital gains and the tax deemed paid with respect
to their shares. If AIMCO should fail to distribute during each calendar year at
least the sum of:
(i) 85% of its REIT ordinary income for such year,
(ii) 95% of its REIT capital gain net income for such year (excluding
retained net capital gain), and
(iii) any undistributed taxable income from prior periods,
AIMCO would be subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed. AIMCO believes that it has
made, and intends to make, timely distributions sufficient to satisfy these
annual distribution requirements.
It is possible that AIMCO, from time to time, may not have sufficient cash
to meet the 90% distribution requirement due to timing differences between (i)
the actual receipt of cash (including receipt of distributions from the AIMCO
operating partnership) and (ii) the inclusion of certain items in income by
AIMCO for Federal income tax purposes. In the event that such timing differences
occur, in order to meet the 90% distribution requirement, AIMCO may find it
necessary to arrange for short-term, or possibly long-term, borrowings, or to
pay dividends in the form of taxable distributions of property.
Under certain circumstances, AIMCO may be able to rectify a failure to meet
the distribution requirement for a year by paying "deficiency dividends" to
stockholders in a later year, which may be included in AIMCO's deduction for
dividends paid for the earlier year. Thus, AIMCO may be able to avoid being
taxed on amounts distributed as deficiency dividends; however, AIMCO will be
required to pay interest and a penalty based on the amount of any deduction
taken for deficiency dividends.
Failure to Qualify. If AIMCO fails to qualify for taxation as a REIT in
any taxable year, and the relief provisions do not apply, AIMCO will be subject
to tax (including any applicable alternative minimum tax) on its taxable income
at regular corporate rates. Distributions to stockholders in any year in which
AIMCO fails to qualify will not be deductible by AIMCO nor will they be required
to be made. In such event, to the extent of current and accumulated earnings and
profits, all distributions to stockholders will be taxable as ordinary income,
and, subject to certain limitations of the Internal Revenue Code, corporate
distributees may be eligible for the dividends received deduction. Unless AIMCO
is entitled to relief under specific statutory provisions, AIMCO would also be
disqualified from taxation as a REIT for the four taxable years following the
year during which qualification was lost. It is not possible to state whether in
all circumstances AIMCO would be entitled to such statutory relief.
TAX ASPECTS OF AIMCO'S INVESTMENTS IN PARTNERSHIPS
General. Substantially all of AIMCO's investments are held indirectly
through the AIMCO operating partnership. In general, partnerships are
"pass-through" entities that are not subject to Federal income tax. Rather,
partners are allocated their proportionate shares of the items of income, gain,
loss, deduction and credit of a partnership, and are potentially subject to tax
thereon, without regard to whether the partners receive a distribution from the
partnership. AIMCO will include in its income its proportionate share of the
foregoing partnership items for purposes of the various REIT income tests and in
the computation of its REIT taxable income. Moreover, for purposes of the REIT
asset tests, AIMCO will include its proportionate share of assets held by the
Subsidiary Partnerships. See "-- Federal Income Taxation of AIMCO and AIMCO
Stockholders -- General."
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Entity Classification. AIMCO's direct and indirect investment in
partnerships involves special tax considerations, including the possibility of a
challenge by the IRS of the status of any of the Subsidiary Partnerships as a
partnership (as opposed to as an association taxable as a corporation) for
Federal income tax purposes. If any of these entities were treated as an
association for Federal income tax purposes, it would be subject to an
entity-level tax on its income. In such a situation, the character of AIMCO's
assets and items of gross income would change and could preclude AIMCO from
satisfying the asset tests and the income tests (see "-- Federal Income Taxation
of AIMCO and AIMCO Stockholders -- Asset Tests" and "-- Federal Income Taxation
of AIMCO and AIMCO Stockholders -- Income Tests"), and in turn could prevent
AIMCO from qualifying as a REIT. See "-- Federal Income Taxation of AIMCO and
AIMCO Stockholders -- Failure to Qualify" above for a discussion of the effect
of AIMCO's failure to meet such tests for a taxable year. In addition, any
change in the status of any of the Subsidiary Partnerships for tax purposes
might be treated as a taxable event, in which case AIMCO might incur a tax
liability without any related cash distributions.
Tax Allocations with Respect to the Properties. Under the Internal Revenue
Code and the Regulations, income, gain, loss and deduction attributable to
appreciated or depreciated property that is contributed to a partnership in
exchange for an interest in the partnership must be allocated in a manner such
that the contributing partner is charged with, or benefits from, respectively,
the unrealized gain or unrealized loss associated with the property at the time
of the contribution. The amount of such unrealized gain or unrealized loss is
generally equal to the difference between the fair market value of the
contributed property at the time of contribution, and the adjusted tax basis of
such property at the time of contribution (a "Book -- Tax Difference"). Such
allocations are solely for Federal income tax purposes and do not affect the
book capital accounts or other economic or legal arrangements among the
partners. See "-- Federal Income Taxation of the AIMCO operating partnership and
OP Unitholders -- Tax Consequences Upon Contribution of Property to the AIMCO
operating partnership." The AIMCO operating partnership was formed by way of
contributions of appreciated property. Consequently, allocations must be made in
a manner consistent with these requirements. Where a partner contributes cash to
a partnership that holds appreciated property, the Regulations provide for a
similar allocation of such items to the other partners. These rules apply to the
contribution by AIMCO to the AIMCO operating partnership of the cash proceeds
received in any offerings of its stock.
In general, certain OP Unitholders will be allocated lower amounts of
depreciation deductions for tax purposes and increased taxable income and gain
on the sale by the AIMCO operating partnership or other Subsidiary Partnerships
of the contributed properties. This will tend to eliminate the Book-Tax
Difference over the life of these partnerships. However, the special allocations
do not always entirely rectify the Book-Tax Difference on an annual basis or
with respect to a specific taxable transaction such as a sale. Thus, the
carryover basis of the contributed properties in the hands of the AIMCO
operating partnership or other Subsidiary Partnerships may cause AIMCO to be
allocated lower depreciation and other deductions, and possibly greater amounts
of taxable income in the event of a sale of such contributed assets in excess of
the economic or book income allocated to it as a result of such sale. This may
cause AIMCO to recognize taxable income in excess of cash proceeds, which might
adversely affect AIMCO's ability to comply with the REIT distribution
requirements. See "-- Federal Income Taxation of AIMCO and AIMCO
Stockholders -- Annual Distribution Requirements."
With respect to any property purchased or to be purchased by any of the
Subsidiary Partnerships (other than through the issuance of OP Units) subsequent
to the formation of AIMCO, such property will initially have a tax basis equal
to its fair market value and the special allocation provisions described above
will not apply.
Sale of the Properties. AIMCO's share of any gain realized by the AIMCO
operating partnership or any other Subsidiary Partnership on the sale of any
property held as inventory or primarily for sale to customers in the ordinary
course of business will be treated as income from a prohibited transaction that
is subject to a 100% penalty tax. See "-- Taxation of AIMCO and AIMCO
Stockholders -- General -- Income Tests." Under existing law, whether property
is held as inventory or primarily for sale to customers in the ordinary course
of a partnership's trade or business is a question of fact that depends on all
the facts
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and circumstances with respect to the particular transaction. The AIMCO
operating partnership and the other Subsidiary Partnerships intend to hold their
properties for investment with a view to long-term appreciation, to engage in
the business of acquiring, developing, owning and operating the properties and
to make such occasional sales of the properties, including peripheral land, as
are consistent with AIMCO's investment objectives.
TAXATION OF MANAGEMENT COMPANIES
A portion of the amounts to be used to fund distributions to stockholders
is expected to come from distributions made by the management companies to the
AIMCO operating partnership, and interest paid by the management companies on
certain notes held by the AIMCO operating partnership. In general, the
management companies pay Federal, state and local income taxes on their taxable
income at normal corporate rates. Any Federal, state or local income taxes that
the management companies are required to pay will reduce AIMCO's cash flow from
operating activities and its ability to make payments to holders of its
securities.
TAXATION OF TAXABLE DOMESTIC STOCKHOLDERS
Distributions. Provided that AIMCO qualifies as a REIT, distributions made
to AIMCO's taxable domestic stockholders out of current or accumulated earnings
and profits (and not designated as capital gain dividends) will be taken into
account by them as ordinary income and will not be eligible for the dividends
received deduction for corporations. Distributions (and retained net capital
gains) that are designated as capital gain dividends will be taxed as long-term
capital gains (to the extent that they do not exceed AIMCO's actual net capital
gain for the taxable year) without regard to the period for which the
stockholder has held its stock. However, corporate stockholders may be required
to treat up to 20% of certain capital gain dividends as ordinary income. In
addition, net capital gains attributable to the sale of depreciable real
property held for more than 12 months are subject to a 25% maximum Federal
income tax rate to the extent of previously claimed real property depreciation.
Distributions in excess of current and accumulated earnings and profits
will not be taxable to a stockholder to the extent that they do not exceed the
adjusted basis of the stockholder's shares in respect of which the distributions
were made, but rather will reduce the adjusted basis of such shares. To the
extent that such distributions exceed the adjusted basis of a stockholder's
shares in respect of which the distributions were made, they will be included in
income as long-term capital gain (or short-term capital gain if the shares have
been held for one year or less). In addition, any dividend declared by AIMCO in
October, November or December of any year and payable to a stockholder of record
on a specified date in any such month will be treated as both paid by AIMCO and
received by the stockholder on December 31 of such year, provided that the
dividend is actually paid by AIMCO during January of the following calendar
year. Stockholders may not include in their individual income tax returns any
net operating losses or capital losses of AIMCO.
Dispositions of AIMCO Class A Common Stock. Capital gains recognized by
individuals and other non-corporate taxpayers upon the sale or disposition of
AIMCO Class A common stock will be subject to a maximum Federal income tax rate
of 20% if the AIMCO Class A common stock is held for more than one year and will
be taxed at ordinary income rates if the AIMCO Class A common stock is held for
one year or less. Capital losses recognized by a stockholder upon the
disposition of AIMCO Class A common stock held for more than one year at the
time of disposition will be a long-term capital loss. In addition, any loss upon
a sale or exchange of shares of AIMCO Class A common stock by a stockholder who
has held such shares for six months or less (after applying certain holding
period rules) will be treated as a long-term capital loss to the extent of
distributions from AIMCO required to be treated by such stockholder as long-term
capital gain.
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TAXATION OF FOREIGN STOCKHOLDERS
The following is a discussion of certain anticipated U.S. Federal income
and estate tax consequences of the ownership and disposition of AIMCO Stock
applicable to Non-U.S. Holders of AIMCO Stock. A "Non-U.S. Holder" is any person
other than (i) a citizen or resident of the United States, (ii) a corporation or
partnership created or organized in the United States or under the laws of the
United States or of any state thereof or the District of Columbia, (iii) an
estate whose income is includable in gross income for U.S. Federal income tax
purposes regardless of its source or (iv) a trust if a United States court is
able to exercise primary supervision over the administration of such trust and
one or more United States fiduciaries have the authority to control all
substantial decisions of such trust. The discussion is based on current law and
is for general information only. The discussion addresses only certain and not
all aspects of U.S. Federal income and estate taxation.
Ordinary Dividends. The portion of dividends received by Non-U.S. Holders
payable out of AIMCO's earnings and profits which are not attributable to
capital gains of AIMCO and which are not effectively connected with a U.S. trade
or business of the Non-U.S. Holder will be subject to U.S. withholding tax at
the rate of 30% (unless reduced by treaty and the Non-U.S. Holder provides
appropriate documentation regarding its eligibility for treaty benefits). In
general, Non-U.S. Holders will not be considered engaged in a U.S. trade or
business solely as a result of their ownership of AIMCO Stock. In cases where
the dividend income from a Non-U.S. Holder's investment in AIMCO Stock is (or is
treated as) effectively connected with the Non-U.S. Holder's conduct of a U.S.
trade or business, the Non-U.S. Holder generally will be subject to U.S. tax at
graduated rates, in the same manner as U.S. Holders are taxed with respect to
such dividends (and may also be subject to the 30% branch profits tax in the
case of a Non-U.S. Holder that is a corporation).
Non-Dividend Distributions. Unless AIMCO Stock constitutes a United States
real property interest (a "USRPI") within the meaning of the Foreign Investment
in Real Property Tax Act of 1980 ("FIRPTA"), distributions by AIMCO which are
not dividends out of the earnings and profits of AIMCO will not be subject to
U.S. income or withholding tax. If it cannot be determined at the time a
distribution is made whether or not such distribution will be in excess of
current and accumulated earnings and profits, the distribution will be subject
to withholding at the rate applicable to dividends. However, the Non-U.S. Holder
may seek a refund of such amounts from the IRS if it is subsequently determined
that such distribution was, in fact, in excess of current and accumulated
earnings and profits of AIMCO. If AIMCO Stock constitutes a USRPI, such
distributions will be subject to 10% withholding and taxed pursuant to FIRPTA at
a rate of 35% to the extent such distributions exceed a stockholder's basis in
his or her AIMCO Stock.
Capital Gain Dividends. Under FIRPTA, a distribution made by AIMCO to a
Non-U.S. Holder, to the extent attributable to gains from dispositions of USRPIs
such as the properties beneficially owned by AIMCO ("USRPI Capital Gains"), will
be considered effectively connected with a U.S. trade or business of the
Non-U.S. Holder and subject to U.S. income tax at the rates applicable to U.S.
individuals or corporations, without regard to whether such distribution is
designated as a capital gain dividend. In addition, AIMCO will be required to
withhold tax equal to 35% of the amount of dividends to the extent such
dividends constitute USRPI Capital Gains. Distributions subject to FIRPTA may
also be subject to a 30% branch profits tax in the hands of Non-U.S. Holder that
is a corporation.
Dispositions of AIMCO Stock. Unless AIMCO Stock constitutes a USRPI, a
sale of such stock by a Non-U.S. Holder generally will not be subject to
taxation under FIRPTA. The AIMCO Stock will not constitute a USRPI if AIMCO is a
"domestically controlled REIT." A domestically controlled REIT is a REIT in
which, at all times during specified testing period, less than 50% in value of
its shares is held directly or indirectly by Non-U.S. Holders. AIMCO believes
that it is, and it expects to continue to be, a domestically controlled REIT. If
AIMCO is, and continues to be, a domestically controlled REIT, the sale of AIMCO
Stock should not be subject to taxation under FIRPTA. Because most classes of
stock of AIMCO are publicly traded, however, no assurance can be given that
AIMCO is or will continue to be a domestically controlled REIT.
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Even if AIMCO does not constitute a domestically controlled REIT, a
Non-U.S. Holder's sale of AIMCO Stock generally will still not be subject to tax
under FIRPTA as a sale of a USRPI provided that:
- the stock is "regularly traded" (as defined by applicable Regulations) on
an established securities market (e.g., the NYSE, on which AIMCO Class A
Common Stock is listed) and
- the selling Non-U.S. Holder held 5% or less of such class of AIMCO stock
at all times during a specified testing period.
If gain on the sale of stock of AIMCO were subject to taxation under
FIRPTA, the Non-U.S. Holder would be subject to the same treatment as a U.S.
stockholder with respect to such gain (subject to applicable alternative minimum
tax and a special alternative minimum tax in the case of nonresident alien
individuals) and the purchaser of the stock could be required to withhold 10% of
the purchase price and remit such amount to the IRS.
Gain from the sale of AIMCO Stock that is not subject to taxation under
FIRPTA will nonetheless be taxable in the United States to a Non-U.S. Holder in
two cases. First, if the Non-U.S. Holder's investment in the AIMCO Stock is
effectively connected with a U.S. trade or business conducted by such Non-U.S.
Holder, the Non-U.S. Holder will be subject to the same treatment as a U.S.
stockholder with respect to such gain. Second, if the Non-U.S. Holder is a
nonresident alien individual who was present in the United States for 183 days
or more during the taxable year and has a "tax home" in the United States, the
nonresident alien individual will be subject to a 30% tax on the individual's
capital gain.
Estate Tax. AIMCO Stock owned or treated as owned by an individual who is
not a citizen or resident (as specially defined for U.S. Federal estate tax
purposes) of the United States at the time of death will be includable in the
individual's gross estate for U.S. Federal estate tax purposes, unless an
applicable estate tax treaty provides otherwise. Such individual's estate may be
subject to U.S. Federal estate tax on the property includable in the estate for
U.S. Federal estate tax purposes.
TAXATION OF TAX-EXEMPT STOCKHOLDERS
Tax-exempt entities, including qualified employee pension and profit
sharing trusts and individual retirement accounts ("Exempt Organizations"),
generally are exempt from Federal income taxation. However, they are subject to
taxation on their unrelated business taxable income ("UBTI"). While many
investments in real estate generate UBTI, the IRS has ruled that dividend
distributions from a REIT to an exempt employee pension trust do not constitute
UBTI, provided that the shares of the REIT are not otherwise used in an
unrelated trade or business of the exempt employee pension trust. Based on that
ruling, AIMCO believes that amounts distributed by AIMCO to Exempt Organizations
should generally not constitute UBTI. However, if an Exempt Organization
finances its acquisition of AIMCO Stock with debt, a portion of its income from
AIMCO will constitute UBTI pursuant to the "debt-financed property" rules.
Furthermore, social clubs, voluntary employee benefit associations, supplemental
unemployment benefit trusts, and qualified group legal services plans that are
exempt from taxation under paragraphs (7), (9), (17) and (20), respectively, of
Section 501(c) of the Internal Revenue Code are subject to different UBTI rules,
which generally will require them to characterize distributions from AIMCO as
UBTI. In addition, in certain circumstances, a pension trust that owns more than
10% of AIMCO's stock is required to treat a percentage of the dividends from
AIMCO as UBTI (the "UBTI Percentage"). The UBTI Percentage is the gross income
derived by AIMCO from an unrelated trade or business (determined as if AIMCO
were a pension trust) divided by the gross income of AIMCO for the year in which
the dividends are paid. The UBTI rule applies to a pension trust holding more
than 10% of AIMCO's stock only if:
- the UBTI Percentage is at least 5%,
- AIMCO qualifies as a REIT by reason of the modification of the 5/50 Rule
that allows the beneficiaries of the pension trust to be treated as
holding shares of AIMCO in proportion to their actuarial interest in the
pension trust, and
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- either (A) one pension trust owns more than 25% of the value of AIMCO's
stock or (B) a group of pension trusts each individually holding more
than 10% of the value of AIMCO's stock collectively owns more that 50% of
the value of AIMCO's stock.
The restrictions on ownership and transfer of AIMCO's stock should prevent an
Exempt Organization from owning more than 10% of the value of AIMCO's stock.
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FEDERAL INCOME TAXATION OF AIMCO CLASS P PREFERRED STOCKHOLDERS
This is a discussion of certain Federal income tax considerations with
respect to the acquisition, ownership and disposition of a share of Class P
preferred stock to investors. This discussion is based on current law, is for
general information only and is not tax advice. This discussion supplements the
discussion set forth under the heading "Federal Income Taxation of AIMCO and
AIMCO Stockholders." This discussion does not purport to deal with all aspects
of taxation that may be relevant to particular investors in light of their
personal investment or tax circumstances.
Each prospective purchaser is advised to consult his or her tax advisor
regarding the specific tax consequences to him or her of the acquisition,
ownership, redemption, conversion or sale of Class P preferred stock and of the
Company's election to be taxed as a real estate investment trust, including the
Federal, state, local, foreign income and other tax consequences of such
acquisition, ownership, sale and election, and of potential changes in
applicable tax laws.
DISTRIBUTIONS ON CLASS P PREFERRED STOCK
For a discussion of the treatment of dividends and other distributions with
respect to the shares of the Class P preferred stock, see "Federal Income
Taxation of AIMCO and AIMCO Stockholders." In determining the extent to which a
distribution with respect to the Class P preferred stock constitutes a dividend
for tax purposes, the earnings and profits of AIMCO will be allocated first to
distributions with respect to preferred stock, including any Class P preferred
stock, and then to Class A common stock.
REDEMPTION OF CLASS P PREFERRED STOCK
A redemption of the Class P preferred stock for cash will be treated under
Section 302 of the Internal Revenue Code as a dividend taxable at ordinary
income tax rates to the extent of AIMCO's current and accumulated earnings and
profit, unless the redemption satisfies certain tests set forth in Section
302(b) of the Internal Revenue Code enabling the redemption to be treated as a
sale or exchange of the Class P preferred stock. The redemption will satisfy
such test if it:
- is "substantially disproportionate" with respect to the holder,
- results in a "complete termination" of the holder's stock interest in
AIMCO, or
- is "not essentially equivalent to a dividend" with respect to the holder,
all within the meaning of Section 302(b) of the Internal Revenue Code.
In determining whether any of these tests have been met, shares considered to be
owned by the holder by reason of certain constructive ownership rules set forth
in the Internal Revenue Code, as well as shares actually owned, must generally
be taken into account. Because the determination as to whether any of the
alternative tests of Section 302(b) of the Internal Revenue Code is satisfied
with respect to any particular holder of the Class P preferred stock will depend
upon the facts and circumstances as of the time the determination is made,
prospective investors are advised to consult their tax advisors to determine
such tax treatment.
If a redemption of the Class P preferred stock is treated as a distribution
that is taxable as a dividend, the amount of the distribution would be measured
by the amount of cash and the fair market value of any property received by the
stockholders. The stockholder's adjusted tax basis in such redeemed Class P
preferred stock would be transferred to the holder's remaining stockholdings in
AIMCO. If, however, the stockholder has no remaining stockholdings in AIMCO,
such basis may, under certain circumstances, be transferred to a related person
or it may be lost entirely.
Under Section 305(c) of the Internal Revenue Code and the applicable
Treasury Regulations thereunder, if the cash redemption price of preferred stock
exceeds its issue price, the difference (the "redemption premium") may be
taxable as a constructive dividend of additional shares of preferred stock to
holders over a certain period. Because the terms of the Class P preferred stock
provide for an optional
85
<PAGE> 94
right of redemption for cash by AIMCO at a price in excess of its issue price,
holders could be required to recognize such redemption premium under an economic
accrual method if, based on all of the facts and circumstances, the optional
redemption is more likely than not to occur.
CONVERSION OF CLASS P PREFERRED STOCK
The conversion of Class P preferred stock into shares of Class A common
stock will constitute a recapitalization for Federal income tax purposes.
Accordingly, income, gain or loss generally will not be recognized by a holder
of Class P preferred stock upon the exchange of Class P preferred stock for
Class A common stock (except with respect to cash received in discharge of
accrued dividends or cash received for a fractional share interest of Class P
preferred stock). A holder's tax basis in Class A common stock received pursuant
to the conversion generally will equal the holder's tax basis in the Class P
preferred stock surrendered in exchange therefor. Similarly, the holding period
for Class A common stock received pursuant to the conversion or optional
redemption generally will include the holding period of the Class P preferred
stock surrendered in exchange therefor.
If a holder receives a combination of cash and Class A common stock upon
conversion of its Class P preferred stock, such holder will generally recognize
gain on the exchange in an amount equal to the lesser of (i) the amount of cash
received, or (ii) the excess, if any, of the sum of the amount of cash and the
fair market value of Class A common stock received over the tax basis of the
Class P preferred stock exchanged therefor. No loss by such holder will be
recognized. The tax basis of the Class A common stock received will equal the
tax basis of the Class P preferred stock exchanged therefor, increased by the
amount of gain recognized on the exchange and decreased by the amount of cash
received on the exchange. Such recognized gain will be capital gain, unless the
receipt of cash by the holder has the effect of the distribution of a dividend,
in which case such recognized gain generally will be treated as dividend income.
The tests described in "Redemption of Class P preferred stock" above provide
relevant guidelines for purposes of determining whether the receipt of cash by
the stockholder has the effect of a distribution of a dividend for this purpose.
Any recognized gain that is treated as capital gain will be long term if the
holding period for the Class P preferred stock is more than one year as of the
date of the conversion. In addition, a holder who receives cash in lieu of a
fractional share of Class P preferred stock upon conversion of its Class P
preferred stock for Class A common stock will be treated as having first
received such fractional share and as having then exchanged such fractional
share for cash in a taxable transaction. Gain or loss will be recognized,
measured by the difference between the amount of cash received and the portion
of the basis of the share of Class P preferred stock allocable to such
fractional interest. In general, such gain or loss will constitute a capital
gain or loss and will be a long term capital gain or loss if the Class P
preferred stock has been held for more than one year as of the date of such
conversion.
Future adjustments, if any, of the conversion rates of Class P preferred
stock (including adjustments to reflect AIMCO's issuance of certain rights,
warrants or evidence of indebtedness, or distributions of assets to holders of
Class A common stock) may result in constructive distributions taxable as
dividends to the holders of Class P preferred stock (to the extent that AIMCO
has current or accumulated earnings and profits).
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<PAGE> 95
OTHER TAX CONSEQUENCES
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS
The rules dealing with Federal income taxation are constantly under review
by persons involved in the legislative process and by the IRS and the U.S.
Treasury Department. Changes to the Federal laws and interpretations thereof
could adversely affect an investment in AIMCO. Congress enacted legislation,
generally effective in 2001, that will, among other things:
- modify the current ownership limitations to permit a REIT to own up to
100% of the voting securities and 100% of the value of the other
interests in a taxable REIT subsidiary. In addition, the 5% REIT asset
test would not apply to taxable REIT subsidiaries, but securities of
taxable REIT subsidiaries could not exceed 20% of the total value of a
REIT's assets;
- permit a taxable REIT subsidiary to perform services to REIT's tenants
and impose a 100% excise tax on certain non-arms length transactions
between a taxable REIT subsidiary and a REIT;
- disallow REIT status where healthcare or lodging facilities are operated
or managed by a taxable REIT subsidiary, beginning in 2001;
- generally restrict a REIT from owning more than 10% of the vote or value
of the securities of an issuer, including a partnership (taking into
account only the partnership's debt securities) or a non-REIT C
corporation that is not a taxable REIT subsidiary;
- apply certain limitations to the deductibility of interest paid by a
taxable REIT subsidiary to a related REIT;
- allow a REIT to rent up to 10% of a property to a taxable REIT subsidiary
and generally have the rent qualify as good income for purposes of the
REIT gross income tests; and
- change the measurement of rent attributable to personal property leased
in connection with a lease of real property from a comparison based on
adjusted tax bases of properties to a comparison of fair market values.
We cannot predict whether, when, in what form, or with what effective
dates, other legislative proposals applicable to AIMCO or its stockholders will
become law.
We cannot predict whether, when, in what form, or with what effective
dates, the tax laws applicable to AIMCO, or an investment in AIMCO, will be
changed.
STATE, LOCAL AND FOREIGN TAXES
AIMCO and AIMCO stockholders may be subject to state, local or foreign
taxation in various jurisdictions, including those in which it or they transact
business, own property or reside. The state, local or foreign tax treatment of
AIMCO and its stockholders may not conform to the Federal income tax
consequences discussed above. Consequently, BAC holders should consult their own
tax advisors regarding the application and effect of state, local or foreign tax
laws on an investment in AIMCO.
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<PAGE> 96
COMPARATIVE RIGHTS OF STOCKHOLDERS OF AIMCO
AND BAC HOLDERS OF OTEF
Upon consummation of the merger, the holders of BACs, other than AIMCO and
the OTEF associate general partner, will become stockholders of AIMCO.
Accordingly, the rights of BAC holders following the merger will be governed by
AIMCO's articles of incorporation and bylaws, and by the Maryland General
Corporation Law.
The following is a summary of the material differences between the rights
and privileges of BAC holders and those of holders of the Class A common stock
and Class P preferred stock. This summary is not meant to be relied upon as an
exhaustive description of the differences. You should consult AIMCO's articles
of incorporation and bylaws, the Maryland General Corporation Law, OTEF's
partnership agreement and the Maryland Revised Uniform Limited Partnership Act
for a complete description of the rights of BAC holders and AIMCO stockholders.
<TABLE>
<CAPTION>
BACS AIMCO STOCK
---- -----------
<S> <C>
NATURE OF INVESTMENT
The BACs constitute assignments of limited The Class A common stock and Class P preferred stock
partnership interests in OTEF but are not limited constitute equity interests in AIMCO. Dividends are
partnership interests. Each BAC entitles the holder paid, when and as declared by the AIMCO board of
to their respective pro rata share of Cash Flow (as directors. Under the REIT rules, AIMCO is required to
such term is defined in the partnership agreement) to distribute dividends (other than capital gain
be made to such holders. Similar to many equity dividends) to its stockholders in an amount at least
REITs, OTEF distributes to its BACs most but not all equal to (A) the sum of (i) 90% of AIMCO's "REIT
of its cash flow, so as to maintain cash reserves for taxable income" (computed without regard to the
future quarterly distributions or other purposes. dividends paid deduction and AIMCO's net capital
OTEF's payout ratio, or percentage of net income per gain) and (ii) 90% of the net income (after tax), if
BAC, varies from time to time. Approximately 90% of any, from foreclosure property, minus (B) the sum of
the annual dividend per BAC is federally tax-exempt. certain items of noncash income. The majority of the
distributions on the Class A common stock and all
distributions on the Class P preferred stock are
likely to be taxable.
VOTING RIGHTS
Under the partnership agreement, each BAC Each outstanding share of Class A common stock
entitles the holder thereof to one vote, through the entitles the holder thereof to one vote on all
initial limited partner, on all matters in which the matters submitted to stockholders for vote, including
initial limited partner is entitled to vote (either the election of directors. Holders of Class A common
in person or by proxy). With respect to any matter on stock have the right to vote on, among other things,
which a vote of the limited partners is taken or any a merger of AIMCO, amendments to the AIMCO articles
other action of the limited partners is required or of incorporation and the dissolution of AIMCO.
permitted, the initial limited partner agrees that it Certain amendments to the AIMCO articles of
shall vote a limited partnership interest or take incorporation require the affirmative vote of not
such action (other than solely administrative less than two-thirds of votes entitled to be cast on
additions as to which the initial limited partner has the matter. The AIMCO articles of incorporation
no discretion) only for the sole benefit of, and in permits the AIMCO board of directors to classify and
accordance with the written instructions of, the BAC issue capital stock in one or more series having
holder to which the limited partnership interest is voting power which may differ from that of the Class
assigned. The initial limited partner shall provide A common stock.
notice to the BAC holders containing information Under Maryland law, a consolidation, merger,
regarding any matters to be voted upon or as to which
any other action is requested
</TABLE>
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<PAGE> 97
<TABLE>
<CAPTION>
BACS AIMCO STOCK
---- -----------
<S> <C>
or proposed sufficiently in advance of the date of share exchange or transfer of all or substantially
the vote or action for which instructions are all of the assets of AIMCO requires the affirmative
requested to permit such BAC holder to provide vote of not less than two-thirds of all of the votes
written instructions and shall otherwise establish entitled to be cast on the matter. With respect to
reasonable procedures for any such request for each of these transactions, only the holders of Class
instructions. Under the partnership agreement, the A common stock are entitled to vote on the matters.
BAC holders have the right to vote on a proposed No approval of the stockholders is required for the
dissolution of OTEF. OTEF cannot be dissolved without sale of less than all or less than substantially all
the prior approval of two-thirds in interest of the of AIMCO's assets.
limited partners, including the initial limited Maryland law provides that the AIMCO board of
partner acting on behalf of and at the direction of directors must obtain the affirmative vote of at
the BAC holders. least two-thirds of the votes entitled to be cast on
the matter in order to dissolve AIMCO. Only the
holders of Class A common stock are entitled to vote
on AIMCO's dissolution.
Holders of Class P preferred stock have no general
voting rights similar to those associated with the
Class A common stock. However, before any alteration
or repeal of the Articles Supplementary, the articles
of incorporation, or bylaws that would materially
effect the rights and preferences of the Class P
preferred stock or would convert the Class P
preferred stock into cash or any other security,
other than a preferred stock with similar rights and
preferences, can be given effect, the affirmative
vote of 2/3 of the holders of Class P preferred
stock is required. An affirmative vote of 2/3 of the
holders of the Class P preferred is also required
before the authorization, creation or issuance any
class or series of stock senior to the Class P
preferred stock, or of any class or series of stock
convertible into stock that is senior to the Class P
preferred stock.
ELECTION AND REMOVAL OF GENERAL PARTNERS AND DIRECTORS
Each BAC entitles the holder thereof to one Holders of Class A common stock have the power to
vote, through the initial limited partner, on all elect directors by an affirmative vote of a plurality
matters in which the initial limited partner is of all the votes cast at a meeting at which a quorum
entitled to vote, including the removal of a general is present. A majority of the votes entitled to be
partner. The approval of two-thirds in interest of cast constitutes a quorum. Holders of Class A common
the limited partners is required for the removal of stock may remove any or all of the directors, with
any general partner. cause.
Only the general partners may designate If (i) six quarterly dividends (whether or not
additional persons to be general partners. However, consecutive) payable on the Class P preferred stock
upon any removal of a general partner (so long as are in arrears, or (ii) for two consecutive quarterly
such general partner is not the sole general partner) dividend periods the Corporation fails to pay
by the limited partners, the limited partners may dividends of at least $0.5950, subject to certain
elect a replacement upon the approval of two-thirds adjustments, on the Class A common stock, the number
in interest of the limited of directors will be increased by
</TABLE>
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<PAGE> 98
<TABLE>
<CAPTION>
BACS AIMCO STOCK
---- -----------
<S> <C>
partners. two (in the case of arrearages described in clause
For a detailed description of the voting rights (i)) or one (in the case of arrearages described in
of holders of BACs, see "-- Voting Rights." clause (ii)). The increase will not occur if the
number of directors has already been increased due to
a similar type of provision relating to other classes
or series of preferred stock. The holders of the
Class P preferred stock, together with all other
holders of preferred stock with similar voting
rights, shall be entitled, voting as a single class,
to elect the additional director(s). Upon payment of
the accumulated arrearages, the term of the directors
so elected will cease and the number of directors
shall be reduced accordingly.
AMENDMENT TO GOVERNING DOCUMENTS
Each BAC entitles the holder thereof to one Each outstanding share of Class A common stock
vote, through the initial limited partner, on all entitles the holder thereof to one vote on all
matters in which the initial limited partner is matters submitted to stockholders for vote, including
entitled to vote, including the amendment of the the amendment of the AIMCO articles of incorporation
partnership agreement. The approval of two-thirds in and by-laws.
interest of the limited partners is required for Generally, the AIMCO articles of incorporation and
amendments that would change the rights of limited bylaws may be amended by a majority of the
partners and BAC holders; authorize the payment of stockholders voting on the matter. However,
additional fees to the managing general partner, its provisions of the AIMCO articles of incorporation
affiliates or their respective successors and assigns relating to the removal of directors and repeal of
that are not authorized by the partnership agreement; the AIMCO bylaws may only be amended by a vote of
or modify in a manner not otherwise permitted by the two-thirds of the votes entitled to be cast on the
partnership agreement any of the provisions regarding matter.
fees payable by OTEF to the managing general partner Generally, the holders of Class P preferred stock
or its affiliates. All other amendments to the have no right to vote on amendments to the articles
partnership agreement require the approval of a of incorporation or bylaws. For a description of the
majority in interest of the limited partners. voting rights of holders of Class P preferred stock,
For a detailed description of the voting rights see "-- Voting Rights."
of holders of BACs, see "-- Voting Rights."
DISTRIBUTIONS
The partnership agreement requires the managing Holders of the Class A common stock are entitled to
general partner to distribute quarterly all Cash receive dividends when and as declared by the AIMCO
Flow, or such portion as the managing general partner board of directors, out of funds legally available
may in its sole and absolute discretion determine, therefor.
generated by OTEF during such quarter to the limited Under the REIT rules, AIMCO is required to distribute
partners and BAC holders as a single class and the dividends (other than capital gain dividends) to its
general partners in accordance with their special stockholders in an amount at least equal to (A) the
interests in OTEF. The first 98% of Cash Flow shall sum of (i) 90% of AIMCO's "REIT taxable income"
be paid to the limited partners and BAC holders as a (computed without regard to the dividends paid
class and the remaining 2% to the general partners deduction and AIMCO's net capital gain) and (ii) 90%
until the limited partners and BAC holders as a class of the net income (after tax), if any, from
</TABLE>
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<PAGE> 99
<TABLE>
<CAPTION>
BACS AIMCO STOCK
---- -----------
<S> <C>
(other than the Affiliated BAC Holder with respect to foreclosure property, minus (B) the sum of certain
the Affiliated BACs that it owns (as such terms are items of noncash income.
defined in the partnership agreement)) have received Holders of the Class P preferred stock are entitled
a noncumulative return in such year equal to 11% of to receive quarterly cash dividends when and as
the Limited Partners Preference Amount, and, declared by the AIMCO board of directors, out of
thereafter during such year, 90% to the limited funds legally available for the distribution. The
partners and BAC Holders as a class and 9.99% to the dividend shall be the greater of $0.5625 or the
associate general partner and 0.01% to the managing quarterly cash dividend paid or payable on the number
general partner. of shares of Class A common stock into which the
Class P preferred stock is convertible. The dividends
are cumulative from the date of issuance, regardless
of whether or not a dividend is declared or there are
funds legally available for distribution, and shall
be payable quarterly in arrears.
LIQUIDITY AND TRANSFERABILITY/REDEMPTION
The BACs are listed on the American Stock The Class A common stock is publicly tradable and is
Exchange. listed on the NYSE. An ownership limit for the Class
Under the partnership agreement, BACs are freely A common stock is set forth in the AIMCO articles of
transferable, subject to the following sentence and incorporation, as described in "Description of AIMCO
applicable Federal and state securities laws and Capital Stock -- Restrictions on Transfer."
regulations, and the general partners may prohibit AIMCO has applied to list the Class P preferred stock
any transfer which does not so comply or which the on the New York Stock Exchange. Upon listing, which
managing general partner, in its sole discretion, is not assured, the Class P preferred stock will be
determines is not in the best interests of OTEF. publicly tradable. An ownership limit for the Class P
Under the partnership agreement, if any sale, preferred stock is set forth in the AIMCO articles of
assignment, pledge, transfer or exchange of a incorporation and Articles Supplementary, as
partnership interest by a limited partner, other than described in "Description of AIMCO Class P Preferred
the initial limited partner, or of a BAC may result, Stock -- Restrictions on Transfer."
when considered with all other sales, assignments, AIMCO may, at its option redeem shares of Class P
transfers and exchanges of partnership interests and preferred stock, in whole or from time to time in
BACs within the previous 12 months, in OTEF being part, for cash (i) prior to the third anniversary of
considered to have been terminated within the meaning the original date of issue provided that the closing
of Section 708 of the Internal Revenue Code, which market price of the Class A common stock has equaled
termination would, in the judgment of the managing or exceeded $56 per share at any time prior to the
general partner, following receipt of advice of date of redemption, in which case the Class P
counsel, have tax consequences that are materially preferred stock is redeemable for six months after
adverse to the interests of the limited partners or any date on which the closing market price has
BAC holders, then in such event the sale, assignment, reached such level, (ii) at any time on or after the
pledge, transfer or exchange may be deferred by the third anniversary of the original date of issue,
managing general partner. (iii) on or after a change in control of AIMCO, as
defined in the Articles Supplementary, or (iv) at any
time there has been a violation of the restrictions
on transfer referred to above. Upon redemption,
holders of Class P preferred stock shall receive
</TABLE>
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<PAGE> 100
<TABLE>
<CAPTION>
BACS AIMCO STOCK
---- -----------
<S> <C>
cash in the amount of 100% of the $25 liquidation
preference of each share of Class P preferred stock.
BUSINESS COMBINATIONS WITH INTERESTED SECURITY HOLDERS
OTEF may not engage in any business combination For a description of the restrictions on business
with any interested party for a period of five years combinations between AIMCO and holders of AIMCO Class
following the most recent date on which the A common stock or Class P preferred stock, see
interested party became an interested party. For "Description of AIMCO Capital Stock -- Business
purposes of the partnership agreement, an interested Combinations."
party is any person that is the beneficial owner, The shares of Class A common stock into which Class P
directly or indirectly, of 10% or more of the preferred stock may be converted will be considered
outstanding BACs, or any affiliate of such person, or in the determination of whether a holder is the
an affiliate or associate of OTEF, which at any time beneficial owner of 10% of the voting stock of AIMCO
within the two-year period immediately prior to the for purposes of the Maryland business combination
date in question was the beneficial owner, directly statute.
or indirectly, of 10% or more of the voting power of
the then-outstanding BACs.
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
CONTROL SHARE RIGHTS
The partnership agreement provides that Control For a description of the rights of holders of control
BACs acquired in a Control BAC Acquisition have no shares of AIMCO Class A common stock and Class P
voting rights except to the extent approved by a vote preferred stock, see "Description of AIMCO Capital
of two-thirds of the votes interest of the limited Stock -- Control Share Acquisitions."
partners. Control BACs are BACs that would, if
aggregated with all other BACs owned or controlled by
a Person, entitle that Person to exercise or direct
the exercise of the voting power of the BACs within
the following ranges of voting power: (i) one-fifth
or more but less than one-third, (ii) one-third or
more but less than a majority or (iii) a majority or
more of all voting power. A Control BAC Acquisition
is any acquisition of ownership of, or the power to
direct the exercise of voting power with respect to,
issued and outstanding Control BACs.
The partnership, upon receiving notice of any
person's intent to make a Control BAC Acquisition,
may choose to redeem any or all Control BACs, under
certain conditions.
</TABLE>
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<PAGE> 101
LEGAL MATTERS
Certain legal and tax matters relating to the merger will be passed upon
for AIMCO and Oxford Tax Exempt Fund II Corporation, OTEF's managing general
partner, by Shaw Pittman, a law partnership including professional corporations,
Washington, DC, and, with respect to the Federal income taxation of AIMCO and
AIMCO stockholders, by Skadden, Arps, Slate, Meagher & Flom LLP, Los Angeles,
California. Partners in Shaw Pittman participating in the representation of
AIMCO and their family members own an aggregate of 2,900 BACs, which will
convert in the merger into the right to receive the merger consideration.
EXPERTS
Ernst & Young LLP, independent auditors, have audited (i) AIMCO's
consolidated financial statements and schedule included in AIMCO's Annual Report
on Form 10-K for the year ended December 31, 1999; (ii) Regency Windsor
Apartment Communities combined historical summary of gross income and direct
operating expenses for the year ended December 31, 1998 included in AIMCO's
Current Report on Form 8-K dated December 15, 1999; and (iii) Dreyfuss Apartment
Communities combined historical summary of gross income and direct operating
expenses for the year ended December 31, 1998 included in AIMCO's Current Report
on Form 8-K dated December 15, 1999, as set forth in their reports, which are
incorporated by reference in this prospectus/information statement. These
financial statements and schedule and combined historical summaries of gross
income and direct operating expenses are incorporated by reference in reliance
on Ernst & Young LLP's reports, given on their authority as experts in
accounting and auditing.
The consolidated financial statements of OTEF appearing in OTEF's Annual
Report on Form 10-K for the year ended December 31, 1999 have been audited by
PricewaterhouseCoopers LLP, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
Reznick Fedder & Silverman, independent auditors, have audited (i) Oxford
Holding Corporation and Subsidiaries, Oxford Realty Financial Group, Inc. and
Subsidiaries, ZIMCO Entities and Oxford Equities Corporation III's combined
financial statements for the year ended December 31, 1999; (ii) ORFG Operations,
L.L.C. and Subsidiary's combined financial statements for the year ended
December 31, 1999; (iii) OXPARC L.L.C.s' combined financial statements for the
year ended December 31, 1999; and (iv) Oxford Realty Financial Group Properties'
combined financial statements for the year ended December 31, 1999; as set forth
in their reports, which are incorporated by reference in this
prospectus/information statement. These financial statements are incorporated by
reference in reliance on Reznick Fedder & Silverman's reports, given on their
authority as experts in accounting and auditing.
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<PAGE> 102
INDEX TO PRO FORMA FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Pro Forma Financial Information of AIMCO (Pre-Merger)....... F-2
AIMCO Pro Forma Condensed Consolidated Statement of
Operations (Pre-Merger) for the Year Ended December
31, 1999.............................................. F-4
AIMCO Pro Forma Condensed Consolidated Statement of
Operations (Pre-Merger) for the Nine Months Ended
September 30, 2000.................................... F-9
Pro Forma Financial Information of AIMCO (Merger)........... F-14
AIMCO Pro Forma Condensed Consolidated Balance Sheet
(Merger) as of September 30, 2000..................... F-15
AIMCO Pro Forma Condensed Consolidated Statement of
Operations (Merger) for the Year Ended December 31,
1999.................................................. F-18
AIMCO Pro Forma Condensed Consolidated Statement of
Operations (Merger) for the Nine Months Ended
September 30, 2000................................... F-20
</TABLE>
F-1
<PAGE> 103
PRO FORMA FINANCIAL INFORMATION OF AIMCO (PRE-MERGER)
The following Pro Forma Consolidated Statement of Operations (Pre-Merger)
of AIMCO for the year ended December 31, 1999 has been prepared as if each of
the following transactions had occurred as of January 1, 1999: (i) the Oxford
Acquisition; and (ii) the acquisition of the Regency Windsor Apartment
Communities (the "Regency Acquisition"), which includes fourteen separate
residential apartment communities located in Indiana, Michigan and North
Carolina; (iii) the acquisition of four Dreyfuss Apartment Communities located
in Virginia and Maryland ( the "1999 Dreyfuss Acquisition"); and (iv) the
acquisition in 2000 of five Dreyfuss Apartment Communities located in Virginia
and Maryland (the "2000 Dreyfuss Acquisition," and combined with the 1999
Dreyfuss Acquisition, the "Dreyfuss Acquisitions").
The following Pro Forma Consolidated Statement of Operations (Pre-Merger)
of AIMCO for the nine months ended September 30, 2000 has been prepared as if
each of the following transactions had occurred as of January 1, 1999: (i) the
Oxford Acquisition; and (ii) the 2000 Dreyfuss Acquisition.
No Pro Forma Consolidated Balance Sheet (Pre-Merger) of AIMCO as of
September 30, 2000 has been presented as the Oxford Acquisition, which occurred
on September 20, 2000, and the 2000 Dreyfuss Acquisition, which occurred on
September 22, 2000, are already reflected in the historical balance sheet of
AIMCO at September 30, 2000.
The total purchase price for the Oxford acquisition was $1,183,137, as
follows (in thousands):
<TABLE>
<S> <C>
Cash paid to sellers........................................ $ 279,000
OP Units issued to sellers.................................. 62,177
Transaction costs........................................... 18,441
Accrued liabilities resulting from acquisition, including
pre-acquisition contingencies............................. 33,650
Accrued liability for restructuring plan related to
restructuring of Oxford................................... 2,133
Assumed liabilities of the Oxford entities.................. 720,929
Deferred tax liability resulting from the acquisition....... 30,000
Minority interest assumed of consolidated real estate
partnerships.............................................. 36,807
----------
$1,183,137
==========
</TABLE>
The purchase price was allocated to the various assets acquired in the
Oxford acquisition, as follows (in thousands):
<TABLE>
<S> <C>
Real estate................................................. $ 702,107
Investments in unconsolidated real estate partnerships...... 172,617
Notes receivable from unconsolidated real estate
partnerships.............................................. 91,094
Notes receivable from and advances to unconsolidated
subsidiaries.............................................. 92,248
Cash and cash equivalents................................... 32,512
Investment in asset management contracts.................... 7,487
Investment in participation management contracts............ 52,026
Other assets................................................ 33,046
----------
$1,183,137
==========
</TABLE>
The following Pro Forma Financial Information (Pre-Merger) is based, in
part, on the following historical financial statements, which are incorporated
by reference in this Prospectus/Information Statement: (i) the Consolidated
Financial Statements of AIMCO for the year ended December 31, 1999 and the nine
months ended September 30, 2000; (ii) the combined historical summary of gross
income and direct operating expenses of Regency Windsor Apartment Communities
for the year ended December 31, 1998; (iii) the combined historical summary of
gross income and direct operating expenses of Dreyfuss Apartment Communities for
the year ended December 31, 1998; (iv) the combined financial statements of
Oxford Realty Financial Group, Inc. and Subsidiaries, Zimco and Oxford Equities
F-2
<PAGE> 104
Corporation III (the "Oxford Entities"); (v) the consolidated financial
statements of ORFG Operations L.L.C. and Subsidiary ("ORFG Operations"); and
(vi) the combined financial statements of Oxparc L.L.C.s (the "Oxparc
Entities"). The Pro Forma Financial Information (Pre-Merger) should be read in
conjunction with such financial statements and the notes thereto. In the opinion
of AIMCO's management, all material adjustments necessary to reflect the effects
of these transactions have been made.
The unaudited Pro Forma Financial Information (Pre-Merger) has been
prepared using the purchase method of accounting whereby the assets and
liabilities of the entities acquired in the Oxford Acquisition are adjusted to
estimated fair market value, based upon preliminary estimates, which are subject
to change as additional information is obtained. The allocations of purchase
costs are subject to final determination based upon estimates and other
evaluations of fair value. Therefore, the allocations reflected in the following
unaudited Pro Forma Financial Information (Pre-Merger) may differ from the
amounts ultimately determined.
The unaudited Pro Forma Financial Information (Pre-Merger) is presented for
informational purposes only and is not necessarily indicative of the financial
position or results of operations of AIMCO that would have occurred if such
transactions had been completed on the dates indicated, nor does it purport to
be indicative of future financial positions or results of operations. In the
opinion of AIMCO's management, all material adjustments necessary to reflect the
effects of these transactions have been made. The unaudited Pro Forma
Consolidated Statement of Operations (Pre-Merger) for the nine months ended
September 30, 2000 is not necessarily indicative of the results of operations to
be expected for the year ending December 31, 2000.
F-3
<PAGE> 105
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS (PRE-MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS
-----------------------------------------------------------------------
AIMCO BEFORE
AIMCO OXFORD OXFORD OXFORD PRO FORMA
HISTORICAL(A) ADJUSTMENTS(B) ACQUISITION(C) REORGANIZATION(D) REORGANIZATION(E) TOTAL
------------- -------------- -------------- ----------------- ----------------- ----------
<S> <C> <C> <C> <C> <C> <C>
RENTAL PROPERTY OPERATIONS
Rental and other property
revenues................. $ 533,917 $ 71,412(F) $119,272 $ 724,601 $(80,823)(J) $ 643,778
Property operating
expenses................. (214,693) (31,748)(F) (67,290) (313,731) 50,342(J) (263,389)
Owned property management
expense.................. (15,429) (2,892)(F) (4,569) (22,890) 3,191(J) (19,699)
Depreciation............... (131,753) (11,165)(F) (30,213) (173,131) 15,435(J) (157,696)
--------- -------- -------- --------- -------- ---------
Income from property
operations............... 172,042 25,607 17,200 214,849 (11,855) 202,994
--------- -------- -------- --------- -------- ---------
SERVICE COMPANY BUSINESS
Management fees and other
income................... 43,455 -- 15,541 58,996 (14,206)(K) 44,790
Management and other
expenses................. (25,470) -- (3,735) (29,205) 2,086(K) (27,119)
--------- -------- -------- --------- -------- ---------
Income from service company
business................. 17,985 -- 11,806 29,791 (12,120) 17,671
--------- -------- -------- --------- -------- ---------
General and administrative
expense.................. (13,112) -- (1,152) (14,264) 1,152(K) (13,112)
Interest expense........... (140,094) (18,477)(G) (84,695) (243,266) 43,267(L) (199,999)
Interest income............ 62,721 (1,519)(H) 12,595 73,797 (997)(K)
2,465(M) 75,265
Equity in earnings (losses)
of unconsolidated real
estate partnerships...... (4,467) -- (8,827) (13,294) 1,299(K) (11,995)
Equity in earnings (losses)
of unconsolidated
subsidiaries............. (2,818) -- -- (2,818) (24,456)(N) (27,274)(P)
Minority interest in other
entities................. (900) -- 4,782 3,882 (3,278)(J) 604
Amortization of
intangibles.............. (5,860) -- (14,134) (19,994) 14,134(K) (5,860)
--------- -------- -------- --------- -------- ---------
Income from operations..... 85,497 5,611 (62,425) 28,683 9,611 38,294
Gain (loss) on disposition
of properties............ (1,785) -- (600) (2,385) 600 (1,785)
Gain (loss) on
extinguishment of debt... -- -- 1,378 1,378 (1,378) --
--------- -------- -------- --------- -------- ---------
Income (loss) before
extraordinary item and
minority interest in
operating partnership.... 83,712 5,611 (61,647) 27,676 8,833 36,509
Extraordinary item......... -- -- (7,883) (7,883) 7,883 --
--------- -------- -------- --------- -------- ---------
Income (loss) before
minority interest in
operating partnership.... 83,712 5,611 (69,530) 19,793 16,716 36,509
Minority interest in
operating partnership.... (2,753) (8,812)(I) 8,001 (3,564) (2,054)(I) (5,618)
--------- -------- -------- --------- -------- ---------
Net income (loss).......... $ 80,959 $ (3,201) $(61,529) $ 16,229 $ 14,662 $ 30,891
========= ======== ======== ========= ======== =========
Net income allocable to
preferred stockholders... $ 56,885 $ 56,885
========= =========
Net income (loss) allocable
to common stockholders... $ 24,074 $ (25,994)
========= =========
Basis earnings (loss) per
common share............. $ 0.39 $ (0.42)
========= =========
Diluted earnings (loss) per
common share............. $ 0.38 $ (0.42)
========= =========
Weighted average common
shares outstanding....... 62,242 62,242
========= =========
Weighted average common
shares and common share
equivalents
outstanding.............. 63,446 62,242(O)
========= =========
</TABLE>
F-4
<PAGE> 106
---------------
(A) Represents AIMCO's audited historical consolidated results of operations
for the year ended December 31, 1999.
(B) Represents adjustments to reflect (i) the Regency Acquisition; and (ii) the
Dreyfuss Acquisitions as if they had occurred on January 1, 1999. These pro
forma operating results are based on historical results of the properties,
except for depreciation, which is based on AIMCO's investment in the
properties.
(C) Represents the adjustment to reflect the Oxford Acquisition as if it had
occurred on January 1, 1999. These adjustments are detailed, as follows:
<TABLE>
<CAPTION>
COMBINED
OXFORD ORFG OXPARC OXFORD PRO FORMA
ENTITIES(I) OPERATIONS(II) ENTITIES(III) OTHER(IV) HISTORICAL ADJUSTMENTS(V)
----------- -------------- ------------- --------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
RENTAL PROPERTY OPERATIONS
Rental and other property
revenues.......................... $ 76,087 $ -- $ -- $ -- $ 76,087 $ 43,185(vi)
Property operating expenses......... (39,932) -- -- -- (39,932) (27,358)(vi)
Owned property management expense... (3,537) -- -- -- (3,537) (1,032)(vi)
Depreciation........................ (7,223) -- -- -- (7,223) (22,990)(vi)
-------- -------- ------- ------- -------- ---------
Income from property operations..... 25,395 -- -- -- 25,395 (8,195)
-------- -------- ------- ------- -------- ---------
SERVICE COMPANY BUSINESS
Management fees and other income.... 9,500 12,109 4,707 -- 26,316 (10,775)(vii)
Management and other expenses....... (13,107) (11,533) (1,236) -- (25,876) 10,775(vii)
11,366(viii)
-------- -------- ------- ------- -------- ---------
Income from service company
business.......................... (3,607) 576 3,471 -- 440 11,366
-------- -------- ------- ------- -------- ---------
General and administrative
expense........................... (1,415) -- -- -- (1,415) 263(ix)
Interest expense.................... (40,501) (124) -- -- (40,625) (11,501)(vi)
(30,380)(x)
(2,189)(xi)
Interest income..................... 913 12 -- 2,824 3,749 8,846(xii)
Equity in losses of unconsolidated
real estate partnerships.......... (295) 768 -- (2,160) (1,687) (7,140)(xiii)
Equity in earnings (losses) of
unconsolidated subsidiaries....... -- -- -- -- -- --
Minority interest................... -- (6) -- -- (6) 4,788(vi)
Amortization........................ -- -- -- -- -- (14,134)(xiv)
-------- -------- ------- ------- -------- ---------
Income from operations.............. (19,510) 1,226 3,471 664 (14,149) (48,276)
Gain (loss) on disposition of
properties........................ (600) -- -- -- (600)
Gain (loss) on extinguishment of
debt.............................. 1,378 -- -- -- 1,378
-------- -------- ------- ------- -------- ---------
Income (loss) before extraordinary
item and tax provision............ (18,732) 1,226 3,471 664 (13,371) (48,276)
Extraordinary item.................. (7,883) -- -- -- (7,883)
-------- -------- ------- ------- -------- ---------
Income (loss) before tax
provision......................... (26,615) 1,226 3,471 664 (21,254) (48,276)
Income tax provision................ 120 -- -- -- 120 (120)(xv)
-------- -------- ------- ------- -------- ---------
Net income (loss)................... $(26,495) $ 1,226 $ 3,471 $ 664 $(21,134) $ (48,396)
======== ======== ======= ======= ======== =========
<CAPTION>
OXFORD
ACQUISITION
-----------
<S> <C>
RENTAL PROPERTY OPERATIONS
Rental and other property
revenues.......................... $119,272
Property operating expenses......... (67,290)
Owned property management expense... (4,569)
Depreciation........................ (30,213)
--------
Income from property operations..... 17,200
--------
SERVICE COMPANY BUSINESS
Management fees and other income.... 15,541
Management and other expenses.......
(3,735)
--------
Income from service company
business.......................... 11,806
--------
General and administrative
expense........................... (1,152)
Interest expense....................
(84,695)
Interest income..................... 12,595
Equity in losses of unconsolidated
real estate partnerships.......... (8,827)
Equity in earnings (losses) of
unconsolidated subsidiaries....... --
Minority interest................... 4,782
Amortization........................ (14,134)
--------
Income from operations.............. (62,425)
Gain (loss) on disposition of
properties........................ (600)
Gain (loss) on extinguishment of
debt.............................. 1,378
--------
Income (loss) before extraordinary
item and tax provision............ (61,647)
Extraordinary item.................. (7,883)
--------
Income (loss) before tax
provision......................... (69,530)
Income tax provision................ --
--------
Net income (loss)................... $(69,530)
========
</TABLE>
--------------------
(i) Represents the combined historical operating results of the Oxford
Entities for the year ended December 31, 1999.
(ii) Represents the historical operating results of ORFG Operations for the
year ended December 31, 1999.
(iii) Represents the historical operating results of the Oxparc Entities for
the year ended December 31, 1999.
(iv) Represents the historical operating results of other assets acquired in
the Oxford Acquisition, primarily related to partnership interests in
the real estate partnerships and notes receivable.
(v) Represents adjustments related to the Oxford Acquisition as follows:
(a) reversal of results of operations for Oxford entities consolidated
in the Combined Oxford financial statements; (b) results of operations
for Oxford entities consolidated in the financial statements of AIMCO;
(c) interest income on additional borrowings for the Oxford
Acquisition; (d) elimination of intercompany costs recorded in the
Combined Oxford financial statements;
F-5
<PAGE> 107
(e) interest income and expense on notes receivable and payable
adjusted to AIMCO's basis; (f) equity in earnings of unconsolidated
real estate partnerships adjusted to AIMCO's basis; and (g)
amortization of intangible assets acquired by AIMCO in the Oxford
Acquisition.
(vi) Represents adjustments to consolidate additional partnerships in
AIMCO's consolidated financial statements. Certain of the former Oxford
entities' financial statements may not be combined or consolidated on a
historical basis under generally accepted accounting principles. As a
result of AIMCO's acquisition of ownership interests in real estate
partnerships from several different Oxford entities, AIMCO owns a
controlling interest in partnerships that were previously accounted for
on the equity method by the Oxford entities. Therefore, additional
partnerships are consolidated by AIMCO.
(vii) Represents adjustment to eliminate the intercompany servicing fee in
the Combined Oxford financial statements.
(viii) Represents adjustment for a reduction in personnel costs of Oxford
pursuant to a restructuring plan, approved by AIMCO senior management,
assuming that the Oxford Acquisition had occurred on January 1, 1999,
and the restructuring plan was completed on January 1, 1999. The
restructuring plan specifically identifies all significant actions to
be taken to complete the restructuring plan, including the reduction of
personnel, job functions, location and date of completion. As a result
of such restructuring plan, the personnel costs of the Oxford entities
will not be incurred by AIMCO.
(ix) Represents the elimination of general and administrative costs related
to assets not purchased from the Oxford entities ($85) and adjustment
to depreciation expense for furniture and equipment on a fair value
basis ($178).
(x) Represents interest expense related to the $279 million borrowed by
AIMCO to complete the Oxford Acquisition, at 10.5%, plus amortization
of the related deferred financing cost.
(xi) Represents adjustment to historical interest expense, based on the fair
value of the notes payable recorded by AIMCO. The adjustment represents
the difference between the fair market interest rate and the
contractual interest rate.
(xii) Represents adjustment to interest income on loans receivable from
affiliates based on the fair value recorded by AIMCO, net of interest
income on the historical basis recorded in the Combined Oxford
financial statements. The adjustment represents the difference between
the fair market interest rate and the contractual interest rate.
(xiii) Represents adjustment to equity in earnings of unconsolidated real
estate partnerships related primarily to the increased depreciation as
a result of the allocation of the purchase price of the Oxford
Acquisition. The increase in depreciation is due to the fair value of
the partnership interest being greater than the historical value of the
partnership interest. This difference is primarily driven by the fair
value of the underlying real estate properties owned by the
partnerships being higher than the historical cost basis that is being
depreciated by the partnership. The increased depreciation expense for
AIMCO's ownership percentage on a fair value basis is included as a
reduction of equity in earnings of unconsolidated real estate
partnerships.
(xiv) Represents incremental amortization of intangible assets, based on
AIMCO's new basis as adjusted by the allocation of the purchase price
of the Oxford Acquisition. The intangible assets are comprised of asset
management and participation management contracts. The asset management
contracts are amortized using the straight-line method over the
estimated life of one year, as the contracts have a one-year term. The
participation management contracts are amortized using the
straight-line method over the estimated life of ten years. The
participation contracts have no termination date and provide for AIMCO
to participate in cash flows from operations and cash flows upon
liquidation of the partnership. A ten year amortization period was used
as the useful life as ten years is the average expected hold period for
the properties.
F-6
<PAGE> 108
(xv) Represents reversal of income tax provision recorded in the Combined
Oxford financial statements.
(D) Represents the effects of AIMCO's acquisition of Oxford immediately after
the Oxford Acquisition. These amounts do not give effect to the Oxford
Reorganization, which includes the transfers of certain assets and
liabilities of Oxford to the combined Unconsolidated Subsidiaries. The
Oxford Reorganization must occur immediately after the Oxford Acquisition
in order for AIMCO to maintain its qualification as a REIT. This column is
included as an intermediate step to assist the reader in understanding the
entire nature of the Oxford Acquisition and related transactions.
(E) Represents adjustments related to the Oxford Reorganization, whereby,
following the Oxford Acquisition, AIMCO contributed or sold to the combined
Unconsolidated Subsidiaries certain assets and liabilities of Oxford,
primarily asset management and cash flow participation contracts and
related working capital assets and liabilities related to Oxford's asset
management operations. The adjustments reflect the transfer of assets
valued at AIMCO's new basis resulting from the allocation of the purchase
price of Oxford. AIMCO received non-voting preferred stock and a $29
million note payable as consideration in exchange for the net assets
contributed or sold.
(F) Represents adjustment to reflect (i) the Regency Acquisition and (ii) the
Dreyfuss Acquisitions as if they had occurred on January 1, 1999. These pro
forma operating results are based on historical results of the properties,
except for depreciation, which is based on AIMCO's investment in the
properties.
(G) Represents interest expense adjustment related to the assumption of
mortgage debt in connection with the Regency Acquisition and the Dreyfuss
Acquisitions.
(H) Represents adjustments to interest income related to the forfeiture of cash
in connection with the Regency Acquisition and the Dreyfuss Acquisitions.
(I) Represents adjustments to Minority Interest in Operating Partnership
assuming the Regency Acquisition, the Dreyfuss Acquisitions, and the Oxford
Acquisition had occurred as of January 1, 1999. On a pro forma basis, as of
December 31, 1999, the minority interest percentage is approximately 12.3%.
(J) Represents results of operations from certain consolidated Oxford entities
that were contributed to the Unconsolidated Subsidiaries.
(K) Represents management income and expense associated with certain assets and
liabilities contributed to the Unconsolidated Subsidiaries, primarily
related to the asset management operations, cashflow participations, notes
receivable, and equity in earnings of unconsolidated partnerships of
Oxford.
(L) Represents the following: (i) interest expense from certain consolidated
Oxford entities that were contributed to the Unconsolidated Subsidiaries of
$23,784; (ii) interest expense of $5,227 on $48,000 of third party
financing contributed by AIMCO to the Unconsolidated Subsidiaries in
connection with the Oxford Reorganization; and (iii) interest expense on
certain liabilities that were contributed to the Unconsolidated
Subsidiaries of $14,256.
(M) Represents interest income earned at 8.5% on notes payable of $29 million
to AIMCO issued as consideration for certain assets sold by AIMCO to the
Unconsolidated Subsidiaries.
(N) Represents adjustment to AIMCO's equity in income (loss) of the
Unconsolidated Subsidiaries as a result of the Oxford Acquisition and the
contribution and sale of certain assets and liabilities to the
Unconsolidated Subsidiaries.
(O) On a pro forma basis, there is a net loss allocable to common stockholders.
As a result, there are no common stock equivalents included for the
computation of diluted earnings (loss) per common share as they would be
antidilutive.
F-7
<PAGE> 109
(P) The combined Pro Forma Statement of Operations (Pre-Merger) of the
Unconsolidated Subsidiaries for the year ended December 31, 1999 is
presented below, which reflects the effects of the Oxford Acquisition and
the Oxford Reorganization as if these transactions had occurred as of
January 1, 1999.
COMBINED UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS (PRE-MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED
UNCONSOLIDATED
SUBSIDIARIES OXFORD
HISTORICAL(I) REORGANIZATION(II) PRO-FORMA
-------------- ------------------ ---------
<S> <C> <C> <C>
RENTAL PROPERTY OPERATIONS
Rental and other property revenues................... $ 4,064 $ 80,823 $ 84,887
Property operating expenses.......................... (1,524) (50,342) (51,866)
Owned property management expense.................... -- (3,191) (3,191)
Depreciation......................................... (1,161) (15,435) (16,596)
-------- -------- --------
Income from property operations...................... 1,379 11,855 13,234
-------- -------- --------
SERVICE COMPANY BUSINESS
Management fees and other income..................... 140,666 14,206 154,872
Management and other expenses........................ (77,753) (2,086) (79,839)
-------- -------- --------
Income from service company business................. 62,913 12,120 75,033
-------- -------- --------
General and administrative expense................... (24,162) (1,152) (25,314)
Interest expense..................................... (8,123) (43,267)
(2,465)(iii) (53,855)
Interest income...................................... 2,776 997 3,773
Equity in losses of unconsolidated real estate
partnerships....................................... (1,665) (1,299) (2,964)
Minority interest.................................... -- 3,278 3,278
Depreciation and Amortization........................ (31,915) (14,134) (46,049)
-------- -------- --------
Income from operations............................... 1,203 (34,067) (32,864)
Gain (loss) on disposition of properties............. 1,051 (600) 451
Gain (loss) on extinguishment of debt................ -- 1,378 1,378
-------- -------- --------
Income (loss) before extraordinary item and tax
provision.......................................... 2,254 (33,289) (31,035)
Extraordinary item................................... -- (7,883) (7,883)
-------- -------- --------
Income (loss) before tax provision................... 2,254 (41,172) (38,918)
Income tax provision................................. (927) 16,469(iv) 15,542
-------- -------- --------
Net income (loss).................................... $ 1,327 $(24,703) $(23,376)
======== ======== ========
Income (loss) allocable to preferred stock........... $ 1,314 $(24,456) $(23,142)
======== ======== ========
Income (loss) allocable to common stock.............. $ 13 $ (247) $ (234)
======== ======== ========
</TABLE>
---------------
(i) Represents the combined historical operating results of the Unconsolidated
Subsidiaries for the year ended December 31, 1999.
(ii) Represents adjustments related to the Oxford Reorganization, whereby,
following the Oxford Acquisition, AIMCO contributed or sold to the combined
Unconsolidated Subsidiaries certain assets and liabilities of Oxford,
primarily asset management and cash flow participation contracts and
related working capital assets and liabilities related to Oxford's asset
management operations. The adjustments reflect the transfer of assets
valued at AIMCO's new basis resulting from the allocation of the purchase
price of Oxford. AIMCO received non-voting preferred stock and a $29
million note payable as consideration in exchange for the net assets
contributed or sold.
(iii)Represents interest expense at 8.5% on notes payable of $29 million to
AIMCO issued as consideration for certain assets sold by AIMCO to the
Unconsolidated Subsidiaries.
(iv) Represents the estimated Federal and state tax provisions, which are
calculated on the operating results of the Unconsolidated Subsidiaries.
F-8
<PAGE> 110
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS (PRE-MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS
-----------------------------------------------------------------------
AIMCO BEFORE
AIMCO OXFORD OXFORD OXFORD PRO FORMA
HISTORICAL(A) ADJUSTMENTS(B) ACQUISITION(C) REORGANIZATION(D) REORGANIZATION(E) TOTAL
------------- -------------- -------------- ----------------- ----------------- ----------
<S> <C> <C> <C> <C> <C> <C>
RENTAL PROPERTY OPERATIONS
Rental and other property
revenues................ $ 753,463 $ 6,903(F) $ 92,935 $ 853,301 $(61,163)(I) $ 792,138
Property operating
expenses................ (302,435) (2,634)(F) (49,528) (354,597) 35,887(I) (318,710)
Owned property management
expense................. (9,713) (287)(F) (3,651) (13,651) 2,479(I) (11,172)
Depreciation.............. (223,128) (1,121)(F) (20,964) (245,213) 11,164(I) (234,049)
--------- -------- -------- --------- -------- ---------
Income from property
operations.............. 218,187 2,861 18,792 239,840 (11,633) 228,207
--------- -------- -------- --------- -------- ---------
SERVICE COMPANY BUSINESS
Management fees and other
income.................. 36,865 -- 9,629 46,494 (9,432)(J) 37,062
Management and other
expenses................ (23,603) -- (2,762) (26,365) 1,169(J) (25,196)
--------- -------- -------- --------- -------- ---------
Income from service
company business........ 13,262 -- 6,867 20,129 (8,263) 11,866
--------- -------- -------- --------- -------- ---------
General and administrative
expense................. (9,609) -- (1,101) (10,710) 1,121(J) (9,589)
Interest expense.......... (190,459) (2,055)(G) (62,545) (255,059) 32,378(K) (222,681)
Interest income........... 47,352 -- 16,426 63,778 (7,984)(J)
1,849(L) 57,643
Equity in earnings
(losses) of
unconsolidated real
estate partnerships..... (4,489) -- (3,222) (7,711) 625(J) (7,086)
Equity in earnings
(losses) of
unconsolidated
subsidiaries............ 2,538 -- -- 2,538 (7,015)(M) (4,477)(N)
Minority interest in other
entities................ (10,977) -- 2,635 (8,342) (1,801)(I) (10,143)
Amortization of
intangibles............. (4,968) -- (4,580) (9,548) 4,985(J) (4,563)
--------- -------- -------- --------- -------- ---------
Income from operations.... 60,837 806 (26,728) 34,915 4,262 39,177
Gain (loss) on disposition
of properties........... 14,234 -- 35 14,269 (35) 14,234
Gain (loss) on
extinguishment of
debt.................... -- -- (568) (568) 568 --
--------- -------- -------- --------- -------- ---------
Income (loss) before
minority interest in
operating partnership... 75,071 806 (27,261) 48,616 4,795 53,411
Minority interest in
operating partnership... (7,131) (781)(H) 2,388 (5,524) (502)(H) (6,026)
--------- -------- -------- --------- -------- ---------
Net income (loss)......... $ 67,940 $ 25 $(24,873) $ 43,092 $ 4,293 $ 47,385
========= ======== ======== ========= ======== =========
Net income allocable to
preferred
stockholders............ $ 44,843 $ 44,843
========= =========
Net income allocable to
common stockholders..... $ 23,097 $ 2,542
========= =========
Basis earnings per common
share................... $ 0.35 0.04
========= =========
Diluted earnings per
common share............ $ 0.34 $ 0.04
========= =========
Weighted average common
shares outstanding...... 66,641 66,641
========= =========
Weighted average common
shares and common share
equivalents
outstanding............. 68,478 68,478
========= =========
</TABLE>
---------------
(A) Represents AIMCO's unaudited historical condensed consolidated results of
operations for the nine months ended September 30, 2000.
F-9
<PAGE> 111
(B) Represents adjustment to reflect the 2000 Dreyfuss Acquisition as if it had
occurred on January 1, 1999. These pro forma operating results are based on
historical results of the properties, except for depreciation, which is
based on AIMCO's investment in the properties.
(C) Represents the adjustment to reflect the Oxford Acquisition as if it had
occurred on January 1, 1999. These adjustments are detailed as follows:
<TABLE>
<CAPTION>
COMBINED
OXFORD ORFG OXPARC OXFORD PRO FORMA
ENTITIES(I) OPERATIONS(II) ENTITIES(III) OTHER(IV) HISTORICAL ADJUSTMENTS(V)
----------- -------------- ------------- --------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
RENTAL PROPERTY OPERATIONS
Rental and other property
revenues..................... $ 52,667 $ -- $ -- $ -- $ 52,667 $ 40,268(vi)
Property operating expenses.... (25,777) -- -- -- (25,777) (23,751)(vi)
Owned property management
expense...................... (2,423) -- -- -- (2,423) (1,228)(vi)
Depreciation................... (4,901) -- -- -- (4,901) (16,063)(vi)
-------- ------- ------ ------- -------- --------
Income from property
operations................... 19,566 -- -- -- 19,566 (774)
-------- ------- ------ ------- -------- --------
SERVICE COMPANY BUSINESS
Management fees and other
income....................... 5,900 9,044 2,484 -- 17,428 1,747(vii)
(9,546)(viii)
Management and other
expenses..................... (9,581) (7,324) (684) -- (17,589) 5,281(ix)
9,546(viii)
-------- ------- ------ ------- -------- --------
Income from service company
business..................... (3,681) 1,720 1,800 -- (161) 7,028
-------- ------- ------ ------- -------- --------
General and administrative
expense...................... (1,136) -- -- -- (1,136) 35(x)
Interest expense............... (25,905) (75) -- -- (25,980) (13,774)(vi)
(21,890)(xi)
(901)(xii)
Interest income................ 603 13 -- 2,316 2,932 13,494(xiii)
Equity in losses of
unconsolidated real estate
partnerships................. 181 647 -- (1,699) (871) (2,351)(xiv)
Equity in earnings (losses) of
unconsolidated
subsidiaries................. -- -- -- -- -- --
Minority interest.............. -- (6) -- -- (6) 2,641(vi)
Amortization................... -- -- -- -- -- (4,580)(xv)
-------- ------- ------ ------- -------- --------
Income from operations......... (10,372) 2,299 1,800 617 (5,656) (21,072)
Gain (loss) on disposition of
properties................... 35 -- -- -- 35 --
Gain (loss) on extinguishment
of debt...................... (568) -- -- -- (568) --
-------- ------- ------ ------- -------- --------
Income (loss) before tax
provision.................... (10,905) 2,299 1,800 617 (6,189) (21,072)
Income tax provision........... (1,576) -- -- -- (1,576) 1,576(xvi)
-------- ------- ------ ------- -------- --------
Net income (loss).............. $(12,481) $ 2,299 $1,800 $ 617 $ (7,765) $(19,496)
======== ======= ====== ======= ======== ========
<CAPTION>
OXFORD
ACQUISITION
-----------
<S> <C>
RENTAL PROPERTY OPERATIONS
Rental and other property
revenues..................... $ 92,935
Property operating expenses.... (49,528)
Owned property management
expense...................... (3,651)
Depreciation................... (20,964)
--------
Income from property
operations................... 18,792
--------
SERVICE COMPANY BUSINESS
Management fees and other
income.......................
9,629
Management and other
expenses.....................
(2,762)
--------
Income from service company
business..................... 6,867
--------
General and administrative
expense...................... (1,101)
Interest expense...............
(62,545)
Interest income................ 16,426
Equity in losses of
unconsolidated real estate
partnerships................. (3,222)
Equity in earnings (losses) of
unconsolidated
subsidiaries................. --
Minority interest.............. 2,635
Amortization................... (4,580)
--------
Income from operations......... (26,728)
Gain (loss) on disposition of
properties................... 35
Gain (loss) on extinguishment
of debt...................... (568)
--------
Income (loss) before tax
provision.................... (27,261)
Income tax provision........... --
--------
Net income (loss).............. $(27,261)
========
</TABLE>
---------------
(i) Represents the unaudited combined historical operating results of the
Oxford Entities for the eight months ended August 31, 2000.
(ii) Represents the unaudited historical operating results of ORFG
Operations for the eight months ended August 31, 2000.
(iii) Represents the unaudited historical operating results of the Oxparc
Entities for the eight months ended August 31, 2000.
(iv) Represents the unaudited historical operating results for the eight
months ended August 31, 2000 of other assets acquired in the Oxford
Acquisition, primarily related to partnership interests in the real
estate partnerships and notes receivable.
F-10
<PAGE> 112
(v) Represents adjustments related to the Oxford Acquisition as follows:
(a) reversal of results of operations for Oxford entities consolidated
in the Combined Oxford financial statements; (b) results of operations
for Oxford entities consolidated in the financial statements of AIMCO;
(c) interest income on additional borrowings for the Oxford
Acquisition; (d) elimination of intercompany costs recorded in the
Combined Oxford financial statements; (e) interest income and expense
on notes receivable and payable adjusted to AIMCO's basis; (f) equity
in earnings of unconsolidated real estate partnerships adjusted to
AIMCO's basis; and (g) amortization of intangible assets acquired by
AIMCO in the Oxford Acquisition.
(vi) Represents adjustments to consolidate additional partnerships in
AIMCO's consolidated financial statements. Certain of the former Oxford
entities' financial statements may not be combined or consolidated on a
historical basis under generally accepted accounting principles. As a
result of AIMCO's acquisition of ownership interests in real estate
partnerships from several different Oxford entities, AIMCO owns a
controlling interest in partnerships that were previously accounted for
on the equity method by the Oxford entities. Therefore, additional
partnerships are consolidated by AIMCO.
(vii) Represents adjustment from eight months of management fees and other
income recorded in the Combined Oxford financial statements to nine
months recorded in the pro forma financial statements of AIMCO, net of
amount recorded by AIMCO subsequent to the Oxford Acquisition.
(viii) Represents adjustment to eliminate the intercompany servicing fee in
the Combined Oxford financial statements.
(ix) Represents adjustment for a reduction in personnel costs of Oxford
pursuant to a restructuring plan, approved by AIMCO senior management,
assuming that the Oxford Acquisition had occurred on January 1, 1999,
and the restructuring plan was completed on January 1, 1999. The
restructuring plan specifically identifies all significant actions to
be taken to complete the restructuring plan, including the reduction of
personnel, job functions, location and date of completion. As a result
of such restructuring plan, the personnel costs of the Oxford entities
will not be incurred by AIMCO.
(x) Represents (i) $122 for adjustment from eight months of expense to nine
months, net of the amount recorded by AIMCO subsequent to the Oxford
Acquisition; net of (ii) the elimination of general and administrative
expenses related to assets not purchased from the Oxford entities ($64)
and adjustment to depreciation expense for furniture and equipment on a
fair value basis ($93).
(xi) Represents interest expense related to the $279 million borrowed by
AIMCO to complete the Oxford Acquisition, at 10.5%, plus amortization
of the related deferred financing cost.
(xii) Represents adjustment to historical interest expense, based on the fair
value of the notes payable recorded by AIMCO. The adjustment represents
the difference between the fair market interest rate and the
contractual interest rate.
(xiii) Represents adjustment to interest income on loans receivable from
affiliates based on the fair value recorded by AIMCO, net of interest
income on the historical basis recorded in the Combined Oxford
financial statements. The adjustment represents the difference between
the fair market interest rate and the contractual interest rate.
(xiv) Represents adjustment to equity in earnings of unconsolidated real
estate partnerships related primarily to the increased depreciation as
a result of the allocation of the purchase price of the Oxford
Acquisition. The increase in depreciation is due to the fair value of
the partnership interest being greater than the historical value of the
partnership interest. This difference is primarily driven by the fair
value of the underlying real estate properties owned by the
partnerships being higher than the historical cost basis that is being
depreciated by the partnership. The increased depreciation expense for
AIMCO's ownership percentage on a fair
F-11
<PAGE> 113
value basis is included as a reduction of equity in earnings of
unconsolidated real estate partnerships.
(xv) Represents incremental amortization of intangible assets, based on
AIMCO's new basis as adjusted by the allocation of the purchase price
of the Oxford Acquisition. The intangible assets are comprised of asset
management and participation management contracts. The asset management
contracts are amortized using the straight-line method over the
estimated life of one year, as the contracts have a one-year term. The
participation management contracts are amortized using the
straight-line method over the estimated life of ten years. The
participation contracts have no termination date and provide for AIMCO
to participate in cash flows from operations and cash flows upon
liquidation of the partnership. A ten year amortization period was used
as the useful live as ten years is the average expected hold period for
the properties.
(xvi) Represents reversal of income tax provision recorded in the Combined
Oxford financial statements.
(D) Represents the effects of AIMCO's acquisition of Oxford immediately after
the Oxford Acquisition. These amounts do not give effect to the Oxford
Reorganization, which includes the transfers of certain assets and
liabilities of Oxford to the combined Unconsolidated Subsidiaries. The
Oxford Reorganization must occur immediately after the Oxford Acquisition
in order for AIMCO to maintain its qualification as a REIT. This column is
included as an intermediate step to assist the reader in understanding the
entire nature of the Oxford Acquisition and related transactions.
(E) Represents adjustments related to the Oxford Reorganization, whereby,
following the Oxford Acquisition, AIMCO contributed or sold to the combined
Unconsolidated Subsidiaries certain assets and liabilities of Oxford,
primarily asset management and cash flow participation contracts and
related working capital assets and liabilities related to Oxford's asset
management operations. The adjustments reflect the transfer of assets
valued at AIMCO's new basis resulting from the allocation of the purchase
price of Oxford. AIMCO received non-voting preferred stock and a $29
million note payable as consideration in exchange for the net assets
contributed or sold.
(F) Represent adjustments to reflect the 2000 Dreyfuss Acquisition as if it had
occurred on January 1, 1999. These pro-forma operating results are based on
historical results of the properties, except for depreciation, which is
based on AIMCO's investment in the properties.
(G) Represents interest expense adjustment related to the assumption of
mortgage debt in connection with the 2000 Dreyfuss Acquisition.
(H) Represents adjustments to Minority Interest in Operating Partnership
assuming the Oxford Acquisition and the 2000 Dreyfuss Acquisition had
occurred as of January 1, 1999. On a pro forma basis, as of September 30,
2000, the minority interest percentage is approximately 10.5%.
(I) Represents results of operations from certain consolidated Oxford entities
that were contributed to the Unconsolidated Subsidiaries.
(J) Represents management income and expense associated with certain assets and
liabilities contributed to the Unconsolidated Subsidiaries, primarily
related to the asset management operations, cashflow participations, ,
notes receivable, and equity in earnings of unconsolidated partnerships of
Oxford.
(K) Represents the following: (i) interest expense from certain consolidated
Oxford entities that were contributed to the Unconsolidated Subsidiaries of
$17,837; (ii) interest expense of $3,920 on $48,000 of third party
financing contributed by AIMCO to the Unconsolidated Subsidiaries in
connection with the Oxford Reorganization; and (iii) interest expense on
certain liabilities that were contributed to the Unconsolidated
Subsidiaries of $10,621.
(L) Represents interest income earned at 8.5% on notes payable of $29 million
to AIMCO issued as consideration for certain assets sold by AIMCO to the
Unconsolidated Subsidiaries.
(M) Represents adjustment to AIMCO's equity in income (loss) of the
Unconsolidated Subsidiaries as a result of the Oxford Acquisition and the
contribution and sale of certain assets and liabilities to the
Unconsolidated Subsidiaries.
F-12
<PAGE> 114
(N) The combined Pro Forma Statement of Operations (Pre-Merger) of the
Unconsolidated Subsidiaries for the nine months ended September 30, 2000 is
presented below, which reflects the effects of the Oxford Acquisition and
the Oxford Reorganization as if these transactions had occurred as of
January 1, 1999.
COMBINED UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(PRE-MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED
UNCONSOLIDATED
SUBSIDIARIES OXFORD
HISTORICAL(I) REORGANIZATION(II) PRO-FORMA
-------------- ------------------ ---------
<S> <C> <C> <C>
RENTAL PROPERTY OPERATIONS
Rental and other property revenues................... $ -- $ 61,163 $ 61,163
Property operating expenses.......................... -- (35,887) (35,887)
Owned property management expense.................... -- (2,479) (2,479)
Depreciation......................................... -- (11,164) (11,164)
-------- -------- --------
Income from property operations...................... -- 11,633 11,633
-------- -------- --------
SERVICE COMPANY BUSINESS
Management fees and other income..................... 102,392 9,432 111,824
Management and other expenses........................ (46,198) (1,169) (47,367)
-------- -------- --------
Income from service company business................. 56,194 8,263 64,457
-------- -------- --------
General and administrative expense................... (15,057) (1,121) (16,178)
Interest expense..................................... (7,311) (32,378)
(1,849)(iii) (41,538)
Interest income...................................... 4,529 7,984 12,513
Equity in losses of unconsolidated real estate
partnerships....................................... (13,654) (625) (14,279)
Minority interest.................................... -- 1,801 1,801
Depreciation and Amortization........................ (18,967) (4,985) (23,952)
-------- -------- --------
Income from operations............................... 5,734 (11,277) (5,543)
Gain (loss) on disposition of properties............. 5,760 35 5,795
Gain (loss) on extinguishment of debt................ -- (568) (568)
-------- -------- --------
Income (loss) before tax provision................... 11,494 (11,810) (316)
Income tax provision................................. (2,562) 4,724(iv) 2,162
-------- -------- --------
Net income (loss).................................... $ 8,932 $ (7,086) $ 1,846
======== ======== ========
Income (loss) allocable to preferred stock........... $ 8,843 $ (7,015) $ 1,828
======== ======== ========
Income (loss) allocable to common stock.............. $ 89 $ (71) $ 18
======== ======== ========
</TABLE>
---------------
(i) Represents the unaudited combined historical operating results of the
Unconsolidated Subsidiaries for the nine months ended September 30,
2000.
(ii) Represents adjustments related to the Oxford Reorganization, whereby,
following the Oxford Acquisition, AIMCO contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of
Oxford, primarily asset management and cash flow participation
contracts and related working capital assets and liabilities related to
Oxford's asset management operations. The adjustments reflect the
transfer of assets valued at AIMCO's new basis resulting from the
allocation of the purchase price of Oxford. AIMCO received non-voting
preferred stock and a $29 million note payable as consideration in
exchange for the net assets contributed or sold.
(iii) Represents interest expense at 8.5% on notes payable of $29 million to
AIMCO issued as consideration for certain assets sold by AIMCO to the
Unconsolidated Subsidiaries.
(iv) Represents the estimated Federal and state tax provisions, which are
calculated on the operating results of the Unconsolidated Subsidiaries.
F-13
<PAGE> 115
PRO FORMA FINANCIAL INFORMATION OF AIMCO (MERGER)
The following Pro Forma Condensed Consolidated Balance Sheet (Merger) of
AIMCO as of September 30, 2000 has been prepared as if the merger had occurred
as of September 30, 2000. The following Pro Forma Condensed Consolidated
Statements of Operations (Merger) of AIMCO for the year ended December 31, 1999
and the nine months ended September 30, 2000 have been prepared as if each of
the following transactions had occurred as of January 1, 1999: (i) OTEF's
redemption of the status quo BACs and payment of the special distribution; (ii)
the exercise by AIMCO of 652,125 options to acquire BACs; (iii) the merger; and
(iv) each of the transactions reflected in the Pro Forma Consolidated Statements
of Operations (Pre-Merger) of AIMCO for the year ended December 31, 1999 and the
nine months ended September 30, 2000.
The following Pro Forma Financial Information (Merger) is based, in part,
on the Pro Forma Financial Information (Pre-Merger) included elsewhere in this
Prospectus/Information Statement. The Pro Forma Financial Information
(Pre-Merger) gives effect to all material transactions of AIMCO prior to the
merger and as of the date of this Prospectus/Information Statement, including
the Oxford Acquisition, the Regency Acquisition, and the Dreyfuss Acquisitions.
See "Pro Forma Financial Information (Pre-Merger)." The Pro Forma Financial
Information (Merger) is also based, in part, on the following historical
financial statements, which are incorporated by reference in this Prospectus/
Information Statement: (i) the Consolidated Financial Statements of AIMCO for
the year ended December 31, 1999 and the nine months ended September 30, 2000;
and (ii) the Consolidated Financial Statements of OTEF for the year ended
December 31, 1999 and the nine months ended September 30, 2000. The Pro Forma
Financial Information (Merger) should be read in conjunction with such financial
statements and the notes thereto.
The unaudited Pro Forma Financial Information (Merger) has been prepared
using the purchase method of accounting whereby the assets and liabilities of
OTEF are adjusted to estimated fair market value, based upon preliminary
estimates, which are subject to change as additional information is obtained.
The allocations of purchase costs are subject to final determination based upon
estimates and other evaluations of fair market value. Therefore, the allocations
reflected in the following unaudited Pro Forma Financial Information (Merger)
may differ from the amounts ultimately determined.
The unaudited Pro Forma Financial Information (Merger) is presented for
informational purposes only and is not necessarily indicative of the financial
position or results of operations of AIMCO that would have occurred if such
transactions had been completed on the dates indicated, nor does it purport to
be indicative of future financial positions or results of operations. In the
opinion of AIMCO's management, all material adjustments necessary to reflect the
effects of these transactions have been made. The unaudited Pro Forma
Consolidated Statement of Operations (Merger) for the nine months ended
September 30, 2000 is not necessarily indicative of the results of operations to
be expected for the year ending December 31, 2000.
F-14
<PAGE> 116
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (MERGER)
AS OF SEPTEMBER 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS
----------------------------------------------------
OPTION EXERCISE, MERGER
AIMCO OTEF REDEMPTION MERGER PRO FORMA
HISTORICAL(A) HISTORICAL(B) AND DISTRIBUTION(C) ADJUSTMENTS(D) TOTAL
------------- ------------- ------------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Real estate, net of accumulated
depreciation.............................. $5,471,364 $ -- $ -- $ -- $5,471,364
Investments in unconsolidated real estate
partnerships.............................. 798,158 -- -- -- 798,158
Investments in unconsolidated
subsidiaries.............................. 91,358 -- -- -- 91,358
Notes receivable from unconsolidated real
estate partnerships....................... 145,587 -- -- -- 145,587
Notes receivable from and advances to
unconsolidated subsidiaries............... 213,991 -- -- -- 213,991
Investments in bonds and notes
receivable.............................. -- 288,362 -- (5,084)
(190,362)(G) 92,916
Cash and cash equivalents................. 106,544 41,358 (40,082)(C) --
15,573(E)
(15,573)(F) 107,820
Restricted cash........................... 113,545 -- -- -- 113,545
Other assets.............................. 216,237 4,452 15,573(F) (1,427)
(4,800)
(2,172)
(15,573) 212,290
---------- -------- -------- --------- ----------
$7,156,784 $334,172 $(24,509) $(219,418) $7,247,029
========== ======== ======== ========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY/PARTNERS' CAPITAL
Liabilities:
Secured notes payable..................... $2,836,097 $ -- $ -- $ -- $2,836,097
Secured tax-exempt bond financing......... 583,106 -- -- (190,362)(G) 392,744
Unsecured short-term financing............ 406,000 52,229 10,000(C) 2,585 470,814
---------- -------- -------- --------- ----------
Total indebtedness.................. 3,825,203 52,229 10,000 (187,777) 3,699,655
Accounts payable, accrued and other
liabilities............................... 243,286 4,488 -- 5,000 252,774
Resident security deposits and prepaid
rents..................................... 32,899 -- -- -- 32,899
---------- -------- -------- --------- ----------
Total liabilities................... 4,101,388 56,717 10,000 (182,777) 3,985,328
---------- -------- -------- --------- ----------
Commitments and contingencies............... -- -- -- -- --
Mandatorily redeemable convertible preferred
securities................................ 35,330 -- -- -- 35,330
Minority interest in other entities......... 194,006 -- -- -- 194,006
Minority interest in Operating
Partnership............................... 297,631 -- -- -- 297,631
Stockholders' equity/Partners' capital:
Preferred Stock........................... 837,717 -- -- 100,000 937,717
Class A Common Stock ($.01 par value)..... 712 -- -- 22 734
General Partners' interests............... -- (1,670) -- 1,670 --
Limited Partners' interests............... -- 194,002 (50,082)(C) (159,493)
15,573(E) --
Additional paid-in capital................ 2,065,618 -- -- 106,283 2,171,901
Notes receivable on common stock
purchases................................. (44,795) -- -- -- (44,795)
Distributions in excess of earnings......... (330,823) -- -- -- (330,823)
Accumulated other comprehensive income...... -- 85,411 -- (85,411) --
Treasury shares............................. -- (288) -- 288 --
---------- -------- -------- --------- ----------
Total stockholders' equity/partners'
capital........................... 2,528,429 277,455 (34,509) (36,641) 2,734,734
---------- -------- -------- --------- ----------
Total liabilities and stockholders'
equity/ partners' capital......... $7,156,784 $334,172 $(24,509) $(219,418) $7,247,029
========== ======== ======== ========= ==========
</TABLE>
F-15
<PAGE> 117
---------------
(A) Represents the unaudited historical consolidated financial position of
AIMCO as of September 30, 2000.
(B) Represents the unaudited historical consolidated financial position of OTEF
as of September 30, 2000.
(C) Represents the following transactions of OTEF immediately prior to the
merger: (i) the exercise by AIMCO of 652,125 options to acquire BACs; (ii)
the redemption at $860.25 of each outstanding status quo BAC, for a total
of $82; and (iii) the payment of the special distribution of $50,000.
(D) Represents the following adjustments occurring as a result of the merger:
(i) the issuance of $100,000 of Class P Preferred Stock, with a dividend
rate of 9%, as merger consideration to holders of OTEF BAC interests
outstanding as of September 30, 2000 and to the OTEF associate general
partner; (ii) the issuance of 2,405 shares of AIMCO Class A Common Stock,
valued at approximately $106,305 (based on $48.509 per share, which is the
average of the high and low reported sales prices of AIMCO Class A common
stock for the 20 trading-day period beginning on December 4, 2000, the
third full trading day following the first public announcement of the
merger) as merger consideration to holders of OTEF BAC interests
outstanding as of September 30, 2000 and to the OTEF associate general
partner; (iii) the payment of $2,585 to the Oxford principals and the OTEF
non-employee directors as additional consideration for the options to
acquire BACs; (iv) the reclassification of the OTEF options acquired by
AIMCO in the Oxford Acquisition for $4,800, which is considered additional
consideration in connection with the merger; (v) the reclassification of
the fair value assigned to the OTEF general partner interest acquired by
AIMCO in the Oxford Acquisition of $2,172; (vi) the elimination of AIMCO's
investment in OTEF of $15,573, resulting from AIMCO's exercise of options
to acquire BACs; and (vii) the allocation of the purchase price of OTEF
based on the preliminary estimates of relative fair value of the asset and
liabilities of OTEF.
The total purchase price of OTEF is $287,579, as follows:
<TABLE>
<S> <C>
Issuance of Class P Preferred Stock......................... $ 100,000
Issuance of 2,405 shares of AIMCO Class A Common Stock...... 106,305
Reclassification of OTEF options purchased in the Oxford
Acquisition............................................... 4,800
Reclassification of the OTEF general partner interest
acquired by AIMCO in the Oxford Acquisition............... 2,172
Additional consideration paid to the Oxford principals and
the OTEF non-employee directors for the options to acquire
BACs...................................................... 2,585
Assumption of OTEF liabilities, including additional
borrowings by OTEF to pay a portion of the special
distribution.............................................. 66,717
Transaction costs........................................... 5,000
---------
Total............................................. $ 287,579
=========
The purchase price was allocated to the various assets of OTEF to be
acquired in the merger, as follows:
Purchase Price.............................................. $ 287,579
Historical basis of OTEF assets, net of payment of cash by
OTEF for the redemption of the status quo BACs and payment
of the special distribution............................... (294,090)
---------
Reduction to record OTEF's assets at AIMCO's costs as a
result of the merger...................................... $ (6,511)
=========
The reduction was applied to OTEF's assets based on their relative fair
values, as follows:
Reduction in investments in bonds and notes receivable...... $ (5,084)
Reduction in other assets................................... (1,427)
---------
Reduction to record OTEF's assets at AIMCO's costs as a
result of the merger...................................... $ (6,511)
=========
</TABLE>
F-16
<PAGE> 118
<TABLE>
<S> <C>
The reduction in the assets of OTEF results from the excess of the
historical net assets acquired over the consideration given in the
merger. The write-down required by purchase accounting in the pro forma
balance sheet has been applied to all non-current assets of OTEF.
As of September 30, 2000, OTEF's partners' capital (after the redemption
of the status quo BACs, AIMCO's exercise of options to acquire BACs and
the payment of the special distribution) was $242,946, which is detailed
as follows:
General Partners' capital................................... $ (1,670)
Limited Partners' capital (after the redemption of the
status quo BACs and the payment of the special
distribution)............................................. 159,493
Accumulated other comprehensive income...................... 85,411
Treasury shares............................................. (288)
---------
Total partners' capital..................................... $ 242,946
=========
Upon completion of the merger, the entire amount of OTEF partners'
capital is eliminated.
</TABLE>
(E) Represents the receipt of cash by OTEF from the exercise of 652,125 BACs by
AIMCO at an exercise price of $23.88 per BAC.
(F) Represents the exercise of 652,125 BACs by AIMCO at an exercise price of
$23.88 per BAC. AIMCO's investment in OTEF is recorded in Other assets.
(G) Represents the elimination of the investment in bonds with the secured
tax-exempt bond financing on OTEF properties that are consolidated by
AIMCO.
F-17
<PAGE> 119
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS
----------------------------------------------------
PRE-MERGER OTEF MERGER
PRO FORMA OTEF REDEMPTION MERGER PRO FORMA
TOTAL(A) HISTORICAL(B) AND DISTRIBUTION(C) ADJUSTMENTS(D) TOTAL
---------- ------------- ------------------- -------------- ---------
<S> <C> <C> <C> <C> <C>
RENTAL PROPERTY OPERATIONS
Rental and other property
revenues......................... $ 643,778 $ -- $ -- $ -- $ 643,778
Property operating expenses........ (263,389) -- -- -- (263,389)
Owned property management
expense.......................... (19,699) -- -- -- (19,699)
Depreciation....................... (157,696) -- -- -- (157,696)
--------- ------- ----- -------- ---------
Income from property operations.... 202,994 -- -- -- 202,994
--------- ------- ----- -------- ---------
SERVICE COMPANY BUSINESS
Management fees and other income... 44,790 -- -- -- 44,790
Management and other expenses...... (27,119) -- -- -- (27,119)
--------- ------- ----- -------- ---------
Income from service company
business......................... 17,671 -- -- -- 17,671
--------- ------- ----- -------- ---------
General and administrative
expense.......................... (13,112) (2,512) (15,624)
Interest expense................... (199,999) (2,121) (783) 13,200(E)
(202)(F) (189,905)
Interest income.................... 75,265 24,607 -- 508(G)
-- (13,200)(E) 87,180
Equity in losses of
unconsolidated real estate
partnerships................... (11,995) -- -- -- (11,995)
Equity in losses of unconsolidated
subsidiaries..................... (27,274) -- -- -- (27,274)
Minority interest in other
entities......................... 604 -- -- -- 604
Amortization of intangibles........ (5,860) -- -- -- (5,860)
--------- ------- ----- -------- ---------
Income from operations............. 38,294 19,974 (783) 306 57,791
Gain (loss) on disposition of
properties....................... (1,785) -- -- -- (1,785)
--------- ------- ----- -------- ---------
Income before minority interest in
operating partnership............ 36,509 19,974 (783) 306 56,006
Minority interest in operating
partnership...................... (5,618) -- -- (2,433)(H) (8,051)
--------- ------- ----- -------- ---------
Net income......................... $ 30,891 $19,974 $(783) $ (2,127) $ 47,955
========= ======= ===== ======== =========
Net income allocable to preferred
stockholders..................... $ 56,885 $ 9,000(I) $ 65,885
========= ======== =========
Net income (loss) allocable to
common stockholders.............. $ (25,994) $ (17,930)
========= =========
Basis earnings (loss) per common
share............................ $ (0.42) $ (0.28)
========= =========
Diluted earnings (loss) per common
share............................ $ (0.42) $ (0.28)
========= =========
Weighted average common shares
outstanding...................... 62,242 2,191(J) 64,433
========= ======== =========
Weighted average common shares and
common share equivalents
outstanding...................... 62,242 2,191(J) 64,433(K)
========= ======== =========
</TABLE>
F-18
<PAGE> 120
---------------
(A) Represents AIMCO's pro forma consolidated results of operations for the
year ended December 31, 1999, which gives effect to (i) the Regency
Acquisition; (ii) the Dreyfuss Acquisitions; and (iii) the Oxford
Acquisition. See "Pro Forma Financial Information (Pre-Merger)."
(B) Represents the audited historical consolidated results of operations of
OTEF for the year ended December 31, 1999.
(C) Represents additional interest expense due to the additional borrowings by
OTEF of $10,000 to pay a portion of the special distribution.
(D) Represents the following adjustments occurring as a result of the merger:
(i) the amortization of the discount on the bonds and notes receivable;
(ii) the allocation of income to the Class P Preferred Stock issued in
connection with the merger, at a dividend rate of 9%; and (iii) the
issuance of AIMCO Class A Common Stock in connection with the merger.
(E) Represents the elimination of the interest income on the investment in
bonds with the interest expense on the secured tax-exempt bond financing on
OTEF properties that are consolidated by AIMCO.
(F) Represents adjustment for interest expense on additional borrowings for the
additional consideration to the Oxford principals and the OTEF non-employee
directors.
(G) Represents adjustment to amortize the discount on the bonds and notes
receivable purchased from OTEF, using the effective interest method over
the estimated lives of the bonds and notes receivable. The discount on the
bonds is the result of AIMCO purchasing the bonds and notes receivable at a
discount of $5,084. The discount is amortized to interest income based upon
estimated future cash flows and the estimated timing of their receipt.
(H) Represents adjustment to minority interest in the Operating Partnership
assuming the merger had occurred as of January 1, 1999. On a pro forma
basis, as of December 31, 1999, the minority interest percentage is 11.9%.
(I) Represents the allocation of income to the Class P Preferred Stock issued
in connection with the merger, at a dividend rate of 9%.
(J) Represents the number of shares of AIMCO Class A Common Stock to be issued
in connection with the merger.
(K) On pro forma basis, there is a net loss allocable to common stockholders.
As a result, there are no common stock equivalents included for the
computation of diluted earnings (loss) per common share as they would be
antidilutive.
F-19
<PAGE> 121
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS
PRE-MERGER ----------------------------------- MERGER
PRO FORMA OTEF OTEF REDEMPTION MERGER PRO FORMA
TOTAL(A) HISTORICAL(B) AND DISTRIBUTION(C) ADJUSTMENTS(D) TOTAL
---------- ------------- ------------------- -------------- ---------
<S> <C> <C> <C> <C> <C>
RENTAL PROPERTY OPERATIONS
Rental and other property revenues..... $ 792,138 $ -- $ -- $ -- $ 792,138
Property operating expenses............ (318,710) -- -- -- (318,710)
Owned property management
expense.............................. (11,172) -- -- -- (11,172)
Depreciation........................... (234,049) -- -- -- (234,049)
--------- ------- -------- -------- ---------
Income from property operations........ 228,207 -- -- -- 228,207
--------- ------- -------- -------- ---------
SERVICE COMPANY BUSINESS
Management fees and other income....... 37,062 -- -- -- 37,062
Management and other expenses.......... (25,196) -- -- -- (25,196)
--------- ------- -------- -------- ---------
Income from service company business... 11,866 -- -- -- 11,866
--------- ------- -------- -------- ---------
General and administrative expense..... (9,589) (1,939) -- -- (11,528)
Interest expense....................... (222,681) (1,943) (688) 9,900(E)
(178)(F) (215,590)
Interest income........................ 57,643 18,539 -- 381(G)
-- (9,900)(E) 66,663
Equity in losses of unconsolidated real
estate partnerships.................. (7,086) -- -- -- (7,086)
Equity in losses of unconsolidated
subsidiaries......................... (4,477) -- -- -- (4,477)
Minority interest in other entities.... (10,143) -- -- -- (10,143)
Amortization of intangibles............ (4,563) -- -- -- (4,563)
--------- ------- -------- -------- ---------
Income from operations................. 39,177 14,657 (688) 203 53,349
Gain (loss) on disposition of
securities........................... -- 23,499 -- -- 23,499
Gain (loss) on disposition of
properties........................... 14,234 -- -- -- 14,234
--------- ------- -------- -------- ---------
Income (loss) before minority interest
in operating partnership............. 53,411 38,156 (688) 203 91,082
Minority interest in operating
partnership.......................... (6,026) -- -- (3,818)(H) (9,844)
--------- ------- -------- -------- ---------
Net income (loss)...................... $ 47,385 $38,156 $ (688) $ (3,615) $ 81,238
========= ======= ======== ======== =========
Net income allocable to preferred
stockholders......................... $ 44,843 $ 6,750(I) $ 51,593
========= ======== =========
Net income allocable to common
stockholders......................... $ 2,542 $ 29,645
========= =========
Basis earnings per common share........ $ 0.04 $ 0.43
========= =========
Diluted earnings per common share...... $ 0.04 $ 0.42
========= =========
Weighted average common shares
outstanding.......................... 66,641 2,191(J) 68,832
========= ======== =========
Weighted average common shares and
common share equivalents
outstanding.......................... 68,478 2,191(J) 70,669
========= ======== =========
</TABLE>
F-20
<PAGE> 122
---------------
(A) Represents AIMCO's pro forma consolidated results of operations for the
nine months ended September 30, 2000, which gives effect to (i) the 2000
Dreyfuss Acquisition; and (ii) the Oxford Acquisition. See "Pro Forma
Financial Information (Pre-Merger)."
(B) Represents the unaudited historical consolidated results of operations of
OTEF for the nine months ended September 30, 2000.
(C) Represents additional interest expense due to the additional borrowings by
OTEF of $10,000 to pay a portion of the special distribution.
(D) Represents the following adjustments occurring as a result of the merger:
(i) the amortization of the discount on the bonds and notes receivable;
(ii) the elimination of OTEF's historical gain on disposition of
securities; (iii) the allocation of income to the Class P Preferred Stock
issued in connection with the merger, at a dividend rate of 9%; and (iv)
the issuance of AIMCO Class A Common Stock in connection with the merger.
(E) Represents the elimination of the interest income on the investment in
bonds with the interest expense on the secured tax-exempt bond financing on
OTEF properties that are consolidated by AIMCO.
(F) Represents adjustment for interest expense on additional borrowings for the
additional consideration to the Oxford principals and the OTEF non-employee
directors.
(G) Represents adjustment to amortize the discount on the bonds and notes
receivable purchased from OTEF, using the effective interest method over
the estimated lives of the bonds and notes receivable. The discount on the
bonds is the result of AIMCO purchasing the bonds and notes receivable at a
discount of $5,084 to OTEF's carrying value. The discount is amortized to
interest income based upon estimated future cash flows and the estimated
timing of their receipt.
(H) Represents adjustment to minority interest in the Operating Partnership
assuming the merger had occurred as of January 1, 1999. On a pro forma
basis, as of September 30, 2000, the minority interest percentage is 10.2%.
(I) Represents the allocation of income to the Class P Preferred Stock issued
in connection with the merger, at a dividend rate of 9%.
(J) Represents the number of shares of AIMCO Class A Common Stock to be issued
in connection with the merger.
F-21
<PAGE> 123
ANNEX A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of November 29, 2000 (this
"Agreement"), is by and among APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a
Maryland corporation ("AIMCO"), AIMCO PROPERTIES, L.P., a Delaware limited
partnership ("AIMCO OP"), AIMCO/OTEF, LLC, a Maryland limited liability company
and subsidiary of AIMCO OP ("AIMCO/OTEF"), and OXFORD TAX EXEMPT FUND II LIMITED
PARTNERSHIP, a Maryland limited partnership ("OTEF").
WHEREAS, OTEF is governed by a Third Amended and Restated Agreement of
Limited Partnership, dated as of June 26, 1995 (the "OTEF Partnership
Agreement"), by and among Oxford Tax Exempt Fund II Corporation, a Maryland
corporation (the "OTEF Managing General Partner"), and OTEF II Associates
Limited Partnership, a Maryland limited partnership (the "OTEF Associate General
Partner"), as general partners (the "OTEF General Partners"), OTEF II Assignor
Corporation, as the initial limited partner (the "OTEF Initial Limited
Partner"), and all other persons who have become partners in the partnership as
provided therein (together with the OTEF General Partners and the OTEF Initial
Limited Partner, the "OTEF Partners");
WHEREAS, AIMCO OP, as the managing member of AIMCO/OTEF (the "Managing
Member"), and the OTEF Managing General Partner have determined that the merger
of AIMCO/OTEF with and into OTEF on the terms set forth herein (the "Merger"),
with OTEF as the surviving entity, is advisable and in the best interests of
such company and its members and is fair to the partnership and its partners,
and each has approved this Agreement; and
WHEREAS, the Independent Real Estate Consultant under the OTEF Partnership
Agreement has delivered to the OTEF Managing General Partner its opinion that
the Merger is fair to OTEF, the Merger is fair to the OTEF BAC Holders and the
OTEF Associate General Partner from a financial point of view, and OTEF's
publicly reported book value per OTEF BAC for the quarter ended September 30,
2000 was fairly computed.
NOW, THEREFORE, in consideration of the mutual representations, warranties
and agreements contained herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound hereby, agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 Definitions. The capitalized terms used in this Agreement and
not otherwise defined shall have the following meanings (unless the context
otherwise requires, such capitalized terms shall include the singular and plural
and the conjunctive and disjunctive forms of the terms defined):
"Acquisition Proposal" shall have the meaning set forth in Section 6.5.
"Affiliate" shall have the meaning set forth in Rule 12b-2 of the Exchange
Act.
"Affiliated BAC" shall have the meaning set forth in the OTEF Partnership
Agreement.
"Agreement" shall have the meaning set forth in the recitals.
"AIMCO Common Stock" shall mean Class A common stock, par value $.01 per
share, of AIMCO.
"AIMCO Floor Price" shall mean the average of the high and low reported
sale prices (regular way) of AIMCO Common Stock on the New York Stock Exchange
on each of twenty (20) consecutive full trading days ending on the applicable
Determination Date, provided that, if an Ex-Dividend Date occurs during the
20-day measuring period established by this definition, then, for purposes of
calculating the
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AIMCO Floor Price, the prices for the AIMCO Common Stock on the Ex-Dividend Date
shall be deemed to be the sum of the actual cash prices and the dividend related
to such Ex-Dividend Date.
"AIMCO Market Price" shall mean, (i) the average of the high and low
reported sale prices (regular way) of AIMCO Common Stock on the New York Stock
Exchange on each of twenty (20) consecutive full trading days beginning on the
third full trading day following the first public announcement of the execution
of this Agreement, (ii) $44 per share if the average determined pursuant to
clause (i) is less than $44 per share or (iii) $50 per share if the average
determined pursuant to (i) is greater than $50 per share, provided that, if an
Ex-Dividend Date occurs during the 20-day measuring period established by this
definition, then, for purposes of calculating the AIMCO Market Price, the prices
for the AIMCO Common Stock on the Ex-Dividend Date shall be deemed to be the sum
of the actual cash prices and the dividend related to such Ex-Dividend Date.
"AIMCO OP" shall have the meaning set forth in the recitals.
"AIMCO/OTEF" shall have the meaning set forth in the recitals.
"AIMCO/OTEF Operating Agreement" shall mean the operating agreement of
AIMCO/OTEF, dated as of November 9, 2000.
"AIMCO OP General Partner" shall mean AIMCO-GP, Inc., a Delaware
corporation and a wholly owned subsidiary of AIMCO.
"AIMCO OP Partnership Agreement" shall mean the Third Amended and Restated
Agreement of Limited Partnership, dated as of July 29, 1994, as amended, by and
among AIMCO, AIMCO-GP, Inc., a Delaware corporation and a wholly owned
subsidiary of AIMCO, AIMCO-LP, Inc., a Delaware corporation and a wholly owned
subsidiary of AIMCO, and other Limited Partners.
"AIMCO Preferred Stock" shall mean the Class P Convertible Cumulative
Preferred Stock, par value $.01 per share, of AIMCO, which shall have the terms
set forth in the Articles Supplementary.
"AIMCO Registration Statement" shall have the meaning set forth in Section
6.6.
"AIMCO SEC Reports" shall have the meaning set forth in Section 5.9.
"Articles of Merger" shall have the meaning set forth in Section 2.2.
"Articles Supplementary" shall mean the Articles Supplementary of AIMCO's
Class P Convertible Cumulative Preferred Stock, par value $.01 per share, in the
form attached hereto as Annex A.
"Benefit Plan" shall mean, with respect to any Person, any plan, program,
arrangement, practice or contract which provides benefits or compensation to or
on behalf of employees, former employees, consultants, officers or directors of
such Person or any of such Person's subsidiaries, including, without limitation,
any employee pension benefit plan (whether or not insured), as defined in
Section 3(2) of ERISA, any employee welfare benefit plan (whether or not
insured), as defined in Section 3(1) of ERISA, any stock bonus, stock ownership,
stock option, stock purchase, stock appreciation right, phantom stock, or other
stock plan (whether qualified or non-qualified), and any pension, welfare,
termination, employment, change-in-control, severance, retirement, bonus,
deferred compensation, incentive compensation, insurance (whether life, accident
and health, or other and whether key man, group, workers compensation, or
other), profit sharing, disability, thrift, day care, legal services, leave of
absence, layoff, or supplemental or excess benefit plan, and any other benefit
contract, arrangement, or procedure having the effect of a plan, whether formal,
informal, written or oral, that is (or was at any time) sponsored, maintained or
contributed to by such Person or by any trade or business (whether or not
incorporated) which, together with such Person, would be deemed a "single
employer" within the meaning of Section 4001(b)(1) of ERISA.
"Blue Sky Laws" shall have the meaning set forth in Section 4.5.
"Business Day" shall mean any day other than a Saturday, a Sunday or a day
on which banking institutions in New York City are not required to be open.
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<PAGE> 125
"Certificate" shall have the meaning set forth in Section 3.1.
"Closing" shall have the meaning set forth in Section 2.3.
"Closing Date" shall have the meaning set forth in Section 2.3.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Consents" shall have the meaning set forth in Section 6.2.
"Contract" shall mean, with respect to any Person, any note, bond,
indenture, lease, license, permit, franchise, deed of trust, mortgage, loan
agreement or other document, instrument, obligation or agreement, oral or
written, to which such Person or any of its subsidiaries is a party or by which
any of them or their assets or properties is bound or affected.
"Determination Date" shall mean any date on which the AIMCO Floor Price is
calculated pursuant to Section 8.1(f).
"Effective Time" shall have the meaning set forth in Section 2.2.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended (including without limitation any successor act), and the rules and
regulations promulgated thereunder.
"Excess Shares" shall have the meaning set forth in Section 3.3.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exchange Agent" shall have the meaning set forth in Section 3.2.
"Ex-Dividend Date" shall mean the date that is two business days prior to
the record date for a stock dividend payable on AIMCO Class A common stock.
"Fairness Opinion" shall have the meaning set forth in Section 4.13.
"GAAP" shall mean generally accepted accounting principles, consistently
applied throughout the specified period and in the immediately prior comparable
period.
"Governmental Authority" shall mean any government or any agency, bureau,
board, commission, court, judicial or quasi-judicial body, department,
authority, official, political subdivision, tribunal or other instrumentality of
any government, whether Federal, state or local, domestic or foreign.
"IRS" shall mean the United States Internal Revenue Service or any
successor agency.
"Indemnifiable Amount" shall have the meaning set forth in Section 6.5.
"Indemnified Party" shall have the meaning set forth in Section 6.10.
"Indemnifying Party" shall have the meaning set forth in Section 6.10.
"Indemnitee" shall have the meaning set forth in Section 6.11.
"Independent Directors" shall mean the directors of the OTEF Managing
General Partner who are not employees of AIMCO, AIMCO OP or the OTEF Managing
General Partner.
"Independent Real Estate Consultant" shall mean Marshall & Stevens
Incorporated or such other nationally recognized investment banking firm,
accounting firm, mortgage banking firm, bank, real estate financial consulting
firm or advisory firm as may be selected by the OTEF Managing General Partner in
the event of a resignation by Marshall & Stevens Incorporated as the Independent
Real Estate Consultant.
"Law" shall mean any law, statute, rule, regulation, ordinance, decree or
order of any Governmental Authority.
"Lien" shall mean any mortgage, pledge, assessment, security interest,
lease, sublease, lien, adverse claim, levy, charge, option, right of others or
restriction (whether on voting, sale, transfer, disposition or otherwise) or
other encumbrance of any kind, whether imposed by agreement, understanding, law
or
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<PAGE> 126
equity, or any conditional sale contract, title retention contract or other
contract to give or to refrain from giving any of the foregoing.
"Losses" shall have the meaning set forth in Section 6.11.
"Managing Member" shall have the meaning set forth in the recitals.
"Maryland LLC Act" shall mean the Maryland Limited Liability Company Act.
"Maryland Partnership Act" shall mean the Maryland Revised Uniform Limited
Partnership Act.
"Material Adverse Effect" shall mean, with respect to any Person, a
material adverse effect on (i) the validity or enforceability of this Agreement,
(ii) the ability of such Person to perform its obligations under this Agreement
or (iii) the business, assets, condition, results of operations or prospects of
such Person and its subsidiaries, taken as a whole.
"Merger" shall have the meaning set forth in the recitals.
"Merger Consideration" shall mean the Share Consideration and any cash
payable in lieu of fractional shares in accordance with Section 3.4.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Notices" shall have the meaning set forth in Section 9.4.
"Option" shall mean, with respect to any Person, any option, warrant, call,
right, subscription, convertible or exchangeable security or other right,
agreement, arrangement or commitment of any kind or character to which such
Person or any of its subsidiaries is a party relating to the issued or unissued
capital stock of such Person or any of its subsidiaries, or obligating such
Person or any of its subsidiaries to issue, transfer, grant or sell any shares
of capital stock of, or other equity interest in, or securities convertible into
or exchangeable for any capital stock or other equity interest in, such Person
or any of its subsidiaries.
"Option Sale Agreements" shall mean that option sale agreement, dated
September 20, 2000, among AIMCO, AIMCO OP, AIMCO NHP Properties, Inc., NHP
Management Company, Leo E. Zickler, Francis P. Lavin, Robert B. Downing, Mark E.
Schifrin, Marc B. Abrams and Richard R. Singleton and that option sale
agreement, dated September 20, 2000, among AIMCO, AIMCO NHP Properties, Inc.,
NHP Management Company, Kenneth C. Willard, Cher B. Compton, Mary Ann Ewers,
Brian M. Grant, Carol A. Kohl, Michael B. Tillett, Stephen P. Gavula, Jr., Scot
B. Barker and ORFG Operations, L.L.C.
"Organizational Documents" shall mean (i) with respect to a corporation,
its certificate or articles of incorporation and bylaws, (ii) with respect to
any limited liability company, its certificate of formation, articles of
organization, regulations and operating agreement, as applicable, (iii) with
respect to any limited partnership, its certificate of limited partnership and
limited partnership agreement, (iv) with respect to any general partnership, its
partnership agreement, and (v) all other similar organizational documents.
"OTEF" shall have the meaning set forth in the recitals.
"OTEF AGP Interest" shall mean the OTEF Partnership Interest held by the
OTEF Associate General Partner.
"OTEF Associate General Partner" shall have the meaning set forth in the
recitals.
"OTEF BAC" shall mean a unit of beneficial assignee interest in OTEF and
the related Right, including any Affiliated BAC and its related Right.
"OTEF BAC Holder" shall mean a holder of an OTEF BAC.
"OTEF General Partners" shall have the meaning set forth in the recitals.
"OTEF Initial Limited Partner" shall have the meaning set forth in the
recitals.
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<PAGE> 127
"OTEF Managing General Partner" shall have the meaning set forth in the
recitals.
"OTEF Option Plans" shall mean the 1997 Incentive BAC Plan and the 1999
Incentive BAC Plan of OTEF.
"OTEF Options" shall mean options to purchase OTEF BACs granted under one
of the OTEF Option Plans or pursuant to agreements approved by the board of
directors of the OTEF Managing General Partner.
"OTEF Partners" shall have the meaning set forth in the recitals.
"OTEF Partnership Interests" shall mean the OTEF BACs, the OTEF SQBs, the
OTEF General Partners' interests in OTEF and the OTEF Initial Limited Partner's
interest in OTEF.
"OTEF Partnership Agreement" shall have the meaning set forth in the
recitals.
"OTEF SEC Reports" shall have the meaning set forth in Section 4.7.
"OTEF SQB" shall mean a unit of status quo beneficial assignee interest in
OTEF.
"Outside Date" shall mean June 30, 2001.
"Ownership Limit" shall have the meaning set forth in Section 3.3.
"Person" shall mean any natural person, corporation, general partnership,
limited partnership, limited liability company, limited liability partnership,
proprietorship, trust, union, association, court, tribunal, agency, government,
department, commission, self-regulatory organization, arbitrator, board, bureau,
instrumentality or other entity, enterprise, authority or business organization.
"Potential Acquiror" shall have the meaning set forth in Section 6.5.
"Prospectus/Information Statement" shall mean the prospectus/information
statement of AIMCO and OTEF, which constitutes a part of the AIMCO Registration
Statement.
"Qualifying Income" shall have the meaning set forth in Section 6.5.
"Redemption" shall have the meaning set forth in Section 6.12.
"REIT Requirements" shall have the meaning set forth in Section 6.5.
"REIT Status" shall mean, with respect to any Person, (a) the qualification
of such Person as a real estate investment trust under Sections 856 through 860
of the Code, (b) the applicability to such Person and its shareholders of the
method of taxation provided for in Sections 857 et seq. of the Code, and (c) the
qualification and taxation of such Person as a real estate investment trust
under analogous provisions of state and local law in various states and
jurisdictions in which such Person owns property, operates or conducts business.
"Representatives" shall mean, with respect to any Person, the officers,
directors, employees, auditors and other agents and representatives of such
Person.
"Right" shall have the meaning set forth in the Rights Agreement.
"Rights Agreement" shall mean the Rights Agreement, dated as of May 30,
1995, by and between OTEF and Crestar Bank, as rights agent.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Sellers" shall have the meaning set forth in Section 3.5.
"Share Consideration" shall mean the shares of AIMCO Common Stock and AIMCO
Preferred Stock issuable pursuant to Section 3.1.
"Special Distribution" shall have the meaning set forth in Section 6.13.
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<PAGE> 128
"Subsidiary" shall mean, with respect to any Person, (i) any corporation
with respect to which such Person, directly or indirectly through one or more
subsidiaries, (a) owns more than 50% of the outstanding shares of capital stock
having generally the right to vote in the election of directors or (b) has the
power, under ordinary circumstances, to elect, or to direct the election of, a
majority of the board of directors of such corporation, (ii) any partnership
with respect to which (a) such Person or a subsidiary of such Person is a
general partner, (b) such Person and its subsidiaries together own more than 50%
of the interests therein, or (c) such Person and its subsidiaries have the right
to appoint or elect or direct the appointment or election of a majority of the
directors or other Person or body responsible for the governance or management
thereof, (iii) any limited liability company with respect to which (a) such
Person or a subsidiary of such Person is the manager or managing member, (b)
such Person and its subsidiaries together own more than 50% of the interests
therein, or (c) such Person and its subsidiaries have the right to appoint or
elect or direct the appointment or election of a majority of the directors or
other Person or body responsible for the governance or management thereof, or
(iv) any other entity in which such Person has, and/or one or more of its
subsidiaries have, directly or indirectly, (a) at least a 50% ownership interest
or (b) the power to appoint or elect or direct the appointment or election of a
majority of the directors or other Person or body responsible for the governance
or management thereof.
"Suit" shall have the meaning set forth in Section 9.12.
"Superior Proposal" shall have the meaning set forth in Section 6.5.
"Surviving Partnership" shall have the meaning set forth in Section 2.1.
"Taxes" shall mean any federal, state, county, local, or foreign taxes,
charges, fees, levies, duties, assessments, forfeiture or payment obligations
(including, without limitation, any obligation under unclaimed property or
escheat laws), or charge of any kind whatsoever imposed by a Governmental
Authority including, without limitation, all income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental (including taxes under Code Section 59A), capital stock,
franchise, profits, withholding, social security, unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax, customs duty, fee, or
assessment, including any interest, penalty, or addition thereto, whether
disputed or not; and "Tax" shall mean any of the foregoing Taxes.
"Tax Return" shall mean any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Transactions" shall mean the transactions contemplated by this Agreement.
"Voting Debt" shall have the meaning set forth in Section 4.3.
ARTICLE 2
THE MERGER
SECTION 2.1 The Merger. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time, in accordance with the Maryland LLC Act
and the Maryland Partnership Act, AIMCO/ OTEF shall be merged with and into OTEF
in accordance with this Agreement and the separate existence of AIMCO/OTEF shall
cease. OTEF shall be the surviving entity in the Merger (hereinafter sometimes
referred to as the "Surviving Partnership").
SECTION 2.2 Effective Time of the Merger. Upon the terms and subject to
the conditions hereof, the parties hereto shall execute and file articles of
merger (the "Articles of Merger") with the State Department of Assessments and
Taxation of the State of Maryland in accordance with the relevant provisions of
the Maryland Partnership Act and the Maryland LLC Act. The Merger shall become
effective upon filing of the Articles of Merger or such other time as may be
provided in the Articles of Merger (the time the Merger becomes effective being
referred to herein as the "Effective Time").
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SECTION 2.3 Closing. Subject to the satisfaction or waiver of all of the
conditions to closing contained in Article 7, the closing of the Merger (the
"Closing") will take place at 10:00 a.m., Washington, D.C. time, on a date to be
specified by the parties, which shall be no earlier than January 2, 2001 and no
later than the fifth Business Day after the satisfaction or waiver of the
conditions to Closing contained in Article 7, at the offices of Shaw Pittman,
2300 N Street, N.W., Washington, D.C. 20037, unless another date, time or place
is agreed to in writing by the parties hereto. The date and time at which the
Closing occurs is referred to herein as the "Closing Date."
SECTION 2.4 Effects of the Merger. The Merger shall have the effects set
forth in the Maryland LLC Act and the Maryland Partnership Act. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time, all
the properties, rights, privileges, powers and franchises of AIMCO/OTEF and OTEF
shall vest in the Surviving Partnership, and all debts, liabilities and duties
of AIMCO/OTEF and OTEF shall become the debts, liabilities and duties of the
Surviving Partnership.
SECTION 2.5 Certificate of Limited Partnership. The Certificate of
Limited Partnership of OTEF, as in effect immediately prior to the Effective
Time, shall be the Certificate of Limited Partnership for the Surviving
Partnership without change or amendment until thereafter amended in accordance
with the terms thereof and with applicable law.
SECTION 2.6 Partnership Agreement. The OTEF Partnership Agreement, as in
effect immediately prior to the Effective Time, shall be the partnership
agreement of the Surviving Partnership without change or amendment until
thereafter amended in accordance with the terms thereof and with applicable law.
SECTION 2.7 General Partner. The OTEF Managing General Partner shall be
the managing general partner of the Surviving Partnership until removed or
replaced in accordance with the terms of the partnership agreement of the
Surviving Partnership.
SECTION 2.8 Withholding Rights. AIMCO OP or the Exchange Agent shall be
entitled to deduct and withhold from the Merger Consideration otherwise payable
pursuant to this Agreement to any OTEF BAC Holder, such amounts as AIMCO OP or
the Exchange Agent is required to deduct and withhold with respect to the making
of such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by AIMCO OP or the Exchange
Agent, such withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the OTEF BAC Holder, in respect of which such deduction
and withholding was made by AIMCO OP or the Exchange Agent.
SECTION 2.9 Tax Treatment of the Merger. The parties hereto agree that
the Merger, together with all other transactions contemplated by this Agreement,
will be treated for United States federal income tax purposes as a purchase of
the OTEF BACs (other than OTEF BACs held by AIMCO OP) by AIMCO OP, in exchange
for the Merger Consideration. The parties agree to report the Merger
accordingly.
ARTICLE 3
CONVERSION OF PARTNERSHIP INTERESTS
SECTION 3.1 Effect of the Merger on Partnership Interests in OTEF.
a. Except as otherwise provided in Section 3.3, and subject to Section
3.1(b), as of the Effective Time, by virtue of the Merger and without any action
on the part of the OTEF General Partners and the OTEF Initial Limited Partner:
i. each issued and outstanding OTEF Partnership Interest held by AIMCO
OP shall remain issued and outstanding;
ii. each issued and outstanding OTEF Partnership Interest held by the
OTEF Managing General Partner shall remain issued and outstanding;
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iii. each issued and outstanding OTEF Partnership Interest held by the
OTEF Initial Limited Partner shall remain issued and outstanding;
iv. each issued and outstanding OTEF BAC (except any such OTEF BAC
held by AIMCO OP or the OTEF Associate General Partner) shall be converted
into the right to receive $28.20 of consideration comprised of (i) 0.547
shares of AIMCO Preferred Stock and (ii) the number of shares of AIMCO
Common Stock equal to $14.525 divided by the AIMCO Market Price (the "Share
Consideration");
v. the OTEF AGP Interest shall be converted into the right to receive
$1,000 of consideration comprised of (i) 19 shares of AIMCO Preferred Stock
and (ii) the number of shares of AIMCO Common Stock equal to $525.00
divided by the AIMCO Market Price; and
vi. each outstanding OTEF Option shall be terminated.
As a result of the Merger and without any action on the part of the holders
thereof, at the Effective Time, all of the OTEF Partnership Interests other than
those held by AIMCO OP, the OTEF Managing General Partner and the OTEF Initial
Limited Partner shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each OTEF BAC Holder (other
than AIMCO OP, the OTEF Managing General Partner and the OTEF Initial Limited
Partner) and the OTEF Associate General Partner shall thereafter cease to have
any rights with respect to such OTEF BACs and OTEF AGP Interest, except the
right to receive, without interest, the applicable Share Consideration and cash,
if any, for fractional shares of AIMCO Common Stock and AIMCO Preferred Stock in
accordance with Section 3.4, in the case of an OTEF BAC Holder, upon the
surrender of a certificate that, immediately prior to the Effective Time,
represented an outstanding OTEF BAC (a "Certificate"). In addition, as a result
of the Merger and without any action on the part of the holders thereof, at the
Effective Time, all Rights shall, in accordance with their terms, no longer be
outstanding and shall automatically be cancelled and retired and shall cease to
exist, and each holder of Rights shall thereafter cease to have any rights with
respect thereto.
b. At the Effective Time, the membership interest in AIMCO/OTEF shall be
converted into the number of OTEF BACs and the OTEF AGP Interest acquired from
the OTEF BAC Holders and OTEF Associate General Partner.
SECTION 3.2 Exchange of Certificates.
a. At the Closing, AIMCO shall transfer to AIMCO OP the aggregate number of
shares of AIMCO Common Stock and AIMCO Preferred Stock that may be issued in the
Merger, and AIMCO OP shall deposit (or cause to be deposited) with a bank or
trust company to be designated by AIMCO and reasonably acceptable to OTEF (the
"Exchange Agent"), for the benefit of the OTEF BAC Holders, for exchange in
accordance with this Article 3, (i) certificates representing the aggregate
number of shares of AIMCO Common Stock and AIMCO Preferred Stock that may be
issued in respect of the OTEF BACs in the Merger and (ii) cash in an amount
sufficient to pay the aggregate amount of cash payable in lieu of fractional
shares of AIMCO Common Stock and AIMCO Preferred Stock pursuant to Section 3.4.
AIMCO Common Stock and AIMCO Preferred Stock into which the OTEF BACs shall be
converted pursuant to the Merger shall be deemed to have been issued at the
Effective Time.
b. As soon as reasonably practicable after the Effective Time, AIMCO OP
shall cause the Exchange Agent to mail to each holder of record of the OTEF BACs
immediately prior to the Effective Time (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other customary provisions,
including signature guarantee provisions, as AIMCO may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration with respect to the OTEF BACs formerly
represented thereby.
c. Upon surrender of a Certificate for cancellation to the Exchange Agent
or to such other sub-agent or sub-agents as may be appointed by AIMCO, together
with a letter of transmittal, duly executed with
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signature guarantees, and such other documents as AIMCO or the Exchange Agent
shall reasonably request, the holder of such Certificate shall be entitled to
receive as soon as reasonably practicable after the Effective Time in exchange
therefor, (i) certificates representing the number of shares of AIMCO Common
Stock and AIMCO Preferred Stock which such holder has the right to receive
pursuant to the provisions of this Article 3 and (ii) a check in an amount equal
to the cash, if any, which such holder has the right to receive in lieu of
fractional shares of AIMCO Common Stock and AIMCO Preferred Stock pursuant to
this Article 3 (in each case, less the amount of any required withholding
taxes), and the Certificate so surrendered shall forthwith be cancelled. Until
surrendered as contemplated by this Section 3.2(c), each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive the Merger Consideration with respect to the OTEF BACs formerly
represented thereby.
d. AIMCO shall have the right to make reasonable rules, not inconsistent
with the terms of this Agreement, governing the issuance and delivery of
certificates for shares of AIMCO Common Stock and AIMCO Preferred Stock into
which the OTEF BACs and OTEF AGP Interest are converted in the Merger.
SECTION 3.3 AIMCO Ownership Limit. Notwithstanding any other provision of
this Agreement to the contrary, AIMCO shall not be obligated to issue shares of
AIMCO Common Stock or AIMCO Preferred Stock to any Person if such issuance would
result in a violation of the ownership limit (the "Ownership Limit") set forth
in AIMCO's Organizational Documents. In lieu of issuing any shares (the "Excess
Shares") of AIMCO Common Stock or AIMCO Preferred Stock that would result in any
Person receiving a number of shares of AIMCO Common Stock or AIMCO Preferred
Stock in excess of the Ownership Limit, AIMCO shall pay to such Person cash in
an amount equal to the number of such Excess Shares multiplied, with respect to
AIMCO Common Stock, by the AIMCO Market Price as of the Effective Time, and,
with respect to AIMCO Preferred Stock, $25.
SECTION 3.4 Dividends, Fractional Shares, Etc.
a. Notwithstanding any other provisions of this Agreement, dividends or
other distributions declared after the Effective Time on AIMCO Common Stock and
AIMCO Preferred Stock shall be paid into an escrow for the benefit of the holder
of any unsurrendered Certificate or Certificates, and all proceeds in escrow
shall be released to the holder upon such surrender, and no cash payment in lieu
of fractional shares of AIMCO Common Stock or AIMCO Preferred Stock shall be
paid to any such holder pursuant to Section 3.4(b) until such Certificate or
Certificates are surrendered for exchange as provided for in this Article 3.
Subject to the effect of applicable laws, following the surrender of any such
Certificate, there shall be paid, without interest, to the Person in whose name
the certificates representing the shares of AIMCO Common Stock or AIMCO
Preferred Stock into which the OTEF BACs formerly represented by such
Certificate were converted are registered, (i) at the time of such surrender,
the amount of all dividends and other distributions with a record date after the
Effective Time theretofore payable with respect to such whole shares of AIMCO
Common Stock or AIMCO Preferred Stock and not yet paid (less the amount of any
applicable withholding taxes) and (ii) at the appropriate payment date, the
amount of dividends or other distributions, with a record date after the
Effective Time but prior to surrender and a payment date subsequent to
surrender, payable with respect to such whole shares of AIMCO Common Stock or
AIMCO Preferred Stock, less the amount of any withholding taxes which may be
required thereon.
b. No fractional shares of AIMCO Common Stock or AIMCO Preferred Stock
shall be issued in the Merger. All fractional shares of AIMCO Common Stock or
AIMCO Preferred Stock that an OTEF BAC Holder would otherwise be entitled to
receive as a result of the Merger shall be aggregated and, if a fractional share
results from such aggregation, such holder shall be entitled to receive, in lieu
thereof, an amount in cash determined by multiplying (i) the fraction of a share
to which such holder would otherwise have been entitled by (ii)(A) with respect
to AIMCO Common Stock, the AIMCO Market Price or (B) with respect to the AIMCO
Preferred Stock, $25. No interest will be paid or will accrue on any cash paid
or payable in lieu of any fractional shares of AIMCO Common Stock.
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c. At and after the Effective Time, there shall be no further registration
of transfers of OTEF Partnership Interests. If, after the Effective Time,
Certificates are presented to the Surviving Partnership, they shall be exchanged
for the consideration provided for, and in accordance with the procedures set
forth, in this Article 3.
d. If any portion of the Merger Consideration is to be paid to a Person
other than the registered holder of the OTEF BACs represented by the Certificate
or Certificates surrendered in exchange therefor, it shall be a condition to
such payment that the Certificate or Certificates so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and that the
Person requesting such payment shall pay to the Exchange Agent any transfer or
other taxes required as a result of such payment to a Person other than the
registered holder of such Certificates or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
e. Any portion of the Merger Consideration made available to the Exchange
Agent pursuant to this Article 3 that remains unclaimed by the former OTEF BAC
Holders one year after the Effective Time shall be delivered to AIMCO OP. Any
such holder who has not theretofore exchanged his Certificates for the Merger
Consideration in accordance with this Article 3 shall thereafter look only to
AIMCO OP for payment of the applicable Merger Consideration and unpaid dividends
and distributions on the AIMCO Common Stock or AIMCO Preferred Stock deliverable
in respect thereof and held in escrow, determined pursuant to this Agreement, in
each case, without interest. None of AIMCO, AIMCO OP, OTEF or the Surviving
Partnership shall be liable to any former OTEF BAC Holder for any amount paid to
a public official pursuant to any applicable abandoned property, escheat or
similar laws. Any amounts remaining unclaimed by any former OTEF BAC Holder
three years after the Effective Time (or such earlier date immediately prior to
such time as such amounts would otherwise escheat to or become property of any
governmental entity) shall, to the extent permitted by applicable law, become
the property of AIMCO OP, free and clear of any claims or interest of any person
previously entitled thereto.
f. In the event that any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed and, if required by AIMCO OP,
the posting by such Person of a bond in such reasonable amount as AIMCO OP may
direct as indemnity against any claim that may be made against it with respect
to such Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the applicable Merger Consideration and unpaid
dividends and distributions on shares of AIMCO Common Stock or AIMCO Preferred
Stock deliverable in respect thereof pursuant to this Agreement.
SECTION 3.5 OTEF Principal Option Rights.
AIMCO shall pay to the Sellers (as defined in each of the Option Sale
Agreements) the amounts owed to such Sellers under Section 1 of each of the
Option Sale Agreements.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF OTEF
OTEF hereby represents and warrants to AIMCO, AIMCO OP and AIMCO/OTEF that:
SECTION 4.1 Organization and Qualifications. OTEF is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Maryland and has the requisite partnership power and authority
and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing or in good standing or to have
such power, authority and governmental approvals would not, individually or in
the aggregate, have a Material Adverse Effect on OTEF. OTEF is duly qualified or
licensed as a foreign partnership to transact business, and is in good standing
in each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except for such failures to be so qualified or licensed and
in good standing that would not, individually or in the aggregate, have a
Material Adverse Effect on OTEF.
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SECTION 4.2 Organizational Documents. OTEF has furnished to AIMCO true
and complete copies of its Certificate of Limited Partnership and the OTEF
Partnership Agreement, as in effect on the date of this Agreement. Such
Organizational Documents are in full force and effect and OTEF is not in
violation of any provision of its Organizational Documents.
SECTION 4.3 Capitalization.
a. The outstanding interests in OTEF, as of September 30, 2000, are as
follows: (i) a 0.002% partnership interest held by the OTEF Managing General
Partner; (ii) a 1.998% partnership interest held by the OTEF Associate General
Partner; and (iii) a 98% partnership interest held by the OTEF Initial Limited
Partner, who has assigned rights to the limited partnership interests in OTEF to
OTEF BAC Holders holding 7,344,425 OTEF BACs and OTEF SQB Holders holding 97
OTEF SQBs. The Rights will not become exercisable upon the execution, delivery
or performance of this Agreement or the consummation of the transactions
contemplated herein.
b. There are no bonds, debentures, notes or other indebtedness having the
right to vote or approve (or convertible into any interests of OTEF having the
right to vote or approve) any matters for which the holders of OTEF Partnership
Interests may vote or approve ("Voting Debt"). There are no outstanding
subscriptions, calls, options, contracts, voting trusts, proxies or other
commitments, understandings, restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any outstanding security,
instrument or other agreement, obligating OTEF to issue, deliver or sell, or
cause to be issued, delivered or sold, additional OTEF BACs, OTEF SQBs or other
ownership interests in OTEF or any Voting Debt of OTEF or obligating OTEF to
grant, extend or enter into any such agreement or commitment, except for the
OTEF Options.
SECTION 4.4 Authority Relative to This Agreement. OTEF has all necessary
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the Transactions. The execution and
delivery of this Agreement by OTEF, the performance by OTEF of its obligations
hereunder and the consummation by OTEF of the Transactions have been duly and
validly authorized by all necessary action on the part of OTEF or its partners,
including the approval of the Merger based on the terms herein by the OTEF
Managing General Partner, and no other proceedings on the part of OTEF or its
partners are necessary to authorize this Agreement or to consummate the
Transactions (other than the non-withdrawal of the Fairness Opinion and the
filing of the Articles of Merger). This Agreement has been duly and validly
executed and delivered by OTEF and, assuming the due authorization, execution
and delivery thereof by AIMCO, AIMCO OP and AIMCO/OTEF, constitutes the legal,
valid and binding obligation of OTEF, enforceable against OTEF in accordance
with its terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws relating
to creditors' rights generally and by equitable principles to which the remedies
of specific performance and injunctive and similar forms of relief are subject.
SECTION 4.5 No Conflict; Required Filings and Consents; Certain Contracts.
a. The execution and delivery of this Agreement by OTEF does not, and the
performance of its obligations under this Agreement and the consummation of the
Transactions by OTEF will not, (i) conflict with, result in a breach of, cause a
dissolution or require the consent or approval of any Person other than the OTEF
Managing General Partner under, or violate any provision of, the Organizational
Documents of OTEF; (ii) require any consent, approval, authorization or permit
of, or filing with or notification to, any Governmental Authority, except for
(A) applicable requirements of the Exchange Act, the Securities Act and state
securities or "blue sky" laws ("Blue Sky Laws") and (B) the filing of the
Articles of Merger; (iii) subject to the making of the filings and obtaining the
approvals identified in clause (ii), conflict with or violate any Law, judgment,
order, writ, injunction or decree applicable to OTEF or by which any property or
asset of OTEF is bound or affected; or (iv) conflict with or result in any
breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, result in the loss by OTEF or
modification in a manner adverse to OTEF of any right or benefit under, or give
to others any right of termination, amendment, acceleration, repurchase or
repayment, increased payments or cancellation of, or result in the creation of a
Lien or other encumbrance
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on any OTEF Partnership Interest or any property or asset of OTEF pursuant to,
any Contract of OTEF, except, in each case, such as would not prevent or delay
in any material respect consummation of the Merger, or otherwise, individually
or in the aggregate, prevent OTEF from performing its obligations under this
Agreement in any material respect, and would not, individually or in the
aggregate, have a Material Adverse Effect on OTEF.
b. Except as set forth in the Contracts filed (or incorporated by
reference) as exhibits to OTEF's Annual Report on Form 10-K for the year ended
December 31, 1999 or the other OTEF SEC Reports filed thereafter, there are no
Contracts to which OTEF is a party or by which OTEF or any asset of OTEF is
bound, which by its terms materially limits the ability of OTEF or, after
consummation of the Transactions, would by its terms materially limit the
ability of AIMCO or any of its affiliates, to engage in any business in any area
or for any period.
SECTION 4.6 Compliance. OTEF is not in conflict with, or in default or
violation of, (a) any Law applicable to it or by which any of its properties or
assets are bound or affected, or (b) any Contract to which it is a party or by
which it or any of its properties or assets are bound or affected, except for
any such conflicts, defaults or violations that would not, individually or in
the aggregate, have a Material Adverse Effect on OTEF.
SECTION 4.7 SEC Reports and Financial Statements. Each form, report,
schedule, registration statement and definitive proxy statement filed by OTEF
with the SEC since January 1, 1998 and prior to the date hereof (as such
documents have been amended prior to the date hereof, the "OTEF SEC Reports"),
as of their respective dates, complied in all material respects with the
applicable requirements of the Securities Act and the Exchange Act and the rules
and regulations thereunder. None of the OTEF SEC Reports, as of their respective
dates, contained or contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except for such statements, if any, as have been modified or
superseded by subsequent filings prior to the date hereof. OTEF has made
available to AIMCO true, accurate and complete copies of all of the OTEF SEC
Reports. The financial statements of OTEF included in such reports comply as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP (except as may be indicated in the notes
thereto or, in the case of the unaudited interim financial statements, as
permitted by Form 10-Q of the SEC) and fairly present (subject, in the case of
the unaudited interim financial statements, to normal, year-end audit
adjustments) in all material respects the financial position of OTEF as at the
dates thereof and the results of its operations and cash flows for the periods
then ended. Since December 31, 1999, OTEF has not incurred any liabilities or
obligations (whether absolute, accrued, fixed, contingent, liquidated,
unliquidated or otherwise and whether due or to become due) of any nature,
except liabilities, obligations or contingencies (a) which are reflected on the
balance sheet of OTEF as at December 31, 1999 (including the notes thereto) or
(b) which (i) were incurred in the ordinary course of business after December
31, 1999 and consistent with past practices, or (ii) are disclosed in the OTEF
SEC Reports filed after December 31, 1999 or (iii) are not in the aggregate
material. Since January 1, 1998, OTEF has timely filed with the SEC all forms,
reports and other documents required to be filed prior to the date hereof
pursuant to the Securities Act, the Exchange Act or the rules and regulations
thereunder. Since December 31, 1999, there has been no change in any of the
significant accounting (including tax accounting) policies, practices or
procedures of OTEF.
SECTION 4.8 Absence of Certain Changes or Events. Except as contemplated
by this Agreement or as disclosed in any OTEF SEC Report, since December 31,
1999, (a) OTEF has conducted its business only in the ordinary course,
consistent with past practice, and (b) there has not occurred or arisen any
event that, individually or in the aggregate, has had or, insofar as reasonably
can be foreseen, is likely in the future to have, a Material Adverse Effect on
OTEF other than events or developments generally affecting the industry in which
OTEF operates.
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SECTION 4.9 Litigation. Except as disclosed in the OTEF SEC Reports,
there are no claims, suits, actions or proceedings pending or, to OTEF's
knowledge, threatened or contemplated, nor are there any investigations or
reviews by any Governmental Authority pending or, to OTEF's knowledge,
threatened or contemplated, against, relating to or affecting OTEF, which could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on OTEF, or to prohibit or materially restrict the consummation
of the Transactions, nor is there any judgment, decree, order, injunction, writ
or rule of any Governmental Authority or any arbitrator outstanding against OTEF
having, or which, insofar as can be reasonably foreseen, in the future is likely
to have, a Material Adverse Effect on OTEF. In addition, to the knowledge of
OTEF, there have not been any developments with respect to any of the claims,
suits, actions, proceedings, investigations or reviews disclosed in the OTEF SEC
Reports which, insofar as can be reasonably foreseen, in the future are likely
to have a Material Adverse Effect on OTEF.
SECTION 4.10 AIMCO Registration Statement. The information supplied or to
be supplied by OTEF or its Representatives for inclusion in the AIMCO
Registration Statement will not, either at the time such document is filed with
the SEC, at the time any amendment thereof or supplement thereto is filed with
the SEC, or at the time it becomes effective under the Securities Act or at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading. The AIMCO Registration Statement, as to
information supplied by OTEF or its Representatives, will comply in all material
respects with all applicable provisions of the Securities Act and the Exchange
Act and the rules and regulations promulgated thereunder.
SECTION 4.11 Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
Transactions based on any arrangement or agreement made by or on behalf of OTEF.
SECTION 4.12 Taxes.
a. OTEF has timely filed (or has had timely filed on its behalf) or will
file or cause to be timely filed, all Tax Returns required by applicable law to
be filed by it prior to or as of the Effective Time. All such Tax Returns and
amendments thereto are, or will be before the Effective Time, true, complete and
correct in all material respects.
b. OTEF has paid (or has had paid on its behalf), or where payment is not
yet due, has established (or has had established on its behalf and for its sole
benefit and recourse), or will establish or cause to be established on or before
the Effective Time, an adequate accrual for the payment of, all material Taxes
due with respect to any period ending prior to or as of the Effective Time.
c. No deficiency or adjustment for any material Taxes has been proposed,
asserted or assessed against OTEF that has not been resolved or paid or for
which an adequate accrual has not been established in accordance with generally
accepted accounting principles. There are no Liens for material Taxes upon the
assets of OTEF, except Liens for current Taxes not yet due.
d. OTEF has not granted any power of attorney (or similar authority) as to
any matter regarding any Taxes, audit, or Tax Return, which power of attorney
remains in effect or outstanding.
e. OTEF has complied in all material respects with all applicable laws,
rules and regulations relating to withholding Taxes, including, without
limitation, the withholding and reporting requirements under sections 1441
through 1446 of the Code.
f. OTEF has not received any notice from any authority that it intends to
assess any additional Taxes for any period that ends on or before the Effective
Time. There is no audit or other proceeding presently pending or threatened with
regard to any Taxes or Tax Returns of OTEF. OTEF has not received a written
ruling from a taxing authority relating to any Tax or entered into a written
agreement with a taxing authority relating to any Tax if such ruling or
agreement could have a continuing effect after the Effective Time.
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g. OTEF has not waived any statute of limitations with respect to any Tax
or Tax Return or agreed to any extension of time with respect to a Tax
assessment or deficiency, which has continuing effect.
h. OTEF has not agreed to make nor has OTEF or the IRS proposed any
adjustment pursuant to section 481(a) of the Code (or any predecessor
provision); and there is no application pending with any taxing authority
requesting permission for any change in any accounting method which, in each
respective case, would reasonably cause OTEF to include any adjustment in
taxable income for any taxable period.
i. Neither the IRS nor any other Governmental Authority has challenged the
status of OTEF as a "partnership" for Federal income tax purposes, and OTEF has
at all times complied with the 90% gross income requirement set forth in Section
7704(c) of the Code to be treated as a "partnership" for Federal income tax
purposes.
j. OTEF has not entered into any Contract and does not otherwise maintain
any Benefit Plan that would result in the disallowance of any tax deductions
pursuant to section 162(m) or section 280G of the Code. No "consent" within the
meaning of section 341(f) of the Code has been filed with respect to OTEF.
k. All Tax sharing agreements, Tax indemnity agreements and similar
agreements to which OTEF is a party are disclosed on Schedule 4.12 hereto.
l. OTEF does not own (as determined for purposes of Section 856 of the Code
and with the same meaning as used in the Investment Company Act of 1940, as
amended), directly or indirectly, (i) securities (other than real estate assets
within the meaning of Section 856(c)(5)(B) of the Code) possessing more than 10
percent (10%) of the total voting power of any issuer, or (ii) securities (other
than real estate assets within the meaning of Section 856(c)(5)(B) of the Code)
having a value of more than ten percent (10%) of the total value of the
outstanding securities of any issuer, other than securities satisfying the
straight debt safe harbor of Section 856(c)(7) of the Code.
m. OTEF has not made an election under Section 754 of the Code.
SECTION 4.13 Opinion of the Independent Real Estate Consultant. The OTEF
Managing General Partner has received the opinion of the Independent Real Estate
Consultant, dated as of November 29, 2000 (the "Fairness Opinion"), to the
effect that, as of such date, the Merger is fair to OTEF, the Merger is fair to
the OTEF BAC Holders and the OTEF Associate General Partner from a financial
point of view and OTEF's publicly reported book value per BAC for the quarter
ended September 30, 2000 was fairly computed, and a copy of the Fairness Opinion
has been delivered to AIMCO, and such opinion has not been withdrawn or
modified.
SECTION 4.14 Advisers to Independent Directors. As of the date of this
Agreement, the OTEF Managing General Partner, on behalf of the independent
directors on its board of directors, has retained PricewaterhouseCoopers LLP and
Kirkpatrick & Lockhart LLP to provide information to the independent directors
with respect to this Agreement and the Merger.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF AIMCO, AIMCO OP AND AIMCO/OTEF
AIMCO, AIMCO OP and AIMCO/OTEF hereby represent and warrant, jointly and
severally, to OTEF that:
SECTION 5.1 Organization and Qualifications; Subsidiaries. Each of AIMCO,
AIMCO OP and AIMCO/OTEF is a corporation, limited partnership or limited
liability company duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization and has the
requisite power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing or in good
standing or to have such power, authority and governmental approvals would not,
individually or in the aggregate, have a Material Adverse Effect on AIMCO, AIMCO
OP or
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AIMCO/OTEF. Each of AIMCO, AIMCO OP and AIMCO/OTEF is duly qualified or licensed
as a foreign corporation or partnership to transact business, and is in good
standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except for such failures to be so qualified or licensed
and in good standing that would not, individually or in the aggregate, have a
Material Adverse Effect on AIMCO, AIMCO OP or AIMCO/OTEF.
SECTION 5.2 Charter and Bylaws of AIMCO. Complete and correct copies of
the charter and bylaws of AIMCO, as amended and supplemented to date, have been
filed (or incorporated by reference) as exhibits 3.1 and 3.2, respectively, to
AIMCO's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000.
Such Organizational Documents are in full force and effect and AIMCO is not in
violation of any provision of its Organizational Documents.
SECTION 5.3 Organizational Document of AIMCO OP. AIMCO OP has furnished
to OTEF true and complete copies of its Certificate of Limited Partnership and
Agreement of Limited Partnership, as in effect on the date of this Agreement.
Such Organizational Documents are in full force and effect, and AIMCO OP is not
in violation of any provision of its Organizational Documents.
SECTION 5.4 Organizational Documents of AIMCO/OTEF. AIMCO/OTEF has
furnished to OTEF true and complete copies of its Articles of Organization and
the AIMCO/OTEF Operating Agreement, as in effect on the date of this Agreement.
Such Organizational Documents are in full force and effect and AIMCO/OTEF is not
in violation of any provision of its Organizational Documents.
SECTION 5.5 Capitalization. As of September 30, 2000, the capitalization
of AIMCO is as set forth in its Quarterly Report on Form 10-Q for the quarter
ended September 30, 2000, as filed with the SEC.
SECTION 5.6 Authority Relative to This Agreement. Each of AIMCO, AIMCO OP
and AIMCO/ OTEF has all necessary power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
Transactions, other than such authority as will be obtained prior to the
Closing. The execution and delivery of this Agreement by AIMCO, AIMCO OP and
AIMCO/OTEF, the performance by AIMCO, AIMCO OP and AIMCO/OTEF of their
respective obligations hereunder and the consummation by AIMCO, AIMCO OP and
AIMCO/OTEF of the Transactions have been duly and validly authorized by all
necessary action and no other proceedings on the part of AIMCO, AIMCO OP or
AIMCO/OTEF are necessary to authorize this Agreement or to consummate the
Transactions (other than the filing of the Articles of Merger), other than such
action or proceedings as will be completed prior to the Closing of the Merger.
This Agreement has been duly and validly executed and delivered by AIMCO, AIMCO
OP and AIMCO/OTEF and, assuming the due authorization, execution and delivery
thereof by OTEF, constitutes the legal, valid and binding obligation of AIMCO,
AIMCO OP and AIMCO/OTEF, enforceable against AIMCO, AIMCO OP and AIMCO/ OTEF in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other similar
laws relating to creditors' rights generally and by equitable principles to
which the remedies of specific performance and injunctive and similar forms of
relief are subject.
SECTION 5.7 No Conflict; Required Filings and Consents. The execution and
delivery of this Agreement by AIMCO, AIMCO OP and AIMCO/OTEF do not, and the
performance of their respective obligations under this Agreement and the
consummation of the Transactions by AIMCO, AIMCO OP and AIMCO/OTEF will not, (a)
conflict with, result in a breach of, cause a dissolution or require the consent
or approval of any Person under, or violate any provision of, the Organizational
Documents of AIMCO, AIMCO OP or AIMCO/OTEF, (b) require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Authority, except for (i) applicable requirements, if any, of the Exchange Act,
the Securities Act or the Blue Sky Laws, and (ii) the filing or the Articles of
Merger, (c) subject to the making of the filings and obtaining the approvals
identified in clause (b), conflict with or violate any Law, judgment, order,
writ, injunction or decree applicable to AIMCO, AIMCO OP or AIMCO/OTEF or by
which any property or asset of AIMCO, AIMCO OP or AIMCO/
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OTEF is bound or affected, or (d) conflict with or result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, result in the loss by AIMCO, AIMCO OP or
AIMCO/OTEF or modification in a manner adverse to AIMCO, AIMCO OP or AIMCO/OTEF
of any right or benefit under, or give to others any right of termination,
amendment, acceleration, repurchase or repayment, increased payments or
cancellation of, or result in the creation of a Lien or other encumbrance on any
securities issued by, or any property or asset of, AIMCO, AIMCO OP or AIMCO/OTEF
pursuant to, any Contract of AIMCO, AIMCO OP or AIMCO/OTEF, except, in each
case, such as would not prevent or delay AIMCO, AIMCO OP or AIMCO/OTEF from
performing its obligations under this Agreement in any material respect, and
would not, individually or in the aggregate, have a Material Adverse Effect on
AIMCO.
SECTION 5.8 Compliance. Neither AIMCO, AIMCO OP nor AIMCO/OTEF is in
conflict with, or in default or violation of, (a) any Law applicable to such
Person or by which any property or asset of such Person is bound or affected, or
(b) any Contract to which AIMCO, AIMCO OP or AIMCO/OTEF is a party or by which
such Person or any property or asset of such Person is bound or affected, except
for any such conflicts, defaults or violations that would not, individually or
in the aggregate, have a Material Adverse Effect on AIMCO or AIMCO OP.
SECTION 5.9 SEC Reports and Financial Statements. Each form, report,
schedule, registration statement and definitive proxy statement filed by AIMCO
with the SEC since November 15, 1999 and prior to the date hereof (as such
documents have been amended prior to the date hereof, the "AIMCO SEC Reports"),
as of their respective dates, complied in all material respects with the
applicable requirements of the Securities Act and the Exchange Act and the rules
and regulations thereunder. None of the AIMCO SEC Reports, as of their
respective dates, contained or contains any untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, except for such statements, if any, as have been modified
or superseded by subsequent filings prior to the date hereof. AIMCO has made
available to OTEF true, accurate and complete copies of all of the AIMCO SEC
Reports. The consolidated financial statements of AIMCO and its subsidiaries
included in such reports comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with GAAP
(except as may be indicated in the notes thereto or, in the case of the
unaudited interim financial statements, as permitted by Form 10-Q of the SEC)
and fairly present (subject, in the case of the unaudited interim financial
statements, to normal, year-end audit adjustments) in all material respects the
consolidated financial position of AIMCO and its subsidiaries as at the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended. Since December 31, 1999, AIMCO has not incurred any
liabilities or obligations (whether absolute, accrued, fixed, contingent,
liquidated, unliquidated or otherwise and whether due or to become due) of any
nature, except liabilities, obligations or contingencies (a) which are reflected
on the consolidated balance sheet of AIMCO and its subsidiaries as at December
31, 1999 (including the notes thereto) or (b) which (i) were incurred in the
ordinary course of business after December 31, 1999 and consistent with past
practices, or (ii) are disclosed in the AIMCO SEC Reports filed after December
31, 1999. Since November 15, 1999, AIMCO has timely filed with the SEC all
forms, reports and other documents required to be filed prior to the date
hereof, pursuant to the Securities Act, the Exchange Act or the rules and
regulations thereunder. Since December 31, 1999, there has been no change in any
of the significant accounting (including tax accounting) policies, practices or
procedures of AIMCO.
SECTION 5.10 Absence of Certain Changes or Events. Except as contemplated
by this Agreement or as disclosed in any AIMCO SEC Report, since December 31,
1999, (a) AIMCO and its subsidiaries have conducted their respective businesses
only in the ordinary course, consistent with past practice, and (b) there has
not occurred or arisen any event that, individually or in the aggregate, has had
or, insofar as reasonably can be foreseen, is likely in the future to have, a
Material Adverse Effect on AIMCO other than events or developments generally
affecting the industry in which AIMCO operates.
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SECTION 5.11 Litigation. Except as disclosed in the AIMCO SEC Reports,
there are no claims, suits, actions or proceedings pending or, to AIMCO's
knowledge, threatened or contemplated, nor are there any investigations or
reviews by any Governmental Authority pending or, to AIMCO's knowledge,
threatened or contemplated, against, relating to or affecting AIMCO or any of
its subsidiaries, which could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on AIMCO or AIMCO OP, or to prohibit or
materially restrict the consummation of the Transactions, nor is there any
judgment, decree, order, injunction, writ or rule of any Governmental Authority
or any arbitrator outstanding against AIMCO or any of its subsidiaries having,
or which, insofar as can be reasonably foreseen, in the future is likely to
have, a Material Adverse Effect on AIMCO or AIMCO OP. In addition, there have
not been any developments with respect to any of the claims, suits, actions,
proceedings, investigations or reviews disclosed in the AIMCO SEC Reports which,
insofar as can be reasonably foreseen, in the future are likely to have a
Material Adverse Effect on AIMCO or AIMCO OP.
SECTION 5.12 Authorization for AIMCO Common Stock and AIMCO Preferred
Stock. The shares constituting the Share Consideration will, when issued, be
duly authorized, validly issued, fully paid and nonassessable, and no
stockholder of AIMCO will have any preemptive right or similar rights of
subscription or purchase in respect thereof. The shares constituting the Share
Consideration will be registered under the Securities Act and will be registered
or exempt from registration under all applicable state securities laws, and such
shares will, when issued, be approved for listing on the NYSE, subject to
official notice of issuance.
SECTION 5.13 AIMCO Registration Statement. The information supplied or to
be supplied by AIMCO or its Representatives for inclusion in the AIMCO
Registration Statement will not, either at the time such document is filed with
the SEC, at the time any amendment thereof or supplement thereto is filed with
the SEC, or at the time it becomes effective under the Securities Act or at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading. The AIMCO Registration Statement will comply
in all material respects with the provisions of the Securities Act, the Exchange
Act and the rules and regulations promulgated thereunder.
SECTION 5.14 Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
Transactions based on any arrangement or agreement made by or on behalf of
AIMCO.
SECTION 5.15 REIT Status. AIMCO has been organized and operated in
conformity with the requirements for qualification as a real estate investment
trust under the Code for its taxable years ended December 31, 1997, 1998 and
1999, AIMCO's present and proposed method of operation will enable it to
continue to meet the requirements for qualification as a real estate investment
trust under the Code, and the consummation of the transactions contemplated by
this Agreement will not adversely affect AIMCO's ability to continue to meet
such requirements.
ARTICLE 6
COVENANTS
SECTION 6.1 Notification of Certain Matters. Each of the parties hereto
shall give prompt notice to the other parties hereto of (a) the occurrence or
nonoccurrence of any event the occurrence or nonoccurrence of which would be
likely to cause (i) any representation or warranty contained in this Agreement
to be untrue or inaccurate in any material respect, or (ii) any covenant,
condition or agreement contained in this Agreement not to be complied with or
satisfied and (b) any failure of such party to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder. The delivery of any notice pursuant to this Section 6.1 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
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SECTION 6.2 Further Action, Reasonable Efforts; Consents and
Approvals. Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use commercially reasonable efforts to take, or cause to be
taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations and
otherwise to consummate and make effective the transactions contemplated hereby,
including, without limitation, using commercially reasonable efforts to obtain
all licenses, permits, consents, approvals, authorizations, certificates,
qualifications and orders of, and make all filings and required submissions
with, all Governmental Authorities, and all shareholders, lenders and partners
of, and parties to Contracts with, AIMCO, AIMCO OP, AIMCO/OTEF, OTEF or any
other Person, in each case, as are necessary or desirable for the consummation
of the transactions contemplated hereby (collectively "Consents"). OTEF shall,
as soon as possible prior to the Closing, deliver to AIMCO copies of all
Consents obtained by OTEF. AIMCO shall, as soon as possible prior to the
Closing, deliver to OTEF copies of all Consents obtained by AIMCO. In case at
any time after the Closing Date any further action is necessary or desirable to
carry out the purposes of this Agreement, AIMCO and OTEF shall use commercially
reasonable efforts to take all such action. Prior to the Closing, each party
shall use its best efforts not to take any action, or enter into any
transaction, that would cause any of its representations or warranties contained
in this Agreement to be untrue.
SECTION 6.3 Conduct of Business by OTEF Pending the Closing. From the
date hereof through the Closing, except as expressly permitted or contemplated
by this Agreement, unless AIMCO shall otherwise agree in writing prior to the
taking of any action prohibited by the terms of this Section 6.3, OTEF shall
conduct its operations and business in the ordinary, usual and regular course of
business and consistent with past practice and use commercially reasonable
efforts to keep available the services of its present officers and key employees
and preserve the goodwill and business relationships with all Persons having
business relationships with it. In addition, OTEF shall make a quarterly
distribution of at least $0.565 per BAC on each regularly scheduled distribution
date occurring during the first two quarters of 2001 (in respect of
distributions for the last quarter of 2000 and the first quarter of 2001), if
the Closing has not occurred prior to such distribution date.
SECTION 6.4 Access to Information. From the date hereof to the Effective
Time, each of AIMCO and OTEF shall (and shall cause their respective
subsidiaries and Representatives to) afford the Representatives of the other
party reasonable access at all reasonable times to its officers, employees,
agents, properties, offices, plants and other facilities, books, records and Tax
Returns, and shall furnish such Representatives with all financial, operating
and other data and information as may be reasonably requested.
SECTION 6.5 No Solicitation.
a. Neither OTEF nor the OTEF Managing General Partner shall, and each of
OTEF and the OTEF Managing General Partner shall cause each of its and their
respective officers, directors, employees, representatives (including investment
bankers, attorneys and accountants retained by or on behalf of either OTEF or
the OTEF Managing General Partner), agents or affiliates not to, directly or
indirectly, encourage, solicit, initiate or participate in any way in any
discussions or negotiations with, or provide any information to, or afford any
access to the properties, books or records of OTEF or the OTEF Managing General
Partner to, or otherwise take any other action to assist or facilitate, any
Person or group (other than AIMCO, AIMCO OP or AIMCO/OTEF) concerning any
Acquisition Proposal (as defined below) or that may reasonably be expected to
lead to the making of any Acquisition Proposal, except to the extent required by
law. Notwithstanding the foregoing and subject to compliance with Section 6.5(b)
and the prior execution by such Person or group of a confidentiality agreement
in connection with such matter, OTEF or the OTEF Managing General Partner may
furnish or provide access to information to or enter into discussions or
negotiations with any Person or entity that has made an unsolicited bona fide
Acquisition Proposal that the board of directors of the OTEF Managing General
Partner determines is reasonably likely to constitute or lead to a Superior
Proposal, as defined below, if, and only to the extent that, the board of
directors of the OTEF Managing General Partner, after consultation with outside
legal counsel to the OTEF Managing General Partner, determines in good faith
that failure to do so could result
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in a breach of the fiduciary duty of the board of directors of the OTEF Managing
General Partner to OTEF's security holders under applicable law.
b. The OTEF Managing General Partner will promptly (and in any event within
24 hours) notify AIMCO, orally and in writing, if any such information is
requested or any such negotiations or discussions are sought to be initiated and
will promptly communicate to AIMCO the identity of the Person or group making
such request or inquiry (the "Potential Acquiror") and all other terms of such
request, inquiry or Acquisition Proposal. Such notification shall include copies
of any written communications received from the Potential Acquiror, unless the
OTEF Managing General Partner is prohibited from doing so. If the OTEF Managing
General Partner (or any of its officers, directors, employees, representatives,
agents or affiliates) participates in discussions or negotiation with, or
provides information to, a Potential Acquiror, the OTEF Managing General Partner
will keep AIMCO advised on a current basis of any developments with respect
thereto.
c. The OTEF Managing General Partner will, and will cause each of its
officers, directors, employees, representatives, agents and affiliates to,
immediately cease and cause to be terminated any existing activities,
discussions, or negotiations with any Persons other than AIMCO, AIMCO OP,
AIMCO/OTEF or any of their respective affiliates or associates conducted prior
to the date hereof with respect to any Acquisition Proposal and shall notify any
such Person with whom it has had any such discussions during the prior 60 days
that the OTEF Managing General Partner is no longer seeking the making of any
Acquisition Proposal and withdraws any request or consent theretofore given to
the making of an Acquisition Proposal.
d. Nothing contained in this Section 6.5 shall prohibit the OTEF Managing
General Partner or its board of directors from taking and disclosing to OTEF's
security holders a position with respect to a tender offer by a third party
pursuant to Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act.
e. For purposes of this Agreement, (i) "Acquisition Proposal" means any
offer or proposal, or any indication of interest in making an offer or proposal,
made by a Person or group at any time which is (A) structured to permit such
Person or group to acquire beneficial ownership of all or a substantial portion
of the assets or businesses of, or at least 20% of the equity interest in, OTEF
pursuant to a merger, consolidation or other business combination, sale of
shares of capital stock, sale of assets, tender offer or exchange offer or
similar transaction, including any single or multi-step transaction or series of
related transactions, in each case other than the Merger or (B) relates to any
other transaction the consummation of which would reasonably be expected to
impede, interfere with, prevent or materially delay the Transactions and (ii)
"Superior Proposal" means any unsolicited, bona fide Acquisition Proposal made
in writing in respect of which the board of directors of the OTEF Managing
General Partner has reasonably determined in good faith that (A) the Potential
Acquiror has the financial wherewithal to consummate such Acquisition Proposal,
(B) such Acquisition Proposal would, if consummated, result in a transaction
that is more favorable to OTEF's security holders (other than AIMCO and its
Affiliates) than the Merger from a financial point of view and (C) the board of
directors is not aware of any substantial impediments to closing such
Acquisition Proposal, and the determinations in clauses (A) and (B) have been
made after receiving the advice of the independent advisers to the board of
directors with respect to such matters.
f. If AIMCO or AIMCO OP terminates this Agreement pursuant to Section
8.1(d) hereof, or if OTEF terminates this Agreement pursuant to Section 8.1(e)
hereof, then, if the transaction set forth in the applicable Superior Proposal
closes within one year of such termination, OTEF shall pay to AIMCO OP
$5,000,000 in same date funds, plus (notwithstanding paragraph 9.5 hereof)
non-accountable fees and expenses of $1,000,000 (all amounts owed pursuant to
this Section 6.5(f), the "Indemnifiable Amount").
g. Notwithstanding the foregoing, in no event shall the amount paid to
AIMCO OP pursuant to Section 6.5(f) in any tax year exceed the maximum amount
that can be paid to AIMCO OP in such year without causing AIMCO to fail to meet
the requirements of Sections 856(c)(2) and (3) of the Code (the "REIT
Requirements") for such year, determined as if the payment of such amount did
not constitute income described in Section 856(c)(2)(A)-(H) and 856(c)(3)(A)-(I)
of the Code ("Qualifying Income") as determined by independent accountants to
AIMCO. If the amount payable for any tax year
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under the preceding sentence is less than the amount which OTEF would otherwise
be obligated to pay to AIMCO OP pursuant to Section 6.5(f), OTEF shall place the
remaining portion of the Indemnifiable Amount in escrow and shall not release
any portion thereof to AIMCO OP, and AIMCO OP shall not be entitled to any such
amount, unless and until OTEF receives either (i) an opinion of AIMCO's tax
counsel to the effect that such amount, if and to the extent paid, would not
constitute gross income which is not Qualifying Income or (ii) a letter from
AIMCO's independent accountants indicating the maximum amount that can be paid
at that time to AIMCO without causing AIMCO to fail to meet the REIT
Requirements for any relevant taxable year, together with either an IRS Ruling
issued to AIMCO or an opinion of AIMCO's tax counsel to the effect that such
payment would not be treated as includible in the income of AIMCO for any prior
taxable year, in which event OTEF shall pay such maximum amount. OTEF's
obligation to pay any unpaid portion of the Indemnifiable Amount shall terminate
ten years from the date of this Agreement, and OTEF shall have no obligation to
make any further payments notwithstanding that the entire Indemnifiable Amount
has not been paid as of such date.
SECTION 6.6 AIMCO Registration Statement and Prospectus.
a. As promptly as practicable after the execution of this Agreement, AIMCO
shall prepare and file with the SEC a registration statement on Form S-4
(together with all amendments thereto, the "AIMCO Registration Statement"), in
connection with the registration under the Securities Act of the shares of AIMCO
Common Stock and AIMCO Preferred Stock to be issued pursuant to the Merger.
AIMCO (i) shall cause the AIMCO Registration Statement to comply as to form in
all material respects with the applicable provisions of the Securities Act, the
Exchange Act and the rules and regulations thereunder, (ii) shall use
commercially reasonable efforts to have or cause the AIMCO Registration
Statement to become effective as promptly as practicable, and (iii) shall take
any and all action required under any applicable Federal or state securities
laws in connection with the issuance of shares of AIMCO Common Stock and AIMCO
Preferred Stock pursuant to the Merger.
b. The information supplied by AIMCO and OTEF for inclusion in the AIMCO
Registration Statement shall not (i) at the time the AIMCO Registration
Statement is declared effective, (ii) at the time the prospectus included
therein (or any amendment thereof or supplement thereto) is first mailed to the
partners and beneficial interest holders of OTEF, or (iii) at the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading. If, at any time prior to the Effective Time,
any event or circumstance relating to OTEF or AIMCO should be discovered by such
party which should be set forth in an amendment or a supplement to the AIMCO
Registration Statement or the prospectus included therein, such party shall
promptly inform the other thereof and take appropriate action in respect
thereof.
SECTION 6.7 Public Announcements. At all times at or before the Closing,
the parties hereto shall not issue or make, directly or indirectly, any reports,
statements or releases to the public with respect to this Agreement or the
transactions contemplated hereby without the prior written consent of the other
parties; provided, however, that each party may, without the prior written
consent of the other parties, issue or make, directly or indirectly, any report,
statement or release required by Law, its fiduciary obligations or any listing
agreement or arrangement to which such Person is a party with a national
securities exchange if to the extent practicable and otherwise permissible the
other parties to this Agreement are so notified as soon as possible in advance
of such report, statement or release.
SECTION 6.8 Blue Sky. AIMCO shall use its best efforts to obtain prior to
the Effective Time all approvals or permits required to carry out the
transactions contemplated hereby under applicable Blue Sky Laws in connection
with the issuance of shares of AIMCO Common Stock and AIMCO Preferred Stock in
the Merger and as contemplated by this Agreement; provided, however, that with
respect to such qualifications neither AIMCO nor the Surviving Partnership shall
be required to register or qualify as a foreign corporation or partnership or to
take any action which would subject it to general service of process or taxation
in any jurisdiction where any such entity is not now so subject.
SECTION 6.9 NYSE Listing. AIMCO shall promptly prepare and submit to the
NYSE listing applications covering the shares of AIMCO Common Stock and AIMCO
Preferred Stock to be issued in
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the Merger, and shall use its best efforts to cause such shares to be approved
for listing and trading on the NYSE prior to the Effective Time, subject to
official notice of issuance.
SECTION 6.10 Indemnification with Respect to the AIMCO Registration
Statement.
a. Each party hereto shall (i) indemnify (in such role, an "Indemnifying
Party") and hold harmless each other party and their respective directors,
officers and controlling persons (each such Person, an "Indemnified Party")
against any and all loss, liability, claim, damage and expense whatsoever to
which an Indemnified Party may become subject, under the Securities Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of any untrue statement or
alleged untrue statement of a material fact contained in the AIMCO Registration
Statement, the Prospectus/Information Statement contained therein, or any
amendment or supplement thereto, or any preliminary prospectus/information
statement, or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading; and (ii) will reimburse the Indemnified Party for any legal or other
expenses reasonably incurred by the Indemnified Party in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that OTEF shall be liable under
this Section 6.10 only for information relating to OTEF included or incorporated
by reference in the Prospectus/Information Statement.
b. Promptly after receipt by an Indemnified Party under this Section 6.10
of notice of any claim or the commencement of any action, the Indemnified Party
shall, if a claim in respect thereof is to be made against the Indemnifying
Party under this Section 6.10, promptly notify the Indemnifying Party in writing
of the claim or the commencement of the action; provided, however, that the
failure to notify or a delay in notifying the Indemnifying Party shall not
relieve it from any liability which it may have to an Indemnified Party under
this Section 6.10 except to the extent that such Indemnifying Party is
prejudiced thereby. If any such claim or action shall be brought against an
Indemnified Party, and it shall notify the Indemnifying Party thereof, the
Indemnifying Party shall be entitled to participate therein, and, to the extent
that it wishes, jointly with any other similarly notified Indemnifying Party, to
assume the defense thereof with counsel reasonably satisfactory to the
Indemnified Party. After notice from the Indemnifying Party to the Indemnified
Party of its election to assume the defense of such claim or action, the
Indemnifying Party shall not be liable to the Indemnified Party under this
Section 6.10 for any legal or other expenses subsequently incurred by the
Indemnified Party in connection with the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party
unless (i) the employment thereof has been specifically authorized by the
Indemnifying Party in writing, (ii) such Indemnified Party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
Indemnifying Party and in the reasonable judgment of such counsel it is
advisable for such Indemnified Party to employ separate counsel or (iii) the
Indemnifying Party has failed to assume the defense of such claim or action and
employ counsel reasonably satisfactory to the Indemnified Party, in which case,
if such Indemnified Party notifies the Indemnifying Party in writing that it
elects to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense of such claim
or action on behalf of such Indemnified Party; it being understood, however,
that the Indemnifying Party shall not, in connection with any one such claim or
action or separate but substantially similar or related claims or actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate firm of
attorneys at any time for all such Indemnified Parties, which firm shall be
designated in writing by such Indemnified Parties. Each Indemnified Party, as a
condition of the indemnity agreements contained herein shall use its best
efforts to cooperate with the Indemnifying Party in the defense of any such
claim or action. The Indemnifying Party shall not be liable for any settlement
of any such claim or action effected without its written consent (which consent
shall not be unreasonably withheld), but if settled with its written consent or
if there be a final judgment in favor of the plaintiff in any such claim or
action, the Indemnifying Party agrees to indemnify and hold harmless any
Indemnified Party from and against any loss or liability by reason of such
settlement or judgment.
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SECTION 6.11 Directors', Officers' and Employees' Indemnification.
a. From and after the date hereof, AIMCO, AIMCO OP and, from and after the
Effective Time, the Surviving Partnership shall, jointly and severally,
indemnify, defend and hold harmless the directors, officers and employees (as of
the date hereof) of the OTEF Managing General Partner (each, an "Indemnitee")
against all losses, expenses (including attorneys fees and the reasonable time
of the party), claims, damages, liabilities or amounts ("Losses") that are paid
in settlement (provided that such settlement has been approved by AIMCO, such
approval not to be unreasonably withheld) of, or otherwise in connection with,
(i) any investigation, threatened claim or claim by any Governmental Authority
arising from, based on or related to actions taken or omitted to be taken by
AIMCO (or its predecessors in interest) or its employees or agents at or prior
to the Closing; provided, however, AIMCO will not settle any matter described in
this Section 6.11(a) without obtaining the consent of any affected Indemnitee,
which consent shall not unreasonably be withheld so long as such settlement does
not involve the payment of money by such affected Indemnitee or other sanction
or anything else that could negatively affect such Indemnitee; (ii) actions
taken or omitted to be taken by any Indemnitee in connection with, or relating
in any way to, the approval or execution of this Agreement by any party hereto
or the closing of any transactions contemplated by this Agreement or any action
or omission taken or suffered to occur in anticipation thereof, including
without limitation, the failure to request or obtain any consents, to deliver
any documents required to be delivered, or to notify any Person of the execution
of this Agreement or the closing of the transactions contemplated by this
Agreement, notwithstanding any conflicts of interest the Indemnitee may have as
a result of his or her position with more than one of the parties hereto; and
(iii) any liability, obligation, claim, demand and other amounts arising from or
relating to such Person's capacity as a director, officer or employee of the
OTEF Managing General Partner, AIMCO, the AIMCO OP General Partner or the
Managing Member of AIMCO/OTEF and arising out of actions or omissions relating
to OTEF occurring at or prior to the Effective Time, in each case, to the full
extent permitted under OTEF's Organizational Documents, including the provisions
related to advancement of expenses, or any Contract (to the extent permitted by
applicable law) as in effect on the date of this Agreement and without regard to
any amendment made hereafter, provided, however, that notwithstanding the
foregoing references to OTEF's Organizational Documents or to any Contract, such
indemnification, including advancement of expenses, shall be made to the fullest
extent permitted under applicable law.
b. The provisions of this Section 6.11 shall survive the consummation of
the Merger and expressly are intended to benefit each of the Indemnitees.
SECTION 6.12 Redemption of OTEF SQBs. OTEF shall, prior to the Closing
Date, redeem all of the outstanding OTEF SQBs for cash at a rate of $860.25 per
OTEF SQB (the "Redemption").
SECTION 6.13 Declaration of Special Distribution. OTEF shall, prior to
the Closing Date, declare a special cash distribution (the "Special
Distribution") on the OTEF BACs in an aggregate amount of $50,000,000.
ARTICLE 7
CONDITIONS TO THE MERGER
SECTION 7.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to this Agreement to effect
the Merger shall be subject to the following conditions:
a. No action shall have been taken, and no statute, rule, regulation,
executive order, judgment, decree, or injunction shall have been enacted,
entered, promulgated or enforced (and not repealed, superseded, lifted or
otherwise made inapplicable), by any court of competent jurisdiction or
Governmental Authority which restrains, enjoins or otherwise prohibits the
consummation of the transactions contemplated by this Agreement (each party
agreeing to use its commercially reasonable efforts to avoid the effect of any
such statute, rule, regulation, temporary restraining order or order or to have
any such order, judgment, decree, temporary restraining order or injunction
lifted).
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b. The AIMCO Registration Statement shall have become effective in
accordance with the provisions of all applicable Federal securities laws, rules
and regulations, and no stop order suspending such effectiveness shall have been
issued and remain in effect. AIMCO shall have received all state securities or
"blue sky" permits and other authorizations necessary to issue and distribute
the AIMCO Common Stock and AIMCO Preferred Stock pursuant to this Agreement.
c. The shares of AIMCO Common Stock and AIMCO Preferred Stock shall have
been approved for listing on the NYSE, subject only to official notice of
issuance.
d. The Independent Real Estate Consultant shall not have withdrawn the
Fairness Opinion.
e. The Redemption shall have been effected.
f. The Special Distribution shall have been paid or provision shall have
been made for the distribution thereof.
g. The Articles Supplementary shall have been filed with the Maryland State
Department of Assessments and Taxation.
h. Each of AIMCO, AIMCO OP and OTEF shall have taken such corporate or
limited partnership action as may be necessary to allow such entity to comply in
all material respects with its obligations under this Agreement.
SECTION 7.2 Conditions to Obligation of OTEF to Effect the Merger. The
obligation of OTEF to effect the Merger is subject to the satisfaction of the
following conditions, unless waived in writing by OTEF:
a. The representations and warranties of AIMCO and AIMCO/OTEF contained
herein that are qualified as to materiality shall be true and accurate, and
those not so qualified shall be true and accurate in all material respects, in
each case, at and as of the Effective Time with the same force and effect as
though made at and as of the Effective Time (except to the extent a
representation or warranty speaks specifically as of an earlier date or except
as contemplated by this Agreement); provided, that any representation and
warranty that is true and accurate as of the date hereof (or such earlier date
as set forth above) shall be deemed to be true and accurate at and as of the
Effective Time except to the extent that AIMCO or any of its subsidiaries shall
have taken any voluntary action completely within the control of such person
that has been the principal cause of such representation or warranty not being
true and accurate; and provided, further, that the representations and
warranties set forth in Section 5.10 shall be true and accurate only as of the
date hereof.
b. AIMCO, AIMCO OP and AIMCO/OTEF shall have performed, in all material
respects, all obligations and complied, in all material respects, with all
covenants required by this Agreement to be performed or complied with by them
prior to the Effective Time.
c. AIMCO shall have delivered to OTEF a certificate, dated the Effective
Time and signed by a senior executive officer, evidencing compliance with
Sections 7.2(a) and (b).
d. AIMCO shall have transferred to AIMCO OP the number of shares of AIMCO
Common Stock and AIMCO Preferred Stock to be issued in the Merger, and AIMCO OP
shall have deposited the Merger Consideration with the Exchange Agent.
SECTION 7.3 Conditions to Obligations of AIMCO, AIMCO OP and AIMCO/OTEF to
Effect the Merger. The obligations of AIMCO, AIMCO OP and AIMCO/OTEF to effect
the Merger are subject to the satisfaction of the following conditions, unless
waived by AIMCO, AIMCO OP and AIMCO/ OTEF:
a. The representations and warranties of OTEF contained herein that are
qualified as to materiality shall be true and accurate, and those not so
qualified shall be true and accurate in all material respects, in each case at
and as of the Effective Time with the same force and effect as though made at
and as of the Effective Time (except to the extent a representation or warranty
speaks specifically as of an earlier date
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or except as contemplated by this Agreement); provided, that any representation
and warranty that is true and accurate as of the date hereof (or such earlier
date as set forth above) shall be deemed to be true and accurate at and as of
the Effective Time except to the extent that OTEF shall have taken any voluntary
action completely within its control that has been the principal cause of such
representation or warranty not being true and accurate; and provided, further,
that the representations and warranties set forth in Section 4.9 shall be true
and accurate only as of the date hereof.
b. OTEF shall have performed, in all material respects, all obligations and
complied, in all material respects, with all covenants required by this
Agreement to be performed or complied with by it prior to the Effective Time.
c. OTEF shall have delivered to AIMCO a certificate, dated the Effective
Time and signed by the OTEF Managing General Partner, evidencing compliance with
Sections 7.3(a) and (b).
d. OTEF shall have received an opinion of counsel to the effect that the
Merger may be consummated by OTEF without a vote of the OTEF BAC Holders.
ARTICLE 8
TERMINATION, WAIVER, AMENDMENT AND CLOSING
SECTION 8.1 Termination. This Agreement may be terminated and abandoned
at any time prior to the Effective Time:
a. by the mutual written consent of OTEF, AIMCO and AIMCO OP;
b. by OTEF or AIMCO or AIMCO OP, if (i) the Effective Time shall not have
occurred on or before the Outside Date, (ii) any Governmental Authority, the
consent of which is a condition to the obligations of OTEF, AIMCO, AIMCO OP and
AIMCO/OTEF to consummate the Transactions, shall have determined not to grant
its consent and all appeals of such determination shall have been taken and have
been unsuccessful or (iii) any court of competent jurisdiction shall have issued
an order, judgment or decree restraining, enjoining or otherwise prohibiting the
Merger and such order, judgment or decree shall have become final and
nonappealable; provided, however, that the right to terminate this Agreement
pursuant to clause (i) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or resulted
in, the failure of the Effective Time to occur on or before such date;
c. by OTEF, if there has been a material breach by AIMCO or AIMCO OP of any
representation, warranty, covenant or agreement set forth in this Agreement,
which breach has not been cured within ten (10) Business Days following receipt
by AIMCO or AIMCO OP of notice of such breach from OTEF; provided, however, that
the right to terminate this Agreement pursuant to this Section 8.1(c) shall not
be available to OTEF if OTEF, at such time, is in material breach of any
representation, warranty, covenant or agreement set forth in this Agreement;
d. by AIMCO or AIMCO OP, if there has been a material breach by OTEF of any
representation, warranty, covenant or agreement set forth in this Agreement,
which breach has not been cured within ten (10) Business Days following receipt
by OTEF of notice of such breach from AIMCO or AIMCO OP; provided, however, that
the right to terminate this Agreement pursuant to this Section 8.1(d) shall not
be available to AIMCO or AIMCO OP if either AIMCO or AIMCO OP, at such time, is
in material breach of any representation, warranty, covenant or agreement set
forth in this Agreement;
e. by OTEF, if OTEF is in compliance with its obligations under Section
6.5, and if the board of directors of the OTEF Managing General Partner has
determined to accept a Superior Proposal; and
f. by AIMCO or AIMCO OP if the AIMCO Floor Price is less than $40 per share
or by OTEF upon the direction of the Independent Directors, acting together in
their capacities as the independent directors of the OTEF Managing General
Partner, if the AIMCO Floor Price is less than $40 per share.
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SECTION 8.2 Effect of Termination. In the event of termination of this
Agreement by OTEF, AIMCO or AIMCO OP as provided in Section 8.1, this Agreement
shall forthwith become void (except for Sections 6.10, 6.11, 8.2, 9.1, 9.2, 9.4,
9.5, 9.6, 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13 and 9.14 ) and there shall be no
liability on the part of the parties hereto or their respective officers or
directors or managing partners, except for any breach of a party's obligations
under Sections 6.10, 6.11, 8.2, 9.5, 9.6, 9.9, 9.12, 9.13 and 9.14.
Notwithstanding the foregoing, no party hereto shall be relieved from liability
for any willful, material breach of this Agreement.
SECTION 8.3 Extension of Time, Waiver, Etc. At any time prior to the
Effective Time:
a. AIMCO or AIMCO OP may extend the time for the performance of any of the
obligations or acts of OTEF, and OTEF may extend the time for the performance of
any of the obligations or acts of AIMCO, AIMCO OP or AIMCO/OTEF;
b. AIMCO or AIMCO OP may waive any inaccuracies in the representations and
warranties of OTEF contained herein or in any document delivered pursuant
hereto, and OTEF may waive any inaccuracies in the representations and
warranties of AIMCO or AIMCO/OTEF contained herein or in any document delivered
pursuant hereto; or
c. AIMCO or AIMCO OP may waive compliance with any of the agreements of
OTEF contained herein, and OTEF may waive compliance with any of the agreements
of AIMCO, AIMCO OP or AIMCO/OTEF contained herein;
provided, however, that no failure or delay by OTEF, AIMCO or AIMCO OP in
exercising any right hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right hereunder.
Any such waiver by AIMCO, AIMCO OP or OTEF shall be in writing and delivered to
the other party.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1 Governing Law. This Agreement and the legal relations among
the parties hereto shall be governed by and construed and enforced in accordance
with the laws of the State of Maryland, without regard to its principles of
conflicts of law.
SECTION 9.2 Entire Agreement. This Agreement, including the exhibits and
schedules attached hereto, constitutes the entire agreement among the parties
pertaining to the subject matter hereof and supersedes all prior agreements,
understandings, letters of intent, negotiations and discussions, whether oral or
written, of the parties, and there are no warranties, representations or other
agreements, express or implied, made to any party by any other party in
connection with the subject matter hereof except as specifically set forth
herein or in the documents delivered pursuant hereto or in connection herewith.
SECTION 9.3 Modification; Waiver. No supplement, modification, extension,
waiver or termination of this Agreement shall be binding unless executed in
writing by the party to be bound thereby. No waiver of any provision of this
Agreement shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided.
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SECTION 9.4 Notices. All notices, consents, requests, reports, demands or
other communications hereunder (collectively, "Notices") shall be in writing and
may be given personally, by registered mail, fax or by Federal Express (or other
reputable overnight delivery service):
if to AIMCO, AIMCO OP or AIMCO/OTEF, to each of them at:
Apartment Investment and Management Company
2000 South Colorado Boulevard, Suite 2-1000
Denver, Colorado 80222
Attention: Patrick J. Foye
Telephone: (303) 691-4313
Fax: (303) 692-0786
with a copy to:
Shaw Pittman
2300 N Street, N.W.
Washington, D.C. 20037
Attention: Robert B. Robbins, Esq.
Telephone: (202) 663-8000
Fax: (202) 663-8007
if to OTEF, to it at:
Oxford Tax Exempt Fund II Corporation
c/o Apartment Investment and Management Company
2000 South Colorado Boulevard, Suite 2-1000
Denver, Colorado 80222
Attention: Patrick J. Foye
Telephone: (303) 691-4313
Fax: (303) 692-0786
with copies to:
Shaw Pittman
2300 N Street, N.W.
Washington, D.C. 20037
Attention: Robert B. Robbins, Esq.
Telephone: (202) 663-8000
Fax: (202) 663-8007
and
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
2nd Floor
Washington, D.C. 20036
Attention: Alan J. Berkeley, Esq.
Telephone: (202) 778-9050
Fax: (202) 778-9100
or to such other address or such other person as the addressee party shall have
last designated by notice to the other party. All Notices shall be deemed to
have been given (i) when delivered personally, (ii) three days after being sent
by registered mail, (iii) upon transmission by fax and receipt of confirmation
of such transmission by the sender's fax machine, or (iv) one day after being
sent by Federal Express (or other reputable overnight delivery service).
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SECTION 9.5 Expenses. Whether or not the transactions contemplated by
this Agreement shall be consummated, all fees and expenses incurred by any party
hereto in connection with this Agreement shall be borne by such party.
SECTION 9.6 Assignment. No party hereto shall have the right, power or
authority to assign or pledge this Agreement or any portion of this Agreement,
or to delegate any duties or obligations arising under this Agreement,
voluntarily, involuntarily, or by operation of law, without the prior written
consent of the other parties hereto.
SECTION 9.7 Survival. None of the representations and warranties in this
Agreement or in any document or instrument delivered pursuant to this Agreement
shall survive the Merger or the termination of this Agreement pursuant to
Article 8.
SECTION 9.8 Severability. Any provision or part of this Agreement which
is invalid or unenforceable in any situation in any jurisdiction shall, as to
such situation and such jurisdiction, be ineffective only to the extent of such
invalidity and shall not affect the enforceability of the remaining provisions
hereof or the validity or enforceability of any such provision in any other
situation or in any other jurisdiction.
SECTION 9.9 Successors and Assigns; Third Parties. Subject to and without
waiver of the provisions of Section 9.6, all of the rights, duties, benefits,
liabilities and obligations of the parties shall inure to the benefit of, and be
binding upon, their respective successors, assigns, heirs and legal
representatives. Except as specifically set forth in Sections 3.1, 3.2, 3.4,
3.5, 6.10 and 6.11, nothing herein expressed or implied is intended or shall be
construed to confer upon or give to any person or entity, other than the parties
hereto and their successors or permitted assigns, any rights or remedies under
or by reason of this Agreement.
SECTION 9.10 Counterparts. This Agreement may be executed in as many
counterparts as may be deemed necessary and convenient, and by the different
parties hereto on separate counterparts each of which, when so executed, shall
be deemed an original, but all such counterparts shall constitute one and the
same instrument.
SECTION 9.11 Interpretation; References. Any use of masculine, feminine
or neuter pronouns herein shall not be limiting, but shall be construed as
referring to persons of any gender, as the context may require. Any use of the
singular or plural form herein shall not be limiting, but shall be construed as
referring to either the plural or singular, as the context may require.
References to an "Article" or a "Section" are, unless otherwise specified, to an
Article or a Section of this Agreement. The Article and Section headings of this
Agreement are for convenience of reference only and shall not be deemed to
modify, explain, restrict, alter or affect the meaning or interpretation of any
provision hereof.
SECTION 9.12 Jurisdiction. The parties hereto hereby agree that any
disputes arising out of, in connection with or with respect to this Agreement,
the subject matter hereof, the performance or non-performance of any obligation
hereunder, or any of the transactions contemplated hereby shall be adjudicated
in a state or federal court of competent civil jurisdiction sitting in the State
of Maryland and nowhere else. Each of the parties hereto hereby irrevocably
submits to the jurisdiction of any such court for the purposes of any suit,
civil action or other proceeding arising out of, in connection with or with
respect to this Agreement, the subject matter hereof, the performance or
non-performance of any obligation hereunder, or any of the transactions
contemplated hereby (each, a "Suit"). To the extent permitted by Law, each of
the parties hereto hereby waives and agrees not to assert by way of motion, as a
defense or otherwise in any such Suit, any claim that it is not subject to the
jurisdiction of the above courts, that such Suit is brought in an inconvenient
forum, that the venue of such Suit is improper or that it is entitled to a trial
by jury.
SECTION 9.13 Attorneys' Fees. In the event that any party hereto brings
an action or proceeding against the other party to enforce or interpret any of
the covenants, conditions, agreements or provisions of this Agreement, the
prevailing party in such action or proceeding shall be entitled to recover all
costs and expenses of such action or proceeding, including, without limitation,
reasonable attorneys' fees, charges, disbursements and the fees and costs of
expert witnesses.
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SECTION 9.14 WAIVER OF JURY TRIAL. EACH PARTY TO THIS AGREEMENT FURTHER
WAIVES ITS RESPECTIVE RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN ANY OF THE PARTIES HERETO
RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT. THE SCOPE OF THIS WAIVER IS
INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY
COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING,
WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, SUPPLEMENTS OR OTHER MODIFICATIONS TO THIS AGREEMENT OR
TO ANY OTHER DOCUMENT OR AGREEMENT RELATING TO THE TRANSACTIONS.
SECTION 9.15 Further Assurances. Each of the parties shall, without
further consideration, use commercially reasonable efforts to execute and
deliver such additional documents and take such other action as the other
parties, or any of them, may reasonably request to carry out the intent of this
Agreement and the Transactions.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
OXFORD TAX EXEMPT FUND II LIMITED
PARTNERSHIP
By: OXFORD TAX EXEMPT FUND II
CORPORATION,
Managing General Partner
By: /s/ PATRICK J. FOYE
--------------------------------
Name: Patrick J. Foye
Title: Executive Vice
President
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
By: /s/ PETER K. KOMPANIEZ
----------------------------------
Name: Peter K. Kompaniez
Title: President
AIMCO PROPERTIES, L.P.
By: AIMCO-GP, INC., General Partner
By:/s/ PETER K. KOMPANIEZ
--------------------------------
Name: Peter K. Kompaniez
Title: President
AIMCO/OTEF, LLC
By: AIMCO Properties, L.P., Managing
Member
By: AIMCO-GP INC., General Partner
By:/s/ PETER K. KOMPANIEZ
--------------------------------
Name: Peter K. Kompaniez
Title: President
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ANNEX B
Marshall & Stevens
INCORPORATED
------------------------
VALUATION AND FINANCIAL CONSULTANTS
1700 Market Street, Suite 1510, Philadelphia, PA
19103-9977 - 215.561.5600 -FAX 215.557.7280 - http://www.marshall-stevens.com
November 29, 2000 File Reference: 11-31-50176
Board of Directors
Oxford Tax Exempt Fund II Corporation
7200 Wisconsin Avenue, 11th floor
Bethesda, Maryland 20814-4815
Dear Board of Directors:
You have requested that we, as the independent real estate consultant (the
"IREC") to Oxford Tax Exempt Fund II Limited Partnership ("OTEF"), render
certain advice in connection with the contemplated merger (the "Merger")
described in your letter to us dated November 28, 2000.
Prior to the Merger, OTEF will declare a special distribution in cash to
holders of OTEF's beneficial assignee certificates ("BACs") of $50 million, or
$6.21 per BAC.
In the Merger, (i) AIMCO/OTEF LLC ("AIMCO/OTEF") will merge into OTEF, with
OTEF as the surviving entity, (ii) BAC holders will receive $28.20 per BAC in a
combination of Apartment Investment and Management Company ("AIMCO") Class A
common stock and AIMCO Class P preferred stock, and (iii) OTEF II Associates
Limited Partnership (the "Associate General Partner") will receive $1,000 in a
combination of Class A common stock and Class P preferred stock, each as set
forth in the Agreement and Plan of Merger among AIMCO, AIMCO Properties, L.P.,
AIMCO/OTEF and OTEF of which we have received a draft dated November 29, 2000.
In arriving at our opinion in this letter (the "Opinion"), we received and
reviewed the following information:
1. A draft of the Agreement and Plan of Merger dated November 29,
2000, including the Articles Supplementary regarding the Class P preferred
stock attached as Annex A;
2. A draft of the registration statement on Form S-4 relating to the
Merger, dated November 28, 2000 (the "Registration Statement");
3. OTEF Board of Directors Meeting presentation on September 13, 2000,
including the following:
a. Distribution memo containing actual results through June 30,
2000, projections through the remainder of 2000 and a 5-year projection;
b. 5-year net operating income projections and debt service
coverage for the properties;
c. Analysis of excess revenue by property; and
d. BAC share price, book value at September 30, 2000 and projected
book value for the remainder of the year;
4. Form of OTEF Excess Revenue Agreement;
5. Form of OTEF Series A Bond Pooling Agreement;
6. OTEF's December 31,1999 Audited Financial Statements for 18 of the
19 OTEF-related operating partnerships;
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7. OTEF's Annual Reports to Shareholders for the fiscal years ending
December 31, 1997 & 1998;
8. OTEF's Annual Report on Form 10-K, as filed with the Securities and
Exchange Commission, for the fiscal year ending 1999;
9. OTEF's Quarterly Report on Form 10-Q, as filed with the Securities
and Exchange Commission, for the fiscal quarters ending March 31, 2000,
June 30, 2000, and September 30, 2000; and
10. Certain publicly available business and financial information
relating to OTEF and AIMCO, which we deemed relevant, including such
entities' annual reports on Form 10-K and quarterly reports on Form 10-Q,
each as filed with the Securities and Exchange Commission.
In addition to reviewing the aforementioned information, we have among
other things:
1. Considered the nature of the business and the history of OTEF; the
economic outlook in general; and the outlook for the industry in which OTEF
competes, in particular.
2. Reviewed OTEF's historical net book value and total assets; the
outlook for OTEF's future earnings; and OTEF's financial condition and
dividend-paying capacity.
3. Analyzed financial statements and other materials regarding
guidelines for publicly traded companies in the same or similar industries;
and required rates of return on debt and equity capital for OTEF and
comparable companies in the same or similar industries.
4. Reviewed and analyzed data relative to acquisitions of companies in
the same or similar industries; and prices at which public companies in
related lines of business are selling, both on a minority and control
basis.
5. Analyzed prior transactions in BACs, as well as, historical trading
prices and volume of OTEF's publicly traded interests.
6. Analyzed the total consideration to be received by the BAC Holders
in the Agreement and Plan of Merger.
7. Reviewed the comparative rights of AIMCO shareholders and BAC
Holders of OTEF as detailed in the Registration Statement.
8. Conducted interviews with management of OTEF and participated in
discussions among representatives of AIMCO and OTEF and their financial and
legal advisers.
In addition, you have requested that in providing this advice, we take into
account the reasons for the proposed actions, the alternatives available to
OTEF, including liquidation, and any advantages, disadvantages or other
consequences of the proposed actions, as well as any other matters we considered
material relating to the actions or their possible consequences.
We have been given full access to all information in OTEF's and AIMCO's
possession, respectively, relating to the financial condition and operations of
OTEF and AIMCO, and we have conducted such analyses as we deemed necessary in
connection with this Opinion. In providing this advice, we have assumed, with
your permission, that the substantive terms of the final transaction documents
will be substantially similar to those contained in the documents reviewed by us
in draft form, and to the terms provided to us of documents not yet prepared.
We have not undertaken any independent verification of the accuracy or
completeness of any information concerning OTEF that has been considered in our
review and have relied upon and assumed the accuracy and completeness of all
such information and data. Our Opinion herein is based on economic and other
conditions, as in effect on November 29, 2000, and the information made
available to us as of the date hereof. We assume there are not undisclosed or
unexpected conditions associated with OTEF that
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might adversely affect value. Further, we assume no responsibility to amend the
Opinion to reflect changes in market conditions.
You have requested that we advise you whether, taking into account all
matters we considered to be relevant, (i) the Merger is fair to OTEF, (ii) the
Merger is fair to the BAC holders and Associate General Partner from a financial
point of view and (iii) that OTEF's publicly reported book value per BAC for the
quarter ended September 30, 2000 was fairly computed, and (iv) the fair market
value of the Class P preferred stock is $25.00 per share. Based upon the
foregoing, we are of the opinion that (i) the Merger is fair to OTEF, (ii) the
Merger is fair to the BAC holders and Associate General Partner from a financial
point of view, (iii) that OTEF's publicly reported book value per BAC for the
quarter ended September 30, 2000 was fairly computed, and (iv) the fair market
value of the Class P preferred stock is $25.00 per share, and we consent to the
Merger to the extent that our consent is necessary or appropriate under the
terms of the Third Amended and Restated Agreement of Limited Partnership of OTEF
dated June 26, 1995.
We consent to the reference to our opinion in communications to the holders
of BACs and in filings made by either OTEF or AIMCO with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, as well as any related filings with
the National Association of Securities Dealers, Inc., state securities
authorities or the administering authority of any registered stock exchange.
This Opinion is for the use and benefit of the Board of Directors. Our
opinion does not address the merits of the underlying decision by the Board of
Directors to engage in the Merger. We are not expressing any opinion herein as
to the prices at which the BACs or the AIMCO Class A common stock or Class P
preferred stock will trade following the announcement or consummation of the
Merger. We have made no investigation of legal title, we render no opinion as to
ownership of the underlying assets used by OTEF or AIMCO and we do not hold
ourselves out to be legal experts. We neither express nor imply any opinions for
matters that require legal or specialized expertise, investigation or knowledge,
beyond that customarily employed by us.
We have been engaged by the Board of Directors of OTEF's managing general
partner, and will receive a fee for our services. The fee established for the
formulation of this Opinion and reporting of findings is not contingent upon the
opinions presented.
Very truly yours,
/s/ MARSHALL & STEVENS INCORPORATED
--------------------------------------------
Marshall & Stevens Incorporated
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<PAGE> 155
ANNEX C
DESCRIPTION OF OXFORD TRANSACTION DOCUMENTS
On June 28, 2000, AIMCO and the principals of Oxford Realty Financial
Group, Inc. entered into definitive agreements to acquire all of the stock and
other interests of the Oxford entities that were held by officers and directors
of the Oxford entities, whom we refer to as the Oxford principals, and not
already owned by AIMCO. The purchase price was $328 million, paid through a
combination of cash and AIMCO common operating partnership units. In addition,
AIMCO, amended and re-issued previously outstanding warrants held by the Oxford
principals to purchase 500,000 shares of AIMCO Class A common stock. AIMCO
incurred approximately $25 million in transaction costs.
The Oxford properties are 167 apartment communities including 36,949 units,
located in 18 states. The Oxford properties include properties financed by
mortgage revenue bonds held by OTEF. AIMCO, through an affiliate, has since 1997
managed 165 of the 167 Oxford properties. The properties are owned by 166
separate partnerships, subject to mortgage loans totaling approximately $1.4
billion, of which Oxford's pro rata share of the indebtedness is $555 million.
None of the Oxford properties financed by OTEF's bonds receive project subsidies
from the U.S. Department of Housing and Urban Development. A description of
OTEF's mortgage revenue bonds is set forth in Annex D to this
prospectus/information statement. The average monthly rent for the residential
Oxford properties that are financed by OTEF's bonds is approximately $790. The
transaction, which we refer to as the Oxford acquisition, closed on September
20, 2000.
As part of the Oxford acquisition, AIMCO acquired a 99% economic interest
in OTEF's managing general partner and slightly more than one half of the
general partner interests in OTEF's associate general partner. The remaining 1%
interest in OTEF's managing general partner was acquired by a company controlled
by two members of AIMCO's board of directors. AIMCO also acquired an option to
purchase 32,580 BACs held by the Oxford principals and stock options held by the
Oxford principals and other directors, officers and employees of OTEF's managing
general partner to purchase 652,125 BACs. As a result, AIMCO currently holds
options to acquire approximately 8.53% of the BACs that would be outstanding
were the options to be exercised.
The principal agreements related to the Oxford transaction are described
below. For the purposes of this Annex C, we refer to AIMCO, AIMCO Properties,
L.P., NHP Management Company and AIMCO/ NHP Properties, Inc., collectively, as
AIMCO, and Leo E. Zickler, Francis P. Lavin, Robert B. Downing, Mark E.
Schifrin, Marc B. Abrams and Richard R. Singleton, collectively, as the Oxford
principals. We also refer to Kenneth C. Willard, Cher B. Compton, Mary Ann
Ewers, Brian M. Grant, Carol A. Kohl, Michael B. Tillett, Stephen P. Gavula,
Jr., Scot B. Barker and ORFG Operations, L.L.C., collectively, as the OTEF
sellers.
On June 28, 2000, AIMCO entered into an Acquisition Agreement with the
Oxford principals pursuant to which the Oxford principals agreed to sell and/or
contribute their respective interests in partnerships, corporations and other
business entities that owned or controlled the Oxford properties and OTEF to
AIMCO in exchange for the cash and units of limited partnership interests in
AIMCO's operating partnership described above, and AIMCO agreed to accept the
assets in exchange for such consideration. Under the agreement, AIMCO agreed to
amend and re-issue previously outstanding warrants held by the Oxford principals
to allow them to purchase 500,000 shares of AIMCO Class A common stock. AIMCO
also irrevocably committed to pay to the Oxford principals $6,000,000 if the
Oxford principals terminated the agreement due to a material breach of the
agreement by AIMCO. The parties made customary representations and warranties in
connection with the agreement, each of which generally survives for one year
from September 20, 2000. The parties also agreed to place a cap on each Oxford
principal's liability for misrepresentations of ownership interests and
investment intent, as well as a separate cap on any other matters arising under
the agreement. Each of the caps was in the amount of each Oxford principal's pro
rata share of $3,000,000. Also on June 28, 2000, in connection with the
Acquisition Agreement, AIMCO agreed with the Oxford principals that if AIMCO
acquired OTEF at any
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time prior to September 20, 2003, it would pay minimum consideration per BAC of
90% of the book value per BAC reported by OTEF for the calendar quarter
immediately preceding the date of the acquisition.
On June 28, 2000, AIMCO entered into an Option Sale Agreement with the
Oxford principals pursuant to which AIMCO purchased from the Oxford principals
options to purchase 593,435 BACs. AIMCO paid $8.00 per option, provided that, in
the event AIMCO or OTEF closed one or more purchase transactions at any time
prior to September 20, 2003 at a price higher than $31.88 per BAC, then, upon
the closing of the purchase transaction, AIMCO would promptly pay each Oxford
principal in cash an additional amount for their respective options equal to the
amount per BAC that is paid to BAC holders generally in the transaction above
$31.88. A purchase transaction was defined as any transaction involving a sale,
contribution, exchange, purchase, repurchase or redemption, tender offer,
merger, reorganization, spin-off, consolidation, business combination or similar
type of transaction, relating to the BACs or all or substantially all of the
assets of OTEF, or a liquidation of OTEF or all or any of its assets. The
parties made customary representations and warranties in connection with this
agreement.
On September 20, 2000, AIMCO entered into an Option Sale Agreement with the
OTEF sellers pursuant to which AIMCO purchased from the OTEF sellers options to
purchase 58,690 BACs. AIMCO paid $8.00 per option, provided that, in the event
AIMCO or OTEF closed one or more purchase transactions at any time prior to
September 20, 2003 at a price higher than $31.88 per BAC, then, upon the closing
of the purchase transaction, AIMCO would promptly pay each OTEF seller in cash
an additional amount for their respective options equal to the amount per BAC
that is paid to BAC holders generally in the transaction above $31.88. A
purchase transaction was defined as any transaction involving a sale,
contribution, exchange, purchase, repurchase or redemption, tender offer,
merger, reorganization, spin-off, consolidation, business combination or similar
type of transaction, relating to the BACs or all or substantially all of the
assets of OTEF, or a liquidation of OTEF or all or any of its assets. The
parties made customary representations and warranties in connection with this
agreement.
On September 20, 2000, AIMCO entered into an ILPI and BAC Agreement with
the Oxford principals pursuant to which each of the Oxford principals agreed to
sell to AIMCO, on September 20, 2000, each general and/or limited partnership
interest in an employee partnership, investor limited partnership interest, or
ILPI, in an Oxford entity or related investment tier partnership. The purchase
price for each of the several ILPIs varied according to its value. Each of the
Oxford principals also sold to AIMCO an irrevocable option, or BAC Option, to
acquire all BACs owned by such Oxford principal on September 20, 2000. On
September 20, 2000, the Oxford principals owned a total of 32,580 BACs. The BAC
Option could be exercised at any time during the option period, but if AIMCO
proposed an acquisition transaction, such as the Merger, it would be deemed to
have given notice that it intended to exercise the BAC Option. The purchase
price would be (i) in the case of an acquisition transaction, the price, fair
market value of consideration or proceeds in liquidation offered by AIMCO or
payable by OTEF generally to other BAC holders pursuant to, or in connection
with, any acquisition transaction or (ii) in any other case, 90% of the fully
diluted book value of the BACs reported by OTEF for the calendar quarter
immediately preceding the date the notice of option exercise is given or deemed
to have been given, with certain conditions. Pursuant to the agreement, the
Oxford principals are prohibited from taking certain actions with the intent to
gain control or influence of the management of any Oxford entity.
On September 20, 2000, AIMCO entered into a Personal Liability Assignment
and Assumption Agreement with the Oxford principals pursuant to which they
assigned personal liabilities, to which they were subject under the terms of the
Acquisition Agreement, to AIMCO in exchange for a waiver by the Oxford
principals of certain closing conditions. The personal liabilities that were
assigned consisted primarily of agreements by the partnerships and/or individual
Oxford principals to indemnify various lenders against defaults on loan
agreements. AIMCO also agreed to a standard indemnification provision related to
the personal liabilities.
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ANNEX D
OTEF MORTGAGE REVENUE BONDS
<TABLE>
<CAPTION>
A BONDS B BONDS
FACE AMOUNT -------------------------------------- ---------------------------
MORTGAGE FACE BALANCE INTEREST FACE BALANCE
PROPERTIES FINANCED BONDS AMOUNT 10/31/00 RATE AMOUNT 10/31/00
------------------- -------------------- ------------ ------------ -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
GARDEN APARTMENTS
Chesapeake Landing Apts
Aurora, IL................... $ 13,102,400 $ 12,942,433 4.48% $ 12,347,600 $ 12,347,600
Hunt Club Apts
Austin, TX................... 8,732,400 8,625,786 5.12% 11,537,600 11,537,600
Island Club Apts
Columbia, MD................. 5,743,700 5,673,575 4.48% 5,556,300 5,556,300
Northwood Apts
Middletown, CT............... 11,126,400 10,990,557 5.37% 10,573,600 10,573,600
Reflections Apts
Virginia Beach, VA........... 13,998,250 13,827,346 4.48% 11,645,926 11,645,926
Savannah Trace Apts
Schaumburg, IL............... 11,231,850 11,094,720 4.48% 12,168,150 12,168,150
The Harbour Apts, Phase II(1)
Melbourne, FL................ $ 8,710,000 5.00%
Windrift Apts
Oceanside, CA................ 11,258,450 11,120,995 5.12% 18,171,550 18,171,550
Windsor Park Apts
Woodbridge, VA............... 6,332,700 6,255,385 4.48% 7,667,300 7,667,300
----------- ------------ ------------ ------------ ------------
TOTAL GARDEN APTS.............. $ 8,710,000 $ 81,526,150 $ 80,530,797 $ 89,668,026 $ 89,668,026
----------- ------------ ------------ ------------ ------------
SENIOR LIVING FACILITIES
Chambrel at Club Hill Apts
Garland, TX.................. $ 8,672,550 $ 8,566,667 5.54% $ 16,757,450 $ 16,757,450
Chambrel at Montrose Apts
Akron, OH.................... 7,353,600 7,263,819 5.12% 5,446,400 5,446,400
Chambrel at Pine Castle Apts
Ocala, FL.................... 5,457,750 5,391,116 4.48% 4,042,250 4,042,250
Chambrel at Williamsburg Apts
Williamsburg, VA............. 13,707,550 13,540,196 4.48% 11,292,450 11,292,450
------------ ------------ ------------ ------------
TOTAL SENIOR LIVING............ $ 35,191,450 $ 34,761,798 $ 37,538,550 $ 37,538,550
------------ ------------ ------------ ------------
ACQUISITION PROPERTIES
Harbour Town of Jacaranda
Apts(1)
Plantation, FL............... $ 4,200,000 11.00%
Springhouse Apts(1)(2)
Dallas, TX................... 10,300,000 7.25%
Steeplechase Apts(1)(2)
Plano, TX.................... 14,200,000 7.25%
The Peaks at Conyers(1)(3)
Conyers, GA.................. 5,420,000 9.87%
-----------
TOTAL ACQUISITION PROPERTIES... $34,120,000
----------- ------------ ------------ ------------ ------------
GRAND TOTAL.................... $42,830,000 $116,717,600 $115,292,595 $127,206,576 $127,206,576
=========== ============ ============ ============ ============
<CAPTION>
B BONDS
--------
INTEREST MATURITY
PROPERTIES FINANCED RATE DATE
------------------- -------- --------
<S> <C> <C>
GARDEN APARTMENTS
Chesapeake Landing Apts
Aurora, IL................... 9.14% 11/2026
Hunt Club Apts
Austin, TX................... 5.16% 12/2026
Island Club Apts
Columbia, MD................. 9.68% 11/2026
Northwood Apts
Middletown, CT............... 8.98% 1/2027
Reflections Apts
Virginia Beach, VA........... 9.51% 11/2026
Savannah Trace Apts
Schaumburg, IL............... 6.73% 11/2026
The Harbour Apts, Phase II(1)
Melbourne, FL................ 11/2009
Windrift Apts
Oceanside, CA................ 5.10% 12/2026
Windsor Park Apts
Woodbridge, VA............... 6.87% 11/2026
TOTAL GARDEN APTS..............
SENIOR LIVING FACILITIES
Chambrel at Club Hill Apts
Garland, TX.................. 3.55% 3/2027
Chambrel at Montrose Apts
Akron, OH.................... 12.78% 12/2026
Chambrel at Pine Castle Apts
Ocala, FL.................... 13.04% 11/2026
Chambrel at Williamsburg Apts
Williamsburg, VA............. 11.30% 11/2026
TOTAL SENIOR LIVING............
ACQUISITION PROPERTIES
Harbour Town of Jacaranda
Apts(1)
Plantation, FL............... 4/2006
Springhouse Apts(1)(2)
Dallas, TX................... 4/2018
Steeplechase Apts(1)(2)
Plano, TX.................... 9/2018
The Peaks at Conyers(1)(3)
Conyers, GA.................. 11/2009
TOTAL ACQUISITION PROPERTIES...
GRAND TOTAL....................
</TABLE>
---------------
(1)Mortgage bonds do not have an A/B structure. Their interest rates are listed
in the A column.
(2)Unlike the other properties listed in this Annex, an affiliate of AIMCO does
not own an interest in the underlying property.
(3)Under construction.
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<PAGE> 158
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
OXFORD TAX EXEMPT FUND II LIMITED PARTNERSHIP
INFORMATION STATEMENT
---------------------
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PROSPECTUS
January [ ], 2001
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 159
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Restated Articles of Incorporation (the "Charter") of Apartment
Investment and Management Company ("AIMCO") limits the liability of AIMCO's
directors and officers to AIMCO and its stockholders to the fullest extent
permitted from time to time by Maryland law. Maryland law presently permits the
liability of directors and officers to a corporation or its stockholders for
money damages to be limited, except (i) to the extent that it is proved that the
director or officer actually received an improper benefit or profit in money,
property or services for the amount of the benefit or profit in money, property
or services actually received, or (ii) if a judgment or other final adjudication
is entered in a proceeding based on a finding that the director's or officer's
action, or failure to act, was the result of active and deliberate dishonesty
and was material to the cause of action adjudicated in the proceeding. This
provision does not limit the ability of AIMCO or its stockholders to obtain
other relief, such as an injunction or rescission.
AIMCO's Charter and Amended and Restated By-laws ("Bylaws") require AIMCO
to indemnify its directors, officers and certain other parties to the fullest
extent permitted from time to time by Maryland law. The Maryland General
Corporation Law permits a corporation to indemnify its directors, officers and
certain other parties against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by them in connection with any proceeding
to which they may be made a party by reason of their service to or at the
request of the corporation, unless it is established that (i) the act or
omission of the indemnified party was material to the matter giving rise to the
proceeding and (x) was committed in bad faith or (y) was the result of active
and deliberate dishonesty, (ii) the indemnified party actually received an
improper personal benefit in money, property or services or (iii) in the case of
any criminal proceeding, the indemnified party had reasonable cause to believe
that the act or omission was unlawful. Indemnification may be made against
judgments, penalties, fines, settlements and reasonable expenses actually
incurred by the director or officer in connection with the proceeding; provided,
however, that if the proceeding is one by or in the right of the corporation,
indemnification may not be made with respect to any proceeding in which the
director or officer has been adjudged to be liable to the corporation. In
addition, a director or officer may not be indemnified with respect to any
proceeding charging improper personal benefit to the director or officer in
which the director or officer was adjudged to be liable on the basis that
personal benefit was improperly received. The termination of any proceeding by
conviction, or upon a plea of nolo contendere or its equivalent, or an entry of
any order of probation prior to judgment, creates a rebuttable presumption that
the director or officer did not meet the requisite standard of conduct required
for indemnification to be permitted. It is the position of the Securities and
Exchange Commission that indemnification of directors and officers for
liabilities arising under the Securities Act of 1933, as amended, is against
public policy and is unenforceable pursuant to Section 14 of the Securities Act.
AIMCO has entered into agreements with certain of its officers, pursuant to
which AIMCO has agreed to indemnify such officers to the fullest extent
permitted by applicable law.
The Agreement of Limited Partnership (the "Operating Partnership
Agreement") of AIMCO Properties, L.P., AIMCO's operating partnership (the
"Operating Partnership"), also provides for indemnification of AIMCO, or any
director or officer of AIMCO, in its capacity as the previous general partner of
the Operating Partnership, from and against all losses, claims, damages,
liabilities, joint or several, expenses (including legal fees), fines,
settlements and other amounts incurred in connection with any actions relating
to the operations of the Operating Partnership, as set forth in the Operating
Partnership Agreement.
Section 11.6 of the Apartment Investment and Management Company 1997 Stock
Award and Incentive Plan (the "1997 Plan"), Section 2.8 of the Amended and
Restated Apartment Investment and Management Company Non-Qualified Employee
Stock Option Plan (the "Non-Qualified Plan"), Section 2.8 of the Apartment
Investment and Management Company 1996 Stock Award and Incentive Plan (the "1996
Plan"), and Section 6.7 of the 1994 Stock Option Plan of Apartment Investment
and
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<PAGE> 160
Management Company (the "1994 Plan") specifically provide that, to the fullest
extent permitted by law, each of the members of the Board of Directors of AIMCO
(the "Board"), the Compensation Committee of the Board and each of the
directors, officers and employees of AIMCO, any AIMCO subsidiary, the Operating
Partnership and any subsidiary of the Operating Partnership shall be held
harmless and indemnified by AIMCO for any liability, loss (including amounts
paid in settlement), damages or expenses (including reasonable attorneys' fees)
suffered by virtue of any determinations, acts or failures to act, or alleged
acts or failures to act, in connection with the administration of the 1997 Plan,
the Non-Qualified Plan, the 1996 Plan or the 1994 Plan, as the case may be, so
long as such person is not determined by a final adjudication to be guilty of
willful misconduct with respect to such determination, action or failure to act.
Pursuant to the merger agreement (the "Merger Agreement") among AIMCO, the
Operating Partnership, AIMCO/OTEF, LLC and Oxford Tax Exempt Fund II Limited
Partnership ("OTEF"), (i) each party to the Merger Agreement has agreed to
indemnify each other party and its directors, officers and controlling persons
against any liability to which such persons may become subject as a result of
any untrue statement of a material fact or alleged untrue statement of material
fact contained in this Registration Statement or omission or alleged omission to
state a material fact required to be stated herein or necessary to make the
statements herein not misleading and (ii) AIMCO and the partnership that
survives the Merger have agreed to indemnify all of the directors, officers and
employees of OTEF's managing general partner, including such persons who are
also directors and officers of AIMCO, against all liabilities related to action
they have taken in connection with the Merger Agreement or the closing of the
transactions contemplated by the Merger Agreement, liability arising as a result
of certain actions taken by AIMCO prior to the closing of the Merger Agreement,
and liability arising as a result of any of their actions as a director, officer
or employee of OTEF's managing general partner, AIMCO, the general partner of
the Operating Partnership or the managing member of AIMCO/OTEF, LLC, relating to
OTEF prior to the effective time of the merger. This obligation includes agreed
compensation for the value of the indemnitees' time.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<C> <S>
2.1 Agreement and Plan of Merger, dated as of November 29, 2000,
by and among Apartment Investment and Management Company
("AIMCO"), AIMCO Properties, L.P., AIMCO/OTEF, LLC and
Oxford Tax Exempt Fund II Limited Partnership (incorporated
by reference to Annex A to the prospectus/information
statement that constitutes Part I of this Registration
Statement)
3.1 Charter(1)
3.2 Bylaws(2)
3.3 Form of Articles Supplementary with respect to the Class P
Convertible Cumulative Preferred Stock**
4.1 Amended and Restated Declaration of Trust of IFT Financing I
(formerly Insignia Financing I), dated as of November 1,
1996, among Insignia Financial Group, Inc. as Sponsor, First
Union National Bank of South Carolina as Property Trustee,
First Union Bank of Delaware, as Delaware Trustee and Andrew
I. Farkas, John K. Lines and Ronald Uretta as Regular
Trustees(3)
4.2 Indenture for the 6.5% Convertible Subordinated Debentures,
dated as of November 1, 1996, between Insignia Financial
Group, Inc., as Issuer and First Union National Bank of
South Carolina, as Trustee(3)
</TABLE>
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<PAGE> 161
<TABLE>
<C> <S>
4.3 First Supplemental Indenture, dated as of October 1, 1998,
by and among Apartment Investment and Management Company,
Insignia Financial Group, Inc., and First Union National
Bank (formerly First Union National Bank of South Carolina),
as Trustee(4)
4.4 Specimen certificate for Class A Common Stock(5)
4.5 Specimen certificate for Class P Convertible Cumulative
Preferred Stock(28)
5.1 Opinion of Shaw Pittman regarding the validity of the
Securities registered hereby+
8.1 Opinion of Shaw Pittman regarding taxation of the Merger+
8.2 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
regarding taxation of AIMCO and AIMCO stockholders+
10.1 Third Amended and Restated Agreement of Limited Partnership
of AIMCO Properties, L.P., dated as of July 29, 1994 as
amended and restated as of October 1, 1998(6)
10.2 First Amendment to the Third Amended and Restated Agreement
of Limited Partnership of AIMCO Properties, L.P., dated as
of November 6, 1998(6)
10.3 Second Amendment to the Third Amended and Restated Agreement
of Limited Partnership of AIMCO Properties, L.P., dated as
of December 30, 1998(7)
10.4 Third Amendment to Third Amended and Restated Agreement of
Limited Partnership of AIMCO Properties, L.P., dated as of
February 18, 1999(4)
10.5 Fourth Amendment to the Third Amended and Restated Agreement
of Limited Partnership of AIMCO Properties, L.P., dated as
of March 25, 1999(8)
10.6 Fifth Amendment to the Third Amended and Restated Agreement
of Limited Partnership of AIMCO Properties, L.P., dated as
of March 26, 1999(8)
10.7 Sixth Amendment to the Third Amended and Restated Agreement
of Limited Partnership of AIMCO Properties, L.P., dated as
of March 26, 1999(9)
10.8 Seventh Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated as of September 27, 1999(10)
10.9 Eighth Amendment to the Third Amended and Restated Agreement
of Limited Partnership of AIMCO Properties, L.P., dated as
of December 14, 1999(2)
10.10 Ninth Amendment to the Third Amended and Restated Agreement
of Limited Partnership of AIMCO Properties, L.P., dated as
of December 21, 1999(2)
10.11 Tenth Amendment to the Third Amended and Restated Agreement
of Limited Partnership of AIMCO Properties, L.P., dated as
of December 21, 1999(2)
10.12 Eleventh Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated as of January 13, 2000(2)
10.13 Twelfth Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated April 19, 2000(11)
10.14 Thirteenth Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated August 7, 2000(12)
10.15 Shareholders Agreement, dated October 1, 1998, by and among
AIMCO, Andrew L. Farkas, James A. Aston and Frank M.
Garrison(13)
10.16 Common Stock Purchase Agreement made as of August 26, 1997,
by and between AIMCO and ABKB/LaSalle Securities Limited
Partnership(14)
10.17 Amended and Restated Assignment and Assumption Agreement,
dated as of December 7, 1998, by and among Insignia
Properties, L.P. and AIMCO Properties, L.P.(15)
</TABLE>
II-3
<PAGE> 162
<TABLE>
<C> <S>
10.18 Amended and Restated Indemnification Agreement, dated as of
May 26, 1998, by and between AIMCO and Insignia/ESG
Holdings, Inc.(16)
10.19 Interim Credit Agreement, dated as of September 20, 2000,
among AIMCO Properties, L.P., NHP Management Company,
AIMCO/Bethesda Holdings, Inc. Bank of America N.A., Lehman
Commercial Paper Inc. and several other lenders(17)
10.20 Credit Agreement (Secured Revolving Credit Facility), dated
as of August 16, 1999, among AIMCO Properties, L.P., Bank of
America, BankBoston, N.A., and First Union National Bank(18)
10.21 First Amended and Restated Credit Agreement, dated as of
September 20, 2000, among AIMCO Properties, L.P., NHP
Management Company, AIMCO/Bethesda Holdings, Inc. Bank of
America N.A. and several other lenders(12)
10.22 Second Amended and Restated Credit Agreement, dated as of
September 20, 2000, among AIMCO Properties, L.P., NHP
Management Company, AIMCO/Bethesda Holdings, Inc. Bank of
America N.A. and several other lenders(17)
10.23 Intercreditor and Subordination Agreement, dated as of
September 20, 2000, among AIMCO Properties, L.P., NHP
Management Company, AIMCO/Bethesda Holdings, Inc. Bank of
America N.A. and several other lenders(17)
10.24 Borrower Pledge Agreement, dated August 16, 1999 between
AIMCO Properties, L.P. and Bank of America(18)
10.25 Form of Committed Loan Note, issued by AIMCO Properties,
L.P. to Bank of America, BankBoston, N.A., and First Union
National Bank(18)
10.26 Form of Swing Line Note, issued by AIMCO Properties, L.P. to
Bank of America, BankBoston, N.A., and First Union National
Bank(18)
10.27 Form of Payment Guaranty, by AIMCO, AIMCO/NHP Holdings,
Inc., NHP A&R Services, Inc., and NHP Management Company(18)
10.28 Apartment Investment and Management Company 1998 Incentive
Compensation Plan, filed as of April 10, 1998(19)
10.29 Employment Contract, executed on July 29, 1994, by and
between AIMCO Properties, L.P., and Peter Kompaniez(20)
10.30 Employment Contract executed on July 29, 1994 by and between
AIMCO Properties, L.P. and Terry Considine(20)
10.31 Employment Contract executed on July 29, 1994 by and between
AIMCO Properties, L.P. and Steven D. Ira(20)
10.32 Apartment Investment and Management Company 1997 Stock Award
and Incentive Plan (October 1999)(2)
10.33 Form of Restricted Stock Agreement (1997 Stock Award and
Incentive Plan)(21)
10.34 Form of Incentive Stock Option Agreement (1997 Stock Award
and Incentive Plan)(4)
10.35 Apartment Investment and Management Company Non-Qualified
Employee Stock Option Plan, adopted August 29, 1996(22)
10.36 Amended and Restated Apartment Investment and Management
Company Non-Qualified Employee Stock Option Plan(23)
10.37 The 1994 Stock Incentive Plan for Officers, Directors and
Key Employees of Ambassador Apartments, Inc., Ambassador
Apartments, L.P., and Subsidiaries(24)
10.38 Amendment to the 1994 Stock Incentive Plan for Officers,
Directors and Key Employees of Ambassador Apartments, Inc.,
Ambassador Apartments, L.P. and Subsidiaries(24)
</TABLE>
II-4
<PAGE> 163
<TABLE>
<S> <C>
10.39 The 1996 Stock Incentive Plan for Officers, Directors and Key Employees of Ambassador
Apartments, Inc., Ambassador Apartments, L.P., and Subsidiaries, as amended March 20,
1997(24)
10.40 Insignia 1992 Stock Incentive Plan, as amended through March 28, 1994, November 13, 1995
and March 25, 1997(25)
10.41 NHP Incorporated 1990 Stock Option Plan(26)
10.42 NHP Incorporated 1995 Incentive Stock Option Plan(26)
10.43 Summary of Agreement for Sale of Stock to Executive Officers(27)
10.44 Acquisition Agreement, dated June 28, 2000, by and among AIMCO, AIMCO Properties, L.P.,
NHP Management Company and AIMCO/NHP Properties, Inc. (collectively, the "Buyers") and Leo
E. Zickler, Francis P. Lavin, Robert B. Downing, Mark E. Schifrin, Marc B. Abrams and
Richard R. Singleton (collectively,the "Sellers")(12)
10.45 Letter, dated June 28, 2000, from AIMCO to Sellers, regarding acquisition of BACs**
10.46 Option Sale Agreement, dated September 20, 2000, by and among the Buyers and Sellers(17)
10.47 Option Sale Agreement, dated September 20, 2000, by and among the Buyers and Kenneth C.
Willard, Cher B. Compton, Mary Ann Ewers, Brian M. Grant, Carol A. Kohl, Michael B.
Tillett, Stephen P. Gavula, Jr., Scot B. Barker and ORFG Operations, L.L.C.**
10.48 ILPI and BAC Agreement, dated September 20, 2000, by and among the Buyers and Sellers(17)
10.49 Personal Liability Assignment and Assumption Agreement, dated September 20, 2000, by and
among the Buyers and Sellers**
21.1 Subsidiaries of the Registrant(2)
23.1 Consent of Ernst & Young LLP+
23.2 Consent of PricewaterhouseCoopers LLP+
23.3 Consent of Shaw Pittman (included in their opinion filed as Exhibit 5.1)
23.4 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in their opinion filed as
Exhibit 8.2)
23.5 Consent of Marshall & Stevens Incorporated+
23.6 Consent of Reznick Fedder and Silverman+
24 Power of Attorney**
</TABLE>
---------------
+ Filed herewith
* To be filed by amendment
**Previously filed
(1)Incorporated by reference to AIMCO's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 2000
(2) Incorporated by reference to AIMCO's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999
(3) Incorporated by reference to Insignia Financial Group, Inc.'s Registration
Statement on Form S-3 (File No. 333-17595)
(4) Incorporated by reference to AIMCO's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998
II-5
<PAGE> 164
(5) Incorporated by reference to AIMCO's Registration Statement on Form 8-A,
filed with the SEC on July 19, 1994
(6) Incorporated by reference to AIMCO's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1998
(7) Incorporated by reference to Amendment No. 1 to AIMCO's Current Report on
Form 8-K/A, dated November 2, 1998 and filed with the SEC on February 11,
1999
(8) Incorporated by reference to AIMCO's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1999
(9) Incorporated by reference to AIMCO's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 1999
(10) Incorporated by reference to AIMCO's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1999
(11)Incorporated by reference to AIMCO's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 2000
(12)Incorporated by reference to AIMCO's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 2000
(13) Incorporated by reference to AIMCO's General Statement of Beneficial
Ownership on Schedule 13D, filed with the SEC on October 15, 1998
(14) Incorporated by reference to AIMCO's Current Report on Form 8-K, dated
August 26, 1997
(15) Incorporated by reference to Insignia Properties Trust's Current Report on
Form 8-K, dated February 11, 1999
(16) Incorporated by reference to AIMCO's Registration Statement on Form S-4
(File No. 333-60663)
(17)Incorporated by reference to AIMCO's General Statement of Beneficial
Ownership on Schedule 13D, filed with the Securities and Exchange Commission
(the "SEC") on October 2, 2000
(18)Incorporated by reference to AIMCO's Current Report on Form 8-K, dated
August 16, 1999
(19)Incorporated by reference to Annex B to AIMCO's Definitive Proxy Statement
on Schedule 14A, filed with the SEC on April 10, 1998
(20)Incorporated by reference to AIMCO's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994
(21) Incorporated by reference to AIMCO's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1997
(22) Incorporated by reference to AIMCO's Quarterly Report on Form 10-Q/A for
the fiscal quarter ended September 30, 1996
(23) Incorporated by reference to AIMCO's Definitive Proxy Statement on Schedule
14A, filed with the SEC on April 1, 1997
(24) Incorporated by reference to Ambassador Apartments, Inc.'s Annual Report on
Form 10-K for the fiscal year ended December 31, 1997
(25)Incorporated by reference to Annex B to Insignia Financial Group Inc.'s
Definitive Proxy Statement on Schedule 14A, filed with the SEC on March 31,
1997
(26) Incorporated by reference to NHP Incorporated's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995
(27) Incorporated by reference to AIMCO's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996
(28)Incorporated by reference to AIMCO's Registration Statement on Form 8-A,
filed with the SEC on December 27, 2000
(b) Financial Statement Schedules
II-6
<PAGE> 165
None.
(c) Reports, Opinions and Appraisals
The opinion of Marshall & Stevens Incorporated is included as Annex B
to the prospectus/ information statement that constitutes Part I of this
Registration Statement.
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(1) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement shall be
deemed to be a new Registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(b)(1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus/information
statement pursuant to Item 4, 10(b), 11, or 13 of this form, within one business
day of receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the Registration Statement
through the date of responding to the request.
(d) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
(e) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-7
<PAGE> 166
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized in the city of
Denver, State of Colorado on January 11, 2001.
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
By: /s/ TERRY CONSIDINE
---------------------------------
Name: Terry Considine
Title: Chairman of the Board and
Chief Executive Officer
II-8
<PAGE> 167
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on January 11, 2001.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ TERRY CONSIDINE Chairman of the Board and Chief Executive
----------------------------------------------------- Officer (Principal Executive Officer)
Terry Considine
/s/ PETER K. KOMPANIEZ Vice Chairman, President and Director
-----------------------------------------------------
Peter K. Kompaniez
/s/ PAUL J. MCAULIFFE* Executive Vice President, Chief Financial
----------------------------------------------------- Officer (Principal Financial and Accounting
Paul J. McAuliffe Officer)
/s/ JAMES N. BAILEY* Director
-----------------------------------------------------
James N. Bailey
/s/ RICHARD S. ELLWOOD* Director
-----------------------------------------------------
Richard S. Ellwood
/s/ J. LANDIS MARTIN* Director
-----------------------------------------------------
J. Landis Martin
/s/ THOMAS L. RHODES* Director
-----------------------------------------------------
Thomas L. Rhodes
*By: /s/ PETER K. KOMPANIEZ Attorney-in-Fact
------------------------------------------------
Peter K. Kompaniez
</TABLE>
II-9
<PAGE> 168
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of November 29, 2000,
by and among Apartment Investment and Management Company
("AIMCO"), AIMCO Properties, L.P., AIMCO/OTEF, LLC and
Oxford Tax Exempt Fund II Limited Partnership (incorporated
by reference to Annex A to the prospectus/information
statement that constitutes Part I of this Registration
Statement)
3.1 Charter(1)
3.2 Bylaws(2)
3.3 Form of Articles Supplementary with respect to the Class P
Convertible Cumulative Preferred Stock**
4.1 Amended and Restated Declaration of Trust of IFT Financing I
(formerly Insignia Financing I), dated as of November 1,
1996, among Insignia Financial Group, Inc. as Sponsor, First
Union National Bank of South Carolina as Property Trustee,
First Union Bank of Delaware, as Delaware Trustee and Andrew
I. Farkas, John K. Lines and Ronald Uretta as Regular
Trustees(3)
4.2 Indenture for the 6.5% Convertible Subordinated Debentures,
dated as of November 1, 1996, between Insignia Financial
Group, Inc., as Issuer and First Union National Bank of
South Carolina, as Trustee(3)
4.3 First Supplemental Indenture, dated as of October 1, 1998,
by and among Apartment Investment and Management Company,
Insignia Financial Group, Inc., and First Union National
Bank (formerly First Union National Bank of South Carolina),
as Trustee(4)
4.4 Specimen certificate for Class A Common Stock(5)
4.5 Specimen certificate for Class P Convertible Cumulative
Preferred Stock(28)
5.1 Opinion of Shaw Pittman regarding the validity of the
Securities registered hereby+
8.1 Opinion of Shaw Pittman regarding taxation of the Merger+
8.2 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
regarding taxation of AIMCO and AIMCO stockholders+
10.1 Third Amended and Restated Agreement of Limited Partnership
of AIMCO Properties, L.P., dated as of July 29, 1994 as
amended and restated as of October 1, 1998(6)
10.2 First Amendment to the Third Amended and Restated Agreement
of Limited Partnership of AIMCO Properties, L.P., dated as
of November 6, 1998(6)
10.3 Second Amendment to the Third Amended and Restated Agreement
of Limited Partnership of AIMCO Properties, L.P., dated as
of December 30, 1998(7)
10.4 Third Amendment to Third Amended and Restated Agreement of
Limited Partnership of AIMCO Properties, L.P., dated as of
February 18, 1999(4)
10.5 Fourth Amendment to the Third Amended and Restated Agreement
of Limited Partnership of AIMCO Properties, L.P., dated as
of March 25, 1999(8)
10.6 Fifth Amendment to the Third Amended and Restated Agreement
of Limited Partnership of AIMCO Properties, L.P., dated as
of March 26, 1999(8)
10.7 Sixth Amendment to the Third Amended and Restated Agreement
of Limited Partnership of AIMCO Properties, L.P., dated as
of March 26, 1999(9)
10.8 Seventh Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated as of September 27, 1999(10)
</TABLE>
<PAGE> 169
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.9 Eighth Amendment to the Third Amended and Restated Agreement
of Limited Partnership of AIMCO Properties, L.P., dated as
of December 14, 1999(2)
10.10 Ninth Amendment to the Third Amended and Restated Agreement
of Limited Partnership of AIMCO Properties, L.P., dated as
of December 21, 1999(2)
10.11 Tenth Amendment to the Third Amended and Restated Agreement
of Limited Partnership of AIMCO Properties, L.P., dated as
of December 21, 1999(2)
10.12 Eleventh Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated as of January 13, 2000(2)
10.13 Twelfth Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated April 19, 2000(11)
10.14 Thirteenth Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated August 7, 2000(12)
10.15 Shareholders Agreement, dated October 1, 1998, by and among
AIMCO, Andrew L. Farkas, James A. Aston and Frank M.
Garrison(13)
10.16 Common Stock Purchase Agreement made as of August 26, 1997,
by and between AIMCO and ABKB/LaSalle Securities Limited
Partnership(14)
10.17 Amended and Restated Assignment and Assumption Agreement,
dated as of December 7, 1998, by and among Insignia
Properties, L.P. and AIMCO Properties, L.P.(15)
10.18 Amended and Restated Indemnification Agreement, dated as of
May 26, 1998, by and between AIMCO and Insignia/ESG
Holdings, Inc.(16)
10.19 Interim Credit Agreement, dated as of September 20, 2000,
among AIMCO Properties, L.P., NHP Management Company,
AIMCO/Bethesda Holdings, Inc. Bank of America N.A., Lehman
Commercial Paper Inc. and several other lenders(17)
10.20 Credit Agreement (Secured Revolving Credit Facility), dated
as of August 16, 1999, among AIMCO Properties, L.P., Bank of
America, BankBoston, N.A., and First Union National Bank(18)
10.21 First Amended and Restated Credit Agreement, dated as of
September 20, 2000, among AIMCO Properties, L.P., NHP
Management Company, AIMCO/Bethesda Holdings, Inc. Bank of
America N.A. and several other lenders(12)
10.22 Second Amended and Restated Credit Agreement, dated as of
September 20, 2000, among AIMCO Properties, L.P., NHP
Management Company, AIMCO/Bethesda Holdings, Inc. Bank of
America N.A. and several other lenders(17)
10.23 Intercreditor and Subordination Agreement, dated as of
September 20, 2000, among AIMCO Properties, L.P., NHP
Management Company, AIMCO/Bethesda Holdings, Inc. Bank of
America N.A. and several other lenders(17)
10.24 Borrower Pledge Agreement, dated August 16, 1999 between
AIMCO Properties, L.P. and Bank of America(18)
10.25 Form of Committed Loan Note, issued by AIMCO Properties,
L.P. to Bank of America, BankBoston, N.A., and First Union
National Bank(18)
10.26 Form of Swing Line Note, issued by AIMCO Properties, L.P. to
Bank of America, BankBoston, N.A., and First Union National
Bank(18)
10.27 Form of Payment Guaranty, by AIMCO, AIMCO/NHP Holdings,
Inc., NHP A&R Services, Inc., and NHP Management Company(18)
10.28 Apartment Investment and Management Company 1998 Incentive
Compensation Plan, filed as of April 10, 1998(19)
</TABLE>
<PAGE> 170
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.29 Employment Contract, executed on July 29, 1994, by and
between AIMCO Properties, L.P., and Peter Kompaniez(20)
10.30 Employment Contract executed on July 29, 1994 by and between
AIMCO Properties, L.P. and Terry Considine(20)
10.31 Employment Contract executed on July 29, 1994 by and between
AIMCO Properties, L.P. and Steven D. Ira(20)
10.32 Apartment Investment and Management Company 1997 Stock Award
and Incentive Plan (October 1999)(2)
10.33 Form of Restricted Stock Agreement (1997 Stock Award and
Incentive Plan)(21)
10.34 Form of Incentive Stock Option Agreement (1997 Stock Award
and Incentive Plan)(4)
10.35 Apartment Investment and Management Company Non-Qualified
Employee Stock Option Plan, adopted August 29, 1996(22)
10.36 Amended and Restated Apartment Investment and Management
Company Non-Qualified Employee Stock Option Plan(23)
10.37 The 1994 Stock Incentive Plan for Officers, Directors and
Key Employees of Ambassador Apartments, Inc., Ambassador
Apartments, L.P., and Subsidiaries(24)
10.38 Amendment to the 1994 Stock Incentive Plan for Officers,
Directors and Key Employees of Ambassador Apartments, Inc.,
Ambassador Apartments, L.P. and Subsidiaries(24)
10.39 The 1996 Stock Incentive Plan for Officers, Directors and
Key Employees of Ambassador Apartments, Inc., Ambassador
Apartments, L.P., and Subsidiaries, as amended March 20,
1997(24)
10.40 Insignia 1992 Stock Incentive Plan, as amended through March
28, 1994, November 13, 1995 and March 25, 1997(25)
10.41 NHP Incorporated 1990 Stock Option Plan(26)
10.42 NHP Incorporated 1995 Incentive Stock Option Plan(26)
10.43 Summary of Agreement for Sale of Stock to Executive
Officers(27)
10.44 Acquisition Agreement, dated June 28, 2000, by and among
AIMCO, AIMCO Properties, L.P., NHP Management Company and
AIMCO/NHP Properties, Inc. (collectively, the "Buyers") and
Leo E. Zickler, Francis P. Lavin, Robert B. Downing, Mark E.
Schifrin, Marc B. Abrams and Richard R. Singleton
(collectively, the "Sellers")(12)
10.45 Letter, dated June 28, 2000, from AIMCO to Sellers,
regarding acquisition of BACs**
10.46 Option Sale Agreement, dated September 20, 2000, by and
among the Buyers and Sellers(17)
10.47 Option Sale Agreement, dated September 20, 2000, by and
among the Buyers and Kenneth C. Willard, Cher B. Compton,
Mary Ann Ewers, Brian M. Grant, Carol A. Kohl, Michael B.
Tillett, Stephen P. Gavula, Jr., Scot B. Barker and ORFG
Operations, L.L.C.**
10.48 ILPI and BAC Agreement, dated September 20, 2000, by and
among the Buyers and Sellers(17)
10.49 Personal Liability Assignment and Assumption Agreement,
dated September 20, 2000, by and among the Buyers and
Sellers**
21.1 Subsidiaries of the Registrant(2)
23.1 Consent of Ernst & Young LLP+
</TABLE>
<PAGE> 171
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
23.2 Consent of PricewaterhouseCoopers LLP+
23.3 Consent of Shaw Pittman (included in their opinion filed as
Exhibit 5.1)
23.4 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in their opinion filed as Exhibit 8.2)
23.5 Consent of Marshall & Stevens Incorporated+
23.6 Consent of Reznick Fedder and Silverman+
24 Power of Attorney**
</TABLE>
---------------
+ Filed herewith
* To be filed by amendment
** Previously filed
(1)Incorporated by reference to AIMCO's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 2000
(2) Incorporated by reference to AIMCO's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999
(3) Incorporated by reference to Insignia Financial Group, Inc.'s Registration
Statement on Form S-3 (File No. 333-17595)
(4) Incorporated by reference to AIMCO's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998
(5) Incorporated by reference to AIMCO's Registration Statement on Form 8-A,
filed with the SEC on July 19, 1994
(6) Incorporated by reference to AIMCO's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1998
(7) Incorporated by reference to Amendment No. 1 to AIMCO's Current Report on
Form 8-K/A, dated November 2, 1998 and filed with the SEC on February 11,
1999
(8) Incorporated by reference to AIMCO's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1999
(9) Incorporated by reference to AIMCO's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 1999
(10) Incorporated by reference to AIMCO's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1999
(11)Incorporated by reference to AIMCO's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 2000
(12)Incorporated by reference to AIMCO's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 2000
(13) Incorporated by reference to AIMCO's General Statement of Beneficial
Ownership on Schedule 13D, filed with the SEC on October 15, 1998
(14) Incorporated by reference to AIMCO's Current Report on Form 8-K, dated
August 26, 1997
(15) Incorporated by reference to Insignia Properties Trust's Current Report on
Form 8-K, dated February 11, 1999
(16) Incorporated by reference to AIMCO's Registration Statement on Form S-4
(File No. 333-60663)
(17)Incorporated by reference to AIMCO's General Statement of Beneficial
Ownership on Schedule 13D, filed with the Securities and Exchange Commission
(the "SEC") on October 2, 2000
(18)Incorporated by reference to AIMCO's Current Report on Form 8-K, dated
August 16, 1999
(19)Incorporated by reference to Annex B to AIMCO's Definitive Proxy Statement
on Schedule 14A, filed with the SEC on April 10, 1998
<PAGE> 172
(20)Incorporated by reference to AIMCO's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994
(21) Incorporated by reference to AIMCO's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1997
(22) Incorporated by reference to AIMCO's Quarterly Report on Form 10-Q/A for
the fiscal quarter ended September 30, 1996
(23) Incorporated by reference to AIMCO's Definitive Proxy Statement on Schedule
14A, filed with the SEC on April 1, 1997
(24) Incorporated by reference to Ambassador Apartments, Inc.'s Annual Report on
Form 10-K for the fiscal year ended December 31, 1997
(25)Incorporated by reference to Annex B to Insignia Financial Group Inc.'s
Definitive Proxy Statement on Schedule 14A, filed with the SEC on March 31,
1997
(26) Incorporated by reference to NHP Incorporated's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995
(27) Incorporated by reference to AIMCO's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996
(28)Incorporated by reference to AIMCO's Registration Statement on Form 8-A,
filed with the SEC on December 27, 2000
