-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DTnU1rhJiVMPdla5u6Km6Lz0LW0DCkA2dTRL1b084QUPhCR2AtCGG5IPhS4yFzm4 k4PorJVLgxtar3PZUKC5jg== 0000950134-99-002364.txt : 19990402 0000950134-99-002364.hdr.sgml : 19990402 ACCESSION NUMBER: 0000950134-99-002364 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: APARTMENT INVESTMENT & MANAGEMENT CO CENTRAL INDEX KEY: 0000922864 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 841259577 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-13232 FILM NUMBER: 99581287 BUSINESS ADDRESS: STREET 1: 1873 S BELLAIRE ST STREET 2: SUITE 1700 CITY: DENVER STATE: CO ZIP: 80222 BUSINESS PHONE: 3037578101 MAIL ADDRESS: STREET 1: 1873 SOUTH BELLAIRE ST STREET 2: 17TH FL CITY: DENVER STATE: CO ZIP: 80222 10-K 1 FORM 10-K FOR FISCAL YEAR END DECEMBER 31, 1998 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 1-13232 APARTMENT INVESTMENT AND MANAGEMENT COMPANY (Exact name of registrant as specified in its charter) MARYLAND 84-1259577 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 80222-4348 1873 SOUTH BELLAIRE STREET, SUITE 1700, (Zip Code) DENVER, CO (Address of principal executive offices)
--------------------- Registrant's telephone number, including area code: (303) 757-8101 Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- --------------------- Class A Common Stock New York Stock Exchange Class C Cumulative Preferred Stock New York Stock Exchange Class D Cumulative Preferred Stock New York Stock Exchange Class G Cumulative Preferred Stock New York Stock Exchange Class H Cumulative Preferred Stock New York Stock Exchange Class K Convertible Cumulative Preferred Stock New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] As of March 11, 1999, there were 61,656,837 shares of Class A Common Stock and no shares of Class B Common Stock outstanding. The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant, was approximately $2,289.0 million as of March 11, 1999. --------------------- DOCUMENTS INCORPORATED BY REFERENCE Portions of the proxy statement for the registrant's 1999 annual meeting of stockholders are incorporated by reference into Part III of this Annual Report. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 APARTMENT INVESTMENT AND MANAGEMENT COMPANY TABLE OF CONTENTS ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
ITEM PAGE - ---- ---- PART I 1. Business.................................................... 1 1998 Developments........................................... 2 Financial Information About Industry Segments............... 6 Operating and Financial Strategies.......................... 6 Growth Strategies........................................... 7 Property Management Strategies.............................. 8 Taxation of the Company..................................... 8 Competition................................................. 8 Regulation.................................................. 9 Insurance................................................... 10 Employees................................................... 10 2. Properties.................................................. 11 3. Legal Proceedings........................................... 12 4. Submission of Matters to a Vote of Security Holders......... 12 PART II Market for the Registrant's Common Equity and Related 5. Stockholder Matters....................................... 13 6. Selected Financial Data..................................... 15 Management's Discussion and Analysis of Financial Condition 7. and Results of Operations................................. 16 Quantitative and Qualitative Disclosures About Market 7a. Risk...................................................... 27 8. Financial Statements and Supplementary Data................. 28 Changes in and Disagreements with Accountants on Accounting 9. and Financial Disclosure.................................. 28 PART III 10. Directors and Executive Officers of the Registrant.......... 28 11. Executive Compensation...................................... 31 Security Ownership of Certain Beneficial Owners and 12. Management................................................ 31 13. Certain Relationships and Related Transactions.............. 31 PART IV Exhibits, Financial Statement Schedules and Reports on Form 14. 8-K....................................................... 32
3 PART I INTRODUCTION The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements in certain circumstances. Certain information included in this Report, the company's Annual Report to Shareholders and other filings (collectively "SEC Filings") under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended (as well as information communicated orally or in writing between the dates of such SEC Filings) contains or may contain information that is forward looking, including, without limitation, statements regarding the effect of acquisitions, the Company's future financial performance and the effect of government regulations. Actual results may differ materially from those described in the forward looking statements and will be affected by a variety of risks and factors including, without limitation, national and local economic conditions, the general level of interest rates, terms of governmental regulations that affect the company and interpretations of those regulations, the competitive environment in which the company operates, financing risks, including the risk that the company's cash flows from operations may be insufficient to meet required payments of principal and interest, real estate risks, including variations of real estate values and the general economic climate in local markets and competition for tenants in such markets, acquisition and development risks, including failure of such acquisitions to perform in accordance with projections, and possible environmental liabilities, including costs which may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by the company. In addition, the company's continued qualification as a real estate investment trust involves the application of highly technical and complex provisions of the Internal Revenue Code. Readers should carefully review the company's financial statements and the notes thereto, as well as the risk factors described in the SEC filings. ITEM 1. BUSINESS. Apartment Investment and Management Company ("AIMCO"), a Maryland corporation formed on January 10, 1994, is a self-administered and self-managed REIT engaged in the ownership, acquisition, development, expansion and management of multi-family apartment properties. As of December 31, 1998, we owned or managed 379,363 apartment units in 2,147 properties located in 49 states, the District of Columbia and Puerto Rico. On July 24, 1994, AIMCO completed its initial public offering and engaged in a business combination and consummated a series of related transactions which enabled it to continue and expand the property management and related businesses of Property Asset Management, L.L.C., Limited Liability Company, and its affiliated companies, and PDI Realty Enterprises, Inc. (collectively, the "AIMCO Predecessors"). Based on apartment unit data compiled by the National Multi Housing Council, we believe that, as of December 31, 1998, we were the largest owner and manager of multifamily apartment properties in the United States. As of December 31, 1998, we: - owned or controlled 63,086 units in 242 apartment properties; - held an equity interest in 170,243 units in 902 apartment properties; and - managed 146,034 units in 1,003 apartment properties for third party owners and affiliates. We conduct substantially all of our operations through our operating partnership, AIMCO Properties, L.P. Through wholly owned subsidiaries, we act as the sole general partner of the AIMCO operating partnership. As of December 31, 1998, we owned approximately an 83% interest in the AIMCO operating partnership. We manage apartment properties for third parties and affiliates through unconsolidated subsidiaries that we refer to as the "management companies." Generally, when we refer to "we," "us" or the "Company" in this annual report on Form 10-K, we are referring to AIMCO, the AIMCO operating partnership, the management companies and their respective subsidiaries. We refer to interests in the AIMCO operating partnership that are held by third parties as "OP Units." 1 4 The Company's principal executive offices are located at 1873 South Bellaire Street, Suite 1700, Denver, Colorado 80222-4348 and its telephone number is (303) 757-8101. 1998 DEVELOPMENTS Ambassador Acquisition On May 8, 1998, Ambassador Apartments, Inc. ("Ambassador") was merged with and into AIMCO, with AIMCO being the surviving corporation. The purchase price of $713.6 million was comprised of $90.3 million in cash, $372.0 million of assumed debt and up to approximately 6.6 million shares of Class A Common Stock valued at $251.3 million. Pursuant to the Ambassador merger agreement, each outstanding share of Ambassador common stock was converted into the right to receive 0.553 shares of AIMCO Class A Common Stock. Concurrently, all outstanding options to purchase Ambassador common stock were converted into cash or options to purchase AIMCO Class A Common Stock, at the same conversion ratio. Contemporaneously with the consummation of the Ambassador merger, a subsidiary of the AIMCO operating partnership merged with Ambassador's operating partnership and each outstanding unit of limited partnership interest in the Ambassador operating partnership was converted into the right to receive 0.553 OP Units. Prior to the merger, Ambassador was a self-administered and self-managed real estate investment trust engaged in the ownership and management of garden-style apartment properties leased primarily to middle income tenants. Ambassador owned 52 apartment communities with a total of 15,728 units located in Arizona, Colorado, Florida, Georgia, Illinois, Tennessee and Texas, and managed one property containing 252 units for an unrelated third party. Insignia Acquisition On October 1, 1998, Insignia Financial Group, Inc., a Delaware corporation, was merged with and into AIMCO with AIMCO being the surviving corporation. The purchase price of $1,125.7 million was comprised of the issuance of up to approximately 8.9 million shares of Class E Cumulative Convertible Preferred Stock (the "Class E Preferred Stock") valued at $301.2 million, $670.1 million in assumed debt and liabilities (including the $50 million special dividend, assumed liabilities of Insignia Properties Trust and transaction costs), $149.5 million in assumed mandatory redeemable convertible preferred securities, and $4.9 million in cash. The merger was accounted for as a purchase. The Class E Preferred Stock entitled the holders thereof to receive the same cash dividends per share as holders of Class A Common Stock. In addition, on January 15, 1999, holders of Class E Preferred Stock received a special dividend in an aggregate amount of approximately $50 million, and all outstanding shares of Class E Preferred Stock automatically converted into an equal number of shares of Class A Common Stock. As a result of the Insignia merger, AIMCO acquired; (i) Insignia's interests in Insignia Properties Trust, a Maryland REIT ("IPT"), which was a majority owned subsidiary of Insignia; (ii) Insignia's interest in Insignia Properties, L.P., IPT's operating partnership ("IPLP"); (iii) 100% of the ownership of the Insignia entities that provide multifamily property management and partnership administrative services; (iv) Insignia's interest in multifamily co-investments; (v) Insignia's ownership of subsidiaries that control multifamily properties not included in IPT; (vi) Insignia's limited partner interests in public and private syndicated real estate limited partnerships; and (vii) assets incidental to the foregoing businesses (collectively, the "Insignia Multifamily Business"). IPT Merger As a result of the Insignia merger, AIMCO acquired approximately 51% of the outstanding shares of beneficial interest of IPT. On February 26, 1999, IPT was merged into AIMCO. Pursuant to the merger, each of the outstanding shares of IPT that were not held by AIMCO were converted into the right to receive 0.3601 shares of AIMCO Class A Common Stock, resulting in the issuance of approximately 4.3 million shares of AIMCO Class A Common Stock (valued at approximately $158.8 million). 2 5 Individual Property Acquisitions During the year ended December 31, 1998, the Company purchased or acquired control of 30 properties consisting of 6,707 apartment units for total consideration of $316.5 million. The Company's purchase price consisted of $172.3 million in assumed mortgage obligations, $96.0 million in cash, and $48.2 million of OP Units. Tender Offers During 1998, the Company made separate offers to the limited partners of 308 partnerships to acquire their limited partnerships interests. The Company paid approximately $84.5 million in cash and OP Units to acquire limited partnership interests pursuant to the offers. Property Dispositions In 1998, the Company sold eleven properties for an aggregate sales price of $85.3 million. Cash proceeds to the Company from the sales were used to repay a portion of the Company's outstanding short-term indebtedness. The results of operations of six of these properties were accounted for by the Company under the equity method. The Company recognized a gain of approximately $4.7 million on the disposition of the five consolidated properties. Debt Assumptions and Financings During the year ended December 31, 1998, the Company assumed or incurred new non-recourse indebtedness totalling $544.4 million in connection with the acquisition of 82 apartment properties. In January 1998, the Company entered into a new $50 million credit agreement with Bank of America National Trust and Savings Association and Bank Boston, N.A. The AIMCO operating partnership is the borrower under the credit agreement, but all obligations thereunder are guaranteed by AIMCO and certain of its subsidiaries. In October 1998, the Company amended and restated the credit agreement. The agreement now provides for a revolving credit facility of up to $100 million, including a swing line of up to $30 million. The credit facility matures on September 30, 1999, unless extended, at the discretion of the lenders. The credit agreement also provides for the conversion of the revolving facility into a three-year term loan. Under the credit agreement, as amended in January 1999, loans bear interest at LIBOR or Bank of America's reference rate, at the election of the Company, plus an applicable margin. The margins range from 2.25% to 2.75% for a LIBOR rate borrowing and 0.75% to 1.25% for a base rate borrowing, both dependant upon the total balance outstanding relative to the calculated borrowing base value. The balance outstanding under the credit facility was $84.3 million as of December 31, 1998. In February 1998, the AIMCO operating partnership, entered into a five year $50 million secured credit facility agreement with Washington Mortgage Financial Group, Ltd. AIMCO and certain subsidiaries guaranteed loans under the agreement and the guarantees were secured by certain of their assets, including four apartment properties and two mortgage notes. Under the agreement, advances to the AIMCO operating partnership were funded with the proceeds from the sale to investors of mortgage-backed securities issued by Fannie Mae and secured by the advance and an interest in the collateral. The interest rate on each advance was determined by investor bids for such mortgage-backed securities, plus a margin. In February 1999, the Company terminated the credit facility and repaid all outstanding borrowings with proceeds from new long-term, fully amortizing indebtedness secured by certain properties that previously secured the credit facility. In October 1998, the AIMCO operating partnership and AIMCO entered into an interim term loan agreement with Lehman Brothers Inc. and one of its affiliates, and borrowed $300 million thereunder. The loan is unsecured and matures on September 30, 1999. The proceeds were used to finance the Insignia merger and related fees and expenses, to refinance existing indebtedness, and for general working capital purposes. The loan bears interest at a base rate or the rate at which eurodollar deposits for one month are offered in the interbank eurodollar market, plus, in either case, a margin which averages 1.375% to 2.208% in the case of base rate loans, and 2.375% to 3.208% in the case of eurodollar loans. The base rate will be the higher of 3 6 (i) the primary rate of Citibank, N.A., (ii) the secondary market rate for three month certificates of deposit plus 1%, or (iii) the federal funds effective rate plus 0.5%. In November 1998, the Company used proceeds of $100 million from the sale of AIMCO's Class J Cumulative Preferred Stock to pay down the loan. As of December 31, 1998, there was $196 million of indebtedness outstanding under the loan agreement. In February 1999, net proceeds of $115.0 million from the sale of 5,000,000 shares of AIMCO's Class K Convertible Cumulative Preferred Stock were used to further pay down the loan. In October 1998, as a result of the acquisition of Insignia, AIMCO, directly or through its subsidiaries, became the owner of approximately 51% of IPT. Prior to the acquisition, IPT's operating partnership had entered into a $50 million revolving credit agreement with Lehman Commercial Paper, Inc., as syndication agent, and First Union National Bank, as administrative agent. Borrowings under the credit agreement may be used to finance certain permitted investments and refinance certain other investments. The credit agreement matures on December 30, 2000. The credit agreement provides for interest at an annual rate equal to (i) 2.50% plus a rate based on LIBOR or (ii) 0.50% plus a base rate that is the higher of the prime rate or the Federal Funds rate. As of December 31, 1998, there was $30 million outstanding under the credit agreement. In December 1998, the Company completed the refinancing of $222 million in variable rate tax-exempt debt assumed in conjunction with the May 1998 merger with Ambassador. The debt was secured by 27 properties located in Texas, Arizona, Tennessee and Illinois. Through the refinancing, the Company converted the previous tax-exempt debt to $204 million in fixed rate, fully amortizing tax-exempt debt secured by 26 properties. The new debt has a weighted average interest rate of 5.8% and matures in 23 years. The Company also incurred $7.1 million of taxable debt secured by three of the properties, repaid $11.4 million of the previous tax-exempt debt, released $21.5 million in cash reserves and impound accounts held by the prior mortgagors, and released two properties that served as additional collateral for the previous debt. In February and March 1999, the Company incurred in the aggregate $83.4 million of long-term, fixed rate, fully amortizing mortgage debt secured by 13 properties in separate loan transactions. The Company used the $81.5 million of net proceeds from the financings to repay debt under the interim loan agreement with Lehman Brothers Inc., to repay debt under its credit facility with Bank of America National Trust and Savings Association and Bank, Boston, N.A. and to provide working capital. As of March 11, 1999, the balance outstanding under the interim loan agreement was $25 million, under the credit facility was $74.8 million, and under the IPT credit agreement was $45 million. The amount available under the credit facility at March 11, 1999 was $24 million and under the IPT credit agreement was $5 million. 4 7 Equity Offerings In 1998, the Company raised proceeds of over $391 million in three public offerings and three private placements of equity securities. These transactions are summarized below:
NUMBER OF TOTAL PROCEEDS DIVIDEND OR SHARES IN DISTRIBUTION TRANSACTION TYPE DATE OR UNITS MILLIONS RATE - ----------- ------- --------- --------- -------------- ----------------- Class D Cumulative Preferred Stock of AIMCO................. Public Feb. 1998 4,200,000 $105.00 8.75% Class G Cumulative Preferred Stock of AIMCO................. Public Jul. 1998 4,050,000 $101.25 9.375% Class H Cumulative Preferred Stock of AIMCO................. Public Aug. 1998 2,000,000 $ 50.00 9.5% Class J Cumulative Convertible Preferred Stock of AIMCO....... Private Nov. 1998 1,250,000 $100.00 (1) Preferred Partnership Units of Ambassador Apartments, L.P..... Private Dec. 1998 1,400,000 $ 30.85 7.75% Warrants to purchase AIMCO Class A Common Stock................. Private Dec. 1998 875,000 $ 4.15 N/A ------- TOTAL PROCEEDS 1998............................................... $391.25 Class K Convertible Cumulative Preferred Stock of AIMCO....... Public Feb. 1999 5,000,000 $125.00 (2)
- --------------- (1) Holders of Class J Preferred Stock are entitled to receive cash dividends at the rate of 7% per annum of the $100 liquidation preference (equivalent to $7 per annum per share) for the period from November 6, 1998 until November 15, 1998, 8% per annum of the $100 liquidation preference (equivalent to $8 per annum per share) for the period from November 15, 1998 until November 15, 1999, 9% per annum of the $100 liquidation preference (equivalent to $9 per annum per share) for the period from November 15, 1999 until November 15, 2000, and 9 1/2% per annum of the $100 liquidation preference (equivalent to $9.50 per annum per share) thereafter. (2) For three years from the date of original issuance, the Class K Preferred Stock dividend will be in an amount per share equal to the greater of (i) $2.00 per year (equivalent to 8% of the $25 liquidation preference), 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 K Preferred Stock is convertible. Beginning with the third anniversary of the date of original issuance, the Class K Preferred Stock dividend per share will be increased to the greater of (i) $2.50 per year (equivalent to 10% of the $25 liquidation preference), 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 K Preferred Stock is convertible. Pending acquisitions In the ordinary course of business, the Company engages in discussions and negotiations regarding the acquisition of apartment properties (including interests in entities that own apartment properties). The Company frequently enters into contracts and nonbinding letters of intent with respect to the purchase of properties. These contracts are typically subject to certain conditions and permit the Company to terminate the contract in its sole and absolute discretion if it is not satisfied with the results of its due diligence investigation of the properties. The Company believes that such contracts essentially result in the creation of an option on the subject properties and give the Company greater flexibility in seeking to acquire properties. As of March 8, 1999, the Company had under contract or letter of intent an aggregate of 32 multi-family apartment properties with a maximum aggregate purchase price of $571.1 million, including estimated capital improvements, which, in some cases, may be paid in the form of assumption of existing debt. All such contracts are subject to termination by the Company as described above. No assurance can be given that any 5 8 of these possible acquisitions will be completed or, if completed, that they will be accretive on a per share basis. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS The Company operates in one industry segment, the ownership and management of real estate properties. See the consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K for financial information relating to the Company. OPERATING AND FINANCIAL STRATEGIES The Company's operating and financing strategies to attempt to meet its objective of providing long-term, predictable funds from operations ("FFO") per share of Class A Common Stock, less an allowance for Capital Replacements of $300 per apartment unit, include the following: - Acquisition of Properties at Less Than Replacement Cost. AIMCO attempts to acquire properties at a significant discount to their replacement cost. - Geographic Diversification. AIMCO operates in 49 states, the District of Columbia and Puerto Rico. This geographic diversification insulates the Company, to some degree, from inevitable downturns in any one market. - Market Growth. The Company seeks to operate in markets where population and employment growth are expected to exceed the national average and where it believes it can become a regionally significant owner or manager of properties. For the period from 1996 through 1999, annual population and employment growth rates in AIMCO's five largest regional markets are forecasted to be 2.2% and 3.6%, respectively. - Product Diversification. The Company's portfolio of apartment properties spans a wide range of apartment community types, both within and among markets. - Capital Replacement. AIMCO believes that the physical condition and amenities of its apartment communities are important factors in its ability to maintain and increase rental rates. The Company allocates approximately $300 annually per owned apartment unit for capital replacements, and reserves unexpended amounts for future capital replacements. - Debt Financing. AIMCO's strategy is generally to incur debt to increase its return on 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, and a ratio of earnings before interest, income taxes, depreciation and amortization (with certain adjustments and after a provision of approximately $300 per owned apartment unit) to debt service of at least 2:1, and to match debt maturities to the character of the assets financed. For the year ended December 31, 1998, the Company was within these targets. The Company uses predominantly long-term, fixed-rate and self-amortizing non-recourse debt in order to avoid the refunding or repricing risks of short-term borrowings. The Company also uses short-term debt financing to fund acquisitions and generally expects to refinance such borrowings with proceeds from equity offerings or long-term debt financings. As of December 31, 1998, approximately 25.2% of AIMCO's outstanding debt was short-term debt and 74.8% was long-term debt. As of March 11, 1999, approximately 9.5% of AIMCO's outstanding debt was short-term debt and 90.5% was long-term debt. - Dispositions. From time to time, the Company sells properties that do not meet its return on investment criteria or that are located in areas where AIMCO does not believe that the long-term neighborhood values justify the continued investment in the properties. - Dividend Policy. AIMCO pays dividends on its Class A Common Stock to share its profitability with its stockholders. The Company distributed 65.8%, 66.5% and 72.3% of FFO to holders of Class A Common Stock for the years ended December 31, 1998, 1997 and 1996, respectively. It is the present policy of the Board of Directors to increase the dividend annually in an amount equal to one-half of the 6 9 projected increase in FFO, adjusted for capital replacements, subject to minimum distribution requirements to maintain its REIT status. GROWTH STRATEGIES The Company seeks growth through two primary sources -- acquisitions and internal expansion. Acquisition Strategies. The Company believes its acquisition strategies will increase profitability and predictability of earnings by increasing its geographic diversification, economies of scale and opportunities to provide ancillary services to tenants at its properties. Since AIMCO's initial public offering in July 1994, the Company has completed numerous acquisition transactions, expanding its portfolio of owned or managed properties from 132 apartment properties with 29,343 units to 2,147 apartment properties with 379,363 units as of December 31, 1998. The Company acquires additional properties primarily in three ways: - Direct Acquisitions. AIMCO may directly, including through mergers and other business combinations, acquire individual properties or portfolios of properties and controlling interests in entities that own or control such properties or portfolios. To date, a significant portion of AIMCO's growth has resulted from the acquisition of other companies that owned or controlled properties. - Acquisition of Managed Properties. AIMCO believes that its property management operations support its acquisition activities. Since AIMCO's initial public offering, the Company has acquired from its managed portfolio 15 properties comprising 4,432 units for total consideration of $155.4 million. - Increasing its Interest in Partnerships. For properties where AIMCO owns a general partnership interest in the property-owning partnership, the Company may seek to acquire, subject to its fiduciary duties, the interests in the partnership held by third parties for cash or, in some cases, in exchange for OP Units. AIMCO has completed tender offers with respect to 308 partnerships and has purchased additional interests in such partnerships for cash and for OP Units. Internal Growth Strategies. The Company pursues internal growth primarily through the following strategies: - Revenue Increases. The Company increases rents where feasible and seeks to improve occupancy rates. - Redevelopment of Properties. The Company believes redevelopment of selected properties in superior locations provides advantages over development of new properties. AIMCO believes that redevelopment generally allows the Company to maintain rents comparable to new properties and, compared to development of new properties, can be accomplished with relatively lower financial risk, in less time and with reduced delays due to governmental regulation. - Expansion of Properties. The Company believes that expansion within or adjacent to properties already owned or managed by the Company also provides growth opportunities at lower risk than new development. Such expansion can offer cost advantages to the extent common area amenities and on-site management personnel can service the property expansions. - Conversion of Affordable Properties; Improvement of Performance. The Company believes that it may be able to significantly increase its return from its portfolio of affordable properties by improving operations at some of its properties or by converting some of these properties to conventional properties. - Ancillary Services. The Company's management believes that its ownership and management of properties provides it with unique access to a customer base for the sale of additional services which 7 10 generate incremental revenues. The Company currently provides cable television, telephone services, appliance rental, and carport, garage and storage space rental at certain properties. - Controlling Expenses. Cost reductions are accomplished by local focus on the regional operating center level and by exploiting economies of scale. As a result of the size of its portfolio and its creation of regional concentrations of properties, the Company has the ability to leverage fixed costs for general and administrative expenditures and certain operating functions, such as insurance, information technology and training, over a large property base. PROPERTY MANAGEMENT STRATEGIES AIMCO seeks to improve the operating results from its property management business by, among other methods, combining centralized financial control and uniform operating procedures with localized property management decision-making and market knowledge. AIMCO's management operations are organized into 35 regional operating centers. Each of the regional operating centers is supervised by a Regional Vice-President. TAXATION OF THE COMPANY The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, commencing with its taxable year ended December 31, 1994, and the Company intends to continue to operate in such a manner. The Company's current and continuing qualification as a REIT depends on its ability to meet the various requirements imposed by the Internal Revenue Code, through actual operating results, distribution levels and diversity of stock ownership. If the Company qualifies for taxation as a REIT, it will generally not be subject to U.S. federal corporate income tax on its net income that is currently distributed to stockholders. This treatment substantially eliminates the "double taxation" (at the corporate and stockholder levels) that generally results from investment in a corporation. If the Company fails to qualify as a REIT in any taxable year, its taxable income will be subject to U.S. federal income tax at regular corporate rates (including any applicable alternative minimum tax). Even if the Company qualifies as a REIT, it may be subject to certain state and local income taxes and to U.S. federal income and excise taxes on its undistributed income. If in any taxable year the Company fails to qualify as a REIT and incurs additional tax liability, the Company may need to borrow funds or liquidate certain investments in order to pay the applicable tax and the Company would not be compelled to make distributions under the Code. Unless entitled to relief under certain statutory provisions, the Company would also be disqualified from treatment as a REIT for the four taxable years following the year during which qualification is lost. Although the Company currently intends to operate in a manner designed to qualify as a REIT, it is possible that future economic, market, legal, tax or other considerations may cause the Company to fail to qualify as a REIT or may cause the Board of Directors to revoke the REIT election. The Company and its stockholders may be subject to state or local taxation in various state or local jurisdictions, including those in which it or they transact business or reside. The state and local tax treatment of the Company and its stockholders may not conform to the U.S. federal income tax treatment. COMPETITION There are numerous housing alternatives that compete with the Company's properties in attracting residents. The Company's properties compete directly with other multi-family rental apartments and single family homes that are available for rent in the markets in which the Company's properties are located. The Company's properties also compete for residents with new and existing homes and condominiums. The number of competitive properties in a particular area could have a material effect on the Company's ability to lease apartment units at its properties and on the rents charged. The Company competes with numerous real estate companies in acquiring, developing and managing multi-family apartment properties and seeking tenants to occupy its properties. In addition, the Company competes with numerous property management companies in the markets where the properties managed by the Company are located. 8 11 REGULATION General Multifamily apartment properties are subject to various laws, ordinances and regulations, including regulations relating to recreational facilities such as swimming pools, activity centers and other common areas. Changes in laws increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions, as well as changes in laws affecting development, construction and safety requirements, may result in significant unanticipated expenditures, which would adversely affect the Company's cash flows from operating activities. In addition, future enactment of rent control or rent stabilization laws or other laws regulating multi-family housing may reduce rental revenue or increase operating costs in particular markets. HUD Enforcement A significant number of properties owned by the Company are subject to regulation by HUD. Under its regulations, HUD reserves the right to approve the owner and the manager of HUD-insured and HUD-assisted properties, as well as their "principals" (e.g., general partners, stockholders with a 10% or greater interest, officers and directors) in connection with the acquisition of a property, participation in HUD programs or the award of a management contract. This approval process is commonly referred to as "2530 Clearance." HUD monitors the performance of properties with HUD-insured mortgage loans. HUD also monitors compliance with applicable regulations, and takes performance and compliance into account in approving the acquisition of management of HUD-assisted properties. In the event of instances of unsatisfactory performance or regulatory violations, the HUD office with jurisdiction over the applicable property has the authority to enter a "flag" into the computerized 2530 Clearance system. If one or more flags have been entered, a decision whether to grant 2530 Clearance is then subject to review by HUD's Multifamily Participation Review Committee in Washington, D.C. (the "2530 Committee"). As a result of certain mortgage defaults and unsatisfactory ratings received by NHP Incorporated in years prior to its acquisition by AIMCO in December 1997, HUD believes that the 2530 Committee must review any application for 2530 Clearance filed by AIMCO. On December 18, 1998, AIMCO received approval of approximately fifty 2530 applications and had no unresolved flags in the 2530 system as of December 31, 1998. AIMCO believes that the 2530 Committee will continue to apply the 2530 clearance process to large management portfolios such as AIMCO's with discretion and flexibility. While there can be no assurance, AIMCO believes that the unsatisfactory reviews and the mortgage defaults will not have a material impact on its results of operations or financial condition. If HUD were to disapprove AIMCO as property manager for one or more affordable properties, AIMCO's ability to obtain property management revenues from new affordable properties would be impaired. Laws Benefitting Disabled Persons Under the Americans with Disabilities Act of 1990, all places of public accommodation are required to meet certain Federal requirements related to access and use by disabled persons. These requirements became effective in 1992. A number of additional Federal, state and local laws may also require modifications to the Company'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 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 the Company believes that its properties are substantially in compliance with present requirements, it may incur unanticipated expenses to comply with these laws. Regulation of Affordable Housing As of December 31, 1998, the Company owned or controlled 12 properties, held an equity interest in 462 properties and managed for third parties and affiliates 578 properties that benefit from governmental 9 12 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 ("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 a loss of management fee revenue. The Company must obtain the approval of HUD in order to manage, or acquire a significant interest in, a HUD-assisted or HUD-insured property. The Company can make no assurance that it will always receive such approval. Environmental Various Federal, state and local laws subject property owners or operators to liability for the costs of removal or remediation of certain hazardous substances present 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 the Company'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 substances at the disposal or treatment facility. Anyone who arranges for the disposal or treatment of hazardous or toxic substances is potentially liable under such laws. These laws often impose liability whether or not the person arranging for the disposal ever owned or operated the disposal facility. In connection with the ownership, operation and management of properties, the Company could potentially be liable for environmental liabilities or costs associated with its properties. INSURANCE Management believes that the Company's properties are covered by adequate fire, flood and property insurance provided by reputable companies and with commercially reasonable deductibles and limits. EMPLOYEES The Company has a staff of employees performing various acquisition, redevelopment and management functions. The Company, through the AIMCO operating partnership and the management companies, has approximately 13,000 employees, most of whom are employed at the property level. None of the employees are represented by a union, and the Company has never experienced a work stoppage. The Company believes it maintains satisfactory relations with its employees. 10 13 ITEM 2. PROPERTIES. The Company's properties are located in 49 states, Puerto Rico and the District of Columbia. The properties are managed by four Division Vice-Presidents controlling 35 regional operating centers. The following table sets forth information for the regional operating centers as of December 31, 1998:
REGIONAL OPERATING NUMBER OF NUMBER OF CENTER DIVISION PROPERTIES UNITS - --------- --------- ---------- --------- Chicago, IL................................................. Far West 60 11,744 Denver, CO.................................................. Far West 73 11,478 Kansas City, MO............................................. Far West 97 13,138 Los Angeles, CA............................................. Far West 69 10,239 Oakland, CA................................................. Far West 80 8,931 Phoenix, AZ................................................. Far West 51 13,138 San Diego, CA............................................... Far West 36 5,291 ----- ------- 466 73,959 Allentown, PA............................................... East 48 7,493 Columbia, SC................................................ East 57 10,011 Greenville, SC.............................................. East 70 8,650 Philadelphia, PA............................................ East 37 11,804 MLG Sub ROC 2............................................... East 27 8,061 Richmond, VA................................................ East 43 11,420 Rockville, MD............................................... East 84 13,053 Maine Sub ROC 1............................................. East 70 2,328 Tarrytown, NY............................................... East 67 9,582 ----- ------- 503 82,402 Atlanta, GA................................................. Southeast 63 11,896 Boca Raton, FL.............................................. Southeast 35 7,797 Miami, FL................................................... Southeast 49 10,454 Mobile, AL.................................................. Southeast 62 10,136 Nashville, TN............................................... Southeast 63 11,589 Orlando, FL................................................. Southeast 52 12,786 Tampa, FL................................................... Southeast 53 13,075 ----- ------- 377 77,733 Austin, TX.................................................. West 55 10,452 Columbus, OH................................................ West 57 8,774 Dallas I, TX................................................ West 65 12,773 Dallas II, TX............................................... West 68 13,153 Houston I, TX............................................... West 49 10,458 Houston II, TX.............................................. West 58 13,818 Indianapolis, IN............................................ West 43 9,675 ----- ------- 395 79,103
11 14
REGIONAL OPERATING NUMBER OF NUMBER OF CENTER DIVISION PROPERTIES UNITS - --------- --------- ---------- --------- Portfolio: Senior Living Sub ROC 1..................................... Oxford 8 1,638 Affordable Midwest.......................................... Oxford 44 5,711 Conventional Mideast........................................ Oxford 23 6,342 Conventional Midwest........................................ Oxford 45 10,725 Conventional South.......................................... Oxford 41 10,210 ----- ------- 161 34,626 Other....................................................... 245 31,540 ----- ------- 2,147 379,363 ===== =======
At December 31, 1998, the Company owned or controlled 242 properties containing 63,086 units. These properties contain, on average, 261 apartment units, with the largest property containing 2,113 apartment units. These properties offer residents a range of amenities, including swimming pools, clubhouses, spas, fitness centers, tennis courts and saunas. Many of the apartment units offer design and appliance features such as vaulted ceilings, fireplaces, washer and dryer hook-ups, cable television, balconies and patios. In addition, at December 31, 1998, the Company held an equity interest in 902 properties containing 170,243 units, and managed 1,003 other properties containing 146,034 units. The Company's 2,147 properties contain, on average, 177 apartment units, with the largest property containing 2,899 apartment units. Substantially all of the properties owned or controlled by the Company are encumbered by mortgage indebtedness or serve as collateral for the Company's indebtedness. At December 31, 1998, the Company had aggregate mortgage indebtedness totaling $1,242.4 million, which was secured by 197 properties with a combined net book value of $2,185.7 million, having an aggregate weighted average interest rate of 7.1%. As of December 31, 1998, approximately 25.2% of AIMCO's outstanding debt was short-term debt and 74.8% was long-term debt. As of March 11, 1999, approximately 9.5% of AIMCO's outstanding debt was short-term debt and 90.5% was long-term debt. See the financial statements included elsewhere in this Annual Report on Form 10-K for additional information about the Company's indebtedness. ITEM 3. LEGAL PROCEEDINGS. The Company is a party to various legal actions resulting from its operating activities. These actions are routine litigation and administrative proceedings arising in the ordinary course of business, some of which are covered by liability issuance, and none of which are expected to have a material adverse effect on the consolidated financial condition or results of operations of the Company. In connection with the Company's offers to purchase interests in limited partnerships that own properties, the Company and its affiliates are sometimes subject to legal actions, including allegations that such activities may involve breaches of fiduciary duties to the limited partners of such partnerships or violations of the relevant partnership agreements. The Company believes it complies with its fiduciary obligations and relevant partnership agreements, and does not expect such legal actions to have a material adverse effect on the consolidated financial condition or results of operations of the Company and its subsidiaries taken as a whole. The Company may incur costs in connection with the defense or settlement of such litigation, which could adversely affect the Company's desire or ability to complete certain transactions and thereby have a material adverse effect on the Company and its subsidiaries. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. 12 15 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. AIMCO's Class A Common Stock has been listed and traded on the NYSE under the symbol "AIV" since July 22, 1994. The following table sets forth the quarterly high and low sales prices of the Class A Common Stock, as reported on the NYSE, and the dividends paid by the Company for the periods indicated.
DIVIDENDS PAID QUARTER ENDED HIGH LOW (PER SHARE) ------------- ---- --- ----------- 1996 March 31, 1996............................................ $21 1/8 $19 3/8 $ 0.425 June 30, 1996............................................. 21 18 3/8 0.425 September 30, 1996........................................ 22 18 3/8 0.425 December 31, 1996......................................... 28 3/8 21 1/8 0.425 1997 March 31, 1997............................................ 30 1/2 25 1/2 0.4625 June 30, 1997............................................. 29 3/4 26 0.4625 September 30, 1997........................................ 36 3/16 28 1/8 0.4625 December 31, 1997......................................... 38 32 0.4625 1998 March 31, 1998............................................ 38 9/16 34 1/4 0.5625 June 30, 1998............................................. 39 7/8 36 1/2 0.5625 September 30, 1998........................................ 41 31 0.5625 December 31, 1998......................................... 37 3/8 30 0.5625 1999 March 31, 1999 (thru March 11, 1999)...................... 41 5/8 35 3/4 0.625(1)
- --------------- (1) On January 20, 1999, the Company's Board of Directors declared a cash dividend of $0.625 per share of Class A Common Stock, paid on February 12, 1999 to stockholders of record on February 6, 1998. On March 11, 1999, there were 61,656,837 shares of Class A Common Stock outstanding, held by 1,575 stockholders of record. AIMCO, as a REIT, is required to distribute annually to holders of common stock at least 95% of its "real estate investment trust taxable income," which, as defined by the Internal Revenue Code and Treasury regulations, is generally equivalent to net taxable ordinary income. AIMCO measures its economic profitability and intends to pay regular dividends to its stockholders based on FFO during the relevant period. However, the future payment of dividends by AIMCO will be at the discretion of the Board of Directors and will depend on numerous factors including AIMCO's financial condition, its capital requirements, the annual distribution requirements under the provisions of the Internal Revenue Code applicable to REITs and such other factors as the Board of Directors deems relevant. From time to time, AIMCO issues shares of Class A Common Stock in exchange for OP Units tendered to the AIMCO operating partnership for redemption in accordance with the terms and provisions of the agreement of limited partnership of the AIMCO operating partnership. Such shares are issued based on an exchange ratio of one share for each OP Unit. The shares are issued in exchange for OP Units in private transactions exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to Section 4(2) thereof. During 1998, a total of 275,405 shares of Class A Common Stock were issued in exchange for OP Units. On November 6, 1998, AIMCO sold 1,000,000 shares of its Class J Cumulative Convertible Preferred Stock ("Class J Preferred Stock") in a private placement for approximately $100.0 million, all of which was used to repay indebtedness under its interim term loan agreement with Lehman Brothers, Inc. In addition, on 13 16 the same date, AIMCO issued 250,000 shares of Class J Preferred Stock to the AIMCO operating partnership in a private placement in exchange for 250,000 Class J Partnership Preferred Units of the AIMCO operating partnership. The shares were sold in a private transaction exempt from registration under the Securities Act, pursuant to Section 4(2) thereof. On December 14, 1998, the Company sold to AEW Targeted Securities Fund, L.P. (i) 1,400,000 Class B partnership preferred units of a subsidiary of the AIMCO operating partnership for $30.85 million, and (ii) a warrant to purchase 875,000 shares of Class A Common Stock for $4.15 million. The partnership units may be redeemed at the option of the holders at any time, and at the option of the Company under certain circumstances. Any redemption of the units may be satisfied by delivery of cash, Class A Common Stock or OP Units. The warrant has an exercise price of $40 per share. The warrant may be exercised at any time, and expires upon a redemption of the Class B partnership preferred units. The Company used all of the $35 million of proceeds from these transactions for general corporate purposes. The partnership units and warrant were sold in private transactions exempt from registration under the Securities Act, pursuant to Section 4(2) thereof. 14 17 ITEM 6. SELECTED FINANCIAL DATA The historical selected financial data for AIMCO for the years ended December 31, 1998, 1997 and 1996 is based on audited financial statements. This information should be read in conjunction with such financial statements, including the notes thereto, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included herein. The historical selected financial data for AIMCO for the year ended December 31, 1995 and the period from January 10, 1994 (the date of inception) through December 31, 1994 and for the AIMCO Predecessors for the period January 1, 1994 through July 28, 1994 is based on audited financial statements.
AIMCO THE COMPANY PREDECESSORS -------------------------------------------------------------------------- -------------- FOR THE PERIOD FOR THE PERIOD JANUARY 10, JANUARY 1, 1994 1994 FOR THE YEAR ENDED DECEMBER 31, THROUGH THROUGH --------------------------------------------------------- DECEMBER 31, JULY 28, 1998 1997 1996 1995 1994 1994 ------------ ------------ ------------ ------------ -------------- -------------- OPERATING DATA: RENTAL PROPERTY OPERATIONS: Rental and other income......... $ 377,139 $ 193,006 $ 100,516 $ 74,947 $ 24,894 $ 5,805 Property operating expenses..... (147,541) (76,168) (38,400) (30,150) (10,330) (2,263) Owned property management expenses...................... (11,013) (6,620) (2,746) (2,276) (711) -- Depreciation.................... (84,635) (37,741) (19,556) (15,038) (4,727) (1,151) ---------- ---------- ---------- -------- -------- ------- 133,950 72,477 39,814 27,483 9,126 2,391 ---------- ---------- ---------- -------- -------- ------- SERVICE COMPANY BUSINESS: Management fees and other income........................ 24,103 13,937 8,367 8,132 3,217 6,533 Management and other expenses... (16,764) (10,373) (5,560) (5,150) (2,211) (6,173) Corporate overhead allocation... (196) (588) (590) (581) -- -- ---------- ---------- ---------- -------- -------- ------- 7,143 2,976 2,217 2,401 1,006 360 ---------- ---------- ---------- -------- -------- ------- General and administrative expenses...................... (14,650) (5,396) (1,512) (1,804) (977) (36) Interest expense................ (89,424) (51,385) (24,802) (13,322) (1,576) (4,214) Interest income................. 30,450 8,676 523 658 123 -- Equity in losses of unconsolidated partnerships... (4,854) (1,798) -- -- -- -- Equity in earnings of unconsolidated subsidiaries... 11,570 4,636 -- -- -- -- Minority interest in other entities...................... (468) 1,008 (111) -- -- -- Amortization of goodwill........ (8,735) (948) (500) (428) -- -- ---------- ---------- ---------- -------- -------- ------- Income from operations.......... 64,982 30,246 15,629 14,988 7,702 (1,499) Gain on disposition of properties.................... 4,674 2,720 44 -- -- -- ---------- ---------- ---------- -------- -------- ------- Income (loss) before extraordinary item and minority interest in operating partnership................... 69,656 32,966 15,673 14,988 7,702 (1,499) Extraordinary item -- early extinguishment of debt........ -- (269) -- -- -- -- ---------- ---------- ---------- -------- -------- ------- Income (loss) before minority interest in operating partnership................... 69,656 32,697 15,673 14,988 7,702 (1,499) Minority interest in operating partnership................... (5,182) (4,064) (2,689) (1,613) (559) -- ---------- ---------- ---------- -------- -------- ------- Net income (loss)............... $ 64,474 $ 28,633 $ 12,984 $ 13,375 $ 7,143 $(1,499) ========== ========== ========== ======== ======== =======
15 18
AIMCO THE COMPANY PREDECESSORS -------------------------------------------------------------------------- -------------- FOR THE PERIOD FOR THE PERIOD JANUARY 10, JANUARY 1, 1994 1994 FOR THE YEAR ENDED DECEMBER 31, THROUGH THROUGH --------------------------------------------------------- DECEMBER 31, JULY 28, 1998 1997 1996 1995 1994 1994 ------------ ------------ ------------ ------------ -------------- -------------- OTHER INFORMATION: Total owned or controlled properties (end of period).... 242 147 94 56 48 4 Total owned or controlled apartment units (end of period)....................... 63,086 40,039 23,764 14,453 12,513 1,711 Total equity apartment units (end of period)............... 170,243 83,431 19,045 19,594 20,758 29,343 Units under management (end of period)....................... 146,034 69,587 19,045 19,594 20,758 29,343 Basic earnings per common share......................... $ 0.84 $ 1.09 $ 1.05 $ 0.86 $ 0.42 N/A Diluted earnings per common share......................... $ 0.80 $ 1.08 $ 1.04 $ 0.86 $ 0.42 N/A Dividends paid per common share......................... $ 2.25 $ 1.85 $ 1.70 $ 1.66 $ 0.29 N/A BALANCE SHEET INFORMATION: Real estate, before accumulated depreciation.................. $2,802,598 $1,657,207 $ 865,222 $477,162 $406,067 $47,500 Real estate, net of accumulated depreciation.................. 2,573,718 1,503,922 745,145 448,425 392,368 33,270 Total assets.................... 4,268,285 2,100,510 827,673 480,361 416,739 39,042 Total mortgages and notes payable....................... 1,660,715 808,530 522,146 268,692 141,315 40,873 Mandatorily redeemable 1994 Cumulative Senior Preferred Stock......................... -- -- -- -- 96,600 -- Company-obligated mandatory redeemable convertible preferred securities of a subsidiary trust.............. 149,500 -- -- -- -- -- Stockholders' equity............ 1,902,564 1,045,300 215,749 169,032 140,319 (9,345)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. OVERVIEW The following discussion and analysis of the results of operations and financial condition of the Company should be read in conjunction with the financial statements incorporated by reference in Item 8 of this Annual Report on Form 10-K. RESULTS OF OPERATIONS Comparison of the Year Ended December 31, 1998 to the Year Ended December 31, 1997 Net Income The Company recognized net income of $64.5 million, and net income attributable to common stockholders of $37.9 million, for the year ended December 31, 1998, compared to net income and net income attributable to common stockholders of $28.6 million and $26.3 million, respectively, for the year ended December 31, 1997. Net income attributable to common stockholders represents net income less dividends on preferred stock. The increase in net income attributable to common stockholders of $11.6 million, or 44.1%, was primarily the result of the following: - the increase in net "same store" property results; - the acquisition of 11,706 units in 44 apartment communities during 1997; 16 19 - the acquisition of 22,459 units in 82 apartment communities during 1998; - the acquisition of NHP Incorporated ("NHP") in December 1997; - the acquisition of Ambassador Apartments, Inc. in May 1998; - the acquisition of the Insignia Multi-family Business in October 1998; and - receipt of interest income on general partner loans to unconsolidated real estate partnerships and notes receivable. The effect of the above on net income was partially offset by the sale of five properties in 1998 and five properties in 1997. These factors are discussed in more detail in the following paragraphs. Rental Property Operations Rental and other property revenues from the Company's owned or controlled properties totaled $377.1 million for the year ended December 31, 1998, compared to $193.0 million for the year ended December 31, 1997, an increase of $184.1 million, or 95.4%. Rental and other property revenues consisted of the following (in thousands):
1998 1997 -------- -------- 1997 acquisitions........................................... $124,266 $ 36,871 1998 acquisitions........................................... 92,033 -- "Same store" properties..................................... 150,476 136,219 1997 dispositions........................................... -- 4,092 1998 dispositions........................................... 304 8,106 Properties in lease-up after the completion of an expansion or renovation............................................. 10,060 7,718 -------- -------- Total............................................. $377,139 $193,006 ======== ========
Property operating expenses consist of on-site payroll costs, utilities (net of reimbursements received from tenants), contract services, turnover costs, repairs and maintenance, advertising and marketing, property taxes and insurance. Property operating expenses totaled $147.5 million for the year ended December 31, 1998, compared to $76.2 million for the year ended December 31, 1997, an increase of $71.3 million, or 93.6%. Property operating expenses consisted of the following (in thousands):
1998 1997 -------- ------- 1997 acquisitions........................................... $ 48,570 $15,389 1998 acquisitions........................................... 35,386 -- "Same store" properties..................................... 59,993 52,870 1997 dispositions........................................... -- 1,972 1998 dispositions........................................... 348 3,592 Properties in lease-up after the completion of an expansion or renovation............................................. 3,244 2,345 -------- ------- Total............................................. $147,541 $76,168 ======== =======
Owned property management expenses, representing the costs of managing the Company's owned or controlled properties, totaled $11.0 million for the year ended December 31, 1998, compared to $6.6 million for the year ended December 31, 1997, an increase of $4.4 million, or 66.7%. The increase resulted from acquisitions of properties in 1997 and 1998 and acquisitions of controlling interests in properties through the NHP, Ambassador and Insignia mergers. 17 20 Service Company Business Income from the service company business was $7.1 million for the year ended December 31, 1998, compared to $3.0 million for the year ended December 31, 1997, an increase of $4.1 million or 136.7%. The increase was primarily due to management contracts acquired in the Insignia merger that are held by the Company, as well as the transfer of majority-owned management contracts from the management companies to the AIMCO operating partnership. When the Company owns at least a 40% interest in a real estate partnership, the management contract with that real estate partnership is assigned to the AIMCO operating partnership. In addition, the increase is partially due to additional partnership and administrative fees resulting from the acquisition of partnership interests during 1998. The commercial asset management and brokerage businesses were reorganized as part of the management companies at the start of 1998. The insurance portion of operations and also property management services were reorganized as part of the management companies, effective July 1, 1998. The Company's share of income from service company businesses consisted of the following (in thousands):
1998 1997 -------- ------- (IN THOUSANDS) Properties managed Management fees and other income.......................... $ 18,718 $ 9,353 Management and other expenses............................. (13,472) (9,498) -------- ------- 5,246 (145) -------- ------- Commercial asset management Management and other income............................... -- 245 Management and other expenses............................. -- (275) -------- ------- -- (30) -------- ------- Reinsurance operations Revenues.................................................. 993 4,228 Expenses.................................................. (255) (360) -------- ------- 738 3,868 -------- ------- Other Revenues.................................................. 4,392 111 Expenses.................................................. (3,037) (240) -------- ------- 1,355 (129) -------- ------- Corporate overhead allocation............................... (196) (588) -------- ------- $ 7,143 $ 2,976 ======== =======
General and Administrative Expenses General and administrative expenses totaled $14.7 million for the year ended December 31, 1998, compared to $5.4 million for the year ended December 31, 1997, an increase of $9.3 million, or 172.2%. The increase in general and administrative expenses is primarily due to additional corporate costs and additional employee salaries associated with the purchase of NHP Real Estate Companies in June 1997 and the mergers with NHP Incorporated in December 1997, Ambassador Apartments, Inc. in May 1998 and Insignia Financial Group, Inc. in October 1998. In addition, due to the growth of the Company, several new departments have been added including legal, tax and Limited Partnership administration, as well as increased levels of personnel in the accounting and finance departments. Interest Expense Interest expense, which includes the amortization of deferred finance costs, totaled $89.4 million for the year ended December 31, 1998, compared to $51.4 million for the year ended December 31, 1997, an increase of $38.0 million or 73.9%. The increase was primarily due to interest expense incurred in connection with the 18 21 acquisition of interests in Ambassador Apartments, Inc. and Insignia Financial Group, Inc. and interest expense incurred in connection with 1998 and 1997 acquisitions. Interest income Interest income totaled $30.4 million for the year ended December 31, 1998, compared to $8.7 million for the year ended December 31, 1997. The increase is primarily due to interest earned on the increased average outstanding balances of general partner loans and notes receivable. COMPARISON OF THE YEAR ENDED DECEMBER 31, 1997 TO THE YEAR ENDED DECEMBER 31, 1996 The Company recognized net income of $28.6 million and net income attributable to common stockholders of $26.3 million for the year ended December 31, 1997 compared to net income and net income attributable to common stockholders of $13.0 million for the year ended December 31, 1996. Net income attributable to common stockholders represents net income less dividends on preferred stock. The increase in net income allocable to common stockholders of $13.3 million, or 102.3%, was primarily the result of the following: - the acquisition of 10,484 units in 42 apartment communities primarily during November and December 1996; - the acquisitions of 11,706 units in 44 apartment communities during 1997; - the acquisition of interests in the NHP Partnerships including the period June through December 1997; - the acquisition of NHP Partnerships in December 1997; - interest income on general partner loans to unconsolidated real estate partnerships; and - the increase in net "same store" property results. The effect of the above on net income was partially offset by the sale of four properties in August 1996 and five properties in October 1997. These factors are discussed in more detail in the following paragraphs. Rental Property Operations Rental and other property revenues from the Company's owned or controlled properties totaled $193.0 million for the year ended December 31, 1997, compared to $100.5 million for the year ended December 31, 1996, an increase of $92.5 million, or 92.0%. Rental and other property revenues consisted of the following (in thousands):
1997 1996 -------- -------- 1996 acquisitions........................................... $ 68,505 $ 14,970 1997 acquisitions........................................... 22,163 -- "Same store" properties..................................... 78,724 75,069 Acquisitions of interests in the NHP Partnerships........... 15,592 -- 1996 dispositions........................................... -- 3,363 1997 dispositions........................................... 4,092 4,719 Properties in lease-up after the completion of an expansion or renovation............................................. 3,930 2,395 -------- -------- Total............................................. $193,006 $100,516 ======== ========
Average monthly rent per occupied unit for the same store properties increased to $571 at December 31, 1997 from $560 at December 31, 1996, an increase of 2.0%. Weighted average physical occupancy for the properties increased to 94.8% at December 31, 1997, from 94.5% at December 31, 1996, an increase of 0.3%. 19 22 Property operating expenses totaled $76.2 million for the year ended December 31, 1997, compared to $38.4 million for the year ended December 31, 1996, an increase of $37.8 million, or 98.4%. Property operating expenses consisted of the following (in thousands):
1997 1996 ------- ------- 1996 acquisitions........................................... $28,911 $ 5,258 1997 acquisitions........................................... 8,402 -- "Same store" properties..................................... 28,009 28,234 Acquisition of interests in the NHP Partnerships............ 7,304 -- 1996 dispositions........................................... -- 1,793 1997 dispositions........................................... 1,972 2,300 Properties in lease-up after the completion of an expansion or renovation............................................. 1,570 815 ------- ------- Total............................................. $76,168 $38,400 ======= =======
Owned property management expenses, representing the costs of managing the Company's owned properties, totaled $6.6 million for the year ended December 31, 1997, compared to $2.7 million for the year ended December 31, 1996, an increase of $3.9 million or 144.4%. The increase resulted from the acquisition of properties in 1996 and 1997 and the acquisition of interests in the NHP Partnerships. Service Company Business Income from the service company business was $3.0 million for the year ended December 31, 1997 compared to $2.2 million for the year ended December 31, 1996, an increase of $0.8 million or 36.4%. The increase is due to the acquisition by the Company of property management businesses in August and November 1996, the acquisition of partnership interests which provide for certain partnership and administrative fees, and a captive insurance subsidiary acquired in connection with the acquisition of the NHP Real Estate Companies in June 1997, which were offset by the expiration of the Company's commercial asset management contracts on March 31, 1997. The Company's share of income from service company businesses consisted of the following (in thousands):
1997 1996 ------- ------- Properties managed Management fees and other income.......................... $ 9,353 $ 5,679 Management and other expenses............................. (9,498) (4,623) ------- ------- (145) 1,056 ------- ------- Commercial asset management Management and other income............................... 245 1,026 Management and other expenses............................. (275) (339) ------- ------- (30) 687 ------- ------- Reinsurance operations Revenues.................................................. 4,228 1,267 Expenses.................................................. (360) (282) ------- ------- 3,868 985 ------- ------- Brokerage and other Revenues.................................................. 111 395 Expenses.................................................. (240) (316) ------- ------- (129) 79 ------- ------- Corporate overhead allocation............................... (588) (590) ------- ------- $ 2,976 $ 2,217 ======= =======
20 23 Income (loss) from the management of properties for third parties and affiliates was $(0.1) million for the year ended December 31, 1997 compared to $1.1 million for the year ended December 31, 1996, a decrease of $1.2 million, or 109.1%. Losses from commercial asset management were $30,000 for the year ended December 31, 1997 compared to income of $0.7 million for the year ended December 31, 1996. The decrease is primarily due to the expiration of certain commercial management contracts in March 1997. Income from the reinsurance operations for the year ended December 31, 1997 increased by $2.9 million from the year ended December 31, 1996, due to increased premiums collected from a larger work force, improved loss experience and the closure of claims for less than the amounts previously reserved, as well as the acquisition of the NHP Real Estate Companies, which included the acquisition of a captive insurance company. General and Administrative Expenses General and administrative expenses totaled $5.4 million for the year ended December 31, 1997 compared to $1.5 million for the year ended December 31, 1996, an increase of $3.9 million, or 260.0%. The increase in general and administrative expenses is primarily due to the purchase of the NHP Real Estate Companies in June 1997 and the merger with NHP Incorporated in December 1997. Interest Expense Interest expense, which includes the amortization of deferred finance costs, totaled $51.4 million for the year ended December 31, 1997, compared to $24.8 million for the year ended December 31, 1996, an increase of $26.6 million or 107.3%. The increase was primarily due to interest expense incurred in connection with the acquisition of interests in the NHP Real Estate Companies and NHP and interest expense incurred in connection with 1997 and 1996 acquisitions. Interest Income Interest income totaled $8.7 million for the year ended December 31, 1997, compared to $0.5 million for the year ended December 31, 1996. The increase is primarily due to interest earned on general partner loans to unconsolidated real estate partnerships acquired in 1997. LIQUIDITY AND CAPITAL RESOURCES At December 31, 1998, the Company had $71.3 million in cash and cash equivalents and $55.8 million of restricted cash, primarily consisting of reserves and impounds held by lenders for capital expenditures, property taxes and insurance. In addition, cash, cash equivalents and restricted cash is held by partnerships and subsidiaries which are not presented on a consolidated basis. The Company's principal demands for liquidity include normal operating activities, payments of principal and interest on outstanding debt, capital improvements, acquisitions of or investments in properties, dividends paid to its stockholders and distributions paid to limited partners. The Company considers its cash provided by operating activities to be adequate to meet short-term liquidity demands. As of December 31, 1998, 89% of the Company's owned or controlled properties and 53% of its total assets were encumbered by debt. The Company had total outstanding indebtedness of $1,660.7 million, of which $1,350.4 million was secured by properties. The Company's indebtedness is comprised of $843.8 million of secured long-term financing, $398.6 million of secured tax-exempt bonds and $418.3 in secured and unsecured short-term financing. As of December 31, 1998, approximately 27.8% of the Company's indebtedness bears interest at variable rates. As of March 11, 1999, approximately 9.5% of the Company's indebtedness bears interest at variable rates. General Motors Acceptance Corporation had made 85 loans (the "GMAC Loans") to property owning partnerships of the Company, each of which is secured by the property owned by such partnership. The 85 GMAC Loans had an aggregate outstanding principal balance of $175.2 million as of December 31, 1998. Certain GMAC Loans are cross-collateralized with certain other GMAC Loans. Other 21 24 than certain GMAC Loans, none of the Company's debt is subject to cross-collateralization provisions. The weighted average interest rate on the Company's long-term, secured, tax-exempt notes payable was 7.0% with a weighted average maturity of 11.7 years as of December 31, 1998. The weighted average interest rate on the Company's secured and unsecured short-term financing was 7.2% as of December 31, 1998. In February 1999, the $50 million credit facility with Washington Mortgage Financial Group, Ltd. was terminated and all outstanding indebtedness was repaid with the proceeds from new, long-term, fully amortizing indebtedness secured by properties that previously secured the credit facility. In February and March 1999, the Company incurred in the aggregate $83.4 million of long-term, fixed rate, fully amortizing mortgage debt secured by 13 properties in separate loan transactions. The Company used the $81.5 million of net proceeds from the financings to repay debt under the interim loan agreement with Lehman Brothers Inc., to repay debt under its credit facility with Bank of America National Trust and Savings Association and Bank Boston, N.A. and to provide working capital. As of March 11, 1999, the balance outstanding under the interim loan agreement was $25 million, under the credit facility was $74.8 million, and under the IPT credit agreement was $45 million. The amount available under the credit facility at March 11, 1999 was $24 million. The Company expects to meet its long-term liquidity requirements, such as refinancing debt and property acquisitions, through long-term borrowings, both secured and unsecured, the issuance of debt or equity securities (including OP Units) and cash generated from operations. In August 1998, AIMCO and the AIMCO operating partnership filed a shelf registration statement with the Securities and Exchange Commission ("SEC") with respect to an aggregate of $1,268 million of debt and equity securities of AIMCO (of which $268 million was carried forward from AIMCO's 1997 shelf registration statement) and $500 million of debt securities of the AIMCO operating partnership. The registration statement was declared effective by the SEC on December 10, 1998. As of December 31, 1998, the Company had $1,268 million available and the AIMCO operating partnership had $500 million available from this registration statement. On February 18, 1999, the Company raised net proceeds of $120.6 million in a public offering. The offering reduced the amount remaining available to AIMCO under the shelf registration statement to $1,143 million. All proceeds were used to further reduce the balance outstanding under the Lehman interim loan. The Company expects to finance pending acquisition of real estate interests with the issuance of equity securities and debt. CAPITAL EXPENDITURES For the year ended December 31, 1998, the Company spent $29.0 million for Capital Replacements (expenditures for routine maintenance of a property), $28.1 million for Initial Capital Expenditures ("ICE", expenditures at a property that have been identified, at the time the property is acquired, as expenditures to be incurred within one year of the acquisition), and $20.1 million for construction and capital enhancements (amenities that add a material new feature or revenue source at a property). These expenditures were funded by borrowings under the Company's primary credit facility, working capital reserves and net cash provided by operating activities. During 1999, the Company will provide an allowance for capital replacements of $300 per apartment unit. ICE and capital enhancements will primarily be funded by cash from operating activities and borrowings under the Company's primary credit facility. 22 25 The Company's accounting treatment of various capital and maintenance costs is detailed in the following table:
DEPRECIABLE LIFE EXPENDITURE ACCOUNTING TREATMENT IN YEARS - ----------- -------------------- ---------------- Initial capital expenditures........................ capitalize 5 to 30 Capital enhancements................................ capitalize 5 to 30 Capital replacements: Carpet/vinyl replacement............................ capitalize 5 Carpet cleaning..................................... expense N/A Major appliance replacement (refrigerators, stoves, capitalize 5 dishwashers, washers/dryers)...................... Cabinet replacement................................. capitalize 5 Major new landscaping............................... capitalize 5 Seasonal plantings and landscape replacements....... expense N/A Roof replacements................................... capitalize 30 Roof repairs........................................ expense N/A Model furniture..................................... capitalize 5 Office equipment.................................... capitalize 5 Exterior painting, significant...................... capitalize 5 Interior painting................................... expense N/A Parking lot repairs................................. expense N/A Parking lot repaving................................ capitalize 30 Equipment repairs................................... expense N/A General policy for capitalization................... capitalize amounts various in excess of $250
FUNDS FROM OPERATIONS The Company measures its economic profitability based on FFO, less a reserve for Capital Replacements of $300 per apartment unit. The Company's management believes that FFO, less such a reserve, provides investors with an understanding of the Company's ability to incur and service debt and make capital expenditures. The Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT") defines FFO as net income (loss), computed in accordance with generally accepted accounting principles ("GAAP"), excluding gains and losses from debt restructuring and sales of property, plus real estate related depreciation and amortization (excluding amortization of financing costs), and after adjustments for unconsolidated partnerships and joint ventures. The Company calculates FFO based on the NAREIT definition, as adjusted for minority interest in the AIMCO operating partnership, amortization of goodwill, the non-cash deferred portion of the income tax provision for unconsolidated subsidiaries and less the payment of dividends on preferred stock. FFO should not be considered an alternative to net income or net cash flows from operating activities, as calculated in accordance with GAAP, as an indication of the Company's performance or as a measure of liquidity. FFO is not necessarily indicative of cash available to fund future cash needs. In addition, there can be no assurance that the Company's basis for computing FFO is comparable with that of other real estate investment trusts. 23 26 For the years ended December 31, 1998, 1997 and 1996, the Company's FFO is calculated as follows (amounts in thousands):
1998 1997 1996 --------- --------- -------- Income before minority interest in operating partnership...................................... $ 69,656 $ 32,697 $ 15,673 Extraordinary item................................. -- 269 -- Gain on disposition of properties.................. (4,674) (2,720) (44) Real estate depreciation, net of minority interests........................................ 80,369 33,751 19,056 Real estate depreciation related to unconsolidated entities......................................... 34,840 9,864 -- Amortization of goodwill........................... 11,401 948 500 Amortization of recoverable amount of management contracts........................................ 14,776 1,587 -- Deferred taxes..................................... 9,215 4,894 -- Preferred stock dividends.......................... (20,701) (135) -- Preferred OP Unit distribution..................... (136) -- -- --------- --------- -------- Funds From Operations (FFO)........................ $ 194,746 $ 81,155 $ 35,185 ========= ========= ======== Weighted average number of common shares, common share equivalents and OP Units outstanding: Common stock..................................... 45,187 24,055 12,411 Common stock equivalents......................... 2,437 381 16 Preferred stock convertible into common stock.... 2,463 1,006 -- OP Units......................................... 6,732 3,677 2,567 --------- --------- -------- 56,819 29,119 14,994 ========= ========= ======== CASH FLOW INFORMATION: Cash flow provided by operating activities......... $ 148,414 $ 73,032 $ 38,806 Cash flow used in investing activities............. (328,321) (717,663) (88,144) Cash flow provided by financing activities......... 214,124 668,549 60,129
CONTINGENCIES HUD Enforcement In October 1997, NHP received a subpoena from the HUD Inspector General, which requested documents relating to any arrangement whereby NHP or any of its affiliates provides or has provided compensation to owners of HUD multi-family projects in exchange for or in connection with property management of a HUD project. AIMCO believes that other owners and managers of HUD projects have received similar subpoenas. Documents provided by AIMCO to the HUD Inspector General relating to certain of NHP acquisitions of property management rights for HUD projects may be responsive to the subpoena. AIMCO believes that its operations are in compliance, in all material respects, with all laws, rules and regulations relating to HUD-assisted or HUD-insured properties. Effective February 13, 1998, counsel for AIMCO and the U.S. Attorney for the Northern District of California entered into a Tolling Agreement related to certain civil claims the government may have against AIMCO. Although no action has been initiated against AIMCO or, to AIMCO's knowledge, any owner of a HUD property managed by AIMCO, if any such action is taken in the future, it could ultimately affect existing arrangements with respect to HUD projects, affect AIMCO's ability to receive 2530 Clearances or otherwise have a material adverse effect on AIMCO's results of operations. HUD also has the authority to suspend or deny property owners and managers from participation in HUD programs with respect to additional assistance within a geographic region through imposition of a Limited Denial of Participation by any HUD office or nationwide for violations of HUD regulatory requirements. 24 27 Year 2000 Compliance GENERAL DESCRIPTION OF THE YEAR 2000 ISSUE AND THE NATURE AND EFFECTS OF THE YEAR 2000 ON INFORMATION TECHNOLOGY (IT) AND NON-IT SYSTEMS The Year 2000 issue is the result of computer programs being written using two digits rather than four digits to define the applicable year. Any of the Company's computer programs or hardware that have date-sensitive software or embedded chips may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. Over the past two years, the Company has determined that it will be required to modify or replace significant portions of its software and certain hardware so that those systems will properly utilize dates beyond December 31, 1999. The Company presently believes that with modifications or replacements of existing software and certain hardware, the Year 2000 issue can be mitigated. However, if such modifications and replacements are not made, or are not completed in time, the Year 2000 issue could have a material impact on the operations of the Company. The Company's plan to resolve Year 2000 issues involves four phases: assessment, remediation, testing, and implementation. To date, the Company has fully completed its assessment of all information systems that could be significantly affected by the Year 2000, and has begun the remediation, testing and implementation phases on both hardware and software systems. Assessments are continuing in regards to embedded systems. The status of each is detailed below. STATUS OF PROGRESS IN BECOMING YEAR 2000 COMPLIANT, INCLUDING TIMETABLE FOR COMPLETION OF EACH REMAINING PHASE COMPUTER HARDWARE During 1997 and 1998, AIMCO identified all of the computer systems at risk and formulated a plan to repair or replace each of the affected systems. During 1997, when AIMCO merged with NHP, the mainframe system used by NHP was Year 2000 compliant. In August 1998, the Year-2000 compliant system became fully functional for the entire Company. In addition to the mainframe, PC-based network servers, routers and desktop PCs were analyzed for compliance. AIMCO has begun to replace each of the non-compliant network connections and desktop PCs and, as of December 31, 1998, had completed approximately 75% of this effort. The total cost to replace the PC-based network servers, routers and desktop PCs is expected to be approximately $1.5 million, of which $1.3 million has been incurred to date. The remaining network connections and desktop PCs are expected to be upgraded to Year 2000 compliant systems by March 31, 1999. COMPUTER SOFTWARE AIMCO utilizes a combination of off-the-shelf, commercially available software programs as well as custom-written programs that are designed to fit specific needs. Both of these types of programs were studied, and implementation plans written and executed with the intent of repairing or replacing any non-compliant software programs. In 1997, when AIMCO merged with NHP, the core financial system used by NHP was Year 2000 compliant. During 1998, AIMCO integrated all of its core financial systems to this compliant system for general ledger and financial reporting purposes. In 1997, AIMCO determined that the software used for property management and rent collection was not Year 2000 compliant. During 1998, AIMCO implemented a Year 2000 compliant system at each of its owned or managed properties, at a cost of $1.4 million. During 1998, AIMCO acquired 82 properties and acquired the Insignia multi-family business. Insignia owned or managed 1,100 properties. As properties are 25 28 acquired, AIMCO converts the existing property management and rent collection systems to AIMCO's Year 2000 compliant systems. The estimated additional costs to convert such systems at all recently acquired properties, including those acquired from Insignia, is $200,000, and the implementation and testing process is expected to be completed by March 31, 1999. The final software area is the office software and server operating systems. AIMCO has upgraded all non-compliant office software systems on each PC and has upgraded 80% of the server operating systems. The remaining server operating systems are planned to be upgraded to be Year 2000 compliant by March 31, 1999. OPERATING EQUIPMENT AIMCO has operating equipment, primarily at the property sites, which needed to be evaluated for Year 2000 compliance. In September 1997, AIMCO began taking a census and inventory of embedded systems (including those devices that use time to control systems and machines at specific properties, for example, elevators, heating, ventilating and air conditioning systems, security and alarm systems, etc.) The Company has chosen to focus its attention mainly upon security systems, elevators, heating, ventilating and air conditioning systems, telephone systems and switches, and sprinkler systems. While this area is the most difficult to fully research adequately, management has not yet found any major non- compliance issues that put AIMCO at risk financially or operationally. AIMCO intends to have a third-party conduct an audit of these systems and report their findings by March 31, 1999. Any of the above operating equipment that has been found to be non-compliant to date has been replaced or repaired. To date, these have consisted only of security systems and phone systems. As of December 31, 1998, AIMCO has evaluated approximately 86% of the operating equipment for Year 2000 compliance. The total cost incurred as of December 31, 1998 to replace or repair the operating equipment was approximately $70,000. AIMCO estimates the cost to replace or repair any remaining operating equipment is approximately $325,000, and AIMCO expects to be completed by April 30, 1999. AIMCO continues to have "awareness campaigns" throughout the organization designed to raise awareness and report any possible compliance issues regarding operating equipment within the enterprise. NATURE AND LEVEL OF IMPORTANCE OF THIRD PARTIES AND THEIR EXPOSURE TO THE YEAR 2000 AIMCO continues to conduct surveys of its banking and other vendor relationships to assess risks regarding their Year 2000 readiness. AIMCO has banking relationships with three major financial institutions, all of which have indicated their compliance efforts will be complete before May 1999. AIMCO has updated data transmission standards with two of the three financial institutions. AIMCO's contingency plan in this regard is to move accounts from any institution that cannot be certified Year 2000 compliant by June 1, 1999. The Company does not rely heavily on any single vendor for goods and services, and does not have significant suppliers and subcontractors who share information systems with the Company (external agents). To date, the Company is not aware of any external agent with a Year 2000 compliance issue that would materially impact the Company's results of operations, liquidity, or capital resources. However, the Company has no means of ensuring that external agents will be Year 2000 compliant. Management does not believe that the inability of external agents to complete their Year 2000 remediation process in a timely manner will have a material impact on the financial position or results of operations of the Company. However, the effect of non-compliance by external agents is not readily determinable. COSTS TO ADDRESS YEAR 2000 The total cost of the Year 2000 project is estimated at $3.5 million and is being funded from operating cash flows. To date, the Company has incurred approximately $2.8 million ($0.6 million expensed and $2.2 million capitalized for new systems and equipment) related to all phases of the Year 2000 project. Of the total remaining project costs, approximately $0.5 million is attributable to the purchase of new software and 26 29 operating equipment, which will be capitalized. The remaining $0.2 million relates to repair of hardware and software and will be expensed as incurred. RISKS ASSOCIATED WITH THE YEAR 2000 Management believes it has an effective program in place to resolve the Year 2000 issue in a timely manner. As noted above, the Company has not yet completed all necessary phases of the Year 2000 program. In the event that the Company does not complete any additional phases, certain worst case scenarios could occur. The worst case scenarios include elevators, security and heating, ventilating and air conditioning systems that read incorrect dates and operate with incorrect schedules (e.g., elevators will operate on Monday as if it were Sunday). Although such a change would be annoying to residents, it is not business critical. In addition, disruptions in the economy generally resulting from Year 2000 issues could also adversely affect the Company. The Company could be subject to litigation for, among other things, computer system failures, equipment shutdowns or a failure to properly date business records. The amount of potential liability and lost revenue cannot be reasonably estimated at this time. CONTINGENCY PLANS ASSOCIATED WITH THE YEAR 2000 The Company has contingency plans for certain critical applications and is working on such plans for others. These contingency plans involve, among other actions, manual workarounds and selecting new relationships for such activities as banking relationships and elevator operating systems. INFLATION Substantially all of the leases at the Company's apartment properties are for a period of six months or less, allowing, at the time of renewal, for adjustments in the rental rate and the opportunity to re-lease the apartment unit at the prevailing market rate. The short term nature of these leases generally serves to minimize the risk to the Company of the adverse effect of inflation and the Company does not believe that inflation has had a material adverse impact on its revenues. ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's primary market risk exposure relates to changes in interest rates. The Company is not subject to any foreign currency exchange rate risk or commodity price risk, or any other material market rate or price risks. The Company uses predominantly long-term, fixed-rate and self-amortizing non-recourse debt in order to avoid the refunding or repricing risks of short-term borrowings. The Company uses short-term debt financing and working capital primarily to fund acquisitions and generally expects to refinance such borrowings with proceeds from equity offerings or long term debt financings. The Company had $462.0 million of variable rate debt outstanding at December 31, 1998, which represents 27.8% of the Company's total outstanding debt. Based on this level of debt, an increase in interest rates of 1% would result in the Company's income and cash flows being reduced by $4.6 million on an annual basis. As of March 11, 1999, approximately 9.5% of the Company's indebtedness bears interest at variable rates. At December 31, 1998, the Company had $1,198.7 million of fixed rate debt outstanding, of which debt in an aggregate amount of $39.8 million, $46.4 million, $41.0 million, $107.0 million and $54.9 million will mature in the years 1999, 2000, 2001, 2002 and 2003, respectively. From time to time, the Company enters into interest rate lock agreements to obtain what the Company considers advantageous pricing for future anticipated debt issuances. The estimated aggregate fair value of the Company's cash and cash equivalents, receivables, payables and short-term secured and unsecured debt as of December 31, 1998 is assumed to approximate their carrying value due to their relatively short terms. Management further believes that, after consideration of interest rate agreements, the fair market value of the Company's secured tax-exempt bond debt and secured long-term debt approximates their carrying value, based on market comparisons to similar types of debt instruments having similar maturities. 27 30 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The independent auditor's reports, consolidated financial statements and schedules listed in the accompanying index are filed as part of this report and incorporated herein by this reference. See "Index to Financial Statements" on page F-1. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information regarding the Company's Directors required by this item is presented under the caption "Board of Directors and Officers" in AIMCO's proxy statement for its 1999 annual meeting of stockholders and is incorporated herein by reference. The directors and executive officers of the Company as of March 11, 1999 are:
NAME AGE POSITION WITH THE COMPANY - ---- --- ------------------------- Terry Considine................ 51 Chairman of the Board of Directors and Chief Executive Officer Peter K. Kompaniez............. 54 Vice Chairman, President and Director Joel F. Bonder................. 50 Executive Vice President, General Counsel and Secretary Patrick J. Foye................ 42 Executive Vice President Robert Ty Howard............... 41 Executive Vice President -- Ancillary Services Steven D. Ira.................. 48 Executive Vice President and Co -- Founder Paul J. McAuliffe.............. 42 Executive Vice President -- Capital Markets Thomas W. Toomey............... 38 Executive Vice President -- Finance and Administration Harry G. Alcock................ 35 Senior Vice President -- Acquisitions Troy D. Butts.................. 34 Senior Vice President and Chief Financial Officer Richard S. Ellwood............. 67 Director, Chairman, Audit Committee J. Landis Martin............... 53 Director, Chairman, Compensation Committee Thomas L. Rhodes............... 59 Director John D. Smith.................. 70 Director
Terry Considine. Mr. Considine has been Chairman of the Board of Directors and Chief Executive Officer of the Company since July 1994. He is the sole owner of Considine Investment Co. and prior to July 1994 was owner of approximately 75% of Property Asset Management, L.L.C., Limited Liability Company, a Colorado limited liability company, and its related entities (collectively, "PAM"), one of the Company's predecessors. Mr. Considine serves as Chairman and director of Asset Investors Corporation and Commercial Asset, Inc., two other public real estate investment trusts. Mr. Considine has been and remains involved as a principal in a variety of real estate activities, including the acquisition, renovation, development and disposition of properties. Mr. Considine has also controlled entities engaged in other businesses such as television broadcasting, gasoline distribution and environmental laboratories. Mr. Considine received a B.A. from Harvard College, a J.D. from Harvard Law School and was formerly admitted as a member of the Massachusetts Bar (inactive). Mr. Considine has had substantial multifamily real estate experience. From 1975 through July 1994, partnerships or other entities in which Mr. Considine had controlling interests invested in approximately 35 multifamily apartment properties and commercial real estate properties. Six of these real estate assets (four of which were multifamily apartment properties and two of which were office properties) did not generate sufficient cash flow to service their related indebtedness and were foreclosed upon by their lenders, causing 28 31 pre-tax losses of approximately $11.9 million to investors and losses of approximately $2.7 million to Mr. Considine. Peter K. Kompaniez. Mr. Kompaniez has been Vice Chairman and a director of AIMCO since July 1994 and was appointed President in July 1997. Mr. Kompaniez has also served as Chief Operating Officer of NHP and President of NHP Partners since June 1997. Since September 1993, Mr. Kompaniez has owned 75% of PDI Realty Enterprises, Inc., a Delaware corporation ("PDI"), one of AIMCO's predecessors, and serves as its President and Chief Executive Officer. From 1986 to 1993, he served as President and Chief Executive Officer of Heron Financial Corporation ("HFC"), a United States holding company for Heron International, N.V's real estate and related assets. While at HFC, Mr. Kompaniez administered the acquisition, development and disposition of approximately 8,150 apartment units (including 6,217 units that have been acquired by AIMCO) and 3.1 million square feet of commercial real estate. Prior to joining HFC, Mr. Kompaniez was a senior partner with the law firm of Loeb and Loeb where he had extensive real estate and REIT experience. Mr. Kompaniez received a B.A. from Yale College and a J.D. from the University of California (Boalt Hall). Joel F. Bonder. Mr. Bonder was appointed Executive Vice President General Counsel and Secretary of AIMCO effective December 1997. Prior to joining AIMCO, Mr. Bonder served as Senior Vice President and General Counsel of NHP from April 1994 until December 1997. Mr. Bonder served as Vice President and Deputy General Counsel of NHP Incorporated from June 1991 to March 1994 and as Associate General Counsel of NHP from 1986 to 1991. From 1983 to 1985, Mr. Bonder practiced with the Washington, D.C. law firm of Lane & Edson, PC. From 1979 to 1983, Mr. Bonder practiced with the Chicago law firm of Ross and Hardies. Mr. Bonder received 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 interest, and corporate and other acquisitions. Prior to joining AIMCO, Mr. Foye was a Mergers 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 received a B.A. from Fordham College, a J.D. from Fordham Law School and was Associate Editor of the Fordham Law Review. Mr. Foye is also Deputy Chairman of the Long Island Power Authority ("LIPA"). Mr. Foye is also a member of the New York State Privatization Council. Robert Ty Howard. Mr. Howard was appointed Executive Vice President -- Ancillary Services in February 1998. Prior to joining AIMCO, Mr. Howard served as an officer and/or director of four affiliated companies, Hecco Ventures, Craig Corporation, Reading Company and Decurion Corporation. Prior to joining AIMCO, Mr. Howard was responsible for venture investment, financing, mergers and acquisitions activities and investments in commercial real estate, both nationally and internationally. From 1983 to 1987, he was employed by Spieker Properties. Mr. Howard received a B.A. from Amherst College, a J.D. from Harvard Law School and an M.B.A. from Stanford University Graduate School of Business. Steven D. Ira. Mr. Ira is a Co-Founder of AIMCO and has served as Executive Vice President since July 1994. From 1987 until July 1994, he served as President of PAM. Prior to merging his firm with PAM in 1987, Mr. Ira acquired extensive experience in property management. Between 1977 and 1981 he supervised the property management of over 3,000 apartment and mobile home units in Colorado, Michigan, Pennsylvania and Florida, and in 1981 he joined with others to form the property management firm of McDermott, Stein and Ira. Mr. Ira served for several years on the National Apartment Manager Accreditation Board and is a former president of both the National Apartment Association and the Colorado Apartment Association. Mr. Ira is the sixth individual elected to the Hall of Fame of the National Apartment Association in its 54-year history. He holds a Certified Apartment Property Supervisor (CAPS) and a Certified Apartment Manager designation from the National Apartment Association, a Certified Property Manager (CPM) designation from the National Institute of Real Estate Management (IREM) and is a member of the Boards of Directors of the National Multi-Housing Council, the National Apartment 29 32 Association and the Apartment Association of Metro Denver. Mr. Ira received a B.S. from Metropolitan State College in 1975. Paul J. McAuliffe. Mr. McAuliffe was appointed Executive Vice President -- Capital Markets in February 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 the 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. Thomas W. Toomey. Mr. Toomey has served as Senior Vice President -- Finance and Administration of AIMCO since January 1996 and was promoted to Executive Vice President -- Finance and Administration in March 1997. From 1990 until 1995, Mr. Toomey served in a similar capacity with Lincoln Property Company ("LPC") as Vice President/Senior Controller and Director of Administrative Services of Lincoln Property Services where he was responsible for LPC's computer systems, accounting, tax, treasury services and benefits administration. From 1984 to 1990, he was an audit manager with Arthur Andersen & Co. where he served real estate and banking clients. Mr. Toomey received a B.S. in Business Administration/Finance from Oregon State University. Harry G. Alcock. Mr. Alcock has served as a Vice President since July 1996, and was promoted to Senior Vice President -- Acquisitions in October 1997, with responsibility for acquisition and financing activities since July 1994. From June 1992 until July 1994, Mr. Alcock served as Senior Financial Analyst for PDI and HFC. From 1988 to 1992, Mr. Alcock worked for Larwin Development Corp., a Los Angeles based real estate developer, with responsibility for raising debt and joint venture equity to fund land acquisitions and development. From 1987 to 1988, Mr. Alcock worked for Ford Aerospace Corp. He received his B.S. from San Jose State University. Troy D. Butts. Mr. Butts has served as Senior Vice President and Chief Financial Officer of AIMCO since November 1997. Prior to joining AIMCO, Mr. Butts served as a Senior Manager in the audit practice of the Real Estate Services Group for Arthur Andersen LLP in Dallas, Texas. Mr. Butts was employed by Arthur Andersen LLP for ten years and his clients were primarily publicly-held real estate companies, including office and multi-family real estate investment trusts. Mr. Butts holds a Bachelor of Business Administration degree in Accounting from Angelo State University and is a Certified Public Accountant. 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 and a director of NL Industries, Inc., a manufacturer of titanium dioxide, since 1987. Mr. Martin has served as Chairman of Tremont Corporation, a holding company operating through its affiliates Titanium Metals Corporation and NL Industries, Inc., since August 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 Haliburton Company ("Haliburton") in 1994, Mr. Martin served as Chairman of the Board and Chief Executive Officer of Baroid Corporation, an 30 33 oilfield service company. In addition to Tremont, NL and TIMET, Mr. Martin is a director of Haliburton, which is engaged in the petroleum services, hydrocarbon and engineering industries. 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 (and served as Chairman of the Compensation Committee prior to March 19, 1998). Mr. Rhodes has served as the President and Director of National Review magazine since November 30, 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 27, 1992. He is currently Vice Chairman of the Board, and a Director of Asset Investors and Commercial Assets. 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 and is a Trustee of the Heritage Foundation. John D. Smith. Mr. Smith was appointed a director of AIMCO in November 1994. Mr. Smith is a member of the Compensation Committee and the Audit Committee. Mr. Smith is Principal and President of John D. Smith Developments. Mr. Smith has been a shopping center developer, owner and consultant for over 8.6 million square feet of shopping center projects including Lenox Square in Atlanta, Georgia. Mr. Smith is a Trustee and former President of the International Council of Shopping Centers and was selected to be a member of the American Society of Real Estate Counselors. Mr. Smith served as a director for Pan-American Properties, Inc. (National Coal Board of Great Britain) formerly known as Continental Illinois Properties. He also serves as a director of American Fidelity Assurance Companies and is retained as an advisor by Shop System Study Society, Tokyo, Japan. Information required by this item is presented under the caption "Other Matters-Section 16(a) Compliance" in the Company's proxy statement for its 1999 annual meeting of stockholders and is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is presented under the captions "Summary Compensation Table," "Option/SAR Grants in Last Fiscal Year" and "Aggregate Option/SAR Exercises in Last Fiscal Year and Fiscal Year-end Options/SAR Values" in AIMCO's proxy statement for its 1999 annual meeting of stockholders and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is presented under the caption "Security Ownership of Certain Beneficial Owners and Management" in AIMCO's proxy statement for its 1999 annual meeting of stockholders and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is presented under the caption "Certain Relationships and Transactions" in AIMCO's proxy statement for its 1999 annual meeting of stockholders and is incorporated herein by reference. 31 34 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) (1) The financial statements listed in the Index to Financial Statements on Page F-1 of this report are filed as part of this report and incorporated herein by reference. (a) (2) The financial statement schedules listed in the Index to Financial Statements on Page F-1 of this report are filed as part of this report and incorporated herein by reference. (a) (3) The Exhibit Index is included on page 33 of this report and incorporated herein by reference. (b) Reports on Form 8-K for the quarter ended December 31, 1998: Current Report on Form 8-K, dated October 1, 1998, relating to the completion of the merger of Insignia Financial Group, Inc. with and into Apartment Investment and Management Company; the conversion of each share of Class A Common Stock of Insignia Financial Group, Inc. into the right to receive 0.262 shares of Class E Cumulative Convertible Preferred Stock of Apartment Investment and Management Company; Apartment Investment and Management Company and AIMCO Properties, L.P.'s entering into an unsecured interim term loan agreement with an affiliate of Lehman Brothers Inc.; and Apartment Investment and Management Company's amendment and restatement of its revolving credit facility with Bank of America National Trust and Savings Association and BankBoston, N.A. Current Report on Form 8-K, dated November 2, 1998 (and Amendment Nos. 1, 2 and 3 thereto, filed November 24, 1998, December 7, 1998 and December 14, 1998, respectively), relating to the acquisition of five multifamily residential properties from Cirque Property, L.C.; the acquisition of interests in nine multifamily restricted properties from affiliates of Realty Investment Co.; and the acquisition of the SunLake Apartments from a related party. The Report includes the Combined Historical Summary of Gross Income and Direct Operating Expenses of Cirque Apartment Communities for the year ended December 31, 1997 and the three months ended March 31, 1998 (unaudited), together with the Report of Independent Auditors; the Combined Historical Summary of Gross Income and Direct Operating Expenses of Realty Investment Apartment Communities I for the year ended December 31, 1997 and the six months ended June 30, 1998 (unaudited), together with the Independent Auditors' Report; the Combined Historical Summary of Gross Income and Direct Operating Expenses of Realty Investment Apartment Communities II for the year ended December 31, 1997 and the six months ended June 30, 1998 (unaudited), together with the Independent Auditors' Report; the Historical Summary of Gross Income and Direct Operating Expenses of Sun Lake Apartments for the years ended December 31, 1997, 1996 and 1995 and the nine months ended September 30, 1998 (unaudited), together with the Independent Auditor's Report; and certain pro forma financial information. Current Report on Form 8-K, dated December 21, 1998, relating to the Company's entering into an Acquisition and Contribution Agreement and Joint Escrow Instructions with Calhoun Beach Associates II Limited Partnership, including the Historical Summary of Gross Income and Direct Operating Expenses of Calhoun Beach Club Apartments for the year ended December 31, 1997 and the nine months ended September 30, 1998 (unaudited), together with the Independent Auditor's Report, and certain pro forma information. 32 35 INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION ----------- ----------- 2.1 -- Second Amended and Restated Agreement and Plan of Merger, dated as of January 22, 1999, by and between Apartment Investment and Management Company and Insignia Properties Trust (Exhibit 2.2 to the Current Report on Form 8-K of Insignia Properties Trust, dated February 11, 1999, is incorporated herein by this reference) 2.2 -- Agreement and Plan of Merger, dated as of December 23, 1997, by and between Apartment Investment and Management Company and Ambassador Apartments, Inc. (Exhibit 2.1 to AIMCO's Current Report on Form 8-K, dated December 23, 1997, is incorporated herein by this reference) 2.3 -- Amended and Restated Agreement and Plan of Merger, dated as of May 26, 1998, by and among Apartment Investment and Management Company, AIMCO Properties, L.P., Insignia Financial Group, Inc., and Insignia/ESG Holdings, Inc. (Exhibit 2.1 to AIMCO's Registration Statement on Form S-4, filed August 5, 1998, is incorporated herein by this reference) 3.1 -- Charter 3.2 -- Bylaws 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 (Exhibit 4.2 to Form S-3 of Insignia Financial Group, Inc. dated December 10, 1996, is incorporated herein by this reference) 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 (Exhibit 4.3 to Form S-3 of Insignia Financial Group, Inc., dated December 10, 1996, is incorporated herein by this reference) 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. 10.1 -- Amended and Restated Credit Agreement (Unsecured Revolver-to-Term Facility), dated as of October 1, 1998, among AIMCO Properties, L.P., Bank of America National Trust and Savings Association, and BankBoston, N.A. (Exhibit 10.1 to AIMCO's Current Report on Form 8-K, dated October 1, 1998, is incorporated herein by this reference) 10.2 -- First Amendment to Credit Agreement, dated as of November 6, 1998, by and among AIMCO Properties, L.P., the financial institutions listed on the signature pages thereof and Bank of America National Trust and Savings Association 10.3 -- Promissory Note, dated October 1, 1998, in the principal amount of $65,000,000 issued by AIMCO Properties, L.P. to Bank of America National Trust and Savings Association, and BankBoston, N.A. (Exhibit 10.2 to AIMCO's Current Report on Form 8-K, dated October 1, 1998, is incorporated herein by this reference) 10.4 -- Promissory Note, dated October 1, 1998, in the principal amount of $35,000,000 issued by AIMCO Properties, L.P. to Bank of America National Trust and Savings Association, and BankBoston, N.A. (Exhibit 10.3 to AIMCO's Current Report on Form 8-K, dated October 1, 1998, is incorporated herein by this reference) 10.5 -- Swing Line Promissory Note, dated October 1, 1998, in the principal amount of $30,000,000, issued by AIMCO Properties, L.P. to Bank of America National Trust and Savings Association, and BankBoston, N.A. (Exhibit 10.4 to AIMCO's Current Report on Form 8-K, dated October 1, 1998, is incorporated herein by this reference)
33 36
EXHIBIT NO. DESCRIPTION ----------- ----------- 10.6 -- Payment Guaranty of Non-Preferred Stock Subsidiaries, dated as of October 1, 1998, by Apartment Investment and Management Company, AIMCO Holdings QRS, Inc., AIMCO/OTC QRS, Inc., AIMCO Holdings, L.P., AIMCO-GP, Inc., AIMCO-LP, Inc., AIMCO Properties Finance Corp., AIMCO Somerset, Inc., Ambassador II, L.P., Ambassador X, L.P., Ambassador IV, Inc., Ambassador V, Inc., Ambassador Florida Partners Inc. and A.J. Two, Inc. (Exhibit 10.5 to AIMCO's Quarterly Report on Form 10-Q for the quarterly period ending September 30, 1998, is incorporated herein by this reference) 10.7 -- Payment Guaranty of Preferred Stock Subsidiaries, dated as of October 1, 1998, by Property Asset Management Services, Inc., Property Asset Management Services, L.P., NHP Management Company and Property Asset Management Services-California, L.L.C. (Exhibit 10.6 to AIMCO's Quarterly Report on Form 10-Q for the quarterly period ending September 30, 1998, is incorporated herein by this reference) 10.8 -- Payment Guaranty of Non-Preferred Stock Subsidiaries, dated as of October 1, 1998, by CPF XIV/St. Charleston, Inc., CPF XIV/Torrey Pines, Inc., CPF XIV/ Sun River, Inc., CPF XIV/Lakeside Place, Inc., ConCap CCP/IV Stratford Place Properties, Inc., ConCap CCP/IV River's Edge Properties, Inc., PRA, Inc. and National Property Investors, Inc. (Exhibit 10.7 to AIMCO's Quarterly Report on Form 10-Q for the quarterly period ending September 30, 1998, is incorporated herein by this reference) 10.9 -- 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 (Exhibit 10.8 to AIMCO's Quarterly Report on Form 10-Q for the quarterly period ending September 30, 1998, is incorporated herein by this reference) 10.10 -- First Amendment to the Third Amended and Restated Agreement of Limited Partnership of AIMCO Properties, L.P., dated as of November 6, 1998 (Exhibit 10.9 to AIMCO's Quarterly Report on Form 10-Q for the quarterly period ending September 30, 1998, is incorporated herein by this reference) 10.11 -- Second Amendment to the Third Amended and Restated Agreement of Limited Partnership of AIMCO Properties, L.P., dated as of December 30, 1998 (Exhibit 10.1 to Amendment No. 1 to AIMCO's Current Report on Form 8-K/A, filed February 11, 1999, is incorporated herein by this reference) 10.12 -- Third Amendment to the Third Amended and Restated Agreement of Limited Partnership of AIMCO Properties, L.P., dated as of February 18, 1999 10.13 -- Credit Agreement dated December 30, 1997, by and among Insignia Properties, L.P., Lehman Commercial Paper Inc., as lending agent, First Union National Bank, as administrative agent, and the lenders from time to party thereto (Exhibit 10.8 to Form S-4 of Insignia Properties Trust, filed May 28, 1998, is incorporated herein by this reference) 10.14 -- Unconditional Guaranty, dated as of December 30, 1997, made by Insignia Properties Trust in favor of First Union National Bank (Exhibit 10.9 to Form S-4 of Insignia Properties Trust, filed May 28, 1998, is incorporated herein by this reference) 10.15 -- Shareholders Agreement, dated October 1, 1998, by and among Apartment Investment and Management Company, Andrew L. Farkas, James A. Aston and Frank M. Garrison (Exhibit 10.4 to AIMCO's Schedule 13D filed on October 15, 1998, is incorporated herein by this reference) 10.16 -- $300,000,000 Interim Term Loan Agreement, dated as of October 1, 1998, among Apartment Investment and Management Company, AIMCO Properties, L.P., the several lenders from time to time parties thereto, Lehman Brothers, Inc., and Lehman Commercial Paper Inc. 10.17 -- Subsidiaries Guarantee, dated as October 1, 1998, made by each of the entities that are signatories thereto in favor of Lehman Commercial Paper Inc. as administrative agent for the several banks and other financial institutions or entities from time to time parties to the Interim Term Loan Agreement
34 37
EXHIBIT NO. DESCRIPTION ----------- ----------- 10.18 -- Preferred Stock Subsidiaries' Guarantee, dated as of October 1, 1998, made by each of the entities that are signatories thereto in favor of Lehman Commercial Paper Inc., as administrative agent for the several banks and other financial institutions or entities from time to time parties to the Interim Loan Agreement 10.19 -- Common Stock Purchase Agreement made as of August 26, 1997, by and between Apartment Investment and Management Company and ABKB/LaSalle Securities Limited Partnership (Exhibit 99.1 to AIMCO's Current Report on Form 8-K, dated August 26, 1997, is incorporated herein by this reference) 10.20 -- Purchase and Sale Agreement and Joint Escrow Instructions, made and entered into as of August 22, 1997, by and between AIMCO Properties, L.P. and each of the parties identified on Exhibit "A" attached thereto (collectively, the "Winthrop Sellers") (Exhibit 99.3 to AIMCO's Current Report on Form 8-K, dated October 15, 1997, is incorporated herein by this reference) 10.21 -- Letter Agreement, dated October 15, 1997 by and between AIMCO Properties, L.P. and the Winthrop Sellers (Exhibit 99.6 to AIMCO's Current Report on Form 8-K, dated October 15, 1997, is incorporated herein by this reference) 10.22 -- Summary of Arrangement for Sale of Stock to Executive Officers (Exhibit 10.104 to AIMCO's Annual Report on Form 10-K for the fiscal year 1996, is incorporated herein by this reference) * 10.23 -- Apartment Investment and Management Company 1997 Stock Award and Incentive Plan (Annex A to AIMCO's Proxy Statement for the Annual Meeting of Stockholders to be held on April 24, 1997, is incorporated herein by this reference) * 10.24 -- Amendment No. 1 to the Apartment Investment and Management Company 1997 Stock Award and Incentive Plan (Annex A to AIMCO's Proxy Statement for Annual Meeting of Stockholders to be held on May 8, 1998, is incorporated herein by this reference) * 10.25 -- Apartment Investment and Management Company 1998 Incentive Compensation Plan (Annex B to AIMCO's Proxy Statement for Annual Meeting of Stockholders to be held on May 8, 1998, is incorporated herein by this reference) * 10.26 -- Employment Contract, executed on July 29, 1994, by and between AIMCO Properties, L.P. and Peter Kompaniez (Exhibit 10.44A to AIMCO's Annual Report on Form 10-K for the fiscal year 1994, is incorporated herein by this reference)* 10.27 -- Real Estate Acquisition Agreement, dated as of May 22, 1997, by and among Apartment Investment and Management Company, AIMCO Properties, L.P., Demeter Holdings Corporation, Phemus Corporation, Capricorn Investors, L.P., J. Roderick Heller, III and NHP Partners LLC (Exhibit 2.1 to AIMCO's Current Report on Form 8-K, dated June 3, 1997, is incorporated herein by this reference) 10.28 -- Contribution Agreement, dated as of January 31, 1998, by and between Apartment Investment and Management Company and Terry Considine and Peter K. Kompaniez (Exhibit 2.1 to AIMCO's Current Report on Form 8-K, dated January 31, 1998, is incorporated herein by this reference)* 10.29 -- 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. (Exhibit 10.1 to the Current Report on Form 8-K of Insignia Properties Trust, dated February 11, 1999, is incorporated herein by this reference)
35 38
EXHIBIT NO. DESCRIPTION ----------- ----------- 10.30 -- Amended and Restated Indemnification Agreement, dated as of May 26, 1998, by and between Apartment Investment and Management Company and Insignia/ESG Holdings, Inc. (Exhibit 2.2 to AIMCO's Registration Statement on Form S-4, filed August 5, 1998, is incorporated herein by this reference.) 10.31 -- Form of Restricted Stock Agreement (1997 Stock Award and Incentive Plan) (Exhibit 10.11 to AIMCO's Quarterly Report on Form 10-Q for the quarterly period ending September 30, 1997, is incorporated herein by this reference)* 10.32 -- Apartment Investment and Management Company Non-Qualified Employee Stock Option Plan, adopted August 29, 1996 (Exhibit 10.8 to AIMCO's Quarterly Report on Form 10/Q-A for the quarterly period ending September 30, 1996, is incorporated herein by this reference)* 10.33 -- Amended and Restated Apartment Investment and Management Company Non-Qualified Employee Stock Option Plan (Annex B to AIMCO's Proxy Statement for the Annual Meeting of Stockholders to be held on April 24, 1997, is incorporated herein by this reference)* 10.34 -- Employment Contract executed on July 29, 1994 by and between AIMCO Properties, LP and Terry Considine (Exhibit 10.44C to AIMCO's Annual Report on Form 10-K for the fiscal year 1994, is incorporated herein by this reference)* 10.35 -- Employment Contract executed on July 29, 1994 by and between AIMCO Properties, LP and Steven D. Ira (Exhibit 10.44D to AIMCO's Annual Report on Form 10-K for the fiscal year 1994, is incorporated herein by this reference)* 10.36 -- The 1994 Stock Incentive Plan for Officers, Directors and Key Employees of Ambassador Apartments, Inc., Ambassador Apartments, L.P. and Subsidiaries (Exhibit 10.40 to Ambassador Apartments, Inc. Annual Report on Form 10-K for the fiscal year 1997, is incorporated herein by this reference)* 10.37 -- Amendment to the 1994 Stock Incentive Plan for Officers, Directors and Key Employees of Ambassador Apartments, Inc., Ambassador Apartments, L.P. and Subsidiaries (Exhibit 10.41 to Ambassador Apartments, Inc. Annual Report on Form 10-K for the fiscal year 1997, is incorporated herein by this reference)* 10.38 -- 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 (Exhibit 10.42 to Ambassador Apartments, Inc. Annual Report on Form 10-K for the fiscal year 1997, is incorporated herein by this reference)* 10.39 -- Insignia 1992 Stock Incentive Plan, as amended through March 28, 1994 and November 13, 1995 (Exhibit 10.1 to Insignia Financial Group, Inc. Annual Report on Form 10-K for the fiscal year 1997, is incorporated herein by this reference)* 10.40 -- NHP Incorporated 1990 Stock Option Plan (Exhibit 10.9 to NHP Incorporated Annual Report on Form 10-K for the fiscal year 1995, is incorporated herein by this reference)* 10.41 -- NHP Incorporated 1995 Incentive Stock Option Plan (Exhibit 10.10 to NHP Incorporated Annual Report on Form 10-K for the fiscal year 1995, is incorporated herein by this reference)* 10.42 -- Form of Incentive Stock Option Agreement (1997 Stock Award and Incentive Plan)* 21.1 -- List of Subsidiaries 23.1 -- Consent of Ernst & Young LLP 27.1 -- Financial Data Schedule 99.1 -- Agreement re: disclosure of long-term debt instruments
- --------------- (1) Schedules and supplemental materials to the exhibits have been omitted but will be provided to the Securities and Exchange Commission upon request. * Management contract or compensatory plan or arrangement. 36 39 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 11th day of March, 1999. APARTMENT INVESTMENT AND MANAGEMENT COMPANY /s/ TERRY CONSIDINE ------------------------------------ Terry Considine Chairman of the Board And Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ TERRY CONSIDINE Chairman of the Board and Chief March 11, 1999 - ----------------------------------------------------- Executive Officer Terry Considine /s/ PETER K. KOMPANIEZ Vice Chairman, President and March 11, 1999 - ----------------------------------------------------- Director Peter K. Kompaniez /s/ THOMAS W. TOOMEY Executive Vice President of March 11, 1999 - ----------------------------------------------------- Finance and Administration Thomas W. Toomey /s/ PATRICK FOYE Executive Vice President March 11, 1999 - ----------------------------------------------------- Patrick Foye /s/ TROY D. BUTTS Senior Vice President and Chief March 11, 1999 - ----------------------------------------------------- Financial Officer Troy D. Butts /s/ RICHARD S. ELLWOOD Director March 11, 1999 - ----------------------------------------------------- Richard S. Ellwood /s/ J. LANDIS MARTIN Director March 11, 1999 - ----------------------------------------------------- J. Landis Martin /s/ THOMAS L. RHODES Director March 11, 1999 - ----------------------------------------------------- Thomas L. Rhodes /s/ JOHN D. SMITH Director March 11, 1999 - ----------------------------------------------------- John D. Smith
37 40 INDEX TO FINANCIAL STATEMENTS APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PAGE ---- FINANCIAL STATEMENTS: Report of Independent Auditors............................ F-2 Consolidated Balance Sheets as of December 31, 1998 and 1997................................................... F-3 Consolidated Statements of Income for the Years Ended December 31, 1998, 1997 and 1996....................... F-4 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1998, 1997 and 1996........... F-5 Consolidated Statements of Cash Flow for the Years Ended December 31, 1998, 1997 and 1996....................... F-6 Notes to Consolidated Financial Statements................ F-10 FINANCIAL STATEMENT SCHEDULES: Schedule III -- Real Estate and Accumulated Depreciation........................................... F-34 Schedule IV -- Mortgage Loans on Real Estate.............. F-41 All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
F-1 41 REPORT OF INDEPENDENT AUDITORS Stockholders and Board of Directors Apartment Investment and Management Company We have audited the accompanying consolidated balance sheets of Apartment Investment and Management Company as of December 31, 1998 and 1997, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1998. Our audits also included the consolidated financial statement schedules listed in the Index at Item 14(a)(2). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Apartment Investment and Management Company at December 31, 1998 and 1997, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1998 in conformity with generally accepted accounting principles. Also, in our opinion, the related consolidated financial statement schedules when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects the information set forth therein. /s/ ERNST & YOUNG LLP Denver, Colorado March 11, 1999 F-2 42 APARTMENT INVESTMENT AND MANAGEMENT COMPANY CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1998 AND 1997 (IN THOUSANDS, EXCEPT SHARE DATA) ASSETS
1998 1997 ---------- ---------- Real Estate, net of accumulated depreciation of $228,880 and $153,285.................................................. $2,573,718 $1,503,922 Property held for sale...................................... 27,304 6,284 Investments in and notes receivable from unconsolidated subsidiaries.............................................. 198,417 84,459 Investments in and notes receivable from unconsolidated real estate partnerships....................................... 1,036,479 212,150 Cash and cash equivalents................................... 71,305 37,088 Restricted cash............................................. 55,826 24,229 Notes receivable............................................ 33,708 -- Goodwill.................................................... 128,658 125,239 Investments in securities................................... -- 22,144 Other assets................................................ 142,870 84,995 ---------- ---------- $4,268,285 $2,100,510 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Secured notes payable....................................... $ 843,791 $ 681,421 Secured tax-exempt bond financing........................... 398,602 74,010 Unsecured short-term financing.............................. 310,300 -- Secured short-term financing................................ 108,022 53,099 ---------- ---------- Total indebtedness................................. 1,660,715 808,530 ---------- ---------- Accounts payable, accrued and other liabilities............. 208,300 88,170 Resident security deposits and prepaid rents................ 12,654 10,213 ---------- ---------- Total liabilities.................................. 1,881,669 906,913 ---------- ---------- Commitments and contingencies............................... -- -- Company-obligated mandatory redeemable convertible preferred securities of a subsidiary trust.......................... 149,500 -- Minority interest in other entities......................... 185,705 36,335 Minority interest in operating partnership.................. 148,847 111,962 Stockholders' equity Preferred Stock........................................... 792,468 135,000 Class A Common Stock, $.01 par value, 484,027,500 shares and 150,000,000 shares authorized, 48,451,388 and 40,439,218 shares issued and outstanding, respectively............................................ 485 403 Class B Common Stock, $.01 par value, 100,000 and 262,500 shares authorized, none and 162,500 shares issued and outstanding............................................. -- 2 Additional paid-in capital................................ 1,246,962 977,601 Notes receivable on common stock purchases................ (49,658) (35,095) Distributions in excess of earnings....................... (87,693) (30,928) Unrealized loss on investments............................ -- (1,683) ---------- ---------- Total stockholders' equity......................... 1,902,564 1,045,300 ---------- ---------- $4,268,285 $2,100,510 ========== ==========
See accompanying notes to consolidated financial statements. F-3 43 APARTMENT INVESTMENT AND MANAGEMENT COMPANY CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (IN THOUSANDS, EXCEPT PER SHARE DATA)
1998 1997 1996 --------- -------- -------- RENTAL PROPERTY OPERATIONS Rental and other property revenues.......................... $ 377,139 $193,006 $100,516 Property operating expenses................................. (147,541) (76,168) (38,400) Owned property management expense........................... (11,013) (6,620) (2,746) Depreciation................................................ (84,635) (37,741) (19,556) --------- -------- -------- Income from property operations............................. 133,950 72,477 39,814 --------- -------- -------- SERVICE COMPANY BUSINESS Management fees and other income............................ 24,103 13,937 8,367 Management and other expenses............................... (16,764) (10,373) (5,560) Corporate overhead allocation............................... (196) (588) (590) --------- -------- -------- Income from service company business........................ 7,143 2,976 2,217 --------- -------- -------- General and administrative expenses......................... (14,650) (5,396) (1,512) Interest expense............................................ (89,424) (51,385) (24,802) Interest income............................................. 30,450 8,676 523 Equity in losses of unconsolidated real estate partnerships.............................................. (4,854) (1,798) -- Equity in earnings of unconsolidated subsidiaries........... 11,570 4,636 -- Minority interest in other entities......................... (468) 1,008 (111) Amortization of goodwill.................................... (8,735) (948) (500) --------- -------- -------- Income from operations...................................... 64,982 30,246 15,629 Gain on disposition of properties........................... 4,674 2,720 44 --------- -------- -------- Income before extraordinary item and minority interest in operating partnership..................................... 69,656 32,966 15,673 Extraordinary item -- early extinguishment of debt.......... -- (269) -- --------- -------- -------- Income before minority interest in operating partnership.... 69,656 32,697 15,673 Minority interest in operating partnership.................. (5,182) (4,064) (2,689) --------- -------- -------- Net income.................................................. 64,474 28,633 12,984 Net income attributable to preferred stockholders........... 26,533 2,315 -- --------- -------- -------- Net income attributable to common stockholders.............. $ 37,941 $ 26,318 $ 12,984 ========= ======== ======== Comprehensive Income Net income.................................................. $ 64,474 $ 28,633 $ 12,984 Other comprehensive income: Net unrealized gains on investment in securities.......... -- (1,683) -- --------- -------- -------- Comprehensive income........................................ $ 64,474 $ 26,950 $ 12,984 ========= ======== ======== Basic earnings per common share............................. $ 0.84 $ 1.09 $ 1.05 ========= ======== ======== Diluted earnings per common share........................... $ 0.80 $ 1.08 $ 1.04 ========= ======== ======== Weighted average common shares outstanding.................. 45,187 24,055 12,411 ========= ======== ======== Weighted average common shares and common share equivalents outstanding............................................... 47,624 24,436 12,427 ========= ======== ======== Dividends paid per common share............................. $ 2.25 $ 1.85 $ 1.70 ========= ======== ========
See accompanying notes to consolidated financial statements. F-4 44 APARTMENT INVESTMENT AND MANAGEMENT COMPANY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (IN THOUSANDS)
CLASS A CLASS B PREFERRED STOCK COMMON STOCK COMMON STOCK NOTES ----------------- --------------- --------------- ADDITIONAL RECEIVABLE SHARES SHARES SHARES PAID-IN FROM ISSUED AMOUNT ISSUED AMOUNT ISSUED AMOUNT CAPITAL OFFICERS ------ -------- ------ ------ ------ ------ ---------- ---------- BALANCE DECEMBER 31, 1995..................... -- $ -- 11,847 $118 585 $ 6 $ 175,211 $ -- Net proceeds from of Class A Common Stock..... -- -- 1,265 13 -- -- 28,123 -- Conversion of Class B Common Stock to Class A Common Stock................................. -- -- 260 3 (260) (3) -- -- Conversion of Operating Partnership Units to Class A Common Stock......................... -- -- 212 2 -- -- 3,797 -- Class A Common Stock issued as consideration for real estate acquired..................... -- -- 704 7 -- -- 15,287 -- Purchase of stock by officers................. -- -- 895 9 -- -- 18,568 (7,140) Repurchase of Class A Common Stock............ -- -- (206) (2) -- -- (4,253) -- Stock options exercised....................... -- -- 3 -- -- -- 58 -- Net Income.................................... -- -- -- -- -- -- -- -- Dividends paid -- Class A Common Stock........ -- -- -- -- -- -- -- -- ------ -------- ------ ---- ---- --- ---------- -------- BALANCE DECEMBER 31, 1996..................... -- -- 14,980 150 325 3 236,791 (7,140) Net proceeds from issuance of Class A Common Stock........................................ -- -- 16,367 164 -- -- 509,950 -- Net proceeds from issuance of Preferred Stock........................................ 750 75,000 -- -- -- -- -- -- Net proceeds from issuance of Class C Preferred Stock.............................. 2,400 60,000 -- -- -- -- (1,890) -- Repurchase of Class A Common Stock from officer...................................... -- -- -- -- -- -- (67) 67 Conversion of Class B Common Stock to Class A Common Stock................................. -- -- 163 1 (163) (1) -- -- Conversion of operating partnership units to Class A Common Stock......................... -- -- 562 6 -- -- 8,615 -- Purchase of stock by officers................. -- -- 1,149 11 -- -- 34,704 (33,517) Repayment of notes receivable from officers... -- -- -- -- -- -- -- 14,540 Stock options exercised....................... -- -- 442 4 -- -- 8,411 (9,045) Warrants exercised............................ -- -- 16 -- -- -- 303 -- Class A Common Stock issued as consideration for NHP common stock......................... -- -- 6,760 67 -- -- 180,784 -- Net income.................................... -- -- -- -- -- -- -- -- Dividends paid -- Class A Common Stock........ -- -- -- -- -- -- -- -- Dividends paid -- Class B Preferred Stock..... -- -- -- -- -- -- -- -- Unrealized loss on investments................ -- -- -- -- -- -- -- -- ------ -------- ------ ---- ---- --- ---------- -------- BALANCE DECEMBER 31, 1997..................... 3,150 135,000 40,439 403 162 2 977,601 (35,095) Net proceeds from issuances of Preferred Stock........................................ 11,250 356,250 -- -- -- -- (15,353) -- Repurchase of Class A Common Stock............ -- -- (303) (3) -- -- (11,064) -- Conversion of Class B Common Stock to Class A Common Stock................................. -- -- 162 2 (162) (2) -- -- Conversion of operating partnership units to Class A Common Stock......................... -- -- 275 3 -- -- 5,792 -- Purchase of stock by officers and awards of restricted stock............................. -- -- 640 7 -- -- 23,619 (23,471) Repayment of notes receivable from officers... -- -- -- -- -- -- -- 8,908 Stock options and warrants exercised.......... -- -- 658 7 -- -- 11,008 -- Class A Common Stock issued as consideration for Ambassador common stock.................. -- -- 6,580 66 -- -- 251,209 -- Class E Preferred Stock issued as consideration for Insignia common stock...... 8,424 301,218 -- -- -- -- -- -- Issuance of warrants to purchase Class A Common Stock................................. -- -- -- -- -- -- 4,150 -- Net Income.................................... -- -- -- -- -- -- -- -- Dividends paid -- Class A Common Stock........ -- -- -- -- -- -- -- -- Dividends paid -- Preferred Stock............. -- -- -- -- -- -- -- -- Unrealized gain (loss) on investments......... -- -- -- -- -- -- -- -- ------ -------- ------ ---- ---- --- ---------- -------- BALANCE DECEMBER 31, 1998..................... 22,824 $792,468 48,451 $485 -- $-- $1,246,962 $(49,658) ====== ======== ====== ==== ==== === ========== ======== UNREALIZED DISTRIBUTIONS GAIN IN EXCESS (LOSS) ON OF EARNINGS INVESTMENTS TOTAL ------------- ----------- ---------- BALANCE DECEMBER 31, 1995..................... $ (6,303) $ -- $ 169,032 Net proceeds from of Class A Common Stock..... -- -- 28,136 Conversion of Class B Common Stock to Class A Common Stock................................. -- -- -- Conversion of Operating Partnership Units to Class A Common Stock......................... -- -- 3,799 Class A Common Stock issued as consideration for real estate acquired..................... -- -- 15,294 Purchase of stock by officers................. -- -- 11,437 Repurchase of Class A Common Stock............ -- -- (4,255) Stock options exercised....................... -- -- 58 Net Income.................................... 12,984 -- 12,984 Dividends paid -- Class A Common Stock........ (20,736) -- (20,736) -------- ------- ---------- BALANCE DECEMBER 31, 1996..................... (14,055) -- 215,749 Net proceeds from issuance of Class A Common Stock........................................ -- -- 510,114 Net proceeds from issuance of Preferred Stock........................................ -- -- 75,000 Net proceeds from issuance of Class C Preferred Stock.............................. -- -- 58,110 Repurchase of Class A Common Stock from officer...................................... -- -- -- Conversion of Class B Common Stock to Class A Common Stock................................. -- -- -- Conversion of operating partnership units to Class A Common Stock......................... -- -- 8,621 Purchase of stock by officers................. -- -- 1,198 Repayment of notes receivable from officers... -- -- 14,540 Stock options exercised....................... -- -- (630) Warrants exercised............................ -- -- 303 Class A Common Stock issued as consideration for NHP common stock......................... -- -- 180,851 Net income.................................... 28,633 -- 28,633 Dividends paid -- Class A Common Stock........ (44,660) -- (44,660) Dividends paid -- Class B Preferred Stock..... (846) -- (846) Unrealized loss on investments................ -- (1,683) (1,683) -------- ------- ---------- BALANCE DECEMBER 31, 1997..................... (30,928) (1,683) 1,045,300 Net proceeds from issuances of Preferred Stock........................................ -- -- 340,897 Repurchase of Class A Common Stock............ -- -- (11,067) Conversion of Class B Common Stock to Class A Common Stock................................. -- -- -- Conversion of operating partnership units to Class A Common Stock......................... -- -- 5,795 Purchase of stock by officers and awards of restricted stock............................. -- -- 155 Repayment of notes receivable from officers... -- -- 8,908 Stock options and warrants exercised.......... -- -- 11,015 Class A Common Stock issued as consideration for Ambassador common stock.................. -- -- 251,275 Class E Preferred Stock issued as consideration for Insignia common stock...... -- -- 301,218 Issuance of warrants to purchase Class A Common Stock................................. -- -- 4,150 Net Income.................................... 64,474 -- 64,474 Dividends paid -- Class A Common Stock........ (94,835) -- (94,835) Dividends paid -- Preferred Stock............. (26,404) -- (26,404) Unrealized gain (loss) on investments......... -- 1,683 1,683 -------- ------- ---------- BALANCE DECEMBER 31, 1998..................... $(87,693) $ -- $1,902,564 ======== ======= ==========
See accompanying notes to consolidated financial statements. F-5 45 APARTMENT INVESTMENT AND MANAGEMENT COMPANY CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (IN THOUSANDS)
1998 1997 1996 --------- --------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net income................................................ $ 64,474 $ 28,633 $ 12,984 --------- --------- -------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization........................... 101,610 43,520 21,209 Gain on disposition of properties....................... (4,674) (2,720) (44) Minority interest in operating partnership.............. 5,182 4,064 2,689 Minority interests in other entities.................... 468 (1,008) 111 Equity in losses of unconsolidated partnerships......... 4,854 1,798 -- Equity in earnings of unconsolidated subsidiaries....... (11,570) (4,636) -- Extraordinary loss on early extinguishment of debt...... -- 269 -- Changes in operating assets and operating liabilities... (11,930) 3,112 1,857 --------- --------- -------- Total adjustments................................... 83,940 44,399 25,822 --------- --------- -------- Net cash provided by operating activities........... 148,414 73,032 38,806 --------- --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of real estate................................... (155,456) (376,315) (26,032) Additions to real estate.................................. (77,336) (26,719) (19,663) Proceeds from sale of property held for sale.............. 36,468 22,095 17,147 Additions to property held for sale....................... (2,339) (247) (5,718) Purchase of NHP common stock, notes receivable, general limited partnership interests and other assets.......... (56,760) (199,146) (53,878) Contributions to unconsolidated subsidiaries.............. (13,032) (59,787) -- Advances to unconsolidated partnerships................... -- (42,879) -- Purchase of/additions to notes receivable................. (81,587) (60,575) -- Proceeds from repayments of notes receivable.............. 29,290 -- -- Cash received in connection with acquisitions............. 60,777 -- -- Cash paid for merger related costs........................ (78,568) -- -- Distributions from investments in real estate partnerships............................................ 15,673 -- -- Purchase of investments held for sale..................... (4,935) (19,881) -- Redemptions of OP Units................................... (516) -- -- Dividends received from unconsolidated subsidiaries....... -- 45,791 -- --------- --------- -------- Net cash used in investing activities............... (328,321) (717,663) (88,144) --------- --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from secured notes payable borrowings............ 102,115 225,436 -- Principal repayments on secured notes payable............. (93,469) (12,512) (28,463) Proceeds from secured tax-exempt bond financing........... 210,720 -- 58,010 Principal repayments on secured tax-exempt bond financing............................................... (224,395) (1,487) (48,703) Proceeds from (payoff of) unsecured short-term financing............................................... -- (12,579) 12,500 Proceeds from secured short-term financing................ 57,140 19,050 30,119 Repayments on secured short-term financing................ (34,333) -- -- Net borrowings (paydowns) on the revolving credit facilities.............................................. (46,262) (162,008) 40,800 Payment of loan costs, including proceeds and costs from interest rate hedges.................................... (7,407) (6,387) (3,464) Proceeds from issuance of Class A Common Stock............ -- 510,114 28,136 Proceeds from issuances of Preferred Stock................ 340,897 133,110 -- Proceeds from exercises of employee stock options and warrants................................................ 11,015 871 -- Proceeds from partnership preferred units in a subsidiary and warrants to purchase Class A Common Stock........... 35,000 -- -- Proceeds from issuance of high performance units.......... 1,988 -- -- Principal repayments received on notes due from officers on Class A Common Stock purchases....................... 8,951 25,957 -- Repurchase of common stock................................ (11,066) (4,255) Payment of common stock dividends......................... (94,835) (44,660) (20,736) Payment of distributions to minority interest in operating partnership............................................. (12,651) (5,510) (3,815) Payment of distributions to minority interest in other entities................................................ (2,880) -- -- Payment of preferred stock dividends...................... (26,404) (846) -- --------- --------- -------- Net cash provided by financing activities........... 214,124 668,549 60,129 --------- --------- -------- NET INCREASE IN CASH AND CASH EQUIVALENTS................... 34,217 23,918 10,791 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.............. 37,088 13,170 2,379 --------- --------- -------- CASH AND CASH EQUIVALENTS AT END OF YEAR.................... $ 71,305 $ 37,088 $ 13,170 ========= ========= ========
See accompanying notes to consolidated financial statements. F-6 46 APARTMENT INVESTMENT AND MANAGEMENT COMPANY CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (IN THOUSANDS, EXCEPT SHARE AND PARTNERSHIP UNIT DATA)
1998 1997 1996 ------- ------- ------- SUPPLEMENTAL CASH FLOW INFORMATION: Interest paid............................................. $91,795 $51,076 $22,869
NON CASH INVESTING AND FINANCING ACTIVITIES PURCHASE OF REAL ESTATE, CASH COLLATERAL AND PROPERTY MANAGEMENT BUSINESSES
1998 1997 1996 -------- -------- ------- Secured notes payable assumed in connection with purchase of real estate............................................... $115,151 $140,451 $31,796 Secured short-term financing assumed in connection with purchase of real estate................................... -- 9,600 5,072 Real estate, restricted cash, cash collateral and property management businesses contributed in exchange for interests in AIMCO Properties, L.P. ...................... 34,756 55,906 15,279 Real estate purchased in exchange for 90,000 partnership preferred units of AIMCO Properties, L.P.................. 9,000 -- -- Assumption of operating liabilities......................... 857 -- -- Accrual of contingent consideration......................... 4,500 -- -- Common Stock issued in consideration for purchase of real estate.................................................... -- -- 15,294
PURCHASE OF INSIGNIA FINANCIAL GROUP, INC. In October 1998, the company acquired all the common stock of Insignia Financial Group, Inc. in exchange for up to approximately 8.9 million shares of Class E Cumulative Convertible Preferred Stock with a recorded value of approximately $301.2 million (see Note 4). The aggregate purchase price consisted of the following: Real estate................................................. $ 59,593 Investment in unconsolidated real estate partnerships....... 799,177 Investment in unconsolidated subsidiaries................... 68,168 Restricted cash............................................. 1,339 Notes receivable............................................ 30,257 Other assets................................................ 66,081 Secured notes payable....................................... 29,002 Secured short-term financing................................ 331,948 Account payable, accrued and other liabilities.............. 157,061 Mandatory redeemable convertible preferred securities of a subsidiary trust.......................................... 149,500 Minority interest in other entities......................... 112,170 Stockholders' equity........................................ 301,218
F-7 47 PURCHASE OF AMBASSADOR APARTMENTS, INC. In May 1998, the Company acquired all of the common stock of Ambassador Apartments, Inc. in exchange for approximately 6.6 million shares of Class A Common Stock with a recorded value of $251.3 million (see Note 4). The aggregate purchase price consisted of the following: Real estate................................................. $713,596 Investment in unconsolidated real estate partnerships....... 2,290 Restricted cash............................................. 35,523 Accounts receivable......................................... 7,953 Deferred financing costs.................................... 4,359 Other assets................................................ 2,319 Secured notes payable....................................... 37,162 Secured tax-exempt bond financing........................... 334,881 Secured short-term financing................................ 31,550 Unsecured short-term financing.............................. 2,513 Account payable, accrued and other liabilities.............. 15,199 Resident security deposits and prepaid rents................ 8,898 Minority interest in other partnerships..................... 5,752 Minority interest in AIMCO Properties, L.P.................. 147 Stockholders' equity........................................ 251,274
PURCHASE OF NHP AND REAL ESTATE COMPANIES In 1997, the company acquired NHP Partners, Inc., NHP Partners Two Limited Partners and their subsidiaries (collectively, the "NHP Real Estate Companies") and all of the common stock of NHP Incorporated ("NHP") in exchange for approximately 6.8 million shares of Class A Common Stock with a recorded value of $180.9 million, $141.3 million in cash and warrants to purchase 399,999 shares of Class A Common Stock in a series of related transactions (see Notes 5 and 6). The aggregate purchase price consisted of the following: Assets purchased............................................ $638,944 Liabilities assumed......................................... 312,555 Cash paid................................................... 141,328 Stock issued................................................ 180,851 Stock options issued........................................ 4,210
REDEMPTION OF OPERATING PARTNERSHIP UNITS In 1998, 275,405 operating partnership units with a recorded value of $5,650 were redeemed in exchange for an equal number of shares of Class A Common Stock. In 1997, 565,101 operating partnership units with a recorded value of $8,621 were redeemed in exchange for an equal number of shares of Class A Common Stock. In 1996, 211,392 operating partnership units with a recorded value of $3,799 were redeemed in exchange for an equal number of shares of Class A Common Stock. RECEIPT OF NOTES PAYABLE FROM OFFICERS In 1998, the company issued notes receivable from officers for a total of $23.5 million in connection with their purchase of approximately 600,000 shares of Class A Common Stock. F-8 48 In 1997, the company received promissory notes from officers for a total of $42.6 million in connection with the sale of approximately 1.5 million shares of Class A Common Stock. CONVERSION OF CLASS B COMMON STOCK In 1998, 162,500 shares of Class B Common Stock were converted to Class A Common Stock upon achievement of the 1998 target results for a total recorded value of $2. As a result, all previously issued and outstanding shares of Class B Common Stock have now been converted to Class A Common Stock. In 1997, 162,500 shares of Class B Common Stock were converted to Class A Common Stock upon achievement of the 1997 target results for a total recorded value of $2. In 1996, 260,000 shares of Class B Common Stock were converted to Class A Common Stock upon achievement of the 1995 and 1996 target results (130,000 shares respectively for each year) for a total recorded value of $3. OTHER In 1998, the company's operating partnership issued an additional 194,208 partnership units with a recorded value of $4,045 in connection with the purchase of certain partnership interests. In 1997, the company's operating partnership issued an additional 216,564 partnership units with a recorded value of $7,469 in connection with the purchase of certain partnership interests. In 1998, the company obtained control of real estate partnerships which became consolidated. The non-cash effects are as follows: Real estate................................................. $22,089 Investments in and notes receivable from unconsolidated real estate partnerships....................................... 16,683 Secured notes payable....................................... 4,679 Accounts payable, accrued and other liabilities............. 727
During the year ended December 31, 1998, the company contributed certain assets and liabilities to unconsolidated subsidiaries and unconsolidated partnerships as follows: Investment in unconsolidated subsidiaries................... $38,579 Investment in unconsolidated partnerships................... 3,361 Restricted cash............................................. 552 Accounts receivable......................................... 13,972 Other assets................................................ 14,440 Accounts payable, accrued and other liabilities............. 62,011
F-9 49 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1998, 1997, AND 1996 NOTE 1 ORGANIZATION Apartment Investment and Management Company ("AIMCO" or the "Company"), a Maryland corporation formed on January 10, 1994, is a self-administered and self-managed REIT engaged in the ownership, acquisition, development, expansion and management of multi-family apartment properties. As of December 31, 1998, the Company owned or managed 379,363 apartment units in 2,147 properties located in 49 states, the District of Columbia and Puerto Rico. On July 24, 1994, AIMCO completed its initial public offering and engaged in a business combination and consummated a series of related transactions which enabled it to continue and expand the property management and related businesses of Property Asset Management, L.L.C., Limited Liability Company, and its affiliated companies, and PDI Realty Enterprises, Inc. (collectively, the "AIMCO Predecessors"). Based on apartment unit data compiled by the National Multi-Housing Council, we believe that, as of December 31, 1998, AIMCO was the largest owner and manager of multi-family apartment properties in the United States. As of December 31, 1998, AIMCO: - owned or controlled 63,086 units in 242 apartment properties; - held an equity interest in 170,243 units in 902 apartment properties; and - managed 146,034 units in 1,003 apartment properties for third party owners and affiliates. AIMCO conducts substantially all of its operations through its operating partnership, AIMCO Properties, L.P. (the "AIMCO operating partnership"). Through wholly owned subsidiaries, AIMCO acts as the sole general partner of the AIMCO operating partnership. As of December 31, 1998, AIMCO owned approximately an 83% interest in the AIMCO operating partnership. AIMCO manages apartment properties for third parties and affiliates through unconsolidated subsidiaries referred to as the "management companies". At December 31, 1998, AIMCO had 48,451,388 shares of Class A Common Stock outstanding and the AIMCO operating partnership had 9,763,488 common units outstanding, for a combined total of 58,214,876 shares and units. NOTE 2 BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying consolidated financial statements include the accounts of AIMCO, the AIMCO operating partnership, majority owned subsidiaries and controlled real estate limited partnerships. Interests held by limited partners in real estate partnerships controlled by the Company and interests held by the minority shareholders of Insignia Properties Trust are reflected as Minority Interests in Other Entities. All significant intercompany balances and transactions have been eliminated in consolidation. Interests in the AIMCO operating partnership held by limited partners other than AIMCO are referred to as "OP Units". The AIMCO operating partnership's income is allocated to holders of OP Units based on the weighted average number of OP Units outstanding during the period. The AIMCO operating partnership records the issuance of OP Units and the assets acquired in purchase transactions based on the market price of the Company's Class A Common Stock at the date of execution of the purchase contract. The holders of the OP Units receive distributions, prorated from the date of admittance, in an amount equivalent to the dividends paid to holders of Class A Common Stock. During 1998, 1997 and 1996, the weighted average ownership interest in the AIMCO operating partnership held by the OP Unit holders was 12.4%, 13.2% and 17.1%, respectively. F-10 50 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) After holding the OP Units for one year, the limited partners generally have the right to redeem their OP Units for cash. Notwithstanding that right, the AIMCO operating partnership may elect to acquire some or all of the OP Units tendered for redemption in exchange for shares of Class A Common Stock in lieu of cash. Investments in and Notes Receivable from Unconsolidated Subsidiaries The Company has investments in numerous subsidiaries. Investments in entities in which the Company does not have control are accounted for under the equity method. Under the equity method, the Company's pro-rata share of the earnings or losses of the entity for the periods being presented is included in earnings (losses) from unconsolidated subsidiaries (see Note 5). Investments in and Notes Receivable from Unconsolidated Real Estate Partnerships The Company owns general and limited partnership interests in numerous partnerships that own multi-family apartment properties. Investments in real estate partnerships in which the Company does not have control, are accounted for under the equity method. Under the equity method, the Company's pro-rata share of the earnings or losses of the entity for the periods being presented is included in earnings (losses) from unconsolidated partnerships (see Note 6). Real Estate and Depreciation Real estate is recorded at cost, less accumulated depreciation, unless considered impaired. If events or circumstances indicate that the carrying amount of a property may be impaired, the Company will make an assessment of its recoverability by estimating the future undiscounted cash flows, excluding interest charges, of the property. If the carrying amount exceeds the aggregate future cash flows, the Company would recognize an impairment loss to the extent the carrying amount exceeds the fair value of the property. As of December 31, 1998, management believes that no impairments exist based on periodic reviews. No impairment losses were recognized for the years ended December 31, 1998, 1997 and 1996. Expenditures in excess of $250 that maintain an existing asset which has a useful life of more than one year are capitalized as capital replacement expenditures and depreciated over the estimated useful life of the asset. Depreciation is calculated on the straight-line method based on a fifteen to thirty year life for buildings and improvements and five years for furniture, fixtures and equipment. Initial Capital Expenditures ("ICE") are those costs considered necessary by the Company in its investment decision to correct deferred maintenance or improve a property. Capital enhancements are costs incurred that add a material new feature or increase the revenue potential of a property. ICE and capital enhancement costs are capitalized and depreciated over the estimated useful lives of the related assets. Direct costs associated with the acquisition of ownership or control of properties are capitalized as a cost of the assets acquired, and are depreciated over the estimated useful lives of the related assets. Expenditures for ordinary repairs, maintenance and apartment turnover costs are expensed as incurred. Redevelopment The Company capitalizes direct and indirect costs (including interest, taxes and other costs) in connection with the redevelopment of its owned or controlled properties and land under development. Interest of $2.8 million, $1.3 million and $0.8 million was capitalized for the years ended December 31, 1998, 1997 and 1996, respectively. F-11 51 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Property Held For Sale Property held for sale is recorded at the lower of carrying amount or fair value less costs to sell. Upon management's determination that a property is to be sold, the Company ceases depreciation of the property's assets. Cash Equivalents The Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents. Restricted Cash Restricted cash includes capital replacement reserves, completion repair reserves, bond sinking fund amounts and tax and insurance impound accounts held by lenders. Goodwill The Company records goodwill in connection with purchase business combinations where the aggregate purchase price exceeds the fair value of the assets acquired. Goodwill is amortized on a straight-line basis over a period of 20 years, which represents its estimated useful life. The carrying amount of goodwill is reviewed if facts and circumstances suggest that it may be impaired. Management believes that goodwill is not impaired at December 31, 1998. Other Assets Fees and costs incurred in obtaining financing are capitalized and are included in other assets. Such costs are amortized over the terms of the related loan agreements and are charged to interest expense. Certain intangible assets are included in other assets and consist of costs associated with the purchase of property management businesses, including property management contracts, legal and other acquisition costs. These costs are amortized on a straight-line basis over terms ranging from five to twenty years. Revenue Recognition The Company's properties have operating leases with apartment residents with terms generally of six months or less. Rental revenues and property management and asset management fees are recognized when earned. The Company recognizes interest income on notes receivable as earned, in accordance with the terms of the notes. Interest income is not recorded on individual notes receivable if management believes the interest is not collectible. Income Taxes AIMCO has elected to be taxed as a real estate investment trust ("REIT") as defined under the Internal Revenue Code of 1986, as amended. In order for AIMCO to qualify as a REIT, at least 95% of AIMCO's gross income in any year must be derived from qualifying sources. The activities of unconsolidated subsidiaries engaged in the service company business are not qualifying sources. As a REIT, AIMCO generally will not be subject to U.S. Federal income taxes at the corporate level if it distributes at least 95% of its REIT taxable income to its stockholders. REITs are also subject to a number of other organizational and operational requirements. If AIMCO fails to qualify as a REIT in any taxable year, its taxable income will be subject to U.S. Federal income tax at regular corporate rates (including any F-12 52 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) applicable alternative minimum tax). Even if AIMCO qualifies as a REIT, it may be subject to certain state and local income taxes and to U.S. Federal income and excise taxes on its undistributed income. For income tax purposes, distributions paid to stockholders consist of ordinary income, capital gains, return of capital or a combination thereof. Earnings and profits, which determine the taxability of dividends to stockholders, differ from net income reported for financial reporting purposes due to differences for U.S. Federal tax purposes in the estimated useful lives used to compute depreciation and the carrying value (basis) of the investments in properties. For the years ended December 31, 1998, 1997 and 1996, distributions paid per share were taxable as follows:
1998 1997 1996 -------------------- -------------------- -------------------- AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE ------ ---------- ------ ---------- ------ ---------- Ordinary income................ $0.90 40% $1.74 94% $1.45 85% Return of capital.............. 1.33 59% -- -- 0.25 15% Capital Gains.................. -- -- 0.04 2% -- -- Unrecaptured SEC.1250 Gain..... 0.02 1% 0.07 4% -- -- ----- --- ----- --- ----- --- $2.25 100% $1.85 100% $1.70 100% ===== === ===== === ===== ===
Earnings Per Share Earnings per share is calculated based on the weighted average number of shares of common stock, common stock equivalents and dilutive convertible securities outstanding during the period (see Note 17). Fair Value of Financial Instruments The estimated aggregate fair value of the Company's cash and cash equivalents, receivables, payables and short-term secured and unsecured debt as of December 31, 1998 is assumed to approximate their carrying value due to their relatively short terms. Management further believes that, after consideration of interest rate agreements, the fair market value of the Company's secured tax-exempt bond debt and secured long-term debt approximate their carrying value, based on market comparisons to similar types of debt instruments having similar maturities. In valuing its investments in securities at their quoted market price, the Company has recognized unrealized losses on investments of $1.7 million as of December 31, 1997, which are included as a component of stockholders' equity. Due to a reorganization, Property Asset Management Services, Inc. ("PAMS, Inc."), a subsidiary of the Company, is no longer consolidated. All unrealized losses on investments in 1997 were related to PAMS, Inc. As PAMS, Inc. is not consolidated at December 31, 1998, there are no unrealized losses on investments. Interest Rate Lock and Interest Rate Swap Agreements Interest rate lock agreements related to planned refinancings of identified variable rate indebtedness are accounted for as anticipatory hedges. Upon the refinancing of such indebtedness, any gain or loss associated with the termination of the interest rate lock agreement is deferred and recognized over the life of the refinanced indebtedness. Reclassifications Certain items included in the 1997 and 1996 consolidated financial statements have been reclassified to conform with the 1998 presentation. F-13 53 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Use of Estimates The preparation of the Company's consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts included in the financial statements and accompanying notes thereto. Actual results could differ from those estimates. NOTE 3 REAL ESTATE Real estate at December 31, 1998 and 1997, is as follows (in thousands):
1998 1997 ---------- ---------- Land........................................................ $ 413,577 $ 265,570 Buildings and improvements.................................. 2,389,021 1,391,637 ---------- ---------- 2,802,598 1,657,207 Accumulated depreciation.................................... (228,880) (153,285) ---------- ---------- $2,573,718 $1,503,922 ========== ==========
During the years ended December 31, 1998 and 1997, the Company purchased or acquired control of 82 properties (22,459 units) and 59 properties (17,191 units), respectively, and disposed of five properties (1,468 units) and five properties (916 units), respectively, as described below. The Company directly acquired 30 apartment communities in unrelated transactions during 1998 (not including those acquired in connection with the mergers with Ambassador Apartments, Inc. and Insignia Financial Group, Inc. (see Note 4)). The aggregate consideration paid by the Company of $316.5 million consisted of $96.0 million in cash, 1.2 million OP Units with a total recorded value of $48.2 million, and the assumption of $172.3 million of secured long-term indebtedness. In 1997, as a result of the acquisition of the NHP Real Estate Companies and related tender offers to limited partners, the Company acquired a controlling interest in 15 partnerships, which own 5,285 units located in 15 apartment communities. The portion of the aggregate purchase price for the NHP Real Estate Companies allocated to these 15 partnerships was approximately $269.3 million, including the assumption of approximately $212.3 million of mortgage indebtedness. In October 1997, the Company acquired a portfolio of 35 residential apartment properties. The aggregate purchase price of $263.0 million, including transaction costs, was comprised of $115.6 million in cash, the assumption of $8.3 million in mortgage indebtedness and the incurrence of $139.1 million of new indebtedness secured by the properties. The Company has also budgeted an additional $16.0 million in initial capital expenditures related to these properties. During 1998, the Company sold five apartment properties containing 1,468 units to unaffiliated third parties. Cash proceeds from the sales of approximately $40.1 million were used to repay a portion of the Company's outstanding indebtedness. The Company recognized a gain of approximately $4.7 million on the disposition of these five properties. During 1997, the Company sold five apartment properties containing 916 units to unaffiliated third parties. Cash proceeds from the sales of approximately $22.7 million were used to repay a portion of the Company's outstanding indebtedness. The Company recognized a gain of approximately $2.8 million on the disposition of these five properties. F-14 54 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 4 MERGERS Ambassador Merger On May 8, 1998, Ambassador was merged with and into AIMCO, with AIMCO being the surviving corporation. The merger was accounted for as a purchase. The purchase price of $713.6 million was comprised of $90.3 million in cash, $372.0 million of assumed debt and approximately 6.6 million shares of Class A Common Stock valued at $251.3 million. Pursuant to the Ambassador merger agreement, each outstanding share of Ambassador common stock not owned by AIMCO was converted into the right to receive 0.553 shares of Class A Common Stock. Concurrently, all outstanding options to purchase Ambassador common stock were converted into cash or options to purchase Class A Common Stock, at the same conversion ratio. Contemporaneously with the consummation of the Ambassador merger, a subsidiary of the AIMCO operating partnership merged with Ambassador's operating partnership and each outstanding unit of limited partnership interest in the Ambassador operating partnership was converted into the right to receive 0.553 OP Units. Prior to its acquisition by AIMCO, Ambassador was a self-administered and self-managed real estate investment trust engaged in the ownership and management of garden-style apartment properties leased primarily to middle income tenants. Ambassador owned 52 apartment communities with a total of 15,728 units located in Arizona, Colorado, Florida, Georgia, Illinois, Tennessee and Texas, and managed one property containing 252 units for an unrelated third party. Insignia Merger On October 1, 1998, Insignia Financial Group, Inc., a Delaware corporation, was merged with and into AIMCO with AIMCO being the surviving corporation. The merger was accounted for as a purchase. The purchase price of $1,125.7 million was comprised of the issuance of up to approximately 8.9 million shares of Class E Cumulative Convertible Preferred Stock (the "Class E Preferred Stock") valued at $301.2 million, $670.1 million in assumed debt and liabilities (including the $50 million special dividend, assumed liabilities of Insignia Properties Trust and transaction costs), $149.5 million in assumed mandatory redeemable convertible preferred securities, and $4.9 million in cash. The Class E Preferred Stock entitled the holders thereof to receive the same cash dividends per share as holders of Class A Common Stock. On January 15, 1999, holders of Class E Preferred Stock received a special dividend in an aggregate amount of approximately $50 million, and all outstanding shares of Class E Preferred Stock automatically converted into an equal number of shares of Class A Common Stock. As a result of the Insignia merger, AIMCO acquired: (i) Insignia's interests in Insignia Properties Trust, ("IPT"), a Maryland REIT, which was a majority owned subsidiary of Insignia; (ii) Insignia's interest in Insignia Properties, L.P. ("IPLP"), IPT's operating partnership; (iii) 100% of the ownership of the Insignia entities that provide multifamily property management and partnership administrative services; (iv) Insignia's interest in multi-family coinvestments; (v) Insignia's ownership of subsidiaries that control multi-family properties not included in IPT; (vi) Insignia's limited partner interests in public and private syndicated real estate limited partnerships; and (vii) assets incidental to the foregoing businesses (collectively, the "Insignia Multi-family Business"). Insignia owned or managed in excess of 170,000 apartment units. IPT Merger As a result of the Insignia merger, AIMCO acquired approximately 51% of the outstanding shares of beneficial interest of IPT. On February 26, 1999, IPT was merged into AIMCO (see Note 24). NOTE 5 INVESTMENTS IN AND NOTES RECEIVABLE FROM UNCONSOLIDATED SUBSIDIARIES In order to satisfy certain requirements of the Internal Revenue Code applicable to AIMCO's status as a REIT, certain assets of the Company are held through corporations in which the AIMCO operating F-15 55 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) partnership holds non-voting preferred stock that represents a 95% economic interest, and certain officers and/or directors of AIMCO hold, directly or indirectly, all of the voting common stock, representing a 5% economic interest. As a result of the controlling ownership interest in the unconsolidated subsidiaries held by others, AIMCO accounts for its interest in the unconsolidated subsidiaries using the equity method. As of December 31, 1998, the unconsolidated subsidiaries included AIMCO/NHP Holdings, Inc. ("ANHI"), AIMCO/NHP Properties, Inc. ("ANPI"), NHP Management Company ("NHPMC"), and NHP A&R Services, Inc. ("NHPA&R"). In May and September of 1997, the Company acquired an aggregate of approximately 6.9 million shares of common stock ("NHP Common Stock") of NHP. On December 8, 1997, the Company acquired the remaining shares of NHP Common Stock in a merger transaction accounted for as a purchase (the "NHP Merger"). Pursuant to the NHP Merger, each outstanding share of NHP Common Stock was converted into either (i) 0.74766 shares of Class A Common Stock or (ii) at the stockholder's option, 0.37383 shares of Class A Common Stock and $10.00 in cash. As a result of the NHP Merger, AIMCO issued approximately 6.8 million shares of Class A Common Stock, valued at $180.8 million, and paid $86.5 million in cash. The total cost of the purchase was $349.5 million. In connection with the purchase of NHP and Insignia, the Company acquired NHP's and Insignia's property management businesses, as well as several other businesses, including a membership purchasing organization, home health care services, and insurance services. Immediately following both the NHP merger and the Insignia merger, AIMCO completed reorganizations which resulted in those businesses being conducted by unconsolidated subsidiaries. As of December 31, 1998 and 1997, AIMCO's investment in and notes receivable from unconsolidated subsidiaries totaled $198.4 million and $84.5 million, respectively, which consisted of $114.0 million and $50.0 million, respectively, in notes receivable, advances of $20.4 million in 1998, and $64.0 million and $34.5 million, respectively, in preferred stock of the unconsolidated subsidiaries. The following table provides selected combined financial information for the Company's unconsolidated subsidiaries as of and for the years ended December 31, 1998 and 1997 (in thousands):
1998 1997 -------- -------- Management contracts........................................ $122,291 $ 51,441 Goodwill.................................................... 42,889 45,494 Total assets................................................ 236,976 119,936 Total liabilities........................................... 169,560 83,663 Stockholders' equity........................................ 67,416 36,273 Total liabilities and stockholders' equity.................. 236,976 119,936 Service company revenues.................................... 99,845 23,776 Service company expenses.................................... (70,771) (11,733) Interest expense............................................ (7,699) (2,902) Net income before discontinued operations................... 12,177 3,430 Net income.................................................. 12,177 3,636
NOTE 6 INVESTMENT IN AND NOTES RECEIVABLE FROM UNCONSOLIDATED REAL ESTATE PARTNERSHIPS In connection with the purchase of the NHP Real Estate Companies, the Company acquired general and limited partnership interests in partnerships that own in excess of 82,000 conventional and affordable apartment units in 519 apartment properties. The Company's ownership interests in these partnerships ranges from 1% to 100%, and the provisions of the partnership agreements give the Company varying degrees of control. F-16 56 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Subsequent to the acquisition of the NHP Real Estate Companies, AIMCO contributed interests in certain of the limited partnerships which it controlled to AIMCO/NHP Partners, L.P. ("ANPLP"), a partnership in which the Company owns a 99% limited partnership interest. A limited liability company owned by certain officers of the Company is the 1% general partner of ANPLP. Based on the provisions of the partnership agreement for ANPLP, the Company does not possess control of the partnership. In connection with the Insignia merger, and through IPT, Insignia's controlled subsidiary, the Company acquired general and limited partnership interests in partnerships that are unconsolidated (see Note 4). The Company's ownership interests in these unconsolidated partnerships ranges from 1% to 47%. Based on the provisions of the partnership agreements, the Company does not possess control of these partnerships. During 1998 and 1997, the Company has made separate offers to the limited partners of approximately 300 partnerships to acquire their limited partnership interests. The Company paid approximately $84.5 million and $59 million during 1998 and 1997, respectively, in connection with such tender offers. At December 31, 1998 and 1997, AIMCO's investment in and notes receivable from unconsolidated real estate partnerships totaled $1,036.5 million and $212.1 million, respectively. The following table provides selected combined financial information for the Company's unconsolidated partnerships as of and for the years ended December 31, 1998 and 1997 (in thousands):
1998 1997 ---------- ---------- Real estate, net of accumulated depreciation................ $3,705,342 $2,252,702 Total assets................................................ 4,221,817 2,707,328 Secured notes payable....................................... 3,234,310 2,951,989 Partners' capital (deficit)................................. 673,958 (805,776) Total liabilities and partners' capital (deficit)........... 4,221,817 2,707,328 Rental and other property revenues.......................... 873,531 501,384 Property operating expenses................................. (524,010) (303,547) Depreciation expense........................................ (151,569) (63,384) Interest expense............................................ (220,134) (154,027) Net loss before gain on disposition of properties........... (12,468) (11,019) Net income (loss)........................................... (12,468) 7,900
NOTE 7 SECURED NOTES PAYABLE The following table summarizes the Company's secured notes payable at December 31, 1998 and 1997, all of which are non-recourse to the Company (in thousands):
1998 1997 -------- -------- Fixed rate, ranging from 5.99% to 8.75%, fully-amortizing notes maturing at various dates through 2032.............. $659,953 $561,056 Fixed rate, ranging from 6.96% to 10.63%, non-amortizing notes maturing at various dates through 2027.............. 178,258 106,424 Floating rate, ranging from 5.0% to 7.1% at December 31, 1998, non-amortizing notes maturing at various dates through 2025.............................................. 5,580 13,941 -------- -------- $843,791 $681,421 ======== ========
F-17 57 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) As of December 31, 1998, the scheduled principal payments for the Company's secured notes payable are as follows (in thousands): 1999........................................................ $ 27,020 2000........................................................ 40,702 2001........................................................ 34,939 2002........................................................ 100,435 2003........................................................ 47,851 Thereafter.................................................. 592,844 -------- $843,791 ========
NOTE 8 SECURED TAX-EXEMPT BOND FINANCING In December 1998, the Company completed the refinancing of $222 million in variable rate tax-exempt debt assumed in conjunction with the May 1998 merger with Ambassador Apartments, Inc. The debt was secured by 27 properties located in Texas, Arizona, Tennessee and Illinois. Through the refinancing, the Company converted the previous tax-exempt debt to $204 million in fixed rate, fully amortizing tax-exempt debt secured by 26 properties. The new debt has a weighted average interest rate of 5.8% and matures in 23 years. The Company also incurred $7.1 million of taxable debt secured by three of the properties, repaid $11.4 million of the previous tax-exempt debt, released $21.5 million in cash reserves and impound accounts held by the prior mortgagors, and released two properties that served as additional collateral for the previous debt. The following table summarizes the Company's secured tax-exempt bond financing at December 31, 1998 and 1997, all of which is non-recourse to the Company (in thousands):
1998 1997 -------- ------- 7.0% fully-amortizing bonds, due July 2016.................. $ 45,237 $46,498 6.9% fully-amortizing bonds, due July 2016.................. 9,267 9,529 Fixed rate fully-amortizing bonds, ranging from 5.1% to 5.8%, due December 2021................................... 159,555 -- Fixed rate fully-amortizing bonds, ranging from 6.5% to 7.3%, due at various dates through 2028................... 78,926 -- Fixed rate non-amortizing bonds, ranging from 5.0% to 6.8%, due at various dates through 2017......................... 55,747 -- 4.2% interest-only bonds, due July 2016..................... -- 5,958 6.0% interest-only bonds, secured by a letter of credit in the amount of $5,350, due September 1998.................. -- 5,325 5.4% interest-only bonds, due December 2002................. -- 6,700 4.0% interest-only bonds, due December 2020................. 4,525 -- Variable rate bonds, ranging from 4.9% to 5.3%, due December 2021...................................................... 45,345 -- -------- ------- Total............................................. $398,602 $74,010 ======== =======
F-18 58 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) As of December 31, 1998, the scheduled principal payments for the Company's secured tax-exempt bonds are as follows (in thousands): 1999........................................................ $ 14,408 2000........................................................ 11,978 2001........................................................ 7,702 2002........................................................ 8,132 2003........................................................ 8,610 Thereafter.................................................. 347,772 -------- $398,602 ========
NOTE 9 UNSECURED SHORT-TERM FINANCING In January 1998, the Company entered into a new $50 million unsecured credit agreement with Bank of America National Trust and Savings Association and Bank Boston, N.A. The AIMCO operating partnership is the borrower under the credit agreement, but all obligations thereunder are guaranteed by AIMCO and certain of its subsidiaries. In October 1998, the Company amended and restated the credit agreement. The agreement now provides for a revolving credit facility of up to $100 million, including a swing line of up to $30 million. The credit facility matures on September 30, 1999, unless extended, at the discretion of the lenders. The credit agreement provides for the conversion of the revolving facility into a three-year term loan. Under the credit agreement, as amended in January 1999, loans bear interest at LIBOR or Bank of America's reference rate, at the election of the Company, plus an applicable margin. The margins range from 2.25% to 2.75% for a LIBOR rate borrowing and 0.75% to 1.25% for a base rate borrowing, both dependant upon the total balance outstanding relative to the calculated borrowing base value. The balance outstanding under the credit facility was $84.3 million as of December 31, 1998. In October 1998, the AIMCO operating partnership and AIMCO entered into an interim term loan agreement with Lehman Brothers Inc. and one of its affiliates, and borrowed $300 million thereunder. The loan is unsecured and matures on September 30, 1999. The proceeds were used to finance the Insignia merger and related fees and expenses, to refinance existing indebtedness, and for general working capital purposes. The loan bears interest at a base rate or the rate at which eurodollar deposits for one month are offered in the interbank eurodollar market, plus, in either case, a margin which averages 1.375% to 2.208% in the case of base rate loans, and 2.375% to 3.208% in the case of eurodollar loans. The base rate will be the higher of (i) the primary rate of Citibank, N.A., (ii) the secondary market rate for three month certificates of deposit plus 1%, or (iii) the federal funds effective rate plus 0.5%. As of December 31, 1998, there was $196 million of indebtedness outstanding under the loan agreement. In October 1998, as a result of the acquisition of Insignia, AIMCO, directly or through its subsidiaries, became the owner of approximately 51% of IPT. Prior to the acquisition, IPT's operating partnership had entered into a $50 million revolving credit agreement with Lehman Commercial Paper, Inc., as syndication agent, and First Union National Bank, as administrative agent. Borrowings under the credit agreement may be used to finance certain permitted investments and refinance certain other investments. The credit agreement matures on December 30, 2000. The credit agreement provides for interest at an annual rate equal to (i) 2.50% plus a rate based on LIBOR or (ii) 0.50% plus a base rate that is the higher of the prime rate or the Federal Funds rate. As of December 31, 1998, there was $30 million outstanding under the credit agreement. F-19 59 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table summarizes the Company's unsecured short-term financing at December 31, 1998 (in thousands):
1998 -------- Floating rate credit facility, interest at 7.30% at December 31, 1998, expiring September 1999......................... $ 84,300 Floating rate interim term loan, interest at 7.30% at December 31, 1998, expiring September 1999................ 196,000 Floating rate credit facility, interest at 7.91% at December 31, 1998, expiring December 2000.......................... 30,000 -------- Total............................................. $310,300 ========
At December 31, 1998, the total unused commitments under the Company's unsecured short-term financing arrangements were $35.7 million. At March 11, 1999, $144.8 million remained outstanding on the Company's unsecured short-term financing and unused commitments aggregated $29 million. NOTE 10 SECURED SHORT-TERM FINANCING The Company utilizes a variety of secured short-term financing instruments to manage its working capital needs and to finance real estate investments. In February 1998, the AIMCO operating partnership entered into a five year $50 million secured credit facility agreement with Washington Mortgage Financial Group, Ltd. AIMCO and certain subsidiaries guaranteed loans under the agreement and the guarantees were secured by assets including four apartment properties and two mortgage notes. Under the agreement, advances to the AIMCO operating partnership were funded with the proceeds from the sale to investors of mortgage-backed securities issued by Fannie Mae and secured by the advance and an interest in the collateral. The interest rate on each advance was determined by investor bids for such mortgage-backed securities, plus a margin. In February 1999, the Company terminated the credit facility agreement (see Note 24). In December 1998, the Company acquired Calhoun Beach Club Apartments for $77.1 million, of which $53.5 million was financed with short-term indebtedness. The debt incurred was in the form of a short-term bridge loan bearing interest at 8.63% and maturing in April 1999. The Company intends to replace the short- term debt with a fixed rate, fully amortizing note in 1999. In January 1998, the Company replaced its secured credit facility with Bank of America National Trust and Savings Association with a new unsecured revolving credit facility (see Note 9). F-20 60 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table summarizes the Company's secured short-term financing at December 31, 1998 and 1997 (in thousands):
1998 1997 -------- ------- Floating rate credit facility, interest at 5.70% at December 31, 1998, expiring February 2003.......................... $ 50,000 $ -- Floating rate interest-only notes, having a stated interest rate of 8.63% at December 31, 1998, due April 1999........ 53,500 -- Floating rate interest-only notes, having a stated interest rate of 7.62% at December 31, 1998, due March 1999........ 4,522 -- Floating rate credit facility, interest at 7.33% at December 31, 1997, replaced in January 1998........................ -- 33,500 Floating rate interest-only note, repaid February 1998...... -- 19,050 Other....................................................... -- 549 -------- ------- $108,022 $53,099 ======== =======
NOTE 11 COMMITMENTS AND CONTINGENCIES Legal The Company is a party to various legal actions resulting from its operating activities. These actions are routine litigation and administrative proceedings arising in the ordinary course of business, some of which are covered by liability insurance, and none of which are expected to have a material adverse effect on the consolidated financial condition or results of operations of the Company. In connection with the Company's offers to purchase interests in limited partnerships that own properties, the Company and its affiliates are sometimes subject to legal actions, including allegations that such activities may involve breaches of fiduciary duties to the limited partners of such partnerships or violations of the relevant partnership agreements. The Company believes it complies with its fiduciary obligations and relevant partnership agreements, and does not expect such legal actions to have a material adverse effect on the consolidated financial condition or results of operations of the Company and its subsidiaries taken as a whole. The Company may incur costs in connection with the defense or settlement of such litigation, which could adversely affect the Company's desire or ability to complete certain transactions and thereby have a material adverse effect on the Company and its subsidiaries. HUD Approval and Enforcement A significant number of affordable units included as assets of AIMCO properties are subject to regulation by the U.S. Department of Housing and Urban Development ("HUD"). Under its regulations, HUD reserves the right to approve the owner and the manager of HUD-insured and HUD-assisted properties, as well as their "principals" (e.g., general partners, stockholders with a 10% or greater interest, officers and directors) in connection with the acquisition of a property, participation in HUD programs or the award of a management contract. This approval process is commonly referred to as "2530 Clearance." HUD monitors the performance of properties with HUD-insured mortgage loans. HUD also monitors compliance with applicable regulations, and takes performance and compliance into account in approving the acquisition of management of HUD-assisted properties. In the event of instances of unsatisfactory performance or regulatory violations, the HUD office with jurisdiction over the applicable property has the authority to enter a "flag" into the computerized 2530 Clearance system. If one or more flags have been entered, a decision whether to grant 2530 Clearance is then subject to review by HUD's Multi-family Participation Review Committee in Washington, D.C. (the "2530 Committee"). As a result of certain mortgage defaults and unsatisfactory ratings received by NHP in years prior to its acquisition in December 1997 by AIMCO, HUD believes that the 2530 Committee must review any application for 2530 Clearance filed by AIMCO. On December 18, 1998, AIMCO received F-21 61 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) approval of approximately fifty 2530 applications and had no unresolved flags in the 2530 system as of December 31, 1998. In October 1997, NHP received a subpoena from the HUD Inspector General, which requested documents relating to any arrangement whereby NHP or any of its affiliates provides or has provided compensation to owners of HUD multi-family projects in exchange for or in connection with property management of a HUD project. AIMCO believes that other owners and managers of HUD projects have received similar subpoenas. Documents provided by AIMCO to the HUD Inspector General relating to certain NHP acquisitions of property management rights for HUD projects may be responsive to the subpoena. AIMCO believes that its operations are in compliance, in all material respects, with all laws, rules and regulations relating to HUD-assisted or HUD-insured properties. Effective February 13, 1998, counsel for AIMCO and the U.S. Attorney for the Northern District of California entered into a Tolling Agreement related to certain civil claims the government may have against AIMCO. Although no action has been initiated against AIMCO or, to AIMCO's knowledge, any owner of a HUD property managed by AIMCO, if any such action is taken in the future, it could ultimately affect existing arrangements with respect to HUD projects, affect AIMCO's ability to receive 2530 Clearances or otherwise have a material adverse effect on AIMCO's results of operations. HUD also has the authority to suspend or deny property owners and managers from participation in HUD programs with respect to additional assistance within a geographic region through imposition of a Limited Denial of Participation by any HUD office or nationwide for violations of HUD regulatory requirements. AIMCO believes that the 2530 Committee will continue to apply the 2530 Clearance process to large management portfolios such as AIMCO's with discretion and flexibility. While there can be no assurance, AIMCO believes that the unsatisfactory reviews and the mortgage defaults will not have a material impact on its results of operations or financial condition. If HUD were to disapprove AIMCO as property manager for one or more affordable properties, AIMCO's ability to obtain property management revenues from new affordable properties would be impaired. Environmental Various Federal, state and local laws subject property owners or operators to liability for the costs of removal or remediation of certain hazardous substances present 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 our 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 substances at the disposal or treatment facility. Anyone who arranges for the disposal or treatment of hazardous or toxic substances is potentially liable under such laws. These laws often impose liability whether or not the person arranging for the disposal ever owned or operated the disposal facility. In connection with the ownership, operation and management of our properties, we could potentially be liable for environmental liabilities or costs associated with our properties or properties we may acquire or manage in the future. Operating Leases The Company is obligated under office space and equipment under noncancelable operating leases. In addition, the Company subleases certain of its office space to tenants under noncancelable subleases. Approximate minimum annual rentals under operating leases and approximate minimum payments to be F-22 62 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) received under annual subleases for the five years ending after December 31, 1998 are as follows (in thousands):
OPERATING LEASE SUBLEASE PAYMENTS PAYMENTS --------------- -------- 1999........................................................ $10,600 $ 2,100 2000........................................................ 10,400 2,100 2001........................................................ 8,800 1,600 2002........................................................ 3,700 -- 2003........................................................ 2,200 -- Thereafter.................................................. 3,000 -- ------- ------- Total....................................................... $38,700 $ 5,800 ======= =======
Under the Company's current operating structure, substantially all of the office space and equipment subject to the operating leases described above are for the use of its regional operating centers, which are operated by certain of the Company's unconsolidated subsidiaries (see Note 5). Rent expense recognized by the unconsolidated subsidiaries totaled $6.2 million in 1998. Rent expense recognized by the Company totaled $0.7 million and $0.6 million in 1997 and 1996, respectively. Sublease income for the unconsolidated subsidiaries for 1998 was approximately $2.7 million. There was no sublease income for 1997 and 1996. NOTE 12 TRUST BASED CONVERTIBLE PREFERRED SECURITIES In connection with the Insignia merger, the Company assumed the obligations under the Trust Based Convertible Preferred Securities (the "Securities") with an aggregate liquidation amount of $149.5 million. The Securities will mature on September 30, 2016 and require distributions at the rate of 6.5% per annum, with quarterly distributions payable in arrears. The Securities are convertible by the holders at any time through September 30, 2016 and may be redeemed by the Company on or after November 1, 1999. Each $50 of liquidation value of the Securities can be converted into Class A Common Stock at a conversion price of $49.61, which equates to 1.007 shares of Class A Common Stock. NOTE 13 TRANSACTIONS INVOLVING MINORITY INTERESTS On December 14, 1998, the Company sold, in a private placement, 1.4 million Class B partnership preferred units of a subsidiary of the AIMCO operating partnership for $30.85 million. The partnership units may be redeemed at the option of the holders at any time, and at the option of the Company under certain circumstances. Any redemption of the units may be satisfied by delivery of cash, Class A Common Stock or OP Units. On December 30, 1998, the Company acquired Calhoun Beach Club Apartments, a 351 unit, high-rise apartment community and 83,300 square feet of commercial space for approximately $77.1 million. The Company paid cash of $6.0 million; assumed $53.5 million in mortgage debt; issued 90,000 preferred operating partnership units valued at $9.0 million; issued approximately 100,300 common operating partnership units valued at $4.1 million; and withheld, as contingent consideration, approximately 109,800 common operating partnership units valued at approximately $4.5 million. NOTE 14 REGISTRATION STATEMENTS In April 1997, AIMCO filed a shelf registration statement with the Securities and Exchange Commission which provides for the offering of, on a delayed or continuous basis, debt securities, Class A Common Stock, preferred stock and warrants with an aggregate value of up to $1.0 billion. The shelf registration statement was declared effective in May 1997. F-23 63 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In August 1998, AIMCO and the AIMCO operating partnership filed a shelf registration statement with the Securities and Exchange Commission with respect to an aggregate of $1,268 million of debt and equity securities of AIMCO (of which $268 million was carried forward from AIMCO's 1997 shelf registration statement) and $500 million of debt securities of the AIMCO operating partnership. The registration statement was declared effective by the SEC on December 10, 1998. As of December 31, 1998, the Company had $1,268 million available and the AIMCO operating partnership had $500 million available from this registration statement. The Company expects to finance pending acquisitions of real estate interests with the issuance of equity and debt securities under the shelf registration statement. NOTE 15 STOCKHOLDERS' EQUITY Preferred Stock At December 31, 1998 and 1997, the Company had the following classes of preferred stock outstanding:
1998 1997 -------- -------- Class B Cumulative Convertible Preferred Stock, $.01 par value, 750,000 shares authorized, 750,000 and 750,000 shares issued and outstanding............................. $ 75,000 $ 75,000 Class C Cumulative Preferred Stock, $.01 par value, 2,760,000 shares authorized, 2,400,000 and 2,400,000 shares issued and outstanding; dividends payable at 9.0%, per annum................................................. 60,000 60,000 Class D Cumulative Preferred Stock, $.01 par value, 4,600,000 shares authorized, 4,200,000 and no shares issued and outstanding; dividends payable at 8.75%, per annum..................................................... 105,000 -- Class G Cumulative Preferred Stock, $.01 par value, 4,050,000 shares authorized, 4,050,000 and no shares issued and outstanding; dividends payable at 9.375%, per annum..................................................... 101,250 -- Class H Cumulative Preferred Stock, $.01 par value, 2,300,000 shares authorized, 2,000,000 and no shares issued and outstanding; dividends payable at 9.5%, per annum..................................................... 50,000 -- Class J Cumulative Convertible Preferred Stock, $.01 par value, 2,000,000 shares authorized, 1,000,000 and no shares issued and outstanding............................. 100,000 -- Class E Cumulative Convertible Preferred Stock, $.01 par value, 10,000,000 shares authorized, 8,423,658 and no shares issued and outstanding............................. 301,218 -- -------- -------- $792,468 $135,000 ======== ========
All classes of preferred stock, except the Class E Cumulative Convertible Preferred Stock (the "Class E Preferred Stock"), are on equal parity and are senior to the Class E Preferred Stock, the Class A Common Stock, and the Class B Common Stock. The Class E Preferred Stock is senior to the Class A Common Stock and the Class B Common Stock. All the classes of preferred stock have no voting rights. Holders of the Class B Cumulative Convertible Preferred Stock (the "Class B Preferred Stock") are entitled to receive, when, as and if declared by the Board of Directors, quarterly cash dividends per share equal to the greater of $1.78125 or the cash dividends declared on the number of shares of Class A Common Stock into which one share of Class B Preferred Stock is convertible. Each share of Class B Preferred Stock is convertible at the option of the holder, beginning August 1998, into 3.28407 shares of Class A Common Stock, subject to certain anti-dilution adjustments. Holders of Class J Cumulative Convertible Preferred Stock (the "Class J Preferred Stock") are entitled to receive cash dividends at the rate of 7% per annum of the $100 liquidation preference (equivalent to $7 per annum per share) for the period beginning on November 6, 1998 and lasting until November 15, 1998, 8% per F-24 64 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) annum of the $100 liquidation preference(equivalent to $8 per annum per share) for the period beginning on and including November 15, 1998 and lasting until November 15, 1999, 9% per annum of the $100 liquidation preference (equivalent to $9 per annum per share) for the period beginning on and including November 15, 1999 and lasting until November 15, 2000, and 9 1/2% per annum of the $100 liquidation preference (equivalent to $9.50 per annum per share) thereafter. The Company may convert any or all of the Class J Preferred Stock into Class A Common Stock at a conversion rate of 2.5 shares of Class A Common Stock for each share of Class J Preferred Stock, plus unpaid dividends accrued on the shares redeemed (a) on or after November 6, 2002, if the market price of the Class A Common Stock in the five most recent trading days, as defined, is equal to or greater than $40 or; (b) at any time on or prior to November 6, 2002, if the internal rate of return, as defined, exceeds 12.5%. The Class E Preferred Stock was issued in connection with the Insignia merger. Holders of Class E Preferred Stock were entitled to receive the same cash dividends per share as holders of Class A Common Stock. In addition, on January 15, 1999, holders of Class E Preferred Stock received a special dividend in an aggregate amount of approximately $50 million, and all outstanding shares of Class E Preferred Stock automatically converted into an equal number of shares of Class A Common Stock. Common Stock During 1998 and 1997, the Company issued approximately 600,000 and 1,149,900 shares, respectively, of Class A Common Stock to certain executive officers (or entities controlled by them) at market prices. In exchange for the shares purchased, the executive officers (or entities controlled by them) executed notes payable totaling $23.5 million and $33.5 million, respectively. Total payments on such notes from officers in 1998 and 1997 were $8.9 million and $14.5 million, respectively. In addition, in 1998, the Company issued approximately 40,000 restricted shares of Class A Common Stock to certain executive officers. Concurrent with AIMCO's initial public offering in July 1994, 650,000 shares of AIMCO common stock held by four of the Company's executive officers were reclassified as AIMCO Class B Common Stock ("Class B Common Stock"). The Class B Common Stock is convertible into Class A Common Stock, subject to certain conditions. In 1998, 1997 and 1996, respectively, 162,500, 162,500, and 260,000 shares of Class B Common Stock were converted into Class A Common Stock upon the satisfaction of the requisite financial conditions for 1994 through 1998. As of December 31, 1998, all previously issued and outstanding shares of Class B Common Stock had been converted to Class A Common Stock. NOTE 16 STOCK OPTION PLANS AND STOCK WARRANTS The Company has elected to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25") and related interpretations in accounting for its employee stock options because, as discussed below, the alternative fair value accounting provided for under Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS 123"), requires use of option valuation models that were not developed for use in valuing employee stock options and warrants. Under APB 25, because the exercise price of the Company's employee stock options and warrants equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. The Company has adopted the 1994 Stock Option Plan of Apartment Investment and Management Company (the "1994 Plan"), the Apartment Investment and Management Company 1996 Stock Award and Incentive Plan (the "1996 Plan"), the Apartment Investment and Management Company 1997 Stock Award and Incentive Plan (the "1997 Plan") and the Apartment Investment and Management Company Non- Qualified Employee Stock Option Plan (the "Non-Qualified Plan") to attract and retain officers, key employees and independent directors. The 1994 Plan provides for the granting of a maximum of 150,000 options to purchase common shares. The 1996 Plan provides for the granting of a maximum of 500,000 options F-25 65 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) to purchase common shares. The 1997 Plan provides for the granting of a maximum of 20,000,000 options to purchase common shares. The Non-Qualified Plan provides for the granting of a maximum of 500,000 options to purchase common shares. The 1994 Plan, the 1996 Plan, the 1997 Plan and the Non-Qualified Plan allow for the grant of incentive and non-qualified stock options, and are administered by the Compensation Committee of the Board of Directors. The 1994 Plan also provides for a formula grant of the non-qualified stock options to the independent directors to be administered by the Board of Directors to the extent necessary. The exercise price of the options granted may not be less than the fair market value of the common stock at the date of grant. The term of the incentive and non-qualified options is ten years from the date of grant. The options vest over a one to five-year period from the date of grant. Terms may be modified at the discretion of the Compensation Committee of the Board of Directors. Pro forma information regarding net income and earnings per share is required by SFAS 123, which also requires that the information be determined as if the Company had accounted for its employee stock options and warrants granted subsequent to December 31, 1994 under the fair value method. The fair value for these options and warrants were estimated at the date of grant using a Black-Scholes valuation model with the following weighted average assumptions:
1998 1997 1996 ------------ ------------ ------------ Range of risk free interest rates.......... 5.2% to 7.5% 5.2% to 7.5% 5.2% to 7.5% Expected dividend yield.................... 6.0% 6.0% 7.8% Volatility factor of the expected market price of the Company's common stock...... 0.183 0.175 0.194 Weighted average expected life of options.................................. 4.5 years 4.5 years 4.5 years
The Black-Scholes valuation model was developed for use in estimating the fair value of traded options and warrants which have no vesting restrictions and are fully transferable. In addition, the valuation model requires the input of highly subjective assumptions including the expected stock price volatility. Because the Company's stock options and warrants have characteristics significantly different from those of traded options and warrants, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing model does not necessarily provide a reliable single measure of the fair value of its employee stock options and warrants. For purposes of pro forma disclosures, the estimated fair values of the options are amortized over the options' vesting period. The Company's pro forma information for the years ended December 31, 1998, 1997 and 1996 is as follows (in thousands, except per share information):
1998 1997 1996 ------- ------- ------- Pro forma income attributable to common stockholders.... $34,443 $26,096 $12,201 Pro forma basic earnings per common share............... $ 0.76 $ 1.00 $ 0.98 Pro forma diluted earnings per common share............. $ 0.75 $ 1.00 $ 0.98
The effects of applying SFAS 123 in calculating pro forma income attributable to common stockholders and pro forma basic earnings per share may not necessarily be indicative of the effects of applying SFAS 123 to future years' earnings. F-26 66 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table summarizes the option and warrants activity for the years ended December 31, 1998, 1997 and 1996:
1998 1997 1996 -------------------- -------------------- ------------------- WEIGHTED WEIGHTED WEIGHTED OPTIONS AVERAGE OPTIONS AVERAGE OPTIONS AVERAGE AND EXERCISE AND EXERCISE AND EXERCISE WARRANTS PRICE WARRANTS PRICE WARRANTS PRICE --------- -------- --------- -------- -------- -------- Outstanding at beginning of year...................... 1,184,000 $30.01 505,000 $20.74 108,000 $18.00 Granted............................................... 5,578,000 38.91 127,000 30.88 422,600 20.75 Assumed in connection with acquisitions............... 671,000 25.99 995,000 26.75 -- -- Exercised............................................. (647,000) 19.88 (437,000) 18.11 (2,600) 18.50 Forfeited............................................. (50,000) 20.25 (6,000) 18.50 (23,000) 17.50 --------- ------ --------- ------ ------- ------ Outstanding at end of year............................ 6,736,000 $37.82 1,184,000 $30.01 505,000 $20.74 Exercisable at end of year............................ 1,293,000 $25.19 690,000 $19.95 425,000 $20.25 Weighted-average fair value of options and warrants granted during the year............................. $ 3.71 $ 3.24 $ 1.01
At December 31, 1998, exercise prices for outstanding and exercisable options range from $12.36 to $43.85 and warrants range from $3.96 to $51.67, and the remaining weighted-average contractual life of the options and warrants is 9.06 years. On June 3, 1997, AIMCO issued warrants (the "NHP Warrants") exercisable to purchase an aggregate of 399,999 shares of Class A Common Stock at $36 per share at any time prior to June 3, 2002. The NHP Warrants were issued as part of the consideration for the NHP Real Estate Companies. On December 2, 1997, AIMCO issued warrants (the "Oxford Warrants") exercisable to purchase up to an aggregate of 500,000 shares of Class A Common Stock at $41 per share. The Oxford Warrants were issued to affiliates of Oxford Realty Financial Group, Inc., a Maryland corporation ("Oxford"), in connection with the amendment of certain agreements pursuant to which the Company manages properties controlled by Oxford or its affiliates. The actual number of shares of Class A Common Stock for which the Oxford Warrants will be exercisable is based on certain performance criteria with respect to the Company's management arrangements with Oxford for each of the five years ending December 31, 2001. The Oxford Warrants are exercisable for six years after the determination of such criteria for each of the five years. In connection with the Insignia merger, the Company assumed warrants that will allow the holders to purchase shares of Class A Common Stock at prices ranging from approximately $4 to $52 per share at any time prior to September 30, 1999. At December 31, 1998, warrants representing approximately 359,000 shares were available for exercise. On December 14, 1998, the Company sold, in a private placement, a warrant to purchase 875,000 shares of Class A Common Stock for $4.15 million. The warrant has an exercise price of $40 per share. The warrant may be exercised at any time, and expires upon a redemption of the Class B partnership preferred units (see Note 13). NOTE 17 EARNINGS PER SHARE In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128"), which replaced Accounting Principles Board Opinion No. 15 ("APB 15"). As required, the Company adopted SFAS 128 as of December 31, 1997 and restated earnings per share information for prior interim and annual periods. The Class B Common Stock is not included in the computation of earnings per share until such time as all the conditions required for conversion into Class A Common Stock have been met. The Class B Preferred Stock, Class E Preferred Stock and the Class J Preferred Stock is convertible (see Note 15). The Class C F-27 67 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Preferred Stock, the Class D Preferred Stock, the Class G Preferred Stock, and the Class H Preferred Stock are not convertible. The following table illustrates the calculation of basic and diluted earnings per share for the years ended December 31, 1998, 1997 and 1996 (in thousands, except per share data):
1998 1997 1996 -------- -------- -------- Numerator: Net income.................................................. $ 64,474 $ 28,633 $ 12,984 Preferred stock dividends................................... (26,533) (2,315) -- -------- -------- -------- Numerator for basic and diluted earnings per share -- income attributable to common stockholders....................... $ 37,941 $ 26,318 $ 12,984 -------- -------- -------- Denominator: Denominator for basic earnings per share -- weighted average number of shares of common stock outstanding.............. 45,187 24,055 12,411 Effect of dilutive securities: Class E Preferred Stock..................................... 2,119 -- -- Employee stock options...................................... 318 381 14 Warrants.................................................... -- -- 2 -------- -------- -------- Dilutive potential common shares............................ 2,437 381 16 -------- -------- -------- Denominator for diluted earnings per share.................. 47,624 24,436 12,427 -------- -------- -------- Basic earnings per common share: Operations................................................ $ 0.74 $ 0.99 $ 1.05 Gain on disposition of properties......................... 0.10 0.11 -- Extraordinary item........................................ -- (0.01) -- -------- -------- -------- Total............................................. $ 0.84 $ 1.09 $ 1.05 -------- -------- -------- Diluted earnings per common share: Operations................................................ $ 0.70 $ 0.98 $ 1.04 Gain on dispositions of properties........................ 0.10 0.11 -- Extraordinary item........................................ -- (0.01) -- -------- -------- -------- Total............................................. $ 0.80 $ 1.08 $ 1.04 -------- -------- --------
NOTE 18 RECENT ACCOUNTING DEVELOPMENTS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("Statement 133"). Statement 133 requires recording all derivative instruments as assets or liabilities, measured at fair value. Statement 133 is effective beginning after 1999. The Company has elected not to early adopt the provisions of Statement 133 as of December 31, 1998 and when Statement 133 is adopted, the Company does not expect the Statement to have a significant impact on its financial position and results of operations. NOTE 19 TRANSACTIONS WITH AFFILIATES 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 formed by fourteen members of AIMCO's senior management, and to three of its independent directors for $2.1 million in cash. The High Performance Units have nominal value unless the Company's total return, defined as dividend income plus share price appreciation, over the three year period ending December 31, 2000, is at least 30% and F-28 68 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) exceeds the industry average, as determined by a peer group index, by at least 15% (the "Total Return"). At the conclusion of the three year period, if the Company's Total Return satisfies these criteria, the holders of the High Performance Units will receive distributions and allocations of income and loss from the AIMCO operating partnership in the same amounts and at the same times as would holders of a number of OP Units equal to the quotient obtained by dividing the product of (i)(a) 15% of the amount by which the Company's cumulative Total Return over the three year period exceeds the greater of 115% of a peer group index or 30% (such excess being the "Excess Return"), multiplied by (b) the weighted average market value of the Company's outstanding Class A Common Stock and OP Units, by (ii) the market value of one share of Class A Common Stock at the end of the three year period. The three year measurement period will be shortened in the event of a change of control of the Company. Unlike OP Units, the High Performance Units are not redeemable or convertible into Class A Common Stock unless a change of control of the Company occurs. Because there is substantial uncertainty that the High Performance Units will have more than nominal value due to the required Total Return over the three year term, the Company has not recorded any value to the High Performance Units. If the measurement period had ended December 31, 1998, the Excess Return would have been $0 and the value of the High Performance Units would have been $0, and such High Performance Units would have had no dilutive effect on net income per share. Interest income earned on notes receivable from affiliates for the year ended December 31, 1998 was $26.1 million. Fees earned based on services provided by the Company, as general partner, to real estate partnerships for customary services including refinancing, construction supervisory and disposition fees for the year ended December 31, 1998 were $6.4 million. Interest income on notes receivable from affiliates and fees earned by the Company for the years ended December 31, 1997 and 1996 were not significant. NOTE 20 EMPLOYEE BENEFIT PLANS The Company offers medical, dental, life and long-term disability benefits to employees of the Company through insurance coverage of Company-sponsored plans. The medical and dental plans are self-funded and are administered by independent third parties. In addition, the Company also participates in a 401(k) defined-contribution employee savings plan. Employees who have completed six months of service are eligible to participate. The Company matches 50% of the participant's contributions to the plan up to a maximum of 6% of the participant's prior year compensation. F-29 69 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 21 UNAUDITED SUMMARIZED CONSOLIDATED QUARTERLY INFORMATION Summarized unaudited consolidated quarterly information for 1998 and 1997 is provided below (amounts in thousands, except per share amounts).
QUARTER --------------------------------------- YEAR ENDED DECEMBER 31, 1998 FIRST SECOND THIRD FOURTH - ---------------------------- ------- ------- -------- -------- Revenue from property operations..................... $71,336 $89,928 $104,436 $111,439 Income from property operations...................... 28,918 33,701 33,943 37,388 Revenue from service company business................ 4,821 4,741 4,406 10,135 Company's share of income from service company business........................................... 992 1,183 1,775 1,475 Income before extraordinary item and minority interest in operating partnership.................. 23,930 14,594 17,745 13,387 Net income........................................... 21,642 13,620 16,582 12,630 Basic earnings per common share...................... $ 0.44 $ 0.19 $ 0.19 $ 0.05 Diluted earnings per common share.................... $ 0.43 $ 0.19 $ 0.19 $ 0.05 Weighted average common shares outstanding........... 41,128 45,298 47,062 47,261 Weighted average common shares and common share equivalents outstanding............................ 41,310 45,539 47,403 56,244
QUARTER --------------------------------------- YEAR ENDED DECEMBER 31, 1997 FIRST SECOND THIRD FOURTH - ---------------------------- ------- ------- -------- -------- Revenue from property operations..................... $38,040 $41,679 $ 47,364 $ 65,923 Income from property operations...................... 14,808 15,971 17,375 24,323 Revenue from service company business................ 2,444 3,161 3,568 4,764 Company's share of income from service company business........................................... 551 1,480 773 (776) Income before minority interest in operating partnership........................................ 5,694 6,039 7,963 13,270 Net income........................................... 4,584 5,264 6,967 11,818 Basic earnings per share............................. $ 0.28 $ 0.26 $ 0.25 $ 0.30 Diluted earnings per share........................... $ 0.28 $ 0.26 $ 0.25 $ 0.29 Weighted average common shares outstanding........... 16,454 20,366 24,425 34,771 Weighted average common shares and common share equivalents outstanding............................ 16,586 20,504 24,609 35,190
NOTE 22 INDUSTRY SEGMENTS The Company adopted Financial Accounting Standards Board ("FASB") Statement No. 131, Disclosures about Segments of an Enterprise and Related Information ("Statement 131") in the fourth quarter of 1998. Statement No. 131 superseded FASB Statement No. 14, Financial Reporting for Segments of a Business Enterprise. Statement 131 establishes standards for the way public business enterprises report information regarding reportable operating segments. The adoption of Statement 131 did not affect the results of operations or financial position of the Company. The Company owns and operates multi-family apartment communities throughout the United States and Puerto Rico which generated rental and other property related income through the leasing of apartment units to a diverse base of tenants. The Company separately evaluates the performance of each of its apartment communities. However, because each of the apartment communities have similar economic characteristics, facilities, services and tenants, the apartment communities have been aggregated into a single apartment F-30 70 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) communities segment. All segment disclosures are included in or can be derived from the Company's consolidated financial statements. All revenues are from external customers and no revenues are generated from transactions with other segments. There are no tenants which contributed 10% or more of the Company's total revenues during 1998, 1997 or 1996. NOTE 23 PRO FORMA FINANCIAL STATEMENTS (UNAUDITED) The unaudited pro forma condensed consolidated statements of operations for the years ended December 31, 1998 and 1997 have been prepared as if each of the following transactions had occurred on January 1, 1997: (i) the NHP stock purchases and the NHP Merger (see Note 5); (ii) the acquisition of the NHP Real Estate Companies (see Note 6); (iii) a reorganization of the interests held by the NHP Real Estate Companies (see Note 5); (iv) the (a) 1997 property acquisitions, (b) the acquisition of the Controlled NHP Partnerships and (c) the acquisition of the Winthrop Portfolio, the related issuance of Class A Common Stock and OP Units, the incurrence of indebtedness to finance such acquisitions, and the refinancing of such indebtedness; (v) the 1998 property acquisitions; (vi) the 1998 property dispositions; (vii) the sale of (a) 2,015,000 shares of Class A Common Stock in February 1997, (b) 2,300,000 shares of Class A Common Stock in May 1997, (c) 5,052,418 shares of Class A Common Stock in August and September 1997, and (d) 7,000,000 shares of Class A Common Stock in October 1997, and the application of the aggregate net proceeds thereof to repay indebtedness and fund the purchase of additional shares of NHP common stock; (viii) the sale of 750,000 shares of Class B Preferred Stock in August 1997, and the application of the net proceeds thereof to repay indebtedness; (ix) the sale of 2,400,000 shares of Class C Preferred Stock in December 1997 and the application of the net proceeds thereof to pay indebtedness; (x) the sale of 4,200,000 shares of Class D Cumulative Preferred Stock and the application of the net proceeds thereof to pay indebtedness; (xi) the sale of 4,050,000 shares of Class G Cumulative Preferred Stock and the application of the net proceeds thereof to pay indebtedness; (xii) the sale of 2,000,000 shares of Class H Cumulative Preferred Stock and the application of the net proceeds thereof to pay indebtedness; (xiii) the sale of 1,000,000 shares of Class J Cumulative Convertible Preferred Stock and the application of the net proceeds thereof to repay indebtedness; (xiv) the Company's receipt of a dividend from ANHI from proceeds ANHI received from ANHI stock transfers; (xv) the Ambassador Merger (Note 4); (xvi) the purchase of third-party notes payable secured by four properties in which the NHP Real Estate Companies own an interest, and the conversion of such notes payable into loans from the general partner; (xvii) the purchase of land leased by two partnerships in which the NHP Real Estate Companies own an interest; and (xviii) the Insignia merger (Note 4). The pro forma information is not necessarily indicative of what the Company's results of operations would have been assuming the completion of the described transactions at the beginning of the periods indicated, nor does it purport to project the Company's results of operations for any future period. F-31 71 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
1998 1997 -------- -------- Income from property operations............................. $155,741 $140,744 -------- -------- Company's share of loss from service company business....... (1,162) (12,628) -------- -------- Income (loss) before minority interest in operating partnership............................................... 44,443 (2,946) -------- -------- Net income.................................................. $ 43,669 $ 2,393 ======== ======== Net income attributable to preferred stockholders........... $ 40,994 $ 41,174 ======== ======== Net income (loss) attributable to common stockholders....... $ 2,675 $(38,781) ======== ======== Basic earnings (loss) per share............................. $ 0.05 $ (0.70) Diluted earnings (loss) per share........................... $ 0.05 $ (0.70) Weighted average number of common shares outstanding........ 56,735 55,109 Weighted average number of common shares and common share equivalents outstanding................................... 57,400 55,953
NOTE 24 SUBSEQUENT EVENTS Dividend declared AIMCO's Board of Directors declared a one-time special dividend of $5.582 per share of the Class E Preferred Stock, paid on January 15, 1999 to holders of record on December 31, 1998. Upon payment of this special dividend totaling approximately $50 million in the aggregate, each share of Class E Preferred Stock was automatically converted into one share of Class A Common Stock. Approximately 8.4 million shares of Class E Preferred stock were issued and approximately 0.5 million shares were reserved for options and warrants in October 1998 in connection with the Insignia merger. On January 20, 1999, the Board of Directors declared a quarterly cash dividend of $0.625 per common share for the quarter ended December 31, 1998, paid on February 12, 1999, to stockholders of record on February 5, 1999. The increased dividend is equivalent to an annualized dividend rate of $2.50 per common share, an 11% increase from the previous annual dividend rate of $2.25. Insignia Properties Trust As a result of the Insignia merger, AIMCO acquired approximately 51% of the outstanding shares of beneficial interest of IPT. On February 26, 1999, IPT was merged into AIMCO. Pursuant to the merger, each of the outstanding shares of IPT that were not held by AIMCO were converted into the right to receive 0.3601 shares of Class A Common Stock for each share of IPT common stock, resulting in the issuance of approximately 4.3 million shares of Class A Common Stock (with a recorded value of approximately $158.8 million). Stock Offering On February 18, 1999, AIMCO issued 5,000,000 shares of newly created Class K Convertible Cumulative Preferred Stock, par value $.01 per share ("Class K Preferred Stock") in a public offering. The net proceeds of $120.6 million were used to repay certain indebtedness and for working capital. For three years, holders of the Class K Preferred Stock are entitled to receive, when, as and if declared by the Board of Directors, annual cash dividends in an amount per share equal to the greater of (i) $2.00 per year (equivalent to 8% of the liquidation preference), or (ii) the cash dividends payable on the number of shares of Class A F-32 72 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Common Stock into which a share of Class K Preferred Stock is convertible. Beginning with the third anniversary of the date of original issuance, holders of Class K Preferred Stock will be entitled to receive an amount per share equal to the greater of (i) $2.50 per year (equivalent to 10% of the liquidation preference), or (ii) the cash dividends payable on the number of Class A Common Stock into which a share of Class K Preferred is convertible. The Class K Preferred Stock is senior to the Class A Common Stock as to dividends and liquidation. Upon any liquidation, dissolution or winding up of AIMCO, before payment or distributions by AIMCO shall be made to any holders of Class A Common Stock, the holders of the Class K Preferred Stock shall be entitled to receive a liquidation preference of $25 per share, plus accumulated, accrued and unpaid dividends. Debt Refinancing In February 1999, the Company terminated its $50 million credit facility with Washington Mortgage Financial Group, Ltd. and repaid all outstanding borrowings with proceeds from new long-term, fully amortizing indebtedness secured by certain properties that previously secured the credit facility. In February and March 1999, the Company incurred in the aggregate $83.4 million of long-term, fixed rate, fully amortizing mortgage debt secured by 13 properties in separate loan transactions. The Company used the $81.5 million of net proceeds from the financings to repay debt under the interim loan agreement with Lehman Brothers Inc., to repay debt under its credit facility with Bank of America National Trust and Savings Association and Bank Boston, N.A. and to provide working capital. As of March 11, 1999, the balance outstanding under the interim loan agreement was $25 million, under the credit facility was $74.8 million, and under the IPT credit agreement was $45 million. The amount available under the credit facility at March 11, 1999 was $24 million. F-33 73 SCHEDULE III APARTMENT INVESTMENT AND MANAGEMENT COMPANY REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1998 (IN THOUSANDS EXCEPT UNIT DATA)
INITIAL COST COST ---------------------- CAPITALIZED BUILDINGS SUBSEQUENT DATE YEAR NUMBER AND TO PROPERTY NAME ACQUIRED LOCATION BUILT OF UNITS LAND IMPROVEMENTS ACQUISITION - ------------- -------- --------------------- --------- -------- ------- ------------ ----------- 100 Forest Place......... 10/97 OakPark, IL 1986 234 $ 3,463 $ 19,624 $ 528 40th North............... 7/94 Phoenix, AZ 1970 556 2,546 14,437 1,539 Anchorage................ 11/96 League City, TX 1985 264 523 9,097 403 Arbor Crossing........... 5/97 Lithonia, GA 1988 240 1,879 10,647 1,169 Arbor Station............ 4/98 Montgomery, AL 1987 264 1,627 9,218 577 Arbors................... 5/98 Deland, FL 1983 224 1,872 7,925 307 Arbors................... 10/97 Tempe, AZ 1971 200 1,092 6,189 310 Ashford Plantation....... 12/95 Atlanta, GA 1975 211 2,770 9,956 578 Aspen Hills.............. 5/98 Austin, TX 1986 344 3,281 13,917 590 Atriums of Plantation.... 8/98 Plantation, FL 1980 210 1,807 9,756 519 Bay Club................. 4/97 Aventura, FL 1990 702 10,530 60,830 1,719 Beacon Hill.............. 10/97 Chamblee, GA 1978 120 928 5,261 243 Bent Oaks................ 5/98 Austin, TX 1979 146 1,444 5,834 222 Blossomtree.............. 10/97 Scottsdale, AZ 1970 125 535 3,029 225 Bluffs................... 9/83 Boulder, CO 1971 232 696 7,779 909 Boardwalk................ 12/95 Tamarac, FL 1986 291 3,350 8,196 1,049 Brandywine............... 4/83 St. Petersburg, FL 1971 477 1,423 11,336 1,810 Brant Rock............... 10/97 Houston, TX 1984 84 337 1,908 128 Breasview................ 5/98 San Antonio, TX 1982 396 3,200 17,051 765 Brentwood................ 11/96 Lake Jackson, TX 1980 104 200 3,092 428 Bridgewater.............. 11/96 Tomball, TX 1978 206 333 4,033 551 Broadmoor Apartments..... 5/98 Austin, TX 1985 200 1,606 7,360 208 Brookdale Lakes.......... 5/98 Naperville, IL 1990 200 1,923 15,430 857 Brookside Village........ 4/96 Tustin, CA 1970 628 2,498 14,180 20,286 Calhoun Beach............ 12/98 Minneapolis, MN 1928/1998 351 11,567 65,546 2,633 Cambridge Heights........ 5/97 Natchez, MS 1979 94 249 1,413 74 Cape Cod................. 5/98 San Antonio, TX 1985 244 1,951 8,324 317 Captiva Club............. 12/96 Tampa, FL 1975 357 1,500 7,085 7,052 Casa Anita............... 3/98 Phoenix, AZ 1986 224 1,125 6,404 68 Cedar Creek.............. 5/98 San Antonio, TX 1979 392 1,630 10,051 328 Chesapeake............... 12/96 Houston, TX 1983 320 775 7,317 655 Citrus Grove............. 6/98 Redlands, CA 1985 198 1,118 6,333 107 Citrus Sunset............ 3/98 Vista, CA 1985 96 663 3,758 53 Cleveland Properties..... 10/98 Strongsville, OH 1975 0 646 3,652 91 Cobble Creek............. 3/98 Tucson, AZ 1980 301 1,299 7,395 269 Colonade Gardens/Ferntree........ 10/97 Phoenix, AZ 1973 196 765 4,337 203 Colony................... 9/98 Bradenton, FL 1986 166 1,121 6,350 144 Copper Chase............. 12/96 Katy, TX 1982 316 1,484 11,530 478 Copperfield.............. 11/96 Houston, TX 1983 196 702 7,003 (574) Coral Cove............... 5/98 Tampa, FL 1985 200 1,614 5,875 241 Coral Gardens............ 4/93 Las Vegas, NV 1983 670 3,190 12,745 2,047 DECEMBER 31, 1998 ----------------------------------------------------------------------------------- TOTAL COST BUILDINGS NET OF AND ACCUMULATED ACCUMULATED PROPERTY NAME LAND IMPROVEMENTS TOTAL DEPRECIATION DEPRECIATION ENCUMBRANCES - ------------- ----------- ------------ --------- ------------ ------------ ------------ 100 Forest Place......... $ 3,463 $ 20,152 $ 23,615 $ 1,186 $ 22,429 $ 15,281 40th North............... 2,546 15,976 18,522 2,998 15,524 10,521 Anchorage................ 523 9,500 10,023 3,290 6,733 4,821 Arbor Crossing........... 1,880 11,815 13,695 866 12,829 5,191 Arbor Station............ 1,627 9,795 11,422 176 11,246 --(2) Arbors................... 1,872 8,232 10,104 221 9,883 3,816 Arbors................... 1,092 6,499 7,591 323 7,268 7,605 Ashford Plantation....... 2,770 10,534 13,304 1,449 11,855 7,289 Aspen Hills.............. 3,281 14,507 17,788 504 17,284 9,800 Atriums of Plantation.... 1,807 10,275 12,082 195 11,886 7,767 Bay Club................. 10,530 62,549 73,079 3,923 69,156 49,000 Beacon Hill.............. 928 5,504 6,432 236 6,196 3,590 Bent Oaks................ 1,444 6,056 7,500 181 7,319 4,400 Blossomtree.............. 535 3,254 3,789 158 3,631 2,092 Bluffs................... 696 8,688 9,384 5,396 3,988 4,522 Boardwalk................ 3,350 9,245 12,595 1,299 11,296 9,267(2) Brandywine............... 1,423 13,146 14,569 5,217 9,352 6,407 Brant Rock............... 337 2,036 2,373 91 2,282 1,210 Breasview................ 3,200 17,816 21,016 523 20,493 14,025 Brentwood................ 200 3,520 3,720 242 3,478 1,779 Bridgewater.............. 333 4,584 4,917 1,190 3,727 4,150 Broadmoor Apartments..... 1,606 7,568 9,174 226 8,948 6,000 Brookdale Lakes.......... 1,923 16,287 18,210 482 17,728 13,600 Brookside Village........ 7,263 29,701 36,964 2,706 34,258 --(2) Calhoun Beach............ 11,698 68,048 79,746 -- 79,746 53,500 Cambridge Heights........ 249 1,487 1,736 113 1,623 1,555 Cape Cod................. 1,951 8,641 10,592 273 10,319 6,800 Captiva Club............. 1,500 14,137 15,637 591 15,046 --(2) Casa Anita............... 1,125 6,472 7,597 219 7,378 4,101 Cedar Creek.............. 1,630 10,379 12,009 262 11,747 --(2) Chesapeake............... 775 7,972 8,747 692 8,055 --(2) Citrus Grove............. 1,118 6,440 7,558 211 7,347 --(2) Citrus Sunset............ 663 3,811 4,474 107 4,367 3,594 Cleveland Properties..... 646 3,743 4,389 55 4,334 --(4) Cobble Creek............. 1,299 7,664 8,963 253 8,710 6,998 Colonade Gardens/Ferntree........ 765 4,540 5,305 226 5,079 -- Colony................... 1,121 6,494 7,615 121 7,494 3,331 Copper Chase............. 1,484 12,008 13,492 3,736 9,756 5,525 Copperfield.............. 572 6,559 7,131 1,178 5,953 3,453 Coral Cove............... 1,614 6,116 7,730 182 7,548 3,965 Coral Gardens............ 3,190 14,792 17,982 3,766 14,216 10,996
F-34 74
INITIAL COST COST ---------------------- CAPITALIZED BUILDINGS SUBSEQUENT DATE YEAR NUMBER AND TO PROPERTY NAME ACQUIRED LOCATION BUILT OF UNITS LAND IMPROVEMENTS ACQUISITION - ------------- -------- --------------------- --------- -------- ------- ------------ ----------- Country Club Villas...... 7/94 Amarillo, TX 1984 282 1,049 5,951 749 Country Club West........ 5/98 Greeley, CO 1986 288 1,646 17,029 637 Courtney Park............ 5/98 Fort Collins, CO 1986 248 2,570 15,336 505 Coventry Square.......... 11/96 Houston, TX 1983 270 975 6,355 684 Crossings at Bell........ 1/98 Amarillo, TX 1976 160 483 2,737 1,092 Crossings of Bellevue.... 5/98 Nashville, TN 1985 300 2,096 14,754 747 Crossroads............... 5/98 Phoenix, AZ 1982 316 1,447 12,788 456 Crows Nest............... 11/96 League City, TX 1984 176 795 5,400 247 Cypress Landing.......... 12/96 Savannah, GA 1984 200 386 7,911 983 Cypress Ridge............ 5/98 Houston, TX 1979 268 1,477 4,179 262 Dolphins Landing......... 12/96 Corpus Christi, TX 1980 218 1,740 5,589 662 Dunwoody Park............ 7/94 Dunwoody, GA 1980 318 1,838 10,538 966 Eagles Nest.............. 5/98 San Antonio, TX 1973 226 1,339 5,365 380 Eaglewood/Woods.......... 6/98 Memphis, TN 1983 584 750 16,544 (3,702) Easton Village........... 11/96 Houston, TX 1983 146 440 6,584 284 Eden Crossing............ 11/94 Pensacola, FL 1985 200 1,111 6,332 653 Elm Creek................ 5/97 Elmhurst, IL 1986 372 5,339 30,253 6,939 Emerald Ridge............ 2/98 Tyler, TX 1984 484 1,469 8,324 469 Fairways................. 7/94 Chandler, AZ 1986 352 1,830 10,403 6,844 Ferntree................. 10/98 Phoenix, AZ 1970 219 1,243 7,046 10 Fieldcrest............... 10/98 Jacksonville, FL 1982 240 1,331 7,544 14 Fishermans Landing....... 9/98 Temple Terrace, FL 1986 256 1,643 9,311 153 Fisherman's Landing...... 12/97 Bradenton, FL 1984 200 1,275 7,225 571 Fishermans Wharf......... 11/96 Clute, TX 1981 360 830 9,969 407 Foothills................ 10/97 Tucson, AZ 1982 270 1,203 6,817 166 Foxbay................... 10/97 Tucson, AZ 1983 232 700 3,966 478 Foxchase................. 5/97 Alexandria, VA 1947 2,113 39,390 68,354 6,692 Foxtree.................. 10/97 Tempe, AZ 1976 487 2,505 14,194 687 Frankford Place.......... 7/94 Carrollton, TX 1982 274 1,125 6,382 854 Franklin Oaks............ 5/98 Franklin, TN 1987 468 3,467 22,753 1,369 Freedom Place Club....... 10/97 Jacksonville, FL 1988 352 2,289 12,970 388 Garden Terrace........... 7/94 Bowie, TX 1978 20 49 280 28 Greens of Naperville..... 5/97 Naperville, IL 1986 400 3,756 21,284 (227) Greentree................ 12/96 Carrollton, TX 1983 365 1,909 14,842 1,442 Hampton Hill............. 11/96 Houston, TX 1984 332 1,574 8,408 1,218 Harbor Cove.............. 5/98 San Antonio, TX 1980 256 1,845 7,563 328 Hastings Place........... 11/96 Houston, TX 1984 176 734 3,382 307 Haverhill Commons........ 5/98 W. Palm Beach, FL 1986 222 2,389 8,372 443 Hazeltree................ 10/97 Phoenix, AZ 1970 310 997 5,650 689 Heather Ridge............ 5/98 Phoenix, AZ 1983 252 1,914 8,568 316 Heather Ridge............ 12/96 Arlington, TX 1983 180 655 5,455 (1,077) Hidden Lake Apts......... 5/98 Tampa, FL 1983 267 1,613 7,241 357 Hiddentree............... 10/97 East Lansing, MI 1966 261 1,470 8,330 908 Highland Park............ 12/96 Fort Worth, TX 1985 500 3,234 19,536 (2,331) Hillmeade................ 11/94 Nashville, TN 1985 288 2,872 16,066 1,449 Hunters Glen............. 4/98 Austell, GA 1983 72 301 1,704 69 Islandtree............... 10/97 Savannah, GA 1985 216 1,267 7,181 445 Jefferson Place.......... 11/94 Baton Rouge, LA 1985 234 2,696 15,115 1,397 La Jolla de San Antonio................. 5/98 San Antonio, TX 1975 300 1,196 10,676 1,975 La Jolla de Tucson Apts.................... 5/98 Tucson, AZ 1978 223 2,944 7,196 (431) Lake Crossing............ 5/97 Austell, GA 1988 300 2,046 11,596 401 DECEMBER 31, 1998 ----------------------------------------------------------------------------------- TOTAL COST BUILDINGS NET OF AND ACCUMULATED ACCUMULATED PROPERTY NAME LAND IMPROVEMENTS TOTAL DEPRECIATION DEPRECIATION ENCUMBRANCES - ------------- ----------- ------------ --------- ------------ ------------ ------------ Country Club Villas...... 1,049 6,700 7,749 1,228 6,521 3,955 Country Club West........ 1,646 17,666 19,312 446 18,866 11,253 Courtney Park............ 2,570 15,841 18,411 401 18,010 9,979 Coventry Square.......... 975 7,039 8,014 2,679 5,335 3,005 Crossings at Bell........ 483 3,829 4,312 156 4,156 --(2) Crossings of Bellevue.... 2,096 15,501 17,597 387 17,210 8,540 Crossroads............... 1,447 13,244 14,691 378 14,313 7,000 Crows Nest............... 795 5,647 6,442 1,708 4,734 2,856 Cypress Landing.......... 386 8,894 9,280 2,670 6,610 4,274 Cypress Ridge............ 1,477 4,441 5,918 177 5,741 4,250 Dolphins Landing......... 1,740 6,251 7,991 591 7,400 --(2) Dunwoody Park............ 1,838 11,504 13,342 2,136 11,206 7,338 Eagles Nest.............. 1,339 5,745 7,084 260 6,824 4,805 Eaglewood/Woods.......... 750 12,842 13,592 1,325 12,267 --(2) Easton Village........... 590 6,718 7,308 1,352 5,956 2,863 Eden Crossing............ 1,111 6,985 8,096 1,193 6,903 5,786 Elm Creek................ 5,339 37,192 42,531 2,388 40,143 --(2) Emerald Ridge............ 1,469 8,793 10,262 435 9,827 6,176 Fairways................. 1,830 17,247 19,077 2,111 16,966 6,229 Ferntree................. 1,243 7,056 8,299 67 8,232 2,826 Fieldcrest............... 1,331 7,558 8,889 108 8,781 5,745 Fishermans Landing....... 1,643 9,464 11,107 177 10,930 5,688 Fisherman's Landing...... 1,275 7,796 9,071 298 8,773 -- Fishermans Wharf......... 830 10,376 11,206 4,230 6,976 3,498(2) Foothills................ 1,203 6,983 8,186 354 7,832 3,835 Foxbay................... 700 4,444 5,144 208 4,936 3,176 Foxchase................. 16,175 98,261 114,436 5,955 108,481 65,879 Foxtree.................. 2,505 14,881 17,386 736 16,650 8,845 Frankford Place.......... 1,125 7,236 8,361 1,409 6,952 3,896 Franklin Oaks............ 3,467 24,122 27,589 668 26,921 17,700 Freedom Place Club....... 2,289 13,358 15,647 618 15,029 6,935 Garden Terrace........... 49 308 357 61 296 -- Greens of Naperville..... 3,756 21,057 24,813 1,308 23,505 12,724(2) Greentree................ 1,909 16,284 18,193 4,697 13,496 7,358(2) Hampton Hill............. 2,130 9,070 11,200 4,173 7,027 4,094 Harbor Cove.............. 1,845 7,891 9,736 250 9,486 5,900 Hastings Place........... 734 3,689 4,423 1,166 3,257 2,626 Haverhill Commons........ 2,389 8,815 11,204 241 10,963 9,100 Hazeltree................ 997 6,339 7,336 294 7,042 4,034 Heather Ridge............ 1,914 8,884 10,798 248 10,550 6,000 Heather Ridge............ 655 4,378 5,033 593 4,440 2,603 Hidden Lake Apts......... 1,613 7,598 9,211 219 8,992 -- Hiddentree............... 1,470 9,238 10,708 573 10,135 4,390 Highland Park............ 3,234 17,205 20,439 8,294 12,145 9,270 Hillmeade................ 2,872 17,515 20,387 2,930 17,457 10,788 Hunters Glen............. 301 1,773 2,074 65 2,009 1,111 Islandtree............... 1,267 7,626 8,893 322 8,571 4,191 Jefferson Place.......... 2,697 16,511 19,208 2,803 16,405 9,281 La Jolla de San Antonio................. 2,670 11,177 13,847 337 13,510 8,855 La Jolla de Tucson Apts.................... 1,470 8,239 9,709 869 8,840 5,820 Lake Crossing............ 2,047 11,996 14,043 947 13,096 9,765
F-35 75
INITIAL COST COST ---------------------- CAPITALIZED BUILDINGS SUBSEQUENT DATE YEAR NUMBER AND TO PROPERTY NAME ACQUIRED LOCATION BUILT OF UNITS LAND IMPROVEMENTS ACQUISITION - ------------- -------- --------------------- --------- -------- ------- ------------ ----------- Lakehaven I.............. 5/97 Carol Stream, IL 1984 144 1,071 6,069 298 Lakehaven II............. 5/97 Carol Stream, IL 1985 348 2,680 15,189 604 Landmark................. 5/98 Albuquerque, NM 1965 101 780 4,455 224 Las Brisas............... 12/95 San Antonio, TX 1983 176 1,100 5,454 (2,476) Las Brisas............... 7/94 Casa Grande, AZ 1985 132 573 3,260 3,127 Legend Oaks/The Woodlands............... 5/98 Tampa, FL 1983 416 2,723 12,243 686 Lexington................ 7/94 San Antonio, TX 1981 72 311 1,764 125 Los Arboles.............. 9/97 Chandler, AZ 1985 232 1,662 9,418 449 Madera Point............. 5/98 Phoenix, AZ 1986 256 924 12,733 420 Meadow Creek............. 4/85 Boulder, CO 1972 332 1,387 10,027 919 Meadows.................. 12/96 Austin, TX 1983 100 417 4,563 673 Mesa Ridge............... 5/98 San Antonio, TX 1986 200 1,159 6,594 371 Mills.................... 5/98 Houston, TX 1979 708 7,075 18,750 774 Montecito................ 7/94 Austin, TX 1985 268 1,268 7,194 1,809 Morton Towers............ 9/97 Miami Beach, FL 1960 1,277 8,736 49,774 21,136 Mountainview............. 5/98 Colorado Springs, CO 1985 252 1,935 14,647 613 Newberry Park............ 5/97 Chicago, IL 1985 84 181 1,027 (3) Newport.................. 7/94 Avondale, AZ 1986 204 800 4,554 508 Oak Falls................ 11/96 Spring, TX 1983 144 514 3,585 398 Ocean Oaks Apartments.... 5/98 Port Orange, FL 1988 296 2,694 11,157 443 Old Farm................. 12/98 Lexington, KY 1985 330 1,893 10,725 43 Olmos Club............... 10/97 San Antonio, TX 1983 134 322 1,825 120 Olympiad................. 11/94 Montgomery, AL 1986 176 1,046 5,958 558 Orchidtree............... 10/97 Scottsdale, AZ 1971 278 2,314 13,112 303 Palencia................. 5/98 Tampa, FL 1985 420 3,448 14,666 737 Paradise Palms........... 7/94 Phoenix, AZ 1970 130 647 3,684 469 Park @ Cedar Lawn........ 11/96 Galveston, TX 1985 192 769 5,073 358 Park Colony.............. 5/98 Norcross, GA 1984 352 3,335 17,990 491 Parliament Bend.......... 7/94 San Antonio, TX 1980 232 765 4,342 662 Peachtree Park........... 1/96 Atlanta, GA 1962/1995 295 4,681 12,957 1,898 Penn Square.............. 12/94 Albuquerque, NM 1982 210 1,128 6,478 592 Peppermill Place......... 11/96 Houston, TX 1983 224 406 3,957 441 Pine Creek............... 10/97 Clio, MI 1978 233 852 4,830 318 Pine Shadows............. 5/98 Phoenix, AZ 1983 272 2,490 11,143 402 Pinebrook................ 10/98 Jacksonville, FL 1974 208 856 4,854 6 Pleasant Ridge........... 11/94 Little Rock, AR 1982 200 1,660 9,464 811 Pleasant Valley Point.... 11/94 Little Rock, AR 1985 112 907 5,069 890 Point West............... 5/97 Lenexa, KS 1985 172 979 5,548 (16) Polo Park................ 10/97 Midland, TX 1983 184 800 4,532 325 Prairie Hills............ 7/94 Albuquerque, NM 1985 360 1,680 9,633 589 Pride Gardens............ 5/97 Flora, MS 1975 76 265 1,502 169 Prime Crest.............. 5/98 Austin, TX 1973 148 1,160 3,508 209 Privado Park............. 5/98 Phoenix, AZ 1984 352 2,054 15,236 389 Quail Ridge.............. 5/98 Tucson, AZ 1974 253 2,015 8,559 400 Quailtree................ 10/97 Phoenix, AZ 1978 184 659 3,735 247 Raintree................. 10/98 Pensacola, FL 1971 168 417 2,359 91 Rancho Sunset............ 3/98 Escondido, CA 1985 344 3,103 16,755 933 Randol Crossing.......... 12/96 Fort Worth, TX 1984 160 782 5,742 670 Redhill Plaza............ 6/97 Tustin, CA 1971 392 1,515 3,735 2 Ridgecrest............... 12/96 Denton, TX 1983 152 612 5,642 (1,125) DECEMBER 31, 1998 ----------------------------------------------------------------------------------- TOTAL COST BUILDINGS NET OF AND ACCUMULATED ACCUMULATED PROPERTY NAME LAND IMPROVEMENTS TOTAL DEPRECIATION DEPRECIATION ENCUMBRANCES - ------------- ----------- ------------ --------- ------------ ------------ ------------ Lakehaven I.............. 1,071 6,367 7,438 404 7,034 --(1)(2) Lakehaven II............. 2,680 15,793 18,473 1,013 17,460 --(1)(2) Landmark................. 780 4,679 5,459 148 5,311 --(2) Las Brisas............... 573 3,505 4,078 657 3,421 --(3) Las Brisas............... 1,100 5,860 6,960 797 6,163 3,302 Legend Oaks/The Woodlands............... 2,723 12,929 15,652 383 15,269 --(2) Lexington................ 311 1,889 2,200 362 1,838 1,038 Los Arboles.............. 1,662 9,867 11,529 491 11,038 --(3) Madera Point............. 924 13,153 14,077 348 13,729 8,067 Meadow Creek............. 1,398 10,935 12,333 4,089 8,244 7,716 Meadows.................. 417 5,236 5,653 1,372 4,281 2,062 Mesa Ridge............... 1,159 6,965 8,124 241 7,883 5,100 Mills.................... 7,075 19,524 26,599 589 26,010 14,575 Montecito................ 1,268 9,003 10,271 1,542 8,729 4,895 Morton Towers............ 13,182 66,464 79,646 2,632 77,014 12,913 Mountainview............. 1,935 15,260 17,195 449 16,746 --(2) Newberry Park............ 158 1,047 1,205 82 1,123 8,495 Newport.................. 800 5,062 5,862 1,002 4,860 2,531 Oak Falls................ 514 3,983 4,497 1,181 3,316 2,702 Ocean Oaks Apartments.... 2,694 11,600 14,294 317 13,977 10,295 Old Farm................. 1,893 10,768 12,661 47 12,614 9,919 Olmos Club............... 322 1,945 2,267 82 2,185 1,242 Olympiad................. 1,046 6,516 7,562 1,146 6,416 5,158 Orchidtree............... 2,314 13,415 15,729 677 15,052 7,227 Palencia................. 3,448 15,403 18,851 564 18,287 --(2) Paradise Palms........... 647 4,153 4,800 782 4,018 2,273 Park @ Cedar Lawn........ 769 5,431 6,200 1,396 4,806 2,537 Park Colony.............. 3,335 18,481 21,816 446 21,370 --(2) Parliament Bend.......... 765 5,004 5,769 963 4,807 --(3) Peachtree Park........... 4,683 14,853 19,536 1,636 17,900 9,396 Penn Square.............. 1,128 7,070 8,198 1,240 6,958 4,189 Peppermill Place......... 406 4,398 4,804 1,196 3,608 3,541 Pine Creek............... 852 5,148 6,000 217 5,783 2,380 Pine Shadows............. 2,490 11,545 14,035 321 13,714 --(2) Pinebrook................ 857 4,859 5,716 58 5,658 3,626 Pleasant Ridge........... 1,661 10,274 11,935 1,799 10,136 6,700 Pleasant Valley Point.... 907 5,959 6,866 1,030 5,836 3,370 Point West............... 979 5,532 6,511 367 6,144 5,580 Polo Park................ 800 4,857 5,657 226 5,431 2,268 Prairie Hills............ 1,680 10,222 11,902 1,938 9,964 7,134 Pride Gardens............ 265 1,671 1,936 121 1,815 890 Prime Crest.............. 1,160 3,717 4,877 134 4,743 2,400 Privado Park............. 2,054 15,625 17,679 438 17,241 9,200 Quail Ridge.............. 2,015 8,959 10,974 262 10,712 6,400 Quailtree................ 659 3,982 4,641 195 4,446 2,198 Raintree................. 417 2,450 2,867 36 2,831 2,640 Rancho Sunset............ 3,103 17,688 20,791 502 20,289 13,787 Randol Crossing.......... 782 6,412 7,194 1,988 5,206 2,427 Redhill Plaza............ 1,515 3,737 5,252 279 4,973 -- Ridgecrest............... 612 4,517 5,129 2,037 3,092 2,451
F-36 76
INITIAL COST COST ---------------------- CAPITALIZED BUILDINGS SUBSEQUENT DATE YEAR NUMBER AND TO PROPERTY NAME ACQUIRED LOCATION BUILT OF UNITS LAND IMPROVEMENTS ACQUISITION - ------------- -------- --------------------- --------- -------- ------- ------------ ----------- Rio Cancion.............. 10/98 Tucson, AZ 1983 379 2,832 16,090 146 Rivercrest............... 10/97 Tucson, AZ 1984 310 751 4,253 139 Riverside................ 7/94 Littleton, CO 1987 248 1,553 8,829 938 Riverwalk................ 12/95 Little Rock, AR 1988 262 1,075 9,295 520 Royal Crest.............. 5/98 Austin, TX 1973 204 1,709 6,176 302 Royal Gardens............ 10/98 Hemet, CA 1987 137 521 2,817 141 Royal Palms.............. 7/94 Mesa, AZ 1985 152 832 4,731 244 San Marina............... 3/98 Phoenix, AZ 1986 399 1,926 10,954 267 Sand Castles............. 10/97 League City, TX 1987 136 978 5,541 267 Sand Pebble.............. 10/97 El Paso, TX 1983 208 861 4,879 309 Sandalwood............... 5/98 Houston, TX 1979 352 2,142 7,394 289 Sandpiper Cove........... 5/97 Boynton Beach, FL 1987 416 4,006 22,701 2,432 Sawgrass................. 7/97 Orlando, FL 1986 208 1,443 8,158 477 Seaside Point............ 11/96 Galveston, TX 1985 102 295 2,994 406 Seasons.................. 10/95 San Antonio, TX 1976 280 974 5,749 728 Shadetree................ 10/97 Tempe, AZ 1965 123 591 3,349 376 Shadow Creek Apartments.............. 5/98 Phoenix, AZ 1984 266 2,599 11,085 314 Shadow Lake.............. 10/97 Greensboro, NC 1988 136 1,054 5,972 336 Shallow Creek............ 5/98 San Antonio, TX 1982 208 1,390 6,678 301 Signature Point.......... 11/96 League City, TX 1994 304 2,160 13,627 (431) Silktree................. 10/97 Phoenix, AZ 1979 86 421 2,383 145 Silver Ridge............. 10/98 Maplewood, MN 1986 186 650 3,677 91 Snug Harbor.............. 12/95 Las Vegas, NV 1990 64 750 2,966 300 Somerset Village......... 5/96 West Valley City, UT 1985 486 4,375 17,600 1,035 South Willow............. 7/94 West Jordan, UT 1987 440 2,218 12,612 1,085 Southgate Village........ 10/98 Bedford Heights, OH 1987 152 384 2,169 91 Southridge............... 12/96 Greenville, TX 1984 160 565 5,787 700 Spectrum Pointe.......... 7/94 Marietta, GA 1984 196 1,029 5,903 578 Stirling Court........... 11/96 Houston, TX 1984 228 946 5,958 396 Stonebrook............... 6/97 Sanford, FL 1991 244 1,583 9,046 418 Stoney Brook............. 11/96 Houston, TX 1972 113 579 3,871 529 Stonybrook............... 5/98 Tucson, AZ 1983 411 2,503 11,565 554 Summerchase.............. 5/97 Van Buren, AR 1974 72 170 962 145 Summit Creek............. 5/98 Austin, TX 1985 164 1,331 5,007 236 Sun Grove................ 7/94 Peoria, AZ 1986 86 659 3,749 161 Sun Katcher.............. 12/95 Jacksonville, FL 1972 360 578 3,440 5,830 Sun Lake................. 5/98 Lake Mary, FL 1986 600 5,574 24,277 1,076 Sunbury Downs............ 11/96 Houston, TX 1982 240 565 4,380 297 Sunchase Clearwater...... 11/94 Clearwater, FL 1985 461 2,177 19,641 1,597 Sunchase East............ 11/94 Orlando, FL 1985 296 927 8,361 857 Sunchase North........... 11/94 Orlando, FL 1985 324 1,013 9,142 974 Sunchase Tampa........... 11/94 Tampa, FL 1985 216 757 6,831 782 Sundown Village.......... 3/98 Tucson, AZ 1984/1994 330 2,214 12,582 161 Sunlake.................. 9/98 Brandon, FL 1986 88 189 1,086 3,126 Sunset Village........... 3/98 Oceanside, CA 1987 114 1,128 6,392 44 Surrey Oaks.............. 10/97 Bedford, TX 1983 152 628 3,560 265 Swiss Village............ 11/96 Houston, TX 1972 360 1,011 11,310 (625) Tall Timbers............. 10/97 Houston, TX 1982 256 1,238 7,016 349 Tara Bridge.............. 5/97 Jonesboro, GA 1988 220 1,610 9,124 335 Tatum Gardens............ 5/98 Phoenix, AZ 1985 128 1,229 5,326 282 The Bluffs............... 12/98 Laffayette, IN 1982 181 979 5,549 0 DECEMBER 31, 1998 ----------------------------------------------------------------------------------- TOTAL COST BUILDINGS NET OF AND ACCUMULATED ACCUMULATED PROPERTY NAME LAND IMPROVEMENTS TOTAL DEPRECIATION DEPRECIATION ENCUMBRANCES - ------------- ----------- ------------ --------- ------------ ------------ ------------ Rio Cancion.............. 2,832 16,236 19,068 551 18,517 12,990 Rivercrest............... 751 4,392 5,143 220 4,923 2,801 Riverside................ 1,554 9,766 11,320 1,850 9,470 5,884 Riverwalk................ 1,075 9,815 10,890 1,269 9,621 5,555 Royal Crest.............. 1,709 6,478 8,187 217 7,970 3,400 Royal Gardens............ 521 2,958 3,479 28 3,451 2,414 Royal Palms.............. 832 4,975 5,807 939 4,868 3,463 San Marina............... 1,926 11,221 13,147 375 12,772 7,912 Sand Castles............. 978 5,808 6,786 265 6,521 3,081 Sand Pebble.............. 861 5,188 6,049 243 5,806 2,690 Sandalwood............... 2,142 7,683 9,825 277 9,548 4,700 Sandpiper Cove........... 4,006 25,133 29,139 1,774 27,365 13,376 Sawgrass................. 1,443 8,635 10,078 504 9,574 4,778 Seaside Point............ 295 3,400 3,695 873 2,822 2,075 Seasons.................. 982 6,469 7,451 866 6,585 4,472 Shadetree................ 591 3,725 4,316 176 4,140 2,048 Shadow Creek Apartments.............. 2,599 11,399 13,998 329 13,669 6,965 Shadow Lake.............. 1,054 6,308 7,362 268 7,094 3,216 Shallow Creek............ 1,390 6,979 8,369 204 8,165 4,600 Signature Point.......... 2,160 13,196 15,356 2,122 13,234 7,306 Silktree................. 421 2,528 2,949 125 2,824 1,547 Silver Ridge............. 650 3,768 4,418 55 4,363 4,525 Snug Harbor.............. 751 3,26 4,016 463 3,553 2,028 Somerset Village......... 4,375 18,635 23,010 1,866 21,144 8,311 South Willow............. 2,218 13,697 15,915 2,585 13,330 8,149 Southgate Village........ 384 2,260 2,644 33 2,611 2,520 Southridge............... 565 6,487 7,052 2,374 4,678 2,083 Spectrum Pointe.......... 1,029 6,481 7,510 1,145 6,365 4,238 Stirling Court........... 946 6,354 7,300 3,047 4,253 3,546 Stonebrook............... 1,583 9,465 11,048 632 10,416 5,395 Stoney Brook............. 679 4,300 4,979 960 4,019 -- Stonybrook............... 2,503 12,119 14,622 370 14,252 5,598(1) Summerchase.............. 170 1,107 1,277 77 1,200 670 Summit Creek............. 1,331 5,243 6,574 181 6,393 3,524 Sun Grove................ 659 3,910 4,569 756 3,813 --(3) Sun Katcher.............. 578 9,270 9,848 702 9,146 --(2) Sun Lake................. 5,574 25,353 30,927 665 30,262 15,102(2) Sunbury Downs............ 565 4,677 5,242 1,186 4,056 2,433 Sunchase Clearwater...... 2,177 21,238 23,415 2,781 20,634 17,074 Sunchase East............ 927 9,218 10,145 1,592 8,553 8,960 Sunchase North........... 1,013 10,116 11,129 1,715 9,414 12,019 Sunchase Tampa........... 757 7,613 8,370 1,319 7,051 7,184 Sundown Village.......... 2,214 12,743 14,957 431 14,526 8,464 Sunlake.................. 189 4,212 4,401 329 4,072 -- Sunset Village........... 1,128 6,436 7,564 182 7,382 5,549 Surrey Oaks.............. 628 3,825 4,453 177 4,276 2,290 Swiss Village............ 1,011 10,685 11,696 4,343 7,353 4,490 Tall Timbers............. 1,238 7,365 8,603 336 8,267 4,080 Tara Bridge.............. 1,610 9,459 11,069 747 10,322 6,800 Tatum Gardens............ 1,229 5,608 6,837 170 6,667 3,426 The Bluffs............... 979 5,549 6,528 -- 6,528 --
F-37 77
INITIAL COST COST ---------------------- CAPITALIZED BUILDINGS SUBSEQUENT DATE YEAR NUMBER AND TO PROPERTY NAME ACQUIRED LOCATION BUILT OF UNITS LAND IMPROVEMENTS ACQUISITION - ------------- -------- --------------------- --------- -------- ------- ------------ ----------- The Bradford............. 10/97 Midland, TX 1982 264 705 3,996 (789) The Breakers............. 10/98 Daytona Beach, FL 1985 258 1,008 5,710 14 The Falls of Bells Ferry................... 5/98 Marietta, GA 1987 720 8,270 34,528 1,125 The Hills................ 10/97 Austin, TX 1983 329 1,367 7,747 235 The Park................. 10/98 Melbourne, FL 1983 120 719 4,072 8 The Pines................ 10/97 Palm Bay, FL 1984 216 601 3,406 16 The Stratford............ 5/98 San Antonio, TX 1979 269 1,920 10,567 573 Tierra Bonita............ 5/98 Tucson, AZ 1986 410 2,081 9,489 747 Timbermill............... 10/95 San Antonio, TX 1982 296 778 4,674 667 Timbertree............... 10/97 Phoenix, AZ 1980 387 2,334 13,229 459 Township at Highlands.... 11/96 Littleton, CO 1986 119 1,058 11,166 2,910 Trails of Ashford........ 5/98 Houston, TX 1979 514 3,237 14,123 485 Twinbridge............... 10/97 Tucson, AZ 1982 104 310 1,757 76 University Center -- Phase I....... 10/98 Friedly, MN 1987 -- 139 780 91 University Center -- Phase IV...... 10/98 Friedly, MN 1987 -- 225 1,265 91 Victoria Station......... 6/98 Victoria, TX 1997 224 425 3946 1,330 Villa La Paz............. 6/98 Sun City, CA 1990 96 573 3,096 189 Villa Ladera............. 1/96 Albuquerque, NM 1985 280 1,765 10,013 975 Village Creek at Brookhill............... 7/94 Westminster, CO 1987 324 2,446 13,901 959 Village Crossing......... 5/98 W. Palm Beach, FL 1986 289 2,259 8,251 436 Village of Pennbrook..... 10/98 Levitown, PA 1970 722 5,533 31,345 91 Vista Ventana Apartments.............. 5/98 Phoenix, AZ 1982 275 2,196 10,327 417 Walnut Springs........... 12/96 San Antonio, TX 1983 224 851 8,076 448 Waterford................ 11/96 Houston, TX 1984 312 533 5,693 781 Waterways Village........ 6/97 Aventura, FL 1991 180 4,504 11,702 314 Weatherly................ 10/98 Stone Mountain, GA 1984 274 1,275 6,887 350 Weslayan I............... 10/96 Houston, TX 1983 25 130 376 (10) West 135th Street........ 8/98 New York, NY 1979 242 258 9660 3,246 West Way Village......... 5/98 Houston, TX 1979 276 3,353 6,816 425 Whispering Pines......... 10/98 Madison, WI 1986 186 719 4,046 91 Wickertree............... 10/97 Phoenix, AZ 1983 226 1,225 6,944 189 Wildflower............... 10/97 Midland, TX 1982 264 705 3,996 635 Williams Cove............ 7/94 Irving, TX 1984 260 1,227 6,972 508 Williamsburg............. 5/98 Rolling Meadows, IL 1985 379 3,103 14,471 986 Windridge................ 5/98 San Antonio, TX 1983 286 1,374 8,228 340 Windsor Landing.......... 10/97 Morrow, GA 1991 200 1,641 9,298 158 Windward at the Villages................ 10/97 W. Palm Beach, FL 1988 196 1,595 9,037 314 Woodhill Associates...... 12/96 Denton, TX 1985 352 1,578 13,199 1,191 Woodhollow............... 10/97 Austin, TX 1974 108 658 3,728 163 Woodland Ridge........... 12/96 Irving, TX 1984 130 1,021 4,507 459 Woodlands/Odessa......... 7/94 Odessa, TX 1982 240 676 3,835 677 Woodlands/Tyler.......... 7/94 Tyler, TX 1984 256 1,029 5,845 545 Yorktree................. 10/97 Carolstream, IL 1972 293 1,968 11,151 712 ------ ------- --------- ------- 63,086 423,098 2,188,020 186,481 ------ ------- --------- ------- Other Land and Assets.... -- 3,860 1,139 -- ------ ------- --------- ------- 63,086 426,958 2,189,159 186,481 ====== ======= ========= ======= DECEMBER 31, 1998 ----------------------------------------------------------------------------------- TOTAL COST BUILDINGS NET OF AND ACCUMULATED ACCUMULATED PROPERTY NAME LAND IMPROVEMENTS TOTAL DEPRECIATION DEPRECIATION ENCUMBRANCES - ------------- ----------- ------------ --------- ------------ ------------ ------------ The Bradford............. 519 3,393 3,912 147 3,765 1,631 The Breakers............. 1,008 5,724 6,732 40 6,692 3,773 The Falls of Bells Ferry................... 8,270 35,653 43,923 1,023 42,900 27,685 The Hills................ 1,367 7,982 9,349 348 9,001 8,144 The Park................. 719 4,080 4,799 58 4,741 2,728 The Pines................ 601 3,422 4,023 49 3,974 2,226 The Stratford............ 1,920 11,140 13,060 364 12,696 5,945 Tierra Bonita............ 2,081 10,236 12,317 325 11,992 6,000 Timbermill............... 778 5,341 6,119 767 5,352 --(2) Timbertree............... 2,334 13,688 16,022 685 15,337 7,843 Township at Highlands.... 1,059 14,075 15,134 2,520 12,614 9,500 Trails of Ashford........ 3,237 14,608 17,845 463 17,382 9,050 Twinbridge............... 310 1,833 2,143 91 2,052 1,131 University Center -- Phase I....... 139 871 1,010 13 997 --(4) University Center -- Phase IV...... 225 1,356 1,581 20 1,561 --(4) Victoria Station......... 425 5,276 5,701 437 5,264 3,339 Villa La Paz............. 573 3,285 3,858 108 3,750 --(2) Villa Ladera............. 1,765 10,988 12,753 1,368 11,385 5,502 Village Creek at Brookhill............... 2,446 14,860 17,306 2,631 14,675 --(3) Village Crossing......... 2,259 8,687 10,946 230 10,716 7,000 Village of Pennbrook..... 5,533 31,436 36,969 452 36,517 19,300 Vista Ventana Apartments.............. 2,196 10,744 12,940 305 12,635 6,400 Walnut Springs........... 851 8,524 9,375 2,478 6,897 4,811 Waterford................ 533 6,474 7,007 1,759 5,248 3,973 Waterways Village........ 4,504 12,016 16,520 789 15,731 7,771 Weatherly................ 1,275 7,237 8,512 84 8,428 4,642 Weslayan I............... 130 366 496 184 312 -- West 135th Street........ 259 12,905 13,164 895 12,269 1,054 West Way Village......... 3,353 7,241 10,594 317 10,277 4,846 Whispering Pines......... 719 4,137 4,856 61 4,795 -- Wickertree............... 1,225 7,133 8,358 362 7,996 4,123 Wildflower............... 705 4,631 5,336 199 5,137 2,065 Williams Cove............ 1,227 7,480 8,707 1,459 7,248 3,822 Williamsburg............. 3,103 15,457 18,560 446 18,114 12,535 Windridge................ 1,374 8,568 9,942 293 9,649 6,270 Windsor Landing.......... 1,641 9,456 11,097 418 10,679 5,421 Windward at the Villages................ 1,595 9,351 10,946 467 10,479 4,615 Woodhill Associates...... 1,578 14,390 15,968 4,679 11,289 5,770 Woodhollow............... 658 3,891 4,549 167 4,382 2,082 Woodland Ridge........... 1,021 4,966 5,987 1,628 4,359 2,060 Woodlands/Odessa......... 676 4,512 5,188 806 4,382 --(2) Woodlands/Tyler.......... 1,029 6,390 7,419 1,224 6,195 4,156 Yorktree................. 1,968 11,863 13,831 501 13,330 6,604 ----------- --------- --------- ------- --------- --------- 409,722 2,387,877 2,797,599 228,880 2,568,719 1,300,365 ----------- --------- --------- ------- --------- --------- Other Land and Assets.... 3,855 1,144 4,999 -- 4,999 ----------- --------- --------- ------- --------- --------- 413,577 2,389,021 2,802,598 228,880 2,573,718 1,300,365 =========== ========= ========= ======= ========= =========
F-38 78 - --------------- (1) Debt is owned by AIMCO and is therefore eliminated in consolidation. (2) Pledged as security under one of the Company's credit facilities. (3) Pledged as additional collateral for secured tax-exempt financing. (4) Commercial Property. F-39 79 APARTMENT INVESTMENT AND MANAGEMENT COMPANY REAL ESTATE AND ACCUMULATED DEPRECIATION FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (IN THOUSANDS)
1998 1997 1996 ---------- ---------- -------- REAL ESTATE Balance at beginning of year............................ $1,657,207 $ 865,222 $477,162 Additions during the year: Real estate acquisitions............................. 1,116,643 786,571 388,574 Additions............................................ 80,368 26,808 17,993 Sales/transfers to held for sale..................... (51,620) (21,394) (18,507) ---------- ---------- -------- Balance at end of year.................................. $2,802,598 $1,657,207 $865,222 ========== ========== ======== ACCUMULATED DEPRECIATION Balance at beginning of year............................ $ 153,285 $ 120,077 $ 28,737 Additions during the year: Depreciation......................................... 84,635 37,741 19,556 Additions............................................ -- -- 73,189 Sales/transfers to held for sale..................... (9,040) (4,533) (1,405) ---------- ---------- -------- Balance at end of year.................................. $ 228,880 $ 153,285 $120,077 ========== ========== ========
F-40 80 APARTMENT INVESTMENT AND MANAGEMENT COMPANY SCHEDULE IV -- MORTGAGE LOANS ON REAL ESTATE DECEMBER 31, 1998 (IN THOUSANDS)
PRINCIPAL AMOUNT CARRYING OF LOANS SUBJECT FACE AMOUNT OF TO OR DELINQUENT INTEREST MATURITY PAYMENT PRIOR AMOUNT MORTGAGE PRINCIPAL OR DESCRIPTION RATE DATE TERMS LIENS OF MORTGAGE (3)(4) INTEREST - ----------- -------- -------- -------- -------- ----------- --------- ---------------- FIRST TRUST DEEDS Golf Course Princeton Meadows, New Jersey........... 12.50% Sep-01 (1) $ $ 1,567 $ 1,585(5) $ -- Hotels Pensacola, Florida...................... 11.25% Nov-02 (8)(15) -- 1,652 1,655(5) -- Pensacola, Florida...................... 11.00% Nov-02 (9)(15) -- 1,297 1,287 -- Jacksonville, Florida................... 11.00% Nov-02 (10)(15) -- 2,274 2,278(5) -- Industrial Aiken, South Carolina -- Warehouse...... 8.00% Dec-07 (20)(16) -- 531 215 -- Cleveland, Ohio -- Warehouse............ 6.25% Oct-08 (11)(16) -- 1,700 1,705(5) -- Houston, Texas -- Office/Warehouse...... 8.00% Dec-07 (1)(16) -- 1,301 1,145 -- Indianapolis, Indiana -- Office/Showroom............ 7.30% Oct-08 (12)(16) -- 275 217 -- Indianapolis, Indiana -- Warehouse...... 7.71% Jun-08 (1)(16) -- 5,500 4,841 -- Jackson, Tennessee -- Warehouse......... 10.50% Dec-07 (1)(16) -- 2,185 1,781 -- Memphis, Tennessee -- Warehouse......... 8.00% Jan-08 (1)(16) -- 1,000 881 -- Manufactured Home Parks Cheyenne, Wyoming....................... 9.07% Dec-03 (1)(17) -- 1,900 1,673 -- Denton and Tyler, Texas................. 8.90% Dec-03 (1)(17) -- 5,000 4,407 -- Retail Stores Des Moines and Cedar Rapids, Iowa....... 9.00% Dec-03 (21) -- 3,500 3,491 -- -------- ------- ------- ------ TOTAL FIRST TRUST DEEDS........... $ -- $29,682 $27,161 $ -- ======== ======= ======= ====== SECOND TRUST DEEDS Apartments South Bend, Indiana..................... 12.50% Jun-95 (2) $ 3,970 $ 1,350 $ 675 $ 675 Huntsville, Alabama..................... 12.50% Dec-00 (1) 9,401 1,570 1,908(5) -- Duplexes Santa Monica and Pacific Palisades, California............................ 12.00% Sep-98 (1) 1,800 455 383 383(6) -------- ------- ------- ------ TOTAL SECOND TRUST DEEDS.......... $ 15,171 $ 3,375 $ 2,966 $1,058 ======== ======= ======= ====== THIRD TRUST DEEDS Apartment Plainsboro, New Jersey.................. 11.25% Jan-02 (13) $ 30,399 $ 875 $ 875 -- -------- ------- ------- ------ TOTAL THIRD TRUST DEEDS........... $ 30,399 $ 875 $ 875 $ -- ======== ======= ======= ====== PROMISSORY NOTES RECEIVABLE J. Schultz, an Individual................ 8.00% May-00 (1) $ -- $ 75 $ 76(5) $ -- Angeles Partners XIV, California Limited Partnership............................. 12.00% Mar-02 (18) -- 433 433 433 Fox Crest Apartments, Waukegan, Illinois................................ 12.50% Mar-03 (18) 6,283 4,764 -- 4,764 Warner Center............................ 5.70% Jan-15 (19) 134,609 1,858 2,265(5) -- General Reserve.......................... -- (68) (68) -- -------- ------- ------- ------ TOTAL PROMISSORY NOTES RECEIVABLE....................... $140,892 $ 7,062 $ 2,706 $5,197 ======== ======= ======= ======
FACE AMOUNT CARRYING PRINCIPAL AMOUNT OF LOANS PRIOR OF AMOUNT OF SUBJECT TO OR DELINQUENT DESCRIPTION LIENS MORTGAGE MORTGAGE(3)(4) PRINCIPAL OR INTEREST - ----------- -------- -------- -------------- ------------------------- SUMMARY TOTAL FIRST TRUST DEEDS.......................... $ -- $29,682 $27,161 $ -- TOTAL SECOND TRUST DEEDS......................... 15,171 3,375 2,966 1,058 TOTAL THIRD TRUST DEEDS.......................... 30,399 875 875 -- TOTAL PROMISSORY NOTES RECEIVABLE................ 140,892 7,062 2,706 5,197 -------- ------- ------- ------ TOTAL............................................ $186,462 $40,994 $33,708 $6,255 ======== ======= ======= ======
F-41 81 - --------------- (1) Note requires periodic interest only payments through maturity, when the principal balance is payable in full. (2) The note matured in June of 1995. The borrower is currently in default and is not making the required interest only payments. (3) Reconciliation of notes receivable: Balance at October 1, 1998.................................. $29,405 Additions: New Loans(7).............................................. 3,558 Accrued Interest.......................................... 964 Deductions: Premium Amortization...................................... (25) Principal Collections..................................... (194) ------- Balance at December 31, 1998................................ $33,708 =======
(4) The carrying amount for Federal income tax purposes is approximately $39,216. (5) The carrying amount of the mortgage is greater than the face amount due to the inclusion of accrued interest. (6) Nolana Apartments made interest only payments through December 31, 1998. (7) Amount includes Cleveland, Ohio -- Warehouse for $1,700, and Warner Center for $1,858. (8) Monthly principal and interest payments of $16 are required through the maturity date at which time the balance of $1,617 is payable in full. (9) Monthly principal and interest payments of $12 are required through the maturity date at which time the balance of $1,268 is payable in full. (10) Monthly principal and interest payments of $22 are required through the maturity date at which time the balance of $2,222 is payable in full. (11) Monthly principal and interest payments of $12 are required through the maturity date at which time the balance of $1,119 is payable in full. (12) Monthly principal and interest payments of $2 are required through the maturity date at which time the balance of $188 is payable in full. (13) An initial interest payment of $3 is required. Thereafter, monthly principal and interest payments of $8 are required through the maturity date at which time the balance of $860 is payable in full. (14) The first mortgage loans on these properties are not held by the Company. Accordingly, the amounts of the prior liens at December 31, 1998 are estimated. (15) A prepayment penalty ranging from 1% to 3% of the outstanding principal balance will be assessed if the loan is prepaid prior to the maturity date. (16) A prepayment penalty ranging from 1% to 3% of the outstanding principal balance will be assessed if the loan is prepaid four or more years prior to the maturity date. (17) A prepayment penalty ranging from 1% to 3% of the outstanding principal balance will be assessed if the loan is prepaid prior to one year before the maturity date. (18) Annual principal and interest payments based upon available Net Cash Flow, as defined, are required throughout the maturity date at which time all remaining unpaid accrued interest and principal are payable in full. (19) Semi-annual principal and interest payments based upon available Net Cash Flow, as defined, are required throughout the maturity date at which time all remaining unpaid accrued interest and principal are payable in full. (20) Monthly principal and interest payments of $6 are required through the maturity date. (21) Monthly principal and interest payments of $72 are required through the maturity date. F-42 82 INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION ----------- ----------- 2.1 -- Second Amended and Restated Agreement and Plan of Merger, dated as of January 22, 1999, by and between Apartment Investment and Management Company and Insignia Properties Trust (Exhibit 2.2 to the Current Report on Form 8-K of Insignia Properties Trust, dated February 11, 1999, is incorporated herein by this reference) 2.2 -- Agreement and Plan of Merger, dated as of December 23, 1997, by and between Apartment Investment and Management Company and Ambassador Apartments, Inc. (Exhibit 2.1 to AIMCO's Current Report on Form 8-K, dated December 23, 1997, is incorporated herein by this reference) 2.3 -- Amended and Restated Agreement and Plan of Merger, dated as of May 26, 1998, by and among Apartment Investment and Management Company, AIMCO Properties, L.P., Insignia Financial Group, Inc., and Insignia/ESG Holdings, Inc. (Exhibit 2.1 to AIMCO's Registration Statement on Form S-4, filed August 5, 1998, is incorporated herein by this reference) 3.1 -- Charter 3.2 -- Bylaws 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 (Exhibit 4.2 to Form S-3 of Insignia Financial Group, Inc. dated December 10, 1996, is incorporated herein by this reference) 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 (Exhibit 4.3 to Form S-3 of Insignia Financial Group, Inc., dated December 10, 1996, is incorporated herein by this reference) 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. 10.1 -- Amended and Restated Credit Agreement (Unsecured Revolver-to-Term Facility), dated as of October 1, 1998, among AIMCO Properties, L.P., Bank of America National Trust and Savings Association, and BankBoston, N.A. (Exhibit 10.1 to AIMCO's Current Report on Form 8-K, dated October 1, 1998, is incorporated herein by this reference) 10.2 -- First Amendment to Credit Agreement, dated as of November 6, 1998, by and among AIMCO Properties, L.P., the financial institutions listed on the signature pages thereof and Bank of America National Trust and Savings Association 10.3 -- Promissory Note, dated October 1, 1998, in the principal amount of $65,000,000 issued by AIMCO Properties, L.P. to Bank of America National Trust and Savings Association, and BankBoston, N.A. (Exhibit 10.2 to AIMCO's Current Report on Form 8-K, dated October 1, 1998, is incorporated herein by this reference) 10.4 -- Promissory Note, dated October 1, 1998, in the principal amount of $35,000,000 issued by AIMCO Properties, L.P. to Bank of America National Trust and Savings Association, and BankBoston, N.A. (Exhibit 10.3 to AIMCO's Current Report on Form 8-K, dated October 1, 1998, is incorporated herein by this reference) 10.5 -- Swing Line Promissory Note, dated October 1, 1998, in the principal amount of $30,000,000, issued by AIMCO Properties, L.P. to Bank of America National Trust and Savings Association, and BankBoston, N.A. (Exhibit 10.4 to AIMCO's Current Report on Form 8-K, dated October 1, 1998, is incorporated herein by this reference)
83
EXHIBIT NO. DESCRIPTION ----------- ----------- 10.6 -- Payment Guaranty of Non-Preferred Stock Subsidiaries, dated as of October 1, 1998, by Apartment Investment and Management Company, AIMCO Holdings QRS, Inc., AIMCO/OTC QRS, Inc., AIMCO Holdings, L.P., AIMCO-GP, Inc., AIMCO-LP, Inc., AIMCO Properties Finance Corp., AIMCO Somerset, Inc., Ambassador II, L.P., Ambassador X, L.P., Ambassador IV, Inc., Ambassador V, Inc., Ambassador Florida Partners Inc. and A.J. Two, Inc. (Exhibit 10.5 to AIMCO's Quarterly Report on Form 10-Q for the quarterly period ending September 30, 1998, is incorporated herein by this reference) 10.7 -- Payment Guaranty of Preferred Stock Subsidiaries, dated as of October 1, 1998, by Property Asset Management Services, Inc., Property Asset Management Services, L.P., NHP Management Company and Property Asset Management Services-California, L.L.C. (Exhibit 10.6 to AIMCO's Quarterly Report on Form 10-Q for the quarterly period ending September 30, 1998, is incorporated herein by this reference) 10.8 -- Payment Guaranty of Non-Preferred Stock Subsidiaries, dated as of October 1, 1998, by CPF XIV/St. Charleston, Inc., CPF XIV/Torrey Pines, Inc., CPF XIV/ Sun River, Inc., CPF XIV/Lakeside Place, Inc., ConCap CCP/IV Stratford Place Properties, Inc., ConCap CCP/IV River's Edge Properties, Inc., PRA, Inc. and National Property Investors, Inc. (Exhibit 10.7 to AIMCO's Quarterly Report on Form 10-Q for the quarterly period ending September 30, 1998, is incorporated herein by this reference) 10.9 -- 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 (Exhibit 10.8 to AIMCO's Quarterly Report on Form 10-Q for the quarterly period ending September 30, 1998, is incorporated herein by this reference) 10.10 -- First Amendment to the Third Amended and Restated Agreement of Limited Partnership of AIMCO Properties, L.P., dated as of November 6, 1998 (Exhibit 10.9 to AIMCO's Quarterly Report on Form 10-Q for the quarterly period ending September 30, 1998, is incorporated herein by this reference) 10.11 -- Second Amendment to the Third Amended and Restated Agreement of Limited Partnership of AIMCO Properties, L.P., dated as of December 30, 1998 (Exhibit 10.1 to Amendment No. 1 to AIMCO's Current Report on Form 8-K/A, filed February 11, 1999, is incorporated herein by this reference) 10.12 -- Third Amendment to the Third Amended and Restated Agreement of Limited Partnership of AIMCO Properties, L.P., dated as of February 18, 1999 10.13 -- Credit Agreement dated December 30, 1997, by and among Insignia Properties, L.P., Lehman Commercial Paper Inc., as lending agent, First Union National Bank, as administrative agent, and the lenders from time to party thereto (Exhibit 10.8 to Form S-4 of Insignia Properties Trust, filed May 28, 1998, is incorporated herein by this reference) 10.14 -- Unconditional Guaranty, dated as of December 30, 1997, made by Insignia Properties Trust in favor of First Union National Bank (Exhibit 10.9 to Form S-4 of Insignia Properties Trust, filed May 28, 1998, is incorporated herein by this reference_) 10.15 -- Shareholders Agreement, dated October 1, 1998, by and among Apartment Investment and Management Company, Andrew L. Farkas, James A. Aston and Frank M. Garrison (Exhibit 10.4 to AIMCO's Schedule 13D filed on October 15, 1998, is incorporated herein by this reference) 10.16 -- $300,000,000 Interim Term Loan Agreement, dated as of October 1, 1998, among Apartment Investment and Management Company, AIMCO Properties, L.P., the several lenders from time to time parties thereto, Lehman Brothers, Inc., and Lehman Commercial Paper Inc. 10.17 -- Subsidiaries Guarantee, dated as October 1, 1998, made by each of the entities that are signatories thereto in favor of Lehman Commercial Paper Inc. as administrative agent for the several banks and other financial institutions or entities from time to time parties to the Interim Term Loan Agreement
84
EXHIBIT NO. DESCRIPTION ----------- ----------- 10.18 -- Preferred Stock Subsidiaries' Guarantee, dated as of October 1, 1998, made by each of the entities that are signatories thereto in favor of Lehman Commercial Paper Inc., as administrative agent for the several banks and other financial institutions or entities from time to time parties to the Interim Loan Agreement 10.19 -- Common Stock Purchase Agreement made as of August 26, 1997, by and between Apartment Investment and Management Company and ABKB/LaSalle Securities Limited Partnership (Exhibit 99.1 to AIMCO's Current Report on Form 8-K, dated August 26, 1997, is incorporated herein by this reference) 10.20 -- Purchase and Sale Agreement and Joint Escrow Instructions, made and entered into as of August 22, 1997, by and between AIMCO Properties, L.P. and each of the parties identified on Exhibit "A" attached thereto (collectively, the "Winthrop Sellers") (Exhibit 99.3 to AIMCO's Current Report on Form 8-K, dated October 15, 1997, is incorporated herein by this reference) 10.21 -- Letter Agreement, dated October 15, 1997 by and between AIMCO Properties, L.P. and the Winthrop Sellers (Exhibit 99.6 to AIMCO's Current Report on Form 8-K, dated October 15, 1997, is incorporated herein by this reference) 10.22 -- Summary of Arrangement for Sale of Stock to Executive Officers (Exhibit 10.104 to AIMCO's Annual Report on Form 10-K for the fiscal year 1996, is incorporated herein by this reference) * 10.23 -- Apartment Investment and Management Company 1997 Stock Award and Incentive Plan (Annex A to AIMCO's Proxy Statement for the Annual Meeting of Stockholders to be held on April 24, 1997, is incorporated herein by this reference) * 10.24 -- Amendment No. 1 to the Apartment Investment and Management Company 1997 Stock Award and Incentive Plan (Annex A to AIMCO's Proxy Statement for Annual Meeting of Stockholders to be held on May 8, 1998, is incorporated herein by this reference) * 10.25 -- Apartment Investment and Management Company 1998 Incentive Compensation Plan (Annex B to AIMCO's Proxy Statement for Annual Meeting of Stockholders to be held on May 8, 1998, is incorporated herein by this reference) * 10.26 -- Employment Contract, executed on July 29, 1994, by and between AIMCO Properties, L.P. and Peter Kompaniez (Exhibit 10.44A to AIMCO's Annual Report on Form 10-K for the fiscal year 1994, is incorporated herein by this reference)* 10.27 -- Real Estate Acquisition Agreement, dated as of May 22, 1997, by and among Apartment Investment and Management Company, AIMCO Properties, L.P., Demeter Holdings Corporation, Phemus Corporation, Capricorn Investors, L.P., J. Roderick Heller, III and NHP Partners LLC (Exhibit 2.1 to AIMCO's Current Report on Form 8-K, dated June 3, 1997, is incorporated herein by this reference) 10.28 -- Contribution Agreement, dated as of January 31, 1998, by and between Apartment Investment and Management Company and Terry Considine and Peter K. Kompaniez (Exhibit 2.1 to AIMCO's Current Report on Form 8-K, dated January 31, 1998, is incorporated herein by this reference)* 10.29 -- 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. (Exhibit 10.1 to the Current Report on Form 8-K of Insignia Properties Trust, dated February 11, 1999, is incorporated herein by this reference)
85
EXHIBIT NO. DESCRIPTION ----------- ----------- 10.30 -- Amended and Restated Indemnification Agreement, dated as of May 26, 1998, by and between Apartment Investment and Management Company and Insignia/ESG Holdings, Inc. (Exhibit 2.2 to AIMCO's Registration Statement on Form S-4, filed August 5, 1998, is incorporated herein by this reference.) 10.31 -- Form of Restricted Stock Agreement (1997 Stock Award and Incentive Plan) (Exhibit 10.11 to AIMCO's Quarterly Report on Form 10-Q for the quarterly period ending September 30, 1997, is incorporated herein by this reference)* 10.32 -- Apartment Investment and Management Company Non-Qualified Employee Stock Option Plan, adopted August 29, 1996 (Exhibit 10.8 to AIMCO's Quarterly Report on Form 10/Q-A for the quarterly period ending September 30, 1996, is incorporated herein by this reference)* 10.33 -- Amended and Restated Apartment Investment and Management Company Non-Qualified Employee Stock Option Plan (Annex B to AIMCO's Proxy Statement for the Annual Meeting of Stockholders to be held on April 24, 1997, is incorporated herein by this reference)* 10.34 -- Employment Contract executed on July 29, 1994 by and between AIMCO Properties, LP and Terry Considine (Exhibit 10.44C to AIMCO's Annual Report on Form 10-K for the fiscal year 1994, is incorporated herein by this reference)* 10.35 -- Employment Contract executed on July 29, 1994 by and between AIMCO Properties, LP and Steven D. Ira (Exhibit 10.44D to AIMCO's Annual Report on Form 10-K for the fiscal year 1994, is incorporated herein by this reference)* 10.36 -- The 1994 Stock Incentive Plan for Officers, Directors and Key Employees of Ambassador Apartments, Inc., Ambassador Apartments, L.P. and Subsidiaries (Exhibit 10.40 to Ambassador Apartments, Inc. Annual Report on Form 10-K for the fiscal year 1997, is incorporated herein by this reference)* 10.37 -- Amendment to the 1994 Stock Incentive Plan for Officers, Directors and Key Employees of Ambassador Apartments, Inc., Ambassador Apartments, L.P. and Subsidiaries (Exhibit 10.41 to Ambassador Apartments, Inc. Annual Report on Form 10-K for the fiscal year 1997, is incorporated herein by this reference)* 10.38 -- 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 (Exhibit 10.42 to Ambassador Apartments, Inc. Annual Report on Form 10-K for the fiscal year 1997, is incorporated herein by this reference)* 10.39 -- Insignia 1992 Stock Incentive Plan, as amended through March 28, 1994 and November 13, 1995 (Exhibit 10.1 to Insignia Financial Group, Inc. Annual Report on Form 10-K for the fiscal year 1997, is incorporated herein by this reference)* 10.40 -- NHP Incorporated 1990 Stock Option Plan (Exhibit 10.9 to NHP Incorporated Annual Report on Form 10-K for the fiscal year 1995, is incorporated herein by this reference)* 10.41 -- NHP Incorporated 1995 Incentive Stock Option Plan (Exhibit 10.10 to NHP Incorporated Annual Report on Form 10-K for the fiscal year 1995, is incorporated herein by this reference)* 10.42 -- Form of Incentive Stock Option Agreement (1997 Stock Award and Incentive Plan)* 21.1 -- List of Subsidiaries 23.1 -- Consent of Ernst & Young LLP 27.1 -- Financial Data Schedule 99.1 -- Agreement re: disclosure of long-term debt instruments
- --------------- (1) Schedules and supplemental materials to the exhibits have been omitted but will be provided to the Securities and Exchange Commission upon request. * Management contract or compensatory plan or arrangement. EX-3.1 2 ARTICLES OF RESTATEMENT 1 EXHIBIT 3.1 APARTMENT INVESTMENT AND MANAGEMENT COMPANY ARTICLES OF RESTATEMENT APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation, having its principal office in Baltimore City, Maryland (hereinafter referred to as the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: The Corporation desires to and does hereby restate its Charter as currently in effect. The Charter as currently in effect is found in Articles of Amendment and Restatement dated July 13, 1994 and filed on July 15, 1994 (as corrected by Certificate of Correction dated November 6, 1997 and filed on November 6, 1997), Articles of Amendment dated July 27, 1994 and filed July 28, 1994 at 11:33 a.m. (as corrected by Certificate of Correction dated November 6, 1997 and filed on November 6, 1997), Articles of Amendment dated July 27, 1994 and filed July 28, 1994 at 11:35 a.m. (as corrected by Certificate of Correction dated November 6, 1997 and filed on November 6, 1997), Articles Supplementary dated May 20, 1997 and filed May 21, 1997, and Articles Supplementary dated August 1, 1997 and filed August 4, 1997. The Charter of the Corporation is hereby restated in its entirety as follows: ARTICLE I NAME The name of the corporation (the "Corporation") is Apartment Investment and Management Company. ARTICLE II PURPOSE The purpose for which the Corporation is formed is to engage in any lawful act or activity for which corporations may be organized under the general laws of the State of Maryland authorizing the formation of corporations as now or hereafter in force. ARTICLE III PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT The post office address of the principal office of the Corporation in the State of Maryland is c/o The PrenticeHall Corporation System, Maryland, 11 East Chase Street, Baltimore, Maryland 21202. The name and address of the resident agent of the Corporation in the State of Maryland is The PrenticeHall Corporation System, Maryland, 11 East Chase Street, Baltimore, Maryland 21202. The resident agent is a Maryland corporation located in the State of Maryland. 2 ARTICLE IV STOCK SECTION 1. AUTHORIZED SHARES 1.1 CLASS AND NUMBER OF SHARES. The total number of shares of stock that the Corporation from time to time shall have authority to issue is 160,750,000 shares of capital stock having a par value of $.01 per share, amounting to an aggregate par value of $1,607,500, consisting of 150,000,000 shares initially classified as Class A Common Stock having a par value of $.01 per share ("Class A Common Stock"), 750,000(1) shares initially classified as Class B Common Stock having a par value of $.01 per share (the "Class B Common Stock") (the Class A Common Stock and Class B Common Stock being referred to collectively herein as the "Common Stock") and 10,000,000(2) shares initially classified as Preferred Stock having a par value of $.01 per share ("Preferred Stock"). 1.2 CHANGES IN CLASSIFICATION AND PREFERENCES. The Board of Directors by resolution or resolutions from time to time may classify and reclassify any unissued shares of capital stock by setting or changing in any one or more respects the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption of such shares of capital stock, including, but not limited to, ownership restrictions consistent with the Ownership Restrictions with respect to each such class or subclass of capital stock, and the number of shares constituting each such class or subclass, and to increase or decrease the number of shares of any such class or subclass. SECTION 2. NO PREEMPTIVE RIGHTS. No holder of shares of stock of the Corporation shall, as such holder, have any preemptive right to purchase or subscribe for any additional shares of the stock of the Corporation or any other security of the Corporation that it may issue or sell. SECTION 3. COMMON STOCK. 3.1 DIVIDEND RIGHTS. The holders of shares of Common Stock shall be entitled to receive such dividends as may be declared by the Board of Directors of the Corporation out of funds legally available therefor. 3.2 RIGHTS UPON LIQUIDATION. Subject to the preferential rights of Preferred Stock, if any, as may be determined by the Board of Directors pursuant to Section 1 of this Article IV, in the event of any voluntary or involuntary liquidation, dissolution or winding up of, or any distribution of the assets of the Corporation, each holder of shares of Common Stock shall be entitled to receive, ratably with each other holder of Common Stock, that portion of the assets of the Corporation available for distribution to its shareholders as the number of shares of the Common Stock held by such holder bears to the total number of shares of Common Stock then outstanding. 3.3 VOTING RIGHTS. The holders of shares of Common Stock shall be entitled to vote on all matters (on which a holder of shares of Common Stock shall be entitled to vote) at the meetings of the shareholders of the Corporation, and shall be entitled to one vote for each share of Common Stock entitled to vote at such meeting. 3.4 RESTRICTION ON OWNERSHIP AND TRANSFERS. The Beneficial Ownership and Transfer of Common Stock shall be subject to the restrictions set forth in this Section 3.4 of this Article IV. 3.4.1 RESTRICTIONS. (A) LIMITATION ON BENEFICIAL OWNERSHIP. Except as provided in Section 3.4.8 of this Article IV, from and after the date of the Initial Public Offering, no Person (other than the Initial Holder or a Look-Through Entity) shall Beneficially Own shares of Common Stock in excess of the Ownership Limit, the Initial Holder shall not Beneficially Own shares of Common Stock in excess of the Initial Holder Limit and no Look-Through Entity shall Beneficially Own shares of Common Stock in excess of the Look-Through Ownership Limit. (1) See Article SIXTH. (2) See Article SEVENTH. 3 (B) TRANSFERS IN EXCESS OF OWNERSHIP LIMIT. Except as provided in Section 3.4.8 of this Article IV, from and after the date of the Initial Public Offering (and subject to Section 3.4.12 of this Article IV), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated interdealer quotation system) that, if effective, would result in any Person (other than the Initial Holder or a Look-Through Entity) Beneficially Owning shares of Common Stock in excess of the Ownership Limit shall be void AB INITIO as to the Transfer of such shares of Common Stock that would be otherwise Beneficially Owned by such Person in excess of the Ownership Limit, and the intended transferee shall acquire no rights in such shares of Common Stock. (C) TRANSFERS IN EXCESS OF INITIAL HOLDER LIMIT. Except as provided in Section 3.4.8 of this Article IV, from and after the date of the Initial Public Offering (and subject to Section 3.4.12 of this Article IV), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated interdealer quotation system) that, if effective, would result in the Initial Holder Beneficially Owning shares of Common Stock in excess of the Initial Holder Limit shall be void AB INITIO as to the Transfer of such shares of Common Stock that would be otherwise Beneficially Owned by the Initial Holder in excess of the Initial Holder limit, and the Initial Holder shall acquire no rights in such shares of Common Stock. (D) TRANSFERS IN EXCESS OF LOOK-THROUGH OWNERSHIP LIMIT. Except as provided in Section 3.4.8 of this Article IV from and after the date of the Initial Public Offering (and subject to Section 3.4.12 of this Article IV), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated interdealer quotation system) that, if effective, would result in any Look-Through Entity Beneficially Owning shares of Common Stock in excess of the Look-Through Ownership limit shall be void AB INITIO as to the Transfer of such shares of Common Stock that would be otherwise Beneficially Owned by such Look-Through Entity in excess of the Look-Through Ownership Limit and such Look-Through Entity shall acquire no rights in such shares of Common Stock. (E) TRANSFERS RESULTING IN OWNERSHIP BY FEWER THAN 100 PERSONS. Except as provided in Section 3.4.8 of this Article IV, from and after the date of the Initial Public Offering (and subject to Section 3.4.12 of this Article IV), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated interdealer quotation system) that, if effective, would result in the Common Stock being Beneficially Owned by less than 100 Persons (determined without reference to any rules of attribution) shall be void AB INITIO as to the Transfer of such shares of Common Stock that would be otherwise Beneficially Owned by the transferee and the intended transferee shall acquire no rights in such shares of Common Stock. (F) TRANSFERS RESULTING IN "CLOSELY HELD" STATUS. From and after the date of the Initial Public Offering, any Transfer that, if effective would result in the Corporation being "closely held" within the meaning of Section 856(h) of the Code, or would otherwise result in the Corporation failing to qualify as a REIT (including, without limitation, a Transfer or other event that would result in the Corporation owning (directly or constructively) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by the Corporation from such tenant would cause the Corporation to fail to satisfy any of the gross income requirements of Section 856(c) of the Code) shall be void AB INITIO as to the Transfer of shares of Common Stock that would cause the Corporation (i) to be "closely held" within the meaning of Section 856(h) of the Code or (ii) otherwise fail to qualify as a REIT, as the case may be, and the intended transferee shall acquire no rights in such shares of Common Stock. (G) SEVERABILITY ON VOID TRANSACTIONS. A Transfer of a share of Common Stock that is null and void under Sections 3.4.1(B), (C), (D), (E) or (F) of this Article IV because it would, if effective, result in (i) the ownership of Common Stock in excess of the Initial Holder Limit, the Ownership Limit, or the Look-Through Ownership Limit, (ii) the Common Stock being Beneficially Owned by less than 100 Persons (determined without reference to any rules of attribution), (iii) the Corporation being "closely held" within the meaning of Section 856(h) of the Code or (iv) the Corporation otherwise failing to qualify as a REIT, shall not adversely affect the validity of the Transfer of any other share of Common Stock in the same or any other related transaction. 3.4.2 REMEDIES FOR BREACH. If the Board of Directors or a committee thereof shall at any time determine 4 in good faith that a Transfer or other event has taken place in violation of Section 3.4.1 of this Article IV or that a Person intends to acquire or has attempted to acquire Beneficial Ownership of any shares of Common Stock in violation of Section 3.4.1 of this Article IV (whether or not such violation is intended), the Board of Directors or a committee thereof shall be empowered to take any action as it deems advisable to refuse to give effect to or to prevent such Transfer or other event, including, but not limited to, refusing to give effect to such Transfer or other event on the books of the Corporation, causing the Corporation to redeem such shares at the then current Market Price and upon such terms and conditions as may be specified by the Board of Directors in its sole discretion (including, but not limited to, by means of the issuance of longterm indebtedness for the purpose of such redemption), demanding the repayment of any distributions received in respect of shares of Common Stock acquired in violation of Section 3.4.1 of this Article IV or instituting proceedings to enjoin such Transfer or to rescind such Transfer or attempted Transfer; PROVIDED, HOWEVER, that any Transfers or attempted Transfers (or in the case of events other than a Transfer, Beneficial Ownership) in violation of Section 3.4.1 of this Article IV, regardless of any action (or nonaction) by the Board of Directors or such committee, (a) shall be void AB INITIO or (b) shall automatically result in the transfer described in Section 3.4.3 of this Article IV; PROVIDED, FURTHER, that the provisions of this Section 3.4.2 shall be subject to the provisions of Section 3.4.12 of this Article IV; PROVIDED, FURTHER, that neither the Board of Directors nor any committee thereof may exercise such authority in a manner that interferes with any ownership or transfer of Common Stock that is expressly authorized pursuant to Section 3.4.8(d) of this Article IV. 3.4.3. TRANSFER IN TRUST. (A) ESTABLISHMENT OF TRUST. If, notwithstanding the other provisions contained in this Article IV, at any time after the date of the Initial Public Offering there is a purported Transfer (an "EXCESS TRANSFER") (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated interdealer quotation system) or other change in the capital structure of the Corporation (including, but not limited to, any redemption of Preferred Stock) or other event such that (a) any Person (other than the Initial Holder or a Look-Through Entity) would Beneficially Own shares of Common Stock in excess of the Ownership Limit, or (b) the Initial Holder would Beneficially Own shares of Common Stock in excess of the Initial Holder Limit, or (c) any Person that is a Look-Through Entity would Beneficially Own shares of Common Stock in excess of the Look-Through Ownership Limit (in any such event, the Person, Initial Holder or Look-Through Entity that would Beneficially Own shares of Common Stock in excess of the Ownership Limit, the Initial Holder Limit or the Look-Through Entity Limit is referred to as a "PROHIBITED TRANSFEREE"), then, except as otherwise provided in Section 3.4.8 of this Article IV, such shares of Common Stock in excess of the Ownership Limit, the Initial Holder Limit or the Look-Through Ownership Limit, as the case may be, (rounded up to the nearest whole share) shall be automatically transferred to a Trustee in his capacity as trustee of a Trust for the exclusive benefit of one or more Charitable Beneficiaries. Such transfer to the Trustee shall be deemed to be effective as of the close of business on the business day prior to the date of the Excess Transfer, change in capital structure or another event giving rise to a potential violation of the Ownership Limit, the Initial Holder Limit or the Look-Through Entity Ownership Limit. (B) APPOINTMENT OF TRUSTEE. The Trustee shall be appointed by the Corporation and shall be a Person unaffiliated with either the Corporation or any Prohibited Transferee. The Trustee may be an individual or a bank or trust company duly licensed to conduct a trust business. (C) STATUS OF SHARES HELD BY THE TRUSTEE. Shares of Common Stock held by the Trustee shall be issued and outstanding shares of capital stock of the Corporation. Except to the event provided in Section 3.4.3(E), the Prohibited Transferee shall have no rights in the Common Stock held by the Trustee, and the Prohibited Transferee shall not benefit economically from ownership of any shares held in trust by the Trustee, shall have no rights to dividends and shall not possess any rights to vote or other rights attributable to the shares held in the Trust. (D) DIVIDEND AND VOTING RIGHTS. The Trustee shall have all voting rights and rights to dividends with respect to shares of Common Stock held in the Trust, which rights shall be exercised for the benefit of the Charitable Beneficiary. Any dividend or distribution paid prior to the discovery by the Corporation that the shares of Common Stock have been transferred to the Trustee shall be repaid to the Corporation upon demand, and any dividend or distribution declared but unpaid shall be rescinded as void AB INITIO with respect to such shares of Common Stock. Any dividends or distributions so disgorged or rescinded shall be paid over to the Trustee and held 5 in trust for the Charitable Beneficiary. Any vote cast by a Prohibited Transferee prior to the discovery by the Corporation that the shares of Common Stock have been transferred to the Trustee will be rescinded as AB INITIO and shall be recast in accordance with the desires of the Trustee acting for the benefit of the Charitable Beneficiary. The owner of the shares at the time of the Excess Transfer, change in capital structure or other event giving rise to a potential violation of the Ownership Limit, Initial Holder Limit or Look-Through Entity Ownership Limit shall be deemed to have given an irrevocable proxy to the Trustee to vote the shares of Common Stock for the benefit of the Charitable Beneficiary. (E) RESTRICTIONS ON TRANSFER. The Trustee of the Trust may transfer the shares held in the Trust to a person, designated by the Trustee, whose ownership of the shares will not violate the Ownership Restrictions. If such a transfer is made, the interest of the Charitable Beneficiary shall terminate and proceeds of the sale shall be payable to the Prohibited Transferee and to the Charitable Beneficiary as provided in this Section 3.4.3(E). The Prohibited Transferee shall receive the lesser of (1) the price paid by the Prohibited Transferee for the shares or, if the Prohibited Transferee did not give value for the shares (through a gift, devise or other transaction), the Market Price of the shares on the day of the event causing the shares to be held in the Trust and (2) the price per share received by the Trustee from the sale or other disposition of the shares held in the Trust. Any proceeds in excess of the amount payable to the Prohibited Transferee shall be payable to the Charitable Beneficiary. If any of the transfer restrictions set forth in this Section 3.4.3(E) or any application thereof is determined in a final judgment to be void, invalid or unenforceable by any court having jurisdiction over the issue, the Prohibited Transferee may be deemed, at the option of the Corporation, to have acted as the agent of the Corporation in acquiring the Common Stock as to which such restrictions would, by their terms, apply, and to hold such Common Stock on behalf of the Corporation. (F) PURCHASE RIGHT IN STOCK TRANSFERRED TO THE TRUSTEE. Shares of Common Stock transferred to the Trustee shall be deemed to have been offered for sale to the Corporation, or its designee, at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in such transfer to the Trust (or, in the case of a devise or gift, the Market Price at the time of such devise or gift) and (ii) the Market Price on the date the Corporation, or its designee, accepts such offer. The Corporation shall have the right to accept such offer for a period of 90 days after the later of (i) the date of the Excess Transfer or other event resulting in a transfer to the Trust and (ii) the date that the Board of Directors determines in good faith that an Excess Transfer or other event occurred. (G) DESIGNATION OF CHARITABLE BENEFICIARIES. By written notice to the Trustee, the Corporation shall designate one or more nonprofit organizations to be the Charitable Beneficiary of the interest in the Trust relating to such Prohibited Transferee if (i) the shares of Common Stock held in the Trust would not violate the Ownership Restrictions in the hands of such Charitable Beneficiary and (ii) each Charitable Beneficiary is an organization described in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code. 3.4.4 NOTICE OF RESTRICTED TRANSFER. Any Person that acquires or attempts to acquire shares of Common Stock in violation of Section 3.4.1 of this Article IV, or any Person that is a Prohibited Transferee such that stock is transferred to the Trustee under Section 3.4.3 of this Article IV, shall immediately give written notice to the Corporation of such event and shall provide to the Corporation such other information as the Corporation may request in order to determine the effect, if any, of such Transfer or attempted Transfer or other event on the Corporation's status as a REIT. Failure to give such notice shall not limit the rights and remedies of the Board of Directors provided herein in any way. 3.4.5 OWNERS REQUIRED TO PROVIDE INFORMATION. From and after the date of the Initial Public Offering certain record and Beneficial Owners and transferees of shares of Common Stock will be required to provide certain information as set out below. (A) ANNUAL DISCLOSURE. Every record and Beneficial Owner of more than 5% (or such other percentage between 0.5% and 5%, as provided in the applicable regulations adopted under the Code) of the number of Outstanding shares of Common Stock shall, within 30 days after January 1 of each year, give written notice to the Corporation stating the name and address of such record or Beneficial Owner, the number of shares of Common Stock Beneficially Owned, and a full description of how such shares are held. Each such record or Beneficial Owner 6 of Common Stock shall, upon demand by the Corporation, disclose to the Corporation in writing such additional information with respect to the Beneficial Ownership of the Common Stock as the Board of Directors, in its sole discretion, deems appropriate or necessary to (i) comply with the provisions of the Code regarding the qualification of the Corporation as a REIT under the Code and (ii) ensure compliance with the Ownership Limit, the Initial Holder Limit or the Look-Through Ownership Limit, as applicable. Each shareholder of record, including without limitation any Person that holds shares of Common Stock on behalf of a Beneficial Owner, shall take all reasonable steps to obtain the written notice described in this Section 3.4.5 from the Beneficial Owner. (B) DISCLOSURE AT THE REQUEST OF THE CORPORATION. Any Person that is a Beneficial Owner of shares of Common Stock and any Person (including the shareholder of record) that is holding shares of Common Stock for a Beneficial Owner, and any proposed transferee of shares, shall provide such information as the Corporation, in its sole discretion, may request in order to determine the Corporation's status as a REIT, to comply with the requirements of any taxing authority or other governmental agency, to determine any such compliance or to ensure compliance with the Ownership Limit, the Initial Holder Limit and the Look-Through Ownership Limit, and shall provide a statement or affidavit to the Corporation setting forth the number of shares of Common Stock already Beneficially Owned by such shareholder or proposed transferee and any related persons specified, which statement or affidavit shall be in the form prescribed by the Corporation for that purpose. 3.4.6 REMEDIES NOT LIMITED. Nothing contained in this Article IV shall limit the authority of the Board of Directors to take such other action as it deems necessary or advisable (subject to the provisions of Section 3.4.12 of this Article IV) (i) to protect the Corporation and the interests of its shareholders in the preservation of the Corporation's status as a REIT and (ii) to insure compliance with the Ownership Limit, the Initial Holder Limit and the Look-Through Ownership Limit. 3.4.7 AMBIGUITY. In the case of an ambiguity in the application of any of the provisions of Section 3.4 of this Article IV, or in the case of an ambiguity in any definition contained in Section 4 of this Article IV, the Board of Directors shall have the power to determine the application of the provisions of this Article IV with respect to any situation based on its reasonable belief, understanding or knowledge of the circumstances. 3.4.8 EXCEPTIONS. The following exceptions shall apply or may be established with respect to the limitations of Section 3.4.1 of this Article IV. (A) WAIVER OF OWNERSHIP LIMIT. The Board of Directors, upon receipt of a ruling from the Internal Revenue Service or an opinion of tax counsel or other evidence or undertaking acceptable to it, may waive the application, in whole or in part, of the Ownership Limit to a Person subject to the Ownership Limit, if such person is not an individual for purpose of Section 542(a) of the Code and is a corporation, partnership, estate or trust; PROVIDED, HOWEVER, that in no event may any such exception cause such Person's ownership, direct or indirect (without taking into account such Person's ownership of interests in any partnership of which the Corporation is a partner), to exceed 9.8% of the number of Outstanding shares of Common Stock. In connection with any such exemption, the Board of Directors may require such representations and undertakings from such Person and may impose such other conditions as the Board deems necessary, in its sole discretion, to determine the effect, if any, of the proposed Transfer on the Corporation's status as a REIT. (B) PLEDGE BY INITIAL HOLDER. Notwithstanding any other provision of this Article IV, the pledge by the Initial Holder of all or any portion of the Common Stock directly owned at any time or from time to time shall not constitute a violation of Section 3.4.1 of this Article IV and the pledgee shall not be subject to the Ownership Limit with respect to the Common Stock so pledged to it either as a result of the pledge or upon foreclosure. (C) UNDERWRITERS. For a period of 270 days following the purchase of Common Stock by an underwriter that (i) is a corporation or a partnership and (ii) participates in an offering of the Common Stock, such underwriter shall not be subject to the Ownership Limit with respect to the Common Stock purchased by it as a part of or in connection with such offering and with respect to any Common Stock purchased in connection with market making activities. 7 (D) OWNERSHIP AND TRANSFERS BY THE CMO TRUSTEE. The Ownership Limit shall not apply to the initial holding of Common Stock by the "CMO Trustee" (as that term is defined in the "Glossary" to the Prospectus) for the benefit of "HF Funding Trust" (as that term is defined in the "Glossary" to the Prospectus), to any subsequent acquisition of Common Stock by the CMO Trustee in connection with any conversion of Preferred Stock or to any transfer or assignment of all or any part of the legal or beneficial interest in the Common Stock to the CMO Trustee, "ESA" (as that term is defined in the "Glossary" to the Prospectus), any entity controlled by ESA, or any direct or indirect creditor of HF Funding Trust (including without limitation any reinsurer of any obligation of HF Funding Trust) or any acquisition of Common Stock by any such person in connection with any conversion of Preferred Stock. 3.4.9 LEGEND. Each certificate for Common Stock shall bear the following legend: "The shares of Common Stock represented by this certificate are subject to restrictions on transfer. No person may Beneficially Own shares of Common Stock in excess of the Ownership Restrictions, as applicable, with certain further restrictions and exceptions set forth in the Corporation's Amended and Restated Certificate of Incorporation ("Certificate"). Any Person that attempts to Beneficially Own shares of Common Stock in excess of the applicable limitation must immediately notify the Corporation. All capitalized terms in this legend have the meanings ascribed to such terms in the Corporation's Certificate, as the same may be amended from time to time, a copy of which, including the restrictions on transfer, will be sent without charge to each shareholder that so requests. If the restrictions on transfer are violated, the shares of Common Stock represented hereby will be either (i) void in accordance with the Certificate or (ii) automatically transferred to a Trustee of a Trust for the benefit of one or more Charitable Beneficiaries." 3.4.10 SEVERABILITY. If any provision of this Article IV or any application of any such provision is determined in a final and unappealable judgment to be void, invalid or unenforceable by any Federal or state court having jurisdiction over the issues, the validity and enforceability of the remaining provisions shall not be affected and other applications of such provision shall be affected only to the extent necessary to comply with the determination of such court. 3.4.11 BOARD OF DIRECTORS DISCRETION. Anything in this Article IV to the contrary notwithstanding, the Board of Directors shall be entitled to take or omit to take such actions as it in its discretion shall determine to be advisable in order that the Corporation maintain its status as and continue to qualify as a REIT, including, but not limited to, reducing the Ownership Limit, the Initial Holder Limit and the Look-Through Ownership Limit in the event of a change in law. 3.4.12 SETTLEMENT. Nothing in this Section 3.4 of this Article IV shall be interpreted to preclude the settlement of any transaction entered into through the facilities of the NYSE or other securities exchange or an automated interdealer quotation system. SECTION 4. DEFINITIONS. The terms set forth below shall have the meanings specified below when used in this Article IV or in Article V of these Articles of Amendment and Restatement.(3) 4.1 BENEFICIAL OWNERSHIP. The term "BENEFICIAL OWNERSHIP" shall mean, with respect to any Person, ownership of shares of Common Stock equal to the sum of (i) the shares of Common Stock directly owned by such Person, (ii) the number of shares of Common Stock indirectly owned by such Person (if such Person is an "individual" as defined in Section 542(a)(2) of the Code) taking into account the constructive ownership rules of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code, and (iii) the number of shares of Common Stock that such Person is deemed to beneficially own pursuant to Rule 13d3 under the Exchange Act or that is attributed to such Person pursuant to Section 318 of the Code, as modified by Section 856(d)(5) of the Code, PROVIDED that when applying this definition of Beneficial Ownership to the Initial Holder, clause (iii) of this definition, and clause (b) of the definition of "Person" shall be disregarded. The terms "BENEFICIAL OWNER," (3) See Article FOURTH 8 "BENEFICIALLY OWNS" and "BENEFICIALLY OWNED" shall have the correlative meanings. 4.2 CHARITABLE BENEFICIARY. The term "CHARITABLE BENEFICIARY" shall mean one or more beneficiaries of the Trust as determined pursuant to Section 3.4.3 of this Article IV, each of which shall be an organization described in Section 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code. 4.3 CODE. The term "CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor thereto, as interpreted by any applicable regulations or other administrative pronouncements as in effect from time to time. 4.4 COMMON STOCK. The term "COMMON STOCK" shall mean all shares now or hereafter authorized of any class of Common Stock of the Corporation and any other capital stock of the Corporation, however designated, authorized after the Issue Date, that has the right (subject always to prior rights of any class of Preferred Stock) to participate in the distribution of the assets and earnings of the Corporation without limit as to per share amount. 4.5 EXCESS TRANSFER. The term "EXCESS TRANSFER" has the meaning set forth in Section 3.4.3(A) of this Article IV. 4.6 EXCHANGE ACT. The term "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. 4.7 INITIAL HOLDER. The term "INITIAL HOLDER" shall mean Terry Considine. 4.8 INITIAL HOLDER LIMIT. The term "INITIAL HOLDER LIMIT" shall mean 15% of the number of Outstanding shares of Common Stock applied, in the aggregate, to the Initial Holder. From the date of the Initial Public Offering, the secretary of the Corporation, or such other person as shall be designated by the Board of Directors, shall upon request make available to the representative(s) of the Initial Holder and the Board of Directors, a schedule that sets forth the thencurrent Initial Holder Limit applicable to the Initial Holder. 4.9 INITIAL PUBLIC OFFERING. The term "INITIAL PUBLIC OFFERING" shall mean the first underwritten public offering of Class A Common Stock registered under the Securities Act of 1933, as amended, on a registration statement on Form S11 filed with the Securities and Exchange Commission. 4.10 LOOK-THROUGH ENTITY. The term "LOOK-THROUGH ENTITY" shall mean a Person that is either (i) described in Section 401(a) of the Code as provided under Section 856(h)(3) of the Code or (ii) registered under the Investment Company Act of 1940. 4.11 LOOK-THROUGH OWNERSHIP LIMIT. The term "LOOK-THROUGH OWNERSHIP LIMIT" shall mean 15% of the number of Outstanding shares of Common Stock. 4.12 MARKET PRICE. The term "MARKET PRICE" on any date shall mean the Closing Price on the Trading Day immediately preceding such date. The term "CLOSING PRICE" on any date shall mean the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE or, if the Common Stock is not listed or admitted to trading on the NYSE, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if the Common Stock is not listed or admitted to trading on any national securities exchange, the last quoted price, or if not so quoted, the average of the high bid and low asked prices in the overthecounter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the principal other automated quotations system that may then be in use or, if the Common Stock is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board of Directors of the Company. The term "TRADING DAY" shall mean a day on which the principal national securities exchange on which the Common Stock is listed or admitted to trading is open for the transaction of business or, if the Common Stock is not listed or admitted to trading on any national securities 9 exchange, shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. 4.13 NYSE. The term "NYSE" shall mean the New York Stock Exchange, Inc. 4.14 OUTSTANDING. The term "OUTSTANDING" shall mean issued and outstanding shares of Common Stock of the Corporation, PROVIDED that for purposes of the application of the Ownership Limit, the Look-Through Ownership Limit or the Initial Holder Limit to any Person, the term "OUTSTANDING" shall be deemed to include the number of shares of Common Stock that such Person alone, at that time, could acquire pursuant to any options or convertible securities. 4.15 OWNERSHIP LIMIT. The term "OWNERSHIP LIMIT" shall mean, for any Person other than the Initial Holder or a Look-Through Entity, 8.7% of the number of the Outstanding shares of Common Stock of the Corporation. 4.16 OWNERSHIP RESTRICTIONS. The term "OWNERSHIP RESTRICTIONS" shall mean collectively the Ownership Limit as applied to Persons other than the Initial Holder or Look-Through Entities, the Initial Holder Limit as applied to the Initial Holder and the Look-Through Ownership Limit as applied to Look-Through Entities. 4.17 PERSON. The term "PERSON" shall mean (A) an individual, corporation, partnership, estate, trust (including a trust qualifying under Section 401(a) or 501(c) of the Code), association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, and (B) also includes a group as that term is used for purposes of Section 13(d)(3) of the Exchange Act. 4.18 PROHIBITED TRANSFEREE. The term "PROHIBITED TRANSFEREE" has the meaning set forth in Section 3.4.3(A) of this Article IV. 4.19 REIT. The term "REIT" shall mean a "real estate investment trust" as defined in Section 856 of the Code. 4.20 TRANSFER. The term "TRANSFER" shall mean any sale, transfer, gift, assignment, devise or other disposition of a share of Common Stock (including (i) the granting of an option or any series of such options or entering into any agreement for the sale, transfer or other disposition of Common Stock or (ii) the sale, transfer, assignment or other disposition of any securities or rights convertible into or exchangeable for Common Stock), whether voluntary or involuntary, whether of record or Beneficial Ownership, and whether by operation of law or otherwise (including, but not limited to, any transfer of an interest in other entities that results in a change in the Beneficial Ownership of shares of Common Stock). The term "TRANSFERS" and "TRANSFERRED" shall have correlative meanings. 4.21 TRUST. The term "TRUST" shall mean the trust created pursuant to Section 3.4.3 of this Article IV. 4.22 TRUSTEE. The term "TRUSTEE" shall mean the Person unaffiliated with either the Corporation or the Prohibited Transferee that is appointed by the Corporation to serve as trustee of the Trust. 4.23 PROSPECTUS. The term "PROSPECTUS" shall mean the prospectus that forms a part of the registration statement filed with the Securities and Exchange Commission in connection with the Initial Public Offering, in the form included in the registration statement at the time the registration statement becomes effective; PROVIDED, HOWEVER, that, if such prospectus is subsequently supplemented or amended for use in connection with the Initial Public Offering, "PROSPECTUS" shall refer to such prospectus as so supplemented or amended. 10 ARTICLE V GENERAL REIT PROVISIONS SECTION 1. TERMINATION OF REIT STATUS. The Board of Directors shall take no action to terminate the Corporation's status as a REIT until such time as (i) the Board of Directors adopts a resolution recommending that the Corporation terminate its status as a REIT, (ii) the Board of Directors presents the resolution at an annual or special meeting of the shareholders and (iii) such resolution is approved by the vote of a majority of the shares entitled to be cast on the resolution. SECTION 2. EXCHANGE OR MARKET TRANSACTIONS. Nothing in Article IV or this Article V shall preclude the settlement of any transaction entered into through the facilities of the NYSE or other national securities exchange or an automated interdealer quotation system. The fact that the settlement of any transaction is permitted shall not negate the effect of any other provision of this Article V or any provision of Article IV, and the transferee, including but not limited to any Prohibited Transferee, in such a transaction shall remain subject to all the provisions and limitations of Article IV and this Article V. SECTION 3. SEVERABILITY. If any provision of Article IV or this Article V or any application of any such provision is determined to be invalid by any federal or state court having jurisdiction over the issues, the validity of the remaining provisions shall not be affected and other applications of such provision shall be affected only to the extent necessary to comply with the determination of such court. SECTION 4. WAIVER. The Corporation shall have authority at any time to waive the requirement that the Corporation redeem shares of Preferred Stock if, in the sole discretion of the Board of Directors, any such redemption would jeopardize the status of the Corporation as a REIT for federal income tax purposes. ARTICLE VI BOARD OF DIRECTORS SECTION 1. MANAGEMENT. The business and the affairs of the Corporation shall managed under the direction of its Board of Directors. SECTION 2. NUMBER. The number of directors that will constitute the entire Board of Directors shall be fixed by, or in the manner provided in, the Bylaws but shall in no event be less than three. Any increases or decreases in the size of the board shall be apportioned equally among the classes of directors to prevent stacking in any one class of directors. There are currently six directors in office whose names are as follows: Terry Considine, Peter K. Kompaniez, Richard S. Ellwood, J. Landis Martin, Thomas L. Rhodes and John D. Smith.(4) SECTION 3. INTENTIONALLY DELETED. SECTION 4. VACANCIES. Except as otherwise provided in these Articles of Amendment and Restatement(5), newly created directorships resulting from any increase in the number of directors may be filled by the majority vote of the Board of Directors, and any vacancies on the Board of Directors resulting from death, resignation, removal or other cause shall be filled by the affirmative vote of a majority of the remaining directors then in office, even if less than a quorum of the Board of Directors, or, if applicable, by a sole remaining director. Any director elected in accordance with the preceding sentence shall hold office until the next annual meeting of the Corporation at which time a successor shall be elected to fill the remaining term of the position filled by such director. SECTION 5. REMOVAL. Except as otherwise provided in these Articles of Amendment and Restatement(6), any director may be removed from office only for cause and only by the affirmative vote of two thirds of the aggregate number of votes then entitled to be cast generally in the election of directors. For purposes of this Section 5, "CAUSE" (4) See Article THIRD. (5) See Article FOURTH. (6) See Article FOURTH. 11 shall mean the willful and continuous failure of a director to substantially perform the duties to the Corporation of such director (other than any such failure resulting from temporary incapacity due to physical or mental illness) or the willful engaging by a director in gross misconduct materially and demonstrably injurious to the Corporation. SECTION 6. BYLAWS. The Board of Directors shall have power to adopt, amend, alter, change and repeal any Bylaws of the Corporation by vote of the majority of the Board of Directors then in office. Any adoption, amendment, alteration, change or repeal of any Bylaws by the shareholders of the Corporation shall require the affirmative vote of a majority of the aggregate number of votes then entitled to be cast generally in the election of directors. Notwithstanding anything in this Section 6 to the contrary, no amendment, alteration, change or repeal of any provision of the Bylaws relating to the removal of directors or repeal of the Bylaws shall be effected without the vote of twothirds of the aggregate number of votes entitled be cast generally in the election of Directors. SECTION 7. POWERS. The enumeration and definition of particular powers of the Board of Directors included elsewhere in these Articles of Amendment and Restatement(7) shall in no way be limited or restricted by reference to or inference from the terms of any other clause of this or any other Article of these Articles of Amendment and Restatement(8), or construed as excluding or limiting, or deemed by inference or otherwise in any manner to exclude or limit, the powers conferred upon the Board of Directors under the Maryland General Corporation Law ("MGCL") as now or hereafter in force. ARTICLE VII LIMITATION OF LIABILITY No director or officer of the Corporation shall be liable to the Corporation or its shareholders for money damages to the maximum extent that Maryland law in effect from time to time permits limitation of the liability of directors and officers. Neither the amendment nor repeal of this Article VII, nor the adoption or amendment or any other provision of the charter or Bylaws of the Corporation inconsistent with this Article VII, shall apply to or affect in any respect the applicability of the preceding sentence with respect to any act or failure to act that occurred prior to such amendment, repeal or adoption. (7) See Article FOURTH. (8) See Article FOURTH. 12 ARTICLE VIII INDEMNIFICATION The Corporation shall indemnify, to the fullest extent permitted by Maryland law, as applicable from time to time, all persons who at any time were or are directors or officers of the Corporation for any threatened, pending or completed action, suit or proceeding (whether civil, criminal, administrative or investigative) relating to any action alleged to have been taken or omitted in such capacity as a director or an officer. The Corporation shall pay or reimburse all reasonable expenses incurred by a present or former director or officer of the Corporation in connection with any threatened, pending or completed action, suit or proceeding (whether civil, criminal, administrative or investigative) in which the present or former director or officer is a party, in advance of the final disposition of the proceeding, to the fullest extent permitted by, and in accordance with the applicable requirements of, Maryland law, as applicable from time to time. The Corporation may indemnify any other persons permitted but not required to be indemnified by Maryland law, as applicable from time to time, if and to extent indemnification is authorized and determined to be appropriate, in each case in accordance with applicable law, by the Board of Directors, the majority of the shareholders of the Corporation entitled to vote thereon or special legal counsel appointed by the Board of Directors. No amendment of these Articles of Amendment and Restatement(9) of the Corporation or repeal of any of its provisions shall limit or eliminate any of the benefits provided to directors and officers under this Article VIII in respect of any act or omission that occurred prior to such amendment or repeal. ARTICLE IX WRITTEN CONSENT OF SHAREHOLDERS Any corporate action upon which a vote of shareholders is required or permitted may be taken without a meeting or vote of shareholders with the unanimous written consent of shareholders entitled to vote thereon. ARTICLE X AMENDMENT The Corporation reserves the right to amend, alter or repeal any provision contained in this charter upon (i) adoption by the Board of Directors of a resolution recommending such amendment, alteration, or repeal, (ii) presentation by the Board of Directors to the shareholders of a resolution at an annual or special meeting of the shareholders and (iii) approval of such resolution by the affirmative vote of the holders of a majority (or, as applicable, a twothirds vote) of the aggregate number of votes entitled to be case generally in the election of directors. All rights conferred upon shareholders herein are subject to this reservation. ARTICLE XI EXISTENCE The Corporation is to have a perpetual existence. ARTICLE XII CLASS B COMMON STOCK GENERAL. The holders of the Class B Common Stock shall have the same rights and privileges as, and shall be subject to the same restrictions and limitations contained in the Charter as apply to, the holders of the Class A Common Stock, except as set forth below. SECTION 1. DEFINITIONS. Capitalized terms used in these Articles Supplementary(10) shall have the meanings ascribed to them in the Charter or elsewhere in these Articles Supplementary, except that the terms set forth below shall have the meanings specified below when used in this Article. (9) See Article FOURTH. (10) See Article FOURTH. 13 "ADJUSTED FUNDS FROM OPERATIONS" shall have the same meaning as the term "Adjusted Funds from Operations" used in the Prospectus and shall be calculated in the manner specified in the Prospectus and based on generally accepted accounting principles. Adjusted Funds from Operations shall be determined from the Corporation's financial statements audited and certified by an independent public accountant. "ADJUSTED FUNDS FROM OPERATIONS PER SHARE" when used with respect to any period shall mean the Adjusted Funds from Operations for such period DIVIDED by the sum of (a) the number of shares of the Class A Common Stock outstanding on the last day of such period (excluding any shares of the Class A Common Stock into which shares of the Class B Common Stock shall have been converted as a result of the conversion of shares of the Class B Common Stock on the last day of such period) and (b) the number of shares of the Class A Common Stock issuable to acquire units of limited partnership that (i) may be tendered for redemption in any limited partnership in which the Corporation serves as general partner and (ii) are outstanding on the last day of such period. "AVERAGE MARKET PRICE" for a period shall mean the average of the Closing Prices for a share of the Class A Common Stock for the Trading Days in such period. "CAUSE" shall mean the termination of employment of an individual with an Employer as a result of (a) the performance by such individual of any activity involving fraud or dishonesty, (b) the conviction of the individual of a felony or a crime involving moral turpitude, (c) the failure or refusal of such individual to reasonably or satisfactorily perform any material duties or responsibilities reasonably required of such individual by an Employer, (d) the gross negligence or willful neglect or malfeasance by the individual in the performance or nonperformance of such individual's duties or responsibilities to the Employer, or (e) any unauthorized act or omission by such individual that is injurious in any material respect to the financial condition or business reputation of any Employer. "CHANGE IN CONTROL" shall mean the occurrence of any of the following events: (a) An acquisition (other than directly from the Corporation) of any voting securities of the Corporation (the "VOTING SECURITIES") by any "person" (as the term "person" is used for purposes of Section 13(d) or Section 14(d) of the Securities Exchange Act of 1934, as amended (the "1934 ACT")) immediately after which such person has "beneficial ownership" (within the meaning of Rule 13d3 promulgated under the 1934 Act) ("BENEFICIAL OWNERSHIP") of 20% or more of the combined voting power of the Corporation's then outstanding Voting Securities; PROVIDED, HOWEVER, in determining whether a Change in Control has occurred. Voting Securities that are acquired in a NonControl Acquisition (as hereinafter defined) shall not constitute an acquisition that would cause a Change in Control. "NONCONTROL ACQUISITION" shall mean an acquisition by (1) an employee benefit plan (or a trust forming a part thereof) maintained by (a) the Corporation or (b) any corporation, partnership or other Person of which a majority of its voting power or its equity securities or equity interest is owned directly or indirectly by the Corporation or in which the Corporation serves as a general partner or manager (a "SUBSIDIARY"), (2) the Corporation or any Subsidiary, or (3) any Person in connection with a NonControl Transaction (as hereinafter defined); (b) The individuals who are named in the Prospectus as constituting the Board of Directors of the Corporation following the Initial Public Offering (the "INCUMBENT BOARD") cease for any reason to constitute at least twothirds (2/3rds) of the Board of Directors; PROVIDED, HOWEVER, that if the election, or nomination for election by the Corporation's stockholders, of any new director was approved by a vote of at least twothirds (2/3rds) of the Incumbent Board, such new director shall be considered as a member of the Incumbent Board; PROVIDED, FURTHER, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened "election contest" (as described in Rule 14a11 promulgated under the 1934 Act) (an "ELECTION CONTEST") or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors (a "PROXY CONTEST") including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or (c) Approval by stockholders of the Corporation of: (1) A merger, consolidation, share exchange or reorganization involving the Corporation, unless 14 (A) the stockholders of the Corporation, immediately before such merger, consolidation, share exchange or reorganization, own, directly or indirectly immediately following such merger, consolidation, share exchange or reorganization, at least 80% of the combined voting power of the outstanding voting securities of the corporation that is the successor in such merger, consolidation, share exchange or reorganization (the "SURVIVING CORPORATION") in substantiality the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation, share exchange or reorganization, (B) the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such merger, consolidation, share exchange or reorganization constitute at least twothirds (2/3rds) of the members of the board of directors of the Surviving Corporation, and (C) no Person (other than the corporation or any subsidiary, any employee benefit plan (or any trust forming a part thereof) maintained by the Corporation, the Surviving Corporation or any Subsidiary, or any Person who, immediately prior to such merger, consolidation, share exchange or reorganization had Beneficial Ownership of 15% or more of the then outstanding Voting Securities) has Beneficial Ownership of 15% or more of the combined voting power of the Surviving Corporation's then outstanding voting securities (a transaction described in clauses (i) through (iii) is referred to herein as a "NONCONTROL TRANSACTION"); (2) A complete liquidation or dissolution of the Corporation, or (3) An agreement for the sale or other disposition of all or substantially all of the assets of the Corporation to any Person (other than a transfer to a Subsidiary). Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (a "SUBJECT PERSON") acquired Beneficial Ownership of more than the permitted amount of the outstanding Voting Securities as a result of the acquisition of Voting Securities by the Corporation that, by reducing the number of Voting Securities outstanding, increases the proportional number of shares Beneficially Owned by such Subject Person, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of Voting Securities by the Corporation, and after such share acquisition by the Corporation, such subject Person becomes the Beneficial Owner of any additional Voting Securities that increases the percentage of the then outstanding Voting Securities Beneficially Owned by such Subject Person, then a Change in Control shall occur. "CLOSING PRICE" on any date shall mean the last sale price, regular way, or, in case that no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE or, if shares of the Class A Common Stock are not listed or admitted to trading on the NYSE, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which shares of the Class A Common Stock are listed or admitted to trading or, if shares of the Class A Common Stock are not listed or admitted to trading on any national securities exchange, the last quoted price, or if not so quoted, the average of the high bid and low asked prices in the overthecounter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the principal other automated quotations system that may then be in use or, if shares of the Class A Common Stock are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in shares of the Class A Common Stock selected by the Board of Directors of the Corporation. "CONVERTIBLE CLASS B SHARES" shall mean Eligible Class B Shares that shall have become subject to automatic conversion into shares of the Class A Common Stock, subject to Article IV, Section 3.4 of the Charter, pursuant to Sections 3 and 4 of this Article. "DISABILITY" shall mean the mental or physical illness or disability of an individual that substantially impairs the ability of the individual to perform substantially all of his duties as an employee of an Employer in a satisfactory manner for a period in excess of ninety (90) days in any consecutive 12month period. "ELIGIBLE CLASS B SHARES" shall mean the following percentages (subject to modification as provided 15 in Section 3(c) of this Article) of the Outstanding Class B Shares as of the Year-End Testing Dates indicated.
PERCENTAGE OF OUTSTANDING CLASS B SHARES YEAR-END TESTING DATE ----------------------------------------------------------- December 31, 1994 10.0000% December 31, 1995 22.2222% December 31, 1996 28.5714% December 31, 1997 50.0000% December 31, 1998 100.0000%
"EMPLOYER" shall mean (a) the Corporation, (b) any partnership in which the Corporation serves as a general partner, (c) any corporation directly or indirectly controlled by or under common control with the Corporation, (d) any partnership or company in which any of the foregoing may own, directly or indirectly, an equity interest or (e) any limited liability company in which any of the foregoing may be a member. "INITIAL HOLDER" shall refer to each person holding Outstanding Class B Shares on the date of the closing of the Initial Public Offering, whether such Outstanding Class B Shares result from designation of outstanding common stock or from new issuance by the Corporation. "OP UNITS" shall mean units of limited partnership interest in the Operating Partnership. "OPERATING PARTNERSHIP" shall mean AIMCO Properties, L.P., a Delaware limited partnership in which the Corporation holds a general partnership interest. "OUTSTANDING CLASS B SHARES" shall mean issued and outstanding shares of the Class B Common Stock of the Corporation, excluding any Convertible Class B Shares that have been converted into shares of the Class A Common Stock. "PROSPECTUS" shall mean the prospectus that forms a part of the registration statement filed with the Securities and Exchange Commission in connection with the Initial Public Offering, in the form included in the registration statement at the time the registration statement becomes effective; PROVIDED, HOWEVER, that, if such prospectus is subsequently supplemented or amended for use in connection with the Initial Public Offering, "PROSPECTUS" shall refer to such prospectus as so supplemented or amended. "TRADING DAY" shall mean a day on which the principal national securities exchange on which shares of the Class A Common Stock are listed or admitted to trading is open for the transaction of business or, if shares of the Class A Common Stock are not listed or admitted to trading on any national securities exchange, "TRADING DAY" shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. "YEAREND TESTING DATE" shall mean each of December 31, 1994, December 31, 1995, December 31, 1996, December 31, 1997 and December 31, 1998; PROVIDED, HOWEVER, that December 31, 1999 shall be substituted in place of December 31, 1998 each place such earlier date appears in this Article if, as of December 31, 1998, either the Annual Growth Target requirement or the Compounded Cumulative Growth Target requirement set forth in Section 3(a) of this Article in respect of the YearEnd Testing Date of December 31, 1998 is not satisfied as of December 31, 1998. SECTION 2. RESTRICTIONS ON DIVIDENDS AND VOTING RIGHTS. (a) NO DIVIDENDS. No dividends shall accrue or be paid on any shares of the Class B Common Stock. (b) No Voting Rights; Exception for Convertible Class B Shares. Holders of shares of the Class B Common Stock shall not have the right to vote on any matter, including, but not limited to, the election of 16 directors, the merger of the Corporation, the sale or other disposition of the Corporation's assets, or the dissolution or liquidation of the Corporation; PROVIDED, HOWEVER, that holders of Convertible Class B Shares shall have the right to one (1) vote per share on all matters for which holders of shares of the Class A Common Stock shall have the right to vote. SECTION 3. CONVERTIBILITY OF OUTSTANDING CLASS B SHARES. (a) IN GENERAL. The Eligible Class B Shares as of a Year-End Testing Date shall automatically become Convertible Class B Shares according to the Adjusted Funds from Operations Per Share and the Average Market Values of a share of the Class A Common Stock for the periods indicated, provided that (i) the "Annual Growth Target" requirement set forth below in this Section 3(a) is satisfied, (ii) the "Compounded Cumulative Growth Target" requirement set forth below in this Section 3(a) is satisfied AND (iii) the "MARKET VALUE" requirement set forth in Section 3(b) of this Article is satisfied; PROVIDED, HOWEVER, that, if in any calendar year an applicable Annual Growth Target requirement is not satisfied, the Eligible Class B Shares becoming Convertible Class B Shares in the following calendar year or years shall include, as a carryforward from year to year, the Eligible Class B Shares otherwise applicable to the first year provided that in the later year (which need not immediately follow the first year) the Annual Growth Target requirement, the Cumulative Compounded Growth Target requirement and the Market Value requirement for such later year are all satisfied:
YEAR-END TESTING COMPOUNDED CUMULATIVE DATE. ANNUAL GROWTH TARGET GROWTH TARGET - ------------------------------------------------------------------------------- December 31, 1994 Adjusted Funds from Adjusted Funds from Operations Per Share for the Operations Per Share for period beginning on the the period beginning on the Initial Public Offering and Initial Public Offering and ending on the YearEnd ending on the YearEnd Testing Date is at least Testing Date is at least $0.864 $0.864 December 31, 1995 ANNUALIZED Adjusted Funds ANNUALIZED Adjusted Funds from Operations Per Share from Operations Per Share for the period beginning on for the period beginning on the Initial Public Offering the Initial Public Offering and ending on the YearEnd and ending on the YearEnd Testing Date is at least Testing Date is at least $2.161 $2.161 December 31, 1996 Adjusted Funds from ANNUALIZED Adjusted Funds Operations Per Share for the from Operations Per Share calendar year ending on the for the period beginning on YearEnd Testing Date is at the Initial Public Offering least 108.5% of the Adjusted and ending on the YearEnd Funds from Operations Per Testing Date is at least Share for the calendar year $2.345 ending on the previous YearEnd Testing Date December 31, 1997 Adjusted Funds from ANNUALIZED Adjusted Funds Operations Per Share for the from Operations Per Share calendar year ending on the for the period beginning on YearEnd Testing Date is at the Initial Public Offering least 108.5% of the Adjusted and ending on the YearEnd Funds from Operations Per Testing Date is at least Share for the calendar year $2.544 ending on the previous YearEnd Testing Date
17 December 31, 1998 Adjusted Funds from ANNUALIZED Adjusted Funds Operations Per Share for the from Operations Per Share calendar year ending on the for the period beginning on YearEnd Testing Date is at the Initial Public Offering least 108.5% of the Adjusted and ending on the YearEnd Funds from Operations Per Testing Date is at least Share for the calendar year $2.760 ending on the previous YearEnd Testing Date
(b) MARKET VALUE REQUIREMENT. The Market Value requirement shall be satisfied as to any Year-End Testing Date if the Average Market Value of a share of the Class A Common Stock shall equal or exceed the amount set forth in the following table for any 90 calendar day period (whether or not a calendar quarter or an exact three month period) beginning on any day (whether or not a Trading Day) on or after October 1 immediately preceding the applicable YearEnd Testing Date:
YEAR-END TESTING DATE AVERAGE MARKET PRICE ----------------------------------------------- December 31, 1994 $19.030 December 31, 1995 $20.648 December 31, 1996 $22.403 December 31, 1997 $24.307 December 31, 1998 $26.373
By way of illustration, the Market Value requirement for the Year-End Testing Date of December 31, 1996 would be satisfied if the Average Market Value of a share of the Class A Common Stock equaled or exceeded $22.403 for (i) the 90day period beginning on October 1, 1986 and ending on December 30, 1996, (ii) the 90day period beginning on April 17, 1997 and ending on July 16, 1997 OR (iii) the 90day period beginning on November 20, 1997 and ending on February 18, 1998. (c) MODIFICATIONS TO ELIGIBILITY AND CONVERTIBILITY SCHEDULES. Notwithstanding the provisions of Section 3(a) of this Article, in or as to any calendar year the Corporation's Board of Directors shall have the authority, upon consideration of factors and financial performance criteria that it shall in its sole and absolute discretion consider relevant, to declare a greater or lesser percentage of (i) Outstanding Class B Shares as of a YearEnd Testing Date to be Eligible Class B Shares and (ii) Eligible Class B Shares to be Convertible Class B Shares; PROVIDED, HOWEVER, that no such declaration shall decrease the number of Eligible Class B Shares or Convertible Class B Shares held by any person without such person's consent. SECTION 4. CONDITIONAL CONVERSION OF CLASS B COMMON STOCK. (a) CONVERSION OF CONVERTIBLE CLASS B SHARES. Subject to Section 4(c) of this Article and to the limitations set forth in Article IV, Section 3.4 of the Charter, upon becoming a Convertible Class B Share, each Convertible Class B Share shall be converted automatically into the number of shares of the Class A Common Stock that results from dividing $18.50 by the Conversion Price in effect at the time of conversion (the "CONVERSION PRICE"). Subject to the limitations set forth in Article IV, Section 3.4 of the Charter, such conversion shall occur and be effective as of the applicable YearEnd Testing Date or, if later, the satisfaction of the Market Price requirement set forth in Section 3(b) of this Article. The initial Conversion Price shall be $18.50 per share and shall be subject to adjustment as provided in Section 7 of this Article. (b) CONVERSION UPON OCCURRENCE OF OTHER EVENTS. Notwithstanding the foregoing provisions of this Section 4, but nevertheless subject to the limitations set forth in Article IV, Section 3.4 of the Charter: (1) all Outstanding Class B Shares (whether or not Eligible Class B Shares) that have not previously converted into shares of the Class A Common Stock shall convert automatically upon any Change in Control of the Corporation. 18 (2) all Outstanding Class B Shares (whether or not Eligible Class B Shares) held by an Initial Holder and any transferee of such Initial Holder shall convert automatically into shares of the Class A Common Stock on the date on which employment of such Initial Holder by an Employer is terminated by the Employer (and not voluntarily by such Initial Holder) for any reason other than Cause if following termination such Initial Holder is no longer employed as an employee by any Employer, and (3) the Board of Directors of the Corporation may, by resolution duly adopted by the Board of Directors (and, if there shall be a duly constituted compensation committee of the Board of Directors at the time, only with the approval of the compensation committee), accelerate the conversion of Outstanding Class B Shares (whether or not Eligible Class B Shares) into shares of the Class A Common Stock at such time and in such amount as it may determine to be appropriate from time to time. The conversion of any Outstanding Class B Share pursuant to this Section 4(b) shall be into the number of shares of the Class A Common Stock that results from dividing $18.50 by the Conversion Price then in effect. (c) IDENTIFICATION OF CLASS B COMMON STOCK CONVERTED. Whenever shares of the Class B Common Stock are converted into shares of the Class A Common Stock pursuant to Section 4(a), Section 4(b)(1) or Section 4(b)(3) of this Article, the shares converted shall be allocated among all the record holders of such shares of the Class B Common Stock in proportion to their record ownership. (d) DELAYED CONVERSION. If the conversion of any shares of Class B Common Stock into shares of the Class A Common Stock shall be limited or restricted by reason of the provisions of Article IV, Section 3.4 of the Charter, such shares shall automatically be so converted at such later time, if any, and to such extent as such limitations and restrictions do not apply. (e) NO FRACTIONAL SHARES. No fractional shares of the Class A Common Stock shall be issued upon conversion of any shares of the Class B Common Stock. Rather, the Corporation shall pay to the record holder cash for such fractional shares at a rate equal to the Conversion Price per share. SECTION 5. MANDATORY REPURCHASE OR STOCKHOLDER PURCHASE OF OUTSTANDING CLASS B SHARES. (a) REPURCHASE FOLLOWING THE FIFTH YEAREND TESTING DATE. Subject to the limitations set forth in Article IV, Section 3.4 of the Charter, each Outstanding Class B Share (whether or not an Eligible Class B Share) that has not converted into shares of the Class A Common Stock in respect of the YearEnd Testing Date of December 31, 1998 shall be subject to mandatory repurchase by the Corporation at a price of $.10 per Outstanding Class B Share. Such mandatory repurchase shall close upon the determination, no earlier than March 31, 2000, that such Outstanding Class B Share is not convertible into shares of the Class A Common Stock pursuant to Section 3 of this Article. (b) INITIAL HOLDER PURCHASE UPON CERTAIN TERMINATIONS OF EMPLOYMENT. Subject to the limitations set forth in Article IV, Section 3.4 of the Charter, each Outstanding Class B Share (whether or not an Eligible Class B Share), other than a Convertible Class B Share, held by the Initial Holder of such Outstanding Class B Share, or by any holder who acquired such Outstanding Class B Share directly or indirectly from such Initial Holder, that has neither converted nor become convertible into shares of the Class A Common Stock or prior to either (i) the date of termination of employment of such Initial Holder by an Employer for Cause or (ii) the date of such Initial Holder's voluntary termination of employment with an Employer shall be subject to mandatory purchase, at the time of such termination of employment, by the other Initial Holders that are at that time employed by an Employer. The purchase price shall be $.10 per Outstanding Class B Share. The purchase of such Outstanding Class B Shares shall be made, by the Initial Holders that are at that time employed by an Employer, proportionate to the following percentages:
INITIAL HOLDER PERCENTAGE --------------------------------------- Terry Considine 68.33% Peter K. Kompaniez 13.50% Steven D. Ira 13.67% Robert P. Lacy 4.50%
19 (c) REPURCHASE UPON CERTAIN TERMINATIONS OF EMPLOYMENT FOLLOWING CONVERSION. Subject to the limitations set forth in Article IV, Section 3.4 of the Charter, each share of the Class A Common Stock, whether held by an Initial Holder of any other person who acquired such share of the Class A Common Stock directly or indirectly from an Initial Holder, into which an Outstanding Class B Share was originally converted pursuant to Section 4 of this Article shall be subject to mandatory repurchase by the Corporation, at a price of $.10 per share of the Class A Common Stock, upon such Initial Holder's termination of employment with an Employer, other than (i) by reason of death, disability or a Change in Control or (ii) the involuntary termination of employment of such Initial Holder by an Employer without Cause, within 12 months following such conversion of an Outstanding Class B Share into such share of the Class A Common Stock; PROVIDED, HOWEVER, that nothing in this Section 5(c) shall be interpreted or applied to preclude the settlement of any transaction entered into through the facilities of the NYSE or other securities exchange or an automated interdealer quotation system. (d) DELAYED REPURCHASE OR PURCHASE. If either the limitations or restrictions of Article IV, Section 3.4 of the Charter shall apply to (i) a mandatory repurchase under Section 5(a) or Section 5(c) of this Article or (ii) a mandatory purchase by the Initial Holders under Section 5(b) of this Article, or if the Corporation cannot then lawfully effect a repurchase of its shares, then the repurchase or purchase, as the case may be, shall be deferred until, and then only to the extent that, such repurchase or purchase can be lawfully effected within such limitations and restrictions. (e) PROCEDURES UPON REPURCHASE OR PURCHASE. Any repurchase of Outstanding Class B Shares as provided by Section 5(a) or Section 5(c) of this Article shall be effected by delivery by the Corporation to the record holder of such Outstanding Class B Shares of a certified or cashier's check in the amount of the aggregate repurchase price. Upon such payment by the Corporation in repurchase of Outstanding Class B Shares, the certificates evidencing such repurchased Outstanding Class B Shares shall be canceled. Any purchase of Outstanding Class B Shares as provided by Section 5(b) of this Article shall be effected by delivery of the Initial Holders then employed by an Employer to the record holder of such Outstanding Class B Shares of a certified or cashier's check in the amount of the aggregate purchase price. (f) CHANGE IN CONTROL. The provisions of Sections 5(a), 5(b) and 5(c) of this Article shall not apply following any Change in Control. SECTION 6. REDUCTION IN AUTHORIZED SHARES. The number of authorized shares of the Class B Common Stock shall be reduced automatically by (a) the number of shares of the Class B Common Stock converted into shares of the Class A Common Stock pursuant to Section 4 of this Article and (b) the number of shares of the Class B Common Stock repurchased by the Corporation pursuant to Section 5(a) or Section 5(c) of this Article. SECTION 7. ADJUSTMENTS. The Conversion Price and the number of shares of the Class A Common Stock issuable upon the conversion of each share of the Class B Common Stock shall be subject to adjustment from time to time as provided in this Section 7. (a) ADJUSTMENT UPON CERTAIN EVENTS. In case that the Corporation shall at any time after the date of the Initial Public Offering (i) pay a dividend in shares of the Class A Common Stock or make a distribution in shares of the Class A Common Stock, (ii) subdivide the outstanding shares of the Class A Common Stock, (iii) combine the outstanding Class A Common Stock into a smaller number of shares of the Class A Common Stock, or (iv) issue any shares of its capital stock or other securities by reclassification of the Class A Common Stock, the Conversion Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination or reclassification shall be proportionately adjusted so that each holder of shares of the Class B Common Stock converted after such time shall be entitled to receive the aggregate number and kind of the Class A Common Stock or other securities of the Corporation that, if such shares of the Class B Common Stock had been converted immediately prior to such time, he would have owned upon such conversion and been entitled to receive by virtue of such dividend, distribution, subdivision, combination or reclassification. Such adjustment shall 20 be made successively whenever any event listed above shall occur. (b) ISSUANCE OF RIGHTS, OPTIONS OR WARRANTS. If after the Initial Public Offering the Corporation issues any rights, options or warrants to all holders of its Class A Common Stock entitling them for a period expiring within 60 days after the record date mentioned below to purchase shares of the Class A Common Stock (or securities convertible into or exchangeable for shares of the Class A Common Stock) at a price per share less than the current market price per share on that record date, the Conversion Price shall be adjusted in accordance with the formula: A equals the adjusted Conversion Price. C equals the then current Conversion Price. O equals the number of shares of the Class A Common Stock outstanding on the record date. N equals the number of additional shares of the Class A Common Stock offered or initially issuable upon conversion or exchange of the convertible or exchangeable securities offered. P equals the offering price or conversion price or exchange per share of the additional shares. M equals the current market price per share of the Class A Common Stock on the record date. The adjustment shall be made successively whenever any such rights, options or warrants are issued and shall become effective immediately after the record date for the determination of stockholders entitled to receive the rights, options or warrants. If all of the shares of the Class A Common Stock or securities convertible into or exchangeable for shares of the Class A Common Stock subject to such rights, options or warrants have not been issued when such rights, options or warrants expire, then the Conversion Price shall be immediately readjusted to what it would have been if "N" in the above formula had been the number of shares of the Class A Common Stock actually issued upon the exercise of such rights, options or warrants or initially issuable based upon the number of convertible securities or exchangeable securities actually issued upon the exercise of such rights or warrants. (c) DISTRIBUTION OF ASSETS AND DEBT SECURITIES. If after the Initial Public Offering the Corporation distributes to all holders of its Class A Common Stock any of its assets or debt securities or any rights or warrants to purchase debt securities, assets or other securities of the Corporation (including shares of the Class A Common Stock), the Conversion Price shall be adjusted in accordance with the formula: where A equals the adjusted Conversion Price. C equals the then current Conversion Price. M equals the current market price per share of the Class A Common Stock on the record date mentioned below. F equals the fair market value on the record date of the assets, securities, rights or warrants applicable to one share of the Class A Common Stock. The Board of Directors shall determine, in good faith, such fair market value, which determination shall be conclusive. This Section 7(c) does not apply to any rights, options or warrants referred to in Section 7(b) of this Article. This Section 7(c) does not apply to cash dividends or cash distributions paid in respect of the Class A Common Stock for any period if the cash dividends or cash distributions paid in respect of the Class A Common Stock and OP Units for that period, when added to the amount of all other cash dividends or cash distributions paid in respect to the Class A Common Stock and OP Units for the twelve (12) month period ending on the last day of such period, does not exceed 100% of Cash Available for Distribution for such twelve (12) month period. "CASH AVAILABLE FOR DISTRIBUTION" shall mean "Funds from Operations" (as that term is defined in the "Glossary" of the Prospectus but computed at the Operating Partnership level) minus (i) the amount of any dividend on Preferred Stock accrued during such twelve (12) month period, whether or not declared or paid, and (ii) an annual reserve for capital replacements of $300 per apartment unit for the weighted average number of apartment units owned by the Corporation during such twelve (12) month period. By way of example, Cash Available for Distribution for the twelve (12) month 21 period ending June 15, 1995 as set forth in the Prospectus is projected on a PRO FORMA basis to be $18,476,000. (d) ISSUANCE OF DISCOUNTED SHARES. If after the Initial Public Offering the Corporation issues shares of the Class A Common Stock for a consideration per share less than the current market price per share, on the date that the Corporation fixes the offering price of such additional shares, the Conversion Price shall be adjusted in accordance with the formula: where A equals the adjusted Conversion Price. C equals the then current Conversion Price. O equals the number of shares of the Class A Common Stock outstanding immediately prior to the issuance of such additional shares. P equals the aggregate consideration received for the issuance of such additional shares. M equals the current market price per share of the Class A Common Stock on the date of issuance of such additional shares. S equals the number of shares outstanding immediately after the issuance of such additional shares. The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance. This Section 7(d) does not apply to (i) any of the transactions described in Section 7(b) or Section 7(c) of this Article, (ii) the conversion or exchange of shares of the Class B Common Stock or other securities convertible into or exchangeable for shares of the Class A Common Stock, (iii) shares of the Class A Common Stock issued by the Corporation upon, and as consideration for, the purchase of OP Units, (iv) shares of the Class A Common Stock issued to the Corporation's employees (other than upon the exercise of options of the type referred to in clause (v) below) under BONA FIDE employee benefit plans adopted by the Board of Directors, if such Class A Common Stock would otherwise be covered by this Section 7(d), (v) the Class A Common Stock issued upon the exercise of options granted to employees at an exercise price equal to at least 85% of the fair market value of such Class A Common Stock at the time that such options were granted, (vi) the Class A Common Stock issued to stockholders of any person that merges into the Corporation, or with a subsidiary of the Corporation, in proportion to their stock holdings in such Person immediately prior to such merger, upon such merger, (vii) the Class A Common Stock issued in a BONA FIDE public offering pursuant to a firm commitment or best efforts underwriting, or (viii) the Class A Common Stock issued in a BONA FIDE private placement through a placement agent that is a member firm of the National Association of Securities Dealers, Inc. (except to the extent that any discount from the current market price attributable to restrictions on transferability of the Class A Common Stock, as determined in good faith by the Board of Directors, shall exceed 10% of the then current market price). (e) ISSUANCE OF CONVERTIBLE DISCOUNTED SECURITIES. If after the Initial Public Offering the Corporation issues any securities convertible into or exchangeable for shares of the Class A Common Stock (other than securities issued in transactions described in Section 7(b) or Section 7(c)) of this Article for a consideration per share of the Class A Common Stock initially deliverable upon conversion or exchange of such securities less than the current market price per share of the Class A Common Stock on the date of issuance of such securities, the Conversion Price shall be adjusted in accordance with the formula: where A equals the adjusted Conversion Price. C equals the then current Conversion Price. O equals the number of shares of the Class A Common Stock outstanding immediately prior to the issuance of such securities. P equals the aggregate consideration received for the issuance of such securities. M equals the current market price per share of the Class A Common Stock on the date of issuance of such securities. 22 D equals the maximum number of shares deliverable upon conversion or in exchange for such securities at the initial conversion or exchange rate. The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance. If all of the Class A Common Stock deliverable upon conversion or exchange of such securities have not been issued when such securities are no longer outstanding, then the Conversion Price shall promptly be readjusted to the conversion price that would then be in effect had the adjustment upon the issuance of such securities been made on the basis of the actual number of shares of the Class A Common Stock issued upon conversion or exchange of such securities. This Section 7(e) does not apply to (i) convertible securities issued to stockholders of any Person that merges into the Corporation, or with a subsidiary of the Corporation, in proportion to their stock holdings in such Person immediately prior to such merger, upon such merger, (ii) convertible securities issued in a BONA FIDE public offering pursuant to a firm commitment or best efforts underwriting, or (iii) convertible securities issued in a BONA FIDE private placement through a placement agent that is a member firm of the National Association of Securities Dealers, Inc. (except to the extent that any discount from the current market price attributable to restrictions on transferability of the Class A Common Stock issuable upon conversion, as determined in good faith by the Board of Directors and described in a Board resolution, shall exceed 20% of the then current market price). (f) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS. If at any time or from time to time there is a capital reorganization of the Corporation (other than a recapitalization, subdivision, combination, reclassification or exchange of shares provided for elsewhere in this Section 7 or Section 4 of this Article) or a merger or consolidation of the Corporation with or into another corporation, or the sale of all or substantially all of the Corporation's properties and assets to any other person then, each share of the Class B Common Stock then outstanding shall thereafter be convertible into, in lieu of the Class A Common Stock issuable upon such conversion prior to consummation of such reorganization, merger, consolidation or sale, the kind and amount of shares of stock and other securities and property receivable (including cash) upon the consummation of such reorganization, merger, consolidation or sale by a holder of that number of shares of Class A Common Stock into which one share of the Class B Common Stock was convertible immediately prior to such reorganization, merger, consolidation or sale (including, on a PRO RATA basis, the cash, securities or property received by holders of Class A Common Stock in any tender or exchange offer that is a step in such transaction). In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 7 and Section 4 of this Article with respect to the rights of the holders of the shares of the Class B Common Stock after the reorganization, merger, consolidation or sale to the end that the provisions of this Section 7 (including adjustment of the Conversion Price then in effect and the number of shares issuable upon conversion of the shares of the Class B Common Stock) shall be applicable after that event and be as nearly equivalent as may be practicable. (g) COMPUTATION OF CONSIDERATION. For purposes of any computation respecting consideration received pursuant to Sections 7(d) and 7(e) of this Article, the following shall apply: (1) In the case of the issuance of shares of the Class A Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by the Corporation for any underwriting of the issue or otherwise in connection therewith; (2) In the case of the issuance of shares of the Class A Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined in good faith by the Board of Directors (irrespective of the accounting treatment thereof), whose determination shall be conclusive, and described in a Board resolution; and (3) In the case of the issuance of securities convertible into or exchangeable for shares, the aggregate consideration received therefor shall be deemed to be the consideration received by the Corporation for the issuance of such securities plus the additional minimum consideration if any, to be received by the Corporation upon the conversion of exchange thereof (the consideration in each case to be determined in the same manner 23 provided in Sections 7(g)(1) and 7(g)(2) of this Article. (h) COMPUTATION OF CURRENT MARKET PRICE. For the purpose of any computation pursuant to Sections 7(b), 7(c), 7(d) and 7(e) of this Article, the current market price per share of the Class A Common Stock on any date shall be deemed to be the average of the Closing Prices for 15 consecutive Trading Days commencing 30 Trading Days before that date. However, if the Class A Common Stock is not publicly listed or publicly traded, current market price shall mean the fair market value per share of Class A Common Stock, as determined in good faith by the Board of Directors, based on the opinion of an independent investment banking firm. (i) EXCEPTIONS. No adjustment in the Conversion Price need be made: (1) unless the adjustment would require an increase or decrease of at least 1% in the Conversion Price. Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 7 shall be made to the nearest cent or to the nearest one hundredth (1/100th) of a share, as the case may be. The Conversion Price shall not be adjusted upward except in the event of a combination of the outstanding shares of the Class A Common Stock into a smaller number of shares of Common Stock or in the event of a readjustment of the Conversion Price pursuant to Section 7(b) or Section 7(e) of this Article; (2) for a transaction referred to in Section 7(a), Section 7(b), Section 7(c), Section 7(d) or Section 7(e) of this Article if holders of the Class B Common Stock are to participate in the transaction on a basis and with notice that the Board of Directors determines to be fair and appropriate in light of the basis and notice on which holders of the Class A Common Stock participate in the transaction; (3) for rights to purchase shares of the Class A Common Stock pursuant to a plan for reinvestment of dividends or interest; (4) for a change in the part value or no par value of the Class A Common Stock; or (5) to the extent that the Class B Common Stock becomes convertible into cash, as to such cash. Interest will not accrue on any such cash. (j) NOTICE. Whenever the Conversion Price is adjusted or reduced, the Corporation shall promptly mail, at least 12 days prior to the record date of the distribution triggering the adjustment or reduction, to holders of the Class B Common Stock and file with the transfer agent therefor a notice of the adjustment or reduction and, in the case of an adjustment, file with the transfer agent for the Class B Common Stock an officer's certificate briefly stating the facts requiring the adjustment and the manner of computing it. The certificate shall be conclusive evidence that the adjustment is correct. (k) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of the Class A Common Stock, solely for the purpose of effecting the conversion of the shares of the Class B Common Stock, such number of its shares of the Class A Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Class B Common Stock; and if at any time the number of authorized but unissued shares of the Class A Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Class B Common Stock, the Corporation will take such corporate and other action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of the Class A Common Stock to such number of shares as shall be sufficient for such purpose. (l) DISCRETIONARY ADJUSTMENTS. The Board of Directors may (but shall not be required to) make such adjustments in the Conversion Price, in addition to those required by this Section 7, as shall be determined by the Board of Directors, as evidenced by a Board resolution, to be advisable in order that any event that would otherwise be treated for federal income tax purposes as a dividend of stock or stock rights will, to the extent practicable, not be so treated or not be taxable to all the recipients. 24 (m) AMBIGUITY. The Board of Directors may interpret the provisions of this Section 7 to resolve any inconsistency or ambiguity that may arise or be revealed in connection with the adjustment procedures provided herein, and if such inconsistency or ambiguity reflects an inaccurate provision hereof, the Board of Directors may, in appropriate circumstances, authorize the filing of additional articles supplementary or a certificate of designation. SECTION 8. RESTRICTION ON ADDITIONAL ISSUANCES. Upon the filing of these Articles of Amendment, there shall be authorized 750,000 shares and issued and outstanding 650,000 shares of the Class B Common Stock.(11) No additional shares of the Class B Common Stock shall be issued without the affirmative consent or vote of a majority of the Corporation's Board of Directors other than employees of an Employer. ARTICLE XIII CLASS B PREFERRED STOCK The terms of the Class B Cumulative Convertible Preferred Stock (including the preferences, conversions or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, or terms or conditions of redemption) as set by the Board of Directors are as follows: 1. NUMBER OF SHARES AND DESIGNATION. This class of Preferred Stock shall be designated as Class B Cumulative Convertible Preferred Stock (the "Class B Preferred Stock") and Seven Hundred Fifty Thousand (750,000) shall be the authorized number of shares of such Class B Preferred Stock constituting such class. 2. DEFINITIONS. For purposes of the Class B Preferred Stock, the following terms shall have the meanings indicated: "ACT" shall mean the Securities Act of 1933, as amended. "affiliate" of a Person means a Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Person specified. "AGGREGATE VALUE" shall mean, with respect to any block of Equity Stock, the sum of the products of (i) the number of shares of each class of Equity Stock within such block multiplied by (ii) the corresponding Market Price of one share of Equity Stock of such class. "BASE COMMON STOCK DIVIDEND" shall have the meaning set forth in paragraph (a) of Section 9 of this Article. "BENEFICIAL OWNERSHIP" shall mean, with respect to any Person, ownership of shares of Equity Stock equal to the sum of (i) the number of shares of Equity Stock directly owned by such Person, (ii) the number of shares of Equity Stock indirectly owned by such Person (if such Person is an "individual" as defined in Section 542(a)(2) of the Code) taking into account the constructive ownership rules of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code, and (iii) the number of shares of Equity Stock that such Person is deemed to beneficially own pursuant to Rule 13d3 under the Exchange Act or that is attributed to such Person pursuant to Section 318 of the Code, as modified by Section 856(d)(5) of the Code, PROVIDED that when applying this definition of Beneficial Ownership to the Initial Holder, clause (iii) of this definition, and clause (ii) of the definition of "Person" shall be disregarded. The terms "BENEFICIAL OWNER," "BENEFICIALLY OWNS" and "BENEFICIALLY OWNED" shall have the correlative meanings. "BOARD OF DIRECTORS" shall mean the Board of Directors of the Corporation or any committee authorized by such Board of Directors to perform any of its responsibilities with respect to the Class B Preferred Stock. (11) See Article FIFTH. 25 "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a day on which state or federally chartered banking institutions in New York, New York are not required to be open. "CALL DATE" shall have the meaning set forth in paragraph (b) of Section 5 of this Article. "CHARITABLE BENEFICIARY" shall mean one or more beneficiaries of the Trust as determined pursuant to Section 11.3 of this Article, each of which shall be an organization described in Section 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code. "CLASS B PREFERRED STOCK" shall have the meaning set forth in Section 1 of this Article. "CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor thereto, as interpreted by any applicable regulations or other administrative pronouncements as in effect from time to time. "COMMON STOCK" shall mean the Class A Common Stock, $.01 par value per share, of the Corporation or such shares of the Corporation's capital stock into which outstanding shares of Common Stock shall be reclassified. "CONVERSION PRICE" shall mean the conversion price per share of Common Stock for which each share of Class B Preferred Stock is convertible, as such Conversion Price may be adjusted pursuant to paragraph (d) of Section 7 of this Article. The initial Conversion Price shall be $30.45 (equivalent to an initial conversion rate of 3.28407 shares of Common Stock for each share of Class B Preferred Stock). "CURRENT MARKET PRICE" of publicly traded shares of Common Stock or any other class or series of capital stock or other security of the Corporation or of any similar security of any other issuer for any day shall mean the closing price, regular way on such day, or, if no sale takes place on such day, the average of the reported closing bid and asked prices regular way on such day, in either case as reported on the principal national securities exchange on which such securities are listed or admitted for trading, or, if such security is not quoted on any national securities exchange, on the National Market of the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or, if such security is not quoted on the NASDAQ National Market, the average of the closing bid and asked prices on such day in the overthecounter market as reported by NASDAQ or, if bid and asked prices for such security on such day shall not have been reported through NASDAQ, the average of the bid and asked prices on such day as furnished by any New York Stock Exchange or National Association of Securities Dealers, Inc. member firm regularly making a market in such security selected for such purpose by the Chief Executive Officer or the Board of Directors or if any class or series of securities are not publicly traded, the fair value of the shares of such class as determined reasonably and in good faith by the Board of Directors of the Corporation. "DISTRIBUTION" shall have the meaning set forth in paragraph (d)(iii) of Section 7 of this Article. "DIVIDEND PAYMENT DATE" shall mean, with respect to each Dividend Period, (a) the date that cash dividends are paid on the Common Stock with respect to such Dividend Period; or (b) if such dividends have not been paid on the Common Stock by 9:00 a.m., New York City time, on the sixtieth day from and including the last day of such Dividend Period, then on such day; provided, further, that if any Dividend Payment Date falls on any day other than a Business Day, the dividend payment payable on such Dividend Payment Date shall be paid on the Business Day immediately following such Dividend Payment Date. "DIVIDEND PERIODS" shall mean the Initial Dividend Period and each subsequent quarterly dividend period commencing on and including January 1, April 1, July 1 and October 1 of each year and ending on and including the day preceding the first day of the next succeeding Dividend Period, other than the Dividend Period during which any Class B Preferred Stock shall be redeemed pursuant to Section 5 hereof, which shall end on and include the Call Date with respect to the Class B Preferred Stock being redeemed. 26 "EQUITY STOCK" shall mean one or more shares of any class of capital stock of the Corporation. "EXCESS TRANSFER" has the meaning set forth in Section 11.3(A) of this Article. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. "FAIR MARKET VALUE" shall mean the average of the daily Current Market Prices of a share of Common Stock during five (5) consecutive Trading Days selected by the Corporation commencing not more than twenty (20) Trading Days before, and ending not later than, the earlier of the day in question and the day before the "ex" date with respect to the issuance or distribution requiring such computation. The term "'ex' date," when used with respect to any issuance or distribution, means the first day on which the share of Common Stock trades regular way, without the right to receive such issuance or distribution, on the exchange or in the market, as the case may be, used to determine that day's Current Market Price. "ISSUE DATE" shall mean August 4, 1997. "INITIAL DIVIDEND PERIOD" shall mean the period commencing on and including the Issue Date and ending on and including September 30, 1997. "INITIAL HOLDER" shall mean Terry Considine. "INITIAL HOLDER LIMIT" shall mean a number of the Outstanding shares of Class B Preferred Stock of the Corporation having an Aggregate Value not in excess of the excess of (x) 15% of the Aggregate Value of all Outstanding shares of Equity Stock over (y) the Aggregate Value of all shares of Equity Stock other than Class B Preferred Stock that are Beneficially Owned by the Initial Holder. From the Issue Date, the secretary of the Corporation, or such other person as shall be designated by the Board of Directors, shall upon request make available to the representative(s) of the Initial Holder and the Board of Directors, a schedule that sets forth the thencurrent Initial Holder Limit applicable to the Initial Holder. "JUNIOR STOCK" shall have the meaning set forth in paragraph (c) of Section 8 of this Article. "LOOK-THROUGH ENTITY" shall mean a Person that is either (i) described in Section 401(a) of the Code as provided under Section 856(h)(3) of the Code or (ii) registered under the Investment Company Act of 1940. "LOOK-THROUGH OWNERSHIP LIMIT" shall mean, for any Look-Through Entity, a number of the Outstanding shares of Class B Preferred Stock of the Corporation having an Aggregate Value not in excess of the excess of (x) 15% of the Aggregate Value of all Outstanding shares of Equity Stock over (y) by the Aggregate Value of all shares of Equity Stock other than Class B Preferred Stock that are Beneficially Owned by the Look-Through Entity. "MARKET PRICE" on any date shall mean, with respect to any share of Equity Stock, the Closing Price of a share of that class of Equity Stock on the Trading Day immediately preceding such date. The term "CLOSING PRICE" on any date shall mean the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE or, if the Equity Stock is not listed or admitted to trading on the NYSE, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Equity Stock is listed or admitted to trading or, if the Equity Stock is not listed or admitted to trading on any national securities exchange, the last quoted price, or if not so quoted, the average of the high bid and low asked prices in the overthecounter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the principal other automated quotations system that may then be in use or, if the Equity Stock is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Equity Stock selected by the Board of Directors of the Company. 27 "NYSE" shall mean the New York Stock Exchange, Inc. "OUTSTANDING" shall mean issued and outstanding shares of Equity Stock of the Corporation, PROVIDED that for purposes of the application of the Ownership Limit, the Look-Through Ownership Limit or the Initial Holder Limit to any Person, the term "OUTSTANDING" shall be deemed to include the number of shares of Equity Stock that such Person alone, at that time, could acquire pursuant to any options or convertible securities. "OWNERSHIP LIMIT" shall mean, for any Person other than the Initial Holder or a Look-Through Entity, a number of the Outstanding shares of Class B Preferred Stock of the Corporation having an Aggregate Value not in excess of the excess of (x) 8.7% of the Aggregate Value of all Outstanding shares of Equity Stock over (y) the Aggregate Value of all shares of Equity Stock other than Class B Preferred Stock that are Beneficially Owned by the Person. "OWNERSHIP RESTRICTIONS" shall mean collectively the Ownership Limit as applied to Persons other than the Initial Holder or Look-Through Entities, the Initial Holder Limit as applied to the Initial Holder and the Look-Through Ownership Limit as applied to Look-Through Entities. "PARITY STOCK" shall have the meaning set forth in paragraph (b) of Section 8 of this Article. "PERSON" shall mean (a) for purposes of Section 11 of this Article, (i) an individual, corporation, partnership, estate, trust (including a trust qualifying under Section 401(a) or 501(c) of the Code), association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, and (ii) also includes a group as that term is used for purposes of Section 13(d)(3) of the Exchange Act and (b) for purposes of the remaining Sections of this Article, any individual, firm, partnership, corporation or other entity and shall include any successor (by merger or otherwise) of such entity. "PROHIBITED TRANSFEREE" has the meaning set forth in Section 11.3(A) of this Article. "REIT" shall mean a "real estate investment trust" as defined in Section 856 of the Code. "SENIOR STOCK" shall have the meaning set forth in paragraph (a) of Section 8 of this Article. "SET APART FOR PAYMENT" shall be deemed to include, without any action other than the following, the recording by the Corporation in its accounting ledgers of any accounting or bookkeeping entry which indicates, pursuant to a declaration of dividends or other distribution by the Board of Directors, the allocation of funds to be so paid on any series or class of capital stock of the Corporation; provided, however, that if any funds for any class or series of Junior Stock or any class or series of Parity Stock are placed in a separate account of the Corporation or delivered to a disbursing, paying or other similar agent, then "set apart for payment" with respect to the Class B Preferred Stock shall mean placing such funds in a separate account or delivering such funds to a disbursing, paying or other similar agent. "TRADING DAY", as to any securities, shall mean any day on which such securities are traded on the principal national securities exchange on which such securities are listed or admitted or, if such securities are not listed or admitted for trading on any national securities exchange, the NASDAQ National Market or, if such securities are not listed or admitted for trading on the NASDAQ National Market, any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. "TRANSACTION" shall have the meaning set forth in paragraph (e) of Section 7 of this Article. "TRANSFER" shall mean any sale, transfer, gift, assignment, devise or other disposition of a share of Class B Preferred Stock (including (i) the granting of an option or any series of such options or entering into any agreement for the sale, transfer or other disposition of Class B Preferred Stock or (ii) the sale, transfer, 28 assignment or other disposition of any securities or rights convertible into or exchangeable for Class B Preferred Stock), whether voluntary or involuntary, whether of record or Beneficial Ownership, and whether by operation of law or otherwise (including, but not limited to, any transfer of an interest in other entities that results in a change in the Beneficial Ownership of shares of Class B Preferred Stock). The term "TRANSFERS" and "TRANSFERRED" shall have correlative meanings. "TRANSFER AGENT" means such transfer agent as may be designated by the Board of Directors or their designee as the transfer agent for the Class B Preferred Stock; provided, that if the Corporation has not designated a transfer agent then the Corporation shall act as the transfer agent for the Class B Preferred Stock. "TRUST" shall mean the trust created pursuant to Section 11.3 of this Article. "TRUSTEE" shall mean the Person unaffiliated with either the Corporation or the Prohibited Transferee that is appointed by the Corporation to serve as trustee of the Trust. "VOTING PREFERRED STOCK" shall have the meaning set forth in Section 9 of this Article. 3. DIVIDENDS. (a) The holders of Class B Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors out of funds legally available for that purpose, cumulative dividends payable in cash in an amount per share of Class B Preferred Stock equal to the greater of (i) the base dividend of $1.78125 per quarter (the "Base Rate") or (ii) the cash dividends declared on the number of shares of Common Stock, or portion thereof, into which a share of Class B Preferred Stock is convertible. The dividends payable with respect to the Initial Dividend Period shall be determined solely by reference to the Base Rate. The amount referred to in clause (ii) of this paragraph (a) with respect to each succeeding Dividend Period shall be determined as of the applicable Dividend Payment Date by multiplying the number of shares of Common Stock, or portion thereof calculated to the fourth decimal point, into which a share of Class B Preferred Stock would be convertible at the opening of business on such Dividend Payment Date (based on the Conversion Price then in effect) by the aggregate cash dividends payable or paid for such Dividend Period in respect of a share of Common Stock outstanding as of the record date for the payment of dividends on the Common Stock with respect to such Dividend Period. If (A) the Corporation pays a cash dividend on the Common Stock after the Dividend Payment Date for the corresponding Dividend Period and (B) the dividend on the Class B Preferred Stock for such Dividend Period calculated pursuant to clause (ii) of this paragraph (a), taking into account the Common Stock dividend referenced in clause (A), exceeds the dividend previously declared on the Class B Preferred Stock for such Dividend Period, the Corporation shall pay an additional dividend to the holders of the Class B Preferred Stock on the date that the Common Stock dividend referenced in clause (A) is paid, in an amount equal to the difference between the dividend calculated pursuant to clause (B) and the dividends previously declared on the Class B Preferred Stock with respect to such Dividend Period. Such dividends shall be cumulative from the Issue Date, whether or not in any Dividend Period or Periods such dividends shall be declared or there shall be funds of the Corporation legally available for the payment of such dividends, and shall be payable quarterly in arrears on the Dividend Payment Dates, commencing on the first Dividend Payment Date after the Issue Date. Each such dividend shall be payable in arrears to the holders of record of the Class B Preferred Stock, as they appear on the stock records of the Corporation at the close of business on a record date fixed by the Board of Directors which shall be not more than 60 days prior to the applicable Dividend Payment Date and, within such 60 day period, shall be the same date as the record date for the regular quarterly dividend payable with respect to the Common Stock for the Dividend Period to which such Dividend Payment Date relates (or, if there is no such record date for Common Stock, then such date as the Board of Directors may fix). Accumulated, accrued and unpaid dividends for any past Dividend Periods may be declared and paid at any time, without reference to any regular Dividend Payment Date, to holders of record on such date, which date shall not precede by more than 45 days the payment date thereof, as may be fixed by the Board of Directors. Upon a final administrative determination by the Internal Revenue Service that the Corporation does not qualify as a real estate investment trust in accordance with Section 856 of the Code, the Base Rate set forth in (a)(i) will be increased to $3.03125 until such time as the Corporation regains its status as a real estate investment 29 trust; provided, however, that if the Corporation contests its loss of real estate investment trust status in Federal Court, following its receipt of an opinion of nationally recognized tax counsel to the effect that there is a reasonable basis to contest such loss of status, the Base Rate shall not be increased during the pendency of such judicial proceeding; provided further, however, that upon a final judicial determination in Federal Tax Court, Federal District Court or the Federal Claims Court that the Corporation does not qualify as a real estate investment trust, the Base Rate will be increased as stated above from the date of such judicial determination. (b) The amount of dividends payable per share of Class B Preferred Stock for the Initial Dividend Period, or any other period shorter than a full Dividend Period, shall be computed ratably on the basis of twelve 30day months and a 360day year. Holders of Class B Preferred Stock shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of cumulative dividends, as herein provided, on the Class B Preferred Stock. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Class B Preferred Stock that may be in arrears. (c) So long as any of the shares of Class B Preferred Stock are outstanding, except as described in the immediately following sentence, no dividends shall be declared or paid or set apart for payment by the Corporation and no other distribution of cash or other property shall be declared or made directly or indirectly by the Corporation with respect to any class or series of Parity Stock for any period unless dividends equal to the full amount of accumulated, accrued and unpaid dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof has been or contemporaneously is set apart for such payment on the Class B Preferred Stock for all Dividend Periods terminating on or prior to the Dividend Payment Date with respect to such class or series of Parity Stock. When dividends are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, all dividends declared upon the Class B Preferred Stock and all dividends declared upon any other class or series of Parity Stock shall be declared ratably in proportion to the respective amounts of dividends accumulated, accrued and unpaid on the Class B Preferred Stock and accumulated, accrued and unpaid on such Parity Stock. (d) So long as any of the shares of Class B Preferred Stock are outstanding, no dividends (other than dividends or distributions paid in shares of or options, warrants or rights to subscribe for or purchase shares of Junior Stock) shall be declared or paid or set apart for payment by the Corporation and no other distribution of cash or other property shall be declared or made directly or indirectly by the Corporation with respect to any shares of Junior Stock, nor shall any shares of Junior Stock be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Common Stock made for purposes of an employee incentive or benefit plan of the Corporation or any subsidiary) for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) directly or indirectly by the Corporation (except by conversion into or exchange for Junior Stock), nor shall any other cash or other property otherwise be paid or distributed to or for the benefit of any holder of shares of Junior Stock in respect thereof, directly or indirectly, by the Corporation unless in each case (i) the full cumulative dividends (including all accumulated, accrued and unpaid dividends) on all outstanding shares of Class B Preferred Stock and any other Parity Stock of the Corporation shall have been paid or such dividends have been declared and set apart for payment for all past Dividend Periods with respect to the Class B Preferred Stock and all past dividend periods with respect to such Parity Stock and (ii) sufficient funds shall have been paid or set apart for the payment of the full dividend for the current Dividend Period with respect to the Class B Preferred Stock and the current dividend period with respect to such Parity Stock. 30 4. LIQUIDATION PREFERENCE. (a) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any payment or distribution of the Corporation (whether capital or surplus) shall be made to or set apart for the holders of Junior Stock, the holders of shares of Class B Preferred Stock shall be entitled to receive One Hundred Dollars ($100) per share of Class B Preferred Stock (the "Liquidation Preference"), plus an amount equal to all dividends (whether or not earned or declared) accumulated, accrued and unpaid thereon to the date of final distribution to such holders; but such holders shall not be entitled to any further payment. Until the holders of the Class B Preferred Stock have been paid the Liquidation Preference in full, plus an amount equal to all dividends (whether or not earned or declared) accumulated, accrued and unpaid thereon to the date of final distribution to such holders, no payment will be made to any holder of Junior Stock upon the liquidation, dissolution or winding up of the Corporation. If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation, or proceeds thereof, distributable among the holders of Class B Preferred Stock shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other shares of any class or series of Parity Stock, then such assets, or the proceeds thereof, shall be distributed among the holders of Class B Preferred Stock and any such other Parity Stock ratably in the same proportion as the respective amounts that would be payable on such Class B Preferred Stock and any such other Parity Stock if all amounts payable thereon were paid in full. For the purposes of this Section 4, (i) a consolidation or merger of the Corporation with one or more corporations, (ii) a sale or transfer of all or substantially all of the Corporation's assets, or (iii) a statutory share exchange shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Corporation. (b) Upon any liquidation, dissolution or winding up of the Corporation, after payment shall have been made in full to the holders of Class B Preferred Stock and any Parity Stock, as provided in this Section 4, any other series or class or classes of Junior Stock shall, subject to the respective terms thereof, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Class B Preferred Stock and any Parity Stock shall not be entitled to share therein. 5. REDEMPTION AT THE OPTION OF THE CORPORATION. (a) Shares of Class B Preferred Stock shall not be redeemable by the Corporation prior to August 4, 2002. On and after August 4, 2002, the Corporation, at its option, may redeem shares of Class B Preferred Stock, in whole or from time to time in part, at a redemption price payable in cash equal to 100% of the Liquidation Preference thereof, plus all accrued and unpaid dividends to the Call Date. (b) Shares of Class B Preferred Stock shall be redeemed by the Corporation on the date specified in the notice to holders required under paragraph (d) of this Section 5 (the "Call Date"). The Call Date shall be selected by the Corporation, shall be specified in the notice of redemption and shall be not less than 30 days nor more than 60 days after the date notice of redemption is sent by the Corporation. (c) If full cumulative dividends on all outstanding shares of Class B Preferred Stock and any other class or series of Parity Stock of the Corporation have not been paid or declared and set apart for payment, no shares of Class B Preferred Stock may be redeemed unless all outstanding shares of Class B Preferred Stock are simultaneously redeemed and neither the Corporation nor any affiliate of the Corporation may purchase or acquire shares of Class B Preferred Stock, otherwise than pursuant to a purchase or exchange offer made on the same terms to all holders of shares of Class B Preferred Stock. (d) If the Corporation shall redeem shares of Class B Preferred Stock pursuant to paragraph (a) of this Section 5, notice of such redemption shall be given to each holder of record of the shares to be redeemed. Such notice shall be provided by first class mail, postage prepaid, at such holder's address as the same appears on the stock records of the Corporation. Neither the failure to mail any notice required by this paragraph (d), nor any defect therein or in the mailing thereof to any particular holder, shall affect the sufficiency of the notice or the validity of the proceedings for redemption with respect to the other holders. Any notice which was mailed in the manner herein provided shall be conclusively presumed to have been duly given on the date mailed whether or not the holder receives the notice. Each such notice shall state, as appropriate: (1) the Call Date; (2) the number of 31 shares of Class B Preferred Stock to be redeemed and, if fewer than all such shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the place or places at which certificates for such shares are to be surrendered for cash; and (4) the thencurrent Conversion Price. Notice having been mailed as aforesaid, from and after the Call Date (unless the Corporation shall fail to make available the amount of cash necessary to effect such redemption), (i) except as otherwise provided herein, dividends on the shares of Class B Preferred Stock so called for redemption shall cease to accumulate or accrue on the shares of Class B Preferred Stock called for redemption (except that, in the case of a Call Date after a dividend record date and prior to the related Dividend Payment Date, holders of Class B Preferred Stock on the dividend record date will be entitled on such Dividend Payment Date to receive the dividend payable on such shares), (ii) said shares shall no longer be deemed to be outstanding, and (iii) all rights of the holders thereof as holders of Class B Preferred Stock of the Corporation shall cease (except the rights to receive the cash payable upon such redemption, without interest thereon, upon surrender and endorsement of their certificates if so required and to receive any dividends payable thereon). The Corporation's obligation to make available the redemption price in accordance with the preceding sentence shall be deemed fulfilled if, on or before the Call Date, the Corporation shall deposit with a bank or trust company (which may be an affiliate of the Corporation) that has, or is an affiliate of a bank or trust company that has, a capital and surplus of at least $50,000,000, such amount of cash as is necessary for such redemption, in trust, with irrevocable instructions that such cash be applied to the redemption of the shares of Class B Preferred Stock so called for redemption. No interest shall accrue for the benefit of the holders of shares of Class B Preferred Stock to be redeemed on any cash so set aside by the Corporation. Subject to applicable escheat laws, any such cash unclaimed at the end of two years from the Call Date shall revert to the general funds of the Corporation, after which reversion the holders of shares of Class B Preferred Stock so called for redemption shall look only to the general funds of the Corporation for the payment of such cash. As promptly as practicable after the surrender in accordance with such notice of the certificates for any such shares of Class B Preferred Stock to be so redeemed (properly endorsed or assigned for transfer, if the Corporation shall so require and the notice shall so state), such certificates shall be exchanged for cash (without interest thereon) for which such shares have been redeemed in accordance with such notice. If fewer than all the outstanding shares of Class B Preferred Stock are to be redeemed, shares to be redeemed shall be selected by the Corporation from outstanding shares of Class B Preferred Stock not previously called for redemption by lot or, with respect to the number of shares of Class B Preferred Stock held of record by each holder of such shares, pro rata (as nearly as may be) or by any other method as may be determined by the Board of Directors in its discretion to be equitable. If fewer than all the shares of Class B Preferred Stock represented by any certificate are redeemed, then a new certificate representing the unredeemed shares shall be issued without cost to the holders thereof. 6. STATUS OF REACQUIRED STOCK. All shares of Class B Preferred Stock which shall have been issued and reacquired in any manner by the Corporation (including shares of Class B Preferred Stock which have been surrendered for conversion into Common Stock) shall be returned to the status of authorized, but unissued shares of Class B Preferred Stock. 7. CONVERSION. At any time on or after August 4, 1998. Holders of shares of Class B Preferred Stock shall have the right to convert all or a portion of such shares into shares of Common Stock, as follows: (a) Subject to and upon compliance with the provisions of this Section 7, a holder of shares of Class B Preferred Stock shall have the right, at such holder's option, at any time on or after August 4, 1998 to convert such shares, in whole or in part, into the number of fully paid and nonassessable shares of authorized but previously unissued shares of Common Stock per each share of Class B Preferred Stock obtained by dividing the Liquidation Preference (excluding any accumulated, accrued and unpaid dividends) per share of Class B Preferred Stock by the Conversion Price (as in effect at the time and on the date provided for in the last subparagraph of paragraph (b) of this Section 7) and by surrendering such shares to be converted, such surrender to be made in the manner provided in paragraph (b) of this Section 7; provided, however, that the right to convert shares of Class B Preferred Stock called for redemption pursuant to Section 5 shall terminate at the close of business on the Call Date fixed for such redemption, unless the Corporation shall default in making payment of cash payable upon such redemption under Section 5 of this Article. 32 (b) In order to exercise the conversion right, the holder of each share of Class B Preferred Stock to be converted shall surrender the certificate representing such share, duly endorsed or assigned to the Corporation or in blank, at the office of the Transfer Agent, accompanied by written notice to the Corporation that the holder thereof elects to convert such share of Class B Preferred Stock. Unless the shares issuable on conversion are to be issued in the same name as the name in which such share of Class B Preferred Stock is registered, each share surrendered for conversion shall be accompanied by instruments of transfer, in form satisfactory to the Corporation, duly executed by the holder or such holder's duly authorized attorney and an amount sufficient to pay any transfer or similar tax (or evidence reasonably satisfactory to the Corporation demonstrating that such taxes have been paid). Holders of shares of Class B Preferred Stock at the close of business on a dividend payment record date shall be entitled to receive the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the conversion thereof following such dividend payment record date and prior to such Dividend Payment Date. Except as provided above, the Corporation shall make no payment or allowance for unpaid dividends, whether or not in arrears, on converted shares or for dividends on the shares of Common Stock issued upon such conversion. As promptly as practicable after the surrender of certificates for shares of Class B Preferred Stock as aforesaid, the Corporation shall issue and shall deliver at such office to such holder, or send on such holder's written order, a certificate or certificates for the number of full shares of Common Stock issuable upon the conversion of such shares of Class B Preferred Stock in accordance with provisions of this Section 7, and any fractional interest in respect of a share of Common Stock arising upon such conversion shall be settled as provided in paragraph (c) of this Section 7. Each conversion shall be deemed to have been effected immediately prior to the close of business on the date on which the certificates for shares of Class B Preferred Stock shall have been surrendered and such notice received by the Corporation as aforesaid, and the Person or Persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares represented thereby at such time on such date and such conversion shall be at the Conversion Price in effect at such time on such date unless the stock transfer books of the Corporation shall be closed on that date, in which event such Person or Persons shall be deemed to have become such holder or holders of record at the close of business on the next succeeding day on which such stock transfer books are open, but such conversion shall be at the Conversion Price in effect on the date on which such shares shall have been surrendered and such notice received by the Corporation. If the dividend payment record date for the Class B Preferred Stock and Common Stock do not coincide, and the preceding sentence does not operate to ensure that a holder of shares of Class B Preferred Stock whose shares are converted into Common Stock does not receive dividends on both the shares of Class B Preferred Stock and the Common Stock into which such shares are converted for the same Dividend Period, then notwithstanding anything herein to the contrary, it is the intent, and the Transfer Agent is authorized to ensure that no conversion after the earlier of such record dates will be accepted until after the latter of such record dates. (c) No fractional share of Common Stock or scrip representing fractions of a share of Common Stock shall be issued upon conversion of the shares of Class B Preferred Stock. Instead of any fractional interest in a share of Common Stock that would otherwise be deliverable upon the conversion of shares of Class B Preferred Stock, the Corporation shall pay to the holder of such share an amount in cash based upon the Current Market Price of the Common Stock on the Trading Day immediately preceding the date of conversion. If more than one share shall be surrendered for conversion at one time by the same holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Class B Preferred Stock so surrendered. (d) The Conversion Price shall be adjusted from time to time as follows: (i) If the Corporation shall after the Issue Date (A) pay a dividend or make a distribution on its capital stock in shares of Common Stock, (B) subdivide its outstanding Common Stock into a greater number 33 of shares, (C) combine its outstanding Common Stock into a smaller number of shares or (D) issue any shares of capital stock by reclassification of its outstanding Common Stock, the Conversion Price in effect at the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such dividend or distribution or at the opening of business on the day following the day on which such subdivision, combination or reclassification becomes effective, as the case may be, shall be adjusted so that the holder of any share of Class B Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock (or fraction of a share of Common Stock) that such holder would have owned or have been entitled to receive after the happening of any of the events described above had such share of Class B Preferred Stock been converted immediately prior to the record date in the case of a dividend or distribution or the effective date in the case of a subdivision, combination or reclassification. An adjustment made pursuant to this paragraph (d)(i) of this Section 7 shall become effective immediately after the opening of business on the day next following the record date (except as provided in paragraph (h) below) in the case of a dividend or distribution and shall become effective immediately after the opening of business on the day next following the effective date in the case of a subdivision, combination or reclassification. (ii) If the Corporation shall issue after the Issue Date rights, options or warrants to all holders of Common Stock entitling them (for a period expiring within 45 days after the record date described below in this paragraph (d)(ii) of this Section 7) to subscribe for or purchase Common Stock at a price per share less than the Fair Market Value per share of the Common Stock on the record date for the determination of stockholders entitled to receive such rights, options or warrants, then the Conversion Price in effect at the opening of business on the day next following such record date shall be adjusted to equal the price determined by multiplying (A) the Conversion Price in effect immediately prior to the opening of business on the day following the date fixed for such determination by (B) a fraction, the numerator of which shall be the sum of (X) the number of shares of Common Stock outstanding on the close of business on the date fixed for such determination and (Y) the number of shares that could be purchased at such Fair Market Value from the aggregate proceeds to the Corporation from the exercise of such rights, options or warrants for Common Stock, and the denominator of which shall be the sum of (XX) the number of shares of Common Stock outstanding on the close of business on the date fixed for such determination and (YY) the number of additional shares of Common Stock offered for subscription or purchase pursuant to such rights, options or warrants. Such adjustment shall become effective immediately after the opening of business on the day next following such record date (except as provided in paragraph (h) below). In determining whether any rights, options or warrants entitle the holders of Common Stock to subscribe for or purchase Common Stock at less than such Fair Market Value, there shall be taken into account any consideration received by the Corporation upon issuance and upon exercise of such rights, options or warrants, the value of such consideration, if other than cash, to be determined in good faith by the Board of Directors. (iii) If the Corporation shall after the Issue Date make a distribution on its Common Stock other than in cash or shares of Common Stock (including any distribution in securities (other than rights, options or warrants referred to in paragraph (d)(ii) of this Section 7)) (each of the foregoing being referred to herein as a "distribution"), then the Conversion Price in effect at the opening of business on the next day following the record date for determination of stockholders entitled to receive such distribution shall be adjusted to equal the price determined by multiplying (A) the Conversion Price in effect immediately prior to the opening of business on the day following the record date by (B) a fraction, the numerator of which shall be the difference between (X) the number of shares of Common Stock outstanding on the close of business on the record date and (Y) the number of shares determined by dividing (aa) the aggregate value of the property being distributed by (bb) the Fair Market Value per share of Common Stock on the record date, and the denominator of which shall be the number of shares of Common Stock outstanding on the close of business on the record date. Such adjustment shall become effective immediately after the opening of business on the day next following such record date (except as provided below). The value of the property being distributed shall be as determined in good faith by the Board of Directors; provided, however, if the property being distributed is a publicly traded security, its value shall be calculated in accordance with the procedure for calculating the Fair Market Value of a share of Common Stock (calculated for a period of five consecutive Trading Days commencing on the twentieth Trading Day after the distribution). Neither the issuance by the Corporation of rights, options or warrants to subscribe for or purchase securities of the Corporation nor the exercise thereof shall be deemed a distribution under this paragraph. (iv) If after the Issue Date the Corporation shall acquire, pursuant to an issuer or self tender 34 offer, all or any portion of the outstanding Common Stock and such tender offer involves the payment of consideration per share of Common Stock having a fair market value (as determined in good faith by the Board of Directors), at the last time (the "Expiration Time") tenders may be made pursuant to such offer, that exceeds the Current Market Price per share of Common Stock on the Trading Day next succeeding the Expiration Time, then the Conversion Price in effect on the opening of business on the day next succeeding the Expiration Time shall be adjusted to equal the price determined by multiplying (A) the Conversion Price in effect immediately prior to the Expiration Time by (B) a fraction, the numerator of which shall be (X) the number of shares of Common Stock outstanding (including the shares acquired in the tender offer (the "Acquired Shares")) immediately prior to the Expiration Time, multiplied by (Y) the Current Market Price per share of Common Stock on the Trading Day next succeeding the Expiration Time, and the denominator of which shall be the sum of (XX) the fair market value (determined as aforesaid) of the aggregate consideration paid to acquire the Acquired Shares and (YY) the product of (I) the number of shares of Common Stock outstanding (less any Acquired Shares) at the Expiration Time, multiplied by (II) the Current Market Price per share of Common Stock on the Trading Day next succeeding the Expiration Time. (v) No adjustment in the Conversion Price shall be required unless such adjustment would require a cumulative increase or decrease of at least 1% in such price; provided, however, that any adjustments that by reason of this paragraph (d)(v) are not required to be made shall be carried forward and taken into account in any subsequent adjustment until made; and provided, further, that any adjustment shall be required and made in accordance with the provisions of this Section 7 (other than this paragraph (d)(v)) not later than such time as may be required in order to preserve the taxfree nature of a distribution to the holders of shares of Common Stock. Notwithstanding any other provisions of this Section 7, the Corporation shall not be required to make any adjustment of the Conversion Price for the issuance of (A) any shares of Common Stock pursuant to any plan providing for the reinvestment of dividends or interest payable on securities of the Corporation and the investment of optional amounts in shares of Common Stock under such plan or (B) any options, rights or shares of Common Stock pursuant to any stock option, stock purchase or other stockbased plan maintained by the Corporation. All calculations under this Section 7 shall be made to the nearest cent (with $.005 being rounded upward) or to the nearest onetenth of a share (with .05 of a share being rounded upward), as the case may be. Anything in this paragraph (d) of this Section 7 to the contrary notwithstanding, the Corporation shall be entitled, to the extent permitted by law, to make such reductions in the Conversion Price, in addition to those required by this paragraph (d), as it in its discretion shall determine to be advisable in order that any stock dividends, subdivision of shares, reclassification or combination of shares, distribution of rights or warrants to purchase stock or securities, or a distribution of other assets (other than cash dividends) hereafter made by the Corporation to its stockholders shall not be taxable, or if that is not possible, to diminish any income taxes that are otherwise payable because of such event. (e) If the Corporation shall be a party to any transaction (including without limitation a merger, consolidation, statutory share exchange, issuer or self tender offer for at least 30% of the shares of Common Stock outstanding, sale of all or substantially all of the Corporation's assets or recapitalization of the Common Stock, but excluding any transaction as to which paragraph (d)(i) of this Section 7 applies) (each of the foregoing being referred to herein as a "Transaction"), in each case as a result of which shares of Common Stock shall be converted into the right to receive stock, securities or other property (including cash or any combination thereof), each share of Class B Preferred Stock which is not converted into the right to receive stock, securities or other property in connection with such Transaction shall thereupon be convertible into the kind and amount of shares of stock, securities and other property (including cash or any combination thereof) receivable upon such consummation by a holder of that number of shares of Common Stock into which one share of Class B Preferred Stock was convertible immediately prior to such Transaction (without giving effect to any Conversion Price adjustment pursuant to Section 7(d)(iv) of this Article). The Corporation shall not be a party to any Transaction unless the terms of such Transaction are consistent with the provisions of this paragraph (e), and it shall not consent or agree to the occurrence of any Transaction until the Corporation has entered into an agreement with the successor or purchasing entity, as the case may be, for the benefit of the holders of the Class B Preferred Stock that will contain provisions enabling the holders of the Class B Preferred Stock that remain outstanding after such Transaction to convert into the consideration received by holders of Common Stock at the Conversion Price in effect immediately prior to such Transaction. The provisions of this paragraph (e) shall similarly apply to successive Transactions. 35 (f) If: (i) the Corporation shall declare a dividend (or any other distribution) on the Common Stock (other than cash dividends and cash distributions); or (ii) the Corporation shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of any class or series of capital stock or any other rights or warrants; or (iii) there shall be any reclassification of the outstanding Common Stock or any consolidation or merger to which the Corporation is a party and for which approval of any stockholders of the Corporation is required, or a statutory share exchange, an issuer or self tender offer shall have been commenced for at least 30% of the outstanding shares of Common Stock (or an amendment thereto changing the maximum number of shares sought or the amount or type of consideration being offered therefor shall have been adopted), or the sale or transfer of all or substantially all of the assets of the Corporation as an entirety; or (iv) there shall occur the voluntary or involuntary liquidation, dissolution or winding up of the Corporation, then the Corporation shall cause to be filed with the Transfer Agent and shall cause to be mailed to each holder of shares of Class B Preferred Stock at such holder's address as shown on the stock records of the Corporation, as promptly as possible, a notice stating (A) the record date for the payment of such dividend, distribution or rights or warrants, or, if a record date is not established, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution or rights or warrants are to be determined or (B) the date on which such reclassification, consolidation, merger, statutory share exchange, sale, transfer, liquidation, dissolution or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, statutory share exchange, sale, transfer, liquidation, dissolution or winding up or (C) the date on which such tender offer commenced, the date on which such tender offer is scheduled to expire unless extended, the consideration offered and the other material terms thereof (or the material terms of any amendment thereto). Failure to give or receive such notice or any defect therein shall not affect the legality or validity of the proceedings described in this Section 7. (g) Whenever the Conversion Price is adjusted as herein provided, the Corporation shall promptly file with the Transfer Agent an officer's certificate setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment which certificate shall be conclusive evidence of the correctness of such adjustment absent manifest error. Promptly after delivery of such certificate, the Corporation shall prepare a notice of such adjustment of the Conversion Price setting forth the adjusted Conversion Price and the effective date such adjustment becomes effective and shall mail such notice of such adjustment of the Conversion Price to each holder of shares of Class B Preferred Stock at such holder's last address as shown on the stock records of the Corporation. (h) In any case in which paragraph (d) of this Section 7 provides that an adjustment shall become effective on the day next following the record date for an event, the Corporation may defer until the occurrence of such event (A) issuing to the holder of any share of Class B Preferred Stock converted after such record date and before the occurrence of such event the additional Common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the Common Stock issuable upon such conversion before giving effect to such adjustment and (B) paying to such holder any amount of cash in lieu of any fraction pursuant to paragraph (c) of this Section 7. (i) There shall be no adjustment of the Conversion Price in case of the issuance of any capital stock of the Corporation in a reorganization, acquisition or other similar transaction except as specifically set forth in this Section 7. (j) If the Corporation shall take any action affecting the Common Stock, other than action described in this Section 7, that in the opinion of the Board of Directors would materially adversely affect the conversion rights of the holders of Class B Preferred Stock, the Conversion Price for the Class B Preferred Stock 36 may be adjusted, to the extent permitted by law, in such manner, if any, and at such time as the Board of Directors, in its sole discretion, may determine to be equitable under the circumstances. (k) The Corporation shall at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock solely for the purpose of effecting conversion of the Class B Preferred Stock, the full number of shares of Common Stock deliverable upon the conversion of all outstanding shares of Class B Preferred Stock not theretofore converted into Common Stock. For purposes of this paragraph (k), the number of shares of Common Stock that shall be deliverable upon the conversion of all outstanding shares of Class B Preferred Stock shall be computed as if at the time of computation all such outstanding shares were held by a single holder (and without regard to the Ownership Limit set forth in the Charter of the Corporation). The Corporation covenants that any shares of Common Stock issued upon conversion of the shares of Class B Preferred Stock shall be validly issued, fully paid and nonassessable. The Corporation shall use its best efforts to list the shares of Common Stock required to be delivered upon conversion of the shares of Class B Preferred Stock, prior to such delivery, upon each national securities exchange, if any, upon which the outstanding shares of Common Stock are listed at the time of such delivery. (l) The Corporation will pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock or other securities or property on conversion or redemption of shares of Class B Preferred Stock pursuant hereto; provided, however, that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issue or delivery of shares of Common Stock or other securities or property in a name other than that of the holder of the shares of Class B Preferred Stock to be converted or redeemed, and no such issue or delivery shall be made unless and until the Person requesting such issue or delivery has paid to the Corporation the amount of any such tax or established, to the reasonable satisfaction of the Corporation, that such tax has been paid. (m) In addition to any other adjustment required hereby, to the extent permitted by law, the Corporation from time to time may decrease the Conversion Price by any amount, permanently or for a period of at least twenty Business Days, if the decrease is irrevocable during the period. (n) Notwithstanding anything to the contrary contained in this Section 7, conversion of Class B Preferred Stock pursuant to this Section 7 shall be permitted only to the extent that such conversion would not result in a violation of the Ownership Restrictions (as defined in the Charter), after taking into account any waiver of such limitation granted to any holder of the shares of Class B Preferred Stock. 8. RANKING. Any class or series of capital stock of the Corporation shall be deemed to rank: (a) prior or senior to the Class B Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, if the holders of such class or series shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Class B Preferred Stock ("Senior Stock"); (b) on a parity with the Class B Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share thereof be different from those of the Class B Preferred Stock, if the holders of such class of stock or series and the Class B Preferred Stock shall be entitled to the receipt of dividends and of amounts distributable upon liquidation, dissolution or winding up in proportion to their respective amounts of accrued and unpaid dividends per share or liquidation preferences, without preference or priority one over the other ("Parity Stock"); and (c) junior to the Class B Preferred Stock, as to the payment of dividends or as to the distribution 37 of assets upon liquidation, dissolution or winding up, if such stock or series shall be Common Stock or if the holders of Class B Preferred Stock shall be entitled to receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of shares of such class or series ("Junior Stock"). 9. VOTING. (a) If and whenever (i) six quarterly dividends (whether or not consecutive) payable on the Class B Preferred Stock or any series or class of Parity Stock shall be in arrears (which shall, with respect to any such quarterly dividend, mean that any such dividend has not been paid in full), whether or not earned or declared, or (ii) for two consecutive quarterly dividend periods the Corporation fails to pay dividends on the Common Stock in an amount per share at least equal to $0.4625 (subject to adjustment consistent with any adjustment of the Conversion Price pursuant to Section 7(d) of this Article) (the "Base Common Stock Dividend") the number of directors then constituting the Board of Directors shall be increased by two (in the case of an arrearage in dividends described in clause (i)) or one additional director (in the case of an arrearage in dividends described in clause (ii)) (in each case if not already increased by reason of similar types of provisions with respect to Voting Preferred Stock (as defined below)) and the holders of shares of Class B Preferred Stock, together with the holders of shares of every other series or class of Parity Stock (any other such series, the "Voting Preferred Stock"), voting as a single class regardless of series, shall be entitled to elect the two additional directors (in the case of an arrearage in dividends described in clause (i)) or one (in the case of an arrearage in dividends described in clause (ii)) to serve on the Board of Directors at any annual meeting of stockholders or special meeting held in place thereof, or at a special meeting of the holders of the Class B Preferred Stock and the Voting Preferred Stock called as hereinafter provided. Whenever (1) in the case of an arrearage in dividends described in clause (i), all arrears in dividends on the Class B Preferred Stock and the Voting Preferred Stock then outstanding shall have been paid and dividends thereon for the current quarterly dividend period shall have been paid or declared and set apart for payment, or 2) in the case of an arrearage in dividends described in clause (ii), the Corporation makes a quarterly dividend payment on the Common Stock in an amount per share equal to or exceeding the Base Common Stock Dividend, then the right of the holders of the Class B Preferred Stock and the Voting Preferred Stock to elect such additional two directors (in the case of an arrearage in dividends described in clause (i)) or one additional director (in the case of an arrearage in dividends described in clause (ii)) shall cease (but subject always to the same provision for the vesting of such voting rights in the case of any similar future arrearages), and the terms of office of all Persons elected as directors by the holders of the Class B Preferred Stock and the Voting Preferred Stock shall forthwith terminate and the number of directors constituting the Board of Directors shall be reduced accordingly. At any time after such voting power shall have been so vested in the holders of Class B Preferred Stock and the Voting Preferred Stock, if applicable, the Secretary of the Corporation may, and upon the written request of any holder of Class B Preferred Stock (addressed to the Secretary at the principal office of the Corporation) shall, call a special meeting of the holders of the Class B Preferred Stock and of the Voting Preferred Stock for the election of the two directors (in the case of an arrearage in dividends described in clause (i)) or one director (in the case of an arrearage in dividends described in clause (ii)) to be elected by them as herein provided, such call to be made by notice similar to that provided in the Bylaws of the Corporation for a special meeting of the stockholders or as required by law. If any such special meeting required to be called as above provided shall not be called by the Secretary within 20 days after receipt of any such request, then any holder of Class B Preferred Stock may call such meeting, upon the notice above provided, and for that purpose shall have access to the stock books of the Corporation. The directors or director elected at any such special meeting shall hold office until the next annual meeting of the stockholders or special meeting held in lieu thereof if such office shall not have previously terminated as above provided. If any vacancy shall occur among the directors elected by the holders of the Class B Preferred Stock and the Voting Preferred Stock, a successor shall be elected by the Board of Directors, upon the nomination of the thenremaining director elected by the holders of the Class B Preferred Stock and the Voting Preferred Stock or the successor of such remaining director, to serve until the next annual meeting of the stockholders or special meeting held in place thereof if such office shall not have previously terminated as provided above. (b) So long as any shares of Class B Preferred Stock are outstanding, in addition to any other vote or consent of stockholders required by law or by the Charter of the Corporation, the affirmative vote of at least 662/3% of the votes entitled to be cast by the holders of the Class B Preferred Stock, given in Person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating: 38 (i) Any amendment, alteration or repeal of any of the provisions of these Articles Supplementary, the Charter or the ByLaws of the Corporation that materially adversely affects the voting powers, rights or preferences of the holders of the Class B Preferred Stock; provided, however, that the amendment of the provisions of the Charter so as to authorize or create, or to increase the authorized amount of, any Junior Stock or any shares of any class of Parity Stock shall not be deemed to materially adversely affect the voting powers, rights or preferences of the holders of Class B Preferred Stock; or (ii) The authorization, creation of, the increase in the authorized amount of, or issuance of , any shares of any class of Senior Stock or any security convertible into shares of any class of Senior Stock (whether or not such class of Senior Stock is currently authorized); provided, however, that no such vote of the holders of Class B Preferred Stock shall be required if, at or prior to the time when such amendment, alteration or repeal is to take effect, or when the issuance of any such prior shares or convertible security is to be made, as the case may be, provision is made for the redemption of all shares of Class B Preferred Stock at the time outstanding to the extent such redemption is authorized by Section 5 of this Article. For purposes of the foregoing provisions and all other voting rights under these Articles Supplementary, each share of Class B Preferred Stock shall have one (1) vote per share, except that when any other class or series of preferred stock shall have the right to vote with the Class B Preferred Stock as a single class on any matter, then the Class B Preferred Stock and such other class or series shall have with respect to such matters one (1) vote per $100 of stated liquidation preference. Except as otherwise required by applicable law or as set forth herein, the Class B Preferred Stock shall not have any relative, participating, optional or other special voting rights and powers other than as set forth herein, and the consent of the holders thereof shall not be required for the taking of any corporate action. 10. RECORD HOLDERS. The Corporation and the Transfer Agent may deem and treat the record holder of any share of Class B Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Corporation nor the Transfer Agent shall be affected by any notice to the contrary. 11.1 RESTRICTIONS ON OWNERSHIP AND TRANSFERS. (A) LIMITATION ON BENEFICIAL OWNERSHIP. Except as provided in Section 11.8, from and after the Issue Date, no Person (other than the Initial Holder or a Look-Through Entity) shall Beneficially Own shares of Class B Preferred Stock in excess of the Ownership Limit, the Initial Holder shall not Beneficially Own shares of Class B Preferred Stock in excess of the Initial Holder Limit and no Look-Through Entity shall Beneficially Own shares of Class B Preferred Stock in excess of the Look-Through Ownership Limit. (B) TRANSFERS IN EXCESS OF OWNERSHIP LIMIT. Except as provided in Section 11.8, from and after the Issue Date (and subject to Section 11.12), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated interdealer quotation system) that, if effective, would result in any Person (other than the Initial Holder or a Look-Through Entity) Beneficially Owning shares of Class B Preferred Stock in excess of the Ownership Limit shall be void AB INITIO as to the Transfer of such shares of Class B Preferred Stock that would be otherwise Beneficially Owned by such Person in excess of the Ownership Limit, and the intended transferee shall acquire no rights in such shares of Class B Preferred Stock. (C) TRANSFERS IN EXCESS OF INITIAL HOLDER LIMIT. Except as provided in Section 11.8, from and after the Issue Date (and subject to Section 11.12), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated interdealer quotation system) that, if effective, would result in the Initial Holder Beneficially Owning shares of Class B Preferred Stock in excess of the Initial Holder Limit shall be void AB INITIO as to the Transfer of such shares of Class B Preferred Stock that would be otherwise Beneficially Owned by the Initial Holder in excess of the Initial Holder 39 limit, and the Initial Holder shall acquire no rights in such shares of Class B Preferred Stock. (D) TRANSFERS IN EXCESS OF LOOK-THROUGH OWNERSHIP LIMIT. Except as provided in Section 11.8 from and after the Issue Date (and subject to Section 11.12), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated interdealer quotation system) that, if effective, would result in any Look-Through Entity Beneficially Owning shares of Class B Preferred Stock in excess of the Look-Through Ownership limit shall be void AB INITIO as to the Transfer of such shares of Class B Preferred Stock that would be otherwise Beneficially Owned by such Look-Through Entity in excess of the Look-Through Ownership Limit and such Look-Through Entity shall acquire no rights in such shares of Class B Preferred Stock. (E) TRANSFERS RESULTING IN "CLOSELY HELD" STATUS. From and after the Issue Date, any Transfer that, if effective would result in the Corporation being "closely held" within the meaning of Section 856(h) of the Code, or would otherwise result in the Corporation failing to qualify as a REIT (including, without limitation, a Transfer or other event that would result in the Corporation owning (directly or constructively) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by the Corporation from such tenant would cause the Corporation to fail to satisfy any of the gross income requirements of Section 856(c) of the Code) shall be void AB INITIO as to the Transfer of shares of Class B Preferred Stock that would cause the Corporation (i) to be "closely held" within the meaning of Section 856(h) of the Code or (ii) otherwise fail to qualify as a REIT, as the case may be, and the intended transferee shall acquire no rights in such shares of Class B Preferred Stock. (F) SEVERABILITY ON VOID TRANSACTIONS. A Transfer of a share of Class B Preferred Stock that is null and void under Sections 11.1(B), (C), (D), or (E) of this Article because it would, if effective, result in (i) the ownership of Class B Preferred Stock in excess of the Initial Holder Limit, the Ownership Limit, or the Look-Through Ownership Limit, (ii) the Corporation being "closely held" within the meaning of Section 856(h) of the Code or (iii) the Corporation otherwise failing to qualify as a REIT, shall not adversely affect the validity of the Transfer of any other share of Class B Preferred Stock in the same or any other related transaction. 11.2 REMEDIES FOR BREACH. If the Board of Directors or a committee thereof shall at any time determine in good faith that a Transfer or other event has taken place in violation of Section 11.1 of this Article or that a Person intends to acquire or has attempted to acquire Beneficial Ownership of any shares of Class B Preferred Stock in violation of Section 11.1 of this Article (whether or not such violation is intended), the Board of Directors or a committee thereof shall be empowered to take any action as it deems advisable to refuse to give effect to or to prevent such Transfer or other event, including, but not limited to, refusing to give effect to such Transfer or other event on the books of the Corporation, causing the Corporation to redeem such shares at the then current Market Price and upon such terms and conditions as may be specified by the Board of Directors in its sole discretion (including, but not limited to, by means of the issuance of longterm indebtedness for the purpose of such redemption), demanding the repayment of any distributions received in respect of shares of Class B Preferred Stock acquired in violation of Section 11.1 of this Article or instituting proceedings to enjoin such Transfer or to rescind such Transfer or attempted Transfer; PROVIDED, HOWEVER, that any Transfers or attempted Transfers (or in the case of events other than a Transfer, Beneficial Ownership) in violation of Section 11.1 of this Article, regardless of any action (or nonaction) by the Board of Directors or such committee, (a) shall be void AB INITIO or (b) shall automatically result in the transfer described in Section 11.3 of this Article; PROVIDED, FURTHER, that the provisions of this Section 11.2 shall be subject to the provisions of Section 11.12 of this Article; PROVIDED, FURTHER, that neither the Board of Directors nor any committee thereof may exercise such authority in a manner that interferes with any ownership or transfer of Class B Preferred Stock that is expressly authorized pursuant to Section 11.8(d) of this Article. 40 11.3. TRANSFER IN TRUST. (A) ESTABLISHMENT OF TRUST. If, notwithstanding the other provisions contained in this Article, at any time after the Issue Date there is a purported Transfer (an "EXCESS TRANSFER") (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated interdealer quotation system) or other change in the capital structure of the Corporation (including, but not limited to, any redemption of Preferred Stock) or other event (including, but not limited to, any acquisition of any share of Equity Stock) such that (a) any Person (other than the Initial Holder or a Look-Through Entity) would Beneficially Own shares of Class B Preferred Stock in excess of the Ownership Limit, or (b) the Initial Holder would Beneficially Own shares of Class B Preferred Stock in excess of the Initial Holder Limit, or (c) any Person that is a Look-Through Entity would Beneficially Own shares of Class B Preferred Stock in excess of the Look-Through Ownership Limit (in any such event, the Person, Initial Holder or Look-Through Entity that would Beneficially Own shares of Class B Preferred Stock in excess of the Ownership Limit, the Initial Holder Limit or the Look-Through Entity Limit, respectively, is referred to as a "PROHIBITED TRANSFEREE"), then, except as otherwise provided in Section 11.8 of this Article, such shares of Class B Preferred Stock in excess of the Ownership Limit, the Initial Holder Limit or the Look-Through Ownership Limit, as the case may be, (rounded up to the nearest whole share) shall be automatically transferred to a Trustee in his capacity as trustee of a Trust for the exclusive benefit of one or more Charitable Beneficiaries. Such transfer to the Trustee shall be deemed to be effective as of the close of business on the business day prior to the Excess Transfer, change in capital structure or another event giving rise to a potential violation of the Ownership Limit, the Initial Holder Limit or the Look-Through Entity Ownership Limit. (B) APPOINTMENT OF TRUSTEE. The Trustee shall be appointed by the Corporation and shall be a Person unaffiliated with either the Corporation or any Prohibited Transferee. The Trustee may be an individual or a bank or trust company duly licensed to conduct a trust business. (C) STATUS OF SHARES HELD BY THE TRUSTEE. Shares of Class B Preferred Stock held by the Trustee shall be issued and outstanding shares of capital stock of the Corporation. Except to the extent provided in Section 11.3(E), the Prohibited Transferee shall have no rights in the Class B Preferred Stock held by the Trustee, and the Prohibited Transferee shall not benefit economically from ownership of any shares held in trust by the Trustee, shall have no rights to dividends and shall not possess any rights to vote or other rights attributable to the shares held in the Trust. (D) DIVIDEND AND VOTING RIGHTS. The Trustee shall have all voting rights and rights to dividends with respect to shares of Class B Preferred Stock held in the Trust, which rights shall be exercised for the benefit of the Charitable Beneficiary. Any dividend or distribution paid prior to the discovery by the Corporation that the shares of Class B Preferred Stock have been transferred to the Trustee shall be repaid to the Corporation upon demand, and any dividend or distribution declared but unpaid shall be rescinded as void AB INITIO with respect to such shares of Class B Preferred Stock. Any dividends or distributions so disgorged or rescinded shall be paid over to the Trustee and held in trust for the Charitable Beneficiary. Any vote cast by a Prohibited Transferee prior to the discovery by the Corporation that the shares of Class B Preferred Stock have been transferred to the Trustee will be rescinded as void AB INITIO and shall be recast in accordance with the desires of the Trustee acting for the benefit of the Charitable Beneficiary. The owner of the shares at the time of the Excess Transfer, change in capital structure or other event giving rise to a potential violation of the Ownership Limit, Initial Holder Limit or Look-Through Entity Ownership Limit shall be deemed to have given an irrevocable proxy to the Trustee to vote the shares of Class B Preferred Stock for the benefit of the Charitable Beneficiary. (E) RESTRICTIONS ON TRANSFER. The Trustee of the Trust may sell the shares held in the Trust to a person, designated by the Trustee, whose ownership of the shares will not violate the Ownership Restrictions. If such a sale is made, the interest of the Charitable Beneficiary shall terminate and proceeds of the sale shall be payable to the Prohibited Transferee and to the Charitable Beneficiary as provided in this Section 11.3(E). The Prohibited Transferee shall receive the lesser of (1) the price paid by the Prohibited Transferee for the shares or, if the Prohibited Transferee did not give value for the shares (through a gift, devise or other transaction), the Market Price of the shares on the day of the event causing the shares to be held in the Trust and (2) the price per share received by the Trustee from the sale or other disposition of the shares held in the Trust. Any proceeds in excess of the amount payable to the Prohibited Transferee shall be payable to the Charitable Beneficiary. If any of the transfer 41 restrictions set forth in this Section 11.3(E) or any application thereof is determined in a final judgment to be void, invalid or unenforceable by any court having jurisdiction over the issue, the Prohibited Transferee may be deemed, at the option of the Corporation, to have acted as the agent of the Corporation in acquiring the Class B Preferred Stock as to which such restrictions would, by their terms, apply, and to hold such Class B Preferred Stock on behalf of the Corporation. (F) PURCHASE RIGHT IN STOCK TRANSFERRED TO THE TRUSTEE. Shares of Class B Preferred Stock transferred to the Trustee shall be deemed to have been offered for sale to the Corporation, or its designee, at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in such transfer to the Trust (or, in the case of a devise or gift, the Market Price at the time of such devise or gift) and (ii) the Market Price on the date the Corporation, or its designee, accepts such offer. The Corporation shall have the right to accept such offer for a period of 90 days after the later of (i) the date of the Excess Transfer or other event resulting in a transfer to the Trust and (ii) the date that the Board of Directors determines in good faith that an Excess Transfer or other event occurred. (G) DESIGNATION OF CHARITABLE BENEFICIARIES. By written notice to the Trustee, the Corporation shall designate one or more nonprofit organizations to be the Charitable Beneficiary of the interest in the Trust relating to such Prohibited Transferee if (i) the shares of Class B Preferred Stock held in the Trust would not violate the Ownership Restrictions in the hands of such Charitable Beneficiary and (ii) each Charitable Beneficiary is an organization described in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code. 11.4 NOTICE OF RESTRICTED TRANSFER. Any Person that acquires or attempts to acquire shares of Class B Preferred Stock in violation of Section 11.1 of this Article, or any Person that is a Prohibited Transferee such that stock is transferred to the Trustee under Section 11.3 of this Article, shall immediately give written notice to the Corporation of such event and shall provide to the Corporation such other information as the Corporation may request in order to determine the effect, if any, of such Transfer or attempted Transfer or other event on the Corporation's status as a REIT. Failure to give such notice shall not limit the rights and remedies of the Board of Directors provided herein in any way. 11.5 OWNERS REQUIRED TO PROVIDE INFORMATION. From and after the Issue Date certain record and Beneficial Owners and transferees of shares of Class B Preferred Stock will be required to provide certain information as set out below. (A) ANNUAL DISCLOSURE. Every record and Beneficial Owner of more than 5% (or such other percentage between 0.5% and 5%, as provided in the applicable regulations adopted under the Code) of the number of Outstanding shares of Class B Preferred Stock shall, within 30 days after January 1 of each year, give written notice to the Corporation stating the name and address of such record or Beneficial Owner, the number of shares of Class B Preferred Stock Beneficially Owned, and a full description of how such shares are held. Each such record or Beneficial Owner of Class B Preferred Stock shall, upon demand by the Corporation, disclose to the Corporation in writing such additional information with respect to the Beneficial Ownership of the Class B Preferred Stock as the Board of Directors, in its sole discretion, deems appropriate or necessary to (i) comply with the provisions of the Code regarding the qualification of the Corporation as a REIT under the Code and (ii) ensure compliance with the Ownership Limit, the Initial Holder Limit or the Look-Through Ownership Limit, as applicable. Each stockholder of record, including without limitation any Person that holds shares of Class B Preferred Stock on behalf of a Beneficial Owner, shall take all reasonable steps to obtain the written notice described in this Section 11.5 from the Beneficial Owner. (B) DISCLOSURE AT THE REQUEST OF THE CORPORATION. Any Person that is a Beneficial Owner of shares of Class B Preferred Stock and any Person (including the stockholder of record) that is holding shares of Class B Preferred Stock for a Beneficial Owner, and any proposed transferee of shares, shall provide such information as the Corporation, in its sole discretion, may request in order to determine the Corporation's status as a REIT, to comply with the requirements of any taxing authority or other governmental agency, to determine any such compliance or to ensure compliance with the Ownership Limit, the Initial Holder Limit and the Look-Through Ownership Limit, and shall provide a statement or affidavit to the Corporation setting forth the number of shares of Class B Preferred Stock already Beneficially Owned by such stockholder or proposed transferee and any related 42 persons specified, which statement or affidavit shall be in the form prescribed by the Corporation for that purpose. 11.6 REMEDIES NOT LIMITED. Nothing contained in this Article shall limit the authority of the Board of Directors to take such other action as it deems necessary or advisable (subject to the provisions of Section 11.12 of this Article) (i) to protect the Corporation and the interests of its stockholders in the preservation of the Corporation's status as a REIT and (ii) to insure compliance with the Ownership Limit, the Initial Holder Limit and the Look-Through Ownership Limit. 11.7 AMBIGUITY. In the case of an ambiguity in the application of any of the provisions of Section 11 of this Article, or in the case of an ambiguity in any definition contained in Section 11 of this Article, the Board of Directors shall have the power to determine the application of the provisions of this Article with respect to any situation based on its reasonable belief, understanding or knowledge of the circumstances. 11.8 EXCEPTIONS. The following exceptions shall apply or may be established with respect to the limitations of Section 11.1 of this Article. (A) WAIVER OF OWNERSHIP LIMIT. The Board of Directors, upon receipt of a ruling from the Internal Revenue Service or an opinion of tax counsel or other evidence or undertaking acceptable to it, may waive the application, in whole or in part, of the Ownership Limit to a Person subject to the Ownership Limit, if such person is not an individual for purposes of Section 542(a) of the Code and is a corporation, partnership, estate or trust. In connection with any such exemption, the Board of Directors may require such representations and undertakings from such Person and may impose such other conditions as the Board deems necessary, in its sole discretion, to determine the effect, if any, of the proposed Transfer on the Corporation's status as a REIT. (B) PLEDGE BY INITIAL HOLDER. Notwithstanding any other provision of this Article, the pledge by the Initial Holder of all or any portion of the Class B Preferred Stock directly owned at any time or from time to time shall not constitute a violation of Section 11.1 of this Article and the pledgee shall not be subject to the Ownership Limit with respect to the Class B Preferred Stock so pledged to it either as a result of the pledge or upon foreclosure. (C) UNDERWRITERS. For a period of 270 days following the purchase of Class B Preferred Stock by an underwriter that (i) is a corporation or a partnership and (ii) participates in an offering of the Class B Preferred Stock, such underwriter shall not be subject to the Ownership Limit with respect to the Class B Preferred Stock purchased by it as a part of or in connection with such offering and with respect to any Class B Preferred Stock purchased in connection with market making activities. 11.9 LEGEND. Each certificate for Class B Preferred Stock shall bear the following legend: "The shares of Class B Preferred Stock represented by this certificate are subject to restrictions on transfer. No person may Beneficially Own shares of Class B Preferred Stock in excess of the Ownership Restrictions, as applicable, with certain further restrictions and exceptions set forth in the Corporation's Charter (including the Articles Supplementary setting forth the terms of the Class B Preferred Stock). Any Person that attempts to Beneficially Own shares of Class B Preferred Stock in excess of the applicable limitation must immediately notify the Corporation. All capitalized terms in this legend have the meanings ascribed to such terms in the Corporation's Charter (including the Articles Supplementary setting forth the terms of the Class B Preferred Stock), as the same may be amended from time to time, a copy of which, including the restrictions on transfer, will be sent without charge to each stockholder that so requests. If the restrictions on transfer are violated, the shares of Class B Preferred Stock represented hereby will be either (i) void in accordance with the Certificate or (ii) automatically transferred to a Trustee of a Trust for the benefit of one or more Charitable Beneficiaries." 11.10 SEVERABILITY. If any provision of this Article or any application of any such provision is determined in a final and unappealable judgment to be void, invalid or unenforceable by any Federal or state court having jurisdiction over the issues, the validity and enforceability of the remaining provisions shall not be affected and other 43 applications of such provision shall be affected only to the extent necessary to comply with the determination of such court. 11.11 BOARD OF DIRECTORS DISCRETION. Anything in this Article to the contrary notwithstanding, the Board of Directors shall be entitled to take or omit to take such actions as it in its discretion shall determine to be advisable in order that the Corporation maintain its status as and continue to qualify as a REIT, including, but not limited to, reducing the Ownership Limit, the Initial Holder Limit and the Look-Through Ownership Limit in the event of a change in law. 11.12 SETTLEMENT. Nothing in this Section 11 of this Article shall be interpreted to preclude the settlement of any transaction entered into through the facilities of the NYSE or other securities exchange or an automated interdealer quotation system. * * * * * * SECOND: The Board of Directors of the Corporation at a meeting or by a unanimous consent in writing in lieu of a meeting under Section 2408 of the Maryland General Corporation Law, as of October 23, 1997, adopted a resolution that set forth and approved the foregoing restatement of the Charter. THIRD: The Charter of the Corporation is not amended by these Articles of Restatement; PROVIDED, HOWEVER, consistent with Section 2608(b)(7) of the Maryland General Corporation Law, the current number and names of directors are provided in Section 2 of Article VI of the restated Charter of the Corporation. FOURTH: References to "these Articles of Amendment and Restatement" have been retained in Section 4 of Article IV, in Section 4, Section 5, and Section 7 of Article VI, and in Article VIII of the restated Charter and to "these Articles Supplementary" have been retained in Section 1 of Article XII of the restated Charter to conform to the original text of the provisions. In the context of these Articles of Restatement the term "these Articles of Amendment and Restatement" should be read as "the Charter" and the term "these Articles Supplementary" should be read as "this Article". FIFTH: The sentence "Upon the filing of these Articles of Amendment, there shall be authorized 750,000 shares and issued and outstanding 650,000 shares of the Class B Common Stock" has been retained in Section 8 of Article XII of the restated Charter to conform to the original text of the provision. In the context of these Articles of Restatement the sentence is not necessary. SIXTH: The number of shares of Class B Common Stock shown as "750,000" has been retained in Section 1.1 of Article IV of the restated Charter to conform to the original text of the provision. As of August 11, 1997 a total of 325,000 shares of Class B Common Stock have been converted which causes the number of authorized shares of Class B Common Stock to be reduced from 750,000 shares to 425,000 shares as provided in Sections 6(a) and 8 of Article XII of the restated Charter. SEVENTH: The number of shares of Preferred Stock shown as "10,000,000" has been retained in Section 1.1 of Article IV of the restated Charter to conform to the original text of the provision. As of August 4, 1997 a total of 750,000 shares of Preferred Stock were reclassified as Class B Cumulative Convertible Preferred Stock, par value $.01 per share (the "Class B Preferred Stock"), which causes the number of authorized shares of Preferred Stock to be reduced from 10,000,000 shares to 9,250,000 shares and the number of authorized shares of Class B Preferred Stock to be increased from zero shares to 750,000 shares as provided in Sections 1 Article XIII of the restated Charter. 44 IN WITNESS WHEREOF, APARTMENT INVESTMENT AND MANAGEMENT COMPANY has caused these presents to be signed in its name and on its behalf by its President and witnessed by its Secretary on November 7, 1997. WITNESS: APARTMENT INVESTMENT AND MANAGEMENT COMPANY /s/ LEEANN MOREIN By: /s/ PETER K. KOMPANIEZ - ------------------------------- ---------------------------------- Leeann Morein, Secretary Peter K. Kompaniez, President THE UNDERSIGNED, President of APARTMENT INVESTMENT AND MANAGEMENT COMPANY, who executed on behalf of the Corporation the foregoing Articles of Restatement of which this certificate is made a part, hereby acknowledges in the name and on behalf of said Corporation the foregoing Articles of Restatement to be the corporate act of said Corporation and hereby certifies that to the best of his knowledge, information, and belief the matters and facts set forth therein with respect to the authorization and approval thereof are true in all material respects under the penalties of perjury. /s/ PETER K. KOMPANIEZ -------------------------------------- Peter K. Kompaniez, President 45 ARTICLES SUPPLEMENTARY APARTMENT INVESTMENT AND MANAGEMENT COMPANY CLASS C CUMULATIVE PREFERRED STOCK (PAR VALUE $.01 PER SHARE) APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation (hereinafter called the "Corporation"), having its principal office in Baltimore City, Maryland, hereby certifies to the Department of Assessments and Taxation of the State of Maryland that: FIRST: Pursuant to authority expressly vested in the Board of Directors of the Corporation by Section 1.2 of Article IV of the Charter of the Corporation, the Board of Directors has duly divided and classified 2,760,000 authorized but unissued shares of the capital stock of the Corporation into a class designated as Class C Cumulative Preferred Stock and has provided for the issuance of such class. SECOND: The reclassification increases the number of shares classified as Class C Cumulative Preferred Stock, par value $.01 per share, from no shares immediately prior to the reclassification to 2,760,000 shares immediately after the reclassification. The reclassification decreases the number of shares classified as Preferred Stock, par value $.01 per share, from 9,250,000 shares immediately prior to the reclassification to 6,490,000 shares immediately after the reclassification. The number of shares classified as Class C Cumulative Preferred Stock may be decreased pursuant to Section 6 of Article Third of these Articles Supplementary upon reacquisition thereof in any manner, or by retirement thereof, by the Corporation. THIRD: The terms of the Class C Cumulative Preferred Stock (including the preferences, conversions or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, or terms or conditions of redemption) as set by the Board of Directors are as follows: 1. NUMBER OF SHARES AND DESIGNATION. This class of Preferred Stock shall be designated as Class C Cumulative Preferred Stock (the "Class C Preferred Stock") and Two Million Seven Hundred Sixty Thousand (2,760,000) shall be the authorized number of shares of such Class C Preferred Stock constituting such class. 5 46 2. DEFINITIONS. For purposes of the Class C Preferred Stock, the following terms shall have the meanings indicated: "ACT" shall mean the Securities Act of 1933, as amended. "AFFILIATE" of a Person means a Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Person specified. "AGGREGATE VALUE" shall mean, with respect to any block of Equity Stock, the sum of the products of (i) the number of shares of each class of Equity Stock within such block multiplied by (ii) the corresponding Market Price of one share of Equity Stock of such class. "BENEFICIAL OWNERSHIP" shall mean, with respect to any Person, ownership of shares of Equity Stock equal to the sum of (i) the number of shares of Equity Stock directly owned by such Person, (ii) the number of shares of Equity Stock indirectly owned by such Person (if such Person is an "individual" as defined in Section 542(a)(2) of the Code) taking into account the constructive ownership rules of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code, and (iii) the number of shares of Equity Stock that such Person is deemed to beneficially own pursuant to Rule 13d3 under the Exchange Act or that is attributed to such Person pursuant to Section 318 of the Code, as modified by Section 856(d)(5) of the Code, PROVIDED that when applying this definition of Beneficial Ownership to the Initial Holder, clause (iii) of this definition, and clause (ii) of the definition of "Person" shall be disregarded. The terms "BENEFICIAL OWNER," "BENEFICIALLY OWNS" and "BENEFICIALLY OWNED" shall have the correlative meanings. "BOARD OF DIRECTORS" shall mean the Board of Directors of the Corporation or any committee authorized by such Board of Directors to perform any of its responsibilities with respect to the Class C Preferred Stock. "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a day on which state or federally chartered banking institutions in New York, New York are not required to be open. "CHARITABLE BENEFICIARY" shall mean one or more beneficiaries of the Trust as determined pursuant to Section 10.3 of this Article, each of which shall be an organization described in Section 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code. "CLASS C PREFERRED STOCK" shall have the meaning set forth in Section 1 of this Article. "CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor thereto, as interpreted by any applicable 6 47 regulations or other administrative pronouncements as in effect from time to time. "COMMON STOCK" shall mean the Class A Common Stock, $.01 par value per share, of the Corporation or such shares of the Corporation's capital stock into which outstanding shares of Common Stock shall be reclassified. "DIVIDEND PAYMENT DATE" shall mean January 15, April 15, July 15 and October 15 of each year; provided, further, that if any Dividend Payment Date falls on any day other than a Business Day, the dividend payment payable on such Dividend Payment Date shall be paid on the Business Day immediately following such Dividend Payment Date and no interest shall accrue on such dividend from such date to such Dividend Payment Date. "DIVIDEND PERIODS" shall mean the Initial Dividend Period and each subsequent quarterly dividend period commencing on and including January 15, April 15, July 15 and October 15 of each year and ending on and including the day preceding the first day of the next succeeding Dividend Period, other than the Dividend Period during which any Class B Preferred Stock shall be redeemed pursuant to Section 5 hereof, which shall end on and include the Redemption Date with respect to the Class C Preferred Stock being redeemed. "EQUITY STOCK" shall mean one or more shares of any class of capital stock of the Corporation. "EXCESS TRANSFER" has the meaning set forth in Section 10.3(A) of this Article. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. "ISSUE DATE" shall mean December 23, 1997(1). "INITIAL DIVIDEND PERIOD" shall mean the period commencing on and including the Issue Date and ending on and including April 14, 1998. "INITIAL HOLDER" shall mean Terry Considine. "INITIAL HOLDER LIMIT" shall mean a number of the Outstanding shares of Class C Preferred Stock of the Corporation having an Aggregate Value not in excess of the excess of (x) 15% of the Aggregate Value of all Outstanding shares of Equity Stock over (y) the Aggregate Value of all shares of Equity Stock other than Class B Preferred Stock that are Beneficially Owned by the Initial Holder. From the Issue Date, the secretary of the Corporation, or such other person as shall be designated by the Board of Directors, shall upon request make available to the representative(s) of the Initial Holder and the Board of Directors, a schedule that sets forth the thencurrent Initial Holder Limit applicable to the Initial Holder. 7 48 "JUNIOR STOCK" shall mean the Common Stock and any other class or series of capital stock of the Corporation over which the shares of Class C Preferred Stock have preference or priority in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Corporation. "LOOK-THROUGH ENTITY" shall mean a Person that is either (i) described in Section 401(a) of the Code as provided under Section 856(h)(3) of the Code or (ii) registered under the Investment Company Act of 1940. "LOOK-THROUGH OWNERSHIP LIMIT" shall mean, for any Look-Through Entity, a number of the Outstanding shares of Class C Preferred Stock of the Corporation having an Aggregate Value not in excess of the excess of (x) 15% of the Aggregate Value of all Outstanding shares of Equity Stock over (y) by the Aggregate Value of all shares of Equity Stock other than Class B Preferred Stock that are Beneficially Owned by the Look-Through Entity. "MARKET PRICE" on any date shall mean, with respect to any share of Equity Stock, the Closing Price of share of that class of Equity Stock on the Trading Day immediately preceding such date. The term "CLOSING PRICE" on any date shall mean the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE or, if the Equity Stock is not listed or admitted to trading on the NYSE, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Equity Stock is listed or admitted to trading or, if the Equity Stock is not listed or admitted to trading on any national securities exchange, the last quoted price, or if not so quoted, the average of the high bid and low asked prices in the overthecounter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the principal other automated quotations system that may then be in use or, if the Equity Stock is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Equity Stock selected by the Board of Directors of the Company. The term "TRADING DAY" shall mean a day on which the principal national securities exchange on which the Equity Stock is listed or admitted to trading is open for the transaction of business or, if the Equity Stock is not listed or admitted to trading on any national securities exchange, shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. "NYSE" shall mean the New York Stock Exchange, Inc. "OUTSTANDING" shall mean issued and outstanding shares of Equity Stock of the Corporation, PROVIDED that for purposes of the application of the Ownership Limit, the Look-Through Ownership Limit or the Initial Holder Limit to any Person, the term "OUTSTANDING" shall be deemed to include the number of shares of Equity Stock that such Person alone, at that time, could acquire pursuant to any options or convertible securities. 8 49 "OWNERSHIP LIMIT" shall mean, for any Person other than the Initial Holder or a Look-Through Entity, a number of the Outstanding shares of Class C Preferred Stock of the Corporation having an Aggregate Value not in excess of the excess of (x) 8.7% of the Aggregate Value of all Outstanding shares of Equity Stock over (y) the Aggregate Value of all shares of Equity Stock other than Class C Preferred Stock that are Beneficially Owned by the Person. "OWNERSHIP RESTRICTIONS" shall mean collectively the Ownership Limit as applied to Persons other than the Initial Holder or Look-Through Entities, the Initial Holder Limit as applied to the Initial Holder and the Look-Through Ownership Limit as applied to Look-Through Entities. "PARITY STOCK" shall have the meaning set forth in paragraph (b) of Section 7 of this Article. The Class B Preferred Stock shall be a Parity Stock. "PERSON" shall mean (a) for purposes of Section 10 of this Article, (i) an individual, corporation, partnership, estate, trust (including a trust qualifying under Section 401(a) or 501(c) of the Code), association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, and (ii) also includes a group as that term is used for purposes of Section 13(d)(3) of the Exchange Act and (b) for purposes of the remaining Sections of this Article, any individual, firm, partnership, corporation or other entity and shall include any successor (by merger or otherwise) of such entity. "PROHIBITED TRANSFEREE" has the meaning set forth in Section 10.3(A) of this Article. "REDEMPTION DATE" shall have the meaning set forth in paragraph (b) of Section 5 of this Article. "REIT" shall mean a "real estate investment trust" as defined in Section 856 of the Code. "SENIOR STOCK" shall have the meaning set forth in paragraph (a) of Section 7 of this Article. "SET APART FOR PAYMENT" shall be deemed to include, without any action other than the following, the recording by the Corporation in its accounting ledgers of any accounting or bookkeeping entry which indicates, pursuant to a declaration of dividends or other distribution by the Board of Directors, the allocation of funds to be so paid on any series or class of capital stock of the Corporation; provided, however, that if any funds for any class or series of Junior Stock or any class or series of Parity Stock are placed in a separate account of the Corporation or delivered to a disbursing, paying or other similar agent, then "set apart for payment" with respect to the Class C Preferred Stock shall mean placing such funds in a separate account or delivering such funds to a disbursing, paying or other similar agent. "TRADING DAY", as to any securities, shall mean any day on which such securities are traded on the principal national securities exchange on which such securities are listed or admitted or, if such securities are not listed or admitted for trading on any national securities exchange, the NASDAQ 9 50 National Market or, if such securities are not listed or admitted for trading on the NASDAQ National Market, in the securities market in which such securities are traded. "TRANSFER" shall mean any sale, transfer, gift, assignment, devise or other disposition of a share of Class C Preferred Stock (including (i) the granting of an option or any series of such options or entering into any agreement for the sale, transfer or other disposition of Class C Preferred Stock or (ii) the sale, transfer, assignment or other disposition of any securities or rights convertible into or exchangeable for Class C Preferred Stock), whether voluntary or involuntary, whether of record or Beneficial Ownership, and whether by operation of law or otherwise (including, but not limited to, any transfer of an interest in other entities that results in a change in the Beneficial Ownership of shares of Class C Preferred Stock). The term "TRANSFERS" and "TRANSFERRED" shall have correlative meanings. "TRANSFER AGENT" means such transfer agent as may be designated by the Board of Directors or their designee as the transfer agent for the Class C Preferred Stock; provided, that if the Corporation has not designated a transfer agent then the Corporation shall act as the transfer agent for the Class C Preferred Stock. "TRUST" shall mean the trust created pursuant to Section 10.3 of this Article. "TRUSTEE" shall mean the Person unaffiliated with either the Corporation or the Prohibited Transferee that is appointed by the Corporation to serve as trustee of the Trust. "VOTING PREFERRED STOCK" shall have the meaning set forth in Section 8 of this Article. 3. DIVIDENDS. (a) The holders of Class C Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors out of funds legally available for that purpose, cumulative dividends payable in cash in an amount per share of Class C Preferred Stock equal to $2.25 per annum. Such dividends shall be cumulative from the Issue Date, whether or not in any Dividend Period or Periods such dividends shall be declared or there shall be funds of the Corporation legally available for the payment of such dividends, and shall be payable quarterly in arrears on each Dividend Payment Date, commencing on April 15, 1998. Each such dividend shall be payable in arrears to the holders of record of the Class C Preferred Stock, as they appear on the stock records of the Corporation at the close of business on the January 1, April 1, July 1 or October 1, as the case may be, immediately preceding such Dividend Payment Date. Accumulated, accrued and unpaid dividends for any past Dividend Periods may be declared and paid at any time, without reference to any regular Dividend Payment Date, to holders of record on such date, which date shall not precede by more than 45 days the payment date thereof, as may be fixed by the Board of Directors. (b) The amount of dividends payable per share of Class C Preferred Stock for the Initial Dividend Period, or any other period shorter than a full Dividend Period, shall be computed ratably on the basis of twelve 30day months and a 360day 10 51 year. Holders of Class C Preferred Stock shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of cumulative dividends, as herein provided, on the Class C Preferred Stock. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Class C Preferred Stock that may be in arrears. (c) So long as any of the shares of Class C Preferred Stock are outstanding, except as described in the immediately following sentence, no dividends shall be declared or paid or set apart for payment by the Corporation and no other distribution of cash or other property shall be declared or made directly or indirectly by the Corporation with respect to any class or series of Parity Stock for any period unless dividends equal to the full amount of accumulated, accrued and unpaid dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof has been or contemporaneously is set apart for such payment on the Class C Preferred Stock for all Dividend Periods terminating on or prior to the Dividend Payment Date with respect to such class or series of Parity Stock. When dividends are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, all dividends declared upon the Class C Preferred Stock and all dividends declared upon any other class or series of Parity Stock shall be declared ratably in proportion to the respective amounts of dividends accumulated, accrued and unpaid on the Class C Preferred Stock and accumulated, accrued and unpaid on such Parity Stock. (d) So long as any of the shares of Class C Preferred Stock are outstanding, no dividends (other than dividends or distributions paid in shares of, or options, warrants or rights to subscribe for or purchase shares of, Junior Stock) shall be declared or paid or set apart for payment by the Corporation and no other distribution of cash or other property shall be declared or made, directly or indirectly, by the Corporation with respect to any shares of Junior Stock, nor shall any shares of Junior Stock be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Common Stock made for purposes of an employee incentive or benefit plan of the Corporation or any subsidiary) for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock), directly or indirectly, by the Corporation (except by conversion into or exchange for shares of, or options, warrants or rights to subscribe for or purchase shares of, Junior Stock), nor shall any other cash or other property otherwise be paid or distributed to or for the benefit of any holder of shares of Junior Stock in respect thereof, directly or indirectly, by the Corporation unless in each case the full cumulative dividends (including all accumulated, accrued and unpaid dividends) on all outstanding shares of Class C Preferred Stock shall have been paid or such dividends have been declared and set apart for payment for all past Dividend Periods with respect to the Class C Preferred Stock. Notwithstanding the provisions of this Section 3(d), the Corporation shall not be prohibited from (i) declaring or paying or setting apart for payment any dividend or distribution on any shares of Parity Stock or (ii) or redeeming, purchasing or otherwise acquiring any Parity Stock, in each case, if such declaration, payment, redemption, purchase or other acquisition is necessary in order to maintain the continued qualification of the Corporation as a REIT under Section 856 of the Code. 11 52 4. LIQUIDATION PREFERENCE. (a) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any payment or distribution by the Corporation (whether of capital or surplus) shall be made to or set apart for the holders of Junior Stock, the holders of shares of Class C Preferred Stock shall be entitled to receive TwentyFive Dollars ($25) per share of Class C Preferred Stock (the "Liquidation Preference"), plus an amount equal to all dividends (whether or not earned or declared) accumulated, accrued and unpaid thereon to the date of final distribution to such holders; but such holders shall not be entitled to any further payment. Until the holders of the Class C Preferred Stock have been paid the Liquidation Preference in full, plus an amount equal to all dividends (whether or not earned or declared) accumulated, accrued and unpaid thereon to the date of final distribution to such holders, no payment will be made to any holder of Junior Stock upon the liquidation, dissolution or winding up of the Corporation. If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation, or proceeds thereof, distributable among the holders of Class C Preferred Stock shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other shares of any class or series of Parity Stock, then such assets, or the proceeds thereof, shall be distributed among the holders of Class C Preferred Stock and any such other Parity Stock ratably in the same proportion as the respective amounts that would be payable on such Class C Preferred Stock and any such other Parity Stock if all amounts payable thereon were paid in full. For the purposes of this Section 4, (i) a consolidation or merger of the Corporation with one or more corporations, (ii) a sale or transfer of all or substantially all of the Corporation's assets, or (iii) a statutory share exchange shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Corporation. (b) Upon any liquidation, dissolution or winding up of the Corporation, after payment shall have been made in full to the holders of Class C Preferred Stock and any Parity Stock, as provided in this Section 4, any other series or class or classes of Junior Stock shall, subject to the respective terms thereof, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Class C Preferred Stock and any Parity Stock shall not be entitled to share therein. 5. REDEMPTION AT THE OPTION OF THE CORPORATION. (a) Shares of Class C Preferred Stock shall not be redeemable by the Corporation prior to December 23, 2002(2) except as set forth in Section 10.2 of this Article. On and after December 23, 2002(3), the Corporation, at its option, may redeem shares of Class C Preferred Stock, in whole or from time to time in part, at a redemption price payable in cash equal to 100% of the Liquidation Preference thereof, plus all accrued and unpaid dividends to the date fixed for redemption (the "Redemption Date"). In connection with any redemption pursuant to this Section 5(a), the redemption price of the Class C Preferred Stock (other than any portion thereof consisting of accrued and unpaid dividends) shall be payable solely with the proceeds from the sale by the Corporation or AIMCO Properties, L.P., a Delaware limited partnership (the "Operating Partnership") of other capital shares of the Corporation or the Operating Partnership (whether or not such sale occurs concurrently with such redemption). For purposes of the preceding sentence, 'capital shares' means any common stock, preferred stock, depositary shares, partnership or other interests, participations or other ownership interests (however designated) and any rights (other than debt securities convertible into or exchangeable at the option of the holder for equity securities (unless and to the extent such debt securities are subsequently converted into capital shares)) or options to purchase any of the foregoing of or in the Corporation or the Operating Partnership. 12 53 (b) The Redemption Date shall be selected by the Corporation, shall be specified in the notice of redemption and shall be not less than 30 days nor more than 60 days after the date notice of redemption is sent by the Corporation. (c) If full cumulative dividends on all outstanding shares of Class C Preferred Stock have not been paid or declared and set apart for payment, no shares of Class C Preferred Stock may be redeemed unless all outstanding shares of Class C Preferred Stock are simultaneously redeemed and neither the Corporation nor any affiliate of the Corporation may purchase or acquire shares of Class C Preferred Stock, otherwise than pursuant to a purchase or exchange offer made on the same terms to all holders of shares of Class C Preferred Stock. (d) If the Corporation shall redeem shares of Class C Preferred Stock pursuant to paragraph (a) of this Section 5, notice of such redemption shall be given to each holder of record of the shares to be redeemed. Such notice shall be provided by first class mail, postage prepaid, at such holder's address as the same appears on the stock records of the Corporation. Neither the failure to mail any notice required by this paragraph (d), nor any defect therein or in the mailing thereof to any particular holder, shall affect the sufficiency of the notice or the validity of the proceedings for redemption with respect to the other holders. Any notice which was mailed in the manner herein provided shall be conclusively presumed to have been duly given on the date mailed whether or not the holder receives the notice. Each such notice shall state, as appropriate: (1) the Redemption Date; (2) the number of shares of Class C Preferred Stock to be redeemed and, if fewer than all such shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; and (3) the place or places at which certificates for such shares are to be surrendered for cash. Notice having been mailed as aforesaid, from and after the Redemption Date (unless the Corporation shall fail to make available the amount of cash necessary to effect such redemption), (i) except as otherwise provided herein, dividends on the shares of Class C Preferred Stock so called for redemption shall cease to accumulate or accrue on the shares of Class C Preferred Stock called for redemption (except that, in the case of a Redemption Date after a dividend record date and prior to the related Dividend Payment Date, holders of Class C Preferred Stock on the dividend record date will be entitled on such Dividend Payment Date to receive the dividend payable on such shares), (ii) said shares shall no longer be deemed to be outstanding, and (iii) all rights of the holders thereof as holders of Class C Preferred Stock of the Corporation shall cease (except the rights to receive the cash payable upon such redemption, without interest thereon, upon surrender and endorsement of their certificates if so required and to receive any dividends payable thereon). The Corporation's obligation to make available the redemption price in accordance with the preceding sentence shall be deemed fulfilled if, on or before the Call Date, the Corporation shall deposit with a bank or trust company (which may be an affiliate of the Corporation) that has, or is an affiliate of a bank or trust company that has, a capital and surplus of at least $50,000,000, such amount of cash as is necessary for such redemption, in trust, with irrevocable instructions that such cash be applied to the redemption of the shares of Class C Preferred Stock so called for redemption. No interest shall accrue for the benefit of the holders of shares of Class C Preferred Stock to be redeemed on any cash so set aside by the Corporation. Subject to applicable escheat laws, any such cash unclaimed at the end of two years from the Redemption Date shall revert to the general funds of the Corporation, after which reversion the holders of shares of Class C Preferred Stock so called for redemption shall look only to the general funds of the Corporation for the payment of such cash. 13 54 As promptly as practicable after the surrender in accordance with such notice of the certificates for any such shares of Class C Preferred Stock to be so redeemed (properly endorsed or assigned for transfer, if the Corporation shall so require and the notice shall so state), such certificates shall be exchanged for cash (without interest thereon) for which such shares have been redeemed in accordance with such notice. If fewer than all the outstanding shares of Class C Preferred Stock are to be redeemed, shares to be redeemed shall be selected by the Corporation from outstanding shares of Class C Preferred Stock not previously called for redemption by lot or, with respect to the number of shares of Class C Preferred Stock held of record by each holder of such shares, pro rata (as nearly as may be) or by any other method as may be determined by the Board of Directors in its discretion to be equitable. If fewer than all the shares of Class C Preferred Stock represented by any certificate are redeemed, then a new certificate representing the unredeemed shares shall be issued without cost to the holders thereof. 6. STATUS OF REACQUIRED STOCK. All shares of Class C Preferred Stock which shall have been issued and reacquired in any manner by the Corporation shall be returned to the status of authorized, but unissued shares of Class C Preferred Stock. 7. RANKING. Any class or series of capital stock of the Corporation shall be deemed to rank: (a) prior or senior to the Class C Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, if the holders of such class or series shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Class C Preferred Stock ("Senior Stock"); (b) on a parity with the Class C Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share thereof be different from those of the Class C Preferred Stock, if the holders of such class of stock or series and the Class C Preferred Stock shall be entitled to the receipt of dividends and of amounts distributable upon liquidation, dissolution or winding up in proportion to their respective amounts of accrued and unpaid dividends per share or liquidation preferences, without preference or priority one over the other ("Parity Stock"); and (c) junior to the Class C Preferred Stock, as to the payment of dividends or as to the distribution of assets upon liquidation, dissolution or winding up, if such stock or series shall be Common Stock or if the holders of Class C Preferred Stock shall be entitled to receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of shares of such class or series ("Junior Stock"). 14 55 8. VOTING. (a) If and whenever six quarterly dividends (whether or not consecutive) payable on the Class C Preferred Stock or any series or class of Parity Stock shall be in arrears (which shall, with respect to any such quarterly dividend, mean that any such dividend has not been paid in full), whether or not earned or declared, the number of directors then constituting the Board of Directors shall be increased by two (if not already increased by reason of similar types of provisions with respect to shares of Parity Stock of any other class or series which is entitled to similar voting rights (the "Voting Preferred Stock")) and the holders of shares of Class C Preferred Stock, together with the holders of shares of all other Voting Preferred Stock then entitled to exercise similar voting rights, voting as a single class regardless of series, shall be entitled to elect the two additional directors to serve on the Board of Directors at any annual meeting of stockholders or special meeting held in place thereof, or at a special meeting of the holders of the Class C Preferred Stock and the Voting Preferred Stock called as hereinafter provided. Whenever all arrears in dividends on the Class C Preferred Stock and the Voting Preferred Stock then outstanding shall have been paid and dividends thereon for the current quarterly dividend period shall have been paid or declared and set apart for payment, then the right of the holders of the Class C Preferred Stock and the Voting Preferred Stock to elect such additional two directors shall cease (but subject always to the same provision for the vesting of such voting rights in the case of any similar future arrearages), and the terms of office of all Persons elected as directors by the holders of the Class C Preferred Stock and the Voting Preferred Stock shall forthwith terminate and the number of directors constituting the Board of Directors shall be reduced accordingly. At any time after such voting power shall have been so vested in the holders of Class C Preferred Stock and the Voting Preferred Stock, if applicable, the Secretary of the Corporation may, and upon the written request of any holder of Class C Preferred Stock (addressed to the Secretary at the principal office of the Corporation) shall, call a special meeting of the holders of the Class C Preferred Stock and of the Voting Preferred Stock for the election of the two directors to be elected by them as herein provided, such call to be made by notice similar to that provided in the Bylaws of the Corporation for a special meeting of the stockholders or as required by law. If any such special meeting required to be called as above provided shall not be called by the Secretary within 20 days after receipt of any such request, then any holder of Class C Preferred Stock may call such meeting, upon the notice above provided, and for that purpose shall have access to the stock books of the Corporation. The directors elected at any such special meeting shall hold office until the next annual meeting of the stockholders or special meeting held in lieu thereof if such office shall not have previously terminated as above provided. If any vacancy shall occur among the directors elected by the holders of the Class C Preferred Stock and the Voting Preferred Stock, a successor shall be elected by the Board of Directors, upon the nomination of the thenremaining director elected by the holders of the Class C Preferred Stock and the Voting Preferred Stock or the successor of such remaining director, to serve until the next annual meeting of the stockholders or special meeting held in place thereof if such office shall not have previously terminated as provided above. (b) So long as any shares of Class C Preferred Stock are outstanding, in addition to any other vote or consent of stockholders required by law or by the Charter of the Corporation, the affirmative vote of at least 662/3% of the votes entitled to be cast by the holders of the Class C Preferred Stock voting as a single class 15 56 with the holders of all other classes or series of Preferred Stock entitled to vote on such matters, given in Person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating: (i) Any amendment, alteration or repeal of any of the provisions of these Articles Supplementary, the Charter or the ByLaws of the Corporation that materially adversely affects the voting powers, rights or preferences of the holders of the Class C Preferred Stock; provided, however, that the amendment of the provisions of the Charter so as to authorize or create, or to increase the authorized amount of, or issue any Junior Stock or any shares of any class of Parity Stock shall not be deemed to materially adversely affect the voting powers, rights or preferences of the holders of Class C Preferred Stock; or (ii) The authorization, creation of, the increase in the authorized amount of, or issuance of any shares of any class of Senior Stock or any security convertible into shares of any class of Senior Stock (whether or not such class of Senior Stock is currently authorized); provided, however, that no such vote of the holders of Class C Preferred Stock shall be required if, at or prior to the time when such amendment, alteration or repeal is to take effect, or when the issuance of any such prior shares or convertible security is to be made, as the case may be, provision is made for the redemption of all shares of Class C Preferred Stock at the time outstanding to the extent such redemption is authorized by Section 5 of this Article. For purposes of the foregoing provisions and all other voting rights under these Articles Supplementary, each share of Class C Preferred Stock shall have one (1) vote per share, except that when any other class or series of preferred stock shall have the right to vote with the Class C Preferred Stock as a single class on any matter, then the Class C Preferred Stock and such other class or series shall have with respect to such matters one quarter of one (.25) vote per $25 of stated liquidation preference. Except as otherwise required by applicable law or as set forth herein, the Class C Preferred Stock shall not have any relative, participating, optional or other special voting rights and powers other than as set forth herein, and the consent of the holders thereof shall not be required for the taking of any corporate action. 9. RECORD HOLDERS. The Corporation and the Transfer Agent may deem and treat the record holder of any share of Class C Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Corporation nor the Transfer Agent shall be affected by any notice to the contrary. 16 57 10.1 RESTRICTIONS ON OWNERSHIP AND TRANSFERS. (A) LIMITATION ON BENEFICIAL OWNERSHIP. Except as provided in Section 10.8, from and after the Issue Date, no Person (other than the Initial Holder or a Look-Through Entity) shall Beneficially Own shares of Class C Preferred Stock in excess of the Ownership Limit, the Initial Holder shall not Beneficially Own shares of Class C Preferred Stock in excess of the Initial Holder Limit and no Look-Through Entity shall Beneficially Own shares of Class C Preferred Stock in excess of the Look-Through Ownership Limit. 17 58 (B) TRANSFERS IN EXCESS OF OWNERSHIP LIMIT. Except as provided in Section 10.8, from and after the Issue Date (and subject to Section 10.12), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated interdealer quotation system) that, if effective, would result in any Person (other than the Initial Holder or a Look-Through Entity) Beneficially Owning shares of Class C Preferred Stock in excess of the Ownership Limit shall be void AB INITIO as to the Transfer of such shares of Class C Preferred Stock that would be otherwise Beneficially Owned by such Person in excess of the Ownership Limit, and the intended transferee shall acquire no rights in such shares of Class C Preferred Stock. (C) TRANSFERS IN EXCESS OF INITIAL HOLDER LIMIT. Except as provided in Section 10.8, from and after the Issue Date (and subject to Section 10.12), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated interdealer quotation system) that, if effective, would result in the Initial Holder Beneficially Owning shares of Class C Preferred Stock in excess of the Initial Holder Limit shall be void AB INITIO as to the Transfer of such shares of Class C Preferred Stock that would be otherwise Beneficially Owned by the Initial Holder in excess of the Initial Holder limit, and the Initial Holder shall acquire no rights in such shares of Class C Preferred Stock. (D) TRANSFERS IN EXCESS OF LOOK-THROUGH OWNERSHIP LIMIT. Except as provided in Section 10.8 from and after the Issue Date (and subject to Section 10.12), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated interdealer quotation system) that, if effective, would result in any Look-Through Entity Beneficially Owning shares of Class C Preferred Stock in excess of the Look-Through Ownership limit shall be void AB INITIO as to the Transfer of such shares of Class C Preferred Stock that would be otherwise Beneficially Owned by such Look-Through Entity in excess of the Look-Through Ownership Limit and such Look-Through Entity shall acquire no rights in such shares of Class C Preferred Stock. (E) TRANSFERS RESULTING IN "CLOSELY HELD" STATUS. From and after the Issue Date, any Transfer that, if effective would result in the Corporation being "closely held" within the meaning of Section 856(h) of the Code, or would otherwise result in the Corporation failing to qualify as a REIT (including, without limitation, a Transfer or other event that would result in the Corporation owning (directly or constructively) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by the Corporation from such tenant would cause the Corporation to fail to satisfy any of the gross income requirements of Section 856(c) of the Code) shall be void AB INITIO as to the Transfer of shares of Class C Preferred Stock that would cause the Corporation (i) to be "closely held" within the meaning of Section 856(h) of the Code or (ii) otherwise fail to qualify as a REIT, as the case may be, and the intended transferee shall acquire no rights in such shares of Class C Preferred Stock. (F) SEVERABILITY ON VOID TRANSACTIONS. A Transfer of a share of Class C Preferred Stock that is null and void under Sections 10.1(B), (C), (D), or (E) of this Article because it would, if effective, result in (i) the ownership of Class C Preferred Stock in excess of the Initial Holder Limit, the Ownership Limit, or the Look-Through Ownership Limit, (ii) the Corporation being "closely held" within the 18 59 meaning of Section 856(h) of the Code or (iii) the Corporation otherwise failing to qualify as a REIT, shall not adversely affect the validity of the Transfer of any other share of Class C Preferred Stock in the same or any other related transaction. 10.2 REMEDIES FOR BREACH. If the Board of Directors or a committee thereof shall at any time determine in good faith that a Transfer or other event has taken place in violation of Section 10.1 of this Article or that a Person intends to acquire or has attempted to acquire Beneficial Ownership of any shares of Class C Preferred Stock in violation of Section 10.1 of this Article (whether or not such violation is intended), the Board of Directors or a committee thereof shall be empowered to take any action as it deems advisable to refuse to give effect to or to prevent such Transfer or other event, including, but not limited to, refusing to give effect to such Transfer or other event on the books of the Corporation, causing the Corporation to redeem such shares at the then current Market Price and upon such terms and conditions as may be specified by the Board of Directors in its sole discretion (including, but not limited to, by means of the issuance of longterm indebtedness for the purpose of such redemption), demanding the repayment of any distributions received in respect of shares of Class C Preferred Stock acquired in violation of Section 10.1 of this Article or instituting proceedings to enjoin such Transfer or to rescind such Transfer or attempted Transfer; PROVIDED, HOWEVER, that any Transfers or attempted Transfers (or in the case of events other than a Transfer, Beneficial Ownership) in violation of Section 10.1 of this Article, regardless of any action (or nonaction) by the Board of Directors or such committee, (a) shall be void AB INITIO or (b) shall automatically result in the transfer described in Section 10.3 of this Article; PROVIDED, FURTHER, that the provisions of this Section 10.2 shall be subject to the provisions of Section 10.12 of this Article; PROVIDED, FURTHER, that neither the Board of Directors nor any committee thereof may exercise such authority in a manner that interferes with any ownership or transfer of Class C Preferred Stock that is expressly authorized pursuant to Section 10.8(d) of this Article. 10.3. TRANSFER IN TRUST. (A) ESTABLISHMENT OF TRUST. If, notwithstanding the other provisions contained in this Article, at any time after the Issue Date there is a purported Transfer (an "EXCESS TRANSFER") (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated interdealer quotation system) or other change in the capital structure of the Corporation (including, but not limited to, any redemption of Preferred Stock) or other event (including, but not limited to, any acquisition of any share of Equity Stock) such that (a) any Person (other than the Initial Holder or a Look-Through Entity) would Beneficially Own shares of Class C Preferred Stock in excess of the Ownership Limit, or (b) the Initial Holder would Beneficially Own shares of Class C Preferred Stock in excess of the Initial Holder Limit, or (c) any Person that is a Look-Through Entity would Beneficially Own shares of Class C Preferred Stock in excess of the Look-Through Ownership Limit (in any such event, the Person, Initial Holder or Look-Through Entity that would Beneficially Own shares of Class C Preferred Stock in excess of the Ownership Limit, the Initial Holder Limit or the Look-Through Entity Limit, respectively, is referred to as a "PROHIBITED TRANSFEREE"), then, except as otherwise provided in Section 10.8 of this Article, such shares of Class C Preferred Stock in excess of the Ownership Limit, the Initial Holder Limit or the Look-Through Ownership Limit, as the case may be, (rounded up to the nearest whole share) shall be automatically transferred to a Trustee in his capacity as trustee of a Trust for the 19 60 exclusive benefit of one or more Charitable Beneficiaries. Such transfer to the Trustee shall be deemed to be effective as of the close of business on the business day prior to the Excess Transfer, change in capital structure or another event giving rise to a potential violation of the Ownership Limit, the Initial Holder Limit or the Look-Through Entity Ownership Limit. (B) APPOINTMENT OF TRUSTEE. The Trustee shall be appointed by the Corporation and shall be a Person unaffiliated with either the Corporation or any Prohibited Transferee. The Trustee may be an individual or a bank or trust company duly licensed to conduct a trust business. (C) STATUS OF SHARES HELD BY THE TRUSTEE. Shares of Class C Preferred Stock held by the Trustee shall be issued and outstanding shares of capital stock of the Corporation. Except to the extent provided in Section 10.3(E), the Prohibited Transferee shall have no rights in the Class C Preferred Stock held by the Trustee, and the Prohibited Transferee shall not benefit economically from ownership of any shares held in trust by the Trustee, shall have no rights to dividends and shall not possess any rights to vote or other rights attributable to the shares held in the Trust. (D) DIVIDEND AND VOTING RIGHTS. The Trustee shall have all voting rights and rights to dividends with respect to shares of Class C Preferred Stock held in the Trust, which rights shall be exercised for the benefit of the Charitable Beneficiary. Any dividend or distribution paid prior to the discovery by the Corporation that the shares of Class C Preferred Stock have been transferred to the Trustee shall be repaid to the Corporation upon demand, and any dividend or distribution declared but unpaid shall be rescinded as void AB INITIO with respect to such shares of Class C Preferred Stock. Any dividends or distributions so disgorged or rescinded shall be paid over to the Trustee and held in trust for the Charitable Beneficiary. Any vote cast by a Prohibited Transferee prior to the discovery by the Corporation that the shares of Class C Preferred Stock have been transferred to the Trustee will be rescinded as void AB INITIO and shall be recast in accordance with the desires of the Trustee acting for the benefit of the Charitable Beneficiary. The owner of the shares at the time of the Excess Transfer, change in capital structure or other event giving rise to a potential violation of the Ownership Limit, Initial Holder Limit or Look-Through Entity Ownership Limit shall be deemed to have given an irrevocable proxy to the Trustee to vote the shares of Class C Preferred Stock for the benefit of the Charitable Beneficiary. (E) RESTRICTIONS ON TRANSFER. The Trustee of the Trust may sell the shares held in the Trust to a person, designated by the Trustee, whose ownership of the shares will not violate the Ownership Restrictions. If such a sale is made, the interest of the Charitable Beneficiary shall terminate and proceeds of the sale shall be payable to the Prohibited Transferee and to the Charitable Beneficiary as provided in this Section 10.3(E). The Prohibited Transferee shall receive the lesser of (1) the price paid by the Prohibited Transferee for the shares or, if the Prohibited Transferee did not give value for the shares (through a gift, devise or other transaction), the Market Price of the shares on the day of the event causing the shares to be held in the Trust and (2) the price per share received by the Trustee from the sale or other disposition of the shares held in the Trust. Any proceeds in excess of the amount payable to the Prohibited Transferee shall be payable to the Charitable Beneficiary. If any of the transfer restrictions set forth in this Section 10.3(E) or any application thereof is determined in a final judgment to be void, invalid or unenforceable by any court 20 61 having jurisdiction over the issue, the Prohibited Transferee may be deemed, at the option of the Corporation, to have acted as the agent of the Corporation in acquiring the Class C Preferred Stock as to which such restrictions would, by their terms, apply, and to hold such Class C Preferred Stock on behalf of the Corporation. (F) PURCHASE RIGHT IN STOCK TRANSFERRED TO THE TRUSTEE. Shares of Class C Preferred Stock transferred to the Trustee shall be deemed to have been offered for sale to the Corporation, or its designee, at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in such transfer to the Trust (or, in the case of a devise or gift, the Market Price at the time of such devise or gift) and (ii) the Market Price on the date the Corporation, or its designee, accepts such offer. The Corporation shall have the right to accept such offer for a period of 90 days after the later of (i) the date of the Excess Transfer or other event resulting in a transfer to the Trust and (ii) the date that the Board of Directors determines in good faith that an Excess Transfer or other event occurred. (G) DESIGNATION OF CHARITABLE BENEFICIARIES. By written notice to the Trustee, the Corporation shall designate one or more nonprofit organizations to be the Charitable Beneficiary of the interest in the Trust relating to such Prohibited Transferee if (i) the shares of Class C Preferred Stock held in the Trust would not violate the Ownership Restrictions in the hands of such Charitable Beneficiary and (ii) each Charitable Beneficiary is an organization described in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code. 10.4 NOTICE OF RESTRICTED TRANSFER. Any Person that acquires or attempts to acquire shares of Class C Preferred Stock in violation of Section 10.1 of this Article, or any Person that is a Prohibited Transferee such that stock is transferred to the Trustee under Section 10.3 of this Article, shall immediately give written notice to the Corporation of such event and shall provide to the Corporation such other information as the Corporation may request in order to determine the effect, if any, of such Transfer or attempted Transfer or other event on the Corporation's status as a REIT. Failure to give such notice shall not limit the rights and remedies of the Board of Directors provided herein in any way. 10.5 OWNERS REQUIRED TO PROVIDE INFORMATION. From and after the Issue Date certain record and Beneficial Owners and transferees of shares of Class C Preferred Stock will be required to provide certain information as set out below. (A) ANNUAL DISCLOSURE. Every record and Beneficial Owner of more than 5% (or such other percentage between 0.5% and 5%, as provided in the applicable regulations adopted under the Code) of the number of Outstanding shares of Class C Preferred Stock shall, within 30 days after January 1 of each year, give written notice to the Corporation stating the name and address of such record or Beneficial Owner, the number of shares of Class C Preferred Stock Beneficially Owned, and a full description of how such shares are held. Each such record or Beneficial Owner of Class C Preferred Stock shall, upon demand by the Corporation, disclose to the Corporation in writing such additional information with respect to the Beneficial Ownership of the Class C Preferred Stock as the Board of Directors, in its sole discretion, deems appropriate or necessary to (i) comply with the provisions of the Code regarding the qualification of the Corporation as a REIT under the Code and (ii) ensure compliance with the Ownership Limit, the Initial Holder Limit or the Look-Through Ownership Limit, as applicable. Each stockholder of record, including 21 62 without limitation any Person that holds shares of Class C Preferred Stock on behalf of a Beneficial Owner, shall take all reasonable steps to obtain the written notice described in this Section 10.5 from the Beneficial Owner. (B) DISCLOSURE AT THE REQUEST OF THE CORPORATION. Any Person that is a Beneficial Owner of shares of Class C Preferred Stock and any Person (including the stockholder of record) that is holding shares of Class C Preferred Stock for a Beneficial Owner, and any proposed transferee of shares, shall provide such information as the Corporation, in its sole discretion, may request in order to determine the Corporation's status as a REIT, to comply with the requirements of any taxing authority or other governmental agency, to determine any such compliance or to ensure compliance with the Ownership Limit, the Initial Holder Limit and the Look-Through Ownership Limit, and shall provide a statement or affidavit to the Corporation setting forth the number of shares of Class C Preferred Stock already Beneficially Owned by such stockholder or proposed transferee and any related persons specified, which statement or affidavit shall be in the form prescribed by the Corporation for that purpose. 10.6 REMEDIES NOT LIMITED. Nothing contained in this Article shall limit the authority of the Board of Directors to take such other action as it deems necessary or advisable (subject to the provisions of Section 10.12 of this Article) (i) to protect the Corporation and the interests of its stockholders in the preservation of the Corporation's status as a REIT and (ii) to insure compliance with the Ownership Limit, the Initial Holder Limit and the Look-Through Ownership Limit. 10.7 AMBIGUITY. In the case of an ambiguity in the application of any of the provisions of Section 10 of this Article, or in the case of an ambiguity in any definition contained in Section 10 of this Article, the Board of Directors shall have the power to determine the application of the provisions of this Article with respect to any situation based on its reasonable belief, understanding or knowledge of the circumstances. 10.8 EXCEPTIONS. The following exceptions shall apply or may be established with respect to the limitations of Section 10.1 of this Article. (A) WAIVER OF OWNERSHIP LIMIT. The Board of Directors, upon receipt of a ruling from the Internal Revenue Service or an opinion of tax counsel or other evidence or undertaking acceptable to it, may waive the application, in whole or in part, of the Ownership Limit to a Person subject to the Ownership Limit, if such person is not an individual for purposes of Section 542(a) of the Code and is a corporation, partnership, estate or trust. In connection with any such exemption, the Board of Directors may require such representations and undertakings from such Person and may impose such other conditions as the Board deems necessary, in its sole discretion, to determine the effect, if any, of the proposed Transfer on the Corporation's status as a REIT. (B) PLEDGE BY INITIAL HOLDER. Notwithstanding any other provision of this Article, the pledge by the Initial Holder of all or any portion of the Class C Preferred Stock directly owned at any time or from time to time shall not constitute a violation of Section 10.1 of this Article and the pledgee shall not be subject to the Ownership Limit with respect to the Class C Preferred Stock so pledged to it either as a result of the pledge or upon foreclosure. 22 63 (C) UNDERWRITERS. For a period of 270 days following the purchase of Class C Preferred Stock by an underwriter that (i) is a corporation or a partnership and (ii) participates in an offering of the Class C Preferred Stock, such underwriter shall not be subject to the Ownership Limit with respect to the Class C Preferred Stock purchased by it as a part of or in connection with such offering and with respect to any Class C Preferred Stock purchased in connection with market making activities. 10.9 LEGEND. Each certificate for Class C Preferred Stock shall bear the following legend: "The shares of Class C Cumulative Preferred Stock represented by this certificate are subject to restrictions on transfer. No person may Beneficially Own shares of Class C Cumulative Preferred Stock in excess of the Ownership Restrictions, as applicable, with certain further restrictions and exceptions set forth in the Corporation's Charter (including the Articles Supplementary setting forth the terms of the Class C Cumulative Preferred Stock). Any Person that attempts to Beneficially Own shares of Class C Cumulative Preferred Stock in excess of the applicable limitation must immediately notify the Corporation. All capitalized terms in this legend have the meanings ascribed to such terms in the Corporation's Charter (including the Articles Supplementary setting forth the terms of the Class C Cumulative Preferred Stock), as the same may be amended from time to time, a copy of which, including the restrictions on transfer, will be sent without charge to each stockholder that so requests. If the restrictions on transfer are violated, the shares of Class C Cumulative Preferred Stock represented hereby will be either (i) void in accordance with the Certificate or (ii) automatically transferred to a Trustee of a Trust for the benefit of one or more Charitable Beneficiaries." 10.10 SEVERABILITY. If any provision of this Article or any application of any such provision is determined in a final and unappealable judgment to be void, invalid or unenforceable by any Federal or state court having jurisdiction over the issues, the validity and enforceability of the remaining provisions shall not be affected and other applications of such provision shall be affected only to the extent necessary to comply with the determination of such court. 10.11 BOARD OF DIRECTORS DISCRETION. Anything in this Article to the contrary notwithstanding, the Board of Directors shall be entitled to take or omit to take such actions as it in its discretion shall determine to be advisable in order that the Corporation maintain its status as and continue to qualify as a REIT, including, but not limited to, reducing the Ownership Limit, the Initial Holder Limit and the Look-Through Ownership Limit in the event of a change in law. 10.12 SETTLEMENT. Nothing in this Section 10 of this Article shall be interpreted to preclude the settlement of any transaction entered into through the facilities of the NYSE or other securities exchange or an automated interdealer quotation system. FOURTH: The terms of the Class C Cumulative Preferred Stock set forth in Article Third hereof shall become Article XIV of the Charter. 23 64 IN WITNESS WHEREOF, the Corporation has caused these presents to be signed in its name and on its behalf by its Chairman and witnessed by its Secretary on December 19, 1997. WITNESS: APARTMENT INVESTMENT AND MANAGEMENT COMPANY /s/ Leeann Morein /s/ Terry Considine - ----------------------- -------------------------- Leeann Morein, Terry Considine Secretary Chairman THE UNDERSIGNED, Chairman of APARTMENT INVESTMENT AND MANAGEMENT COMPANY, who executed on behalf of the Corporation the Articles Supplementary of which this Certificate is made a part, hereby acknowledges in the name and on behalf of said Corporation the foregoing Articles Supplementary to be the corporate act of said Corporation and hereby certifies that the matters and facts set forth herein with respect to the authorization and approval thereof are true in all material respects under the penalties of perjury. /s/ Terry Considine Terry Considine ----------------------- Chairman 24 65 CERTIFICATE OF CORRECTION TO ARTICLES SUPPLEMENTARY CLASS C CUMULATIVE PREFERRED STOCK (PAR VALUE $.01 PER SHARE) OF APARTMENT INVESTMENT AND MANAGEMENT COMPANY (A MARYLAND CORPORATION) APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation (the "Corporation"), having its principal office in Baltimore City, Maryland, hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: Articles Supplementary, dated December, 1997, of the Corporation relating to its Class C Cumulative Preferred Stock (par value $.01 per share) were filed with the State Department of Assessments and Taxation of Maryland on December 22, 1997, and said Articles Supplementary require correction as permitted by Section 1-207 of the Corporations and Associations Article of the Annotated Code of Maryland. SECOND: ARTICLE FIRST of the Articles Supplementary as previously filed and to be corrected hereby read as follows: FIRST: Pursuant to authority expressly vested in the Board of Directors of the Corporation by Section 1.2 of Article IV of the Charter of the Corporation, the Board of Directors has duly divided and classified 2,300,000 authorized but unissued shares of the capital stock of the Corporation into a class designated as Class C Cumulative Preferred Stock and has provided for the issuance of such class. THIRD: ARTICLE FIRST of the Articles Supplementary as corrected hereby is as follows: FIRST: Pursuant to authority expressly vested in the Board of Directors of the Corporation by Section 1.2 of Article IV of the Charter of the Corporation, the Board of Directors has duly divided and classified 2,760,000 authorized but unissued shares of the capital stock of the Corporation into a class designated as Class C Cumulative Preferred Stock and has provided for the issuance of such class. FOURTH: The inaccuracy or defect in ARTICLE FIRST of the Articles Supplementary as previously filed is that ARTICLE FIRST contained the wrong number of shares classified as Class C Cumulative Preferred Stock. 66 FIFTH: ARTICLE SECOND of the Articles Supplementary as previously filed and to be corrected hereby reads as follows: SECOND: The reclassification increases the number of shares classified as Class C Cumulative Preferred Stock, par value $.01 per share, from no shares immediately prior to the reclassification to 2,300,000 shares immediately after the reclassification. The reclassification decreases the number of shares classified as Preferred Stock, par value $.01 per share, from 9,250,000 shares immediately prior to the reclassification to 6,950,000 shares immediately after the reclassification. The number of shares classified as Class C Cumulative Preferred Stock may be decreased pursuant to Section 6 of Article Third of these Articles Supplementary upon reacquisition thereof in any manner, or by retirement thereof, by the Corporation. SIXTH: ARTICLE SECOND of the Articles Supplementary as corrected hereby is as follows: SECOND: The reclassification increases the number of shares classified as Class C Cumulative Preferred Stock, par value $.01 per share, from no shares immediately prior to the reclassification to 2,760,00 shares immediately after the reclassification. The reclassification decreases the number of shares classified as Preferred Stock, par value $.01 per share, from 9,250,000 shares immediately prior to the reclassification to 6,490,000 shares immediately after the reclassification. The number of shares classified as Class C Cumulative Preferred Stock may be decreases pursuant to Section 6 of Article Third of these Articles Supplementary upon reacquisition thereof in any manner, or by retirement thereof, by the Corporation. SEVENTH: The inaccuracies or defects in ARTICLE SECOND of the Articles Supplementary as previously filed are that ARTICLE SECOND contained the wrong number of shares classified as Class C Cumulative Preferred Stock immediately after the reclassification and the wrong number of shares classified as Preferred Stock, par value $.01 per share, immediately after the reclassification. EIGHTH: Section 1 of ARTICLE THIRD of the Articles Supplementary as previously filed and to be corrected hereby reads as follows: 1. Number of Shares and Designation. This class of Preferred Stock shall be designated as Class C Cumulative Preferred Stock (the "Class C Preferred Stock") and Two Million Three Hundred Thousand (2,300,000) shall be the authorized number of shares of such Class C Preferred Stock constituting such class. -2- 67 NINTH: The first paragraph of Section 1 of ARTICLE THIRD of the Articles Supplementary as corrected hereby is as follows: 1. Number of Shares and Designation. This class of Preferred Stock shall be designated as Class C Cumulative Preferred Stock (the "Class C Preferred Stock") and Two Million Seven Hundred Sixty Thousand (2,760,000) shall be the authorized number of shares of such Class C Preferred Stock constituting such class. TENTH: The inaccuracy or defect in Section 1 of ARTICLE THIRD of the Articles Supplementary as previously filed is that Section 1 of ARTICLE FIRST contained the wrong number of shares classified as Class C Cumulative Preferred Stock. ELEVENTH: The definition of "Dividend Periods" contained in Section 2 of ARTICLE THIRD of the Articles Supplementary as previously filed and to be corrected hereby reads as follows: "DIVIDEND PERIODS" shall mean the Initial Dividend Period and each subsequent quarterly dividend period commencing on and including January 15, April 15, July 15 and October 15 of each year and ending on and including the day preceding the first day of the next succeeding Dividend Period, other than the Dividend Period during which any Class B Preferred Stock shall be redeemed pursuant to Section 5 hereof, which shall end on and include the Redemption Date with respect to the Class C Preferred Stock being redeemed. TWELFTH: The definition of "Dividend Periods" contained in Section 2 of ARTICLE THIRD of the Articles Supplementary as corrected hereby is as follows: "DIVIDEND PERIODS" shall mean the Initial Dividend Period and each subsequent quarterly dividend period commencing on and including January 15, April 15, July 15 and October 15 of each year and ending on and including the day preceding the first day of the next succeeding Dividend Period, other than the Dividend Period during which any Class C Preferred Stock shall be redeemed pursuant to Section 5 hereof, which shall end on and include the Redemption Date with respect to the Class C Preferred Stock being redeemed. THIRTEENTH: The inaccuracy or defect in the definition of "Dividend Periods" contained in Section 2 of ARTICLE THIRD of the Articles Supplementary as previously filed is that the reference to "Class B Preferred Stock" in the fifth line thereof should be to "Class C Preferred Stock." FOURTEENTH: The definition of "Initial Holder Limit" contained in Section 2 of ARTICLE THIRD of the Articles Supplementary as previously filed and to be corrected hereby reads as follows: -3- 68 "INITIAL HOLDER LIMIT" shall mean a number of the Outstanding shares of Class C Preferred Stock of the Corporation having an Aggregate Value not in excess of the excess of (x) 15% of the Aggregate Value of all Outstanding shares of Equity Stock over (y) the Aggregate Value of all shares of Equity Stock other than Class B Preferred Stock that are Beneficially Owned by the Initial Holder. From the Issue Date, the secretary of the Corporation, or such other person as shall be designated by the Board of Directors, shall upon request make available to the representative(s) of the Initial Holder and the Board of Directors' a schedule that sets forth the then-current Initial Holder Limit applicable to the Initial Holder. FIFTEENTH: The definition of "Initial Holder Limit" contained in Section 2 of ARTICLE THIRD of the Articles Supplementary as corrected hereby is as follows: "INITIAL HOLDER LIMIT" shall mean a number of the Outstanding shares of Class C Preferred Stock of the Corporation having an Aggregate Value not in excess of the excess of (x) 15% of the Aggregate Value of all Outstanding shares of Equity Stock over (y) the Aggregate Value of all shares of Equity Stock other than Class C Preferred Stock that are Beneficially Owned by the Initial Holder. From the Issue Date, the secretary of the Corporation, or such other person as shall be designated by the Board of Directors, shall upon request make available to the representative(s) of the Initial Holder and the Board of Directors, a schedule that sets forth the then-current Initial Holder Limit applicable to the Initial Holder. SIXTEENTH: The inaccuracy or defect in the definition of "Initial Holder Limit" contained in Section 2 of ARTICLE THIRD of the Articles Supplementary as previously filed is that the reference to "Class B Preferred Stock" in the fourth and fifth lines thereof should be to "Class C Preferred Stock." SEVENTEENTH: The definition of "Look-Through Ownership Limit" contained in Section 2 of ARTICLE THIRD of the Articles Supplementary as previously filed and to be corrected hereby reads as follows: "LOOK-THROUGH OWNERSHIP LIMIT" shall mean, for any Look-Through Entity, a number of the Outstanding shares of Class C Preferred Stock of the Corporation having an Aggregate Value not in excess of the excess of (x) 15% of the Aggregate Value of all Outstanding shares of Equity Stock over (y) by the Aggregate Value of all shares of Equity Stock other than Class B Preferred Stock that are Beneficially Owned by the Look-Through Entity. EIGHTEENTH: The definition of "Look-Through Ownership Limit" contained in Section 2 of ARTICLE THIRD of the Articles Supplementary as corrected hereby is as follows: "LOOK-THROUGH OWNERSHIP LIMIT" shall mean, for any Look-Through Entity, a number of the Outstanding shares of Class C Preferred Stock of the Corporation -4- 69 having an Aggregate Value not in excess of the (x) 15% of the Aggregate Value of all Outstanding shares of Equity Stock over (y) by the Aggregate Value of all shares of Equity Stock other than Class C Preferred Stock that are Beneficially Owned by the Look-Through Entity. NINETEENTH: The inaccuracy or defect in the definition of "Look-Through Ownership Limit" contained in Section 2 of ARTICLE THIRD of the Articles Supplementary as previously filed is that the reference to "Class B Preferred Stock" in the fifth line thereof should be to "Class C Preferred Stock." TWENTIETH: The provision in the Articles Supplementary as previously filed and to be corrected hereby reads as follows: IN WITNESS WHEREOF, the Corporation has caused these presents to be signed in its name and on its behalf by its Chairman and witnessed by its Secretary on December ____, 1997. TWENTY-FIRST: The provision in the Articles Supplementary as corrected hereby is as follows: IN WITNESS WHEREOF, the Corporation has caused these presents to be signed in its name and on its behalf by its Chairman and witnessed by its Secretary on December 22, 1997. TWENTY-SECOND: The inaccuracy or defect in the provision of the Articles Supplementary as previously filed is that such statement failed to state correctly the date such Articles were signed. -5- 70 IN WITNESS WHEREOF, Apartment Investment and Management Company has caused this Certificate of Correction to be signed in its name and on its behalf by its Chairman and witnessed by its Secretary on February 17, 1998. WITNESS: APARTMENT INVESTMENT AND MANAGEMENT COMPANY /s/ LEEANN MOREIN By: TERRY CONSIDINE - ----------------------------- ----------------------------- Leeann Morein, Secretary Terry Considine, Chairman The undersigned, Chairman of APARTMENT INVESTMENT AND MANAGEMENT COMPANY, with respect to the foregoing Certificate of Correction of which this certificate is made a part, hereby acknowledges, in the name and on behalf of said Corporation, the foregoing Certificate of Correction to be the act of said Corporation and further certifies that, to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the authorization and approval thereof are true in all material respects, under the penalties of perjury. /s/ TERRY CONSIDINE ----------------------------- Terry Considine, Chairman -6- 71 ARTICLES SUPPLEMENTARY APARTMENT INVESTMENT AND MANAGEMENT COMPANY CLASS D CUMULATIVE PREFERRED STOCK (PAR VALUE $.01 PER SHARE) APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation (hereinafter called the "Corporation"), having its principal office in Baltimore City, Maryland, hereby certifies to the Department of Assessments and Taxation of the State of Maryland that: FIRST: Pursuant to authority expressly vested in the Board of Directors of the Corporation by Section 1.2 of Article IV of the Charter of the Corporation, the Board of Directors has duly divided and classified 4,600,000 authorized but unissued shares of the capital stock of the Corporation into a class designated as Class D Cumulative Preferred Stock and has provided for the issuance of such class. SECOND: The reclassification increases the number of shares classified as Class D Cumulative Preferred Stock, par value $.01 per share, from no shares immediately prior to the reclassification to 4,600,000 shares immediately after the reclassification. The reclassification decreases the number of shares classified as Preferred Stock, par value $.01 per share, from 6,490,000 shares immediately prior to the reclassification to 1,890,000 shares immediately after the reclassification. The number of shares classified as Class D Cumulative Preferred Stock may be decreased pursuant to Section 6 of Article Third of these Articles Supplementary upon reacquisition thereof in any manner, or by retirement thereof, by the Corporation. THIRD: The terms of the Class D Cumulative Preferred Stock (including the preferences, conversions or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, or terms or conditions of redemption) as set by the Board of Directors are as follows: 1. NUMBER OF SHARES AND DESIGNATION. This class of Preferred Stock shall be designated as Class D Cumulative Preferred Stock (the "Class D Preferred Stock") and Four Million Six Hundred Thousand (4,600,000) shall be the authorized number of shares of such Class D Preferred Stock constituting such class. 72 2. DEFINITIONS. For purposes of the Class D Preferred Stock, the following terms shall have the meanings indicated: "ACT" shall mean the Securities Act of 1933, as amended. "AFFILIATE" of a Person means a Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Person specified. "AGGREGATE VALUE" shall mean, with respect to any block of Equity Stock, the sum of the products of (i) the number of shares of each class of Equity Stock within such block multiplied by (ii) the corresponding Market Price of one share of Equity Stock of such class. "BENEFICIAL OWNERSHIP" shall mean, with respect to any Person, ownership of shares of Equity Stock equal to the sum of (i) the number of shares of Equity Stock directly owned by such Person, (ii) the number of shares of Equity Stock indirectly owned by such Person (if such Person is an "individual" as defined in Section 542(a)(2) of the Code) taking into account the constructive ownership rules of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code, and (iii) the number of shares of Equity Stock that such Person is deemed to beneficially own pursuant to Rule 13d3 under the Exchange Act or that is attributed to such Person pursuant to Section 318 of the Code, as modified by Section 856(d)(5) of the Code, PROVIDED that when applying this definition of Beneficial Ownership to the Initial Holder, clause (iii) of this definition, and clause (ii) of the definition of "Person" shall be disregarded. The terms "BENEFICIAL OWNER," "BENEFICIALLY OWNS" and "BENEFICIALLY OWNED" shall have the correlative meanings. "BOARD OF DIRECTORS" shall mean the Board of Directors of the Corporation or any committee authorized by such Board of Directors to perform any of its responsibilities with respect to the Class D Preferred Stock. "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a day on which state or federally chartered banking institutions in New York, New York are not required to be open. "CHARITABLE BENEFICIARY" shall mean one or more beneficiaries of the Trust as determined pursuant to Section 10.3 of this Article, each of which shall be an organization described in Section 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code. 2 73 "CLASS D PREFERRED STOCK" shall have the meaning set forth in Section 1 of this Article. "CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor thereto, as interpreted by any applicable regulations or other administrative pronouncements as in effect from time to time. "COMMON STOCK" shall mean the Class A Common Stock, $.01 par value per share, of the Corporation or such shares of the Corporation's capital stock into which outstanding shares of Common Stock shall be reclassified. "DIVIDEND PAYMENT DATE" shall mean January 15, April 15, July 15 and October 15 of each year; provided, further, that if any Dividend Payment Date falls on any day other than a Business Day, the dividend payment payable on such Dividend Payment Date shall be paid on the Business Day immediately following such Dividend Payment Date and no interest shall accrue on such dividend from such date to such Dividend Payment Date. "DIVIDEND PERIODS" shall mean the Initial Dividend Period and each subsequent quarterly dividend period commencing on and including January 15, April 15, July 15 and October 15 of each year and ending on and including the day preceding the first day of the next succeeding Dividend Period, other than the Dividend Period during which any Class D Preferred Stock shall be redeemed pursuant to Section 5 hereof, which shall end on and include the Redemption Date with respect to the Class D Preferred Stock being redeemed. "EQUITY STOCK" shall mean one or more shares of any class of capital stock of the Corporation. "EXCESS TRANSFER" has the meaning set forth in Section 10.3(A) of this Article. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. "ISSUE DATE" shall mean February 19, 1998. "INITIAL DIVIDEND PERIOD" shall mean the period commencing on and including the Issue Date and ending on and including April 14, 1998. "INITIAL HOLDER" shall mean Terry Considine. "INITIAL HOLDER LIMIT" shall mean a number of the Outstanding shares of Class D Preferred Stock of the Corporation having an Aggregate Value not in excess 3 74 of the excess of (x) 15% of the Aggregate Value of all Outstanding shares of Equity Stock over (y) the Aggregate Value of all shares of Equity Stock other than Class D Preferred Stock that are Beneficially Owned by the Initial Holder. From the Issue Date, the secretary of the Corporation, or such other person as shall be designated by the Board of Directors, shall upon request make available to the representative(s) of the Initial Holder and the Board of Directors, a schedule that sets forth the thencurrent Initial Holder Limit applicable to the Initial Holder. "JUNIOR STOCK" shall mean the Common Stock and any other class or series of capital stock of the Corporation over which the shares of Class D Preferred Stock have preference or priority in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Corporation. "LOOK-THROUGH ENTITY" shall mean a Person that is either (i) described in Section 401(a) of the Code as provided under Section 856(h)(3) of the Code or (ii) registered under the Investment Company Act of 1940. "LOOK-THROUGH OWNERSHIP LIMIT" shall mean, for any Look-Through Entity, a number of the Outstanding shares of Class D Preferred Stock of the Corporation having an Aggregate Value not in excess of the excess of (x) 15% of the Aggregate Value of all Outstanding shares of Equity Stock over (y) by the Aggregate Value of all shares of Equity Stock other than Class D Preferred Stock that are Beneficially Owned by the Look-Through Entity. "MARKET PRICE" on any date shall mean, with respect to any share of Equity Stock, the Closing Price of share of that class of Equity Stock on the Trading Day immediately preceding such date. The term "CLOSING PRICE" on any date shall mean the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE or, if the Equity Stock is not listed or admitted to trading on the NYSE, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Equity Stock is listed or admitted to trading or, if the Equity Stock is not listed or admitted to trading on any national securities exchange, the last quoted price, or if not so quoted, the average of the high bid and low asked prices in the overthecounter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the principal other automated quotations system that may then be in use or, if the Equity Stock is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Equity Stock selected by the Board of 4 75 Directors of the Company. The term "TRADING DAY" shall mean a day on which the principal national securities exchange on which the Equity Stock is listed or admitted to trading is open for the transaction of business or, if the Equity Stock is not listed or admitted to trading on any national securities exchange, shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. "NYSE" shall mean the New York Stock Exchange, Inc. "OUTSTANDING" shall mean issued and outstanding shares of Equity Stock of the Corporation, PROVIDED that for purposes of the application of the Ownership Limit, the Look-Through Ownership Limit or the Initial Holder Limit to any Person, the term "OUTSTANDING" shall be deemed to include the number of shares of Equity Stock that such Person alone, at that time, could acquire pursuant to any options or convertible securities. "OWNERSHIP LIMIT" shall mean, for any Person other than the Initial Holder or a Look-Through Entity, a number of the Outstanding shares of Class D Preferred Stock of the Corporation having an Aggregate Value not in excess of the excess of (x) 8.7% of the Aggregate Value of all Outstanding shares of Equity Stock over (y) the Aggregate Value of all shares of Equity Stock other than Class D Preferred Stock that are Beneficially Owned by the Person. "OWNERSHIP RESTRICTIONS" shall mean collectively the Ownership Limit as applied to Persons other than the Initial Holder or Look-Through Entities, the Initial Holder Limit as applied to the Initial Holder and the Look-Through Ownership Limit as applied to Look-Through Entities. "PARITY STOCK" shall have the meaning set forth in paragraph (b) of Section 7 of this Article. The Class B Preferred Stock and the Class C Preferred Stock shall each be a Parity Stock. "PERSON" shall mean (a) for purposes of Section 10 of this Article, (i) an individual, corporation, partnership, estate, trust (including a trust qualifying under Section 401(a) or 501(c) of the Code), association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, and (ii) also includes a group as that term is used for purposes of Section 13(d)(3) of the Exchange Act and (b) for purposes of the remaining Sections of this Article, any individual, firm, partnership, corporation or other entity and shall include any successor (by merger or otherwise) of such entity. "PROHIBITED TRANSFEREE" has the meaning set forth in Section 10.3(A) of this Article. 5 76 "REDEMPTION DATE" shall have the meaning set forth in paragraph (b) of Section 5 of this Article. "REIT" shall mean a "real estate investment trust" as defined in Section 856 of the Code. "SENIOR STOCK" shall have the meaning set forth in paragraph (a) of Section 7 of this Article. "SET APART FOR PAYMENT" shall be deemed to include, without any action other than the following, the recording by the Corporation in its accounting ledgers of any accounting or bookkeeping entry which indicates, pursuant to a declaration of dividends or other distribution by the Board of Directors, the allocation of funds to be so paid on any series or class of capital stock of the Corporation; provided, however, that if any funds for any class or series of Junior Stock or any class or series of Parity Stock are placed in a separate account of the Corporation or delivered to a disbursing, paying or other similar agent, then "set apart for payment" with respect to the Class D Preferred Stock shall mean placing such funds in a separate account or delivering such funds to a disbursing, paying or other similar agent. "TRADING DAY", as to any securities, shall mean any day on which such securities are traded on the principal national securities exchange on which such securities are listed or admitted or, if such securities are not listed or admitted for trading on any national securities exchange, the NASDAQ National Market or, if such securities are not listed or admitted for trading on the NASDAQ National Market, in the securities market in which such securities are traded. "TRANSFER" shall mean any sale, transfer, gift, assignment, devise or other disposition of a share of Class D Preferred Stock (including (i) the granting of an option or any series of such options or entering into any agreement for the sale, transfer or other disposition of Class D Preferred Stock or (ii) the sale, transfer, assignment or other disposition of any securities or rights convertible into or exchangeable for Class D Preferred Stock), whether voluntary or involuntary, whether of record or Beneficial Ownership, and whether by operation of law or otherwise (including, but not limited to, any transfer of an interest in other entities that results in a change in the Beneficial Ownership of shares of Class D Preferred Stock). The term "TRANSFERS" and "TRANSFERRED" shall have correlative meanings. "TRANSFER AGENT" means such transfer agent as may be designated by the Board of Directors or their designee as the transfer agent for the Class D Preferred Stock; provided, that if the Corporation has not designated a transfer agent then the Corporation shall act as the transfer agent for the Class D Preferred Stock. 6 77 "TRUST" shall mean the trust created pursuant to Section 10.3 of this Article. "TRUSTEE" shall mean the Person unaffiliated with either the Corporation or the Prohibited Transferee that is appointed by the Corporation to serve as trustee of the Trust. "VOTING PREFERRED STOCK" shall have the meaning set forth in Section 8 of this Article. 3. DIVIDENDS. (a) The holders of Class D Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors out of funds legally available for that purpose, cumulative dividends payable in cash in an amount per share of Class D Preferred Stock equal to $2.1875 per annum. Such dividends shall be cumulative from the Issue Date, whether or not in any Dividend Period or Periods such dividends shall be declared or there shall be funds of the Corporation legally available for the payment of such dividends, and shall be payable quarterly in arrears on each Dividend Payment Date, commencing on April 15, 1998. Each such dividend shall be payable in arrears to the holders of record of the Class D Preferred Stock, as they appear on the stock records of the Corporation at the close of business on the January 1, April 1, July 1 or October 1, as the case may be, immediately preceding such Dividend Payment Date. Accumulated, accrued and unpaid dividends for any past Dividend Periods may be declared and paid at any time, without reference to any regular Dividend Payment Date, to holders of record on such date, which date shall not precede by more than 45 days the payment date thereof, as may be fixed by the Board of Directors. (b) The amount of dividends payable per share of Class D Preferred Stock for the Initial Dividend Period, or any other period shorter than a full Dividend Period, shall be computed ratably on the basis of twelve 30day months and a 360day year. Holders of Class D Preferred Stock shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of cumulative dividends, as herein provided, on the Class D Preferred Stock. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Class D Preferred Stock that may be in arrears. (c) So long as any of the shares of Class D Preferred Stock are outstanding, except as described in the immediately following sentence, no dividends shall be declared or paid or set apart for payment by the Corporation and no other distribution of cash or other property shall be declared or made directly or indirectly by the Corporation with respect to any class or series of Parity Stock for any period unless dividends equal to the full amount of accumulated, accrued and unpaid dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof has been or contemporaneously is set apart for 7 78 such payment on the Class D Preferred Stock for all Dividend Periods terminating on or prior to the Dividend Payment Date with respect to such class or series of Parity Stock. When dividends are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, all dividends declared upon the Class D Preferred Stock and all dividends declared upon any other class or series of Parity Stock shall be declared ratably in proportion to the respective amounts of dividends accumulated, accrued and unpaid on the Class D Preferred Stock and accumulated, accrued and unpaid on such Parity Stock. (d) So long as any of the shares of Class D Preferred Stock are outstanding, no dividends (other than dividends or distributions paid in shares of, or options, warrants or rights to subscribe for or purchase shares of, Junior Stock) shall be declared or paid or set apart for payment by the Corporation and no other distribution of cash or other property shall be declared or made, directly or indirectly, by the Corporation with respect to any shares of Junior Stock, nor shall any shares of Junior Stock be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Common Stock made for purposes of an employee incentive or benefit plan of the Corporation or any subsidiary) for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock), directly or indirectly, by the Corporation (except by conversion into or exchange for shares of, or options, warrants or rights to subscribe for or purchase shares of, Junior Stock), nor shall any other cash or other property otherwise be paid or distributed to or for the benefit of any holder of shares of Junior Stock in respect thereof, directly or indirectly, by the Corporation unless in each case the full cumulative dividends (including all accumulated, accrued and unpaid dividends) on all outstanding shares of Class D Preferred Stock shall have been paid or such dividends have been declared and set apart for payment for all past Dividend Periods with respect to the Class D Preferred Stock. Notwithstanding the provisions of this Section 3(d), the Corporation shall not be prohibited from (i) declaring or paying or setting apart for payment any dividend or distribution on any shares of Parity Stock or (ii) or redeeming, purchasing or otherwise acquiring any Parity Stock, in each case, if such declaration, payment, redemption, purchase or other acquisition is necessary in order to maintain the continued qualification of the Corporation as a REIT under Section 856 of the Code. 4. LIQUIDATION PREFERENCE. (a) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any payment or distribution by the Corporation (whether of capital or surplus) shall be made to or set apart for the holders of Junior Stock, the holders of shares of Class D Preferred Stock shall be entitled to receive TwentyFive Dollars ($25) per share of Class D Preferred Stock (the "Liquidation Preference"), plus an amount equal to all dividends (whether or not earned or declared) accumulated, accrued and unpaid thereon to the date of final 8 79 distribution to such holders; but such holders shall not be entitled to any further payment. Until the holders of the Class D Preferred Stock have been paid the Liquidation Preference in full, plus an amount equal to all dividends (whether or not earned or declared) accumulated, accrued and unpaid thereon to the date of final distribution to such holders, no payment will be made to any holder of Junior Stock upon the liquidation, dissolution or winding up of the Corporation. If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation, or proceeds thereof, distributable among the holders of Class D Preferred Stock shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other shares of any class or series of Parity Stock, then such assets, or the proceeds thereof, shall be distributed among the holders of Class D Preferred Stock and any such other Parity Stock ratably in the same proportion as the respective amounts that would be payable on such Class D Preferred Stock and any such other Parity Stock if all amounts payable thereon were paid in full. For the purposes of this Section 4, (i) a consolidation or merger of the Corporation with one or more corporations, (ii) a sale or transfer of all or substantially all of the Corporation's assets, or (iii) a statutory share exchange shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Corporation. (b) Upon any liquidation, dissolution or winding up of the Corporation, after payment shall have been made in full to the holders of Class D Preferred Stock and any Parity Stock, as provided in this Section 4, any other series or class or classes of Junior Stock shall, subject to the respective terms thereof, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Class D Preferred Stock and any Parity Stock shall not be entitled to share therein. 5. REDEMPTION AT THE OPTION OF THE CORPORATION. (a) Shares of Class D Preferred Stock shall not be redeemable by the Corporation prior to February 19, 2003, except as set forth in Section 10.2 of this Article. On and after February 19, 2003, the Corporation, at its option, may redeem shares of Class D Preferred Stock, in whole or from time to time in part, at a redemption price payable in cash equal to 100% of the Liquidation Preference thereof, plus all accrued and unpaid dividends to the date fixed for redemption (the "Redemption Date"). In connection with any redemption pursuant to this Section 5(a), the redemption price of the Class D Preferred Stock (other than any portion thereof consisting of accrued and unpaid dividends) shall be payable solely with the proceeds from the sale by the Corporation or AIMCO Properties, L.P., a Delaware limited Partnership (the "Operating Partnership"), of other capital shares of the Corporation or the Operating Partnership (whether or not such sale occurs concurrently with such redemption). For purposes of the preceding sentence, 'capital shares' means any common stock, preferred stock, depositary shares, partnership or other interests, participations or other ownership interests (however designated) and any rights (other than debt securities convertible into or exchangeable at the option of the holder for equity securities (unless 9 80 and to the extent such debt securities are subsequently converted into capital shares)) or options to purchase any of the foregoing of or in the Corporation or the Operating Partnership. (b) The Redemption Date shall be selected by the Corporation, shall be specified in the notice of redemption and shall be not less than 30 days nor more than 60 days after the date notice of redemption is sent by the Corporation. (c) If full cumulative dividends on all outstanding shares of Class D Preferred Stock have not been paid or declared and set apart for payment, no shares of Class D Preferred Stock may be redeemed unless all outstanding shares of Class D Preferred Stock are simultaneously redeemed and neither the Corporation nor any affiliate of the Corporation may purchase or acquire shares of Class D Preferred Stock, otherwise than pursuant to a purchase or exchange offer made on the same terms to all holders of shares of Class D Preferred Stock. (d) If the Corporation shall redeem shares of Class D Preferred Stock pursuant to paragraph (a) of this Section 5, notice of such redemption shall be given to each holder of record of the shares to be redeemed. Such notice shall be provided by first class mail, postage prepaid, at such holder's address as the same appears on the stock records of the Corporation. Neither the failure to mail any notice required by this paragraph (d), nor any defect therein or in the mailing thereof to any particular holder, shall affect the sufficiency of the notice or the validity of the proceedings for redemption with respect to the other holders. Any notice which was mailed in the manner herein provided shall be conclusively presumed to have been duly given on the date mailed whether or not the holder receives the notice. Each such notice shall state, as appropriate: (1) the Redemption Date; (2) the number of shares of Class D Preferred Stock to be redeemed and, if fewer than all such shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; and (3) the place or places at which certificates for such shares are to be surrendered for cash. Notice having been mailed as aforesaid, from and after the Redemption Date (unless the Corporation shall fail to make available the amount of cash necessary to effect such redemption), (i) except as otherwise provided herein, dividends on the shares of Class D Preferred Stock so called for redemption shall cease to accumulate or accrue on the shares of Class D Preferred Stock called for redemption (except that, in the case of a Redemption Date after a dividend record date and prior to the related Dividend Payment Date, holders of Class D Preferred Stock on the dividend record date will be entitled on such Dividend Payment Date to receive the dividend payable on such shares), (ii) said shares shall no longer be deemed to be outstanding, and (iii) all rights of the holders thereof as holders of Class D Preferred Stock of the Corporation shall cease (except the rights to receive the cash payable upon such redemption, without interest thereon, upon surrender and endorsement of their certificates if so required and to receive any dividends payable thereon). The Corporation's obligation to make available the redemption price in accordance with the preceding sentence shall be deemed fulfilled if, on or before the Call Date, the 10 81 Corporation shall deposit with a bank or trust company (which may be an affiliate of the Corporation) that has, or is an affiliate of a bank or trust company that has, a capital and surplus of at least $50,000,000, such amount of cash as is necessary for such redemption, in trust, with irrevocable instructions that such cash be applied to the redemption of the shares of Class D Preferred Stock so called for redemption. No interest shall accrue for the benefit of the holders of shares of Class D Preferred Stock to be redeemed on any cash so set aside by the Corporation. Subject to applicable escheat laws, any such cash unclaimed at the end of two years from the Redemption Date shall revert to the general funds of the Corporation, after which reversion the holders of shares of Class D Preferred Stock so called for redemption shall look only to the general funds of the Corporation for the payment of such cash. As promptly as practicable after the surrender in accordance with such notice of the certificates for any such shares of Class D Preferred Stock to be so redeemed (properly endorsed or assigned for transfer, if the Corporation shall so require and the notice shall so state), such certificates shall be exchanged for cash (without interest thereon) for which such shares have been redeemed in accordance with such notice. If fewer than all the outstanding shares of Class D Preferred Stock are to be redeemed, shares to be redeemed shall be selected by the Corporation from outstanding shares of Class D Preferred Stock not previously called for redemption by lot or, with respect to the number of shares of Class D Preferred Stock held of record by each holder of such shares, pro rata (as nearly as may be) or by any other method as may be determined by the Board of Directors in its discretion to be equitable. If fewer than all the shares of Class D Preferred Stock represented by any certificate are redeemed, then a new certificate representing the unredeemed shares shall be issued without cost to the holders thereof. 6. STATUS OF REACQUIRED STOCK. All shares of Class D Preferred Stock which shall have been issued and reacquired in any manner by the Corporation shall be returned to the status of authorized, but unissued shares of Class D Preferred Stock. 7. RANKING. Any class or series of capital stock of the Corporation shall be deemed to rank: (a) prior or senior to the Class D Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, if the holders of such class or series shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Class D Preferred Stock ("Senior Stock"); 11 82 (b) on a parity with the Class D Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share thereof be different from those of the Class D Preferred Stock, if the holders of such class of stock or series and the Class D Preferred Stock shall be entitled to the receipt of dividends and of amounts distributable upon liquidation, dissolution or winding up in proportion to their respective amounts of accrued and unpaid dividends per share or liquidation preferences, without preference or priority one over the other ("Parity Stock"); and (c) junior to the Class D Preferred Stock, as to the payment of dividends or as to the distribution of assets upon liquidation, dissolution or winding up, if such stock or series shall be Common Stock or if the holders of Class D Preferred Stock shall be entitled to receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of shares of such class or series ("Junior Stock"). 8. VOTING. (a) If and whenever six quarterly dividends (whether or not consecutive) payable on the Class D Preferred Stock or any series or class of Parity Stock shall be in arrears (which shall, with respect to any such quarterly dividend, mean that any such dividend has not been paid in full), whether or not earned or declared, the number of directors then constituting the Board of Directors shall be increased by two (if not already increased by reason of similar types of provisions with respect to shares of Parity Stock of any other class or series which is entitled to similar voting rights (the "Voting Preferred Stock")) and the holders of shares of Class D Preferred Stock, together with the holders of shares of all other Voting Preferred Stock then entitled to exercise similar voting rights, voting as a single class regardless of series, shall be entitled to elect the two additional directors to serve on the Board of Directors at any annual meeting of stockholders or special meeting held in place thereof, or at a special meeting of the holders of the Class D Preferred Stock and the Voting Preferred Stock called as hereinafter provided. Whenever all arrears in dividends on the Class D Preferred Stock and the Voting Preferred Stock then outstanding shall have been paid and dividends thereon for the current quarterly dividend period shall have been paid or declared and set apart for payment, then the right of the holders of the Class D Preferred Stock and the Voting Preferred Stock to elect such additional two directors shall cease (but subject always to the same provision for the vesting of such voting rights in the case of any similar future arrearages), and the terms of office of all Persons elected as directors by the holders of the Class D Preferred Stock and the Voting Preferred Stock shall forthwith terminate and the number of directors constituting the Board of Directors shall be reduced accordingly. At any time after such voting power shall have been so vested in the holders of Class D Preferred Stock and the Voting Preferred Stock, if applicable, the Secretary of the Corporation may, and upon the written request of any holder of Class D Preferred 12 83 Stock (addressed to the Secretary at the principal office of the Corporation) shall, call a special meeting of the holders of the Class D Preferred Stock and of the Voting Preferred Stock for the election of the two directors to be elected by them as herein provided, such call to be made by notice similar to that provided in the Bylaws of the Corporation for a special meeting of the stockholders or as required by law. If any such special meeting required to be called as above provided shall not be called by the Secretary within 20 days after receipt of any such request, then any holder of Class D Preferred Stock may call such meeting, upon the notice above provided, and for that purpose shall have access to the stock books of the Corporation. The directors elected at any such special meeting shall hold office until the next annual meeting of the stockholders or special meeting held in lieu thereof if such office shall not have previously terminated as above provided. If any vacancy shall occur among the directors elected by the holders of the Class D Preferred Stock and the Voting Preferred Stock, a successor shall be elected by the Board of Directors, upon the nomination of the then remaining director elected by the holders of the Class D Preferred Stock and the Voting Preferred Stock or the successor of such remaining director, to serve until the next annual meeting of the stockholders or special meeting held in place thereof if such office shall not have previously terminated as provided above. (b) So long as any shares of Class D Preferred Stock are outstanding, in addition to any other vote or consent of stockholders required by law or by the Charter of the Corporation, the affirmative vote of at least 662/3% of the votes entitled to be cast by the holders of the Class D Preferred Stock voting as a single class with the holders of all other classes or series of Preferred Stock entitled to vote on such matters, given in Person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating: (i) Any amendment, alteration or repeal of any of the provisions of these Articles Supplementary, the Charter or the ByLaws of the Corporation that materially adversely affects the voting powers, rights or preferences of the holders of the Class D Preferred Stock; provided, however, that the amendment of the provisions of the Charter so as to authorize or create, or to increase the authorized amount of, or issue any Junior Stock or any shares of any class of Parity Stock shall not be deemed to materially adversely affect the voting powers, rights or preferences of the holders of Class D Preferred Stock; or (ii) The authorization, creation of, the increase in the authorized amount of, or issuance of any shares of any class of Senior Stock or any security convertible into shares of any class of Senior Stock (whether or not such class of Senior Stock is currently authorized); provided, however, that no such vote of the holders of Class D Preferred Stock shall be required if, at or prior to the time when such amendment, alteration or repeal is to take effect, or when the issuance of any such prior shares or convertible security is to be made, as the case may be, provision 13 84 is made for the redemption of all shares of Class D Preferred Stock at the time outstanding to the extent such redemption is authorized by Section 5 of this Article. For purposes of the foregoing provisions and all other voting rights under these Articles Supplementary, each share of Class D Preferred Stock shall have one (1) vote per share, except that when any other class or series of preferred stock shall have the right to vote with the Class D Preferred Stock as a single class on any matter, then the Class D Preferred Stock and such other class or series shall have with respect to such matters one quarter of one (.25) vote per $25 of stated liquidation preference. Except as otherwise required by applicable law or as set forth herein, the Class D Preferred Stock shall not have any relative, participating, optional or other special voting rights and powers other than as set forth herein, and the consent of the holders thereof shall not be required for the taking of any corporate action. 9. RECORD HOLDERS. The Corporation and the Transfer Agent may deem and treat the record holder of any share of Class D Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Corporation nor the Transfer Agent shall be affected by any notice to the contrary. 10.1 RESTRICTIONS ON OWNERSHIP AND TRANSFERS. (A) LIMITATION ON BENEFICIAL OWNERSHIP. Except as provided in Section 10.8, from and after the Issue Date, no Person (other than the Initial Holder or a Look-Through Entity) shall Beneficially Own shares of Class D Preferred Stock in excess of the Ownership Limit, the Initial Holder shall not Beneficially Own shares of Class D Preferred Stock in excess of the Initial Holder Limit and no Look-Through Entity shall Beneficially Own shares of Class D Preferred Stock in excess of the Look-Through Ownership Limit. (B) TRANSFERS IN EXCESS OF OWNERSHIP LIMIT. Except as provided in Section 10.8, from and after the Issue Date (and subject to Section 10.12), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated interdealer quotation system) that, if effective, would result in any Person (other than the Initial Holder or a Look-Through Entity) Beneficially Owning shares of Class D Preferred Stock in excess of the Ownership Limit shall be void AB INITIO as to the Transfer of such shares of Class D Preferred Stock that would be otherwise Beneficially Owned by such Person in excess of the Ownership Limit, and the intended transferee shall acquire no rights in such shares of Class D Preferred Stock. (C) TRANSFERS IN EXCESS OF INITIAL HOLDER LIMIT. Except as provided in Section 10.8, from and after the Issue Date (and subject to Section 10.12), any Transfer (whether or not such Transfer is the result of transactions entered into 14 85 through the facilities of the NYSE or other securities exchange or an automated interdealer quotation system) that, if effective, would result in the Initial Holder Beneficially Owning shares of Class D Preferred Stock in excess of the Initial Holder Limit shall be void AB INITIO as to the Transfer of such shares of Class D Preferred Stock that would be otherwise Beneficially Owned by the Initial Holder in excess of the Initial Holder limit, and the Initial Holder shall acquire no rights in such shares of Class D Preferred Stock. (D) TRANSFERS IN EXCESS OF LOOK-THROUGH OWNERSHIP LIMIT. Except as provided in Section 10.8 from and after the Issue Date (and subject to Section 10.12), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated interdealer quotation system) that, if effective, would result in any Look-Through Entity Beneficially Owning shares of Class D Preferred Stock in excess of the Look-Through Ownership limit shall be void AB INITIO as to the Transfer of such shares of Class D Preferred Stock that would be otherwise Beneficially Owned by such Look-Through Entity in excess of the Look-Through Ownership Limit and such Look-Through Entity shall acquire no rights in such shares of Class D Preferred Stock. (E) TRANSFERS RESULTING IN "CLOSELY HELD" STATUS. From and after the Issue Date, any Transfer that, if effective would result in the Corporation being "closely held" within the meaning of Section 856(h) of the Code, or would otherwise result in the Corporation failing to qualify as a REIT (including, without limitation, a Transfer or other event that would result in the Corporation owning (directly or constructively) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by the Corporation from such tenant would cause the Corporation to fail to satisfy any of the gross income requirements of Section 856(c) of the Code) shall be void AB INITIO as to the Transfer of shares of Class D Preferred Stock that would cause the Corporation (i) to be "closely held" within the meaning of Section 856(h) of the Code or (ii) otherwise fail to qualify as a REIT, as the case may be, and the intended transferee shall acquire no rights in such shares of Class D Preferred Stock. (F) SEVERABILITY ON VOID TRANSACTIONS. A Transfer of a share of Class D Preferred Stock that is null and void under Sections 10.1(B), (C), (D), or (E) of this Article because it would, if effective, result in (i) the ownership of Class D Preferred Stock in excess of the Initial Holder Limit, the Ownership Limit, or the Look-Through Ownership Limit, (ii) the Corporation being "closely held" within the meaning of Section 856(h) of the Code or (iii) the Corporation otherwise failing to qualify as a REIT, shall not adversely affect the validity of the Transfer of any other share of Class D Preferred Stock in the same or any other related transaction. 10.2 REMEDIES FOR BREACH. If the Board of Directors or a committee thereof shall at any time determine in good faith that a Transfer or other event has taken place in violation of Section 10.1 of this Article or that a Person intends to acquire or has 15 86 attempted to acquire Beneficial Ownership of any shares of Class D Preferred Stock in violation of Section 10.1 of this Article (whether or not such violation is intended), the Board of Directors or a committee thereof shall be empowered to take any action as it deems advisable to refuse to give effect to or to prevent such Transfer or other event, including, but not limited to, refusing to give effect to such Transfer or other event on the books of the Corporation, causing the Corporation to redeem such shares at the then current Market Price and upon such terms and conditions as may be specified by the Board of Directors in its sole discretion (including, but not limited to, by means of the issuance of longterm indebtedness for the purpose of such redemption), demanding the repayment of any distributions received in respect of shares of Class D Preferred Stock acquired in violation of Section 10.1 of this Article or instituting proceedings to enjoin such Transfer or to rescind such Transfer or attempted Transfer; PROVIDED, HOWEVER, that any Transfers or attempted Transfers (or in the case of events other than a Transfer, Beneficial Ownership) in violation of Section 10.1 of this Article, regardless of any action (or nonaction) by the Board of Directors or such committee, (a) shall be void AB INITIO or (b) shall automatically result in the transfer described in Section 10.3 of this Article; PROVIDED, FURTHER, that the provisions of this Section 10.2 shall be subject to the provisions of Section 10.12 of this Article; PROVIDED, FURTHER, that neither the Board of Directors nor any committee thereof may exercise such authority in a manner that interferes with any ownership or transfer of Class D Preferred Stock that is expressly authorized pursuant to Section 10.8(d) of this Article. 10.3. TRANSFER IN TRUST. (A) ESTABLISHMENT OF TRUST. If, notwithstanding the other provisions contained in this Article, at any time after the Issue Date there is a purported Transfer (an "EXCESS TRANSFER") (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated interdealer quotation system) or other change in the capital structure of the Corporation (including, but not limited to, any redemption of Preferred Stock) or other event (including, but not limited to, any acquisition of any share of Equity Stock) such that (a) any Person (other than the Initial Holder or a Look-Through Entity) would Beneficially Own shares of Class D Preferred Stock in excess of the Ownership Limit, or (b) the Initial Holder would Beneficially Own shares of Class D Preferred Stock in excess of the Initial Holder Limit, or (c) any Person that is a Look-Through Entity would Beneficially Own shares of Class D Preferred Stock in excess of the Look-Through Ownership Limit (in any such event, the Person, Initial Holder or Look-Through Entity that would Beneficially Own shares of Class D Preferred Stock in excess of the Ownership Limit, the Initial Holder Limit or the Look-Through Entity Limit, respectively, is referred to as a "PROHIBITED TRANSFEREE"), then, except as otherwise provided in Section 10.8 of this Article, such shares of Class D Preferred Stock in excess of the Ownership Limit, the Initial Holder Limit or the Look-Through Ownership Limit, as the case may be, (rounded up to the nearest whole share) shall be automatically transferred to a Trustee in his capacity as trustee of a Trust for the 16 87 exclusive benefit of one or more Charitable Beneficiaries. Such transfer to the Trustee shall be deemed to be effective as of the close of business on the business day prior to the Excess Transfer, change in capital structure or another event giving rise to a potential violation of the Ownership Limit, the Initial Holder Limit or the Look-Through Entity Ownership Limit. (B) APPOINTMENT OF TRUSTEE. The Trustee shall be appointed by the Corporation and shall be a Person unaffiliated with either the Corporation or any Prohibited Transferee. The Trustee may be an individual or a bank or trust company duly licensed to conduct a trust business. (C) STATUS OF SHARES HELD BY THE TRUSTEE. Shares of Class D Preferred Stock held by the Trustee shall be issued and outstanding shares of capital stock of the Corporation. Except to the extent provided in Section 10.3(E), the Prohibited Transferee shall have no rights in the Class D Preferred Stock held by the Trustee, and the Prohibited Transferee shall not benefit economically from ownership of any shares held in trust by the Trustee, shall have no rights to dividends and shall not possess any rights to vote or other rights attributable to the shares held in the Trust. (D) DIVIDEND AND VOTING RIGHTS. The Trustee shall have all voting rights and rights to dividends with respect to shares of Class D Preferred Stock held in the Trust, which rights shall be exercised for the benefit of the Charitable Beneficiary. Any dividend or distribution paid prior to the discovery by the Corporation that the shares of Class D Preferred Stock have been transferred to the Trustee shall be repaid to the Corporation upon demand, and any dividend or distribution declared but unpaid shall be rescinded as void AB INITIO with respect to such shares of Class D Preferred Stock. Any dividends or distributions so disgorged or rescinded shall be paid over to the Trustee and held in trust for the Charitable Beneficiary. Any vote cast by a Prohibited Transferee prior to the discovery by the Corporation that the shares of Class D Preferred Stock have been transferred to the Trustee will be rescinded as void AB INITIO and shall be recast in accordance with the desires of the Trustee acting for the benefit of the Charitable Beneficiary. The owner of the shares at the time of the Excess Transfer, change in capital structure or other event giving rise to a potential violation of the Ownership Limit, Initial Holder Limit or Look-Through Entity Ownership Limit shall be deemed to have given an irrevocable proxy to the Trustee to vote the shares of Class D Preferred Stock for the benefit of the Charitable Beneficiary. (E) RESTRICTIONS ON TRANSFER. The Trustee of the Trust may sell the shares held in the Trust to a person, designated by the Trustee, whose ownership of the shares will not violate the Ownership Restrictions. If such a sale is made, the interest of the Charitable Beneficiary shall terminate and proceeds of the sale shall be payable to the Prohibited Transferee and to the Charitable Beneficiary as provided in this Section 10.3(E). The Prohibited Transferee shall receive the lesser of (1) the price 17 88 paid by the Prohibited Transferee for the shares or, if the Prohibited Transferee did not give value for the shares (through a gift, devise or other transaction), the Market Price of the shares on the day of the event causing the shares to be held in the Trust and (2) the price per share received by the Trustee from the sale or other disposition of the shares held in the Trust. Any proceeds in excess of the amount payable to the Prohibited Transferee shall be payable to the Charitable Beneficiary. If any of the transfer restrictions set forth in this Section 10.3(E) or any application thereof is determined in a final judgment to be void, invalid or unenforceable by any court having jurisdiction over the issue, the Prohibited Transferee may be deemed, at the option of the Corporation, to have acted as the agent of the Corporation in acquiring the Class D Preferred Stock as to which such restrictions would, by their terms, apply, and to hold such Class D Preferred Stock on behalf of the Corporation. (F) PURCHASE RIGHT IN STOCK TRANSFERRED TO THE TRUSTEE. Shares of Class D Preferred Stock transferred to the Trustee shall be deemed to have been offered for sale to the Corporation, or its designee, at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in such transfer to the Trust (or, in the case of a devise or gift, the Market Price at the time of such devise or gift) and (ii) the Market Price on the date the Corporation, or its designee, accepts such offer. The Corporation shall have the right to accept such offer for a period of 90 days after the later of (i) the date of the Excess Transfer or other event resulting in a transfer to the Trust and (ii) the date that the Board of Directors determines in good faith that an Excess Transfer or other event occurred. (G) DESIGNATION OF CHARITABLE BENEFICIARIES. By written notice to the Trustee, the Corporation shall designate one or more nonprofit organizations to be the Charitable Beneficiary of the interest in the Trust relating to such Prohibited Transferee if (i) the shares of Class D Preferred Stock held in the Trust would not violate the Ownership Restrictions in the hands of such Charitable Beneficiary and (ii) each Charitable Beneficiary is an organization described in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code. 10.4 NOTICE OF RESTRICTED TRANSFER. Any Person that acquires or attempts to acquire shares of Class D Preferred Stock in violation of Section 10.1 of this Article, or any Person that is a Prohibited Transferee such that stock is transferred to the Trustee under Section 10.3 of this Article, shall immediately give written notice to the Corporation of such event and shall provide to the Corporation such other information as the Corporation may request in order to determine the effect, if any, of such Transfer or attempted Transfer or other event on the Corporation's status as a REIT. Failure to give such notice shall not limit the rights and remedies of the Board of Directors provided herein in any way. 10.5 OWNERS REQUIRED TO PROVIDE INFORMATION. From and after the Issue Date certain record and Beneficial Owners and transferees of shares of Class D Preferred Stock will be required to provide certain information as set out below. 18 89 (A) ANNUAL DISCLOSURE. Every record and Beneficial Owner of more than 5% (or such other percentage between 0.5% and 5%, as provided in the applicable regulations adopted under the Code) of the number of Outstanding shares of Class D Preferred Stock shall, within 30 days after January 1 of each year, give written notice to the Corporation stating the name and address of such record or Beneficial Owner, the number of shares of Class D Preferred Stock Beneficially Owned, and a full description of how such shares are held. Each such record or Beneficial Owner of Class D Preferred Stock shall, upon demand by the Corporation, disclose to the Corporation in writing such additional information with respect to the Beneficial Ownership of the Class D Preferred Stock as the Board of Directors, in its sole discretion, deems appropriate or necessary to (i) comply with the provisions of the Code regarding the qualification of the Corporation as a REIT under the Code and (ii) ensure compliance with the Ownership Limit, the Initial Holder Limit or the Look-Through Ownership Limit, as applicable. Each stockholder of record, including without limitation any Person that holds shares of Class D Preferred Stock on behalf of a Beneficial Owner, shall take all reasonable steps to obtain the written notice described in this Section 10.5 from the Beneficial Owner. (B) DISCLOSURE AT THE REQUEST OF THE CORPORATION. Any Person that is a Beneficial Owner of shares of Class D Preferred Stock and any Person (including the stockholder of record) that is holding shares of Class D Preferred Stock for a Beneficial Owner, and any proposed transferee of shares, shall provide such information as the Corporation, in its sole discretion, may request in order to determine the Corporation's status as a REIT, to comply with the requirements of any taxing authority or other governmental agency, to determine any such compliance or to ensure compliance with the Ownership Limit, the Initial Holder Limit and the Look-Through Ownership Limit, and shall provide a statement or affidavit to the Corporation setting forth the number of shares of Class D Preferred Stock already Beneficially Owned by such stockholder or proposed transferee and any related persons specified, which statement or affidavit shall be in the form prescribed by the Corporation for that purpose. 10.6 REMEDIES NOT LIMITED. Nothing contained in this Article shall limit the authority of the Board of Directors to take such other action as it deems necessary or advisable (subject to the provisions of Section 10.12 of this Article) (i) to protect the Corporation and the interests of its stockholders in the preservation of the Corporation's status as a REIT and (ii) to insure compliance with the Ownership Limit, the Initial Holder Limit and the Look-Through Ownership Limit. 10.7 AMBIGUITY. In the case of an ambiguity in the application of any of the provisions of Section 10 of this Article, or in the case of an ambiguity in any definition contained in Section 10 of this Article, the Board of Directors shall have the power to determine the application of the provisions of this Article with respect to any situation based on its reasonable belief, understanding or knowledge of the circumstances. 19 90 10.8 EXCEPTIONS. The following exceptions shall apply or may be established with respect to the limitations of Section 10.1 of this Article. (A) WAIVER OF OWNERSHIP LIMIT. The Board of Directors, upon receipt of a ruling from the Internal Revenue Service or an opinion of tax counsel or other evidence or undertaking acceptable to it, may waive the application, in whole or in part, of the Ownership Limit to a Person subject to the Ownership Limit, if such person is not an individual for purposes of Section 542(a) of the Code and is a corporation, partnership, estate or trust. In connection with any such exemption, the Board of Directors may require such representations and undertakings from such Person and may impose such other conditions as the Board deems necessary, in its sole discretion, to determine the effect, if any, of the proposed Transfer on the Corporation's status as a REIT. (B) PLEDGE BY INITIAL HOLDER. Notwithstanding any other provision of this Article, the pledge by the Initial Holder of all or any portion of the Class D Preferred Stock directly owned at any time or from time to time shall not constitute a violation of Section 10.1 of this Article and the pledgee shall not be subject to the Ownership Limit with respect to the Class D Preferred Stock so pledged to it either as a result of the pledge or upon foreclosure. (C) UNDERWRITERS. For a period of 270 days following the purchase of Class D Preferred Stock by an underwriter that (i) is a corporation or a partnership and (ii) participates in an offering of the Class D Preferred Stock, such underwriter shall not be subject to the Ownership Limit with respect to the Class D Preferred Stock purchased by it as a part of or in connection with such offering and with respect to any Class D Preferred Stock purchased in connection with market making activities. 10.9 LEGEND. Each certificate for Class D Preferred Stock shall bear the following legend: "The shares of Class D Cumulative Preferred Stock represented by this certificate are subject to restrictions on transfer. No person may Beneficially Own shares of Class D Cumulative Preferred Stock in excess of the Ownership Restrictions, as applicable, with certain further restrictions and exceptions set forth in the Corporation's Charter (including the Articles Supplementary setting forth the terms of the Class D Cumulative Preferred Stock). Any Person that attempts to Beneficially Own shares of Class D Cumulative Preferred Stock in excess of the applicable limitation must immediately notify the Corporation. All capitalized terms in this legend have the meanings ascribed to such terms in the Corporation's Charter (including the Articles Supplementary setting forth the terms of the Class D Cumulative Preferred Stock), as the same may be amended from time to time, a copy of which, including the restrictions on transfer, will be sent 20 91 without charge to each stockholder that so requests. If the restrictions on transfer are violated, the shares of Class D Cumulative Preferred Stock represented hereby will be either (i) void in accordance with the Certificate or (ii) automatically transferred to a Trustee of a Trust for the benefit of one or more Charitable Beneficiaries." 10.10 SEVERABILITY. If any provision of this Article or any application of any such provision is determined in a final and unappealable judgment to be void, invalid or unenforceable by any Federal or state court having jurisdiction over the issues, the validity and enforceability of the remaining provisions shall not be affected and other applications of such provision shall be affected only to the extent necessary to comply with the determination of such court. 10.11 BOARD OF DIRECTORS DISCRETION. Anything in this Article to the contrary notwithstanding, the Board of Directors shall be entitled to take or omit to take such actions as it in its discretion shall determine to be advisable in order that the Corporation maintain its status as and continue to qualify as a REIT, including, but not limited to, reducing the Ownership Limit, the Initial Holder Limit and the Look-Through Ownership Limit in the event of a change in law. 10.12 SETTLEMENT. Nothing in this Section 10 of this Article shall be interpreted to preclude the settlement of any transaction entered into through the facilities of the NYSE or other securities exchange or an automated interdealer quotation system. FOURTH: The terms of the Class D Cumulative Preferred Stock set forth in Article Third hereof shall become Article XV of the Charter. 21 92 IN WITNESS WHEREOF, the Corporation has caused these presents to be signed in its name and on its behalf by its Senior Vice President and Chief Financial Officer and witnessed by its Secretary on February 17, 1998. WITNESS: APARTMENT INVESTMENT AND MANAGEMENT COMPANY /s/ Leeann Morein /s/ Troy D. Butts - --------------------------- ------------------------------ Leeann Morein, Troy D. Butts Secretary Senior Vice President and Chief Financial Officer THE UNDERSIGNED, Senior Vice President and Chief Financial Officer of APARTMENT INVESTMENT AND MANAGEMENT COMPANY, who executed on behalf of the Corporation the Articles Supplementary of which this Certificate is made a part, hereby acknowledges in the name and on behalf of said Corporation the foregoing Articles Supplementary to be the corporate act of said Corporation and hereby certifies that the matters and facts set forth herein with respect to the authorization and approval thereof are true in all material respects under the penalties of perjury. /s/ Troy D. Butts ----------------------------------- Troy D. Butts Senior Vice President and Chief Financial Officer 93 ARTICLES OF MERGER BETWEEN APARTMENT INVESTMENT AND MANAGEMENT COMPANY (a Maryland corporation) AND AMBASSADOR APARTMENTS, INC. (a Maryland corporation) APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a corporation duly organized and existing under the laws of the State of Maryland ("AIMCO"), and AMBASSADOR APARTMENTS, INC., a corporation duly organized and existing under the laws of the State of Maryland ("AAI"), do hereby certify that: FIRST: AIMCO and AAI have agreed to merge. SECOND: The name and place of incorporation of each party to these Articles are APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation, and AMBASSADOR APARTMENTS, INC., a Maryland corporation. AIMCO shall survive the merger and shall continue under the name "APARTMENT INVESTMENT AND MANAGEMENT COMPANY" as a corporation of the State of Maryland. THIRD: AIMCO has its principal office in Baltimore City, Maryland. AAI has its principal office in Baltimore City, Maryland and does not own an interest in land in the State of Maryland. FOURTH: The terms and conditions of the transaction set forth in these Articles were advised, authorized, and approved by each corporation party to the Articles in the manner and by the vote required by its Charter and the laws of the state of its incorporation. The manner of approval was as follows: (a) The Board of Directors of AIMCO at meetings held on December 21, 1997 and May 7, 1998 adopted resolutions (by a vote of a majority of the entire Board of Directors) which declared that the proposed merger was advisable on substantially the terms and conditions set forth or referred to in the resolutions and approved the proposed merger. (b) The Board of Directors of AAI at meetings held on, or by unanimous consents dated, December 23, 1997, March 9, 1998, and March 13, 1998 adopted resolutions (by a vote of a majority of the entire Board of Directors) which declared that the proposed merger was advisable on substantially the terms and conditions set forth or referred to in the resolutions and directed that the proposed merger be submitted for consideration at a special meeting of the stockholders of AAI. -1- 94 (c) Notice which stated that a purpose of the meeting was to act on the proposed merger was given by AAI to AAI's stockholders of record as required by law. (d) The proposed merger was approved by the stockholders of AAI at a special meeting of stockholders held May 8, 1998, by the affirmative vote of two-thirds of all the votes entitled to be cast on the matter. FIFTH: No amendment to the Charter of AIMCO is to be effected as a part of the merger. The merger does not reclassify or change the outstanding capital stock of AIMCO. The number of shares of Class A Common Stock, par value $.01 per share, of AIMCO to be issued or delivered in the proposed merger is not more than 20 percent of the number of shares of Class A Common Stock, par value $.01 per share, of AIMCO outstanding immediately before the proposed merger becomes effective. SIXTH: (a) The total number of shares of capital stock of all classes which AIMCO has authority to issue is 160,262,500 shares, currently classified as follows: 150,000,000 shares of Class A Common Stock, par value $.01 per share; 262,500 shares of Class B Common Stock, par value $.01 per share; 1,890,000 shares of Preferred Stock, par value $.01 per share; 750,000 shares of Class B Cumulative Convertible Preferred Stock, par value $.01 per share; 2,760,000 shares of Class C Cumulative Preferred Stock, par value $.01 per share; and 4,600,000 shares of Class D Cumulative Preferred Stock, par value $.01 per share. The aggregate par value of all the shares of stock of all classes of AIMCO is $1,602,625.00. (b) The total number of shares of capital stock of all classes which AAI has authority to issue is 240,000,000 shares, currently classified as follows: 100,000,000 shares of Common Stock, par value $.01 per share; 18,648,649 shares of Preferred Stock, par value $.01 per share; 1,351,351 shares of Class A Senior Cumulative Convertible Preferred Stock, par value $.01 per share; 100,000,000 shares of Excess Common Stock, par value $.01 per share; 18,648,649 shares of Excess Preferred Stock, par value $.01 per share; and 1,351,351 shares of Excess Class A Preferred Stock, par value $.01 per share. -2- 95 The aggregate par value of all the shares of stock of all classes of AAI is $2,400,000.00. SEVENTH: The merger does not increase the authorized stock of AIMCO. EIGHTH: The manner and basis of converting or exchanging issued stock of the merging corporations into different stock of a corporation, for other consideration and the treatment of any issued stock of the merging corporations not to be converted or exchanged are as follows: (a) Each issued and outstanding share of the capital stock of AIMCO at the effective time of the merger shall continue, without change as to class, series or otherwise, to be an issued and outstanding share of capital stock of AIMCO. (b) Each issued and outstanding share of Common Stock, par value $.01 per share, of AAI at the effective time of the merger, other than shares of Common Stock, par value $.01 per share, of AAI held by AAI or AIMCO, shall upon effectiveness and without further act be converted into and become 0.553 shares of Class A Common Stock, par value $.01 per share, of AIMCO. In lieu of issuance of fractional shares of Class A Common Stock, par value $.01 per share, of AIMCO, cash will be paid at the rate of $38.00 per share. Each issued and outstanding share of Common Stock, par value $.01 per share, of AAI at the effective time of the merger held by AAI or AIMCO shall upon effectiveness and without further act be canceled. There will be no issued and outstanding shares of Preferred Stock, par value $.01 per share, Class A Senior Cumulative Convertible Preferred Stock, par value $.01 per share, Excess Common Stock, par value $.01 per share, Excess Preferred Stock, par value $.01 per share, or Excess Class A Preferred Stock, par value $.01 per share, of AAI at the effective time of the merger. (c) As soon as practicable following the effective time of the merger, each holder of issued and outstanding shares of Common Stock, par value $.01 per share, of AAI shall be entitled to surrender to AIMCO the certificates representing the shares of Common Stock, par value $.01 per share, of AAI held by such holder immediately prior to the effective time of the merger, and, upon such surrender, shall be entitled to receive in exchange therefor a certificate or certificates representing the number of whole shares of Class A Common Stock, par value $.01 per share, of AIMCO deliverable in respect thereof, together with cash, without interest, in lieu of any fractional shares of Class A Common Stock, par value $.01 per share, of AIMCO and in respect of any dividends withheld on Class A Common Stock, par value $.01 per share, of AIMCO with record and payment dates after the effective time. NINTH: The merger shall become effective upon acceptance for record by the Maryland State Department of Assessments and Taxation. -3- 96 IN WITNESS WHEREOF, APARTMENT INVESTMENT AND MANAGEMENT COMPANY and AMBASSADOR APARTMENTS, INC. have caused these presents to be signed in their respective names and on their respective behalves by their respective presidents or chairmen and witnessed by their respective secretaries on May 8, 1998. WITNESS: APARTMENT INVESTMENT AND MANAGEMENT COMPANY (a Maryland corporation) /s/ JOEL F. BONDER By: /s/ PETER K. KOMPANIEZ - --------------------------------- ------------------------------- Joel F. Bonder, Secretary Peter K. Kompaniez, President WITNESS: AMBASSADOR APARTMENTS, INC. (a Maryland corporation) /s/ THOMAS J. COORSH By: /s/ DAVID M. GLICKMAN - --------------------------------- ------------------------------- Thomas J. Coorsh, Secretary David M. Glickman, Chairman of the Board -4- 97 THE UNDERSIGNED, the President of APARTMENT INVESTMENT AND MANAGEMENT COMPANY, who executed on behalf of the Corporation the foregoing Articles of Merger of which this certificate is made a part, hereby acknowledges in the name and on behalf of said Corporation the foregoing Articles of Merger to be the corporate act of said Corporation and hereby certifies that to the best of his knowledge, information and belief the matters and facts set forth therein with respect to the authorization and approval thereof are true in all material respects under the penalties of perjury. /s/ PETER K. KOMPANIEZ ---------------------------------------- Peter K. Kompaniez, President THE UNDERSIGNED, the Chairman of the Board of AMBASSADOR APARTMENTS, INC., who executed on behalf of the Corporation the foregoing Articles of Merger of which this certificate is made a part, hereby acknowledges in the name and on behalf of said Corporation the foregoing Articles of Merger to be the corporate act of said Corporation and hereby certifies that to the best of his knowledge, information and belief the matters and facts set forth therein with respect to the authorization and approval thereof are true in all material respects under the penalties of perjury. /s/ DAVID M. GLICKMAN ---------------------------------------- David M. Glickman, Chairman of the Board -5- 98 APARTMENT INVESTMENT AND MANAGEMENT COMPANY ARTICLES OF AMENDMENT APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation, having its principal office in Baltimore City, Maryland (which is hereinafter called the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: Article IV, Section 1.1 of the Charter of the Corporation is hereby amended in its entirety to read as follows: 1.1 CLASS AND NUMBER OF SHARES. The total number of shares of stock that the Corporation from time to time shall have authority to issue is 510,750,000 shares of capital stock having a par value of $.01 per share amounting to an aggregate par value of $5,107,500, consisting of 502,377,500 shares currently classified as Class A Common Stock, par value $.01 per share (the "Class A Common Stock"), 262,500 shares currently classified as Class B Common Stock, par value $.01 per share (the "Class B Common Stock") (the Class A Common Stock and Class B Common Stock being referred to collectively herein as "Common Stock"), 750,000 shares currently classified as Class B Cumulative Convertible Preferred Stock, par value $.01 per share (the "Class B Preferred Stock"), 2,760,000 shares currently classified as Class C Cumulative Preferred Stock, par value $.01 per share (the "Class C Preferred Stock"), and 4,600,000 shares currently classified as Class D Cumulative Preferred Stock, par value $.01 per share (the "Class D Preferred Stock")(the Class B Preferred Stock, the Class C Preferred Stock, the Class D Preferred Stock, and all other classes or series of preferred stock hereafter classified being referred to collectively herein as the "Preferred Stock"). SECOND: (a) As of immediately before the amendment the total number of shares of stock of all classes which the Corporation has authority to issue is 160,262,500(1) shares of capital stock, which are currently classified as follows: 150,000,000 shares of Class A Common Stock, par value $.01 per share; 262.500 shares of Class B Common Stock, par value $.01 per share;(2) - ----------------------- (1) The number of shares of authorized capital stock has been reduced since the last amendment of the Charter of the Corporation from 160,750,000 shares to 160,262,500 shares through the cancellation of 487,500 shares of Class B Common Stock, par value $.01 per share, that were converted into shares of Class A Common Stock, par value $.01 per share. -1- 99 1,890,000 shares of Preferred Stock, par value $.01 per share; 750,000 shares of Class B Cumulative Convertible Preferred Stock, par value $.01 per share; 2,760,000 shares of Class C Cumulative Preferred Stock, par value $.01 per share; and 4,600,000 shares of Class D Cumulative Preferred Stock, par value $.01 per share. (b) As amended the total number of shares of stock of all classes which the Corporation has authority to issue is 510,750,000 shares of capital stock, which, as amended, are currently classified as follows: 502,377,500 shares of Class A Common Stock, par value $.01 per share; 262,500 shares of Class B Common Stock, par value $.01 per share; 750,000 shares of Class B Cumulative Convertible Preferred Stock, par value $.01 per share; 2,760,000 shares of Class C Cumulative Preferred Stock, par value $.01 per share; and 4,600,000 shares of Class D Cumulative Preferred Stock, par value $.01 per share. (c) The aggregate par value of all shares having a par value is $1,602,625(3) before the amendment and $5,107,500 as amended. (d) The shares of stock of the Corporation are divided into classes, but the descriptions of each class of capital stock of the Corporation are not changed by the amendment. THIRD: The foregoing amendment to the Charter of the Corporation has been advised by the Board of Directors and approved by the stockholders of the Corporation. - ------------------------------------------------------------------------------ (2) The number of shares of Class B Common Stock, par value $.01 per share, has been reduced since the last amendment of the Charter of the Corporation from 750,000 shares to 262,500 shares through the cancellation of 487,500 shares of Class B Common Stock, par value $.01 per share, that were converted into shares of Class A Common Stock, par value $.01 per share. (3) The aggregate par value of shares having a par value before the amendment has been reduced since the last amendment of the Charter of the Corporation from $1,607,500 to $1,602,625 through the cancellation of 487,500 shares of Class B Common Stock, par value $.01 per share, that were converted into shares of Class A Common Stock, par value $.01 per share. -2- 100 IN WITNESS WHEREOF, APARTMENT INVESTMENT AND MANAGEMENT COMPANY has caused these presents to be signed in its name and on its behalf by its Chairman of the Board and witnessed by its Secretary on June 16, 1998. WITNESS: APARTMENT INVESTMENT AND MANAGEMENT COMPANY /s/ JOEL F. BONDER By:/s/ TERRY CONSIDINE - ----------------------- --------------------- Joel F. Bonder Terry Considine Secretary Chairman of the Board THE UNDERSIGNED, Chairman of the Board of APARTMENT INVESTMENT AND MANAGEMENT COMPANY, who executed on behalf of the Corporation the foregoing Articles of Amendment of which this certificate is made a part, hereby acknowledges in the name and on behalf of said Corporation the foregoing Articles of Amendment to be the corporate act of said Corporation and hereby certifies that to the best of his knowledge, information, and belief the matters and facts set forth therein with respect to the authorization and approval thereof are true in all material respects under the penalties of perjury. /s/ TERRY CONSIDINE --------------------- Terry Considine Chairman of the Board -3- 101 ARTICLES SUPPLEMENTARY APARTMENT INVESTMENT AND MANAGEMENT COMPANY CLASS G CUMULATIVE PREFERRED STOCK (PAR VALUE $.01 PER SHARE) APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation (hereinafter called the "Corporation"), having its principal office in Baltimore City, Maryland, hereby certifies to the Department of Assessments and Taxation of the State of Maryland that: FIRST: Pursuant to authority expressly vested in the Board of Directors of the Corporation by Section 1.2 of Article IV of the Charter of the Corporation, as amended to date (the "Charter"), the Board of Directors has duly divided and classified 4,050,000 authorized but unissued shares of Class A Common Stock of the Corporation, par value $.01 per share (the "Class A Common Stock"), into a class designated as Class G Cumulative Preferred Stock, par value $.01 per share, and has provided for the issuance of such class. SECOND: The reclassification increases the number of shares classified as Class G Cumulative Preferred Stock, par value $.01 per share, from no shares immediately prior to the reclassification to 4,050,000 shares immediately after the reclassification. The reclassification decreases the number of shares classified as Class A Common Stock from 502,377,500 shares immediately prior to the reclassification to 498,327,500 shares immediately after the reclassification. THIRD: The terms of the Class G Cumulative Preferred Stock (including the preferences, conversions or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, or terms or conditions of redemption) as set by the Board of Directors are as follows: 1. NUMBER OF SHARES AND DESIGNATION. This class of Preferred Stock shall be designated as Class G Cumulative Preferred Stock, par value $.01 per share (the "Class G Preferred Stock") and Four Million Fifty Thousand (4,050,000) shall be the authorized number of shares of such Class G Preferred Stock constituting such class. 102 2. DEFINITIONS. For purposes of the Class G Preferred Stock, the following terms shall have the meanings indicated: "Act" shall mean the Securities Act of 1933, as amended. "affiliate" of a Person means a Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Person specified. "Aggregate Value" shall mean, with respect to any block of Equity Stock, the sum of the products of (i) the number of shares of each class of Equity Stock within such block multiplied by (ii) the corresponding Market Price of one share of Equity Stock of such class. "Beneficial Ownership" shall mean, with respect to any Person, ownership of shares of Equity Stock equal to the sum of (i) the number of shares of Equity Stock directly owned by such Person, (ii) the number of shares of Equity Stock indirectly owned by such Person (if such Person is an "individual" as defined in Section 542(a)(2) of the Code) taking into account the constructive ownership rules of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code, and (iii) the number of shares of Equity Stock that such Person is deemed to beneficially own pursuant to Rule 13d-3 under the Exchange Act or that is attributed to such Person pursuant to Section 318 of the Code, as modified by Section 856(d)(5) of the Code, provided that when applying this definition of Beneficial Ownership to the Initial Holder, clause (iii) of this definition, and clause (ii) of the definition of "Person" shall be disregarded. The terms "Beneficial Owner,""Beneficially Owns" and "Beneficially Owned" shall have the correlative meanings. "Board of Directors" shall mean the Board of Directors of the Corporation or any committee authorized by such Board of Directors to perform any of its responsibilities with respect to the Class G Preferred Stock. "Business Day" shall mean any day other than a Saturday, Sunday or a day on which state or federally chartered banking institutions in New York, New York are not required to be open. "Charitable Beneficiary" shall mean one or more beneficiaries of the Trust as determined pursuant to Section 10.3 of this Article, each of which shall be an organization described in Section 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code. 2 103 "Class G Preferred Stock" shall have the meaning set forth in Section 1 of this Article. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor thereto, as interpreted by any applicable regulations or other administrative pronouncements as in effect from time to time. "Common Stock" shall mean the Class A Common Stock, $.01 par value per share, of the Corporation or such shares of the Corporation's capital stock into which outstanding shares of Common Stock shall be reclassified. "Dividend Payment Date" shall mean January 15, April 15, July 15 and October 15 of each year; provided, further, that if any Dividend Payment Date falls on any day other than a Business Day, the dividend payment payable on such Dividend Payment Date shall be paid on the Business Day immediately following such Dividend Payment Date and no interest shall accrue on such dividend from such date to such Dividend Payment Date. "Dividend Periods" shall mean the Initial Dividend Period and each subsequent quarterly dividend period commencing on and including January 15, April 15, July 15 and October 15 of each year and ending on and including the day preceding the first day of the next succeeding Dividend Period, other than the Dividend Period during which any Class G Preferred Stock shall be redeemed pursuant to Section 5 hereof, which shall end on and include the Redemption Date with respect to the Class G Preferred Stock being redeemed. "Equity Stock" shall mean one or more shares of any class of capital stock of the Corporation. "Excess Transfer" has the meaning set forth in Section 10.3(A) of this Article. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Issue Date" shall mean July 15, 1998. "Initial Dividend Period" shall mean the period commencing on and including the Issue Date and ending on and including October 15, 1998. "Initial Holder" shall mean Terry Considine. "Initial Holder Limit" shall mean a number of the Outstanding shares of Class G Preferred Stock of the Corporation having an Aggregate Value not in excess of the excess of (x) 15% of the Aggregate Value of all Outstanding shares of 3 104 Equity Stock over (y) the Aggregate Value of all shares of Equity Stock other than Class G Preferred Stock that are Beneficially Owned by the Initial Holder. From the Issue Date, the secretary of the Corporation, or such other person as shall be designated by the Board of Directors, shall upon request make available to the representative(s) of the Initial Holder and the Board of Directors, a schedule that sets forth the then-current Initial Holder Limit applicable to the Initial Holder. "Junior Stock" shall mean the Common Stock and any other class or series of capital stock of the Corporation over which the shares of Class G Preferred Stock have preference or priority in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Corporation. "Look-Through Entity" shall mean a Person that is either (i) described in Section 401(a) of the Code as provided under Section 856(h)(3) of the Code or (ii) registered under the Investment Company Act of 1940. "Look-Through Ownership Limit" shall mean, for any Look-Through Entity, a number of the Outstanding shares of Class G Preferred Stock of the Corporation having an Aggregate Value not in excess of the excess of (x) 15% of the Aggregate Value of all Outstanding shares of Equity Stock over (y) by the Aggregate Value of all shares of Equity Stock other than Class G Preferred Stock that are Beneficially Owned by the Look-Through Entity. "Market Price" on any date shall mean, with respect to any share of Equity Stock, the Closing Price of share of that class of Equity Stock on the Trading Day immediately preceding such date. The term "Closing Price" on any date shall mean that last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE or, if the Equity Stock is not listed or admitted to trading on the NYSE, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Equity Stock is listed or admitted to trading or, if the Equity Stock is not listed or admitted to trading on any national securities exchange, the last quoted price, or if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the principal other automated quotations system that may then be in use or, if the Equity Stock is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Equity Stock selected by the Board of Directors of the Company. The term "Trading Day" shall mean a day on which the principal national securities exchange on which 4 105 the Equity Stock is listed or admitted to trading is open for the transaction of business or, if the Equity Stock is not listed or admitted to trading on any national securities exchange, shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. "NYSE" shall mean the New York Stock Exchange, Inc. "Outstanding" shall mean issued and outstanding shares of Equity Stock of the Corporation, provided that for purposes of the application of the Ownership Limit, the Look-Through Ownership Limit or the Initial Holder Limit to any Person, the term "Outstanding" shall be deemed to include the number of shares of Equity Stock that such Person alone, at that time, could acquire pursuant to any options or convertible securities. "Ownership Limit" shall mean, for any Person other than the Initial Holder or a Look-Through Entity, a number of the Outstanding shares of Class G Preferred Stock of the Corporation having an Aggregate Value not in excess of the excess of (x) 8.7% of the Aggregate Value of all Outstanding shares of Equity Stock over (y) the Aggregate Value of all shares of Equity Stock other than Class G Preferred Stock that are Beneficially Owned by the Person. "Ownership Restrictions" shall mean collectively the Ownership Limit as applied to Persons other than the Initial Holder or Look-Through Entities, the Initial Holder Limit as applied to the Initial Holder and the Look-Through Ownership Limit as applied to Look-Through Entities. "Parity Stock" shall have the meaning set forth in paragraph (b) of Section 7 of this Article. The Class B Preferred Stock, the Class C Preferred Stock and the Class D Preferred Stock shall each be a Parity Stock. "Person" shall mean (a) for purposes of Section 10 of this Article, (i) an individual, corporation, partnership, estate, trust (including a trust qualifying under Section 401(a) or 501(c) of the Code), association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, and (ii) also includes a group as that term is used for purposes of Section 13(d)(3) of the Exchange Act and (b) for purposes of the remaining Sections of this Article, any individual, firm, partnership, corporation or other entity and shall include any successor (by merger or otherwise) of such entity. "Prohibited Transferee" has the meaning set forth in Section 10.3(A) of this Article. "Redemption Date" shall have the meaning set forth in paragraph (b) of Section 5 of this Article. 5 106 "REIT" shall mean a "real estate investment trust" as defined in Section 856 of the Code. "Senior Stock" shall have the meaning set forth in paragraph (a) of Section 7 of this Article. "set apart for payment" shall be deemed to include, without any action other than the following, the recording by the Corporation in its accounting ledgers of any accounting or bookkeeping entry which indicates, pursuant to a declaration of dividends or other distribution by the Board of Directors, the allocation of funds to be so paid on any series or class of capital stock of the Corporation; provided, however, that if any funds for any class or series of Junior Stock or any class or series of Parity Stock are placed in a separate account of the Corporation or delivered to a disbursing, paying or other similar agent, then "set apart for payment" with respect to the Class G Preferred Stock shall mean placing such funds in a separate account or delivering such funds to a disbursing, paying or other similar agent. "Trading Day", as to any securities, shall mean any day on which such securities are traded on the principal national securities exchange on which such securities are listed or admitted or, if such securities are not listed or admitted for trading on any national securities exchange, the NASDAQ National Market or, if such securities are not listed or admitted for trading on the NASDAQ National Market, in the securities market in which such securities are traded. "Transfer" shall mean any sale, transfer, gift, assignment, devise or other disposition of a share of Class G Preferred Stock (including (i) the granting of an option or any series of such options or entering into any agreement for the sale, transfer or other disposition of Class G Preferred Stock or (ii) the sale, transfer, assignment or other disposition of any securities or rights convertible into or exchangeable for Class G Preferred Stock), whether voluntary or involuntary, whether of record or Beneficial Ownership, and whether by operation of law or otherwise (including, but not limited to, any transfer of an interest in other entities that results in a change in the Beneficial Ownership of shares of Class G Preferred Stock). The term "Transfers" and "Transferred" shall have correlative meanings. "Transfer Agent" means such transfer agent as may be designated by the Board of Directors or their designee as the transfer agent for the Class G Preferred Stock; provided, that if the Corporation has not designated a transfer agent then the Corporation shall act as the transfer agent for the Class G Preferred Stock. "Trust" shall mean the trust created pursuant to Section 10.3 of this Article. 6 107 "Trustee" shall mean the Person unaffiliated with either the Corporation or the Prohibited Transferee that is appointed by the Corporation to serve as trustee of the Trust. "Voting Preferred Stock" shall have the meaning set forth in Section 8 of this Article. 3. DIVIDENDS. (a) The holders of Class G Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors out of funds legally available for that purpose, cumulative dividends payable in cash in an amount per share of Class G Preferred Stock equal to $2.34375 per annum. Such dividends shall be cumulative from the Issue Date, whether or not in any Dividend Period or Periods such dividends shall be declared or there shall be funds of the Corporation legally available for the payment of such dividends, and shall be payable quarterly in arrears on each Dividend Payment Date, commencing on October 15, 1998. Each such dividend shall be payable in arrears to the holders of record of the Class G Preferred Stock, as they appear on the stock records of the Corporation at the close of business on the January 1, April 1, July 1 or October 1, as the case may be, immediately preceding such Dividend Payment Date. Accumulated, accrued and unpaid dividends for any past Dividend Periods may be declared and paid at any time, without reference to any regular Dividend Payment Date, to holders of record on such date, which date shall not precede by more than 45 days the payment date thereof, as may be fixed by the Board of Directors. (b) Any dividend payable on the Class G Preferred Stock for any partial dividend period shall be computed ratably on the basis of twelve 30-day months and a 360-day year. Holders of Class G Preferred Stock shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of cumulative dividends, as herein provided, on the Class G Preferred Stock. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Class G Preferred Stock that may be in arrears. (c) So long as any of the shares of Class G Preferred Stock are outstanding, except as described in the immediately following sentence, no dividends shall be declared or paid or set apart for payment by the Corporation and no other distribution of cash or other property shall be declared or made directly or indirectly by the Corporation with respect to any class or series of Parity Stock for any period unless dividends equal to the full amount of accumulated, accrued and unpaid dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof has been or contemporaneously is set apart for such payment on the Class G Preferred Stock for all Dividend Periods terminating on or prior to the Dividend Payment Date with respect to such class or series of Parity Stock. When dividends are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, all dividends declared upon the Class G Preferred Stock and all dividends declared upon any 7 108 other class or series of Parity Stock shall be declared ratably in proportion to the respective amounts of dividends accumulated, accrued and unpaid on the Class G Preferred Stock and accumulated, accrued and unpaid on such Parity Stock. (d) So long as any of the shares of Class G Preferred Stock are outstanding, no dividends (other than dividends or distributions paid in shares of, or options, warrants or rights to subscribe for or purchase shares of, Junior Stock) shall be declared or paid or set apart for payment by the Corporation and no other distribution of cash or other property shall be declared or made, directly or indirectly, by the Corporation with respect to any shares of Junior Stock, nor shall any shares of Junior Stock be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Common Stock made for purposes of an employee incentive or benefit plan of the Corporation or any subsidiary) for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock), directly or indirectly, by the Corporation (except by conversion into or exchange for shares of, or options, warrants or rights to subscribe for or purchase shares of, Junior Stock), nor shall any other cash or other property otherwise be paid or distributed to or for the benefit of any holder of shares of Junior Stock in respect thereof, directly or indirectly, by the Corporation unless in each case the full cumulative dividends (including all accumulated, accrued and unpaid dividends) on all outstanding shares of Class G Preferred Stock shall have been paid or such dividends have been declared and set apart for payment for all past Dividend Periods with respect to the Class G Preferred Stock. Notwithstanding the provisions of this Section 3(d), the Corporation shall not be prohibited from (i) declaring or paying or setting apart for payment any dividend or distribution on any shares of Parity Stock or (ii) or redeeming, purchasing or otherwise acquiring any Parity Stock, in each case, if such declaration, payment, redemption, purchase or other acquisition is necessary in order to maintain the continued qualification of the Corporation as a REIT under Section 856 of the Code. 4. LIQUIDATION PREFERENCE. (a) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any payment or distribution by the Corporation (whether of capital or surplus) shall be made to or set apart for the holders of Junior Stock, the holders of shares of Class G Preferred Stock shall be entitled to receive Twenty-Five Dollars ($25) per share of Class G Preferred Stock (the "Liquidation Preference"), plus an amount equal to all dividends (whether or not earned or declared) accumulated, accrued and unpaid thereon to the date of final distribution to such holders; but such holders shall not be entitled to any further payment. Until the holders of the Class G Preferred Stock have been paid the Liquidation Preference in full, plus an amount equal to all dividends (whether or not earned or declared) accumulated, accrued and unpaid thereon to the date of final distribution to such holders, no payment will be made to any holder of Junior Stock upon the liquidation, dissolution or winding up of the 8 109 Corporation. If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation, or proceeds thereof, distributable among the holders of Class G Preferred Stock shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other shares of any class or series of Parity Stock, then such assets, or the proceeds thereof, shall be distributed among the holders of Class G Preferred Stock and any such other Parity Stock ratably in the same proportion as the respective amounts that would be payable on such Class G Preferred Stock and any such other Parity Stock if all amounts payable thereon were paid in full. For the purposes of this Section 4, (i) a consolidation or merger of the Corporation with one or more corporations, (ii) a sale or transfer of all or substantially all of the Corporation's assets, or (iii) a statutory share exchange shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Corporation. (b) Upon any liquidation, dissolution or winding up of the Corporation, after payment shall have been made in full to the holders of Class G Preferred Stock and any Parity Stock, as provided in this Section 4, any other series or class or classes of Junior Stock shall, subject to the respective terms thereof, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Class G Preferred Stock and any Parity Stock shall not be entitled to share therein. 5. REDEMPTION AT THE OPTION OF THE CORPORATION. (a) Shares of Class G Preferred Stock shall not be redeemable by the Corporation prior to July 15, 2008, except as set forth in Section 10.2 of this Article. On and after July 15, 2008, the Corporation, at its option, may redeem shares of Class G Preferred Stock, in whole or from time to time in part, at a redemption price payable in cash equal to 100% of the Liquidation Preference thereof, plus all accrued and unpaid dividends to the date fixed for redemption (the "Redemption Date"). In connection with any redemption pursuant to this Section 5(a), the redemption price of the Class G Preferred Stock (other than any portion thereof consisting of accrued and unpaid dividends) shall be payable solely with the proceeds from the sale by the Corporation or AIMCO Properties, L.P., a Delaware limited Partnership (the "Operating Partnership"), of other capital shares of the Corporation or the Operating Partnership (whether or not such sale occurs concurrently with such redemption). For purposes of the preceding sentence, "capital shares" means any common stock, preferred stock, depositary shares, partnership or other interests, participations or other ownership interests (however designated) and any rights (other than debt securities convertible into or exchangeable at the option of the holder for equity securities (unless and to the extent such debt securities are subsequently converted into capital shares)) or options to purchase any of the foregoing of or in the Corporation or the Operating Partnership. (b) The Redemption Date shall be selected by the Corporation, shall be specified in the notice of redemption and shall be not less than 30 days nor more than 60 days after the date notice of redemption is sent by the Corporation. 9 110 (c) If full cumulative dividends on all outstanding shares of Class G Preferred Stock have not been paid or declared and set apart for payment, no shares of Class G Preferred Stock may be redeemed unless all outstanding shares of Class G Preferred Stock are simultaneously redeemed and neither the Corporation nor any affiliate of the Corporation may purchase or acquire shares of Class G Preferred Stock, otherwise than pursuant to a purchase or exchange offer made on the same terms to all holders of shares of Class G Preferred Stock. (d) If the Corporation shall redeem shares of Class G Preferred Stock pursuant to paragraph (a) of this Section 5, notice of such redemption shall be given to each holder of record of the shares to be redeemed. Such notice shall be provided by first class mail, postage prepaid, at such holder's address as the same appears on the stock records of the Corporation. Neither the failure to mail any notice required by this paragraph (d), nor any defect therein or in the mailing thereof to any particular holder, shall affect the sufficiency of the notice of the validity of the proceedings for redemption with respect to the other holders. Any notice which was mailed in the manner herein provided shall be conclusively presumed to have been duly given on the date mailed whether or not the holder receives the notice. Each such notice shall state, as appropriate: (1) the Redemption Date; (2) the number of shares of Class G Preferred Stock to be redeemed and, if fewer than all such shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; and (3) the place or places at which certificates for such shares are to be surrendered for cash. Notice having been mailed as aforesaid, from and after the Redemption Date (unless the Corporation shall fail to make available the amount of cash necessary to effect such redemption), (i) except as otherwise provided herein, dividends on the shares of Class G Preferred Stock so called for redemption shall cease to accumulate or accrue on the shares of Class G Preferred Stock called for redemption(except that, in the case of a Redemption Date after a dividend record date and prior to the related Dividend Payment Date, holders of Class G Preferred Stock on the dividend record date will be entitled to such Dividend Payment Date to receive the dividend payable on such shares), (ii) said shares shall no longer be deemed to be outstanding, and (iii) all rights of the holders thereof as holders of Class G Preferred Stock of the Corporation shall cease (except the rights to receive the cash payable upon such redemption, without interest thereon, upon surrender and endorsement of their certificates if so required and to receive any dividends payable thereon). The Corporation's obligation to make available the redemption price in accordance with the preceding sentence shall be deemed fulfilled if, on or before the Call Date, the Corporation shall deposit with a bank or trust company (which may be an affiliate of the Corporation) that has, or is an affiliate of a bank or trust company that has, a capital and surplus of at least $50,000,000, such amount of cash as is necessary for such redemption, in trust, with irrevocable instructions that such cash be applied to the redemption of the shares of Class G Preferred Stock so called for redemption. No interest shall accrue for the benefit of the holders of shares of Class G Preferred Stock to be redeemed on any cash so set aside by the Corporation. Subject to applicable escheat laws, any such cash unclaimed at the end of two years from the Redemption Date shall revert to the general funds of the Corporation, after which reversion the holders of shares of Class G Preferred 10 111 Stock so called for redemption shall look only to the general funds of the Corporation for the payment of such cash. As promptly as practicable after the surrender in accordance with such notice of the certificates for any such shares of Class G Preferred Stock to be so redeemed (properly endorsed or assigned for transfer, if the Corporation shall so require and the notice shall so state), such certificates shall be exchanged for cash (without interest thereon) for which such shares have been redeemed in accordance with such notice. If fewer than all the outstanding shares of Class G Preferred Stock are to be redeemed, shares to be redeemed shall be selected by the Corporation from outstanding shares of Class G Preferred Stock not previously called for redemption by lot or, with respect to the number of shares of Class G Preferred Stock held of record by each holder of such shares, pro rata (as nearly as may be) or by any other method as may be determined by the Board of Directors in its discretion to be equitable. If fewer than all the shares of Class G Preferred Stock represented by any certificate are redeemed, then a new certificate representing the unredeemed shares shall be issued without cost to the holders thereof. 6. Status of Reacquired Stock. All shares of Class G Preferred Stock which shall have been issued and reacquired in any manner by the Corporation shall be returned to the status of authorized, but unissued shares of Class G Preferred Stock. 7. Ranking. Any class or series of capital stock of the Corporation shall be deemed to rank: (a) prior or senior to the Class G Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, if the holders of such class or series shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Class G Preferred Stock ("Senior Stock"); (b) on a parity with the Class G Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share thereof be different from those of the Class G Preferred Stock, if the holders of such class of stock or series and the Class G Preferred Stock shall be entitled to the receipt of dividends and of amounts distributable upon liquidation, dissolution or winding up in proportion to their respective amounts of accrued and unpaid dividends per share or liquidation preferences, without preference or priority one over the other ("Parity Stock"); and 11 112 (c) junior to the Class G Preferred Stock, as to the payment of dividends or as to the distribution of assets upon liquidation, dissolution or winding up, if such stock or series shall be Common Stock or if the holders of Class G Preferred Stock shall be entitled to receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of shares of such class or series ("Junior Stock"). 8. VOTING. (a) If and whenever six quarterly dividends (whether or not consecutive) payable on the Class G Preferred Stock or any series or class of Parity Stock shall be in arrears (which shall, with respect to any such quarterly dividend, mean that any such dividend has not been paid in full), whether or not earned or declared, the number of directors then constituting the Board of Directors shall be increased by two (if not already increased by reason of similar types of provisions with respect to shares of Parity Stock of any other class or series which is entitled to similar voting rights (the "Voting Preferred Stock")) and the holders of shares of Class G Preferred Stock, together with the holders of shares of all other Voting Preferred Stock then entitled to exercise similar voting rights, voting as a single class regardless of series, shall be entitled to elect the two additional directors to serve on the Board of Directors at any annual meeting of stockholders or special meeting held in place thereof, or at a special meeting of the holders of the Class G Preferred Stock and the Voting Preferred Stock called as hereinafter provided. Whenever all arrears in dividends on the Class G Preferred Stock and the Voting Preferred Stock then outstanding shall have been paid and dividends thereon for the current quarterly dividend period shall have been paid or declared and set apart for payment, then the right of the holders of the Class G Preferred Stock and the Voting Preferred Stock to elect such additional two directors shall cease (but subject always to the same provision for the vesting of such voting rights in the case of any similar future arrearages), and the terms of office of all Persons elected as directors by the holders of the Class G Preferred Stock and the Voting Preferred Stock shall forthwith terminate and the number of directors constituting the Board of Directors shall be reduced accordingly. At any time after such voting power shall have been so vested in the holders of Class G Preferred Stock and the Voting Preferred Stock, if applicable, the Secretary of the Corporation may, and upon the written request of any holder of Class G Preferred Stock (addressed to the Secretary at the principal office of the Corporation) shall, call a special meeting of the holders of the Class G Preferred Stock and of the Voting Preferred Stock for the election of the two directors to be elected by them as herein provided, such call to be made by notice similar to that provided in the Bylaws of the Corporation for a special meeting of the stockholders or as required by law. If any such special meeting required to be called as above provided shall not be called by the Secretary within 20 days after receipt of any such request, then any holder of Class G Preferred Stock may call such meeting, upon the notice above provided, and for that purpose shall have access to the stock books of the Corporation. The directors elected at any such special meeting shall hold office until the next annual meeting of the stockholders or special meeting held in lieu thereof if such office shall not have 12 113 previously terminated as above provided. If any vacancy shall occur among the directors elected by the holders of the Class G Preferred Stock and the Voting Preferred Stock, a successor shall be elected by the Board of Directors, upon the nomination of the then-remaining director elected by the holders of the Class G Preferred Stock and the Voting Preferred Stock or the successor of such remaining director, to serve until the next annual meeting of the stockholders or special meeting held in place thereof if such office shall not have previously terminated as provided above. (b) So long as any shares of Class G Preferred Stock are outstanding, in addition to any other vote or consent of stockholders required by law or by the Charter of the Corporation, the affirmative vote of at least 66-2/3% of the votes entitled to be cast by the holders of the Class G Preferred Stock voting as a single class with the holders of all other classes or series of Preferred Stock entitled to vote on such matters, given in Person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating: (i) Any amendment, alteration or repeal of any of the provisions of these Articles Supplementary, the Charter or the By-Laws of the Corporation that materially adversely affects the voting powers, rights or preferences of the holders of the Class G Preferred Stock; provided, however, that the amendment of the provisions of the Charter so as to authorize or create, or to increase the authorized amount of, or issue any Junior Stock or any shares of any class of Parity Stock shall not be deemed to materially adversely affect the voting powers, rights or preferences of the holders of Class G Preferred Stock; or (ii) The authorization, creation of, the increase in the authorized amount of, or issuance of any shares of any class of Senior Stock or any security convertible into shares of any class of Senior Stock (whether or not such class of Senior Stock is currently authorized); provided, however, that no such vote of the holders of Class G Preferred Stock shall be required if, at or prior to the time when such amendment, alteration or repeal is to take effect, or when the issuance of any such prior shares or convertible security is to be made, as the case may be, provision is made for the redemption of all shares of Class G Preferred Stock at the time outstanding to the extent such redemption is authorized by Section 5 of this Article. For purposes of the foregoing provisions and all other voting rights under these Articles Supplementary, each share of Class G Preferred Stock shall have one (1) vote per share, except that when any other class or series of preferred stock shall have the right to vote with the Class G Preferred Stock as a single class on any matter, then the Class G Preferred Stock and such other class or series shall have with respect to such matters one quarter of one(.25) vote per $25 of stated liquidation preference. Except as otherwise required by applicable law or as set forth herein, the Class G Preferred Stock shall not have any relative, participating, optional or other special voting rights and powers other than as set forth herein, and the consent of the holders thereof shall not be required for the taking of any corporate action. 13 114 9. RECORD HOLDERS. The Corporation and the Transfer Agent may deem and treat the record holder of any share of Class G Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Corporation nor the Transfer Agent shall be affected by any notice to the contrary. 10.1 RESTRICTIONS ON OWNERSHIP AND TRANSFERS. (A) LIMITATION ON BENEFICIAL OWNERSHIP. Except as provided in Section 10.8, from and after the Issue Date, no Person (other than the Initial Holder or a Look-Through Entity) shall Beneficially Own shares of Class G Preferred Stock in excess of the Ownership Limit, the Initial Holder shall not Beneficially Own shares of Class G Preferred Stock in excess of the Initial Holder Limit and no Look-Through Entity shall Beneficially Own shares of Class G Preferred Stock in excess of the Look-Through Ownership Limit. (B) TRANSFERS IN EXCESS OF OWNERSHIP LIMIT. Except as provided in Section 10.8, from and after the Issue Date (and subject to Section 10.12), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or automated inter-dealer quotation system) that, if effective, would result in any Person (other than the Initial Holder or a Look-Through Entity) Beneficially Owning shares of Class G Preferred Stock in excess of the Ownership Limit shall be void ab initio as to the Transfer of such shares of Class G Preferred Stock that would be otherwise Beneficially Owned by such Person in excess of the Ownership Limit, and the intended transferee shall acquire no rights in such shares of Class G Preferred Stock. (C) TRANSFERS IN EXCESS OF INITIAL HOLDER LIMIT. Except as provided in Section 10.8, from and after the Issue Date (and subject to Section 10.12), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system) that, if effective, would result in the Initial Holder Beneficially Owning shares of Class G Preferred Stock in excess of the Initial Holder Limit shall be void ab initio as to the Transfer of such shares of Class G Preferred Stock that would be otherwise Beneficially Owned by the Initial Holder in excess of the Initial Holder limit, and the Initial Holder shall acquire no rights in such shares of Class G Preferred Stock. (D) TRANSFERS IN EXCESS OF LOOK-THROUGH OWNERSHIP LIMIT. Except as provided in Section 10.8 from and after the Issue Date (and subject to Section 10.12), any Transfer (whether or not such Transfer is the result of transactions entered into through facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system) that, if effective, would result in any Look-Through Entity Beneficially Owning shares of Class G Preferred Stock in excess of the Look-Through Ownership limit shall be void ab initio as to the Transfer of such shares of Class G 14 115 Preferred Stock that would be otherwise Beneficially Owned by such Look-Through Entity in excess of the Look-Through Ownership Limit and such Look-Through Entity shall acquire no rights in such shares of Class G Preferred Stock. (E) TRANSFERS RESULTING IN "CLOSELY HELD" STATUS. From and after the Issue Date any Transfer that, if effective would result in the Corporation being "closely held" within the meaning of Section 856(h) of the Code, or would otherwise result in the Corporation failing to qualify as a REIT (including without limitation, a Transfer or other event that would result in the Corporation owning (directly or constructively) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by the Corporation from such tenant would cause the Corporation to fail to satisfy any of the gross income requirements of Section 856(c) of the Code) shall be void ab initio as to the Transfer of shares of Class G Preferred Stock that would cause the Corporation (i) to be "closely held" within the meaning of Section 856(h) of the Code or (ii) otherwise fail to qualify as a REIT, as the case may be, and the intended transferee shall acquire no rights in such shares of Class G Preferred Stock. (F) SEVERABILITY ON VOID TRANSACTIONS. A Transfer of a share of Class G Preferred Stock that is null and void under Sections 10.1(B), (C), (D), or (E) of this Article because it would, if effective, result in (i) the ownership of Class G Preferred Stock in excess of the Initial Holder Limit, the Ownership Limit, or the Look-Through Ownership Limit, (ii) the Corporation being "closely held" within the meaning of Section 856(h) of the Code or (iii) the Corporation otherwise failing to qualify as a REIT, shall not adversely affect the validity of the Transfer of any other share of Class G Preferred Stock in the same or any other related transaction. 10.2 REMEDIES FOR BREACH. If the Board of Directors or a committee thereof shall at any time determine in good faith that a Transfer or other event has taken place in violation of Section 10.1 of this Article or that a Person intends to acquire or has attempted to acquire Beneficial Ownership of any shares of Class G Preferred Stock in violation of Section 10.1 of this Article (whether or not such violation is intended), the Board of Directors or a committee thereof shall be empowered to take any action as it deems advisable to refuse to give effect to or to prevent such Transfer or other event, including, but not limited to, refusing to give effect to such Transfer or other event on the books of the Corporation, causing the Corporation to redeem such shares at the then current Market Price and upon such terms and conditions as may be specified by the Board of Directors in its sole discretion (including, but not limited to, by means of the issuance of long-term indebtedness for the purpose of such redemption), demanding the repayment of any distributions received in respect of shares of Class G Preferred Stock acquired in violation of Section 10.1 of this Article or instituting proceedings to enjoin such Transfer or to rescind such Transfer or attempted Transfer; provided, however, that any Transfers or attempted Transfers (or in the case of events other than a Transfer, Beneficial Ownership) in violation of Section 10.1 of this Article, regardless of any action (or non-action) by the Board of Directors or such committee, (a) shall be void ab initio or (b) shall automatically result in the transfer described in Section 10.3 of this 15 116 Article; provided, further, that the provisions of this Section 10.2 shall be subject to the provisions of Section 10.12 of this Article; provided, further, that neither the Board of Directors nor any committee thereof may exercise such authority in a manner that interferes with any ownership or transfer of Class G Preferred Stock that is expressly authorized pursuant to Section 10.8(d) of this Article. 10.3. TRANSFER IN TRUST. (A) ESTABLISHMENT OF TRUST. If, notwithstanding the other provisions contained in this Article, at any time after the Issue Date there is a purported Transfer (an "Excess Transfer") (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated interdealer quotation system) or other change in the capital structure of the Corporation (including, but not limited to, any redemption of Preferred Stock) or other event (including, but not limited to, any acquisition of any share of Equity Stock) such that (a) any Person (other than the Initial Holder or a Look-Through Entity) would Beneficially Own shares of Class G Preferred Stock in excess of the Ownership Limit, or (b) the Initial Holder would Beneficially Own shares of Class G Preferred Stock in excess of the Initial Holder Limit, or (c) any Person that is a Look-Through Entity would Beneficially Own shares of Class G Preferred Stock in excess of the Look-Through Ownership Limit (in any such event, the Person, Initial Holder or Look-Through Entity that would Beneficially Own shares of Class G Preferred Stock in excess of the Ownership Limit, the Initial Holder Limit or the Look-Through Entity Limit, respectively, is referred to as a "Prohibited Transferee"), then, except as otherwise provided in Section 10.8 of this Article, such shares of Class G Preferred Stock in excess of the Ownership Limit, the Initial Holder Limit or the Look-Through Ownership Limit, as the case may be, (rounded up to the nearest whole share) shall be automatically transferred to a Trustee in his capacity as trustee of a Trust for the exclusive benefit of one or more Charitable Beneficiaries. Such transfer to the Trustee shall be deemed to be effective as of the close of business on the business day prior to the Excess Transfer, change in capital structure or another event giving rise to a potential violation of the Ownership Limit, the Initial Holder Limit or the Look-Through Entity Ownership Limit. (B) APPOINTMENT OF TRUSTEE. The Trustee shall be appointed by the Corporation and shall be a Person unaffiliated with either the Corporation or any Prohibited Transferee. The Trustee may be an individual or a bank or trust company duly licensed to conduct a trust business. (C) STATUS OF SHARES HELD BY THE TRUSTEE. Shares of Class G Preferred Stock held by the Trustee shall be issued and outstanding shares of capital stock of the Corporation. Except to the extent provided in Section 10.3(E), the Prohibited Transferee shall have no rights in the Class G Preferred Stock held by the Trustee, and the Prohibited Transferee shall not benefit economically from ownership of any shares held in trust by the Trustee, shall have no rights to dividends and shall not possess any rights to vote or other rights attributable to the shares held in the Trust. 16 117 (D) DIVIDEND AND VOTING RIGHTS. The Trustee shall have all voting rights and rights to dividends with respect to shares of Class G Preferred Stock held in the Trust, which rights shall be exercised for the benefit of the Charitable Beneficiary. Any dividend or distribution paid prior to the discovery by the Corporation that the shares of Class G Preferred Stock have been transferred to the Trustee shall be repaid to the Corporation upon demand, and any dividend or distribution declared but unpaid shall be rescinded as void ab initio with respect to such shares of Class G Preferred Stock. Any dividends or distributions so disgorged or rescinded shall be paid over to the Trustee and held in trust for the Charitable Beneficiary. Any vote cast by a Prohibited Transferee prior to the discovery by the Corporation that the shares of Class G Preferred Stock have been transferred to the Trustee will be rescinded as void ab initio and shall be recast in accordance with the desires of the Trustee acting for the benefit of the Charitable Beneficiary. The owner of the shares at the time of the Excess Transfer, change in capital structure or other event giving rise to a potential violation of the Ownership Limit, Initial Holder Limit or Look-Through Entity Ownership Limit shall be deemed to have given an irrevocable proxy to the Trustee to vote the shares of Class G Preferred Stock for the benefit of the Charitable Beneficiary. (E) RESTRICTIONS ON TRANSFER. The Trustee of the Trust may sell the shares held in the Trust to a person, designated by the Trustee, whose ownership of the shares will not violate the Ownership Restrictions. If such a sale is made, the interest of the Charitable Beneficiary shall terminate and proceeds of the sale shall be payable to the Prohibited Transferee and to the Charitable Beneficiary as provided in this Section 10.3(E). The Prohibited Transferee shall receive the lesser of (1) the price paid by the Prohibited Transferee for the shares or, if the Prohibited Transferee did not give value for the shares (through a gift, devise or other transaction), the Market Price of the shares on the day of the event causing the shares to be held in the Trust and (2) the price per share received by the Trustee from the sale or other disposition of the shares held in the Trust. Any proceeds in excess of the amount payable to the Prohibited Transferee shall be payable to the Charitable Beneficiary. If any of the transfer restrictions set forth in this Section 10.3(E) or any application thereof is determined in a final judgement to be void, invalid or unenforceable by any court having jurisdiction over the issue, the Prohibited Transferee may be deemed, at the option of the Corporation, to have acted as the agent of the Corporation in acquiring the Class G Preferred Stock as to which such restrictions would, by their terms, apply, and to hold such Class G Preferred Stock on behalf of the Corporation. (F) PURCHASE RIGHT IN STOCK TRANSFERRED TO THE TRUSTEE. Shares of Class G Preferred Stock transferred to the Trustee shall be deemed to have been offered for sale to the Corporation, or its designee, at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in such transfer to the Trust (or, in the case of a devise or gift, the Market Price at the time of such devise or gift) and (ii) the Market Price on the date the Corporation, or its designee, accepts such offer. The Corporation shall have the right to accept such offer for a period of 90 days after the later of (i) the date of the Excess Transfer or other event resulting in a transfer to the Trust and 17 118 (ii) the date that the Board of Directors determines in good faith that an Excess Transfer or other event occurred. (G) DESIGNATION OF CHARITABLE BENEFICIARIES. By written notice to the Trustee, the Corporation shall designate one or more nonprofit organizations to be the Charitable Beneficiary of the interest in the Trust relating to such Prohibited Transferee if (i) the shares of Class G Preferred Stock held in the Trust would not violate the Ownership Restrictions in the hands of such Charitable Beneficiary and (ii) each Charitable Beneficiary is an organization described in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code. 10.4 NOTICE OF RESTRICTED TRANSFER. Any Person that acquires or attempts to acquire shares of Class G Preferred Stock in violation of Section 10.1 of this Article, or any Person that is a Prohibited Transferee such that stock is transferred to the Trustee under Section 10.3 of this Article, shall immediately give written notice to the Corporation of such event and shall provide to the Corporation such other information as the Corporation may request in order to determine the effect, if any, of such Transfer or attempted Transfer or other event on the Corporations's status as a REIT. Failure to give such notice shall not limit the rights and remedies of the Board of Directors provided herein in any way. 10.5 OWNERS REQUIRED TO PROVIDE INFORMATION. From and after the Issue Date certain record and Beneficial Owners and transferees of shares of Class G Preferred Stock will be required to provide certain information as set out below. (A) ANNUAL DISCLOSURE. Every record and Beneficial Owner of more than 5% (or such other percentage between 0.5% and 5%, as provided in the applicable regulations adopted under the Code) of the number of Outstanding shares of Class G Preferred Stock shall, within 30 days after January 1 of each year, give written notice to the Corporation stating the name and address of such record or Beneficial Owner, the number of shares of Class G Preferred Stock Beneficially Owned, and a full description of how such shared are held. Each such record or Beneficial Owner of Class G Preferred Stock shall, upon demand by the Corporation, disclose to the Corporation in writing such additional information with respect to the Beneficial Ownership of the Class G Preferred Stock as the Board of Directors, in its sole discretion, deems appropriate or necessary to (i) comply with the provisions of the Code regarding the qualification of the Corporation as a REIT under the Code and (ii) ensure compliance with the Ownership Limit, the Initial Holder Limit or the Look-Through Ownership Limit, as applicable. Each stockholder of record, including without limitation any Person that holds shares of Class G Preferred Stock on behalf of a Beneficial Owner, shall take all reasonable steps to obtain the written notice described in this Section 10.5 from the Beneficial Owner. (B) DISCLOSURE AT THE REQUEST OF THE CORPORATION. Any Person that is a Beneficial Owner of shares of Class G Preferred Stock and any Person (including the stockholder of record) that is holding shares of Class G Preferred Stock for a Beneficial 18 119 Owner, and any proposed transferee of shares, shall provide such information as the Corporation, in its sole discretion, may request in order to determine the Corporation's status as a REIT, to comply with the requirements of any taxing authority or other governmental agency, to determine any such compliance or to ensure compliance with the Ownership Limit, the Initial Holder Limit and the Look-Through Ownership Limit, and shall provide a statement or affidavit to the Corporation setting forth the number of shares of Class G Preferred Stock already Beneficially Owned by such stockholder or proposed transferee and any related persons specified, which statement or affidavit shall be in the form prescribed by the Corporation for that purpose. 10.6 REMEDIES NOT LIMITED. Nothing contained in this Article shall limit the authority of the Board of Directors to take such other action as it deems necessary or advisable (subject to the provisions of Section 10.12 of this Article) (i) to protect the Corporation and the interests of its stockholders in the preservation of the Corporation's status as a REIT and (ii) to insure compliance with the Ownership Limit, the Initial Holder Limit and the Look-Through Ownership Limit. 10.7 AMBIGUITY. In the case of an ambiguity in the application of any of the provisions of Section 10 of this Article, or in the case of an ambiguity in any definition contained in Section 10 of this Article, the Board of Directors shall have the power to determine the application of the provisions of this Article with respect to any situation based on its reasonable belief, understanding or knowledge of the circumstances. 10.8 EXPECTATIONS. The following exceptions shall apply or may be established with respect to the limitations of Section 10.1 of this Article. (A) WAIVER OF OWNERSHIP LIMIT. The Board of Directors, upon receipt of a ruling from the Internal Revenue Service or an opinion of tax counsel or other evidence or undertaking acceptable to it, may waive the application, in whole or in part, of the Ownership Limit to a Person subject to the Ownership Limit, if such person is not an individual for purposes of Section 542(a) of the Code and is a corporation, partnership, estate or trust. In connection with any such exemption, the Board of Directors may require such representations and undertakings from such Person and may impose such other conditions as the Board of Directors deems necessary, in its sole discretion, to determine the effect, if any, of the proposed Transfer on the Corporation's status as a REIT. (B) PLEDGE BY INITIAL HOLDER. Notwithstanding any other provision of this Article, the pledge by the Initial Holder of all or any portion of the Class G Preferred Stock directly owned at any time or from time to time shall not constitute a violation of Section 10.1 of this Article and the pledgee shall not be subject to the Ownership Limit with respect to the Class G Preferred Stock so pledged to it either as a result of the pledge or upon foreclosure. 19 120 (C) UNDERWRITERS. For a period of 270 days following the purchase of Class G Preferred Stock by an underwriter that (i) is a corporation or a partnership and (ii) participates in an offering of the Class G Preferred Stock, such underwriter shall not be subject to the Ownership Limit with respect to the Class G Preferred Stock purchased by it as a part of or in connection with such offering and with respect to any Class G Preferred Stock purchased in connection with market making activities. 10.9 LEGEND. Each certificate for Class G Preferred Stock shall bear the following legend: "The shares of Class G Cumulative Preferred Stock represented by this certificate are subject to restrictions on transfer. No person may Beneficially Own shares of Class G Cumulative Preferred Stock in excess of the Ownership Restrictions, as applicable, with certain further restrictions and exceptions set forth in the Charter (including the Articles Supplementary setting forth the terms of the Class G Cumulative Preferred Stock). Any Person that attempts to Beneficially Own shares of Class G Cumulative Preferred Stock in excess of the applicable limitation must immediately notify the Corporation. All capitalized terms in this legend have the meanings ascribed to such terms in the Charter (including the Articles Supplementary setting forth the terms of the Class G Cumulative Preferred Stock), as the same may be amended from time to time, a copy of which, including the restrictions on transfer, will be sent without charge to each stockholder that so requests. If the restrictions on transfer are violated (i) the transfer of the shares of Class G Cumulative Preferred Stock represented hereby will be void in accordance with the Charter (including the Articles Supplementary setting forth the terms of the Class G Cumulative Preferred Stock) or (ii) the shares of Class G Cumulative Preferred Stock represented hereby will automatically be transferred to a Trustee of a Trust for the benefit of one or more Charitable Beneficiaries." 10.10 SEVERABILITY. If any provision of this Article or any application of any such provision is determined in a final and unappealable judgment to be void, invalid or unenforceable by any Federal or state court having jurisdiction over the issues, the validity and enforceability of the remaining provisions shall not be affected and other applications of such provision shall be affected only to the extent necessary to comply with the determination of such court. 10.11 BOARD OF DIRECTORS DISCRETION. Anything in this Article to the contrary notwithstanding, the Board of Directors shall be entitled to take or omit to take such actions as it in its discretion shall determine to be advisable in order that the Corporation maintain its status as and continue to qualify as a REIT, including, but not limited to, reducing the Ownership Limit, the Initial Holder Limit and the Look-Through Ownership Limit in the event of a change in law. 20 121 10.12 SETTLEMENT. Nothing in this Section 10 of this Article shall be interpreted to preclude the settlement of any transaction entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system. FOURTH: The terms of the Class G Cumulative Preferred Stock set forth in Article Third hereof shall become Article XVI of the Charter. 21 122 IN WITNESS WHEREOF, the Corporation has caused these presents to be signed in its name and on its behalf by its Senior Vice President and Chief Financial Officer and witnessed by its Secretary on July 13, 1998. WITNESS: APARTMENT INVESTMENT AND MANAGEMENT COMPANY /s/ JOEL BONDER /s/ TROY D. BUTTS - ------------------------------ ----------------------------- Joel Bonder Troy D. Butts Secretary Senior Vice President and Chief Financial Officer THE UNDERSIGNED, Senior Vice President and Chief Financial Officer of APARTMENT INVESTMENT AND MANAGEMENT COMPANY, who executed on behalf of the Corporation the Articles Supplementary of which this Certificate is made a part, hereby acknowledges in the name and on behalf of said Corporation the foregoing Articles Supplementary to be the corporate act of said Corporation and hereby certifies that the matters and facts set forth herein with respect to the authorization and approval thereof are true in all material respects under the penalties of perjury. /s/ TROY D. BUTTS ----------------------------- Troy D. Butts Senior Vice President and Chief Financial Officer 22 123 ARTICLES SUPPLEMENTARY APARTMENT INVESTMENT AND MANAGEMENT COMPANY CLASS H CUMULATIVE PREFERRED STOCK (PAR VALUE $.01 PER SHARE) APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation (hereinafter called the "Corporation"), having its principal office in Baltimore City, Maryland, hereby certifies to the Department of Assessments and Taxation of the State of Maryland that: FIRST: Pursuant to authority expressly vested in the Board of Directors of the Corporation by Section 1.2 of Article IV of the Charter of the Corporation, as amended to date (the "Charter"), the Board of Directors has duly divided and classified 2,300,000 authorized but unissued shares of Class A Common Stock of the Corporation, par value $.01 per share (the "Class A Common Stock"), into a class designated as Class H Cumulative Preferred Stock, par value $.01 per share, and has provided for the issuance of such class. SECOND: The reclassification increases the number of shares classified as Class H Cumulative Preferred Stock, par value $.01 per share, from no shares immediately prior to the reclassification to 2,300,000 shares immediately after the reclassification. The reclassification decreases the number of shares classified as Class A Common Stock from 498,327,500 shares immediately prior to the reclassification to 496,027,500 shares immediately after the reclassification. THIRD: The terms of the Class H Cumulative Preferred Stock (including the preferences, conversions or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, or terms or conditions of redemption) as set by the Board of Directors are as follows: 1. NUMBER OF SHARES AND DESIGNATION. This class of Preferred Stock shall be designated as Class H Cumulative Preferred Stock, par value $.01 per share (the "Class H Preferred Stock") and Two Million Three Hundred Thousand (2,300,000) shall be the authorized number of shares of such Class H Preferred Stock constituting such class. 2. DEFINITIONS. For purposes of the Class H Preferred Stock, the following terms shall have the meanings indicated: 124 "Act" shall mean the Securities Act of 1933, as amended. "affiliate" of a Person means a Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Person specified. "Aggregate Value" shall mean, with respect to any block of Equity Stock, the sum of the products of (i) the number of shares of each class of Equity Stock within such block multiplied by (ii) the corresponding Market Price of one share of Equity Stock of such class. "Beneficial Ownership" shall mean, with respect to any Person, ownership of shares of Equity Stock equal to the sum of (i) the number of shares of Equity Stock directly owned by such Person, (ii) the number of shares of Equity Stock indirectly owned by such Person (if such Person is an "individual" as defined in Section 542(a)(2) of the Code) taking into account the constructive ownership rules of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code, and (iii) the number of shares of Equity Stock that such Person is deemed to beneficially own pursuant to Rule 13d-3 under the Exchange Act or that is attributed to such Person pursuant to Section 318 of the Code, as modified by Section 856(d)(5) of the Code, provided that when applying this definition of Beneficial Ownership to the Initial Holder, clause (iii) of this definition, and clause (a) (ii) of the definition of "Person" shall be disregarded. The terms "Beneficial Owner," "Beneficially Owns" and "Beneficially Owned" shall have the correlative meanings. "Board of Directors" shall mean the Board of Directors of the Corporation or any committee authorized by such Board of Directors to perform any of its responsibilities with respect to the Class H Preferred Stock; provided that, for purposes of paragraph (a) of Section 8 of this Article, the term "Board of Directors" shall not include any such committee. "Business Day" shall mean any day other than a Saturday, Sunday or a day on which state or federally chartered banking institutions in New York, New York are not required to be open. "Charitable Beneficiary" shall mean one or more beneficiaries of the Trust as determined pursuant to Section 10.3 of this Article, each of which shall be an organization described in Section 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code. "Class H Preferred Stock" shall have the meaning set forth in Section 1 of this Article. 2 125 "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor thereto, as interpreted by any applicable regulations or other administrative pronouncements as in effect from time to time. "Common Stock" shall mean the Class A Common Stock, $.01 par value per share, of the Corporation, and the Class B Common Stock, $.01 par value per share, of the Corporation and such other shares of the Corporation's capital stock into which outstanding shares of such Class A Common Stock or Class B Common Stock shall be reclassified. "Dividend Payment Date" shall mean January 15, April 15, July 15 and October 15 of each year; provided, that if any Dividend Payment Date falls on any day other than a Business Day, the dividend payment payable on such Dividend Payment Date shall be paid on the Business Day immediately following such Dividend Payment Date and no interest shall accrue on such dividend from such date to such Dividend Payment Date. "Dividend Periods" shall mean the Initial Dividend Period and each subsequent quarterly dividend period commencing on and including January 15, April 15, July 15 and October 15 of each year and ending on and including the day preceding the first day of the next succeeding Dividend Period, other than the Dividend Period during which any Class H Preferred Stock shall be redeemed pursuant to Section 5 hereof, which shall end on and include the Redemption Date with respect to the Class H Preferred Stock being redeemed. "Equity Stock" shall mean one or more shares of any class of capital stock of the Corporation. "Excess Transfer" has the meaning set forth in Section 10.3(A) of this Article. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Issue Date" shall mean August 14, 1998. "Initial Dividend Period" shall mean the period commencing on and including the Issue Date and ending on and including October 14, 1998. "Initial Holder" shall mean Terry Considine. "Initial Holder Limit" shall mean a number of the Outstanding shares of Class H Preferred Stock of the Corporation having an Aggregate Value not in excess of the excess of (x) 15% of the Aggregate Value of all Outstanding shares of 3 126 Equity Stock over (y) the Aggregate Value of all shares of Equity Stock other than Class H Preferred Stock that are Beneficially Owned by the Initial Holder. From the Issue Date, the secretary of the Corporation, or such other person as shall be designated by the Board of Directors, shall upon request make available to the representative(s) of the Initial Holder and the Board of Directors, a schedule that sets forth the then-current Initial Holder Limit applicable to the Initial Holder. "Junior Stock" shall have the meaning set forth in paragraph (c) of Section 7 of this Article. "Look-Through Entity" shall mean a Person that is either (i) described in Section 401(a) of the Code as provided under Section 856(h)(3) of the Code or (ii) registered under the Investment Company Act of 1940. "Look-Through Ownership Limit" shall mean, for any Look-Through Entity, a number of the Outstanding shares of Class H Preferred Stock of the Corporation having an Aggregate Value not in excess of the excess of (x) 15% of the Aggregate Value of all Outstanding shares of Equity Stock over (y) the Aggregate Value of all shares of Equity Stock other than Class H Preferred Stock that are Beneficially Owned by the Look-Through Entity. "Market Price" on any date shall mean, with respect to any share of Equity Stock, the Closing Price of a share of that class of Equity Stock on the Trading Day immediately preceding such date. The term "Closing Price," when used with respect to a share of any Equity Stock and for any date, shall mean the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case, as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE or, if the Equity Stock is not listed or admitted to trading on the NYSE, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Equity Stock is listed or admitted to trading or, if the Equity Stock is not listed or admitted to trading on any national securities exchange, the last quoted price, or if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the principal other automated quotations system that may then be in use or, if the Equity Stock is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Equity Stock selected by the Board of Directors of the Corporation. The term "Trading Day," when used with respect to the Closing Price of a share of any Equity Stock, shall mean (i) if the Equity Stock is listed or admitted to trading on the NYSE, a day on which the NYSE is open for the 4 127 transaction of business, (ii) if the Equity Stock is not listed or admitted to trading on the NYSE but is listed or admitted to trading on another national securities exchange or automated quotation system, a day on which the principal national securities exchange or automated quotation system, as the case may be, on which the Equity Stock is listed or admitted to trading is open for the transaction of business, or (iii) if the Equity Stock is not listed or admitted to trading on any national securities exchange or automated quotation system, any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. "NYSE" shall mean the New York Stock Exchange, Inc. "Operating Partnership" shall mean AIMCO Properties, L.P., a Delaware limited partnership. "Outstanding" shall mean issued and outstanding shares of Equity Stock of the Corporation, provided that for purposes of the application of the Ownership Limit, the Look-Through Ownership Limit or the Initial Holder Limit to any Person, the term "Outstanding" shall be deemed to include the number of shares of Equity Stock that such Person alone, at that time, could acquire pursuant to any options or convertible securities. "Ownership Limit" shall mean, for any Person other than the Initial Holder or a Look-Through Entity, a number of the Outstanding shares of Class H Preferred Stock of the Corporation having an Aggregate Value not in excess of the excess of (x) 8.7% of the Aggregate Value of all Outstanding shares of Equity Stock over (y) the Aggregate Value of all shares of Equity Stock other than Class H Preferred Stock that are Beneficially Owned by the Person. "Ownership Restrictions" shall mean collectively the Ownership Limit as applied to Persons other than the Initial Holder or Look-Through Entities, the Initial Holder Limit as applied to the Initial Holder and the Look-Through Ownership Limit as applied to Look-Through Entities. "Parity Stock" shall have the meaning set forth in paragraph (b) of Section 7 of this Article. "Person" shall mean (a) for purposes of Section 10 of this Article, (i) an individual, corporation, partnership, estate, trust (including a trust qualifying under Section 401(a) or 501(c) of the Code), association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, and (ii) also includes a group as that term is used for purposes of Section 13(d)(3) of the Exchange Act and (b) for purposes of the remaining 5 128 Sections of this Article, any individual, firm, partnership, corporation or other entity and shall include any successor (by merger or otherwise) of such entity. "Prohibited Transferee" has the meaning set forth in Section 10.3(A) of this Article. "Redemption Date" shall have the meaning set forth in paragraph (a) of Section 5 of this Article. "REIT" shall mean a "real estate investment trust" as defined in Section 856 of the Code. "Senior Stock" shall have the meaning set forth in paragraph (a) of Section 7 of this Article. "set apart for payment" shall be deemed to include, without any action other than the following, the recording by the Corporation in its accounting ledgers of any accounting or bookkeeping entry which indicates, pursuant to a declaration of dividends or other distribution by the Board of Directors, the allocation of funds to be so paid on any series or class of capital stock of the Corporation; provided, however, that if any funds for any class or series of Junior Stock or any class or series of Parity Stock are placed in a separate account of the Corporation or delivered to a disbursing, paying or other similar agent, then "set apart for payment" with respect to the Class H Preferred Stock shall mean placing such funds in a separate account or delivering such funds to a disbursing, paying or other similar agent. "Transfer" shall mean any sale, transfer, gift, assignment, devise or other disposition of a share of Class H Preferred Stock (including (i) the granting of an option or any series of such options or entering into any agreement for the sale, transfer or other disposition of Class H Preferred Stock or (ii) the sale, transfer, assignment or other disposition of any securities or rights convertible into or exchangeable for Class H Preferred Stock), whether voluntary or involuntary, whether of record or Beneficial Ownership, and whether by operation of law or otherwise (including, but not limited to, any transfer of an interest in other entities that results in a change in the Beneficial Ownership of shares of Class H Preferred Stock). The term "Transfers" and "Transferred" shall have correlative meanings. "Transfer Agent" means such transfer agent as may be designated by the Board of Directors or their designee as the transfer agent for the Class H Preferred Stock; provided, that if the Corporation has not designated a transfer agent then the Corporation shall act as the transfer agent for the Class H Preferred Stock. "Trust" shall mean the trust created pursuant to Section 10.3 of this Article. 6 129 "Trustee" shall mean the Person unaffiliated with either the Corporation or the Prohibited Transferee that is appointed by the Corporation to serve as trustee of the Trust. "Voting Preferred Stock" shall have the meaning set forth in Section 8 of this Article. 3. DIVIDENDS. (a) The holders of Class H Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors out of funds legally available for that purpose, cumulative dividends payable in cash in an amount per share of Class H Preferred Stock equal to $2.375 per annum (equivalent to 9 1/2% per annum of the per share Liquidation Preference (as hereinafter defined)). Such dividends shall be cumulative from the Issue Date, whether or not in any Dividend Period or Periods such dividends shall be declared or there shall be funds of the Corporation legally available for the payment of such dividends, and shall be payable quarterly in arrears on each Dividend Payment Date, commencing on October 15, 1998. Each such dividend shall be payable in arrears to the holders of record of the Class H Preferred Stock, as they appear on the stock records of the Corporation at the close of business on the January 1, April 1, July 1 or October 1, as the case may be, immediately preceding such Dividend Payment Date. Accumulated, accrued and unpaid dividends for any past Dividend Periods may be declared and paid at any time, without reference to any regular Dividend Payment Date, to holders of record on such date, which date shall not precede by more than 45 days the payment date thereof, as may be fixed by the Board of Directors. (b) Any dividend payable on the Class H Preferred Stock for any partial dividend period shall be computed ratably on the basis of twelve 30-day months and a 360-day year. Holders of Class H Preferred Stock shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on the Class H Preferred Stock. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Class H Preferred Stock that may be in arrears. (c) So long as any of the shares of Class H Preferred Stock are outstanding, except as described in the immediately following sentence, no dividends shall be declared or paid or set apart for payment by the Corporation and no other distribution of cash or other property shall be declared or made, directly or indirectly, by the Corporation with respect to any shares of Parity Stock unless, in each case, dividends equal to the full amount of accumulated, accrued and unpaid dividends on all outstanding shares of Class H Preferred Stock have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof has been or contemporaneously is set apart for payment of such dividends on the Class H Preferred Stock for all Dividend Periods ending on or prior to the date such dividend 7 130 or distribution is declared, paid, set apart for payment or made, as the case may be, with respect to such shares of Parity Stock. When dividends are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, all dividends declared upon the Class H Preferred Stock and all dividends declared upon any shares of Parity Stock shall be declared ratably in proportion to the respective amounts of dividends accumulated, accrued and unpaid on the Class H Preferred Stock and accumulated, accrued and unpaid on such Parity Stock. (d) So long as any of the shares of Class H Preferred Stock are outstanding, no dividends (other than dividends or distributions paid in shares of, or options, warrants or rights to subscribe for or purchase shares of, Junior Stock) shall be declared or paid or set apart for payment by the Corporation and no other distribution of cash or other property shall be declared or made, directly or indirectly, by the Corporation with respect to any shares of Junior Stock, nor shall any shares of Junior Stock be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Common Stock made for purposes of an employee incentive or benefit plan of the Corporation or any subsidiary) for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock), directly or indirectly, by the Corporation (except by conversion into or exchange for shares of, or options, warrants or rights to subscribe for or purchase shares of, Junior Stock), nor shall any other cash or other property otherwise be paid or distributed to or for the benefit of any holder of shares of Junior Stock in respect thereof, directly or indirectly, by the Corporation unless, in each case, dividends equal to the full amount of all accumulated, accrued and unpaid dividends on all outstanding shares of Class H Preferred Stock have been declared and paid, or such dividends have been declared and a sum sufficient for the payment thereof has been set apart for such payment, on all outstanding shares of Class H Preferred Stock for all Dividend Periods ending on or prior to the date such dividend or distribution is declared, paid, set apart for payment or made with respect to such shares of Junior Stock, or the date such shares of Junior Stock are redeemed, purchased or otherwise acquired or monies paid to or made available for any sinking fund for such redemption, or the date any such cash or other property is paid or distributed to or for the benefit of any holders of Junior Stock in respect thereof, as the case may be. Notwithstanding the provisions of this Section 3, the Corporation shall not be prohibited from (i) declaring or paying or setting apart for payment any dividend or distribution on any shares of Parity Stock or (ii) or redeeming, purchasing or otherwise acquiring any Parity Stock, in each case, if such declaration, payment, redemption, purchase or other acquisition is necessary in order to maintain the continued qualification of the Corporation as a REIT under Section 856 of the Code. 4. LIQUIDATION PREFERENCE. (a) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any payment or distribution by 8 131 the Corporation (whether of capital, surplus or otherwise) shall be made to or set apart for the holders of Junior Stock, the holders of shares of Class H Preferred Stock shall be entitled to receive Twenty-Five Dollars ($25) per share of Class H Preferred Stock (the "Liquidation Preference"), plus an amount equal to all dividends (whether or not earned or declared) accumulated, accrued and unpaid thereon to the date of final distribution to such holders; but such holders shall not be entitled to any further payment. Until the holders of the Class H Preferred Stock have been paid the Liquidation Preference in full, plus an amount equal to all dividends (whether or not earned or declared) accumulated, accrued and unpaid thereon to the date of final distribution to such holders, no payment will be made to any holder of Junior Stock upon the liquidation, dissolution or winding up of the Corporation. If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation, or proceeds thereof, distributable among the holders of Class H Preferred Stock shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other shares of any class or series of Parity Stock, then such assets, or the proceeds thereof, shall be distributed among the holders of Class H Preferred Stock and any such other Parity Stock ratably in the same proportion as the respective amounts that would be payable on such Class H Preferred Stock and any such other Parity Stock if all amounts payable thereon were paid in full. For the purposes of this Section 4, (i) a consolidation or merger of the Corporation with one or more corporations, (ii) a sale or transfer of all or substantially all of the Corporation's assets, or (iii) a statutory share exchange shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Corporation. (b) Upon any liquidation, dissolution or winding up of the Corporation, after payment shall have been made in full to the holders of Class H Preferred Stock and any Parity Stock, as provided in this Section 4, any other series or class or classes of Junior Stock shall, subject to the respective terms thereof, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Class H Preferred Stock and any Parity Stock shall not be entitled to share therein. 5. REDEMPTION AT THE OPTION OF THE CORPORATION. (a) Shares of Class H Preferred Stock shall not be redeemable by the Corporation prior to August 14, 2003, except as set forth in Section 10.2 of this Article. On and after August 14, 2003, the Corporation, at its option, may redeem shares of Class H Preferred Stock, in whole or from time to time in part, at a redemption price payable in cash equal to 100% of the Liquidation Preference thereof, plus all accumulated, accrued and unpaid dividends to the date fixed for redemption (the "Redemption Date"); provided, however, that in the event of a redemption of shares of Class H Preferred Stock, if the Redemption Date occurs after a dividend record date and on or prior to the related Dividend Payment Date, the dividend payable on such Dividend Payment Date in respect of such shares called for redemption shall be payable on such Dividend Payment Date to the holders of record at the close of 9 132 business on such dividend record date, and shall not be payable as part of the redemption price for such shares. In connection with any redemption pursuant to this Section 5(a), the redemption price of the Class H Preferred Stock (other than any portion thereof consisting of accumulated, accrued and unpaid dividends) shall be payable solely with the proceeds from the sale by the Corporation or the Operating Partnership, of other capital shares of the Corporation or the Operating Partnership (whether or not such sale occurs concurrently with such redemption). For purposes of the preceding sentence, "capital shares" means any common stock, preferred stock, depositary shares, partnership or other interests, participations or other ownership interests (however designated) and any rights (other than debt securities convertible into or exchangeable at the option of the holder for equity securities (unless and to the extent such debt securities are subsequently converted into capital shares)) or options to purchase any of the foregoing of or in the Corporation or the Operating Partnership. (b) The Redemption Date shall be selected by the Corporation, shall be specified in the notice of redemption and shall be not less than 30 days nor more than 60 days after the date notice of redemption is sent by the Corporation. (c) If full cumulative dividends on all outstanding shares of Class H Preferred Stock have not been declared and paid, or declared and set apart for payment, no shares of Class H Preferred Stock may be redeemed unless all outstanding shares of Class H Preferred Stock are simultaneously redeemed and neither the Corporation nor any affiliate of the Corporation may purchase or acquire shares of Class H Preferred Stock, otherwise than pursuant to a purchase or exchange offer made on the same terms to all holders of shares of Class H Preferred Stock. (d) If the Corporation shall redeem shares of Class H Preferred Stock pursuant to paragraph (a) of this Section 5, notice of such redemption shall be given to each holder of record of the shares to be redeemed. Such notice shall be provided by first class mail, postage prepaid, at such holder's address as the same appears on the stock records of the Corporation. Neither the failure to mail any notice required by this paragraph (d), nor any defect therein or in the mailing thereof to any particular holder, shall affect the sufficiency of the notice or the validity of the proceedings for redemption with respect to the other holders. Any notice which was mailed in the manner herein provided shall be conclusively presumed to have been duly given on the date mailed whether or not the holder receives the notice. Each such notice shall state, as appropriate: (1) the Redemption Date; (2) the number of shares of Class H Preferred Stock to be redeemed and, if fewer than all such shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the place or places at which certificates for such shares are to be surrendered for cash; and (4) the redemption price payable on such Redemption Date, including, without limitation, a statement as to whether or not accumulated, accrued and unpaid dividends will be (x) payable as part of the redemption price, or (y) payable on the next Dividend Payment Date to the record holder at the close of business on the relevant record date as described in the next succeeding sentence. 10 133 Notice having been mailed as aforesaid, from and after the Redemption Date (unless the Corporation shall fail to make available the amount of cash necessary to effect such redemption), (i) dividends on the shares of Class H Preferred Stock so called for redemption shall cease to accumulate or accrue on the shares of Class H Preferred Stock called for redemption, (ii) said shares shall no longer be deemed to be outstanding, and (iii) all rights of the holders thereof as holders of Class H Preferred Stock of the Corporation shall cease except the rights to receive the cash payable upon such redemption, without interest thereon, upon surrender and endorsement of their certificates if so required; provided, however, that if the Redemption Date for any shares of Class H Preferred Stock occurs after any dividend record date and on or prior to the related Dividend Payment Date, the full dividend payable on such Dividend Payment Date in respect of such shares of Class H Preferred Stock called for redemption shall be payable on such Dividend Payment Date to the holders of record of such shares at the close of business on the corresponding dividend record date notwithstanding the prior redemption of such shares. The Corporation's obligation to make available the redemption price in accordance with the preceding sentence shall be deemed fulfilled if, on or before the applicable Redemption Date, the Corporation shall irrevocably deposit in trust with a bank or trust company (which may not be an affiliate of the Corporation) that has, or is an affiliate of a bank or trust company that has, a capital and surplus of at least $50,000,000, such amount of cash as is necessary for such redemption plus, if such Redemption Date occurs after any dividend record date and on or prior to the related Dividend Payment Date, such amount of cash as is necessary to pay the dividend payable on such Dividend Payment Date in respect of such shares of Class H Preferred Stock called for redemption, with irrevocable instructions that such cash be applied to the redemption of the shares of Class H Preferred Stock so called for redemption and, if applicable, the payment of such dividend. No interest shall accrue for the benefit of the holders of shares of Class H Preferred Stock to be redeemed on any cash so set aside by the Corporation. Subject to applicable escheat laws, any such cash unclaimed at the end of two years from the Redemption Date shall revert to the general funds of the Corporation, after which reversion the holders of shares of Class H Preferred Stock so called for redemption shall look only to the general funds of the Corporation for the payment of such cash. As promptly as practicable after the surrender in accordance with such notice of the certificates for any such shares of Class H Preferred Stock to be so redeemed (properly endorsed or assigned for transfer, if the Corporation shall so require and the notice shall so state), such certificates shall be exchanged for cash (without interest thereon) for which such shares have been redeemed in accordance with such notice. If fewer than all the outstanding shares of Class H Preferred Stock are to be redeemed, shares to be redeemed shall be selected by the Corporation from outstanding shares of Class H Preferred Stock not previously called for redemption by lot or, with respect to the number of shares of Class H Preferred Stock held of record by each holder of such shares, pro rata (as nearly as may be) or by any other method as may be determined by the Board of Directors in its discretion to be equitable. If fewer than all the shares of Class H Preferred Stock represented by any certificate are redeemed, 11 134 then a new certificate representing the unredeemed shares shall be issued without cost to the holders thereof. 6. STATUS OF REACQUIRED STOCK. All shares of Class H Preferred Stock which shall have been issued and reacquired in any manner by the Corporation shall be returned to the status of authorized, but unissued shares of Class H Preferred Stock. 7. RANKING. Any class or series of capital stock of the Corporation shall be deemed to rank: (a) prior or senior to the Class H Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, if the holders of such class or series shall be entitled to the receipt of dividends and of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Class H Preferred Stock ("Senior Stock"); (b) on a parity with the Class H Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share thereof be different from those of the Class H Preferred Stock, if (i) such capital stock is Class B Cumulative Convertible Preferred Stock, Class C Cumulative Preferred Stock, Class D Cumulative Preferred Stock, or Class G Cumulative Preferred Stock of the Corporation, or (ii) the holders of such class of stock or series and the Class H Preferred Stock shall be entitled to the receipt of dividends and of amounts distributable upon liquidation, dissolution or winding up in proportion to their respective amounts of accrued and unpaid dividends per share or liquidation preferences, without preference or priority of one over the other (the capital stock referred to in clauses (i) and (ii) of this paragraph being hereinafter referred to, collectively, as "Parity Stock"); and (c) junior to the Class H Preferred Stock, as to the payment of dividends and as to the distribution of assets upon liquidation, dissolution or winding up, if (i) such capital stock or series shall be Common Stock or (ii) the holders of Class H Preferred Stock shall be entitled to receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of shares of such class or series (the capital stock referred to in clauses (i) and (ii) of this paragraph being hereinafter referred to, collectively, as "Junior Stock"). 12 135 8. VOTING. (a) If and whenever six quarterly dividends (whether or not consecutive) payable on the Class H Preferred Stock or any series or class of Parity Stock shall be in arrears (which shall, with respect to any such quarterly dividend, mean that any such dividend has not been paid in full), whether or not earned or declared, the number of directors then constituting the Board of Directors shall be increased by two (if not already increased by reason of similar types of provisions with respect to shares of Parity Stock of any other class or series which is entitled to similar voting rights (the "Voting Preferred Stock")) and the holders of shares of Class H Preferred Stock, together with the holders of shares of all other Voting Preferred Stock then entitled to exercise similar voting rights, voting as a single class regardless of series, shall be entitled to elect the two additional directors to serve on the Board of Directors at any annual meeting of stockholders or special meeting held in place thereof, or at a special meeting of the holders of the Class H Preferred Stock and the Voting Preferred Stock called as hereinafter provided. Whenever all arrears in dividends on the Class H Preferred Stock and the Voting Preferred Stock then outstanding shall have been paid and dividends thereon for the current quarterly dividend period shall have been declared and paid, or declared and set apart for payment, then the right of the holders of the Class H Preferred Stock and the Voting Preferred Stock to elect such additional two directors shall cease (but subject always to the same provision for the vesting of such voting rights in the case of any similar future arrearages), and the terms of office of all persons elected as directors by the holders of the Class H Preferred Stock and the Voting Preferred Stock shall forthwith terminate and the number of directors constituting the Board of Directors shall be reduced accordingly. At any time after such voting power shall have been so vested in the holders of Class H Preferred Stock and the Voting Preferred Stock, if applicable, the Secretary of the Corporation may, and upon the written request of any holder of Class H Preferred Stock (addressed to the Secretary at the principal office of the Corporation) shall, call a special meeting of the holders of the Class H Preferred Stock and of the Voting Preferred Stock for the election of the two directors to be elected by them as herein provided, such call to be made by notice similar to that provided in the Bylaws of the Corporation for a special meeting of the stockholders or as required by law. If any such special meeting required to be called as above provided shall not be called by the Secretary within 20 days after receipt of any such request, then any holder of Class H Preferred Stock may call such meeting, upon the notice above provided, and for that purpose shall have access to the stock books of the Corporation. The directors elected at any such special meeting shall hold office until the next annual meeting of the stockholders or special meeting held in lieu thereof if such office shall not have previously terminated as above provided. If any vacancy shall occur among the directors elected by the holders of the Class H Preferred Stock and the Voting Preferred Stock, a successor shall be elected by the Board of Directors, upon the nomination of the then-remaining director elected by the holders of the Class H Preferred Stock and the Voting Preferred Stock or the successor of such remaining director, to serve until the next annual meeting of the stockholders or special meeting held in place thereof if such office shall not have previously terminated as provided above. 13 136 (b) So long as any shares of Class H Preferred Stock are outstanding, in addition to any other vote or consent of stockholders required by law or by the Charter of the Corporation, the affirmative vote of at least 66- 2/3% of the votes entitled to be cast by the holders of the Class H Preferred Stock voting as a single class with the holders of all other classes or series of Parity Stock entitled to vote on such matters, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating: (i) Any amendment, alteration or repeal of any of the provisions of, or the addition of any provision to, these Articles Supplementary, the Charter or the By-Laws of the Corporation that materially adversely affects the voting powers, rights or preferences of the holders of the Class H Preferred Stock; provided, however, that the amendment of the provisions of the Charter so as to authorize or create, or to increase the authorized amount of, or issue any Junior Stock or any shares of any class of Parity Stock shall not be deemed to materially adversely affect the voting powers, rights or preferences of the holders of Class H Preferred Stock; or (ii) The authorization, creation of, increase in the authorized amount of, or issuance of any shares of any class or series of Senior Stock or any security convertible into shares of any class or series of Senior Stock (whether or not such class or series of Senior Stock is currently authorized); provided, however, that no such vote of the holders of Class H Preferred Stock shall be required if, at or prior to the time when such amendment, alteration or repeal is to take effect, or when the issuance of any such Senior Stock or convertible or exchangeable security is to be made, as the case may be, provision is made for the redemption of all shares of Class H Preferred Stock at the time outstanding to the extent such redemption is authorized by Section 5 of this Article. For purposes of the foregoing provisions and all other voting rights under these Articles Supplementary, each share of Class H Preferred Stock shall have one (1) vote per share, except that when any other class or series of preferred stock of the Corporation shall have the right to vote with the Class H Preferred Stock as a single class on any matter, then the Class H Preferred Stock and such other class or series shall have with respect to such matters one quarter of one (.25) vote per $25 of stated liquidation preference. Except as otherwise required by applicable law or as set forth herein or in the Charter, the Class H Preferred Stock shall not have any relative, participating, optional or other special voting rights and powers other than as set forth herein, and the consent of the holders thereof shall not be required for the taking of any corporate action. 9. RECORD HOLDERS. The Corporation and the Transfer Agent may deem and treat the record holder of any share of Class H Preferred Stock as the true and lawful owner thereof for all 14 137 purposes, and neither the Corporation nor the Transfer Agent shall be affected by any notice to the contrary. 10.1 RESTRICTIONS ON OWNERSHIP AND TRANSFERS. (A) LIMITATION ON BENEFICIAL OWNERSHIP. Except as provided in Section 10.8, from and after the Issue Date, no Person (other than the Initial Holder or a Look-Through Entity) shall Beneficially Own shares of Class H Preferred Stock in excess of the Ownership Limit, the Initial Holder shall not Beneficially Own shares of Class H Preferred Stock in excess of the Initial Holder Limit and no Look-Through Entity shall Beneficially Own shares of Class H Preferred Stock in excess of the Look-Through Ownership Limit. (B) TRANSFERS IN EXCESS OF OWNERSHIP LIMIT. Except as provided in Section 10.8, from and after the Issue Date (and subject to Section 10.12), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system) that, if effective, would result in any Person (other than the Initial Holder or a Look-Through Entity) Beneficially Owning shares of Class H Preferred Stock in excess of the Ownership Limit shall be void ab initio as to the Transfer of such shares of Class H Preferred Stock that would be otherwise Beneficially Owned by such Person in excess of the Ownership Limit, and the intended transferee shall acquire no rights in such shares of Class H Preferred Stock. (C) TRANSFERS IN EXCESS OF INITIAL HOLDER LIMIT. Except as provided in Section 10.8, from and after the Issue Date (and subject to Section 10.12), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system) that, if effective, would result in the Initial Holder Beneficially Owning shares of Class H Preferred Stock in excess of the Initial Holder Limit shall be void ab initio as to the Transfer of such shares of Class H Preferred Stock that would be otherwise Beneficially Owned by the Initial Holder in excess of the Initial Holder limit, and the Initial Holder shall acquire no rights in such shares of Class H Preferred Stock. (D) TRANSFERS IN EXCESS OF LOOK-THROUGH OWNERSHIP LIMIT. Except as provided in Section 10.8 from and after the Issue Date (and subject to Section 10.12), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system) that, if effective, would result in any Look-Through Entity Beneficially Owning shares of Class H Preferred Stock in excess of the Look-Through Ownership limit shall be void ab initio as to the Transfer of such shares of Class H Preferred Stock that would be otherwise Beneficially Owned by such Look-Through Entity in excess of the Look- Through Ownership Limit and such Look-Through Entity shall acquire no rights in such shares of Class H Preferred Stock. 15 138 (E) TRANSFERS RESULTING IN "CLOSELY HELD" STATUS. From and after the Issue Date, any Transfer that, if effective would result in the Corporation being "closely held" within the meaning of Section 856(h) of the Code, or would otherwise result in the Corporation failing to qualify as a REIT (including, without limitation, a Transfer or other event that would result in the Corporation owning (directly or constructively) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by the Corporation from such tenant would cause the Corporation to fail to satisfy any of the gross income requirements of Section 856(c) of the Code) shall be void ab initio as to the Transfer of shares of Class H Preferred Stock that would cause the Corporation (i) to be "closely held" within the meaning of Section 856(h) of the Code or (ii) otherwise fail to qualify as a REIT, as the case may be, and the intended transferee shall acquire no rights in such shares of Class H Preferred Stock. (F) SEVERABILITY ON VOID TRANSACTIONS. A Transfer of a share of Class H Preferred Stock that is null and void under Sections 10.1(B), (C), (D), or (E) of this Article because it would, if effective, result in (i) the ownership of Class H Preferred Stock in excess of the Initial Holder Limit, the Ownership Limit, or the Look-Through Ownership Limit, (ii) the Corporation being "closely held" within the meaning of Section 856(h) of the Code or (iii) the Corporation otherwise failing to qualify as a REIT, shall not adversely affect the validity of the Transfer of any other share of Class H Preferred Stock in the same or any other related transaction. 10.2 REMEDIES FOR BREACH. If the Board of Directors or a committee thereof shall at any time determine in good faith that a Transfer or other event has taken place in violation of Section 10.1 of this Article or that a Person intends to acquire or has attempted to acquire Beneficial Ownership of any shares of Class H Preferred Stock in violation of Section 10.1 of this Article (whether or not such violation is intended), the Board of Directors or a committee thereof shall be empowered to take any action as it deems advisable to refuse to give effect to or to prevent such Transfer or other event, including, but not limited to, refusing to give effect to such Transfer or other event on the books of the Corporation, causing the Corporation to redeem such shares at the then current Market Price and upon such terms and conditions as may be specified by the Board of Directors in its sole discretion (including, but not limited to, by means of the issuance of long-term indebtedness for the purpose of such redemption), demanding the repayment of any distributions received in respect of shares of Class H Preferred Stock acquired in violation of Section 10.1 of this Article or instituting proceedings to enjoin such Transfer or to rescind such Transfer or attempted Transfer; provided, however, that any Transfers or attempted Transfers (or, in the case of events other than a Transfer, Beneficial Ownership) in violation of Section 10.1 of this Article, regardless of any action (or non-action) by the Board of Directors or such committee, (a) shall be void ab initio or (b) shall automatically result in the transfer described in Section 10.3 of this Article; provided, further, that the provisions of this Section 10.2 shall be subject to the provisions of Section 10.12 of this Article; provided, further, that neither the Board of Directors nor any committee thereof may 16 139 exercise such authority in a manner that interferes with any ownership or transfer of Class H Preferred Stock that is expressly authorized pursuant to Section 10.8(C) of this Article. 10.3. TRANSFER IN TRUST. (A) ESTABLISHMENT OF TRUST. If, notwithstanding the other provisions contained in this Article, at any time after the Issue Date there is a purported Transfer (an "Excess Transfer") (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system) or other change in the capital structure of the Corporation (including, but not limited to, any redemption of Equity Stock) or other event (including, but not limited to, any acquisition of any share of Equity Stock) such that (a) any Person (other than the Initial Holder or a Look-Through Entity) would Beneficially Own shares of Class H Preferred Stock in excess of the Ownership Limit, or (b) the Initial Holder would Beneficially Own shares of Class H Preferred Stock in excess of the Initial Holder Limit, or (c) any Person that is a Look-Through Entity would Beneficially Own shares of Class H Preferred Stock in excess of the Look-Through Ownership Limit (in any such event, the Person, Initial Holder or Look-Through Entity that would Beneficially Own shares of Class H Preferred Stock in excess of the Ownership Limit, the Initial Holder Limit or the Look-Through Entity Limit, respectively, is referred to as a "Prohibited Transferee"), then, except as otherwise provided in Section 10.8 of this Article, such shares of Class H Preferred Stock in excess of the Ownership Limit, the Initial Holder Limit or the Look-Through Ownership Limit, as the case may be, (rounded up to the nearest whole share) shall be automatically transferred to a Trustee in his capacity as trustee of a Trust for the exclusive benefit of one or more Charitable Beneficiaries. Such transfer to the Trustee shall be deemed to be effective as of the close of business on the Business Day prior to the Excess Transfer, change in capital structure or another event giving rise to a potential violation of the Ownership Limit, the Initial Holder Limit or the Look-Through Entity Ownership Limit. (B) APPOINTMENT OF TRUSTEE. The Trustee shall be appointed by the Corporation and shall be a Person unaffiliated with either the Corporation or any Prohibited Transferee. The Trustee may be an individual or a bank or trust company duly licensed to conduct a trust business. (C) STATUS OF SHARES HELD BY THE TRUSTEE. Shares of Class H Preferred Stock held by the Trustee shall be issued and outstanding shares of capital stock of the Corporation. Except to the extent provided in Section 10.3(E), the Prohibited Transferee shall have no rights in the Class H Preferred Stock held by the Trustee, and the Prohibited Transferee shall not benefit economically from ownership of any shares held in trust by the Trustee, shall have no rights to dividends and shall not possess any rights to vote or other rights attributable to the shares held in the Trust. 17 140 (D) DIVIDEND AND VOTING RIGHTS. The Trustee shall have all voting rights and rights to dividends with respect to shares of Class H Preferred Stock held in the Trust, which rights shall be exercised for the benefit of the Charitable Beneficiary. Any dividend or distribution paid prior to the discovery by the Corporation that the shares of Class H Preferred Stock have been transferred to the Trustee shall be repaid to the Corporation upon demand, and any dividend or distribution declared but unpaid shall be rescinded as void ab initio with respect to such shares of Class H Preferred Stock. Any dividends or distributions so disgorged or rescinded shall be paid over to the Trustee and held in trust for the Charitable Beneficiary. Any vote cast by a Prohibited Transferee prior to the discovery by the Corporation that the shares of Class H Preferred Stock have been transferred to the Trustee will be rescinded as void ab initio and shall be recast in accordance with the desires of the Trustee acting for the benefit of the Charitable Beneficiary. The owner of the shares at the time of the Excess Transfer, change in capital structure or other event giving rise to a potential violation of the Ownership Limit, Initial Holder Limit or Look-Through Entity Ownership Limit shall be deemed to have given an irrevocable proxy to the Trustee to vote the shares of Class H Preferred Stock for the benefit of the Charitable Beneficiary. (E) RESTRICTIONS ON TRANSFER. The Trustee of the Trust may sell the shares held in the Trust to a Person, designated by the Trustee, whose ownership of the shares will not violate the Ownership Restrictions. If such a sale is made, the interest of the Charitable Beneficiary shall terminate and proceeds of the sale shall be payable to the Prohibited Transferee and to the Charitable Beneficiary as provided in this Section 10.3(E). The Prohibited Transferee shall receive the lesser of (1) the price paid by the Prohibited Transferee for the shares or, if the Prohibited Transferee did not give value for the shares (through a gift, devise or other transaction), the Market Price of the shares on the day of the event causing the shares to be held in the Trust and (2) the price per share received by the Trustee from the sale or other disposition of the shares held in the Trust. Any proceeds in excess of the amount payable to the Prohibited Transferee shall be payable to the Charitable Beneficiary. If any of the transfer restrictions set forth in this Section 10.3(E) or any application thereof is determined in a final judgment to be void, invalid or unenforceable by any court having jurisdiction over the issue, the Prohibited Transferee may be deemed, at the option of the Corporation, to have acted as the agent of the Corporation in acquiring the Class H Preferred Stock as to which such restrictions would, by their terms, apply, and to hold such Class H Preferred Stock on behalf of the Corporation. (F) PURCHASE RIGHT IN STOCK TRANSFERRED TO THE TRUSTEE. Shares of Class H Preferred Stock transferred to the Trustee shall be deemed to have been offered for sale to the Corporation, or its designee, at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in such transfer to the Trust (or, in the case of a devise or gift, the Market Price at the time of such devise or gift) and (ii) the Market Price on the date the Corporation, or its designee, accepts such offer. The Corporation shall have the right to accept such offer for a period of 18 141 90 days after the later of (i) the date of the Excess Transfer or other event resulting in a transfer to the Trust and (ii) the date that the Board of Directors determines in good faith that an Excess Transfer or other event occurred. (G) DESIGNATION OF CHARITABLE BENEFICIARIES. By written notice to the Trustee, the Corporation shall designate one or more nonprofit organizations to be the Charitable Beneficiary of the interest in the Trust relating to such Prohibited Transferee if (i) the shares of Class H Preferred Stock held in the Trust would not violate the Ownership Restrictions in the hands of such Charitable Beneficiary and (ii) each Charitable Beneficiary is an organization described in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code. 10.4 NOTICE OF RESTRICTED TRANSFER. Any Person that acquires or attempts to acquire shares of Class H Preferred Stock in violation of Section 10.1 of this Article, or any Person that is a Prohibited Transferee such that stock is transferred to the Trustee under Section 10.3 of this Article, shall immediately give written notice to the Corporation of such event and shall provide to the Corporation such other information as the Corporation may request in order to determine the effect, if any, of such Transfer or attempted Transfer or other event on the Corporation's status as a REIT. Failure to give such notice shall not limit the rights and remedies of the Board of Directors provided herein in any way. 10.5 OWNERS REQUIRED TO PROVIDE INFORMATION. From and after the Issue Date certain record and Beneficial Owners and transferees of shares of Class H Preferred Stock will be required to provide certain information as set out below. (A) ANNUAL DISCLOSURE. Every record and Beneficial Owner of more than 5% (or such other percentage between 0.5% and 5%, as provided in the applicable regulations adopted under the Code) of the number of Outstanding shares of Class H Preferred Stock shall, within 30 days after January 1 of each year, give written notice to the Corporation stating the name and address of such record or Beneficial Owner, the number of shares of Class H Preferred Stock Beneficially Owned, and a full description of how such shares are held. Each such record or Beneficial Owner of Class H Preferred Stock shall, upon demand by the Corporation, disclose to the Corporation in writing such additional information with respect to the Beneficial Ownership of the Class H Preferred Stock as the Board of Directors, in its sole discretion, deems appropriate or necessary to (i) comply with the provisions of the Code regarding the qualification of the Corporation as a REIT under the Code and (ii) ensure compliance with the Ownership Limit, the Initial Holder Limit or the Look-Through Ownership Limit, as applicable. Each stockholder of record, including without limitation any Person that holds shares of Class H Preferred Stock on behalf of a Beneficial Owner, shall take all reasonable steps to obtain the written notice described in this Section 10.5 from the Beneficial Owner. 19 142 (B) DISCLOSURE AT THE REQUEST OF THE CORPORATION. Any Person that is a Beneficial Owner of shares of Class H Preferred Stock and any Person (including the stockholder of record) that is holding shares of Class H Preferred Stock for a Beneficial Owner, and any proposed transferee of shares, shall provide such information as the Corporation, in its sole discretion, may request in order to determine the Corporation's status as a REIT, to comply with the requirements of any taxing authority or other governmental agency, to determine any such compliance or to ensure compliance with the Ownership Limit, the Initial Holder Limit and the Look-Through Ownership Limit, and shall provide a statement or affidavit to the Corporation setting forth the number of shares of Class H Preferred Stock already Beneficially Owned by such stockholder or proposed transferee and any related persons specified, which statement or affidavit shall be in the form prescribed by the Corporation for that purpose. 10.6 REMEDIES NOT LIMITED. Nothing contained in this Article shall limit the authority of the Board of Directors to take such other action as it deems necessary or advisable (subject to the provisions of Section 10.12 of this Article) (i) to protect the Corporation and the interests of its stockholders in the preservation of the Corporation's status as a REIT and (ii) to insure compliance with the Ownership Limit, the Initial Holder Limit and the Look-Through Ownership Limit. 10.7 AMBIGUITY. In the case of an ambiguity in the application of any of the provisions of Section 10 of this Article, or in the case of an ambiguity in any definition contained in Section 10 of this Article, the Board of Directors shall have the power to determine the application of the provisions of this Article with respect to any situation based on its reasonable belief, understanding or knowledge of the circumstances. 10.8 EXCEPTIONS. The following exceptions shall apply or may be established with respect to the limitations of Section 10.1 of this Article. (A) WAIVER OF OWNERSHIP LIMIT. The Board of Directors, upon receipt of a ruling from the Internal Revenue Service or an opinion of tax counsel or other evidence or undertaking acceptable to it, may waive the application, in whole or in part, of the Ownership Limit to a Person subject to the Ownership Limit, if such person is not an individual for purposes of Section 542(a) of the Code and is a corporation, partnership, estate or trust. In connection with any such exemption, the Board of Directors may require such representations and undertakings from such Person and may impose such other conditions as the Board of Directors deems necessary, in its sole discretion, to determine the effect, if any, of the proposed Transfer on the Corporation's status as a REIT. (B) PLEDGE BY INITIAL HOLDER. Notwithstanding any other provision of this Article, the pledge by the Initial Holder of all or any portion of the Class H Preferred Stock directly owned at any time or from time to time shall not constitute a violation of Section 10.1 of this Article and the pledgee shall not be subject to the 20 143 Ownership Limit with respect to the Class H Preferred Stock so pledged to it either as a result of the pledge or upon foreclosure. (C) UNDERWRITERS. For a period of 270 days (or such longer period of time as any underwriter described below shall hold an unsold allotment of Class H Preferred Stock) following the purchase of Class H Preferred Stock by an underwriter that (i) is a corporation, partnership or other legal entity and (ii) participates in an offering of the Class H Preferred Stock, such underwriter shall not be subject to the Ownership Limit with respect to the Class H Preferred Stock purchased by it as a part of or in connection with such offering and with respect to any Class H Preferred Stock purchased in connection with market making activities. 10.9 LEGEND. Each certificate for Class H Preferred Stock shall bear substantially the following legend: "The shares of Class H Cumulative Preferred Stock represented by this certificate are subject to restrictions on transfer. No person may Beneficially Own shares of Class H Cumulative Preferred Stock in excess of the Ownership Restrictions, as applicable, with certain further restrictions and exceptions set forth in the Charter (including the Articles Supplementary setting forth the terms of the Class H Cumulative Preferred Stock). Any Person that attempts to Beneficially Own shares of Class H Cumulative Preferred Stock in excess of the applicable limitation must immediately notify the Corporation. All capitalized terms in this legend have the meanings ascribed to such terms in the Charter (including the Articles Supplementary setting forth the terms of the Class H Cumulative Preferred Stock), as the same may be amended from time to time, a copy of which, including the restrictions on transfer, will be sent without charge to each stockholder that so requests. If the restrictions on transfer are violated (i) the transfer of the shares of Class H Cumulative Preferred Stock represented hereby will be void in accordance with the Charter (including the Articles Supplementary setting forth the terms of the Class H Cumulative Preferred Stock) or (ii) the shares of Class H Cumulative Preferred Stock represented hereby will automatically be transferred to a Trustee of a Trust for the benefit of one or more Charitable Beneficiaries." 10.10 SEVERABILITY. If any provision of this Article or any application of any such provision is determined in a final and unappealable judgment to be void, invalid or unenforceable by any Federal or state court having jurisdiction over the issues, the validity and enforceability of the remaining provisions shall not be affected and other applications of such provision shall be affected only to the extent necessary to comply with the determination of such court. 21 144 10.11 BOARD OF DIRECTORS DISCRETION. Anything in this Article to the contrary notwithstanding, the Board of Directors shall be entitled to take or omit to take such actions as it in its discretion shall determine to be advisable in order that the Corporation maintain its status as and continue to qualify as a REIT, including, but not limited to, reducing the Ownership Limit, the Initial Holder Limit and the Look-Through Ownership Limit in the event of a change in law. 10.12 SETTLEMENT. Nothing in this Section 10 of this Article shall be interpreted to preclude the settlement of any transaction entered into through the facilities of the NYSE or other securities exchange or an automated inter- dealer quotation system. FOURTH: The terms of the Class H Cumulative Preferred Stock set forth in Article Third hereof shall become Article XVII of the Charter. 22 145 IN WITNESS WHEREOF, the Corporation has caused these presents to be signed in its name and on its behalf by its Senior Vice President and Chief Financial Officer and witnessed by its Assistant Secretary on August 12, 1998. WITNESS: APARTMENT INVESTMENT AND MANAGEMENT COMPANY /s/ KATHLEEN HARVEY /s/ TROY D. BUTTS - ---------------------------------- ------------------------------------- Kathleen Harvey Troy D. Butts Assistant Secretary Senior Vice President and Chief Financial Officer THE UNDERSIGNED, Senior Vice President and Chief Financial Officer of APARTMENT INVESTMENT AND MANAGEMENT COMPANY, who executed on behalf of the Corporation the Articles Supplementary of which this Certificate is made a part, hereby acknowledges in the name and on behalf of said Corporation the foregoing Articles Supplementary to be the corporate act of said Corporation and hereby certifies that the matters and facts set forth herein with respect to the authorization and approval thereof are true in all material respects under the penalties of perjury. /s/ TROY D. BUTTS ------------------------------------- Troy D. Butts Senior Vice President and Chief Financial Officer 146 ARTICLES OF MERGER MERGING INSIGNIA FINANCIAL GROUP, INC. (A CORPORATION OF THE STATE OF DELAWARE) WITH AND INTO APARTMENT INVESTMENT AND MANAGEMENT COMPANY (A CORPORATION OF THE STATE OF MARYLAND) APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a corporation organized and existing under the laws of the State of Maryland ("AIMCO"), and INSIGNIA FINANCIAL GROUP, INC., a corporation organized and existing under the laws of the State of Delaware ("IFG"), do hereby certify to the State Department of Assessments and Taxation of Maryland (the "Department") as follows: FIRST: AIMCO and IFG agree that IFG shall be merged with and into AIMCO and AIMCO shall be the surviving corporation (the "Merger"). The terms and conditions of the Merger and the mode of carrying the same into effect are as hereinafter set forth. SECOND: IFG was incorporated under the Delaware General Corporation Law ("DGCL") on July 20, 1990. IFG qualified to do business in the State of Maryland on May 11, 1998. THIRD: The principal office of each of AIMCO and IFG in the State of Maryland is, and the principal office of AIMCO immediately following the effective time of the Merger will be, located in the City of Baltimore. FOURTH: IFG owns no interest in land located in the State of Maryland. FIFTH: The charter of AIMCO (the "Charter") will be amended as a result of the Merger as set forth in Article NINTH below, and the Charter, as amended, shall continue in full force and effect until duly amended in accordance with its terms and applicable law. SIXTH: These Articles of Merger, which may be executed in counterparts, shall become effective immediately upon the acceptance thereof for record by the Department (the "Effective Time"). SEVENTH: The total number of shares of all classes of stock which each corporation party to these Articles of Merger has the authority to issue, and the number of shares of each class, are as follows: (a) IFG 147 The total number of shares of all classes of stock which IFG has authority to issue is One Hundred Three Million (103,000,000) shares (the "IFG Stock"), consisting of 100,000,000 shares of Class A Common Stock, par value $.01 per share (the "IFG Common Stock"); 2,000,000 shares of Class B Common Stock, par value $.01 per share; and 1,000,000 shares of preferred stock, par value $.01 per share, of which 15,000 shares have been designated as 7.5% Step- Up Rate Convertible Preferred Stock. The aggregate par value of all classes of stock of IFG having par value is One Million Thirty Thousand Dollars ($1,030,000). (b) AIMCO The total number of shares of all classes of stock which AIMCO has authority to issue is Five Hundred Ten Million Seven Hundred Fifty Thousand (510,750,000) shares, consisting of 486,027,500 shares of Class A Common Stock, par value $.01 per share (the "AIMCO Common Stock"); 262,500 shares of Class B Common Stock, par value $.01 per share; and 24,460,000 shares of Preferred Stock, par value $.01 per share, of which 750,000 shares have been designated as Class B Cumulative Convertible Preferred Stock, par value $.01 per share; 2,760,000 shares have been designated as Class C Cumulative Preferred Stock, par value $.01 per share; 4,600,000 shares have been designated as Class D Cumulative Preferred Stock, par value $.01 per share; 10,000,000 shares have been designated as Class E Cumulative Convertible Preferred Stock, par value $.01 per share (the "Class E Stock"); 4,050,000 shares have been designated as Class G Cumulative Preferred Stock, par value $.01 per share; and 2,300,000 shares have been designated as Class H Cumulative Preferred Stock, par value $.01 per share. The aggregate par value of all classes of stock of AIMCO having par value is Five Million One Hundred Seven Thousand Five Hundred Dollars ($5,107,500). EIGHTH: At the Effective Time, IFG shall be merged with and into AIMCO, and thereupon, AIMCO shall possess any and all purposes and powers of IFG, and all leases, licenses, property, rights, privileges and powers and assets of whatever nature or description of IFG shall be transferred to, vest in and devolve on AIMCO, without further act or deed, subject to all of the debts and obligations of IFG. NINTH: At the Effective Time, the Charter shall be amended by inserting the following Article after Article XIX in the Charter: ARTICLE XIX In accordance with Section 15.4 of the Indenture, dated as of November 1, 1996, by and between Insignia Financial Group, Inc. ("Insignia"), a Delaware corporation (as Issuer) and First Union National Bank of South Carolina (as Trustee) (the "Indenture"), upon effectiveness of the Merger (as defined in the Amended and Restated Agreement and Plan of Merger, dated as May 26, 1998, by and among the Corporation, Insignia, Insignia/ESG Holdings, Inc., a Delaware corporation, and AIMCO Properties, L.P., a Delaware limited partnership (the "Merger Agreement")), the 6 1/2 % Convertible Subordinated Debentures due 2016 issued by Insignia (the "Convertible Debentures") will become convertible into the same consideration received by holders of Class A Common Stock, par value $.01 per share, of Insignia, pursuant to the Merger (i.e., shares of Class E Cumulative Preferred Stock, par value $.01 per share, of AIMCO (the "AIMCO Class E Preferred Stock"), (or shares of Class A Common Stock, par value $.01 per share, of the Corporation 2 148 (the "AIMCO Common Stock"), if such Convertible Debentures are converted after the AIMCO Class E Preferred Stock has been converted into AIMCO Common Stock), the Cash Amount (as defined in the Merger Agreement), if any, and cash in lieu of fractional shares). Furthermore, the consideration to be received by holders of Convertible Debentures who convert such Convertible Debentures subsequent to the effectiveness of the Merger shall be adjusted as required by Article XV of the Indenture. TENTH: The issued and outstanding securities of IFG upon the Effective Time shall be converted as follows: (a) Subject to the provisions of Paragraph (f) below, at the Effective Time each share of IFG Common Stock issued and outstanding immediately prior to the Effective Time, other than shares of IFG Common Stock beneficially owned by IFG, AIMCO or any wholly owned subsidiary of AIMCO or IFG, and shares of IFG Common Stock owned by stockholders who have properly demanded appraisal rights under Section 262 of the Delaware General Corporation Law ("Section 262") shall be converted into and become the right to receive .262 shares of Class E Stock (the "Stock Consideration"), and no ($0) Dollars (the "Cash Amount") (together, the "Merger Consideration"), all as further described in that certain Amended and Restated Agreement and Plan of Merger dated as of May 26, 1998, by and among AIMCO, IFG, Insignia/ESG Holdings, Inc., a Delaware corporation, and AIMCO Properties, L.P., a Delaware Limited Partnership (the "Merger Agreement"). (b) At the Effective Time, each 6 1/2 % Convertible Subordinated Debenture (the "Convertible Debentures") issued by IFG pursuant to that certain Indenture dated November 1, 1996 (the "Indenture"), by and between IFG (as Issuer) and First Union National Bank of South Carolina (as Trustee) convertible into shares of IFG Common Stock will become convertible, with such adjustments as required by Article XV of the Indenture, into the Merger Consideration as provided for and calculated pursuant to Paragraph (a) of this Article TENTH, as further set forth in the Merger Agreement. (c) At the Effective Time, each outstanding security issued by IFG or any subsidiary thereof (excluding stock options issued under the Insignia 1992 Stock Incentive Plan, as amended, or the Insignia 1995 Non-Employee Director Stock Option Plan (collectively, the "IFG Stock Plan") and the 6 1/2 % Trust Convertible Preferred Securities issued by Insignia Financing I as described in its prospectus dated January 22, 1997 (the "TOPRs")) which is exercisable, convertible or exchangeable for or into a share or shares of IFG Common Stock (the "IFG Convertible Securities"), shall be assumed by AIMCO and exercisable, convertible or exchangeable, with such adjustments as provided by the terms of each such security, into the Merger Consideration as provided for and calculated pursuant to Paragraph (a) of this Article TENTH, as further set forth in the Merger Agreement. (d) At the Effective Time, each then outstanding, unexercised option to purchase a share of IFG Common Stock, whether vested or unvested, granted under the IFG Stock Plan shall be assumed by AIMCO and shall be converted into an option to purchase .262 shares of AIMCO Common Stock, as further set forth in the Merger Agreement. 3 149 (e) At the Effective Time, each unvested restricted share of IFG Common Stock awarded under the IFG Stock Plan shall entitle the holder thereof to receive the Cash Amount and shall be assumed by AIMCO and shall be converted into .262 restricted shares of AIMCO Common Stock, as further set forth in the Merger Agreement. (f) At the Effective Time, each outstanding certificate or certificates which prior thereto represented shares of IFG Common Stock (other than a certificate or certificates representing (i) shares of IFG Common Stock owned by IFG or AIMCO directly or through wholly-owned subsidiaries and (ii) shares of IFG Common Stock owned by stockholders who have properly demanded appraisal rights under Section 262 (an "IFG Certificate") shall represent the right to receive in exchange therefor, upon surrender of the same, certificates representing that number of shares of Stock Consideration, and the Cash Amount, if any, as provided for in and calculated pursuant to this Article TENTH, together with the cash payable in respect of fractional shares or fractional interests of the Stock Consideration as provided for and calculated pursuant to Paragraph (g) of this Article TENTH. Until so surrendered, each IFG Certificate outstanding prior to the Effective Time shall represent the ownership of the Merger Consideration, which the holder of the shares of IFG Common Stock represented by such IFG Certificates is entitled to receive in connection with the Merger, except that, anything herein to the contrary notwithstanding, no dividends or other distributions on the Merger Consideration shall be paid with respect to any shares of IFG Common Stock represented by a IFG Certificate until such IFG Certificate is surrendered for exchange as provided herein. Following surrender of any such IFG Certificate, there shall be paid to the holder of the certificates representing whole shares of Stock Consideration issued in consideration therefor, without interest, (i) at the time of such surrender, the amount of dividends or other distributions with a record date after the Effective Time theretofore payable with respect to such whole shares of Stock Consideration, less the amount of any withholding taxes which may be required thereon, 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 the Stock Consideration, less the amount of any withholding taxes which may be required thereon. (g) Notwithstanding any other provision hereof, no fractional shares of Stock Consideration shall be issued in connection with the Merger. Instead, each holder of an outstanding security of IFG giving rise to a fractional interest in shares of Stock Consideration, upon the conversion or exchange of such shares in connection with the Merger shall, at the time of surrender of its IFG Certificate(s) in respect of such shares, be paid an amount in cash (without interest) equal to the aggregate of the daily average (computed based on the sum of the high and low sales prices of AIMCO Common Stock (as reported on the NYSE Composite Transactions reporting System) as published in the Wall Street Journal or, if not published therein, in another authoritative source, divided by two) on each of the twenty consecutive NYSE trading days ending on the fifth NYSE trading day immediately preceding the Effective Time, divided by twenty, multiplied by the fraction of such share to which such holder would otherwise be entitled. No such holder shall be entitled to dividends or other distributions, voting rights or any other shareholder rights in respect of any fractional share or interest. (h) As of the Effective Time, all shares of capital stock of IFG shall be canceled and retired and shall cease to exist and no Merger Consideration or other consideration shall be issued or delivered in exchange therefor except as set forth in this Article TENTH. 4 150 ELEVENTH: IFG Certificates shall be exchanged for certificates representing the Merger Consideration, and cash in lieu of fractional interests in shares of Stock Consideration, as follows: (a) As of the Effective Time, AIMCO shall deposit or shall cause to be deposited with Bank Boston, N.A. (the "Exchange Agent"), for the benefit of the holders of shares of IFG Common Stock for exchange in accordance with these Articles of Merger, certificates representing the Stock Consideration, the Cash Amount, if any, and cash in lieu of fractional interests in shares of Stock Consideration, to be issued or delivered in connection with the Merger and in exchange for outstanding shares of IFG Common Stock. (b) Promptly after the Effective Time, AIMCO shall cause the Exchange Agent to mail to each holder of record of IFG Certificate(s) (i) a letter of transmittal which shall specify that delivery shall be effected, and risk of loss and title to the IFG Certificate(s) shall pass, only upon delivery of the IFG Certificate(s) to the Exchange Agent and (ii) instructions for use in effecting the surrender of the IFG Certificate(s) in exchange for Merger Consideration, and cash in lieu of fractional interests in shares of Stock Consideration. Upon surrender of a IFG Certificate for cancellation to the Exchange Agent, together with such letter of transmittal, duly executed and completed in accordance with the instructions thereto, the holder of such certificate shall be entitled to receive in exchange therefor, and AIMCO will cause the Exchange Agent to deliver to such holder, certificates representing the number of whole shares of Stock Consideration into which the IFG Common Stock is convertible in the Merger and a check representing the Cash Amount, if any, and the amount of cash in lieu of fractional interests in shares of Stock Consideration, if any, and unpaid dividends and distributions, if any, which such holder has the right to receive in respect of the IFG Certificate(s) surrendered, after giving effect to any required withholding tax, and the IFG Certificate(s) so surrendered shall forthwith be canceled. No interest will be paid or accrued on the Cash Amount, cash in lieu of fractional shares of Merger Consideration, or unpaid dividends and distributions, if any, payable to the holders of the IFG Certificate(s). In the event of a transfer of ownership of IFG Common Stock which is not registered in the transfer records of IFG, certificates representing the proper number of shares of Stock Consideration, together with a check for the Cash Amount, and cash to be paid in lieu of fractional interests in shares of Stock Consideration, may be issued to such transferee if the IFG Certificate is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer together with evidence that any applicable stock transfer taxes have been paid. (c) At and after the Effective Time, there shall be no transfers on the stock transfer books of IFG of IFG Common Stock which was outstanding immediately prior to the Effective Time. If, after the Effective Time, IFG Certificate(s) are presented to AIMCO, they shall be canceled and exchanged for certificates for whole shares of Stock Consideration, the Cash Amount and cash in lieu of fractional interests in shares of Stock Consideration, if any, and unpaid dividends and distributions deliverable in respect thereof, if any, in accordance with the procedures set forth in the Agreement of Merger and these Articles of Merger. (d) Any portion of the Merger Consideration held by the Exchange Agent (together with any Cash Amount or cash in lieu of fractional interests in shares of Stock Consideration and the proceeds of any investments thereof) that remains unclaimed by the former holders of securities of IFG one year after the Effective Time shall be delivered to AIMCO. Any 5 151 former holders of securities of IFG who have not theretofore complied with the provisions hereof and Article 2 of the Merger Agreement shall thereafter look to AIMCO for payment of their shares or receipts constituting the Merger Consideration, cash in lieu of fractional interests in shares of Stock Consideration and unpaid dividends and distributions on the Merger Consideration deliverable in respect of each share of IFG Common Stock which such stockholder holds, as determined pursuant to Article 2 of the Merger Agreement and these Articles of Merger, in each case, without any interest thereon. (e) None of AIMCO, IFG, the Exchange Agent or any other person shall be liable to any former holder of securities of IFG for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws. (f) In the event any IFG Certificate shall have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming such to be lost, stolen or destroyed, and if required by AIMCO, the posting by such person of a bond in such reasonable amount as AIMCO may direct as indemnity against any claim that may be made against it with respect to such IFG Certificate, the Exchange Agent or AIMCO will deliver in exchange for such lost, stolen or destroyed certificate, the Merger Consideration and cash in lieu of fractional interests in shares of Stock Consideration, and unpaid dividends and distributions on shares of the Merger Consideration as provided in the Agreement of Merger and these Articles of Merger, deliverable in respect thereof pursuant hereto. TWELFTH: The terms and conditions of the transaction described in these Articles of Merger were duly advised, authorized and approved by IFG in the manner and by the vote required by the laws of the State of Delaware and the charter and bylaws of IFG, as follows: (a) The Board of Directors of IFG, by vote of the members of the Board of Directors thereof, at a meeting duly called and held, adopted a resolution declaring that the terms and conditions of the Merger described herein were advisable and directing that the proposed transaction be submitted for consideration by the stockholders of IFG. (b) The stockholders of IFG entitled to vote on the proposed Merger, at a meeting duly called and held, adopted a resolution approving the Merger, in all respects by the vote required by and in the manner prescribed under the DGCL and the charter and bylaws of IFG. The terms and conditions of the Merger were duly authorized and approved by AIMCO in the manner and by the vote required by the laws of the State of Maryland and the Charter and bylaws of AIMCO, as follows: (a) The Board of Directors of AIMCO, by vote of the members of the Board of Directors thereof, at a meeting duly called and held, adopted a resolution declaring that the terms and 6 152 conditions of the Merger described herein were advisable and directing that the proposed Merger be submitted for consideration by the stockholders of AIMCO. (b) The stockholders of AIMCO entitled to vote on the proposed Merger, at a meeting duly called and held, adopted a resolution approving the Merger, in all respects by the vote required by and in the manner prescribed under the MGCL and the Charter and bylaws of AIMCO. THIRTEENTH: Each undersigned President and Chairman of the Board acknowledges these Articles of Merger to be the corporate act of the respective corporate party on whose behalf he has signed, and further, as to all matters and facts required to be verified under oath, each President and Chairman of the Board acknowledges that to the best of his knowledge, information and belief, these matters and facts relating to the corporation on whose behalf he has signed are true in all material respects and that this statement is made under the penalties for perjury. IN WITNESS WHEREOF, these Articles of Merger have been duly executed on behalf of Apartment Investment and Management Company by Peter Kompaniez, its President, and acknowledged by Joel F. Bonder, its Secretary and these Articles of Merger have been duly executed on behalf of Insignia Financial Group, Inc., by Andrew L. Farkas, its Chairman of the Board and acknowledged by Adam B. Gilbert, its Secretary as of this 1st day of October, 1998. ATTEST: APARTMENT INVESTMENT AND MANAGEMENT COMPANY /s/ JOEL F. BONDER By: /s/ PETER KOMPANIEZ - ----------------------- --------------------------- Joel F. Bonder Name: Peter Kompaniez Secretary Title: President ATTEST: INSIGNIA FINANCIAL GROUP, INC. /s/ ADAM B. GILBERT By: /s/ ANDREW L. FARKAS - ------------------------ --------------------------- Adam B. Gilbert Name: Andrew L. Farkas Secretary Title: Chairman of the Board 7 153 ARTICLES SUPPLEMENTARY APARTMENT INVESTMENT AND MANAGEMENT COMPANY CLASS E CUMULATIVE CONVERTIBLE PREFERRED STOCK (PAR VALUE $.01 PER SHARE) APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation (hereinafter called the "Corporation"), having its principal office in Baltimore City, Maryland, hereby certifies to the Department of Assessments and Taxation of the State of Maryland that: FIRST: Pursuant to authority expressly vested in the Board of Directors of the Corporation by Section 1.2 of Article IV of the Charter of the Corporation (the "Charter"), the Board of Directors has duly divided and classified 10,000,000 authorized but unissued shares of Common Stock into a class designated as Class E Cumulative Convertible Preferred Stock, par value $.01 per share, and has provided for the issuance of such class. SECOND: The reclassification increases the number of shares classified as Class E Cumulative Convertible Preferred Stock, par value $.01 per share, from no shares immediately prior to the reclassification to 10,000,000 shares immediately after the reclassification. The reclassification decreases the number of shares classified as Common Stock from 496,027,500 shares immediately prior to the reclassification to 486,027,500 shares immediately after the reclassification. The number of shares classified as Class E Cumulative Convertible Preferred Stock will be decreased pursuant to Section 7 of Article Third of these Articles Supplementary upon reacquisition thereof in any manner, or by retirement thereof, by the Corporation. THIRD: The terms of the Class E Cumulative Convertible Preferred Stock (including the preferences, conversions or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, or terms or conditions of redemption) as set by the Board of Directors are as follows: 1. NUMBER OF SHARES AND DESIGNATION. This class of Preferred Stock shall be designated as Class E Cumulative Convertible Preferred Stock (the "Class E Preferred Stock") and ten million (10,000,000) shall be the authorized number of shares of such Class E Preferred Stock constituting such class. 2. DEFINITIONS. For purposes of the Class E Preferred Stock, the following terms shall have the meanings indicated: 154 "Board of Directors" shall mean the Board of Directors of the Corporation or any committee authorized by such Board of Directors to perform any of its responsibilities with respect to the Class E Preferred Stock. "Business Day" shall mean any day other than a Saturday, Sunday or a day on which state or federally chartered banking institutions in New York, New York are not required to be open. "Class E Preferred Stock" shall have the meaning set forth in Section 1 of this Article. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor thereto, as interpreted by any applicable regulations or other administrative pronouncements as in effect from time to time. "Common Stock" shall mean the Class A Common Stock, $.01 par value per share, of the Corporation or such shares of the Corporation's capital stock into which outstanding shares of Common Stock shall be reclassified. "Conversion Date" shall mean the date on which the Series E Preferred Stock is converted into issued and outstanding Common Stock. "Current Market Price" per share of Common Stock on any date shall mean the average of the daily market prices of a share of Common Stock for the five consecutive trading days preceding such date. The market price for each such day shall mean the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE or, if the Common Stock is not listed or admitted to trading on the NYSE, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if the Common Stock is not listed or admitted to trading on any national securities exchange, the last quoted price, or if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the principal other automated quotations system that may then be in use or, if the Common Stock is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board of Directors of the Corporation. "Dividend Payment Date" shall mean, with respect to each Dividend Period, (a) the date on which cash dividends are paid on the Common Stock with respect to such Dividend Period, but excluding any such dates after the Conversion Date; or (b) if such dividends have not 2 155 been paid on the Common Stock by 9:00 a.m, New York City time, on the sixtieth day from and including the last day of such Dividend Period, then on such day; provided, further, that if any Dividend Payment Date falls on any day other than a Business Day, the dividend payment payable on such Dividend Payment Date shall be paid on the Business Day immediately following such Dividend Payment Date. "Dividend Periods" shall mean the Initial Dividend Period and each subsequent quarterly dividend period commencing on and including January 1, April 1, July 1, and October 1 of each year and ending on and including the day immediately preceding the last day of the succeeding Dividend Period, other than the Dividend Period during which any Class E Preferred Stock shall be redeemed pursuant to Section 6 hereof, which shall end on and include the Call Date with respect to the Class E Stock being redeemed. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Issue Date" shall mean the Effective Time under the Merger Agreement. "Initial Dividend" shall mean the first dividend paid to holders of the Common Stock after the Issue Date. "Initial Dividend Period" shall mean the period commencing on and including the Issue Date and ending on and including the record date for the Initial Dividend. "Junior Stock" shall have the meaning set forth in paragraph (c) of Section 8 of this Article. The Common Stock issued by the Corporation shall be Junior Stock. "Merger Agreement" shall mean the Amended and Restated Agreement and Plan of Merger, dated as of May 26, 1998, by and among the Corporation, Insignia Financial Group, Inc., a Delaware corporation, Insignia/ESG Holdings, Inc., a Delaware corporation, and AIMCO Properties, L.P., a Delaware limited partnership. "NYSE" shall mean the New York Stock Exchange, Inc. "Parity Stock" shall have the meaning set forth in paragraph (b) of Section 8 of this Article. "Prohibited Transferee" has the meaning set forth in Section 11.3(A) of this Article. "Senior Stock" shall have the meaning set forth in paragraph (a) of Section 8 of this Article. The Class B Cumulative Convertible Preferred Stock, Class C 9% Cumulative Preferred Stock, Class D 8.75% Cumulative Preferred Stock, Class G 9.375% Cumulative Preferred Stock and Class H 9.50% Cumulative Preferred Stock previously issued by the Corporation shall each be a Senior Stock. "set apart for payment" shall be deemed to include, without any action other than the following, the recording by the Corporation in its accounting ledgers of any accounting or 3 156 bookkeeping entry which indicates, pursuant to a declaration of dividends or other distribution by the Board of Directors, the allocation of funds to be so paid on any series or class of capital stock of the Corporation; provided, however, that if any funds for any class or series of Parity Stock are placed in a separate account of the Corporation or delivered to a disbursing, paying or other similar agent, then "set apart for payment" with respect to the Class E Preferred Stock shall mean placing such funds in a separate account or delivering such funds to a disbursing, paying or other similar agent. "Special Dividend" shall mean, if and when declared by the Board of Directors, in its sole discretion, the distribution, whether in one or more disbursements, of an amount per share of Class E Preferred Stock equal to the Special Dividend Amount divided by the Series E Conversion Ratio (each as defined in the Merger Agreement) (subject to proportional adjustment upon the occurrence of any of the events described in Section 5(b) hereof), to the holders of Class E Preferred Stock. "Special Dividend Date" shall mean any date on which the Special Dividend, or any portion thereof, is paid to the holders of the Class E Preferred Stock. "Transfer Agent" means such transfer agent as may be designated by the Board of Directors or their designee as the transfer agent for the Class E Preferred Stock; provided, that if the Corporation has not designated a transfer agent then the Corporation shall act as the transfer agent for the Class E Preferred Stock. 3. DIVIDENDS AND THE SPECIAL DIVIDEND DISTRIBUTION. (a) On every Dividend Payment Date, the holders of Class E Preferred Stock shall be entitled to receive cumulative dividends payable in cash in an amount per share of Class E Preferred Stock equal to the per share dividend payable on Common Stock on such Dividend Payment Date. Such dividends shall be cumulative from the Issue Date, whether or not in any Dividend Period or Periods such dividends shall be declared or there shall be funds of the Corporation legally available for the payment of such dividends, and shall be payable quarterly in arrears on the Dividend Payment Dates, commencing on the first Dividend Payment Date after the Issue Date. Each such dividend shall be payable in arrears to the holders of record of the Class E Preferred Stock as they appear on the records of the Corporation at the close of business on the record date fixed by the Board of Directors with respect to such Dividend Payment Date which shall be not more than 60 days prior to the applicable Dividend Payment Date and, within such 60 day period, shall be the same date as the record date for the regular quarterly dividend payable with respect to the Common Stock for the Dividend Period to which such Dividend Payment Date relates (or, if there is no such record date for Common Stock, then such date as the Board of Directors may fix). Accumulated, accrued and unpaid dividends for any past Dividend Periods may be declared and paid at any time, without reference to any regular Dividend Payment Date, to holders of record on such date, which date shall not precede by more than 45 days the payment date thereof, as may be fixed by the Board of Directors. 4 157 (b) The amount of dividends payable per share of Class E Preferred Stock for the Initial Dividend Period, or any other period shorter than a full Dividend Period, shall be computed ratably on the basis of twelve 30-day months and a 360-day year. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Class E Preferred Stock that may be in arrears. (c) On any Special Dividend Date, the holders of Class E Preferred Stock shall be entitled to receive the Special Dividend, or any portion thereof, as determined by the Board of Directors, with respect to each share of Class E Preferred Stock. The Special Dividend payment shall be payable to the holders of record of the Class E Preferred Stock as they appear on the records of the Corporation at the close of business on the record date fixed by the Board of Directors with respect to such Special Dividend Date. (d) After January 15, 1999, if any portion of the Special Dividend or any other dividend payable pursuant to section 3(a) hereof has yet to be declared and paid to the holders of Class E Preferred Stock, no dividends shall be declared or paid or set apart for payment by the Corporation and no other distribution of cash or other property shall be declared or made, directly or indirectly, by the Corporation with respect to any shares of Common Stock, nor shall any shares of Common Stock be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Common Stock made for purposes of an employee incentive or benefit plan of the Corporation or any subsidiary) for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock), directly or indirectly, by the Corporation (except by conversion into or exchange for shares of, or options, warrants or rights to subscribe for or purchase shares of, Common 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 Common Stock in respect thereof, directly or indirectly, by the Corporation. 4. LIQUIDATION. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any payment or distribution of the Corporation (whether capital or surplus) shall be made to or set apart for the holders of Common Stock, the holders of shares of Class E Preferred Stock shall be entitled to receive $1.00 per share of Class E Preferred Stock plus the Special Dividend if such dividend is unpaid on the date of final distribution to such holders, thereafter each share of Class E Preferred Stock shall have the same rights with respect to assets of the Corporation as one share of Common Stock. 5. CONVERSION. (a) On the close of business on the day on which the Special Dividend, or any remaining unpaid portion thereof, is paid to the holders of the Class E Preferred Stock, each share of Class E Preferred Stock shall be automatically converted into one share of Common Stock without any action on the part of the Corporation or the holder of such share of Class E Preferred Stock. 5 158 (b) If the Corporation shall after the Issue Date (i) pay a dividend or make a distribution on its Common Stock in shares of Common Stock, (ii) subdivide its outstanding Common Stock into a greater number of shares, (iii) combine its outstanding Common Stock into a smaller number of shares, (iv) issue any shares of capital stock by reclassification of its outstanding Common Stock, (v) issue rights, options or warrants to all holders of Common Stock entitling them to subscribe for or purchase Common Stock or (vi) make a distribution on its Common Stock other than in cash or shares of Common Stock (including any distribution in securities (other than rights, options or warrants described in clause (v) of this sentence)) then the Corporation shall contemporaneously do the same with respect to the Class E Preferred Stock. (c) The Corporation shall at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock, solely for the purpose of effecting the conversion of the Class E Preferred Stock, the full number of shares of Common Stock deliverable upon the conversion of all outstanding shares of Class E Preferred Stock. The Corporation covenants that any shares of Common Stock issued upon conversion of the shares of Class E Preferred Stock shall be validly issued, fully paid and nonassessable. The Corporation shall list the shares of Common Stock required to be delivered upon conversion of the shares of Class E Preferred Stock, prior to such delivery, upon the NYSE and each other national securities exchange, if any, upon which the outstanding shares of Common Stock are listed at the time of such delivery. (d) The Corporation will pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock upon conversion of shares of Class E Preferred Stock pursuant hereto; provided, however, that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issue or delivery of shares of Common Stock in a name other than that of the holder of the shares of Class E Preferred Stock to be converted, and no such issue or delivery shall be made unless and until the Person requesting such issue or delivery has paid to the Corporation the amount of any such tax or established, to the reasonable satisfaction of the Corporation, that such tax has been paid. 6. REDEMPTION AT THE OPTION OF THE CORPORATION. (a) Shares of Class E Preferred Stock shall not be redeemable by the Corporation prior to October 1, 2018. On or after October 1, 2018, the Corporation, at its option, may redeem shares of Class E Preferred Stock, in whole or from time to time in part, at a redemption price per share payable in cash equal to the sum of (i) the greater of (A) the Current Market Price of the Common Stock on the Call Date or (B) the AIMCO Index Price (as defined in the Merger Agreement, but determined without giving effect to the proviso to the definition thereof for this purpose), plus (ii) all accrued and unpaid dividends to the Call Date. (b) Shares of Class E Preferred Stock shall be redeemed by the Corporation on the date specified in the notice to holders required under paragraph (d) of this Section 6 (the "Call Date"). The Call Date shall be selected by the Corporation, shall be specified in the notice of 6 159 redemption and shall be not less than 30 days nor more than 60 days after the date notice of redemption is sent by the Corporation. (c) If full cumulative dividends on all outstanding shares of Class E Preferred Stock and any other class or series of Parity Stock of the Corporation have not been paid or declared and set apart for payment, no shares of Class E Preferred Stock may be redeemed unless all outstanding shares of Class E Preferred Stock are simultaneously redeemed and neither the Corporation nor any affiliate of the Corporation may purchase or acquire shares of Class E Preferred Stock, otherwise than pursuant to a purchase or exchange offer made on the same terms to all holders of shares of Class E Preferred Stock. (d) If the Corporation shall redeem shares of Class E Preferred Stock pursuant to paragraph (a) of this Section 6, notice of such redemption shall be given to each holder of record of the shares to be redeemed. Such notice shall be provided by first class mail, postage prepaid, at such holder's address as the same appears on the stock records of the Corporation. Neither the failure to mail any notice required by this paragraph (d), nor any defect therein or in the mailing thereof to any particular holder, shall affect the sufficiency of the notice or the validity of the proceedings for redemption with respect to the other holders. Any notice which was mailed in the manner herein provided shall be conclusively presumed to have been duly given on the date mailed whether or not the holder receives the notice. Each such notice shall state, as appropriate: (1) the Call Date, (2) the number of shares of Class E Preferred Stock to be redeemed and, if fewer than all such shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder and (3) the place or places at which certificates for such shares are to be surrendered for cash. Notice having been mailed as aforesaid, from and after the Call Date (unless the Corporation shall fail to make available the amount of cash necessary to effect such redemption), (i) except as otherwise provided herein, dividends on the shares of Class E Preferred Stock so called for redemption shall cease to accumulate or accrue on the shares of Class E Preferred Stock called for redemption (except that, in the case of a Call Date after a dividend record date and prior to the related Dividend Payment Date, holders of Class E Preferred Stock on the dividend record date will be entitled on such Dividend Payment Date to receive the dividend payable on such shares), (ii) said shares shall no longer be deemed to be outstanding, and (iii) all rights of the holders thereof as holders of Class E Preferred Stock of the Corporation shall cease (except the rights to receive the cash payable upon such redemption, without interest thereon, upon surrender and endorsement of their certificates if so required and to receive any dividends payable thereon). The Corporation's obligation to make available the redemption price in accordance with the preceding sentence shall be deemed fulfilled if, on or before the Call Date, the Corporation shall deposit with a bank or trust company (which may be an affiliate of the Corporation) that has, or is an affiliate of a bank or trust company that has, a capital and surplus of at least $50,000,000, such amount of cash as is necessary for such redemption, in trust, with irrevocable instructions that such cash be applied to the redemption of the shares of Class E Preferred Stock so called for redemption. No interest shall accrue for the benefit of the holders of shares of Class E Preferred Stock to be redeemed on any cash so set aside by the Corporation. Subject to applicable escheat laws, any such cash unclaimed at the end of two years from the Call Date shall revert to the general funds of the Corporation, after which reversion the holders of shares of Class E Preferred Stock so called for redemption shall look only to the general funds of the Corporation for the payment of such cash. 7 160 As promptly as practicable after the surrender in accordance with such notice of the certificates for any such shares of Class E Preferred Stock to be so redeemed (properly endorsed or assigned for transfer, if the Corporation shall so require and the notice shall so state), such certificates shall be exchanged for cash (without interest thereon) for which such shares have been redeemed in accordance with such notice. If fewer than all the outstanding shares of Class E Preferred Stock are to be redeemed, shares to be redeemed shall be selected by the Corporation from outstanding shares of Class E Preferred Stock not previously called for redemption by lot or, with respect to the number of shares of Class E Preferred Stock held of record by each holder of such shares, pro rata (as nearly as may be) or by any other method as may be determined by the Board of Directors in its discretion to be equitable. If fewer than all the shares of Class E Preferred Stock represented by any certificate are redeemed, than a new certificate representing the unredeemed shares shall be issued without cost to the holders thereof. 7. STATUS OF REACQUIRED STOCK. All shares of Class E Preferred Stock which shall have been issued and reacquired in any manner by the Corporation shall be retired and cannot be reissued. 8. RANKING. Any class or series of capital stock of the Corporation shall be deemed to rank: (a) prior or senior to the Class E Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, if (i) such class or series shall be Class B Cumulative Convertible Preferred Stock, Class C Cumulative Preferred Stock, Class D Cumulative Preferred Stock, Class G Cumulative Preferred Stock or Class H Cumulative Preferred Stock, or (ii) the holders of such class or series of capital stock shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Class E Preferred Stock ("Senior Stock"); (b) on a parity with the Class E Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share thereof shall be different from those of the Class E Preferred Stock, if the holders of such class or series of capital stock and the Class E Preferred Stock shall be entitled to the receipt of dividends and of amounts distributable upon liquidation, dissolution or winding up in proportion to their respective amounts of accrued and unpaid dividends per share or liquidation preferences, without preference or priority one over the other ("Parity Stock"); and (c) junior to the Class E Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, if the holders of such class or series of capital stock shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Class E Preferred Stock ("Junior Stock"). 8 161 9. VOTING. (a) Each share of Class E Preferred Stock shall entitle its holder to one-half (1/2) of one vote with respect to all matters in which holders of Common Stock shall be entitled to vote thereon. (b) The holders of the Class E Preferred Stock and the holders of Common Stock shall vote together as a single class with respect to all matters, except for any matter relating to the liquidation, dissolution or winding up of the Corporation or amendment of these Articles Supplementary, in which case the holders of the Class E Preferred Stock shall vote as a single class. Approval of two-thirds of the outstanding shares of Class E Preferred Stock shall be required with respect to any proposed amendment which would materially affect the existing terms of the Class E Preferred Stock. (c) If any portion of the Special Dividend has yet to be declared and paid to the holders of Class E Preferred Stock on January 15, 1999, or if the equivalent of six quarterly dividends payable on the Class E Preferred Stock or any other class or series of preferred stock are in default, the number of directors of the Company will be increased by two (without duplication of any increase made pursuant to the terms of any other series of preferred stock of the Company), and the holders of the Class E Preferred Stock, voting as a single class with the holders of shares of any other class of the Company's preferred stock ranking on a parity with the Class E Preferred Stock either as to dividends or distribution of assets and upon which like voting rights have been conferred and are exercisable, will be entitled to elect such two directors to fill such newly-created directorships. Such right shall continue until full cumulative dividends for all past dividend periods on all preferred shares of the Company, including any shares of Class E Preferred Stock, have been paid or declared and set apart for payment. Any such elected directors shall serve until the Company's next annual meeting of stockholders (notwithstanding that prior to the end of such term the dividend default shall cease to exist) or until their respective successors shall be elected and qualify. 10. RECORD HOLDERS. The Corporation and the Transfer Agent may deem and treat the record holder of any share of Class E Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Corporation nor the Transfer Agent shall be affected by any notice to the contrary. 11. ADDITIONAL ISSUANCES. The shares of Series E Preferred Stock designated by these Articles Supplementary may not be issued other than pursuant to the terms of the Merger Agreement. FOURTH: The terms of the Class E Preferred Stock set forth in Article Third hereof shall become Article XVIII of the Charter. [REMAINDER OF PAGE INTENTIONALLY BLANK] 9 162 IN WITNESS WHEREOF, the Corporation has caused these presents to be signed in its name and on its behalf by its President and Vice Chairman of the Board and witnessed by its Secretary on October 1, 1998. WITNESS: APARTMENT INVESTMENT AND MANAGEMENT COMPANY /s/ JOEL BONDER /s/ PETER KOMPANIEZ - --------------------------- --------------------------------------------- Joel Bonder, Peter Kompaniez Secretary President and Vice Chairman of the Board THE UNDERSIGNED, President of APARTMENT INVESTMENT AND MANAGEMENT COMPANY, who executed on behalf of the Corporation the Articles Supplementary of which this Certificate is made a part, hereby acknowledges in the name and on behalf of said Corporation the foregoing Articles Supplementary to be the corporate act of said Corporation and hereby certifies that the matters and facts set forth herein with respect to the authorization and approval thereof are true in all material respects under the penalties of perjury. /s/ PETER KOMPANIEZ --------------------------------------------- Peter Kompaniez President and Vice Chairman of the Board 10 163 ARTICLES SUPPLEMENTARY APARTMENT INVESTMENT AND MANAGEMENT COMPANY CLASS J CUMULATIVE CONVERTIBLE PREFERRED STOCK (PAR VALUE $.01 PER SHARE) APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation (hereinafter called the "Corporation"), having its principal office in Baltimore City, Maryland, hereby certifies to the Department of Assessments and Taxation of the State of Maryland that: FIRST: Pursuant to authority expressly vested in the Board of Directors of the Corporation by Section 1.2 of Article IV of the Charter of the Corporation, as amended to date (the "Charter"), the Board of Directors has duly divided and classified 2,000,000 authorized but unissued shares of Class A Common Stock of the Corporation, par value $.01 per share (the "Class A Common Stock"), into a class designated as Class J Cumulative Convertible Preferred Stock, par value $.01 per share, and has provided for the issuance of such class. SECOND: The reclassification increases the number of shares classified as Class J Cumulative Convertible Preferred Stock, par value $.01 per share, from no shares immediately prior to the reclassification to 2,000,000 shares immediately after the reclassification. The reclassification decreases the number of shares classified as Class A Common Stock from 486,027,500 shares immediately prior to the reclassification to 484,027,500 shares immediately after the reclassification. THIRD: The terms of the Class J Cumulative Convertible Preferred Stock (including the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends and other distributions and qualifications) as set by the Board of Directors are as follows: 1. NUMBER OF SHARES AND DESIGNATION. This class of Preferred Stock shall be designated as Class J Cumulative Convertible Preferred Stock, par value $.01 per share (the "Class J Preferred Stock") and Two Million (2,000,000) shall be the authorized number of shares of such Class J Preferred Stock constituting such class. 164 2. DEFINITIONS. For purposes of the Class J Preferred Stock, the following terms shall have the meanings indicated: "ABP Subscription Agreement" shall mean the Subscription Agreement dated as of November 6, 1998 between the Corporation and Stichting Pensioenfonds ABP. "Act" shall mean the Securities Act of 1933, as amended. "affiliate" of a Person means a Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Person specified. "Aggregate Value" shall mean, with respect to any block of Equity Stock, the sum of the products of (i) the number of shares of each class of Equity Stock within such block multiplied by (ii) the corresponding Market Price of one share of Equity Stock of such class. "Beneficial Ownership" shall mean, with respect to any Person, ownership of shares of Equity Stock equal to the sum of (i) the number of shares of Equity Stock directly owned by such Person, (ii) the number of shares of Equity Stock indirectly owned by such Person (if such Person is an "individual" as defined in Section 542(a)(2) of the Code) taking into account the constructive ownership rules of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code, and (iii) the number of shares of Equity Stock that such Person is deemed to beneficially own pursuant to Rule 13d-3 under the Exchange Act or that is attributed to such Person pursuant to Section 318 of the Code, as modified by Section 856(d)(5) of the Code, provided that when applying this definition of Beneficial Ownership to the Initial Holder, clause (iii) of this definition, and clause (a) (ii) of the definition of "Person" shall be disregarded. The terms "Beneficial Owner," "Beneficially Owns" and "Beneficially Owned" shall have the correlative meanings. "Board of Directors" shall mean the Board of Directors of the Corporation or any committee authorized by such Board of Directors to perform any of its responsibilities with respect to the Class J Preferred Stock; provided that, for purposes of paragraph (a) of Section 8 of this Article, the term "Board of Directors" shall not include any such committee. "Business Day" shall mean any day other than a Saturday, Sunday or a day on which state or federally chartered banking institutions in New York, New York are not required to be open. 2 165 "Charitable Beneficiary" shall mean one or more beneficiaries of the Trust as determined pursuant to Section 11.3 of this Article, each of which shall be an organization described in Section 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code. "Class E Articles Supplementary" shall have the meaning set forth in Section 7.3 of this Article. "Class J Preferred Stock" shall have the meaning set forth in Section 1 of this Article. "Closing Price" shall mean, when used with respect to a share of any Equity Stock and for any date, the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case, as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE or, if the Equity Stock is not listed or admitted to trading on the NYSE, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Equity Stock is listed or admitted to trading or, if the Equity Stock is not listed or admitted to trading on any national securities exchange, the last quoted price, or if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or, if such system is no longer in use, the principal other automated quotations system that may then be in use or, if the Equity Stock is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Equity Stock selected by the Board of Directors of the Corporation. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor thereto, as interpreted by any applicable regulations or other administrative pronouncements as in effect from time to time. "Common Stock" shall mean the Class A Common Stock, $.01 par value per share, of the Corporation, and the Class B Common Stock, $.01 par value per share, of the Corporation and such other shares of the Corporation's capital stock into which outstanding shares of such Class A Common Stock or Class B Common Stock shall be reclassified. "Conversion Price" shall mean the conversion price per share of Class A Common Stock for which each share of Class J Preferred Stock is convertible, 3 166 as such Conversion Price may be adjusted pursuant to Section 7 of this Article. The initial Conversion Price shall be $40 (equivalent to a conversion rate of 2.50 shares of Class A Common Stock for each share of Class J Preferred Stock). "Current Market Price" of a share of any Equity Stock shall mean the closing price, regular way on such day, or, if no sale takes place on such day, the average of the reported closing bid and asked prices, regular way, on such day, in either case as reported on the principal national securities exchange on which such securities are listed or admitted for trading, or, if such security is not quoted on any national securities exchange, on the NASDAQ National Market or if such security is not quoted on the NASDAQ National Market, the average of the closing bid and asked prices on such day in the over-the-counter market as reported by NASDAQ or, if bid and asked prices for each security on such day shall not have been reported through NASDAQ, the average of the bid and asked prices on such day as furnished by any New York Stock Exchange or National Association of Securities Dealers, Inc. member firm regularly making a market in such security selected for such purpose by the Chief Executive Officer of the Corporation or the Board of Directors of the Corporation or if any class or series of securities are not publicly traded, the fair value of the shares of such class as determined reasonably and in good faith by the Board of Directors of the Corporation. "distribution" shall have the meaning set forth in paragraph (a)(iii) of Section 7.3 of this Article. "Dividend Payment Date" shall mean, 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 9:00 a.m., New York City time, on the sixtieth day from and including the last day of such Dividend Period, then on such day; provided, that if any Dividend Payment Date falls on any day other than a Business Day, the dividend payment payable on such Dividend Payment Date shall be paid on the Business Day immediately following such Dividend Payment Date and no interest shall accrue on such dividend from such date to such Dividend Payment Date. "Dividend Periods" shall mean the Initial Dividend Period and each subsequent quarterly dividend period commencing on and including February 15, May 15, August 15 and November 15 of each year and ending on and including the day preceding the first day of the next succeeding Dividend Period. "Equity Stock" shall mean one or more shares of any class of capital stock of the Corporation. 4 167 "Excess Transfer" has the meaning set forth in Section 11.3(a) of this Article. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Fair Market Value" shall mean the average of the daily Current Market Prices of a share of Class A Common Stock during five (5) consecutive Trading Days selected by the Corporation commencing not more than twenty (20) Trading Days before, and ending not later than, the earlier of the day in question and the day before the "ex" date, if any, with respect to any issuance or distribution requiring such computation. The term "'ex' date," when used with respect to any issuance or distribution, means the first day on which the share of Class A Common Stock trades regular way, without the right to receive such issuance or distribution, on the exchange or in the market, as the case may be, used to determine that day's Current Market Price. "Issue Date" shall mean the date on which shares of Class J Preferred Stock are issued pursuant to the ABP Subscription Agreement and the OP Subscription Agreement. "Initial Dividend Period" shall mean the period commencing on and including the Issue Date and ending on and including November 14, 1998. "Initial Holder" shall mean Terry Considine. "Initial Holder Limit" shall mean a number of the Outstanding shares of Class J Preferred Stock of the Corporation having an Aggregate Value not in excess of the excess of (x) 15% of the Aggregate Value of all Outstanding shares of Equity Stock over (y) the Aggregate Value of all shares of Equity Stock other than Class J Preferred Stock that are Beneficially Owned by the Initial Holder. From the Issue Date, the secretary of the Corporation, or such other person as shall be designated by the Board of Directors, shall upon request make available to the representative(s) of the Initial Holder and the Board of Directors, a schedule that sets forth the then-current Initial Holder Limit applicable to the Initial Holder. "Internal Rate of Return" shall mean, as of any determination date, the effective discount rate under which the present value of the Inflows associated with an outstanding share of Class J Preferred Stock equals the Outflow on the Issue Date associated with such share. For purposes of calculation of Internal Rate of Return: (i) "Inflows" shall mean (a) all dividends (whether paid in cash, property or stock) that have been received on such share, (b) any other distributions that have been received on such share, and (c) as of the determination date, the average of the daily Current Market Prices of a share 5 168 of the Corporation's Class A Common Stock during the five most recent Trading Days, such average multiplied by the Liquidation Preference (excluding any accumulated, accrued and unpaid dividends) per share of Class J Preferred Stock, and such product divided by the Conversion Price. For purposes of calculating the amounts of any Inflows, all dividends or distributions received in property or stock shall be deemed to have a value equal to the fair market value of such dividends or distributions as of the date such dividend or distribution is received, as determined in good faith by the Board of Directors. All Inflows shall be deemed to have taken place on the date on which payment was actually received by the holder. (ii) "Outflow" shall mean $100 plus an amount equal to one one-millionth of any and all out-of-pocket costs of Stichting Pensioenfonds ABP relating to the acquisition of 1,000,000 shares of the Corporation's Class J Preferred Stock on the Issue Date. Outflow shall be deemed to have taken place on the Closing Date of the ABP Subscription Agreement and the OP Subscription Agreement, and (iii) Neither the fact of any transfer of Class J Preferred Stock nor the amount of any consideration received by the holder thereof or paid by any successor holder in connection with any transfer shall affect the calculation of Internal Rate of Return. Schedule A attached hereto shows the calculation of Internal Rate of Return at certain hypothetical dates of determination and given a certain hypothetical aggregate purchase price, certain hypothetical Inflows and certain hypothetical levels of the Current Market Price of the Corporation's Class A Common Stock. "Junior Stock" shall have the meaning set forth in paragraph (c) of Section 8 of this Article. "Liquidation Preference" shall have the meaning set forth in paragraph (a) of Section 4 of this Article. "Market Price" on any date shall mean, with respect to any share of Equity Stock, the Closing Price of a share of that class of Equity Stock on the Trading Day immediately preceding such date. "NYSE" shall mean the New York Stock Exchange, Inc. "OP Subscription Agreement" shall mean the Stock Purchase Agreement dated as of November 6, 1998 between the Corporation and AIMCO Properties, L.P. 6 169 "Outstanding" shall mean issued and outstanding shares of Equity Stock of the Corporation, provided that for purposes of the application of the Ownership Limit or the Initial Holder Limit to any Person, the term "Outstanding" shall be deemed to include the number of shares of Equity Stock that such Person alone, at that time, could acquire pursuant to any options or convertible securities. "Ownership Limit" shall mean, for any Person other than the Initial Holder, a number of the Outstanding shares of Class J Preferred Stock of the Corporation having an Aggregate Value not in excess of the excess of (x) 8.7% of the Aggregate Value of all Outstanding shares of Equity Stock over (y) the Aggregate Value of all shares of Equity Stock other than Class J Preferred Stock that are Beneficially Owned by the Person. "Ownership Restrictions" shall mean, collectively, the Ownership Limit as applied to Persons other than the Initial Holder and the Initial Holder Limit as applied to the Initial Holder. "Parity Stock" shall have the meaning set forth in paragraph (b) of Section 8 of this Article. "Person" shall mean (a) for purposes of Section 11 of this Article, (i) an individual, corporation, partnership, estate, trust (including a trust qualifying under Section 401(a) or 501(c) of the Code), association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, and (ii) also includes a group as that term is used for purposes of Section 13(d)(3) of the Exchange Act and (b) for purposes of the remaining Sections of this Article, any individual, firm, partnership, corporation or other entity and shall include any successor (by merger or otherwise) of such entity. "Prohibited Transferee" has the meaning set forth in Section 11.3(a) of this Article. "REIT" shall mean a "real estate investment trust" as defined in Section 856 of the Code. "Senior Stock" shall have the meaning set forth in paragraph (a) of Section 8 of this Article. "set apart for payment" shall be deemed to include, without any action other than the following, the recording by the Corporation in its accounting ledgers of any accounting or bookkeeping entry which indicates, pursuant to a declaration of dividends or other distribution by the Board of Directors, the allocation of funds to be so paid on any series or class of capital stock of the Corporation; provided, however, that if any funds for any class or series of 7 170 Junior Stock or any class or series of Parity Stock are placed in a separate account of the Corporation or delivered to a disbursing, paying or other similar agent, then "set apart for payment" with respect to the Class J Preferred Stock shall mean placing such funds in a separate account or delivering such funds to a disbursing, paying or other similar agent. "Trading Day" shall mean, when used with respect to the Closing Price of a share of any Equity Stock, (i) if the Equity Stock is listed or admitted to trading on the NYSE, a day on which the NYSE is open for the transaction of business, (ii) if the Equity Stock is not listed or admitted to trading on the NYSE but is listed or admitted to trading on another national securities exchange or automated quotation system, a day on which the principal national securities exchange or automated quotation system, as the case may be, on which the Equity Stock is listed or admitted to trading is open for the transaction of business, or (iii) if the Equity Stock is not listed or admitted to trading on any national securities exchange or automated quotation system, any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. "Transaction" shall have the meaning set forth in Section 7.3 of this Article. "Transfer" shall mean any sale, transfer, gift, assignment, devise or other disposition of a share of Class J Preferred Stock (including (i) the granting of an option or any series of such options or entering into any agreement for the sale, transfer or other disposition of Class J Preferred Stock or (ii) the sale, transfer, assignment or other disposition of any securities or rights convertible into or exchangeable for Class J Preferred Stock), whether voluntary or involuntary, whether of record or Beneficial Ownership, and whether by operation of law or otherwise (including, but not limited to, any transfer of an interest in other entities that results in a change in the Beneficial Ownership of shares of Class J Preferred Stock). The term "Transfers" and "Transferred" shall have correlative meanings. "Transfer Agent" means such transfer agent as may be designated by the Board of Directors or their designee as the transfer agent for the Class J Preferred Stock; provided, that if the Corporation has not designated a transfer agent then the Corporation shall act as the transfer agent for the Class J Preferred Stock. "Trust" shall mean the trust created pursuant to Section 11.3 of this Article. "Trustee" shall mean the Person unaffiliated with either the Corporation or the Prohibited Transferee that is appointed by the Corporation to serve as trustee of the Trust. 8 171 "Voting Preferred Stock" shall have the meaning set forth in Section 9 of this Article. 3. DIVIDENDS. (a) The holders of Class J Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors out of funds legally available for that purpose, cumulative dividends payable in cash in an amount per share of Class J Preferred Stock equal to (i) 7% per annum of the per share Liquidation Preference (as hereinafter defined) for the period beginning on and including the Issue Date and lasting until November 15, 1998; (ii) 8% per annum of the per share Liquidation Preference for the period beginning on and including November 15, 1998 and lasting until November 15, 1999; (iii) 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 (iv) 9.5% per annum of the per share Liquidation Preference thereafter. Such dividends shall be cumulative from the Issue Date, whether or not in any Dividend Period or Periods such dividends shall be declared or there shall be funds of the Corporation legally available for the payment of such dividends, and shall be payable quarterly in arrears on each Dividend Payment Date, commencing on November 15, 1998. Each such dividend shall be payable in arrears to the holders of record of the Class J Preferred Stock, as they appear on the stock records of the Corporation at the close of business on a record date fixed by the Board of Directors which shall not be more than 60 days prior to the applicable Dividend Payment Date and, within such 60 day period, shall be the same date as the record date for the regular quarterly dividend payable with respect to the 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 the Board of Directors may fix). Accumulated, accrued and unpaid dividends for any past Dividend Periods may be declared and paid at any time, without reference to any regular Dividend Payment Date, to holders of record on such date, which date shall not precede by more than 45 days the payment date thereof, as may be fixed by the Board of Directors. (b) Any dividend payable on the Class J Preferred Stock for any partial dividend period shall be computed ratably on the basis of twelve 30-day months and a 360-day year. Holders of Class J Preferred Stock shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on the Class J Preferred Stock. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Class J Preferred Stock that may be in arrears. (c) So long as any of the shares of Class J Preferred Stock are outstanding, except as described in the immediately following sentence, no dividends shall be declared or paid or set apart for payment by the Corporation and no other 9 172 distribution of cash or other property shall be declared or made, directly or indirectly, by the Corporation with respect to any shares of Parity Stock unless, in each case, dividends equal to the full amount of accumulated, accrued and unpaid dividends on all outstanding shares of Class J Preferred Stock have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof has been or contemporaneously is set apart for payment of such dividends on the Class J Preferred Stock for all Dividend Periods ending on or prior to the date such dividend or distribution is declared, paid, set apart for payment or made, as the case may be, with respect to such shares of Parity Stock. When dividends are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, all dividends declared upon the Class J Preferred Stock and all dividends declared upon any shares of Parity Stock shall be declared ratably in proportion to the respective amounts of dividends accumulated, accrued and unpaid on the Class J Preferred Stock and accumulated, accrued and unpaid on such Parity Stock. (d) So long as any of the shares of Class J Preferred Stock are outstanding, no dividends (other than dividends or distributions paid in shares of, or options, warrants or rights to subscribe for or purchase shares of, Junior Stock) shall be declared or paid or set apart for payment by the Corporation and no other distribution of cash or other property shall be declared or made, directly or indirectly, by the Corporation with respect to any shares of Junior Stock, nor shall any shares of Junior Stock be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Common Stock made for purposes of an employee incentive or benefit plan of the Corporation or any subsidiary) for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock), directly or indirectly, by the Corporation (except by conversion into or exchange for shares of, or options, warrants or rights to subscribe for or purchase shares of, Junior Stock), nor shall any other cash or other property otherwise be paid or distributed to or for the benefit of any holder of shares of Junior Stock in respect thereof, directly or indirectly, by the Corporation unless, in each case, dividends equal to the full amount of all accumulated, accrued and unpaid dividends on all outstanding shares of Class J Preferred Stock have been declared and paid, or such dividends have been declared and a sum sufficient for the payment thereof has been set apart for such payment, on all outstanding shares of Class J Preferred Stock for all Dividend Periods ending on or prior to the date such dividend or distribution is declared, paid, set apart for payment or made with respect to such shares of Junior Stock, or the date such shares of Junior Stock are redeemed, purchased or otherwise acquired or monies paid to or made available for any sinking fund for such redemption, or the date any such cash or other property is paid or distributed to or for the benefit of any holders of Junior Stock in respect thereof, as the case may be. Notwithstanding the provisions of this Section 3, the Corporation shall not be prohibited from (i) declaring or paying or setting apart for payment any dividend or distribution on any shares of Parity Stock or (ii) redeeming, purchasing 10 173 or otherwise acquiring any Parity Stock, in each case, if such declaration, payment, setting apart for payment, redemption, purchase or other acquisition is necessary in order to maintain the continued qualification of the Corporation as a REIT under Section 856 of the Code. 4. LIQUIDATION PREFERENCE. (a) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any payment or distribution by the Corporation (whether of capital, surplus or otherwise) shall be made to or set apart for the holders of Junior Stock, the holders of shares of Class J Preferred Stock shall be entitled to receive One Hundred Dollars ($100) per share of Class J Preferred Stock (the "Liquidation Preference"), plus an amount equal to all dividends (whether or not earned or declared) accumulated, accrued and unpaid thereon to the date of final distribution to such holders; but such holders shall not be entitled to any further payment. Until the holders of the Class J Preferred Stock have been paid the Liquidation Preference in full, plus an amount equal to all dividends (whether or not earned or declared) accumulated, accrued and unpaid thereon to the date of final distribution to such holders, no payment will be made to any holder of Junior Stock upon the liquidation, dissolution or winding up of the Corporation. If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation, or proceeds thereof, distributable among the holders of Class J Preferred Stock shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other shares of any class or series of Parity Stock, then such assets, or the proceeds thereof, shall be distributed among the holders of Class J Preferred Stock and any such other Parity Stock ratably in the same proportion as the respective amounts that would be payable on such Class J Preferred Stock and any such other Parity Stock if all amounts payable thereon were paid in full. For the purposes of this Section 4, (i) a consolidation or merger of the Corporation with one or more corporations, (ii) a sale or transfer of all or substantially all of the Corporation's assets, or (iii) a statutory share exchange shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Corporation. (b) Upon any liquidation, dissolution or winding up of the Corporation, after payment shall have been made in full to the holders of Class J Preferred Stock and any Parity Stock, as provided in this Section 4, any other series or class or classes of Junior Stock shall, subject to the respective terms thereof, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Class J Preferred Stock and any Parity Stock shall not be entitled to share therein. 11 174 5. REDEMPTION. The Class J Preferred Stock is not redeemable, other than as specified in Section 11.2 hereof. 6. STATUS OF REACQUIRED STOCK. All shares of Class J Preferred Stock which shall have been issued and reacquired in any manner by the Corporation (including without limitation shares of Class J Preferred Stock which have been surrendered for conversion into Class A Common Stock) shall be returned to the status of authorized, but unissued shares of Class J Preferred Stock. 7. CONVERSION. 7.1 CONVERSION AT HOLDERS' OPTION. At any time on or after the Issue Date, holders of shares of Class J Preferred Stock shall have the right to convert all or a portion of such shares into shares of Class A Common Stock, as follows: (a) Subject to and upon compliance with the provisions of this Section 7, a holder of shares of Class J Preferred Stock shall have the right, at such holder's option, at any time on or after the Issue Date to convert such shares, in whole or in part, into the number of fully paid and non-assessable shares of authorized but previously unissued shares of Class A Common Stock per each share of Class J Preferred Stock obtained by dividing the Liquidation Preference (excluding any accumulated accrued and unpaid dividends) per share of Class J Preferred Stock by the Conversion Price (as in effect at the time and on the date provided for in subparagraph (b)(iv) of this Section 7.1) and by surrendering such shares to be converted, such surrender to be made in the manner provided in paragraph (b) of this Section 7.1. (b) (i) In order to exercise the conversion right, the holder of each share of Class J Preferred Stock to be converted shall surrender the certificate representing such share, duly endorsed or assigned to the Corporation or in blank, at the office of the Transfer Agent, accompanied by written notice to the Corporation that the holder thereof elects to convert such share of Class J Preferred Stock. Unless the shares issuable on conversion are to be issued in the same name as the name in which such share of Class J Preferred Stock is registered, each share surrendered for conversion shall be accompanied by instruments of transfer, in form satisfactory to the Corporation, duly executed by the holder or such holder's duly authorized attorney and an amount sufficient to pay any transfer or similar tax (or 12 175 evidence reasonably satisfactory to the Corporation demonstrating that such taxes have been paid). (ii) A holder of shares of Class J Preferred Stock shall, as of the date of the conversion of such shares to shares of Class A Common Stock, be entitled to receive cash payment in respect of any dividends (whether or not earned or declared) that are accumulated, accrued and unpaid thereon as of the time of such conversion, provided, however, that payment in respect of any dividend on such shares that has been declared but for which the Dividend Payment Date has not yet been reached shall be payable as of such Dividend Payment Date. Except as provided above, the Corporation shall make no payment or allowance for unpaid dividends, whether or not in arrears, on converted shares. (iii) As promptly as practicable after the surrender of certificates for shares of Class J Preferred Stock as aforesaid, the Corporation shall issue and shall deliver at such office to such holder, or send on such holder's written order, a certificate or certificates for the number of full shares of Class A Common Stock issuable upon the conversion of such shares of Class J Preferred Stock in accordance with provisions of this Section 7, and any fractional interest in respect of a share of Class A Common Stock arising upon such conversion shall be settled as provided in paragraph (c) of this Section 7.1. (iv) Each conversion shall be deemed to have been effected immediately prior to the close of business on the date on which the certificates for shares of Class J Preferred Stock shall have been surrendered and such notice received by the Corporation as aforesaid, and the Person or Persons in whose name or names any certificate or certificates for shares of Class A Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares represented thereby at such time on such date and such conversion shall be at the Conversion Price in effect at such time on such date unless the stock transfer books of the Corporation shall be closed on that date, in which event such Person or Persons shall be deemed to have become such holder or holders of record at the close of business on the next succeeding day on which such stock transfer books are open, but such conversion shall be at the Conversion Price in effect on the date on which such shares shall have been surrendered and such notice received by the Corporation. If the dividend payment record date for the Class J Preferred Stock and Class A Common Stock do not coincide, and the preceding sentence does not operate to ensure that a holder of shares of Class J Preferred Stock whose shares are converted into Class A Common Stock does not receive dividends on both the shares of Class J Preferred Stock and the Class A Common Stock into which such shares are converted for the same Dividend Period, then notwithstanding anything herein to the contrary, it is the intent, and the Transfer Agent is authorized to ensure, that no conversion after the earlier of such record dates will be accepted until after the latter of such record dates. 13 176 (c) No fractional share of Class A Common Stock or scrip representing fractions of a share of Class A Common Stock shall be issued upon conversion of the shares of Class J Preferred Stock. Instead of any fractional interest in a share of Class A Common Stock that would otherwise be deliverable upon the conversion of shares of Class J Preferred Stock, the Corporation shall pay to the holder of such share an amount in cash based upon the Current Market Price of the Class A Common Stock on the Trading Day immediately preceding the date of conversion. If more than one share shall be surrendered for conversion at one time by the same holder, the number of full shares of Class A Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Class J Preferred Stock so surrendered. 7.2 MANDATORY CONVERSION. (a) The Corporation shall have the right to require that all or part of the issued and outstanding shares of Class J Preferred Stock be converted into shares of Class A Common Stock under the following circumstances: (i) At any time on or prior to the fourth anniversary of the Issue Date, in the event that the Internal Rate of Return exceeds 12.5%, the Corporation shall have the right to require the issued and outstanding shares of Class J Preferred Stock to be converted, in whole or in part, into shares of Class A Common Stock as set forth in this Section 7.2. (ii) At any time after the fourth anniversary of the Issue Date, so long as the average of the daily Current Market Prices of the issued and outstanding shares of Class A Common Stock during the five most recent Trading Days is equal to or greater than $40, the Corporation shall have the right to require the issued and outstanding shares of Class J Preferred Stock to be converted, in whole or in part, into shares of Class A Common Stock as set forth in this Section 7.2. (b) Subject to and upon compliance with the provisions of this Section 7, the Corporation shall have the right, under the circumstances set forth in (a) (i) or (ii) above, to convert such shares, in whole or in part, into the number of fully paid and non-assessable shares of authorized but previously unissued shares of Class A Common Stock per each share of Class J Preferred Stock obtained by dividing the Liquidation Preference (excluding any accumulated accrued and unpaid dividends) per share of Class J Preferred Stock by the Conversion Price (as in effect at the time and on the date provided for in subparagraph (c)(v) of this Section 7.2). (c) (i) In order to exercise the conversion right, the Corporation shall, promptly upon the occurrence of an event described in (a)(i) or (ii) above, and in no event later than the close of business on the next succeeding business day, give notice of such conversion to each holder of record of the shares to be converted. Such 14 177 notice shall be provided by facsimile or, if facsimile is not available, then by first class mail, postage prepaid, at such holder's address as the same appears on the stock records of the Corporation. Any notice which was transmitted or mailed in the manner herein provided shall be conclusively presumed to have been duly given on the date received by the holder. Each such notice shall state, as appropriate: (1) the date of conversion, which date may be any date within one business day following the date on which the notice is transmitted or mailed; (2) the number of shares of Class J Preferred Stock to be converted and, if fewer than all such shares held by such holder are to be converted, the number of such shares to be converted; (3) the event which gave rise to the conversion right; and (4) the then current Conversion Price. (ii) Upon receiving such notice of conversion, each such holder shall promptly surrender the certificates representing such shares of Class J Preferred Stock as are being converted on the conversion date, duly endorsed or assigned to the Corporation or in blank, at the office of the Transfer Agent; provided, however, that the failure to so surrender any such certificates shall not in any way affect the validity of the conversion of the underlying shares of Class J Preferred Stock into shares of Class A Common Stock. Unless the shares issuable on conversion are to be issued in the same name as the name in which such shares of Class J Preferred Stock are registered, each such share surrendered following conversion shall be accompanied by instruments of transfer, in form satisfactory to the Corporation, duly executed by the holder or such holder's duly authorized attorney and an amount sufficient to pay any transfer or similar tax (or evidence reasonably satisfactory to the Corporation demonstrating that such taxes have been paid). (iii) A holder of shares of Class J Preferred Stock shall, as of the date of the conversion of such shares to shares of Class A Common Stock, be entitled to receive cash payment in respect of any dividends (whether or not earned or declared) that are accumulated, accrued and unpaid thereon as of the time of such conversion, provided, however, that payment in respect of any dividend on such shares that has been declared but for which the Dividend Payment Date has not yet been reached shall be payable as of such Dividend Payment Date. Except as provided above, the Corporation shall make no payment or allowance for unpaid dividends, whether or not in arrears, on converted shares. (iv) As promptly as practicable after the surrender of certificates for shares of Class J Preferred Stock as aforesaid, and in any event no later than three business days after the date of such surrender, the Corporation shall issue and shall deliver at such office to such holder, or send on such holder's written order, a certificate or certificates for the number of full shares of Class A Common Stock issuable upon the conversion of such shares of Class J Preferred Stock in accordance with the provisions of this Section 7.2, and any fractional interest in respect of a share of Class A Common Stock arising upon such conversion shall be settled as provided in paragraph (d) of this Section 7.2. 15 178 (v) Each conversion shall be deemed to have been effected immediately prior to the close of business on the date identified as the conversion date in the notice of conversion sent by the Corporation as aforesaid, and the Person or Persons in whose name or names any certificate or certificates for shares of Class A Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares represented thereby at such time on such date and such conversion shall be at the Conversion Price in effect at such time on such date unless the stock transfer books of the Corporation shall be closed on that date, in which event such Person or Persons shall be deemed to have become such holder or holders of record at the close of business on the next succeeding day on which such stock transfer books are open, but such conversion shall be at the Conversion Price in effect on the date identified as the conversion date in the notice of conversion sent by the Corporation as aforesaid. If the dividend payment record dates for the Class J Preferred Stock and Class A Common Stock do not coincide, and the preceding sentence does not operate to ensure that a holder of shares of Class J Preferred Stock whose shares are converted into Class A Common Stock does not receive dividends on both the shares of Class J Preferred Stock and the Class A Common Stock into which such shares are converted for the same Dividend Period, then notwithstanding anything herein to the contrary, it is the intent, and the Transfer Agent is authorized to ensure, that no conversion after the earlier of such record dates will be accepted until after the latter of such record dates. (d) No fractional share of Class A Common Stock or scrip representing fractions of a share of Class A Common Stock shall be issued upon conversion of the shares of Class J Preferred Stock. Instead of any fractional interest in a share of Class A Common Stock that would otherwise be deliverable upon the conversion of shares of Class J Preferred Stock, the Corporation shall pay to the holder of such share an amount of cash based upon the Current Market Price of the Class A Common Stock on the Trading Day immediately preceding the date of conversion. If more than one of any holder's shares shall be converted at one time, the number of full shares of Class A Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Class J Preferred Stock so surrendered. 7.3 ADJUSTMENTS TO CONVERSION PRICE (a) The Conversion Price shall be adjusted from time to time as follows: (i) If the Corporation shall after the Issue Date (A) pay a dividend or make a distribution on its capital stock in shares of Class A Common Stock, (B) subdivide its outstanding Class A Common Stock into a greater number of shares, (C) combine its outstanding Class A Common Stock into a smaller number of shares or (D) issue any shares of capital stock by reclassification of its outstanding Class A Common Stock, the Conversion Price in effect at the opening of business on 16 179 the day following the date fixed for the determination of stockholders entitled to receive such dividend or distribution or at the opening of business on the day following the day on which such subdivision, combination or reclassification becomes effective, as the case may be, shall be adjusted so that the holder of any share of Class J Preferred Stock thereafter converted shall be entitled to receive the number of shares of Class A Common Stock (or fraction of a share of Class A Common Stock) that such holder would have owned or have been entitled to receive after the happening of any of the events described above had such share of Class J Preferred Stock been converted immediately prior to the record date in the case of a dividend or distribution or the effective date in the case of a subdivision, combination or reclassification. An adjustment made pursuant to this paragraph (a)(i) of this Section 7.3 shall become effective immediately after the opening of business on the day next following the record date (except as provided in paragraph (e) below) in the case of a dividend or distribution and shall become effective immediately after the opening of business on the day next following the effective date in the case of a subdivision, combination or reclassification. (ii) If the Corporation shall, after the Issue Date, issue 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 in this paragraph (a)(ii) of this Section 7.3) to subscribe for 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, then the Conversion Price in effect at the opening of business on the day next following such record date shall be adjusted to equal the price determined by multiplying (A) the Conversion Price in effect immediately prior to the opening of business on the day following the date fixed for such determination by (B) a fraction, the numerator of which shall be the sum of (X) the number of shares of Class A Common Stock outstanding on the close of business on the date fixed for such determination and (Y) the number of shares that could be purchased at such Fair Market Value from the aggregate proceeds to the Corporation from the exercise of such rights, options or warrants for Class A Common Stock, and the denominator of which shall be the sum of (XX) the number of shares of Class A Common Stock outstanding on the close of business on the date fixed for such determination and (YY) the number of additional shares of Class A Common Stock offered for subscription or purchase pursuant to such rights, options or warrants. Such adjustment shall become effective immediately after the opening of business on the day next following such record date (except as provided in paragraph (e) below). In determining whether any rights, options or warrants entitle the holders of Class A Common Stock to subscribe for or purchase Class A Common Stock at less than such Fair Market Value, there shall be taken into account any consideration received by the Corporation upon issuance and upon exercise of such rights, options or warrants, the value of such consideration, if other than cash, to be determined in good faith by the Board of Directors. 17 180 (iii) If the Corporation shall after the Issue Date make 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 referred to in paragraph (a)(ii) of this Section 7.3)) (each of the foregoing being referred to herein as a "distribution"), then the Conversion Price in effect at the opening of business on the next day following the record date for determination of stockholders entitled to receive such distribution shall be adjusted to equal the price determined by multiplying (A) the Conversion Price in effect immediately prior to the opening of business on the day following the record date by (B) a fraction, the numerator of which shall be the difference between (X) the number of shares of Class A Common Stock outstanding on the close of business on the record date and (Y) the number of shares determined by dividing (aa) the aggregate value of the property being distributed by (bb) the Fair Market Value per share of Class A Common Stock on the record date, and the denominator of which shall be the number of shares of Class A Common Stock outstanding on the close of business on the record date. Such adjustment shall become effective immediately after the opening of business on the day next following such record date (except as provided below). The value of the property being distributed shall be as determined in good faith by the Board of Directors; provided, however, if the property being distributed is a publicly traded security, its value shall be calculated in accordance with the procedure for calculating the Fair Market Value of a share of Class A Common Stock (calculated for a period of five consecutive Trading Days commencing on the twentieth Trading Day after the distribution). Neither the issuance by the Corporation of rights, options or warrants to subscribe for or purchase securities of the Corporation nor the exercise thereof shall be deemed a distribution under this paragraph. (iv) No adjustment in the Conversion Price shall be required unless such adjustment would require a cumulative increase or decrease of at least 1% in such price: provided, however, that any adjustments that by reason of this paragraph (a)(iv) are not required to be made shall be carried forward and taken into account in any subsequent adjustment until made; and provided, further, that any adjustment shall be required and made in accordance with the provisions of this Section 7.3 (other than this paragraph (a)(iv)) 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. Notwithstanding any other provisions of this Section 7, the Corporation shall not be required to make any adjustment of the Conversion Price for the issuance of (A) any shares of Class A Common Stock pursuant to any plan providing for the reinvestment of dividends or interest payable on securities of the Corporation and the investment of optional amounts in shares of 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 purchases or other stock-based plan maintained by the Corporation. All calculations under this Section 7 shall be made to the nearest cent ($.005 being rounded upward) or to the nearest one-tenth of a share (with .05 of a share being rounded upward), as the case may be. Anything in this paragraph (a) of this Section 7 to the contrary notwithstanding, the Corporation 18 181 shall be entitled, to the extent permitted by law, to make such reductions in the Conversion Price, in addition to those required by this paragraph (a), as it in its discretion shall determine to be advisable in order that any stock dividends, subdivision of shares, reclassification or combination of shares, distribution of rights or warrants to purchase stock or securities, or a distribution of other assets (other than cash dividends) hereafter made by the Corporation to its stockholders shall not be taxable, or if that is not possible, to diminish any income taxes that are otherwise payable because of such event. (b) If the Corporation shall be a party to any transaction (including with limitation a merger, consolidation, statutory share exchange, sale of all or substantially all of the Corporation's assets or recapitalization of the Class A Common Stock, but excluding any transaction as to which paragraph (a)(i) of this Section 7.3 applies) (each of the foregoing being referred to herein as a "Transaction"), in each case as a result of which shares of Class A Common Stock shall be converted into the right to receive stock, securities or other property (including cash or any combination thereof), each share of Class J Preferred Stock which is not converted into the right to receive stock, securities or other property in connection with such Transaction shall thereupon be convertible into the kind and amount of shares of stock, securities and other property (including cash or any combination thereof) receivable upon such consummation by a holder of that number of shares of Class A Common Stock into which one share of Class J Preferred Stock was convertible immediately prior to such Transaction. The Corporation shall not be a party to any Transaction unless the terms of such Transaction are consistent with the provisions of this paragraph (b), and it shall not consent or agree to the occurrence of any Transaction until the Corporation has entered into an agreement with the successor or purchasing entity, as the case may be, for the benefit of the holders of the Class J Preferred Stock that will contain provisions enabling the holders of the Class J 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 apply to successive Transactions: (c) If: (i) the Corporation shall declare a dividend (or any other distribution) on the Class A Common Stock (other than cash dividends and cash distributions); or (ii) the Corporation shall authorize 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 shall be any reclassification of the outstanding Class A Common Stock or any consolidation or merger to which the Corporation is a party and for which approval of any stockholders of the Corporation is required, or a statutory share exchange, or the sale or transfer of all or substantially all of the assets of the Corporation as an entirety; or 19 182 (iv) there shall occur the voluntary or involuntary liquidation, dissolution or winding up of the Corporation, then the Corporation shall cause to be filed with the Transfer Agent and shall cause to be mailed to each holder of shares of Class J Preferred Stock at such holder's address as shown on the stock records of the Corporation, as promptly as possible, a notice stating (A) the record date for the payment of such dividend, distribution or rights or warrants, or, if a record date is not established, the date as of which the holders of 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 shall 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. Failure to give or receive such notice or any defect therein shall not affect the legality or validity of the proceedings described in this Section 7. (d) Whenever the Conversion Price is adjusted as herein provided, the Corporation shall promptly file with the Transfer Agent an officer's certificate setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment which certificate shall be conclusive evidence of the correctness of such adjustment absent manifest error. Promptly after delivery of such certificate, the Corporation shall prepare a notice of such adjustment of the Conversion Price setting forth the adjusted Conversion Price and the effective date such adjustment becomes effective and shall mail such notice of such adjustment of the Conversion Price to each holder of shares of Class J Preferred Stock at such holder's address as shown on the stock record of the Corporation. (e) In any case in which paragraph (a) of this Section 7.3 provides that an adjustment shall become effective on the day next following the record date for an event, the Corporation may defer until the occurrence of such event (A) issuing to the holder of any share of Class J Preferred Stock converted after such record date and before the occurrence of such event the additional Class A Common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the Class A Common Stock issuable upon such conversion before giving effect to such adjustment and (B) paying to such holder any amount of cash in lieu of any fraction pursuant to Section 7.2(d) or Section 7.1(c). (f) There shall be no adjustment of the Conversion Price in case of the issuance of any capital stock of the Corporation except as specifically set forth in 20 183 this Section 7. In addition, notwithstanding any other provision contained in this Section 7, there shall be no adjustment of the Conversion Price upon the payment of any cash dividends or distributions on any capital stock of the Corporation, including, without limitation, the Special Dividend (as such term is defined in the Class E Articles Supplementary) on the Corporation's Class E Preferred Stock or upon the automatic conversion of the shares of such Preferred Stock into shares of Class A Common Stock, as provided in the Class E Articles Supplementary. (g) If the Corporation shall take any action affecting the Class A Common Stock, other than action described in this Section 7, that in the opinion of the Board of Directors would materially adversely affect the conversion rights of the holders of Class J Preferred Stock, the Conversion Price for the Class J Preferred Stock may be adjusted, to the extent permitted by law in such manner, if any, and at such time as the Board of Directors, in its sole discretion, may determine to be equitable under the circumstances. (h) The Corporation shall at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Class A Common Stock solely for the purpose of effecting conversion of the Class J Preferred Stock, the full number of shares of Class A Common Stock deliverable upon the conversion of all outstanding shares of Class J Preferred Stock not theretofore converted into Class A Common Stock. For purposes of this paragraph (h), the number of shares of Class A Common Stock that shall be deliverable upon the conversion of all outstanding shares of Class J Preferred Stock shall be computed as if at the time of computation all such outstanding shares were held by a single holder (and without regard to the Ownership Limit). The Corporation covenants that any shares of Class A Common Stock issued upon conversion of the shares of Class J Preferred Stock shall be validly issued, fully paid and nonassessable. The Corporation shall use its best efforts to list the shares of Class A Common Stock required to be delivered upon conversion of the shares of Class J Preferred Stock, prior to such delivery, upon each national securities exchange, if any, upon which the outstanding shares of Class A Common Stock are listed at the time of such delivery. (i) The Corporation will pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Class A Common Stock or other securities or property on conversion of shares of Class J Preferred Stock pursuant hereto; provided, however, that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issue or delivery of shares of Class A Common Stock or other securities or property in a name other than that of the holder of the shares of Class J Preferred Stock to be converted, and no such issue or delivery shall be made unless 21 184 and until the Person requesting such issue or delivery has paid to the Corporation the amount of any such tax or established, to the reasonable satisfaction of the Corporation, that such tax has been paid. (j) In addition to any other adjustment required hereby, to the extent permitted by law, the Corporation from time to time may decrease the Conversion Price by any amount, permanently or for a period of at least twenty Business Days, if the decrease is irrevocable during the period. (k) Notwithstanding anything to the contrary contained in this Section 7, conversion of Class J Preferred Stock pursuant to this Section 7 shall be permitted only to the extent that such conversion would not result in a violation of the Ownership Restrictions (as defined in the Charter), after taking into account any waiver of such limitation granted to any holder of the shares of Class J Preferred Stock. 8. RANKING. Any class or series of capital stock of the Corporation shall be deemed to rank: (a) prior or senior to the Class J Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, if the holders of such class or series shall be entitled to the receipt of dividends and of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Class J Preferred Stock ("Senior Stock"); (b) on a parity with the Class J Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, whether or not the dividend rates, dividend payment dates or liquidation prices per share thereof be different from those of the Class J Preferred Stock, if (i) such capital stock is Class B Cumulative Convertible Preferred Stock, Class C Cumulative Preferred Stock, Class D Cumulative Preferred Stock, Class G Cumulative Preferred Stock, or Class H Cumulative Preferred Stock of the Corporation, or (ii) the holders of such class of stock or series and the Class J Preferred Stock shall be entitled to the receipt of dividends and of amounts distributable upon liquidation, dissolution or winding up in proportion to their respective amounts of accrued and unpaid dividends per share or liquidation preferences, without preference or priority of one over the other (the capital stock referred to in clauses (i) and (ii) of this paragraph being hereinafter referred to, collectively, as "Parity Stock"); and (c) junior to the Class J Preferred Stock, as to the payment of dividends and as to the distribution of assets upon liquidation, dissolution or winding up, if (i) such capital stock or series shall be Common Stock, (ii) such capital stock is Class E Cumulative Convertible Preferred Stock or (iii) the holders of Class J 22 185 Preferred Stock shall be entitled to receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of shares of such class or series (the capital stock referred to in clauses (i), (ii) and (iii) of this paragraph being hereinafter referred to, collectively, as "Junior Stock"). 9. VOTING. (a) If and whenever six quarterly dividends (whether or not consecutive) payable on the Class J Preferred Stock or any series or class of Parity Stock shall be in arrears (which shall, with respect to any such quarterly dividend, mean that any such dividend has not been paid in full), whether or not earned or declared, the number of directors then constituting the Board of Directors shall be increased by two (if not already increased by reason of similar types of provisions with respect to shares of Parity Stock of any other class or series which is entitled to similar voting rights (the "Voting Preferred Stock")) and the holders of shares of Class J Preferred Stock, together with the holders of shares of all other Voting Preferred Stock then entitled to exercise similar voting rights, voting as a single class regardless of series, shall be entitled to elect the two additional directors to serve on the Board of Directors at any annual meeting of stockholders or special meeting held in place thereof, or at a special meeting of the holders of the Class J Preferred Stock and the Voting Preferred Stock called as hereinafter provided. Whenever all arrears in dividends on the Class J Preferred Stock and the Voting Preferred Stock then outstanding shall have been paid and dividends thereon for the current quarterly dividend period shall have been declared and paid, or declared and set apart for payment, then the right of the holders of the Class J Preferred Stock and the Voting Preferred Stock to elect such additional two directors shall cease (but subject always to the same provision for the vesting of such voting rights in the case of any similar future arrearages), and the terms of office of all persons elected as directors by the holders of the Class J Preferred Stock and the Voting Preferred Stock shall forthwith terminate and the number of directors constituting the Board of Directors shall be reduced accordingly. At any time after such voting power shall have been so vested in the holders of Class J Preferred Stock and the Voting Preferred Stock, if applicable, the Secretary of the Corporation may, and upon the written request of any holder of Class J Preferred Stock (addressed to the Secretary at the principal office of the Corporation) shall, call a special meeting of the holders of the Class J Preferred Stock and of the Voting Preferred Stock for the election of the two directors to be elected by them as herein provided, such call to be made by notice similar to that provided in the Bylaws of the Corporation for a special meeting of the stockholders or as required by law. If any such special meeting required to be called as above provided shall not be called by the Secretary within 20 days after receipt of any such request, then any holder of Class J Preferred Stock may call such meeting, upon the notice above provided, and for that purpose shall have access to the stock books of the Corporation. The directors elected at any such special meeting shall hold office until the next annual meeting of the stockholders or special meeting held in lieu 23 186 thereof if such office shall not have previously terminated as above provided. If any vacancy shall occur among the directors elected by the holders of the Class J Preferred Stock and the Voting Preferred Stock, a successor shall be elected by the Board of Directors, upon the nomination of the then-remaining director elected by the holders of the Class J Preferred Stock and the Voting Preferred Stock or the successor of such remaining director, to serve until the next annual meeting of the stockholders or special meeting held in place thereof if such office shall not have previously terminated as provided above. (b) So long as any shares of Class J Preferred Stock are outstand ing, in addition to any other vote or consent of stockholders required by law or by the Charter of the Corporation, the affirmative vote of at least 66-2/3% of the votes entitled to be cast by the holders of the Class J Preferred Stock voting as a single class with the holders of all other classes or series of Parity Stock entitled to vote on such matters, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating: (i) Any amendment, alteration or repeal of any of the provisions of, or the addition of any provision to, these Articles Supplementary, the Charter or the By-Laws of the Corporation that materially adversely affects the voting powers, rights or preferences of the holders of the Class J Preferred Stock; provided, however, that the amendment of or supplement to the provisions of the Charter so as to authorize or create, or to increase or decrease the authorized amount of, or to issue any Junior Stock, Class J Preferred Stock or any shares of any class of Parity Stock shall not be deemed to materially adversely affect the voting powers, rights or preferences of the holders of Class J Preferred Stock; or (ii) The authorization, creation of, increase in the authorized amount of, or issuance of any shares of any class or series of Senior Stock or any security convertible into shares of any class or series of Senior Stock (whether or not such class or series of Senior Stock is currently authorized). For purposes of the foregoing provisions and all other voting rights under these Articles Supplementary, each share of Class J Preferred Stock shall have one (1) vote per share, except that when any other class or series of preferred stock of the Corporation shall have the right to vote with the Class J Preferred Stock as a single class on any matter, then the Class J Preferred Stock and such other class or series shall have with respect to such matters one quarter of one (.25) vote per $25 of stated liquidation preference. Except as otherwise required by applicable law or as set forth herein or in the Charter, the Class J Preferred Stock shall not have any relative, participating, optional or other special voting rights and powers other than as set forth herein, and the consent of the holders thereof shall not be required for the taking of any corporate action. 24 187 10. RECORD HOLDERS. The Corporation and the Transfer Agent may deem and treat the record holder of any share of Class J Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Corporation nor the Transfer Agent shall be affected by any notice to the contrary. 11. OWNERSHIP AND TRANSFERS. 11.1 RESTRICTIONS ON OWNERSHIP AND TRANSFERS. (a) Limitation on Beneficial Ownership. Except as provided in Section 11.8, from and after the Issue Date, no Person (other than the Initial Holder) shall Beneficially Own shares of Class J Preferred Stock in excess of the Ownership Limit and the Initial Holder shall not Beneficially Own shares of Class J Preferred Stock in excess of the Initial Holder Limit. (b) Transfers in Excess of Ownership Limit. Except as provided in Section 11.8, from and after the Issue Date (and subject to Section 11.12), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system) that, if effective, would result in any Person (other than the Initial Holder) Beneficially Owning shares of Class J Preferred Stock in excess of the Ownership Limit shall be void ab initio as to the Transfer of such shares of Class J Preferred Stock that would be otherwise Beneficially Owned by such Person in excess of the Ownership Limit, and the intended transferee shall acquire no rights in such shares of Class J Preferred Stock. (c) Transfers in Excess of Initial Holder Limit. Except as provided in Section 11.8, from and after the Issue Date (and subject to Section 11.12), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system) that, if effective, would result in the Initial Holder Beneficially Owning shares of Class J Preferred Stock in excess of the Initial Holder Limit shall be void ab initio as to the Transfer of such shares of Class J Preferred Stock that would be otherwise Beneficially Owned by the Initial Holder in excess of the Initial Holder limit, and the Initial Holder shall acquire no rights in such shares of Class J Preferred Stock. (d) Transfers Resulting in "Closely Held" Status. From and after the Issue Date, any Transfer that, if effective would result in the Corporation being "closely held" within the meaning of Section 856(h) of the Code, or would otherwise result in the Corporation failing to qualify as a REIT (including, without limitation, a Transfer or other event that would result in the Corporation owning (directly or constructively) an interest in a tenant that is described in Section 25 188 856(d)(2)(B) of the Code if the income derived by the Corporation from such tenant would cause the Corporation to fail to satisfy any of the gross income requirements of Section 856(c) of the Code) shall be void ab initio as to the Transfer of shares of Class J Preferred Stock that would cause the Corporation (i) to be "closely held" within the meaning of Section 856(h) of the Code or (ii) otherwise fail to qualify as a REIT, as the case may be, and the intended transferee shall acquire no rights in such shares of Class J Preferred Stock. (e) Severability on Void Transactions. A Transfer of a share of Class J Preferred Stock that is null and void under Sections 11.1(b), (c) or (d) of this Article because it would, if effective, result in (i) the ownership of Class J Preferred Stock in excess of the Initial Holder Limit or the Ownership Limit, (ii) the Corporation being "closely held" within the meaning of Section 856(h) of the Code or (iii) the Corporation otherwise failing to qualify as a REIT, shall not adversely affect the validity of the Transfer of any other share of Class J Preferred Stock in the same or any other related transaction. 11.2 REMEDIES FOR BREACH. If the Board of Directors or a committee thereof shall at any time determine in good faith that a Transfer or other event has taken place in violation of Section 11.1 of this Article or that a Person intends to acquire or has attempted to acquire Beneficial Ownership of any shares of Class J Preferred Stock in violation of Section 11.1 of this Article (whether or not such violation is intended), the Board of Directors or a committee thereof shall be empowered to take any action as it deems advisable to refuse to give effect to or to prevent such Transfer or other event, including, but not limited to, refusing to give effect to such Transfer or other event on the books of the Corporation, causing the Corporation to redeem such shares at the then Current Market Price and upon such terms and conditions as may be specified by the Board of Directors in its sole discretion (including, but not limited to, by means of the issuance of long-term indebtedness for the purpose of such redemption), demanding the repayment of any distributions received in respect of shares of Class J Preferred Stock acquired in violation of Section 11.1 of this Article or instituting proceedings to enjoin such Transfer or to rescind such Transfer or attempted Transfer; provided, however, that any Transfers or attempted Transfers (or, in the case of events other than a Transfer, Beneficial Ownership) in violation of Section 11.1 of this Article, regardless of any action (or non-action) by the Board of Directors or such committee, (a) shall be void ab initio or (b) shall automatically result in the transfer described in Section 11.3 of this Article; provided, further, that the provisions of this Section 11.2 shall be subject to the provisions of Section 11.12 of this Article; provided, further, that neither the Board of Directors nor any committee thereof may exercise such authority in a manner that interferes with any ownership or transfer of Class J Preferred Stock that is expressly authorized pursuant to Section 11.8(c) of this Article. 26 189 11.3 TRANSFER IN TRUST. (a) Establishment of Trust. If, notwithstanding the other provisions contained in this Article, at any time after the Issue Date there is a purported Transfer (an "Excess Transfer") (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system) or other change in the capital structure of the Corporation (including, but not limited to, any redemption of Equity Stock) or other event (including, but not limited to, any acquisition of any share of Equity Stock) such that (a) any Person (other than the Initial Holder) would Beneficially Own shares of Class J Preferred Stock in excess of the Ownership Limit, or (b) the Initial Holder would Beneficially Own shares of Class J Preferred Stock in excess of the Initial Holder Limit (in either such event, the Person or Initial Holder that would Beneficially Own shares of Class J Preferred Stock in excess of the Ownership Limit or the Initial Holder Limit, respectively, is referred to as a "Prohibited Transferee"), then, except as otherwise provided in Section 11.8 of this Article, such shares of Class J Preferred Stock in excess of the Ownership Limit or the Initial Holder Limit, as the case may be, (rounded up to the nearest whole share) shall be automatically transferred to a Trustee in his capacity as trustee of a Trust for the exclusive benefit of one or more Charitable Beneficiaries. Such transfer to the Trustee shall be deemed to be effective as of the close of business on the Business Day prior to the Excess Transfer, change in capital structure or another event giving rise to a potential violation of the Ownership Limit or the Initial Holder Limit. (b) Appointment of Trustee. The Trustee shall be appointed by the Corporation and shall be a Person unaffiliated with either the Corporation or any Prohibited Transferee. The Trustee may be an individual or a bank or trust company duly licensed to conduct a trust business. (c) Status of Shares Held by the Trustee. Shares of Class J Preferred Stock held by the Trustee shall be issued and outstanding shares of capital stock of the Corporation. Except to the extent provided in Section 11.3(e), the Prohibited Transferee shall have no rights in the Class J Preferred Stock held by the Trustee, and the Prohibited Transferee shall not benefit economically from ownership of any shares held in trust by the Trustee, shall have no rights to dividends and shall not possess any rights to vote or other rights attributable to the shares held in the Trust. (d) Dividend and Voting Rights. The Trustee shall have all voting rights and rights to dividends with respect to shares of Class J Preferred Stock held in the Trust, which rights shall be exercised for the benefit of the Charitable Beneficiary. Any dividend or distribution paid prior to the discovery by the Corporation that the shares of Class J Preferred Stock have been transferred to the Trustee shall be repaid to the Corporation upon demand, and any dividend or distribution declared but unpaid shall be rescinded as void ab initio with respect to such shares of Class J Preferred Stock. Any dividends or distributions so disgorged or rescinded shall be paid over to the Trustee and held in trust for the Charitable 27 190 Beneficiary. Any vote cast by a Prohibited Transferee prior to the discovery by the Corporation that the shares of Class J Preferred Stock have been transferred to the Trustee will be rescinded as void ab initio and shall be recast in accordance with the desires of the Trustee acting for the benefit of the Charitable Beneficiary. The owner of the shares at the time of the Excess Transfer, change in capital structure or other event giving rise to a potential violation of the Ownership Limit or the Initial Holder Limit shall be deemed to have given an irrevocable proxy to the Trustee to vote the shares of Class J Preferred Stock for the benefit of the Charitable Beneficiary. (e) Restrictions on Transfer. The Trustee of the Trust may sell the shares held in the Trust to a Person, designated by the Trustee, whose ownership of the shares will not violate the Ownership Restrictions. If such a sale is made, the interest of the Charitable Beneficiary shall terminate and proceeds of the sale shall be payable to the Prohibited Transferee and to the Charitable Beneficiary as provided in this Section 11.3(e). The Prohibited Transferee shall receive the lesser of (1) the price paid by the Prohibited Transferee for the shares or, if the Prohibited Transferee did not give value for the shares (through a gift, devise or other transaction), the Market Price of the shares on the day of the event causing the shares to be held in the Trust and (2) the price per share received by the Trustee from the sale or other disposition of the shares held in the Trust. Any proceeds in excess of the amount payable to the Prohibited Transferee shall be payable to the Charitable Beneficiary. If any of the transfer restrictions set forth in this Section 11.3(e) or any application thereof is determined in a final judgment to be void, invalid or unenforceable by any court having jurisdiction over the issue, the Prohibited Transferee may be deemed, at the option of the Corporation, to have acted as the agent of the Corporation in acquiring the Class J Preferred Stock as to which such restrictions would, by their terms, apply, and to hold such Class J Preferred Stock on behalf of the Corporation. (f) Purchase Right in Stock Transferred to the Trustee. Shares of Class J Preferred Stock transferred to the Trustee shall be deemed to have been offered for sale to the Corporation, or its designee, at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in such transfer to the Trust (or, in the case of a devise or gift, the Market Price at the time of such devise or gift) and (ii) the Market Price on the date the Corporation, or its designee, accepts such offer. The Corporation shall have the right to accept such offer for a period of 90 days after the later of (i) the date of the Excess Transfer or other event resulting in a transfer to the Trust and (ii) the date that the Board of Directors determines in good faith that an Excess Transfer or other event occurred. (g) Designation of Charitable Beneficiaries. By written notice to the Trustee, the Corporation shall designate one or more nonprofit organizations to be the Charitable Beneficiary of the interest in the Trust relating to such Prohibited Transferee if (i) the shares of Class J Preferred Stock held in the Trust would not violate the Ownership Restrictions in the hands of such Charitable Beneficiary and (ii) 28 191 each Charitable Beneficiary is an organization described in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code. 11.4 NOTICE OF RESTRICTED TRANSFER. Any Person that acquires or attempts to acquire shares of Class J Preferred Stock in violation of Section 11.1 of this Article, or any Person that is a Prohibited Transferee such that stock is transferred to the Trustee under Section 11.3 of this Article, shall immediately give written notice to the Corporation of such event and shall provide to the Corporation such other information as the Corporation may request in order to determine the effect, if any, of such Transfer or attempted Transfer or other event on the Corporation's status as a REIT. Failure to give such notice shall not limit the rights and remedies of the Board of Directors provided herein in any way. 11.5 OWNERS REQUIRED TO PROVIDE INFORMATION. From and after the Issue Date certain record and Beneficial Owners and transferees of shares of Class J Preferred Stock will be required to provide certain information as set out below. (a) Annual Disclosure. Every record and Beneficial Owner of more than 5% (or such other percentage between 0.5% and 5%, as provided in the applicable regulations adopted under the Code) of the number of Outstanding shares of Class J Preferred Stock shall, within 30 days after January 1 of each year, give written notice to the Corporation stating the name and address of such record or Beneficial Owner, the number of shares of Class J Preferred Stock Beneficially Owned, and a full description of how such shares are held. Each such record or Beneficial Owner of Class J Preferred Stock shall, upon demand by the Corporation, disclose to the Corporation in writing such additional information with respect to the Beneficial Ownership of the Class J Preferred Stock as the Board of Directors, in its sole discretion, deems appropriate or necessary to (i) comply with the provisions of the Code regarding the qualification of the Corporation as a REIT under the Code and (ii) ensure compliance with the Ownership Limit or the Initial Holder Limit, as applicable. Each stockholder of record, including without limitation any Person that holds shares of Class J Preferred Stock on behalf of a Beneficial Owner, shall take all reasonable steps to obtain the written notice described in this Section 11.5 from the Beneficial Owner. (b) Disclosure at the Request of the Corporation. Any Person that is a Beneficial Owner of shares of Class J Preferred Stock and any Person (including the stockholder of record) that is holding shares of Class J Preferred Stock for a Beneficial Owner, and any proposed transferee of shares, shall provide such information as the Corporation, in its sole discretion, may request in order to determine the Corporation's status as a REIT, to comply with the requirements of any taxing authority or other governmental agency, to determine any such compliance or to ensure compliance with the Ownership Limit and the Initial Holder Limit, and shall provide a statement or affidavit to the Corporation setting forth the number of shares of Class J Preferred Stock already Beneficially Owned by such stockholder or 29 192 proposed transferee and any related persons specified, which statement or affidavit shall be in the form prescribed by the Corporation for that purpose. 11.6 REMEDIES NOT LIMITED. Nothing contained in this Article shall limit the authority of the Board of Directors to take such other action as it deems necessary or advisable (subject to the provisions of Section 11.12 of this Article) (i) to protect the Corporation and the interests of its stockholders in the preservation of the Corporation's status as a REIT and (ii) to insure compliance with the Ownership Limit and the Initial Holder Limit. 11.7 AMBIGUITY. In the case of an ambiguity in the application of any of the provisions of Section 11 of this Article, or in the case of an ambiguity in any definition contained in Section 11 of this Article, the Board of Directors shall have the power to determine the application of the provisions of this Article with respect to any situation based on its reasonable belief, understanding or knowledge of the circumstances. 11.8 EXCEPTIONS. The following exceptions shall apply or may be established with respect to the limitations of Section 11.1 of this Article. (a) Waiver of Ownership Limit. The Board of Directors, upon receipt of a ruling from the Internal Revenue Service or an opinion of tax counsel or other evidence or undertaking acceptable to it, may, but shall not be required to, waive the application, in whole or in part, of the Ownership Limit to a Person subject to the Ownership Limit, if such person is not an individual for purposes of Section 542(a) of the Code and is a corporation, partnership, estate or trust. In connection with any such exemption, the Board of Directors may require such representations and undertakings from such Person and may impose such other conditions as the Board of Directors deems necessary, in its sole discretion. (b) Pledge by Initial Holder. Notwithstanding any other provision of this Article, the pledge by the Initial Holder of all or any portion of the Class J Preferred Stock directly owned at any time or from time to time shall not constitute a violation of Section 11.1 of this Article and the pledgee shall not be subject to the Ownership Limit with respect to the Class J Preferred Stock so pledged to it either as a result of the pledge or upon foreclosure. (c) Underwriters. For a period of 270 days (or such longer period of time as any underwriter described below shall hold an unsold allotment of Class J Preferred Stock) following the purchase of Class J Preferred Stock by an underwriter that (i) is a corporation, partnership or other legal entity and (ii) participates in an offering of the Class J Preferred Stock, such underwriter shall not be subject to the Ownership Limit with respect to the Class J Preferred Stock purchased by it as a part of or in connection with such offering and with respect to any Class J Preferred Stock purchased in connection with market making activities. 30 193 11.9 LEGEND. Each certificate for Class J Preferred Stock shall bear substantially the following legend: "The shares of Class J Cumulative Convertible Preferred Stock represented by this certificate are subject to restrictions on transfer. No person may Beneficially Own shares of Class J Cumulative Convertible Preferred Stock in excess of the Ownership Restrictions, as applicable, with certain further restrictions and exceptions set forth in the Charter (including the Articles Supplementary setting forth the terms of the Class J Cumulative Convertible Preferred Stock). Any Person that attempts to Beneficially Own shares of Class J Cumulative Convertible Preferred Stock in excess of the applicable limitation must immediately notify the Corporation. All capitalized terms in this legend have the meanings ascribed to such terms in the Charter (including the Articles Supplementary setting forth the terms of the Class J Cumulative Convertible Preferred Stock), as the same may be amended from time to time, a copy of which, including the restrictions on transfer, will be sent without charge to each stockholder that so requests. If the restrictions on transfer are violated (i) the transfer of the shares of Class J Cumulative Convertible Preferred Stock represented hereby will be void in accordance with the Charter (including the Articles Supplementary setting forth the terms of the Class J Cumulative Convertible Preferred Stock) or (ii) the shares of Class J Cumulative Convertible Preferred Stock represented hereby will automatically be transferred to a Trustee of a Trust for the benefit of one or more Charitable Beneficiaries." 11.10 SEVERABILITY. If any provision of this Article or any application of any such provision is determined in a final and unappealable judgment to be void, invalid or unenforceable by any Federal or state court having jurisdiction over the issues, the validity and enforceability of the remaining provisions shall not be affected and other applications of such provision shall be affected only to the extent necessary to comply with the determination of such court. 11.11 BOARD OF DIRECTORS DISCRETION. Anything in this Article to the contrary notwithstanding, the Board of Directors shall be entitled to take or omit to take such actions as it in its discretion shall determine to be advisable in order that the Corporation maintain its status as and continue to qualify as a REIT, including, but not limited to, reducing the Ownership Limit and the Initial Holder Limit in the event of a change in law. 11.12 SETTLEMENT. Nothing in this Section 11 of this Article shall be interpreted to preclude the settlement of any transaction entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system. 31 194 FOURTH: The terms of the Class J Cumulative Convertible Preferred Stock set forth in Article Third hereof shall become Article XX of the Charter. 32 195 IN WITNESS WHEREOF, the Corporation has caused these presents to be signed in its name and on its behalf by its Senior Vice President and Chief Financial Officer and witnessed by its Assistant Secretary on November 6, 1998. WITNESS: APARTMENT INVESTMENT AND MANAGEMENT COMPANY /s/ LUCY CORDOVA /s/ TROY D. BUTTS - ------------------------- --------------------------------------------- Lucy Cordova Troy D. Butts Assistant Secretary Senior Vice President and Chief Financial Officer THE UNDERSIGNED, Senior Vice President and Chief Financial Officer of APARTMENT INVESTMENT AND MANAGEMENT COMPANY, who executed on behalf of the Corporation the Articles Supplementary of which this Certificate is made a part, hereby acknowledges in the name and on behalf of said Corporation the foregoing Articles Supplementary to be the corporate act of said Corporation and hereby certifies that the matters and facts set forth herein with respect to the authorization and approval thereof are true in all material respects under the penalties of perjury. /s/ TROY D. BUTTS --------------------------------------------- Troy D. Butts Senior Vice President and Chief Financial Officer 196 CERTIFICATE OF CORRECTION to ARTICLES OF AMENDMENT AND RESTATEMENT of APARTMENT INVESTMENT AND MANAGEMENT COMPANY (a Maryland corporation) APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation (the "Corporation"), having its principal office in Baltimore City, Maryland, hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: Articles of Amendment and Restatement, dated July 13, 1994, of the Corporation were filed with the State Department of Assessments and Taxation of Maryland on July 15, 1994, at 3:03 p.m. (as corrected by the Certificate of Correction to Articles of Amendment and Restatement of the Corporation, dated November 6, 1997 and filed with the State Department of Assessment and Taxation of Maryland on November 6, 1997) and said Articles of Amendment and Restatement require correction as permitted by Section 1-207 of the Corporations and Associations Article of the Annotated Code of Maryland. SECOND: Section 3.4.9 of ARTICLE IV of the Articles of Amendment and Restatement as previously filed and to be corrected hereby reads as follows: 3.4.9 Legend. Each certificate for Class A Common Stock shall bear the following legend: "The shares of Class A Common Stock represented by this certificate are subject to restrictions on transfer. No person may Beneficially Own shares of Class A Common Stock in excess of the Ownership Restrictions, as applicable, with certain further restrictions and exceptions set forth in the Corporation's Amended and Restated Certificate of Incorporation ("Certificate"). Any Person that attempts to Beneficially Own shares of Class A Common Stock in excess of the applicable limitation must immediately notify the Corporation. All capitalized terms in this legend have the meanings ascribed to such terms in the Corporation's Certificate, as the same may be amended from time to time, a copy of which, including the restrictions on transfer, will be sent without charge to each shareholder that so requests. If the restrictions on transfer are violated, the shares of Class A Common Stock represented hereby will be either (i) void in accordance with the Certificate or (ii) automatically transferred to a Trustee of a Trust for the benefit of one or more Charitable Beneficiaries." 197 THIRD: Section 3.4.9 of ARTICLE IV of the Articles of Amendment and Restatement as corrected hereby is as follows: 3.4.9 Legend. Each certificate for Class A Common Stock shall bear the following legend: "The shares of Class A Common Stock represented by this certificate are subject to restrictions on transfer. No person may Beneficially Own shares of Class A Common Stock in excess of the Ownership Restrictions, as applicable, with certain further restrictions and exceptions set forth in the Charter. Any Person that attempts to Beneficially Own shares of Class A Common Stock in excess of the applicable limitation must immediately notify the Corporation. All capitalized terms in this legend have the meanings ascribed to such terms in the Charter, as the same may be amended from time to time, a copy of which, including the restrictions on transfer, will be sent without charge to each stockholder that so requests. If the restrictions on transfer are violated, (i) the transfer of the shares of Class A Common Stock represented hereby will be void in accordance with the Charter or (ii) the shares of Class A Common Stock represented hereby will automatically be transferred to a Trustee of a Trust for the benefit of one or more Charitable Beneficiaries." FOURTH: The inaccuracy or defect in the legend contained in Section 3.4.9 of ARTICLE IV of the Articles of Amendment and Restatement as previously filed is that the legend contains an inaccurate description of the effects of an improper transfer as set forth elsewhere in the Charter. 2 198 IN WITNESS WHEREOF, Apartment Investment and Management Company has caused this Certificate of Correction to be signed in its name and on its behalf by its Vice Chairman and President and witnessed by its Secretary on October 21, 1998. WITNESS: APARTMENT INVESTMENT AND MANAGEMENT COMPANY /s/ JOEL F. BONDER By: /s/ PETER K. KOMPANIEZ - ------------------------------- ----------------------------- Joel F. Bonder, Peter K. Kompaniez, Secretary Vice Chairman and President THE UNDERSIGNED, Vice Chairman and President of APARTMENT INVESTMENT AND MANAGEMENT COMPANY, with respect to the foregoing Certificate of Correction of which this certificate is made a part, hereby acknowledges, in the name and on behalf of said Corporation, the foregoing Certificate of Correction to be the act of said Corporation and further certifies that, to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the authorization and approval thereof are true in all material respects, under the penalties of perjury. By: /s/ PETER K. KOMPANIEZ ------------------------------- Peter K. Kompaniez, Vice Chairman and President 3 199 CERTIFICATE OF CORRECTION to ARTICLES SUPPLEMENTARY Class C Cumulative Preferred Stock (Par Value $.01 Per Share) of APARTMENT INVESTMENT AND MANAGEMENT COMPANY (a Maryland corporation) APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation (the "Corporation"), having its principal office in Baltimore City, Maryland, hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: Articles Supplementary, dated December 22, 1997, of the Corporation were filed with the State Department of Assessments and Taxation of Maryland on December 22, 1997, at 1:38 p.m. (as corrected by the Certificate of Correction to Articles Supplementary of the Corporation, dated February 17, 1998 and filed with the State Department of Assessments and Taxation of Maryland on February 18, 1998) and said Articles Supplementary require correction as permitted by Section 1-207 of the Corporations and Associations Article of the Annotated Code of Maryland. SECOND: Section 10.9 of ARTICLE THIRD of the Articles Supplementary as previously filed and to be corrected hereby reads as follows: 10.9 Legend. Each certificate for Class C Preferred Stock shall bear the following legend: "The shares of Class C Cumulative Preferred Stock represented by this certificate are subject to restrictions on transfer. No person may Beneficially Own shares of Class C Cumulative Preferred Stock in excess of the Ownership Restrictions, as applicable, with certain further restrictions and exceptions set forth in the Corporation's Charter (including the Articles Supplementary setting forth the terms of the Class C Cumulative Preferred Stock). Any Person that attempts to Beneficially Own shares of Class C Cumulative Preferred Stock in excess of the applicable limitation must immediately notify the Corporation. All capitalized terms in this legend have the meanings ascribed to such terms in the Corporation's Charter (including the Articles Supplementary setting forth the terms of the Class C Cumulative Preferred Stock), as the same may be amended from time to time, a copy of which, including the restrictions on transfer, will be sent without charge to each stockholder that so requests. If the restrictions on transfer are violated, the shares of Class C Cumulative Preferred Stock represented hereby will be either (i) 200 void in accordance with the Certificate or (ii) automatically transferred to a Trustee of a Trust for the benefit of one or more Charitable Beneficiaries." THIRD: Section 10.9 of ARTICLE THIRD of the Articles Supplementary as corrected hereby is as follows: 10.9 Legend. Each certificate for Class C Preferred Stock shall bear the following legend: "The shares of Class C Cumulative Preferred Stock represented by this certificate are subject to restrictions on transfer. No person may Beneficially Own shares of Class C Cumulative Preferred Stock in excess of the Ownership Restrictions, as applicable, with certain further restrictions and exceptions set forth in the Charter (including the Articles Supplementary setting forth the terms of the Class C Cumulative Preferred Stock). Any Person that attempts to Beneficially Own shares of Class C Cumulative Preferred Stock in excess of the applicable limitation must immediately notify the Corporation. All capitalized terms in this legend have the meanings ascribed to such terms in the Charter (including the Articles Supplementary setting forth the terms of the Class C Cumulative Preferred Stock), as the same may be amended from time to time, a copy of which, including the restrictions on transfer, will be sent without charge to each stockholder that so requests. If the restrictions on transfer are violated (i) the transfer of the shares of Class C Cumulative Preferred Stock represented hereby will be void in accordance with the Charter (including the Articles Supplementary setting forth the terms of the Class C Cumulative Preferred Stock) or (ii) the shares of Class C Cumulative Preferred Stock represented hereby will automatically be transferred to a Trustee of a Trust for the benefit of one or more Charitable Beneficiaries." FOURTH: The inaccuracy or defect in the legend contained in Section 10.9 of ARTICLE THIRD of the Articles Supplementary as previously filed is that the legend contains an inaccurate description of the effects of an improper transfer as set forth elsewhere in the Charter. 2 201 IN WITNESS WHEREOF, Apartment Investment and Management Company has caused this Certificate of Correction to be signed in its name and on its behalf by its Vice Chairman and President and witnessed by its Secretary on October 21, 1998. WITNESS: APARTMENT INVESTMENT AND MANAGEMENT COMPANY /s/ JOEL F. BONDER By: /s/ PETER K. KOMPANIEZ - ------------------------------- ----------------------------- Joel F. Bonder, Peter K. Kompaniez, Secretary Vice Chairman and President THE UNDERSIGNED, Vice Chairman and President of APARTMENT INVESTMENT AND MANAGEMENT COMPANY, with respect to the foregoing Certificate of Correction of which this certificate is made a part, hereby acknowledges, in the name and on behalf of said Corporation, the foregoing Certificate of Correction to be the act of said Corporation and further certifies that, to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the authorization and approval thereof are true in all material respects, under the penalties of perjury. By: /s/ PETER K. KOMPANIEZ -------------------------------- Peter K. Kompaniez, Vice Chairman and President 3 202 CERTIFICATE OF CORRECTION to ARTICLES SUPPLEMENTARY Class D Cumulative Preferred Stock (Par Value $.01 Per Share) of APARTMENT INVESTMENT AND MANAGEMENT COMPANY (a Maryland corporation) APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation (the "Corporation"), having its principal office in Baltimore City, Maryland, hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: Articles Supplementary, dated February 17, 1998, of the Corporation were filed with the State Department of Assessments and Taxation of Maryland on February 18, 1998, at 1:40 p.m. and said Articles Supplementary require correction as permitted by Section 1-207 of the Corporations and Associations Article of the Annotated Code of Maryland. SECOND: Section 10.9 of ARTICLE THIRD of the Articles Supplementary as previously filed and to be corrected hereby reads as follows: 10.9 Legend. Each certificate for Class D Preferred Stock shall bear the following legend: "The shares of Class D Cumulative Preferred Stock represented by this certificate are subject to restrictions on transfer. No person may Beneficially Own shares of Class D Cumulative Preferred Stock in excess of the Ownership Restrictions, as applicable, with certain further restrictions and exceptions set forth in the Corporation's Charter (including the Articles Supplementary setting forth the terms of the Class D Cumulative Preferred Stock). Any Person that attempts to Beneficially Own shares of Class D Cumulative Preferred Stock in excess of the applicable limitation must immediately notify the Corporation. All capitalized terms in this legend have the meanings ascribed to such terms in the Corporation's Charter (including the Articles Supplementary setting forth the terms of the Class D Cumulative Preferred Stock), as the same may be amended from time to time, a copy of which, including the restrictions on transfer, will be sent without charge to each stockholder that so requests. If the restrictions on transfer are violated, the shares of Class D Cumulative Preferred Stock represented hereby will be either (i) void in accordance with the Certificate or (ii) automatically transferred to a Trustee of a Trust for the benefit of one or more Charitable Beneficiaries." 203 THIRD: Section 10.9 of ARTICLE THIRD of the Articles Supplementary as corrected hereby is as follows: 10.9 Legend. Each certificate for Class D Preferred Stock shall bear the following legend: "The shares of Class D Cumulative Preferred Stock represented by this certificate are subject to restrictions on transfer. No person may Beneficially Own shares of Class D Cumulative Preferred Stock in excess of the Ownership Restrictions, as applicable, with certain further restrictions and exceptions set forth in the Charter (including the Articles Supplementary setting forth the terms of the Class D Cumulative Preferred Stock). Any Person that attempts to Beneficially Own shares of Class D Cumulative Preferred Stock in excess of the applicable limitation must immediately notify the Corporation. All capitalized terms in this legend have the meanings ascribed to such terms in the Charter (including the Articles Supplementary setting forth the terms of the Class D Cumulative Preferred Stock), as the same may be amended from time to time, a copy of which, including the restrictions on transfer, will be sent without charge to each stockholder that so requests. If the restrictions on transfer are violated (i) the transfer of shares of Class D Cumulative Preferred Stock represented hereby will be void in accordance with the Charter (including the Articles Supplementary setting forth the terms of the Class D Cumulative Preferred Stock) or (ii) the shares of Class D Cumulative Preferred Stock represented hereby will automatically be transferred to a Trustee of a Trust for the benefit of one or more Charitable Beneficiaries. FOURTH: The inaccuracy or defect in the legend contained in Section 10.9 of ARTICLE THIRD of the Articles Supplementary as previously filed is that the legend contains an inaccurate description of the effects of an improper transfer as set forth elsewhere in the Charter. 2 204 IN WITNESS WHEREOF, Apartment Investment and Management Company has caused this Certificate of Correction to be signed in its name and on its behalf by its Vice Chairman and President and witnessed by its Secretary on October 21, 1998. WITNESS: APARTMENT INVESTMENT AND MANAGEMENT COMPANY /s/ JOEL F. BONDER By: /s/ PETER K. KOMPANIEZ - ------------------------------- ----------------------------- Joel F. Bonder, Peter K. Kompaniez, Secretary Vice Chairman and President THE UNDERSIGNED, Vice Chairman and President of APARTMENT INVESTMENT AND MANAGEMENT COMPANY, with respect to the foregoing Certificate of Correction of which this certificate is made a part, hereby acknowledges, in the name and on behalf of said Corporation, the foregoing Certificate of Correction to be the act of said Corporation and further certifies that, to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the authorization and approval thereof are true in all material respects, under the penalties of perjury. By: /s/ PETER K. KOMPANIEZ -------------------------------- Peter K. Kompaniez, Vice Chairman and President 3 205 ARTICLES SUPPLEMENTARY APARTMENT INVESTMENT AND MANAGEMENT COMPANY CLASS K CONVERTIBLE CUMULATIVE PREFERRED STOCK (PAR VALUE $.01 PER SHARE) APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation (hereinafter called the "Corporation"), having its principal office in Baltimore City, Maryland, hereby certifies to the Department of Assessments and Taxation of the State of Maryland that: FIRST: Pursuant to authority expressly vested in the Board of Directors of the Corporation by Section 1.2 of Article IV of the Charter of the Corporation, as amended to date (the "Charter"), the Board of Directors has duly divided and classified 5,750,000 authorized but unissued shares of Class A Common Stock of the Corporation, par value $.01 per share (the "Class A Common Stock"), into a class designated as Class K Convertible Cumulative Preferred Stock, par value $.01 per share, and has provided for the issuance of such class. SECOND: The reclassification increases the number of shares classified as Class K Convertible Cumulative Preferred Stock, par value $.01 per share, from no shares immediately prior to the reclassification to 5,750,000 shares immediately after the reclassification. The reclassification decreases the number of shares classified as Class A Common Stock from 484,027,500 shares immediately prior to the reclassification to 478,277,500 shares immediately after the reclassification. THIRD: The terms of the Class K Convertible Cumulative Preferred Stock (including the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, or terms or conditions of redemption) as set by the Board of Directors are as follows: 1. NUMBER OF SHARES AND DESIGNATION. This class of Preferred Stock shall be designated as Class K Convertible Cumulative Preferred Stock, par value $.01 per share (the "Class K Preferred Stock"), and Five Million Seven Hundred Fifty Thousand (5,750,000) shall be the authorized number of shares of such Class K Preferred Stock constituting such class. 2. DEFINITIONS. For purposes of the Class K Preferred Stock, the following terms shall have the meanings indicated: 206 "Act" shall mean the Securities Act of 1933, as amended. "affiliate" of a Person means a Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Person specified. "Aggregate Value" shall mean, with respect to any block of Equity Stock, the sum of the products of (i) the number of shares of each class of Equity Stock within such block multiplied by (ii) the corresponding Market Price of one share of Equity Stock of such class. "Beneficial Ownership" shall mean, with respect to any Person, ownership of shares of Equity Stock equal to the sum of (i) the number of shares of Equity Stock directly owned by such Person, (ii) the number of shares of Equity Stock indirectly owned by such Person (if such Person is an "individual" as defined in Section 542(a)(2) of the Code) taking into account the constructive ownership rules of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code, and (iii) the number of shares of Equity Stock that such Person is deemed to beneficially own pursuant to Rule 13d-3 under the Exchange Act or that is attributed to such Person pursuant to Section 318 of the Code, as modified by Section 856(d)(5) of the Code, provided that when applying this definition of Beneficial Ownership to the Initial Holder, clause (iii) of this definition, and clause (a) (ii) of the definition of "Person" shall be disregarded. The terms "Beneficial Owner," "Beneficially Owns" and "Beneficially Owned" shall have the correlative meanings. "Board of Directors" shall mean the Board of Directors of the Corporation or any committee authorized by such Board of Directors to perform any of its responsibilities with respect to the Class K Preferred Stock; provided that, for purposes of paragraph (a) of Section 9 of this Article, the term "Board of Directors" shall not include any such committee. "Business Day" shall mean any day other than a Saturday, Sunday or a day on which state or federally chartered banking institutions in New York, New York are not required to be open. "Cash Redemption Price" shall mean, with respect to any shares of Class K Preferred Stock to be redeemed, (i) if the Redemption Date occurs during the period from and including February 20, 2002, to but excluding February 18, 2003, 102% of the Liquidation Preference thereof, and (ii) if the Redemption Date occurs on or after February 18, 2003, 100% of the Liquidation Preference thereof, plus, in the case of clause (i) or (ii), all accumulated, accrued and unpaid dividends (whether or not earned or declared), if any, to the Redemption Date. 2 207 "Charitable Beneficiary" shall mean one or more beneficiaries of the Trust as determined pursuant to Section 11.3 of this Article, each of which shall be an organization described in Section 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code. "Class K Preferred Stock" shall have the meaning set forth in Section 1 of this Article. "Closing Price" shall mean, when used with respect to a share of any Equity Stock and for any date, the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case, as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE or, if the Equity Stock is not listed or admitted to trading on the NYSE, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Equity Stock is listed or admitted to trading or, if the Equity Stock is not listed or admitted to trading on any national securities exchange, the last quoted price, or if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the principal other automated quotation system that may then be in use or, if the Equity Stock is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Equity Stock selected by the Board of Directors of the Corporation. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor thereto, as interpreted by any applicable regulations or other administrative pronouncements as in effect from time to time. "Common Stock" shall mean the Class A Common Stock, $.01 par value per share, of the Corporation, and the Class B Common Stock, $.01 par value per share, of the Corporation and such other shares of the Corporation's capital stock into which outstanding shares of such Class A Common Stock or Class B Common Stock shall be reclassified. "Conversion Price" shall mean the conversion price per share of Class A Common Stock for which each share of Class K Preferred Stock is convertible, as such Conversion Price may be adjusted pursuant to Section 7 of this Article. The initial Conversion Price shall be $42.00 (equivalent to a 3 208 conversion rate of 0.59524 shares of Class A Common Stock for each share of Class K Preferred Stock). "Dividend Payment Date" shall mean January 15, April 15, July 15 and October 15 of each year; provided, that if any Dividend Payment Date falls on any day other than a Business Day, the dividend payment payable on such Dividend Payment Date shall be paid on the Business Day immediately following such Dividend Payment Date and no interest shall accrue on such dividend from such date to such Dividend Payment Date. "Dividend Periods" shall mean the Initial Dividend Period and each subsequent quarterly dividend period commencing on and including February 18, May 18, August 18 and November 18 of each year and ending on and including the day preceding the first day of the next succeeding Dividend Period, other than the Dividend Period during which any Class K Preferred Stock shall be redeemed pursuant to Section 5 hereof, which shall end on and include the Redemption Date with respect to the Class K Preferred Stock being redeemed. "Equity Stock" shall mean one or more shares of any class of capital stock of the Corporation. "Excess Transfer" has the meaning set forth in Section 11.3(A) of this Article. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Issue Date" shall mean February 18, 1999. "Initial Dividend Period" shall mean the period commencing on and including the Issue Date and ending on and including May 17, 1999. "Initial Holder" shall mean Terry Considine. "Initial Holder Limit" shall mean a number of the Outstanding shares of Class K Preferred Stock of the Corporation having an Aggregate Value not in excess of the excess of (x) 15% of the Aggregate Value of all Outstanding shares of Equity Stock over (y) the Aggregate Value of all shares of Equity Stock other than Class K Preferred Stock that are Beneficially Owned by the Initial Holder. From the Issue Date, the secretary of the Corporation, or such other person as shall be designated by the Board of Directors, shall upon request make available to the representative(s) of the Initial Holder and the Board of Directors, a schedule that sets forth the then-current Initial Holder Limit applicable to the Initial Holder. "Junior Stock" shall have the meaning set forth in paragraph (c) of Section 8 of this Article. 4 209 "Liquidation Preference" shall have the meaning set forth in paragraph (a) of Section 4 of this Article. "Look-Through Entity" shall mean a Person that is either (i) described in Section 401(a) of the Code as provided under Section 856(h)(3) of the Code or (ii) registered under the Investment Company Act of 1940. "Look-Through Ownership Limit" shall mean, for any Look-Through Entity, a number of the Outstanding shares of Class K Preferred Stock of the Corporation having an Aggregate Value not in excess of the excess of (x) 15% of the Aggregate Value of all Outstanding shares of Equity Stock over (y) the Aggregate Value of all shares of Equity Stock other than Class K Preferred Stock that are Beneficially Owned by the Look-Through Entity. "Market Price" on any date shall mean, with respect to any share of Equity Stock, the Closing Price of a share of that class of Equity Stock on the Trading Day immediately preceding such date. "NYSE" shall mean the New York Stock Exchange, Inc. "Operating Partnership" shall mean AIMCO Properties, L.P., a Delaware limited partnership. "Outstanding" shall mean issued and outstanding shares of Equity Stock of the Corporation, provided that for purposes of the application of the Ownership Limit, the Look-Through Ownership Limit or the Initial Holder Limit to any Person, the term "Outstanding" shall be deemed to include the number of shares of Equity Stock that such Person alone, at that time, could acquire pursuant to any options or convertible securities. "Ownership Limit" shall mean, for any Person other than the Initial Holder or a Look-Through Entity, a number of the Outstanding shares of Class K Preferred Stock of the Corporation having an Aggregate Value not in excess of the excess of (x) 8.7% of the Aggregate Value of all Outstanding shares of Equity Stock over (y) the Aggregate Value of all shares of Equity Stock other than Class K Preferred Stock that are Beneficially Owned by the Person. "Ownership Restrictions" shall mean collectively the Ownership Limit, as applied to Persons other than the Initial Holder or Look-Through Entities, the Initial Holder Limit, as applied to the Initial Holder, and the Look-Through Ownership Limit, as applied to Look-Through Entities. "Parity Stock" shall have the meaning set forth in paragraph (b) of Section 8 of this Article. 5 210 "Person" shall mean (a) for purposes of Section 11 of this Article, (i) an individual, corporation, partnership, estate, trust (including a trust qualifying under Section 401(a) or 501(c) of the Code), association, "private foundation," within the meaning of Section 509(a) of the Code, joint stock company or other entity, and (ii) a "group," as that term is used for purposes of Section 13(d)(3) of the Exchange Act, and (b) for purposes of the remaining Sections of this Article, any individual, firm, partnership, corporation or other entity, including any successor (by merger or otherwise) of such entity. "Prohibited Transferee" has the meaning set forth in Section 11.3(A) of this Article. "Record Date" shall have the meaning set forth in paragraph (a) of Section 3 of this Article. "Redemption Market Price" shall mean, with respect to any redemption of shares of Class K Preferred Stock, the lesser of (i) the average of the daily Closing Prices of the Class A Common Stock for the 20 consecutive Trading Days immediately preceding the first Business Day immediately preceding the date of the applicable redemption notice and (ii) the Closing Price of the Class A Common Stock on the Trading Day immediately preceding the first Business Day immediately preceding the date of the applicable redemption notice. "Redemption Date" shall mean, in the case of any redemption of any shares of Class K Preferred Stock, the date fixed for redemption of such shares. "REIT" shall mean a "real estate investment trust," as defined in Section 856 of the Code. "Senior Stock" shall have the meaning set forth in paragraph (a) of Section 8 of this Article. "set apart for payment" shall be deemed to include, without any action other than the following, the recording by the Corporation in its accounting ledgers of any accounting or bookkeeping entry which indicates, pursuant to a declaration of dividends or other distribution by the Board of Directors, the allocation of funds to be so paid on any series or class of capital stock of the Corporation; provided, however, that if any funds for any class or series of Junior Stock or any class or series of Parity Stock are placed in a separate account of the Corporation or delivered to a disbursing, paying or other similar agent, then "set apart for payment" with respect to the Class K Preferred Stock shall mean placing such funds in a separate account or delivering such funds to a disbursing, paying or other similar agent. 6 211 "Trading Day" shall mean, when used with respect to any Equity Stock, (i) if the Equity Stock is listed or admitted to trading on the NYSE, a day on which the NYSE is open for the transaction of business, (ii) if the Equity Stock is not listed or admitted to trading on the NYSE but is listed or admitted to trading on another national securities exchange or automated quotation system, a day on which the principal national securities exchange or automated quotation system, as the case may be, on which the Equity Stock is listed or admitted to trading is open for the transaction of business, or (iii) if the Equity Stock is not listed or admitted to trading on any national securities exchange or automated quotation system, any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. "Transfer" shall mean any sale, transfer, gift, assignment, devise or other disposition of a share of Class K Preferred Stock (including (i) the granting of an option or any series of such options or entering into any agreement for the sale, transfer or other disposition of Class K Preferred Stock or (ii) the sale, transfer, assignment or other disposition of any securities or rights convertible into or exchangeable for Class K Preferred Stock), whether voluntary or involuntary, whether of record or Beneficial Ownership, and whether by operation of law or otherwise (including, but not limited to, any transfer of an interest in other entities that results in a change in the Beneficial Ownership of shares of Class K Preferred Stock). The term "Transfers" and "Transferred" shall have correlative meanings. "Transfer Agent" means such transfer agent as may be designated by the Board of Directors or their designee as the transfer agent for the Class K Preferred Stock; provided, that if the Corporation has not designated a transfer agent then the Corporation shall act as the transfer agent for the Class K Preferred Stock. "Trust" shall mean the trust created pursuant to Section 11.3 of this Article. "Trustee" shall mean the Person unaffiliated with either the Corporation or the Prohibited Transferee that is appointed by the Corporation to serve as trustee of the Trust. "Voting Preferred Stock" shall have the meaning set forth in Section 9 of this Article. 3. DIVIDENDS. (a) The holders of Class K Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors, out of funds legally available for that purpose, quarterly cash dividends on the Class K Preferred Stock in an amount per share equal to (i) during the period from the Issue Date through and including 7 212 February 17, 2002, the greater of $0.50 or the quarterly cash dividend paid or payable (determined on each Dividend Payment Date) on the number of shares of Class A Common Stock (or portion thereof) into which a share of Class K Preferred Stock is convertible, and (ii) during the period from and after February 18, 2002, the greater of $0.625 or the quarterly cash dividend paid or payable (determined on each Dividend Payment Date) on the number of shares of Class A Common Stock (or portion thereof) into which a share of Class K Preferred Stock is convertible. Such dividends shall be cumulative from the Issue Date, whether or not in any Dividend Period or Periods such dividends shall be declared or there shall be funds of the Corporation legally available for the payment of such dividends, and shall be payable quarterly in arrears on each Dividend Payment Date, commencing on May 18, 1999. Each such dividend shall be payable in arrears to the holders of record of the Class K Preferred Stock, as they appear on the stock records of the Corporation at the close of business on the February 1, May 1, August 1 or November 1 (each a "Record Date"), as the case may be, immediately preceding such Dividend Payment Date. Accumulated, accrued and unpaid dividends for any past Dividend Periods may be declared and paid at any time, without reference to any regular Dividend Payment Date, to holders of record on such date, which date shall not precede by more than 45 days the payment date thereof, as may be fixed by the Board of Directors. (b) Any dividend payable on the Class K Preferred Stock for any partial dividend period shall be computed ratably on the basis of twelve 30-day months and a 360-day year. Holders of Class K Preferred Stock shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on the Class K Preferred Stock. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Class K Preferred Stock that may be in arrears. (c) So long as any of the shares of Class K Preferred Stock are outstanding, except as described in the immediately following sentence, no dividends shall be declared or paid or set apart for payment by the Corporation and no other distribution of cash or other property shall be declared or made, directly or indirectly, by the Corporation with respect to any shares of Parity Stock unless, in each case, dividends equal to the full amount of accumulated, accrued and unpaid dividends on all outstanding shares of Class K Preferred Stock have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof has been or contemporaneously is set apart for payment of such dividends on the Class K Preferred Stock for all Dividend Periods ending on or prior to the date such dividend or distribution is declared, paid, set apart for payment or made, as the case may be, with respect to such shares of Parity Stock. When dividends are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, all dividends declared upon the Class K Preferred Stock and all dividends declared upon any shares of Parity Stock shall be declared ratably in proportion to the respective amounts of dividends accumulated, accrued and unpaid on the Class K Preferred Stock and accumulated, accrued and unpaid on such Parity Stock. 8 213 (d) So long as any of the shares of Class K Preferred Stock are outstanding, no dividends (other than dividends or distributions paid in shares of, or options, warrants or rights to subscribe for or purchase shares of, Junior Stock) shall be declared or paid or set apart for payment by the Corporation and no other distribution of cash or other property shall be declared or made, directly or indirectly, by the Corporation with respect to any shares of Junior Stock, nor shall any shares of Junior Stock be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Common Stock made for purposes of an employee incentive or benefit plan of the Corporation or any subsidiary) for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock), directly or indirectly, by the Corporation (except by conversion into or exchange for shares of, or options, warrants or rights to subscribe for or purchase shares of, Junior Stock), nor shall any other cash or other property otherwise be paid or distributed to or for the benefit of any holder of shares of Junior Stock in respect thereof, directly or indirectly, by the Corporation unless, in each case, dividends equal to the full amount of all accumulated, accrued and unpaid dividends on all outstanding shares of Class K Preferred Stock have been declared and paid, or such dividends have been declared and a sum sufficient for the payment thereof has been set apart for such payment, on all outstanding shares of Class K Preferred Stock for all Dividend Periods ending on or prior to the date such dividend or distribution is declared, paid, set apart for payment or made with respect to such shares of Junior Stock, or the date such shares of Junior Stock are redeemed, purchased or otherwise acquired or monies paid to or made available for any sinking fund for such redemption, or the date any such cash or other property is paid or distributed to or for the benefit of any holders of Junior Stock in respect thereof, as the case may be. Notwithstanding the provisions of this Section 3, the Corporation shall not be prohibited from (i) declaring or paying or setting apart for payment any dividend or distribution on any shares of Parity Stock or (ii) redeeming, purchasing or otherwise acquiring any Parity Stock, in each case, if such declaration, payment, redemption, purchase or other acquisition is necessary in order to maintain the continued qualification of the Corporation as a REIT under Section 856 of the Code. 4. LIQUIDATION PREFERENCE. (a) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any payment or distribution by the Corporation (whether of capital, surplus or otherwise) shall be made to or set apart for the holders of Junior Stock, the holders of shares of Class K Preferred Stock shall be entitled to receive Twenty-Five Dollars ($25) per share of Class K Preferred Stock (the "Liquidation Preference"), plus an amount equal to all dividends (whether or not earned or declared) accumulated, accrued and unpaid thereon to the date of final distribution to such holders; but such holders shall not be entitled to any further payment. Until the holders of the Class K Preferred Stock have been paid the Liquidation Preference in full, plus an amount equal to all dividends (whether or not 9 214 earned or declared) accumulated, accrued and unpaid thereon to the date of final distribution to such holders, no payment will be made to any holder of Junior Stock upon the liquidation, dissolution or winding up of the Corporation. If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation, or proceeds thereof, distributable among the holders of Class K Preferred Stock shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other shares of any class or series of Parity Stock, then such assets, or the proceeds thereof, shall be distributed among the holders of Class K Preferred Stock and any such other Parity Stock ratably in the same proportion as the respective amounts that would be payable on such Class K Preferred Stock and any such other Parity Stock if all amounts payable thereon were paid in full. For the purposes of this Section 4, (i) a consolidation or merger of the Corporation with one or more corporations, (ii) a sale or transfer of all or substantially all of the Corporation's assets, or (iii) a statutory share exchange shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Corporation. (b) Upon any liquidation, dissolution or winding up of the Corporation, after payment shall have been made in full to the holders of Class K Preferred Stock and any Parity Stock, as provided in Section 4(a), any other series or class or classes of Junior Stock shall, subject to the respective terms thereof, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Class K Preferred Stock and any Parity Stock shall not be entitled to share therein. 5. REDEMPTION AT THE OPTION OF THE CORPORATION. (a) Shares of Class K Preferred Stock shall not be redeemable by the Corporation prior to February 20, 2002, except as set forth in Section 11.2 of this Article. During the period beginning on February 20, 2002, the Corporation, at its option, may redeem shares of Class K Preferred Stock, in whole or from time to time in part, at a redemption price payable in cash equal to the Cash Redemption Price applicable thereto. On and after February 20, 2002, the Corporation, at its option, may redeem shares of Class K Preferred Stock, in whole or from time to time in part, in exchange for a number of shares of Class A Common Stock equal to (i) 105% of the applicable Cash Redemption Price, divided by (ii) the Redemption Market Price applicable to such redemption. In lieu of any fractional shares of Class A Common Stock which would otherwise be issuable upon any redemption of Class K Preferred Stock, the Corporation shall pay a cash adjustment in respect of such fractional interest in an amount in cash (computed to the nearest cent) equal to the applicable Redemption Market Price multiplied by the fractional interest (computed to the nearest 1/100th of a percent) that otherwise would have been deliverable upon such redemption of Class K Preferred Stock. In the event of a redemption of shares of Class K Preferred Stock, if the Redemption Date occurs after a dividend record date and on or prior to the related Dividend Payment Date, the dividend payable on such Dividend Payment Date in respect of such shares called for redemption shall be payable on such Dividend Payment Date to the holders of record at the close of business on such dividend record 10 215 date notwithstanding the redemption of such shares, and shall not be payable as part of the redemption price for such shares. In connection with any redemption for cash pursuant to this Section 5(a), the redemption price of the Class K Preferred Stock (other than any portion thereof consisting of accumulated, accrued and unpaid dividends) shall be payable solely with the proceeds from the sale by the Corporation or the Operating Partnership of other capital shares of the Corporation or the Operating Partnership (whether or not such sale occurs concurrently with such redemption). For purposes of the preceding sentence, "capital shares" means any common stock, preferred stock, depositary shares, partnership or other interests, participations or other ownership interests (however designated) and any rights (other than debt securities convertible into or exchangeable at the option of the holder for equity securities (unless and to the extent such debt securities are subsequently converted into capital shares)) or options to purchase any of the foregoing of or in the Corporation or the Operating Partnership. (b) The Redemption Date shall be selected by the Corporation, shall be specified in the notice of redemption and shall be not less than 30 days nor more than 60 days after the date notice of redemption is sent by the Corporation. (c) If full cumulative dividends on all outstanding shares of Class K Preferred Stock have not been declared and paid, or declared and set apart for payment, no shares of Class K Preferred Stock may be redeemed unless all outstanding shares of Class K Preferred Stock are simultaneously redeemed, and neither the Corporation nor any affiliate of the Corporation may purchase or acquire shares of Class K Preferred Stock, otherwise than pursuant to a purchase or exchange offer made on the same terms to all holders of shares of Class K Preferred Stock. (d) If the Corporation shall redeem shares of Class K Preferred Stock pursuant to paragraph (a) of this Section 5, notice of such redemption shall be given to each holder of record of the shares to be redeemed. Such notice shall be provided by first class mail, postage prepaid, at such holder's address as the same appears on the stock records of the Corporation. Neither the failure to mail any notice required by this paragraph (d), nor any defect therein or in the mailing thereof to any particular holder, shall affect the sufficiency of the notice or the validity of the proceedings for redemption with respect to the other holders. Any notice which has been mailed in the manner herein provided shall be conclusively presumed to have been duly given on the date mailed whether or not the holder receives the notice. Each such notice shall state, as appropriate: (i) the Redemption Date; (ii) the number of shares of Class K 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 place or places at which certificates for such shares are to be surrendered for cash or shares of Class A Common Stock; and (iv) the redemption price payable on such Redemption Date (whether in cash or shares of Class A Common Stock), including, without limitation, 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 11 216 Payment Date to the record holder at the close of business on the relevant record date as described in the next succeeding sentence. Notice having been mailed as aforesaid, from and after the Redemption Date (unless the Corporation shall fail to make available the amount of cash necessary to effect such redemption), (i) dividends on the shares of Class K Preferred Stock so called for redemption shall cease to accumulate or accrue on the shares of Class K Preferred Stock called for redemption, (ii) said shares shall no longer be deemed to be outstanding, and (iii) all rights of the holders thereof as holders of Class K Preferred Stock of the Corporation shall cease except the right to receive the cash payable, or shares of Class A Common Stock issuable, upon such redemption, without interest thereon, upon surrender of their certificates if so required; provided, however, that if the Redemption Date for any shares of Class K Preferred Stock occurs after any dividend record date and on or prior to the related Dividend Payment Date, the full dividend payable on such Dividend Payment Date in respect of such shares of Class K Preferred Stock called for redemption shall be payable on such Dividend Payment Date to the holders of record of such shares at the close of business on the corresponding dividend record date notwithstanding the prior redemption of such shares. At the close of business on the Redemption Date, without any further action, each holder of shares of Class K Preferred Stock redeemed for shares of Class A Common Stock shall be deemed a holder of the number of shares of Class A Common Stock for which such Class K Convertible Preferred Stock has been redeemed (unless the Corporation defaults on its obligation to deliver shares of Class A Common Stock or cash). The Corporation's obligation to make available the cash necessary to effect such redemption in accordance with the preceding sentence shall be deemed fulfilled if, on or before the applicable Redemption Date, the Corporation shall irrevocably deposit in trust with a bank or trust company (which may not be an affiliate of the Corporation) that has, or is an affiliate of a bank or trust company that has, a capital and surplus of at least $50,000,000, such amount of cash as is necessary for such redemption plus, if such Redemption Date occurs after any dividend record date and on or prior to the related Dividend Payment Date, such amount of cash as is necessary to pay the dividend payable on such Dividend Payment Date in respect of such shares of Class K Preferred Stock called for redemption, with irrevocable instructions that such cash be applied to the redemption of the shares of Class K Preferred Stock so called for redemption and, if applicable, the payment of such dividend. No interest shall accrue for the benefit of the holders of shares of Class K Preferred Stock to be redeemed on any cash so set aside by the Corporation. Subject to applicable escheat laws, any such cash unclaimed at the end of two years from the Redemption Date shall revert to the general funds of the Corporation, after which reversion the holders of shares of Class K Preferred Stock so called for redemption shall look only to the general funds of the Corporation for the payment of such cash. As promptly as practicable after the surrender in accordance with such notice of the certificates for any such shares of Class K Preferred Stock to be so redeemed (properly endorsed or assigned for transfer, if the Corporation shall so require and the notice shall so state), such certificates shall be exchanged for cash (without interest thereon) or shares of Class A Common Stock for which such shares have been 12 217 redeemed in accordance with such notice. If fewer than all the outstanding shares of Class K Preferred Stock are to be redeemed, shares to be redeemed shall be selected by the Corporation from outstanding shares of Class K Preferred Stock not previously called for redemption by lot or, with respect to the number of shares of Class K Preferred Stock held of record by each holder of such shares, pro rata (as nearly as may be) or by any other method as may be determined by the Board of Directors in its discretion to be equitable. If fewer than all the shares of Class K Preferred Stock represented by any certificate are redeemed, then a new certificate representing the unredeemed shares shall be issued without cost to the holders thereof. (e) All shares of Class A Common Stock that may be issued upon redemption of shares of Class K Preferred Stock shall be duly and validly issued and fully paid and non-assessable, and prior to giving any notice of redemption the Corporation shall take any corporate action necessary therefor. 6. STATUS OF REACQUIRED STOCK. All shares of Class K Preferred Stock that have been issued and reacquired in any manner by the Corporation (including, without limitation, shares of Class K Preferred Stock which have been surrendered for conversion) shall be returned to the status of authorized but unissued shares of Class K Preferred Stock. 7. CONVERSION. 7.1 CONVERSION AT HOLDERS' OPTION. At any time on or after the Issue Date, holders of shares of Class K Preferred Stock shall have the right to convert all or a portion of such shares into shares of Class A Common Stock, as follows: (a) Subject to and upon compliance with the provisions of this Section 7, each share of Class K Preferred Stock shall, 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 Redemption Date, unless the Corporation shall default in payment due upon redemption thereof), into that 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 $25 by the Conversion Price in effect at such time and by surrender of the certificate representing such shares to be converted in the manner provided in subsection (b) of this Section 7.1. (b) In order to convert shares of Class K Preferred Stock, the holder of the shares to be converted shall surrender the certificate representing such shares at any office or agency maintained by the Corporation for such purpose, accompanied by 13 218 the funds, if any, required by the last paragraph of this subsection (b), and shall give written notice of conversion in the form provided on such certificate representing shares of Class K Preferred Stock (or such other notice as is acceptable to the Corporation) to the Corporation at such office or agency that the holder elects to convert the shares of Class K Preferred Stock specified in such notice. Such notice shall also state the name or names, together with address or addresses, in which the certificate or certificates for shares of Class A Common Stock which shall be issuable in such conversion shall 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 K Preferred Stock is registered, each certificate representing a share of Class K Preferred Stock surrendered for conversion shall be accompanied by instruments of transfer, in form satisfactory to the Corporation, duly executed by the holder or such holder's duly authorized attorney and an amount sufficient to pay any transfer or similar tax. As promptly as practicable after the surrender of certificates representing such shares of Class K Preferred Stock and the receipt of such notice, instruments of transfer and funds, if any, as aforesaid, the Corporation shall issue and shall deliver at such office or agency to such holder, or as designated in such holder's written instructions, a certificate or certificates for the number of full shares of Class A Common Stock issuable upon the conversion of such share or shares of Class K Preferred Stock in accordance with provisions of this Section 7, and a check or cash in respect of any fractional interest in a share of Class A Common Stock arising upon such conversion, as provided in paragraph (c) of this Section 7.1. Each conversion shall be deemed to have been effected immediately prior to the close of business on the date on which certificates representing such shares of Class K Preferred Stock shall have been surrendered and such notice (and any applicable instruments of transfer and any required taxes) received by the Corporation as aforesaid, and the Person or Persons in whose name or names any certificate or certificates for shares of Class A Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares represented thereby at such time on such date, and such conversion shall be at the Conversion Price in effect at such time on such date, unless the stock transfer books of the Corporation shall be closed on that date, in which event such Person or Persons shall be deemed to have become such holder or holders of record at the close of business on the next succeeding day on which such stock transfer books are open, but such conversion shall be at the Conversion Price in effect on the date on which such shares shall have been surrendered and such notice received by the Corporation. Holders of Class K Preferred Stock at the close of business on a Record Date 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 and prior to such Dividend Payment Date; provided, however, that Class K Preferred Stock surrendered for conversion during the period between the close of business on any Record Date and the opening of business 14 219 on the corresponding Dividend Payment Date (except shares converted after the issuance of a notice of redemption with respect to a Redemption Date during such period or coinciding with such Dividend Payment Date, which will be entitled to such dividend) must be accompanied by payment of an amount equal to the dividend payable on such shares on such Dividend Payment Date. A holder of Class K Preferred Stock on a Record Date who (or whose transferee) tenders any such shares for conversion into shares of Class A Common Stock on such Dividend Payment Date will receive the dividend payable by the Corporation on such shares of Class K Preferred Stock on such date, and the converting holder need not include payment of the amount of such dividend upon surrender of Class K Preferred Stock for conversion. Except as provided herein, the Corporation will make no payment or allowance for unpaid dividends, whether or not in arrears, on converted shares or for dividends on the Class A Common Stock issued upon such conversion. (c) No fractional shares of Class A Common Stock or scrip representing fractions of a share of Class A Common Stock shall be issued upon conversion of shares of Class K Preferred Stock. If more than one share of Class K Preferred Stock shall be surrendered for conversion at one time by the same holder, the number of full shares of Class A Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Class K Preferred Stock so surrendered. In lieu 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 K Preferred Stock, the Corporation shall pay to the holder of such shares an amount in cash (computed to the nearest cent) equal to the Closing Price of the Class A Common Stock on the Trading Day immediately preceding the date of conversion, multiplied by the fractional interest that otherwise would have been deliverable upon conversion of such share. 7.2 ADJUSTMENTS TO CONVERSION PRICE (a) The Conversion Price shall be adjusted from time to time as follows: (i) If the Corporation shall after the Issue Date (A) pay a dividend or make a distribution on its Class A Common Stock in shares of Class A Common Stock, (B) subdivide its outstanding shares of Class A Common Stock into a greater number of shares, (C) combine its outstanding shares of Class A Common Stock into a smaller number of shares or (D) issue any shares of capital stock by reclassification of its outstanding Class A Common Stock, then, in each such case, the Conversion Price in effect immediately prior to such action shall be adjusted so that the holder of any share of Class K Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Class A Common Stock or other capital stock of the Corporation which such holder would have owned or been entitled to receive immediately following such action had such share been converted immediately prior to the occurrence of such event. An adjustment made pursuant to 15 220 this subsection (i) of this Section 7.2(a) shall become effective immediately after the record date, in the case of a dividend or distribution, or immediately after the effective date, in the case of a subdivision, combination or reclassification. If, as a result of an adjustment made pursuant to this subsection (i), the holder of any share of Class K Preferred Stock thereafter surrendered for conversion shall become entitled to receive shares of two or more classes of capital stock or shares of Class A Common Stock and other capital stock of the Corporation, the Board of Directors (whose determination shall be conclusive and shall be described in a statement filed by the Corporation with the Transfer Agent) shall determine the allocation of the adjusted Conversion Price between or among shares of such classes of capital stock or shares of Class A Common Stock and other capital stock. (ii) If the Corporation shall, after the Issue Date, issue rights, options or warrants to all holders of its outstanding shares of Class A Common Stock entitling them (for a period expiring within 45 days after the record date described below) to subscribe for or purchase shares of Class A Common Stock at a price per share less than the current market price per share (determined pursuant to subsection (iv) of this Section 7.2(a)) of the Class A Common Stock (other than pursuant to any stock option, restricted stock or other incentive or benefit plan or stock ownership or purchase plan for the benefit of employees, directors or officers or any dividend reinvestment plan of the Corporation in effect at the time hereof or any other similar plan adopted or implemented hereafter), then the Conversion Price in effect immediately prior thereto shall be adjusted so that it shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the record date by a fraction, the numerator of which shall be the sum of (A) the number of shares of Class A Common Stock outstanding on the record date and (B) the number of shares which the aggregate proceeds to the Corporation from the exercise of such rights, options or warrants for Class A Common Stock would purchase at such current market price, and the denominator of which shall be the sum of (A) the number of shares of Class A Common Stock outstanding on the record date and (B) the number of additional shares of Class A Common Stock offered for subscription or purchase pursuant to such rights, options or warrants. Such adjustment shall be made successively whenever any rights, options or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights, options or warrants; provided, however, that if all of the shares of Class A Common Stock offered for subscription or purchase are not delivered upon the exercise of such rights, options or warrants, upon the expiration of such rights, options or warrants, the Conversion Price shall be readjusted to the Conversion Price which would have been in effect had the numerator and the denominator of the foregoing fraction and the resulting adjustment been made based upon the number of shares of Class A Common Stock actually delivered upon the exercise of such rights, options or warrants rather than upon the number of shares of Class A Common Stock offered for subscription or purchase. In determining whether any rights, options or warrants entitle the holders to subscribe for or purchase shares of Class A Common Stock at less than such current market price, and in determining 16 221 the aggregate offering price of such shares of Class A Common Stock, there shall be taken into account any consideration received by the Corporation for such rights, options or warrants, with the value of such consideration, if other than cash, determined by the Board of Directors (whose determination shall be conclusive and shall be described in a statement filed by the Corporation with the Transfer Agent). (iii) In case the Corporation shall, by dividend or otherwise, distribute to all holders of its outstanding Class A Common Stock any capital stock (other than Class A Common Stock), evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase securities of the Corporation (excluding (A) those referred to in subsections (i) and (ii) of this Section 7.2(a), (B) dividends and distributions paid in cash out of the retained earnings of the Corporation, and (C) distributions upon mergers or consolidations to which subsection (b) of this Section 7.2 applies), then, in each such case, the Conversion Price shall be adjusted to equal the price determined by multiplying the Conversion Price in effect immediately prior to the record date of such distribution by a fraction, the numerator of which shall be the current market price per share (determined pursuant to subsection (iv) of this Section 7.2(a)) of the Class A Common Stock, less the fair market value on such record date (determined by the Board or Directors, whose determination shall be conclusive and shall be described in a statement filed by the Corporation with the Transfer Agent) of the portion of the capital stock or assets or the evidences of indebtedness or assets so distributed to the holder of one share of Class A Common Stock or of such subscription rights or warrants applicable to one share of Class A Common Stock, and the denominator of which shall be such current market price per share of Class A Common Stock. Such adjustment shall become effective immediately after the record date for the determination of stockholders entitled to receive such distribution. (iv) For the purpose of any computation under subsections (ii) and (iii) of this Section 7.2(a), the current market price per share of Class A Common Stock on any date shall be the average of the Closing Price of the Class A Common Stock for the shorter of (A) 20 consecutive Trading Days ending on the last full Trading Day prior to the Time of Determination or (B) the period commencing on the date next succeeding the first public announcement of the issuance of such rights or warrants or such distribution through such last full Trading Day prior to the Time of Determination. For purposes of the foregoing, the term "Time of Determination" shall mean the time and date of the earlier of (A) the record date for determining stockholders entitled to receive the rights, warrants or distribution referred to in subsections (ii) and (iii) of this Section 7.2, or (B) the commencement of "ex-dividend" trading on the exchange or market referred to in the definition of "Closing Price." (v) No adjustment in the Conversion Price shall be required to be made unless such adjustment would require an increase or decrease of at least one percent of such price; provided, however, that any adjustment which by reason of this subsection (v) is not required to be made shall be carried forward and taken into 17 222 account in any subsequent adjustment. All calculations under this Section 7.2 shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. Anything in this Section 7.2 to the contrary notwithstanding, the Corporation shall be entitled to make such reduction in the Conversion Price, in addition to those required by this Section 7.2, as it shall determine in its discretion to be advisable in order that any stock dividend, subdivision of shares, distribution of rights to purchase stock or securities, or distribution of securities convertible into or exchangeable for stock hereafter made by the Corporation to its stockholders shall not be taxable to the recipients. Except as set forth in subsections (i), (ii) and (iii) above, the Conversion Price shall not be adjusted for the issuance of Class A Common Stock, or any securities convertible into or exchangeable for Class A Common Stock or carrying the right to purchase any of the foregoing, in exchange for cash, property or services. (vi) The Corporation from time to time may decrease the Conversion Price by any amount for any period of time if the period is at least 20 days and if the decrease is irrevocable during the period. Whenever the Conversion Price is so decreased, the Corporation shall mail to holders of record of shares of Class K Preferred Stock a notice of the decrease at least 15 days before the date the decreased Conversion Price takes effect, and such notice shall state the decreased Conversion Price and the period it will be in effect. (b) Notwithstanding any other provision herein to the contrary, in case of any merger or consolidation to which the Corporation is a party (other than a merger or consolidation in which the Corporation 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 the securities or other property of another entity), or in the case of any sale or transfer of all or substantially all of the Corporation's property and assets to another entity, there will be no adjustment of the Conversion Price, and lawful provision shall be made by the entity formed by such consolidation or the entity whose securities, cash or other property will immediately after the merger or consolidation be owned, by virtue of the merger or consolidation, by the holders of Class A Common Stock immediately prior to the merger or consolidation, or the entity which shall have acquired such assets of the Corporation, such that each share of Class K Preferred Stock then outstanding will, without the consent of the holder thereof, become convertible into the kind and amount of securities, cash or other property receivable upon such merger, consolidation, sale or transfer by a holder of the number of shares of Class A Common Stock into which such share of Class K Preferred Stock was convertible immediately prior to such merger, consolidation, sale or transfer assuming such holder of Class A Common Stock did not exercise his rights of election, if any, as to the kind or amount of securities, cash or other property receivable upon such merger, consolidation, sale or transfer. In the case of a cash merger of the Corporation into another entity or any other cash transaction of the type mentioned in this Section 7.2(b), each share of Class K Preferred Stock will thereafter be convertible at the Conversion Price in effect at such time into the same amount of cash per share into which each share of Class K Preferred Stock would have been convertible had 18 223 such share been converted into Class A Common Stock immediately prior to the effective date of such cash merger or other transaction. The foregoing provisions of this Section 7.2(b) shall similarly apply to successive mergers, consolidations, sales or transfers. (c) If (i) the Corporation shall take any action that would require an adjustment in the Conversion Price pursuant to Section 7.2; (ii) the Corporation shall authorize the granting to the holders of the Class A Common Stock generally of rights or warrants to subscribe for or purchase any shares of stock of any class or series or of any other rights or warrants; (iii) there shall be any reorganization or reclassification of the Class A Common Stock (other than an event to which subsection (i) of Section 7.2(a) applies) or any consolidation or merger to which the Corporation is a party or any sale or transfer of all or substantially all of the assets of the Corporation, in each case, for which approval of any stockholders of the Corporation is required; or (iv) there shall be a voluntary or involuntary liquidation, dissolution or winding up of the Corporation; then, in each such case, the Corporation shall cause to be given to the holders of shares of Class K Preferred Stock and the Transfer Agent as promptly as possible, but in any event at least 15 days prior to the applicable date hereinafter specified, a notice stating (i) the date on which a record is to be taken for the purpose of such action or granting of rights or warrants, or, if a record is not to be taken, the date as of which the holders of Class A Common Stock of record to be entitled to such dividend, distribution, rights or warrants are to be determined, or (ii) the date on which such reorganization, reclassification, consolidation, merger, sale, transfer, liquidation, dissolution or winding up is expected to become effective or occur, and the date as of which it is expected that holders of Class A Common Stock of record shall be entitled to exchange their shares of Class A Common Stock for securities, cash or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, transfer, liquidation, dissolution or winding up. Failure to give such notice or any defect therein shall not affect the legality or validity of the proceedings described in this Section 7.2(c). (d) Whenever the Conversion Price is adjusted as herein provided, (i) the Corporation shall promptly file with the Transfer Agent a certificate setting forth the Conversion Price after such adjustment and a brief statement of the facts requiring such adjustment and the manner of computing the same, which certificate shall be conclusive evidence of the correctness of such adjustment, and (ii) the Corporation shall mail or cause to be mailed by first class mail, postage prepaid, as soon as practicable to each holder of record of shares of Class K Preferred Stock a notice stating that the Conversion Price has been adjusted and setting forth the adjusted Conversion Price. (e) In any case in which paragraph (a) of this Section 7.2 shall require that an adjustment be made immediately following a record date or an effective date, the Corporation may elect to defer (but only until the filing by the Corporation with the Transfer Agent of the certificate required by subsection 7.2(d)) (i) issuing to 19 224 the holder of any share of Class K Preferred Stock converted after such record date or effective date the shares of Class A Common Stock issuable upon such conversion in excess of the shares of Class A Common Stock issuable upon such conversion on the basis of the Conversion Price prior to adjustment, and (ii) paying to such holder any amount of cash in lieu of a fractional share. (f) In the event that at any time, as a result of an adjustment made pursuant to subsection (i) of Section 7.2(a), the holder of any share of Class K Preferred Stock thereafter surrendered for conversion shall become entitled to receive any shares of the Corporation other than shares of Class A Common Stock, thereafter the Conversion Price of such other shares so receivable upon conversion of any share of Class K Preferred Stock shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to Class A Common Stock contained in this Section 7.2. (g) The Corporation shall at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued shares of Class A Common Stock, for the purpose of effecting conversion of shares of Class K Preferred Stock, the full number of shares of Class A Common Stock deliverable upon the conversion of all outstanding shares of Class K Preferred Stock not theretofore converted and on or before (and as a condition of) taking any action that would cause an adjustment of the Conversion Price resulting in an increase in the number of shares of Class A Common Stock deliverable upon conversion in excess of the number thereof previously reserved and available therefor, the Corporation shall take all such action so required. For purposes of this paragraph (g), the number of shares of Class A Common Stock which shall be deliverable upon the conversion of all outstanding shares of Class K Preferred Stock shall be computed as if at the time of computation all such outstanding shares of Class K Preferred Stock were held by a single holder (and without regard to the Ownership Limit). Before taking any action which would cause an adjustment reducing the Conversion Price below the then par value (if any) of the shares of Class A Common Stock deliverable upon conversion of the shares of Class K Preferred Stock, the Corporation shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and non-assessable shares of Class A Common Stock at such adjusted Conversion Price. (h) The Corporation will pay any and all documentary stamp, issue or transfer taxes, and any other similar taxes, payable in respect of the issue or delivery of shares of Class A Common Stock upon conversion of shares of Class K Preferred Stock pursuant hereto; provided, however, that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issue or delivery of shares of Class A Common Stock in a name other than that of the holder of the shares of Class K Preferred Stock to be converted, and no such issue or delivery shall be made unless and until the Person requesting such issue or delivery has paid to the Corporation the amount of any such tax or established, to the reasonable satisfaction of the Corporation, that such tax has been paid. 20 225 (i) Notwithstanding anything to the contrary contained in this Section 7, conversion of Class K Preferred Stock pursuant to this Section 7 shall be permitted only to the extent that such conversion would not result in a violation of the Ownership Restrictions (as defined in the Charter). 8. RANKING. Any class or series of capital stock of the Corporation shall be deemed to rank: (a) prior or senior to the Class K Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, if the holders of such class or series shall be entitled to the receipt of dividends and of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Class K Preferred Stock ("Senior Stock"); (b) on a parity with the Class K Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share thereof be different from those of the Class K Preferred Stock, if (i) such capital stock is 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 or Class J Cumulative Convertible Preferred Stock of the Corporation, or (ii) the holders of such class of stock or series and the Class K Preferred Stock shall be entitled to the receipt of dividends and of amounts distributable upon liquidation, dissolution or winding up in proportion to their respective amounts of accrued and unpaid dividends per share or liquidation preferences, without preference or priority of one over the other (the capital stock referred to in clauses (i) and (ii) of this paragraph being hereinafter referred to, collectively, as "Parity Stock"); and (c) junior to the Class K Preferred Stock, as to the payment of dividends and as to the distribution of assets upon liquidation, dissolution or winding up, if (i) such capital stock or series shall be Common Stock or (ii) the holders of Class K Preferred Stock shall be entitled to receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of shares of such class or series (the capital stock referred to in clauses (i) and (ii) of this paragraph being hereinafter referred to, collectively, as "Junior Stock"). 21 226 9. VOTING. (a) If and whenever six quarterly dividends (whether or not consecutive) payable on the Class K Preferred Stock or any series or class of Parity Stock shall be in arrears (which shall, with respect to any such quarterly dividend, mean that any such dividend has not been paid in full), whether or not earned or declared, the number of directors then constituting the Board of Directors shall be increased by two (if not already increased by reason of similar types of provisions with respect to shares of Parity Stock of any other class or series which is entitled to similar voting rights (the "Voting Preferred Stock")) and the holders of shares of Class K Preferred Stock, together with the holders of shares of all other Voting Preferred Stock then entitled to exercise similar voting rights, voting as a single class regardless of series, shall be entitled to elect the two additional directors to serve on the Board of Directors at any annual meeting of stockholders or special meeting held in place thereof, or at a special meeting of the holders of the Class K Preferred Stock and the Voting Preferred Stock called as hereinafter provided. Whenever all arrears in dividends on the Class K Preferred Stock and the Voting Preferred Stock then outstanding shall have been paid and dividends thereon for the current quarterly dividend period shall have been declared and paid, or declared and set apart for payment, then the right of the holders of the Class K Preferred Stock and the Voting Preferred Stock to elect such additional two directors shall cease (but subject always to the same provision for the vesting of such voting rights in the case of any similar future arrearages), and the terms of office of all persons elected as directors by the holders of the Class K Preferred Stock and the Voting Preferred Stock shall forthwith terminate and the number of directors constituting the Board of Directors shall be reduced accordingly. At any time after such voting power shall have been so vested in the holders of Class K Preferred Stock and the Voting Preferred Stock, if applicable, the Secretary of the Corporation may, and upon the written request of any holder of Class K Preferred Stock (addressed to the Secretary at the principal office of the Corporation) shall, call a special meeting of the holders of the Class K Preferred Stock and of the Voting Preferred Stock for the election of the two directors to be elected by them as herein provided, such call to be made by notice similar to that provided in the Bylaws of the Corporation for a special meeting of the stockholders or as required by law. If any such special meeting required to be called as above provided shall not be called by the Secretary within 20 days after receipt of any such request, then any holder of Class K Preferred Stock may call such meeting, upon the notice above provided, and for that purpose shall have access to the stock books of the Corporation. The directors elected at any such special meeting shall hold office until the next annual meeting of the stockholders or special meeting held in lieu thereof if such office shall not have previously terminated as above provided. If any vacancy shall occur among the directors elected by the holders of the Class K Preferred Stock and the Voting Preferred Stock, a successor shall be elected by the Board of Directors, upon the nomination of the then-remaining director elected by the holders of the Class K Preferred Stock and the Voting Preferred Stock or the successor of such remaining director, to serve until the next annual meeting of the stockholders or special meeting held in place thereof if such office shall not have previously terminated as provided above. 22 227 (b) So long as any shares of Class K Preferred Stock are outstanding, in addition to any other vote or consent of stockholders required by law or by the Charter of the Corporation, the affirmative vote of at least 66-2/3% of the votes entitled to be cast by the holders of the Class K Preferred Stock voting as a single class with the holders of all other classes or series of Parity Stock entitled to vote on such matters, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating: (i) Any amendment, alteration or repeal of any of the provisions of, or the addition of any provision to, these Articles Supplementary, the Charter or the By-Laws of the Corporation that materially adversely affects the voting powers, rights or preferences of the holders of the Class K Preferred Stock; provided, however, that the amendment of the provisions of the Charter so as to authorize or create, or to increase the authorized amount of, or issue any Junior Stock or any shares of any class of Parity Stock shall not be deemed to materially adversely affect the voting powers, rights or preferences of the holders of Class K Preferred Stock; or (ii) The authorization, creation of, increase in the authorized amount of, or issuance of any shares of any class or series of Senior Stock or any security convertible into shares of any class or series of Senior Stock (whether or not such class or series of Senior Stock is currently authorized); provided, however, that no such vote of the holders of Class K Preferred Stock shall be required if, at or prior to the time when such amendment, alteration or repeal is to take effect, or when the issuance of any such Senior Stock or convertible or exchangeable security is to be made, as the case may be, provision is made for the redemption of all shares of Class K Preferred Stock at the time outstanding to the extent such redemption is authorized by Section 5 of this Article. For purposes of the foregoing provisions and all other voting rights under these Articles Supplementary, each share of Class K Preferred Stock shall have one (1) vote per share, except that when any other class or series of preferred stock of the Corporation shall have the right to vote with the Class K Preferred Stock as a single class on any matter, then the Class K Preferred Stock and such other class or series shall have with respect to such matters one quarter of one vote per $25 of stated liquidation preference. Except as otherwise required by applicable law or as set forth herein or in the Charter, the Class K Preferred Stock shall not have any relative, participating, optional or other special voting rights and powers other than as set forth herein, and the consent of the holders thereof shall not be required for the taking of any corporate action. 10. RECORD HOLDERS. The Corporation and the Transfer Agent may deem and treat the record holder of any share of Class K Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Corporation nor the Transfer Agent shall be affected by any notice to the contrary. 23 228 11.1 RESTRICTIONS ON OWNERSHIP AND TRANSFERS. (A) LIMITATION ON BENEFICIAL OWNERSHIP. Except as provided in Section 11.8, from and after the Issue Date, no Person (other than the Initial Holder or a Look-Through Entity) shall Beneficially Own shares of Class K Preferred Stock in excess of the Ownership Limit, the Initial Holder shall not Beneficially Own shares of Class K Preferred Stock in excess of the Initial Holder Limit and no Look-Through Entity shall Beneficially Own shares of Class K Preferred Stock in excess of the Look- Through Ownership Limit. (B) TRANSFERS IN EXCESS OF OWNERSHIP LIMIT. Except as provided in Section 11.8, from and after the Issue Date (and subject to Section 11.12), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system) that, if effective, would result in any Person (other than the Initial Holder or a Look-Through Entity) Beneficially Owning shares of Class K Preferred Stock in excess of the Ownership Limit shall be void ab initio as to the Transfer of such shares of Class K Preferred Stock that would be otherwise Beneficially Owned by such Person in excess of the Ownership Limit, and the intended transferee shall acquire no rights in such shares of Class K Preferred Stock. (C) TRANSFERS IN EXCESS OF INITIAL HOLDER LIMIT. Except as provided in Section 11.8, from and after the Issue Date (and subject to Section 11.12), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system) that, if effective, would result in the Initial Holder Beneficially Owning shares of Class K Preferred Stock in excess of the Initial Holder Limit shall be void ab initio as to the Transfer of such shares of Class K Preferred Stock that would be otherwise Beneficially Owned by the Initial Holder in excess of the Initial Holder limit, and the Initial Holder shall acquire no rights in such shares of Class K Preferred Stock. (D) TRANSFERS IN EXCESS OF LOOK-THROUGH OWNERSHIP LIMIT. Except as provided in Section 11.8 from and after the Issue Date (and subject to Section 11.12), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system) that, if effective, would result in any Look-Through Entity Beneficially Owning shares of Class K Preferred Stock in excess of the Look- Through Ownership limit shall be void ab initio as to the Transfer of such shares of Class K Preferred Stock that would be otherwise Beneficially Owned by such Look- Through Entity in excess of the Look-Through Ownership Limit and such Look- Through Entity shall acquire no rights in such shares of Class K Preferred Stock. 24 229 (E) TRANSFERS RESULTING IN "CLOSELY HELD" STATUS. From and after the Issue Date, any Transfer that, if effective would result in the Corporation being "closely held" within the meaning of Section 856(h) of the Code, or would otherwise result in the Corporation failing to qualify as a REIT (including, without limitation, a Transfer or other event that would result in the Corporation owning (directly or constructively) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by the Corporation from such tenant would cause the Corporation to fail to satisfy any of the gross income requirements of Section 856(c) of the Code) shall be void ab initio as to the Transfer of shares of Class K Preferred Stock that would cause the Corporation (i) to be "closely held" within the meaning of Section 856(h) of the Code or (ii) otherwise fail to qualify as a REIT, as the case may be, and the intended transferee shall acquire no rights in such shares of Class K Preferred Stock. (F) SEVERABILITY ON VOID TRANSACTIONS. A Transfer of a share of Class K Preferred Stock that is null and void under Sections 11.1(B), (C), (D), or (E) of this Article because it would, if effective, result in (i) the ownership of Class K Preferred Stock in excess of the Initial Holder Limit, the Ownership Limit, or the Look-Through Ownership Limit, (ii) the Corporation being "closely held" within the meaning of Section 856(h) of the Code or (iii) the Corporation otherwise failing to qualify as a REIT, shall not adversely affect the validity of the Transfer of any other share of Class K Preferred Stock in the same or any other related transaction. 11.2 REMEDIES FOR BREACH. If the Board of Directors or a committee thereof shall at any time determine in good faith that a Transfer or other event has taken place in violation of Section 11.1 of this Article or that a Person intends to acquire or has attempted to acquire Beneficial Ownership of any shares of Class K Preferred Stock in violation of Section 11.1 of this Article (whether or not such violation is intended), the Board of Directors or a committee thereof shall be empowered to take any action as it deems advisable to refuse to give effect to or to prevent such Transfer or other event, including, but not limited to, refusing to give effect to such Transfer or other event on the books of the Corporation, causing the Corporation to redeem such shares at the then current Market Price and upon such terms and conditions as may be specified by the Board of Directors in its sole discretion (including, but not limited to, by means of the issuance of long-term indebtedness for the purpose of such redemption), demanding the repayment of any distributions received in respect of shares of Class K Preferred Stock acquired in violation of Section 11.1 of this Article or instituting proceedings to enjoin such Transfer or to rescind such Transfer or attempted Transfer; provided, however, that any Transfers or attempted Transfers (or, in the case of events other than a Transfer, Beneficial Ownership) in violation of Section 11.1 of this Article, regardless of any action (or non-action) by the Board of Directors or such committee, (a) shall be void ab initio or (b) shall automatically result in the transfer described in Section 11.3 of this Article; provided, further, that the provisions of this Section 11.2 shall be subject to the provisions of Section 11.12 of this Article; provided, further, that neither the Board of Directors nor any committee thereof may exercise such authority in a manner that interferes with any ownership or transfer of Class K Preferred Stock that is expressly authorized pursuant to Section 11.8(C) of this Article. 25 230 11.3. TRANSFER IN TRUST. (A) ESTABLISHMENT OF TRUST. If, notwithstanding the other provisions contained in this Article, at any time after the Issue Date there is a purported Transfer (an "Excess Transfer") (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system) or other change in the capital structure of the Corporation (including, but not limited to, any redemption of Equity Stock) or other event (including, but not limited to, any acquisition of any share of Equity Stock) such that (a) any Person (other than the Initial Holder or a Look-Through Entity) would Beneficially Own shares of Class K Preferred Stock in excess of the Ownership Limit, or (b) the Initial Holder would Beneficially Own shares of Class K Preferred Stock in excess of the Initial Holder Limit, or (c) any Person that is a Look-Through Entity would Beneficially Own shares of Class K Preferred Stock in excess of the Look- Through Ownership Limit (in any such event, the Person, Initial Holder or Look- Through Entity that would Beneficially Own shares of Class K Preferred Stock in excess of the Ownership Limit, the Initial Holder Limit or the Look-Through Entity Limit, respectively, is referred to as a "Prohibited Transferee"), then, except as otherwise provided in Section 11.8 of this Article, such shares of Class K Preferred Stock in excess of the Ownership Limit, the Initial Holder Limit or the Look-Through Ownership Limit, as the case may be, (rounded up to the nearest whole share) shall be automatically transferred to a Trustee in his capacity as trustee of a Trust for the exclusive benefit of one or more Charitable Beneficiaries. Such transfer to the Trustee shall be deemed to be effective as of the close of business on the Business Day prior to the Excess Transfer, change in capital structure or another event giving rise to a potential violation of the Ownership Limit, the Initial Holder Limit or the Look- Through Entity Ownership Limit. (B) APPOINTMENT OF TRUSTEE. The Trustee shall be appointed by the Corporation and shall be a Person unaffiliated with either the Corporation or any Prohibited Transferee. The Trustee may be an individual or a bank or trust company duly licensed to conduct a trust business. (C) STATUS OF SHARES HELD BY THE TRUSTEE. Shares of Class K Preferred Stock held by the Trustee shall be issued and outstanding shares of capital stock of the Corporation. Except to the extent provided in Section 11.3(E), the Prohibited Transferee shall have no rights in the Class K Preferred Stock held by the Trustee, and the Prohibited Transferee shall not benefit economically from ownership of any shares held in trust by the Trustee, shall have no rights to dividends and shall not possess any rights to vote or other rights attributable to the shares held in the Trust. 26 231 (D) DIVIDEND AND VOTING RIGHTS. The Trustee shall have all voting rights and rights to dividends with respect to shares of Class K Preferred Stock held in the Trust, which rights shall be exercised for the benefit of the Charitable Beneficiary. Any dividend or distribution paid prior to the discovery by the Corporation that the shares of Class K Preferred Stock have been transferred to the Trustee shall be repaid to the Corporation upon demand, and any dividend or distribution declared but unpaid shall be rescinded as void ab initio with respect to such shares of Class K Preferred Stock. Any dividends or distributions so disgorged or rescinded shall be paid over to the Trustee and held in trust for the Charitable Beneficiary. Any vote cast by a Prohibited Transferee prior to the discovery by the Corporation that the shares of Class K Preferred Stock have been transferred to the Trustee will be rescinded as void ab initio and shall be recast in accordance with the desires of the Trustee acting for the benefit of the Charitable Beneficiary. The owner of the shares at the time of the Excess Transfer, change in capital structure or other event giving rise to a potential violation of the Ownership Limit, Initial Holder Limit or Look-Through Entity Ownership Limit shall be deemed to have given an irrevocable proxy to the Trustee to vote the shares of Class K Preferred Stock for the benefit of the Charitable Beneficiary. (E) RESTRICTIONS ON TRANSFER. The Trustee of the Trust may sell the shares held in the Trust to a Person, designated by the Trustee, whose ownership of the shares will not violate the Ownership Restrictions. If such a sale is made, the interest of the Charitable Beneficiary shall terminate and proceeds of the sale shall be payable to the Prohibited Transferee and to the Charitable Beneficiary as provided in this Section 11.3(E). The Prohibited Transferee shall receive the lesser of (1) the price paid by the Prohibited Transferee for the shares or, if the Prohibited Transferee did not give value for the shares (through a gift, devise or other transaction), the Market Price of the shares on the day of the event causing the shares to be held in the Trust and (2) the price per share received by the Trustee from the sale or other disposition of the shares held in the Trust. Any proceeds in excess of the amount payable to the Prohibited Transferee shall be payable to the Charitable Beneficiary. If any of the transfer restrictions set forth in this Section 11.3(E) or any application thereof is determined in a final judgment to be void, invalid or unenforceable by any court having jurisdiction over the issue, the Prohibited Transferee may be deemed, at the option of the Corporation, to have acted as the agent of the Corporation in acquiring the Class K Preferred Stock as to which such restrictions would, by their terms, apply, and to hold such Class K Preferred Stock on behalf of the Corporation. (F) PURCHASE RIGHT IN STOCK TRANSFERRED TO THE TRUSTEE. Shares of Class K Preferred Stock transferred to the Trustee shall be deemed to have been offered for sale to the Corporation, or its designee, at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in such transfer to the Trust (or, in the case of a devise or gift, the Market Price at the time of such devise or gift) and (ii) the Market Price on the date the Corporation, or its designee, accepts such offer. The Corporation shall have the right to accept such offer for a period of 27 232 90 days after the later of (i) the date of the Excess Transfer or other event resulting in a transfer to the Trust and (ii) the date that the Board of Directors determines in good faith that an Excess Transfer or other event occurred. (G) DESIGNATION OF CHARITABLE BENEFICIARIES. By written notice to the Trustee, the Corporation shall designate one or more nonprofit organizations to be the Charitable Beneficiary of the interest in the Trust relating to such Prohibited Transferee if (i) the shares of Class K Preferred Stock held in the Trust would not violate the Ownership Restrictions in the hands of such Charitable Beneficiary and (ii) each Charitable Beneficiary is an organization described in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code. 11.4 NOTICE OF RESTRICTED TRANSFER. Any Person that acquires or attempts to acquire shares of Class K Preferred Stock in violation of Section 11.1 of this Article, or any Person that is a Prohibited Transferee such that stock is transferred to the Trustee under Section 11.3 of this Article, shall immediately give written notice to the Corporation of such event and shall provide to the Corporation such other information as the Corporation may request in order to determine the effect, if any, of such Transfer or attempted Transfer or other event on the Corporation's status as a REIT. Failure to give such notice shall not limit the rights and remedies of the Board of Directors provided herein in any way. 11.5 OWNERS REQUIRED TO PROVIDE INFORMATION. From and after the Issue Date certain record and Beneficial Owners and transferees of shares of Class K Preferred Stock will be required to provide certain information as set out below. (A) ANNUAL DISCLOSURE. Every record and Beneficial Owner of more than 5% (or such other percentage between 0.5% and 5%, as provided in the applicable regulations adopted under the Code) of the number of Outstanding shares of Class K Preferred Stock shall, within 30 days after January 1 of each year, give written notice to the Corporation stating the name and address of such record or Beneficial Owner, the number of shares of Class K Preferred Stock Beneficially Owned, and a full description of how such shares are held. Each such record or Beneficial Owner of Class K Preferred Stock shall, upon demand by the Corporation, disclose to the Corporation in writing such additional information with respect to the Beneficial Ownership of the Class K Preferred Stock as the Board of Directors, in its sole discretion, deems appropriate or necessary to (i) comply with the provisions of the Code regarding the qualification of the Corporation as a REIT under the Code and (ii) ensure compliance with the Ownership Limit, the Initial Holder Limit or the Look- Through Ownership Limit, as applicable. Each stockholder of record, including without limitation any Person that holds shares of Class K Preferred Stock on behalf of a Beneficial Owner, shall take all reasonable steps to obtain the written notice described in this Section 11.5 from the Beneficial Owner. 28 233 (B) DISCLOSURE AT THE REQUEST OF THE CORPORATION. Any Person that is a Beneficial Owner of shares of Class K Preferred Stock and any Person (including the stockholder of record) that is holding shares of Class K Preferred Stock for a Beneficial Owner, and any proposed transferee of shares, shall provide such information as the Corporation, in its sole discretion, may request in order to determine the Corporation's status as a REIT, to comply with the requirements of any taxing authority or other governmental agency, to determine any such compliance or to ensure compliance with the Ownership Limit, the Initial Holder Limit and the Look- Through Ownership Limit, and shall provide a statement or affidavit to the Corporation setting forth the number of shares of Class K Preferred Stock already Beneficially Owned by such stockholder or proposed transferee and any related persons specified, which statement or affidavit shall be in the form prescribed by the Corporation for that purpose. 11.6 REMEDIES NOT LIMITED. Nothing contained in this Article shall limit the authority of the Board of Directors to take such other action as it deems necessary or advisable (subject to the provisions of Section 11.12 of this Article) (i) to protect the Corporation and the interests of its stockholders in the preservation of the Corporation's status as a REIT and (ii) to insure compliance with the Ownership Limit, the Initial Holder Limit and the Look-Through Ownership Limit. 11.7 AMBIGUITY. In the case of an ambiguity in the application of any of the provisions of Section 11 of this Article, or in the case of an ambiguity in any definition contained in Section 11 of this Article, the Board of Directors shall have the power to determine the application of the provisions of this Article with respect to any situation based on its reasonable belief, understanding or knowledge of the circumstances. 11.8 EXCEPTIONS. The following exceptions shall apply or may be established with respect to the limitations of Section 11.1 of this Article. (A) WAIVER OF OWNERSHIP LIMIT. The Board of Directors, upon receipt of a ruling from the Internal Revenue Service or an opinion of tax counsel or other evidence or undertaking acceptable to it, may waive the application, in whole or in part, of the Ownership Limit to a Person subject to the Ownership Limit, if such person is not an individual for purposes of Section 542(a) of the Code and is a corporation, partnership, estate or trust. In connection with any such exemption, the Board of Directors may require such representations and undertakings from such Person and may impose such other conditions as the Board of Directors deems necessary, in its sole discretion, to determine the effect, if any, of the proposed Transfer on the Corporation's status as a REIT. (B) PLEDGE BY INITIAL HOLDER. Notwithstanding any other provision of this Article, the pledge by the Initial Holder of all or any portion of the Class K Preferred Stock directly owned at any time or from time to time shall not constitute a violation of Section 11.1 of this Article and the pledgee shall not be subject to the Ownership Limit with respect to the Class K Preferred Stock so pledged to it either as a result of the pledge or upon foreclosure. 29 234 (C) UNDERWRITERS. For a period of 270 days (or such longer period of time as any underwriter described below shall hold an unsold allotment of Class K Preferred Stock) following the purchase of Class K Preferred Stock by an underwriter that (i) is a corporation, partnership or other legal entity and (ii) participates in an offering of the Class K Preferred Stock, such underwriter shall not be subject to the Ownership Limit with respect to the Class K Preferred Stock purchased by it as a part of or in connection with such offering and with respect to any Class K Preferred Stock purchased in connection with market making activities. 11.9 LEGEND. Each certificate for Class K Preferred Stock shall bear substantially the following legend: "The shares of Class K Convertible Cumulative Preferred Stock represented by this certificate are subject to restrictions on transfer. No person may Beneficially Own shares of Class K Convertible Cumulative Preferred Stock in excess of the Ownership Restrictions, as applicable, with certain further restrictions and exceptions set forth in the Charter (including the Articles Supplementary setting forth the terms of the Class K Convertible Cumulative Preferred Stock). Any Person that attempts to Beneficially Own shares of Class K Convertible Cumulative Preferred Stock in excess of the applicable limitation must immediately notify the Corporation. All capitalized terms in this legend have the meanings ascribed to such terms in the Charter (including the Articles Supplementary setting forth the terms of the Class K Convertible Cumulative Preferred Stock), as the same may be amended from time to time, a copy of which, including the restrictions on transfer, will be sent without charge to each stockholder that so requests. If the restrictions on transfer are violated (i) the transfer of the shares of Class K Convertible Cumulative Preferred Stock represented hereby will be void in accordance with the Charter (including the Articles Supplementary setting forth the terms of the Class K Convertible Cumulative Preferred Stock) or (ii) the shares of Class K Convertible Cumulative Preferred Stock represented hereby will automatically be transferred to a Trustee of a Trust for the benefit of one or more Charitable Beneficiaries." 11.10 SEVERABILITY. If any provision of this Article or any application of any such provision is determined in a final and unappealable judgment to be void, invalid or unenforceable by any Federal or state court having jurisdiction over the issues, the validity and enforceability of the remaining provisions shall not be affected and other applications of such provision shall be affected only to the extent necessary to comply with the determination of such court. 30 235 11.11 BOARD OF DIRECTORS DISCRETION. Anything in this Article to the contrary notwithstanding, the Board of Directors shall be entitled to take or omit to take such actions as it in its discretion shall determine to be advisable in order that the Corporation maintain its status as and continue to qualify as a REIT, including, but not limited to, reducing the Ownership Limit, the Initial Holder Limit and the Look-Through Ownership Limit in the event of a change in law. 11.12 SETTLEMENT. Nothing in this Section 11 of this Article shall be interpreted to preclude the settlement of any transaction entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system. FOURTH: The terms of the Class K Cumulative Preferred Stock set forth in Article Third hereof shall become Article XXI of the Charter. 31 236 IN WITNESS WHEREOF, the Corporation has caused these presents to be signed in its name and on its behalf by its Senior Vice President and Chief Financial Officer and witnessed by its Assistant Secretary on February 17, 1999. WITNESS: APARTMENT INVESTMENT AND MANAGEMENT COMPANY /s/ LUCY CORDOVA /s/ TROY D. BUTTS - ----------------------------- -------------------------------- Lucy Cordova Troy D. Butts Assistant Secretary Senior Vice President and Chief Financial Officer THE UNDERSIGNED, Senior Vice President and Chief Financial Officer of APARTMENT INVESTMENT AND MANAGEMENT COMPANY, who executed on behalf of the Corporation the Articles Supplementary of which this Certificate is made a part, hereby acknowledges in the name and on behalf of said Corporation the foregoing Articles Supplementary to be the corporate act of said Corporation and hereby certifies that the matters and facts set forth herein with respect to the authorization and approval thereof are true in all material respects under the penalties of perjury. /s/ TROY D. BUTTS -------------------------------- Troy D. Butts Senior Vice President and Chief Financial Officer 32 237 ARTICLES OF MERGER BETWEEN INSIGNIA PROPERTIES TRUST AND APARTMENT INVESTMENT AND MANAGEMENT COMPANY Apartment Investment and Management Company, a corporation organized and existing under the laws of the State of Maryland ("AIMCO"), and Insignia Properties Trust, a real estate investment trust organized and existing under the laws of the State of Maryland ("IPT"), do hereby certify to the State Department of Assessments and Taxation of Maryland (the "SDAT") as follows: FIRST: AIMCO and IPT agree that IPT shall be merged with and into AIMCO (the "Merger"). SECOND: AIMCO shall be the surviving entity of the Merger (the "Surviving Entity"). THIRD: These Articles of Merger, which may be executed in counter parts, shall become effective at 5:00 p.m. EST on the date these Articles of Merger are accepted for record by the SDAT (the "Effective Time"). FOURTH: Both AIMCO and IPT were organized and exist under the laws of the State of Maryland. FIFTH: The principal office of each of AIMCO and IPT in the State of Maryland is, and the principal office of the Surviving Entity immediately following the Effective Time will be, located in the City of Baltimore. SIXTH: IPT owns no interest in land located in the State of Maryland. SEVENTH: The charter of AIMCO will not be amended as a result of the Merger. 238 EIGHTH: The total number of shares of all classes of stock which each entity party to these Articles of Merger has the authority to issue and the number of shares of each class are as follows: a. AIMCO The total number of shares of all classes of stock which AIMCO has authority to issue is 510,587,500 shares, consisting of 478,277,500 shares of Class A Common Stock, par value $.01 per share (the "AIMCO Common Stock"); 100,000 shares of Class B Common Stock, par value $.01 per share; and 32,210,000 shares of Preferred Stock, par value $.01 per share, of which 750,000 shares have been designated as Class B Cumulative Convertible Preferred Stock, par value $.01 per share; 2,760,000 shares have been designated as Class C Cumulative Preferred Stock, par value $.01 per share; 4,600,000 shares have been designated as Class D Cumulative Preferred Stock, par value $.01 per share; 10,000,000 shares have been designated as Class E Cumulative Convertible Preferred Stock, par value $.01 per share; 4,050,000 shares have been designated as Class G Cumulative Preferred Stock, par value $.01 per share; 2,300,000 shares have been designated as Class H Cumulative Preferred Stock, par value $.01 per share; 2,000,000 shares have been designated as Class J Cumulative Convertible Preferred Stock, par value $.01 per share; and 5,750,000 shares have been designated as Class K Cumulative Convertible Preferred Stock, par value $.01 per share. The aggregate par value of all classes of stock of AIMCO having par value is $5,105,875. b. IPT The total number of shares of beneficial interest (the "IPT Shares") which IPT has authority to issue is 500,000,000 shares, consisting of 400,000,000 common shares of beneficial interest, par value $.01 per share (the "IPT Common Shares"); and 100,000,000 preferred shares of beneficial interest, par value $.01 per share. The aggregate par value of the IPT Shares is $5,000,000. NINTH: At the Effective Time, IPT shall be merged with and into AIMCO; and thereupon, the Surviving Entity shall possess any and all purposes and powers of IPT; and all leases, licenses, property, rights, privileges and powers of whatever nature and description of IPT shall be transferred to, vested in and devolved upon the Surviving Entity, without further act or deed, subject to all of the debts and obligations of IPT. 2 239 TENTH: The issued and outstanding securities of IPT shall be converted at the Effective Time as follows: a. Subject to Article TENTH paragraph (c), each IPT Common Share issued and outstanding immediately prior to the Effective Time, other than IPT Common Shares cancelled according to Article TENTH paragraph (b) (the "Out standing IPT Common Shares"), shall be converted into and become the right to receive 0.3601 shares of AIMCO Common Stock (together with cash in lieu of fractional interests pursuant to paragraph (e) of Article TENTH, the "Merger Consideration"), all as further described in that certain Second Amended and Restated Agreement and Plan of Merger, dated as of January 22, 1999 (the "Merger Agreement"), by and between AIMCO and IPT. b. Each IPT Common Share owned, directly or indirectly, by AIMCO, IPT, or any of their respective subsidiaries immediately prior to the Effective Time shall, at the Effective Time, automatically be cancelled and retired and shall cease to exist, and no Merger Consideration or other consideration shall be issued or delivered in exchange therefor. c. Each restricted IPT Common Share awarded under the Insignia Properties Trust 1997 Share Incentive Plan (the "IPT Share Plan") which is outstanding and unvested at the Effective Time (each a "Restricted Share") shall be converted, at the Effective Time, into 0.3601 restricted shares of AIMCO Common Stock ("AIMCO Restricted Shares"). Each such AIMCO Restricted Share shall have, and be subject to, the same terms and conditions (including rights to Dividend Equivalents (as defined in the IPT Share Plan)) set forth in the IPT Share Plan and the applicable restricted share agreement, each as in effect immediately prior to the Effective Time. d. All of the Outstanding IPT Common Shares, when so converted in accordance with this Article TENTH and the Merger Agreement, shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of a certificate (an "IPT Certificate") which, immediately prior to the Effective Time, evidenced Outstanding IPT Common Shares shall cease to have any rights with respect thereto, except (i) the right to receive any dividend or other distribution on IPT Common Shares with a record date prior to the Effective Time and (ii) upon surrender of such IPT Certificate, (x) the right to receive the Merger Consideration and (y) any dividend or other distribution on the AIMCO Common 3 240 Stock with a record date on or after the date on which the Effective Time occurs and paid prior to the time such IPT Certificate is surrendered. e. (i) No scrip or fractional share certificate for AIMCO Common Stock will be issued upon the surrender for exchange of IPT Certificates, and an outstanding fractional share interest will not entitle the owner thereof to vote, to receive dividends or to any rights of a stockholder of AIMCO or of the Surviving Entity with respect to such fractional share interest. (ii) In lieu of any fractional shares of AIMCO Common Stock, each holder of an IPT Common Share that otherwise would be entitled to a fractional share of AIMCO Common Stock shall receive a cash payment in lieu of such fractional share of AIMCO Common Stock equal to such shareholder's proportionate interest in a share of AIMCO Common Stock multiplied by $38.0656. f. As of the Effective Time, all other shares of beneficial interest of IPT shall be cancelled and retired and shall cease to exist, and no Merger Consideration or other consideration shall be issued or delivered in exchange therefor. ELEVENTH: The terms and conditions of the transaction described in these Articles of Merger were duly authorized and approved by IPT in the manner and by the vote required by the laws of the State of Maryland and the declaration of trust of IPT and the bylaws of IPT, as follows: a. The Board of Trustees of IPT, at a meeting of the IPT Board of Trustees duly called and held, adopted a resolution deeming the Merger advisable and in the best interest of IPT and directing that the Merger, the Merger Agreement and the transactions contemplated by the Merger Agreement be submitted for consideration by the shareholders of IPT. b. The shareholders of IPT entitled to vote on the Merger, Merger Agreement and the transactions contemplated by the Merger Agreement, at a meeting duly called and held, adopted a resolution approving the Merger, the Merger Agreement and the transactions contemplated by the Merger Agreement, and such resolution was filed with the records of meetings of the shareholders of IPT. 4 241 TWELFTH: The terms and conditions of the Merger were duly authorized and approved by AIMCO in the manner and by the vote required by the laws of the State of Maryland and the charter and bylaws of AIMCO, as follows: a. The Board of Directors of AIMCO adopted a resolution deeming the Merger advisable and in the best interest of AIMCO. b. Pursuant to Section 3-105(a)(5)(i) of the Maryland General Corporation Law, no vote of the stockholders of AIMCO was required or obtained to approve the Merger. THIRTEENTH: Each undersigned President acknowledges these Articles of Merger to be the act of the respective party on whose behalf he has signed, and further, as to all matters and facts required to be verified under oath, each undersigned President acknowledges, that to the best of his knowledge, information and belief, the matters and facts relating to the entity on whose behalf he has signed are true in all material respects and that this statement is made under the penalties for perjury. 5 242 IN WITNESS WHEREOF, these Articles of Merger have been duly executed on behalf of the parties hereto this 26th day of February, 1999. ATTEST: INSIGNIA PROPERTIES TRUST /s/ JEFFREY P. COHEN By: /s/ PETER K. KOMPANIEZ - ------------------------------------ ------------------------------------ Jeffrey P. Cohen Name: Peter K. Kompaniez Secretary Title: President ATTEST: APARTMENT INVESTMENT AND MANAGEMENT COMPANY /s/ JOEL F. BONDER By: /s/ PETER K. KOMPANIEZ - ------------------------------------ ------------------------------------ Joel F. Bonder Name: Peter K. Kompaniez Secretary Title: President
EX-3.2 3 AMENDED AND RESTATED BYLAWS 1 EXHIBIT 3.2 AMENDED AND RESTATED BYLAWS OF APARTMENT INVESTMENT AND MANAGEMENT COMPANY 2 TABLE OF CONTENTS
PAGE ---- ARTICLE I OFFICES............................................................ 1 Section 1. Registered Office.................................................. 1 Section 2. Other Offices...................................................... 1 ARTICLE II STOCK.............................................................. 1 Section 1. Certificates Representing Stock.................................... 1 Section 2. Fractional Share Interests or Scrip................................ 2 Section 3. Share Transfers.................................................... 2 Section 4. Record Date for Stockholders....................................... 3 Section 5. Meaning of Certain Terms........................................... 3 ARTICLE III STOCKHOLDERS....................................................... 4 Section 1. Stockholder Meetings............................................... 4 Section 2. Informal Action.................................................... 7 ARTICLE IV BOARD OF DIRECTORS................................................. 7 Section 1. Functions and Definition........................................... 7 Section 2. Qualifications and Number.......................................... 8 Section 3. Election and Term.................................................. 8 Section 4. Meetings............................................................ 8 Section 5. Removal of Directors................................................ 9 Section 6. Committees......................................................... 10 Section 7. Informal Action.................................................... 10 ARTICLE V OFFICERS........................................................... 10 Section 1. Officers........................................................... 10 Section 2. Election of Officers............................................... 10 Section 3. Subordinate Officers............................................... 11 Section 4. Compensation of Officers........................................... 11 Section 5. Term of Office; Removal and Vacancies.............................. 11 Section 6. Chairman of the Board.............................................. 11
i 3 Section 7. Vice Chairman of the Board......................................... 11 Section 8. President.......................................................... 11 Section 9. Vice President..................................................... 12 Section 10. Secretary.......................................................... 12 Section 11. Assistant Secretaries.............................................. 12 Section 12. Treasurer.......................................................... 12 Section 13. Assistant Treasurer................................................ 13 ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS......................................... 13 ARTICLE VII STOCK LEDGER....................................................... 14 ARTICLE VIII GENERAL PROVISIONS................................................. 14 Section 1. Dividends.......................................................... 14 Section 2. Payment of Dividends............................................... 14 Section 3. Checks............................................................. 14 Section 4. Fiscal Year........................................................ 14 Section 5. Corporate Seal..................................................... 14 Section 6. Manner of Giving Notice........................................... 15 Section 7. Waiver of Notice................................................... 15 Section 8. Annual Statement................................................... 15 Section 9. Record Keeping..................................................... 15 ARTICLE IX AMENDMENTS......................................................... 15
ii 4 AMENDED AND RESTATED BYLAWS OF APARTMENT INVESTMENT AND MANAGEMENT COMPANY ARTICLE I OFFICES Section 1. Registered Office. The address of the initial principal office of the corporation in the State of Maryland and the name and the address of the initial resident agent of the corporation in the State of Maryland are set forth in the Articles of Incorporation. Section 2. Other Offices. The corporation may also have offices at such other places both within and without the State of Maryland as the Board of Directors may from time to time determine or the business of the corporation may require. ARTICLE II STOCK Section 1. Certificates Representing Stock. Certificates representing shares of stock shall set forth thereon the statements prescribed by Section 2-211 of the Maryland General Corporation Law and by any other applicable provision of law and shall be signed by the President or the Chairman of the Board, if any, or a Vice-President and countersigned by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer and may be sealed with the corporate seal or a facsimile of it or in any other form. The signatures of any such officers may be either manual or facsimile signatures. In case any such officer who has signed manually or by facsimile any such certificate ceases to be such officer before the certificate is issued, it may nevertheless be issued by the corporation with the same effect as if the officer had not ceased to be such officer as of the date of its issue. No certificate representing shares of stock shall be issued for any share of stock until such share is fully paid, except as otherwise authorized by the provisions of Section 2-210 of the Maryland General Corporation Law. 1 5 The corporation may issue a new certificate of stock in place of any certificate theretofore issued by it, alleged to have been lost, stolen, or destroyed, and the Board of Directors may, in its discretion, require the owner of any such certificate to give bond, with sufficient surety, to the corporation to indemnify it against any loss or claim that may arise by reason of the issuance of a new certificate. Upon compliance with the provisions of Section 2-514 of the Maryland General Corporation Law, the Board of Directors of the corporation may adopt by resolution a procedure by which a stockholder of the corporation may certify in writing to the corporation that any shares registered in the name of the stockholder are held for the account of a specified person other than the stockholder. Section 2. Fractional Share Interests or Scrip. The corporation may, but shall not be obliged to, issue fractional shares of stock, eliminate a fractional interest by rounding off to a full share of stock, arrange for the disposition of a fractional interest by the person entitled to it, pay cash for the fair value of a fractional share of stock determined as of the time when the person entitled to receive it is determined, or issue scrip or other evidence of ownership which shall entitle its holder to exchange such scrip or other evidence of ownership aggregating a full share for a certificate which represents the share; but such scrip or other evidence of ownership shall not, unless otherwise provided, entitle the holder to exercise any voting right, or to receive dividends thereon or to participate in any of the assets of the corporation in the event of liquidation. The Board of Directors may impose any reasonable condition on the issuance of scrip or other evidence of ownership, and may cause such scrip or evidence of ownership to be issued subject to the condition that it shall become void if not exchanged for a certificate representing a full share of stock before a specified date or subject to the condition that the shares for which such scrip or evidence of ownership is exchangeable may be sold by the corporation and the proceeds thereof distributed to the holders of such scrip or evidence of ownership, or subject to a provision for forfeiture of such proceeds to the corporation if not claimed within a period of not less than three years from the date the scrip or other evidence of ownership was originally issued. Section 3. Share Transfers. Upon compliance with provisions restricting the transferability of shares of stock, if any, transfers of shares of stock of the corporation shall be made only on the stock transfer books of the corporation by the record holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the corporation or with a transfer agent or a registrar, if any, and on surrender of the certificate or certificates for such shares of stock properly endorsed and the payment of all taxes due thereon, if any. 2 6 Section 4. Record Date for Stockholders. The Board of Directors may set a record date or direct that the stock transfer books be closed for a stated period for the purpose of making any proper determination with respect to stockholders, including which stockholders are entitled to notice of a meeting, to vote at a meeting, to receive a dividend, or to be allotted other rights; provided, that, except as may be otherwise provided herein, any such record date may not be prior to the close of business on the day the record date is fixed, shall be not more than ninety days before the date on which the action requiring the determination will be taken, that any such closing of the transfer books may not be for a period longer than twenty days, and that, in the case of a meeting of stockholders, any such record date or any such closing of the transfer books shall be at least ten days before the date of the meeting. If a record date is not set, and, if the stock transfer books are not closed, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the later of either the close of business on the day on which notice of the meeting is mailed or the thirtieth day before the meeting, and the record date for determining stockholders entitled to receive payment or a dividend or an allotment of any rights shall be the close of business on the date on which the resolution of the Board of Directors declaring the dividend or allotment of rights is adopted, by any such payment of a dividend or allotment of rights shall not be made more than sixty days after the date on which the resolution is adopted; and a meeting of stockholders convened on the date for which it was called may be adjourned from time to time without further notice to a date not more than one hundred and twenty days after the original record date. Section 5. Meaning of Certain Terms. As used herein in respect of the right to notice of a meeting of stockholders or a waiver thereof or to participate or vote thereat or to consent or dissent in writing in lieu of a meeting, as the case may be, the term "share of stock" or "shares of stock" or "stockholder" or "stockholders" refers to an outstanding share or shares of stock and to a holder or holders of record of outstanding shares of stock when the corporation is authorized to issue only one class of shares of stock. Said reference is also intended to include any outstanding share or shares of stock and any holder or holders of record of outstanding shares of stock of any class or series upon which or upon whom the Articles of Incorporation confer such rights where there are two or more classes or series of shares or upon which or upon whom the provisions of the Maryland General Corporation Law may confer such rights or the right of dissent notwithstanding that the Articles of Incorporation may provide for more than one class or series of shares of stock, one or more of which are limited or denied such rights thereunder. 3 7 ARTICLE III STOCKHOLDERS Section 1. Stockholder Meetings. (a) TIME. (i) Annual Meetings. The corporation shall hold an annual meeting of its stockholders to elect directors and transact any other business within its powers, either at 9:00 a.m. on the second Tuesday of May in each year if not a legal holiday, or at such other time or such other day falling on or before the 30th day thereafter as shall be set by the Board of Directors. (ii) Special Meetings. At any time in the interval between annual meetings, a special meeting of the stockholders may be called by the Chairman of the Board or the Vice-Chairman of the Board or the President or by a majority of the Board of Directors by vote at a meeting or in writing (addressed to the Secretary of the corporation) with or without a meeting. Special meetings of the stockholders shall be called as may be required by law. (b) PLACE. Annual meetings and special meetings shall be held at such place, either within the State of Maryland or at such other place within the United States, as the directors may, from time to time, set. Whenever the directors shall fail to set such place, or, whenever stockholders entitled to call a special meeting shall call the same, and a place of meeting is not set, the meeting shall be held at the principal office of the corporation in the State of Maryland. (c) CALL. Annual meetings may be called by the directors or the President or by any officer instructed by the directors or the President to call the meeting. Except as may be otherwise provided by the provisions of the Maryland General Corporation Law, special meetings may be called in like manner. Special meetings shall also be called by the Secretary whenever the holders of shares entitled to at least twenty-five percent of all the votes entitled to be cast at such meeting shall make a written request that such meeting be called. 4 8 (d) NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER OF NOTICE. Written notice of all meetings shall be given by the Secretary and shall state the time and place of the meeting. The notice of an annual meeting shall state that the meeting is called for the election of directors and for the transaction of other business which may properly come before the meeting, and shall (if any other action which could be taken at a special meeting is to be taken at such annual meeting) contain any additional statements required in a notice of a special meeting, and shall include a copy of any requisite statements or provisions prescribed by the provisions of the Maryland General Corporation Law; provided, however, that any business of the corporation may be transacted at any annual meeting without being specially noticed unless the provisions of the Maryland General Corporation Law provide otherwise. The notice of a special meeting shall in all instances state the purpose or purposes for which the meeting is called and shall include a copy of any requisite statements or provisions prescribed by the provisions of the Maryland General Corporation Law. Written notice of any meeting shall be given to each stockholder either by mail at the address as it appears on the records of the corporation or by personal delivery to such stockholder or by leaving such notice at his residence or usual place of business not less than ten days and not more than ninety days before the date of the meeting, unless any provision of the Maryland General Corporation Law shall prescribe a different period of time. If mailed, notice shall be deemed to be given when deposited in the United States mail addressed to the stockholder at his address as it appears on the records of the corporation with postage thereon prepaid. Whenever any notice of the time, place or purpose of any meeting of stockholders is required to be given under the provisions of the Articles of Incorporation, these Bylaws or of the provisions of the Maryland General Corporation Law, such notice may be waived by a writing signed by the stockholder and filed with records of the meeting, whether before or after the holding thereof, or by his presence in person or by proxy at the meeting. The foregoing requirements of notice shall also apply, whenever the corporation shall have any class of stock which is not entitled to vote, to holders of stock who are not entitled to vote at the meeting, but who are entitled to notice thereof and to dissent from any action taken thereat. (e) STATEMENT OF AFFAIRS. The President of the corporation, or, if the Board of Directors shall determine otherwise, some other executive officer thereof, shall prepare or cause to be prepared annually a full and correct statement of the affairs of the corporation, including a balance sheet and a financial statement of operations for the preceding fiscal year, which shall be submitted at the Annual Meeting and placed on file within twenty days thereafter at the principal office of the corporation in the State of Maryland. 5 9 (f) CONDUCT OF MEETINGS. Meetings of the stockholders shall be presided over by one of the following officers in the order of seniority and if present and acting: the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, the President, a Vice-President, or, if none of the foregoing is in office and present and acting, by a chairman to be chosen by the stockholders. The Secretary of the corporation, or in his absence, an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present the Chairman of the meeting shall appoint a secretary of the meeting. (g) ADJOURNMENT. Whether or not a quorum is present, a meeting of stockholders convened on the date for which it was called may be adjourned from time to time without further notice by the Chairman of the meeting, or by a majority vote of the stockholders present in person or by proxy, to a date not more than 120 days after the original record date. Any business which might have been transacted at the meeting as originally notified may be deferred and transacted at any such adjourned meeting at which a quorum shall be present. (h) PROXY REPRESENTATION. Every stockholder may authorize another person or persons to act for him by proxy in all matters in which a stockholder is entitled to participate, whether for the purposes of determining his presence at a meeting, or whether by waiving notice of any meeting, voting or participating at a meeting, or expressing consent or dissent without a meeting, or otherwise. Every proxy shall be executed in writing by the stockholder or by his duly authorized attorney in fact, and filed with the Secretary of the corporation. No proxy shall be valid more than eleven months from the date of its execution, unless the proxy provides otherwise. (i) INSPECTORS OF ELECTION. The directors, in advance of any meeting, may, but need not, appoint one or more inspectors to act at the meeting or any adjournment thereof. If an inspector or inspectors are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors. In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the directors in advance of the meeting or at the meeting, by the person presiding thereat. Each inspector, if any, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors, if any, shall determine the number of shares outstanding and the voting power of each, the shares presented at the meeting, the existing of a quorum, the validity and effect of proxies, 6 10 and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting or any stockholder, the inspector or inspectors, if any, shall make a report in writing of any challenge, question or matter determined by him or them and execute a certificate of any fact found by him or them. (j) QUORUM. Except as may otherwise be required by the provisions of the Maryland General Corporation Law, the Articles of Incorporation, or these Bylaws, the presence in person or by proxy at a meeting of the stockholders entitled to cast at least a majority of the votes entitled to be cast at the meeting shall constitute a quorum. (k) VOTING. Each share of stock shall entitle the holder thereof to one vote on each matter submitted to a vote at a meeting of stockholders except in the election of directors, at which each share of stock may be voted for as many individuals as there are directors to be elected and for whose election the share is entitled to be voted may be cast for as many persons as there are directors to be elected. Except as may otherwise be provided in the provisions of the Maryland General Corporation Law, the Articles of Incorporation or these Bylaws, a majority of all the votes cast at a meeting of stockholders at which a quorum is present shall be sufficient to approve any matter which may properly come before the meeting. A plurality of all the votes cast at a meeting of stockholders at which a quorum is present is sufficient to elect a director. Section 2. Informal Action. Any action required or permitted to be taken at any meeting of stockholders may be taken without a meeting if the following are filed with the records of the meeting: an unanimous written consent which sets forth the action and is signed by each stockholder entitled to vote on the matter, and, as applicable, a written waiver of any right to dissent signed by each stockholder entitled to notice of the meeting but not entitled to vote at it. ARTICLE IV BOARD OF DIRECTORS Section 1. Functions and Definition. The business and affairs of the corporation shall be managed by or under the direction of its Board of Directors. All powers of the corporation may be exercised by or under authority of said Board 7 11 of Directors. The use of the phrase "entire board" herein refers to the total number of directors which the corporation would have if there were no vacancies. Section 2. Qualifications and Number. Each director shall be a natural person at least 18 years of age. A director need not be a stockholder, a citizen of the United States, or a resident of the State of Maryland. The initial Board of Directors shall consist of the persons set forth in the Articles of Incorporation. Thereafter the number of directors constituting the entire board shall consist of not less than three (3) nor more than nine (9) persons who shall be chosen by the stockholders. Each member of the Board of Directors shall serve for a period of one (1) year. Section 3. Election and Term. The first Board of Directors shall consist of the directors named in the Articles of Incorporation and shall hold office until the first annual meeting of stockholders or until their successors have been elected and qualified. Thereafter, directors who are elected at an annual meeting of stockholders, and directors who are elected in the interim to fill vacancies and newly created directorships, shall hold office until the next annual meeting of stockholders and until their successors have been elected and qualified. In the interim between annual meetings of stockholders or of special meetings of stockholders called for the election of directors, newly created directorships and any vacancies in the Board of Directors, including vacancies resulting from the removal of directors by the stockholders which have not been filled by said stockholders, may be filled by the Board of Directors. Newly created directorships shall be filled by action of a majority of the entire Board of Directors. All other vacancies to be filled by the Board of Directors may be filled by a majority of the remaining members of the Board of Directors, whether or not sufficient to constitute a quorum. A director elected by the Board of Directors to fill a vacancy serves until the next annual meeting of stockholders and until his successor is elected and qualified. Section 4. Meetings. (a) TIME. Meetings shall be held at such time as the Board shall set, except that the first meeting of a newly elected Board shall be held as soon after its election as the directors may conveniently assemble. (b) PLACE. Meetings shall be held at such place within or without the State of Maryland as shall be set by the Board. 8 12 (c) CALL. No call shall be required for regular meetings for which the time and place have been fixed. Special meetings may be called by or at the direction of the Chairman of the Board, if any, of the President, or of a majority of the directors in office. (d) NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required for regular meetings for which the time and place have been fixed. Written, oral or any other mode of notice of the time and place shall be given for special meetings in sufficient time for the convenient assembly of the directors thereat. The notice of any meeting need not specify the business to be transacted or the purpose of the meeting. Whenever any notice of the time, place, or purpose of any meeting of directors or any committee thereof is required to be given under the provisions of the Maryland General Corporation Law or of these Bylaws, such notice may be waived by a writing signed by the director or committee member entitled to such notice and filed with the records of the meeting, whether before or after the meeting, or by presence at the meeting. (e) QUORUM AND ACTION. A majority of the entire Board of Directors shall constitute a quorum except when a vacancy or vacancies prevents such majority, whereupon a majority of the directors in office shall constitute a quorum, provided such majority shall constitute at least one-third of the entire Board and, in no event, less than two directors (provided, that whenever the entire Board of Directors consists of one director, that one director shall constitute a quorum). Except as in the Articles of Incorporation and herein otherwise provided and, except as in provisions of the Maryland General Corporation Law otherwise provided, the action of a majority of the directors present at a meeting at which a quorum is present shall be the action of the Board of Directors. Members of the Board of Directors or of a committee thereof may participate in a meeting by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time; and participation by such means shall constitute presence in person at a meeting. (f) CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if present and acting, shall preside at all meetings. Otherwise, the President, if present and acting, or any other director chosen by the Board, shall preside. Section 5. Removal of Directors. Any or all of the directors may be removed, with or without cause by the affirmative vote of a majority of all the votes entitled to be cast for the election of directors. 9 13 Section 6. Committees. The Board of Directors may appoint from among its members an Executive Committee and other committees composed of two or more directors, and may delegate to such committee or committees any of the powers of the Board of Directors except such powers as may not be delegated under the provisions of the Maryland General Corporation Law. In the absence of any member of any such committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint a member of the Board of Directors to act in the place of such absent member. Section 7. Informal Action. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if a written consent to such action is signed by all members of the Board of Directors or any such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board or any such committee. ARTICLE V OFFICERS Section 1. Officers. The corporation shall have a President, a Secretary, and a Treasurer, and may have a Chairman of the Board, a Vice-Chairman of the Board and one or more Vice-Presidents, who shall be elected by the Board of Directors, and may also have any such other officers, assistant officers, and agents as the Board of Directors shall authorize from time to time, each of whom shall be elected or appointed in the manner prescribed by the Board of Directors. Any two or more offices, except those of President, Vice-Chairman and Vice-President, may be held by the same person, but no person shall execute, acknowledge or verify any instrument in more than one capacity, if such instrument is required by law to be executed, acknowledged or verified by more than one officer. Unless otherwise provided in the resolution of election or appointment, each officer shall hold office until the meeting of the Board of Directors following the next annual meeting of stockholders and until his successor has been elected or appointed or qualified. The officers and agents of the corporation shall have the authority and perform the duties in the management of the corporation as determined by the resolution electing or appointing them. Section 2. Election of Officers. The Board of Directors, at its first meeting after each annual meeting of stockholders, shall choose the officers of the corporation. 10 14 Section 3. Subordinate Officers. The Board of Directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board. Section 4. Compensation of Officers. The salaries of all officers and agents of the corporation shall be fixed by the Board of Directors. Section 5. Term of Office; Removal and Vacancies. The officers of the corporation shall hold office until their successors are chosen and qualify in their stead. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors whenever, in its judgment, the best interests of the corporation will be served thereby. If the office of any officer or officers becomes vacant for any reason, the vacancy shall be filled by the Board of Directors. Section 6. Chairman of the Board. The Chairman of the Board shall be the Chief Executive Officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and affairs of the corporation. If present, he shall preside at all meetings of the stockholders and at all meetings of the Board of Directors. He shall be an ex-officio member of all committees and shall have the general powers and duties of management usually vested in the office of President and Chief Executive Officer of the corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors or these Bylaws. Section 7. Vice Chairman of the Board. The Vice Chairman of the Board, if such an officer be elected, shall preside in the absence or disability of the Chairman of the Board at all meetings of the stockholders and at all meetings of the Board of Directors, and shall exercise and perform such other powers and duties as may be from time to time assigned to him by the Board of Directors or prescribed by these Bylaws. Section 8. President. In the absence or disability of the Chairman of the Board, the President shall perform all of the duties of the Chief Executive Officer of the corporation, and when so acting shall have all the powers of and be subject to all the restrictions upon the Chief Executive Officer. The President shall have such other duties as from time to time may be prescribed for him by the Board of Directors. 11 15 Section 9. Vice President. In the absence or disability of the President, the Vice Presidents in order of their rank as fixed by the Board of Directors, or if not ranked, the Vice President designated by the Board of Directors, shall perform all the duties of the President, and when so acting shall have all the powers of and be subject to all the restrictions upon the President. The Vice President shall have such other duties as from time to time may be prescribed for them, respectively, by the Board of Directors. Section 10. Secretary. The Secretary shall attend all sessions of the Board of Directors and all meetings of the stockholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose; and shall perform like duties for the standing committees when required by the Board of Directors. He shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or these Bylaws. He shall keep in safe custody the seal of the corporation, and when authorized by the Board, affix the same to any instrument requiring it, and when so affixed it shall be attested by his signature or by the signature of an Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the corporation and to attest to the seal by his signature. Section 11. Assistant Secretaries. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board of Directors, or if there be no such determination, the Assistant Secretary designated by the Board of Directors, shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. Section 12. Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys, and other valuable effects in the name and to the credit of the corporation, in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the corporation. If required by the Board of Directors, he shall give the corporation a bond, in such sum and with such surety or sureties as shall be satisfactory to the 12 16 Board of Directors, for the faithful performance of the duties of his office and for the restoration of the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. Section 13. Assistant Treasurer. The Assistant Treasurer, of if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors, or if there be no such determination, the Assistant Treasurer designated by the Board of Directors, shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS The corporation shall, to the maximum extent permitted by the Maryland General Corporation Law indemnify each of its directors and officers against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceeding arising by reason of the fact any such person is or was a director or officer of the corporation and shall advance to such director or officer expenses incurred in defending any such proceeding to the maximum extent permitted by such law. For purposes of this Article VI, a "director" or "officer" of the corporation includes any person who is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, or other enterprise, or was a director or officer of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation. The Board of Directors may in its discretion provide by resolution for such indemnification of, or advance of expenses to, other agents of the corporation, and likewise may refuse to provide for such indemnification or advance of expenses except to the extent such indemnification is mandatory under the Maryland General Corporation Law. 13 17 ARTICLE VII STOCK LEDGER The corporation shall maintain, at its principal office in the State of Maryland or at a business office or an agency of the corporation an original or duplicate stock ledger containing the name and address of each stockholder and the number of shares of each class held by each stockholder. Such stock ledger may be in written form or any other form capable of being converted into written form within a reasonable time for visual inspection. ARTICLE VIII GENERAL PROVISIONS Section 1. Dividends. Dividends upon the capital stock of the corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation. Section 2. Payment of Dividends. Before payment of any dividend there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interests of the corporation, and the directors may abolish any such reserve. Section 3. Checks. All checks or demands for money and notes of the corporation shall be signed by such officer or officers as the Board of Directors may from time to time designate. Section 4. Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors. Section 5. Corporate Seal. The corporate seal shall have inscribed thereon the name of the corporation and shall be in such form and contain such other words and/or figures as the Board of Directors shall determine or the law require. 14 18 Section 6. Manner of Giving Notice. Whenever, under the provisions of the statutes or of the Certificate of Incorporation or of these Bylaws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram. Section 7. Waiver of Notice. Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation or of these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed to be equivalent. Section 8. Annual Statement. The Board of Directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation. Section 9. Record Keeping. The corporation shall keep at its principal office in the State of Maryland the original or a certified copy of the Bylaws, including all amendments thereto, and shall duly file thereat the annual statements of affairs of the corporation. ARTICLE IX AMENDMENTS These Bylaws may be altered, amended or repealed or new Bylaws may be adopted by the stockholders or by the Board of Directors, when such power is conferred upon the Board of Directors by the Articles of Incorporation, at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new Bylaws be contained in the notice of such special meeting. If the power to adopt, amend or repeal Bylaws is conferred upon the Board of Directors by the Articles of Incorporation it shall not divest or limit the power of the stockholders to adopt, amend or repeal Bylaws. 15 19 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Amendment to Article IV, Section 6 of the Bylaws Adopted October 21, 1998 Existing Article IV, Section 6: Section 6. Committees. The Board of Directors may appoint from among its members an Executive Committee and other committees composed of two or more directors, and may delegate to such committee or committees any of the powers of the Board of Directors except such powers as may not be delegated under the provisions of the Maryland General Corporation Law. In the absence of any member of any such committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint a member of the Board of Directors to act in the place of such absent member. Proposed Article IV, Section 6: Section 6. Committees. The Board of Directors may appoint from among its members an Executive Committee and other committees composed of one or more directors and delegate to these committees any of the powers of the Board of Directors, except the power to authorize dividends on stock, elect directors, issue stock other than as provided in the next sentence, recommend to the stockholders any action which requires stockholder approval, amend these By-Laws, or approve any merger or share exchange which does not require stockholder approval. If the Board of Directors has given general authorization for the issuance of stock providing for or establishing a method or procedure for determining the maximum number of shares to be issued, a committee of the Board, in accordance with that general authorization or any stock option or other plan or program adopted by the Board of Directors, may authorize or fix the terms of stock subject to classification or reclassification and the terms on which any stock may be issued, including all terms and conditions required or permitted to be established or authorized by the Board of Directors. Each committee may fix rules of procedure for its business. A majority of the members of a committee shall constitute a quorum for the transaction of business and the act of a majority of those present at a meeting at which a quorum is present shall be the act of the committee. The members of a committee present at any meeting, whether or not they constitute a quorum, may appoint a director to act in the place of an absent member. EX-4.3 4 FIRST SUPPLEMENTAL INDENTURE - 10/1/98 1 EXHIBIT 4.3 FIRST SUPPLEMENTAL INDENTURE, dated as of October 1, 1998 (the "First Supplemental Indenture"), by and among Apartment Investment and Management Company, a Maryland corporation (the "Company"), Insignia Financial Group, Inc., a Delaware corporation (the "Issuer"), and First Union National Bank (formerly First Union National Bank of South Carolina), a national banking association, as Trustee (the "Trustee") under the Indenture, dated as of November 1, 1996, by and between the Issuer and the Trustee (the "Indenture"). Capitalized terms used herein and not defined herein shall have the meanings given such terms in the Indenture. WHEREAS, the Company, the Issuer, Insignia/ESG Holdings, Inc., a Delaware corporation, and AIMCO Properties, L.P., a Delaware limited partnership, entered into an Amended and Restated Agreement and Plan of Merger, dated as of May 26, 1998 (the "Merger Agreement"), whereby the Issuer will be merged with and into the Company, with the Company being the surviving corporation (the "Merger"); and WHEREAS, Section 12.1 of the Indenture prohibits the Issuer from merging with any other corporation where such other corporation is the continuing corporation, unless, among other things, such continuing corporation expressly assumes the due and punctual payment of the Issuer's 6 1/2% Convertible Subordinated Debentures Due 2016 (the "Debentures"), according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of the Indenture to be performed or observed by the Issuer, by supplemental indenture satisfactory to the Trustee. NOW, THEREFORE, inconsideration of the foregoing, the parties hereto agree as follows: 1. The Company hereby expressly and unconditionally assumes the due and punctual payment of the principal of, premium, if any, and interest on all the Debentures issued pursuant to the Indenture according to their tenor and the Company hereby expressly and unconditionally assumes the performance or observance of all of the covenants and conditions of the Debentures and the Indenture to be performed or observed by the Issuer as if the Company had been originally named in the Indenture as the "Company" (as such term is defined therein). 1 2 2. The Company hereby represents and warrants that, assuming that the Issuer is not in default in the performance of any of the covenants or conditions to be performed or observed by the Issuer under the Indenture immediately prior to the consummation of the Merger, the Company will not be in default in the performance or observance of any such covenants or conditions immediately after the consummation of the Merger. 3. Except as provided herein, all of the terms and conditions of the Indenture shall remain in full force and effect. This First Supplemental Indenture is an indenture supplemental to and in implementation of the Indenture, and the Indenture and this First Supplemental Indenture shall henceforth be read and construed together. 4. The Trustee accepts the succession of the Company as issuer under the Indenture as evidenced by this First Supplemental Indenture. Without limiting the generality of the foregoing, the Trustee assumes no responsibility for the correctness of the recitals herein contained, which shall be taken as the statements of the Company. The Trustee makes no representation and shall have no responsibility as to the validity of this First Supplemental Indenture. 5. Notwithstanding any provision contained herein or in the Indenture, it is hereby acknowledged that the Company will (i) consummate the Merger, (ii) consummate the transfer of substantially all the assets of the Issuer (including the Common Securities of the Insignia Trust) to certain subsidiaries of the Company and partially-owned subsidiary partnerships of the Company in exchange for fair value and (iii) perform all other necessary or desirable actions in connection with the Merger and the post-Merger restructuring of the assets obtained from the Issuer in the Merger. 6. In case any provision in this First Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions of this First Supplemental Indenture or of the Indenture shall not in any way be affected or impaired thereby. 7. THIS FIRST SUPPLEMENTAL INDENTURE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF. 2 3 8. This First Supplemental Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but such counterparts shall together constitute but one and the same instrument. * * * * * 3 4 IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed on the date first above written. APARTMENT INVESTMENT AND MAN AGEMENT COMPANY By: /s/ PETER KOMPANIEZ --------------------------------- Name: Peter Kompaniez Title: President FIRST UNION NATIONAL BANK By: /s/ R. DOUGLAS MILNER --------------------------------- Name: R. Douglas Milner Title: Vice President 4 EX-10.2 5 FIRST AMENDMENT TO CREDIT AGREEMENT - 11/6/98 1 EXHIBIT 10.2 AIMCO PROPERTIES, L.P. FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT This FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this "Amendment") is dated as of November 6, 1998 (the "Amendment Effective Date") and entered into by and among AIMCO PROPERTIES, L.P., a Delaware limited partnership ("Borrower"), the financial institutions listed on the signature pages hereof ("Lenders") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as agent for Lenders ("Agent"), and BANKBOSTON, N.A. as one of the Lenders and the Documentation Agent and is made with reference to that certain Amended and Restated Credit Agreement dated as of October 1, 1998, (as amended by this Amendment, the "Credit Agreement"), by and among Borrower, Lenders and Agent. Capitalized terms used in this Amendment without definition are used as defined in the Credit Agreement. The Guarantor Subsidiaries set forth on pages S-5 through S-20 are only a party to this Amendment for the purposes of Section 4 and are not a party to the Credit Agreement. RECITAL WHEREAS, Borrower and Lenders desire to amend the Credit Agreement to (a) provide for an increase in the borrowing availability attributable to the Palencia Bond and (b) to conform the Revolver Maturity Date to the maturity date in the Lehman Unsecured Facility Documents, all as more particularly set forth below; NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: Section 1. AMENDMENTS TO THE CREDIT AGREEMENT 1.1 AMENDMENTS TO SECTION 1: PROVISIONS RELATING TO DEFINED TERMS A. Subsection 1.1 of the Credit Agreement is hereby amended by deleting the definitions "Borrowing Ratio" and "Revolver Maturity Date" and substituting them with the following definitions into subsection 1.1 in the proper alphabetical order: "Borrowing Ratio" means the quotient of 1 divided by 1.30, multiplied by 100 and expressed as a percentage. "Revolver Maturity Date" means the maturity date of the Revolver, which shall be September 30, 1999, subject, however, to earlier acceleration pursuant to the provisions of the Loan Documents. 2 Section 2. CONDITIONS TO EFFECTIVENESS This Amendment shall become effective on the Amendment Effective Date, if each of the following conditions are satisfied: A. Borrower has delivered to Lenders (or to Agent for Lenders with sufficient originally executed copies, where appropriate, for each Lender and its counsel) executed copies of this Amendment and any required guaranties from the additional Guarantor Subsidiaries, each, unless otherwise noted, dated as of the Amendment Effective Date: B. If required by Agent, Lenders and their respective counsel shall have received originally executed copies of one or more favorable written opinions of counsel for Borrower and the Guarantor Subsidiaries in form and substance satisfactory to Agent and its counsel, dated as of the Amendment Effective Date with respect to the validity, binding effect and enforceability of the Credit Agreement and due authorization, execution and delivery thereof, and as to such other matters as Agent acting on behalf of Lenders may reasonably request. Section 3. BORROWER'S REPRESENTATIONS AND WARRANTIES In order to induce Lenders to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, Borrower represents and warrants to each Lender that the following statements are true, correct and complete: A. CORPORATE POWER AND AUTHORITY. Borrower has all requisite corporate power and authority to enter into this Amendment and any other agreements, guaranties or other operative documents to be delivered by Borrower pursuant to the Amendment, to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement. Each of the Borrower, the REIT and the Guarantor Subsidiaries are in good standing in the respective states of their organization on the Amendment Effective Date. B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of this Amendment and the performance of the Credit Agreement have been duly authorized by all necessary corporate action on the part of Borrower and the other parties delivering any of such documents, as the case may be. The organizational documents of the Borrower, the REIT and the Guarantor Subsidiaries have not been modified in any material respect since October 1, 1998. C. NO CONFLICT. The execution and delivery by Borrower and the Guarantor Subsidiaries of this Amendment and the performance by Borrower of the Credit Agreement by Borrower do not and will not (i) violate any provision of any law or any governmental rule or regulation applicable to Borrower or any of its Subsidiaries, their respective Organizational Documents or any order, judgment or decree of any court or other agency of government binding on Borrower, the REIT or any of their Subsidiaries, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of Borrower, the REIT or any of their Subsidiaries, (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets of Borrower, the REIT or any of their Subsidiaries, or (iv) require any 2 3 approval of stockholders or any approval or consent of any Person under any Contractual Obligation of Borrower, the REIT or any of their Subsidiaries. D. GOVERNMENTAL CONSENTS. The execution and delivery by Borrower and the Guarantor Subsidiaries of this Amendment and the performance by Borrower and the Guarantor Subsidiaries of the Credit by Borrower do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any federal, state or other governmental authority or regulatory body. E. BINDING OBLIGATION. This Amendment and the Credit Agreement have been duly executed and delivered by Borrower and the Guarantor Subsidiaries, as applicable, and are, and the Guarantor Subsidiaries, as applicable, enforceable against Borrower and/or the Guarantor Subsidiaries, as applicable, in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. F. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT AGREEMENT. The representations and warranties contained in Section 5 of the Credit Agreement are and will be true, correct and complete in all material respects on and as of the date hereof to the same extent as though made on and as of that date, except Section 5.5 and other representations and warranties solely to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date. G. ABSENCE OF DEFAULT. No event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment that would constitute an Event of Default or a Default. Section 4. ACKNOWLEDGEMENT AND CONSENT Guarantor Subsidiaries are party to the Guaranties, in each case as amended through the date hereof, pursuant to which Guarantor Subsidiaries have guarantied the Obligations. Nothing in this Section 4 shall be construed to make the Guarantor Subsidiaries a party to the Credit Agreement or to create any obligation in respect thereof except pursuant to each Guaranty. Each Guarantor Subsidiary hereby acknowledges that it has reviewed the terms and provisions of the Credit Agreement and this Amendment and consents to the amendment of the Credit Agreement effected pursuant to this Amendment. Each Guarantor Subsidiary hereby confirms that each Guaranty to which it is a party or otherwise bound will continue to guaranty or secure, as the case may be, to the fullest extent possible the payment and performance of all of the "Indebtedness" (as defined in the applicable Guaranty), including without limitation the payment and performance of all such "Indebtedness," as the case may be, in respect of the Obligations of Borrower now or hereafter existing under or in respect of the Credit Agreement and the Notes defined therein. 3 4 Each Guarantor Subsidiary acknowledges and agrees that any Guaranty to which it is a party or otherwise bound shall continue in full force and effect and that all of its obligations thereunder shall be valid and enforceable and shall not be impaired or limited by the execution or effectiveness of this Amendment. Each Guarantor Subsidiary represents and warrants that all representations and warranties contained in the Credit Agreement and the Guaranty to which it is a party or otherwise bound are true, correct and complete in all material respects on and as of the Amendment Effective Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date. Each Guarantor Subsidiary acknowledges and agrees that (i) notwithstanding the conditions to effectiveness set forth in this Amendment, such Guarantor Subsidiary is not required by the terms of the Credit Agreement or any other Loan Document to consent to the amendments to the Credit Agreement effected pursuant to this Amendment and (ii) nothing in the Credit Agreement, this Amendment or any other Loan Document shall be deemed to require the consent of such Guarantor Subsidiary to any future amendments to the Credit Agreement. Section 5. MISCELLANEOUS A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS. (i) On and after the Amendment Effective Date, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to the "Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement shall mean and be a reference to the Credit Agreement, as amended by this Amendment. (ii) Except as specifically amended by this Amendment, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. (iii) The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of Agent or any Lender under, the Credit Agreement or any of the other Loan Documents. B. FEES AND EXPENSES. Borrower acknowledges that all costs, fees and expenses incurred by Agent and its counsel with respect to this Amendment and the documents and transactions contemplated hereby shall be for the account of Borrower. C. HEADINGS. Section and subsection headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect. 4 5 D. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Amendment shall become effective upon (i) the receipt by Agent of written or facsimile consent from Lehman Commercial Paper Inc. ("LCI"), in its capacity as administrative agent under the Lehman Unsecured Facility Documents, pursuant to Section 2(a) of that certain Intercreditor Agreement dated October 1, 1998 among Agent, LCI and Lehman Brothers, Inc., and (ii) the execution of a counterpart hereof by Borrower and the Requisite Lenders, and receipt by Borrower and Agent of written, facsimile or telephonic notification of such execution and authorization of delivery thereof. [Signatures on Attached Pages S-1 through S-20] 5 6 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first written above. BORROWER AIMCO PROPERTIES, L.P., a Delaware limited partnership By: AIMCO-GP, INC., a Delaware corporation, its general partner By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President Notices to be sent to: 1873 South Bellaire Street 17th Floor Denver, Colorado 80222 Attention: Peter K. Kompaniez, President Facsimile: (303) 757-8735 S-6 7 B OF A BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Lender and as the Issuing Lender By: /s/ ROBERT N. ALLEN Name: Robert N. Allen Title: Vice President Notices to be sent to: Bank of America National Trust and Savings Association CRES #1313 555 South Flower Street, 6th Floor Los Angeles, CA 90071 Attention: M. Harvey Telephone: 213/228-4013 Facsimile: 213/228-5389 Payments to be made to: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION 333 S. Beaudry Ave. Loan Accounting Dept #1503 Los Angeles, CA 90017 ABA #: 121 000 358 Credit Account #: 15033-00401 Attention: Unit Representative Ref: AIMCO Unsecured Revolver S-7 8 AGENT BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: /s/ ROBERT N. ALLEN Name: Robert N. Allen Title: Vice President Notices to be sent to: Bank of America National Trust and Savings Association CRES #1313 555 South Flower Street, 6th Floor Los Angeles, CA 90071 Attention: M. Harvey Telephone: 213/228-4013 Facsimile: 213/228-5389 Payments to be made to: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ABA #: 121 000 358 Credit Account #: 15033-00401 Attention: Unit Representative Ref: AIMCO Unsecured Revolver S-8 9 BANKBOSTON, N.A., LENDER AND DOCUMENTATION AGENT BANKBOSTON, N.A. By: /s/ KATHLEEN M. AHERN Name: Kathleen M. Ahern Title: Vice President Notices to be sent to: BankBoston, N.A. 100 Federal Street Mail Stop 01-32-04 Boston, MA 02110 Attention: Andrea Martingnetti Telephone: (617) 434-2835 Facsimile: (617) 434-0645 Payments to be made to: BANKBOSTON, N.A. ABA #: 011-000-390 Credit Loan #: 1102655 Attention: Linda Wheeler/CLS Ref: AIMCO Unsecured Revolver S-9 10 GUARANTOR SUBSIDIARIES Address Where Notices to Guarantors are to be Sent: 1873 South Bellaire Street 17th Floor Denver, Colorado 90071 APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President AIMCO-GP, INC., a Delaware corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President AIMCO-LP, INC., a Delaware corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President AIMCO HOLDINGS, LP, a Delaware limited partnership By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, General Partner By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President S-10 11 AIMCO HOLDINGS QRS, INC., a Delaware corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President AIMCO SOMERSET, INC., a Delaware corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President AIMCO PROPERTIES FINANCE CORP., a Delaware corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President AIMCO PROPERTIES FINANCE PARTNERSHIP, L.P., a Delaware limited partnership By: AIMCO Properties Finance Corp. a Delaware corporation General Partner By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President AIMCO/OTC QRS, INC., a Delaware corporation S-11 12 By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President PROPERTY ASSET MANAGEMENT SERVICES, INC., a Delaware corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President PROPERTY ASSET MANAGEMENT SERVICES, L.P. a Delaware limited partnership By: AIMCO PROPERTIES, L.P., General Partner By: AIMCO-GP, INC. a Delaware corporation General Partner By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President NHP MANAGEMENT COMPANY, a District of Columbia corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President S-12 13 PROPERTY MANAGEMENT SERVICES-CALIFORNIA, LLC, a California limited liability company PROPERTY ASSET MANAGEMENT SERVICES, L.P. a Delaware limited partnership Member By: AIMCO PROPERTIES, L.P., General Partner By: AIMCO-GP, INC. a Delaware corporation General Partner By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President AMBASSADOR II, L.P., a Delaware limited partnership By: AMBASSADOR II, INC., a Delaware corporation General Partner By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President AMBASSADOR X, L.P., a Delaware limited partnership By: AMBASSADOR X, INC., a Delaware corporation General Partner By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President S-13 14 AMBASSADOR IV, INC., a Delaware corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President AMBASSADOR V, INC., a Delaware corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President AMBASSADOR FLORIDA PARTNERS, INC., a Delaware corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President A.J. TWO, INC., a Delaware corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President AIMCO/NHP HOLDINGS, INC., a Delaware corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President S-14 15 AIMCO/NHP PROPERTIES, INC., a Delaware corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President NHP TEXAS MANAGEMENT COMPANY a Texas corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President NHP PUERTO RICO MANAGEMENT COMPANY a Delaware corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President RESCORP REALTY, INC., an Illinois corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President NHP CONGRESS MANAGEMENT LP a Virginia limited partnership By: NHP-HG SIX, INC. General Partner By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President S-15 16 NHP FLORIDA MANAGEMENT COMPANY a Florida corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President NHP/PRC MANAGEMENT COMPANY LLC, a Delaware limited liability company By: NHP Management Company a District of Columbia corporation Member By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President BROADSTREET MANAGEMENT, INC. an Ohio corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President NHP-HG 15, INC., a Virginia corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President NHP-HG 17, INC., a Virginia corporation S-16 17 By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President NHP HDV THREE, INC. a Delaware corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President NHP A&R SERVICES, INC. a Delaware corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President NHP CASH MANAGEMENT SERVICES, INC., a Virginia corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President PROPERTY SERVICES GROUP, INC., a District of Columbia corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President THE RISK SPECIALIST GROUP, INC., a District of Columbia corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President S-17 18 NHP MAINTENANCE SERVICES COMPANY a Virginia corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President NHP EQUITY SERVICES, INC., a Virginia corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President NHP ASSET MANAGEMENT SERVICES, INC., a Virginia corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President HP-HDV 20, INC., a Virginia corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President PREFERRED HOME HEALTH, INC., a Florida corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President S-18 19 NHP-HDV TEN, INC., a Delaware corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President NHP-HDV SIXTEEN, INC., a Delaware corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President AG PROPERTIES, LLC, a Delaware limited liability company By: Apartment Investment and Management Company, a Maryland corporation Member By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President SECURITY MANAGEMENT, INC., a Washington corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President INSIGNIA RESIDENTIAL MANAGEMENT, INC., a Delaware corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President S-19 20 INSIGNIA RESIDENTIAL GROUP, L.P., a Delaware limited partnership By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President By: Insignia Residential Corporation General Partner By: Insignia Residential Corporation General Partner By /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President INSIGNIA RESIDENTIAL GROUP OF ALABAMA, INC., a Delaware corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President INSIGNIA RESIDENTIAL GROUP OF CALIFORNIA, INC., a Delaware corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President INSIGNIA RESIDENTIAL GROUP OF COLORADO, INC., a Colorado corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President S-20 21 INSIGNIA RESIDENTIAL GROUP OF TEXAS, INC., a Delaware corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President AG MANAGEMENT, LLC, a Delaware limited liability company By: Apartment Investment and Management Company, a Maryland corporation Member By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President AG A&R SERVICES, LLC, a Delaware limited liability company By: Apartment Investment and Management Company, a Maryland corporation Member By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President S-21 22 NPI-AP MANAGEMENT, L.P., a Delaware limited partnership By: /s/ PETER K. KOMPANIEZ By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President APTEK MANAGEMENT COMPANY, LLC, a Delaware limited liability company By: NHP Management Company a District of Columbia corporation Member By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President APTEK MAINTENANCE SERVICES, LLC, a Delaware limited liability company By: NHP Maintenance Services Company a Virginia corporation Member By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President CPF XIV/ST. CHARLESTON, INC., a Nevada corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President S-22 23 CPF XIV/TORREY PINES, INC., a Nevada corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President CPF XIV/SUN RIVER, INC., an Arizona corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President CPF XIV/LAKESIDE PLACE, INC., a Texas corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President CONCAP CCP/IV STRATFORD PLACE PROPERTIES, INC., a Texas corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President CONCAP CCP/IV RIVER'S EDGE PROPERTIES, INC., a Texas corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President S-23 24 PRA, INC., a Georgia corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President NATIONAL PROPERTY INVESTORS, INC., a Delaware corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President AMREAL CORPORATION a South Carolina corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President DBL PROPERTIES CORPORATION a New York corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President COLONY OF SPRINGDALE PROPERTIES, INC., a Texas corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President S-24 25 SF GENERAL, INC., a Delaware corporation By: /s/ PETER K. KOMPANIEZ Peter K. Kompaniez President S-25 EX-10.12 6 3RD AMENDMENT TO 3RD AMENDED/RESTATED AGREEMENT 1 EXHIBIT 10.12 THIRD AMENDMENT TO THE THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF AIMCO PROPERTIES, L.P. This THIRD AMENDMENT TO THE THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF AIMCO PROPERTIES, L.P., dated as of February 18, 1999 (this "Amendment"), is being executed by AIMCO-GP, Inc., a Delaware corporation (the "General Partner"), as the general partner of AIMCO Properties, L.P., a Delaware limited partnership (the "Partnership"), pursuant to the authority conferred on the General Partner by Section 7.3.C(7) of the Third Amended and Restated Agreement of Limited Partnership of AIMCO Properties, L.P., dated as of July 29, 1994 (the "Agreement"). Capitalized terms used, but not otherwise defined herein, shall have the respective meanings ascribed thereto in the Agreement. WHEREAS, on February 18, 1999, the Previous General Partner filed Articles Supplementary amending its Charter to reclassify 5,750,000 shares of authorized but unissued shares of its Class A Common Stock, par value $.01 per share, as shares of its Class K Convertible Cumulative Preferred Stock, par value $.01 per share (the "Class K Preferred Stock"); WHEREAS, in accordance with Section 4.3.E of the Agreement, upon the issuance of any such shares of Class K Preferred Stock, the Previous General Partner will contribute the net cash proceeds from such issuance to the Special Limited Partner, which will contribute such net cash proceeds to the Partnership in exchange for a number of Partnership Preferred Units equal to the number of shares of Class K Preferred Stock so issued, which Partnership Preferred Units shall have designations, preferences and other rights, terms and provisions that are substantially the same as the designations, preferences and other rights, terms and provisions of the Class K Preferred Stock; and WHEREAS, pursuant to Section 4.2.A of the Agreement, the General Partner is authorized to determine the designations, preferences and relative, participating, optional or other special rights, powers and duties of such Partnership Preferred Units. NOW, THEREFORE, in consideration of the foregoing, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. The Agreement is hereby amended by the addition of a new exhibit, entitled "Exhibit P," in the form attached hereto, which shall be attached to and made a part of the Agreement. 2 2. Except as specifically amended hereby, the terms, covenants, provisions and conditions of the Agreement shall remain unmodified and continue in full force and effect and, except as amended hereby, all of the terms, covenants, provisions and conditions of the Agreement are hereby ratified and confirmed in all respects. 2 3 IN WITNESS WHEREOF, this Amendment has been executed as of the date first written above. GENERAL PARTNER: AIMCO-GP, INC. By: /s/ PETER KOMPANIEZ ---------------------------------- Name: Peter Kompaniez Title: President and Vice Chairman 4 EXHIBIT P PARTNERSHIP UNIT DESIGNATION OF THE CLASS K PARTNERSHIP PREFERRED UNITS OF AIMCO PROPERTIES, L.P. 1. NUMBER OF UNITS AND DESIGNATION. A class of Partnership Preferred Units is hereby designated as "Class K Partnership Preferred Units," and the number of Partnership Preferred Units constituting such class shall be 5,750,000. 2. DEFINITIONS. For purposes of the Class K Partnership Preferred Units, the following terms shall have the meanings indicated in this Section 2, and capitalized terms used and not otherwise defined herein shall have the meanings assigned thereto in the Agreement: "Agreement" shall mean the Third Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of July 29, 1994, as amended. "Class K Partnership Preferred Unit" means a Partnership Preferred Unit with the designations, preferences and relative, participating, optional or other special rights, powers and duties as are set forth in this Exhibit P. It is the intention of the General Partner that each Class K Partnership Preferred Unit shall be substantially the economic equivalent of one share of Class K Preferred Stock. "Class K Preferred Stock" means the Class K Convertible Cumulative Preferred Stock, par value $0.01 per share, of the Previous General Partner. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor thereto, as interpreted by any applicable regulations or other administrative pronouncements as in effect from time to time. "Common Stock" shall mean the Class A Common Stock, $.01 par value per share, of the Previous General Partner or such shares of the Previous General Partner's capital stock into which outstanding shares of Common Stock shall be reclassified. 1 5 "Distribution Payment Date" shall mean any date on which cash dividends are paid on the Class K Preferred Stock. "Junior Partnership Units" shall have the meaning set forth in paragraph (c) of Section 8 of this Exhibit P. "Parity Partnership Units" shall have the meaning set forth in paragraph (b) of Section 8 of this Exhibit P. "Partnership" shall mean AIMCO Properties, L.P., a Delaware limited partnership. "Senior Partnership Units" shall have the meaning set forth in paragraph (a) of Section 8 of this Exhibit P. 3. DISTRIBUTIONS. On every Distribution Payment Date, the holders of Class K Partnership Preferred Units shall be entitled to receive distributions payable in cash in an amount per Class K Partnership Preferred Unit equal to the per share dividend payable on the Class K Preferred Stock on such Distribution Payment Date. Each such distribution shall be payable to the holders of record of the Class K Partnership Preferred Units, as they appear on the records of the Partnership at the close of business on the record date (the "Record Date") for the dividend payable with respect to the Class K Preferred Stock on such Distribution Payment Date. Holders of Class K Partnership Preferred Units shall not be entitled to any distributions on the Class K Partnership Preferred Units, whether payable in cash, property or stock, except as provided herein. 4. LIQUIDATION PREFERENCE. (a) In the event of any liquidation, dissolution or winding up of the Partnership, whether voluntary or involuntary, before any payment or distribution of the Partnership (whether capital, surplus or otherwise) shall be made to or set apart for the holders of Junior Partnership Units, the holders of Class K Partnership Preferred Units shall be entitled to receive Twenty-Five Dollars ($25) per Class K Partnership Preferred Unit (the "Liquidation Preference"), plus an amount per Class K Partnership Preferred Unit equal to all dividends (whether or not declared or earned) accumulated, accrued and unpaid on one share of Class K Preferred Stock to the date of final distribution to such holders; but such holders shall not be entitled to any further payment. Until the holders of the Class K Partnership Preferred Units have been paid the Liquidation Preference in full, plus an amount equal to all dividends (whether or not declared or earned) accumulated, accrued and unpaid on the Class K Preferred Stock to the date of final 2 6 distribution to such holders, no payment shall be made to any holder of Junior Partnership Units upon the liquidation, dissolution or winding up of the Partnership. If, upon any liquidation, dissolution or winding up of the Partnership, the assets of the Partnership, or proceeds thereof, distributable among the holders of Class K Partnership Preferred Units shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any Parity Partnership Units, then such assets, or the proceeds thereof, shall be distributed among the holders of Class K Partnership Preferred Units and any such Parity Partnership Units ratably in the same proportion as the respective amounts that would be payable on such Class K Partnership Preferred Units and any such other Parity Partnership Units if all amounts payable thereon were paid in full. For the purposes of this Section 4, (i) a consolidation or merger of the Partnership with one or more partnerships, (ii) a sale or transfer of all or substantially all of the Partnership's assets or (iii) a statutory share exchange shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Partnership. (b) Upon any liquidation, dissolution or winding up of the Partnership, after payment shall have been made in full to the holders of Class K Partnership Preferred Units and any Parity Partnership Units, as provided in this Section 4, any other series or class or classes of Junior Partnership Units shall, subject to the respective terms thereof, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Class K Partnership Preferred Units and any Parity Partnership Units shall not be entitled to share therein. 5. REDEMPTION. (a) At any time that the Previous General Partner redeems any shares of Class K Preferred Stock for cash, the General Partner shall concurrently cause the Partnership to redeem an equal number of Class K Partnership Preferred Units, at a redemption price per Class K Partnership Preferred Unit payable in cash and equal to the redemption price paid by the Previous General Partner for such Class K Preferred Stock. At any time that the Previous General Partner redeems any shares of Class K Preferred Stock in exchange for a number of shares of Class A Common Stock issued by the Previous General Partner, the General Partner shall concurrently cause the Partnership to redeem an equal number of Class K Partnership Preferred Units in exchange for a number of Partnership Common Units equal to the number of such shares of Class A Common Stock, and a cash amount equal to any cash amounts paid by the Previous General Partner in lieu of fractional shares. In the event of a redemption of Class K Partnership Preferred Units, if the redemption date occurs after a Record Date and on or prior to the related Distribution Payment Date, the distribution payable on such Distribution Payment Date in respect of such Class K Partnership Preferred Units called for redemption shall be payable on such Distribution Payment Date to the holders of record of such Class K Partnership Preferred Units at the close of business on such 3 7 Record Date notwithstanding the redemption of such Class K Partnership Preferred Units, and shall not be payable as part of the redemption price for such Class K Partnership Preferred Units. (b) If the Partnership shall redeem Class K Partnership Preferred Units pursuant to paragraph (a) of this Section 5, from and after the redemption date (unless the Partnership shall fail to make available the amount of cash necessary to effect such redemption), (i) except for payment of the redemption price, the Partnership shall not make any further distributions on the Class K Partnership Preferred Units so called for redemption, (ii) said units shall no longer be deemed to be outstanding, and (iii) all rights of the holders thereof as holders of Class K Partnership Preferred Units of the Partnership shall cease except the rights to receive the cash payable, or Partnership Common Units issuable, upon such redemption, without interest thereon; provided, however, that if the redemption date occurs after a Record Date and on or prior to the related Distribution Payment Date, the full distribution payable on such Distribution Payment Date in respect of such Class K Partnership Preferred Units called for redemption shall be payable on such Distribution Payment Date to the holders of record of such Class K Partnership Preferred Units at the close of business on such Record Date notwithstanding the prior redemption of such Class K Partnership Preferred Units. (c) If fewer than all the outstanding Class K Partnership Preferred Units are to be redeemed, units to be redeemed shall be selected by the Partnership from outstanding Class K Partnership Preferred Units not previously called for redemption by any method determined by the General Partner in its discretion. Upon any such redemption, the General Partner shall amend Exhibit A to the Agreement as appropriate to reflect such redemption. 6. STATUS OF REACQUIRED UNITS. All Class K Partnership Preferred Units which shall have been issued and reacquired in any manner by the Partnership shall be deemed cancelled. 7. CONVERSION. Class K Partnership Preferred Units shall be convertible by the holders thereof as follows: (a) Upon conversion of any number of shares of Class K Preferred Stock into shares of Common Stock, an equal number of Class K Partnership Preferred Units shall automatically be converted into Partnership Common Units. If Class K Partnership Preferred Units are held by more than one holder, the units to be converted shall be selected by the General Partner in its discretion. The conversion ratio in effect 4 8 from time to time for the conversion of Class K Partnership Preferred Units into Partnership Common Units pursuant to this Section 7 shall at all times be equal to, and shall be automatically adjusted as necessary to reflect, the conversion ratio in effect from time to time for the conversion of Class K Preferred Stock into Common Stock. (b) Holders of Class K Partnership Preferred Units at the close of business on a Record Date shall be entitled to receive the distribution payable on such units on the corresponding Distribution Payment Date notwithstanding the conversion thereof following such Record Date and prior to such Distribution Payment Date; provided, however, that if Class K Partnership Preferred Units are converted during the period between the close of business on any Record Date and the opening of business on the corresponding Distribution Payment Date (except shares converted after the issuance of a notice of redemption with respect to a redemption date during such period or coinciding with such Distribution Payment Date, which will be entitled to such distribution) the holder must pay the Partnership an amount equal to the distribution payable on such units on such Distribution Payment Date. If any Class K Partnership Preferred Units are converted on a Distribution Payment Date, the holder thereof will receive the distribution payable by the Partnership on such Class K Partnership Preferred Units on such date, and the holder need not pay the amount of such distribution upon conversion of Class K Partnership Preferred Units. Except as provided above, the Partnership shall make no payment or allowance for unpaid distributions on converted Class K Partnership Preferred Units or for distributions on the Partnership Common Units issued upon such conversion. Each conversion of Class K Partnership Preferred Units into Partnership Common Units shall be deemed to have been effected at the same time and date that the corresponding conversion of Class K Preferred Stock into Common Stock is deemed to have been effected. (c) No fractional Partnership Common Units shall be issued upon conversion of Class K Partnership Preferred Units. Instead of any fractional Partnership Common Units that would otherwise be deliverable upon the conversion of Class K Partnership Preferred Units, the Partnership shall pay to the holder of such converted units an amount in cash equal to the cash payable to a holder of an equivalent number of converted shares of Class K Preferred Stock in lieu of fractional shares of Common Stock. (d) The Partnership will pay any and all documentary stamp, issue or transfer taxes, and any other similar taxes, payable in respect of (i) the issue or delivery of Partnership Common Units or other securities or property on conversion or redemption of Class K Partnership Preferred Units pursuant hereto, and (ii) the issue or delivery of Common Stock or other securities or property on conversion or redemption of Class K Preferred Stock pursuant to the terms hereof. 5 9 8. RANKING. Any class or series of Partnership Units of the Partnership shall be deemed to rank: (a) prior or senior to the Class K Partnership Preferred Units, as to the payment of distributions and as to distributions of assets upon liquidation, dissolution or winding up, if the holders of such class or series shall be entitled to the receipt of distributions and of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Class K Partnership Preferred Units ("Senior Partnership Units"); (b) on a parity with the Class K Partnership Preferred Units, as to the payment of distributions and as to distribution of assets upon liquidation, dissolution or winding up, whether or not the distribution rates, distribution payment dates or redemption or liquidation prices per unit or other denomination thereof be different from those of the Class K Partnership Preferred Units if (i) such class or series of Partnership Units shall be Class B Partnership Preferred Units, Class C Partnership Preferred Units, Class D Partnership Preferred Units, Class G Partnership Preferred Units, Class H Partnership Preferred Units or Class J Partnership Preferred Units or (ii) the holders of such class or series of Partnership Units and the Class K Partnership Preferred Units shall be entitled to the receipt of distributions and of amounts distributable upon liquidation, dissolution or winding up in proportion to their respective amounts of accrued and unpaid distributions per unit or other denomination or liquidation preferences, without preference or priority one over the other (the Partnership Units referred to in clauses (i) and (ii) of this paragraph being hereinafter referred to, collectively, as "Parity Partnership Units"); and (c) junior to the Class K Partnership Preferred Units, as to the payment of distributions and as to the distribution of assets upon liquidation, dissolution or winding up, if (i) such class or series of Partnership Units shall be Partnership Common Units or Class I High Performance Partnership Units or (ii) the holders of Class K Partnership Preferred Units shall be entitled to receipt of distributions or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of such class or series of Partnership Units (the Partnership Units referred to in clauses (i) and (ii) of this paragraph being hereinafter referred to, collectively, as "Junior Partnership Units"). 9. SPECIAL ALLOCATIONS. (a) Gross income and, if necessary, gain shall be allocated to the holders of Class K Partnership Preferred Units for any Fiscal Year (and, if necessary, 6 10 subsequent Fiscal Years) to the extent that the holders of Class K Partnership Preferred Units receive a distribution on any Class K Partnership Preferred Units (other than an amount included in any redemption pursuant to Section 5 hereof) with respect to such Fiscal Year. (b) If any Class K Partnership Preferred Units are redeemed pursuant to Section 5 hereof, for the Fiscal Year that includes such redemption (and, if necessary, for subsequent Fiscal Years) (a) gross income and gain (in such relative proportions as the General Partner in its discretion shall determine) shall be allocated to the holders of Class K Partnership Preferred Units to the extent that the redemption amounts paid or payable with respect to the Class K Partnership Preferred Units so redeemed exceeds the aggregate Capital Contributions (net of liabilities assumed or taken subject to by the Partnership) per Class K Partnership Preferred Unit allocable to the Class K Partnership Preferred Units so redeemed and (b) deductions and losses (in such relative proportions as the General Partner in its discretion shall determine) shall be allocated to the holders of Class K Partnership Preferred Units to the extent that the aggregate Capital Contributions (net of liabilities assumed or taken subject to by the Partnership) per Class K Partnership Preferred Unit allocable to the Class K Partnership Preferred Units so redeemed exceeds the redemption amount paid or payable with respect to the Class K Partnership Preferred Units so redeemed. 10. RESTRICTIONS ON OWNERSHIP. The Class K Partnership Preferred Units shall be owned and held solely by the General Partner or the Special Limited Partner. 11. GENERAL. (a) The ownership of Class K Partnership Preferred Units may (but need not, in the sole and absolute discretion of the General Partner) be evidenced by one or more certificates. The General Partner shall amend Exhibit A to the Agreement from time to time to the extent necessary to reflect accurately the issuance of, and subsequent conversion, redemption, or any other event having an effect on the ownership of, Class K Partnership Preferred Units. (b) The rights of the General Partner and the Special Limited Partner, in their capacity as holders of the Class K Partnership Preferred Units, are in addition to and not in limitation of any other rights or authority of the General Partner or the Special Limited Partner, respectively, in any other capacity under the Agreement or applicable law. In addition, nothing contained herein shall be deemed to limit or otherwise restrict the authority of the General Partner or the Special Limited Partner under the Agreement, other than in their capacity as holders of the Class K Partnership Preferred Units. 7 EX-10.16 7 $300,000,000 INTERIM TERM LOAN AGREEMENT 1 EXHIBIT 10.16 ================================================================================ $300,000,000 INTERIM TERM LOAN AGREEMENT AMONG APARTMENT INVESTMENT AND MANAGEMENT COMPANY, AIMCO PROPERTIES, L.P., AS BORROWER, THE SEVERAL LENDERS FROM TIME TO TIME PARTIES HERETO, LEHMAN BROTHERS INC., AS ARRANGER LEHMAN COMMERCIAL PAPER INC., AS SYNDICATION AGENT AND LEHMAN COMMERCIAL PAPER INC., AS ADMINISTRATIVE AGENT DATED AS OF OCTOBER 1, 1998 ================================================================================ 2 TABLE OF CONTENTS
Page ---- SECTION 1. DEFINITIONS................................................................... 2 1.1 Defined Terms................................................................... 2 1.2 Other Definitional Provisions................................................... 26 SECTION 2. AMOUNT AND TERMS OF COMMITMENTS............................................... 26 2.1 Commitments..................................................................... 26 2.2 Procedure for Borrowing......................................................... 26 2.3 Maturity Date................................................................... 27 2.4 Repayment of Loans; Evidence of Debt............................................ 27 2.5 Fees, etc. ..................................................................... 27 2.6 Optional Prepayments............................................................ 28 2.7 Mandatory Prepayments .......................................................... 28 2.8 Conversion and Continuation Options............................................. 28 2.9 [Intentionally Omitted]......................................................... 29 2.10 Interest Rates and Payment Dates............................................... 29 2.11 Computation of Interest........................................................ 29 2.12 Inability to Determine Interest Rate........................................... 30 2.13 Pro Rata Treatment and Payments................................................ 30 2.14 Requirements of Law............................................................ 31 2.15 Taxes.......................................................................... 32 2.16 Indemnity...................................................................... 34 2.17 Illegality..................................................................... 35 2.18 Change of Lending Office....................................................... 35 2.19 Replacement of Lender.......................................................... 35 SECTION 3. REPRESENTATIONS AND WARRANTIES................................................ 36 3.1 Financial Condition............................................................. 36 3.2 No Change....................................................................... 37 3.3 Corporate Existence; Compliance with Law........................................ 37 3.4 Corporate Power; Authorization; Enforceable Obligations......................... 37 3.5 No Legal Bar.................................................................... 37 3.6 No Material Litigation.......................................................... 38 3.7 No Default...................................................................... 38 3.8 Ownership of Property; Liens.................................................... 38 3.9 Intellectual Property........................................................... 38 3.10 Taxes.......................................................................... 38 3.11 Federal Regulations............................................................ 38 3.12 Labor Matters.................................................................. 38 3.13 ERISA.......................................................................... 39
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Page ---- 3.14 Investment Company Act; Other Regulations..................................... 39 3.15 Subsidiaries.................................................................. 39 3.16 Use of Proceeds............................................................... 40 3.17 Environmental Matters......................................................... 40 3.18 Accuracy of Information, etc.................................................. 41 3.19 Solvency...................................................................... 41 3.20 Year 2000 Matters............................................................. 41 3.21 Not Foreign Persons........................................................... 42 3.22 Defects....................................................................... 42 3.23 Utilities..................................................................... 42 3.24 Subsidiary Guarantors......................................................... 42 3.25 Leases........................................................................ 42 3.26 Management Contracts.......................................................... 42 3.27 Eligible Note Receivables..................................................... 42 3.28 Non-Guarantor Subsidiaries.................................................... 43 3.29 FNMA Guaranty................................................................. 43 SECTION 4. CONDITIONS PRECEDENT......................................................... 43 4.1 Conditions Precedent to the Loans.............................................. 43 SECTION 5. AFFIRMATIVE COVENANTS......................................................... 46 5.1 Financial Statements............................................................ 46 5.2 Certificates; Other Information................................................. 47 5.3 Payment of Obligations.......................................................... 48 5.4 Conduct of Business and Maintenance of Existence, etc. ......................... 48 5.5 Maintenance of Property; Insurance.............................................. 48 5.6 Inspection of Property; Books and Records; Discussions.......................... 49 5.7 Notices......................................................................... 49 5.8 Environmental Laws.............................................................. 50 5.9 Ownership of the Borrower....................................................... 50 5.10 Solvency....................................................................... 50 5.11 Additional Guarantor Subsidiaries.............................................. 50 5.12 Covenants Relating to Unencumbered Real Estate Assets.......................... 50 5.13 Liens on Unencumbered Real Estate Assets....................................... 51 5.14 Payment of Taxes............................................................... 51 5.15 Year 2000 Matters.............................................................. 51 5.16 Management Contracts........................................................... 51 5.17 Eligible Notes Receivable. ................................................... 51 5.18 Post-Closing Requirements...................................................... 52 SECTION 6. NEGATIVE COVENANTS............................................................ 52 6.1 Financial Condition Covenants................................................... 53
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Page ---- 6.2 Additional Recourse Indebtedness................................................ 53 6.3 Limitation on Liens............................................................. 54 6.4 Limitation on Fundamental Changes............................................... 55 6.5 Limitation on Disposition of Property........................................... 55 6.6 Limitation on Restricted Payments............................................... 56 6.7 Limitation on Capital Expenditures.............................................. 56 6.8 Limitation on Investments....................................................... 57 6.9 Limitation on Optional Payments and Modifications of Debt Instruments, etc. .... 57 6.10 Limitation on Transactions with Affiliates..................................... 58 6.11 Limitation on Sales and Leasebacks............................................. 58 6.12 Limitation on Negative Pledge Clauses.......................................... 58 6.13 Limitation on Restrictions on Subsidiary Distributions......................... 58 6.14 Limitation on Lines of Business................................................ 58 6.15 Limitation on Amendments to Merger Documentation............................... 59 6.16 Limitation on New Construction................................................. 59 6.17 Limitation on Contingent Obligations........................................... 59 6.18 Limitation on Lease Obligations................................................ 59 6.19 Special Covenants Relating to the REIT......................................... 60 6.20 Taxation of the Borrower....................................................... 60 6.21 Changes to BofA Facility Documents............................................. 60 6.22 Non-Guarantor Subsidiaries..................................................... 60 6.23 FNMA Guaranty.................................................................. 61 SECTION 7. EVENTS OF DEFAULT............................................................. 61 SECTION 8. GUARANTEE..................................................................... 64 8.1 Guarantee....................................................................... 64 8.2 No Subrogation.................................................................. 65 8.3 Amendments, etc. with respect to the Obligations; Waiver of Rights.............. 65 8.4 Guarantee Absolute and Unconditional............................................ 66 8.5 Reinstatement................................................................... 67 8.6 Payments........................................................................ 67 SECTION 9. THE AGENTS.................................................................... 67 9.1 Appointment..................................................................... 67 9.2 Delegation of Duties............................................................ 67 9.3 Exculpatory Provisions.......................................................... 67 9.4 Reliance by Agents.............................................................. 68 9.5 Notice of Default............................................................... 68 9.6 Non-Reliance on Agents and Other Lenders........................................ 68 9.7 Indemnification................................................................. 69 9.8 Agent in Its Individual Capacity................................................ 69
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Page ---- 9.9 Successor Agents................................................................ 70 9.10 The Arranger................................................................... 70 SECTION 10. MISCELLANEOUS................................................................ 70 10.1 Amendments and Waivers......................................................... 70 10.2 Notices........................................................................ 71 10.3 No Waiver; Cumulative Remedies................................................. 72 10.4 Survival of Representations and Warranties..................................... 73 10.5 Payment of Expenses............................................................ 73 10.6 Successors and Assigns; Participations and Assignments......................... 74 10.7 Adjustments; Set-off........................................................... 76 10.8 Counterparts................................................................... 77 10.9 Severability................................................................... 77 10.10 Integration................................................................... 77 10.11 GOVERNING LAW................................................................. 77 10.12 Submission To Jurisdiction; Waivers........................................... 77 10.13 Acknowledgements.............................................................. 78 10.14 Confidentiality............................................................... 78 10.15 Accounting Changes............................................................ 78 10.16 WAIVERS OF JURY TRIAL......................................................... 79
-iv- 6 ANNEXES: A Pricing Grid SCHEDULES: 1.1 Lenders; Commitments 1.1(a) Additions and Exclusions of Properties as Unencumbered Real Estate Assets 2.7(a) Permitted Indebtedness 3.4 Consents, Authorizations, Filings and Notices 3.15(a) Subsidiaries 3.15(b) Outstanding Warrants 3.24 Subsidiary Guarantors 6.3(f) Existing Liens 6.5 Permitted Asset Sales 6.7 Estimated Remediation and Rehabilitation Costs 6.16 New Construction 6.17 Existing Contingent Obligations EXHIBITS: A Form of Subsidiary Guarantee B Form of Compliance Certificate C Form of Closing Certificate D Form of Assignment and Acceptance E-1 Form of Legal Opinion of Skadden, Arps, Slate, Meagher & Flom E-2 Form of Legal Opinion of General Counsel F Form of Note G Form of Exemption Certificate H Form of Unencumbered Real Estate Asset Certificate -V- 7 INTERIM TERM LOAN AGREEMENT, dated as of October 1, 1998, among APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation (the "REIT"), AIMCO PROPERTIES, L.P., a Delaware limited partnership (the "Borrower"), the several banks and other financial institutions or entities from time to time parties to this Agreement (the "Lenders"), LEHMAN BROTHERS INC., as advisor and arranger (in such capacity, the "Arranger"), LEHMAN COMMERCIAL PAPER INC., as syndication agent (in such capacity, the "Syndication Agent"), and LEHMAN COMMERCIAL PAPER INC., as administrative agent (in such capacity, the "Administrative Agent"). W I T N E S S E T H: WHEREAS, the REIT owns, directly or indirectly, approximately 89.5% of the equity interests in the Borrower, and a Wholly Owned Subsidiary of the REIT is the sole general partner of the Borrower; WHEREAS, the REIT has elected to be taxed for Federal income tax purposes as a real estate investment trust; WHEREAS, the REIT and the Borrower have entered into the Amended and Restated Agreement and Plan of Merger, dated as of May 26, 1998 (the "Merger Agreement"), with Insignia Financial Group, Inc. ("Insignia") and Insignia/ESG Holdings, Inc. ("Insignia Holdings"), pursuant to which Insignia will be merged (the "Merger") with and into the REIT, with the REIT being the surviving corporation of the Merger; WHEREAS, prior to the Merger, certain of Insignia's businesses will be contributed to Insignia Holdings, and all of the capital stock of Insignia Holdings will then be distributed to shareholders of Insignia, all as described in the Merger Agreement; WHEREAS the REIT and the Borrower have requested the Lenders to provide the credit facility described below (i) to finance the cash consideration to be paid by the Borrower and the REIT in connection with the Merger and fees and expenses related thereto, (ii) to refinance certain existing Indebtedness of the REIT, the Borrower and/or Insignia and (iii) for general working capital purposes of the Borrower and its Subsidiaries; and 1 8 WHEREAS, the Lenders are willing to provide such credit facility upon and subject to the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises and the agreements hereinafter set forth, the parties hereto hereby agree as follows: 2 9 SECTION 1. DEFINITIONS 1.1 Defined Terms. As used in this Agreement, the terms listed in this Section 1.1 shall have the respective meanings set forth in this Section 1.1. "Adjusted EBITDA": of any Person for any period, the EBITDA of such Person for such period (or, as applicable, such Person's Pro Rata Share of EBITDA of another Person), less reserves for repairs and replacements on real estate assets of such Person calculated at the per annum rate of $300 per Class A Property unit and Class B Property unit, and $400 per Class C Property unit. "Adjusted Net Operating Income Value": an amount equal to the sum of (i) with respect to any Class A Property, Class B Property or Class C Property on any date, an amount equal to four times the Borrower's Pro Rata Share of the Net Operating Income generated by such real estate asset for the three consecutive calendar months most recently ended prior to such date; provided, that in determining such Net Operating Income pursuant to clause (i), reserves for repairs and replacements shall be deducted at the per annum rate of $300 per Class A Property unit and Class B Property unit, and $400 per Class C Property unit and (ii) with respect to (a) the LaJolla Del Tuscon Apartments (Property ID# 1125), (b) the Pine Shadows Apartments (Property ID# 1133), (c) the Hidden Lake Apartments (Property ID# 1123), (d) the Legend Oaks/Woodlands Apartments (Property ID# 1126) and (e) the Palencia Apartments (Property ID# 1131), an amount equal to (x) the Borrower's Pro Rata Share of the Net Operating Income generated by such Properties for the twelve consecutive calendar months most recently ended prior to such date or, (y) if any of the Properties in the foregoing clauses (a) through (e) was acquired less than twelve months before such determination, the annualized Net Operating Income for such Property based on the consecutive monthly period from the acquisition date of such property until such date of determination; provided, that in determining such Net Operating Income pursuant to clause (ii), reserves for repairs and replacements shall be deducted at the per annum rate of $400 per Property unit. "Administrative Agent": as defined in the preamble hereto. 3 10 "Affiliate": as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors (or persons performing similar functions) of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. "Agents": the collective reference to the Syndication Agent and the Administrative Agent. "Aggregate Exposure": with respect to any Lender at any time, an amount equal to (a) until the Closing Date, the amount of such Lender's Commitment at such time and (b) thereafter, the aggregate then unpaid principal amount of such Lender's Loans. "Aggregate Exposure Percentage": with respect to any Lender at any time, the ratio (expressed as a percentage) of such Lender's Aggregate Exposure at such time to the Aggregate Exposure of all Lenders at such time. "Agreement": this Interim Term Loan Agreement, as amended, supplemented or otherwise modified from time to time. "Applicable Margin": for each Type of Loan, the rate per annum determined pursuant to the Pricing Grid. "Arranger": as defined in the preamble hereto. "Asset Sale": any Disposition of Property or series of related Dispositions of Property (excluding any such Disposition permitted by clause (a), (b), (c) or (d) of Section 6.5) which yields gross proceeds to the REIT, the Borrower or any of their respective Subsidiaries (valued at the initial principal amount thereof in the case of non-cash proceeds consisting of notes or other debt securities and valued at fair market value in the case of other non-cash proceeds) in excess of $1,000,000. 4 11 "Assignee": as defined in Section 10.6(c). "Assignor": as defined in Section 10.6(c). "Base Rate": for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by the Reference Lender as its prime or base rate in effect at its principal office in New York City (the Prime Rate not being intended to be the lowest rate of interest charged by the Reference Lender in connection with extensions of credit to debtors); "Base CD Rate" shall mean the sum of (a) the product of (i) the Three-Month Secondary CD Rate and (ii) a fraction, the numerator of which is one and the denominator of which is one minus the C/D Reserve Percentage and (b) the C/D Assessment Rate; and "Three-Month Secondary CD Rate" shall mean, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day shall not be a Business Day, the next preceding Business Day) by the Board through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day), or, if such rate shall not be so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 A.M., New York City time, on such day (or, if such day shall not be a Business Day, on the next preceding Business Day) by the Reference Lender from three New York City negotiable certificate of deposit dealers of recognized standing selected by it. Any change in the Base Rate due to a change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate, respectively. 5 12 "Base Rate Loans": Loans the rate of interest applicable to which is based upon the Base Rate. "Benefitted Lender": as defined in Section 10.7. "Board": the Board of Governors of the Federal Reserve System of the United States (or any successor). "BofA Facility": the Amended and Restated Credit Agreement, dated as of September 30, 1998 (as amended, supplemented or otherwise modified from time to time), among the Borrower, Bank of America National Trust and Savings Association, as agent, and BankBoston, N.A., as documentation agent. "BofA Facility Documents": all documents relating to, or executed in connection with, the BofA Facility. "Borrower": as defined in the preamble hereto. "Business Day": (i) for all purposes other than as covered by clause (ii) below, a day other than a Saturday, Sunday or other day on which the Administrative Agent or commercial banks in New York City are authorized or required by law to close and (ii) with respect to all notices and determinations in connection with, and payments of principal and interest on, Eurodollar Loans, any day which is a Business Day described in clause (i) and which is also a day for trading by and between banks in Dollar deposits in the interbank eurodollar market. "Capital Expenditures": for any period, with respect to any Person, the aggregate of all expenditures by such Person and its Subsidiaries for the acquisition or leasing (pursuant to a capital lease) of fixed or capital assets or additions to equipment (including replacements, capitalized repairs and improvements during such period) which should be capitalized under GAAP on a consolidated balance sheet of such Person and its Subsidiaries. "Capital Lease Obligations": as to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a 6 13 combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP. "Capital Stock": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing. "Carrying Value": with respect to any asset or liability of any Person, the amount at which such asset or liability has been recorded or, in accordance with GAAP, should have been recorded, in the books of account of such Person, as reduced by any reserves or write-downs which have been announced, set aside or taken or, in accordance with GAAP, should have been set aside or taken, with respect thereto; provided, that if more than one method of recording the amount of any asset or liability, or the setting aside or taking of any reserves or write-downs with respect thereto, is permitted under GAAP, the permitted method actually used shall be controlling for purposes of determining Carrying Value, provided that such method is used in a manner consistent with prior periods. "Cash and Cash Equivalent Amount": on any date, an amount equal to the Borrower's Pro Rata Share of all cash and Cash Equivalents held on such date, determined in accordance with GAAP. "Cash Equivalents": (a) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition; (b) certificates of deposit, time deposits, eurodollar time deposits or overnight bank deposits having maturities of six months or less from the date of acquisition issued by any Lender or by any commercial bank organized under the laws of the United States of America or any state thereof having combined capital and surplus of not less than $500,000,000; (c) commercial paper of an issuer rated at least A-1 by Standard & Poor's Ratings Services 7 14 ("S&P") or P-1 by Moody's Investors Service, Inc. ("Moody's"), or carrying an equivalent rating by a nationally recognized rating agency, if both of the two named rating agencies cease publishing ratings of commercial paper issuers generally, and maturing within six months from the date of acquisition; (d) repurchase obligations of any Lender or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than 30 days with respect to securities issued or fully guaranteed or insured by the United States government; (e) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) having the highest rating by S&P or Moody's; (f) securities with maturities of six months or less from the date of acquisition backed by standby letters of credit issued by any Lender or any commercial bank satisfying the requirements of clause (b) of this definition; or (g) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition. "Category I Contract": any Management Contract (a) under which the entity providing the management services is a Qualified Management Entity (when the term "Category I Contract" is used in calculating Long Term Management Contract Value) or a Management Entity (when the term "Category I Contract" is used in calculating Gross Asset Value) and (b) which meets either of the following criteria: (i) the Borrower or the REIT, directly or through a Wholly Owned Subsidiary, is the sole general partner, with at least a 51% equity interest, in the entity which owns the property that is the subject of such Management Contract and the Borrower or the REIT has complete and sole discretion of the selection of the property manager for such property or (ii) such Management Contract is not cancelable by the property owner without cause and has at least 10 years remaining term as of the date of the determination thereof. "Category II Contract": any Management Contract (a) under which the entity providing the management services is a Qualified Management Entity (when the term "Category II Contract" is used in calculating Long 8 15 Term Management Contract Value) or a Management Entity (when the term "Category II Contract" is used in calculating Gross Asset Value) and (b) in respect of which the Borrower or the REIT, directly or through Wholly Owned Subsidiaries, is the sole general partner, with less than a 51% equity interest, in the entity which owns the property that is the subject of such Management Contract (and, as general partner, has complete and sole discretion with respect to the selection of the property manager for such entity). "C/D Assessment Rate": for any day as applied to any Base Rate Loan, the annual assessment rate in effect on such day which is payable by a member of the Bank Insurance Fund maintained by the Federal Deposit Insurance Corporation (the "FDIC") classified as well-capitalized and within supervisory subgroup "B" (or a comparable successor assessment risk classification) within the meaning of 12 C.F.R. Section 327.4 (or any successor provision) to the FDIC (or any successor) for the FDIC's (or such successor's) insuring time deposits at offices of such institution in the United States. "C/D Reserve Percentage": for any day as applied to any Base Rate Loan, that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board, for determining the maximum reserve requirement for a Depositary Institution (as defined in Regulation D of the Board as in effect from time to time) in respect of new non-personal time deposits in Dollars having a maturity of 30 days or more. "Class A Property": any rental apartment property which is generally recognized as a Class A property in accordance with prevailing national real estate industry standards, pursuant to prevailing appraisal methods and procedures. "Class B Property": any rental apartment property which is generally recognized as a Class B property in accordance with prevailing national real estate industry standards, pursuant to prevailing appraisal methods and procedures. "Class C Property": any rental apartment property which is generally recognized as other than a Class A Property or a Class B Property in 9 16 accordance with prevailing national real estate industry standards, pursuant to prevailing appraisal methods and procedures. "Closing Date": the date on which the conditions precedent set forth in Section 4.1 shall have been satisfied, which date shall be not later than October 1, 1998. "Code": the Internal Revenue Code of 1986, as amended from time to time. "Commonly Controlled Entity": an entity, whether or not incorporated, which is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group which includes the Borrower and which is treated as a single employer under Section 414 of the Code. "Commitment": as to any Lender, the obligation of such Lender to make a Loan to the Borrower on the Closing Date in an amount not exceeding the amount set forth with such Lender's name on Schedule 1.1. "Commitment Percentage": as to any Lender, the percentage which such Lender's Commitment constitutes of the aggregate commitments of all Lenders. "Compliance Certificate": a certificate duly executed by a Responsible Officer substantially in the form of Exhibit B. "Consolidated Adjusted EBITDA": for any period, Adjusted EBITDA of the REIT, the Borrower and their respective Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP for such period, plus the Borrower's Pro Rata Share of aggregate Net Management Fee Income for each of the Management Entities and plus, with respect to any period commencing less than four months after the Closing Date, any amounts for accounting, reporting and ancillary fees (and similar items as determined reasonably by the Administrative Agent) earned by the REIT, the Borrower and their Subsidiaries. For avoidance of doubt, accounting, reporting and ancillary fees shall not be included in Consolidated Adjusted EBITDA for any period commencing four months or more after the Closing Date. 10 17 "Consolidated Intangibles": at any date, all amounts which would, in conformity with GAAP, be classified as intangible assets on a consolidated balance sheet of the REIT and its Subsidiaries, including, without limitation, (a) goodwill, including any amounts (however designated on the balance sheet) representing the cost of acquisitions in excess of underlying net tangible assets, and (b) patents, trademarks, copyrights and other intangibles. "Consolidated Tangible Net Worth": at any date, all amounts which would, in conformity with GAAP, be included on a consolidated balance sheet of the REIT and its Subsidiaries under stockholders' equity at such date, minus Consolidated Intangibles on such date, plus the minority interests in the equity of the Borrower held by Persons other than the REIT and its Wholly Owned Subsidiaries. "Contingent Obligation": as to any Person, (a) any Guarantee Obligation of that Person, and (b) any direct or indirect obligation or liability, contingent or otherwise, of that Person, (i) in respect of any letter of credit or similar instrument issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings, (ii) as a partner or joint venturer in any partnership or joint venture, (iii) to purchase any materials, supplies or other Property from, or to obtain the services of, another Person if the relevant contract or other related document or obligation requires that payment for such materials, supplies or other Property, or for such services, shall be made regardless of whether delivery of such materials, supplies or other Property is ever made or tendered, or such services are ever performed or tendered, or (iv) incurred pursuant to any Hedge Agreement. Except as provided in the definition of "Total Indebtedness" below, the amount of any Contingent Obligation shall (subject, in the case of Guarantee Obligations, to the last sentence of the definition of "Guarantee Obligation") be deemed equal to the maximum reasonably anticipated liability in respect thereof. "Continuing Directors": the directors of the REIT on the Closing Date, after giving effect to the Merger and the other transactions contemplated 11 18 hereby, and each other director, if, in each case, such other director's nomination for election to the board of directors of the REIT is recommended by at least 66-2/3% of the then Continuing Directors. "Contractual Obligation": as to any Person, any provision of any security issued by such Person or of any agreement (including any Management Contract or note receivable), instrument or other undertaking to which such Person is a party or by which it or any of its Property is bound. "Credit Rating": with respect to any Person, the lowest rating assigned by a Rating Agency to such Person's senior unsubordinated, unsecured and non-credit enhanced long term indebtedness; provided, however, that in all events, if a Person's senior unsubordinated long term indebtedness is rated by only one Rating Agency, then it shall be deemed to have a Credit Rating below Investment Grade. "D&P": Duff & Phelps Rating Co. "Debt Service Coverage Ratio": as of the last day of any month, the ratio of (a) the sum of (i) the aggregate Adjusted Net Operating Income Value as of such date, in respect of all Unencumbered Real Estate Assets, plus (ii) the Borrower's Pro Rata Share of aggregate Net Management Fee Income for such period in respect of all performing and unencumbered Management Contracts plus (iii) the aggregate net income received by the Borrower during such period in respect of performing and unencumbered notes receivable, to (b) the greater of (i) the actual amount of principal, interest, fees and other amounts scheduled to be payable by the Borrower, the REIT and their respective Subsidiaries (without duplication) in respect of unsecured Indebtedness during the first twelve consecutive calendar months immediately following such date and (ii) an assumed debt service amount for such unsecured Indebtedness for the first twelve consecutive calendar months immediately following such date, calculated on the basis of a 25 year amortization schedule with equal monthly installments of principal and interest and an assumed interest rate equal to 2.00% above the annual interest rate in effect on the date of calculation on U.S. Treasury obligations having a maturity of seven years from the date of such calculation (as determined by the Administrative Agent from such sources as it selects in its sole discretion). 12 19 "Default": any of the events specified in Section 7, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied. "Disposition": with respect to any Property, any sale, lease, sale and leaseback, assignment, conveyance, transfer or other disposition thereof; the terms "Dispose" and "Disposed of" shall have correlative meanings. "Dollars" and "$": dollars in lawful currency of the United States of America. "Due Diligence Package": with respect to any Property proposed to be added as an additional Unencumbered Real Estate Asset after the Closing Date, the due diligence and underwriting materials customarily prepared by or for the Borrower (or its Subsidiaries) in connection with the acquisition of Property. "EBITDA": for any period and for any Person (in the case of the REIT, before deducting for the minority interest in the Borrower held by Persons other than the REIT and its Wholly Owned Subsidiaries) the sum of the following (references to line items to be taken from the financial statements prepared in accordance with GAAP): (a) the net income (or net loss) of such Person during such period plus (b) amounts treated as depreciation, interest expense and the amortization of intangibles of any kind to the extent included in the determination of such net income (or loss), plus (c) all accrued taxes on income to the extent included in the determination of such net income (or loss); provided, that net income (or loss) shall be computed for those purposes without giving effect to (i) extraordinary gains or losses (including gains or losses from the sale of properties or assets) and (ii) any amortization of capitalized financing expenses or charges related to restructuring of Indebtedness; and provided, further that EBITDA of any Person shall exclude amounts related to equity or interests in earnings (or losses) of unconsolidated Subsidiaries, including without limitation, Management Entities. "Eligible Note Receivable": any note receivable which is not subject to a Lien and (a) which is wholly owned by the Borrower or a 13 20 Wholly Owned Subsidiary, (b) in respect of which the obligor (i) is an entity controlled by the Borrower, the REIT or any of their respective Wholly Owned Subsidiaries and (ii) is an entity of which the sole general partner is the Borrower, the REIT or any of their respective Wholly Owned Subsidiaries, (c) which is in a face amount less any discount allocated to such note by the Borrower or its Wholly Owned Subsidiary at the time such note is acquired which, when added to all other Indebtedness secured by the asset securing such note receivable, would not exceed (i) 85% of the Real Estate Value (without adjustment for the Borrower's Pro Rata Share) of such asset, in the case of any calculation of Note Receivable Value prior to the date which is four months after the Closing Date, or (ii) 80% of such Real Estate Value (without adjustment for the Borrower's Pro Rata Share), in the case of any such determination thereafter, provided that this clause (c) shall also include the note receivable with respect to the Eaglewood Apartments (Property ID# 775), so long as such note receivable is the sole Indebtedness with respect to such Property, (d) is a performing note receivable in respect of which there is no overdue payment of principal or interest, (e) in respect of which the related asset is at least a Class B Property and (f) in respect of which the related asset is free of any material structural, title or other similar defect and is in compliance with Environmental Law. "Environmental Claims": all claims, however asserted, by any Governmental Authority or other Person alleging potential liability or responsibility for violation of any Environmental Law or for release or injury to the environment or threat to public health, personal injury (including sickness, disease or death), property damage, natural resources damage, or otherwise alleging liability or responsibility for damages (punitive or otherwise), cleanup, removal, remedial or response costs, restitution, civil or criminal penalties, injunctive relief, or other type of relief, resulting from or based upon (a) the presence, placement, discharge, emission or release (including intentional and unintentional, negligent and non-negligent, sudden or non-sudden, accidental or non-accidental placement, spills, leaks, discharges, emissions or release) of any Hazardous Material at, in, or from Property, whether or not owned by the Borrower, or (b) any other circumstances forming the basis of any violation, or alleged violation, of any Environmental Law. 14 21 "Environmental Laws": any and all laws, rules, orders, regulations, statutes, ordinances, guidelines, codes, decrees, or other legally enforceable requirements (including, without limitation, common law) of any international authority, foreign government, the United States, or any state, local, municipal or other governmental authority, regulating, relating to or imposing liability or standards of conduct concerning protection of the environment or of human health, or employee health and safety, as has been, is now, or may at any time hereafter be, in effect. "Environmental Permits": any and all permits, licenses, approvals, registrations, notifications, exemptions and any other authorization required under any Environmental Law. "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time. "Estimated Remediation and Rehabilitation Cost": all costs associated with performing work to address deferred maintenance and immediate capital repairs and replacements and to remediate contamination of real property or groundwater in accordance with Environmental Law and as recommended by an environmental consultant reasonably satisfactory to the Administrative Agent, including in all cases engineering and other professional fees and expenses, costs to remove, transport and dispose of contaminated soil, costs to "cap" or otherwise contain contaminated soil, and costs to pump and treat water and monitor water quality, as estimated by the Borrower in good faith, subject to the reasonable approval of the Administrative Agent. "Eurocurrency Reserve Requirements": for any day as applied to a Eurodollar Loan, the aggregate (without duplication) of the maximum rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board) maintained by a member bank of the Federal Reserve System. 15 22 "Eurodollar Base Rate": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, the rate per annum determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on Page 3750 of the Telerate screen as of 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on Page 3750 of the Telerate screen (or otherwise on such screen), the "Eurodollar Base Rate" for purposes of this definition shall be determined by reference to such other comparable publicly available service for displaying eurodollar rates as may be selected by the Administrative Agent or, in the absence of such availability, by reference to the rate at which the Administrative Agent is offered Dollar deposits at or about 11:00 A.M., New York City time, two Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where its eurodollar and foreign currency and exchange operations are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein. "Eurodollar Loans": Loans the rate of interest applicable to which is based upon the Eurodollar Rate. "Eurodollar Rate": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%): Eurodollar Base Rate ---------------------------------------- 1.00 - Eurocurrency Reserve Requirements "Eurodollar Tranche": the collective reference to Eurodollar Loans the then current Interest Periods with respect to all of which begin on the same date and end on the same later date. "Event of Default": any of the events specified in Section 7, provided that any requirement for the giving of notice, the lapse of time, or both, has been satisfied. 16 23 "Federal Funds Effective Rate": for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Reference Lender from three federal funds brokers of recognized standing selected by it. "FNMA Guaranty": a collective reference to (i) the FNMA Payment Guaranty and (ii) the related FNMA Master Cash Management Agreement. "FNMA Master Cash Management Agreement": the Master Cash Management Security, Pledge and Assignment Agreement, dated as of August 27, 1998, made by the Borrower in favor of the Federal National Mortgage Association. "FNMA Payment Guaranty": the Payment Guaranty,, dated as of May 8, 1998, made by the Borrower in favor of the Federal National Mortgage Association. "Funding Office": the office specified from time to time by the Administrative Agent as its funding office by notice to the Borrower and the Lenders. "Funds From Operations": with respect to the Borrower, the REIT, and their Subsidiaries on a consolidated basis, net income calculated in accordance with GAAP, excluding gains or losses from debt restructuring and sales of property, plus real estate depreciation and amortization (excluding amortization of financing costs), plus amortization associated with the purchase of property management companies, and after adjustments for unconsolidated partnerships and joint ventures (with adjustments for unconsolidated partnerships and joint ventures calculated to reflect funds from operations on the same basis), plus non-cash deferred portion of the income tax provision for unconsolidated Subsidiaries. 17 24 "GAAP": generally accepted accounting principles in the United States of America as in effect from time to time, except that for purposes of Section 6.1, GAAP shall be determined on the basis of such principles in effect on the date hereof and consistent with those used in the preparation of the most recent audited financial statements delivered pursuant to Section 3.1(b) and the pro forma balance sheet delivered pursuant to Section 3.1(a). "Governmental Authority": any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Gross Asset Value": at any date, the sum of (a) the Real Estate Value, including Unencumbered Real Estate Assets, (b) the Borrower's Pro Rata Share of an amount equal to the sum of (i) five times the Net Management Fee Income in respect of Category I Contracts, (ii) an amount equal to four times the Net Management Fee Income in respect of Category II Contracts and (iii) an amount equal to three times the Net Management Fee Income in respect of Short Term Management Contracts (provided, that the amount described in this clause (b) shall in no event constitute more than 15% of Gross Asset Value, and no value shall be attributed in this clause (b) to Management Contracts in respect of assets that are wholly owned, directly or indirectly, by the Borrower or the REIT), (c) the Borrower's Pro Rata Share of the Carrying Value of all currently performing notes receivable held by the Borrower and its Subsidiaries and (d) the Cash and Cash Equivalent Amount (including Restricted Cash) on such date, less Estimated Remediation and Rehabilitation Costs on Property owned by the REIT, the Borrower and their respective consolidated Subsidiaries. "Guarantee": as defined in Section 8.1(b). "Guarantee Obligation": as to any Person (the "guaranteeing person"), any obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the "primary obligations") of any other third Person (the 18 25 "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any Property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase Property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith. "Hazardous Materials": (i) all those substances which are regulated by, or which may form the basis of liability under, any Environmental Law, including all substances identified under any Environmental Law as a pollutant, contaminant, hazardous waste, hazardous constituent, special waste, hazardous substance, hazardous material, or toxic substance, or petroleum or petroleum-derived substance or waste, (ii) any other materials or pollutants that (a) pose a hazard to any Property of the Borrower or to Persons on or about such Property or (b) cause such Property to be in violation of any Environmental Laws, (iii) asbestos in any form which is or could become friable, urea formaldehyde foam insulation, electrical equipment which contains any oil or dielectric fluid containing levels of polychlorinated biphenyls in excess of fifty parts per million, and (iv) any other chemical, material, substance, or waste, exposure to which is prohibited, 19 26 limited, or regulated by any Governmental Authority or may or could pose a hazard to the health and safety of the owners, occupants, or any Persons surrounding the relevant Property. "Hedge Agreements": all interest rate swaps, caps or collar agreements or similar arrangements entered into by the Borrower, the REIT or any of their respective Subsidiaries providing for protection against fluctuations in interest rates or currency exchange rates or the exchange of nominal interest obligations, either generally or under specific contingencies. "Indebtedness": of any Person at any date, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of Property or services (other than trade payables incurred in the ordinary course of such Person's business which are less than 60 days past due), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to Property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such Property), (e) all Capital Lease Obligations of such Person, (f) all obligations of such Person, contingent or otherwise, as an account party under acceptance, letter of credit or similar facilities, (g) all obligations of such Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any Capital Stock of such Person, (h) all Guarantee Obligations of such Person in respect of obligations of the kind referred to in clauses (a) through (g) above; (i) all obligations of the kind referred to in clauses (a) through (h) above secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any Lien on Property (including, without limitation, accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligation and (j) for the purposes of Section 7(e) only, all obligations of such Person in respect of Hedge Agreements. Indebtedness shall not include (i) that certain bond titled "State of Florida Housing Finance Agency Multifamily Housing Revenue Bond 1994 Series A (Palencia Apartments Project)" dated March 31, 1994 (the "Bond") so long as the Bond is solely owned by the Borrower or any of 20 27 its Wholly Owned Subsidiaries and (ii) any partnership units issued by the Borrower. "Indemnified Liabilities": as defined in Section 10.5. "Indemnitee": as defined in Section 10.5. "Insolvency": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA. "Insolvent": pertaining to a condition of Insolvency. "Intellectual Property": the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including, without limitation, copyrights, copyright licenses, patents, patent licenses, trademarks, trademark licenses, technology, know-how and processes, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom. "Interest Expense": for any period, gross interest expense incurred for the period (including all commissions, discounts, fees and other charges in connection with standby letters of credit and similar instruments), including any amounts as capitalized interest, for the Borrower, the REIT and their respective Subsidiaries, and the portion of the upfront costs and expenses for Hedge Agreements entered into by the Borrower, the REIT and their respective Subsidiaries (to the extent not included in gross interest expense) fairly allocated to such Hedge Agreements as expenses for such period, as determined in accordance with GAAP; provided, that, all interest expense accrued by the Borrower, the REIT and their respective Subsidiaries during such period, even if not payable on or before the Maturity Date, shall be included within "Interest Expense." Notwithstanding the foregoing, interest accrued under any Intra-Company Debt shall not be included within "Interest Expense" for any purposes hereof. 21 28 "Interest Payment Date": (a) as to any Base Rate Loan, the last day of each calendar month to occur while such Loan is outstanding, (b) as to any Eurodollar Loan, the last day of each Interest Period with respect thereto and (c) as to any Loan, the date of any repayment or prepayment made in respect thereof. "Interest Period": as to any Eurodollar Loan, (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and ending one month thereafter; and (b) thereafter, each period commencing on the day after the last day of the next preceding Interest Period applicable to such Eurodollar Loan and ending one month thereafter; provided, that all of the foregoing provisions relating to Interest Periods are subject to the following: (iii) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; (iv) any Interest Period that would otherwise extend beyond the Maturity Date shall end on the Maturity Date; (v) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the next calendar month; and (vi) the Borrower shall select Interest Periods so as not to require a payment or prepayment of any Eurodollar Loan during an Interest Period for such Loan. "Intra-Company Debt": Indebtedness (whether book-entry or evidenced by a term, demand or other note or other instrument) owed by the Borrower, the REIT or any of their respective Subsidiaries to the Borrower, the REIT or any of their respective Subsidiaries. 22 29 "Investment Grade": with respect to any Person, a Credit Rating from at least two Rating Agencies which is at least BBB- (or its equivalent) or better. "Investments": as defined in Section 6.8. "Lenders": as defined in the preamble hereto. "Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any capital lease having substantially the same economic effect as any of the foregoing). "Loan": as defined in Section 2.1. "Loan Documents": this Agreement, the Subsidiaries' Guarantee and the Notes. "Loan Parties": the REIT, the Borrower and each Subsidiary Guarantor. "Long Term Management Contract Value": on any date, an amount equal to the sum of (a) five times the Borrower's Pro Rata Share of the Net Management Fee Income from Category I Contracts plus (b) four times the Borrower's Pro Rata Share of Net Management Fee Income from Category II Contracts; provided, that no value shall be attributed to Management Contracts in respect of assets that are wholly owned, directly or indirectly, by the Borrower or the REIT, and no value shall be attributed to (i) any Management Contract that is subject to any Lien other than Liens permitted under Sections 6.3(a)-(e), (ii) a Management Contract with a Management Entity party thereto, if such Management Entity has incurred any Indebtedness or (iii) any Management Contract which is held by a Non-Subsidiary Guarantor. Net Management Fee Income earned pursuant to management agreements (x) which are cancelled or transferred to a Person which is not a Qualified Management Entity or (y) for which the Borrower has received 23 30 notice that any such agreement is to be terminated within 12 months shall be excluded from the calculation of Long Term Management Contract Value in the quarter in which such cancellation, transfer or notice occurs and thereafter. "Management Contract": any contract pursuant to which the Borrower or any Management Entity agrees to perform management services in respect of real estate assets. "Management Entity": any entity of which the Borrower or the REIT owns a majority of the Capital Stock and which is primarily engaged in the business of managing multifamily apartment projects or other real estate projects or providing ancillary or related services, including, without limitations, the following: NHP Management Company, a District of Columbia corporation, Property Asset Management Services, L.P., a Delaware limited partnership, Property Asset Management Services, Inc., a Delaware corporation, and Property Asset Management Services-CA, LLC, a California limited liability company. "Material Adverse Effect": a material adverse effect on (a) the Merger, (b) the business, assets, property, condition (financial or otherwise) of the REIT, the Borrower and their respective Subsidiaries taken as a whole or (c) the validity or enforceability of this Agreement or any of the other Loan Documents or the rights or remedies of the Agents or the Lenders hereunder or thereunder. "Material Environmental Amount": an amount or amounts payable by the REIT, the Borrower and/or any of their Subsidiaries, in the aggregate in excess of $500,000, for: costs to comply with any Environmental Law; costs of any investigation, and any remediation, of any Hazardous Material; and compensatory damages (including, without limitation damages to natural resources), punitive damages, fines, and penalties pursuant to any Environmental Law. "Material Subsidiary": as defined in Section 7(f). "Maturity Date": September 30, 1999. 24 31 "Merger": as defined in the recitals to this Agreement. "Merger Agreement": as defined in the recitals to this Agreement. "Merger Documentation": collectively, the Merger Agreement and all schedules, exhibits, annexes and amendments thereto and all side letters and agreements affecting the terms thereof or entered into in connection therewith, in each case, as amended, supplemented or otherwise modified from time to time. "Multiemployer Plan": a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Cash Proceeds": (a) in connection with any Asset Sale or any Recovery Event, the proceeds thereof in the form of Cash and Cash Equivalents (including any such proceeds received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise, but only as and when received) of such Asset Sale or Recovery Event, net of attorneys' fees, accountants' fees, investment banking, broker's or finder's fees, amounts required to be applied to the repayment of Indebtedness secured by a Lien expressly permitted hereunder on any Property which is the subject of such Asset Sale or Recovery Event (other than any Lien pursuant to a Security Document) and other customary fees and expenses actually incurred in connection therewith and net of taxes paid or reasonably estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements) and (b) in connection with any issuance or sale of equity securities or debt securities or instruments or the incurrence of loans, the cash proceeds received from such issuance or incurrence, net of attorneys' fees, investment banking fees, accountants' fees, underwriting discounts and commissions and other customary fees and expenses actually incurred in connection therewith. "Net Management Fee Income": as of any date and with respect to any Management Contract, the net income, determined in accordance with GAAP, derived by the Borrower and the Management Entities from such Management Contract for the period of twelve consecutive calendar months most recently ended prior to such date; provided, that in any event such net 25 32 income shall be net of any costs or expenses incurred by the Borrower and the Management Entities during such period in performing services required under such Management Contract. "Net Operating Income": for any period, as to any real estate asset (a) all gross revenues received from the operation of such real estate asset during such period including, without limitation, payments received on account of business or rental interruption insurance and condemnation proceeds from any temporary use or occupancy, in each case to the extent attributable to the period for which such Net Operating Income is being determined, but excluding any proceeds from the sale or other disposition of any part of all of such real estate asset; or from any financing or refinancing of such real estate asset; or from any condemnation of any part or all of such real estate asset (except for temporary use or occupancy); or on account of a casualty to the property (other than payments on account of business or rental interruption insurance); or any security deposits paid under leases of all or part of such real estate asset, unless forfeited by tenants; and similar items or transactions the proceeds of which under GAAP are deemed attributable to capital), minus (b) all reasonable and customary property maintenance and repair costs, leasing and administrative costs, management fees equal to the greater of the actual amount of management fees paid and the management fee calculated at the rate of 4% of gross receipts from all real estate assets for such period (whether or not actually paid pursuant to separate management contract or otherwise), and real estate taxes and insurance premiums actually payable by the Borrower during such period with respect to such real estate asset (exclusive of Capital Expenditures). There shall be no deduction for any expense not involving or requiring a cash expenditure, such as depreciation. Net Operating Income shall be determined in accordance with GAAP. "Non-Excluded Taxes": as defined in Section 2.15(a). "Non-Guarantor Subsidiaries": any Subsidiary of the REIT or the Borrower other than those listed on Schedule 3.24. "Non-Recourse Indebtedness": any Indebtedness of the Borrower, the REIT or any of their respective Subsidiaries; provided, that (i) the holders of such Indebtedness shall have no recourse to the REIT, the 26 33 Borrower or any of their respective Subsidiaries in respect of such Indebtedness and (ii) such Indebtedness shall not be, directly or indirectly, guaranteed by, or secured by any Property of, the REIT, the Borrower or any of their respective Subsidiaries (other than the Property acquired or financed with the proceeds of such Indebtedness), provided, however, that with respect to Indebtedness secured by such acquired or financed Property pursuant to clause (ii) which contains limitations as to the nonrecourse nature of the obligation, such limited nonrecourse obligations shall not be deemed Recourse Indebtedness if and to the extent the nonrecourse exceptions are for liability of such Person for any of the following under the applicable loan documentation and solely to the extent the following exceptions relate to the Property acquired or financed by such Indebtedness: (a) fraud, waste, material misrepresentation, or willful misconduct; (b) indemnification with respect to environmental matters or failure to comply with Environmental Laws; (c) failure to maintain required insurance policies; (d) misapplication of insurance proceeds, condemnation awards and tenant security deposits; (e) breach of covenants relating to unpermitted transfers or encumbrances of real property or other collateral; (f) misappropriation or misapplication of property income; (g) breach of covenants relating to unpermitted transfers of interests in a Person; (h) failure to deliver books and records; or (i) failure to pay transfer fees or charges. An obligation of a Person that is Non-Recourse Indebtedness but becomes Recourse Indebtedness upon the occurrence of the events or circumstances described in clauses (a) through (i) above shall not be considered Recourse Indebtedness unless such events or circumstances have occurred. "Non-U.S. Lender": as defined in Section 2.15(d). "Note": as defined in Section 2.4(e). "Note Receivable Value": on any date, with respect to any Eligible Note Receivable held by the Borrower or a Wholly Owned Subsidiary, an amount equal to the lesser of (a) the Carrying Value of such Eligible Note Receivable and (b) an amount which, when added to all other Indebtedness secured by the asset related to such Eligible Note Receivable, would equal 75% of the Real Estate Value of such asset (without adjustment for the Borrower's Pro Rata Share), provided, that no value shall be attributed to (i) any Eligible Note Receivable that is subject to any Lien other than Liens 27 34 permitted under Sections 6.3(a)-(e) or (ii) an Eligible Note Receivable held by any of the Borrower's Wholly Owned Subsidiaries, if (x) such Wholly Owned Subsidiary has incurred any Indebtedness or (y) such Eligible Note Receivable is held by a Non-Guarantor Subsidiary. "Obligations": the unpaid principal of and interest on (including, without limitation, interest accruing after the maturity of the Loans and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans and all other obligations and liabilities of the Borrower to the Administrative Agent or to any Lender (or, in the case of Hedge Agreements, any affiliate of any Lender), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any other Loan Document, any Hedge Agreement entered into with any Lender or any affiliate of any Lender or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all fees, charges and disbursements of counsel to the Administrative Agent or to any Lender that are required to be paid by the Borrower pursuant hereto) or otherwise. "Other Taxes": any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document. "Participant": as defined in Section 10.6(b). "Payment Office": the office specified from time to time by the Administrative Agent as its payment office by notice to the Borrower and the Lenders. "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA (or any successor). 28 35 "Person": an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "Plan": at a particular time, any employee benefit plan which is covered by ERISA and in respect of which the Borrower or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Preferred Stock Subsidiary": any entity in which a Person (i) owns 95% of the non-voting preferred stock and (ii) over which such person does not exercise control. "Pricing Grid": the pricing grid attached hereto as Annex A. "Pro Forma Balance Sheet": as defined in Section 3.1(a). "Projections": as defined in Section 5.2(c). "Property": any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible, including, without limitation, Capital Stock. "Property Liability": with respect to any Unencumbered Real Estate Asset, the aggregate amount of the loss, damage or other liability or reduction in value associated with such Property as a result of any Environmental Claims or other adverse defect, condition, hazard, condemnation, violation or other circumstance with respect to such Property which shall be disclosed in each Compliance Certificate required to be delivered by the Borrower under this Agreement. "Pro Rata Share": with respect to the REIT or the Borrower, as the case may be, and with respect to any asset value, any income generated by any asset or any Indebtedness of any entity in which the REIT or the Borrower, as the case may be, has an ownership interest, a portion of such value, income 29 36 or Indebtedness equal to the product of such value, income or Indebtedness and the percentage ownership held by the REIT or the Borrower, directly or indirectly, in the entity that owns such asset, generates such income or that is the obligor on such Indebtedness, as the case may be. "Qualified Management Entity": on any date of determination, a Management Entity (a) in which the Borrower or its Wholly Owned Subsidiaries owns at least a 95% of the Capital Stock thereof, (b) which is a Subsidiary Guarantor, and (c) which is controlled, directly or indirectly, by (i) Peter K. Kompaniez, (ii) Terry S. Considine, (iii) any Person controlled by Peter K. Kompaniez and Terry S. Considine, (iv) any other Person reasonably satisfactory to the Required Lenders, or (v) any combination of the foregoing clauses (i)-(iv). "Qualified Property": a Property, which is (a) Class B or a Class A Property, (b) a multifamily apartment project which is 100% owned in fee simple title, directly or indirectly, by the Borrower or any of its Wholly Owned Subsidiaries, (c) not subject to any Lien other than Liens permitted under Sections 6.3(a)-(e), and (d) with respect to Property owned by a Wholly Owned Subsidiary of the Borrower, such Person owning such Property (i) has not incurred any Indebtedness and (ii) is a Subsidiary Guarantor. "Qualified Wholly Owned Subsidiary": any Wholly Owned Subsidiary which, immediately prior to the transfer of Property thereto pursuant to Schedule 1.1(a), has no assets and no liabilities, and is, or will become, a Subsidiary Guarantor. "Rating Agency": any of, S&P, Moody's or D&P. "Real Estate Value": on any date, the Borrower's Pro Rata Share of (a) with respect to any real estate asset acquired by the Borrower or any of its Subsidiaries on any date which is less than three consecutive full calendar months prior to such date of calculation, an amount equal to 95% of the purchase price paid for such real estate asset, (b) with respect to any other real estate asset owned by the Borrower or any of its Subsidiaries, the quotient of (i) the Adjusted Net Operating Income Value with respect to such real estate asset, divided by (ii) .096 and (c) with respect to the Bay 30 37 West/Captiva Club Apartments (Property ID# 8575), until the earlier of (x) April 1, 1999 or (y) the date the Property becomes Stabilized, an amount equal to 95% of the Borrower's or its Wholly Owned Subsidiary's cash investment in such Property. "Recourse Indebtedness": all Indebtedness other than Non-Recourse Indebtedness. "Recovery Event": any settlement of or payment in respect of any property or casualty insurance claim or any condemnation proceeding relating to any Property of the REIT, the Borrower or any of its Subsidiaries. "Reference Lender": Bankers Trust Company. "Refinancing Indebtedness": means Indebtedness that is incurred to refund, refinance, replace, renew, repay or extend (including pursuant to any defeasance or discharge mechanism) (collectively, "refinances", and "refinanced" shall have a correlative meaning) any Indebtedness listed on Schedule 2.7(a); provided, however, that (i) no guarantee, security or collateral shall be issued by the REIT, the Borrower or any of their Subsidiaries in excess of, or in addition to, any guarantee, security or collateral originally issued with respect to such Indebtedness and (ii) any amount of such Refinancing Indebtedness incurred in excess of an aggregate principal amount (or if issued with original issue discount, an aggregate issue price) then outstanding of the Indebtedness being refinanced, plus fees, underwriting discounts, premiums, unpaid accrued interest and other costs and expenses incurred in connection with such Refinancing Indebtedness shall be deemed to be Net Cash Proceeds and applied to prepay the Loans in accordance with the provisions of Section 2.7. "Register": as defined in Section 10.6(d). "Regulation U": Regulation U of the Board as in effect from time to time. "REIT Status": with respect to any Person, (a) the qualification of such Person as a real estate investment trust under Section 856 through 860 31 38 of the Code, and (b) the applicability to such Person and its shareholders of the method of taxation provided for in Sections 857 et seq. of the Code. "Reorganization": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA. "Reportable Event": any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty day notice period is waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg. Section 4043. "Required Lenders": at any time, the holders of more than 50% of (a) until the Closing Date, the Commitments and (b) thereafter, the aggregate unpaid principal amount of the Loans then outstanding. "Requirement of Law": as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its Property or to which such Person or any of its Property is subject. "Responsible Officer": the chief executive officer, president or chief financial officer of the Borrower, but in any event, with respect to financial matters, the chief financial officer of the Borrower. "Restricted Cash": any cash pledged by the Borrower, the REIT or any of their respective Subsidiaries to other Persons or is subject to a Lien, including any compensatory balance, sinking fund, escrow item, required reserve item or similar items. "Restricted Payments": as defined in Section 6.6. "SEC": the Securities and Exchange Commission (or successors thereto or an analogous U.S. Governmental Authority). 32 39 "Short Term Management Contract": any Management Contract which is not a Category I Contract or a Category II Contract. "Single Employer Plan": any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan. "Solvent": when used with respect to any Person, means that, as of any date of determination, (a) the amount of the "present fair saleable value" of the assets of such Person will, as of such date, exceed the amount of all "liabilities of such Person, contingent or otherwise", as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (b) the present fair saleable value of the assets of such Person will, as of such date, be greater than the amount that will be required to pay the liability of such Person on its debts as such debts become absolute and matured, (c) such Person does not have, as of such date, an unreasonably small amount of capital with which to conduct its business, and (d) such Person is able to pay its debts as they mature. For purposes of this definition, (i) "debt" means liability on a "claim", and (ii) "claim" means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured. "Stabilized": with respect to any Qualified Property and as of any date of determination, the date on which the occupancy level of such Qualified Property is at least 90% on average for the three consecutive calendar months most recently ended on or prior to such date. "Subsidiary": as to any Person, a corporation, partnership, limited liability company or other entity which is controlled, directly or indirectly through one or more intermediaries, or both, by such Person, including without limitation, entities for which such Person acts as a general partner and any Preferred Stock Subsidiary. Unless otherwise qualified, all references 33 40 to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. "Subsidiaries' Guarantee": the Subsidiaries' Guarantee to be executed and delivered by each Subsidiary Guarantor, substantially in the form of Exhibit A, as the same may be amended, supplemented or otherwise modified from time to time. "Subsidiary Guarantor": each Subsidiary of the Borrower other than Non-Guarantor Subsidiaries. "Total Indebtedness": on any date, all Indebtedness of the REIT, the Borrower and their respective Subsidiaries, determined on a consolidated basis, without duplication. "Transferee": as defined in Section 10.14. "Type": as to any Loan, its nature as a Base Rate Loan or a Eurodollar Loan. "Unencumbered Assets Leverage": the leverage ratio described in Section 6.1(a). "Unencumbered Asset Value": on any date, the sum of (a) the aggregate of the Unencumbered Real Estate Value of all Unencumbered Real Estate Assets owned by the Borrower or any of its Wholly Owned Subsidiaries as of such date, (b) the Long Term Management Contract Value (provided, that the amount of Long Term Management Contract Value included in Unencumbered Asset Value on any date may not exceed 30% of Unencumbered Asset Value on such date) as of such date, (c) the aggregate of the Note Receivable Value on such date of all Eligible Note Receivables held by the Borrower on such date (provided, that the amount of Note Receivable Value included in Unencumbered Asset Value on any date on or after the date which is five months after the Closing Date may not exceed $150,000,000), (d) the Cash and Cash Equivalent Amount (excluding Restricted Cash) and (e) with respect to the Bay West/Captiva Club Apartments (Property ID# 8575), until the earlier of (x) April 1, 1999 or (y) the date the Property becomes Stabilized, an amount equal to 95% of 34 41 the Borrower's or its Wholly Owned Subsidiary's cash investment in such Property. "Unencumbered Real Estate Asset": any Qualified Property (i) on the Closing Date (a) which is Stabilized and (b) which is free of any material structural, title or other similar defect and is in compliance with Environmental Law and (ii) after the Closing Date, which complies with clauses (i)(a) and (i)(b) above and with the provisions of paragraph (a) of Schedule 1.1(a). "Unencumbered Real Estate Value": on any date, (a) with respect to any Unencumbered Real Estate Asset acquired by the Borrower or any of its Wholly Owned Subsidiaries on any date which is less than three consecutive full calendar months prior to such date, an amount equal to 95% of the purchase price paid for such Unencumbered Real Estate Asset and (b) with respect to any other Unencumbered Real Estate Asset, the quotient of (i) the Adjusted Net Operating Income Value with respect to such Unencumbered Real Estate Asset, divided by (ii) .096; and in the case of clause (a) or (b) above, net of Estimated Remediation and Rehabilitation Costs related to such Unencumbered Real Estate Asset. "Unfunded Pension Liabilities": the excess of a Plan's benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Plan's assets, determined in accordance with the assumptions used by the Plan's actuaries for funding the Plan pursuant to Section 412 for the applicable plan year. "Wholly Owned Subsidiary": as to any Person, any other Person all of the Capital Stock of which (other than directors' qualifying shares required by law) is owned, directly or indirectly, by such Person or, in the case of the Borrower and the REIT, any Person all of the Capital Stock of which is owned, directly or indirectly, by the Borrower and the REIT. 1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the other Loan Documents or any certificate or other document made or delivered pursuant hereto or thereto. 35 42 (b) As used herein and in the other Loan Documents, and any certificate or other document made or delivered pursuant hereto or thereto, accounting terms relating to Holdings, the Borrower and its Subsidiaries not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP. (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, Schedule and Exhibit references are to this Agreement unless otherwise specified. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. SECTION 2. AMOUNT AND TERMS OF COMMITMENTS 2.1 Commitments. Subject to the terms and conditions hereof, each Lender severally agrees to make a term loan (a "Loan") to the Borrower on the Closing Date in an amount not to exceed the amount of the Commitment of such Lender. The Loans may from time to time be Eurodollar Loans or Base Rate Loans, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 2.2 and 2.8. 2.2 Procedure for Borrowing. The Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to 10:00 A.M., New York City time, three Business Days prior to the anticipated Closing Date) requesting that the Lenders make the Loans on the Closing Date and specifying the amount to be borrowed. Upon receipt of such notice the Administrative Agent shall promptly notify each Lender thereof. Not later than 12:00 Noon, New York City time, on the Closing Date each Lender shall make available to the Administrative Agent at the Funding Office an amount in immediately available funds equal to the Loan or Loans to be made by such Lender. The Administrative Agent shall make available to the Borrower the aggregate of the amounts made available to the Administrative Agent by the Lenders in immediately available funds. 36 43 2.3 Maturity Date. The Loans shall mature and be payable in full on the Maturity Date. 2.4 Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent, for the account of the appropriate Lender, the principal amount of the Loan of such Lender on the Maturity Date (or on such earlier date on which the Loans become due and payable pursuant to Section 7). The Borrower hereby further agrees to pay interest on the unpaid principal amount of the Loans from time to time outstanding from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in Section 2.10. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower to such Lender resulting from each Loan of such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. (c) The Administrative Agent, on behalf of the Borrower, shall maintain the Register pursuant to Section 10.6(e), and a subaccount therein for each Lender, in which shall be recorded (i) the amount of each Loan made hereunder and any Note evidencing such Loan, the Type thereof and each Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) both the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Lender's share thereof. (d) The entries made in the Register and the accounts of each Lender maintained pursuant to Section 2.4(b) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain the Register or any such account, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Loans made to the Borrower by such Lender in accordance with the terms of this Agreement. (e) The Borrower agrees that, upon the request to the Administrative Agent by any Lender, the Borrower will execute and deliver to such Lender a 37 44 promissory note of the Borrower evidencing any Loan of such Lender, substantially in the form of Exhibit F, with appropriate insertions as to date and principal amount (each, a "Note"). 2.5 Fees, etc. (a) The Borrower agrees to pay to the Syndication Agent the fees in the amounts and on the dates previously agreed to in writing by the Borrower and the Syndication Agent. (b) The Borrower agrees to pay to the Administrative Agent the fees in the amounts and on the dates from time to time agreed to in writing by the Borrower and the Administrative Agent. 2.6 Optional Prepayments. The Borrower may at any time and from time to time prepay the Loans, in whole or in part, without premium or penalty, upon irrevocable notice delivered to the Administrative Agent at least three Business Days prior thereto in the case of Eurodollar Loans and at least one Business Day prior thereto in the case of Base Rate Loans, which notice shall specify the date and amount of prepayment and whether the prepayment is of Eurodollar Loans or Base Rate Loans; provided, that if a Eurodollar Loan is prepaid on any day other than the last day of the Interest Period applicable thereto, the Borrower shall also pay any amounts owing pursuant to Section 2.16. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to such date on the amount prepaid. Partial prepayments of Loans shall be in an aggregate principal amount of $1,000,000 or a whole multiple thereof. Amounts prepaid may not be reborrowed. 2.7 Mandatory Prepayments . (a) If any Capital Stock shall be issued, or Indebtedness incurred, by the REIT, the Borrower or any of their respective Subsidiaries (excluding any Indebtedness constituting a Refinancing Indebtedness, but in any event, including the proceeds of a proposed offering of senior unsecured notes by the REIT and/or the Borrower), an amount equal to 100% of the Net Cash Proceeds thereof shall be applied on the date of such issuance or incurrence toward the prepayment of the Loans. (b) If on any date the REIT, the Borrower or any of their respective Subsidiaries shall receive Net Cash Proceeds from any Asset Sale or Recovery 38 45 Event then such Net Cash Proceeds shall be applied on such date toward the prepayment of the Loans. (c) The application of any prepayment pursuant to this Section shall be made, first, to Base Rate Loans and, second, to Eurodollar Loans. Each prepayment of the Loans under this Section shall be accompanied by accrued interest to the date of such prepayment on the amount prepaid. Amounts prepaid may not be reborrowed. 2.8 Conversion and Continuation Options. (a) The Borrower may elect from time to time to convert Eurodollar Loans to Base Rate Loans by giving the Administrative Agent at least two Business Days' prior irrevocable notice of such election, provided that any such conversion of Eurodollar Loans may only be made on the last day of an Interest Period with respect thereto. The Borrower may elect from time to time to convert Base Rate Loans to Eurodollar Loans by giving the Administrative Agent at least three Business Days' prior irrevocable notice of such election, provided that no Base Rate Loan may be converted into a Eurodollar Loan (i) when any Event of Default has occurred and is continuing and the Administrative Agent or the Required Lenders have determined in its or their sole discretion not to permit such conversions or (ii) after the date that is one month prior to the Maturity Date. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof. (b) Any Eurodollar Loan may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Borrower giving irrevocable notice to the Administrative Agent not less than three Business Days prior to the expiration of such then current Interest Period, provided that no Eurodollar Loan may be continued as such (i) when any Event of Default has occurred and is continuing and the Administrative Agent has or the Required Lenders have determined in its or their sole discretion not to permit such continuations or (ii) after the date that is one month prior to the Maturity Date, and provided, further, that if the Borrower shall fail to give any required notice as described above in this paragraph or if such continuation is not permitted pursuant to the preceding proviso such Loans shall be automatically converted to Base Rate Loans on the last day of such then expiring Interest Period. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof. 39 46 2.9 [Intentionally Omitted]. 2.10 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such day plus the Applicable Margin. (b) Each Base Rate Loan shall bear interest at a rate per annum equal to the Base Rate plus the Applicable Margin. (c) (i) If all or a portion of the principal amount of any Loan shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), all outstanding Loans (whether or not overdue) shall bear interest at a rate per annum which is equal to the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this Section plus 3% and (ii) if all or a portion of any interest payable on any Loan or any other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum equal to the rate then applicable to Base Rate Loans plus 3%, in each case, with respect to clauses (i) and (ii) above, from the date of such non-payment until such amount is paid in full (as well after as before judgment). (d) Interest shall be payable in arrears on each Interest Payment Date, provided that interest accruing pursuant to paragraph (c) of this Section shall be payable from time to time on demand. 2.11 Computation of Interest. (a) Interest payable pursuant hereto shall be calculated on the basis of a 360-day year for the actual days elapsed, except that, with respect to Base Rate Loans the rate of interest on which is calculated on the basis of the Prime Rate, the interest thereon shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the relevant Lenders of each determination of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a change in the Base Rate or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall as soon as practicable notify the Borrower and the relevant Lenders of the effective date and the amount of each such change in interest rate. 40 47 (b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Borrower, deliver to the Borrower a statement showing any quotations used by the Administrative Agent in determining any interest rate pursuant to Section 2.10(a). 2.12 Inability to Determine Interest Rate. If prior to the first day of any Interest Period: (a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, or (b) the Administrative Agent shall have received notice from the Required Lenders that the Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period, the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the relevant Lenders as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as Base Rate Loans, (y) any Loans that were to have been converted on the first day of such Interest Period to Eurodollar Loans shall be continued as Base Rate Loans and (z) any outstanding Eurodollar Loans shall be converted, on the last day of the then current Interest Period with respect thereto, to Base Rate Loans. Until such notice has been withdrawn by the Administrative Agent, no further Eurodollar Loans shall be made or continued as such, nor shall the Borrower have the right to convert Loans to Eurodollar Loans. 2.13 Pro Rata Treatment and Payments. (a) Each borrowing by the Borrower from the Lenders hereunder, each payment by the Borrower on account of any commitment fee and any reduction of the Commitments of the Lenders shall be made pro rata according to the respective Commitment Percentages of the Lenders. Each payment (including prepayments) in respect of principal 41 48 or interest in the Loans shall be applied to the amounts of such obligations owing to the Lenders pro rata according to the respective amounts then due and owing to the Lenders. (b) All payments (including prepayments) to be made by the Borrower hereunder, whether on account of principal, interest, fees or otherwise, shall be made without setoff or counterclaim and shall be made prior to 12:00 Noon, New York City time, on the due date thereof to the Administrative Agent, for the account of the Lenders, at the Payment Office, in Dollars and in immediately available funds. The Administrative Agent shall distribute such payments to the Lenders promptly upon receipt in like funds as received. If any payment hereunder (other than payments on the Eurodollar Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day. If any payment on a Eurodollar Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. In the case of any extension of any payment of principal pursuant to the preceding two sentences, interest thereon shall be payable at the then applicable rate during such extension. (c) Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its share of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the daily average Federal Funds Effective Rate for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this paragraph shall be conclusive in the absence of manifest error. If such Lender's share of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days of such Borrowing Date, the Administrative Agent shall also be entitled to recover 42 49 such amount with interest thereon at the rate per annum applicable to Base Rate Loans under the relevant Facility, on demand, from the Borrower. (d) Unless the Administrative Agent shall have been notified in writing by the Borrower prior to the date of any payment being made hereunder that the Borrower will not make such payment to the Administrative Agent, the Administrative Agent may assume that the Borrower is making such payment, and the Administrative Agent may, but shall not be required to, in reliance upon such assumption, make available to the Lenders their respective pro rata shares of a corresponding amount. If such payment is not made to the Administrative Agent by the Borrower within three Business Days of such required date, the Administrative Agent shall be entitled to recover, on demand, from each Lender to which any amount which was made available pursuant to the preceding sentence, such amount with interest thereon at the rate per annum equal to the daily average Federal Funds Effective Rate. Nothing herein shall be deemed to limit the rights of the Administrative Agent or any Lender against the Borrower. 2.14 Requirements of Law. (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof: (i) shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Non-Excluded Taxes covered by Section 2.15 and changes in the rate of tax on the overall net income of such Lender); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the Eurodollar Rate hereunder; or (iii) shall impose on such Lender any other condition; 43 50 and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining Eurodollar Loans, or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrower shall promptly pay such Lender, upon its demand, any additional amounts necessary to compensate such Lender for such increased cost or reduced amount receivable. If any Lender becomes entitled to claim any additional amounts pursuant to this Section, it shall promptly notify the Borrower (with a copy to the Administrative Agent) of the event by reason of which it has become so entitled. (b) If any Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, after submission by such Lender to the Borrower (with a copy to the Administrative Agent) of a written request therefor, the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. (c) A certificate as to any additional amounts payable pursuant to this Section submitted by any Lender to the Borrower (with a copy to the Administrative Agent) shall be conclusive in the absence of manifest error. The obligations of the Borrower pursuant to this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 2.15 Taxes. (a) All payments made by the Borrower or the REIT under this Agreement shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding net income taxes and franchise taxes imposed on any Agent or any Lender as a result of a present or former connection between such Agent or 44 51 such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from such Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any other Loan Document). If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings ("Non-Excluded Taxes") or Other Taxes are required to be withheld from any amounts payable to any Agent or any Lender hereunder, the amounts so payable to such Agent or such Lender shall be increased to the extent necessary to yield to such Agent or such Lender (after payment of all Non-Excluded Taxes and Other Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, provided, however, that the Borrower or the REIT, as the case may be, shall not be required to increase any such amounts payable to any Lender with respect to any Non-Excluded Taxes (i) that are attributable to such Lender's failure to comply with the requirements of paragraph (d) or (e) of this Section or (ii) that are United States withholding taxes imposed on amounts payable to such Lender at the time the Lender becomes a party to this Agreement, except to the extent that such Lender's assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower or the REIT, as the case may be, with respect to such Non-Excluded Taxes pursuant to Section 2.15(a). (b) The Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) Whenever any Non-Excluded Taxes or Other Taxes are payable by the Borrower or the REIT, as the case may be, as promptly as possible thereafter the Borrower shall send to the Administrative Agent for the account of the relevant Agent or Lender, as the case may be, a certified copy of an original official receipt received by the Borrower or the REIT, as the case may be showing payment thereof to the extent available. If the Borrower fails to pay any Non-Excluded Taxes or Other Taxes when due to the appropriate taxing authority or fails to remit to the Agents the required receipts or other required documentary evidence, the Borrower or the REIT, as the case may be, shall indemnify the Administrative Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by any Agent or any Lender as a result of any such failure. The agreements in this Section 2.15 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 45 52 (d) Each Lender (or Transferee) that is not a citizen or resident of the United States of America, a corporation, partnership or other entity created or organized in or under the laws of the United States of America (or any jurisdiction thereof), or any estate or trust that is subject to federal income taxation regardless of the source of its income (a "Non-U.S. Lender") shall deliver to the Borrower and the Administrative Agent (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) two copies of either U.S. Internal Revenue Service Form 1001 or Form 4224, or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest" a statement substantially in the form of Exhibit G and a Form W-8, or any subsequent versions thereof or successors thereto properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, or a reduced rate of, U.S. federal withholding tax on all payments by the Borrower under this Agreement and the other Loan Documents. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement (or, in the case of any Participant, on or before the date such Participant purchases the related participation). In addition, each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower (or any other form of certification adopted by the U.S. taxing authorities for such purpose). Notwithstanding any other provision of this paragraph, a Non-U.S. Lender shall not be required to deliver any form pursuant to this paragraph that such Non-U.S. Lender is not legally able to deliver. (e) A Lender that is entitled to an exemption from or reduction of non-U.S. withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate, provided that such Lender is legally entitled to complete, execute and deliver such documentation and in such Lender's reasonable judgment such completion, execution or submission would not materially prejudice the legal position of such Lender. 46 53 2.16 Indemnity. The Borrower agrees to indemnify each Lender and to hold each Lender harmless from any loss or expense which such Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment after the Borrower has given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment or conversion of Eurodollar Loans on a day which is not the last day of an Interest Period with respect thereto. Such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (excluding, however, the Applicable Margin included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market. A certificate as to any amounts payable pursuant to this Section submitted to the Borrower by any Lender shall be conclusive in the absence of manifest error. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 2.17 Illegality. Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and convert Base Rate Loans to Eurodollar Loans shall forthwith be cancelled and (b) such Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to Section 2.16. 47 54 2.18 Change of Lending Office. Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Section 2.14, 2.15(a) or 2.17 with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans affected by such event with the object of avoiding the consequences of such event; provided, that such designation is made on terms that, in the sole judgment of such Lender, cause such Lender and its lending office(s) to suffer no economic, legal or regulatory disadvantage, and provided, further, that nothing in this Section shall affect or postpone any of the obligations of the Borrower or the rights of any Lender pursuant to Section 2.14, 2.15(a) or 2.17. 2.19 Replacement of Lender. The Borrower shall be permitted to replace (with one or more replacement Lenders) any Lender which (i) requests reimbursement for amounts owing pursuant to Section 2.14 or 2.15, (ii) has received a written notice from the Borrower of an impending change in law that would entitle such Lender to payment of additional amounts under Section 2.14 or 2.15, unless such Lender designates a different lending office before such change in law becomes effective and such alternate lending office obviates the need for the Borrower to make payments of additional amounts under Section 2.14 or 2.15, (iii) is affected in the manner described in Section 2.12 or 2.17 and as a result thereof any of the actions described in Section 2.12 or 2.17, as the case may be, are required to be taken, (iv) does not consent to any proposed amendment, supplement, modification, consent or waiver of any provisions of this Agreement or any other Loan Document as contemplated by Section 10.1, or (v) defaults in its obligation to make Loans; provided that (A) such replacement does not conflict with any Requirement of Law, (B) no Event of Default shall have occurred and be continuing at the time of such replacement, (C) the Borrower shall repay (or the replacement bank or institution shall purchase, at par) all Loans and other amounts owing to such replaced Lender prior to the date of replacement, (D) the Borrower shall be liable to such replaced Lender under Section 2.16 if any Eurodollar Loan owing to such replaced Lender shall be prepaid (or purchased) other than on the last day of the Interest Period relating thereto, (E) the replacement bank or institution, if not already a Lender, shall be reasonably satisfactory to the Administrative Agent, (F) the replaced Lender shall be obligated to make such replacement in accordance with the provisions of this Section 2.19 (provided that the Borrower or replacement Lender shall be obligated to pay the registration and processing fee), (G) until such time as such replacement shall be consummated, the Borrower 48 55 shall pay all additional amounts (if any) required pursuant to Section 2.14 or 2.15, as the case may be, (H) any such replacement shall not be deemed to be a waiver of any rights which the Borrower, the Administrative Agent or any other Lender shall have against the replaced Lender, and (I) any replacement contemplated by clause (iv) above shall be permitted only if the consent of Lenders holding at least 90% of the aggregate unpaid principal amount of the Loans then outstanding plus the aggregate amount of undrawn Commitments then in effect is obtained, but the consent of one or more of the other Lenders is not obtained (other than the withholding of any required consent pursuant to clauses (i) or (ii) of the first proviso of Section 10.1), and each replacement Lender consents to the proposed amendment, supplement, modification, consent or waiver. SECTION 3. REPRESENTATIONS AND WARRANTIES To induce the Agents and the Lenders to enter into this Agreement and to make the Loans, the REIT and the Borrower hereby jointly and severally represent and warrant to each Agent and each Lender that: 3.1 Financial Condition. (a) The unaudited pro forma consolidated balance sheet of the REIT and its consolidated Subsidiaries as at June 30, 1998 (including the notes thereto) (the "Pro Forma Balance Sheet"), copies of which have heretofore been furnished to each Lender, has been prepared giving effect (as if such events had occurred on such date) to (i) the consummation of the Merger, (ii) the Loans to be made on the Closing Date and the use of proceeds thereof and (iii) the payment of fees and expenses in connection with the foregoing. The Pro Forma Balance Sheet has been prepared based on the best information available to the REIT as of the date of delivery thereof, and presents fairly on a pro forma basis the estimated financial position of REIT and its consolidated Subsidiaries as at June 30, 1998, assuming that the events specified in the preceding sentence had actually occurred at such date. (b) The audited consolidated balance sheets of the REIT as at December 31, 1996 and December 31, 1997, and the related consolidated statements of income, stockholders' equity and cash flows for the fiscal years ended on such dates, reported on by and accompanied by an unqualified report from Ernst & Young, LLP, present fairly the consolidated financial condition of the REIT as at such date, and the consolidated results of its operations and its consolidated cash 49 56 flows for the respective fiscal years then ended. The unaudited consolidated balance sheet of the REIT as at June 30, 1998, and the related unaudited consolidated statements of income, stockholders' equity and cash flows for the six-month period ended on such date, present fairly the consolidated financial condition of the REIT as at such date, and the consolidated results of its operations and its consolidated cash flows for the six-month period then ended (subject to normal year-end audit adjustments). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by the aforementioned firm of accountants and disclosed therein). The REIT, the Borrower and their respective Subsidiaries do not have any material Guarantee Obligations, contingent liabilities and liabilities for taxes, or any long-term leases or unusual forward or long-term commitments, including, without limitation, any interest rate or foreign currency swap or exchange transaction or other obligation in respect of derivatives, which are not reflected in the most recent financial statements referred to in this paragraph. During the period from December 31, 1997 to and including the date hereof there has been no Disposition by the REIT of any material part of its business or Property. 3.2 No Change. Since December 31, 1997 there has been no development or event which has had or could reasonably be expected to have a Material Adverse Effect. 3.3 Corporate Existence; Compliance with Law. Each of the REIT, the Borrower and their respective Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate (or partnership, as the case may be) power and authority, and the legal right, to own and operate its Property, to lease the Property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign entity and in good standing under the laws of each jurisdiction where its ownership, lease or operation of Property or the conduct of its business requires such qualification and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 3.4 Corporate Power; Authorization; Enforceable Obligations. Each Loan Party has the corporate (or partnership, as the case may be) power and authority, and the legal right, to make, deliver and perform the Loan Documents to 50 57 which it is a party and, in the case of the Borrower, to borrow hereunder. Each Loan Party has taken all necessary corporate action to authorize the execution, delivery and performance of the Loan Documents to which it is a party and, in the case of the Borrower, to authorize the borrowings on the terms and conditions of this Agreement. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the Merger and the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of this Agreement or any of the Loan Documents, except consents, authorizations, filings and notices described in Schedule 3.4, which consents, authorizations, filings and notices have been obtained or made and are in full force and effect. Each Loan Document has been duly executed and delivered on behalf of each Loan Party which is a party thereto. This Agreement constitutes, and each other Loan Document upon execution will constitute, a legal, valid and binding obligation of each Loan Party which is a party thereto, enforceable against each such Loan Party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). 3.5 No Legal Bar. The execution, delivery and performance of this Agreement and the other Loan Documents, the borrowings hereunder and the use of the proceeds thereof will not violate any Requirement of Law or any Contractual Obligation of the REIT, the Borrower or any of its Subsidiaries and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or revenues pursuant to any Requirement of Law or any such Contractual Obligation. 3.6 No Material Litigation. No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the best knowledge of the REIT or the Borrower, threatened by or against the REIT, the Borrower or any of its Subsidiaries or against any of their respective properties or revenues (a) with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby, or (b) which could reasonably be expected to have a Material Adverse Effect. 3.7 No Default. Neither the REIT, the Borrower nor any of their respective Subsidiaries is in default under or with respect to any of its Contractual 51 58 Obligations in any respect which could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 3.8 Ownership of Property; Liens. Each of the REIT, the Borrower and their respective Subsidiaries has title in fee simple to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other Property, and none of such Property is subject to any Lien except as permitted by Section 6.3. 3.9 Intellectual Property. The ownership or license to use Intellectual Property is not necessary for the conduct of business as currently conducted of the REIT, the Borrower and their respective Subsidiaries. 3.10 Taxes. Each of the REIT, the Borrower and each of their respective Subsidiaries has filed or caused to be filed all Federal, state and other material tax returns which are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its Property and all other taxes, fees or other charges imposed on it or any of its Property by any Governmental Authority (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the REIT, the Borrower or their respective Subsidiaries, as the case may be); no tax Lien has been filed (except for Liens for taxes not yet due and payable permitted under Section 6.3(a)), and, to the knowledge of the REIT and the Borrower, no claim is being asserted, with respect to any such tax, fee or other charge. 3.11 Federal Regulations. No part of the proceeds of any Loans will be used for "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U as now and from time to time hereafter in effect or for any purpose which violates the provisions of the Regulations of the Board. If requested by any Lender or the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-1 referred to in Regulation U, as the case may be. 3.12 Labor Matters. There are no strikes or other labor disputes against the REIT, the Borrower or any of their Subsidiaries pending or, to the 52 59 knowledge of the REIT or the Borrower, threatened that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect. Hours worked by and payment made to employees of the REIT, the Borrower and their respective Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Requirement of Law dealing with such matters that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect. All payments due from the REIT, the Borrower or any of its Subsidiaries on account of employee health and welfare insurance that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect if not paid have been paid or accrued as a liability on the books of the REIT, the Borrower or the relevant Subsidiary. 3.13 ERISA. Neither a Reportable Event nor an "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan and no facts or circumstances exist which could reasonably be expected to result in any such Reportable Event or accumulated funding deficiency, and each Plan has complied in all material respects with its terms and the applicable provisions of ERISA and the Code. No notice of intent to terminate has been filed, trustee has been appointed, termination proceedings have been instituted or termination has occurred with respect to any Single Employer Plan or Multiemployer Plan, and no Lien in favor of the PBGC or a Plan has arisen, during such five-year period and no facts or circumstances exist which could reasonably be expected to result in any such filing, appointments, termination or institution. The present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits by a material amount. Neither the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan which has resulted or could reasonably be expected to result in a material liability under ERISA, and neither the Borrower nor any Commonly Controlled Entity would become subject to any material liability under ERISA if the Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. No such Multiemployer Plan is in Reorganization or Insolvent, and no facts 53 60 or circumstances exist, to the knowledge of the Borrower, that could reasonably be expected to result in such Reorganization or Insolvency. 3.14 Investment Company Act; Other Regulations. No Loan Party is an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. No Loan Party is subject to regulation under any Requirement of Law (other than Regulation X of the Board) which limits its ability to incur Indebtedness. 3.15 Subsidiaries. (a) The Subsidiaries listed on Schedule 3.15(a) includes all the Subsidiaries of the REIT and the Borrower at the date hereof. (b) There are no outstanding subscriptions, options, warrants, calls, rights or other agreements or commitments (other than stock options granted to employees or directors and directors' qualifying shares) of any nature relating to any Capital Stock of the REIT, the Borrower or any Subsidiary, except as disclosed on Schedule 3.15(b). 3.16 Use of Proceeds. The proceeds of the Loans shall be used (i) to finance the Merger and to pay related fees and expenses, (ii) to refinance existing Indebtedness of the REIT, the Borrower and/or Insignia and (iii) for general working capital purposes of the Borrower and its Subsidiaries. 3.17 Environmental Matters. Other than exceptions to any of the following that could not, individually or in the aggregate, reasonably be expected to result in the payment of a Material Environmental Amount or have a Material Adverse Effect: (a) The REIT, the Borrower and their respective Subsidiaries: (i) are, and within the period of all applicable statutes of limitation have been, in compliance with all applicable Environmental Laws; (ii) hold all Environmental Permits (each of which is in full force and effect) required for any of their current or intended operations or for any property owned, leased, or otherwise operated by any of them; (iii) are, and within the period of all applicable statutes of limitation have been, in compliance with all of their Environmental Permits; and (iv) reasonably believe that: each of their Environmental Permits will be timely renewed and complied 54 61 with, without material expense; any additional Environmental Permits that may be required of any of them will be timely obtained and complied with, without material expense; and compliance with any Environmental Law that is or is expected to become applicable to any of them will be timely attained and maintained, without material expense. (b) Hazardous Materials are not present at, on, under, in, or about any real property now or formerly owned, leased or operated by the Borrower or any of its Subsidiaries, or at any other location (including, without limitation, any location to which Hazardous Materials have been sent for re-use or recycling or for treatment, storage, or disposal) which could reasonably be expected to (i) give rise to liability of the REIT, the Borrower or any of their respective Subsidiaries under any applicable Environmental Law or otherwise result in costs to the REIT, the Borrower or any of their respective Subsidiaries, or (ii) interfere with the Borrower's or any of their respective Subsidiaries' continued operations, or (iii) impair the fair saleable value of any real property owned or leased by the REIT, the Borrower or any of their respective Subsidiaries. (c) There is no judicial, administrative, or arbitral proceeding (including any notice of violation or alleged violation) under or relating to any Environmental Law to which the REIT, the Borrower or any of their respective Subsidiaries is, or to the knowledge of the Borrower will be, named as a party that is pending or, to the knowledge of the Borrower threatened. (d) Neither the REIT, the Borrower nor any of their respective Subsidiaries has received any written request for information, or been notified that it is a potentially responsible party under or relating to the federal Comprehensive Environmental Response, Compensation, and Liability Act or any similar Environmental Law, or with respect to any Hazardous Materials. (e) Neither the REIT, the Borrower nor any of their Subsidiaries has entered into or agreed to any consent decree, order, or settlement or other agreement, or is subject to any judgment, decree, or order or other agreement, in any judicial, administrative, arbitral, or other forum for 55 62 dispute resolution, relating to compliance with or liability under any Environmental Law. (f) Neither the REIT, the Borrower nor any of their respective Subsidiaries has assumed or retained, by contract or operation of law, any liabilities of any kind, fixed or contingent, known or unknown, under any Environmental Law or with respect to any Hazardous Material. 3.18 Accuracy of Information, etc. No statement or information, taken as a whole, contained in the Merger Agreement, this Agreement, any other Loan Document or any other document, certificate or statement furnished to the Administrative Agent or the Lenders or any of them, by or on behalf of any Loan Party for use in connection with the transactions contemplated by this Agreement or the other Loan Documents, contained as of the date such statement, information, document or certificate was so furnished, any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements contained herein or therein, light of the circumstances under which they were made, not misleading. The projections and pro forma financial information contained in the materials referenced above are based upon good faith estimates and assumptions believed by management of the Borrower to be reasonable at the time made, it being recognized by the Lenders that such financial information as it relates to future events is not to be viewed as fact and that actual results during the period or periods covered by such financial information may differ from the projected results set forth therein by a material amount. The Borrower has delivered to the Agents a true and complete copy of the Merger Agreement (including all schedules and exhibits thereto). As of the date hereof, the representations and warranties contained in the Merger Agreement are true and correct in all material respects. There is no fact known to any Loan Party that could reasonably be expected to have a Material Adverse Effect that has not been expressly disclosed herein, in the other Loan Documents or in any other documents, certificates and statements furnished to the Administrative Agent and the Lenders for use in connection with the transactions contemplated hereby and by the other Loan Documents. 3.19 Solvency. Each Loan Party is, and after giving effect to the Merger and the incurrence of all Indebtedness and obligations being incurred in connection herewith and therewith will be and will continue to be, Solvent. 56 63 3.20 Year 2000 Matters. Any reprogramming required to permit the proper functioning, in and following the year 2000, of (i) the REIT's, the Borrower's and their Subsidiaries' computer systems and (ii) equipment containing embedded microchips (including systems and equipment supplied by others or with which the REIT's, the Borrower's or their respective Subsidiaries' systems interface) and the testing of all such systems and equipment, as so reprogrammed, will be completed by January 1, 1999. The cost to the REIT, the Borrower and their respective Subsidiaries of such reprogramming and testing and of the reasonably foreseeable consequences of year 2000 to the REIT, the Borrower and their respective Subsidiaries (including, without limitation, reprogramming errors and the failure of others' systems or equipment) will not result in a Default or a Material Adverse Effect. 3.21 Not Foreign Persons. Neither the Borrower nor any Wholly Owned Subsidiary which owns an Unencumbered Real Estate Asset is a "foreign person" within the meaning of Section 1445(f)(3) of the Code. 3.22 Defects. Except as disclosed to and approved in writing by the Required Lenders, to the knowledge of the Borrower, there exist no material defects that would make any Unencumbered Real Asset unsuitable for the present or contemplated use thereof. Except as disclosed to and approved in writing by the Required Lenders, to the knowledge of the Borrower, there are no abnormal hazards, including but not limited to earth movement or slippage, affecting any Unencumbered Real Estate Asset. 3.23 Utilities. Each Unencumbered Real Estate Asset has adequate water, gas, telephone, electrical supply, storm and sanitary sewerage facilities and means of access to and from public streets or highways. 3.24 Subsidiary Guarantors. All of the Subsidiaries of the REIT and the Borrower, noted on Schedule 3.24 are Subsidiary Guarantors. 3.25 Leases. Except for apartment leases and as otherwise permitted under Section 6.18, there are no leases affecting any Property which is an Unencumbered Real Estate Asset. No rent has been collected more than one month in advance under any such apartment lease for a Property which is an Unencumbered Real Estate Asset other than in the ordinary course of business. No such lease or any interest therein is subject to any present assignment or pledge. 57 64 All rent due to date under each such lease has been collected in the ordinary course of business and no concession has been granted to any lessee in the form of a waiver, release, reduction, discount or other alteration of rent due or to become due, other than in the ordinary course of business. The interest of the lessee under each such lease is as lessee only, with no options to purchase or rights of first refusal. 3.26 Management Contracts. All fees payable to the Borrower or any Management Entity under the Management Contracts are payable directly to the person party thereto and the portion of the fees to which the Borrower or such Management Entity are entitled will not be subject to any pass-through arrangement, fee-splitting arrangement or any other arrangement with any third party which would require such Person to remit any portion of such fees to a third party under any circumstances. The Borrower and its Management Entities have delivered to the Agent a true and complete copy of each Management Contract with respect to which a copy has been requested by such Agent. 3.27 Eligible Note Receivables. All amounts payable to the Borrower or any of its Wholly Owned Subsidiaries under the Eligible Note Receivables are payable directly to the person party thereto and the portion of the amounts to which the Borrower or such Wholly Owned Subsidiary are entitled will not be subject to any pass-through arrangement, fee-splitting arrangement or any other arrangement with any third party which would require such Person to remit any portion of such fees to a third party under any circumstances. The Borrower and its Wholly Owned Subsidiaries have delivered to the Agent a true and complete copy of each Eligible Note Receivable with respect to which a copy has been requested by such Agent. 3.28 Non-Guarantor Subsidiaries. (a) Each Non-Guarantor Subsidiary is Wholly Owned, directly or indirectly, by the REIT, the Borrower or a Subsidiary Guarantor, except to the extent any interest in such Non-Guarantor Subsidiary is held by a third-party investor. (b) None of the Non-Guarantor Subsidiaries owns an Unencumbered Real Estate Asset or other Property included in the calculation of Unencumbered Real Estate Value. 58 65 3.29 FNMA Guaranty. (a) The aggregate amount available to be drawn under the Letter of Credit (as defined in the FNMA Payment Guaranty) is $7,500,000. (b) None of the events listed in Section 2.2(b) of the FNMA Payment Guaranty have occurred. (c) The Pledgee under the FNMA Master Cash Management Agreement has not exercised its right to lock the Master Lockbox pursuant to Section 13 of the FNMA Master Cash Management Agreement. (d) The Borrower has notified the beneficiary of the FNMA Guaranty of the transactions contemplated by this Agreement, and such beneficiary has agreed to execute promptly a waiver of any default or event of default arising out of, or in connection with, this Agreement. SECTION 4. CONDITIONS PRECEDENT 4.1 Conditions Precedent to the Loans. The agreement of each Lender to make the Loan requested to be made by it is subject to the satisfaction, prior to or concurrently with the making of such Loan on the Closing Date, of the following conditions precedent: (a) Loan Documents. The Administrative Agent shall have received (i) this Agreement, executed and delivered by a duly authorized officer of the REIT and the Borrower, (ii) the Subsidiaries Guarantee executed and delivered by a duly authorized officer of each Subsidiary Guarantor, and (iii) for the account of each relevant Lender, a Note conforming to the requirements hereof and executed and delivered by a duly authorized officer of the Borrower. (b) Merger. The Merger shall have been consummated in accordance with the Merger Agreement concurrently with the making of the Loans hereunder. (c) Pro Forma Balance Sheet; Financial Statements. The Lenders shall have received (i) the Pro Forma Balance Sheet, (ii) audited consolidated financial statements of the REIT for the 1996 and 1997 fiscal years 59 66 and (iii) unaudited interim consolidated financial statements of the REIT for each fiscal month and quarterly period ended subsequent to the date of the latest applicable financial statements delivered pursuant to clause (ii) of this paragraph as to which such financial statements are available, and such financial statements shall not, in the reasonable judgment of the Lenders, reflect any material adverse change in the consolidated financial condition of the REIT. (d) Approvals. All governmental and third party approvals necessary in connection with the Merger, the continuing operations of the REIT, the Borrower and their respective Subsidiaries and the transactions contemplated hereby shall have been obtained and be in full force and effect, except where the failure to obtain such approvals will not have a Material Adverse Effect, and all applicable waiting periods shall have expired without any action being taken or threatened by any competent authority which would restrain, prevent or otherwise impose adverse conditions on the Merger or the financing contemplated hereby. (e) Related Agreements. The Administrative Agent shall have received (in a form reasonably satisfactory to the Syndication Agent), with a copy for each Lender, true and correct copies, certified as to authenticity by the Borrower, of each debt instrument (other than Non-Recourse Indebtedness, unless otherwise reasonably requested by the Administrative Agent) of the Borrower or the REIT or their respective Subsidiaries to be in effect after the Merger and such other documents or instruments as may be reasonably requested by the Syndication Agent. (f) Waivers under Existing Credit Facilities. The Administrative Agent shall have received copies of all waivers and consents under existing Indebtedness of the REIT, the Borrower or any of their respective Subsidiaries required to permit the Merger, the Loans and the other transactions contemplated hereby, except to the extent such waivers and consents with respect to any Non-Recourse Indebtedness are not material, unless reasonably requested by the Administrative Agent. (g) Repayment of Existing Indebtedness. The Administrative Agent shall have received evidence satisfactory to it that, prior to or concurrently with the making of the Loans, the credit facility evidenced by the Amended 60 67 and Restated Credit Agreement, dated as of March 19, 1997, among First Union National Bank of South Carolina, the lenders thereto, Insignia Financial Group Inc. and Lehman Commercial Paper Inc. is being repaid in full and all commitments to extend further credit thereunder have been terminated. (h) Fees. The Lenders, Syndication Agent and the Administrative Agent shall have received all fees required to be paid, and all expenses for which invoices have been presented (including reasonable fees, disbursements and other charges of counsel to the Agents), on or before the Closing Date. All such amounts will be paid with proceeds of Loans made on the Closing Date and will be reflected in the funding instructions given by the Borrower to the Administrative Agent on or before the Closing Date. (i) Closing Certificate. The Administrative Agent shall have received (i) a certificate of the REIT and the Borrower dated the Closing Date, substantially in the form of Exhibit C, with appropriate insertions and attachments and (ii) a Compliance Certificate of the Borrower and the REIT, substantially in the form of Exhibit B. (j) Legal Opinions. The Administrative Agent shall have received the following executed legal opinions: (i) the legal opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel to the REIT, the Borrower and their respective Subsidiaries, substantially in the form of Exhibit E-1; (ii) the legal opinion of Joel Bonder, general counsel of the REIT, the Borrower and their respective Subsidiaries, substantially in the form of Exhibit E-2; (iii) to the extent consented to by the relevant counsel, each legal opinion, if any, delivered in connection with the Merger Agreement, accompanied by a reliance letter in favor of the Lenders. 61 68 Each such legal opinion shall cover such other matters incident to the transactions contemplated by this Agreement as the Administrative Agent may reasonably require. (k) Intercreditor Agreement. The Administrative Agent shall have received a fully executed copy of the Intercreditor Agreement relating to the BofA Facility, in form and substance satisfactory to the Administrative Agent. (l) BofA Facility. The Administrative Agent shall have received fully executed copies of the BofA Facility Documents. (m) Representations and Warranties. Each of the representations and warranties made by any Loan Party in or pursuant to the Loan Documents shall be true and correct in all material respects on and as of the Closing Date, as if made on and as of such date. (n) No Default. No Default or Event of Default shall have occurred and be continuing on the Closing Date, before and after giving effect to the Loans. SECTION 5. AFFIRMATIVE COVENANTS The REIT and the Borrower hereby jointly and severally agree that, so long as the Commitments remain in effect or any Loan or other amount is owing to any Lender or any Agent hereunder, each of the REIT and the Borrower shall, and shall cause each of its Subsidiaries to: 5.1 Financial Statements. Furnish to each Agent and each Lender: (a) as soon as available, but in any event within 90 days after the end of each fiscal year of the REIT, a copy of the audited consolidated balance sheet of the REIT and its consolidated Subsidiaries as at the end of such year and the related audited consolidated statements of income, stockholders' equity and cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a "going concern" or like qualification or exception, or qualification arising 62 69 out of the scope of the audit, by Ernst & Young LLP or other independent certified public accountants of nationally recognized standing; (b) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of the REIT, the unaudited consolidated balance sheet of the REIT and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income, stockholders' equity and cash flows for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments); (c) if requested by the Administrative Agent, as soon as available, but in any event not later than 45 days after the end of each month occurring during each fiscal year of the REIT (other than the third, sixth, ninth and twelfth such month), the unaudited consolidated balance sheets of the REIT and its Subsidiaries as at the end of such month and the related unaudited consolidated statements of income, stockholders' equity and cash flows for such month and the portion of the fiscal year through the end of such month, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments); and (d) as soon as available, but not later than 45 days after the end of each calendar quarter, a quarterly operating statement for each Property which is an Unencumbered Real Estate Asset and for each Management Entity (in a format and with such detail as the Administrative Agent may reasonably request). all such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein). 5.2 Certificates; Other Information. Furnish to each Agent and each Lender, or, in the case of clause (i), to the relevant Lender: 63 70 (a) concurrently with the delivery of the financial statements referred to in Section 5.1(a), a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, except as specified in such certificate, including a review of the Compliance Certificates delivered in connection with the quarter and year ended December 31, 1998; (b) concurrently with the delivery of any financial statements pursuant to Section 5.1, (i) a certificate of a Responsible Officer stating that, to the best of each such Responsible Officer's knowledge, each Loan Party during such period has observed or performed all of its covenants and other agreements, and satisfied every condition, contained in this Agreement and the other Loan Documents to which it is a party to be observed, performed or satisfied by it, and that such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate and (ii) in the case of quarterly or annual financial statements (and, upon the request of the Administrative Agent, in the case of monthly financial statements), a Compliance Certificate containing all information and calculations necessary for determining compliance by the REIT, the Borrower and their respective Subsidiaries with the provisions of this Agreement referred to therein as of the last day of the fiscal quarter or fiscal year of the REIT, as the case may be. (c) as soon as available, and in any event no later than 45 days after the end of each fiscal year of the REIT, a detailed consolidated budget for the current and next succeeding two fiscal years (including a projected consolidated balance sheet of the REIT and its Subsidiaries as of the end of the following fiscal year, and the related consolidated statements of projected cash flow, projected changes in financial position and projected income), and, as soon as available, significant revisions, if any, of such budget and projections with respect to such fiscal year (collectively, the "Projections"), which Projections shall in each case be accompanied by a certificate of a Responsible Officer stating that such Projections are based on reasonable estimates, information and assumptions and that such Responsible Officer has no reason to believe that such Projections are incorrect or misleading in any material respect; 64 71 (d) within 45 days after the end of each fiscal quarter of the REIT, a narrative discussion and analysis of the financial condition and results of operations of the REIT and its Subsidiaries for such fiscal quarter and for the period from the beginning of the then current fiscal year to the end of such fiscal quarter, as compared to the comparable periods of the previous year; (e) within five days after the same are sent, copies of all financial statements and reports which the REIT sends to the holders of any class of its debt securities or public equity securities and, within five days after the same are filed, copies of all financial statements and reports which the REIT may make to, or file with, the SEC; (f) as soon as possible and in any event within five Business Days of obtaining knowledge thereof: (i) any development, event, or condition that, individually or in the aggregate with other developments, events or conditions, could reasonably be expected to result in the payment by the REIT, the Borrower and their Subsidiaries, in the aggregate, of a Material Environmental Amount; and (ii) any notice that any governmental authority may deny any application for an Environmental Permit sought by, or revoke or refuse to renew any Environmental Permit held by, the REIT, the Borrower or any of their respective Subsidiaries; (g) upon the request of the Administrative Agent, an updated Schedule 3.14 showing the REIT, the Borrower, all of their respective Subsidiaries and their respective interests in the Subsidiaries; (h) (i) any and all material enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened against the Borrower, the REIT or any of their Subsidiaries or any of their Properties pursuant to any Environmental Laws, (ii) all other material Environmental Claims, and (iii) any environmental or similar condition on any real property adjoining or in the vicinity of the Properties of the Borrower, the REIT or any of their Subsidiaries that could reasonably be anticipated to cause such Properties (or any portion thereof) to be subject to any material restrictions on ownership, occupancy, transferability or use under any Environmental Laws; provided, however, that with respect to any Property, only to the extent any of the foregoing could reasonably be 65 72 expected to result in the payment of a Material Environmental Amount or have a Material Adverse Effect; and (i) promptly, such additional financial and other information as any Lender may from time to time reasonably request. 5.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its material obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the REIT, the Borrower or their respective Subsidiaries, as the case may be. 5.4 Conduct of Business and Maintenance of Existence, etc. (a) (i) Preserve, renew and keep in full force and effect its corporate existence and (ii) take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business, except, in each case, as otherwise permitted by Section 6.4 and except, in the case of clause (ii) above, to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (b) comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 5.5 Maintenance of Property; Insurance. (a) Keep all Property and systems useful and necessary in its business in good working order and condition, ordinary wear and tear excepted and (b) (i) maintain with financially sound and reputable insurance companies insurance on all its Property in at least such amounts and against at least such risks (but including in any event casualty insurance for the full replacement cost, public liability and one-year business interruption) as are usually insured against in the same general area by companies engaged in the same or a similar business and (ii) upon the request of the Administrative Agent, will furnish to the Administrative Agent evidence of such insurance. 5.6 Inspection of Property; Books and Records; Discussions. (a) Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities and (b) permit representatives 66 73 of the Administrative Agent or any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records at reasonable times during normal business hours and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the REIT, the Borrower and their respective Subsidiaries with officers and employees of the REIT, the Borrower and its Subsidiaries and with their respective independent certified public accountants. 5.7 Notices. Promptly give notice to the Administrative Agent and each Lender of: (a) the occurrence of any Default or Event of Default; (b) any (i) default or event of default under any Contractual Obligation of the REIT, the Borrower or any of their Subsidiaries or (ii) litigation, investigation or proceeding which may exist at any time between the REIT, the Borrower or any of their Subsidiaries and any Governmental Authority, which in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect; (c) any litigation or proceeding affecting the REIT, the Borrower or any of their respective Subsidiaries in which the amount involved is $1,000,000 or more and not covered by insurance or in which injunctive or similar relief is sought; (d) the following events, as soon as possible and in any event within 30 days after the Borrower or the REIT knows or has reason to know thereof: (i) the occurrence of any Reportable Event with respect to any Plan, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan or (ii) the institution of proceedings or the taking of any other action by the PBGC or the Borrower or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the termination, Reorganization or Insolvency of, any Plan; and (e) any development or event which has had or could reasonably be expected to have a Material Adverse Effect. 67 74 Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the REIT, the Borrower or the relevant Subsidiary proposes to take with respect thereto. 5.8 Environmental Laws. (a) Comply in all material respects with, and ensure compliance in all material respects by all tenants and subtenants, if any, with, all applicable Environmental Laws, and obtain and comply in all material respects with and maintain, and ensure that all tenants and subtenants obtain and comply in all material respects with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws. (b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws. 5.9 Ownership of the Borrower. In the case of the REIT, continue to own, directly or indirectly, at least 75% of the equity interests in the Borrower, and continue to cause one of the REIT's Wholly Owned Subsidiaries to be sole general partner of the Borrower. 5.10 Solvency. The Borrower shall at all times be, and shall cause the REIT and each of their respective Subsidiaries to be, Solvent. 5.11 Additional Guarantor Subsidiaries. Any Subsidiaries which (i) owns Unencumbered Real Estate Assets or other assets included in the determination of Unencumbered Real Estate Value, (ii) is a Management Entity or (iii) owns an Eligible Note Receivable, shall at all times be a Subsidiary Guarantor. 5.12 Covenants Relating to Unencumbered Real Estate Assets. (a) Maintenance. The Borrower shall maintain each Unencumbered Real Estate Asset in good order and condition in accordance with the Borrower's past practices. 68 75 (b) Material Agreements. The Borrower shall obtain the prior written approval of the Administrative Agent and the Required Lenders prior to entering into any reciprocal easement or similar agreement, ground lease or any other material agreement affecting any Unencumbered Real Estate Asset. (c) Management Contracts. The Borrower shall obtain, and shall cause its Affiliates to obtain, the prior written approval of the Administrative Agent and the Required Lenders prior to entering into any property management agreement with a Person other than the Borrower or one of the Qualified Management Entities, or replacing the property manager for any Unencumbered Real Estate Asset with a Person other than the Borrower or one of the Qualified Management Entities. The Borrower shall cause all property management contracts affecting any Unencumbered Real Estate Asset to permit termination of the manager (whether such manager is one of the Management Entities or otherwise) by the owner within thirty days' written notice, without penalty, and the Borrower shall not permit the management fee payable under any such property management agreement to exceed 4% of gross receipts from such property per fiscal year. (d) Construction. The Borrower shall obtain the prior written approval of the Administrative Agent and the Required Lenders prior to entering into any major construction or renovation affecting an Unencumbered Real Estate Asset and shall discharge all mechanic's liens resulting from any such construction or renovation. 5.13 Liens on Unencumbered Real Estate Assets. The Borrower shall keep each Unencumbered Real Estate Asset at all times free and clear of all Liens (unless such Liens are bonded and thereby released of record in a manner satisfactory to the Administrative Agent), except for Liens expressly permitted by Sections 6.3(a) - (e) or other matters approved by the Administrative Agent and the Required Lenders. 5.14 Payment of Taxes. Each of the REIT, the Borrower and their respective Subsidiaries will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, all material taxes, assessments and governmental charges levied or imposed upon the REIT, the Borrower or any Subsidiary or upon the income, profits or property of the REIT, the Borrower or any Subsidiary; provided, however, that the REIT, the Borrower or any Subsidiary, as the case may be, shall not be required to pay or discharge or cause to be 69 76 paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which appropriate reserves, if necessary (in the good faith judgment of management of such Person) are being maintained in accordance with GAAP. 5.15 Year 2000 Matters. Cause any reprogramming required to permit the proper functioning, in and following the year 2000, of (i) the REIT's, the Borrower's and their Subsidiaries' computer systems and (ii) equipment containing embedded microchips (including systems and equipment supplied by others or with which the REIT's, the Borrower's or their respective Subsidiaries' systems interface) and the testing of all such systems and equipment, as so reprogrammed, to be completed by January 1, 1999. 5.16 Management Contracts. Cause all fees payable to the Borrower or any Management Entity under the Management Contracts to be payable directly to the person party thereto and the portion of the fees to which the Borrower or such Management Entity are entitled will not be subject to any pass-through arrangement, fee-splitting arrangement or any other arrangement with any third party which would require such Person to remit any portion of such fees to a third party under any circumstances. The Borrower and any Management Entity will deliver to the Agent a true and complete copy of each Management Contract with respect to which a copy has been requested by such Agent. 5.17 Eligible Notes Receivable. Cause all amounts payable to the Borrower or any of its Wholly Owned Subsidiaries under the Eligible Note Receivables to be payable directly to the person party thereto and the portion of the amounts to which the Borrower or such Wholly Owned Subsidiary are entitled will not be subject to any pass-through arrangement, fee-splitting arrangement or any other arrangement with any third party which would require such Person to remit any portion of such fees to a third party under any circumstances. The Borrower and its Wholly Owned Subsidiaries will deliver to the Agent a true and complete copy of each Eligible Note Receivable with respect to which a copy has been requested by such Agent. 5.18 Post-Closing Requirements. (a) Within 30 days of the Closing Date, provide to the Administrative Agent, on behalf of the Lenders, with: 70 77 (i) a revised Schedule 2.7(a) listing Indebtedness of the REIT, the Borrower and the Subsidiaries outstanding on the Closing Date, listing with respect to each item of Indebtedness, to the reasonable satisfaction of the Administrative Agent: (A) the borrower, (B) the outstanding principal amount, (C) the maturity date, (D) the interest rate, (E) the location or name of collateral, if any, (F) the scheduled amortization and (G) whether such Indebtedness is Recourse or Non-Recourse; (ii) a revised Schedule 3.15(a) setting forth as of the Closing Date, to the reasonable satisfaction of the Administrative Agent, (i) the name and jurisdiction of incorporation of each Subsidiary and, (ii) as to each such Subsidiary, (A) the percentage of each class of Capital Stock thereof owned by any Loan Party and (B) any real property assets, Management Contracts and notes receivable owned by such Subsidiary; and (iii) supporting schedules to the Compliance Certificates of the REIT and the Borrower, demonstrating compliance as of the Closing Date, to the reasonable satisfaction of the Administrative Agent, with the covenants set forth in Sections 6.1 and 6.2, after giving effect to the Merger, the Loans and the transactions contemplated hereby. (b) Within 60 days of the Closing Date, (i) either (x) provide the Administrative Agent, on behalf of the Lenders, with the Subsidiaries Guarantee executed by each Wholly Owned Subsidiary of the REIT and the Borrower or (y) demonstrate to the reasonable satisfaction of the Administrative Agent the legal or contractual reasons any Wholly Owned Subsidiary of the REIT or the Borrower which did not execute the Subsidiaries Guarantee was unable to do so; and (ii) a revised Schedule 3.24 setting forth each Subsidiary Guarantor. SECTION 6. NEGATIVE COVENANTS The REIT and the Borrower hereby jointly and severally agree that, so long as the Commitments remain in effect or any Loan or other amount is owing to any Lender or any Agent hereunder, each of the REIT and the Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly: 71 78 6.1 Financial Condition Covenants. (a) Unencumbered Asset Leverage. Permit the aggregate amount (without duplication) of unsecured Indebtedness of the Borrower and its Subsidiaries and the REIT and its Subsidiaries, determined on a consolidated basis, to exceed on any date an amount equal to 62.5% of the Unencumbered Asset Value on such date. (b) Debt Service Coverage Ratio. Permit the Debt Service Coverage Ratio to exceed 2.00 at the end of any calendar month. (c) Total Senior Leverage. Permit the ratio of (a) the REIT's and the Borrower's Pro Rata Share (without duplication) of Indebtedness of the REIT, the Borrower and their respective Subsidiaries to (b) Gross Asset Value, to exceed .55 to 1.0 at any time. (d) Total Consolidated Leverage. Permit the ratio of (a) the REIT's and the Borrower's Pro Rata Share of Indebtedness of the REIT, the Borrower and their respective Subsidiaries plus the aggregate liquidation preference of all outstanding preferred stock issued by the Borrower or the REIT to (b) Gross Asset Value, to exceed .65 to 1.0 at any time. (e) Interest Coverage Ratio. Permit the ratio of (a) Consolidated Adjusted EBITDA for any period of twelve consecutive calendar months to (b) the sum of Interest Expense on Total Indebtedness for such period plus the amount of preferred stock dividends payable by the Borrower and the REIT for such period, to be less than 2.0 to 1.0. (f) Fixed Charge Coverage Ratio Permit the ratio of (a) Consolidated Adjusted EBITDA for any period of twelve consecutive calendar months to (b) the sum (without duplication) of consolidated Interest Expense and scheduled principal amortization (including, without limitation, sinking fund payments) on Total Indebtedness for such period plus the amount of dividends accrued (whether or not declared or payable) on the REIT's or the Borrower's preferred stock for such period and any cumulative unpaid dividends on such preferred stock for such period (but excluding preferred stock dividends payable to Management Entities), to be less than 1.75 to 1.0. 72 79 (g) Consolidated Tangible Net Worth. Permit Consolidated Tangible Net Worth to be at any time less than the sum of (i) $1,750,000,000 plus (ii) 75% of the amount of net equity proceeds received by the Borrower and the REIT (without duplication) after the Closing Date. 6.2 Additional Recourse Indebtedness. Create, incur, assume or suffer to exist any Recourse Indebtedness of the Borrower, the REIT or any of their respective Subsidiaries provided, that (a) from the Closing Date to January 31, 1999, up to $241,400,000 of Recourse Indebtedness other than the Loans shall be permitted to be outstanding and (b) from and after January 31, 1999, up to $191,400,000 of Recourse Indebtedness other than the Loans shall be permitted to be outstanding and provided, further, that the amounts referred to in clauses (a) and (b) above shall be permanently reduced by the amount of any repayments or reductions of Recourse Indebtedness included therein. 6.3 Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon any of its Property, whether now owned or hereafter acquired, except for: (a) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 30 days or which are being contested in good faith by appropriate proceedings; (c) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation; (d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; 73 80 (e) subject to Section 6.16, easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and which do not in any case materially detract from the value of the Property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or any of its Subsidiaries; (f) Liens in existence on the date hereof listed on Schedule 6.3(f), securing Indebtedness outstanding on the date hereof, provided that no such Lien is spread to cover any additional Property after the Closing Date and that the amount of Indebtedness secured thereby is not increased and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; and (g) Liens securing Indebtedness of the REIT, the Borrower or any other Subsidiary to finance the acquisition of Property, provided that (i) such Liens shall be created substantially simultaneously with the acquisition of such Property, (ii) such Liens do not at any time encumber any Property other than the Property financed by such Indebtedness; and (iii) the amount of Indebtedness secured thereby is not increased; (h) Any Lien existing on any Person that becomes a Subsidiary, or existing on any property or asset of such Person, after the date hereof prior to the time such Person becomes a Subsidiary; provided that (i) such Lien is not created in contemplation of or in connection with such Person becoming a Subsidiary, (ii) such Lien shall not apply to any other property or assets of the REIT, the Borrower or any Subsidiary and (iii) such Lien shall secure only those obligations which it secures on the date such Person becomes a Subsidiary, and refinancings, renewals and replacements thereof; and (i) Liens securing new Indebtedness on unencumbered Real Estate Assets; provided that the proceeds of such Indebtedness are applied to prepay the Loans in accordance with Section 2.7; and provided, further, that after the incurrence of such Liens, the Property subject to such Liens will not be an Unencumbered Real Estate Asset. 74 81 6.4 Limitation on Fundamental Changes. Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or Dispose of all or substantially all of its Property or business, except that: (a) the Merger may be consummated; (b) any Subsidiary of the Borrower may be merged or consolidated with or into the Borrower (provided that the Borrower shall be the continuing or surviving corporation) or with or into any Subsidiary Guarantor (provided that the Subsidiary Guarantor shall be the continuing or surviving corporation); (c) any Subsidiary of the Borrower may Dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower or any Subsidiary Guarantor; and (d) the REIT or the Borrower may merge or consolidate with another person provided that no Default or Event of Default has occurred and is continuing and that each of the following conditions are satisfied; (i) the REIT or the Borrower will be the surviving Person (the "Surviving Entity") after the consummation of the contemplated transaction; (ii) the Surviving Entity will have the same or greater net worth than the net worth of the REIT or the Borrower, as the case may be, immediately prior to such merger or consolidation; (iii) the Surviving Entity assumes or affirms in writing the obligations of the REIT or the Borrower, as the case may be, under this Agreement; and (iv) the contemplated transaction will not have a Material Adverse Effect. 6.5 Limitation on Disposition of Property. Dispose of any of its Property (including, without limitation, receivables and leasehold interests), 75 82 whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any Person, except: (a) the Disposition of obsolete or worn out property in the ordinary course of business; (b) the sale of inventory in the ordinary course of business; (c) Dispositions permitted by Section 6.4(b); (d) the sale or issuance of any Subsidiary's Capital Stock to the REIT, the Borrower or any Subsidiary; (e) Asset Sales listed on Schedule 6.5; and (f) any Asset Sale or Recovery Event, provided, that the requirements of Section 2.7(b) are complied with in connection therewith. 6.6 Limitation on Restricted Payments. Declare or pay any dividend (other than dividends payable solely in common stock of the Person making such dividend) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any Capital Stock of the REIT, the Borrower or any of their respective Subsidiary, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the REIT, the Borrower or any of their respective Subsidiary (collectively, "Restricted Payments"), except that: (a) any Subsidiary of the Borrower or the REIT may make Restricted Payments to (i) the Borrower or the REIT or any Subsidiary Guarantor and (ii) any third-party investor holding an interest in such Subsidiary, in the ordinary course of business pursuant to the related partnership agreement; (b) so long as no Default or Event of Default shall have occurred and be continuing, the REIT may make (i) Restricted Payments in any fiscal year in an aggregate amount not exceeding 80% of Funds From Operations for such fiscal year or such amounts as may be necessary to 76 83 maintain REIT Status and (ii) the $50,000,000 special dividend amount to be paid pursuant to terms of Exhibit 6E of the Merger Agreement; and (c) so long as no Default or Event of Default shall have occurred and be continuing, the Borrower may pay distributions to holders of its Capital Stock in any fiscal year in an aggregate amount not exceeding 80% of Funds From Operations for such fiscal year or such amounts as may be necessary to maintain REIT Status. 6.7 Limitation on Capital Expenditures. Make or commit to make any Capital Expenditure, except Capital Expenditures of the Borrower and its Subsidiaries in the ordinary course of business not exceeding $300 per Class A Property or Class B Property apartment unit and $400 per Class C Property apartment unit per annum plus the unspent amount of Estimated Remediation and Rehabilitation Costs listed on Schedule 6.7. 6.8 Limitation on Investments. Make any advance, loan, extension of credit (by way of guarantee or otherwise) or capital contribution to, or purchase any Capital Stock, bonds, notes, debentures or other debt securities of, or any assets constituting an ongoing business from, or make any other investment in, any other Person (all of the foregoing, "Investments"), except: (a) extensions of trade credit in the ordinary course of business; (b) investments in Cash Equivalents; (c) loans and advances to employees of the REIT, the Borrower or any of their respective Subsidiaries in the ordinary course of business (including, without limitation, for travel, entertainment and relocation expenses) in an aggregate amount for the REIT, the Borrower and their respective Subsidiaries not to exceed $5,000,000 after the Closing Date at any one time outstanding. For avoidance of doubt, any such loans or advances outstanding on the Closing Date shall not be included in the preceding sentence and to the extent such outstanding loans or advances are repaid, any re-advances of such loans or advances shall be included in the preceding sentence; (d) the Merger; 77 84 (e) Investments in Capital Expenditures permitted in Section 6.7; (f) Investments by the REIT, the Borrower or any of its Subsidiaries in the Borrower or any Person that, prior to such investment, is a Subsidiary Guarantor; (g) Investments in multi-family apartment projects in fee simple or leasehold interests therein or partnership, joint venture interests, partnership tenders, or other Investments (including capital contributions or partner loans) in Subsidiaries that own, directly or indirectly, multi-family apartment projects; (h) ownership interest in Management Entities, provided in each case the same are engaged in managing multi-family apartment projects; and (i) in addition to Investments otherwise expressly permitted by this Section, Investments by the Borrower or any of its Subsidiaries with an aggregate Carrying Value not to exceed 5% of the Gross Asset Value during the term of this Agreement. 6.9 Limitation on Optional Payments and Modifications of Debt Instruments, etc. (a) Make or offer to make any optional or voluntary payment, prepayment, repurchase or redemption of, or otherwise voluntarily or optionally defease, any Indebtedness (other than the Loans), preferred stock or segregate funds for any such payment, prepayment, repurchase, redemption or defeasance or, (b) amend, modify or otherwise change, or consent or agree to any amendment, modification, waiver or other change to, any of the terms of any Indebtedness (other than the Loans) or preferred stock (other than any such amendment, modification, waiver or other change which (i) would extend the maturity or reduce the amount of any payment of principal thereof, reduce the rate or extend the date for payment of interest thereon or relax any covenant or other restriction applicable to the REIT, the Borrower or any of its Subsidiaries and (ii) does not involve the payment of a consent fee). 6.10 Limitation on Transactions with Affiliates. Enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of Property, the rendering of any service or the payment of any management, 78 85 advisory or similar fees, with any Affiliate (other than the REIT, the Borrower or any Subsidiary Guarantor) unless such transaction is (a) otherwise permitted under this Agreement or (b) in the ordinary course of business of the REIT, the Borrower or such Subsidiary, as the case may be, upon fair and reasonable terms no less favorable to the REIT, the Borrower or such Subsidiary, as the case may be, than it would obtain in a comparable arm's length transaction with a Person which is not an Affiliate. 6.11 Limitation on Sales and Leasebacks. Enter into any arrangement with any Person providing for the leasing by the REIT, the Borrower or any Subsidiary of Property which has been or is to be sold or transferred by the REIT, the Borrower or such Subsidiary to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such Property or rental obligations of the REIT, the Borrower or such Subsidiary. 6.12 Limitation on Negative Pledge Clauses. Enter into or suffer to exist or become effective any agreement which prohibits or limits the ability of the REIT, the Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its Property or revenues, whether now owned or hereafter acquired, to secure the Obligations or, in the case of any guarantor, its obligations under the Subsidiary Guarantee, other than (a) this Agreement and the other Loan Documents, (b) any agreements governing any purchase money Liens or Capital Lease Obligations otherwise permitted hereby (in which case, any prohibition or limitation shall only be effective against the assets financed thereby), (c) the BofA Facility and (d) the proposed offering of senior unsecured notes by the REIT and/or the Borrower. 6.13 Limitation on Restrictions on Subsidiary Distributions. Enter into or suffer to exist or become effective any consensual encumbrance or restriction on the ability of any Subsidiary to (a) make Restricted Payments in respect of any Capital Stock of such Subsidiary held by, or pay any Indebtedness owed to, the REIT, the Borrower or any other Subsidiary, (b) make Investments in the Borrower or any other Subsidiary or (c) transfer any of its assets to the Borrower or any other Subsidiary, except for such encumbrances or restrictions existing under or by reason of (i) any restrictions existing under the Loan Documents and (ii) any restrictions with respect to a Subsidiary imposed pursuant to an agreement which has been entered into in connection with the Disposition of all or substantially 79 86 all of the Capital Stock or assets of such Subsidiary, except, until January 31, 1999, the FNMA Guaranty. 6.14 Limitation on Lines of Business. Enter into any business, either directly or through any Subsidiary, except for those businesses in which the Borrower and its Subsidiaries are engaged on the date of this Agreement (after giving effect to the Merger) or which are reasonably related thereto. 6.15 Limitation on Amendments to Merger Documentation. (a) Amend, supplement or otherwise modify (pursuant to a waiver or otherwise) the terms and conditions of the indemnities furnished to the REIT, the Borrower or any of their respective Subsidiaries pursuant to the Merger Documentation such that after giving effect thereto such indemnities or licenses shall be materially less favorable to the interests of the Loan Parties or the Lenders with respect thereto or (b) otherwise amend, supplement or otherwise modify the terms and conditions of the Merger Documentation except to the extent that any such amendment, supplement or modification could not reasonably be expected to have a Material Adverse Effect. 6.16 Limitation on New Construction. Make any expenditure to construct any new Property, except for any construction planned or contemplated as of the Closing Date and listed on Schedule 6.16 6.17 Limitation on Contingent Obligations. Create, incur, assume or suffer to exist any Contingent Obligations except: (a) endorsements for collection or deposit in the ordinary course of business; (b) unsecured Hedge Agreements entered into by the Borrower with respect to variable rate Indebtedness permitted hereunder; (c) reimbursement obligations of the Borrower or of Subsidiaries that do not own Unencumbered Real Estate Assets under letters of credit provided that such obligations are on such terms and in such amounts that, upon incurring such obligations and assuming that all conditions for drawing on such letters of credit have been complied with, the Borrower will be in compliance with the terms of Section 6.1; 80 87 (d) Contingent Obligations of the REIT, the Borrower and their Subsidiaries consisting of standard "exceptions to nonrecourse" guarantees of Non-Recourse Indebtedness or of other Indebtedness permitted under Section 6.2; and (e) Contingent Obligations outstanding on the date hereof and listed on Schedule 6.17. 6.18 Limitation on Lease Obligations. (a) Create or suffer to exist any obligations for the payment of rent for any property under a lease or agreement to lease that is not a Capital Lease Obligation, except for: (i) leases in existence on the Closing Date (and any renewal, extension or refinancing thereof); or (ii) leases entered into after the Closing Date in the ordinary course of business and at reasonable and customary market rates and terms. (b) Collect any rent more than one month in advance under any such apartment lease for a Property which is an Unencumbered Real Estate Asset other than in the ordinary course of business. (c) Cause any lease or any interest therein permitted under this Section 6.18 to be subject to any assignment or pledge. (d) Collect any rent under any lease permitted under this Section 6.18 other than in the ordinary course of business and grant any concessions to any lessee in the form of a waiver, release, reduction, discount or other alteration of rent due or to become due, other than in the ordinary course of business. (e) Fail to cause the interest of the lessee under any lease permitted under this Section 6.18 to be as lessee only, with no options to purchase or rights of first refusal. 6.19 Special Covenants Relating to the REIT. (a) Make any disposition of or encumber, pledge or hypothecate, whether directly or indirectly, all or any portion of the REIT's interest in the 81 88 Borrower or any Subsidiary which owns an Unencumbered Real Estate Asset at any time or any rights to distributions or dividends therefrom other than to the Borrower or a Wholly Owned Subsidiary of the REIT or the Borrower. (b) Cease to have the common stock of the REIT listed on the NYSE (unless it is then listed on the American Stock Exchange or the Nasdaq Stock Exchange). (c) Permit the REIT to fail to have REIT Status or to fail to comply with the requirements of the Code relating to qualified REIT subsidiaries. 6.20 Taxation of the Borrower. Permit the Borrower to cease at any time to be taxed as a partnership under the Code and not as an association taxable as a corporation. 6.21 Changes to BofA Facility Documents. The Borrower shall not permit any modifications, amendments or alterations to any of the BofA Facility Documents without the prior consent of the Required Lenders. 6.22 Non-Guarantor Subsidiaries. Permit any Non-Guarantor Subsidiary to: (a) incur any additional Indebtedness or Contingent Obligations, other than any Indebtedness or Contingent Obligation outstanding on the Closing Date and refinancings, renewals and replacements thereof; (b) enter into any line of business other than the business currently conducted by such Non-Guarantor Subsidiary on the Closing Date; or (c) fail to be Wholly Owned, directly or indirectly, by a Subsidiary Guarantor, except to the extent and interest in such Non-Guarantor Subsidiary is held by third-party investors. 6.23 FNMA Guaranty. The Borrower shall fail to be released from its obligations under the FNMA Guaranty prior to January 31, 1999. 82 89 SECTION 7. EVENTS OF DEFAULT If any of the following events shall occur and be continuing: (a) The Borrower shall fail to pay any principal of any Loan when due in accordance with the terms hereof; or the Borrower shall fail to pay any interest on any Loan, or any other amount payable hereunder or under any other Loan Document, within five days after any such interest or other amount becomes due in accordance with the terms hereof; or (b) Any representation or warranty made or deemed made by any Loan Party herein or in any other Loan Document or which is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Loan Document shall prove to have been inaccurate in any material respect on or as of the date made or deemed made; or (c) Any Loan Party shall default in the observance or performance of any agreement contained in Section 5.1, 5.2, 5.5(b), 5.7(a), 5.9, 5.18 or Section 6; or (d) Any Loan Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 20 days after the earlier of (i) the date upon which a Responsible Officer had actual knowledge thereof or received written notice of such failure or (ii) the date upon which written notice thereof is given to the Borrower by the Administrative Agent or any Lender; or (e) The REIT, the Borrower or any of their respective Subsidiaries shall (i) default in making any payment of any principal of any Indebtedness (including, without limitation, any Guarantee Obligation, but excluding the Loans) on the scheduled or original due date with respect thereto; or (ii) default in making any payment of any interest on any such Indebtedness beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created; or (iii) default in the observance or performance of any other agreement or condition relating to any 83 90 such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or beneficiary of such Indebtedness (or a trustee or agent on behalf of such holder or beneficiary) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or (in the case of any such Indebtedness constituting a Guarantee Obligation) to become payable; provided, that a default, event or condition described in clause (i), (ii) or (iii) of this paragraph (e) in respect of Non-Recourse Debt shall not at any time constitute an Event of Default unless, at such time, one or more defaults, events or conditions of the type described in clauses (i), (ii) and (iii) of this paragraph (e) in respect of Non-Recourse Debt shall have occurred and be continuing with respect to Indebtedness the outstanding principal amount of which exceeds in the aggregate $20,000,000; or (f) (i) The REIT, the Borrower or any of their respective Subsidiaries with an individual or aggregate net worth (determined in accordance with GAAP) of $10,000,000 or more (each, a "Material Subsidiary") shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the REIT, the Borrower or any Material Subsidiary shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the REIT, the Borrower or any Material Subsidiary any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against the REIT, the Borrower or any Material Subsidiary any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, 84 91 discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) the REIT, the Borrower or any Material Subsidiary shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) the REIT, the Borrower or any Material Subsidiary shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (g) (i) Any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Lenders, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan, (vi) the Borrower or any Commonly Controlled Entity, any of which is a "substantial employer" (as defined in Section 4001(a)(2) or Section 4062(e) of ERISA) withdraws from a Single Employer Plan or (vii) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vii) above, such event or condition, together with all other such events or conditions, if any, that, in the sole judgment of the Required Lenders, could result in a potential liability, net increase in aggregate Unfunded Pension Liabilities, or any combination thereof, in excess of $5,000,000; or (h) One or more judgments or decrees shall be entered against the REIT, the Borrower or any of their respective Subsidiaries involving for the REIT, the Borrower and their respective Subsidiaries taken as a whole a liability (not paid or fully covered by insurance as to which the relevant 85 92 insurance company has acknowledged coverage) of $10,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 30 days from the entry thereof; or (i) Any non-monetary judgment, order or decree shall be rendered against the Borrower, the REIT or any of their Subsidiaries that has or would reasonably be expected to have a Material Adverse Effect, and there shall be any period of 10 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (j) The Subsidiary Guarantee or the Guarantee contained in Section 8 shall cease, for any reason, to be in full force and effect or any Loan Party or any Affiliate of any Loan Party shall so assert; or (k) (i) Any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), shall become, or obtain rights (whether by means or warrants, options or otherwise) to become, the "beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of more than 20% of the outstanding common stock of the REIT; (ii) the board of directors of the REIT shall cease to consist of a majority of Continuing Directors; or (iii) the REIT shall cease to own and control, of record and beneficially, directly or indirectly, 75% or more of each class of outstanding Capital Stock of the Borrower free and clear of all Liens; or (l) The Borrower, the REIT, or any of their Subsidiaries or any of their respective properties shall become subject to one or more Liens for costs or damages in excess of (i) with respect to any Property which is an Unencumbered Real Estate Asset, $1,000,000 individually or in the aggregate or (ii) with respect to any other Property, $5,000,000, individually or in the aggregate, and in each case under any Environmental Law and such Liens shall remain in place for 30 days after the creation thereof; or (m) At any time after the incurrence of any Intra-Company Debt, the Borrower, the REIT, or any Subsidiary Guarantor is not the holder of such Intra-Company Debt; or if any modification or amendment with 86 93 respect to the payment terms of any Intra-Company Debt is entered into without the prior written consent of the Required Lenders; or (n) At any time there shall occur any event which would permit the holders of any class of preferred stock of the REIT to elect more than one director to the Board of Directors of the REIT. then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) above with respect to the Borrower, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents to be immediately due and payable, whereupon the same shall be immediately due and payable. SECTION 8. GUARANTEE 8.1 Guarantee. (a) The REIT hereby unconditionally and irrevocably guarantees to the Administrative Agent, for the ratable benefit of the Lenders and their respective successors, indorsees, transferees and assigns, the prompt and complete payment and performance by the Borrower when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations. (b) The REIT further agrees to pay any and all expenses (including, without limitation, all fees and disbursements of counsel) which may be paid or incurred by the Administrative Agent or any Lender in enforcing, or obtaining advice of counsel in respect of, any rights with respect to, or collecting, any or all of the Obligations and/or enforcing any rights with respect to, or collecting 87 94 against, the REIT under the guarantee contained in this Section 8 (the "Guarantee"). (c) No payment or payments made by the Borrower or any other Person or received or collected by the Administrative Agent or any Lender from the Borrower or any other Person by virtue of any action or proceeding or any set-off or appropriation or application, at any time or from time to time, in reduction of or in payment of the Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of the REIT hereunder which shall, notwithstanding any such payment or payments (other than payments made by the REIT in respect of the Obligations or payments received or collected from the REIT in respect of the Obligations), remain liable for the Obligations until the Obligations are paid in full. (d) The REIT agrees that whenever, at any time, or from time to time, it shall make any payment to the Administrative Agent or any Lender on account of its liability hereunder, it will notify the Administrative Agent and such Lender in writing that such payment is made under this Guarantee for such purpose. 8.2 No Subrogation. Notwithstanding any payment or payments made by the REIT hereunder, or any set-off or application of funds of the REIT by the Administrative Agent or any Lender, the REIT shall not be entitled to be subrogated to any of the rights of the Administrative Agent or any Lender against the Borrower or against any collateral security or guarantee or right of offset held by the Administrative Agent or any Lender for the payment of the Obligations, nor shall the REIT seek or be entitled to seek any contribution or reimbursement from the Borrower in respect of payments made by the REIT hereunder, until all amounts owing to the Administrative Agent and the Lenders by the Borrower on account of the Obligations are paid in full. If any amount shall be paid to the REIT on account of such subrogation rights at any time when all of the Obligations shall not have been paid in full, such amount shall be held by the REIT in trust for the Administrative Agent and the Lenders, segregated from other funds of the REIT, and shall, forthwith upon receipt by the REIT, be turned over to the Administrative Agent in the exact form received by the REIT (duly indorsed by the REIT to the Administrative Agent, if required), to be applied against the Obligations, whether matured or unmatured, in such order as the Administrative Agent may determine. 88 95 8.3 Amendments, etc. with respect to the Obligations; Waiver of Rights. The REIT shall remain obligated hereunder notwithstanding that, without any reservation of rights against the REIT, and without notice to or further assent by the REIT, any demand for payment of any of the Obligations made by the Administrative Agent or any Lender may be rescinded by the Administrative Agent or such Lender, and any of the Obligations continued, and the Obligations, or the liability of any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Administrative Agent or any Lender, and any Loan Document and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as the Administrative Agent (or the Required Lenders, as the case may be) may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by the Administrative Agent or any Lender for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. Neither the Administrative Agent nor any Lender shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Obligations or for this Guarantee or any property subject thereto. When making any demand hereunder against the REIT, the Administrative Agent or any Lender may, but shall be under no obligation to, make a similar demand on the Borrower or any other guarantor, and any failure by the Administrative Agent or any Lender to make any such demand or to collect any payments from the Borrower or any such other guarantor or any release of the Borrower or such other guarantor shall not relieve the REIT of its obligations or liabilities hereunder, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of the Administrative Agent or any Lender against the REIT. For the purposes hereof "demand" shall include the commencement and continuance of any legal proceedings. 8.4 Guarantee Absolute and Unconditional. The REIT waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Administrative Agent or any Lender upon this Guarantee or acceptance of this Guarantee; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon this Guarantee; and all dealings between the Borrower or the REIT, on the one hand, and the Administrative Agent and the Lenders, on the other, shall likewise be conclusively presumed 89 96 to have been had or consummated in reliance upon this Guarantee. The REIT waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Borrower or the REIT with respect to the Obligations. This Guarantee shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (a) the validity, regularity or enforceability of this Agreement, any Note, or any other Loan Document, any of the Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Administrative Agent or any Lender, (b) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by the Borrower against the Administrative Agent or any Lender, or (c) any other circumstance whatsoever (with or without notice to or knowledge of the Borrower or the REIT) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Borrower for the Obligations, or of the REIT under this Guarantee, in bankruptcy or in any other instance. When pursuing its rights and remedies hereunder against the REIT, the Administrative Agent and any Lender may, but shall be under no obligation to, pursue such rights and remedies as it may have against the Borrower or any other Person or against any collateral security or guarantee for the Obligations or any right of offset with respect thereto, and any failure by the Administrative Agent or any Lender to pursue such other rights or remedies or to collect any payments from the Borrower or any such other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of the Borrower or any such other Person or of any such collateral security, guarantee or right of offset, shall not relieve the REIT of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Administrative Agent or any Lender against the REIT. This Guarantee shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon the REIT and its successors and assigns thereof, and shall inure to the benefit of the Administrative Agent and the Lenders, and their respective successors, indorsees, transferees and assigns, until all the Obligations and the obligations of the REIT under this Guarantee shall have been satisfied by payment in full and the Commitments shall be terminated. 8.5 Reinstatement. This Guarantee shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by the Administrative Agent or any Lender upon the insolvency, bankruptcy, dissolution, 90 97 liquidation or reorganization of the Borrower or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any substantial part of its property, or otherwise, all as though such payments had not been made. 8.6 Payments. The REIT hereby agrees that the Obligations will be paid to the Administrative Agent without set-off or counterclaim in U.S. Dollars at the Payment Office. SECTION 9. THE AGENTS 9.1 Appointment. Each Lender hereby irrevocably designates and appoints the Agents as the agents of such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes each Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the such Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, no Agent shall have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against any Agent. 9.2 Delegation of Duties. Each Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. No Agent shall be responsible for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care. 9.3 Exculpatory Provisions. Neither any Agent nor any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except to the extent that any of the foregoing are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from 91 98 its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any Loan Party or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Agents under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of any Loan Party a party thereto to perform its obligations hereunder or thereunder. The Agents shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party. 9.4 Reliance by Agents. Each Agent shall be entitled to rely, and shall be fully protected in relying, upon any instrument, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Loan Parties), independent accountants and other experts selected by the Administrative Agent. The Agents may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. Each Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders (or, if so specified by this Agreement, all Lenders) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Each Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or, if so specified by this Agreement, all Lenders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans. 9.5 Notice of Default. No Agent shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder 92 99 unless such Agent has received notice from a Lender, the REIT or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or, if so specified by this Agreement, all Lenders); provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. 9.6 Non-Reliance on Agents and Other Lenders. Each Lender expressly acknowledges that neither the Agents nor any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by any Agent hereinafter taken, including any review of the affairs of a Loan Party or any affiliate of a Loan Party, shall be deemed to constitute any representation or warranty by any Agent to any Lender. Each Lender represents to the Agents that it has, independently and without reliance upon any Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon any Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, no Agent shall have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Loan Party or any affiliate of a Loan Party which may come into the possession of such Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. 93 100 9.7 Indemnification. The Lenders agree to indemnify each Agent in its capacity as such (to the extent not reimbursed by the REIT or the Borrower and without limiting the obligation of the REIT or the Borrower to do so), ratably according to their respective Aggregate Exposure Percentages in effect on the date on which indemnification is sought under this Section (or, if indemnification is sought after the date upon which the Commitments shall have terminated and the Loans shall have been paid in full, ratably in accordance with such Aggregate Exposure Percentages immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted against such Agent in any way relating to or arising out of, the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by such Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements which are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from such Agent's gross negligence or willful misconduct. The agreements in this Section 9.7 shall survive the payment of the Loans and all other amounts payable hereunder. 9.8 Agent in Its Individual Capacity. Each Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with any Loan Party as though such Agent was not an Agent. With respect to its Loans made or renewed by it, each Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not an Agent, and the terms "Lender" and "Lenders" shall include each Agent in its individual capacity. 9.9 Successor Agents. The Administrative Agent may resign as Administrative Agent upon 10 days' notice to the Lenders and the Borrower. If the Administrative Agent shall resign as Administrative Agent under this Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term "Administrative Agent" shall mean such successor agent effective 94 101 upon such appointment and approval, and the former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Loans. If no successor agent has accepted appointment as Administrative Agent by the date that is 10 days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective, and the Lenders shall assume and perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. The Syndication Agent may, at any time, by notice to the Lenders and the Administrative Agent, resign as Syndication Agent hereunder, whereupon the duties, rights, obligations and responsibilities hereunder shall automatically be assumed by, and inure to the benefit of, the Administrative Agent, without any further act by the Syndication Agent, the Administrative Agent or any Lender. After any retiring Agent's resignation as Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement and the other Loan Documents. 9.10 The Arranger. The Arranger, in its capacity as such, shall have no duties or responsibilities, and shall incur no liability, under this Agreement and the other Loan Documents. SECTION 10. MISCELLANEOUS 10.1 Amendments and Waivers. Neither this Agreement or any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this Section 10.1. The Required Lenders and each Loan Party which is a party to the relevant Loan Document may, or (with the written consent of the Required Lenders) the Agents and each Loan Party which is a party to the relevant Loan Document may, from time to time, (a) enter into written amendments, supplements or modifications hereto and to the other Loan Documents (including amendments and restatements hereof or thereof) for the purpose of adding any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Lenders or of the Loan Parties hereunder or thereunder or (b) waive, on such terms and conditions as may be specified in the instrument of waiver, any of the requirements 95 102 of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (i) forgive the principal amount or extend the final scheduled date of maturity of any Loan, extend the scheduled date of any amortization payment in respect of any Loan, reduce the stated rate of any interest or fee payable hereunder or extend the scheduled date of any payment thereof, or increase the amount or extend the expiration date of any Commitment of any Lender, in each case without the consent of each Lender directly affected thereby; (ii) amend, modify or waive any provision of this Section or reduce any percentage specified in the definition of Required Lenders, consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement and the other Loan Documents, release all or substantially all of the Subsidiary Guarantors from their guarantee obligations under the Subsidiary Guarantee, in each case without the consent of all Lenders; (iii) amend, modify or waive any provision of Section 9 without the consent of any Agent directly affected thereby; or (iv) amend, modify or waive any provision of Section 2.15 without the consent of each Lender directly affected thereby. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Loan Parties, the Lenders, the Administrative Agent and all future holders of the Loans. In the case of any waiver, the Loan Parties, the Lenders and the Administrative Agent shall be restored to their former position and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. Any such waiver, amendment, supplement or modification shall be effected by a written instrument signed by the parties required to sign pursuant to the foregoing provisions of this Section; provided, that delivery of an executed signature page of any such instrument by facsimile transmission shall be effective as delivery of a manually executed counterpart thereof. For the avoidance of doubt, this Agreement may be amended (or amended and restated) with the written consent of the Required Lenders, the Administrative Agent and each Loan Party to each relevant Loan Document (x) to add one or more additional credit facilities to this Agreement and to permit the extensions of credit from time to time outstanding thereunder and the accrued interest and fees in respect thereof (collectively, the "Additional Extensions of Credit") to share ratably in the benefits of this Agreement and the other Loan Documents with the Loans and the accrued interest and fees in respect thereof and (y) to include appropriately the Lenders holding such credit facilities in any determination of the Required Lenders. 96 103 10.2 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered, or three Business Days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received, addressed (a) in the case of the REIT, the Borrower and the Agents, as follows and (b) in the case of the Lenders, as set forth on Schedule I or, in the case of a Lender which becomes a party to this Agreement pursuant to an Assignment and Acceptance, in such Assignment and Acceptance or (c) in the case of any party, to such other address as such party may hereafter notify to the other parties hereto: The REIT: Apartment Investment and Management Company 1873 South Bellaire St. 17th Floor Denver, CO 80222 Attn: Patricia Heath Telecopy: (303) 961-4317 Telephone: (303) 691-4343 The Borrower: AIMCO Properties c/o Apartment Investment and Management Company 1873 South Bellaire St. 17th Floor Denver, CO 80222 Attn: Patricia Heath Telecopy: (303) 961-4317 Telephone: (303) 691-4343 The Syndication Agent: Lehman Commercial Paper Inc. 3 World Financial Center, 8th Floor New York, New York 10285 Attention: Allyson Bailey Telecopy: (212) 528-7423 Telephone: (212) 526-5849 97 104 The Administrative Agent: Lehman Commercial Paper Inc. 3 World Financial Center, 8th Floor New York, New York 10285 Attention: Allyson Bailey Telecopy: (212) 528-7423 Telephone: (212) 526-5849 provided that any notice, request or demand to or upon the either Agent or any Lender shall not be effective until received. 10.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the either Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 10.4 Survival of Representations and Warranties. All representations and warranties made hereunder, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans and other extensions of credit hereunder. 10.5 Payment of Expenses. The Borrower agrees (a) to pay or reimburse the Agents for all their reasonable out-of-pocket costs and expenses incurred in connection with the syndication of the Loans and the Commitments (other than fees payable to syndicate members) and the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements and other charges of counsel to the Administrative Agent, (b) to pay or reimburse each Lender and the Agents for all its costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents and any such other documents, including, without limitation, the fees and disbursements of counsel (including the allocated fees 98 105 and disbursements and other charges of in-house counsel) to each Lender and of counsel to the Agents, (c) to pay, indemnify, and hold each Lender and the Agents harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other documents, and (d) to pay, indemnify, and hold each Lender and the Agents and their respective officers, directors, trustees, employees, affiliates, agents and controlling persons (each, an "Indemnitee") harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the other Loan Documents and any such other documents, including, without limitation, any of the foregoing relating to the use of proceeds of the Loans or the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of the REIT, the Borrower any of their respective Subsidiaries or any Property owned or occupied by any of them and the fees and disbursements and other charges of legal counsel in connection with claims, actions or proceedings by any Indemnitee against the Borrower or the REIT hereunder (all the foregoing in this clause (d), collectively, the "Indemnified Liabilities"), provided, that the Borrower and the REIT shall have no obligation hereunder to any Indemnitee with respect to Indemnified Liabilities to the extent such Indemnified Liabilities are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnitee. Without limiting the foregoing, and to the extent permitted by applicable law, each of the REIT and the Borrower agrees not to assert and to cause its Subsidiaries not to assert, and hereby waives and agrees to cause its Subsidiaries so to waive, all rights for contribution or any other rights of recovery with respect to all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, under or related to Environmental Laws, that any of them might have by statute or otherwise against any indemnitee. The agreements in this Section shall survive repayment of the Loans and all other amounts payable hereunder. 10.6 Successors and Assigns; Participations and Assignments. (a) This Agreement shall be binding upon and inure to the benefit of the REIT, the Borrower, the Lenders, the Agents, all future holders of the Loans and their respective successors and assigns, except that neither the REIT nor the Borrower may assign or transfer any of its 99 106 rights or obligations under this Agreement without the prior written consent of the Agents and each Lender. (b) Any Lender may, without the consent of the Borrower, in accordance with applicable law, at any time sell to one or more banks, financial institutions or other entities (each, a "Participant") participating interests in any Loan owing to such Lender, any Commitment of such Lender or any other interest of such Lender hereunder and under the other Loan Documents. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Loan for all purposes under this Agreement and the other Loan Documents, and the Borrower and the Agents shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Loan Documents. In no event shall any Participant under any such participation have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by any Loan Party therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Loans or any fees payable hereunder, or postpone the date of the final maturity of the Loans, in each case to the extent subject to such participation. Each of the REIT and the Borrower agrees that if amounts outstanding under this Agreement and the Loans are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement, provided that, in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in Section 10.7(a) as fully as if it were a Lender hereunder. The Borrower also agrees that each Participant shall be entitled to the benefits of Sections 2.14, 2.15 and 2.16 with respect to its participation in the Commitments and the Loans outstanding from time to time as if it was a Lender; provided that, in the case of Section 2.15, such Participant shall have complied with the requirements of said Section and provided, further, that no Participant shall be entitled to receive any greater amount pursuant to any such Section than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. 100 107 (c) Any Lender (an "Assignor") may, in accordance with applicable law and upon written notice to the Syndication Agent, at any time and from time to time assign to any Lender or any affiliate thereof or, with the consent of the Agents (which, in each case, shall not be unreasonably withheld or delayed) (provided that no such consent need be obtained by Lehman Commercial Paper Inc. for a period of 180 days following the Closing Date), to an additional bank, financial institution or other entity (an "Assignee") all or any part of its rights and obligations under this Agreement pursuant to an Assignment and Acceptance, substantially in the form of Exhibit D, executed by such Assignee and such Assignor (and, where the consent of the Agents is required pursuant to the foregoing provisions, by the Agents) and delivered to the Administrative Agent for its acceptance and recording in the Register; provided that no such assignment to an Assignee (other than any Lender or any affiliate thereof) shall be in an aggregate principal amount of less than $10,000,000 (other than in the case of an assignment of all of a Lender's interests under this Agreement), unless otherwise agreed by the Syndication Agent and the Administrative Agent. Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with a Commitment and/or Loans as set forth therein, and (y) the Assignor thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of an Assignor's rights and obligations under this Agreement, such Assignor shall cease to be a party hereto). (d) The Administrative Agent shall, on behalf of the Borrower, maintain at its address referred to in Section 10.2 a copy of each Assignment and Acceptance delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register as the owner of the Loans and any Notes evidencing such Loans recorded therein for all purposes of this Agreement. Any assignment of any Loan, whether or not evidenced by a Note, shall be effective only upon appropriate entries with respect thereto being made in the Register (and each Note shall expressly so provide). Any assignment or transfer of all or part of a Loan evidenced by a Note shall be registered on the Register only upon surrender for registration of assignment or transfer of the Note evidencing such Loan, accompanied by a duly executed Assignment and Acceptance; thereupon one or more new Notes in the same 101 108 aggregate principal amount shall be issued to the designated Assignee, and the old Notes shall be returned by the Administrative Agent to the Borrower marked "cancelled". The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of an Assignment and Acceptance executed by an Assignor and an Assignee (and, in any case where the consent of any other Person is required by Section 10.6(c), by each such other Person) together with payment to the Administrative Agent of a registration and processing fee of $3,500 (except that no such registration and processing fee shall be payable (y) in connection with an assignment by or to Lehman Commercial Paper Inc. or (z) in the case of an Assignee which is already a Lender or is an affiliate of a Lender or a Person under common management with a Lender), the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Lenders and the Borrower. On or prior to such effective date, the Borrower, at its own expense, upon request, shall execute and deliver to the Administrative Agent (in exchange for the Note of the assigning Lender) a new Note to the order of such Assignee in an amount equal to the applicable Loans acquired by it pursuant to such Assignment and Acceptance and, if the Assignor has retained Loans upon request, a new Note to the order of the Assignor in an amount equal to the Loans retained by it hereunder. Such new Note shall be dated the Closing Date and shall otherwise be in the form of the Note or Notes replaced thereby. (f) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this Section concerning assignments of Loans and Notes relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests, including, without limitation, any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank in accordance with applicable law. 10.7 Adjustments; Set-off. (a) If any Lender (a "Benefitted Lender") shall at any time receive any payment of all or part of the Obligations owing to it, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 7(f), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender's Obligations, such Benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lender's Obligations, or shall provide such other Lenders with the benefits of 102 109 any such collateral, as shall be necessary to cause such Benefitted Lender to share the excess payment or benefits of such collateral ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. (b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to the REIT or the Borrower, any such notice being expressly waived by the REIT and the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by the REIT or the Borrower hereunder (whether at the stated maturity, by acceleration or otherwise), to set off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the REIT or the Borrower, as the case may be. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such setoff and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such setoff and application. 10.8 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent. 10.9 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 10.10 Integration. This Agreement and the other Loan Documents represent the agreement of the REIT, the Borrower, the Administrative Agent and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent or any Lender relative to 103 110 subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents. 10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 10.12 Submission To Jurisdiction; Waivers. Each of the REIT and the Borrower hereby irrevocably and unconditionally: (a) submits for itself and its Property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the REIT or the Borrower, as the case may be at its address set forth in Section 10.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages. 104 111 10.13 Acknowledgements. Each of the REIT and the Borrower hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents; (b) neither the Administrative Agent nor any Lender has any fiduciary relationship with or duty to the REIT or the Borrower arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between Administrative Agent and Lenders, on one hand, and the REIT and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the REIT, the Borrower and the Lenders. 10.14 Confidentiality. Each of the Agents and the Lenders agrees to keep confidential all non-public information provided to it by any Loan Party pursuant to this Agreement that constitutes projections or is designated by such Loan Party as confidential; provided that nothing herein shall prevent any Agent or any Lender from disclosing any such information (a) to the Administrative Agent, any other Lender or any affiliate of any Lender, (b) to any Participant or Assignee (each, a "Transferee") or prospective Transferee which agrees to comply with the provisions of this Section, (c) any of its employees, directors, agents, attorneys, accountants and other professional advisors, (d) upon the request or demand of any Governmental Authority having jurisdiction over it, (e) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (f) if requested or required to do so in connection with any litigation or similar proceeding, (g) which has been publicly disclosed other than in breach of this Section 10.14, (h) to the National Association of Insurance Commissioners or any similar organization or any nationally recognized rating agency that requires access to information about a Lender's investment portfolio in connection with ratings issued with respect to such Lender or (i) in connection with the exercise of any remedy hereunder or under any other Loan Document. 10.15 Accounting Changes. In the event that any "Accounting Change" (as defined below) shall occur and such change results in a change in the method of calculation of financial covenants, standards or terms in this Agreement, then the REIT, 105 112 the Borrower and the Administrative Agent agree to enter into negotiations in order to amend such provisions of this Agreement so as to equitably reflect such Accounting Changes with the desired result that the criteria for evaluating financial condition of the REIT and the Borrower shall be the same after such Accounting Changes as if such Accounting Changes had not been made. Until such time as such an amendment shall have been executed and delivered by the Borrower, the Administrative Agent and the Required Lenders, all financial covenants, standards and terms in this Agreement shall continue to be calculated or construed as if such Accounting Changes had not occurred. "Accounting Changes" refers to changes in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants or, if applicable, the SEC. 10.16 WAIVERS OF JURY TRIAL. THE REIT, THE BORROWER, THE AGENTS AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 106 113 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. APARTMENT INVESTMENT AND MANAGEMENT COMPANY By: /s/ Peter K. Kompaniez ---------------------------------- Name: Title: President AIMCO PROPERTIES, L.P., as Borrower By: AIMCO-GP, INC., general partner By: /s/ Peter K. Kompaniez ---------------------------------- Name: Title: President LEHMAN BROTHERS INC., as Arranger By: /s/ Francis X. Gilhool ---------------------------------- Name: Title: Authorized Signatory LEHMAN COMMERCIAL PAPER INC., as Syndication Agent, Administrative Agent and as a Lender By: /s/ Francis X. Gilhool ---------------------------------- Name: Title: Authorized Signatory 107 EX-10.17 8 SUBSIDIARIES GUARANTEE - 10/1/98 1 EXHIBIT 10.17 SUBSIDIARIES' GUARANTEE SUBSIDIARIES' GUARANTEE, dated as of October 1, 1998, made by each of the entities that are signatories hereto (the "Guarantors"), in favor of LEHMAN COMMERCIAL PAPER INC., as administrative agent (in such capacity, the "Administrative Agent") for the several banks and other financial institutions or entities (the "Lenders") from time to time parties to the Interim Term Loan Agreement, dated as of October 1, 1998 (as amended, supplemented or otherwise modified from time to time, the "Interim Term Loan Agreement"), among APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation (the "REIT"), AIMCO PROPERTIES, L.P., a Delaware limited partnership (the "Borrower"), the Lenders, LEHMAN BROTHERS INC., as advisor and arranger (in such capacity, the "Arranger"), LEHMAN COMMERCIAL PAPER INC., as syndication agent (in such capacity, the "Syndication Agent"), and the Administrative Agent. W I T N E S S E T H: WHEREAS, pursuant to the Interim Term Loan Agreement, the Lenders have severally agreed to make Loans to the Borrower upon the terms and subject to the conditions set forth therein, to be evidenced by the Notes issued by the Borrower under the Interim Term Loan Agreement; WHEREAS, the Borrower owns directly or indirectly all or a portion of the issued and outstanding Capital Stock of each Guarantor; WHEREAS, the Borrower and the Guarantors are engaged in related businesses, and each Guarantor will derive substantial direct and indirect benefits from the making of the Loans; and WHEREAS, it is a condition precedent to the obligation of the Lenders to make their respective Loans to the Borrower under the Interim Term Loan Agreement that the Guarantors shall have executed and delivered this Guarantee to the Administrative Agent for the ratable benefit of the Lenders. NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent and the Lenders to enter into the Interim Term 2 Loan Agreement and to induce the Lenders to make their respective loans to the Borrower under the Interim Term Loan Agreement, the Guarantors hereby agree with the Administrative Agent, for the ratable benefit of the Lenders, as follows: 1. Defined Terms. (a) Unless otherwise defined herein, terms defined in the Interim Term Loan Agreement and used herein shall have the meanings given to them in the Interim Term Loan Agreement. (b) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Guarantee shall refer to this Guarantee as a whole and not to any particular provision of this Guarantee, and section and paragraph references are to this Guarantee unless otherwise specified. (c) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. 2. Guarantee (a) Subject to the provisions of paragraph 2.(b), each of the Guarantors hereby, jointly and severally, unconditionally and irrevocably, guarantees to the Administrative Agent, for the ratable benefit of the Lenders and their respective successors, indorsees, transferees and assigns, the prompt and complete payment and performance by the Borrower when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations. (b) Anything herein or in any other Loan Document to the contrary notwithstanding, the maximum liability of each Guarantor hereunder and under the other Loan Documents shall in no event exceed the amount which can be guaranteed by such Guarantor under applicable federal and state laws relating to the insolvency of debtors. (c) Each Guarantor further agrees to pay any and all expenses (including, without limitation, all fees and disbursements of counsel) which may be paid or incurred by the Administrative Agent or any Lender in enforcing, or obtaining advice of counsel in respect of, any rights with respect to, or collecting, any or all of the Obligations and/or enforcing any rights with respect to, or collecting against, such Guarantor under this Guarantee. (d) Each Guarantor agrees that the Obligations may at any time and from time to time exceed the amount of the liability of such Guarantor hereunder without impairing this Guarantee or affecting the rights and remedies of the Administrative Agent or any Lender hereunder. 2 3 (e) No payment or payments made by the Borrower, any of the Guarantors, any other guarantor or any other Person or received or collected by the Administrative Agent or any Lender from the Borrower, any of the Guarantors, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder which shall, notwithstanding any such payment or payments (other than payments made by such Guarantor in respect of the Obligations or payments received or collected from such Guarantor in respect of the Obligations), remain liable for the Obligations up to the maximum liability of such Guarantor hereunder until the Obligations are paid in full. (f) Each Guarantor agrees that whenever, at any time, or from time to time, it shall make any payment to the Administrative Agent or any Lender on account of its liability hereunder, it will notify the Administrative Agent in writing that such payment is made under this Guarantee for such purpose. 3. Right of Contribution. Each Guarantor hereby agrees that to the extent that a Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder who has not paid its proportionate share of such payment. Each Guarantor's right of contribution shall be subject to the terms and conditions of Section 5 hereof. The provisions of this Section shall in no respect limit the obligations and liabilities of any Guarantor to the Administrative Agent and the Lenders, and each Guarantor shall remain liable to the Administrative Agent and the Lenders for the full amount guaranteed by such Guarantor hereunder. 4. Right of Set-off. Each Guarantor hereby irrevocably authorizes each Lender at any time and from time to time without notice to such Guarantor or any other Guarantor, any such notice being expressly waived by each Guarantor, to set-off and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender to or for the credit or the account of such Guarantor, or any part thereof in such amounts as such Lender may elect, against and on account of the obligations and liabilities of such Guarantor to such Lender hereunder and claims of every nature and description of such Lender against such Guarantor, in any currency, whether arising hereunder, under the Interim Term Loan Agreement, any Note, any Loan 3 4 Documents or otherwise, as such Lender may elect, whether or not the Administrative Agent or any Lender has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured. The Administrative Agent and each Lender shall notify such Guarantor promptly of any such set-off and the application made by the Administrative Agent or such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Administrative Agent and each Lender under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Administrative Agent or such Lender may have. 5. No Subrogation. Notwithstanding any payment or payments made by any of the Guarantors hereunder, or any set-off or application of funds of any of the Guarantors by the Administrative Agent or any Lender, no Guarantor shall be entitled to be subrogated to any of the rights of the Administrative Agent or any Lender against the Borrower or any other Guarantor or any collateral security or guarantee or right of offset held by any Lender for the payment of the Obligations, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from the Borrower or any other Guarantor in respect of payments made by such Guarantor hereunder, until all amounts owing to the Administrative Agent and the Lenders by the Borrower on account of the Obligations are paid in full. If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Obligations shall not have been paid in full, such amount shall be held by such Guarantor in trust for the Administrative Agent and the Lenders, segregated from other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the Administrative Agent in the exact form received by such Guarantor (duly indorsed by such Guarantor to the Administrative Agent, if required), to be applied against the Obligations, whether matured or unmatured, in such order as the Administrative Agent may determine. 6. Amendments, etc. with respect to the Obligations; Waiver of Rights. Each Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against any Guarantor, and without notice to or further assent by any Guarantor, any demand for payment of any of the Obligations made by the Administrative Agent or any Lender may be rescinded by such party and any of the Obligations continued, and the Obligations, or the liability of any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Administrative Agent or any Lender, and any Loan Document and any other documents executed and delivered in connection 4 5 therewith may be amended, modified, supplemented or terminated, in whole or in part, as the Administrative Agent (or the Required Lenders, as the case may be) may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by the Administrative Agent or any Lender for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. Neither the Administrative Agent nor any Lender shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Obligations or for this Guarantee or any property subject thereto. When making any demand hereunder against any of the Guarantors, the Administrative Agent or any Lender may, but shall be under no obligation to, make a similar demand on the Borrower or any other Guarantor or guarantor, and any failure by the Administrative Agent or any Lender to make any such demand or to collect any payments from the Borrower or any such other Guarantor or guarantor or any release of the Borrower or such other Guarantor or guarantor shall not relieve any of the Guarantors of their several obligations or liabilities hereunder, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of the Administrative Agent or any Lender against any of the Guarantors. For the purposes hereof "demand" shall include the commencement and continuance of any legal proceedings. 7. Guarantee Absolute and Unconditional. Each Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Administrative Agent or any Lender upon this Guarantee or acceptance of this Guarantee; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon this Guarantee; and all dealings between the Borrower and any of the Guarantors, on the one hand, and the Administrative Agent and the Lenders, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon this Guarantee. Each Guarantor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Borrower or any of the Guarantors with respect to the Obligations. Each Guarantor understands and agrees that this Guarantee shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (a) the validity, regularity or enforceability of the Interim Term Loan Agreement, any Note or any other Loan Document, any of the Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Administrative Agent or any Lender, (b) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by the Borrower against the Administrative Agent or any Lender, or (c) any other circumstance whatsoever (with or without 5 6 notice to or knowledge of the Borrower or such Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Borrower for the Obligations, or of such Guarantor under this Guarantee, in bankruptcy or in any other instance. When pursuing its rights and remedies hereunder against any Guarantor, the Administrative Agent and any Lender may, but shall be under no obligation to, pursue such rights and remedies as it may have against the Borrower or any other Person or against any collateral security or guarantee for the Obligations or any right of offset with respect thereto, and any failure by the Administrative Agent or any Lender to pursue such other rights or remedies or to collect any payments from the Borrower or any such other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of the Borrower or any such other Person or any such collateral security, guarantee or right of offset, shall not relieve such Guarantor of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Administrative Agent and the Lenders against such Guarantor. This Guarantee shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon each Guarantor and the successors and assigns thereof, and shall inure to the benefit of the Administrative Agent and the Lenders, and their respective successors, indorsees, transferees and assigns, until all the Obligations and the obligations of each Guarantor under this Guarantee shall have been satisfied by payment in full and the Commitments shall be terminated. 8. Reinstatement. This Guarantee shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by the Administrative Agent or any Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made. 9. Payments. Each Guarantor hereby guarantees that payments hereunder will be paid to the Administrative Agent without set-off or counterclaim in U.S. Dollars at the office of the Administrative Agent located at the Payment Office. 10. Representations and Warranties. Each Guarantor hereby represents and warrants that: 6 7 (a) it (i) is a corporation, partnership or limited liability company, as the case may be, duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (ii) has the corporate or partnership, as the case may be, power and authority and the legal right to own and operate its property, to lease the property it operates as lessee, (iii) to conduct the business in which it is currently engaged and (iv) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a material adverse effect on the business, assets, property, condition (financial or otherwise) or prospects of such Guarantor (a "Material Adverse Effect"); (b) it has the corporate or partnership, as the case may be, power and authority, and the legal right, to make and deliver, and perform its obligations under this Guarantee, and has taken all necessary corporate action to authorize its execution, delivery and performance of this Guarantee; (c) this Guarantee constitutes a legal, valid and binding obligation of such Guarantor enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and general equitable principles (whether enforcement is sought by proceedings in equity or at law); (d) the execution, delivery and performance of this Guarantee will not violate any provision of any Requirement of Law or Contractual Obligation of such Guarantor and will not result in, or require, the creation or imposition of any Lien on any of the properties or revenues of such Guarantor pursuant to any Requirement of Law or Contractual Obligation of the Guarantor; no Requirement of Law or Contractual Obligation applicable to such Guarantor could reasonably be expected to have a Material Adverse Effect; (e) no consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the execution, delivery, performance, validity or enforceability of this Guarantee; and (f) no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of such Guarantor, threatened by or against such Guarantor or against any of its properties or revenues with respect to this Guarantee. 7 8 Each Guarantor agrees that the foregoing representations and warranties shall be deemed to have been made by such Guarantor on the date of each borrowing by the Borrower under the Interim Term Loan Agreement on and as of such date of borrowing as though made hereunder on and as of such date. 11. Authority of Administrative Agent. Each Guarantor acknowledges that the rights and responsibilities of the Administrative Agent under this Guarantee with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Guarantee shall, as between the Administrative Agent and the Lenders, be governed by the Interim Term Loan Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent and such Guarantor, the Administrative Agent shall be conclusively presumed to be acting as agent for the Lenders with full and valid authority so to act or refrain from acting, and no Guarantor shall be under any obligation, or entitlement, to make any inquiry respecting such authority. 12. Notices. All notices, requests and demands to or upon the Administrative Agent, any Lender or any Guarantor to be effective shall be in writing (including by telecopy) and shall be deemed to have been duly given or made postage prepaid when delivered or three Business Days after being deposited in the mail, or, in the case of telecopy notice, when received, addressed as follows: (a) if to the Administrative Agent or any Lender, at its address or transmission number for notices provided in subsection 10.2 of the Interim Term Loan Agreement; and (b) if to any Guarantor, at its address or transmission number for notices set forth under its signature below. The Administrative Agent, each Lender and each Guarantor may change its address and transmission numbers for notices by notice in the manner provided in this Section. 13. Counterparts. This Guarantee may be executed by one or more of the Guarantors on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of copies of this Guarantee signed by all the Guarantors shall be lodged with the Administrative Agent. 8 9 14. Severability. Any provision of this Guarantee which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 15. Integration. This Guarantee represents the agreement of each Guarantor with respect to the subject matter hereof and there are no promises or representations by the Administrative Agent or any Lender relative to the subject matter hereof not reflected herein. 16. Amendments in Writing; No Waiver; Cumulative Remedies. (a) None of the terms or provisions of this Guarantee may be waived, amended, supplemented or otherwise modified except by a written instrument executed by each Guarantor and the Administrative Agent, provided that any provision of this Guarantee may be waived by the Administrative Agent and the Lenders in a letter or agreement executed by the Administrative Agent or by telecopy from the Administrative Agent. (b) No failure to exercise and no delay in exercising, on the part of either Agent or any Lender, any right, remedy, power or privilege under this Guarantee shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. (c) The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any other rights, remedies, powers and privileges provided by law. 17. Section Headings. The section headings used in this Guarantee are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 18. Successors and Assigns. This Guarantee shall be binding upon the successors and assigns of each Guarantor and shall inure to the benefit of the Administrative Agent and the Lenders and their successors and assigns. 19. Governing Law. This Guarantee shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. 9 10 IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee to be duly executed and delivered by its duly authorized officer as of the day and year first above written. AIMCO HOLDINGS QRS, INC. AIMCO-GP, INC. AIMCO-LP, INC. AIMCO/OTC QRS, INC. AIMCO PROPERTIES FINANCE CORP. AIMCO SOMERSET, INC. A.J. TWO, INC. AMBASSADOR IV, INC. AMBASSADOR V, INC. AMBASSADOR FLORIDA PARTNERS, INC. By: /s/ PETER KOMPANIEZ ----------------------------------- Name: Peter Kompaniez Title: President AIMCO ARBOR STATION, L.P. AIMCO CITRUS GROVE, L.P. AIMCO FISHERMAN'S LANDING, L.P. AIMCO LANDMARK, L.P. AIMCO/TEAL POINTE, L.P. AIMCO VILLA LA PAZ, L.P. By: AIMCO HOLDINGS, L.P., as their general partner By: AIMCO HOLDINGS QRS, INC., as its general partner By: /s/ PETER KOMPANIEZ ----------------------------------- Name: Peter Kompaniez Title: President 11 AIMCO HOLDINGS, L.P. By: AIMCO HOLDINGS QRS, INC., as its general partner By: /s/ PETER KOMPANIEZ ----------------------------------- Name: Peter Kompaniez Title: President AIMCO PROPERTIES FINANCE PARTNERSHIP, L.P. By: AIMCO PROPERTIES FINANCE CORP., as its general partner By: /s/ PETER KOMPANIEZ ----------------------------------- Name: Peter Kompaniez Title: President AMBASSADOR II, L.P. By: AMBASSADOR II, INC., as its general partner By: /s/ PETER KOMPANIEZ ----------------------------------- Name: Peter Kompaniez Title: President AMBASSADOR X, L.P. By: AMBASSADOR X, INC., as its general partner By: /s/ PETER KOMPANIEZ ----------------------------------- Name: Peter Kompaniez Title: President S.A. APARTMENTS, LTD. By: AIMCO HOLDINGS, L.P., as its general partner By: AIMCO HOLDINGS QRS, INC., as its general partner By: /s/ PETER KOMPANIEZ ----------------------------------- Name: Peter Kompaniez Title: President EX-10.18 9 PREFERRED STOCK SUBSIDIARIES GUARANTEED - 11/1/98 1 EXHIBIT 10.18 PREFERRED STOCK SUBSIDIARIES' GUARANTEE PREFERRED STOCK SUBSIDIARIES' GUARANTEE, dated as of October 1, 1998, made by each of the entities that are signatories hereto (the "Guarantors"), in favor of LEHMAN COMMERCIAL PAPER INC., as administrative agent (in such capacity, the "Administrative Agent") for the several banks and other financial institutions or entities (the "Lenders") from time to time parties to the Interim Term Loan Agreement, dated as of October 1, 1998 (as amended, supplemented or otherwise modified from time to time, the "Interim Term Loan Agreement"), among APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation (the "REIT"), AIMCO PROPERTIES, L.P., a Delaware limited partnership (the "Borrower"), the Lenders, LEHMAN BROTHERS INC., as advisor and arranger (in such capacity, the "Arranger"), LEHMAN COMMERCIAL PAPER INC., as syndication agent (in such capacity, the "Syndication Agent"), and the Administrative Agent. W I T N E S S E T H: WHEREAS, pursuant to the Interim Term Loan Agreement, the Lenders have severally agreed to make Loans to the Borrower upon the terms and subject to the conditions set forth therein, to be evidenced by the Notes issued by the Borrower under the Interim Term Loan Agreement; WHEREAS, the Borrower and the Guarantors are engaged in related businesses; WHEREAS, the Borrower has obtained this Guarantee from the Guarantors, and the Guarantors have provided this Guarantee in return for Borrower's payment of a Guarantee fee; and WHEREAS, it is a condition precedent to the obligation of the Lenders to make their respective Loans to the Borrower under the Interim Term Loan Agreement that the Guarantors shall have executed and delivered this Guarantee to the Administrative Agent for the ratable benefit of the Lenders. NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent and the Lenders to enter into the Interim Term Loan Agreement and to induce the Lenders to make their respective loans to the Borrower under the Interim 2 Term Loan Agreement, the Guarantors hereby agree with the Administrative Agent, for the ratable benefit of the Lenders, as follows: 1. Defined Terms. (a) Unless otherwise defined herein, terms defined in the Interim Term Loan Agreement and used herein shall have the meanings given to them in the Interim Term Loan Agreement. (b) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Guarantee shall refer to this Guarantee as a whole and not to any particular provision of this Guarantee, and section and paragraph references are to this Guarantee unless otherwise specified. (c) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. 2. Guarantee (a) Subject to the provisions of paragraph 2.(b), each of the Guarantors hereby, jointly and severally, unconditionally and irrevocably, guarantees to the Administrative Agent, for the ratable benefit of the Lenders and their respective successors, indorsees, transferees and assigns, the prompt and complete payment and performance by the Borrower when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations. (b) Anything herein or in any other Loan Document to the contrary notwithstanding, the maximum liability of each Guarantor hereunder and under the other Loan Documents shall in no event exceed the amount which can be guaranteed by such Guarantor under applicable federal and state laws relating to the insolvency of debtors. (c) Each Guarantor further agrees to pay any and all expenses (including, without limitation, all fees and disbursements of counsel) which may be paid or incurred by the Administrative Agent or any Lender in enforcing, or obtaining advice of counsel in respect of, any rights with respect to, or collecting, any or all of the Obligations and/or enforcing any rights with respect to, or collecting against, such Guarantor under this Guarantee. (d) Each Guarantor agrees that the Obligations may at any time and from time to time exceed the amount of the liability of such Guarantor hereunder without impairing this Guarantee or affecting the rights and remedies of the Administrative Agent or any Lender hereunder. (e) No payment or payments made by the Borrower, any of the Guarantors, any other guarantor or any other Person or received or collected by the Administrative 2 3 Agent or any Lender from the Borrower, any of the Guarantors, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder which shall, notwithstanding any such payment or payments (other than payments made by such Guarantor in respect of the Obligations or payments received or collected from such Guarantor in respect of the Obligations), remain liable for the Obligations up to the maximum liability of such Guarantor hereunder until the Obligations are paid in full. (f) Each Guarantor agrees that whenever, at any time, or from time to time, it shall make any payment to the Administrative Agent or any Lender on account of its liability hereunder, it will notify the Administrative Agent in writing that such payment is made under this Guarantee for such purpose. 3. Right of Contribution. Each Guarantor hereby agrees that to the extent that a Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder who has not paid its proportionate share of such payment. Each Guarantor's right of contribution shall be subject to the terms and conditions of Section 5 hereof. The provisions of this Section shall in no respect limit the obligations and liabilities of any Guarantor to the Administrative Agent and the Lenders, and each Guarantor shall remain liable to the Administrative Agent and the Lenders for the full amount guaranteed by such Guarantor hereunder. 4. Right of Set-off. Each Guarantor hereby irrevocably authorizes each Lender at any time and from time to time without notice to such Guarantor or any other Guarantor, any such notice being expressly waived by each Guarantor, to set-off and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender to or for the credit or the account of such Guarantor, or any part thereof in such amounts as such Lender may elect, against and on account of the obligations and liabilities of such Guarantor to such Lender hereunder and claims of every nature and description of such Lender against such Guarantor, in any currency, whether arising hereunder, under the Interim Term Loan Agreement, any Note, any Loan Documents or otherwise, as such Lender may elect, whether or not the Administrative Agent or any Lender has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured. The Administrative Agent and each Lender shall notify such Guarantor promptly of any such set-off and the application made by the Administrative Agent or such Lender, provided that the failure to 3 4 give such notice shall not affect the validity of such set-off and application. The rights of the Administrative Agent and each Lender under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Administrative Agent or such Lender may have. 5. No Subrogation. Notwithstanding any payment or payments made by any of the Guarantors hereunder, or any set-off or application of funds of any of the Guarantors by the Administrative Agent or any Lender, no Guarantor shall be entitled to be subrogated to any of the rights of the Administrative Agent or any Lender against the Borrower or any other Guarantor or any collateral security or guarantee or right of offset held by any Lender for the payment of the Obligations, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from the Borrower or any other Guarantor in respect of payments made by such Guarantor hereunder, until all amounts owing to the Administrative Agent and the Lenders by the Borrower on account of the Obligations are paid in full. If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Obligations shall not have been paid in full, such amount shall be held by such Guarantor in trust for the Administrative Agent and the Lenders, segregated from other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the Administrative Agent in the exact form received by such Guarantor (duly indorsed by such Guarantor to the Administrative Agent, if required), to be applied against the Obligations, whether matured or unmatured, in such order as the Administrative Agent may determine. 6. Amendments, etc. with respect to the Obligations; Waiver of Rights. Each Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against any Guarantor, and without notice to or further assent by any Guarantor, any demand for payment of any of the Obligations made by the Administrative Agent or any Lender may be rescinded by such party and any of the Obligations continued, and the Obligations, or the liability of any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Administrative Agent or any Lender, and any Loan Document and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as the Administrative Agent (or the Required Lenders, as the case may be) may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by the Administrative Agent or any Lender for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. Neither the Administrative Agent nor any Lender shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Obligations or for this Guarantee or any property subject thereto. When making any demand hereunder against 4 5 any of the Guarantors, the Administrative Agent or any Lender may, but shall be under no obligation to, make a similar demand on the Borrower or any other Guarantor or guarantor, and any failure by the Administrative Agent or any Lender to make any such demand or to collect any payments from the Borrower or any such other Guarantor or guarantor or any release of the Borrower or such other Guarantor or guarantor shall not relieve any of the Guarantors of their several obligations or liabilities hereunder, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of the Administrative Agent or any Lender against any of the Guarantors. For the purposes hereof "demand" shall include the commencement and continuance of any legal proceedings. 7. Guarantee Absolute and Unconditional. Each Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Administrative Agent or any Lender upon this Guarantee or acceptance of this Guarantee; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon this Guarantee; and all dealings between the Borrower and any of the Guarantors, on the one hand, and the Administrative Agent and the Lenders, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon this Guarantee. Each Guarantor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Borrower or any of the Guarantors with respect to the Obligations. Each Guarantor understands and agrees that this Guarantee shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (a) the validity, regularity or enforceability of the Interim Term Loan Agreement, any Note or any other Loan Document, any of the Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Administrative Agent or any Lender, (b) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by the Borrower against the Administrative Agent or any Lender, or (c) any other circumstance whatsoever (with or without notice to or knowledge of the Borrower or such Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Borrower for the Obligations, or of such Guarantor under this Guarantee, in bankruptcy or in any other instance. When pursuing its rights and remedies hereunder against any Guarantor, the Administrative Agent and any Lender may, but shall be under no obligation to, pursue such rights and remedies as it may have against the Borrower or any other Person or against any collateral security or guarantee for the Obligations or any right of offset with respect thereto, and any failure by the Administrative Agent or any Lender to pursue such other rights or remedies or to collect any payments from the Borrower or any such other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of the Borrower or any such other Person or any such collateral security, guarantee or right of offset, shall not relieve such Guarantor 5 6 of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Administrative Agent and the Lenders against such Guarantor. This Guarantee shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon each Guarantor and the successors and assigns thereof, and shall inure to the benefit of the Administrative Agent and the Lenders, and their respective successors, indorsees, transferees and assigns, until all the Obligations and the obligations of each Guarantor under this Guarantee shall have been satisfied by payment in full and the Commitments shall be terminated. 8. Reinstatement. This Guarantee shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by the Administrative Agent or any Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made. 9. Payments. Each Guarantor hereby guarantees that payments hereunder will be paid to the Administrative Agent without set-off or counterclaim in U.S. Dollars at the office of the Administrative Agent located at the Payment Office. 10. Representations and Warranties. Each Guarantor hereby represents and warrants that: (a) it (i) is a corporation, partnership or limited liability company, as the case may be, duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (ii) has the corporate or partnership, as the case may be, power and authority and the legal right to own and operate its property, to lease the property it operates as lessee, (iii) to conduct the business in which it is currently engaged and (iv) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a material adverse effect on the business, assets, property, condition (financial or otherwise) or prospects of such Guarantor (a "Material Adverse Effect"); (b) it has the corporate or partnership, as the case may be, power and authority, and the legal right, to make and deliver, and perform its obligations under this Guarantee, and has taken all necessary corporate action to authorize its execution, delivery and performance of this Guarantee; 6 7 (c) this Guarantee constitutes a legal, valid and binding obligation of such Guarantor enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and general equitable principles (whether enforcement is sought by proceedings in equity or at law); (d) the execution, delivery and performance of this Guarantee will not violate any provision of any Requirement of Law or Contractual Obligation of such Guarantor and will not result in, or require, the creation or imposition of any Lien on any of the properties or revenues of such Guarantor pursuant to any Requirement of Law or Contractual Obligation of the Guarantor; no Requirement of Law or Contractual Obligation applicable to such Guarantor could reasonably be expected to have a Material Adverse Effect; (e) no consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the execution, delivery, performance, validity or enforceability of this Guarantee; and (f) no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of such Guarantor, threatened by or against such Guarantor or against any of its properties or revenues with respect to this Guarantee. Each Guarantor agrees that the foregoing representations and warranties shall be deemed to have been made by such Guarantor on the date of each borrowing by the Borrower under the Interim Term Loan Agreement on and as of such date of borrowing as though made hereunder on and as of such date. 11. Authority of Administrative Agent. Each Guarantor acknowledges that the rights and responsibilities of the Administrative Agent under this Guarantee with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Guarantee shall, as between the Administrative Agent and the Lenders, be governed by the Interim Term Loan Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent and such Guarantor, the Administrative Agent shall be conclusively presumed to be acting as agent for the Lenders with full and valid authority so to act or refrain from acting, and no Guarantor shall be under any obligation, or entitlement, to make any inquiry respecting such authority. 7 8 12. Notices. All notices, requests and demands to or upon the Administrative Agent, any Lender or any Guarantor to be effective shall be in writing (including by telecopy) and shall be deemed to have been duly given or made postage prepaid when delivered or three Business Days after being deposited in the mail, or, in the case of telecopy notice, when received, addressed as follows: (a) if to the Administrative Agent or any Lender, at its address or transmission number for notices provided in subsection 10.2 of the Interim Term Loan Agreement; and (b) if to any Guarantor, at its address or transmission number for notices set forth under its signature below. The Administrative Agent, each Lender and each Guarantor may change its address and transmission numbers for notices by notice in the manner provided in this Section. 13. Counterparts. This Guarantee may be executed by one or more of the Guarantors on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of copies of this Guarantee signed by all the Guarantors shall be lodged with the Administrative Agent. 14. Severability. Any provision of this Guarantee which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 15. Integration. This Guarantee represents the agreement of each Guarantor with respect to the subject matter hereof and there are no promises or representations by the Administrative Agent or any Lender relative to the subject matter hereof not reflected herein. 16. Amendments in Writing; No Waiver; Cumulative Remedies. (a) None of the terms or provisions of this Guarantee may be waived, amended, supplemented or otherwise modified except by a written instrument executed by each Guarantor and the Administrative Agent, provided that any provision of this Guarantee may be waived by the Administrative Agent and the Lenders in a letter or agreement executed by the Administrative Agent or by telecopy from the Administrative Agent. 8 9 (b) No failure to exercise and no delay in exercising, on the part of either Agent or any Lender, any right, remedy, power or privilege under this Guarantee shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. (c) The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any other rights, remedies, powers and privileges provided by law. 17. Section Headings. The section headings used in this Guarantee are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 18. Successors and Assigns. This Guarantee shall be binding upon the successors and assigns of each Guarantor and shall inure to the benefit of the Administrative Agent and the Lenders and their successors and assigns. 19. Governing Law. This Guarantee shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. 9 10 IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee to be duly executed and delivered by its duly authorized officer as of the day and year first above written. AIMCO/NHP HOLDINGS, INC. AIMCO/NHP PROPERTIES, INC. APTEK MAINTENANCE SERVICES COMPANY LLC APTEK MANAGEMENT COMPANY LLC BROADSTREET MANAGEMENT, INC. NHP A&R SERVICES, INC. NHP ASSET MANAGEMENT SERVICES, INC. NHP CASH MANAGEMENT SERVICES, INC. NHP EQUITY SERVICES, INC. NHP FLORIDA MANAGEMENT COMPANY NHP-HDV SIXTEEN, INC. NHP-HDV TEN, INC. NHP-HDV THREE, INC. NHP-HDV 20, INC. NHP-HG 15, INC. NHP-HG 17, INC. NHP MANAGEMENT COMPANY NHP MAINTENANCE SERVICES COMPANY NHP/PRC MANAGEMENT COMPANY LLC NHP PUERTO RICO MANAGEMENT COMPANY NHP TEXAS MANAGEMENT COMPANY PREFERRED HOME HEALTH, INC. PROPERTY ASSET MANAGEMENT SERVICES-CALIFORNIA, L.L.C. PROPERTY ASSET MANAGEMENT SERVICES, INC. PROPERTY SERVICES GROUP, INC. RESCORP REALTY, INC. THE RISK SPECIALIST GROUP, INC. 11 By: /s/ PETER KOMPANIEZ ---------------------------------- Name: Peter Kompaniez Title: President NHP/CONGRESS MANAGEMENT LIMITED PARTNERSHIP By: NHP-HG SIX, INC., as its general partner By: /s/ PETER KOMPANIEZ ---------------------------------- Name: Peter Kompaniez Title: President PROPERTY ASSET MANAGEMENT SERVICES, L.P. By: AIMCO PROPERTIES, L.P., as its general partner By: AIMCO-GP, INC., as its general partner By: /s/ PETER KOMPANIEZ ---------------------------------- Name: Peter Kompaniez Title: President EX-10.42 10 INCENTIVE STOCK OPTION AGREEMENT 1 EXHIBIT 10.42 INCENTIVE STOCK OPTION AGREEMENT (1997 Stock Award and Incentive Plan) INCENTIVE STOCK OPTION AGREEMENT, dated as of ________________ (the "Agreement"), by and between Apartment Investment and Management Company, a Maryland corporation (the "Company"), and _______________ (the "Optionee"). Capitalized terms used but not otherwise defined in this Agreement shall have the respective meanings set forth in the Apartment Investment and Management Company 1997 Stock Award and Incentive Plan, as amended (the "Plan"). WHEREAS, on _____________ (the "Grant Date") the Compensation Committee (the "Committee") of the Board of Directors (the "Board") of the Company awarded the Optionee an incentive stock option, exercisable to purchase shares of the Company's Class A Common Stock, par value $.01 per share ("Common Stock"), pursuant to, and subject to the terms and provisions of, the Plan. NOW, THEREFORE, in consideration of the Optionee's services to the Company and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Number of Shares and Purchase Price. The Company hereby grants the Optionee an Incentive Stock Option (the "Option") to purchase ________________, shares of Common Stock (the "Option Shares") at a purchase price per share equal to $ ___________ (the "Exercise Price"), pursuant to the terms of this Agreement and the provisions of the Plan. 2. Period of Option and Conditions of Exercise. (a) Unless the Option is previously terminated pursuant to this Agreement or the Plan, the Option shall terminate on the tenth anniversary of the Date of Grant (the "Expiration Date"). Upon the termination of the Option, all rights of the Optionee hereunder shall cease. (b) In the event that the January 21, 1998 amendment to the Plan is not approved by the stockholders of the Company at the Company's 1998 Annual Meeting of Stockholders, this Option shall terminate and all rights of the Optionee hereunder shall cease. (c) Subject to the provisions of the Plan and this Agreement, the Option shall be exercisable as follows: (i) ____% of the Option Shares on the second anniversary of the Date of Grant, (ii) ____% of the Option Shares on the third anniversary of the Date of Grant, (iii) ____% of the Option Shares on the fourth anniversary of the Date of Grant, and (iv) ____% of the Option Shares on the fifth anniversary of the Date of Grant, provided, however, that the Option shall be immediately exercisable as to ____% of the Option Shares following the occurrence of a Change of Control (as defined below). 2 3. Termination of Employment. (a) Except as provided in this Section 3, the Option may not be exercised after the Optionee has ceased to be employed by the Company or one of its affiliates. In the event that the Optionee ceases to be employed by the Company or one of its affiliates, the Option may be exercised following such termination, as follows: (i) if the Optionee's termination of employment is due to his or her death or Disability (as defined below), the Option shall remain exercisable until the Expiration Date for all Option Shares for which the Option was otherwise exercisable; (ii) if the Optionee ceases to be employed by the Company or an affiliate other than due to death, Disability or termination for Cause, the Option shall remain exercisable for a period of ninety (90) days following such termination (but in no event later than the Expiration Date) with respect to all Option Shares for which the Option was otherwise exercisable as of the date of such termination, and shall thereafter terminate; and (iii) if the Optionee's termination is by the Company or one of its affiliates for Cause (as defined below), the Option shall terminate immediately on the date of the such termination. 4. Exercise of Option. (a) The Option may be exercised only by the Optionee or, in the event of the death or incapacity of the Optionee, the Optionee's successor, heir or legal representative. The Option shall be exercised by delivery to the Company of (i) a written notice, substantially in the form attached hereto as Exhibit A, specify the number of Option Shares for which the Option is being exercised to purchase, and (ii) full payment of the Exercise Price for such number of Option Shares being purchased (in respect of such Option Shares, the "Total Exercise Price"), in the manner provided below, and any transfer or withholding taxes applicable thereto. (b) Payment of the Exercise Price for any Option Shares being purchased shall be made as follows: (i) The Optionee may satisfy all or any portion of the Total Exercise Price by delivery to the Company of cash, by certified or cashier's check, or (ii) The Optionee may satisfy the remaining portion of the Total Exercise Price by (A) assignment, transfer and delivery to the Company, free of any liens, claims or encumbrances, of shares of Common Stock that the Optionee owns, or (B) assignment and transfer to the Company, free of any liens, claims or encumbrances, of OP Units that the Optionee owns. If the Optionee pays by assignment, transfer and delivery of shares 2 3 of Common Stock, the Optionee must include with the notice of exercise the certificates for such shares of Common Stock, either duly endorsed for transfer or accompanied by an appropriately executed stock power in favor of the Company. If the Optionee pays by assignment and transfer of OP Units, the Optionee must include with the notice of exercise a duly executed assignment of all of the Optionee's interest in such OP Units. For purposes of this Agreement, the value of all such shares of Common Stock delivered by the Optionee will be their Fair Market Value, and the value of all OP Units assigned by the Optionee will be the Fair Market Value of the number of shares of Common Stock for which such OP Units are then subject to exchange upon a redemption of such OP Units. If the value of the shares of Common Stock delivered, or OP Units assigned, by the Optionee exceeds the amount required to be paid pursuant to this Section 4, the Company will provide to the Optionee, as soon as practicable, cash or a check in an amount equal to the value of any fractional portion of a share of Common Stock or OP Unit, and will issue a certificate to the Optionee for any whole share(s) of Common Stock or OP Units exceeding the number of shares of Common Stock or OP Units required to pay the Exercise Price for all Option Shares being purchased. (c) Not less than 100 shares of Common Stock may be purchased at any time upon the exercise of the Option, unless the number of shares of Common Stock so purchased constitutes the total number of Option Shares for which the Option is then exercisable. The Option may be exercised only to purchase whole shares of Common Stock, and in no case may a fractional share of Common Stock be purchased. The right of the Optionee to purchase Option Shares for which the Option is then exercisable may be exercised, in whole or in part, at any time or from time to time, prior to the Expiration Date. (d) The Company may require the Optionee to pay, prior to the delivery of any Option Shares to which the Optionee shall be entitled upon exercise of the Option, an amount equal to the Federal, state and local income taxes and other amounts required by law to be withheld by the Company with respect thereto. Alternatively, the Optionee may authorize the Company to withhold from the number of Option Shares he or she would otherwise receive upon exercise of the Option, that number of Option Shares having a Fair Market Value equal to the amount of such required tax. (e) Any Option that is exercised in a manner that prevents its qualification as an Incentive Stock Option shall be treated for all purposes as a Non-qualified Stock Option. 5. Definitions. For purposes of this Agreement: (a) "Cause" shall mean the termination of employment of an individual with the Company as a result of (i) the performance by such individual of any activity involving fraud or dishonesty, (ii) the conviction of the individual of a felony or crime involving moral turpitude, (iii) the failure or refusal of such individual to reasonably or satisfactorily perform any material duties or responsibilities reasonably required of such individual by the Company, (iv) the gross 3 4 negligence or willful neglect or malfeasance by the individual in the performance or non-performance of such individual's duties or responsibilities to the Company, or (v) any unauthorized act or omission by such individual that is injurious in any material respect to the financial condition or business reputation of the Company. (b) "Change in Control" shall mean the occurrence of any of the following events: (i) an acquisition (other than directly from the Company) of any voting securities of the Company (the "Voting Securities) by any "person" (as the term "person" is used for purposes of Section 13(d) or Section 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) immediately after which such person has "beneficial ownership" (within the meaning of Rule 13d-3 promulgated under the Exchange Act) ("Beneficial Ownership") of 20% or more of the combined voting power of the Company's then outstanding Voting Securities; provided, however, in determining whether a Change in Control has occurred, Voting Securities that are acquired in a Non-Control Acquisition (as hereinafter defined) shall not constitute an acquisition that would cause a Change in Control. "Non-Control Acquisition" shall mean an acquisition by (A) an employee benefit plan (or a trust forming a part thereof) maintained by (1) the Company or (2) any corporation, partnership or other person of which a majority of its voting power or its equity securities or equity interest is owned directly or indirectly by the Company or in which the Company serves as a general partner or manager (a "Subsidiary"), (B) the Company or any Subsidiary, or (C) any person in connection with a Non-Control Transaction (as hereinafter defined); (ii) the individuals who constitute the Board of Directors of the Company as of the date hereof (the "Incumbent Board") cease for any reason to constitute at least two-thirds (2/3) of the Board of Directors; provided, however, that if the election, or nomination for election by the Company's stockholders, of any new director was approved by a vote of at least two-thirds (2/3) of the Incumbent Board, such new director shall be considered as a member of the Incumbent Board; provided, further, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened "election contest" (as described in Rule 14a-11 promulgated under the Exchange Act) (an "Election Contest") or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board of Directors (a "Proxy Contest") including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or (iii) approval by stockholders of the Company of: (A) a merger, consolidation, share exchange or reorganization involving the Company, unless (1) the stockholders of the Company, immediately before such merger, consolidation, share exchange or reorganization, own, directly or indirectly immediately following such merger, consolidation, share exchange or reorganization, at least 80% of the combined voting power of the outstanding voting securities of the corporation that is the successor in such merger, consolidation, share exchange or reorganization (the "Surviving Company") in substantially the same proportion as 4 5 their ownership of the Voting Securities immediately before such merger, consolidation, share exchange or reorganization, (2) the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such merger, consolidation, share exchange or reorganization constitute at least two-thirds (2/3) of the members of the board of directors of the Surviving Company, and (3) no persons (other than the Company or any Subsidiary, any employee benefit plan (or any trust forming a part thereof) maintained by the Company, the Surviving Company or any Subsidiary, or any person who, immediately prior to such merger, consolidation, share exchange or reorganization had Beneficial Ownership of 15% or more of the then outstanding Voting Securities has Beneficial Ownership of 15% or more of the combined voting power of the Surviving Company's then outstanding voting securities (a transaction described in clauses (1) through (3) is referred to herein as "Non-Control Transaction"); (B) a complete liquidation or dissolution of the Company; or (C) an agreement for the sale or other disposition of all or substantially all of the assets of the Company to any person (other than a transfer to a Subsidiary). Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any person (a "Subject Person") acquired Beneficial Ownership of more than the permitted amount of the outstanding Voting Securities as a result of the acquisition of Voting Securities by the Company that, by reducing the number of Voting Securities outstanding, increases the proportional number of shares Beneficially Owned by such Subject Person, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of Voting Securities by the Company, and after such share acquisition by the Company, such Subject Person becomes the Beneficial Owner of any additional Voting Securities that increases the percentage of the then outstanding Voting Securities Beneficially Owned by such Subject Person, then a Change in Control shall occur. (c) The Optionee's employment will have terminated by reason of "Disability" if, as a result of the Optionee's incapacity due to physical or mental illness, the Optionee shall have been absent from his or her duties on a full-time basis for the entire period of six (6) consecutive months, and within thirty (30) days after written notice is given by the Company to the Optionee (which may occur before or after the end of such six-month period), the Optionee shall not have returned to the performance of his or her duties on a full-time basis. 6. Tax Treatment; Tax Withholding. (a) If the Optionee fails to comply with the requirements of Section 422(a) of the Code (as from time to time redesignated or amended), subsection (a)(1) of which currently re quires that any Shares acquired upon exercise of the Option not be disposed of within two (2) years of the Date of Grant or one (1) year from the date on which such Shares are acquired, Optionee understands that the tax treatment otherwise applicable to the Option shall not be available. 5 6 (b) The Optionee understands that, to the extent that the aggregate Fair Market Value of Option Shares (as of the Date of Grant) with respect to which the Option is exercisable for the first time by the Optionee during any calendar year under the Plan shall exceed $100,000, the Option shall be treated as a Non-Qualified Stock Option. (c) The Company shall have the power and the right to deduct or withhold, or require a Optionee to remit to the Company, an amount sufficient to satisfy any Federal, state, and local taxes (including the Optionee's FICA obligation) required by law to be withheld as a result of any taxable event arising in connection with the Option, in accordance with the terms of the Plan. (d) The Option shall be construed insofar as is practicable to permit its continued qualification as an Incentive Stock Option; if, however, the Option no longer so qualifies, it shall be treated for all purposes as a Non-qualified Stock Option. 7. Miscellaneous. (a) Entire Agreement. This Agreement and the Plan contain the entire understanding and agreement of the Company and the Optionee concerning the subject matter hereof, and supersede all earlier negotiations and understandings, written or oral, between the parties with respect thereto. (b) Captions. The captions and section numbers appearing in this Agreement are inserted only as a matter of convenience. They do not define, limit, construe or describe the scope or intent of the provisions of this Agreement. (c) Counterparts. This Agreement may be executed in counterparts, each of which when signed by the Company or the Optionee will be deemed an original and all of which together will be deemed the same agreement. (d) Notices. Any notice or communication having to do with this Agreement must be given by personal delivery or by certified mail, return receipt requested, addressed, if to the Company or the Committee, to the attention of the Chief Financial Officer of the Company at the principal office of the Company and, if to the Optionee, to the Optionee's last known address contained in the personnel records of the Company. (e) Succession and Transfer. Each and all of the provisions of this Agreement are binding upon and inure to the benefit of the Company and the Optionee and their successors, assigns and legal representatives; provided, however, that the Option granted hereunder shall not be transferable by the Optionee (or the Optionee's successor or legal representative) other than by will or by the laws of descent and distribution and may be exercised during the lifetime of the Optionee, only by the Optionee or by his or her guardian or legal representative. 6 7 (f) Amendments. Subject to the provisions of the Plan, this Agreement may be amended or modified at any time by an instrument in writing signed by the parties hereto. (g) Governing Law. This Agreement and the rights of all persons claiming hereunder will be construed and determined in accordance with the laws of the State of Colorado without giving effect to the choice of law principles thereof. (h) Plan Controls. This Agreement is made under and subject to the provisions of the Plan, and all of the provisions of the Plan are hereby incorporated by reference into this Agreement. In the event of any conflict between the provisions of this Agreement and the provisions of the Plan, the provisions of the Plan shall govern. By signing this Agreement, the Optionee confirms that he or she has received a copy of the Plan and has had an opportunity to review the contents thereof. 7 8 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. APARTMENT INVESTMENT AND MANAGEMENT COMPANY By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- OPTIONEE: ---------------------------------------- 8 EX-21.1 11 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21.1 APARTMENT INVESTMENT AND MANAGEMENT COMPANY SUBSIDIARIES 1. 7400 Roosevelt Corp. (Massachusetts) 2. AG A&R Services, Inc. (Delaware) 3. AG Management Company (Delaware) 4. AG Properties, Inc. (Delaware) 5. AIMCO/Beacon Hill, Inc. (Delaware) 6. AIMCO/Blossomtree, Inc. (Delaware) 7. AIMCO/Brant Rock, Inc. (Delaware) 8. AIMCO Calhoun, Inc. (Delaware) 9. AIMCO/Colonnade, Inc. (Delaware) 10. AIMCO/Foothills, Inc. (Delaware) 11. AIMCO/Fox Bay, Inc. (Delaware) 12. AIMCO/Foxtree, Inc. (Delaware) 13. AIMCO/Freedom Place, Inc. (Delaware) 14. AIMCO/Grovetree, Inc. (Delaware) 15. AIMCO/Hazeltree, Inc. (Delaware) 16. AIMCO/Hiddentree, Inc. (Delaware) 17. AIMCO Holdings QRS, Inc. (Delaware) 18. AIMCO/IPT, Inc. (Delaware) 19. AIMCO/Islandtree, Inc. (Delaware) 20. AIMCO LJ Tucson, Inc. (Delaware) 21. AIMCO/Olmos, Inc. (Delaware) 22. AIMCO/Orchidtree, Inc. (Delaware) 23. AIMCO/OTC QRS, Inc. (Delaware) 24. AIMCO/Pine Creek, Inc. (Delaware) 25. AIMCO/Polo Park, Inc. (Delaware) 26. AIMCO Properties Finance Corp. (Delaware) 27. AIMCO/Quailtree, Inc. (Delaware) 28. AIMCO/Rivercrest, Inc. (Delaware) 29. AIMCO/Sand Castles, Inc. (Delaware) 30. AIMCO/Sand Pebble, Inc. (Delaware) 31. AIMCO/Shadetree, Inc. (Delaware) 32. AIMCO/Shadow Lake, Inc. (Delaware) 33. AIMCO/Silktree, Inc. (Delaware) 34. AIMCO Somerset Inc. (Delaware) 35. AIMCO/Surrey Oaks, Inc. (Delaware) 36. AIMCO/Tall Timbers, Inc. (Delaware) 37. AIMCO/The Hills, Inc. (Delaware) 38. AIMCO/Timbertree, Inc. (Delaware) 39. AIMCO/Twinbridge, Inc. (Delaware) 40. AIMCO/Wickertree, Inc. (Delaware) 41. AIMCO/Wildflower, Inc. (Delaware) 42. AIMCO/Windsor Landing, Inc. (Delaware) 1 2 43. AIMCO/Woodhollow, Inc. (Delaware) 44. AIMCO/Wydewood, Inc. (Delaware) 45. AIMCO/Yorktree, Inc. (Delaware) 46. AIMCO-GP, Inc. (Delaware) 47. AIMCO-LP, Inc. (Delaware) 48. A.J. One, Inc. (Delaware) 49. A.J. Two, Inc. (Delaware) 50. Ambassador I, Inc. (Delaware) 51. Ambassador II, Inc. (Delaware) 52. Ambassador IV, Inc. (Delaware) 53. Ambassador V, Inc. (Delaware) 54. Ambassador VI, Inc. (Delaware) 55. Ambassador VII, Inc. (Delaware) 56. Ambassador VIII, Inc. (Delaware) 57. Ambassador IX, Inc. (Delaware) 58. Ambassador X, Inc. (Delaware) 59. Ambassador XI, Inc. (Delaware) 60. Ambassador Florida Partners, Inc. (Delaware) 61. AmReal Corporation (South Carolina) 62. AmReal Realty, Inc. (South Carolina) 63. Angeles Acceptance Directives, Inc. (California) 64. Angeles Acceptance Pool, L.P. (California) 65. Angeles Investment Properties, Inc. (California) 66. Angeles Properties, Inc. (California) 67. Angeles Realty Corporation (California) 68. Angeles Realty Corporation II (California) 69. Angeles Securitization Corporation (California) 70. API/AREC Partners, Ltd. (California) 71. Brampton Corp. (Connecticut) 72. Calmark/Fort Collins, Inc. (California) 73. Capital Commercial, Inc. (Maryland) 74. Casa del Mar, Inc. (Florida) 75. CCP/III Village Greens GP, Inc. (South Carolina) 76. CCP/IV Briar Bay GP, Inc. (South Carolina) 77. Century Stoney Greens, Inc. (California) 78. Colony of Springdale Properties, Inc. (Texas) 79. ConCap CCP/IV River's Edge Properties, Inc. (Texas) 80. ConCap CCP/IV Stratford Place Properties, Inc. (Texas) 81. ConCap Equities, Inc. (Delaware) 82. ConCap Holdings, Inc. (Texas) 83. Congress Realty Corp. (Massachusetts) 84. CPF 16 Landings GP, Inc. (South Carolina) 85. CPF XIV/St. Charleston, Inc. (Nevada) 86. CPF XIV/Sun River, Inc. (Arizona) 87. CPF XIV/Torrey Pines, Inc. (Nevada) 88. CPF XV/Lakeside Place, Inc. (Texas) 89. Cragin Service Corporation (Illinois) 2 3 90. CRC Congress Realty Corp. (Massachusetts) 91. CRC Scotch Lane Corp. (Massachusetts) 92. CRPTEX, Inc. (Texas) 93. Davidson Diversified Properties, Inc. (Tennessee) 94. Davidson Growth Plus GP Corporation (Delaware) 95. Davidson Properties, Inc. (Tennessee) 96. East Windsor 255, Inc. (Delaware) 97. Fox Capital Management Corporation (California) 98. Fox Strategic Housing Income Partners, Inc. (California) 99. GP Services III, Inc. (Delaware) 100. GP Services IV, Inc. (South Carolina) 101. GP Services IX, Inc. (South Carolina) 102. GP Services V, Inc. (South Carolina) 103. GP Services VI, Inc. (South Carolina) 104. GP Services VII, Inc. (South Carolina) 105. GP Services VIII, Inc. (South Carolina) 106. GP Services XI, Inc. (South Carolina) 107. GP Services XIII, Inc. (South Carolina) 108. GP Services XIV, Inc. (South Carolina) 109. GP Services XV, Inc. (South Carolina) 110. GP Services XVI, Inc. (South Carolina) 111. GP Services XVIII, Inc. (South Carolina) 112. Hamilton House, Inc. (Florida) 113. Heritage Park Investors, Inc. (California) 114. Heritage Park/MRA, Inc. (California) 115. Holbrook Enterprises, Inc. (Illinois) 116. HPI, Ltd. (Bermuda) 117. Hunters Run Properties Corporation (Georgia) 118. IAP GP Corporation (Delaware) 119. IH Inc. (Delaware) 120. InCap Management, Inc. (Texas) 121. Insignia Capital Corporation (Delaware) 122. Insignia Financing I (Delaware) 123. IPGP, Inc. (Delaware) 124. Lucerne Florida Development Corporation (Florida) 125. MAE California, Inc. (California) 126. MAE Delta, Inc. (Delaware) 127. MAE Investments, Inc. (Delaware) 128. MAE Ventures, Inc. (Delaware) 129. MAE-JMA, Inc. (Delaware) 130. MAERIL, Inc. (Delaware) 131. National Corporation for Housing Partnerships (Washington, D.C.) 132. National Corporation for Housing Partnerships/Development Corporation (Washington, D.C.) 133. National Property Investors, Inc. (Delaware) 134. Neighborhood Reinvestment Resources Corporation (Illinois) 135. NHP Acquisition Corporation (Delaware) 3 4 136. NHP Capital Corporation (Virginia) 137. NHP-HDV, Inc. (Delaware) 138. NHP-HDV Two, Inc. (Delaware) 139. NHP-HDV Four, Inc. (Delaware) 140. NHP-HDV Five, Inc. (Delaware) 141. NHP-HDV Six, Inc. (Delaware) 142. NHP-HDV Seven, Inc. (Delaware) 143. NHP-HDV Eight, Inc. (Delaware) 144. NHP-HDV Nine, Inc. (Delaware) 145. NHP-HDV 21, Inc. (Virginia) 146. NHP-HG, Inc. (Virginia) 147. NHP-HG III, Inc. (Virginia) 148. NHP-HG Four, Inc. (Virginia) 149. NHP-HG Five, Inc. (Virginia) 150. NHP-HG Ten, Inc. (Delaware) 151. NHP-HG Eleven, Inc. (Delaware) 152. NHP-HG Twelve, Inc. (Delaware) 153. NHP-HG Fourteen, Inc. (Delaware) 154. NHP-HS, Inc. (Delaware) 155. NHP-HS Two, Inc. (Delaware) 156. NHP-HS Five, Inc. (Delaware) 157. NHP-HS Six, Inc. (Delaware) 158. NHP Joint Ventures, Inc. (Delaware) 159. NHP Multi-Family Capital Corporation (Washington, D.C.) 160. NHP Real Estate Corporation (Delaware) 161. NHP Real Estate Securities, Inc. (Washington, D.C.) 162. NHP Ridgewood, Inc. (Delaware) 163. NHP Servicing, Inc. (Virginia) 164. NPI Equity Investments II, Inc. (Florida) 165. NPI Equity Investments, Inc. (Florida) 166. NPI III Pinetree, Inc. (North Carolina) 167. Pebblepoint 55, Inc. (Delaware) 168. Plainview GP, Inc. (Delaware) 169. Pleasant Hill 287, Inc. (Delaware) 170. PRA, Inc. (Georgia) 171. Rescorp Development, Inc. (Illinois) 172. Ridge Carlton Corp. (Massachusetts) 173. SAHF Funding Corp. (Delaware) 174. Scotch Lane Corp. (Massachusetts) 175. SF General, Inc. (Delaware) 176. Shelter Realty Corporation (South Carolina) 177. Shelter Realty II Corporation (South Carolina) 178. Shelter Realty III Corporation (South Carolina) 179. Shelter Realty IV Corporation (South Carolina) 180. Shelter Realty V Corporation (South Carolina) 181. Shelter Realty VI Corporation (South Carolina) 182. Shelter Realty VII Corporation (South Carolina) 4 5 183. Sturbrook Investors, Inc. (California) 184. Summerwalk GP, Inc. (South Carolina) 185. Top of the World 735, Inc. (Delaware) 186. U.S. Realty I Corporation (South Carolina) 187. United Investors Real Estate, Inc. (Delaware) 188. Wilbur and Company, Inc. (Delaware) 189. AIMCO/NHP Holdings, Inc. (Delaware) 190. AIMCO/NHP Properties, Inc. (Delaware) 191. NHP A&R Services, Inc. (Virginia) 192. NHP Management Company (Washington, D.C.) 193. Property Asset Management Services, Inc. (Delaware) 194. AG A&R Services, L.L.C. (Delaware) 195. AG Management, L.L.C. (Delaware) 196. AG Properties, L.L.C. (Delaware) 197. AIMCO of Florida, Inc. (Florida) 198. Apartment CCG 17, L.P. (California) 199. Apartment CCG 17, L.L.C. (South Carolina) 200. Apartment CCG 17, Inc. (California) 201. Apartment CRK 17, L.P. (California) 202. Apartment LDG 17, Inc. (California) 203. Apartment Lodge 17, L.L.C. (South Carolina) 204. Apartment Lodge 17, L.P. (California) 205. Aptek Maintenance Services Company LLC (Delaware) 206. Aptek Management Company LLC (Delaware) 207. Argus Land Company, Inc. (Alabama) 208. Arizona Development Partners (Massachusetts) 209. Aspen Ridge Properties, Inc. (Texas) 210. Brighton Meadows Associates (Indiana) 211. Broad Street Management, Inc. (Ohio) 212. Calmark Heritage Park, L.P. (California) 213. Calmark Heritage Park III, L.P. (California) 214. Canyon Terrace Inc. (Delaware) 215. Carriage House Apartments Limited Partnership (Virginia) 216. CCP/III Mountain Plaza Properties, Inc. (Texas) 217. Century 23 Sunnymead, Inc. (California) 218. Century HillCreste Apartment Investors, L.P. (California) 219. Century Summerhill, Inc. (California) 220. Century Sunrunner 19, Inc. (California) 221. CHA Properties, Inc. (Delaware) 222. Coastal Commons Limited Partnership (South Carolina) 223. Compleat Resource Group, Inc. (Delaware) 224. ConCap CCP/III Properties, Inc. (Texas) 225. ConCap CCP/IV Apartment Properties, Inc. (Texas) 226. ConCap CCP/IV Citadel Properties, Inc. (Texas) 227. ConCap CCP/IV Properties, Inc. (Texas) 228. ConCap CCP/IV Residential, Inc. (Texas) 229. ConCap CCP/V Properties, Inc. (Texas) 5 6 230. ConCap MBRF Properties, Inc. (Texas) 231. Conifer Medford (Puerto Rico) 232. Continental Plaza Limited Partnership (Illinois) 233. Continental Plaza Associates Limited Partnership (Illinois) 234. Coventry Properties, Inc. (Texas) 235. Creekside Inc. (Delaware) 236. DalCap Management, Inc. (Texas) 237. DBL Properties Corporation (New York) 238. Direct Access Association, Inc. (Tennessee) 239. Drexel Burnham Lambert Real Estate Associates (New York) 240. Dunlop Tobacco Associates Limited Partnership (Maryland) 241. Evergreen Club Corporation (Massachusetts) 242. First Atlantic Management Corporation (Delaware) 243. First Piedmont Mortgage, Inc. (South Carolina) 244. First Winthrop Corporation (Delaware) 245. Fox Assignor, Inc. (California) 246. Franklin Mountain Run Associates Liquidating Trust (Pennsylvania) 247. Franklin Partnership Liquidating Trust (Pennsylvania) 248. Galleria Park Associates Limited Partnership (Massachusetts) 249. Glenbrook Corporation (Massachusetts) 250. GP Real Estate Services II Inc. (Delaware) 251. GP Services II, Inc. (South Carolina) 252. GP Real Estate Services II Inc. (Delaware) 253. GP Services II-B, Inc. (Delaware) 254. Greenfair-DCW Ltd (California) 255. Guilford Company, Inc. (Alabama) 256. Heritage Park Inc. (Delaware) 257. Heritage Park II Inc. (Delaware) 258. HHP, L.P. (Delaware) 259. HillCreste Properties Inc. (Delaware) 260. Historic Properties, Inc. (Delaware) 261. Holliday Associates Limited Partnership (Washington, D.C.) 262. Hollidaysburg Limited Partnership (Pennsylvania) 263. Housing Programs Corp. II (Delaware) 264. Housing Programs Ltd. (California) 265. IFG-SCN Corporation (Delaware) 266. IHMG of Alabama, Inc. (Alabama) 267. IMH, Inc. (Delaware) 268. Insignia Allegiance Management, Inc. (Delaware) 269. Insignia CCP III Acquisition, LLC (Delaware) 270. Insignia Hospitality Management Group, Inc. (Delaware) 271. Insignia Related, Inc. (Delaware) 272. Insignia Related, L.P. (Delaware) 273. Insignia Residential Group, L.P. (Delaware) 274. Insignia Residential Group of Alabama, Inc. (Delaware) 275. Insignia Residential Group of California, Inc. (Delaware) 276. Insignia Residential Group of Colorado, Inc. (Colorado) 6 7 277. Insignia Residential Group of Texas, Inc. (Delaware) 278. Insignia Residential Management, Inc. (Delaware) 279. IPT I LLC (Delaware) 280. ISPMC, Inc. (Delaware) 281. ISTC Corporation (Delaware) 282. Ivanhoe Corporation (Massachusetts) 283. Kennedy Boulevard I, Inc. (Pennsylvania) 284. Kennedy Boulevard II, Inc. (Pennsylvania) 285. Kennedy Boulevard III, Inc. (Pennsylvania) 286. Lifton/MAQ S.E. Investments II, Inc. (Georgia) 287. Louisville Apartment Limited Partnership (Texas) 288. Lytle Place Community Urban Redevelopment Corp. (Ohio) 289. MAE-SPI, L.P. (Delaware) 290. Maine Maintenance Corporation (Delaware) 291. MAQ/Lifton Acquisition Corp. (Florida) 292. Market Ventures, L.L.C. (Delaware) 293. Mayer Canyon Terrace (California) 294. Mayer Creekside (California) 295. Mayer Warner Center Ltd. (California) 296. Minneapolis Associates II Limited Partnership (Massachusetts) 297. NHP Asset Management Services, Inc. (Virginia) 298. NHP Cash Management Services, Inc. (Virginia) 299. NHP/Congress Management Limited Partnership (Virginia) 300. NHP Equity Services, Inc. (Virginia) 301. NHP Financial Services, Ltd. (Delaware) 302. NHP Florida Management Company (Florida) 303. NHP Maintenance Services Company (Delaware) 304. NHP/PRC Management Company LLC (Delaware) 305. NHP Puerto Rico Management Company (Delaware) 306. NHP Southeast Partners, L.P. (Delaware) 307. NHP Southwark HA, Inc. (Virginia) 308. NHP Texas Management Company (Texas) 309. NHP-HDV 20, Inc. (Virginia) 310. NHP-HDV Eighteen, Inc. (Delaware) 311. NHP-HDV Eleven, Inc. (Delaware) 312. NHP-HDV Fifteen, Inc. (Virginia) 313. NHP-HDV Fourteen, Inc. (Delaware) 314. NHP-HDV Nineteen, Inc. (Delaware) 315. NHP-HDV Seventeen, Inc. (Delaware) 316. NHP-HDV Sixteen, Inc. (Delaware) 317. NHP-HDV Ten, Inc. (Delaware) 318. NHP-HDV Three, Inc. (Delaware) 319. NHP-HDV Twelve, Inc. (Delaware) 320. NHP-HG 15, Inc. (Virginia) 321. NHP-HG 16, Inc. (Virginia) 322. NHP-HG 17, Inc. (Virginia) 323. NHP-HG Six, Inc. (Virginia) 7 8 324. NHP-HS Four, Inc. (Delaware) 325. NHP-HS Three, Inc. (Delaware) 326. NPI Property Management Corporation (Florida) 327. NPI Realty Advisors, Inc. (Florida) 328. NPI Realty Management Corp. (Florida) 329. Orchard Park Apartments, L.P. (South Carolina) 330. PAM Consolidated Assurance Company, Ltd. (Bermuda) 331. Park Towne Place Associates Limited Partnership (Delaware) 332. Playa Blanca Inc. (Delaware) 333. Playa Blanca, Inc. (California) 334. Preferred Home Health, Inc. (Florida) 335. Preferred Home Health Limited Partnership (Florida) 336. Property Asset Brokerage of Florida (Florida) 337. Property Services Group, Inc. (Washington, D.C.) 338. PTP Properties, Inc. (Delaware) 339. Raintree GP Inc. (Delaware) 340. Raintree Meadows (California) 341. Real Estate Equity Partners, Inc. (Delaware) 342. RealMark, Inc. (South Carolina) 343. Rescorp Realty, Inc. (Illinois) 344. Residents Direct Access Association, Inc. (Missouri) 345. Rivercrest Apartments, L.P. (South Carolina) 346. The Risk Specialist Group, Inc. (Washington, D.C.) 347. Secured Income, L.P. (Delaware) 348. Security Management Inc. (Washington) 349. Security Properties (Washington) 350. Security Properties 73 (Washington) 351. Security Properties 74 (Washington ) 352. Security Properties 74 II (Washington) 353. Security Properties 74 III (Washington ) 354. Security Properties 74A (Washington) 355. Security Properties 75 (Washington ) 356. Security Properties 76 (Washington) 357. Security Properties 77 (Washington ) 358. Security Properties 77A (Washington ) 359. Security Properties 78 (Washington) 360. Security Properties 78A (Washington) 361. Security Properties 79 (Washington ) 362. Security Properties 79 II (Washington ) 363. Security Properties 80 (Washington) 364. Security Properties 81 (Washington) 365. Security Properties 81A (Washington) 366. Six Winthrop Properties, Inc. (Delaware) 367. Southwest Parkway, Ltd. (Texas) 368. SP Properties 1982 (Washington) 369. SP Properties 1983 (Washington) 370. SP Properties 1983 Two (Washington) 8 9 371. SP Properties 1984 (Washington) 372. St. Joseph Limited Partnership (Maryland) 373. Standpoint Vista Limited Partnership (Maryland) 374. TAHF Funding Corp. (Delaware) 375. TEB Municipal Trust II (Delaware) 376. Ten Winthrop Properties, Inc. (Maryland) 377. The Villas, A Limited Partnership (Texas) 378. USS Depositary, Inc. (South Carolina) 379. Vincennes Associates (Illinois) 380. WAI Associates Limited Partnership (Texas) 381. WAI Properties, Inc. (Texas) 382. Warner Center Inc. (Delaware) 383. Warner Center/MGP Inc. (Delaware) 384. WFC Realty Co., Inc. (Massachusetts) 385. WFC Realty Saugus, Inc. (Massachusetts) 386. Wilder Richman Historic Properties II, L.P. (Delaware) 387. Wilder Richman Historic Properties, L.P. (Delaware) 388. Winthrop Apartment Investors 2 Limited Partnership (Maryland) 389. Winthrop Financial Associates (Maryland) 390. Winthrop Financial Co., Inc. (Massachusetts) 391. Winthrop Metro Equities Corporation (Delaware) 392. Winthrop Northeast Properties, Inc. (Massachusetts) 393. Winthrop Petersburg Co., Inc. (Maryland) 394. Creekside Industrial Associates, Inc. (New York) 395. Monroeville Development Corporation (Massachusetts) 396. ISLP Limited Partnership (Delaware) 397. Partners Liquidating Trust (Delaware) 398. Stratford Village Realty Trust (Massachusetts) 399. 1133 Fifteenth Street Fourth Associates (Maryland) 400. 1133 Fifteenth Street Associates (Washington, D.C.) 401. 2900 Van Ness Associates (Washington, D.C.) 402. 7400 Roosevelt Investors (Pennsylvania) 403. Advanced Affordable Mill, Ltd. (Florida) 404. AG Services, L.P. (Delaware) 405. AIMCO Anchorage, L.P. (Delaware) 406. AIMCO Arbor Station, L.P. (Delaware) 407. AIMCO Arbor Station Two, L.P. (Delaware) 408. AIMCO Atriums of Plantation L.P. (Delaware) 409. AIMCO Bay Club II, L.P. (Delaware) 410. AIMCO Bay Club, L.P. (Delaware) 411. AIMCO/Beacon Hill, L.L.C. (Delaware) 412. AIMCO/Beacon Hill, L.P. (Delaware) 413. AIMCO/Blossomtree L.L.C. (Delaware) 414. AIMCO/Blossomtree L.P. (Delaware) 415. AIMCO/Bluffs, L.L.C. (Delaware) 416. AIMCO/Boardwalk, L.P. (Delaware) 417. AIMCO/Boardwalk Finance, L.P. (Delaware) 9 10 418. AIMCO/Brandywine, L.P. (Delaware) 419. AIMCO/Brant Rock, L.L.C. (Delaware) 420. AIMCO/Brant Rock, L.P. (Delaware) 421. AIMCO Breakers, L.P. (Delaware) 422. AIMCO Bridgewater, L.P. (Delaware) 423. AIMCO Brookside, L.L.C. (Delaware) 424. AIMCO Brookside/Tustin, L.L.C. (Delaware) 425. AIMCO Calhoun, L.L.C. (Delaware) 426. AIMCO Casa Anita, L.P. (Delaware) 427. AIMCO Cedar Creek, L.P. (Delaware) 428. AIMCO Chesapeake, L.P. (Delaware) 429. AIMCO Citrus Grove, L.P. (Delaware) 430. AIMCO Citrus Sunset, L.L.C. (Delaware) 431. AIMCO Cobble Creek, L.P. (Delaware) 432. AIMCO/Colonnade, L.L.C. (Delaware) 433. AIMCO/Colonnade, L.P. (Delaware) 434. AIMCO Colony, L.P. (Delaware) 435. AIMCO Copperfield, L.P. (Delaware) 436. AIMCO Crossings at Belle, L.P. (Delaware) 437. AIMCO Crows Nest, L.P. (Delaware) 438. AIMCO Dolphin's Landing, L.P. (Delaware) 439. AIMCO/Easton Falls, L.P. (Delaware) 440. AIMCO Elm Creek, L.P. (Delaware) 441. AIMCO Fieldcrest, L.P. (Delaware) 442. AIMCO Fisherman's Landing, L.P. (Delaware) 443. AIMCO Fondren Court, L.P. (Delaware) 444. AIMCO/Foothills, L.P. (Delaware) 445. AIMCO/Foothills, L.L.C. (Delaware) 446. AIMCO/Fox Bay, L.P. (Delaware) 447. AIMCO/Fox Bay, L.L.C. (Delaware) 448. AIMCO Foxchase, L.P. (Delaware) 449. AIMCO/Foxtree, L.L.C. (Delaware) 450. AIMCO/Foxtree, L.P. (Delaware) 451. AIMCO/Freedom Place, L.L.C. (Delaware) 452. AIMCO/Freedom Place, L.P. (Delaware) 453. AIMCO Galleria Office, L.P. (Delaware) 454. AIMCO Group, L.P. (Delaware) 455. AIMCO/Grovetree, L.L.C. (Delaware) 456. AIMCO/Grovetree, L.P. (Delaware) 457. AIMCO Hampton Hill, L.P. (Delaware) 458. AIMCO Hanover Square/DIP, L.L.C. (Delaware) 459. AIMCO Hastings Green, L.P. (Delaware) 460. AIMCO Hastings Place, L.P. (Delaware) 461. AIMCO/Hazeltree, L.P. (Delaware) 462. AIMCO/Hazeltree, L.L.C. (Delaware) 463. AIMCO/Hiddentree, L.L.C. (Delaware) 464. AIMCO/Hiddentree, L.P. (Delaware) 10 11 465. AIMCO/HIL, L.L.C. (Delaware) 466. AIMCO Holdings, L.P. (Delaware) 467. AIMCO Hunters Glen, L.P. (Delaware) 468. AIMCO/Islandtree, L.P. (Delaware) 469. AIMCO/Islandtree, L.L.C. (Delaware) 470. AIMCO Lake Castleton Arms, L.L.C. (Delaware) 471. AIMCO Lakehaven, L.P. (Delaware) 472. AIMCO Lakehaven Two, L.P. (Delaware) 473. AIMCO Landmark, L.P. (Delaware) 474. AIMCO LaValle, L.L.C. (Delaware) 475. AIMCO LJ Tucson, L.P. (Delaware) 476. AIMCO Los Arboles, L.P. (Delaware) 477. AIMCO LT, L.P. (Delaware) 478. AIMCO/Montecito, L.P. (Delaware) 479. AIMCO Mountain View, L.L.C. (Delaware) 480. AIMCO/NHP Partners, L.P. (Delaware) 481. AIMCO Oak Falls, L.P. (Delaware) 482. AIMCO Old Farm, L.L.C. (Delaware) 483. AIMCO/Olmos, L.L.C. (Delaware) 484. AIMCO/Olmos, L.P. (Delaware) 485. AIMCO/Orchidtree, L.L.C. (Delaware) 486. AIMCO/Orchidtree, L.P. (Delaware) 487. AIMCO/OTC, L.L.C. (Delaware) 488. AIMCO/OTC, L.P. (Delaware) 489. AIMCO/PAM Properties, L.P. (Delaware) 490. AIMCO Park at Cedar Lawn, L.P. (Delaware) 491. AIMCO Park Townhomes, L.P. (Delaware) 492. AIMCO Park Colony, L.L.C. (Delaware) 493. AIMCO/Penn Square, L.L.C. (Delaware) 494. AIMCO Peppermill Place, L.P. (Delaware) 495. AIMCO/Pine Creek, L.P. (Delaware) 496. AIMCO/Pine Creek, L.L.C. (Delaware) 497. AIMCO Pine Shadows, L.L.C. (Delaware) 498. AIMCO Pinebrook, L.P. (Delaware) 499. AIMCO Pines, L.P. (Delaware) 500. AIMCO Placid Lake, L.P. (Delaware) 501. AIMCO/Polo Park, L.L.C. (Delaware) 502. AIMCO/Polo Park, L.P. (Delaware) 503. AIMCO Properties, L.P. (Delaware) 504. AIMCO Properties Finance Partnership, L.P. (Delaware) 505. AIMCO Properties Holdings, L.L.C. (Delaware) 506. AIMCO/Quailtree, L.L.C. (Delaware) 507. AIMCO/Quailtree, L.P. (Delaware) 508. AIMCO/RALS, L.P. (Delaware) 509. AIMCO Recovery Fund, L.P. (Delaware) 510. AIMCO Rio Cancion, L.P. (Delaware) 511. AIMCO/Rivercrest, L.P. (Delaware) 11 12 512. AIMCO/Rivercrest, L.L.C. (Delaware) 513. AIMCO Royal Gardens, L.L.C. (Delaware) 514. AIMCO/SA, L.L.C. (Delaware) 515. AIMCO San Marina, L.P. (Delaware) 516. AIMCO/Sand Castles, L.P. (Delaware) 517. AIMCO/Sand Pebble, L.L.C. (Delaware) 518. AIMCO/Sand Pebble, L.P. (Delaware) 519. AIMCO/Sand Castles, L.L.C. (Delaware) 520. AIMCO Sandalwood, L.P. (Delaware) 521. AIMCO Sandpiper, L.P. (Delaware) 522. AIMCO Seaside Point, L.P. (Delaware) 523. AIMCO/Shadetree, L.P. (Delaware) 524. AIMCO/Shadetree, L.L.C. (Delaware) 525. AIMCO/Shadow Lake, L.P. (Delaware) 526. AIMCO/Shadow Lake, L.L.C. (Delaware) 527. AIMCO Signature Point, L.P. (Delaware) 528. AIMCO/Silktree, L.P. (Delaware) 529. AIMCO/Silktree, L.L.C. (Delaware) 530. AIMCO Steeplechase, L.P. (Delaware) 531. AIMCO/Stonegate, L.P. (Delaware) 532. AIMCO Sunbury, L.P. (Delaware) 533. AIMCO Sundown, L.P. (Delaware) 534. AIMCO Sunset Village, L.L.C. (Delaware) 535. AIMCO Sunset Escondido, L.L.C. (Delaware) 536. AIMCO/Surrey Oaks, L.L.C. (Delaware) 537. AIMCO/Surrey Oaks, L.P. (Delaware) 538. AIMCO/Tall Timbers, L.P. (Delaware) 539. AIMCO/Tall Timbers, L.L.C. (Delaware) 540. AIMCO/Teal Pointe, L.P. (Delaware) 541. AIMCO Terrace Royale, L.L.C. (Delaware) 542. AIMCO/The Hills, L.P. (Delaware) 543. AIMCO/The Hills, L.L.C. (Delaware) 544. AIMCO Timbermill, L.P. (Delaware) 545. AIMCO/Timbertree, L.P. (Delaware) 546. AIMCO/Timbertree, L.L.C. (Delaware) 547. AIMCO Township at Highlands, L.P. (Delaware) 548. AIMCO Tustin, L.P. (Delaware) 549. AIMCO/Twinbridge, L.P. (Delaware) 550. AIMCO/Twinbridge, L.L.C. (Delaware) 551. AIMCO UT, L.P. (Delaware) 552. AIMCO Villa Del Sol, L.L.C. (Delaware) 553. AIMCO/Villa Ladera, L.P. (Delaware) 554. AIMCO Villa La Paz, L.P. (Delaware) 555. AIMCO Walnut Springs, L.P. (Delaware) 556. AIMCO Weatherly, L.P. (Delaware) 557. AIMCO West Trails, L.P. (Delaware) 558. AIMCO Westchase Midrise, L.P. (Delaware) 12 13 559. AIMCO Whispering Pines, L.L.C. (Delaware) 560. AIMCO/Wickertree, L.P. (Delaware) 561. AIMCO/Wickertree, L.L.C. (Delaware) 562. AIMCO/Wildflower, L.P. (Delaware) 563. AIMCO/Wildflower, L.L.C. (Delaware) 564. AIMCO/Williams Cove, L.P. (Delaware) 565. AIMCO Wimbledon Square, L.L.C. (Delaware) 566. AIMCO/Windsor Landing, L.L.C. (Delaware) 567. AIMCO/Windsor Landing, L.P. (Delaware) 568. AIMCO/Woodhollow, L.P. (Delaware) 569. AIMCO/Woodhollow, L.L.C. (Delaware) 570. AIMCO/Woodlands-Tyler, L.P. (Delaware) 571. AIMCO Woodway Offices, L.P. (Delaware) 572. AIMCO/Wydewood, L.P. (Delaware) 573. AIMCO/Wydewood, L.L.C. (Delaware) 574. AIMCO/Yorktree, L.L.C. (Delaware) 575. AIMCO/Yorktree, L.P. (Delaware) 576. AIP II Georgetown GP, L.L.C. (South Carolina) 577. AIP II Georgetown, L.L.C. (Massachusetts) 578. AIP IV GP Limited Partnership (South Carolina) 579. AIP IV GP Limited Partnership (South Carolina) 580. AIV Properties, L.P. (Delaware) 581. AJ One, L.P. (Delaware) 582. AJ Two, L.P. (Delaware) 583. Ambassador Apartments, L.P. (Delaware) 584. Ambassador CRM Florida Partners Limited Partnership (Delaware) 585. Ambassador Florida Partners Limited Partnership (Delaware) 586. Ambassador I, L.P. (Illinois) 587. Ambassador II, L.P. (Delaware) 588. Ambassador III, L.P. (Delaware) 589. Ambassador IV, L.P. (Delaware) 590. Ambassador IX, L.P. (Delaware) 591. Ambassador Texas Partners, L.P. (Delaware) 592. Ambassador V, L.P. (Delaware) 593. Ambassador VI, L.P. (Delaware) 594. Ambassador VII, L.P. (Delaware) 595. Ambassador VIII, L.P. (Delaware) 596. Ambassador X, L.P. (Delaware) 597. Ambassador XI, L.P. (Delaware) 598. Anchorage Partners (Texas) 599. Anderson Mill Associates (Illinois) 600. Angeles Income Properties, Ltd. II (California) 601. Angeles Income Properties, Ltd. III (California) 602. Angeles Income Properties Ltd. IV (California) 603. Angeles Income Properties Ltd. V (California) 604. Angeles Income Properties, Ltd. 6 (California) 605. Angeles Opportunity Properties, Ltd. (California) 13 14 606. Angeles Park Communities, Ltd. (California) 607. Angeles Partners VII (California) 608. Angeles Partners VIII (California) 609. Angeles Partners IX (California) 610. Angeles Partners X (California) 611. Angeles Partners XI (California) 612. Angeles Partners XII (California) 613. Angeles Partners XIV (California) 614. Angeles Partners XV (California) 615. Angeles Partners 16 (California) 616. AP XII Associates GP, L.L.C. (South Carolina) 617. Ashland Town Square-REO, L.P. (Texas) 618. Autumn Chase-REO, L.P. (Texas) 619. Balcor/Sportvest-II (Illinois) 620. Barrington Park-REO, L.P. (Texas) 621. Boca West Shopping Center Associates, Ltd. (Florida) 622. Boynton Sandpiper Limited Partnership (Florida) 623. Braesview Partnership (Texas) 624. Brampton Associates Limited Partnership (Connecticut) 625. Brandemere-REO Assoc., L.P. (Texas) 626. Brandon Lake, Ltd. (Florida) 627. Bridgewater Partners, Ltd. (Texas) 628. Broad River Properties, L.L.C. (Delaware) 629. Brook Run Associates, L. P. (Illinois) 630. Brookdale Lakes Partnership (Illinois) 631. Buccaneer Trace, Limited Partnership (South Carolina) 632. Burgundy Court Associates, L.P. (Delaware) 633. Cabell Associates of Lakeview (Virginia) 634. Calmark Investors (California) 635. Calverton Construction Co. Limited Partnership (Maryland) 636. Cape Cod Partnership (Texas) 637. Casa del Mar Associates Limited Partnership (Florida) 638. Castle Rock Joint Venture (Texas) 639. Catawba Club Associates, L.P. (Delaware) 640. CB L-2 B Associates (Florida) 641. CB Associates (Florida) 642. CB L-2 C Associates (Florida) 643. CCP VI Springdale GP, LLC (South Carolina) 644. CCP V GP Limited Partnership (South Carolina) 645. CCP V Fifty-One GP LLC (South Carolina) 646. CCP V Sutton Place GP LLC (South Carolina) 647. Cedar Creek Partners, Ltd. (Alabama) 648. Century St. Charleston, L.P. (Nevada) 649. Century Stoney Greens, L.P. (California) 650. Century Sun River, L.P. (Arizona) 651. Century Properties Fund XI (California) 652. Century Properties Growth Fund XXII (California) 14 15 653. Century Torrey Pines, L.P. (Nevada) 654. Century Pension Income Fund XXIII (California) 655. Century Pension Income Fund XXIV (California) 656. Century Properties Fund XX (California) 657. Century Properties Fund XIX (California) 658. Century 23 Sunnymead, L.P. (California) 659. Century Properties Fund XVI (California) 660. Century Properties Fund XIV (California) 661. Century Properties Fund XVII (California) 662. Century Properties Fund XVIII (California) 663. Century Properties Fund XV (California) 664. Chapel Hill, Limited (Delaware) 665. Chateau Gardens L.P. (California) 666. Chelsea Place, Limited (Tennessee) 667. Chestnut Hill Associates Limited Partnership (Delaware) 668. Church Street Associates (Illinois) 669. Clear Lake Land Partners, Ltd. (Texas) 670. Cloverleaf Farms Limited Partnership (South Carolina) 671. Colony-REO, L.P. (Texas) 672. Columbus Associates, Ltd. (Tennessee) 673. Congress Realty Companies Limited Partnership (Massachusetts) 674. Congress Management Company Limited Partnership (Massachusetts) 675. Connecticut Colony Associates (Georgia) 676. Consolidated Capital Institutional Properties/3 (California) 677. Consolidated Capital Equity Partners / Two, L.P. (California) 678. Consolidated Capital Properties III (California) 679. Consolidated Capital Equity Partners, L.P. (California) 680. Consolidated Capital Properties IV (California) 681. Consolidated Capital Properties V (California) 682. Consolidated Capital Growth Fund (California) 683. Consolidated Capital Institutional Properties (California) 684. Consolidated Capital Institutional Properties/2 (California) 685. Consolidated Capital Properties VI (California) 686. Cooper River Properties, L.L.C. (California) 687. Copper Chase Partners (Illinois) 688. Copper Chase Associates (Illinois) 689. Copperfield Partners, Ltd. (Texas) 690. Country Lake Associates Two Limited Partnership (Illinois) 691. Coventry Square Partners (Texas) 692. CPF 16 Woods of Inverness GP, L.L.C. (South Carolina) 693. CRA Investors, Ltd. (Texas) 694. Creekside Industrial Associates (California) 695. Creekside Partners (New York) 696. Cross Creek Limited Partnership (Georgia) 697. Crows Nest Partners, Ltd. (Texas) 698. Cypress Landing Associates (Illinois) 699. Cypress Landing Limited Partnership (Illinois) 15 16 700. Davidson Income GP Limited Partnership (Delaware) 701. Davidson GP, L.L.C. (South Carolina) 702. Davidson Diversified Real Estate I, L.P. (Delaware) 703. Davidson Diversified Real Estate II, L.P. (Delaware) 704. Davidson Diversified Real Estate Investors III GP, L.P. (Delaware) 705. Davidson Diversified Real Estate Investors III, L.P. (Delaware) 706. Davidson Growth Plus, L.P. (Delaware) 707. Davidson Income Real Estate, L.P. (Delaware) 708. DFW Apartment Investors Limited Partnership (Delaware) 709. DFW Residential Investors Limited Partnership (Delaware) 710. Discovery Limited Partnership (Massachusetts) 711. Drexel Burnham Lambert Real Estate Associates II (New York) 712. Drexel Burnham Lambert Real Estate Associates III (New York) 713. Eagle's Nest Partnership (Texas) 714. East Windsor 255 Limited Partnership (Delaware) 715. Eastgreen, Ltd. (Tennessee) 716. Easton Terrace II Associates Ltd Partnership (Delaware) 717. Elm Creek Limited Partnership (Illinois) 718. English Manor Joint Venture (Texas) 719. English Manor Partners (Texas) 720. Everest Investors 5, L.L.C. (California) 721. Evergreen Club Limited Partnership (Massachusetts) 722. Fairfax Associates (Virginia) 723. First Alexandria Associates (Virginia) 724. Fisherman's Wharf Partners (Texas) 725. Fisherman's Landing Apartments Limited Partnership (Florida) 726. FMI Limited Partnership (Pennsylvania) 727. Fondren Court Partners, Ltd. (Texas) 728. Fox Growth Partners (California) 729. Fox Partners IX (California ) 730. Fox Partners V (California) 731. Fox Partners VI (California) 732. Fox Realty Partners '77, Ltd. (California) 733. Fox Partners VII (California) 734. Fox Partners IX (California) 735. Fox Partners IV (California) 736. Fox Partners III (California) 737. Fox Partners II (California) 738. Fox Partners (California) 739. Fox Realty Investors (California) 740. Fox Strategic Housing Income Partners (California) 741. Foxfire Associates, a South Carolina Limited Partnership (South Carolina) 742. Franklin Park Ltd Partnership (Pennsylvania) 743. Franklin Chandler Associates (Pennsylvania) 744. Franklin Chapel Hill Associates (Pennsylvania) 745. Franklin Eagle Rock Associates (Pennsylvania) 746. Franklin Housing Associates (Pennsylvania) 16 17 747. Franklin Huntsville Associates (Pennsylvania) 748. Franklin New York Avenue Associates (Pennsylvania) 749. Franklin Woods Associates (Pennsylvania) 750. Franklin Pheasant Ridge Associates (Pennsylvania) 751. Franklin Pine Ridge Associates (Pennsylvania) 752. Franklin Ridgewood Associates (Pennsylvania) 753. Franklin Victoria Associates I (Texas) 754. FRP Limited Partnership (Pennsylvania) 755. G.P. Municipal Holdings, LLC (Delaware) 756. Galleria Office Partners, Ltd. (Texas) 757. Georgetown of Columbus Associates, L.P. (Delaware) 758. Georgetown AIP II, Ltd. (Massachusetts) 759. Glenbrook Limited Partnership (Massachusetts) 760. GP Services XIX, Inc. (South Carolina) 761. GP Services XVII, Inc. (South Carolina) 762. Grandland Realty Associates (Georgia) 763. Greater Hartford Associates (Connecticut) 764. Greentree Associates (Illinois) 765. Grosvenor House Associates Limited Partnership (Massachusetts) 766. Growth Hotel Investors II (California) 767. Growth Hotel Investors (California) 768. GSSW-REO Confederate Ridge, L.P. (Mississippi) 769. GSSW-REO Providence Place, L.P. (Texas) 770. GSSW-REO Pebblecreek, L.P. (Texas) 771. GSSW-REO Dallas, L.P. (Texas) 772. GSSW-REO Limited Partnership II (South Carolina) 773. GSSW-REO Timberline, L.P. (Texas) 774. GSSW-Woods on the Fairway, L.P. (Texas) 775. Gulf Coast Partners, Ltd. (Alabama) 776. Gulfgate Partners, Ltd. (Texas) 777. Hamilton House Associates (Florida) 778. Hampton Hill Partners (Texas) 779. Harbor Landing AP XI, LP (South Carolina) 780. Hastings Green Partners, Ltd. (Texas) 781. Hastings Place Partners (Texas) 782. HCW General Partners, Ltd. (Texas) 783. HCW Pension Real Estate Fund Limited Partnership (Massachusetts) 784. Heather Associates (Illinois) 785. Heatherwood-REO, L.P. (Texas) 786. Heritage Village Limited Partnership (Connecticut) 787. Highland Park Partners (Illinois) 788. Highridge Associates, L.P. (Delaware) 789. Hollywood Gardens (Washington D.C.) 790. HomeCorp Investments, Ltd. (Alabama) 791. Hospitality Pensacola Partners, Ltd. (California) 792. Hospitality Partners II (California) 793. Hunter's Glen Phase I GP, LLC (South Carolina) 17 18 794. Hunter's Glen Phase V GP, LLC (South Carolina) 795. Hunters Run Partners Ltd. (Georgia) 796. Insignia Properties, L.P. (Delaware) 797. Investors First-Staged Equity, L.P. (Delaware) 798. Investors First-Staged Equity, L.P. II (Delaware) 799. IPLP Midrise, L.L.C. (Delaware) 800. IPLP Acquisition I, L.L.C. (Delaware) 801. Ivanhoe Associates Limited Partnership (Pennsylvania) 802. J.W. English, Fondren Court Partners (Texas) 803. J.W. English, Camelot Apartments (Texas) 804. J.W. English Swiss Village Partners, Ltd. (Texas) 805. Jacques-Miller Associates (Tennessee) 806. JMA Equities, L.P. (Delaware) 807. Johnstown/Consolidated Income Partners / 2 (California) 808. Johnstown/Consolidated Income Partners (California) 809. Jupiter - I, L.P. (Delaware) 810. Jupiter - II, L.P. (Delaware) 811. Kendall Townhome Investors, Ltd. (Florida) 812. Kennedy Boulevard Associates I, L.P. (Pennsylvania) 813. Kennedy Boulevard Associates II, L.P. (Pennsylvania) 814. Kennedy Boulevard Associates III, L.P. (Pennsylvania) 815. Kennedy Boulevard Associates IV, L.P. (Pennsylvania) 816. Key Parkway West Associates (Massachusetts) 817. La Colina Partners, Ltd. (California) 818. Lafayette Square, Ltd. (Tennessee) 819. LaJolla Partnership (Texas) 820. Lake Crossing (Georgia) 821. Lake Eden Associates, L.P. (Delaware) 822. Lake Avenue Partners, Ltd. (California) 823. Lakehaven Associates One (Illinois) 824. Lakehaven Associates Two (Illinois) 825. Lakeland East Limited Partnership (Connecticut) 826. Lakeside Village, Limited Partnership (Tennessee) 827. Lakewood Associates, L.P. (Delaware) 828. Landmark Associates, Ltd. (Tennessee) 829. Lassen Associates (Washington, D.C.) 830. Lauderdale Towers-REO, L.P. (Texas) 831. Lawndale Square-REO, L.P. (Texas) 832. Lincmar Associates (California) 833. Lyncstar Integrated Communications LLC (Colorado) 834. Madison River Properties, L.L.C. (Delaware) 835. Magnolia State Partners, Ltd. (Mississippi) 836. Marten Manor Realty Associates (Indiana) 837. McCombs Pension Investment Fund, Ltd. (California) 838. McCombs Realty Partners, L.P. (California) 839. Meadowbrook Drive Limited Partnership (Illinois) 840. Meadows Partners IV, Ltd. (Mississippi) 18 19 841. Meadows Partners, Ltd. (Mississippi) 842. Meadows Limited Partnership (Illinois) 843. Merced Commons (Washington, D.C.) 844. Merced Commons II (Washington, D.C.) 845. Meridian-REO, L.P. (Texas) 846. Mesa Ridge Partnership (Texas) 847. Mesa Dunes GP, LLC (South Carolina) 848. Mid-States Partners, Ltd. (California) 849. Montgomery Realty Company - 84 (California) 850. Montgomery Realty Company - 85 (California) 851. Montgomery Realty Company - 80 (California) 852. Montgomery Realty Company - 83 (California) 853. Morton Towers Apartments, L.P. (Delaware) 854. MRI Business Properties Fund, Ltd. (California) 855. Multi-Benefit Realty Funds 87-1(A) (California) 856. Multi-Benefit Realty Funds 87-1(B) (California) 857. National Housing Partnership Realty Fund IV (Maryland) 858. National Property Investors 8 (California) 859. National Pinetree Limited Partnership (North Carolina) 860. National Property Investors 3 (California) 861. National Property Investors 4 (California) 862. National Property Investors 5 (California) 863. National Property Investors 6 (California) 864. National Property Investors 7 (California) 865. NHP Employee Limited Partnership (Washington, D.C.) 866. NHP/HG Ten, L.P. (Delaware) 867. NHP Mid-Atlantic Partners One Limited Partnership (Delaware) 868. NHP Mid-Atlantic Partners Three Limited Partnership (Delaware) 869. NHP Mid-Atlantic Partners Two Limited Partnership (Delaware) 870. NHP Partners Two Limited Partnership (Delaware) 871. NHP Ridgewood Partners, L.P. (Delaware) 872. NHP Southwest Partners, L.P. (Delaware) 873. Norco Associates (Pennsylvania) 874. Northgate Limited, L.P. (Delaware) 875. NPI-AP Management, L.P. (Delaware) 876. NPI-CL Management, L.P. (Delaware) 877. Oak Park Partnership (Illinois) 878. Oak Falls Partners (Texas) 879. Oak Park Partnership (Illinois) 880. OFA Partners (Pennsylvania) 881. Old Farm Associates (Pennsylvania) 882. Olde Rivertown Venture (Indiana) 883. Olde Mill Investors Limited Partnership (Delaware) 884. One Lytle Place (Ohio) 885. Orlando-Lake Conway Limited Partnership (Connecticut) 886. OTC Apartments Limited Partnership (Florida) 887. Outlets Mall GP Limited Partnership (Delaware) 19 20 888. P.A.C. Land II Limited Partnership (Ohio) 889. Peppermill Place Partners (Texas) 890. Placid Lake Associates, Ltd. (Florida) 891. Plantation Partners Ltd. (Florida) 892. Point West Limited Partnership (Kansas) 893. Porterwood-REO, L.P. (Texas) 894. Portfolio Properties Eight Associates (Washington, D.C.) 895. Preferred Properties Fund 82 (California) 896. Preferred Properties Fund 80 (California) 897. Prime H.C. Limited Partnership (Texas) 898. Prime Crest, L.P. (Texas) 899. Prime Aspen Limited Partnership (Texas) 900. Property Asset Management Services, L.P. (Delaware) 901. Property Asset Management Services-California, L.L.C. (California) 902. Quail Run Associates, L.P. (Delaware) 903. Queen's Court Joint Venture (Tennessee) 904. Raintree Pensacola, L.P. (South Carolina) 905. Raintree GP, L.L.C. (South Carolina) 906. Rancho Townhouse Associates (Washington, D.C.) 907. Randol Crossing Investors (Illinois) 908. Randol Crossing Partners (Illinois) 909. RC Associates (Illinois) 910. Reedy River, L.L.C. (Delaware) 911. Related/Advance Capital, Ltd. (Florida) 912. Related/GMN Biscayne, Ltd. (Florida) 913. Related/GMN Teal, Ltd. (Florida) 914. Related Management Company of Florida (Florida) 915. Related/Winchester, Ltd. (Florida) 916. Residual Equities, L.P. (Delaware) 917. Restaurant Properties 1978, Ltd. (Tennessee) 918. Retirement Manor Associates (California) 919. RI-15 Limited Partnership (Washington, D.C.) 920. Ridge Carlton Associates (Massachusetts) 921. Ridgecrest Associates (Illinois) 922. Riding Club, Ltd. (Delaware) 923. River Loft Associates (Massachusetts) 924. River Hill, Limited (Tennessee) 925. River Loft Apartments Limited Partnership (Pennsylvania) 926. Riverside Park Associates Limited Partnership (Delaware) 927. Rodeo Drive Limited Partnership (California) 928. RT Homestead Assoc., Ltd. (Florida) 929. RT Walden Associates, Ltd. (Florida) 930. S.A. Apartments, Ltd. (Alabama) 931. SAHF I Limited Partnership (Delaware) 932. SAHF II Limited Partnership (Delaware) 933. San Souci-REO, L.P. (Texas) 934. Scotch Associates Limited Partnership (Pennsylvania) 20 21 935. Scotch Lane Associates (Pennsylvania) 936. Seaside Point Partners, Ltd. (Texas) 937. Seasons Apartments, L.L.C. (Texas) 938. Seasons Apartments, L.P. (Texas) 939. Sencit F/G Metropolitan Associates (New Jersey) 940. Serramonte Plaza (California) 941. Shaker Square, L.P. (Delaware) 942. Serramonte Plaza (California) 943. Sharon Woods, Limited (Tennessee) 944. Shearson/Calmark Heritage Park, Ltd. (California) 945. Shearson/Calmark Heritage Park II, Ltd. (California) 946. Shelter Properties V (South Carolina) 947. Shelter Properties I (South Carolina) 948. Shelter Properties III (South Carolina) 949. Shelter Properties VII (South Carolina) 950. Shelter Properties VI (South Carolina) 951. Shelter Properties IV (South Carolina) 952. Shelter Properties II (South Carolina) 953. Signature Point Partners, Ltd. (Texas) 954. Signature Point Joint Venture (Texas) 955. Snowden Village Associates, L.P. (Delaware) 956. Snowden Village GP Limited Partnership (Delaware) 957. Somerset Utah, L.P. (Colorado) 958. South Brittany Oaks, L.P. (Delaware) 959. South Windrush Properties, L.P. (Texas) 960. South Port Apartments (California) 961. South La Mancha, L.P. (Delaware) 962. South Landmark Properties, L.P. (Texas) 963. Southridge Investors (Illinois) 964. Southridge Associates (Illinois) 965. Southwest Associates, L.P. (Delaware) 966. Springfield Facilities, LLC (Maryland) 967. Springhill Commercial Limited Partnership (Maryland) 968. Springhill Lake Investors Limited Partnership (Maryland) 969. Standart Woods Associates Limited Partnership (Delaware) 970. Stirling Court Partners (Texas) 971. Stone Hollow-REO, L.P. (Texas) 972. Stonecreek, Limited (Tennessee) 973. Stratford Place Investors Limited Partnership (Delaware) 974. Sunbury Partners, Ltd. (Texas) 975. Sycamore Creek Associates, L.P. (Delaware) 976. TAHF II Limited Partnership (Delaware) 977. Tara Bridge Limited Partnership (Georgia) 978. Texas Apartment Investors General Partnership (Delaware) 979. Texas Affordable Housing Investment Fund I Limited Partnership (North Carolina) 980. Texas Residential Investors Limited Partnership (Delaware) 981. The Corners Apartments IV Limited Partnership (South Carolina) 21 22 982. The Crossings II Limited Partnership (Georgia) 983. The Fondren Court Joint Venture (Texas) 984. The Houston Recovery Fund (Texas) 985. The National Housing Partnership (Washington, D.C.) 986. The Park at Cedar Lawn, Ltd. (Texas) 987. Thrippence Associates, Ltd. (Georgia) 988. Thurber Manor Associates, L.P. (Delaware) 989. Towne Parc-REO, L.P. (Texas) 990. Township at Highlands Partners, Ltd. (Texas) 991. Treeslope Apartments Limited Partnership (South Carolina) 992. Turnberry-REO, L.P. (Texas) 993. U.S. Realty Partners, Limited Partnership (South Carolina) 994. United Investors Income Properties (Missouri) 995. United Investors Growth Properties II (Missouri) 996. United Investors Growth Properties (Missouri) 997. United Investors Income Properties II (Missouri) 998. Villa De Guadalupe Associates (Washington, D.C.) 999. Villa Nova, Ltd. (Tennessee) 1000. VMS Apartment Portfolio Associates III (California) 1001. VMS National Residential Properties Joint Venture (Illinois) 1002. VMS Apartment Portfolio Associates II (California) 1003. Walker Springs, Limited (Tennessee) 1004. Walnut Springs Associates (Illinois) 1005. Walnut Springs Limited Partnership (Illinois) 1006. Walters/Property Asset Management Services, L.P. (Delaware) 1007. West Trails Partners, Ltd. (Texas) 1008. West Lake Arms Limited Partnership (Delaware) 1009. Westbury Investors Limited Partnership (Delaware) 1010. Westbury Limited Partnership (Maryland) 1011. Westchase Midrise Office Partners, Ltd. (Texas) 1012. Williamsburg East-REO, L.P. (Texas) 1013. Williamsburg Limited Partnership (Illinois) 1014. Wingfield Club Investors, Limited Partnership (Kansas) 1015. Winrock Houston Limited Partnership (Delaware) 1016. Winthrop Houston Associates Limited Partnership (Delaware) 1017. Winthrop Apartment Investors Limited Partnership (Maryland) 1018. Winthrop Growth Investors I Limited Partnership (Massachusetts) 1019. Winthrop Texas Investors Limited Partnership (Maryland) 1020. Woodberry Forest-REO, L.P. (Texas) 1021. Woodhaven Associates (Virginia) 1022. Woodhill Associates (Illinois) 1023. Woodland Ridge Associates (Illinois) 1024. Woodland Ridge II Partners (Illinois) 1025. Woodlawn Village Associates, L.P. (Delaware) 1026. Woodmere Associates, L.P. (Delaware) 1027. Woods Mortgage Associates (Pennsylvania) 1028. Woodway Office Partners, Ltd. (Texas) 22 23 1029. Wyckford Commons, L.P. (Delaware) 1030. Wyntre Brook Associates (Pennsylvania) 1031. Yorktown Towers Associates (Illinois) 1032. AIMCO Stirling Court, L.P. (Delaware) 1033. Granada AIPL 6, Inc. 1034. Lakewood AOPL, Inc. 1035. Tennessee Trust Company 1036. Tenntruco, Inc. 1037. Vista APX, Inc. 1038. 1212 South Michigan 1039. 5 Mile Limited Partnership 1040. 711 West Casino Associates 1041. 735 Willoughby Avenue Company 1042. Alaska House Associates 1043. Allegheny Associates 1044. Allison Village Associates 1045. Alms Hill II Limited 1046. Alpine Company Ltd. 1047. Alpine II Company Ltd. 1048. Anderson Oaks Limited 1049. Apartment LDG 17, L.P. 1050. Arch-Way Ltd 1051. Athens Gardens Ltd 1052. Athens Station, Ltd 1053. Atlanta Shallowford Associates, LP 1054. Atrium Village Associates 1055. Avon Development Company 1056. Banning Villa 1057. Bannock Arms Apartments 1058. Barnett Plaza Ltd 1059. Bellerive Associates Limited 1060. Bethlehem Development Company 1061. Birchfield Associates 1062. Blackhawk Hills Associates 1063. Blanchard Apts 1064. Bluefield Associates 1065. Bluff Estate II 1066. Bluff Estates Limited 1067. Brentwood Manor, Ltd. 1068. Broadleaf Manor Associates 1069. Broadway Associates 1070. Broadway Glenn Associates 1071. Broadway Plaza Associates 1072. Buckannon Manor Associates 1073. Bulldogger Housing Associates, 1074. Burnsville Apartments Limited Partnership 23 24 1075. Capital Heights Associates 1076. Carolina Associates Limited 1077. Cascade Associates, Ltd 1078. Cascadian Apartments 1079. Catwil Liquidating Trust 1080. Cayuga Village Associates 1081. Central Park Towers 1082. Central Park Towers II 1083. Charney Associates Ltd Partnership 1084. Childress Manor Associates 1085. Cider Mills Associates 1086. Clayton Associates Limited 1087. Colchester Stage II Company 1088. Cold Harbor Limited Partnership 1089. College Trace Apartments Ltd 1090. Colony House Apartments Ltd 1091. Combined Properties Ltd 1092. Commencement Terrace Associates 1093. Conifer Bedford 116, A Limited Partnership 1094. Conifer Wenatchee Apartments 1095. Continental Apartments 1096. Creekside Investment Company 1097. Crestview Apartments Company 1098. Cumberland Apartments 1099. Cypress Housing Associates Ltd 1100. Damen Court Associates 1101. Daytona Village, Ltd 1102. DBL Airport Valley, L.P. 1103. Decatur Arms, Limited Partnership 1104. Deer Grove Associates 1105. DEK Associates 1106. Delta Associates, Ltd 1107. Delta Park Investment Company 1108. Deshler Apartment Associates 1109. Dewitt Clinton Associates 1110. Dorchester Place Apartments 1111. Drexel Chandler Land Limited Partnership 1112. Drexel Orlando Land Limited Partnership 1113. Eastgate Apartments 1114. Eco Village, Ltd 1115. Edgewood Apartments Associates 1116. Edgewood Associates 1117. Edgewood Housing Associates 1118. Edgewood, Ltd. 1119. Eighth Springhill Lake Limited Partnership 1120. El Cazador Ltd. 24 25 1121. El Coronado Apts, Ltd 1122. Elkhart Town & Country Apartments Limited Partnership 1123. Elms Common Associates 1124. Everett Square Plaza 1125. Evergreen Property Ltd 1126. Fairwind Associates, Ltd 1127. Fernwood Ltd. 1128. Fish Creek Plaza, Ltd 1129. Five (5) Mile Ltd 1130. Fleetwood Village Apartments 1131. Forest Park South Ltd 1132. Fort Vancouver Terrace 1133. Fox Run Associates Limited 1134. Franklin Woods Ltd 1135. Fremont Investment Company 1136. G.V. II Limited Partnership 1137. Garden Court Associates 1138. Glenn Acres Associates 1139. Goler Metropolitan Apartments 1140. Goose Hollow Village Limited 1141. Gotham Apartments, Ltd. 1142. Grand Glaize Associates 1143. Granite Properties Limited Partnership 1144. Green Acres Apartments Limited 1145. Green Village Associates 1146. Greenbriar Manor, Ltd. 1147. Greene Valley Associates 1148. Greenfair Tower II 1149. Greenfair-ABC California Corporation 1150. Greenfair-Tower II Cal Ltd 1151. Greensburg Associates, Ltd 1152. Greenwood Acres 1153. Greenwood Villa Apts Ltd 1154. Hamlet Manor Limited Partnership 1155. Hamlet Manor, Ltd. 1156. Hampton Hills Associates 1157. Harlan Associates Limited 1158. Harold Apartment (Aprs) Associates 1159. Hawthorne Plaza Associates 1160. Haynes House Associates 1161. Hi View Gardens Development Company 1162. Hibben Ferry Recreation Inc. 1163. Hilltop Apartments Phase I 1164. Hilltop Apartments Phase II 1165. Hinton House Associates 1166. Holiday Acres Apts 25 26 1167. Holiday Acres Associates 1168. Holly Point Associates 1169. Hugo Plaza Apartments Ltd. 1170. Hyde Park Apts. (Apartments Limited) 1171. Indian River Associates 1172. International House Ltd 1173. Ironman Housing Association 1174. Jardines De Mayaguez Associates 1175. Jenny Lind Hall 1176. Kenosha Gardens Associates 1177. Kenton Development Company 1178. Kenton Village Associates 1179. Kenton Village Ltd 1180. Kenyon House Co 1181. Kings Row Associates 1182. Kingston Greene Associates Ltd 1183. Kohler Gardens Apartments 1184. Kona Plus Associates (Limited) 1185. L.M. Associates 1186. Lafayette Terrace Associates 1187. Lake June Village II Ltd 1188. Lake June Village Ltd 1189. Lake Towers Associates 1190. Lakehurst Apts I 1191. Lakehurst II Ltd. 1192. Landmark Apts (Apartment) Associates 1193. Leeco Co 1194. Lemay Village Ltd 1195. Lincoln Village Oregon, Ltd 1196. Linnaeus Hawthorne Associates1 1197. Linnaeus Lexington Associates1 1198. Lone Star Properties Limited 1199. Long Beach/Wilmington Associates 1200. Madison Park III Associates 1201. Madison Park Properties Ltd 1202. Madison Terrace Associates 1203. Mallards of Wedgewood Limited 1204. Mandarin Trace Apts Ltd 1205. Manor Green Ltd 1206. Marcella Manor Associates 1207. Marinette Woods (Apartment) Apt Associates 1208. Meadow Lane LP 1209. MHO Partners Ltd 1210. Midpark Development Company 1211. Midtown Plaza Associates 1212. Minneapolis Associates Limited Partnership 1213. Morningside Housing Phase B 26 27 1214. Mount Pleasant Associates Limited Partnership 1215. New Wesley Highland Towers 1216. Newark Ohio Townehouses Ltd 1217. Nichols Townehomes Ltd 1218. Normandy Group, Ltd. 1219. North Omaha Homes 1220. North Park Associates 1221. North Washington Park Estates 1222. Northern States Properties Ltd 1223. Northwest Village Ltd. 1224. Northwind Forest Ltd 1225. Nova Associates Limited 1226. O'Dea Investment Company 1227. Oak Knoll (Apartments) Apts Ltd 1228. Oak Woods Associates 1229. One Linwood Associates Ltd. 1230. Oxford Holding Corporation 1231. P&R Investment Services 1232. Pacific Coast Plaza 1233. Palace Apartments 1234. Palisades Apartments LTD 1235. Park Manor, Oregon, Ltd. 1236. Parkview Associates 1237. Parkview Development Co. 1238. Penview Associates 1239. Phillips Village Associates 1240. Pine Haven Apartments, Ltd 1241. Pine Tree Apartments, Ltd. 1242. Pinetree Associates 1243. Pinewood Ltd. 1244. Piney Branch Associates 1245. Plains Village Ltd. 1246. Pleasanton Greens Investment Co. 1247. Plumly Townhomes Ltd 1248. Point Village Associates 1249. Portage Associates Limited Partnership 1250. Prairie Village Associates 1251. Preston Drive Ltd Partnership 1252. Pullman Wheelworks Assoc I 1253. Queensgate II Associates 1254. Quincy Manor Associates 1255. Ravensworth Associates 1256. RH Associates 1257. Richton Park Investment 1258. Richton Square Elderly, Ltd. 1259. Richton Square, Phase IV, Ltd. 1260. River Crossing Apartments, Ltd. 27 28 1261. River Oaks Associates 1262. Riverfront Associates Ltd 1263. Rochester Avenue Associates 1264. Rockledge Associates 1265. Rockville Associates, Ltd. 1266. Rowland Heights Apartments 1267. Rowland Heights II Ltd 1268. Rowland Heights Liquidating Trust 1269. Royal De Leon Apartments, Ltd. 1270. Royal Shore Associates 1271. Running Brooke II Associates 1272. Sagewood Manor Associates1 1273. Saginaw Village Oregon, Ltd. 1274. Salem Manor Oregon Ltd 1275. Scott Manor Apartments 1276. Seattle Rochester Avenue Associates 1277. Second Springhill Lake Limited Partnership 1278. Security House, Ltd. 1279. Security Properties FHA 1280. Shadowood Apartments 1281. Silverwood Village Apartments 1282. Smith House Associates 1283. South Arsenal Neighborhood Associates 1284. South Shore Village Leased 1285. Southside Village Apts. Liquidating Trust 1286. Southwest Parkway Holdings, Inc. 1287. SP Bolingbrook Associates 1288. SP Buckeye Properties 1289. SP Columbia Limited 1290. SP Diversified 1980 1291. SP Diversified Properties -I 1292. SP/Hotel Associates, Ltd. 1293. SP Illinois Partnership Ltd. 1294. SP Jayhawk Properties 1295. SP Mid Term Income Fund, Ltd. 1296. SP Pine Hills Properties 1297. SP Properties I 1298. SPI Hartford Associates 1299. SPI Willoughby Avenue 1300. Springdale West 1301. Springdale West II California Ltd 1302. Spruce Hill Apartments, Ltd. 1303. Steeplechase (Ailken) Ltd. 1304. Stewartown Associates Ltd. 1305. Stonegate Park Apartments, Ltd 1306. Stuyvesant Limited Dividend 28 29 1307. Summit Square Associates 1308. Sun Terrace Associates 1309. Suncrest Village 1310. Sunrise Gardens 1311. Sunset Capital Apartments Liquidating Trust 1312. Sunset Silver Bow Apts 1313. Sunset Village Apartments Ltd 1314. Swan Creek Associates Liquidating Trust 1315. Table Mesa Joint Venture 1316. Tanara Villa Associates I Liquidating Trust 1317. Tandem Properties 1318. TERRA II Ltd. 1319. Terrace Investors Ltd. 1320. The Advance Fund, Ltd. 1321. The New Fairways, L.P. 1322. The Tinley Company 1323. The Villa Limited Partnership 1324. The Woods Associates 1325. Three Fountains Limited 1326. Three Winthrop Properties, L.P. 1327. Tower of David 1328. Town & Country Club Apartments LP 1329. Town One, Phase I 1330. Town One, Phase II 1331. Trail Ridge Apartments, Ltd. 1332. Treeline Associates 1333. Tri-State Ltd 1334. Uptown Village Ltd 1335. Urbana Village 1336. Valley Associates 1337. Victoria Arms Apts 1338. Victorian Associates Limited 1339. Villa Del Norte Associates 1340. Villa Del Norte II Associates 1341. Village East Towers Limited 1342. Village South Associates 1343. Virginia Apartments Limited 1344. Vivendas Associates 1345. W.T. Limited Partnership 1346. Walnut Towers Development Liquidating Trust 1347. Walton-Perry Ltd. 1348. Warden Associates, A Limited Partnership 1349. Warwick Terrace Company Liquidating Trust 1350. Washington Plaza, Oreg., Ltd. 1351. Watergate II Apartments Ltd. 1352. Watergate II Associates 1353. Waterman Crossing Associates, L.P. 29 30 1354. Wedgewood Club Estates Limited 1355. Wedgewood Golf Associates 1356. Wesley Madison Towers Ltd. 1357. West Alameda Apartments 1358. West Virginian Manor Associates 1359. Western Hills, Assoc. LLC 1360. Westgate (Spartanburg) Ltd 1361. Westgate Apartments 1362. Westlake Terrace Associates 1363. Westminster Commons Associates 1364. Westminster Properties Ltd. 1365. Westview-Youngstown Ltd 1366. Westwick Apartments, Ltd. 1367. Westwick II Ltd 1368. Westwood Terrace Associates 1369. Willow Park Associates, L.P. 1370. Willows Associates Limited 1371. Win-Wood Village, Ltd. 1372. Winding Brook Associates 1373. Winhaven Associates 1374. Winslowe Apts Ltd 1375. Winthrop Properties, L.P. 1376. WoodCrest Apartments, Ltd. 1377. Woodlake Associates, a Limited Partnership 1378. Woodsong I 1379. Woodsong II 1380. Woodsong Limited Partnership 1381. Woodsvilla Associates 1382. WRC -87A Corp. 1383. 51 North High Street L.P. 1384. 62nd Street Ltd Partnership 1385. 107-145 West 135th Street Associates Ltd Partnership 1386. 630 East Lincoln Avenue Associates Ltd Partnership 1387. Abbott Associates Ltd Partnership 1388. Academy Gardens Associates LP 1389. Adirondack Apartments Saranac Associates LP 1390. AIMCO Casa Anita, L.P. 1391. AIMCO Cedar Creek, L.P. 1392. AIMCO Cobble Creek, L.P. 1393. AIMCO Rio Cancion, L.P. 1394. AIMCO San Marina, L.P. 1395. AIMCO Sundown, L.P. 1396. AIMCO Terrace Royale, L.L.C. 1397. AIMCO Tustin, L.P. 1398. AIP 6 GP, L.P. 30 31 1399. AIP III GP Limited Partnership 1400. AIP IV Factory GP, LLC 1401. Algonquin Tower Ltd Partnership 1402. All Hallows Associates 1403. Allentown Towne House Ltd Partnership 1404. Anglers Manor Associates LP 1405. Angeles Eastgate Joint Venture 1406. Angeles Income Properties II GP LP 1407. Angeles Income Properties IV GP LP 1408. Angeles Income Properties Ltd 6 GP LP 1409. Angeles Opportunity Properties Ltd GP LP 1410. Angeles Park Communities GP LP 1411. Angeles Partners X GP Limited Partnership 1412. Angeles Partners XII GP LP 1413. Anton Square Ltd 1414. ARC II/AREMCO Partners 1415. Antioch Apartments Ltd 1416. AP XI Fox Run GP, LLC 1417. AP XII Associates Limited Partnership 1418. AP XII GP, LP 1419. Apartment Associates, Ltd. 1420. Apartment LDG 17, LLC 1421. Arvada House Ltd Partnership 1422. Ashley Woods LLC 1423. Aspen Ridge Associates, Ltd. 1424. Aspen Stratford Apartments Company B 1425. Aspen Stratford Apartments Company C 1426. Athens Arms Associates 1427. Audobon Park Associates 1428. Aurora/GHI Associates 1429. Baisley Park Associates LP 1430. Baldwin Towers Associates 1431. Baldwin Oaks Elderly Ltd 1432. Basswood Manor Ltd Partnership 1433. Bayview Hunters Point Apartments 1434. Baywood Partners. Ltd 1435. Baywood Apts. Ltd 1436. Beautiful Village Associates LP Redevelopment Company 1437. Beaux Gardens Associates, LTD. 1438. Bellmire LP 1439. Benjamin Banneker Plaza Associates 1440. Bennington Square Associates, L.P. 1441. Bensalem Gardens Associates Ltd 1442. Bensalem Gardens Associates Ltd Partnership 1443. Benton Square Partnership 1444. Berkley Ltd Partnership 1445. Beverly Apartments Assoc., LP 31 32 1446. Bexley House GP, L.L.C. 1447. Bexley House, LP 1448. Big Walnut, L.P. 1449. Biscayne Apartments Associates, Ltd. 1450. Blakewood Properties Assoc. 1451. Blakewood Apartments Associates 1452. Bloomsburg Elderly Associates 1453. Branchwood Towers Ltd Partnership 1454. Briar Bay Apartments Associates, Ltd. 1455. Briarwood Apartments 1456. Brighton Crest LP 1457. Brighton GP, L.L.C. 1458. Brightwood Ltd Partnership 1459. Brightwood Manor Associates 1460. Brinton Towers Associates 1461. Brinton Manor No. 1 Associates 1462. Brittany Point AP VIII LP 1463. Brittany Point GP LP 1464. Broadmoor Apt. Assoc. 1465. Brookside Apartments Associates 1466. Brookview Apartments Co Ltd 1467. Brunswick Village Limited Partnership 1468. Buckingham Hall Associates Ltd Partnership 1469. Buena Vista Apartments Ltd 1470. Buena Vista Rehabilitation Associates, LTD. 1471. Buffalo Village Associates 1472. Burnt Oaks Ltd 1473. California Square Ltd Partnership 1474. California Square II Ltd Partnership 1475. Calmark/Fort Collins, Ltd. 1476. Calmark Investors, a California Limited Partnership 1477. Calmark MRA Limited Partnership 1478. Calmark Heritage Park II, Limited Partnership 1479. Calvert City LP 1480. Calverton Associates Limited Partnership 1481. Cambridge Heights Apartments Ltd 1482. Campbell Heights Associates Ltd Partnership 1483. Canterbury Gardens Associates Ltd Partnership 1484. Capital Park Limited Partnership 1485. Cardinal Woods Apts. Ltd 1486. Caroline Associates I Ltd Partnership 1487. Caroline Arms Limited Partnership 1488. Carriage AP X Ltd 1489. Carter Associates Ltd Partnership 1490. CC Office Associates 1491. CCP V/Aspen Ridge GP, LLC 1492. CCP/IV Nob Hill GP, LLC 32 33 1493. CCP/IV Residential GP, LLC 1494. CCP/IV Apartments GP, LLC 1495. CCP/IV Citadel GP, LLC 1496. CCP/IV Associates Ltd. 1497. Cedar Creek Partners, Ltd. 1498. Cedar Tree, L.L.C. 1499. Center Square Associates 1500. Centinella GP LP 1501. Central Woodlawn LP 1502. Central Village Associates Ltd Partnership 1503. Central Court LP 1504. Century Lakeside Place, L.P. 1505. Chapel Housing Ltd Partnership 1506. Cheek Road Ltd Partnership 1507. Chesterfield Housing Associates 1508. Cheyenne Woods LLC 1509. Cheyenne Woods United Investors LP 1510. Cheyenne Woods GP LP 1511. Cheyenne Village Apartments Ltd Partnership 1512. Chimney Ridge, LP 1513. Christopher Court Housing Company Ltd Partnership 1514. Churchview Gardens Ltd Partnership 1515. Citrus Park Associates Ltd 1516. Civic Tower Associates, LTD. 1517. Clay Courts Associates Ltd Partnership 1518. Clinton Manor, L.P. 1519. Clover Ridge East Ltd Partnership 1520. Club Apartments Associates 1521. Cobble Creek, LLC 1522. College Park Associates 1523. College Heights Ltd Partnership 1524. College Park Associates Ltd Partnership 1525. Colonial Terrace I Associates 1526. Colonial Terrace II Associates 1527. Colony of Springdale Associates, Ltd. 1528. Colony Apartments Company Ltd 1529. Columbus Court LP 1530. Columbus Square Associates I Ltd Partnership 1531. Columbus Square Associates II Ltd Partnership 1532. Community Developers Of High Point Ltd Partnership 1533. Community Circle II Ltd 1534. Community Developers Of Princeville Ltd Partnership 1535. ConCap Metro Centre Associates, Ltd. 1536. ConCap Village Green Associates, Ltd. 1537. ConCap River's Edge Associates, Ltd. 1538. ConCap Citadel Associates, Ltd. 1539. ConCap Stratford Place Associates, Ltd. 33 34 1540. Concord Houses Associates 1541. Congress Park Associates Ltd Partnership 1542. Congress Park Associates II Ltd Partnership 1543. Cooper's Pointe CPGF 22, LP 1544. Copper Mill CPGF 22, LP 1545. Copperwood II Ltd Partnership 1546. Copperwood Ltd Partnership 1547. Coral Palm Plaza Joint Venture 1548. Corinth Square Assocs. 1549. Cottonwood Apartments 1550. Country Villa Associates 1551. Countrybrook Associates 1552. Court Street Plaza Ltd 1553. Covington Pike Associates 1554. CPF Misty Woods GP, L.L.C. 1555. CPF 16 Woods of Inverness, LLC 1556. CPGF 22 Hampton Greens, L.L.C. 1557. CPGF 22 Hampton Greens GP, L.L.C. 1558. CPGF 22 Cooper's Pointe GP, L.L.C. 1559. CPGF 22 Copper Mill GP, L.L.C. 1560. CPGF 22 Four Winds GP, L.L.C. 1561. CPGF 22 Wood Creek GP, L.L.C. 1562. CPGF 22 Plantation Creek GP, L.L.C. 1563. CPGF 22 Stoney Creek GP, L.L.C. 1564. Crosland Housing Associates 1565. Cumberland Court Associates 1566. Cutler Canal Associates, Ltd. 1567. Cutler Canal II Associates, Ltd. 1568. Cutler Canal III Associates, Ltd. 1569. Daniel Lake Apts. Ltd 1570. Darby Townhouses Associates 1571. Darbytown Development Associates LP 1572. Davidson IRE Assocs. LP 1573. Davidson IRE GP LP 1574. Dawson Springs Ltd. 1575. Decatur Meadows Housing Partners Ltd 1576. Deerfield Apartments, L.L.C. 1577. Deerfield Beach Associates, LTD. 1578. Delcar-S Ltd 1579. Delcar T Ltd Partnership 1580. Desoto Estates, LP 1581. DGP, GP, L.P. 1582. Diakonia Associates 1583. Dip Limited Partnership 1584. Dip Limited Partnership II 1585. Dip Limited Partnership III 1586. Diversified Equities, L.P. 34 35 1587. Dixie Apartments Associates, LTD. 1588. Downing Apartments 1589. Druid Hills Apartments, LP 1590. Duke Manor Associates 1591. Duquesne Associates No. 1592. East Hampton Ltd Partnership 1593. Eastcourt Village Partners 1594. Easton Terrace II Associates Ltd Partnership 1595. Easton Terrace I Associates Ltd Partnership 1596. Eastridge Apartments 1597. Edgewood II Associates 1598. Edmond Estates Limited Partnership 1599. Elden Limited Partnership 1600. Elderly Housing Associates Ltd Partnership 1601. Emory Grove Limited Partnership. 1602. Esbro Limited Partnership 1603. Eustis Apartments Ltd 1604. Factory Merchants AIP IV LP 1605. Fairburn & Gordon Associates Phase II 1606. Fairburn & Gordon Associates Phase I 1607. Fairmeadows Limited Partnership 1608. Fairmont #2 Ltd Partnership 1609. Fairmont #1 Ltd Partnership 1610. Fairview Homes Associates 1611. Fairview Gardens LP 1612. Fairwood Associates 1613. Federal Square Village Ltd Partnership 1614. Fernando Associates, LTD. 1615. Ferncliff Limited Partnership 1616. Field Associates 1617. Fifth Springhill Lake Limited Partnership 1618. Fifty-One North High Street LP 1619. First Springhill Lake Limited Partnership 1620. Flatbush Nsa Associates Ltd Partnership 1621. Foothill Chimney Assocs. LP 1622. Forest Apartments Associates 1623. Forest Green Limited Partnership 1624. Forrester Gardens Ltd 1625. Forst Park Elderly Associates Ltd Partnership 1626. Fort Collins Co. Ltd 1627. Fort Carson Associates Ltd Partnership 1628. Four Winds CPGF 22, LP 1629. Four Quarters Habitat Apts. Assocs. 1630. Fourth Springhill Lake Limited Partnership 1631. Fox Run AP XI LP 1632. Fox Run AP XI GP, LP 1633. Foxfire Apts. V LP 35 36 1634. Foxwood II-REO, L.P. 1635. Franklin Park Ltd Partnership 1636. Franklin Chandler Associates 1637. Franklin Square School Associates Ltd Partnership 1638. Freeman Equities, L.P. 1639. Friendset Housing Co Ltd Partnership 1640. Friendship Court, LP 1641. Frio Housing Ltd Partnership 1642. Galion Limited Partnership 1643. Garfield Hill Associates Ltd Partnership 1644. Gate Manor Apartments Ltd 1645. Gates Mills I Limited Partnership 1646. Gateway Village Associates 1647. Genesee Gardens Associates Ltd Partnership 1648. GHI II Big River Associates 1649. GHI Associates 1650. Gladys Hampton Homes Associates Ltd Partnership 1651. Glendale Terrace LP 1652. Golden II 1653. Golden Apartments I 1654. Governor's Park Apt. VII LP 1655. Governors Associates, L.P. 1656. Granada AIP 6 Ltd 1657. Grandview Apartments 1658. Great Southwest GP, L.L.C. 1659. Great Southwest Industrial, L.P. 1660. Greater Richmond Community Development Corp. #2 & Associates 1661. Greater Mt. Calvary Terrace Ltd 1662. Greater Richmond Community Development Corp. #1 & Associates 1663. Green Mountain Manor Ltd Partnership 1664. Greenfield Apartments Ltd Partnership 1665. Greenfield North Apartments Ltd Partnership 1666. Greenville Arms, LP 1667. Griffith Limited Partnership 1668. Grove Park Villas, Ltd 1669. Growth Hotel Investors Combined Fund #12 1670. Gulf Coast Holdings Ltd 1671. Gulfport Apts. Ltd. 1672. Gulfway Limited Partnership 1673. GW Carver Ltd 1674. Haili Associates 1675. Haines Associates Ltd Partnership 1676. Hainlin Mills Apt. Assoc., Ltd. 1677. Halls Mill Ltd. 1678. Hampton Greens CPGF 22, LP 1679. Hampton/GHI Associates No. 12 1680. Hampton/GHI Associates No. 22 36 37 1681. Harbor Court Associates, LTD. 1682. Harold House Limited Partnership 1683. Harris Park Ltd Partnership 1684. Hatillo Housing Associates 1685. Hattiesburg Ltd. 1686. Heights Associates Ltd Partnership 1687. Hemingway Housing Associates Ltd Partnership 1688. Hickory Ridge Associates Ltd 1689. Hickory Heights Apartments, LP 1690. Highlands Village II Ltd 1691. Hillcrest Green Apartments Ltd 1692. Hillside Village Associates 1693. Hilltop Apartments Associates 1694. Hilltop Limited Partnership 1695. Hollows Associates Ltd Partnership 1696. Holly Court, LP 1697. Hollywood Gardens 1698. Homestead Apartments Associates, Ltd. 1699. Homestead Apartments Associates II, Ltd. 1700. Homestead III Associates, Ltd. 1701. Hospitality Inns Pensacola, Ltd. II 1702. Hospitality Inns Jacksonville Ltd II 1703. Hospitality Inns Pensacola, Ltd. 1704. Housing Assistance Of Mt. Dora Ltd 1705. Housing Assistance Sebring Ltd 1706. Housing Assistance Of Vero Beach Ltd 1707. Housing Assistance Of Orange City Ltd 1708. Houston Pines Ltd 1709. Houston Aristocrat Apartments Ltd Partnership 1710. HRH Properties, Ltd. 1711. Hudson Terrace Associates Ltd Partnership 1712. Hunt Club Associates, L. P. 1713. Hunter's Glen (Phase I) AP XII LP 1714. Hunter's Glen AP XII LP 1715. Hurbell II Limited Partnership 1716. Hurbell III Ltd Partnership 1717. Hurbell IV Limited Partnership 1718. Hurbell I Limited Partnership 1719. IDA Tower 1720. Indian Valley III Limited Partnership 1721. Indian Valley I Limited Partnership 1722. Indian Valley II Limited Partnership 1723. Ingram Square Apartments Ltd 1724. Insignia Jacques Miller, L.P. 1725. International Plaza Associates, LTD 1726. Intown West Associates Ltd Partnership 1727. Jamestown Village Associates 37 38 1728. Jersey Park Associates Ltd Partnership 1729. JFK Associates 1730. Johnson Court LP 1731. Johnston Square Associates Ltd Partnership 1732. JVL 19 Associates Ltd Partnership Verified 1733. JVL Limited Partnership 1734. JVL Sixteen Limited Partnership 1735. JVL 18 Associates Ltd Partnership Verified 1736. Kalmia Apts. LP 1737. Kapuna Associates 1738. Kemar Townhouses Associates 1739. Kendall Court Associates, Ltd. 1740. Kennedy Boulevard II GP, LLC 1741. Kennedy Boulevard III GP, LLC 1742. Kennedy Boulevard Associates 1743. Kennedy Boulevard I GP, LLC 1744. Kennedy Homes Limited Partnership 1745. Kenneth Court LP 1746. Kenneth Arms 1747. Kimberly Associates Limited Partnership 1748. Kimberton Apartments Associates Limited Partnership 1749. Kinard LP 1750. King Bell Associates 1751. Knollcrest Apartments Ltd Partnership 1752. Koolau Housing Associates 1753. La Colina Partners, Ltd. 1754. La Colina Ranch Apartments Ltd. 1755. La Salle Apartments 1756. La Vista Associates 1757. La Fontenay LP 1758. Lafayette Manor Associates Ltd Partnership 1759. Lafayette Towne Family Ltd Partnership 1760. Lafayette Square Associates 1761. Lafayette Towne Elderly Ltd Partnership 1762. Laing Village Ltd Partnership 1763. Lake Avenue Associates 1764. Lake Avenue Offices Ltd 1765. Lake Forest Apartments 1766. Lake Wales Villas Ltd 1767. Lake Meadows GP, LLC 1768. Lakeshore LP 1769. Lakeside Villa Associates, Ltd. 1770. Lakeview Arms Associates Lts Partnership 1771. Lakeview Villas Ltd 1772. Lakewood AOPL LP 1773. Landau Apartments Company, LP 1774. Landings CPF 16, L.P. 38 39 1775. La Fontenay LLC 1776. Las Americas Housing Associates 1777. Lassen Associates 1778. Lauderdale Lakes Associates, Ltd. 1779. Laurel Gardens, a Partnership In Commendam 1780. Laurens Villas, LP 1781. Lazy Hollow Partners (a general partnership) 1782. Le Mans Apartments LP 1783. Lee Hy Manor Associates Ltd Partnership 1784. Lewisburg Associates 1785. Lincmar Associates 1786. Lincoln Park Associates 1787. Linden Court Associates Ltd Partnership 1788. Lock Haven Gardens Associates 1789. Lock Haven Elderly Associates 1790. Long Meadow Apartments, LP 1791. Loring Towers Associates 1792. Loring Towers Apartments Limited Partnership 1793. Loudoun House Ltd Partnership 1794. Louisbourg Elderly Associates 1795. Ludlam Gardens Apartments, LTD. 1796. M&P Development Co. 1797. Madison Apts. Assocs. 1798. Madisonville, Ltd. 1799. Manzanita Arms 1800. Maple Park West Ltd Partnership 1801. Maple Hill Associates 1802. Mayfair Manor Limited Partnership 1803. MBRF Hunt Club GP, LLC 1804. McColl Housing Associates 1805. Meadow Wood Associates General Partnership 1806. Meadowgreen Associates, LTD 1807. Meadowood Townhouses III Limited Partnership 1808. Meadowood Townhouses I Limited Partnership 1809. Meadows IV Ltd. 1810. Meadows II Ltd 1811. Meadows Apartments Limited Partnership 1812. Meadows East Apartments Limited Partnership 1813. Menlo Limited Partnership 1814. Merced Commons 1815. Merced Commons II 1816. Merrifields Associates 1817. Mesa Dunes MHP LP 1818. Miami Elderly Associates Ltd Partnership 1819. Miami Court Associates, LTD 1820. Mid States Industrial Complex Ltd 1821. Midtown Plaza Associates, Ltd. 39 40 1822. Mill Street Associates Ltd Partnership 1823. Miller Village (Eastline Associates) 1824. Milliken Apartments Company 1825. Minneapolis Business Park JV 1826. Miramar Housing Associates Ltd Partnership 1827. Misty Woods CPF 19, LP 1828. Monaco Arms Associates II Ltd 1829. Monaco Arms Associates I 1830. Monmouth Associates Ltd Partnership 1831. Montblanc Gardens Apartments Associates 1832. Montblanc Housing Associates 1833. Montgomery Partners, Ltd. 1834. Monument Street Ltd Partnership 1835. Moral Gardens Associates 1836. Morrisania Towers Housing Company Ltd Partnership 1837. Moss Gardens Ltd, a Partnership in Commendam 1838. MRR Ltd Partnership 1839. Murphy Blair Associates III Associates Ltd Partnership 1840. Muske Ltd Partnership 1841. Natchez Ltd 1842. Natick Associates 1843. National Housing Partnership Realty Fund I 1844. National Housing Partnership Realty Fund III 1845. National Housing Partnership Realty Fund IV 1846. National Housing Partnership Realty Fund Two 1847. Neighborhoods of The Universities Lock Street Apartments Company 1848. New Vistas Apartments Associates Phase II 1849. New Fairways LP 1850. New Hidden Acres, LP 1851. New Horizons Associates, LTD. 1852. New Lake Meadows LP 1853. New Shelter V LP 1854. New Timber Ridge GP, L.P. 1855. New Timber Ridge, L.P. 1856. New Snowden Village I LP 1857. New Vistas Apartments Ltd Partnership 1858. New West 111th Street Housing Company Ltd Partnership 1859. New West 111th Street Two Associates Ltd Partnership 1860. Newberry Arms, LP 1861. Newton Hill Limited Partnership 1862. NHP Carriage Associates LP 1863. NHP Bayberry Associates LP 1864. NHP Center Associates LP 1865. NHP Chapparal Associates LP 1866. NHP Coach Associates LP 1867. NHP Cornerstone Associates, LP 1868. NHP Country Club Woods Associates LP 40 41 1869. NHP Dove Associates, LP 1870. NHP Elk Associates, LP 1871. NHP Forest II Associates, LP 1872. NHP Forest IV Associates, LP 1873. NHP Gates of Arlington Associates LP 1874. NHP Green Associates LP 1875. NHP Greenbriar Associates LP 1876. NHP Heather I Associates LP 1877. NHP Heather II Associates, LP 1878. NHP Hessian Hills Associates LP 1879. NHP High River Associates LP 1880. NHP Joint Ventures, Inc. 1881. NHP Lane Associates LP 1882. NHP Laurel III LP 1883. NHP Longfellow Associates, LP 1884. NHP Mattapony, LP 1885. NHP Midland Associates LP 1886. NHP Mill Creek Associates LP 1887. NHP Oak Associates LP 1888. NHP Paradise Bay Associates, LP 1889. NHP Park Associates LP 1890. NHP Parkview Associates LP 1891. NHP Pembroke Associates LP 1892. NHP Pine Creek Manor Associates, LP 1893. NHP Port Richey Associates LP 1894. NHP Regal Associates LP 1895. NHP Spring Lake Manor Associates LP 1896. NHP Summer Associates LP 1897. NHP Summit Associates LP 1898. NHP Sunridge Associates LP 1899. NHP Three Chopt West Associates LP 1900. NHP Timberview Associates LP 1901. NHP Town & Country/Country Place, LP 1902. NHP Townhouse Associates LP 1903. NHP Twin Associates LP 1904. NHP Twin Gates East Associates LP 1905. NHP Villa Associates LP 1906. NHP Will-O-Wisp Arms Associates LP 1907. NHP Woodcreek Associates LP 1908. Ninth Springhill Lake Limited Partnership 1909. Nob Hill Villa Apts. Assocs. LP 1910. North River Village III 1911. North Lake Terrace Associates Ltd Partnership 1912. North Washington Park Partnership 1913. North River Village III GP LP 1914. North Coast/Syracuse LP 1915. Northbrook Partners, Ltd. 41 42 1916. Northbrook Apts. Ltd 1917. Northgate Village Limited Partnership 1918. Northwest Terrace Associates Ltd Partnership 1919. Oak West Ltd Partnership 1920. Oak Run LLC 1921. Oak Hill Apartment Associates 1922. Oak Hollow South Associates 1923. Oakland City West End Associates Ltd 1924. Oakland Village Townhouse Associates Ltd Partnership 1925. Oakland Company, LP 1926. Oakwood Limited Partnership 1927. Ocala Place Ltd 1928. One West Conway Associates Ltd Partnership 1929. Opa Locka Associates, LTD. 1930. Orange Village Associates 1931. Orange City Villas II Ltd 1932. Orangeburg Manor 1933. Orchard Park Joint Venture 1934. Orchard Mews Associates Ltd Partnership 1935. Orchard Park Apartments, L.P. 1936. Outlets GP, L.L.C. 1937. Outlets Mall LP 1938. Overbrook Park Ltd 1939. Overlook Apartments Associates Ltd 1940. Oxford Apartments Ltd 1941. Oxford Place Associates 1942. Oxford Oaks Investors Ltd Partnership 1943. P W VI Associates Ltd Partnership 1944. P W III Associates Ltd Partnership 1945. P W IV Associates Ltd Partnership 1946. P W V Associates Ltd Partnership 1947. Palm Lake Associates, LTD. 1948. Palm Beach Apartments, L.P. 1949. Palm House Ltd Partnership 1950. Palmer Square Apartments Associates 1951. Park Avenue West I Limited Partnership 1952. Park Avenue West II Limited Partnership 1953. Park Creek Ltd Partnership 1954. Parkview Arms Associates I Ltd Partnership 1955. Parkview Arms Associates II Ltd Partnership 1956. Parkview Apartments Ltd Partnership 1957. Parkview Associates Ltd Partnership Verified 1958. Parkways Associates Ltd Partnership 1959. Patman Switch Associates 1960. Pavilion Associates 1961. Pelham Place GP Limited Partnership 1962. Pelham Place L.P. 42 43 1963. Pendleton Riverside Apartments Oregon Ltd 1964. Penn Hall Associates Ltd Partnership 1965. Peppertree Village Of Avon Park Ltd 1966. Pershing Waterman Phase I Ltd Partnership 1967. Pickwick Place AP XII, LP 1968. PineHaven Villas Apartments LP 1969. Pinehurst, Ltd. 1970. Pittsfield Neighborhood Associates 1971. Place One Ltd Partnership 1972. Plainview Apartments, LP 1973. Plantation Creek CPGF 22, LP 1974. Pleasant Valley Apartments Ltd Partnership 1975. Point West Associates Limited Partnership 1976. Point James Apts., LP 1977. Polynesian Apartments Associates, LTD. 1978. Poplar Square GP LP 1979. Poplar Square AIP III LP 1980. Portland Plaza Ltd Partnership 1981. Portner Place Associates Ltd Partnership 1982. Post Ridge Associates, Ltd. 1983. Post Street Associates Ltd Partnership 1984. Pride Gardens 1985. Prince Street Towers Ltd Partnership 1986. Pueblo Ltd Partnership 1987. Quail Run IV GP LP 1988. Quail Woods Developers 1989. Quail Run IV LP 1990. Queenstown Apartments Ltd Partnership 1991. Quint Properties 1992. Ramblewood LP 1993. Rancho Townhouse Associates 1994. Rancho Arms 1995. Raymonia Apts. LP 1996. Real Estate Venture Fund III Limited Partnership 1997. Red River Estates, LP 1998. Registry Square Ltd Partnership 1999. Richlieu Associates 2000. River Woods Associates Ltd Partnership 2001. Rivercreek Apartments Limited Partnership 2002. Rivercrest Apartments LP 2003. Riverfront Apartments Ltd Partnership 2004. Riverview II Associates Ltd Partnership 2005. Riverwalk Associates LP 2006. Rockwell Limited Partnership 2007. Rodeo Drive Limited Partnership 2008. Rolling Meadows Of Ada Ltd 2009. Roosevelt Gardens II 43 44 2010. Roosevelt Gardens LP 2011. Royal Coast Apt. Assoc., Ltd. 2012. Royal Towers Limited Partnership 2013. Ruffin Road Associates Ltd Partnership 2014. Ruscombe Gardens Ltd Partnership 2015. Russ Allen Plaza Associates, LTD 2016. Rutherford Park Townhouses Associates 2017. Sabal Palm Associates, Ltd. 2018. Saint George Villas Ltd Partnership 2019. Salem GP, L.L.C. 2020. Salem Court House LP 2021. Salem Arms of Augusta LP 2022. San Juan Apartments 2023. San Juan del Centro Limited Partnership 2024. San Jose Limited Partnership 2025. Sandy Springs Associates Ltd 2026. Seagrape Village Associates, LTD. 2027. Sencit Selinsgrove Associates 2028. Sencit Towne House LP 2029. Sencit New York Avenue Associates 2030. Sencit Kelly Township Associates 2031. Sencit Lebanon Company 2032. Sencit Jacksonville Company, Ltd 2033. Serramonte Plaza, a California Limited Partnership 2034. Serramonte Plaza, a California Limited Partnership 2035. Seventh Springhill Lake Limited Partnership 2036. Shannon Manor 2037. Shelter V GP SC LP 2038. Shelter IV GP LP 2039. Shelter I GP LP 2040. Shelter III GP LP 2041. Shelter V GP LP 2042. Shelter VII GP LP 2043. Sherman Terrace Associates 2044. Shoreview Apartments 2045. Silver Blue Lake Apartments, LTD. 2046. Site 10 Community Alliance Associates Ltd Partnership 2047. Sixth Springhill Lake Limited Partnership 2048. Sleepy Hollow Apartments Ltd Partnership 2049. Snap IV Ltd Partnership 2050. SNI Development Company Ltd Partnership 2051. Snowden GP, L.L.C. 2052. South Port CCP/IV, L.L.C. 2053. South Port Apartments, A California Limited Partnership 2054. South Mountain Terrace Ltd 44 45 2055. South Dade Apartments, LTD. 2056. South Hiawassee Village Ltd 2057. Southmont Apartments 2058. Southridge Apartments Limited Partnership 2059. Southward Limited Partnership 2060. Spring Meadow Limited Partnership 2061. Spruce Ltd Partnership 2062. St. Nicholas Associates Ltd Partnership 2063. Stafford Apartments Ltd Partnership 2064. Stanbridge LP (Lakeshore I) 2065. Star Creek Assoc., Ltd. 2066. Star Creek II Assoc., Ltd. 2067. Staunton Heights LP (Lakeshore III) 2068. Sterling Crest Joint Venture 2069. Stock Island Ltd Partnership 2070. Stone Ridge LLC 2071. Stoney Creek CPGF 22, LP 2072. Stoney Greens, LLC 2073. Stoneybrook Apartments Associates 2074. Storey Manor Associates Ltd Partnership 2075. Strawbridge Square Associates Ltd Partnership 2076. Sturbrook Investors, Ltd. 2077. Summersong Townhouse Ltd Partnership 2078. Summerwalk NPI III, L.P. 2079. Sunrise Associates Ltd Partnership 2080. Sunset Plaza Apartments 2081. Susquehanna View LP 2082. Sutton Place CCP V, LP 2083. Swift Creek Apts. of Hartsville, LP 2084. T.M. Alexander Associates, LTD. 2085. Tamarac Pines II Ltd Partnership 2086. Tamarac Pines Ltd Partnership 2087. Taunton II Associates 2088. Taunton Green Associates 2089. Teal Pointe Assoc., Ltd. 2090. The Glens LP 2091. The Meadows Apartments 2092. The Rogers Park Partnership 2093. The Trails GP Limited Partnership 2094. The Trails, LP 2095. Third Springhill Lake Limited Partnership 2096. Tiffany Rehab Associates Ltd Partnership 2097. Timberhill Associates LP 2098. Timberlake Apartments Ltd Partnership 2099. Timberwoods Associates, LP 2100. Timuquana Park Associates 2101. Tinker Creek Limited Partnership 45 46 2102. Tompkins Terrace Associates 2103. Town North, a Limited Partnership 2104. Townview Towers I Partnership, Ltd. 2105. Tri-Properties Associates, LP 2106. Trianon Ltd. A LP 2107. Trinity Hills Village Apartments Ltd Partnership 2108. Trinity Towers 14th Street Associates Ltd Partnership 2109. Tumast Associates 2110. Twin Gables Associates Ltd Partnership 2111. Twin Towers Associates 2112. Two Bridges Associates Ltd Partnership 2113. Tyee Associates 2114. U.S. Shelter, LP 2115. United Front Homes 2116. United Handicap Federation Apartments Associates 2117. United House Associates 2118. United Housing Partners-Cuthbert Ltd 2119. United Housing Partners Elmwood Ltd 2120. United Housing Partners Morristown Ltd Partnership 2121. United Housing Partners Welch Ltd 2122. United Housing Partnership Carbondale Ltd 2123. United Redevelopment Associates Ltd Partnership 2124. University Plaza Associates 2125. Urbanizacion Maria Lopez Housing Company Ltd Partnership 2126. US Realty I Limited Partnership 2127. Vantage '78 Ltd Partnership 2128. Verdes Del Oriente 2129. Villa De Guadalupe Associates 2130. Village Apts. 2131. Village Circle Apartments Ltd Partnership 2132. Village Green Limited Partnership 2133. Village Green Apartments Company Ltd 2134. Vineville Towers Associates Ltd 2135. Vista APX, Ltd. 2136. Vistas De San Juan Associates Ltd Partnership 2137. Vistula Heritage Village 2138. VMS 1985-253 Ltd 2139. VMS 1985-254 Ltd 2140. VMS National Residential Portfolio II 2141. VMS National Residential Portfolio I 2142. Voltaire Assocs. 2143. Waico Phase II Associates Ltd Partnership 2144. Waico Apartments Associates Ltd Partnership 2145. Waipahu Associates 2146. Walden Oaks Associates Ltd Partnership 2147. Walden Pond Assoc., Ltd. 2148. Walden Joint Venture Limited Partnership 46 47 2149. Walhalla Gardens LP 2150. Walmsley Terrace Associates Ltd Partnership 2151. Walnut Hills Associates Ltd 2152. Wash-West Properties 2153. Washington Manor Ltd Partnership 2154. Washington Chinatown Associates Ltd Partnership 2155. Waterford Square Apartments, Ltd. 2156. Waterman Ltd Partnership 2157. Waters Towers Associates Ltd Partnership 2158. Waynesboro Ltd. 2159. West Oak Village Limited Partnership 2160. Western Can Ltd 2161. Westgate Apartments 2162. Westlake Apts. Assocs. 2163. Westlake East Associates, L.P. 2164. Westminster Ltd Partnership 2165. Whispering Pines AIP 6 LP 2166. Whitefield Place Ltd Partnership 2167. Wigar Ltd Partnership 2168. Williamsburg South Apartments LP 2169. Winchester Gardens, Ltd. 2170. Windsor Apartments Associates Limited Partnership 2171. Windsor Crossings Limited Partnership 2172. Windsor Hills I LP 2173. Wingfield Investors LP 2174. Winnsboro Arms LP 2175. Winter Park Associates LP 2176. Wolf Ridge Apartments, Ltd. 2177. Wollaston Manor Associates 2178. Wood Creek CPGF 22, LP 2179. Woodcrest Apartments Ltd Partnership 2180. Woodhaven Associates, a Virginia Limited Partnership 2181. Woodland Apartments L.P. 2182. Woodmark Limited Partnership 2183. Woods of Inverness CPF 16, L.P. 2184. Woodside Village 2185. Woodside Villas of Arcadia Ltd 2186. Worcester Episcopal Housing Company 2187. Yadkin Associates Ltd Partnership 2188. AIMCO/NHP Acquisition Corp. 2189. Central Woodlawn Rehabilitation Joint Venture 2190. 62nd Street Joint Venture 2191. NHP Bayshore, L.P. 2192. NHP Hollymead, L.P. 2193. NHP Kingston L.P. 2194. NHP Pembroke Courts L.P. 2195. NHP Parkway L.P. 47 48 2196. NHP Ramblewood L.P. 2197. NHP Villas L.P. 2198. NHP Cranbrook Club Limited Partnership 2199. NHP Park Village Limited Partnership 2200. NHP Tropical Gardens Limited Partnership 2201. NHP Woodshire, L.P. 2202. NHP Bayberry, L.P. 2203. NHP Carriage, L.P. 2204. NHP Center, L.P. 2205. NHP Cornerstone, LP 2206. NHP Dove, LP 2207. NHP Forest II, LP 2208. NHP Gates of Arlington, LP 2209. NHP Elk, LP 2210. NHP Green, LP 2211. NHP Heather I, LP 2212. NHP Heather II, LP 2213. NHP Lane, LP 2214. NHP Laurel III, LP 2215. NHP Twin, LP 2216. NHP Mill Creek, LP 2217. NHP Forest IV, LP 2218. NHP Oak, LP 2219. NHP Paradise Bay, LP 2220. NHP Park, LP 2221. NHP Parkview, LP 2222. NHP Pine Creek Manor, LP 2223. NHP Summer, LP 2224. NHP Summit, LP 2225. NHP Sunridge, LP 2226. NHP Regal, LP 2227. NHP Coach, LP 2228. NHP Villa, LP 2229. NHP Timberview, LP 2230. NHP Longfellow, LP 2231. NHP Port Richey, LP 2232. NHP Midland, LP 2233. NHP Woodcreek, LP 48 EX-23.1 12 CONSENT OF ERNST & YOUNG L.L.P 1 Exhibit 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements listed below of Apartment Investment and Management Company of our report dated March 11, 1999, with respect to the consolidated financial statements and schedules of Apartment Investment and Management Company included in its Annual Report on Form 10-K for the year ended December 31, 1998. Form S-3 (No. 333-828) Form S-3 (No. 333-8997) Form S-3 (No. 333-17431) Form S-3 (No. 333-20755) Form S-3 (No. 333-4546) Form S-3 (No. 333-36531) Form S-3 (No. 333-36537) Form S-3 (No. 333-4542) Form S-8 (No. 333-4550) Form S-8 (No. 333-4548) Form S-8 (No. 333-14481) Form S-8 (No. 333-36803) Form S-4 (No. 333-39357) Form S-8 (No. 333-41719) Form S-4 (No. 333-49075) Form S-3 (No. 333-47201) Form S-8 (No. 333-57617) Form S-4 (No. 333-60663) Form S-8 (No. 333-70409) Form S-3 (No. 333-61409) Form S-4 (No. 333-66207) Form S-3 (No. 333-69121) Form S-3 (No. 333-75109) Form S-4 (No. 333-60355) /s/ ERNST & YOUNG LLP Denver, Colorado March 29, 1999 EX-27.1 13 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-K. YEAR DEC-31-1998 JAN-01-1998 DEC-31-1998 127,131 0 33,708 0 0 0 2,802,598 (228,880) 4,268,285 0 1,660,715 149,500 792,468 485 1,109,611 4,268,285 401,242 431,692 260,149 283,534 0 0 89,424 64,474 0 64,474 0 0 0 64,474 0.84 0.80
EX-99.1 14 AGREEMENT RE: DISCLOSURE LONG TERM DEBT INSTRUMENT 1 EXHIBIT 99.1 Agreement Regarding Disclosure of Long-Term Debt Instruments In reliance upon Item 601(b)(4)(iii)(A), of Regulation S-K, Apartment Investment and Management Company, a Maryland corporation (the "Company") has not filed as an exhibit to its Annual Report on Form 10-K for the fiscal year ended December 31, 1998, any instrument with respect to long-term debt not being registered where the total amount of securities authorized thereunder does not exceed 10 percent of the total assets of the Company and its subsidiaries on a consolidated basis. Pursuant to Item 601(b)(4)(iii)(A), of Regulation S-K, the Company hereby agrees to furnish a copy of any such agreement to the Securities Exchange Commission upon request. APARTMENT INVESTMENT AND MANAGEMENT COMPANY By: /s/ PETER KOMPANIEZ -------------------------- Peter Kompaniez President -----END PRIVACY-ENHANCED MESSAGE-----