-----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, Ikbz4uJj5E176uOccxd5HHYcfMSOwVlpBCIuCo8HZABZ15ltp4SfHwEbxqszcgDS 8xNvONTT0mc49HjNxcBqHw== 0000912057-97-010886.txt : 19970401 0000912057-97-010886.hdr.sgml : 19970401 ACCESSION NUMBER: 0000912057-97-010886 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 49 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970331 SROS: NYSE 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: 1934 Act SEC FILE NUMBER: 001-13232 FILM NUMBER: 97568207 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 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _______________________ FORM 10-K /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission File Number 1-13232 APARTMENT INVESTMENT AND MANAGEMENT COMPANY (Exact name of registrant as specified in its charter) MARYLAND 84-1259577 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1873 SO. BELLAIRE STREET, SUITE 1700, DENVER, CO 80222-4348 (Address of principal executive offices) (Zip Code) _______________________ 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, Inc. SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10K. _____ The number of shares of Class A and Class B Common Stock outstanding as of March 11, 1997 was 17,569,970 and 325,000, respectively. The aggregate market value of the voting stock held by non-affiliates of the registrant, was approximately $468,337,000 as of March 11, 1997. _______________________ DOCUMENTS INCORPORATED BY REFERENCE Portions of the proxy statement for the registrant's 1997 annual meeting of stockholders' are incorporated by reference into Part III of this Annual Report. APARTMENT INVESTMENT AND MANAGEMENT COMPANY TABLE OF CONTENTS ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 ITEM PAGE - ---- ---- PART I 1. Business........................................................... 1 Recent Developments............................................. 1 Financial Information About Industry Segments................... 5 Growth Strategies............................................... 5 Operating Strategies............................................ 7 Taxation of the Company......................................... 8 Competition..................................................... 8 Regulation...................................................... 8 Environmental Matters........................................... 9 Insurance....................................................... 10 Employees....................................................... 10 2. Properties......................................................... 11 3. Legal Proceedings.................................................. 14 4. Submission of Matters to a Vote of Security Holders................ 14 PART II 5. Market for the Registrant's Common Equity and Related Stockholder Matters.............................................. 15 6. Selected Financial Data............................................ 16 7. Management's Discussion and Analysis of Financial Condition and Results of Operations............................................ 17 8. Financial Statements and Supplementary Data........................ 28 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure......................................... 28 PART III 10. Directors and Executive Officers of the Registrant................. 28 11. Executive Compensation............................................. 30 12. Security Ownership of Certain Beneficial Owners and Management..... 30 13. Certain Relationships and Related Transactions..................... 31 PART IV 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.... 31 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 Company filings (collectively "SEC Filings") under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended (as well as information communicated orally or in writing between the dates of such SEC Filings), contains or may contain information that is forward looking, including, without limitation, statements regarding the effect of acquisitions, the Company's future financial performance and the effect of government regulations. Actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors including, without limitation, national and local economic conditions, the general level of interest rates, terms of governmental regulations that affect the Company and interpretations of those regulations, the competitive environment in which the Company operates, financing risks, including the risk that the Company's cash flow from operations may be insufficient to meet required payments of principal and interest, real estate risks, including variations of real estate values and the general economic climate in local markets and competition for tenants in such markets, acquisition and development risks, including failure of such acquisitions to perform in accordance with projections, and possible environmental liabilities, including costs which may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by the Company. In addition, the Company's continued qualification as a real estate investment trust involves the application of highly technical and complex provisions of the Internal Revenue Code. Readers should carefully review the Company's financial statements and the notes thereto, as well as the risk factors described in the SEC Filings. ITEM 1. BUSINESS Apartment Investment and Management Company, a Maryland corporation formed on January 10, 1994 ("AIMCO" and, together with its subsidiaries and other controlled entities, the "Company"), is a self-administered and self-managed real estate investment trust (a "REIT") engaged in the ownership, acquisition, development, expansion and management of multifamily apartment properties. Through its controlling interests in AIMCO Properties, L.P. a Delaware limited partnership (the "Operating Partnership"), other limited partnerships and subsidiary corporations, the Company owns or controls multifamily apartment properties (the "Owned Properties") and manages other multifamily apartment properties (the "Managed Properties") for third parties and affiliates. The Company focuses on "middle market" multifamily apartment properties (properties with rents at or near the averages in their markets). As of December 31, 1996, the Company owned or controlled 23,764 apartment units in 94 multifamily apartment properties, managed for affiliates 3,611 apartment units in 18 properties and managed for over 90 third-party owners 15,434 apartment units in 119 properties bringing the total managed portfolio to 42,809 apartment units in 231 properties. The Company's principal executive offices are located at 1873 So. Bellaire Street, Suite 1700, Denver, Colorado 80222-4348 and its telephone number is (303) 757-8101. Limited partners in the Operating Partnership and holders of minority interests in partnerships controlled by the Company can contact the Company at (888) 759- 0816 for information and assistance. RECENT DEVELOPMENTS INDIVIDUAL PROPERTY ACQUISITIONS During the year ended December 31, 1996, the Company acquired seven multifamily apartment properties consisting of 2,311 apartment units. The aggregate consideration paid by the Company of $93.1 million consisted of $26.0 million in cash, 704,220 shares of AIMCO's Class A Common Stock, par value $.01 per share (the "Class A Common Stock") with a total recorded value of $15.3 million, 745,183 Operating Partnership Units ("OP Units") with a total recorded value of $15.0 million and the assumption of $31.7 million of secured long-term indebtedness and $5.1 million of secured short-term indebtedness. 1 PORTFOLIO ACQUISITIONS: ENGLISH PORTFOLIO ACQUISITION In November 1996, the Company completed the acquisition (the "English Portfolio Acquisition") of certain partnership interests, real estate and related assets owned by J.W. English, a Houston, Texas-based real estate syndicator and developer, and certain affiliated entities (collectively, the "J.W. English Companies"). The English Portfolio Acquisition included the purchase of all of the general and some of the limited partnership interests in 22 limited partnerships which act as the general partner to 31 limited partnerships (the "English Partnerships"). The English Partnerships own multifamily apartment properties, aggregating 5,230 apartment units, and four commercial properties, primarily in Houston, Texas. In addition, the Company acquired title to a 104-unit multi-family apartment property in Houston, Texas; certain assets of J. W. English Management Company which provided management services to the apartment properties; and other real estate interests related to the J.W. English Companies' operations. The aggregate purchase price of the English Portfolio Acquisition was $23.1 million, consisting of $15.2 million in OP Units and $7.9 million in cash. The Company also made separate offers (the "English Tender Offers") to the limited partners of 25 of the English Partnerships to acquire their limited partnerships interests for cash or OP Units. The Company accepted tenders representing, in the aggregate, approximately 46% of all outstanding limited partnership interests in the English Partnerships subject to the offers. The Company paid $16.0 million in cash and $1.7 million in OP Units, at a price of $23 per OP Unit, for the interests tendered in the English Tender Offers. The remaining limited partners elected to continue as limited partners in such English Partnerships. DALLAS PORTFOLIO ACQUISITION In a series of related transactions completed in November and December 1996, the Company acquired general partnership interests in 21 limited partnerships which own twelve multifamily apartment properties (collectively, the "Dallas Acquisition Properties") aggregating 2,839 apartment units, primarily in the Dallas, Texas metropolitan area, and loans made by the previous general partners and their affiliates to such partnerships, for an aggregate price of $26.7 million in cash (collectively, the "Dallas Portfolio Acquisition"). The existing limited partners retained their interest in such limited partnerships. PROPERTY DISPOSITIONS In August 1996, the Company sold the Dakota Apartments, the Sterling Point Apartments, the Ridgmar Park Apartments and the Woodcreek Apartments (collectively, the "Four Sold Properties") consisting of 1,265 apartment units, all of which are located in the Dallas, Texas metropolitan area, in a single transaction for net cash proceeds totaling $17.1 million. The net proceeds were used to repay the balance then outstanding under the Company's revolving line of credit with Bank of America (the "Credit Facility") of $9.2 million and to provide funds for working capital and investment purposes. The properties were acquired as part of a portfolio in conjunction with the Company's initial public offering in July 1994. The Company recognized a gain of $44,000 on the dispositions. DEBT ASSUMPTIONS AND FINANCINGS In 1996, the Company assumed $31.7 million in first and second long-term mortgage loans in connection with the purchase of the three apartment properties. In July 1996, mortgage loans on two of the apartment properties totaling $25.8 million, in addition to $2.7 million in participating interest due in accordance with the terms of a second mortgage loan, were repaid using borrowings under the Credit Facility and the issuance of 63,152 OP Units with a recorded value of $1.2 million. 2 In June 1996, the Company completed two tax-exempt bond offerings totaling $58.0 million on five Florida properties. Proceeds from the bond offerings were used to repay the variable rate $48.1 million tax-exempt bonds securing four Florida properties and the $9.9 million tax-exempt revenue bonds which were purchased in connection with the acquisition of a Florida property in December 1995. The bond offerings include $48.0 million in fully amortizing, 20 year mortgage loans with an effective interest rate of 7.2% and a $9.9 million fully amortizing, 20 year mortgage loan with an effective interest rate of 7.3%. In addition to the five Florida properties, five other properties were pledged as additional collateral to secure the financings. In August 1996, the Company's refinanced its $25.0 million one-year bridge facility secured by five properties. The borrowings were increased to $25.8 million, the interest rate was reduced to LIBOR plus 1.75% from LIBOR plus 2.0% and the maturity was extended to July 31, 1998. In addition, one of the properties was released from the cross-collateralized security. The indebtedness is unconditionally guaranteed by the Company. In November 1996, the Company borrowed $12.5 million pursuant to an unsecured line of credit with Bank One, Colorado, NA (the "Bank One Credit Line"). The Bank One Credit Line bears interest at a variable rate equal to LIBOR plus 1.75% (7.1% per annum as of December 31, 1996). The proceeds were used by the Company to pay for a portion of the limited partnership interests acquired in the English Tender Offers. The Bank One credit line was repaid with proceeds of a public offering in February 1997. In December 1996, the English Partnerships borrowed $60.5 million, bearing interest at a variable rate equal to LIBOR plus 1.75% (7.4% per annum as of December 31, 1996) which matures in December 1997 (subject to extension by the Company to December 1998). The indebtedness is secured by deeds of trust on 13 of the properties owned by 12 of the English partnerships and is guaranteed in part by AIMCO and certain of its affiliates. The aggregate amount of the obligations guaranteed is approximately $28.8 million. This guaranty is secured by an assignment of the Company's general partnership interests in the 12 English Partnerships. The net proceeds of such indebtedness were used by the Company to repay indebtedness of certain of the English Partnerships. The English Partnerships are subject to an additional $34.9 million of mortgage debt. In December 1996, the Company borrowed approximately $25.6 million to finance the Dallas Portfolio Acquisition. Such indebtedness is secured by second mortgages on twelve of the Dallas Acquisition Properties and bears interest at a variable rate equal to LIBOR plus 2.50% (8.0% per annum as of December 31, 1996). The indebtedness was repaid by the Company with proceeds of a public offering in February 1997. In December 1996, the partnerships which own the Dallas Acquisition Properties borrowed $29.2 million, bearing interest at LIBOR plus 2.50% (8.0% at December 31, 1996) which matures December 1998. The indebtedness is secured by deeds of trust on seven of the Dallas Acquisition Properties. The net proceeds of such indebtedness were used by the Company to repay indebtedness of certain of the partnerships which own the Dallas Acquisition Properties. The Dallas Acquisition Properties are subject to an additional $31.5 million of mortgage debt. STOCK REPURCHASES In September 1996, the Company's Board of Directors authorized the re-purchase of up to 500,000 shares of Class A Common Stock in open market and privately negotiated purchase transactions. During 1996, the Company repurchased 79,400 shares of Class A Common Stock in open market purchases for a total of $1.7 million at an average price of $21.41 per share. In addition, the Company repurchased 126,300 shares of Class A Common Stock in a privately negotiated purchase transaction for a total of $2.6 million at an average price of $20.50 per share. 3 PUBLIC OFFERINGS In November 1996, the Company completed a public offering of 1,265,000 shares of Class A Common Stock (including 165,000 shares subject to the underwriter's overallotment option) at a net price of $23.43 per share. The net proceeds of $29.6 million were used to repay a portion of the indebtedness incurred in recent acquisitions. In February 1997, the Company completed a public offering of 2,015,000 shares of Class A Common Stock (including 15,000 shares subject to the underwriter's overallotment option) at a price of $26.75 per share. The net proceeds of $51.1 million were used to repay a portion of the Company's indebtedness incurred in acquisitions completed in November and December 1996. MANAGEMENT STOCK ACQUISITION On October 1, 1996, the Company issued 379,750 shares of Class A Common Stock to certain executive officers (or entities controlled by them) at $20.75 per share (the closing price on the NYSE on August 29, 1996, the option award date) pursuant to the exercise of stock options issued under the Apartment Investment and Management Company 1996 Stock Award and Incentive Plan. In payment for such shares, the executive officers (or entities controlled by them) executed $7.9 million of notes payable to the Company bearing interest at 7.25% per annum, payable quarterly, and due in 2006. The notes are secured by the shares purchased and are recourse as to 25% of the principal owed. In March 1997, certain executive officers (or entities controlled by them) repaid $740,000 of the $7.9 million of notes payable to the Company outstanding as of December 31, 1996. In addition, on August 29, 1996, certain executive officers also agreed to purchase (or cause entities controlled by them to purchase), prior to January 31, 1997, an additional 515,500 shares of Class A Common Stock at a purchase price of $20.75 per share. These shares were issued and delivered as of December 31, 1996. In payment for such shares, the executive officers (or entities controlled by them) executed $10.7 million of notes payable to the Company bearing interest at 7.25% per annum, payable quarterly, and due in 2006. The notes are recourse to the officers. In March 1997, certain officers of the Company (or entities controlled by them) repaid in full the notes payable to the Company totaling $10.7 million. As a result of these two transactions, management and directors ownership increased from approximately 8% at December 31, 1995 to approximately 12% at December 31, 1996. PENDING ACQUISITION On February 20, 1997, the Company announced that its Board of Directors had approved an agreement with Demeter Holdings Corporation ("Demeter") and Phemus Corporation ("Phemus"), affiliates of The Harvard Private Capital Group, and Capricorn Investors, L.P. ("Capricorn"), pursuant to which the Company will acquire all of Demeter's and Capricorn's 6.93 million shares of NHP Incorporated ("NHP") common stock at a purchase price of $20.00 per share, payable in 3.2 million shares of Class A Common Stock of the Company and $53 million in cash. In addition, Demeter and Capricorn would be entitled to retain their proportionate interest in NHP's subsidiary, NHP Financial Services, Ltd. The agreement also provides for the Company to acquire from Demeter, Phemus and Capricorn (together, the "Sellers") interests in certain entities that, directly or indirectly, own conventional and affordable multifamily apartment properties managed by NHP. Pursuant to the agreement, the Operating Partnership will acquire the Sellers' controlling interests in limited partnerships that own 18 conventional apartment communities containing 7,278 apartment units for an aggregate price of approximately $24.5 million, payable in cash or OP Units, at the sellers' option. The Company also has an option to acquire the Sellers' interests in entities that own an additional 15 conventional apartment communities containing 3,800 apartment units. Upon completion of such acquisition, the Operating Partnership intends to make separate offers to the limited partners of the various partnerships to acquire their interests in the limited partnerships. 4 The agreement also provides for the formation of a joint venture with the Sellers in which the Operating Partnership will have a 50% interest. The joint venture would be managed equally by the Sellers, on the one hand, and Operating Partnership on the other. The Sellers will contribute to the venture their interests in entities that own 24 apartment communities containing 5,464 apartment units, and, at the Operating Partnership's option, the Sellers' interests in entities that own an additional 20 apartment communities containing 4,532 apartment units. The Company will contribute cash or other assets valued at approximately $13 million and the Sellers will contribute assets valued at approximately $13 million to form the joint venture. Also pursuant to the agreement, the Operating Partnership will invest approximately $3.4 million to acquire a 25% interest in entities owned by the Sellers that own interests in 52,741 affordable housing units and 12,588 other apartment units and other assets. The Company also made a merger proposal to NHP's Board of Directors pursuant to which NHP would merge into the Company (or one of its subsidiaries) and the Company would offer to acquire the remaining stockholders' interests in NHP for $20 per NHP share to be paid in the Company's Class A Common Stock. The Company's proposal contemplates that NHP's subsidiary, NHP Financial Services, Ltd., will be spun off to NHP stockholders (including the Sellers' but not the Company) prior to the merger. Consequently, NHP stockholders would be entitled to receive approximately 0.75 shares of the Company's Class A Common Stock in the merger. If the spin-off of NHP Financial Services, Ltd. does not occur, the Company will pay an additional $3.05 per share to Demeter, Capricorn and the remaining Stockholders in NHP. Closing of the transactions is subject to completion of additional documentation and customary closing conditions, including all necessary governmental approvals, the continuation of the Company's status as a REIT under federal tax laws, as well as certain rights of first refusal of NHP with respect to the purchase of interests in properties managed by NHP. The closing of the real estate transactions with the Sellers and the acquisition by the Company of the Sellers' interest in NHP is expected to occur during the second quarter of 1997. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS The Company operates in one industry segment, the ownership and management of real estate. See the consolidated financial statements and notes thereto included in Item 8 of this Annual Report on Form 10-K for financial information relating to the Company. GROWTH STRATEGIES The Company measures its economic profitability based on Funds From Operations ("FFO") less a minimum annual provision for capital replacements of $300 per apartment unit, which the Company defines as Cash Earned For Shareholders ("CEFS"). The Company's primary objective is to maximize shareholder value by increasing the amount and predictability of CEFS on a per share basis. The Company seeks to achieve this objective primarily by improving net operating income from its Owned Properties and by acquiring additional properties at values that are accretive on a per share basis. The Company follows operating and financial strategies, including: (i) maintaining a geographically diversified portfolio of properties; (ii) providing a minimum of $300 per apartment unit per year for capital replacements to maintain its properties; (iii) emphasizing long-term, fixed rate, fully amortizing debt; (iv) maintaining a ratio of CEFS plus interest expense and preferred stock dividends ("Free Cash Flow") to interest expense of at least 2 to 1; and (v) maintaining a dividend payout ratio of more than 80% of CEFS. 5 ACQUISITIONS During 1996, the Company has acquired, either directly or through the acquisition of controlling interests in limited partnerships, 42 multifamily apartment properties, and has sold four Owned Properties, increasing the number of apartment units it owns or controls to 23,764, a net increase of approximately 64% from the 14,453 apartment units in the 56 Owned Properties held at December 31, 1995. The Company intends to continue to expand its portfolio of Owned Properties by: (i) acquiring properties in markets familiar to the Company's management; (ii) developing and expanding its Owned Properties and (iii) acquiring controlling interests in companies that own or manage multifamily properties. MANAGED PROPERTIES The Company believes its property management operations are integral to its overall business strategy. The economies of scale realized from managing more than 40,000 apartment units enable the Company to more efficiently operate its properties. In addition, the Company believes that managing properties for third parties improves the performance of its Owned Properties by subjecting property managers to market-based pricing and service standards. The Company's property management operations also support the Company's acquisition activities by enhancing its ability to identify and evaluate acquisition and development opportunities in its markets. The Company's local and regional personnel maintain first-hand knowledge of local market conditions and often obtain early notification of Managed Properties and other properties that may be offered for sale. REDEVELOPMENT AND EXPANSION PROPERTIES The Company has a cautious strategy concerning new development and intends to develop only in situations in which it believes it has a significant advantage. The Company believes that redevelopment of selected properties in superior locations can provide advantages over the development of new properties, because redevelopment generally can be accomplished with relatively lower risk, in shorter periods of time and with reduced delays attributable to governmental approval procedures. The Company acquired the Sun Katcher Apartments (360 units) located in Jacksonville, Florida in December 1995. The property has substantially completed a second phase of redevelopment, at a total cost of approximately $4.0 million. The entire redevelopment is expected to be completed by the second quarter of 1997. The Company acquired the Bay West Apartments (376 units) located in Tampa, Florida, in December 1996. The Company anticipates spending $2.6 million in renovation costs to upgrade the interior and exterior of the property and reposition the property in the marketplace. The Company believes that expansion within, or adjacent to, existing properties will provide growth opportunities at lower risks than are associated with new development, and may offer certain cost advantages to the extent common area amenities and on-site management personnel can be utilized. In 1996, the Company completed 92 additional units within Fairways, (260 units) located in Phoenix, Arizona, at a total cost of approximately $6.0 million. Common area amenities and on-site management personnel from Fairways will serve the additional 92 units. In addition, the Company owns Fairways III, 19.9 acres of undeveloped land adjacent to Fairways suitable for development. The Company has received approval from local agencies for the construction of 279 units. 6 The acquisition of the English Portfolio Acquisition included a partnership which owns the Township at Highlands (119 units) located in Denver, Colorado. The Company has plans to develop an additional 42 apartments units at a cost of approximately $75,000 per unit. The 42 apartment units will use the existing common area amenities and on-site management personnel already in place at the Township at Highlands. OPERATING STRATEGIES PRODUCT FOCUS The Company focuses on "middle market" multifamily apartment properties, a market segment in which the Company's management has substantial ownership and management experience. The Company considers a middle market multifamily apartment property to be a property with units offered for rent at or near the average rents in their markets. As of December 31, 1996, the Owned Properties which the Company considers to be representative of middle market properties, had an average acquisition cost of approximately $35,000 per apartment unit (approximately $44 per square foot). Excluding properties acquired in November and December 1996, the average monthly rent per occupied unit was $535 per month ($0.66 per square foot) during 1996. INTERNAL GROWTH STRATEGY The Company's strategy for internal growth and to increase cash flow is to continually: (i) seek higher net rental revenues by enhancing and maintaining the competitiveness of properties through periodic property upgrades which typically include cable television, selective refurbishment and the addition of other amenities; (ii) provide a high level of service to residents; (iii) manage expenses through a system of detailed management reporting and accountability; and (iv) provide training programs, orientation workshops and technical courses for on-site marketing, maintenance and management personnel. In pursuing its internal growth strategy, the Company's policy is to: (i) provide on-site management trained to respond promptly to residents' needs; (ii) conduct annual resident satisfaction surveys; (iii) respond to maintenance calls within 24 hours; and (iv) maintain the quality and appearance of its properties with an annual provision of $300 per apartment unit for capital replacements. PROPERTY MANAGEMENT The Company's property management strategy is to achieve improvements in operating results by combining centralized financial control and uniform operating procedures with localized property management decision making and market knowledge. The Company is organized into six regions. Each region is served by local offices of regional property managers and is supervised by a Regional Vice President. DIVERSIFIED MARKETS The Company seeks to operate in markets: (i) where population and employment growth rates are expected to exceed the national averages; (ii) where it believes it can become one of the regionally significant owners and managers of multifamily apartment properties; and (iii) that will enable the Company to maintain a geographically diversified portfolio or otherwise gain significant financial benefits. The distribution of the Owned Properties reflects the Company's focus on growth markets and its belief that geographic diversification will help to insulate the portfolio from regional and economic fluctuations. The Company also seeks to create concentrations of properties within each of its markets in order to achieve economies of scale in management and operations. The Company owns or manages in excess of 5,000 apartment units in the Houston, Texas metropolitan area and 2,000 apartment units in the Dallas, Texas metropolitan area and in excess of 1,000 apartment units in each of the Atlanta, Georgia; Phoenix, Arizona; Salt Lake City, 7 Utah; San Antonio, Texas; Denver/Boulder, Colorado; and Tampa/St. Petersburg, Florida metropolitan areas. TAXATION OF THE COMPANY The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"), commencing with its taxable year ended December 31, 1994, and the Company intends to continue to operate in such a manner. The Company's current and continuing qualification as a REIT depends on its ability to meet the various requirements imposed by the Code, through actual operating results, distribution levels and diversity of stock ownership. If the Company qualifies for taxation as a REIT, it will generally not be subject to 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 Federal income tax at regular corporate rates on its taxable income (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 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 might need to borrow funds or liquidate certain investments in order to pay the applicable tax and the Company would not be compelled to make distributions under the Code. Unless entitled to relief under certain statutory provisions, the Company would also be disqualified from treatment as a REIT for the four taxable years following the year during which qualification is lost. Although the Company currently intends to operate in a manner designed to qualify as a REIT, it is possible that future economic, market, legal, tax or other considerations may cause the Company to fail to qualify as a REIT or may cause the Board of Directors to revoke the REIT election. The Company and its stockholders may be subject to state or local taxation in various state or local jurisdictions, including those in which it or they transact business or reside. The state and local tax treatment of the Company and its stockholders may not conform to the Federal income tax treatment. COMPETITION There are numerous housing alternatives that compete with the Company's Owned Properties and Managed Properties in attracting residents. The Company's properties compete directly with other multifamily 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. Numerous real estate companies compete with the Company in acquiring, developing and managing multifamily apartment properties and seeking tenants to occupy their properties. In addition, numerous property management companies compete with the Company in the markets where the Managed Properties are located. REGULATION GENERAL Multifamily apartment properties are subject to various laws, ordinances and regulations, including regulations relating to recreational facilities such as swimming pools, activity centers and other common areas. Changes in laws increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions, as well as changes in laws affecting 8 development, construction and safety requirements, may result in significant unanticipated expenditures, which would adversely affect the Company's cash flow from operating activities. In addition, future enactment of rent control or rent stabilization laws or other laws regulating multifamily housing may reduce rental revenue or increase operating costs in particular markets. RESTRICTIONS IMPOSED BY LAWS BENEFITING DISABLED PERSONS Under the Americans with Disabilities Act of 1990 (the "ADA"), all places of public accommodation are required to meet certain federal requirements related to access and use by disabled persons. These requirements became effective in 1992. A number of additional federal, state and local laws exist which also may require modifications to the Owned Properties, or restrict certain further renovations thereof, with respect to access thereto by disabled persons. For example, the Fair Housing Amendments Act of 1988 (the "FHAA") requires apartment properties first occupied after March 13, 1990 to be accessible to the handicapped. Noncompliance with the ADA or the FHAA could result in the imposition of fines or an award of damages to private litigants and also could result in an order to correct any non-complying feature, which could result in substantial capital expenditures. Although management of the Company believes that the Owned Properties are substantially in compliance with present requirements, if the Owned Properties are not in compliance, the Company is likely to incur additional costs to comply with the ADA and the FHAA. ENVIRONMENTAL MATTERS Under federal, state and local environmental laws and regulations, a current or previous owner or operator of real property may be required to investigate and clean up a release of hazardous substances at such property, and may, under such laws and common law, be held liable for property damage and other costs incurred by third parties in connection with such releases. The liability under certain of these laws has been interpreted to be joint and several unless the harm is divisible and there is a reasonable basis for allocation of responsibility. The failure to remediate the property properly may also adversely affect the owner's ability to sell or rent the property or to borrow using the property as collateral. In connection with its ownership, operation and management of the Owned Properties and other real properties, including the Managed Properties, the Company could be potentially liable for such costs. Certain federal, state and local laws and ordinances govern the removal, encapsulation or disturbance of asbestos-containing materials ("ACMs") when those materials are in poor condition or in the event of building remodeling, renovation or demolition, impose certain worker protection and notification requirements and govern emissions of and exposure to asbestos fibers in the air. The laws may also impose liability for release of ACMs and may enable third parties to seek recovery from owners or operators of real properties for personal injury associated with ACMs. In connection with its ownership, operation and management of properties, the Company could be potentially liable for those costs. There are ACMs at certain of the Owned Properties and there may be ACMs at certain of the Managed Properties. The Company has developed and implemented operations and maintenance programs that establish operating procedures with respect to the ACMs at the Owned Properties. Certain of the Owned Properties are, and some of the Managed Properties may be, located on or near properties that have contained underground storage tanks or on which activities have occurred which could have released hazardous substances into the soil or groundwater. There can be no assurances that such hazardous substances have not been released or have not migrated, or in the future will not be released or will not migrate onto the Owned Properties and Managed Properties. In addition, the Company's Montecito property in Austin, Texas is located adjacent to, and may be partially on, land that was used as a landfill. Low levels of methane and other landfill gases have been detected at Montecito. The remediation of the landfill gas is now substantially complete. The environmental authorities have preliminarily approved the methane gas remediation efforts. Final approval of the site and the remediation process is contingent upon the results of continued methane gas monitors to confirm the effectiveness of the remediation efforts. Should further actionable levels of methane gas be detected, a proposed contingent plan of passive methane gas venting may be implemented. The Company believes the cost of such further limited action, if any, will not be material. Testing has also been conducted on Montecito to 9 determine whether, and to what extent, groundwater has been impacted. Test reports have indicated that the groundwater is not contaminated at actionable levels. All of the Owned Properties were subject to Phase I or similar environmental audits by independent environmental consultants. The audits did not reveal, nor is the Company aware of, any environmental liability relating to the Owned Properties that the Company believes would have a material adverse effect on the Company's business, assets or results of operations. Nevertheless, it is possible that the Company's audits did not reveal all environmental liabilities or that there are material environmental liabilities of which the Company is unaware. Although the Managed Properties may not have been subject to Phase I or similar environmental audits by independent environmental consultants, the Company is not aware of any environmental liability relating to the Managed Properties that it believes would have a material adverse effect on its business, assets or results of operations. INSURANCE Management believes that the 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 Operating Partnership and related service company businesses, has 1,294 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 ITEM 2. PROPERTIES The Company's Owned Properties are located in thirteen states in the Sunbelt regions of the United States. A significant portion of the Owned Properties are concentrated in or around twelve metropolitan areas in which the Company owns or controls more than 500 units. The following table sets forth certain information as of December 31, 1996 with respect to the Company's twelve principal markets: PERCENTAGE OF NUMBER OF NUMBER OF TOTAL UNITS PROPERTIES UNITS OWNED/CONTROLLED ---------- --------- ---------------- Albuquerque, NM................. 3 750 3% Atlanta, GA..................... 4 1,020 4% Dallas, TX...................... 11 2,743 12% Denver, CO...................... 5 1,255 5% Houston, TX..................... 23 5,657 24% Las Vegas, NV................... 2 734 3% Little Rock, AR................. 3 574 2% Orlando, FL..................... 2 620 3% Phoenix, AZ..................... 7 1,622 7% Salt Lake City, UT.............. 3 1,356 6% San Antonio, TX................. 6 1,280 5% Tampa/St. Petersburg, FL........ 4 1,530 7% -- ------ --- Principal markets total....... 73 19,141 81% Other markets................... 21 4,623 19% -- ------ --- Total......................... 94 23,764 100% -- ------ --- -- ------ --- At December 31, 1996, the Company owned or controlled 94 Owned Properties containing 23,764 units. The Owned Properties average 253 apartment units each, with the largest property containing 670 apartment units. Apartment units in the Owned Properties have an average size of 800 square feet. The Owned Properties include 1,047 studio apartments, 12,060 one-bedroom apartments, 9,436 two-bedroom apartments, 1,204 three-bedroom apartments and 17 four-bedroom apartments. At December 31, 1996, the weighted average physical occupancy for the Company's Owned Properties was 93.7% and their weighted average monthly rent per occupied unit was $555. The Owned Properties offer residents a range of amenities. Many of the Owned Properties include a swimming pool and clubhouse, spas, fitness centers, tennis courts and saunas. Many of the apartment units offer design and appliance features such as vaulted ceilings, fireplaces, washer and dryer hook-ups, cable television, balconies and patios. 11 APARTMENT INVESTMENT AND MANAGEMENT COMPANY APARTMENT PORTFOLIO The following table sets forth certain property information at December 31, 1996 by region and state: AVERAGE NUMBER NET RENTABLE TOTAL YEAR UNIT SIZE PROPERTY STATE OF UNITS SQUARE FEET ACREAGE CONSTRUCTED (SQ. FT.) - -------- ----- -------- ------------ ------- ----------- --------- COLORADO REGION Bluffs Colorado 232 154,176 19.00 1971 665 Meadowcreek Colorado 332 260,000 24.00 1972 783 Riverside Colorado 248 199,344 9.85 1987 804 Village Creek Colorado 324 222,348 12.26 1987 686 Township Colorado 119 175,841 16.5 1985 1,478 Prairie Hills New Mexico 260 218,352 12.00 1985 840 Penn Square Village New Mexico 210 150,150 6.47 1982 715 Villa Ladera New Mexico 280 279,860 10.99 1985 1,000 ------ ---------- -------- REGIONAL TOTAL 2,005 1,660,071 111.07 SOUTHWEST REGION 40th North Arizona 556 372,800 9.57 1970 671 Cobble Creek Arizona 142 100,840 4.66 1985 710 Fairways Village Arizona 352 236,600 15.33 1986 910 Newport Arizona 204 151,984 6.79 1986 745 Paradise Palms Arizona 130 132,804 5.65 1970 1,022 Royal Palms Arizona 152 116,940 7.12 1985 769 Sun Grove Arizona 86 83,298 4.59 1986 969 Las Brisas Arizona 132 90,584 6.96 1985 686 Rillito Village Arizona 272 142,248 7.77 1985 523 Coral Gardens Nevada 670 397,148 26.67 1983 593 Snug Harbor Nevada 64 69,052 4.25 1990 1,079 Sun Valley Utah 430 169,144 14.23 1985 393 Somerset Utah 486 420,080 25.23 1985 393 South Willow Utah 440 244,044 18.63 1987 555 ------ ---------- -------- REGIONAL TOTAL 4,116 2,727,566 157.45 FLORIDA REGION Bay West Florida 376 294,300 11.10 1975 783 Boardwalk Florida 291 235,599 17.65 1986 810 Brandywine Florida 477 357,472 19.70 1971 749 Eden Crossing Florida 200 164,992 14.20 1985 825 Sun Katcher Florida 360 308,512 18.74 1972 857 Sunchase Clearwater Florida 461 369,761 30.57 1985 802 Sunchase East Florida 296 216,512 19.63 1985 731 Sunchase North Florida 324 258,480 24.90 1985 798 Sunchase Tampa Florida 216 165,920 12.04 1985 768 ------ ---------- -------- REGIONAL TOTAL 3,001 2,371,548 168.53 SOUTH TEXAS REGION Ashwood Texas 144 96,744 5.25 1984 672 Anchorage Texas 264 206,936 14.55 1985 784 Brentwood Texas 104 92,648 4.91 1981 891 Bridgewater Texas 206 171,920 8.19 1979 835 Chesapeake Texas 320 239,856 11.13 1983 822 Copper Chase Texas 316 255,636 11.00 1982 809 Copperfield Texas 196 161,032 7.45 1983 822 Coventry Square Texas 270 201,880 8.40 1985 748 Crows Nest Texas 176 134,272 6.85 1984 763 Dolphin's Landing Texas 218 199,723 23.70 1975 916 Easton Village I & II Texas 146 129,573 7.60 1983 887 Fisherman's Wharf Texas 360 277,984 21.95 1981 772 Fondren Court Texas 429 366,598 13.16 1979 855 Hampton Hill Texas 332 235,312 11.11 1984 709 Hastings Place Texas 176 159,992 5.62 1984 909 Las Brisas Texas 176 179,982 17.66 1983 1,023 Lexington Texas 72 55,848 3.56 1981 776 Meadowbrook Texas 260 199,504 9.81 1985 767 Oak Falls Texas 144 162,000 8.40 1983 1,125 Park at Cedar Lawn Texas 192 191,090 5.93 1985 995 12 APARTMENT INVESTMENT AND MANAGEMENT COMPANY APARTMENT PORTFOLIO AVERAGE NUMBER NET RENTABLE TOTAL YEAR UNIT SIZE PROPERTY STATE OF UNITS SQUARE FEET ACREAGE CONSTRUCTED (SQ. FT.) - -------- ----- -------- ------------ ------- ----------- --------- Parkside Texas 160 107,952 5.45 1983 675 Parliament Bend Texas 232 134,880 6.47 1980 581 Peppermill Place Texas 224 169,776 8.00 1983 758 Seaside Point Texas 102 71,012 3.10 1985 696 Seasons Texas 280 233,334 9.95 1976 833 Signature Point Texas 304 261,136 19.56 1994 859 Stirling Court Texas 228 144,772 7.06 1984 635 Stonehaven Texas 337 299,523 11.60 1972 889 Stoneybrook Texas 113 135,947 4.05 1972 1,203 Sunbury Downs Texas 240 167,408 8.05 1984 698 Swiss Village Texas 360 248,472 11.42 1972 690 Walnut Springs Texas 224 154,392 10.85 1983 689 Waterford Texas 312 213,656 10.63 1984 685 Timbermill Texas 296 197,560 11.00 1982 667 ------ ---------- -------- REGIONAL TOTAL 7,913 6,258,350 333.42 NORTH TEXAS REGION Olympiad Alabama 176 137,296 11.00 1986 780 Pleasant Ridge Arkansas 200 248,200 14.50 1982 1,241 Pleasant Valley Pointe Arkansas 112 149,580 13.19 1985 1,336 Riverwalk Arkansas 262 212,118 10.95 1988 810 Ashford Plantation Georgia 211 280,135 23.25 1975 1,328 Cypress Landing Georgia 200 209,600 16.40 1984 1,048 Dunwoody Georgia 318 273,000 27.00 1980 858 Peachtree Park Georgia 295 280,106 13.24 1962/1995 950 Spectrum Pointe Georgia 196 169,484 14.00 1984 865 Jefferson Place Louisiana 234 324,814 24.73 1985 1,388 Hillmeade Tennessee 288 397,352 57.50 1985 1,380 Chimney Ridge Texas 210 133,212 4.29 1983 634 Country Club Texas 282 223,180 10.78 1984 791 Frankford Place Texas 274 220,248 15.34 1982 804 Garden Terrace Texas 20 19,000 1.45 1978 950 Greentree Texas 365 302,724 20.00 1983 829 Heather Texas 180 128,920 7.20 1983 716 Highland Park Texas 500 421,616 28.00 1985 843 Meadows Texas 100 81,168 5.00 1983 812 Montecito Texas 268 187,824 10.37 1985 701 Randol Crossing Texas 160 120,820 6.50 1984 755 Ridgecrest Texas 152 125,712 7.40 1983 827 Southridge Texas 160 139,992 8.01 1984 875 Williams Cove Texas 260 205,096 10.39 1984 789 Woodhill Texas 352 294,728 19.00 1985 837 Woodland Ridge Texas 130 99,126 5.00 1984 763 Woodlands - Odessa Texas 232 174,712 9.09 1982 753 Woodlands - Tyler Texas 256 177,600 10.64 1984 694 ------ ---------- -------- REGIONAL TOTAL 6,393 5,737,363 404.22 CALIFORNIA REGION Brookside Village California 336 266,264 13.24 1970 792 ------ ---------- -------- --- TOTAL 23,764 19,021,162 1,187.93 ------ ---------- -------- ------ ---------- -------- AVERAGE 253 202,352 12.64 1982 800 ------ ---------- -------- --- ------ ---------- -------- ---
The average physical occupancy during 1996 for the Owned Properties held as of December 31, 1995 and for the Owned Properties purchased during 1996 (exclusive of properties purchased in November and December 1996) was 95%. The average monthly rent per occupied unit during 1996 for these Owned Properties was $535 per unit, or $0.66 per square foot. 13 Substantially all of the Owned Properties are encumbered by mortgage indebtedness or serve as collateral for the Company's Credit Facility. At December 31, 1996, the Company had aggregate mortgage indebtedness totaling $463.8 million, which was secured by 83 Owned Properties with a combined net book value of $647.0 million. At December 31, 1996, the Company had borrowings of $44.8 million outstanding under its Credit Facility which were collateralized by six Owned Properties with a combined net book value of $89.0 million. See Item 8 of this Annual Report on Form 10-K for additional information about the Company's indebtedness. ITEM 3. LEGAL PROCEEDINGS In November 1996, five limited partners in certain of the English Partnerships sued the Company alleging that, in connection with the English Portfolio Acquisition, the Company conspired with J.W. English to breach his fiduciary duties to the plaintiffs, and that the offering materials used by the Company in connection with the English Tender Offers contained misleading statements or omissions. The plaintiffs made an application for a temporary restraining order with respect to the English Tender Offers, which was denied. To date, the Company has not received a summons effecting service of the Complaint. The Company intends to defend itself vigorously in connection with this action. 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. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 14 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Common Stock has been listed and traded on the New York Stock Exchange ("NYSE") under the symbol "AIV" since July 22, 1994. The following table sets forth the quarterly high and low sales prices of the Common Stock as reported on the NYSE and the dividends paid by the Company for the periods indicated. QUARTER ENDED HIGH LOW DIVIDENDS - ------------- ------- ------- --------- 1995 (PER SHARE) - ---- March 31, 1995.............................. $18 1/2 $17 1/8 $0.415 June 30, 1995............................... 20 1/4 17 7/8 0.415 September 30, 1995.......................... 21 1/4 19 1/2 0.415 December 31, 1995........................... 20 7/8 18 0.425 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 March 31, 1997 (Through March 11, 1997)..... 29 1/2 25 7/8 0.4625(1) - ------------------- (1) On January 23, 1997, the Company's Board of Directors declared a cash dividend of $0.4625 per share of Common Stock, paid on February 14, 1997 to stockholders of record on February 7, 1997. On March 11, 1997, there were 17,569,970 shares of Common Stock outstanding held by 308 stockholders of record. The Company, as a REIT, is required to distribute annually to holders of Common Stock at least 95% of its "real estate investment trust taxable income," which, as defined by the Code and Treasury regulations, is generally equivalent to net taxable ordinary income. The Company measures its economic profitability and intends to pay regular dividends to its stockholders based on CEFS during the relevant period. However, the future payment of dividends by the Company will be at the discretion of the Board of Directors and will depend on numerous factors including the Company's financial condition, its capital requirements, the annual distribution requirements under the provisions of the Code applicable to REITs and such other factors as the Board of Directors deems relevant. 15 ITEM 6. SELECTED FINANCIAL DATA The historical selected financial data for the Company for the years ended December 31, 1996 and 1995 and for the period January 10, 1994 (the date of inception) through December 31, 1994 and for the AIMCO Predecessors (as defined in the audited financial statements included elsewhere in this Form 10-K) for the period from January 1, 1994 through July 28, 1994 are based on the audited financial statements included elsewhere in this Form 10-K. This information should be read in conjunction with such financial statements, including the notes thereto. The historical selected financial data for the AIMCO Predecessors for the year ended December 31, 1993 and 1992 is derived from audited financial statements. THE COMPANY AIMCO PREDECESSORS ---------------------------------------------- ---------------------------------- FOR THE PERIOD FOR THE PERIOD FOR THE YEARS FOR THE FOR THE JANUARY 10, 1994 JANUARY 1, 1994 ENDED YEAR ENDED YEAR ENDED THROUGH THROUGH DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, JULY 28, ---------------- 1996 1995 1994 1994 1993 1992 ------------ ------------ ---------------- --------------- ------- ------ (RESTATED) (RESTATED) OPERATING DATA: RENTAL PROPERTY OPERATIONS: Rental and other income $100,516 $ 74,947 $ 24,894 $ 5,805 $ 8,056 $ 5,769 Property operating expenses (38,400) (30,150) (10,330) (2,263) (3,200) (2,248) Owned property management expenses (2,746) (2,276) (711) - - - -------- -------- -------- ------- ------- ------- 59,370 42,521 13,853 3,542 4,856 3,521 Depreciation (19,556) (15,038) (4,727) (1,151) (1,702) (1,232) -------- -------- -------- ------- ------- ------- 39,814 27,483 9,126 2,391 3,154 2,289 -------- -------- -------- ------- ------- ------- SERVICE COMPANY BUSINESS: Management fees and other income 8,367 8,132 3,217 6,533 8,069 7,231 Management and other expenses (5,352) (4,953) (2,047) (5,823) (6,414) (5,853) Corporate overhead allocation (590) (581) - - - - Owner and seller bonuses - - - (204) (468) (522) Depreciation and amortization (718) (596) (150) (146) (204) (350) -------- -------- -------- ------- ------- ------- 1,707 2,002 1,020 360 983 506 -------- -------- -------- ------- ------- ------- Minority interests in service company business 10 (29) (14) - - - -------- -------- -------- ------- ------- ------- Company's shares of income from service company business 1,717 1,973 1,006 360 983 506 -------- -------- -------- ------- ------- ------- GENERAL AND ADMINISTRATIVE EXPENSES (1,512) (1,804) (977) 0 0 0 INTEREST INCOME 523 658 123 0 0 0 INTEREST EXPENSE (24,802) (13,322) (1,576) (4,214) (3,510) (2,741) NON-CONTROLLED INTERESTS IN PARTNERSHIPS (111) - - - - - -------- -------- -------- ------- ------- ------- INCOME (LOSS) BEFORE GAIN ON DISPOSITION OF PROPERTY, EXTRAORDINARY ITEM, INCOME TAXES AND MINORITY INTEREST IN OPERATING PARTNERSHIP 15,629 14,988 7,702 (1,463) 627 54 Gain on disposition of property 44 - - - - - Extraordinary gain - forgiveness of debt - - - - - 135 Provision for income taxes - - - (36) (336) (303) -------- -------- -------- ------- ------- ------- INCOME (LOSS) BEFORE MINORITY INTEREST IN OPERATING PARTNERSHIP 15,673 14,988 7,702 (1,499) 291 (114) Minority interest in Operating Partnership (2,689) (1,613) (559) - - - -------- -------- -------- ------- ------- ------- NET INCOME (LOSS) $ 12,984 $ 13,375 $ 7,143 $(1,499) $ 291 $ (114) -------- -------- -------- ------- ------- ------- -------- -------- -------- ------- ------- ------- OTHER INFORMATION: Total properties (end of period) 94 56 48 4 4 3 Total apartment units (end of period) 23,764 14,453 12,513 1,711 1,711 1,041 Units under management (end of period) 19,045 19,594 20,758 29,343 28,422 25,636 Net income per common share and common share equivalent $1.04 $0.86 $0.42 N/A N/A N/A Dividends paid per common share $1.70 $1.66 $0.29 N/A N/A N/A BALANCE SHEET DATA: Real estate, before accumulated depreciation $865,222 $477,162 $406,067 $47,500 $46,819 $30,789 Total assets 834,813 480,361 416,739 39,042 38,914 23,366 Total mortgages and notes payable 522,146 268,692 141,315 40,873 41,893 25,935 Mandatorily redeemable 1994 Cumulative Convertible Senior Preferred Stock - - 96,600 - - - Stockholders' equity 222,889 169,032 140,319 (9,345) (7,556) (7,003)
16 APARTMENT INVESTMENT AND MANAGEMENT COMPANY ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. OVERVIEW The Company is a real estate investment trust which holds a geographically diversified portfolio of apartments, primarily serving the middle market. As of December 31, 1996, the Company owned or controlled 94 multifamily apartment properties containing 23,764 apartment units. In addition to its Owned Properties, the Company managed 3,611 apartment units in 18 properties for affiliates and 15,434 apartment units in 119 properties for over 90 third party-owners, bringing the total managed portfolio to 231 multifamily apartment properties containing 42,809 apartment units located in the Sunbelt regions of the United States. The following discussion and analysis of the results of operations and financial condition of the Company should be read in conjunction with Item 8 of the Form 10-K included herein. RESULTS OF OPERATIONS COMPARISON OF THE YEAR ENDED DECEMBER 31, 1996 TO THE YEAR ENDED DECEMBER 31, 1995 The Company recognized net income of $12,984,000 for the year ended December 31, 1996 allocable to the holders of Class A Common Stock ("Common Stockholders"). For the year ended December 31, 1995, the Company recognized net income of $13,375,000, of which $5,169,000 was allocable to the holder of the mandatorily redeemable 1994 Cumulative Convertible Senior Preferred Stock ("Convertible Preferred Stock") and $8,206,000 was allocable to the Common Stockholders. The increase in net income allocable to the Common Stockholders in 1996 of 58% was primarily the result of the acquisition of forty-seven Owned Properties from December 1995 (acquired with the proceeds of a December 1995 public offering) to December 1996 offset by the sale of the Four Sold Properties. The increase in net 17 APARTMENT INVESTMENT AND MANAGEMENT COMPANY ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) income is partially offset by increased interest expense associated with debt which was incurred in June 1995 and September 1995 upon the redemption of the Convertible Preferred Stock, increased interest expense attributable to indebtedness assumed or incurred in connection with the acquisition of Owned Properties offset by decreased interest expense after the pay down of the Credit Facility with proceeds from the sale of the Four Sold Properties. These factors are discussed in more detail in the following paragraphs. RENTAL PROPERTY OPERATIONS Rental and other property revenues from the Company's apartment properties totaled $100,516,000 for the year ended December 31, 1996 consisting of $69,268,000 for the 42 "same store" properties, $3,363,000 for the four properties sold in July 1996, $1,956,000 for two properties owned in 1995 and 1996 but for which operations are not comparable and $25,929,000 for the 47 properties acquired from December 1995 to December 1996. Rental and other revenue for the 42 "same store" properties increased from $67,058,000 for the year ended December 31, 1995 to $69,268,000 for the year ended December 31, 1996, an increase of $2,210,000 or 3.3%. Average monthly rent per occupied unit for these 42 properties at December 31, 1996 and 1995 was $546 and $531, respectively, an increase of 2.8%. Weighted average physical occupancy for the 42 properties increased from 94.2% at December 31, 1995 to 94.9% at December 31, 1996, a 0.7% increase. Operating expenses, consisting of on-site payroll costs, utilities (net of reimbursements received from tenants), contract services, turnover costs, repairs and maintenance, advertising and marketing, property taxes and insurance totaled $38,400,000 for the year ended December 31, 1996, consisting of $26,103,000 for the 42 "same store" properties, $1,793,000 for the four sold properties, $852,000 for the two non-comparable properties and $9,652,000 for the 47 properties acquired from December 1995 to December 1996. Operating expenses for the 42 properties of $26,103,000 for the year ended December 31, 1996, compared to $25,615,000 for the same period in 1995, reflecting an increase of $488,000, or 1.9%, is due primarily to increases in utilities, marketing, turnover and real estate taxes offset by a decrease in payroll expense and insurance costs due to lower premiums. Owned property management expenses, representing the costs of managing the Company's Owned Properties, totaled $2,746,000 for the year ended December 31, 1996, consisting of $1,900,000 for the 42 "same store" properties, $127,000 for the Four Sold Properties, $41,000 for the two non-comparable properties and $678,000 for the properties purchased from December 1995 to December 1996. The owned property management expenses for the year ended December 31, 1995 totaled $2,276,000, consisting of $2,003,000 for the 42 "same store" properties, $230,000 for the Four Sold Properties and $43,000 for the two non-comparable properties. 18 APARTMENT INVESTMENT AND MANAGEMENT COMPANY ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) SERVICE COMPANY BUSINESS The Company's share of income from the service company business was $1,717,000 for the year ended December 31, 1996 compared to $1,973,000 for the year ended December 31, 1995. Management fees and other income totaled $8,367,000 for the year ended December 31, 1996 compared to $8,132,000 for the year ended December 31, 1995, reflecting an increase of $235,000, or 2.9%. Management and other expenses totaled $5,352,000 for the year ended December 31, 1996 compared to $4,953,000 for the year ended December 31, 1995, reflecting an increase of $399,000, or 8.1%. Major sources of revenue and expense before amortization of management company goodwill, corporate overhead allocations, depreciation and amortization and minority interest are described below. YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1996 1995 ------------ ------------ (in thousands) Properties managed for third parties and affiliates Management fees and other income $ 5,679 $ 4,878 Management and other expenses (4,405) (3,620) ------- ------- 1,274 1,258 ------- ------- Commercial asset management Management and other income 1,026 1,564 Management and other expenses (339) (562) ------- ------- 687 1,002 ------- ------- Reinsurance operations Revenues 1,267 1,193 Expenses (282) (432) ------- ------- 985 761 ------- ------- Brokerage and other Revenues 395 497 Expenses (326) (339) ------- ------- 69 158 ------- ------- $ 3,015 $ 3,179 ------- ------- ------- ------- 19 APARTMENT INVESTMENT AND MANAGEMENT COMPANY ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Net income from the management of properties for third parties and affiliates was $1,274,000 for the year ended December 31, 1996, compared to $1,258,000 for the year ended December 31, 1995, an increase of $16,000, or 1.3%. The increase in net income is primarily due to the acquisition by the Company of property management businesses in August and November 1996. For the year ended December 31, 1996, the Company had income of $997,000 and expenses of $415,000 attributable to the operations of these recently acquired property management businesses. The increase in net income due to these property management businesses acquired is partially offset by increased payroll costs. Net income from commercial asset management was $687,000 for the year ended December 31, 1996 compared to $1,002,000 for the same period in 1995, a decrease of $315,000, or 31.4%, as a result of a reduction in the number of commercial properties under management. The decline in revenues from commercial asset management for the year ended December 31, 1996 of $538,000, or 34.4%, from the year ended December 31, 1995, was partially offset by a decrease in related management and other expenses over the same periods of $223,000, or 39.7%, primarily due to a reduction in personnel. The asset management contracts expire on March 31, 1997. Net income from the reinsurance operations for the year ended December 31, 1996 increased by $224,000, or 29.4%, from the year ended December 31, 1995, due to increased premiums collected from a larger work force, improved loss experience and the closure of claims for less than the amounts previously reserved. GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses totaled $1,512,000 for the year ended December 31, 1996 compared to $1,804,000 for the same period in 1995. The amount presented for 1996 included $1,460,000 for payroll, overhead and other costs associated with operating a public company and $642,000 for payroll and other costs incurred in the development of new business offset by a corporate overhead allocation of $590,000 to the service company business. The amount presented for 1995 included $1,620,000 for payroll, overhead and other costs associated with operating a public company, and $765,000 for payroll and other costs incurred in the development of new business offset by a corporate overhead allocation of $581,000 to the service company business. The net decrease in general and administrative expenses for the year ended December 31, 1996 of $292,000, or 16.2%, from the year ended December 31, 1995 is attributable to fewer personnel and a decrease in state income taxes paid in 1996 as a result of the restructuring in early 1995. 20 APARTMENT INVESTMENT AND MANAGEMENT COMPANY ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) INTEREST EXPENSE Interest expense totaled $24,802,000 for the year ended December 31, 1996 compared to $13,322,000 for the year ended December 31, 1995. Interest expense, which includes amortization of deferred financing costs, for the year ended December 31, 1996 increased by $11,480,000, or 86.2% from the year ended December 31, 1995. The increase consists primarily of $5,693,000 in interest expense on secured long-term debt incurred in connection with refinancings completed in June 1995 and September 1995 to refinance certain secured notes payable, redeem the Convertible Preferred Stock and repurchase 513,514 unregistered shares of Class A Common Stock, and $5,532,000 in interest expense on long-term and short-term indebtedness incurred or assumed in connection with properties purchased from December 1995 to December 1996. Interest expense on secured tax-exempt bond financing increased by $993,000 or 13.5% due to an increase in interest rate on the $48,140,000 of tax-exempt bonds refinanced in June 1996 and the borrowing of $9,870,000 in June 1996 (proceeds of which were used to pay down the Company's Credit Facility). During the year ended December 31, 1996, the Company capitalized interest of $821,000 as a result of increased construction and renovation activities compared to $113,000 which was capitalized during the year ended December 31, 1995. Interest expense, amortization of deferred financing costs and unused commitment fees on the Credit Facility were $1,589,000 for the year ended December 31, 1996 compared to $1,598,000 for the year ended December 31, 1995. COMPARISON OF THE YEAR ENDED DECEMBER 31, 1995 TO THE PERIOD FROM JANUARY 10, 1994 (INCEPTION) THROUGH DECEMBER 31, 1994 The Company recognized net income of $13,375,000 for the year ended December 31, 1995 of which $5,169,000 was allocable to the holder of the Convertible Preferred Stock and $8,206,000 was allocable to the Common Stockholders. For the period from January 10, 1994 (inception) through December 31, 1994 the Company recognized net income of $7,143,000 of which $3,114,000 was allocable to the holder of the Convertible Preferred Stock and $4,029,000 was allocable to the Common Stockholders. The Company completed its initial public offering (the "IPO") on July 29, 1994 and while the AIMCO Predecessors advanced costs associated with the IPO during the period from the Company's formation on January 10, 1994 through July 28, 1994, the day prior to the Company's completion of its IPO, the Company did not pay for any costs associated with the IPO or incur any operating expenses during the period from January 10, 1994 to July 28, 1994. 21 APARTMENT INVESTMENT AND MANAGEMENT COMPANY ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RENTAL PROPERTY OPERATIONS Rental and other property revenues totaled $74,947,000 for the year ended December 31, 1995 compared to $24,894,000 for the period from July 29, 1994 (when the Company commenced operations as a public company following the IPO) to December 31, 1994. The revenues for the year ended December 31, 1995 include $55,924,000 for the 37 Owned Properties acquired or contributed in conjunction with the IPO compared to $23,163,000 for the same properties for the five month period of operations in 1994. For the eleven Owned Properties acquired during November and December 1994, the Company earned revenues of $18,507,000 for the year ended December 31, 1995 compared to $1,731,000 for the period of operations in 1994. In addition, the Company acquired eight Owned Properties in December 1995. Rental and other property revenues for these Owned Properties was $516,000. Operating expenses totaled $30,150,000 for the year ended December 31, 1995 compared to $10,330,000 for the five months of operations in 1994. The expenses include $23,225,000 for the initial 37 properties for the year ended December 31, 1995 compared to $9,709,000 for the period of operations in 1994. For the eleven Owned Properties acquired during November and December 1994, the Company incurred expenses of $6,707,000 for the year ended December 31, 1995 compared to $621,000 for the period of operations in 1994. Operating expenses for the eight Owned Properties acquired in December 1995 totaled $218,000. Owned property management expenses totaled $2,276,000 for the year ended December 31, 1995 compared to $711,000 for the period of operations in 1994. Weighted average physical occupancy during the year ended December 31, 1995 and the period from July 29, 1994 through December 31, 1994 was 94.4% and 95.1%, respectively. The average monthly rent per occupied unit was $505 and $489 per apartment unit, respectively, for the periods presented. 22 APARTMENT INVESTMENT AND MANAGEMENT COMPANY ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) SERVICE COMPANY BUSINESS The Company's share of income from the service company business was $1,973,000 for the year ended December 31, 1995 compared to $1,006,000 for the period from July 29, 1994 to December 31, 1994. Major sources of revenue and expense before amortization of management company goodwill, corporate overhead allocations, depreciation and amortization and minority interest are described below. JANUARY 10, 1994 (INCEPTION) YEAR ENDED THROUGH DECEMBER 31, DECEMBER 31, 1995 1994 ------------ ---------------- (IN THOUSANDS) Properties managed for third parties and affiliates Management fees and other income $ 4,878 $ 1,843 Management and other expenses (3,620) (1,398) ------- ------- 1,258 445 ------- ------- Commercial asset management Management fees and other income 1,564 714 Management and other expenses (562) (293) ------- ------- 1,002 421 ------- ------- Reinsurance operations Revenues 1,193 430 Expenses (432) (235) ------- ------- 761 195 ------- ------- Brokerage and other Revenues 497 230 Expenses (339) (121) ------- ------- 158 109 ------- ------- $ 3,179 $ 1,170 ------- ------- ------- ------- 23 APARTMENT INVESTMENT AND MANAGEMENT COMPANY ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) REIT GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses totaled $1,804,000 for the year ended December 31, 1995 compared to $977,000 for the period from July 29, 1994 to December 31, 1994. INTEREST EXPENSE Interest expense for the year ended December 31, 1995 totaled $13,322,000. The amount includes: (1) $1,427,000 of interest expense of secured notes payable assumed in conjunction with the acquisition of three properties at the IPO; (2) $5,292,000 of interest expense on the secured tax-exempt bond financing and secured notes payable assumed in conjunction with the acquisition of eleven Owned Properties in November and December 1994; (3) $5,118,000 of interest expense on June and September 1995 refinancings; and (4) $1,598,000 of interest expense on the Credit Facility. The Company capitalized $113,000 of interest expense in conjunction with the development, expansion and redevelopment of three Owned Properties. Interest expense of $1,576,000 for the five months ended December 31, 1994 includes: (1) $655,000 of interest expense on mortgages assumed in conjunction with the acquisition of three properties at the IPO; (2) $856,000 of interest expense on the secured tax-exempt bond financing, secured notes payable and borrowings under the Credit Facility incurred in conjunction with the acquisition of eleven Owned Properties in November and December; and (3) $65,000 of interest expense on an unsecured note payable incurred in conjunction with the IPO which was repaid in November 1994. LIQUIDITY AND CAPITAL RESOURCES At December 31, 1996, the Company had $13,170,000 in cash and cash equivalents and $15,831,000 of restricted cash primarily consisting of reserves and impounds held by lenders for capital expenditures, property taxes and insurance. The Company's principal demands for liquidity include normal operating activities, payments of principal and interest on outstanding debt, capital improvements, acquisitions of or investments in properties, dividends paid to its stockholders and distributions paid to minority limited partners in the Operating Partnership. The Company considers its cash provided by operating activities to be adequate to meet short-term liquidity demands. On August 13, 1996, the Company increased its Credit Facility to $50 million from $40 million, reduced its interest rate to LIBOR plus 1.625% from LIBOR plus 1.75% and reduced its unused commitment fee to 0.125% from 0.375%. Effective January 1, 1997, the Company further reduced its interest rate on the Credit Facility to LIBOR plus 1.45%. The Credit Facility has an initial term of two years and, subject to certain customary conditions, the outstanding balance may be converted to a three year term loan. The Company utilizes the Credit Facility for general corporate purposes and to fund investments on an interim basis. At December 31, 1996, $44,800,000 was borrowed under the Credit Facility. 24 APARTMENT INVESTMENT AND MANAGEMENT COMPANY ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) 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, units of limited partnership in the Operating Partnerships ("OP Units") or equity securities and cash generated from operations. On October 18, 1995, the Company filed a shelf registration statement with the Securities and Exchange Commission with respect to an aggregate of $200 million of debt and equity securities. As of March 1, 1997, the amount remaining available under the shelf registration was $64.7 million. The Company expects to finance the pending acquisition of the NHP common stock and other real estate interests, discussed previously in this report, with the issuance of equity securities and debt. As of December 31, 1996, the Company had outstanding indebtedness totaling $522.1 million including $242.1 million of secured long-term financing, $147.2 in secured short-term financing, $75.5 million of secured tax-exempt bonds, $12.5 million of unsecured short-term financing and $44.8 million outstanding under its Credit Facility. The Company's outstanding debt is secured by substantially all of the Company's Owned Properties. The weighted average interest rate on the Company's long-term secured tax-exempt financing and secured notes payable was 7.9% with a weighted average maturity of 10 years. The weighted average interest rate on the Company's secured short-term financing was 8.1%. Indebtedness of the English Partnerships totaling approximately $28.8 million is guaranteed in part by the Company and certain of its affiliates. This guaranty is secured by an assignment of the Company's general partnership interests in 12 of the English Partnerships. In 1997, the Company intends to refinance approximately $116 million in secured short-term, floating rate indebtedness with fixed rate, fully amortizing indebtedness with a maturity of twenty years. The Company entered into two anticipatory interest rate swap agreements in November and December 1996, aggregating $100 million in order to fix the interest rate on $100 million of its outstanding floating rate debt intended to be refinanced. The Company locked in the twelve year U.S. Treasury rate at 6.2% and 6.3%, respectively, in two separate $50 million transactions. In February 1997, the Company completed a public offering of 2,015,000 shares of common stock at $26.75 per share (including 15,000 shares subject to the underwriter's overallotment option). The net proceeds of $51.1 million were used to repay $38.1 million of secured and unsecured short-term indebtedness arising from the acquisitions completed in November and December 1996, $9.5 million was used to pay down the Company's Credit Facility and $3.5 million was used to provide working capital. 25 APARTMENT INVESTMENT AND MANAGEMENT COMPANY ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) CAPITAL EXPENDITURES For the year ended December 31, 1996, the Company spent $5.1 million for capital replacements, $6.2 million for initial capital expenditures and $0.9 million for capital enhancements. In addition, in the year ended December 31, 1996, the Company spent $6.8 million in costs related to the expansion and renovation of two Owned Properties. These expenditures were funded by borrowings under the Credit Facility, working capital reserves and net cash provided by operating activities. For the year ending December 31, 1997, the Company will provide an allowance for capital replacements of $300 per apartment unit per annum, plus a reserve of $586,000 carried over for amounts not expended during the year ended December 31, 1996 for a total of $6.7 million. In addition, the Company expects to spend initial capital expenditures of approximately $15.5 million (including expansion and renovation costs of $7.0 million) and approximately $3.8 million of capital enhancements (including $2.5 million for cable television equipment at certain Owned Properties) during the year ended December 31, 1997. Initial capital expenditures and capital enhancements will be funded by cash from operating activities and borrowings under the Credit Facility. The Company's accounting treatment of various capital and maintenance costs is detailed in the following table: ACCOUNTING DEPRECIABLE EXPENDITURE TREATMENT LIFE IN YEARS - ----------- ---------- ------------- Initial capital expenditures (costs identified at the time of acquisition to be spent within one year of acquisition) capitalize 5 to 30 Capital enhancements (amenities to add a material new feature or revenue source) capitalize 5 to 30 Carpet/vinyl replacement capitalize 5 Carpet cleaning expense n/a Major appliance replacement (refrigerators, stoves, dishwashers, washers/dryers) capitalize 5 Cabinet replacement capitalize 5 Major new landscaping capitalize 15 Seasonal plantings and landscape replacements expense n/a Roof replacements capitalize 15 Roof repairs expense n/a Model furniture capitalize 5 Office equipment capitalize 5 Exterior painting, significant capitalize 10 Interior painting expense n/a Parking lot repairs expense n/a Parking lot repaving capitalize 15 Equipment repairs expense n/a General policy for capitalization capitalize various amounts in excess of $250 26 APARTMENT INVESTMENT AND MANAGEMENT COMPANY ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) FUNDS FROM OPERATIONS AND CASH EARNED FOR SHAREHOLDERS The Company measures its economic profitability based on Funds From Operations ("FFO") less a minimum annual provision for capital replacements of $300 per apartment unit, which the Company defines as Cash Earned For Shareholders ("CEFS"). FFO represents income before minority interest and gain on sale of real estate based on generally accepted accounting principles plus real estate depreciation and amortization of management company goodwill less any preferred stock dividend payments. FFO computations conform to the National Association of Real Estate Investment Trusts' ("NAREIT") definition adjusted to add back amortization of management company goodwill and deduct payment of dividends on preferred stock. FFO and CEFS do not represent cash generated from operating activities in accordance with generally accepted accounting principles and therefore should not be considered an alternative to net income as an indication of the Company's performance or to net cash flows from operating activities as determined by generally accepted accounting principles as a measure of liquidity and is not necessarily indicative of cash available to fund future cash needs. For the years ended December 31, 1996 and 1995, FFO and CEFS are as follows (amounts in thousands): YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1996 1995 ------------ ------------ Income before gain on disposition of property and minority interest in Operating Partnership $15,629 $14,988 Owned properties depreciation 19,056 15,038 Amortization of management company goodwill 500 428 Preferred stock dividend - (5,169) ------- ------- Funds From Operations (FFO) 35,185 25,285 Capital Replacements (4,617) (3,764) ------- ------- Cash Earned For Shareholders (CEFS) $30,568 $21,521 ------- ------- ------- ------- Weighted average common shares, common share equivalents and OP Units 14,994 11,461 ------- ------- ------- ------- 27 APARTMENT INVESTMENT AND MANAGEMENT COMPANY ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) CONTINGENCIES Certain of the Company's Owned Properties are, and some of the Managed Properties may be, located on or near properties that have contained underground storage tanks or on which activities have occurred which could have released hazardous substances into the soil or groundwater. There can be no assurances that such hazardous substances have not been released or have not migrated, or in the future will not be released or will not migrate onto the properties. In addition, the Company's Montecito property in Austin, Texas, is located adjacent to, and may be partially on, land that was used as a landfill. Low levels of methane and other landfill gas have been detected at Montecito. The remediation of the landfill gas is now substantially complete. The environmental authorities have preliminarily approved the methane gas remediation efforts. Final approval of the site and the remediation process is contingent upon the results of continued methane gas monitors to confirm the effectiveness of the remediation efforts. Should further actionable levels of methane gas be detected, a proposed contingent plan of passive methane gas venting may be implemented. The Company believes the costs of such further limited action, if any, will not be material. Testing has also been conducted on Montecito to determine whether, and to what extent, groundwater has been impacted. Test reports have indicated that the groundwater is not contaminated at actionable levels. 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. 28 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The independent auditor's reports, consolidated and combined financial statements and schedules listed in the accompanying index are filed as part of this report and incorporated herein by 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 the Company's proxy statement for its 1997 annual meeting of stockholders and is incorporated herein by reference. The Executive Officers of the Company as of March 11, 1997 are: NAME AGE POSITION WITH THE COMPANY - ---- --- ------------------------- Terry Considine 49 Chairman of the Board of Directors, President and Chief Executive Officer Peter K. Kompaniez 52 Vice Chairman and Director Steven D. Ira 47 Executive Vice President - Start Robert P. Lacy 46 Executive Vice President Thomas W. Toomey 36 Executive Vice President - Finance and Administration David L. Williams 51 Executive Vice President-Property Operations Leeann Morein 42 Senior Vice President, Chief Financial Officer and Secretary Patricia K. Heath 42 Vice President and Chief Accounting Officer Harry Alcock 33 Vice President-Acquisitions TERRY CONSIDINE. Mr. Considine has been Chairman of the Board of Directors, President and Chief Executive Officer of the Company since July 1994. He is the sole owner of Considine Investment Co. and prior to the IPO was an owner of approximately 75% of Property Asset Management, one of the AIMCO Predecessors. Mr. Considine has been 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 and a J.D. from Harvard Law School. He served as a Colorado State Senator from 1987 to 1992 and in 1992 was the Republican nominee for election to the United States Senate from Colorado. PETER K. KOMPANIEZ. Mr. Kompaniez has been Vice Chairman and a Director of the Company since July 1994. Since September 1993, Mr. Kompaniez has owned 75% of PDI Realty Enterprises, Inc. ("PDI"), one of the AIMCO 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 apartment units that have been acquired by the Company) 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). 29 STEVEN D. IRA. Mr. Ira has served as Executive Vice President of the Company since July 1994. From 1987 until July 1994, he served as President of Property Asset Management ("PAM"). Prior to merging his firm with PAM in 1987, Mr. Ira acquired extensive experience in property management. Between 1977 and 1981, he supervised the property management of over 3,000 apartment and mobile home units in Colorado, Michigan, Pennsylvania and Florida, and in 1981 he joined with others to form the property management firm of McDermott, Stein and Ira. Mr. Ira served for several years on the National Apartment Manager Accreditation Board and is the 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 53-year history. He holds a Certified Apartment Property Supervisor (CAPS) designation from the National Apartment Association, a Certified Property Manager (CPM) designation from the National Institute of Real Estate Management (IREM) and he is a member of the Board of Directors of the National Multi-Housing Council, National Apartment Association and Apartment Association of Metro Denver. Mr. Ira received a B.S. from Metropolitan State College in 1973. ROBERT P. LACY. Mr. Lacy has served as Executive Vice President of the Company since July 1994. From September 1993, Mr. Lacy has owned 25% of PDI and served as Executive Vice President and Chief Operating Officer of PDI. From 1990 to 1993, Mr. Lacy served as Executive Vice President of Income Producing Properties for HFC. In that capacity he was responsible for all improved real estate in HFC's portfolio, including 8,150 apartment units (6,217 were acquired by the Company) and over 3.1 million square feet of commercial real estate. From 1985 to 1990, Mr. Lacy served in various capacities with the Birtcher Group of Companies, initially as Executive Vice President and Chief Operating Officer of Birtcher Properties, where he managed public and private partnership properties nationwide. Subsequently, Mr. Lacy participated in the formation of Birtcher Financial Services and eventually became Managing General Partner of that entity, where he provided portfolio work-out services to the banking and thrift industries and successfully resolved over $500 million in real estate loans and properties. Mr. Lacy received a B.A. in Business Administration from California State University at Fullerton in 1973, holds a CPM designation from IREM and is a California Real Estate Broker. DAVID L. WILLIAMS. Mr. Williams has been Executive Vice President-Property Operations of the Company since January 1997. Prior to joining the Company, Mr. Williams was Senior Vice President of Operations at Evans Withycombe Residential, Inc. from January 1996 to January 1997. Previously, he was Executive Vice President at Equity Residential Properties Trust from October 1989 to December 1995. He has served on National Multi-Housing Council Boards and NAREIT committees. Mr. Williams also served as Senior Vice President of Operations and Acquisitions of US Shelter Corporation from 1983 to 1989. Mr. Williams has been involved in the property management, development and acquisition of real estate properties since 1973. Mr. Williams received a B.A. in education and administration from the University of Washington in 1967. THOMAS W. TOOMEY. Mr. Toomey has served as Senior Vice President - Finance and Administration of the Company since January 1996 and was promoted to Executive Vice President in March 1997. From 1990 until 1995, Mr. Toomey served in a similar capacity with Lincoln Property Company ("LPC") as Vice President/Senior Controller and Director of Administrative Services of Lincoln Property Services where he was responsible for LPC's computer systems, accounting, tax, treasury services and benefits administration. From 1984 to 1990, he was an audit manager with Arthur Andersen & Co. where he served real estate and banking clients. From 1981 to 1983, Mr. Toomey was on the audit staff of Kenneth Leventhal & Company. Mr. Toomey received a B.S. in Business Administration/Finance from Oregon State University and is a Certified Public Accountant. 30 LEEANN MOREIN. Ms. Morein has served as Senior Vice President, Chief Financial Officer and Secretary of the Company since July 1994. From September 1990 to March 1994, Ms. Morein served as Chief Financial Officer of the real estate subsidiaries of California Federal Bank, including the general partner of CF Income Partners, L.P., a publicly traded master limited partnership. Ms. Morein joined California Federal in September 1988 as Director of Real Estate Syndications Accounting and became Vice President - Financial Administration in January 1990. From 1983 to 1988, Ms. Morein was Controller of Storage Equities, Inc., a real estate investment trust, and from 1981 to 1983, she was Director of Corporate Accounting for Angeles Corporation, a real estate syndication firm. Ms. Morein worked on the audit staff of Price Waterhouse from 1979 to 1981. Ms. Morein received a B.A. from Pomona College and is a Certified Public Accountant. PATRICIA K. HEATH. Ms. Heath has served as Vice President and Chief Accounting Officer of the Company since July 1994. From 1992 to July 1994, Ms. Heath served as Manager of Accounting, then Chief Financial Officer, of HFC, and effective September 1993, as Chief Financial Officer of PDI. She had responsibility for all internal and external financial reporting, cash management and budgeting for HFC, its subsidiaries, related joint ventures and partnerships and for PDI. Ms. Heath served as Controller for the real estate investment, development and syndication firms of Guilford Glazer & Associates from 1990 to 1992, Ginarra Holdings, Inc. from 1984 to 1990, and Fox & Carskadon Financial Corporation from 1980 to 1983. Ms. Heath worked from 1978 to 1980 as an auditor with Deloitte, Haskins and Sells. She received her B.S. in Business from California State University at Chico and is a Certified Public Accountant. HARRY G. ALCOCK. Mr. Alcock has worked for the Company since July 1994 and has served as Vice President since July 1996, with responsibility for acquisition and financing activities. From 1992 until July 1994, Mr. Alcock served as Senior Financial Analyst for PDI and HFC. 6,217 of HFC's apartment units were acquired by the Company. From 1988 to 1992, Mr. Alcock worked for Larwin Development Corp., a 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. Information required by this item is presented under the caption "Other Matters - Section 16(a) Compliance" in the Company's proxy statement for its 1997 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 the Company's proxy statement for its 1997 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 the Company's proxy statement for its 1997 annual meeting of stockholders and is incorporated herein by reference. 31 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is presented under the caption "Certain Relationships and Transactions" in the Company's proxy statement for its 1997 annual meeting of stockholders and is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a)(1) The financial statements listed in the Index to Financial Statements on Page F-1 of this report are filed as part of this report. (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. (a)(3) The Exhibit Index is included on page 32 of this report. (b) Reports on Form 8-K for the quarter ended December 31, 1996: Current Report on Form 8-K, dated November 21, 1996 and Amendment No.1 thereto. Current Report on Form 8-K, dated December 19, 1996. ___________________________________ 32 EXHIBIT INDEX (1) EXHIBIT NO. DESCRIPTION 3.1 Restated Articles of Incorporation of the Company (2) 3.2 Bylaws of the Company (2) 10.1 Letter agreement dated July 20, 1995 between AIMCO and Financial Security Assurance Inc. re: redemption of AIMCO preferred stock and related matters (4) 10.2 Letter agreement dated July 20, 1995 between AIMCO and Financial Security Assurance Inc. re: release from certain obligations under November 29, 1994 letter agreement (4) 10.3 Multifamily Note, dated as of June l, 1995, by AIMCO/Brandywine, L.P. in favor of GMAC Commercial Mortgage Corporation in the amount of $2,467,318 (Paradise Palms Apartments, Phoenix, Arizona) (3) 10.4 Addendum to Multifamily Note, dated as of June 1, 1995, by AIMCO/Brandywine, L.P. in favor of GMAC Commercial Mortgage Corporation (Paradise Palms Apartments, Phoenix, Arizona) (3) 10.5 Supplemental Addendum to Multifamily Note, dated as of June 1, 1995, by AIMCO/Brandywine, L.P. in favor of GMAC Commercial Mortgage Corporation (Paradise Palms Apartments, Phoenix, Arizona) (3) 10.6 Multifamily Deed of Trust, Assignment of Rents and Security Agreement, dated as of June 1, 1995, by and among AIMCO/Brandywine, L.P., the Trustee named therein and GMAC Commercial Mortgage Corporation (Paradise Palms Apartments, Phoenix, Arizona) (3) 10.7 Rider to Multifamily Instrument, dated as of June l, 1995, by AIMCO/Brandywine, L.P. (Paradise Palms Apartments, Phoenix, Arizona)(3) 10.8 Supplemental Rider to Multifamily Instrument, dated as of June 1, 1995, by AIMCO/Brandywine, L.P. (Paradise Palms Apartments, Phoenix, Arizona) (3) 33 EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.9 Exceptions to Non-Recourse Guaranty, dated as of June 1, 1995, by Apartment Investment and Management Company and AIMCO Properties, L.P. (Paradise Palms Apartments, Phoenix, Arizona) (3) 10.10 Replacement Reserve and Security Agreement, dated as of June 1, 1995, by AIMCO/Brandywine, L.P. and GMAC Commercial Mortgage Corporation (Paradise Palms Apartments, Phoenix, Arizona) (3) 10.11 Completion/Repair and Security Agreement, dated as of June 1, 1995, by AIMCO/Brandywine, L.P. and GMAC Commercial Mortgage Corporation (Paradise Palms Apartments, Phoenix, Arizona) (3) 10.12 Assignment of Management Agreement, dated as of June 1, 1995, by and among AIMCO/Brandywine, L.P., GMAC Commercial Mortgage Corporation and the Manager named therein (Paradise Palms Apartments, Phoenix, Arizona)(3) 10.13 Multifamily Note, dated as of September 1, 1995, by AIMCO Properties Finance Partnership, L.P. in favor of GMAC Commercial Mortgage Corporation in the amount of $4,587,281 (Spectrum Pointe Apartments, Marietta, Georgia) (5) 10.14 Addendum to Multifamily Note, dated as of September 1, 1995, by AIMCO Properties Finance Partnership, L.P. in favor of GMAC Commercial Mortgage Corporation (Spectrum Pointe Apartments, Marietta, Georgia) (5) 10.15 Supplemental Addendum to Multifamily Note, dated as of September 1, 1995, by AIMCO Properties Finance Partnership, L.P. in favor of GMAC Commercial Mortgage Corporation (Spectrum Pointe Apartments, Marietta, Georgia) (5) 10.16 Multifamily Deed to Secure Debt, Assignment of Rents and Security Agreement, dated as of September 1, 1995, by AIMCO Properties Finance Partnership, L.P. (Spectrum Pointe Apartments, Marietta, Georgia) (5) 10.17 Rider to Multifamily Instrument, dated as of September 1, 1995, by AIMCO Properties Finance Partnership, L.P. (Spectrum Pointe Apartments, Marietta, Georgia) (5) 34 EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.18 Supplemental Rider to Multifamily Instrument, dated as of September 1, 1995, by AIMCO Properties Finance Partnership, L.P. (Spectrum Pointe Apartments, Marietta, Georgia) (5) 10.19 Exceptions to Non-Recourse Guaranty, dated as of September 1, 1995, by Apartment Investment and Management Company and AIMCO Properties Finance Partnership, L.P (Spectrum Pointe Apartments, Marietta, Georgia) (5) 10.20 Replacement Reserve and Security Agreement, dated as of September 1, 1995, by AIMCO Properties Finance Partnership, L.P. and GMAC Commercial Mortgage Corporation (Spectrum Pointe Apartments, Marietta, Georgia) (5) 10.21 Completion/Repair and Security Agreement, dated as of September 1, 1995, by AIMCO Properties Finance Partnership, L.P. and GMAC Commercial Mortgage Corporation (Spectrum Pointe Apartments, Marietta, Georgia) (5) 10.22 Assignment of Management Agreement, dated as of September l, 1995, by and among AIMCO Properties Finance Partnership, L.P., GMAC Commercial Mortgage Corporation and the Manager named therein (Spectrum Pointe Apartments, Marietta, Georgia) (5) 10.23 Property Contribution Agreement, dated as of June 30, 1995, by the Company and Centennial Mortgage, Inc. ("Centennial") (5) 10.24 Option Agreement, dated as of August 2, 1995, by the Company and Centennial (5) 10.25 First Amendment to Property Contribution Agreement, dated as of August 2, 1995, by the Company and Centennial (5) 10.26 Purchase and Sale Agreement, dated as of October 9, 1995, by AIMCO Properties, L.P. and Villa Ladera Associates, Ltd. (5) 10.27 Amendment to and Restatement of Agreement to Contribute Partnership Interests, dated as of October 20, 1995, by and among SKG Holding Corp., Joel Kagan, Herbert M. Scheuer, Jr., Michael S. Goldner, AIMCO/Properties, L.P. and AIMCO/Holdings, L.P. (5) 10.28 Purchase and Sale Agreement, dated as of October 23, 1995, by Tamarac Apartments Joint Venture and the Company (5) 35 EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.29 Purchase and Sale Agreement (with Escrow Instructions) by AIMCO/Properties, L.P. and Foundation for Social Resources, Inc. (5) 10.30 Agreement of Purchase and Sale, dated as of December 27, 1995, by and among General Electric Credit Equities, Inc., AIMCO/RALS, L.P. and Stewart Title Guarantee Company (6) 10.31 Contribution Agreement, dated as of December 27, 1995, by and among AIMCO/Properties, L.P., Home Ventures Associates I, Ltd. and Home Ventures Associates II, Ltd. (6) 10.32 Agreement of Purchase and Sale, dated as of December 27, 1995, by and among Riverwa1k Village Associates, L.P., AIMCO/AIMCO/RALS, L.P. and Stewart Title Guarantee Company (6) 10.33 Assignment of Management Agreement, dated as of December 29, 1995, by and among AIMCO/RALS, L.P., GMAC Commercial Mortgage Corporation and the Manager named therein (Ashford Plantation Apartments, Dekalb County, Georgia)(6) 10.34 Guaranty and Surety Agreement, dated as of December 29, 1995, by Apartment Investment and Management Company in favor of GMAC Commercial Mortgage Corporation (Ashford Plantation Apartments, Dekalb County, Georgia) (6) 10.35 Multifamily Note, dated as of December 29, 1995, by AIMCO/RALS, L.P. in favor of GMAC Commercial Mortgage Corporation in the amount of $6,800,000 (Ashford Plantation Apartments, Dekalb County, Georgia)(6) 10.36 Multifamily Deed to Secure Debt, Assignment of Rents and Security Agreement, dated as of December 29, 1995, by AIMCO/RALS, L.P. and GMAC Commercial Mortgage Corporation (Ashford Plantation Apartments, Dekalb County, Georgia)(6) 10.37 Rider to Multifamily Instrument, dated as of December 29, 1995, by AIMCO/RALS, L.P. (Ashford Plantation Apartments, Dekalb County, Georgia) (6) 10.38 Supplemental Rider to Multifamily Instrument, dated as of December 29, 1995, by AIMCO/RALS, L.P. (Ashford Plantation Apartments, Dekalb County, Georgia)(6) 36 EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.39 Replacement Reserve and Security Agreement, dated as of December 29, 1995, by AIMCO/RALS, L.P. and GMAC Commercial Mortgage Corporation (Ashford Plantation Apartments, Dekalb County, Georgia)(6) 10.40 Completion/Repair and Security Agreement, dated as of December 29, 1995, by AIMCO/RALS, L.P. and GMAC Commercial Mortgage Corporation (Ashford Plantation Apartments, Dekalb County, Georgia)(6) 10.41 Note, dated as of December 29, 1995, by AIMCO/Boardwalk Finance, L.P. in favor of GMAC Commercial Mortgage Corporation in the amount of $6,200,000 (6) 10.42 Guaranty and Surety Agreement, dated as of December 29, 1995, by Apartment Investment and Management Company in favor of GMAC Commercial Mortgage Corporation (6) 10.43 Pledge and Security Agreement, dated as of December 29, 1995, by AIMCO/Boardwalk Finance, L.P. and GMAC Commercial Mortgage Corporation (6) 10.44 Contribution Agreement and Joint Escrow Instructions, dated as of January 1, 1996, by and between AIMCO Properties, L.P. and Peachtree Park 94, L.P. (7) 10.45 Acquisition Agreement, dated as of April 30, 1996, by and among the Company, AIMCO Somerset, Inc., AIMCO Properties, L.P., Somerset REIT, Inc., RJ Holdings, Ltd., Somerset PAM Partnership and RJ Equities, Inc. (8) 10.46 Shareholder Registration Rights Agreement, dated as of May 31, 1996, by and between the Company and Somerset REIT, Inc. (8) 10.47 Unitholder Registration Rights Agreement, dated as of May 20, 1996, by and among the Company and the investors listed on Schedule A thereto (8) 10.48 Amended and Restated Promissory Note, dated September 1, 1993, in the original principal amount of $13,200,000 by Somerset Utah, L.P. in favor of Branzos Partners, L.P. (8) 10.49 Acquisition and Contribution Agreement and Joint Escrow Instructions, dated as of April 19, 1996 by and among the Company, AIMCO Properties, L.P. and Thoner-Pankey (8) 37 EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.50 Registration Agreement, dated as of April 19, 1996, by among the Company and the investors listed on Schedule A thereto (OP Units) (8) 10.51 Registration Agreement, dated as of April 19, 1996, by and among the Company and the investors listed on Schedule A thereto (Class A Common Stock) (8) 10.52 Credit Agreement, dated as of August 12, 1996, by and among AIMCO Properties, L.P., the banks from time to time party to this Agreement, Bank of America National Trust and Savings Association, as one of the Banks, and Bank of America National Trust and Savings Association, as Agent (9) 10.53 Promissory Note, dated as of August 12, 1996, by AIMCO Properties, L.P., in favor of Bank of America National Trust and Savings Association (9) 10.54 Payment Guaranty, dated as of August 12, 1996, by the Company, AIMCO-GP, Inc., AIMCO-LP, Inc., AIMCO Holdings, L.P., AIMCO Holdings QRS, Inc., AIMCO Somerset, Inc. and AIMCO/OTC QRS, Inc. in favor of Bank of America National Trust and Savings Association, as the agent (9) 10.55 Credit Agreement (BRIDGE LOAN) entered into as of August 12, 1996, among AIMCO Properties, L.P., the National Trust and Savings Association and Bank of America National Trust and Savings Association, as Agent (9) 10.56 Promissory Note by AIMCO Properties, L.P. in favor of Bank of America National Trust and Savings Association (9) 10.57 Payment Guaranty dated as of August 12, 1996, by the Company, AIMCO-GP, Inc., AIMCO-LP, Inc., AIMCO Holdings, L.P., AIMCO Holdings QRS, Inc., AIMCO Somerset, Inc. and AIMCO/OTC QRS, Inc., in favor of Bank of America National Trust and Savings Association (9) 10.58 Acquisition Agreement, dated as of July 26, 1995, among the Company, AIMCO Properties, L.P., AIMCO/PAM Properties, L.P., John W. English, J.W. English Real Estate, Inc., J.W. English Development Co., J.W. English Investments Co., J.W. English Management Co., Easton Falls Partners, Ltd. and English Income Fund I, a Texas Limited Partnership (9) 38 EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.59 Apartment Investment and Management Company Non-Qualified Employee Stock Option Plan, adopted August 29, 1996 (10) (11) 10.60 Registration Rights Agreement, dated as of September 30, 1996, among the Company and the persons listed on Schedule A hereto 10.61 Registration Rights Agreement, dated as of October 9, 1996, among the Company and the persons listed on Schedule A hereto 10.62 Unitholder Registration Rights Agreement, dated as of November 7, 1996, among the Company and the persons listed on Schedule A hereto 10.63 Guaranty Agreement, dated as of November 12, 1996, by the Company, in favor of Bank United 10.64 Amendment and Modification of Promissory Note and Deed of Trust, dated as of December 26, 1996, between Township at Highlands Partners, Ltd. and Bank United 10.65 Registration Rights Agreement, dated as of December 27, 1996, among the Company and the persons listed on Schedule A thereto 10.66 Promissory Note, dated as of December 27, 1996, by Hastings Place Partners, payable to NationsBank of Texas, N.A., in the original principal amount of $3,258,000.00 10.67 Deed of Trust, Assignment, Security Agreement and Financing Statement, dated as of December 27, 1996, by Hastings Place Partners, for the benefit of NationsBank of Texas, N.A. 10.68 Guaranty Agreement, dated as of December 27, 1996, by the Company, AIMCO Properties, L.P., AIMCO-GP, Inc., AIMCO-L.P., Inc., AIMCO Holdings, L.P. and AIMCO Holdings QRS, Inc., in favor of NationsBank of Texas, N.A. 10.69 Security Agreement, dated as of December 27, 1996, among AIMCO Properties, L.P., AIMCO Copperfield, L.P., AIMCO Crows Nest, L.P., AIMCO Group, L.P., AIMCO Hampton Hill, L.P., AIMCO Hastings Place, L.P., AIMCO Oak Falls, L.P., AIMCO Recovery Fund, L.P., AIMCO Signature Point, L.P., AIMCO Sunbury, L.P., AIMCO West Trails, L.P. and NationsBank of Texas, N.A. 39 EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.70 Apartment Investment and Management Company 1996 Stock Award and Incentive Plan, adopted April 25, 1996 (11) 10.71 Amended and Restated Note, dated as of December 2, 1996, between AIMCO LT, L.P. and GMAC Commercial Mortgage Corporation in the amount of $25,615,200.00 10.72 Amended and Restated General Partner Pledge and Security Agreement, dated as of December 2, 1996, between AIMCO LT, L.P. and GMAC Commercial Mortgage Corporation 10.73 General Partner Pledge and Security Agreement, dated as of December 2, 1996, by AIMCO LT, L.P. as general partner of Meadows Limited Partnership in favor of GMAC Commercial Mortgage Corporation relating to a loan in the amount of $2,488,400.00 (Meadows at Anderson Mill Apartments in Austin, Texas) 10.74 Multifamily Deed of Trust, Assignment of Rents and Security Agreement, dated as of December 2, 1996, among Meadows Limited Partnership, Jay C. Paxton and GMAC Commercial Mortgage Corporation 10.75 Rider to Multifamily Instrument, dated as of December 2, 1996, by Meadows Limited Partnership 10.76 Supplemental Rider to Multifamily Instrument, dated as of December 2, 1996, by Meadows Limited Partnership 10.77 Exceptions to Non-Recourse Guaranty, dated as of December 2, 1996, between Meadows Limited Partnership and GMAC Commercial Mortgage Corporation 10.78 Multifamily Note, dated as of December 2, 1996, by Meadows Limited Partnership in favor of GMAC Commercial Mortgage Corporation in the amount of $2,488,400.00 10.79 Master Reimbursement Agreement, dated as of July 1, 1996, between Federal National Mortgage Association and OTC Apartments Limited Partnership 40 EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.80 Cash Management, Security, Pledge and Assignment Agreement, dated as of July 1, 1996, among OTC Apartments Limited Partnership, Federal National Mortgage Association and GMAC Commercial Mortgage Corporation 10.81 Payment Guaranty, dated as of July 1, 1996, by the Company in favor of Federal National Mortgage Association 10.82 Payment Guaranty, dated as of July 1, 1996, by AIMCO Properties, L.P. in favor of Federal National Mortgage Association 10.83 Amended and Restated Pledge and Security Agreement, dated as of December 2, 1996, between AIMCO LT, L.P. and GMAC Commercial Mortgage Corporation 10.84 Multifamily First Mortgage, Assignment of Rents and Security Agreement, dated as of July 1, 1996, between OTC Apartments Limited Partnership and Housing Finance Authority of Broward County, Florida 10.85 Rider to Multifamily Instrument, dated as of July 1, 1996, by OTC Apartments Limited Partnership 10.86 Special Rider to Multifamily Instrument, dated as of July 1, 1996, by OTC Apartments Limited Partnership 10.87 Multifamily Second Mortgage, Assignment of Rents and Security Agreement, dated as of July 1, 1996, between OTC Apartments Limited Partnership and Federal National Mortgage Association 10.88 Rider to Multifamily Instrument, dated as of July 1, 1996, by OTC Apartments Limited Partnership 10.89 Special Rider to Multifamily Instrument, dated as of July 1, 1996, by OTC Apartments Limited Partnership 10.90 Financing Agreement, dated as of June 15, 1996, among Housing Finance Authority of Broward County, Florida, The Bank of New York and OTC Apartments Limited Partnership 10.91 Multifamily Note, dated as of July 1, 1996, by OTC Apartments Limited Partnership in favor of Housing Finance Authority of Broward County, Florida in the amount of $9,870,000.00 41 EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.92 Addendum to Multifamily Note, dated as of July 1, 1996, by OTC Apartments Limited Partnership in favor of Housing Finance Authority of Broward County, Florida 10.93 Supplemental Addendum to Multifamily Note, dated as of July 1, 1996, by OTC Apartments Limited Partnership in favor of Housing Finance Authority of Broward County, Florida 10.94 Multifamily Mortgage, Assignment of Rents and Security Agreement, dated as of August 1, 1996, between OTC Apartments Limited Partnership and The Bank of New York 10.95 Rider to Multifamily Instrument, dated as of August 1, 1996, between OTC Apartments Limited Partnership and The Bank of New York 10.96 Special Rider to Multifamily Instrument, dated as of August 1, 1996, between OTC Apartments Limited Partnership and The Bank of New York 10.97 Multifamily Mortgage, Assignment of Rents and Security Agreement, dated as of August 1, 1996, between OTC Apartments Limited Partnership and Federal National Mortgage Association 10.98 Rider to Multifamily Instrument, dated as of August 1, 1996, between OTC Apartments Limited Partnership and Federal National Mortgage Association 10.99 Special Rider to Multifamily Instrument, dated as of August 1, 1996, between OTC Apartments Limited Partnership and Federal National Mortgage Association 10.100 Multifamily Deed of Trust, Assignment of Rents and Security Agreement, dated as of July 1, 1996, among OTC Apartments Limited Partnership, the Public Trustee of Jefferson County and Federal National Mortgage Association (Village Creek Apartments) 10.101 Rider to Multifamily Instrument, dated as of July 1, 1996, among OTC Apartments Limited Partnership, the Public Trustee of Jefferson County and Federal National Mortgage Association (Village Creek Apartments) 42 EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.102 Special Rider to Multifamily Instrument, dated as of July 1, 1996, among OTC Apartments Limited Partnership, the Public Trustee of Jefferson County and Federal National Mortgage Association (Village Creek Apartments) 10.103 Amended and Restated Loan Agreement, as Most Recently Amended and Restated, dated as of June 1, 1991 and most recently amended and restated as of July 1, 1996, among the State Agency, OTC Apartments Limited Partnership and SunTrust Bank, Central Florida, N.A., relating to those certain $48,140,000.00 Florida Housing Finance Agency Multi-Family Housing Revenue Refunding Bonds, 1991 Series C (Players Club at Tampa, Suntree at East Bay, Suntree at Orlando, Players Club at Magnolia Bay and Players Club at East Bay Projects) 10.104 Summary of Arrangement for Sale of Stock to Executive Officers (11) 10.105 Employment Contract executed on July 29, 1994 by and between AIMCO Properties, L.P. and Peter Kompaniez (2) (11) 10.106 Employment Contract executed on July 29, 1994 by and between AIMCO Properties, L.P. and Robert P. Lacy (2) (11) 10.107 Employment Contract executed on July 29, 1994 by and between AIMCO Properties, L.P. and Terry Considine (2) (11) 10.108 Employment Contract executed on July 29, 1994 by and between AIMCO Properties, L.P. and Steven D. Ira (2) (11) 21.1 List of Subsidiaries 23.1 Consent of Ernst & Young LLP 27.1 Financial Data Schedule - ------------------- (1) Schedules and supplemental materials to the exhibits have been omitted but will be provided to the SEC upon request. (2) Incorporated by reference from the Company's Annual Report on Form 10-K for fiscal year 1994. (3) Incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarterly period ending June 30, 1995. 43 (4) Incorporated by reference from the Company's Current Report on Form 8-K dated July 20, 1995. (5) Incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarterly period ending September 30, 1995. (6) Incorporated by reference from the Company's Current Report on Form 8-K dated December 29, 1995. (7) Incorporated by reference from the Company's Current Report on Form 8-K dated January 1, 1996. (8) Incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarterly period ending June 30, 1996. (9) Incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarterly period ending September 30, 1996. (10) Incorporated by reference from the Company's Quarterly Report on Form 10-Q/A for the quarterly period ending September 30, 1996. (11) Management contract or compensatory plan or arrangement. 44 SCHEDULE 1 Documents substantially identical to Exhibits 10.3 through 10.12, except as to the loan amount and the subject property, have been omitted in reliance on Rule 12b-31 under the Securities Exchange Act of 1934, as amended. Set forth below are the material details in which such documents differ from Exhibits 10.3 through 10.12. SUBJECT PROPERTY LOAN AMOUNT ---------------- ----------- 1. Brandywine Apartments $ 6,955,768 St. Petersburg, Florida 2. Meadow Creek Apartments $ 8,376,699 Boulder, Colorado 3. Riverside Apartments $ 6,387,619 Littleton, Colorado 4. Chimney Ridge Apartments $ 2,033,570 Dallas, Texas 5. Williams Cove Apartments $ 4,149,900 Irving, Texas 6. Frankford Place Apartments $ 4,229,425 Carrollton, Texas 7. Meadowbrook Apartments $ 3,467,381 Humble, Texas 8. Parkside Apartments $ 2,284,650 Humble, Texas 9. Ashwood Park Apartments $ 1,660,560 Pasadena, Texas 10. Lexington Apartments $ 1,126,868 San Antonio, Texas 11. Montecito Apartments $ 5,314,567 Austin, Texas 12. Country Club Apartments $ 4,293,866 Amarillo, Texas 45 13. Newport Apartments $ 2,747,889 Avondale, Arizona 14. Cobble Creek Apartments $ 1,503,920 Glendale, Arizona Documents substantially identical to Exhibits 10.13 through 10.22, except as to the loan amount and the subject property, have been omitted in reliance on Rule 12b-31 under the Securities Exchange Act of 1934, as amended. Set forth below are the material details in which such documents differ from Exhibits 10.13 through 10.22. SUBJECT PROPERTY LOAN AMOUNT ---------------- ----------- 15. Fairways Apartments $ 6,743,232 Chandler, Arizona 16. Rillito Village Apartments $ 4,276,352 Tuscon, Arizona 17. Royal Palms Apartments $ 3,749,110 Mesa, Arizona 18. 40th North Apartments $11,389,266 Phoenix, Arizona 19. South Willow Apartments $ 8,821,703 West Jordan, Utah 20. Sun Valley Apartments $ 5,895,456 Layton, Utah 21. Dunwoody Apartments $ 7,943,606 Dunwoody, Georgia 22. Coral Gardens Apartments $11,903,230 Las Vegas, Nevada 23. Prairie Hills Apartments $ 7,720,008 Albuquerque, New Mexico 24. Pleasant Valley Apartments $ 3,648,119 Little Rock, Arkansas 25. Hillmeade Apartments $11,676,811 Nashville, Tennessee 26. Jefferson Place Apartments $10,046,507 Baton Rouge, Louisiana 46 Documents substantially identical to Exhibits 10.33 through 10.43, except as to the loan amount and the subject property, have been omitted in reliance on Rule 12b-31 under the Securities Exchange Act of 1934, as amended. Set forth below are the material details in which such documents differ from Exhibits 10.33 through 10.43. SUBJECT PROPERTY LOAN AMOUNT ---------------- ----------- 27. Las Brisas Apartments $ 3,800,000 San Antonio, Texas 28. Riverwalk Apartments $ 6,200,000 Little Rock, Arkansas 29. Snug Harbor Apartments $ 2,000,000 Las Vegas, Nevada Documents substantially identical to Exhibits 10.66 through 10.67, except as to the loan amount and the subject partnership, have been omitted in reliance on Rule 12b-31 under the Securities Exchange Act of 1934, as amended. Set forth below are the material details in which such documents differ from Exhibits 10.66 through 10.67. SUBJECT PARTNERSHIP LOAN AMOUNT ------------------- ----------- 30. Copperfield Partners, Ltd. $ 4,336,000 31. Coventry Square Partners $ 4,240,000 32. Crows Nest Partners, Ltd. $ 4,160,000 33. Fisherman's Wharf Partners $ 6,000,000 34. Hampton Hill Partners $ 3,952,000 35. The Houston Recovery Fund $ 4,732,000 36. The Houston Recovery Fund $ 750,000 37. Oak Falls Partners $ 3,285,000 38. Signature Point Joint Venture, $11,040,000 a Texas Joint Venture 39. Sunbury Partners, Ltd. $ 2,950,000 40. J.W. English Swiss Village $ 6,880,000 Partners, Ltd. 41. West Trails Partners, Ltd. $ 4,870,952 47 Documents substantially identical to Exhibits 10.73 through 10.78, except as to the loan amount and the subject partnership and property, have been omitted in reliance on Rule 12b-31 under the Securities Exchange Act of 1934. Set forth below are the material details in which such documents differ from Exhibits 10.73 through 10.78. SUBJECT PARTNERSHIP/PROPERTY LOAN AMOUNT ---------------------------- ----------- 42. Greentree Associates $8,353,100 Greentree Apartments, Carrollton, Texas 43. Meadowbrook Drive Limited Partnership $3,276,400 Randol Crossing Apartments, Fort Worth, Texas 44. RC Associates $2,683,100 Ridgecrest Apartments, Denton, Texas 45. Southridge Associates $3,050,100 Southridge Apartments, Greenville, Texas 46. Woodhill Associates $6,849,600 Woodhill Apartments, Denton, Texas 47. Woodland Ridge II Partners $2,544,100 Limited Partnership Woodland Ridge II Apartments, Irving, Texas Documents substantially identical to Exhibits 10.84 through 10.93, except as to the loan amount and the subject property, have been omitted in reliance on Rule 12b-31 under the Securities Exchange Act of 1934. Set forth below are the material details in which such documents differ from Exhibits 10.84 through 10.93. SUBJECT PROPERTY LOAN AMOUNT ---------------- ----------- 48. Sunchase Eastbay $18,170,000 49. Sunchase Tampa $12,790,000 50. Sunchase North $ 9,535,000 51. Sunchase East $ 7,645,000 48 Documents substantially identical to Exhibits 10.100 through 10.102, except as to the subject property, have been omitted in reliance on Rule 12b-31 under the Securities Exchange Act of 1934. Set forth below are the material details in which such documents differ from Exhibits 10.100 through 10.102. SUBJECT PROPERTY ---------------- 52. Las Brisas Apartments 53. Parliament Bend Apartments 54. Woodlands-Odessa Apartments 55. Sun Grove Apartments 49 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 27th day of March, 1997. APARTMENT INVESTMENT AND MANAGEMENT COMPANY /S/ TERRY CONSIDINE ----------------------------------------- Terry Considine, CHAIRMAN OF THE BOARD, PRESIDENT 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, President and March 28, 1997 - ----------------------- Chief Executive Officer Terry Considine /s/ THOMAS W. TOOMEY Executive Vice President-Finance March 28, 1997 - --------------------- and Administration Thomas W. Toomey /s/ LEEANN MOREIN Senior Vice President, Chief Financial March 28, 1997 - --------------------- Officer and Secretary Leeann Morein /s/ PATRICIA K. HEATH Vice President and Chief Accounting March 28, 1997 - ---------------------- Officer Patricia K. Heath /s/ PETER K. KOMPANIEZ Vice Chairman and Director March 28, 1997 - ----------------------- Peter K. Kompaniez /s/ RICHARD S. ELLWOOD Director March 28, 1997 - ----------------------- Richard S. Ellwood /s/ J. LANDIS MARTIN Director March 28, 1997 - ----------------------- J. Landis Martin /s/ THOMAS L. RHODES Director March 28, 1997 - ----------------------- Thomas L. Rhodes /s/ JOHN D. SMITH Director March 28, 1997 - ----------------------- John D. Smith 50 INDEX TO FINANCIAL STATEMENTS APARTMENT INVESTMENT AND MANAGEMENT COMPANY AND AIMCO PREDECESSORS PAGE ---- APARTMENT INVESTMENT AND MANAGEMENT COMPANY FINANCIAL STATEMENTS: Report of Independent Auditors...................................... F-2 Consolidated Balance Sheets as of December 31, 1996 and 1995....... F-3 Consolidated Statements of Income for the Years ended December 31, 1996 and 1995 and for the Period January 10, 1994 (inception) through December 31, 1994.............................. F-4 Consolidated Statements of Stockholders' Equity for the Years ended December 31, 1996 and 1995 and for the Period January 10, 1994 (inception) through December 31, 1994......................... F-5 Consolidated Statements of Cash Flow for the Years ended December 31, 1996 and 1995 and for the Period January 10, 1994 (inception) through December 31, 1994.............................. F-6 Notes to Consolidated Financial Statements.......................... F-8 FINANCIAL STATEMENT SCHEDULE: Schedule III -- Real Estate and Accumulated Depreciation .......... F-32 All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. AIMCO PREDECESSORS FINANCIAL STATEMENTS: Report of Independent Auditors.................................... F-35 Combined Balance Sheet as of July 28, 1994........................ F-36 Combined Statements of Operations for the Period January 1, 1994 through July 28, 1994............................................ F-37 Combined Statements of Owners' Deficit for the Period January 1, 1994 through July 28, 1994....................................... F-38 Combined Statements of Cash Flows for the Period January 1, 1994 through July 28, 1994............................................ F-39 Notes to Combined Financial Statements............................ F-40 FINANCIAL STATEMENT SCHEDULE: Schedule III -- Real Estate and Accumulated Depreciation.......... F-46 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 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, 1996 and 1995, and the related consolidated statements of income, stockholders' equity and cash flows for each of the two years in the period ended December 31, 1996 and for the period January 10, 1994 (inception) to December 31, 1994. Our audits also included the consolidated financial statement schedule listed in the Index at Item 14(a)(2). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Apartment Investment and Management Company at December 31, 1996 and 1995, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 1996 and for the period January 10, 1994 (inception) to December 31, 1994, in conformity with generally accepted accounting principles. Also, in our opinion, the related consolidated financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects, the information set forth therein. ERNST & YOUNG LLP Dallas, Texas January 24, 1997, except for Note 4 and Note 20, as to which the date is March 25, 1997 F-2 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Consolidated Balance Sheets December 31, 1996 and 1995 (In Thousands, Except Share Data) 1996 1995 -------- -------- (Restated) ASSETS REAL ESTATE - net of accumulated depreciation of $120,077 and $28,737 - Note 3 $745,145 $448,425 CASH AND CASH EQUIVALENTS 13,170 2,379 RESTRICTED CASH 15,831 18,630 ACCOUNTS RECEIVABLE 4,344 1,581 DEFERRED FINANCING COSTS 11,053 5,474 OTHER ASSETS - Note 4 45,270 3,872 -------- -------- $834,813 $480,361 -------- -------- -------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY SECURED NOTES PAYABLE - Note 5 $242,110 $173,502 SECURED SHORT-TERM FINANCING - Note 6 192,039 29,000 SECURED TAX-EXEMPT BOND FINANCING - Note 7 75,497 66,190 UNSECURED SHORT-TERM FINANCING - Note 8 12,500 -- ACCOUNTS PAYABLE, ACCRUED AND OTHER LIABILITIES 16,299 9,615 RESIDENT SECURITY DEPOSITS AND PREPAID RENTS 4,316 2,646 -------- -------- 542,761 280,953 -------- -------- COMMITMENTS AND CONTINGENCIES - Note 9 -- -- MINORITY INTERESTS IN OTHER PARTNERSHIPS - Note 11 10,386 -- MINORITY INTEREST IN OPERATING PARTNERSHIP - Note 12 58,777 30,376 STOCKHOLDERS' EQUITY - Note 13 Class A Common Stock, $.01 par value, 150,000,000 shares authorized, 14,980,441 and 11,847,568 shares issued and outstanding 150 118 Class B Common Stock, $.01 par value, 685,000 shares authorized, 325,000 and 585,000 shares issued and outstanding 3 6 Non-voting preferred stock, $0.01 par value, 10,000,000 authorized, none issued and outstanding -- -- Additional paid-in capital 236,791 175,211 Accumulated deficit (14,055) (6,303) -------- -------- 222,889 169,032 -------- -------- $834,813 $480,361 -------- -------- -------- -------- See accompanying notes to consolidated financial statements. F-3 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Consolidated Statements of Income For the Years Ended December 31, 1996 and 1995 and For the Period January 10, 1994 (Inception) through December 31, 1994 (In Thousands, Except Per Share Data) FOR THE PERIOD JANUARY 10, 1994 FOR THE YEAR FOR THE YEAR (INCEPTION) ENDED ENDED THROUGH DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994 ----------------- ----------------- ----------------- (RESTATED) (RESTATED) RENTAL PROPERTY OPERATIONS Rental and other property revenues $ 100,516 $ 74,947 $ 24,894 Property operating expenses (38,400) (30,150) (10,330) Owned property management expense (2,746) (2,276) (711) ----------- ---------- ---------- Income from property operations before depreciation 59,370 42,521 13,853 Depreciation (19,556) (15,038) (4,727) ----------- ---------- ---------- Income from rental property operations 39,814 27,483 9,126 ----------- ---------- ---------- SERVICE COMPANY BUSINESS Management fees and other income 8,367 8,132 3,217 Management and other expenses (5,352) (4,953) (2,047) Corporate overhead allocation (590) (581) - Management company goodwill amortization (500) (428) (76) Depreciation and amortization (218) (168) (74) ----------- ---------- ---------- 1,707 2,002 1,020 Minority interests in service company business 10 (29) (14) ----------- ---------- ---------- Company's share of income from service company business 1,717 1,973 1,006 ----------- ---------- ---------- GENERAL AND ADMINISTRATIVE EXPENSES (1,512) (1,804) (977) INTEREST EXPENSE (24,802) (13,322) (1,576) INTEREST INCOME 523 658 123 NON-CONTROLLED INTERESTS IN PARTNERSHIPS (111) - - ----------- ---------- ---------- INCOME BEFORE GAIN ON DISPOSTION OF PROPERTY AND MINORITY INTEREST IN OPERATING PARTNERSHIP 15,629 14,988 7,702 GAIN ON DISPOSITION OF PROPERTY 44 - - ----------- ---------- ---------- INCOME BEFORE MINORITY INTEREST 15,673 14,988 7,702 MINORITY INTEREST IN OPERATING PARTNERSHIP (2,689) (1,613) (559) ----------- ---------- ---------- NET INCOME $ 12,984 $ 13,375 $ 7,143 ----------- ---------- ---------- ----------- ---------- ---------- NET INCOME ALLOCABLE TO PREFERRED STOCKHOLDER $ - $ 5,169 $ 3,114 ----------- ---------- ---------- ----------- ---------- ---------- NET INCOME ALLOCABLE TO COMMON STOCKHOLDERS $ 12,984 $ 8,206 $ 4,029 ----------- ---------- ---------- ----------- ---------- ---------- NET INCOME PER COMMON SHARE AND COMMON SHARE EQUIVALENT $ 1.04 $ 0.86 $ 0.42 ----------- ---------- ---------- ----------- ---------- ---------- DIVIDENDS PAID PER COMMON SHARE $ 1.70 $ 1.66 $ 0.29 ----------- ---------- ---------- ----------- ---------- ---------- WEIGHTED AVERAGE SHARES AND COMMON SHARE EQUIVALENTS OUTSTANDING 12,427 9,579 9,589 ----------- ---------- ---------- ----------- ---------- ----------
See accompanying notes to consolidated financial statements. F-4 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Consolidated Statements of Stockholders' Equity For the Years Ended December 31, 1996 and 1995 and For the Period January 10, 1994 (inception) through December 31, 1994 (In Thousands) CLASS A CLASS B COMMON STOCK COMMON STOCK RETAINED -------------- --------------- ADDITIONAL EARNINGS/ SHARES SHARES PAID-IN (ACCUMULATED ISSUED AMOUNT ISSUED AMOUNT CAPITAL DEFICIT) TOTAL ------ ------ ------ ------ --------- ----------- ----- Issuance of Class B Common Stock upon Incorporation (January 10, 1994) 1,000 Reverse Stock Split (April 29, 1994) (250) Reverse Stock Split (July 19, 1994) (100) Purchase of Class B Common Stock $ 7 $ 3 $ 10 Net proceeds from issuance of Class A Common Stock at initial public offering 9,075 $ 91 154,173 154,264 Issuance of unregistered Class A Common Stock 514 5 9,495 9,500 AIMCO Predecessor historical capital accounts (24,703) (24,703) Net income $ 7,143 7,143 Dividends paid - Convertible Preferred Stock (3,114) (3,114) Dividends paid - Class A Common Stock (2,781) (2,781) ------ ----- --- ---- --------- -------- -------- BALANCE DECEMBER 31, 1994 9,589 96 650 7 138,968 1,248 140,319 Net proceeds from issuance of Class A Common Stock at public offering 2,706 27 46,847 46,874 Repurchase of unregistered Class A Common Stock (514) (5) (10,623) (10,628) Conversion of Class B Common Stock to Class A Common Stock 65 (65) (1) 1 - Conversion of Operating Partnership Units to Class A Common Stock 1 18 18 Net income 13,375 13,375 Dividends paid - Convertible Preferred Stock (5,169) (5,169) Dividends paid - Class A Common Stock (15,757) (15,757) ------ ----- --- ---- --------- -------- -------- BALANCE DECEMBER 31, 1995 11,847 118 585 6 175,211 (6,303) 169,032 Net proceeds from issuance of Class A Common Stock at public offering 1,265 13 28,123 28,136 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 3,799 Class A Common Stock issued as consideration for real estate acquired 704 7 15,287 15,294 Purchase of stock by officers 895 9 18,568 18,577 Repurchase of Class A Common Stock (206) (2) (4,253) (4,255) Stock options exercised 3 58 58 Net income 12,984 12,984 Dividends paid - Class A Common Stock (20,736) (20,736) ------ ----- --- ---- --------- -------- -------- BALANCE DECEMBER 31, 1996 14,980 $ 150 325 $ 3 $ 236,791 $(14,055) $222,889 ------ ----- --- ---- --------- -------- -------- ------ ----- --- ---- --------- -------- --------
See accompanying notes to consolidated financial statements. F-5 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Consolidated Statements of Cash Flow For the Years Ended December 31, 1996 and 1995 and For the Period January 10, 1994 (Inception) through December 31, 1994 (In Thousands) FOR THE PERIOD FOR THE YEAR FOR THE YEAR (INCEPTION) ENDED ENDED THROUGH DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994 ----------------- ----------------- ----------------- (RESTATED) (RESTATED) CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 12,984 $ 13,375 $ 7,143 --------- --------- -------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 21,209 15,859 4,877 Gain on disposition of property (44) - - Minority interest in Operating Partnership 2,689 1,613 559 Minority interests in other partnerships 111 - - Changes in operating assets, (increase) decrease in: Restricted cash 6,678 (6,072) (2,085) Accounts receivable (1,515) (2,065) 36 Accounts receivable from affiliates - 289 (289) Other assets (3,270) 209 - Changes in operating liabilities, increase (decrease) in: Accounts payable, accrued and other liabilities (385) 2,391 4,599 Resident security deposits and prepaid rents 349 312 1,985 --------- --------- -------- Total adjustments 25,822 12,536 9,682 --------- --------- -------- Net cash provided by operating activities 38,806 25,911 16,825 --------- --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of real estate 17,147 - - Purchase of real estate (26,032) (52,419) (184,999) Purchase of property held for sale (5,718) - - Purchase of notes receivable, general and limited partnership interests and other assets (53,878) - - Capital replacements (5,133) (2,865) (1,310) Initial capital expenditures (6,194) (4,879) (172) Capital enhancements (854) - - Construction in progress (6,775) (639) - Purchase of office equipment and leasehold improvements (707) (19) - --------- --------- -------- Net cash used in investing activities (88,144) (60,821) (186,481) --------- --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of Class A Common Stock and Class B Common Stock, net of underwriting and offering costs 28,136 46,792 163,774 Proceeds from secured tax-exempt bond financing 58,010 - - Proceeds from secured notes payable borrowings - 155,401 - Principal paydowns on secured tax-exempt bond financing (48,703) - - Principal paydowns on secured notes payable (28,463) (43,666) (33) Payment of loan costs (3,464) (4,703) - Net borrowings (paydowns) on Credit Facility 40,800 (17,600) 21,600 Proceeds from secured short-term financing 30,119 25,000 - Proceeds from unsecured short-term financing 12,500 - - Payoff of unsecured note payable - - (2,300) Redemption of mandatorily redeemable 1994 Cumulative Convertible Senior Preferred Stock and repurchase of unregistered Class A Common Stock - (107,228) - Payment of dividend on mandatorily redeemable 1994 Cumulative Convertible Senior Preferred Stock - (5,169) (3,114) Repurchase of common stock (4,255) - - Payment of common stock dividends (20,736) (15,757) (2,781) Payment of distributions to minority interest in Operating Partnership (3,815) (2,925) (346) --------- --------- -------- Net cash provided by financing activities 60,129 30,145 176,800 --------- --------- -------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 10,791 (4,765) 7,144 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,379 7,144 - --------- --------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 13,170 $ 2,379 $ 7,144 --------- --------- -------- --------- --------- --------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. F-6 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Consolidated Statements of Cash Flow (In Thousands Except Share and Operating Partnership Unit Data) NON CASH INVESTING AND FINANCING ACTIVITIES PURCHASE OF REAL ESTATE, CASH COLLATERAL AND PROPERTY MANAGEMENT BUSINESSES 1996 1995 1994 --------- -------- --------- Secured notes payable assumed in connection with purchase of real estate $ 31,796 $ 8,242 $ 37,150 Secured tax-exempt financing assumed in connection with purchase of real estate - - 66,190 Secured short-term financing assumed in connection with purchase of real estate 5,072 - - Real estate, restricted cash, cash collerateral and property management businesses contributed in exchange for Operating Partnership Units ("OP Units") 15,279 2,626 11,544 Common Stock issued in consideration for purchase of real estate 15,294 - - --------- -------- --------- $ 67,441 $ 10,868 $ 114,884 --------- -------- --------- --------- -------- ---------
PURCHASE OF NOTES RECEIVABLE, GENERAL AND LIMITED PARTNERSHIPS, PROPERTY HELD FOR SALE AND OTHER ASSETS In 1996, the Company issued 789,039 OP units with a recorded value of $16,877 and assumed $1,051 in secured short-term financing in connection with the purchase of the English Portfolio Acquisition. The historical cost of the assets and liabilities assumed in connection with the purchase of the English Portfolio Acquisition and the Dallas Portfolio Acquisition were as follows (in thousands): Real estate, net $ 157,689 Restricted cash 3,879 Accounts receivable 1,248 Deferred financing costs 2,956 Other assets 5,331 Secured notes payable (66,443) Secured short-term financing (85,995) Accounts payable, accrued and other liabilities (7,069) Resident security deposits and prepaid rent (1,321) Minority interests in other partnerships (10,275) REPAYMENT OF SECURED NOTE PAYABLE In 1996, 63,152 OP Units with a recorded value of $1,168 were issued in connection with the repayment of the second deed of trust on a property purchased in 1996. ISSUANCE OF NOTES RECEIVABLE DUE FROM OFFICERS In 1996, the Company issued notes receivable due from Officers for a total of $18,557 in connection with the purchase of 895,250 shares of Class A Common Stock (of which $11,440 was repaid in March 1997). REDEMPTION OF OP UNITS In 1996, 211,392 OP Units with a recorded value of $3,799 were redeemed in exchange for an equal number of shares of Class A Common Stock. In 1995, 1,145 OP Units with a recorded value of $18 were redeemed in exchange for an equal number of shares of Class A Common Stock. CONVERSION OF CLASS B COMMON STOCK In 1996, 260,000 shares of Class B Common Stock were converted to Class A Common Stock upon achievement of the 1995 and 1996 target results (130,000 shares respectively for each year) for a total recorded value of $3 (See Note 11). In 1995, 65,000 shares of Class B Common Stock with a recorded value of $1 were converted to Class A Common Stock upon achievement of the 1994 target results. FORMATION TRANSACTIONS In July 1994, upon the completion of the initial public offering and the purchase of certain real estate assets, the Company executed the following transactions: - - Issued $96,600 of mandatorily redeemable 1994 Cumulative Convertible Senior Preferred Stock. - - Assumed $12,308 of mortgages and an unsecured note payable. - - Issued 1,193,695 Operating Partnership Units with a recorded value of $22,083 in exchange for assets and liabilities acquired from the AIMCO Predecessors. F-7 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements December 31, 1996, 1995 and 1994 NOTE 1 - ORGANIZATION Apartment Investment and Management Company, a Maryland corporation incorporated on January 10, 1994 ("AIMCO" and together with its subsidiaries and other controlled entities, the "Company") acts as sole general partner of AIMCO Properties, L.P. (the "Operating Partnership"), through AIMCO-GP, Inc. and AIMCO-LP, Inc., wholly-owned subsidiaries which hold all of the Company's general and limited partnership interests in and majority ownership of the Operating Partnership. On July 29, 1994, the Company completed its initial public offering (the "IPO") of 9,075,000 shares of Class A Common Stock and issued 966,000 shares Convertible Preferred Stock and 513,514 unregistered shares of Class A Common Stock. On such date, the Company and Property Asset Management, L.L.C., Limited Liability Company and its affiliated companies and PDI Realty Enterprises, Inc. (collectively, the "AIMCO Predecessors") engaged in a business combination and consummated a series of related transactions which enabled the Company to continue and expand the property management and related businesses of the AIMCO Predecessors. Prior to February 1996, four of the Company's executive officers collectively held a 5% beneficial interests in each of four regional business trusts (the "Service Trusts"). The Service Trusts owned four corresponding regional limited liability companies (the "Service LLCs") through which the Company's third party property and asset management business was then principally conducted. In February 1996, the Operating Partnership and the four executive officers contributed their respective interests in the Service Trusts to Property Asset Management Services, Inc. ("PAMS, Inc."), a newly formed non-controlled subsidiary of the Operating Partnership. In April 1996, the Service Trusts were dissolved and their interests in the Service LLCs were distributed to PAMS, Inc. In May 1996, the four Service LLCs were merged into Property Asset Management Services, L.P. ("PAMS, LP" and, together with PAMS, Inc., the "Service Company Subsidiaries") with PAMS, LP as the surviving entity. Consequently, the Company's property and asset management business is now conducted principally through PAMS, Inc. and PAMS, LP. At December 31, 1996, the Company had 14,980,441 shares of Class A Common Stock and the Operating Partnership had 3,400,509 OP Units outstanding, for a combined total of 18,380,950 shares and OP Units. The Company held an 81.5% interest in the Operating Partnership as of December 31, 1996. At December 31, 1996, the Company owned or controlled 23,764 apartment units in 94 properties (the "Owned Properties") and managed an additional 15,434 apartment units in 119 properties for third party owners and 3,611 apartment units in 18 properties for affiliates (the "Managed Properties"), bringing the total managed portfolio to 231 properties containing 42,809 apartment units located in the Sunbelt regions of the United States. F-8 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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 Operating Partnership, majority owned subsidiaries and controlled real estate limited partnerships for the years ended December 31, 1996 and 1995. Interests held by limited partners in real estate partnerships controlled by the Company are reflected as Minority Interests in Other Partnerships. In the second quarter of 1996, the Company adopted Emerging Issues Task Force (EITF) Number 95-6 "Accounting by a Real Estate Investment Trust for an Investment in a Service Corporation". The Company reports the operations of the service company business on a consolidated basis after the adoption of EITF 95-6. Prior to the issuance of EITF 95-6, the Company reported the service company business on the equity method. The adoption of EITF 95-6 has no impact on net income, but does increase third party and affiliate management and other income, management and other expenses, amortization of management company goodwill and depreciation of non-real estate assets. The Company has restated the balance sheet as of December 31, 1995 and the statements of income and statements of cash flows for the year ended December 31, 1995 and for the period from January 10, 1994 through December 31, 1994 to reflect the retroactive application of the change. Due to the significance of the property acquisitions which occurred concurrently with the IPO, the financial statements of the AIMCO Predecessors, prior to July 29, 1994, are not considered comparable to the Company and have not been included herein. All significant intercompany balances and transactions have been eliminated in consolidation. REAL ESTATE AND DEPRECIATION Real estate is recorded at the lower of cost or net realizable value less accumulated depreciation. 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 discounted 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. No impairments exist based on the Company's periodic reviews and therefore, no real estate carrying amounts have been adjusted. Costs in excess of $250 which have a useful life of more than one year and maintain the existing assets are capitalized as capital replacement expenditures. Such costs are capitalized and depreciated over their estimated useful lives. If the Company does not spend $300 per apartment unit in capital replacements per annum, the amount not spent is available to offset such spending in future years. At December 31, 1996, a total of $586,000 remains available for future capital replacements. 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. F-9 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (Continued) NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Initial capital expenditures are those costs considered by the Company in its investment decision to correct deferred maintenance or improve a property; these costs are capitalized and depreciated over their estimated useful lives. Capital enhancements which add a material new feature or increase the revenue potential of a property are capitalized and depreciated over their estimated useful lives. The Company capitalizes direct and indirect costs (including interest, taxes and other carrying costs) in connection with the development or redevelopment of its Owned Properties and land under development. Expenditures for ordinary repairs, maintenance and apartment turnover costs are expensed as incurred. PROPERTY HELD FOR SALE Property held for sale, which is included in other assets, is recorded at the lower of cost or estimated sales proceeds less selling costs. 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. Restricted cash at December 31, 1996 includes $5,074,000 which was held in escrow for the repayment of indebtedness assumed in connection with the acquisition of the Chesapeake Apartments in December 1996 (see Note 20). Restricted cash at December 31, 1995 included $10,000,000 which was held as collateral by a financial institution providing credit enhancement for certain bond indebtedness. Upon the refinancing of such indebtedness in 1996, the $10,000,000 in collateral was released by the lender. DEFERRED FINANCING COSTS Fees and costs incurred in obtaining long-term and short-term financing and credit facilities are amortized on the effective yield method or the straight-line method (if it is not materially different from the effective yield method) over the terms of the related loan agreements and are charged to interest expense. F-10 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (Continued) NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INTANGIBLE ASSETS Intangible assets, which are included in other assets, consist of costs associated with the purchase of property management businesses including property management contracts, goodwill, 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 Owned Properties have operating leases with apartment residents with terms generally of six months or less and rental revenues associated with these leases are recognized when earned. Fees for property management and asset management services provided for properties which the Company does not own are recognized when earned. INTEREST RATE SWAP AGREEMENTS The differential to be paid or received under the terms of interest rate swap agreements is accrued as interest rates change and is recognized over the life of the agreements. Interest rate swap agreements accounted for as anticipatory hedges are related to planned refinances of certain of the Company's variable rate indebtedness. Upon refinance of such indebtedness, any gain or loss associated with the termination of the interest rate swap agreement is deferred and recognized over the life of the refinanced indebtedness. INCOME TAXES The Company has elected to be taxed as a real estate investment trust ("REIT") as defined under the Internal Revenue Code of 1986, as amended (the "Code"). In order for the Company to qualify as a REIT, at least 95% of the Company's gross income in any year must be derived from qualifying sources. The activities of the Service Company Subsidiaries are not qualifying sources. As a REIT, the Company generally will not be subject to Federal income taxes at the corporate level if it distributes at least 95% of its REIT taxable income to its shareholders. REITs are also subject to a number of other organizational and operational requirements. If the Company fails to qualify as a REIT in any taxable year, its taxable income will be subject to Federal income tax at regular corporate rates on its taxable income (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 Federal income and excise taxes on its undistributed income. For income tax purposes, distributions paid to shareholders consist of ordinary income, capital gains, return of capital or a combination thereof. Earnings and profits, which determine the taxability of dividends to shareholders, differ from net income reported for financial reporting purposes due to differences for Federal tax purposes in the estimated useful lives used to compute depreciation and the carrying value (basis) of the investment in the Owned Properties. F-11 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (Continued) NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) For the years ended December 31, 1996 and 1995 and the period ended December 31, 1994, distributions paid per share were taxable as follows: 1996 % 1995 % 1994 % ---- - ---- - ---- - Ordinary income $1.45 85% $1.48 89% $0.29 100% Return of capital 0.25 15 0.18 11 - - ----- ---- ----- ---- ----- ---- $1.70 100% $1.66 100% $0.29 100% ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- EARNINGS PER SHARE Earnings per share is computed using the weighted average common shares and common share equivalents outstanding during the period. 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. FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments" requires disclosure of the year end fair value of significant financial instruments, including long-term debt. Management believes that the estimated aggregate fair values of the secured tax-exempt bond financing and secured long-term financing approximate their carrying values. Rents receivable, accounts payable, accrued and other liabilities, secured short-term financing including the Credit Facility and unsecured short-term financing which mature December 31, 1997 approximate fair value because of the short term of these instruments. INSURANCE SUBSIDIARY Reinsurance premiums written are earned on a monthly pro rata basis over the terms of the policies. A reserve for outstanding losses and loss-related expenses of $435,000 has been provided at December 31, 1996. The reserve includes estimates for insurance losses incurred but not reported, as well as losses pending settlement. Reserves are based on Management's estimates and are believed to be adequate. 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. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest paid for the years ended December 31, 1996 and 1995 and for the period from January 10, 1994 (inception) through December 31, 1994, net of amounts capitalized, were $22,869,000, $12,170,000 and $1,316,000, respectively. State income and franchise taxes of $271,000 and $639,000 were paid in 1996 and 1995, respectively. No state or franchise taxes were paid in 1994. F-12 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (Continued) NOTE 3 - REAL ESTATE Real estate at December 31 is as follows (in thousands): 1996 1995 --------- -------- Land $ 118,031 $ 70,904 Buildings and improvements 747,191 406,258 --------- -------- 865,222 477,162 Accumulated depreciation (120,077) (28,737) --------- -------- $ 745,145 $448,425 --------- -------- --------- -------- During 1996, the Company purchased or acquired control of forty-two properties as described below. The cash portions of the acquisitions were funded from proceeds raised through public offerings, short-term financings, borrowings under the Company's Credit Facility or with working capital. The Company acquired 100% ownership in the following seven multi-family apartment properties in unrelated transactions in 1996. The aggregate consideration paid by the Company of $93.1 million consisted of $26.0 million in cash, 704,220 shares of Common Stock with a total recorded value of $15.3 million, 745,183 in OP Units with a total recorded value of $15.0 million and the assumption of $31.7 million of secured long-term indebtedness and $5.1 million of secured short-term indebtedness. Each transaction, with the exception of Peachtree Park and Somerset Village, was with an unaffiliated third party (see Note 16). Date Number Acquired Property Location of Units -------- -------- -------- -------- 1/96 Peachtree Park Atlanta, Georgia 295 1/96 Villa Ladera Albuquerque, New Mexico 280 4/96 Brookside Village Tustin, California 336 (formerly known as Sycamore Creek) 5/96 Somerset Village Salt Lake City, Utah 486 12/96 Bay West Tampa, Florida 376 12/96 Chesapeake Houston, Texas 320 12/96 Dolphin's Landing Corpus Cristi, Texas 218 ----- 2,311 ----- ----- In November 1996, the Company completed the acquisition (the "English Portfolio Acquisition") of certain partnership interests, real estate and related assets owned by J.W. English, a Houston, Texas-based real estate syndicator and developer, and certain affiliated entities (collectively, the "J.W. English Companies"). The English Portfolio Acquisition included the purchase of all of the general and some of the limited partnership interests in 22 limited partnerships which act as the general partner to 31 limited partnerships (the "English Partnerships") that own 22 multifamily apartment properties, aggregating 5,230 apartment units, and four commercial properties, primarily in Houston, Texas; title to a 104-unit apartment property in Houston, Texas; certain assets of J. W. English Management Company which provided management services to the apartment properties; and other real estate interests related to the J.W. English Companies' operations. The aggregate purchase price of the English Portfolio Acquisition was $23.1 million, consisting of $15.2 million in OP Units and $7.9 million in cash. The English Partnerships are subject to approximately $95.4 million of mortgage debt. F-13 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (Continued) NOTE 3 - REAL ESTATE (CONTINUED) The Company also made separate offers (the "English Tender Offers") to the limited partners of 25 of the English Partnerships to acquire their limited partnerships interests for cash or OP Units. The Company accepted tenders representing, in the aggregate, approximately 46% of all outstanding limited partnership interests in the English Partnerships subject to the offers. The Company paid $16.0 million in cash and $1.7 million in OP Units, at a price of $23 per OP Unit, for the interest tendered in the English Tender Offers. The remaining limited partners elected to continue as limited partners in such English Partnerships. Through its ownership of the general partners of the English Partnerships, the Company has the ability to refinance or sell the properties held by the English Partnerships. In addition, the Company owns, in the aggregate, approximately 46% of all outstanding limited partnership interests. Net cash flow generated by the English Partnerships, if any, after payment of debt service to third party lenders, is used to make distributions to the general and limited partners and, in some cases, to repay indebtedness due to the general partner. Due to the level of control that the Company has over the activities of the English Partnerships, the financial position and results of operations of the English Partnerships are included in the consolidated financial statements of the Company. The English Portfolio Acquisition included the acquisition of controlling interests or a 100% interest in the following properties: Date Number Acquired Property Location of Units -------- -------- -------- -------- 11/96 Anchorage League City, Texas 264 11/96 Brentwood Lake Jackson, Texas 104 11/96 Bridgewater Tomball, Texas 206 11/96 Copperfield Houston, Texas 196 11/96 Coventry Square Houston, Texas 270 11/96 Crow's Nest League City, Texas 176 11/96 Easton Village Houston, Texas 146 11/96 Fisherman's Wharf Clute, Texas 360 11/96 Fondren Court Houston, Texas 429 11/96 Hampton Hill Houston, Texas 332 11/96 Hastings Place Houston, Texas 176 11/96 Oaks Falls Spring, Texas 144 11/96 Park at Cedar Lawn Galveston, Texas 192 11/96 Peppermill Place Houston, Texas 224 11/96 Seaside Point Galveston, Texas 102 11/96 Signature Point League City, Texas 304 11/96 Stirling Court Houston, Texas 228 11/96 Stonehaven Houston, Texas 337 11/96 Stoneybrook Houston, Texas 113 11/96 Sunbury Downs Houston, Texas 240 11/96 Swiss Village Houston, Texas 360 11/96 Township at Highlands Denver, Colorado 119 11/96 Waterford Houston, Texas 312 ----- 5,334 ----- ----- F-14 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (Continued) NOTE 3 - REAL ESTATE (CONTINUED) In a series of related transactions completed in November and December 1996, the Company acquired general partnership interests in 21 limited partnerships which own twelve multifamily apartment properties (collectively, the "Dallas Acquisition Properties") aggregating 2,839 apartment units, primarily in the Dallas, Texas metropolitan area, and loans made by the general partners and their affiliates to such partnerships, for an aggregate price of $26.7 million in cash (collectively, the "Dallas Portfolio Acquisition"). The Dallas Acquisition Properties are subject to approximately $60.7 million of mortgage debt. The existing limited partners retained their interest in such limited partnerships. The Company borrowed approximately $25.6 million to finance the purchase price and closing costs. Through its ownership of the general partners of the partnerships that own the Dallas Acquisition Properties, the Company has the ability to refinance or sell the properties. Although a majority vote of the limited partners may replace the general partner, the Company considers this replacement remote as the Company also has substantial demand notes with second liens on the properties. Cash flow generated by the Dallas Acquisition Properties, if any, after payment of debt service to third party lenders, is used to repay indebtedness due to the general partner and thereafter, to make distributions to general and limited partners. Due to the level of control that the Company has over the activities of the partnerships that own the Dallas Acquisition Properties, the financial position and results of operations of the Dallas Acquisition Properties are included in the consolidated financial statements of the Company. The Dallas Acquisition Properties consisted of the following properties: Date Number Acquired Property Location of Units -------- -------- -------- -------- 12/96 Copper Chase Katy, Texas 316 12/96 Cypress Landing Savannah, Georgia 200 12/96 Greentree Carrollton, Texas 365 12/96 Heather Ridge Arlington., Texas 180 11/96 Highland Park Fort Worth, Texas 500 12/96 Randol Crossing Fort Worth, Texas 160 11/96 Ridgecrest Denton, Texas 152 12/96 Southridge Greenville, Texas 160 12/96 Meadows Austin, Texas 100 12/96 Walnut Springs San Antonio, Texas 224 12/96 Woodhill Denton, Texas 352 12/96 Woodland Ridge Irving, Texas 130 ----- 2,839 ----- ----- During 1996, the Company disposed of the four properties listed below. The properties were sold to one unaffiliated third party. The cash proceeds from the disposition of approximately $17.1 million were used to pay down the then outstanding balance on the Company's Credit Facility of $9.2 million and to provide funds available for future investment purposes. The Company recognized a total gain of approximately $44,000 on the disposition on these four properties. F-15 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (Continued) NOTE 3 - REAL ESTATE (CONTINUED) Net Disposition Date Number Price Disposed Property Location of Units (in thousands) -------- -------- -------- -------- --------------- 8/96 Dakota Dallas, Texas 584 $ 8,916 8/96 Ridgmar Park Fort Worth, Texas 232 2,058 8/96 Sterling Point Dallas, Texas 149 1,715 8/96 Woodcreek Dallas, Texas 300 4,458 ----- ------- 1,265 $17,147 ----- ------- ----- -------
In the fourth quarter of 1996, the Company completed construction of a 92 apartment unit expansion within the Fairways Apartments in Phoenix, Arizona for a cost of approximately $6.0 million. During 1996, the Company spent $3.0 million on the renovation of the Sun Katcher Apartments (336 units) in Jacksonville, Florida. The Company anticipates spending an additional $1.0 million for the completion of the renovation. The renovation is anticipated to be completed in 1997. Interest of $821,000 and $113,000 was capitalized for the years ended December 31, 1996 and 1995, respectively. The tax basis of the real estate assets has been recorded based upon the value of the consideration paid by the Company and the historical cost of the AIMCO Predecessors' properties, the English Acquisition Properties and the Dallas Acquisition Properties. The aggregate cost of the real estate for Federal income tax purposes at December 31, 1996 and 1995 was $880,558,000 and $454,998,000, respectively. NOTE 4 - OTHER ASSETS The following table summarizes the Company's other assets at December 31, 1996 and 1995 (in thousands): 1996 1995 ------- ------ Notes receivable from officers $18,557 Investments in property management contracts 9,441 $1,479 Property held for sale 6,769 - Other 10,503 2,393 ------- ------ $45,270 $3,872 ------- ------ ------- ------ On October 1, 1996, the Company issued 379,750 shares of Class A Common Stock to certain executive officers (or entities controlled by them) at $20.75 per share (the closing price on the NYSE on August 29, 1996, the option award date) pursuant to the exercise of stock options issued under the Apartment Investment and Management Company 1996 Stock Award and Incentive Plan. In payment for such shares, the executive officers executed notes payable to the F-16 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (Continued) NOTE 4 - OTHER ASSETS (CONTINUED) Company totaling $7.9 million bearing interest at 7.25% per annum, payable quarterly, and due in 2006. These stock purchase notes are secured by the shares purchased and are recourse as to 25% of the principal owed. In March 1997, certain executive officers of the Company (or entities controlled by them) repaid $740,000 of the notes payable to the Company outstanding as of December 31, 1996. In addition, on August 29, 1996, certain executive officers also agreed to purchase (or cause entities controlled by them to purchase), prior to January 31, 1997, 515,500 shares of Class A Common Stock at a purchase price of $20.75 per share (the closing price on the NYSE on such date). These shares were issued and delivered as of December 31, 1996. In payment for such shares, the executive officers (or entities controlled by them) executed notes payable to the Company totaling $10.7 million bearing interest at 7.25% per annum, payable quarterly, and due in 2006. The notes receivable are recourse as to 100% of the principal amount. In March 1997, these executive officers (or entities controlled by them) repaid in full the notes payable to the Company totaling $10.7 million. NOTE 5 - SECURED NOTES PAYABLE The following table summarizes the Company's long-term secured notes payable at December 31, 1996 and 1995, all of which are non-recourse to the Company (in thousands): 1996 1995 -------- -------- Fixed rate, ranging from 7.13% to 8.1%, or a weighted average all-in rate of 8.0%, fully-amortizing notes maturing at various dates through 2029 $165,762 $163,502 Fixed rate, ranging from 8.125% to 9.5%, or a weighted average all-in rate of 9.1%, non-amortizing notes maturing at various dates through 2001 57,198 10,000 Floating rate, ranging from 6.19% to 7.625% at December 31, 1996, or a weighted average all-in rate of 7.6%, non-amortizing notes maturing at various dates through 2005 19,150 - -------- -------- $242,110 $173,502 -------- -------- -------- -------- Real estate assets which secure the first trust deeds for these secured notes payable had a net book value of $366,644,000 at December 31, 1996. Certain of the secured notes payable require, among other things, reserve accounts for payments of taxes, insurance, improvements and repairs. Lenders retained $8,026,000 in these accounts at December 31, 1996. As of December 31, 1996, the scheduled principal payments are as follows (in thousands): 1997 $ 4,975 1998 10,962 1999 30,103 2000 12,761 2001 40,678 Thereafter 142,631 -------- $242,110 -------- -------- F-17 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (Continued) NOTE 6 - SECURED SHORT-TERM FINANCING The Company entered into a $40,000,000 variable rate revolving credit facility with Bank of America (the "Credit Facility") in conjunction with the IPO. In August 1996, the Credit Facility was extended through August 1998, the interest rate was reduced from LIBOR plus 1.75% to LIBOR plus 1.625% and the commitment was increased to $50,000,000. Interest is payable monthly at the variable interest rate of LIBOR plus 1.625% (7.52% at December 31, 1996). The interest rate was changed to LIBOR plus 1.45% effective January 1, 1997. Subject to certain conditions, the Company may elect to convert any outstanding borrowings under the Credit Facility into a three year term loan bearing interest at the same rate. The availability of funds to the Company under the Credit Facility is subject to certain borrowing base restrictions and other customary restrictions, including compliance with financial and other covenants thereunder. As of December 31, 1996, $44,800,000 was borrowed under the Credit Facility, $609,000 was used to collateralize two outstanding letters of credit which expire in 1997 and $4,591,000 remained available to be borrowed. Commitment fees of 0.125% per annum on the remaining availability are payable quarterly. The following table summarizes the Company's secured short-term financing at December 31, 1996 and 1995 (in thousands): 1996 1995 -------- ------- Floating rate interest only notes, ranging from 7.3% to 8.0% at December 31, 1996, or a weighted average all-in rate of 8.5%, maturing at various dates through 1998. $115,499 $25,000 Floating rate interest only notes, interest at 8.0% at December 31, 1996. See Note 20. 25,615 - Floating rate interest only notes, ranging from 8.95% to 9.25% secured by property held for sale maturing at various dates through 2008. 1,051 - 7.875% fixed rate, non-amortizing note, repaid February 1997. 5,074 - Floating rate Credit Facility, interest at 7.52% at December 31, 1996, expiring August 1998. 44,800 4,000 -------- ------- $192,039 $29,000 -------- ------- -------- ------- Real estate assets which secure the first and second trust deeds for this short-term financing had a net book value of $253,724,000 at December 31, 1996. Certain of the secured notes payable require, among other things, reserve accounts for payments of taxes, insurance, improvements and repairs. Lenders retained $1,176,000 in these accounts at December 31, 1996. Secured short-term indebtedness totaling $28.8 million is guaranteed by the Company and certain of its affiliates and secured by an assignment of the Company's general partnership interests in the 12 English Partnerships. An additional $25.8 million of secured short-term indebtedness is guaranteed by the Company. F-18 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (Continued) NOTE 6 - SECURED SHORT-TERM FINANCING (CONTINUED) The Company anticipates that it will refinance a portion of its floating rate indebtedness with fixed rate indebtedness during 1997. In order to reduce the impact of changes in interest rates prior to the refinancing, the Company entered into interest rate swap agreements that are accounted for as anticipatory hedges. At December 31, 1996, the Company had outstanding two interest rate swap agreements with a commercial bank and an investment banker, each having a notional principal amount of $50 million. Those agreements effectively reduce the Company's interest rate exposure on $100 million of its LIBOR based floating rate indebtedness. When the floating rate indebtedness is refinanced, the gain or loss on the interest rate swap agreements will be deferred and amortized over the life of the refinanced indebtedness, as an adjustment to interest expense. Management expects that this adjustment will have the effect of locking in the fixed rate identified in the swap agreements of 6.2% and 6.3%. The interest rate swap agreements, each with a notional amount of $50 million mature on March 12, 1997 and May 27, 1997, respectively, and have a fair value at December 31, 1996 of approximately $568,000 and $1,143,000, respectively. The Company is exposed to credit risk in the event of nonperformance by the other parties to the interest rate swap agreements. However, the Company does not anticipate nonperformance by the counterparties. In addition, since the variable rate in the interest rate swap agreements is not on the same basis as the variable rate indebtedness, the Company is exposed to losses to the extent that the LIBOR rate and the Treasury rate change independently of each other. The Company does not anticipate that inconsistent changes in the LIBOR rate and the Treasury rate will have a material effect. NOTE 7 - SECURED TAX-EXEMPT BOND FINANCING The following table summarizes the Company's secured tax-exempt bond financing at December 31, 1996 and 1995, which is non-recourse to the Company (in thousands): 1996 1995 ---- ---- 7.03% fully-amortizing bonds, effective rate of 7.03%, due July 2016. $47,674 Floating rate bonds (5.35% at December 31, 1995) due July 2022, repaid July 1996. - $48,140 6.9% fully-amortizing bonds due, effective rate of 7.3% July 2016. 9,773 - 4.2% interest only bonds, effective rate of 5.23%, due July 2016. 6,000 6,000 6.0% interest only bonds, effective rate of 7.9%, secured by a letter of credit in the amount of $5,350, due September 1997. 5,350 5,350 5.375% interest only bonds due December 2002. 6,700 6,700 ------- ------- Total $75,497 $66,190 ------- ------- ------- -------
F-19 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (Continued) NOTE 7 - SECURED TAX-EXEMPT BOND FINANCING (CONTINUED) Real estate assets securing the tax-exempt bond financing had a net book value of $116,273,000 at December 31, 1996. Certain of the secured tax-exempt bond financings require, among other things, reserve accounts for the payments of taxes, insurance, improvements and repairs. Lenders retained $1,136,000 in these accounts at December 31, 1996. As of December 31, 1996, the scheduled principal payments are as follows (in thousands): 1997 $6,784 1998 1,533 1999 1,642 2000 1,760 2001 1,886 Thereafter 61,892 ------- $75,497 ------- ------- NOTE 8 - UNSECURED SHORT-TERM FINANCING In November 1996, the Company borrowed $12,500,000 in conjunction with the purchase of limited partnership interests in the English Partnerships. The loan is unsecured and bears interest at LIBOR plus 1.75% (see Note 20). NOTE 9 - COMMITMENTS AND CONTINGENCIES INCOME TAXES The Company filed a request with the IRS for a private letter ruling regarding the characterization of certain advances paid in 1994 and 1995 to the Service Company Subsidiaries with respect to property management services provided to third parties and affiliates. In October 1996, the IRS ruled that such amounts are not includable in gross income for purposes of the REIT qualification tests for the Company's 1994 and 1995 taxable years. LEGAL In November 1996, five limited partners in certain of the English Partnerships sued the Company alleging that, in connection with the English Portfolio Acquisition, the Company conspired with J.W. English to breach his fiduciary duties to the plaintiffs, and that the offering materials used by the Company in connection with the English Tender Offers contained misleading statements or omissions. The plaintiffs made an application for a temporary restraining order with respect to the English Tender Offers, which was denied. To date, the Company has not received a summons effecting service of the Complaint. The Company intends to defend itself vigorously in connection with this action. The Company is a party to various legal actions resulting from its operating activities. These actions are routine litigation arising in the ordinary course of business, some of which are covered F-20 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (Continued) NOTE 9 - COMMITMENTS AND CONTINGENCIES (CONTINUED) by liability insurance, and all of which are not expected to have a material adverse effect on the consolidated financial condition or the results of operations of the Company. ENVIRONMENTAL Certain of the Owned Properties are, and some of the Managed properties may be, located on or near properties that have contained underground storage tanks or on which activities have occurred which could have released hazardous substances into the soil or groundwater. There can be no assurances that such hazardous substances have not been released or have not migrated, or in the future will not be released or will not migrate onto the Owned Properties and Managed Properties. In addition, the Company's Montecito property in Austin, Texas, is located adjacent to, and may be partially on, land that was used as a landfill. Low levels of methane and other landfill gas have been detected at Montecito. The remediation of the landfill gas is now substantially complete. The environmental authorities have preliminarily approved the methane gas remediation efforts. Final approval of the site and the remediation process is contingent upon the results of continued methane gas monitors to confirm the effectiveness of the remediation efforts. Should further actionable levels of methane gas be detected, a proposed contingent plan of passive methane gas venting may be implemented. The Company believes the costs of such further limited action, if any, will not be material. Testing has also been conducted on Montecito to determine whether, and to what extent, groundwater has been impacted. Test reports have indicated that the groundwater is not contaminated at actionable levels. LEASE COMMITMENTS Minimum payments under the terms of all noncancellable operating leases in which the Company is the lessee, principally for office space, at December 31, 1996 are as follows (in thousands): 1997 $ 476 1998 401 1999 234 2000 74 2001 1 ------ $1,186 ------ ------ F-21 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (Continued) NOTE 10 - MANDATORILY REDEEMABLE 1994 CUMULATIVE CONVERTIBLE SENIOR PREFERRED STOCK The Company issued 966,000 shares of Convertible Preferred Stock in connection with the IPO. In September 1995, the Company repurchased all of the outstanding shares of Convertible Preferred Stock and 513,514 unregistered shares of Class A Common Stock for an aggregate price of $107.2 million with the proceeds from a $98.4 million secured debt financing and borrowings under its Credit Facility. NOTE 11 - MINORITY INTERESTS IN OTHER PARTNERSHIPS Interests held by limited partners in real estate partnerships controlled by the Company are reflected as Minority Interests in Other Partnerships. Net income is allocated based on the percentage interest owned by the limited partners in each respective real estate partnership. NOTE 12 - MINORITY INTEREST IN OPERATING PARTNERSHIP Net income is allocated to the limited partners whose interests are represented by OP Units based on their respective weighted-average ownership percentage in the Operating Partnership. The Company owns one OP Unit in the Operating Partnership for each share of Class A Common Stock outstanding. Ownership percentage is determined by dividing the number of OP Units held by the limited partners, weighted for the number of days outstanding during the period by total weighted OP Units and shares of Class A Common Stock outstanding. Reductions to or issuance of additional OP Units and Class A Common Stock changes the ownership percentage of both the limited partners and the Company. The Company records the issuance of OP Units and the assets acquired in purchase transactions based on the market price of the Company's Class A Common Stock 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 1996 and 1995, the weighted average ownership interest of the limited partners in the Operating Partnership was 17.1% and 16.4%, respectively. At December 31, 1996, the ownership interest of the limited partners was 18.5%. The limited partners do not have voting rights in the Company. 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 Company, may elect to acquire some or all of the OP Units tendered for redemption in exchange for shares of the Company's Class A Common Stock in lieu of cash. To date, the Company has acquired all OP Units tendered for redemption in exchange for such shares. F-22 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (Continued) NOTE 13 - STOCKHOLDERS' EQUITY At December 31, 1996, the Company had 14,980,441 shares of Class A Common Stock outstanding. Concurrent with the IPO, 650,000 shares of common stock held by four of the Company's executive officers were reclassified as Class B Common Stock. The Class B Common Stock is convertible into Class A Common Stock, subject to certain conditions. In April 1995, the Board of Directors waived the right of the Company to purchase the Class A Common Stock if the holder terminates employment for certain reasons within one year after conversion. In 1996 and 1995, respectively, 260,000 and 65,000 shares of Class B Common Stock were converted into Class A Common Stock upon the satisfaction of the requisite conditions for 1994 through 1996. The Company recognized the issuance of these shares of Class A Common Stock with no charge to earnings. In September 1996, the Company's Board of Directors authorized the re-purchase of up to 500,000 shares of Class A Common Stock in open market and privately negotiated purchase transactions. The shares acquired were made available for the issuance upon exercise of employee stock options granted by the Compensation Committee of the Board of Directors in August 1996. The stock may be purchased from time to time as market conditions warrant. At December 31, 1996, the Company had purchased and canceled 205,664 shares for approximately $4.3 million at an average price of $20.69 per share. On October 1, 1996, the Company issued 379,750 shares of Class A Common Stock to certain executive officers (or entities controlled by them) at $20.75 per share (the closing price on the NYSE on August 29, 1996, the option award date) pursuant to the exercise of stock options issued under the Apartment Investment and Management Company 1996 Stock Award and Incentive Plan. In addition, on August 29, 1996, certain executive officers also agreed to purchase (or cause entities controlled by them to purchase), prior to January 31, 1997, 515,500 shares of Class A Common Stock at a purchase price of $20.75 per share (the closing price on the NYSE on such date). These shares were issued and delivered as of December 31, 1996. In payment for the shares purchased, the executive officers (or entities controlled by them) executed notes payable totaling $18.6 million to the Company (see Note 20). F-23 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (Continued) NOTE 14 - 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 FASB Statement No. 123, "Accounting for Stock-Based Compensation", requires use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. The Company has adopted the 1994 Stock Option Plan of Apartment Investment and Management Company (the "1994 Plan"), the Apartment Investment and Management Company 1996 Stock Award and Incentive Plan (the"1996 Plan") and the Apartment Investment and Management Company Non-Qualified Employee Stock Option Plan (the "Non-Qualified Plan") to attract and retain officers, key employees and independent directors. The 1994 Plan provides for the granting of a maximum of 150,000 options to purchase common shares. The 1996 Plan provides for the granting of a maximum of 500,000 options to purchase common shares. The Non-Qualified Plan provides for the granting of a maximum of 500,000 options to purchase common shares. The 1994 Plan, the 1996 Plan and the Non-Qualified Plan allow for the grant of incentive and non-qualified stock options and are administered by the Compensation Committee of the Board of Directors. The 1994 Plan also provides for a formula grant of the non-qualified stock options to the independent directors to be administered by the Board of Directors to the extent necessary. The exercise price of the options granted may not be less than the fair market value of the common stock at the date of grant. The term of the incentive and non-qualified options is ten years from the date of grant. The non-qualified options vest 20% per year over a five-year period with initial vesting one year from the date of grant. Terms may be modified at the discretion of the Compensation Committee of the Board of Directors. Pro forma information regarding the net income and earnings per share is required by Statement 123, which also requires that the information be determined as if the Company has accounted for its employee stock options granted subsequent to December 31, 1994 under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions for 1996 and 1995, respectively: (i) risk-free interest rates ranging from 5.2% to 7.5%; (ii) a dividend yield of 7.8%; (iii) volatility factors of the expected market price of the Company's common stock of .194; and (iv) a weighted average expected life of the options of 4 1/2 years. The Black-Scholes option valuation model was developed for use in estimating fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma information follows (in thousands except per share information): 1996 1995 ---- ---- Pro forma net income $12,201 $13,360 Pro forma earnings per share $0.98 $0.86 F-24 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (Continued) NOTE 14 - STOCK OPTION PLAN AND STOCK WARRANTS (CONTINUED) The following table summarizes the option activity for the years ended December 31, 1996 and 1995 and for the period from January 10, 1994 (inception) through December 31, 1994: 1996 1995 1994 ---- ---- ---- Number of Shares Under Stock Options: Outstanding at beginning of period 108,000 86,000 - Granted 803,000 27,000 102,000 Exercised (383,000) - - Forfeited (23,000) (5,000) (16,000) -------- ------- ------- Outstanding at end of period 505,000 108,000 86,000 -------- ------- ------- -------- ------- ------- Stock options exercisable at the end of the year 425,000 26,000 - -------- ------- ------- -------- ------- ------- Weighted average fair value of options granted during the year $1.01 $1.75 N/A Weighted average exercise price $20.74 $17.69 N/A Exercise price $20.25- $17.12- N/A $20.75 $18.37
At December 31, 1996, 16,400 warrants were outstanding. During 1996, 65,600 warrants which had not vested were forfeited. The warrants have an exercise price of $18.50 per share and vest in equal annual installments over five years. The warrants expire in November 2004. NOTE 15 - DIVIDEND REINVESTMENT PLAN Effective August 21, 1995, the Company implemented a dividend reinvestment plan. Stockholders can reinvest dividends and make voluntary cash investments to purchase additional shares of the Company's Class A Common Stock. In May 1996, the Company filed a registration statement relating to 1,000,000 shares of Class A Common Stock to be made available for issuance under the dividend reinvestment plan. NOTE 16 - TRANSACTIONS WITH AFFILIATES The Company serves as property manager for certain apartment properties owned by entities in which certain officers of the Company have an ownership interest. Compensation for these services is 3% to 6% of gross receipts from the properties and were $619,000 and $1,347,000 for the years ending December 31, 1996 and 1995, respectively. In addition, the Company received consulting fees from affiliates of $149,000 for the year ended December 31, 1995. No consulting fees from affiliates were received for the year ended December 31, 1996. F-25 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (Continued) NOTE 16 - TRANSACTIONS WITH AFFILIATES (CONTINUED) In 1996, the Company acquired the Peachtree Park Apartments in Atlanta, Georgia and the Somerset Village Apartments in Salt Lake City, Utah from entities controlled by officers of the Company. The aggregate consideration paid of $39.6 million consisted of $3.8 million in cash, 372,678 shares of Class A Common Stock and 121,447 of OP Units with a total recorded value of $9.9 million, and the assumption of $25.9 million of secured short-term indebtedness. In addition, the Company acquired the cable equipment at the Peachtree Park Apartments from an entity controlled by an officer of the Company for total consideration of 8,243 shares of Class A Common Stock with a recorded value $175,000. NOTE 17 - EMPLOYEE BENEFIT PLANS The Company offers medical, dental, life and long-term disability benefits to employees of the Company through insurance coverage of the Company-sponsored plan. The medical and dental plans are self-funded and are administered by independent third parties. The Company incurred insurance benefit costs, net of reimbursements, of approximately $577,000 and $617,000 for the years ended December 31, 1996 and 1995, respectively. The Company also participates in a 401(k) defined-contribution employee savings plan. Employees who have completed one year of service are eligible to participate. The Company matches 50% of the participant's contributions to the plan up to a maximum of 2% of the participant's prior year compensation. The Company contributed $91,000 in matching contributions to the plan for the year ended December 31, 1996. F-26 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (Continued) NOTE 18 - UNAUDITED SUMMARIZED CONSOLIDATED QUARTERLY INFORMATION Summarized unaudited consolidated quarterly information for 1996 and 1995 are as follows (amounts in thousands except per share amounts): QUARTER ------- Year ended December 31, 1996 FIRST SECOND THIRD FOURTH ----- ------ ----- ------ Income from property operations $8,617 $9,083 $9,866 $12,248 Company's share of income from service company business 291 350 401 675 Income before gain on disposition of property and minority interest in Operating Partnership 3,304 3,774 4,054 4,497 Net income 2,810 3,145 3,396 3,633 Net income per share $0.24 $0.26 $0.27 $0.27 Weighted average common shares and common share equivalents outstanding 11,860 12,217 12,398 13,309 QUARTER ------- Year ended December 31, 1995 FIRST SECOND THIRD FOURTH ----- ------ ----- ------ Income from property operations $6,946 $6,829 $6,495 $7,213 Company's share of income from service company business 450 597 974 (48) Income before minority interest in Operating Partnership 4,425 4,356 3,907 2,300 Net income 4,005 3,947 3,508 1,915 Net income allocable to Preferred Stockholder 1,836 1,836 1,497 - Net income allocable to common stockholders 2,169 2,111 2,011 1,915 Net income per common share $0.23 $0.22 $0.21 $0.20 Weighted average common shares and common share equivalents outstanding 9,589 9,589 9,650 9,488 F-27 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (Continued) NOTE 19 - PRO FORMA FINANCIAL STATEMENTS (UNAUDITED) The unaudited pro forma Consolidated Statement of Income for the year ended December 31, 1996 is presented based on the audited historical financial data of the Company and has been prepared as if each of the following transactions had occurred on January 1, 1996: (i) the sale of 1,265,000 shares of the Company's Class A Common Stock at $23.428 per share completed in November and December 1996 and the application of the net proceeds thereof to pay indebtedness under the Credit Facility; (ii) the conversion of 260,000 shares of Class B Common Stock to Class A Common Stock; (iii) the purchase of the Dolphin's Landing Apartments, the Chesapeake Apartments and the Bay West Apartments (the "December 1996 Acquisitions") and the incurrence of indebtedness and issuance of 193,676 shares of Class A Common Stock to finance such acquisitions; (iv) the acquisition of the English Partnerships; (v) the consummation of the English Tender Offers; (vi) the Dallas Portfolio Acquisition; (vii) the incurrence of indebtedness to finance the English Portfolio Acquisition, the English Tender Offer and the Dallas Portfolio Acquisition; (viii) the refinancing of certain indebtedness assumed in connection with the English Partnership acquisition; (ix) the acquisition of the Villa Ladera Apartments, the Brookside Village Apartments and the Somerset Village Apartments from January 1996 through May 1996 and the assumption of indebtedness and issuance of OP Units in consideration for certain of the acquisitions (the "1996 Acquisitions"); and (x) the sale of the Four Sold Properties in August 1996 and the application of sales proceeds therefrom to pay indebtedness under the Credit Facility. The unaudited pro forma Consolidated Statement of Income for the year ended December 31, 1995 is presented based on the audited historical financial data of the Company and has been prepared as if each of the following transactions had occurred on January 1, 1995: (i) the sale of 2,706,423 shares of the Company's Class A Common Stock at $19.125 per share completed in December 1995; (ii) the sale of 1,265,000 shares of Class A Common Stock at $23.428 per share completed in November and December 1996 and the application of net proceeds thereof to pay indebtedness under the Credit Facility; (iii) the purchase of eight properties acquired by the Company in December 1995 (iv) the conversion of 260,000 shares of Class B Common Stock to Class A Common Stock; (v) the purchase of the December 1996 Acquisitions and the incurrence of indebtedness and issuance of 193,676 shares of Class A Common Stock to finance such acquisitions; (vi) the acquisition of the English Partnerships; (vii) the consummation of the English Tender Offers; (viii) the Dallas Portfolio Acquisition; (ix) the incurrence of indebtedness to finance the English Portfolio Acquisition, the English Tender Offer and the Dallas Portfolio Acquisition; (x) the refinancing of certain indebtedness assumed in connection with the English Partnership acquisition; (xi) the purchase of the 1996 Acquisitions and the assumption of indebtedness and issuance of OP Units in consideration for certain of the 1996 Acquisitions; and (xii) the sale of the Four Sold Properties and the application of sales proceeds therefrom to pay indebtedness under the Credit Facility. 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-28 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (Continued) NOTE 19 - PRO FORMA FINANCIAL STATEMENTS (CONTINUED) Pro Forma Condensed Consolidated Statement of Operations (In Thousands Except Per Share Data) (Unaudited) 1996 1995 ---- ---- RENTAL PROPERTY OPERATIONS Rental and other property revenues $148,043 $138,810 Property operating expenses (65,797) (65,808) Owned property management expenses (4,816) (4,971) -------- -------- Income from property operations before depreciation 77,430 68,031 Depreciation (27,396) (26,929) -------- -------- Income from property operations 50,034 41,102 -------- -------- SERVICE COMPANY BUSINESS Company's share of income from Service Company Business 1,917 2,239 GENERAL AND ADMINISTRATIVE EXPENSES (1,512) (1,804) INTEREST INCOME 523 658 INTEREST EXPENSE (37,661) (30,835) NON-CONTROLLED INTERESTS IN PARTNERSHIPS 3,385 4,997 -------- -------- INCOME BEFORE MINORITY INTEREST IN OPERATING PARTNERSHIP 16,686 16,357 Minority interest in Operating Partnership (3,299) (3,322) -------- -------- NET INCOME $13,387 $13,035 -------- -------- -------- -------- NET INCOME ALLOCABLE TO PREFERRED STOCKHOLDER $ - $ 5,169 -------- -------- -------- -------- NET INCOME ALLOCABLE TO COMMON STOCKHOLDERS $13,387 $ 7,866 -------- -------- -------- -------- NET INCOME PER COMMON SHARE $0.95 $0.56 -------- -------- -------- -------- WEIGHTED AVERAGE COMMON SHARES AND COMMON SHARE EQUIVALENTS OUTSTANDING 14,141 14,032 -------- -------- -------- -------- F-29 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (Continued) NOTE 20 - SUBSEQUENT EVENTS DIVIDEND DECLARED On January 24, 1997, the Board of Directors declared a cash dividend of $0.4625 per share ($1.85 annualized dividend per share, an increase of 8.8% per share) of Class A Common Stock for the quarter ended December 31, 1996, payable on February 14, 1997 to stockholders of record on February 7, 1997. COMPLETION OF PUBLIC OFFERING In February 1997, the Company completed a public offering of 2,015,000 shares of Class A Common Stock (including 15,000 shares subject to the underwriter's overallotment option) at a price of $26.75 per share. The net proceeds of $51.1 million were used to repay a portion of the Company's indebtedness incurred in acquisitions completed in December 1996. USE OF RESTRICTED CASH In February 1997, the Company used $5,074,000 which was held in escrow at December 31, 1996 to repay indebtedness assumed in connection with the acquisition of the Chesapeake Apartments in December 1996. PENDING ACQUISITION On February 20, 1997, the Company announced that its Board of Directors had approved an agreement with Demeter Holdings Corporation ("Demeter") and Phemus Corporation ("Phemus"), affiliates of The Harvard Private Capital Group, and Capricorn Investors, L.P. ("Capricorn"), pursuant to which the Company will acquire all of Demeter's and Capricorn's 6.93 million shares of NHP Incorporated ("NHP") common stock at a purchase price of $20.00 per share, payable in 3.2 million shares of Class A Common Stock of the Company and $53 million cash. In addition, Demeter and Capricorn would be entitled to retain their proportionate interest in NHP's subsidiary, NHP Financial Services, Ltd. The agreement also provides for the Company to acquire from Demeter, Phemus and Capricorn (together, the "Sellers") interests in certain entities that, directly or indirectly, own conventional and affordable multifamily apartment properties managed by NHP. Pursuant to the agreement, the Operating Partnership will acquire the Sellers' controlling interests in limited partnerships that own 18 conventional apartment communities containing 7,278 apartment units for an aggregate price of approximately $24.5 million, payable in cash or OP Units, at the sellers' option. The Company has an option to acquire the Sellers' interests in entities that own an additional 15 conventional apartment communities containing 3,800 apartment units. Upon completion of such acquisition, the Operating Partnership intends to make separate offers to the limited partners of the various partnerships to acquire their interests in the limited partnerships. The agreement also provides for the formation of a joint venture with the Sellers in which the Operating Partnership will have a 50% interest. The joint venture would be managed equally by the Sellers, on the one hand, and Operating Partnership on the other. The Sellers will contribute to the venture their interests in entities that own 24 apartment communities containing 5,464 apartment units, and, at the Operating Partnership's option, the Sellers' interests in entities that own an additional 20 apartment communities containing 4,532 apartment units. The Company will contribute cash or other assets valued at approximately $13 million and the Sellers will contribute assets valued at approximately $13 million to form the joint venture. F-30 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (Continued) NOTE 20 - SUBSEQUENT EVENTS (CONTINUED) Also pursuant to the agreement, the Operating Partnership will invest approximately $3.4 million to acquire a 25% interest in entities owned by the Sellers that own interests in 52,741 affordable housing units and 12,588 apartment units and other assets. The Company also made a merger proposal to NHP's Board of Directors pursuant to which NHP would merge into the Company (or one of its subsidiaries) and the Company would offer to acquire the remaining stockholders' interests in NHP for $20 per NHP share to be paid in the Company's Class A common stock. The Company's proposal contemplates that NHP's Subsidiary, NHP Financial Services, Ltd., will be spun off to NHP stockholders (including the Sellers' but not the Company) prior to the merger. Consequently, NHP stockholders would be entitled to receive approximately 0.75 shares of the Company's Class A Common Stock in the merger. If the spin-off of NHP Financial Services, Ltd. does not occur, the Company will pay an additional $3.05 per share to Demeter, Capricorn and the remaining stockholders in NHP. Closing of the transactions is subject to completion of additional documentation and customary closing conditions, including all necessary governmental approvals, the continuation of the Company's status as a REIT under federal tax laws, as well as certain rights of first refusal of NHP with respect to the purchase of interests in properties managed by NHP. The closing of the real estate transactions with the Sellers and the acquisition by the Company of the Sellers' interest in NHP is expected to occur during the second quarter of 1997. REPAYMENT OF NOTES RECEIVABLE FROM OFFICERS In March 1997, certain executive of the Company (or entities controlled by them) repaid in full notes payable to the Company totaling $10.7 million executed for the purchase in 1996 of 515,500 shares of Class A Common Stock. In addition, $740,000 was repaid on the notes payable to the Company totaling $7.9 million executed for the purchase in 1996 of 379,750 shares of Class A Common Stock. AGREEMENT TO ACQUIRE THREE PROPERTIES On March 25, 1997, the Company announced that an agreement was reached on the acquisition of three multifamily apartment properties totaling 536 apartment units located in Tustin, California and Orlando, Florida in two separate transactions. The acquisition price for the three properties totals $28.8 million which includes $1.7 million which the Company has budgeted for initial capital expenditures. The consideration will include approximately $9.8 million in cash, the issuance of approximately 450,000 shares of Class A Common Stock and OP units for an aggregate recorded value of $12.5 million and the assumption of $6.5 million of indebtedness secured by a first trust deed. The transactions are expected to be completed by April 30, 1997. F-31 APARTMENT INVESTMENT AND MANAGEMENT COMPANY SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1996 (IN THOUSANDS EXCEPT UNIT DATA) INITIAL COST ------------------- COST BUILDINGS CAPITALIZED UNITS YEAR NO. OF AND SUBSEQUENT TO PROPERTY NAME ACQUIRED LOCATION BUILT UNITS LAND IMPROVEMENTS ACQUISITION - ------------- -------- -------- ----- ----- ---- ------------ ------------ 40th North 07/94 Phoenix, AZ 1970 556 $2,546 $14,437 $ 1,016 Anchorage 11/96 League City, TX 1985 264 523 9,097 7 Ashford Plantation 12/95 Atlanta, GA 1975 211 2,770 9,956 217 Ashwood 07/94 Houston, TX 1984 144 451 2,563 132 Bay West 12/96 Tampa, FL 1975 376 1,500 7,085 Bluffs 09/83 Boulder, CO 1971 232 696 7,779 270 Boardwalk 12/95 Tamarac, FL 1986 291 3,350 8,196 715 Brandywine 04/83 St. Petersburg, FL 1971 477 1,423 11,336 823 Brentwood 11/96 Lake Jackson, TX 1980 104 200 3,092 Bridgewater 11/96 Tomball, TX 1978 206 333 4,033 14 Brookside Village 4/96 Tustin, CA 1970 336 2,498 14,180 1,051 Chesapeake 12/96 Houston, TX 1983 320 775 7,317 Chimney Ridge 07/94 Dallas, TX 1983 210 574 3,258 243 Cobble Creek 07/94 Phoenix, AZ 1985 142 407 2,314 88 Copperfield 11/96 Houston, TX 1983 196 572 7,133 6 Copper Chase 12/96 Katy, TX 1982 316 1,484 11,530 Coral Gardens 04/93 Las Vegas, NV 1983 670 3,190 12,745 900 Country Club 07/94 Amarillo, TX 1984 282 1,049 5,951 173 Coventry Square 11/96 Houston, TX 1983 270 975 6,355 7 Crows Nest 11/96 League City, TX 1984 176 795 5,400 4 Cypress Landing 12/96 Savannah, GA 1984 200 386 7,911 Dolphin's Landing 12/96 Corpus Cristi, TX 1980 218 1,740 5,589 Dunwoody 07/94 Atlanta, GA 1980 318 1,838 10,538 374 Easton Village 11/96 Houston, TX 1983 146 440 6,584 3 Eden Crossing 11/94 Pensacola, FL 1985 200 1,111 6,332 236 Fairways 07/94 Phoenix, AZ 1986 260 1,830 10,403 416 Fairways II 09/96 Phoenix, AZ 1996 92 5,952 Fishermans Wharf 11/96 Clute, TX 1981 360 830 9,969 10 Fondren Court 11/96 Houston, TX 1979 429 1,349 9,355 11 Frankford Place 07/94 Dallas, TX 1982 274 1,125 6,382 399 Garden Terrace 07/94 Bowie, TX 1978 20 49 280 11 Green Tree 12/96 Carrollton, TX 1983 365 1,909 14,842 Hampton Hill 11/96 Houston, TX 1984 332 1,574 8,408 11 Hastings Place 11/96 Houston, TX 1984 176 734 3,382 21 Heather Ridge 12/96 Arlington, TX 1983 180 655 5,455 Highland Park 12/96 Ft. Worth, TX 1985 500 3,234 19,536 Hillmeade 11/94 Nashville, TN 1985 288 2,872 16,066 1,020 Jefferson Place 11/94 Baton Rouge, LA 1985 234 2,696 15,115 976 Las Brisas 07/94 Casa Grande, AZ 1985 132 572 3,261 69 Las Brisas 12/95 San Antonio, TX 1983 176 1,100 5,454 209 Lexington 07/94 San Antonio, TX 1981 72 311 1,764 52 Meadowbrook 07/94 Houston, TX 1985 260 999 5,667 300 Meadowcreek 04/85 Boulder, CO 1972 332 1,387 10,027 364 Meadows 12/96 Austin, TX 1983 100 417 4,563 Montecito 07/94 Austin, TX 1985 268 1,268 7,194 206 Newport 07/94 Phoenix, AZ 1986 204 800 4,554 158 Oak Falls 11/96 Spring, TX 1983 144 514 3,585 20 Olympiad 11/94 Montgomery, AL 1986 176 1,046 5,958 320 Paradise Palms 07/94 Phoenix, AZ 1970 130 647 3,684 232 Park at Cedar Lawn 11/96 Galveston, TX 1985 192 769 5,073 4 Parkside 07/94 Houston, TX 1983 160 592 3,358 187 Parliament Bend 07/94 San Antonio, TX 1980 232 765 4,342 267 Peachtree Park 1/96 Atlanta, GA 1962/1995 295 4,681 12,957 931 Penn Square 12/94 Albuquerque, NM 1982 210 1,128 6,478 236 Peppermill Place 11/96 Houston, TX 1983 224 406 3,957 10
DECEMBER 31, 1996 --------------------------------------------------------------------- TOTAL COST TOTAL COST ----------------------------- NET OF BUILDINGS AND ACCUMULATED ACCUMULATED LAND IMPROVEMENTS TOTAL DEPRECIATION DEPRECIATION ENCUMBRANCES PROPERTY NAME - ------------- 40th North $ 2,546 $15,453 $17,999 $1,584 $16,415 $11,093 Anchorage 523 9,104 9,627 2,599 7,028 5,016 Ashford Plantation 2,770 10,173 12,943 428 12,515 9,300 Ashwood 451 2,695 3,146 270 2,876 1,611 Bay West 1,500 7,085 8,585 8,585 Bluffs 696 8,049 8,745 4,604 4,141 6,256 Boardwalk 3,350 8,911 12,261 376 11,885 9,773 Brandywine 1,423 12,159 13,582 4,027 9,555 6,746 Brentwood 200 3,092 3,292 3,292 (A) Bridgewater 333 4,047 4,380 915 3,465 Brookside Village 2,498 15,231 17,729 395 17,334 (A) Chesapeake 775 7,317 8,092 8,092 5,073 Chimney Ridge 574 3,501 4,075 360 3,715 1,972 Cobble Creek 407 2,402 2,809 245 2,564 1,459 Copperfield 572 7,139 7,711 697 7,014 4,336 Copper Chase 1,484 11,530 13,014 3,367 9,647 9,772 Coral Gardens 3,190 13,645 16,835 2,408 14,427 11,594 Country Club 1,049 6,124 7,173 619 6,554 4,165 Coventry Square 975 6,362 7,337 2,453 4,884 4,240 Crows Nest 795 5,404 6,199 1,316 4,883 4,160 Cypress Landing 386 7,911 8,297 2,301 5,996 7,629 Dolphin's Landing 1,740 5,589 7,329 7,329 Dunwoody 1,838 10,912 12,750 1,090 11,660 7,737 Easton Village 440 6,587 7,027 457 6,570 4,732 Eden Crossing 1,111 6,568 7,679 579 7,100 6,000 Fairways 1,830 10,819 12,649 1,100 11,549 6,568 Fairways II - 5,952 5,952 - 5,952 Fishermans Wharf 830 9,979 10,809 3,412 7,397 6,000 Fondren Court 1,349 9,366 10,715 4,229 6,486 5,642 Frankford Place 1,125 6,781 7,906 673 7,233 4,102 Garden Terrace 49 291 340 29 311 Green Tree 1,909 14,842 16,751 4,188 12,563 11,520 Hampton Hill 1,574 8,419 9,993 3,406 6,587 3,952 Hastings Place 734 3,403 4,137 914 3,223 3,258 Heather Ridge 655 5,455 6,110 1,855 4,255 4,838 Highland Park 3,234 19,536 22,770 7,440 15,330 18,157 Hillmeade 2,872 17,086 19,958 1,439 18,519 11,373 Jefferson Place 2,696 16,091 18,787 1,357 17,430 9,785 Las Brisas 572 3,330 3,902 334 3,568 (B) Las Brisas 1,100 5,663 6,763 236 6,527 5,250 Lexington 311 1,816 2,127 183 1,944 1,093 Meadowbrook 999 5,967 6,966 610 6,356 3,363 Meadowcreek 1,387 10,391 11,778 3,016 8,762 8,125 Meadows 417 4,563 4,980 1,188 3,792 3,330 Montecito 1,268 7,400 8,668 745 7,923 5,155 Newport 800 4,712 5,512 481 5,031 2,665 Oak Falls 514 3,605 4,119 940 3,179 3,285 Olympiad 1,046 6,278 7,324 534 6,790 5,350 Paradise Palms 647 3,916 4,563 391 4,172 2,393 Park at Cedar Lawn 769 5,077 5,846 1,011 4,835 2,826 Parkside 592 3,545 4,137 349 3,788 2,216 Parliament Bend 765 4,609 5,374 464 4,910 (B) Peachtree Park 4,681 13,888 18,569 501 18,068 (A) Penn Square 1,128 6,714 7,842 575 7,267 4,257 Peppermill Place 406 3,967 4,373 887 3,486 3,677
F-32 ESTIMATE AND MANAGEMENT COMPANY SCHEDULE III - (CONTINUED) INITIAL COST ------------------ COST BUILDINGS CAPITALIZED UNITS YEAR NO. OF AND SUBSEQUENT TO PROPERTY NAME ACQUIRED LOCATION BUILT UNITS LAND IMPROVEMENTS ACQUISITION - ------------- -------- -------- ----- ----- ---- ------------ ------------ Pleasant Ridge 11/94 Little Rock, AR 1982 200 1,660 9,464 401 Pleasant Valley 11/94 Little Rock, AR 1985 112 907 5,069 510 Prairie Hills 07/94 Albuquerque, NM 1985 260 1,680 9,633 163 Randol Crossing 12/96 Ft. Worth, TX 1984 160 782 5,742 Ridge Crest 12/96 Denton, TX 1983 152 612 5,642 Rillito Village 07/94 Tuscon, AZ 1985 272 1,220 6,947 145 Riverside 07/94 Denver, CO 1987 248 1,553 8,828 258 Riverwalk 12/95 Little Rock, AR 1988 262 1,075 9,295 205 Royal Palms 07/94 Phoenix, AZ 1985 152 832 4,730 129 Seaside Point 11/96 Galveston, TX 1985 102 295 2,994 2 Seasons 10/95 San Antonio, TX 1976 280 974 5,749 430 Signature Point 11/96 League City, TX 1994 304 2,160 13,627 2 Snug Harbor 12/95 Las Vegas, NV 1990 64 750 2,966 195 Somerset Village 5/96 Salt Lake City, UT 1985 486 4,375 17,600 174 South Willow 07/94 Salt Lake City, UT 1987 440 2,218 12,612 283 Southridge 12/96 Greenville, TX 1984 160 565 5,787 Spectrum Pointe 07/94 Atlanta, GA 1984 196 1,029 5,903 110 Stirling Court 11/96 Houston, TX 1984 228 946 5,958 8 Stonehaven 11/96 Houston, TX 1972 337 1,197 11,236 6 Stoney Brook 11/96 Houston, TX 1972 113 579 3,871 8 Sun Grove 07/94 Phoenix, AZ 1986 86 659 3,749 90 Sun Katcher 12/95 Jacksonville, FL 1972 360 578 3,440 3,044 Sun Valley 07/94 Salt Lake City, UT 1985 430 1,306 7,434 232 Sunbury Downs 11/96 Houston, TX 1982 240 565 4,380 11 Sunchase-Clearwater 11/94 Clearwater, FL 1985 461 2,177 19,641 598 Sunchase-East 11/94 Orlando, FL 1985 296 927 8,361 380 Sunchase-North 11/94 Orlando, FL 1985 324 1,013 9,142 352 Sunchase-Tampa 11/94 Tampa, FL 1985 216 757 6,831 542 Swiss Village 11/96 Houston, TX 1972 360 1,011 11,310 13 Timbermill 10/95 San Antonio, TX 1982 296 778 4,674 461 Township at Highlands 11/96 Denver, CO 1986 119 1,058 11,166 3 Villa Ladera 1/96 Albuquerque, NM 1985 280 1,764 10,014 456 Village Creek 07/94 Denver, CO 1987 324 2,446 13,901 622 Walnut Springs 12/96 San Antonio, TX 1983 224 851 8,076 Waterford 11/96 Houston, TX 1984 312 533 5,692 7 Williams Cove 07/94 Dallas, TX 1984 260 1,227 6,972 295 Woodhill 12/96 Denton, TX 1985 352 1,578 13,199 Woodland Ridge 12/96 Irving, TX 1984 130 1,021 4,507 Woodlands-Odessa 07/94 Odessa, TX 1982 232 676 3,835 208 Woodlands-Tyler 07/94 Tyler, TX 1984 256 1,030 5,844 207 ---------------------------------------- Sub-total 23,764 115,249 717,601 29,221 ---------------------------------------- Properties under development or held for development: Fairways III land 07/94 2,303 369 Villa Ladera land 03/96 479 - ---------------------------------------- Total 23,764 $118,031 $717,601 $29,590 ---------------------------------------- ----------------------------------------
DECEMBER 31, 1996 ----------------------------------------------------------------------- TOTAL COST TOTAL COST ----------------------------- NET OF BUILDINGS AND ACCUMULATED ACCUMULATED PROPERTY NAME LAND IMPROVEMENTS TOTAL DEPRECIATION DEPRECIATION ENCUMBRANCES - ------------- ----- ------------ ----- ------------ ------------ ------------ Pleasant Ridge 1,660 9,865 11,525 846 10,679 6,700 Pleasant Valley 907 5,579 6,486 466 6,020 3,553 Prairie Hills 1,680 9,796 11,476 978 10,498 7,519 Randol Crossing 782 5,742 6,524 1,762 4,762 3,875 Ridge Crest 612 5,642 6,254 1,804 4,450 3,825 Rillito Village 1,220 7,092 8,312 708 7,604 4,165 Riverside 1,553 9,086 10,639 917 9,722 6,195 Riverwalk 1,075 9,500 10,575 386 10,189 8,550 Royal Palms 832 4,859 5,691 487 5,204 3,652 Seaside Point 295 2,996 3,291 663 2,628 Seasons 974 6,179 7,153 251 6,902 4,596 Signature Point 2,160 13,629 15,789 1,164 14,625 11,040 Snug Harbor 750 3,161 3,911 131 3,780 2,700 Somerset Village 4,375 17,774 22,149 408 21,741 (A) South Willow 2,218 12,895 15,113 1,295 13,818 8,592 Southridge 565 5,787 6,352 2,074 4,278 3,473 Spectrum Pointe 1,029 6,013 7,042 599 6,443 4,468 Stirling Court 946 5,966 6,912 2,472 4,440 3,673 Stonehaven 1,197 11,242 12,439 2,804 9,635 4,969 Stoney Brook 579 3,879 4,458 945 3,513 750 Sun Grove 659 3,839 4,498 387 4,111 (B) Sun Katcher 578 6,484 7,062 56 7,006 (A) Sun Valley 1,306 7,666 8,972 768 8,204 5,742 Sunbury Downs 565 4,391 4,956 799 4,157 2,950 Sunchase-Clearwater 2,177 20,239 22,416 1,140 21,276 17,994 Sunchase-East 927 8,741 9,668 758 8,910 9,443 Sunchase-North 1,013 9,494 10,507 823 9,684 12,666 Sunchase-Tampa 757 7,373 8,130 633 7,497 7,571 Swiss Village 1,011 11,323 12,334 5,195 7,139 6,880 Timbermill 778 5,135 5,913 208 5,705 (A) Township at Highlands 1,058 11,169 12,227 1,750 10,477 9,165 Villa Ladera 1,764 10,470 12,234 423 11,811 5,781 Village Creek 2,446 14,523 16,969 1,422 15,547 (B) Walnut Springs 851 8,076 8,927 2,182 6,745 6,730 Waterford 533 5,699 6,232 1,358 4,874 4,871 Williams Cove 1,227 7,267 8,494 739 7,755 4,025 Woodhill 1,578 13,199 14,777 4,240 10,537 9,605 Woodland Ridge 1,021 4,507 5,528 1,445 4,083 3,580 Woodlands-Odessa 676 4,043 4,719 403 4,316 (B) Woodlands-Tyler 1,030 6,051 7,081 611 6,470 3,653 ---------------------------------------------------------------------- Sub-total 115,249 746,822 862,071 120,077 741,994 463,795 ---------------------------------------------------------------------- Properties under development or held for development: Fairways III land 2,303 369 2,672 2,672 Villa Ladera land 479 - 479 479 ---------------------------------------------------------------------- Total $118,031 $747,191 $865,222 $120,077 $745,145 463,795 ---------------------------------------------------------------------- ----------------------------------------------------------------------
(A) Pledged as security for the Credit Facility. (B) Pledges as additional colleratal for secured tax-exempt financing. _______________ See Report of Independent Auditors and accompanying notes to consolidated financial statements. F-33 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Real Estate and Accumulated Depreciation For the Years ended December 31, 1996 and 1995 and For the Period January 10, 1994 (Inception) through December 31, 1994 (In Thousands) REAL ESTATE 1996 1995 1994 -------- -------- -------- Balance at beginning of period $477,162 $406,067 $ - Additions during the period: Real estate acquisitions and AIMCO Predecessor's historical cost 388,574 63,351 402,847 Additions 17,993 7,744 1,482 Dispositions (18,507) - - -------- -------- -------- Balance at end of period $865,222 $477,162 404,329 -------- -------- -------- -------- -------- -------- ACCUMULATED DEPRECIATION Balance at beginning of period $ 28,737 $ 13,699 $ - Additions during the period: AIMCO Predecessor's historical cost - - 8,972 Depreciation 19,556 15,038 4,727 Additions 73,189 - - Dispositions (1,405) - - -------- -------- -------- Balance at end of period $120,077 $ 28,737 $ 13,699 -------- -------- -------- -------- -------- --------
The aggregate cost of the real estate for Federal income tax purposes at December 31, 1996 and 1995 was $880,558, or $15,336 more than the book basis and $454,998, or $22,164, less than the book basis, respectively. See Report of Independent Auditors and accompanying notes to consolidated financial statements. F-34 Report of Independent Auditors Owners of the AIMCO Predecessors We have audited the accompanying combined balance sheet of the AIMCO Predecessors (as defined in Note 1), as of July 28, 1994, and the related combined statements of operations, owners' deficit and cash flows for the period January 1, 1994 through July 28, 1994. Our audit also included the consolidated financial statement schedule listed in the Index at Item 14(a)(2). These financial statements and schedule are the responsibility of the AIMCO Predecessors' management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit. We conducted our audit 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 audit provides a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of the AIMCO Predecessors at July 28, 1994, and the combined results of its operations and its cash flows for the period January 1, 1994 through July 28, 1994, in conformity with generally accepted accounting principles. Also, in our opinion, the related combined financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects, the information set forth therein. ERNST & YOUNG LLP Dallas, Texas January 20, 1995 F-35 AIMCO PREDECESSORS Combined Balance Sheet (In Thousands) July 28, 1994 ------- ASSETS MULTIFAMILY PROPERTIES - net of accumulated depreciation of $14,230 - Note 3 $33,270 CASH AND CASH EQUIVALENTS 1,531 RESTRICTED CASH 343 ACCOUNTS RECEIVABLE - TENANTS AND OTHER - Note 4 1,089 NOTES AND ADVANCES RECEIVABLE - AFFILIATES - Note 5 - REINSURANCE BALANCES RECEIVABLE - Note 9 723 FUNDS WITHHELD - Note 9 40 INVESTMENTS - Note 6 697 PROPERTY AND EQUIPMENT - net of accumulated depreciation of $966 285 INTANGIBLE ASSETS - net of accumulated amortization of $91 181 PREPAID EXPENSES 156 OTHER ASSETS 727 ------- $39,042 ------- ------- LIABILITIES AND OWNERS' DEFICIT NOTES PAYABLE - Note 7 $ 3,077 MORTGAGES PAYABLE - Note 8 37,796 RESIDENT SECURITY DEPOSITS AND PREPAID RENT 333 ACCOUNTS PAYABLE AND ACCRUED EXPENSES - Note 10 2,955 ACCRUED INTEREST PAYABLE 2,768 REINSURANCE BALANCES PAYABLE 244 RESERVE FOR OUTSTANDING LOSSES AND LOSS- RELATED EXPENSES 647 UNEARNED PREMIUMS 567 ------- 48,387 ------- COMMITMENTS AND CONTINGENCIES - Note 9 - OWNER'S DEFICIT (9,345) ------- $39,042 ------- ------- See accompanying notes to combined financial statements. F-36 AIMCO PREDECESSORS Combined Statements of Operations (In Thousands) FOR THE PERIOD JANUARY 1, 1994 THROUGH JULY 28, 1994 ----------------------- RENTAL PROPERTY OPERATIONS Rental and other property revenue $ 5,805 Property operating expenses 2,263 ------- 3,542 Depreciation and amortization (1,151) ------- 2,391 ------- PROPERTY MANAGEMENT BUSINESS Residential management 3,286 Commercial management and brokerage 1,700 Brokerage 296 Insurance Operations 426 Other income 825 ------- 6,533 ------- Employee compensation and expenses 4,000 General and administrative 1,197 Depreciation and amortization 146 Insurance Operations 626 Owner and seller bonuses 204 ------- 6,173 ------- 360 ------- INTEREST EXPENSE (4,214) ------- LOSS BEFORE EXTRAORDINARY ITEM AND INCOME TAXES (1,463) Provision for income taxes (36) ------- NET LOSS $(1,499) ------- ------- See accompanying notes to combined financial statements. F-37 AIMCO PREDECESSORS Combined Statements of Owners' Deficit (In Thousands) PAM PROPERTIES COMMON PAID-IN OWNERS' OWNERS' STOCK CAPITAL DEFICIT DEFICIT TOTAL ------ ------- ------- ------- ------- Balance January 1, 1994 $120 $316 $(1,001) $(6,991) $(7,556) Net income (loss) - - (1,499) - (1,499) Contributions - - - 887 887 Distributions - - (278) (899) (1,177) ------ ------- ------- ------- ------- Balance July 28, 1994 $120 $316 $(2,778) $(7,003) $(9,345) ------ ------- ------- ------- ------- ------ ------- ------- ------- -------
See accompanying notes to condensed combined financial statements. F-38 AIMCO PREDECESSORS Combined Statements of Cash Flow (In Thousands) FOR THE PERIOD JANUARY 1, 1994 THROUGH 1994 --------------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(1,499) ------- Adjustments to reconcile net loss to net cash provided by operating activities Depreciation and Amortization 1,297 Changes in operating assets and liabilities Net disbursements from impound accounts 205 Increase in accounts receivable-tenants and other (644) (Increase) decrease in reinsurance balances receivable (300) Decrease (increase) in funds withheld 661 Decrease (increase) in prepaid expenses and other assets 24 Increase (decrease) in reserve for outstanding losses and loss related expenses 189 Increase (decrease) in unearned premiums 251 (Decrease) increase in resident security deposits and prepaid rent (77) Increase (decrease) in accounts payable and accrued expenses 921 (Decrease) increase in taxes payable (163) Increase in accrued interest payable 1,788 Increase in reinsurance balances payable 25 ------- Total Adjustments 4,177 ------- Net cash provided by operating activities 2,678 ------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (707) Decrease in notes receivable-affiliates 120 (Increase) decrease in investments, net (337) ------- Net cash used in by financing activities (924) ------- CASH FLOWS FROM FINANCING ACTIVITIES Repayments of mortgages and other notes payable (1,020) Contributions from owners 887 Distribution to owners (899) ------- Net cash (used in) provided by financing activities (1,032) ------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 722 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 809 ------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,531 ------- ------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during period of interest $ 2,383 ------- -------
See accompanying notes to combined financial statements. F-39 AIMCO PREDECESSORS Notes to Combined Financial Statements July 28, 1994 NOTE 1 - ORGANIZATION Property Asset Management, L.L.C., Limited Liability Company ("PAM"), certain limited liability companies related to PAM, PAM Consolidated Assurance Company ("PCA") (collectively, the "PAM Companies"), PDI Realty Enterprises, Inc. and certain related limited partnerships and limited liability companies that have general partners or shareholders affiliated with the PAM Companies (together, the "AIMCO Predecessors") were engaged in providing property management services for apartment properties, commercial real estate brokerage services, workers' compensation and excess employer liability reinsurance, asset management for apartment and commercial properties and the ownership of four apartment properties. Apartment Investment and Management Company (the "Company") was formed to continue and expand the property management and related businesses of the AIMCO Predecessors. NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying combined financial statements reflect the financial position and results of operations for the AIMCO Predecessors for the period from January 1, 1994 through July 28, 1994, the date of the completion of the business combination with the Company. PRINCIPLES OF COMBINATION The financial statements include the accounts of the AIMCO Predecessors. The financial statements have been presented on a combined basis because, in conjunction with the Company's initial public offering on July 29, 1994, the entities were included in a business combination with the Company. The owners of the AIMCO Predecessors transferred their property management and related businesses and certain of their interests in real estate to AIMCO Properties, L.P., an operating partnership (the "Operating Partnership") for which the Company's wholly owned subsidiary is the sole general partner. Concurrent with the transfer, certain owners of the AIMCO Predecessors received units of limited partnership interest in the Operating Partnership ("OP Units"). All significant intercompany balances and transactions have been eliminated in combination. MULTIFAMILY PROPERTIES, PROPERTY AND EQUIPMENT AND DEPRECIATION Multifamily properties are recorded at cost less accumulated depreciation. Property and equipment is stated at cost. For multifamily properties, depreciation is calculated on the straight-line method based on a 25-year life for buildings and five to ten year lives for furniture and fixtures. Apartment turnover costs and ordinary repairs and maintenance are expensed as incurred. Replacements and betterments that extend the useful life of the assets are capitalized and depreciated over their estimated useful lives. Property and equipment is depreciated over the estimated useful lives of the related assets, ranging from two to seven years, using various accelerated methods. F-40 AIMCO PREDECESSORS Notes to Combined Financial Statements (continued) NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CASH EQUIVALENTS Cash equivalents consist of highly liquid investments with original maturities of three months or less when acquired. RESTRICTED CASH Restricted cash consists of escrow deposits held by lenders for property taxes, insurance and replacement reserves, and tenant security deposits. REINSURANCE To reduce the potential adverse effects of significant workers' compensation claims, PCA has ceded the potential exposure of excess layers of coverage to an unrelated insurance provider. No claims have reached this excess layer and, accordingly, no recoveries from reinsurers are provided for in the combined balance sheet. Reinsurance does not relieve PCA of the liabilities under the original policies. However, in the opinion of management, PCA's reinsurer is financially capable, and any potential future expenses from nonpayment are unlikely. FUNDS WITHHELD Funds withheld represent amounts on deposit with ceding insurance companies as security for PCA's reinsurance obligations. INVESTMENTS Investments include holdings in a fixed income fund administered in Bermuda, which are carried at quoted market values with unrealized gains recognized in owners' deficit. F-41 AIMCO PREDECESSORS Notes to Combined Financial Statements (Continued) NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INTANGIBLE ASSETS Intangible assets consist of organization costs, loan procurement costs and allocated costs of purchasing other property management businesses, including non-compete agreements, property management contracts, goodwill, trade names and other acquisition costs. These costs are amortized on a straight-line basis over their contractual and estimated useful lives ranging from one to five years. DEFERRED FINANCING COSTS Fees and costs incurred in obtaining long-term financing are included in other assets and such costs are amortized on a straight-line basis (which approximates the interest method) over the term of the related loan agreements. RESERVE FOR OUTSTANDING LOSSES AND LOSS-RELATED EXPENSES The reserve for outstanding losses and loss-related expenses and the provision for losses and loss-related expenses included in insurance operations include estimates for insurance losses incurred but not reported, as well as losses pending settlement. Reserves are based on management's estimates, loss adjusters' evaluations and actuarial determinations and are believed to be adequate. REVENUE RECOGNITION The apartment properties have operating leases with terms generally of one year or less and rental revenues associated with these leases are recognized when earned. Fees for the property management business and other income are recognized when earned. Reinsurance premiums written are earned on a monthly pro rata basis over the terms of the policies. INCOME TAXES The provision for income taxes is recorded for the combined corporations. Income from the limited liability companies and limited partnerships is recorded on the separate tax returns of the membership unit holders and individual partners and accordingly, no provision for their income taxes has been recorded. Deferred taxes of $395,000 are the result of expected future tax consequences of temporary differences between the financial reporting basis and tax basis of assets and liabilities. COMMON STOCK SHARES AND EARNINGS PER SHARE The number of common stock shares issued and outstanding and per share data is not relevant since the financial statements are a presentation of the combined operations of various corporations, limited liability companies and limited partnerships. F-42 AIMCO PREDECESSORS Notes to Combined Financial Statements (Continued) NOTE 3 - MULTIFAMILY PROPERTIES Multifamily properties are summarized as follows (in thousands): JULY 28, 1994 ------------- Land $ 5,703 Buildings and improvements 37,669 Furniture, fixtures and equipment 4,128 -------- 47,500 Accumulated depreciation (14,230) -------- $ 33,270 -------- -------- NOTE 4 - ACCOUNTS RECEIVABLE - TENANTS AND OTHER Accounts receivable - tenants and other at July 28, 1994 included approximately $700,000 of costs advanced to the Company in conjunction with its initial public offering. These costs were repaid following the completion of the offering. NOTE 5 - NOTES AND ADVANCES RECEIVABLE - AFFILIATES Notes and advances receivable from affiliates are due on demand and interest is charged at rates ranging from 6% to 9% per year. Notes and advances receivable from affiliates of $278,000 were distributed to owners, and $120,000 was repaid, prior to the transfer of the businesses to the Company. NOTE 6 - INVESTMENTS Investments at July 28, 1994 are comprised of fixed income fund balances of $697,000. NOTE 7 - NOTES PAYABLE Notes payable bear interest at rates ranging from 4% to prime plus 1%, and have maturities ranging from March 1994 to October 1996. All of the notes payable were repaid upon the completion of the Company's initial public offering. F-43 AIMCO PREDECESSORS Notes to Combined Financial Statements (Continued) NOTE 8 - MORTGAGES PAYABLE A mortgage note payable, secured by a first trust deed, to a mortgage company of $6,380,000 was assumed by the Company. Interest at 9.25% and principal is paid in monthly installments of $53,000, with the remaining balance due June 1999. All other mortgages payable, secured by first and second trust deeds and mortgages, having maturities from April 1994 to June 2000, with fixed and variable interest rates, were repaid upon the completion of the Company's initial public offering. NOTE 9 - COMMITMENTS AND CONTINGENCIES REINSURANCE BALANCES RECEIVABLE AND FUNDS WITHHELD There is a dispute with National Union Fire Insurance Company regarding March 1991 to February 1992 insurance risks which were subsequently reinsured by PCA. Reinsurance balances receivable and funds withheld includes $213,000 relating to this dispute. The Company became a party to this dispute in conjunction with the business combination. LETTER OF CREDIT PAM pledged $220,000 of its holdings in a fixed income fund to collateralize a $200,000 letter of credit securing the payment of outstanding losses and loss-related expenses relating to the reinsurance business. LITIGATION PAM is involved in various litigation arising in the ordinary course of business. Management does not believe that these actions will have a material adverse effect on the Company. NOTE 10 - RELATED PARTY TRANSACTIONS The AIMCO Predecessors provided property management, consulting and accounting services to affiliated companies and recorded fees of $266,000 for the period ended July 28, 1994. The parent company of PAM provides loss consulting services to PCA for $8,000 per month. These fees are included in owner and seller bonuses. Seller bonuses represent performance compensation to sellers of property management and brokerage operations acquired by PAM. Accounts payable and accrued expenses include $220,000 due to certain owners and officers of PAM relating to deferred compensation. F-44 AIMCO PREDECESSORS Notes to Combined Financial Statements (Continued) NOTE 11 - EMPLOYEE BENEFIT PLAN The PAM Companies participated in a 401(k) defined-contribution employee savings plan. Employees who had completed one year of service were eligible to participate. The PAM Companies matched 50% of the participant's contributions to the plan up to a maximum of 2% of the participant's prior year compensation. Expenses under the plan are not material. This 401(k) plan was continued in conjunction with the business combination. NOTE 12 - STATUTORY CAPITAL AND SURPLUS PCA is registered under the Bermuda Insurance Act of 1978 and Related Regulations (the "Act") and is required to comply with various provisions of the Act regarding solvency and liquidity. Actual statutory capital was and continues to be in excess of the minimum statutory capital and surplus requirement. F-45 AIMCO PREDECESSORS SCHEDULE III REAL ESTATE INVESTMENT AND ACCUMULATED DEPRECIATION AS OF JULY 28, 1994 (IN THOUSANDS) PROPERTY NAME LOCATION NUMBER OF LAND BUILDINGS AND IMPROVEMENTS CARRYING LAND BUILDING AND TOTAL - ------------- -------- UNITS ---- IMPROVEMENTS ------------ COSTS ---- IMPROVEMENTS ------- --------- ------------- -------- TOTAL COST INITIAL COST COST CAPITALIZED ------------ ------------ SUBSEQUENT TO ACQUISITION ------------------------- Bluffs Boulder, CO 232 $ 696 $ 6,102 $1,661 - $ 696 $ 7,763 $ 8,459 Meadowcreek Boulder, CO 332 821 6,328 2,639 - 821 8,967 9,788 Coral Gardens Las Vegas, NV 670 3,190 11,775 602 - 3,190 12,377 15,567 Brandywine St. Petersburg, FL 477 996 11,444 1,246 - 996 12,690 13,686 ----- ------ ------- ------ ----- ------ ------- ------- 1,711 $5,703 $35,649 $6,148 - $5,703 $41,797 $47,500 ----- ------ ------- ------ ----- ------ ------- ------- ----- ------ ------- ------ ----- ------ ------- ------- PROPERTY NAME ACCUMULATED ENCUMBRANCES YEAR DATE DEPRECIABLE - ------------- DEPRECIATION ------------ BUILT ACQUIRED LIFE ------------ ------------ ----------- ------------ Bluffs $ 3,675 $ 6,387 1971 Sept. 1983 5 - 25 years Meadowcreek 3,788 5,987 1972 June 1985 5 - 25 years Coral Gardens 777 14,930 1983 June 1993 5 - 25 years Brandywine 5,990 10,492 1971 April 1983 5 - 25 years ------- ------- $14,230 $37,796 ------- ------- ------- -------
A summary of activity of real estate assets and accumulated depreciation is as follows: JULY 28, 1994 ------- REAL ESTATE ASSETS ------------------ Balance at beginning of period............. $46,819 Improvements............................... 681 Acquisition of building and improvements... - Balance at end of period................... $47,500 ------- ------- JULY 28, 1994 ------- ACCUMULATED DEPRECIATION ------------------------ Balance at beginning of period............. $13,118 Depreciation expense....................... 1,112 ------- Balance at end of period................... $14,230 ------- ------- See report of independent auditors and accompanying notes to combined financial statements. EX-10.60 2 EXHIBIT 10.60 REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT, dated as of September 30, 1996 (this "AGREEMENT"), by and among Apartment Investment and Management Company, a Maryland corporation (the "COMPANY"), and the persons listed on Schedule A hereto (each, an "INVESTOR"). WHEREAS, pursuant to that certain Registration Rights Agreement, dated as of July 29, 1994 (the "PREVIOUS REGISTRATION AGREEMENT"), by and among the Company and certain holders of units ("OP UNITS") of limited partnership interest in AIMCO Properties, L.P., a Delaware limited partnership ("AIMCO OP"), the Company agreed to register for sale shares of the Company's Class A Common Stock, par value $.01 per share (the "COMMON STOCK"), that may be issued by the Company in exchange for OP Units surrendered for redemption, in accordance with, and subject to certain restrictions set forth in, the agreement of limited partnership of AIMCO OP (the "OP PARTNERSHIP AGREEMENT") and the Company's charter; WHEREAS, Colorado National Bank ("CNB") has made one or more loans (the "LOANS") to the Investors and/or their affiliates that are secured by the Investors' pledge to CNB of (i) the number of OP Units set forth opposite the name of each Investor under the heading "Pledged OP Units" on Schedule A hereto (collectively, the "PLEDGED OP UNITS") and (ii) the number of shares of Common Stock set forth opposite the name of each Investor under the heading "Pledged Shares" on Schedule A hereto (collectively, the "PLEDGED SHARES"); WHEREAS, CNB has requested that the Investors cause the registration of (i) the shares of Common Stock that may be issued by the Company in exchange for Pledged OP Units surrendered for redemption pursuant to the OP Partnership Agreement, and (ii) the Pledged Shares (collectively, the "REGISTRABLE SHARES"); and WHEREAS, pursuant to the Previous Registration Agreement, the Investors acquired certain registration rights from the Company and, in partial satisfaction of the Company's obligations to the Investors thereunder, the Company has agreed to enter into this Agreement with the Investors to provide for the registration of the Registrable Shares. NOW, THEREFORE, in consideration of the foregoing and the covenants of the parties set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, subject to the terms and conditions set forth herein, the parties hereby agree as follows: Section 1. CERTAIN DEFINITIONS. In this Agreement the following terms shall have the following respective meanings: "ACCREDITED INVESTOR" shall have the meaning set forth in Rule 501 of the General Rules and Regulations promulgated under the Securities Act. "AFFILIATE" shall mean, when used with respect to a specified person, another person that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the person specified. "COMMISSION" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the relevant time. "HOLDERS" shall mean (i) the Investors, and (ii) CNB. "INDEMNIFIED PARTY" shall have the meaning ascribed to it in Section 4(c) of this Agreement. "INDEMNIFYING PARTY" shall have the meaning ascribed to it in Section 4(c) of this Agreement. "OP UNITS" shall mean units of limited partnership interest in AIMCO OP. "PERSON" shall mean an individual, corporation, partnership, estate, trust, association, private foundation, joint stock company or other entity. The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act providing for the sale by the Holders of Registrable Shares in accordance with the method or methods of distribution designated by the Holders, and the declaration or ordering of the effectiveness of such registration statement by the Commission. "REGISTRABLE SHARES" shall have the meaning ascribed to it in the recitals to this Agreement. 2 "REGISTRATION EXPENSES" shall mean all out-of-pocket expenses (excluding Selling Expenses) incurred by the Company in complying with Section 2 hereof, including, without limitation, the following: (a) all registration, filing and listing fees; (b) fees and expenses of compliance with federal and state securities or real estate syndication laws (including, without limitation, reasonable fees and disbursements of counsel in connection with state securities and real estate syndication qualifications of the Registrable Shares under the laws of such jurisdictions as the Holders may designate); (c) printing (including, without limitation, expenses of printing or engraving certificates for the Registrable Shares in a form eligible for deposit with The Depository Trust Company and otherwise meeting the requirements of any securities exchange on which they are listed and of printing registration statements and prospectuses), messenger, telephone, shipping and delivery expenses; (d) fees and disbursements of counsel for the Company; (e) fees and disbursements of all independent public accountants of the Company (including without limitation the expenses of any annual or special audit and "cold comfort" letters required by the managing underwriter); (f) securities act liability insurance if the Company so desires; (g) fees and expenses of other Persons reasonably necessary in connection with the registration, including any experts, retained by the Company; (h) fees and expenses incurred in connection with the listing of the Registrable Shares on each securities exchange on which securities of the same class are then listed; and (i) fees and expenses associated with any NASD filing required to be made in connection with the registration statement. "RIGHTS" shall have the meaning ascribed to it in Section 6 of this Agreement. "RULE 144" shall mean Rule 144 promulgated by the Commission under the Securities Act. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the relevant time. "SELLING EXPENSES" shall mean all underwriting discounts, selling commissions and stock transfer taxes applicable to any sale of Registrable Shares. Section 2. REGISTRATION. (a) The Company shall prepare and file with the Commission, as soon as practicable after the date hereof, a registration statement for the purpose of effecting a Registration of the sale of Registrable Shares by the Holders; shall use its best 3 efforts to effect such Registration within 90 days of the date hereof (including, without limitation, the execution of an undertaking to file post- effective amendments and appropriate qualification under applicable state securities and real estate syndication laws); and shall keep such Registration continuously effective until the earlier of (i) the latest maturity date of the Loans, (ii) the date on which all Registrable Shares have been sold pursuant to such registration statement or Rule 144, and (iii) the date on which all of the Registrable Shares may be sold in accordance with Rule 144 under the Securities Act; PROVIDED, HOWEVER, that the Company shall not be obligated to take any action to effect any such Registration, qualification or compliance pursuant to this Section 2 in any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such Registration, qualification or compliance unless the Company is already subject to service in such jurisdiction. Notwithstanding the foregoing, the Company shall have the right (the "SUSPENSION RIGHT") to defer such filing (or suspend sales under any filed registration statement or defer the updating of any filed registration statement and suspend sales thereunder) for a period of not more than 120 days during any one-year period ending on December 31, if the Company shall furnish to the Holders a certificate signed by the President or any other executive officer or any director of the Company stating that, in the good faith judgment of the Company, it would be detrimental to the Company and its shareholders to file such registration statement or amendment thereto at such time (or continue sales under a filed registration statement) and therefore the Company has elected to defer the filing of such registration statement (or suspend sales under a filed registration statement); PROVIDED, HOWEVER, that the filing of any such registration statement (or the continuance of sales under a filed registration statement) shall not be considered detrimental to the Company and its shareholders solely as a consequence of any adverse effect on the market price of the Common Stock resulting from such filing (or continued sales). (b) The Company shall promptly notify the Holders of the occurrence of the following events: (i) when any registration statement relating to the Registrable Shares or post-effective amendment thereto filed with the Commission has become effective; (ii) the issuance by the Commission of any stop order suspending the effectiveness of any registration statement relating to the Registrable Shares; 4 (iii) the suspension of an effective registration statement by the Company in accordance with the last paragraph of Section 2(a) above; (iv) the Company's receipt of any notification of the suspension of the qualification of any Registrable Shares covered by a registration statement for sale in any jurisdiction or the initiation or threat of any proceeding for that purpose; and (v) the existence of any event, fact or circumstance that results in a registration statement or prospectus relating to Registrable Shares or any document incorporated therein by reference containing an untrue statement of material fact or omitting to state a material fact required to be stated therein or necessary to make the statements therein not misleading during the distribution of securities. The Company agrees to use its best effort to obtain the withdrawal of any order suspending the effectiveness of any such registration statement or state qualification at the earliest possible moment. (c) The Company shall promptly provide the Holders, at no cost to the Holders, with copies of any registration statement or prospectus relating to the Registrable Shares, and any post-effective amendment or supplement thereto, and such other documents as the requesting Holders may reasonably request in order to facilitate the disposition of the Registrable Shares covered by such registration statement. The Company consents to the use of each such prospectus and any supplement thereto by the Holders in connection with the offering and sale of the Registrable Shares covered by such registration statement or amendment thereto. The Company shall also file a sufficient number of copies of the prospectus and any post-effective amendment or supplement thereto with the New York Stock Exchange (or, if the Common Stock is no longer listed thereon, with such other securities exchange or market on which the Common Stock is then listed) so as to enable the Holders to the benefits of the prospectus delivery provisions of Rule 153 under the Securities Act. (d) The Company agrees to use its best efforts to cause the Registrable Shares covered by a registration statement to be registered with or approved by such state securities authorities as may be necessary to enable the Holders to consummate the disposition of such shares pursuant to the plan of distribution set forth in the registration statement. 5 (e) Subject to the Company's Suspension Right, if any event, fact or circumstance requiring an amendment to a registration statement relating to the Registrable Shares or supplement to a prospectus relating to the Registrable Shares shall exist, immediately upon becoming aware thereof the Company agrees to notify the Holders and prepare and furnish to the Holders a post-effective amendment to the registration statement or supplement to the prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Shares, the prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. (f) The Company agrees to use commercially reasonable efforts (including the payment of any listing fees) to obtain the listing of all Registrable Shares covered by the registration statement on each securities exchange on which securities of the same class are then listed. (g) The Company agrees to use its best efforts to comply with the Securities Act and the Exchange Act, and, as soon as reasonably practicable following the end of any fiscal year during which a registration statement effecting a Registration of the Registrable Shares shall have been effective, to make available to its security holders an earnings statement satisfying the provisions of Section 11(a) of the Securities Act. (h) The Company agrees to cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Registrable Shares to be sold pursuant to a Registration and not bearing any Securities Act legend; and enable certificates for such Registrable Shares to be issued for such numbers of shares and registered in such names as the Holders may reasonably request at least two business days prior to any sale of Registrable Shares. Section 3. EXPENSES OF REGISTRATION. The Company shall pay all Registration Expenses incurred in connection with the registration, qualification or compliance pursuant to Section 2 hereof. All Selling Expenses incurred in connection with the sale of Registrable Shares by any of the Holders shall be borne by the Holder selling such Registrable Shares. Each Holder shall pay the expenses of its own counsel. 6 Section 4. INDEMNIFICATION. (a) The Company will indemnify each Holder, each Holder's officers and directors, and each person controlling such Holder within the meaning of Section 15 of the Securities Act, against all expenses, claims, losses, damages and liabilities (including reasonable legal expenses), arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement or prospectus relating to the Registrable Shares, or any amendment or supplement thereto, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, PROVIDED, HOWEVER, that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission, made in reliance upon and in conformity with information furnished in writing to the Company by such Holder or underwriter for inclusion therein. (b) Each Holder will indemnify the Company, each of its directors and each of its officers who signs the registration statement, each underwriter, if any, of the Company's securities covered by such registration statement, and each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act, against all claims, losses, damages and liabilities (including reasonable legal fees and expenses) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement or prospectus, or any amendment or supplement thereto, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each ease to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement or prospectus, in reliance upon and in conformity with information furnished in writing to the Company by such Holder for inclusion therein. (c) Each party entitled to indemnification under this Section 4 (the "INDEMNIFIED PARTY") shall give notice to the party required to provide indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, but the omission to so notify the Indemnifying Party shall not relieve it from any liability which it may have to the Indemnified Party otherwise than pursuant to the provisions of this Section 4 and then, only to the extent of the actual damages suffered by such delay in notification. The Indemnifying Party shall assume the defense of such action, including the employment of counsel to be chosen by the Indemnifying Party to be reasonably satisfactory to the 7 Indemnified Party and payment of expenses. The Indemnified Party shall have the right to employ its own counsel in any such case, but the legal fees and expenses of such counsel shall be at the expense of the Indemnified Party, unless the employment of such counsel shall have been authorized in writing by the Indemnifying Party in connection with the defense of such action, or the Indemnifying Party shall not have employed counsel to take charge of the defense of such action or the Indemnified Party shall have reasonably concluded that there may be defenses available to it or them which are different from or additional to those available to the Indemnifying Party (in which case the Indemnifying Party shall not have the right to direct the defense of such action on behalf of the Indemnified Party), in any of which events such fees and expenses shall be borne by the Indemnifying Party. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. (d) If the indemnification provided for in this Section 4 is unavailable to a party that would have been an Indemnified Party under this Section in respect of any expenses, claims, losses, damages and liabilities referred to herein, then each party that would have been an Indemnifying Party hereunder shall, in lieu of indemnifying such Indemnified Party, contribute to the amount paid or payable by such Indemnified Party as a result of such expenses, claims, losses, damages and liabilities in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and such Indemnified Party on the other in connection with the statement or omission which resulted in such expenses, claims, losses, damages and liabilities, as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Indemnifying Party or such Indemnified Party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and each holder of Registrable Shares agrees that it would not be just and equitable if contribution pursuant to this Section were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 4(d). (e) No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 8 Section 5. INFORMATION TO BE FURNISHED BY HOLDERS. Each Holder shall furnish to the Company such information as the Company may reasonably request and as shall be required in connection with the Registration and related proceedings referred to in Section 2 hereof. If any Holder fails to provide the Company with such information within three weeks of the Company's request, the Company shall no longer have any obligations under Section 2 hereof with respect to such Holder or Registrable Shares owned by such Holder. Section 6. TRANSFER OF EXCHANGE AND REGISTRATION RIGHTS. The rights of each Holder under Section 2 hereof and the related rights of each Holder hereunder (the "RIGHTS") may be assigned by each Holder (i) if the Holder is a corporation, to a shareholder or shareholders of such Holder, (ii) if the Holder is a partnership, to a partner or partners of that partnership, (iii) if the Holder is an individual, to a Family Member (as such term is defined in the OP Agreement), (iv) upon the death of the Holder, to the heirs of the Holder by virtue of the Holder's will or the laws of descent and distribution, (v) if the Holder is a corporation or a partnership, to any Person into or with which the Holder is merged or consolidated or to which the Holder sells all or substantially all of its assets, in each case, only in connection with the transfer of Registrable Shares originally owned by the Holder or Pledged OP Units originally owned by the Holder in respect of which the Registrable Shares were issued, or (vi) if the Holder is CNB, to any Person succeeding to all of CNB's interest in the Registrable Shares, through foreclosure sale or otherwise; PROVIDED that (w) in each case, the transferee is an Accredited Investor, (x) such transfer is otherwise effected in accordance with applicable securities laws and the Company shall have been provided by the transferor and the transferee with such evidence thereof as the Company may request, including representations by the transferee in form and content reasonably acceptable to the Company, (y) the Company is given written notice of such transfer prior to such transfer (or, in the case of the death of the Holder, as soon as practicable following the death of the Holder), and (z) the transferee by written agreement delivered to the Company acknowledges that such transferee is bound by the terms of this Agreement. In the event of any such permitted transfer, the defined term "HOLDERS" shall from and after such transfer include such transferee. Section 7. ADDITIONAL REPRESENTATIONS. Each Holder agrees that, upon surrender of any Pledged OP Units for redemption as provided in the OP Partnership Agreement, such Holder shall make such investment and other representations in connection with (and as a condition to) the issuance of Common Stock in exchange for such Pledged OP Units as the Company or AIMCO OP may reasonably request. 9 Section 8. RULE 144 SALES. (a) The Company covenants that it will file the reports required to be filed by the Company under the Exchange Act, so as to enable the Holders to sell Registrable Shares pursuant to Rule 144 under the Securities Act. (b) In connection with any sale, transfer or other disposition by any Holder of any Registrable Shares pursuant to Rule 144 under the Securities Act, the Company shall cooperate with such Holder to facilitate the timely preparation and delivery of certificates representing Registrable Shares to be sold and not bearing any Securities Act legend, and enable certificates for such Registrable Shares to be for such number of shares and registered in such names as the selling Holder may reasonably request at least two business days prior to any sale of Registrable Shares. Section 9. MISCELLANEOUS. (a) GOVERNING LAW. This Agreement shall be governed in all respects by the laws of the State of Maryland. (b) ENTIRE AGREEMENT. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subject matter hereof. (c) AMENDMENT. No supplement, modification, waiver or termination of this Agreement shall be binding unless executed in writing by the party to be bound thereby. (d) NOTICES, ETC. Each notice, demand, request, request for approval, consent, approval, disapproval, designation or other communication (each of the foregoing being referred to herein as a notice) required or desired to be given or made under this Agreement shall be in writing (except as otherwise provided in this Agreement), and shall be effective and deemed to have been received (i) when delivered in person, (ii) when sent by fax with receipt acknowledged, (iii) five (5) days after having been mailed by certified or registered United States mail, postage prepaid, return receipt requested, or (iv) the next business day after having been sent by a nationally recognized overnight mail or courier service, receipt requested. Notices shall be addressed as follows (or at such other address or fax number as the Person shall specify by like notice): 10 if to the Company or the Investors: Terry Considine Apartment Investment and Management Company 1873 South Bellaire Street Denver, Colorado 80222 Fax: (303) 753-9538 if to CNB: George Adams Colorado National Bank 8401 East Bellview Denver, Colorado 80237 Fax: (303) 290-8671 and if to any assignee or transferee of a Holder, at such address or fax number as such assignee or transferee shall have furnished the Company in writing. . (e) COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which may be executed by fewer than all of the parties hereto (PROVIDED that each party executes one or more counterparts), each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument. (f) SEVERABILITY. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision. (g) SECTION TITLES. Section titles are for descriptive purposes only and shall not control or alter the meaning of the Agreement as set forth in the text. (h) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the parties hereto and their respective successors and assigns. (i) REMEDIES. The Company and the Investor acknowledge that there would be no adequate remedy at law if any party fails to perform any of its obligations hereunder, and accordingly agree that the Company and each Holder, in addition to any other remedy to which it may be entitled at law or in equity, shall be entitled to compel specific performance of the obligations of another party under this 11 Agreement in accordance with the terms and conditions of this Agreement in any court of the United States or any State thereof having jurisdiction. (j) ATTORNEYS' FEES. If the Company or any Holder brings an action to enforce its rights under this Agreement, the prevailing party in the action shall be entitled to recover its costs and expenses, including, without limitation, reasonable attorneys' fees, incurred in connection with such action, including any appeal of such action. (THE NEXT PAGE IS THE SIGNATURE PAGE) 12 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. APARTMENT INVESTMENT AND MANAGEMENT COMPANY By: ___________________________________________________ Name: _________________________________________________ Title: ______________________________________________ INVESTOR: Name:__________________________________________________ By:____________________________________________________ Name:__________________________________________________ Title:_________________________________________________ 13 EX-10.61 3 EXHIBIT 10.61 Exhibit 10.61 REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT, dated as of October 9, 1996 (this "AGREEMENT"), by and among Apartment Investment and Management Company, a Maryland corporation (the "COMPANY"), and the persons listed on SCHEDULE A hereto (each, an "INVESTOR"). Capitalized terms used, but not otherwise defined herein, shall have the meaning ascribed to them in the Acquisition Agreement (as defined below). WHEREAS, pursuant to that certain Acquisition Agreement, dated as of July 26, 1996 (the "ACQUISITION AGREEMENT"), by and among the Company, AIMCO Properties, L.P., a Delaware limited partnership ("AIMCO OP"), AIMCO/PAM Properties, L.P., John W. English, J.W. English Real Estate, Inc., J.W. English Development Co., J.W. English Investments Co., J.W. English Management Co., Easton Falls Partners, Ltd., and English Income Fund I, a Texas Limited Partnership, the Investors will be issued up to 716,137 units of limited partnership interest in AIMCO OP (the "ISSUED OP UNITS") upon the contribution of certain assets and the assignment of certain rights to AIMCO OP, all of which Issued OP Units when surrendered for redemption may be acquired by the Company in exchange for shares of the Company's Class A Common Stock, par value $.01 per share (the "COMMON STOCK"), subject to certain restrictions under the agreement of limited partnership of AIMCO OP (the "OP PARTNERSHIP AGREEMENT") and the Company's charter; WHEREAS, in connection with the Acquisition Agreement, the Company has agreed to register for sale by the Investors and certain transferees, the shares of Common Stock received by the Investors in exchange for Issued OP Units that are surrendered for redemption (collectively, the "REGISTRABLE SHARES"); and WHEREAS, the parties hereto desire to enter into this agreement to evidence the foregoing agreement of the Company and the mutual covenants of the parties relating thereto. NOW, THEREFORE, in consideration of the foregoing and the covenants of the parties set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, subject to the terms and conditions set forth herein, the parties hereby agree as follows: Section 1. CERTAIN DEFINITIONS. In this Agreement the following terms shall have the following respective meanings: "ACCREDITED INVESTOR" shall have the meaning set forth in Rule 501 of the General Rules and Regulations promulgated under the Securities Act. "AFFILIATE" shall mean, when used with respect to a specified person, another person that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the person specified. "COMMISSION" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the relevant time. "HOLDERS" shall mean (i) each of the Investors, (ii) each Person holding OP Units as a result of a Permitted Transfer (as such term is defined in the OP Agreement) to that Person of OP Units made by an Investor in accordance with the provisions of the OP Agreement, and (iii) each Person holding Registrable Shares as a result of a transfer or assignment to that Person of Registrable Shares made by an Investor in accordance with this Agreement other than pursuant to an effective registration statement or Rule 144 under the Securities Act. "INDEMNIFIED PARTY" shall have the meaning ascribed to it in Section 4(c) of this Agreement. "INDEMNIFYING PARTY" shall have the meaning ascribed to it in Section 4(c) of this Agreement. "OP UNITS" shall mean units of limited partnership interest in AIMCO OP. "PERSON" shall mean an individual, corporation, partnership, estate, trust, association, private foundation, joint stock company or other entity. The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act providing for the sale by the Holders of Registrable Shares in accordance with the method or methods of distribution designated by the Holders, 2 and the declaration or ordering of the effectiveness of such registration statement by the Commission. "REGISTRABLE SHARES" shall have the meaning ascribed to it in the recitals to this Agreement. "REGISTRATION EXPENSES" shall mean all out-of-pocket expenses (excluding Selling Expenses) incurred by the Company in complying with Section 2 hereof, including, without limitation, the following: (a) all registration, filing and listing fees; (b) fees and expenses of compliance with federal and state securities or real estate syndication laws (including, without limitation, reasonable fees and disbursements of counsel in connection with state securities and real estate syndication qualifications of the Registrable Shares under the laws of such jurisdictions as the Holders may designate); (c) printing (including, without limitation, expenses of printing or engraving certificates for the Registrable Shares in a form eligible for deposit with The Depository Trust Company and otherwise meeting the requirements of any securities exchange on which they are listed and of printing registration statements and prospectuses), messenger, telephone, shipping and delivery expenses; (d) fees and disbursements of counsel for the Company; (e) fees and disbursements of all independent public accountants of the Company (including without limitation the expenses of any annual or special audit and "cold comfort" letters required by the managing underwriter); (f) securities act liability insurance if the Company so desires; (g) fees and expenses of other Persons reasonably necessary in connection with the registration, including any experts, retained by the Company; (h) fees and expenses incurred in connection with the listing of the Registrable Shares on each securities exchange on which securities of the same class are then listed; and (i) fees and expenses associated with any NASD filing required to be made in connection with the registration statement. "RIGHTS" shall have the meaning ascribed to it in Section 6 of this Agreement. "RULE 144" shall mean Rule 144 promulgated by the Commission under the Securities Act. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the relevant time. "SELLING EXPENSES" shall mean all underwriting discounts, selling commissions and stock transfer taxes applicable to any sale of Registrable Shares. 3 Section 2. REGISTRATION. (a) The Company shall prepare and file with the Commission, within 10 months after the effective date hereof, a registration statement for the purpose of effecting a Registration of the sale of Registrable Shares by the Holders thereof; shall use its best efforts to effect such Registration on or prior to the first anniversary of the effective date hereof (including, without limitation, the execution of an undertaking to file post-effective amendments and appropriate qualification under applicable state securities and real estate syndication laws); and shall keep such Registration continuously effective until the earlier of (i) the third anniversary hereof, (ii) the date on which all Registrable Shares have been sold pursuant to such registration statement or Rule 144, and (iii) the date on which all of the Registrable Shares may be sold in accordance with Rule 144 under the Securities Act; PROVIDED, HOWEVER, that the Company shall not be obligated to take any action to effect any such Registration, qualification or compliance pursuant to this Section 2 in any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such Registration, qualification or compliance unless the Company is already subject to service in such jurisdiction. Notwithstanding the foregoing, the Company shall have the right (the "SUSPENSION RIGHT") to defer such filing (or suspend sales under any filed registration statement or defer the updating of any filed registration statement and suspend sales thereunder) for a period of not more than 120 days during any one-year period ending on December 31, if the Company shall furnish to the Holders a certificate signed by the President or any other executive officer or any director of the Company stating that in the judgment of the Company it would be detrimental to the Company and its shareholders to file such registration statement or amendment thereto at such time (or continue sales under a filed registration statement) and therefore the Company has elected to defer the filing of such registration statement (or suspend sales under a filed registration statement). (b) The Company shall promptly notify the Holders of the occurrence of the following events: (i) the filing with the Commission of the registration statement, any supplement to the prospectus or any amendment or post- effective amendment to the registration statement and, with respect to the registration statement or any post-effective amendment, when the same has become effective; 4 (ii) any request by the Commission for amendments or post-effective amendments to the registration statement or supplements to the prospectus or for additional information; (iii) the issuance by the Commission of any stop order suspending the effectiveness of the registration statement or the initiation or threatening of any proceedings for that purpose; (iv) the suspension of an effective registration statement by the Company in accordance with the last paragraph of Section 2(a) above; (v) the Company's receipt of any notification of the suspension of the qualification of any shares of Common Stock covered by the registration statement for sale in any jurisdiction or the initiation or threat of any proceeding for that purpose; and (vi) the existence of any event, fact or circumstance that results in the registration statement, the prospectus or any document incorporated therein by reference containing an untrue statement of material fact or omitting to state a material fact required to be stated therein or necessary to make the statements therein not misleading during the distribution of securities. The Company agrees to use its best effort to obtain the withdrawal of any order suspending the effectiveness of the registration statement or any state qualification at the earliest possible moment. (c) The Company shall provide to each Holder, at no cost to the Holders, promptly upon the effectiveness thereof, five copies of the prospectus and any post-effective amendment or supplement thereto, together with a copy of the registration statement and any amendment thereto used to effect the Registration of the Registrable Shares, each prospectus contained in such registration statement or post-effective amendment and any amendment or supplement thereto including financial statements and schedules, all documents incorporated therein by reference and all exhibits thereto. The Company shall also provide the Holders with such other documents as the requesting Holders may reasonably request in order to facilitate the disposition of the Registrable Shares covered by such registration statement. The Company consents to the use of each prospectus or any supplement 5 thereto by the Holders in connection with the offering and sale of the shares covered by such registration statement or any amendment thereto. The Company shall also file a sufficient number of copies of the prospectus and any post- effective amendment or supplement thereto with the New York Stock Exchange (or, if the Common Stock is no longer listed thereon, with such other securities exchange or market on which the Common Stock is then listed) so as to enable the Holders to the benefits of the prospectus delivery provisions of Rule 153 under the Securities Act. (d) The Company agrees to use its best efforts to cause the shares covered by the registration statement to be registered with or approved by such state securities authorities as may be necessary to enable the Holders to consummate the disposition of such shares pursuant to the plan of distribution set forth in the registration statement. (e) Subject to the Company's Suspension Right, if any event, fact or circumstance requiring an amendment to the registration statement or supplement to the prospectus shall exist, immediately upon becoming aware thereof the Company agrees to notify the Holders and prepare and furnish to the Holders a post-effective amendment to the registration statement or supplement to the prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Shares, the prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. (f) The Company agrees to use commercially reasonable efforts (including the payment of all listing fees) to obtain the listing of all Registrable Shares covered by the registration statement on each securities exchange on which securities of the same class are then listed. (g) The Company agrees to use its best efforts to comply with the Securities Act and the Exchange Act, and, as soon as reasonably practicable following the end of any fiscal year during which a registration statement effecting a Registration of the Registrable Shares shall have been effective, to make available to its security holders an earnings statement satisfying the provisions of Section 11(a) of the Securities Act. (h) The Company agrees to cooperate with the selling Holders to facilitate the timely preparation and delivery of certificates representing Registrable Shares to be sold pursuant to a Registration and not bearing any 6 Securities Act legend; and enable certificates for such Registrable Shares to be issued for such numbers of shares and registered in such names as the selling Holders may reasonably request at least two business days prior to any sale of Registrable Shares. Section 3. EXPENSES OF REGISTRATION. The Company shall pay all Registration Expenses incurred in connection with the registration, qualification or compliance pursuant to Section 2 hereof. All Selling Expenses incurred in connection with the sale of Registrable Shares by any of the Holders shall be borne by the Holder selling such Registrable Shares. Each Holder shall pay the expenses of its own counsel. Section 4. INDEMNIFICATION. (a) The Company will indemnify each Holder, each Holder's officers and directors, and each person controlling such Holder within the meaning of Section 15 of the Securities Act, against all expenses, claims, losses, damages and liabilities (including reasonable legal expenses), arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement or prospectus, or any amendment or supplement thereto, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, PROVIDED, HOWEVER, that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission, made in reliance upon and in conformity with information furnished in writing to the Company by such Holder or underwriter for inclusion therein. (b) Each Holder will indemnify the Company, each of its directors and each of its officers who signs the registration statement, each underwriter, if any, of the Company's securities covered by such registration statement, and each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act, against all claims, losses, damages and liabilities (including reasonable legal fees and expenses) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement or prospectus, or any amendment or supplement thereto, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each ease to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement or prospectus, in reliance upon and in conformity with 7 information furnished in writing to the Company by such Holder for inclusion therein. (c) Each party entitled to indemnification under this Section 4 (the "INDEMNIFIED PARTY") shall give notice to the party required to provide indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, but the omission to so notify the Indemnifying Party shall not relieve it from any liability which it may have to the Indemnified Party otherwise than pursuant to the provisions of this Section 4 and then, only to the extent of the actual damages suffered by such delay in notification. The Indemnifying Party shall assume the defense of such action, including the employment of counsel to be chosen by the Indemnifying Party to be reasonably satisfactory to the Indemnified Party and payment of expenses. The Indemnified Party shall have the right to employ its own counsel in any such case, but the legal fees and expenses of such counsel shall be at the expense of the Indemnified Party, unless the employment of such counsel shall have been authorized in writing by the Indemnifying Party in connection with the defense of such action, or the Indemnifying Party shall not have employed counsel to take charge of the defense of such action or the Indemnified Party shall have reasonably concluded that there may be defenses available to it or them which are different from or additional to those available to the Indemnifying Party (in which case the Indemnifying Party shall not have the right to direct the defense of such action on behalf of the Indemnified Party), in any of which events such fees and expenses shall be borne by the Indemnifying Party. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. (d) If the indemnification provided for in this Section 4 is unavailable to a party that would have been an Indemnified Party under this Section in respect of any expenses, claims, losses, damages and liabilities referred to herein, then each party that would have been an Indemnifying Party hereunder shall, in lieu of indemnifying such Indemnified Party, contribute to the amount paid or payable by such Indemnified Party as a result of such expenses, claims, losses, damages and liabilities in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and such Indemnified Party on the other in connection with the statement or omission which resulted in such expenses, claims, losses, damages and liabilities, as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether 8 the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Indemnifying Party or such Indemnified Party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and each holder of Registrable Shares agrees that it would not be just and equitable if contribution pursuant to this Section were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 4(d). (e) No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Section 5. INFORMATION TO BE FURNISHED BY HOLDERS. Each Holder shall furnish to the Company such information as the Company may reasonably request in writing (which request shall be submitted a reasonable period of time in advance of the filing of the registration statement or amendment or supplement thereto with respect to which the requested information relates) and as shall be required in connection with the Registration and related proceedings referred to in Section 2 hereof. If any Holder fails to provide the Company with such information within three weeks of the Company's request, the Company shall no longer have any obligations under Section 2 hereof with respect to such Holder or such Holder's Registrable Shares. Section 6. TRANSFER OF EXCHANGE AND REGISTRATION RIGHTS. The rights of each Investor under Section 2 hereof and the related rights of each Investor hereunder (the "RIGHTS") may be assigned by each Investor (i) if the Investor is a corporation, to a shareholder or shareholders of such Investor, (ii) if the Investor is a partnership, to a partner or partners of that partnership, (iii) if the Investor is an individual, to a Family Member (as such term is defined in the OP Agreement), (iv) upon the death of the Investor, to the heirs of the Investor by virtue of the Investor's will or the laws of descent and distribution, or (v) if the Investor is a corporation or a partnership, to any Person into or with which the Investor is merged or consolidated or to which the Investor sells all or substantially all of its assets, in each case, only in connection with the transfer of Registrable Shares originally owned by the Investor or OP Units originally owned by the Investor in respect of which the Registrable Shares were issued; PROVIDED that (w) in each case, the transferee is an Accredited Investor, (x) such transfer is otherwise effected in accordance with applicable securities laws and the Company shall have been provided by the transferor and the transferee with such evidence thereof as the Company may 9 request, including representations by the transferee in form and content reasonably acceptable to the Company, (y) the Company is given written notice of such transfer prior to such transfer (or, in the case of the death of the Investor, as soon as practicable following the death of the Investor), and (z) the transferee by written agreement delivered to the Company acknowledges that such transferee is bound by the terms of this Agreement. In the event of any such permitted transfer, the defined term "HOLDERS" shall from and after such transfer include such transferee. Section 7. ADDITIONAL REPRESENTATIONS. Each Holder of OP Units agrees that upon surrender of any such OP Units for redemption as provided in the OP Partnership Agreement, such Holder shall make such investment and other representations in connection with (and as a condition to) the issuance of Common Stock in exchange for such OP Units as the Company or AIMCO OP may reasonably request. Section 8. RULE 144 SALES. (a) The Company covenants that it will file the reports required to be filed by the Company under the Exchange Act, so as to enable any Holder to sell Registrable Shares pursuant to Rule 144 under the Securities Act. (b) In connection with any sale, transfer or other disposition by any Holder of any Registrable Shares pursuant to Rule 144 under the Securities Act, the Company shall cooperate with such Holder to facilitate the timely preparation and delivery of certificates representing Registrable Shares to be sold and not bearing any Securities Act legend, and enable certificates for such Registrable Shares to be for such number of shares and registered in such names as the selling Holders may reasonably request at least two business days prior to any sale of Registrable Shares. Section 9. EFFECTIVE DATE. This Agreement shall be effective as of the Closing. Section 10. MISCELLANEOUS. (a) GOVERNING LAW. This Agreement shall be governed in all respects by the laws of the State of Maryland. 10 (b) ENTIRE AGREEMENT. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subject matter hereof. (c) AMENDMENT. No supplement, modification, waiver or termination of this Agreement shall be binding unless executed in writing by the party to be bound thereby. (d) NOTICES, ETC. Each notice, demand, request, request for approval, consent, approval, disapproval, designation or other communication (each of the foregoing being referred to herein as a notice) required or desired to be given or made under this Agreement shall be in writing (except as otherwise provided in this Agreement), and shall be effective and deemed to have been received (i) when delivered in person, (ii) when sent by fax with receipt acknowledged, (iii) five (5) days after having been mailed by certified or registered United States mail, postage prepaid, return receipt requested, or (iv) the next business day after having been sent by a nationally recognized overnight mail or courier service, receipt requested. Notices shall be addressed as follows: (a) if to an Investor, at such Investor's address or fax number set forth below its signature hereon, or at such other address or fax number as the Investor shall have furnished to the Company in writing, or (b) if to any assignee or transferee of an Investor, at such address or fax number as such assignee or transferee shall have furnished the Company in writing, or (c) if to the Company, at the address of its principal executive offices and addressed to the attention of the President, or at such other address or fax number as the Company shall have furnished to the Investors or any assignee or transferee. Any notice or other communication required to be given hereunder to a Holder in connection with a registration may instead be given to the designated representative of such Holder. (e) COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which may be executed by fewer than all of the parties hereto (PROVIDED that each party executes one or more counterparts), each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument. (f) SEVERABILITY. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision. 11 (g) SECTION TITLES. Section titles are for descriptive purposes only and shall not control or alter the meaning of the Agreement as set forth in the text. (h) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the parties hereto and their respective successors and assigns. (i) REMEDIES. The Company and the Investors acknowledge that there would be no adequate remedy at law if any party fails to perform any of its obligations hereunder, and accordingly agree that the Company and each Holder, in addition to any other remedy to which it may be entitled at law or in equity, shall be entitled to compel specific performance of the obligations of another party under this Agreement in accordance with the terms and conditions of this Agreement in any court of the United States or any State thereof having jurisdiction. (j) ATTORNEYS' FEES. If the Company or any Holder brings an action to enforce its rights under this Agreement, the prevailing party in the action shall be entitled to recover its costs and expenses, including, without limitation, reasonable attorneys' fees, incurred in connection with such action, including any appeal of such action. 12 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. APARTMENT INVESTMENT AND MANAGEMENT COMPANY By: /s/ Peter K. Kompaniez -------------------------------------- Peter K. Kompaniez Vice Chairman INVESTOR: ---------------------------------------- JOHN WESLEY ENGLISH Investor's Address: J.W. ENGLISH REAL ESTATE, INC. By: /s/ John Wesley English ------------------------------------- Name: John Wesley English Title: Investor's Address: 7676 Woodway, Suite 200 Houston, Texas 77063 Phone: (713) 783-6811 Fax: (713) 972-1062 J.W. ENGLISH DEVELOPMENT CO. By: /s/ John Wesley English ------------------------------------ Name: John Wesley English Title: Investor's Address: 7676 Woodway, Suite 200 Houston, Texas 77063 Phone: (713) 783-6811 Fax: (713) 972-1062 J.W. ENGLISH INVESTMENTS CO. By: /s/ John Wesley English ------------------------------------ Name: John Wesley English Title: Investor's Address: 7676 Woodway, Suite 200 Houston, Texas 77063 Phone: (713) 783-6811 Fax: (713) 972-1062 EX-10.62 4 EXHIBIT 10.62 Exhibit 10.62 UNITHOLDER REGISTRATION RIGHTS AGREEMENT UNITHOLDER REGISTRATION RIGHTS AGREEMENT, dated as of November 7, 1996 (this "AGREEMENT"), by and among Apartment Investment and Management Company, a Maryland corporation (the "COMPANY"), and the persons listed on SCHEDULE A hereto (each, an "INVESTOR"). WHEREAS, pursuant to that certain Acquisition Agreement, dated as of July 26, 1996 (the "ACQUISITION AGREEMENT"), by and among the Company, AIMCO Properties, L.P., ("AIMCO OP"), AIMCO/PAM Properties, L.P., John W. English, J.W. English Real Estate, Inc., J.W. English Development Co., J.W. English Investments Co., J.W. English Management Co., Easton Falls Partners, Ltd., and English Income Fund I, a Texas Limited Partnership, the Investors will be issued units of limited partnership interest in AIMCO OP (the "ISSUED OP UNITS") upon the contribution of their limited partnership interests in certain limited partnerships to AIMCO OP, all of which Issued OP Units when surrendered for redemption may be acquired by the Company in exchange for shares of the Company's Class A Common Stock, par value $.01 per share (the "COMMON STOCK"), subject to certain restrictions under the agreement of limited partnership of AIMCO OP (the "OP PARTNERSHIP AGREEMENT") and the Company's charter; WHEREAS, in connection with the Acquisition Agreement, the Company has agreed to register for sale by the Investors and certain transferees, the shares of Common Stock received by the Investors in exchange for Issued OP Units that are surrendered for redemption (collectively, the "REGISTRABLE SHARES"); and WHEREAS, the parties hereto desire to enter into this agreement to evidence the foregoing agreement of the Company and the mutual covenants of the parties relating thereto. NOW, THEREFORE, in consideration of the foregoing and the covenants of the parties set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, subject to the terms and conditions set forth herein, the parties hereby agree as follows: Section 1. CERTAIN DEFINITIONS. In this Agreement the following terms shall have the following respective meanings: "ACCREDITED INVESTOR" shall have the meaning set forth in Rule 501(a) of the General Rules and Regulations promulgated under the Securities Act. "AFFILIATE" shall mean, when used with respect to a specified person, another person that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the person specified. "COMMISSION" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the relevant time. "HOLDERS" shall mean (i) each of the Investors, (ii) each Person holding OP Units as a result of a Permitted Transfer (as such term is defined in the OP Agreement) to that Person of OP Units made by an Investor in accordance with the provisions of the OP Agreement, and (iii) each Person holding Registrable Shares as a result of a transfer or assignment to that Person of Registrable Shares made by an Investor in accordance with this Agreement other than pursuant to an effective registration statement or Rule 144 under the Securities Act. "INDEMNIFIED PARTY" shall have the meaning ascribed to it in Section 4(c) of this Agreement. "INDEMNIFYING PARTY" shall have the meaning ascribed to it in Section 4(c) of this Agreement. "OP UNITS" shall mean units of limited partnership interest in AIMCO OP. "PERSON" shall mean an individual, corporation, partnership, estate, trust, association, private foundation, joint stock company or other entity. The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act providing for the sale by the Holders of Registrable Shares in accordance with the method or methods of distribution designated by the Holders, and the declaration or ordering of the effectiveness of such registration statement by the Commission. "REGISTRABLE SHARES" shall have the meaning ascribed to it in the recitals to this Agreement. "REGISTRATION EXPENSES" shall mean all out-of-pocket expenses (excluding Selling Expenses) incurred by the Company in complying with Section 2 hereof, including, without limitation, the following: (a) all registration, filing and listing fees; (b) fees and expenses of compliance with federal and state securities or real estate syndication laws (including, without limitation, reasonable fees and disbursements of counsel in connection with state securities and real estate syndication qualifications of the Registrable Shares under the laws of such jurisdictions as the Holders may designate); (c) printing (including, without limitation, expenses of printing or engraving certificates for the Registrable Shares in a form eligible for deposit with The Depository Trust Company and otherwise meeting the requirements of any securities exchange on which they are listed and of printing registration statements and prospectuses), messenger, telephone, shipping and delivery expenses; (d) fees and disbursements of counsel for the Company; (e) fees and disbursements of all independent public accountants of the Company (including without limitation the expenses of any annual or special audit and "cold comfort" letters required by the managing underwriter); (f) securities act liability insurance if the Company so desires; (g) fees and expenses of other Persons reasonably necessary in connection with the registration, including any experts, retained by the Company; (h) fees and expenses incurred in connection with the listing of the Registrable Shares on each securities exchange 2 on which securities of the same class are then listed; and (i) fees and expenses associated with any NASD filing required to be made in connection with the registration statement. "RIGHTS" shall have the meaning ascribed to it in Section 6 of this Agreement. "RULE 144" shall mean Rule 144 promulgated by the Commission under the Securities Act. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the relevant time. "SELLING EXPENSES" shall mean all underwriting discounts, selling commissions and stock transfer taxes applicable to any sale of Registrable Shares. Section 2. REGISTRATION. (a) The Company shall prepare and file with the Commission, within 10 months after the date hereof, a registration statement for the purpose of effecting a Registration of the sale of Registrable Shares by the Holders thereof; shall use its best efforts to effect such Registration on or prior to the first anniversary of the date hereof (including, without limitation, the execution of an undertaking to file post-effective amendments and appropriate qualification under applicable state securities and real estate syndication laws); and shall keep such Registration continuously effective until the earlier of (i) the third anniversary hereof, (ii) the date on which all Registrable Shares have been sold pursuant to such registration statement or Rule 144, and (iii) the date on which all of the Registrable Shares may be sold in accordance with Rule 144 under the Securities Act; PROVIDED, HOWEVER, that the Company shall not be obligated to take any action to effect any such Registration, qualification or compliance pursuant to this Section 2 in any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such Registration, qualification or compliance unless the Company is already subject to service in such jurisdiction. Notwithstanding the foregoing, the Company shall have the right (the "SUSPENSION RIGHT") to defer such filing (or suspend sales under any filed registration statement or defer the updating of any filed registration statement and suspend sales thereunder) for a period of not more than 120 days during any one-year period ending on December 31, if the Company shall furnish to the Holders a certificate signed by the President or any other executive officer or any director of the Company stating that in the judgment of the Company it would be detrimental to the Company and its shareholders to file such registration statement or amendment thereto at such time (or continue sales under a filed registration statement) and therefore the Company has elected to defer the filing of such registration statement (or suspend sales under a filed registration statement). (b) The Company shall promptly notify the Holders of the occurrence of the following events: (i) when any registration statement or post-effective amendment thereto filed with the Commission has become effective; 3 (ii) the issuance by the Commission of any stop order suspending the effectiveness of the registration statement; (iii) the suspension of an effective registration statement by the Company in accordance with the last paragraph of Section 2(a) above; (iv) the Company's receipt of any notification of the suspension of the qualification of any shares of Common Stock covered by the registration statement for sale in any jurisdiction or the initiation or threat of any proceeding for that purpose; and (v) the existence of any event, fact or circumstance that results in the registration statement, the prospectus or any document incorporated therein by reference containing an untrue statement of material fact or omitting to state a material fact required to be stated therein or necessary to make the statements therein not misleading during the distribution of securities. The Company agrees to use its best effort to obtain the withdrawal of any order suspending the effectiveness of the registration statement or any state qualification at the earliest possible moment. (c) The Company shall promptly provide the Holders, at no cost to the Holders, with copies of the registration statement, the prospectus and any post-effective amendment or supplement thereto, and such other documents as the requesting Holders may reasonably request in order to facilitate the disposition of the Registrable Shares covered by such registration statement. The Company consents to the use of each prospectus or any supplement thereto by the Holders in connection with the offering and sale of the shares covered by such registration statement or any amendment thereto. The Company shall also file a sufficient number of copies of the prospectus and any post-effective amendment or supplement thereto with the New York Stock Exchange (or, if the Common Stock is no longer listed thereon, with such other securities exchange or market on which the Common Stock is then listed) so as to enable the Holders to the benefits of the prospectus delivery provisions of Rule 153 under the Securities Act. (d) The Company agrees to use its best efforts to cause the shares covered by the registration statement to be registered with or approved by such state securities authorities as may be necessary to enable the Holders to consummate the disposition of such shares pursuant to the plan of distribution set forth in the registration statement. (e) Subject to the Company's Suspension Right, if any event, fact or circumstance requiring an amendment to the registration statement or supplement to the prospectus shall exist, immediately upon becoming aware thereof the Company agrees to notify the Holders and prepare and furnish to the Holders a post-effective amendment to the registration statement or supplement to the prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Shares, the prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. 4 (f) The Company agrees to use commercially reasonable efforts (including the payment of any listing fees) to obtain the listing of all Registrable Shares covered by the registration statement on each securities exchange on which securities of the same class are then listed. (g) The Company agrees to use its best efforts to comply with the Securities Act and the Exchange Act, and, as soon as reasonably practicable following the end of any fiscal year during which a registration statement effecting a Registration of the Registrable Shares shall have been effective, to make available to its security holders an earnings statement satisfying the provisions of Section 11(a) of the Securities Act. (h) The Company agrees to cooperate with the selling Holders to facilitate the timely preparation and delivery of certificates representing Registrable Shares to be sold pursuant to a Registration and not bearing any Securities Act legend; and enable certificates for such Registrable Shares to be issued for such numbers of shares and registered in such names as the selling Holders may reasonably request at least two business days prior to any sale of Registrable Shares. Section 3. EXPENSES OF REGISTRATION. The Company shall pay all Registration Expenses incurred in connection with the registration, qualification or compliance pursuant to Section 2 hereof. All Selling Expenses incurred in connection with the sale of Registrable Shares by any of the Holders shall be borne by the Holder selling such Registrable Shares. Each Holder shall pay the expenses of its own counsel. Section 4. INDEMNIFICATION. (a) The Company will indemnify each Holder, each Holder's officers and directors, and each person controlling such Holder within the meaning of Section 15 of the Securities Act, against all expenses, claims, losses, damages and liabilities (including reasonable legal expenses), arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement or prospectus, or any amendment or supplement thereto, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, PROVIDED, HOWEVER, that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission, made in reliance upon and in conformity with information furnished in writing to the Company by such Holder or underwriter for inclusion therein. (b) Each Holder will indemnify the Company, each of its directors and each of its officers who signs the registration statement, each underwriter, if any, of the Company's securities covered by such registration statement, and each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act, against all claims, losses, damages and liabilities (including reasonable legal fees and expenses) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement or prospectus, or any amendment or supplement thereto, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each ease to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration 5 statement or prospectus, in reliance upon and in conformity with information furnished in writing to the Company by such Holder for inclusion therein. (c) Each party entitled to indemnification under this Section 4 (the "INDEMNIFIED PARTY") shall give notice to the party required to provide indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, but the omission to so notify the Indemnifying Party shall not relieve it from any liability which it may have to the Indemnified Party otherwise than pursuant to the provisions of this Section 4 and then, only to the extent of the actual damages suffered by such delay in notification. The Indemnifying Party shall assume the defense of such action, including the employment of counsel to be chosen by the Indemnifying Party to be reasonably satisfactory to the Indemnified Party and payment of expenses. The Indemnified Party shall have the right to employ its own counsel in any such case, but the legal fees and expenses of such counsel shall be at the expense of the Indemnified Party, unless the employment of such counsel shall have been authorized in writing by the Indemnifying Party in connection with the defense of such action, or the Indemnifying Party shall not have employed counsel to take charge of the defense of such action or the Indemnified Party shall have reasonably concluded that there may be defenses available to it or them which are different from or additional to those available to the Indemnifying Party (in which case the Indemnifying Party shall not have the right to direct the defense of such action on behalf of the Indemnified Party), in any of which events such fees and expenses shall be borne by the Indemnifying Party. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. (d) If the indemnification provided for in this Section 4 is unavailable to a party that would have been an Indemnified Party under this Section in respect of any expenses, claims, losses, damages and liabilities referred to herein, then each party that would have been an Indemnifying Party hereunder shall, in lieu of indemnifying such Indemnified Party, contribute to the amount paid or payable by such Indemnified Party as a result of such expenses, claims, losses, damages and liabilities in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and such Indemnified Party on the other in connection with the statement or omission which resulted in such expenses, claims, losses, damages and liabilities, as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Indemnifying Party or such Indemnified Party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and each holder of Registrable Shares agrees that it would not be just and equitable if contribution pursuant to this Section were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 4(d). (e) No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 6 Section 5. INFORMATION TO BE FURNISHED BY HOLDERS. Each Holder shall furnish to the Company such information as the Company may reasonably request and as shall be required in connection with the Registration and related proceedings referred to in Section 2 hereof. If any Holder fails to provide the Company with such information within three weeks of the Company's request, the Company shall no longer have any obligations under Section 2 hereof with respect to such Holder or such Holder's Registrable Shares. Section 6. TRANSFER OF EXCHANGE AND REGISTRATION RIGHTS. The rights of each Investor under Section 2 hereof and the related rights of each Investor hereunder (the "RIGHTS") may be assigned by each Investor (i) if the Investor is a corporation, to a shareholder or shareholders of such Investor, (ii) if the Investor is a partnership, to a partner or partners of that partnership, (iii) if the Investor is an individual, to a Family Member (as such term is defined in the OP Agreement), (iv) upon the death of the Investor, to the heirs of the Investor by virtue of the Investor's will or the laws of descent and distribution, or (v) if the Investor is a corporation or a partnership, to any Person into or with which the Investor is merged or consolidated or to which the Investor sells all or substantially all of its assets, in each case, only in connection with the transfer of Registrable Shares originally owned by the Investor or OP Units originally owned by the Investor in respect of which the Registrable Shares were issued; PROVIDED that (w) in each case, the transferee is an Accredited Investor, (x) such transfer is otherwise effected in accordance with applicable securities laws and the Company shall have been provided by the transferor and the transferee with such evidence thereof as the Company may request, including representations by the transferee in form and content reasonably acceptable to the Company, (y) the Company is given written notice of such transfer prior to such transfer (or, in the case of the death of the Investor, as soon as practicable following the death of the Investor), and (z) the transferee by written agreement delivered to the Company acknowledges that such transferee is bound by the terms of this Agreement. In the event of any such permitted transfer, the defined term "HOLDERS" shall from and after such transfer include such transferee. Section 7. ADDITIONAL REPRESENTATIONS. Each Holder agrees that upon surrender of any OP Units for redemption as provided in the OP Partnership Agreement, such Holder shall make such investment and other representations in connection with (and as a condition to) the issuance of Common Stock in exchange for such OP Units as the Company or AIMCO OP may reasonably request. Section 8. RULE 144 SALES. (a) The Company covenants that it will file the reports required to be filed by the Company under the Exchange Act, so as to enable any Holder to sell Registrable Shares pursuant to Rule 144 under the Securities Act. (b) In connection with any sale, transfer or other disposition by any Holder of any Registrable Shares pursuant to Rule 144 under the Securities Act, the Company shall cooperate with such Holder to facilitate the timely preparation and delivery of certificates representing Registrable Shares to be sold and not bearing any Securities Act legend, and enable certificates for such Registrable Shares to be for such number of shares and registered in such names as the selling Holders may reasonably request at least two business days prior to any sale of Registrable Shares. 7 Section 9. MISCELLANEOUS. (a) GOVERNING LAW. This Agreement shall be governed in all respects by the laws of the State of Delaware. (b) ENTIRE AGREEMENT. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subject matter hereof. (c) AMENDMENT. No supplement, modification, waiver or termination of this Agreement shall be binding unless executed in writing by the party to be bound thereby. (d) NOTICES, ETC. Each notice, demand, request, request for approval, consent, approval, disapproval, designation or other communication (each of the foregoing being referred to herein as a notice) required or desired to be given or made under this Agreement shall be in writing (except as otherwise provided in this Agreement), and shall be effective and deemed to have been received (i) when delivered in person, (ii) when sent by fax with receipt acknowledged, (iii) five (5) days after having been mailed by certified or registered United States mail, postage prepaid, return receipt requested, or (iv) the next business day after having been sent by a nationally recognized overnight mail or courier service, receipt requested. Notices shall be addressed as follows: (a) if to an Investor, at such Investor's address or fax number set forth below its signature hereon, or at such other address or fax number as the Investor shall have furnished to the Company in writing, or (b) if to any assignee or transferee of an Investor, at such address or fax number as such assignee or transferee shall have furnished the Company in writing, or (c) if to the Company, at the address of its principal executive offices and addressed to the attention of the President, or at such other address or fax number as the Company shall have furnished to the Investors or any assignee or transferee. Any notice or other communication required to be given hereunder to a Holder in connection with a registration may instead be given to the designated representative of such Holder. (e) COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which may be executed by fewer than all of the parties hereto (PROVIDED that each party executes one or more counterparts), each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument. (f) SEVERABILITY. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision. (g) SECTION TITLES. Section titles are for descriptive purposes only and shall not control or alter the meaning of the Agreement as set forth in the text. (h) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the parties hereto and their respective successors and assigns. (i) REMEDIES. The Company and the Investors acknowledge that there would be no adequate remedy at law if any party fails to perform any of its obligations hereunder, and accordingly agree that the Company and each Holder, in addition to any other remedy to which 8 it may be entitled at law or in equity, shall be entitled to compel specific performance of the obligations of another party under this Agreement in accordance with the terms and conditions of this Agreement in any court of the United States or any State thereof having jurisdiction. (j) ATTORNEYS' FEES. If the Company or any Holder brings an action to enforce its rights under this Agreement, the prevailing party in the action shall be entitled to recover its costs and expenses, including, without limitation, reasonable attorneys' fees, incurred in connection with such action, including any appeal of such action. 9 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. APARTMENT INVESTMENT AND MANAGEMENT COMPANY By: /s/ Peter Kompaniez -------------------------------------- Name: Peter Kompaniez -------------------------------------- Title: Vice Chairman -------------------------------------- INVESTOR: Name: -------------------------------------- By: -------------------------------------- Name: -------------------------------------- Title: -------------------------------------- Investor's Address: ------------------------------------------------ ------------------------------------------------ ------------------------------------------------ Phone: -------------------------------------- Fax: -------------------------------------- 10 EX-10.63 5 EXHIBIT 10.63 GUARANTY AGREEMENT (Apartment Investment and Management Company) WHEREAS, the execution of this Guaranty Agreement is a condition to borrowing from BANK UNITED, a federal savings bank successor by name change to Bank United of Texas, a federal savings bank ("Lender"), making a loan, as may be from time to time modified, extended and renewed, to Castle Rock Joint Venture, a Texas joint venture ("Borrower"), the aggregate principal amount of FIVE MILLION AND NO/100 DOLLARS ($5,000,000.00), evidenced by that certain Promissory Note described below. NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, the undersigned, Apartment Investment and Management Company, a Maryland corporation (the "Guarantor"), hereby irrevocably and unconditionally guarantees to Lender the prompt payment and performance of the Guaranteed Obligations (hereinafter defined), this Guaranty Agreement being upon the following terms: 1. The term "Guaranteed Obligations," as used herein, includes: (a) that certain Promissory Note dated June 12, 1996, as modified by that certain Modification of Loan Agreement and Loan Documents of even date herewith, in the original principal amount of $5,000,000.00, executed by Borrower and payable to the order of Lender (the "Note"); (b) interest on any of the indebtedness described in (a) preceding; (c) any renewal or extension of the indebtedness described in (a) through (b) preceding, or any part thereof; (d) all other obligations of Borrower to Lender under that certain Loan Agreement dated June 12, 1996, as modified by that certain Modification of Loan Agreement and Loan Documents of even date herewith (the "Loan Agreement"); and (e) and all other obligations of Borrower to Lender under the Loan Documents as that term is described in the Loan Agreement, including, but not limited to, the Deed of Trust as that term is defined in the Loan Agreement. 2. This instrument shall be an absolute, continuing, irrevocable, and unconditional guaranty, of payment and performance and not a guaranty of collection, and Guarantor shall remain liable on its obligations hereunder until the payment and performance in full of the Guaranteed Obligations (other than contingent obligations under indemnification provisions of the Loan Documents), unless otherwise provided herein. 3. If Guarantor becomes liable for any indebtedness owing by Borrower to Lender by endorsement or otherwise, other than under this Guaranty Agreement, such liability shall not be in any manner impaired or affected hereby, and the rights of Lender hereunder shall be cumulative of any and all other rights that Lender may ever have against Guarantor. The exercise by Lender of any right or remedy hereunder or under any other instrument, or at law or in equity, shall not preclude the concurrent or subsequent exercise of any other right or remedy. 4. In the Event of Default (as that term is defined in the Loan Agreement) by Borrower in payment or performance of the Guaranteed Obligations, or any part thereof, when such Guaranteed Obligations becomes due, whether by its terms, by acceleration, or otherwise, Guarantor shall promptly pay the amount due thereon to Lender upon written demand in lawful money of the United States and it shall not be necessary for Lender, in order to enforce such payment by Guarantor, first to institute suit or exhaust its remedies against Borrower or others liable on such Guaranteed Obligations, or to enforce any rights against any collateral which shall ever have been given to secure such Guaranteed Obligations. 5. Guarantor hereby agrees that its obligations under this Guaranty Agreement shall not be released, diminished, impaired, reduced, or affected by the occurrence of any reason or event, including, without limitation, one or more of the following events, whether or not with notice to or the consent of Guarantor: (a) the taking or accepting of collateral as security for any or all of the Guaranteed Obligations or the release, surrender, exchange, or subordination of any collateral now or hereafter securing any or all of the Guaranteed Obligations; (b) any partial release of the liability of Guarantor hereunder, or the release of any other guarantor from liability for any or all of the Guaranteed Obligations; (c) any disability of Borrower, or the dissolution, insolvency, or bankruptcy of Borrower, Guarantor, or any party at any time liable for the payment of any or all of the Guaranteed Obligations; (d) any renewal, extension, modification, waiver, amendment, or rearrangement of any or all of the Guaranteed Obligations or any instrument, document, or agreement evidencing, securing, or otherwise relating to any or all of the Guaranteed Obligations that would increase Guarantor's liability; (e) any adjustment, indulgence, forbearance, waiver, or compromise that may be granted or given by Lender to Borrower, Guarantor, or any other party ever liable for any or all of the Guaranteed Obligations; (f) any neglect, delay, omission, failure, or refusal of Lender to take or prosecute any action for the collection of any of the Guaranteed Obligations or to foreclose or take or prosecute any action in connection with any instrument, document, or agreement evidencing, securing, or otherwise relating to any or all of the Guaranteed Obligations; (g) the unenforceability or invalidity of any or all of the Guaranteed Obligations or any instrument, document, or agreement evidencing, securing, or otherwise relating to any or all of the Guaranteed Obligations; (h) any payment by Borrower to Lender is determined by a court to constitute a preference under the bankruptcy laws or if for any other reason Lender is required to refund such payment or pay the amount thereof to someone else; (i) the settlement or compromise of any of the Guaranteed Obligations; (j) the failure of Lender to perfect or -2- continue any security interest or lien securing any or all of the Guaranteed Obligations; or (k) the failure of Lender to preserve, protect, maintain, or insure any collateral securing any or all of the Guaranteed Obligations. 6. Guarantor represents and warrants to Lender as follows: (a) Guarantor has the power and authority to execute, deliver and perform its obligations under this Guaranty Agreement and this Guaranty Agreement constitutes the legal, valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with its terms, except as limited by bankruptcy, insolvency, or other laws of general application relating to the enforcement of creditor's rights. (b) To Guarantor's knowledge, the execution, delivery, and performance by Guarantor of this Guaranty Agreement do not and will not violate Guarantor's bylaws, any law or any order of any court, governmental authority or arbitrator and do not and will not conflict with, result in a breach of, or constitute a default under, or result in the imposition of any lien upon any assets of Guarantor pursuant to the provisions of any indenture, mortgage, deed of trust, security agreement, franchise, permit, license, or other instrument or agreement to which Guarantor or its properties is bound. (c) No authorization, approval, or consent of, and no filing or registration with, any court, governmental authority, or third party is necessary for the execution, delivery, or performance by Guarantor of this Guaranty Agreement or the validity or enforceability thereof. (d) All of Guarantor's federal income tax returns for tax year 1995 and all prior years have been filed and the resulting reported tax liability has been paid in full. 7. Guarantor covenants and agrees that, as long as the Guaranteed Obligations or any part thereof is outstanding (other than contingent obligations under indemnification provisions of the Loan Documents): (a) Guarantor will furnish to Lender as soon as available, and in any event on or before April 15, with respect to the preceding calendar year, beginning with the calendar year ending December 31, 1996, and annually thereafter a copy of the financial statements of Guarantor for such fiscal year, including, without limitation, balance sheets (reflecting, without limitation, all contingent liabilities), income statements, statements of changes in financial position (reflecting, without limitation, cash flow changes), and (ii) sixty (60) days after filing, a copy of -3- Guarantor's United States income tax return form, as filed with the Internal Revenue Service, together with any and all exhibits and schedules filed in connection therewith. The financial statements and tax return shall be accompanied by a certificate of Guarantor to Lender stating that no default under this Guaranty Agreement and no event which with notice or lapse of time or both would be a default under this Guaranty Agreement, or if in Guarantor's opinion a default has occurred, stating in reasonable detail the nature of any such default. (b) Guarantor will furnish promptly to Lender written notice of the occurrence of any default under this Guaranty Agreement or an Event of Default under the Loan Documents of which Guarantor has knowledge. (c) Guarantor will furnish promptly to Lender such additional information concerning the financial condition of Guarantor as may be required by any law, statute or directive of any governmental agency or authority having jurisdiction over Lender. 8. All present and future indebtedness of Borrower to Guarantor is hereby subordinated to the Guaranteed Obligations. All sums paid to Guarantor by Borrower following and during the continuation of or resulting in the occurrence of an Event of Default on account of such present and future indebtedness shall be held in trust by Guarantor until such Event of Default is cured to Lender's satisfaction for the benefit of Lender and upon demand shall forthwith be paid to Lender without affecting the liability of Guarantor under this Guaranty Agreement except that all such payments shall be applied to the Guaranteed Obligations. Upon the request of Lender, Guarantor shall execute, deliver, and endorse to Lender such documents and instruments as Lender deems necessary or appropriate to perfect, preserve, and enforce its rights hereunder. 9. No amendment or waiver of any provision of this Guaranty Agreement nor consent to any departure by the Guarantor therefrom shall in any event be effective unless the same shall be in writing and signed by Lender. No failure on the part of Lender to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. 10. Any acknowledgment or new promise, whether by payment of principal or interest or otherwise and whether by Borrower or others (including Guarantor), with respect to any of the Guaranteed Obligations shall, if the statute of limitations on any of the -4- Guaranteed Obligations shall have commenced to run, toll the running of such statute of limitations and, if the period of such statute of limitations shall have expired, prevent the operation of such statute of limitations. 11. This Guaranty Agreement is for the benefit of Lender and its successors and assigns, and in the event of an assignment of the Guaranteed Obligations, or any part thereof, the rights and benefits hereunder, to the extent applicable to the Obligations so assigned, may be transferred with such Obligations. This Guaranty Agreement is binding not only on Guarantor, but on Guarantor's successors and assigns and personal representatives. 12. Guarantor recognizes that Lender is relying upon this Guaranty Agreement and the undertakings of Guarantor hereunder in making a loan to Borrower under the Loan Documents and further recognizes that the execution and delivery of this Guaranty Agreement is a material inducement to Lender in entering into the Loan Agreement and the Loan Documents. 13. This Guaranty Agreement is executed and delivered as an incident to a lending transaction performable in Harris County, Texas, and shall be governed by and construed in accordance with the laws of the State of Texas. Venue in any dispute relating to this Guaranty Agreement, whether in federal or state court, shall be laid in Harris County, Texas. 14. Guarantor shall pay on demand all reasonable attorneys' fees and all other costs and expenses incurred by Lender in connection with the preparation, enforcement, or collection of this Guaranty Agreement. 15. Except as herein provided, Guarantor hereby waives promptness, diligence, demand of payment, notice of acceptance of this Guaranty Agreement, presentment, notice of protest, notice of dishonor, notice of intent to accelerate, notice of acceleration, notice of the incurring by Borrower of additional Obligations, and all other notices and demands with respect to the Guaranteed Obligations and this Guaranty Agreement. 16. Guarantor acknowledges that this Guaranty Agreement is executed in connection with the Loan Agreement and that Guarantor is aware of the Obligations of Borrower and the terms thereunder. Guarantor agrees that Lender may exercise any and all rights granted to it under the Loan Documents without affecting the validity or enforceability of this Guaranty Agreement. 17. Guarantor hereby expressly waives any right to trial by jury in any action or legal proceeding arising out of or relating to the Loan Documents on the transactions contemplated thereby or hereby. -5- 18. Guarantor acknowledges and agrees that the value of the consideration received and to be received by Guarantor as a result of Borrower and Lender entering into the Loan Documents and Guarantor executing and delivering this Guaranty Agreement is reasonably worth at least as much as the liability and obligation of Guarantor hereunder, and such liability and obligation and the Loan Documents has benefited or may reasonably be expected to benefit Guarantor directly or indirectly. 19. Notwithstanding anything herein to the contrary, the liability of Guarantor for repayment of the portion of the Guaranteed Obligations consisting of principal evidenced by the Note shall be limited to $1,000,000.00, together with accrued interest on such amounts in accordance with the terms of the Note. For purposes of determining Guarantor's obligations hereunder, all payments made under the Note shall be applied first to accrued, unpaid interest on the Note, then to the portion of the unpaid principal balance of the Note that is not guaranteed hereunder, and the balance, if any, to the portion of the principal balance of the Note that is guaranteed hereunder. If Lender exercises the power of sale described in the Deed of Trust, as defined in the Loan Agreement, all proceeds from such sale shall be applied to Lender's cost of collection, reasonable attorney's fees, court costs and other expenses, then to accrued, unpaid interest on the Note, then to the portion of the unpaid principal balance of the Note that is not guaranteed hereunder, and, finally, to the remaining principal balance of the portion of the Note that is guaranteed hereunder. 20. In addition to the foregoing, Guarantor shall be personally liable without limitation to Lender, in the amount of any loss, damage or cost incurred by Lender resulting from (1) fraud or intentional misrepresentation by Borrower in connection with obtaining the loan evidenced by the Note or in complying with Borrower's agreements and any other Loan Documents entered into by and between Borrower and Lender in connection with the loan evidenced by the Note. In such event, the "loss" shall be deemed to include but not be limited to all sums owing from Borrower under the Note, and any other Loan Documents (as defined in the Loan Agreement); (2) failure to remit to Lender insurance proceeds, condemnation awards, or other sums or payments attributable to the Project (as defined in the Loan Agreement) in accordance with the provisions of the Deed of Trust (as defined in the Loan Agreement), except to the extent that Borrower did not have the legal right, because of a bankruptcy, receivership, or similar judicial proceeding, to direct disbursement of such sums or payments; (3) failure to apply to principal and interest under the Note, payment of utilities, taxes and assessments, ground rents, if any, on the Project or other operating expenses or obligations under the Loan Documents as they become due and payable, or otherwise remit to Lender all rents, profits, issues, products and income of the Project received during the existence of an Event of Default under -6- the Note or the Loan Documents (including any received or collected by or on behalf of Borrower during the existence of an Event of Default, except to the extent that Borrower did not have the legal right, because of a bankruptcy, receivership or similar judicial proceeding, to direct the disbursement of such sums); (4) removal of any personalty or fixtures constituting a portion of the Project; (5) failure to pay or provide a bond in accordance with the law to discharge any valid mechanics', materialman's or similar lien claimants' liens arising from work performed or materials furnished in connection with the Project prior to any sale or foreclosure thereof; (6) Borrower's failure to deliver to Lender during the existence of an Event of Default under the Loan Documents and upon demand by Lender, all security deposits received in connection with the Property (and not returned to tenants or applied to tenants' defaults); (7) any waste of or damage to the Project caused by the willful or wanton acts or omissions of Borrower or its agents; (8) any obligation of Borrower arising under the Environmental Hazards section of the Deed of Trust and/or the Amended and Restated Certificate and Indemnification Regarding Hazardous Substances of even date herewith executed by Borrower and Guarantor in which event, the "loss" shall include all monetary obligations of Borrower thereunder; or (9) Borrower's failure to pay transfer fees and charges due under the Deed of Trust, in which event the "loss" shall equal such unpaid fees and charges. 21. The following shall be the basis for the finder of fact's determination of the fair market value of the Property (defined in the Loan Agreement) as of the date of the foreclosure sale in proceedings governed by Sections 51.003, 51.004, and 51.005 of the Texas Property Code (as amended from time to time); (i) The Property shall be valued in an "as is" condition as of the date of the foreclosure sale, without any assumption or expectation that the Property will be repaired or improved in any manner before a resale o the Property after foreclosure; (ii) The valuation shall be based upon an assumption that the foreclosure purchaser desires a prompt resale of the Property for cash promptly (but no later than twelve months) following the foreclosure sale; (iii) All reasonable closing costs customarily borne by the seller in a commercial real estate transaction should be deducted from the gross fair market value of the Property, including, without limitation, brokerage commissions, title insurance, a survey of the Property, tax prorations, attorney's fees, and marketing costs; (iv) The gross fair market value of the Property shall be further discounted to account for any estimated -7- holding costs associated with maintaining the Property pending sale, including, without limitation, utilities expenses, property management fees, taxes and assessments (to the extent not accounted for in (d)(iii) above, and other maintenance expenses; and (v) Any expert opinion testimony given or considered in connection with a determination of the fair market value of the Property must be given by persons having at least five years experience in appraising property similar to the Property and who have conducted and prepared a complete written appraisal of the Property taking into consideration the factors set forth above. 22. ARBITRATION To the maximum extent not prohibited by law, any controversy, dispute or claim arising out of, in connection with, or relating to the Loan Documents or any transaction provided for therein, including but not limited to any claim based on or arising from an alleged tort or an alleged breach of any agreement contained in any of the Loan Documents, shall, at the request of any party to the Loan Documents (either before or after the commencement of judicial proceedings), be settled by arbitration pursuant to Title 9 of the United States Code, which the parties hereto acknowledge and agree applies to the transaction involved herein, and in accordance with the Commercial Arbitration Rules of the American Arbitration Association (the "AAA"). If Title 9 of the United States Code is inapplicable to any such claim, dispute or controversy for any reason, such arbitration shall be conducted pursuant to the Texas General Arbitration Act and in accordance with the Commercial Arbitration Rules of the AAA. In any such arbitration proceeding: (i) all statutes of limitations which would otherwise be applicable shall apply; and (ii) the proceeding shall be conducted in Houston, Texas, by a single arbitrator, if the amount in controversy is $1,000,000.00 or less, or by a panel of three arbitrators if the amount in controversy is over $1,000,000.00. All arbitrators shall be selected by the process of appointment from a panel pursuant to Section 13 of the AAA Commercial Arbitration Rules and each arbitrator shall be either an active attorney or retired judge with an AAA acknowledged expertise in the subject matter of the controversy, dispute or claim. Any award rendered in any such arbitration proceeding shall be final and binding, and judgment upon any such award may be entered in any court having jurisdiction. If Guarantor or Lender files a proceeding in any court to resolve any such controversy, dispute or claim, such action shall not constitute a waiver of the right of such party or a bar to the right of any other party to seek arbitration under the provisions of this Section of that or any other claim, dispute or controversy, and the court shall, upon motion of any party to the proceeding, -8- direct that such controversy, dispute or claim be arbitrated in accordance with this Section. Notwithstanding any of the foregoing, the parties hereto agree that no arbitrator or panel of arbitrators shall possess or have the power to (i) assess punitive damages, (ii) dissolve, rescind or reform (except that the arbitrator may construe ambiguous terms) this Agreement, (iii) enter judgment on the debt evidenced by the above-described Note, (iv) exercise equitable powers or issue or enter any equitable remedies or (v) allow discovery of attorney/client privileged information; the parties hereby further waive, each to the other, any claims for punitive damages and agree that neither an arbitrator nor any court shall have the power to assess such damages. The Commercial Arbitration Rules of the AAA are hereby modified to this extent for the purpose of arbitration of any dispute, controversy or claim arising out of, in connection with, or relating to this Agreement. No provision of, or the exercise of any rights under, this Section shall limit or impair the right of Lender before, during or after any arbitration proceeding to: (i) exercise self-help remedies such as setoff or repossession; (ii) foreclose (judicially or otherwise) any lien on or security interest in the Property described in the Loan Agreement; or (iii) obtain emergency relief from a court of competent jurisdiction to prevent the dissipation, damage, destruction, transfer, hypothecation, pledging or concealment of assets or of collateral securing any indebtedness, obligation or guaranty referenced in the Loan Agreement. Such emergency relief may be in the nature of, but is not limited to: prejudgment attachments, garnishments, sequestrations, appointments of receivers, or other emergency injunctive relief to preserve the status quo. EXECUTED on the date shown below to be effective on the 12th day of November, 1996. GUARANTOR: APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation By: /s/ H. Alcock ----------------------------------- Name: Harry Alcock --------------------------------- Title: Vice President -------------------------------- Date: 11/12/96 --------------------------------- -9- THE STATE OF COLORADO COUNTY OF DENVER This instrument was acknowledged before me on 12 November, 1996 by Harry Alcock, VP of Apartment Investment and management Company, a Maryland Corporation, on behalf of said corporation. /s/ Alix Kyle --------------------------------- Notary Public in and for [SEAL] The State of Colorado My Commission Expires 1/12/2000 -10- EX-10.64 6 EXHIBIT 10.64 AMENDMENT AND MODIFICATION OF PROMISSORY NOTE AND DEED OF TRUST THIS AMENDMENT AND MODIFICATION OF PROMISSORY NOTE AND DEED OF TRUST is made as of the 26th day of December, 1996, by and between TOWNSHIP AT HIGHLANDS PARTNERS, LTD., a Texas limited partnership whose address is 1873 South Bellaire Street, 19th Floor, Denver, Colorado 80222 (sometimes referred to as "Borrower" or "Grantor") and BANK UNITED, a federally chartered savings bank formerly known; as Bank United of Texas FSB, whose address for notice is 3200 Southwest Freeway, Suite 1900, Houston, Texas 7702' (sometimes referred to as "Lender" or "Beneficial"). RECITALS A. Borrower is the maker of and the Borrower under that certain Promissory Note payable to Lender dated April 8, 1996, in the original principal amount of $9,250,000.00 (the "Note"). B. Borrower is the grantor under that certain Deed of Trust, Assignment and Security Agreement for the benefit of Lender dated April 8, 1996, and recorded April 10, 1996, under Reception No. A6043035 of the real estate records of the Office of the Clerk and Recorder of Arapahoe County, Colorado (the "Deed of Trust"). C. The Note was additionally secured by each of the Loan Documents (as that term is defined in the Note), including but not limited to the following: l. Assignment of Rents and Leases executed by Borrower for the benefit of Lender dated April 8, 1996, and recorded April 10, l996, under Reception No. A6043036 of the real estate records of the Office of the Clerk and Recorder of Arapahoe County, Colorado. 2. UCC-1 Financing Statement executed by Borrower for the benefit of Lender recorded April 10, 1996, under Reception No. A6043037 of the real estate records of the Office of the Clerk and Recorder of Arapahoe County, Colorado. 3. Subordination Agreement executed by Borrower for the benefit of Lender dated April 8, 1996, and recorded April 10, 1996, under Reception No, A6043039 of the real estate records of the Office of the Clerk and Recorder of Arapahoe County, Colorado. 4. Collateral Assignment of Declarant's Rights executed by Borrower for the benefit of Lender dated April 8, 1996, and recorded April 10, 1996, under Reception No. A6043040 of the real estate records of the Office of the Clerk and Recorder of Arapahoe County, Colorado. Page 1 of 5 Pages D. Borrower desires and Lender agrees to amend and modify the Promissory Note and Deed of Trust on the terms and conditions set forth herein. AGREEMENT NOW THEREFORE, in consideration of the mutual promises and covenants herein contained and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, Borrower and Lender agree as follows: l. INTEREST RATE MODIFICATION. The second paragraph of the Note is deleted in its entirety and replaced with the following: In addition to the principal sum referred to in the first paragraph of this Note, Borrower also agrees to pay interest on all amounts so advanced and remaining from time to time unpaid hereon from the date hereof until maturity at 180 basis points (1.80%) above the 30-day London Interbank Offered Rate ("LIBOR") as reflected on page five of the Telerate screen or any other reputable quoting service selected by Lender (the "Basic Rate"), such interest to be paid in arrears, until default or acceleration as provided elsewhere in this Note. 2. DEED OF TRUST MODIFICATION. Clause (a) of the first sentence of Article II of the Deed of Trust is hereby deleted in its entirety and replaced with the following: (a) The payment of all amounts from time to time outstanding under the promissory note from Grantor to Beneficiary dated April 8, 1996, in the original principal amount of $9,250,000.00, plus interest thereon at 1.80% above the 30-day LIBOR as announced from time to time, as mere specifically set forth in the promissory note (the "Note), and any and all renewals, extensions for any period, modifications, amendments, enlargements or rearrangements thereof; and he remainder of that first sentence shall not be modified or deleted in any respect. 3. NO OTHER MODIFICATIONS. Except as set forth in this Amendment, all other provisions of the Note and Deed of Trust shall remain in full force and effect. This Amendment shall not be deemed to discharge, modify or amend any of the other Loan Documents. 4. TRANSFER OF INTEREST. Lender hereby consents to the merger of Borrower's general partner, JWE Township at Highlands, L.L.C., a Delaware limited liability company, with and into AIMCO Township at Highlands, L.P., a Delaware limited partnership, whose general partner is AIMCO Holdings, L.P., a Delaware limited partnership, whose general partner is AIMCO Holdings QRS, Inc., a Delaware corporation. This consent shall not be deemed a waiver of Lender's right to require that Borrower obtain Lender's prior written consent to any further Transfers, whether Transfers of the Property or any part thereof or Transfers of Equity Interests in the Borrower, all as set forth in the Loan Documents. Page 2 of 5 Pages 5. MODIFICATION FEE: ATTORNEY'S FEES. Borrower shall pay to Lender a modification fee pursuant to a separate agreement, and Borrower shall pay to Lender its attorney's fees and all expenses incurred by Lender in connection with the preparation of this first amendment, including all costs associated with obtaining endorsements to the mortgagee's policy of title insurance issued in connection with the Deed of Trust. 6. REPRESENTATION AND WARRANTIES. By execution hereof, Borrower hereby reaffirms, ratifies and restates all representations and warranties contained in the Loan Documents, including but not limited to the representations and warranties set forth in Article IV of the Deed of Trust. 7. NO WAIVER. Lender's execution of this Amendment shall not constitute a waiver (either express or implied) of the requirement that any further modification of the Loan Documents shall squire the express written approval of Lender, 8. NOTICES. All notices, requests, consents, demands and other communications required or permitted hereunder or under any other Loan Document shall be in writing and, unless otherwise specifically provided by applicable law, including but not limited to C.R.S. $$ 38-38-101, ET SEQ., or in such other Loan Document, shall be deemed given immediately upon personal delivery, or five (5) days following deposit into the United States Mail marked registered or certified mail, postage prepaid at the addresses specified above (unless changed in accordance with law, including recordation, if necessary). Any such notice or communication shall deemed effective either at the time of personal delivery or, in the case of delivery, service or mail, as of the date of first attempted delivery at the address and in the manner provided herein, or in the case of telegram, telex or facsimile, upon receipt. Notwithstanding the foregoing, no notice of change of address shall be effective except upon receipt. This paragraph shall not be construed in any way to affect or impair any waiver of, notice or demand provided in any Loan Document or to require giving of notice or demand to or upon any person in any situation or for any reason. 9. NO DEFAULT. As of the present date, the Note, Deed of Trust and Loan Documents am in full force and effect, there are no offsets in amounts due and owing under the Note, there are no defenses to the enforcement of the Note, Deed of Trust or any of the Loan Documents, there are no counterclaims, setoffs or rights to assert a counterclaim or setoff against Lender, and there are no violations of or defaults by or on the part of Lender under any of the terms of the Note, Deed of Trust or any of the Loan Documents. Borrower has no knowledge of any circumstances giving rise to any credit or offset against its obligation to pay the Note or any installments under the Note or any amounts due and owing under the Deed of Trust or any of the Loan Documents. 10. CONFLICT. a. In the event of any conflict between the Note and Deed of Trust and this Amendment, the terms and provisions of this Amendment shall control. Page 3 of 5 Pages b. Except as modified by this Amendment, the terms and provisions of the Note and Deed of Trust shall remain in full force and effect. c. Any capitalized term not defined herein shall have the meaning ascribed to it in the Note, Deed of Trust or the Loan Documents. 11. ENTIRE AGREEMENT. There are no secret agreements or understandings between Borrower and Lender with respect to the Note where the debt evidenced thereby or with respect to the Deed of Trust or the security instruments. This Amendment represents the entire agreement between the parties concerning the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations, promises and writings with respect to the subject matter hereof. IN WITNESS WHEREOF, Borrower and Lender have set their hands and seals as of the day and year first above written. BORROWER: TOWNSHIP AT HIGHLANDS PARTNERS, LTD., a Texas limited partnership BY: AIMCO TOWNSHIP AT HIGHLANDS, L.P.,a Delaware limited partnership, successor by merger to JWE Township at Highlands, L.L.C., a Delaware limited liability company, general partner BY: AIMCO HOLDINGS, L.P., a Delaware limited partnership, general partner BY: AIMCO HOLDINGS QRS, INC., a Delaware corporation, general partner BY: /s/ Harry Alcock ------------------------ Vice President ------- Page 4 of 5 Pages LENDER: BANK UNITED, a federally chartered savings bank, f/k/a Bank United of Texas FSB BY: /s/ Illegible ------------------------------------------- Managing Director STATE OF Colorado ) ----------- )SS. COUNTY OF Denver ) ----------- The above and foregoing instrument was acknowledged before me this 21 day of December, 1996, by Harry Alcock as Vice President of AIMCO Holdings, QRS, Inc., a Delaware corporation, as general partner of AIMCO Holdings, L.P., a Delaware limited partnership, as general partner of AIMCO Township at Highlands, L.P., a Delaware limited partnership, successor by merger to JWE Township at Highlands, L.L.C., a Delaware limited liability company, as general partner of Township at Highlands Partners, Ltd., Texas limited partnership. Witness my hand and official seal. My commission expires: 2-13-00 ------------------------- /s/ Lori A. Dieckman ---------------------------------- Notary Public STATE OF TEXAS ) ) SS. COUNTY OF HARRIS ) The above and foregoing instrument was acknowledged before me this 27th day of December, 1996, by Michael T. Davitt as Managing Director of Bank United, a federally chartered savings bank. Witness my hand and official seal. My commission expires: 3/25/97 ------------------- /s/ Joyce Cranford ---------------------------------- Notary Public [SEAL] Page 5 of 5 Pages EX-10.65 7 EXHIBIT 10.65 REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT, dated as of December 27, 1996 (this "AGREEMENT"), by and among Apartment Investment and Management Company, a Maryland corporation (the "COMPANY"), and the persons listed on Schedule A hereto (each, an "INVESTOR"). WHEREAS, pursuant to the Agreement for Purchase and Sale of Property and Joint Escrow Instructions, dated as of December 27, 1996 (the "PURCHASE AGREEMENT"), by and among AIMCO Properties, L.P., a Delaware limited partnership, Pacific Multi-Family Group, L.P., a Texas limited partnership, and Ticor Title Company, the Investors will acquire in the aggregate the number of shares (the "REGISTRABLE SHARES") of the Company's Class A Common Stock, par value $.01 per share (the "COMMON STOCK") equal to $4,900,000.00 divided by the average (i.e., mean) closing price of the Common Stock on the New York Stock Exchange for the ten trading days immediately preceding the date which is three trading days prior to closing under the Purchase Agreement (the "STOCK PRICE"), in the amounts set forth opposite the name of each Investor under the heading "Registrable Shares" on Schedule A hereto; and WHEREAS, it is a condition to the closing under the Purchase Agreement that the Company enter into this Agreement with the Investors to provide for the registration of the Registrable Shares. NOW, THEREFORE, in consideration of the foregoing and the covenants of the parties set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, subject to the terms and conditions set forth herein, the parties hereby agree as follows: Section 1. CERTAIN DEFINITIONS. In this Agreement the following terms shall have the following respective meanings: "ACCREDITED INVESTOR" shall have the meaning set forth in Rule 501 of the General Rules and Regulations promulgated under the Securities Act. "AFFILIATE" shall mean, when used with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the Person specified. "COMMISSION" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the relevant time. "HOLDERS" shall mean (i) each of the Investors, and (ii) each Person holding Registrable Shares as a result of a transfer or assignment to that Person of Registrable Shares made by an Investor in accordance with this Agreement other than pursuant to an effective registration statement or Rule 144. "INDEMNIFIED PARTY" shall have the meaning ascribed to it in Section 4(c) of this Agreement. "INDEMNIFYING PARTY" shall have the meaning ascribed to it in Section 4(c) of this Agreement. "PERSON" shall mean an individual, corporation, partnership, estate, trust, association, private foundation, joint stock company or other entity. The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act providing for the sale by the Holders of Registrable Shares in accordance with the method or methods of distribution designated by the Holders, and the declaration or ordering of the effectiveness of such registration statement by the Commission. "REGISTRABLE SHARES" shall have the meaning ascribed to it in the recitals to this Agreement. "REGISTRATION EXPENSES" shall mean all out-of-pocket expenses (excluding Selling Expenses) incurred by the Company in complying with Section 2 hereof, including, without limitation, the following: (a) all registration, filing and listing fees; (b) fees and expenses of compliance with federal and state securities or real estate syndication laws (including, without limitation, reasonable fees and disbursements of counsel in connection with state securities and real estate syndication qualifications of the Registrable Shares under the laws of such jurisdictions as the Holders may reasonably designate); (c) printing (including, without limitation, expenses of printing or engraving certificates for the Registrable Shares in a form eligible for deposit with The Depository Trust 2 Company and otherwise meeting the requirements of any securities exchange on which they are listed and of printing registration statements and prospectuses), messenger, telephone, shipping and delivery expenses; (d) fees and disbursements of counsel for the Company; (e) fees and disbursements of all independent public accountants of the Company (including without limitation the expenses of any annual or special audit and "cold comfort" letters required by the managing underwriter); (f) securities act liability insurance if the Company so desires; (g) fees and expenses of other Persons reasonably necessary in connection with the registration, including any experts, retained by the Company; (h) fees and expenses incurred in connection with the listing of the Registrable Shares on each securities exchange on which securities of the same class are then listed; and (i) fees and expenses associated with any NASD filing required to be made in connection with the registration statement. "RULE 144" shall mean Rule 144 promulgated by the Commission under the Securities Act. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the relevant time. "SELLING EXPENSES" shall mean all underwriting discounts, selling commissions and stock transfer taxes applicable to any sale of Registrable Shares. Section 2. REGISTRATION. (a) The Company shall prepare and file with the Commission a registration statement for the purpose of effecting a Registration of the sale of Registrable Shares by the Holders; shall use commercially reasonable efforts to effect such Registration on or before March 4, 1997 (including, without limitation, the execution of an undertaking to file post-effective amendments and appropriate qualification under applicable state securities and real estate syndication laws); and shall keep such Registration continuously effective until the earlier of (i) the third anniversary of the date hereof, (ii) the date on which all Registrable Shares have been sold pursuant to such registration statement or Rule 144, (iii) the date on which all of the Registrable Shares may be sold in accordance with Rule 144 under the Securities Act, and (iv) the date on which all of the Registrable Shares have been repurchased by the Company in accordance with Section 2(i) below; PROVIDED, HOWEVER, that the Company shall not be obligated to take any action to effect any such Registration, qualification or compliance pursuant to this Section 2 in any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such Registration, 3 qualification or compliance unless the Company is already subject to service in such jurisdiction. Notwithstanding the foregoing, the Company shall have the right (the "Suspension Right") to defer such filing (or suspend sales under any filed registration statement or defer the updating of any filed registration statement and suspend sales thereunder) for a period of not more than 120 days during any one year period ending on December 31, if the Company shall furnish to the Holders a certificate signed by the President or any other executive officer or any director of the Company stating that, in the good faith judgment of the Company, it would be detrimental to the Company and its shareholders to file such registration statement or amendment thereto at such time (or continue sales under a filed registration statement) and therefore the Company has elected to defer the filing of such registration statement (or suspend sales under a filed registration statement). (b) The Company shall promptly notify the Holders of the occurrence of the following events: (i) when any registration statement relating to the Registrable Shares or post-effective amendment thereto filed with the Commission has become effective; (ii) the issuance by the Commission of any stop order suspending the effectiveness of any registration statement relating to the Registrable Shares; (iii) the suspension of an effective registration statement by the Company in accordance with the last paragraph of Section 2(a) above; (iv) the Company's receipt of any notification of the suspension of the qualification of any Registrable Shares covered by a registration statement for sale in any jurisdiction; and (v) the existence of any event, fact or circumstance that results in a registration statement or prospectus relating to Registrable Shares or any document incorporated therein by reference containing an untrue statement of material fact or omitting to state a material fact required to be stated therein or necessary to make the statements therein not misleading during the distribution of securities. 4 The Company agrees to use its best effort to obtain the withdrawal of any order suspending the effectiveness of any such registration statement or state qualification at the earliest possible moment. (c) The Company shall promptly provide the Holders, at no cost to the Holders, with copies of any registration statement or prospectus relating to the Registrable Shares, and any post-effective amendment or supplement thereto, and such other documents as the requesting Holders may reasonably request in order to facilitate the disposition of the Registrable Shares covered by such registration statement. The Company consents to the use of each such prospectus and any supplement thereto by the Holders in connection with the offering and sale of the Registrable Shares covered by such registration statement or amendment thereto. The Company shall also file a sufficient number of copies of the prospectus and any post-effective amendment or supplement thereto with the New York Stock Exchange (or, if the Common Stock is no longer listed thereon, with such other securities exchange or market on which the Common Stock is then listed) so as to enable the Holders to the benefits of the prospectus delivery provisions of Rule 153 under the Securities Act. (d) The Company agrees to use its best efforts to cause the Registrable Shares covered by a registration statement to be registered with or approved by such state securities authorities as may be necessary to enable the Holders to consummate the disposition of such shares pursuant to the plan of distribution set forth in the registration statement. (e) Subject to the Company's Suspension Right, if any event, fact or circumstance requiring an amendment to a registration statement relating to the Registrable Shares or supplement to a prospectus relating to the Registrable Shares shall exist, immediately upon becoming aware thereof the Company agrees to notify the Holders and prepare and furnish to the Holders a post-effective amendment to the registration statement or supplement to the prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Shares, the prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. (f) The Company agrees to use commercially reasonable efforts (including the payment of any listing fees) to obtain the listing of all Registrable Shares covered by the registration statement on each securities exchange on which securities of the same class are then listed. 5 (g) The Company agrees to use its best efforts to comply with the Securities Act and the Exchange Act, and, as soon as reasonably practicable following the end of any fiscal year during which a registration statement effecting a Registration of the Registrable Shares shall have been effective, to make available to its security holders an earnings statement satisfying the provisions of Section 11(a) of the Securities Act. (h) The Company agrees to cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Registrable Shares to be sold pursuant to a Registration and not bearing any Securities Act legend; and enable certificates for such Registrable Shares to be issued for such numbers of shares and registered in such names as the Holders may reasonably request at least two business days prior to any sale of Registrable Shares. (i) If the Company has not effected a Registration of all of the Registrable Shares (excluding shares for which, pursuant to Section 5, the Company no longer has any obligations under Section 2) on or before March 4, 1997, whether or not the Company has exercised the Company's Suspension Right, the Holder of any such shares that have not been registered may give written notice (the "Put Notice") to the Company of such Holder's desire to sell such shares (the "Put Shares") to the Company or to an affiliate designated by the Company. Within 14 days after receipt of any Put Notice, the Company shall give such Holder notice of the date (the "Put Date") on which the Company proposes to purchase or to cause its designated affiliate to purchase such Put Shares and such other information as the Holder may need in order to sell such Put Shares to the Company or its designated affiliate on the Put Date. The Put Date shall not be later than 28 days after the Company's receipt of the relevant Put Notice. Unless the Company has effected a Registration of the Put Shares prior thereto (in which case this Section 2(i) shall no longer apply), on the Put Date, such Holder shall sell, assign, transfer and deliver to the Company or its designated affiliate the Put Shares, free and clear of any and all liens, claims and encumbrances, and the Company shall purchase or cause its designated affiliate to purchase the Put Shares from such Holder for an aggregate purchase price (the "Put Purchase Price") equal to (i) the Stock Price, multiplied by (ii) the number of Put Shares so purchased. The closing of the purchase and sale of the Put Shares hereunder (the "Put Closing") shall take place at the offices of Skadden, Arps, Slate, Meagher & Flom in Los Angeles, California, on the Put Date. At the Put Closing, such Holder shall deliver to the Company or its designated affiliate (i) a counterpart copy of a stock purchase agreement, in the form provided by the Company or its designated affiliate and reasonably acceptable to the Holder (the "Stock Purchase Agreement"), duly executed by the Holder, (ii) certificates representing the Put Shares, in negotiable form, duly endorsed by the Holder in blank, or with separate stock 6 transfer powers attached thereto and duly signed in blank by the Holder, and (iii) a receipt executed by the Holder, evidencing the Holder's receipt of the Put Purchase Price and reasonably satisfactory to the Company or its designated affiliate. At the Put Closing, the Company shall deliver or shall cause its designated affiliate to deliver to the Holder (i) a counterpart copy of the Stock Purchase Agreement, duly executed by the Company or its designated affiliate, and (ii) immediately available funds payable to the Holder in an aggregate amount equal to the Put Purchase Price. Section 3. EXPENSES OF REGISTRATION. The Company shall pay all Registration Expenses incurred in connection with the registration, qualification or compliance pursuant to Section 2 hereof. All Selling Expenses incurred in connection with the sale of Registrable Shares by any of the Holders shall be borne by the Holder selling such Registrable Shares. Each Holder shall pay the expenses of its own counsel. Section 4. INDEMNIFICATION. (a) The Company will indemnify each Holder, each Holder's officers and directors, and each person controlling such Holder within the meaning of Section 15 of the Securities Act, against all expenses, claims, losses, damages and liabilities (including reasonable legal expenses), arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement or prospectus relating to the Registrable Shares, or any amendment or supplement thereto, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, PROVIDED, HOWEVER, that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission, made in reliance upon and in conformity with information furnished in writing to the Company by such Holder or underwriter for inclusion therein. (b) Each Holder will indemnify the Company, each of its directors and each of its officers who signs the registration statement, each underwriter, if any, of the Company's securities covered by such registration statement, and each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act, against all claims, losses, damages and liabilities (including reasonable legal fees and expenses) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement or prospectus, or any amendment or supplement thereto, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the 7 extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement or prospectus, in reliance upon and in conformity with information furnished in writing to the Company by such Holder for inclusion therein. (c) Each party entitled to indemnification under this Section 4 (the "INDEMNIFIED PARTY") shall give notice to the party required to provide indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, but the omission to so notify the Indemnifying Party shall not relieve it from any liability which it may have to the Indemnified Party otherwise than pursuant to the provisions of this Section 4 and then, only to the extent of the actual damages suffered by such delay in notification. The Indemnifying Party shall assume the defense of such action, including the employment of counsel to be chosen by the Indemnifying Party to be reasonably satisfactory to the Indemnified Party, and payment of expenses. The Indemnified Party shall have the right to employ its own counsel in any such case, but the legal fees and expenses of such counsel shall be at the expense of the Indemnified Party, unless the employment of such counsel shall have been authorized in writing by the Indemnifying Party in connection with the defense of such action, or the Indemnifying Party shall not have employed counsel to take charge of the defense of such action or the Indemnified Party shall have reasonably concluded that there may be defenses available to it or them which are different from or additional to those available to the Indemnifying Party (in which case the Indemnifying Party shall not have the right to direct the defense of such action on behalf of the Indemnified Party), in any of which events such fees and expenses shall be borne by the Indemnifying Party. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. (d) If the indemnification provided for in this Section 4 is unavailable to a party that would have been an Indemnified Party under this Section in respect of any expenses, claims, losses, damages and liabilities referred to herein, then each party that would have been an Indemnifying Party hereunder shall, in lieu of indemnifying such Indemnified Party, contribute to the amount paid or payable by such Indemnified Party as a result of such expenses, claims, losses, damages and liabilities in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and such Indemnified Party on the other in connection with the statement or omission which resulted in such expenses, claims, losses, damages and liabilities, as well as any other relevant equitable considerations. The relative fault shall be determined 8 by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Indemnifying Party or such Indemnified Party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and each holder of Registrable Shares agrees that it would not be just and equitable if contribution pursuant to this Section were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 4(d). (e) No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Section 5. INFORMATION TO BE FURNISHED BY HOLDERS. Each Holder shall furnish to the Company such information as the Company may reasonably request and as shall be required in connection with the Registration and related proceedings referred to in Section 2 hereof. If any Holder fails to provide the Company with such information within three weeks of the Company's request, the Company shall no longer have any obligations under Section 2 hereof with respect to such Holder or Registrable Shares owned by such Holder. Section 6. PLEDGE OF REGISTRABLE SHARES. The Registrable Shares may be pledged by each Investor to any financial institution holding a loan that encumbers the property that is the subject of the Purchase and Sale Agreement, provided that (i) in each case, the pledgee is an Accredited Investor, (ii) such pledge is otherwise effected in accordance with applicable securities laws and the Company shall have been provided by the pledgor and the pledgee with such evidence thereof as the Company may request, including representations by the pledgee in form and content reasonably acceptable to the Company, (iii) the Company is given written notice of such pledge prior to such pledge, and (iv) the pledgee by written agreement delivered to the Company acknowledges that such pledgee is bound by the terms of this Agreement and provides the Company with an address and fax number for receipt of notices hereunder. Section 7. INTENTIONALLY OMITTED. Section 8. RULE 144 SALES. (a) The Company covenants that it will file the reports required to be filed by the Company under the Exchange Act, so as to enable the Holders to sell Registrable Shares pursuant to Rule 144 under the Securities Act. 9 (b) In connection with any sale, transfer or other disposition by any Holder of any Registrable Shares pursuant to Rule 144 under the Securities Act, the Company shall cooperate with such Holder to facilitate the timely preparation and delivery of certificates representing Registrable Shares to be sold and not bearing any Securities Act legend, and enable certificates for such Registrable Shares to be for such number of shares and registered in such names as the selling Holder may reasonably request at least two business days prior to any sale of Registrable Shares. Section 9. MISCELLANEOUS. (a) GOVERNING LAW. This Agreement shall be governed in all respects by the laws of the State of Maryland. (b) ENTIRE AGREEMENT. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subject matter hereof. (c) AMENDMENT. No supplement, modification, waiver or termination of this Agreement shall be binding unless executed in writing by the party to be bound thereby. (d) NOTICES, ETC. Each notice, demand, request, request for approval, consent, approval, disapproval, designation or other communication (each of the foregoing being referred to herein as a notice) required or desired to be given or made under this Agreement shall be in writing (except as otherwise provided in this Agreement), and shall be effective and deemed to have been received (i) when delivered in person, (ii) when sent by fax with receipt acknowledged, (iii) five (5) days after having been mailed by certified or registered United States mail, postage prepaid, return receipt requested, or (iv) the next business day after having been sent by a nationally recognized overnight mail or courier service, receipt requested. Notices shall be addressed as follows (or at such other address or fax number as the Person shall specify by like notice): if to the Company: Mr. Terry Considine Apartment Investment and Management Company 1873 South Bellaire Street Denver, Colorado 80222 Fax: (303) 753-9538 10 with a copy (which copy shall not constitute notice) to: Rod Guerra, Esq. Skadden, Arps, Slate, Meagher & Flom 300 South Grand Avenue, 34th Floor Los Angeles, California 90071 Fax: (213) 687-5900 if to any Investor, to it at the address or fax number set forth below its signature hereon; and if to any assignee or transferee of an Investor, at such address or fax number as such assignee or transferee shall have furnished the Company in writing. (e) COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which may be executed by fewer than all of the parties hereto (PROVIDED that each party executes one or more counterparts), each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument. (f) SEVERABILITY. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision. (g) SECTION TITLES. Section titles are for descriptive purposes only and shall not control or alter the meaning of the Agreement as set forth in the text. (h) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the parties hereto and their respective successors and assigns. (i) REMEDIES. The Company and the Investors acknowledge that there would be no adequate remedy at law if any party fails to perform any of its obligations hereunder, and accordingly agree that the Company and each Holder, in addition to any other remedy to which it may be entitled at law or in equity, shall be entitled to compel specific performance of the obligations of another party under this Agreement in accordance with the terms and conditions of this Agreement in any court of the United States or any State thereof having jurisdiction. (j) ATTORNEYS' FEES. If the Company or any Holder brings an action to enforce its rights under this Agreement, the prevailing party in the action shall be entitled to recover its costs and expenses, including, without limitation, reasonable 11 attorneys' fees and costs, incurred in connection with such action, including any appeal of such action. (k) LIMITATION ON SALE OF REGISTERED COMMON STOCK. Notwithstanding anything to the contrary contained herein, the Investors agree to, and agree to cause each of the Holders to, limit on any trading day the aggregate trades and sales of Registered Common Stock held by the Holders to no more than 10,000 shares of Common Stock. (THE NEXT PAGE IS THE SIGNATURE PAGE) 12 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. APARTMENT INVESTMENT AND MANAGEMENT COMPANY By: /s/ Harry Alcock ---------------------------------------- Name: Harry Alcock -------------------------------------- Title: Vice President ------------------------------------- PACIFIC MULTI-FAMILY GROUP, L.P., a Texas limited partnership By: Pacific American Advisors Company, a Nevada corporation, its general partner By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- Address: ----------------------------------- ----------------------------------- ----------------------------------- ----------------------------------- Phone Number: ------------------------------ Fax Number: -------------------------------- 13 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. APARTMENT INVESTMENT AND MANAGEMENT COMPANY By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- PACIFIC MULTI-FAMILY GROUP, L.P., a Texas limited partnership By: Pacific American Advisors Company, a Nevada corporation, its general partner By: /s/ David B. Hendricks ---------------------------------------- Name: David B. Hendricks -------------------------------------- Title: Chief Executive Officer ------------------------------------- Address: 13810 CHAMPIONS FOREST DR., #150 ----------------------------------- HOUSTON, TEXAS 77069 ----------------------------------- ----------------------------------- ----------------------------------- Phone Number: (713) 580-1247 ------------------------------ Fax Number: (713) 893-6588 -------------------------------- 13 EX-10.66 8 EXHIBIT 10.66 EXHIBIT 10.66 HASTINGS PLACE PROMISSORY NOTE $3,258,000.00 Dallas, Texas December 27, 1996 FOR VALUE RECEIVED, HASTINGS PLACE PARTNERS, A TEXAS LIMITED PARTNERSHIP, a Texas limited partnership ("MAKER"), hereby promises to pay to the order of NATIONSBANK OF TEXAS, N.A., a national banking association ["LENDER"], at its banking house in the City of Dallas, Dallas County, Texas, the principal sum of THREE MILLION TWO HUNDRED FIFTY-EIGHT THOUSAND AND NO/100 DOLLARS ($3,258,000.00) for the unpaid balance of all principal advanced against this Promissory Note ["NOTE"], if that amount is less), together with interest on the unpaid principal balance of this Note from day to day outstanding, as hereinafter provided. 1. DEFINITIONS. When used in this Note, the following terms shall have the following meanings: (a) "ADJUSTED LIBOR RATE" means a rate per annum equal to the quotient (rounded upwards, if necessary, to the next higher one/one-hundredth [1/100] of one percent [1%] obtained by dividing (i) the applicable "Euro-Dollar" (as such term is hereafter defined) by (ii) 1.00 minus the "Euro Dollar Reserve Percentage" (as such term is hereafter defined) to which Lender or any participant (a "PARTICIPANT") in the Loan may be or become subject. (b) "ELECTION" means a Matching Funds Election. (c) "EURO-DOLLAR BUSINESS DAYS" means any domestic business day on which commercial banks are open for international business (including dealings in U.S. dollar deposits) in London. (d) "EURO-DOLLAR RESERVE PERCENTAGE" means for any day during the term of this Note, that percentage (expressed as a decimal) that is in effect on such day, as the same is prescribed by the Board of Governors of the Federal Reserve System (or its successor) for determining the maximum reserve requirement for Lender or any Participant in respect of "Euro-currency liabilities" (or in respect of any other category of liabilities which includes deposits, by reference to which the interest rate on a borrowing is determined, or any category of extensions of credit or other assets which includes loans by a non-United States office of any bank to United States residents). (e) "FORMULA RATE" means the per annum interest rate, calculated for the applicable day, equal to the "Prime Rate" (as such term is hereafter defined) for that day plus one and three-fourths percent (1.75%) (the "PRIME RATE ADJUSTMENT"), computed for the actual number of calendar days elapsed during which the principal of this Note is outstanding but as if each year consisted of 360 days, subject to the controlling terms of SECTION 2(d) herein below. (f) "EURO-DOLLAR RATE" means the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in U.S. dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of any interest period for a term comparable to such interest period. If for any reason such rate is not available, the term "Eurodollar Rate" shall mean the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in U.S. dollars at approximately 11:00 a.m., (London time) two Business Days prior to the first day of an interest period for a term comparable to such interest period; PROVIDED, HOWEVER, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates. PROMISSORY NOTE - Page 1 (g) "MATCHING FUNDS ELECTION" means an election by Maker to cause a portion of the proceeds of the Loan to be segregated into a separate account and to bear interest at the applicable "Matching Funds Rate" rather than the "Stated Rate" (as such terms are hereafter defined) for the term of the Election. (h) "MATCHING FUNDS PRINCIPAL" means the outstanding principal balance of the Loan advanced to Maker which is subject to interest at a Matching Funds Rate pursuant to an effective Election. (i) "MATCHING FUNDS RATE" means a rate one hundred seventy-five (175) basis points (the "LIBOR RATE ADJUSTMENT") per annum in excess of the Adjusted LIBOR Rate as it exists from time to time. (j) "MAXIMUM RATE" means the maximum nonusurious rate of interest per annum permitted by whichever of applicable United States federal law or Texas law permits the higher interest rate, including to the extent permitted by applicable law, any amendments thereof hereafter or any new law hereafter coming into effect to the extent a higher Maximum Rate is permitted thereby. To the extent, if any, that Chapter One ("CHAPTER ONE") of Title 79, Texas Revised Civil Statutes, Section 1925, as amended (the "TEXAS CREDIT CODE") establishes the Maximum Rate, the Maximum Rate shall be the weekly "indicated rate ceiling" (as defined in Article 5069-1.04[a] of Chapter One). The Maximum Rate shall be applied by taking into account all amounts characterized by applicable law as interest on the debt evidenced by this Note, so that the aggregate of all interest does not exceed the maximum nonusurious amount permitted by applicable law. (k) "PAST DUE RATE" means, on any day, a rate per annum equal to the lesser of (a) the Maximum Rate, or (b) the Stated Rate plus four percent (4%) per annum computed for the actual number of calendar days elapsed during which such a past due amount is outstanding. (L) "PRIME RATE" means that variable rate of interest per annum established and announced by Lender at its principal office in Dallas, Texas from time to time as its "prime rate." Such rate is set by Lender as a general reference rate of interest, taking into account such factors as Lender may deem appropriate, it being understood that it is not necessarily the lowest or best rate actually charged to any customer or a favored rate and that Lender may make various business or other loans at rates of interest having no relationship to that rate. (m) "STATED RATE" means, on any day, a rate per annum equal to and calculated on the basis of the Formula Rate. If on any day the Stated Rate shall exceed the maximum permitted by application of the Maximum Rate in effect on that day, the Stated Rate shall be fixed at the maximum permitted by application of the Maximum Rate on that day and on each day thereafter until the total amount of interest accrued at the fixed stated Rate on the unpaid balance of this Note equals the total amount of interest which would have accrued if there were no limitation by the Maximum Rate and the Stated Rate had not been so fixed. 2. INTEREST. As hereinafter provided, the principal balance of this Note may be segregated into separate accounts and shall bear interest as follows: (a) So much of the principal balance of this Note as is not from time to time subject to an effective Election shall constitute one account (the "STATED RATE ACCOUNT") and shall bear interest prior to default or maturity at a varying rate per annum equal to the lesser of (i) the Maximum Rate, or (ii) the Stated Rate. (b) The principal balance of this Note which may from time to time be subject to an effective Election, shall constitute a separate account (the "MATCHING FUNDS ACCOUNT") and shall bear interest prior to default or maturity at a rate per annum equal to the lesser of (i) the Maximum Rate, or (ii) the Matching Funds Rate applicable to such Election. PROMISSORY NOTE - Page 2 (c) Any principal of this Note which is not paid when due, and to the extent permitted by applicable law, any interest on this Note which is not paid within five (5) days after the same shall become due and payable, shall bear interest at a varying rate per annum equal to the Past Due Rate from the date due and payable until paid. (d) Subject always to limitation by the Maximum Rate, interest on this Note shall be calculated on the basis of the 360-day method, which computes a daily amount of interest for a hypothetical year of 360 days, then multiplies such amount by the actual number of days elapsed in an interest calculation period. (e) Without notice to Maker or anyone else, the Prime Rate and the Maximum Rate shall each automatically fluctuate upward and downward as and in the amount by which the Lender's prime rate and such maximum nonusurious rate of interest permitted by applicable law, respectively, fluctuate, subject always to limitation of the Stated Rate and the Past Due Rate by the Maximum Rate. 3. PAYMENT OF PRINCIPAL AND INTEREST. (a) The entire principal balance of this Note then unpaid shall be due and payable on December 27, 1997. The final maturity of this Note is subject to possible extension as provided and subject to the conditions herein. (b) Accrued but unpaid interest shall be due and payable (i) in monthly installments beginning on February 1, 1997, (ii) continuing on the first (1st) day of each consecutive calendar month thereafter before maturity, and (iii) at the final maturity of this Note. Maker agrees and acknowledges that Lender has no obligation to give notice to Maker of the amount of interest which is due and payable each month. Maker further agrees and acknowledges that Maker is solely responsible for, and shall not be relieved of, its obligation to pay such interest on the first day of each month until maturity of this Note, notwithstanding the fact that notice of such amount may not have been sent by Lender and/or received by Maker even if Lender regularly gives such notice. (c) Whenever any payment shall be due under this Note on a day which is not a "Business Day" (as such term is hereafter defined), the date on which such payment is due shall be extended to the next succeeding Business Day. "BUSINESS DAY" means a day other than a Saturday, Sunday or other day on which national banks in Dallas, Texas are authorized or required to be closed. (d) All principal, interest and other sums payable under this Note shall be paid, not later than 2:00 o'clock p.m. (Dallas, Texas time) on the day when due, in immediately available funds and in lawful money of the United States of America. Funds received after 2:00 o'clock p.m. (Dallas, Texas time) shall be treated for all purposes as having been received by Lender on the Business Day next following the date of receipt of such funds. Any payment under this Note or under any other "Loan Document" (as such term in hereafter defined) other than in the required amount in good, unrestricted U.S. funds immediately available to the holder hereof shall not, regardless of any receipt or credit issued therefor, constitute payment until the required amount is actually received by the holder hereof in such funds and shall be made and accepted subject to the condition that any check or draft may be handled for collection in accordance with the practice of the collecting bank or banks. (e) Except to the extent specific provisions are set forth in this Note or another Loan Document with respect to application of payments, all payments received by the holder hereof shall be applied, to the extent thereof, to the "secured indebtedness" (as defined in the Mortgage, which is hereafter defined) in the order and manner which the holder hereof shall deem appropriate, any instructions from Maker to the contrary notwithstanding. All payments made as scheduled on this Note shall be applied, to the extent thereof, first to accrued but unpaid interest and the balance to unpaid principal. All prepayments on this Note shall be applied, to the extent thereof, first to accrued but unpaid interest which is then past due under the terms of this Note and the balance to the PROMISSORY NOTE - Page 3 remaining principal installments. Nothing herein shall limit or impair any rights of the holder hereof to apply as provided in the Loan Documents any past due payments, any proceeds from the disposition of any collateral by foreclosure or other collections after default. 4. PREPAYMENT. Maker may at any time pay the full amount or any part of this Note without payment of any premium or fee; PROVIDED, HOWEVER, that if Maker prepares any portion of the Matching Funds Account prior to the expiration of the term of the Matching Funds Election applicable to such portion. Maker shall reimburse Lender for any Funding Loss as defined in SECTION 7 hereof. All prepayments shall be applied first to accrued interest, the balance to principal. 5. MORTGAGE. This Note has been issued in connection with a certain Deed of Trust, Assignment, Security Agreement and Financing Statement of even date herewith executed by Maker to Michael F. Hord, Trustee for the benefit of Lender, covering and affecting certain property (the "PROPERTY") located in Harris County, Texas, more fully described therein (which, as it may have been or may be amended, restated, modified or supplemented from time to time, herein called the "MORTGAGE"). Lender is entitled to the benefits of and security provided for in the Mortgage. This Note, the Mortgage, any guaranty executed in connection therewith and any other document now or hereafter evidencing, securing, guaranteeing or executed in connection with the loan currently evidenced by this Note are, as the same have been or may be amended, restated, modified or supplemented from time to time, herein sometimes called individually a "LOAN DOCUMENT" and together the "LOAN DOCUMENTS." Terms used herein with initial capital letters and not defined herein, if any, have the meanings given them in the Mortgage. Any notice required or which any party desires to give under this Note shall be given and effective as provided in the Mortgage. 6. MATCHING FUNDS ELECTION. (a) Commencing upon the effective date hereof, and from time to time during the term of the Loan, so long as no default has occurred and is continuing, Maker may elect to cause the Loan to bear interest at the Matching Funds Rate rather than the Stated Rate; PROVIDED, HOWEVER, that (i) Maker may not exercise an Election at any time when the Matching Funds Rate would exceed the Maximum Rate, and (ii) no more than one (1) Election may be in force at any time regarding the Loan. Upon the effective date of the Election, the Loan shall bear interest prior to default or maturity from the effective date of the Election to the end of the term of the Election at the Matching Funds Rate applicable on the effective date of the Election; PROVIDED that the Matching Funds Rate shall be adjusted from time to time during the term of the Election in accordance with any fluctuations in the Adjusted LIBOR Rate caused solely by fluctuations in the Euro-Dollar Reserve Percentage referenced in SECTION 1(a)(ii) hereinabove. (b) Maker shall inform Lender when Maker wishes to exercise an Election, and Lender shall advise Maker as to the then applicable Matching Funds Rates and the available periods for which Maker may exercise the Election. To exercise the Election, Maker shall advise Lender by 1:00 p.m. (Dallas, Texas time) at least three (3) days prior to the desired effective date of the Election of (a) the amount of the Matching Funds Principal as to which Maker wishes to exercise the Election, (ii) the desired effective date of the election, and (iii) the desired term of the Election, which term shall be a 30, 60 or 90 day period, provided that the term of an Election for the Adjusted LIBOR Rate must not end on a day other than a Euro-Dollar Business Day, and no Election may end on a day that is later than the stated maturity date of this Note. The Election shall become effective three (3) Euro-Dollar Business Days following the date of Maker's advising Lender of the particular terms of the Election. On or before the effective date of the Election. Maker shall execute and deliver to Lender a written confirmation of (i) the amount of the Matching Funds Principal subject to the Election, (ii) the term of the Election, and (iii) the initial Matching Funds Rate applicable to the Election. (c) Maker may not extend an Election beyond the original term thereof at the Matching Funds Rate applicable during the original term. However, at the end of the PROMISSORY NOTE - Page 4 term of an Election, Maker may make an additional Election to cause the Matching Funds Principal subject to the expired Election to bear interest at the Matching Funds Rate applicable on the day of the expiration of the prior Election for the term of the new Election by so advising Lender three (3) Euro-Dollar Business Days before the expiration of the prior Election, and giving to Lender a written confirmation by the effective date of the new Election in the manner specified above accompanied by the payment of any additional fee required by this Note. Otherwise, upon the expiration of the prior Election, the Matching Funds Principal subject to the expired Election shall be returned to the same account as the Loan proceeds which bear interest at the Stated Rate and shall again bear interest prior to default or maturity at the Stated Rate. (d) Notwithstanding any other provision of this Note, if (i) any change in applicable law, rule or regulation or in the interpretation or administration thereof shall make it unlawful for Lender to issue certificates of deposit or impair or restrict Lender's ability to do so for terms and at rates which permit Lender to respond to an Election by obtaining funds at the Adjusted LIBOR Rate, or (ii) Lender reasonably determines that by reason of circumstances affecting the Interbank euro-dollar market generally, either adequate or reasonable means do not exist for ascertaining the Adjusted LIBOR Rate for any period, or (iii) Lender reasonably determines that it is impracticable for Lender to obtain funds against which to match Matching Funds Principal in connection with an Election (by purchasing U.S. Dollars in the Interbank euro-dollar market): then, in any of the foregoing instances. Maker's right to make any further Elections or to continue any Elections then in force shall be suspended for the duration of such illegality or impairment or restriction. 7. FUNDING LOSS. Maker agrees to reimburse Lender for, and to hold Lender harmless from, any loss or expense of Lender resulting from: (a) the failure of Maker to make any required payment or prepayment of principal of the Loan (including payments to be made after any acceleration thereof): (b) the prepayment of any funds advanced hereunder which are subject to a Matching Funds Election on a day which is not the last day of the term of such Election: or (c) the conversion of any funds advanced under Matching Funds Rate to a Stated Rate on a day which is not the last day of the term of such Matching Funds Election. It is expressly understood that all provisions of this Note, including but not limited to the provisions regarding the charging of interest at a Matching Funds Rate for the term of an Election, are subject to the provisions hereof limiting the amount of interest contracted for, charged, received or collected hereunder to the maximum amount permitted under applicable law. 8. EVENTS OF DEFAULT. The occurrence of any one of the following shall be a default under this Note ("DEFAULT"): (a) Any principal payment and any other sum of money due under this Note or any obligation involving the payment of money by Maker under the Loan Documents is not paid when due, whether at the due date specified herein or in the Loan Documents or at a date fixed for payment in full at maturity or upon prepayment, by acceleration or otherwise or any interest due on such principal or other sum is not paid to Lender within five (5) days of the due date thereof; or (b) The occurrence of any other default, breach or event of default (however such term is defined therein or whether or not such term is defined) under any Loan Document and such default is not cured within any applicable notice and cure periods provided therein. PROMISSORY NOTE - Page 5 Any default under this Note shall constitute a default (however such term is defined therein or whether or not such term is defined therein) under each of the Loan Documents, and any default, breach, or event of default (however such term is defined therein or whether or not such term is defined therein) under any of the Loan Documents shall constitute a default under this Note and under each of the Loan Documents. Upon the occurrence of a default, the holder hereof shall have the right to declare the unpaid principal balance and accrued but unpaid interest on this Note at once due and payable (and upon such declaration, the same shall be at once due and payable), to foreclose any liens and security interests securing payment hereof and to exercise any of its other rights, powers and remedies under this Note, under any other Loan Document, or at law or in equity. 9. NO WAIVER BY HOLDER. Neither the failure by the holder hereof to exercise, nor delay by the holder hereof in exercising, the right to accelerate the maturity of this Note or any other right, power or remedy upon any default shall be construed as a waiver of such default or as a waiver of the right to exercise any such right, power or remedy at any time. No single or partial exercise by the holder hereof of any right, power or remedy shall exhaust the same or shall preclude any other or further exercise thereof, and every such right, power or remedy may be exercised at any time and from time to time. All remedies provided for in this Note and in any other Loan Document are cumulative of each other and of any and all other remedies existing at law or in equity, and the holder hereof shall, in addition to the remedies provided herein or in any other Loan Document, be entitled to avail itself of all such other remedies as may now or hereafter exist at law or in equity for the collection of the indebtedness owing hereunder, and the resort to any remedy provided for hereunder or under any such other Loan Document or provided for by law or in equity shall not prevent the concurrent or subsequent employment of any other appropriate remedy or remedies. Without limiting the generality of the foregoing provisions, the acceptance by the holder hereof from time to time of any payment under this Note which is past due or which is less than the payment in full of all amounts due and payable at the time of such payment, shall not (i) constitute a waiver of or impair or extinguish the rights of the holder hereof to accelerate the maturity of this Note or to exercise any other right, power or remedy at the time or at any subsequent time, or nullify any prior exercise of any such right, power or remedy, or (ii) constitute a waiver of the requirement of punctual payment and performance, or a novation in any respect. 10. COLLECTION OF COSTS. If any holder of this Note retains an attorney in connection with any default or at maturity or to collect, enforce, or defend this Note or any other Loan Document in any lawsuit or in any probate, reorganization, bankruptcy or other proceeding, or if Maker sues any holder in connection with this Note or any other Loan Document and does not prevail, then Maker agrees to pay to each such holder, in addition to principal and interest, all reasonable costs and expenses incurred by such holder in trying to collect this Note or in any such suit or proceeding, including reasonable attorneys' fees. 11. COMPLIANCE WITH LAWS. It is the intent of Lender and Maker and all other parties to the Loan Documents to confirm to and contract in strict compliance with applicable usury law from time to time in effect. All agreements between Lender or any other holder hereof and Maker (or any other party liable with respect to any Indebtedness under the Loan Documents) are hereby limited by the provisions of this paragraph which shall override and control all such agreements, whether now existing or hereafter arising and whether written or oral. In no way, nor in any event or contingency (including but not limited to prepayment, default, demand for payment, or acceleration of the maturity of any obligation), shall the interest contracted for, charged or received under this Note or otherwise, exceed the Maximum Rate. If, from any possible construction of any document, interest would otherwise be payable in excess of the Maximum Rate, any such construction shall be subject to the provisions of this paragraph and such document shall be automatically reformed and the interest payable shall be automatically reduced to the Maximum Rate, without the necessity of execution of any amendment or new document. If the holder hereof shall ever receive anything of value which is characterized as interest under applicable law and which would apart from this provision be in excess of the Maximum Rate, an amount equal to the amount which would have been excessive interest shall, without penalty, be applied to the reduction of the principal amount owing on the secured indebtedness in the inverse order of its maturity and not to the payment of interest, or refunded to Maker or the other payor thereof if and to the extent such amount which would have been PROMISSORY NOTE - Page 6 excessive exceeds such unpaid principal. The right to accelerate maturity of this Note or any other indebtedness does not include the right to accelerate any interest which has not otherwise accrued on the date of such acceleration, and the holder hereof does not intend to charge or receive any unearned interest in the event of acceleration. All interest paid or agreed to be paid to the holder hereof shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full stated term (including any renewal or extension) of such indebtedness so that the amount of interest on account of such indebtedness does not exceed the maximum permitted by applicable law. 12. JOINT AND SEVERAL LIABILITY. If more than one person or entity executes this Note as Maker, all of said parties shall be jointly and severally liable for payment of the indebtedness evidenced hereby. Maker and all sureties, endorsers, guarantors and any other party now or hereafter liable for the payment of this Note in whole or in part, hereby severally (i) waive demand, presentment for payment, notice of dishonor and of nonpayment, protest, notice of protest, notice of intent to accelerate, notice of acceleration and all other notice (except only for any notices which are specifically required by this Note or any other Loan Document), filing of suit and diligence in collecting this Note or enforcing any of the security therefor; (ii) agree to any substitution, subordination, exchange or release of any such security or the release of any party primarily or secondarily liable hereon; (iii) agree that the holder hereof shall not be required first to institute suit or exhaust its remedies hereon against Maker or others liable or to become liable hereon or to enforce its rights against them or any security therefor; (iv) consent to any extension or postponement of time of payment of this Note for any period or periods of time and to any partial payments, before or after maturity, and to any other indulgences with respect hereto, without notice thereof to, any of them; and (v) submit (and waive all rights to object) to non-exclusive personal jurisdiction in the State of Texas, and venue in Dallas County, Texas, for the enforcement of any and all obligations under the Loan Documents. 13. AMENDMENTS. This Note may not be changed, amended or modified except in a writing expressly intended for such purposes and executed by the party against whom enforcement of the change, amendment or modification is sought. 14. PURPOSE OF LOAN. The loan evidenced by this Note is made solely for business purposes and is not for personal, family, household or agricultural purposes. 15. PARTICIPATION. The holder of this Note may, from time to time, sell or offer to sell the loan evidenced by this Note, or interests therein, to one or more assignees or participants and is hereby authorized to disseminate any information it now has or hereafter obtains pertaining to the loan evidenced by this Note including, without limitation, any security for this Note and credit information on Maker, any of its principals and any guarantor of this Note to any assignee or participant or prospective assignee or prospective participant, the holder's affiliates including NationsBanc Capital Markets, Inc. in the case of Lender, any regulatory body having jurisdiction over the holder, and to any other parties as necessary or appropriate in holder's reasonable judgment. Maker shall execute, acknowledge and deliver any and all instruments reasonably requested by Lender in connection therewith, and to the extent, if any, specified in any such assignment or participation, such companies, assignee(s), and participant(s) shall have the rights and benefits with respect to this Note and the other Loan Documents as such person(s) would have had if such person(s) had been Lender hereunder. 16. SUCCESSORS AND ASSIGNS. The terms, provisions, covenants and conditions of this Note shall be binding upon Maker and the heirs, devisees, representatives, successors and assigns of Maker. 17. GOVERNING LAW. THIS NOTE, AND ITS VALIDITY, ENFORCEMENT AND INTERPRETATION, SHALL BE GOVERNED BY LAWS OF THE STATE OF TEXAS (WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES) AND APPLICABLE UNITED STATES FEDERAL LAW. MAKER HEREBY ACKNOWLEDGES THAT ITS BUSINESS OFFICE IS IN DENVER COUNTY, COLORADO, BUT THAT THE NOTE IS PAYABLE IN DALLAS COUNTY, TEXAS. THEREFORE, MAKER HEREBY CONFIRMS AND AGREES THAT ALL LEGAL ACTIONS INVOLVING THE VALIDITY OR ENFORCEMENT OF THIS NOTE (INCLUDING, BUT NOT LIMITED TO, ANY PROMISSORY NOTE - Page 7 BANKRUPTCY PROCEEDINGS INVOLVING MAKER) SHALL HAVE JURISDICTION AND VENUE IN DALLAS COUNTY, TEXAS. 18. TIME OF ESSENCE. Time shall be of the essence in this Note with respect to all of Maker's obligations hereunder. 19. CAPTIONS. The paragraph headings used in this Note are for convenience of reference only and shall not affect the meaning or interpretation of this Note. 20. EXTENSION OPTION. Maker shall have the right, at its option, by written notice thereof given to Lender at least thirty (30) days (but not more than ninety (90) days) prior to the final maturity date of this Note, to extend such maturity date for an additional period of twelve (12) months, provided the following conditions have been satisfied to Lender's satisfaction: (a) Lender has reviewed and approved the then current financial condition of Maker; (b) Maker shall pay a fee of one-quarter of one percent (0.25%) of the outstanding loan balance to Lender upon the date that the Note is extended and renewed; (c) No default or event of default under the Note, the Mortgage or any other Loan Document shall currently exist, which is not cured during any applicable notice and cure periods provided therein, nor shall any event then exist, which with notice and or lapse of time could become an event of default or a default under any of the Loan Documents which is not cured within any applicable notice and cure period; (d) Maker shall execute such documentation as is required by Lender in connection with each extension and renewal; (e) The title policy is endorsed by the issuing title company in a manner satisfactory to Lender; (f) No material adverse change has occurred in the condition of the Mortgaged Property, Maker or Guarantor, and each meets the conditions concerning financial, operating and rent statements provided in the Mortgage; (g) The Mortgaged Property has a Debt Coverage Ratio of 1.2 to 1.0. As used in this Note, the term "Debt Coverage Ratio" means a debt coverage ratio calculated according to the form of Debt Coverage Ratio Certificate incorporated in that certain Debt Coverage Agreement of even date herewith executed by Maker for the benefit of Lender; (h) The outstanding principal balance of the Loan is not greater than eighty percent (80%) of the appraised value of the Mortgaged Property; (i) Immediately upon and at all times following the extension of the Note, Maker shall pay monthly on the first day of each calendar month in addition to the interest described herein, a principal reduction payment of $3,000 per month; and (j) The Mortgaged Property shall have a minimum occupancy rate of 85%. Upon any extension of the Note, the terms and provisions of the Note shall be in full force and effect without any amendments or modifications thereto except as agreed to in writing by Maker and Lender. 21. STATUTE OF FRAUDS NOTICE. THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OR PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. PROMISSORY NOTE - Page 8 22. This Note is a full recourse obligation of the Maker. Notwithstanding the foregoing, recourse under this Note to the general partner of Maker (the "General Partner") shall be limited to the same extent that the General Partner's liability is limited in the Security Agreement (as defined in the Mortgage), and recourse under this Note to any constituent partner of such General Partner shall be limited to the same extent that such constituent partner's liability is limited in the Guaranty (as defined in the Mortgage). [Remainder of page intentionally left blank] PROMISSORY NOTE - Page 9 IN WITNESS WHEREOF, Maker has duly executed this Note to be effective as of the date first above written. MAKER: ADDRESS OF OWNER: 1873 S. Bellaire Street, 17th Floor HASTINGS PLACE PARTNERS. A TEXAS Denver, Colorado 80222 LIMITED PARTNERSHIP. a Texas limited partnership By: AIMCO HASTINGS PLACE, L.P., a Delaware limited partnership, as General Partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, as General Partner By: AIMCO HOLDING QRS, INC., a Delaware corporation, as General Partner By: /s/ Harry Alcock -------------------------- Harry Alcock Vice President PROMISSORY NOTE (HASTINGS PLACE) - Signature Page EX-10.67 9 EXHIBIT 10.67 Hastings Place DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT THIS DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT (this "MORTGAGE"), dated to be effective as of December 27, 1996, is executed and delivered by Grantor for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged by Grantor. ARTICLE I CERTAIN DEFINITIONS: GRANTING CLAUSES: SECURED INDEBTEDNESS Section 1.1 CERTAIN DEFINITIONS AND REFERENCE TERMS. In addition to other terms defined herein, each of the following terms shall have the meaning assigned to it: "DEBT COVERAGE AGREEMENT": That certain Debt Coverage Agreement of even date herewith executed by Grantor for the benefit of Lender and containing, among other things, the form of Debt Coverage Ratio Certificate (herein so called). "GRANTOR": Hastings Place Partners, a Texas Limited Partnership. "GUARANTOR": Collectively, the following entities Apartment Investment and Management Company, a Maryland corporation, AIMCO Properties, L.P., a Delaware limited partnership, AIMCO-GP, Inc., a Delaware corporation, AIMCO-LP, INC., a Delaware corporation, AIMCO Holdings, L.P., a Delaware limited partnership and AIMCO Holdings QRS, Inc., a Delaware corporation together with any additional persons or entities which in the future may execute a guaranty in connection with the Loan. "GUARANTY": That certain Guaranty of even date herewith executed by Guarantors for the benefit of Lender, together with any amendments or modifications thereto. "LENDER": NationsBank of Texas, N.A., a national banking association. "LOAN": The Loan by Lender to Grantor in the maximum amount of the Promissory Note. "PROMISSORY NOTE": Promissory note dated as of December 27, 1996 made by Grantor payable to the order of Lender in the principal face amount of $3,258,000, bearing interest as therein provided, containing a provision for the payment of a reasonable additional amount as attorneys' fees, and finally maturing on December 27, 1997, subject to extension as provided in the Loan Agreement of even date herewith by and between Grantor and Lender, pertaining to the loan evidenced by the Promissory Note. "SECURITY AGREEMENT": That certain Security Agreement of even date herewith securing certain obligations with respect to the Loan and the Guaranty. "TRUSTEE": Michael F. Hord, of Dallas County, Texas, or any successor or substitute appointed and designated as herein provided from time to time acting hereunder. Section 1.2 MORTGAGED PROPERTY. Grantor does hereby GRANT, BARGAIN, SELL, CONVEY, TRANSFER, ASSIGN and SET OVER to Trustee the following: (a) the real estate (herein called the "LAND") described in EXHIBIT A which is attached hereto and incorporated herein by reference, and (i) all improvements now or hereafter situated or to be situated on the Land (herein together called the "IMPROVEMENTS"); and (ii) all right, title and interest of Grantor in and to (1) all streets, roads, alleys, easements, rights-of-way, licenses, rights of ingress and egress, vehicle DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 1 parking rights and public places, existing or proposed, abutting, adjacent, used in connection with or pertaining to the Land or the Improvements: (2) any strips or gores between the Land and abutting or adjacent properties; and (3) any and all water and water rights, timber, crops and mineral interests on or pertaining to the Land (the Land, Improvements and other rights, titles and interests referred to in this CLAUSE (a) being herein sometimes collectively called the "PREMISES"): (b) all fixtures, equipment, systems, machinery, furniture, furnishings, appliances, inventory, goods, building and construction materials, supplies, and articles of personal property, of every kind and character, now owned or hereafter acquired by Grantor, which are now or hereafter attached to or situated in, on or about the Land or the Improvements, or used in or necessary to the complete and proper planning, development, use, occupancy or operation thereof, or acquired (whether delivered to the Land or stored elsewhere) for use or installation in or on the Land or the Improvements, and all renewals and replacements of, substitutions for and additions to the foregoing (the properties referred to in this CLAUSE (b) being herein sometimes collectively called the "ACCESSORIES," all of which are hereby declared to be permanent accessions to the Land): (c) any and all (i) plans and specifications for the Improvements; (ii) Grantor's rights, but not liability for any breach by Grantor, under all commitments (including any commitment for financing to pay any of the secured indebtedness, as defined below), insurance policies and other contracts and general intangibles (including but not limited to trademarks, trade names and symbols) related to the Premises or the Accessories or the operation thereof; (iii) deposits (including but not limited to Grantor's rights in tenants' security deposits, deposits with respect to utility services to the Premises, and any deposits or reserves hereunder or under any other Loan Document for taxes, insurance or otherwise), money, accounts, instruments, documents, notes and chattel paper arising from or by virtue of any transactions to which Grantor or any affiliate of Grantor is a party and which are related to the Premises or the Accessories; (iv) permits, licenses, franchises, certificates, development rights, commitments and rights for utilities, and other rights and privileges obtained in connection with the Premises or the Accessories; (v) leases, rents, royalties, bonuses, issues, profits, revenues and other benefits of the Premises and the Accessories (without derogation of Article 3 hereof); (vi) oil, gas and other hydrocarbons and other minerals owned or controlled by Grantor and produced from or allocated to the Land and all products processed or obtained therefrom, and the proceeds thereof; and (vii) engineering, accounting, title, legal, and other technical or business data concerning the Mortgaged Property which are in the possession of Grantor or in which Grantor can otherwise grant a security interest; and (d) any and all (i) proceeds of or arising from the properties, rights, titles and interests referred to above in this SECTION 1.2, including but not limited to proceeds of any sale, lease or other disposition thereof, proceeds of each policy of insurance relating thereto (including premium refunds), proceeds of the taking thereof or of any rights appurtenant thereto, including change of grade of streets, curb cuts or other rights of access, by eminent domain or transfer in lieu thereof for public or quasi-public use under any law, and proceeds arising out of any damage thereto; and (ii) other interests of every kind and character which Grantor now has or hereafter acquires in, to or for the benefit of the properties, rights, titles and interests referred to above in this Section 1.2 and all property used or useful in connection therewith, including but not limited to rights of ingress and egress and remainders, reversions and reversionary rights or interests; and if the estate of Grantor in any of the property referred to above in this SECTION 1.2 is a leasehold estate, this conveyance shall include, and the lien and security interest created hereby shall encumber and extend to, all other or additional title, estates, interests or rights which are now owned or may hereafter be acquired by Grantor in or to the property demised under the lease creating the leasehold estate; TO HAVE AND TO HOLD the foregoing rights, interests and properties, and all rights, estates, powers and privileges appurtenant thereto (herein collectively called the "MORTGAGED PROPERTY"), unto Trustee, and his successors or substitutes in this trust, and to his or their successors and assigns, in trust, however, upon the terms, provisions and conditions herein set forth. DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 2 Section 1.3 SECURITY INTEREST. In order to further secure the payment of the secured indebtedness hereinafter referred to, and the performance of the obligations, covenants, agreements, warranties and undertakings of Grantor hereinafter described. Grantor hereby grants to Holder (as hereinafter defined) a security interest in all of the Mortgaged Property which constitutes personal property or fixtures (herein sometimes collectively called the "COLLATERAL") In addition to its rights hereunder or otherwise. Holder shall have all of the rights of a secured party under the Texas Business and Commerce Code, or under the Uniform Commercial Code in force in any other state to the extent the same is applicable law. Section 1.4 NOTE LOAN DOCUMENTS, OTHER OBLIGATIONS. This Mortgage is made to secure and enforce the payment and performance of the following promissory notes, obligations, indebtedness and liabilities and all renewals, extensions, supplements, increases, and modifications thereof in whole or in part from time to time: (a) the Promissory Note and all other notes given in substitution therefor or in modification, supplement, increase, renewal or extension thereof, in whole or in part (such note or notes, whether one or more. as from time to time renewed, extended, supplemented, increased or modified and all other notes given in substitution therefor, or in modification, renewal or extension thereof, in whole or in part, being hereinafter called the "NOTE", and Lender, or the subsequent holder at the time in question of the Note or any of the secured indebtedness, as hereinafter defined, being herein called "HOLDER"); and (b) all indebtedness and other obligations owed by Grantor to Holder now or hereafter incurred or arising pursuant to or permitted by the provisions of the Note, this Mortgage, or any other document now or hereafter evidencing, governing, guaranteeing, securing or otherwise executed in connection with the loan evidenced by the Note, including but not limited to any loan or credit agreement, tri-party financing agreement or other agreement between Grantor and Holder, or among Grantor, Holder and any other party or parties, pertaining to the repayment or use of the proceeds of the loan evidenced by the Note (the Note, this Mortgage and such other documents, as they or any of them may have been or may be from time to time renewed, extended, supplemented, increased or modified, being herein sometimes collectively called the "LOAN DOCUMENTS"), Each amount due an owing by Grantor to Holder pursuant to this Mortgage or any other Loan Document shall, except to the extent otherwise specified in the document evidencing the indebtedness, bear interest from the date of such expenditure or payment until paid, at the rate per annum provided in the Note for interest on past due principal owed on the Note; and all such amounts, together with such interest thereon, shall be a part of the secured indebtedness and shall be secured by this Mortgage. The amount and nature of such expense and the time when paid shall be fully established by the certificate of Holder or any of Holder's officers or agents. Section 1.5 SECURED INDEBTEDNESS. The indebtedness referred to in Section 1.4 and all renewals, extensions and modifications thereof, and all substitutions therefor, in whole or in part, are hereinafter sometimes referred to as the "SECURED INDEBTEDNESS" or the "INDEBTEDNESS SECURED HEREBY." ARTICLE II REPRESENTATIONS, WARRANTIES AND COVENANTS Section 2.1 Grantor represents, warrants, and covenants as follows: (a) PAYMENT AND PERFORMANCE. Grantor will make due and punctual payment of the secured indebtedness. Subject to applicable grace periods, Grantor will timely and properly perform and comply with all of the covenants, agreements, and conditions imposed upon it by this Mortgage and the other Loan Documents and will not permit a default to occur hereunder or thereunder. Time shall be of the essence in this Mortgage. DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 3 (b) TITLE AND PERMITTED ENCUMBRANCES. Grantor has, in Grantor's own right, and Grantor covenants to maintain, lawful good and marketable title to the Mortgaged Property, free and clear of all liens, charges, claims, security interests, and encumbrances except for (i) the matters, if any, set forth under the heading "Permitted Encumbrances" in EXHIBIT R hereto, which are Permitted Encumbrances only to the extent the same are valid and subsisting and affect the Mortgaged Property, (ii) the liens and security interests evidenced by this Mortgage, (iii) statutory liens for ad valorem taxes and standby fees on the Mortgaged Property which are not yet delinquent, (iv) other liens and security interests (if any) in favor of Lender, (v) liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, provided that, at Lender's option, either (A) appropriate bonds are posted in amounts satisfactory to Lender, or (b) reserves with respect thereto are maintained on the books of Grantor, or its subsidiaries, as the case may be in such amounts as are satisfactory to Lender, and (vi) 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 sixty (60) days or which are being contested in good faith by appropriate proceedings, provided that, at Lender's option, either (A) appropriate bonds are posted by Grantor in amounts satisfactory to Lender or (B) reserves with respect thereto are maintained on the books of Grantor or its subsidiaries, as the case may be, in such amounts as are satisfactory to Lender (the matters described in the foregoing CLAUSES (i)-(vi) being herein collectively called the "PERMITTED ENCUMBRANCES"). Grantor, and Grantor's successors and assigns, will warrant and forever defend title to the Mortgaged Property, subject as aforesaid, to Trustee and his successors or substitutes and assigns, against the claims and demands of all persons claiming or to claim the same or any part thereof. Grantor will punctually pay, perform, observe and keep all covenants, obligations and conditions in or pursuant to any Permitted Encumbrance and will not modify or permit modification of any Permitted Encumbrance without the prior written consent of Holder. Inclusion of any matter as a Permitted Encumbrance does not constitute approval or waiver by Holder of any existing or future violation or other breach thereof by Grantor, by the Mortgaged Property or otherwise. No part of the Mortgaged Property constitutes all or any part of the homestead of Grantor. To the extent required by applicable law, Grantor has filed all necessary tax returns and reports and has paid all taxes and governmental charges thereby shown to be owing except any such taxes or charges that are being contested in good faith by appropriate proceedings which have been disclosed to Lender in writing and for which adequate reserves have been set aside on its books in accordance with generally accepted accounting principles. (c) DEFENSE OF MORTGAGE. If the validity or priority of this Mortgage or of any rights, titles, liens or security interests created or evidenced hereby with respect to the Mortgaged Property or any part thereof shall be endangered or questioned or shall be attacked directly or indirectly or if any legal proceedings are instituted against Grantor with respect thereto, Grantor will give prompt written notice thereof to Holder and at Grantor's own cost and expense will diligently endeavor to cure any defect that may be developed or claimed, and will take all necessary and proper steps for the defense of such legal proceedings, including, but not limited to, the employment of counsel, the prosecution or defense of litigation and or the release or discharge of all adverse claims. Trustee and Holder, or either of them (whether or not named as parties to legal proceedings with respect thereto), are hereby authorized and empowered to take such additional steps as in their discretion may be proper for the defense of any such legal proceedings or the protection of the validity or the priority of this Mortgage and the rights, titles, liens and security interests created or evidenced hereby, including but not limited to the employment of independent counsel, the prosecution or defense of litigation, and the compromise or discharge of adverse claims made with respect to the Mortgaged Property, the purchase of any taxed title and the removal of prior liens or security interests (including, but not limited to, the payment of debts as they mature or the payment in full of matured or non-matured debts, which are secured by prior liens or security interests). All expenditures so made of every kind and character shall be a demand obligation (which obligation Grantor hereby promises to pay) owing by Grantor to Holder or Trustee (as the case may be), and the party (Holder or Trustee, as the case DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 4 may be) making such expenditures shall be subrogated to all rights of the person receiving such payment. (d) TAXES AND OTHER IMPOSITIONS. Grantor will pay, or cause to be paid, or contest, in good faith by appropriate proceedings, and if so contested, shall post such payment bonds or provide such other collateral as shall be satisfactory to Holder, all taxes, assessments and other charges or levies imposed upon or against or with respect to the Mortgaged Property or the ownership, use, occupancy or enjoyment of any portion thereof, or any utility service thereto, as the same become due and payable, including but not limited to all ad valorem taxes assessed against the Mortgaged Property or any part thereof, and shall deliver promptly to Holder such evidence of the payment thereof as Holder may require. No commitments have been made to any Governmental Authorities, utility company, school board, church or other religious body, or any homeowners association, or to any other organization, group, or individual relating to the Mortgaged Property which would impose an obligation upon Grantor to make any contribution or dedications of money or land or to construct, install or maintain any improvements of a public or private nature on or off the Mortgaged Property; and no Governmental Authority or utility company has imposed any requirement that any developer of the Mortgaged Property pay directly or indirectly any special fees or contributions or incur any expenses or obligations in connection with the construction of single family residences upon the Mortgaged Property, exclusive of regular local real estate and school taxes assessed against the Mortgaged Property. As used in this Mortgage, the term "GOVERNMENTAL AUTHORITY" means the United States, the state, the county, the city, or any other political subdivision in which the Mortgaged Property is located, and any court or political subdivision, agency, or instrumentality having or exercising jurisdiction over Grantor or the Mortgaged Property. (e) INSURANCE. Grantor shall obtain and maintain at Grantor's sole expense: (1) mortgagee title insurance issued to Holder covering the Premises as required by Holder; (2) all-risk insurance with respect to all insurable Mortgaged Property, against loss or damage by fire, lightning, windstorm, explosion, hail, tornado and such hazards as are presently included in so-called "all-risk" coverage and against such other insurable hazards as Holder may require, in an amount not less than 100% of the full replacement cost, including the cost of debris removal, without deduction for depreciation and sufficient to prevent Grantor and Holder from becoming a coinsurer, such insurance to be in Builder's Risk (non-reporting) form during and with respect to any construction on the Premises; (3) if and to the extent any portion of the Premises is in a special flood hazard area, a flood insurance policy in an amount equal to the lesser of the principal face amount of the Note or the maximum amount available; (4) comprehensive general public liability insurance, on an "occurrence" basis, for the benefit of Grantor and Holder as named insureds; (5) statutory workers' compensation insurance with respect to any work on or about the Premises; and (6) such other insurance on the Mortgaged Property as may from time to time be required by Holder (including but not limited to business interruption insurance, boiler and machinery insurance, earthquake insurance, and war risk insurance, if available) and against other insurable hazards or casualties which at the time are commonly insured against in the case of premises similarly situated, due regard being given to the height, type, construction, location, use and occupancy of buildings and improvements. All insurance policies shall be issued and maintained by insurers having a Best's insurance rating of A X (Ten), or otherwise approved by Lender, in amounts, with deductibles, and in form satisfactory to Holder, and shall require not less than thirty (30) days' prior written notice to Holder of any cancellation or change of coverage. All insurance policies maintained, or caused to be maintained, by Grantor with respect to the Mortgaged Property, except for public liability insurance, shall provide that each such policy shall be primary without right of contribution from any other insurance that may be carried by Grantor or Holder and that all of the provisions thereof, except the limits of liability, shall operate in the same manner as if there were a separate policy covering each insured. If any insurer which has issued a policy of title, hazard, liability or other insurance required pursuant to this Mortgage or any other Loan Document becomes insolvent or the subject of any bankruptcy, receivership or similar proceeding or if in DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 5 Holder's reasonable opinion the financial responsibility of such insurer is or becomes inadequate, Grantor shall. in each instance promptly upon the request of Holder and at Grantor's expense, obtain and deliver to Holder a like policy (or, if and to the extent permitted by Holder, a certificate of insurance) issued by another insurer, which insurer and policy meet the requirements of this Mortgage or such other Loan Document, as the case may be. Without limiting the discretion of Holder with respect to required endorsements to insurance policies, all such policies for loss of or damage to the Mortgaged Property shall contain a standard mortgage clause (without contribution) naming Holder as mortgagee with loss proceeds payable to Holder notwithstanding (i) any act, failure to act or negligence of or violation of any warranty, declaration or condition contained in any such policy by any named insured; (ii) the occupation or use of the Mortgaged Property for purposes more hazardous than permitted by the terms of any such policy; (iii) any foreclosure or other action by Holder under the Loan Documents: or (iv) any change in title to or ownership of the Mortgaged Property or any portion thereof, such proceeds to be held for application as provided in the Loan Documents. Notwithstanding the foregoing, in the event of property damage due to (A) condemnation for which proceeds are paid or (B) an insured casualty, for which repair or restoration is reasonably estimated by a reputable contractor or architect acceptable to Lender to cost not more than $150,000, then insurance or condemnation proceeds, as applicable, in the amount of such repairs may be paid by the insurer directly to Grantor, provided that Grantor promptly commences and diligently pursues restoration of the damaged portion of the Mortgaged Property to substantially the same condition as that which existed prior to the insured casualty or the condemnation. A copy of the original policy and a satisfactory certificate of insurance bearing an original signatue shall be delivered to Holder at the time of execution of this Mortgage, with premiums fully paid, and each renewal or substitute policy (or certificate) shall be delivered to Holder, with premiums fully paid, at least ten (10) days before the termination of the policy it renews or replaces. Grantor shall pay all premiums on policies required hereunder as they become due and payable and promptly deliver to Holder evidence satisfactory to Holder of the timely payment thereof. If any loss occurs at any time when Grantor has failed to perform Grantor's covenants and agreements in this paragraph, Holder shall nevertheless be entitled to the benefit of all insurance covering the loss and held by or for Grantor, to the same extent as if it had been made payable to Holder. Upon any foreclosure hereof or transfer of title to the Mortgaged Property in extinguishment of the whole or any part of the secured indebtedness, all of Grantor's right, title and interest in and to the insurance policies referred to in this Section (including unearned premiums) and all proceeds payable thereunder shall thereupon vest in the purchaser at foreclosure or other such transferee, to the extent permissible under such policies. Holder shall have the right (but not the obligation) to make proof of loss for, settle and adjust any claim under, and receive the proceeds of, all insurance for loss of or damage to the Mortgaged Property, and the expenses incurred by Holder in the adjustment and collection of insurance proceeds shall be a part of the secured indebtedness and shall be due and payable to Holder on demand. Except in the event of gross negligence or fraud by Holder, Holder shall not be, under any circumstances, liable or responsible for failure to collect or exercise diligence in the collection of any of such proceeds or for the obtaining, maintaining or adequacy of any insurance or for failure to see to the proper application of any amount paid over to Grantor. Any such proceeds received by Holder shall, after deduction therefrom of all reasonable expenses actually incurred by Holder, including attorneys' fees, at Holder's option be (1) released to Grantor, or (2) applied (upon compliance with such terms and conditions as may be required by Holder) to repair or restoration, either partly or entirely, of the Mortgaged Property so damaged, or (3) applied to the payment of the secured indebtedness in such order and manner as Holder, in its sole discretion, may elect, whether or not due. In any event, the unpaid portion of the secured indebtedness shall remain in full force and effect and the payment thereof shall not be excused. Grantor shall at all times comply with the requirements of the insurance policies required hereunder and of the issuers of such policies and of any board of fire underwriters or similar body as applicable to or affecting the Mortgaged Property. DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 6 (f) RESERVE FOR INSURANCE. TAXES AND ASSESSMENTS. Upon request of Holder, to secure certain of Grantor's obligations in PARAGRAPHS (d) AND (e) above, but not in lieu of such obligations, Grantor will deposit with Holder a sum equal to ad valorem taxes, assessments and charges (which charges for the purpose of this paragraph shall include without limitation any recurring charge which could result in a lien against the Mortgaged Property) against the Mortgaged Property for the current year and the premiums for such policies of insurance for the current year, all as estimated by Holder and prorated to the end of the calendar month following the month during which Holder's request is made, and thereafter will deposit with Holder, on each date when an installment of principal and/or interest is due on the Note, sufficient funds (as estimated from time to time by Holder) to permit Holder to pay at least fifteen (15) days prior to the due date thereof, the next maturing ad valorem taxes, assessments and charges and premiums for such policies of insurance. Holder shall have the right to rely upon tax information furnished by applicable taxing authorities in the payment of such taxes or assessments and shall have no obligation to make any protest of any such taxes or assessments. Any excess over the amounts required for such purposes shall be held by Holder for future use, applied to any secured indebtedness or refunded to Grantor, at Holder's option, and any deficiency in such funds so deposited shall be made up by Grantor upon demand of Holder. All such funds so deposited shall bear no interest, may be mingled with the general funds of Holder and shall be applied by Holder toward the payment of such taxes, assessments, charges and premiums when statements therefor are presented to Holder by Grantor (which statements shall be presented by Grantor to Holder a reasonable time before the applicable amount is due); provided, however, that, if a default shall have occurred hereunder, such funds may at Holder's option be applied to the payment of the secured indebtedness in the order determined by Holder in its sole discretion, and that Holder may (but shall have no obligation) at any time, in its discretion, apply all or any part of such funds toward the payment of any such taxes, assessments, charges or premiums which are past due, together with any penalties or late charges with respect thereto. The conveyance or transfer of Grantor's interest in the Mortgaged Property for any reason (including without limitation the foreclosure of a subordinate lien or security interest or a transfer by operation of law) shall constitute an assignment or transfer of Grantor's interest in and rights to such funds held by Holder under this paragraph but subject to the rights of Holder hereunder. (g) CONDEMNATION. Grantor shall notify Holder immediately of any threatened or pending proceeding for condemnation affecting the Mortgaged Property or arising out of damage to the Mortgaged Property, and Grantor shall, at Grantor's expense, diligently prosecute any such proceedings. Holder shall have the right (but not the obligation) to participate in any such proceeding and to be represented by counsel of its own choice. Holder shall be entitled to receive all sums which may be awarded or become payable to Grantor for the condemnation of the Mortgaged Property, or any part thereof, for public or quasi-public use, or by virtue of private sale in lieu thereof, and any sums which may be awarded or become payable to Grantor for injury or damage to the Mortgaged Property. Grantor shall, promptly upon request of Holder, execute such additional assignments and other documents as may be necessary from time to time to permit such participation and to enable Holder to collect and receipt for any such sums. All such sums are hereby assigned to Holder, and shall, after deduction therefrom of all reasonable expenses actually incurred by Holder, including attorneys' fees, at Holder's option be (1) released to Grantor, or (2) applied (upon compliance with such terms and conditions as may be required by Holder) to repair or restoration of the Mortgaged Property so affected, or (3) applied to the payment of the secured indebtedness in such order and manner as Holder, in its sole discretion, may elect, whether or not due. In any event the unpaid portion of the secured indebtedness shall remain in full force and effect and the payment thereof shall not be excused. Except in the event of gross negligence or fraud by Holder, Holder shall not be, under any circumstances, liable or responsible for failure to collect or to exercise diligence in the collection of any such sum or for failure to see to the proper application of any amount paid over to Grantor. Holder is hereby authorized, in the name of Grantor, to execute and deliver valid acquittance for, and to appeal from, any such award, Judgement or decree. All costs and expenses (including but not limited to DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 7 attorneys' fees) incurred by Holder in connection with any condemnation shall be a demand obligation owing by Grantor (which Grantor hereby promises to pay) to Holder pursuant to this Mortgage. (h) COMPLIANCE WITH LEGAL REQUIREMENTS. The Mortgaged Property and the use, operation and maintenance thereof and all activities thereon do and shall at all times comply with all applicable Legal Requirements (defined below) provided, however, Grantor may contest in good faith and by appropriate proceedings the imposition on the Mortgaged Property of any Legal Requirement provided that Grantor shall have first provided a bond or other collateral in form and amount satisfactory to Lender. The Mortgaged Property is not, and shall not be, dependent on any other property or premises or any interest therein other than the Mortgaged Property to fulfill any requirement of any Legal Requirement. Grantor shall not, by act or omission, permit any building or other improvement not subject to the lien of this Mortgage to rely on the Mortgaged Property or any interest therein to fulfill any requirement of any Legal Requirement. To the best knowledge of Grantor after reasonable inquiry no part of the Mortgaged Property constitutes a nonconforming use under any zoning law, planing or subdivision law, or similar law or ordinance. Grantor has obtained and shall preserve in force all requisite zoning, utility, building, health and operating permits, and all licenses or permits for development rights, water use, waste disposal and other rights material to the use of the Mortgaged Property from the governmental authorities or quasi-governmental entities having jurisdiction over the Mortgaged Property. If Grantor receives a notice or claim from any federal, state or local government agency or other governmental authority that the Mortgaged Property, or any use, activity, operation or maintenance thereof or thereon, is not in compliance with any Legal Requirement, Grantor will promptly furnish a copy of such notice or claim to Holder. Grantor has received no notice and has no knowledge of any such noncompliance. As used in this Mortgage: (i) the term "LEGAL REQUIREMENT" means any Law (defined below), agreement, covenant, restriction, easement or condition (including, without limitation of the foregoing, any condition or requirement imposed by any insurance or surety company), as any of the same now exists or may be changed or amended or come into effect in the future; and (ii) the term "LAW" means any federal, state or local law, statute, ordinance, code, rule, regulation, license, permit, authorization, decision, order, injunction or decree, domestic or foreign applicable to Grantor or the Mortgaged Property. (i) CONDITION OF MORTGAGED PROPERTY. All streets, alleys and easements necessary to serve the Mortgaged Property have been dedicated to applicable utilities and governmental entities. The Mortgaged Property is in good condition and repair with no deferred maintenance and is free from damage caused by fire or other casualty. To the best knowledge of Grantor after reasonably inquiry, Grantor is aware of no latent or patent structural or other significant defect or deficiency in the Mortgaged Property. Design and as built conditions of the Mortgaged Property are such that no drainage or surface or other water will drain across or rest upon either the Mortgaged Property or land of others without creating any liability to adjacent land owners. Except as may be disclosed on any survey of the Mortgaged Property delivered to Lender in connection with the Loan, (i) none of the Mortgaged Property is within a flood plain, and (ii) none of the Improvements creates an encroachment over, across or upon any of the Mortgaged Property boundary lines, rights of way or easements, and no building or other improvement on adjoining land creates such an encroachment. There is no material fact (excluding conditions of the economy or the real estate industry in general) that Grantor has not disclosed to Holder in writing that could materially adversely affect the Mortgaged Property or the property, business, or financial condition of Grantor. (j) ACCESS FOR THE DISABLED. To the best knowledge of Grantor after reasonable inquiry, the Improvements are not in violation of any and all applicable federal, state or local laws and regulations regarding access or facilities for handicapped or disabled persons (collectively, "ACCESS LAWS"), including but not limited to the Architectural Barriers Act of 1968, Section 504 of the Rehabilitation Act of 1973, the Americans with Disabilities Act of 1990, Article 9:02 of the general statutes of the State of Texas relating DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 8 to architectural barriers, the Fair Housing Amendments Act of 1988 and any and all regulations relating to the foregoing laws. Grantor shall from time to time, at its cost, make such changes to the physical characteristics of the Improvements or to Grantor's operation of the Improvements as may be necessary to maintain compliance with the Access Laws then in effect and shall furnish to Holder plans and specifications of any physical alterations prior to the time they are made. If Holder reasonably considers any changes to be necessary in order to comply with the Access Laws, Holder may notify Grantor in writing and Grantor shall, within a reasonable time, make such changes Grantor shall indemnity and hold Holder harmless from all awards, liabilities, claims and costs of investigation and defense arising out of any alleged noncompliance with the Access Laws by the physical characteristics of the Improvements or Grantor's operation of the Improvements. This indemnity shall not terminate upon the Release Date or upon the release, foreclosure or other termination of this Mortgage but will survive the Release Date, foreclosure of this Mortgage or conveyance in lieu of foreclosure, the repayment of the secured indebtedness, the discharge and release of this Mortgage and the other Loan Documents, any bankruptcy or other debtor relief proceeding, and any other event whatsoever. Notwithstanding the foregoing, this indemnity shall not apply to any cost, claim, demand, liability or other cost or expense arising from the action or failure to act of Holder or Trustee after such time as Holder or Trustee shall have taken possession of the Mortgaged Property. (k) MAINTENANCE REPAIR AND RESTORATION. Grantor will keep the Mortgaged Property in first class order, repair, operating condition and appearance, causing all necessary repairs, renewals, replacements, additions and improvements to be promptly made, and will not allow any of the Mortgaged Property to be misused, abused or wasted or to deteriorate. Notwithstanding the foregoing, Grantor will not, without the prior written consent of Holder, (i) remove from the Mortgaged Property any fixtures or personal property covered by this Mortgage except such as is replaced by Grantor by an article of equal suitability and value, owned by Grantor, free and clear of any lien or security interest (except that created by this Mortgage), or (ii) make any structural alteration to the Mortgaged Property or any other alteration thereto which impairs the value thereof. If any act or occurrence of any kind or nature (including any condemnation or any casualty for which insurance was not obtained or obtainable) shall result in damage to or loss or destruction of the Mortgaged Property, Grantor shall give prompt notice thereof to Holder and Grantor shall promptly, at Grantor's sole cost and expense and regardless of whether insurance or condemnation proceeds (if any) shall be available or sufficient for the purpose, commence and continue diligently to completion to restore, repair, replace and rebuild the Mortgaged Property as nearly as possible to its value, condition and character immediately prior to the damage, loss or destruction; provided, however, in the event that (x) casualty damage or condemnation causes a decrease of sixty percent (60%) or more in the value of the Mortgaged Property, and (y) that insurance or condemnation proceeds are sufficient to fully repay to Lender the indebtedness secured by this Mortgage or, if insufficient, are supplemented by Grantor to an amount sufficient to fully repay the indebtedness hereunder, and such payment in full is made to Lender, then Lender may release the Mortgaged Property from the lien of this Mortgage, and if so releasd, Grantor shall not be required to rebuild the Mortgaged Property pursuant hereto. (l) NO OTHER LIENS. Grantor will not, without the prior written consent of Holder, create, place or permit to be created or placed, or through any act or failure to act, acquiesce in the placing of, or allow to remain, any deed of trust, mortgage, voluntary or involuntary lien, whether statutory, constitutional or contractual, security interest, encumbrance or charge, or conditional sale or other title retention document, against or covering the Mortgaged Property, or any part thereof, other than the Permitted Encumbrances, regardless of whether the same are expressly or otherwise subordinate to the lien or security interest created in this Mortgage, and should any of the foregoing become attached hereafter in any manner to any part of the Mortgaged Property without the prior written consent of Holder, Grantor will cause the same to be promptly discharged and released: Grantor will own all parts of the Mortgaged Property and will DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 9 not acquire any fixtures, equipment or other property forming a part of the Mortgaged Property pursuant to a lease, license, security agreement or similar agreement, whereby any party has or may obtain the right to repossess or remove same, without the prior written consent of Holder. If Holder consents to the voluntary grant by Grantor of any lien, security interest, or other encumbrance (hereinafter called "SUBORDINATE MORTGAGE") covering any of the Mortgaged Property or if the foregoing prohibition is determined by a court of competent jurisdiction to be unenforceable as to a Subordinate Mortgage, any such Subordinate Mortgage shall contain express covenants to the effect that: (1) the Subordinate Mortgage is unconditionally subordinate to this Mortgage and all Leases (hereinafter defined); (2) if any action (whether judicial or pursuant to a power of sale) shall be instituted to foreclose or otherwise enforce the Subordinate Mortgage, no tenant of any of the Leases (hereinafter defined) shall be named as a party defendant, and no action shall be taken that would terminate any occupancy or tenancy without the prior written consent of Holder; (3) Rents (hereinafter defined), if collected by or for the holder of the Subordinate Mortgage, shall be applied first to the payment of the secured indebtedness then due and expenses incurred in the ownership, operation and maintenance of the Mortgaged Property in such order as Holder may determine, prior to being applied to any indebtedness secured by the Subordinate Mortgage; (4) written notice of default under the Subordinate Mortgage and written notice of the commencement of any action (whether judicial or pursuant to a power of sale) to foreclose or otherwise enforce the Subordinate Mortgage or to seek the appointment of a receiver for all or any part of the Mortgaged Property shall be given to Holder with or immediately after the occurrence of any such default or commencement; and (5) neither the holder of the Subordinate Mortgage, nor any purchaser at foreclosure thereunder, nor anyone claiming by, through or under any of them shall succeed to any of Grantor's rights hereunder without the prior written consent of Holder. (m) OPERATION OF MORTGAGED PROPERTY. Grantor will operate the Mortgaged Property in a good and workmanlike manner and in accordance with all Legal Requirements and will pay all fees or charges of any kind in connection therewith. Grantor will keep the Mortgaged Property occupied so as not to impair the insurance carried thereon. Grantor will not use or occupy or conduct any activity on, or allow the use or occupancy of or the conduct of any activity on, the Mortgaged Property in any manner which violates any Legal Requirement or which constitutes a public or private nuisance or which makes void, voidable or cancelable, or increases the premium of, any insurance then in force with respect thereto. Grantor will not initiate or permit any zoning reclassification of the Mortgaged Property or seek any variance under existing zoning ordinances applicable to the Mortgaged Property or use or permit the use of the Mortgaged Property in such a manner which would result in such use becoming a nonconforming use under applicable zoning ordinances or other Legal Requirement. Grantor will not impose any easement, restrictive covenant or encumbrance upon the Mortgaged Property, execute or file any subdivision plan or condominium declaration affecting the Mortgaged Property or consent to the annexation of the Mortgaged Property to any municipality, without the prior written consent of Holder. Grantor will not do or suffer to be done any act whereby the value of any part of the Mortgaged Property may be lessened. Grantor will preserve, protect, renew, extend and retain all material rights and privileges granted for or applicable to the Mortgaged Property. Without the prior written consent of Holder, there shall be no drilling or exploration for or extraction, removal or production of any mineral, hydrocarbon, gas, natural element, compound or substance (including sand and gravel) from the surface or subsurface of the Land regardless of the depth thereof or the method of mining or extraction thereof. Grantor will cause all debts and liabilities of any character (incuding without limitation all debts and liabilities for labor, material and equipment and all debts and charges for utilities servicing the Mortgaged Property) incurred in the construction, maintenance, operation and development of the Mortgaged Property to be promptly paid or diligently contested through appropriate proceedings, provided that a bond or other collateral in form and amount satisfactory to Lender shall have been provided in connection with such contest. DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 10 (n) FINANCIAL MATTERS: MATERIALS AND REPORTS FURNISHED. Grantor is solvent after giving effect to all borrowings contemplated by the Loan Documents and no proceeding under any Debtor Relief Law (hereinafter defined) is pending (or, to Grantor's knowledge, threatened) by or against Grantor, or any affiliate of Grantor, as a debtor All reports, statements, plans, budgets, applications, agreements and other data and information heretofore furnished or hereafter to be furnished by or on behalf of Grantor to Holder in connection with the loan or loans evidenced by the Loan Documents (including, without limitation, all financial statements and financial information) are and will be true, correct and complete in all material respects as of their respective dates and do not and will not omit to state any fact or circumstance necessary to make the statements contained therein not misleading. No material adverse change has occurred since the dates of such reports, statements and other data in the financial condition of Grantor or, to Grantor's knowledge, of any tenant under any lease described therein. For the purposes of this paragraph, "Grantor" shall also include any person liable directly or indirectly for the secured indebtedness or any part thereof and any joint venturer or general partner of Grantor. (o) STATUS OF GRANTOR: SUITS AND CLAIMS: LOAN DOCUMENTS. Grantor is and will continue to be (i) duly organized, validly existing and in good standing under the laws of its state of organization, (ii) authorized to do business in, and in good standing in, each state in which the Mortgaged Property is located, and (iii) possessed of all requisite power and authority to carry on its business and to own and operate the Mortgaged Property. Each Loan Document executed by Grantor has been duly authorized, executed and delivered by Grantor, and the obligations thereunder and the performance thereof by Grantor in accordance with their terms are and will continue to be within Grantor's power and authority (without the necessity of joinder or consent of any other person), are not and will not be in contravention of any Legal Requirement to which Grantor or the Mortgaged Property is subject, and do not and will not result in the creation of any encumbrance against any assets or properties of Grantor, or any other person liable, directly or indirectly, for any of the secured indebtedness, except as expressly contemplated by the Loan Documents. Except as has been disclosed in writing to Holder, there is no suit, action, claim, investigation, inquiry, proceeding or demand pending (or, to Grantor's knowledge, threatened) which affects the Mortgaged Property (including, without limitation, any which challenges or otherwise pertains to Grantor's title to the Mortgaged Property) or the validity, enforceability or priority of any of the Loan Documents. There is no judicial or administrative action, suit or proceeding pending (or, to Grantor's knowledge, threatened) against Grantor, or against any other person liable directly or indirectly for the secured indebtedness, except as has been disclosed in writing to Holder in connection with the loan evidenced by the Note. The Loan Documents constitute legal, valid and binding obligations of Grantor (and of each guarantor, if any) enforceable in accordance with their terms, except as the enforceability thereof may be limited by Debtor Relif Laws (hereinafter defined) and except as the availability of certain remedies may be limited by general principles of equity. Grantor is not a "foreign person" within the meaning of the Internal Revenue Code of 1986, as amended, Sections 1445 and 7701 (i.e. Grantor is not a non-resident alien, foreign corporation, foreign partnership, foreign trust or foreign estate as those terms are defined therein and in any regulations promulgated thereunder). The loan evidenced by the Note is solely for business purposes, and is not for personal, family, household or agricultural purposes. Grantor will not cause or permit any change to be made in its name, identity, or corporate or partnership structure, unless Grantor shall have notified Holder of such change prior to the effective date of such change, and shall have first taken all action required by Holder for the purpose of further perfecting or protecting the lien and security interest of Holder in the Mortgaged Property. Grantor's principal place of business and chief executive office, and the place where Grantor keeps its books and records concerning the Mortgaged Property, has for the preceding four months been and will continue to be (unless Grantor notifies Holder of any change in writing prior to the date of such change) the address of Grantor set forth at the end of this Mortgage. The sole purpose of Grantor is and will remain the ownership and operation of the Mortgaged Property. The proceeds of the Loan are not being used and shall not be used to purchase or carry any "margin DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 11 stock" within the meaning of Regulation "U'" of the Board of Governors of the Federal Reserve System, nor to extend credit to others for that purpose. Grantor is not, and no person having "control" (as that term is defined in 12 U.S.C Section 375(b)(5) or in regulations promulgated pursuant thereto) of Grantor is an "executive officer," "director," or person who directly or indirectly or in concert with one or more persons owns, controls, or has the power to vote more than 10% of any class of voting securities" (as those terms are defined in 12 U.S.C. Section 375(b) or in regulations promulgated pursuant thereto) of Holder, of a bank holding company of which Holder is a subsidiary, or of any subsidiary of a bank holding company of which Holder is a subsidiary, or of any bank at which Holder maintains a correspondent account, or of any bank which maintains a correspondent account with Holder. The representations and warranties contained in the Loan Documents are made by Grantor as an inducement to Holder to make the Loan. Grantor understands that Holder is relying on such representations and warranties and that such representations and warranties shall survive any (a) bankruptcy proceedings involving Grantor or the Property, or (b) foreclosure of the Mortgage, or (c) conveyance of title to the Property in lieu of foreclosure of the Mortgage. (p) CERTAIN ENVIRONMENTAL MATTERS. (i) DEFINITIONS. As used in this Mortgage: (1) "ENVIRONMENTAL CLAIM" means any investigative, enforcement, cleanup, removal, containment, remedial or other governmental or regulatory action at any time threatened, instituted or completed pursuant to any applicable Environmental Requirement against Grantor or against or with respect to the Mortgaged Property or any use or activity on the Mortgaged Property, and any claim at any time threatened or made by any person against Grantor or against or with respect to the Mortgaged Property or any use or activity on the Mortgaged Property, relating to damage, contribution, cost recovery, compensation, loss or injury resulting from any Hazardous Substance; (2) "ENVIRONMENTAL REQUIREMENT" means any Legal Requirement which pertains to ground or air or water or noise pollution or contamination, underground or aboveground tanks, health or the environment, including without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), the Resource Conservation and Recovery Act of 1976, as amended ("RCRA"), the Texas Water Code and the Texas Solid Waste Disposal Act; and (3) "HAZARDOUS SUBSTANCE" means any substance, whether solid, liquid or gaseous: (a) which is listed, defined or regulated as a "hazardous substance", "hazardous waste" or "solid waste", or otherwise classified as hazardous or toxic, in or pursuant to any Environmental Requirement; or (b) which is or contains asbestos, radon, any polychlorinated biphenyl, urea formaldehyde foam insulation, or explosive or radioactive material; or (c) which causes or poses a threat to cause a contamination or nuisance on the Mortgaged Property or on any adjacent property or a hazard to the environment or to the health or safety of persons on the Mortgaged Property. As used in this PARAGRAPH (p), the word "on" when used with respect to the Mortgaged Property or adjacent property means "on, in, under, above or about". (ii) REPRESENTATIONS AND WARRANTIES. Grantor represents and warrants to Holder, without regard to whether Holder has or hereafter obtains any knowledge or report of the environmental condition of the Mortgaged Property, as follows: (1) during the period of Grantor's ownership of the Mortgaged Property, the Mortgaged Property has not been used for industrial or manufacturing purposes, for landfill, dumping or other waste disposal activity or operation, for generation, storage, use, sale, treatment, processing, recycling or disposal of any Hazardous Substance, or for any other use that would give rise to the release of any Hazardous Substance on the Mortgaged Property; (2) to the best of Grantor's knowledge after inquiry in accordance with good commercial or customary practices, no use of the Mortgaged Property described in CLAUSE (1) preceding occurred at any time prior to the period of Grantor's ownership of the Mortgaged Property nor did any such use on any adjacent property occur during DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 12 or at any time prior to the period of Grantor's ownership of the Mortgaged Property, and there is no Hazardous Substance, storage tank (or similar vessel), sump or well on the Mortgaged Property; (3) Grantor has received no notice and has no knowledge of any Environmental Claim or any completed, pending, proposed or threatened investigation or inquiry concerning the presence or release of any Hazardous Substance on the Mortgaged Property or on any adjacent property or concerning whether any condition, use or activity on the Mortgaged Property or on any adjacent property is in violation of any Environmental Requirement; (4) the present conditions, uses and activities on the Mortgaged Property do not violate any Environmental Requirement and the use of the Mortgaged Property which Grantor (and each tenant and subtenant, if any) makes and intends to make of the Mortgaged Property complies and will comply with all applicable Environmental Requirements; (5) the Mortgaged Property is not currently on, and to the best of Grantor's knowledge after inquiry in accordance with good commercial or customary practices, has never been on, any federal or state "superfund" or "superlien" list; and (6) neither Grantor, nor to Grantor's knowledge any tenant or subtenant, has obtained or is required to obtain any permit or other authorization to construct, occupy, operate, use or conduct any activity on any of the Mortgaged Property by reason of any Environmental Requirement. (iii) VIOLATIONS. Grantor will not cause, commit, permit or allow to continue any violation of any Environmental Requirement by Grantor or by or with respect to the Mortgaged Property or any use or activity on the Mortgaged Property, or the attachment of any environmental lien to the Mortgaged Property. Grantor will not place, install, dispose of or release, or cause, permit or allow the placing, installation, disposal or release of, any Hazardous Substance or storage tank (or similar vessel) on the Mortgaged Property and will keep the Mortgaged Property free of any Hazardous Substance. (iv) NOTICE TO HOLDER. Grantor will promptly advise Holder in writing of any Environmental Claim or of the discovery of any Hazardous Substance on the Mortgaged Property, as soon as Grantor first obtains knowledge thereof, including a full description of the nature and extent of the Environmental Claim and/or Hazardous Substance and all relevant circumstances. (v) SITE ASSESMENTS AND INFORMATION. If Holder shall ever have reason to believe that any Hazardous Substance affects the Mortgaged Property, or if any Environmental Claim is made or threatened, or if a default shall have occurred, Grantor will at its expense provide to Holder from time to time, in each case within 30 days of Holder's request, a report (including all drafts thereof if requested by Holder) of an environmental assessment of the Mortgaged Property made after the date of Holder's request and of such scope (including but not limited to the taking of soil borings, air and groundwater samples and other above and below ground testing) as Holder may request and by a consulting firm acceptable to Holder. Provided that no default under this Mortgage exists, Grantor shall not be required to provide shall an environmental assessment report more than once during a 12 month period, unless any environmental assessment report recommends follow-up reports and/or actions. Grantor will cooperate with each consulting firm making any such assessment and will supply to the consulting firm, from time to time and promptly on request, all information available to Grantor to facilitate the completion of the assessment and report. (vi) REMEDIAL ACTIONS. Without limitation of Holder's rights to declare a default and to exercise all remedies available by reason thereof, if any Hazardous Substance is discovered on the Mortgaged Property at any time and regardless of the cause, Grantor shall: (1) promptly at Grantor's sole risk and expense remove, treat and dispose of the Hazardous Substance in compliance with all applicable Environmental Requirements and solely under Grantor's name (or DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 13 if removal is prohibited by any Environmental Requirement, take whatever action is required by applicable Environmental Requirements), in addition to taking such other action as is necessary to have the full use and benefit of the Mortgaged Property as contemplated by the Loan Documents, and provide Holder with satisfactory evidence thereof; and (2) if requested by Holder, provide to Holder within 30 days of Holder's request a bond, letter of credit or other financial assurance evidencing to Holder's satisfaction that all necessary funds are readily available to pay the costs and expenses of the actions required by CLAUSE (1) preceding and to discharge any assessments or liens established against the Mortgaged Property as a result of the presence of the Hazardous Substance on the Mortgaged Property. (q) FURTHER ASSURANCES. Grantor will, promptly on request of Holder, (i) correct any defect, error or omission which may be discovered in the contents, execution or acknowledgment of this Mortgage or any other Loan Document; (ii) execute, acknowledge, deliver, procure and record and/or file such further documents (including, without limitation, further deeds of trust, security agreements, financing statements, continuation statements, and assignments of rents or leases) and do such further acts as may be necessary, desirable or proper to carry out more effectively the purposes of this Mortgage and the other Loan Documents, to more fully identify and subject to the liens and security interests hereof any property intended to be covered hereby (including specifically, but without limitation, any renewals, additions, substitutions, replacements, or appurtenances to the Mortgaged Property) or as deemed advisable by Holder to protect the lien or the security interest hereunder against the rights or interests of third persons; and (iii) provide such certificates, documents, reports, information. affidavits and other instruments and do such further acts as may be necessary, desirable or proper in the reasonable determination of Holder to enable Holder to comply with the requirements or requests of any agency having jurisdiction over Holder or any examiners of such agencies with respect to the indebtedness secured hereby, Grantor or the Mortgaged Property. Grantor shall pay all costs connected with any of the foregoing, which shall be a demand obligation payable within fifteen (15) days of request therefor owing by Grantor (which Grantor hereby promises to pay) to Holder pursuant to this Mortgage. (r) FEES AND EXPENSES. Without limitation of any other provision of this Mortgage or of any other Loan Document and to the extent not prohibited by applicable law, Grantor will pay, and will reimburse to Holder and/or Trustee on demand to the extent paid by Holder and/or Trustee: (i) all appraisal fees, filing and recording fees, taxes, brokerage fees and commissions, abstract fees, title search or examination fees, title policy and endorsement premiums and fees, uniform commercial code search fees, escrow fees, reasonable attorneys' fees, architect fees, construction consultant fees, environmental inspection fees, survey fees, and all other out-of-pocket costs and expenses of every character incurred by Grantor or Holder and/or Trustee in connection with the preparation of the Loan Documents, the evaluation, closing and funding of the loan evidenced by the Loan Documents, and any and all amendments and supplements to this Mortgage, the Note or any other Loan Documents or any approval, consent, waiver, release or other matter requested or required hereunder or thereunder, or otherwise attributable or chargeable to Grantor as owner of the Mortgaged Property; and (ii) all costs and expenses, including reasonable attorneys' fees and expenses, incurred or expended by Holder in connection with the investigation of the Mortgaged Property or the consummation, enforcement or defense of the Loan, this Mortgage, or any other Loan Document. (s) INDEMNIFICATION. (i) Grantor will indemnify and hold harmless Holder and Trustee from and against, and reimburse them on demand for, any and all Indemnified Matters (defined below). For purposes of this PARAGRAPH (p), the terms "Holder" and "Trustee" shall include the directors, officers, partners, employees and agents of Trustee and Holder, respectively, and any persons owned or controlled by, owning DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 14 or controlling, or under common control or affiliated with Holder or Trustee, respectively. WITHOUT LIMITATION, THE FOREGOING INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO MATTERS WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF SUCH (AND/OR ANY OTHER) INDEMNIFIED PERSON. HOWEVER, SUCH INDEMNITIES SHALL NOT APPLY TO A PARTICULAR INDEMNIFIED PERSON TO THE EXTENT THAT THE SUBJECT OF THE INDEMNIFICATION IS CAUSED BY OR ARISES OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THAT INDEMNIFIED PERSON. Any amount to be paid under this PARAGRAPH (p) by Grantor to Holder and/or Trustee shall be a demand obligation owing by Grantor (which Grantor hereby promises to pay) to Holder and/or Trustee pursuant to this Mortgage. Nothing in this paragraph, elsewhere in this Mortgage or in any other Loan Document shall limit or impair any rights or remedies of Holder and/or Trustee (including without limitation any rights of contribution or indemnification) against Grantor or any other person under any other provision of this Mortgage, any other Loan Document, any other agreement or any applicable Legal Requirement. (ii) As used herein, the term "INDEMNIFIED MATTERS" means any and all claims, demands, liabilities (including strict liability), losses, damages (including consequential damages), causes of action, judgments, penalties, costs and expenses (including without limitation, reasonable fees and expenses of attorneys and other professional consultants and experts, and of the investigation and defense of any claim, whether or not such claim is ultimately defeated, and the settlement of any claim or judgment including all value paid or given in settlement) of every kind, known or unknown, foreseeable or unforeseeable, which may be imposed upon, asserted against or incurred or paid by Holder and/or Trustee at any time and from time to time, whenever imposed, asserted or incurred, because of, resulting from, in connection with, or arising out of any transaction, act, omission, event or circumstance in any way connected with the Mortgaged Property or with this Mortgage or any other Loan Document, including but not limited to any bodily injury or death or property damage occurring in or upon or in the vicinity of the Mortgaged Property through any cause whatsoever at any time on or before the Release Date, any act performed or omitted to be performed hereunder or under any other Loan Document, any breach by Grantor of any representation, warranty, covenant, agreement or condition contained in this Mortgage or in any other Loan Document, any default as defined herein, any claim under or with respect to any Lease (hereinafter defined) and any Environmental Matter (defined below). Notwithstanding the foregoing, the term Indemnified Matters shall not include any cost, claim, demand, liability or other cost or expense arising from the action or failure to act of Holder or Trustee after such time as Holder or Trustee shall have taken possession of the Mortgaged Property. As used herein, the term "ENVIRONMENTAL MATTER" means: (a) the presence of any Hazardous Substance on, in, under, above or about the Mortgaged Property, or the migration or release or threatened migration or release of any Hazardous Substance on, to, from or through the Mortgaged Property, on or at any time before the Release Date; or (b) any act, omission, event or circumstance existing or occurring in connection with the handling, treatment, containment, removal, storage, decontamination, clean-up, transport or disposal of any Hazardous Substance which is at any time on or before the Release Date present on, in, under, above or about the Mortgaged Property; or (c) any violation on or before the Release Date, of any Environmental Requirement in effect on or before the Release Date, regardless of whether any act, omission, event or circumstance giving rise to the violation constituted a violation at the time of the occurrence or inception of such act, omission, event or circumstance; or (d) any Environmental Claim, or the filing or imposition of any environmental lien against the Mortgaged Property, because of, resulting from, in connection with, or arising out of any of the matters referred to in CLAUSES (a) through (c) preceding; and regardless of whether any of the matters referred to in DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 15 the foregoing CLAUSES (a) THROUGH (d) was caused by Grantor or Grantor's tenant or any subtenant, or a prior owner of the Mortgaged Property or its tenant or any subtenant, or any third party. Without limitation of the definition of Indemnified Matters herein, Grantor's indemnification obligations regarding any Environmental Matter shall include injury or damage to any person, property or natural resource occurring upon or off of the Mortgaged Property (including but not limited to the cost of demolition and rebuilding of any improvements on real property), the preparation of any feasibility studies or reports and the performance of any cleanup, remediation, removal, response, abatement, containment, closure, restoration, monitoring or similar work required by any Environmental Requirement or necessary to have the full use and benefit of the Mortgaged Property as contemplated by the Loan Documents (including, without limitation, any of the same in connection with any foreclosure or transfer in lieu thereof), and all liability to pay or indemnify any person for costs in connection with any of the foregoing. The term "RELEASE DATE" as used herein means the earlier of the following two dates: (i) the date on which the indebtedness and obligations secured hereby have been paid and performed in full and this Mortgage has been released, or (ii) the date on which the lien of this Mortgage is fully and finally foreclosed or a conveyance by deed in lieu of such foreclosure is fully and finally effective, and possession of the Mortgaged Property has been given to the purchaser or grantee free of occupancy and claims to occupancy by Grantor and Grantor's heirs, devisees, representatives, successors and assigns; provided, that if such payment, performance, release, foreclosure or conveyance is challenged, in bankruptcy proceedings or otherwise, the Release Date shall be deemed not to have occurred until such challenge is rejected, dismissed or withdrawn with prejudice. The indemnities in this PARAGRAPH (s) shall not terminate upon the Release Date or upon the release, foreclosure or other termination of this Mortgage but will survive the Release Date, foreclosure of this Mortgage or conveyance in lieu of foreclosure, the repayment of the secured indebtedness, the discharge and release of this Mortgage and the other Loan Documents, any bankruptcy or other debtor relief proceeding, and any other event whatsoever. (t) RECORDS AND FINANCIAL REPORTS. Grantor will keep accurate books and records in accordance with sound accounting principles in which full, true and correct entries shall be promptly made with respect to the Mortgaged Property and the operation thereof, and will permit all such books and records to be inspected and copied, and the Mortgaged Property to be inspected and photographed, by Holder and its representatives during normal business hours and at any other reasonable times upon advance notice by Holder. Without limitation of other or additional requirements in any of the other Loan Documents, Grantor will furnish to Holder: (i) current operating statements itemizing all income and expenses of the Mortgaged Property, for each month (and for the fiscal year through the end of such month) as soon as reasonably practicable but in any event within fifteen (15) days after the end of such month and for each fiscal year of Grantor within sixty (60) days after the end thereof including also a projection of such operations for the next fiscal year; and (ii) a balance sheet (including disclosure of all contingent liabilities) and an income statement of Grantor, for each fiscal year of Grantor as soon as reasonably practicable following the end of such fiscal year, but in any event within ninety (90) days after the end thereof. Each financial statement submitted pursuant to this paragraph shall be certified in writing as true and correct by Grantor (or if Grantor is not a natural person, by a representative of Grantor acceptable to Holder). Grantor will furnish to Holder at Grantor's expense all evidence which Holder may from time to time reasonably request as to compliance with all provisions of the Loan Documents. Any inspection or audit of the Mortgaged Property or the books and records of Grantor, or the procuring of documents and financial and other information, by or on behalf of Holder shall be for Holder's protection only, and shall not constitute any assumption of responsibility to Grantor or anyone else with regard to the condition, constrution, maintenance or operation of the Mortgaged Property nor Holder's approval of any certification given to Holder nor relieve Grantor of any of Grantor's obligations. DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 16 (u) TAXES ON NOTE OR MORTGAGE. Grantor will promptly pay all income, franchise and other taxes owing by Grantor and any stamp taxes or other taxes (unless such payment by Grantor is prohibited by law) which may be required to be paid with respect to the Note, this Mortgage or any other instrument evidencing or securing any of the secured indebtedness. In the event of the enactment after this date of any law of any governmental entity applicable to Holder, the Note, the Mortgaged Property or this Mortgage deducting from the value of property for the purpose of taxation any lien or security interest thereon, or imposing upon Holder the payment of the whole or any part of the taxes or assessments or charges or liens herein required to be paid by Grantor, or changing in any way the laws relating to the taxation of deeds of trust or mortgages or security agreements or debts secured by deeds of trust or mortgages or security agreements or the interest of the mortgagee or secured party in the property covered thereby, or the manner of collection of such taxes, so as to affect this Mortgage or the indebtedness secured hereby or Holder, then, and in any such event. Grantor, upon demand by Holder, shall pay such taxes, assessments, charges or liens, or reimburse Holder therefor; provided, however, that if in the opinion of counsel for Holder (i) it might be unlawful to require Grantor to make such payment or (ii) the making of such payment might result in the imposition of interest beyond the maximum amount permitted by law, then and in such event, Holder may elect, by notice in writing given to Grantor, to declare all of the indebtedness secured hereby to be and become due and payable sixty (60) days from the giving of such notice. (v) STATEMENT CONCERNING NOTE OR MORTGAGE. Grantor shall at any time and from time to time furnish within ten (10) business days of request by Holder a written statement in such form as may be required by Holder stating that (i) the Note, this Mortgage and the other Loan Documents are valid and binding obligations of Grantor, enforceable against Grantor in accordance with their terms; (ii) the unpaid principal balance of the Note; (iii) the date to which interest on the Note is paid; (iv) the Note, this Mortgage and the other Loan Documents have not been released, subordinated or modified; and (v) there are no offsets or defenses against the enforcement of the Note, this Mortgage or any other Loan Document. If any of the foregoing statements are untrue, Grantor shall, alternatively, specify the reasons therefor. (w) ANNUAL APPRAISAL. Holder may at its option obtain at Grantor's expense, not more than once in each year, an appraisal of the Mortgaged Property or any part thereof prepared in accordance with written instructions from Holder by a third-party appraiser engaged directly by Holder. Each such appraiser and appraisal shall be satisfactory to Holder. The costs of each such appraisal shall be a part of the secured indebtedness and shall be payable by Grantor to Holder within fifteen (15) days of Holder's demand (which obligation Grantor hereby promises to pay). Section 2.2 PERFORMANCE BY HOLDER ON GRANTOR'S BEHALF. Grantor agrees that, if Grantor fails to perform any act or to take any action which under any Loan Document Grantor is required to perform or take, or to pay any money which under any Loan Document Grantor is required to pay (taking into account any applicable grace, cure, or contest periods), and whether or not the failure then constitutes a default hereunder or thereunder, and whether or not there has occurred any default or defaults hereunder or the secured indebtedness has been accelerated, Holder, in Grantor's name or its own name, may, but shall not be obligated to, perform or cause to be performed such act or take such action or pay such money, and any expenses so incurred by Holder and any money so paid by Holder shall be a demand obligation owing by Grantor to Holder (which obligation Grantor hereby promises to pay), shall be a part of the indebtedness secured hereby, and Holder, upon making such payment, shall be subrogated to all of the rights of the person, entity or body politic receiving such payment. Holder and its designees shall have the right, upon advance notice to Grantor, to enter upon the Mortgaged Property at any time and from time to time for any such purposes. No such payment or performance by Holder shall waive or cure any default or waive any right, remedy or recourse of Holder. Any such payment may be made by Holder in reliance on any statement, invoice or claim without inquiry into the validity or accuracy thereof. Each amount due and owing by Grantor to Holder pursuant to this Mortgage shall bear interest, from the date such amount becomes due until paid, at the rate per DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 17 annum provided in the Note for interest on past due principal owed on the Note but never in excess of the maximum nonusurious amount permitted by applicable law, which interest shall he payable to Holder within fifteen (15) days of demand therefor; and all such amounts, together with such interest thereon, shall automatically and without notice be a part of the indebtedness secured hereby. The amount and nature of any expense by Holder hereunder and the time when paid shall be fully established by the certificate of Holder or any of Holder's officers or agents. Section 2.3 ABSENCE OF OBLIGATIONS OF HOLDER WITH RESPECT TO MORTGAGED PROPERTY. Notwithstanding anything in this Mortgage to the contrary, including, without limitation, the definition of "Mortgaged Property" and/or the provisions of Article 3 hereof, (i) to the extent permitted by applicable law, the Mortgaged Property is composed of Grantor's rights, title and interests therein but not Grantor's obligations, duties or liabilities pertaining thereto, (ii) Holder neither assumes nor shall have any obligations, duties or liabilities in connection with any portion of the items described in the definition of "Mortgaged Property" herein, either prior to or after obtaining title to such Mortgaged Property, whether by foreclosure sale, the granting of a deed in lieu of foreclosure or otherwise, and (iii) Holder may, at any time prior to or after the acquisition of title to any portion of the Mortgaged Property as above described, advise any party in writing as to the extent of Holder's interest therein and/or expressly disaffirm in writing any rights, interests, obligations, duties and/or liabilities with respect to such Mortgaged Property or matters related thereto. Without limiting the generality of the foregoing, it is understood and agreed that Holder shall have no obligations, duties or liabilities prior to or after acquisition of title to any portion of the Mortgaged Property, as lessee under any lease or purchaser or seller under any contract or option unless Holder elects otherwise by written notification. ARTICLE III COLLATERAL ASSIGNMENT OF LEASES AND RENTS AND LEASES Section 3.1 ASSIGNMENT. As additional security for the indebtedness secured hereby, Grantor hereby assigns to Holder all Rents (hereinafter defined) and all of Grantor's rights in and under all Leases (hereinafter defined). Upon the occurrence of a default hereunder, Holder shall have the right, power and privilege (but shall be under no duty) to demand possession of the Rents, which demand shall to the fullest extent permitted by applicable law be sufficient action by Holder to entitle Holder to immediate and direct payment of the Rents (including delivery to Holder of Rents collected for the period in which the demand occurs and for any subsequent period), for application as provided in this Mortgage, all without the necessity of any further action by Holder, including, without limitation, any action to obtain possession of the Land, Improvements or any other portion of the Mortgaged Property. Grantor hereby authorizes and directs the tenants under the Leases to pay Rents to Holder upon written demand by Holder, without further consent of Grantor, without any obligation to determine whether a default has in fact occurred and regardless of whether Holder has taken possession of any portion of the Mortgaged Property, and the tenants may rely upon any written statement delivered by Holder to the tenants. Any such payment to Holder shall constitute payment to Grantor under the Leases, and Grantor hereby appoints Holder as Grantor's lawful attorney-in-fact for giving, and Holder is hereby empowered to give, acquittance to any tenants for such payments to Holder after a default. The assignment contained in this Section shall become null and void upon the release of this Mortgage. As used herein: (i) "LEASE" means each existing or future lease, sublease (to the extent of Grantor's rights thereunder) or other agreement under the terms of which any person has or acquires any right to occupy or use the Mortgaged Property, or any part thereof, or interest therein, and each existing or future guaranty of payment or performance thereunder, and all extensions, renewals, modifications and replacements of each such lease, sublease, agreement or guaranty; and (ii) "RENTS" means all of the rents, revenue, income, profits and proceeds derived and to be derived from the Mortgaged Property or arising from the use or enjoyment of any portion thereof or from any Lease, including but not limited to liquidated damages following default under any such Lease, all proceeds payable under any policy of insurance covering loss of rents resulting from untenantability caused by damage to any part of the Mortgaged Property, all of Grantor's rights to recover monetary amounts from any tenant in bankruptcy including, DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 18 without limitation, rights of recovery for use and occupancy and damage claims arising out of Lease defaults, including rejections, under any applicable Debtor Relief Law (as hereinafter defined), together with any sums of money that may now or at any time hereafter be or become due and payable to Grantor by virtue of any and all royalties, overriding royalties, bonuses, delay rentals and any other amount of any kind or character arising under any and all present and all future oil, gas, mineral and mining leases covering the Mortgaged Property or any part thereof, and all proceeds and other amounts paid or owing to Grantor under or pursuant to any and all contracts and bonds relating to the construction or renovation of the Mortgaged Property. Section 3.2 COVENANTS, REPRESENTATIONS AND WARRANTIES CONCERNING LEASES AND RENTS. Grantor covenants, represents and warrants that: (i) Grantor has good title to, and is the owner of the entire landlord's interest in, the Leases and Rents hereby assigned and authority to assign them; (ii) all Leases are valid and enforceable, and in full force and effect, and are unmodified except as stated therein; (iii) unless otherwise stated in a Permitted Encumbrance, no Rents or Leases have been or will be assigned, mortgaged, pledged or otherwise encumbered and no other person has or will acquire any right, title or interest in such Rents or Leases; (iv) except as disclosed in writing to Holder in the rent roll for the Mortgaged Property or otherwise, no Rents have been waived, released, discounted, set off or compromised; (v) except as stated in the Leases, Grantor has not received any funds or deposits from any tenant for which credit has not already been made on account of accrued Rents; (vi) Grantor shall perform all of its obligations under the Leases and enforce the tenants' obligations under the Leases to the extent enforcement is prudent under the circumstances; (vii) except as may be described in the standard form tenant lease approved by Holder, or as may be consistent with good marketing practice for residential apartments in the vicinity of and of similar quality to the Premises, Grantor will not without the prior written consent of Holder, enter into any Lease after the date hereof, or waive, release, discount, set off, compromise, reduce or defer any Rent, receive or collect Rents more than one (1) month in advance, grant any rent-free period to any tenant, reduce any Lease term or waive, release or otherwise modify any other material obligation under any Lease, renew or extend any Lease except in accordance with a right of the tenant thereto in such Lease, approve or consent to an assignment of a Lease or a subletting of any part of the premises covered by a Lease, or settle or compromise any claim against a tenant under a Lease in bankruptcy or otherwise; (viii) Grantor will not, except in good faith where the tenant is in material default thereunder, terminate or consent to the cancellation or surrender of any Lease having an unexpired term of one year or more unless promptly after the cancellation or surrender a new Lease of such premises is made with a new tenant having a credit standing at least equivalent to that of the tenant whose Lease was cancelled, on substantially the same terms as the terminated or cancelled Lease; (ix) Grantor will not execute any Lease except in accordance with the Loan Documents and for actual occupancy by the tenant thereunder; (x) Grantor shall give prompt notice to Holder, as soon as Grantor first obtains notice, of any claim, or the commencement of any action, by any tenant or subtenant under or with respect to a Lease regarding any claimed damage, default, diminution of or offset against Rent, cancellation of the Lease, or constructive eviction, excluding, however, notices of default under residential Leases, and Grantor shall defend, at Grantor's expense, any proceeding pertaining to any Lease, including, if Holder so requests, any such proceeding to which Holder is a party; (xi) Grantor shall as often as requested by Holder, within ten (10) business days of each request, deliver to Holder a complete rent roll of the Mortgaged Property in such detail as Holder may require and financial statements of the tenants, subtenants and guarantors under the Leases to the extent available to Grantor, and deliver to such of the tenants and others obligated under the Leases specified by Holder written notice of the assignment in Section 3.1 hereof in form and content satisfactory to Holder; (xii) promptly upon request by Holder, Grantor shall deliver to Holder executed copies of all Leases and copies of all records relating thereto; (xiii) there shall be no merger of the leasehold estates, created by the Leases, with the fee estate of the Land without the prior written consent of Holder; and (xiv) Holder may at any time and from time to time by specific written instrument intended for the purpose, unilaterally subordinate the lien of this Mortgage to any Lease, without joinder or consent of, or notice to, Grantor, any tenant or any other person, and notice is hereby given to each tenant under a Lease of such right to subordinate. No such subordination shall constitute a subordination to any lien or other encumbrance, whenever arising, or improve the right of any junior lienholder; and nothing herein shall be construed as subordinating this Mortgage to any Lease. DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 19 Section 3.3 NO LIABILITY OF HOLDER. Until such time as Holder shall take possession of the Premises, (i) Holder's acceptance of this assignment shall not be deemed to constitute Holder a "mortgagee in possession," nor obligate Holder to appear in or defend any proceeding relating to any Lease or to the Mortgaged Property, or to take any action hereunder, expend any money, incur any expenses, or perform any obligation or liability under any Lease, or assume any obligation for any deposit delivered to Grantor by any tenant and not as such delivered to and accepted by Holder; (ii) Holder shall not be liable for any injury or damage to person or property in or about the Mortgaged Property, or for Holder's failure to collect or to exercise diligence in collecting Rents, but shall be accountable only for Rents that it shall actually receive and (iii) Holder neither has nor assumes any obligations as lessor or landlord with respect to any Lease. Neither the assignment of Leases and Rents nor enforcement of Holder's rights regarding Leases and Rents (including collection of Rents) nor possession of the Mortgaged Property by Holder nor Holder's consent to or approval of any Lease (nor all of the same), shall render Holder liable on any obligation under or with respect to any Lease or constitute affirmation of, or any subordination to, any Lease, occupancy, use or option. If Holder seeks or obtains any judicial relief regarding Rents or Leases, the same shall in no way prevent the concurrent or subsequent employment of any other appropriate rights or remedies nor shall same constitute an election of judicial relief for any foreclosure or any other purpose. The rights of Holder under this Article 3 shall be cumulative of all other rights of Holder under the Loan Documents or otherwise. ARTICLE IV DEFAULT Section 4.1 EVENTS OF DEFAULT. The occurrence of any one of the following shall be a default under this Mortgage ("DEFAULT"): (a) FAILURE TO PAY INDEBTEDNESS. Any interest due on the secured indebtedness pursuant to the Note is not paid within five (5) days after the same shall become due and payable, whether it be the due date stipulated in the Note and/or the Loan Documents or the date fixed for payment in full at maturity or upon prepayment, by acceleration or otherwise. (b) NONPERFORMANCE OF COVENANTS. Any covenant, agreement or condition herein or in any other Loan Document (other than covenants otherwise addressed in another paragraph of this Section, such as covenants to pay the secured indebtedness) is not fully and timely performed, observed or kept, and such failure is not cured within thirty (30) days after Holder delivers written notice thereof; provided, however, Holder may at Holder's option, upon request of Grantor, allow Grantor a longer period in which to effect a cure of a matter not reasonably susceptible to cure within such thirty (30) days, provided that Grantor shall diligently pursue such cure and shall provide such bond or additional collateral as Holder may require. (c) REPRESENTATIONS. Any statement, representation or warranty in any of the Loan Documents, or in any financial statement or any other writing heretofore or hereafter delivered to Holder in connection with the secured indebtedness is false, misleading or erroneous in any material respect on the date hereof or on the date as of which such statement, representation or warranty is made, and such statement, representation or warranty is not made true and correct (as of the time such corrective action is taken) within the applicable grace period (if any) provided for in such Loan Document. (d) BANKRUPTCY OR INSOLVENCY. The owner of the Mortgaged Property or any person liable, directly or indirectly, for any of the secured indebtedness (or any general partner or joint venturer of such owner or other person): (1) (i) Executes an assignment for the benefit of creditors, or takes any action in furtherance thereof; or (ii) admits in writing its inability to pay, or fails to pay, its debts generally as they become due; or (iii) as a debtor, files a petition, DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 20 case, proceeding or other action pursuant to, or voluntarily seeks the benefit or benefits of, Title 11 of the United States Code as now or hereafter in effect or any other law, domestic or foreign, as now or hereafter in effect relating to bankruptcy, insolvency, liquidation, receivership, reorganization, arrangement, composition, extension or adjustment of debts, or similar laws affecting the rights of creditors (Title 11 of the United States Code and such other laws being herein called "DEBTOR RELIEF LAWS"), or takes any action in furtherance thereof; or (iv) seeks the appointment of a receiver, trustee, custodian or liquidator of the Mortgaged Property or any part thereof or of any significant portion of its other property; or (2) Suffers the filing of a petition, case, proceeding or other action against it as a debtor under any Debtor Relief Law or seeking appointment of a receiver, trustee, custodian or liquidator of the Mortgaged Property or any part thereof or of any significant portion of its other property, and (i) admits, acquiesces in or fails to contest diligently the material allegations thereof, or (ii) the petition, case, proceeding or other action results in entry of any order for relief or order granting relief sought against it, or (iii) in a proceeding under the Federal Bankruptcy Code, the case is converted from one chapter to another, or (iv) fails to have the petition, case, proceeding or other action permanently dismissed or discharged on or before the earlier of trial thereon or sixty (60) days next following the date of its filing; or (3) Conceals, removes, or permits to be concealed or removed, any part of its property, with intent to hinder, delay or defraud its creditors or any of them, or makes or suffers a transfer of any of its property which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law; or makes any transfer of its property to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid; or suffers or permits, while insolvent, any creditor to obtain a lien (other than as described in SUBPARAGRAPH [4] below) upon any of its property through legal proceedings which are not vacated and such lien discharged prior to enforcement thereof and in any event within sixty (60) days from the date thereof; or (4) Fails to have discharged within a period of ten (10) days any attachment, sequestration, or similar writ levied upon any of the Mortgaged Property; or (5) Fails to pay immediately any final money judgment against it. (e) TRANSFER OF THE MORTGAGED PROPERTY. Any sale, lease, conveyance, assignment, pledge, encumbrance, or transfer of all or any part of the Mortgaged Property or any interest therein, voluntarily or involuntarily, whether by operation of law or otherwise, except: (i) sales or transfers of items of the Accessories which have become obsolete or worn beyond practical use and which have been replaced by adequate substitutes, owned by Grantor, having a value equal to or greater than the replaced items when new; and (ii) the grant, in the ordinary course of business, of a leasehold interest in a part of the Improvements to a tenant for occupancy, not containing a right or option to purchase and not in contravention of any provision of this Mortgage or of any other Loan Document. Holder may, in its sole discretion, waive a default under this paragraph, but it shall have no obligation to do so, and any waiver may be conditioned upon such one or more of the following (if any) which Holder may require: the grantee's integrity, reputation, character, creditworthiness and management ability being satisfactory to Holder in its sole judgment and grantee executing, prior to such sale or transfer, a written assumption agreement containing such terms as Holder may require, a principal paydown on the Note, an increase in the rate of interest payable under the Note, a transfer fee, a modification of the term of the Note, and any other modification of the Loan Documents which Holder may require. DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 21 (f) TRANSFER OF OWNERSHIP OF GRANTOR. The sale, pledge, encumbrance, assignment or transfer, voluntarily or involuntarily, whether by operation of law or otherwise, of any interest in Grantor (if Grantor is not a natural person but is a corporation, partnership, trust or other legal entity), without the prior written consent of Holder (including, without limitation, if Grantor is a partnership or joint venture, the withdrawal from or admission into it of any general partner or joint venturer). (g) GRANT OF EASEMENT, ETC. Without the prior written consent of Holder, Grantor grants any easement or dedication, files any plat, condominium declaration, or restriction, or otherwise encumbers the Mortgaged Property, or seeks or permits any zoning reclassification or variance, unless such action is expressly permitted by the Loan Documents or does not affect the Mortgaged Property. (h) ABANDONMENT. The owner of the Mortgaged Property abandons any of the Mortgaged Property. (i) DEFAULT UNDER OTHER LIEN. A default or event of default occurs under any lien. security interest or assignment covering the Mortgaged Property or any part thereof (whether or not Holder has consented, and without hereby implying Holder's consent, to any such lien, security interest or assignment not created hereunder), or the holder of any such lien, security interest or assignment declares a default or institutes foreclosure or other proceedings for the enforcement of its remedies thereunder. (j) DESTRUCTION. The Mortgaged Property is so demolished, destroyed or damaged that, in the reasonable opinion of Holder, it cannot be restored or rebuilt with available funds to a profitable condition within a reasonable period of time and in any event prior to the final maturity date of the Note. (k) CONDEMNATION. (i) Any governmental authority shall require, or commence any proceeding for, the demolition of any building or structure comprising a part of the Premises, or (ii) there is commenced any proceeding to condemn or otherwise take pursuant to the power of eminent domain, or a contract for sale or a conveyance in lieu of such a taking is executed which provides for the transfer of, a material portion of the Premises, including but not limited to the taking (or transfer in lieu thereof) of any portion which would result in the blockage or substantial impairment of access or utility service to the Improvements or which would cause the Premises to fail to comply with any Legal Requirement. (l) LIQUIDATION, ETC. The liquidation, termination, dissolution, merger, consolidation or failure to maintain good standing in the State of Texas (or in the case of an individual, the death or legal incapacity) of the owner of the Mortgaged Property or any person obligated to pay any part of the secured indebtedness. (m) MATERIAL ADVERSE CHANGE. In Holder's reasonable opinion, the prospect of payment of all or any part of the secured indebtedness has been impaired because of a material, adverse change in the financial condition, results of operations, business or properties of the owner of the Mortgaged Property or any person liable, directly or indirectly, for any of the secured indebtedness, or of any general partner or joint venturer thereof (if such owner or other person is a partnership or joint venture). (n) ENFORCEABILITY; PRIORITY. Any Loan Document shall for any reason without Holder's specific written consent cease to be in full force and effect, or shall be declared null and void or unenforceable in whole or in part, or the validity or enforceability thereof, in whole or in part, shall be challenged or denied by any party thereto other than Holder; or the liens, mortgages or security interests of Holder in any of the Mortgaged Property become unenforceable in whole or in part, or cease to be of the priority herein required, or the validity or enforceability thereof, in whole or in part, shall be challenged or denied by Grantor or any person obligated to pay any part of the secured indebtedness. DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 22 (o) OTHER LOAN DOCUMENTS. A default or event of default occurs under any Loan Document, other than this Mortgage, or under the Guaranty or the Security Agreement, and the same is not remedied within the applicable period of grace (if any) provided in such Loan Document. (p) AFFILIATE LOANS. A default or event of default occurs under any of the deeds of trust or notes listed on EXHIBIT C attached hereto and incorporated herein by this reference, or under any other loan document referenced in the aforesaid deeds of trust. All of such deeds of trust, promissory notes and other loan documents are collectively referred to herein as the Affiliate Loan Documents, and the loans evidenced thereby are referred to collectively as the Affiliate Loans. (q) GUARANTOR DEFAULT. A default or event of default occurs under any guaranty agreement executed by Guarantor in connection with the Loan. Section 4.2 NOTICE AND CURE. If any provision of this Mortgage or any other Loan Document provides for Holder to give to Grantor any notice regarding a default or incipient default, then if Holder shall fail to give such notice to Grantor as provided, the sole and exclusive remedy of Grantor for such failure shall be to seek appropriate equitable relief to enforce the agreement to give such notice and to have any acceleration of the maturity of the Note and the secured indebtedness postponed or revoked and foreclosure proceedings in connection therewith delayed or terminated pending or upon the curing of such default in the manner and during the period of time permitted by such agreement, if any, and Grantor shall have no right to damages or any other type of relief not herein specifically set out against Holder, all of which damages or other relief are hereby waived by Grantor. Nothing herein or in any other Loan Document shall operate or be construed to add on or make cumulative any cure or grace periods specified in any of the Loan Documents. ARTICLE V REMEDIES Section 5.1 CERTAIN REMEDIES. If a default shall occur, Holder may (but shall have no obligation to) exercise any one or more of the following remedies, without notice (unless notice is required by applicable statute): (a) ACCELERATION. Holder may at any time and from time to time declare any or all of the secured indebtedness immediately due and payable and such secured indebtedness shall thereupon be immediately due and payable, without presentment, demand, protest, notice of protest, notice of acceleration or of intention to accelerate or any other notice or declaration of any kind, all of which are hereby expressly waived by Grantor. Without limitation of the foregoing, upon the occurrence of a default described in CLAUSES (i), (iii) OR (iv) of SUBPARAGRAPH (l) of PARAGRAPH (d) of SECTION 4.1, hereof, all of the secured indebtedness shall thereupon be immediately due and payable, without presentment, demand, protest, notice of protest, declaration or notice of acceleration or intention to accelerate, or any other notice, declaration or act of any kind, all of which are hereby expressly waived by Grantor. (b) ENFORCEMENT OF ASSIGNMENT OF RENTS. Prior or subsequent to taking possession of any portion of the Mortgaged Property or taking any action with respect to such possession, Holder may: (1) collect and/or sue for the Rents in Holder's own name, give receipts and releases therefor, and after deducting all expenses of collection, including attorneys' fees and expenses, apply the net proceeds thereof to the secured indebtedness in such manner and order as Holder may elect and/or to the operation and management of the Mortgaged Property, including the payment of management, brokerage and attorney's fees and expenses; and (2) require Grantor to transfer all security deposits and records thereof to Holder together with original counterparts of the Leases. DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 23 (c) FORECLOSURE. Upon the occurrence of a default, Trustee. or his successor or substitute, is authorized and empowered and it shall be his special duty at the request of Holder to sell the Mortgaged Property or any part thereof situated in the State of Texas, at the courthouse of any county (whether or not the counties in which the Mortgaged Property is located are contiguous, if the Mortgaged Property is located in more than one county) in the State of Texas in which any part of the Mortgaged Property is situated, at public venue to the highest bidder for cash between the hours of ten o'clock a.m. and four o'clock p.m. on the first Tuesday in any month or at such other place, time and date as provided by the statutes of the State of Texas then in force governing sales of real estate under powers of sale conferred by deed of trust, after having given notice of such sale in accordance with such statutes. Any sale made by Trustee hereunder may be as an entirety or in such parcels as Holder may request. To the extent permitted by applicable law, any sale may be adjourned by announcement at the time and place appointed for such sale without further notice except as may be required by law. The sale by Trustee of less than the whole of the Mortgaged Property shall not exhaust the power of sale herein granted, and Trustee is specifically empowered to make successive sale or sales under such power until the whole of the Mortgaged Property shall be sold; and, if the proceeds of such sale of less than the whole of the Mortgaged Property shall be less than the aggregate of the indebtedness secured hereby and the expense of executing this trust as provided herein, this Mortgage and the lien hereof shall remain in full force and effect as to the unsold portion of the Mortgaged Property just as though no sale had been made; provided, however, that Grantor shall never have any right to require the sale of less than the whole of the Mortgaged Property but Holder shall have the right, at its sole election, to request Trustee to sell less than he whole of the Mortgaged Property. Trustee may, after any request or direction by Holder, sell not only the real property but also the Collateral and other interests which are a part of the Mortgaged Property, or any part thereof, as a unit and as a part of a single sale, or may sell any part of the Mortgaged Property separately from the remainder of the Mortgaged Property. It shall not be necessary for Trustee to have taken possession of any part of the Mortgaged Property or to have present or to exhibit at any sale any of the Collateral. After each sale, Trustee shall make to the purchaser or purchasers at such sale good and sufficient conveyances in the name of Grantor, conveying the property so sold to the purchaser or purchasers with general warranty of title by Grantor, subject to the Permitted Encumbrances (and to such leases and other matters, if any, as Trustee may elect upon request of Holder), and shall receive the proceeds of said sale or sales and apply the same as herein provided. Payment of the purchase price to the Trustee shall satisfy the obligation of purchaser at such sale therefor, and such purchaser shall not be responsible for the application thereof. The power of sale granted herein shall not be exhausted by any sale held hereunder by Trustee or his substitute or successor, and such power of sale may be exercised from time to time and as many times as Holder may deem necessary until all of the Mortgaged Property has been duly sold and all secured indebtedness has been fully paid. In the event any sale hereunder is not completed or is defective in the opinion of Holder, such sale shall not exhaust the power of sale hereunder and Holder shall have the right to cause a subsequent sale or sales to be made hereunder. Any and all statements of fact or other recitals made in any deed or deeds or other conveyances given by Trustee or any successor or substitute appointed hereunder as to nonpayment of the secured indebtedness or as to the occurrence of any default, or as to Holder's having declared all of said indebtedness to be due and payable, or as to the request to sell, or as to notice of time, place and terms of sale and the properties to be sold having been duly given, or as to the refusal, failure or inability to act of Trustee or any substitute or successor trustee, or as to the appointment of any substitute or successor trustee, or as to any other act or thing having been duly done by Holder or by such Trustee, substitute or successor, shall be taken as prima facie evidence of the truth of the facts so stated and recited. The Trustee or his successor or substitute may appoint or delegate any one or more persons as agent to perform any act or acts necessary or incident to any sale held by Trustee, including the posting of notices and the conduct of sale, but in the name and on behalf of Trustee, his successor or substitute. If Trustee or his successor or substitute shall have given notice of sale hereunder, any successor or substitute Trustee thereafter appointed may complete DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 24 the sale and the conveyance of the property pursuant thereto as if such notice had been given by the successor or substitute Trustee conducting the sale. (d) UNIFORM COMMERCIAL CODE. Without limitation of Holder's rights of enforcement with respect to the Collateral or any part thereof in accordance with the procedures for foreclosure of real estate, Holder may exercise its rights of enforcement with respect to the Collateral or any part thereof under the Texas Business and Commerce Code as amended (or under the Uniform Commercial Code in force in any other state to the extent the same is applicable law) and in conjunction with, in addition to or in substitution for those rights and remedies: (1) Holder may enter upon Grantor's premises to take possession of, assemble and collect the Collateral or, to the extent and for those items of the Collateral permitted under applicable law, to render it unusable; (2) Holder may require Grantor to assemble the Collateral and make it available at a place Holder designates which is mutually convenient to allow Holder to take possession or dispose of the Collateral; (3) written notice mailed to Grantor as provided herein at least five (5) days prior to the date of public sale of the Collateral or prior to the date after which private sale of the Collateral will be made shall constitute reasonable notice; (4) any sale made pursuant to the provisions of this paragraph shall be deemed to have been a public sale conducted in a commercially reasonable manner if held contemporaneously with and upon the same notice as required for the sale of the Mortgaged Property under power of sale as provided in PARAGRAPH (c) above in this SECTION 5.1; (5) in the event of a foreclosure sale, whether made by Trustee under the terms hereof, or under judgment of a court, the Collateral and the other Mortgaged Property may, at the option of Holder, be sold as a whole; (6) it shall not be necessary that Holder take possession of the Collateral or any part thereof prior to the time that any sale pursuant to the provisions of this Section is conducted and it shall not be necessary that the Collateral or any part thereof be present at the location of such sale; (7) with respect to application of proceeds of disposition of the Collateral under SECTION 5.3 hereof, the costs and expenses incident to disposition shall include the reasonable expenses of retaking, holding, preparing for sale or lease, selling, leasing and the like and the reasonable attorneys' fees and legal expenses incurred by Holder; (8) any and all statements of fact or other recitals made in any bill of sale or assignment or other instrument evidencing any foreclosure sale hereunder as to nonpayment of the secured indebtedness or as to the occurrence of any default, or as to Holder having declared all of such indebtedness to be due and payable, or as to notice of time, place and terms of sale and of the properties to be sold having been duly given, or as to any other act or thing having been duly done by Holder, shall be taken as prima facie evidence of the truth of the facts so stated and recited; and (9) Holder may appoint or delegate any one or more persons as agent to perform any act or acts necessary or incident to any sale held by Holder, including the sending of notices and the conduct of the sale, but in the name and on behalf of Holder. (e) LAWSUITS. Holder may proceed by a suit or suits in equity or at law, whether for collection of the indebtedness secured hereby, the specific performance of any covenant or agreement herein contained or in aid of the execution of any power herein granted, or for any foreclosure hereunder or for the sale of the Mortgaged Property under the judgment or decree of any court or courts of competent jurisdiction. (f) ENTRY ON MORTGAGED PROPERTY. Holder is authorized, prior or subsequent to the institution of any foreclosure proceedings, to the fullest extent permitted by applicable law, to enter upon the Mortgaged Property, or any part thereof, and to take possession of the Mortgaged Property and all books and records relating thereto, and to exercise without interference from Grantor any and all rights which Grantor has with respect to the management, possession, operation, protection or preservation of the Mortgaged Property. Holder shall not be deemed to have taken possession of the Mortgaged Property or any part thereof except upon the exercise of its right to do so, and then only to the extent evidenced by its demand and overt act specifically for such purpose. All costs, expenses and liabilities of every character incurred by Holder in managing, operating, maintaining, protecting or preserving the Mortgaged Property shall constitute a demand obligation of Grantor (which obligation Grantor hereby promises to DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 25 pay) to Holder pursuant to this Mortgage. If necessary to obtain the possession provided for above. Holder may invoke any and all legal remedies to dispossess Grantor. In connection with any action taken by Holder pursuant to this Section, Holder shall not he liable for any loss sustained by Grantor resulting from any failure to let the Mortgaged Property or any part thereof, or from any act or omission of Holder in managing the Mortgaged Property unless such loss is caused by the gross negligence, willful misconduct, or bad faith of Holder, nor shall Holder be obligated to perform or discharge any obligation, duty or liability of Grantor arising under any lease or other agreement relating to the Mortgaged Property or arising under any Permitted Encumbrance or otherwise arising. Grantor hereby assents to, ratifies and confirms any and all actions of Holder with respect to the Mortgaged Property taken under this Section. (g) RECEIVER. Holder shall as a matter of right be entitled to the appointment of a receiver or receivers for all or any part of the Mortgaged Property, whether such receivership be incident to a proposed sale (or sales) of such property or otherwise, and without regard to the value of the Mortgaged Property or the solvency of any person or persons liable for the payment of the indebtedness secured hereby, and Grantor does hereby irrevocably consent to the appointment of such receiver or receivers, waives any and all defenses to such appointment, agrees not to oppose any application therefor by Holder, and agrees that such appointment shall in no manner impair, prejudice or otherwise affect the rights of Holder to application of Rents as provided in this Mortgage. Nothing herein is to be construed to deprive Holder of any other right, remedy or privilege it may have under the law to have a receiver appointed. Any money advanced by Holder in connection with any such receivership shall be a demand obligation (which obligation Grantor hereby promises to pay) owing by Grantor to Holder pursuant to this Mortgage. (h) TERMINATION OF COMMITMENT TO LEND. Holder may terminate any commitment or obligation to lend or disburse funds under any Loan Document. (i) OTHER RIGHTS AND REMEDIES. Holder may exercise any and all other rights and remedies which Holder may have under the Loan Documents, or at law or in equity or otherwise. Section 5.2 EFFECTIVE AS MORTGAGE. This instrument shall be effective as a mortgage as well as a deed of trust and upon the occurrence of a default may be foreclosed as to any of the Mortgaged Property in any manner permitted by applicable law, and any foreclosure suit may be brought by Trustee or by Holder, and to the extent, if any, required to cause this instrument to be so effective as a mortgage as well as a deed of trust. Grantor hereby mortgages the Mortgaged Property to Holder. In the event a foreclosure hereunder shall be commenced by Trustee, or his substitute or successor, Holder may at any time before the sale of the Mortgaged Property direct Trustee to abandon the sale, and may then institute suit for the collection of the Note and/or any other secured indebtedness, and for the foreclosure of this Mortgage. It is agreed that if Holder should institute a suit for the collection of the Note or any other secured indebtedness and for the foreclosure of this Mortgage, Holder may at any time before the entry of a final judgment in said suit dismiss the same, and require Trustee, his substitute or successor to sell the Mortgaged Property in accordance with the provisions of this Mortgage. Section 5.3 PROCEEDS OF FORECLOSURE. The proceeds of any sale held by Trustee or Holder or any receiver or public officer in foreclosure of the liens and security interests evidenced hereby shall be applied: FIRST, to the payment of all necessary costs and expenses incident to such foreclosure sale, including but not limited to all reasonable attorneys' fees and legal expenses, all court costs and charges of every character, and a reasonable fee (not exceeding five percent (5%) of the gross proceeds of such sale) to Trustee acting under the provisions of PARAGRAPH (c) of SECTION 5.1 hereof if foreclosed by power of sale as provided in said paragraph, and to the payment of the other secured indebtedness, including specifically without limitation the principal, accrued interest and attorneys' fees due and unpaid on the Note and the amounts due and unpaid and owed to Holder under this Mortgage, the order and manner of application to the items in this clause FIRST to be in Holder's sole discretion; and SECOND, the remainder, DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 26 if any there shall be, shall be paid to Grantor, or to Grantor's heirs, devisees, representatives, successors or assigns, or such other persons (including the holder or beneficiary of any inferior lien) as may be entitled thereto by law, provided, however, that if Holder is uncertain which person or persons are so entitled. Holder may interplead such remainder in any court of competent jurisdiction, and the amount of any attorneys' fees, court costs and expenses incurred in such action shall be a part of the secured indebtedness and shall be reimbursable (without limitation) from such remainder. Section 5.4 HOLDER AS PURCHASER. Holder shall have the right to become the purchaser at any sale held by Trustee or substitute or successor or by any receiver or public officer or at any public sale, and Holder shall have the right to credit upon the amount of Holder's successful bid, to the extent necessary to satisfy such bid, all or any part of the secured indebtedness in such manner and order as Holder may elect. Section 5.5 FORECLOSURE AS TO MATURED DEBT. Upon the occurrence of a default, Holder shall have the right to proceed with foreclosure (judicial or nonjudicial) of the liens and security interests hereunder without declaring the entire secured indebtedness due, and in such event any such foreclosure sale may be made subject to the unmatured part of the secured indebtedness; and any such sale shall not in any manner affect the unmatured part of the secured indebtedness, but as to such unmatured part this Mortgage shall remain in full force and effect just as though no sale had been made. The proceeds of such sale shall be applied as provided in Section 5.3 hereof except that the amount paid under clause FIRST thereof shall be only the matured portion of the secured indebtedness and any proceeds of such sale in excess of those provided for in clause FIRST (modified as provided above) shall be applied to the prepayment (without penalty) of any other secured indebtedness in such manner and order and to such extent as Holder deems advisable, and the remainder, if any, shall be applied as provided in clause SECOND of Section 5.3 hereof. Several sales may be made hereunder without exhausting the right of sale for any unmatured part of the secured indebtedness. Section 5.6 REMEDIES CUMULATIVE. All rights and remedies provided for herein and in any other Loan Document are cumulative of each other and of any and all other rights and remedies existing at law or in equity, and Trustee and Holder shall, in addition to the rights and remedies provided herein or in any other Loan Document, be entitled to avail themselves of all such other rights and remedies as may now or hereafter exist at law or in equity for the collection of the secured indebtedness and the enforcement of the covenants herein and the foreclosure of the liens and security interests evidenced hereby, and the resort to any right or remedy provided for hereunder or under any such other Loan Document or provided for by law or in equity shall not prevent the concurrent or subsequent employment of any other appropriate right or rights or remedy or remedies. Section 5.7 HOLDER'S DISCRETION AS TO SECURITY. Holder may resort to any security given by this Mortgage or to any other security now existing or hereafter given to secure the payment of the secured indebtedness, in whole or in part, and in such portions and in such order as may seem best to Holder in its sole and uncontrolled discretion, and any such action shall not in anywise be considered as a waiver of any of the rights, benefits, liens or security interests evidenced by this Mortgage. Section 5.8 GRANTOR'S WAIVER OF CERTAIN RIGHTS. To the full extent Grantor may do so, Grantor agrees that Grantor will not at any time insist upon, plead, claim or take the benefit or advantage of any law now or hereafter in force providing for any appraisement, valuation, stay, extension or redemption, and Grantor, for Grantor, Grantor's heirs, devisees, representatives, successors and assigns, and for any and all persons ever claiming any interest in the Mortgaged Property, to the extent permitted by applicable law, hereby waives and releases all rights of redemption, valuation, appraisement, stay of execution, notice of intention to mature or declare due the whole of the secured indebtedness, notice of election to mature or declare due the whole of the secured indebtedness and all rights to a marshaling of assets of Grantor, including the Mortgaged Property, or to a sale in inverse order of alienation in the event of foreclosure of the liens and/or security interests hereby created. Grantor shall not have or assert any right under any statute or rule of law pertaining to the marshaling of assets, sale in inverse order of DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 27 alienation, the exemption of homestead, the administration of estates of decedents, or other matters whatever to defeat, reduce or affect the right of Holder under the terms of this Mortgage to a sale of the Mortgaged Property for the collection of the secured indebtedness without any prior or different resort for collection, or the right of Holder under the terms of this Mortgage to the payment of the secured indebtedness out of the proceeds of sale of the Mortgaged Property in preference to ever, other claimant whatever. Grantor waives any right or remedy which Grantor may have or be able to assert pursuant to Chapter 34 of the Texas Business and Commerce Code, or any other provision of Texas law, pertaining to the rights and remedies of sureties. If any law, referred to in this Section and now in force, of which Grantor or Grantor's heirs, devisees, representatives, successors or assigns or any other persons claiming any interest in the Mortgaged Property might take advantage despite this Section, shall hereafter be repealed or cease to be in force, such law shall not thereafter be deemed to preclude the application of this Section. Section 5.9 DELIVER OF POSSESSION AFTER FORECLOSURE, In the event there is a foreclosure sale hereunder and at the time of such sale, Grantor or Grantor's heirs, devisees, representatives, successors or assigns are occupying or using the Mortgaged Property, or any part thereof, each and all shall immediately become the tenant of the purchaser at such sale, which tenancy shall be a tenancy from day to day, terminable at the will of either landlord or tenant, at a reasonable rental per day based upon the value of the property occupied, such rental to be due daily to the purchaser; and to the extent permitted by applicable law, the purchaser at such sale shall, notwithstanding any language herein apparently to the contrary, have the sole option to demand immediate possession following the sale or to permit the occupants to remain as tenants at will. In the event the tenant fails to surrender possession of said property upon demand, the purchaser shall be entitled to institute and maintain a summary action for possession of the property (such as an action for forcible detainer) in any court having jurisdiction. ARTICLE VI MISCELLANEOUS Section 6.1 SCOPE OF MORTGAGE. This Mortgage is a deed of trust and mortgage of both real and personal property, a security agreement, a financing statement and a collateral assignment, and also covers proceeds and fixtures. Section 6.2 EFFECTIVE AS A FINANCING STATEMENT. This Mortgage shall be effective as a financing statement filed as a fixture filing with respect to all fixtures included within the Mortgaged Property and is to be filed for record in the real estate records of each county where any part of the Mortgaged Property (including said fixtures) is situated. This Mortgage shall also be effective as a financing statement covering minerals or the like (including oil and gas) and accounts subject to Subsection (e) of Section 9.103 of the Texas Business and Commerce Code, as amended, and similar provisions (if any) of the Uniform Commercial Code as enacted in any other state where the Mortgaged Property is situated which will be financed at the wellhead or minehead of the wells or mines located on the Mortgaged Property and is to be filed for record in the real estate records of each county where any part of the Mortgaged Property is situated. This Mortgage shall also be effective as a financing statement covering any other Mortgaged Property and may be filed in any other appropriate filing or recording office. The mailing address of Grantor is the address of Grantor set forth at the end of this Mortgage and the address of Holder from which information concerning the security interests hereunder may be obtained is the address of Holder set forth at the end of this Mortgage. A carbon, photographic or other reproduction of this Mortgage or of any financing statement relating to this Mortgage shall be sufficient as a financing statement for any of the purposes referred to in this Section. Section 6.3 NOTICE TO ACCOUNT DEBTORS. In addition to the rights granted elsewhere in this Mortgage, Holder may at any time notify the account debtors or obligors of any accounts, chattel paper, negotiable instruments or other evidences of indebtedness included in the Collateral to pay Holder directly. DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 28 Section 6.4 WAIVER BY HOLDER. Holder may at any time and from time to time by a specific writing intended for the purpose; (a) waive compliance by Grantor with any covenant herein made by Grantor to the extent and in the manner specified in such writing; (b) consent to Grantor's doing any act which hereunder Grantor is prohibited from doing, or to Grantor's failing to do any act which hereunder Grantor is required to do, to the extent and in the manner specified in such writing; (c) release any part of the Mortgaged Property or any interest therein from the lien and security interest of this Mortgage, without the joinder of Trustee; or (d) release any party liable, either directly or indirectly, for the secured indebtedness or for any covenant herein or in any other Loan Document, without impairing or releasing the liability of any other party. No such act shall in any way affect the rights or powers of Holder or Trustee hereunder except to the extent specifically agreed to by Holder in such writing. Section 6.5 NO IMPAIRMENT OF SECURITY. The lien, security interest and other security rights of Holder hereunder or under any other Loan Document shall not be impaired by any indulgence, moratorium or release granted by Holder including, but not limited to, any renewal, extension or modification which Holder may grant with respect to any secured indebtedness, or any surrender, compromise, release, renewal, extension, exchange or substitution which Holder may grant in respect of the Mortgaged Property, or any part thereof or any interest therein, or any release or indulgence granted to any endorser, guarantor or surety of any secured indebtedness, The taking of additional security by Holder shall not release or impair the lien, security interest or other security rights of Holder hereunder or affect the liability of Grantor or of any endorser, guarantor or surety, or improve the right of any junior lienholder in the Mortgaged Property (without implying hereby Holder's consent to any junior lien). Section 6.6 ACTS NOT CONSTITUTING WAIVER BY HOLDER. Holder may waive any default without waiving any other prior or subsequent default. Holder may remedy any default without waiving the default remedied. Neither failure by Holder to exercise, nor delay by Holder in exercising, nor discontinuance of the exercise of any right, power or remedy (including but not limited to the right to accelerate the maturity of the secured indebtedness or any part thereof) upon or after any default shall be construed as a waiver of such default or as a waiver of the right to exercise any such right, power or remedy at a later date. No single or partial exercise by Holder of any right, power or remedy hereunder shall exhaust the same or shall preclude any other or further exercise thereof, and every such right, power or remedy hereunder may be exercised at any time and from time to time. No modification or waiver of any provision hereof nor consent to any departure by Grantor therefrom shall in any event be effective unless the same shall be in writing and signed by Holder and then such waiver or consent shall be effective only in the specific instance, for the purpose for which given and to the extent therein specified. No notice to nor demand on Grantor in any case shall of itself entitle Grantor to any other or further notice or demand in similar or other circumstances. Remittances in payment of any part of the secured indebtedness other than in the required amount in immediately available U.S. funds shall not, regardless of any receipt or credit issued therefor, constitute payment until the required amount is actually received by Holder in immediately available U.S. funds and shall be made and accepted subject to the condition that any check or draft may be handled for collection in accordance with the practice of the collecting bank or banks. Acceptance by Holder of any payment in an amount less than the amount then due on any secured indebtedness shall be deemed an acceptance on account only and shall not in any way excuse the existence of a default hereunder. Section 6.7 Grantor's Successors. If the ownership of the Mortgaged Property or any part thereof becomes vested in a person other than Grantor, Holder may, without notice to Grantor, deal with such successor or successors in interest with reference to this Mortgage and to the indebtedness secured hereby in the same manner as with Grantor, without in any way vitiating or discharging Grantor's liability hereunder or for the payment of the indebtedness or performance of the obligations secured hereby. No transfer of the Mortgaged Property, no forbearance on the part of Holder, and no extension of the time for the payment of the indebtedness secured hereby given by Holder shall operate to release, discharge, modify, change or affect, in whole or in part, the liability of Grantor hereunder for the payment of the indebtedness or performance of the obligations secured hereby or the liability of any other person hereunder for the payment of the indebtedness secured hereby. Each Grantor agrees that it shall DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 29 be bound by any modification of this Mortgage or any of the other Loan Documents made by Holder and any subsequent owner of the Mortgaged Property, with or without notice to such Grantor, and no such modifications shall impair the obligations of such Grantor under this Mortgage or any other Loan Document. Nothing in this Section or elsewhere in this Mortgage shall be construed to imply Holder's consent to any transfer of the Mortgaged Property. Section 6.8 PLACE OF PAYMENT: FORUM. All secured indebtedness which may be owning hereunder at any time by Grantor shall be payable at the place designated in the Note (or if no such designation is made, at the address of Holder indicated at the end of this Mortgage), Grantor hereby irrevocably submits generally and unconditionally for itself and in respect of its property to the non-exclusive jurisdiction of any Texas state court, or any United States federal court, sitting in the county in which the secured indebtedness is payable, and to the non-exclusive jurisdiction of any state or United States federal court sitting in the state in which any of the Mortgaged Property is located, over any suit, action or proceeding arising out of or relating to this Mortgage or the secured indebtedness. Grantor hereby agrees and consents that, in addition to any methods of service of process provided for under applicable law, all service of process in any such suit, action or proceeding in any Texas state court, or any United States federal court, sitting in the county in which the secured indebtedness is payable may be made by certified or registered mail, return receipt requested, directed to Grantor at its address stated in this Mortgage, or at a subsequent address of Grantor of which Holder received actual notice from Grantor in accordance with this Mortgage, and service so made shall be complete five (5) days after the same shall have been so mailed. Section 6.9 SUBROGATION TO EXISTING LIENS: VENDOR'S LIEN. To the extent that proceeds of the Note are used to pay indebtedness secured by any outstanding lien, security interest, charge or prior encumbrance against the Mortgaged Property, such proceeds have been advanced by Holder at Grantor's request, and Holder shall be subrogated to any and all rights, security interests and liens owned by any owner or holder of such outstanding liens, security interests, charges or encumbrances, however remote, irrespective of whether said liens, security interests, charges or encumbrances are released, and all of the same are recognized as valid and subsisting and are renewed and continued and merged herein to secure the secured indebtedness, but the terms and provisions of this Mortgage shall govern and control the manner and terms of enforcement of the liens, security interests, charges and encumbrances to which Holder is subrogated hereunder. It is expressly understood that, in consideration of the payment of such indebtedness by Holder, Grantor hereby waives and releases all demands and causes of action for offsets and payments in connection with the said indebtedness. If all or any portion of the proceeds of the loan evidenced by the Note or of any other secured indebtedness has been advanced for the purpose of paying the purchase price for all or a part of the Mortgaged Property, no vendor's lien is waived; and Holder shall have, and is hereby granted, a vendor's lien on the Mortgaged Property as cumulative additional security for the secured indebtedness. Holder may foreclose under this Mortgage or under the vendor's lien without waiving the other or may foreclose under both. Section 6.10 APPLICATION OF PAYMENTS TO CERTAIN INDEBTEDNESS. If any part of the secured indebtedness cannot be lawfully secured by this Mortgage or if any part of the Mortgaged Property cannot be lawfully subject to the lien and security interest hereof to the full extent of such indebtedness, then all payments made shall be applied on said indebtedness first in discharge of that portion thereof which is not secured by this Mortgage. Section 6.11 COMPLIANCE WITH USURY Laws. It is the intent of Grantor and Holder and all other parties to the Loan Documents to conform to and contract in strict compliance with applicable usury law from time to time in effect. All agreements between Holder and Grantor (or any other party liable with respect to any indebtedness under the Loan Documents) are hereby limited by the provisions of this Section which shall override and control all such agreements, whether now existing or hereafter arising. In no way, nor in any event or contingency (including but not limited to prepayment, default, demand for payment, or acceleration of the maturity of any obligation), shall the interest taken, reserved, contracted for, charged, chargeable, or received under this Mortgage, the Note or any other Loan Document or otherwise, exceed the maximum nonusurious amount permitted by applicable law (the "Maximum Amount"). If, from any DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 30 possible construction of any document, interest would otherwise be payable in excess of the Maximum Amount, any such construction shall be subject to the provisions of this Section and such document shall ipso facto be automatically reformed and the interest payable shall be automatically reduced to the Maximum Amount, without the necessity of execution of any amendment or new document. If Holder shall ever receive anything of value which is characterized as interest under applicable law and which would apart from this provision be in excess of the Maximum Amount, an amount equal to the amount which would have been excessive interest shall, without penalty, be applied to the reduction of the principal amount owing on the secured indebtedness in the inverse order of its maturity and not to the payment of interest, or refunded to Grantor or the other payor thereof if and to the extent such amount which would have been excessive exceeds such unpaid principal. The right to accelerate maturity of the Note or any other secured indebtedness does not include the right to accelerate any interest which has not otherwise accrued on the date of such acceleration, and Holder does not intend to charge or receive any unearned interest in the event of acceleration. All interest paid or agreed to be paid to Holder shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full stated term (including any renewal or extension) of such indebtedness so that the amount of interest on account of such indebtedness does not exceed the Maximum Amount. As used in this Section, the term "applicable law" shall mean the laws of the State of Texas or the federal laws of the United States applicable to this transaction, whichever laws allow the greater interest, as such laws now exist or may be changed or amended or come into effect in the future. Section 6.12 Substitute Trustee. The Trustee may resign by an instrument in writing addressed to Holder, or Trustee may be removed at any time with or without cause by an instrument in writing executed by Holder. In case of the death, resignation, removal, or disqualification of Trustee, or if for any reason Holder shall deem it desirable to appoint a substitute or successor trustee to act instead of the herein named trustee or any substitute or successor trustee, then Holder shall have the right and is hereby authorized and empowered to appoint a successor trustee, or a substitute trustee, without other formality than appointment and designation in writing executed by Holder and the authority hereby conferred shall extend to the appointment of other successor and substitute trustees successively until the indebtedness secured hereby has been paid in full, or until the Mortgaged Property is fully and finally sold hereunder. If Holder is a corporation or association and such appointment is executed on its behalf by an officer of such corporation or association, such appointment shall be conclusively presumed to be executed with authority and shall be valid and sufficient without proof of any action by the board of directors or any superior officer of the corporation or association. Upon the making of any such appointment and designation, all of the estate and title of Trustee in the Mortgaged Property shall vest in the named successor or substitute Trustee and he shall thereupon succeed to, and shall hold, possess and execute, all the rights, powers, privileges, immunities and duties herein conferred upon Trustee. All references herein to "TRUSTEE" shall be deemed to refer to Trustee (including any successor or substitute appointed and designated as herein provided) from time to time acting hereunder. Section 6.13 NO LIABILITY OF TRUSTEE. The Trustee shall not be liable for any error of judgment or act done by Trustee in good faith, or be otherwise responsible or accountable under any circumstances whatsoever (including Trustee's negligence), except for Trustee's gross negligence or willful misconduct. The Trustee shall have the right to rely on any instrument, document or signature authorizing or supporting any action taken or proposed to be taken by him hereunder, believed by him in good faith to be genuine. All moneys received by Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated in any manner from any other moneys (except to the extent required by law), and Trustee shall be under no liability for interest on any moneys received by him hereunder. Grantor hereby ratifies and confirms any and all acts which the herein named Trustee or his successor or successors, substitute or substitutes, in this trust, shall do lawfully by virtue hereof. Grantor will reimburse Trustee for, and save him harmless against, any and all liability and expenses which may be incurred by him in the performance of his duties. The foregoing indemnity shall not terminate upon discharge of the secured indebtedness or foreclosure, or release or other termination, of this Mortgage. DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 31 Section 6.14 RELEASE OF MORTGAGE. If all of the secured indebtedness be paid as the same becomes due and payable and all of the covenants, warranties, undertakings and agreements made in this Mortgage are kept and performed, and all obligations, if any, of Holder for further advances have been terminated, then, and in that event only, all rights under this Mortgage shall terminate (except to the extent expressly provided herein with respect to indemnifications, representations and warranties and other rights which are to continue following the release hereof) and the Mortgaged Property shall become wholly clear of the liens, security interests, conveyances and assignments evidenced hereby, and such liens and security interests shall be released by Holder in due form at Grantor's cost. Without limitation, all provisions herein for indemnity of Holder or Trustee shall survive discharge of the secured indebtedness and any foreclosure, release or termination of this Mortgage. Grantor acknowledges that this Mortgage and the Loan Documents are cross-defaulted with the Affiliate Loans. Grantor and Holder agree that notwithstanding a default under an Affiliate Loan Document, Holder will permit Grantor, so long as (x) it otherwise satisfies all terms and conditions of the Note and this Mortgage, and (y) that no default otherwise exists under the Security Agreement, the Guaranty, or any other document evidencing or securing the Note, that Grantor will be entitled to secure a release of this Mortgage so long as any applicable requirements of the Security Agreement are met with respect to payment of the proceeds of any sale or refinancing. Provided further however, in no event shall Holder be obligated to provide its consent to any proposed release of this Mortgage if any one or more of the following events exist at the time of the request for the proposed Release: (a) default is existing and uncured under either the Security Agreement or the Guaranty; (b) either Grantor, or any of the parties to the Security Agreement or to the Guaranty have either challenged the validity of the Loan or the Affiliate Loans, including but not limited to the covenants contained in the Security Agreement, or have instituted either litigation or undertaken any bankruptcy or insolvency action as described in SECTION 4.1(d) of this Mortgage. Section 6.15 NOTICES. All notices, requests, consents, demands and other communications required or which any party desires to give hereunder or under any other Loan Document shall be in writing and, unless otherwise specifically provided in such other Loan Document, shall be deemed sufficiently given or furnished if delivered by personal delivery, by courier, or by registered or certified United States mail, postage prepaid, addressed to the party to whom directed at the addresses specified at the end of this Mortgage (unless changed by similar notice in writing given by the particular party whose address is to be changed) or by telegram, telex, or facsimile. Any such notice or communication shall be deemed to have been given either at the time of personal delivery or, in the case of courier or mail, as of the date of first attempted delivery at the address and in the manner provided herein, or, in the case of telegram, telex or facsimile, upon receipt, followed by a copy of such notice or communication delivered by another method permitted hereby; provided that, service of a notice required by Texas Property Code Section 51.002, as amended, shall be considered complete when the requirements of that statute are met. Notwithstanding the foregoing, no notice of change of address shall be effective except upon receipt. This Section shall not be construed in any way to acct or impair any waiver of notice or demand provided in any Loan Document or to require giving of notice or demand to or upon any person in any situation or for any reason. Section 6.16 INVALIDITY OF CERTAIN PROVISIONS. A determination that any provision of this Mortgage is unenforceable or invalid shall not affect the enforceability or validity of any other provision and the determination that the application of any provision of this Mortgage to any person or circumstance is illegal or unenforceable shall not affect the enforceability or validity of such provision as it may apply to other persons or circumstances. Section 6.17 GENDER TITLES; CONSTRUCTION. Within this Mortgage, words of any gender shall be held and construed to include any other gender, and words in the singular number shall be held and construed to include the plural, unless the context otherwise requires. Titles appearing at the beginning of any subdivisions hereof are for convenience only, do not constitute any part of such subdivisions, and shall be disregarded in construing the language contained in DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 32 such subdivisions. The use of the words "herein," "hereof," "hereunder" and other similar compounds of the word "here" shall refer to this entire Mortgage and not to any particular Article, Section, paragraph or provision. The term "person" and words importing persons as used in this Mortgage shall include firms, associations, partnerships (including limited partnerships), joint ventures, trusts, corporations and other legal entities, including public or governmental bodies, agencies or instrumentalities, as well as natural persons. Section 6.18 REPORTING COMPLIANCE. Grantor agrees to comply with any and all reporting requirements applicable to the transaction evidenced by the Note and secured by this Mortgage which are set forth in any law, statute, ordinance, rule, regulation, order or determination of any governmental authority, including but not limited to The International Investment Survey Act of 1976. The Agricultural Foreign Investment Disclosure Act of 1978. The Foreign Investment in Real Property Tax Act of 1980 and the Tax Reform Act of 1984 and further agrees upon request of Holder to furnish Holder with evidence of such compliance. Section 6.19 HOLDER'S CONSENT. Except where otherwise expressly provided herein, in any instance hereunder where the approval, consent or the exercise of judgment of Holder is required or requested, (i) the granting or denial of such approval or consent and the exercise of such judgment shall be within the sole discretion of Holder, and Holder shall not, for any reason or to any extent, be required to grant such approval or consent or exercise such judgment in any particular manner, regardless of the reasonableness of either the request or Holder's judgment, and (ii) no approval or consent of Holder shall be deemed to have been given except by a specific writing intended for the purpose and executed by an authorized representative of Holder. Section 6.20 GRANTOR. Unless the context clearly indicates otherwise, as used in this Mortgage, "Grantor" means the grantors named in Section 1.1 hereof or any of them. The obligations of Grantor hereunder shall be joint and several. If any Grantor, or any signatory who signs on behalf of any Grantor, is a corporation, partnership or other legal entity, Grantor and any such signatory, and the person or persons signing for it, represent and warrant to Holder that this instrument is executed, acknowledged and delivered by Grantor's duly authorized representatives. If Grantor is an individual, no power of attorney granted by Grantor herein shall terminate on Grantor's disability. Section 6.21 EXECUTION; RECORDING. This Mortgage has been executed in several counterparts, all of which are identical, and all of which counterparts together shall constitute one and the same instrument. The date or dates reflected in the acknowledgments hereto indicate the date or dates of actual execution of this Mortgage, but such execution is as of the date shown on the first page hereof, and for purposes of identification and reference the date of this Mortgage shall be deemed to be the date reflected on the first page hereof. Grantor will cause this Mortgage and all amendments and supplements thereto and substitutions therefor and all financing statements and continuation statements relating thereto to be recorded, filed, re-recorded and refiled in such manner and in such places as Trustee or Holder shall reasonably request and will pay all such recording, filing, re-recording and refiling taxes, fees and other charges. Section 6.22 SUCCESSORS AND ASSIGNS. The terms, provisions, covenants and conditions hereof shall be binding upon Grantor, and the heirs, devisees, representatives, successors and assigns of Grantor, and shall inure to the benefit of Trustee and Holder and shall constitute covenants running with the Land. All references in this Mortgage to Grantor shall be deemed to include all such heirs, devisees, representatives, successors and assigns of Grantor. Section 6.23 MODIFICATION OR TERMINATION. The Loan Documents may only be modified or terminated by a written instrument or instruments intended for that purpose and executed by the party against which enforcement of the modification or termination is asserted. Any alleged modification or termination which is not so documented shall not be effective as to any party. Section 6.24 NO PARTNERSHIP. ETC. The relationship between Holder and Grantor is solely that of lender and borrower. Holder has no fiduciary or other special relationship with Grantor. Nothing contained in the Loan Documents is intended to create any partnership, joint venture, association or special relationship between Grantor and Holder or in any way make DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 33 Holder a co-principal with Grantor with reference to the Mortgaged Property. All agreed contractual duties between or among Holder, Grantor and Trustee are set forth herein and in the other Loan Documents and any additional implied covenants or duties are hereby disclaimed. Any inferences to the contrary of any of the foregoing are hereby expressly negated. Grantor acknowledges and agrees that except as expressly set forth in the Note, Lender has not made any commitments, either express or implied, to extend the term of the Loan past its stated maturity date or to provide Grantor with permanent financing for the Mortgaged Property. Section 6.25 APPLICABLE LAW. THIS MORTGAGE, AND ITS VALIDITY, ENFORCEMENT AND INTERPRETATION, SHALL BE GOVERNED BY TEXAS LAW (WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES) AND APPLICABLE UNITED STATES FEDERAL LAW. Section 6.26 MANDATORY ARBITRATION. Any controversy or claim between or among the parties hereto including but not limited to those arising out of or relating to this Mortgage or any related agreements or instruments, including any claim based on or arising from an alleged tort, shall be determined by binding arbitration in accordance with the Federal Arbitration Act (or if not applicable, the applicable state law), the Rules of Practice and Procedure for the Arbitration of Commercial Disputes of Judicial Arbitration and Mediation Services, Inc., predecessor in interest to Endispute, Inc., doing business as "J.A.M.S./ENDISPUTE" and the "Special Rules" set forth below. In the event of any inconsistency, the Special Rules shall control. Judgment upon any arbitration award may be entered in any court having jurisdiction. Any party to this Mortgage may bring an action, including a summary or expedited proceeding, to compel arbitration of any controversy or claim to which this Mortgage applies in any court having jurisdiction over such action. (a) SPECIAL RULES. The arbitration shall be conducted in Dallas, Texas and administered by J.A.M.S./Endispute who will appoint an arbitrator; if J.A.M.S./Endispute is unable or legally precluded from administering the arbitration, then the American Arbitration Association will serve. All arbitration hearings will be commenced within ninety (90) calendar days of the demand for arbitration; further, the arbitrator shall only, upon a showing of cause, be permitted to extend the commencement of such hearing for up to an additional sixty (60) calendar days. (b) RESERVATIONS OF RIGHTS. Nothing in this Mortgage shall be deemed to (i) limit the applicability of any otherwise applicable statutes of limitation or repose and any waivers contained in this Mortgage; or (ii) be a waiver by Holder of the protection afforded to it by 12 U.S.C. Sec. 91 or any substantially equivalent state law; or (iii) limit the right of Holder (A) to exercise self help remedies such as (but not limited to) setoff, or (B) to foreclose against any real or personal property collateral, or (C) to obtain from a court provisional or ancillary remedies such as (but not limited to) injunctive relief or the appointment of a receiver. Holder may exercise such self help rights, foreclose upon such property, or obtain such provisional or ancillary remedies before, during or after the pendency of any arbitration proceeding brought pursuant to this Mortgage. At Holder's option, foreclosure under a deed of trust or mortgage may be accomplished by any of the following: the exercise of a power of sale under the deed of trust or mortgage, or by judicial sale under the deed of trust or mortgage, or by judicial foreclosure. Neither the exercise of self help remedies nor the institution or maintenance of an action for foreclosure or provisional or ancillary remedies shall constitute a waiver of the right of any party, including the claimant in any such action, to arbitrate the merits of the controversy or claim occasioning resort to such remedies. No provision in the Loan Documents regarding submission to jurisdiction and/or venue in any court is intended or shall be construed to be in derogation of the provisions in any Loan Document for arbitration of any controversy or claim. Section 6.27 LOAN PARTICIPATIONS. Holder may, from time to time, sell or offer to sell the secured indebtedness or interests therein to one or more assignees or participants and is hereby authorized to disseminate any information Holder now has or hereafter obtains pertaining to the secured indebtedness and the Mortgaged Property including, without limitation, credit or DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 34 other information on the Mortgaged Property. Grantor, any of Grantor's principals, any guarantor of the obligations of Grantor hereunder, any tenant or guarantor under any lease affecting any part of the Mortgaged Property, and any property manager to any assignee or participant or prospective assignee or prospective participant, Holder's affiliates, including NationsBanc Capital Markets, Inc. in the case of Lender, any regulatory body having jurisdiction over Holder, and to any other parties as necessary or appropriate in Holder's reasonable judgment. Grantor shall execute, acknowledge, and deliver any and all instruments reasonably requested by Holder in connection therewith, and to the extent, if any, specified in any such assignment or participation such companies, assignee(s), and participant(s) shall have the rights and benefits of this Mortgage as such person(s) would have had if such person(s) had been Lender hereunder. Notwithstanding any other provision of this Mortgage or any other Loan Document, Lender agrees that, except in the event of a default by Grantor, Lender shall retain its interest in not less than twenty-five percent (25%) of the secured indebtedness, and Lender shall act as agent for the other assignees or participants. Section 6.28 CAPITAL REQUIREMENTS AND YIELD MAINTENANCE. If at any time after the date hereof, and from time to time, Lender determines that the adoption or modification of any applicable law, rule or regulation regarding taxation, Lender's required levels of reserves, deposits, insurance, or capital (including any allocation of capital requirements or conditions), or similar requirements, or any interpretation or administration thereof by any governmental authority, central bank, or comparable agency charged with the interpretation, administration, or compliance of Lender with any of such requirements, has or would have, the effect of (i) increasing Lender's costs relating to the obligations hereunder or (ii) reducing the yield or rate of return of Lender on the obligation hereunder, to a level below that which Lender could have achieved but for the adoption or modification of any such requirements. Grantor shall, within fifteen (15) days of any request by Lender, pay to Lender such additional amounts as (in Lender's sole judgment, after good faith and reasonable computation) will compensate Lender for such increase in costs or reduction in yield or rate of return of Lender. No failure by Lender to immediately demand payment of any additional amounts payable hereunder shall constitute a waiver of Lender's right to demand payment of such amounts at any subsequent time. Nothing herein contained shall be construed or so operate as to require Grantor to pay any interest, fees, costs, or charges greater than is permitted by applicable law. Section 6.29 ENTIRE AGREEMENT. The Loan Documents constitute the entire understanding and agreement between Grantor and Lender with respect to the transactions arising in connection with the indebtedness secured hereby and supersede all prior written or oral understandings and agreements between Grantor and Lender with respect to the matters addressed in the Loan Documents. In particular, and without limitation, the terms of any commitment by Lender to make the Loan are merged into the Loan Documents. Lender has not made any commitments to extend the term of the Loan past its stated maturity date or to provide Grantor with financing except as set forth in the Loan Documents. Grantor hereby acknowledges that, except as incorporated in writing in the Loan Documents, there are not, and were not, and no persons are or were authorized by Lender to make, any representations, understandings, stipulations, agreements or promises, oral or written, with respect to the matters addressed in the Loan Documents. (The balance of this page is intentionally left blank.) DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT - Page 35 THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. IN WITNESS WHEREOF, this instrument is executed by Grantor as of the date first written on page 1 hereof. The address and federal tax GRANTOR: identification number of Grantor are: HASTINGS PLACE PARTNERS, A TEXAS LIMITED PARTNERSHIP, 1873 S. Bellaire Street, 17th Floor a Texas limited partnership Denver, Colorado 80222 By: AIMCO HASTINGS PLACE, L.P., Federal Tax ID No. 67-0141773 a Delaware limited partnership, as General Partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, as General Partner By: AIMCO HOLDING QRS, INC., a Delaware corporation, as General Partner By: /s/ Harry Alcock ---------------------- Harry Alcock Vice President The address of Holder is (including county): NationsBank of Texas, N.A. 901 Main Street 51st Floor Dallas, Texas 75202 Attention: Real Estate Administration THE STATE OF TEXAS Section Section COUNTY OF DALLAS Section This instrument was acknowledged before me on December 27, 1996 by Harry Alcock, Vice President of AIMCO HOLDING QRS, INC., as General Partner of AIMCO HOLDINGS, L.P., as General Partner of AIMCO HASTINGS PLACE. L.P., as General Partner of HASTINGS PLACE PARTNERS, A TEXAS LIMITED PARTNERSHIP, a Texas limited partnership, on behalf of said partnership. [SEAL] /s/ Linda K. Buchanan ---------------------------------------- Notary Public, State of Texas DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT (HASTINGS PLACE) - Signature Page EX-10.68 10 EXHIBIT 10.68 GUARANTY AGREEMENT THIS GUARANTY AGREEMENT (this "GUARANTY") is made as of December 27, 1996, by APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation; AIMCO PROPERTIES, L.P., a Delaware limited partnership; AIMCO-GP, INC., a Delaware corporation; AIMCO-LP, INC., a Delaware corporation: AIMCO HOLDINGS, L.P., Delaware limited partnership; and AIMCO HOLDINGS QRS, INC., a Delaware corporation; (singly or collectively, "GUARANTOR"), in favor of NATIONSBANK OF TEXAS, N.A., a national banking association ("LENDER"), and its successors and assigns. RECITALS: A. The following entities are affiliates of each Guarantor: 1. COPPERFIELD PARTNERS, LTD., a Texas limited partnership ("Copperfield") 2. FISHERMAN'S WHARF PARTNERS, A TEXAS LIMITED PARTNERSHIP, a Texas limited partnership ("Fisherman's Wharf") 3. HAMPTON HILL PARTNERS, A TEXAS LIMITED PARTNERSHIP, a Texas limited partnership ("Hampton") 4. HASTINGS PLACE PARTNERS, A TEXAS LIMITED PARTNERSHIP, a Texas limited partnership ("Hastings") 5. OAK FALLS PARTNERS, A TEXAS LIMITED PARTNERSHIP, a Texas limited partnership ("Oak Falls") 6. THE HOUSTON RECOVERY FUND, A TEXAS LIMITED PARTNERSHIP, a Texas limited partnership ("HRF") 7. WEST TRAILS PARTNERS, LTD., a Texas limited partnership ("West Trails") 8. SIGNATURE POINT JOINT VENTURE, a Texas joint venture ("Signature") 9. COVENTRY SQUARE PARTNERS, A TEXAS LIMITED PARTNERSHIP, a Texas limited partnership ("Coventry") 10. CROWS NEST PARTNERS, LTD., a Texas limited partnership ("Crows Nest") 11. SUNBURY PARTNERS, LTD., a Texas limited partnership ("Sunbury") 12. J.W. ENGLISH SWISS VILLAGE PARTNERS, LTD., A TEXAS LIMITED PARTNERSHIP, a Texas limited partnership ("Village") Each of the entities identified in items 1-12 hereinabove is sometimes hereinafter individually referred to as a "BORROWER" and such entities are also sometimes collectively referred to hereinafter as "BORROWERS". B. Lender has agreed to make a loan to each of the Borrowers, all of such loans being hereinafter collectively referred to as the "Loan." The Borrowers have executed the following promissory notes (collectively, the "Notes") evidencing the Loan: 1. Promissory note of even date herewith in the amount of $4,336,000.00 executed by Copperfield as maker in favor of Lender as payee thereunder (as such promissory note may hereafter be renewed, extended, supplemented, increased or modified and in effect from time to time, and all other notes given in substitution therefor, or in modification, renewal, or extension thereof, in whole or in part, is herein called the "Copperfield Note"). 2. Promissory note of even date herewith in the amount of $6,000,000.00, executed by Fisherman's Wharf as maker in favor of Lender as payee thereunder (as such promissory note may hereafter be renewed, extended, supplemented, increased or modified and in effect from time to time, and all other notes given in substitution therefor, or in modification, renewal, or extension thereof, in whole or in part, is herein called the "Fisherman's Wharf Note"). 3. Promissory note of even date herewith in the amount of $3,952,000.00, executed by Hampton as maker in favor of Lender as payee thereunder (as such promissory note may hereafter be renewed, extended, supplemented, increased or modified and in effect from time to time, and all other notes given in substitution GUARANTY AGREEMENT - Page 1 therefor, or in modification, renewal, or extension thereof, in whole or in part, is herein called he the "Hampton Note"). 4. Promissory note of even date herewith in the amount of $3,258,000.00, executed by Hastings as maker in favor of Lender as payee thereunder (as such promissory note may hereafter be renewed, extended, supplemented, increased or modified and in effect from time to time, and all other notes given in substitution therefor, or in modification, renewal, or extension thereof, in whole or in part, is herein called the "Hastings Note"). 5. Promissory note of even date herewith in the amount of $3,285,000.00, executed by Oak Falls as maker in favor of Lender as payee thereunder (as such promissory note may hereafter be renewed, extended, supplemented, increased or modified and in effect from time to time, and all other notes given in substitution therefor, or in modification, renewal, or extension thereof, in whole or in part, is herein called the "Oak Falls Note"). 6. Promissory note of even date herewith in the amount of $4,732,000.00, executed by HRF as maker in favor of Lender as payee thereunder (as such promissory note may hereafter be renewed, extended, supplemented, increased or modified and in effect from time to time, and all other notes given in substitution therefor, or in modification, renewal, or extension thereof, in whole or in part, is herein called the "HRF/Easton Note"). 7. Promissory note of even date herewith in the amount of $750,000.00, executed by HRF as maker in favor of Lender as payee thereunder (as such promissory note may hereafter be renewed, extended, supplemented, increased or modified and in effect from time to time, and all other notes given in substitution therefor, or in modification, renewal, or extension thereof, in whole or in part, is herein called the "HRF/Stony Note"). 8. Promissory note of even date herewith in the amount of $4,870,952.00, executed by West Trails as maker in favor of Lender as payee thereunder (as such promissory note may hereafter be renewed, extended, supplemented, increased or modified and in effect from time to time, and all other notes given in substitution therefor, or in modification, renewal, or extension thereof, in whole or in part, is herein called the "West Trails Note"). 9. Promissory note of even date herewith in the amount of $11,040,000.00, executed by Signature as maker in favor of Lender as payee thereunder (as such promissory note may hereafter be renewed, extended, supplemented, increased or modified and in effect from time to time, and all other notes given in substitution therefor, or in modification, renewal, or extension thereof, in whole or in part, is herein called the "Signature Note"). 10. Promissory note of even date herewith in the amount of $4,240,000.00, executed by Coventry as maker in favor of Lender as payee thereunder (as such promissory note may hereafter be renewed, extended, supplemented, increased or modified and in effect from time to time, and all other notes given in substitution therefor, or in modification, renewal, or extension thereof, in whole or in part, is herein called the "Coventry Note"). 11. Promissory note of even date herewith in the amount of $4,160,000.00, executed by Crows Nest as maker in favor of Lender as payee thereunder (as such promissory note may hereafter be renewed, extended, supplemented, increased or modified and in effect from time to time, and all other notes given in substitution therefor, or in modification, renewal, or extension thereof, in whole or in part, is herein called the "Crows Nest Note"). 12. Promissory note of even date herewith in the amount of $2,950,000.00, executed by Sunbury as maker in favor of Lender as payee thereunder (as such GUARANTY AGREEMENT - Page 2 promissory note may hereafter be renewed, extended, supplemented, increased or modified and in effect from time to time, and all other notes given in substitution therefor, or in modification, renewal, or extension thereof, in whole or in part, is herein called the "Sunbury Note"). 13. Promissory note of even date herewith in the amount of $6,880,000.00, executed by Village as maker in favor of Lender as payee thereunder (as such promissory note may hereafter be renewed, extended, supplemented, increased or modified and in effect from time to time, and all other notes given in substitution therefor, or in modification, renewal, or extension thereof, in whole or in part, is herein called the "Village Note"). The total principal amount payable by Borrowers to Lender evidenced by the Notes is $60,453,952.00. C. The Borrowers have also executed the following deeds of trust (collectively, the "Deeds of Trust") as security for the Notes: 1. Deed of Trust of even date herewith, granted by Copperfield to Michael F. Hord as trustee for the benefit of Lender, with respect to certain real property located in Harris County, Texas consisting of the land more completely described on the applicable Exhibit "A" attached hereto and incorporated herein by this reference and the multifamily residences and related improvements sometimes known as the Copperfield Apartments I and II located on such land (the "Copperfield Deed of Trust"). 2. Deed of Trust of even date herewith, granted by Fisherman's Wharf to Michael F. Hord as trustee for the benefit of Lender, with respect to certain real property located in Brazoria County, Texas consisting of the land more completely described on the applicable Exhibit "A" attached hereto and incorporated herein by this reference and the multifamily residences and related improvements sometimes known as the Fisherman's Wharf Apartments located on such land (the "Fisherman's Wharf Deed of Trust"). 3. Deed of Trust of even date herewith, granted by Hampton to Michael F. Hord as trustee for the benefit of Lender, with respect to certain real property located in Harris County, Texas consisting of the land more completely described on the applicable Exhibit "A" attached hereto and incorporated herein by this reference and the multifamily residences and related improvements sometimes known as the Hampton Hill Apartments located on such land (the "Hampton Deed of Trust"). 4. Deed of Trust of even date herewith, granted by Hastings to Michael F. Hord as trustee for the benefit of Lender, with respect to certain real property located in Harris County, Texas consisting of the land more completely described on the applicable Exhibit "A" attached hereto and incorporated herein by this reference and the multifamily residences and related improvements sometimes known as the Hastings Place Apartments located on such land (the "Hastings Deed of Trust"). 5. Deed of Trust of even date herewith, granted by Oak Falls to Michael F. Hord as trustee for the benefit of Lender, with respect to certain real property located in Harris County, Texas consisting of the land more completely described on the applicable Exhibit "A" attached hereto and incorporated herein by this reference and the multifamily residences and related improvements sometimes known as the Oak Falls Condominiums located on such land (the "Oak Falls Deed of Trust"). 6. Deed of Trust of even date herewith, granted by HRF to Michael F. Hord as trustee for the benefit of Lender, with respect to certain real property located in Harris County, Texas consisting of the land more completely described on the applicable Exhibit "A" attached hereto and incorporated herein by this reference and the multifamily residences and related improvements sometimes known as Easton Village I and II located on such land (the "HRF/Easton Deed of Trust"). GUARANTY AGREEMENT - Page 3 7. Deed of Trust of even date herewith, granted by HRF to Michael F. Hord as trustee for the benefit of Lender, with respect to certain real property located in Harris County, Texas consisting of the land more completely described on the applicable Exhibit "A" attached hereto and incorporated herein by this reference and the multifamily residences and related improvements sometimes known as the Stony Brook Apartments located on such land (the "HRF Stony Deed of Trust"). 8. Deed of Trust of even date herewith, granted by West Trails to Michael F. Hord as trustee for the benefit of Lender, with respect to certain real property located in Harris County, Texas consisting of the land more completely described on the applicable Exhibit "A" attached hereto and incorporated herein by this reference and the multifamily residences and related improvements sometimes known as The Waterford Apartments located on such land (the "West Trails Deed of Trust"). 9. Deed of Trust of even date herewith, granted by Signature to Michael F. Hord as trustee for the benefit of Lender, with respect to certain real property located in Galveston County, Texas consisting of the land more completely described on the applicable Exhibit "A" attached hereto and incorporated herein by this reference and the multifamily residences and related improvements sometimes known as the Signature Point Apartments located on such land (the "Signature Deed of Trust"). 10. Deed of Trust of even date herewith, granted by Coventry to Michael F. Hord as trustee for the benefit of Lender, with respect to certain real property located in Harris County, Texas consisting of the land more completely described on the applicable Exhibit "A" attached hereto and incorporated herein by this reference and the multifamily residences and related improvements sometimes known as the Coventry Square Apartments located on such land (the "Coventry Deed of Trust"). 11. Deed of Trust of even date herewith, granted by Crows Nest to Michael F. Hord as trustee for the benefit of Lender, with respect to certain real property located in Galveston County, Texas consisting of the land more completely described on the applicable Exhibit "A" attached hereto and incorporated herein by this reference and the multifamily residences and related improvements sometimes known as the Crows Nest Apartments located on such land (the "Crows Nest Deed of Trust"). 12. Deed of Trust of even date herewith, granted by Sunbury to Michael F. Hord as trustee for the benefit of Lender, with respect to certain real property located in Harris County, Texas consisting of the land more completely described on the applicable Exhibit "A" attached hereto and incorporated herein by this reference and the multifamily residences and related improvements sometimes known as the Sunbury Downs Apartments located on such land (the "Sunbury Deed of Trust"). 13. Deed of Trust of even date herewith, granted by Village to Michael F. Hord as trustee for the benefit of Lender, with respect to certain real property located in Harris County, Texas consisting of the land more completely described on the applicable Exhibit "A" attached hereto and incorporated herein by this reference and the multifamily residences and related improvements sometimes known as the Swiss Village Apartments located on such land (the "Village Deed of Trust"). Capitalized terms used herein and not otherwise defined shall have the meanings given to them in the Deeds of Trust or the Security Agreement (hereinafter defined), as applicable. D. It is a condition precedent to Lender's obligation to make the Loan to Borrower that Guarantor execute and deliver to Lender this Guaranty and that certain Security Agreement of even date herewith executed by Guarantor for the benefit of Lender. This Guaranty and the Security Agreement, and the Deeds of Trust are sometimes hereinafter collectively referred to as the Loan Documents. For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and as a material inducement to Lender to extend credit to Borrower, Guarantor hereby guarantees to Lender the prompt and full payment and performance of the indebtedness GUARANTY AGREEMENT - Page 4 and obligations described below in this Guaranty; this Guaranty being upon the following terms and conditions: AGREEMENT 1. GUARANTEED OBLIGATIONS. The payment and performance obligations set forth below in this Section 1, and including any limitations thereon as set forth in Section 1(c) are hereinafter collectively referred to as the "Guaranteed Obligations" (a) Guarantor hereby unconditionally and irrevocably guarantees to Lender the punctual payment when due, whether by lapse of time, by acceleration of maturity, or otherwise, and at all times thereafter, of all principal, interest (including interest accruing after the commencement of any bankruptcy or insolvency proceeding by or against Borrowers, whether or not allowed in such proceeding), fees, costs, expenses, indemnification indebtedness, and other sums of money now or hereafter due and owing pursuant to (i) the terms of the Notes, the Deeds of Trust, and the other Loan Documents, including the making of any deposits required or contemplated to be made by Borrowers pursuant to the Deeds of Trust, the provision of any additional collateral, and any indemnifications contained in such Loan Documents, now or hereafter existing, and (ii) all renewals, extensions, refinancings, modifications, supplements or amendments of such indebtedness or any part thereof (the indebtedness described in CLAUSES (i) AND (ii) above in this SECTION 1 is herein collectively called the "INDEBTEDNESS") subject, however, to the limitations of SECTION 1(b) hereof. This Guaranty covers the Indebtedness, whether presently outstanding or arising subsequent to the date hereof, including all amounts advanced by Lender in stages or installments. The guaranty of Guarantor as set forth in this SECTION 1 is a continuing guaranty of payment and performance, and not a guaranty of collection. (b) Guarantor additionally hereby unconditionally and irrevocably guarantees to Lender the timely performance of all other obligations of Borrowers under the Notes, the Deeds of Trust, or under any other the Loan Documents. If any of the Guaranteed Obligations are not complied with, in any respect whatsoever, Guarantor agrees to indemnify and hold Lender harmless from any and all loss, cost, liability or expense that Lender may suffer by any reason of any such non-compliance. Lender shall accept performance by Guarantor of Guaranteed Obligations, and so long as all of the Guaranteed Obligations are being performed by Borrower or Guarantor and no Default exists, Lender will make the Loan proceeds available under and subject to the terms of the Notes and the Deeds of Trust. (c) Guarantor acknowledges and agrees that the liability of Guarantor with respect to the payment and performance obligations described in Sections 1(a) and 1(b) hereinabove arising under the four deeds of trust listed as items C.10.-C.13. hereinabove (collectively, the "Unlimited Guaranty Deeds of Trust") is unlimited. Except as otherwise set forth in SECTION 1(d) hereinbelow, the liability of Guarantor for the Guaranteed Obligations arising under the nine deeds of trust listed as items C.1. through C.9. hereinabove (collectively, the "Limited Guaranty Deeds of Trust") shall not exceed payment of twenty-five percent (25%) of the principal of the Notes secured by such Limited Guaranty Deeds of Trust, together with (i) interest on the full amount of such Notes and (ii) any other debt service required pursuant to such Notes; provided, however, in the event that the term of the Loan is extended pursuant to the terms of the Notes, and if, after such extension, any one or more of the Mortgaged Properties secured by a Limited Guaranty Deed of Trust fails to comply with the minimum Debt Coverage Ratio set forth in the Notes (each such property being hereinafter referred to as "Noncomplying Mortgaged Property"), then either (x) Guarantor shall cause the principal due under the Note for such Noncomplying Mortgaged Property to be reduced so that the Noncomplying Mortgaged Property is able to again comply with the Debt Coverage Ratio requirement or (y) the Deed of Trust for such Noncomplying Mortgaged Property shall automatically and without further action by Lender or any Guarantor become an Unlimited Guaranty Deed of Trust, and Guarantor shall be fully liable for all Guaranteed Obligations thereunder. (d) The limitations on Guarantor liability set forth in SECTION 1(c) hereinabove shall not apply to any costs, losses, expenses or fees, including but not limited to court costs or GUARANTY AGREEMENT - Page 5 attorney's fees, incurred, suffered or occasioned by the Lender as a consequence of any one or more of the following: (i) Borrower's failure to pay taxes, assessments and other similar charges which could result in liens against any portion of the property covered by the Deed of Trust or the other Loan Documents; provided, however, that the escrow of taxes and assessments with Lender shall be deemed a payment for such taxes, assessments and other similar charges to the extent actually paid; (ii) Borrower's failure to pay and discharge any mechanic's liens, materialmen's liens or similar liens against any portion of the property covered by the Deed of Trust or the other Loan Documents; provided, however, that Borrower has the right to contest any such liens and to either bond around same or have same paid under the payment and performance bonds supplied in connection with the construction contract; (iii) Fraud, any material misrepresentation of any fact by Borrower at the time when made or waste of any property covered by the Deed of Trust or the other Loan Documents; (iv) Retention by the Borrower of any rental income or other income received with respect to any property covered by the Deed of Trust or the other Loan Documents which, under the terms thereof, should have been paid to the Lender; (v) Misapplication by Borrower of insurance proceeds, condemnation awards or other similar funds or payments attributable to any property covered by the Deed of Trust or the other Loan Documents received by Borrower or directed by Borrower to a third party other than Lender which, under the terms thereof, should have been paid to the Lender; (vi) Failure to maintain, repair or restore any property covered by the Deed of Trust or the other Loan Documents in good condition; and (vii) The failure to maintain casualty and other insurance, if commercially available, required to be maintained by Borrower under the Loan Documents or the removal of any property covered by the Deed of Trust or the other Loan Documents which is not consented to in writing by Lender, replaced by similar property of similar quality or permitted by the terms of the Loan Documents. 2. PRIMARY LIABILITY OF GUARANTOR. (a) This Guaranty is an absolute, irrevocable and unconditional guaranty of payment and performance. Guarantor shall be liable for the payment and performance of the Guaranteed Obligations, as set forth in this Guaranty, as a primary obligor. This Guaranty shall be effective as a waiver of, and Guarantor hereby expressly waives, any and all rights to which Guarantor may otherwise have been entitled under any suretyship laws in effect from time to time, including, without limitation, any rights pursuant to RULE 31 of the Texas Rules of Civil Procedure, SECTION 17.001 of the Texas Civil Practice and Remedies Code, and CHAPTER 34 of the Texas Business and Commerce Code. (b) In the event of default by Borrower in payment or performance of the Guaranteed Obligations, or any part thereof, when such indebtedness or performance becomes due, either by its terms or as the result of the exercise of any power to accelerate, Guarantor shall, on demand and without presentment, protest, notice of protest, further notice of nonpayment or of dishonor or of default or nonperformance, or notice of acceleration or of intent to accelerate, or any other notice whatsoever, without any notice having been given to Guarantor previous to such demand of the acceptance by Lender of this Guaranty, and without any notice having been given to Guarantor previous to such demand of the creating or incurring of such indebtedness or of such obligation to perform, all such notices being GUARANTY AGREEMENT - Page 6 hereby waived by Guarantor, pay the amount due thereon to Lender or perform or observe the agreement, covenant, term or condition, as the case may be, and it shall not be necessary for Lender, in order to enforce such payment or performance by Guarantor, first to institute suit or pursue or exhaust any rights or remedies against Borrower or others liable on such indebtedness or for such performance, or to enforce any rights against any security that shall ever have been given to secure such indebtedness or performance, or to join Borrower or any others liable for the payment or performance of the Guaranteed Obligations or any part thereof in any action to enforce this Guaranty, or to resort to any other means of obtaining payment or performance of the Guaranteed Obligations. (c) Suit may be brought or demand may be made against all parties who have signed this Guaranty or any other guaranty covering all or any part of the Guaranteed Obligations, or against any one or more of them, separately or together, without impairing the rights of Lender against any party hereto. Any time that Lender is entitled to exercise its rights or remedies hereunder, it may in its discretion elect to demand payment and/or performance. If Lender elects to demand performance, it shall at all times thereafter have the right to demand payment until all of the Guaranteed Obligations have been paid and performed in full. If Lender elects to demand payment, it shall at all times thereafter have the right to demand performance until all of the Guaranteed Obligations have been paid and performed in full. 3. CERTAIN AGREEMENTS AND WAIVERS BY GUARANTOR. (a) Guarantor hereby agrees that neither Lender's rights or remedies nor Guarantor's obligations under the terms of this Guaranty shall be released, diminished, impaired, reduced or affected by any one or more of the following events, actions, facts, or circumstances, and the liability of Guarantor under this Guaranty shall be absolute and unconditional irrespective of: (i) any limitation of liability or recourse in any other Loan Document or arising under any Law; (ii) the taking or accepting of any other security or guaranty for, or right of recourse with respect to, any or all of the Guaranteed Obligations; (iii) any release, surrender, abandonment, exchange, alteration, sale or other disposition, subordination, deterioration, waste, failure to protect or preserve, impairment, or loss of, or any failure to create or perfect any lien or security interest with respect to, or any other dealings with, any collateral or security at any time existing or purported, believed or expected to exist in connection with any or all of the Guaranteed Obligations; (iv) whether express or by operation of Law, any partial release of the liability of Guarantor hereunder, or if one or more other guaranties are now or hereafter obtained by Lender covering all or any part of the Guaranteed Obligations, any complete or partial release of any one or more of such guarantors under any such other guaranty, or any complete or partial release of Borrower or any other party liable, directly or indirectly, for the payment or performance of any or all of the Guaranteed Obligations; (v) the death, insolvency, bankruptcy, disability, dissolution, liquidation, termination, receivership, reorganization, merger, consolidation, change of form, structure or ownership, sale of all assets, or lack of corporate, partnership or other power of any Borrower, Guarantor or any other party at any time liable for the payment or performance of any or all of the Guaranteed Obligations; (vi) either with or without notice to or consent of Guarantor: any renewal, extension, modification or rearrangement of the terms of any or all of the Guaranteed Obligations and/or any of the Loan Documents, including, without limitation, material alterations of the terms of payment (including changes in maturity date(s) and interest rate(s)) or performance (including changes in the GUARANTY AGREEMENT - Page 7 Plans and other terms or aspects of construction of the improvements) or any other terms thereof, or any waiver, termination, or release of, or consent to departure from, any of the Loan Documents or any other guaranty of any or all of the Guaranteed Obligations, or any adjustment, indulgence, forbearance, or compromise that may be granted from time to time by Lender to Borrower, Guarantor, and/or any other party at any time liable for the payment or performance of any or all of the Guaranteed Obligations; (vii) any neglect, lack of diligence, delay, omission, failure, or refusal of Lender to take or prosecute (or in taking or prosecuting) any action for the collection or enforcement of any of the Guaranteed Obligations, or to foreclose or take or prosecute any action to foreclose (or in foreclosing or taking or prosecuting any action to foreclose) upon any security therefor, or to exercise (or in exercising) any other right or power with respect to any security therefor, or to take or prosecute (or in taking or prosecuting) any action in connection with any Loan Document, or any failure to sell or otherwise dispose of in a commercially reasonable manner any collateral securing any or all of the Guaranteed Obligations (excepting only, with respect to any such sale or other disposition of collateral, any such requirement imposed at the time in question by then applicable law and which may not be waived by Guarantor, and Guarantor agreeing, with respect to any such sale or other disposition to which SECTION 9.504(c) of the Texas Business and Commerce Code or other similar provision of applicable law, is determined to be applicable, that ten (10) days notice shall constitute reasonable notification; and provided that, except for any such requirement applicable to any sale or other disposition of any such collateral which may not be waived, no provision of this Guaranty shall be construed to limit or otherwise adversely affect Lender's absolute and discretionary rights, as set forth in this Guaranty, to release and/or otherwise deal or fail to deal with any such collateral without affecting or impairing Guarantor's liability hereunder); (viii) any failure of Lender to notify Guarantor of any creation, renewal, extension, rearrangement, modification, supplement, or assignment of the Guaranteed Obligations or any part thereof, or of any Loan Document, or of any release of or change in any security or of any other action taken or refrained from being taken by Lender against Borrower or any security or other recourse or of any new agreement between Lender and Borrower, it being understood that Lender shall not be required to give Guarantor any notice of any kind under any circumstances with respect to or in connection with the Guaranteed Obligations, any and all rights to notice Guarantor may have otherwise had being hereby waived by Guarantor (excepting only any notice, if any, required at the time in question by then-applicable law and not waivable by Guarantor); (ix) if for any reason Lender is required to refund any payment by Borrower to any other party liable for the payment or performance of any or all of the Guaranteed Obligations or pay the amount thereof to someone else; (x) the existence of any claim, set-off, or other right that Guarantor may at any time have against Borrower, Lender, or any other Person (hereinafter defined), whether or not arising in connection with this Guaranty, the Note, the Loan Agreement, or any other Loan Document (provided that nothing contained herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim); or (xi) the unenforceability of all or any part of the Guaranteed Obligations against Borrower, whether because the Guaranteed Obligations exceed the amount permitted by law or violate any usury law, or because the act of creating the Guaranteed Obligations, or any part thereof, is ULTRA VIRES, or because the officers or Persons creating same acted in excess of their authority, or because of a lack of validity or enforceability of or defect or deficiency in any of the Loan Documents, or because Borrower has any valid defense, claim or offset with respect thereto, or because Borrower's obligation ceases to exist by operation of GUARANTY AGREEMENT - Page 8 law, or because of any other reason or circumstance, it being agreed that Guarantor shall remain liable hereon regardless of whether Borrower or any other Person be found not liable on the Guaranteed Obligations, or any part thereof, for any reason (and regardless of any joinder of Borrower or any other party in any action to obtain payment or performance of any or all of the Guaranteed Obligations). (b) In the event any payment by Borrower or any other party to Lender is held to constitute a preference, fraudulent transfer or other voidable payment under any bankruptcy, insolvency or similar law, or if for any other reason Lender is required to refund such payment or pay the amount thereof to any other party, such payment by Borrower or any other party to Lender shall not constitute a release of Guarantor from any liability hereunder, and this Guaranty shall continue to be effective or shall be reinstated (notwithstanding any prior release or discharge by Lender of this Guaranty or of Guarantor), as the case may be, with respect to, and this Guaranty shall apply to, any and all amounts so refunded by Lender or paid by Lender to another party (which amounts shall constitute part of the Guaranteed Obligations), and any interest paid by Lender and any attorneys' fees, costs and expenses paid or incurred by Lender in connection with any such event. It is the intent of Guarantor and Lender that the obligations and liabilities of Guarantor hereunder are absolute and unconditional under any and all circumstances and that until the Guaranteed Obligations are fully and finally paid and performed, and not subject to refund or disgorgement, the obligations and liabilities of Guarantor hereunder shall not be discharged or released, in whole or in part, by any act or occurrence that might, but for the provisions of this Guaranty, be deemed a legal or equitable discharge or release of a guarantor. Lender shall be entitled to continue to hold this Guaranty in its possession for a period of one year from the date the Guaranteed Obligations are paid and performed in full and for so long thereafter as may be necessary to enforce any obligation of Guarantor hereunder and/or to exercise any right or remedy of Lender hereunder. (c) If acceleration of the time for payment of any amount payable by Borrower under the Note, the Loan Agreement, or any other Loan Document is stayed or delayed by any Law or Tribunal, all such amounts shall nonetheless be payable by Guarantor on demand by Lender. 4. SUBORDINATION. If, for any reason whatsoever, Borrower is now or hereafter becomes indebted to Guarantor: (a) such indebtedness and all interest thereon and all liens, security interests and rights now or hereafter existing with respect to property of Borrower securing same shall, at all times, be subordinate in all respects to the Guaranteed Obligations and to all liens, security interests and rights now or hereafter existing to secure the Guaranteed Obligations; (b) Guarantor shall not be entitled to enforce or receive payment, directly or indirectly, of any such indebtedness of Borrower to Guarantor until the Guaranteed Obligations have been fully and finally paid and performed; (c) Guarantor hereby assigns and grants to Lender a security interest in all such indebtedness and security therefor, if any, of Borrower to Guarantor now existing or hereafter arising, including any dividends and payments pursuant to debtor relief or insolvency proceedings referred to below. In the event of receivership, bankruptcy, reorganization, arrangement or other debtor relief or insolvency proceedings involving Borrower as debtor, Lender shall have the right to prove its claim in any such proceeding so as to establish its rights hereunder and shall have the right to receive directly from the receiver, trustee or other custodian (whether or not a default shall have occurred or be continuing under any of the Loan Documents), dividends and payments that are payable upon any obligation of Borrower to Guarantor now existing or hereafter arising, and to have all benefits of any security therefor, until the Guaranteed Obligations have been fully and finally paid and performed. If, notwithstanding the foregoing provisions, Guarantor should receive any payment, claim or distribution that is prohibited as provided above in GUARANTY AGREEMENT - Page 9 this SECTION 4, Guarantor shall pay the same to Lender immediately. Guarantor hereby agreeing that it shall receive the payment, claim or distribution in trust for Lender and shall have absolutely no dominion over the same except to pay it immediately to Lender; and (d) Guarantor shall promptly upon request of Lender from time to time execute such documents and perform such acts as Lender may require to evidence and perfect its interest and to permit or facilitate exercise of its rights under this SECTION 4, including, but not limited to, execution and delivery of financing statements, proofs of claim, further assignments and security agreements, and delivery to Lender of any promissory notes or other instruments evidencing indebtedness of Borrower to Guarantor. All promissory notes, accounts receivable ledgers or other evidences, now or hereafter held by Guarantor, of obligations of Borrower to Guarantor shall contain a specific written notice thereon that the indebtedness evidenced thereby is subordinated under and is subject to the terms of this Guaranty. 5. OTHER LIABILITY OF GUARANTOR OR BORROWER. If Guarantor becomes liable, by endorsement or otherwise, for any indebtedness owing by Borrower to Lender other than under this Guaranty, such liability shall not be in any manner impaired or affected hereby, and the rights of Lender hereunder shall be cumulative of any and all other rights that Lender may have against Guarantor. If Borrower is or becomes indebted to Lender for any indebtedness other than or in excess of the Indebtedness for which Guarantor is liable under this Guaranty, any payment received or recovery realized upon any indebtedness of Borrower to Lender may, except to the extent paid by Guarantor on the Indebtedness for which Guarantor is liable under this Guaranty or specifically required by Law or agreement of Lender to be applied to the Indebtedness for which Guarantor is liable under this Guaranty, in Lender's sole discretion, be applied upon indebtedness of Borrower to Lender other than the Indebtedness for which Guarantor is liable under this Guaranty. 6. LENDER ASSIGNS. This Guaranty is for the benefit of Lender and Lender's successors and assigns, and in the event of an assignment of the Guaranteed Obligations, or any part thereof, the rights and benefits hereunder, to the extent applicable to the Guaranteed Obligations so assigned, may be transferred with such Guaranteed Obligations. Guarantor waives notice of any transfer or assignment of the Guaranteed Obligations, or any part thereof, and agrees that failure to give notice will not affect the liabilities of Guarantor hereunder. 7. BINDING EFFECT. This Guaranty is binding not only on Guarantor, but also on Guarantor's heirs, personal representatives, successors and assigns. Upon the death of Guarantor, this Guaranty shall continue against Guarantor's estate as to all of the Guaranteed Obligations, including that portion incurred or arising after the death of Guarantor and shall be provable in full against Guarantor's estate, whether or not the Guaranteed Obligations are then due and payable. If this Guaranty is signed by more than one person, then all of the obligations of Guarantor arising hereunder shall be jointly and severally binding on each of the undersigned, and their respective heirs, personal representatives, successors and assigns, and the term "GUARANTOR" shall mean all such persons and each of them individually. Words importing "PERSONS" herein shall include firms, associations, partnerships (including limited partnerships), joint ventures, trusts, corporations and other legal entities, including public or governmental bodies, agencies or instrumentalities, as well as natural persons. 8. GOVERNING LAW FORUM. THIS GUARANTY, AND ITS VALIDITY, ENFORCEMENT, AND INTERPRETATION, SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE UNITED STATES FEDERAL LAW, AND IS INTENDED TO BE PERFORMED IN ACCORDANCE WITH, AND ONLY TO THE EXTENT PERMITTED BY, SUCH LAWS. ALL OBLIGATIONS OF GUARANTOR HEREUNDER ARE PAYABLE AND PERFORMABLE AT THE PLACE OR PLACES WHERE THE GUARANTEED OBLIGATIONS ARE PAYABLE AND PERFORMABLE. GUARANTOR HEREBY IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY FOR GUARANTOR AND IN RESPECT OF GUARANTOR'S PROPERTY TO THE NON-EXCLUSIVE JURISDICTION OF ANY TEXAS STATE COURT, OR ANY UNITED STATES FEDERAL COURT, SITTING IN THE CITY OF GUARANTY AGREEMENT - Page 10 DALLAS, TEXAS, AND TO THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR UNITED STATES FEDERAL COURT SITTING IN THE STATE IN WHICH ANY OF THE PROPERTY IS LOCATED, OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE GUARANTEED OBLIGATIONS. 9. INVALIDITY OF CERTAIN PROVISIONS. If any provision of this Guaranty or the application thereof to any person or circumstance shall, for any reason and to any extent, be judicially declared to be invalid or unenforceable, neither the remaining provisions of this Guaranty nor the application of such provision to any other Person or circumstance shall be affected thereby, and the remaining provisions of this Guaranty, or the applicability of such provision to other Persons or circumstances, as applicable, shall remain in effect and be enforceable to the maximum extent permitted by applicable Law. 10. ATTORNEYS' FEES AND COSTS OF COLLECTION. Guarantor shall pay on demand all reasonable attorneys' fees and all other costs and expenses incurred by Lender in the enforcement of or preservation of Lender's rights under this Guaranty. Guarantor agrees to pay interest on any expenses or other sums due to Lender under this SECTION 10 that are not paid when due, at a rate per annum equal to the lesser of (i) the Maximum Rate, or (ii) the Past Due Rate, as each is defined in the Notes. Guarantor's obligations and liabilities under this SECTION 10 shall survive any payment or discharge in full of the Guaranteed Obligations. 11. PAYMENTS. All sums payable under this Guaranty shall be paid in lawful money of the United States of America that at the time of payment is legal tender for the payment of public and private debts. 12. CONTROLLING AGREEMENT. It is not the intention of Lender or Guarantor to obligate Guarantor to pay interest in excess of that lawfully permitted to be paid by Guarantor under applicable Law. Should it be determined that any portion of the Guaranteed Obligations or any other amount payable by Guarantor under this Guaranty constitutes interest in excess of the maximum amount of interest that Guarantor, in Guarantor's capacity as guarantor, may lawfully be required to pay under applicable Law, the obligation of Guarantor to pay such interest shall automatically be limited to the payment thereof in the maximum amount so permitted under applicable Law. The provisions of this SECTION 12 shall override and control all other provisions of this Guaranty and of any other agreement between Guarantor and Lender. l3. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF GUARANTOR. Guarantor hereby represents, warrants, and covenants as follows: (a) Guarantor is the owner of a direct or indirect interest in one or more of the Borrowers, and Guarantor will derive substantial benefit, directly or indirectly, from the making of the Loan to one or more of the Borrowers and from the making of this Guaranty by Guarantor and Guarantor shall not, during the term hereof, sell, lease, convey, mortgage, assign, pledge, hypothecate, encumber or transfer its interest in the applicable Borrower except to Lender pursuant to the Security Agreement of even date; (b) this Guaranty is duly authorized and valid, and is binding upon and enforceable against Guarantor; (c) Guarantor is not, and the execution, delivery and performance by Guarantor of this Guaranty will not cause Guarantor to be, in violation of or in default with respect to any Law or in default (or at risk of acceleration of indebtedness) under any agreement or restriction by which Guarantor is bound or affected; (d) Guarantor is duly organized, validly existing, and in good standing under the Laws of the state of its organization and has full power and authority to enter into and perform this Guaranty; (e) except as has been disclosed to Lender in writing by Guarantor, there is no Litigation pending or, to the knowledge of Guarantor, threatened before or by any GUARANTY AGREEMENT - Page 11 Tribunal against or affecting Guarantor that could reasonably be expected to have a material adverse effect on guarantor if adversely determined: (f) all financial statements and information heretofore furnished to Lender by Guarantor do, and all financial statements and information hereafter furnished to Lender by Guarantor will, fully and accurately present the condition (financial or otherwise) of Guarantor as of their dates and the results of Guarantor's operations for the periods therein specified, and, since the date of the most recent financial statements of Guarantor heretofore furnished to Lender, no material adverse change has occurred in the financial condition of Guarantor, nor, except as heretofore disclosed in writing to Lender, has Guarantor incurred any material liability, direct or indirect, taxed or contingent: (g) after giving effect to this Guaranty, Guarantor is solvent, is not engaged or about to engage in business or a transaction for which the property of Guarantor is an unreasonably small capital, and does not intend to incur or believe that it will incur debts that will be beyond its ability to pay as such debts mature and Guarantor acknowledges and agrees that it shall be a default under this Guaranty if Guarantor does any of the following: (1) (i) Executes an assignment for the benefit of creditors, or takes any action in furtherance thereof, or (ii) admits in writing its inability to pay, or fails to pay, its debts generally as they become due, or (iii) as a debtor, files a petition, case, proceeding or other action pursuant to, or voluntarily seeks the benefit or benefits of, Title 11 of the United States Code as now or hereafter in effect or any other law, domestic or foreign, as now or hereafter in effect relating to bankruptcy, insolvency, liquidation, receivership, reorganization, arrangement, composition, extension or adjustment of debts, or similar laws affecting the rights of creditors (Title 11 of the United States Code and such other laws being herein called "DEBTOR RELIEF LAWS"), or takes any action in furtherance thereof, or (iv) seeks the appointment of a receiver, trustee, custodian or liquidator of any of its property; or (2) Suffers the filing of a petition, case, proceeding or other action against it as a debtor under any Debtor Relief Law or seeking appointment of a receiver, trustee, custodian or liquidator of its property, and (i) admits, acquiesces in or fails to contest diligently the material allegations thereof, or (ii) the petition, case, proceeding or other action results in entry of any order for relief or order granting relief sought against it, or (iii) in a proceeding under the Federal Bankruptcy Code, the case is converted from one chapter to another, or (iv) fails to have the petition, case, proceeding or other action permanently dismissed or discharged on or before the earlier of trial thereon or sixty (60) days next following the date of its filing; or (3) Conceals, removes, or permits to be concealed or removed, any part of its property, with intent to hinder, delay or defraud its creditors or any of them, or makes or suffers a transfer of any of its property which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law, or makes any transfer of its property to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid, or suffers or permits, while insolvent, any creditor to obtain a lien (other than as described in SUBPARAGRAPH [4] below) upon any of its property through legal proceedings which are not vacated and such lien discharged prior to enforcement thereof and in any event within sixty (60) days from the date thereof; or (4) Any Guarantor shall fail to discharge within a period of thirty (30) days after the commencement thereof any attachment, sequestration, or similar proceeding or proceedings involving an aggregate amount in excess of One Million Dollars ($1,000,000) against any of its assets or properties. GUARANTY AGREEMENT - Page 12 (5) Any Guarantor shall fail to satisfy and discharge promptly any judgment or judgments for any Guarantor for the payment of money in an aggregate amount in excess of One Million Dollars ($1,000,000). (h) Lender has no duty at any time to investigate or inform Guarantor of the financial or business condition or affairs of any Borrower or any change therein, and guarantor will keep himself fully appraised of each Borrower's financial and business condition; (i) Guarantor acknowledges and agrees that Guarantor may be required to pay and perform the Guaranteed Obligations in full without assistance or support from any Borrower or any other party; (j) Guarantor has read and fully understands the provisions contained in the Notes, the Deeds of Trust and the other Loan Documents. Any default by any Borrower under a Deed of Trust or other Loan Document, and any default or Event of Default under the Security Agreement shall also be a default under this Guaranty; (k) Guarantor shall at all times during the term hereof comply with the terms and provisions of the Security Agreement, including but not limited to all financial covenants set forth therein; (l) Neither Guarantor nor any Affiliate (as defined in the Security Agreement) of Guarantor holds a partnership interest in any Borrower other than those interests pledged to Lender in the Security Agreement. If any Affiliate shall acquire any interest in any Borrower, Guarantor shall cause such interest to be pledged to Lender. Guarantor's representations, warranties and covenants are a material inducement to Lender to enter into the other Loan Documents and shall survive the execution hereof and any bankruptcy, foreclosure, transfer of security or other event affecting Borrower, Guarantor, any other party, or any security for all or any part of the Guaranteed Obligations. 14. NOTICES. Unless specifically provided otherwise, any notice for purposes of this Guaranty or any other Loan Document shall be given in writing or by telex or by facsimile (fax) transmission and shall be addressed or delivered to the respective addresses set forth at the end of this Guaranty, or to such other address as may have been previously designated by the intended recipient by notice given in accordance with this Section. If sent by prepaid, registered or certified mail (return receipt requested), the notice shall be deemed effective when the receipt is signed or when the attempted initial delivery is refused or cannot be made because of a change in address of which the sending party has not been notified; if transmitted by telex, the notice shall be effective when transmitted (answerback confirmed); and if transmitted by facsimile or personal delivery, the notice shall be effective when received. No notice of change of address shall be effective except upon actual receipt. This SECTION 14 shall not be construed in any way to affect or impair any waiver of notice or demand provided in this Guaranty or in any other Loan Document or to require giving notice or demand to or upon any Person in any situation or for any reason. 15. CUMULATIVE RIGHTS. The exercise by Lender of any right or remedy hereunder or under any other Loan Document, or at Law or in equity, shall not preclude the concurrent or subsequent exercise of any other right or remedy. Lender shall have all rights, remedies and recourses afforded to Lender by reason of this Guaranty or any other Loan Document or by Law or equity or otherwise, and the same (a) shall be cumulative and concurrent, (b) may be pursued separately, successively or concurrently against Guarantor or others obligated for the Guaranteed Obligations, or any part thereof, or against any one or more of them, or against any security or otherwise, at the sole discretion of Lender, (c) may be exercised as often as occasion therefor shall arise, it being agreed by Guarantor that the exercise of, discontinuance of the exercise of or failure to exercise any of such rights, remedies, or recourses shall in no event be construed as a waiver or release thereof or of any other right, remedy, or recourse, and (d) are intended to be, and shall be, nonexclusive. No waiver of any default on the part of Guarantor or of any breach of any of the provisions of this Guaranty or of any other document shall be considered a waiver of any other or subsequent default or breach, and no delay or omission in exercising or GUARANTY AGREEMENT - Page 13 enforcing the rights and powers granted herein or in any other document shall be construed as a waiver of such rights and powers, and no exercise or enforcement of any rights or powers hereunder or under any other document shall be held to exhaust such rights and powers, and every such right and power may be exercised from time to time. The granting of any consent, approval or waiver by Lender shall be limited to the specific instance and purpose therefor and shall not constitute consent or approval in any other instance or for any other purpose. No notice to or demand on Guarantor in any case shall of itself entitle Guarantor to any other or further notice or demand in similar or other circumstances. No provision of this Guaranty or any right, remedy or recourse of Lender with respect hereto, or any default or breach, can be waived, nor can this Guaranty or Guarantor be released or discharged in any way or to any extent, except specifically in each case by a writing intended for that purpose (and which refers specifically to this Guaranty) executed, and delivered to Guarantor, by Lender. 16. TERM OF GUARANTY. This Guaranty shall continue in effect until all the Guaranteed Obligations are fully and finally paid, performed, and discharged, except that, and notwithstanding any return of this Guaranty to Guarantor, this Guaranty shall continue in effect (i) with respect to any of the Guaranteed Obligations that survive the release of the liens of the Deeds of Trust, (ii) with respect to all obligations and liabilities of Guarantor under SECTION 10, and (iii) as provided in SECTION 3(b). 17. FINANCIAL STATEMENTS. Guarantor shall furnish or cause to be furnished to Lender all financial reports, balance sheets, operating statements and other financial reporting information as is required under the Security Agreement. All balance sheets and operating statements together shall include disclosure of all contingent liabilities, a profit and loss statement, an income and expense statement, a reconciliation of capital and surplus, and a schedule of sources and uses of funds, a detailed cash flow statement and changes in financial condition for the applicable period, together with such supporting schedules and documentation Lender requires. All balance sheets and operating statements shall be certified by Guarantor and the balance sheet and operating statement described above shall be audited by independent certified public accountants of recognized standing, selected by Guarantor, and consented to by Lender without qualification or exception other than those acceptable to Lender. 18. DISCLOSURE OF INFORMATION. Lender may sell or offer to sell the Loan or interests in the Loan to one or more assignees or participants and may disclose to any such assignee or participant or prospective assignee or prospective participant, Lender's affiliates including NationsBanc Capital Markets, Inc., any regulatory body having jurisdiction over Lender, and to any other parties as necessary or appropriate in Lender's reasonable judgment any information Lender now has or hereafter obtains pertaining to the Guaranteed Obligations, this Guaranty, and Guarantor including, without limitation, information regarding any security for the Guaranteed Obligations or for this Guaranty, any credit or other information on Guaranty, Borrower, and any other party liable, directly or indirectly, for any part of the Guaranteed Obligations. 19. RIGHT OF SET-OFF. Upon the occurrence and during the continuance of any Default, however defined, in the payment or performance when due of any of the Guaranteed Obligations, Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable Law, without notice to any Person (any such notice being expressly waived by Guarantor to the fullest extent permitted by applicable law), to set-off and apply any and all deposits (general or special, time or demand, provisional or final), funds, or assets at any time held and other indebtedness at any time owing by Lender to or for the credit or the account of Guarantor against any and all of the obligations of Guarantor now or hereafter existing under this Guaranty, whether or not Lender shall have made any demand under this Guaranty or exercised any other right or remedy hereunder and although such obligations may be unmatured, Lender will promptly notify Guarantor after any such set-off and application made by Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of Lender under this SECTION 20 are in addition to the other rights and remedies (including other rights of set-off) that Lender may have. 20. FURTHER ASSURANCES. Guarantor at Guarantor's expense will promptly execute and deliver to Lender upon Lender's request all such other and further documents, agreements, and GUARANTY AGREEMENT - Page 14 instruments in compliance with or accomplishment of the agreements of Guarantor under this Guaranty. 21. NO FIDUCIARY RELATIONSHIP. The relationship between Lender and Guarantor is solely that of lender and guarantor. Lender has no fiduciary or other special relationship with or duty to Guarantor and none is created hereby. 22. DEFINITIONS AND INTERPRETATION. As used in this Guaranty, the term "Person" means firms, associations, partnerships (including limited partnerships), joint ventures, trusts, corporations and other legal entities including public or governmental bodies, agencies or instrumentalities, as well as natural persons. If this Guaranty is signed by more than one Person as "GUARANTOR," then the term "GUARANTOR" as used in this Guaranty shall refer to all such Persons jointly and severally, and all promises, agreements, covenants, waivers, consents, representations, warranties and other provisions in this Agreement are made by and shall be binding upon each and every such undersigned Person, jointly and severally. The term "LENDER" shall be deemed to include any subsequent holder(s) of the Note. Whenever the context of any provisions hereof shall require it, words in the singular shall include the plural, words in the plural shall include the singular, and pronouns of any gender shall include the other genders. Captions and headings in the Loan Documents are for convenience only and shall not affect the construction of the Loan Documents. All references in this Guaranty to Schedules, Articles, Sections, Subsections, paragraphs and subparagraphs refer to the respective subdivisions of this Guaranty, unless such reference specifically identifies another document. The terms "HEREIN," "HEREOF," "HERETO," "HEREUNDER" and similar terms refer to this Guaranty and not to any particular Section or subsection of this Guaranty. The terms "INCLUDE" and "INCLUDING" shall be interpreted as if followed by the words "WITHOUT LIMITATION." All references in this Guaranty to sums denominated in dollars or with the symbol "$" refer to the lawful currency of the United States of America, unless such reference specifically identifies another currency. 23. TIME OF ESSENCE. Time shall be of the essence in this Guaranty with respect to all of Guarantor's obligations hereunder. 24. EXECUTION. This Guaranty may be executed in multiple counterparts, each of which, for all purposes, shall be deemed an original, and all of which together shall constitute one and the same agreement. 25. ENTIRE AGREEMENT. This Guaranty embodies the entire agreement between Lender and Guarantor with respect to the guaranty by Guarantor of the Guaranteed Obligations. This Guaranty supersedes all prior agreements and understandings, if any, with respect to guaranty by Guarantor of the Guaranteed Obligations. No condition or conditions precedent to the effectiveness of this Guaranty exist. This Guaranty shall be effective upon execution by Guarantor and delivery to Lender. THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 26. INDEMNIFICATION REGARDING SUITS OR CLAIMS. Guarantor hereby agrees to indemnify and hold Lender harmless against any and all losses, liabilities, claims, damages, costs or expenses of any kind, including but not limited to attorney's fees, to which Lender may become subject as a result of the following: (a) any claim, suit, or other action filed or otherwise instituted against Guarantor, any Borrower, or any party to the Security Agreement, [including, but not limited to ALKER ET AL v. J.W. ENGLISH ET AL (U.S. District Court, Northern District of California)], as the same creates a claim or cause of action which challenges the ability of the Apartment Investment and Management Company, a Maryland corporation, or the Company (as defined in the Security Agreement) to enter into or perform their respective obligations with respect to this Guaranty or GUARANTY AGREEMENT - Page 15 the Company to enter into or perform its obligations with respect to the Security Agreement: or (b) any failure of any Mortgaged Property as defined in the Deeds of Trust) to comply with (i) applicable Laws (as defined in the Deeds of Trust) or restrictive covenants regarding parking requirements or (ii) the Access Laws (as defined in the Deeds of Trust). (The balance of this page is intentionally left blank.) GUARANTY AGREEMENT - Page 16 IN WITNESS WHEREOF, guarantor duly executed this Guaranty as of the date first written above. GUARANTOR: APARTMENT INVESTMENT AND MANAGEMENT COMPANY Address of Guarantor: 1873 S. Bellaire Street, 17th Floor By: /s/ H. Alcock Denver, Colorado 80222-4348 ------------------------------------- Fax No. 303-753-9538 Harry Alcock, Vice President Telephone No. 303-757-8101 AIMCO PROPERTIES, L.P., a Delaware limited partnership By: AIMCO-GP, INC., a Delaware corporation. General Partner By: /s/ H. Alcock -------------------------------- Harry Alcock, Vice President AIMCO-GP, INC. By: /s/ H. Alcock ------------------------------------- Harry Alcock, Vice President AIMCO-LP, INC. By: /s/ H. Alcock ------------------------------------- Harry Alcock, Vice President AIMCO HOLDINGS, L.P., By: AIMCO HOLDINGS QRS. INC., a Delaware limited partnership. General Partner By: /s/ H. Alcock -------------------------------- Harry Alcock, Vice President AIMCO HOLDINGS QRS, INC. By: /s/ H. Alcock ------------------------------------- Harry Alcock, Vice President GUARANTY AGREEMENT - Signature Page Executed by Lender for the purpose of the notice of final agreement set forth above: Address of Lender: LENDER: NationsBank of Texas. N.A. NATIONSBANK OF TEXAS. N.A. 901 Main Street 51st Floor Dallas, Texas 75202-3714 Attn: Real Estate Loan Administration By: /s/ John A. Lank Fax No. 214-508-0506 ------------------------------------- Telephone No. 214-508-1515 Name: John A. Lank ----------------------------------- Title: S.V.P. ---------------------------------- GUARANTY AGREEMENT - Signature Page EX-10.69 11 EXHIBIT 10.69 SECURITY AGREEMENT THIS SECURITY AGREEMENT dated as of December 27, 1996, is by and among AIMCO PROPERTIES, L.P., a Delaware limited partnership (the "Company"), AIMCO COPPERFIELD, L.P., a Delaware limited partnership, AIMCO CROWS NEST, L.P., a Delaware limited partnership, AIMCO GROUP, L.P., a Delaware limited partnership, AIMCO HAMPTON HILL, L.P., a Delaware limited partnership, AIMCO HASTINGS PLACE, L.P., a Delaware limited partnership, AIMCO OAK FALLS, L.P., a Delaware limited partnership, AIMCO RECOVERY FUND, L.P., a Delaware limited partnership, AIMCO SIGNATURE POINT, L.P., a Delaware limited partnership, AIMCO SUNBURY, L.P., a Delaware limited partnership, and AIMCO WEST TRAILS, L.P., a Delaware limited partnership (individually, a "Debtor" and collectively, the "Debtors"), and NATIONSBANK OF TEXAS, N.A., a national banking association (the "Secured Party"). R E C I T A L S: A. The entities described on Schedule 1 hereto (individually, a "Borrower" and collectively, the "Borrowers"), all of whom are Affiliates (hereinafter defined) of Debtors, each desire to obtain extensions of credit from the Secured Party. B. The Secured Party has conditioned its obligations to make such extensions of credit upon the execution and delivery of this Agreement by the Debtors. NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.1. DEFINITIONS. As used in this Agreement, the following terms have the following meanings: "AFFILIATE" means, as to any Person, any other Person (a) that directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, such Person; (b) that directly or indirectly beneficially owns or holds five percent (5%) or more of any class of voting stock or other equity interests of such Person; or (c) five percent (5%) or more of the voting stock or other equity interests of which is directly or indirectly beneficially owned or held by the Person in question. The term "control" means the possession, directly or indirectly, of the power to direct or cause direction of the management and policies of a Person, whether through the ownership of voting securities or other equity interests, by contract, or otherwise; PROVIDED, however, in no event shall the Secured Party be deemed an Affiliate of the REIT or any of its Subsidiaries. "CAPITAL LEASE OBLIGATIONS" means, as to any Person, the obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) real and/or personal property, which obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP. For purposes of this Agreement, the amount of such Capital Lease Obligations shall be the capitalized amount thereof, determined in accordance with GAAP. "CASH COLLATERAL ACCOUNT" means that certain account to be maintained by Debtors with Secured Party into which Distributions shall be deposited in accordance with Section 5.5 of this Agreement, or any substitute or replacement account therefor. "CASH EQUIVALENTS" means: (a) securities issued or fully guaranteed or insured by the United States Government or any agency thereof and backed by the full faith and credit of the United States having maturities of not more than six months from the date of acquisition; (b) certificates of deposit, time deposits, demand deposits, eurodollar time deposits, repurchase agreements, reverse repurchase agreements, or bankers' acceptances, having in each case a tenor of not more than three (3) months, issued by any U.S. commercial lender (or any branch or agency of a non-U.S. bank licensed to conduct business in the U.S.) having combined capital and surplus of not less than $100,000,000 whose short-term securities are rated at least A-1 by Standard & Poor's Corporation and P-1 by Moody's Investors Service, Inc.; PROVIDED, HOWEVER, such investments may not be made in amounts in excess of $1,000,000 with any bank that is owed Indebtedness in excess of $1,000,000 by the Company, the REIT or any Subsidiary (other than the Obligations) unless such bank waives in writing (in form and substance satisfactory to the Secured Party) its right to set-off such investment against such Indebtedness; (c) demand deposits on deposit in accounts maintained at commercial banks having membership in the FDIC and in amounts not exceeding the maximum amounts of insurance thereunder; and (d) commercial paper of an issuer rated at least A-1 by Standard & Poor's Corporation or P-1 by Moody's Investors Service, Inc. and in either case having a tenor of not more than three (3) months. "COLLATERAL" has the meaning specified in Section 2.1 of this Agreement. "DEBT COVERAGE AGREEMENTS" means those certain Debt Coverage Agreements of even date herewith between the Borrowers identified on Schedule 1 hereto and Secured Party, as the same may be amended or modified from time to time. "DEBT SERVICE COVERAGE RATIO" means, with respect to the Company, the REIT and their respective Subsidiaries on a consolidated basis for any period of determination, the ratio computed as follows: -2- EBITDA minus Imputed Capital Expenditures Debt Service Coverage Ratio= -------------------------------------------------- Net Interest Expense plus Scheduled Amortization
"DISTRIBUTION" for any Person means, with respect to any shares of any capital stock, partnership interests, or other equity interests issued by such Person, (a) the retirement, redemption, purchase. or other acquisition for value of any such interests, (b) the declaration or payment of any dividend or distribution on or with respect to any such interests, (c) any loan or advance by such Person to, or other investment by such Person in, the holder of any of such interests, and (d) any other payment by such Person with respect to such interests. "DOCUMENT" means any "document", as such term is defined in Section 9.105(a)(6) of the UCC, now owned or hereafter acquired by any Debtor. "EBITDA" means, for any period, the sum determined in accordance with GAAP, of the following, for the Company, the REIT and their respective Subsidiaries on a consolidated basis (a) the net income (or net loss) PLUS (b) all amounts treated as expenses for real estate depreciation, Net 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 or measured by income to the extent included in the determination of such net income (or loss); provided, however, that net income (or loss) shall be computed for these purposes without giving effect to extraordinary losses or gains. "EVENT OF DEFAULT" has the meaning specified in Section 6.1. "FUNDS FROM OPERATIONS" means, with respect to the Company, the REIT, and their Subsidiaries on a consolidated basis, net income calculated in accordance with GAAP, excluding gains or losses from debt restructuring or sales of property, plus real estate depreciation, plus amortization associated with the purchase of property management companies, and after adjustments for unconsolidated partnerships and joint ventures. "GAAP" means generally accepted accounting principles, applied on a consistent basis, as set forth in Opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants and/or in statements of the Financial Accounting Standards Board and/or their respective successors and which are applicable in the circumstances as of the date in question. Accounting principles are applied on a "consistent basis" when the accounting principles applied in a current period are comparable in all material respects to those accounting principles applied in a preceding period. "GENERAL INTANGIBLES" means any "general intangibles", as such term is defined in Section 9.106 of the UCC, now owned or hereafter acquired by any Debtor and, in any -3- event, shall include, without limitation, each of the following, whether now owned or hereafter acquired by such Debtor: (a) all of such Debtor's patents, patent applications, patent rights, service marks, trademarks, trade names, trade secrets, intellectual property, registrations, goodwill, copyrights, franchises, licenses, permits, propriety information, customer lists, designs, and inventions, (b) all of such Debtor's books, records, data, plans, manuals, computer software, and computer programs, (c) all of such Debtor's contract rights, partnership interests, joint venture interests, securities, deposit accounts, investment accounts, and certificates of deposit, (d) all rights of such Debtor to payment under letters of credit and similar agreements, (e) all tax refunds and tax refund claims of such Debtor, (f) all choses in action and causes of action of such Debtor (whether arising in contract, tort, or otherwise and whether or not currently in litigation) and all judgments in favor of such Debtor, (g) all rights and claims of such Debtor under warranties and indemnities, and (h) all rights of such Debtor under any insurance, surety, or similar contract or arrangement. "GOVERNMENTAL AUTHORITY" means any nation or government, any state or political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory, or administrative functions of or pertaining to government. "GROSS ASSET VALUE" means, with respect to the Company, the REIT and their respective Subsidiaries on a consolidated basis, the sum of: (a) annualized Net Operating Income from all apartment projects owned by the Company and the Subsidiaries of the Company and the REIT for the period from the commencement of the then current year through the end of the most recent quarter, capitalized at 9-3/4%, PLUS (b) annualized unconsolidated net income of the Management Entities for the period from the commencement of the then current year through the end of the most recent quarter multiplied by 4.50, PLUS (c) all cash (including Restricted Cash) and the fair market value of all Cash Equivalents held as of the last day of such quarter. "GUARANTORS" means the Persons identified on Schedule 3 hereto. "GUARANTY" means that certain Guaranty Agreement of even date herewith, executed by Guarantors in favor of Secured Party, as the same may be amended or modified from time to time. "IMPUTED CAPITAL EXPENDITURES" means, for any four (4) consecutive quarters, an amount equal to the average number of apartment units owned by the Company and the Subsidiaries of the company and the REIT during such period multiplied by Three Hundred Dollars ($300) and for any period of less than four (4) consecutive quarters, an appropriate proration of such amount. "INDEBTEDNESS" of any Person means without duplication, (a) all indebtedness for borrowed money, (b) all obligations issued, undertaken or assumed as the deferred purchase price of property or services, (c) all reimbursement obligations with respect to -4- surety bonds, letters of credit, bankers' acceptances and similar instruments (in each case, to the extent material or noncontingent), (d) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of properties, (e) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to properties acquired by the Person (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such properties), (f) all Capital Lease Obligations, (g) all net obligations with respect to Rate Contracts, (h) all obligations (other than, in the case of the REIT, the obligation to acquire units in exchange for shares of common stock of the REIT) to purchase, redeem, or acquire any stock of such Person or its Affiliates that, by its terms or by the terms of any security into which it is convertible or exchangeable, is, or upon the happening of any event or the passage of time would be, required to be redeemed or repurchased by such Person or its Affiliates, including at the option of the holder, in whole or in part, or has, or upon the happening of an event or passage of time would have, a redemption or similar payment due, before June 30, 2001, (i) all indebtedness referred to in clauses (a) through (h) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any lien upon or in properties (including accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness, and (j) all guaranty obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (a) through (h) above. "INSTRUMENT" means any "instrument", as such term is defined in Section 9.105(a)(9) of the UCC, now owned or hereafter acquired by any Debtor. "INTEREST COVERAGE RATIO" means, with respect to the Company, the REIT and their respective Subsidiaries on a consolidated basis for any period of determination, the ratio computed as follows: EBITDA minus Imputed Capital Expenditures Interest Coverage Ratio= ----------------------------------------- Net Interest Expense "LOAN DOCUMENTS" means this Agreement and all promissory notes, security agreements, deeds of trust, assignments, guaranties, and other instruments, documents, and agreements executed and delivered pursuant to or in connection with this Agreement, as such instruments, documents, and agreements may be amended, modified, renewed, extended, or supplemented from time to time. "MANAGEMENT ENTITY" shall mean each of the following Persons and any successor thereto which conducts the management business described in the SEC report of the REIT, as well as any Subsidiary of the Company which is engaged in the business of managing multi-family apartment projects or other real estate projects: Property Asset -5- Management Services, L.P., a Delaware limited partnership, Property Asset Management Services, Inc., a Delaware corporation, Property Asset Management Services-CA, LLC, a California limited liability company, and each of the "Service LLC's" referred to in the SEC Report. "NET INTEREST EXPENSE" means, for any period, gross interest expense for the period (including all commissions, discounts, fees and other charges in connection with standby letters of credit and similar instruments) for the Company, the REIT and their respective Subsidiaries PLUS the portion of the upfront costs and expenses for Rate Contracts entered into by the Company, the REIT and their respective Subsidiaries (to the extent not included in gross interest expense) fairly allocated to such Rate Contracts as expenses for such period, as determined in accordance with GAAP; provided, that, all interest expense accrued by the Company, the REIT and their respective Subsidiaries during such period, even if not payable on or before December 27, 1997, shall be included within "Net Interest Expense." Notwithstanding the foregoing, interest accrued under any intercompany Indebtedness shall not be included within "Net Interest Expense" for any purposes hereof. "NET OPERATING INCOME," as to any property, means (a) all gross revenues received from the operation of such property during a particular period (including, without limitation, payments received from insurance on account of business or rental interruption 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 or all of such property; or from any financing or refinancing of such property; or from any condemnation of any part or all of such property (except for temporary use or occupancy); or on account of a casualty to the property (other than payments from insurance on account of business or rental interruption); or any security deposits paid under leases of all or a part of such property, 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 assumed to be three percent (3%) of gross receipts (whether or not actually paid pursuant to a separate management contract or otherwise) and real estate taxes and insurance premiums actually paid by the Company during such period with respect to such property (exclusive of Capital Expenditures). There shall be no deduction for any expense not involving a cash expenditure, such as depreciation. "NET WORTH" means at any time the Gross Asset Value minus all liabilities (as determined in accordance with GAAP) of the Company, the REIT and their respective Subsidiaries on a consolidated basis. "NOTES" means the promissory notes of even date herewith of the Borrowers (except as to the Signature Point Loan, the Borrower for this purpose shall mean -6- Signature Point Joint Venture) payable to the order of Secured Party in the original principal amount identified for each Borrower on Schedule 1 hereto, and all renewals, extensions, and modifications thereof. "OBLIGATIONS" means all obligations, indebtedness, and liabilities of the Debtors, Guarantors, or any of them to the Secured Party, now existing or hereafter arising, whether direct, indirect, related, unrelated, fixed, contingent, liquidated, unliquidated, joint, several, or joint and several, under the Guaranty, all costs and expenses, including, without limitation, all attorneys' fees and legal expenses incurred by the Secured Party to preserve and maintain the Collateral, collect the obligations herein described, and enforce this Agreement, and all extensions, renewals, and modifications of any of the foregoing. "PERSON" means any individual, corporation, business trust, association, company, partnership, joint venture, Governmental Authority, or other entity. "PLEDGED CASH" means the amount held on deposit in the Cash Collateral Account. "PROCEEDS" means any "proceeds", as such term is defined in Section 9.306 of the UCC and, in any event, shall include, but not be limited to, (a) any and all proceeds of any insurance, indemnity, warranty, or guaranty payable to any Debtor from time to time with respect to any of the Collateral, (b) any and all payments (in any form whatsoever) made or due and payable to any Debtor from time to time in connection with any requisition, confiscation, condemnation, seizure, or forfeiture of all or any part of the Collateral by any governmental authority or agency (or any person acting under color of governmental authority or agency), and (c) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral. "RATE CONTRACTS" means interest rate and currency swap agreements, cap, floor and collar agreements, interest rate insurance, currency spot and forward contracts and other agreements or arrangements designed to provide protection against fluctuations in interest or currency exchange rates. "REIT" means, Apartment Investment and Management Company, a Maryland corporation. "RESPONSIBLE OFFICER" means, in relation to the REIT, the Chief Executive Officer or the Vice Chairman of the REIT, and, in relation to the Company, the Chief Executive Officer or any Vice President of the general partner of the Company, in its capacity as the general partner of the Company, and/or any other officer of the REIT or the general partner of the Company having substantially the same authority and responsibility, or, with respect to financial matters, the Chief Financial Officer or the Treasurer of the REIT or the general partner of the Company, respectively, or any other officer having substantially the same authority and responsibility. -7- "RESTRICTED CASH" means the sum of Pledged Cash plus any cash pledged by the Company, the REIT or any of their respective Subsidiaries to other lenders, as indicated in the line item for "restricted cash" in the REIT's balance sheet from time to time. "SCHEDULED AMORTIZATION" means, with respect to the Company and the Subsidiaries of the Company or the REIT on a consolidated basis, the sum, as of any date of determination, of (a) all Indebtedness of such Persons, the maturity of which is less than or equal to twelve (12) months from the date of determination excluding balloon payments on any secured loan which is secured by real property collateral with no physical, operating, financial performance or valuation characteristics which could impair in any respect the ability of the owner thereof to refinance such loan in full on or prior to the maturity thereof at customary market terms, conditions and underwriting criteria, and (b) the current portion (i.e., such portion as is scheduled to be paid by the obligor thereof within twelve (12) months from the date of determination) of all Indebtedness of such Persons, the maturity of which is more than twelve (12) months from the date of determination. "SEC" means the Securities and Exchange Commission, or any successor thereto. "SEC REPORT" means the Annual Report of the REIT on Form 10-K filed with the SEC for the year ending December 31, 1995. "SUBSIDIARY" means any corporation, association, partnership, joint venture, trust, or other business entity of which at least a majority of the outstanding shares of stock or other equity or beneficial interests (in the case of Persons other than corporations) is at the time directly or indirectly owned or controlled by a Person or one or more of the Subsidiaries or by a Person and one or more of the Subsidiaries. "TOTAL INDEBTEDNESS" means as of any date of determination, all outstanding Indebtedness, and in the case of clause (iii) below, Indebtedness available to be drawn, of the Company, the REIT and their respective Subsidiaries, and shall include, without limitation: (i) any such Person's share of the Indebtedness of any partnership or joint venture in which such Person directly or indirectly holds any interest; (ii) any recourse or contingent obligations, directly or indirectly, of such Person with respect to any Indebtedness of such partnership or joint venture in excess of its proportionate share and (iii) such Person's liability in respect of letters of credit, whether such liability in contingent or fixed (such liability to be determined on the assumption that all conditions for drawing upon such letters of credit have been complied with). Notwithstanding the foregoing, (x) intercompany indebtedness, and (y) accounts payable to trade creditors for goods and services and current operating liabilities (not the result of the borrowing of money) incurred in the ordinary course of business in accordance with customary terms and paid within the specified time, shall be excluded from the calculation of "Total Indebtedness" but shall not otherwise be excluded as Indebtedness for any other purpose hereof. -8- "UCC" means the Uniform Commercial Code as in effect in the State of Texas or, if so required with respect to any particular Collateral by mandatory provisions of applicable law, as in effect in the jurisdiction in which such Collateral is located. ARTICLE II SECURITY INTEREST Section 2.1. SECURITY INTEREST. As collateral security for the prompt payment and performance in full when due of the Obligations (whether at stated maturity, by acceleration, or otherwise), the Debtors hereby assign to Secured Party and grant to the Secured Party a lien on and security interest in all of the right, title, and interest of the Debtors, or any of them, in and to the following, whether now owned or hereafter arising or acquired and wherever located (collectively, the "Collateral"): (a) all of the interests of Debtors or any of them in the Borrowers, including general and limited partnership interests, and all Instruments, Documents, and General Intangibles evidencing the foregoing or related thereto; (b) all Distributions paid to Debtors or any of them on account of the interests described in subparagraph (a); (c) the Cash Collateral Account, and all money, Instruments, securities, Documents, chattel paper, credits, claims, demands, income, and other property on deposit in, issued in connection with, or otherwise related to any such deposit account, all of which Secured Party shall be deemed to have possession when in transit to or set apart for it or any of its agents or Affiliates; (d) all other goods and personal property of the Debtors whether tangible or intangible and now or hereafter delivered by Debtors or any of them to Secured Party; and (e) all Proceeds and products of any or all of the foregoing. Without limiting the foregoing, this Agreement secures the payment of all amounts that constitute part of the Obligations and would be owed by the Debtors, the Guarantors, or any of them to the Secured Party but for the fact that they are unenforceable or not allowable due to the existence of bankruptcy, reorganization, or similar proceedings involving any Borrower, Guarantor, or Debtor. Section 2.2. DEBTORS REMAIN LIABLE. Notwithstanding anything to the contrary contained herein, (a) the Debtors shall remain liable under the contracts and agreements included in the Collateral to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the -9- Secured Party of any of its rights hereunder shall not release any Debtor from any of its duties or obligations under the contracts and agreements included in the Collateral, and (c) the Secured Party shall not have any obligation or liability under any of the contracts and agreements included in the Collateral by reason of this Agreement, nor shall the Secured Party be obligated to perform any of the obligations or duties of any Debtor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. ARTICLE III REPRESENTATIONS AND WARRANTIES To induce the Secured Party to enter into this Agreement, the Debtors jointly and severally represent and warrant to the Secured Party that: Section 3.1. PARTNERSHIP EXISTENCE, Each Debtor (a) is a limited partnership duly organized, validly existing, and in good standing under the laws of the jurisdiction of its organization; (b) has all requisite partnership power and authority to own its assets and carry on its business as now being or as proposed to be conducted; and (c) is qualified to do business in all jurisdictions in which the nature of its business makes such qualification necessary and where failure to so qualify would have a material adverse effect on its business, condition (financial or otherwise), operations, prospects, or properties. The Debtors have the partnership power and authority to execute, deliver, and perform their respective obligations under this Agreement, Other than the Debtors, no Affiliate of the REIT holds a partnership interest in any of the Borrowers. Schedule I hereto sets forth all ownership interests in each Borrower now owned by Debtors or any of them. The ownership interest of Debtors in the Borrowers is not evidenced by any Instrument, Document, or certificate, Debtors have, at the time of execution of this Agreement, delivered to Secured Party a true and correct copy of the organizational documents of each Borrower. Section 3.2. PARTNERSHIP ACTION NO BREACH. The execution. delivery, and performance by the Debtors of this Agreement and compliance with the terms and provisions hereof have been duly authorized by all requisite partnership action on the part of the Debtors and do not and will not (a) violate or conflict with, or result in a breach of, or require any consent under (i) the partnership agreement, as the case may be, of the Debtors or any Borrower, (ii) any applicable law, rule, or regulation or any order, writ, injunction. or decree of any governmental authority or agency or arbitrator, or (iii) any agreement or instrument to which any Debtor is a party or by which it or any of its property is bound or subject, or (b) constitute a default under any such agreement or instrument, or result in the creation or imposition of any lien (except as provided in Section 2.1 hereof) upon any of the revenues or assets of any Debtor. The exercise by Secured Party of any remedies available hereunder, including without limitation transfer of partnership interests which constitute Collateral, will not (a) breach any partnership agreement of any Borrower, nor (b) provided that the limited partners of such Borrower approve the substitution of the Secured Party as a substitute general partner, trigger a dissolution of any Borrower. -10- Section 3.3. APPROVALS. No authorization, approval, or consent of, and no filing or registration with, any governmental authority or agency or third party is or will be necessary for the execution, delivery, or performance by the Debtors of this Agreement or the validity or enforceability thereof. Section 3.4. ENFORCEABILITY. This Agreement constitutes the legal, valid, and binding obligation of the Debtors, enforceable against each Debtor in accordance with its terms, except as limited by bankruptcy, insolvency, or other laws of general application relating to the enforcement of creditors' rights. Section 3.5. TITLE. Each Debtor is, and with respect to Collateral acquired after the date hereof each Debtor will be, the legal and beneficial owner of the Collateral free and clear of any lien, security interest, or other encumbrance, except the lien of Secured Party. Section 3.6. FINANCING STATEMENTS. No financing statement, security agreement, or other lien instrument covering all or any part of the Collateral is on file in any public office, except as may have been filed in favor of the Secured Party pursuant to this Agreement. No Debtor has within the past five (5) years had a trade name or done business under any name other than its legal name set forth at the beginning of this Agreement. Section 3.7. PRINCIPAL PLACE OF BUSINESS. The principal place of business and chief executive office of each Debtor, and the office where such Debtor keeps its books and records, is located on the signature pages of this Agreement. Section 3.8. LOCATION. All Instruments of any Debtor evidencing Collateral have been delivered to the Secured Party. Section 3.9. PERFECTION. Upon the filing of Uniform Commercial Code financing statements in the jurisdictions listed on Schedule 2 attached hereto, and upon the Secured Party's obtaining possession of all Documents and Instruments of the Debtors evidencing Collateral, the security interest in favor of the Secured Party created herein will constitute a valid and perfected lien upon and security interest in the Collateral, subject to no equal or prior lien. Section 3.10. INDEPENDENT INVESTIGATION. Each Debtor has, independently and without reliance upon the Secured Party and based upon such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. There are no conditions precedent to the full effectiveness of this Agreement that have not been fully and permanently satisfied. Section 3.11. LITIGATION. There is no litigation, investigation, or governmental proceeding threatened against any Debtor or any of its properties which if adversely determined would reasonably be expected to have a material adverse effect on the Collateral or the financial condition. operations, or business of such Debtor. -11- Section 3.12. BENEFIT TO DEBTOR. The value of the consideration received and to be received by each Debtor as a result of the Borrowers and the Secured Party entering into the loan transactions and the Debtors executing and delivering this Agreement and the Guaranty is reasonably worth at least as much as the liability and obligation of such Debtor hereunder, and such liability and obligation and the Borrowers' entering into the loan transactions have benefited and may reasonably expected to benefit such Debtor directly and indirectly. Section 3.13. DISCLOSURE. No statement, information, report, representation, or warranty made by any Debtor in this Agreement or in any other Loan Document or furnished to the Secured Party in connection with this Agreement or any of the transactions contemplated hereby contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements herein or therein not misleading. There is no fact known to any Debtor which has a material adverse effect, or which might in the future have a material adverse effect, on the business, condition (financial or otherwise), operations, prospects, or properties of any Debtor or any Subsidiary that has not been disclosed in writing to the Secured Party. Section 3.14. AGREEMENTS. No Debtor nor any of their Subsidiaries is a party to any indenture, loan, or credit agreement, or to any lease or other agreement or instrument, or subject to any charter or corporate restriction which could have a material adverse effect on the business, condition (financial or otherwise), operations, prospects, or properties of any Debtor or any Subsidiary, or the ability of any Borrower or Debtor to pay and perform its obligations under the Loan Documents. No Debtors nor any of their Subsidiaries is in default in any respect in the performance, observance, or fulfillment of any of the obligations, covenants, or conditions contained in any agreement or instrument material to its business to which it is a party. Section 3.15. COMPLIANCE WITH LAWS. No Debtor nor any of their Subsidiaries is in violation in any material respect of any law, rule, regulation, order, or decree of any Governmental Authority or arbitrator. ARTICLE IV COVENANTS The Debtors jointly and severally covenant and agree with the Secured Party that until the Obligations are paid and performed in full and all commitments of the Secured Party to the Borrowers and the Debtors have terminated: Section 4.1. ENCUMBRANCES. No Debtor shall create, permit, or suffer to exist, and shall defend the Collateral against, any lien, security interest, or other encumbrance on the Collateral, and shall defend such Debtor's rights in the Collateral and the Secured Party's security interest in the Collateral against the claims and demands of all persons or entities. No Debtor shall do anything to impair the rights of the Secured Party in the Collateral. -12- Section 4.2. MODIFICATION OF COLLATERAL. The Debtors shall, in accordance with prudent business practices, endeavor to collect or cause to be collected from each Borrower, as and when due, any and all amounts owing in respect of the Collateral. Without the prior written consent of the Secured Party, the Debtors shall not (a) grant any extension of time for any payment with respect to any of the Distributions, (b) compromise, compound, or settle any of the Distributions with respect to the Collateral for less than the full amount thereof, (c) release, in whole or in part, any person or entity liable for payment thereof, (d) allow any credit or discount for payment with respect thereto, or (e) release any lien, security interest, or guaranty securing any such amount. Section 4.3. DISPOSITION OF COLLATERAL. No Debtor shall sell, lease, assign (by operation of law or otherwise), or otherwise dispose of, or grant any option with respect to, the Collateral or any part thereof without the prior written consent of the Secured Party. Section 4.4. FURTHER ASSURANCES. At any time and from time to time, upon the request of the Secured Party, and at the sole expense of the Debtors, the Debtors shall promptly execute and deliver all such further instruments, agreements, and documents and take such further action as the Secured Party may deem necessary or desirable to preserve and perfect its security interest in the Collateral and carry out the provisions and purposes of this Agreement. Without limiting the generality of the foregoing, the Debtors shall (a) execute and deliver to the Secured Party such financing statements as the Secured Party may from time to time require; (b) deliver and pledge to the Secured Party all Documents (including, without limitation, negotiable documents of title) evidencing Collateral; (c) deliver and pledge to the Secured Party all Instruments of the Debtors evidencing Collateral with any necessary endorsements; and (d) execute and deliver to the Secured Party such other documents, instruments, and agreements as the Secured Party may require to perfect and maintain the validity, effectiveness, and priority of the liens intended to be created thereby. Each Debtor authorizes the Secured Party to file one or more financing or continuation statements, and amendments thereto, relating to all or any part of the Collateral without the signature of each Debtor where permitted by law. A carbon, photographic, or other reproduction of this Agreement or of any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement and may be filed as a financing statement. Section 4.5. RISK OF LOSS. The Debtors shall be responsible for any loss or damage to the Collateral except any loss or damage due to Secured Party's gross negligence or willful misconduct. Section 4.6. INSPECTION RIGHTS. Each Debtor shall permit the Secured Party and its representatives to examine, inspect, and audit the Collateral and to examine, inspect, and copy such Debtor's books and records at any reasonable time and as often as the Secured Party may desire, but excluding materials subject to valid privileges which would be voided by such examination, inspection and audit. The Secured Party may at any time and from time to time contact obligors with respect to the Collateral to verify the existence, amounts, and terms thereof. -13- Section 4.7. CHANGES. No Debtor shall change its name, identity, or corporate or partnership structure in any manner that might make any financing statement filed in connection with this Agreement seriously misleading unless such Debtor shall have given the Secured Party thirty (30) days prior written notice thereof and shall have taken all action deemed necessary or desirable by the Secured Party to make each financing statement not seriously misleading. No Debtor shall change its principal place of business, chief executive office, or the place where it keeps its books and records unless it shall have given the Secured Party thirty (30) days prior written notice thereof and shall have taken all action deemed necessary or desirable by the Secured Party to cause its security interest in the Collateral to be perfected with the priority required by this Agreement. Section 4.8. BOOKS AND RECORDS: INFORMATION. The Debtors shall keep accurate and complete books and records of the Collateral and the Debtor's business and financial condition in accordance with GAAP. The Debtors shall from time to time at the request of the Secured Party deliver to the Secured Party such information regarding the Collateral and the Debtors as the Secured Party may request, including, without limitation, lists and descriptions of the Collateral and evidence of the identity and existence of the Collateral, to the extent such materials are not subject to a valid privilege which would be voided by disclosure of such information. The Debtors shall mark their books and records to reflect the security interest of the Secured Party under this Agreement. Section 4.9. TAXES AND CLAIMS. Each Debtor shall pay and discharge, before the same become delinquent, (a) all taxes, assessments, and governmental charges imposed upon it or upon any of its property, and (b) all lawful claims that, if unpaid, might become a lien upon any of its property; PROVIDED, however, that no Debtor shall be required to pay or discharge any such tax, assessment, or governmental charge if (i) the amount or validity thereof is being contested in good faith by proper proceedings being diligently pursued, (ii) adequate reserves therefor have been established in accordance with GAAP, and (iii) such proceedings do not subject the Secured Party to any criminal or civil penalty or liability or involve any substantial risk of the sale, forfeiture, or loss of any item of Collateral. Section 4.10. COMPLIANCE WITH LAWS. Each Debtor shall comply in all material respects with all applicable laws, rules, regulations, orders, and decrees of any governmental authority or agency or arbitrator. Section 4.11. COMPLIANCE WITH AGREEMENTS. Each Debtor shall comply in all material respects with all agreements, contracts, and instruments binding on it or affecting its properties or businesses. Section 4.12. NOTIFICATION. The Debtors shall promptly notify the Secured Party of (a) any lien, security interest, encumbrance, or claim that has attached to or been made or asserted against any of the Collateral, (b) any material change in any of the Collateral, including, without limitation, any material damage to or loss of any of the Collateral, (c) the occurrence of any other event that could have a material adverse effect on the Collateral or the security interest -14- created hereunder, and (d) the occurrence or existence of any Event of Default or of any event or condition that, with the giving of notice or lapse of time or both, would constitute an Event of Default. Section 4.13. COLLECTION OF COLLATERAL. Except as otherwise provided in this Section, the Debtors shall have the right to collect and receive payments on the Collateral. In connection with such collections, the Debtors may take (and, at the Secured Party's direction, shall take) such actions as the Debtors or the Secured Party may deem necessary or advisable to enforce collection of the Collateral. If an Event of Default shall have occurred and be continuing, the Debtors shall, upon the request of the Secured Party, instruct all persons or entities obligated in respect of the Collateral to make all payments on the Collateral either (a) directly to the Secured Party (by instructing that such payments be remitted to a post office box which shall be in the name and under the control of the Secured Party), or (b) to one or more other banks in the United States of America (by instructing that such payments be remitted to a post office box which shall be in the name or under the control of the Secured Party) under arrangements in form and substance satisfactory to the Secured Party pursuant to which the Debtors shall have irrevocably instructed such other bank (and such other bank shall have agreed) to remit all such payments directly to the Secured Party. In addition to the foregoing, the Debtors agree that if any Proceeds of any Collateral shall be received by any Debtor while an Event of Default exists, the Debtors shall promptly deliver such Proceeds to the Secured Party with any necessary endorsements. Until such Proceeds are delivered to the Secured Party, such Proceeds shall be held in trust by such Debtor for the benefit of the Secured Party and shall not be commingled with any other funds or property of such Debtor. All Proceeds of Collateral received by the Secured Party pursuant to this Section may be applied by the Secured Party to the Obligations in such order and manner as the Secured Party may elect in its sole discretion. Section 4.14. REPORTING REQUIREMENTS. The Debtors will furnish to the Secured Party, or cause the Guarantors to furnish to the Secured Party, in form and detail satisfactory to Secured Party: (a) ANNUAL FINANCIAL STATEMENTS. As soon as available, but not later than ninety (90) days after the end of each fiscal year, a copy of the audited consolidated balance sheet of the REIT, and each Guarantor and Debtor not included in the REIT's consolidated financial statements, as of the end of such year and the related consolidated statements of operations, stockholders' equity (where applicable) and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous year, including the REIT's SEC Form 10K for such period, and accompanied by the unqualified opinion of a nationally-recognized independent public accounting firm stating that such consolidated financial statements present fairly the financial position for the periods indicated, in conformity with GAAP, and applied on a basis consistent with prior years; (b) QUARTERLY FINANCIAL STATEMENTS. As soon as available, but not later than sixty (60) days after the end of each of the first three (3) fiscal quarters of each year, a -15- copy of the unaudited consolidated balance sheet of the REIT, and each Guarantor and Debtor not included in the REIT's consolidated financial statements, as of the end of such quarter and the related consolidated statements of operations, stockholders' equity (where applicable) and cash flows for the period commencing on the first day and ending on the last day of such quarter, including the REIT's SEC Form 10Q for such period, and accompanied by a certificate signed by at least two (2) Responsible Officers stating that such financial statements are complete and correct and present fairly the financial position for the periods indicated, in conformity with GAAP for interim financial statements, and applied on a basis consistent with prior quarters; (c) COMPANY PLANS AND PROJECTIONS. Not less than ninety (90) days after the beginning of each fiscal year, copies of (A) the Company's business plan for the current and the succeeding three (3) fiscal years, (B) the Company's annual budgets (including capital expenditure budgets) and projections; and (C) the Company's financial projections for the current and the succeeding three (3) fiscal years, as prepared by the Company's Chief Financial Officer and in a format and with such detail as Secured Party may reasonably require; (d) QUARTERLY CONSOLIDATED OPERATING STATEMENTS. To the extent not otherwise provided in disclosure documents filed with the SEC and delivered to Secured Party hereunder, as soon as available, but not later than forty-five (45) days after the end of each fiscal quarter, a quarterly consolidated operating statement for all of the properties of the Company and its Subsidiaries (in a format and with such detail as Secured Party may require), accompanied by a certificate signed by at least two (2) Responsible Officers certifying that the information contained therein, subject to audit, is complete and correct to the knowledge of the Company; (e) ACCOUNTING CERTIFICATES. Concurrently with the delivery of the financial statements referred to in Section 4.14(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 Event of Default, or event which with the giving of notice or lapse of time or both would be an Event of Default, except as specified in such certificate; (f) OFFICERS' CERTIFICATES. Concurrently with the delivery of the financial statements referred to in Sections 4.14(a) and 4.14(b) above, a compliance certificate, signed by at least two (2) Responsible Officers (i) stating that, to the best of such officers' knowledge, each of the Company, the REIT and their respective Subsidiaries, during such period, has observed or performed all of its covenants and other agreements, and satisfied every condition contained in this Agreement to be observed, performed or satisfied by it, and that such officers have no knowledge of any Event of Default, or event which with the giving of notice or lapse of time or both would be an Event of Default, except as specified in such certificate; and (ii) showing in detail the calculations supporting such statement for such period in respect of the covenants in Section 4.15; -16- (g) PERIODIC REPORTS AND FILINGS: PRESS RELEASES. Promptly after the same are sent or released, copies of all reports, proxy statements and financial statements which the REIT sends to its shareholders and copies of all press releases made by the company and the REIT, promptly after the same are filed, copies of all financial statements and regular, periodical or special reports which the REIT may make to, or file with, the SEC or any successor or similar Governmental Authority and promptly after the same are received, copies of any reports prepared by analysts for or with respect to the Company or the REIT; (h) ACCOUNTANTS' REPORTS. Promptly after the same are received, copies of all reports which the independent certified public accountants of the Company or the REIT deliver to the Company or the REIT; (i) NOTICE OF LITIGATION. Promptly after the commencement thereof, notice of all actions, suits, and proceedings before any Governmental Authority or arbitrator affecting the REIT, any of its Subsidiaries, any Guarantor, or any Debtor which, if determined adversely, could have a material adverse effect on the business, condition (financial or otherwise), operations, prospects, or properties of the REIT, such Subsidiary, any Guarantor, or any Debtor; (j) NOTICE OF DEFAULT. As soon as possible and in any event within five (5) days after the occurrence of each Event of Default, a written notice setting forth the details of such Event of Default and the action that the REIT has taken and proposes to take with respect thereto; (k) REPORTS TO OTHER CREDITORS. Promptly after the furnishing thereof, copies of any statement or report furnished by the REIT or the Company to any other party pursuant to the terms of any indenture, loan, or credit or similar agreement and not otherwise required to be furnished to the Secured Party pursuant to any other clause of this Section; (l) NOTICE OF MATERIAL ADVERSE CHANGE. As soon as possible and in any event within five (5) days after the occurrence thereof, written notice of any matter that could have a material adverse effect on the business, condition (financial or otherwise), operations, prospects, or properties of the REIT, any Subsidiary, any Guarantor, or any Debtor; and (m) GENERAL INFORMATION. Promptly, such other information concerning the REIT or any Subsidiary as the Secured Party may from time to time reasonably request except materials subject to a valid privilege which would be voided by providing such information. Section 4.15. FINANCIAL COVENANTS. -17- (a) The Net Worth of the REIT and its Subsidiaries on a consolidated basis shall not be less than $200,000,000 at any time. (b) The ratio of Total Indebtedness to Gross Asset Value shall not exceed 0.60-to-1.00 at any time. (c) The Interest Coverage Ratio computed for any fiscal quarter or year shall not be less than 2.00-to-1.00. (d) The Debt Service Coverage Ratio computed for any fiscal quarter or year shall not be less than 1.80-to-1.00. (e) The aggregate amount of (i) the appraised values of each Mortgaged Property (as defined in the applicable Deed of Trust securing a Note) owned by a Borrower, as determined by the most recent MAI appraisal obtained and accepted by Secured Party, from time to time. minus all Indebtedness and other liabilities of each Borrower, TIMES (ii) the percentage of partnership interests in all Borrowers which are subject to Secured Party's security interest created under this Agreement, shall at all times equal or exceed $12,000,000. Section 4.16. MAINTENANCE OF EXISTENCE: CONDUCT OF BUSINESS. Each Debtor will preserve and maintain, and will cause each of their Subsidiaries to preserve and maintain, its partnership or corporate existence and all of its leases, privileges, licenses, permits, franchises, qualifications, and rights that are necessary or desirable in the ordinary conduct of its business. Each Debtor will conduct, and will cause each of their Subsidiaries to conduct, its business in an orderly and efficient manner in accordance with good business practices. Section 4.17. MAINTENANCE OF PROPERTIES. Each Debtor will maintain, keep, and preserve, and cause each of their Subsidiaries to maintain, keep, and preserve, all of its properties (tangible and intangible) necessary or useful in the proper conduct of its business in good working order and condition. Section 4.18. MERGERS, ETC. No Debtor will become a party and will not permit any of their Subsidiaries to become a party, to a merger or consolidation, or purchase or otherwise acquire all or any part of the assets of any Person or any shares or other evidence of beneficial ownership of any Person, or wind-up, dissolve, or liquidate. Section 4.19. RESTRICTED PAYMENTS. At any time when Distributions are required to be paid into the Cash Collateral Account pursuant to Section 5.5 hereof, no Debtor will declare or pay any dividends or make any other payment or distribution (in cash, property, or obligations) on account of its capital stock or partnership interests comprised of all or any portion of the Collateral, or redeem, purchase, retire, or otherwise acquire any of its capital stock or partnership interests, or permit any of its Subsidiaries to purchase or otherwise acquire any of the capital stock or partnership interests of such Debtor or any Subsidiary in exchange or consideration for -18- all or any portion of the Collateral, or set apart all of any portion of the Collateral for a sinking or other analogous fund for any dividend or other distribution on its capital stock or partnership interests or for any redemption, purchase, retirement, or other acquisition of any of its capital stock or partnership interests in respect of all or any portion of the Collateral; provided, however, that when an Event of Default, or event which with the giving of notice or lapse of time or both would be an Event of Default, exists or would result therefrom, the Company shall not take or permit to be taken any of the foregoing actions regardless of whether or not same relate to all or any portion of the Collateral. Section 4.20. TRANSACTIONS WITH AFFILIATES. The Debtors will not enter into, and will not permit any of their Subsidiaries to enter into, any transaction, including, without limitation, the purchase, sale, or exchange of property or the rendering of any service, with any Affiliate of the Debtors or such Subsidiary, except in the ordinary course of and pursuant to the reasonable requirements of such Debtor's or such Subsidiary's business and upon fair and reasonable terms no less favorable to such Debtor or such Subsidiary than would be obtained in a comparable arm's-length transaction with a Person not an Affiliate of such Debtor or such Subsidiary. Section 4.21. ACCOUNTING. The Debtors will not, and will not permit any of their Subsidiaries to, change its fiscal year or make any change (a) in accounting treatment or reporting practices, except as required by GAAP and disclosed to the Secured Party, or (b) in tax reporting treatment, except as required by law and disclosed to the Secured Party. Section 4.22. AMENDMENT TO PARTNERSHIP AGREEMENTS. None of the Debtors shall initiate or consent to any amendment to the partnership agreement governing any Borrower that would increase the percentage of the limited partners therein whose approval is required to admit a substitute general partner to such partnership. Section 4.23. NOTICES REGARDING FORECLOSURE. The Secured Party shall use reasonable efforts to send written notice to the applicable Debtor in the event that, following the occurrence and during the continuance of an Event of Default, the Secured Party elects to exercise its rights under this Agreement to foreclose upon such Debtor's general partnership interest in a Borrower. Within two (2) business days of receipt of such notice, the applicable Debtor shall send a notice to the limited partners in such Borrower proposing the admission of the Secured Party as a substitute general partner. The Company shall exercise its right to vote in respect of its limited partnership interests in any such Borrower in favor of admitting the Secured Party as a substitute general partner. Section 4.24. NOTICE AND CONSENT. Concurrently herewith, each Debtor shall execute and deliver a Notice and Consent in the form of Schedule 4 attached hereto and made a part hereof to each Borrower in which it holds a partnership interest. -19- ARTICLE V RIGHTS OF THE SECURED PARTY Section 5.1. POWER OF ATTORNEY. Each Debtor hereby irrevocably constitutes and appoints the Secured Party and any officer or agent thereof, with full power of substitution, as its true and faithful attorney-in-fact with full irrevocable power and authority in the name of such Debtor or in its own name, when an Event of Default exists, to take any and all action and to execute any and all documents and instruments which the Secured Party at any time and from time to time deems necessary or desirable to accomplish the purposes of this Agreement and, without limiting the generality of the foregoing, each Debtor hereby gives the Secured Party the power and right on behalf of such Debtor and in its own name to do any of the following, without notice to or the consent of such Debtor: (i) to demand, sue for, collect, or receive in the name of such Debtor or in its own name, any money or property at any time payable or receivable on account of or in exchange for any of the Collateral and, in connection therewith, endorse checks, notes, drafts, acceptances, money orders, documents of title, or any other instruments for the payment of money under the Collateral or any policy of insurance: (ii) to pay or discharge taxes, liens, or other encumbrances levied or placed on or threatened against the Collateral; (iii) (A) to direct account debtors and any other parties liable for any payment under any of the Collateral to make payment of any and all monies due and to become due thereunder directly to the Secured Party or as the Secured Party shall direct; (B) to receive payment of and receipt for any and all monies, claims, and other amounts due and to become due at any time in respect of or arising out of any Collateral; (C) to sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, proxies, stock powers, verifications, and notices in connection with accounts and other documents relating to the Collateral; (D) to commence and prosecute any suit, action, or proceeding at law or in equity in any court of competent jurisdiction to collect the Collateral or any part thereof and to enforce any other right in respect of any Collateral; (E) to defend any suit, action, or proceeding brought against such Debtor with respect to any Collateral; (F) to settle, compromise, or adjust any suit, action, or proceeding described above and, in connection therewith, to give such discharges or releases as the Secured Party may deem appropriate; (G) to exchange any of the Collateral for other property upon any merger, consolidation, reorganization, recapitalization, or other readjustment of the issuer thereof and, in connection therewith, deposit any of the Collateral with any committee, depositary, transfer agent, registrar, or other designated agency upon such terms as the Secured Party may determine; (H) to add or release any guarantor, indorser, surety, or other party to any of the Collateral; (I) to renew, extend, or otherwise change the terms and conditions of any of the Collateral; (J) to make, settle, compromise, or adjust claims under any -20- insurance policy covering any of the Collateral; and (K) to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Secured Party were the absolute owner thereof for all purposes, and to do, at the Secured Party's option and the Debtor's expense, at any time, or from time to time, all acts and things which the Secured Party deems necessary to protect, preserve, or realize upon the Collateral and the Secured Party's security interest therein. This power of attorney is a power coupled with an interest and shall be irrevocable. The Secured Party shall be under no duty to exercise or withhold the exercise of any of the rights, powers, privileges, and options expressly or implicitly granted to the Secured Party in this Agreement, and shall not be liable for any failure to do so or any delay in doing so. The Secured Party shall not be liable for any act or omission or for any error of judgment or any mistake of fact or law in its individual capacity or in its capacity as attorney-in-fact except acts or omissions resulting from its willful misconduct. This power of attorney is conferred on the Secured Party solely to protect, preserve, and realize upon its security interest in the Collateral. The Secured Party shall not be responsible for any decline in the value of the Collateral and shall not be required to take any steps to preserve rights against prior parties or to protect, preserve, or maintain any security interest or lien given to secure the Collateral. Section 5.2. SETOFF: PROPERTY HELD BY THE SECURED PARTY. When an Event of Default exists, the Secured Party shall have the right to set off and apply against the Obligations, at any time and without notice to any Debtor, any and all deposits (general or special, time or demand, provisional or final) or other sums at any time credited by or owing from the Secured Party to the Debtors or any of them whether or not the Obligations are then due. As additional security for the Obligations, each Debtor hereby grants the Secured Party a security interest in all money, instruments, and other property of such Debtor now or hereafter held by the Secured Party, including without limitation, property held in safekeeping. In addition to the Secured Party's right of setoff and as further security for the Obligations, each Debtor hereby grants the Secured Party a security interest in all deposits (general or special, time or demand, provisional or final) of such Debtor now or hereafter on deposit with or held by the Secured Party and all other sums at any time credited by or owing from the Secured Party to such Debtor. The rights and remedies of the Secured Party hereunder are in addition to other rights and remedies (including, without limitation, other rights of setoff) which the Secured Party may have. Section 5.3. ASSIGNMENT BY THE SECURED PARTY. The Secured Party may at any time assign or otherwise transfer all or any portion of the Obligations, in accordance with paragraph 15 of the Notes, to any other person or entity, and such person or entity shall thereupon become vested with all of the rights and benefits of the Secured Party hereunder. Section 5.4. PERFORMANCE BY THE SECURED PARTY. If any Debtor shall fail to perform any covenant or agreement contained in this Agreement, the Secured Party may perform or attempt to perform such covenant or agreement on behalf of the Debtors. In such event, the Debtors shall, at the request of the Secured Party, promptly pay any amount expended by the Secured Party in connection with such performance or attempted performance to the Secured Party, -21- together with interest thereon at the maximum rate permitted by applicable law, from and including the date of such expenditure to but excluding the date such expenditure is paid in full. Notwithstanding the foregoing. it is expressly agreed that the Secured Party shall not have any liability or responsibility for the performance of any obligation of any Debtor under this Agreement. Section 5.5. DISTRIBUTIONS WITH RESPECT TO COLLATERAL AND RIGHT TO NOTIFY. (a) All Distributions in respect of the Collateral shall be deposited into the Cash Collateral Account until such time as the tests in this Section are satisfied. Each Debtor hereby authorizes Secured Party to direct each issuer of the Collateral to make payment of any Distributions in respect thereof directly to the Cash Collateral Account. At such time as (i) the Debt Coverage Ratio (as defined in the Debt Coverage Agreements) for each of Coventry Square Partners, Crows Nest Partners, Ltd., Sunbury, Partners, Ltd., and J. W. English Swiss Village Partners, Ltd. equals or exceeds 1.20 to 1.00, and (ii) the outstanding principal balance of the Notes listed on Schedule 1 for Coventry Square Partners, Crows Nest Partners, Ltd., Sunbury Partners, Ltd., and J. W. English Swiss Village Partners, Ltd. equals or exceeds 1.20 to 1.00 are reduced to (or balances exist in the Cash Collateral Account in an amount sufficient to reduce such balances to) $3,890,000, $3,880,000, $2,730,000, and $6,388,000, respectively, then any further Distributions with respect to the Collateral shall be paid to Debtors for so long as no Event of Default exists. Thereafter, Secured Party hereby authorizes each Debtor to collect the Collateral, but Secured Party may, without cause or notice, curtail or terminate said authority at any time when an Event of Default exists. When an Event of Default exists, upon notice by Secured Party, whether oral or in writing, to a Debtor, such Debtor shall forthwith upon receipt of all checks, drafts, cash, and other remittances in payment of or on account of the Collateral, deposit the same in one or more special accounts maintained with Secured Party over which Secured Party alone shall have the power of withdrawal. The remittance of the proceeds of such Collateral shall not, however. constitute payment or liquidation of such Collateral until Secured Party shall receive good funds for such proceeds. Funds placed in such special accounts shall be held by Secured Party as security for all Obligations secured hereunder. These proceeds shall be deposited in precisely the form received, except for the indorsement of a Debtor where necessary to permit collection of items, which indorsement a Debtor agrees to make, and which indorsement Secured Party is also hereby authorized, as attorney-in-fact, to make on behalf of such Debtor. In the event Secured Party has notified a Debtor to make deposits to a special account, pending such deposit, such Debtor agrees that it will not commingle any such checks, drafts, cash or other remittances with any funds or other property of such Debtor, but will hold them separate and apart therefrom, and upon an express trust for Secured Party until deposit thereof is made in the special account. When an Event of Default exists, Secured Party may, from time to time, apply the whole or any part of the Collateral funds on deposit in this special account against such Obligations as are secured hereby as Secured Party may in its sole discretion elect. At the sole election of Secured Party, any portion of said funds on deposit in the special account which Secured -22- Party shall elect not to apply to the Obligations, may be paid over by Secured Party to Debtors. At any time when an Event of Default exists and during the period prior to satisfaction of the tests set forth in this Section. Secured Party may notify persons obligated on any Collateral to make payments directly to Secured Party and Secured Party may take control of all proceeds of any Collateral. Until Secured Party elects to exercise such rights, Debtors, as agent of Secured Party, shall collect and enforce all payments owed on the Collateral. (b) If at any time the REIT shall determine in its reasonable judgment that its status as a real estate investment trust may be jeopardized as a result of the fact that it has insufficient cash funds to comply with the provisions of the Internal Revenue Code of 1986, as amended, regarding real estate investment trusts, the REIT may request that Secured Party release cash on deposit in the Cash Collateral Account to make up such shortfall. Secured Party agrees to release such cash proceeds provided that (i) no Event of Default (and no event which with the giving of notice of lapse of time or both would be an Event of Default) exists, and (ii) the REIT delivers to Secured Party an irrevocable letter of credit issued by a financial institution acceptable to Secured Party in an amount not less than the amount requested to be released from the Cash Collateral Account and otherwise in form and substance satisfactory to Secured Party. (c) As provided in the Notes, if any Debtor fails to cause Distributions paid to such Debtor to be deposited into the Cash Collateral Account as required by this Section, such Debtor shall be liable for repayment of the Notes as and to the extent provided in the Notes and the Guaranty. (d) After satisfaction of the tests established in subsection (a) above, Secured Party will from time to time upon Debtors' request release to Debtors any funds on deposit in the Cash Collateral Account to the extent such funds exceed the amount necessary to satisfy the test set forth in subsection (a) above so long as no Event of Default, and no event which with the giving of notice or lapse of time or both would be an Event of Default, then exists or would result therefrom. Section 5.6. VOTING RIGHTS. Unless and until an Event of Default shall have occurred and be continuing, Debtors shall be entitled to (i) exercise any and all voting rights pertaining to the Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement and (ii) act as general partner of the applicable Borrower, Secured Party shall execute and deliver to the Debtors all such proxies and other instruments as Debtors may reasonably request for the purpose of enabling Debtors to exercise the voting rights which they are entitled to exercise pursuant to this Section. Section 5.7. ADDITIONAL INTEREST. No Debtor shall consent to or approve the issuance of any additional shares of any class of capital stock or partnership interests of the issuer of the Collateral, or any securities convertible into, or exchangeable for, any such interests or any -23- warrants, options, rights, or other commitments entitling any Person to purchase or otherwise acquire any such interests. Section 5.8. PROVIDE INFORMATION. Each Debtor shall fully cooperate, to the extent requested by Secured Party, in the completion of any notice, form, schedule, or other document filed by Secured Party on its own behalf or on behalf of a Debtor, including, without limitation, any required notice or statement of beneficial ownership or of the acquisition of beneficial ownership of equity securities constituting part of the Collateral and any notice of proposed sale of any such securities pursuant to Rule 144 as promulgated by the SEC under the Securities Act of 1933, as amended, Without limiting the generality of the foregoing, each Debtor shall furnish to Secured Party any and all information which Secured Party may reasonably request for purposes of any such filing, regarding a Debtor, the Collateral, and any issuer of any of the Collateral, and each Debtor shall disclose to Secured Party all material adverse information known by such Debtor with respect to the operations of any issuer of any of the Collateral. Section 5.9. DISTRIBUTIONS. If any Debtor shall become entitled to receive or shall receive any certificate (including, without limitation, any certificate representing a dividend or a distribution in connection with any reclassification, increase, or reduction of capital or issued in connection with any reorganization), option or rights, whether as an addition to, in substitution of, or in exchange for any Collateral or otherwise, such Debtor agrees to accept the same as Secured Party's agent and to hold the same in trust for Secured Party, and to deliver the same forthwith to Secured Party in the exact form received, with the appropriate endorsement of such Debtor when necessary and/or appropriate undated stock powers duly executed in blank, to be held by Secured Party as additional Collateral for the Obligations, subject to the terms hereof. Any sums paid upon or in respect of the Collateral upon the liquidation or dissolution of the issuer thereof shall be paid over to Secured Party to be held by it as additional Collateral for the Obligations subject to the terms hereof; and in case any distribution of capital shall be made on or in respect of the Collateral or any property shall be distributed upon or with respect to the Collateral pursuant to any recapitalization or reclassification of the capital of the issuer thereof or pursuant to any reorganization of the issuer thereof, the property so distributed shall be delivered to the Secured Party to be held by it, as additional Collateral for the Obligations, subject to the terms hereof, All sums of money and property so paid or distributed in respect of the Collateral that are received by any Debtor shall, until paid or delivered to Secured Party, be held by such Debtor in trust as additional security for the Obligations. ARTICLE VI DEFAULT Section 6.1. EVENTS OF DEFAULT. Each of the following shall be deemed an "Event of Default": -24- (a) Any Debtor or any Borrower shall fail to pay when due the Obligations or any part thereof and such failure continues for five (5) days with respect to the payment of interest only. (b) Any representation or warranty made or deemed made by any Debtor in this Agreement or in any certificate, report, notice, or statement furnished at any time in connection with this Agreement is false, misleading, or erroneous in any material respect on the date when made or deemed to have been made. (c) Any Debtor shall fail to perform, observe, or comply with any covenant, agreement, or term contained in this Agreement and such failure is not cured within thirty (30) days after Secured Party sends written notice thereof to Debtors; provided however Secured Party may at Secured Party's option upon request of Debtors allow Debtors a longer period in which to effect a cure of a matter not reasonably susceptible to cure within such thirty (30) day period so long as Debtors shall diligently pursue such cure and shall provide such bond or additional collateral as Secured Party may require. (d) Any Debtor or any Borrower shall commence a voluntary proceeding seeking liquidation, reorganization, or other relief with respect to itself or its debts under any bankruptcy, insolvency, or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian, or other similar official of it or a substantial part of its property or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it or shall make a general assignment for the benefit of creditors or shall generally fail to pay its debts as they become due or shall take any corporate action to authorize any of the foregoing. (e) An involuntary proceeding shall be commenced against any Debtor or any Borrower seeking liquidation, reorganization, or other relief with respect to it or its debts under any bankruptcy, insolvency, or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or a substantial part of its property, and such involuntary proceeding shall remain undismissed and unstayed for a period of thirty (30) days. (f) Any Debtor shall fail to discharge within a period of thirty (30) days after the commencement thereof any attachment, sequestration, or similar proceeding or proceedings not covered by insurance involving an aggregate amount in excess of $250,000 for any Debtor other than the Company or the REIT, and $1,000,000 with respect to the Company and the REIT, against any of its assets or properties. (g) Any Debtor shall fail to satisfy and discharge promptly any judgment or judgments not covered by insurance against such Debtor for the payment of money in an aggregate amount in excess of $250,000 for any Debtor other than the Company or the REIT, and $1,000,000 with respect to the Company and the REIT. -25- (h) Any Debtor shall default in the payment of any indebtedness beyond any applicable grace period, or any Debtor shall default in the performance of any other agreement binding upon such Debtor. (i) This Agreement shall cease to be in full force and effect or shall be declared null and void or the validity or enforceability thereof shall be contested or challenged by any Debtor or any of its shareholders or partners, or any Debtor shall deny that it has any further liability or obligation under this Agreement. (j) A default or any event of default shall occur under the Guaranty or any Note or any document or instrument related thereto. Section 6.2. RIGHTS AND REMEDIES. If an Event of Default shall have occurred and be continuing, the Secured Party shall have the following rights and remedies: (i) The Secured Party may declare the Obligations or any part thereof immediately due and payable, without notice, demand, presentment, notice of dishonor, notice of acceleration, notice of intent to accelerate, notice of intent to demand, protest, or other formalities of any kind, all of which are hereby expressly waived by the Debtors; provided, however, that upon the occurrence of an Event of Default under Section 6.1(d) or Section 6.1(e) of this Agreement, the Obligations shall become immediately due and payable without notice, demand, presentment, notice of dishonor, notice of acceleration, notice of intent to accelerate, notice of intent to demand, protest, or other formalities of any kind, all of which are hereby expressly waived by the Debtors. (ii) In addition to all other rights and remedies granted to the Secured Party in this Agreement or in any other Loan Document or by applicable law, the Secured Party shall have all of the rights and remedies of a secured party under the UCC (whether or not the UCC applies to the affected Collateral). Without limiting the generality of the foregoing, the Secured Party may (A) without demand or notice to any Debtor, collect, receive, or take possession of the Collateral or any part thereof and for that purpose the Secured Party may enter upon any premises on which the Collateral is located and remove the Collateral therefrom or render it inoperable, and/or (B) sell, lease, or otherwise dispose of the Collateral, or any part thereof, in one or more parcels at public or private sale or sales, at the Secured Party's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Secured Party may deem commercially reasonable. The Secured Party shall have the right at any public sale or sales, and, to the extent permitted by applicable law, at any private sale or sales, to bid and become a purchaser of the Collateral or any part thereof free of any right or equity of redemption on the part of any Debtor, which right or equity of redemption is hereby expressly waived and released by the Debtors. Upon the request of the Secured Party, the Debtors shall assemble the Collateral and make it available to the Secured Party at any place designated by the Secured Party that is reasonably convenient to the Debtors and the Secured Party. Each Debtor agrees that the Secured Party shall not be obligated -26- to give more than five (5) days written notice of the time and place of any public sale or of the time after which any private sale may take place and that such notice shall constitute reasonable notice of such matters. The Secured Party shall not be obligated to make any sale of Collateral if it shall determine not to do so, regardless of the fact that notice of sale of Collateral may have been given. The Secured Party may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may without further notice, be made at the time and place to which the same was so adjourned. The Debtors shall be liable for all expenses of retaking, holding, preparing for sale, or the like, and all attorneys' fees, legal expenses, and all other costs and expenses incurred by the Secured Party in connection with the collection of the Obligations and the enforcement of the Secured Party's rights under this Agreement. The Debtors shall remain liable for any deficiency if the Proceeds of any sale or other disposition of the Collateral are insufficient to pay the Obligations in full. The Secured Party may apply the Collateral against the Obligations in such order and manner as the Secured Party may elect in its sole discretion. The Debtors waive all rights of marshalling, valuation, and appraisal in respect of the Collateral. (iii) The Secured Party may cause any or all of the Collateral held by it to be transferred into the name of the Secured Party or the name or names of the Secured Party's nominee or nominees. (iv) Subject to the terms of the applicable partnership agreements (and Debtors' compliance with the provisions of Section 4.22 hereof), the Secured Party may exercise or cause to be exercised all voting rights and corporate and partnership powers in respect of the Collateral. (v) The Secured Party may collect or receive all money or property at any time payable or receivable on account of or in exchange for any of the Collateral, but shall be under no obligation to do so. (vi) On any sale of the Collateral, the Secured Party is hereby authorized to comply with any limitation or restriction with which compliance is necessary, in the view of the Secured Party's counsel, in order to avoid any violation of applicable law or in order to obtain any required approval of the purchaser or purchasers by any applicable governmental authority or agency. (vii) Each Debtor hereby acknowledges and confirms that Secured Party may be unable to effect a public sale of any or all of the Collateral by reason of certain prohibitions contained in the Securities Act of 1933, as amended, and applicable state securities laws and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers who will be obligated to agree, among other things, to acquire any shares of the Collateral for their own respective accounts for investment and not with a view to distribution or resale thereof. Each Debtor further acknowledges and -27- confirms that any such private sale may result in prices or other terms less favorable to the seller than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner, and Secured Party shall be under no obligation to take any steps in order to permit the Collateral to be sold at a public sale. Secured Party shall be under no obligation to delay a sale of any of the Collateral for any period of time necessary, to permit any issuer thereof to register such Collateral for public sale under the Securities Act of 1933, as amended, or under applicable state securities laws. (viii) If Secured Party determines that it will sell all or part of the Collateral pursuant to Section 6.2 hereof, and if, in the opinion of Secured Party it is necessary or advisable to have the Collateral, or that portion thereof to be sold, registered under the Securities Act of 1933, as amended, Debtors will, at Debtors' expense, cause each issuer of the Collateral, or that portion thereof to be sold, to execute and deliver, and cause the directors and officers of each such issuer to execute and deliver all such instruments and documents and cause such issuer(s), directors, and officers to do or cause to be done all such other acts and things as may be necessary or, in Secured Party's opinion, advisable to register the Collateral, or that portion thereof to be sold, under the Securities Act of 1933, as amended, and to cause the registration statement relating thereto to become effective and to remain effective for a period of one year from the date of the first public offering of the Collateral, or that portion thereof to be sold, and to make all amendments thereto and to the related prospectus that, in Secured Party's opinion, are necessary or advisable, all in conformity with the requirements of the Securities Act of 1933, as amended, and the rules and regulations of the SEC applicable thereto. Debtors agree to cause each issuer of the Collateral, or that portion thereof to be sold, to comply with Securities Act of 1933, as amended, and the blue sky laws of any jurisdiction that Secured Party shall designate and cause each such issuer to make available to its security holders, as soon as practical, an earnings statement (which need not be audited) that will satisfy the provisions of the Securities Act of 1933, as amended. ARTICLE VII MISCELLANEOUS Section 7.1. EXPENSES. The Debtors jointly and severally agree to pay on demand all costs and expenses incurred by the Secured Party in connection with the preparation, negotiation, execution, administration, and enforcement of this Agreement and any and all amendments, modifications, and supplements hereto. The Debtors jointly and severally agree to pay and to hold the Secured Party harmless from and against all filing fees and all excise, sales, stamp, and other taxes payable in connection with this Agreement or the transactions contemplated hereby. -28- Section 7.2. INDEMNIFICATION. THE DEBTORS HEREBY JOINTLY AND SEVERALLY AGREE TO INDEMNIFY THE SECURED PARTY AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS, AND AGENTS FROM, AND HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING ATTORNEYS' FEES) TO WHICH ANY OF THEM MAY BECOME SUBJECT WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR RELATE TO (A) THE NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION, OR ENFORCEMENT OF THIS AGREEMENT, (B) ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (C) ANY BREACH BY ANY DEBTOR OF ANY REPRESENTATION, WARRANTY, COVENANT, OR OTHER AGREEMENT CONTAINED IN THIS AGREEMENT, OR (D) ANY INVESTIGATION, LITIGATION, OR OTHER PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY THREATENED INVESTIGATION, LITIGATION, OR OTHER PROCEEDING RELATING TO ANY OF THE FOREGOING; BUT EXCLUDING LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS AND EXPENSES ARISING AS A RESULT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SECURED PARTY, WITHOUT LIMITING ANY PROVISION OF THIS AGREEMENT, IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT EACH PERSON OR ENTITY TO BE INDEMNIFIED UNDER THIS SECTION SHALL BE INDEMNIFIED FROM AND HELD HARMLESS AGAINST ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING ATTORNEYS' FEES) ARISING OUT OF OR RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE OF SUCH PERSON OR ENTITY. Section 7.3. NO WAIVER: CUMULATIVE REMEDIES. No failure on the part of the Secured Party to exercise and no delay in exercising, and no course of dealing with respect to, any right, power, or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power, or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, power, or privilege. The rights and remedies provided for in this Agreement are cumulative and not exclusive of any rights and remedies provided by law. Section 7.4. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the Debtors and the Secured Party and their respective heirs, successors, and assigns, except that no Debtor may assign any of its rights or obligations under this Agreement without the prior written consent of the Secured Party. Section 7.5. AMENDMENT: ENTIRE AGREEMENT. THIS AGREEMENT EMBODIES THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED -29- OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO. The provisions of this Agreement may be amended or waived only by an instrument in writing signed by the parties hereto. Section 7.6. NOTICES. All notices and other communications provided for in this Agreement shall be given or made by telex, telegraph, telecopy, cable, or in writing and telexed, telecopied, telegraphed, cabled, mailed by certified mail return receipt requested, or delivered to the intended recipient at the "Address for Notices" specified below its name on the signature pages hereof; or, as to any party at such other address as shall be designated by such party in a notice to the other party given in accordance with this Section. Except as otherwise provided in this Agreement, all such communications shall be deemed to have been duly given when transmitted by telex or telecopy, subject to telephone confirmation of receipt, or delivered to the telegraph or cable office, subject to telephone confirmation of receipt, or when personally delivered or, in the case of a mailed notice, when duly deposited in the mails, in each case given or addressed as aforesaid. Section 7.7. GOVERNING LAW: VENUE SERVICE OF PROCESS. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas and the applicable laws of the United States of America. This Agreement has been entered into in Dallas County, Texas, and it shall be performable for all purposes in Dallas County, Texas. Any action or proceeding against the Debtor under or in connection with this Agreement may be brought in any state or federal court in Dallas County, Texas. Each Debtor hereby irrevocably (a) submits to the nonexclusive jurisdiction of such courts, and (b) waives any objection it may now or hereafter have as to the venue of any such action or proceeding brought in such court or that such court is an inconvenient forum. Each Debtor agrees that service of process upon it may be made by certified or registered mail, return receipt requested, at its address specified or determined in accordance with the provisions of Section 7.6 of this Agreement. Nothing in this Agreement shall affect the right of the Secured Party to serve process in any other manner permitted by law or shall limit the right of the Secured Party to bring any action or proceeding against any Debtor or with respect to any of its property in courts in other jurisdictions. Any action or proceeding by the Debtors against the Secured Party shall be brought only in a court located in Dallas County, Texas. Section 7.8. HEADINGS. The headings, captions, and arrangements used in this Agreement are for convenience only and shall not affect the interpretation of this Agreement. Section 7.9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made in this Agreement or in any certificate delivered pursuant hereto shall survive the execution and delivery of this Agreement, and no investigation by the Secured Party shall affect the representations and warranties or the right of the Secured Party to rely upon them. -30- Section 7.10. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Section 7.11. WAIVER OF BOND. In the event the Secured Party seeks to take possession of any or all of the Collateral by judicial process, the Debtors hereby irrevocably waive any bonds and any surety or security relating thereto that may be required by applicable law as an incident to such possession, and waives any demand for possession prior to the commencement of any such suit or action. Section 7.12. 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 of this Agreement, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 7.13. CONSTRUCTION. The Debtors and the Secured Party acknowledge that each of them has had the benefit of legal counsel of its own choice and has been afforded an opportunity to review this Agreement with its legal counsel and that this Agreement shall be construed as if jointly drafted by the Debtors and the Secured Party. Section 7.14. OBLIGATIONS ABSOLUTE. All rights and remedies of the Secured Party hereunder, and all obligations of the Debtors hereunder, shall be absolute and unconditional irrespective of: (a) any lack of validity or enforceability of the Obligations or this Agreement or any other agreement or instrument relating to; (b) any change in the time, manner, or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Obligations or this Agreement; (c) any exchange, release, or nonperfection of any Collateral, or any release or amendment or waiver of or consent to any departure from any guarantee, for all or any of the Obligations; or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Debtor. Section 7.15. TERMINATION. If all of the Obligations shall have been paid and performed in full and all commitments of the Secured Party to the Debtors and the Borrowers shall have expired or terminated, the Secured Party shall, upon the written request of the Debtors, execute and deliver to the Debtors a proper instrument or instruments acknowledging the release and termination of the security interests created by this Agreement, and shall duly assign and deliver -31- to the Debtors (without recourse and without any representation or warranty) such of the Collateral as may be in the possession of the Secured Party and has not previously been sold or otherwise applied pursuant to this Agreement. Section 7.16. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEBTORS HEREBY JOINTLY, SEVERALLY, IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDINIG, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF THE SECURED PARTY IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF. Section 7.17. MANDATORY ARBITRATION. Any controversy or claim between or among the parties hereto including but not limited to those arising out of or relating to this Agreement or any related agreements or instruments, including any claim based on or arising from an alleged tort, shall be determined by binding arbitration in accordance with the Federal Arbitration Act (or if not applicable, the applicable state law), the Rules of Practice and Procedure for the Arbitration of Commercial Disputes of Judicial Arbitration and Mediation Services, Inc., predecessor in interest to Endispute, Inc., doing business as "J.A.M.S./ENDISPUTE" and the "Special Rules" set forth below. In the event of any inconsistency, the Special Rules shall control. Judgment upon any arbitration award may be entered in any court having jurisdiction. Any party to this Agreement may bring an action, including a summary or expedited proceeding, to compel arbitration of any controversy or claim to which this Agreement applies in any court having jurisdiction over such action. (a) SPECIAL RULES. The arbitration shall be conducted in Dallas, Texas and administered by J.A.M.S./Endispute who will appoint an arbitrator; if J.A.M.S./Endispute is unable or legally precluded from administering the arbitration, then the American Arbitration Association will serve. All arbitration hearings will be commenced within ninety (90) calendar days of the demand for arbitration; further, the arbitrator shall only, upon a showing of cause, be permitted to extend the commencement of such hearing for up to an additional sixty (60) calendar days. (b) RESERVATIONS OF RIGHTS. Nothing in this Agreement shall be deemed to (i) limit the applicability of any otherwise applicable statutes of limitation or repose and any waivers contained in this Agreement; or (ii) be a waiver by Secured Party of the protection afforded to it by 12 U.S.C. Sec. 91 or any substantially equivalent state law; or (iii) limit the right of Secured Party (A) to exercise self help remedies such as (but not limited to) setoff, or (B) to foreclose against any real or personal property collateral, or (C) to obtain from a court provisional or ancillary remedies such as (but not limited to) injunctive relief or the appointment of a receiver. Secured Party may exercise such self help rights, foreclose upon such property, or obtain such provisional or ancillary remedies before, during or after the pendency of any arbitration proceeding brought pursuant to this Agreement. At Secured Party's option, foreclosure under a deed of trust or mortgage may -32- be accomplished by any of the following: the exercise of a power of sale under the deed of trust or mortgage, or by judicial sale under the deed of trust or mortgage, or by judicial foreclosure. Neither the exercise of self help remedies nor the institution or maintenance of an action for foreclosure or provisional or ancillary remedies shall constitute a waiver of the right of any party, including the claimant in any such action, to arbitrate the merits of the controversy or claim occasioning resort to such remedies. No provision in the Loan Documents regarding submission to jurisdiction and/or venue in any court is intended or shall be construed to be in derogation of the provisions in any Loan Document for arbitration of any controversy or claim. -33- IN WITNESS WHEREOF. the parties hereto have duly executed this Agreement as of the day and year first written above. DEBTORS: AIMCO PROPERTIES, L.P., a Delaware limited partnership By: AIMCO-GP, Inc., a Delaware corporation, as General Partner By: /s/ Harry Alcock ------------------------------------- Harry Alcock, Vice President Principal Place of Business, Chief Executive Office, and Address for Notices: c/o Apartment Investment and Management Company 1873 S. Bellaire Street, 17th Floor Denver, Colorado 80022-4348 Fax No.: (303) 753-9538 Telephone No.: (303) 759-8600 Attention: Harry Alcock SIGNATURE PAGE - SECURITY AGREEMENT AIMCO COPPERFIELD, L.P., a Delaware limited partnership, as General Partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, as General Partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, as General Partner By: /s/ Harry Alcock ------------------------------- Harry Alcock, Vice President Principal Place of Business, Chief Executive Office, and Address for Notices: c/o Apartment Investment and Management Company 1873 S. Bellaire Street, 17th Floor Denver, Colorado 80022-4348 Fax No.: (303) 753-9538 Telephone No.: (303) 759-8600 Attention: Harry Alcock SIGNATURE PAGE - SECURITY AGREEMENT AIMCO CROWS NEST, L.P., a Delaware limited partnership, as General Partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, as General Partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, as General Partner By: /s/ Harry Alcock ------------------------------- Harry Alcock, Vice President Principal Place of Business, Chief Executive Office, and Address for Notices: c/o Apartment Investment and Management Company 1873 S. Bellaire Street, 17th Floor Denver, Colorado 80022-4348 Fax No.: (303) 753-9538 Telephone No.: (303) 759-8600 Attention: Harry Alcock SIGNATURE PAGE - SECURITY AGREEMENT AIMCO GROUP, L.P., a Delaware limited partnership, as General Partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, as General Partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, as General Partner By: /s/ Harry Alcock ------------------------------- Harry Alcock, Vice President Principal Place of Business, Chief Executive Office, and Address for Notices: c/o Apartment Investment and Management Company 1873 S. Bellaire Street, 17th Floor Denver, Colorado 80022-4348 Fax No.: (303) 753-9538 Telephone No.: (303) 759-8600 Attention: Harry Alcock SIGNATURE PAGE - SECURITY AGREEMENT AIMCO HAMPTON HILL, L.P., a Delaware limited partnership, as General Partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, as General Partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, as General Partner By: /s/ Harry Alcock ------------------------------- Harry Alcock, Vice President Principal Place of Business, Chief Executive Office, and Address for Notices: c/o Apartment Investment and Management Company 1873 S. Bellaire Street, 17th Floor Denver, Colorado 80022-4348 Fax No.: (303) 753-9538 Telephone No.: (303) 759-8600 Attention: Harry Alcock SIGNATURE PAGE - SECURITY AGREEMENT AIMCO HASTINGS PLACE, L.P., a Delaware limited partnership, as General Partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, as General Partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, as General Partner By: /s/ Harry Alcock ------------------------------- Harry Alcock, Vice President Principal Place of Business, Chief Executive Office, and Address for Notices: c/o Apartment Investment and Management Company 1873 S. Bellaire Street, 17th Floor Denver, Colorado 80022-4348 Fax No.: (303) 753-9538 Telephone No.: (303) 759-8600 Attention: Harry Alcock SIGNATURE PAGE - SECURITY AGREEMENT AIMCO OAK FALLS, L.P., a Delaware limited partnership, as General Partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, as General Partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, as General Partner By: /s/ Harry Alcock ------------------------------- Harry Alcock, Vice President Principal Place of Business, Chief Executive Office, and Address for Notices: c/o Apartment Investment and Management Company 1873 S. Bellaire Street, 17th Floor Denver, Colorado 80022-4348 Fax No.: (303) 753-9538 Telephone No.:(303) 759-8600 Attention: Harry Alcock SIGNATURE PAGE - SECURITY AGREEMENT AIMCO RECOVERY FUND, L.P., a Delaware limited partnership, as General Partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, as General Partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, as General Partner By: /s/ Harry Alcock ------------------------------- Harry Alcock, Vice President Principal Place of Business, Chief Executive Office, and Address for Notices: c/o Apartment Investment and Management Company 1873 S. Bellaire Street, 17th Floor Denver, Colorado 80022-4348 Fax No.: (303) 753-9538 Telephone No.:(303) 759-8600 Attention: Harry Alcock SIGNATURE PAGE - SECURITY AGREEMENT AIMCO SIGNATURE POINT, L.P., a Texas limited partnership, as Manager of Joint Venture By: AIMCO SIGNATURE POINT, L.P., a Delaware limited partnership, as General Partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, as General Partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, as General Partner By: /s/ Harry Alcock ------------------------------- Harry Alcock, Vice President Principal Place of Business, Chief Executive Office, and Address for Notices: c/o Apartment Investment and Management Company 1873 S. Bellaire Street, 17th Floor Denver, Colorado 80022-4348 Fax No.: (303) 753-9538 Telephone No.: (303) 759-8600 Attention: Harry Alcock SIGNATURE PAGE - SECURITY AGREEMENT AIMCO SUBURY, L.P., a Delaware limited partnership, as General Partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, as General Partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, as General Partner By: /s/ Harry Alcock ------------------------------- Harry Alcock, Vice President Principal Place of Business, Chief Executive Office, and Address for Notices: c/o Apartment Investment and Management Company 1873 S. Bellaire Street, 17th Floor Denver, Colorado 80022-4348 Fax No.: (303) 753-9538 Telephone No.: (303) 759-8600 Attention: Harry Alcock SIGNATURE PAGE - SECURITY AGREEMENT AIMCO WEST TRAILS, L.P., a Delaware limited partnership, as General Partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, as General Partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, as General Partner By: /s/ Harry Alcock ------------------------------- Harry Alcock, Vice President Principal Place of Business, Chief Executive Office, and Address for Notices: c/o Apartment Investment and Management Company 1873 S. Bellaire Street, 17th Floor Denver, Colorado 80022-4348 Fax No.: (303) 753-9538 Telephone No.: (303) 759-8600 Attention: Harry Alcock SIGNATURE PAGE - SECURITY AGREEMENT SECURED PARTY: NATIONSBANK OF TEXAS, N.A. By: /s/ [Illegible] ------------------------------------ Its: Sen. Vice President ------------------------------- Address for Notices: NationsBank of Texas, N.A. 901 Main Street, 51st Floor Dallas, Texas 75202 Fax No.: (214)-508-0085 ------------------------------ Telephone No.: (214) 508-1515 Attention: /s/ John B. Lamb ------------------------------- SIGNATURE PAGE - SECURITY AGREEMENT EX-10.70 12 EXHIBIT 10.70 Exhibit 10.70 APARTMENT INVESTMENT AND MANAGEMENT COMPANY 1996 STOCK AWARD AND INCENTIVE PLAN ADOPTED April 25, 1996 TABLE OF CONTENTS PAGE ---- SECTION 1 PURPOSE OF PLAN; DEFINITIONS. . . . . . . . . . . . . . . . . 1 1.1 PURPOSE. . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 2 ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . . 6 2.1 ADMINISTRATOR. . . . . . . . . . . . . . . . . . . . . . 6 2.2 DUTIES AND POWERS OF ADMINISTRATOR . . . . . . . . . . . 6 2.3 SPECIAL AUTHORITY. . . . . . . . . . . . . . . . . . . . 7 2.4 MAJORITY RULE. . . . . . . . . . . . . . . . . . . . . . 7 2.5 COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 7 2.6 DELEGATION OF AUTHORITY. . . . . . . . . . . . . . . . . 8 2.7 NO LIABILITY . . . . . . . . . . . . . . . . . . . . . . 8 2.8 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . 8 SECTION 3 STOCK SUBJECT TO PLAN . . . . . . . . . . . . . . . . . . . . 9 3.1 NUMBER AND SOURCE OF SHARES. . . . . . . . . . . . . . . 9 3.2 LIMITATION ON INDIVIDUAL GRANTS. . . . . . . . . . . . . 9 3.3 UNREALIZED AWARDS. . . . . . . . . . . . . . . . . . . . 9 3.4 ADJUSTMENT OF AWARDS . . . . . . . . . . . . . . . . . . . 9 SECTION 4 ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.1 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . 10 4.2 SPECIAL PROVISIONS FOR INDEPENDENT DIRECTORS . . . . . . 10 SECTION 5 STOCK OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . 10 5.1 OPTION AWARDS. . . . . . . . . . . . . . . . . . . . . . 10 5.2 TYPES OF OPTIONS . . . . . . . . . . . . . . . . . . . . 11 5.3 TERMS AND CONDITIONS OF OPTIONS. . . . . . . . . . . . . 11 5.4 METHOD OF EXERCISE . . . . . . . . . . . . . . . . . . . 12 5.5 RIGHTS OF STOCKHOLDERS . . . . . . . . . . . . . . . . . 15 5.6 SURRENDER OF SHARES. . . . . . . . . . . . . . . . . . . 15 5.7 LOANS. . . . . . . . . . . . . . . . . . . . . . . . . . 15 5.8 NON-TRANSFERABILITY OF OPTIONS . . . . . . . . . . . . . 16 5.9 TERMINATION OF EMPLOYMENT OR SERVICE . . . . . . . . . . 16 i 5.10 ANNUAL LIMIT ON INCENTIVE STOCK OPTIONS . . . . . . . . 16 SECTION 6 STOCK APPRECIATION RIGHTS AND LIMITED STOCK APPRECIATION RIGHTS . . . . . . . . . . . . . . 17 6.1 GRANT OF RIGHTS. . . . . . . . . . . . . . . . . . . . . 17 6.2 TERMINATION OF RIGHTS. . . . . . . . . . . . . . . . . . 17 6.3 EXERCISE OF RIGHTS . . . . . . . . . . . . . . . . . . . 17 6.4 TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS. . . . 17 6.5 LIMITED STOCK APPRECIATION RIGHTS. . . . . . . . . . . . 19 SECTION 7 DIVIDEND EQUIVALENTS. . . . . . . . . . . . . . . . . . . . . 20 7.1 GRANT OF DIVIDEND EQUIVALENTS. . . . . . . . . . . . . . 20 7.2 PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . 21 7.3 RELATED DIVIDEND EQUIVALENTS . . . . . . . . . . . . . . 21 SECTION 8 RESTRICTED STOCK, DEFERRED STOCK AND PERFORMANCE SHARES. . . . . . . . . . . . . . . . . . . . . . 21 8.1 GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . 21 8.2 AWARD AGREEMENTS . . . . . . . . . . . . . . . . . . . . 22 8.3 AWARD CERTIFICATES . . . . . . . . . . . . . . . . . . . 22 8.4 DEFERRED STOCK CERTIFICATES. . . . . . . . . . . . . . . 22 8.5 RESTRICTIONS AND CONDITIONS. . . . . . . . . . . . . . . 22 SECTION 9 AWARDS TO INDEPENDENT DIRECTORS . . . . . . . . . . . . . . . 24 9.1 INDEPENDENT DIRECTOR GRANTS. . . . . . . . . . . . . . . 24 9.2 ANNUAL GRANTS. . . . . . . . . . . . . . . . . . . . . . 24 9.3 TERMS AND CONDITIONS OF OPTIONS. . . . . . . . . . . . . 24 SECTION 10 AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . 25 10.1 AMENDMENT OF THE PLAN . . . . . . . . . . . . . . . . . 25 10.2 STOCKHOLDER APPROVAL REQUIREMENT. . . . . . . . . . . . 26 10.3 AMENDMENT OF AWARDS . . . . . . . . . . . . . . . . . . 26 SECTION 11 UNFUNDED STATUS OF PLAN . . . . . . . . . . . . . . . . . . . 26 SECTION 12 GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . 26 12.1 REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . 26 ii 12.2 LEGENDS . . . . . . . . . . . . . . . . . . . . . . . . 26 12.3 OTHER PLANS; NO GUARANTEE OF ENGAGEMENT . . . . . . . . 26 12.4 WITHHOLDING REQUIREMENTS. . . . . . . . . . . . . . . . 27 12.5 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . 27 SECTION 13 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 27 13.1 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . 27 13.2 NO RIGHTS TO AWARDS; NO STOCKHOLDER RIGHTS. . . . . . . 28 13.3 OWNERSHIP AND TRANSFER RESTRICTIONS . . . . . . . . . . 28 13.4 RESTRICTIONS ON OWNERSHIP . . . . . . . . . . . . . . . 29 13.5 APPROVAL OF PLAN BY STOCKHOLDERS. . . . . . . . . . . . 29 13.6 NONTRANSFERABILITY. . . . . . . . . . . . . . . . . . . 30 13.7 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . 30 SECTION 14 EFFECTIVE DATE OF PLAN. . . . . . . . . . . . . . . . . . . . 30 SECTION 15 TERM OF PLAN. . . . . . . . . . . . . . . . . . . . . . . . . 31 iii APARTMENT INVESTMENT AND MANAGEMENT COMPANY 1996 STOCK AWARD AND INCENTIVE PLAN Apartment Investment and Management Company, a Maryland corporation, AIMCO Properties, L.P., a Delaware limited partnership, Property Asset Management Services of the Southeast, L.L.C., a Delaware limited liability company, Property Asset Management Services of the Southcentral, L.L.C., a Delaware limited liability company, and Property Asset Management Services of the Southwest, L.L.C., a Delaware limited liability company, have adopted the Apartment Investment and Management Company 1996 Stock Award and Incentive Plan (the "PLAN"), effective April 25, 1996, for the benefit of eligible employees and directors of the Company, the Partnership, the Company Subsidiaries and the Partnership Subsidiaries. SECTION 1 PURPOSE OF PLAN; DEFINITIONS 1.1 PURPOSE. The purpose of the Plan is to reinforce the long-term commitment to the Company's success of those officers (including officers who are directors of the Company), other employees, independent directors, consultants and advisors of the Company, the Partnership, the Company Subsidiaries and the Partnership Subsidiaries who are or will be responsible for such success; to facilitate the ownership of the Company's stock by such individuals, thereby reinforcing the identity of their interests with those of the Company's stockholders; and to assist the Company, the Partnership, the Company Subsidiaries and the Partnership Subsidiaries in attracting and retaining officers and other employees, directors and consultants and advisors with experience and ability. 1.2 DEFINITIONS. Wherever the masculine gender is used it shall include the feminine, and where a singular pronoun is used it shall include the plural, unless the context clearly indicates otherwise. For purposes of the Plan, the following terms shall be defined as set forth below: (a) "ADMINISTRATOR" means the Board, or if the Board does not administer the Plan, the Committee in accordance with Section 2. (b) "BOARD" means the Board of Directors of the Company. 1 (c) "CODE" means the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto. (d) "COMMITTEE" means the Compensation Committee of the Board including such additional individuals as the Board shall designate in order to fulfill the Disinterested Persons requirement of Rule 16b-3 as promulgated by the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934 (the "Act"), and as such Rule may be amended from time to time, or any successor definition adopted by the Commission, or any other Committee the Board may subsequently appoint to administer the Plan. The Committee shall be composed entirely of individuals who are both (a) a Disinterested Person and (b) an "outside director" within the meaning of Section 162(m)(4)(c)(ii) of the Code. If at any time the Board shall not administer the Plan, then the functions of the Board specified in the Plan shall be exercised by the Committee. (e) "COMPANY" means Apartment Investment and Management Company, a Maryland corporation (or any successor corporation). (f) "COMPANY EMPLOYEE" means any officer or other employee (as defined in accordance with Section 3401(c) of the Code) of the Company, or of any corporation that is then a Company Subsidiary. (g) "COMPANY SUBSIDIARIES" means any corporation in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. Except with respect to Incentive Stock Options, "COMPANY SUBSIDIARY" shall also mean any partnership in which the Company and/or any Company Subsidiary owns more than fifty percent (50%) of the capital or profits interests; PROVIDED, HOWEVER, that "COMPANY SUBSIDIARY" shall not include the Partnership or any Partnership Subsidiary. (h) "DEFERRED STOCK" means an award made pursuant to Section 7 below of the right to receive Stock at the end of a specified deferral period. (i) "DISABILITY" means the inability of a Participant to perform substantially his duties and responsibilities to the Company by reason of 2 a physical or mental disability or infirmity (i) for a continuous period of six months, or (ii) at such earlier time as the Participant submits medical evidence satisfactory to the Company that he has a physical or mental disability or infirmity which will likely prevent him from returning to the performance of his work duties for six months or longer. The date of such Disability shall be on the last day of such six-month period or the day on which the Participant submits such satisfactory medical evidence, as the case may be. (j) "DISINTERESTED PERSON" shall have the meaning set forth in Rule 16b-3 of the Act, and as such Rule may be amended from time to time, or any successor definition adopted by the Commission. (k) "DIVIDEND EQUIVALENT" means an award granted pursuant to Section 7 of a right to receive certain payments with respect to shares of Stock of the Company. (l) "EFFECTIVE DATE" shall mean the date provided pursuant to Section 11. (m) "ELIGIBLE PERSONS" means any person eligible to participate in the Plan pursuant to Section 4.1. (n) "FAIR MARKET VALUE" means, as of any given date, with respect to any awards granted hereunder (A) the closing price of a share of the Company's Common Stock on the principal exchange on which shares of the Company's Common Stock are then trading, if any, on the trading day previous to such date, or, if shares were not traded on the trading day previous to such date, then on the next preceding trading day during which a sale occurred; or (B) if such Common Stock is not traded on an exchange but is quoted on Nasdaq or a successor quotation system, (1) the last sales price (if the Company's Common Stock is then listed as a National Market Issue under the Nasdaq National Market System) or (2) the mean between the closing representative bid and asked prices (in all other cases) for the Company's Common Stock on the trading day previous to such date as reported by Nasdaq or such successor quotation system; or (C) if such Common Stock is not publicly traded on an exchange and not quoted on Nasdaq or a successor quotation system, the mean between the closing bid and asked prices for the Company's Common Stock, on the day previous to such date, as determined in good faith by the Committee; or (D) if the Company's Common Stock is not publicly traded, the fair market value established by the Committee acting in good faith. 3 (o) "GENERAL PARTNER INTEREST" means an ownership interest in the Partnership that is a general partner interest and includes any and all benefits to which the holder of such an interest may be entitled as provided in the Agreement of Limited Partnership of AIMCO Properties, L.P., as amended, together with all obligations of such holder to comply with the terms and provisions of such agreement. (p) "INCENTIVE STOCK OPTION" means any Stock Option intended to be designated as an "incentive stock option" within the meaning of Section 422 of the Code. (q) "INDEPENDENT DIRECTOR" means a member of the Board who is not a Company Employee or a Partnership Employee. (r) "LIMITED STOCK APPRECIATION RIGHT" means a Stock Appreciation Right that can be exercised only in the event of a "Change of Control" (as defined in the award evidencing such Limited Stock Appreciation Right). (s) "NON-QUALIFIED STOCK OPTION" means any Stock Option that is not an Incentive Stock Option, including any Stock Option that provides (as of the time such option is granted) that it will not be treated as an Incentive Stock Option. (t) "PARTICIPANT" means any Eligible Person, or any consultant or advisor to the Company, any Company Subsidiary, the Partnership or any Partnership Subsidiary selected by the Administrator, pursuant to the Administrator's authority in Section 2 below, to receive grants of Stock Options, Stock Appreciation Rights, Limited Stock Appreciation Rights, Dividend Equivalents, Restricted Stock awards, Deferred Stock awards, Performance Shares or any combination of the foregoing. (u) "PARTNERSHIP" means AIMCO Properties, L.P., a Delaware limited partnership. (v) "PARTNERSHIP EMPLOYEE" means any officer or other employee (as defined in accordance with Section 3401(c) of the Code) of the Partnership, or any entity that is then a Partnership Subsidiary. 4 (w) "PARTNERSHIP SUBSIDIARY" means any partnership or limited liability company in any unbroken chain of partnerships or limited liability companies beginning with the Partnership if each of the partnerships or limited liability companies other than the last partnership or limited liability company in the unbroken chain then owns more than fifty percent (50%) of the capital or profits interests in one of the other partnerships or limited liability companies. "PARTNERSHIP SUBSIDIARY" shall also mean any corporation in which the Partnership and/or any Partnership Subsidiary owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock. "PARTNERSHIP SUBSIDIARY" includes the Regional Service Companies. (x) "PERFORMANCE SHARE" means an award of shares of Stock pursuant to Section 7 that is subject to restrictions based upon the attainment of specified performance objectives. (y) "REGIONAL SERVICE COMPANY" shall mean Property Asset Management Services of the Southeast, L.L.C., a Delaware limited liability company, Property Asset Management Services of the Southcentral, L.L.C., a Delaware limited liability company, and Property Asset Management Services of the Southwest, L.L.C., a Delaware limited liability company. (z) "RESTRICTED STOCK" means an award granted pursuant to Section 7 of shares of Stock subject to certain restrictions. (aa) "STOCK" means the Class A Common Stock of the Company, par value $.01 per share, and any equity security of the Company issued or authorized to be issued in the future, but excluding any warrants, options or other rights to purchase Class A Common Stock. Debt securities of the Company convertible into Class A Common Stock shall be deemed equity securities of the Company. (ab) "STOCK APPRECIATION RIGHT" means the right pursuant to an award granted under Section 6 to receive an amount equal to the difference between (A) the Fair Market Value, as of the date such Stock Appreciation Right or portion thereof is surrendered, of the shares of Stock covered by such right or such portion thereof, and (B) the aggregate exercise price of such right or such portion thereof. (ac) "STOCK OPTION" means any option to purchase shares of Stock granted pursuant to Section 5. 5 (ad) "STOCK OWNERSHIP LIMIT" means the restrictions on ownership and transfer of Common Stock provided in Section 3.4 of the Company's Charter. SECTION 2 ADMINISTRATION 2.1 ADMINISTRATOR. The Plan shall be administered by the Board or by a Committee which shall be appointed by the Board and which shall serve at the pleasure of the Board and in accordance with the requirements of Rule 16b-3 of the Act, including, with respect to awards granted to Independent Directors pursuant to Section 9 of the Plan, the requirements of Section 16b-3(c)(2)(ii) of the Act governing formula award plans. 2.2 DUTIES AND POWERS OF ADMINISTRATOR. The Administrator shall have the power and authority to grant to Eligible Persons, pursuant to the terms of the Plan: (a) Stock Options, (b) Stock Appreciation Rights or Limited Stock Appreciation Rights, (c) Dividend Equivalents, (d) Restricted Stock, (e) Performance Shares, (f) Deferred Stock or (g) any combination of the foregoing. In particular, the Administrator shall have the authority: (a) to select those persons who shall be Participants; (b) to determine whether and to what extent Stock Options, Stock Appreciation Rights, Limited Stock Appreciation Rights, Dividend Equivalents, Restricted Stock, Deferred Stock, Performance Shares or a combination of the foregoing, are to be granted hereunder to Participants; (c) to determine the number of shares of Stock to be covered by each such award granted hereunder; (d) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted hereunder (including, but not limited to, (x) the restrictions applicable to Restricted or Deferred Stock awards and the conditions under which restrictions applicable to such Restricted or Deferred Stock shall lapse, and (y) the performance goals and periods applicable to the award of Performance Shares); 6 (e) to determine the terms and conditions, not inconsistent with the terms of the Plan, which shall govern all written instruments evidencing the Stock Options, Stock Appreciation Rights, Limited Stock Appreciation Rights, Dividend Equivalents, Restricted Stock, Deferred Stock, Performance Shares or any combination of the foregoing; and (f) in its discretion, to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall from time to time deem advisable; to interpret the terms and provisions of the Plan and any award issued under the Plan (and any agreements relating thereto); and to otherwise supervise the administration of the Plan. 2.3 SPECIAL AUTHORITY. Notwithstanding the foregoing, the full Board, acting by a majority of its members in office, shall conduct the general administration of the Plan with respect to awards granted to Independent Directors pursuant to Section 9 hereof. Any such grant under this Plan need not be the same with respect to each grantee. Any such interpretations and rules with respect to Incentive Stock Options shall be consistent with the provisions of Section 422 of the Code. 2.4 MAJORITY RULE. The Committee shall act by a majority of its members in attendance at a meeting at which a quorum is present or by a memorandum or other written instrument signed by all members of the Committee. 2.5 COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS. Members of the Committee shall receive such compensation for their services as members as may be determined by the Board. All expenses and liabilities that members of the Committee or Board may incur in connection with the administration of this Plan shall be borne by the Company. The Committee may, with the approval of the Board, employ attorneys, consultants, accountants, appraisers, brokers or other persons. The Committee, the Board, the Company and the Company's officers and directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee or Board in good faith shall be final and binding upon all Participants, the Company, the Partnership, the Company Subsidiaries and the Partnership Subsidiaries and all other interested persons. No member of the Committee or Board shall be personally liable for any action, determination or interpretation made in good faith with respect to this Plan or any 7 award, and all members of the Committee and Board shall be fully protected by the Company in respect of any such action, determination or interpretation. 2.6 DELEGATION OF AUTHORITY. The Administrator may in his sole and absolute discretion delegate to the Chief Financial Officer of the Company or the Secretary of the Company, or both, any or all of the administrative duties and authority of the Administrator under this Plan, other than the authority to (a) make grants under this Plan to employees who are "officers" of the Company within the meaning of Rule 16(a)-1(b) of the Exchange Act or whose total compensation is required to be reported to the Company's stockholders under the Exchange Act, (b) determine the price, timing or amount of such grants or (c) determine any other matter required by Rule 16b-3 or Section 162(m) of the Code to be determined in the sole and absolute discretion of the Administrator. 2.7 NO LIABILITY. No member of the Board or the Committee, or any director, officer or employee of the Company, any Company Subsidiary, the Partnership or any Partnership Subsidiary shall be liable, responsible or accountable in damages or otherwise for any determination made or other action taken or any failure to act by such person so long as such person is not determined to be guilty by a final adjudication of willful misconduct with respect to such determination, action or failure to act. 2.8 INDEMNIFICATION. To the fullest extent permitted by law, each of the members of the Board and the Committee and each of the directors, officers and employees of the Company, any Company Subsidiary, the Partnership or any Partnership Subsidiary shall be held harmless and be indemnified by the Company for any liability, loss (including amounts paid in settlement), damages or expenses (including reasonable attorneys' fees) suffered by virtue of any determinations, acts or failures to act, or alleged acts or failures to act, in connection with the administration of this Plan so long as such person is not determined by a final adjudication to be guilty of willful misconduct with respect to such determination, action or failure to act. 8 SECTION 3 STOCK SUBJECT TO PLAN 3.1 NUMBER AND SOURCE OF SHARES. The total number of shares of Stock reserved and available for issuance under the Plan shall be 500,000 (plus that number of shares of Stock remaining available for issuance (but not subject to outstanding awards) under the 1994 Stock Option Plan of Apartment Investment and Management Company and Affiliates at the time of its termination). Such shares may consist, in whole or in part, of treasury shares, authorized and unissued shares or shares of Stock reacquired by the Company. 3.2 LIMITATION ON INDIVIDUAL GRANTS. The aggregate number of shares of Stock as to which Stock Options, Stock Appreciation Rights, Dividend Equivalents, Restricted Stock, Deferred Stock and Performance Shares may be granted to any individual during any calendar year may not, subject to adjustment as provided in this Section 3, exceed . 3.3 UNREALIZED AWARDS. To the extent that (a) a Stock Option expires or is otherwise terminated without being exercised, or (b) any shares of Stock subject to any Restricted Stock, Deferred Stock or Performance Share award granted hereunder are forfeited, such shares shall again be available for issuance in connection with future awards under the Plan. If any shares of Stock otherwise issuable under the Plan have been pledged as collateral for indebtedness incurred by a Participant in connection with the realization of any award hereunder, and such shares are returned to the Company in satisfaction of such indebtedness, such shares shall again be available for issuance in connection with future awards under the Plan. 3.4 ADJUSTMENT OF AWARDS. In the event of any merger, reorganization, consolidation, recapitalization, stock dividend or other change in corporate structure affecting the Stock, a substitution or adjustment shall be made in (a) the kind and aggregate number of shares reserved for issuance under the Plan, (b) the kind, number and option price of shares subject to outstanding Stock Options granted under the Plan, and (c) the kind, number and purchase price of shares issuable pursuant to awards of Restricted Stock, Deferred Stock and Performance Shares, as may be determined by the Administrator, in its sole discretion. Such other substitutions or adjustments shall be made respecting awards hereunder as may be determined by the Administrator, in its sole discretion. An adjusted option price shall also be used to determine the amount payable by the Company in connection with Stock Appreciation Rights, Limited Stock Appreciation Rights 9 and Dividend Equivalents awarded under the Plan. In connection with any event described in this paragraph, the Administrator may provide, in its discretion, for the cancellation of any outstanding awards and payment in cash or other property in exchange therefor. SECTION 4 ELIGIBILITY 4.1 GENERAL PROVISIONS. Subject to Section 3.1 and the Stock Ownership Limit, officers (including officers who are directors of the Company), other key employees of, and consultants and advisors to, the Company, any Company Subsidiary, the Partnership and any Partnership Subsidiary who are responsible for or contribute to the management, growth and/or profitability of the business of the Company, any Company Subsidiary and any Partnership Subsidiary, shall be eligible to be granted awards under the Plan which may include Stock Options, Stock Appreciation Rights, Dividend Equivalents, Limited Stock Appreciation Rights, awards, Deferred Stock awards or Performance Shares. The Participants under the Plan shall be selected from time to time by the Administrator, in its sole discretion, from among the Eligible Persons, consultants and advisors to the Company recommended by the senior management of the Company, and the Administrator shall determine, in its sole discretion, the number of shares covered by each award. 4.2 SPECIAL PROVISIONS FOR INDEPENDENT DIRECTORS. Independent Directors shall be eligible to participate in the Plan; PROVIDED THAT awards to such participants shall be made solely in accordance with Section 9 of the Plan. SECTION 5 STOCK OPTIONS 5.1 OPTION AWARDS. Stock Options may be granted alone or in addition to other awards granted under the Plan. Any Stock Option granted under the Plan shall be in such form as the Administrator may from time to time approve, and the provisions of Stock Option awards need not be the same with respect to each optionee. Recipients of Stock Options shall enter into an award agreement with the Company, in such form as the Administrator shall determine, which agreement shall set forth, among other things, the exercise price of the 10 option, the term of the option and provisions regarding exercisability of the option granted thereunder. 5.2 TYPES OF OPTIONS. The Stock Options granted under the Plan may be of two types: (a) Incentive Stock Options and (b) Non-Qualified Stock Options. The Administrator shall have the authority to grant (x) Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock Options (in each case with or without Stock Appreciation Rights or Limited Stock Appreciation Rights) to Company Employees and (y) Non-Qualified Stock Options (with or without Stock Appreciation Rights or Limited Stock Appreciation Rights) to Partnership Employees, and persons who are consultants or advisors to the Company, any Company Subsidiary, the Partnership or any Partnership Subsidiary. To the extent that any Stock Option does not qualify as an Incentive Stock Option, it shall constitute a separate Non-Qualified Stock Option. More than one option may be granted to the same optionee and be outstanding concurrently hereunder. 5.3 TERMS AND CONDITIONS OF OPTIONS. Stock Options granted under the Plan shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable: (a) OPTION PRICE. The option price per share of Stock purchasable under a Stock Option shall be determined by the Administrator in its sole discretion at the time of grant but shall not, in the case of Incentive Stock Options, be less than one hundred percent (100%) of the Fair Market Value of the Stock on such date, and shall not, in any event, be less than the par value of the Stock. If a Company Employee owns or is deemed to own (by reason of the attribution rules applicable under Section 424(d) of the Code) more than ten percent (10%) of the combined voting power of all classes of stock of the Company or any Company Subsidiary or any Partnership Subsidiary that is a corporation and an Incentive Stock Option is granted to such employee, the option price of such Incentive Stock Option (to the extent required by the Code at the time of grant) shall be no less than one hundred and ten percent (110%) of the Fair Market Value of the Stock on the date such Incentive Stock Option is granted. (b) OPTION TERM. The term of each Stock Option shall be fixed by the Administrator, but no Stock Option shall be exercisable more than ten (10) years after the date such Stock Option is granted; PROVIDED THAT if a 11 Company Employee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than ten percent (10%) of the combined voting power of all classes of stock of the Company or any Company Subsidiary or any Partnership Subsidiary that is a corporation and an Incentive Stock Option is granted to such employee, the term of such Incentive Stock Option (to the extent required by the Code at the time of grant) shall be no more than five (5) years from the date of grant. (c) EXERCISABILITY. Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator at or after grant. The Administrator may provide, in its discretion, that any Stock Option shall be exercisable only in installments, and the Administrator may waive such installment exercise provisions at any time in whole or in part based on such factors as the Administrator may determine, in its sole discretion. 5.4 METHOD OF EXERCISE. Subject to Section 5.3(c), Stock Options may be exercised in whole or in part at any time during the option period by: (a) Delivery of all of the following to the Secretary of the Company or his office: (i) A written notice complying with the applicable rules established by the Committee (or the Board, in the case of Non- Qualified Stock Options granted to Independent Directors), the Company or the Partnership stating that the Stock Option, or a portion thereof, is exercised. The notice shall be signed by the optionee or other person then entitled to exercise the Stock Option or such portion; (ii) Such representations and documents as the Committee (or the Board, in the case of Non-Qualified Stock Options granted to Independent Directors), in its sole and absolute discretion, deems necessary or advisable to effect compliance with all applicable provisions of any state or federal securities laws. The Committee or Board may, in its absolute discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer notices to agents and registrars; and 12 (iii) In the event that the Stock Option shall be exercised by any person or persons other than the optionee, appropriate proof of the right of such person or persons to exercise the Stock Option. (b) Full cash payment to (i) the Secretary of the Company (with respect to Stock Options held by Company Employees, Independent Directors or consultants or advisors to the Company or any Company Subsidiary) or (ii) the Partnership (with respect to Stock Options held by Partnership Employees or consultants or advisors to the Partnership or any Partnership Subsidiary) for the shares with respect to which the Stock Option, or portion thereof, is exercised. However, at the sole and absolute discretion of the Committee (or the Board, in the case of Non-Qualified Stock Options granted to Independent Directors), the terms of a Stock Option granted to Participants or Independent Directors may allow payment, in whole or in part, (1) through the delivery of shares of Stock owned by the optionee duly endorsed for transfer to the Company with a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Stock Option or exercised portion thereof, (2) through the surrender of shares of Stock then issuable upon exercise of the Stock Option having a Fair Market Value on the date of exercise equal to the aggregate exercise price of the Stock Option or exercised portion thereof, or (3) in the case of the exercise of a Non-Qualified Stock Option, Restricted Stock or Performance Shares subject to an award hereunder (based, in each case, on the Fair Market Value of the Stock on the date the option is exercised); PROVIDED THAT in the case of an Incentive Stock Option, the right to make payment in the form of already owned shares may be authorized only at the time of grant. If payment of the option exercise price of a Non-Qualified Stock Option is made in whole or in part in the form of Restricted Stock or Performance Shares, the shares received upon the exercise of such Stock Option (to the extent of the number of shares of Restricted Stock or Performance Shares surrendered upon exercise of such Stock Option) shall be restricted in accordance with the original terms of the Restricted Stock or Performance Share award in question, except that the Administrator may direct that such restrictions shall apply only to that number of shares equal to the number of shares surrendered upon the exercise of such option. In addition, at the sole and absolute discretion of the Committee, the terms of the Stock Options granted to Participants (other than Independent Directors) may (X) allow a delay in payment up to thirty (30) days from the date that the Stock Option, or portion thereof, is exercised; (Y) allow payment, in whole or in part, through the delivery of property of any kind that constitutes good and valuable consideration; or (Z) 13 allow payment through any combination of the consideration provided in the foregoing clauses (X) and (Y). (c) As soon as practicable after receipt by the Company of payment for the shares with respect to which a Stock Option, or portion thereof, is exercised by an optionee that is a Company Employee, Independent Director or consultant or advisor to the Company or Company Subsidiary, the Company shall transfer to the optionee the number of shares of Stock equal to (i) the amount of the payment made by the optionee to the Company pursuant to Section 5.4(b), DIVIDED BY (ii) the per share exercise price of the Stock subject to the Stock Option. (d) As soon as practicable after receipt by the Partnership of payment for the shares with respect to which a Stock Option, or portion thereof, is exercised by an optionee who is a Partnership Employee or a consultant or advisor to the Partnership or a Partnership Subsidiary: (i) the Company shall sell to the Partnership the number of shares of Stock equal to (A) the amount of the payment to be made by the optionee to the Partnership pursuant to Section 5.4(b) DIVIDED BY (B) the per share exercise price of the shares subject to the Option. The price to be paid by the Partnership to the Company for such shares shall be an amount equal to the product of (Y) the number of such shares MULTIPLIED BY (Z) the Fair Market Value of a share of Stock at the time of such exercise; (ii) the Partnership shall sell to the optionee (or if the optionee is an employee, consultant or advisor of a Partnership Subsidiary, the Partnership shall sell to such Partnership Subsidiary, which in turn shall sell to such optionee), for a cash price per share equal to the Fair Market Value of a share of Stock at the time of the exercise, the number of shares equal to (A) the amount of the payment to be made by the optionee to the Partnership pursuant to Section 5.4(b) DIVIDED BY (B) the Fair Market Value of a share of Stock at the time of the exercise; and 14 (iii) the Partnership shall transfer to the optionee (or if the optionee is an employee, consultant or advisor of a Partnership Subsidiary, the Partnership shall transfer to such Partnership Subsidiary, which in turn shall transfer to the optionee) at no additional cost, as additional compensation, the number of shares of Stock equal to the number of shares described in subsection (d)(i) above LESS the number of shares described in subsection (d)(ii) above. (e) As soon as practicable after receipt by the Company of (i) the amount described in Section 5.4(b) (with respect to Stock Options held by Company Employees, Independent Directors or consultants or advisors to the Company or Company Subsidiary) or (ii) the amount described in Section 5.4(d)(i) above (with respect to Stock Options held by Partnership Employees or consultants or advisors to the Partnership or a Partnership Subsidiary), the Company may contribute to the Partnership an amount of cash equal to such payment and the Partnership shall issue an additional General Partner Interest to the Company with a value equal to the amount of such contribution. 5.5 RIGHTS OF STOCKHOLDERS. An optionee shall generally have the rights to dividends and any other rights of a stockholder with respect to the Stock subject to the option only after the optionee has given written notice of exercise, has paid in full for such shares, and, if requested, has given the representation described in paragraph 1.1 of Section 12. 5.6 SURRENDER OF SHARES. The Administrator may require the voluntary surrender of all or a portion of any Stock Option granted under the Plan as a condition precedent to a grant of a new Stock Option. Subject to the provisions of the Plan, such new Stock Option shall be exercisable at the price, during such period and on such other terms and conditions as are specified by the Administrator at the time the new Stock Option is granted; PROVIDED THAT if the Administrator so requires, the number of shares subject to such new Stock Option shall not be greater than the number of shares subject to the surrendered Stock Option. Upon their surrender, Stock Options shall be canceled and the shares previously subject to such canceled Stock Options shall again be available for grants of Stock Options and other awards hereunder. 5.7 LOANS. The Company may make loans available to Stock Option holders in connection with the exercise of outstanding options granted under the Plan, as the Administrator, in its discretion, may determine. Such 15 loans shall (a) be evidenced by promissory notes entered into by the Stock Option holders in favor of the Company, (b) be subject to the terms and conditions set forth in this Section 5.7 and such other terms and conditions, not inconsistent with the Plan, as the Administrator shall determine, (c) bear interest, if any, at such rate as the Administrator shall determine, and (d) be subject to Board approval (or to approval by the Administrator to the extent the Board may delegate such authority). In no event may the principal amount of any such loan exceed the sum of (x) the exercise price less the par value of the shares of Stock covered by the option, or portion thereof, exercised by the holder, and (y) any federal, state, and local income tax attributable to such exercise. The initial term of the loan, the schedule of payments of principal and interest under the loan, the extent to which the loan is to be with or without recourse against the holder with respect to principal or interest and the conditions upon which the loan will become payable in the event of the holder's termination of employment shall be determined by the Administrator. Unless the Administrator determines otherwise, when a loan is made, shares of Stock having a Fair Market Value at least equal to the principal amount of the loan shall be pledged by the holder to the Company as security for payment of the unpaid balance of the loan, and such pledge shall be evidenced by a pledge agreement, the terms of which shall be determined by the Administrator, in its discretion; PROVIDED THAT each loan shall comply with all applicable laws, regulations and rules of the Board of Governors of the Federal Reserve System and any other governmental agency having jurisdiction. 5.8 NON-TRANSFERABILITY OF OPTIONS. Unless otherwise determined by the Administrator subject to the limitations on transferability set forth in Rule 16b-3, no Stock Option shall be transferable by the optionee, and all Stock Options shall be exercisable, during the optionee's lifetime, only by the optionee. 5.9 TERMINATION OF EMPLOYMENT OR SERVICE. If an optionee's employment with or service as a director of or consultant or advisor to the Company, any Company Subsidiary or any Partnership Subsidiary terminates by reason of death, Disability or for any other reason, the Stock Option may thereafter be exercised to the extent provided in the applicable award agreement, or as otherwise determined by the Administrator. 5.10 ANNUAL LIMIT ON INCENTIVE STOCK OPTIONS. To the extent that the aggregate Fair Market Value (determined as of the date the Incentive Stock Option is granted) of shares of Stock with respect to which Incentive Stock Options granted to an Optionee under this Plan and all other option plans of the Company or its Company Subsidiaries become exercisable for the first time by 16 the Optionee during any calendar year exceeds $100,000, such Stock Options shall be treated as Non-Qualified Stock Options. SECTION 6 STOCK APPRECIATION RIGHTS AND LIMITED STOCK APPRECIATION RIGHTS 6.1 GRANT OF RIGHTS. Stock Appreciation Rights and Limited Stock Appreciation Rights may be granted either alone ("Free Standing Rights") or in conjunction with all or part of any Stock Option granted under the Plan ("Related Rights"). In the case of a Non-Qualified Stock Option, Related Rights may be granted either at or after the time of the grant of such Stock Option. In the case of an Incentive Stock Option, Related Rights may be granted only at the time of the grant of the Incentive Stock Option. 6.2 TERMINATION OF RIGHTS. A Related Right or applicable portion thereof granted in conjunction with a Stock Option shall terminate and no longer be exercisable upon the termination or exercise of the related Stock Option, except that, unless otherwise provided by the Administrator at the time of grant, a Related Right granted with respect to less than the full number of shares covered by a related Stock Option shall only be reduced if and to the extent that the number of shares covered by the exercise or termination of the related Stock Option exceeds the number of shares not covered by the Related Right. 6.3 EXERCISE OF RIGHTS. A Related Right may be exercised by an optionee, in accordance with paragraph 6.4, by surrendering the applicable portion of the related Stock Option. Upon such exercise and surrender, the optionee shall be entitled to receive an amount determined in the manner prescribed in paragraph 6.4. Stock Options which have been so surrendered, in whole or in part, shall no longer be exercisable to the extent the Related Rights have been so exercised. 6.4 TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS. Stock Appreciation Rights shall be subject to such terms and conditions, not inconsistent with the provisions of the Plan, as shall be determined from time to time by the Administrator, including the following: 17 (a) RELATED STOCK APPRECIATION RIGHTS. Stock Appreciation Rights that are Related Rights ("Related Stock Appreciation Rights") shall be exercisable only at such time or times and to the extent that the Stock Options to which they relate shall be exercisable in accordance with the provisions of Section 5 and this Section 6 of the Plan; PROVIDED THAT no Related Stock Appreciation Right shall be exercisable during the first six months of its term, except that this additional limitation shall not apply in the event of death or Disability of the optionee prior to the expiration of such six-month period. (b) REALIZATION OF RELATED RIGHT. Upon the exercise of a Related Stock Appreciation Right, an optionee shall be entitled to receive up to, but not more than, an amount in cash or that number of shares of Stock (or in some combination of cash and shares of Stock) equal in value to the excess of the Fair Market Value of one share of Stock as of the date of exercise over the option price per share specified in the related Stock Option multiplied by the number of shares of Stock in respect of which the Related Stock Appreciation Right is being exercised, with the Administrator having the right to determine the form of payment. (c) TRANSFER OF RELATED RIGHT. Related Stock Appreciation Rights shall be transferable or exercisable only when and to the extent that the underlying Stock Option would be transferable or exercisable under paragraph 5.8 of the Plan. (d) EFFECT ON EXERCISE OF RELATED OPTIONS. Upon the exercise of a Related Stock Appreciation Right, the Stock Option or part thereof to which such Related Stock Appreciation Right is related shall be deemed to have been exercised for the purpose of the limitation set forth in Section 3 of the Plan on the number of shares of Stock to be issued under the Plan, but only to the extent of the number of shares issued under the Related Stock Appreciation Right. (e) RELATED INCENTIVE STOCK OPTIONS. A Related Stock Appreciation Right granted in connection with an Incentive Stock Option may be exercised only if and when the Fair Market Value of the Stock subject to the Incentive Stock Option exceeds the exercise price of such Stock Option. (f) FREE STANDING STOCK APPRECIATION RIGHTS. Stock Appreciation Rights that are Free Standing Rights ("Free Standing Stock Appreciation Rights") shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator at or after grant; PROVIDED 18 THAT no Free Standing Stock Appreciation Right shall be exercisable during the first six months of its term, except that this limitation shall not apply in the event of death or Disability of the recipient of the Free Standing Stock Appreciation Right prior to the expiration of such six-month period. (g) TERM OF FREE STANDING RIGHTS. The term of each Free Standing Stock Appreciation Right shall be fixed by the Administrator, but no Free Standing Stock Appreciation Right shall be exercisable more than ten years after the date such right is granted. (h) REALIZATION OF FREE STANDING RIGHT. Upon the exercise of a Free Standing Stock Appreciation Right, a recipient shall be entitled to receive up to, but not more than, an amount in cash or that number of shares of Stock (or any combination of cash or shares of Stock) equal in value to the excess of the Fair Market Value of one share of Stock as of the date of exercise over the price per share specified in the Free Standing Stock Appreciation Right (which price shall be no less than one hundred percent (100%) of the Fair Market Value of the Stock on the date of grant) multiplied by the number of shares of Stock in respect of which the right is being exercised, with the Administrator having the right to determine the form of payment. (i) TRANSFER OF FREE STANDING RIGHT. Free Standing Stock Appreciation Rights shall be transferable or exercisable only when and to the extent that a Stock Option would be transferable or exercisable under paragraph 5.8 of the Plan. (j) TERMINATION OF EMPLOYMENT OR SERVICE. In the event of the termination of employment or service of a Participant who has been granted one or more Free Standing Stock Appreciation Rights, such rights shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator at or after grant. 6.5 LIMITED STOCK APPRECIATION RIGHTS. Limited Stock Appreciation Rights shall be subject to such terms and conditions, not inconsistent with the provisions of the Plan, as shall be determined from time to time by the Administrator, including the following: (a) EXERCISE PERIOD. Limited Stock Appreciation Rights may only be exercised within the 30-day period following a "Change of Control" (as defined by the Administrator in the agreement evidencing such Limited Stock 19 Appreciation Right) and, with respect to Limited Stock Appreciation Rights that are Related Rights ("Related Limited Stock Appreciation Rights"), only to the extent that the Stock Options to which they relate shall be exercisable in accordance with the provisions of Section 5 and this Section 6 of the Plan; PROVIDED THAT no Related Limited Stock Appreciation Right shall be exercisable during the first six months of its term, except that this additional limitation shall not apply in the event of death or Disability of the optionee prior to the expiration of such six-month period. (b) REALIZATION OF LIMITED RIGHT. Upon the exercise of a Limited Stock Appreciation Right, the recipient shall be entitled to receive an amount in cash equal in value to the excess of the "Change of Control Price" (as defined in the agreement evidencing such Limited Stock Appreciation Right) of one share of Stock as of the date of exercise over (i) the option price per share specified in the related Stock Option, or (ii) in the case of a Limited Stock Appreciation Right which is a Free Standing Stock Appreciation Right, the price per share specified in the Free Standing Stock Appreciation Right, such excess to be multiplied by the number of shares in respect of which the Limited Stock Appreciation Right shall have been exercised. SECTION 7 DIVIDEND EQUIVALENTS 7.1 GRANT OF DIVIDEND EQUIVALENTS. The Committee is authorized to grant Dividend Equivalents to Participants, which will entitle such Participant to receive, on a current or deferred basis and subject to such conditions as may be imposed by the Committee, cash payments from the Company in the same amounts (or such lesser fraction of such amounts as may be specifically set forth in the Dividend Equivalent agreement evidencing such award) that the holder of record of such number of shares of Stock would be entitled to receive as cash dividends on such Stock (unless otherwise limited in such agreement). Dividend Equivalent agreements will specify the expiration date of such Dividend Equivalents, the number of shares of Stock to which it relates, and such other conditions as the Committee may impose. The Committee may provide, at the date of grant or thereafter, that Dividend Equivalents shall be paid or distributed when accrued or shall be deemed to have been reinvested in additional Stock, or other investment vehicles as the Committee may specify; PROVIDED THAT Dividend Equivalents (other than freestanding Dividend Equivalents) shall be subject to all of the conditions and restrictions of the underlying awards to which they relate. 20 7.2 PAYMENTS. The right to a cash payment in respect of a Dividend Equivalent will apply to all dividends the record date for which occurs at any time during the period commencing on the date the Dividend Equivalent is granted and ending on the date such Dividend Equivalent expires or is terminated, whichever occurs first. 7.3 RELATED DIVIDEND EQUIVALENTS. If a Dividend Equivalent is granted in conjunction with the grant of a Stock Option or a Stock Appreciation Right, the applicable Dividend Equivalent agreement will provide that the grantee is entitled to receive from the Company cash payments, on a current or deferred basis, in the same amounts (or such lesser fraction of such amounts as may be specifically set forth in the Dividend Equivalent agreement) that the holder of record of a number of shares of Stock equal to the number of shares covered by such Stock Option or Stock Appreciation Right would be entitled to receive as dividends on such Stock unless otherwise limited in the Dividend Equivalent agreement. Such right to a cash payment will apply to, and such Dividend Equivalent will remain outstanding in respect of, all cash dividends the record date for which occurs at any time during the period commencing on the date the related Stock Option or Stock Appreciation Right is granted and ending on the date that such Stock Option or Stock Appreciation Right is exercised, expires or terminates, whichever occurs first. SECTION 8 RESTRICTED STOCK, DEFERRED STOCK AND PERFORMANCE SHARES 8.1 GENERAL. Restricted Stock, Deferred Stock or Performance Share awards may be issued either alone or in addition to other awards granted under the Plan. The Administrator shall determine the Eligible Persons to whom, and the time or times at which, grants of Restricted Stock, Deferred Stock or Performance Share awards shall be made; the number of shares to be awarded; the price, if any, to be paid by the recipient of Restricted Stock, Deferred Stock or Performance Share awards; the Restricted Period (as defined in paragraph 8.5 hereof) applicable to Restricted Stock or Deferred Stock awards; the performance objectives applicable to Performance Share or Deferred Stock awards; the date or dates on which restrictions applicable to such Restricted Stock or Deferred Stock awards shall lapse during such Restricted Period; and all other conditions of the Restricted Stock, Deferred Stock and Performance Share awards. The Administrator may also condition the grant of Restricted Stock, Deferred Stock awards or 21 Performance Shares upon the exercise of Stock Options, or upon such other criteria as the Administrator may determine, in its sole discretion. The provisions of Restricted Stock, Deferred Stock or Performance Share awards need not be the same with respect to each recipient. In the discretion of the Administrator, loans may be made to Participants in connection with the purchase of Restricted Stock under substantially the same terms and conditions as provided in Section 5.7 with respect to the exercise of stock options. 8.2 AWARD AGREEMENTS. The prospective recipient of a Restricted Stock, Deferred Stock or Performance Share award shall not have any rights with respect to such award, unless and until such recipient has executed an agreement evidencing the award (a "Restricted Stock Award Agreement," "Deferred Stock Award Agreement," "Performance Share Award Agreement," or other award agreement, as appropriate) and delivered a fully executed copy thereof to the Company, within a period of sixty (60) days (or such other period as the Administrator may specify after the award date). 8.3 AWARD CERTIFICATES. Except as otherwise provided below in this Section 8.3, (a) each Participant who is awarded Restricted Stock or Performance Shares shall be issued a stock certificate in respect of such shares of Restricted Stock or Performance Shares; and (b) such certificate shall be registered in the name of the Participant, and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such award. The Company may require that such stock certificates be held in the custody of the Company until the restrictions thereon shall have lapsed, and that, as a condition of any Restricted Stock award or Performance Share award, the Participant shall have delivered a stock power, endorsed in blank, relating to the Stock covered by such award. 8.4 DEFERRED STOCK CERTIFICATES. With respect to Deferred Stock awards, at the expiration of the Restricted Period, stock certificates in respect of such shares of Deferred Stock shall be delivered to the participant, or his legal representative, in a number equal to the number of shares of Stock covered by the Deferred Stock award. 8.5 RESTRICTIONS AND CONDITIONS. The Restricted Stock, Deferred Stock and Performance Share awards granted pursuant to this Section 8 shall be subject to the following restrictions and conditions: 22 (a) RESTRICTIONS ON TRANSFER. Subject to the provisions of the Plan and the Restricted Stock Award Agreement, Deferred Stock Award Agreement, Performance Share Award Agreement or other award agreement, as appropriate, governing such award, during such period as may be set by the Administrator commencing on the grant date (the "Restricted Period"), the Participant shall not be permitted to sell, transfer, pledge or assign shares of Restricted Stock, Performance Shares or Deferred Stock awarded under the Plan; PROVIDED THAT the Administrator may, in its sole discretion, provide for the lapse of such restrictions in installments and may accelerate or waive such restrictions in whole or in part based on such factors and such circumstances as the Administrator may determine, in its sole discretion, including, but not limited to, the attainment of certain performance related goals, the Participant's termination of employment or service, death or Disability or the occurrence of a "Change of Control" as defined in the agreement evidencing such award. (b) STOCKHOLDER RIGHTS. Except as provided in Section 8.5(a), the Participant shall generally have, with respect to the shares of Restricted Stock or Performance Shares, all of the rights of a stockholder with respect to such stock during the Restricted Period. The Participant shall generally not have the rights of a stockholder with respect to stock subject to Deferred Stock awards during the Restricted Period; PROVIDED THAT dividends declared during the Restricted Period with respect to the number of shares covered by a Deferred Stock award shall be paid to the Participant. Certificates for shares of unrestricted Stock shall be delivered to the Participant promptly after, and only after, the Restricted Period shall expire without forfeiture in respect of such shares of Restricted Stock, Performance Shares or Deferred Stock, except as the Administrator, in its sole discretion, shall otherwise determine. (c) TERMINATION OF EMPLOYMENT OR SERVICE. The rights of holders of Restricted Stock, Deferred Stock and Performance Share awards upon termination of employment or service for any reason during the Restricted Period shall be set forth in the Restricted Stock Award Agreement, Deferred Stock Award Agreement, Performance Share Award Agreement or other award agreement, as appropriate, governing such awards. 23 SECTION 9 AWARDS TO INDEPENDENT DIRECTORS 9.1 INDEPENDENT DIRECTOR GRANTS. Independent Directors shall be granted Non-Qualified Stock Options in accordance with this Section 9 and may not be granted any other awards under the Plan. Notwithstanding any of the other provisions of the Plan to the contrary, only the provisions of this Section 9 shall apply to grants of Non-Qualified Stock Options to Independent Directors; PROVIDED THAT the other provisions of the Plan shall apply to such grants to the extent not inconsistent with this Section 9 and to the extent that grants to such Independent Directors is specifically referenced. 9.2 ANNUAL GRANTS. Subject to the Stock Ownership Limit, immediately following each annual meeting of stockholders of the Company and prior to the termination of the Plan, each Independent Director shall automatically be issued a Non-Qualified Stock Option pursuant to the Plan to purchase 3,000 shares of Stock. The day on which such options are granted pursuant to this Section 9.2 shall hereinafter be referred to as the "Date of Grant." 9.3 TERMS AND CONDITIONS OF OPTIONS. The Non-Qualified Stock Options to be granted to Independent Directors shall be subject to the following terms and conditions: (a) Non-Qualified Stock Options shall be granted at a per share option price equal to the Fair Market Value of Stock on the Date of Grant (the "Option Price"). (b) Each Non-Qualified Stock Option shall first become exercisable on the date that is six months following the Date of Grant. Each Non-Qualified Stock Option shall cease to be exercisable on the date that is ten years following the Date of Grant (the "Expiration Date"). (c) The grant of a Non-Qualified Stock Option shall be evidenced by a stock option agreement in such form and not inconsistent with the Plan as the Committee may approve from time to time. 24 (d) Options shall be exercised by written notice to the Secretary of the Company and otherwise in the manner set forth in Section 5.4 of the Plan. Partial exercise shall be permitted from time to time, provided that exercises shall be in multiples of one hundred (100) shares of Stock. (e) If for any reason during the term of an unexercised and unexpired Non-Qualified Stock Option, the Independent Director shall cease to be a voting member of the Board, such Non-Qualified Stock Option may be exercised by the Independent Director (or, in the event of his death, by his estate) until the Expiration Date. A Non-Qualified Stock Option that is not exercisable at the time of the termination of such Independent Director's status as a voting member of the Board shall become exercisable, according to its terms, on the date that is six months following the Date of Grant. (f) The Committee shall have no discretion with respect to the number, timing, price or other terms and conditions of awards to Independent Directors except to the extent such discretion is permitted under Rule 16-b(3)(c)(2)(ii) of the Act. SECTION 10 AMENDMENT AND TERMINATION 10.1 AMENDMENT OF THE PLAN. The Board may amend, alter or discontinue the Plan, but no amendment, alteration, or discontinuation shall be made that would impair the rights of a Participant under any award theretofore granted without such Participant's consent, or that without the approval of the stockholders (as described below) would: (a) except as provided in Section 3, increase the total number of shares of Stock reserved for the purpose of the Plan; (b) change the class of employees, consultants and advisors eligible to participate in the Plan; or (c) extend the maximum option period under paragraph 5.3(b) of the Plan. 25 10.2 STOCKHOLDER APPROVAL REQUIREMENT. Notwithstanding the foregoing, stockholder approval under this Section 10 shall only be required at such time and under such circumstances as stockholder approval would be required under Rule 16b-3 of the Act or Section 162(m) of the Code with respect to any material amendment to any employee benefit plan of the Company. 10.3 AMENDMENT OF AWARDS. The Administrator may amend the terms of any award theretofore granted, prospectively or retroactively, but, subject to Section 10.1(c), no such amendment shall impair the rights of any holder without his or her consent. SECTION 11 UNFUNDED STATUS OF PLAN The Plan is intended to constitute an "unfunded" plan for incentive compensation. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company. SECTION 12 GENERAL PROVISIONS 12.1 REPRESENTATIONS. The Administrator may require each person purchasing shares pursuant to a Stock Option to represent to and agree with the Company in writing that such person is acquiring the shares without a view to distribution thereof. The certificates for such shares may include any legend which the Administrator deems appropriate to reflect any restrictions on transfer. 12.2 LEGENDS. All certificates for shares of Stock delivered under the Plan shall be subject to such stock-transfer orders and other restrictions as the Administrator may deem advisable under the rules, regulations, and other requirements of the Commission, any stock exchange upon which the Stock is then listed, and any applicable federal or state securities law, and the Administrator may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions. 12.3 OTHER PLANS; NO GUARANTEE OF ENGAGEMENT. Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is 26 required; and such arrangements may be either generally applicable or applicable only in specific cases. The adoption of the Plan shall not confer upon any director, employee, consultant or advisor of the Company, any Company Subsidiary or any Partnership or Partnership Subsidiary any right to continued employment with or service as a director to the Company, any Company Subsidiary or any Partnership or Partnership Subsidiary, as the case may be, nor shall it interfere in any way with the right of the Company, any Company Subsidiary, the Partnership or any Partnership Subsidiary to terminate the employment or service of any of its directors, employees, consultants or advisors at any time. 12.4 WITHHOLDING REQUIREMENTS. Each Participant shall, no later than the date as of which the value of an award first becomes includible in the gross income of the Participant for federal income tax purposes, pay to the Company, any Company Subsidiary, the Partnership or any Partnership Subsidiary (as the case may be), or make arrangements satisfactory to the Administrator regarding payment of, any federal, state, or local taxes of any kind required by law to be withheld with respect to the award. The obligations of the Company under the Plan shall be conditional on the making of such payments or arrangements, and the Company, any Company Subsidiary, the Partnership or any Partnership Subsidiary shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant. 12.5 INDEMNIFICATION. No member of the Board or the Administrator, nor any officer or employee of the Company acting on behalf of the Board or the Administrator, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board or the Administrator and each and any officer or employee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination or interpretation. SECTION 13 MISCELLANEOUS 13.1 COMPLIANCE WITH LAWS. (a) The obligation of the Company to sell or deliver Stock with respect to any award granted under the Plan shall be subject to all applicable 27 laws, rules and regulations, including all applicable federal and state securities laws, and the obtaining of all such approvals by governmental agencies as may be deemed necessary or appropriate by the Committee. (b) Each award is subject to the requirement that, if at any time the Committee determines, in its absolute discretion, that the listing, registration or qualification of Stock issuable pursuant to the Plan is required by any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the grant of an award or the issuance of Stock, no such award shall be granted, payment made or Stock issued, in whole or in part, unless listing, registration, qualification, consent or approval has been effected or obtained free of any conditions not acceptable to the Committee. (c) In the event that the disposition of Stock acquired pursuant to the Plan is not covered by a then current registration statement under the Securities Act of 1933, as amended (the "Securities Act") and is not otherwise exempt from such registration, such Stock shall be restricted against transfer to the extent required by the Securities Act or regulations thereunder, and the Committee may require a grantee receiving Stock pursuant to the Plan, as a condition precedent to receipt of such Stock, to represent to the Company in writing that the Stock acquired by such grantee is acquired for investment only and not with a view to distribution. 13.2 NO RIGHTS TO AWARDS; NO STOCKHOLDER RIGHTS. No Eligible Person shall have any claim to be granted any award or loan under the Plan, and there is no obligation for uniformity of treatment of grantees. Except as provided specifically herein, a grantee or a transferee of an award shall have no rights as a stockholder with respect to any shares covered by the award until the date of the issuance of a stock certificate to him for such shares. 13.3 OWNERSHIP AND TRANSFER RESTRICTIONS. Shares acquired through the realization of awards granted under the Plan shall be subject to the restrictions on ownership and transfer set forth in the Company's Charter. The Committee (or the Board, in the case of Non-Qualified Stock Options granted to Independent Directors), in its sole and absolute discretion, may impose such additional restrictions on the ownership and transferability of the shares issuable pursuant to Plan awards as it deems appropriate. Any such restriction shall be set forth in the respective award agreement and may be referred to on the certificates evidencing such shares. The Committee may require a Participant to give the 28 Company prompt notice of any disposition of shares of Stock acquired by exercise of an Incentive Stock Option within (i) two (2) years from the date of granting such option to such Participant or (ii) one (1) year after the transfer of such shares to such Participant. The Committee may direct that the certificates evidencing shares acquired by exercise of a Stock Option refer to such requirement to give prompt notice of disposition. 13.4 RESTRICTIONS ON OWNERSHIP. A Stock Option is not exercisable (and an award may not otherwise be realized) if, in the sole and absolute discretion of the Committee, the exercise of such Option or realization of such award would likely result in any of the following: (a) the Participant's ownership of Stock being in violation of the Stock Ownership Limit set forth in the Company's Charter; (b) income to the Company that could impair the Company's status as a "real estate investment trust," within the meaning of Sections 856 through 860 of the Code; (c) a transfer, at any one time, of more than one-tenth of one percent (0.1%) (measured in value or in number of shares, whichever is more restrictive) of the Company's total Stock from the Company to the Partnership pursuant to Section 5.4(d); or (d) Notwithstanding any other provision of this Plan, a Participant shall have no rights under this Plan to acquire Stock that would otherwise be prohibited under the Company's Charter. 13.5 APPROVAL OF PLAN BY STOCKHOLDERS. The Plan shall take effect upon its adoption by the Board but the Plan (and any grants of awards made prior to the shareholder approval mentioned herein) shall be subject to ratification by the holder(s) of a majority of the issued and outstanding shares of voting securities of the Company entitled to vote, which ratification must occur within twelve (12) months of the date that the Plan is adopted by the Board. In the event that the shareholders of the Company do not ratify the Plan at a meeting of the shareholders at which such issue is considered and voted upon, then upon such event the Plan and all rights hereunder shall immediately terminate and no grantee (or any permitted transferee thereof) shall have any remaining rights under the Plan or any award agreement entered into in connection herewith. 29 13.6 NONTRANSFERABILITY. Awards shall not be transferable by a Participant except by will or the laws of descent and distribution or, if then permitted under Rule 16b-3, pursuant to a qualified domestic relations order as defined under the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder, and shall be exercisable during the lifetime of a Participant only by such Participant or his guardian or legal representative. 13.7 GOVERNING LAW. The Plan and all determinations made and actions taken pursuant hereto shall be governed by the laws of the State of Maryland without giving effect to the conflict of laws principles thereof. SECTION 14 EFFECTIVE DATE OF PLAN The Plan became effective (the "Effective Date") on April 25, 1996, the date the Company's stockholders formally approved the Plan. 30 SECTION 15 TERM OF PLAN No Stock Option, Stock Appreciation Right, Limited Stock Appreciation Right, Dividend Equivalent, Restricted Stock, Deferred Stock or Performance Share award shall be granted pursuant to the Plan on or after the tenth anniversary of the Effective Date, but awards theretofore granted may extend beyond that date. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers duly authorized on this ____ day of _____, 1996. Apartment Investment and Management Company, a Maryland corporation By __________________________________________________ Title: ____________________________________________ AIMCO Properties, L.P., a Delaware limited partnership By _________________________________________________ Title: ___________________________________________ On Behalf of Apartment Investment and Management Company, a Maryland corporation, in its capacity as General Partner 31 Property Asset Management Services of the Southeast, L.L.C., a Delaware limited liability company By _________________________________________________ Title: ___________________________________________ Property Asset Management Services of the Southcentral, L.L.C., a Delaware limited liability company By _________________________________________________ Title: ___________________________________________ Property Asset Management Services of the Southwest, L.L.C., a Delaware limited liability company By _________________________________________________ Title: ___________________________________________ 32 EX-10.71 13 EXHIBIT 10.71 $25,615,200 December 2, 1996 AMENDED AND RESTATED NOTE This Amended and Restated Note is made and entered into as of the 2nd day of December, 1996, by and between AIMCO LT, L.P., a Delaware limited partnership ("MAKER"), and GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation ("LENDER"). BACKGROUND A. Lender is the holder of a Note from Maker (the "ORIGINAL NOTE") dated November 14, 1996 in the principal amount of $6,317,000. B. Maker and Lender desire to amend and restate the Original Note on the terms hereinafter set forth. NOW, THEREFORE, intending to be legally bound, Maker and Lender agree that the Original Note is hereby amended and restated in its entirety to read as follows: [Remainder of Page Intentionally Left Blank] NOTE (GP Loan) US $25,615,200 December 2, 1996 FOR VALUE RECEIVED, AIMCO LT, L.P., a Delaware limited partnership ("MAKER"), promises to pay GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation ("LENDER"), or order, the principal sum of Twenty-Five Million Six Hundred Fifteen Thousand Two Hundred Dollars ($25,615,200), together with interest thereon, as follows. 1. DEFINITIONS. As used in this Note, the following terms shall have the meanings set forth below: "BUSINESS DAY" shall mean any day other than (i) a Saturday, Sunday or public holiday under the laws of the Commonwealth of Pennsylvania, or (ii) any other day on which banking institutions are authorized or obligated to close in Philadelphia, Pennsylvania. "COMMITMENT" shall mean that certain commitment letter dated October 10, 1996 from Lender to Maker and to Apartment Investment and Management Company ("AIMCO"), as amended. The Commitment shall survive the execution and delivery of the other Loan Documents. In the event of any conflict between the terms of the Commitment and the terms of the other Loan Documents, the latter shall control. "DEFAULT RATE" shall mean a rate per annum equal to four percent (4%) above the then current LIBOR Rate under this Note. "DOLLAR", "DOLLARS" and "$" shall mean lawful money of the United States of America. "LIBOR RATE" shall mean with respect to each Euro-Dollar Interest Period the annual rate of interest designated as the British Banker's Association settlement rate that appears on the display on page 3750 (under the caption "USD" of the Telerate Services, Incorporated screens or such other display as may replace such page) as of 11:00 AM (London time) on the second (2nd) full Euro-Dollar Day next preceding the first day of each calendar month with respect to which interest is payable under this Note, as the rate per annum for (1) month deposits in the London interbank market; provided, however, that if no offered quotations appear on the Telerate Services, Incorporated screen or if quotations are not given on such screen for a period of time comparable to such Euro-Dollar Interest Period, then the LIBOR Rate applicable to such Euro-Dollar 2 Interest Period shall be the rate of interest determined by Lender to be the prevailing rate per annum quoted to it at approximately 10:00 AM (Eastern time) by two (2) or more New York Euro-Dollar deposit dealers of recognized standing selected by Lender for the offering of Dollar deposits to Holder by lending banks in the London interbank market for one (1) month periods and in the amount approximately equal to the principal amount then owing under this Note. If more than one LIBOR Rate is reported, then the LIBOR Rate shall equal the average of such rates. Notwithstanding anything to the contrary contained in this Note, the LIBOR Rate for the period from the date hereof through and including December 31, 1996 shall be five and one-half percent (5.5%). "EURO-DOLLAR DAY" means any business day on which commercial banks are open for international business (including dealings in Dollar deposits) in London, England. "EURO-DOLLAR INTEREST PERIOD" shall mean the period commencing on the first day of each calendar month during the term of this Note through and including the last such calendar day of such month; provided, that the first Euro-Dollar Interest Period shall commence on the date hereof. "EVENT OF DEFAULT" shall mean (i) a failure of Maker to pay when due principal, interest or any other charge under this Note or to otherwise comply with the terms of this Note, and (ii) a default beyond the expiration of any applicable notice and grace period under any other Loan Document. "GOVERNMENTAL AUTHORITY" shall mean any federal, state or local governmental or quasi-governmental subdivision, authority or other instrumentality thereof and any entity asserting or exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "LAW" shall mean all statutes, codes, laws, ordinances, regulations, rules, policies or other federal, state, local and municipal requirements of any governmental authority, whether now or hereafter enacted or adopted, and all judgments, decrees, injunctions, writs, orders or like action of an arbitrator or other governmental authority of competent jurisdiction. "LOAN" shall mean the $25,615,200 loan made by Lender to Maker pursuant to the Pledge and the Commitment and evidenced by this Note. "LOAN DOCUMENTS" shall mean the following documents: (i) the Commitment; (ii) this Note; (iii) the Pledge; and (iv) all other documents or agreements arising under, related to, or 3 made in connection with, the Loan, as such loan documents may be amended from time to time. To the extent there is any inconsistency between this Note and the Fledge, the terms of this Note shall, to the extent permitted by Law, govern. "MATURITY DATE" is defined in paragraph 5 hereof. "PLEDGE" shall mean that certain Amended and Restated Pledge and Security Agreement from Maker to Lender of even date herewith. "PERSON" shall mean any individual, for profit or not for profit corporation, partnership, joint venture, association, limited liability company, limited liability partnership, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "PRIME RATE" shall mean the interest rate per annum announced from time to time by Citibank, N.A. or its successor, as its Prime Rate. The Prime Rate may be greater or less than other interest rates charged by Citibank, N.A. to other borrowers and is not solely based or dependent upon the interest rate which Citibank, N.A. may charge any particular borrower or class of borrowers. 2. INTEREST RATES. (a) LIBOR RATE. The unpaid principal amount of this Note shall, subject to subparagraph 2(b) hereof, bear interest for each day at a rate per annum equal to the LIBOR Rate then in effect for such day plus two hundred fifty (250) basis points; provided, however, that if under paragraph 3 hereof the LIBOR Rate is not applicable, then such interest shall accrue at the Prime Rate. (b) DEFAULT RATE. Upon the occurrence of any Event of Default by Maker and/or after the maturity hereof (whether by acceleration or otherwise), this Note shall bear interest at the Default Rate. (c) CALCULATIONS. The interest rate hereunder shall (i) be calculated based on a year of 360 days and charged for the actual number of days elapsed, and (ii) change automatically from time to time, effective as of the effective date of each change in the LIBOR Rate, or the Prime Rate, as applicable. 3. INTEREST RATE; REIMBURSEMENT; INDEMNITY. (a) LIBOR UNASCERTAINABLE. If (i) on any date on which the LIBOR Rate would otherwise be set Lender shall have determined in good faith (which determination shall be 4 conclusive) that (A) adequate and reasonable means do not exist for ascertaining such LIBOR Rate, or (B) a contingency has occurred which materially and adversely affects the interbank eurodollar market, or (ii) at any time Lender shall have determined in good faith (which determination shall be conclusive) that the making, maintenance or funding of any part of the Loan has been made impracticable or unlawful by compliance by Lender in good faith with any Law or guideline or interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof or with any request or directive of any such Governmental Authority (whether or not having the force of law); then, and in any such event, Lender may notify Maker of such determination. Upon such date as shall be specified in such notice (which shall not be earlier than the date such notice is given) the obligation of Lender to charge interest to Maker at the LIBOR Rate shall be suspended until Lender shall have later notified Maker of Lender's determination in good faith (which determination shall be conclusive) that the circumstances giving rise to such previous determination no longer exist. (b) PRIME RATE. If Lender notifies Maker of a determination under subparagraph 3(a) hereof, the LIBOR Rate shall automatically be converted to the Prime Rate as of the date specified in such notice (and accrued interest thereon shall be due and payable on such date). (c) REIMBURSEMENT FOR INCREASED COSTS OR REDUCED RETURN. If any Law or guideline or interpretation or application thereof by any Governmental Authority charged with the interpretation or administration thereof or compliance with any request or directive of any Governmental Authority (whether or not having the force of law) now existing or hereafter adopted (i) subjects Lender to any tax or changes the basis of taxation with respect to this Note, the Commitment, the Loan or payments by Maker of principal, interest or other amounts due from Maker hereunder or thereunder (except for taxes on the overall net income or overall gross receipts of Lender imposed as a result of a present or former connection between the jurisdiction of the government or taxing authority imposing such tax and Lender; provided, that this exclusion shall not apply to a connection arising solely from Lender having executed, delivered, performed its obligations under or received a payment under, or enforced any of the Loan Documents), (ii) imposes, modifies or deems applicable any reserve, special deposit or similar requirement against credits or commitments to extend credit extended by, assets (funded or contingent) of, deposits with or for the account of, or other acquisition of funds by, Lender, (iii) imposes, modifies or deems applicable any capital adequacy or similar requirement against assets (funded or contingent) of, or credits or commitments to extend credit extended by, Lender, or 5 otherwise applicable to the obligations of Lender under the Commitment, or (iv) imposes upon Lender any other condition or expense with respect to this Note, the Commitment or its making, maintenance or funding of any part of the Loan or any security therefor, and the result of any of the foregoing is to increase the cost to, reduce the income receivable by, or impose any expense (including, without limitation, loss of margin) upon Lender or, in the case of clause (iii) above, any Person controlling Lender, with respect to this Note, the Commitment or the making, maintenance or funding of any part of the Loan (or, in the case of any capital adequacy or similar requirement, to have the effect of reducing the rate of return on Lender's or such controlling Person's capital, taking into consideration Lender's or such controlling Person's policies with respect to capital adequacy) by an amount which Lender deems to be material, Lender may from time to time notify Maker of the amount determined in good faith (using any averaging and attribution methods) by Lender (which determination shall be conclusive) to be necessary to compensate Lender for such increase, reduction or imposition. Such amount shall be due and payable by Maker to Lender five (5) Business Days after such notice is given. 4. INTEREST PAYMENT DATES. Interest hereunder shall be due and payable on the first day of the second full calendar month after the date hereof and on the first day of each calendar month thereafter. After maturity hereof (by acceleration or otherwise), interest hereunder shall be due and payable on demand. 5. MATURITY. This Note shall mature on January 1, 1998 (the "MATURITY DATE"). On the Maturity Date the entire unpaid principal balance hereof, together with accrued interest thereon, and all other amounts due hereunder and under the other Loan Documents, shall become due and payable in full. 6. PREPAYMENTS/EXIT FEE. (a) OPTIONAL. Maker shall have the right at its option to prepay this Note in whole (but not in part, except in the case of a partial prepayment required by Maker under the Pledge) at any time. (b) NOTICE OF PREPAYMENT. Maker shall give Lender not less than thirty (30) days' prior written notice of any prepayment permitted by this paragraph 6, specifying the date of prepayment, which shall be a Business Day. Such notice of prepayment having been given, on the date specified in such notice, the principal together with interest on such principal amount to such date, along with all other amounts due hereunder and under the other Loan Documents (including, without 6 limitation, the premium described in subparagraph 6 (c) hereof) shall be due and payable. (c) PREMIUM. In the event any prepayment is made (or this Note is paid at maturity, but Lender does not facilitate the refinancing of the Loan) Lender will suffer damages that are extremely difficult to ascertain. Accordingly, any prepayment or payment of this Note at maturity shall be accompanied by payment of an amount equal to one percent (1%) of the original principal amount of this Note (or in the case of a permitted partial prepayment, one percent (1%) of the amount being prepaid) as a prepayment or exit fee, as applicable. The parties have agreed that this premium is a reasonable estimate of Lender's damages in the event of a prepayment, or a refinancing not facilitated by Lender. Notwithstanding the foregoing, the premium set forth in this subparagraph 6(c) shall be waived if (i) Maker repays the Note solely with the proceeds of a sale of common or preferred stock by AIMCO and without using the proceeds, directly or indirectly, of any loan or other indebtedness, or (ii) Lender facilitates the refinancing of the Loan. 7. PAYMENTS. All payments (including, without limitation, prepayments) to be made in respect of principal, interest or other amounts due from Maker hereunder shall be payable at 12:00 Noon, Philadelphia time, on the day when due. Such payments shall be made to Lender at its office at 650 Dresher Road, P.O. Box 1015, Horsham PA 19044-8015, in Dollars, without setoff, counterclaim or other deduction of any nature. Any such payment received by Lender after 12:00 Noon, Philadelphia time, on any day shall be deemed to have been received on the next succeeding Business Day. Whenever any payment to be made under this Note or any other Loan Document shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next following Business Day and such extension of time shall be included in computing interest, if any, in connection with such payment. To the extent permitted by Law, after there shall have occurred an Event of Default, all amounts due hereunder and under the other Loan Documents (by acceleration or otherwise), including, without limitation, principal and interest under this Note, shall bear interest for each day until paid (before and after judgment), payable on demand, at the Default Rate. 8. LATE CHARGE. If any installment of interest, principal, or principal and interest shall become overdue for a period in excess of ten (10) days, a "late charge" in the amount of five percent (5%) of such overdue installment shall be paid by Maker to Lender, which "late charge" shall be payable on demand. This charge shall be in addition to, and not in lieu of, any other remedy Lender may have and is in addition to any reasonable fees and charges of any agents or attorneys which Lender is 7 entitled to employ on any default hereunder, whether authorized herein, or by Law. 9. DEFAULT. If an Event of Default shall occur, Lender, at its option, may accelerate the indebtedness evidenced hereby and all other amounts due under the Loan Documents and may exercise the other rights and remedies provided it in the Pledge and the other Loan Documents, as well as those it may have at law or in equity. Upon the acceleration of this Note because of an Event of Default, a tender of payment by Maker of the amount necessary to satisfy the entire indebtedness evidenced hereby made at any time shall constitute an evasion of the prepayment terms of this Note and shall be deemed a voluntary prepayment and shall entitle Lender to receive, in addition to all other amounts due Lender, the prepayment fee set forth in subparagraph 6(c) hereof. 10. INTEREST LIMITATION. Notwithstanding anything to the contrary contained herein or in the Pledge or any other of the Loan Documents, the effective rate of interest on the obligation evidenced by this Note shall not exceed the maximum rate of interest permitted to be paid by applicable Law. Without limiting the generality of the foregoing, in the event the interest charged hereunder results in an effective rate of interest higher than that lawfully permitted to be paid, then such charges shall be reduced by the sum sufficient to result in an effective rate of interest permitted and any amount which would exceed the highest lawful rate already received and held by Lender shall be applied to a reduction of principal and not to the payment of interest. Maker agrees that for the purpose of determining the highest rate permitted by applicable Law, any non-principal payment (including, without limitation, late fees and other fees) shall be deemed, to the extent permitted by Law, to be an expense, fee, premium or penalty, rather than interest. 11. MISCELLANEOUS. This Note is secured by and is entitled to the benefits of the Pledge and the other Loan Documents. The unpaid principal amount of this Note, the unpaid interest accrued hereon, the interest rate or rates applicable to such unpaid principal amount and the duration of such applicability shall at all times be ascertained from the records of Lender, which shall be conclusive absent manifest error. Maker hereby expressly waives presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note, the Pledge and the other Loan Documents, and an action for amounts due hereunder or thereunder shall immediately accrue. 8 All notices, requests, demands, directions and other communications (collectively, "NOTICES") under the provisions hereof shall be in writing unless otherwise expressly permitted hereunder, shall be sent as provided in the Pledge and shall be effective as provided in the Pledge. Lender may rely on any notice purportedly made by or on behalf of Maker, and shall have no duty to verify the identity or authority of the person giving such notice. If this Note is placed in the hands of an attorney at law for collection by reason of default on the part of Maker, Maker hereby agrees to pay to Lender in addition to the sums stated above, the reasonable costs of collection, including without limitation, a reasonable sum as attorneys fees. This Note may not be amended, modified or supplemented orally. If any term or provision of this Note or the application thereof to any Person or circumstance shall to any extent be invalid or unenforceable, the remainder of this Note, or the application of such term or provision to Persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term and provision of this Note shall be valid and enforceable to the fullest extent permitted by Law. This obligation shall bind Maker and its successors and assigns, and the benefits hereof shall inure to Lender and its successors and assigns. The paragraph headings used herein are for convenience only and do not affect or modify the terms and conditions of this Note. From time to time, without affecting the obligation of Maker to pay the outstanding principal balance of this Note and observe the covenants of Maker contained herein, without affecting the guaranty of any person, corporation, partnership or other entity for payment of the outstanding principal balance of this Note, without giving notice to or obtaining the consent of Maker or any guarantor, and without liability on the part of Lender, Lender may, at the option of Lender, extend the time for payment of such outstanding principal balance or any part thereof, reduce the payments thereon, release anyone liable on any of such outstanding principal balance, accept a renewal of this Note, modify the terms and time of payment of such outstanding principal balance, join in any extension or subordination agreement, release any security given herefor, take or release other or additional security, and agree in writing with Maker to modify the rate of interest or period of 9 amortization of this Note or change the amount of the monthly installments payable hereunder. The remedies of Lender as provided herein, and in the other Loan Documents shall be cumulative and concurrent, and may be pursued singly, successively or together against Maker and/or any other property mortgaged, pledged or assigned to Lender as security for this Note, at the sole discretion of Lender, and such remedies shall not be exhausted by any exercise thereof but may be exercised as often as occasion therefor shall occur. Maker hereby waives and releases all errors, defects and imperfections in any proceedings instituted by Lender under the terms of this Note or any of the other Loan Documents, as well as all benefit that might accrue to Maker by virtue of any present or future laws exempting any property, real or personal, or any part of the proceeds arising from any sale of such property, from attachment, levy or sale under execution or providing for any stay of execution, exemption from civil process or extension of time for payment, as well as the right of inquisition on any real estate that may be levied upon under a judgment obtained by virtue hereof, and Maker hereby voluntarily condemns the same and authorizes the entry of such voluntary condemnation on any writ of execution issued thereon, and agrees that such real estate may be sold upon any such writ in whole or in part in any order desired by Lender. Lender shall not by any act of omission or commission be deemed to have waived any of its rights or remedies hereunder unless such waiver be in writing and signed by Lender, and then only to the extent specifically set forth therein; a waiver with respect to one event shall not be construed as continuing or as a bar to or waiver of such right or remedy on a subsequent event. THIS NOTE AMENDS, RESTATES, CONSOLIDATES AND SUPERSEDES THE ORIGINAL NOTE. WITHOUT DUPLICATION, THIS NOTE SHALL IN NO WAY EXTINGUISH MAKER'S UNCONDITIONAL OBLIGATION TO REPAY ALL INDEBTEDNESS EVIDENCED BY THE ORIGINAL NOTE (PLUS THE ADDITIONAL PRINCIPAL INDEBTEDNESS SET FORTH IN THIS NOTE), IS GIVEN IN SUBSTITUTION FOR, AND NOT AS PAYMENT OF, THE ORIGINAL NOTE, AND IS IN NO WAY INTENDED TO CONSTITUTE A NOVATION OF THE ORIGINAL NOTE. 12. CHOICE OF LAW; JURISDICTION. Notwithstanding anything in the Loan Documents to the contrary, this Note shall be governed by, interpreted, construed and enforced pursuant to and in accordance with the laws of the Commonwealth of Pennsylvania (excluding the law applicable to conflicts or choice of law) except to the extent as may be expressly provided otherwise in the Pledge. Maker agrees that, at Lender's option, any controversy arising under or in relation to this Note or any 10 other Leon Documents shall be litigated in the Commonwealth of Pennsylvania. At Lender's option, the Court of Common Pleas for Montgomery County, Pennsylvania and the federal court for the Eastern District of Pennsylvania, shall have jurisdiction over all controversies which may arise under or in relation to this Note, including, without limitation, those controversies relating to the execution, jurisdiction, breach, enforcement or compliance with this Note or any other issue arising under, related to, or in connection with any of the other Loan Documents. Maker irrevocably consents to service, jurisdiction, and venue of such courts for any litigation arising from this Note or any of the other Loan Documents, and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise. Nothing contained herein, however, shall prevent Lender from bringing any suit, action or proceeding or exercising any rights against Maker, or against any property in any other jurisdiction. Initiating such suit, action or proceeding or taking such action in any other jurisdiction shall in no event constitute a waiver of the agreement contained herein that the laws of the Commonwealth of Pennsylvania shall govern the rights and obligations of Maker and Lender as provided herein, or the submission herein by Maker to personal jurisdiction within the Commonwealth of Pennsylvania. The foregoing provisions were knowingly, willingly and voluntarily agreed to by Maker upon consultation with independent counsel. IN WITNESS WHEREOF, the parties, intending to be legally bound, have duly executed and delivered this Amended and Restated Note as of the date first above written. MAKER: AIMCO LT, L.P., a Delaware limited partnership By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ H. Alcock --------------------------------- Name: Harry Alcock --------------------------------- Title: VP --------------------------------- [Signatures Continued on Following Page] 11 LENDER: GMAC COMMERCIAL MORTGAGE CORPORATION By: /s/ Jerome R. Prassas --------------------------------- Senior Vice President 12 EX-10.72 14 EXHIBIT 10.72 AMENDED AND RESTATED GENERAL PARTNER PLEDGE AND SECURITY AGREEMENT This Amended and Restated General Partner Pledge and Security Agreement is made and entered into as of this 2nd day of December, 1996 by and between AIMCO LT, L.P., a Delaware limited partnership ("PLEDGOR"), and GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation ("GMAC"). BACKGROUND GMAC is the holder of a Note from Pledgor (the "ORIGINAL NOTE") dated November 14, 1996 in the principal amount of $6,317,000. As security for the payment and performance by Pledgor of its obligations under the Original Note, Pledgor executed and delivered to GMAC, among other things, a General Partner Pledge and Security Agreement dated November 14, 1996, (the "ORIGINAL PLEDGE"). The aforesaid loan has been amended and restated pursuant to an Amended and Restated Note between Pledgor and GMAC of even date herewith. Accordingly, the parties desire to amend and restate the Original Pledge in connection with such Amended and Restated Note. NOW, THEREFORE, intending to be legally bound, the parties agree that the Original Pledge is hereby amended and restated in its entirety to read as follows: [Remainder of page intentionally left blank] GENERAL PARTNER PLEDGE AND SECURITY AGREEMENT (GP LOAN) THIS PLEDGE AND SECURITY AGREEMENT dated as of December 2, 1996, made by AIMCO LT, L.P., a Delaware limited partnership (the "PLEDGOR"), having an address at 1873 South Bellaire Street, Denver, Colorado 80222, in favor of GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation ("GMAC"), having an address at 650 Dresher Road, P.O. Box 1015, Horsham, PA 19044-8015. W I T N E S S E T H: WHEREAS, the Pledgor is a general partner of RC Associates ("RC"), Highland Park Partners, Woodland Ridge II Partners Limited Partnership ("WOODLAND"), Woodhill Associates ("WOODHILL"), Southridge Associates ("SOUTHRIDGE"), Meadowbrook Drive Limited Partnership ("MEADOWBROOK"), Greentree Associates ("GREENTREE"), Meadows Limited Partnership ("MEADOWS"), Walnut Springs Limited Partnership, Heather Associates, Copper Chase Partners and Cypress Landing Limited Partnership, each an Illinois limited partnership (each, individually, a "PARTNERSHIP", and collectively, the "PARTNERSHIPS"); WHEREAS, GMAC has made a loan to the Pledgor in the principal amount of $25,615,200 (the "LOAN"); WHEREAS, the Loan is evidenced by an Amended and Restated Note (the "NOTE") of even date herewith issued by the Pledgor and is secured by, among other things, an Amended and Restated Pledge and Security Agreement (the "PLEDGE") of even date herewith. The Note, the Pledge and all other documents executed in connection with the Loan are hereinafter collectively referred to as the "LOAN DOCUMENTS"; and WHEREAS, to secure the obligations of the Pledgor under the Loan Documents, the Pledgor has agreed to execute and deliver this Agreement; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: SECTION 1 DEFINED TERMS. The following terms which are defined in the Uniform Commercial Code in effect in the Commonwealth of Pennsylvania on the date hereof are used herein as so defined: Accounts, Chattel Paper, General Intangibles, Instruments and Proceeds; and the following terms shall have the following meanings: 2 "AGREEMENT" means this General Partner Pledge and Security Agreement, as amended, supplemented or otherwise modified from time to time. "COLLATERAL" has the meaning assigned to it in Section 2 of this Agreement. "PARTNERSHIP AGREEMENTS" means the respective partnership agreements for the Partnerships. "UCC" means the Uniform Commercial Code as from time to time in effect in the Commonwealth of Pennsylvania. SECTION 2 GRANT OF SECURITY INTEREST BY PLEDGOR. The Pledgor hereby pledges to GMAC, and grants to GMAC, a lien on, and continuing security interest in (subject only to prior security interests and liens granted to GMAC, if any), all of the following property now owned or at any time hereafter acquired by the Pledgor or in which the Pledgor now has or at any time in the future may acquire any right, title or interest (collectively, the "COLLATERAL"), as collateral security for the prompt and complete payment and performance by the Pledgor of its obligations under the Loan Documents: (a) The Pledgor's general partnership interests in the Partnerships and all of its rights as general partner under the Partnership Agreements (including, without limitation, all of its right, title and interest as a general partner to participate in the operation and management of the Partnerships and all of its right, title and interest as general partner to property, assets, management and other fees, partnership interest and distributions under the Partnership Agreements); (b) all Accounts arising out of its general partnership interests in the Partnerships and the Partnership Agreements; (c) all General Intangibles arising out of its general partnership interests in the Partnerships and the Partnership Agreements; (d) all present and future rights of the Pledgor to receive any payment of money or other distribution or payment arising out of or in connection with its general partnership interests in the Partnerships and its rights as general partner under the Partnership Agreements; (e) any other property of the Partnership to which the Pledgor now or in the future may be entitled in its capacity 3 as a general partner of the Partnerships by way of distribution, return of capital or otherwise; (f) any other claim which the Pledgor now has or may in the future acquire in its capacity as a general partner of the Partnerships against the Partnerships and/or their property and/or the other partners thereof; and (g) to the extent not otherwise included above, all Proceeds of any and all of the foregoing, including, without limitation, whatever is received upon any collection, exchange, sale or other disposition of any of the Collateral, and any property into which any of the Collateral is converted, whether cash or noncash proceeds, and any and all other amounts paid or payable under or in connection with any of the Collateral. This Agreement constitutes a continuing security interest in the Collateral and shall remain in full force and effect until release or termination of the Partnership's obligations under the Loan Documents (collectively, the "OBLIGATIONS"). SECTION 3 RIGHTS OF GMAC: LIMITATIONS ON GMAC'S OBLIGATIONS. (a) PLEDGOR REMAINS LIABLE. Anything herein to the contrary notwithstanding, the Pledgor shall remain liable under the Partnership Agreements to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with and pursuant to the terms and provisions thereof. Unless GMAC shall become a general partner of the Partnerships as a result of its exercise of remedies pursuant to the terms hereof, and except as set forth in Section 17 hereof, GMAC shall not have any obligation or liability by reason of or arising out of this Agreement or the receipt by GMAC of any payment relating to any Collateral pursuant hereto, nor shall GMAC be obligated in any manner to perform any of the obligations of the Pledgor under or pursuant to the Partnership Agreements, or any of them, or any Account or General Intangible to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party under any thereof, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts that may have been pledged to it or to which it may be entitled at any time or times. Nothing contained in this Agreement shall be construed or interpreted (a) to transfer to GMAC any of the obligations of a partner of any of the Partnerships, or (b) to constitute GMAC a partner of the Partnerships. 4 (b) PROCEEDS. Subject to Section 6 hereof, GMAC hereby authorizes the Pledgor to collect all Accounts arising out of the Partnership Agreements in respect of its general partnership interests in the Partnerships. If required by GMAC at any time after the occurrence of a default or an Event of Default under any of the Loan Documents, such Accounts and any Proceeds, when collected by the Pledgor, shall be forthwith deposited by the Pledgor in the exact form received, duly indorsed by the Pledgor to GMAC if required, in a special bank account maintained by GMAC, subject to withdrawal by GMAC as hereinafter provided, and, until so turned over, shall be held by the Pledgor in trust for GMAC, segregated from other funds of the Pledgor. SECTION 4 REPRESENTATIONS AND WARRANTIES. The Pledgor hereby represents and warrants as follows: (a) OWNERSHIP OF COLLATERAL; LIENS. The Pledgor is the legal and beneficial owner of the Collateral, free and clear of all liens, except for the liens created by this Agreement, and other liens in favor of GMAC. The Pledgor has all requisite power and authority and the legal right to pledge to GMAC, and to grant to GMAC, a second priority lien on and continuing second priority security interest in the Collateral relating to RC, Woodland, Woodhill, Meadowbrook, Southridge, Greentree and Meadows and a first priority lien on and continuing first priority security interest in the remaining Collateral. GMAC acknowledges that the Pledgor has previously granted GMAC a first priority lien on and a continuing first priority security interest in certain of the Collateral as security for certain obligations to GMAC of parties related to the Pledgor. The execution, delivery and performance by the Pledgor of this Agreement is within the Pledgor's powers, has been duly authorized by all necessary partnership and legal action, and does not contravene any agreement applicable to any of the Partnerships or the Pledgor or restriction binding on or affecting any of the Partnerships or the Pledgor or any of their respective assets. No security agreement, financing statement or other public notice with respect to all or any part of the Collateral is on file or of record in any public office, except such as may have been filed in favor of GMAC. (b) SECURITY INTEREST. The security interests granted and continued pursuant to this Agreement constitute perfected first or second priority security interests, as applicable, in the Collateral in favor of GMAC and are enforceable as such against all creditors of and purchasers from the Pledgor. All action on the part of the Pledgor necessary or desirable to perfect such security interests in each item of the Collateral requested by GMAC, including the 5 execution of financing statements for filing in the appropriate filing offices in all appropriate public offices, has been or will be duly taken. (c) GOVERNMENTAL ACTION. No action by any governmental or quasi- governmental body or authority (i) is required in connection with the grant or continuation by the Pledgor of the liens intended to be created or continued pursuant to this Agreement, (ii) is required to be obtained by the Pledgor in connection with the exercise by GMAC of the rights provided in this Agreement or the remedies in respect of the Collateral pursuant to this Agreement, or (iii) is required in connection with the execution, delivery and performance by the Pledgor of this Agreement or any of the Partnership Agreements. (d) ACCOUNTS. The Pledgor's chief executive office and chief place of business, and the place where the Pledgor keeps its records concerning the Collateral, is located at Pledgor's address set forth on page 1 hereof. SECTION 5 COVENANTS. The Pledgor covenants and agrees that, so long as any of the Obligations under the Loan Documents remain in effect: (a) FURTHER DOCUMENTATION; PLEDGE OF INSTRUMENTS. At any time and from time to time, upon the written request of GMAC, and at the sole expense of the Pledgor, the Pledgor will promptly and duly execute and deliver such further instruments and documents and take such further action as GMAC may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted. Without limiting the generality of the foregoing, the Pledgor will execute and file such financing or continuation statements, or amendments thereto, and such other instruments, endorsements or notices, as GMAC may deem necessary or desirable in order to perfect and preserve the liens created or continued or intended to be created or continued hereby. The Pledgor hereby authorizes GMAC to file any such financing or continuation statement without the signature of the Pledgor to the extent permitted by applicable law. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note, other Instrument or Chattel Paper, such note, Instrument or Chattel Paper shall be immediately delivered to GMAC, duly indorsed in a manner satisfactory to GMAC, to be held as Collateral pursuant to this Agreement. 6 (b) MAINTENANCE OF RECORDS. The Pledgor will keep and maintain at its own cost and expense satisfactory and complete records of the Collateral. (c) LIMITATION ON LIENS ON COLLATERAL. The Pledgor will not create, incur or permit to exist, will defend the Collateral and the right, title and interest of GMAC therein against, and will take such other action as is necessary to remove, any lien, encumbrance or claim on or to the Collateral other than the lien created and continued pursuant to this Agreement. (d) FURTHER IDENTIFICATION OF COLLATERAL. The Pledgor will furnish to GMAC from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as GMAC may reasonably request, all in reasonable detail. (e) CHANGES IN LOCATIONS, NAME, ETC. The Pledgor will not, unless it shall give 60 days' prior written notice to such effect to GMAC, (i) change the location of its chief executive office or chief place of business from that specified in Section 4(d) hereof, or remove its books and records from such location, or (ii) change its name, identity or structure to such an extent that any financing statements filed by GMAC in connection with this Agreement would become misleading. (f) AMENDMENTS TO PARTNERSHIP AGREEMENTS. The Pledgor shall not, without the prior written consent of GMAC, consent to, vote in favor of or otherwise permit any amendment to or modification of any of the Partnership Agreements or the partnership agreements, Articles of Incorporation or by-laws of any Affiliate (as hereinafter defined). For purposes of this Pledge, "AFFILIATE" shall mean any corporation, partnership, joint venture, association, limited liability company, limited liability partnership, joint stock company, trust, or unincorporated organization that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with the Pledgor. (g) NO TRANSFER OF INTEREST IN PARTNERSHIPS. The Pledgor shall not sell, assign, transfer, pledge or encumber or permit to be sold, assigned, transferred, pledged or encumbered any of its interests in any of the Partnerships or the other Collateral. Any sale, assignment, transfer, pledge or encumbrance of the Pledgor's interest in any of the Partnerships in violation of the foregoing provisions of this Section 5(g) shall be null and void. 7 (h) BANKRUPTCY OF THE PARTNERSHIPS. The Pledgor shall not authorize, seek to cause or permit any of the Partnerships to commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property or to consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or to make a general assignment for the benefit of its creditors. (i) CONDUCT OF BUSINESS. MAINTENANCE OF EXISTENCE, ETC. The Pledgor shall at all times (i) preserve and maintain in full force and effect its existence as a limited partnership under the laws of the State of Delaware and its qualification to do business in each other jurisdiction where the ownership or leasing of property or the nature of business transacted makes such qualification necessary, and (ii) obtain, maintain in full force and effect and comply in all material respects with all legal requirements and other consents and approvals required at any time in connection with its general partnership interests in the Partnerships. (j) CLAIMS AGAINST COLLATERAL. The Pledgor shall, within 5 days of receipt of knowledge by the Pledgor, notify GMAC in reasonable detail of any lien, encumbrance or claim made or asserted against the Collateral. (k) COMPLIANCE WITH LAWS. The Pledgor shall comply with all legal requirements in connection with its business as a general partner of the Partnerships. (l) NOTICE OF DISSOLUTION. The Pledgor will forthwith upon learning of the occurrence of any event which would cause termination and/or dissolution of any of the Partnerships, notify GMAC in writing thereof. SECTION 6 GMAC'S APPOINTMENT AS ATTORNEY-IN-FACT. (a) POWERS. Effective immediately, without limiting any rights or powers granted herein to GMAC while no default or Event of Default under any of the Loan Documents has occurred, the Pledgor hereby irrevocably constitutes and appoints GMAC and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority, in the place and stead of the Pledgor and in the name of the Pledgor or in its own name, for the purpose of carrying out 8 the terms of this Agreement, without notice to or assent by the Pledgor, to do the following: (i) upon the occurrence of any default or Event of Default under any of the Loan Documents, to exercise all partnership rights, powers and principles to the same extent as a general partner of the Partnerships; (ii) to the extent that the Pledgor would have the right to do so under any of the Partnership Agreements, upon the occurrence of any Event of Default, in the name of the Pledgor or its own name, or otherwise, to take possession of and indorse (without recourse) and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under any of the Partnership Agreements or any Account, Instrument or General Intangible arising thereunder or out of the Pledgor's general partnership interests in any of the Partnerships and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by GMAC for the purpose of collecting any and all such moneys due under any of the Partnership Agreements or any Account, Instrument or General Intangible arising thereunder or out of any of the Pledgor's general partnership interests in the Partnerships whenever payable; (iii) upon the occurrence of any default or Event of Default under any of the Loan Documents, to pay or discharge taxes and Liens levied or placed on the Collateral and to execute any and all documents and instruments that may be necessary or desirable to accomplish the purposes of Section 5(a) hereof; and (iv) upon the occurrence of any default or Event of Default under any of the Loan Documents, (A) to direct any party liable for any payment under any of the Collateral to make payment of any and all moneys due or to become due thereunder directly to GMAC or as GMAC shall direct, (B) to ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral, (C) to sign and indorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, notices and other documents in connection with any of the Collateral, (D) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any part thereof and to 9 enforce any other right in respect of any Collateral, (E) to defend any suit, action or proceeding brought against the Pledgor with respect to any Collateral, (F) to settle, compromise or adjust any suit, action or proceeding described in clause (E) above and, in connection therewith, to give such discharges or releases as GMAC may deem appropriate and (G) generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though GMAC were the absolute owner thereof for all purposes, and to do, at GMAC's option and the Pledgor's expense, at any time, or from time to time, all acts and things that GMAC deems necessary to protect, preserve or realize upon the Collateral and the liens thereon created and continued hereby and to effect the intent of this Agreement, all as fully and effectively as the Pledgor might do. The Pledgor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. This power of attorney is a power coupled with an interest and shall be irrevocable. (b) OTHER POWERS. The Pledgor also authorizes GMAC, at any time and from time to time, to execute, in connection with any sale provided for in Section 8 hereof, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral. SECTION 7 PERFORMANCE BY GMAC OF THE PLEDGOR'S OBLIGATIONS; RIGHTS OF PLEDGOR PRIOR TO A DEFAULT OR EVENT OF DEFAULT. Immediately upon the occurrence of a default or an Event of Default under any of the Loan Documents, and without limiting any rights or powers granted herein to GMAC while no default or an event of Default under any of the Loan Documents has occurred, GMAC, without releasing the Pledgor from any obligation, covenant or condition hereof, itself may make any payment or perform, or cause the performance of, any such obligation, covenant or condition or take any other action in such manner and to such extent as GMAC may deem necessary to protect, perfect or continue the perfection of the liens created or continued or intended to be created or continued pursuant to this Agreement. Unless a default or an Event of Default under any of the Loan Documents shall have occurred, the Pledgor shall be entitled to receive and retain, dividend or otherwise utilize all distributions made to it pursuant to the Partnership Agreements or otherwise arising out of the Collateral and exercise all voting, partnership and other rights pertaining to the Collateral and take all action it is authorized to take thereunder; PROVIDED that no vote or other 10 action taken shall otherwise result in a default or an Event of Default under any of the Loan Documents. SECTION 8 RIGHTS AND REMEDIES. (a) If a default or an Event of Default under any of the Loan Documents shall have occurred, (i) all payments made in respect of the Collateral and received by or on behalf of GMAC in accordance with the provisions of this Agreement or otherwise, may, in the discretion of GMAC, (A) be held by or on behalf of GMAC as Collateral, and/or (B) then or at any time thereafter be applied to the Obligations in such order as GMAC shall determine, and (ii) to the extent permitted by applicable law, all shares or certificates of or evidencing the Collateral shall be registered in the name of GMAC or its nominee, and (whether or not so registered) GMAC or its nominee may thereafter exercise (A) all voting, partnership and other rights pertaining to the Collateral and (B) any and all rights of conversion, exchange, subscription and any other rights, privileges or options pertaining to the Collateral as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Collateral upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the partnership structure of any of the Partnerships or upon the exercise by the Pledgor or GMAC of any right, privilege or option pertaining to such shares or certificates of or evidencing the Collateral, and in connection therewith, the right to deposit and deliver any and all of the Collateral with any committee, depository, transfer agent, registrar or other designated agency upon such terms and conditions as it may determine), all without liability except to account for property actually received by it, but GMAC shall have no duty to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing. (b) If a default or an Event of Default under any of the Loan Documents shall have occurred, then, in addition to any other rights and remedies provided for herein and in any other instrument or agreement securing, evidencing or relating to the Obligations, or that may otherwise be available, GMAC may, without any demand, advertisement or notice (except as expressly provided for below in this Section 8(b) or by applicable law), exercise all the rights and remedies of a secured party under the UCC, and in addition may sell, lease, assign, give option or options to purchase, or otherwise dispose of the Collateral, or any part thereof, as hereinafter provided. The Collateral may be sold or otherwise disposed of in one or more sales, at 11 public or private sale, conducted by any officer or agent of, or auctioneer or attorney for, GMAC, at any exchange or broker's board or at GMAC's place of business or elsewhere, for cash, upon credit or for other property, for immediate or future delivery, and at such price or prices and on such terms as GMAC shall, in its sole discretion, deem appropriate. GMAC may be the purchaser of any or all of the Collateral so sold at a sale and thereafter may hold the same, and the obligations of the Pledgor and/or any of the Partnerships, to such purchaser may be applied as a credit against the purchase price. GMAC may, in its sole discretion, at any such sale restrict the prospective bidders or purchasers as to their number, nature of business and investment intention. Upon any such sale, GMAC shall have the right to deliver, assign and transfer to the purchaser thereof (including GMAC) the Collateral so sold. Each purchaser (including GMAC) at any such sale shall hold the Collateral so sold, absolutely free from any claim or right of whatsoever kind, including any equity or right of redemption, of the Pledgor, and the Pledgor hereby specifically waives, to the fullest extent it may lawfully do so, all rights of redemption, stay or appraisal that it has or may have under any rule of law or statute now existing or hereafter adopted. The Pledgor agrees that GMAC need not give more than 10 days prior notice of the time and place of any public sale or of the time after which a private sale or other intended disposition is to take place and that such notice is reasonable notification of such matters. No notification need be given to the Pledgor if it has signed after the occurrence of a default or an Event of Default under any of the Loan Documents a statement renouncing or modifying any right to notification of sale or other intended disposition. Any such public sale shall be held at such time or times within ordinary business hours as GMAC shall fix in the notice of such sale. At any such sale, the Collateral may be sold in one lot as an entirety or in separate parcels. GMAC shall not be obligated to make any sale pursuant to any such notice. GMAC may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for such sale, and any such sale may be made at any time or place to which the same may be so adjourned without further notice or publication. In case of any sale of all or any part of the Collateral on credit or for future delivery, the Collateral so sold may be retained by GMAC until the full selling price is paid by the purchaser thereof, but GMAC shall not incur any liability in case of the failure of such purchaser to take up and pay for the Collateral so sold, and, in case of any such failure, such Collateral may again be sold pursuant to the provisions hereof. 12 (c) If a default or an Event of Default under any of the Loan Documents shall have occurred, instead of exercising the power of sale provided in Section 8(b) hereof, GMAC may proceed by a suit or suits at law or in equity to foreclose the pledge and security interest under this Agreement and sell the Collateral or any portion thereof under a judgment or decree of a court or courts of competent jurisdiction. (d) GMAC, as attorney-in-fact pursuant to Section 6 hereof, may, in the name and stead of the Pledgor, make and execute all conveyances, assignments and transfers of the Collateral sold pursuant to Section 8(b) or Section 8(c) hereof, and, to the extent permitted by applicable law, the Pledgor hereby ratifies and confirms all that GMAC, as such attorney-in-fact, shall do by virtue hereof. Nevertheless, the Pledgor shall, if so requested by GMAC, ratify and confirm any sale or sales by executing and delivering to GMAC, or to such purchaser or purchasers, all such instruments as may, in the judgment of GMAC, be advisable for the purpose. (e) The receipt of GMAC for the purchase money paid at any such sale made by it pursuant to Section 8(b) or 8(c) hereof shall be a sufficient discharge therefor to any purchaser of the Collateral, or any portion thereof, sold as aforesaid; and no such purchaser (or the representatives or assigns of such purchaser), after paying such purchase money and receiving such receipt, shall be bound to see to the application of such purchase money or any part thereof or in any manner whatsoever be answerable for any loss, misapplication or non-application of any such purchase money, or any part thereof, or be bound to inquire as to the authorization, necessity, expediency or regularity of any such sale. (f) GMAC shall not incur any liability as a result of the sale of the Collateral, or any part thereof, at any private sale pursuant to Section 8(b) hereof conducted in a commercially reasonable manner and in accordance with applicable law. The Pledgor hereby waives, to the fullest extent permitted by applicable law, all claims, damages and demands against GMAC arising out of the repossession or retention of the Collateral or the sale of the Collateral pursuant to Section 8(b) or Section 8(c) hereof, including, without limitation, any claims against GMAC arising by reason of the fact that the price at which the Collateral, or any part thereof, may have been sold at a private sale was less than the price that might have been obtained at a public sale or was less than the aggregate amount of the Obligations, even if GMAC accepts the first offer received 13 that GMAC in good faith deems to be commercially reasonable under the circumstances and does not offer the Collateral to more than one offeree. To the fullest extent permitted by law, the Pledgor shall have the burden of proving that any such sale of the Collateral was conducted in a commercially unreasonable manner. (g) If GMAC shall demand possession of the Collateral or any part thereof in connection with its rights pursuant to Section 8(b) or Section 8(c) hereof, the Pledgor will, at its own expense, forthwith cause such Collateral or any part thereof designated by GMAC to be assembled and made available and/or delivered to GMAC at any place reasonably designated by GMAC. (h) No sale or other disposition of all or any part of the Collateral by GMAC pursuant to this Section 8 shall be deemed to relieve the Partnership of its obligations in respect of any Obligations except to the extent the proceeds thereof are applied by GMAC to the payment of such Obligations. (i) if a default or an Event of Default under any of the Loan Documents shall have occurred, GMAC (i) may (but need not), upon notice to the Pledgor, exercise all voting and other rights of the Pledgor as a general partner of the Partnership and exercise all other rights provided under the Partnership Agreements, and (ii) shall receive all permitted distributions, if any, made for the account of the Pledgor under the Partnership Agreements. SECTION 9 WAIVER. To the fullest extent it may lawfully so agree, the Pledgor agrees that it will not at any time insist upon, claim, plead, or take any benefit or advantage of any appraisement, valuation, stay, extension, moratorium, redemption, or similar law now or hereafter in force in order to prevent, delay, or hinder the enforcement hereof or the absolute sale of any part of the Collateral. The Pledgor for itself and all who claim through it, so far as it or they now or hereafter lawfully may do so, hereby waives the benefit of all such laws, and all right to have the Collateral marshalled upon any foreclosure hereof, and agrees that any court having jurisdiction to foreclose this Agreement may order the sale of the Collateral as an entirety. Without limiting the generality of the foregoing, the Pledgor hereby: (a) authorizes GMAC, in its sole discretion and without notice to or demand upon the Pledgor and without otherwise affecting the obligations of the Pledgor hereunder or in respect of the Obligations, from time to time to take and hold other collateral (in addition to the Collateral) for payment of any Obligations, or any part thereof, and to exchange, enforce or release such other collateral or any part thereof and to accept 14 and hold any endorsement or guarantee of payment of the Obligations or any part thereof and to release or substitute any endorser or guarantor or any other person or entity granting security for or in any other way obligated upon the obligations or any part thereof; and (b) waives and releases any and all right to require GMAC to collect any of the Obligations from any specific item or items of the Collateral or from any other party liable as guarantor or in any other manner in respect of any of the Obligations or from any collateral (other than such Collateral) for any of the Obligations. SECTION 10 INDEMNITY. The Pledgor shall indemnify, defend with counsel reasonably acceptable to and hold harmless GMAC from and against any and all claims, losses and liabilities growing out of or resulting from (i) this Agreement (including, without limitation, enforcement of this Agreement), (ii) any refund or adjustment (including, without limitation, any interest thereon) of any amount paid or payable in accordance with the terms hereof to GMAC in respect of any Collateral after the occurrence of a default or an Event of Default under any of the Loan Documents, (iii) any delay in paying any and all excise, sales or other similar taxes which may be payable or determined to be payable with respect to any of the Collateral, (iv) any delay in complying with any legal requirements applicable to any of the Collateral and (v) the transactions contemplated by this Agreement, but excluding any such claims, losses or liabilities found by a final order of a court of competent jurisdiction to result from GMAC's gross negligence or wilful misconduct. SECTION 11 AMENDMENTS; ETC. No amendment or waiver of any provision of this Agreement or consent to any departure by the Pledgor from the terms of this Agreement shall in any event be effective unless the same shall be in writing and signed by the ledgor and GMAC and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 12 NOTICES. All notices, demands and other communications hereunder shall be in writing and sent in the manner set forth in the Pledge, to the addresses of the parties set forth on page 1 of this Agreement. Such notices, demands, and other communications shall be effective as set forth in the Pledge. Each party may change the address to which notices to it are to be sent by written notice given to the other in accordance with this paragraph. SECTION 13 CONTINUING PLEDGE AND SECURITY INTEREST. This Agreement shall be a continuing one and all representations, warranties, covenants, undertakings, obligations, consents, waivers and agreements of the Pledgor herein shall survive the date of this Agreement and shall continue in full force and 15 effect until the earlier to occur of (i) the indefeasible payment in full of all of the Obligations, or (ii) the termination of the Obligations; at which time GMAC shall release this Agreement and make any appropriate filings to reflect such release. SECTION 14 CHOICE OF LAW; CONSENT TO JURISDICTION. Notwithstanding anything in the Loan Documents to the contrary, this Agreement shall be governed by, interpreted, construed and enforced pursuant to and in accordance with the laws of the Commonwealth of Pennsylvania (excluding the law applicable to conflicts or choice of law) except to the extent as may be expressly provided otherwise in the Pledge. The Pledgor agrees that, at GMAC's option, any controversy arising under or in relation to this Agreement or any other Loan Documents shall be litigated in the Commonwealth of Pennsylvania. At GMAC's option, the Court of Common Pleas for Montgomery County, Pennsylvania and the federal court for the Eastern District of Pennsylvania, shall have jurisdiction over all controversies which may arise under or in relation to this Agreement, including, without limitation, those controversies relating to the execution, jurisdiction, breach, enforcement or compliance with this Agreement or any other issue arising under, related to, or in connection with any of the other Loan Documents. The Pledgor irrevocably consents to service, jurisdiction, and venue of such courts for any litigation arising from this Agreement or any of the other Loan Documents, and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise. Nothing contained herein, however, shall prevent GMAC from bringing any suit, action or proceeding or exercising any rights against the Pledgor, or against any property in any other jurisdiction. Initiating such suit, action or proceeding or taking such action in any other jurisdiction shall in no event constitute a waiver of the agreement contained herein that the laws of the Commonwealth of Pennsylvania shall govern the rights and obligations of the Pledgor and GMAC as provided herein, or the submission herein by the Pledgor to personal jurisdiction within the Commonwealth of Pennsylvania. The foregoing provisions were knowingly, willingly and voluntarily agreed to by the Pledgor upon consultation with independent counsel. SECTION 15 HEADINGS. Headings used in this Agreement are for convenience of reference only and do not constitute part of this Agreement for any purpose. SECTION 16 NO WAIVER; CUMULATIVE REMEDIES; INTEGRATION. GMAC shall not by any act (except by a written instrument pursuant to this Section), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any default or Event of Default under any of the Loan Documents or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in 16 exercising, on the part of GMAC, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by GMAC of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which it would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law. SECTION 17 GMAC'S DUTIES. The powers conferred on GMAC hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. GMAC shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. GMAC's sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the UCC or otherwise, shall be to deal with it in the same manner as GMAC deals with similar securities and property for its own account. Neither GMAC nor any of its directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Pledgor or otherwise. SECTION 18 SEVERABILITY. Any provision of this Agreement that 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. Where provisions of any law or regulation resulting in such prohibition or unenforceability may be waived, they are hereby waived by the Pledgor and GMAC to the full extent permitted by law so that this Agreement shall be deemed a valid and binding agreement, and the liens and security interests created and continued hereby shall constitute continuing second priority liens on and second priority perfected security interests in the Collateral, in each case enforceable in accordance with its terms and subject only to first priority liens and security interests of GMAC. SECTION 19 SPECIFIC PERFORMANCE. The Pledgor hereby irrevocably waives, to the extent that it may do so under applicable law, any defense based on the adequacy of a remedy at law that may be asserted as a bar to the remedy of specific 17 performance in any action brought against the Pledgor for specific performance of this Agreement by GMAC or in respect of all or a substantial part of the Pledgor's assets under the bankruptcy or insolvency laws of any jurisdiction to which the Pledgor or its assets are subject. SECTION 20 PRIVATE SALES. The Pledgor recognizes that GMAC may be unable to effect a public sale of any or all the Collateral, by reason of certain prohibitions contained in any federal or state law governing the issuance or sale of securities and applicable state securities laws or otherwise, and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire the Collateral for their own account for investment and not with a view to the distribution thereof. The Pledgor acknowledges and agrees that any such private sale may result in prices and other terms less favorable to GMAC than if such sale were a public sale and agrees that such circumstances shall not, in and of themselves, result in a determination that such sale was not made in a commercially reasonable manner. GMAC shall be under no obligation to delay a sale of any of the Collateral for the period of time necessary to permit any of the Partnerships to register for public sale under any federal or state law governing the issuance or sale of securities, even if the Partnership would agree to do so. SECTION 21 REGISTRATION OF PLEDGE. Concurrently with the execution of this Agreement, the Pledgor will send to the Partnerships written instructions substantially in the form of EXHIBIT A hereto and shall cause the Partnerships to, and the Partnerships shall, deliver to GMAC Initial Transaction Statements in the form of EXHIBIT B hereto confirming that the Partnerships have registered on their books the pledge effected by this Agreement. SECTION 22 REINSTATEMENT. This Agreement 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 GMAC upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Pledgor or any of the Partnerships or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Pledgor or any of the Partnerships, or any substantial part of their property, or otherwise, all as though such payments had not been made. SECTION 23 POWERS COUPLED WITH AN INTEREST. All authorizations, agencies and powers herein contained with respect to the Collateral are irrevocable and are coupled with an interest. 18 SECTION 24 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. SECTION 25 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. IN WITNESS WHEREOF, the Pledgor and GMAC have caused this Amended and Restated Agreement to be duly executed and delivered as of the date first above written. GMAC COMMERCIAL MORTGAGE CORPORATION By: /s/ Jerome R. Prassass --------------------------------- AIMCO LT, L.P., a Delaware limited partnership By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ H. Alcock ---------------------------------------- Name: Harry Alcock -------------------------------------- Title: VP ------------------------------------- 19 ACKNOWLEDGMENT AND CONSENT The undersigned, which are the Partnerships referred to in the foregoing Amended and Restated General Partner Pledge and Security Agreement (the "PLEDGE"), hereby acknowledge receipt of a copy thereof and agree to be bound thereby and to comply with the terms thereof insofar as such terms are applicable to us. The undersigned also agree that if a default or an Event of Default under any of the Loan Documents (as defined in the Note) shall occur to pay to GMAC Commercial Mortgage Corporation ("GMAC") all amounts then due and thereafter as they become due to AIMCO LT, L.P., in its capacity as general partner of the undersigned, until the Obligations (as defined in the Pledge) are no longer in force. The undersigned further agree that GMAC will not have any of the obligations of a general partner of any of the undersigned unless GMAC affirmatively elects in writing to undertake such obligations by becoming a general partner in the undersigned in accordance with the terms of the Pledge. December 2, 1996 RC ASSOCIATES, an Illinois limited partnership By: AIMCO LT, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ H. Alcock ---------------------------------------- Name: Harry Alcock -------------------------------------- Title: VP ------------------------------------- [SIGNATURES CONTINUED ON FOLLOWING PAGE] 20 HIGHLAND PARK PARTNERS, an Illinois limited partnership By: AIMCO LT, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ H. Alcock --------------------------------------------- Name: Harry Alcock ------------------------------------------- Title: VP ------------------------------------------ WOODLAND RIDGE II PARTNERS LIMITED PARTNERSHIP, an Illinois limited partnership By: AIMCO LT, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ H. Alcock --------------------------------------------- Name: Harry Alcock ------------------------------------------- Title: VP ------------------------------------------ 21 WOODHILL ASSOCIATES, an Illinois limited partnership By: AIMCO LT, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ H. Alcock --------------------------------------------- Name: Harry Alcock ------------------------------------------- Title: VP ------------------------------------------ SOUTHRIDGE ASSOCIATES, an Illinois limited partnership By: AIMCO LT, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ H. Alcock --------------------------------------------- Name: Harry Alcock ------------------------------------------- Title: VP ------------------------------------------ 22 MEADOWBROOK DRIVE LIMITED PARTNERSHIP, an Illinois limited partnership By: AIMCO LT, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ H. Alcock --------------------------------------------- Name: Harry Alcock ------------------------------------------- Title: VP ------------------------------------------ GREENTREE ASSOCIATES, an Illinois limited partnership By: AIMCO LT, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ H. Alcock --------------------------------------------- Name: Harry Alcock ------------------------------------------- Title: VP ------------------------------------------ 23 MEADOWS LIMITED PARTNERSHIP, an Illinois limited partnership By: AIMCO LT, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ H. Alcock --------------------------------------------- Name: Harry Alcock ------------------------------------------- Title: VP ------------------------------------------ WALNUT SPRINGS LIMITED PARTNERSHIP, an Illinois limited partnership By: AIMCO LT, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ H. Alcock --------------------------------------------- Name: Harry Alcock ------------------------------------------- Title: VP ------------------------------------------ 24 HEATHER ASSOCIATES, an Illinois limited partnership By: AIMCO LT, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ H. Alcock --------------------------------------------- Name: Harry Alcock ------------------------------------------- Title: VP ------------------------------------------ COPPER CHASE PARTNERS, an Illinois limited partnership By: AIMCO LT, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ H. Alcock --------------------------------------------- Name: Harry Alcock ------------------------------------------- Title: VP ------------------------------------------ 25 CYPRESS LANDING LIMITED PARTNERSHIP, an Illinois limited partnership By: AIMCO LT, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ H. Alcock --------------------------------------------- Name: Harry Alcock ------------------------------------------- Title: VP ------------------------------------------ 26 EX-10.73 15 EXHIBIT 10.73 GENERAL PARTNER PLEDGE AND SECURITY AGREEMENT THIS PLEDGE AND SECURITY AGREEMENT (this "AGREEMENT"), dated as of December 2, 1996 made by AIMCO LT, L.P., a Delaware limited partnership (the "PLEDGOR"), having an address at 1873 South Bellaire Street, Denver, CO 80222, in favor of GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation ("GMAC"), having an address at 650 Dresher Road, P.O. Box 1015, Horsham, PA 19044-8015 W I T N E S S E T H: WHEREAS, the Pledgor is a general partner of MEADOWS LIMITED PARTNERSHIP, an Illinois limited partnership (the "PARTNERSHIP"); WHEREAS, GMAC has made a first mortgage loan to the Partnership in the original principal amount of $2,488,400 (the "LOAN"). The proceeds of the Loan will be used to finance a multifamily project known as Meadows at Anderson Mill Apartments and located in Austin, Texas (the "PROPERTY"); WHEREAS, the Loan is evidenced by a Multifamily Note (the "NOTE") issued by the Partnership and is secured by, among other things, a Multifamily Deed of Trust, Assignment of Rents and Security Agreement (the "DEED OF TRUST") of even date herewith, granting a first lien on the Property. The Note, the Deed of Trust and all other documents executed in connection with the Loan are hereinafter collectively referred to as the "LOAN DOCUMENTS"; WHEREAS, to secure the obligations of the Partnership under the Loan Documents, the Pledgor has agreed to execute and deliver this Agreement; and WHEREAS, the Pledgor will receive substantial benefits as a result of and in connection with the transactions contemplated by the Loan Documents. NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: SECTION 1 DEFINED TERMS. The following terms which are defined in the Uniform Commercial Code in effect in the State of Texas on the date hereof are used herein as so defined: Accounts, Chattel Paper, General Intangibles, Instruments and Proceeds; and the following terms shall have the following meanings: "AGREEMENT" means this General Partner Pledge and Security Agreement, as amended, supplemented or otherwise modified from time to time. "COLLATERAL" has the meaning assigned to it in Section 2 of this Agreement. "PARTNERSHIP AGREEMENT" means the partnership agreement of the Partnership. "UCC" means the Uniform Commercial Code as from time to time in effect in the State of Texas. SECTION 2 GRANT OF SECURITY INTEREST BY PLEDGOR. The Pledgor hereby pledges to GMAC, and grants to GMAC, a first priority lien on, and continuing first priority security interest in, all of the following property now owned or at any time hereafter acquired by the Pledgor or in which the Pledgor now has or at any time in the future may acquire any right, title or interest (collectively, the "COLLATERAL"), as collateral security for the prompt and complete payment and performance by the Partnership of its obligations under the Loan Documents: (a) The Pledgor's general partnership interests in the Partnership and all of its rights as general partner under the Partnership Agreement (including, without limitation, all of its right, title and interest as a general partner to participate in the operation and management of the Partnership and all of its right, title and interest as general partner to property, assets, management and other fees, partnership interest and distributions under the Partnership Agreement); (b) all Accounts arising out of its general partnership interests in the Partnership and the Partnership Agreement; (c) all General Intangibles arising out of its general partnership interests in the Partnership and the Partnership Agreement; (d) all present and future rights of the Pledgor to receive any payment of money or other distribution or payment arising out of or in connection with its general partnership interests in the Partnership and its rights as general partner under the Partnership Agreement; 2 (e) any other property of the Partnership to which the Pledgor now or in the future may be entitled in its capacity as a general partner of the Partnership by way of distribution, return of capital or otherwise; (f) any other claim which the Pledgor now has or may in the future acquire in its capacity as a general partner of the Partnership against the Partnership and/or its property and/or the other partners thereof; and (g) to the extent not otherwise included above, all Proceeds of any and all of the foregoing, including, without limitation, whatever is received upon any collection, exchange, sale or other disposition of any of the Collateral, and any property into which any of the Collateral is converted, whether cash or noncash proceeds, and any and all other amounts paid or payable under or in connection with any of the Collateral. This Agreement constitutes a continuing security interest in the Collateral and shall remain in full force and effect until release or termination of the Partnership's obligations under the Loan Documents (collectively, the "OBLIGATIONS"). SECTION 3 RIGHTS OF GMAC; LIMITATIONS ON GMAC'S OBLIGATIONS. (a) PLEDGOR REMAINS LIABLE. Anything herein to the contrary notwithstanding, the Pledgor shall remain liable under the Partnership Agreement to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with and pursuant to the terms and provisions thereof. Unless GMAC shall become a general partner of the Partnership as a result of its exercise of remedies pursuant to the terms hereof, and except as set forth in Section 17 hereof, GMAC shall not have any obligation or liability by reason of or arising out of this Agreement or the receipt by GMAC of any payment relating to any Collateral pursuant hereto, nor shall GMAC be obligated in any manner to perform any of the obligations of the Pledgor under or pursuant to the Partnership Agreement or any Account or General Intangible to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party under any thereof, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts that may have been pledged to it or to which it may be entitled at any time or times. Nothing contained in this Agreement shall be construed or interpreted (a) to transfer to GMAC any of the obligations of a partner of the 3 Partnership, or (b) to constitute GMAC a partner of the Partnership. (b) PROCEEDS. Subject to Section 6 hereof, GMAC hereby authorizes the Pledgor to collect all Accounts arising out of the Partnership Agreement in respect of its general partnership interests in the Partnership. If required by GMAC at any time after the occurrence of a default or an Event of Default under any of the Loan Documents, such Accounts and any Proceeds, when collected by the Pledgor, shall be forthwith deposited by the Pledgor in the exact form received, duly indorsed by the Pledgor to GMAC if required, in a special bank account maintained by GMAC, subject to withdrawal by GMAC as hereinafter provided, and, until so turned over, shall be held by the Pledgor in trust for GMAC, segregated from other funds of the Pledgor. SECTION 4 REPRESENTATIONS AND WARRANTIES. The Pledgor hereby represents and warrants as follows: (a) OWNERSHIP OF COLLATERAL; LIENS. The Pledgor is the legal and beneficial owner of the Collateral, free and clear of all liens, except for the liens created by this Agreement. The Pledgor has all requisite power and authority and the legal right to pledge to GMAC, and to grant to GMAC, a first priority lien on and continuing first priority security interest in the Collateral. The execution, delivery and performance by the Pledgor of this Agreement is within the Pledgor's powers, has been duly authorized by all necessary partnership and legal action, and does not contravene any agreement applicable to the Partnership or the Pledgor or restriction binding on or affecting the Partnership or the Pledgor or any of their respective assets. No security agreement, financing statement or other public notice with respect to all or any part of the Collateral is on file or of record in any public office, except such as may have been filed in favor of GMAC pursuant to this Agreement. (b) SECURITY INTEREST. The security interests granted and continued pursuant to this Agreement constitute perfected first priority security interests in the Collateral in favor of GMAC and are enforceable as such against all creditors of and purchasers from the Pledgor. All action on the part of the Pledgor necessary or desirable to perfect such security interests in each item of the Collateral requested by GMAC, including the execution of financing statements for filing in the appropriate filing offices in all appropriate public offices, has been or will be duly taken. 4 (c) GOVERNMENTAL ACTION. No action by any governmental or quasi-governmental body or authority (i) is required in connection with the grant or continuation by the Pledgor of the liens intended to be created or continued pursuant to this Agreement, (ii) is required to be obtained by the Pledgor in connection with the exercise by GMAC of the rights provided in this Agreement or the remedies in respect of the Collateral pursuant to this Agreement, or (iii) is required in connection with the execution, delivery and performance by the Pledgor of this Agreement or the Partnership Agreement. (d) ACCOUNTS. The Pledgor's chief executive office and chief place of business, and the place where the Pledgor keeps its records concerning the Collateral, is located at Pledgor's address set forth on page 1 hereof. SECTION 5 COVENANTS. The Pledgor covenants and agrees that, so long as any of the Obligations under the Loan Documents remain in effect: (a) FURTHER DOCUMENTATION; PLEDGE OF INSTRUMENTS. At any time and from time to time, upon the written request of GMAC, and at the sole expense of the Pledgor, the Pledgor will promptly and duly execute and deliver such further instruments and documents and take such further action as GMAC may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted. Without limiting the generality of the foregoing, the Pledgor will execute and file such financing or continuation statements, or amendments thereto, and such other instruments, endorsements or notices, as GMAC may deem necessary or desirable in order to perfect and preserve the liens created or continued or intended to be created or continued hereby. The Pledgor hereby authorizes GMAC to file any such financing or continuation statement without the signature of the Pledgor to the extent permitted by applicable law. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note, other Instrument or Chattel Paper, such note, Instrument or Chattel Paper shall be immediately delivered to GMAC, duly indorsed in a manner satisfactory to GMAC, to be held as Collateral pursuant to this Agreement. (b) MAINTENANCE OF RECORDS. The Pledgor will keep and maintain at its own cost and expense satisfactory and complete records of the Collateral. (c) LIMITATION ON LIENS ON COLLATERAL. The Pledgor will not create, incur or permit to exist, will defend the 5 Collateral and the right, title and interest of GMAC therein against, and will take such other action as is necessary to remove, any lien, encumbrance or claim on or to the Collateral other than the lien created and continued pursuant to this Agreement. (d) FURTHER IDENTIFICATION OF COLLATERAL. The Pledgor will furnish to GMAC from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as GMAC may reasonably request, all in reasonable detail. (e) CHANGES IN LOCATIONS, NAME, ETC. The Pledgor will not, unless it shall give 60 days' prior written notice to such effect to GMAC, (i) change the location of its chief executive office or chief place of business from that specified in Section 4(d) hereof, or remove its books and records from such location, or (ii) change its name, identity or structure to such an extent that any financing statements filed by GMAC in connection with this Agreement would become misleading. (f) AMENDMENTS TO PARTNERSHIP AGREEMENT. The Pledgor shall not, without the prior written consent of GMAC, consent to, vote in favor of or otherwise permit any amendment to or modification of the Partnership Agreement or the partnership agreements, Articles of Incorporation or by-laws of any Affiliate (as hereinafter defined). For purposes of this Pledge, "Affiliate" shall mean any corporation, partnership, joint venture, association, limited liability company, limited liability partnership, joint stock company, trust, or unincorporated organization that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with the Pledgor. (g) NO TRANSFER OF INTEREST IN PARTNERSHIP. The Pledgor shall not sell, assign, transfer, pledge or encumber or permit to be sold, assigned, transferred, pledged or encumbered any of its interests in the Partnership or the other Collateral. Any sale, assignment, transfer, pledge or encumbrance of the Pledgor's interest in the Partnership in violation of the foregoing provisions of this Section 5(g) shall be null and void. (h) BANKRUPTCY OF THE PARTNERSHIP. The Pledgor shall not authorize, seek to cause or permit the Partnership to commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the 6 appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property or to consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or to make a general assignment for the benefit of its creditors. (i) REPRESENTATIONS. The Pledgor will not take any action which would cause any of the representations of the Partnership set forth in the Loan Documents to cease to be true and correct at all times. (j) CONDUCT OF BUSINESS, MAINTENANCE OF EXISTENCE, ETC. The Pledgor shall at all times (i) preserve and maintain in full force and effect its existence as a limited partnership under the laws of the State of Delaware and its qualification to do business in each other jurisdiction where the ownership or leasing of property or the nature of business transacted makes such qualifications necessary, and (ii) obtain, maintain in full force and effect and comply in all material respects with all legal requirements and other consents and approvals required at any time in connection with its general partnership interests in the Partnership. (k) CLAIMS AGAINST COLLATERAL. The Pledgor shall, within 5 days of receipt of knowledge by the Pledgor, notify GMAC in reasonable detail of any lien, encumbrance or claim made or asserted against the Collateral. (l) COMPLIANCE WITH LAWS. The Pledgor shall comply with all legal requirements in connection with its business as a general partner of the Partnership. (m) NOTICE OF DISSOLUTION. The Pledgor will forthwith upon learning of the occurrence of any event which would cause termination and/or dissolution of the Partnership, notify GMAC in writing thereof. SECTION 6 GMAC'S APPOINTMENT AS ATTORNEY-IN-FACT. (a) POWERS. Effective immediately, without limiting any rights or powers granted herein to GMAC while no default or Event of Default under any of the Loan Documents has occurred, the Pledgor hereby irrevocably constitutes and appoints GMAC and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority, in the place and stead of the Pledgor and in the name of the Pledgor or in its own name, for the purpose of carrying out 7 the terms of this Agreement, without notice to or assent by the Pledgor, to do the following: (i) upon the occurrence of any default or Event of Default under any of the Loan Documents, to exercise all partnership rights, powers and principles to the same extent as a general partner of the Partnership; (ii) to the extent that the Pledgor would have the right to do so under the Partnership Agreement, upon the occurrence of any Event of Default, in the name of the Pledgor or its own name, or otherwise, to take possession of and indorse (without recourse) and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under the Partnership Agreement or any Account, Instrument or General Intangible arising thereunder or out of the Pledgor's general partnership interests in the Partnership and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by GMAC for the purpose of collecting any and all such moneys due under the Partnership Agreement or any Account, Instrument or General Intangible arising thereunder or out of the Pledgor's general partnership interests in the Partnership whenever payable; (iii) upon the occurrence of any default or Event of Default under any of the Loan Documents, to pay or discharge taxes and Liens levied or placed on the Collateral and to execute any and all documents and instruments that may be necessary or desirable to accomplish the purposes of Section 5(a) hereof; and (iv) upon the occurrence of any default or Event of Default under any of the Loan Documents, (A) to direct any party liable for any payment under any of the Collateral to make payment of any and all moneys due or to become due thereunder directly to GMAC or as GMAC shall direct, (B) to ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral, (C) to sign and indorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, notices and other documents in connection with any of the Collateral, (D) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any part thereof and to 8 enforce any other right in respect of any Collateral, (E) to defend any suit, action or proceeding brought against the Pledgor with respect to any Collateral, (F) to settle, compromise or adjust any suit, action or proceeding described in clause (E) above and, in connection therewith, to give such discharges or releases as GMAC may deem appropriate and (G) generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though GMAC were the absolute owner thereof for all purposes, and to do, at GMAC's option and the Pledgor's expense, at any time, or from time to time, all acts and things that GMAC deems necessary to protect, preserve or realize upon the Collateral and the liens thereon created and continued hereby and to effect the intent of this Agreement, all as fully and effectively as the Pledgor might do. The Pledgor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. This power of attorney is a power coupled with an interest and shall be irrevocable. (b) OTHER POWERS. The Pledgor also authorizes GMAC, at any time and from time to time, to execute, in connection with any sale provided for in Section 8 hereof, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral. SECTION 7 PERFORMANCE BY GMAC OF THE PLEDGOR'S OBLIGATIONS; RIGHTS OF PLEDGOR PRIOR TO A DEFAULT OR EVENT OF DEFAULT. Immediately upon the occurrence of a default or an Event of Default under any of the Loan Documents, and without limiting any rights or powers granted herein to GMAC while no default or an Event of Default under any of the Loan Documents has occurred, GMAC, without releasing the Pledgor from any obligation, covenant or condition hereof, itself may make any payment or perform, or cause the performance of, any such obligation, covenant or condition or take any other action in such manner and to such extent as GMAC may deem necessary to protect, perfect or continue the perfection of the liens created or continued or intended to be created or continued pursuant to this Agreement. Unless a default or an Event of Default under any of the Loan Documents shall have occurred, the Pledgor shall be entitled to receive and retain, dividend or otherwise utilize all distributions made to it pursuant to the Partnership Agreement or otherwise arising out of the Collateral and exercise all voting, partnership and other rights pertaining to the Collateral and take all action it is authorized to take thereunder; PROVIDED that no vote or other 9 action taken shall otherwise result in a default or an Event of Default under any of the Loan Documents. SECTION 8 RIGHTS AND REMEDIES. (a) If a default or an Event of Default under any of the Loan Documents shall have occurred, (i) all payments made in respect of the Collateral and received by or on behalf of GMAC in accordance with the provisions of this Agreement or otherwise, may, in the discretion of GMAC, (A) be held by or on behalf of GMAC as Collateral, and/or (B) then or at any time thereafter be applied to the Obligations in such order as GMAC shall determine, and (ii) to the extent permitted by applicable law, all shares or certificates of or evidencing the Collateral shall be registered in the name of GMAC or its nominee, and (whether or not so registered) GMAC or its nominee may thereafter exercise (A) all voting, partnership and other rights pertaining to the Collateral and (B) any and all rights of conversion, exchange, subscription and any other rights, privileges or options pertaining to the Collateral as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Collateral upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the partnership structure of the Partnership or upon the exercise by the Pledgor or GMAC of any right, privilege or option pertaining to such shares or certificates of or evidencing the Collateral, and in connection therewith, the right to deposit and deliver any and all of the Collateral with any committee, depository, transfer agent, registrar or other designated agency upon such terms and conditions as it may determine), all without liability except to account for property actually received by it, but GMAC shall have no duty to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing. (b) If a default or an Event of Default under any of the Loan Documents shall have occurred, then, in addition to any other rights and remedies provided for herein and in any other instrument or agreement securing, evidencing or relating to the Obligations, or that may otherwise be available, GMAC may, without any demand, advertisement or notice (except as expressly provided for below in this Section 8(b) or by applicable law), exercise all the rights and remedies of a secured party under the UCC, and in addition may sell, lease, assign, give option or options to purchase, or otherwise dispose of the Collateral, or any part thereof, as hereinafter provided. The Collateral may be sold or otherwise disposed of in one or more sales, at 10 public or private sale, conducted by any officer or agent of, or auctioneer or attorney for, GMAC, at any exchange or broker's board or at GMAC's place of business or elsewhere, for cash, upon credit or for other property, for immediate or future delivery, and at such price or prices and on such terms as GMAC shall, in its sole discretion, deem appropriate. GMAC may be the purchaser of any or all of the Collateral so sold at a sale and thereafter may hold the same, and the obligations of the Pledgor and/or the Partnership, to such purchaser may be applied as a credit against the purchase price. GMAC may, in its sole discretion, at any such sale restrict the prospective bidders or purchasers as to their number, nature of business and investment intention. Upon any such sale, GMAC shall have the right to deliver, assign and transfer to the purchaser thereof (including GMAC) the Collateral so sold. Each purchaser (including GMAC) at any such sale shall hold the Collateral so sold, absolutely free from any claim or right of whatsoever kind, including any equity or right of redemption, of the Pledgor, and the Pledgor hereby specifically waives, to the fullest extent it may lawfully do so, all rights of redemption, stay or appraisal that it has or may have under any rule of law or statute now existing or hereafter adopted. The Pledgor agrees that GMAC need not give more than 10 days prior notice of the time and place of any public sale or of the time after which a private sale or other intended disposition is to take place and that such notice is reasonable notification of such matters. No notification need be given to the Pledgor if it has signed after the occurrence of a default or an Event of Default under any of the Loan Documents a statement renouncing or modifying any right to notification of sale or other intended disposition. Any such public sale shall be held at such time or times within ordinary business hours as GMAC shall fix in the notice of such sale. At any such sale, the Collateral may be sold in one lot as an entirety or in separate parcels. GMAC shall not be obligated to make any sale pursuant to any such notice. GMAC may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for such sale, and any such sale may be made at any time or place to which the same may be so adjourned without further notice or publication. In case of any sale of all or any part of the Collateral on credit or for future delivery, the Collateral so sold may be retained by GMAC until the full selling price is paid by the purchaser thereof, but GMAC shall not incur any liability in case of the failure of such purchaser to take up and pay for the Collateral so sold, and, in case of any such failure, such Collateral may again be sold pursuant to the provisions hereof. 11 (c) If a default or an Event of Default under any of the Loan Documents shall have occurred, instead of exercising the power of sale provided in Section 8(b) hereof, GMAC may proceed by a suit or suits at law or in equity to foreclose the pledge and security interest under this Agreement and sell the Collateral or any portion thereof under a judgment or decree of a court or courts of competent jurisdiction. (d) GMAC, as attorney-in-fact pursuant to Section 6 hereof, may, in the name and stead of the Pledgor, make and execute all conveyances, assignments and transfers of the Collateral sold pursuant to Section 8(b) or Section 8(c) hereof, and, to the extent permitted by applicable law, the Pledgor hereby ratifies and confirms all that GMAC, as such attorney-in-fact, shall do by virtue hereof. Nevertheless, the Pledgor shall, if so requested by GMAC, ratify and confirm any sale or sales by executing and delivering to GMAC, or to such purchaser or purchasers, all such instruments as may, in the judgment of GMAC, be advisable for the purpose. (e) The receipt of GMAC for the purchase money paid at any such sale made by it pursuant to Section 8(b) or 8(c) hereof shall be a sufficient discharge therefor to any purchaser of the Collateral, or any portion thereof, sold as aforesaid; and no such purchaser (or the representatives or assigns of such purchaser), after paying such purchase money and receiving such receipt, shall be bound to see to the application of such purchase money or any part thereof or in any manner whatsoever be answerable for any loss, misapplication or non-application of any such purchase money, or any part thereof, or be bound to inquire as to the authorization, necessity, expediency or regularity of any such sale. (f) GMAC shall not incur any liability as a result of the sale of the Collateral, or any part thereof, at any private sale pursuant to Section 8(b) hereof conducted in a commercially reasonable manner and in accordance with applicable law. The Pledgor hereby waives, to the fullest extent permitted by applicable law, all claims, damages and demands against GMAC arising out of the repossession or retention of the Collateral or the sale of the Collateral pursuant to Section 8(b) or Section 8(c) hereof, including, without limitation, any claims against GMAC arising by reason of the fact that the price at which the Collateral, or any part thereof, may have been sold at a private sale was less than the price that might have been obtained at a public sale or was less than the aggregate amount of the Obligations, even if GMAC accepts the first offer received 12 that GMAC in good faith deems to be commercially reasonable under the circumstances and does not offer the Collateral to more than one offeree. To the fullest extent permitted by law, the Pledgor shall have the burden of proving that any such sale of the Collateral was conducted in a commercially unreasonable manner. (g) If GMAC shall demand possession of the Collateral or any part thereof in connection with its rights pursuant to Section 8(b) or Section 8(c) hereof, the Pledgor will, at its own expense, forthwith cause such Collateral or any part thereof designated by GMAC to be assembled and made available and/or delivered to GMAC at any place reasonably designated by GMAC. (h) No sale or other disposition of all or any part of the Collateral by GMAC pursuant to this Section 8 shall be deemed to relieve the Partnership of its Obligations in respect of any Obligations except to the extent the proceeds thereof are applied by GMAC to the payment of such Obligations. (i) if a default or an Event of Default under any of the Loan Documents shall have occurred, GMAC (i) may (but need not), upon notice to the Pledgor, exercise all voting and other rights of the Pledgor as a general partner of the Partnership and exercise all other rights provided under the Partnership Agreement, and (ii) shall receive all permitted distributions, if any, made for the account of the Pledgor under the Partnership Agreement. SECTION 9 WAIVER. To the fullest extent it may lawfully so agree, the Pledgor agrees that it will not at any time insist upon, claim, plead, or take any benefit or advantage of any appraisement, valuation, stay, extension, moratorium, redemption, or similar law now or hereafter in force in order to prevent, delay, or hinder the enforcement hereof or the absolute sale of any part of the Collateral. The Pledgor for itself and all who claim through it, so far as it or they now or hereafter lawfully may do so, hereby waives the benefit of all such laws, and all right to have the Collateral marshalled upon any foreclosure hereof, and agrees that any court having jurisdiction to foreclose this Agreement may order the sale of the Collateral as an entirety. Without limiting the generality of the foregoing, the Pledgor hereby: (a) authorizes GMAC, in its sole discretion and without notice to or demand upon the Pledgor and without otherwise affecting the obligations of the Pledgor hereunder or in respect of the Obligations, from time to time to take and hold other collateral (in addition to the Collateral) for payment of any Obligations, or any part thereof, and to exchange, enforce or release such other collateral or any part thereof and to accept 13 and hold any endorsement or guarantee of payment of the Obligations or any part thereof and to release or substitute any endorser or guarantor or any other person or entity granting security for or in any other way obligated upon the obligations or any part thereof; and (b) waives and releases any and all right to require GMAC to collect any of the Obligations from any specific item or items of the Collateral or from any other party liable as guarantor or in any other manner in respect of any of the Obligations or from any collateral (other than such Collateral) for any of the Obligations. SECTION 10 INDEMNITY. The Pledgor shall indemnify, defend with counsel reasonably acceptable to and hold harmless GMAC from and against any and all claims, losses and liabilities growing out of or resulting from (i) this Agreement (including, without limitation, enforcement of this Agreement), (ii) any refund or adjustment (including, without limitation, any interest thereon) of any amount paid or payable in accordance with the terms hereof to GMAC in respect of any Collateral after the occurrence of a default or an Event of Default under any of the Loan Documents, (iii) any delay in paying any and all excise, sales or other similar taxes which may be payable or determined to be payable with respect to any of the Collateral, (iv) any delay in complying with any legal requirements applicable to any of the Collateral and (v) the transactions contemplated by this Agreement, but excluding any such claims, losses or liabilities found by a final order of a court of competent jurisdiction to result from GMAC's gross negligence or wilful misconduct. SECTION 11 AMENDMENTS; ETC. No amendment or waiver of any provision of this Agreement or consent to any departure by the Pledgor from the terms of this Agreement shall in any event be effective unless the same shall be in writing and signed by the Pledgor and GMAC and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 12 NOTICES. All notices, demands and other communications hereunder shall be in writing and sent in the manner set forth in the Deed of Trust, to the addresses of the parties set forth on page 1 of this Agreement. Such notices, demands, and other communications shall be effective as set forth in the Deed of Trust. Each party may change the address to which notices to it are to be sent by written notice given to the other in accordance with this paragraph. SECTION 13 CONTINUING PLEDGE AND SECURITY INTEREST. This Agreement shall be a continuing one and all representations, warranties, covenants, undertakings, obligations, consents, waivers and agreements of the Pledgor herein shall survive the date of this Agreement and shall continue in full force and 14 effect until the earlier to occur of (i) the indefeasible payment in full of all of the Obligations, or (ii) the termination of the Obligations; at which time GMAC shall release this Agreement and make any appropriate filings to reflect such release. SECTION 14 CHOICE OF LAW; CONSENT TO JURISDICTION. EACH OF THE TERMS AND PROVISIONS OF THIS AGREEMENT SHALL BE GOVERNED BY, INTERPRETED, CONSTRUED AND ENFORCED PURSUANT TO AND IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. AT GMAC'S OPTION, THE PLEDGOR AGREES THAT ANY CONTROVERSY ARISING UNDER OR IN RELATION TO THIS AGREEMENT SHALL BE LITIGATED IN THE COMMONWEALTH OF PENNSYLVANIA. AT GMAC'S OPTION, THE LOCAL AND FEDERAL COURTS AND AUTHORITIES WITH JURISDICTION IN THE COMMONWEALTH OF PENNSYLVANIA SHALL HAVE JURISDICTION OVER ALL CONTROVERSIES WHICH MAY ARISE UNDER OR IN RELATION TO THIS AGREEMENT. THE PLEDGOR IRREVOCABLY CONSENTS TO SERVICE, JURISDICTION, AND VENUE OF SUCH COURTS FOR ANY LITIGATION ARISING FROM THIS AGREEMENT AND WAIVES ANY OTHER VENUE TO WHICH IT MIGHT BE ENTITLED BY VIRTUE OF DOMICILE, HABITUAL RESIDENCE OR OTHERWISE. NOTHING CONTAINED HEREIN, HOWEVER, SHALL PREVENT GMAC FROM BRINGING ANY SUIT, ACTION OR PROCEEDING OR EXERCISING ANY RIGHTS AGAINST THE PLEDGOR OR AGAINST THE COLLATERAL IN ANY OTHER JURISDICTION. INITIATING SUCH SUIT, ACTION OR PROCEEDING OR TAKING SUCH ACTION IN ANY OTHER JURISDICTION SHALL IN NO EVENT CONSTITUTE A WAIVER OF THE AGREEMENT CONTAINED HEREIN THAT THE LAWS OF THE STATE OF TEXAS SHALL GOVERN THE RIGHTS AND OBLIGATIONS OF THE PLEDGOR AND GMAC AS PROVIDED HEREIN OR THE SUBMISSION HEREIN BY THE PLEDGOR TO PERSONAL JURISDICTION WITHIN THE COMMONWEALTH OF PENNSYLVANIA. THE FOREGOING PROVISIONS WERE KNOWINGLY, WILLINGLY AND VOLUNTARILY AGREED TO BY THE PLEDGOR UPON CONSULTATION WITH INDEPENDENT LEGAL COUNSEL SELECTED BY THE PLEDGOR'S OWN FREE WILL. SECTION 15 HEADINGS. Headings used in this Agreement are for convenience of reference only and do not constitute part of this Agreement for any purpose. SECTION 16 NO WAIVER; CUMULATIVE REMEDIES; INTEGRATION. GMAC shall not by any act (except by a written instrument pursuant to this Section), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any default or Event of Default under any of the Loan Documents or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of GMAC, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by GMAC of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which it would 15 otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law. SECTION 17 GMAC'S DUTIES. The powers conferred on GMAC hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. GMAC shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. GMAC's sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the UCC or otherwise, shall be to deal with it in the same manner as GMAC deals with similar securities and property for its own account. Neither GMAC nor any of its directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Pledgor or otherwise. SECTION 18 SEVERABILITY. Any provision of this Agreement that 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. Where provisions of any law or regulation resulting in such prohibition or unenforceability may be waived, they are hereby waived by the Pledgor and GMAC to the full extent permitted by law so that this Agreement shall be deemed a valid and binding agreement, and the liens and security interests created and continued hereby shall constitute continuing first priority liens on and first priority perfected security interests in the Collateral, in each case enforceable in accordance with its terms. SECTION 19 SPECIFIC PERFORMANCE. The Pledgor hereby irrevocably waives, to the extent that it may do so under applicable law, any defense based on the adequacy of a remedy at law that may be asserted as a bar to the remedy of specific performance in any action brought against the Pledgor for specific performance of this Agreement by GMAC or in respect of all or a substantial part of the Pledgor's assets under the bankruptcy or insolvency laws of any jurisdiction to which the Pledgor or its assets are subject. SECTION 20 SECURITY INTEREST ABSOLUTE. All rights of GMAC hereunder, the liens created and continued hereby and all 16 obligations of the Pledgor hereunder shall be absolute and unconditional irrespective of: (a) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from any documents delivered in connection with the transactions contemplated by the Loan Documents including, without limitation, the Partnership Agreement; or (b) any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to or departure from any guaranty, for all or any of the Obligations. SECTION 21 PRIVATE SALES. The Pledgor recognizes that GMAC may be unable to effect a public sale of any or all the Collateral, by reason of certain prohibitions contained in any federal or state law governing the issuance or sale of securities and applicable state securities laws or otherwise, and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire the Collateral for their own account for investment and not with a view to the distribution thereof. The Pledgor acknowledges and agrees that any such private sale may result in prices and other terms less favorable to GMAC than if such sale were a public sale and agrees that such circumstances shall not, in and of themselves, result in a determination that such sale was not made in a commercially reasonable manner. GMAC shall be under no obligation to delay a sale of any of the Collateral for the period of time necessary to permit the Partnership to register for public sale under any federal or state law governing the issuance or sale of securities, even if the Partnership would agree to do so. SECTION 22 REGISTRATION OF PLEDGE. Concurrently with the execution of this Agreement, the Pledgor will send to the Partnership written instructions substantially in the form of EXHIBIT A hereto and shall cause the Partnership to, and the Partnership shall, deliver to GMAC an Initial Transaction Statement in the form of EXHIBIT B hereto confirming that the Partnership has registered on its books the pledge effected by this Agreement. SECTION 23 REINSTATEMENT. This Agreement 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 GMAC upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Pledgor or the Partnership or upon or as a result of the appointment of a receiver, intervenor or 17 conservator of, or trustee or similar officer for, the Pledgor or the Partnership, or any substantial part of their property, or otherwise, all as though such payments had not been made. SECTION 24 POWERS COUPLED WITH AN INTEREST. All authorizations, agencies and powers herein contained with respect to the Collateral are irrevocable and are coupled with an interest. SECTION 25 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. SECTION 26 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. IN WITNESS WHEREOF, the Pledgor and GMAC have caused this Agreement to be duly executed and delivered as of the date first above written. GMAC COMMERCIAL MORTGAGE CORPORATION By: /s/ Jerome R. Prassas ---------------------------------------------- AIMCO LT, L.P., a Delaware limited partnership By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ H. Alcock -------------------------------- Name: Harry Alcock ------------------------------ Title: VP ----------------------------- 18 ACKNOWLEDGMENT AND CONSENT MEADOWS LIMITED PARTNERSHIP, an Illinois limited partnership (the "PARTNERSHIP"), the Partnership referred to in the foregoing General Partner Pledge and Security Agreement (the "PLEDGE"), hereby acknowledges receipt of a copy thereof and agrees to be bound thereby and to comply with the terms thereof insofar as such terms are applicable to it. The Partnership also agrees if a default or an Event of Default under any of the Loan Documents (as defined in the Pledge) shall occur to pay to GMAC Commercial Mortgage Corporation ("GMAC") all amounts then due and thereafter as they become due to AIMCO LT, L.P., in its capacity as general partner of the Partnership, until the Obligations (as defined in the Pledge) are no longer in force. The Partnership further agrees that GMAC will not have any of the obligations of a general partner of the Partnership unless GMAC affirmatively elects in writing to undertake such obligations by becoming a general partner in the Partnership in accordance with the terms of the Pledge. December 2, 1996 MEADOWS LIMITED PARTNERSHIP, an Illinois limited partnership By: AIMCO LT, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ H. Alcock -------------------------------- Name: Harry Alcock ------------------------------ Title: VP ----------------------------- 19 EX-10.74 16 EXHIBIT 10.74 WHEN RECORDED MAIL TO SPACE ABOVE THIS LINE FOR RECORDER'S USE - ------------------------------------------------------------------------------- MULTIFAMILY DEED OF TRUST, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT MEADOWS AT ANDERSON MILL THIS DEED OF TRUST (herein "Instrument" is made as of this 2nd day of December 1996, among the Trustor/Grantor Meadows Limited Partnership whose address is 1873 South Bellaire Street, Denver, Colorado 80222 (herein "Borrower"), : JAY C. PAXTON (herein "Trustee"), and the Beneficiary, GMAC COMMERCIAL MORTGAGE CORPORATION, a corporation organized and existing under the laws of the State of California, whose address is 650 Dresher Road, P.O. Box 1015, Horsham, PA 19044-8015 (herein "Lender"). BORROWER, in consideration of the indebtedness herein recited and the trust herein created, irrevocably grants, conveys and assigns to Trustee, in trust, with power of sale,[] the following described property located in _________________________________________________________ State of Texas: *DELETE BRACKETED MATERIAL IF NOT COMPLETED. See EXHIBIT "A" attached hereto and incorporated herein. This Instrument has been amended and supplemented in certain respects as set forth in (i) Rider to Multifamily Instrument and (ii) Supplemental Rider to Multifamily Instrument (collectively, the "Riders"), annexed hereto and incorporated herein by this reference. In the event of any inconsistencies between the printed portions of this Instrument and the provisions of the Riders, the provisions of the Riders shall control. TEXAS - Multifamily - 1/77 - FNMA/FHLMC Uniform Instrument FORM 4044 (PAGE 1 OF 8 PAGES) TOGETHER with all buildings, improvements, and tenements now or hereafter erected on the property, and all heretofore or hereafter vacated alleys and streets abutting the property, and all easements, rights, appurtenances, rents (subject however to the assignment of rents to Lender herein), royalties, mineral, oil and gas rights and profits, water, water rights, and water stock appurtenant to the property, and all fixtures, machinery, equipment, engines, boilers, incinerators, building materials, appliances and goods of every nature whatsoever now or hereafter located in, or on, or used, or intended to be used in connection with the property, including, but not limited to, those for the purposes of supplying or distributing heating, cooling, electricity, gas, water, air and light; and all elevators, and related machinery and equipment, fire prevention and extinguishing apparatus, security and access control apparatus, plumbing, bath tubs, water heaters, water closets, sinks, ranges, stoves, refrigerators, dishwashers, disposals, washers, dryers, awnings, storm windows, storm doors, screens, blinds, shades, curtains and curtain rods, mirrors, cabinets, panelling, rugs, attached floor coverings, furniture, pictures, antennas, trees and plants, and any and all other additional items of personal property, described in Exhibit "B" attached hereto and incorporated herein; all of which, including replacements and additions thereto, shall be deemed to be and remain a part of the real property covered by this Instrument; and all of the foregoing, together with said property (or the leasehold estate in the event this Instrument is on a leasehold) are herein referred to as the "Property". To SECURE TO LENDER (a) the repayment of the indebtedness evidenced by Borrower's note dated of even date herewith (herein "Note") in the principal sum of Two Million Four Hundred Eighty Eight Thousand Four Hundred ($2,488,400) Dollars, with interest thereon, with the balance of the indebtedness, if not sooner paid, due and payable on January 1, 1999 and all renewals, extensions and modifications thereof; (d) the payment of all other sums, with interest thereon, advanced in accordance herewith to protect the security of this Instrument; and (e) the performance of the covenants and agreements of Borrower herein contained. Borrower covenants that Borrower is lawfully seised of the estate hereby conveyed and has the right to grant, convey and assign the Property (and, if this Instrument is on a leasehold, that the ground lease is in full force and effect without modification except as noted above and without default on the part of either lessor or lessee thereunder), that the Property is unencumbered, and that Borrower will warrant and defend generally the title to the Property against all claims and demands, subject to any easements and restrictions listed in a schedule of exceptions to coverage in any title insurance policy insuring Lender's interest in the Property. FORM 4044 (PAGE 2 OF 8 PAGES) Uniform Covenants. Borrower and Lender covenant and agree as follows: 1. PAYMENT OF PRINCIPAL AND INTEREST. Borrower shall promptly pay when due the pricipal of and interest on the indebtedness evidenced by the Note, any prepayment and late charges provided in the Note and all other sums secured by this Instrument. 2. FUNDS FOR TAXES, INSURANCE AND OTHER CHARGES. Subject to applicable law or to a written waiver by Lender, Borrower shall pay to Lender on the day monthly installments of principal or interest are payable under the Note (or on another day designated in writing by Lender), until the Note is paid in full, a sum (herein "Funds") equal to one-twelfth of (a) the yearly water and sewer rates and taxes and assessments which may be levied on the Property, (b) the yearly ground rents, if any, (c) the yearly premium installments for fire and other hazard insurance, rent loss insurance and such other insurance covering the Property as Lender may require pursuant to paragraph 5 hereof, (d) the yearly premium installments for mortgage insurance, if any, and (e) if this instrument is on a leasehold, the yearly fixed rents, if any, under the ground lease, all as reasonably estimated initially and from time to time by Lender on the basis of assessments and bills and reasonable estimates thereof. Any waiver by Lender of a requirement that Borrower pay such Funds may be revoked by Lender, in Lender's sole discretion, at any time upon notice in writing to Borrower. Lender may require Borrower to pay to Lender, in advance, such other Funds for other taxes, charges, premiums, assessments and impositions in connection with Borrower or the Property which Lender shall reasonably deem necessary to protect Lender's interests (herein "Other Impositions"). Unless otherwise provided by applicable law, Lender may require Funds for Other Impositions to be paid by Borrower in a lump sum or in periodic installments, at Lender's option. The Funds shall be held in an institution(s) the deposits or accounts of which are insured or guaranteed by a Federal or state agency (including Lender if Lender is such an institution). Lender shall apply the Funds to pay said rates, rents, taxes, assessments, insurance premiums and Other Impositions so long as Borrower is not in breach of any covenant or agreement of Borrower in this Instrument. Lender shall make no charge for so holding and applying the Funds, analyzing said account or for verifying and compiling said assessments and bills, unless Lender pays Borrower interest, earnings or profits on the Funds and applicable law permits Lender to make such a charge. Borrower and Lender may agree in writing at the time of execution of this Instrument that (interest on the Funds shall be paid to Borrower, and unless such agreement is made or applicable law requires interest, earnings or profits to be paid, Lender shall not be required to pay Borrower any interest, earnings or profits on the Funds. Lender shall give to Borrower, without charge, an annual accounting of the Funds in Lender's normal format showing credits and debits to the Funds and the purpose for which each debit to the Funds was made. The Funds are pledged as additional security for the sums secured by this Instrument. If the amount of the Funds held by Lender at the time of the annual accounting thereof shall exceed the amount deemed necessary by Lender to provide for the payment of water and sewer rates, taxes, assessments, insurance premiums, rents and Other Impositions, as they fall due, such excess shall be credited to Borrower on the next monthly installment or installments of Funds due. If at any time the amount of the Funds held by Lender shall be less than the amount deemed necessary by Lender to pay water and sewer rates, taxes, assessments, insurance premiums, rents and Other Impositions, as they fall due. Borrower shall pay to Lender any amount necessary to make up the deficiency within thony days after notice from Lender to Borrower requesting payment thereof. Upon Borrower's breach of any covenant or agreement of Borrower in this Instrument. Lender may apply, in any amount and in any order as Lender shall determine in Lender's sole discretion, any Funds held by Lender at the time of application (i) to pay rates, rents, taxes, assessments, insurance premiums and Other Impositions which are now or will hereafter become due, or (ii) as a credit against sums secured by this Instrument. Upon payment in full of all sums secured by this Instrument, Lender shall promptly refund to Borrower any Funds held by Lender. 3. APPLICATION OF PAYMENTS. Unless applicable law provides otherwise, all payments received by Lender from Borrower under the Note or this instrument shall be applied by Lender in the following order of priority: (i) amounts payable to Lender by Borrower under paragraph 2 hereof; (ii) interest payable on the Note; (iii) principal of the Note; (iv) interest payable on advances made pursuant to paragraph 8 hereof; (v) principal of advances made pursuant to paragraph 8 hereof; (vi) interest payable on any Future Advance, provided that if more than one Future Advance is outstanding. Lender may apply payments received among the amounts of interest payable on the Future Advances in such order as Lender, in Lender's sole discretion, may determine: (vii) principal of any Future Advance, provided that if more than one Future Advance is outstanding. Lender may apply payments received among the principal balances of the Future Advances in such order as Lender, in Lender's sole discretion, may determine: and (viii) any other sums secured by this Instrument in such order as Lender, at Lender's option, may determine; provided; however, that Lender may, at Lender's option, apply any sums payable pursuant to paragraph 8 hereof prior to interest on and principal of the Note, but such application shall not otherwise affect the order of priority of application specified in this paragraph 3. 4. CHARGES: LIENS. Borrower shall pay all water and sewer rates, rents, taxes, assessments, premiums, and Other Impositions attributable to the Property at Lender's option in the manner provided under paragraph 2 hereof or, if not paid in such manner, by Borrower making payment, when due. directly to the payee thereof, or in such other manner as Lender may designate in writing. Borrower shall promptly furnish to Lender all notices of amounts due under this paragraph 4, and in the event (Borrower shall make payment directly, Borrower shall promptly furnish to Lender receipts evidencing such payments. Borrower shall promptly discharge any lien which has, or may have, priority over or equality with, the lien of this Instrument, and Borrower shall pay, when due, the claims of all persons supplying labor or materials to or in connection with the Property. Without Lender's prior written permission, Borrower shall not allow any lien inferior to this Instrument to be perfected against the Property. 5. HAZARD INSURANCE. Borrower shall keep the improvements now existing or hereafter erected on the Property insured by carriers at all times satisfactory to Lender against loss by fire, hazards included within the term-extended coverage", rent loss and such other hazards, casualties, liabilities and contingencies as Lender (and, if this Instrument is on a leasehold, the ground lease) shall require and in such amounts and for such periods as Lender shall require. All premiums on insurance policies shall be paid, at Lender's option, in the manner provided under paragraph 2 hereof, or by Borrower making payment, when due, directly to the carrier, or in such other manner as Lender may designate in writing. All insurance policies and renewals thereof shall be in a form acceptable to Lender and shall include a standard mortgage clause in favor of and in form acceptable to Lender. Lender shall have the right to hold the policies, and Borrower shall promptly furnish to Lender all renewal notices and all receipts of paid premiums. At least thirty days prior to the expiration date of a policy. Borrower shall deliver to Lender a renewal policy in form satisfactory to Lender. If this instrument is on a leasehold, Borrower shall furnish Lender a duplicate of all policies, renewal notices, renewal policies and receipts of paid premiums if, by virtue of the ground lease, the originals thereof may not be supplied by Borrower to Lender. In the event of loss, Borrower shall give immediate written notice to the insurance carrier and to Lender. Borrower hereby authorizes and empowers Lender as attorney-in-fact for Borrower to make proof of loss, to adjust and compromise any claim under insurance policies, to appear in and prosecute any action arising from such insurance policies, to collect and receive insurance proceeds, and to deduct therefrom Lender's expenses incurred in the collection of such proceeds: provided however, that nothing contained in this paragraph 5 shall require Lender to incur any expense or take any action hereunder. Borrower further authorizes Lender, at Lender's option, (a) to hold the balance of such proceeds to be used to reimburse Borrower for the cost of reconstruction or repair of the Property or (b) to apply the balance of such proceeds to the payment of the sums secured by this Instrument, whether or not then due, in the order of application set forth in paragraph 3 hereof (subject, however, to the rights of the lessor under the ground lease if this Instrument is on a leasehold). If the insurance proceeds are held by Lender to reimburse Borrower for the cost of restoration and repair of the Property, the Property shall be restored to the equivalent of its original condition or such other condition as Lender may approve in writing. Lender may, at Lender's option, condition disbursement of said proceeds on Lender's approval of such plans and specifications of an architect satisfactory to Lender, contractor's cost estimates, architect's certificates, waivers of liens, sworn statements of mechanics and materialmen and such other evidence of costs, percentage completion of construction, application of payments, and satisfaction of liens as Lender may reasonably require. If the insurance proceeds are applied to the payment of the sums secured by this Instrument, any such application of proceeds to principal shall not extend or postpone the due dates of the monthly installments referred to in paragraphs 1 and 2 hereof or change the amounts of such installments. If the Property is sold pursuant to paragraph 27 hereof or if Lender acquires title to the Property, Lender shall have all of the right, title and interest of Borrower in end to any insurance policies and unearned premiums thereon and in and to the proceeds resulting from any damage to the Property prior to such sale or acquisition. 6. PRESERVATION AND MAINTENANCE OF PROPERTY; LEASEHOLDS. Borrower (a) shall not commit waste or permit impairment or deterioration of the Property, (b) shall not abandon the Property, (c) shall restore or repair promptly and in a good and workmanlike manner all UNIFORM COVENANTS - Multifamily - 1 /77 - FNMA/FHLMC Uniform Instrument FORM 4044 (PAGE 3 OF 8 PAGES) or any part of the Property to the equivalent of its original condition, or such other condition as Lender may approve in writing, in the event of any damage, injury or loss thereto, whether or not insurance proceeds are available to cover in whole or in part the costs of such restoration or repair, (d) shall keep the Property, including improvements, fixtures, equipment, machinery and appliances thereon in good repair and shall replace fixtures, equipment, machinery and appliances on the Property when necessary to keep such items in good repair, (e) shall comply with all laws, ordinances, regulations and requirements of any governmental body applicable to the Property, (f) shall provide for professional management of the Property by a residential rental property manager satisfactory to Lender pursuant to a contract approved by Lender in writing, unless such requirement shall be waived by Lender in writing, (g) shall generally operate and maintain the Property in a manner to ensure maximum rentals, and (h) shall give notice in writing to Lender of and, unless otherwise directed in writing by Lender, appear in and defend any action or proceeding purporting to affect the Property, the security of this Instrument or the rights or powers of Lender. Neither Borrower nor any tenant or other person shall remove, demolish or alter any improvement now existing or hereafter erected on the Property or any fixture, equipment, machinery or appliance in or on the Property except when incident to the replacement of fixtures, equipment, machinery and appliances with items of like kind. If this Instrument is on a leasehold, Borrower (i) shall comply with the provisions of the ground lease, (ii) shall give immediate written notice to Lender of any default by lessor under the ground lease or of any notice received by Borrower from such lessor of any default under the ground lease by Borrower, (iii) shall exercise any option to renew or extend the ground lease and give written confirmation thereof to Lender within thirty days after such option becomes exercisable, (iv) shall give immediate written notice to Lender of the commencement of any remedial proceedings under the ground lease by any party thereto and, if required by Lender, shall permit Lender as Borrower's attorney-in-fact to control and act for Borrower in any such remedial proceedings and (v) shall within thirty days after request by Lender obtain from the lessor under the ground lease and deliver to Lender the lessor's estoppel certificate required thereunder, if any. Borrower hereby expressly transfers and assigns to Lender the benefit of all covenants contained in the ground lease, whether or not such covenants run with the land, but Lender shall have no liability with respect to such covenants nor any other covenants contained in the ground lease. Borrower shall not surrender the leasehold estate and interests herein conveyed nor terminate or cancel the ground lease creating said estate and interests, and Borrower shall not, without the express written consent of Lender, alter or amend said ground lease. Borrower covenants and agrees that there shall not be a merger of the ground lease, or of the leasehold estate created thereby, with the fee estate covered by the ground lease by reason of said leasehold estate or said fee estate, or any part of either, coming into common ownership, unless Lender shall consent in writing to such merger, if Borrower shall acquire such fee estate, then this Instrument shall simultaneously and without further action be spread so as to become a lien on such fee estate. 7. USE OF PROPERTY. Unless required by applicable law or unless Lender has otherwise agreed in writing, Borrower shall nor allow changes in the use for which all or any part of the Property was intended at the time this Instrument was executed. Borrower shall not initiate or acquiesce in a change in the zoning classification of the Property without Lender's prior written consent. 8. PROTECTION OF LENDER'S SECURITY. If Borrower fails to perform the covenants and agreements contained in this Instrument, or if any action or proceeding is commenced which affects the Property or title thereto or the interest of Lender therein, including, but not limited to, eminent domain, insolvency, code enforcement, or arrangements or proceedings involving a bankrupt or decedent, then Lender at Lender's option may make such appearances, disburse such sums and take such action as Lender deems necessary, in its sole discretion, to protect Lender's interest, including, bur not limited to, (i) disbursement of attorney's fees, (ii) entry upon the Property to make repairs, (iii) procurement of satisfactory insurance as provided in paragraph 5 hereof, and (iv) if this Instrument is on a leasehold, exercise of any option to renew or extend the ground lease on behalf of Borrower and the curing of any default of Borrower in the terms and conditions of the ground lease. Any amounts disbursed by Lender pursuant to this paragraph 8, with interest thereon, shall become additional indebtedness of Borrower secured by this Instrument. Unless Borrower and Lender agree to other terms of payment, such amounts shall be immediately due and payable and shall bear interest from the date of disbursement at the rate stated in the Note unless collection from Borrower of interest at such rate would be contrary to applicable law, in which event such amounts shall bear interest at the highest rate which may be collected from Borrower under applicable law. Borrower hereby covenants and agrees that Lender shall be subrogated to the lien of any mortgage or other lien discharged, in whole or in part, by the indebtedness secured hereby. Nothing contained in this paragraph 8 shall require Lender to incur any expense or take any action hereunder. 9. INSPECTION. Lender may make or cause to be made reasonable entries upon and inspections of the Property. SEE ATTACHED RIDER TO MULTIFAMILY INSTRUMENT 11. CONDEMNATION. Borrower shall promptly notify Lender of any action or proceeding relating to any condemnation or other taking, whether direct or indirect, of the Property. or part thereof, and Borrower shall appear in and prosecute any such anion or proceeding unless otherwise directed by Lender in writing. Borrower authorizes Lender, at Lender's option, as attorney-in-fact for Borrower, to commence, appear in and prosecute, in Lender's or Borrower's name, any action or proceeding relating to any condemnation or other taking of the Property, whether direct or indirect, and to settle or compromise any claim in connection with such condemnation or other taking. The proceeds of any award, payment or claim for damages, direct or consequential, in connection with any condemnation or other taking, whether direct or indirect, of the Property, or part thereof, or for conveyances in lieu of condemnation, are hereby assigned to and shall be paid to Lender subject, if this Instrument is on a leasehold, to the rights of lessor under the ground lease. Borrower authorizes Lender to apply such awards, payments, proceeds or damages, after the deduction of Lender's expenses incurred in the collection of such amounts, at Lender's option, to restoration or repair of the Property or to payment of the sums secured by this Instrument, whether or not then due, in the order of application set forth in paragraph 3 hereof, with the balance, if any, to Borrower. Unless Borrower and Lender otherwise agree in writing, any application of proceeds to principal shall not extend or postpone the due date of the monthly installments referred to in paragraphs 1 and 2 hereof or change the amount of such installments. Borrower agrees to execute such further evidence of assignment of any awards, proceeds, damages or claims arising in connection with such condemnation or taking as Lender may require. 12. BORROWER AND LIEN NOT RELEASED. From time to time, Lender may, at Lender's option, without giving notice to or obtaining the consent of Borrower, Borrower's successors or assigns or of any junior lienholder or guarantors, without liability on Lender's part and notwithstanding Borrower's breach of any covenant or agreement of Borrower in this Instrument, extend the time for payment of said indebtedness or any part thereof, reduce the payments thereon, release anyone liable on any of said indebtedness, accept a renewal note or notes therefor, modify the terms and time of payment of said indebtedness, release from the lien of this Instrument any part of the Property, take or release other or additional security, reconvey any part of the Property, consent to any map or plan of the Property, consent to the granting of any easement, join in any extension or subordination agreement, and agree in writing with Borrower to modify the rate of interest or period of amortization of the Note or change the amount of the monthly installments payable thereunder. Any actions taken by Lender pursuant to the terms of this paragraph 12 shall not affect the obligation of Borrower or Borrower's successors or assigns to pay the sums secured by this Instrument and to observe the covenants of Borrower contained herein, shall not affect the guaranty of any person, corporation, partnership or other entity for payment of the indebtedness secured hereby, and shall not affect the lien or priority of lien hereof on the Property. Borrower shall pay Lender a reasonable service charge, together with such title insurance premiums and attorney's fees as may be incurred at Lender's option, for any such action if taken at Borrower's request. 13. FORBEARANCE BY LENDER NOT A WAIVER. Any forbearance by Lender in exercising any right or remedy hereunder, or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of any right or remedy. The acceptance by Lender of payment of any sum secured by this Instrument after the due date of such payment shall not be a waiver of Lender's right to either require prompt payment when due of all other sums so secured or to declare a default for failure to make prompt payment. The procurement of insurance or the payment of taxes or other liens or charges by Lender shall not be a waiver of Lender's right to accelerate the maturity of the indebtedess secured by this Instrument, nor shall Lender's receipt of any awards, proceeds or damages under paragraphs 5 and 11 hereof operate to cure or waive Borrower's default in payment of sums secured by this Instrument. FORM 4044 (PAGE 4 OF 8 PAGES) 14. ESTOPPEL CERTIFICATE. Borrower shall within ten days of a written request from Lender furnish Lender with a written statement, duly acknowledged, setting forth the sums secured by this Instrument and any right of sef-off, counterclaim or other defense which exists against such sums and the obligations of this Instrument. 15. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. This Instrument is intended to be a security agreement pursuant to the Uniform Commercial Code for any of the items specified above as part of the Property which, under applicable law, may be subject to a security interest pursuant to the Uniform Commercial Code, and Borrower hereby grants Lender a security interest in said items. Borrower agrees that Lender may file this Instrument, or a reproduction thereof, in the real estate records or other appropriate index, as a financing statement for any of the items specified above as part of the Property. Any reproduction of this Instrument or of any other security agreement or financing statement shall be sufficient as a financing statement. In addition, Borrower agrees to execute and deliver to Lender, upon Lender's request, any financing statements, as well as extensions, renewals and amendments thereof, and reproductions of this Instrument in such form as Lender may require to perfect a security interest with respect to said items. Borrower shall pay all costs of filing such financing statements and any extensions, renewals, amendments and releases thereof, and shall pay all reasonable costs and expenses of any record searches for financing statements Lender may reasonably require. Without the prior written consent of Lender, Borrower shall not create or suffer to be created pursuant to the Uniform Commercial Code any other security interest in said items, including replacements and additions thereto. Upon Borrower's breach of any covenant or agreement of Borrower contained in this Instrument, including the covenants to pay when due all sums secured by this Instrument, Lender shall have the remedies of a secured party under the Uniform Commercial Code and, at Lender's option, may also invoke the remedies provided in paragraph 27 of this Instrument as to such items. In exercising any of said remedies, Lender may proceed against the items of real property and any items of personal property specified above as part of the Property separately or together and in any order whatsoever, without in any way affecting the availability of Lender's remedies under the Uniform Commercial Code or of the remedies provided in paragraph 27 of this Instrument. 16. LEASES OF THE PROPERTY. As used in this paragraph 16, the word "lease" shall mean "sublease" if this Instrument is on a leasehold. Borrower shall comply with and observe Borrower's obligations as landlord under all leases of the Property or any part thereof. Borrower will not lease any portion of the Property for non-residential use except with the prior written approval of Lender. Borrower, at Lender's request, shall furnish Lender with executed copies of all leases now existing or hereafter made of all or any part of the Property, and all leases now or hereafter entered into will be in form and substance subject to the approval of Lender. All leases of the Property shall specifically provide that such leases are subordinate to this Instrument; that the tenant attorns to Lender, such attornment to be effective upon Lender's acquisition of title to the Property; that the tenant agrees to execute such further evidences of attornment as Lender may from time to time request; that the attornment of the tenant shall not be terminated by foreclosure; and that Lender may, at Lender's option. accept or reject such attornments. Borrower shall not, without Lender's written consent, execute, modify, surrender or terminate, either orally or in writing, any lease now existing or hereafter made of all or any part of the Property providing for a term of three years or more, permit an assignment or sublease of such a lease without Lender's written consent, or request or consent to the subordination of any lease of all or any part of the Property to any lien subordinate to this Instrument. If Borrower becomes aware that any tenant proposes to do, or is doing, any act or thing which may give rise to any right of set-off against rent, Borrower shall (i) take such steps as shall be reasonably calculated to prevent the accrual of any right to a set-off against rent, (ii) notify Lender thereof and of the amount of said set-offs, and (iii) within ten days after such accrual, reimburse the tenant who shall have acquired such right to set-off or take such other steps as shall effectively discharge such set-off and as shall assure that rents thereafter due shall continue to be payable without set-off or deduction. Upon Lender's request, Borrower shall assign to Lender, by written instrument satisfactory to Lender, all leases now existing or hereafter made of all or any part of the Property and all security deposits made by tenants in connection with such leases of the Property. Upon assignment by Borrower to Lender of any leases of the Property, Lender shall have all of the rights and powers possessed by Borrower prior to such assignment and Lender shall have the right to modify, extend or terminate such existing leases and to execute new leases, in Lender's sole discrection. 17. REMEDIES CUMULATIVE. Each remedy provided in this Instrument is distinct and cumulative to all other rights or remedies under this Instrument or afforded by law or equity, and may be exercised concurrently, independently, or successively, in any order whatsoever. 18. ACCELERATION IN CASE OF BORROWER'S INSOLVENCY. If Borrower shall voluntarily file a petition under the Federal Bankruptcy Act, as such Act may from time to time be amended, or under any similar or successor Federal statute relating to bankruptcy, insolvency, arrangements or reorganizations, or under any state bankruptcy or insolvency act, or file an answer in an involuntary proceeding admitting insolvency or inability to pay debts, or if Borrower shall fail to obtain a vacation or stay of involuntary proceedings brought for the reorganization, dissolution or liquidation of Borrower, or if Borrower shall be adjudged a bankrupt, or if a trustee or receiver shall be appointed for Borrower or Borrower's property, or if the Property shall become subject to the jurisdiction of a Federal bankruptcy court or similar state court, or if Borrower shall make an assignment for the benefit of Borrower's creditors, or if there is an attachment, execution or other judicial seizure of any portion of Borrower's assets and such seizure is not discharged within ten days, then Lender may, at Lender's option, declare all of the sums secured by this Instrument to be immediately due and payable without prior notice to Borrower, and Lender may invoke any remedies permitted by paragraph 27 of this Instrument. Any attorney's fees and other expenses incurred by Lender in connection with Borrower's bankruptcy or any of the other aforesaid events shall be additional indebtedness of Borrower secured by this instrument pursuant to paragraph 8 hereof. SEE ATTACHED RIDER TO MULTIFAMILY INSTRUMENT SEE ATTACHED RIDER TO MULTIFAMILY INSTRUMENT 21. SUCCESSORS AND ASSIGNS BOUND: JOINT AND SEVERAL LIABILITY; AGENTS; CAPTIONS. The covenants and agreements herein contained shall bind, and the rights hereunder shall inure to, the respective successors and assigns of Lender and Borrower, subject to the provisions of paragraph 19 hereof. All covenants and agreements of Borrower shall be joint and several. In exercising any rights hereunder or taking any actions provided for herein, Lender may act through its employees, agents or independent contractors as authorized by Lender. The captions and headings of the paragraphs of this Instrument are for convenience only and are not to be used to interpret or define the provisions hereof. 22. UNIFORM MULTIFAMILY INSTRUMENT; GOVERNING LAW; SEVERABILTY. This form of multifamily instrument combines uniform covenants for national use and non-uniform covenants with limited variations by jurisdiction to constitute a uniform security instrument covering real property and related fixtures and personal property. This Instrument shall be governed by the law of the jurisdiction in which the Property is located. In the event that any provision of this Instrument or the Note contains with applicable law, such conflict shall not affect other provisions of this Instrument or the Note which can be given effect without the conflicting provisions, and to this end the provisions of this FORM 4044 (PAGE 5 OF 8 PAGES) Instrument and the Note are declared to be severable. In the event that any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower is interpreted so that any charge provided for in this Instrument or in the Note, whether considered separately or together with other charges levied in connection with this Instrument and the Note, violates such law, and Borrower is entitled to the benefit of such law, such charge is hereby reduced to the extent necessary to eliminate such violation. The amounts, if any, previously paid to Lender in excess of the amounts payable to Lender pursuant to such charges as reduced shall be applied by Lender to reduce the principal of the indebtedness evidenced by the Note. For the purpose of determining whether any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower has been violated, all indebtedness which is secured by this instrument or evidenced by the Note and which constitutes interest, as well as all other charges levied in connection with such indebtedness which constitute interest, shall be deemed to be allocated and spread over the stated term of the Note. Unless otherwise required by applicable law, such allocation and spreading shall be effected in such a manner that the rate of interest computed thereby is uniform throughout the stated term of the Note. 23. WAIVER OF STATUTE OF LIMITATIONS. Borrower hereby waives the right to assert any statute of limitations as a bar to the enforcement of the lien of this Instrument or to any action brought to enforce the Note or any other obligation secured by this instrument. 24. WAIVER OF MARSHALLING. Norwithstanding the existence of any other security interests in the Property held by Lender or by any other party. Lender shall have the right to determine the order in which any or all of the Property shall be subjected to the remedies provided herein. Lender shall have the right to determine the order in which any or all portions of the indebtedness secured hereby are satisfied from the proceeds realized upon the exercise of the remedies provided herein. Borrower, any party who consents to this Instrument and any party who now or hereafter acquires a security interest in the Property and who has actual or constructive notice hereof hereby waives any and all right to require the marshalling of assets in connection with the exercise of any of the remedies permitted by applicable law or provided herein. 26. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION. As part of the consideration for the indebtedness evidenced by the Note. Borrower hereby absolutely and unconditionally assigns and transfers to Lender all the rents and revenues of the Property, including those now due, past due, or to become due by virtue of any lease or other agreement for the occupancy or use of all or any part of the Property, regardless of to whom the rents and revenues of the Property are payable. Borrower hereby authorizes Lender or Lender's agents to collect the aforesaid rents and revenues and hereby directs each tenant of the Property to pay such rents to Lender or Lender's agents; provided, however, that prior to written notice given by Lender to Borrower of the breach by Borrower of any covenant or agreement of Borrower in this instrument, Borrower shall collect and receive all rents and revenues of the Property as trustee for the benefit of Lender and Borrower, to apply the rents and revenues so collected to the sums secured by this Instrument in the order provided in paragraph 3 hereof with the balance, so long as no such breach has occurred, to the account of Borrower, it being intended by Borrower and Lender that this assignment of rents constitutes an absolute assignment and not an assignment for additional security only. Upon delivery of written notice by Lender to Borrower of the breach by Borrower of any covenant or agreement of Borrower in this Instrument, and without the necessity of Lender entering upon and taking and maintaining full control of the Property in person, by agent or by a court-appointed receiver, Lender shall immediately be entitled to possession of all rents and revenues of the Property as specified in this paragraph 26 as the same become due and payable, including but not limited to rents then due and unpaid, and all such rents shall immediately upon delivery of such notice be held by Borrower as trustee for the benefit of Lender only; provided, however, that the written notice by Lender to Borrower of the breach by Borrower shall contain a statement that Lender exercises its rights to such rents. Borrower agrees that commencing upon delivery of such written notice of Borrower's breach by Lender to Borrower, each tenant of the Property shall make such rents payable to and pay such rents to Lender or Lender's agents on Lender's written demand to each tenant therefor, delivered to each tenant personally, by mail or by delivering such demand to each rental unit, without any liability on the part of said tenant to inquire further as to the existence of a default by Borrower. Borrower hereby covenants that Borrower has not executed any prior assignment of said rents, that Borrower has not performed, and will not perform, any acts or has not executed, and will not execute, any instrument which would prevent Lender from exercising its rights under this paragraph 26, and that at the time of execution of this Instrument there has been no anticipation or prepayment of any of the rents of the Property for more than two months prior to the due dates of such rents. Borrower covenants that Borrower will not hereafter collect or accept payment of any rents of the Property more than two months prior to the due dates of such rents. Borrower further covenants that Borrower will execute and deliver to Lender such further assignments of rents and revenues of the Property as Lender may from time to time request. Upon Borrower's breach of any covenant or agreement of Borrower in this Instrument. Lender may in person, by agent or by a court-appointed receiver, regardless of the adequacy of Lender's security, enter upon and take and maintain full control of the Property in order to perform all acts necessary and appropriate for the operation and maintenance thereof including, but not limited to, the execution, cancellation or modification of leases, the collection of all rents and revenues of the Property, the making of repairs to the Property and the execution or termination of contracts providing for the management or maintenance of the Property, all on such terms as are deemed best to protect the security of this Instrument. In the event Lender elects to seek the appointment of a receiver for the Property upon Borrower's breach of any covenant or agreement of Borrower in this Instrument, Borrower hereby expressly consents to the appointment of such receiver. Lender or the receiver shall be entitled to receive a reasonable fee for so managing the Property. All rents and revenues collected subsequent to delivery of written notice by Lender to Borrower of the breach by Borrower of any covenant or agreement of Borrower in this Instrument shall be applied first to the costs, if any, of taking control of and managing the Property and collecting the rents, including, but not limited to, attorney's fees, receiver's fees, premiums on receiver's bonds, costs of repairs to the Property, premiums on insurance policies, taxes, assessments and other charges on the Property, and the costs of discharging any obligation or liability of Borrower as lessor or landlord of the Property and then to the sums secured by this Instrument. Lender or the receiver shall have access to the books and records used in the operation and maintenance of the Property and shall be liable to account only for those rents actually received. Lender shall not be liable to Borrower, anyone claiming under or through Borrower or anyone having an interest in the Property by reason of anything done or left undone by Lender under this paragraph 26. If the rents of the Property are not suffcient to meet the costs, if any, of taking control of and managing the Property and collecting the rents, any funds expended by Lender for such purposes shall become indebtedness of Borrower to Lender secured by this Instrument pursuant to paragraph 8 hereof. Unless Lender and Borrower agree in writing to other terms of paymemt, such amounts shall be payable upon notice from Lender to Borrower requesting payment thereof and shall bear interest from the date of disbursement at the rate stated in the Note unless payment of interest at such rate would be contrary to applicable law, in which event such amounts shall bear interest at the highest rate which may be collected from Borrower under applicable law. Any entering upon and taking and maintaining of control of the Property by Lender or the receiver and any application of rents as provided herein shall not cure or waive any default hereunder or invalidate any other right or remedy of Lender under applicable law or provided herein. This assignment of rents of the Property shall terminate at such time as this instrument ceases to secure indebtedness held by Lender. UNIFORM COVENANTS - Multifamily - 1/77 - FNMA/FHLMC UNIFORM INSTRUMENT FORM 4044 (PAGE 6 OF 8 PAGES) NON-UNIFORM COVENANTS. BORROWER AND LENDER FURTHER COVENANT AND AGREE AS FOLLOWS: SEE SUPPLEMENTAL RIDER TO MULTIFAMILY INSTRUMENT 28. RELEASE. Upon payment of all sums secured by this Instrument, Lender shall release this Instrument. Borrower shall pay Lender's reasonable costs incurred in releasing this Instrument. 29. SUBSTITUTE TRUSTEE. Lender at Lender's option, with or without cause, may from time to time remove Trustee and appoint a successor trustee to any Trustee appointed hereunder by an instrument recorded in the county in which this Instrument is recorded. Without conveyance of the Property, the successor trustee shall succeed to all the title, power and duties conferred upon the Trustee herein and by applicable law. 30. SUBROGATION. Any of the proceeds of the Note utilized to take up outstanding liens against all or any part of the Property have been advanced by Lender at Borrower's request and upon Borrower's representation that such amounts are due and are secured by valid liens against the Property. Lender shall he subrogated to any and all rights, superior titles, liens and equities owned or claimed by any owner or holder of any outstanding liens and debts, however remote, regardless of whether said liens or debts are acquired by Lender, by assignment or are released by the holder thereof upon payment. 31. PARTIAL INVALIDITY. In the event any portion of the sums intended to be secured by this Instrument cannot be lawfully secured hereby, payments in reduction of such sums shall be applied first to those portions not secured hereby. *DELETE BRACKETED CLAUSES AS APPROPRIATE. IN WITNESS WHEREOF Borrower has executed this Instrument or has caused the same to be executed by its representatives thereunto duly authorized. MEADOWS LIMITED PARTNERSHIP, an Illinois limited partnership By: AIMCO LT, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ H. Alcock ------------------------------ Name: Harry Alcock ----------------------------- Title: VP ---------------------------- 1873 South Bellaire Street Denver, Colorado 80222 FORM 4044 (PAGE 7 OF 8 PAGES) State of ILLINOIS -------- County of COOK -------- On the 26th day of November, 1996, before me, the subscriber, a Notary Public in and for the State and County aforesaid, personally appeared Harry Alcock who acknowledged himself to be the Vice President of AIMCO HOLDINGS QRS, INC., a corporation which is the sole general partner of AIMCO HOLDINGS, L.P., a limited partnership which is the sole general partner of AIMCO LT, L.P., a limited partnership which is a general partner of MEADOWS LIMITED PARTNERSHIP, a limited partnership, and that he, being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing the name of such corporate general partner as such officer. WITNESS my hand and seal the day and year aforesaid. /s/ Lydia Ladd --------------------- Notary Public My Commission Expires: --------- (Page 8 of 8) EX-10.75 17 EXHIBIT 10.75 RIDER TO MULTIFAMILY INSTRUMENT (FOR USE WITH EXCEPTIONS TO NON-RECOURSE GUARANTY) MEADOWS AT ANDERSON MILL THIS RIDER TO MULTIFAMILY INSTRUMENT (the "Rider") is made as of this 2nd day of December 1996, and is incorporated into and shall be deemed to amend and supplement the Multifamily Mortgage, Deed of Trust or Deed to Secure Debt of the same date (the "Instrument"), given by the undersigned Meadows Limited Partnership an Illinois limited partnership (the "Borrower"), to secure Borrower's Multifamily Note of the same date (the "Note") to GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation, 650 Dresher Road, Horsham, Pennsylvania 19044-8015, and its successors, assigns and transferees (the "Lender"), covering the property described in the Instrument and defined therein as the "Property," located at: 10507 MELLOW MEADOWS, Austin, Texas [Property Address] The Property is located entirely within the state of Texas (the "Property Jurisdiction"). The term "Loan Documents" when used in this Rider shall mean, collectively, the following documents: (i) the Instrument, as modified by this Rider and any other riders to the Instrument given by Borrower to Lender and covering the Property; (ii) the Note, and (iii) all other documents or agreements, including any Collateral Agreements (as defined below) or O&M Agreements (as defined below), arising under, related to, or made in connection with, the loan evidenced by the Note, as such Loan Documents may be amended from time to time. Any conflict between the provisions of the Instrument and the Rider shall be resolved in favor of the Rider. The covenants and agreements of this Rider, and the covenants and agreements of any other riders to the Instrument given by Borrower to Lender and covering the Property, shall be incorporated into and shall amend and supplement the covenants and agreements of the Instrument as if this Rider and the other riders were a part of the Instrument and all references to the Instrument in the Loan Documents shall mean the Instrument as so amended and supplemented. ADDITIONAL COVENANTS. In addition to the covenants and agreements made in the Instrument, Borrower and Lender further covenant and agree as follows: A. FUNDS FOR TAXES, INSURANCE AND OTHER CHARGES Uniform Covenant 2 of the Instrument ("Funds for Taxes, Insurance and Other Charges") is amended to change the title to "Funds for Taxes, Insurance and Other Charges; Collateral Agreements." Existing Uniform Covenant 2 is amended to become Uniform Covenant 2A. The following new Uniform Covenant 2B is added at the end of Uniform Covenant 2A: 2B REPLACEMENT RESERVE AGREEMENT, COMPLETION/REPAIR AGREEMENT, ACHIEVEMENT AGREEMENT AND OTHER COLLATERAL AGREEMENTS (a) REPLACEMENT RESERVE AGREEMENT Borrower shall deposit with Lender the amounts required by the Replacement Reserve and Security Agreement (the "Replacement Reserve Agreement") between Borrower and Lender, dated the date of the Note, at the times required by the Replacement Reserve Agreement, and shall perform all other obligations as and when required pursuant to the Replacement Reserve Agreement. (b) COMPLETION/REPAIR AGREEMENT Borrower shall deposit with Lender the amount required by the Completion/Repair and Security Agreement (the "Completion/Repair Agreement") between Borrower and Lender (if any), dated the date of the Note, at the time required by the Completion/Repair Agreement, and shall perform all other obligations as and when required pursuant to the Completion/Repair Agreement. (c) ACHIEVEMENT AGREEMENT Borrower shall perform all of its obligations as and when required pursuant to the Achievement Agreement between Borrower and Lender (if any), dated the date of the Note. (d) COLLATERAL AGREEMENTS As used herein, the term "Collateral Agreement" shall mean any of the Replacement Reserve Agreement, the Completion/Repair Agreement, the Achievement Agreement and any similar agreement which has been entered into between Borrower and Lender in connection with the loan evidenced by the Note. B. APPLICATION OF PAYMENTS Uniform Covenant 3 of the Instrument ("Application of Payments") is amended to add the following sentence at the end thereof: Notwithstanding the preceding sentence, (i) Lender shall be permitted to apply any partial payment received from Borrower in any manner determined by Lender and in any order of priority of application as determined by Lender, in Lender's sole discretion, and (ii) upon any breach of any covenant or agreement of Borrower in the Instrument, the Note or any other Loan Document, Lender shall be permitted to apply any funds held pursuant to RIDER TO MULTIFAMILY INSTRUMENT WITH SEPARATE EXCEPTIONS TO NON-RECOURSE GUARANTY - - Fannie Mae Uniform Instrument FORM 4058 6/93 (PAGE 1 OF 8 PAGES) any Collateral Agreement in any manner which is permitted pursuant to such Collateral Agreement and in any order of priority of application as determined by Lender, in Lender's sole discretion. C. HAZARD INSURANCE; RESTORATION OF PROPERTY Uniform Covenant 5 of the Instrument ("Hazard Insurance") is amended to add the following sentence at the end thereof: Lender shall not exercise Lender's option to apply insurance proceeds to the payment of the sums secured by the Instrument if all of the following conditions are met: (i) Borrower is not in breach or default of any provision of the Instrument, the Note or any other Loan Document; (ii) Lender determines that there will be sufficient funds to restore and repair the Property to a condition approved by Lender; (iii) Lender determines that the rental income of the Property, after restoration and repair of the Property to a condition approved by Lender, will be sufficient to meet all operating costs and other expenses, payments for reserves and loan repayment obligations relating to the Property; and (iv) Lender determines that restoration and repair of the Property to a condition approved by Lender will be completed prior to the earlier of either (1) the maturity date of the Note or (2) within one year of the date of the loss or casualty to the Property. D. ENVIRONMENTAL HAZARDS PROVISION In addition to Borrower's covenants and agreements under Uniform Covenant 6 of the Instrument ("Preservation and Maintenance of Property; Leaseholds"), Borrower further covenants and agrees that Borrower shall not: (a) cause or permit the presence, use, generation, manufacture, production, processing, installation, release, discharge, storage (including aboveground and underground storage tanks for petroleum or petroleum products), treatment, handling, or disposal of any Hazardous Materials (as defined below) (excluding the safe and lawful use and storage of quantities of Hazardous Materials customarily used in the operation and maintenance of comparable multifamily properties or for normal household purposes) on or under the Property, or in any way affecting the Property or its value, or which may form the basis for any present or future demand, claim or liability relating to contamination, exposure, cleanup or other remediation of the Property or, (b) cause or permit the transportation to, from or across the Property of any Hazardous Material (excluding the safe and lawful use and storage of quantities of Hazardous Materials customarily used in the operation and maintenance of comparable multifamily properties or for normal household purposes); or permit, (c) cause or exacerbate any occurrence or condition on the Property that is or may be in violation of Hazardous Materials Law (as defined below). (The matters described in (a), (b) and (c) above are referred to collectively below as "Prohibited Activities or Conditions.") Except with respect to any matters which have been disclosed in writing by Borrower to Lender prior to the date of the Instrument, or matters which have been disclosed in an environmental hazard assessment report of the Property received by Lender prior to the date of the Instrument, Borrower represents and warrants that it has not at any time caused or permitted any Prohibited Activities or Conditions and to the best of its knowledge, no Prohibited Activities or Conditions exist or have existed on or under the Property. Borrower shall take all appropriate steps (including but not limited to appropriate lease provisions) to prevent its employees, agents, and contractors, and all tenants and other occupants on the Property, from causing, permitting or exacerbating any Prohibited Activities or Conditions. Borrower shall not lease or allow the sublease of all or any portion of the Property for non-residential use to any tenant or subtenant that, in the ordinary course of its business, would cause, permit or exacerbate any Prohibited Activities or Conditions, and all non-residential leases and subleases shall provide that tenants and sub-tenants shall not cause, permit or exacerbate any Prohibited Activities or Conditions. If any Prohibited Activities or Conditions exist on the Property(1), Borrower shall comply in a timely manner with, and cause all employees, agents, and contractors of Borrower and any other persons present on the Property to so comply with, (1) any program of operations and maintenance ("O&M Program") relating to the Property that is acceptable to Lender with respect to one or more Hazardous Materials (which O&M Program may be set forth in an agreement of Borrower (an "O&M Agreement")) and all other obligations set forth in any O&M Agreement(2), and (2) all Hazardous Materials Laws. Any O&M Program shall be performed by qualified personnel. All costs and expenses of the O&M Program shall be paid by Borrower, including without limitation Lender's fees and costs incurred in connection with the monitoring and review of the O&M Program and Borrower's performance thereunder. If Borrower fails to timely commence or diligently continue and complete the O&M Program and comply with any O&M Agreement, then Lender may, at Lender's option, declare all of the sums secured by the Instrument to be immediately due and payable, and Lender may invoke any remedies permitted by paragraph 27 of the Instrument. Without limiting the foregoing, Borrower shall take prompt remedial action in the event of the discovery of any Prohibited Activities or Conditions and obtain Lender's prior written(3) Borrower represents that Borrower has not received, and has no knowledge of the issuance of, any claim, citation or notice of any pending or threatened suits, proceedings, orders, or governmental inquiries or opinions involving the Property that allege the violation of any Hazardous Materials Law ("Governmental Actions"). Borrower shall promptly notify Lender in writing of: (i) the occurrence of any Prohibited Activity or Condition on the Property; (ii) Borrower's actual knowledge of the presence on or under any adjoining property of any Hazardous Materials which can reasonably be expected to have a material adverse impact on the Property or the value of the Property, discovery of any occurrence or condition on the Property or any adjoining real property that could cause any restrictions on the ownership, occupancy, transferability or use of the Property under Hazardous Materials - ------------- 1 or if Lender shall require the same in accordance with reasonable commercial practices 2 or other remedial action requested by Lender 3 approval of any such remedial action. FORM 4058 6/93 (PAGE 2 OF 8 PAGES) Law. Borrower shall cooperate with any governmental inquiry, and shall comply with any governmental or judicial order which arises from any alleged Prohibited Activities or Conditions; (iii) any Governmental Action: and (iv) any claim made or threatened by any third party against Borrower, Lender, or the Property relating to loss or injury resulting from any Hazardous Materials. Any such notice by Borrower shall not relieve Borrower of, or result in a waiver of any obligation of Borrower under this paragraph D. Borrower shall pay promptly the costs of any environmental audits, studies or investigations (including but not limited to advice of legal counsel) and the removal of any Hazardous Materials from the Property required by Lender as a condition of its consent to any sale or transfer under paragraph 19 of the Instrument of all or any part of the Property or any transfer occurring upon a foreclosure or a deed in lieu of foreclosure or any interest therein, or required by Lender following a reasonable determination by Lender that there may be Prohibited Activities or Conditions on or under the Property. Borrower authorizes Lender and its employees, agents and, contractors to enter onto the Property for the purpose of conducting such environmental audits, studies and investigations. Any such costs and expenses incurred by Lender (including but not limited to fees and expenses of attorneys and consultants, whether incurred in connection with any judicial or administrative process or otherwise) which Borrower fails to pay promptly shall become immediately due and payable and shall become additional indebtedness secured by the Instrument pursuant to Uniform Covenant 8 of the Instrument. Borrower shall hold harmless, defend and indemnify Lender and its officers, directors, trustees, employees, and agents from and against all proceedings (including but not limited to Government Actions), claims, damages, penalties, costs and expenses (including without limitation fees and expenses of attorneys and expert witnesses, investigatory fees, and cleanup and remediation expenses, whether or not incurred within the context of the judicial process), arising directly or indirectly from (i) any breach of any representation, warranty, or obligation of Borrower contained in this paragraph D or (ii) the presence or alleged presence of Hazardous Materials on or under the Property. The term "Hazardous Materials," for purposes of this paragraph D, includes petroleum and petroleum products, flammable explosives, radioactive materials (excluding radioactive materials in smoke detectors), polychlorinated biphenyls, lead, asbestos in any form that is or could become friable, hazardous waste, toxic or hazardous substances or other related materials whether in the form of a chemical, element, compound, solution, mixture or otherwise including, but not limited to, those materials defined as "hazardous substances," "extremely hazardous substances," "hazardous chemicals," "hazardous materials," "toxic substances," "solid waste," "toxic chemicals," "air pollutants," "toxic pollutants," "hazardous wastes," "extremely hazardous waste," or "restricted hazardous waste" by Hazardous Materials Law or regulated by Hazardous Materials Law in any manner whatsoever. The term "Hazardous Materials Law," for the purposes of this paragraph D, means all federal, state, and local laws, ordinances and regulations and standards, rules, policies and other binding governmental requirements and any court judgments applicable to Borrower or to the Property relating to industrial hygiene or to environmental or unsafe conditions or to human health including, but not limited to, those relating to the generation, manufacture, storage, handling, transportation, disposal, release, emission or discharge of Hazardous Materials, those in connection with the construction, fuel supply, power generation and transmission, waste disposal or any other operations or processes relating to the Property, and those relating to the atmosphere, soil, surface and ground water, wetlands, stream sediments and vegetation on, under, in or about the Property. The representations, warranties, covenants, agreements, indemnities and undertakings of Borrower contained in this paragraph D shall be in addition to any and all other obligations and liabilities that Borrower may have to Lender under applicable law. The representations, warranties, covenants, agreements, indemnities and undertakings of Borrower contained in this paragraph D shall continue and survive notwithstanding the satisfaction, discharge, release, assignment, termination, subordination or cancellation of the Instrument or the payment in full of the principal of and interest on the Note and all other sums payable under the Loan Documents or the foreclosure of the Instrument or the tender or delivery of a deed in lieu of foreclosure or the release of any portion of the Property from the lien of the Instrument, except with respect to any Prohibited Activities or Conditions or violation of any of the Hazardous Materials Laws which first commences and occurs after the satisfaction, discharge, release, assignment, termination or cancellation of the Instrument following the payment in full of the principal of and interest on the Note and all other sums payable under the Loan Documents or which first commences or occurs after the actual dispossession from the entire Property of the Borrower and all entities which control, are controlled by, or are under common control with the Borrower (each of the foregoing persons or entities is hereinafter referred to as a "Responsible Party") following foreclosure of the Instrument or acquisition of the Property by a deed in lieu of foreclosure. Nothing in the foregoing sentence shall relieve the Borrower from any liability with respect to any Prohibited Activities or Conditions or violation of Hazardous Materials Laws where such Prohibited Activities or Conditions or violation of Hazardous Materials Laws commences or occurs, or is present as a result of, any act or omission by any Responsible Party or by any person or entity acting on behalf of a Responsible Party. E. BOOKS, RECORDS AND FINANCIAL INFORMATION Uniform Covenant 10 of the Instrument ("Books and Records") is amended to read as follows: Borrower shall keep and maintain at all times and upon Lender's request, Borrower shall make available at the Property address, complete and accurate books of accounts and records in sufficient detail to correctly reflect the results of the operation of the Property and copies of all written contracts, leases and other instruments which affect the Property (including but net limited to all bills, invoices and contracts for electrical service, gas service, water and FORM 4058 6/93 (PAGE 3 OF 8 PAGES) water and sewer service, waste management service, telephone service and management services). These books, records, contracts, leases and other instruments shall be subject to examination and inspection at any reasonable time by Lender. Borrower shall furnish to Lender the following: and (iv) promptly upon Borrower's receipt, copies of any complaint filed against the Borrower or the Property management alleging any violation of fair housing law, handicap access or the Americans with Disabilities Act and any final administrative or judicial dispositions of such complaints. If Borrower shall fail to timely provide the financial statements required by clause (i) above, Lender shall have the right to have the Borrower's books and records audited in order to obtain such financial statements, and any such costs and expenses incurred by Lender which Borrower fails to pay promptly shall become immediately due and payable and shall become additional indebtedness secured by the Instrument pursuant to paragraph 8 of the Instrument. F. TRANSFERS OF THE PROPERTY OR SIGNIFICANT INTERESTS IN BORROWER; TRANSFER FEES Uniform Covenant 19 of the Instrument ("Transfers of the Property or Beneficial Interests in Borrower, Assumption") is amended to read as set forth below: TRANSFERS OF THE PROPERTY OR SIGNIFICANT INTERESTS IN BORROWER; TRANSFER FEES (a) DEFINITIONS For purposes of the Instrument (and the Rider), the following terms have the respective meanings set forth below: (1) The term "Key Principal" means the entities who execute(s) the Exceptions to Non-Recourse Guaranty to Lender dated as of the date of the Note and any persons or entities who subsequently execute an Exceptions to Non-Recourse Guaranty to Lender in connection with the Note. (2) The term "Transfer" means a sale, assignment, transfer or other disposition (whether voluntary or by operation of law) of, or the granting or creating of a lien, encumbrance or security interest in, the Property or in ownership interests, and the issuance or other creation of ownership interests in an entity and the reconstitution of one type of entity to another type of entity. (3) A "Significant Interest" in any entity shall mean the following: (i) if the entity is a general partnership or a joint venture, (A) any partnership interest in the general partnership, or (B) any interest of a joint venturer in a joint venture; (ii) if the entity is a limited partnership, (A) any limited partnership interest in the entity or (B) any general partnership interest in the entity; (iii) if the entity is a limited liability company, any membership interest; (iv) if the entity is a corporation, any voting stock in the corporation; or (v) if the entity is a trust, any beneficial interest in such trust (b) ACCELERATION OF THE LOAN UPON TRANSFERS OF THE PROPERTY OR SIGNIFICANT INTERESTS Lender may, at Lender's option, declare all sums secured by the Instrument immediately due and payable and Lender may invoke any remedies permitted by paragraph 27 of the Instrument if, without the Lender's prior written consent, any of the following shall occur. (1) a Transfer of all or any part of the Property or any interest in the Property; (2) a Transfer of any Significant Interest in Borrower; (3) a Transfer of any Significant Interest in a corporation, partnership, limited liability company, joint venture, or trust which owns a Significant Interest in the Borrower; (4) if the Borrower is a trust, or if any trust owns a Significant Interest in the Borrower, the addition, deletion or substitution of a trustee of such trust, which addition, deletion or substitution has not been approved by Lender; or 1 SEE SUPPLEMENTAL RIDER TO MULTIFAMILY INSTRUMENT. FORM 4058 6/93 (PAGE 4 OF 8 PAGES) (5) a Transfer of all or any part of any Key Principal's ownership interest (other than limited partnership interests) in the general partner or limited partner of the Borrower, or in any other entity which owns, directly or indirectly, through one or more intermediate entities, an ownership interest in the Borrower. (d) NO ACCELERATION OF THE LOAN FOR TRANSFERS CAUSED BY CERTAIN EVENTS Notwithstanding the foregoing provisions of this covenant, Lender shall not be entitled to declare sums secured by the Instrument immediately due and payable or to invoke any remedy permitted by paragraph 27 of the Instrument solely upon the occurrence of any of the following: (1) A Transfer that occurs by inheritance, devise, or bequest or by operation of law upon the death of a natural person who is an owner of the Property or the owner of a direct or indirect ownership interest in the Borrower. (2) The grant of a leasehold interest in individual dwelling units for a term of two years or less and leases for commercial uses as long as commercial leases do not exceed 20 percent of the rentable space of the Property (measured as required by Lender) and provided that all such leasehold interests do not contain an option to purchase the Property. (3) A sale or other disposition of obsolete or worn out personal property which is contemporaneously replaced by comparable personal property of equal or greater value which is free and clear of liens, encumbrances and security interests other than those created by the Loan Documents. (4) The creation of a mechanic's or materialmen's lien or judgment lien against the Property which is released of record or otherwise remedied to Lender's satisfaction, within 30 days of the date of creation. (5) The grant of an easement, if prior to the granting of the easement the Borrower causes to be submitted to Lender all information required by Lender to evaluate the easement, and if Lender determines that the easement will not materially affect the operation of the Property or Lender's interest in the Property and Borrower pays to Lender, on demand, all cost and expenses incurred by Lender in connection with reviewing Borrower's request. G. NOTICE Uniform Covenant 20 of the Instrument ("Notice") is amended to read as follows: Each notice, demand, consent, or other approval (collectively, "notices" and singly, "notice") given under the Note, the Instrument, and any other Loan Document, shall be in writing to the other party, and if to Borrower, at its address set forth below Borrower's signature on the Instrument, and if to Lender at its address set forth at the beginning of the Rider, or at such other address as such party may designate by notice to the other party and shall be deemed given (a) three (3) Business Days after mailing, by certified or registered U.S. mail, return receipt requested, FORM 4058 6/93 (PAGE 5 OF 8 PAGES) postage prepaid, (b) one (1) Business Day after delivery, fee prepaid, to a national overnight delivery service, or (c) when delivered, if personally delivered with proof of delivery thereof. Borrower and Lender each agrees that it will not refuse or reject delivery of any notice given hereunder, that it will acknowledge, in writing, the receipt of the same upon request by the other party and that any notice rejected or refused by it shall be deemed for all purposes of this Agreement to have been received by the rejecting party on the date so refused or rejected, as conclusively established by the records of the U.S. Postal Service or the courier service. As used in the Instrument, the term "Business Day" means any day other than a Saturday, a Sunday or any other day on which Lender is not open for business. Lender shall not be required to deliver notice to Key Principal in connection with any notice given to Borrower. However, if Lender shall deliver notice to Key Principal, such notice shall be given in the manner provided in this Uniform Covenant 20, at Key Principal's address set forth at the foot of the Rider. I. ACCELERATION; REMEDIES Covenant 27 of the Instrument ("Acceleration: Remedies") is amended to add the following at the end of the first paragraph: Upon the breach of any covenant or agreement by Borrower in the Instrument, (including, but not limited to, the covenants to pay when due sums secured by the Instrument) or any other Loan Document, Lender, at Lender's option may, in addition to any remedies specified in this covenant, invoke any other remedies provided in any Collateral Agreement. If Borrower is in default under any promissory note (other than the Note) evidencing a loan (the "Subordinate Loan") secured by a security instrument (other than the Instrument) covering all or any portion of the Property (the "Subordinate Instrument") or under any Subordinate Instrument or other loan document executed in connection with the Subordinate Loan, (and whether or not the Borrower has obtained the prior approval of Lender to the placement of such Subordinate Instrument on the Property) which default remains uncured after any applicable cure period, Borrower also then will be in default under the Note and the Instrument. In that event, the entire unpaid principal balance of the Note, accrued interest and any other sums due Lender secured by the Instrument then will become due and payable, at Lender's option. If Lender exercises this option to accelerate, Lender will do so in accordance with the provisions of the Note and the Instrument, and the Lender may invoke any and all remedies permitted by applicable law, the Note, the Instrument, or any of the other Loan Documents. J. SINGLE ASSET BORROWER Until the debt evidenced by the Note is paid in full, Borrower shall not (1) acquire any real or personal property other than the Property and assets (such as accounts) related to the operation and maintenance of the Property, or (2) operate any business other than the management and operation of the Property. K. NON-RECOURSE LIABILITY Subject to the provisions of paragraph L and notwithstanding any other provision in the Note or Instrument, the personal liability of Borrower, any general partner of Borrower (if Borrower is a partnership), and any Key Principal to pay the principal of and interest on the debt evidenced by the Note and any other agreement evidencing Borrower's obligations under the Note and the Instrument shall be limited to (1) the real and personal property described as the "Property" in the Instrument, (2) the personal property described in and pledged under any FORM 4058 6/93 (PAGE 6 OF 8 PAGES) Collateral Agreement executed in connection with the loan evidenced by the Note, (3) the rents, profits, issues, products and income of the Property received or collected by or on behalf of Borrower (the "Rents and profits") to the extent such receipts are necessary, first, to pay the reasonable expenses of operating, managing, maintaining and repairing the Property, including but not limited to real estate taxes, utilities, assessments, insurance premiums, repairs, replacements and ground rents, if any (the "Operating Expenses") then due and payable as of the time of receipt of such Rents and Profits, and then, to pay the principal and interest due under the Note, and any other sums due under the Instrument or any other Loan Document (including but not limited to deposits or reserves due under any Collateral Agreement), except to the extent that Borrower did not have the legal right, because of a bankruptcy, receivership or similar judicial proceeding, to direct the disbursement of such sums. Except as provided in paragraph L, Lender shall not seek (a) any judgment for a deficiency against Borrower, any general partner of Borrower (if Borrower is a partnership) or any Key Principal or Borrower's or any such general partner's or Key Principal's heirs, legal representatives, successors or assigns, in any action to enforce any right or remedy under the Instrument, or (b) any judgment on the Note except as may be necessary in any action brought under the Instrument to enforce the lien against the Property or to exercise any remedies under any Collateral Agreement. L. EXCEPTIONS TO NON-RECOURSE LIABILITY If, without obtaining Lender's prior written consent, (i) a Transfer shall occur which, pursuant to Uniform Covenant 19 of the Instrument, gives Lender the right, at its option, to declare all sums secured by the Instrument immediately due and payable, (ii) Borrower shall encumber the Property with the lien of any Subordinate Instrument in connection with any financing by Borrower, or (iii) Borrower shall violate the single asset covenant in paragraph J of the Rider, any of such events shall constitute a default by Borrower under the Note, the Instrument and the other Loan Documents and if such event shall continue for 30 days, paragraph K shall not apply from and after the date which is 30 days after such event and the Borrower, any general partner of Borrower (if Borrower is a partnership) and Key Principal (each individually on a joint and several basis if more than one) shall be personally liable on a joint and several basis for full recourse liability under the Note and the other Loan Documents. Notwithstanding paragraph K, Borrower, any general partner of Borrower (if Borrower is a partnership) and Key Principal (each individually on a joint and several basis if more than one), shall be personally liable on a joint and several basis, in the amount of any loss, damage or cost (including but not limited to attorneys' fees) resulting from (A) fraud or material misrepresentation by Borrower or Borrower's agents or employees or any Key Principal or general partner of Borrower in connection with obtaining the loan evidenced by the Note, or in complying with any of Borrower's obligations under the Loan Documents, (B) insurance proceeds, condemnation awards, security deposits from tenants and other sums or payments received by or on behalf of Borrower in its capacity as owner of the Property and not applied in accordance with the provisions of the Instrument (except to the extent that Borrower did not have the legal right, because of a bankruptcy, receivership or similar judicial proceeding, to direct disbursement of such sums or payments), (C) all Rents and Profits (except to the extent that Borrower did not have the legal right, because of a bankruptcy, receivership or similar judicial proceeding, to direct the disbursement of such sums), and not applied, first, to the payment of the reasonable Operating Expenses as such Operating Expenses become due and payable, and then, to the payment of principal and interest then due and payable under the Note and all other sums due under the Instrument and all other Loan Documents (including but not limited to deposits or reserves payable under any Collateral Agreement), (D) Borrower's failure to pay transfer fees and charges due under paragraph 19(c) of the Instrument, or (E) Borrower's failure following a default under any of the Loan Documents to deliver to Lender on demand all Rents and Profits, and security deposits (except to the extent that Borrower did not have the legal right because of a bankruptcy, receivership or similar judicial proceeding to direct disbursement of such sums), books and records relating to the Property, or (F) or relating Hazardous Materials* No provision of paragraphs K or L shall (i) affect any guaranty or similar agreement executed in connection with the debt evidenced by the Note, (ii) release or reduce the debt evidenced by the Note, (iii) impair the right of Lender to enforce the provisions of paragraph D of the Rider, (iv) impair the lien of the Instrument or (v) impair the right of Lender to enforce the provisions of any Collateral Agreement. M. WAIVER OF JURY TRIAL Borrower and Key Principal (each for himself if more that one) (i) covenant and agree not to elect a trial by jury with respect to any issue arising under any of the Loan Documents triable by a jury and (ii) waive any right to trial by jury to the extent that any such right shall now or hereafter exist. This waiver of right to trial by jury is separately given, knowingly and voluntarily with the benefit of competent legal counsel by the Borrower and Key Principal, and this waiver is intended to encompass individually each instance and each issue as to which the right to a jury trial would otherwise accrue. Further, Borrower and Key Principal hereby certify that no representative or agent of the Lender (including, but not limited to, the Lender's counsel) has represented, expressly or otherwise, to Borrower or Key Principal that Lender will not seek to enforce the provisions of this paragraph M. * or compliance with Hazardous Materials Laws to the full extent of any losses or damages (including those resulting from diminution in value of the Property) incurred by Lender as a result of the existence of such Hazardous Materials or failure to comply with Hazardous Materials Laws or the obligations of Borrower hereunder relating thereto. FORM 4058 6/93 (PAGE 7 OF 8 PAGES) BY SIGNING BELOW, Borrower accepts and agrees to the covenants and agreements contained in this Rider. Borrower: MEADOWS LIMITED PARTNERSHIP, an Illinois limited partnership By: AIMCO LT, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ H. Alcock --------------------------- Name: Harry Alcock ------------------------- Title: VP ------------------------- FORM 4058 6/93 (PAGE 8 OF 8 PAGES) EX-10.76 18 EXHIBIT 10.76 SUPPLEMENTAL RIDER TO MULTIFAMILY INSTRUMENT -------------------------------------------- (Meadows at Anderson Mill) THIS SUPPLEMENTAL RIDER TO MULTIFAMILY INSTRUMENT (this "SUPPLEMENTAL RIDER") is made as of this 2nd day of December, 1996, and is incorporated into and shall be deemed to amend and supplement the Multifamily Mortgage or Deed of Trust or Deed to Secure Debt as of the same date (the "INSTRUMENT"), as modified by the Rider to Multifamily Instrument dated as of the same date (the "RIDER"), given by the undersigned, MEADOWS LIMITED PARTNERSHIP, an Illinois limited partnership ("BORROWER"), to secure Borrower's Multifamily Note as of the same date (the "NOTE") to GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation, whose address is 650 Dresher Road, P.O. Box 1015, Horsham, Pennsylvania 19044-8015, and its successors, assigns and transferees (the "LENDER"), covering the property described in the Instrument and defined therein as the "PROPERTY" located at: 10507 Mellow Meadows, Austin, Texas The Property is located entirely within the State of Texas (the "PROPERTY JURISDICTION"). The term "LOAN DOCUMENTS" when used in this Supplemental Rider shall mean, collectively, the following documents: (i) the Instrument, as modified by the Rider, this Supplemental Rider and any other riders to the Instrument given by Borrower to Lender and covering the Property; (ii) the Note, and (iii) all other documents or agreements, including any Collateral Agreements (as defined in the Rider), or O&M Agreements (as defined in the Rider), arising under, related to, or made in connection with, the loan evidenced by the Note, as such loan documents may be amended from time to time. Any conflict between the provisions of the Instrument, the Rider and this Supplemental Rider shall be resolved in favor of this Supplemental Rider. The, covenants and agreements of this Supplemental Rider, and the covenants and agreements of any other riders to the Instrument given by Borrower to Lender and covering the Property, shall be incorporated into and shall amend and supplement the covenants and agreements of the Instrument as if this Supplemental Rider and the other riders were a part of the Instrument and all references to the Instrument in the Loan Documents shall mean the Instrument as so amended and supplemented. ADDITIONAL COVENANTS. In addition to the covenants and agreements made in the Instrument and the Rider, Borrower and Lender further covenant and agree as follows: A. Choice of Law; Consent of Jurisdiction. THIS INSTRUMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY, INTERPRETED, CONSTRUED AND ENFORCED PURSUANT TO AND IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (EXCLUDING THE LAW APPLICABLE TO CONFLICTS OR CHOICE OF LAW) NOTWITHSTANDING THE FOREGOING, BORROWER AGREES THAT AT LENDER'S OPTION, ANY CONTROVERSY ARISING UNDER OR IN RELATION TO THE NOTE, THE INSTRUMENT OR ANY OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN THE COMMONWEALTH OF PENNSYLVANIA. AT LENDER'S OPTION, THE COURT OF COMMON PLEAS OF MONTGOMERY COUNTY PENNSYLVANIA AND THE FEDERAL COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA SHALL HAVE JURISDICTION OVER ALL CONTROVERSIES WHICH MAY ARISE UNDER OR IN RELATION TO THE NOTE, THE INSTRUMENT OR ANY OTHER LOAN DOCUMENTS, INCLUDING WITHOUT LIMITATION THOSE CONTROVERSIES RELATING TO THE EXECUTION, JURISDICTION, BREACH, ENFORCEMENT OR COMPLIANCE WITH THE NOTE OR THE INSTRUMENT OR ANY OTHER ISSUE ARISING UNDER, RELATING TO, OR IN CONNECTION WITH ANY OF THE OTHER LOAN DOCUMENTS. BORROWER IRREVOCABLY CONSENTS TO SERVICE, JURISDICTION, AND VENUE OF SUCH COURTS FOR ANY LITIGATION ARISING FROM THE NOTE, THE INSTRUMENT OR ANY OF THE OTHER LOAN DOCUMENTS, AND WAIVES ANY OTHER VENUE TO WHICH IT MIGHT BE ENTITLED BY VIRTUE OF DOMICILE, HABITUAL RESIDENCE OR OTHERWISE. NOTHING CONTAINED HEREIN, HOWEVER, SHALL PREVENT LENDER FROM BRINGING ANY SUIT, ACTION OR PROCEEDING OR EXERCISING ANY RIGHTS AGAINST BORROWER AND/OR AGAINST THE PROPERTY IN ANY OTHER JURISDICTION. INITIATING SUCH SUIT, ACTION OR PROCEEDING OR TAKING SUCH ACTION IN ANY OTHER JURISDICTION SHALL IN NO EVENT CONSTITUTE A WAIVER OF THE AGREEMENT CONTAINED HEREIN THAT THE LAWS OF THE STATE OF TEXAS SHALL GOVERN THE RIGHTS AND OBLIGATIONS OF BORROWER AND LENDER AS PROVIDED HEREIN OR THE SUBMISSION HEREIN BY BORROWER TO PERSONAL JURISDICTION WITHIN THE COMMONWEALTH OF PENNSYLVANIA. THE FOREGOING PROVISIONS WERE KNOWINGLY, WILLINGLY AND VOLUNTARILY AGREED TO BY BORROWER UPON CONSULTATION WITH INDEPENDENT LEGAL COUNSEL SELECTED BY BORROWER. B. INSURANCE. Without limitation of the terms and provisions of the Instrument, Borrower will, at its expense, procure and maintain for the benefit of Borrower and Lender, insurance policies issued by such insurance companies, in such amounts, in such form and substance, and with such coverages, endorsements, deductibles and expiration dates as are acceptable to Lender, providing the following types of insurance covering the Property: (i) "All Risks" property insurance (including broad form flood, broad form earthquake and comprehensive boiler and machinery coverages) on each building and the contents therein of Borrower in an amount not less than one hundred percent (100%) of the full replacement cost of each building and the contents therein of Borrower, with deductibles not to exceed $10,000 for any one occurrence (unless a higher deductible is required by state law), with a replacement cost coverage endorsement and an agreed amount endorsement. Full replacement cost as used herein means the cost of replacing the buildings (exclusive of the cost of excavations, foundations and footings below the lowest basement floor) and the contents therein of Borrower without deduction for physical depreciation thereof; (ii) Flood insurance if at any time any building is located in any federally designated "special hazard area", in an amount equal to the full replacement cost or the maximum amount then available under the National Flood Insurance Program, with deductibles not to exceed $3,000 for any one occurrence (unless a higher deductible is required by state law); (iii) Rent loss insurance in an amount sufficient to recover at least the total estimated gross receipts from all sources of income, including without limitation, rental income, for the Property for a twelve month period; and (iv) Commercial general liability insurance against claims for personal injury and property damage liability, all on an occurrence basis, with such coverage as Lender may reasonably request with a general aggregate limit of not less than $1,000,000, and a combined single "per occurrence" limit of not less than $2,000,000 for bodily injury, property damage and medical payments, with no deductible. The insurance policies with respect to the property provided for in clause (iv) above with respect to the Property shall name Lender as an additional insured. The insurance policies provided for in clauses (i), (ii) and (iii) above shall name Lender as mortgagee and loss payee, shall be first payable in case of loss to Lender, and shall contain mortgagee clauses and lender's loss payable endorsements in form and substance acceptable to Lender. At least 30 days prior to the expiration date of the policies, Borrower shall deliver to Lender evidence of continued coverage, including a certificate of insurance, as may be satisfactory to Lender. All policies of insurance required by this Instrument shall contain clauses or endorsements to the effect that such policies shall not be modified, cancelled or terminated prior to the scheduled expiration date thereof without the insurer thereunder giving at least 30 days prior written notice to Lender. All policies of insurance required by the instrument shall be issued by companies licensed to do business in the State where the policy is issued and also in the states where the Property is located and having a rating in Best's Key Rating Guide of at least "A-" and a financial size category of at least "V". -2- C. REPRESENTATIONS REGARDING LOAN. Borrower agrees that in the event that any representation or warranty made herein, or in connection with any application or commitment relating to the loan evidenced by the Note, or in any of the other Loan Documents to Lender by Borrower, by any principal or general partner in Borrower, or by any Key Principal under any indemnity, guarantee or other agreement executed in connection with the loan secured hereby, is determined by Lender to have been false or misleading in any material respect at the time made, the same shall constitute a default hereunder, and any amounts which Lender may advance to cure such a default shall bear interest at the default rate under the Note, shall be payable upon demand and shall be secured by the Instrument. D. ADDITIONAL REPRESENTATIONS; TRANSFER RIGHT. Borrower represents and warrants to Lender that AIMCO LT, L.P., a Delaware limited partnership ("LT"), is a general partner of Borrower, that AIMCO HOLDINGS, LP, a Delaware limited partnership ("LP") is the sole general partner of LT, that AIMCO HOLDINGS QRS, INC. ("QRS") is the sole general partner of LP and that Apartment Investment and Management Company owns 100% of the stock of QRS. Borrower represents and warrants that it does not own any real property other than the Property or engage in any business other than management and operation of the Property. Notwithstanding anything to the contrary contained in the Rider, (i) a Transfer of a Significant Interest in LT, LP and QRS, or any of them, shall constitute, at Lender's option, a default under the Instrument and permit Lender to exercise any remedies permitted by paragraph 27 of the Instrument, (ii) limited partnership interests in AIMCO Properties, L.P. may be Transferred so long as AIMCO-LP, Inc. owns not less than 50.1% of the limited partnership interests in AIMCO Properties, LP and Apartment Investment and Management Company owns 100% of the stock of AIMCO-LP, Inc., and (iii) limited partnership interests in Borrower existing on the date hereof that are not owned by persons or entities directly or indirectly affiliated in any way with one or more of Apartment Investment and Management Company, LT, LP and QRS may be Transferred without the consent of Lender. E. CONSENT TO RELIEF FROM AUTOMATIC STAY. Borrower hereby agrees that, in consideration of the making of the loan by Lender to Borrower evidenced by the Note, and as a material inducement to Lender to make such loan, in the event Borrower shall (i) file with any bankruptcy court of competent jurisdiction or be the subject of any petition under the United States Bankruptcy Code (the "BANKRUPTCY Code"), (ii) be the subject of any order for relief issued under the Bankruptcy Code, (iii) file or be the subject of any petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any present or future federal or state act or law relating to bankruptcy, insolvency, or other relief for debtors, (iv) have sought or consented to or acquiesced in the appointment of any trustee, receiver, conservator, or liquidator, or (v) be the subject of any order, judgment, or decree entered by any court of competent jurisdiction approving a petition filed against such party for any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any present or future federal or state act or law relating to bankruptcy, insolvency, or relief for debtors, then (a) Lender shall thereupon be entitled and Borrower irrevocably consents to relief from any automatic stay imposed by Section 362 of the Bankruptcy Code, or otherwise, on or against the exercise of the rights and remedies otherwise available to Lender as provided in the Note and/or Instrument, and as otherwise provided by law, and Borrower hereby irrevocably waives its right to object to such relief and acknowledges that no reorganization in bankruptcy is feasible; (b) Borrower waives its exclusive right pursuant to Section 1121(b) of the Bankruptcy Code to file a plan of reorganization and irrevocably consents to the Lender filing a plan immediately upon the entry of an order for relief if any involuntary petition is filed against Borrower or upon the filing of a voluntary petition by the Borrower; (c) in the event that Lender shall move pursuant to Section 1121(d) of the Bankruptcy Code for an order reducing the 120 day exclusive period, Borrower shall not object to any such motion; and (d) -3- Borrower irrevocably waives its right to demand a turnover of the Property from a receiver appointed at the request of Lender, and agrees that it is in the best interest of the creditors pursuant to Section 543(d) of the Bankruptcy Code for the receiver to continue in possession, custody and control of the Property. F. ACCELERATION; REMEDIES. Non-Uniform Covenant 27 of the Instrument ("Acceleration; Remedies") is amended to read as follows: (a) DEFAULT. Upon (i) Borrower's breach of any covenant or agreement of Borrower in the Instrument or any other Loan Document, including, but not limited to, the covenant to pay when due any sums secured by the Instrument, and/or (ii) AIMCO LT, L.P.'s breach of any covenant or agreement of AIMCO LT, L.P. under that certain General Partner Pledge and Security Agreement of even date herewith (each, an "EVENT OF DEFAULT"), Lender may exercise any and all remedies provided under the Instrument and under any of the other Loan Documents, or any other remedies available under applicable law, or any one or more of such remedies. (b) REMEDIES. Upon the occurrence of any Event of Default and at any time thereafter: (i) INDEBTEDNESS DUE. All indebtedness secured by the Instrument in its entirety shall, at the option of Lender become immediately due and payable without presentment, demand, notice of intention to accelerate or notice of acceleration, or other notice of any kind except as otherwise expressly set forth herein, all of which are hereby expressly WAIVED, and the liens and security interests created or intended to be created hereby shall be subject to foreclosure, repossession and sale in any manner provided for herein or provided for by law, as Lender may elect, and Lender may exercise any and all of its rights under the Instrument, the Note, and the other Loan Documents. (ii) LEGAL PROCEEDINGS. Lender shall have the right and power to proceed by suit or suits in equity or at law, whether for the specific performance of any covenant or agreement of Borrower contained herein or in aid of the execution of the powers herein granted, or for foreclosure or the sale of the Property or any part thereof under the judgment or decree of any court of competent jurisdiction, or for the enforcement of any other appropriate legal or equitable remedy. (iii) FORECLOSURE SALE. Lender shall be entitled to institute an action to foreclose the Instrument as to the total amount declared due and payable by Lender, together with all of the costs, expenses and disbursements of the Lender, including, without limitation, a reasonable fee for Lender's attorneys at all trial and appellate levels, as hereinafter set forth. The Property may be sold in one parcel, several parcels or groups of parcels, and Lender shall be entitled to bid at the sale and, if Lender is the highest bidder for the Property or any part or parts thereof, Lender shall be entitled to purchase the same. Lender shall have the right, after paying or accounting for all costs of said sale or sales, to credit the amount of the bid at the foreclosure sale upon the amount of the obligations (in the order of priority set forth below) in lieu of cash payment. In case of a foreclosure and sale of the Property and of the obligations hereby secured, the Lender shall be entitled to enforce payment of and to receive all amounts then remaining due and unpaid upon the indebtedness secured by the Instrument from any and all security for said amounts and from any and all persons or entities (including the Borrower) under any agreement, guaranty or collateral undertaking to pay any portion of said amount. The proceeds of any foreclosure sale of the Property shall be distributed and applied in the order of priority set forth below. Upon any such foreclosure sale pursuant to the judicial proceedings, the Lender may bid for and purchase the Property and, upon compliance with the terms of said sale, may hold, retain and possess and dispose of -4- the Property in its own absolute right without further accountability to the Borrower. In any civil action to foreclose the lien hereof, there shall be allowed and included as part of the indebtedness secured by this Instrument in the order of judgment for foreclosure and sale all expenditures and expenses which may be paid or incurred by or on behalf of the Lender for reasonable attorneys' fees, appraisers' fees, outlays for documentary and expert evidence, stenographers' charges, publication costs, and costs (which may be estimated as to items to be expended after entry of said order or judgment) of procuring all such abstracts of title, title searches and examinations, title insurance policies and similar data and insurance with respect to the title as the Lender may deem reasonably necessary either to prosecute such civil action or to evidence to bidders at any sale which may be had pursuant to such order or judgment the true condition of the title to, or the value of, the Property. (c) APPLICATION OF PROCEEDS, RENTS, ETC. The proceeds of any sale of, and any rents and other amounts generated by the holding, leasing, operation or other use of the Property shall be applied by the Lender (or the receiver, if one is appointed) to the extent that funds are so available therefrom, in the following order of priority: (i) COSTS OF SALE. First, to the payment of all reasonable costs of the sale or other costs mandated by law. (ii) OTHER COSTS. Second, to the payment of the reasonable costs and expense of taking possession of the Property and of holding, using, leasing, repairing and selling the same, including, without limitation, (1) reasonable attorneys' and accountants' fees, and (2) the payment of any and all taxes, assessments, liens, security interests or other rights, titles or interest superior to the lien and security interest of this Instrument; (iii) INDEBTEDNESS. Third, to the payment of the indebtedness secured by the Instrument in such order as Lender, in Lender's sole discretion, directs; and (iv) BALANCE. Fourth, to Borrower, its heirs, legal representatives, successors and assigns, or to whomsoever may be lawfully entitled to receive the same. G. BOOKS AND RECORDS. In addition to the obligations of Borrower under paragraph E of the Rider to Multifamily Instrument amending Uniform Covenant 10 of the Instrument ("BOOKS AND RECORDS"), Borrower shall provide Lender the following: (i) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in any event within 120 days after the close of each fiscal year of any Key Principal during the term of this Agreement, its audited balance sheet as of the end of such fiscal as of the end of such fiscal year, its audited statement of income, partners' equity and retained earnings for such fiscal year and its audited statement of cash flows for such fiscal year, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the prior fiscal year, prepared in accordance with GAAP, consistently applied, and accompanied by a certificate of its independent certified public accountants to the effect that such financial statements have been prepared in accordance with GAAP, consistently applied, and that such financial statements fairly present the results of its operations and financial condition for the periods and dates indicated, with such certification to be free of exceptions and qualifications as to the scope of the audit or as to the going concern nature of the business. (ii) QUARTERLY FINANCIAL STATEMENTS. As soon as available, and in any event within 45 days after each of the first three fiscal quarters of any fiscal year of the Key Principal during the term of this Agreement, its unaudited balance sheet as of the end of such fiscal -5- quarter and its unaudited statement of income and retained earnings and its unaudited statement of cash flows for the portion of the fiscal year ended with the last day of such quarter, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the previous fiscal year, accompanied by a certificate of each Key Principal to the effect that such financial statements have been prepared in accordance with GAAP, consistently applied, and that such financial statements fairly present the results of its operations and financial condition for the periods and dates indicated. (iii) MONTHLY PROPERTY STATEMENT. Upon Lender's request, on a monthly basis within 15 days of the last day of the prior month, a statement of income and expenses of the Property accompanied by a certificate of Borrower to the effect that each such statement of income and expenses fairly, accurately and completely presents the operations of the Property for the period indicated. (iv) ANNUAL PROPERTY STATEMENTS. On an annual basis within 15 days of the end of the fiscal year, an annual statement of income and expenses of the Property accompanied by a certificate of Borrower to the effect that each such statement of income and expenses fairly, accurately and completely presents the operations of the Property for the period indicated. (v) UPDATED RENT ROLLS. Upon Lender's request, a current rent roll for the Property, showing the name of each tenant, and for each tenant, the space occupied, the lease expiration date, the rent payable, the rent paid and any other information requested by Lender and in the form required by Lender and accompanied by a certificate of Borrower to the effect that each such rent roll fairly, accurately and completely presents the information required therein. (vi) SECURITY DEPOSIT INFORMATION. Upon Lender's request, an accounting of all security deposits held in connection with any lease of any part of the Property, including the name and identification number of the accounts in which such security deposits are held, the name and address of the financial institutions in which such security deposits and held and the name of the person to contact at such financial institution, along with any authority or release necessary for Lender to access information regarding such accounts. (vii) SECURITY LAW REPORTING INFORMATION. Promptly upon the mailing thereof to the partners or shareholders of Borrower or any Key Principal, copies of all financial statements, reports and proxy statements so mailed and promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and annual, quarterly or monthly reports (excluding Form 4, Statement of Changes in Beneficial Ownership, or its equivalent, unless they reflect a change in control in Owner) which Borrower or any Key Principal shall have filed with the United States Securities and Exchange Commission or other Governmental Authorities. (viii) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, copies of any reports or management letters submitted to Borrower by its independent certified public accountants in connection with the examination of its financial statements made by such accountants (except for reports otherwise provided pursuant to clause (i) above). (ix) CONDITION OF APARTMENT INVESTMENT AND MANAGEMENT COMPANY. Borrower shall promptly notify the Lender of any report, event or condition known to the Borrower that the status of Apartment Investment and Management Company as a real estate investment trust under Subchapter M of the Internal Revenue Code has been terminated or brought into question. H. FEES. Borrower covenants that it shall not, without the prior written consent of Lender, pay any fees, charges, expenses, or other -6- amounts to any entity in which Apartment Investment and Management Company has a direct or indirect interest at any time an Event of Default exists under any of the Loan Instruments. I. SUBORDINATION; CASH MANAGEMENT. At Lender's option, it shall constitute an Event of Default under the Instrument and the other Loan Documents if Borrower shall fail to deliver to Lender within thirty (30) days after the date hereof (i) Subordination Agreements from all tenants of the Property that have leases for laundry or cable television facilities, in form and substance satisfactory to Lender, in its sole and absolute discretion, and (ii) a Cash Management Agreement (including, without limitation, a Restricted Account Letter executed by a depository bank reasonably acceptable to Lender) satisfactory in form and substance to Lender in its sole and absolute discretion. BY SIGNING BELOW, Borrower accepts and agrees to the covenants and agreements contained in this Supplemental Rider. BORROWER: MEADOWS LIMITED PARTNERSHIP, an Illinois limited partnership By: AIMCO LT, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ H. Alcock ----------------------------- Name: Harry Alcock ----------------------------- Title: VP ----------------------------- -7- EX-10.77 19 EXHIBIT 10.77 EXCEPTIONS TO NON-RECOURSE GUARANTY This Exceptions to Non-Recourse Guaranty is entered into as of December 1996, by the undersigned (collectively, the "Key Principal" whether one or more), in order to induce GMAC COMMERCIAL MORTGAGE CORPORATION (the "Lender") to make a loan to MEADOWS LIMITED PARTNERSHIP, an Illinois limited partnership (the "Borrower ) in the amount of $2,488,400 (the "Loan"). RECITALS A. The Loan is evidenced by a Multifamily Note from Borrower to Lender of even date herewith (the "Multifamily Note"). The Loan is secured by a Multifamily Deed of Trust, Assignment of Rents and Security Agreement of even date herewith (the "Multifamily Instrument"), covering the property described in the Multifamily Instrument and located at Austin, Texas (the "Property"). The Multifamily Instrument is amended and supplemented by a Rider to Multifamily Instrument of even date herewith and a Supplemental Rider to the Multifamily Instrument of even date herewith (collectively, the "Rider"). B. The Multifamily Note, as amended from time to time, shall be referred to in this Exceptions to Non-Recourse Guaranty as the "Note." The Multifamily Instrument, as modified by the Rider and as further amended from time to time, shall be referred to in this Exceptions to Non-Recourse Guaranty as the "Instrument." The term "Loan Documents" when used in this Exceptions to Non-Recourse Guaranty, shall mean, collectively, the following documents: (i) the Note, (ii) the Instrument, and (iii) all other documents or agreements, including any Collateral Agreements (as defined in the Rider) or O&M Agreement (as defined in the Rider), executed in connection with the Loan, whether presently existing or hereinafter entered into, as such Loan Documents may be amended from time to time. C. Lender is unwilling to make the Loan unless the undersigned Key Principal executes this Exceptions to Non-Recourse Guaranty. NOW, THEREFORE, in order to induce Lender to make the Loan evidenced by the Note and secured by the Instrument, and in consideration thereof, Key Principal hereby (i) irrevocably and unconditionally guarantees the full and prompt payment to Lender of all amounts which may from time to time while the Note is outstanding and unpaid become due and owing by Borrower, whether principal, interest or other sums, for which Borrower may from time to time, or at any time be personally liable for payment to Lender under the Note and the Instrument (due to the applicability of the exceptions to non-recourse liability provisions contained in paragraph L of the Rider) (the "Guaranteed Obligations"), and (ii) agrees to pay, on demand, all costs and expenses, including reasonable attorneys' fees and disbursements, incurred by Lender in enforcing its rights under this Exceptions to Non-Recourse Guaranty. All obligations of Key Principal under this Exceptions to Non-Recourse Guaranty shall be joint and several among all persons (if more than one) included as a Key Principal. This Exceptions to Non-Recourse Guaranty is an unconditional guaranty of payment, and not a guaranty of collection, and may be enforced by Lender directly against Key Principal without any requirement that Lender must first exercise its rights against Borrower or any general partner of Borrower or any collateral or other security for payment of the Note. The obligations of Key Principal under this Exceptions to Non-Recourse Guaranty shall be performed without demand by Lender and shall be unconditional irrespective of the genuineness, validity, regularity or enforceability of the Note, the Instrument, or any other circumstance which might otherwise constitute a legal or equitable discharge of a surety or a guarantor. Key Principal hereby waives the benefit of all principles or provisions of law, statutory or otherwise, which are or might be in conflict with the terms of this Exceptions to Non-Recourse Guaranty, and agrees that the obligations of Key Principal shall not be affected by any circumstances, whether or not referred to in this Exceptions to Non-Recourse Guaranty, which might otherwise constitute a legal or equitable discharge of a surety or guarantor. Key Principal hereby waives the benefits of any right of discharge under any and all statutes or other laws relating to guarantors or sureties and any other rights of sureties and guarantors thereunder. Without limiting the generality of the foregoing, Key Principal hereby waives diligence, presentment, demand for payment, protest, all notices which may be required by statute, rule of law or otherwise to preserve intact Lender's rights against Key Principal under this Exceptions to Non-Recourse Guaranty, including, but not limited to, notice of acceptance, notice of any amendment of the Loan Documents, notice of the occurrence of any default, notice of intent to accelerate, notice of acceleration, notice of dishonor, notice of foreclosure, notice of protest, notice of the incurring by Borrower of any of the Guaranteed Obligations, and, generally, all demands, notices and other formalities of every kind in connection with this Exceptions to Non-Recourse Guaranty, and all rights to require Lender to (a) proceed against Borrower or, if Borrower is a partnership, any general partner of Borrower, (b) proceed against or exhaust any collateral held by Lender to secure the payment of the Loan, or (c) pursue any other remedy it may now or hereafter have against Borrower, or, if Borrower is a partnership, any general partner of Borrower. Key Principal hereby agrees that, at any time or from time to time and any number of times, without notice to Key Principal and without affecting the liability of Key Principal, (a) the time for payment of the principal of or interest on the Note may be extended or the Note may be renewed in whole or in part one or more times; (b) the time for Borrower's performance of or compliance with any covenant or agreement contained in the Note, the Instrument or any other Loan Document evidencing, securing or governing the Loan, whether presently existing or hereinafter entered into, may be extended or such performance or compliance may be waived; (c) the maturity of the Note may be accelerated as provided therein or in the Instrument, or any other Loan Document; (d) the Note, the Instrument, or any other Loan Document, may be modified or amended by Lender and Borrower in any respect, including, but not limited to, an increase in the principal EXCEPTIONS TO NON-RECOURSE GUARANTY - Fannie Mae Uniform Instrument Form 4501 6/93 (PAGE 1 OF 2) amount; and (e) any security for the Loan may be modified, exchanged, surrendered or otherwise dealt with or additional security may be pledged or mortgaged for the Loan. If any payment by Borrower is held to constitute a preference under any applicable bankruptcy or similar laws, or if for any reason Lender is required to refund any sums to Borrower, such amounts shall not constitute a release of any liability of Key Principal hereunder. It is the intention of Lender and Key Principal that Key Principal's obligations hereunder shall not be discharged except by Key Principal's performance of such obligations and then only to the extent of such performance. Key Principal agrees that any indebtedness of Borrower now or hereafter held by Key Principal is hereby and shall be subordinated to all indebtedness of Borrower to Lender and any such indebtedness of Borrower shall be collected, enforced and received by Key Principal, as trustee for Lender, but without reducing or affecting in any manner the liability of Key Principal under the other provisions of this Exceptions to Non-Recourse Guaranty. Key Principal agrees that Lender, in its sole and absolute discretion, may (a) bring suit against Key Principal, or any one or more of the individuals constituting Key Principal, and any other guarantor of the Note, jointly and severally, or against any one or more of them; (b) compromise or settle with any one or more of the individuals constituting Key Principal for such consideration as Lender may deem proper; (c) release one or more of the individuals constituting Key Principal, or any other guarantors of the Note, from liability thereunder; and (d) otherwise deal with Key Principal and any other guarantor of the Note, or any one or more of them, in any manner whatsoever, and that no such action shall impair the rights of Lender to collect the Guaranteed Obligations from Key Principal. Nothing contained in this paragraph shall in any way affect or impair the rights or obligations of the Key Principal with respect to any other guarantor of the Note. Lender may assign its rights under this Exceptions to Non-Recourse Guaranty in whole or in part and upon any such assignment, all the terms and provisions of this Exceptions to Non-Recourse Guaranty shall inure to the benefit of such assignee to the extent so assigned. The terms used to designate any of the parties herein shall be deemed to include the heirs, legal representatives, successors and assigns of such parties; and the term "Lender" shall include, in addition to Lender, any lawful owner, holder or pledgee of the Note. Key Principal shall have no right of, and hereby waives any claim for, subrogation or reimbursement against the Borrower or any general partner of Borrower by reason of any payment by Key Principal under, this Exceptions to Non-Recourse Guaranty, whether such right or claim arises at law or in equity or under any contract or statute. Key Principal hereby waives trial by jury in any action or proceeding commenced by Lender against Key Principal under this Exceptions to Non-Recourse Guaranty. THIS EXCEPTIONS TO NON-RECOURSE GUARANTY AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS, UNDERSTANDINGS, REPRESENTATIONS, AND STATEMENTS, ORAL OR WRITTEN, ARE MERGED INTO THIS EXCEPTIONS TO NON-RECOURSE GUARANTY AND THE OTHER LOAN DOCUMENTS. NEITHER THIS EXCEPTIONS TO NON-RECOURSE GUARANTY NOR ANY PROVISION HEREOF MAY BE WAIVED, MODIFIED, AMENDED, DISCHARGED, OR TERMINATED EXCEPT BY AN AGREEMENT IN WRITING SIGNED BY THE PARTY AGAINST WHICH THE ENFORCEMENT OF SUCH WAIVER, MODIFICATION, AMENDMENT, DISCHARGE, OR TERMINATION IS SOUGHT, AND THEN ONLY TO THE EXTENT SET FORTH IN SUCH AGREEMENT. This Exceptions to Non-Recourse Guaranty shall be governed by, interpreted, construed and enforced pursuant to and in accordance with the laws of the State of Texas (excluding the law applicable to conflicts or choice of law). Key Principal agrees that, at Lender's option, any controversy arising under or in relation to this Exceptions to Non-Recourse Guaranty shall be litigated in the Commonwealth of Pennsylvania. At Lender's option, the Court of Common Pleas for Montgomery County, Pennsylvania and the federal court for the Eastern District of Pennsylvania, shall have jurisdiction over all controversies which may arise under or in relation to this Exceptions to Non-Recourse Guaranty, including without limitation those controversies relating to the execution, jurisdiction, breach, enforcement or compliance with this Exceptions to Non-Recourse Guaranty. Key Principal irrevocably consents to service, jurisdiction, and venue of such courts for any litigation arising from this Exceptions to Non-Recourse Guaranty, and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise. Nothing contained herein, however, shall prevent Lender from bringing any suit, action or proceeding or exercising any rights against Key Principal and/or against any property in any other jurisdiction. Initiating such suit, action or proceeding or taking such action in any other jurisdiction shall in no event constitute a waiver of the agreement contained herein that the laws of the State of Texas shall govern the rights and obligations of Key Principal and Lender as provided herein or the submission herein by Key Principal to personal jurisdiction within the Commonwealth of Pennsylvania. The foregoing provisions were knowingly, willingly, and voluntarily agreed to by Key Principal upon consultation with independent counsel selected by Key Principal. Form 4501 6/93 (PAGE 2 OF 2) SIGNATURE PAGE TO EXCEPTIONS TO NON-RECOURSE GUARANTY KEY PRINCIPAL: APARTMENT INVESTMENT AND MANAGEMENT COMPANY By: /s/ H. Alcock ____________________________ Name: Harry Alcock __________________________ Title: VP _________________________ Address: 1873 S. Bellaire Street Denver, Colorado 80222 Page 3 of 3 EX-10.78 20 EXHIBIT 10.78 MULTIFAMILY NOTE US $2,488,400 December 2, 1996 FOR VALUE RECEIVED, MEADOWS LIMITED PARTNERSHIP, an Illinois limited partnership ("MAKER"), promises to pay GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation ("LENDER"), or order, the principal sum of Two Million Four Hundred Eighty-Eight Thousand Four Hundred Dollars ($2,488,400), together with interest thereon, as follows. 1. DEFINITIONS. As used in this Note, the following terms shall have the meanings set forth below: "BUSINESS DAY" shall mean any day other than (i) a Saturday, Sunday or public holiday under the laws of the Commonwealth of Pennsylvania, or (ii) any other day on which banking institutions are authorized or obligated to close in Philadelphia, Pennsylvania. "COMMITMENT" shall mean that certain commitment letter dated October 10, 1996 from Lender to Maker's general partner and to Apartment Investment and Management Company ("AIMCO"), as amended. The Commitment shall survive the execution and delivery of the other Loan Documents. In the event of any conflict between the terms of the Commitment and the terms of the other Loan Documents, the latter shall control. "DEFAULT RATE" shall mean a rate per annum equal to four percent (4%) above the then current LIBOR Rate under this Note. "DOLLAR", "DOLLARS" and "$" shall mean lawful money of the United States of America. "LIBOR RATE" shall mean with respect to each Euro-Dollar Interest Period the annual rate of interest designated as the British Banker's Association settlement rate that appears on the display on page 3750 (under the caption "USD" of the Telerate Services, Incorporated screens or such other display as may replace such page) as of 11:00 AM (London time) on the second (2nd) full Euro-Dollar Day next preceding the first day of each calendar month with respect to which interest is payable under this Note, as the rate per annum for (1) month deposits in the London interbank market; provided, however, that if no offered quotations appear on the Telerate Services, Incorporated screen or if quotations are not given on such screen for a period of time comparable to such Euro-Dollar Interest Period, then the LIBOR Rate applicable to such Euro-Dollar Interest Period shall be the rate of interest determined by Lender to be the prevailing rate per annum quoted to it at approximately 10:00 AM (Eastern time) by two (2) or more New York Euro-Dollar deposit dealers of recognized standing selected by Lender for the offering of Dollar deposits to Holder by lending banks in the London interbank market for one (1) month periods and in the amount approximately equal to the principal amount then owing under this Note. If more than one LIBOR Rate is reported, then the LIBOR Rate shall equal the average of such rates. Notwithstanding anything to the contrary contained in this Note, the LIBOR Rate for the period from the date hereof through and including December 31, 1996, shall be five and a half percent (5.5%). "EURO-DOLLAR DAY" means any business day on which commercial banks are open for international business (including dealings in Dollar deposits) in London, England. "EURO-DOLLAR INTEREST PERIOD" shall mean the period commencing on the first day of each calendar month during the term of this Note through and including the last such calendar day of such month; provided, that the first Euro-Dollar Interest Period shall commence on the date hereof. "EVENT OF DEFAULT" shall mean (i) a failure of Maker to pay when due principal, interest or any other charge under this Note or to otherwise comply with the terms of this Note, and (ii) a default beyond the expiration of any applicable notice and grace period under any other Loan Document. "GOVERNMENTAL AUTHORITY" shall mean any federal, state or local governmental or quasi-governmental subdivision, authority or other instrumentality thereof and any entity asserting or exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "LAW" shall mean all statutes, codes, laws, ordinances, regulations, rules, policies or other federal, state, local and municipal requirements of any governmental authority, whether now or hereafter enacted or adopted, and all judgments, decrees, injunctions, writs, orders or like action of an arbitrator or other governmental authority of competent jurisdiction. "LOAN" shall mean the $2,488,400 loan made by Lender to Maker pursuant to the Mortgage and the Commitment and evidenced by this Note. "LOAN DOCUMENTS" shall mean the following documents: (i) the Commitment; (ii) this Note; (iii) the Mortgage; and (iv) all other documents or agreements arising under, related to, or made in connection with, the Loan, as such loan documents may be amended from time to time. To the extent there is any inconsistency between this Note and the Mortgage, the terms of this Note shall, to the extent permitted by Law, govern. "MATURITY DATE" is defined in paragraph 5 hereof. 2 "MORTGAGE" shall mean (i) that certain Multifamily Deed of Trust from Maker to Jay C. Paxton, as trustee, of even date herewith, covering certain property located in Austin, Texas, and intended to be filed for record forthwith in the Office of the County Clerk of Williamson County, Texas. "PERSON" shall mean any individual, for profit or not for profit corporation, partnership, joint venture, association, limited liability company, limited liability partnership, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "PRIME RATE" shall mean the interest rate per annum announced from time to time by Citibank, N.A. or its successor, as its Prime Rate. The Prime Rate may be greater or less than other interest rates charged by Citibank, N.A. to other borrowers and is not solely based or dependent upon the interest rate which Citibank, N.A. may charge any particular borrower or class of borrowers. "PROPERTY" shall mean the real estate defined as the "Property" in the Mortgage. 2. INTEREST RATES. (a) LIBOR RATE. The unpaid principal amount of this Note shall, subject to subparagraph 2(b) hereof, bear interest for each day at a rate per annum equal to the LIBOR Rate then in effect for such day plus two hundred fifty (250) basis points (rounded up to the nearest eighth of one percent (.125%)); provided, however, that if under paragraph 3 hereof the LIBOR Rate is not applicable, then such interest shall accrue at the Prime Rate. (b) DEFAULT RATE. Upon the occurrence of any Event of Default by Maker and/or after the maturity hereof (whether by acceleration or otherwise), this Note shall bear interest at the Default Rate. (c) CALCULATIONS. The interest rate hereunder shall (i) be calculated based on a year of 360 days and charged for the actual number of days elapsed, and (ii) change automatically from time to time, effective as of the effective date of each change in the LIBOR Rate, or the Prime Rate, as applicable. 3. INTEREST RATE; REIMBURSEMENT; INDEMNITY. (a) LIBOR UNASCERTAINABLE. If (i) on any date on which the LIBOR Rate would otherwise be set Lender shall have determined in good faith (which determination shall be conclusive) that (A) adequate and reasonable means do not exist for ascertaining such LIBOR Rate, or (B) a contingency has 3 occurred which materially and adversely affects the interbank eurodollar market, or (ii) at any time Lender shall have determined in good faith (which determination shall be conclusive) that the making, maintenance or funding of any part of the Loan has been made impracticable or unlawful by compliance by Lender in good faith with any Law or guideline or interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof or with any request or directive of any such Governmental Authority (whether or not having the force of law); then, and in any such event, Lender may notify Maker of such determination. Upon such date as shall be specified in such notice (which shall not be earlier than the date such notice is given) the obligation of Lender to charge interest to Maker at the LIBOR Rate shall be suspended until Lender shall have later notified Maker of Lender's determination in good faith (which determination shall be conclusive) that the circumstances giving rise to such previous determination no longer exist. (b) PRIME RATE. If Lender notifies Maker of a determination under subparagraph 3(a) hereof, the LIBOR Rate shall automatically be converted to the Prime Rate as of the date specified in such notice (and accrued interest thereon shall be due and payable on such date). (c) REIMBURSEMENT FOR INCREASED COSTS OR REDUCED RETURN. If any Law or guideline or interpretation or application thereof by any Governmental Authority charged with the interpretation or administration thereof or compliance with any request or directive of any Governmental Authority (whether or not having the force of law) now existing or hereafter adopted (i) subjects Lender to any tax or changes the basis of taxation with respect to this Note, the Commitment, the Loan or payments by Maker of principal, interest or other amounts due from Maker hereunder or thereunder (except for taxes on the overall net income or overall gross receipts of Lender imposed as a result of a present or former connection between the jurisdiction of the government or taxinq authority imposing such tax and Lender; provided, that this exclusion shall not apply to a connection arising solely from Lender having executed, delivered, performed its obligations under or received a payment under, or enforced any of the Loan Documents), (ii) imposes, modifies or deems applicable any reserve, special deposit or similar requirement against credits or commitments to extend credit extended by, assets (funded or contingent) of, deposits with or for the account of, or other acquisition of funds by, Lender, (iii) imposes, modifies or deems applicable any capital adequacy or similar requirement against assets (funded or contingent) of, or credits or commitments to extend credit extended by, Lender, or otherwise applicable to the obligations of Lender under the Commitment, or (iv) imposes upon Lender any other condition or expense with respect to this Note, the Commitment or its making, 4 maintenance or funding of any part of the Loan or any security therefor, and the result of any of the foregoing is to increase the cost to, reduce the income receivable by, or impose any expense (including, without limitation, loss of margin) upon Lender or, in the case of clause (iii) above, any Person controlling Lender, with respect to this Note, the Commitment or the making, maintenance or funding of any part of the Loan (or, in the case of any capital adequacy or similar requirement, to have the effect of reducing the rate of return on Lender's or such controlling Person's capital, taking into consideration Lender's or such controlling Person's policies with respect to capital adequacy) by an amount which Lender deems to be material, Lender may from time to time notify Maker of the amount determined in good faith (using any averaging and attribution methods) by Lender (which determination shall be conclusive) to be necessary to compensate Lender for such increase, reduction or imposition. Such amount shall be due and payable by Maker to Lender five (5) Business Days after such notice is given. 4. INTEREST PAYMENT DATES. Interest hereunder shall be due and payable on the first day of the second full calendar month after the date hereof and on the first day of each calendar month thereafter. After maturity hereof (by acceleration or otherwise), interest hereunder shall be due and payable on demand. 5. MATURITY. This Note shall mature on January 1, 1999 (the "MATURITY DATE"). On the Maturity Date the entire unpaid principal balance hereof, together with accrued interest thereon, and all other amounts due hereunder and under the other Loan Documents, shall become due and payable in full. 6. PREPAYMENTS/EXIT FEE. (a) OPTIONAL. Maker shall have the right at its option to prepay this Note in whole (but not in part, except in the case of a partial prepayment required by Lender pursuant to the Mortgage after a casualty or condemnation relating to the Property) at any time. (b) NOTICE OF PREPAYMENT. Maker shall give Lender not less than thirty (30) days' prior written notice of any prepayment permitted by this paragraph 6, specifying the date of prepayment, which shall be a Business Day. Such notice of prepayment having been given, on the date specified in such notice, the principal together with interest on such principal amount to such date, along with all other amounts due hereunder and under the other Loan Documents (including, without limitation, the premium described in subparagraph 6(c) hereof) shall be due and payable. 5 (c) PREMIUM. In the event any prepayment is made (or this Note is paid at maturity, but Lender does not facilitate the refinancing of the Loan), Lender will suffer damages that are extremely difficult to ascertain. Accordingly, any prepayment or payment of this Note at maturity shall be accompanied by payment of an amount equal to one percent (1%) of the original principal amount of this Note (or in the case of a permitted partial prepayment, one percent (1%) of the amount being prepaid) as a prepayment or exit fee, as applicable. The parties have agreed that this premium is a reasonable estimate of Lender's damages in the event of a prepayment, or a refinancing not facilitated by Lender. Notwithstanding the foregoing, the prepayment premium set forth in this subparagraph 6(c) shall be waived (i) if Maker repays the Note solely with the proceeds of a sale of common or preferred stock by AIMCO and without using the proceeds, directly or indirectly, of any loan or other indebtedness, or (ii) if Lender facilitates the refinancing of the Loan. 7. PAYMENTS. All payments (including, without limitation, prepayments) to be made in respect of principal, interest or other amounts due from Maker hereunder shall be payable at 12:00 Noon, Philadelphia time, on the day when due. Such payments shall be made to Lender at its office at 650 Dresher Road, P.O. Box 1015, Horsham PA 19044-8015, in Dollars, without setoff, counterclaim or other deduction of any nature. Any such payment received by Lender after 12:00 Noon, Philadelphia time, on any day shall be deemed to have been received on the next succeeding Business Day. Whenever any payment to be made under this Note or any other Loan Document shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next following Business Day and such extension of time shall be included in computing interest, if any, in connection with such payment. To the extent permitted by Law, after there shall have occurred an Event of Default, all amounts due hereunder and under the other Loan Documents (by acceleration or otherwise), including, without limitation, principal and interest under this Note, shall bear interest for each day until paid (before and after judgment), payable on demand, at the Default Rate. 8. LATE CHARGE. If any installment of interest, principal, or principal and interest shall become overdue for a period in excess of ten (10) days, a "late charge" in the amount of five percent (5%) of such overdue installment shall be paid by Maker to Lender, which "late charge" shall be payable on demand. This charge shall be in addition to, and not in lieu of, any other remedy Lender may have and is in addition to any reasonable fees and charges of any agents or attorneys which Lender is entitled to employ on any default hereunder, whether authorized herein, or by Law. 6 9. DEFAULT. If an Event of Default shall occur, Lender, at its option, may accelerate the indebtedness evidenced hereby and all other amounts due under the Loan Documents and may exercise the other rights and remedies provided it in the Mortgage and the other Loan Documents, as well as those it may have at law or in equity. Upon the acceleration of this Note because of an Event of Default, a tender of payment by Maker of the amount necessary to satisfy the entire indebtedness evidenced hereby made at any time shall constitute an evasion of the prepayment terms of this Note and shall be deemed a voluntary prepayment and shall entitle Lender to receive, in addition to all other amounts due Lender, the prepayment fee set forth in subparagraph 6(c) hereof. 10. INTEREST LIMITATION. Notwithstanding anything to the contrary contained herein or in the Mortgage or any other of the Loan Documents, the effective rate of interest on the obligation evidenced by this Note shall not exceed the maximum rate of interest permitted to be paid by applicable Law. The term "maximum rate of interest permitted to be paid by applicable Law" (the "MAXIMUM RATE") shall mean the highest lawful rate of interest applicable to this Note. In determining the Maximum Rate, due regard shall be given to all payments, fees, charges, deposits, balances and agreements which may constitute interest or be deducted from principal when calculating interest. For purposes of determining the Maximum Rate, the Indicated Rate Ceiling specified in Texas Revised Civil Statutes, Article 5069-1.04 shall be used; however, if permitted by applicable Law, Lender may implement any ceiling under that law used to compute the rate of interest hereunder by notice to Maker as provided in such article. Notwithstanding the foregoing sentence, if Section 501 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (as amended) permits a higher Maximum Rate than article 5069-1.04 or applicable Texas Law, such higher Maximum Rate shall apply to this Note. It is expressly stipulated and agreed to be the intent of Maker and Lender at all times to comply with the applicable Law governing the Maximum Rate or amount of interest payable on or in connection with this Note and the Loan (or applicable United States federal law to the extent that it permits Lender to contract for, charge, take, reserve, or receive a greater amount of interest than under the Law of the State of Texas). If the applicable Law is ever judicially interpreted so as to render usurious any amount called for under this Note or under the Mortgage or any other Loan Document or contracted for, charged, taken, reserved or received with respect to the Loan, or if acceleration of the maturity of this Note or if any prepayment by Maker results in Maker having paid any interest in excess of that permitted by applicable Law, then it is Maker's and Lender's express intent that all excess amounts theretofore collected by Lender be credited on the principal balance of this Note (or, if 7 this Note has been or would thereby be paid in full, refunded to Maker), and the provisions of this Note, the Mortgage and the other Loan Documents immediately be deemed reformed and the amounts thereafter collectible hereunder and thereunder reduced, without the necessity of the execution of any new documents, so as to comply with the applicable Law, but so as to permit the recovery of the fullest amount otherwise called for hereunder and thereunder. The right to accelerate the maturity of this Note does not include the right to accelerate any interest which has not otherwise accrued on the date of such acceleration, and Lender does not intend to collect any unearned interest in the event of acceleration. All sums paid or agreed to be paid to Lender for the use, forbearance or detention of the indebtedness evidenced hereby shall, to the extent permitted by applicable Law, be amortized, prorated, allocated and spread throughout the full term of such indebtedness until payment in full so that the rate or amount of interest on account of such indebtedness does not exceed the applicable usury ceiling. Notwithstanding any provision contained in this Note, the Mortgage or in any of the other Documents that permits the compounding of interest, including, without limitation, any provision by which any accrued interest is added to the principal amount of this Note, the total amount of interest that Maker is obligated to pay and Lender is entitled to receive with respect to this Note shall not exceed the amount calculated on a simple (i.e., noncompounded) interest basis at the Maximum Rate on principal amounts actually advanced to or for the account of Maker, including all current and prior advances and any advances made pursuant to the Mortgage or other Loan Documents (such as for the payment of taxes, insurance premiums and similar expenses and costs). 11. MISCELLANEOUS. This Note is the "Note" referred to in the Mortgage. This Note is secured by and is entitled to the benefits of the Mortgage and the other Loan Documents. The unpaid principal amount of this Note, the unpaid interest accrued hereon, the interest rate or rates applicable to such unpaid principal amount and the duration of such applicability shall at all times be ascertained from the records of Lender, which shall be conclusive absent manifest error. Maker hereby expressly waives presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note, the Mortgage and the other Loan Documents, and an action for amounts due hereunder or thereunder shall immediately accrue. All notices, requests, demands, directions and other communications (collectively, "NOTICES") under the provisions hereof shall be in writing unless otherwise expressly permitted hereunder, shall be sent as provided in the Mortgage and shall be 8 effective as provided in the Mortgage. Lender may rely on any notice purportedly made by or on behalf of Maker, and shall have no duty to verify the identity or authority of the person giving such notice. If this Note is placed in the hands of an attorney at law for collection by reason of default on the part of Maker, Maker hereby agrees to pay to Lender in addition to the sums stated above, the reasonable costs of collection, including without limitation, a reasonable sum as attorneys fees. This Note represents the final agreement between the parties and may not be contradicted by evidence of prior or subsequent oral agreements of the parties. There are no unwritten oral agreements between the parties. This Note may not be amended, modified or supplemented orally. If any term or provision of this Note or the application thereof to any Person or circumstance shall to any extent be invalid or unenforceable, the remainder of this Note, or the application of such term or provision to Persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term and provision of this Note shall be valid and enforceable to the fullest extent permitted by Law. This obligation shall bind Maker and its successors and assigns, and the benefits hereof shall inure to Lender and its successors and assigns. The paragraph headings used herein are for convenience only and do not affect or modify the terms and conditions of this Note. From time to time, without affecting the obligation of Maker to pay the outstanding principal balance of this Note and observe the covenants of Maker contained herein, without affecting the guaranty of any person, corporation, partnership or other entity for payment of the outstanding principal balance of this Note, without giving notice to or obtaining the consent of Maker or any guarantor, and without liability on the part of Lender, Lender may, at the option of Lender, extend the time for payment of such outstanding principal balance or any part thereof, reduce the payments thereon, release anyone liable on any of such outstanding principal balance, accept a renewal of this Note, modify the terms and time of payment of such outstanding principal balance, join in any extension or subordination agreement, release any security given herefor, take or release other or additional security, and agree in writing with Maker to modify the rate of interest or period of amortization of this Note or change the amount of the monthly installments payable hereunder. 9 The remedies of Lender as provided herein, and in the other Loan Documents shall be cumulative and concurrent, and may be pursued singly, successively or together against Maker and/or one or more of the properties that comprise the Property and/or any other property mortgaged, pledged or assigned to Lender as security for this Note, at the sole discretion of Lender, and such remedies shall not be exhausted by any exercise thereof but may be exercised as often as occasion therefor shall occur. Maker hereby waives and releases all errors, defects and imperfections in any proceedings instituted by Lender under the terms of this Note or any of the other Loan Documents, as well as all benefit that might accrue to Maker by virtue of any present or future laws exempting any of the Property or any other property, real or personal, or any part of the proceeds arising from any sale of such property, from attachment, levy or sale under execution or providing for any stay of execution, exemption from civil process or extension of time for payment, as well as the right of inquisition on any real estate that may be levied upon under a judgment obtained by virtue hereof, and Maker hereby voluntarily condemns the same and authorizes the entry of such voluntary condemnation on any writ of execution issued thereon, and agrees that such real estate may be sold upon any such writ in whole or in part in any order desired by Lender. Lender shall not by any act of omission or commission be deemed to have waived any of its rights or remedies hereunder unless such waiver be in writing and signed by Lender, and then only to the extent specifically set forth therein; a waiver with respect to one event shall not be construed as continuing or as a bar to or waiver of such right or remedy on a subsequent event. 12. CHOICE OF LAW; JURISDICTION. This Note shall be governed by, interpreted, construed and enforced pursuant to and in accordance with the Laws of the State of Texas (excluding the Law applicable to conflicts or choice of Law). Notwithstanding the foregoing, Maker agrees that, at Lender's option, any controversy arising under or in relation to this Note or any other Loan Documents shall be litigated in the Commonwealth of Pennsylvania. At Lender's option, the Court of Common Pleas for Montgomery County, Pennsylvania and the federal court for the Eastern District of Pennsylvania, shall have jurisdiction over all controversies which may arise under or in relation to this Note, including without limitation those controversies relating to the execution, jurisdiction, breach, enforcement or compliance with this Note or any other issue arising under, related to, or in connection with any of the other Loan Documents. Maker irrevocably consents to service, jurisdiction, and venue of such courts for any litigation arising from this Note or any of the other Loan Documents, and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise. Nothing contained herein, however, shall prevent 10 Lender from bringing any suit, action or proceeding or exercising any rights against Maker and/or against the Property in any other jurisdiction. Initiating such suit, action or proceeding or taking such action in any other jurisdiction shall in no event constitute a waiver of the agreement contained herein that the Laws of the State of Texas shall govern the rights and obligations of Maker and Lender as provided herein or the submission herein by Maker to personal jurisdiction within the Commonwealth of Pennsylvania. The foregoing provisions were knowingly, willingly, and voluntarily agreed to by Maker upon consultation with independent counsel selected by Maker. 13. LIABILITY. Maker's liability under this Note is subject to the limitations (and exceptions to those limitations) contained in the Mortgage and in the Exceptions to Non-Recourse Guaranty from AIMCO to Lender of even date herewith. IN WITNESS WHEREOF, Maker, intending to be legally bound, has duly executed and delivered this Note as of the date first above written. MEADOWS LIMITED PARTNERSHIP, an Illinois limited partnership By: AIMCO LT, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ H. Alcock ____________________________ Name: Harry Alcock __________________________ Title: VP ________________________ 11 EX-10.79 21 EXHIBIT 10.79 ----------------------- MASTER REIMBURSEMENT AGREEMENT DATED AS OF JULY 1, 1996 BY AND BETWEEN FEDERAL NATIONAL MORTGAGE ASSOCIATION AND OTC APARTMENTS LIMITED PARTNERSHIP ----------------------- TABLE OF CONTENTS Page ---- ARTICLE I. DEFINITIONS SECTION 1.1 General Interpretative Principles. . . . . . . . . . . . . 3 SECTION 1.2 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . 4 SECTION 1.3 Interpretation . . . . . . . . . . . . . . . . . . . . . . 24 ARTICLE II. REPRESENTATIONS, WARRANTIES AND COVENANTS SECTION 2.1 Representations and Warranties of Owner. . . . . . . . . . 24 SECTION 2.2 Affirmative Covenants of Owner . . . . . . . . . . . . . . 36 SECTION 2.3 Negative Covenants of Owner. . . . . . . . . . . . . . . . 44 SECTION 2.4 Certain Covenants With Respect to Bond Transactions. . . . 46 SECTION 2.5 Certain Covenants With Respect to Village Creek Project. . 46 ARTICLE III. FEES AND EXPENSES; INDEMNIFICATION SECTION 3.1 Fees and Expenses. . . . . . . . . . . . . . . . . . . . . 47 SECTION 3.2 Payment of Fees and Expenses . . . . . . . . . . . . . . . 49 SECTION 3.3 Guaranty Fee; Olympiad Project Stand-By Fee; Eden Crossing Project Stand-By Fee . . . . . . . . . . . . 49 SECTION 3.4 Indemnification. . . . . . . . . . . . . . . . . . . . . . 50 SECTION 3.5 Liability of Owner . . . . . . . . . . . . . . . . . . . . 52 SECTION 3.6 Fannie Mae and Servicer Not Liable . . . . . . . . . . . . 52 SECTION 3.7 Waivers and Consents . . . . . . . . . . . . . . . . . . . 53 SECTION 3.8 Application of Payments. . . . . . . . . . . . . . . . . . 53 SECTION 3.9 Pledge of Rights to Certain Funds and Investments. . . . . 53 SECTION 3.10 Cash Collateral. . . . . . . . . . . . . . . . . . . . . . 54 SECTION 3.11 Nonrecourse Obligations. . . . . . . . . . . . . . . . . . 54 ARTICLE IV. ALLOCABLE FACILITY AMOUNTS; SUBSTITUTION, RELEASE, AND ADDITION OF PROPERTIES SECTION 4.1 Allocable Facility Amount; Facility Reduction Credits. . . 57 SECTION 4.2 Substitution of Additional Mortgaged Properties . . . . . 57 SECTION 4.3 Release of Properties. . . . . . . . . . . . . . . . . . . 58 SECTION 4.4 Addition of New Properties to the Credit Facility. . . . . 59 (i) Page ---- SECTION 4.5 Certain Permitted Transfers of Properties. . . . . . . . . 60 SECTION 4.6 Credit Enhancement of Olympiad Project . . . . . . . . . . 62 SECTION 4.7 Certain Permitted Transfers of Ownership Interests . . . . 66 SECTION 4.8 Credit Enhancement of Eden Crossing Project. . . . . . . . 66 ARTICLE V. SERVICING; REPLACEMENT OF CREDIT ENHANCEMENT SECTION 5.1 Servicing. . . . . . . . . . . . . . . . . . . . . . . . . 70 SECTION 5.2 Replacement of Fannie Mae Credit Enhancement . . . . . . . 71 ARTICLE VI. EVENTS OF DEFAULT AND REMEDIES SECTION 6.1 Events of Default. . . . . . . . . . . . . . . . . . . . . 72 SECTION 6.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 75 ARTICLE VII. MISCELLANEOUS SECTION 7.1 Waivers, Amendments . . . . . . . . . . . . . . . . . . . 77 SECTION 7.2 Survival of Representation and Warranties. . . . . . . . . 77 SECTION 7.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 77 SECTION 7.4 Payment Procedure. . . . . . . . . . . . . . . . . . . . . 79 SECTION 7.5 Continuing Obligation. . . . . . . . . . . . . . . . . . . 79 SECTION 7.6 Satisfaction Requirement . . . . . . . . . . . . . . . . . 79 SECTION 7.7 Consent of Fannie Mae. . . . . . . . . . . . . . . . . . . 79 SECTION 7.8 Governing Law. . . . . . . . . . . . . . . . . . . . . . . 80 SECTION 7.9 Jurisdiction, Consent to Service . . . . . . . . . . . . . 80 SECTION 7.10 Waivers of Jury Trial. . . . . . . . . . . . . . . . . . . 81 SECTION 7.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . 81 SECTION 7.12 Severability . . . . . . . . . . . . . . . . . . . . . . . 81 SECTION 7.13 Business Days. . . . . . . . . . . . . . . . . . . . . . . 81 SECTION 7.14 Entire Agreement . . . . . . . . . . . . . . . . . . . . . 81 SECTION 7.15 Headings . . . . . . . . . . . . . . . . . . . . . . . . . 82 SECTION 7.16 Further Assurances and Corrective Instruments. . . . . . . 82 SECTION 7.17 Assignment; Transfers; Third-Party Rights. . . . . . . . . 82 SECTION 7.18 Waiver of Claims . . . . . . . . . . . . . . . . . . . . . 82 SECTION 7.19 Disclaimer; Acknowledgements . . . . . . . . . . . . . . . 83 SECTION 7.20 Conflicts Between Agreements . . . . . . . . . . . . . . . 83 (ii) Page ---- EXHIBIT A BOND PROPERTIES EXHIBIT B ADDITIONAL MORTGAGED PROPERTIES EXHIBIT C SCHEDULE OF TRANSACTION DOCUMENTS EXHIBIT D PERMITTED LIENS EXHIBIT E FORM OF NEW PROPERTY CONFIRMATION EXHIBIT F DIAGRAM OF OWNERSHIP STRUCTURE EXHIBIT G EXCEPTIONS TO INDEPENDENT UNIT REPRESENTATIONS IN SECTION 2.1(z) EXHIBIT H ALLOCABLE FACILITY AMOUNTS AS OF THE FANNIE MAE FACILITY CLOSING DATE EXHIBIT I MANAGEMENT AGREEMENTS (iii) MASTER REIMBURSEMENT AGREEMENT THIS MASTER REIMBURSEMENT AGREEMENT is made and entered into as of this 1st day of July, 1996, by and between FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FANNIE MAE"), a corporation duly organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. Section 1716 ET. SEQ., and OTC APARTMENTS LIMITED PARTNERSHIP ("OWNER"), a limited partnership duly organized and existing under the laws of Florida. The meanings of initially capitalized terms used herein and not defined are set forth in section 1.2. RECITALS WHEREAS, Owner owns each of the five (5) multifamily housing projects described in Exhibit A (the "BOND PROPERTIES"), which Bond Properties are financed by two existing issues of tax-exempt housing bonds (each an "EXISTING BOND ISSUE"; and collectively, the "EXISTING BOND ISSUES") in accordance with two trust indentures (each an "EXISTING BOND INDENTURE"; and collectively, the "EXISTING BOND INDENTURES"); WHEREAS, each of the Existing Bond Issues is supported by one or more first priority mortgages (the "EXISTING SECURITY INSTRUMENT") and one or more mortgage notes secured by the related Existing Security Instrument (such note, the "EXISTING MORTGAGE NOTE"); WHEREAS, the Issuer with respect to the Existing Bond Issue relating to the Bond Properties identified on Exhibit A as Sunchase East Apartments, Orlando, Florida, Sunchase North Apartments, Orlando, Florida, Sunchase Eastbay Apartments, Clearwater, Florida and Sunchase Tampa Apartments, Tampa, Florida (the "FHFA BOND PROPERTIES") has received a request from Owner to consent to (i) the replacement of the existing credit enhancement and (ii) the current remarketing with respect to such Existing Bond Issue pursuant to the terms of the Related Act and the Existing Indenture with respect to the FHFA Bond Properties; WHEREAS, on or immediately prior to the Fannie Mae Facility Closing Date (as defined below), the Existing Bond Issue with respect to the FHFA Bond Properties will be purchased at the direction of the related Issuer and the bonds with respect to such Existing Bond Issue (the "REMARKETED BONDS") shall be remarketed pursuant to the Related Indenture (as defined below); WHEREAS, the Issuer with respect to the Existing Bond Issue relating to the Bond Property identified on Exhibit A as Boardwalk Apartments, Tamarac, Florida (the "BOARDWALK BOND PROPERTY") has received a request from Owner to issue new bonds under the Related Act in order to refinance the Boardwalk Bond Property by the current refunding of the Existing Bond Issue with respect thereto; 1 WHEREAS, on or immediately prior to the Fannie Mae Facility Closing Date (as defined below), the Existing Bond Issue with respect to the Boardwalk Bond Property will be repaid and new bonds (the "NEW BONDS") will be issued pursuant to the Related Indenture; WHEREAS, the Existing Security Instruments and Existing Mortgage Notes with respect to the Remarketed Bonds will be assigned by the holder hereof to the Issuer of the Remarketed Bonds and amended and restated (as so amended and restated, the "RESTATED SECURITY INSTRUMENTS" and the "RESTATED NOTES"); WHEREAS, the Existing Security Instrument and Existing Mortgage Note with respect to New Bonds will be terminated and released by the holder thereof and Owner will grant the Issuer with respect to the New Bonds a new note (the "NEW NOTE") secured by a new mortgage (the "NEW SECURITY INSTRUMENT") incumbering such Bond Property; WHEREAS, the Restated Security Instruments, the Restated Notes, the New Note and the New Security Instrument, together with certain other collateral, will be assigned by each Issuer to the Servicer (as defined below) and thereafter further assigned by the Servicer to Fannie Mae; WHEREAS, each Issuer has determined that the remarketing or issuance, as the case may be, of the Bonds and the application of the proceeds thereof to fund the Mortgage Loans will promote and serve the intended purposes of, and in all respects will conform to the provisions and requirements of, the Related Acts; WHEREAS, each Mortgage Loan will be (a) made in accordance with the requirements of Fannie Mae and the Issuer with respect to such Mortgage Loan, (b) evidenced by the Related Mortgage Note, (c) secured by the one or more Related Bond Mortgages, and (d) otherwise secured by the other Related Bond Documents; WHEREAS, Fannie Mae has agreed to provide credit enhancement for the Bonds pursuant to and in accordance with the terms of the Related Fannie Mae Pass-Through Certificates issued to the Related Trustees; WHEREAS, Owner owns each of the five (5) multifamily housing projects described in Exhibit B (the "ADDITIONAL MORTGAGED PROPERTIES"); WHEREAS, in consideration of Fannie Mae agreeing to issue the Related Fannie Mae Pass-Through Certificates and in order to further evidence and secure Owner's obligations to Fannie Mae, Owner has agreed, among other things: (i) to grant Fannie Mae second priority Security Instruments on the Bond Properties; (ii) to grant Fannie Mae first priority Security Instruments on the Additional Mortgaged Properties; (iii) to grant Fannie Mae security interests in certain cash collateral; (iv) to pay certain fees to Fannie Mae; and (v) to reimburse Fannie Mae for amounts otherwise advanced in accordance with this Agreement and the other Transaction Documents; and 2 WHEREAS, it is a condition to the execution and delivery of the Related Fannie Mae Pass-Through Certificates by Fannie Mae that Owner enter into this Agreement. NOW THEREFORE, in consideration of the mutual covenants and undertakings set forth herein, the payment of certain fees to Fannie Mae, and other good and valuable consideration, the receipt and sufficiency of which are acknowledged by Fannie Mae and Owner, the parties hereto agree as follows: ARTICLE I. DEFINITIONS SECTION 1.1 GENERAL INTERPRETATIVE PRINCIPLES. For purposes of this Agreement, except as otherwise provided or unless the context otherwise requires: (a) the terms defined in section 1.2 have the meanings assigned to them in section 1.2 and include the plural as well as the singular, and the use of any gender herein shall be deemed to include the other gender; (b) accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; (c) references herein to "sections," "subsections," "paragraphs" and other subdivisions without reference to a document are to designated sections, subsections, paragraphs and other subdivisions of this Agreement; (d) a reference to a subsection without further reference to a section is a reference to such subsection as contained in the same section in which the reference appears, and this rule shall also apply to paragraphs and other subdivisions; (e) a reference to an Exhibit or a Schedule without a further reference to the document to which the Exhibit or Schedule is attached is a reference to an Exhibit or Schedule to this Agreement; (f) a reference to Fannie Mae forms, guides, memos, updates or announcements shall mean such Fannie Mae forms, guides, memos, updates or announcements as the same may be amended, supplemented, otherwise modified, superseded or replaced from time to time; (g) the words "attorneys' fees and expenses," "legal fees and expenses," "attorneys' fees and costs," "attorneys' fees and court costs," and other words of similar import are deemed to include any actual costs and expenses incurred by Fannie Mae's in-house counsel; 3 (h) the words "herein," "hereof," "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular provision; and (i) the word "including" means "including, but not limited to." SECTION 1.2 DEFINED TERMS. For all purposes of this Agreement, the following terms shall have the respective meanings set forth below: "ADDITIONAL MORTGAGED PROPERTIES" means the real properties, together with the improvements and fixtures located thereon, described in Exhibit B. "ADDITIONAL MORTGAGED PROPERTIES" shall also include each New Additional Property from and after the date of its addition to the Fannie Mae Credit Facility, and shall exclude each Released Property (which prior to such substitution or release, as applicable, was an Additional Mortgaged Property), from and after the date of such substitution or release. "ADDITIONAL MORTGAGED PROPERTY" means any one of the foregoing, individually. "AFFILIATE", as applied to any Person, means any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, "control" (including with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities, partnership interests or by contract or otherwise. "AGGREGATE DEBT SERVICE COVERAGE RATIO" means, at any time, the ratio of (a) the aggregate of the Net Operating Income for the applicable period for all of the Properties, to (b) the aggregate scheduled debt service due on all of the Mortgage Loans for the applicable period. "AGGREGATE FACILITY AMOUNT" means at any time the total amount of all Facility Amounts. "AGREEMENT" means this Master Reimbursement Agreement, as amended, supplemented,or otherwise modified or amended and restated from time to time in accordance with its terms. "ALLOCABLE FACILITY AMOUNT" means the portion of the Aggregate Facility Amount allocated to a particular Property by Fannie Mae in accordance with section 4.1. "ALLOCATED FACILITY REDUCTION CASH COLLATERAL" means, with respect to each Bond Property, the portion of the aggregate amount of all Facility Reduction Cash Collateral allocable to such Bond Property on a pro rata basis, as determined by Fannie Mae in its discretion. 4 "ALTERATIONS" shall mean the meaning given to such term in section 2.2(o). "AIMCO OP" means AIMCO Properties, L.P., a Delaware limited partnership. "AIMCO OP PARTNERSHIP AGREEMENT" shall have the meaning given to that term in section 2.1(a). "AIMCO OP PARTNERSHIP CERTIFICATE" shall have the meaning given to that term in section 2.1(a). "AIMCO OP ORGANIZATIONAL DOCUMENTS" shall have the meaning given to that term in section 2.1(a). "AIMCO REIT" means Apartment Investment and Management Company, a Maryland corporation. "APPLICABLE LAW" means (a) all applicable provisions of all constitutions, statutes, rules, regulations and orders of all governmental bodies, all Governmental Approvals and all orders, judgments and decrees of all courts and arbitrators, (b) all zoning, building, environmental and other laws, ordinances, rules, regulations and restrictions of any Governmental Authority affecting the ownership, management, use, operation, maintenance or repair of any Property, including the Americans with Disabilities Act (if applicable), the Fair Housing Amendment Act of 1988 and Hazardous Materials Laws, (c) any building permits or any conditions, easements, rights-of-way, covenants, restrictions of record or any recorded or unrecorded agreement affecting or concerning any Property including planned development permits, condominium declarations, and reciprocal easement and regulatory agreements with any Governmental Authority, (d) all laws, ordinances, rules and regulations, whether in the form of rent control, rent stabilization or otherwise, that limit or impose conditions on the amount of rent that may be collected from the units of any Property, and (e) all terms of any insurance policy that Owner is required to maintain under the Mortgages, all requirements of the issuers of any such policy, and all orders, rules, regulations and other requirements of the National Board of Fire Underwriters (or any body exercising similar functions) applicable to or affecting the operation or use of any Property or the consummation of the transactions to be effected by this Agreement or any of the other Transaction Documents. "ASSIGNMENT" means, individually, any assignment of mortgage with respect to a Bond Property by the related Issuer to the Servicer and any subsequent assignment of mortgage by the Servicer to Fannie Mae, as each such assignment may be amended, supplemented or, otherwise modified or amended and restated from time to time in accordance with its terms. "ASSIGNMENTS" means every such Assignment, collectively. "ASSIGNMENT OF MANAGEMENT AGREEMENT" means, individually, any Assignment of Management Agreement with respect to a Property by the Owner and AIMCO OP for the benefit of Fannie Mae, as such assignment may be amended, supplemented or, otherwise modified or 5 amended and restated from time to time in accordance with its terms. "ASSIGNMENTS OF MANAGEMENT AGREEMENTS" means every such Assignment of Management Agreement, collectively. "BOARDWALK BOND PROPERTY" shall have the meaning given that term in the recitals to this Agreement. "BOND DOCUMENTS" means, collectively, the Related Bond Documents for all Bond Properties, together with all other documents, instruments and agreements, that may evidence, secure or otherwise relate to this Agreement, as each such document, agreement or instrument may be amended, supplemented, otherwise modified or amended and restated from time to time in accordance with its respective terms, and "BOND DOCUMENT" means any one of the foregoing, individually. "BOND FEES" shall have the meaning given that term in section 3.2(a). "BONDHOLDERS" with respect to any Related Bonds shall have the meaning given that term in the Related Indenture. "BOND MORTGAGE" means the first priority Security Instrument on each Bond Property securing the obligations of Owner under and with respect to the Related Mortgage Note and the related Mortgage Loan, and "BOND MORTGAGES" means every such Bond Mortgage, collectively. "BOND PROPERTIES" means the real properties, together with the improvements and fixtures located thereon, described in Exhibit A. "BOND PROPERTIES" shall also include each New Bond Property from and after the date of its addition to the Fannie Mae Credit Facility, and shall exclude each Released Property (which prior to its substitution or release, as applicable, was a Bond Property), from and after the date of such substitution or release. "BOND PROPERTY" means any one of the foregoing, individually. "BOND PROPERTY LOAN DOCUMENT" means, with respect to a Mortgage Loan, any of the documents, agreements or instruments granting, evidencing or securing such Mortgage Loan, including the Related Mortgage Note, the Related Mortgages, the title policy, UCC fixture filings and UCC financing statements (in each case relating to such Mortgage Loan) and the assignment, if any, of such Mortgage Loan by the prior holder thereof to the related Issuer, the Assignments of such Mortgage Loan to the Servicer and Fannie Mae, as each such document, agreement or instrument may be amended, supplemented, otherwise modified or amended and restated from time to time in accordance with its respective terms, and "BOND PROPERTY LOAN DOCUMENTS" means every such Bond Property Loan Document with respect to such Mortgage Loan, collectively. "BONDS" means, collectively, the Related Bonds with respect to all Mortgage Loans. 6 "BOND TRANSACTION CLOSING DATE", with respect to each issue of Related Bonds, shall mean the date the Related Bonds are issued and paid for. "BUSINESS DAY" means any day other than a Saturday, Sunday, a day on which the principal office of Fannie Mae is not open for business, a day on which banks located in the city in which any Related Trustee is located are authorized or obligated by law or executive order to close, or a day on which the New York Stock Exchange is closed. "CASH COLLATERAL" shall have the meaning given to the term "COLLATERAL" in the Cash Management Agreement. "CASH MANAGEMENT AGREEMENT" means, with respect to all Properties, that certain Cash Management, Security, Pledge and Assignment Agreement of even date herewith, among Owner, Fannie Mae and Servicer, as such agreement may be amended, supplemented, otherwise modified or amended and restated from time to time in accordance with its terms. "CASUALTY", with respect to any Property, means any damage to, or destruction or loss of, all or any portion of the Property, whether by fire or other cause. "CENTRAL ACCOUNT" means, the Central Account identified in the Cash Management Agreement. "CODE" means the Internal Revenue Code of 1954, as amended (herein the "1954 CODE" and the Internal Revenue Code of 1986), as amended (herein the "1986 CODE"), in each case to the extent made applicable to matters relating to the Bonds and the Project by Section 1313(a) of the Tax Reform Act of 1986, and with respect to a specific section thereof such reference shall be deemed to include (a) the applicable regulations promulgated or proposed under such section or any previous corresponding section, (b) any successor provision of similar import hereafter enacted, (c) any corresponding provision of any subsequent Internal Revenue Code and (d) the applicable regulations promulgated or proposed under the provisions described in (b) and (c). "COLLATERAL" means all cash, Government Obligations, assets and property, real and personal (including the Bond Properties, the Additional Mortgaged Properties, the Property Accounts, the Central Account, the Cash Collateral, Facility Reduction Cash Collateral, the Replacement Reserve Accounts and all funds contained in such accounts), pledged by Owner pursuant to any Bond Document or any Mortgage Document or any other Transaction Document and the Proceeds thereof. "CONDEMNATION", with respect to any Property, means (a) any action or proceeding for the taking of the Property, or any part thereof or interest therein, for public or quasi-public use under the power of eminent domain, by reason of any public improvement or condemnation proceeding, or in any other similar manner or (b) the conveyancing of any Property under the threat or contemplation of any action or proceeding described in clause (a). 7 "CONDEMNATION PROCEEDS" means the proceeds of any Condemnation. "CONTINGENT OBLIGATION" as to any Person (the "GUARANTEEING PERSON"), means any obligation (a) of the guaranteeing person or (b) of another Person (including any bank under any letter of credit) and with respect to 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 "PRIMARY OBLIGOR") in any manner, whether directly or indirectly. By way of example the term "Contingent Obligation" shall include (without duplication) 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 Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Contingent Obligation of any guaranteeing person shall be deemed to be the lesser of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent 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 Contingent 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 Contingent Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by Owner in good faith. "CONTROLLED GROUP" means all members of a group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with Owner, are treated as a single employer under Section 414 of the Code. "DETERMINATION DATE" means the first (1st) day of October of each year during the term of this Agreement. "DUS GUIDE" means the Fannie Mae Multifamily Delegated Underwriting and Servicing (DUS) Guide, as such DUS Guide may be amended, supplemented or otherwise modified from time to time, including by Lender Memos, Guide Updates and Guide Announcements (all references to Parts, Chapters, Sections and other subdivisions of the DUS Guide shall be deemed references to (a) the Parts, Chapters, Sections and other subdivisions in effect on the Fannie Mae Facility Closing Date and (b) any successor provisions to such Parts, Chapters, Sections and other subdivision). 8 "EDEN CROSSING BONDS" means an issue of tax exempt housing finance bonds issued by the issuer with respect to the Eden Crossing Bond Transaction in order to refinance (by repurchase and a subsequent remarketing pursuant to an amended and restated trust indenture and related bond documents) or refund (by the issuance of new refunding bonds) the existing bond financing with respect to the Eden Crossing Project. "EDEN CROSSING BOND TRANSACTION" shall have the meaning given to such term in section 4.8. "EDEN CROSSING CLOSING DATE" shall have the meaning given to such term in section 4.8. "EDEN CROSSING COMMITMENT TERMINATION DATE" shall have the meaning given to such term in section 4.8. "EDEN CROSSING CREDIT ENHANCEMENT" shall have the meaning given to such term in section 4.8. "EDEN CROSSING MORTGAGE LOAN" shall have the meaning given to such term in section 4.8. "EDEN CROSSING PROJECT" shall have the meaning given to such term in section 4.8. "EDEN CROSSING REFUNDING DOCUMENTS" shall have the meaning given to such term in section 4.8. "EDEN CROSSING SUBSTITUTION TRANSACTION" shall have the meaning given to such term in section 4.8. "EDEN CROSSING STAND-BY FEE" shall have the meaning given to such term in section 3.3(c). "ENVIRONMENTAL CLAIM" means any notice of violation, claim, demand, abatement, order or other order or direction (conditional or otherwise) by any person or entity for any damage, including personal injury (including sickness, disease or death), tangible or intangible property damage, contribution, indemnity, indirect or consequential damages, damage to the environment, pollution, contamination or other adverse effects on the environment, removal, cleanup or remedial action or for fines, penalties or restrictions, resulting from or based upon (a) the existence or occurrence, or the alleged existence or occurrence, of a Hazardous Substance Activity or (b) the violation, or alleged violation, of any Hazardous Materials Laws in connection with any Property. "ENVIRONMENTAL REPORTS" means any Phase I environmental report meeting the requirements of the DUS Guide, and any additional environmental report delivered to Servicer or Fannie Mae with respect to any Property. 9 "ERISA" means the Employee Retirement Income Security Act of 1974 as amended from time to time. "EVENT OF DEFAULT" shall have the meaning given that term in section 6.1. "EXISTING BOND ISSUES" shall have the meaning given that term in the recitals to this Agreement. "EXISTING BOND INDENTURE" and "EXISTING BOND INDENTURES" shall have the respective meanings given such terms in the recitals to this Agreement. "EXISTING MORTGAGE NOTE" and "EXISTING MORTGAGE NOTES" shall have the respective meanings given such terms in the recitals to this Agreement. "EXISTING SECURITY INSTRUMENT" and "EXISTING SECURITY INSTRUMENTS" shall have the respective meanings given such terms in the recitals to this Agreement. "FACILITY", with respect to particular Related Bonds, means the credit enhancement of such Related Bonds by Fannie Mae, subject and pursuant to the Related Fannie Mae Pass-Through Certificate. "FACILITY AMOUNT", with respect to particular Related Bonds, means the aggregate principal amount of such Related Bonds then outstanding. "FACILITY REDUCTION CASH COLLATERAL" shall have the meaning given that term in section 4.3(a). "FACILITY REDUCTION CREDIT" shall have the meaning given that term in section 4.1(b). "FANNIE MAE CREDIT FACILITY" means the credit enhancement provided by Fannie Mae subject and pursuant to the Related Fannie Mae Pass-Through Certificates. "FANNIE MAE FACILITY CLOSING DATE" means July 3, 1996. "FHFA BOND PROPERTIES" shall have the meaning given that term in the recitals to this Agreement. "FINANCING AGREEMENT", with respect to an issue of Related Bonds, shall have the meaning given that term in the Related Indenture and "FINANCING AGREEMENTS" means every such Financing Agreement, collectively. "FINANCING LEASE" means any lease of property, real or personal, the obligations of the lessee in respect of which are required in accordance with GAAP to be capitalized on a balance sheet of the lessee or to be otherwise disclosed as such in a note to such balance sheet. 10 "GAAP" means generally accepted accounting principles in effect in the United States from time to time. "GENERAL PARTNER" means AIMCO/OTC QRS, Inc., a Delaware corporation. "GENERAL PARTNER ARTICLES OF INCORPORATION" shall have the meaning given to that term in section 2.1(a). "GENERAL PARTNER ORGANIZATIONAL DOCUMENTS" shall have the meaning given to that term in section 2.1(a). "GOVERNMENT OBLIGATIONS", with respect to an issue of Related Bonds, shall have the meaning given that term in the Related Indenture. "GOVERNMENTAL ACTION" means any pending or, to the actual knowledge of Owner, threatened suit, proceeding, order, or governmental inquiry or opinion involving any Property that alleges the violation of any Hazardous Materials Law. "GOVERNMENTAL APPROVAL" means an authorization, permit, consent, approval, license, registration or exemption from registration or filing with, or report to, any Governmental Authority. "GOVERNMENTAL AUTHORITY" means 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 CASH FLOW" means, for any period, with respect to any of the Properties, all gross rents collected from or on behalf of tenants at such Property (other than unforfeited tenant security deposits), any other income, receipts or reserves (but only to the extent such reserves were included as Operating Expenses at the times they were set aside) derived from such Property (including from the use or operation thereof) without regard to its source, INCLUDING tenant reimbursements for utilities, services and supplies, security deposit forfeitures, parking rents or fees, concessions and vending fees and laundry income and proceeds from rental interruption insurance, BUT EXCLUDING Insurance Proceeds (other than proceeds from rental interruption insurance), Condemnation Proceeds, proceeds from the sale of the Related Bonds, if any, unearned portion of prepaid rent, other refundable items, interest on any account established for the deposit of refundable items, and proceeds from the sale or other disposition of all or any portion of a Property. "GUARANTY" means each Payment Guaranty of even date herewith executed by a Guarantor for the benefit of Fannie Mae, as it may be amended, supplemented, otherwise modified or amended and restated from time to time in accordance with its terms, and "GUARANTIES" means every such Guaranty, collectively. 11 "GUARANTOR" either AIMCO REIT or AIMCO OP individually, and "GUARANTORS" means each such Guarantor, collectively. "HAZARDOUS MATERIALS" means petroleum and petroleum products, flammable explosives, radioactive materials (excluding radioactive materials in smoke detectors), polychlorinated biphenyls, lead, asbestos in any form that is or could become friable, hazardous waste, toxic or hazardous substances or other related materials whether in the form of a chemical, element, compound, solution, mixture or otherwise and shall also include those materials defined as "hazardous substances," "extremely hazardous substances," "hazardous chemicals," "hazardous materials," "toxic substances," "solid waste," "toxic chemicals," "air pollutants," "toxic pollutants," "hazardous wastes," "extremely hazardous waste," or "restricted hazardous waste" by Hazardous Materials Law or regulated by Hazardous Materials Law in any manner whatsoever. "HAZARDOUS MATERIALS LAW" means all federal, state, and local laws, ordinances and regulations and standards, rules, policies and other binding governmental requirements and any court judgments applicable to Owner or any Property relating to industrial hygiene or to environmental or unsafe conditions or to human health including, those relating to the generation, manufacture, storage, handling, transportation, disposal, release, emission or discharge of Hazardous Materials, those in connection with the construction, fuel supply, power generation and transmission, waste disposal or any other operations or processes relating to any Property, and those relating to the atmosphere, soil, surface and ground water, wetlands. stream sediments and vegetation on, under, in or about any Property. "HAZARDOUS SUBSTANCE ACTIVITY" means any storage, holding, existence, release, spill, leaking, pumping, pouring, injection, escaping, deposit, disposal, dispersal, leaching, migration, use, treatment, emission, discharge, generation, processing, abatement, removal, disposition, handling or transportation of any Hazardous Materials from, under, into or on any Property in violation of Hazardous Materials Laws, including the discharge of any Hazardous Materials emanating from any Property in violation of Hazardous Materials Laws through the air, soil, surface water, groundwater or property and also including the abandonment or disposal of any barrels, containers and other receptacles containing any Hazardous Materials from or on any Property in violation of Hazardous Materials Laws, in each case whether sudden or nonsudden, accidental or nonaccidental. "IMPOSITIONS" means, with respect to any Property, all real estate and personal property taxes, water, sewer and vault charges and all other taxes, levies, assessments, common charges and other similar charges, general and special, ordinary and extraordinary, foreseen and unforeseen, of every kind and nature whatsoever, which at any time prior to, at or after the execution of this Agreement may be assessed, levied or imposed by, in each case, a Governmental Authority or any other Person upon such Property or the rents or the ownership, use, occupancy or enjoyment thereof, and any interest, costs or penalties with respect to any of the foregoing. 12 "INDEBTEDNESS" of any Person at any date means, without duplication, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices), (b) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument; (c) all obligations of such Person under Financing Leases, (d) all obligations of such person in respect of acceptances issued or created for the account of such Person, (e) all liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof, and (f) all Contingent Obligations. "INSURANCE PROCEEDS" means, with respect to any Property, all insurance proceeds, damages, claims and rights of action and the right thereto under any insurance policies with respect to a Casualty insuring and relating to any portion of such Property. "ISSUER" means the issuer with respect to an issue of Related Bonds, and "ISSUERS" means every such Issuer, collectively. As of the date hereof, the Issuer with respect to each issue of Related Bonds is listed on Exhibit A. "LEASE" means any lease, any sublease or subsublease, license, concession or other agreement (whether written or oral and whether now or hereafter in effect) pursuant to which any Person is granted a possessory interest in, or right to use or occupy all or any portion of any space in any Property, and every modification, amendment or other agreement relating to such lease, sublease, subsublease or other agreement entered into in connection with such lease, sublease, subsublease or other agreement, and every guarantee of the performance and observance of the covenants, conditions and agreements to be performed and observed by the other party thereto. "LIABILITIES" shall have the meaning set forth in section 3.4(a). "LIEN" means any mortgage, deed of trust, deed to secure debt, charge (whether fixed or floating), pledge, lien, encumbrance, assignment, hypothecation, security interest, conditional sale, capital lease or other title retention, preferential right, trust arrangement or any other encumbrance, security agreement or arrangement securing any obligation of any Person. "LOAN TO VALUE RATIO" means, at any time, the ratio (expressed as a percentage) of (a) the Aggregate Facility Amount to (b) the aggregate of the Values for all of the Properties. "MANAGEMENT AGREEMENTS" each of the Management Agreements identified on Exhibit I, collectively. "MATERIAL ADVERSE EFFECT" means any circumstance, act, condition or event of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, or circumstance or circumstances, whether or not related, 13 that could reasonably be expected to have a material adverse change in or a materially adverse effect upon any of (a) the business, operations, property or condition (financial or otherwise) of Owner, General Partner or AIMCO OP, (b) the present or future ability of Owner to perform the Obligations, (c) the validity, priority, perfection or enforceability of this Agreement or any other Transaction Document or the rights or remedies of Fannie Mae under any Transaction Document, or (d) the value of, or Fannie Mae's ability to have recourse against, any Property. "MINIMUM SUBSTITUTE PROPERTY VALUE" means, with respect to each Released Property, the Allocable Facility Amount for such Released Property divided by .6940. "MOODY'S INVESTORS SERVICE" means Moody's Investors Service, Inc., a corporation organized and existing under the laws of the State of Delaware, and its successors and assigns, if such successors and assigns shall continue to perform the functions of a securities rating agency. "MORTGAGE" means any Bond Mortgage and any Reimbursement Mortgage, individually, and "MORTGAGES" means every such Mortgage, collectively. "MORTGAGE" shall include any Security Instrument in favor of Fannie Mae or a Related Trustee on any New Property from and after the date of its addition to the Fannie Mae Credit Facility, and shall exclude any Mortgage on a Released Property released from the lien of such Mortgage, from and after the date of release. "MORTGAGE DOCUMENTS" means, collectively, the Bond Property Loan Documents for all of the Bond Properties and the Reimbursement Loan Documents. "MORTGAGE LOAN" with respect to an issue of Related Bonds, shall have the meaning given that term in the Related Indenture, and "MORTGAGE LOANS" shall mean every such Mortgage Loan, collectively. "MORTGAGE NOTES" means every Related Mortgage Note, collectively. "MORTGAGE NOTE RATE", with respect to a Related Mortgage Note, shall be the interest rate payable under such Related Mortgage Note. "MULTIFAMILY RESIDENTIAL PROPERTY" means a residential property containing five or more dwelling units in which not more than twenty percent (20%) of the net rentable area is or will be rented to non-residential tenants. "NET OPERATING INCOME" means, for any period, with respect to any of the Properties, the amount, if any, without duplication, by which the Gross Cash Flow for such Property during such period exceeds the Operating Expenses for such Property during such period. 14 "NEW ADDITIONAL PROPERTY" means a Multifamily Residential Property substituted for an Additional Mortgaged Property pursuant to section 4.2 or otherwise added to the Fannie Mae Credit Facility by Owner as Collateral for the Obligations. "NEW BOND PROPERTY" means a Multifamily Residential Property substituted for a Bond Property pursuit to section 4.2 or otherwise added to the Fannie Mae Credit Facility in connection with Fannie Mae's issuance of a new Related Fannie Mae Pass-Through Certificate. "NEW BONDS" shall have the meaning given that term in the recitals to this Agreement. "NEW NOTE" shall have the meaning given that term in the recitals to this Agreement. "NEW PROPERTY" means a New Additional Property or a New Bond Property. "NEW PROPERTY CONFIRMATION" shall have the meaning given that term in section 4.4. "NEW SECURITY INSTRUMENT" shall have the meaning given that term in the recitals to this Agreement. "OBLIGATIONS" means the obligations of Owner (i) to pay principal, interest and fees and any other amounts on the Mortgage Loans when due and payable, (ii) to make all required deposits into the Replacement Reserve Accounts, the Central Account, the Property Accounts and any and all other loan funds, escrow funds, revenue funds, debt service funds, reserve funds, redemption funds or other funds or accounts required to be maintained under the Transaction Documents, (iii) to reimburse Fannie Mae and Servicer for all Reimbursable Advances and for all other sums advanced and costs and expenses incurred by Fannie Mae and Servicer in accordance with the terms of this Agreement or any other Transaction Document, (iv) to pay all other amounts payable under the Transaction Documents, and (v) to observe and perform each of the terms, conditions and provisions of the Transaction Documents. "OFFICIAL STATEMENT" means the Official Statement or any reoffering, remarketing circular or informational document approved by Owner and issued in connection with the issuance or remarketing of an issue of Related Bonds, as such statement may be amended, supplemented, otherwise modified or amended and restated from time to time in accordance with its terms, and "OFFICIAL STATEMENTS" means every such Official Statement, collectively. "OLYMPIAD COMMITMENT TERMINATION DATE" shall have the meaning given to such term in section 4.6. "OLYMPIAD CREDIT ENHANCEMENT" shall have the meaning given to such term in section 4.6. "OLYMPIAD BOND TRANSACTION" shall have the meaning given to such term in section 4.6. 15 "OLYMPIAD MORTGAGE LOAN" shall have the meaning given to such term in section 4.6. "OLYMPIAD PROJECT" shall have the meaning given to such term in section 4.6. "OLYMPIAD REFUNDING BONDS" means an issue of tax exempt housing finance bonds issued by the issuer with respect to the Olympiad Bond Transaction in order to refinance (by repurchase and a subsequent remarketing pursuant to an amended and restated trust indenture and related bond documents) or refund (by the issuance of new refunding bonds) the existing bond financing with respect to the Olympiad Project. "OLYMPIAD REFUNDING CLOSING DATE" shall have the meaning given to such term in section 4.6. "OLYMPIAD REFUNDING DOCUMENTS" shall have the meaning given to such term in section 4.6. "OLYMPIAD STAND-BY FEE" shall have the meaning given to such term in section 3.3(b). "OPERATING EXPENSES" means, for any period, with respect to any of the Properties, the aggregate of all direct, ordinary, normal, recurring and necessary expenses thereof including, without duplication, (a) Impositions, (b) property and liability insurance premiums, (c) wages, salaries and benefits of personnel employed on site to manage, lease, maintain and operate such Property, (d) costs or expenses of utility services to such Property and tenant spaces to the extent payable by Owner, (e) costs or expenses of providing security services to such Property, if any, (f) costs or expenses of in-house or outside service arrangements for landscaping, janitorial, window washing and cleaning, trash, debris, make ready units, cable and satellite television and other services, (g) expenses of maintaining, repairing and cleaning the grounds, parking, amenities, exterior and interior spaces of such Property, (h) expenses of repairing and maintaining in good operable condition the mechanical, structural, electrical, elevator, heating, ventilating, air conditioning and plumbing systems, (i) property management fees payable to parties other than Owner, (j) administrative expenses including advertising incurred at the site of such Property, (k) legal fees associated with lease documentation and tenant matters and legal, accounting and other professional fees relating to the operation of the Properties, (l) (for all purposes hereunder other than the calculation of Value) the replacement and repair amount with respect to such Property, (m) costs for water and sewage fees, and (n) any other items that are treated as noncapital expenses under GAAP. All of the foregoing (including Impositions) shall be computed on an accrual basis and in accordance with GAAP consistently applied. For the purposes of calculating Value and/or Net Operating Income, the management fees included in Operating Expenses with respect to each Property shall be equal to the greater of four percent (4%) of the Gross Cash Flow of such Property or the actual fees payable under the terms of the Management Agreements approved by Fannie Mae. In addition, for all purposes Operating Expenses shall exclude (i) payments on the Obligations and any other interest payments or principal payments on any Indebtedness, (ii) depreciation and amortization, (iii) all legal, accounting and professional fees not included in clause (iv) above, and (v) items that would be 16 treated as capital expenses under GAAP consistently applied and calculated in accordance with Fannie Mae Form 4254. "OWNER" means OTC APARTMENTS LIMITED PARTNERSHIP, a Florida limited partnership. "OWNER PARTNERSHIP AGREEMENT" shall have the meaning given to that term in section 2.1(a). "OWNER PARTNERSHIP CERTIFICATE" shall have the meaning given to that term in section 2.1(a). "OWNER'S DATE-DOWN CERTIFICATE" shall have the meaning given to that term in section 4.6. "OWNER'S ORGANIZATIONAL DOCUMENTS" shall have the meaning given that term in section 2.1(a). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "PERMITS" means all permits, or similar licenses or approvals issued and/or required by an applicable Governmental Authority or any Applicable Law in connection with the ownership, use, occupancy, leasing, management, operation, repair, maintenance or rehabilitation of any Property or Owner's business. "PERMITTED LIENS" means, with respect to each Property, (i) exceptions to title contained in the marked-up title insurance commitments insuring the lien of the Mortgage with respect to such Property (other than notes or other informational items set forth therein) listed on Exhibit D; (ii) Liens created by, or permitted by, the applicable Mortgage Documents and the Bond Documents with respect to such Property; (iii) Liens created by the Leases with respect to such Property; and (iv) Liens approved by Fannie Mae. "PERMITTED TRANSFER" shall have the meaning given that term in section 4.5. "PERSON" means an individual, an estate, a trust, a corporation, a partnership, a limited liability company or any other organization or entity (whether governmental or private). "PLAN" means at any time an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and is either (i) maintained by a member of the Controlled Group for employees of any member of the Controlled Group or (ii) maintained pursuant to a collective bargaining agreement or any other agreement under which more than one employer makes contributions and to which a member 17 of the Controlled Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions. "POTENTIAL EVENT OF DEFAULT" means any of the events specified in section 6.1 which with the passage of time or giving of notice or both would constitute an Event of Default. "PREPAYMENT PREMIUM", with respect to Mortgage Loan shall have the meaning given the term "prepayment premium" in the Related Mortgage Note. "PROCEEDS" mean all "proceeds" as such term is defined in Section 9-306(1) of the UCC and, in any event, shall include all interest, dividends or other earnings, income or distributions from or in respect of, or from or in respect of investments or reinvestments of, the Property Accounts, the Central Account or the Cash Collateral, all collections and distributions with respect to the Mortgage Loans and all other proceeds of Collateral. "PROHIBITED ACTIVITIES OR CONDITIONS", with respect to a particular Mortgage, shall have the meaning given that term in such Mortgage. "PROPERTY" means any of the Bond Properties or any of the Additional Mortgaged Properties, individually. "PROPERTIES" means every such Bond Property and Additional Mortgaged Property, collectively. "PROPERTY ACCOUNT" means, with respect to each Property, the Property Account corresponding to such Property as identified in the Cash Management Agreement, and "PROPERTY ACCOUNTS" means every such Property Account, collectively. "PROPOSED TRANSFER" shall have the meaning given that term in section 4.5. "PROPOSED TRANSFEREE" shall have the meaning given that term in section 4.5. "RATING AGENCIES" means Standard & Poor's and Moody's Investors Services, their successors in interest, or any other nationally recognized rating agency acceptable to Fannie Mae. "REGULATORY AGREEMENT", with respect to each Bond Property, shall have the meaning given such term in the Related Indenture, and "REGULATORY AGREEMENTS" means every such Regulatory Agreement, collectively. "REIMBURSABLE ADVANCE" shall have the meaning given that term in section 3.2. "REIMBURSABLE ADVANCE RATE" means the prime rate of interest as reported from day to day in THE WALL STREET JOURNAL as the base rate on corporate loans posted by at least seventy-five percent (75%) of the nation's thirty (30) largest banks plus two percent (2%) per annum. The Reimbursable Advance Rate will be the rate reported on the applicable publication date as 18 determined above, notwithstanding the fact that such reported rate shall be the prime rate for the preceding Business Day. If such rate is no longer available, then the Reimbursable Advance Rate shall mean the base rate or prime rate of interest of any "Money Center" bank designated by Fannie Mae, in its discretion, plus two percent (2%) per annum. "REIMBURSEMENT LOAN DOCUMENTS" means, collectively, the Reimbursement Mortgages and each of the other documents, agreements and instruments granting, evidencing or perfecting security interests granted in connection with the obligations secured by the Reimbursement Mortgages, including the Cash Management Agreement, the Guaranties, the Replacement Reserve Agreements, the Assignments of Management Agreement, title policies, UCC fixture filings and UCC financing statements, and assignments of such Mortgages by the prior holders thereof to Fannie Mae, as each such document, agreement or instrument may be amended, supplemented, otherwise modified or amended and restated from time to time in accordance with its respective terms, and "REIMBURSEMENT LOAN DOCUMENT" means any one of the foregoing, individually. "REIMBURSEMENT MORTGAGES" means, collectively, the first priority Security Instruments on each of the Additional Mortgaged Properties securing the obligations of Owner under all of the Mortgaged Notes and under this Agreement, and the second priority Security Instruments on each of the Bond Properties securing the obligations of Owner under all of the Mortgage Notes, other than the Related Mortgage Note evidencing the Mortgage Loan secured by the first priority Mortgage on such Bond Property, and under this Agreement, and "REIMBURSEMENT MORTGAGE" means any one of the foregoing, individually. "RELATED ACT", with respect to an issue of Related Bonds, shall have the meaning given to the term "Act" in the Related Indenture. "RELATED BOND DOCUMENTS" means, with respect to particular Related Bonds, the Related Bonds, the Related Indenture, the Related Fannie Mae Pass-Through Certificate, the Regulatory Agreement (and any other agreement relating to rental restrictions on the applicable Bond Property), the Financing Agreement, a Tax Certificate (or other applicable agreement relating to arbitrage in connection with the proceeds of such Related Bonds) and all other documents, instruments and agreements executed and delivered in connection with the issuance, sale, delivery and/or remarketing of the Related Bonds, as each such agreement or instrument may be amended, supplemented, otherwise modified or amended and restated from time to time in accordance with its terms. "RELATED BOND MORTGAGE" with respect to a particular Bond Property, means the first priority Bond Mortgage encumbering such Bond Property and securing the Related Mortgage Note. 19 "RELATED BONDS" means, with respect to a particular Bond Property, the tax-exempt multifamily revenue bonds issued pursuant to Applicable Law and the Related Indenture. "RELATED FANNIE MAE PASS-THROUGH CERTIFICATE" means, with respect to an issue of Related Bonds, the Guaranteed Mortgage Pass-Through Certificate issued to and registered in the name of the Related Trustee by Fannie Mae or, in the event a substitute Guaranteed Mortgage Pass-Through Certificate shall be delivered to such Related Trustee pursuant to the Related Indenture, such substitute Guaranteed Mortgage Pass-Through Certificate, and "RELATED FANNIE MAE PASS-THROUGH CERTIFICATES" means every such Related Fannie Mae Pass-Through Certificate, collectively. "RELATED INDENTURE" means, with respect to an issue of Related Bonds, the indenture of trust between an Issuer and a Related Trustee pursuant to which such Related Bonds were issued, as such Related Indenture may be amended, supplemented, otherwise modified or amended and restated from time to time in accordance with its terms, and "RELATED INDENTURES" means every such Related Indenture, collectively. "RELATED MORTGAGE" means (a) with respect to a particular Bond Property, the Related Bond Mortgage and the Related Second Mortgage, collectively, encumbering such Bond Property, and (b) with respect to a particular Additional Mortgaged Property, the Reimbursement Mortgage encumbering such Additional Mortgaged Property. "RELATED MORTGAGE NOTE" means, with respect to an issue of Related Bonds, one or more Multifamily Notes or Amended and Restated Multifamily Notes (in each instance, together with all addenda thereto) executed by Owner in favor of an Issuer and secured by, among other things, one or more Related Bond Mortgages, as such Related Mortgage Note may be amended, supplemented, otherwise modified or amended and restated from time to time in accordance with its terms, and "RELATED MORTGAGE NOTES" means every such Related Mortgage Note, collectively. "RELATED SECOND MORTGAGE", with respect to a particular Bond Property, means the second priority Reimbursement Mortgage encumbering such Bond Property. "RELATED TRUSTEE" with respect to an issue of Related Bonds, means the entity designated as the "Trustee" under the Related Indenture, and "RELATED TRUSTEES" means every such Related Trustee, collectively. "RELEASED PROPERTY" means a Property released or proposed to be released from the lien of a Mortgage pursuant to section 4.2 or section 4.3. "REMARKETED BONDS" shall have the meaning given that term in the recitals to this Agreement. "RENT ROLL" shall have the meaning given that term in section 2.1(s). 20 "RENTS", (a) with respect to any Bond Property, shall have the meaning given that term in the Related Second Mortgage, unless such Related Second Mortgage is no longer in effect, in which case Rent shall have the meaning given such term in the Related Bond Mortgage, and (b) with respect to any Additional Mortgaged Property, shall have the meaning given that term in the Related Mortgage. "REPLACEMENT RESERVE ACCOUNT", with respect to a particular Property, means the replacement reserve account established pursuant to the Replacement Reserve Agreement relating to such Property, and "REPLACEMENT RESERVE ACCOUNTS" means every such Replacement Reserve Account, collectively. "REPLACEMENT RESERVE AGREEMENT" means each Replacement Reserve and Security Agreement between Owner and Fannie Mae relating to a Property and establishing Owner's obligation to fund certain replacement reserve accounts, as such agreement may be amended, supplemented, otherwise modified or amended and restated from time to time in accordance with its terms, and "REPLACEMENT RESERVE AGREEMENTS" means every such Replacement Reserve Agreement, collectively. "REQUIRED FACILITY REDUCTION" shall have the meaning given that term in section 4.3(a). "RESTATED NOTES" shall have the meaning given that term in the recitals to this Agreement. "RESTATED SECURITY INSTRUMENTS" shall have the meaning given that term in the recitals to this Agreement. "SECURITY INSTRUMENT" means a written instrument creating a valid lien on a Property either in favor of or held by Fannie Mae and/or a Related Trustee, as such instrument may be amended, supplemented, otherwise modified or amended and restated from time to time in accordance with its terms. A Security Instrument may be in the form of a mortgage, deed of trust, deed to secure debt or security deed. "SERVICER" means the independent contractor engaged to service the Mortgage Loans, the Related Bond Documents, the Bond Property Loan Documents and the Reimbursement Documents for Fannie Mae and any replacements or successors engaged by Fannie Mae. The initial Servicer pursuant to a written contract with Fannie Mae is GMAC Commercial Mortgage Corporation. "SERVICING AGREEMENT" means any agreement with respect to the servicing of the Mortgage Loans, the Bond Property Loan Documents and the Reimbursement Documents between Fannie Mae and an independent contractor, if any, designated from time to time by Fannie Mae as the Servicer of the Mortgage Loans, the Bond Property Loan Documents and the Reimbursement Documents, as each such agreement may be amended, supplemented, otherwise modified or amended and restated from time to time in accordance with its terms; PROVIDED that 21 the Servicing Agreement may be a Fannie Mae guide or announcement made applicable to the Mortgage Loans by an agreement between Fannie Mae and the Servicer. "SINGLE-PURPOSE" means, with respect to a Person, that such Person at all times since its formation: (i) has been a duly formed and existing limited partnership or corporation, as the case may be; (ii) has been duly qualified in each jurisdiction in which such qualification was at such time necessary for the conduct of its business; (iii) has complied with the provisions of its organizational documents and the laws of its jurisdiction of formation in all respects; (iv) has observed all customary formalities regarding its partnership or corporate existence, as the case may be; (v) has accurately maintained its financial statements, accounting records and other partnership or corporate documents separate from those of any other Person; (vi) has not commingled its assets or funds with those of any other Person; (vii) has accurately maintained its own bank accounts, payroll and books and accounts separate from those of any other Person; (viii) has paid its own liabilities from its own separate assets; (ix) has identified itself in all dealings with the public, under its own name and as a separate and distinct entity; (x) has not identified itself as being a division or a part of any other Person; (xi) has not identified any other Person as being a division or a part of such Person; (xii) has been adequately capitalized in light of its contemplated business operations; (xiii) has not assumed, guaranteed or become obligated for the liabilities of any other Person (except in connection with the endorsement of negotiable instruments in the ordinary course of business) or held out its credit as being available to satisfy the obligations of any other Person; (xiv) has not acquired obligations or securities of any other Person; (xv) has not made loans or advances to any other Person; (xvi) has not entered into and was not a party to any transaction with any Affiliate of such Person, except in the ordinary course of business and on terms which are no less favorable to such Person than would be obtained in a comparable arm's-length transaction with an unrelated third party; (xvii) has conducted its own business in its own name; (xviii) has paid the salaries of its own employees and maintained a sufficient number of employees in light of its contemplated business operations; (xix) has allocated fairly and reasonably any overhead for shared office space; (xx) has used stationery, invoices and checks separate from those of any other Person; (xxi) has not pledged its assets for the benefit of any other entity or made any loans or advances to any Person; (xxii) has not engaged in a non-exempt prohibited transaction described in Section 406 of ERISA or Section 4975 of the Code; (xxiii) has not acquired obligations or securities of its partners or Affiliates; and (xxiv) has corrected any known misunderstanding regarding its separate identity. "STANDARD & POOR'S" means Standard & Poor's Ratings Group, a division of McGraw Hill, and its successors and assigns if such successors and assigns shall continue to perform the functions of a securities rating agency. "SUBSIDIARY" means, as to any Person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is 22 otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. "SUBSTITUTION PERCENTAGE" shall have the meaning given that term in section 4.2(a). "TAX CERTIFICATE", with respect to a particular Related Bonds, means any certificate, instrument, contract or other agreement executed and delivered by Owner to assure continuation of the exclusion of interest on the Related Bonds from gross income for federal income tax purposes, and "TAX CERTIFICATES" means every such Tax Certificate, collectively. "TAXES" shall have the meaning given that term in section 2.2(r). "TRANSACTION DOCUMENTS" means, collectively, the Bond Documents, the Mortgage Documents, this Agreement, the Guaranties and all other agreements, instruments or documents executed by Owner in connection with the Bonds, the Mortgage Loans, this Agreement or the transactions contemplated thereby or hereby, including those listed in Exhibit C, and "TRANSACTION DOCUMENT" means any one of the foregoing, individually. "UCC" or "UNIFORM COMMERCIAL CODE", with respect to a Property, means the Uniform Commercial Code as in effect in the state where such Property is located. "VALUE" means, as of any date of determination, the value attributed to any Property by Fannie Mae in accordance with the standards and procedures utilized for underwriting purposes for similar Multifamily Residential Properties in accordance with the applicable provisions of the DUS Guide as of such date of determination, it being acknowledged that in evaluating the Value of a Property, Fannie Mae may take into account all factors relevant to the value of such Property including the current condition of the Property, and in evaluating the Value of a Property without an extended operating history, such Value shall be based on projections and pro formas satisfactory to Fannie Mae. "VILLAGE CREEK REGULATORY AGREEMENT" shall mean that certain Regulatory Agreement and Declaration of Restrictive Covenants dated as of December 15, 1985, and recorded on December 31, 1985 in the real estate records of Jefferson County, Colorado at Reception Number 85126922, as such agreement has been (i) amended by that certain Amended and Restated Regulatory Agreement dated as of December 1, 1988 recorded on December 14, 1988 in the real estate records of Jefferson County, Colorado at Reception Number 88121206, (ii) further amended by that certain First Amendment to Regulatory Agreement and Declaration of Restrictive Covenants dated as of January 1, 1989 recorded on April 21, 1989 in the real estate records of Jefferson County, Colorado at Reception Number 89033727, (iii) further amended by that certain Second Amendment to Regulatory Agreement and Declaration of Restrictive Covenants dated as of December 29, 1992 recorded on January 4, 1993 in the real estate records of Jefferson County, Colorado at Reception Number 93000837, (iv) further amended by that certain Third Amendment to Regulatory Agreement and Declaration of Restrictive Covenants dated as of May 11, 1993 recorded on May 14, 1993 in the real estate records of Jefferson 23 County, Colorado at Reception Number 93067649, and as such agreement may be amended, supplemented, otherwise modified or amended and restated from time to time in accordance with its terms. "VILLAGE CREEK PROJECT" means the Additional Property identified on Exhibit B as Village Creek Apartments, Westminster, Jefferson County, Colorado. SECTION 1.3 INTERPRETATION. The parties to this Agreement acknowledge that each party and their respective counsel have participated in the drafting and revision of this Agreement and the other Transaction Documents. Accordingly, the parties agree that any rule of construction which disfavors the drafting party shall not apply in the interpretation of this Agreement and the other Transaction Documents or any statement or supplement or exhibit to this Agreement or to the other Transaction Documents. ARTICLE II. REPRESENTATIONS, WARRANTIES AND COVENANTS SECTION 2.1 REPRESENTATIONS AND WARRANTIES OF OWNER. To induce Fannie Mae to enter into this Agreement and to deliver the Pass-Through Certificates, the Owner represents and warrants to Fannie Mae as follows: (a) DUE ORGANIZATION; OWNERSHIP STRUCTURE. (i) Owner is a Single-Purpose limited partnership duly organized, validly existing and in good standing under the laws of the State of Florida pursuant to (x) that certain Second Amended and Restated Limited Partnership Agreement dated as of June 20, 1996 (together with all schedules, exhibits and annexes thereto, the "OWNER PARTNERSHIP AGREEMENT"), and (y) that certain Certificate of Limited Partnership duly filed in the office of the Secretary of State of Florida on June 5, 1991, as amended by that certain Amendment to Certificate of Limited Partnership dated as of December 21, 1994 and duly filed in the office of the Secretary of State of Florida on April 11, 1995 (collectively, the "OWNER PARTNERSHIP CERTIFICATE"). Copies of the Owner Partnership Agreement, the Owner Partnership Certificate and all other organizational documents of Owner (collectively, the "OWNER ORGANIZATIONAL DOCUMENTS"), certified as true, correct and complete by a duly authorized officer of General Partner, have been delivered to Fannie Mae. The Owner Organizational Documents are in full force and effect and constitute the entire agreement of the partners thereof with respect to Owner, and have not been supplemented, amended or modified. 24 (ii) General Partner is the sole general partner of Owner and is the record and beneficial owner of, and has good title to, a one percent (1%) partnership interest in Owner, free and clear of all liens, security interests, options, rights of first refusal and adverse claims of title of any kind or character, and such percentage interest is not the subject of any agreement providing for the sale or transfer thereof. (iii) AIMCO OP is a limited partner of Owner and is the record and beneficial owner of, and has good title to, not less than a ninety-five percent (95%) partnership interest in Owner, free and clear of all liens, security interests, options, rights of first refusal and adverse claims of title of any kind or character, and such percentage interest is not the subject of any agreement providing for the sale or transfer thereof. (iv) General Partner is a newly formed, Single-Purpose corporation duly organized, validly existing and in good standing under the laws of the State of Delaware pursuant to that certain Certificate of Incorporation dated June 19, 1996, and duly filed in the office of the Secretary of State of Delaware on June 19, 1996 (the "GENERAL PARTNER ARTICLES OF INCORPORATION"). Copies of the General Partner Articles of Incorporation, By-Laws and all other organizational documents of General Partner (collectively, the "GENERAL PARTNER ORGANIZATIONAL DOCUMENTS"), certified as true, correct and complete by a duly authorized officer of General Partner, have been delivered to Fannie Mae. The General Partner Organizational Documents are in full force and effect and have not been supplemented, amended or modified. (v) AIMCO OP is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware pursuant to (x) that certain First Amended and Restated Agreement of Limited Partnership dated as of July 29, 1994 (together with all schedules, exhibits and annexes thereto, the "AIMCO OP PARTNERSHIP AGREEMENT"), and (y) that certain Certificate of Limited Partnership dated May 16, 1994 and duly filed in the office of the Secretary of State of Delaware on May 16, 1994 as the same has been amended pursuant to (a) that certain Certificate of Merger of Coral Garden Apartments Limited Liability Company into AIMCO Properties, L.P. dated July 29, 1994 and duly filed in the office of the Secretary of State of Delaware on July 29, 1994, (b) that certain Certificate of Amendment to the Certificate of Limited Partnership of AIMCO Properties, L.P. dated March 10, 1995 and filed in the office of the Secretary of State of Delaware on March 13, 1995, (c) that certain Certificate of Amendment of Certificate of Limited Partnership of AIMCO Properties, L.P. dated October 10, 1995 and filed in the office of the Secretary of State of Delaware on October 18, 1995 (the "AIMCO OP PARTNERSHIP CERTIFICATE"). Copies of the AIMCO OP Partnership Agreement and the AIMCO OP Partnership Certificate (the "AIMCO OP ORGANIZATIONAL DOCUMENTS"), certified as true, correct and complete by a duly authorized officer of the AIMCO REIT, have been delivered to Fannie Mae. The AIMCO OP Organizational Documents are in full force and effect and constitute the 25 entire agreement of the partners thereof with respect to AIMCO OP, and have not been supplemented, amended or modified. (vi) AIMCO-GP, Inc., a Delaware corporation, is the sole general partner of AIMCO 0P and is the record and beneficial owner of, and has good title to not less than a 0.99% interest in AIMCO OP, free and clear of all liens, security interests, options, rights of first refusal and adverse claims of title of any kind or character (except for any options' rights of first refusal and adverse claims arising under or pursuant to the AIMCO OP Partnership Agreement), and such percentage interest is not subject to any agreement providing for the sale or transfer thereof. (vii) AIMCO-LP, Inc., a Delaware corporation, is a limited partner of AIMCO OP and is the record and beneficial owner of, and has good title to not less than a 84.00% interest in AIMCO OP, free and clear of all liens, security interests, options, rights of first refusal and adverse claims of title of any kind or character (except for any options' rights of first refusal and adverse claims arising under or pursuant to the AIMCO OP Partnership Agreement), and such percentage interest is not subject to any agreement providing for the sale or transfer thereof. (viii) AIMCO REIT is the sole shareholder and is the record and beneficial owner of, and has good title to not less than a 100% interest in each of General Partner, AIMCO-GP, Inc. and AIMCO-LP, Inc., free and clear of all liens, security interests, options, rights of first refusal and adverse claims of title of any kind or character. (ix) Owner is qualified to transact business and in good standing in the States of Florida, Arizona, Texas and Colorado and in each other jurisdiction in which such qualification and/or standing is necessary to the conduct of its business and where the failure to be so qualified would adversely affect the validity of, the enforceability of, or the ability of Owner to perform the Obligations under this Agreement and the other Transaction Documents. General Partner is qualified to transact business and in good standing in the States of Florida, Arizona, Texas, Colorado and Delaware and in each other jurisdiction in which such qualification and/or standing is necessary to the conduct of its business and where the failure to be so qualified would adversely affect the validity of, the enforceability of, or the ability of Owner to perform the Obligations under this Agreement and the other Transaction Documents. Each Guarantor is qualified to transact business and in good standing in each jurisdiction in which such qualification and/or standing is necessary to the conduct of its business. (x) Owner's principal place of business, principal office and office where it keeps its books and records as to the Collateral is located at 1873 South Bellaire Street, 17th Floor, Denver, Colorado 80222-4348. 26 (b) POWER AND AUTHORITY. Each of Owner, General Partner and each Guarantor has the requisite power and authority (i) to own its properties and to carry on its business as now conducted and as contemplated to be conducted in connection with the performance of the Obligations hereunder and under the other Transaction Documents and (ii) to execute and deliver this Agreement and the other Transaction Documents and to carry out the transactions contemplated by this Agreement and the other Transaction Documents. (c) DUE AUTHORIZATION. The execution, delivery and performance of this Agreement and the other Transaction Documents have been duly authorized by all necessary action and proceedings by or on behalf of each of Owner, General Partner and each Guarantor, and no further approvals or filings of any kind, including any approval of or filing with any Governmental Authority, are required by or on behalf of Owner, General Partner or any Guarantor as a condition to the valid execution, delivery and performance by Owner, General Partner or the Guarantors of this Agreement or any of the other Transaction Documents. (d) VALID AND BINDING OBLIGATIONS. This Agreement and the other Transaction Documents have been duly authorized, executed and delivered by Owner and General Partner and constitute the legal, valid and binding obligations of Owner, enforceable against Owner in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles affecting the enforcement of creditors' rights generally or by equitable principles or by the exercise of discretion by any Court. Each Guaranty has been duly authorized, executed and delivered by the respective Guarantor and constitutes the legal, valid and binding obligation of each such Guarantor, enforceable against such Guarantor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles affecting the enforcement of creditors' rights generally or by equitable principles or by the exercise of discretion by any Court. (e) NON-CONTRAVENTION: NO LIENS. Neither the execution and delivery of this Agreement and the other Transaction Documents, nor the fulfillment of or compliance with the terms and conditions of this Agreement and the other Transaction Documents, the issuance of the Bonds nor the payment of the Obligations: (i) does or will conflict with or result in any breach or violation of any Applicable Law, rule or regulation enacted or issued by any Governmental Authority or other agency having jurisdiction over Owner, General Partner or any Guarantor, any of the Properties or any other portion of the Collateral or other assets of Owner, General Partner or any Guarantor, or any judgment or order applicable to Owner, General Partner or any Guarantor or to which Owner, General Partner or any Guarantor, any of the Properties or other assets of either Owner, General Partner or any Guarantor are subject; 27 (ii) does or will conflict with or result in any material breach or violation of, or constitute a default under, any of the terms, conditions or provisions of Owner's Organizational Documents, General Partner's Organizational Documents, AIMCO OP's Organizational Documents, any indenture, existing agreement or other instrument to which Owner, General Partner or any Guarantor is a party or to which Owner, General Partner or any Guarantor, any of the Properties or any other portion of the Collateral or other assets of Owner, General Partner or any Guarantor are subject; (iii) does or will result in or require the creation of any Lien on all or any portion of the Collateral or any of the Properties, except for the Permitted Liens; or (iv) does or will require the consent or approval of any creditor of Owner, General Partner or any Guarantor, any Governmental Authority or any other Person except such consents or approvals which have already been obtained. (f) PENDING LITIGATION OR OTHER PROCEEDINGS. There is no pending or, to the best knowledge of Owner, threatened action, suit, proceeding or investigation, at law or in equity, before any court, board, body or official of any Governmental Authority or arbitrator against or affecting any Property or any other portion of the Collateral or other assets of Owner, General Partner or any Guarantor, which, if decided adversely, (i) would have, or may reasonably be expected, to have, a Material Adverse Effect or (ii) would adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes. Owner is not in default with respect to any order of any Governmental Authority. (g) SOLVENCY. Neither Owner, General Partner or any Guarantor is insolvent or will be rendered insolvent by the transactions contemplated by this Agreement or the other Transaction Documents and after giving effect to such transactions, neither Owner, General Partner or any Guarantor will be left with an unreasonably small amount of capital with which to engage in its business or undertakings, nor will either Owner, General Partner or any Guarantor have incurred, have intended to incur, or believe that it has incurred, debts beyond its ability to pay such debts as they mature. Owner did not receive less than a reasonably equivalent value in exchange for incurrence of the Obligations. There (i) is no contemplated, pending or, to the best of Owner's knowledge, threatened bankruptcy, reorganization, receivership, insolvency or like proceeding, whether voluntary or involuntary, affecting either Owner, General Partner or any Guarantor or any of the Properties and (ii) has been no assertion or exercise of jurisdiction over either Owner, General Partner or any Guarantor or any of the Properties by any court empowered to exercise bankruptcy powers. (h) RATIOS. As of the date hereof, the Aggregate Debt Service Coverage Ratio for all Properties for the 12 month period ending on June 13, 1996 is not less than 1.32:1, and the Loan to Value Ratio is not greater than sixty-nine and forty one hundredths percent (69.40%). 28 (i) TITLE. Owner has good, valid, marketable and indefeasible title in fee to each Property, free and clear of all Liens whatsoever except the Permitted Liens. Each Bond Mortgage, if and when properly recorded in the appropriate records, together with any Uniform Commercial Code financing statements required to be filed in connection therewith, will create a valid, perfected first lien on the Bond Property intended to be encumbered thereby (including the Leases of such Bond Property and the Rents and all rights to collect Rents under such Leases), subject only to Permitted Liens. Each Reimbursement Mortgage with respect to an Additional Mortgaged Property, if and when properly recorded in the appropriate records, together with any Uniform Commercial Code financing statements required to be filed in connection therewith, will create a valid, perfected first priority lien on the Additional Mortgaged Property intended to be encumbered thereby (including the Leases of such Additional Mortgaged Property and the Rents and all rights to collect Rents under such Leases), subject only to Permitted Liens. Each Reimbursement Mortgage with respect to a Bond Property, if and when properly recorded in the appropriate records, together with any Uniform Commercial Code financing statements required to be filed in connection therewith, will create a valid, perfected second priority lien on the Bond Property intended to be encumbered thereby (including the Leases of such Bond Property and the Rents and all rights to collect Rents under such Leases), subject only to Permitted Liens. Except for any Permitted Liens, there are no Liens or claims for work, labor or materials affecting any Property which are or may be prior to, subordinate to, or of equal priority with, the Liens created by the Mortgage Documents. With the exception of any Regulatory Agreement, the Permitted Liens do not have, and may not reasonably be expected to have, a Material Adverse Effect. (j) COMPLIANCE WITH EXISTING BOND ISSUES AND EXISTING SECURITY INSTRUMENTS. No event has occurred since Owner acquired the Properties and no condition currently exists with respect to Owner or any Bond Property that would constitute an event of default or which, with the lapse of time, if not cured, or with the giving of notice or both, would become an event of default under any of the Regulatory Agreements, any of the Existing Security Instruments or any other document executed in connection with any of the Existing Bond Issues. Owner has complied in all material respects with the requirements of each loan agreement executed in connection with the Existing Bond Issues. (k) COMPLIANCE WITH TAX CERTIFICATES. Owner has not taken and will not take any action, or permit any action that is within Owner's control to be taken, that would impair the exclusion from gross income for federal income tax purposes of the interest payable on any of the Existing Bond Issues or the Bonds. As of the Fannie Mae Facility Closing Date, Owner is in compliance with all material requirements of all of the Tax Certificates. Owner has complied and will comply with all the terms and conditions of the Tax Certificates, including the terms and conditions of the exhibits thereto, and the representations set forth in the Tax Certificates pertaining to Owner are true and accurate in all material respects. (l) COMPLIANCE WITH REGULATORY AGREEMENTS. Each of the Bond Properties is in compliance with all material requirements of the applicable Regulatory Agreement. Owner intends to cause the residential units in each Bond Property to be rented or available for rental 29 on a basis which satisfies the requirements of the Regulatory Agreement with respect to such Bond Property. All Leases with respect to each Bond Property will comply with all Applicable Laws and the Regulatory Agreement with respect to such Bond Property. (m) TAXES. Owner has filed all property and similar tax returns required to have been filed by it with respect to each Property and has paid and discharged, or caused to be paid and discharged, all installments for the payment of real estate, property or similar taxes due to date, and all other material Impositions imposed against, affecting or relating to each Property other than those which have not become due, together with any fine, penalty, interest or cost for nonpayment pursuant to such returns or pursuant to any assessment received by it. Owner has no knowledge of any new proposed tax, levy or other governmental or private assessment or charge in respect of any Property which has not been disclosed in writing to Fannie Mae. (n) ZONING. Each Property complies in all material respects with all Applicable Laws affecting such Property. Without limiting the foregoing, all material Permits, including certificates of occupancy, have been issued and are in full force and effect. Neither Owner nor, to the knowledge of Owner, any former owner of any Property, has received any written notification or threat of any actions or proceedings regarding the noncompliance or nonconformity of any Property with any Applicable Laws or Permits, nor is Owner otherwise aware of any such pending actions or proceedings. (o) LIABILITY FOR HAZARDOUS SUBSTANCES. Neither Owner, General Partner nor any Guarantor has any liability, contingent or otherwise, in connection with any Hazardous Substance Activity on or affecting any Property in violation of Hazardous Materials Laws. (p) PROHIBITED ACTIVITIES OR CONDITIONS. Except as disclosed in any Environmental Report delivered to Fannie Mae prior to the date of this Agreement, or otherwise disclosed in writing by Owner to Fannie Mae prior to the date of this Agreement, (i) to the best knowledge of Owner, no Prohibited Activities or Conditions exist or have existed at, upon, under or within any Property that have not been remedied and (ii) neither Owner, General Partner nor any Guarantor has at any time caused or permitted any Prohibited Activities or Conditions to exist at, upon, under or within any Property. (q) HAZARDOUS MATERIALS LAWS. Except as disclosed in an Environmental Report delivered to Fannie Mae prior to the date of this Agreement, or otherwise disclosed in writing by Owner to Fannie Mae prior to date of this Agreement, (i) neither Owner nor, to the knowledge of Owner, any other party has been or is involved in operations at any Property which operations could reasonably be expected to lead to (x) the imposition of liability on Owner, General Partner or any Guarantor under any Hazardous Materials Law in effect as of the date of this Agreement, or on any subsequent or former owner of any Property, or (y) the creation of a Lien with respect to a liability on any Property under any Hazardous Materials Law in effect as of the date hereof; (ii) neither Owner, General Partner nor any Guarantor nor to the best knowledge of Owner, any predecessor-in-interest with respect to any Property has permitted 30 any tenant or occupant of any Property to engage in any activity that could reasonably be expected to impose a claim or liability under any Hazardous Materials Law in effect as of the date hereof on such tenant or occupant, on Owner or on any other subsequent or former owner of any Property; and (iii) neither Owner, General Partner nor any Guarantor has received, and Owner has no knowledge of the issuance of, any claim, citation or notice of any Governmental Actions. (r) LEASES. Owner has delivered to Servicer, on behalf of Fannie Mae, a true and correct copy of its form apartment lease for each Property, and each Lease with respect to such Property is in the form thereof, with no material modifications thereto, except as previously disclosed in writing to Servicer or Fannie Mae. Except as set forth in a Rent Roll, no Lease for any unit in any Property (i) is for a term in excess of one year, including any renewal or extension period unless such renewal or extension period is subject to termination by Owner upon not more than 30 days' written notice, (ii) provides for prepayment of more than one month's rent, or (iii) was entered into in other than the ordinary course of business. (s) RENT ROLL. Owner has executed and delivered to Servicer, on behalf of Fannie Mae, a Certification to Property Rent Roll (the "RENT ROLL"), for each Property, each dated as of and delivered within thirty (30) days prior to the Fannie Mae Facility Closing Date and otherwise in the form promulgated by Fannie Mae. Each Rent Roll sets forth each and every unit subject to a Lease which is in full force and effect as of the date of such Rent Roll. The information set forth on each Rent Roll is true, correct and complete as of its date and there has occurred no material adverse change in the information shown on any Rent Roll from the date of each such Rent Roll to the Fannie Mae Facility Closing Date. Except as disclosed in the Rent Roll with respect to each Property or otherwise previously disclosed in writing to Servicer or Fannie Mae, no Lease is in effect as of the date of the Rent Roll with respect to such Property. (t) STATUS OF LANDLORD UNDER LEASES. Except for any assignment of leases and rents which is a Permitted Lien or which is to be released in connection with the consummation of the transactions contemplated by this Agreement, Owner is the owner and holder of the landlord's interest under each of the Leases of units in each Property and there are no prior outstanding assignments of any such Lease, or any portion of the Rents, additional rents, charges, issues or profits due and payable or to become due and payable thereunder. (u) ENFORCEABILITY OF LEASES. Each Lease constitutes the legal, valid and binding obligation of Owner and, to the knowledge of Owner, of each of the other parties thereto, enforceable in accordance with its terms, subject only to bankruptcy, insolvency, reorganization or other similar laws relating to creditors' rights generally, and equitable principles, and except as disclosed in writing to Fannie Mae, no notice of any default by Owner which remains uncured has been sent by any tenant under any such Lease. (v) NO LEASE OPTIONS. All premises demised to tenants under Leases are occupied by such tenants as tenants only. No Lease contains any option or right to purchase, 31 right of first refusal or any other similar provisions. No option or right to purchase, right of first refusal, purchase contract or similar right exists with respect to any Property. (w) INSURANCE. Owner has delivered to Service or Fannie Mae true and correct certified copies of all policies of insurance currently in effect as of the date of this Agreement with respect to the Properties. Each such insurance policy complies in all material respects with the requirements set forth in the Mortgage Documents. (x) TAX PARCELS. Each Property is on one or more separate tax parcels, and each such parcel (or parcels) is (or are) separate and apart from any other property. (y) ENCROACHMENTS. Except as disclosed on the survey with respect to each Property, none of the improvements located on any Property encroaches upon the property of any other Person nor lies outside of the boundaries and building restriction lines of such Property and no improvement located on property adjoining such Property lies within the boundaries of or in any way encroaches upon such Property. (z) INDEPENDENT UNIT. Except for the Permitted Liens and as disclosed on Exhibit G, each Property is an independent unit which does not rely on any drainage, sewer, access, parking, structural or other facilities located on any property not included in such Property or on public or utility easements for the (i) fulfillment of any zoning, building code or other requirement of any Governmental Authority that has jurisdiction over such Property, (ii) structural support, or (iii) the fulfillment of the requirements of any Lease or other agreement affecting such Property. Owner, directly or indirectly, has the right to use all amenities, easements, public or private utilities, parking, access routes or other items necessary or currently used for the operation of each Property. All public utilities are installed and operating at each Property and all billed installation and connection charges have been paid in full. Each Property is either (x) contiguous to or (y) benefits from an irrevocable unsubordinated easement permitting access from such Property to a physically open, dedicated public street, and has all necessary permits for ingress and egress and is adequately serviced by public water, sewer systems and utilities. No building or other improvement not located on a Property relies on any part of the Property to fulfill any zoning requirements, building code or other requirement of any Governmental Authority that has jurisdiction over the Property for structural support or to furnish to such building or improvement any essential building systems or utilities. (aa) CONDITION OF THE PROPERTIES. Each Property is in good condition, order and repair, there exist no structural or other material defects in such Property, whether latent or otherwise and Owner has not received notice from any insurance company or bonding company of any defects or inadequacies in such Property, or any part of it, which would adversely affect the insurability of such Property or cause the imposition of extraordinary premiums or charges for insurance or of any termination or threatened termination of any policy of insurance or bond. No claims have been made against any contractor, architect or other party with respect to the condition of any Property or the existence of any structural or other material defect therein. No Property has been materially damaged by Casualty which has not been fully 32 repaired or for which Insurance Proceeds have not been received or are not expected to be received except as previously disclosed in writing to Fannie Mae or Servicer. There are no proceedings pending for partial or total Condemnation of any Property except as disclosed in writing to Fannie Mae or Servicer. The average term of Related Bonds does not exceed 120% of the average reasonably expected economic life of the facilities of the Bond Property with respect to such issue of Related Bonds financed with the original net proceeds. (ab) NO CONTRACTUAL DEFAULTS. Other than any defaults that Owner is required to cure pursuant to section 2.5, there are no defaults by either Owner, General Partner or any Guarantor or, to the knowledge of Owner, by any other Person under any contract to which either Owner, General Partner or any Guarantor is a party relating to any Property, including any management, rental, service, supply, security, maintenance or similar contract. Neither Owner, General Partner or any Guarantor or to the knowledge of Owner, any other person has received notice or has any knowledge of any existing circumstances in respect of which it could receive any notice of default or breach in respect of any contracts affecting or concerning any Property. (ac) COMPLIANCE WITH THE TRANSACTION DOCUMENTS. Owner is in compliance with all provisions of the Transaction Documents to which it is a party or by which it is bound. The representations and warranties made by Owner in the Transaction Documents are true, complete and correct as of the Fannie Mae Facility Closing Date and do not contain any untrue statement of material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. (ad) ERISA. Each of Owner, General Partner and the Guarantors are in compliance in all material respects with all applicable provisions of ERISA and has not incurred any liability to the PBGC on a Plan under Title IV of ERISA. None of the assets of either Owner, General Partner or any Guarantor constitute plan assets (within the meaning of Department of Labor Regulation Section 2510.3-101) of any employee benefit plan subject to Title I of ERISA. (ae) OFFICIAL STATEMENT. The statements and information concerning Owner and its Affiliates, and the Related Bond Property set forth in each Official Statement (other than the information under the subheading "Federal National Mortgage Association" of each such Official Statement) are each complete and correct as of its date and, as of its date, do not contain any untrue statement of material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. (af) FINANCIAL INFORMATION. The financial projections relating to Owner, General Partner and the Guarantors and delivered to Servicer, on behalf of Fannie Mae, on or prior to the date hereof, if any, were prepared on the basis of assumptions believed by Owner, in good faith at the time of preparation, to be reasonable and Owner is not aware of any fact or 33 information that would lead it to believe that such assumptions are incorrect or misleading in any material respect; provided, however, that no representation or warranty is made that any result set forth in such financial projections shall be achieved. The financial statements of Owner, General Partner and the Guarantors which have been furnished to Servicer on behalf of Fannie Mae are complete and accurate in all material respects and present fairly the financial condition of Owner, General Partner and each Guarantor, as of their respective dates in accordance with GAAP, applied on a consistent basis, and since the date of the most recent of such financial statements no event has occurred which would have, or may reasonably be expected to have a Material Adverse Effect, and there has not been any material transaction entered into by Owner, General Partner or any Guarantor other than transactions in the ordinary course of business. Neither Owner, General Partner or any Guarantor has any material Contingent Obligation which are not otherwise disclosed in its most recent financial statements. (ag) ACCURACY OF INFORMATION. No information, statement or report furnished in writing to Fannie Mae, any Issuer, Servicer or any Related Trustee by Owner, General Partner or the Guarantors in connection with this Agreement, the Bond Documents, the Mortgage Documents or any other Transaction Document or in connection with the consummation of the transactions contemplated hereby and thereby (including any information furnished by Owner, General Partner or any Guarantor in connection with the preparation of any materials related to the issuance delivery or offering of any of the Bonds on the Bond Transaction Closing Date) contains any material misstatement of fact or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading; and the representations and warranties of Owner and the statements, information and descriptions contained in Owner's closing certificates, as of the Fannie Mae Facility Closing Date, are true, correct and complete in all material respects, do not contain any untrue statement or misleading statement of a material fact, and do not omit to state a material fact required to be stated therein or necessary to make the certifications, representations, warranties, statements, information and descriptions contained therein, in light of the circumstances under which they were made, not misleading; and the estimates and the assumptions contained herein and in any certificate of Owner delivered as of the Fannie Mae Facility Closing Date are reasonable and based on the best information available to Owner. (ah) NO CONFLICTS OF INTEREST. To the best knowledge of Owner, no member, officer, agent or employee of any Issuer has been or is in any manner interested, directly or indirectly, in that Person's own name, or in the name of any other Person, in the Related Bonds, the Related Bond Documents, the Bond Property Loan Documents, Owner, General Partner or any Guarantor or any Bond Property, in any contract for property or materials to be furnished or used in connection with such Bond Property or in any aspect of the transactions contemplated by the Bond Documents or the Related Bond Property Loan Documents. (ai) GOVERNMENTAL APPROVALS. No Governmental Approval not already obtained or made is required for the execution and delivery or approval, as the case may be, of this Agreement, the Bond Documents, the Mortgage Documents or any other Transaction 34 Document or the performance of the terms and provisions hereof or thereof by Owner, General Partner or any Guarantor. (aj) GOVERNMENTAL ORDERS. Owner is not presently under any cease or desist order or other orders of a similar nature, temporary or permanent, of any Governmental Authority which would have the effect of preventing or hindering performance of its duties hereunder, nor are there any proceedings presently in progress or to its knowledge contemplated which would, if successful, lead to the issuance of any such order. (ak) NO RELIANCE. Owner acknowledges, represents and warrants that it understands the nature and structure of the transactions relating to the refinancings of the Bond Properties, that it is familiar with the provisions of all of the documents and instruments relating to such refinancings to which it or any Issuer is a party or of which it is a beneficiary; that it understands the risks inherent in such transactions, including the risk of loss of all or any of the Bond Properties and the Additional Mortgaged Properties; and that it has not relied on any Issuer or Fannie Mae for any guidance or expertise in analyzing the financial or other consequences of the transactions contemplated by this Agreement, any Related Indenture or any other Transaction Document or otherwise relied on any Issuer or Fannie Mae in any manner in connection with interpreting, entering into or otherwise in connection with this Agreement, any other Transaction Document or any of the matters contemplated hereby or thereby. (al) ARBITRAGE BONDS. No money on deposit in any fund or account in connection with the Existing Bond Issues, whether or not such money was derived from other sources, has been used by or under the direction of Owner, General Partner or any Guarantor in a manner which would cause the Existing Bond Issues to be "arbitrage bonds" within the meaning of Section 103(c) of the Code. (am) COMPLIANCE WITH APPLICABLE LAW. Each of Owner, General Partner and each Guarantor is in compliance with Applicable Law, including all Governmental Approvals, if any, except for such items of noncompliance that, singly or in the aggregate, have not had and are not reasonably expected to cause, a Material Adverse Effect. (an) CONTRACTS WITH AFFILIATES. Owner has not entered into and is not a party to any contract, lease or other agreement with any Affiliate of Owner for the provision of any service, materials or supplies to any Property or Properties (including any contract, lease or agreement for the provision of property management services, cable television services or equipment, gas, electric or other utilities, security services or equipment, laundry services or equipment or telephone services or equipment) other than (i) the Management Agreements and (ii) that certain Amended and Restated Cash Management Agreement, dated as of January 1, 1995, among AIMCO OP, Owner and certain Affiliates of Owner. 35 SECTION 2.2 AFFIRMATIVE COVENANTS OF OWNER. Owner agrees and covenants with Fannie Mae that, at all times during the term of this Agreement: (a) COMPLIANCE WITH AGREEMENTS; NO AMENDMENTS. Owner shall comply with all the terms and conditions of each Transaction Document to which it is a party or by which it is bound and shall use its best efforts to cause each Related Trustee at all times to comply with the terms of the Related Bond Documents to which each such Related Trustee is a party; provided, however, that Owner's failure to comply with such terms and conditions shall not be an Event of Default under section 6.1 of this Agreement until the expiration of applicable notice and cure periods, if any, specified in the applicable Transaction Document. (b) MAINTENANCE OF EXISTENCE. Owner shall maintain its existence and continue to be a limited partnership organized under the laws of the state of its organization, duly qualified to do business in each jurisdiction in which such qualification is necessary to the conduct of its business and where the failure to be so qualified would adversely affect the validity of, the enforceability of or ability to perform its obligations under this Agreement or any other Transaction Document. (c) MAINTENANCE OF REIT STATUS. At all times during which Owner is bound by the terms of this Agreement: (i) AIMCO REIT shall continue to qualify and be taxed as a real estate investment trust under Subchapter M of the Code; and (ii) General Partner shall continue to qualify as a "Qualified REIT Subsidiary" (as defined in Subchapter M of the Code) of AIMCO REIT. (d) FINANCIAL STATEMENTS: ACCOUNTANTS' REPORTS: OTHER INFORMATION. Owner shall keep and maintain at all times complete and accurate books of accounts and records in sufficient detail to correctly reflect (x) all of Owner's financial transactions and assets and (y) the results of the operation of each Property and copies of all written contracts, Leases and other instruments which affect each Property (including all bills, invoices and contracts for electrical service, gas service, water and sewer service, waste management service, telephone service and management services). In addition, Owner shall furnish, or cause to be furnished, to Servicer, and upon Fannie Mae's request, to Fannie Mae: (i) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in any event within one hundred and twenty (120) days after the close of each of Owner's fiscal years during the term of this Agreement, its audited balance sheet as of the end of such fiscal year, its audited statement of income, partners' equity and retained earnings for such fiscal year and its audited statement of cash flows for such fiscal year, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the prior fiscal year, prepared in accordance with GAAP, consistently applied, and accompanied by a certificate of Owner's independent certified public accountants to the effect that such financial statements have been prepared 36 in accordance with GAAP, consistently applied, and that such financial statements fairly present the results of its operations and financial condition for the periods and dates indicated, with such certification to be free of exceptions and qualifications as to the scope of the audit or as to the going concern nature of the business. (ii) QUARTERLY FINANCIAL STATEMENTS. As soon as available, and in any event within forty-five (45) days after each of the first three fiscal quarters of each fiscal years during the term of this Agreement, its unaudited balance sheet as of the end of such fiscal quarter and its unaudited statement of income and retained earnings and its unaudited statement of cash flows for the portion of the fiscal year ended with the last day of such quarter, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the previous fiscal year, accompanied by a certificate of Owner's authorized representative to the effect that such financial statements have been prepared in accordance with GAAP, consistently applied, and that such financial statements fairly present the results of its operations and financial condition for the periods and dates indicated subject to year end adjustments in accordance with GAAP. (iii) MONTHLY PROPERTY STATEMENTS. Upon Fannie Mae's request (but not more frequently than on a monthly basis) within thirty (30) days of the last day of the prior month, a statement of income and expenses of each Property accompanied by a certificate of Owner's authorized representative to the effect that each such statement of income and expenses fairly, accurately and completely presents the operations of each such Property for the period indicated. (iv) ANNUAL PROPERTY STATEMENTS. On an annual basis within thirty (30) days of the end of the fiscal year, an annual statement of income and expenses of each Property accompanied by a certificate of Owner's authorized representative to the effect that each such statement of income and expenses fairly, accurately and completely presents the operations of each such Property for the period indicated. (v) UPDATED RENT ROLLS. Upon Servicer's or Fannie Mae's request, a current Rent Roll for each Property, showing the name of each tenant, and for each tenant, the space occupied, the lease expiration date, the rent payable, the rent paid and any other information requested by Servicer or Fannie Mae and in the form required by Servicer or Fannie Mae and accompanied by a certificate of Owner's authorized representative to the effect that each such Rent Roll fairly, accurately and completely presents the information required therein. (vi) SECURITY DEPOSIT INFORMATION. Upon Servicer's or Fannie Mae's request, an accounting of all security deposits held in connection with any lease of any part of any Property, including the name and identification number of the accounts in which such security deposits are held, the name and address of the financial institutions in which such security deposits are held and the name of the person to contact at such 37 financial institution, along with any authority or release necessary for Servicer or Fannie Mae to access information regarding such accounts. (vii) SECURITY LAW REPORTING INFORMATION. So long as AIMCO REIT or any other Affiliate of Owner is a reporting company under the Securities and Exchange Act of 1934, promptly upon their becoming available, copies of (A) all financial statements, reports, notices and proxy statements sent or made available generally by AIMCO REIT or any other Affiliate of Owner to their respective security holders, (B) all regular and periodic reports and all registration statements (other than on Form S-8 or a similar form) and prospectuses, if any, filed by AIMCO REIT or any other Affiliate of Owner with the United States Securities and Exchange Commission or other Governmental Authorities, and (c) all press releases and other statements made available generally by AIMCO REIT or any other Affiliate of Owner to the public concerning material developments in the business of AIMCO REIT or any other Affiliate of Owner. (viii) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, copies of any reports or management letters submitted to Owner by its independent certified public accountants in connection with the examination of its financial statements made by such accountants (except for reports otherwise provided pursuant to clause (i) above); PROVIDED, HOWEVER, that Owner shall only be required to deliver such reports and management letters to the extent that they relate to Owner, General Partner or any of the Properties. (ix) OTHER REPORTS. Promptly upon receipt thereof, all schedules, financial statements or other similar reports delivered by Owner pursuant to the Transaction Documents or requested by Servicer or Fannie Mae with respect to Owner's business affairs or condition (financial or otherwise) or any of the Properties. (e) CERTIFICATE OF COMPLIANCE. Owner shall deliver to Servicer concurrently with the delivery of the financial statements and/or reports required to be delivered pursuant to paragraphs (d)(i) and (d)(ii) above a certificate signed by the controller of General Partner and AIMCO REIT stating that, to the best of the knowledge of such controller following reasonable inquiry, no Event of Default or Potential Event of Default has occurred, or if an Event of Default or Potential Event of Default has occurred, specifying the nature thereof. (f) MAINTAIN LICENSES. Owner shall procure and maintain in full force and effect all licenses, Permits, charters and registrations which are material to the conduct of its business and shall abide by and satisfy all terms and conditions of all such licenses, Permits, charters and registrations. (g) ACCESS TO RECORDS; DISCUSSIONS WITH OFFICERS AND ACCOUNTANTS. To the extent permitted by law and in addition to the applicable requirements of the Mortgages, Owner shall permit Fannie Mae or Servicer: 38 (i) to inspect, make copies and abstracts of, and have reviewed or audited, such of Owner's books and records as may relate to the Obligations or any Property; (ii) to discuss Owner's affairs, finances and accounts with any of Owner's officers, partners and employees; (iii) to discuss Owner's affairs, finances and accounts with its independent public accountants, provided that the controller of General Partner and AIMCO REIT has been given the opportunity by Servicer or Fannie Mae to be a party to such discussions; and (iv) to receive any other information that Fannie Mae or Servicer deems necessary or relevant in connection with any Mortgage Loan, any Transaction Document or the Obligations. Notwithstanding the foregoing, prior to an Event of Default or Potential Event of Default, all inspections shall be conducted at reasonable times during normal business hours. (h) INFORM FANNIE MAE AND SERVICER OF MATERIAL EVENTS. Owner shall promptly inform Fannie Mae and Servicer in writing of any of the following (and shall deliver to the Fannie Mae and Servicer copies of any related written communications, complaints, orders, judgments and other documents relating to the following) of which Owner has or obtains acrual knowledge: (i) DEFAULTS. The occurrence of any Event of Default or any Potential Event of Default under this Agreement or any other Transaction Document; (ii) REGULATORY PROCEEDINGS. The commencement of any rulemaking or disciplinary proceeding or the promulgation of any proposed or final rule which would have, or may reasonably be expected to have, a Material Adverse Effect or adversely affect the tax-exempt status of the interest payable on the Bonds; (iii) LEGAL PROCEEDINGS. The commencement or threat of, or amendment to, any proceedings by or against Owner, General Partner or any Guarantor in any Federal, state or local court or before any Governmental Authority, or before any arbitrator, which, if adversely determined, would have, or at the time of determination may reasonably be expected to have, a Material Adverse Effect or adversely affect the tax-exempt status of the interest payable on the Bonds; (iv) BANKRUPTCY PROCEEDINGS. The commencement of any proceedings by or against Owner, General Partner or any Guarantor under any applicable bankruptcy, reorganization, liquidation, insolvency or other similar law now or hereafter in effect or 39 of any proceeding in which a receiver, liquidator, trustee or other similar official is sought to be appointed for it; (v) REGULATORY SUPERVISION OR PENALTY. The receipt of notice from any Governmental Authority having jurisdiction over Owner, General Partner or any Guarantor that (A) Owner, General Partner or any Guarantor is being placed under regulatory supervision, (B) any license, Permit, charter, membership or registration material to the conduct of Owner's or any Guarantor's respective business or the Properties is to be suspended or revoked or (C) Owner, General Partner or any Guarantor is to cease and desist any practice, procedure or policy employed by Owner, General Partner or such Guarantor, as the case may be, in the conduct of its business, and such cessation would have, or may reasonably be expected to have, a Material Adverse Effect or would adversely affect the tax-exempt status of the interest on any Bonds; and (vi) ENVIRONMENTAL CLAIM. The receipt of notice from any Governmental Authority or other Person relating to any Environmental Claim involving Owner, General Partner or any Guarantor or any of their respective assets, including the Properties. (i) SINGLE-PURPOSE ENTITIES. Owner and General Partner shall at all times maintain and conduct themselves as Single-Purpose entities. (j) INSPECTION. Owner shall permit any Person designated by Fannie Mae (including Servicer): (i) to make entries upon and inspections of the Properties; and (ii) to otherwise verify, examine and inspect the amount, quantity, quality, value and/or condition of, or any other matter relating to, any Property; PROVIDED, HOWEVER, that prior to an Event of Default or Potential Event of Default, all such entries, examinations and inspections shall be conducted at reasonable times during normal business hours. (k) COMPLIANCE WITH APPLICABLE LAWS. Owner shall comply in all material respects with all Applicable Laws now or hereafter affecting any Property or any part of any Property or requiring any alterations, repairs or improvements to any Property. Owner shall procure and continuously maintain in full force and effect, and shall abide by and satisfy all material terms and conditions of all Permits. (l) WARRANTY OF TITLE. Owner shall warrant and defend (a) the title to each Property and every part of each Property, subject only to Permitted Liens, and (b) the validity and priority of the lien of the applicable Mortgage Documents, subject only to Permitted Liens, in each case against the claims of all Persons whatsoever. Owner shall reimburse Fannie Mae and Servicer for any losses, costs, damages or expenses (including reasonable attorneys' fees and court costs) incurred by Fannie Mae or Servicer if an interest in any Property, other than with respect to a Permitted Lien, is claimed by others. 40 (m) DEFENSE OF ACTIONS. Owner shall appear in and defend any action or proceeding purporting to affect the security for this Agreement or the rights or power of Fannie Mae or Servicer hereunder, and shall, pursuant to section 3.1, pay all costs and expenses, including the cost of evidence of title and reasonable attorneys' fees, in any such action or proceeding in which Fannie Mae may appear. If Owner fails to perform any of the covenants or agreements contained in this Agreement, or if any action or proceeding is commenced that is not diligently defended by Owner which affects in any material respect Fannie Mae's or any Related Trustee's interest in any Property or any part thereof, including eminent domain, code enforcement or proceedings of any nature whatsoever under any Applicable Law, whether now existing or hereafter enacted or amended, then Fannie Mae may, but without obligation to do so and without notice to or demand upon Owner and without releasing Owner from any Obligation, make such appearances, disburse such sums and take such action as Fannie Mae or Servicer deems necessary or appropriate to protect Fannie Mae's or such Related Trustee's interest, including disbursement of attorney's fees, entry upon such Property to make repairs or take other action to protect the security of said Property, and payment, purchase, contest or compromise of any encumbrance, charge or lien which in the judgment of Fannie Mae appears to be prior or superior to the Transaction Documents. In the event (i) that any Mortgage is foreclosed in whole or in part or that any Transaction Document is put into the hands of an attorney for collection, suit, action or foreclosure, or (ii) of the foreclosure of any mortgage, deed to secure debt, deed of trust or other security instrument prior to or subsequent to any Mortgage or any Transaction Document in which proceeding Fannie Mae is made a party or (iii) of the bankruptcy of Owner, General Partner or any Guarantor or an assignment by Owner, General Partner or any Guarantor for the benefit of their respective creditors, Owner shall be chargeable with and agrees to pay all costs of collection and defense, including actual attorneys' fees in connection therewith and in connection with any appellate proceeding or post-judgment action involved therein, which shall be due and payable together with all required service or use taxes. (n) PROPERTY MANAGEMENT; MAINTENANCE OF PROPERTIES. Owner shall continue to operate each Property as a Multifamily Residential Property, and shall manage or cause to be managed the operations of each Property in accordance with the applicable provisions of the Mortgage Documents and the other Transaction Documents. Owner (i) shall not commit waste or permit impairment or deterioration of any Property, (ii) shall not abandon any Property, (iii) shall restore or repair promptly and in a good and workmanlike manner all or any part of any Property to the equivalent of its condition existing immediately prior to such Casualty, or such other lesser condition as Fannie Mae may approve in writing, in the event of any Casualty thereto, whether or not Insurance Proceeds are available to cover in whole or in part the costs of such restoration or repair, (iv) shall keep each Property, including improvements, fixtures, equipment, machinery and appliances thereon in good repair and shall replace fixtures, equipment, machinery and appliances on each Property when necessary to keep such items in good repair, (v) shall generally operate and maintain each Property in accordance with the standards for "Class A" Multifamily Residential Properties in the regional market in which each such Property is located and (vi) shall give notice in writing to Fannie Mae of, and, unless otherwise directed in writing by Fannie Mae, appear in and defend, any action or 41 proceeding purporting to affect any Property, the security of any Mortgage or the rights or powers of Fannie Mae under any of the Transaction Documents. Neither Owner nor any tenant or other person shall remove, demolish or alter any improvement now existing or hereafter erected on any Property or any fixture, equipment, machinery or appliance in or on any Property except when incident to the replacement of fixtures, equipment, machinery and appliances with items of like kind. (o) ADDITIONS TO THE PROPERTIES. Except as otherwise provided in the Mortgage Documents, Owner shall have the right to undertake any alteration, improvement, demolition, removal, or construction (collectively, "ALTERATIONS") to the Properties without the prior consent of Fannie Mae; provided, however, that in any case, no such Alterations shall be made to any Property without the prior written consent of Fannie Mae if (i) such Improvement could reasonably be expected to adversely affect the value of such Property or its operation as a multifamily housing facility in substantially the same manner in which it is being operated on the date of this Agreement, (ii) the construction of such Improvement could reasonably be expected to result in interference to the occupancy of tenants of such Property such that tenants in occupancy with respect to 5% or more of the Leases would be permitted to terminate their Leases or to abate the payment of all or any portion of their rent, or (iii) such Improvement will be completed in more than 12 months from the date of commencement or in the last year of the term of this Agreement. Notwithstanding the foregoing, Owner must obtain Fannie Mae's prior written consent to construct Alterations with respect to the Property costing in excess of $125,000.00 and Owner must give prior written notice to Fannie Mae of its intent to construct Alterations with respect to such Property costing in excess of $50,000.00; PROVIDED, HOWEVER, that preceding requirements shall not be applicable to Alterations made, conducted or undertaken by Owner as part of Owner's routine maintenance and repair of the Properties pursuant to section 2.2(n) or as otherwise required by the Mortgage Documents.. (p) ERISA. Owner shall at all times remain in compliance in all material respects with all applicable provisions of ERISA and similar requirements of the PBGC. (q) NO AMENDMENTS TO TRANSACTION DOCUMENTS. Unless Fannie Mae shall otherwise consent in writing, Owner shall not agree to any amendment of, supplement to, waiver of, or modification of, the terms of any Transaction Document. (r) TAXES. If any tax, assessment or Imposition (other than a franchise tax imposed on or measured by, the net income or capital (including branch profits tax) of any Related Trustee or Fannie Mae (or any transferee or assignee thereof, including a participation holder)) ("TAXES") is levied, assessed or charged by the United States or any political subdivision or taxing authority thereof or therein upon any of the Transaction Documents or the obligations secured thereby, the interest of Fannie Mae or any Related Trustee in the Properties, or Fannie Mae or any Related Trustee by reason of or as holder of the Transaction Documents, Owner shall pay all such Taxes to, for, or on account of Fannie Mae or the applicable Related Trustee (or provide funds to Fannie Mae or such Related Trustee for such payment, as the case may be) as they become due and payable and shall promptly furnish proof of such payment to 42 Fannie Mae or such Related Trustee, as applicable. In the event of passage of any law or regulation permitting, authorizing or requiring such Taxes to be levied, assessed or charged, which law or regulation in the opinion of counsel to Fannie Mae or any Related Trustee may prohibit Owner from paying the Taxes to or for Fannie Mae or such Related Trustee, Owner shall enter into such further instruments as may be permitted by law to obligate Owner to pay such Taxes. (s) FURTHER ASSURANCES. Owner, at the request of Fannie Mae, shall execute and deliver and, if necessary, file or record such statements, documents, agreements, UCC financing and continuation statements and such other instruments and take such further action as Fannie Mae from time to time may request as reasonably necessary, desirable or proper to carry out more effectively the purposes of this Agreement or any of the other Transaction Documents or to subject the Collateral to the lien and security interests of the Mortgage Documents or to evidence, perfect or otherwise implement, to assure the lien and security interests intended by the terms of the Transaction Documents or in order to exercise or enforce its rights under the Transaction Documents. In addition, Owner shall cooperate with each of the Rating Agencies in connection with any review of the transactions described in the Transaction Documents which may be undertaken by either of the Rating Agencies after the date of this Agreement. (t) MONITORING COMPLIANCE. Upon the request of Servicer, from time to time, and at any time certification of the matters set forth below is provided to the Issuer, the Related Trustee or any other Governmental Authority, Owner shall promptly provide to Servicer the following: (i) Owner's certification of each Bond Property's compliance with the rules qualifying such Bond Property for federal tax exemption pursuant to Section 103 of the Code and the regulations issued under such Section 103 and the requirements of the Regulatory Agreement with respect to such Bond Property; (ii) If any Property has received or receives a tax credit allocation, Owner's certification of such Property's compliance with the requirements of Section 42 of the Code and the regulations issued under Section 42 and if the tax credits have not yet been syndicated, Owner's report regarding progress in syndicating the tax credit allocation until the syndication is completed; (iii) Owner's certification of the Village Creek Project's compliance with the requirements of the Village Creek Regulatory Agreement; and (iv) Such other documents, certificates and other information as may be deemed reasonably necessary to enable Servicer to perform the functions under the Servicing Agreement. 43 (u) CONTINUING DISCLOSURE. Owner shall cooperate with the Issuers, the Related Trustees and Fannie Mae in complying with all federal securities laws relating to continuing disclosure that are applicable to the Bonds including, Rule 15c2-12, promulgated by the Securities and Exchange Commission under the Securities Exchange Related Act of 1934, as such rule may be amended from time to time. (v) LEASES. Each unit in each Property will be leased pursuant to the form lease delivered to, and acceptable to, Fannie Mae and Servicer, with no material modifications to such approved form lease, except as disclosed in writing to Fannie Mae and Servicer. SECTION 2.3 NEGATIVE COVENANTS OF OWNER. Owner enters into the covenants and agreements with Fannie Mae set forth in this section 2.3. Each covenant and agreement shall apply continuously during the term of this Agreement: (a) OTHER ACTIVITIES. Neither Owner nor General Partner shall: (i) either directly or indirectly sell, transfer, exchange or otherwise dispose of any of its assets except as permitted hereunder, by the Mortgages or the Cash Management Agreement; (ii) take any action or omit to take any action that, if taken or omitted, would adversely affect the exclusion of interest on the Bonds from gross income for Federal income tax purposes pursuant to Section 103 of the Code; (iii) engage in any business or activity other than in connection with (x) with respect to Owner, the ownership, management and operation of the Properties and (y) with respect to General Partner, the ownership, management and operation of Owner; (iv) amend the Owner Organizational Documents or the General Partner Organizational Documents, as the case may be, in any manner, without the prior written consent of Fannie Mae; (v) dissolve or liquidate in whole or in part; (vi) merge or consolidate with any Person; or (vii) use, or permit to be used, any Property for any uses or purposes other than as a Multifamily Residential Property. (b) NO AMENDMENTS TO TRANSACTION DOCUMENTS. Unless Fannie Mae shall otherwise consent in writing, Owner shall not agree to any amendment of, supplement to, or waiver, modification, or termination of, any of the terms or provisions of any Transaction 44 Document. Owner shall promptly give written notice to Fannie Mae of any such amendment, supplement, waiver, modification or termination. (c) COMPLIANCE WITH THE TRANSACTION DOCUMENTS. Owner shall not fail to comply with any provision of the Transaction Documents to which it is a party or by which it is bound. (d) VALUE OF SECURITY. Owner shall not take any action which could reasonably be expected to have any Material Adverse Effect. (e) ZONING. Owner shall not initiate or consent to any zoning reclassification of any Property or seek any variance under any zoning ordinance or use or permit the use of any Property in any manner that could result in the use becoming a nonconforming use under any zoning ordinance or any other applicable land use law, rule or regulation. (f) LIENS. Owner shall not create, incur, assume or suffer to exist any Lien on any Property or any part of any Property, except the Permitted Liens; (g) SALE. Owner shall not sell, convey, transfer, assign or otherwise relinquish any Property or any part of any Property without the prior written consent of Fannie Mae (which consent may be granted or withheld in Fannie Mae's discretion), or any interest in any Property, other than (i) as may be permitted by the Mortgage Documents with respect to such Property, or (ii) in accordance with the provisions of section 4.2 or section 4.3, or (iii) to enter into Leases for units in a Property to any tenant in the ordinary course of business. (h) USE OF PROCEEDS. The proceeds from the issuance and sale of the Bonds shall not be used for any purpose other than the refinancing of the Bond Properties through the refunding of the Existing Bond Issues. (i) PREPAYMENT OF A MORTGAGE LOAN. Notwithstanding anything to the contrary contained in the Transaction Documents, Owner shall not make a voluntary prepayment of any Mortgage Loan unless (i) Owner has complied with the terms and provisions of the Mortgage Note relating to prepayment, (ii) Owner has received the prior written consent of Fannie Mae; PROVIDED that Fannie Mae shall not withhold its consent unless Fannie Mae determines that all or any part of such prepayment by Owner is not permitted by the terms of any Related Mortgage Note or may be subject to avoidance or any other recovery or disgorgement pursuant to the Bankruptcy Code (including sections 544, 547, 549 or 550 thereof) or any other applicable bankruptcy or insolvency law, and (iii) with respect to the prepayment in part or in full of the Facility Amount prior to the tenth anniversary of the Facility, Fannie Mae has received a Prepayment Premium pursuant to the Related Mortgage Note. (j) INDEBTEDNESS. Owner shall not incur or be obligated at any time with respect to aggregate Indebtedness (other than the Mortgage Loans), in excess of $100,000.00. 45 (k) SINGLE-PURPOSE ENTITY. Neither Owner nor General Partner shall cease at any time during the term hereof to be a Single-Purpose entity. (l) PRINCIPAL PLACE OF BUSINESS. Owner shall not change its principal place of business or the location of its books and records, each as set forth in section 2.1(a), without first giving thirty (30) days' prior written notice to Fannie Mae. SECTION 2.4 CERTAIN COVENANTS WITH RESPECT TO BOND TRANSACTIONS. Owner agrees and covenants with Fannie Mae that, at all times during the term of this Agreement: (a) DEBT SERVICE FUND REQUIREMENT WITH RESPECT TO FIXED RATE BOND TRANSACTIONS. Owner shall deposit with the Related Trustee with respect to each issue of Related Bonds, on or before the date the Related Mortgage Note is executed and delivered, for deposit into the debt service fund with respect to each issue of Related Bonds, the initial funding requirement required by the Rating Agency for such issue of Related Bonds, which requirement shall not be less than one (1) month's payment of interest and principal on the Related Mortgage Note. (b) ASSIGNMENT OF MORTGAGE LOANS TO FANNIE MAE. With respect to each issue of Related Bonds, Owner acknowledges and agrees that Fannie Mae is the assignee of the all of the Issuer's right, title and interest in and to the Bond Property Loan Documents with respect to such issue of Related Bonds and as such, Fannie Mae shall be entitled to exercise all rights and receive all benefits available to the owner and holder of such Bond Property Loan Documents. Owner further acknowledges and agrees that Fannie Mae has delegated or may delegate certain matters and functions related to or arising under such Bond Property Loan Documents to Servicer, as an independent contractor, pursuant to the Servicing Agreement. SECTION 2.5 CERTAIN COVENANTS WITH RESPECT TO VILLAGE CREEK PROJECT. Owner agrees and covenants with Fannie Mae that, at all times during the term of this Agreement: (a) COMPLIANCE WITH REGULATORY AGREEMENT. Owner shall at all times comply in all material respects with all provisions of the Village Creek Regulatory Agreement, including, all applicable reporting requirements, and all rental limitations and restrictions. In addition, Owner shall immediately cure all past failures to comply with such Village Creek Regulatory Agreement. 46 (b) INDEMNIFICATION WITH RESPECT TO VILLAGE CREEK REGULATORY AGREEMENT. Owner hereby agrees to indemnify, hold harmless and defend Fannie Mae from and against, any and all claims, losses, liabilities (including penalties), actions, suits, judgments, demands, damages, costs, charges or expenses (including reasonable fees and expenses of attorneys, consultants and auditors and costs of investigation) and obligation whatsoever of any nature arising out of, relating to or in connection with the Village Creek Regulatory Agreement, including, any violation by Owner or any predecessor in interest to the Village Creek Project of any of the terms, conditions, requirements or restrictions of the Village Creek Regulatory Agreement. Notwithstanding any permitted transfer of the Village Creek Project to another Person or the release of the Village Creek Project from the lien of the Related Mortgage, Owner shall remain obligated to indemnify Fannie Mae pursuant to this section 2.5(b) with respect to acts occurring prior or subsequent to the date of permitted transfer of legal title to such Village Creek Project or release of such Village Creek Project from the lien of the Related Mortgage, as applicable (irrespective of when a claim is actually made). The indemnity provisions of this section 2.5(b) shall survive the termination of this Agreement and foreclosure or release of the Related Mortgage or other disposition of the Village Creek Project to the fullest extent permitted by law. (c) TERMINATION OF VILLAGE CREEK REGULATORY AGREEMENT. Notwithstanding anything herein to the contrary, on or before March 31, 1998 Owner shall cause the Village Creek Regulatory Agreement to be fully satisfied and discharged of record by obtaining appropriate release documentation from each party-in-interest to the Village Creek Regulatory Agreement and causing such release documentation to be recorded in the land records of Jefferson County, Colorado. Owner's satisfaction of the requirements of this section 2.5(c) shall be evidenced by Owner's delivery to Fannie Mae of an endorsement to Fannie Mae's title policy with respect to the Village Creek Project, in form and substance acceptable to Fannie Mae, confirming that the Village Creek Regulatory Agreement is no longer an exception to the title insurance provided thereunder. ARTICLE III. FEES AND EXPENSES; INDEMNIFICATION SECTION 3.1 FEES AND EXPENSES. Owner hereby agrees absolutely and unconditionally to pay, or cause to be paid, to Fannie Mae or Servicer, as the case may be, the following: (a) any and all reasonable fees, costs, charges and expenses (including the reasonable fees and expenses of attorneys, accountants and other experts) which Fannie Mae or Servicer may pay or incur in connection with any payment under any Related Fannie Mae Pass-Through Certificate, including payments of any fees and charges in connection with any accounts established to facilitate payments under any Related Fannie Mae Pass-Through Certificate, or 47 the performance of Fannie Mae's obligations under any Related Fannie Mae Pass-Through Certificate; (b) the amount of any fees, costs, or charges or expenses (including the reasonable fees and expenses of attorneys, accountants and other experts) incurred by Fannie Mae or Servicer in connection with the administration or enforcement of, or preservation of rights or remedies under, this Agreement or any of the other Transaction Documents or in connection with the foreclosure upon, sale of or other disposition of any security granted pursuant to the Transaction Documents; (c) any and all reasonable fees, costs, charges and expenses (including the reasonable fees and expenses of attorneys, accountants and other experts) incurred by Fannie Mae or Servicer in connection with the disbursement or application of insurance or condemnation awards, proceeds, payments or damages to the costs of restoration and repair of any Property; (d) any payments or advances made by Fannie Mae or Servicer on behalf of Owner pursuant to any of the Transaction Documents; (e) all reasonable expenses incurred in connection with or related to the execution and delivery of the Related Fannie Mae Pass-Through Certificates, the sale of the Bonds or the Obligations and the preparation and review of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby, including fees payable to any agencies rating the Bonds or the Obligations from which ratings were requested and received, any tax or governmental charge imposed in connection with the execution and delivery of the Related Fannie Mae Pass-Through Certificates and the reasonable fees and disbursements of Fannie Mae's and Servicer's counsel and accountants, including fees and expenses relating to any (i) amendments, consents or waivers to this Agreement or any of the other Transaction Documents (whether or not any such amendments, consents or waivers are entered into), (ii) requests to evaluate any substitute or additional collateral or (iii) proposed or actual release or substitution of a Property; and (f) all documentary stamp, recording, transfer, mortgage, intangible or filing or other taxes or fees and any and all liabilities with respect to, or resulting therefrom 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 or filing of record, recordation, release or discharge of, this Agreement, the Mortgages, or any other Transaction Document. All amounts to be paid pursuant to clauses (a) through (f) of this section 3.1 shall be due and payable in accordance with section 3.2. 48 SECTION 3.2 PAYMENT OF FEES AND EXPENSES. (a) BOND FEES. Owner shall pay, or cause to be paid, when due, the ONGOING fees and expenses of the Issuer, the Related Trustee and any rebate analyst (collectively, the "BOND FEES") with respect to each issue of Related Bonds to the extent that such fees or expenses have not been included as part of the Mortgage Note Rate under the Related Mortgage Note. Such Bond Fees shall be paid by Owner in accordance with the terms of the Related Bond Documents. (b) PAYMENT. All fees, costs and expenses incurred from time to time in accordance with section 3.1 or section 3.2(a) above, in connection with the Bonds or the Mortgage Loans (excluding those fees which are included in the Mortgage Note Rate of each Related Mortgage Note), or related to any other matter contemplated in this Agreement or in any other Transaction Document, shall be paid when due by Owner separate and apart from payments due under the Mortgage Loan and shall not be included in the Mortgage Note Rate of each Related Mortgage Note. Fannie Mae shall not have (x) any liability, responsibility or accountability for the payment, remittance or handling of any such fees, costs or expenses, or (y) any obligation under any Related Fannie Mae Pass-Through Certificate or otherwise to pay any such fees, costs or expenses; PROVIDED, HOWEVER, that Fannie Mae shall have the right, but not the obligation, to pay any fees, costs or expenses on behalf of Owner if Owner fails to pay any such fees, costs or expenses when due. Any fees, costs or expenses paid by Fannie Mae (a "Reimbursable Advance") shall be due and payable upon demand and shall accrue interest at the Reimbursable Advance Rate until paid in full by Owner. (c) PREPAYMENT PREMIUM. Owner agrees to pay the Prepayment Premium pursuant to each Related Mortgage Note whether prepayment of the Related Mortgage Note is voluntary or involuntary (in connection with acceleration of the unpaid principal balance of a Related Mortgage Note) or the Related Mortgage is satisfied or released by foreclosure (whether by power of sale or judicial proceeding) and in lieu of foreclosure or by any other means. SECTION 3.3 GUARANTY FEE; OLYMPIAD PROJECT STAND-BY FEE: EDEN CROSSING PROJECT STAND-BY FEE. (a) GUARANTY FEE. In addition to any other fees and amounts payable to Fannie Mae under this Agreement or the other Transaction Documents, Owner shall, in consideration of Fannie Mae's providing the Related Fannie Mae Pass-Through Certificates with respect to each issue of Related Bonds and so long as the Related Fannie Mae Pass-Through Certificates shall remain in effect, be responsible for paying to Servicer, for remittance to Fannie Mae, a guaranty fee, which shall be included in the actual fixed rate of interest set forth in and payable under the Related Mortgage Note as set forth on Exhibit A. (b) OLYMPIAD PROJECT STAND-BY FEE. In addition to any other fees and amounts payable to Fannie Mae under this Agreement or the other Transaction Documents, Owner shall, in consideration of Fannie Mae's agreement to provide the Olympiad Credit 49 Enhancement, pay to Servicer, for remittance to Fannie Mae, a stand-by credit enhancement fee, which shall be equal to $446 per month (the "OLYMPIAD STAND-BY FEE"). The Olympiad StandBy Fee shall be payable monthly, on the first Business Day of each calendar month from and including August 1, 1996 to the earlier to occur of (i) the Olympiad Refunding Closing Date or (ii) the Olympiad Commitment Termination Date. (c) EDEN CROSSING PROJECT STAND-BY FEE. In addition to any other fees and amounts payable to Fannie Mae under this Agreement or the other Transaction Documents, Owner shall, in consideration of Fannie Mae's agreement to provide the Eden Crossing Credit Enhancement, pay to Servicer, for remittance to Fannie Mae, a stand-by credit enhancement fee, which shall be equal to $500.00 per month (the "EDEN CROSSING STAND-BY FEE"). The Eden Crossing Stand-By Fee shall be payable monthly in arrears, on the first Business Day of each calendar month from and including September 1, 1996 to the earlier to occur of (i) the Eden Crossing Closing Date, (ii) closing of the Eden Closing Substitution Transaction, or (iii) the Eden Crossing Commitment Termination Date. SECTION 3.4 INDEMNIFICATION. (a) INDEMNIFICATION. Owner hereby releases Fannie Mae, Servicer and their respective officers, directors, members, shareholders, officials, agents, independent contractors and employees and each of them and each Person, if any, who controls Fannie Mae or Servicer within the meaning of either Section 15 of the Securities Act of 1933, as amended, or Section 20 of the Securities Exchange Act of 1934, as amended (each an "INDEMNIFIED PARTY"), from, and covenants and agrees to indemnify, hold harmless and defend each such indemnified party from and against, any and all claims, losses, liabilities (including penalties), actions, suits, judgments, demands, damages, costs, charges or expenses (including reasonable fees and expenses of attorneys, consultants and auditors and costs of investigation) and obligations whatsoever (herein collectively referred to as "LIABILITIES") of any nature arising out of, relating to or in connection with: (i) the transactions provided for in this Agreement or the other Transaction Documents or otherwise in connection with any Property, the Bonds, the Mortgage Loans or the execution or amendment of any document relating thereto; (ii) the approval of the refinancing of the Bond Properties or the making of the Mortgage Loans; (iii) any act or omission of Owner or any of its Affiliates, agents, servants, employees or licensees, in connection with the Mortgage Loans, the Properties, this Agreement or the other Transaction Documents; (iv) the issuance and sale, resale or remarketing of any Bonds or any certifications or representations made by any person (other than any Issuer or the party seeking indemnification in connection therewith), including, (A) any untrue statement or alleged untrue statement of a material fact contained in any offering documents relating to any of the Bonds or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or (B) the violation by Owner of any Federal, state or local securities or real estate laws, rules or regulations in connection with the issuance, offer and sale of any of the Bonds; (v) the operations of any Property, or the conditions, occupancy, use, possession, conduct or management of work done in or about, or from the planning, design, acquisition, installation or 50 construction of any Property, or any part of any Property; (vi) the exercise by Fannie Mae or Servicer of their respective powers or duties under this Agreement or any other Transaction Document; (vii) any Related Trustee's acceptance or administration of the trusts created by the Related Indenture and the exercise of its powers or duties thereunder, and under any Regulatory Agreement or any other agreements in connection therewith to which it is a party; (viii) errors, omissions, interruptions, losses or delays in transmission or delivery of any messages by mail, cable, telegraph, telex, telephone or otherwise; (ix) any other circumstances whatsoever in making or failing to make payment under any Related Fannie Mae Pass-Through Certificate; and (x) all reasonable costs, counsel fees, expenses or liabilities incurred in connection with any such claim or proceeding referred to in clauses (i) through (ix) above; PROVIDED, HOWEVER, that the foregoing indemnification shall not be effective to the extent such Liabilities are caused by the gross negligence or willful misconduct of an indemnified party. Neither Fannie Mae nor Servicer shall have any liability to Owner or to any other person as a result of any reduction of the credit rating of any of the Bonds or any deterioration of Fannie Mae's financial condition, nor shall any such reduction or deterioration reduce or diminish in any respect Owner's obligations under this Agreement. In the event that any action or proceeding is brought against any indemnified party with respect to which indemnity may be sought hereunder, Owner, upon written notice from the indemnified party, shall assume the investigation and defense thereof, including the employment of counsel selected by Owner, but acceptable to the indemnified party, and shall assume the payment of all expenses related thereto, with full power to litigate, compromise or settle the same in its discretion, PROVIDED that if such settlement or compromise shall contain or infer an admission regarding, or relating in any way to, any indemnified party, such indemnified party shall have the right to review and approve or disapprove any such compromise or settlement. Each indemnified party shall have the right, if such indemnified party shall conclude in good faith that a conflict of interest exists, to employ separate counsel in any such action or proceeding and participate in the investigation and defense thereof, and Owner shall pay the reasonable fees and expenses of such separate counsel. If separate counsel are employed as described above, Owner and any such indemnified party agree to cooperate as may reasonably be required in order to ensure the proper and adequate defense of any such action, suit or proceeding, including making available to each other, and their counsel and accountants, all books and records relating to such action, suit or proceeding. If any such counsel determines that the rendering of such assistance will adversely affect the defense or interests of its client, such counsel shall not be required to comply with the terms of the immediately preceding sentence. Notwithstanding any permitted transfer of any Property to another Person or the release of any Property from the lien of any Mortgage, Owner shall remain obligated to indemnify each indemnified party pursuant to this section 3.4 with respect to acts occurring prior to the date of permitted transfer of legal title to such Property or release of such Property from the lien of any Mortgage, as applicable (irrespective of when a claim is actually made). (b) SURVIVAL. The indemnity provisions of this section 3.4 shall survive the termination of this Agreement and foreclosure or release of the Mortgages or other disposition of the Properties to the fullest extent permitted by law. 51 SECTION 3.5 LIABILITY OF OWNER. The obligations of Owner under this Agreement shall be absolute, unconditional and irrevocable and shall be paid and performed strictly in accordance with the terms of this Agreement under all circumstances whatsoever, including the following circumstances: (a) any invalidity or unenforceability of this Agreement or any of the other Transaction Documents or any other agreement or instrument related to the Transaction Documents; (b) any amendment or waiver of, or any consent to or departure from, the terms of this Agreement, any Related Fannie Mae Pass-Through Certificate, any of the other Transaction Documents, or any other agreement or instrument related to the Transaction Documents, any extensions of time or other modifications of the terms and conditions for any act to be performed in connection with this Agreement, any Related Fannie Mae Pass-Through Certificate or any of the other Transaction Documents, other than any amendment, waiver, consent, extension or modification entered into in strict accordance with the terms of this Agreement; (c) the existence of any claim, set-off, defense or other right which Owner may have at any time against any Issuer, any Related Trustee, Fannie Mae, Servicer or any other Person, whether in connection with this Agreement, any of the other Transaction Documents, any Property, or any unrelated transaction; (d) the surrender or impairment of any security for the performance or observance of any of the agreements or terms of this Agreement or the other Transaction Documents; (e) defect in title to any Property, any acts or circumstances that may constitute failure of consideration, destruction of, damage to or condemnation of any Property, commercial frustration of purpose, or any change in the tax or other laws of the United States of America or of the State or any political subdivision of either; (f) the breach by any Issuer, any Related Trustee, Servicer, Fannie Mae or any other Person of its obligations under any Transaction Document or (g) any other circumstance, happening or omission whatsoever. SECTION 3.6 FANNIE MAE AND SERVICER NOT LIABLE. Neither Fannie Mae, Servicer nor any of their officials, officers, directors, members, shareholders, agents, independent contractors or employees shall be responsible for or liable to Owner, its Affiliates or any of Owner's or its Affiliates' members, partners, Affiliates, independent contractors or employees for (i) any act or omission of Fannie Mae, Servicer or any other Person made in good faith with respect to the validity, sufficiency, accuracy or genuineness of documents, or of any endorsement(s) thereon (except for documents and endorsements provided by Fannie Mae or Servicer, as applicable), even if such documents should in fact prove to be in any or all respects invalid, insufficient, fraudulent or forged, (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any Related Fannie Mae Pass-Through Certificate or the rights or benefits under any Related Fannie Mae Pass-Through Certificate or proceeds under any Related Fannie Mae Pass-Through Certificate, in whole or in part, that may prove to be invalid or ineffective for any reason, (iii) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex, telecopier or otherwise; (iv) any consequences arising from causes beyond the control of Fannie Mae. In furtherance and not in limitation of the foregoing, Fannie Mae or Servicer may accept documents that appear on their face to be valid 52 and in order, without any responsibility for further investigation. None of the above shall affect, impair, or prevent the vesting of rights or powers of Fannie Mae or Servicer under this Agreement. In furtherance and extension and not in limitation of the specific provision set forth above, any action taken or omitted by Fannie Mae under or in connection with any Transaction Document or any related certificates or other documents, if taken or omitted in good faith, shall be binding upon Owner, the Related Trustee and the Issuer and shall not put Fannie Mae under any resulting liability to any of them. SECTION 3.7 WAIVERS AND CONSENTS. OWNER AGREES TO BE BOUND BY THIS AGREEMENT AND TO THE EXTENT PERMITTED BY LAW, (A) WAIVES AND RENOUNCES ANY AND ALL REDEMPTION AND EXEMPTION RIGHTS AND THE BENEFIT OF ALL VALUATION AND APPRAISAL PRIVILEGES AGAINST THE INDEBTEDNESS AND OBLIGATIONS EVIDENCED BY THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS OR BY ANY EXTENSION OR RENEWAL OF THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS; (B) WAIVES PRESENTMENT AND DEMAND FOR PAYMENT, NOTICES OF NONPAYMENT AND OF DISHONOR, PROTEST OF DISHONOR AND NOTICE OF PROTEST; (C) WAIVES ALL NOTICES IN CONNECTION WITH THE DELIVERY AND ACCEPTANCE OF THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS AND ALL OTHER NOTICES IN CONNECTION WITH THE PERFORMANCE, DEFAULT OR ENFORCEMENT OF THE PAYMENT OF ANY OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS EXCEPT AS REQUIRED BY THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS; (D) AGREES THAT ITS LIABILITIES UNDER THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS SHALL BE UNCONDITIONAL AND WITHOUT REGARD TO THE LIABILITY OF ANY OTHER PERSON; AND (E) AGREES THAT ANY CONSENT, WAIVER OR FORBEARANCE UNDER THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS WITH RESPECT TO AN EVENT SHALL OPERATE ONLY FOR SUCH EVENT AND NOT FOR ANY SUBSEQUENT EVENT. SECTION 3.8 APPLICATION OF PAYMENTS. Payments made by Owner in respect of the Obligations shall be applied in the manner provided in the Mortgage Documents. SECTION 3.9 PLEDGE OF RIGHTS TO CERTAIN FUNDS AND INVESTMENTS. To secure Owner's obligations under this Agreement, to the extent, if any, that Owner retains an interest in and to all funds and accounts and investments of funds and accounts now or hereafter held by: (a) the Related Trustees under the Related Indentures as security for the payment of the Bonds, and any and all loan funds, escrow funds, revenue funds, debt service funds, reserve funds, redemption funds and other funds and securities and other instruments 53 comprising investments of any of the foregoing and interest and other income derived from any of the foregoing held as security for the payment of the Bonds, Owner hereby pledges and assigns to Fannie Mae and grants to Fannie Mae a security interest in such funds, accounts, and investments (which pledge, assignment and grant shall be subject only to the rights of each Related Trustee under the Related Indenture); and (b) Servicer with respect to payments payable under any of the Transaction Documents including the Replacement Reserve Accounts and any and all escrow funds, completion repair funds and other funds, and my securities and other instruments comprising investments of any of the foregoing and interest income and other proceeds derived from any of the foregoing, Owner hereby pledges and assigns to Fannie Mae and grants to Fannie Mae a security interest in such funds, accounts and instruments. Owner covenants and agrees that it will defend Fannie Mae's rights and security interests created by this section 3.9 against the claims and demands of all Persons. In addition to its other rights and remedies under this Agreement and the other Transaction Documents, Fannie Mae shall have all the rights and remedies of a secured party under the Uniform Commercial Code or other applicable law with respect to the security interests created by this section 3.9, subject only to the rights of the Related Trustees under the Related Indentures. Fannie Mae's rights under this section 3.9 are in addition to, and not in lieu of, its rights and remedies described elsewhere in this Agreement. Notwithstanding the foregoing, Owner and Fannie Mae acknowledge and agree that any cash collateral held as of the Fannie Mae Facility Closing Date by or on behalf of Sumitomo Trust and Banking Company Limited in connection with the Existing Bond Issues shall be excluded from the grants, pledges and assignments provided in this section 3.9. SECTION 3.10 CASH COLLATERAL. In addition to the pledge and security interest granted to Fannie Mae by Owner pursuant to section 3.9, as separate and additional security for Owner's obligations under this Agreement, Owner shall pledge and assign to Fannie Mae, and grant to Fannie Mae a first priority security interest in, all of Owner's right, title and interest in and to each Property Account, the Central Account and the Cash Collateral by executing and delivering to Fannie Mae the Cash Management Agreement on the Fannie Mae Facility Closing Date. Owner covenants and agrees that it will defend Fannie Mae's rights and security interest created by this section 3.10 and the Cash Management Agreement against the claims and demands of all Persons. The Property Accounts, the Central Account and the Cash Collateral shall be pledged, assigned, secured, maintained, invested and disposed of pursuant to the Cash Management Agreement. SECTION 3.11 NONRECOURSE OBLIGATIONS. (a) NON-RECOURSE LIABILITY. Subject to the provisions of subsections 3.11(b) and 3.11(c) and notwithstanding any other provision in the Related Mortgage Notes, the Mortgages or any other Transaction Document, the personal liability of Owner, General Partner, each Guarantor and their respective affiliates, shareholders, members, partners, officers, director's and employees to pay the principal and interest on the debt evidenced by the Related Mortgage Notes and to perform the other Obligations shall be limited to (i) the real and personal property described as "Property" in the Mortgages, (ii) the personal property described in and 54 pledged under any other Mortgage Document, (iii) the rents, profits, issues, products and income of the Properties received or collected by or on behalf of Owner (the "RENTS AND PROFITS") to the extent such receipts are necessary, first, to pay the Operating Expenses then due and payable as of the time of receipt of such Rents and Profits, and then, to pay principal and interest due under the Related Mortgage Notes, any other sums due under the Mortgages or any other Mortgage Document and any other Obligations then due and owning to Fannie Mae under this Agreement, except to the extent that Owner did not have the legal right, because of a bankruptcy, receivership or similar judicial proceeding, to direct the disbursement of such sums. Except as provided in sections 3.11(b) and (c), Fannie Mae shall not seek (A) any judgment for a deficiency against Owner, General Partner or any Guarantor, or Owner's, General Partner's or any Guarantor's heirs, legal representatives, successors or assigns, in any action to enforce any right or remedy under any of the Related Mortgage Notes, the Mortgages, this Agreement or any other Transaction Document, or (B) any judgment on any of the Related Mortgage Notes or the Obligations except as may be necessary in any action brought under any of the Mortgages to enforce the lien against the Property encumbered thereby or to exercise any remedies under any other Mortgage Documents. (b) EXCEPTIONS TO NON-RECOURSE LIABILITY. If, without obtaining Fannie Mae's prior written consent, (i) a "Transfer" shall occur which, pursuant to Uniform Covenant 19 of the any of the Mortgages, gives Fannie Mae the right, at its option, to declare all sums secured by any such Mortgage immediately due and payable, (ii) Owner shall voluntarily encumber or permit the encumbrance of any Property with the lien of any "Subordinate Instrument" (as defined in the Related Mortgage with respect to such Property) in connection with any financing by Owner, or (iii) Owner shall fail to remain a Single-Purpose entity or to comply with any of the provisions of subsection 2.3(a)(iii) or 2.3(a)(iv), any of such events shall constitute an Event of Default hereunder and under the Mortgage Documents, and if such Event of Default shall continue for thirty (30) days then, from and after the date that is thirty (30) days after such event, (x) section 3.11(a) shall not apply, and (y) Owner, General Partner and each Guarantor shall be personally liable on a joint and several basis for full recourse liability under the Related Mortgage Notes, this Agreement and the other Mortgage Documents. Notwithstanding the foregoing, with respect to clause (iii) above, the thirty (30) day period referenced in the preceding sentence shall commence upon Owner's receipt of notice of Owner's failure to remain a Single-Purpose entity or to comply with any of the provisions of such subsections 2.3(a)(iii) or 2.3(a)(iv). (c) EXCEPTIONS TO EXCULPATION. Notwithstanding section 3.11(a), Owner, General Partner and each Guarantor shall be personally liable on a joint and several basis in the amount of any loss, damage or cost (including reasonable attorneys' fees and expenses) resulting from (1) fraud or material misrepresentation by Owner, General Partner or any Guarantor, or Owner's, General Partner's or any Guarantor's agents or employees, in connection with obtaining the Mortgage Loans evidenced by the Related Mortgage Notes, obtaining the credit enhancement evidenced by the Related Fannie Mae Pass-Through Certificates, or in complying with any of Owner's Obligations, (2) Insurance Proceeds, Condemnation Proceeds, security deposits from tenants and other sums or payments received by or on behalf of Owner in its 55 capacity as owner of the Properties and not applied in accordance with the provisions of the Mortgages (except to the extent that Owner did not have the legal right, because of a bankruptcy, receivership or similar judicial proceeding, to direct disbursement of such sums or payments), (3) all Rents and Profits (except to the extent that Owner did not have the legal right, because of a bankruptcy, receivership or similar judicial proceeding, to direct the disbursement of such sums) received by or on behalf of Owner in its capacity as owner of the Properties and not applied first (a) to the payment of the Operating Expenses as such Operating Expenses become due and payable, and then (b) to the payment of principal and interest due under the Related Mortgage Notes, any other sums due under the Mortgages or any other Mortgage Document and any other Obligations then due and owning to Fannie Mae under this Agreement, (4) Owner's failure to deposit all Gross Cash Flow into the Property Accounts as required in accordance with the Cash Management Agreement (except to the extent that Owner did not have the legal right because of a bankruptcy, receivership or similar judicial proceeding to deposit such sums), (5) Owner's failure following an Event of Default to deliver to Fannie Mae on demand all Rents and Profits and security deposits (except to the extent that Owner did not have the legal right because of a bankruptcy, receivership or similar judicial proceeding to direct disbursement of such sums), (6) Owner's failure following an Event of Default to deliver to Fannie Mae on demand all books and records relating to the Properties, (7) Owner's indemnification obligations set forth in section 3.4(a) and in section 2.5(b), or (8) or relating to Hazardous Material or compliance with Hazardous Materials Laws to the full extent of any losses or damages (including those resulting from diminution in value of any Property) incurred by Fannie Mae as a result of the existence of such Hazardous Material or failure to comply with Hazardous Materials Laws or the obligations of Owner with respect to Hazardous Materials as set forth in the Mortgages. Notwithstanding the foregoing, Owner, General Partner and each Guarantor shall have no liability for Rents and Profits which were distributed in any fiscal year, provided that Owner paid all of the Operating Expenses, all amounts due under the Related Mortgage Notes, this Agreement, the Mortgages, and the other Transaction Documents and all other debt service relating to the Properties and Owner for that fiscal year. (d) NO IMPAIRMENT OF CERTAIN RIGHTS. No provision of this section 3.11 shall (i) affect any guaranty or similar agreement executed in connection with the debt evidenced by the Related Mortgage Notes or otherwise in connection with the Obligations, (ii) release or reduce the Obligations or the debt evidenced by the Related Mortgage Notes, (iii) impair the right of Fannie Mae to enforce the provisions of paragraph 6 of the portion of each Mortgage identified as the "Multifamily Instrument", (iv) impair the lien of any Mortgage, (v) impair the right of Fannie Mae to enforce the provisions of the Cash Management Agreement, any Replacement Reserve Agreement, the Assignment of Management Agreement, or any other agreement defined as an "Ancillary Collateral Agreement" in any Mortgage or (vi) limit Owner's obligation to pay documentary stamp, recording, transfer, mortgage, intangible, filing or other taxes or fees and other liabilities payable by Owner pursuant to section 3.1(f). 56 ARTICLE IV. ALLOCABLE FACILITY AMOUNTS; SUBSTITUTION, RELEASE, AND ADDITION OF PROPERTIES SECTION 4.1 ALLOCABLE FACILITY AMOUNT: FACILITY REDUCTION CREDITS. (a) ALLOCABLE FACILITY AMOUNT. Fannie Mae shall determine the Allocable Facility Amount for each Property on or before each annual Determination Date, commencing with the Determination Date in 1997. The Allocable Facility Amount, once determined by Fannie Mae as aforesaid, shall remain in effect until the next Determination Date, unless sooner modified in connection with the addition of a New Property pursuant to section 4.4. As of the Fannie Mae Facility Closing Date, the Allocable Facility Amount of each Property is as set forth on Exhibit H attached hereto. (b) FACILITY REDUCTION CREDITS. Upon a Release of any Bond Property pursuant to section 4.3 or the Permitted Transfer of a Bond Property pursuant to section 4.5, Owner shall receive a credit (a "FACILITY REDUCTION CREDIT") equal to the amount, if any, by which (i) the Facility Amount of such Bond Property at the time of such release or Permitted Transfer, EXCEEDS (ii) the Required Facility Reduction. Such Facility Reduction Credit may be used by Owner in satisfaction of the Required Facility Reduction in connection with the subsequent release of an Additional Property pursuant to section 4.3. SECTION 4.2 SUBSTITUTION OF ADDITIONAL MORTGAGED PROPERTIES. An Additional Mortgaged Property may be released from the lien of a Mortgage and a New Additional Property substituted therefor if each of the following conditions are met: (a) The New Additional Property has a Value equal to or greater than the product of 125% (the "SUBSTITUTION PERCENTAGE") multiplied by the Minimum Substitute Property Value of the Released Property; (b) The New Additional Property has Net Operating Income (as determined by Fannie Mae in its discretion) for the 12 month period ending within 60 days of the date this test is applied, equal to or greater than the Net Operating Income (as determined by Fannie Mae in its discretion) of the Additional Mortgaged Property being released from the lien for the corresponding 12 month period multiplied by the Substitution Percentage; (c) No Event of Default or Potential Event of Default shall have occurred and be continuing; (d) Owner shall cause the Released Property to be immediately conveyed by Owner to AIMCO OP, or such other purchaser as Owner may otherwise determine; 57 (e) The New Additional Property meets all of Fannie Mae's then applicable underwriting criteria for new loans secured by Multifamily Residential Property; (f) All documentation relating to the foregoing is acceptable to Fannie Mae in its discretion in all respects, including legal opinions, title insurance, Security Instruments, Replacement Reserve Agreements, assignments and any amendments to this Agreement or the other Transaction Documents; and (g) With respect to each proposed New Additional Property, Owner shall pay Fannie Mae and Servicer a due diligence fee plus all costs and expenses (including legal fees and expenses) reasonably incurred by Fannie Mae or Servicer in connection with the foregoing. Such amounts shall be paid by Owner promptly upon receipt of invoices therefor, and shall be payable regardless of whether the property substitution does or does not (for any reason) ultimately occur. SECTION 4.3 RELEASE OF PROPERTIES. A Property may be released from the lien of a Mortgage without another Multifamily Residential Property being substituted therefor if each of the following conditions are met: (a) Owner shall either redeem or otherwise remove Bonds from the Fannie Mae Credit Facility and/or post cash collateral in a manner acceptable to Fannie Mae in its discretion, in either case in an amount equal to 110% of the Allocable Facility Amount of the Released Property (the "REQUIRED FACILITY REDUCTION"); the following shall be credited toward such Required Facility Reduction: (i) if the Released Property is a Bond Property, the amount of Bonds outstanding with respect to such Bond Property immediately prior to such release (provided, that, the requirements of section 4.3(c) have been satisfied), plus (ii) the amount of any other Bonds redeemed by Owner to obtain such release, plus (iii) the amount of any cash collateral ("FACILITY REDUCTION CASH COLLATERAL") that has been deemed acceptable by Fannie Mae and posted by Owner to obtain such release, plus (iv) if the Released Property is an Additional Property, the amount of any Facility Reduction Credit that Owner authorizes and instructs Fannie Mae to apply to such Required Facility Reduction; (b) No Event of Default or Potential Event of Default shall have occurred and be continuing; (c) If the Released Property is a Bond Property, then the Related Fannie Mae Pass-Through Certificate shall terminate on or before the date the Released Property is released from the lien of any Related Mortgage; (d) Owner shall cause the Released Property to be immediately conveyed by Owner to AIMCO OP or such other purchaser as Owner may determine; 58 (e) All documentation relating to the foregoing is acceptable to Fannie Mae in all respects, including legal opinions, release documentation and any amendments to this Agreement or the other Transaction Documents; and (f) Owner shall pay, with respect to each Released Property, to Fannie Mae and Servicer, a due diligence fee plus all costs and expenses (including legal fees and expenses) reasonably incurred by Fannie Mae or Servicer in connection with the foregoing. Such amounts shall be paid by Owner promptly upon receipt of invoices therefor, and shall be payable regardless of whether the property is or is not (for any reason) ultimately released from the lien of a Mortgage. SECTION 4.4 ADDITION OF NEW PROPERTIES TO THE CREDIT FACILITY. (a) At the request of Owner and Servicer, Fannie Mae may, from time to time, consent to the addition of a New Bond Property (and to the extent required to meet the underwriting requirements established by Fannie Mae with respect to the addition of a New Bond Property, a New Additional Property) to the Fannie Mae Credit Facility; PROVIDED, HOWEVER, that: (i) such consent may be granted or withheld by Fannie Mae in its discretion; (ii) the underwriting with respect to each such New Property shall be conducted by Servicer and reviewed by Fannie Mae and shall take into account all facts and circumstances deemed relevant by Servicer and Fannie Mae in their discretion; (iii) the terms and conditions relating to the addition of such New Property shall be determined by Servicer and Fannie Mae in their discretion; (iv) all documentation deemed necessary by Servicer or Fannie Mae for the addition of such New Property shall be fully executed and delivered by each party thereto and shall be in form and substance acceptable to Servicer and Fannie Mae in their discretion; (v) any loan made in conjunction with the addition of a new Bond Property or a New Additional Property must be originated by an independent third-party lender or issuer and otherwise comply with the other Fannie Mae Charter Act requirements for multifamily loans; and (vi) Owner shall pay or cause to be paid all fees, costs, charges and expenses (including the fees and expenses of attorneys, accountants and other experts) incurred by or on behalf of Fannie Mae or Servicer in connection with the addition of such New Property in accordance with section 3.1. 59 (b) The addition of any New Bond Property and any New Additional Property to the Credit Facility shall become effective only upon satisfaction of all requirements in section 4.4(a) and Fannie Mae's execution and delivery to Owner of a Confirmation of Addition of New Property, substantially in the form of Exhibit E attached hereto (a "NEW PROPERTY CONFIRMATION"), which New Property Confirmation shall specify whether such New Property is a New Bond Property or a New Additional Property. Upon the execution and delivery of the New Property Confirmation in accordance with this section 4.4, this Agreement shall be automatically deemed amended and supplemented to incorporate the terms and provisions of such New Property Confirmation including any provisions, (i) specifying whether the New Property is a New Bond Property or a New Additional Property is a New Bond Property or a New Additional Property, (ii) specifying the amendment and restatement of any of the Exhibits to this Agreement and (iii) modifying the Allocable Facility Amount of all or any of the Properties. SECTION 4.5 CERTAIN PERMITTED TRANSFERS OF PROPERTIES. (a) CONDITIONS TO PERMITTED TRANSFERS. At the request of Owner, Fannie Mae shall, from time to time, consent to Owner's sale and transfer of a Bond Property subject to Fannie Mae credit enhancement (a "PROPOSED TRANSFER") to an independent third-party purchaser if Fannie Mae determines that each of the following conditions have been satisfied in full: (i) no Event of Default or Potential Event of Default shall have occurred and be continuing either immediately before or immediately after giving effect to the Proposed Transfer; (ii) at the time of such Proposed Transfer, Fannie Mae continues to provide credit enhancement with respect to new bond transactions similar to the Related Bonds, pursuant to guaranteed mortgage pass-through certificates similar to the Related Fannie Mae Pass-Through Certificate and the provision of such credit enhancement continues to be permitted under the Fannie Mae Charter Act; (iii) Owner shall either redeem or otherwise remove Bonds from the Fannie Mae Credit Facility and/or post cash collateral in a manner acceptable to Fannie Mae, in either case in an amount equal to the Required Facility Reduction with respect to the Bond Property that is proposed to be transferred; the following shall be credited toward such Required Facility Reduction: (1) the amount of the Related Bonds outstanding immediately prior to the Proposed Transfer, PLUS (2) the amount of any other Bonds redeemed by Owner to obtain approval of the Proposed Transfer, PLUS (3) the amount of any Facility Reduction Cash Collateral posted by Owner to obtain approval for the Proposed Transfer; (iv) the proposed transferee shall be a Single-Purpose entity, shall not be an Affiliate of Owner, General Partner or any Guarantor and meets the eligibility, credit, management and otherwise satisfies the then applicable underwriting standards 60 customarily applied by Fannie Mae for approval of new borrowers (the "PROPOSED TRANSFEREE"); (v) Owner causes to be submitted to Fannie Mae all information required by Fannie Mae to evaluate the Proposed Transferee and the Bond Property proposed to be transferred as if a new loan were being made to the Proposed Transferee and secured by the Bond Property proposed to be transferred; (vi) at the time of such Proposed Transfer, the Bond Property proposed to be transferred shall be subject to re-underwriting in accordance with Fannie Mae's then applicable standards (including satisfaction of loan to value ratio requirements, debt service coverage ratio requirements, physical maintenance requirements, replacement reserve requirements and all other applicable conditions, requirements and limitations) customarily applied by Fannie Mae for approval of new loans secured by liens on new Multifamily Residential Properties and such re-underwriting shall be conducted by or on behalf of Servicer and Fannie Mae taking into account all facts and circumstances deemed relevant by Servicer and Fannie Mae; (vii) the Proposed Transferee shall: (1) assume all of the obligations of Owner under and with respect to the Related Bonds, the other Related Bond Documents, the Bond Property Loan Documents with respect to such Bond Property and the related Fannie Mae credit enhancement pursuant to documentation in form and substance acceptable to Fannie Mae; (2) enter into a reimbursement agreement and such other documentation deemed necessary by Fannie Mae to evidence and secure its reimbursement and other obligations to Fannie Mae; (3) agree to credit enhancement pricing that shall be determined by Fannie Mae; and (4) amend, modify, supplement or amend and restate the Related Bond Documents and the Bond Property Loan Documents with respect to such Bond Property, all as deemed necessary by Fannie Mae; (viii) Owner shall have obtained the consent of the Issuer with respect to the Related Bonds, the Related Trustee and each other party to the Related Bond Documents and the Bond Property Loan Documents that is required under the terms of such documents to consent to a transfer of the Bond Property; (ix) all documentation relating to the foregoing shall be acceptable to Fannie Mae in all respects, including legal opinions, release documentation and any amendments to this Agreement or the other Transaction Documents; (x) Owner or the Permitted Transferee shall have paid to Fannie Mae it customary transfer and assumption fees consisting of a $3000 non-refundable application fee and, upon completion of the Proposed Transfer transaction, a transfer fee equal to one percent (1%) of the Allocable Facility Amount of the Bond Property that is proposed to be transferred. In addition, Owner shall have paid to Fannie Mae and Servicer, customary due diligence fees plus all out-of-pocket costs and expenses (including 61 reasonable legal fees and expenses) incurred by Fannie Mae or Servicer in connection with the foregoing, to the extent such expenses exceed $3000. Such additional amounts shall be paid by Owner on or prior to the closing date of the Proposed Transfer, or if such Proposed Transfer fails to close, within thirty (30) days of Owner's receipt of invoices therefor, and shall be payable regardless. of whether the Bond Property is or is not (for any reason) ultimately transferred; and (xi) Owner or the Permitted Transferee shall have paid to the appropriate parties all other fees, costs and expenses (including legal fees and expenses) payable by Owner to each of the related Issuer, the Related Trustee, the related Remarketing Agent, Fannie Mae and Servicer under the terms of the Bond Property Loan Documents and the Bond Documents with respect to such Bond Property in connection with the Proposed Transfer. (b) PERMITTED TRANSFERS. Fannie Mae's consent to a Proposed Transfer shall become effective upon (i) Fannie Mae's determination, that each of the conditions set forth above have been satisfied in full, and (ii) Fannie Mae's execution and delivery to Owner of a written instrument releasing (in whole or in part as applicable) Owner from its obligations under and with respect to the Related Bonds, the other Related Bond Documents, the Bond Property Loan Documents with respect to such Bond Property, and the related Facility. Any transfer of a Bond Property consented to by Fannie Mae in accordance with the provisions set forth above (a "PERMITTED TRANSFER") shall be made together with and subject to (1) the Related Bonds, (2) the other Related Bond Documents (subject to any amendments and modifications required by Fannie Mae in accordance with subsection (a) above), (3) the Bond Property Loan Documents with respect to such Bond Property (subject to any amendments and modifications required by Fannie Mae in accordance with subsection (a) above), and (4) Fannie Mae's credit enhancement with respect to such Bond Property. Notwithstanding anything herein or in the Bond Property Loan Documents with respect to such Bond Property to the contrary, Owner shall not be required to pay the Prepayment Premium otherwise required under any the Related Mortgage Note in connection with a Permitted Transfer. SECTION 4.6 CREDIT ENHANCEMENT OF OLYMPIAD PROJECT. (a) CREDIT ENHANCEMENT OF THE OLYMPIAD PROJECT. On or before August 1, 1997, Owner and Servicer may request that a new tax-exempt housing bond transaction (the "OLYMPIAD BOND TRANSACTION") with respect to that certain Multifamily Residential Property located in Montgomery, Alabama and commonly known as Olympiad Apartments (the "OLYMPIAD PROJECT") be added to the Fannie Mae Credit Facility as a New Bond Property. Subject to satisfaction in full of the conditions and limitations set forth in this section 4.6, Fannie Mae shall grant its approval to the addition of the Olympiad Bond Transaction and Fannie Mae's credit enhancement with respect thereto (the "OLYMPIAD CREDIT ENHANCEMENT") by issuing a Guaranteed Mortgage Pass-Through Certificate substantially in the form of the Related Fannie Mae Pass-Through Certificates for the benefit of the trustee with respect to the Olympiad Bond Transaction. Fannie Mae's agreement to provide the Olympiad 62 Credit Enhancement is subject to Fannie Mae's determination in Fannie Mae's discretion that each of the following conditions have been satisfied in full: (i) the Olympiad Bond Transaction shall close on or before December 1, 1997 (the "OLYMPIAD COMMITMENT TERMINATION DATE"); (ii) No Event of Default or Potential Event of Default shall have occurred; (iii) The mortgage loan with respect to the Olympiad Bond Transaction (the "OLYMPIAD MORTGAGE LOAN") shall be originated by either (A) Servicer and assigned to Fannie Mae or (B) an independent third-party issuer and then assigned in succession to Servicer and then to Fannie Mae, and such mortgage loan shall otherwise comply with all other Fannie Mae Charter Act requirements for multifamily loans; (iv) The following underwriting tests shall be satisfied: (A) the actual fixed interest rate (including the base interest rate payable on the Olympiad Refunding Bonds plus all issuer's fees, trustee's fees, credit enhancement fees and other fees payable under the mortgage note) with respect the Olympiad Mortgage Loan shall not exceed 8%; (B) the ratio (expressed as a percentage) of the Facility Amount of Olympiad Bond Transaction to the Value of the Olympiad Project, will be equal to or less than ninety-three percent (93%); and (C) the ratio of (1) the Net Operating Income of the Olympiad Project for the twelve (12) month period ending within sixty (60) days of the proposed date for the addition of the Olympiad Project, to (2) the anticipated scheduled debt service due with respect to the Olympiad Project for the twelve (12) months immediately following the Olympiad Refunding Closing Date, each as determined by Fannie Mae in its discretion, will be equal to or exceed 103:1; In addition, if the actual fixed interest rate (including the base interest rate payable on the Olympiad Refunding Bonds plus all issuer's fees, trustee's fees, credit enhancement fees and other fees payable under the mortgage note) with respect the Olympiad Mortgage Loan shall (I) be less than or equal to 7%, then Fannie Mae's credit enhancement fee with respect to such Olympiad Mortgage Loan shall be .65% or 65 "basis points", or (II) exceed 7% but be less than or equal to 8%, then Fannie Mae's credit enhancement fee with respect to such Olympiad Mortgage Loan shall be determined by Fannie Mae in its discretion; 63 (v) All documentation (including any amendments to this Agreement and the other Transaction Documents) relating to the Olympiad Bond Transaction shall be the same in all material respects as the documentation relating to the existing Bonds, subject to such modifications as may be necessary and which, in any event, are agreed to by Owner and approved by Fannie Mae in its discretion and the terms and conditions of the Olympiad Refunding Bonds, the related bond documents, mortgage loan documents and other documents delivered in connection with the Olympiad Bond Transaction (the "OLYMPIAD REFUNDING DOCUMENTS"), shall be satisfactory to Fannie Mae, including the following: (A) such Olympiad Bond Transaction shall be incorporated into and be governed by the terms of this Agreement; (B) the principal amount of the Olympiad Mortgage Loan shall be equal to or less than $5,350,000.00; (C) the principal amortization schedule of the Olympiad Mortgage Loan shall be sufficient to cause such Olympiad Mortgage Loan to fully amortize by July 1, 2016; (D) the Olympiad Refunding Bonds shall mature on August 1, 2016; (E) the Olympiad Refunding Documents shall contain cross-default and cross-collateralization provisions that conform to the existing Transaction Documents; Notwithstanding the foregoing, the Prepayment Premium with respect to the Olympiad Refunding Transaction shall continue for not less than ten (10) years from the closing date of the Olympiad Bond Transaction (the "OLYMPIAD REFUNDING CLOSING DATE"); (vi) Owner shall execute and deliver to Fannie Mae a certificate (an "OWNER'S DATE-DOWN CERTIFICATE") confirming that all of the representations and warranties set forth in this Agreement (including those with respect to the Aggregate Debt Service Coverage Ratio and the Aggregate Loan to Value Ratio as set forth in section 2.1(h)) are true, correct and complete after giving effect to the Olympiad Bond Transaction; (vii) Each of Owner and each Guarantor, to the extent applicable, shall have delivered to Fannie Mae appropriate evidence satisfactory to Fannie Mae of its authority to execute and deliver the Olympiad Refunding Documents to which it is a party; (viii) Fannie Mae shall have received from Servicer such representations, warranties, undertakings and such other certificates as Fannie Mae shall customarily require relating to the Olympiad Bond Transaction; 64 (ix) Fannie Mae shall have received such opinions of bond counsel, trustee's counsel and issuer's counsel, and such other opinions and certificates as Fannie Mae shall reasonably require relating to the Olympiad Bond Transaction; (x) Fannie Mae shall have received an opinion of counsel to Owner concerning such matters as Fannie Mae may reasonably require relating to the Olympiad Bond Transaction and Fannie Mae shall otherwise have received satisfactory evidence that all conditions to the effectiveness and enforceability of the Olympiad Refunding Documents have been fully satisfied; (xi) All legal opinions relating to the Olympiad Bond Transaction shall be the same in all material respects as the opinions relating to the existing Transaction Documents and otherwise in form and substance satisfactory to Fannie Mae; (xii) Fannie Mae shall have received certified copies of all consents and authorizations (including Governmental Approvals, if any), necessary for the applicable issuer or Owner to execute, deliver and perform their respective obligations under the Olympiad Refunding Documents; (xiii) Fannie Mae shall nave received certified copies of (A) such issuer's charter or certificate of incorporation and by-laws, if any, (B) the resolution or resolutions of such issuer authorizing the execution, delivery and performance of its obligations under the Olympiad Refunding Documents to which it is a party and (C) certified copies of all other documents evidencing any other official action of such issuer taken with respect to the Olympiad Bond Transaction, as each such item is then in full force and effect; (xiv) Fannie Mae shall have received copies of all documents relating to the closing of such Olympiad Bond Transaction, authenticated to Fannie Mae's reasonable satisfaction; (xv) Fannie Mae shall have received true and correct copies of rating letters from the Rating Agency rating the Olympiad Refunding Bonds confirming that such bonds have received the same rating afforded other debt instruments of the character of the Olympiad Refunding Bonds and which are credit enhanced by Fannie Mae; (xvi) Owner shall have executed and delivered to Fannie Mae such amendments and modifications to this Agreement or the other Transaction Documents and Fannie Mae shall have received such other documents, certificates, filings, legal opinions, approvals or instruments, as Fannie Mae shall deem necessary in order to effectuate the Olympiad Bond Transaction; (xvii) Fannie Mae shall have received payment in full of all fees and expenses (including fees and disbursements of Fannie Mae's and the Servicer's counsel and accountants), incurred in connection with or related to the Olympiad Bond Transaction 65 and the preparation, review, execution and delivery of the Olympiad Refunding Documents; and (xviii) Subject to the qualifications set forth above, all documentation relating to the foregoing shall be acceptable to Fannie Mae in its discretion in all respects, including all legal opinions, title insurance policies and endorsements, Security Instruments, Replacement Reserve Agreements, indentures, collateral agreements, assignments and any amendments necessary to this Agreement or the other Transaction Documents. (b) ADDITION OF OLYMPIAD PROJECT. Upon satisfaction in full of the conditions and limitations set forth in this section 4.6 with respect to the Olympiad Bond Transaction, the Olympiad Project shall be deemed a New Bond Property and shall be added to the Fannie Mae Credit Facility. The addition of the Olympiad Project to the Fannie Mae Credit Facility shall become effective only upon Fannie Mae's execution and delivery to Owner of a New Property Confirmation. Upon the execution and delivery of any such New Property Confirmation in accordance with this section 4.6, this Agreement shall be automatically deemed amended and supplemented to incorporate the terms and provisions of such New Property Confirmation. SECTION 4.7 CERTAIN PERMITTED TRANSFERS OF OWNERSHIP INTERESTS. Notwithstanding anything to the contrary set forth in this Agreement or in the Mortgages, in connection with the Olympiad Bond Transaction and/or the Eden Crossing Bond Transaction a "Transfer" (as defined in Uniform Covenant 19 of the Mortgages) of not more than five percent (5%) in the aggregate with respect to both such bond transactions, of the direct beneficial ownership interests in Owner may occur, provided that, such "Transfer" (a) is made to an Affiliate of Owner, (b) occurs in consideration of such Affiliates conveyance of the Olympiad Project to Owner and (c) consists solely of limited partnership interests in Owner. SECTION 4.8 CREDIT ENHANCEMENT OF EDEN CROSSING PROJECT. (a) CREDIT ENHANCEMENT OF THE EDEN CROSSING PROJECT. On or before November 1, 1997, Owner and Servicer may request that Fannie Mae provide credit enhancement (the "EDEN CROSSING BOND TRANSACTION") with respect to a new tax-exempt housing bond transaction relating to that certain Multifamily Residential Property located in Escambia County, Florida and commonly known as Eden Crossing Apartments (the "EDEN CROSSING PROJECT"), and in connection therewith, that the Eden Crossing Project be added to the Fannie Mae Credit Facility as a New Bond Property. Subject to satisfaction in full of the conditions and limitations set forth in this section 4.8, Fannie Mae shall grant its approval to the Eden Crossing Bond Transaction, the addition of the Eden Crossing Project to the Fannie Mae Credit Facility and Fannie Mae's credit enhancement with respect thereto (the "EDEN CROSSING CREDIT ENHANCEMENT") by issuing a Guaranteed Mortgage Pass-Through Certificate substantially in the form of the Related Fannie Mae Pass-Through Certificates for the benefit of the trustee with respect to the Eden Crossing Bond Transaction. Fannie Mae's agreement to provide the 66 Eden Crossing Credit Enhancement is subject to Fannie Mae's determination in Fannie Mae's discretion that each of the following conditions have been satisfied in full: (i) the Eden Crossing Bond Transaction shall close on or before December 1, 1997 (the "EDEN CROSSING COMMITMENT TERMINATION DATE"); (ii) No Event of Default or Potential Event of Default shall have occurred; (iii) The mortgage loan with respect to the Eden Crossing Bond Transaction (the "EDEN CROSSING MORTGAGE LOAN") shall be originated by either (A) Servicer and assigned to Fannie Mae or (B) an independent third-party issuer and then assigned in succession to Servicer and then to Fannie Mae, and such mortgage loan shall otherwise comply with all Fannie Mae Charter Act requirements for multifamily loans; (iv) The following underwriting tests shall be satisfied: (A) the actual fixed interest rate (including the base interest rate payable on the Eden Crossing Bonds plus all issuer's fees, trustee's fees, credit enhancement fees and other fees payable under the mortgage note) with respect the Eden Crossing Mortgage Loan shall not exceed 8%; (B) the ratio (expressed as a percentage) of the Facility Amount of Eden Crossing Bond Transaction to the Value of the Eden Crossing Project, will be equal to or less than eighty-five and seventy-one hundredths percent (85.71%); and (C) the ratio of (1) the Net Operating Income of the Eden Crossing Project for the twelve (12) month period ending within sixty (60) days of the proposed date for the addition of the Eden Crossing Project, to (2) the anticipated scheduled debt service due with respect to the Eden Crossing Project for the twelve (12) months immediately following the closing date of the Eden Crossing Bond Transaction (the "EDEN CROSSING CLOSING DATE"), each as determined by Fannie Mae in its discretion, will be equal to or exceed 1.10:1; In addition, if the actual fixed interest rate (including the base interest rate payable on the Eden Crossing Bonds plus all issuer's fees, trustee's fees, credit enhancement fees and other fees payable under the mortgage note) with respect the Eden Crossing Mortgage Loan shall (I) be less than or equal to 7%, then Fannie Mae's credit enhancement fee with respect to such Eden Crossing Mortgage Loan shall be .65% or 65 "basis points", or (II) exceed 7% but be less than or equal to 8%, then Fannie Mae's 67 credit enhancement fee with respect to such Eden Crossing Mortgage Loan shall be determined by Fannie Mae in its discretion; (v) All documentation (including any amendments to this Agreement and the other Transaction) relating to the Eden Crossing Bond Transaction shall be the same in all material respects as the documentation relating to the existing Bonds, subject to such modifications as may be necessary and which, in any event, are agreed to by Owner and approved by Fannie Mae in its discretion and the terms and conditions of the Eden Crossing Bonds, the related bond documents, mortgage loan documents and other documents delivered in connection with the Eden Crossing Bond Transaction (the "EDEN CROSSING REFUNDING DOCUMENTS"), shall be satisfactory to Fannie Mae, and upon completion of the Eden Crossing Bond Transaction include the following: (A) such Eden Crossing Bond Transaction shall be incorporated into and be governed by the terms of this Agreement; (B) the principal amount of the Eden Crossing Mortgage Loan shall be equal to or less than $6,000,000.00; (C) the principal amortization schedule of the Eden Crossing Mortgage Loan shall be sufficient to cause such Eden Crossing Mortgage Loan to fully amortize by July 1, 2016; (D) the Eden Crossing Bonds shall mature on August 1, 2016; and (E) the Eden Crossing Refunding Documents shall contain cross-default and cross-collateralization provisions that conform to the existing Transaction Documents; Notwithstanding the foregoing, the Prepayment Premium with respect to the Eden Crossing Mortgage Loan shall continue for not less than ten (10) years from the Eden Crossing Closing Date; (vi) Owner shall execute and deliver to Fannie Mae an Owner's Date-Down Certificate confirming that all of the representations and warranties set forth in this Agreement (including those with respect to the Aggregate Debt Service Coverage Ratio and the Aggregate Loan to Value Ratio as set forth in section 2.1(h)) are true, correct and complete after giving effect to the Eden Crossing Bond Transaction; (vii) Each of Owner and each Guarantor, to the extent applicable, shall have delivered to Fannie Mae appropriate evidence satisfactory to Fannie Mae of its authority to execute and deliver the Eden Crossing Refunding Documents to which it is a party; 68 (viii) Fannie Mae shall have received from Servicer such representations, warranties, undertakings and such other certificates as Fannie Mae shall customarily require relating to the Eden Crossing Bond Transaction; (ix) Fannie Mae shall have received such opinions of bond counsel, trustee's counsel and issuer's counsel, and such other opinions and certificates as Fannie Mae shall reasonably require relating to the Eden Crossing Bond Transaction; (x) Fannie Mae shall have received an opinion of counsel to Owner concerning such matters as Fannie Mae may reasonably require relating to the Eden Crossing Bond Transaction and Fannie Mae shall otherwise have received satisfactory evidence that all conditions to the effectiveness and enforceability of the Eden Crossing Remarketing Documents have been fully satisfied; (xi) All legal opinions relating to the Eden Crossing Bond Transaction shall be the same in all material respects as the opinions relating to the existing Transaction Documents and otherwise in form and substance satisfactory to Fannie Mae; (xii) Fannie Mae shall have received certified copies of all consents and authorizations (including Governmental Approvals, if any), necessary for the applicable issuer or Owner to execute, deliver and perform their respective obligations under the Eden Crossing Refunding Documents; (xiii) Fannie Mae shall have received certified copies of (A) such issuer's charter or certificate of incorporation and by-laws, if any, (B) the resolution or resolutions of such issuer authorizing the execution, delivery and performance of its obligations under the Eden Crossing Refunding Documents to which it is a party and (C) certified copies of all other documents evidencing any other official action of such issuer taken with respect to the Eden Crossing Bond Transaction, as each such item is then in full force and effect; (xiv) Fannie Mae shall have received copies of all documents relating to the closing of such Eden Crossing Bond Transaction, authenticated to Fannie Mae's reasonable satisfaction; (xv) Fannie Mae shall have received true and correct copies of rating letters from the Rating Agency rating the Eden Crossing Bonds confirming that such bonds have received the same rating afforded other debt instruments of the character of the Eden Crossing Bonds and which are credit enhanced by Fannie Mae; (xvi) Owner shall have executed and delivered to Fannie Mae such amendments and modifications to this Agreement or the other Transaction Documents and Fannie Mae shall have received such other documents, certificates, filings, legal opinions, approvals 69 or instruments, as Fannie Mae shall deem necessary in order to effectuate the Eden Crossing Bond Transaction; (xvii) Fannie Mae shall have received payment in full of all fees and expenses (including fees and disbursements of Fannie Mae's and the Servicer's counsel and accountants), incurred in connection with or related to the Eden Crossing Bond Transaction and the preparation, review, execution and delivery of the Eden Crossing Refunding Documents; and (xviii) Subject to the qualifications set forth above, all documentation relating to the foregoing shall be acceptable to Fannie Mae in its discretion in all respects, including all legal opinions, title insurance policies and endorsements, Security Instruments, Replacement Reserve Agreements, indentures, collateral agreements, assignments and any amendments necessary to this Agreement or the other Transaction Documents. (b) ADDITION OF EDEN CROSSING PROJECT. Upon satisfaction in full of the conditions and limitations set forth in this section 4.8 with respect to the Eden Crossing Bond Transaction, the Eden Crossing Project shall be deemed a New Bond Property and shall be added to the Fannie Mae Credit Facility. The addition of the Eden Crossing Project to the Fannie Mae Credit Facility shall become effective only upon Fannie Mae's execution and delivery to Owner of a New Property Confirmation. Upon the execution and delivery of any such New Property Confirmation in accordance with this section 4.8, this Agreement shall be automatically deemed amended and supplemented to incorporate the terms and provisions of such New Property Confirmation. (c) INTERIM SUBSTITUTION OF EDEN CROSSING PROJECT. If prior to the completion of the Eden Crossing Bond Transaction, Fannie Mae in its discretion agrees to provide substitute credit enhancement for the existing bond financing with respect to the Eden Crossing Project (the "EDEN CROSSING SUBSTITUTION TRANSACTION") then Fannie Mae's agreement to provide the Eden Crossing Credit Enhancement shall terminate and be of no further force or effect. ARTICLE V. SERVICING; REPLACEMENT OF CREDIT ENHANCEMENT SECTION 5.1 SERVICING. Owner acknowledges that Fannie Mae has designated or may designate an independent contractor to service the Mortgage Loans, the Bond Property Loan Documents and the Reimbursement Loan Documents. Owner agrees that to the extent that any provision in this Agreement or any other Transaction Document requires, at stipulated dates or at the request of Fannie Mae, the delivery by Owner of certain notices, documents, certificates, opinions, and 70 financial or other information to Fannie Mae or the Lender (as such term is used and defined in the Mortgage Documents), all such items shall instead be delivered to, or at the request of, Servicer, subject to the provisions of this section. Owner acknowledges and agrees that Fannie Mae has delegated or may delegate certain functions to Servicer with respect to the Transaction Documents, subject to and in accordance with the Servicing Agreement. Owner further acknowledges and agrees that in connection with any provision in this Agreement or in any other Transaction Document requiring that any notices, documents or other information shall be given to Servicer, or that Servicer shall have the right to request any documents or other information from Owner, Fannie Mae shall have the right to instruct Owner to instead (a) deliver such items directly to Fannie Mae or to such other Person as Fannie Mae may, from time to time, designate, and (b) act in accordance with the instructions of Fannie Mae with respect to any such items or any other rights Servicer may have under this Agreement or under any other Transaction Document. In addition, Owner agrees that any right of Fannie Mae to give or deliver to Owner any notice or other communications, or to receive from Owner any document or other information, may be given, delivered or received by Servicer, unless otherwise directed by Fannie Mae. Owner shall act in accordance with any instructions received from Fannie Mae pursuant to this section. Owner further acknowledges and agrees that Fannie Mae reserves the unconditional right to replace Servicer with or without cause, with a substitute Servicer chosen by Fannie Mae in its discretion. SECTION 5.2 REPLACEMENT OF FANNIE MAE CREDIT ENHANCEMENT. Except as otherwise permitted upon a substitution or release of a Property pursuant to section 4.2 or section 4.3, respectively, Owner will not cause any Related Trustee to terminate any Related Fannie Mae Pass-Through Certificate (except in connection with the repayment of all of the outstanding Related Bonds) or replace any Related Fannie Mae Pass-Through Certificate with alternate credit enhancement unless prior to or simultaneously with the effectiveness of such termination or replacement: (a) the Related Fannie Mae Pass-Through Certificate is replaced or terminated with respect to all of the outstanding Bonds; (b) Owner shall have received a statement from Fannie Mae to the effect that Owner has paid to Fannie Mae the amount of all Reimbursable Advances and any other outstanding obligations of Owner to Fannie Mae hereunder, whether or not such Reimbursable Advances or other amounts are otherwise then due; (c) Fannie Mae determines that no part of any payments made by Owner prior to or concurrently with the credit enhancement termination or replacement will likely result in an avoidance or any other recovery or disgorgement pursuant to the Bankruptcy Code (including sections 544, 547, 549 or 550 thereof) or any other applicable bankruptcy or insolvency law which would result in Fannie Mae having any liability under any Related Fannie Mae Pass-Through Certificate, or Owner will provide Cash Collateral or make other arrangements 71 acceptable to Fannie Mae in its discretion to ameliorate such risk of avoidance, recovery or disgorgement; and (d) Owner shall have paid the Prepayment Premium with respect to the Mortgage Loans in accordance with the requirements of the Mortgage Notes calculated based on the assumption that the Mortgage Loan is being prepaid in full on the day immediately preceding the effective date of the alternative credit enhancement. ARTICLE VI. EVENTS OF DEFAULT AND REMEDIES SECTION 6.1 EVENTS OF DEFAULT. Each of the following events shall constitute an "Event of Default" under this Agreement, whatever the reason for such event and whether it shall be voluntary or involuntary, or within or without the control of Owner, or be effected by operation of law or pursuant to any judgment or order of any court or any order, rule or regulation of any Governmental Authority: (a) the occurrence of a default under any Transaction Document beyond any cure period set forth therein; or (b) the failure by Owner to pay when due any amount payable by Owner under any Related Mortgage Note, any Mortgage, this Agreement or any other Transaction Document, including any fees, costs or expenses; or (c) the failure by Owner to perform or observe any covenant set forth in subsections 2.2(a), (b), (c), (g), (h), (j), (o) to (q) inclusive, or (s) to (v) inclusive, in subsections 2.3 (a) to (e) inclusive, or (g) to (j) inclusive or in section 2.5; or (d) the failure by Owner to perform or observe any covenant set forth in subsection 2.2(d) or (k) to (m) inclusive, or in section 2.3(l), within ten (10) days after receipt of notice from Servicer or Fannie Mae; or (e) the failure by Owner to perform or observe any covenant set forth in subsections 2.2(i) or 2.3(k) hereunder, within twenty (20) days after receipt of notice from Servicer or Fannie Mae; or (f) any warranty, representation or other written statement made by or on behalf of Owner contained in this Agreement, any other Transaction Document or in any instrument furnished in compliance with or in reference to any of the foregoing, is false or misleading in any material respect on any date when made or deemed made; or 72 (g) any other Indebtedness in an aggregate amount in excess of $75,000.00 of Owner or assumed by Owner (i) is not paid when due nor within any applicable grace period in any agreement or instrument relating to such Indebtedness or (ii) becomes due and payable before its normal maturity by reason of a default or event of default, however described, or any other event of default shall occur and continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Indebtedness; or (h) (i) Owner, General Partner or any Guarantor shall (A) commence a voluntary case under the Federal bankruptcy laws (as now or hereafter in effect), (B) file a petition seeking to take advantage of any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, debt adjustment, winding up or composition or adjustment of debts, (C) consent to or fail to contest in a timely and appropriate manner any petition filed against it in an involuntary case under such bankruptcy laws or other laws, (D) apply for or consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of a substantial part of its property, domestic or foreign, (E) admit in writing its inability to pay, or generally not be paying, its debts as they become due, (F) make a general assignment for the benefit of creditors, (G) assert that Owner, General Partner or any Guarantor has no liability or obligations under this Agreement or any other Transaction Document to which it is a party; or (H) take any action for the purpose of effecting any of the foregoing; or (ii) a case or other proceeding shall be commenced against Owner, General Partner or any Guarantor in any court of competent jurisdiction seeking (A) relief under the Federal bankruptcy laws (as now or hereafter in effect) or under any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding upon or composition or adjustment of debts, or (B) the appointment of a trustee, receiver, custodian, liquidator or the like of Owner, General Partner or any Guarantor, or of all or a substantial part of the property, domestic or foreign, of Owner, General Partner or any Guarantor and any such case or proceeding shall continue undismissed or unstayed for a period of 60 consecutive calendar days, or any order granting the relief requested in any such case or proceeding against Owner, General Partner or any Guarantor (including an order for relief under such Federal bankruptcy laws) shall be entered; or (i) if any provision of this Agreement or any other Transaction Document or the lien and security interest purported to be created hereunder or under any Transaction Document shall at any time for any reason cease to be valid and binding in accordance with its terms on any Issuer or Owner, as the case may be, or shall be declared to be null and void, or the validity or enforceability hereof or thereof or the validity or priority of the lien and security interest created hereunder or under any other Transaction Document shall be contested by Owner seeking to establish the invalidity or unenforceability hereof or thereof, or any Issuer or Owner, as the case may be, shall deny that it has any further liability or obligation hereunder or thereunder; or (j) if a "Transfer" (as defined in any Related Mortgage) shall occur in violation of Uniform Covenant 19 (as modified by the applicable Special Rider to Multifamily Instrument) of any Related Mortgage or if any Property or any part thereof is otherwise 73 conveyed, assigned, mortgaged, pledged, leased or encumbered in any way other than as permitted under this Agreement or any Related Mortgage without the prior written consent of Fannie Mae; or (k) the execution by Owner of a chattel mortgage or other security agreement on any materials, fixtures or articles used in the construction or operation of the improvements located on any Property or on articles of personal property located therein, or (y) if any such materials, fixtures or articles are purchased pursuant to any conditional sales contract or other security agreement or otherwise so that the ownership thereof will not vest unconditionally in Owner free from encumbrances, or (z) if Owner does not furnish to Fannie Mae upon request the contracts, bills of sale, statements, receipted vouchers and agreements, or any of them, under which Owner claims title to such materials, fixtures, or articles; or (l) failure, upon request, to furnish to Fannie Mae the results of official searches made by any Governmental Authority, or failure by Owner to comply with any requirement of any Governmental Authority within 30 days after written notice of such requirement shall have been given to Owner by such Governmental Authority; provided that, if action is commenced and diligently pursued by Owner within such 30 days, then Owner shall have an additional 30 days to comply with such requirement; or (m) a dissolution or liquidation for any reason (whether voluntary or involuntary) of Owner or its Subsidiaries; or (n) if General Partner shall fail to qualify as a "Qualified REIT Subsidiary" or if AIMCO REIT shall fail to qualify as a real estate investment trust under Subchapter M of the Code; or (o) any judgment against Owner, any attachment or other levy against any portion of Owner's assets with respect to a claim in an amount in excess of $50,000.00 individually and/or $175,000.00 in the aggregate remains unpaid, unstayed on appeal undischarged, unbonded, not fully insured or undismissed for a period of sixty (60) days; or (p) the failure by Owner to maintain insurance with respect to each Property in accordance with the terms of the Related Mortgage with respect to each such Property; or (q) the failure by Owner to perform or observe the covenants with respect to Hazardous Materials or Hazardous Materials Laws set forth in any Mortgages or in any other Transaction Document including, the covenants set forth in Paragraph D of the Rider to Multifamily Instrument constituting a part of each Mortgage; or (r) the failure by Owner to cause the Gross Cash Flow with respect to any Property to be deposited into the applicable Property Account in accordance with the requirements of the Cash Management Agreement; or 74 (s) the failure by Owner to perform or observe any term, covenant, condition or agreement hereunder, other than as set forth in subsections (a) through (r) above, or in any other Transaction Document, within thirty (30) days after receipt of notice from Servicer or Fannie Mae identifying such failure; PROVIDED, HOWEVER, that if in Fannie Mae's judgment, (i) the cure of such failure requires a period in excess of thirty (30) days, (ii) such failure will not result in a Material Adverse Effect, and (iii) corrective action is instituted by Owner within such period and pursued diligently and in good faith, then such failure shall not constitute an Event of Default unless such failure is not cured by Owner within sixty (60) days after receipt of notice from Servicer or Fannie Mae identifying such failure; or (t) the failure by Owner to cause an amended certificate of limited partnership to confirming the substitution of General Partner as Owner's sole general partner to be duly filed with the Florida Secretary of State on or before July 19, 1996, and to provide Fannie Mae with a certified copy of such filing on or before July 31, 1996; or (u) (a) Owner, General Partner, any Guarantor or any Issuer shall have asserted that it has no liability or obligations under this Agreement or under any Transaction Document to which it is a party or that the liens and the security interests purported to be created by the Mortgage Loan Documents shall not be a valid and perfected first priority security interest subject to no Liens except Permitted Liens; or (b) any Governmental Authority having jurisdiction over the Owner, General Partner, any Guarantor or any Issuer shall find or rule that any material provision of this Agreement or any Transaction Document to which it is a party is not valid and binding on such person or that the lien and the security interest purported to be created by any Mortgage Loan Document shall not be a valid and perfected first priority security interest subject to no Liens except Permitted Liens. SECTION 6.2 REMEDIES. Upon the occurrence of an Event of Default, Fannie Mae may in its discretion, but shall not be obligated to, exercise any or all of the following remedies: (a) declare all amounts payable by Owner under this Agreement or the other Transaction Documents to be forthwith due and payable, and the same shall thereupon become due and payable without demand, presentment, protest or notice of any kind, all of which are hereby expressly waived; or (b) exercise all or any of its rights and remedies as it may otherwise have under Applicable Law and under this Agreement or the other Transaction Documents or otherwise by such suits, actions, or special proceedings in equity or at law, or by proceedings in the office of any board or officer having jurisdiction, either for specific performance of any covenant or agreement contained in this Agreement or any other Transaction Document, or in aid or execution of any power therein granted or for the enforcement of any proper legal or equitable remedy; or 75 (c) demand and Owner shall provide cash collateral or Government Obligations in the full amount of the outstanding obligations under all of the Bonds whether or not due and payable; or (d) apply all or any portion of the Collateral to any Obligations or other obligation of Owner under this Agreement or any other Transaction Document, in such amounts, at such times and in such order as determined by Fannie Mae in its discretion. Owner acknowledges that this may include, among other things, applying funds or directing Servicer to apply funds on deposit in any Property Account or the Central Account to prepay the applicable Related Bonds or to prepay any other Related Bonds or reimbursement or other payment obligations under this Agreement or any other Transaction Document. Such funds may be applied to prepay or reduce amounts outstanding under one or more issues of Related Bonds regardless of whether such amounts are then due and owing; or (e) deliver to the Related Trustees written notice that an Event of Default has occurred under this Agreement and directing the Related Trustees to take such action pursuant to the Transaction Documents as Fannie Mae may determine, including a request that the Related Trustees declare the principal of all or a portion of the Related Bonds then outstanding and the interest accrued thereon to be immediately due and payable in accordance with the terms and conditions of the Related Indentures. No failure or delay on the part of Fannie Mae to exercise any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy hereunder preclude any further exercise thereof or the exercise of any further right or remedy hereunder or under any other Transaction Document. The remedies herein provided are cumulative and not exclusive of any remedies provided by law or under any Transaction Document. No exercise by Fannie Mae of any remedy under any Transaction Document shall operate as a limitation on any rights or remedies of Fannie Mae under this Agreement. In order to entitle Fannie Mae to exercise any remedy reserved to Fannie Mae in this Article, it shall not be necessary to give any notice, other than such notice as may be required under the applicable provisions of any of the Transaction Documents. The rights and remedies of Fannie Mae specified in this Agreement are for the sole and exclusive benefit, use and protection of Fannie Mae, and Fannie Mae is entitled, but shall have no duty or obligation to Owner, any Issuer, any Related Trustee, any Bondholder with respect to any of the Bonds, or otherwise, (a) to exercise or to refrain from exercising any right or remedy reserved to Fannie Mae hereunder, or (b) to cause any Related Trustee or any other party to exercise or to refrain from exercising any right or remedy available to it under any of the Transaction Documents. 76 ARTICLE VII. MISCELLANEOUS SECTION 7.1 WAIVERS, AMENDMENTS. This Agreement may be amended only by a written instrument duly executed by each of the parties hereto. Owner may take any action herein prohibited or omit to perform any act herein required to be performed or omit to perform any act herein required to be performed by it, only if Owner shall first obtain the written consent of Fannie Mae thereto. No course of dealing between Owner and Fannie Mae, nor any delay in exercising any rights hereunder, shall operate as a waiver of any rights of Fannie Mae hereunder. Unless otherwise specified in such waiver or consent, a waiver or consent given hereunder shall be effective only in the specific instance and for the specific purpose for which given. SECTION 7.2 SURVIVAL OF REPRESENTATION AND WARRANTIES. All statements contained in any Transaction Document or in any certificate, financial statement or other instrument delivered by or on behalf of Owner pursuant to or in connection with this Agreement (including any such statement made in or in connection with any amendment hereto or thereto) shall constitute representations and warranties made under this Agreement. All representations and warranties made under this Agreement (a) shall be made and shall be true at and as of the date of this Agreement, the Fannie Mae Facility Closing Date and (b) shall survive the execution and delivery of this Agreement, regardless of any investigation made by Fannie Mae or on its behalf. SECTION 7.3 NOTICES. All notices, directions, certificates or other communications hereunder shall be given by certified or registered mail, return receipt requested, OR by overnight courier addressed to the appropriate notice address set forth below. Any of the parties hereto may, by a notice to the other party specifically captioned "Notice of Change of Address pursuant to section 7.3 of the Master Reimbursement Agreement", designate any further or different address to which subsequent notices, certificates or other communications shall be sent without any requirement of execution of any amendment to this Agreement. Any such notice, certificate or communication shall be deemed to have been given as of the date of actual delivery or the date of failure to deliver by reason of refusal to accept delivery or changed address of which no notice was given pursuant to this section 7.3. Unless otherwise directed by Fannie Mae pursuant to section 7.19, all notices pursuant to this Agreement shall also be given to Servicer in accordance with this section 7.3. The notice addresses are as follows: 77 (a) if to Owner: OTC Apartments Limited Partnership 1873 South Bellaire Street, 17th Floor Denver, Colorado 80222-4348 Attention: Vice Chairman (b) if to Fannie Mae: if by mail or overnight courier: Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attention: Senior Vice President -Multifamily Activities if by messenger: Fannie Mae 3939 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attention: Senior Vice President -Multifamily Activities in each case, with copies to: Fannie Mae Southwest Regional Office Two Galleria Tower 13455 Noel Road, Suite 600 Dallas, Texas Attention: Regional Vice President - Multifamily Activities and to: Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attention: Multifamily Mortgage Operations - Manager Multifamily Deliveries 78 (c) if to Servicer: GMAC Commercial Mortgage Corporation 650 Drescher Road Horsham, Pennsylvania 19044-8015 Attention: Barry Moore SECTION 7.4 PAYMENT PROCEDURE. Owner agrees that, unless otherwise directed pursuant to section 5.1, all amounts due to Fannie Mae under Article III of this Agreement shall be paid to Servicer for remittance to Fannie Mae pursuant to the Servicing Agreement. All payments to be made to Servicer, for the account of Fannie Mae, pursuant to this Agreement shall be paid in immediately available funds to Servicer in accordance with the Related Mortgage Note or in accordance with instructions given to Owner by Servicer. Except as otherwise provided above in this section 7.4, all payments to be made to Fannie Mae pursuant to this Agreement shall be made before 2:00 p.m., Washington, D.C. time, on the date when due, in lawful currency of the United States of America and in immediately available funds by wire transfer to an account designated in writing by Fannie Mae unless Owner is otherwise instructed in writing by Fannie Mae. SECTION 7.5 CONTINUING OBLIGATION. This Agreement is a continuing obligation of Owner and shall, until the later of the Termination Date under the last remaining Related Fannie Mae Pass-Through Certificate or the date upon which all amounts due and owing to Fannie Mae hereunder shall have been paid in full, (a) be binding upon Owner and its successors and assigns and (b) inure to the benefit of and be enforceable by Fannie Mae and its successors, transferees and assigns; PROVIDED, that Owner may not assign all or any part of this Agreement without the prior written consent of Fannie Mae. SECTION 7.6 SATISFACTION REQUIREMENT. If any agreement, certificate or other writing, or any action taken or to be taken, is by the terms of this Agreement required to be satisfactory to, or subject to the satisfaction of, Fannie Mae, then, unless otherwise expressly specified herein, the determination of such satisfaction shall be made by Fannie Mae in its sole and exclusive judgment. SECTION 7.7 CONSENT OF FANNIE MAE. If any provision of this Agreement provides for the approval, consent, election, determination, exercise of discretion, choice, designation, judgment or waiver of or by Fannie Mae and if a basis for Fannie Mae granting such approval, consent, determination, election, exercise of discretion, choice, designation, judgment or waiver is not otherwise stated (i.e., that such approval, consent, election, determination, exercise of discretion, choice, designation, 79 judgment or waiver will be "reasonable"), then in each case such approval, consent, determination, election, exercise of discretion, choice, designation, judgment or waiver will be given by Fannie Mae in its sole and absolute discretion. SECTION 7.8 GOVERNING LAW. This Agreement shall be construed and enforced in accordance with, and the rights and remedies of the parties hereto shall be governed by, the laws of Florida without regard to conflicts of law, principles, except to the extent that Federal laws may prevail; provided, however, that matters respecting the creation, perfection, priority and foreclosure of the Lien on each Property granted pursuant to or in connection with the Transaction Documents shall be governed by, and construed and enforced in accordance with, the internal law of the state or commonwealth in which such Property is situated without giving effect to the conflicts of law principles of such state or commonwealth. SECTION 7.9 JURISDICTION CONSENT TO SERVICE. (a) Owner hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any court in the state of Florida or Federal court of the United States of America sitting in the state of Florida, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, the Bond Documents, the Mortgage Documents and every other Transaction Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such Florida court or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall effect any right that Fannie Mae may otherwise have to bring any action or proceeding relating to this Agreement, the Bond Documents, the Mortgage Documents or the other Transaction Documents against Owner or its properties in the courts of any jurisdiction. (b) Owner hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement, the Bond Documents, the Mortgage Documents or the other Transaction Documents in any Federal court or any court in the State of Florida. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in section 7.3. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. 80 SECTION 7.10 WAIVERS OF JURY TRIAL. OWNER AND FANNIE MAE HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, ANY BOND DOCUMENT, ANY MORTGAGE DOCUMENT OR ANY OTHER TRANSACTION DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. SECTION 7.11 COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. SECTION 7.12 SEVERABILITY. Any provision of this Agreement that is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or nonauthorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction and the remaining portion of such provision and all other remaining provisions will be construed to render them enforceable to the fullest extent. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 7.13 BUSINESS DAYS. If any payment under this Agreement shall be specified to be made upon a day which is not a Business Day, it shall be made on the next succeeding day which is a Business Day and such extension of time shall in any case be included in computing interest, if any, in connection with such payment. SECTION 7.14 ENTIRE AGREEMENT. This Agreement and the other Transaction Documents constitute the entire contract between the parties relative to the subject matter hereof. Any previous agreement among the parties with respect to the subject matter hereof is superseded by this Agreement and the other Transaction Documents. Nothing in this Agreement or the other Transaction Documents, expressed or implied, is intended to confer upon any party other than the respective parties hereto and thereto any rights, remedies, obligations or liabilities under or by reason of this Agreement or the other Transaction Documents; PROVIDED, HOWEVER, that as to Persons other than Fannie Mae and Owner that are parties to any of the Transaction Documents, such Persons 81 shall not have any rights, remedies, obligations or liabilities under this Agreement or any of the Transaction Documents except under such Transaction Documents as to which such Persons are direct parties. SECTION 7.15 HEADINGS. Section, subsection and paragraph headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purposes. SECTION 7.16 FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS. To the extent permitted by law, the parties to this Agreement agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements to this Agreement and such further instruments as Fannie Mae may request and as may be reasonably required in the opinion of Fannie Mae or its counsel to effectuate the intention of or facilitate the performance of this Agreement or any other Transaction Document. SECTION 7.17 ASSIGNMENT: TRANSFERS: THIRD-PARTY RIGHTS. Owner shall not assign this Agreement, or delegate any of the Obligations hereunder, without the prior written consent of Fannie Mae. This Agreement may not be transferred in any respect without the prior written consent of Fannie Mae. Nothing in this Agreement shall confer any right upon any holder of any Bond or any other Person other than the parties hereto and their successors and permitted assigns; PROVIDED, HOWEVER, that notwithstanding anything to the contrary herein, Servicer shall be a third party beneficiary with respect to Owner's covenants and obligations under section 3.4. SECTION 7.18 WAIVER OF CLAIMS. IN ORDER TO INDUCE FANNIE MAE TO EXECUTE AND DELIVER THE AGREEMENTS, OWNER HEREBY REPRESENTS AND WARRANTS THAT IT HAS NO CLAIMS, SET-OFFS OR DEFENSES AS OF THE FANNIE MAE FACILITY CLOSING DATE IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR IN CONNECTION WITH ANY OF THE OTHER TRANSACTION DOCUMENTS. TO THE EXTENT ANY SUCH CLAIMS, SET-OFFS OR DEFENSES MAY EXIST, WHETHER KNOWN OR UNKNOWN, THEY ARE EACH HEREBY WAIVED AND RELINQUISHED IN THEIR ENTIRETY. 82 SECTION 7.19 DISCLAIMER; ACKNOWLEDGEMENTS. Approval by Fannie Mae of Owner, the Mortgage Loans, the Bonds or otherwise shall not constitute a warranty or representation by Fannie Mae as to any matter. Nothing set forth in this Agreement, in any of the Transaction Documents or in the subsequent conduct of the parties shall be deemed to constitute Fannie Mae as the partner or joint venturer of any person for any purpose whatsoever. SECTION 7.20 CONFLICTS BETWEEN AGREEMENTS. Any terms and conditions contained in this Agreement that may also be contained in any of the Related Mortgage Notes, any of the Related Mortgages, any of the Reimbursement Loan Documents or any other Transaction Document to which Owner and Fannie Mae are parties, shall not, to the extent reasonably practicable, be construed to be in conflict with each other but rather shall be construed as duplicative, confirming, additional, or cumulative provisions. To the extent that any ultimate conflict is determined to exist between the terms and conditions of this Agreement and those set forth in any of the Related Mortgage Notes, any of the Related Mortgages, any of the Reimbursement Loan Documents or any of the other Transaction Document to which Owner and Fannie Mae are parties, the terms and conditions of this Agreement shall control. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] 83 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective duly authorized officers or representatives as of the date hereof. OTC APARTMENTS LIMITED PARTNERSHIP, a Florida limited partnership By: AIMCO/OTC QRS, INC., a Delaware corporation, its general partner By: /s/ Harry Alcock ---------------------------- Name: Harry Alcock Title: Vice President FEDERAL NATIONAL MORTGAGE ASSOCIATION By: /s/ Thomas W. White ----------------------- Name: Thomas W. White Title: Senior Vice President S-1 EX-10.80 22 EXHIBIT 10.80 CASH MANAGEMENT, SECURITY, PLEDGE AND ASSIGNMENT AGREEMENT THIS CASH MANAGEMENT, SECURITY, PLEDGE AND ASSIGNMENT AGREEMENT (this "Cash Management Agreement"), dated as of July 1, 1996, among OTC APARTMENTS LIMITED PARTNERSHIP, a limited partnership duly organized and existing under the laws of Florida ("Pledgor"), FEDERAL NATIONAL MORTGAGE ASSOCIATION, a federally- chartered and stockholder-owned corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. Section 1716, et seq. ("Pledgee"), and GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation ("Servicer"). RECITALS WHEREAS, Pledgor and Pledgee are parties to that certain Master Reimbursement Agreement, dated as of July 1, 1996 (such agreement, as the same may be amended, supplemented, or otherwise modified or amended and restated from time to time in accordance with its terms, the "Reimbursement Agreement"), pursuant to which Pledgee has agreed to provide credit enhancement in connection with certain Mortgage Loans made to Borrower by various issuers and financed by certain Related Bonds pursuant to and in accordance with the terms of certain Related Fannie Mae Pass-Through Certificates. Except as otherwise provided herein, initially-capitalized terms shall have the meaning ascribed to such terms in the Reimbursement Agreement; WHEREAS, in connection with the Reimbursement Agreement and the Related Fannie Mae Pass-Through Certificates Pledgor has agreed, among other things, to grant Pledgee certain mortgages, deeds to secure debt and deeds of trust liens pursuant to the Reimbursement Mortgages encumbering the Properties and securing, among other things, amounts owed by Pledgor under the Reimbursement Agreement. The Reimbursement Mortgages existing as of the date hereof are described on Schedule 1 attached hereto; WHEREAS, in order to induce Pledgee to extend the aforementioned credit enhancement and liquidity accommodations, Pledgor has agreed to pledge and assign to Pledgee the "Collateral" (as defined in SECTION 2 of this Cash Management Agreement) as security for the performance of its obligations under the Reimbursement Agreement and the other Transaction Documents. NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1 1. ESTABLISHMENT OF ACCOUNTS AND DELIVERY OF COLLATERAL. 1.1 ESTABLISHMENT OF ACCOUNTS. (i) ESTABLISHMENT OF PLEDGEE ACCOUNTS. On or before August 3, 1996 (the "EFFECTIVE DATE") Pledgor and Servicer shall establish and shall thereafter maintain for the benefit of Pledgee: (a) a deposit account designated the "GMAC Commercial Mortgage Corporation as Agent for Federal National Mortgage Association/OTC - Central Account" or such other designation as may be approved by Pledgee in its discretion (the "CENTRAL ACCOUNT"), with a financial institution acceptable to Fannie Mae in its discretion (the "CENTRAL ACCOUNT DEPOSITORY"); and (b) a single deposit account with respect to each Property, designated the "[Name of Property] Property Account" or such other designation as may be approved by Pledgee in its discretion (each such account, individually, a "PROPERTY ACCOUNT" and all such accounts, collectively, the "PROPERTY ACCOUNTS"), with a financial institution acceptable to Fannie Mae in its discretion (each a "PROPERTY ACCOUNT DEPOSITORY", and collectively, the "PROPERTY ACCOUNT DEPOSITORIES". The Property Account Depositories and the Central Account Depository are each referred to herein individually as a "DEPOSITORY" and collectively and the "Depositories". The Central Account together with the Property Accounts are referred to herein, collectively, as the "PLEDGEE ACCOUNTS". Notwithstanding anything herein to the contrary, the Depository's records with respect to each of the Pledgee Accounts shall contain a notation reflecting title in the name of Servicer on behalf of the Pledgee. (ii) ESTABLISHMENT OF BORROWER ACCOUNT. Contemporaneously with the establishment of the Central Account, Pledgor shall establish and shall maintain with the Central Account Depository a certain deposit account designated "OTC Apartments Limited Partnership" or such other designation as may be approved by Pledgee in its discretion (the "BORROWER ACCOUNT"; the Pledgee Accounts together with the Borrower Account are referred to herein, collectively, as the "ACCOUNTS"). Notwithstanding anything herein to the contrary, the Borrower Account has been established and at all times shall remain in the name of Pledgor and shall at all times be held under the sole dominion and control of Pledgor. (iii) NOTIFICATION OF PLEDGEE. Upon selection of the Depositories and immediately prior to creation of the Accounts, Pledgor and Servicer shall provide Pledgee with written notice specifying the identity of proposed financial institutions, the address and telephone number of the branch at which the related Account will be located, the name of the officer that will be responsible for each such account, the proposed designation and account number of each such account and all other relevant identifying information 2 with respect to the Depositories and the accounts all of which shall be subject to Pledgee's approval in its discretion. Upon Pledgee's approval of such information Servicer and Pledgor shall complete all steps necessary for the creation of such Accounts and Pledgee shall prepare a Schedule 2 to this Cash Management Agreement which shall (i) include the requisite identifying information with respect to each Property Account, and (ii) be automatically incorporated into this Cash Management Agreement. 1.2 DELIVERY OF COLLATERAL. Pledgor acknowledges and agrees that the Pledgee Accounts shall be established and shall at all times be maintained in the name of Servicer on behalf of Pledgee and shall be held under the sole dominion and control of Servicer on behalf of Pledgee. Only Pledgee and Servicer acting on behalf of Pledgee shall have the right to make withdrawals from the Pledgee Accounts and to exercise all rights with respect to the funds on deposit therein from time to time. All instruments, if any, representing or evidencing any or all of the Pledgee Accounts shall be delivered to and held by Servicer on behalf of Pledgee and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to Pledgee. In the event any of the Pledgee Accounts is not evidenced by an instrument, Pledgor hereby authorizes and instructs Pledgee to contact the Depository for the purposes of advising the Depository of the existence of the security interest created in such Pledgee Account and the Collateral, as defined in Section 2.1 below, and of requesting that a notation reflecting title in the name of Servicer on behalf of the Pledgee or the security interest of Pledgee in such Pledgee Account and the Collateral be made in the records of the Depository or in such other appropriate records as Pledgee may require, all in form and substance satisfactory to Pledgee. In addition, Pledgee shall have the right at any time to exchange certificates or instruments representing or evidencing Collateral for certificates or instruments of smaller or larger denominations. 1.3 PROPERTY ACCOUNTS WITH RESPECT TO NEW PROPERTIES. In the event that a New Property (as defined in the Reimbursement Agreement) shall be substituted for an existing Property in accordance with Section 4.2 of the Reimbursement Agreement or added to the Fannie Mae Credit Facility pursuant to Section 4.4 of the Reimbursement Agreement or otherwise, then Pledgor shall: (a) establish for the benefit of Pledgee a new Property Account with respect to such New Property; (b) prepare a revised version of Schedule 2 which shall (i) include the requisite identifying information with respect to such new Property Account, (ii) be submitted to Pledgee for approval by Pledgee in its sole discretion, and (iii) be automatically incorporated into this Cash Management Agreement upon such approval by Pledgee; (c) notify the Depository by delivering a Restricted Account Letter (defined below) to the Depository and delivering a countersigned acknowledgement of such Restricted Account Letter to Pledgee in accordance with section 2.2 hereof; and (d) 3 execute such financing statements as may be required by Pledgee in accordance with section 6 hereof. 1.4 OPINIONS OF PLEDGOR'S COUNSEL. On or before the Effective Date, to the extent not previously delivered, Pledgor shall deliver or cause to be delivered to Pledgor one or more opinions confirming that upon (a) creation of the Pledgee Accounts in accordance with section 1.1 above, (b) delivery and acknowledgement of the Restricted Account Letters by each Depository in accordance with section 2.2 below and (c) filing of the financing statements in accordance with section 6 below, Pledgee shall have a valid and perfected security interest in each of the Pledgee Accounts under the laws of the state in which each such Pledgee Account is located. Each such opinion shall be in form and substance and delivered by counsel satisfactory to Pledgee in its discretion (a "PERFECTION OPINION"). If Pledgee has not received a Perfection Opinion with respect to any Pledgee Account by the Effective Date, Pledgee is hereby authorized to engage its own counsel to render such opinion and to the extent such determines that additional steps are necessary to create such perfected security interest, Pledgor shall cooperate with Pledgee in all respects necessary to comply with the requirements specified by Pledgee's counsel. In addition, Pledgor will upon demand pay to Pledgee the amount of any and all reasonable expenses, including the reasonable attorneys' fees and expenses of its counsel which Pledgee may incur in connection with obtaining such Perfection Opinion and complying with the requirements specified by Pledgee's counsel for perfection of Pledgee's security interest in the Pledgee Accounts. 2. PLEDGE AND ASSIGNMENT; NOTIFICATION OF DEPOSITORY. 2.1 PLEDGE AND ASSIGNMENT. Pledgor and Pledgee intend that (a) Pledgor shall not have any interest in the Central Account, any of the other Pledgee Accounts or any of the other Collateral and (b) the Pledgee Accounts shall at all times be under the sole dominion and control of Servicer on behalf of Pledgee. Notwithstanding the foregoing, to the extent that Pledgor shall have been deemed to have any interest in all or any of the Pledgee Accounts or any other portion of the Collateral, then Pledgor hereby pledges and assigns to Pledgee and grants to Pledgee a lien and security interest in the following (collectively, the "COLLATERAL"): (i) each of the Pledgee Accounts and all certificates and instruments, if any, from time to time representing or evidencing all or any of the Pledgee Accounts; (ii) all of its right, title and interest in and to all amounts, cash, cash equivalents and funds and all bankers acceptances, bonds, book entry deposits, certificates of deposit, commercial paper, debentures, demand and time deposits, funding agreements, investment contracts, letters of credit and all proceeds from any drawings under any letter of credit, 4 money market funds, notes, reinvestment letters, repurchase obligations, securities or other instruments, all bonds, securities and other obligations issued by any government or any political subdivision thereof or any agency or instrumentality thereof, and all other property from time to time on deposit in the Pledgee Accounts or delivered to or otherwise possessed by Pledgee in substitution for or in addition to any or all of the then existing Collateral (collectively, the "DEPOSITED FUNDS"); (iii) all investments from time to time representing or evidencing the Pledgee Accounts or the Deposited Funds and all certificates and instruments, if any, from time to time representing or evidencing such investments; and (iv) to the extent not covered by clauses (i) through (iii) above, all cash and noncash proceeds and products of any of the foregoing, including, without limitation, interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the then existing Collateral. 2.2 NOTIFICATION OF THE DEPOSITORIES. Prior to the Effective Date Pledgor shall notify each Depository of the grant, pledge and assignment effected by this Cash Management Agreement by executing and delivering an irrevocable Restricted Account Letter in the form of Exhibit A hereto (each a "RESTRICTED ACCOUNT LETTER") to each Depository. Each such Restricted Account Letter shall be countersigned by the respective Depository and returned to Pledgee. 3. SECURITY FOR OBLIGATIONS. This Cash Management Agreement secures the prompt payment and performance in full when due, whether at stated maturity, by acceleration or otherwise (including the payment of amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a), or any successor provision thereto), of all Obligations of Pledgor now or hereafter existing. 4. CASH MANAGEMENT. 4.1 DEPOSIT OF GROSS CASH FLOW IN THE PROPERTY ACCOUNTS. So long as the Obligations shall remain outstanding, Pledgor shall deposit, or cause its property manager AIMCO Properties, L.P. ("PROPERTY MANAGER") (in the ordinary course of Property Manager's management of the Properties), to collect and to deposit, the Gross Cash Flow (as defined in the Reimbursement Agreement) from each Property into the applicable Property Account by directing the tenants of each Property to make rent payments payable to the applicable Property Account. Any such check or 5 instrument that is made payable to any person or entity other than the applicable Property Account shall be endorsed by Pledgor for deposit into the applicable Property Account in legally sufficient form to make Servicer, on behalf of Pledgee, a holder in due course thereof by the payee thereof (or, if Pledgor fails to do so, endorsed by Servicer, Servicer being authorized and instructed to do so pursuant to SUBSECTION 4.2). Pledgor agrees, and each agent of Pledgor (including Property Manager) shall be deemed to have agreed, not to commingle any rents received by it with any of its other funds or property and each further agrees (and shall be deemed to have further agreed) to hold all such rents in trust for Pledgee until deposited into the applicable Property Account in accordance herewith. Only amounts permitted or required to be deposited therein pursuant to this section 4 shall be deposited in the Property Accounts, in accordance with the terms of this Cash Management Agreement. 4.2 PLEDGEE AND SERVICER AUTHORIZED TO ENDORSE CHECKS. Pledgor hereby authorizes Pledgee and Servicer acting on behalf of Pledgee, to receive checks, drafts and other negotiable demand instruments payable to Pledgor or any agent of Pledgor, and authorizes and directs Servicer on behalf of Pledgee, and Servicer acknowledges and agrees, promptly upon receipt of such instrument, to endorse the same for deposit and to effect such deposit into the applicable Property Account. Each check, draft or instrument deposited into the applicable Property Account shall be deemed to have been endorsed by the payee thereof to the order of the applicable Property Account, whether or not such an endorsement is actually placed on such instrument and Servicer on behalf of Pledgee shall have the rights of a holder in due course of such instrument against the payee named thereon and against each party hereto having any right therein or claim thereto, whether or not any disbursement has been made of the funds represented by such instrument. Pledgor agrees to indemnify, defend (with counsel reasonably satisfactory to Pledgee) and hold Pledgee and Servicer harmless from and against any and all claims, actions, liabilities, judgments, costs, expenses (including reasonable attorneys' fees and disbursements) and other charges of whatever kind or character arising out of or relating to the receipt, endorsement or deposit of such checks or instruments as aforesaid. 4.3 DAILY SWEEP OF THE PROPERTY ACCOUNTS. All funds on deposit in each Property Account shall be automatically transferred through automated clearing house funds by electronic transfer or by federal wire transfer on a daily basis from each Property Account into the Central Account. 4.4 TRANSFER OF FUNDS FROM THE CENTRAL ACCOUNT. So long as no Event of Default has occurred and is continuing, Pledgee shall instruct the Servicer to cause all funds on deposit in the Central Account to be automatically transferred into the Borrower Account at the end of each Business Day; PROVIDED, HOWEVER, that if prior to an Event of Default, funds are held in the Central Account overnight for any 6 reason, interest accruing on such funds, if any, shall accrue for the benefit of Pledgor and shall be transferred to the Borrower Account on the next Business Day. Notwithstanding the foregoing, Pledgor shall have no right to withdraw funds from any of the Property Accounts or the Central Account. If an Event of Default occurs, then Pledgee shall, at Pledgee's option, instruct the Servicer to immediately cancel all future transfers of funds from the Central Account to the Borrower Account. If an Event of Default shall have occurred and be continuing, funds on deposit in the Central Account shall be applied by Servicer, at the direction of Pledgee and in Pledgee's option, in accordance with SECTION 13 hereof. 5. MAINTAINING THE ACCOUNTS. So long as the Obligations (as defined in the Reimbursement Agreement) remain outstanding, Pledgor will maintain each Account with the respective Depository or such other depository as Pledgee shall approve in writing from time to time. The Accounts shall be subject to such applicable laws, and such applicable regulations of the Board of Governors of the Federal Reserve System and of any other appropriate banking or governmental authority, as may now or hereafter be in effect. 6. FINANCING STATEMENTS. Pledgor shall execute such financing statements as may be required by Pledgee in order to perfect the security interest granted herein in the Collateral pursuant to the Uniform Commercial Code (the "CODE") as adopted in the state in which each Pledgee Account is located. 7. REPRESENTATIONS AND WARRANTIES. Pledgor represents and warrants to Pledgee and Servicer as follows: 7.1 Prior to the conveyances effected pursuant to this Cash Management Agreement, Pledgor was the legal and beneficial owner of the Collateral free and clear of any lien, security interest, or other charge or encumbrance except for the security interest created by any other Transaction Documents or this Cash Management Agreement. 7.2 To the extent that Pledgor shall be deemed to have any interest in all or any of the Pledgee Accounts or any other portion of the Collateral, the pledge and assignment of the Collateral pursuant to this Cash Management Agreement creates a valid and perfected first priority security interest in the Collateral, securing the payment and performance of the Obligations. 8. FURTHER ASSURANCES. Pledgor agrees that at any time and from time to time, at the expense of Pledgor, Pledgor will promptly execute and deliver to Pledgee all further instruments and documents, and take all further action, that may be necessary or desirable, or that Pledgee or Servicer may request, in order to perfect, continue and protect any security interest granted or purported to be granted hereby or to enable Pledgee to exercise and enforce its rights and remedies hereunder with respect to any Collateral. 7 9. TRANSFERS AND OTHER LIENS. Pledgor agrees that it will not (a) sell or otherwise dispose of any of the Collateral, or (b) create or permit to exist any lien, security interest, or other charge or encumbrance upon or with respect to any of the Collateral, except for the security interest created pursuant to this Cash Management Agreement or any other Transaction Document. 10. PLEDGEE APPOINTED ATTORNEY-IN-FACT. Pledgor hereby appoints Pledgee, through any duly authorized officer of Pledgee, as Pledgor's attorney-in-fact, with full authority in the place and stead of Pledgor and in the name of Pledgor or otherwise, from time to time in Pledgee's discretion during the continuance of an Event of Default, to take any action and to execute any instrument which Pledgee may deem necessary or advisable to accomplish the purposes of this Cash Management Agreement, including, without limitation, to receive, indorse and collect all instruments made payable to Pledgor representing any interest payment, dividend, or other distribution in respect of the Collateral or any part thereof and to give full discharge for the same. 11. PLEDGEE MAY PERFORM. If Pledgor fails to perform any agreement contained herein, then upon the expiration of any applicable cure period therefor, Pledgee or Servicer may itself perform, or cause performance of, such agreement, and the reasonable expenses of Pledgee incurred in connection therewith shall be payable by Pledgor to Pledgee upon demand. 12. REASONABLE CARE. Pledgee and Servicer shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which Pledgee or Servicer, as applicable, accords similar collateral in its possession. Neither Pledgee nor Servicer shall have any responsibility for (a) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Collateral, whether or not Pledgee or Servicer has or is deemed to have knowledge of such matters, (b) taking any steps to preserve rights against any parties with respect to any Collateral or (c) the collection of any Collateral. Neither Pledgee nor Servicer shall have any obligation or liability (i) to provide an accounting to Pledgor of deposits or payments to the Accounts or any of them, the identity of the tenants or other parties making such deposits or payments or the date on which such deposits or payments were made (it being agreed that Pledgor shall look to the Depositories for such information), or (ii) with respect to correspondence or other information which may be delivered to the Accounts or any of them with any deposit or instrument or otherwise. 13. REMEDIES UPON DEFAULT. If any Event of Default shall have occurred and be continuing: 13.1 Pledgee may, without notice to Pledgor except as required by law and at any time or from time to time, charge, set-off and otherwise apply all or any part of the Obligations against the Pledgee Accounts or any part thereof. 8 13.2 Pledgee shall have the right, in its discretion, to transfer to or to register in the name of Pledgee or any of its nominees any or all of the Collateral. 13.3 In addition to other rights and remedies provided for herein or otherwise available to it, Pledgee may also exercise all the rights and remedies of a secured party on default under the Code in effect at that time with respect to such Collateral, and Pledgee may, without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of Pledgee's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as Pledgee may deem commercially reasonable. Pledgor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days' notice to Pledgor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. Pledgee shall not be obligated to make any sale of the Collateral regardless of notice of sale having been given. Pledgee may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. 13.4 All Deposited Funds and all cash proceeds received by Pledgee in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied by Pledgee to the payment of any outstanding Obligations in such order as Pledgee may elect. 14. FEES AND EXPENSES. Pledgor will upon demand pay to Pledgee or Servicer, as applicable, the amount of any and all reasonable expenses, including the reasonable attorneys' fees and expenses of its counsel and of any experts and agents, which Pledgee or Servicer may incur in connection with (a) the administration of this Cash Management Agreement, (b) the custody or preservation of, or the sale of, collection of, or other realization upon, any of the Collateral, (c) the exercise or enforcement of any of the rights of Pledgee or Servicer hereunder or (d) the failure by Pledgor to perform or observe any of the provisions hereof. 15. AMENDMENTS, ETC. No amendment or waiver of any provision of this Cash Management Agreement nor consent to any departure by Pledgor herefrom shall in any event be effective unless the same shall be in writing and signed by Pledgee, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose of which given. 16. NOTICES. All notices, directions, certificates or other communications hereunder shall be given by certified or registered mail, return receipt requested, or by overnight courier addressed to the appropriate notice address set forth below. Any of the parties hereto may, by such notice described above, designate any further or different address to which subsequent notices, certificates or other communications shall be sent without any requirement of execution of any amendment to this Cash Management 9 Agreement. Any such notice, certificate or communication shall be deemed to have been given as of the date of actual delivery or the date of failure to deliver by reason of refusal to accept delivery or changed address of which no notice was given pursuant to this section 16. The notice addresses are as follows: (A) If to Pledgee: if by mail or overnight courier: Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C 20016 Attention: Senior Vice President - Multifamily Activities if by messenger: Fannie Mae 3939 Wisconsin Avenue, N.W. Washington, D.C 20016 Attention: Senior Vice President - Multifamily Activities in each case, with copies to: Fannie Mae Southwest Regional Office Two Galleria Tower 13455 Noel Road, Suite 600 Dallas, Texas 75240-5003 Attention: Regional Vice President - Multifamily Activities and to: Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attention: Multifamily Mortgage Operations - Manager Multifamily Deliveries 10 (B) If to Servicer: GMAC Commercial Mortgage Corporation 650 Drescher Road Horsham, PA 19044-8015 Attn: Barry Moore (C) If to Pledgor: OTC Apartments Limited Partnership 1873 South Bellaire Street, 17th Floor Denver, CO 80222-4348 Attention: Vice Chairman 17. CONTINUING SECURITY INTEREST. This Cash Management Agreement shall create a continuing security interest in the Collateral and shall (a) remain in full force and effect until the Obligations have been indefeasibly paid in full (the "RELEASE DATE"), (b) be binding upon Pledgor, its successors and assigns, and (c) inure to the benefit of Pledgee and its successors, transferees and assigns. From and after the Release Date, at the request and expense of Pledgor, Pledgee shall cause the remainder of the Collateral, if any, as shall not have been sold or otherwise applied pursuant to the terms hereof, to be returned to Pledgor or to such other person or entities who may be lawfully entitled thereto. 18. GOVERNING LAW; TERM. This Cash Management Agreement shall be construed and enforced in accordance with, and the rights and remedies of the parties hereto shall be governed by, the laws of the State of Florida without regard to conflicts of law principals except to the extent that Federal laws may prevail, provided however, that matters respecting the creation, continuation, perfection, priority and enforcement of the security interests granted hereunder, shall governed by and construed and enforced in accordance with, the internal law of the state or commonwealth in which the respective Pledgee Accounts are situated without regard to conflicts of laws principles of such state or commonwealth. 19. SEVERABILITY. In case any provision in or obligation under this Cash Management Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. 20. COUNTERPARTS. To facilitate execution, this Cash Management Agreement may be executed in any number of counterparts. It shall not be necessary that the signatures of, or on behalf of, each party, or that the signatures of all persons required to bind any party, appear on each counterpart, but it shall be sufficient that the signature of, or on behalf of, each party, appear on one or more counterparts. All counterparts shall collectively 11 constitute a single agreement. It shall not be necessary in making proof of this Cash Management Agreement to produce or account for more than a number of counterparts containing the respective signatures of, or on behalf of, all of the parties hereto. 21. SERVICER'S ROLE ON BEHALF OF PLEDGEE. In all circumstances set forth in this Cash Management Agreement where Pledgee is required to act, Servicer shall be entitled to act on behalf of Pledgee in accordance with Section 5.1 of the Reimbursement Agreement. If the agreement between Pledgee and Servicer with respect to the servicing of the Mortgage Loans (such agreement, including a Fannie Mae guide, if applicable, as it may be amended, restated, supplemented, replaced or otherwise modified from time to time, the "SERVICING AGREEMENT"), is terminated or if Servicer is otherwise replaced by Pledgee pursuant to the terms of the Servicing Agreement, then (a) Servicer's rights and obligations under this Cash Management Agreement shall immediately cease and Servicer shall have no further right to act for or on behalf of Pledgee and (b) each and all of the covenants, terms, provisions and agreements relating to Servicer and contained in this Cash Management Agreement shall be binding upon and inure to the benefit of Pledgee or, if applicable, any new servicer chosen by Pledgee in its sole discretion to succeed to the rights and obligations of Servicer under this Cash Management Agreement. 22. ASSIGNMENTS; THIRD-PARTY RIGHTS. None of the parties hereto shall assign this Cash Management Agreement, or delegate any obligations hereunder, without the prior written consent of Pledgee. Except as set forth in the immediately preceding sentence, nothing in this Cash Management Agreement shall confer any right upon any other person or other entity other than the parties hereto and their successors and permitted assigns. 23. CONSENT OF PLEDGEE. If any provision of this Cash Management Agreement provides for the prior approval or consent of Pledgee or any waiver by Pledgee and if a basis for Pledgee granting such approval, consent or waiver is not otherwise stated then it is understood and agreed that such approval or consent will be given by Pledgee in its sole and absolute discretion. 24. SATISFACTION REQUIREMENT. If any agreement, certificate or other writing, or any action taken or to be taken, is by the terms of this Agreement required to be satisfactory to Pledgee, then, unless otherwise expressly specified herein, the determination of such satisfaction shall be made by Pledgee in its sole and exclusive judgement. [THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY.] 12 IN WITNESS WHEREOF, Pledgor, Pledgee and Servicer have caused this Cash Management Agreement to be duly executed and delivered by their respective duly authorized officers as of the date first above written. PLEDGOR: OTC APARTMENTS LIMITED PARTNERSHIP, a Florida limited partnership By: AIMCO/OTC QRS, Inc., a Delaware corporation, its general partner By: /s/ Harry Alcock -------------------------------- Name: Harry Alcock Title: Vice President PLEDGEE: FEDERAL NATIONAL MORTGAGE ASSOCIATION By: /s/ Thomas W. White ------------------------------------- Name: Thomas W. White Title: Senior Vice President SERVICER: GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation By:/s/ Karen M. Net ------------------------------------- Name: Karen M. Net Title: Senior Vice President S-1 EX-10.81 23 EXHIBIT 10.81 PAYMENT GUARANTY THIS PAYMENT GUARANTY (this "Guaranty") is made and entered into as of this 1st day of July, 1996, by APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a corporation duly organized and existing under the laws of Maryland (the "Guarantor"), for the benefit of FEDERAL NATIONAL MORTGAGE ASSOCIATION, a corporation duly organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. Section 1716 ET. SEQ. ("Credit Enhancer"). RECITALS A. Pursuant to that certain Master Reimbursement Agreement of even date herewith, between Credit Enhancer and OTC Apartments Limited Partnership ("Borrower"), a limited partnership duly organized and existing under the laws of Florida (such agreement, as the same may be amended, supplemented, or otherwise modified or amended and restated from time to time in accordance with its terms, the "Reimbursement Agreement"), Credit Enhancer has agreed to provide credit enhancement pursuant to and in accordance with the terms of certain Related Fannie Mae Pass-Through Certificates executed and delivered in connection with certain Mortgage Loans made to Borrower by various issuers and financed by certain Related Bonds. B. Guarantor has an indirect ownership interest in, or is otherwise financially interested in, Borrower and will receive a material benefit from Credit Enhancer's agreement to enter into each of the Related Fannie Mae Pass- Through Certificates and the other Transaction Documents. C. Credit Enhancer is willing to enter into the Related Fannie Mae Pass- Through Certificates only if Guarantor agrees to guaranty certain obligations of Borrower under the Reimbursement Agreement, the Reimbursement Mortgages, the other Reimbursement Loan Documents and the other Transaction Documents. NOW THEREFORE, in order to induce Credit Enhancer to enter into the Related Fannie Mae Pass-Through Certificates for the benefit of Borrower, and in consideration thereof, Guarantor hereby agrees as follows: 1. DEFINITIONS. All capitalized terms used in this Guaranty and not defined herein shall have the respective meanings assigned to such terms in the Reimbursement Agreement. 2. GUARANTY OF PAYMENT. Guarantor irrevocably, absolutely and unconditionally guarantees to Credit Enhancer the full, due and punctual payment of: (a) all amounts for which Borrower may at any time be personally liable under subsection 3.11(b) or subsection 3.11(c) of the Reimbursement Agreement, whether for principal, interest or other sums; and (b) all amounts that Borrower is obligated to pay pursuant to section 3.1(f) of the Reimbursement Agreement. This Guaranty is an unconditional guaranty of payment and not of collection, and is in no way conditioned upon any attempt by Credit Enhancer to collect from Borrower. This Guaranty is a continuing guaranty which shall remain in full force and effect until all of the Obligations of Borrower to Credit Enhancer under the Reimbursement Agreement have been paid and performed in full, and Guarantor shall not be released from any obligations to Credit Enhancer under this Guaranty as long as any amount payable or any other obligation owing by Borrower to Credit Enhancer under the Reimbursement Agreement is not satisfied, performed, settled or paid in full. Guarantor's obligations under this Section are hereinafter referred to as the "Guaranteed Obligations." 3. FORM OF PAYMENT. All payments under this Guaranty shall be made to Credit Enhancer in immediately available funds, without reduction by any recoupment, set-off, counterclaim or cross-claim against Credit Enhancer, in care of the Servicer at the address set forth in Section 15 hereof. 4. GUARANTOR'S OBLIGATIONS ARE ABSOLUTE. The obligations of Guarantor under this Guaranty shall be absolute and unconditional, shall not be subject to any counterclaim, set-off, recoupment, deduction or defense based upon any claim Guarantor may have against Credit Enhancer or Borrower and shall remain in full force and effect without regard to, and shall not be released, discharged or terminated or in any other way affected by, any circumstance or condition (whether or not Guarantor shall have any knowledge or notice thereof), including without limitation: (a) any amendment or modification of, or extension of time for payment of any of the principal of, interest on or other amounts payable under, the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document, or any other Transaction Document (except that the liability of Guarantor hereunder shall be deemed to apply to such Transaction Documents as so amended or modified or to the payment of all amounts so extended); (b) any exercise or non-exercise by Credit Enhancer of any right, power or remedy taken or in respect of the Reimbursement Agreement, the Reimbursement Mortgages, any other reimbursement Loan Document, or any other Transaction Document, or any waiver, consent, forbearance, indulgence or other action, inaction or omission by Credit Enhancer under or in respect of the Reimbursement Agreement, the Reimbursement Mortgages, the other Reimbursement Loan Documents or any other Transaction Documents; (c) any assignment, sale or other transfer of Borrower's interest in all or any part of the real or personal property which at any time constitutes collateral for the payment of the Guaranteed Obligations including without limitation a conveyance of such property by Borrower to Credit Enhancer by deed in lieu of foreclosure; (d) any bankruptcy, insolvency, reorganization, adjustment, dissolution, liquidation or other like proceeding involving or affecting Borrower or Credit Enhancer or their respective properties or creditors, or any action taken with respect to the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction 2 Document by any trustee or receiver of Credit Enhancer or Borrower, or by any court, in any such proceeding; (e) any invalidity or unenforceability, in whole or in part, of any term or provision of the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document or Borrower's incapacity or lack of authority to enter into the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document; (f) any release, compromise, settlement or discharge with respect to all or any portion of Borrower's obligations under the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document; (g) any acceptance of additional or substituted collateral for payment of the Guaranteed Obligations or any release or subordination of any collateral held at any time by Credit Enhancer as security for the payment of the Guaranteed Obligations; (h) any resort to Guarantor for payment of all or any portion of the Guaranteed Obligations, whether or not Credit Enhancer shall have resorted to any collateral securing the Guaranteed Obligations or shall have proceeded against Borrower or any other Person primarily or secondarily liable for the Obligations, it being intended that Credit Enhancer may pursue its rights hereunder at any time or times; or (i) any waiver by Credit Enhancer of any breach of the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document by Borrower. No exercise, delay in exercise or non-exercise by Credit Enhancer of any right hereby given it, no dealing by Credit Enhancer with Borrower, Guarantor or any other Person, no change, impairment or suspension of any right or remedy of Credit Enhancer, and no act or thing which, but for this provision, could act as a release or exoneration of the liabilities of Guarantor hereunder, shall in any way affect, decrease, diminish or impair any of the obligations of Guarantor hereunder or give Guarantor or any other Person any recourse or defense against Credit Enhancer. 5. WAIVER. Guarantor unconditionally waives the following: (a) notice of acceptance of this Guaranty and notice of any of the matters referred to in Section 4 hereof; (b) all notices which may be required by statute, rule of law or otherwise to preserve intact any rights which Credit Enhancer may have against Guarantor under this Guaranty, including without limitation, any demand, proof or notice of non-payment of any of the principal of, interest on or other amounts payable under the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document, and notice of any failure on the part of Borrower to perform and comply with any 3 covenant, agreement, term or condition of the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document; (c) any right to the enforcement, assertion or exercise of any right, power or remedy conferred in the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document or otherwise; (d) any requirement that Credit Enhancer act with diligence in enforcing its rights under the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document or this Guaranty; (e) any right to require Credit Enhancer to proceed against or exhaust its recourse against Borrower or any security or collateral held by Credit Enhancer at any time for the payment of the Guaranteed Obligations or to pursue any other remedy in its power before being entitled to payment from Guarantor under this Guaranty or before proceeding against Guarantor; (f) any failure by Credit Enhancer to file or enforce a claim against the estate (either in administration, bankruptcy or any other proceeding) of Borrower or any other Person; (g) any defense based upon an election of remedies by Credit Enhancer which destroys or otherwise impairs the subrogation rights of Guarantor or the right of Guarantor (after payment of the Guaranteed Obligations) to proceed against Borrower for reimbursement, or both; (h) any defense based upon any taking, modification or release of any collateral for the Guaranteed Obligations, or any failure to perfect any security interest in, or the taking of, or failure to take any other action with respect to, any collateral securing payment of the Guaranteed Obligations; (i) any defense based upon the addition, substitution or release, in whole or in part, of any Person(s), including without limitation another Guarantor, primarily or secondarily liable for or in respect of the Guaranteed Obligations; (j) any rights or defenses based upon an offset by Guarantor against any obligation now or hereafter owed to Guarantor by Borrower; (k) any defense of the statute of limitations in any action against Guarantor under this Guaranty; and (l) all other notices which may or might be lawfully waived by Guarantor; it being the intention hereof that Guarantor shall remain liable as principal, to the extent set forth in this Guaranty, until the payment in full of the Guaranteed Obligations, notwithstanding any act, omission or thing which might otherwise operate as a legal or equitable discharge of Guarantor other than the payment in full of the Guaranteed Obligations. No delay by Credit 4 Enhancer in exercising any rights and/or powers hereunder or in taking any action to enforce Borrower's obligations under the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document shall operate as a waiver as to such rights or powers or in any manner prejudice any and all of Credit Enhancer's rights and powers hereunder against Guarantor. It is the intention of Guarantor under this Guaranty that as long as any of the Guaranteed Obligations remain unsatisfied, the obligations of Guarantor hereunder shall not be discharged except by performance and then only to the extent of such performance. 6. ELECTION OF REMEDIES. This Guaranty may be enforced from time to time, as often as occasion therefor may arise, and without any requirement that Credit Enhancer must first exercise any rights against Borrower or any other Person or exhaust any remedies available to it against Borrower under the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document or against any other Person or resort to any collateral at any time held by it for performance of the Guaranteed Obligations or any other source or means of obtaining payment of any of the Guaranteed Obligations. 7. EXPENSES. Guarantor agrees to pay all costs and out-of-pocket expenses, including court costs and expenses and the reasonable fees and disbursements of legal counsel incurred by or on behalf of Credit Enhancer or the Servicer in connection with the enforcement of Guarantor's obligations under this Guaranty or the protection of Credit Enhancer's rights under this Guaranty. The covenant contained in this Section shall survive the payment of the Guaranteed Obligations. 8. CONDITION OF BORROWER. Guarantor is fully aware of the financial condition of Borrower and is executing and delivering this Guaranty based solely upon Guarantor's own independent investigation of all matters pertinent hereto and is not relying in any manner upon any representation or statement made by Credit Enhancer. Guarantor represents and warrants that Guarantor is in a position to obtain, and Guarantor hereby assumes full responsibility for obtaining, any additional information concerning Borrower's financial condition and any other matters pertinent hereto as Guarantor may desire and Guarantor is not relying upon or expecting Credit Enhancer to furnish to Guarantor any information now or hereafter in Credit Enhancer's possession concerning the same or any other matter. By executing this Guaranty, Guarantor knowingly accepts the full range of risks encompassed within a contract of this type, which risks Guarantor acknowledges. 9. FURTHER ASSURANCES. Guarantor agrees at any time and from time to time upon request by Credit Enhancer to take or cause to be taken, any action and to execute and deliver any additional documents which in the opinion of Credit Enhancer, may be necessary in order to assure to Credit Enhancer the full benefits of this Guaranty. 10. SUBORDINATION. Guarantor hereby irrevocably and unconditionally agrees that any claims, direct or indirect, that Guarantor may have by subrogation or other form of reimbursement, against Borrower or to any security or any interest therein, by virtue of this Guaranty or as a consequence of any payment made by Guarantor pursuant to this Guaranty, 5 shall be fully subordinated in time and right of payment to the payment in full of the Guaranteed Obligations and all other obligations of Guarantor to Credit Enhancer under this Guaranty. 11. NO SUBROGATION. Guarantor shall not have any right of subrogation against Borrower by reason of any payment by Guarantor under this Guaranty. 12. INSOLVENCY AND LIABILITY OF BORROWER. So long as any of the Guaranteed Obligations are unpaid and this Guaranty is in effect, Guarantor agrees to file all claims against Borrower in any bankruptcy or other proceeding in which the filing of claims is required by law in connection with indebtedness owed by Borrower to Guarantor and to assign to Credit Enhancer all rights of Guarantor thereunder up to the amount of such indebtedness. In all such cases the Person or Persons authorized to pay such claims shall pay to Credit Enhancer the full amount thereof to the full extent necessary to pay the Guarantee Obligations and Guarantor hereby assigns to Credit Enhancer all of Guarantor's rights to all such payments to which Guarantor would otherwise be entitled. Notwithstanding the foregoing and except to the extent that any sums owed by Borrower to Credit Enhancer under the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document shall have been fully satisfied thereby, the liability of Guarantor hereunder shall in no way be affected by: (a) the release or discharge of Borrower in any creditors', receivership, bankruptcy or other proceedings; or (b) the impairment, limitation or modification of the liability of Borrower or the estate of Borrower in bankruptcy resulting from the operation of any present or future provisions of the Bankruptcy Code or other statute or from the decision in any court. 13. PREFERENCES, FRAUDULENT CONVEYANCES, ETC. If Credit Enhancer is required to refund, or voluntarily refunds, any payment received from Borrower because such payment is or may be avoided, invalidated, declared fraudulent, set aside or determined to be void or voidable as a preference, fraudulent conveyance, impermissible setoff or a diversion of trust funds under the bankruptcy laws or for any similar reason, including without limitation any judgment, order or decree of any court or administrative body having jurisdiction over Credit Enhancer or any of its property, or any statement or compromise of any claim effected by Credit Enhancer with Borrower or any other claimant (a "RESCINDED PAYMENT"), then Guarantor's liability to Credit Enhancer shall continue in full force and effect, or Guarantor's liability to Credit Enhancer shall be reinstated, as the case may be, with the same effect and to the same extent as if the Rescinded Payment had not been received by Credit Enhancer, notwithstanding the cancellation or termination of the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document. In addition, Guarantor shall pay, or reimburse Credit Enhancer for, all expenses (including all reasonable attorneys' fees, court costs and related disbursements) incurred by Credit Enhancer in the defense of any claim that a payment received by Credit Enhancer in respect of all or any part of the Guaranteed Obligations must be refunded. The provisions of this Section shall survive the termination of this Guaranty and any satisfaction and discharge of Borrower by virtue of any payment, court order or any federal or state law. 6 14. WAIVER. Neither this Guaranty nor any term hereof may be changed, waived, discharged or terminated except by an instrument in writing signed by Credit Enhancer and Guarantor expressly referring to this Guaranty and to the provisions so changed or limited. No such waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of Credit Enhancer in exercising any right under this Guaranty shall operate as a waiver thereof otherwise by prejudicial thereto. 15. NOTICES. Any demand or notice required or permitted to be given by Credit Eahancer to Guarantor under this Guaranty shall be sufficiently given when sent by certified or registered mail, return receipt requested, OR by overnight courier addressed to the appropriate notice address set forth below. Any of the parties hereto may, by a notice to the other party specifically captioned "Notice of Change of Address pursuant to section 15 of the Payment Guaranty", designate any further or different address to which subsequent notices, certificates or other communications shall be sent without any requirement of execution of any amendment to this Guaranty. Any such notice, certificate or communication shall be deemed to have been given as of the date of actual delivery or the date of failure to deliver by reason of refusal to accept delivery or changed address of which no notice was given pursuant to this Section. The notice addresses are as follows: (a) if to Guarantor: Apartment Investment and Management Company 1873 South Bellaire Street, 17th Floor Denver, Colorado 80222-4348 Attention: Vice Chairman (b) if to Credit Enhancer: if by mail or overnight courier: Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attention: Senior Vice President - Multifamily Activities if by messenger: Fannie Mae 3939 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attention: Senior Vice President - Multifamily Activities 7 in each case, with copies to: Fannie Mae Southwest Regional Office Two Galleria Tower 13455 Noel Road, Suite 600 Dallas, Texas 75240-5003 Attention: Vice President - Multifamily Activities and to: Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attention: Multifamily Mortgage Operations - Manager Multifamily Deliveries and with copies to Servicer: GMAC Commercial Mortgage Corporation 650 Drescher Road Horsham, PA 19044-8015 Attention: Barry Moore 16. JURISDICTION, CONSENT TO SERVICE, WAIVER OF JURY TRIAL. (a) Guarantor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any court in the state of Florida or Federal court of the United States of America sitting in the State of Florida, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Guaranty or for recognition or enforcement of any judgment, and each of Guarantor and Credit Enhancer hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such Florida court or, to the extent permitted by law, in such Federal court. Each of Guarantor and Credit Enhancer agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Guaranty shall effect any right that Credit Enhancer may otherwise have to bring any action or proceeding relating to this Guaranty against Guarantor or its properties in the courts of any jurisdiction. (b) Guarantor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Guaranty in any Federal court or any court in the state of Florida. Each of Guarantor and Credit Enhancer hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. 8 (c) Each of Guarantor and Credit Enhancer irrevocably consents to service of process in the manner provided for notices in section 15. Nothing in this Guaranty will affect the right of either Guarantor or Credit Enhancer to serve process in any other manner permitted by law. (d) GUARANTOR AND CREDIT ENHANCER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS GUARANTY AND FOR ANY COUNTERCLAIM THEREIN. 17. WAIVER OF HOMESTEAD OR EXEMPTION RIGHTS. Guarantor waives any and all homestead or exemption rights Guarantor may have under or by virtue of any Constitution or laws of any State of the United States or the State of Florida with respect to the liability and obligation arising under this Guaranty. Guarantor hereby transfers, conveys, and assigns to Credit Enhancer a sufficient amount of any homestead or exemption rights that may be allowed to Guarantor, including any such homestead or exemption rights that may be set apart in bankruptcy, to pay the obligations created by this Guaranty in full, with all costs or collection. Guarantor hereby, directs any party, having possession of such homestead or exemption rights, including a trustee in bankruptcy to deliver to Credit Enhancer a sufficient amount of property or money set apart as exempt to pay Guarantor's obligations arising under this Guaranty. 18. ASSIGNABILITY BY CREDIT ENHANCER. Credit Enhancer may, without notice to Guarantor, assign or transfer the Obligations of Borrower owed to Credit Enhancer under the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document, in whole or in part. In such event, each and every immediate and successive assignee, transferee or holder of all or any part of the Obligations of Borrower under the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document shall have the right to enforce this Guaranty, by legal action or otherwise, as fully as if such assignee, transferee, or holder were by name specifically given such right and power in this Guaranty. Credit Enhancer shall have an unimpaired right to enforce this Guaranty for its benefit as to so much of the Obligations of Borrower under the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document, as Credit Enhancer has not sold, assigned or transferred. 19. GUARANTOR BOUND BY JUDGMENT AGAINST BORROWER. Guarantor shall be conclusively bound with respect to all issues involving or relating to the Guaranteed Obligations, by the judgment in any jurisdiction in any action by Credit Enhancer against Borrower in connection with the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document (wherever instituted) as if Guarantor were a party to such action even if not so joined as a party. 20. COUNTERPARTS. This Guaranty may be signed in one or more counterparts, each of which shall be an original and all of which together shall constitute but one and the same instrument. 21. GOVERNING LAW. This Guaranty shall be construed and enforced in accordance with, and the rights and remedies of the parties hereto shall be governed by, the laws of the 9 IN WITNESS WHEREOF, Guarantor has signed this Guaranty under seal as of the day and year first above written. GUARANTOR: APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation By: /s/ Harry Alcock ------------------------------------- Name: Harry Alcock Title: Vice President S-1 EX-10.82 24 EXHIBIT 10.82 PAYMENT GUARANTY THIS PAYMENT GUARANTY (this "GUARANTY") is made and entered into as of this 1st day of July, 1996, by AIMCO PROPERTIES, L.P., a limited partnership duly organized and existing under the laws of Delaware (the "GUARANTOR"), for the benefit of FEDERAL NATIONAL MORTGAGE ASSOCIATION, a corporation duly organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. Section 1716 ET. SEQ. ("CREDIT ENHANCER"). RECITALS A. Pursuant to that certain Master Reimbursement Agreement of even date herewith, between Credit Enhancer and OTC Apartments Limited Partnership ("BORROWER"), a limited partnership duly organized and existing under the laws of Florida (such agreement, as the same may be amended, supplemented, or otherwise modified or amended and restated from time to time in accordance with its terms, the "REIMBURSEMENT AGREEMENT"), Credit Enhancer has agreed to provide credit enhancement pursuant to and in accordance with the terms of certain Related Fannie Mae Pass-Through Certificates executed and delivered in connection with certain Mortgage Loans made to Borrower by various issuers and financed. by certain Related Bonds. B. Guarantor has an ownership interest in, or is otherwise financially interested in, Borrower and will receive a direct and material benefit from Credit Enhancer's agreement to enter into each of the Related Fannie Mae Pass- Through Certificates and the other Transaction Documents. C. Credit Enhancer is willing to enter into the Related Fannie Mae Pass- Through Certificates only if Guarantor agrees to guaranty certain obligations of Borrower under the Reimbursement Agreement, the Reimbursement Mortgages, the other Reimbursement Loan Documents and the other Transaction Documents. NOW THEREFORE, in order to induce Credit Enhancer to enter into the Related Fannie Mae Pass-Through Certificates for the benefit of Borrower, and in consideration thereof, Guarantor hereby agrees as follows: 1. DEFINITIONS. All capitalized terms used in this Guaranty and not defined herein shall have the respective meanings assigned to such terms in the Reimbursement Agreement. 2. GUARANTY OF PAYMENT. Guarantor irrevocably, absolutely and unconditionally guarantees to Credit Enhancer the full, due and punctual payment of: (a) all amounts for which Borrower may at any time be personally liable under subsection 3.11(b) or subsection 3.11(c) of the Reimbursement Agreement, whether for principal, interest or other sums; and (b) all amounts that Borrower is obligated to pay pursuant to section 3.1(f) of the Reimbursement Agreement. This Guaranty is an unconditional guaranty of payment and not of collection, and is in no way conditioned upon any attempt by Credit Enhancer to collect from Borrower. This Guaranty is a continuing guaranty which shall remain in full force and effect until all of the Obligations of Borrower to Credit Enhancer under the Reimbursement Agreement have been paid and performed in full, and Guarantor shall not be released from any obligations to Credit Enhancer under this Guaranty as long as any amount payable or any other obligation owing by Borrower to Credit Enhancer under the Reimbursement Agreement is not satisfied, performed, settled or paid in full. Guarantor's obligations under this Section are hereinafter referred to as the "GUARANTEED OBLIGATIONS." 3. FORM OF PAYMENT. All payments under this Guaranty shall be made to Credit Enhancer in immediately available funds, without reduction by any recoupment, set-off, counterclaim or cross-claim against Credit Enhancer, in care of the Servicer at the address set forth in Section 15 hereof. 4. GUARANTOR'S OBLIGATIONS ARE ABSOLUTE. The obligations of Guarantor under this Guaranty shall be absolute and unconditional, shall not be subject to any counterclaim, set-off, recoupment, deduction or defense based upon any claim Guarantor may have against Credit Enhancer or Borrower and shall remain in full force and effect without regard to, and shall not be released, discharged or terminated or in any other way affected by, any circumstance or condition (whether or not Guarantor shall have any knowledge or notice thereof), including without limitation: (a) any amendment or modification of, or extension of time for payment of any of the principal of, interest on or other amounts payable under, the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document, or any other Transaction Document (except that the liability of Guarantor hereunder shall be deemed to apply to such Transaction Documents as so amended or modified or to the payment of all amounts so extended); (b) any exercise or non-exercise by Credit Enhancer of any right, power or remedy taken or in respect of the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document, or any other Transaction Document, or any waiver, consent, forbearance, indulgence or other action, inaction or omission by Credit Enhancer under or in respect of the Reimbursement Agreement, the Reimbursement Mortgages, the other Reimbursement Loan Documents or any other Transaction Documents; (c) any assignment, sale or other transfer of Borrower's interest in all or any part of the real or personal property which at any time constitutes collateral for the payment of the Guaranteed Obligations including without limitation a conveyance of such property by Borrower to Credit Enhancer by deed in lieu of foreclosure; (d) any bankruptcy, insolvency, reorganization, adjustment, dissolution, liquidation or other like proceeding involving or affecting Borrower or Credit Enhancer or their respective properties or creditors, or any action taken with respect to the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction 2 Document by any trustee or receiver of Credit Enhancer or Borrower, or by any court, in any such proceeding; (e) any invalidity or unenforceability, in whole or in part, of any term or provision of the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document or Borrower's incapacity or lack of authority to enter into the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document; (f) any release, compromise, settlement or discharge with respect to all or any portion of Borrower's obligations under the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document; (g) any acceptance of additional or substituted collateral for payment of the Guaranteed Obligations or any release or subordination of any collateral held at any time by Credit Enhancer as security for the payment of the Guaranteed Obligations; (h) any resort to Guarantor for payment of all or any portion of the Guaranteed Obligations, whether or not Credit Enhancer shall have resorted to any collateral securing the Guaranteed Obligations or shall have proceeded against Borrower or any other Person primarily or secondarily liable for the Obligations, it being intended that Credit Enhancer may pursue its rights hereunder at any time or times; or (i) any waiver by Credit Enhancer of any breach of the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document by Borrower. No exercise, delay in exercise or non-exercise by Credit Enhancer of any right hereby given it, no dealing by Credit Enhancer with Borrower, Guarantor or any other Person, no change, impairment or suspension of any right or remedy of Credit Enhancer, and no act or thing which, but for this provision, could act as a release or exoneration of the liabilities of Guarantor hereunder, shall in any way affect, decrease, diminish or impair any of the obligations of Guarantor hereunder or give Guarantor or any other Person any recourse or defense against Credit Enhancer. 5. WAIVER. Guarantor unconditionally waives the following: (a) notice of acceptance of this Guaranty and notice of any of the matters referred to in Section 4 hereof; (b) all notices which may be required by statute, rule of law or otherwise to preserve intact any rights which Credit Enhancer may have against Guarantor under this Guaranty, including without limitation, any demand, proof or notice of non-payment of any of the principal of, interest on or other amounts payable under the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document, and notice of any failure on the part of Borrower to perform and comply with any 3 covenant, agreement, term or condition of the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document; (c) any right to the enforcement, assertion or exercise of any right, power or remedy conferred in the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document or otherwise; (d) any requirement that Credit Enhancer act with diligence in enforcing its rights under the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document or this Guaranty; (e) any right to require Credit Enhancer to proceed against or exhaust its recourse against Borrower or any security or collateral held by Credit Enhancer at any time for the payment of the Guaranteed Obligations or to pursue any other remedy in its power before being entitled to payment from Guarantor under this Guaranty or before proceeding against Guarantor; (f) any failure by Credit Enhancer to file or enforce a claim against the estate (either in administration, bankruptcy or any other proceeding) of Borrower or any other Person; (g) any defense based upon an election of remedies by Credit Enhancer which destroys or otherwise impairs the subrogation rights of Guarantor or the right of Guarantor (after payment of the Guaranteed Obligations) to proceed against Borrower for reimbursement, or both; (h) any defense based upon any taking, modification or release of any collateral for the Guaranteed Obligations, or any failure to perfect any security interest in, or the taking of, or failure to take any other action with respect to, any collateral securing payment of the Guaranteed Obligations; (i) any defense based upon the addition, substitution or release, in whole or in part, of any Person(s), including without limitation another Guarantor, primarily or secondarily liable for or in respect of the Guaranteed Obligations; (j) any rights or defenses based upon an offset by Guarantor against any obligation now or hereafter owed to Guarantor by Borrower; (k) any defense of the statute of limitations in any action against Guarantor under this Guaranty; and (l) all other notices which may or might be lawfully waived by Guarantor; it being the intention hereof that Guarantor shall remain liable as principal, to the extent set forth in this Guaranty, until the payment in full of the Guaranteed Obligations, notwithstanding any act, omission or thing which might otherwise operate as a legal or equitable discharge of Guarantor other than the payment in full of the Guaranteed Obligations. No delay by Credit 4 Enhancer in exercising any rights and/or powers hereunder or in taking any action to enforce Borrower's obligations under the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document shall operate as a waiver as to such rights or powers or in any manner prejudice any and all of Credit Enhancer's rights and powers hereunder against Guarantor. It is the intention of Guarantor under this Guaranty that as long as any of the Guaranteed Obligations remain unsatisfied, the obligations of Guarantor hereunder shall not be discharged except by performance and then only to the extent of such performance. 6. ELECTION OF REMEDIES. This Guaranty may be enforced from time to time, as often as occasion therefor may arise, and without any requirement that Credit Enhancer must first exercise any rights against Borrower or any other Person or exhaust any remedies available to it against Borrower under the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document or against any other Person or resort to any collateral at any time held by it for performance of the Guaranteed Obligations or any other source or means of obtaining payment of any of the Guaranteed Obligations. 7. EXPENSES. Guarantor agrees to pay all costs and out-of-pocket expenses, including court costs and expenses and the reasonable fees and disbursements of legal counsel incurred by or on behalf of Credit Enhancer or the Servicer in connection with the enforcement of Guarantor's obligations under this Guaranty or the protection of Credit Enhancer's rights under this Guaranty. The covenant contained in this Section shall survive the payment of the Guaranteed Obligations. 8. CONDITION OF BORROWER. Guarantor is fully aware of the financial condition of Borrower and is executing and delivering this Guaranty based solely upon Guarantor's own independent investigation of all matters pertinent hereto and is not relying in any manner upon any representation or statement made by Credit Enhancer. Guarantor represents and warrants that Guarantor is in a position to obtain, and Guarantor hereby assumes full responsibility for obtaining, any additional information concerning Borrower's financial condition and any other matters pertinent hereto as Guarantor may desire and Guarantor is not relying upon or expecting Credit Enhancer to furnish to Guarantor any information now or hereafter in Credit Enhancer's possession concerning the same or any other matter. By executing this Guaranty, Guarantor knowingly accepts the full range of risks encompassed within a contract of this type, which risks Guarantor acknowledges. 9. FURTHER ASSURANCES. Guarantor agrees at any time and from time to time upon request by Credit Enhancer to take or cause to be taken, any action and to execute and deliver any additional documents which in the opinion of Credit Enhancer, may be necessary in order to assure to Credit Enhancer the full benefits of this Guaranty. 10. SUBORDINATION. Guarantor hereby irrevocably and unconditionally agrees that any claims, direct or indirect, that Guarantor may have by subrogation or other form of reimbursement, against Borrower or to any security or any interest therein, by virtue of this Guaranty or as a consequence of any payment made by Guarantor pursuant to this Guaranty, 5 shall be fully subordinated in time and right of payment to the payment in full of the Guaranteed Obligations and all other obligations of Guarantor to Credit Enhancer under this Guaranty. 11. NO SUBROGATION. Guarantor shall not have any right of subrogation against Borrower by reason of any payment by Guarantor under this Guaranty. 12. INSOLVENCY AND LIABILITY OF BORROWER. So long as any of the Guaranteed Obligations are unpaid and this Guaranty is in effect, Guarantor agrees to file all claims against Borrower in any bankruptcy or other proceeding in which the filing of claims is required by law in connection with indebtedness owed by Borrower to Guarantor and to assign to Credit Enhancer all rights of Guarantor thereunder up to the amount of such indebtedness. In all such cases the Person or Persons authorized to pay such claims shall pay to Credit Enhancer the full amount thereof to the full extent necessary to pay the Guarantee Obligations and Guarantor hereby assigns to Credit Enhancer all of Guarantor's rights to all such payments to which Guarantor would otherwise be entitled. Notwithstanding the foregoing and except to the extent that any sums owed by Borrower to Credit Enhancer under the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document shall have been fully satisfied thereby, the liability of Guarantor hereunder shall in no way be affected by: (a) the release or discharge of Borrower in any creditors', receivership, bankruptcy or other proceedings; or (b) the impairment, limitation or modification of the liability of Borrower or the estate of Borrower in bankruptcy resulting from the operation of any present or future provisions of the Bankruptcy Code or other statute or from the decision in any court. 13. PREFERENCES, FRAUDULENT CONVEYANCES, ETC. If Credit Enhancer is required to refund, or voluntarily refunds, any payment received from Borrower because such payment is or may be avoided, invalidated, declared fraudulent, set aside or determined to be void or voidable as a preference, fraudulent conveyance, impermissible setoff or a diversion of trust funds under the bankruptcy laws or for any similar reason, including without limitation any judgment, order or decree of any court or administrative body having jurisdiction over Credit Enhancer or any of its property, or any statement or compromise of any claim effected by Credit Enhancer with Borrower or any other claimant (a "RESCINDED PAYMENT"), then Guarantor's liability to Credit Enhancer shall continue in full force and effect, or Guarantor's liability to Credit Enhancer shall be reinstated, as the case may be, with the same effect and to the same extent as if the Rescinded Payment had not been received by Credit Enhancer, notwithstanding the cancellation or termination of the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document. In addition, Guarantor shall pay, or reimburse Credit Enhancer for, all expenses (including all reasonable attorneys' fees, court costs and related disbursements) incurred by Credit Enhancer in the defense of any claim that a payment received by Credit Enhancer in respect of all or any part of the Guaranteed Obligations must be refunded. The provisions of this Section shall survive the termination of this Guaranty and any satisfaction and discharge of Borrower by virtue of any payment, court order or any federal or state law. 6 14. WAIVER. Neither this Guaranty nor any term hereof may be changed, waived, discharged or terminated except by an instrument in writing signed by Credit Enhancer and Guarantor expressly referring to this Guaranty and to the provisions so changed or limited. No such waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of Credit Enhancer in exercising any right under this Guaranty shall operate as a waiver thereof otherwise by prejudicial thereto. 15. NOTICES. Any demand or notice required or permitted to be given by Credit Enhancer to Guarantor under this Guaranty shall be sufficiently given when sent by certified or registered mail, return receipt requested, OR by overnight courier addressed to the appropriate notice address set forth below. Any of the parties hereto may, by a notice to the other party specifically captioned "Notice of Change of Address pursuant to section 15 of the Payment Guaranty", designate any further or different address to which subsequent notices, certificates or other communications shall be sent without any requirement of execution of any amendment to this Guaranty. Any such notice, certificate or communication shall be deemed to have been given as of the date of actual delivery or the date of failure to deliver by reason of refusal to accept delivery or changed address of which no notice was given pursuant to this Section. The notice addresses are as follows: (a) if to Guarantor: AIMCO PROPERTIES, L.P. 1873 South Bellaire Street, 17th Floor Denver, Colorado 80222-4348 Attention: Vice Chairman (b) if to Credit Enhancer: if by mail or overnight courier: Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attention: Senior Vice President - Multifamily Activities if by messenger: Fannie Mae 3939 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attention: Senior Vice President - Multifamily Activities 7 in each case, with copies to: Fannie Mae Southwest Regional Office Two Galleria Tower 13455 Noel Road, Suite 600 Dallas, Texas 75240-5003 Attention: Vice President - Multifamily Activities and to: Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attention: Multifamily Mortgage Operations - Manager Multifamily Deliveries and with copies to Servicer: GMAC Commercial Mortgage Corporation 650 Drescher Road Horsham, PA 19044-8015 Attention: Barry Moore 16. JURISDICTION, CONSENT TO SERVICE, WAIVER OF JURY TRIAL. (a) Guarantor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any court in the state of Florida or Federal court of the United States of America sitting in the State of Florida, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Guaranty or for recognition or enforcement of any judgment, and each of Guarantor and Credit Enhancer hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such Florida court or, to the extent permitted by law, in such Federal court. Each of Guarantor and Credit Enhancer agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Guaranty shall effect any right that Credit Enhancer may otherwise have to bring any action or proceeding relating to this Guaranty against Guarantor or its properties in the courts of any jurisdiction. (b) Guarantor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Guaranty in any Federal court or any court in the state of Florida. Each of Guarantor and Credit Enhancer hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. 8 (c) Each of Guarantor and Credit Enhancer irrevocably consents to service of process in the manner provided for notices in section 15. Nothing in this Guaranty will affect the right of either Guarantor or Credit Enhancer to serve process in any other manner permitted by law. (d) GUARANTOR AND CREDIT ENHANCER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS GUARANTY AND FOR ANY COUNTERCLAIM THEREIN. 17. WAIVER OF HOMESTEAD OR EXEMPTION RIGHTS. Guarantor waives any and all homestead or exemption rights Guarantor may have under or by virtue of any Constitution or laws of any State of the United States or the State of Florida with respect to the liability and obligation arising under this Guaranty. Guarantor hereby transfers, conveys, and assigns to Credit Enhancer a sufficient amount of any homestead or exemption rights that may be allowed to Guarantor, including any such homestead or exemption rights that may be set apart in bankruptcy, to pay the obligations created by this Guaranty in full, with all costs or collection. Guarantor hereby, directs any party, having possession of such homestead or exemption rights, including a trustee in bankruptcy to deliver to Credit Enhancer a sufficient amount of property or money set apart as exempt to pay Guarantor's obligations arising under this Guaranty. 18. ASSIGNABILITY BY CREDIT ENHANCER. Credit Enhancer may, without notice to Guarantor, assign or transfer the Obligations of Borrower owed to Credit Enhancer under the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document, in whole or in part. In such event, each and every immediate and successive assignee, transferee or holder of all or any part of the Obligations of Borrower under the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document shall have the right to enforce this Guaranty, by legal action or otherwise, as fully as if such assignee, transferee, or-holder were by name specifically given such right and power in this Guaranty. Credit Enhancer shall have an unimpaired right to enforce this Guaranty for its benefit as to so much of the Obligations of Borrower under the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document, as Credit Enhancer has not sold, assigned or transferred. 19. GUARANTOR BOUND BY JUDGMENT AGAINST BORROWER. Guarantor shall be conclusively bound with respect to all issues involving or relating to the Guaranteed Obligations, by the judgment in any jurisdiction in any action by Credit Enhancer against Borrower in connection with the Reimbursement Agreement, the Reimbursement Mortgages, any other Reimbursement Loan Document or any other Transaction Document (wherever instituted) as if Guarantor were a party to such action even if not so joined as a party. 20. COUNTERPARTS. This Guaranty may be signed in one or more counterparts, each of which shall be an original and all of which together shall constitute but one and the same instrument. 21. GOVERNING LAW. This Guaranty shall be construed and enforced in accordance with, and the rights and remedies of the parties hereto shall be governed by, the laws of the 9 State of Florida without regard to conflicts of law, principles, except to the extent that Federal laws may prevail. 22. INVALID PROVISIONS. Any provision of this Guaranty that is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or nonauthorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction and the remaining portion of such provision and all other remaining provisions will be construed to render them enforceable to the fullest extent. Guarantor and Credit Enhancer shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. 23. GENERAL PROVISIONS. This Guaranty shall be binding upon the respective heirs, legal representative, successors and assigns of Guarantor, and shall inure to the benefit of Credit Enhancer and its successors and assigns. The descriptive headings of the sections of this Guaranty have been inserted herein for convenience of reference only and shall not define or limit the provisions hereof. 24. OBLIGATION OF GUARANTOR. Notwithstanding anything herein to the contrary, this Guaranty shall at all times be the sole obligation of the Guarantor and Guarantor's failure to pay or perform all or any of the Guaranteed Obligations shall not entitle Credit Enhancer to recourse against any of Guarantor's shareholders, members, general or limited partners, officers, director's or employees; provided, however, that no provision of this section 24 shall limit, impair or affect any guaranty or similar agreement executed in connection with the Guaranteed Obligations, or otherwise in connection with the Reimbursement Agreement. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.] 10 IN WITNESS WHEREOF, Guarantor has signed this Guaranty under seal as of the day and year first above written. GUARANTOR: AIMCO PROPERTIES, L.P., a Delaware limited partnership By: AIMCO-GP, INC., a Delaware corporation, its sole general partner By: /s/ Harry Alcock ---------------------------- Name: Harry Alcock Title: Vice President S-1 EX-10.83 25 EXHIBIT 10.83 AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT This Amended and Restated Pledge and Security Agreement is made and entered into as of the 2nd day of December, 1996, by and between AIMCO LT, L.P., a Delaware limited partnership ("PLEDGOR"), and GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation ("LENDER"). BACKGROUND A. Lender is the holder of a Note from Pledgor (the "ORIGINAL NOTE") dated November 14, 1996 in the principal amount of $6,317,000. As security for the payment and performance by Pledgor of its obligations under the Original Note, Pledgor executed and delivered to Lender, among other things, a Pledge and Security Agreement dated as of November 14, 1996 (the ORIGINAL PLEDGE"), which was recorded in the real estate records of Denton County, Texas, in ______________and Tarrant County, Texas in____________________. B. Pledgor and Lender have amended and restated the Original Note to, among other things, increase the principal amount thereof, pursuant to an Amended and Restated Note of even date herewith. Accordingly, Pledgor and Lender desire to amend and restate the Original Pledge. NOW, THEREFORE, intending to be legally bound, Pledgor and Lender agree that the Original Pledge is hereby amended and restated in its entirety to read as follows: [Remainder of Page Intentionally Left Blank] PLEDGE AND SECURITY AGREEMENT (GP Loan) THIS PLEDGE AND SECURITY AGREEMENT (this "AGREEMENT") is made as of the 2nd day of December, 1996 by AIMCO LT, L.P., a Delaware limited partnership ("PLEDGOR"), with an address at 1873 South Bellaire Street, Denver, Colorado 80222, in favor of GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation ("LENDER"), with an address at 650 Dresher Road, P.O. Box 1015, Horsham, Pennsylvania 19044-8015. BACKGROUND: A. Pledgor is the holder of certain notes and security instruments more fully described below. Such security instruments relate to certain land more fully described in EXHIBIT A, attached hereto, and the improvements located thereon. Such notes are each hereinafter referred to individually as a "NOTE" and collectively as the "NOTES"; such security instruments are each hereinafter individually referred to as a "SECURITY INSTRUMENT" and collectively referred to as the "SECURITY INSTRUMENTS". B. Lender has agreed to make a loan to Pledgor in the principal amount of $25,615,200 (the "LOAN"). The Loan will be evidenced by an Amended and Restated Note from Pledgor to Lender in the principal amount of $25,615,200 (the "GP NOTE") and will be secured by, among other things, this Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows: 1. ASSIGNMENT AND PLEDGE. Pledgor hereby pledges and grants a security interest in, and assigns, delivers and grants to Lender all of Pledgor's right, title and interest in and to the collateral (collectively, the "COLLATERAL") described in EXHIBIT B, attached hereto. This assignment is made as collateral security for the full payment and performance by Pledgor of all of its obligations under all documents evidencing and securing the Loan (collectively, the "LOAN DOCUMENTS"). 2. PERFECTION. (a) In order to effectuate the foregoing pledge, Pledgor has endorsed and delivered the Notes to Lender. (b) Lender, as the payee by endorsement of the Notes, shall have all of Pledgor's rights in connection with the Notes, the Security Instruments and the other Collateral, 2 including, without limitation, upon the occurrence of a default in the payment of any of the Notes after the expiration of any applicable notice and grace period set forth therein, the right to designate further payees by endorsement of such Note and assignment of the related Security Instrument. 3. PLEDGOR'S RIGHTS AND COVENANTS. (a) Except as otherwise provided in subparagraph 3(b) and in paragraph 7 hereof, Pledgor shall have a license to collect all regular monthly installments of interest and/or principal due to Pledgor under and with respect to the Collateral, and to retain, use and enjoy the same. Pledgor and Lender acknowledge and agree that the endorsement of the Notes and the assignment of the Security Instruments and other Collateral to Lender are being undertaken solely in furtherance of the pledge, assignment and granting of a security interest in the Collateral, and that, for all other purposes, including, without limitation, federal income tax purposes, Pledgor shall be the owner of the Collateral. (b) Notwithstanding the foregoing, any principal payment other than a regularly scheduled payment made in accordance with the existing amortization schedule, if any, under any of the Notes shall be delivered to Lender, to be applied, if Lender requires, against the obligations of Pledgor under the Loan Documents, in such order as Lender may determine, in its sole and absolute discretion. (c) Pledgor shall: (i) fulfill or perform every condition and covenant, if any, of the Notes, the Security Instruments and the other Collateral to be fulfilled or performed by the holder thereof; (ii) not modify or amend any of the documents that are part of the Collateral, or permit to be modified or amended any of such documents, without Lender's prior written consent; (iii) enforce (short of the institution of a lawsuit on any of the Notes or foreclosure or judicial sale under any of the Security Instruments) all material covenants and conditions of the Notes, the Security Instruments and the other Collateral to be performed or observed by the other parties to the Collateral (collectively, the "OBLIGORS"), and not forgive any indebtedness evidenced by the Notes; provided, that Pledgor shall seek the prior written approval of Lender before undertaking any such 3 enforcement, which approval may be withheld by Lender in its sole and absolute discretion; and (iv) promptly notify Lender of any default under any of the Notes or Security Instruments, and take such action with respect thereto as Lender shall reasonably direct. (d) Lender shall not be obligated to perform or discharge any obligation under the Notes or the Security Instruments, or the other Collateral or have any obligation to any of the partners of the Obligors. To that end, Pledgor hereby agrees to indemnify, defend with counsel reasonably acceptable to Lender and hold Lender and its officers, directors, agents and employees harmless from and against any and all claims, liabilities, costs (including, without limitation, reasonable legal fees and court costs), losses or damages that any of them may incur under or by reason of this Agreement or any alleged obligation or undertaking on the part of Lender to perform or discharge any of the terms of the Notes, the Security Instruments or the other Collateral. 4. ACCOUNTING. Pledgor shall deliver to Lender within ten days after the end of each month, a certified statement specifying the payments derived or received from the Notes and the Security Instruments for the preceding month. 5. REPRESENTATIONS, WARRANTIES AND COVENANTS. Pledgor represents, warrants and covenants that: (a) Pledgor has an assignable interest in the Collateral, free and clear of all liens and encumbrances and claims of all other parties, and none of the Collateral is the subject of any present suit, action or other proceeding, or to the best of Pledgor's knowledge, any threatened suit, action or proceeding, and Pledgor knows of no grounds for the institution of any such proceeding; (b) This Agreement has been duly authorized, executed and delivered by Pledgor and will not conflict with or constitute a breach of or a default under any agreement, indenture or instrument to which Pledgor is a party or by which Pledgor or any of Pledgor's properties are bound; (c) Pledgor has not made any prior pledge or assignment of the Collateral; (d) Pledgor shall not make any other assignment or pledge of the Collateral; 4 (e) Pledgor shall defend, at its own expense, Lender's right, title and interest in and to the Collateral against the claims of any person, firm, corporation or other entity; (f) The outstanding principal balance under the Notes is as set forth in EXHIBIT C, attached hereto; (g) There is no default existing under the Notes or the Security Instruments or other Collateral, or event which, with the passage of time or the giving of notice, or both, could become a default; (h) The copies of the Notes and the Security Instruments previously delivered to Lender by Pledgor are true, complete and correct and there are no other agreements or understandings between the obligors thereunder and Pledgor relating to the subject matter thereof; and (i) The Notes and the Security Instruments are the legal, valid and binding obligations of the parties thereto, enforceable in accordance with their terms. 6. COVENANTS OF LENDER. Lender covenants that, upon timely payment to Lender of all amounts due by Pledgor and timely performance by Pledgor of all obligations arising under the Loan Documents in accordance with the terms thereof, Lender shall return to Pledgor the Security Instruments and the Notes endorsed to Pledgor without recourse or warranty and, at Pledgor's cost, shall execute, and deliver to Pledgor such documents, instruments and agreements necessary to terminate this Agreement. 7. LENDER'S RIGHTS AFTER DEFAULT. After the occurrence of any Event of Default (as defined in the GP Note), Lender, at its option, without further notice and without regard to the adequacy of security for the sums secured by this Agreement, either in person or by agent, may do any one or more of the following: (a) Give written notice to any Obligor authorizing and directing such Obligor to pay all interest and principal under the Notes directly to Lender, and to the extent any Note is payable upon demand, make demand for, and collect, payment of the principal balance and all unpaid interest under such Note; (b) Sue for or otherwise collect and receive all proceeds of the Collateral, including those past due and unpaid; 5 (c) Apply proceeds of the Collateral to amounts due under the Loan in such amounts and in such order as determined by Lender, in its sole and absolute discretion; (d) To the extent permitted by law, take any other actions or exercise any other rights and powers of a secured party under the Uniform Commercial Code (the "UCC") or otherwise dispose of any or all of the Collateral in any manner permitted under the UCC after default by a debtor under any other applicable laws; (e) Record in the appropriate public offices this Agreement and one or more of the Security Instruments relating to the properties known as Copper Chase, Cypress Landing, Walnut Springs and Heather Ridge; and (f) To the extent permitted by law, do any other acts that Lender deems proper to protect its rights hereunder or under the Collateral. 8. WARRANT OF ATTORNEY. Pledgor hereby irrevocably constitutes and appoints Lender its true and lawful attorney, with full power of substitution, at the sole cost and expense of Pledgor, after the occurrence of an Event of Default, to collect and receive all earnings, proceeds, collections and payments with respect to the Collateral, and, whether or not an Event of Default has occurred, to execute on behalf of Pledgor any documents necessary to perfect and maintain Lender's interest in the Collateral or to enforce collection of the earnings, proceeds, collections and payments due under the Collateral, either in its own name or in the name of Pledgor, including but not limited to prosecuting, defending, compromising or releasing any action relating thereto. Lender shall not be responsible to Pledgor for any actions taken or omitted to be taken by Lender, except for its gross negligence or willful misconduct. All power conferred upon Lender by this Agreement is coupled with an interest and shall be irrevocable. 9. SUBORDINATION. Pledgor hereby acknowledges that the lien, operation and payment of the Notes and Security Instruments, and all documents executed and delivered in connection therewith, are unconditionally subordinated to the lien, operation and payment of all documents executed and delivered by any of the Obligors to Lender (collectively, the "GMAC DOCUMENTS"), including, without limitation, the documents evidencing and securing the loans from Lender listed in EXHIBIT D, attached hereto, and to all advances, obligatory and non- obligatory, now or hereafter made under the GMAC Documents, plus all interest, fees, charges and expenses of any kind whatsoever due or to become due thereunder, and to all amendments, replacements, modifications and extensions to the 6 GMAC Documents. All insurance and condemnation proceeds payable as result of a fire or other casualty or any condemnation involving any real property of any of the Obligors subject to any of the GMAC Documents shall be disbursed in accordance with the terms and conditions of the GMAC Documents. Until the indebtedness evidenced by the GMAC Documents is paid in full, Pledgor irrevocably and knowingly waives (i) any rights of approval or consent respecting actions taken or proposed to be taken by any of the Obligors, (ii) any right to file or join in any bankruptcy petition or otherwise institute against, or join with any other person in instituting against any Obligor, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or other similar proceedings under the laws of the United States or any law of any state of the United States, and (iii) any right to take any other action in the event an Obligor becomes bankrupt or insolvent. This paragraph 9 and the requirement that Pledgor obtain Lender's approval before enforcing any of the Notes or Security Instruments or other Collateral shall survive the repayment of the Loan and any reconveyance pursuant to paragraph 6 hereof. 10. MISCELLANEOUS. (a) Pledgor will pay all costs of acknowledging, recording and filing this Agreement and any other documents Lender may reasonably deem necessary in connection with this Agreement. (b) If any provision of this Agreement is held to be invalid, the remainder of this Agreement and its application shall not be affected. (c) This Agreement shall inure to the benefit of Lender and its successors and assigns and shall be binding upon Pledgor and its successors and assigns. (d) This Agreement shall be construed and enforced in accordance with the laws of the Commonwealth of Pennsylvania, without regard to the choice of law principles thereof and except to the extent that the Uniform Commercial Code of the jurisdiction(s) governing the Notes and Security Instruments provides that the validity or perfection of the security interest hereunder, or remedies hereunder in respect of any particular collateral, are governed by the laws of a jurisdiction other than the Commonwealth of Pennsylvania. Pledgor agrees that, at Lender's option, any controversy arising under or in relation to this Agreement or any other Loan Documents shall be litigated in the Commonwealth of Pennsylvania. At Lender's option, the Court of Common Pleas for Montgomery County, Pennsylvania and the federal court for the Eastern District of Pennsylvania, shall have jurisdiction over all 7 controversies which may arise under or in relation to this Agreement, including, without limitation, those controversies relating to the execution, jurisdiction, breach, enforcement or compliance with this Agreement or any other issue arising under, related to, or in connection with any of the other Loan Documents. Pledgor irrevocably consents to service, jurisdiction, and venue of such courts for any litigation arising from this Agreement or any of the other Loan Documents, and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise. Nothing contained herein, however, shall prevent Lender from bringing any suit, action or proceeding or exercising any rights against Pledgor, or against any property in any other jurisdiction. Initiating such suit, action or proceeding or taking such action in any other jurisdiction shall in no event constitute a waiver of the agreement contained herein that the laws of the Commonwealth of Pennsylvania shall govern the rights and obligations of Pledgor and Lender as provided herein, or the submission herein by Pledgor to personal jurisdiction within the Commonwealth of Pennsylvania. The foregoing provisions were knowingly, willingly and voluntarily agreed to by Pledgor upon consultation with independent counsel. (e) All notices, directions, certificates or communications hereunder shall be given by certified or registered mail, return receipt requested, by hand delivery or by nationally recognized overnight courier addressed to the appropriate notice address set forth in the heading to this Agreement. Any of the parties hereto may, by such notice described above, designate any further or different address to which subsequent notices, directions, certificates or other communications shall be sent without any requirement of execution of any amendment to this Agreement. Any such notice, certificate, direction or communication shall be deemed to have been given (a) three (3) business days after mailing, if delivered by registered or certified mail, or (b) one business day after delivery, fee prepaid, to a national overnight delivery service, or (c) when delivered, if hand delivered with proof of delivery thereof. (f) This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which taken together shall constitute one and the same instrument. (g) The headings set forth before the text of each paragraph contained in this Agreement are for convenience only, and shall not affect the meaning or interpretation of this Agreement in any way. 8 (h) This Agreement may be recorded in the public records. IN WITNESS WHEREOF, Lender and Pledgor have duly executed under seal this Amended and Restated Agreement to be effective as of the day and year first above written. GMAC COMMERCIAL MORTGAGE CORPORATION By: /s/ Jerome R. Prassas ------------------------------------------ AIMCO LT, L.P., a Delaware limited partnership By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its generalpartner By: /s/ Harry Alcock --------------------------------- Name: Harry Alcock ------------------------------- Title: VP ------------------------------ [Signatures Continued on Following Page] 9 The undersigned are executing this Agreement (i) to signify their consent to the terms thereof, (ii) to make the representations and warranties set forth in paragraph 5, and (iii) to confirm that no further advances are required to be made to them in connection with the Notes. RC ASSOCIATES, an Illinois limited partnership By: AIMCO LT, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ Harry Alcock --------------------------- Name: Harry Alcock ------------------------- Title: VP ------------------------ HIGHLAND PARK PARTNERS, an Illinois limited partnership By: AIMCO LT, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ Harry Alcock --------------------------- Name: Harry Alcock ------------------------- Title: VP ------------------------ 10 MEADOWS LIMITED PARTNERSHIP, an Illinois limited partnership By: AIMCO LT, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ Harry Alcock --------------------------- Name: Harry Alcock ------------------------- Title: VP ------------------------ GREENTREE ASSOCIATES, an Illinois limited partnership By: AIMCO LT, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ Harry Alcock --------------------------- Name: Harry Alcock ------------------------- Title: VP ------------------------ 11 WOODLAND RIDGE II PARTNERS LIMITED PARTNERSHIP By: AIMCO LT, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ Harry Alcock --------------------------- Name: Harry Alcock ------------------------- Title: VP ------------------------ WOODHILL ASSOCIATES, an Illinois limited partnership By: AIMCO LT, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ Harry Alcock --------------------------- Name: Harry Alcock ------------------------- Title: VP ------------------------ 12 SOUTHRIDGE ASSOCIATES, an Illinois limited partnership By: AIMCO LT, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ Harry Alcock --------------------------- Name: Harry Alcock ------------------------- Title: VP ------------------------ MEADOWBROOK DRIVE LIMITED PARTNERSHIP, an Illinois limited partnership By: AIMCO LT, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ Harry Alcock --------------------------- Name: Harry Alcock ------------------------- Title: VP ------------------------ 13 WALNUT SPRINGS LIMITED PARTNERSHIP, an Illinois limited partnership By: AIMCO LT, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ Harry Alcock --------------------------- Name: Harry Alcock ------------------------- Title: VP ------------------------ HEATHER ASSOCIATES, an Illinois limited partnership By: AIMCO LT, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ Harry Alcock --------------------------- Name: Harry Alcock ------------------------- Title: VP ------------------------ 14 COPPER CHASE PARTNERS, an Illinois limited partnership By: AIMCO LT, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ Harry Alcock --------------------------- Name: Harry Alcock ------------------------- Title: VP ------------------------ CYPRESS LANDING LIMITED PARTNERSHIP, an Illinois limited partnership By: AIMCO LT, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS, L.P., a Delaware limited partnership, its general partner By: AIMCO HOLDINGS QRS, INC., a Delaware corporation, its general partner By: /s/ Harry Alcock --------------------------- Name: Harry Alcock ------------------------- Title: VP ------------------------ 15 LIST OF EXHIBITS Exhibit A - DESCRIPTION OF PROPERTIES Exhibit B - DESCRIPTION OF COLLATERAL Exhibit C - PRINCIPAL BALANCES OF NOTES Exhibit D - DESCRIPTION OF FIRST MORTGAGES 16 STATE OF ILLINOIS ) ) SS COUNTY OF COOK ) On 11/26/96 before me, JOYCE L. LESHER personally appeared JEROME R. PRASSAS personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/her signature on the instrument the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. Signature /s/ Joyce L. Lesher -------------------- (This area for official notarial seal) [NOTARY SEAL] STATE OF ILLINOIS ) ) SS COUNTY OF COOK ) On 11/26/96 before me, LYDIA LADD personally appeared HARRY ALCOCK personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/her signature on the instrument the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. Signature /s/ Lydia Ladd --------------- (This area for official notarial seal) [NOTARY SEAL] EX-10.84 26 EXHIBIT 10.84 DOCUMENT COVER PAGE DOCUMENT TITLE: MULTIFAMILY FIRST MORTGAGE, ------------------------------------------------------ (WARRANTY DEED, MORTGAGE, AFFIDAVIT, ETC.) ASSIGNMENT OF RENTS AND SECURITY AGREEMENT EXECUTED BY: OTC APARTMENTS LIMITED PARTNERSHIP ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ HOUSING FINANCE AUTHORITY OF BROWARD COUNTY, FLORIDA ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ BRIEF LEGAL DESCRIPTION: SEE EXHIBIT "A" (IF APPLICABLE) ------------------------------------------------------ RETURN RECORDED DOCUMENT TO: STEWART TITLE OF FORT LAUDERDALE, INC - ------------------------------------- 6610 N. UNIVERSITY DRIVE, SUITE 100 - ------------------------------------- TAMARAC, FL 33321 - ------------------------------------- SPACE ABOVE THIS LINE FOR RECORDER'S USE - -------------------------------------------------------------------------------- THIS INSTRUMENT WAS PREPARED BY: AND WHEN RECORDED, MAIL TO: L. Avant - --------------------------------- Stewart National Title Services 1980 Post Oak, Suite 610 Houston, Texas 77056 SN # ---------------------------- FIRST MULTIFAMILY/MORTGAGE, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT THIS MORTGAGE (herein "Instrument") is made as of the 1st day of July 1996 between the Mortgagor/Grantor, OTC APARTMENTS LIMITED PARTNERSHIP, a Florida limited partnership whose address is 1873 South Bellaire Street, 17th Floor, Denver, Colorado 80222 (herein "Borrower"), and the Mortgagee, HOUSING FINANCE AUTHORITY OF BROWARD COUNTY, FLORIDA, a public body organized and existing under the laws of State of Florida, whose address is 110 N.E. Third Street, Suite 300, Ft. Lauderdale, Florida 33301 (herein "Lender"). WHEREAS, Borrower is indebted to Lender in the principal sum of NINE MILLION EIGHT HUNDRED SEVENTY THOUSAND AND 00/100 ($9,870,000.00) Dollars, which indebtedness is evidenced by Borrower's note dated as of even date herewith (herein "Note"), providing for monthly installments of principal and interest, with the balance of the indebtedness, if not sooner paid, due and payable on July 1, 2016. TO SECURE TO LENDER (a) the repayment of the indebtedness evidenced by the Note, with interest thereon, and all renewals, extensions and modifications thereof; (d) the payment of all other sums, with interest thereon, advanced in accordance herewith to protect the security of this Instrument; and (e) the performance of the covenants and the agreements of Borrower herein contained, Borrower does hereby mortgage, grant, convey and assign to Lender the following described property located in TAMARAC, BROWARD COUNTY, FLORIDA, State of Florida: *DELETE BRACKETED MATERIAL IF NOT COMPLETED. See EXHIBIT "A" attached hereto and incorporated herein. PURSUANT TO SECTION 159.621 AND/OR SECTION 420.513 FLORIDA STATUTES, NO FLORIDA DOCUMENTARY STAMP TAXES OR INTANGIBLE TAXES ARE REQUIRED TO BE PAID UPON RECORDING OF THIS INSTRUMENT. THIS INSTRUMENT IS AMENDED AND SUPPLEMENTED IN CERTAIN RESPECTS AS SET FORTH IN THE RIDER TO MULTIFAMILY INSTRUMENT (THE "RIDER") AND SPECIAL RIDER TO MULTIFAMILY INSTRUMENT (THE "SPECIAL RIDER"), BOTH DATED AS OF THE DATE OF THIS INSTRUMENT ATTACHED HERETO AND INCORPORATED HEREIN BY THIS REFERENCE. IN THE EVENT OF ANY INCONSISTENCY BETWEEN THE PRINTED PORTIONS OF THIS INSTRUMENT AND THE PROVISIONS OF THE RIDER OR SPECIAL RIDER. THE PROVISIONS OF THE RIDER OR SPECIAL RIDER, AS APPLICABLE, SHALL GOVERN. IN THE EVENT OF ANY INCONSISTENCY BETWEEN THE PROVISIONS OF THE RIDER AND THE PROVISIONS OF THE SPECIAL RIDER, THE PROVISIONS OF THE SPECIAL RIDER SHALL GOVERN. FORM 4010 (PAGE 1 OF 8 PAGES) FLORIDA-MULTIFAMILY-1/77-FNMA/FHLMC U FORM INSTRUMENT FANNIE MAE POOL NO. TOGETHER with all buildings, improvements, and tenements now or hereafter erected on the property, and all heretofore or hereafter vacated alleys and streets abutting the property, and all easements, rights, appurtenances, rents, royalties, mineral, oil and gas rights and profits, water, water rights, and water stock appurtenant to the property, and all fixtures, machinery, equipment, engines, boilers, incinerators, building materials, appliances and goods of every nature whatsoever now or hereafter located in, or on, or used, or intended to be used in connection with the property, including, but not limited to, those for the purposes of supplying or distributing heating, cooling, electricity, gas, water, air and light; and all elevators, and related machinery and equipment, fire prevention and extinguishing apparatus, security and access control apparatus, plumbing, bath tubs, water heaters, water closets, sinks, ranges, stoves, refrigerators, dishwashers, disposals, washers, dryers, awnings, storm windows, storm doors, screens, blinds, shades, curtains and curtain rods, mirrors, cabinets, panelling, rugs, attached floor coverings, furniture, pictures, antennas, trees and plants, and any and all other additional items of personal property described in EXHIBIT "B" attached hereto and incorporated herein; all of which, including replacements and additions thereto, shall be deemed to be and remain a part of the real property covered by this Instrument; and all of the foregoing, together with said property are herein referred to as the "Property". Borrower covenants that Borrower is lawfully seised of the estate hereby conveyed and has the right to mortgage, grant, convey and assign the Property, that the Property is unencumbered, and the Borrower will warrant and defend generally the title to the Property against all claims and demands, subject to any easements and restrictions listed in a schedule of exceptions to coverage in any title insurance policy insuring Lender's interest in the Property. FORM 4010 (PAGE 2 OF 8 PAGES) UNIFORM COVENANTS. Borrower and Lender covenant and agree as follows: 1. PAYMENT OF PRINCIPAL AND INTEREST. Borrower shall promptly pay when due the principal of and interest on the indebtedness evidenced by the Note, any prepayment and late charges provided in the Note and all other sums secured by this Instrument. 2. FUNDS FOR TAXES, INSURANCE AND OTHER CHARGES. Subject to applicable law or to a written waiver by Lender, Borrower shall pay to Lender on the day monthly installments of principal or interest are payable under the Note (or on another day designated in writing by Lender), until the Note is paid in full, a sum (herein "Funds") equal to one-twelfth of (a) the yearly water and sewer rates and taxes and assessments which may be levied on the Property, (b) the yearly ground rents, if any, (c) the yearly premium installments for fire and other hazard insurance, rent loss insurance and such other insurance covering the Property as Lender may require pursuant to paragraph 5 hereof, (c) the yearly premium installments for mortgage insurance, if any. Any waiver by Lender of a requirement that Borrower pay such Funds may be revoked by Lender, in Lender's sole discretion, at any time upon notice in writing to Borrower. Lender may require Borrower to pay to Lender, in advance, such other Funds for other taxes, charges, premiums, assessments and impositions in connection with Borrower or the Property which Lender shall reasonably deem necessary to protect Lender's interests (herein "Other Impositions"). Unless otherwise provided by applicable law, Lender may require Funds for Other Impositions to be paid by Borrower in a lump sum or in periodic installments, at Lender's option. The Funds shall be held in an institution(s) the deposits or accounts of which are insured or guaranteed by a Federal or state agency (including Lender if Lender is such an institution). Lender shall apply the Funds to pay said rates, rents, taxes, assessments, insurance premiums and Other Impositions so long as Borrower is not in breach of any covenant or agreement of Borrower in this Instrument. Lender shall make no charge for so holding and applying the Funds, analyzing said account or for verifying and compiling said assessments and bills, unless Lender pays Borrower interest, earnings or profits on the Funds and applicable law permits Lender to make such a charge. Borrower and Lender may agree in writing at the time of execution of this Instrument that interest on the Funds shall be paid to Borrower, and unless such agreement is made or applicable law requires interest, earnings or profits to be paid, Lender shall not be required to pay Borrower any interest, earnings or profits on the Funds. Lender shall give to Borrower, without charge, an annual accounting of the Funds in Lender's normal format showing credits and debits to the Funds and the purpose for which each debit to the Funds was made. The Funds are pledged as additional security for the sums secured by this Instrument. If the amount of the Funds held by Lender at the time of the annual accounting thereof shall exceed the amount deemed necessary by Lender to provide for the payment of water and sewer rates, taxes, assessments, insurance premiums, rents and Other Impositions, as they fall due, such excess shall be credited to Borrower on the next monthly installment or installments of Funds due. If at any time the amount of the Funds held by Lender shall be less than the amount deemed necessary by Lender to pay water and sewer rates, taxes, assessments, insurance premiums, rents and Other Impositions, as they fall due, Borrower shall pay to Lender any amount necessary to make up the deficiency within thirty days after notice from Lender to Borrower requesting payment thereof. Upon Borrowers' breach of any covenant or agreement of Borrower in this Instrument, Lender may apply, in any amount and in any order as Lender shall determine in Lender's sole discretion, any Funds held by Lender at the time of application (i) to pay rates, rents, taxes, assessments, insurance premiums and Other Impositions which are now or will hereafter become due, or (ii) as a credit against sums secured by this Instrument. Upon payment in full of all sums secured by this Instrument, Lender shall promptly refund to Borrower any Funds held by Lender. 3. APPLICATION OF PAYMENTS. Unless applicable law provides otherwise, all payments received by Lender from Borrower under the Note or this Instrument shall be applied by Lender in the following order of priority: (i) amounts payable to Lender by Borrower under paragraph 2 hereof; (ii) interest payable on the Note; (iii) principal of the Note; (iv) interest payable on advances made pursuant to paragraph 8 hereof; (v) principal of advances made pursuant to paragraph 8 hereof; (vi) any other sums secured by this Instrument in such order as Lender, at Lender's option, may determine; provided, however, that Lender may, at Lender's option, apply any sums payable pursuant to paragraph 8 hereof prior to interest on and principal of the Note, but such application shall not otherwise affect the order of priority of application specified in this paragraph 3. 4. CHARGES; LIENS. Borrower shall pay all water and sewer rates, rents, taxes, assessments, premiums, and Other Impositions attributable to the Property at Lender's option in the manner provided under paragraph 2 hereof or, if not paid in such manner, by Borrower making payment, when due, directly to the payee thereof, or in such other manner as Lender may designate in writing. Borrower shall promptly furnish to Lender all notices of amounts due under this paragraph 4, and in the event Borrower shall make payment directly, Borrower shall promptly furnish to lender receipts evidencing such payments. Borrower shall promptly discharge any lien which has, or may have, priority over or equality with, the lien of this Instrument, and Borrower shall pay, when due, the claims of all persons supplying labor or materials to or in connection with the Property. Without Lender's prior written permission, Borrower shall not allow any lien inferior to this Instrument to be perfected against the Property. 5. HAZARD INSURANCE. Borrower shall keep the improvements now existing or hereafter erected on the Property insured by carriers at all times satisfactory to Lender against loss by fire, hazards included within the term "extended coverage", rent loss and such other hazards, casualties, liabilities and contingencies as Lender shall require and in such amounts and for such periods as Lender shall require. All premiums on insurance policies shall be paid, at Lender's option, in the manner provided under paragraph 2 hereof, or by Borrower making payment, when due, directly to the carrier, or in such other manner as Lender may designate in writing. All insurance polices and renewals thereof shall be in a form acceptable to Lender and shall include a standard mortgage clause in favor of and in form acceptable to Lender. Lender shall have the right to hold the policies, and Borrower shall promptly furnish to Lender all renewal notices and all receipts of paid premiums. At least thirty days prior to the expiration date of a policy, Borrower shall deliver to Lender a renewal policy in form satisfactory to Lender. In the event of loss, Borrower shall give immediate written notice to the insurance carrier and to Lender. Borrower hereby authorizes and empowers Lender as attorney-in-fact for Borrower to make proof of loss, to adjust and compromise any claim under insurance policies, to appear in and prosecute any action arising from such insurance policies, to collect and receive insurance proceeds, and to deduct therefrom Lender's expenses incurred in the collection of such proceeds; provided however, that nothing contained in this paragraph 5 shall require Lender to incur any expense or take any action hereunder. Borrower further authorizes Lender, at Lender's option, (a) to hold the balance of such proceeds to be used to reimburse Borrower for the cost of reconstruction or repair of the Property or (b) to apply the balance of such proceeds to the payment of the sums secured by this Instrument, whether or not then due, in the order of application set forth in paragraph 3 hereof. If the insurance proceeds are held by Lender to reimburse Borrower for the cost of restoration and repair of the Property, the Property shall be restored to the equivalent of its original condition or such other condition as Lender may approve in writing. Lender may, at Lender's option, condition disbursement of said proceeds on Lender's approval of such plans and specifications of an architect satisfactory to Lender, contractor's cost estimates, architect's certificates, waivers of liens, sworn statements of mechanics and materialmen and such other evidence of costs, percentage completion of construction, application of payments, and satisfaction of liens as Lender may reasonably require. If the insurance proceeds are applied to the payment of the sums secured by this Instrument, any such application of proceeds to principal shall not extend or postpone the due dates of the monthly installments referred to in paragraphs 1 and 2 hereof. If the Property is sold pursuant to paragraph 27 hereof or if Lender acquires title to the Property, Lender shall have all of the right, title and interest of Borrower in and to any insurance policies and unearned premiums thereon and in and to the proceeds resulting from any damage to the Property prior to such sale or acquisition. 6. PRESERVATION AND MAINTENANCE OF PROPERTY. Borrower (a) shall not commit waste or permit impairment or deterioration of the Property, (b) shall not abandon the Property, (c) shall restore or repair promptly and in a good and workmanlike manner all FORM 4010 (PAGE 3 OF 8 PAGES) UNIFORM COVENANTS-MULTIFAMILY-1/77-FNMA/FHLMC UNIFORM INSTRUMENT or any part of the Property to the equivalent of its original condition, or such other condition as Lender may approve in writing, in the event of any damage, injury or loss thereto, whether or not insurance proceeds are available to cover in whole or in part the costs of such restoration or repair, (d) shall keep the Property, including improvements, fixtures, equipment, machinery and appliances thereon in good repair and shall replace fixtures, equipment, machinery and appliances on the Property when necessary to keep such items in good repair, (e) shall comply with all laws, ordinances, regulations and requirements of any governmental body applicable to the Property, (f) shall provide for professional management of the Property by a residential rental property manager satisfactory to Lender pursuant to a contract approved by Lender in writing, unless such requirement shall be waived by Lender in writing, (g) shall generally operate and maintain the Property in a manner to ensure maximum rentals, and (h) shall give notice in writing to Lender of and, unless otherwise directed in writing by Lender, appear in __________________________________ purporting to affect the Property, the security of this Instrument or the rights or powers of Lender. Neither Borrower nor any tenant or other person shall remove, demolish or alter any improvement now existing or hereafter erected on the Property or any fixture, equipment, machinery or appliance in or on the Property except when incident to the replacement of fixtures, equipment, machinery and appliances with items of like kind. 7. USE OF PROPERTY. Unless required by applicable law or unless Lender has otherwise agreed in writing, Borrower shall not allow changes in the use for which all or any part of the Property was intended at the time this Instrument was executed. Borrower shall not initiate or acquiesce in a change in the zoning classification of the Property without Lender's prior written consent. 8. PROTECTION OF LENDER'S SECURITY. If Borrower fails to perform the covenants and agreements contained in this Instrument, or if any action or proceeding is commenced which affects the Property or title thereto or the interest of Lender therein, including, but not limited to, eminent domain, insolvency, code enforcement, or arrangements or proceedings involving a bankrupt or decedent, then Lender at Lender's option may make such appearances, disburse such sums and take such action as Lender deems necessary, in its sole discretion, to protect Lender's interest, including, but not limited to (i) disbursement of attorney's fees, (ii) entry upon the Property to make repairs, (iii) procurement of satisfactory insurance as provided in paragraph 5 hereof. Any amounts disbursed by Lender pursuant to this paragraph 8, with interest thereon, shall become additional indebtedness of Borrower secured by this Instrument. Unless Borrower and Lender agree to other terms of payment, such amounts shall be immediately due and payable and shall bear interest from the date of disbursement at the rate stated in the Note unless collection from Borrower of interest at such rate would be contrary to applicable law, in which event such amounts shall bear interest at the highest rate which may be collected from Borrower under applicable law. Borrower hereby covenants and agrees that Lender shall be subrogated to the lien of any mortgage or other lien discharged, in whole or in part, by the indebtedness secured hereby. Nothing contained in this paragraph 8 shall require Lender to incur any expense or take any action hereunder. 9. INSPECTION. Lender may make or cause to be made reasonable entries upon and inspections of the Property. 10. BOOKS AND RECORDS. The provisions of Section 2.2(d) of that certain Master Reimbursement Agreement between Borrower and the Federal National Mortgage Association, dated as of July 1, 1996 (the "Master Reimbursement Agreement"), are incorporated herein by this reference as if fully set forth herein. 11. CONDEMNATION. Borrower shall promptly notify Lender of any action or proceeding relating to any condemnation or other taking, whether direct or indirect, of the Property, or part thereof, and Borrower shall appear in and prosecute any such action or proceeding unless otherwise directed by Lender in writing. Borrower authorizes Lender, at Lender's option, as attorney-in-fact for Borrower, to commence, appear in and prosecute, in Lender's or Borrower's name, any action or proceeding relating to any condemnation or other taking of the Property, whether direct or indirect, and to settle or compromise any claim in connection with such condemnation or other taking. The proceeds of any award, payment or claim for damages, direct or consequential, in connection with any condemnation or other taking, whether direct or indirect, of the Property, or part thereof, or for conveyances in lieu of condemnation, are hereby assigned to and shall be paid to Lender. Borrower authorizes Lender to apply such awards, payments, proceeds or damages, after the deduction of Lender's expenses incurred in the collection of such amounts, at Lender's option, to restoration or repair of the Property or to payment of the sums secured by this Instrument, whether or not then due, in the order of application set forth in paragraph 3 hereof, with the balance, if any, to Borrower. Unless Borrower and Lender otherwise agree in writing, any application of proceeds to principal shall not extend or postpone the due date of the monthly installments referred to in paragraphs 1 and 2 hereof. Borrower agrees to execute such further evidence of assignment of any awards, proceeds, damages or claims arising in connection with such condemnation or taking as Lender may require. 12. BORROWER AND LIEN NOT RELEASED. From time to time, Lender may, at Lender's option, without giving notice to or obtaining the consent of Borrower, Borrower's successors or assigns or of any junior lienholder or guarantors, without liability on Lender's part and notwithstanding Borrower's breach of any covenant or agreement of Borrower in this Instrument, extend the time for payment of said indebtedness or any part thereof, reduce the payments thereon, release anyone liable on any of said indebtedness, accept a renewal note or notes therefor, modify the terms and time of payment of said indebtedness, release from the lien of this Instrument any part of the Property, take or release other or additional security, reconvey any part of the Property, consent to any map or plan of the Property, consent to the granting of any easement, join in any extension or subordination agreement, and agree in writing with Borrower to modify the rate of interest or period of amortization of the Note or change the amount of the monthly installments payable thereunder. Any actions taken by Lender pursuant to the terms of this paragraph 12 shall not affect the obligation of Borrower or Borrower's successors or assigns to pay the sums secured by this Instrument and to observe the covenants of Borrower contained herein, shall not affect the guaranty of any person, corporation, partnership or other entity for payment of the indebtedness secured hereby, and shall not affect the lien or priority of lien hereof on the Property. Borrower shall pay Lender a reasonable service charge, together with such title insurance premiums and attorney's fees as may be incurred at Lender's option, for any such action if taken at Borrower's request. 13. FORBEARANCE BY LENDER NOT A WAIVER. Any forbearance by Lender in exercising any right or remedy hereunder, or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of any right or remedy. The acceptance by Lender or payment of any sum secured by this Instrument after the due date of such payment shall not be a waiver of Lender's right to either require prompt payment when due of all other sums so secured or to declare a default for failure to make prompt payment. The procurement of insurance or the payment of taxes or other liens or charges by Lender shall not be a waiver of Lender's right to accelerate the maturity of the indebtedness secured by this Instrument, nor shall Lender's receipt of any awards, proceeds or damages under paragraphs 5 and 11 hereof operate to cure or waive Borrower's default in payment of sums secured by this Instrument. *Reimbursement Agreement"), are incorporated herein by this reference as if fully set for the herein FORM 4010 (PAGE 4 OF 8 PAGES) 14. ESTOPPEL CERTIFICATE. Borrower shall within ten days of a written request from Lender furnish Lender with a written statement, duly acknowledged, setting forth the sums secured by this Instrument and any right of set-off, counterclaim or other defense which exists against such sums and the obligations of this Instrument. 15. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. This instrument is intended to be a security agreement pursuant to the Uniform Commercial Code for any of the items specified above as part of the Property which, under applicable law, may be subject to a security interest pursuant to the Uniform Commercial Code, and Borrower hereby grants Lender a security interest in said items. Borrower agrees that Lender may file this Instrument, or a reproduction thereof, in the real estate records or other appropriate index, as a financing statement for any of the items specified above as part of the Property. Any reproduction of this Instrument or of any other security agreement or financing statement shall be sufficient as a financing statement. In addition, Borrower agrees to execute and deliver to Lender, upon Lender's request, any financing statements, as well as extensions, renewals and amendments thereof, and reproductions of this Instrument in such form as Lender may require to perfect a security interest with respect to said items. Borrower shall pay all costs of filing such financing statements and any extensions, renewals, amendments and releases thereof, and shall pay all reasonable costs and expenses of any record searches for financing statements Lender may reasonably require. Without the prior written consent of Lender, Borrower shall not create or suffer to be created pursuant to the Uniform Commercial Code any other security interest in said items, including replacements and additions thereto. Upon Borrower's breach of any covenant or agreement of Borrower contained in this Instrument, including the covenants to pay when due all sums secured by this Instrument. Lender shall have the remedies of a secured party under the Uniform Commercial Code and, at Lender's option, may also invoke the remedies provided in paragraph 27 of this Instrument as to such items. In exercising any of said remedies, Lender may proceed against the items of real property and any items of personal property specified above as part of the Property separately or together and in any order whatsoever, without in any way affecting the availability of Lender's remedies under the Uniform Commercial Code or of the remedies provided in paragraph 27 of this Instrument. 16. LEASES OF THE PROPERTY. Borrower shall comply with and observe Borrower's obligations as landlord under all leases of the Property or any part thereof. Borrower will not lease any portion of the Property for non-residential use except with the prior written approval of Lender. Borrower, at Lender's request, shall furnish Lender with executed copies of all leases now existing or hereafter made of all or any part of the Property, and all leases now or hereafter entered into will be in form and substance subject to the approval of Lender. All leases of the Property shall specifically provide that such leases are subordinate to this Instrument; that the tenant attorns to Lender, such attornment to be effective upon Lender's acquisition of title in the Property; that the tenant agrees to execute such further evidences of attornment as Lender may from time to time request; that the attornment of the tenant shall not be terminated by foreclosure; and that Lender may, at Lender's option, accept or reject such attornments. Borrower shall not, without Lender's written consent, execute, modify, surrender or terminate, either orally or in writing, any lease now existing or hereafter made of all or any part of the Property providing for a term of three years or more, permit an assignment or sublease of such a lease without Lender's written consent, or request or consent to the subordination of any lease of all or any part of the Property to any lien subordinate to this Instrument. If Borrower becomes aware that any tenant proposes to do, or is doing, any act or thing which may give rise to any right of set-off against rent, Borrower shall (i) take such steps as shall be reasonably calculated to prevent the accrual of any right to a set-off against rent, (ii) notify Lender thereof and of the amount of said set-offs, and (iii) within ten days after such accrual, reimburse the tenant who shall have acquired such right to set-off or take such other steps as shall effectively discharge such set-off and as shall assure that rents thereafter due shall continue to be payable without set-off or deduction. Upon Lender's request, Borrower shall assign to Lender, by written instrument satisfactory to Lender, all leases now existing or hereafter made of all or any part of the Property and all security deposits made by tenants in connection with such leases of the Property. Upon assignment by Borrower to Lender of any leases of the Property, Lender shall have all of the rights and powers possessed by Borrower prior to such assignment and Lender shall have the right to modify, extend or terminate such existing leases and to execute new leases, in Lender's sole discretion. 17. REMEDIES CUMULATIVE. Each remedy provided in this Instrument is distinct and cumulative to all other rights or remedies under this Instrument or afforded by law or equity, and may be exercised concurrently, independently, or successively, in any order whatsoever. 18. ACCELERATION IN CASE OF BORROWER'S INSOLVENCY. In the event (i) Borrower shall (A) commence a voluntary case under the Federal bankruptcy laws (as now or hereafter in effect), (B) file a petition seeking to take advantage of any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, debt adjustment, winding up or composition or adjustment of debts, (C) consent to or fail to contest in a timely and appropriate manner any petition filed against it in an involuntary case under such bankruptcy laws or other laws, (D) apply for or consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of a substantial part of its property, domestic or foreign, (E) admit in writing its inability to pay, or generally not be paying, its debts as they become due, (F) make a general assignment for the benefit of creditors, (G) assert that it has no liability or obligations under the Note, this Instrument or any of the other Loan Documents, or (H) take any action for the purpose of effecting any of the foregoing; or (ii) a case or other proceedings shall be commenced against Borrower in any court of competent jurisdiction seeking (A) relief under the Federal bankruptcy laws (as now or hereafter in effect) or under any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, or (B) the appointment of a trustee, receiver, custodian, liquidator or the like of Borrower or of all or a substantial part of the property, domestic or foreign, of Borrower, and any such case or proceeding shall continue undismissed or unstayed for a period of 60 consecutive calendar days, or any order granting the relief requested in any such case or proceeding against Borrower (including an order for relief under such Federal bankruptcy laws) shall be entered, or (iii) there is an attachment, execution or other judicial seizure of any portion of Borrower's property and such seizure is not discharged within ten calendar days, then Lender may, at Lender's option, declare all of the sums secured by this Instrument to be immediately due and payable without prior notice to Borrower, and Lender may invoke any remedies permitted by paragraph 27 of this Instrument. Any attorney's fees and other expenses incurred by Lender in connection with Borrower's bankruptcy or any of the other aforesaid events shall be additional indebtedness of Borrower secured by this Instrument pursuant to paragraph 8 hereof. SEE SPECIAL RIDER SEE RIDER FORM 4010 (PAGE 5 OF 8 PAGES) 21. SUCCESSORS AND ASSIGNS BOUND; JOINT AND SEVERAL LIABILITY; AGENTS; CAPTIONS. The covenants and agreements herein contained shall bind; and the rights hereunder shall inure to, the respective successors and assigns of Lender and Borrower, subject to the provisions of paragraph 19 hereof. All covenants and agreements of Borrower shall be joint and several. In exercising any rights hereunder or taking any actions provided for herein, Lender may act through its employees, agents or independent contractors as authorized by Lender. The captions and headings of the paragraphs of this Instrument are for convenience only and are not to be used to interpret or define the provisions hereof. 22. UNIFORM MULTIFAMILY INSTRUMENT; GOVERNING LAW; SEVERABILITY. This form of multifamily instrument combines uniform covenants for national use and non- uniform covenants _____________________________________ to constitute a uniform security instrument covering real property and related fixtures and personal property. This Instrument shall be governed by the law of the jurisdiction in which the Property is located. In the event that any provision of this Instrument or the Note conflicts with applicable law, such conflict shall not affect other provisions of this Instrument or the Note which can be given effect without the conflicting provisions, and to this end the provisions of this Instrument and the Note are declared to be severable. In the event that any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower is interpreted so that any charge provided for in this Instrument or in the Note, whether considered separately or together with other charges levied in connection with this Instrument and the Note, violates such law, and Borrower is entitled to the benefit of such law, such charge is hereby reduced to the extent necessary to eliminate such violation. The amounts, if any, previously paid to Lender in excess of the amounts payable to Lender pursuant to such charges as reduced shall be applied by Lender to reduce the principal of the indebtedness evidenced by the Note. For the purpose of determining whether any applicable law limiting the amount of interest or other charges permitted to be collected form Borrower has been violated, all indebtedness which is secured by this Instrument or evidenced by the Note and which constitutes interest, as well as all other charges levied in connection with such indebtedness which constitute interest, shall be deemed to be allocated and spread over the stated term of the Note. Unless otherwise required by applicable law, such allocation and spreading shall be effected in such a manner that the rate of interest computed thereby is uniform throughout the stated term of the Note. 23. WAIVER OF STATUTE OF LIMITATIONS. Borrower hereby waives the right to assert any statute of limitations as a bar to the enforcement of the lien of this Instrument or to any action brought to enforce the Note or any other obligation secured by this Instrument. 24. WAIVER OF MARSHALLING. Notwithstanding the existence of any other security interests in the Property held by Lender or by any other party, Lender shall have the right to determine the order in which any or all of the Property shall be subjected to the remedies provided herein. Lender shall have the right to determine the order in which any or all portions of the indebtedness secured hereby are satisfied from the proceeds realized upon the exercise of the remedies provided herein. Borrower, any party who consents to this Instrument and any party who now or hereafter acquires a security interest in the Property and who has actual or constructive notice hereof hereby waives any and all right to require the marshalling of assets in connection with the exercise of any of the remedies permitted by applicable law or provided herein. 26. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION. As part of the consideration for the indebtedness evidenced by the Note, Borrower hereby absolutely and unconditionally assigns and transfers to Lender all the rents and revenues of the Property, including those now due, past due or to become due by virtue of any lease or other agreement for the occupancy or use of all or any part of the Property, regardless of to whom the rents and revenues of the Property are payable. Borrower hereby authorizes Lender or Lender's agents to collect the aforesaid rents and revenues and hereby directs each tenant of the Property to pay such rents to Lender or Lender's agents; provided, however, that prior to written notice given by Lender to Borrower of the breach by Borrower of any covenant or agreement of Borrower in this Instrument, Borrower shall collect and receive all rents and revenues of the Property as trustee for the benefit of Lender and Borrower, to apply the rents and revenues so collected to the sums secured by this Instrument in the order provided in paragraph 3 hereof with the balance, so long as no such breach has occurred, to the account of Borrower, it being intended by Borrower and Lender that this assignment of rents constitutes an absolute assignment and not an assignment for additional security only. Upon delivery of written notice by Lender to Borrower of the breach by Borrower of any covenant or agreement of Borrower in this Instrument, and without the necessity of Lender entering upon and taking and maintaining full control of the Property in person, by agent or by a court-appointed receiver, Lender shall immediately be entitled to possession of all rents and revenues of the Property as specified in this paragraph 26 as the same become due and payable, including but not limited to rents then due and unpaid, and all such rents shall immediately upon delivery of such notice be held by Borrower as trustee for the benefit of Lender only; provided, however, that the written notice by Lender to Borrower of the breach by Borrower shall contain a statement that Lender exercises its rights to such rents. Borrower agrees that commencing upon delivery of such written notice of Borrower's breach by Lender to Borrower, each tenant of the Property shall make such rents payable to and pay such rents to Lender or Lender's agents on Lender's written demand to each tenant therefor, delivered to each tenant personally, by mail or by delivering such demand to each rental unit, without any liability on the part of said tenant to inquire further as to the existence of a default by the Borrower. Borrower hereby covenants that Borrower has not executed any prior assignment of said rents that remain in effect as of the date hereof, that Borrower has not performed, and will not perform, any acts or has not executed, and will not execute, any instrument which would prevent Lender from exercising its rights under this paragraph 26, and that at the time of execution of this Instrument there has been no anticipation or prepayment of any of the rents of the Property for more than two months prior to the due dates of such rents. Borrower covenants that Borrower will not hereafter collect or accept payment of any rents of the Property more than two months prior to the due dates of such rents. Borrower further covenants that Borrower will execute and deliver to Lender such further assignments of rents and revenues of the Property as Lender may from time to time request. Upon Borrower's breach of any covenant or agreement of Borrower in this Instrument, Lender may in person, by agent or by a court-appointed receiver, regardless of the adequacy of Lender's security, enter upon and take and maintain full control of the Property in order to perform all acts necessary and appropriate for the operation and maintenance thereof including, but not limited to, the execution, cancellation or modification of leases, the collection of all rents and revenues of the Property, the making of repairs to the Property and the execution or termination of contracts providing for the management or maintenance of the Property, all on such terms as are deemed best to protect the security of this Instrument. In the event Lender elects to seek the appointment of a receiver for the Property upon Borrower's breach of any covenant or agreement of Borrower in this Instrument, Borrower hereby expressly consents to the appointment of such receiver. Lender or the receiver shall be entitled to receive a reasonable fee for so managing the Property. All rents and revenues collected subsequent to delivery of written notice by Lender to Borrower of the breach by Borrower of any covenant or agreement of Borrower in this Instrument shall be applied first to the costs, if any, of taking control of and managing the Property and collecting the rents, including, but not limited to, attorney's fees, receiver's fees, premiums on receiver's bonds, costs of repairs to the Property, premiums on insurance policies, taxes, assessments and other charges on the Property, and the costs of discharging any obligation or liability of Borrower as lessor or landlord of the Property and then to the sums secured by this Instrument. Lender or the receiver shall have access to the books and records used in the operation and maintenance of the Property and shall be liable to account only for those rents actually received. Lender shall not be liable to Borrower, anyone claiming under or through Borrower or anyone having an interest in the Property by reason of anything done or left undone by Lender under this paragraph 26. FORM 4010 (PAGE 6 OF 8 PAGES) UNIFORM COVENANTS-MULTIFAMILY-1/77-FNMA/FHLMC UNIFORM INSTRUMENT If the rents of the Property are not sufficient to meet the costs, if any, of taking control of and managing the Property and collecting the rents, any funds expended by Lender for such purposes shall become indebtedness of Borrower to Lender secured by this Instrument pursuant to paragraph 8 hereof. Unless Lender and Borrower agree in writing to other terms of payment, such amounts shall be payable upon notice from Lender to Borrower requesting payment thereof and shall bear interest from the date of disbursement at the rate stated in the Note unless payment of interest at such rate would be contrary to applicable law, in which event such amounts shall bear interest at the highest rate which may be collected from Borrower under applicable law. Any entering upon and taking and maintaining of control of the Property by Lender or the receiver and any application of rents as provided herein shall not cure or waive any default hereunder or invalidate any other right or remedy ______________ of Lender ____________ provided herein. This assignment of rents of the Property shall terminate at such time as this Instrument ceases to secure indebtedness held by Lender. NON-UNIFORM COVENANTS. Borrower and Lender further covenant and agree as follows: 27. ACCELERATION; REMEDIES. Upon Borrower's breach of any covenant or agreement of Borrower in this Instrument, including, but not limited to, the covenants to pay when due any sums secured by this Instrument. Lender at Lender's option may declare all of the sums secured by this Instrument to be immediately due and payable without further demand and may foreclose this Instrument by judicial proceeding and may invoke any other remedies permitted by applicable law or provided herein. Lender shall be entitled to collect all costs and expenses incurred in pursuing such remedies, including, but not limited to, attorney's fees, costs of documentary evidence, abstracts and title reports. 28. RELEASE. Upon payment of all sums secured by this Instrument, Lender shall release this Instrument. Borrower shall pay Lender's reasonable costs incurred in releasing this Instrument. 29. ATTORNEY'S FEES. As used in this Instrument and in the Note, "attorney's fees" shall include attorney's fees, if any, which may be awarded by an appellate court. IN WITNESS WHEREOF, Borrower has executed this Instrument or has caused the same to be executed by its representatives thereunto duly authorized. BORROWER: Signed, and Delivered OTC APARTMENTS LIMITED PARTNERSHIP, in the Presence of: a Florida limited partnership /s/ Lolly Avant By: AIMCO/OTC QRS, INC., a Delaware - -------------------------- corporation, its sole General Partner Lolly Avart /s/ F.M. DePrez By: /s/ Harry Alcock - -------------------------- --------------------------- F.M. DePrez Name: Harry Alcock Title : Vice President FORM 4010 (PAGE 7 OF 8 PAGES) ACKNOWLEDGMENT STATE OF FLORIDA ) ) ss: COUNTY OF HILLSBOROUGH ) The foregoing instrument was acknowledged before me this 28th day of June, 1996, by Harry Alcock, Vice President of AIMCO/OTC QRS, INC., a Delaware corporation, on behalf of said corporation, the general partner of OTC APARTMENTS LIMITED PARTNERSHIP, a Florida limited partnership. He who is personally known to me/has produced driver license as identification. /s/ Patricia C. Sheppard ----------------------------------- Printed/Typed Name:________________ Notary Public My Commission Expires: [NOTARY SEAL] FLORIDA (PAGE 8 OF 8) EX-10.85 27 EXHIBIT 10.85 RIDER TO MULTIFAMILY INSTRUMENT THIS RIDER TO MULTIFAMILY INSTRUMENT (the "Rider") is made as of the 1st day of July 1996, and is incorporated into and shall be deemed to amend and supplement the Multifamily Mortgage of the same date (the "Instrument"), given by the undersigned OTC APARTMENTS LIMITED PARTNERSHIP a Florida limited partnership (the "Borrower"), to secure Borrower's Multifamily Note of the same date (the "Note") with Addendum to Multifamily Note of the same date (the "Addendum") to Housing Finance Authority of Broward County, a public body of the State of Florida, 110 N.E. Third Street, Suite 300, Ft. Lauderdale, Florida 33301 [INSERT ADDRESS OF LENDER], and its successors, assigns and transferees (the "Lender"), covering the property described in the Instrument and defined therein as the "Property," located at: 8650 NW 61st Street, Tamarac, Florida - -------------------------------------------------------------------------------- [Property Address] The Property is located entirely within the State of Florida [INSERT NAME OF STATE IN WHICH THE PROPERTY IS LOCATED] (the "Property Jurisdiction"). The term "Loan Documents" when used in this Rider shall mean, collectively, the following documents: (i) the Instrument, as modified by this Rider, the Special Rider to Multifamily Instrument as of even date herewith (the "Special Rider") and any other riders to the Instrument given by Borrower to Lender and covering the Property; (ii) the Note, as modified by the Addendum and any other addendum to the Note; and (iii) all other documents or agreements, including any Collateral Agreements (as defined below) or O&M Agreements (as defined below), arising under, related to, or made in connection with, the loan evidenced by the Note, as such Loan Documents may be amended from time to time. Any conflict between the provisions of the Instrument and the Rider shall be resolved in favor of the Rider. *the Special Rider to Multifamily Instrument as of even date herewith (the "Special Rider") The covenants and agreements of this Rider, and the covenants and agreements of any other riders (including, without limitation, the Special Rider) to the Instrument given by Borrower to Lender and covering the Property, shall be incorporated into and shall amend and supplement the covenants and agreements of the Instrument as if this Rider and the other riders were a part of the Instrument and all references to the Instrument in the Loan Documents shall mean the Instrument as so amended and supplemented. ADDITIONAL COVENANTS. In addition to the covenants and agreements made in the Instrument, Borrower and Lender further covenant and agree as follows: A. FUNDS FOR TAXES, INSURANCE AND OTHER CHARGES Uniform Covenant 2 of the Instrument ("Funds for Taxes, Insurance and Other Charges") is amended to change the title to "Funds for Taxes, Insurance and Other Charges; Collateral Agreements." Existing Uniform Covenant 2 is amended to become Uniform Covenant 2A. The following new Uniform Covenant 2B is added at the end of Uniform Covenant 2A: 2B REPLACEMENT RESERVE AGREEMENT, COMPLETION/REPAIR AGREEMENT, ACHIEVEMENT AGREEMENT AND OTHER COLLATERAL AGREEMENTS (a) REPLACEMENT RESERVE AGREEMENT Borrower shall deposit with Lender the amounts required by the Replacement Reserve and Security Agreement (the "Replacement Reserve Agreement") between Borrower and Lender (if any) dated as of the date of the Note, at the times required by the Replacement Reserve Agreement, and shall perform all other obligations as and when required pursuant to the Replacement Reserve Agreement. (b) COMPLETION/REPAIR AGREEMENT Borrower shall deposit with Lender the amount required by the Completion/Repair and Security Agreement (the "Completion/Repair Agreement") between Borrower and Lender (if any), dated as of the date of the Note, at the time required by the Completion/Repair Agreement, and shall perform all other obligations as and when required pursuant to the Completion/Repair Agreement. (d) COLLATERAL AGREEMENTS As used herein, the term "Collateral Agreement" shall mean any of the Replacement Reserve Agreement, the Completion/Repair Agreement, the Achievement Agreement and any similar agreement which has been entered into between Borrower and Lender in connection with the loan evidenced by the Note. B. APPLICATION OF PAYMENTS Uniform Covenant 3 of the Instrument ("Application of Payments") is amended to add the following sentence at the end thereof: Notwithstanding the preceding sentence, (i) Lender shall be permitted to apply any partial payment received from Borrower in any manner determined by Lender and in any order of priority of application as determined by Lender, in Lender's sole discretion, and (ii) upon any breach of any covenant or agreement of Borrower in the Instrument, the Note or any other Loan Document. Lender shall be permitted to apply any funds held pursuant to FORM 4058 6/93 (PAGE 1 OF 8 PAGES) RIDER TO MULTIFAMILY INSTRUMENT - -FANNIE MAE UNIFORM INSTRUMENT Fannie Mae Pool No. any Collateral Agreement in any manner which is permitted pursuant to such Collateral Agreement and in any order of priority of application as determined by Lender, in Lender's sole discretion. C. HAZARD INSURANCE; RESTORATION OF PROPERTY Uniform Covenant 5 of the Instrument ("Hazard Insurance") is amended to add the following sentence at the end thereof: Lender shall not exercise Lender's option to apply insurance proceeds to the payment of the sums secured by the Instrument if all of the following conditions are met: (i) Borrower is not in breach or default of any provision of the Instrument, the Note or any other Loan Document; (ii) Lender determines that there will be sufficient funds to restore and repair the Property to a condition approved by Lender; (iii) Lender determines that the rental income of the Property, after restoration and repair of the Property to a condition approved by Lender, will be sufficient to meet all operating costs and other expenses, payments for reserves and loan repayment obligations relating to the Property; (iv) Lender determines that restoration and repair of the Property to a condition approved by Lender will be completed prior to the earlier of either (1) the maturity date of the Note or (2) within one year of the date of the loss or casualty to the Property; and (v) Lender determines that upon restoration and repair of the Property, there will not have been a material diminution in the value of the Property since the date immediately preceding the casualty. D. ENVIRONMENTAL HAZARDS PROVISION In addition to Borrower's covenants and agreements under Uniform Covenant 6 of the Instrument ("Preservation and Maintenance of Property"), Borrower further covenants and agrees that Borrower shall not: (a) cause or permit the presence, use, generation, manufacture, production, processing, installation, release, discharge, storage (including aboveground and underground storage tanks for petroleum or petroleum products), treatment, handling, or disposal of any Hazardous Materials (as defined below) (excluding the safe and lawful use and storage of quantities of Hazardous Materials customarily used in the operation and maintenance of comparable multifamily properties or for normal household purposes) on or under the Property, or in any way affecting the Property or its value, or which may form the basis for any present or future demand, claim or liability relating to contamination, exposure, cleanup or other remediation of the Property or; (b) cause or permit the transportation to, from or across the Property of any Hazardous Material (excluding the safe and lawful use and storage of quantities of Hazardous Materials customarily used in the operation and maintenance of comparable multifamily properties or for normal household purposes); or (c) permit, cause or exacerbate any occurrence or condition on the Property that is or may be in violation of Hazardous Materials Law (as defined below). (The matters described in (a), (b) and (c) above are referred to collectively below as "Prohibited Activities or Conditions.") Except with respect to any matters which have been disclosed in writing by Borrower to Lender prior to the date of the Instrument, or matters which have been disclosed in an environmental hazard assessment report of the Property received by Lender prior to the date of the Instrument, Borrower represents and warrants that it has not at any time caused or permitted any Prohibited Activities or Conditions and to the best of its knowledge, no Prohibited Activities or Conditions exist or have existed on or under the Property. Borrower shall take all appropriate steps (including but not limited to appropriate lease provisions) to prevent its employees, agents, and contractors, and all tenants and other occupants on the Property, from causing, permitting or exacerbating any Prohibited Activities or Conditions. Borrower shall not lease or allow the sublease of all or any portion of the Property for non-residential use to any tenant or subtenant that, in the ordinary course of its business, would cause, permit or exacerbate any Prohibited Activities or Conditions, and all non-residential leases and subleases shall provide that tenants and sub- tenants shall not cause, permit or exacerbate any Prohibited Activities or Conditions. If any Prohibited Activities or Conditions exist on the Property or if Lender shall otherwise require Borrower to do so in writing in accordance with reasonable commercial practices, Borrower shall comply in a timely manner with, and cause all employees, agents, and contractors of Borrower and any other persons present on the Property to so comply with, (1) any program of operations and maintenance ("O&M Program") relating to the Property that is acceptable to Lender with respect to one or more Hazardous Materials (which O&M Program may be set forth in an agreement of Borrower (an "O&M Agreement")) and all other obligations set forth in any O&M Agreement, or other remedial action requested by Lender, and (2) all Hazardous Materials Laws. Any O&M Program shall be performed by qualified personnel. All costs and expenses of the O&M Program shall be paid by Borrower, including without limitation Lender's fees and costs incurred in connection with the monitoring and review of the O&M Program and Borrower's performance thereunder. If Borrower fails to timely commence or diligently continue and complete the O&M Program and comply with any O&M Agreement, then Lender may, at Lender's option, declare all of the sums secured by the Instrument to be immediately due and payable, and Lender may invoke any remedies permitted by paragraph 27 of the Instrument. Without limiting the foregoing, Borrower shall take prompt remedial action in the event of the discovery of any Prohibited Activities or Conditions and obtain Lender's prior written approval of such remedial action. Borrower represents that Borrower has not received, and has no knowledge of the issuance of, any claim, citation or notice of any pending or threatened suits, proceedings, orders, or governmental inquiries or opinions involving the Property that allege the violation of any Hazardous Materials Law ("Governmental Actions"). Borrower shall promptly notify Lender in writing of: (i) the occurrence of any Prohibited Activity or Condition on the Property; (ii) Borrower's actual knowledge of the presence on or under any adjoining property of any Hazardous Materials which can reasonably be expected to have a material adverse impact on the Property or the value of the Property, discovery of any occurrence or condition on the Property or any adjoining real property that could cause any restrictions on the ownership, occupancy, transferability or use of the Property under Hazardous Materials FORM 4058 6/93 (PAGE 2 OF 8 PAGES) Law. Borrower shall cooperate with any governmental inquiry, and shall comply with any governmental or judicial order which arises from any alleged Prohibited Activities or Conditions; (iii) any Governmental Action; and (iv) any claim made or threatened by any third party against Borrower, Lender, or the Property relating to loss or injury resulting from any Hazardous Materials. Any such notice by Borrower shall not relieve Borrower of, or result in a waiver of any obligation of Borrower under this paragraph D. Borrower shall pay promptly the costs of any environmental audits, studies or investigations (including but not limited to advice of legal counsel) and the removal of any Hazardous Materials from the Property required by Lender as a condition of its consent to any sale or transfer under paragraph 19 of the Instrument of all or any part of the Property or any transfer occurring upon a foreclosure or a deed in lieu of foreclosure or any interest therein, or required by Lender following a reasonable determination by Lender that there may be Prohibited Activities or Conditions on or under the Property. Borrower authorizes Lender and its employees, agents and contractors to enter onto the Property for the purpose of conducting such environmental audits, studies and investigations. Any such costs and expenses incurred by Lender (including but not limited to fees and expenses of attorneys and consultants, whether incurred in connection with any judicial or administrative process or otherwise) which Borrower fails to pay promptly shall become immediately due and payable and shall become additional indebtedness secured by the Instrument pursuant to Uniform Covenant 8 of the Instrument. Borrower shall hold harmless, defend and indemnify Lender and its officers, directors, trustees, employees, and agents from and against all proceedings (including but not limited to Government Actions), claims, damages, penalties, costs and expenses (including without limitation fees and expenses of attorneys and expert witnesses, investigatory fees, and cleanup and remediation expenses, whether or not incurred within the context of the judicial process), arising directly or indirectly from (i) any breach of any representation, warranty, or obligation of Borrower contained in this paragraph D or (ii) the presence or alleged presence of Hazardous Materials on or under the Property. The term "Hazardous Materials," for purposes of this paragraph D, includes petroleum and petroleum products, flammable explosives, radioactive materials (excluding radioactive materials in smoke detectors), polychlorinated biphenyls, lead, asbestos in any form that is or could become friable, hazardous waste, toxic or hazardous substances or other related materials whether in the form of a chemical, element, compound, solution, mixture or otherwise including, but not limited to, those materials defined as "hazardous substances," "extremely hazardous substances," "hazardous chemicals," "hazardous materials," "toxic substances," "solid waste," "toxic chemicals," "air pollutants," "toxic pollutants," "hazardous wastes," "extremely hazardous waste," or "restricted hazardous waste" by Hazardous Materials Law or regulated by Hazardous Materials Law in any manner whatsoever. The term "Hazardous Materials Law," for the purposes of this paragraph D, means all federal, state, and local laws, ordinances and regulations and standards, rules, policies and other binding governmental requirements and any court judgments applicable to Borrower or to the Property relating to industrial hygiene or to environmental or unsafe conditions or to human health including, but not limited to, those relating to the generation, manufacture, storage, handling, transportation, disposal, release, emission or discharge of Hazardous Materials, those in connection with the construction, fuel supply, power generation and transmission, waste disposal or any other operations or processes relating to the Property, and those relating to the atmosphere, soil, surface and ground water, wetlands, stream sediments and vegetation on, under, in or about the Property. The representations, warranties, covenants, agreements, indemnities and undertakings of Borrower contained in this paragraph D shall be in addition to any and all other obligations and liabilities that Borrower may have to Lender under applicable law. The representations, warranties, covenants, agreements, indemnities and undertakings of Borrower contained in this paragraph D shall continue and survive notwithstanding the satisfaction, discharge, release, assignment, termination, subordination or cancellation of the Instrument or the payment in full of the principal of and interest on the Note and all other sums payable under the Loan Documents or the foreclosure of the Instrument or the tender or delivery of a deed in lieu of foreclosure or the release of any portion of the Property from the lien of the Instrument, except with respect to any Prohibited Activities or Conditions or violation of any of the Hazardous Materials Laws which first commences and occurs after the satisfaction, discharge, release, assignment, termination or cancellation of the Instrument following the payment in full of the principal of and interest on the Note and all other sums payable under the Loan Documents or which first commences or occurs after the actual dispossession from the entire Property of the Borrower and all entities which control, are controlled by, or are under common control with the Borrower (each of the foregoing persons or entities is hereinafter referred to as a "Responsible Party") following foreclosure of the Instrument or acquisition of the Property by a deed in lieu of foreclosure. Nothing in the foregoing sentence shall relieve the Borrower from any liability with respect to any Prohibited Activities or Conditions or violation of Hazardous Materials Laws where such Prohibited Activities or Conditions or violation of Hazardous Materials Laws commences or occurs, or is present as a result of, any act or omission by any Responsible Party or by any person or entity acting on behalf of a Responsible Party. FORM 4058 6/93 (PAGE 3 OF 8 PAGES) F. TRANSFERS OF THE PROPERTY OR SIGNIFICANT INTERESTS IN BORROWER; TRANSFER FEES Uniform Covenant 19 of the Instrument ("Transfers of the Property or Beneficial Interests in Borrower, Assumption") is amended to read as set forth below: TRANSFERS OF THE PROPERTY OR SIGNIFICANT INTERESTS IN BORROWER; TRANSFER FEES (a) DEFINITIONS For purposes of the Instrument (and the Rider), the following terms have the respective meanings set forth below: (1) The term "Key Principal" means the entities who execute(s) the Payment Guaranty to Lender dated the date of the Note and any persons or entity who subsequently execute a Guaranty to Lender in connection with the Note. (2) The term "Transfer" means a sale, assignment, substitution, transfer or other disposition (whether voluntary or by operation of law) of, or the granting or creating of a lien, encumbrance or security interest in, the Property or in ownership interests, and the issuance or other creation of ownership interests in an entity and the reconstitution of one type of entity to another type of entity. (3) A "Significant Interest" in any entity shall mean the following: (i) if the entity is a general partnership or a joint venture, (A) any partnership interest in the general partnership, or (B) any interest of a joint venturer in a joint venture; (ii) if the entity is a limited partnership, (A) any limited partnership interest in the entity, or (B) any general partnership interest in the entity; (iii) if the entity is a limited liability company, any membership interest; (iv) if the entity is a corporation, any voting stock in the corporation; (v) if the entity is a trust, any beneficial interest in such trust. (b) ACCELERATION OF THE LOAN UPON TRANSFERS OF THE PROPERTY OR SIGNIFICANT INTERESTS Lender may, at Lender's option, declare all sums secured by the Instrument immediately due and payable and Lender may invoke any remedies permitted by paragraph 27 of the Instrument if, without the Lender's prior written consent, any of the following shall occur: (1) a Transfer of all or any part of the Property or any interest in the Property; (2) a Transfer of any Significant Interest in Borrower; (3) a Transfer of any Significant Interest in a corporation, partnership, limited liability company, joint venture, or trust which owns a Significant Interest in the Borrower; (4) if the Borrower is a trust, or if any trust owns a Significant Interest in the Borrower, the addition, deletion or substitution of a trustee of such trust, which addition, deletion or substitution has not been approved by Lender; or FORM 4058 6/93 (PAGE 4 OF 8 PAGES) (5) a Transfer of all or any part of any Key Principal's ownership interest (other than limited partnership interests) in the Borrower, or in any other entity which owns, directly or indirectly, through one or more intermediate entities, an ownership interest in the Borrower. (d) NO ACCELERATION OF THE LOAN FOR TRANSFERS CAUSED BY CERTAIN EVENTS Notwithstanding the foregoing provisions of this covenant, Lender shall not be entitled to declare sums secured by the Instrument immediately due and payable or to invoke any remedy permitted by paragraph 27 of the Instrument solely upon the occurrence of any of the following: (1) A Transfer that occurs by inheritance, devise, or bequest or by operation of law upon the death of a natural person who is an owner of the Property or the owner of a direct or indirect ownership interest in the Borrower. (2) The grant of a leasehold interest in individual dwelling units for a term of two years or less and leases for commercial uses as long as commercial leases do not exceed 20 percent of the rentable space of the Property (measured as required by Lender) and provided that all such leasehold interests do not contain an option to purchase the Property. (3) A sale or other disposition of obsolete or worn out personal property which is contemporaneously replaced by comparable personal property of equal or greater value which is free and clear of liens, encumbrances and security interests other than those created by the Loan Documents. (4) The creation of a mechanic's or materialmen's lien or judgment lien against the Property which is released of record or otherwise remedied to Lender's satisfaction, within 30 days of the date of creation. (5) The grant of an easement, if prior to the granting of the easement the Borrower causes to be submitted to Lender all information required by Lender to evaluate the easement, and if Lender determines that the easement will not materially affect the operation of the Property or Lender's interest in the Property and Borrower pays to Lender, on demand, all cost and expenses incurred by Lender in connection with reviewing Borrower's request. (6) A Transfer that occurs pursuant to Section 4.5 or Section 4.7 of the Reimbursement Agreement. G. NOTICE FORM 4058 6/93 (PAGE 5 OF 8 PAGES) H. GOVERNING LAW SEE SPECIAL RIDER I. ACCELERATION; REMEDIES Covenant 27 of the Instrument ("Acceleration; Remedies") is amended to add the following at the end of the first paragraph: Upon the breach of any covenant or agreement by Borrower in the Instrument, (including, but not limited to, the covenants to pay when due sums secured by the Instrument) or any other Loan Document. Lender, at Lender's option may, in addition to any remedies specified in this covenant, invoke any other remedies provided in any Collateral Agreement. If Borrower is in default under any promissory note (other than the Note) evidencing a loan (the "Subordinate Loan") secured by a security instrument (other than the Instrument) covering all or any portion of the Property (the "Subordinate Instrument") or under any Subordinate Instrument or other loan document executed in connection with the Subordinate Loan, (and whether or not the Borrower has obtained the prior approval of Lender to the placement of such Subordinate Instrument on the Property) which default remains uncured after any applicable cure period, Borrower also then will be in default under the Note and the Instrument. In that event, the entire unpaid principal balance of the Note, accrued interest and any other sums due Lender secured by the Instrument then will become due and payable, at Lender's option. If Lender exercises this option to accelerate, Lender will do so in accordance with the provisions of the Note and the Instrument, and the Lender may invoke any and all remedies permitted by applicable law, the Note, the Instrument, or any of the other Loan Documents. J. SINGLE ASSET BORROWER SEE SPECIAL RIDER K. NON-RECOURSE LIABILITY FORM 4058 6/93 (PAGE 6 OF 8 PAGES) BY SIGNING BELOW, Borrower accepts and agrees to the covenants and agreements contained in this Rider. Borrower: Signed, and Delivered OTC APARTMENTS LIMITED PARTNERSHIP in the Presence of: a Florida limited partnership /s/ Lolly Avant By: AIMCO/OTC QRS, INC., a Delaware - -------------------------------- corporation, its sole General Partner Lolly Avant /s/ F. M. DePrez By: /s/ Harry Alcock (SEAL) - -------------------------------- ---------------------------------- F. M. DePrez Name: Harry Alcock Title: Vice President FORM 4058 6/93 (PAGE 8 OF 8 PAGES) EX-10.86 28 EXHIBIT 10.86 [HOUSING FINANCE AUTHORITY OF BROWARD COUNTY, FLORIDA] SPECIAL RIDER TO MULTIFAMILY INSTRUMENT THIS SPECIAL RIDER TO MULTIFAMILY INSTRUMENT (this "Special Rider") is made as of the 1st day of July, 1996, and is incorporated into and shall be deemed to amend and supplement the Multifamily First Mortgage, Assignment of Rents and Security Agreement as of even date herewith (the "Instrument"), given by the undersigned, OTC APARTMENTS LIMITED PARTNERSHIP, a Florida limited partnership (the "Borrower") to HOUSING FINANCE AUTHORITY OF BROWARD COUNTY, FLORIDA (sometimes herein, the "Issuer"), together with its successors, assigns and transferees (the "Lender"), and covering the property described in the Instrument and located in Broward County, Florida (the "Property"), as amended by that certain Rider to Multifamily Instrument as of even date herewith (collectively, with this Special Rider and any other riders to the Instrument given by Borrower to Lender and covering the Property, the "Multifamily Instrument"). The Multifamily Instrument secures, among other things, the Note (as defined in the Instrument), and any future addenda, allonges and amendments to the Note, and all obligations owed by Borrower for the payment of $9,870,000.00 in principal, interest thereon, and other amounts as evidenced by and set forth in the Note (the "Mortgage Loan"). The covenants and agreements of this Special Rider, and the covenants and agreements of any other riders to the Instrument, shall be incorporated into and shall amend and supplement the covenants and agreements of the Instrument as if this Special Rider and the other riders were a part of the Instrument, and all references to the Instrument in the Loan Documents shall mean the Instrument as so amended and supplemented. Any conflict between the provisions of the Instrument, as amended by the Rider (as defined in the Instrument) and this Special Rider shall be resolved in favor of this Special Rider. ADDITIONAL COVENANTS. In addition to the covenants and agreements made in the Instrument and the Rider, Borrower and Lender further covenant and agree as follows: A. REGULATORY AGREEMENT. Lender acknowledges and agrees that the operation of the Property will be subject to that certain Amended and Restated Regulatory Agreement and Agreement of Deed Restrictions dated as of June 15, 1996 and executed by Issuer, The Bank of New York, as Trustee (the "Bond Trustee") and Borrower (the "Regulatory Agreement") regulating or restricting the use or manner of operation of the Property. B. CROSS DEFAULT. The failure by Borrower to pay when due any amount payable under the Note, the Multifamily Instrument or any other Loan Document or the failure (beyond applicable cure periods, if any) by Borrower to perform or observe any covenant or obligation of Borrower contained in (a) the Note, the Multifamily Instrument or any other Loan Document, (b) any of the documentation relating to the Bonds, including, without limitation, the Financing Agreement, (c) any subordinate financing, (d) the Regulatory Agreement, (e) that certain Master Reimbursement Agreement as of even date herewith by Borrower and Fannie Mae, as the same may be amended, supplemented, modified or restated from time to time (the "Master Reimbursement Agreement"), and (f) any form of public, quasi-public, public/private or private debt and/or equity infusion, grant, subsidy, tax relief or abatement plan, program or other form of assistance, shall, at Lender's option, in its discretion, constitute a default under the Note, the Multifamily Instrument and the other Loan Documents. Any such default shall: (i) entitle Lender, at its option, in its discretion, to invoke any of the remedies set forth in Paragraph 27 of the Instrument or as otherwise afforded by law or equity; and (ii) at Fannie Mac's option, in its discretion, constitute a default under and in accordance with the Master Reimbursement Agreement. Notwithstanding anything herein to the contrary, the provisions of clause (e) and/or clause (ii) above of this Paragraph B shall become null and void and of no further force or effect upon: (i) a transfer of the Property and assumption of the Multifamily Instrument pursuant to Section 4.5 of the Master Reimbursement Agreement; and (ii) written notice from Fannie Mae to the Borrower and the Permitted Transferee (as defined in the Master Reimbursement Agreement) confirming that such provisions are of no further force or effect. C. LEASES. All leases of the residential housing units in the Property must (a) be legally valid, binding and enforceable obligations of the tenants, (b) comply with all applicable laws and (c) satisfy the standards of the Fannie Mae Delegated Underwriting and Servicing Guide in its present form as of the date of any such lease. D. MORTGAGE EXPENSES. Should Lender (or "Servicer", as "such term is defined in the Master Reimbursement Agreement) pay any Mortgage Expenses (as hereinafter defined), Borrower shall on demand immediately reimburse Lender (or Lender on behalf of Servicer, as applicable) for the full amount of such Mortgage Expenses paid by Lender (or Servicer, as applicable). For purposes of this paragraph E, "Mortgage Expenses" shall mean the cost of real estate taxes, appraisal fees, insurance fees, legal fees and any other expenses which may be required to maintain the priority of, or to protect or enforce Lender's rights in, the Multifamily Instrument, including (i) fees and expenses of the Servicer which are not paid by Borrower, (ii) fees and expenses paid to maintain in full force and effect or realize the benefit of any insurance with respect to the Multifamily Instrument and (iii) any fees or expenses advanced on behalf of Borrower by Fannie Mae to the Bond Trustee or the Issuer. E. CHARGES; LIENS. Uniform Covenant 4 of the Instrument ("Charges; Liens") is amended to add the following provisions at the end thereof: Provided that Borrower is not in breach of any of its covenants, obligations or agreements under this Instrument and no event of default has occurred and is continuing under the Note or any other Loan Document, Borrower shall not be required to pay or discharge any obligation imposed upon Borrower by this paragraph 4 so long as Borrower has given written notice of the same to Lender and is in good faith and at its sole cost and expense diligently contesting the same or the validity thereof by appropriate legal proceedings, which proceedings must operate to prevent the -2- collection thereof or realization thereon, the sale or forfeiture of the Property or any portion thereof to satisfy the same; provided, however, that during such contest (i) Borrower shall, at the option of Lender, provide security reasonably satisfactory to Lender and sufficient in Lender's reasonable judgment to cover the amount of the contested obligations, with interest on such obligations (to the extent interest would be due the obligee) for that period that such proceedings may reasonably be expected to take, and of any additional interest, charge, fine, penalty, fee or expense arising from or incurred as a result of such contest, (ii) the title company insuring the Property agrees to insure over any potential lien that may result from such contest, and (iii) if at any time the payment of any obligation imposed upon Borrower by this paragraph 4 shall become necessary to prevent (a) the delivery of a tax deed conveying the Property or any portion thereof, or (b) the sale of the tax lien therefor because of non-payment (c) the imposition of any penalty, fine, charge, fee, cost or expense on Lender, then Borrower shall pay the same in sufficient time to prevent the occurrence of any of the foregoing. F. CONDEMNATION PROCEEDS; RESTORATION OF PROPERTY. Uniform Covenant 11 of the Instrument ("Condemnation") is amended to add the following provision at the end thereof: Lender shall permit Borrower to apply any such awards, payments, proceeds or damages, after deduction of Lender's expenses incurred in the collection of such amounts, to the payment of repairs to the Property if all of the following conditions are met: (i) Borrower is not in breach or default of any provision of the Instrument, the Note or any other loan Document; (ii) Lender determines that there will be sufficient funds to restore and repair the Property to a condition approved by Lender; (iii) Lender determines that the rental income of the Property, after restoration and repair of the Property to a condition approved by Lender, will be sufficient to meet all operating costs and other expenses, payments for reserves and loan repayment obligations relating to the Property; (iv) Lender determines that restoration and repair of the Property to a condition approved by Lender will be completed prior to the earlier of either (1) the maturity date of the Note or (2) within one year of the date of the loss or casualty to the Property; and (v) Lender determines that upon the restoration and repair of the Property there will not have been a material dimunition in the value of the Property since the date immediately preceding the condemnation. G. LEASES. Uniform Covenant 16 of the Instrument ("Leases of the Property") is modified by adding the phase "entered into hereafter" after the words "All leases of the Property" in the third (3rd) sentence of such Uniform Covenant 16. H. Deleted. -3- I. MODIFICATION OF SINGLE ASSET REQUIREMENTS. Paragraph J of the Rider is amended to read as follows: J. Single Purpose Entity. Borrower covenants and agrees that Borrower shall at all times during the term of this Instrument comply with the covenants set forth in Sections 2.2(i) and 2.3(k) of the Master Reimbursement Agreement and that Borrower shall not violate the provisions of subsections 2.3(a)(iii) or 2.3(a)(iv) of the Master Reimbursement Agreement. J. GRANT OF INTEREST IN CERTAIN FUNDS. Without limiting the generality of the first (1st) sentence of Uniform Covenant 15 of the Instrument and pursuant to the Uniform Commercial Code, Borrower hereby grants, pledges and assigns to Lender all of Borrower's right, title and interest in and to all funds and accounts and investments of funds and accounts now or hereafter held by the Bond Trustee pursuant to the Indenture, including any and all loan funds, escrow funds, revenue funds, debt service funds, reserve funds, redemption funds and other funds and securities and other instruments comprising investments of any of the foregoing and interest and other income derived from any of the foregoing, all to be held by Lender in trust in accordance with the terms of the Indenture. K. NOTICES. Uniform Covenant 20 of the Instrument is amended to read as follows: All notices, directions, certificates or other communications hereunder shall be given by certified or registered mail, return receipt requested, OR by overnight courier addressed to the appropriate notice address set forth below. Any of the parties hereto may, by such notice described above, designate any further or different address to which subsequent notices, certificates or other communications shall be sent without any requirement of execution of any amendment to this Instrument. Any such notice, certificate or communication shall be deemed to have been given as of the date of actual delivery or the date of failure to deliver by reason of refusal to accept delivery or changed address of which no notice was given pursuant to this paragraph 20. Unless otherwise directed by Fannie Mae, all notices from Borrower pursuant to this Instrument shall also be given to the Servicer in accordance with this paragraph 20. The notice addresses are as follows: (a) if to Borrower: OTC Apartments Limited Partnership 1873 South Bellaire Street, 17th Floor Denver, Colorado 80222-4348 Attn: Vice Chairman -4- (b) if to Fannie Mae: if by mail or overnight courier: Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attn: Senior Vice President Multifamily Activities if by messenger: Fannie Mae 3939 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attn: Senior Vice President Multifamily Activities in each case, with copies to: Fannie Mae Southwest Regional Office Two Galleria Tower 13455 Noel Road, Suite 600 Dallas, Texas Attn: Regional Vice President Multifamily Activities and to: Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attn: Multifamily Mortgage Operations Manager, Multifamily Deliveries (c) if to Servicer: GMAC Commercial Mortgage Corporation 650 Dresher Road Horsham, PA. 19044-8015 Attn: Barry Moore L. CHOICE OF LAW; CONSENT TO JURISDICTION. The provisions of Section 7.8 and Section 7.9 of the Reimbursement Agreement are hereby incorporated by reference herein as if fully set forth herein. -5- IN WITNESS WHEREOF, the parties hereto have executed this Special Rider or have caused the same to be executed by their respective representatives thereunto duly authorized. BORROWER: Signed, Sealed and OTC APARTMENTS LIMITED PARTNERSHIP, a Delivered in the Florida limited partnership Presence of: /s/ Lolly Avant By: AIMCO/OTC QRS, INC., a Delaware - ------------------------- corporation, its sole General Lolly Avant Partner /s/ F.M. DePrez By: /s/ Harry Alcock - ------------------------- ------------------------------- F.M. DePrez Harry Alcock Vice President -6- EX-10.87 29 EXHIBIT 10.87 WHEN RECORDED MAIL TO After recording return to: L. Avant - ------------------------------------ Stewart National Title Services 1980 Post Oak, Suite 610 Houston, Texas 77056 SN# --------------------------------- - -------------------------------------------------------------------------------- SPACE ABOVE THIS LINE FOR RECORDER'S USE THIS INSTRUMMENT WAS PREPARED BY: AND WHEN RECORDED, MAILED TO Pursuant to 12 U.S. C. Section 1723a(c)(2) and/or F.A.C. 12B-4.002(2)(c), the Instrument is exempt from documentary stamp amd intangibles tax. SECOND MULTIFAMILY/MORTGAGE, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT THIS MORTGAGE (herein "Instrument") is made as of the 1st day of July, 1996 between the Mortgagor/Grantor, OTC APARTMENTS LIMITED PARTNERSHIP, a Florida limited partnership, whose address is 1873 South Bellaire Street, 17th Floor, Denver, Colorado 80222 (herein "Borrower") and the Mortgagee, FEDERAL NATIONAL MORTGAGE ASSOCIATION, ("Fannie Mae"), a federally- chartered and stockholder-owned corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. Sections 1716 et seq., whose address is 3900 Wisconsin Avenue, N.W., Washington, D.C. 20016 (herein "Lender"). WHEREAS, this Instrument is granted for the benefit of Fannie Mae in connection with that certain Master Reimbursement Agreement as of even date herewith between Fannie Mae and Borrower (as the same may be modified, amended, restated or otherwise supplemented from time to time, the "Reimbursement Agreement") pursuant to which Fannie Mae has agreed to extend certain credit enhancement to the Borrower pursuant to certain Related Fannie Mae Pass-Through Certificates and in connection with certain mortgage loans made to Borrower by various issuers. Notwithstanding the use of the term "Lender" in this Instrument, such term shall not be construed to mean or imply that Fannie Mae is the originator of such mortgage loans and the term "Lender" shall mean Fannie Mae as the provider of such credit enhancement and its successors, assigns and transferees. (Capitalized terms not otherwise defined in this Instrument/*shall have the meanings ascribed thereto in the Reimbursement Agreement); TO SECURE TO LENDER (a) payment and performance by Borrower of each and every obligation, covenant and agreement of the Borrower contained in the Reimbursement Agreement, including, without limitation, all amounts due Lender as reimbursement for amounts provided by Lender under the Reimbursement Agreement, all as more particularly described in the Reimbursement Agreement [as used in this Instrument/* the term "Note" shall mean and refer to the Reimbursement Agreement]; (b) the payment of all other sums, with interest thereon, advanced in accordance herewith to protect the security of this Instrument; and (c) the performance of the covenants and agreements of Borrower contained in this Instrument (collectively, the "Secured Obligations"), Borrower does hereby mortgage, grant, convey and assign to Lender the following described property located in Tamarac, Broward County, State of Florida: *, the Rider or the Special Rider See Exhibit "A" attached hereto and incorporated herein. THIS INSTRUMENT IS AMENDED AND SUPPLEMENTED IN CERTAIN RESPECTS AS SET FORTH IN THE RIDER TO MULTIFAMILY INSTRUMENT (THE "RIDER") AND SPECIAL RIDER TO MULTIFAMILY INSTRUMENT (THE "SPECIAL RIDER"). BOTH DATED AS OF THE DATE OF THIS INSTRUMENT ATTACHED HERETO AND INCORPORATED HEREIN BY THIS REFERENCE. IN THE EVENT OF ANY INCONSISTENCY BETWEEN THE PRINTED PORTIONS OF THIS INSTRUMENT AND THE PROVISIONS OF THE RIDER OR SPECIAL RIDER. THE PROVISIONS OF THE RIDER OR SPECIAL RIDER, AS APPLICABLE, SHALL GOVERN. IN THE EVENT OF ANY INCONSISTENCY BETWEEN THE PROVISIONS OF THE RIDER AND THE PROVISIONS OF THE SPECIAL RIDER, THE PROVISIONS OF THE SPECIAL RIDER SHALL GOVERN. FORM 4010 (PAGES 1 OF 8 PAGES) FLORIDA--Multifamily -- 1/77 -- FNMA/FHLMC Uniform Instrument [This Instrument is subordinate to that certain Multifamily First Mortgage, Assignment of Rents and Security Agreement dated as of even date herewith and executed by Borrower for the benefit of the Florida Housing Finance Agency] Together with all buildings, improvements, and tenements now or hereafter erected on the property, and all heretofore or hereafter vacated alleys and streets abutting the property, and all easements, rights, appurtenances, rents, royalties, mineral, oil and gas rights and profits, water, water rights, and water stock appurtenant to the property, and all fixtures, machinery, equipment, engines, boilers, incinerators, building materials, appliances and goods of every nature whatsoever now or hereafter located in, or on, or used, or intended to be used in connection with the property, including, but not limited to, those for the purposes of supplying or distributing heating, cooling, electricity, gas, water, air and light; and all elevators, and related machinery and equipment, fire prevention and extinguishing apparatus, security and access control apparatus, plumbing, bath tubs, water heaters, water closets, sinks, ranges, stoves, refrigerators, dishwashers, disposals, washers, dryers, awnings, storm windows, storm doors, screens, blinds, shades, curtains and curtain rods, mirrors, cabinets, panelling, rugs, attached floor coverings, furniture, pictures, antennas, trees and plants, and any other additional items of personal property described in Exhibit "B" attached hereto and incorporated herein; all of which, including replacements and additions thereto, shall be deemed to be and remain a part of the real property covered by this Instrument; and all of the foregoing, together with said property are herein referred to as the "Property". Borrower covenants that Borrower is lawfully seised of the estate hereby conveyed and has the right to mortgage, grant, convey and assign the Property that the Property is unencumbered, and that Borrower will warrant and defend generally the title to the Property against all claims and demands, subject to any easements and restrictions listed in a schedule of exceptions to coverage in any title insurance policy insuring Lender's interest in the Property. FORM 4010 (PAGE 2 OF 8 PAGES) Or any part of the Property to the equivalent of its original condition, or such other condition as Lender may approve in writing, in the event of any damage, injury or loss thereto, whether or not insurance proceeds are available to cover in whole or in part the costs of such restoration or repair, (d) shall keep the Property, including improvements, fixtures, equipment, machinery and appliances thereon in good repair and shall replace fixtures, equipment, machinery and appliances on the Property when necessary to keep such items in good repair, (e) shall comply with all laws, ordinances, regulations and requirements of any governmental body applicable to the Property, (f) shall provide for professional management of the Property by a residential rental property manager satisfactory to Lender pursuant to a contract approved by Lender in writing, unless such requirement shall be waived by Lender in writing, (g) shall generally operate and maintain the Property in a manner to ensure maximum rental and (h) shall give notice in writing to Lender of and, unless otherwise directed in writing by Lender, appear in and defend any action or proceeding purporting to affect the Property, the security of this Instrument or the rights or powers of Lender. Neither Borrower nor any tenant or other person shall remove, demolish or alter any improvement now existing or hereafter erected on the Property or any fixture, equipment, machinery or appliance in or on the Property except when incident to the replacement of fixtures, equipment, machinery and appliances with items of like kind. 7. USE OF PROPERTY. Unless required by applicable law or unless Lender has otherwise agreed in writing, Borrower shall not allow changes in the use for which all or any part of the Property was intended at the time this Instrument was executed. Borrower shall not initiate or acquiesce in a change in the zoning classification of the Property without Lender's prior written consent. 8. PROTECTION OF LENDER'S SECURITY. If Borrower fails to perform the covenants and agreements contained in this Instrument, or if any action or proceeding is commenced which affects the Property or title thereto or the interest of Lender therein, including, but not limited to, eminent domain, insolvency, code enforcement, or arrangements or proceedings involving a bankrupt or decedent, then Lender at Lender's option may make such appearances, disburse such sums and take such action as Lender deems necessary, in its sole discretion, to protect Lender's interest, including, but not limited to, (i) disbursement of attorney's fees, (ii) entry upon the Property to make repairs, (iii) procurement of satisfactory insurance as provided in paragraph 5 hereof. Any amounts disbursed by Lender pursuant to this paragraph 8, with interest thereon, shall become additional indebtedness of Borrower secured by this Instrument. Unless Borrower and Lender agree to other terms of payment, such amounts shall be immediately due and payable and shall bear interest from the date of disbursement at the rate stated in the Note unless collection from Borrower of interest at such rate would be contrary to applicable law, in which event such amounts shall bear interest at the highest rate which may be collected from Borrower under applicable law. Borrower hereby covenants and agrees that Lender shall be subrogated to the lien of any mortgage or other lien discharged, in whole or in part, by the indebtedness secured hereby. Nothing contained in this paragraph 8 shall require Lender to incur any expense or take any action hereunder. 9. INSPECTION. Lender may make or cause to be made reasonable entries upon and inspections of the Property. 11. CONDEMNATION. Borrower shall promptly notify Lender of any action or proceeding relating to any condemnation or other taking, whether direct or indirect, of the Property, or part thereof, and Borrower shall appear in and prosecute any such action of proceeding unless otherwise directed by Lender in writing. Borrower authorizes Lender, at Lender's option, as attorney-in-fact for Borrower, to commence, appear in and prosecute, in Lender's or Borrower's name, any action or proceeding relating to any condemnation or other taking of the Property, whether direct or indirect, and to settle or compromise any claim in connection with such condemnation or other taking. The proceeds of any award, payment or claim for damages, direct or consequential, in connection with any condemnation or other taking. The proceeds of any award, payment or claim for damages, direct or consequential, in connection with any condemnation or other taking, whether direct or indirect of the Property, or part thereof, or for conveyances in lieu of condemnation, are hereby assigned to and shall be paid to Lender subject. Borrower authorizes Lender to apply such awards, payments, proceeds or damages, after the deduction of Lender's expenses incurred in the collection of such amounts, at Lender's option, to restoration or repair of the Property or to payment of the sums secured by this Instrument, whether or not then due, in order of application set forth in paragraph 3 hereof, with the balance, if any, to Borrower. Unless Borrower and Lender otherwise agree in writing, any application of proceeds to principal shall not extend or postpone the due date of the monthly installments referred to in paragraphs 1 and 2 hereof. Borrower agrees to execute such further evidence of assignment of any awards, proceeds, damages or claims arising in connection with such condemnation or taking as Lender may require. 12. BORROWER AND LIEN NOT RELEASED. From time to time, Lender may, at Lender's option, without giving notice to or obtaining the consent of Borrower, Borrower's successors or assigns or of any junior lienholder or guarantors without liability on Lender's part and notwithstanding Borrower's breach of any covenant or agreement of Borrower in this Instrument, extend the time for payment of said indebtedness or any part thereof, reduce the payments thereon, release anyone liable on any of said indebtedness, accept a renewal note or notes therefor, modify the terms and time of payment of indebtedness, release from the lien of this Instrument any part of the Property, take or release other or additional security, reconvey any part of the Property, consent to any map or plan of the Property, consent to the granting of any easement, join in any extension or subordination agreement, and agree in writing with Borrower to modify the rate of interest or period of amortization of the Note or change the amount of the monthly installments payable thereunder. Any actions taken by Lender pursuant to the terms of this paragraph 12 shall not affect the obligation of Borrower or Borrower's successors or assigns to pay the sums secured by this instrument and to observe the covenants of Borrower contained herein, shall not affect the guaranty of any person, corporation, partnership or other entity for payment of the indebtedness secured hereby, and shall not affect the lien or priority of lien hereof on the Property. Borrower shall pay Lender a reasonable service charge, together with such title insurance premiums and attorney's fees as may be incurred at Lender's option, for any such action if taken at Borrower's request. 13. FORBEARANCE BY LENDER NOT A WAIVER. Any forbearance by Lender in exercising any right or remedy hereunder, or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of any right or remedy. The acceptance by Lender of payment of any sum secured by this Instrument after the due date of such payment shall not be a waiver of Lender's rights to either require prompt payment when due of all other sums so secured or to declare a default for failure to make prompt payment. The procurement of insurance or the payment of taxes or other liens or charges by Lender shall not a waiver of Lender's right to accelerate the maturity of the indebtedness secured by this Instrument, nor shall Lender's receipt of any awards, proceeds or damages under paragraphs 5 and 11 hereof operate to cure or waive Borrower's default in payment of sums secured by this Instrument. FORM 4010 (PAGE 4 OF 8 PAGES) 14. ESTOPPEL CERTIFICATE. Borrower shall within ten days of a written request from Lender furnish Lender with a written statement, duly acknowledged, setting forth the sums secured by this Instrument and any right of set-off, counterclaim or other defense which exists against such sums and the obligations of this Instrument. 15. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. This Instrument is intended to be a security agreement pursuant to the Uniform Commercial Code for any of the items specified above as part of the Property which, under applicable law, may be subject to a security interest pursuant to the Uniform Commercial Code, and Borrower hereby grants Lender a security interest in said items. Borrower agrees that Lender may file this Instrument, or a reproduction thereof, in the real estate records or other appropriate index, as a financing statement for any of the items specified above as part of the Property. Any reproduction of this Instrument or of any other security agreement or financing statement shall be sufficient as a financing statement. In addition, Borrower agrees to execute and deliver to Lender, upon Lender's request, any financing statements, as well as extensions, renewals and amendments thereof, and reproductions of this Instrument in such form as Lender may require to perfect a security interest with respect to said items. Borrower shall pay all costs of filing such financing statements and any extensions, renewals, amendments and releases thereof, and shall pay all reasonable costs and expenses of any record searches for financing statements Lender may reasonably require. Without the prior written consent of Lender, Borrower shall not create or suffer to be created pursuant to the Uniform Commercial Code any other security interest in said items, including replacements and additions thereto. Upon Borrower's breach of any covenant or agreement of Borrower contained in this Instrument, including the covenants to pay when due all sums secured by this Instrument, Lender shall have the remedies of a secured party under the Uniform Commercial Code and, at Lender's option, may also invoke the remedies provided in paragraph 27 of this Instrument as to such items. In exercising any of said remedies, Lender may proceed against the items of real property and any items of personal property specified above as part of the Property separately or together and in any order whatsoever, without in any way affecting the availability of Lender's remedies under the Uniform Commercial Code or of the remedies provided in paragraph 27 of this Instrument. 16. LEASES OF THE PROPERTY. Borrower shall comply with and observe Borrower's obligations as landlord under all leases of the Property or any part thereof. Borrower will not lease any portion of the Property for non-residential use except with the prior written approval of Lender. Borrower, at Lender's request, shall furnish Lender with executed copies of all leases now existing or hereafter made of all or any part of the Property, and all leases now or hereafter entered into will be in form and substance subject to the approval of Lender. All leases of the Property shall specifically provide that such leases are subordinate to this Instrument; that the tenant attorns to Lender, such attornment to be effective upon Lender's acquisition of title to the Property; that the tenant agrees to execute such further evidences of attornment as Lender may from time to time request; that the attornment of the tenant shall not be terminated by foreclosure; and that Lender may, at Lender's option, accept or reject such attornments. Borrower shall, not without Lender's written consent, execute, modify, surrender or terminate, either orally or in writing, any lease now existing or hereafter made of all or any part of the Property providing for a term of three years or more, permit an assignment or sublease of such a lease without Lender's written consent, or request or consent to the subordination of any lease of all or any part of the Property to any lien subordinate to this Instrument. If Borrower becomes aware that any tenant proposes to do, or is doing, any act or thing which may give rise to any right of set-off against rent, Borrower shall (i) take such steps as shall be reasonably calculated to prevent the accrual of any right to a set-off against rent, (ii) notify Lender thereof and of the amount of said set-offs, and (iii) within ten days after such accrual, reimburse the tenant who shall have acquired such right to set-off or take such other steps as shall effectively discharge such set-off and as shall assure that rents thereafter due shall continue to be payable without set-off or deduction. Upon Lender's request, Borrower shall assign to Lender, by written instrument satisfactory to Lender, all leases now existing or hereafter made of all or any part of the Property and all security deposits made by tenants in connection with such leases of the Property. Upon assignment by Borrower to Lender of any leases of the Property, Lender shall have all of the rights and powers possessed by Borrower prior to such assignment and Lender shall have the right to modify, extend or terminate such existing leases and to execute new leases, in Lender's sole discretion. 17. REMEDIES CUMULATIVE. Each remedy provided in this Instrument is distinct and cumulative to all other rights or remedies under this Instrument or afforded by law or equity, and may be exercised concurrently, independently, or successively, in any order whatsoever. 18. ACCELERATION IN CASE OF BORROWER'S INSOLVENCY. SEE SPECIAL RIDER ATTACHED HERETO. SEE RIDER SEE RIDER 21. SUCCESSORS AND ASSIGNS BOUND; JOINT AND SEVERAL LIABILITY; AGENTS; CAPTIONS. The covenants and agreements herein contained shall bind, and the rights hereunder shall inure to, the respective successors and assigns of Lender and Borrower, subject to the provisions of paragraph 19 hereof. All covenants and agreements of Borrower shall be joint and several. In exercising any rights hereunder or taking any actions provided for herein, Lender may act through its employees, agents or independent contractors as authorized by Lender. The captions and headings of the paragraphs of this Instrument are for convenience only and are not to be used to interpret or define the provisions hereof. 22. UNIFORM MULTIFAMILY INSTRUMENT; GOVERNING LAW; SEVERABILITY. This form of multifamily instrument combines uniform covenants for national use and non- uniform covenants with limited variations by jurisdiction to constitute a uniform security instrument covering real property and related fixtures and personal property. In the event that any provision of this Instrument or the Note conflicts with applicable law, such conflict shall not affect other provisions of this Instrument or the Note which can be given effect without the conflicting provisions, and to this end the provisions of this FORM 4010 (PAGE 5 OF 8 PAGES) Instrument and the Note are declared to be severable. In the event that any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower is interpreted so that any charge provided for in this Instrument or in the Note, whether considered separately or together with other charges levied in connection with this Instrument and the Note, violates such law, and Borrower is entitled to the benefit of such law, such charge is hereby reduced to the extent necessary to eliminate such violation. The amounts, if any, previously paid to Lender in excess of the amounts payable to Lender pursuant to such charges as reduced shall be applied by Lender to reduce the principal of the indebtedness evidenced by the Note. For the purpose of determining whether any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower has been violated, all indebtedness which is secured by this Instrument or evidenced by the Note and which constitutes interest, as well as all other charges levied in connection with such indebtedness which constitute interest, shall be deemed to be allocated and spread over the stated term of the Note. Unless otherwise required by applicable law, such allocation and spreading shall be effected in such a manner that the rate of interest computed thereby is uniform throughout the stated term of the Note. 23. WAIVER OF STATUTE OF LIMITATIONS. Borrower hereby waives the right to assert any statute of limitations as a bar to the enforcement of the lien of this Instrument or to any action brought to enforce the Note or any other obligation secured by this Instrument. SEE SPECIAL RIDER 26. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION. As part of the consideration for the indebtedness evidenced by the Note, Borrower hereby absolutely and unconditionally assigns and transfers to Lender all the rents and revenues of the Property, including those now due, past due, or to become due by virtue of any lease or other agreement for the occupancy or use of all or any part of the Property, regardless of to whom the rents and revenues of the Property are payable. Borrower hereby authorizes Lender or Lender's agents to collect the aforesaid rents and revenues and hereby directs each tenant of the Property to pay such rents to Lender or Lender's agents; provided, however, that prior to written notice given by Lender to Borrower of the breach by Borrower of any covenant or agreement of Borrower in this Instrument. Borrower shall collect and receive all rents and revenues of the Property as trustee for the benefit of Lender and Borrower, to apply the rents and revenues so collected to the sums secured by this Instrument in the order provided in paragraph 3 hereof with the balance, so long as no such breach has occurred, to the account of Borrower, it being intended by Borrower and Lender that this assignment of rents constitutes an absolute assignment and not an assignment for additional security only. Upon delivery of written notice by Lender to Borrower of the breach by Borrower of any covenant or agreement of Borrower in this Instrument, and without the necessity of Lender entering upon and taking and maintaining full control of the Property in person, by agent or by a court-appointed receiver. Lender shall immediately be entitled to possession of all rents and revenues of the Property as specified in this paragraph 26 as the same become due and payable, including but not limited to rents then due and unpaid, and all such rents shall immediately upon delivery of such notice be held by Borrower as trustee for the benefit of Lender only; provided, however, that the written notice by Lender to Borrower of the breach by Borrower shall contain a statement that Lender exercises its rights to such rents. Borrower agrees that commencing upon delivery of such written notice of Borrower's breach by Lender to Borrower, each tenant of the Property shall make such rents payable to and pay such rents to Lender or Lender's agents on Lender's written demand to each tenant therefor, delivered to each tenant personally, by mail or by delivering such demand to each rental unit, without any liability on the part of said tenant to inquire further as to the existence of a default by Borrower. Borrower hereby covenants that Borrower has not executed any prior assignment of said rents, that remain in effect as of the date herein, that Borrower has not performed, and will not perform, any acts or has not executed, and will not execute, any instrument which would prevent Lender from exercising its rights under this paragraph 26, and that at the time of execution of this Instrument there has been no anticipation or prepayment of any of the rents of the Property for more than two months prior to the due dates of such rents. Borrower covenants that Borrower will not hereafter collect or accept payment of any rents of the Property more than two months prior to the due dates of such rents. Borrower further covenants that Borrower will execute and deliver to Lender such further assignments or rents and revenues of the Property as Lender may from time to time request. Upon Borrower's breach of any covenant or agreement of Borrower in this Instrument, Lender may in person, by agent or by a court-appointed receiver, regardless of the adequacy of Lender's security, enter upon and take and maintain full control of the Property in order to perform all acts necessary and appropriate for the operation and maintenance thereof including, but not limited to, the execution, cancellation or modification of leases, the collection of all rents and revenues of the Property, the making of repairs to the Property and the execution or termination of contracts providing for the management or maintenance of the Property, all on such terms as are deemed best to protect the security of this Instrument. In the event Lender elects to seek the appointment of a receiver for the Property upon Borrower's breach of any covenant or agreement of Borrower in this Instrument, Borrower hereby expressly consents to the appointment of such receiver. Lender or the receiver shall be entitled to receive a reasonable fee for so managing the Property. All rents and revenues collected subsequent to delivery of written notice by Lender to Borrower of the breach by Borrower of any covenant or agreement of Borrower in this Instrument shall be applied first to the costs, if any, of taking control of and managing the Property and collecting the rents, including, but not limited to, Attorney's fees, receiver's fees, premiums on receiver's bonds, costs of repairs to the Property, premiums on insurance policies, taxes, assessments and other charges on the Property, and the costs of discharging any obligation or liability of Borrower as lessor or landlord of the Property and then to the sums secured by this Instrument. Lender or the receiver shall have access to the books and records used in the operation and maintenance of the Property and shall be liable to account only for those rents actually received. Lender shall not be liable to Borrower, anyone claiming under or through Borrower or anyone having an interest in the Property by reason of anything done or left undone by Lender under this paragraph 26. If the rents of the Property are not sufficient to meet the costs, if any, of taking control of and managing the Property and collecting the rents, any funds expended by Lender for such purposes shall become indebtedness of Borrower to Lender secured by this Instrument pursuant to paragraph 8 hereof. Unless Lender and Borrower agree in writing to other terms of payment, such amounts shall be payable upon notice from Lender to Borrower requesting payment thereof and shall bear interest from the date of disbursement at the rate stated in the Note unless payment of interest at such rate would be contrary to applicable law, in which event such amounts shall bear interest at the highest rate which may be collected from Borrower under applicable law. Any entering upon and taking and maintaining of control of the Property by Lender or the receiver and any application of rents as provided herein shall not cure or waive any default hereunder or invalidate any other right or remedy of Lender under applicable law or provided herein. This assignment of rents of the Property shall terminate at such time as this Instrument ceases to secure indebtedness held by Lender. FORM 4010 (PAGE 6 OF 8 PAGES) UNIFORM COVENANTS-MULTIFAMILY-1/77-FNMA/FHLMC UNIFORM INSTRUMENT Non-Uniform Covenants. Borrower and Lender further covenant and agree as follows: 27. ACCELERATION REMEDIES. Upon Borrower's breach of any covenant or agreement of Borrower in this Instrument, including, but not limited to, the covenants to pay when due any sums secured by this Instrument. Lender at Lender's option may declare all of the sums secured by this Instrument to be immediately due and payable without further demand and may foreclose this Instrument by judicial proceeding and may invoke any other remedies permitted by applicable law or provided herein. Lender shall be entitled to collect all costs and expenses incurred in pursuing such remedies, including, but not limited to, attorney's fees, costs of documentary evidence, abstracts and title reports. 28. RELEASE. Upon payment of all sums secured by this Instrument, Lender shall release this Instrument. Borrower shall pay Lender's reasonable costs incurred in releasing this Instrument. 29. ATTORNEY'S FEES. As used in this Instrument and in the Note, "attorney's fees" shall include attorney's fees, if any, which may be awarded by an appellate court. IN WITNESS WHEREOF, Borrower has executed this Instrument or has caused the same to be executed by its representative thereunto duly authorized. BORROWER: Signed, and OTC APARTMENTS LIMITED PARTNERSHIP, a Delivered in the Presence Florida limited partnership of: /s/ Lolly Avant By: AIMCO/OTC QRS, INC., a Delaware - ------------------------- corporation, its sole General Partner Lolly Avant /s/ F. M. DePrez By: /s/ Harry Alcock (SEAL) - ------------------------- ----------------------------- F. M. DePrez Harry Alcock Vice President BORROWER'S ADDRESS: 1873 Bellaire Street, 17th Floor Denver, Colorado 80222 FORM 4010 (PAGE 7 OF 8 PAGES) ACKNOWLEDGMENT STATE OF FLORIDA ) ) ss: COUNTY OF Hillsborough ) The foregoing instrument was acknowledged before me this 28th day of June, 1996, by Harry Alcock, Vice President of AIMCO/OTC QRS, INC., a Delaware corporation, on behalf of said corporation, the general partner of OTC APARTMENTS LIMITED PARTNERSHIP, a Florida limited partnership. He who is personally known to me/has produced drivers license as identification. /s/ Patricia C. Sheppard ----------------------------------- Printed/Typed Name:________________ Notary Public My Commission Expires: [NOTARY SEAL] FLORIDA EX-10.88 30 EXHIBIT 10.88 RIDER TO MULTIFAMILY INSTRUMENT THIS RIDER TO MULTIFAMILY INSTRUMENT (the "Rider") is made as of the 1st day of July 1996, and is incorporated into and shall be deemed to amend and supplement the Multifamily Second Mortgage. of the same date (the "Instrument"), given by the undersigned OTC APARTMENTS LIMITED PARTNERSHIP, a Florida limited partnership (the "Borrower"), for the benefit of FEDERAL NATIONAL MORTGAGE ASSOCIATION, a federally chartered corporation, C/0 GMAC COMMERCIAL MORTGAGE CORPORATION, 650 Dresher Road, Horsham, Pa. 19044-8015 [INSERT ADDRESS OF LENDER], and its successors, assigns and transferees (the "Lender"), covering the property described in the Instrument and defined therein as the "Property," located at: 7610 West Waters Avenue, Tampa, Hillsborough County, Florida - -------------------------------------------------------------------------------- (Property Address) The Property is located entirely within the State of Florida [INSERT NAME OF STATE IN WHICH THE PROPERTY IS LOCATED] (the "Property Jurisdiction"). The term "Loan Documents" when used in this Rider shall mean, collectively, the following documents: (i) the Instrument, as modified by this Rider, the Special Rider and any other riders to the Instrument given by Borrower to Lender and covering the Property; (ii) the Reimbursement Agreement (as defined in the Instrument); (iii) any other documents or agreements as shall be required to evidence or secure the obligations of the Borrower or otherwise arising under, related to, or made in connection with, the Reimbursement Agreement, as such documents may be amended from time to time, including, but not limited to, any Collateral Agreement (as defined below) or O&M Agreements (as defined below) and that certain Cash Management, Security, Pledge and Assignment Agreement between Borrower and Lender dated as of even date hewewith; and (iv) the other Security Instruments (as defined in the Special Rider) . The covenants and agreements of this Rider, and the covenants and agreements of any other riders to the Instrument given by Borrower to Lender and covering the Property (including without limitation the Special Rider), shall be incorporated into and shall amend and supplement the covenants and agreements of the Instrument as if this Rider and the other riders were a part of the Instrument and all references to the Instrument in the Loan Documents shall mean the Instrument as so amended and supplemented. ADDITIONAL COVENANTS. In addition to the covenants and agreements made in the Instrument. Borrower and Lender further covenant and agree as follows: A. FUNDS FOR TAXES, INSURANCE AND OTHER CHARGES Uniform Covenant 2 of the Instrument ("Funds for Taxes; Insurance and Other Charges") is amended to change the title to "Funds for Taxes, Insurance and Other Charges; Collateral Agreements." Existing Uniform Covenant 2 is amended to become Uniform Covenant 2A. The following new Uniform Covenant 2B is added at the end of Uniform Covenant 2A: 2B REPLACEMENT RESERVE AGREEMENT, COMPLETION/REPAIR AGREEMENT, ACHIEVEMENT AGREEMENT AND OTHER COLLATERAL AGREEMENTS (a) REPLACEMENT RESERVE AGREEMENT Borrower shall deposit with Lender the amounts required by the Replacement Reserve and Security Agreement (the "Replacement Reserve Agreement") between Borrower and Lender (if any) dated the date hereof, at the times required by the Replacement Reserve Agreement, and shall perform all other obligations as and when required pursuant to the Replacement Reserve Agreement. (b) COMPLETION/REPAIR AGREEMENT Borrower shall deposit with Lender the amount required by the Completion/Repair and Security Agreement (the "Completion/Repair Agreement") between Borrower and Lender (if any), dated the date hereof, at the time required by the Completion/Repair Agreement, and shall perform all other obligations as and when required pursuant to the Completion/Repair Agreement. (d) COLLATERAL AGREEMENTS As used herein, the term "Collateral Agreement" shall mean any of the Replacement Reserve Agreement, the Completion/Repair Agreement, the Achievement Agreement and any similar agreement which has been entered into between Borrower and Lender in connection with the Reimbursement Agreement. B. APPLICATION OF PAYMENTS Uniform Covenant 3 of the Instrument ("Application of Payments") is amended to add the following sentence at the end thereof: Notwithstanding the preceding sentence, (i) Lender shall be permitted to apply any partial payment received from Borrower in any manner determined by Lender and in any order of priority of application as determined by Lender, in Lender's sole discretion, and (ii) upon any breach of any covenant or agreement of Borrower in the Instrument,* or any other Loan Document, Lender shall be permitted to apply any funds held pursuant to * the Reimbursement Agreement Form 4058 6/93 (PAGE 1 OF 8 PAGES) RIDER TO MULTIFAMILY INSTRUMENT - - FANNIE MAE UNIFORM INSTRUMENT any Collateral Agreement/* in any manner which is permitted pursuant to such Collateral Agreement/* and in any order of priority of application as determined by Lender, in Lender's sole discretion. * any Operations and Maintenance Agreement or Cash Management Agreement C. HAZARD INSURANCE; RESTORATION OF PROPERTY Uniform Covenant 5 of the Instrument ("Hazard Insurance") is amended to add the following sentence at the end thereof: Lender shall not exercise Lender's option to apply insurance proceeds to the payment of the sums secured by the Instrument if all of the following conditions are met: (i) Borrower is not in breach or default of any provision of the Instrument, the Note or any other Loan Document; (ii) Lender determines that there will be sufficient funds to restore and repair the Property to a condition approved by Lender; (iii) Lender determines that the rental income of the Property, after restoration and repair of the Property to a condition approved by Lender, will be sufficient to meet all operating costs and other expenses, payments for reserves and loan repayment obligations relating to the Property; and (iv) Lender determines that restoration and repair of the Property to a condition approved by Lender will be completed prior to the earlier of either (1) the maturity date of the Note or (2) within one year of the date of the loss or casualty to the Property; and (v) Lender determines that upon restoration and repair of the Property, there will not have been a material diminution in the value of the Property since the date immediately preceding the casualty. D. ENVIRONMENTAL HAZARDS PROVISION In addition to Borrower's covenants and agreements under Uniform Covenant 6 of the Instrument ("Preservation and Maintenance of Property;"), Borrower further covenants and agrees that Borrower shall not: (a) cause or permit the presence, use, generation, manufacture, production, processing, installation, release, discharge, storage (including aboveground and underground storage tanks for petroleum or petroleum products), treatment, handling, or disposal of any Hazardous Materials (as defined below) (excluding the safe and lawful use and storage of quantities of Hazardous Materials customarily used in the operation and maintenance of comparable multifamily properties or for normal household purposes) on or under the Property, or in any way affecting the Property or its value, or which may form the basis for any present or future demand, claim or liability relating to contamination, exposure, cleanup or other remediation of the Property or; (b) cause or permit the transportation to, from or across the Property of any Hazardous Material (excluding the safe and lawful use and storage of quantities of Hazardous Materials customarily used in the operation and maintenance of comparable multifamily properties or for normal household purposes); or (c) permit/cause or exacerbate any occurrence or condition on the Property that is or may be in violation of hazardous Materials Law (as defined below). (The matters described in (a), (b) and (c) above are referred to collectively below as "Prohibited Activities or Conditions.") Except with respect to any matters which have been disclosed in writing by Borrower to Lender prior to the date of the Instrument, or matters which have been disclosed in an environmental hazard assessment report of the Property received by Lender prior to the date of the Instrument, Borrower represents and warrants that it has not at any time caused or permitted any Prohibited Activities or Conditions and to the best of its knowledge, no Prohibited Activities or Conditions exist or have existed on or under the Property. Borrower shall take all appropriate steps (including but not limited to appropriate lease provisions) to prevent its employees, agents, and contractors, and all tenants and other occupants on the Property, from causing, permitting or exacerbating any Prohibited Activities or Conditions. Borrower shall not lease or allow the sublease of all or any portion of the Property for non-residential use to any tenant or subtenant that, in the ordinary course of its business, would cause, permit or exacerbate any Prohibited Activities or Conditions, and all non-residential leases and subleases shall provide that tenants and sub- tenants shall not cause, permit or exacerbate any Prohibited Activities or Conditions. If any Prohibited Activities or Conditions exist on the Property/**, Borrower shall comply in a timely manner with, and cause all employees, agents, and contractors of Borrower and any other persons present on the Property to so comply with, (1) any program of operations and maintenance ("O&M Program") relating to the Property that is acceptable to Lender with respect to one or more Hazardous Materials (which O&M Program may be set forth in an agreement of Borrower (an "O&M Agreement")) and all other obligations set forth in any O&M Agreement/*** and (2) all Hazardous Materials Laws. Any O&M Program shall be performed by qualified personnel. All costs and expenses of the O&M Program shall be paid by Borrower, including without limitation Lender's fees and costs incurred in connection with the monitoring and review of the O&M Program and Borrower's performance thereunder. If Borrower fails to timely commence or diligently continue and complete the 0&M Program and comply with any 0&M Agreement, then Lender may, at Lender's option, declare all of the sums secured by the Instrument to be immediately due and payable, and Lender may invoke any remedies permitted by paragraph 27 of the Instrument, without limiting the foregoing, Borrower shall take prompt remedial action in the event of the discovery of any Prohibited Activities or Conditions and obtain Lender's prior written approval of such remedial action. Borrower represents that Borrower has not received, and has no knowledge of the issuance of, any claim, citation or notice of any pending or threatened suits, proceedings, orders, or governmental inquiries or opinions involving the Property that allege the violation of any Hazardous Materials Law ("Governmental Actions"). Borrower shall promptly notify Lender in writing of: (i) the occurrence of any Prohibited Activity or Condition on the Property; (ii) Borrower's actual knowledge of the presence on or under any adjoining property of any Hazardous Materials which can reasonably be expected to have a material adverse impact on the Property or the value of the Property, or Borrower's discovery of any occurrence or condition on the Property or any adjoining real property that could cause any restrictions on the ownership, occupancy, transferability or use of the Property under Hazardous Materials ** of if Lender shall otherwise require Borrower to do so in writing in accordance with reasonable commercial practices *** or any other remedial action requested by Lender **** approval of such remedial action. FORM 4058 6/93 (PAGE 2 OF 8 PAGES) Law. (Borrower shall cooperate with any governmental inquiry, and shall comply with any governmental or judicial order which arises from any alleged Prohibited Activities or Conditions), (iii) any Governmental Action; and (iv) any claim made or threatened in writing by any third party against Borrower, Lender, or the Property relating to loss or injury resulting from any Hazardous Materials. Any such notice by Borrower shall not relieve Borrower of, or result in a waiver of any obligation of Borrower under this paragraph D. Borrower shall pay promptly the costs of any environmental audits, studies or investigations (including but not limited to advice of legal counsel) and the removal of any Hazardous Materials from the Property required by Lender as a condition of its consent to any sale or transfer under paragraph 19 of the Instrument of all or any part of the Property or any transfer occurring upon a foreclosure or a deed in lieu of foreclosure or any interest therein, or required by Lender following a reasonable determination by Lender that there may be Prohibited Activities or Conditions on or under the Property. Borrower authorizes Lender and its employees, agents and contractors to enter onto the Property for the purpose of conducting such environmental audits, studies and investigations. Any such costs and expenses incurred by Lender (including but not limited to fees and expenses of attorneys and consultants, whether incurred in connection with any judicial or administrative process or otherwise) which Borrower fails to pay promptly shall become immediately due and payable and shall become additional indebtedness secured by the Instrument pursuant to Uniform Covenant 8 of the Instrument. Borrower shall hold harmless, defend and indemnify Lender and its officers, directors, trustees, employees, and agents from and against all proceedings (including but not limited to Government Actions), claims, damages, penalties, costs and expenses (including without limitation fees and expenses of attorneys and expert witnesses, investigatory fees, and cleanup and remediation expenses, whether or not incurred within the context of the judicial process), arising directly or indirectly from (i) any breach of any representation, warranty, or obligation of Borrower contained in this paragraph D or (ii) the presence or alleged presence of Hazardous Materials on or under the Property. The term "Hazardous Materials," for purposes of this paragraph D, includes petroleum and petroleum products, flammable explosives, radioactive materials (excluding radioactive materials in smoke detectors), polychlorinated biphenyls, lead, asbestos in any form that is or could become friable, hazardous waste, toxic or hazardous substances or other related materials whether in the form of a chemical, element, compound, solution, mixture or otherwise including, but not limited to, those materials defined as "hazardous substances," "extremely hazardous substances." "hazardous chemicals," "hazardous materials," "toxic substances," "solid waste," "toxic chemicals," "air pollutants," "toxic pollutants," "hazardous wastes," "extremely hazardous waste," or "restricted hazardous waste" by Hazardous Materials Law or regulated by Hazardous Materials Law in any manner whatsoever. The term "Hazardous Materials Law," for the purposes of this paragraph D, means all federal, state, and local laws, ordinances and regulations and standards, rules, policies and other binding governmental requirements and any court judgments applicable to Borrower or to the Property relating to industrial hygiene or to environmental or unsafe conditions or to human health including, but not limited to, those relating to the generation, manufacture, storage, handling, transportation, disposal, release, emission or discharge of Hazardous Materials, those in connection with the construction, fuel supply, power generation and transmission, waste disposal or any other operations or processes relating to the Property, and those relating to the atmosphere, soil, surface and ground water, wetlands, stream sediments and vegetation on, under, in or about the Property. The representations, warranties, covenants, agreements, indemnities and undertakings of Borrower contained in this paragraph D shall be in addition to any and all other obligations and liabilities that Borrower may have to Lender under applicable law. The representations, warranties, covenants, agreements, indemnities and undertakings of Borrower contained in this paragraph D shall continue and survive notwithstanding the satisfaction, discharge, release, assignment, termination, subordination or cancellation of the Instrument or the payment in full of the principal of and interest on the Note and all other sums payable under the Loan Documents or the foreclosure of the Instrument or the tender or delivery of a deed in lieu of foreclosure or the release of any portion of the Property from the lien of the Instrument, except with respect to any Prohibited Activities or Conditions or violation of any of the Hazardous Materials Laws which first commences and occurs after the satisfaction, discharge, release, assignment, termination or cancellation of the Instrument following the payment in full of the principal of and interest on the Note and all other sums payable under the Loan Documents or which first commences or occurs after the actual dispossession from the entire Property of the Borrower and all entities which control, are controlled by, or are under common control with the Borrower (each of the foregoing persons or entities is hereinafter referred to as a "Responsible Party") following foreclosure of the Instrument or acquisition of the Property by a deed in lieu of foreclosure. Nothing in the foregoing sentence shall relieve the Borrower from any liability with respect to any Prohibited Activities or Conditions or violation of Hazardous Materials Laws where such Prohibited Activities or Conditions or violation of Hazardous Materials Laws commences or occurs, or is present as a result of, any act or omission by any Responsible Party or by any person or entity acting on behalf of a Responsible Party. FORM 4058 6/93 (PAGE 3 OF 8 PAGES) F. TRANSFERS OF THE PROPERTY OR SIGNIFICANT INTERESTS IN BORROWER; TRANSFER FEES Uniform Covenant 19 of the Instrument ("Transfers of the Property or Beneficial Interests in Borrower, Assumption") is amended to read as set forth below: TRANSFERS OF THE PROPERTY OR SIGNIFICANT INTERESTS IN BORROWER; TRANSFER FEES (a) DEFINITIONS For purposes of the Instrument (and the Rider), the following terms have the respective meanings set forth below: (1) The term "Key Principal" means the entities who execute(s) the Payment Guaranty to Lender dated the date of the Note and any persons/* or entity who subsequently execute an Guaranty to Lender in connection with the Note. (2) The term "Transfer" means a sale, assignment, substitution, transfer or other disposition* or entity (whether voluntary or by operation of law) of, or the granting or creating of a lien, encumbrance or security interest in, the Property or in ownership interests, and the issuance or other creation of ownership interests in an entity and the reconstitution of one type of entity to another type of entity. (3) A "Significant Interest" in any entity shall mean the following: (i) if the entity is a general partnership or a joint venture, (A) any partnership interest in the general partnership, or (B) any interest of a joint venturer in a joint venture; (ii) if the entity is a limited partnership, (A) any limited partnership interest in the entity or (B) any general partnership interest in the entity; (iii) if the entity is a limited liability company, any membership interest (iv) if the entity is a corporation, any voting stock in the corporation (v) if the entity is a trust, any beneficial interest in such trust (b) ACCELERATION OF THE LOAN UPON TRANSFERS OF THE PROPERTY OR SIGNIFICANT INTERESTS Lender may, at Lender's option, declare all sums secured by the Instrument immediately due and payable and Lender may invoke any remedies permitted by paragraph 27 of the Instrument if, without the Lender's prior written consent, any of the following shall occur: (1) a Transfer of all or any part of the Property or any interest in the Property; (2) a Transfer of any Significant Interest in Borrower; (3) a Transfer of any Significant Interest in a corporation, partnership, limited liability company, joint venture, or trust which owns a Significant Interest in the Borrower; (4) if the Borrower is a trust, or if any trust owns a Significant Interest in the Borrower, the addition, deletion or substitution of a trustee of such trust, which addition, deletion or substitution has not been approved by Lender; or FORM 4058 6/93 (PAGE 4 OF 8 PAGES) (5) a Transfer of all or any part of any Key Principal's ownership interest (other than limited partnership interests) in the Borrower, or in any other entity which owns, directly or indirectly, through one or more intermediate entities, an ownership interest in the Borrower. (d) NO ACCELERATION OF THE LOAN FOR TRANSFERS CAUSED BY CERTAIN EVENTS Notwithstanding the foregoing provisions of this covenant, Lender shall not be entitled to declare sums secured by the Instrument immediately due and payable or to invoke any remedy permitted by paragraph 27 of the Instrument solely upon the occurrence of any of the following: (1) A Transfer that occurs by inheritance, devise, or bequest or by operation of law upon the death of a natural person who is an owner of the Property or the owner of a direct or indirect ownership interest in the Borrower. (2) The grant of a leasehold interest in individual dwelling units for a term of two years or less and leases for commercial uses as long as commercial leases do not exceed 20 percent of the rentable space of the Property (measured as required by Lender) and provided that all such leasehold interests do not contain an option to purchase the Property. (3) A sale or other disposition of obsolete or worn out personal property which is contemporaneously replaced by comparable personal property of equal or greater value which is free and clear of liens, encumbrances and security interests other than those created by the Loan Documents. (4) The creation of a mechanic's or materialmen's lien or judgment lien against the Property which is released of record or otherwise remedied to Lender's satisfaction, within 30 days of the date of creation. (5) The grant of an easement, if prior to the granting of the easement the Borrower causes to be submitted to Lender all information required by Lender to evaluate the easement, and if Lender determines that the easement will not materially affect the operation of the Property or Lender's interest in the Property and Borrower pays to Lender, on demand, all cost and expenses incurred by Lender in connection with reviewing Borrower's request. (6) A Transfer that occurs pursant to Section 4.5 or Section 4.7 of the G. Notice Reimbursement Agreement. G. NOTICE REIMBURSEMENT AGREEMENT. FORM 4058 6/93 (PAGE 5 OF 8 PAGES) H. GOVERNING LAW In addition to the governing law provision of Uniform Covenant 22 of the Instrument ("Uniform Multifamily Instrument; Governing Law; Severability"), the Borrower and Lender covenant and agree as follows: (a) CHOICE OF LAW The validity of the Instrument and the other Loan Documents, each of their terms and provisions, and the rights and obligations of Borrower under the Instrument and the other Loan Documents, shall be governed by, interpreted, construed, and enforced pursuant to and in accordance with the laws of the Property Jurisdiction. (b) CONSENT TO JURISDICTION Borrower consents to the exclusive jurisdiction of any and all state and federal courts with jurisdiction in the Property Jurisdiction over Borrower and the Borrower's assets. Borrower agrees that such assets shall be used first to satisfy all claims of creditors organized or domiciled in the United States of America ("USA") and that no assets of the Borrower in the USA shall be considered part of any foreign bankruptcy estate. Borrower agrees that any controversy arising under or in relation to the Note, the Instrument or any of the other Loan Documents shall be litigated exclusively in the Property Jurisdiction. The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over all controversies which may arise under or in relation to the Note, and any security for the debt evidenced by the Note, including without limitation those controversies relating to the execution, interpretation, breach, enforcement, or compliance with the Note, the Instrument, or any other issue arising under, related to, or in connection with any of the Loan Documents. Borrower irrevocably consents to service, jurisdiction, and venue of such courts for any litigation arising from the Note, the Instrument or any of the other Loan Documents, and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise. I. ACCELERATION; REMEDIES Covenant 27 of the Instrument ("Acceleration; Remedies") is amended to add the following at the end of the first paragraph: Upon the breach of any covenant or agreement by Borrower in the Instrument, (including, but not limited to, the covenants to pay when due sums secured by the Instrument) or any other Loan Document, Lender, at Lender's option may, in addition to any remedies specified in this covenant, invoke any other remedies provided in any Collateral Agreement. If Borrower is in default under any promissory note (other than the Note) evidencing a loan (the "Subordinate Loan") secured by a security instrument (other than the Instrument) covering all or any portion of the Property (the "Subordinate Instrument") or under any Subordinate Instrument or other loan document executed in connection with the Subordinate Loan, (and whether or not the Borrower has obtained the prior approval of Lender to the placement of such Subordinate Instrument on the Property) which default remains uncured after any applicable cure period, Borrower also then will be in default under the Note and the Instrument. In that event, the entire unpaid principal balance of the Note, accrued interest and any other sums due Lender secured by the Instrument then will become due and payable, at Lender's option. If Lender exercises this option to accelerate, Lender will do so in accordance with the provisions of the Note and the Instrument, and the Lender may invoke any and all remedies permitted by applicable law, the Note, the Instrument, or any of the other Loan Documents. J. SINGLE ASSET BORROWER SEE SPECIAL RIDER K. NON-RECOURSE LIABILITY FORM 458 6/93 (PAGE 6 OF 8 PAGES) The liability of Borrower and any general partner of Borrower (if Borrower is a partnership) shall be limited to the same extent as provided in Section 3.11 of the Reimbursement Agreement. M. WAIVER OF JURY TRIAL Borrower (each for himself if more than one) (i) covenant and agree not to elect a trial by jury with respect to any issue arising under any of the Loan Documents triable by a jury and (ii) waive any right to trial by jury to the extent that any such right shall now or hereafter exist. This waiver of right to trial by jury is separately given, knowingly and voluntarily with the benefit of competent legal counsel by the Borrower and this waiver is intended to encompass individually each instance and each issue as to which the right to a jury trial would otherwise accrue. Further, Borrower hereby certify that no representative or agent of the Lender (including, but not limited to, the Lender's counsel) has represented, expressly or otherwise, to Borrower that Lender will not seek to enforce the provisions of this paragraph M. FORM 4058 6/93 (PAGE 7 OF 8 PAGES) BY SIGNING BELOW, Borrower accepts and agrees to the covenants and agreements contained in this Rider. BORROWER: Signed, and Delivered OTC APARTMENTS LIMITED PARTNERSHIP, a in the Presence of: Florida limited partnership /s/ Lolly Avant By: AIMCO/OTC QRS, INC., a Delaware - ------------------------- corporation, its sole General Partner Lolly Avant /s/ F.M. DePrez - ------------------------- F.M. DePrez By: /s/ Harry Alcock (SEAL) -------------------------- Harry Alcock Vice President BORROWER'S ADDRESS: 1873 Bellaire Street, 17th Floor Denver, Colorado 80222 FORM 4058 6/93 (PAGE 8 OF 8 PAGES) EX-10.89 31 EXHIBIT 10.89 SPECIAL RIDER TO MULTIFAMILY INSTRUMENT THIS SPECIAL RIDER TO MULTIFAMILY INSTRUMENT (this "Special Rider") is made as of the 1st day of July, 1996, and is incorporated into and shall be deemed to amend and supplement the Multifamily Second Mortgage, Assignment of Rents and Security Agreement as of even date herewith (the "Instrument"), given by OTC APARTMENTS LIMITED PARTNERSHIP, a Florida limited partnership ("Borrower") for the benefit of FEDERAL NATIONAL MORTGAGE ASSOCIATION, a federally chartered corporation ("Fannie Mae" or "Lender") and covering the property described in the Instrument and located in Broward County, Florida (the "Property"), as amended by that certain Rider to Multifamily Instrument as of the same date (the "Rider") (collectively, with this Special Rider and any other riders to the Instrument given by the Borrower to Lender and covering the Property, the "Multifamily Instrument"). The covenants and agreements of this Special Rider, and the covenants and agreements of any other riders to the Instrument, shall be incorporated into and shall amend and supplement the covenants and agreements of the Instrument as if this Special Rider and the other riders were a part of the Instrument, and all references to the Instrument in the Loan Documents (as defined below) shall mean the Instrument as so amended and supplemented. Any conflict between the provisions of the Instrument, as amended by the Rider and this Special Rider shall be resolved in favor of this Special Rider. Initially-capitalized terms used in this Multifamily Instrument, which are not defined in this Multifamily Instrument, shall have the meanings given to those terms in the Reimbursement Agreement. ADDITIONAL COVENANTS. Borrower and Lender further covenant and agree as follows: A. ADDITIONAL SECURITY - OBLIGATIONS SECURED BY OTHER SECURITY INSTRUMENTS. The term "Secured Obligations" as used in this Multifamily Instrument shall also include, and this Multifamily Instrument shall also secure, the payment and performance of all obligations secured by (i) each of the other mortgages, deeds to secure debt and/or deeds of trust identified in the Reimbursement Agreement as the "REIMBURSEMENT MORTGAGES", including any Reimbursement Mortgage on any New Property that is granted after the date hereof (collectively, the "Reimbursement Mortgages"); and (ii) each of the other mortgages, deeds to secure debt and/or deeds of trust identified in the Reimbursement Agreement as the "Bond Mortgages" (other than the Bond Mortgage, if any, with respect to the Property), including any Bond Mortgage on a New Property that is granted after the date hereof (collectively, the "Subject Bond Mortgages"). Each of the other Reimbursement Mortgages and each of the Subject Bond Mortgages is hereinafter referred to individually as an "Other Security Instrument," and collectively as the "Other Security Instruments". The Other Security Instruments existing as of the date of this Multifamily Instrument are identified on Schedule I to this Multifamily Instrument attached hereto. B. CROSS DEFAULT. The failure by Borrower to pay when due any amount payable under any Related Mortgage Note, the Reimbursement Agreement, this Multifamily Instrument or any other Loan Document or the failure (beyond applicable cure periods, if any) by the Borrower to perform or observe any covenant or any obligation of Borrower contained in (a) any other Loan Document, (b) any subordinate financing, (c) that certain Master Reimbursement Agreement as of even date herewith by Borrower and Fannie Mae, as the same may be amended, supplemented or otherwise modified from time to time (the "Reimbursement Agreement"), and (d) any form of public, quasi-public, public/private or private debt and/or equity infusion, grant, subsidy, tax relief or abatement plan, program or other form of assistance, shall, at Lender's option, in its discretion, constitute a default under this Multifamily Instrument and the other Loan Documents. Any such default by Borrower under this Multifamily Instrument shall: (i) entitle Lender, at its option, in its discretion, to invoke any of the remedies set forth in Paragraph 27 of the Instrument or as otherwise afforded by law or equity; and (ii) at Lender's option, in its discretion, constitute a default by Borrower under any or all of the Other Security Instruments and the Reimbursement Agreement. C. WAIVER OF MARSHALLING RIGHTS. Borrower waives all rights to have all or part of the Property described in this Instrument and/or the mortgaged property described in any of the Other Security Instruments marshalled upon any foreclosure of this Instrument or any of the Other Security Instruments. Lender shall have the right to sell, and any court in which foreclosure proceedings may be brought shall have the right to order a sale of the Property described in this Instrument or the mortgaged property described in any of the Other Security Instruments as a whole or in separate parcels, in any order that Lender may designate. Borrower makes this waiver for itself, for all persons and entities claiming through or under Borrower and for persons and entities who may acquire a lien on all or any part of the Property described in this Instrument or in the mortgaged property described in any of the Other Security Instruments, or on any interest therein. D. LEASES. All leases of the residential housing units in the Property must (a) be legally valid, binding and enforceable obligations of the tenants, (b) comply with all applicable laws and (c) satisfy the standards of the Fannie Mae Delegated Underwriting and Servicing Guide in its present form as of the date of any such lease. E. MORTGAGE EXPENSES. Should Lender (or "Servicer" as such term is defined in the Reimbursement Agreement) pay any Mortgage Expenses (as hereinafter defined), Borrower shall on demand immediately reimburse Lender (or Servicer, as applicable) for the full amount of such Mortgage Expenses paid by Lender (or Servicer, as applicable). For purposes of this paragraph E, "Mortgage Expenses" shall mean the cost of real estate taxes, appraisal fees, insurance fees, legal fees and any other expenses which may be required to maintain the priority of, or to protect or enforce Lender's rights in, the Multifamily Instrument, including (i) fees and expenses of the servicer engaged by Fannie Mae to service and administer the Mortgage Loans which are not paid by Borrower, (ii) fees and expenses paid to maintain in full force and effect or realize the benefit of any insurance with respect to the Multifamily Instrument and (iii) any fees advanced on behalf of Borrower by Fannie Mae to any Related Trustee or Issuer. F. CHARGES; LIENS. Uniform Covenant 4 of the Instrument ("Charges; Liens") is amended to add the following provisions at the end thereof: -2- Provided that Borrower is not in breach of any of its covenants, obligations or agreements under this Instrument and no event of default has occurred and is continuing under the Reimbursement Agreement or any other Loan Document, Borrower shall not be required to pay or discharge any obligation imposed upon Borrower by this paragraph 4 so long as Borrower has given written notice of the same to Lender and is in good faith and at its sole cost and expense diligently contesting the same or the validity thereof by appropriate legal proceedings, which proceedings must operate to prevent the collection thereof or realization thereon, the sale or forfeiture of the Property or any portion thereof to satisfy the same; provided, however, that during such contest (i) Borrower shall, at the option of Lender, provide security reasonably satisfactory to Lender and sufficient in Lender's reasonable judgment to cover the amount of the contested obligations, with interest on such obligations (to the extent interest would be due the obligee) for that period that such proceedings may reasonably be expected to take, and of any additional interest, charge, fine, penalty, fee or expense arising from or incurred as a result of such contest, (ii) the title company insuring the Property agrees to insure over any potential lien that may result from such contest, and (iii) if at any time the payment of any obligation imposed upon Borrower by this paragraph 4 shall become necessary to prevent (a) the delivery of a tax deed conveying the Property or any portion thereof, or (b) the sale of the tax lien therefor because of non-payment or (c) the imposition of any penalty, fine, charge, fee, cost or expense on Lender, then Borrower shall pay the same in sufficient time to prevent the occurrence of any of the foregoing. G. CONDEMNATION PROCEEDS; RESTORATION OF PROPERTY. Uniform Covenant 11 of the Instrument ("Condemnation") is amended to add the following provision at the end thereof: Lender shall permit Borrower to apply any such awards, payments, proceeds or damages, after deduction of Lender's expenses incurred in the collection of such amounts, to the payment of repairs to the Property if all of the following conditions are met: (i) Borrower is not in breach or default of any provision of the Instrument, the Reimbursement Agreement or any other Loan Document; (ii) Lender determines that there will be sufficient funds to restore and repair the Property to a condition approved by Lender; (iii) Lender determines that the rental income of the Property, after restoration and repair of the Property to a condition approved by Lender, will be sufficient to meet all operating costs and other expenses, payments for reserves and loan repayment obligations relating to the Property; (iv) Lender determines that restoration and repair of the Property to a condition approved by Lender will be completed prior to the earlier of either (1) the maturity date of the Fannie Mae Credit Facility or (2) within one year of the date of the loss or casualty to the Property; and (v) Lender determines that upon the restoration and repair of the Property there will not have been a material dimunition in the value of the Property since the date immediately preceding the condemnation. -3- H. LEASES. Uniform Covenant 16 of the Instrument ("Leases of the Property") is modified by adding the phase "entered into hereafter" after the words "All leases of the Property" in the third (3rd) sentence of such Uniform Covenant 16. I. ACCELERATION IN CASE OF BORROWER'S INSOLVENCY. Uniform covenant 18 of the Instrument is amended to read as follows: ACCELERATION IN CASE OF BORROWER'S INSOLVENCY. In the event (i) Borrower shall (A), commence a voluntary case under the Federal bankruptcy laws (as now or hereafter in effect), (B) file a petition seeking to take advantage of any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, debt adjustment, winding up or composition or adjustment of debts, (C) consent to or fail to contest in a timely and appropriate manner any petition filed against it in an involuntary case under such bankruptcy laws or other laws, (D) apply for or consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of a substantial part of its property, domestic or foreign, (E) admit in writing its inability to pay, or generally not be paying, its debts as they become due, (F) make a general assignment for the benefit of creditors, (G) assert that it has no liability or obligations under the Note, this Instrument or any of the other Loan Documents, or (H) take any action for the purpose of effecting any of the foregoing; or (ii) a case or other proceedings shall be commenced against Borrower in any court of competent jurisdiction seeking (A) relief under the Federal bankruptcy laws (as now or hereafter in effect) or under any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, or (B) the appointment of a trustee, receiver, custodian, liquidator or the like of Borrower or of all or a substantial part of the property, domestic or foreign, of Borrower, and any such case or proceeding shall continue undismissed or unstayed for a period of 60 consecutive calendar days, or any order granting the relief requested in any such case or proceeding against Borrower(including an order for relief under such Federal bankruptcy laws) shall be entered, or (iii) there is an attachment, execution or other judicial seizure of any portion of Borrower's property and such seizure is not discharged within ten calendar days, then Lender may, at Lender's option, declare all of the sums secured by this Instrument to be immediately due and payable without prior notice to Borrower, and Lender may invoke any remedies permitted by paragraph 27 of this Instrument. Any attorney's fees and other expenses incurred by Lender in connection with Borrower's bankruptcy or any of the other aforesaid events shall be additional indebtedness of Borrower secured by this Instrument pursuant to paragraph 8 hereof. J. NON-IMPAIRMENT. Except as supplemented and/or modified by this Special Rider, all of the terms, covenants and conditions of the Other Security Instruments and the other loan documents executed in connection therewith shall remain in full force and effect. K. MODIFICATION OF SINGLE ASSET REQUIREMENTS. Paragraph J of the Rider is amended to read as follows: -4- J. Single Purpose Entity. Borrower covenants and agrees that Borrower shall at all times during the term of this Instrument comply with the covenants set forth in Sections 2.2(i) and 2.3(k) of the Reimbursement Agreement and that Borrower shall not violate the provisions of subsections 2.3(a)(iii) or 2.3(a)(iv) of the Reimbursement Agreement. L. GRANT OF INTEREST IN CERTAIN FUNDS. Without limiting the generality of the first (1st) sentence of Uniform Covenant 15 of the Instrument and pursuant to the Uniform Commercial Code, Borrower hereby grants, pledges and assigns to Lender all of Borrower's right, title and interest in and to all funds and accounts and investments of funds and accounts now or hereafter held by each Related Bond Trustee pursuant to the Indentures, including any and all loan funds, escrow funds, revenue funds, debt service funds, reserve funds, redemption funds and other funds and securities and other instruments comprising investments of any of the foregoing and interest and other income derived from any of the foregoing, all to be held in trust in accordance with the terms of the Indentures. M. NOTICES. Uniform Covenant 20 of the Instrument is amended to read as follows: All notices, directions, certificates or other communications hereunder shall be given by certified or registered mail, return receipt requested, OR by overnight courier addressed to the appropriate notice address set forth below. Any of the parties hereto may, by such notice described above, designate any further or different address to which subsequent notices, certificates or other communications shall be sent without any requirement of execution of any amendment to this Instrument. Any such notice, certificate or communication shall be deemed to have been given as of the date of actual delivery or the date of failure to deliver by reason of refusal to accept delivery or changed address of which no notice was given pursuant to this paragraph 20. Unless otherwise directed by Fannie Mae, all notices from Borrower pursuant to this Instrument shall also be given to the Servicer in accordance with this paragraph 20. The notice addresses are as follows: (a) if to Borrower: OTC Apartments Limited Partnership 1873 South Bellaire Street, 17th Floor Denver, Colorado 80222-4348 Attn: Vice Chairman (b) if to Fannie Mae: if by mail or overnight courier: Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attn: Senior Vice President Multifamily Activities -5- if by messenger: Fannie Mae 3939 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attn: Senior Vice President Multifamily Activities in each case, with copies to: Fannie Mae Southwest Regional Office Two Galleria Tower 13455 Noel Road, Suite 600 Dallas, Texas Attn: Regional Vice President Multifamily Activities and to: Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attn: Multifamily Mortgage Operations Manager, Multifamily Deliveries (c) if to Servicer: GMAC Commercial Mortgage Corporation 650 Dresher Road Horsham, PA. 19044-8015 Attn: Barry Moore -6- IN WITNESS WHEREOF, the parties hereto have executed this Special Rider or have caused the same to be executed by their respective representatives thereunto duly authorized. Signed, and BORROWER: Delivered in the Presence of: OTC APARTMENTS LIMITED PARTNERSHIP, a Florida limited partnership /s/ Lolly Avant By: AIMCO/OTC QRS, INC., a Delaware - ------------------------- limited corporation, its sole General Lolly Avant Partner /s/ F.M. DePrez - ------------------------- F.M. DePrez By: /s/ Harry Alcock (Seal) -------------------------- Harry Alcock Vice President -7- EX-10.90 32 EXHIBIT 10.90 EXECUTION COPY FINANCING AGREEMENT AMONG HOUSING FINANCE AUTHORITY OF BROWARD COUNTY, FLORIDA AS ISSUER, THE BANK OF NEW YORK AS TRUSTEE AND OTC APARTMENTS LIMITED PARTNERSHIP AS BORROWER RELATING TO $9,870,000 BROWARD COUNTY, FLORIDA MULTIFAMILY HOUSING REVENUE REFUNDING BONDS (BOARDWALK APARTMENTS PROJECTS) SERIES 1996 DATED AS OF JUNE 15, 1996 TABLE OF CONTENTS Page ---- RECITALS .................................................................. 1 ARTICLE I DEFINITIONS AND INTERPRETATION Section 1.1 Definitions.................................................... 2 Section 1.2 Rules of Construction ......................................... 2 Section 1.3 Effective Date ................................................ 3 ARTICLE II REPRESENTATIONS, WARRANTIES AND COVENANTS Section 2.1 Representations, Warranties and Covenants by the Borrower...... 4 ARTICLE III THE BONDS AND THE PROCEEDS THEREOF Section 3.1 Bonds ......................................................... 10 ARTICLE IV THE MORTGAGE LOAN Section 4.1 Amount and Source of Mortgage Loan ............................ 11 Section 4.2 Terms of the Mortgage Loan .................................... 11 Section 4.3 Payment of Fees and Expenses................................... 11 Section 4.4 Application of Mortgage Loan Payments ......................... 13 Section 4.5 Notification of Prepayment of Mortgage Note.................... 13 ARTICLE V COVENANTS, UNDERTAKINGS AND OBLIGATIONS OF THE BORROWER Section 5.1 Taxes, Other Governmental Charges and Utility Charges.......... 14 Section 5.2 Compliance With Laws .......................................... 14 Section 5.3 Maintenance of Legal Existence ................................ 14 Section 5.4 Operation of Project .......................................... 15 Section 5.5 Tax Covenants.................................................. 15 i Page ---- Section 5.6 Further Assurances and Corrective Instruments ................. 15 Section 5.7 Compliance With Other Documents ............................... 15 Section 5.8 Notice of Certain Events....................................... 16 Section 5.9 Indemnification ............................................... 16 Section 5.10 Right to Perform Borrower's Obligations........................ 17 Section 5.11 Nonrecourse Provisions ........................................ 18 ARTICLE VI MORTGAGE LOAN DOCUMENTS Section 6.1 Assurances .................................................... 19 Section 6.2 Financial Obligations Personal to the Borrower................. 19 ARTICLE VII THE PROJECT Section 7.1 Regulatory Agreement .......................................... 20 Section 7.2 Right to Enforce Compliance ................................... 20 Section 7.3 Damage, Destruction and Condemnation .......................... 20 ARTICLE VIII TRUSTEE'S INTEREST IN AGREEMENT Section 8.1 Issuer Assignment of this Financing Agreement.................. 21 Section 8.2 Third-Party Beneficiaries ..................................... 21 Section 8.3 Issuer Compliance With Indenture............................... 21 ARTICLE IX EVENTS OF DEFAULT AND REMEDIES Section 9.1 Events of Default ............................................. 22 Section 9.2 Remedies upon an Event of Default ............................. 23 Section 9.3 Default Under Regulatory Agreement............................. 24 Section 9.4 Limitation on Waivers ......................................... 25 Section 9.5 Notice of Default: Fannie Mae's Right to Cure ................. 26 Section 9.6 Rights Cumulative.............................................. 26 ii Page ---- ARTICLE X MISCELLANEOUS Section 10.1 Notices ...................................................... 27 Section 10.2 Amendment..................................................... 27 Section 10.3 Entire Agreement ............................................. 27 Section 10.4 Binding Effect................................................ 27 Section 10.5 Severability.................................................. 27 Section 10.6 Execution in Counterparts .................................... 28 Section 10.7 Governing Law ................................................ 28 Section 10.8 Limited Liability ............................................ 28 Section 10.9 Term of this Financing Agreement.............................. 28 ARTICLE XI CONTINUING DISCLOSURE Section 11.1 Furnishing of Information Generally........................... 29 Section 11.2 Continuing Disclosure Undertaking ............................ 29 Section 11.3 Borrower to Provide Information to Trustee.................... 31 Section 11.4 Issuer Not Obligated ......................................... 32 iii FINANCING AGREEMENT This FINANCING AGREEMENT (this "FINANCING AGREEMENT"), is dated as of June 15, 1996, and entered into by and among the HOUSING FINANCE AUTHORITY OF BROWARD COUNTY, FLORIDA (the "ISSUER"), THE BANK OF NEW YORK, as trustee under the Indenture referred to below (together with its successors and assigns, the "TRUSTEE") and OTC APARTMENTS LIMITED PARTNERSHIP, a Florida limited partnership, (together with its successors and assigns, the "BORROWER"). RECITALS: A. As more fully set forth in the Indenture of Trust, of even date herewith, between the Issuer and the Trustee (the "INDENTURE"), the Issuer is issuing its MULTIFAMILY REVENUE REFUNDING BONDS (BOARDWALK APARTMENTS PROJECT) SERIES 1996 in the aggregate principal amount of $9,870,000 (herein the "BONDS"). B. The parties hereto acknowledge the matters set forth in the Recitals to the Indenture. NOW, THEREFORE, the parties hereto, in consideration of the premises and the mutual covenants and commitments of the parties set forth herein, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, hereby agree as follows: ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 DEFINITIONS. Capitalized terms used herein without definition shall have the respective meanings set forth in the Indenture. In addition to the terms elsewhere defined in this Financing Agreement, the following terms used in this Financing Agreement (including the recitals) shall have the following meanings unless the context indicates another or different meaning or intent, and such definitions shall be equally applicable to both the singular and plural forms of any of the terms herein defined: "BOND DOCUMENTS" means this Financing Agreement, the Regulatory Agreement, the Tax Certificate, the Indenture and the Bond Purchase Agreement, dated June 19, 1996 among Underwriter, the Issuer and the Borrower. "EVENT OF DEFAULT" means any event of default specified and defined in Section 9.1(a) of this Financing Agreement. "KEY PRINCIPAL" has the meaning assigned to that term in the Mortgage. "MORTGAGE LOAN DOCUMENTS" means the Mortgage Note, the Mortgage and all other documents evidencing, securing or otherwise relating to the Mortgage Loan, including all amendments, supplements, modifications and restatements thereof, excluding, however, the Bond Documents. "MORTGAGE NOTE RATE" shall mean a per annum rate of interest calculated in accordance with the Mortgage Note. "PERMITTED LIENS" shall mean any easements and restrictions listed in a schedule of exceptions to coverage in the title insurance policy delivered with respect to the Project as required by the Mortgage Loan Documents. "PERSON" means any natural person, firm, partnership, association, corporation or public body. "TAX CERTIFICATE" means the Tax Compliance Certificate, dated the Closing Date, executed and delivered by the Issuer and the Borrower, as amended, supplemented or otherwise modified from time to time. SECTION 1.2 RULES OF CONSTRUCTION. (a) The singular form of any word used herein, including the terms defined in Section 1.1, shall include the plural, and vice versa, unless the context otherwise requires. The use herein of a pronoun of any gender shall include correlative words of the other genders. 2 (b) All references herein to "Articles," "Sections" and other subdivisions hereof are to the corresponding Articles, Sections or subdivisions of this Financing Agreement as originally executed; and the words "herein," "hereof," "hereunder" and other words of similar import refer to this Financing Agreement as a whole and not to any particular Article, Section or subdivision hereof. (c) The headings or titles of the several Articles and Sections hereof, and any table of contents appended to copies hereof, shall be solely for convenience of reference and shall not limit or otherwise affect the meaning, construction or effect of this Financing Agreement or describe the scope or intent of any provisions hereof. (d) All accounting terms not otherwise defined herein have the meanings assigned to them in accordance with applicable generally accepted accounting principles as in effect from time to time. (e) Every "request," "order," "demand," "application," "appointment," "notice," "statement," "certificate," "consent," or similar action hereunder by any party shall, unless the form thereof is specifically provided, be in writing signed by a duly authorized representative of such party with a duly authorized signature. (f) The parties hereto acknowledge that each such party and their respective counsel have participated in the drafting and revision of this Financing Agreement and the Indenture. Accordingly, the parties agree that any rule of construction which disfavors the drafting party shall not apply in the interpretation of this Financing Agreement or the Indenture or any amendment or supplement or exhibit hereto or thereto. (g) Whenever Fannie Mae is required to give its consent or approval to any matter, whether stated as "consent," "written consent," "prior written consent," "approval," "written approval," "prior written approval," or otherwise, the giving of such consent or approval by Fannie Mae shall be in its sole and complete discretion. (h) Whenever Fannie Mae shall have any right or option to exercise any discretion, to determine any matter, to accept any presentation or to approve or consent to any matter, such exercise, determination, acceptance, approval or consent shall, without exception, be in Fannie Mae's sole and absolute discretion. SECTION 1.3 EFFECTIVE DATE. The provisions of this Financing Agreement shall be effective on and as of the Closing Date, immediately upon the effectiveness of the Indenture. 3 ARTICLE II REPRESENTATIONS, WARRANTIES AND COVENANTS SECTION 2.1 REPRESENTATIONS, WARRANTIES AND COVENANTS BY THE BORROWER. The Borrower represents, warrants and covenants as follows: (a) The Borrower is a Florida limited partnership and is qualified to do business in the State and in every other state in which the nature of its business requires such qualification. The Borrower has full power and authority to own its properties and to carry on its business as now being conducted and as contemplated to be conducted with respect to the Project, and to enter into, and to perform and carry out the transactions provided for in this Financing Agreement, all other Bond Documents contemplated hereby to be executed by the Borrower and the Mortgage Loan Documents. This Financing Agreement, the other Bond Documents to which the Borrower is a party, the Mortgage Loan Documents and all other documents to which the Borrower is a party and contemplated hereby or thereby have been duly authorized, executed and delivered by the Borrower and, upon execution and delivery of the other parties thereto, constitute the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the rights of creditors generally and general equitable principles. (b) Neither the execution and delivery of this Financing Agreement, all other Bond Documents to be executed by the Borrower, the Mortgage Loan Documents or any other documents contemplated hereby or thereby, the consummation of the transactions contemplated hereby or thereby, nor the fulfillment of or compliance with the terms and conditions of this Financing Agreement, all other Bond Documents to be executed by the Borrower, the Mortgage Loan Documents or any other documents contemplated hereby or thereby, will violate any provision of law, any order of any court or other agency of government, or any of the organizational or other governing documents of the Borrower, or any indenture, agreement or other instrument to which the Borrower is now a party or by which it or any of its properties or assets is bound, or be in conflict with, result in a breach of or constitute a default (with due notice or the passage of time or both) under any such indenture, agreement or other instrument or any license, judgment, decree, law, statute, order, rule or regulation of any governmental agency or body having jurisdiction over the Borrower or any of its activities or properties, or, except as provided hereunder, result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the Borrower, except for Permitted Liens. (c) The Borrower has and will have fee simple title to the Project, subject to the Permitted Liens. The Borrower is the sole borrower under the Mortgage Loan. (d) No litigation or proceeding is pending or, to the knowledge of the Borrower, threatened against the Borrower or with respect to the Project which has a reasonable probability of having a material adverse effect on its financial condition or business, or the 4 transactions contemplated by this Financing Agreement, the Indenture, the other Bond Documents or the Mortgage Loan Documents, or which in any way would adversely affect the validity or enforceability of the Bonds, the Indenture, this Financing Agreement, the other Bond Documents or the Mortgage Loan Documents, or the ability of the Borrower to perform its obligations under this Financing Agreement, the other Bond Documents or the Mortgage Loan Documents executed by the Borrower. (e) The Project conforms in all material respects with all applicable zoning, planning, building and environmental laws, ordinances and regulations of governmental authorities having jurisdiction over the Project, all necessary utilities are available to the Project, and the Borrower will obtain all requisite zoning, planning, building and environmental and other permits which may become necessary with respect to the Project. The Borrower has obtained all licenses, permits and approvals necessary for the ownership, operation and management of the Project, including all approvals essential to the transactions contemplated by this Financing Agreement, the Indenture, the other Bond Documents, the Mortgage Loan Documents and any other documents contemplated hereby or thereby. (f) The financial statements which have been furnished by or on behalf of the Borrower to the Issuer, the Servicer or Fannie Mae are complete and accurate in all material respects and present fairly the financial condition of the Borrower as of their respective dates in accordance with generally accepted accounting methods applied by the Borrower on a consistent basis, and since the date of the most recent of such financial statements there has not been any material adverse change, financial or otherwise, in the condition of the Borrower, and there has not been any material transaction entered into by the Borrower other than transactions in the ordinary course of business, and the Borrower does not have any material contingent obligations which are not otherwise disclosed in its financial statements. There (i) is no completed, pending or threatened bankruptcy, reorganization, receivership, insolvency or like proceeding, whether voluntary or involuntary, affecting the Project, the Borrower or any Key Principal, and (ii) has been no assertion or exercise of jurisdiction over the Project, the Borrower by any court empowered to exercise bankruptcy powers. (g) No event has occurred and no condition exists with respect to the Borrower or the Project that would constitute an Event of Default or which, with the lapse of time, if not cured, or with the giving of notice, or both, would become an Event of Default. The Borrower is not in default under the Regulatory Agreement, the Prior Mortgage or any other document executed in connection with the Prior Loan. (h) The Borrower has complied with all the terms and conditions of the Tax Certificate, including the terms and conditions of the exhibits thereto, and the representations set forth in the Tax Certificate pertaining to the Borrower and the Project are true and accurate. (i) The Project is, as of the Closing Date, in compliance with all requirements of the Regulatory Agreement, including all applicable requirements of the Act and the Code. The Borrower intends to cause the residential units in the Project to be rented or available for rental on a basis which satisfies the requirements of the Regulatory Agreement, including all 5 applicable requirements of the Act and the Code. All leases will comply with all applicable laws and the Regulatory Agreement. The Project meets the requirements of this Financing Agreement, the Regulatory Agreement, the Act and the Code with respect to multifamily rental housing. (j) No information, statement or report furnished in writing to the Issuer, Fannie Mae, the Servicer or the Trustee by the Borrower in connection with this Financing Agreement, the other Bond Documents or Mortgage Loan Documents or the consummation of the transactions contemplated hereby and thereby (including, without limitation, any information furnished by the Borrower in connection with the preparation of any materials related to the issuance delivery or offering of the Bonds on the Closing Date) contains any material misstatement of fact or omits to state a material fact necessary to make the statements contained therein, in the light of the circumstances under which they were made, not misleading; and the representations and warranties of the Borrower and the statements, information and descriptions contained in the Borrower's closing certificates, as of the Closing Date, are true, correct and complete, do not contain any untrue statement or misleading statement of a material fact, and do not omit to state a material fact required to be stated therein or necessary to make the certifications, representations, warranties, statements, information and descriptions contained therein, in the light of the circumstances under which they were made, not misleading; and the estimates and the assumptions contained herein and in any certificate of the Borrower delivered as of the Closing Date are reasonable and based on the best information available to the Borrower. (k) To the best knowledge of the Borrower, no member, officer, agent or employee of the Issuer has been or is in any manner interested, directly or indirectly, in that person's own, name or in the name of any other person, in the Bonds, the Bond Documents, the Mortgage Loan Documents, the Borrower or the Project, in any contract for property or materials to be furnished or used in connection with the Project, or in any aspect of the transactions contemplated by the Bond Documents or the Mortgage Loan Documents. (l) No authorization, consent, approval, order, registration declaration or withholding of objection on the part of or filing of or with any governmental authority not already obtained or made (or to the extent not yet obtained or made the Borrower has no reason to believe that such authorizations, consents, approvals, orders, registrations or declarations will not be obtained or made in a timely fashion) is required for the execution and delivery or approval, as the case may be, of this Financing Agreement, the other Bond Documents, the Mortgage Loan Documents or any other documents contemplated by this Financing Agreement, the other Bond Documents or the Mortgage Loan Documents, or the performance of the terms and provisions hereof or thereof by the Borrower. (m) The Borrower is not presently under any cease or desist order or other orders of a similar nature, temporary or permanent, of any federal or state authority which would have the effect of preventing or hindering performance of its duties hereunder, nor are there any proceedings presently in progress or to its knowledge contemplated which would, if successful, lead to the issuance of any such order. 6 (n) The Borrower acknowledges, represents and warrants that it understands the nature and structure of the transactions relating to the refinancing of the Project; that it is familiar with the provisions of all of the documents and instruments relating to such financing to which it or the Issuer is a party or of which it is a beneficiary including, without limitation, the Indenture; that it approves the initial appointment of the Trustee under the Indenture; that it understands the risks inherent in such transactions, including, without limitation, the risk of loss of the Project; and that it has not relied on the Issuer, the Servicer or Fannie Mae for any guidance or expertise in analyzing the financial or other consequences of the transactions contemplated by this Financing Agreement and the Indenture or otherwise relied on the Issuer, the Servicer or Fannie Mae in any manner. (o) The Borrower has not received any notice that it is not in compliance with all provisions of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended ("CERCLA"); the Resource Conservation and Recovery Act; the Superfund Amendments and Reauthorization Act of 1986; the Toxic Substances Control Act and all environmental laws of the State (the "ENVIRONMENTAL LAWS"), or with any rules, regulations and administrative orders of any governmental agency, or with any judgments, decrees or orders of any court of competent jurisdiction with respect thereto; and the Borrower has not received any assessment, notice (primary or secondary) of liability or financial responsibility, and no notice of any action, claim or proceeding to determine such liability or responsibility, or the amount thereof, or to impose civil penalties with respect to a site listed on any federal or state listing of sites containing or believed to contain "hazardous materials" (as defined in the Environmental Laws), nor has the Borrower received notification that any hazardous substances (as defined under CERCLA) that it has disposed of have been found in any site at which any governmental agency is conducting an investigation or other proceeding under any Environmental Law. (p) The Borrower has not received any notice that it is not in full compliance with the Employment Retirement Income Security Act of 1974, as amended, and the Department of Labor regulations thereunder, with the Code and Regulations thereunder and with terms of such plan or plans with respect to each pension or welfare benefit plan to which the Borrower is a party or makes any employer contributions with respect to its employees, for the current or prior plan years of such plans. (q) The average maturity of the Bonds does not exceed 120% of the average reasonably expected economic life of the facilities of the Project financed with the original net proceeds. (r) The Bonds are not and shall not be "federally guaranteed" as defined in Section 149(b) of the Code. (s) The Borrower intends to hold the Project for its own account and has no current plans to sell and has not entered into any agreement to sell all or any portion of the Project. 7 (t) No money on deposit in any fund or account in connection with the Prior Bonds, whether or not such money was derived from other sources, has been used by or under the direction of the Borrower in a manner which would cause the Prior Bonds to be "arbitrage bonds" within the meaning of Section 103(c) of the 1954 Code. (u) The Borrower has complied in all material respects with the requirements of the loan agreement executed in connection with the Prior Loan. SECTION 2.2 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE ISSUER. The Issuer represents, warrants and covenants as follows: (a) The Issuer is a public body corporate and politic, duly organized and existing under the Constitution and laws of the State. The Issuer has the full legal right, power and authority to execute and deliver this Financing Agreement, the Regulatory Agreement, the Tax Certificate and the Indenture, and to carry out its obligations hereunder and thereunder. The execution, delivery and performance of this Financing Agreement, the Indenture, the Tax Certificate and the Regulatory Agreement (including the issuance of the Bonds) have been duly authorized by the Issuer, and each of the foregoing has been duly executed and delivered by the Issuer and is a legal, valid and binding obligation of the Issuer, enforceable against the Issuer in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the rights of creditors generally and general equitable principles. (b) Neither the execution and delivery of the Bonds, this Financing Agreement, the Regulatory Agreement, the Tax Certificate or the Indenture, the consummation of the transactions contemplated hereby and thereby, nor the fulfillment of or compliance with the terms, conditions or provisions of the Bonds, this Financing Agreement, the Regulatory Agreement, the Tax Certificate or the Indenture conflicts in any material respect with or results in a material breach of any of the terms, conditions or provisions of the Constitution or any statute of the State, or of any agreement, instrument, judgment, order or decree to which the Issuer is now a party or by which it is bound or constitutes a material default under any of the foregoing. (c) Except as otherwise provided in the Indenture, the Issuer has not created and will not create any debt, lien or charge upon the Trust Estate, and has not made and will not make any pledge or assignment of or create any encumbrance thereon, other than the pledge and assignment thereof under the Indenture. (d) The Issuer has complied and will comply with all material provisions of the Act applicable to the Bonds and the transactions contemplated by this Financing Agreement and the other Bond Documents. (e) The Bonds have been issued under the Indenture, and are secured by the Indenture, pursuant to which the Issuer's interest in this Financing Agreement (other than the Reserved Rights), and the revenues and receipts to be derived by the Issuer pursuant to this Financing Agreement, will be pledged and assigned to the Trustee as security for payment of 8 the principal of, premium, if any, and interest on the Bonds. The Issuer covenants that it has not pledged and will not pledge or assign its interest in this Financing Agreement or the revenues and receipts derived pursuant to this Financing Agreement (except Reserved Rights) other than to the Trustee under the Indenture to secure the Bonds. (f) Upon the discovery by the Issuer of any noncompliance by the Borrower with this Financing Agreement or the Regulatory Agreement, the Issuer will notify the Trustee, the Servicer and Fannie Mae of such noncompliance and will, subject to the provisions of Article IX hereof, promptly institute action, or cause the Trustee to institute action, to correct such noncompliance, will diligently pursue such action and will attempt to correct such noncompliance within sixty (60) days after such discovery, all strictly in accordance with the terms and conditions of this Financing Agreement or the Regulatory Agreement, as the case may be, provided that no such action shall be taken which would adversely affect the interests of the Bondholders or Fannie Mae. (g) No litigation or administrative action of any nature has been served on it and is now pending (i) seeking to restrain or enjoin the execution and delivery of the Indenture or this Financing Agreement, or in any manner questioning the proceedings or authority relating thereto or otherwise affecting the validity of the Bonds, or (ii) as to the existence or authority of the Issuer or that of its present or former members or officers and, to the best knowledge of the Issuer, none of the foregoing are threatened. (h) The Issuer has issued the Bonds in order to currently refund the Prior Bonds which were issued for the purpose of providing permanent financing for the acquisition and development of the Project. 9 ARTICLE III THE BONDS AND THE PROCEEDS THEREOF SECTION 3.1 BONDS. The Issuer has authorized the issuance of the Bonds in the aggregate principal amount of $9,870,000 and Bonds in such amount shall be issued and Outstanding as of the Closing Date. The obligations of the Issuer, the Trustee and the Borrower under this Financing Agreement are expressly conditioned upon (i) the issuance, sale and delivery of the Bonds, (ii) receipt by the Trustee of the proceeds thereof, and (iii) delivery, contemporaneously with the issuance of the Bonds, to the Trustee of the Pass Through Certificate. Neither the Issuer, the Servicer, the Trustee nor Fannie Mae shall have any liability for any fees, costs or expenses, including, without limitation, issuance costs relating to the Bonds; all of such fees, costs and expenses shall be paid by the Borrower. 10 ARTICLE IV THE MORTGAGE LOAN SECTION 4.1 AMOUNT AND SOURCE OF MORTGAGE LOAN. Upon the issuance and delivery of the Bonds, pursuant to Section 4.02 of the Indenture the Issuer will apply the proceeds of the Bonds to fund the Mortgage Loan. The Borrower accepts the Mortgage Loan from the Issuer, upon the terms and conditions set forth herein, in the Mortgage Loan Documents and in the Indenture, and subject to the terms and conditions of the Regulatory Agreement, and agrees to have the proceeds of the Mortgage Loan applied and disbursed to provide for the current refunding of the Prior Bonds. SECTION 4.2 TERMS OF THE MORTGAGE LOAN. The Mortgage Loan shall (a) be evidenced by the Mortgage Note; (b) shall be secured by the Mortgage; (c) be in the principal amount of $9,870,000 (d) bear interest at the rate of 6.90% per annum; (e) provide for payment of principal and interest on the principal amount thereof, commencing August 1, 1996, or such earlier date required by the Issuer, and continuing on the first day of each month thereafter through and including August 1, 2016, in amounts equal to level monthly installments of principal and interest on the Mortgage Loan based on a 360 day-year amortization schedule (computed at the per annum rate of interest specified above on the outstanding principal amount of the Mortgage Loan); PROVIDED, HOWEVER, that all indebtedness evidenced by the Mortgage Note shall be due and payable on the date of the final maturity of the Mortgage Note set forth above; and (f) be subject to optional and mandatory prepayment at the times, in the manner and on the terms, and have such other terms and provisions, as are set forth therein. SECTION 4.3 PAYMENT OF FEES AND EXPENSES. In addition to all fees, costs, expenses and other amounts required to be paid by the Borrower under the Mortgage Note the Borrower shall pay, without duplication, the following fees and expenses: (a) All amounts required to (i) pay the fees of the Trustee for its duties and services as Trustee in connection with the Bonds (as such duties and services are set out in the Indenture), and (ii) reimburse the Trustee for all out-of-pocket expenses (including an annual audit fee of $3,000 per year), fees, costs and other charges, including counsel fees and taxes (excluding income, value added and single business taxes), reasonably and necessarily incurred by the Trustee in performing its duties as Trustee under the Indenture. All payments for fees and expenses shall be made by the Borrower not later than ten (10) days after receipt of invoices or other statements rendered to the Borrower by the Trustee. (b) The Issuer's annual fee in an amount equal to .18 percent per annum of the Outstanding principal amount of the Bonds and all amounts required to pay to the Issuer or to any payee designated by the Issuer, all expenses of the Issuer incurred at any time related to the Project or the refinancing thereof which are not paid from the amounts held under the Indenture, including, without limitation, legal fees and expenses incurred in connection with the interpretation, performance, enforcement or amendment 11 of any documents relating to the Project or the Bonds or in connection with questions or other matters arising under such documents, which amounts shall be paid within thirty (30) days after receipt of request for payment thereof. (c) The fees of the rebate monitor, if any, upon receipt of an appropriately completed invoice, all out-of-pocket expenses of the rebate monitor. (d) The annual rating maintenance fee, if any, of any Rating Agency then rating the Bonds. (e) All costs and expenses of issuing the Bonds, including, but not limited to, Rating Agency fees, the Bond Fund Initial Funding Requirement, printing expenses, attorneys' fees and underwriters' fees, and all expenses of originating the Mortgage Loan by the Issuer and assigning and delivering the Mortgage Loan to Fannie Mae, the Borrower acknowledging that all such fees costs and expenses (excluding the portions of the ongoing trust administration fees of the Trustee, the Issuer's annual fee and the rebate monitor's fee to the extent included in the Mortgage Note Rate) must be paid by the Borrower separate and apart from payments due under the Mortgage Loan and will not be included in the Mortgage Note Rate. (f) The Costs of Issuance deposit to be made to the Costs of Issuance Fund on the Closing Date pursuant to Section 4.01 of the Indenture. (g) In addition to the above, the Borrower shall pay, at the times and in the amounts required in the Indenture, all amounts necessary to pay any premium and any costs due in connection with an optional redemption of the Bonds pursuant to the Indenture. The Borrower acknowledges that the following fees and expenses have been included in the Mortgage Note Rate: (i) the annual administrative fees of the Trustee in an amount equal to .025% of the principal amount of the Bonds Outstanding, payable semi-annually in advance on August 1 and February 1 of each year commencing February 1, 1997. (ii) a servicing fee to the Servicer in the amount of .125% per annum of the principal amount of the Mortgage Loan outstanding from time to time, payable monthly in arrears on the same dates on which and for the same periods for which interest is payable under the Mortgage Note. (iii) the guaranty fee of Fannie Mae in the amount of .65% per annum of the principal amount of the Mortgage Loan outstanding from time to time, payable monthly in arrears on the same dates on which and for the same periods for which interest is payable under the Mortgage Note. 12 (iv) the Issuer's annual fee in an amount equal to .18% of the principal amount of the Bonds Outstanding, payable semiannually on the first day of each August and February commencing February 1, 1997. The Borrower shall give notice to Fannie Mae and the Servicer of the payment of all fees and expenses not included within the Mortgage Note Rate. All fees and expenses not included in the Mortgage Note Rate shall not be secured by the Mortgage and shall be unsecured personal obligations of the Borrower and shall be subordinate to the Borrower's obligations under the Mortgage Loan in all respects. SECTION 4.4 APPLICATION OF MORTGAGE LOAN PAYMENTS. All payments of interest, principal or other amounts payable by the Borrower under the Mortgage Loan shall be paid to the Servicer and then by the Servicer to Fannie Mae (less the portion thereof allocable to servicing fees). Fannie Mae will remit to the Trustee for deposit in the Revenue Fund amounts representing interest at the stated rate on the Mortgage Note (less the portion thereof allocable to servicing and Fannie Mae guaranty fees) or principal on the Mortgage Loan at the times and in the manner provided in the Pass-through Certificate without regard to whether timely payment of amounts payable as principal and interest on the Mortgage Loan shall have been made. SECTION 4.5 NOTIFICATION OF PREPAYMENT OF MORTGAGE NOTE. The Servicer shall notify the Trustee promptly of the receipt of any prepayment of the Mortgage Note, whether upon acceleration, by reason of application of insurance or condemnation proceeds, optional prepayment or otherwise, unless the Servicer has received written evidence that the Borrower has notified the Trustee of such prepayment, and the Trustee shall provide notice thereof to the Rating Agency. 13 ARTICLE V COVENANTS, UNDERTAKINGS AND OBLIGATIONS OF THE BORROWER SECTION 5.1 TAXES, OTHER GOVERNMENTAL CHARGES AND UTILITY CHARGES. The Borrower shall pay, or cause to be paid, promptly as the same become due and payable, every lawful cost, expense and obligation of every kind and nature, foreseen or unforeseen, for the payment of which the Issuer, the Trustee, the Servicer or Fannie Mae is or shall become liable by reason of its or their estate or interest in the Project or any portion thereof, by reason of any right or interest of the Issuer, the Trustee, the Servicer or Fannie Mae in or under this Financing Agreement, or by reason of or in any manner connected with or arising out of the possession, operation, maintenance, alteration, repair, rebuilding, use or occupancy of the Project or any portion thereof, including, without limitation, all taxes, assessments, whether general or special, and governmental charges of any kind whatsoever that may at any time be lawfully assessed or levied against or with respect to the Project or any machinery, equipment or other property installed or brought by the Borrower therein or thereon; PROVIDED that any amounts payable hereunder that are also required to be paid by the terms of the Mortgage shall be paid on the terms provided in the Mortgage. Upon request, the Borrower shall furnish to the Issuer, the Trustee, Fannie Mae and the Servicer proof of the payment of any such tax, assessment or other governmental or similar charge, or any other charge which is payable by the Borrower as set forth above. SECTION 5.2 COMPLIANCE WITH LAWS. The Borrower shall, throughout the term of this Financing Agreement and at no expense to the Issuer, the Trustee or Fannie Mae promptly comply or cause compliance with all laws, ordinances, rules, regulations and requirements of duly constituted public authorities which may be applicable to the Project or to the repair and alteration thereof, or to the use or manner of use of the Project, including, but not limited to, the Americans With Disabilities Act and all federal, State and local environmental, labor, health and safety laws, rules and regulations. SECTION 5.3 MAINTENANCE OF LEGAL EXISTENCE. During the term of this Financing Agreement, the Borrower shall maintain its existence as set forth in Section 2.1(a) and shall not terminate, dissolve or dispose of all or substantially all of its assets; PROVIDED, HOWEVER, that the Borrower may, with the written permission of the Issuer, consolidate with or merge into another entity or permit one or more other entities to consolidate with or merge into it, or transfer all or substantially all of its assets to another entity, but only on the condition that the assignee entity or the entity resulting from or surviving such merger or consolidation (if other than the Borrower), or the entity to which such transfer shall be made, shall be duly organized and existing, in good standing and qualified to do business under the laws of the State, shall remain so continuously during the term hereof, and shall expressly assume in writing and agree to perform all of the Borrower's obligations hereunder and under all other documents executed by the Borrower in connection with the issuance of the Bonds; PROVIDED, FURTHER, that (i) Borrower delivers an opinion of Bond Counsel to the effect that such consolidation or merger shall not cause interest on the Bonds to be included in gross income for federal income tax purposes, and 14 (ii) any transfer of the Project shall be effected in accordance with the Mortgage. Nothing in this Section 5.3 shall be deemed to relieve the Borrower of its obligations to comply with the provisions of the Mortgage Loan Documents. SECTION 5.4 OPERATION OF PROJECT. The Borrower will not sell, transfer or otherwise dispose of the Project except as provided in the Regulatory Agreement, the Mortgage and Section 5.3 of this Financing Agreement. SECTION 5.5 TAX COVENANTS. The Borrower covenants that it will comply with the requirements and conditions of the Tax Certificate and the Regulatory Agreement. Without limiting the foregoing, the Borrower covenants that, notwithstanding any provision of this Financing Agreement or the rights of the Borrower hereunder, it will not take, or permit to be taken on its behalf, any action which would cause interest on the Bonds to be included in gross income for federal income tax purposes and that it will take such reasonable action as may be necessary to continue such exclusion from gross income, including, without limitation, (a) the preparation and filing of any statements required to be filed by it in order to maintain such exclusions; and (b) the payment to the United States of any amount required to be paid by the Issuer or the Borrower pursuant to Section 148(f) of the Code and the Regulations thereunder, including, to the extent applicable, Section 1.148-3 of the Regulations or subsequent applicable Regulations, at the times, in the amounts and at the places required thereby in order to maintain the exclusion of interest on the Bonds for federal income tax purposes; and the Borrower hereby irrevocably authorizes and directs the Issuer and the Trustee (and any other agent designated by the Issuer) to make payment of such amounts from funds of the Borrower, if any, held by the Issuer, the Trustee, or any agent of the Issuer or the Trustee. The Borrower further covenants and agrees that, pursuant to the requirements of Section 1. 148-1(b) of the Regulations, it (or any related person contemplated by such Regulations) will not purchase Bonds in an amount related to the amount of the Mortgage Loan. SECTION 5.6 FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS. The parties hereto agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and to the other documents contemplated hereby as may reasonably be required to carry out the intention of or to facilitate the performance of this Financing Agreement, the Mortgage Loan Documents or the other Bond Documents or to perfect or give further assurances of any of the rights granted or provided for herein, the Mortgage Loan Documents or the other Bond Documents. SECTION 5.7 COMPLIANCE WITH OTHER DOCUMENTS. The Borrower shall make all payments and shall observe and perform all covenants, conditions and agreements required to be paid, observed or performed by the Borrower under the Mortgage Note, the Mortgage, the other Mortgage Loan Documents, the Regulatory Agreement and all other documents, instruments or agreements which may at any time, or from time to time, be entered into by the Borrower with respect to the Project or the operation, occupancy or use thereof. The Indenture has been submitted to the Borrower for examination, and the Borrower, by execution of this Financing Agreement, acknowledges and agrees that it has participated in the drafting of the Indenture that it has approved and agreed to each of the provisions of the Indenture and that it 15 is bound by, shall adhere to the provisions of, and shall have the rights set forth by the terms and conditions of, the Indenture and covenants and agrees to perform all obligations required of the Borrower pursuant to the terms of the Indenture. The Borrower hereby grants to the Trustee for the benefit of Fannie Mae and the Bondholders a security interest in all of its rights in and to all funds (except the Rebate Fund and the Cost of Issuance Fund) created or established by the Trustee under the Indenture in the manner and subject to the terms and conditions of the Indenture. SECTION 5.8 NOTICE OF CERTAIN EVENTS. The Borrower hereby covenants to advise the Servicer, the Issuer, the Trustee and Fannie Mae promptly in writing of the occurrence of any default by the Borrower in the performance or observance of any covenant, agreement, representation, warranty or obligation of the Borrower set forth in this Financing Agreement, in any of the other Bond Documents or any other documents contemplated hereby or thereby, or of any Event of Default hereunder known to it or of which it has received notice, or any event which, with the passage of time or service of notice, or both, would constitute an Event of Default hereunder, specifying the nature and period of existence of such event and the actions being taken or proposed to be taken with respect thereto. Such notice shall be given promptly, and in no event less than ten (10) Business Days after the Borrower receives notice or has knowledge of the occurrence of any such event. The Borrower further agrees that it will give prompt written notice to the Servicer if insurance proceeds or condemnation awards are received with respect to the Project and are not used to repair or replace the Project, which notice shall state the amount of such proceeds or award. SECTION 5.9 INDEMNIFICATION. The Borrower hereby releases the Issuer and its officers and employees from, and covenants and agrees to indemnify, hold harmless and defend the Issuer, the Trustee, the Servicer and their respective officers, members, directors, officials, agents and employees and each of them (each an "INDEMNIFIED PARTY") from and against, (a) any and all claims, joint or several, by or on behalf of any person arising from any cause whatsoever in connection with transactions contemplated hereby or otherwise in connection with the Project, the Bonds or the execution or amendment of any document relating thereto; (b) any and all claims, joint or several, arising from any cause whatsoever in connection with the approval of refinancing for the Project or the making of the Mortgage Loan; (c) any and all claims, joint or several, arising from any act or omission of the Borrower or any of its agents, servants, employees or licensees, in connection with the Mortgage Loan or the Project; (d) all reasonable costs, counsel fees, expenses or liabilities incurred in connection with any such claim, or proceeding brought thereon; (e) any and all claims arising in connection with the issuance and sale, resale or remarketing of any Bonds or any certifications or representations made by any Person other than the Issuer or the party seeking indemnification in connection therewith and the carrying out by the Borrower of any of the transactions contemplated by the Bonds, the Indenture, the Regulatory Agreement and this Financing Agreement; (f) any and all claims arising in connection with the operation of the Project, or the conditions thereof, environmental or otherwise, occupancy, use, possession, conduct or management of work done in or about, or from the planning, design, acquisition, installation or construction of, the Project or any part thereof; (g) any and all losses, claims, damages, liabilities or expenses, joint or several, arising 16 out of or connected with the Trustee's acceptance or administration of the trusts created by the Indenture and the exercise of its powers or duties thereunder or under this Financing Agreement, the Regulatory Agreement or any other agreements in connection therewith to which it is a party; and (h) any or all claims arising in connection with the Prior Bonds, including but not limited to claims arising in connection with the redemption and/or defeasance of the Prior Bonds; except (i) in the case of the foregoing indemnification of the Trustee or the Servicer or any of their respective officers, members, directors, officials and employees, to the extent such damages are caused by the negligence or willful misconduct of such Person; or (ii) in the case of the foregoing indemnification of the Issuer or any of its officers, members, directors, officials and employees, to the extent such damages are caused by the willful misconduct of such Person. In the event that any action or proceeding is brought against any indemnified party with respect to which indemnity may be sought hereunder, the Borrower, upon written notice from the indemnified party, shall assume the investigation and defense thereof, including the employment of counsel selected by the Borrower, subject to the approval of the indemnified party in such party's sole discretion, and shall assume the payment of all expenses related thereto, with full power to litigate, compromise or settle the same in its sole discretion; PROVIDED that the Issuer, the Trustee and the Servicer shall have the right to review and approve or disapprove any such compromise or settlement. Each indemnified party shall have the right to employ separate counsel in any such action or proceeding and participate in the investigation and defense thereof, and the Borrower shall pay the reasonable fees and expenses of such separate counsel; PROVIDED, HOWEVER, that unless such separate counsel is employed with the approval of the Borrower, which approval shall not be unreasonably withheld, the Borrower shall not be required to pay the fees and expenses of such separate counsel. Borrower hereby approves the use of the County Attorney office by the Issuer as separate counsel. Notwithstanding any transfer of the Project to another owner in accordance with the provisions of the Regulatory Agreement, the Borrower shall remain obligated to indemnify each indemnified party pursuant to this Section if such subsequent owner fails to indemnify any party entitled to be indemnified hereunder, unless such indemnified party has consented to such transfer and to the assignment of the rights and obligations of the Borrower hereunder. During any period that Fannie Mae owns the Project and that this Section 5.9 is applicable to Fannie Mae, Fannie Mae's obligations under this Section 5.9 shall be limited to acts and omissions of Fannie Mae occurring during the period of Fannie Mae's ownership of the Project. SECTION 5.10 RIGHT TO PERFORM BORROWER'S OBLIGATIONS. In the event the Borrower fails to perform any of its obligations under this Financing Agreement, the Issuer, the Servicer, Fannie Mae and/or the Trustee, after giving the requisite notice, if any, may, but shall be under no obligation to, perform such obligation and pay all costs related thereto, and all such costs so advanced by the Issuer, the Servicer, Fannie Mae or the Trustee shall become an additional obligation of the Borrower hereunder, payable on demand with interest thereon at the default rate of interest payable under the Mortgage Loan Documents. 17 SECTION 5.11 NONRECOURSE PROVISIONS. (a) Except as provided in Section 5.11(b) hereof and except as otherwise provided in the Mortgage, in any action or proceeding brought on any instrument evidencing any indebtedness to the Issuer or the Trustee no deficiency or other money judgment shall be enforced against the Borrower personally, or any successor or assign of the Borrower, and any judgment obtained shall, subject in all respects to the limitations of the Regulatory Agreement, be enforced only against the property of the Borrower, and the rents, issues and profits thereof, and any other security for the indebtedness evidenced hereby, and not against the Borrower, or any successor or assign of the Borrower. It is understood and agreed that nothing herein shall be construed in any way to limit or restrict any of the Reserved Rights of the Issuer or any of the rights and remedies of the Issuer in any proceeding or other enforcement for the payment of any indebtedness, subject only to the aforesaid limitation upon enforcement of any judgment against the Borrower, and any successor or assign of the Borrower, subject in all respects to the limitations of the Regulatory Agreement. (b) Notwithstanding anything to the contrary contained in subsection (a) of this Section 5.11, the obligations of the Borrower pursuant to Section 4.3 (a) through (g) and Section 5.9 shall be recourse to the Borrower. 18 ARTICLE VI MORTGAGE LOAN DOCUMENTS SECTION 6.1 ASSURANCES. The Borrower, the Issuer and the trustee mutually agree that no party hereto shall enter into any contract or agreement, perform any act, or request any other party hereto to enter into any contracts or agreements or perform any acts, which shall adversely affect the Mortgage Loan Documents. SECTION 6.2 FINANCIAL OBLIGATIONS PERSONAL TO THE BORROWER. The Issuer acknowledges that the Project shall be encumbered by the Mortgage Loan Documents. Notwithstanding any provisions of this Financing Agreement or the Regulatory Agreement to the contrary, all obligations of the Borrower under this Financing Agreement and the Regulatory Agreement for the payment of money and all claims for damages against the Borrower occasioned by breach or alleged breach by the Borrower of its obligations under the Regulatory Agreement or this Financing Agreement, including indemnification obligations, shall not be secured by or in any manner constitute a lien on the Project and no Person shall have the right to enforce such obligations other than directly against the Borrower. No subsequent owner of the Project shall be liable or obligated for the breach or default of any obligation of any prior owner under the Regulatory Agreement or this Financing Agreement, including but not limited to any payment or indemnification obligation. Such obligations are personal to the Person who was the owner at the time the default or breach was alleged to have occurred and such Person shall remain liable for any and all damages occasioned thereby even after such Person ceases to be the owner. Nothing in this Section shall be construed to effect the Trustee's right to receive payment of any moneys under and pursuant to this Agreement or the Indenture from payments on the Mortgage Loan to the extent the Trustee or the Issuer is entitled to such payment. 19 ARTICLE VII THE PROJECT SECTION 7.1 REGULATORY AGREEMENT. The covenants of the Borrower in the Regulatory Agreement shall be deemed to constitute covenants of the Borrower running with the land and an equitable servitude for the benefit of the owners of the Bonds and shall be binding upon any owner of the Project until (i) such time as such restrictions expire under their own terms, or (ii) the Issuer (in its sole and absolute discretion) and the Trustee (as provided in the Indenture) consent to the release of such restrictions, or (iii) the Regulatory Agreement is otherwise terminated by its terms. The Borrower hereby covenants to file of record the Regulatory Agreement and such other documents and take such other steps as are necessary in order to assure that the restrictions contained in the Regulatory Agreement will be binding upon all owners of the Project. The Borrower hereby covenants to include such restrictions in any documents transferring any interest in the Project to another to the end that such transferee has notice of, and is bound by, such restrictions. SECTION 7.2 RIGHT TO ENFORCE COMPLIANCE. The Issuer, the Trustee, the Servicer and Fannie Mae shall have the right, but not the obligation, to enforce compliance by the Borrower and its successors as subsequent owners of the Project with the requirements contained in this Article VII and the requirements of the Regulatory Agreement. SECTION 7.3 DAMAGE, DESTRUCTION AND CONDEMNATION. If prior to full payment of the Bonds (or provision for payment thereof in accordance with the provisions of the Indenture) the Project or any portion thereof is destroyed (in whole or in part) or is damaged by fire or other casualty, or title to, or the temporary use of, the Project or any portion thereof shall be taken under the exercise of the power of eminent domain by any governmental body or by any person, firm or corporation acting under governmental authority, the Borrower shall nevertheless be obligated to continue to pay the amounts specified herein and in the Mortgage Note to the extent the Mortgage Loan is not prepaid in accordance with provisions thereof. 20 ARTICLE VIII TRUSTEE'S INTEREST IN AGREEMENT SECTION 8.1 ISSUER ASSIGNMENT OF THIS FINANCING AGREEMENT. (a) Pursuant to the Indenture, the Issuer shall pledge, assign and transfer all of its right, title and interest in this Financing Agreement (other than the Reserved Rights of the Issuer), and the revenues, receipts and collections hereunder and thereunder, to the Trustee in the manner and to the extent provided in the Indenture as security for the payment of the principal of, premium, if any, and interest on the Bonds, and the parties hereby acknowledge that the covenants and agreements contained herein are for the benefit of the registered owners from time to time of the Bonds and may be enforced on their behalf by the Trustee. The Issuer shall execute and deliver from time to time, in addition to the instruments of assignment herein specifically provided for, such other and further instruments and documents as may be reasonably requested by the Trustee from time to time to further evidence, effect or perfect such pledge and assignment for the purposes contemplated in the Indenture. (b) The Borrower hereby acknowledges and consents to the assignment and pledge (subject to the reservation by the Issuer of its Reserved Rights) by the Issuer to the Trustee in the manner and to the extent provided in the Indenture. The Borrower further acknowledges and consents to the right of the Trustee to enforce all rights of the Issuer and the Bondholders assigned under the Indenture. SECTION 8.2 THIRD-PARTY BENEFICIARIES. The Bondholders, the Servicer and Fannie Mae are intended to be, and shall be, third-party beneficiaries of this Financing Agreement; and Fannie Mae and the Servicer shall have the right (but not the obligation) to enforce the terms of this Financing Agreement insofar as this Financing Agreement sets forth obligations of the Borrower under this Financing Agreement. SECTION 8.3 ISSUER COMPLIANCE WITH INDENTURE. The Issuer shall comply with the covenants, requirements and provisions of the Indenture applicable to it and perform all of its obligations thereunder. 21 ARTICLE IX EVENTS OF DEFAULT AND REMEDIES SECTION 9.1 EVENTS OF DEFAULT. (a) Each of the following shall constitute an event of default under this Financing Agreement, and the term "EVENT OF DEFAULT" shall mean, whenever used in this Financing Agreement, any one or more of the following events: (i) Failure by the Borrower to pay any amounts due under this Financing Agreement at the times and in the amounts required hereby or thereby; or (ii) Failure by the Borrower to observe or perform any covenants, agreements or obligations in this Financing Agreement on its part to be observed or performed (other than as provided in clause (i) above) for a period of thirty (30) days after receipt of written notice specifying such failure and requesting that it be remedied, given to the Borrower by any party to this Financing Agreement; PROVIDED, HOWEVER, that if said failure shall be such that it cannot be corrected within such period, it shall not constitute an Event of Default if the failure is correctable without material adverse effect on the Bonds and if corrective action is instituted by the Borrower within such period and diligently pursued until the failure is corrected, and PROVIDED FURTHER that any such failure shall have been cured within ninety (90) days of receipt of notice of such failure; or (iii) Breach of any of the covenants, agreements or obligations of the Borrower under or the occurrence of a default under the Regulatory Agreement, including any exhibits to any of the foregoing; or (iv) The occurrence of an Event of Default caused by the Borrower under and as defined in the Indenture or under any of the other Bond Documents; or (v) An Event of Default declared pursuant to paragraph (b) of this Section 9.1; (b) The occurrence of a default under the Mortgage Loan Documents shall, at the option of Fannie Mae, in its sole and absolute discretion, constitute an Event of Default under this Financing Agreement, and the occurrence of a default under this Financing Agreement shall, at the option of Fannie Mae, in its sole and absolute discretion, constitute a default under the Mortgage Loan Documents. 22 Nothing contained in this Section 9.1 is intended to amend or modify any of the provisions of the Mortgage Loan Documents nor to bind the Servicer or Fannie Mae to any notice and cure periods other than as expressly set forth in the Mortgage Loan Documents. SECTION 9.2 REMEDIES UPON AN EVENT OF DEFAULT. (a) Subject to Section 9.2(d), whenever any Event of Default shall have occurred and be continuing, the Issuer or the Trustee as the Issuer's assignee may take any one or more of the following remedial steps: (i) By any suit, action or proceeding, pursue all remedies now or hereafter existing at law or in equity to collect all amounts then due and thereafter to become due under this Financing Agreement, to enforce the performance of any covenant, obligation or agreement of the Borrower under this Financing Agreement (subject to the nonrecourse provisions of this Financing Agreement and the Regulatory Agreement) or, to enjoin acts or things which may be unlawful or in violation of the rights of the Issuer or the Trustee. (ii) Take whatever other action at law or in equity may appear necessary or desirable to enforce any monetary obligation of the Borrower under this Financing Agreement or to enforce any other covenant, obligation or agreement of the Borrower under (1) this Financing Agreement, or (2) the Regulatory Agreement. (iii) Have access to and inspect, examine, audit and make copies of the books and records and any and all accounts, data and income tax and other tax returns of the Borrower. (b) The provisions of subsection (a) hereof are subject to the condition that if, after any Event of Default, except a default under the Regulatory Agreement, (i) all amounts which would then be payable hereunder by the Borrower if such Event of Default had not occurred and was not continuing shall have been paid by or on behalf of the Borrower, and (ii) the Borrower shall have also performed all other obligations in respect of which it is then in default hereunder and shall have paid the reasonable charges and expenses of the Issuer and the Trustee, including reasonable attorney fees and expenses paid or incurred in connection with such default, then and in every such case, such Event of Default may be waived and annulled by the Trustee, but no such waiver or annulment shall extend to or affect any subsequent Event of Default or impair any right or remedy consequent thereon. (c) The Issuer and the Trustee hereby acknowledge that the occurrence of an Event of Default hereunder will not by itself cause a default to arise under any of the Mortgage Loan Documents unless otherwise declared a default under the Mortgage Loan Documents by Fannie Mae. (d) Subject to the limitations of the Regulatory Agreement and this Financing Agreement, the Issuer, without the consent of the Trustee, but only after written notice to the 23 Trustee, the Borrower, the Servicer and Fannie Mae, may take whatever action at law or in equity may appear necessary or desirable to enforce performance and observance of any Reserved Right of the Issuer; PROVIDED that, the Issuer may not, without the consent of the Fannie Mae, (i) terminate this Financing Agreement or cause the Mortgage Loan to become due and payable, (ii) cause the Trustee to declare the principal of all Bonds then Outstanding and the interest accrued thereon to be immediately due and payable, or cause the Trustee to accelerate, foreclose or take any other action or seek other remedies under the Bond Documents, the Mortgage Loan Documents or any other documents contemplated hereby or thereby to obtain such performance or observance, (iii) cause the acceleration, foreclosure or taking of any other action or the seeking of any remedies under the Mortgage Loan Documents, (iv) initiate or take any action which may have the effect, directly or indirectly, of impairing the ability of the Borrower to timely pay the principal, interest and other amounts due under the Mortgage Loan, or (v) interfere with or attempt to influence the exercise by Fannie Mae of any of its rights under the Bond Documents or the Mortgage Loan Documents. (e) Except as required to be deposited in the Rebate Fund pursuant to the Tax Certificate any amounts collected pursuant to action taken under this Section 9.2 shall, after the payment of the costs and expenses of the proceedings resulting in the collection of such moneys and of the expenses, liabilities and advances incurred or made by the Trustee, the Issuer, the Servicer or Fannie Mae and their respective counsel, be applied in accordance with the provisions of the Indenture. No action taken pursuant to this Section shall relieve the Borrower from the Borrower's obligations pursuant to Section 5.9 hereof. (f) No remedy herein conferred upon or reserved to the Issuer or the Trustee is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy now or hereafter existing pursuant to any other agreement at law or in equity or by statute. (g) Notwithstanding any other provision of this Financing Agreement to the contrary, so long as Fannie Mae is not in default under the Pass-through Certificate, none of the Issuer, the Trustee or any person under their control shall exercise any remedies or direct any proceedings under this Financing Agreement or the Mortgage Loan Documents, other than to (i) enforce rights under the Pass-through Certificate, (ii) enforce the tax and indemnification covenants in the Indenture and this Financing Agreement, or (iii) enforce rights of specific performance under the Regulatory Agreement; provided, however, that any enforcement under (ii) or (iii) above shall not include seeking monetary damages. SECTION 9.3 DEFAULT UNDER REGULATORY AGREEMENT. (a) If the Borrower fails, at any time for any reason, to comply with the requirements of the Regulatory Agreement, then within thirty (30) days after the earlier of the date the violation is discovered by the Issuer or the Trustee or the date the Issuer or the Trustee received notice thereof, the Issuer (if necessary to preserve the exclusion of interest on the Bonds from gross income for federal income tax purposes) or the Trustee, on behalf of the Issuer, shall institute an action for specific performance to correct the violation. The Borrower 24 hereby acknowledges and agrees that were money damages a remedy under the Regulatory Agreement, money damages alone would not be an adequate remedy at law for a default by the Borrower arising from a failure to comply with the Regulatory Agreement, and therefore the Borrower agrees that the remedy of specific performance (subject to the provisions of Section 9.2(d) hereof) shall be available to the Issuer and/or the Trustee in-any such case. (b) Notwithstanding the availability of the remedy of specific performance provided for in subsection (a) of this Section, promptly upon determining that a violation of the Regulatory Agreement has occurred, the Issuer shall, by notice in writing to the Servicer and Fannie Mae, inform Fannie Mae and the Servicer that a violation of the Regulatory Agreement has occurred; notwithstanding the occurrence of such violation, neither the Issuer nor the Trustee shall have, and each of them acknowledges that they shall not have, any right to cause or direct acceleration of the Mortgage Loan, to enforce the Mortgage Note or to foreclose on the Mortgage. SECTION 9.4 LIMITATION ON WAIVERS. (a) No delay or omission to exercise any right or power occurring upon any Event of Default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed appropriate. The Issuer and the Trustee agree to give only such notices as may be herein expressly required. (b) In the event any covenant, agreement or condition contained in this Financing Agreement shall be breached by a party and thereafter waived by another party, such waiver shall not bind any party which has not waived the breach and shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder nor be a waiver of the same breach on a future occasion. By reason of the assignment and pledge of certain of the Issuer's rights and interests in this Financing Agreement to the Trustee, the Issuer shall have no power to waive or release the Borrower from any Event of Default or the performance or observance of any obligation or condition of the Borrower under this Financing Agreement without first requesting and receiving the prior written consent of the Trustee, but shall do so if, requested by the Trustee; PROVIDED that the Issuer shall not be required to grant such waiver or release unless it shall have been provided with (i) an Opinion of Counsel that such action will not result in any pecuniary liability to it and an opinion of Bond Counsel that such waiver shall not cause interest on the Bonds to be included in the gross income of the Holders thereof for federal income tax purposes, (ii) such indemnification as the Issuer shall deem reasonably necessary, and (iii) written notice from the Trustee of the request for such waiver or release. SECTION 9.5 NOTICE OF DEFAULT: FANNIE MAE'S RIGHT TO CURE. The Issuer and the Trustee shall each give notice to the other and to the Servicer and Fannie Mae of the occurrence of any Event of Default by the Borrower hereunder of which it has actual knowledge. Fannie Mae and the Servicer shall have the right, but not the obligation, to cure any such default by the Borrower, and upon performance by Fannie Mae or the Servicer to the satisfaction of the Issuer 25 and the Trustee of the covenant, agreement or obligation of the Borrower with respect to which an Event of Default has occurred, the parties hereto shall be restored to their former respective positions, it being agreed that Fannie Mae and the Servicer shall have the right to repayment from the Borrower of moneys it has expended and any other appropriate redress for actions it has taken to cure any default by the Borrower; PROVIDED that the Borrower's reimbursement obligation shall be non-recourse to the same extent as the underlying obligation is non-recourse to the Borrower. SECTION 9.6 RIGHTS CUMULATIVE. All rights and remedies herein given or granted to the Issuer and the Trustee are cumulative, nonexclusive and in addition to any and all rights and remedies that the Issuer and the Trustee may have or may be given by reason of any law, statute, ordinance or otherwise. Notwithstanding anything to the contrary contained in this Financing Agreement, neither the Trustee nor the Issuer may commence any action against the Borrower for specific performance or any other remedy at law or in equity, other than to enforce performance and observance of any Reserved Right of the Issuer and its rights under Section 9.3, without first obtaining the prior written consent of Fannie Mae. 26 ARTICLE X MISCELLANEOUS SECTION 10.1 NOTICES. All notices, certificates or other communications herein provided shall be given in writing to the Issuer, the Borrower, the Trustee, Fannie Mae and the Servicer, and shall be sufficiently given and shall be deemed given if given in the manner provided in the Indenture. Copies of each notice, certificate or other communication given hereunder by any party hereto shall be given to all parties hereto. By notice given hereunder, any party may designate further or different addresses to which subsequent notices, certificates or other communications are to be sent. A duplicate copy of each notice, certificate, request or other communication given hereunder to the Issuer, the Borrower, the Servicer or the Trustee shall also be given to Fannie Mae. SECTION 10.2 AMENDMENT. This Financing Agreement and all other documents contemplated hereby to which the Issuer is a party may be amended or terminated only if permitted by the Indenture, and no amendment to this Financing Agreement shall be binding upon, any party hereto until such amendment is reduced to writing and executed by the parties hereto; PROVIDED that no amendment, supplement or other modification to this Financing Agreement or any other Bond Document shall be effective without the prior written consent of Fannie Mae. SECTION 10.3 ENTIRE AGREEMENT. Except as provided in the other Bond Documents and the Mortgage Loan Documents, this Financing Agreement contains all agreements among the parties hereto, and there are no other representations, warranties, promises, agreements or understandings, oral, written or implied, among the parties hereto, unless reference is made thereto in this Financing Agreement or the Indenture. SECTION 10.4 BINDING EFFECT. This Financing Agreement shall be binding upon the Issuer, the Borrower and the Trustee and their respective successors and assigns. Notwithstanding anything herein to the contrary, to the extent Fannie Mae or its designee shall become the owner of the Project as a result of a foreclosure or a deed in lieu of foreclosure or similar conveyance, Fannie Mae, and its designee, if applicable, shall not be liable for any breach or default or any of the obligations of any prior owner of the Project under this Financing Agreement, and shall only be responsible for defaults and obligations incurred during the period Fannie Mae or its designee, if applicable, is the owner of the Project. SECTION 10.5 SEVERABILITY. If any clause, provision or section of this Financing Agreement shall be ruled invalid or unenforceable by any court of competent jurisdiction, the invalidity or unenforceability of such clause, provision or section shall not affect any of the remaining clauses, provisions or sections. SECTION 10.6 EXECUTION IN COUNTERPARTS. This Financing Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. 27 SECTION 10.7 GOVERNING LAW. This Financing Agreement shall be governed by and interpreted in accordance with the internal laws of the State without regard to conflicts of laws principles. SECTION 10.8 LIMITED LIABILITY. All obligations of the Issuer incurred hereunder, under the Regulatory Agreement, the Tax Certificate and the Indenture shall be limited obligations of the Issuer, payable solely and only from Bond proceeds, revenues and other amounts available under the Indenture. The Bonds shall be payable solely from the revenues and other funds and property pledged under the Indenture for the payment of the Bonds, and no owner or owners of any of the Bonds shall ever have the right to compel any exercise of the taxing power of the State or any political subdivision or other public body thereof, nor to enforce the payment thereof against any property of the State or any such political subdivision or other public body, including the Issuer except as provided in the Indenture. No member, officer, agent, employee or attorney of the Issuer, including any person executing this Financing Agreement, shall be liable personally hereunder or for any reason relating to the issuance of the Bonds. No recourse shall be had for the payment of the principal of or the interest on the Bonds, or for any claim based therein, or otherwise in respect thereof, or based on or in respect of this Financing Agreement or any amendment hereto, against any member, officer, employee or agent, as such, of the Issuer or any successor whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue of the Bonds, expressly waived and released. SECTION 10.9 TERM OF THIS FINANCING AGREEMENT. This Financing Agreement shall be in full force and effect from its date to and including such date as all of the Bonds shall have been fully paid or retired (or provision for such payment shall have been made as provided in the Indenture); PROVIDED, HOWEVER, that the provisions of Sections 2.1, 5.5 and 5.9 of this Financing Agreement shall survive the termination hereof. 28 ARTICLE XI CONTINUING DISCLOSURE SECTION 11.1 FURNISHING OF INFORMATION GENERALLY. The Borrower hereby agrees at the Borrower's sole cost and expense to provide such information to such parties or entities as shall be necessary for compliance with Rule 15c2-12 of the Securities Exchange Act of 1934, as amended (the "Rule"), and all other applicable federal and state securities laws, rules, and regulations. SECTION 11.2 CONTINUING DISCLOSURE UNDERTAKING. The Borrower hereby agrees, in accordance with the provisions of the Rule, to provide or cause to be provided, to each nationally recognized municipal securities information repository ("NRMSIR") designated by the Securities and Exchange Commission (the "Commission") in accordance with the Rule, and to the appropriate state information depository ("SID"), if any, designated by the State of Florida, the following annual financial information and operating data (the "Annual Information"), commencing with the fiscal year ended December 31, 1996: the annual 10-K report of Apartment Investment Management Company ("AIMCO") as filed with the Securities and Exchange Commission utilizing generally accepted accounting principles, except as may be modified from time to time and described in such report and other information regarding the Borrower and the Project in a manner consistent with the presentation of such information under the heading "THE OWNER AND THE PROJECT" in the Official Statement for the Bonds. The information in the preceding paragraph will be available on or before July 15th of each year for the preceding fiscal year and will be made available, in addition to the NRMSIR's and the SID, to each holder of Bonds who requests such information. If audited financial statements are not available by the said July 15 of any year, then the Borrower will make available unaudited financial statements. The audited financial statements are generally available within six months after the end of the fiscal year of AIMCO. The Borrower agrees to provide or cause to be provided, in a timely manner, to (i) each NRMSIR or to the Municipal Securities Rulemaking Board ("MSRB") and (ii) the SID, notice of the occurrence of any of the following events with respect to the Bonds, if material: (a) principal and interest payment delinquencies; (b) non-payment related defaults; (c) unscheduled draws on debt service reserves reflecting financial difficulties; (d) unscheduled draws on credit enhancements reflecting financial difficulties; (e) substitution of credit or liquidity providers, or their failure to perform; 29 (f) adverse tax opinions or events affecting the tax-exempt status of the Bonds; (g) modifications to rights of holders of the Bonds; (h) bond calls; (i) defeasance; (j) release, substitution, or sale of any security securing repayment of the Bonds; (k) rating changes, if any. The Borrower agrees to provide or cause to be provided, in a timely manner, to (i) each NRMSIR or to the MSRB and (ii) the SID, notice of its failure to provide the Annual Information with respect to itself on or prior to the date set forth in the third paragraph above. The obligations of the Borrower hereunder shall remain in effect only so long as the Bonds are Outstanding. The Borrower reserves the right to terminate its obligation to provide the Annual Information and notices of material events, as set forth above, if and when the Borrower no longer remains an obligated person with respect to the Bonds within the meaning of the Rule. The Borrower agrees that its undertaking pursuant to the Rule set forth in this Section is intended to be for the benefit of the holders of the Bonds and shall be enforceable by any holder of the Bonds; PROVIDED, HOWEVER, that, the right of any such holder to enforce the provisions of this undertaking shall be limited to a right of the holder, or the Trustee or the Issuer to obtain specific enforcement of the Borrower's obligations hereunder and any failure by the Borrower to comply with the provisions of this undertaking shall not be a default hereunder with respect to the Bonds. Notwithstanding the foregoing, the NRMSIRs to which information shall be provided shall include those NRMSIRs approved by the Commission prior to the issuance of the Bonds. In the event the Commission approves any additional NRMSIRs after the date of issuance of the Bonds, the Borrower shall, if the Borrower is notified of such additional NRMSIRs, provide such information to the additional NRMSIRs. Failure to provide information to any new NRMSIR whose status as a NRMSIR is unknown to the Borrower shall not constitute a breach of the foregoing covenant As of the date of this Agreement, (i) the Commission has recognized each of the following entities as a NRMSIR: 30 J.J. Kenny Bond Buyer 65 Broadway 395 Hudson Street 16th Floor 3rd Floor New York, NY 10006 New York, NY 10014 (212) 770-4595 (212) 870-3868 Moody's NRMSIR Disclosure, Inc. Public Finance Information Center 5161 River Road 99 Church Street Bethesda, MD 20816 New York, NY 10707 Attn: Document Acquisitions/Municipal (800) 339-6306 Securities (301) 951-1300 Bloomberg Financial Markets Municipal Securities c/o Municipal Repository Disclosure Archive (MSDA) Post Office Box 888 559 Main Street Princeton, NJ 08452-0888 Hudson, MA 01749 (800) 448-5678 (800) 580-3670 and (ii) no SID has been created for the State of Florida. If, however, a SID is hereafter created for the State of Florida, the Borrower hereby agrees, at Borrower's sole cost and expense, to make all filings and provide all notices to such SID as squired by the Rule. Additionally, the requirements imposed hereby do not necessitate the preparation of any separate annual report addressing only the Bonds. The requirements may be met by the filing of a general annual information statement of the Borrower or AIMCO, provided such report includes all of the required information and is available by July 15. Additionally, the Borrower may incorporate any information provided in any prior filing with each NRMSIR or included in any final official statement or private placement memorandum of the Borrower provided such final official statement or private placement memorandum is filed with the MSRB or filed with the Securities and Exchange Commission. The Borrower reserves the right to modify from time to time the specific types of information provided or the format of the presentation of such information, to the extent necessary or appropriate in the judgment of the Borrower; provided that, the Borrower agrees that any such modification will be done in a manner consistent with the Rule. SECTION 11.3. BORROWER TO PROVIDE INFORMATION TO TRUSTEE. Notwithstanding the foregoing, the Borrower shall provide all of the filings and information required by Section 11.2 hereof to the Trustee for filing with the appropriate repositories. Such information shall be provided to the Trustee at least five Business Days prior to the date such information is required to be submitted to the repositories, in the case of annual filings. The Trustee shall notify the Issuer and the Borrower if such annual information is not received by the date required. Additionally, the Trustee shall notify the NRMSIRs and the SID, if any, of such failure. The 31 Trustee is acting solely as a dissemination agent with respect to its duties under this Section on behalf of the Issuer and the holders and beneficial owners of the Bonds and shall not be considered to be the agent of the Borrower when performing any actions required to be taken by the Trustee under this Section. The Trustee shall not have any obligation under this Section to investigate or determine whether any filing made under this Agreement complies with federal securities laws or rules. Promptly upon receipt of any filings by the Borrower, the Trustee shall distribute such filings to the NRMSIRs, SID and MSRB, as the case may be, as set forth in Section 11.2 hereof. SECTION 11.4. ISSUER NOT OBLIGATED. The Borrower acknowledges and agrees that the Issuer is not an "obligated person" (as defined in the Rule) with respect to the Bonds and represents that the Borrower is the only obligated person with respect to the Bonds. Notwithstanding any other provision of this Agreement, any failure by the Borrower to comply with any provisions of Section 11.1 and Section 11.2 shall not be a failure or a default, or an Event of Default, under this Agreement or the Trust Indenture. 32 IN WITNESS WHEREOF, the parties hereto have caused this Financing Agreement to be executed by their duly authorized representatives as of the date of execution set forth below. [SEAL] HOUSING FINANCE AUTHORITY OF BROWARD CO, FLORIDA ATTEST: By: /s/ (illegible) -------------------------------- Title: Chairman /s/ Daisy Mallard - ------------------------------ Secretary OTC APARMENTS LIMITED PARTNERSHIP By: /s/ H. Alcock -------------------------------- Title: Vice President, AIMCO/OTC QRS, Inc, General Partner THE BANK OF NEW YORK By: The Bank of New York Trust Company of Florida, N.A., as agent By: /s/ Elizabeth Flynn -------------------------------- Authorized Signatory 33 EX-10.91 33 EXHIBIT 10.91 BOARDWALK MULTIFAMILY NOTE US $9,870,000.00 Tampa Florida -------------- --------------- City As of July 1, 1996 FOR VALUE RECEIVED, the undersigned promise to pay HOUSING FINANCE AUTHORITY OF BROWARD COUNTY, FLORIDA or order, the principal sum of NINE MILLION EIGHT HUNDRED SEVENTY THOUSAND AND NO/100 Dollars, with interest on the unpaid principal balance from the date of this Note, until paid, at the rate of 6.90 percent per annum. The principal and interest shall be payable at c/o GMAC COMMERCIAL MORTGAGE CORPORATION, 650 Dresher Road, Horsham, PA 19044 or such other place as the holder hereof may designate in writing, in consecutive monthly installments of SEVENTY-FIVE THOUSAND NINE HUNDRED THIRTY AND 68/100 Dollars (US $75,930.68) on the first day of the month beginning August 1, 1996, (herein "amortization commencement date"), until the entire indebtedness evidenced hereby is fully paid, except that any remaining indebtedness, if not sooner paid, shall be due and payable on July 1, 2016. If any installment under this Note is not paid when due, the entire principal amount outstanding hereunder and accrued interest thereon shall at once become due and payable, at the option of the holder hereof. The holder hereof may exercise this option to accelerate during any default by the undersigned regardless of any prior forbearance. In the event of any default in the payment of this Note, and if the same is referred to an attorney at law for collection or any action at law or in equity is brought with respect hereto, the undersigned shall pay the holder hereof all expenses and costs, including, but not limited to, attorney's fees. If any installment under this Note is not received by the holder hereof within four (4) calendar days after the installment is due, the undersigned shall pay the holder hereof a late charge of five (5) percent of such installment, such late charge to be immediately due and payable without demand by the holder hereof. If any installment under this Note remains past due for thirty (30) calendar days or more, the outstanding principal balance of this Note shall bear interest during the period in which the undersigned is in default at a rate of 10.90 percent per annum, or, if such increased rate of interest may not be collected from the undersigned under applicable law, then at the maximum increased rate of interest, if any, which may be collected from the undersigned under applicable law. From time to time, without affecting the obligation of the undersigned or the successors or assigns of the undersigned to pay the outstanding principal balance of this Note and observe the covenants of the undersigned contained herein, without affecting the guaranty of any person, corporation, partnership or other entity for payment of the outstanding principal balance of this Note, without giving notice to or obtaining the consent of the undersigned, the successors or assigns of the undersigned or guarantors, and without liability on the part of the holder hereof, the holder hereof may, at the option of the holder hereof, extend the time for payment of said outstanding principal balance or any part thereof, reduce the payments thereon, release anyone liable on any of said outstanding principal balance, join in any extension or subordination agreement, release any security given herefor, take or release other or additional security, and agree in writing with the undersigned to modify the rate of interest or period of amortization of this Note or change the amount of the monthly installments payable hereunder. Presentment, notice of dishonor, and protest are hereby waived by all makers, sureties, guarantors and endorsers hereof. This Note shall be the joint and several obligation of all makers, sureties, guarantors and endorsers, and shall be binding upon them and their successors and assigns. The indebtedness evidenced by this Note is secured by a Mortgage dated as of even date herewith and reference is made thereto for rights as to acceleration of the indebtedness evidenced by this Note. This Note shall be governed by the law of the jurisdiction in which the Property subject to the Mortgage is located. THIS MULTIFAMILY NOTE HAS BEEN AMENDED AND SUPPLEMENTED IN CERTAIN RESPECTS AS SET FORTH IN (i) THE ADDENDUM TO MULTIFAMILY NOTE AND (ii) THE SUPPLEMENTAL ADDENDUM TO MULTIFAMILY NOTE (COLLECTIVELY, THE "ADDENDA"), ANNEXED HERETO AND INCORPORATED HEREIN BY THIS REFERENCE. IN THE EVENT OF ANY INCONSISTENCY BETWEEN THE PRINTED PORTIONS OF THIS MULTIFAMILY NOTE AND PROVISIONS OF THE ADDENDA, THE PROVISION OF THE ADDENDA SHALL CONTROL. BORROWER: OTC APARTMENTS LIMITED PARTNERSHIP, a Florida limited partnership By: AIMCO/OTC QRS, Inc., a Delaware corporation, its sole General Partner By: /s/ Harry Alcock (SEAL) ---------------------------- Harry Alcock Vice President Pay to the order of GMAC COMMERCIAL MORTGAGE CORPORATION, without recourse. HOUSING FINANCE AUTHORITY OF BROWARD COUNTY, FLORIDA By: /s/ Albert Cohen ----------------------- Name: Albert Cohen Title: Chairman Pay to the order of FEDERAL NATIONAL MORTGAGE ASSOCIATION, without recourse. GMAC COMMERCIAL MORTGAGE CORPORATION a California corporation By: /s/ Karen M. Nee ---------------------- Karen M. Nee Senior Vice President EX-10.92 34 EXHIBIT 10.92 ADDENDUM TO MULTIFAMILY NOTE THIS ADDENDUM TO MULTIFAMILY NOTE (the "Addendum") is made as of the 1st day of July, 1996 and is incorporated into and shall be deemed to amend and supplement the Multifamily Note (the "Multifamily Note") made by the undersigned (the "Borrower") to HOUSING FINANCING AUTHORITY OF BROWARD COUNTY, FLORIDA and its successors, assigns and transferees (the "Lender"), dated as of the same date as this Addendum (the Multifamily Note as amended and supplemented by this Addendum, any other addendum to the Multifamily Note, and any future amendments to the Multifamily Note is referred to as the "Note"). The debt evidenced by the Note is secured by a Multifamily Mortgage as the same date (the "Multifamily Instrument"), covering the property described in the Multifamily Instrument and defined therein as the "Property," located at: 8650 N.W. 61st Street, Tamarac, Broward County, Florida - -------------------------------------------------------------------------------- (Property Address) This Property is located entirely within the State of Florida [INSERT NAME OF STATE IN WHICH THE PROPERTY IS LOCATED] (the "Property Jurisdiction"). The Multifamily Instrument is amended and supplemented by the Rider to Multifamily Instrument (the "Rider") and any other rider to Multifamily Instrument given by Borrower to Lender and dated the same date as the Multifamily Instrument. (The Multifamily Instrument as amended and supplemented by the Rider and any other rider to the Multifamily Instrument and any future amendments to the Instrument is referred to as the "Instrument".) The term "Loan Documents" when used in this Addendum shall mean, collectively, the following documents: (i) the Instrument, (ii) the Note, and (iii) all other documents or agreements, including any Collateral Agreements (as defined in the Rider) or O&M Agreement (as defined in the Rider), arising under, related to, or made in connection with, the loan evidenced by the Note, as such Loan Documents may be amended. The covenants and agreements of this Addendum, and the covenants and agreements of any other addendum to the Multifamily Note, shall be incorporated into and shall amend and supplement the covenants and agreements of the Multifamily Note as if this Addendum and the other addenda were a part of the Multifamily Note, and all references to the Note in the Loan Documents shall mean the Note as so amended and supplemented. Any conflict between the provisions of the Multifamily Note and this Addendum shall be resolved in favor of this Addendum. ADDITIONAL COVENANTS. In addition to the covenants and agreements made in the Multifamily Note Borrower and Lender further covenant and agree as follows: A. PREPAYMENTS SEE SUPPLEMENTAL ADDENDUM TO MULTIFAMILY NOTE ATTACHED HERETO AND MADE A PART HEREOF. SEE SUPPLEMENTAL ADDENDUM TO MULTIFAMILY NOTE ATTACHED HERETO AND MADE A PART HEREOF. 3. PARTIAL PREPAYMENTS ADDENDUM TO MULTIFAMILY NOTE WITH SEPARATE EXCEPTIONS TO NON-RECOURSE GUARANTY FORM 4156 6/93 PAGE 1 OF 4 Fannie Mae Pool No. SEE SUPPLEMENTAL ADDENDUM TO MULTIFAMILY NOTE ATTACHED HERETO AND MADE A PART HEREOF. 4. PREMIUM DUE WHETHER VOLUNTARY OR INVOLUNTARY PREPAYMENT; INSURANCE AND CONDEMNATION PROCEEDS. Borrower shall pay the prepayment premium due under paragraph B of the Supplemental Addendum to whether the prepayment is voluntary or involuntary (in connection with Lender's acceleration of the unpaid principal balance of the Note) or the Instrument is satisfied or released by foreclosure (whether by power of sale or judicial proceeding), deed in lieu of foreclosure or by any other means. Notwithstanding any other provision herein to the contrary, Borrower shall not be required to pay any prepayment premium in connection with any prepayment occurring as a result of the application of insurance proceeds or condemnation awards under the Instrument. 5. NOTICE; BUSINESS DAY Any notice to Lender provided for in this Addendum shall be given in the manner provided in the Instrument. The term "Business Day" shall have the meaning ascribed thereto in the Supplemental Addendum to Multifamily Note attached hereto and made a part hereof. B. BORROWER'S EXCULPATION * The Multifamily Note attached hereto and made a part hereof. ** The liability of Borrower and any general partner of Borrower (if Borrower is a partnership) shall be limited to the same extent as provided in Section 3.11 of that certain Master Reimbursement Agreement between Borrower and the Federal National Mortgage Association as of even date herewith. Form 4156 6/93 Page 2 of 4 D. BUSINESS, COMMERCIAL OR INVESTMENT PURPOSE Borrower represents that the Loan evidenced by the Note is being made solely for business, commercial or investment purposes. E. GOVERNING LAW SEE SUPPLEMENTAL ADDENDUM F. SUCCESSORS AND ASSIGNS The provisions of the Note, the Instrument, and all other Loan Documents shall be binding on the successor and assigns, including, but not limited to, any receiver, trustee, representative or other person appointed under foreign or domestic bankruptcy, receivership, or similar proceedings of Borrower and any person having an interest in Borrower. Form 4156 6/93 Page 3 of 4 G. NO THIRD PARTY BENEFICIARY Borrower acknowledges and agrees that (i) any loss sharing arrangement or arrangement for interim advancement of funds that originally is made by the Lender named in the Note to Federal National Mortgage Association is made pursuant to a contractual obligation of such Lender to Federal National Mortgage Association that is independent of, and separate and distinct from, the obligation of Borrower for the full and prompt payment of the indebtedness evidenced by the Note, (ii) Borrower shall not be deemed to be a third party beneficiary of such loss sharing arrangement or arrangement for interim advancement of funds, and (iii) no such loss sharing or interim advancement arrangement shall constitute any person or entity making such payment as a guarantor or surety of the Borrower's obligations, notwithstanding the fact that the obligations under any such loss sharing or interim advancement arrangement may be calculated with reference to amounts payable under the Note or other Loan Documents. [For purposed of this paragraph G, all references to "Lender" shall mean and refer to GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation.] BY SIGNING BELOW, Borrower accepts and agrees to the covenants and agreements contained in this Addendum. BORROWER: OTC APARTMENTS LIMITED PARTNERSHIP, a Florida limited partnership By: AIMCO/OTC ORS, INC., a Delaware corporation, its sole General Partner By: /s/ Harry Alcock (SEAL) ------------------------- Name: Harry Alcock Title: Vice President Form 4156 6/93 Page 4 of 4 EX-10.93 35 EXHIBIT 10.93 SUPPLEMENTAL ADDENDUM TO MULTIFAMILY NOTE THIS SUPPLEMENTAL ADDENDUM TO MULTIFAMILY NOTE (the "Supplemental Addendum") is made as of the 1st day of July, 1996, and is incorporated into and shall be deemed to amend and supplement the Multifamily Note (the "Multifamily Note") as amended by the Addendum to Multifamily Note dated as of even date herewith (the "Addendum"), made by the undersigned (the "Borrower"), to HOUSING FINANCE AUTHORITY OF BROWARD COUNTY, FLORIDA and its successors, assigns and transferees (the "Lender"), dated as of the same date as this Supplemental Addendum (the Multifamily Note as amended and supplemented by the Addendum and this Supplemental Addendum, any other addendum to the Multifamily Note, and any future amendments to the Multifamily Note is hereinafter referred to as the "Note"). The debt evidenced by the Note is secured by a Multifamily First Mortgage as of the same date as amended and supplemented as described below (the "Multifamily Instrument"), covering the property described in the Multifamily Instrument and defined therein as the "Property" located at: 8650 N.W. 61st Street, Tamarac, Broward County, Florida - -------------------------------------------------------------------------------- [Property Address] The Property is located entirely within the State of Florida (the "Property Jurisdiction"). The Multifamily Instrument is amended and supplemented by the Rider to Multifamily Instrument (the "Rider"), the Supplemental Rider to Multifamily Instrument (the "Supplemental Rider") and any other rider to Multifamily Instrument given by Borrower to Lender and dated as of the same date as the Multifamily Instrument. (The Multifamily Instrument as amended and supplemented by the Rider, the Supplemental Rider and any other riders to the Multifamily Instrument and any future amendments to the Multifamily Instrument is referred to as the "Instrument".) The term "Loan Documents" when used in this Supplemental Addendum shall mean, collectively, the following documents: (i) the Instrument; (ii) the Note; and (iii) all other documents or agreements, including any Collateral Agreements (as defined in the Rider) or O&M Agreements (as defined in the Rider), arising under, related to, or made in connection with, the loan evidenced by the Note, as such loan documents may be amended from time to time. The covenants and agreements of this Supplemental Addendum, and the covenants and agreements of any other addendum to the Multifamily Note, shall be incorporated into and shall amend and supplement the covenants and agreements of the Multifamily Note as if this Supplemental Addendum and the other addenda were a part of the Multifamily Note and all references to the Note in the Loan Documents shall mean the Note as so amended and supplemented. Any conflict between the provisions of the Note, the Addendum and this Supplemental Addendum shall be resolved in favor of this Supplemental Addendum. ADDITIONAL COVENANTS. In addition to the covenants and agreement made in the Note, Borrower and Lender further covenant and agree as follows: A. NOTICE; DEFINITIONS Any notice to Lender provided for in this Supplemental Addendum shall be given in the manner provided in the Instrument. The terms used in this Supplemental Addendum shall have the following meanings: "BONDS" shall mean the $9,870,000 Housing Finance Authority of Broward County, Florida Multi-family Housing Revenue Refunding Bonds (Boardwalk Apartments Project) Series 1996. "BUSINESS DAY" shall mean any day other than a Saturday, a Sunday, a day on which the principal office of Fannie Mae is not open for business, a day on which banks in the city in which the principal office of the Trustee is located are authorized or obligated by law or executive order to close, or a day on which the New York Stock Exchange is closed. "FANNIE MAE" means the Federal National Mortgage Association, a corporation organized and existing under the laws of the United States. "FINANCING AGREEMENT" means the Financing Agreement, dated as of June 15, 1996, as amended, supplemented, modified or restated from time to time, among the Issuer, the Trustee and the Borrower. "INDENTURE" shall mean the Indenture of Trust, dated as of June 15, 1996, as amended, supplemented, modified or restated from time to time, between the Issuer and the Trustee pursuant to which the Bonds are issued. "INSTRUMENT" shall mean the Multifamily First Mortgage, Assignment of Rents and Security Agreement (together with any riders thereto) securing the indebtedness evidenced by the Note. "ISSUER" shall mean the Housing Finance Authority of Broward County, Florida. "PASS-THROUGH CERTIFICATE" means the Guaranteed Mortgage Pass-through Certificate issued by Fannie Mae as contemplated in the Indenture. "REGULATORY AGREEMENT" shall mean the Amended and Restated Regulatory Agreement and Agreement of Deed Restrictions, dated as of June 15, 1996, as amended, supplemented, modified or restated from time to time, among the Issuer, the Trustee and Borrower. "REIMBURSEMENT AGREEMENT" shall mean the Master Reimbursement Agreement, dated as of July 1, 1996, as amended, supplemented, modified or restated from time to time, between Borrower and Fannie Mae. "TRUSTEE" shall mean The Bank of New York, as Trustee, or any successor thereto serving as the Trustee for the Bonds. B. FULL PREPAYMENT The Note may not be prepaid except as expressly provided in this Supplemental Addendum and in the Addendum. (a) No prepayments, in whole or in part (except from condemnation awards or insurance proceeds), are permitted prior to the last Business Day of June, 2006. Thereafter, prepayments are permitted at such times as hereinafter expressly provided. If, however, the Note is prepaid for any reason prior to the last Business Day of June, 2006, including without limitation a prepayment arising because of an acceleration of the Note, Borrower shall pay, in addition to paying the entire unpaid principal balance, interest accrued thereon to the first day of the month following the date of such prepayment and any other sums due Lender at the time of prepayment, a prepayment premium equal to the following percentage of the entire unpaid principal balance of the Note at the time of such prepayment: First Loan Year 5.670 Second Loan Year 5.243 Third Loan Year 4.789 Fourth Loan Year 4.307 Fifth Loan Year 3.796 Sixth Loan Year 3.254 Seventh Loan Year 2.678 -2- Eighth Loan Year 2.067 Ninth Loan Year 1.418 Tenth Loan Year 0.730 Each Loan Year ends the day before an anniversary date of the Note. No prepayment premium shall be due under the Note for any prepayment made on or after the last Business Day of Tenth Loan Year (i.e., on or after the last Business Day of June, 2006). Any prepayment premium due as herein provided does not include any premium due upon redemption of the Bonds as provided in the Indenture, which must be paid to the Trustee. (b) Borrower shall, upon the direction of the holder hereof, prepay the Note (in whole or in part) on the last Business Day before a scheduled monthly payment date designated by the holder hereof (i) after a default under the Note, the Instrument or any other Loan Documents, in an amount equal to the amount of funds (if any) held by Lender pursuant to any Collateral Agreement (as defined in Uniform Covenant 2B of the Instrument) which the Lender shall elect to apply against the indebtedness secured by the Instrument, or (ii) in any amount equal to the amount of any insurance proceeds or condemnation awards which the Lender shall elect to apply to the indebtedness secured by the Instrument under the circumstances permitting such application as set forth in the Instrument. In the event that Lender shall require a partial prepayment of the outstanding indebtedness pursuant to subparagraph (b)(i) above, or if Lender shall for any other reason accept a partial prepayment by Borrower of the outstanding indebtedness, the prepayment premium specified in paragraph (a) above shall be paid by Borrower based upon the principal amount being prepaid. (c) On or after the last Business Day of June, 2006, Borrower may, at the option of the Borrower, make a voluntary prepayment of the Note, in whole (but not in part without the prior written consent of the holder), on the last Business Day of the second month preceedinq any date on which the Bonds are subject to optional redemption under the Indenture, upon payment of an amount equal to 100% of the principal amount to be prepaid, together with interest accrued thereon to the first day of the month following the date of such prepayment and any other sums due Lender at the time of such prepayment; provided, however, that as a prerequisite to the right to make any such voluntary prepayment, Borrower shall give written notice to Lender and to the Trustee at least sixty (60) days prior to such prepayment, which notice shall state the date of such prepayment, the amount of principal to be prepaid, the amount of interest accrued and the amount of other sums due Lender at the time of such prepayment; and provided, further, that, as a condition to its acceptance of the prepayment, Lender shall have been provided with a certificate of the Trustee to the effect that the Trustee holds on deposit Eligible Funds (as defined in the Indenture) that are both sufficient and available under the terms of the Indenture for payment of any premium, costs and expenses required to be paid in connection with the redemption of the Bonds to be redeemed as a result of the prepayment hereunder. (d) In addition and not in limitation of the foregoing prepayment provisions, Borrower must satisfy the applicable conditions set forth in Section 4.3 of the Reimbursement Agreement with respect to release of the Property from the lien of the Instrument in connection with any full prepayment of the Note. C. PARTIAL PREPAYMENTS Any partial prepayments of principal of the Note (following the last Business Day of June, 2006 or from condemnation awards or insurance proceeds) shall be applied against the outstanding principal balance of the Note and shall not extend or postpone the due date of any subsequent monthly installments, except as hereinafter provided. The amount of any -3- such subsequent monthly installments shall be decreased as necessary to amortize the remaining principal balance hereof at the interest rate then in effect hereunder over a period equal to 360 months minus the number of months in which regularly scheduled monthly installments of principal and interest shall have previously become due from and including the amortization commencement date; provided, however, that all indebtedness evidenced by the Note shall be due and payable on the maturity date set forth in the Note, if not sooner paid. D. CROSS-DEFAULT The failure by Borrower to pay when due any amount payable under the Note, the Instrument or any other Loan Document or the failure (beyond applicable cure periods, if any) by the Borrower to perform or observe any other covenant or obligation of the Borrower contained in (a) the Note, the Instrument or any other Loan Document, (b) any of the documentation relating to the Bonds, including without limitation the Financing Agreement, (c) any subordinate financing, (d) the Regulatory Agreement, (e) the Reimbursement Agreement, or (f) any form of public, quasi-public, public/private or private debt and/or equity infusion, grant, subsidy, tax relief or abatement plan, program or other form of assistance shall, at Lender's option, in its discretion, constitute a default under the Note, the Instrument and each of the other Loan Documents. Any such default shall: (i) entitle Lender, at its option and in its discretion, to invoke any of the remedies set forth in paragraph 27 of the Instrument or as otherwise afforded by law or in equity; and (ii) at Fannie Mae's option, in its discretion, constitute an "Event of Default" under and in accordance with the terms of the Reimbursement Agreement. Notwithstanding anything herein to the contrary, the provisions of clause(e) and/or clause (ii) above of this Paragraph D shall become null and void and of no further force or effect upon: (i) a transfer of the Property and assumption of the Note pursuant to Section 4.5 of the Reimbursement Agreement; and (ii) written notice from Fannie Mae to the Borrower and the "Permitted Transferee" (as defined in the Reimbursement Agreement) confirming that such provisions are of no further force or effect. E. ASSIGNMENT TO FANNIE MAE In the event the Note is assigned to Fannie Mae on a day other than the first day of a month, Borrower shall nevertheless pay to Fannie Mae, in full, the next installment of principal, if any, and interest on the first day of the succeeding month, including an amount equal to one full month's interest, without regard to any payment which Borrower may have made to any other party with respect to the month within which the assignment occurs. F. CHOICE OF LAW; CONSENT TO JURISDICTION. The provisions of Section 7.8 and Section 7.9 of the Reimbursement Agreement are hereby incorporated by reference herein as if fully set forth herein. -4- BY SIGNING BELOW, Borrower accepts and agrees to the covenants and agreements contained in this Supplemental Addendum to Multifamily Note. OTC APARTMENTS LIMITED PARTNERSHIP, a Florida limited partnership By: AIMCO/OTC QRS, INC., a Delaware corporation, its sole General Partner By: /s/ Harry Alcock -------------------------------- Harry Alock Vice President -5- EX-10.94 36 EXHIBIT 10.94 SPACE ABOVE THIS LINE FOR RECORDER'S USE - -------------------------------------------------------------------------------- This instrument was prepared by and when recorded, mail to: Allan R. Winn, Esq. BALLARD SPAHR ANDREWS & INGERSOLL 555 13TH Street, N.W., Suite 900 East Washington, D.C. 20004 MULTIFAMILY MORTGAGE, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT THIS MORTGAGE (herein "Instrument") is made as of the 1st day of August 1996, between the Mortgagor/Grantor, OTC APARTMENTS LIMITED PARTNERSHIP, a Florida limited partnership whose address is 1873 South Bellaire Street, 17th Floor, Denver, Colorado 80222 (herein "Borrower"), and the Mortgagee, THE BANK OF NEW YORK, as Trustee, a banking corporation organized and existing under the laws of New York*, whose address is c/o GMAC Commercial Mortgage Corporation, 650 Dresher Road, Horsham, PA 19044 (herein "Lender"). WHEREAS, Borrower is indebted to Lender in the principal sum of SIX MILLION and NO/100 ($6,000,000.00) Dollars, which indebtedness is evidenced by Borrower's note dated as of even date herewith (herein "Note"), providing for monthly installments of principal and interest, with the balance of the indebtedness, if not sooner paid, due and payable on July 1, 2016. TO SECURE TO LENDER (a) the repayment of the indebtedness evidenced by the Note, with interest thereon, and all renewals, extensions and modifications thereof; (b) the payment of all other sums, with interest thereon, advanced in accordance herewith to protect the security of this Instrument; and (c ) the performance of the covenants and agreements of Borrower herein contained, Borrower does hereby mortgage, grant, convey and assign to Lender the following described property located in Pensacola, Escambia County, State of Florida: See EXHIBIT "A" attached hereto and incorporated herein *Not in its individual or corporate capacity but solely as Trustee under an Amended and Restated Trust Indenture dated as of August 1, 1996 with Escambia County Housing Finance Authority. THIS INSTRUMENT IN AMENDED AND SUPPLEMENTED IN CERTAIN RESPECTS AS SET FORTH IN THE RIDER TO MULTIFAMILY INSTRUMENT (the "RIDER") AND THE SPECIAL RIDER TO MULTIFAMILY INSTRUMENT (the "SPECIAL RIDER"), BOTH DATED AS OF THE DATE OF THIS INSTRUMENT, ATTACHED HERETO AND INCORPORATED HEREIN BY THIS REFERENCE. IN THE EVENT OF ANY INCONSISTENCY BETWEEN THE PRINTED PORTIONS OF THIS INSTRUMENT AND THE PROVISIONS OF THE RIDER OR SPECIAL RIDER, THE PROVISIONS OF THE RIDER OR SPECIAL RIDER , AS APPLICABLE, SHALL GOVERN. IN THE EVENT OF ANY INCONSISTENCY BETWEEN THE PROVISIONS OF THE RIDER AND THE PROVISONS OF THE SPECIAL RIDER, THE PROVISIONS OF THE SPECIAL RIDER SHALL GOVERN. PURSUANT TO SECTION 159.621 AND/OR SECTION 420.513 FLORIDA STATUTES, NO FLORIDA DOCUMENTARY STAMP TAXES OR INTANGIBLE TAXES ARE REQUIRED TO BE PAID UPON RECORDING OF THE INSTRUMENT. Return to: Stewart Title of Pensacola, Inc. 401 East Chase St., Suite 104 Pensacola, FL 32501 FLORIDA--Multifamily--1/77--FNMA/FHLMC Uniform Instrument Form 4010 (page 1 of 8 pages) Fannie Mae MBS/DUS Pool No. This Instrument is subordinate in all respects to that certain (first) Mortgage dated as of October 1, 1985 recorded in Official Records Book 2141 at Page 854 and currently held by The Bank of New York, as Trustee (as such mortgage may have been, or may hereafter be, amended, modified, assigned and/or assumed). TOGETHER with all buildings, improvements, and tenements now or hereafter erected on the property, and all heretofore or hereafter vacated alleys and streets abutting the property, and all easements, rights, appurtenances, rents, royalties, mineral, oil and gas rights and profits, water, water rights, and water stock appurtenant to the property, and all fixtures, machinery, equipment, engines, boilers, incinerators, building materials, appliances and goods of every nature whatsoever now or hereafter located in, or on, or used, or intended to be used in connection with the property, including, but not limited to, those for the purposes of supplying or distributing heating, cooling, electricity, gas, water, air and light; and all elevators, and related machinery and equipment, fire prevention and extinguishing apparatus, security and access control apparatus, plumbing, bath tubs, water heaters, water closets, sinks, ranges, stoves, refrigerators, dishwashers, disposals, washers, dryers, awnings, storm windows, storm doors, screens, blinds, shades, curtains and curtain rods, mirrors, cabinets, panelling, rugs, attached floor coverings, furniture, pictures, antennas, trees and plants, and any and all other additional items of personal property described in Exhibit "B" attached hereto and incorporated herein; all of which, including replacements and additions thereto, shall be deemed to be and remain a part of the real property covered by this Instrument; and all the foregoing, together with said property are herein referred to as the "Property". Borrower covenants that Borrower is lawfully seised of the estate hereby conveyed and has the right to mortgage, grant, convey and assign the Property, that the Property in unencumbered, and that Borrower will warrant and defend generally the title to the Property against all claims and demands, subject to any easements and restrictions listed in a schedule of exceptions to coverage in any title insurance policy insuring Lender's interest in the Property. Form 4010 (page 2 of 8 pages) UNIFORM COVENANTS. Borrower and Lender covenant and agree as follows: 1. PAYMENT OF PRINCIPAL AND INTEREST. Borrower shall promptly pay when due the principal of and interest on the indebtedness evidenced by the Note, any prepayment and late charges provided in the Note and all other sums secured by this Instrument. 2. FUNDS FOR TAXES, INSURANCE AND OTHER CHARGES. Subject to applicable law or to a written waiver by Lender. Borrower shall pay to Lender on the day monthly installments of principal or interest are payable under the Note (or on another day designated in writing by the Lender), until the Note is paid in full, a sum (herein "Funds") equal to one-twelfth of (a) the yearly water and sewer rates and taxes and assessments which may be levied on the Property, (b) the yearly ground rents, if any, (c ) the yearly premium installments for fire and other hazard insurance, rent loss insurance and such other insurance covering the Property as Lender may require pursuant to paragraph 5 hereof, (d) the yearly premium installments for mortgage insurance, if any. Any waiver by Lender of a requirement that Borrower pay such Funds may be revoked by Lender, in Lender"s sole discretion, at any time upon notice in writing to Borrower. Lender may require Borrower to pay to Lender, in advance, such other Funds for other taxes, charges, premiums, assessments and impositions in connection with Borrower or the Property which Lender shall reasonably deem necessary to protect Lender's interest (herein "Other Impositions"). Unless otherwise provided by applicable law, Lender may require Funds for Other Impositions to be paid by Borrower in a lump sum or in periodic installments, at Lender's option. The Funds shall be held in an institution(s) the deposits or accounts of which are insured or guaranteed by a Federal or state agency (including Lender if Lender is such an institution). Lender shall apply the funds to pay said rates, rents, taxes, assessments, insurance premiums and Other Impositions so long as Borrower is not in breach of any covenant or agreement of borrower in this Instrument. Lender shall make no charge for so holding and applying the Funds, analyzing said account or for verifying and compiling said assessments and bills, unless Lender pays Borrower interest, earnings or profits on the Funds and applicable law permits Lender to make such a charge. Borrower and Lender may agree in writing at the time of execution of this Instrument that interest on the Funds shall be paid to Borrower, and unless such agreement is made or applicable law requires interest, earnings or profits to be paid, Lender shall not be required to pay Borrower any interest, earnings or profits on the Funds. Lender shall give to Borrower, without charge, an annual accounting of the Funds in Lender's normal format showing credits and debits to the Funds and the purpose for which each debit to the funds was made. The Funds are pledged as additional security for the sums secured by this Instrument. If the amount of the Funds held by Lender at the time of the annual accounting thereof shall exceed the amout deemed necessary by Lender to provide for the payment of water and sewer rates, taxes, assessments, insurance premiums, rents and Other Impositions, as they fall due, such excess shall be credited to Borrower on the next monthly installment or installments of Funds due. If at any time the amount of the Funds held by Lender shall be less than the amount deemed necessary by Lender to pay water and sewer rates, taxes, assessments, insurance premiums, rents and Other Impositions, as they fall due, Borrower shall pay to Lender any amount necessary to make up the deficiency within thirty days after notice from Lender to Borrower requesting payment thereof. Upon Borrower's breech of any covenant or agreement of Borrower in this Instrument, Lender may apply, in any amout and in any order as Lender shall determine in Lender's sole discretion, any Funds held by Lender at the time of application (i) to pay rates, rents, taxes, assessments, insurance premiums and Other Impositions which are now or will hereafter become due, or (ii) as a credit against sums secured by this Instrument. Upon payment in full of all sums secured by this Instrument, Lender shall promptly refund to Borrower any Funds held by Lender. 3. APPLICATION OF PAYMENTS. Unless applicable law provides otherwise, all payments received by Lender from Borrower under the Note or this Instrument shall be applied by Lender in the following order of priority: (i) amounts payable to Lender by Borrower under paragraph 2 hereof; (ii) interest payable on the Note; (iii) principal of the Note; (iv) interest payable on advances made pursuant to paragraph 8 hereof; (v) principal of advances made pursuant to paragraph 8 hereof; (vi) any other sums secured by this Instrument in such order as Lender, at Lender's option, may determine; provided, however, that Lender may at Lender's option, apply any sums payable pursuant to paragraph 8 hereof prior to interest on and principal of the Note, but such application shall not otherwise affect the order of priority of application specified in this paragraph 3. 4. CHARGES; LIENS. Borrower shall pay all water and sewer rates, rents, taxes, assessments, premiums, and Other Impositions attributable to the Property at Lender's option in the manner provided under paragraph 2 hereof or, if not paid in such manner, by borrower making payment, when due, directly to the payee thereof or in such other manner as Lender may designate in writing. Borrower shall promptly furnish to Lender all notices of amounts due under this paragraph 4, and in the event Borrower shall make payment directly, Borrower shall promptly furnish to Lender receipts evidencing such payments. Borrower shall promptly discharge any lien which has, or may have, priority over or equality with, the lien of this Instrument, and Borrower shall pay, when due, the claims of all persons supplying labor or materials to or in connection with the Property. Without Lender's prior written permission, Borrower shall not allow any lien inferior to this Instrument to be perfected against the Property. 5. HAZARD INSURANCE. Borrower shall keep the improvements now existing or hereafter erected on the Property insured by carriers at all times satisfactory to Lender against loss by fire, hazards included within the term "extended coverage", rent loss and such other hazards, casualties, liabilities and contingencies as Lender shall require and in such amounts and for such periods as Lender shall require. All premiums on insurance policies shall be paid, at Lender's option, in the manner provided under paragraph 2 hereof, or by Borrower making payment, when due, directly to the carrier, or in such other manner as Lender may designate in writing. All insurance policies and renewals thereof shall be in a form acceptable to Lender and shall include a standard mortgage clause in favor of and in form acceptable to Lender. Lender shall have the right to hold the policies, and Borrower shall promptly furnish to Lender all renewal notices and all receipts of paid premiums. At least thirty days prior to the expiration date of a policy, Borrower shall deliver to Lender a renewal policy in form satisfactory to Lender. In the event of loss, Borrower shall give immediate written notice to the insurance carrier and to Lender. Borrower hereby authorizes and empowers Lender as attorney-in-fact for Borrower to make proof of loss, to adjust and compromise any claim under insurance policies, to appear in and prosecute any action arising from such insurance policies, to collect and receive insurance proceeds, and to deduct therefrom Lender's expenses incurred in the collection of such proceeds; provided however, that nothing contained in this paragraph 5 shall require Lender to incur any expense or take any action hereunder. Borrower further authorizes Lender, at Lender's option, (a) to hold the balance of such proceeds to be used to reimburse Borrower for the cost of reconstruction or repair of the Property or (b) to apply the balance of such proceeds to the payment of the sums secured by this Instrument, whether or not then due, in the order of application set forth in paragraph 3 hereof. If the insurance proceeds are held by Lender to reimburse Borrower for the cost of restoration and repair of the Property the Property shall be restored to the equivalent of its original condition or such other condition as Lender may approve in writing. Lender may, at Lender's option, condition disbursement of said proceeds on Lender's approval of such plans and specifications of an architect satisfactory to Lender, contractor's cost estimates, architect's certificates, waivers of liens, sworn statements of mechanics and materialmen and such other evidence of costs, percentage completion of construction, application of payments, and satisfaction of liens as Lender may reasonably require. If the insurance proceeds are applied to the payment of the sums secured by this Instrument, any such application of proceeds to principal shall not extend or postpone the due dates of the monthly installments referred to in paragraphs 1 and 2 hereof. If the Property is sold pursuant to paragraph 27 hereof or if Lender acquires title to the Property, Lender shall have all of the right, title and interest of Borrower in and to any insurance policies and unearned premiums thereon and in and to the proceeds resulting from damage to the Property prior to such sale or acquisition. 6. PRESERVATION AND MAINTENANCE OF PROPERTY. Borrower (a) shall not commit waste or permit impairment or deterioration of the Property, (b) shall not abandon the Property, (c ) shall restore or repair promptly and in a good and workmanlike manner all Uniform Covenants--Multifamily--1/77--FNMA/FHLMC Uniform Instrument Form 4010 (page 3 of 8 pages) or any part of the Property to the equivalent of its original condition, or such other condition as Lender may approve in writing, in the event of any damage, injury or loss thereto, whether or not insurance proceeds are available to cover in whole or in part the costs of such restoration or repair, (d) shall keep the Property, including improvements, fixtures, equipment, machinery and appliances thereon in good repair and shall replace fixtures, equipment, machinery and appliances on the Property when necessary to keep such items in good repair, (e) shall comply with all laws, ordinances, regulations and requirements of any governmental body applicable to the Property, (f) shall provide for professional management of the Property by a residential rental property manager satisfactory to Lender pursuant to a contract approved by Lender in writing, unless such requirement shall be waived by Lender in writing, (g) shall generally operate and maintain the Property in a manner to ensure maximum rentals, and (h) shall give notice in writing to Lender of and, unless otherwise directed in writing by Lender, appear in and defend any action or proceeding purporting to affect the Property, the security of this Instrument or the rights or powers of Lender. Neither Borrower nor any tenant or other person shall remove, demolish or alter any improvement now existing or hereafter erected on the Property or any fixture, equipment, machinery or appliance in or on the Property except when incident to the replacement of fixtures, equipment, machinery and appliances with items of like kind. 7. USE OF PROPERTY. Unless required by applicable law or unless Lender has otherwise agreed in writing, Borrower shall not allow changes in the use for which all or any part of the Property was intended at the time this Instrument was executed. Borrower shall not initiate or acquiesce in a change in the zoning classification of the Property without Lender's prior written consent. 8. PROTECTION OF LENDER'S SECURITY. If Borrower fails to perform the covenants and agreements contained in this Instrument, or if any action or proceeding is commenced which affects the Property or title thereto or the interest of Lender therein, including, but not limited to eminent domain, insolvency, code enforcement, or arrangements or proceedings involving a bankrupt or decedent, then Lender at Lender's option may make such appearances, disburse such sums and take such action as Lender deems necessary, in its sole discretion, to protect Lender's interest including, but not limited to, (i) disbursement of attorney's fees, (ii) entry upon the Property to make repairs, (iii) procurement of satisfactory insurance as provided in paragraph 5 hereof. Any amounts disbursed by Lender pursuant to this paragraph 8, with interest thereon, shall become additional indebtedness of Borrower secured by this Instrument. Unless Borrower and Lender agree to other terms of payment, such amounts shall be immediately due and payable and shall bear interest from the date of disbursement at the rate stated in the Note unless collection from Borrower of interest at such rate would be contrary to applicable law, in which event such amounts shall bear interest at the highest rate which may be collected from Borrower under applicable law. Borrower hereby covenants and agrees that Lender shall be subrogated to the lien of any mortgage or other lien discharged, in whole or in part, by the indebtedness secured hereby. Nothing contained in this paragraph 8 shall require Lender to incur any expense or take any action hereunder. 9. INSPECTION. Lender may make or cause to be made reasonable entries upon and inspections of the Property. 10. BOOKS AND RECORDS. The provisions of Section 2.2 (d) of that certain Master Reimbursement Agreement between Borrower and the Federal National Mortgage Association, dated as of July 1, 1996 (the "Reimbursement Agreement") are incorporated herein by this reference as if fully set forth herein. 11. CONDEMNATION. Borrower shall promptly notify Lender of any action or proceeding relating to any condemnation or other taking, whether direct or indirect, of the Property, or part thereof, and Borrower shall appear in and prosecute any such action or proceeding unless otherwise directed by Lender in writing. Borrower authorizes Lender, at Lender's option, as attorney-in-fact for Borrower, to commence, appear in and prosecute, in Lender's or Borrower's name, any action or proceeding relating to any condemnation or other taking of the Property, whether direct or indirect, and to settle or compromise any claim in connection with such condemnation or other taking. The proceeds of any award, payment of claim for damages, direct or consequential, in connection with any condemnation or other taking. The proceeds of any award, payment or claim for damages, direct or consequential, in connection with any condemnation or other taking, whether direct or indirect, of the Property, or part thereof, or for conveyances in lieu of condemnation, are hereby assigned to and shall be paid to Lender. Borrower authorizes Lender to apply such awards, payments, proceeds or damages, after the deduction of Lender's expenses incurred in the collection of such amounts, at Lender's option, to restoration or repair of the Property or to payment of the sums secured by this Instrument, whether or not then due, in the order of application set forth in paragraph 3 hereof, with the balance, if any, to Borrower. Unless Borrower and Lender otherwise agree in writing, any application of proceeds to principal shall not extend or postpone the due date of the monthly installments referred to in paragraphs 1 and 2 hereof. Borrower agrees to execute such further evidence of assignment of any awards, proceeds, damages or claims arising in connection with such condemnation or taking as Lender may require. 12. BORROWER AND LIEN NOT RELEASED. From time to time, Lender may, at Lender's option, without giving notice to or obtaining the consent of Borrower, Borrower's successors or assigns or of any junior lienholder or guarantors, without liability on Lender's part and notwithstanding Borrower's breech of any covenant or agreement of Borrower in this Instrument, extend the time for payment of said indebtedness or any part thereof, reduce the payments thereon, release anyone liable on any of said indebtedness, accept a renewal note or notes therefor, modify the terms and time of payment of said indebtedness, release from the lien of this Instrument any part of the Property, take ore release other or additional security, reconvey any part of the Property, consent to any map or plan of the Property, consent to the granting of any easement, join in any extension or subordination agreement, and agree in writing with Borrower to modify the rate of interest or period of amortization of the Note or change the amount of the monthly installments payable thereunder. Any actions taken by Lender pursuant to the terms of this paragraph 12 covenants of Borrower contained herein, shall not affect the obligation of Borrower's successor or assigns to pay the sums secured by this instrument and to observe the covenants of Borrower contained herein, shall not affect the guaranty of any person, corporation, partnership or other entity for payment of the indebtedness secured hereby, and shall not affect the lien or priority of lien hereof on the Property. Borrower shall pay Lender a reasonable service charge, together with such title insurance premiums and attorney's fees as may be incurred at Lender's option, for any such action if taken at Borrower's request. 13. FORBEARANCE BY LENDER NOT A WAIVER. Any forbearance by Lender in exercising any right or remedy hereunder, or otherwise affected by applicable law, shall not be a waiver of or preclude the exercise of any right or remedy. The acceptance by Lender of payment of any sum secured by this Instrument after the due date of such payment shall not be a waiver of Lender's right to either require prompt payment when due of all other sums so secured or to declare a default for failure to make prompt payment. The procurement of insurance or the payment of taxes or other liens or charges by Lender shall not be a waiver of Lender's right to accelerate the maturity of the indebtedness secured by this Instrument, nor shall Lender's receipt of any awards, proceeds or damages under paragraphs 5 and 11 hereof operate to cure or waive Borrower's default in payment of sums secured by this Instrument. Form 4010 (page 4 of 8 pages) * 1996 (the "Reimbursement Agreement") are incorporated herein by this reference as if fully set forth herein. 14. ESTOPPEL CERTIFICATE. Borrower shall within ten days of a written request from Lender furnish Lender with a written statement, duly acknowledged, setting forth the sums secured by this Instrument and any right of set-off, counterclaim or other defense which exists against such sums and the obligations of this Instrument. 15. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. This Instrument is intended to be a security agreement pursuant to the Uniform Commercial Code for any of the items specified above as a part of the Property which, under applicable law, may be subject to a security interest pursuant to the Uniform Commercial Code, and Borrower hereby grants Lender a security interest in said items. Borrower agrees that Lender may file this Instrument, or a reproduction thereof, in the real estate records or other appropriate index, as a financing statement for any of the items specified above as part of the Property. Any reproduction of this Instrument or of any other security agreement or financing statement shall be sufficient as a financing statement. In addition, Borrower agrees to execute and deliver to Lender, upon Lender's request, any financing statements, as well as extensions, renewals and amendments thereof, and reproductions of this Instrument in such form as Lender may require to perfect a security interest with respect to said items. Borrower shall pay all costs of filing such financing statements and any extensions, renewals, amendments and releases thereof, and shall pay all reasonable costs and expenses of any record searches for financing statements Lender may reasonably require. Without the prior written consent of Lender, Borrower shall not create or suffer to be created pursuant to the Uniform Commercial Code any other security interest in said items, including replacements and additions thereto. Upon Borrower's breach of any covenant or agreement of Borrower contained in this Instrument, including the covenants to pay when due all sums secured by this Instrument, Lender shall have the remedies of a secured party under the Uniform commercial Code and, at Lender's option, may also invoke the remedies provided in paragraph 27 of this Instrument as to such items. In exercising any of said remedies, Lender may proceed against the items of real property and any items of personal property specified above as part of the Property separately or together and in any order whatsoever, without in any way affecting the availability of Lender's remedies under the Uniform Commercial Code or the remedies provided in paragraph 27 of this Instrument. 16. LEASES OF THE PROPERTY. Borrower shall comply with and observe Borrower's obligations as landlord under all leases of the Property or any part thereof. Borrower will not lease any portion of the Property for non-residential use except with the prior written approval of Lender. Borrower, at Lender's request, shall furnish Lender with executed copies of all leases now existing or hereafter made of all or any part of the Property, and all leases now or hereafter entered into will be in form and substance subject to the approval of Lender. All leases of the Property shall specifically provide that such leases are subordinate to this instrument; that the tenant attorns to Lender, such attornment to be effective upon Lender's acquisition of title to the Property; that the tenant agrees to execute such further evidences of attornment as Lender may from time to time request; that the attornment of the tenant shall not be terminated by foreclosure; and that Lender may, at Lender's option, accept or reject such attornments. Borrower shall not, with Lender's written consent, execute, modify, surrender or terminate, either orally or in writing, any lease now existing or hereafter made of all or any part of the Property providing for a term of three years or more, permit an assignment or sublease of such a lease without Lender's written consent, or request or consent to the subordination of any lease of all or any part of the Property to any lien subordinate to this Instrument. If Borrower becomes aware that any tenant proposes to do, or is doing, any act or thing which may give rise to any right of set-off against rent, Borrower shall (i) take such steps as shall be reasonably calculated to prevent the accrual of any right to a set-off against rent, (ii) notify Lender thereof and of the amount of said set-offs, and (iii) within ten days after such accrual, reimburse the tenant who shall have acquired such right to set-off or take such other steps as shall effectively discharge such set-off and as shall assure that rents thereafter due shall continue to be payable without set-off or deduction. SEE SPECIAL RIDER ATTACHED HERETO. Upon Lender's request, Borrower shall assign to Lender, by written instrument satisfactory to Lender, all leases now existing or hereafter made of all or any part of the Property and all security deposits made by tenants in connection with such leases of the Property. Upon assignment by Borrower to Lender of any leases of the Property, Lender shall have all of the rights and powers possessed by Borrower prior to such assignment and Lender shall have the right to modify, extent or terminate such existing leases to execute new leases, in Lender's sole discretion. 17. REMEDIES CUMULATIVE. Each remedy provided in this Instrument is distinct and cumulative to all other rights or remedies under this Instrument or afforded by law or equity, and may be exercised concurrently, independently, or successively, in any order whatsoever. 18. ACCELERATION IN CASE OF BORROWER'S INSOLVENCY. In the event (i) Borrower shall (A) commence a voluntary case under the Federal bankruptcy laws (as now or hereafter in effect), (B) file a petition seeking to take advantage of any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, debt adjustment, winding up or composition or adjustment of debts, (C ) consent to or fail to contest in a timely and appropriate manner any petition filed against it in an involuntary case under such bankruptcy laws or other laws, (D) apply for or consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of a substantial part of its property, domestic or foreign, (E) admit in writing its inability to pay, or generally not be paying, its debts as they become due, (F) make a general assignment for the benefit of creditors, (G) assert that it has no liability or obligations under the Note, this Instrument or any of the other Loan Documents, or (H) take any action for the purpose of effecting any of the foregoing; or (ii) a case or other proceedings shall be commenced against Borrower in any court of competent jurisdiction seeking (A) relief under the Federal bankruptcy laws (as now or hereafter in effect) or under any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, or (B) the appointment of a trustee, receiver, custodian, liquidator or the like of Borrower or of all or a substantial part of the property, domestic or foreign, of Borrower, and any such case or proceeding shall continue undismissed or unstayed for a period of 60 consecutive calendar days, or any order granting the relief requested in any such case or proceeding against Borrower (including an order for relief under such Federal bankruptcy laws) shall be entered, or (iii) there is an attachment, execution or other judicial seizure of any portion of Borrower's property and such seizure is not discharged within ten calendar days, then Lender may, at Lender's option, declare all of the sums secured by this Instrument to be immediately due and payable without prior notice to Borrower, and Lender may invoke any remedies permitted by paragraph 27 of this Instrument. Any attorney's fees and other expenses incurred by Lender in Connection with Borrower's bankruptcy or any of the other aforesaid events shall be additional indebtedness of Borrower secured by this Instrument pursuant to paragraph 8 hereof. 19. TRANSFERS OF THE PROPERTY OR BENEFICIAL INTERESTS IN BORROWER; ASSUMPTION. SEE RIDER ATTACHED HERETO. 20. NOTICE. SEE SPECIAL RIDER ATTACHED HERETO. Form 4010 (page 5 of 8 pages) 21. SUCCESSORS AND ASSIGNS BOUND; JOINT AND SEVERAL LIABILITY; AGENTS; CAPTIONS. The covenants and agreements herein contained shall bind, and the rights hereunder shall inure to, the respective successors and assigns of Lender and Borrower, subject to the provisions of paragraph 19 hereof. All covenants and agreements of Borrower shall be joint and several. In exercising any rights hereunder or taking any actions provided for herein, Lender may act through its employees, agents or independent contractors as authorized by Lender. The captions and headings of the paragraphs of this Instrument are for convenience only and are not to be used to interpret or define the provisions hereof. 22. UNIFORM MULTIFAMILY INSTRUMENT; GOVERNING LAW; SEVERABILITY. This form of multifamily instrument combines uniform covenants for national use and non-uniform covenants with limited variations by jurisdiction to constitute a uniform security instrument covering real property and related fixtures and personal property. This Instrument shall be governed by the laws of the jurisdiction in which the Property is located. In the event that any provision of this Instrument or the Note conflicts with applicable law, such conflict shall not affect other provisions of this Instrument or the Note which can be given effect without the conflicting provision, and to this end the provision of this Instrument and the Note are declared to be severable. In the event that any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower is interpreted so that any charge provided for is this Instrument or in the Note, whether considered separately or together with other charges levied in connection with this Instrument and the Note, violates such law, and Borrower is entitled to the benefit of such law, such charge is hereby reduced to the extent necessary to eliminate such violation. The amounts, if any, previously paid to Lender in excess of the amounts payable to Lender pursuant to such charges as reduced shall be applied by Lender to reduce the principal of the indebtedness evidenced by the Note. For the purpose of determining whether any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower has been violated, all indebtedness which is secured by this Instrument or evidenced by the Note and which constitutes interest, as well as all other charges levied in connection with such indebtedness which constitute interest, shall be deemed to be allocated and spread over the stated term of the Note. Unless otherwise required by applicable law, such allocation and spreading shall be effected in such a manner that the rate of interest computed thereby is uniform throughout the stated term of the Note. 23. WAIVER OF STATUTE OF LIMITATIONS. Borrower hereby waives the right to assert any statute of limitations as a bar to the enforcement of the lien of this Instrument or to any action brought to enforce the Note or any other obligation secured by this Instrument. 24. WAIVER OF MARSHALLING. Notwithstanding the existence of any other security interests in the Property held by Lender or by any other party, Lender shall have the right to determine the order in which any or all of the Property shall be subjected to the remedies provided herein. Lender shall have the right to determine the order in which any or all portion of the indebtedness secured hereby are satisfied from the proceeds realized upon the exercise of the remedies provided herein. Borrower, any party who consents to this Instrument and any party who now or hereafter acquires a security interest in the Property and who has actual or constructive notice hereof hereby waives any and all right to require the marshalling of assets in connection with the exercise of any of the remedies permitted by applicable law or provided herein. 26. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION. As part of the consideration for the indebtedness evidenced by the Note, Borrower hereby absolutely and unconditionally assigns and transfers to Lender all the rents and revenues of the Property, including those now due, past due, or to become due by virtue of any lease or other agreement for the occupancy or use of all or any part of the Property, regardless of to whom the rents and revenues of the Property are payable. Borrower hereby authorizes Lender or Lender's agents to collect the aforesaid rents and revenues and hereby directs each tenant of the Property to pay such rents to Lender or Lender's agents; provided, however, that prior to written notice given by Lender to Borrower of the breach by Borrower of any covenant or agreement of Borrower in this Instrument, Borrower shall collect and receive all rents and revenues of the Property as trustee for the benefit of Lender and Borrower, to apply the rents and revenues so collected to the sums secured by this Instrument in the order provided in paragraph 3 hereof with the balance, so long as no such breach has occurred, to the account of Borrower, it being intended by Borrower and Lender that this assignment of rents constitutes an absolute assignment and not an assignment for additional security only. Upon delivery of written notice by Lender to Borrower of the breach by Borrower of any covenant or agreement of Borrower in this Instrument, and without the necessity of Lender entering upon and taking and maintaining full control of the Property in person, by agent or by a court-appointed receiver, Lender shall immediately be entitled to possession of all rents and revenues of the Property as specified in this paragraph 26 as the same become due and payable, including but not limited to rents then due and unpaid, and all such rents shall immediately upon delivery of such notice be held by Borrower shall contain a statement that Lender exercises its rights to such rents. Borrower agrees that commencing upon delivery of such written notice of Borrower's breach by Lender to Borrower, each tenant of the Property shall make such rents payable to and pay such rents to Lender or Lender's agents on Lender's written demand to each tenant therefor. Delivered to each tenant personally, by mail or by delivering such demand to each rental unit, without any liability on the part of said tenant to inquire further as to the existence of a default by Borrower. Borrower hereby covenants that Borrower has not executed any prior assignment of said rents that remain effect as of the date hereof, that Borrower has not performed, and will not perform, any acts or has not executed, and will not execute, any instrument which would prevent Lender from exercising its rights under this paragraph 26, and that at the time of execution of this Instrument there has been no anticipation or prepayment of any of the rents of the Property for more than two months prior to the due dates of such rents. Borrower covenants that Borrower will not hereafter collect or accept payment of any rents of the Property more than two months prior to the due dates of such rents. Borrower further covenants that Borrower will execute and deliver to Lender such further assignments of rents and revenues of the Property as Lender may from time to time request. Upon Borrower's breach of any covenant or agreement of Borrower in this Instrument, Lender may in person, by agent or by a court-appointed receiver, regardless of the adequacy of Lender's security, enter upon and take and maintain full control of the Property in order to perform all acts necessary and appropriate for the operation and maintenance thereof including, but not limited to, the execution, cancellation or modification of leases, the collection of all rents and revenues of the Property, the making of repairs to the Property and the execution or termination of contracts providing for the management or maintenance of the Property, all on such terms as are deemed best to protect the security of this Instrument. In the event Lender elects to seek the appointment of a receiver for the Property upon Borrower's breach of any covenant or agreement of Borrower in this Instrument, Borrower hereby expressly consents to the appointment of such receiver. Lender or the receiver shall be entitled to receive a reasonable fee for so managing the Property. All rents and revenues collected subsequent to delivery of written notice by Lender to Borrower of the breach by Borrower of any covenant or agreement of Borrower in this Instrument shall be applied first to the cost, if any, of taking control of and managing the Property and collecting rents, including, but not limited to, attorney's fees, receiver's fees, premiums on receiver's bonds, costs of repairs to the Property, premiums on insurance policies, taxes, assessments and other charges on the Property, and the costs of discharging any obligation or liability of Borrower as lessor or landlord of the Property and then to the sums secured by this Instrument. Lender or the receiver shall have access to the books and records used in the operation and maintenance of the Property and shall be liable to account only for those rents actually received. Lender shall not be liable to Borrower, anyone claiming under or through Borrower or anyone having an interest in the Property by reason of anything done or left undone by Lender under this paragraph 26. Form 4010 (page 6 of 8 pages) If the rents of the Property are not sufficient to meet the costs, if any, of taking control of and managing the Property and collecting the rents, any funds expended by Lender for such purposes shall become indebtedness of Borrower to Lender secured by this Instrument pursuant to paragraph 8 hereof. Unless Lender and Borrower agree in writing to other terms of payment, such amounts shall be payable upon notice from Lender to Borrower requesting payment thereof and shall bear interest from the date of disbursement at the rate stated in the Note unless payment of interest at such rate would be contrary to applicable law, in which event such amount shall bear interest at the highest rate which may be collected from Borrower under applicable law. Any entering upon and taking and maintaining of control of the Property by Lender or the receiver and any application of rents as provided herein shall not cure or waive any default hereunder or invalidate any other right or remedy of Lender under applicable law or provided herein. This assignment of rents of the Property shall terminate at such time as this Instrument ceases to secure indebtedness held by Lender. Non-Uniform Covenants. Borrower and Lender further covenant and agree as follows: 27. ACCELERATION; REMEDIES. Upon Borrower's breach of any covenant or agreement of Borrower in this Instrument, including, but not limited to, the covenants to pay when due any sums secured by this Instrument. Lender at Lender's option may declare all of the sums secured by this Instrument to be immediately due and payable without further demand and may foreclosure this Instrument by judicial proceeding and may invoke any other remedies permitted by applicable law or provided herein. Lender shall be entitled to collect all costs and expenses incurred in pursuing such remedies, including, but not limited to, attorney's fees, costs of documentary evidence, abstracts and title reports. 28. RELEASE. Upon payment of all sums secured by this Instrument, Lender shall release this Instrument. Borrower shall pay Lender's reasonable costs incurred in releasing this Instrument. 29. ATTORNEY'S FEES. As used in this Instrument and in the Note, "attorney's fees" shall include attorney's fees, if any, which may be awarded by an appellate court. IN WITNESS WHEREOF, Borrower has executed this Instrument or has caused the same to be executed by its representatives thereunto duly authorized. BORROWER: Signed, Sealed and Delivered OTC APARTMENTS LIMITED PARTNERSHIP, a in the Presence of: Florida limited partnership /s/ Stu By: AIMCO/OTC QRS, INC., a Delaware - --------------------------------- corporation, its sole General Partner /s/ Donna R. Gallup By: /s/ H. Alcock (SEAL) - --------------------------------- --------------------------------- Harry Alcock Vice President BORROWER'S ADDRESS: 1873 South Bellaire Street, 17th Floor Denver, Colorado 80222 Form 4010 (page 7 of 8 pages) ACKNOWLEDGMENT STATE OF COLORADO ) ) ss: COUNTY OF ARAPAHOE ) The foregoing instrument was acknowledged before me this 16th day of August 1996, by Harry Alcock, Vice President of AIMCO/OTC QRS, INC., a Delaware corporation, on behalf of said corporation, the general partner of OTC APARTMENTS LIMITED PARTNERSHIP, a Florida limited partnership. He who is personally known to me/has produced ____________as identification. /s/ Donna R. Gallup ------------------------------------ Printed/Typed Name: Donna R. Gallup ----------------- Notary Public My Commission Expires: April 10, 2000 [NOTARY STAMP] [SEAL OF COLORADO] FLORIDA--Multifamily--1/77--FNMA/FHLMC Uniform Instrument Form 4010 (page 8 of 8 pages) EX-10.95 37 EXHIBIT 10.95 RIDER TO MULTIFAMILY INSTRUMENT THIS RIDER TO MULTIFAMILY INSTRUMENT (the "Rider") is made as of the 1st day of August 1996, and is incorporated into and shall be deemed to amend and supplement the Multifamily Mortgage as of the same date (the "Instrument"), given by the undersigned OTC APARTMENTS LIMITED PARTNERSHIP, a Florida limited partnership (the "Borrower"), to secure Borrower's Multifamily Note as of the same date (the "Note") with Addendum to Multifamily Note as of the same date (the "Addendum") to THE BANK OF NEW YORK, a New York banking corporation, Not in its individual or corporate capacity but solely as Trustee under an Amended and Restated Trust Indenture dated as of August 1, 1996 with Escambia County Housing Finance Authority. c/o GMAC Commercial Mortgage Corporation, 650 Dresher Road, Horsham, PA 19044 [INSERT ADDRESS OF LENDER] and its successors, assigns and transfers (the "Lender"), covering the property described in the Instrument and defined therein as the "Property," located at: 1878 East Nine Mile Road, Pensacola, Escambia County, Florida - -------------------------------------------------------------------------------- [Property Address] The Property is located entirely within the State of Florida - -------------------------------------------------------------------------------- [INSERT NAME OF STATE IN WHICH THE PROPERTY IS LOCATED] (the "Property Jurisdiction"). The term "Loan Documents" when used in this Rider shall mean, collectively, the following documents: (i) the Instrument, as modified by this Rider, the Special Rider to Multifamily Instrument as of even date herewith (the "Special Rider") and any other riders to the Instrument given by Borrower to Lender and covering the Property; (ii) the Note, as modified by the Addendum and any other addendum to the Note; and (iii) all other documents or agreements, including any Collateral Agreements (as defined below) or O&M Agreements (as defined below), arising under, related to, or made in connection with, the loan evidenced by the Note, as such Loan Documents may be amended from time to time. Any conflict between the provisions of the Instrument and the Rider shall be resolved in favor of the Rider. The covenants and agreements of this Rider, and the covenants and agreements of any other riders (including, without limitation, the Special Rider) to the Instrument given by Borrower to Lender and covering the Property, shall be incorporated into and shall amend and supplement the covenants and agreements of the Instrument as if this Rider and the other riders were a part of the Instrument and all references to the Instrument in the Loan Documents shall mean the Instrument as so amended and supplemented. ADDITIONAL COVENANTS. In addition to the covenants and agreements made in the Instrument, Borrower and Lender further covenant and agree as follows: A. FUNDS FOR TAXES, INSURANCE AND OTHER CHARGES Uniform Covenant 2 of the Instrument ("Funds for Taxes, Insurance and Other Charges") is amended to change the title to "Funds for Taxes, Insurance and Other Charges; Collateral Agreements." Existing Uniform Covenant 2 is amended to become Uniform Covenant 2A. The following new Uniform Covenant 2B is added at the end of Uniform Covenant 2A: 2B REPLACEMENT RESERVE AGREEMENT, COMPLETION/REPAIR AGREEMENT, ACHIEVEMENT AGREEMENT AND OTHER COLLATERAL AGREEMENTS (a) REPLACEMENT RESERVE AGREEMENT Borrower shall deposit with Lender the amounts required by the Replacement Reserve and Security Agreement (the "Replacement Reserve Agreement") between Borrower and Lender (if any), dated as of the date of the Note, at the times required by the Replacement Reserve Agreement, and shall perform all other obligations as and when required pursuant to the Replacement Reserve Agreement. (b) COMPLETION/REPAIR AGREEMENT Borrower shall deposit with Lender the amount required by the Completion/Repair and Security Agreement (the "Completion/Repair Agreement") between Borrower and Lender (if any), dated as of the date of the Note, at the time required by the Completion/Repair Agreement, and shall perform all other obligations as and when required pursuant to the Completion/Repair Agreement. (d) COLLATERAL AGREEMENTS As used herein, the term "Collateral Agreement" shall mean any of the Replacement Reserve Agreement, the Completion/Repair Agreement, the Achievement Agreement and any similar agreement which has been entered into between Borrower and Lender in connection with the loan evidenced by the Note. B. APPLICATION OF PAYMENTS Uniform Covenant 3 of the Instrument ("Application of Payments") is amended to add the following sentence at the end thereof: Notwithstanding the preceding sentence, (i) Lender shall be permitted to apply any partial payment received from Borrower in any manner determined by Lender and in any order of priority of application as determined by Lender, in Lender's sole discretion, and (ii) upon any breach of any covenant or agreement of Borrower in the Instrument, the Note or any other Loan Document, Lender shall be permitted to apply any funds held pursuant to RIDER TO MULTIFAMILY INSTRUMENT WITH SEPARATE EXCEPTIONS TO NON-RECOURSE GUARANTY - - Fannie Mae Uniform Instrument Form 4058 6/93 (PAGE 1 OF 8 PAGES) any Collateral Agreement in any manner which is permitted pursuant to such Collateral Agreement and in any order of priority of application as determined by Lender, in Lender's sole discretion. C. HAZARD INSURANCE; RESTORATION OF PROPERTY Uniform Covenant 5 of the Instrument ("Hazard Insurance") is amended to add the following sentence at the end thereof: Lender shall not exercise Lender's option to apply insurance proceeds to the payment of the sums secured by the Instrument if all of the following conditions are met: (i) Borrower is not in breach or default of any provision of the Instrument, the Note or any other Loan Document; (ii) Lender determines that there will be sufficient funds to restore and repair the Property to a condition approved by Lender; (iii) Lender determines that the rental income of the Property, after restoration and repair of the Property to a condition approved by Lender, will be sufficient to meet all operating costs and other expenses, payments for reserves and loan repayment obligations relating to the Property; (iv) Lender determines that restoration and repair of the Property to a condition approved by Lender will be completed prior to the earlier of either (1) the maturity date of the Note or (2) within one year of the date of the loss or casualty to the Property; and (v) Lender determines that upon restoration and repair of the Property, there will not have been a material diminution in the value of the Property since the date immediately preceding the casualty. D. ENVIRONMENTAL HAZARDS PROVISION In addition to Borrower's covenants and agreements under Uniform Covenant 6 of the Instrument ("Preservation and Maintenance of Property; Leaseholds"), Borrower further covenants and agrees that Borrower shall not: (a) cause or permit the presence, use, generation, manufacture, production, processing, installation, release, discharge, storage (including aboveground and underground storage tanks for petroleum or petroleum products), treatment, handling, or disposal of any Hazardous Materials (as defined below) (excluding the safe and lawful use and storage of quantities of Hazardous Materials customarily used in the operation and maintenance of comparable multifamily properties or for normal household purposes) on or under the Property, or in any way affecting the Property or its value, or which may form the basis for any present or future demand, claim or liability relating to contamination, exposure, cleanup or other remediation of the Property or; (b) cause or permit the transportation to, from or across the Property of any Hazardous Material (excluding the safe and lawful use and storage of quantities of Hazardous Materials customarily used in the operation and maintenance of comparable multifamily properties or for normal household purposes); or (c) permit, cause or exacerbate any occurrence or condition on the Property that is or may be in violation of Hazardous Materials Law (as defined below). (The matters described in (a), (b) and (c) above are referred to collectively below as "Prohibited Activities or Conditions.") Except with respect to any matters which have been disclosed in writing by Borrower to Lender prior to the date of the Instrument, or matters which have been disclosed in an environmental hazard assessment report of the Property received by Lender prior to the date of the Instrument, Borrower represents and warrants that it has not at any time caused or permitted any Prohibited Activities or Conditions and to the best of its knowledge, no Prohibited Activities or Conditions exist or have existed on or under the Property. Borrower shall take all appropriate steps (including but not limited to appropriate lease provisions) to prevent its employees, agents, and contractors, and all tenants and other occupants on the Property, from causing, permitting or exacerbating any Prohibited Activities or Conditions. Borrower shall not lease or allow the sublease of all or any portion of the Property for non-residential use to any tenant or subtenant that, in the ordinary course of its business, would cause, permit or exacerbate any Prohibited Activities or Conditions, and all non-residential leases and subleases shall provide that tenants and sub- tenants shall not cause, permit or exacerbate any Prohibited Activities or Conditions. If any Prohibited Activities or Conditions exist on the Property or if Lender shall otherwise require Borrower to do so in writing in accordance with reasonable commercial practices Borrower shall comply in a timely manner with, and cause all employees, agents, and contractors of Borrower and any other persons present on the Property to so comply with, (1) any program of operations and maintenance ("O&M Program") relating to the Property that is acceptable to Lender with respect to one or more Hazardous Materials (which O&M Program may be set forth in an agreement of Borrower (an "O&M Agreement")) and all other obligations set forth in any O&M Agreement or any other remedial action requested by Lender, and (2) all Hazardous Materials Laws. Any O&M Program shall be performed by qualified personnel. All costs and expenses of the O&M Program shall be paid by Borrower, including without limitation Lender's fees and costs incurred in connection with the monitoring and review of the O&M Program and Borrower's performance thereunder. If Borrower fails to timely commence or diligently continue and complete the O&M Program and comply with any O&M Agreement, then Lender may, at Lender's option, declare all of the sums secured by the Instrument to be immediately due and payable, and Lender may invoke any remedies permitted by paragraph 27 of the Instrument. Without limiting the foregoing, Borrower shall take prompt remedial action in the event of the discovery of any Prohibited Activities or Conditions and obtain Lender's prior written approval of such remedial action. Borrower represents that Borrower has not received, and has no knowledge of the issuance of, any claim, citation or notice of any pending or threatened suits, proceedings, orders, or governmental inquiries or opinions involving the Property that allege the violation of any Hazardous Materials Law ("Governmental Actions"). Borrower shall promptly notify Lender in writing of: (i) the occurrence of any Prohibited Activity or Condition on the Property; (ii) Borrower's actual knowledge of the presence on or under any adjoining property of any Hazardous Materials which can reasonably be expected to have a material adverse impact on the Property or the value of the Property, discovery of any occurrence or condition on the Property or any adjoining real property that could cause any restrictions on the ownership, occupancy, transferability or use of the Property under Hazardous Materials Form 4058 6/93 (PAGE 2 OF 8 PAGES) Law. Borrower shall cooperate with any governmental inquiry, and shall comply with any governmental or judicial order which arises from any alleged Prohibited Activities or Conditions; (iii) any Governmental Action: and (iv) any claim made or threatened by any third party against Borrower, Lender, or the Property relating to loss or injury resulting from any Hazardous Materials. Any such notice by Borrower shall not relieve Borrower of, or result in a waiver of any obligation of Borrower under this paragraph D. Borrower shall pay promptly the costs of any environmental audits, studies or investigations (including but not limited to advice of legal counsel) and the removal of any Hazardous Materials from the Property required by Lender as a condition of its consent to any sale or transfer under paragraph 19 of the Instrument of all or any part of the Property or any transfer occurring upon a foreclosure or a deed in lieu of foreclosure or any interest therein, or required by Lender following a reasonable determination by Lender that there may be Prohibited Activities or Conditions on or under the Property. Borrower authorizes Lender and its employees, agents and contractors to enter onto the Property for the purpose of conducting such environmental audits, studies and investigations. Any such costs and expenses incurred by Lender (including but not limited to fees and expenses of attorneys and consultants, whether incurred in connection with any judicial or administrative process or otherwise) which Borrower fails to pay promptly shall become immediately due and payable and shall become additional indebtedness secured by the Instrument pursuant to Uniform Covenant 8 of the Instrument. Borrower shall hold harmless, defend and indemnify Lender and its officers, directors, trustees, employees, and agents from and against all proceedings (including but not limited to Government Actions), claims, damages, penalties, costs and expenses (including without limitation fees and expenses of attorneys and expert witnesses, investigatory fees, and cleanup and remediation expenses, whether or not incurred within the context of the judicial process), arising directly or indirectly from (i) any breach of any representation, warranty, or obligation of Borrower contained in this paragraph D or (ii) the presence or alleged presence of Hazardous Materials on or under the Property. The term "Hazardous Materials," for purposes of this paragraph D, includes petroleum and petroleum products, flammable explosives, radioactive materials (excluding radioactive materials in smoke detectors), polychlorinated biphenyls, lead, asbestos in any form that is or could become friable, hazardous waste, toxic or hazardous substances or other related materials whether in the form of a chemical, element, compound, solution, mixture or otherwise including, but not limited to, those materials defined as "hazardous substances," "extremely hazardous substances," "hazardous chemicals," "hazardous materials," "toxic substances," "solid waste," "toxic chemicals," "air pollutants," "toxic pollutants," "hazardous wastes," "extremely hazardous waste," or "restricted hazardous waste" by Hazardous Materials Law or regulated by Hazardous Materials Law in any manner whatsoever. The term "Hazardous Materials Law," for the purposes of this paragraph D, means all federal, state, and local laws, ordinances and regulations and standards, rules, policies and other binding governmental requirements and any court judgments applicable to Borrower or to the Property relating to industrial hygiene or to environmental or unsafe conditions or to human health including, but not limited to, those relating to the generation, manufacture, storage, handling, transportation, disposal, release, emission or discharge of Hazardous Materials, those in connection with the construction, fuel supply, power generation and transmission, waste disposal or any other operations or processes relating to the Property, and those relating to the atmosphere, soil, surface and ground water, wetlands, stream sediments and vegetation on, under, in or about the Property. The representations, warranties, covenants, agreements, indemnities and undertakings of Borrower contained in this paragraph D shall be in addition to any and all other obligations and liabilities that Borrower may have to Lender under applicable law. The representations, warranties, covenants, agreements, indemnities and undertakings of Borrower contained in this paragraph D shall continue and survive notwithstanding the satisfaction, discharge, release, assignment, termination, subordination or cancellation of the Instrument or the payment in full of the principal of and interest on the Note and all other sums payable under the Loan Documents or the foreclosure of the Instrument or the tender or delivery of a deed in lieu of foreclosure or the release of any portion of the Property from the lien of the Instrument, except with respect to any Prohibited Activities or Conditions or violation of any of the Hazardous Materials Laws which first commences and occurs after the satisfaction, discharge, release, assignment, termination or cancellation of the Instrument following the payment in full of the principal of and interest on the Note and all other sums payable under the Loan Documents or which first commences or occurs after the actual dispossession from the entire Property of the Borrower and all entities which control, are controlled by, or are under common control with the Borrower (each of the foregoing persons or entities is hereinafter referred to as a "Responsible Party") following foreclosure of the Instrument or acquisition of the Property by a deed in lieu of foreclosure. Nothing in the foregoing sentence shall relieve the Borrower from any liability with respect to any Prohibited Activities or Conditions or violation of Hazardous Materials Laws where such Prohibited Activities or Conditions or violation of Hazardous Materials Laws commences or occurs, or is present as a result of, any act or omission by any Responsible Party or by any person or entity acting on behalf of a Responsible Party. Form 4058 6/93 (PAGE 3 OF 8 PAGES) F. TRANSFERS OF THE PROPERTY OR SIGNIFICANT INTERESTS IN BORROWER; TRANSFER FEES SEE SPECIAL RIDER ATTACHED HERETO. Form 4058 6/93 (PAGE 4 OF 8 PAGES) G. NOTICE Form 4058 6/93 (PAGE 5 OF 8 PAGES) H. GOVERNING LAW SEE SPECIAL RIDER ATTACHED HERETO. I. ACCELERATION; REMEDIES Covenant 27 of the Instrument ("Acceleration; Remedies") is amended to add the following at the end of the first paragraph: Upon the breach of any covenant or agreement by Borrower in the Instrument, (including, but not limited to, the covenants to pay when due sums secured by the Instrument) or any other Loan Document, Lender, at Lender's option may, in addition to any remedies specified in this covenant, invoke any other remedies provided in any Collateral Agreement. If Borrower is in default under any promissory note (other than the Note) evidencing a loan (the "Subordinate Loan") secured by a security instrument (other than the Instrument) covering all or any portion of the Property (the "Subordinate Instrument") or under any Subordinate Instrument or other loan document executed in connection with the Subordinate Loan, (and whether or not the Borrower has obtained the prior approval of Lender to the placement of such Subordinate Instrument on the Property) which default remains uncured after any applicable cure period, Borrower also then will be in default under the Note and the Instrument. In that event, the entire unpaid principal balance of the Note, accrued interest and any other sums due Lender secured by the Instrument then will become due and payable, at Lender's option. If Lender exercises this option to accelerate, Lender will do so in accordance with the provisions of the Note and the Instrument, and the Lender may invoke any and all remedies permitted by applicable law, the Note, the Instrument, or any of the other Loan Documents. J. SINGLE ASSET BORROWER SEE SPECIAL RIDER ATTACHED HERETO. K. NON-RECOURSE LIABILITY Form 4058 6/93 (PAGE 6 OF 8 PAGES) The liability of Borrower and any general partner of Borrower (if Borrower is a partnership) shall be limited to the same extent as provided in Section 3.11 of the Reimbursement Agreement. M. Waiver of Jury Trial Borrower (i) covenants and agrees not to elect a trial by jury with respect to any issue arising under any of the Loan Documents triable by a jury and (ii) waives any right to trial by jury to the extent that any such right shall now or hereafter exist. This waiver of right to trial by jury is separately given, knowingly and voluntarily with the benefit of competent legal counsel by the Borrower and this waiver is intended to encompass individually each instance and each issue as to which the right to a jury trial would otherwise accrue. Further, Borrower hereby certifies that no representative or agent of the Lender (including, but not limited to, the Lender's counsel) has represented, expressly or otherwise, to Borrower that Lender will not seek to enforce the provisions of this paragraph M. Form 4058 6/93 (PAGE 7 OF 8 PAGES) BY SIGNING BELOW, Borrower accepts and agrees to the covenants and agreements contained in this Rider. Signed, Sealed and Delivered OTC APARTMENTS LIMITED PARTNERSHIP, a Florida in the Presence of: limited partnership /s/ illegible - ---------------------------- BY: AIMCO/OTC QRS, INC., a Delaware corporation, its sole General Partner /s/ Donna R. Gallup By: /s/ H. Alcock (SEAL) - ---------------------------- -------------------------- Harry Alcock Vice President Form 4058 6/93 (page 8 of 8 pages) EX-10.96 38 EXHIBIT 10.96 SPECIAL RIDER TO MULTIFAMILY INSTRUMENT THIS SPECIAL RIDER TO MULTIFAMILY INSTRUMENT (this "Special Rider") is made as of the 1st day of August, 1996, and is incorporated into and shall be deemed to amend and supplement the Multifamily Mortgage, Assignment of Rents and Security Agreement as of even date herewith (the "Instrument"), given by the undersigned, OTC APARTMENTS LIMITED PARTNERSHIP, a Florida limited partnership (the "Borrower") to THE BANK OF NEW YORK, a New York banking corporation, not in its individual or corporate capacity but solely as Trustee under that certain Amended and Restated Indenture dated as of August 1, 1996 with Escambia County Housing Finance Authority (sometimes herein, the "Trustee"), together with its successors, assigns and transferees (the "Lender"), and covering the property described in the Instrument and located in Escambia County, Florida (the "Property"), as amended by that certain Rider to Multifamily Instrument as of even date herewith (collectively, with this Special Rider and any other riders to the Instrument given by Borrower to Lender and covering the Property, the "Multifamily Instrument"). The Multifamily Instrument secures, among other things, the Note (as defined in the Instrument), and any future addenda, allonges and amendments to the Note, and all obligations owed by Borrower for the payment of $6,000,000.00 in principal, interest thereon, and other amounts as evidenced by and set forth in the Note (the "Mortgage Loan"). The covenants and agreements of this Special Rider, and the covenants and agreements of any other riders to the Instrument, shall be incorporated into and shall amend and supplement the covenants and agreements of the Instrument as if this Special Rider and the other riders were a part of the Instrument, and all references to the Instrument in the Loan Documents shall mean the Instrument as so amended and supplemented. Any conflict between the provisions of the Instrument, as amended by the Rider (as defined in the Instrument) and this Special Rider shall be resolved in favor of this Special Rider. ADDITIONAL COVENANTS. In addition to the covenants and agreements made in the Instrument and the Rider, Borrower and Lender further covenant and agree as follows: A. REGULATORY AGREEMENT. Lender acknowledges and agrees that the operation of the Property will be subject to that certain Land Use Restriction Agreement dated as of October 1, 1985 by and among ESCAMBIA COUNTY HOUSING FINANCING AUTHORITY ("Issuer"), Harbor Federal Savings and Loan Association (the "Letter of Credit Bank"), Aronov Realty Company, Inc. (the "Prior Borrower") and Barnett Banks Trust Company, N.A. (the "Prior Trustee"), as amended by that certain [Amendment to Land Use Restriction Agreement], dated as of August 1, 1996 among the Issuer, the Letter of Credit Bank, the Trustee and the Borrower (collectively, the "Regulatory Agreement") regulating or restricting the use or manner of operation of the Property. B. CROSS DEFAULT. The failure by Borrower to pay when due any amount payable under the Note, the Multifamily Instrument or any other Loan Document or the failure (beyond applicable cure periods, if any) by Borrower to perform or observe any covenant or obligation of Borrower contained in (a) the Note, the Multifamily Instrument or any other Loan Document, (b) any of the documentation relating to the Bonds, including, without limitation, the Financing Agreement, (c) any subordinate financing, (d) the Regulatory Agreement, (e) that certain Master Reimbursement Agreement as of July 1, 1996 by Borrower and Fannie Mae, as the same may be amended, supplemented, modified or restated from time to time (the "Master Reimbursement Agreement"), and (f) any form of public, quasi-public, public/private or private debt and/or equity infusion, grant, subsidy, tax relief or abatement plan, program or other form of assistance, shall, at Lender's option, in its discretion, constitute a default under the Note, the Multifamily Instrument and the other Loan Documents. Any such default shall: (i) entitle Lender, at its option, in its discretion, to invoke any of the remedies set forth in Paragraph 27 of the Instrument or as otherwise afforded by law or equity; and (ii) at Fannie Mae's option, in its discretion, constitute a default under and in accordance with the Master Reimbursement Agreement. Notwithstanding anything herein to the contrary, the provisions of clause (e) and/or clause (ii) above of this Paragraph B shall become null and void and of no further force or effect upon: (i) a transfer of the Property and assumption of the Multifamily Instrument pursuant to Section 4.5 of the Master Reimbursement Agreement; and (ii) written notice from Fannie Mae to the Borrower and the Permitted Transferee (as defined in the Master Reimbursement Agreement) confirming that such provisions are of no further force or effect. C. LEASES. All leases of the residential housing units in the Property must (a) be legally valid, binding and enforceable obligations of the tenants, (b) comply with all applicable laws and (c) satisfy the standards of the Fannie Mae Delegated Underwriting and Servicing Guide in its present form as of the date of any such lease. D. MORTGAGE EXPENSES. Should Lender (or "Servicer", as such term is defined in the Master Reimbursement Agreement) pay any Mortgage Expenses (as hereinafter defined), Borrower shall on demand immediately reimburse Lender (or Lender on behalf of Servicer, as applicable) for the full amount of such Mortgage Expenses paid by Lender (or Servicer, as applicable). For purposes of this paragraph D, "Mortgage Expenses" shall mean the cost of real estate taxes, appraisal fees, insurance fees, legal fees and any other expenses which may be required to maintain the priority of, or to protect or enforce Lender's rights in, the Multifamily Instrument, including (i) fees and expenses of the Servicer which are not paid by Borrower, (ii) fees and expenses paid to maintain in full force and effect or realize the benefit of any insurance with respect to the Multifamily Instrument and (iii) any fees or expenses advanced on behalf of Borrower by Fannie Mae to the Trustee or the Issuer. E. CHARGES; LIENS. Uniform Covenant 4 of the Instrument ("Charges; Liens") is amended to add the following provisions at the end thereof: Provided that Borrower is not in breach of any of its covenants, obligations or agreements under this Instrument and no event of default has occurred and is continuing under the Note or any other Loan Document, Borrower shall not be required to pay or discharge any obligation imposed upon Borrower by this paragraph 4 so long as Borrower has given written notice of the same to Lender and is in good faith and at its sole cost and expense diligently contesting the same or the validity thereof by appropriate legal proceedings, which proceedings must operate to prevent the collection thereof or realization thereon, the sale or forfeiture of the Property or any portion thereof to satisfy the same; provided, however, that during such contest (i) Borrower shall, at the option of Lender, provide security reasonably satisfactory to Lender and sufficient in Lender's reasonable judgment to cover the amount of the contested obligations, with interest on such obligations (to the extent interest would be due the obligee) for that period that such proceedings may reasonably be expected to take, and of any additional interest, charge, fine, penalty, fee or expense arising from or incurred as a result of such contest, (ii) the title company insuring the Property agrees to insure over any potential lien that may result from such contest, and (iii) if at any time the payment of any obligation imposed upon Borrower by this paragraph 4 shall become necessary to prevent (a) the delivery of a tax deed conveying the Property or any portion thereof, or (b) the sale of the tax lien therefor because of non-payment, or (c) the imposition of any penalty, fine, charge, fee, cost or expense on Lender, then Borrower shall pay the same in -2- sufficient time to prevent the occurrence of any of the foregoing. F. CONDEMNATION PROCEEDS; RESTORATION OF PROPERTY. Uniform Covenant 11 of the Instrument ("Condemnation") is amended to add the following provision at the end thereof: Lender shall permit Borrower to apply any such awards, payments, proceeds or damages, after deduction of Lender's expenses incurred in the collection of such amounts, to the payment of repairs to the Property if all of the following conditions are met: (i) Borrower is not in breach or default of any provision of the Instrument, the Note or any other Loan Document; (ii) Lender determines that there will be sufficient funds to restore and repair the Property to a condition approved by Lender; (iii) Lender determines that the rental income of the Property, after restoration and repair of the Property to a condition approved by Lender, will be sufficient to meet all operating costs and other expenses, payments for reserves and loan repayment obligations relating to the Property; (iv) Lender determines that restoration and repair of the Property to a condition approved by Lender will be completed prior to the earlier of either (1) the maturity date of the Note or (2) within one year of the date of the loss or casualty to the Property; and (v) Lender determines that upon the restoration and repair of the Property there will not have been a material diminution in the value of the Property since the date immediately preceding the condemnation. G. LEASES. Uniform Covenant 16 of the Instrument ("Leases of the Property") is modified by adding the phase "entered into hereafter" after the words "All leases of the Property" in the third (3rd) sentence of such Uniform Covenant 16. H. MODIFICATION OF SINGLE ASSET REQUIREMENTS. Paragraph J of the Rider is amended to read as follows: J. Single Purpose Entity. Borrower covenants and agrees that Borrower shall at all times during the term of this Instrument comply with the covenants set forth in Sections 2.2(i) and 2.3(k) of the Master Reimbursement Agreement and that Borrower shall not violate the provisions of subsections 2.3(a)(iii) or 2.3(a)(iv) of the Master Reimbursement Agreement. I. GRANT OF INTEREST IN CERTAIN FUNDS. Without limiting the generality of the first (1st) sentence of Uniform Covenant 15 of the Instrument and pursuant to the Uniform Commercial Code, Borrower hereby grants, pledges and assigns to Lender all of Borrower's right, title and interest in and to all funds and accounts and investments of funds and accounts now or hereafter held by the Trustee pursuant to the Indenture, including any and all loan funds, escrow funds, revenue funds, debt service funds, reserve funds, redemption funds and other funds and securities and other instruments comprising investments of any of the foregoing and interest and other income derived from any of the foregoing, all to be held by Lender in trust in accordance with the terms of the Indenture. J. NOTICES. Uniform Covenant 20 of the Instrument is amended to read as follows: All notices, directions, certificates or other communications hereunder shall be given by certified or registered mail, return receipt requested, OR by overnight courier addressed to the appropriate notice address set forth below. Any of the parties hereto may, by such notice described above, designate any further or different address to which subsequent notices, certificates or other communications shall be sent without any requirement of execution of any amendment to this Instrument. Any such notice, certificate or communication shall be deemed to have -3- been given as of the date of actual delivery or the date of failure to deliver by reason of refusal to accept delivery or changed address of which no notice was given pursuant to this paragraph 20. Unless otherwise directed by Fannie Mae, all notices from Borrower pursuant to this Instrument shall also be given to the Servicer in accordance with this paragraph 20. The notice addresses are as follows: (a) if to Borrower: OTC Apartments Limited Partnership 1873 South Bellaire Street, 17th Floor Denver, Colorado 80222-4348 Attn: Vice Chairman (b) if to Fannie Mae: if by mail or overnight courier: Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attn: Senior Vice President Multifamily Activities if by messenger: Fannie Mae 3939 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attn: Senior Vice President Multifamily Activities in each case, with copies to: Fannie Mae Southwest Regional Office Two Galleria Tower 13455 Noel Road, Suite 600 Dallas, Texas 75240 Attn: Regional Vice President Multifamily Activities and to: Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attn: Multifamily Mortgage Operations Manager, Multifamily Deliveries (c) if to Servicer: GMAC Commercial Mortgage Corporation 650 Dresher Road Horsham, PA. 19044-8015 Attn: Barry Moore K. TRANSFERS OF THE PROPERTY OR INTERESTS IN BORROWER. (a) DEFINITIONS For purposes of this Instrument, the following terms have the respective meanings set forth below: (i) The term "TRANSFER" means (A) a sale, assignment, pledge, transfer or other disposition (whether voluntary or by operation of law) of, or the granting or creating of a lien, encumbrance or security interest in, any of Borrower's estate, rights, title or interest in the Property, or any portion thereof, or (B) a sale, assignment, pledge, transfer or other disposition of any interest in Borrower, its General Partner, AIMCO -4- REIT or in AIMCO OP, or (C) the issuance or other creation of new ownership interests in Borrower, its General Partner, AIMCO REIT or in AIMCO OP, or (D) a merger or consolidation of Borrower, its General Partner, AIMCO REIT or AIMCO OP, or (E) the reconstitution of Borrower, its General Partner, AIMCO REIT or AIMCO OP from one type of entity to another type of entity. (ii) A "CHANGE OF CONTROL" shall mean the earliest to occur of: (A) the date an Acquiring Person becomes (by acquisition, consolidation, merger or otherwise), directly or indirectly, the beneficial owner of more than forty percent (40%) of the total Voting Equity Capital of AIMCO REIT then outstanding, or (B) the date on which AIMCO REIT shall cease to hold (whether directly or indirectly through a wholly owned intermediary entity such as AIMCO-LP, Inc. or AIMCO-GP, Inc.) 50.1% or more of the limited partnership interests in AIMCO OP or (C) the date of which AIMCO REIT shall cease for any reason to own 100% of the Voting Equity Capital (or any other securities) of the General Partner of Borrower, or (D) the replacement (other than solely by reason of retirement at age sixty-five or older, death or disability) of 50% or more of the members of the board of directors (or trustees, if applicable) of AIMCO REIT over a one-year period where such replacement shall not have been approved by a vote of at least a majority of the board of directors (or trustees, if applicable) of AIMCO REIT then still in office who either were members of such board of directors (or trustees, if applicable) at the beginning of such one-year period or whose election as members of the board of directors (or trustees, if applicable) was previously so approved. (iii) An "ACQUIRING PERSON" shall mean a "PERSON" or "GROUP OF PERSONS" within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended; PROVIDED, HOWEVER, that notwithstanding the foregoing, "ACQUIRING PERSON" shall not be deemed to include any member of the Borrower Control Group unless such member has, directly or indirectly, disposed of, sold or otherwise transferred to, or encumbered or restricted (whether by means of voting trust agreement or otherwise) for the benefit of an Acquiring Person, all or any portion of the Voting Equity Capital of AIMCO REIT directly or indirectly owned or controlled by such member or such member directly or indirectly votes all or any portion of the Voting Equity Capital of AIMCO REIT, directly or indirectly, owned or controlled by such member for the taking of any action which, directly or indirectly, constitutes or would result in a Change of Control, in which event such member of the Borrower Control Group shall be deemed to constitute an Acquiring Person to the extent of the Voting Equity Capital of AIMCO REIT owned or controlled by such member. (iv) "BORROWER CONTROL GROUP" shall mean Terry Considine, Peter K. Kompaniez, Richard S. Ellwood, J. Landis Martin, Thomas L. Rhodes and John D. Smith. (v) A "PERSON" shall mean an individual, an estate, a trust, a corporation, a partnership, a limited liability company or any other organization or entity (whether governmental or private). -5- (vi) "SECURITY" shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended. (vii) "VOTING EQUITY CAPITAL" shall mean Securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the board of directors (or Persons performing similar functions). (viii) "AIMCO REIT" shall mean Apartment Investment and Management Company, a corporation organized and existing under the laws of the State of Maryland. (ix) "AIMCO OP" shall mean AIMCO Properties, L.P., a limited partnership organized and existing under the laws of the State of Delaware. (x) "GENERAL PARTNER" shall mean "AIMCO/OTC QRS, INC., a corporation organized and existing under the laws of the State of Delaware. (b) ACCELERATION OF THE LOAN UPON TRANSFERS OF THE PROPERTY OR SIGNIFICANT INTERESTS Subject to clause (c) hereof, Lender may, at Lender's option, declare all sums secured by this Instrument immediately due and payable and Lender may invoke any remedies permitted by paragraph 27 of this Instrument if, without Lender's prior written consent, any of the following shall occur: (i) a Transfer of all or any part of the Property or any interest in the Property; or (ii) a Transfer of any interest in Borrower or the General Partner; or (iii) a Change in Control. (c) NO ACCELERATION OF THE LOAN FOR TRANSFERS CAUSED BY CERTAIN EVENTS Notwithstanding the foregoing provisions of this covenant, Lender shall not be entitled to declare sums secured by this Instrument immediately due and payable or to invoke any remedy permitted by paragraph 27 of this Instrument solely upon the occurrence of any of the following: (i) A Transfer that occurs by inheritance, devise, or bequest or by operation of law upon the death of a natural person who is an owner of an indirect ownership interest in the Borrower. (ii) The grant of a leasehold interest in individual dwelling units for a term of two years or less and leases for commercial uses provided that (A) commercial leases do not exceed 5 percent (5%) of (1) the rentable space of the Property (measured as required by Lender) or (2) the rental income from the Property, (B) no such commercial leasehold interest contains an option to purchase the Property, and (C) all such commercial leasehold interests, in the aggregate, (1) do not adversely affect the value of the Property and (2) are coincidental to the current use of the Property for multifamily residential purposes. (iii) A sale or other disposition of obsolete or worn out personal property which is contemporaneously replaced by comparable personal property of equal or greater value which is free and clear of liens, encumbrances and security interests other than those created by the Loan Documents. -6- (iv) The creation of a mechanic's or materialmen's lien or judgment lien against the Property which is released of record or otherwise remedied to Lender's satisfaction, within thirty (30) days of the date of creation. (v) The grant of an easement, if prior to the granting of the easement Borrower causes to be submitted to Lender all information required by Lender to evaluate the easement, and if Lender determines that the easement will not materially affect the operation of the Property or Lender's interest in the Property and Borrower pays to Lender on demand, all costs and expenses incurred by Lender in connection with reviewing Borrower's request. Lender shall not unreasonably withhold its consent to (A) the grant of a utility easement serving the Property to a publicly operated utility, or (B) the grant of an easement related to expansion or widening of roadways, provided that such easement is in form and substance reasonably acceptable to Lender and does not materially and adversely affect the access, use or marketability of the Property. (vi) The Transfer of shares of common stock, limited partnership interests or other beneficial or ownership interests or other forms of securities in AIMCO REIT or AIMCO OP, and the issuance of all varieties of convertible debt, equity and other similar securities of AIMCO REIT or AIMCO OP, and the subsequent Transfer of such securities; provided, however, that no Change in Control occurs as a result of such Transfer, either upon such Transfer or upon the subsequent conversion to equity of such convertible debt or other securities. (vii) The issuance by AIMCO REIT or AIMCO OP of additional common stock, limited partnership interests or other beneficial or ownership interests, convertible debt, equity and other similar securities, and the subsequent Transfer of such convertible debt or securities; provided, however, that no Change in Control occurs as the result of such Transfer, either upon such Transfer or upon the subsequent conversion to equity of such convertible debt or other securities. (viii) A Transfer that occurs pursuant to Section 4.5 of the Reimbursement Agreement. (ix) A Transfer that occurs pursuant to Section 4.7 of the Reimbursement Agreement. (x) So long as AIMCO REIT owns 100% of the stock of AIMCO-LP, Inc., a Transfer of limited partnership interests that results in AIMCO- LP, Inc. owning not less than 50.1% of the limited partnership interests in AIMCO OP. L. Choice of Law; Consent to Jurisdiction. The provisions of Section 7.8 and 7.9 of the Reimbursement Agreement are hereby incorporated by reference herein as if fully set forth herein. -7- IN WITNESS WHEREOF, the parties hereto have executed this Special Rider or have caused the same to be executed by their respective representatives thereunto duly authorized. BORROWER: Signed, Sealed and OTC APARTMENTS LIMITED PARTNERSHIP, a Delivered in the Florida limited partnership Presence of: By: AIMCO/OTC QRS, INC., a Delaware corporation, its sole General Partner /s/ Illegible - --------------------------- /s/ Donna R. Gallup By: /s/ H. Alcock - --------------------------- ----------------------------------- Harry Alcock Vice President EX-10.97 39 EXHIBIT 10.97 SPACE ABOVE THIS LINE FOR RECORDER'S USE - ------------------------------------------------------------------------------- This instrument was prepared by and when recorded, mail to: Allan R. Winn, Esq. BALLARD SPAHR ANDREWS & INGERSOLL 555 13th Street, N.W., Suite 900 East Washington, D.C. 20004 MULTIFAMILY MORTGAGE, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT THIS MORTGAGE (herein "Instrument") is made as of the 1st day of August 1996, between the Mortgagor/Grantor, OTC APARTMENTS LIMITED PARTNERSHIP, a Florida limited partnership, whose address is 1873 South Bellaire Street, 17th Floor, Denver, Colorado 80222 (herein "Borrower"), and the Mortgagee, FEDERAL NATIONAL MORTGAGE ASSOCIATION ("Fannie Mae"), a federally-chartered and stockholder-owned corporation organized and existing under Federal National Mortgage Association Charter Act, 12 U.S.C. Section 1716 et seq., whose address is c/o GMAC Commercial Mortgage Corporation, 650 Dresher Road, Horsham, PA 19044 (herein "Lender"). WHEREAS, this Instrument is granted for the benefit of Fannie Mae in connection with that certain Master Reimbursement Agreement as of July 1, 1996 between Fannie Mae and Borrower(as the same may be modified, amended, restated or otherwise supplemented from time to time, the "Reimbursement Agreement") pursuant to which Fannie Mae has agreed to extend certain credit enhancement to the Borrower pursuant to certain Related Fannie Mae Pass-Through Certificates and in connection with certain mortgage loans made to Borrower by various issuers. Notwithstanding the use of the term "Lender" in this Instrument, such term shall not be construed to mean or imply that Fannie Mae is the originator of such mortgage loans and the term "Lender" shall mean Fannie Mae as the provider of such credit enhancement and its successors, assigns and transferees. [Capitalized terms not otherwise defined in this Instrument, the Rider or the Special Rider shall have the meanings ascribed thereto in the Reimbursement Agreement]; TO SECURE TO LENDER (a) payment and performance by Borrower of each and every obligation, covenant and agreement of the Borrower contained in the Reimbursement Agreement, including, without limitation, all amounts due Lender as reimbursement for amounts provided by Lender under the Reimbursement Agreement, all as more particularly described in the Reimbursement Agreement [as used in this Instrument, the Rider or the Special Rider, the term "Note" shall mean and refer to the Reimbursement Agreement]; (b) the payment of all other sums, with interest thereon, advanced in accordance herewith to protect the security of this Instrument; and (c) the performance of the covenants and agreements of Borrower contained in this Instrument (collectively, the "Secured Obligations"), Borrower does hereby mortgage, grant, convey and assign to Lender the following described property located in Pensacola, Escambia County, State of Florida: See Exhibit "A" attached hereto and incorporated herein. THIS INSTRUMENT IN AMENDED AND SUPPLEMENTED IN CERTAIN RESPECTS AS SET FORTH IN THE RIDER TO MULTIFAMILY INSTRUMENT (THE "RIDER") AND THE SPECIAL RIDER TO MULTIFAMILY INSTRUMENT (THE "SPECIAL RIDER"), BOTH DATED AS OF THE DATE OF THIS INSTRUMENT, ATTACHED HERETO AND INCORPORATED HEREIN BY THIS REFERENCE. IN THE EVENT OF ANY INCONSISTENCY BETWEEN THE PRINTED PORTIONS OF THIS INSTRUMENT AND THE PROVISIONS OF THE RIDER OR SPECIAL RIDER, THE PROVISIONS OF THE RIDER OR SPECIAL RIDER, AS APPLICABLE, SHALL GOVERN. IN THE EVENT OF ANY INCONSISTENCY BETWEEN THE PROVISIONS OF THE RIDER AND THE PROVISIONS OF THE SPECIAL RIDER, THE PROVISIONS OF THE SPECIAL RIDER SHALL GOVERN. RETURN TO: STEWART TITLE OF PENSACOLA, INC. 401 EAST CHASE ST., SUITE 104 PENSACOLA, FL 32501 FLORIDA--Multifamily--1/77--FNMA/FHLMC UNIFORM INSTRUMENT Form 4010 (page 1 of 8 pages) This Instrument is subordinate in all respects to (i) that certain (first) Mortgage dated as of October 1, 1985 recorded in Official Records Book 2141 at Page 854 and currently held by The Bank of New York, a New York banking corporation, as Trustee (as such mortgage may have been, or may hereafter be, amended, modified, assigned and/or assumed) and (ii) that certain Multifamily [Second]Mortgage Assignment of Rents and Security Agreement dated as of the date hereof and recorded or to be recorded immediately prior to the this Instrument. TOGETHER with all buildings, improvements, and tenements now or hereafter erected on the property, and all heretofore or hereafter vacated alleys and streets abutting the property, and all easements, rights, appurtenances, rents, royalties, mineral, oil and gas rights and profits, water, water rights, and water stock appurtenant to the property, and all fixtures, machinery, equipment, engines, boilers, incinerators, building materials, appliances and goods of every nature whatsoever now or hereafter located in, or on, or used, or intended to be used in connection with the property, including, but not limited to, those for the purposes of supplying or distributing heating, cooling, electricity, gas, water, air and light; and all elevators, and related machinery and equipment, fire prevention and extinguishing apparatus, security and access control apparatus, plumbing, bath tubs, water heaters, water closets, sinks, ranges, stoves, refrigerators, dishwashers, disposals, washers, dryers, awnings, storm windows, storm doors, screens, blinds, shades, curtains and curtain rods, mirrors, cabinets, panelling, rugs, attached floor coverings, furniture, pictures, antennas, trees and plants, and any and all other additional items of personal property described in Exhibit "B" attached hereto and incorporated herein; all of which, including replacements and additions thereto, shall be deemed to be and remain a part of the real property covered by this Instrument; and all the foregoing, together with said property are herein referred to as the "Property". Borrower covenants that Borrower is lawfully seised of the estate hereby conveyed and has the right to mortgage, grant, convey and assign the Property, that the Property in unencumbered, and that Borrower will warrant and defend generally the title to the Property against all claims and demands, subject to any easements and restrictions listed in a schedule of exceptions to coverage in any title insurance policy insuring Lender's interest in the Property. Form 4010 (page 2 of 8 pages) UNIFORM COVENANTS. Borrower and Lender covenant and agree as follows: 1. PAYMENT OF PRINCIPAL AND INTEREST. Borrower shall promptly pay when due the principal of and interest on the indebtedness evidenced by the Note, any prepayment and late charges provided in the Note and all other sums secured by this Instrument. 2. FUNDS FOR TAXES, INSURANCE AND OTHER CHARGES. Subject to applicable law or to a written waiver by Lender, Borrower shall pay to Lender on the day monthly installments of principal or interest are payable under the Note (or on another day designated in writing by the Lender), until the Note is paid in full, a sum (herein "Funds") equal to one-twelfth of (a) the yearly water and sewer rates and taxes and assessments which may be levied on the Property, (b) the yearly ground rents, if any, (c) the yearly premium installments for fire and other hazard insurance, rent loss insurance and such other insurance covering the Property as Lender may require pursuant to paragraph 5 hereof, (d) the yearly premium installments for mortgage insurance, if any. Any waiver by Lender of a requirement that Borrower pay such Funds may be revoked by Lender, in Lender's sole discretion, at any time upon notice in writing to Borrower. Lender may require Borrower to pay to Lender, in advance, such other Funds for other taxes, charges, premiums, assessments and impositions in connection with Borrower or the Property which Lender shall reasonably deem necessary to protect Lender's interests (herein "Other Impositions"). Unless otherwise provided by applicable law, Lender may require Funds for Other Impositions to be paid by Borrower in a lump sum or in periodic installments, at Lender's option. The Funds shall be held in an institution(s) the deposits or accounts of which are insured or guaranteed by a Federal or state agency (including Lender if Lender is such an institution). Lender shall apply the Funds to pay said rates, rents, taxes, assessments, insurance premiums and Other Impositions so long as Borrower is not in breach of any covenant or agreement of Borrower in this Instrument. Lender shall make no charge for so holding and applying the Funds, analyzing said account or for verifying and compiling said assessments and bills, unless Lender pays Borrower interest, earnings or profits on the Funds and applicable law permits Lender to make such a charge. Borrower and Lender may agree in writing at the time of execution of this Instrument that interest on the Funds shall be paid to Borrower, and unless such agreement is made or applicable law requires interest, earnings or profits to be paid, Lender shall not be required to pay Borrower any interest, earnings or profits on the funds. Lender shall give Borrower, without charge, an annual accounting of the Funds in Lender's normal format showing credits and debits to the Funds and the purpose for which each debit to the Funds was made. The Funds are pledged as additional security for the sums secured by this Instrument. If the amount of the Funds held by Lender at the time of the annual accounting thereof shall exceed the amount deemed necessary by Lender to provide for the payment of water and sewer rates, taxes, assessments, insurance premiums, rents and Other Impositions, as they fall due, such excess shall be credited to Borrower on the next monthly installment or installments of Funds due. If at any time the amount of the Funds held by Lender shall be less than the amount deemed necessary by Lender to pay water and sewer rates, taxes, assessments, insurance premiums, rents and Other Impositions, as they fall due. Borrower shall pay to Lender any amount necessary to make up the deficiency within thirty days after notice from Lender to Borrower requesting payment thereof. Upon Borrower's breach of any covenant or agreement of Borrower in this Instrument, Lender may apply, in any amout and in any order as Lender shall determine in Lender's sole discretion, any Funds held by Lender at the time of application (i) to pay rates, rents, taxes, assessments, insurance premiums and Other Impositions which are now or will hereafter become due, or (ii) as a credit against sums secured by this Instrument. Upon payment in full of all sums secured by this Instrument, Lender shall promptly refund to Borrower any Funds held by Lender. 3. APPLICATION OF PAYMENTS. Unless applicable law provides otherwise, all payments received by Lender from Borrower under the Note or this Instrument shall be applied by Lender in the following order of priority: (i) amounts payable to Lender by Borrower under paragraph 2 hereof; (ii) interest payable on the Note; (iii) principal of the Note; (iv) interest payable on advances made pursuant to paragraph 8 hereof; (v) principal of advances made pursuant to paragraph 8 hereof; (vi) any other sums secured by this Instrument in such order as Lender, at Lender's option, may determine; provided, however, that Lender may, at Lender's option, apply any sums payable pursuant to paragraph 8 hereof prior to interest on and principal of the Note, but such application shall not otherwise affect the order of priority of application specified in this paragraph 3. 4. CHARGES; LIENS. Borrower shall pay all water and sewer rates, rents, taxes, assessments, premiums, and Other Impositions attributable to the Property at Lender's option in the manner provided under paragraph 2 hereof or, if not paid in such manner, by Borrower making payment, when due, directly to the payee thereof, or in such other manner as Lender may designate in writing. Borrower shall promptly furnish to Lender all notices of amounts due under this paragraph 4, and in the event Borrower shall make payment directly, Borrower shall promptly furnish to Lender receipts evidencing such payments. Borrower shall promptly discharge any lien which has, or may have, priority over or equality with, the lien of this Instrument, and Borrower shall pay, when due, the claims of all persons supplying labor or materials to or in connection with the Property. Without Lender's prior written permission, Borrower shall not allow any lien inferior to this Instrument to be perfected against the Property. SEE SPECIAL RIDER ATTACHED HERETO 5. HAZARD INSURANCE. Borrower shall keep the improvements now existing or hereafter erected on the Property insured by carriers at all times satisfactory to Lender against loss by fire, hazards included within the term "extended coverage", rent loss and such other hazards, casualties, liabilities and contingencies as Lender shall require and in such amounts and for such periods as Lender shall require. All premiums on insurance policies shall be paid, at Lender's option, in the manner provided under paragraph 2 hereof, or by borrower making payment, when due, directly to the carrier, or in such other manner as Lender may designate in writing. All insurance policies and renewals thereof shall be in a form acceptable to Lender and shall include a standard mortgage clause in favor of and in form acceptable to Lender. Lender shall have the right to hold the policies, and Borrower shall promptly furnish to Lender all renewal notices and all receipts of paid premiums. At least thirty days prior to the expiration date of a policy, Borrower shall deliver to Lender a renewal policy in form satisfactory to Lender. In the event of loss, Borrower shall give immediate written notice to the insurance carrier and to Lender. Borrower hereby authorizes and empowers Lender as attorney-in-fact for Borrower to make proof of loss, to adjust and compromise any claim under insurance policies, to appear in and prosecute any action arising from such insurance policies, to collect and receive insurance proceeds, and to deduct therefrom Lender's expenses incurred in the collection of such proceeds; provided however, that nothing contained in this paragraph 5 shall require Lender to incur any expense or take any action hereunder. Borrower further authorizes Lender, at Lender's option, (a) to hold the balance of such proceeds to be used to reimburse Borrower for the cost of reconstruction or repair of the Property or (b) to apply the balance of such proceeds to the payment of the sums secured by this Instrument, whether or not then due, in the order of application set forth in paragraph 3 hereof. If the insurance proceeds are held by Lender to reimburse Borrower for the cost of restoration and repair of the Property, the Property shall be restored to the equivalent of its original condition or such other condition as Lender may approve in writing. Lender may, at Lender's option, condition disbursement of said proceeds on Lender's approval of such plans and specifications of an architect satisfactory to Lender, contractor's cost estimates, architect's certificates, waivers of liens, sworn statements of mechanics and materialmen and such other evidence of costs, percentage completion of construction, application of payments, and satisfaction of liens as Lender may reasonably require. If the insurance proceeds are applied to the payment of the sums secured by this Instrument, any such application of proceeds to principal shall not extend or postpone the due dates of the monthly installments referred to in paragraphs 1 and 2. If the Property is sold pursuant to paragraph 27 hereof or if Lender acquires title to the Property, Lender shall have all of the right, title and interest of Borrower in and to any insurance policies and unearned premiums thereon and in and to the proceeds resulting from damage to the Property prior to such sale or acquisition. 6. PRESERVATION AND MAINTENANCE OF PROPERTY. Borrower (a) shall not commit waste or permit impairment or deterioration of the Property, (b) shall not abandon the Property, (c) shall restore or repair promptly and in a good and workmanlike manner all UNIFORM COVENANTS--Multifamily--1/77--FNMA/FHLMC UNIFORM INSTRUMENT Form 4010 (page 3 of 8 pages) or any part of the Property to the equivalent of its original condition, or such other condition as Lender may approve in writing, in the event of any damage, injury or loss thereto, whether or not insurance proceeds are available to cover in whole or in part the costs of such restoration or repair, (d) shall keep the Property, including improvements, fixtures, equipment, machinery and appliances thereon in good repair and shall replace fixtures, equipment, machinery and appliances on the Property when necessary to keep such items in good repair, (e) shall comply with all laws, ordinances, regulations and requirements of any governmental body applicable to the Property, (f) shall provide for professional management of the Property by a residential rental property manager satisfactory to Lender pursuant to a contract approved by Lender in writing, unless such requirement shall be waived by Lender in writing, (g) shall generally operate and maintain the Property in a manner to ensure maximum rentals, and (h) shall give notice in writing to Lender of and, unless otherwise directed in writing by Lender, appear in and defend any action or proceeding purporting to affect the Property, the security of this Instrument or the rights or powers of Lender. Neither Borrower nor any tenant or other person shall remove, demolish or alter any improvement now existing or hereafter erected on the Property or any fixture, equipment, machinery or appliance in or on the Property except when incident to the replacement of fixtures, equipment, machinery and appliances with items of like kind. 7. USE OF PROPERTY. Unless required by applicable law or unless Lender has otherwise agreed in writing, Borrower shall not allow changes in the use for which all or any part of the Property was intended at the time this Instrument was executed. Borrower shall not initiate or acquiesce in a change in the zoning classification of the Property without Lender's prior written consent. 8. PROTECTION OF LENDER'S SECURITY. If Borrower fails to perform the covenants and agreements contained in this Instrument, or if any action or proceeding is commenced which affects the Property or title thereto or the interest of Lender therein, including, but not limited to, eminent domain, insolvency, code enforcement, or arrangements or proceedings involving a bankrupt or decedent, then Lender at Lender's option may make such appearances, disburse such sums and take such action as Lender deems necessary, in its sole discretion, to protect Lender's interest, including, but not limited to, (i) disbursement of attorney's fees, (ii) entry upon the Property to make repairs, (iii) procurement of satisfactory insurance as provided in paragraph 5 hereof. Any amounts disbursed by Lender pursuant to this paragraph 8, with interest thereon, shall become additional indebtedness of Borrower secured by this Instrument. Unless Borrower and Lender agree to other terms of payment, such amounts shall be immediately due and payable and shall bear interest from the date of disbursement at the rate stated in the Note unless collection from Borrower of interest at such rate would be contrary to applicable law, in which event such amounts shall bear interest at the highest rate which may be collected from Borrower under applicable law. Borrower hereby covenants and agrees that Lender shall be subrogated to the lien of any mortgage or other lien discharged, in whole or in part, by the indebtedness secured hereby. Nothing contained in this paragraph 8 shall require Lender to incur any expense or take any action hereunder. 9. INSPECTION. Lender may make or cause to be made reasonable entries upon inspections of the Property. 10. BOOKS AND RECORDS. The provisions of Section 2.2 (d) of the Reimbursement Agreement are incorporated herein by this reference as if fully set forth herein. 11. CONDEMNATION. Borrower shall promptly notify Lender of any action or proceeding relating to any condemnation or other taking, whether direct or indirect, of the Property, or part thereof, and Borrower shall appear in and prosecute any such action or proceeding unless otherwise directed by Lender in writing. Borrower authorizes Lender, at Lender's option, as attorney-in-fact for Borrower, to commence, appear in and prosecute, in Lender's or Borrower's name, any action or proceeding relating to any condemnation or other taking of the Property, whether direct or indirect, and to settle or compromise any claim in connection with such condemnation or other taking. The proceeds of any award, payment or claim for damages, direct or consequential, in connection with any condemnation or other taking, whether direct or indirect, of the Property, or part thereof, or for conveyances in lieu of condemnation, are hereby assigned to and shall be paid to Lender. Borrower authorizes Lender to apply such awards, payments, proceeds or damages, after the deduction of Lender's expenses incurred in the collection of such amounts, at Lender's option, to restoration or repair of the Property or to payment of the sums secured by this Instrument, whether or not then due, in the order of application set forth in paragraph 3 hereof, with the balance, if any, to Borrower. Unless Borrower and Lender otherwise agree in writing, any application of proceeds to principal shall not extend or postpone the due date of the monthly installments referred to in paragraphs 1 and 2 hereof. Borrower agrees to execute such further evidence of assignment of any awards, proceeds, damages or claims arising in connection with such condemnation of taking as Lender may require. SEE SPECIAL RIDER ATTACHED HERETO. 12. BORROWER AND LIEN NOT RELEASED. From time to time, Lender may, at Lender's option, without giving notice to or obtaining the consent of Borrower, Borrower's successors or assigns or of any junior lienholder or guarantors, without liability on Lender's part and notwithstanding Borrower's breach of any covenant or agreement of Borrower in this Instrument, extend the time for payment of said indebtedness or any part thereof, reduce the payments thereon, release anyone liable on any of said indebtedness, accept a renewal note or notes therefor, modify the terms and time of payment of said indebtedness, release from the lien of this Instrument any part of the Property, take or release other or additional security, reconvey any part of the Property, consent to any map or plan of the Property, consent to the granting of any easement, join in any extension or subordination agreement, and agree in writing with Borrower to modify the rate of interest or period of amortization of the Note or change the amount of the monthly installments payable thereunder. Any actions taken by Lender pursuant to the terms of this paragraph 12 shall not affect the obligation of Borrower or Borrower's successors or assigns to pay the sum secured by this Instrument and to observe the covenants of Borrower contained herein, shall not affect the guaranty of any person, corporation, partnership or other entity for payment of the indebtedness secured hereby, and shall not affect the lien or priority of lien hereof on the Property. Borrower shall pay Lender a reasonable service charge, together with such title insurance premiums and attorney's fees as may be incurred at Lender's option, for any such action if taken at Borrower's request. 13. FORBEARANCE BY LENDER NOT A WAIVER. Any forbearance by Lender in exercising any right or remedy hereunder, or otherwise affected by applicable law, shall not be a waiver of or preclude the exercise of any right or remedy. The acceptance by Lender of payment of any sum secured by this Instrument after the due date of such payment shall not be a waiver of Lender's right to either require prompt payment when due of all other sums so secured or to declare a default for failure to make prompt payment. The procurement of insurance of the payment of taxes or other liens or charges by Lender shall not be a waiver of Lender's right to accelerate the maturity of the indebtedness secured by this Instrument, nor shall Lender's receipt of any awards, proceeds or damages under paragraphs 5 and 11 hereof operate to cure or waive Borrower's default in payment of sums secured by this Instrument. Form 4010 (page 4 of 8 pages) 14. ESTOPPEL CERTIFICATE. Borrower shall within ten days of a written request from Lender furnish Lender with a written statement, duly acknowledged, setting forth the sums secured by this Instrument and any right of set-off, counterclaim or other defense which exists against such sums and the obligations of this Instrument. 15. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. This Instrument is intended to be a security agreement pursuant to the Uniform Commercial Code for any of the items specified above as a part of the Property which, under applicable law, may be subject to a security interest pursuant to the Uniform Commercial Code, and Borrower hereby grants Lender a security interest in said items. Borrower agrees that Lender may file this Instrument, or a reproduction thereof, in the real estate records or other appropriate index, as a financing statement for any of the items specified above as a part of the Property. Any reproduction of this Instrument or of any other security agreement or financing statement shall be sufficient as a financing statement. In addition, Borrower agrees to execute and deliver to Lender, upon Lender's request, any financing statements, as well as extensions, renewals and amendments thereof, and reproductions of this Instrument in such form as Lender may require to perfect a security interest with respect to said items. Borrower shall pay all costs of filing such financing statements and any extensions, renewals, amendments and releases thereof, and shall pay all reasonable costs and expenses of any record searches for financing statements Lender may reasonably require. Without the prior written consent of Lender, Borrower shall not create or suffer to be created pursuant to the Uniform Commercial Code any other security interest in said items, including replacements and additions thereto. Upon Borrower's breach of any covenant or agreement of Borrower contained in this Instrument, including the covenants to pay when due all sums secured by this Instrument, Lender shall have the remedies of a secured party under the Uniform Commercial Code and, at Lender's option, may also invoke the remedies provided in paragraph 27 of this Instrument as to such items. In exercising any of said remedies, Lender may proceed against the items of real property and any items of personal property specified above as part of the Property separately or together and in any order whatsoever, without in any way affecting the availability of Lender's remedies under the Uniform Commercial Code or the remedies provided in paragraph 27 of this Instrument. 16. LEASES OF THE PROPERTY. Borrower shall comply with and observe Borrower's obligations as landlord under all leases of the Property or any part thereof. Borrower will not lease any portion of the Property for non-residential use except with the prior written approval of Lender. Borrower, at Lender's request, shall furnish Lender with executed copies of all leases now existing or hereafter made of all or any part of the Property, and all leases now or hereafter entered into will be in form and substance subject to the approval of Lender. All leases of the Property shall specifically provide that such leases are subordinate to this Instrument; that the tenant attorns to Lender, such attornment to be effective upon Lender's acquisition of title to the Property; that the tenant agrees to execute such further evidences of attornment as Lender may from time to time request; that the attornment of the tenant shall not be terminated by foreclosure; and that Lender may, at Lender's option, accept or reject such attornments. Borrower shall not, without Lender's written consent, execute, modify, surrender or terminate, either orally or in writing, any lease now existing or hereafter made of all or any part of the Property providing for a term of three years or more, permit an assignment or sublease of such a lease without Lender's written consent, or request or consent to the subordination of any lease of all or any part of the Property to any lien subordinate to this Instrument. If Borrower becomes aware that any tenant proposes to do, or is doing, any act or thing which may give rise to any right of set-off against rent, Borrower shall (i) take such steps as shall be reasonably calculated to prevent the accrual of any right to a set-off against rent, (ii) notify Lender thereof and of the amount of said set-offs, and (iii) within ten days after such accrual, reimburse the tenant who shall have acquired such right to set-off or take such other steps as shall effectively discharge such set-off and as shall assure that rents thereafter due shall continue to be payable without set-off or deduction. SEE SPECIAL RIDER ATTACHED HERETO. Upon Lender's request, Borrower shall assign to Lender, by written instrument satisfactory to Lender, all leases now existing or hereafter made of all or any part of the Property and all security deposits made by tenants in connection with such leases of the Property. Upon assignment by Borrower to Lender of any leases of the Property, Lender shall have all of the rights and powers possessed by Borrower prior to such assignment and Lender shall have the right to modify, extend or terminate such existing leases and to execute new leases, in Lender's sole discretion. 17. REMEDIES CUMULATIVE. Each remedy provided in this Instrument is distinct and cumulative to all other rights or remedies under this Instrument or afforded by law or equity, and may be exercised concurrently, independently, or successively, in any order whatsoever. 18. ACCELERATION IN CASE OF BORROWER'S INSOLVENCY. SEE SPECIAL RIDER ATTACHED HERETO 19. TRANSFERS OF THE PROPERTY OR BENEFICIAL INTERESTS IN BORROWER; ASSUMPTION. SEE RIDER ATTACHED HERETO. 20. NOTICE. SEE SPECIAL RIDER ATTACHED HERETO. 21. SUCCESSORS AND ASSIGNS BOUND; JOINT AND SEVERAL LIABILITY; AGENTS; CAPTIONS. The covenants and agreements herein contained shall bind, and the rights hereunder shall inure to, the respective successors and assigns of Lender and Borrower, subject to the provisions of paragraph 19 hereof. All covenants and agreements of Borrower shall be joint and several. In exercising any rights hereunder or taking any actions provided for herein, Lender may act through its employees, agents or independent contractors as authorized by Lender. The captions and headings of the paragraphs of this Instrument are for convenience only and are not to be used to interpret or define the provisions hereof. 22. UNIFORM MULTIFAMILY INSTRUMENT; GOVERNING LAW; SEVERABILITY. This form of multifamily instrument combines uniform covenants for national use and non-uniform covenants with limited variations by jurisdiction to constitute a uniform security instrument covering real property and related fixtures and personal property. In the event that any provision of this Instrument or the Note conflicts with applicable law, such conflict shall not affect other provisions of this Instrument or the Note which can be given effect without the conflicting provision, and to this end the provision of this Form 4010 (page 5 of 8 pages) Instrument and the Note are declared to be severable. In the event that any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower is interpreted so that any charge provided for in this Instrument or in the Note, whether considered separately or together with other charges levied in connection with this Instrument and the Note, violates such law, and Borrower is entitled to the benefit of such law, such charge is hereby reduced to the extent necessary to eliminate such violation. The amounts, if any, previously paid to Lender in excess of the amounts payable to Lender pursuant to such charges as reduced shall be applied by Lender to reduce the principal of the indebtedness evidenced by the Note. For the purpose of determining whether any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower has been violated, all indebtedness which is secured by this Instrument or evidenced by the Note and which constitutes interest, as well as all other charges levied in connection with such indebtedness which constitute interest, shall be deemed to be allocated and spread over the stated term of the Note. Unless otherwise required by applicable law, such allocation and spreading shall be effected in such a manner that the rate of interest computed thereby is uniform throughout the stated term of the Note. SEE SPECIAL RIDER ATTACHED HERETO. 23. WAIVER OF STATUTE OF LIMITATIONS. Borrower hereby waives the right to assert any statute of limitations as a bar to the enforcement of the lien of this Instrument or to any action brought to enforce the Note or any other obligation secured by this Instrument. SEE SPECIAL RIDER ATTACHED HERETO. 26. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION. As part of the consideration for the indebtedness evidenced by the Note, Borrower hereby absolutely and unconditionally assigns and transfers to Lender all the rents and revenues of the Property, including those now due, past due, or to become due by virtue of any lease or other agreement for the occupancy or use of all or any part of the Property, regardless of to whom the rents and revenues of the Property are payable. Borrower hereby authorizes Lender or Lender's agents to collect the aforesaid rents and revenues and hereby directs each tenant of the Property to pay such rents to Lender or Lender's agents; provided, however, that prior to written notice given by Lender to Borrower of the breach by Borrower of any covenant or agreement of Borrower in this Instrument, Borrower shall collect and receive all rents and revenues of the Property as trustee for the benefit of Lender and Borrower, to apply the rents and revenues so collected to the sums secured by this Instrument in the order provided in paragraph 3 hereof with the balance, so long as no such breach has occurred, to the account of Borrower, it being intended by Borrower and Lender that this assignment of rents constitutes an absolute assignment and not an assignment for additional security only. Upon delivery of written notice by Lender to Borrower of the breach by Borrower of any covenant or agreement of Borrower in this Instrument, and without the necessity of Lender entering upon and taking and maintaining full control of the Property in person, by agent or by a court-appointed receiver, Lender shall immediately be entitled to possession of all rents and revenues of the Property as specified in this paragraph 26 as the same become due and payable, including but not limited to rents then due and unpaid, and all such rents shall immediately upon delivery of such notice be held by Borrower as trustee for the benefit of Lender only; provided, however, that the written notice by Lender to Borrower of the breach by Borrower shall contain a statement that Lender exercises its rights to such rents. Borrower agrees that commencing upon delivery of such written notice of Borrower's breach by Lender to Borrower, each tenant of the Property shall make such rents payable to and pay such rents to Lender or Lender's agents on Lender's written demand to each tenant therefor, delivered to each tenant personally, by mail or by delivering such demand to each rental unit, without any liability on the part of said tenant to inquire further as to the existence of a default by Borrower. Borrower hereby covenants that Borrower has not executed any prior assignment of said rents that remain in effect as of the date hereof that Borrower has not performed, and will not perform, any acts or has not executed, and will not execute, any instrument which would prevent Lender from exercising its rights under this paragraph 26, and that at the time of execution of this Instrument there has been no anticipation or prepayment of any of the rents of the Property for more than two months prior to the due dates of such rents. Borrower covenants that Borrower will not hereafter collect or accept payment of any rents of the Property more than two months prior to the due dates of such rents. Borrower further covenants that Borrower will execute and deliver to Lender such further assignments of rents and revenues of the Property as Lender may from time to time request. Upon Borrower's breach of any covenant or agreement of Borrower in this Instrument, Lender may in person, by agent or by a court-appointed receiver, regardless of the adequacy of Lender's security, enter upon and take and maintain full control of the Property in order to perform all acts necessary and appropriate for the operation and maintenance thereof including, but not limited to, the execution, cancellation or modification of leases, the collection of all rents and revenues of the Property, the making of repairs to the Property and the execution or termination of contracts providing for the management or maintenance of the Property, all on such terms as are deemed best to protect the security of this Instrument. In the event Lender elects to seek the appointment of a receiver for the Property upon Borrower's breach of any covenant or agreement of Borrower in this Instrument, Borrower hereby expressly consents to the appointment of such receiver. Lender or the receiver shall be entitled to receive a reasonable fee for so managing the Property. All rents and revenues collected subsequent to delivery of written notice by Lender to Borrower of the breach by Borrower of any covenant or agreement of Borrower in this Instrument shall be applied first to the cost, if any, of taking control of and managing the Property and collecting the rents, including, but not limited to, attorney's fees, receiver's fees, premiums on receiver's bonds, costs of repairs to the Property, premiums on insurance policies, taxes, assessments and other charges on the Property, and the costs of discharging any obligation or liability of Borrower as lessor or landlord of the Property and then to the sums secured by this Instrument. Lender or the receiver shall have access to the books and records used in the operation and maintenance of the Property and shall be liable to account only for those rents actually received. Lender shall not be liable to Borrower, anyone claiming under or through Borrower or anyone having an interest in the Property by reason of anything done or left undone by Lender under this paragraph 26. If the rents of the Property are not sufficient to meet the costs, if any, of taking control of and managing the Property and collecting the rents, any funds expended by Lender for such purposes shall become indebtedness of Borrower to Lender secured by this Instrument pursuant to paragraph 8 hereof. Unless Lender and Borrower agree in writing to other terms of payment, such amounts shall be payable upon notice from Lender to Borrower requesting payment thereof and shall bear interest from the date of disbursement at the rate stated in the Note unless payment of interest at such rate would be contrary to applicable law, in which event such amounts shall bear interest at the highest rate which may be collected from Borrower under applicable law. Any entering upon and taking and maintaining of control of the Property by Lender or the receiver and any application of rents as provided herein shall not cure or waive any default hereunder or invalidate any other right or remedy of Lender under applicable law or provided herein. This assignment of rents of the Property shall terminate at such time as this Instrument ceases to secure indebtedness held by Lender. UNIFORM COVENANTS--Multifamily--1/77--FNMA/FHLMC UNIFORM INSTRUMENT Form 4010 (page 6 of 8 pages) NON-UNIFORM COVENANTS. Borrower and Lender further covenant and agree as follows: 27. ACCELERATION; REMEDIES. Upon Borrower's breach of any covenant or agreement of Borrower in this Instrument, including, but not limited to, the covenants to pay when due any sums secured by this Instrument. Lender at Lender's option may declare all of the sums secured by this Instrument to be immediately due and payable without further demand and may foreclosure this Instrument by judicial proceeding and may invoke any other remedies permitted by applicable law or provided herein. Lender shall be entitled to collect all costs and expenses incurred in pursuing such remedies, including, but not limited to, attorney's fees, costs of documentary evidence, abstracts and title reports. 28. RELEASE. Upon payment of all sums secured by this Instrument, Lender shall release this Instrument. Borrower shall pay Lender's reasonable costs incurred in releasing this Instrument. 29. ATTORNEY'S FEES. As used in this Instrument and in the Note, "attorney's fees" shall include attorney's fees, if any, which may be awarded by an appellate court. IN WITNESS WHEREOF, Borrower has executed this Instrument or has caused the same to be executed by its representatives thereunto duly authorized. BORROWER: Signed and Delivered OTC APARTMENTS LIMITED PARTNERSHIP, a in the Presence of: Florida limited partnership /s/ [illegible] By: AIMCO/OTC QRS, INC., a Delaware - -------------------------------- corporation, its sole General Partner /s/ Donna R. Gallup By: /s/ H. Alcock - -------------------------------- ---------------------------------- Harry Alcock Vice President BORROWER'S ADDRESS: 1873 South Bellaire Street, 17th Floor Denver, Colorado 80222 Form 4010 (page 7 of 8 pages) ACKNOWLEDGEMENT STATE OF COLORADO ) ) ss: COUNTY OF ARAPAHOE ) The foregoing instrument was acknowledged before me this 16th day of August 1996, by Harry Alcock, Vice President of AIMCO/OTC QRS, INC., a Delaware corporation, on behalf of said corporation, the general partner of OTC APARTMENTS LIMITED PARTNERSHIP, a Florida limited partnership. He who is personally know to me/has produced _____________________ as identification. /s/ Donna R. Gallup ------------------------------------ Printed/Typed Name: Donna R. Gallup Notary Public My Commission Expires: [STAMP] [SEAL] FLORIDA--Multifamily--1/77--FNMA/FHLMC UNIFORM INSTRUMENT Form 4010 (page 8 of 8 pages) EX-10.98 40 EXHIBIT 10.98 RIDER TO MULTIFAMILY INSTRUMENT THIS RIDER TO MULTIFAMILY INSTRUMENT (the "Rider") is made as of the 1st day of August 1996, and is incorporated into and shall be deemed to amend and supplement the Multifamily Mortgage, as of the same date (the "Instrument"), given by the undersigned OTC APARTMENTS LIMITED PARTNERSHIP a Florida limited partnership (the "Borrower"), for the benefit of FEDERAL NATIONAL MORTGAGE ASSOCIATION, a federally-chartered corporation, c/o GMAC Commercial Mortgage Corporation, 650 Dresher Road, Horsham, PA 19044 [INSERT ADDRESS OF LENDER], and its successors, assigns and transferees (the "Lender"), covering the property described in the Instrument and defined therein as the "Property," located at: 1878 East Nine Mile Road, Pensacola, Escambia County, Florida - -------------------------------------------------------------------------------- [Property Address] The Property is located entirely within the State of Florida [INSERT NAME OF STATE IN WHICH THE PROPERTY IS LOCATED] (the "Property Jurisdiction"). The term "Loan Documents" when used in this Rider shall mean, collectively, the following documents: (i) the Instrument, as modified by this Rider, the Special Rider and any other riders to the Instrument given by Borrower to Lender and covering the Property; (ii) the Reimbursement Agreement (as defined in the Instrument ); (iii) any other documents or agreements as shall be required to evidence or secure the obligations of the Borrower or otherwise arising under, related to, or made in connection with, the Reimbursement Agreement, as such documents may be amended from time to time, including, but not limited to, any Collateral Agreements (as defined below) or O&M Agreement (as defined below) and that certain Cash Management, Security, Pledge and Assignment Agreement between Borrower and Lender dated as of July 1, 1996, and (iv) the other Security Instruments (as defined in the Special Rider). The covenants and agreements of this Rider, and the covenants and agreements of any other riders to the Instrument given by Borrower to Lender and covering the Property (including without limitation the Special Rider), shall be incorporated into and shall amend and supplement the covenants and agreements of the Instrument as if this Rider and the other riders were a part of the Instrument and all references to the Instrument in the Loan Documents shall mean the Instrument as so amended and supplemented. ADDITIONAL COVENANTS. In addition to the covenants and agreements made in the Instrument, Borrower and Lender further covenant and agree as follows: A. FUNDS FOR TAXES, INSURANCE AND OTHER CHARGES Uniform Covenant 2 of the Instrument ("Funds for Taxes, Insurance and Other Charges") is amended to change the title to "Funds for Taxes, Insurance and Other Charges; Collateral Agreements." Existing Uniform Covenant 2 is amended to become Uniform Covenant 2A. The following new Uniform Covenant 2B is added at the end of Uniform Covenant 2A: 2B REPLACEMENT RESERVE AGREEMENT, COMPLETION/REPAIR AGREEMENT, ACHIEVEMENT AGREEMENT AND OTHER COLLATERAL AGREEMENTS (a) REPLACEMENT RESERVE AGREEMENT Borrower shall deposit with Lender the amounts required by the Replacement Reserve and Security Agreement (the "Replacement Reserve Agreement") between Borrower and Lender (if any), dated the date hereof at the times required by the Replacement Reserve Agreement, and shall perform all other obligations as and when required pursuant to the Replacement Reserve Agreement. (b) COMPLETION/REPAIR AGREEMENT Borrower shall deposit with Lender the amount required by the Completion/Repair and Security Agreement (the "Completion/Repair Agreement") between Borrower and Lender (if any), dated the date hereof, at the time required by the Completion/Repair Agreement, and shall perform all other obligations as and when required pursuant to the Completion/Repair Agreement. (d) COLLATERAL AGREEMENTS As used herein, the term "Collateral Agreement" shall mean any of the Replacement Reserve Agreement, the Completion/Repair Agreement, the Achievement Agreement and any similar agreement which has been entered into between Borrower and Lender in connection with the Reimbursement Agreement. B. APPLICATION OF PAYMENTS Uniform Covenant 3 of the Instrument ("Application of Payments") is amended to add the following sentence at the end thereof: Notwithstanding the preceding sentence, (i) Lender shall be permitted to apply any partial payment received from Borrower in any manner determined by Lender and in any order of priority of application as determined by Lender, in Lender's sole discretion, and (ii) upon any breach of any covenant or agreement of Borrower in the Instrument, the Reimbursement Agreement or any other Loan Document, Lender shall be permitted to apply any funds held pursuant to RIDER TO MULTIFAMILY INSTRUMENT WITH SEPARATE EXCEPTIONS TO NON-RECOURSE GUARANTY - - Fannie Mae Uniform Instrument Form 4058 6/93 (PAGE 1 OF 8 PAGES) any Collateral Agreement, any O&M Agreement or Cash Management Agreement in any manner which is permitted pursuant to such Collateral Agreement, any O&M Agreement or Cash Management Agreement and in any order of priority of application as determined by Lender, in Lender's sole discretion. C. HAZARD INSURANCE; RESTORATION OF PROPERTY Uniform Covenant 5 of the Instrument ("Hazard Insurance") is amended to add the following sentence at the end thereof: Lender shall not exercise Lender's option to apply insurance proceeds to the payment of the sums secured by the Instrument if all of the following conditions are met: (i) Borrower is not in breach or default of any provision of the Instrument, the Note or any other Loan Document; (ii) Lender determines that there will be sufficient funds to restore and repair the Property to a condition approved by Lender; (iii) Lender determines that the rental income of the Property, after restoration and repair of the Property to a condition approved by Lender, will be sufficient to meet all operating costs and other expenses, payments for reserves and loan repayment obligations relating to the Property; (iv) Lender determines that restoration and repair of the Property to a condition approved by Lender will be completed prior to the earlier of either (1) the maturity date of the Note or (2) within one year of the date of the loss or casualty to the Property: and (v) Lender determines that upon restoration and repair of the Property, there will not have been a material diminution in the value of the Property since the date immediately preceding the casualty. D. ENVIRONMENTAL HAZARDS PROVISION In addition to Borrower's covenants and agreements under Uniform Covenant 6 of the Instrument ("Preservation and Maintenance of Property; Leaseholds"), Borrower further covenants and agrees that Borrower shall not: (a) cause or permit the presence, use, generation, manufacture, production, processing, installation, release, discharge, storage (including aboveground and underground storage tanks for petroleum or petroleum products), treatment, handling, or disposal of any Hazardous Materials (as defined below) (excluding the safe and lawful use and storage of quantities of Hazardous Materials customarily used in the operation and maintenance of comparable multifamily properties or for normal household purposes) on or under the Property, or in any way affecting the Property or its value, or which may form the basis for any present or future demand, claim or liability relating to contamination, exposure, cleanup or other remediation of the Property or, (b) cause or permit the transportation to, from or across the Property of any Hazardous Material (excluding the safe and lawful use and storage of quantities of Hazardous Materials customarily used in the operation and maintenance of comparable multifamily properties or for normal household purposes); or (c) permit, cause or exacerbate any occurrence or condition on the Property that is or may be in violation of Hazardous Materials Law (as defined below). (The matters described in (a), (b) and (c) above are referred to collectively below as "Prohibited Activities or Conditions.") Except with respect to any matters which have been disclosed in writing by Borrower to Lender prior to the date of the Instrument, or matters which have been disclosed in an environmental hazard assessment report of the Property received by Lender prior to the date of the Instrument, Borrower represents and warrants that it has not at any time caused or permitted any Prohibited Activities or Conditions and to the best of its knowledge, no Prohibited Activities or Conditions exist or have existed on or under the Property. Borrower shall take all appropriate steps (including but not limited to appropriate lease provisions) to prevent its employees, agents, and contractors, and all tenants and other occupants on the Property, from causing, permitting or exacerbating any Prohibited Activities or Conditions. Borrower shall not lease or allow the sublease of all or any portion of the Property for non-residential use to any tenant or subtenant that, in the ordinary course of its business, would cause, permit or exacerbate any Prohibited Activities or Conditions, and all non-residential leases and subleases shall provide that tenants and sub-tenants shall not cause, permit or exacerbate any Prohibited Activities or Conditions. If any Prohibited Activities or Conditions exist on the Property, or if Lender shall otherwise require Borrower to do so in writing in accordance with reasonable commercial practices Borrower shall comply in a timely manner with, and cause all employees, agents, and contractors of Borrower and any other persons present on the Property to so comply with, (1) any program of operations and maintenance ("O&M Program") relating to the Property that is acceptable to Lender with respect to one or more Hazardous Materials (which O&M Program may be set forth in an agreement of Borrower (an "O&M Agreement")) and all other obligations set forth in any O&M Agreement, or any other remedial action requested by Lender and (2) all Hazardous Materials Laws. Any O&M Program shall be performed by qualified personnel. All costs and expenses of the O&M Program shall be paid by Borrower, including without limitation Lender's fees and costs incurred in connection with the monitoring and review of the O&M Program and Borrower's performance thereunder. If Borrower fails to timely commence or diligently continue and complete the O&M Program and comply with any O&M Agreement, then Lender may, at Lender's option, declare all of the sums secured by the Instrument to be immediately due and payable, and Lender may invoke any remedies permitted by paragraph 27 of the Instrument Without limiting the foregoing, Borrower shall take prompt remedial action in the event of the discovery of any Prohibited Activities or Conditions and obtain Lender's prior written approval of such remedial action. Borrower represents that Borrower has not received, and has no knowledge of the issuance of, any claim, citation or notice of any pending or threatened suits, proceedings, orders, or governmental inquiries or opinions involving the Property that allege the violation of any Hazardous Materials Law ("Governmental Actions"). Borrower shall promptly notify Lender in writing of: (i) the occurrence of any Prohibited Activity or Condition on the Property; (ii) Borrower's actual knowledge of the presence on or under any adjoining property of any Hazardous Materials which can reasonably be expected to have a material adverse impact on the Property or the value of the Property, discovery of any occurrence or condition on the Property or any adjoining real property that could cause any restrictions on the ownership, occupancy, transferability or use of the Property under Hazardous Materials Form 4058 6/93 (PAGE 2 OF 8 PAGES) Law. Borrower shall cooperate with any governmental inquiry, and shall comply with any governmental or judicial order which arises from any alleged Prohibited Activities or Conditions; (iii) any Governmental Action; and (iv) any claim made or threatened in writing by any third party against Borrower, Lender, or the Property relating to loss or injury resulting from any Hazardous Materials. Any such notice by Borrower shall not relieve Borrower of, or result in a waiver of any obligation of Borrower under this paragraph D. Borrower shall pay promptly the costs of any environmental audits, studies or investigations (including but not limited to advice of legal counsel) and the removal of any Hazardous Materials from the Property required by Lender as a condition of its consent to any sale or transfer under paragraph 19 of the Instrument of all or any part of the Property or any transfer occurring upon a foreclosure or a deed in lieu of foreclosure or any interest therein, or required by Lender following a reasonable determination by Lender that there may be Prohibited Activities or Conditions on or under the Property. Borrower authorizes Lender and its employees, agents and contractors to enter onto the Property for the purpose of conducting such environmental audits, studies and investigations. Any such costs and expenses incurred by Lender (including but not limited to fees and expenses of attorneys and consultants, whether incurred in connection with any judicial or administrative process or otherwise) which Borrower fails to pay promptly shall become immediately due and payable and shall become additional indebtedness secured by the Instrument pursuant to Uniform Covenant 8 of the Instrument. Borrower shall hold harmless, defend and indemnify Lender and its officers, directors, trustees, employees, and agents from and against all proceedings (including but not limited to Government Actions), claims, damages, penalties, costs and expenses (including without limitation fees and expenses of attorneys and expert witnesses, investigatory fees, and cleanup and remediation expenses, whether or not incurred within the context of the judicial process), arising directly or indirectly from (i) any breach of any representation, warranty, or obligation of Borrower contained in this paragraph D or (ii) the presence or alleged presence of Hazardous Materials on or under the Property. The term "Hazardous Materials," for purposes of this paragraph D, includes petroleum and petroleum products, flammable explosives, radioactive materials (excluding radioactive materials in smoke detectors), polychlorinated biphenyls, lead, asbestos in any form that is or could become friable, hazardous waste, toxic or hazardous substances or other related materials whether in the form of a chemical, element, compound, solution, mixture or otherwise including, but not limited to, those materials defined as "hazardous substances," "extremely hazardous substances," "hazardous chemicals," "hazardous materials," "toxic substances," "solid waste," "toxic chemicals," "air pollutants," "toxic pollutants," "hazardous wastes," "extremely hazardous waste," or "restricted hazardous waste" by Hazardous Materials Law or regulated by Hazardous Materials Law in any manner whatsoever. The term "Hazardous Materials Law," for the purposes of this paragraph D, means all federal, state, and local laws, ordinances and regulations and standards, rules, policies and other binding governmental requirements and any court judgments applicable to Borrower or to the Property relating to industrial hygiene or to environmental or unsafe conditions or to human health including, but not limited to, those relating to the generation, manufacture, storage, handling, transportation, disposal, release, emission or discharge of Hazardous Materials, those in connection with the construction, fuel supply, power generation and transmission, waste disposal or any other operations or processes relating to the Property, and those relating to the atmosphere, soil, surface and ground water, wetlands, stream sediments and vegetation on, under, in or about the Property. The representations, warranties, covenants, agreements, indemnities and undertakings of Borrower contained in this paragraph D shall be in addition to any and all other obligations and liabilities that Borrower may have to Lender under applicable law. The representations, warranties, covenants, agreements, indemnities and undertakings of Borrower contained in this paragraph D shall continue and survive notwithstanding the satisfaction, discharge, release, assignment, termination, subordination or cancellation of the Instrument or the payment in full of the principal of and interest on the Note and all other sums payable under the Loan Documents or the foreclosure of the Instrument or the tender or delivery of a deed in lieu of foreclosure or the release of any portion of the Property from the lien of the Instrument, except with respect to any Prohibited Activities or Conditions or violation of any of the Hazardous Materials Laws which first commences and occurs after the satisfaction, discharge, release, assignment, termination or cancellation of the Instrument following the payment in full of the principal of and interest on the Note and all other sums payable under the Loan Documents or which first commences or occurs after the actual dispossession from the entire Property of the Borrower and all entities which control, are controlled by, or are under common control with the Borrower (each of the foregoing persons or entities is hereinafter referred to as a "Responsible Party") following foreclosure of the Instrument or acquisition of the Property by a deed in lieu of foreclosure. Nothing in the foregoing sentence shall relieve the Borrower from any liability with respect to any Prohibited Activities or Conditions or violation of Hazardous Materials Laws where such Prohibited Activities or Conditions or violation of Hazardous Materials Laws commences or occurs, or is present as a result of, any act or omission by any Responsible Party or by any person or entity acting on behalf of a Responsible Party. Form 4058 6/93 (PAGE 3 OF 8 PAGES) F. TRANSFERS OF THE PROPERTY OR SIGNIFICANT INTERESTS IN BORROWER; TRANSFER FEES SEE SPECIAL RIDER ATTACHED HERETO Form 4058 6/93 (PAGE 4 OF 8 PAGES) G. NOTICE Form 4058 6/93 (PAGE 5 OF 8 PAGES) H. GOVERNING LAW In addition to the governing law provision of Uniform Covenant 22 of the Instrument ("Uniform Multifamily Instrument; Governing Law; Severability"), the Borrower and Lender covenant and agree as follows: (a) CHOICE OF LAW The validity of the Instrument and the other Loan Documents, each of their terms and provisions, and the rights and obligations of Borrower under the Instrument and the other Loan Documents, shall be governed by, interpreted, construed, and enforced pursuant to and in accordance with the laws of the Property Jurisdiction. (b) CONSENT TO JURISDICTION Borrower consents to the exclusive jurisdiction of any and all state and federal courts with jurisdiction in the Property Jurisdiction over Borrower and the Borrower's assets. Borrower agrees that such assets shall be used first to satisfy all claims of creditors organized or domiciled in the United States of America ("USA") and that no assets of the Borrower in the USA shall be considered part of any foreign bankruptcy estate. Borrower agrees that any controversy arising under or in relation to the Note, the Instrument or any of the other Loan Documents shall be litigated exclusively in the Property Jurisdiction. The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over all controversies which may arise under or in relation to the Note, and any security for the debt evidenced by the Note, including without limitation those controversies relation to the execution, interpretation, breach, enforcement, or compliance with the Note, the Instrument, or any other issue arising under, related to, or in connection with any of the Loan Documents. Borrower irrevocably consents to service, jurisdiction, and venue of such courts for any litigation arising from the Note, the Instrument or any other Loan Documents, and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise. I. ACCELERATION; REMEDIES Covenant 27 of the Instrument ("Acceleration; Remedies") is amended to add the following at the end of the first paragraph: Upon the breach of any covenant or agreement by Borrower in the Instrument, (including, but not limited to, the covenants to pay when due sums secured by the Instrument) or any other Loan Document, Lender, at Lender's option may, in addition to any remedies specified in this covenant, invoke any other remedies provided in any Collateral Agreement. If Borrower is in default under any promissory note (other than the Note) evidencing a loan (the "Subordinate Loan") secured by a security instrument (other than the Instrument) covering all or any portion of the Property (the "Subordinate Instrument") or under any Subordinate Instrument or other loan document executed in connection with the Subordinate Loan, (and whether or not the Borrower has obtained the prior approval of Lender to the placement of such Subordinate Instrument on the Property) which default remains uncured after any applicable cure period, Borrower also then will be in default under the Note and the Instrument. In that event, the entire unpaid principal balance of the Note, accrued interest and any other sums due Lender secured by the Instrument then will become due and payable, at Lender's option. If Lender exercises this option to accelerate, Lender will do so in accordance with the provisions of the Note and the Instrument, and the Lender may invoke any and all remedies permitted by applicable law, the Note, the Instrument, or any of the other Loan Documents. J. SINGLE ASSET BORROWER SEE SPECIAL RIDER ATTACHED HERETO. K. NON-RECOURSE LIABILITY Form 4058 6/93 (PAGE 6 OF 8 PAGES) The liability of Borrower and any general partner of Borrower (if Borrower is a partnership) shall be limited to the same extent as provided in Section 3.11 of the Reimbursement Agreement. M. WAIVER OF JURY TRIAL Borrower (i) covenants and agrees not to elect a trial by jury with respect to any issue arising under any of the Loan Documents triable by a jury and (ii) waives any right to trial by jury to the extent that any such right shall now or hereafter exist. This waiver of right to trial by jury is separately given, knowingly and voluntarily with the benefit of competent legal counsel by the Borrower, and this waiver is intended to encompass individually each instance and each issue as to which the right to a jury trial would otherwise accrue. Further, Borrower hereby certifies that no representative or agent of the Lender (including, but not limited to, the Lender's counsel) has represented, expressly or otherwise, to Borrower or that Lender will not seek to enforce the provisions of this paragraph M. Form 4058 6/93 (PAGE 7 OF 8 PAGES) BY SIGNING BELOW, Borrower accepts and agrees to the covenants and agreements contained in this Rider. BORROWER: Signed and Delivered in the OTC APARTMENTS LIMITED PARTNERSHIP, a Presence of: Florida limited partnership /s/ S. Phillips - ---------------------------- By: AIMCO/OTC QRS, INC., a Delaware corporation, its sole General Partner /s/ Donna R. Gallup - ---------------------------- By: /s/ H. Alcock ------------------------------ Harry Alcock Vice President BORROWER'S ADDRESS 1873 Bellaire Street, 17th Floor Denver, Colorado 80222 Form 4058 6/93 (PAGE 8 OF 8 PAGES) EX-10.99 41 EXHIBIT 10.99 SPECIAL RIDER TO MULTIFAMILY INSTRUMENT THIS SPECIAL RIDER TO MULTIFAMILY INSTRUMENT (this "Special Rider") is made as of the 1st day of August, 1996, and is incorporated into and shall be deemed to amend and supplement the Multifamily Third Mortgage, Assignment of Rents and Security Agreement as of even date herewith (the "Instrument"), given by OTC APARTMENTS LIMITED PARTNERSHIP, a Florida limited partnership ("Borrower") for the benefit of FEDERAL NATIONAL MORTGAGE ASSOCIATION, a federally chartered corporation ("Fannie Mae" or "Lender") and covering the property described in the Instrument and located in Escambia County, Florida (the "Property"), as amended by that certain Rider to Multifamily Instrument as of the same date (the "Rider") (collectively, with this Special Rider and any other riders to the Instrument given by the Borrower to Lender and covering the Property, the "Multifamily Instrument"). The covenants and agreements of this Special Rider, and the covenants and agreements of any other riders to the Instrument, shall be incorporated into and shall amend and supplement the covenants and agreements of the Instrument as if this Special Rider and the other riders were a part of the Instrument, and all references to the Instrument in the Loan Documents (as defined in the Rider below) shall mean the Instrument as so amended and supplemented. Any conflict between the provisions of the Instrument, as amended by the Rider and this Special Rider shall be resolved in favor of this Special Rider. Initially-capitalized terms used in this Multifamily Instrument, which are not defined in this Multifamily Instrument, shall have the meanings given to those terms in the Reimbursement Agreement. ADDITIONAL COVENANTS. Borrower and Lender further covenant and agree as follows: A. ADDITIONAL SECURITY - OBLIGATIONS SECURED BY OTHER SECURITY INSTRUMENTS. The term "Secured Obligations" as used in this Multifamily Instrument shall also include, and this Multifamily Instrument shall also secure, the payment and performance of all obligations secured by (i) each of the other mortgages, deeds to secure debt and/or deeds of trust identified in the Reimbursement Agreement as the "REIMBURSEMENT MORTGAGES", including any Reimbursement Mortgage on any New Property that is granted after the date hereof (collectively, the "Reimbursement Mortgages"); and (ii) each of the other mortgages, deeds to secure debt and/or deeds of trust identified in the Reimbursement Agreement as the "Bond Mortgages" (other than the Bond Mortgage, if any, with respect to the Property), including any Bond Mortgage on a New Property that is granted after the date hereof (collectively, the "Subject Bond Mortgages"). Each of the other Reimbursement Mortgages and each of the Subject Bond Mortgages is hereinafter referred to individually as an "Other Security Instrument," and collectively as the "Other Security Instruments". The Other Security Instruments existing as of the date of this Multifamily Instrument are identified on Schedule I to this Multifamily Instrument attached hereto. B. CROSS DEFAULT. The failure by Borrower to pay when due any amount payable under any Related Mortgage Note, the Reimbursement Agreement, this Multifamily Instrument or any other Loan Document or the failure (beyond applicable cure periods, if any) by the Borrower to perform or observe any covenant or any obligation of Borrower contained in (a) any other Loan Document, (b) any subordinate financing, (c) that certain Master Reimbursement Agreement as of July 1, 1996, by Borrower and Fannie Mae, as the same may be amended, supplemented or otherwise modified from time to time (the "Reimbursement Agreement"), and (d) any form of public, quasi-public, public/private or private debt and/or equity infusion, grant, subsidy, tax relief or abatement plan, program or other form of assistance, shall, at Lender's option, in its discretion, constitute a default under this Multifamily Instrument and the other Loan Documents. Any such default by Borrower under this Multifamily Instrument shall: (i) entitle Lender, at its option, in its discretion, to invoke any of the remedies set forth in Paragraph 27 of the Instrument or as otherwise afforded by law or equity; and (ii) at Lender's option, in its discretion, constitute a default by Borrower under any or all of the Other Security Instruments and the Reimbursement Agreement. C. WAIVER OF MARSHALLING RIGHTS. Borrower waives all rights to have all or part of the Property described in this Instrument and/or the mortgaged property described in any of the Other Security Instruments marshalled upon any foreclosure of this Instrument or any of the Other Security Instruments. Lender shall have the right to sell, and any court in which foreclosure proceedings may be brought shall have the right to order a sale of the Property described in this Instrument or the mortgaged property described in any of the Other Security Instruments as a whole or in separate parcels, in any order that Lender may designate. Borrower makes this waiver for itself, for all persons and entities claiming through or under Borrower and for persons and entities who may acquire a lien on all or any part of the Property described in this Instrument or in the mortgaged property described in any of the Other Security Instruments, or on any interest therein. D. LEASES. All leases of the residential housing units in the Property must (a) be legally valid, binding and enforceable obligations of the tenants, (b) comply with all applicable laws and (c) satisfy the standards of the Fannie Mae Delegated Underwriting and Servicing Guide in its present form as of the date of any such lease. E. MORTGAGE EXPENSES. Should Lender (or "Servicer" as such term is defined in the Reimbursement Agreement) pay any Mortgage Expenses (as hereinafter defined), Borrower shall on demand immediately reimburse Lender (or Servicer, as applicable) for the full amount of such Mortgage Expenses paid by Lender (or Servicer, as applicable). For purposes of this paragraph E, "Mortgage Expenses" shall mean the cost of real estate taxes, appraisal fees, insurance fees, legal fees and any other expenses which may be required to maintain the priority of, or to protect or enforce Lender's rights in, the Multifamily Instrument, including (i) fees and expenses of the servicer engaged by Fannie Mae to service and administer the Mortgage Loans which are not paid by Borrower, (ii) fees and expenses paid to maintain in full force and effect or realize the benefit of any insurance with respect to the Multifamily Instrument and (iii) any fees advanced on behalf of Borrower by Fannie Mae to any Related Trustee or Issuer. F. CHARGES; LIENS. Uniform Covenant 4 of the Instrument ("Charges; Liens") is amended to add the following provisions at the end thereof: Provided that Borrower is not in breach of any of its covenants, obligations or agreements under this Instrument and no event of default has occurred and is continuing under the Reimbursement Agreement or any other Loan Document, Borrower shall not be required to pay or discharge any obligation imposed upon Borrower by this paragraph 4 so long as Borrower has given written notice of the same to Lender and is in good faith and at its sole cost and expense diligently contesting the same or the validity thereof by appropriate legal proceedings, which proceedings must operate to prevent the collection thereof or realization thereon, the sale or forfeiture of the Property or any portion thereof to satisfy the same; provided, however, that during such contest (i) Borrower shall, at the option of Lender, provide security reasonably satisfactory to Lender and sufficient in Lender's reasonable judgment to cover the -2- amount of the contested obligations, with interest on such obligations (to the extent interest would be due the obligee) for that period that such proceedings may reasonably be expected to take, and of any additional interest, charge, fine, penalty, fee or expense arising from or incurred as a result of such contest, (ii) the title company insuring the Property agrees to insure over any potential lien that may result from such contest, and (iii) if at any time the payment of any obligation imposed upon Borrower by this paragraph 4 shall become necessary to prevent (a) the delivery of a tax deed conveying the Property or any portion thereof, or (b) the sale of the tax lien therefor because of non-payment or (c) the imposition of any penalty, fine, charge, fee, cost or expense on Lender, then Borrower shall pay the same in sufficient time to prevent the occurrence of any of the foregoing. G. CONDEMNATION PROCEEDS; RESTORATION OF PROPERTY. Uniform Covenant 11 of the Instrument ("Condemnation") is amended to add the following provision at the end thereof: Lender shall permit Borrower to apply any such awards, payments, proceeds or damages, after deduction of Lender's expenses incurred in the collection of such amounts, to the payment of repairs to the Property if all of the following conditions are met: (i) Borrower is not in breach or default of any provision of the Instrument, the Reimbursement Agreement or any other Loan Document; (ii) Lender determines that there will be sufficient funds to restore and repair the Property to a condition approved by Lender; (iii) Lender determines that the rental income of the Property, after restoration and repair of the Property to a condition approved by Lender, will be sufficient to meet all operating costs and other expenses, payments for reserves and loan repayment obligations relating to the Property; (iv) Lender determines that restoration and repair of the Property to a condition approved by Lender will be completed prior to the earlier of either (1) the maturity date of the Fannie Mae Credit Facility or (2) within one year of the date of the loss or casualty to the Property; and (v) Lender determines that upon the restoration and repair of the Property there will not have been a material dimunition in the value of the Property since the date immediately preceding the condemnation. H. LEASES. Uniform Covenant 16 of the Instrument ("Leases of the Property") is modified by adding the phase "entered into hereafter" after the words "All leases of the Property" in the third (3rd) sentence of such Uniform Covenant 16. I. ACCELERATION IN CASE OF BORROWER'S INSOLVENCY. Uniform covenant 18 of the Instrument is amended to read as follows: ACCELERATION IN CASE OF BORROWER'S INSOLVENCY. In the event (i) Borrower shall (A) commence a voluntary case under the Federal bankruptcy laws (as now or hereafter in effect), (B) file a petition seeking to take advantage of any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, debt adjustment, winding up or composition or adjustment of debts, (C) consent to or fail to contest in a timely and appropriate manner any petition filed against it in an involuntary case under such bankruptcy laws or other laws, (D) apply for or consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of a substantial part of its property, domestic or foreign, (E) admit in writing its inability to pay, or generally not be paying, its debts as they become due, (F) make a general assignment for the benefit of creditors, (G) assert that it has no liability or obligations under the Note, this -3- Instrument or any of the other Loan Documents, or (H) take any action for the purpose of effecting any of the foregoing; or (ii) a case or other proceedings shall be commenced against Borrower in any court of competent jurisdiction seeking (A) relief under the Federal bankruptcy laws (as now or hereafter in effect) or under any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, or (B) the appointment of a trustee, receiver, custodian, liquidator or the like of Borrower or of all or a substantial part of the property, domestic or foreign, of Borrower, and any such case or proceeding shall continue undismissed or unstayed for a period of 60 consecutive calendar days, or any order granting the relief requested in any such case or proceeding against Borrower (including an order for relief under such Federal bankruptcy laws) shall be entered, or (iii) there is an attachment, execution or other judicial seizure of any portion of Borrower's property and such seizure is not discharged within ten calendar days, then Lender may, at Lender's option, declare all of the sums secured by this Instrument to be immediately due and payable without prior notice to Borrower, and Lender may invoke any remedies permitted by paragraph 27 of this Instrument. Any attorney's fees and other expenses incurred by Lender in connection with Borrower's bankruptcy or any of the other aforesaid events shall be additional indebtedness of Borrower secured by this Instrument pursuant to paragraph 8 hereof. J. NON-IMPAIRMENT. Except as supplemented and/or modified by this Special Rider, all of the terms, covenants and conditions of the Other Security Instruments and the other loan documents executed in connection therewith shall remain in full force and effect. K. MODIFICATION OF SINGLE ASSET REQUIREMENTS. Paragraph J of the Rider is amended to read as follows: J. Single Purpose Entity. Borrower covenants and agrees that Borrower shall at all times during the term of this Instrument comply with the covenants set forth in Sections 2.2(i) and 2.3(k) of the Reimbursement Agreement and that Borrower shall not violate the provisions of subsections 2.3(a)(iii) or 2.3(a)(iv) of the Reimbursement Agreement. L. GRANT OF INTEREST IN CERTAIN FUNDS. Without limiting the generality of the first (1st) sentence of Uniform Covenant 15 of the Instrument and pursuant to the Uniform Commercial Code, Borrower hereby grants, pledges and assigns to Lender all of Borrower's right, title and interest in and to all funds and accounts and investments of funds and accounts now or hereafter held by each Related Bond Trustee pursuant to the Indentures, including any and all loan funds, escrow funds, revenue funds, debt service funds, reserve funds, redemption funds and other funds and securities and other instruments comprising investments of any of the foregoing and interest and other income derived from any of the foregoing, all to be held in trust in accordance with the terms of the Indentures. M. NOTICES. Uniform Covenant 20 of the Instrument is amended to read as follows: All notices, directions, certificates or other communications hereunder shall be given by certified or registered mail, return receipt requested, OR by overnight courier addressed to the appropriate notice address set forth below. Any of the parties hereto may, by such notice described above, designate any further or different address -4- to which subsequent notices, certificates or other communications shall be sent without any requirement of execution of any amendment to this Instrument. Any such notice, certificate or communication shall be deemed to have been given as of the date of actual delivery or the date of failure to deliver by reason of refusal to accept delivery or changed address of which no notice was given pursuant to this paragraph 20. Unless otherwise directed by Fannie Mae, all notices from Borrower pursuant to this Instrument shall also be given to the Servicer in accordance with this paragraph 20. The notice addresses are as follows: (a) if to Borrower: OTC Apartments Limited Partnership 1873 South Bellaire Street, 17th Floor Denver, Colorado 80222 Attn: Vice Chairman (b) if to Fannie Mae: if by mail or overnight courier: Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, DC 20016 Attn: Senior Vice President Multifamily Activities if by messenger: Fannie Mae 3939 Wisconsin Avenue, N.W. Washington, DC 20016 Attn: Senior Vice President Multifamily Activities in each case, with copies to: Fannie Mae Southwest Regional Office Two Galleria Tower 13455 Noel Road, Suite 600 Dallas, Texas 75240 Attn: Regional Vice President Multifamily Activities and to: Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, DC 20016 Attn: Multifamily Mortgage Operations Manager, Multifamily Deliveries (c) if to Servicer: GMAC Commercial Mortgage Corporation 650 Dresher Road Horsham, Pennsylvania 19044-8015 Attn: Barry Moore N. TRANSFERS OF THE PROPERTY OR INTERESTS IN BORROWER. (a) Definitions For purposes of this Instrument, the following terms have the respective meanings set forth below: (i) The term "TRANSFER" means (A) a sale, assignment, pledge, transfer or other disposition (whether -5- voluntary or by operation of law) of, for the granting or creating of a lien, encumbrance or security interest in, any of Borrower's estate, rights, title or interest in the Property, or any portion thereof, or (B) a sale, assignment, pledge, transfer or other disposition of any interest in Borrower, its General Partner, AIMCO REIT or in AIMCO OP, or (C) the issuance or other creation of new ownership interests in Borrower, its General Partner, AIMCO REIT or in AIMCO OP, or (D) a merger or consolidation of Borrower, its General Partner, AIMCO REIT or AIMCO OP, or (E) the reconstitution of Borrower, its General Partner, AIMCO REIT or AIMCO OP from one type of entity to another type of entity. (ii) A "CHANGE OF CONTROL" shall mean the earliest to occur of: (A) the date an Acquiring Person becomes (by acquisition, consolidation, merger or otherwise), directly or indirectly, the beneficial owner of more than forty percent (40%) of the total Voting Equity Capital of AIMCO REIT then outstanding, or (B) the date on which AIMCO REIT shall cease to hold (whether directly or indirectly through a wholly owned intermediary entity such as AIMCO-LP, Inc. or AIMCO-GP, Inc.) 50.1% or more of the limited partnership interests in AIMCO OP or (C) the date of which AIMCO REIT shall cease for any reason to own 100% of the Voting Equity Capital (or any other securities) of the General Partner of Borrower, or (D) the replacement (other than solely by reason of retirement at age sixty-five or older, death or disability) of 50% or more of the board of directors or trustees, if applicable) of the members of the board of directors (or trustees, if applicable) of AIMCO REIT over a one-year period where such replacement shall not have been approved by a vote of at least a majority of the board of directors (or trustees, if applicable) of AIMCO REIT then still in office who either were members of such board of directors (or trustees, if applicable) at the beginning of such one-year period or whose election as members of the board of directors (or trustees, if applicable) was previously so approved. (iii) An "ACQUIRING PERSON" shall mean a "PERSON" or "GROUP OF PERSONS" within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended; PROVIDED. HOWEVER, that notwithstanding the foregoing, "ACQUIRING PERSON" shall not be deemed to include any member of the Borrower Control Group unless such member has, directly or indirectly, disposed of, sold or otherwise transferred to, or encumbered or restricted (whether by means of voting trust agreement or otherwise) for the benefit of an Acquiring Person, all or any portion of the Voting Equity Capital of AIMCO REIT directly or indirectly owned or controlled by such member or such member directly or indirectly votes all or any portion of the Voting Equity Capital of AIMCO REIT, directly or indirectly, owned or controlled by such member for the taking of any action which, directly or indirectly, constitutes or would result in a Change of Control, in which event such member of the Borrower Control Group shall be deemed to constitute an Acquiring Person to the -6- extent of the Voting Equity Capital of AIMCO REIT owned or controlled by such member. (iv) "BORROWER CONTROL GROUP" shall mean Terry Considine, Peter K. Kompaniez, Richard S. Ellwood, J. Landis Martin, Thomas L. Rhodes and John D. Smith. (v) A "PERSON" shall mean an individual, an estate, a trust, a corporation, a partnership, a limited liability company or any other organization or entity (whether governmental or private). (vi) "SECURITY" shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended. (vii) "VOTING EQUITY CAPITAL" shall mean Securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the board of directors (or Persons performing similar functions). (viii) "AIMCO REIT" shall mean Apartment Investment and Management Company, a corporation organized and existing under the laws of the State of Maryland. (ix) "AIMCO OP" shall mean AIMCO Properties, L.P., a limited partnership organized and existing under the laws of the State of Delaware. (x) "GENERAL PARTNER" shall mean "AIMCO/OTC QRS, INC., a corporation organized and existing under the laws of the State of Delaware. (b) ACCELERATION OF THE LOAN UPON TRANSFERS OF THE PROPERTY OR SIGNIFICANT INTERESTS Subject to clause (c) hereof, Lender may, at Lender's option, declare all sums secured by this Instrument immediately due and payable and Lender may invoke any remedies permitted by paragraph 27 of this Instrument if, without Lender's prior written consent, any of the following shall occur: (i) a Transfer of all or any part of the Property or any interest in the Property; or (ii) a Transfer of any interest in Borrower or the General Partner; or (iii) a Change in Control. (c) No Acceleration of the Loan For Transfers Caused by Certain Events Notwithstanding the foregoing provisions of this covenant, Lender shall not be entitled to declare sums secured by this Instrument immediately due and payable or to invoke any remedy permitted by paragraph 27 of this Instrument solely upon the occurrence of any of the following: (i) A Transfer that occurs by inheritance, devise, or bequest or by operation of law upon the death of a natural person who is an owner of an indirect ownership interest in the Borrower. (ii) The grant of a leasehold interest in individual dwelling units for a term of two years or less and leases for commercial uses provided that (A) commercial leases do not exceed 5 percent (5%) of -7- (1) the rentable space of the Property (measured as required by Lender) or (2) the rental income from the Property, (B) no such commercial leasehold interest contains an option to purchase the Property, and (C) all such commercial leasehold interests, in the aggregate, (1) do not adversely affect the value of the Property and (2) are coincidental to the current use of the Property for multifamily residential purposes. (iii) A sale or other disposition of obsolete or worn out personal property which is contemporaneously replaced by comparable personal property of equal or greater value which is free and clear of liens, encumbrances and security interests other than those created by the Loan Documents. (iv) The creation of a mechanic's or materialmen's lien or judgment lien against the Property which is released of record or otherwise remedied to Lender's satisfaction, within thirty (30) days of the date of creation. (v) The grant of an easement, if prior to the granting of the easement Borrower causes to be submitted to Lender all information required by Lender to evaluate the easement, and if Lender determines that the easement will not materially affect the operation of the Property or Lender's interest in the Property and Borrower pays to Lender on demand, all costs and expenses incurred by Lender in connection with reviewing Borrower's request. Lender shall not unreasonably withhold its consent to (A) the grant of a utility easement serving the Property to a publicly operated utility, or (B) the grant of an easement related to expansion or widening of roadways, provided that such easement is in form and substance reasonably acceptable to Lender and does not materially and adversely affect the access, use or marketability of the Property. (vi) The Transfer of shares of common stock, limited partnership interests or other beneficial or ownership interests or other forms of securities in AIMCO REIT or AIMCO OP, and the issuance of all varieties of convertible debt, equity and other similar securities of AIMCO REIT or AIMCO OP, and the subsequent Transfer of such securities; provided, however, that no Change in Control occurs as a result of such Transfer, either upon such Transfer or upon the subsequent conversion to equity of such convertible debt or other securities. (vii) The issuance by AIMCO REIT or AIMCO OP of additional common stock, limited partnership interests or other beneficial or ownership interests, convertible debt, equity and other similar securities, and the subsequent Transfer of such convertible debt or securities; provided, however, that no Change in Control occurs as the result of such Transfer, either upon such Transfer or upon the subsequent conversion to equity of such convertible debt or other securities. (viii) A Transfer that occurs pursuant to Section 4.5 of the Reimbursement Agreement. (ix) A Transfer that occurs pursuant to Section 4.7 of the Reimbursement Agreement. -8- (x) So long as AIMCO REIT owns 100% of the stock of AIMCO-LP, Inc., a Transfer of limited partnership interests that results in AIMCO-LP, Inc. owning not less than 50.1% of the limited partnership interests in AIMCO OP. O. CHOICE OF LAW; CONSENT TO JURISDICTION. The provisions of Section 7.8 and Section 7.9 of the Reimbursement Agreement are hereby incorporated by reference herein as fully set forth therein. [REMAINDER OF PAGE INTENTIONALLY BLANK; SEE ATTACHED SIGNATURE PAGE] -9- IN WITNESS WHEREOF, the parties hereto have executed this Special Rider or have caused the same to be executed by their respective representatives thereunto duly authorized. Signed and BORROWER: Delivered in the Presence of: OTC APARTMENTS LIMITED PARTNERSHIP, a Florida limited partnership By: AIMCO/OTC QRS, INC., a Delaware limited corporation, its sole General Partner /s/ Sharon Phillips - --------------------- /s/ Donna R. Gallup By: /s/ H. Alcock - --------------------- ---------------------------------- Harry Alcock Vice President EX-10.100 42 EXHIBIT 10.100 WHEN RECORDED MAIL TO After recording return to: Lolly Avant - ------------------------------- Stewart National Title Services 1980 Post Oak, Suite 610 Houston, Texas 77056 SN# ---------------------------- SPACE ABOVE THIS LINE FOR RECORDER'S USE - -------------------------------------------------------------------------------- MULTIFAMILY DEED OF TRUST, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT THIS DEED OF TRUST (herein "Instrument") is made as of the 1st day of July 1996 among the Trustor/Grantor, OTC APARTMENTS LIMITED PARTNERSHIP, Federal Internal Revenue Service Taxpayer Identification Number 94-3224702, whose address is 1873 South Bellaire Street, 17th Floor, Denver, Colorado 80222 (herein "Borrower"), the Public Trustee of Jefferson County (herein "Trustee"), and the Beneficiary, FEDERAL NATIONAL MORTGAGE ASSOCIATION ("Fannie Mae") a corporation organized and existing under the laws of the United States whose address is c/o GMAC COMMERCIAL MORTGAGE CORPORATION, 650 Dresher Road, Horsham, Pennsylvania 19044 (herein "Lender"). This Instrument is granted for the benefit of Fannie Mae in connection with that certain Master Reimbursement Agreement as of even date herewith between Fannie Mae and Borrower(as the same may be modified, amended, restated or otherwise supplemented form time to time, the "Reimbursement Agreement") pursuant to which Fannie Mae has agreed to extend certain credit enhancement to the Borrower pursuant to certain Related Fannie Mae Pass-Through Certificates and in connection with certain mortgage loans made to Borrower by various issuers. Notwithstanding the use of the term "Lender" in this Instrument, such term shall not be construed to mean or imply that Fannie Mae is the originator of such mortgage loans and the term "Lender" shall mean Fannie Mae as the provider of such credit enhancement and its successors, assigns and transferees. (Capitalized terms not otherwise defined in this Instrument the Rider or the Special Rider shall have the meanings ascribed thereto in the Reimbursement Agreement. BORROWER, in consideration of the indebtedness herein recited and the trust herein created, irrevocably grants, conveys and assigns to Trustee, in trust, with power of sale, the following described property located in Westminster, Jefferson County, State of Colorado: SEE EXHIBIT "A" ATTACHED HERETO AND INCORPORATED HEREIN. THIS INSTRUMENT IS AMENDED AND SUPPLEMENTED IN CERTAIN RESPECTS AS SET FORTH IN THE RIDER TO MULTIFAMILY INSTRUMENT (THE "RIDER" AND SPECIAL RIDER TO MULTIFAMILY INSTRUMENT (THE "SPECIAL RIDER"). BOTH DATED AS OF THE DATE OF THIS INSTRUMENT ATTACHED HERETO AND INCORPORATED HEREIN BY THIS REFERENCE. IN THE EVENT OF ANY INCONSISTENCY BETWEEN THE PRINTED PORTIONS OF THIS INSTRUMENT AND THE PROVISIONS OF THE RIDER OR SPECIAL RIDER. THE PROVISIONS OF THE RIDER OR SPECIAL RIDER, AS APPLICABLE, SHALL GOVERN, IN THE EVENT OF ANY INCONSISTENCY BETWEEN THE PROVISIONS OF THE RIDER AND THE PROVISIONS OF THE SPECIAL RIDER. THE PROVISIONS OF THE SPECIAL RIDER SHALL GOVERN. Form 4006 (page 1 of 8 pages) TOGETHER with all buildings, improvements and tenements now or hereafter erected on the property, and all heretofore or hereafter vacated alleys and streets abutting the property, and all easements, rights, appurtenances, rents (subject however to the assignment of rents to Lender herein), royalties, mineral, oil and gas rights and profits, water, water rights, and water stock appurtenant to the property, and all fixtures, machinery, equipment, engines, boilers, incinerators, building materials, appliances and goods of every nature whatsoever now or hereafter located in, or on, or used, or intended to be used in connection with the property, including, but not limited to, those for the purposes of supplying or distributing heating, cooling, electricity, gas, water, air and light; and all elevators, and related machinery and equipment, fire prevention and extinguishing apparatus, security and access control apparatus, plumbing, bath tubs, water heaters, water closets, sinks, ranges, stoves, refrigerators, dishwashers, disposals, washers, dryers, awnings, storm windows, storm doors, screens, blinds, shades, curtains and curtain rods, mirrors, cabinets, panelling, rugs, attached floor coverings, furniture, pictures, antennas, trees and plants, and any and all other additional items of personal property described in Exhibit "B" attached hereto and incorporated herein; all of which, including replacements and additions thereto, shall be deemed to be and remain a part of the real property covered by this Instrument; and all of the foregoing, together with said property are herein referred to as the "Property". TO SECURE TO LENDER (a) payment and performance by Borrower of each and every obligation, covenant and agreement of the Borrower contained in the Reimbursement Agreement, including, without limitation, all amounts due Lender as reimbursement for amounts provided by Lender under the Reimbursement Agreement, all as more particularly described in the Reimbursement Agreement [as used in this Instrument the Rider or the Special Rider, the term "Note" shall mean and refer to the Reimbursement Agreement]; (b) the payment of all other sums, with interest thereon, advanced in accordance herewith to protect the security of this Instrument; and (c) the performance of the covenants and agreements of Borrower contained in this Instrument (collectively, the "Secured Obligations"). The maturity date of the Secured Obligations is August 1, 2016. Borrower covenants that Borrower is lawfully seised of the estate hereby conveyed and has the right to grant, convey and assign the Property, that the Property is unencumbered, and that Borrower will warrant and defend generally the title to the Property against all claims and demands, subject to any easements and restrictions listed in a schedule of exceptions to coverage in any title insurance policy insuring Lender's interest in the Property. Form 4006 (page 2 of 8 pages) UNIFORM COVENANTS. Borrower and Lender covenant and agree as follows: 1. PAYMENT FOR PRINCIPAL AND INTEREST. Borrower shall promptly pay when due the principal of and interest on the indebtedness evidenced by the Note, any prepayment and late charges provided in the Note and all other sums secured by this Instrument. 2. FUNDS OF TAXES, INSURANCE AND OTHER CHARGES. Subject to applicable law or to a written waiver by Lender. Borrower shall pay to Lender on the day monthly installments of principal or interest are payable under the Note (or on another day designated in writing by Lender), until the Note is paid in full, a sum (herein "Funds") equal to one-twelfth of (a) the yearly water and sewer rates and taxes and assessments which may be levied on the Property, (b) the yearly ground rents, if any, (c) the yearly premium installments for fire and other hazard insurance, rent loss insurance and such other insurance covering the Property as Lender may require pursuant to paragraph 5 hereof, (d) the yearly premium installments for mortgage insurance, if any. Any waiver by Lender of a requirement that Borrower pay such Funds may be revoked by Lender, in Lender's sole discretion, at any time upon notice in writing to Borrower. Lender may require Borrower to pay to Lender, in advance, such other Funds for other taxes, charges, premiums, assessments and impositions in connection with Borrower or the Property which Lender shall reasonably deem necessary to protect Lender's interests ( herein "Other Impositions"). Unless otherwise provided by applicable law, Lender may require Funds for Other Impositions to be paid by Borrower in a lump sum or in periodic installments, at Lender's option. The Funds shall be held in an institution(s) the deposits or accounts of which are insured or guaranteed by a Federal or state agency (including Lender if Lender is such an institution). Lender shall apply the Funds to pay said rates, rents, taxes, assessments, insurance premiums and Other Impositions so long as Borrower is not in breach of any covenant or agreement of Borrower in this Instrument. Lender shall make no charge for so holding and applying the Funds, analyzing said account or for verifying and compiling said assessments and bills, unless Lender pays Borrower interest, earnings or profits on the Funds and applicable law permits Lender to make such a charge. Borrower and Lender may agree in writing at the time of execution of this Instrument that interest on the Funds shall be paid to Borrower, and unless such agreement is made or applicable law requires interest, earnings or profits to be paid. Lender shall not be required to pay Borrower any interest, earnings or profits on the Funds. Lender shall give to Borrower, without charge, an annual accounting of the Funds in Lender's normal format showing credits and debits to the Funds and the purpose for which each debit to the Funds was made. The funds are pledged as additional security for the sum secured by this Instrument. If the amount of the Funds held by Lender at the time of the annual accounting thereof shall exceed the amount deemed necessary by Lender to provide for the payment of water and sewer rates, taxes, assessments, insurance premiums, rents and Other Impositions, as they fall due, such excess shall be credited to Borrower on the next monthly installment or installments of Funds due. If at any time the amount of the Funds held by Lender shall be less than the amount deemed necessary by Lender to pay water and sewer rates, taxes, assessments, insurance premiums, rents and Other Impositions, as they fall due, Borrower shall pay to Lender any amount necessary to make up the deficiency within thirty days after notice from Lender to Borrower requesting payment thereof. Upon Borrower's breach of any covenant or agreement of Borrower in this Instrument, Lender may apply, in any amount and in any order as Lender shall determine in Lender's sole discretion, any Funds held by Lender at the time of application (i) to pay rates, rents, taxes, assessments, insurance premiums and Other Impositions which are now or will hereafter become due, or (ii) as a credit against sums secured by this Instrument. Upon payment in full of all sums secured by this Instrument, Lender shall promptly refund to Borrower any Funds held by Lender. 3. APPLICATION OF PAYMENTS. Unless applicable law provides otherwise, all payments received by Lender from Borrower under the Note or this Instrument shall be applied by Lender in the following order of priority: (i) amounts payable to Lender by Borrower under paragraph 2 hereof; (ii) interest payable on the Note; (iii) principal of the Note; (iv) interest payable on advances made pursuant to paragraph 8 hereof; (v) principal of advances made pursuant to paragraph 8 hereof; (vi) any other sums secured by this Instrument in such order as Lender, at Lender's option, may determine; provided, however, that Lender may, at Lender's option, apply any sums payable pursuant to paragraph 8 hereof prior to interest on and principal of the Note, but such application shall not otherwise affect the order of priority of application specified in this paragraph 3. 4. CHARGES; LIENS. Borrower shall pay all water and sewer rates, rents, taxes, assessments, premiums, and Other Impositions attributable to the Property at Lender's option in the manner provided under paragraph 2 hereof or, if not paid in such manner, by Borrower making payment, when due, directly to the payee thereof, or in such other manner as Lender may designate in writing. Borrower shall promptly furnish to Lender all notices of amounts due under this paragraph 4, and in the event Borrower shall make payment directly, Borrower shall promptly furnish to Lender receipts evidencing such payments. Borrower shall promptly discharge any lien which has, or may have, priority over or equality with, the lien of this Instrument, and Borrower shall pay, when due, the claims of all persons supplying labor or materials to or in connection with the Property. Without Lender's prior written permission, Borrower shall not allow any lien inferior to this Instrument to be perfected against the Property. 5. HAZARD INSURANCE. Borrower shall keep the improvements now existing or hereafter erected on the Property insured by carriers at all times satisfactory to Lender against loss by fire, hazards included within the term "extended coverage", rent loss and such other hazards, casualties, liabilities and contingencies as Lender shall require and in such amounts and for such period as Lender shall require. All premiums on insurance policies shall be paid, at Lender's option, in the manner provided under paragraph 2 hereof, or by Borrower making payment, when due, directly to the carrier, or in such other manner as Lender may designate in writing. All insurance policies and renewals thereof shall be in a form acceptable to Lender and shall include a standard mortgage clause in favor of and in form acceptable to Lender. Lender shall have the right to hold the policies, and Borrower shall promptly furnish to Lender all renewal notices and all receipts of paid premiums. At least thirty days prior to the expiration date of a policy, Borrower shall deliver to Lender a renewal policy in form satisfactory to Lender. In the event of loss, Borrower shall give immediate written notice to the insurance carrier and to Lender. Borrower hereby authorizes and empowers Lender as attorney-in-fact for Borrower to make proof of loss, to adjust and compromise any claim under insurance policies, to appear in and prosecute any action arising from such insurance policies, to collect and receive insurance proceeds, and to deduct therefrom Lender's expenses incurred in the collection of such proceeds; provided however, that nothing contained in this paragraph 5 shall require Lender to incur any expense or take any action hereunder. Borrower further authorizes Lender, at Lender's option, (a) to hold the balance of such proceeds to be used to reimburse Borrower for the cost of reconstruction or repair of the Property or (b) to apply the balance of such proceeds to the payment of the sums secured by this Instrument, whether or not then due, in the order of application set forth in paragraph 3 hereof. If the insurance proceeds are held by Lender to reimburse Borrower for the cost of restoration and repair of the Property, the Property shall be restored to the equivalent of its original condition or such other condition as Lender may approve in writing. Lender may, at Lender's option, condition disbursement of said proceeds on Lender's approval of such plans and specifications of an architect satisfactory to Lender, contractor's cost estimates, architect's certificates, waivers of liens, sworn statements of mechanics and materialmen and such other evidence of costs, percentage completion of construction, application of payments, and satisfaction of liens as Lender may reasonably require. If the insurance proceeds are applied to the payment of the sums secured by this Instrument, any such application of proceeds to principal shall not extend or postpone the due dates of the monthly installments referred to in paragraphs 1 and 2 hereof. If the Property is sold pursuant to paragraph 27 hereof or if Lender acquires title to the Property, Lender shall have all of the right, title and interest of Borrower in and to any insurance policies and unearned premiums thereon and in and to the proceeds resulting from any damage to the Property prior to such sale or acquisition. 6. PRESERVATION AND MAINTENANCE OF PROPERTY. [Illegible] Borrower (a) shall not commit waste or permit impairment or deterioration of the Property, (b) shall not abandon the Property, (c) shall restore or repair promptly and in a good and workmanlike manner all Form 4006 (page 3 of 8 pages) or any part of the Property to the equivalent of its original condition, or such other condition as Lender may approve in writing, in the event of any damage, injury or loss thereto, whether or not insurance proceeds are available to cover in whole or in part the costs of such restoration or repair, (d) shall keep the Property, including improvements, fixtures, equipment, machinery and appliances thereon in good repair and shall replace fixtures, equipment, machinery and appliances on the Property when necessary to keep such items in good repair, (e) shall comply with all laws, ordinances, regulations and requirements of any governmental body applicable to the Property, (f) shall provide for professional management of the Property by a residential rental property manager satisfactory to Lender pursuant to a contract approved by Lender in writing, unless such requirement shall be waived by Lender in writing, (g) shall generally operate and maintain the Property in a manner to ensure maximum rentals, and (h) shall give notice in writing to Lender of and, unless otherwise directed in writing by Lender, appear in and defend any action or proceeding purporting to affect the Property, the security of this Instrument or the rights or powers of Lender. Neither Borrower nor any tenant or other person shall remove, demolish or alter any improvement now existing or hereafter erected on the Property or any fixture, equipment, machinery or appliance in or on the Property except when incident to the replacement of fixtures, equipment, machinery and appliances with items of like kind. 7. USE OF PROPERTY. Unless required by applicable law or unless Lender has otherwise agreed in writing, Borrower shall not allow changes in the use for which all or any part of the Property was intended at the time this Instrument was executed. Borrower shall not initiate or acquiesce in a change in the zoning classification of the Property without Lender's prior written consent. 8. PROTECTION OF LENDER'S SECURITY. If Borrower fails to perform the covenants and agreements contained in this Instrument, or if any action or proceeding is commenced which affects the Property or title thereto or the interest of Lender therein, including, but not limited to, eminent domain, insolvency, code enforcement, or arrangements or proceedings involving a bankrupt or decedent, then Lender at Lender's option may make such appearances, disburse such sums and take such action as Lender deems necessary, in its sole discretion, to protect Lender's interest, including, but not limited to, (i) disbursement of attorney's fees, (ii) entry upon the Property to make repairs, (iii) procurement of satisfactory insurance as provided in paragraph 5 hereof. Any amounts disbursed by Lender pursuant to this paragraph 8, with interest thereon, shall become additional indebtedness of Borrower secured by this Instrument. Unless Borrower and Lender agree to other terms of payment, such amounts shall be immediately due and payable and shall bear interest from the date of disbursement at the rate stated in the Note unless collection from Borrower of interest at such rate would be contrary to applicable law, in which event such amounts shall bear interest at the highest rate which may be collected from Borrower under applicable law. Borrower hereby covenants and agrees that Lender shall be subrogated to the lien of any mortgage or other lien discharged, in whole or in part, by the indebtedness secured hereby. Nothing contained in this paragraph 8 shall require Lender to incur any expense or take any action hereunder. 9. INSPECTION. Lender may make or cause to be made reasonable entries upon and inspections of the Property. 10. BOOKS AND RECORDS. The provisions of Section 2.2(d) of the Reimbursement Agreement are incorporated herein by this reference as if fully set forth herein. 11. CONDEMNATION. Borrower shall promptly notify Lender of any action or proceeding relating to any condemnation or other taking, whether direct or indirect, of the Property, or part thereof, and Borrower shall appear in and prosecute any such action or proceeding unless otherwise directed by Lender in writing. Borrower authorizes Lender, at Lender's option, as attorney-in-fact for Borrower, to commence, appear in and prosecute, in Lender's or Borrower's name, any action or proceeding relating to any condemnation or other taking of the Property, whether direct or indirect, and to settle or compromise any claim in connection with such condemnation or other taking. The proceeds of any award, payment or claim for damages, direct or consequential, in connection with any condemnation or other taking, whether direct or indirect, of the Property, or part thereof, or for conveyances in lieu of condemnation, are hereby assigned to and shall be paid to Lender subject, if this Instrument. Borrower authorizes Lender to apply such awards, payments, proceeds or damages, after the deduction of Lender's expenses incurred in the collection of such amounts, at Lender's option, to restoration or repair of the Property or to payment of the sums secured by this Instrument, whether or not then due, in the order of application set forth in paragraph 3 hereof, with the balance, if any, to Borrower. Unless Borrower and Lender otherwise agree in writing, any application of proceeds to principal shall not extend or postpone the due date of the monthly installments referred to in paragraphs 1 and 2 hereof. Borrower agrees to execute such further evidence of assignment of any awards, proceeds, damages or claims arising in connection with such condemnation or taking as Lender may require. 12. BORROWER AND LIEN NOT RELEASED. From time to time, Lender may, at Lender's option, without giving notice to or obtaining the consent of Borrower, Borrower's successors or assigns or of any junior lienholder or guarantors, without liability on Lender's part and notwithstanding Borrower's breach of any covenant or agreement of Borrower in this Instrument, extend the time for payment of said indebtedness or any part thereof, reduce the payments thereon, release anyone liable on any of said indebtedness, accept a renewal note or notes therefor, modify the terms and time of payment of said indebtedness, release from the lien of this Instrument any part of the Property, take or release other or additional security, reconvey any part of the Property, consent to any map or plan of the Property, consent to the granting of any easement, join in any extension or subordination agreement, and agree in writing with Borrower to modify the rate of interest or period of amortization of the Note or change the amount of the monthly installments payable thereunder. Any actions taken by Lender pursuant to the terms of this paragraph 12 shall not affect the obligation of Borrower or Borrower's successors or assigns to pay the sums secured by this Instrument and to observe the covenants of Borrower contained herein, shall not affect the guaranty or any person, corporation, partnership or other entity for payment of the indebtedness secured hereby, and shall not affect the lien or priority of lien hereof on the Property. Borrower shall pay Lender a reasonable service charge, together with such title insurance premiums and attorney's fees as may be incurred at Lender's option, for any such action if taken at Borrower's request. 13. FORBEARANCE BY LENDER NOT A WAIVER. Any forbearance by Lender in exercising any right or remedy hereunder, or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of any right or remedy. The acceptance by Lender of payment of any sum secured by this Instrument after the due date of such payment shall not be a waiver of Lender's right to either require prompt payment when due of all other sums so secured or to declare a default for failure to make prompt payment. The procurement of insurance or the payment of taxes or other liens or charges by Lender shall not be a waiver of Lender's right to accelerate the maturity of the indebtedness secured by this Instrument, nor shall Lender's receipt of any awards, proceeds or damages under paragraphs 5 and 11 hereof operate to cure or waive Borrower's default in payment of sums secured by this Instrument. Form 4006 (page 4 of 8 pages) 14. ESTOPPEL CERTIFICATE. Borrower shall within ten days of a written request from Lender furnish Lender with a written statement, duly acknowledged, setting forth the sums secured by this Instrument and any right of set-off, counterclaim or other defense which exists against such sums and the obligations of this Instrument. 15. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. This Instrument is intended to be a security agreement pursuant to the Uniform Commercial Code for any of the items specified above as part of the Property which, under applicable law, may be subject to a security interest pursuant to the Uniform Commercial Code, and Borrower hereby grants Lender a security interest in said items. Borrower agrees that Lender may file this Instrument, or a reproduction thereof, in the real estate records or other appropriate index, as a financing statement for any of the items specified above as part of the Property. Any reproduction of this Instrument or of any other security agreement or financing statement shall be sufficient as a financing statement. In addition, Borrower agrees to execute and deliver to Lender, upon Lender's request, any financing statements, as well as extensions, renewals and amendments thereof, and reproductions of this Instrument in such a form as Lender may require to perfect a security interest with respect to said items. Borrower shall pay all costs of filing such financing statements and any extensions, renewals, amendments and releases thereof, and shall pay all reasonable costs and expenses of any record searches for financing statements Lender may reasonably require. Without the prior written consent of Lender, Borrower shall not create or suffer to be created pursuant to the Uniform Commercial Code any other security interest in said items, including replacements and additions thereto. Upon Borrower's breach of any covenant or agreement of Borrower contained in this Instrument, including the covenants to pay when due all sums secured by this Instrument, Lender shall have the remedies of a secured party under the Uniform Commercial Code and, at Lender's option, may also invoke the remedies provided in paragraph 27 of this Instrument as to such items. In exercising any of said remedies, Lender may proceed against the items of real property and any items of personal property specified above as part of the Property separately or together and in any order whatsoever, without in any way affecting the availability of Lender's remedies under the Uniform Commercial Code or of the remedies provided in paragraph 27 of this Instrument. 16. LEASES OF THE PROPERTY. Borrower shall comply with and observe Borrower's obligations as landlord under all leases of the Property or any part thereof. Borrower will not lease any portion of the Property for non-residential use except with the prior written approval of Lender. Borrower, at Lender's request, shall furnish Lender with executed copies of all leases now existing or hereafter made of all or any part of the Property, and all leases now or hereafter entered into will be in form and substance subject to the approval of Lender. All leases of the Property shall specifically provide that such leases are subordinate to this Instrument; that the tenant attorns to Lender, such attornment to be effective upon Lender's acquisition of title to the Property; that the tenant agrees to execute such further evidences of attornment as Lender may from time to time request; that the attornment of the tenant shall not be terminated by foreclosure; and that Lender may, at Lender's option, accept or reject such attornments. Borrower shall not, without Lender's written consent, execute, modify surrender or terminate, either orally or in writing, any lease now existing or hereafter made of all or any part of the Property providing for a term of three years or more, permit an assignment or sublease of such a lease without Lender's written consent, or request or consent to the subordination of any lease of all or any part of the Property to any lien subordinate to this Instrument. If Borrower becomes aware that any tenant proposes to do, or is doing, any act or thing which may give rise to any right of set-off against rent, Borrower shall (i) take such steps as shall be reasonably calculated to prevent the accrual of any right to a set-off against rent, (ii) notify Lender therof and of the amount of said set-offs, and (iii) within ten days after such accrual, reimburse the tenant who shall have acquired such right to set-off or take such other steps as shall effectively discharge such set-off and as shall assure that rents thereafter due shall continue to be payable without set-off or deduction. Upon Lender's request, Borrower shall assign to Lender, by written instrument satisfactory to Lender, all leases now existing or hereafter made of all or any part of the Property and all security deposits made by tenants in connection with such leases of the Property. Upon assignment by Borrower to Lender of any leases of the Property, Lender shall have all of the rights and powers possessed by Borrower prior to such assignment and Lender shall have the right to modify, extend or terminate such existing leases and to execute new leases, in Lender's sole discretion. 17. REMEDIES CUMULATIVE. Each remedy provided in this Instrument is distinct and cumulative to all other rights or remedies under this Instrument or afforded by law or equity, and may be exercised concurrently, independently, or successively, in any order whatsoever. 18. ACCELERATION IN CASE OF BORROWER'S INSOLVENCY. SEE SPECIAL RIDER 19. TRANSFERS OF THE PROPERTY OR BENEFICIAL INTERESTS IN BORROWER; ASSUMPTION. SEE SPECIAL RIDER 20. NOTICE. SEE RIDER 21. SUCCESSORS AND ASSIGNS BOUND; JOINT AND SEVERAL LIABILITY; AGENTS; CAPTIONS. The covenants and agreements herein contained shall bind, and the rights hereunder shall inure to, the respective successors and assigns of Lender and Borrower, subject to the provisions of paragraph 19 hereof. All covenants and agreements of Borrower shall be joint and several. In exercising any rights hereunder or taking any actions provided for herein, Lender may act through its employees, agents or independent contractors as authorized by Lender. The captions and headings of the paragraphs of this Instrument are for convenience only and are not to be used to interpret or define the provisions hereof. 22. UNIFORM MULTIFAMILY INSTRUMENT; GOVERNING LAW; SEVERABILITY. This form of multifamily instrument combines uniform covenants for national use and non- uniform covenants with limited variations by jurisdiction to constitute uniform security instrument covering real property and related fixtures and personal property. This Instrument shall be governed by the law of the jurisdiction in which the Property is located. In the event that any provision of this Instrument or the Note conflicts with applicable law, such conflict shall not affect other provisions of this Instrument or the Note which can be given effect without the conflicting provisions, and to this end the provisions of this Form 4006 (page 5 of 8 pages) Instrument and the Note are declared to be severable. In the event that any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower is interpreted so that any charge provided for in this Instrument or in the Note, whether considered separately or together with other charges levied in connection with this Instrument and the Note, violates such law, and Borrower is entitled to the benefit of such law, such charge is hereby reduced to the extent necessary to eliminate such violation. The amounts, if any, previously paid to Lender in excess of the amounts payable to Lender pursuant to such charges as reduced shall be applied by Lender to reduce the principal of the indebtedness evidenced by the Note. For the purpose of determining whether any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower has been violated, all indebtedness which is secured by this Instrument or evidenced by the Note and which constitutes interest, as well as other charges levied in connection with such indebtedness which constitute interest, shall be deemed to be allocated and spread over the stated term of the Note. Unless otherwise required by applicable law, such allocation and spreading shall be effected in such a manner that the rate of interest computed thereby is uniform throughout the stated term of the Note. 23. WAIVER OF STATUTE OF LIMITATIONS. Borrower hereby waives the right to assert any statute of limitations as a bar to the enforcement of the lien of this Instrument or to any action brought to enforce the Note or any other obligation secured by this Instrument. 24. WAIVER OF MARSHALLING. Notwithstanding the existence of any other security interests in the Property held by Lender or by any other party, Lender shall have the right to determine the order in which any or all of the Property shall be subjected to the remedies provided herein. Lender shall have the right to determine the order in which any or all portions of the indebtedness secured hereby are satisfied from the proceeds realized upon the exercise of the remedies provided herein. Borrower, any party who consents to this Instrument and any party who now or hereafter acquires a security interest in the Property and who has actual or constructive notice hereof hereby waives any and all right to require the marshalling of assets in connection with the exercise of any of the remedies permitted by applicable law or provided herein. 26. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION. As part of the consideration for the indebtedness evidenced by the Note, Borrower hereby absolutely and unconditionally assigns and transfers to Lender all the rents and revenues of the Property, including those now due, past due, or to become due by virtue of any lease or other agreement for the occupancy or use of all or any part of the Property, regardless of to whom the rents and revenues of the Property are payable. Borrower hereby authorizes Lender or Lender's agents to collect the aforesaid rents and revenues and hereby directs each tenant of the Property to pay such rents to Lender or Lender's agents; provided, however, that prior to written notice given by Lender to Borrower of the breach by Borrower of any covenant or agreement of Borrower in this Instrument, Borrower shall collect and receive all rents and revenues of the Property as trustee for the benefit of Lender and Borrower, to apply the rents and revenues so collected to the sums secured by this Instrument in the order provided in paragraph 3 hereof with the balance, so long as no such breach has occurred, to the account of Borrower, it being intended by Borrower and Lender that this assignment of rents constitutes an absolute assignment and not an assignment for additional security only. Upon delivery of written notice by Lender to Borrower of the breach by Borrower of any covenant or agreement of Borrower in this Instrument, and without the necessity of Lender entering upon and taking and maintaining full control of the Property in person, by agent or by a court-appointed receiver, Lender shall immediately be entitled to possession of all rents and revenues of the Property as specified in this paragraph 26 as the same become due and payable, including but not limited to rents then due and unpaid, and all such rents shall immediately upon delivery of such notice be held by Borrower as trustee for the benefit of Lender only; provided, however, that the written notice by Lender to Borrower of the breach by Borrower shall contain a statement that Lender exercises its rights to such rents. Borrower agrees that commencing upon delivery of such written notice of Borrower's breach by Lender to Borrower, each tenant of the Property shall make such rents payable to and pay such rents to Lender or Lender's written demand to each tenant therefor, delivered to each tenant personally, by mail or by delivering such demand to each rental unit, without any liability on the part of said tenant to inquire further as to the existence of a default by Borrower. Borrower hereby covenants that Borrower has not executed any prior assignment of said rents that remain in effect as of the date hereof, that Borrower has not performed, and will not perform, any acts or has not executed, and will not execute, any instrument which would prevent Lender from exercising its rights under this paragraph 26, and that at the time of execution of this Instrument there has been no anticipation or prepayment of any of the rents of the Property for more than two months prior to the due dates of such rents. Borrower covenants that Borrower will not hereafter collect or accept payment of any rents of the Property more than two months prior to the due dates of such rents. Borrower further covenants that Borrower will execute and deliver to Lender such further assignments of rents and revenues of the Property as Lender may from time to time request. Upon Borrower's breach of any covenant or agreement of Borrower in this Instrument, Lender may in person, by agent or by a court-appointed receiver, regardless of the adequacy of Lender's security, enter upon and take and maintain full control of the Property in order to perform all acts necessary and appropriate for the operation and maintenance thereof including, but not limited to, the execution, cancellation or modification of leases, the collection of all rents and revenues of the Property, the making of repairs to the Property and the execution or termination of contracts providing for the management or maintenance of the Property, all on such terms as are deemed best to protect the security of this Instrument. In the event Lender elects to seek the appointment of a receiver for the Property upon Borrower's breach of any covenant or agreement of Borrower in this Instrument, Borrower hereby expressly consents to the appointment of such receiver. Lender or the receiver shall be entitled to receive a reasonable fee for so managing the Property. All rents and revenues collected subsequent to delivery of written notice by Lender to Borrower of the breach by Borrower of any covenant or agreement of Borrower in this Instrument shall be applied first to the costs, if any, of taking control of and managing the Property and collecting the rents, including, but not limited to, attorney's fees, receiver's fees, premiums on receiver's bonds, costs of repairs to the Property, premiums on insurance policies, taxes, assessments and other charges on the Property, and the costs of discharging any obligation or liability of Borrower as lessor or landlord of the Property and then to the sums secured by this Instrument. Lender or the receiver shall have access to the books and records used in the operation and maintenance of the Property and shall be liable to account only for those rents actually received. Lender shall not be liable to Borrower, anyone claiming under or through Borrower or anyone having an interest in the Property by reason of anything done or left undone by Lender under this paragraph 26. If the rents of the Property are not sufficient to meet the costs, if any, of taking control of and managing the Property and collecting the rents, any funds expended by Lender for such purposes shall become indebtedness of Borrower to Lender secured by this Instrument pursuant to paragraph 8 hereof. Unless Lender and Borrower agree in writing to other terms of payment, such amounts shall be payable upon notice from Lender to Borrower requesting payment thereof and shall bear interest from the date of disbursement at the rate stated in the Note unless payment of interest at such rate would be contrary to applicable law, in which event such amounts shall bear interest at the highest rate which may be collected from Borrower under applicable law. Any entering upon and taking and maintaining of control of the Property by Lender or the receiver and any application of rents as provided herein shall not cure or waive any default hereunder or invalidate any other right or remedy of Lender under applicable law or provided herein. This assignment of rents of the Property shall terminate at such time as this Instrument ceases to secure indebtedness held by Lender. Form 4006 (page 6 of 8 pages) Non-Uniform Covenants, Borrower and Lender further as follows: 27. ACCELERATION; REMEDIES. Upon Borrower's breach of any covenant or agreement of Borrower in this Instrument, including, but not limited to, the covenants to pay when due any sums secured by this Instrument, Lender at Lender's option may declare all of the sums secured by this Instrument to be immediately due and payable without further demand and may invoke the power of sale and other remedies permitted by applicable law or provided herein. Lender shall be entitled to collect all costs and expenses incurred in pursuing such remedies, including, but not limited to, attorney's fees and costs of documentary evidence, abstracts and title reports. If Lender invokes the power of sale, Trustee shall give notice of sale in the manner provided by the laws of Colorado to Borrower and to such other persons as the laws of Colorado prescribe, and shall sell the Property according to the laws of Colorado. Trustee may sell the Property at the time and place and under the terms designated in the notice of sale in one or more parcels and in such order as Trustee may determine. Trustee may postpone sale of all or any parcel of the Property by public announcement at the time and place of any previously scheduled sale. Lender or Lender's designee may purchase the Property at any sale. Trustee shall deliver to the purchases Trustee's certificate describing the Property and the time when the purchaser will be entitled to Trustee's deed thereto. The recitals in Trustee's deed shall be prima facie evidence of the truth of the statements made therein. Trustee shall apply the proceeds of the sale in the following order: (a) to all costs and expenses of the sale; including, but not limited to Trustee's and attorney's fees and costs of title evidence; (b) to all sums secured by this Instrument in such order as Lender, in Lender's sole discretion, directs; and (c) the excess, if any, to the person or persons legally entitled thereto. 28. RELEASE. Upon payment of all sums secured by this Instrument, Lender shall request Trustee to release this Instrument and shall produce for Trustee duly cancelled all notes evidencing indebtedness secured by this Instrument. Trustee shall release this Instrument without further inquiry or liability. Borrower shall pay all costs of recordation, if any, and Borrower shall pay the statutory Trustee's fees. 29. WAIVER OF HOMESTEAD. Borrower hereby waives all right of homestead exemption in the Property. IN WITNESS WHEREOF, Borrower has executed this Instrument or has caused the same to be executed by its representatives thereunto duly authorized. BORROWER: OTC APARTMENTS LIMITED PARTNERSHIP, a Florida limited partnership By: AIMCO/OTC QRS, INC., a Delaware corporation, its sole General Partner By: /s/ Harry Alcock (SEAL) --------------------- Harry Alcock Vice President BORROWER'S ADDRESS: 1873 Bellaire Street, 17th Floor Denver, Colorado 80222 ACKNOWLEDGMENT STATE OF FLORIDA ) ) ss: COUNTY OF HILLSBOROUGH ) The foregoing instrument was acknowledged before me this 28th day of June, 1996, Harry Alcock, Vice President of AIMCO/OTC QRS, INC., a Delaware corporation, general partner on behalf of OTC APARTMENTS LIMITED PARTNERSHIP, a Florida limited partnership. WITNESS my hand and Official seal /s/ Patricia C. Sheppard ------------------------------- Printed/Typed Name: ----------- Notary Public My Commission expires: [SEAL] August 19, 1998 Form 4006 (page 7 of 8 pages) EX-10.101 43 EXHIBIT 10.101 RIDER TO MULTIFAMILY INSTRUMENT THIS RIDER TO MULTIFAMILY INSTRUMENT (the "Rider") is made as of the 1st day of July 1996, and is incorporated into and shall be deemed to amend and supplement the Multifamily Deed of Trust of the same date (the "Instrument"), given by the undersigned OTC APARTMENTS LIMITED PARTNERSHIP a Florida limited partnership (the "Borrower"), for the benefit of FEDERAL NATIONAL MORTGAGE ASSOCIATION, a federally chartered corporation, C/O GMAC COMMERCIAL MORTGAGE CORPORATION, 650 Dresher Road, Horsham, PA 19044-8015 [Insert address of Lender], and its successors, assigns and transferees (the "Lender"), covering the property described in the Instrument and defined therein as the "Property," located at: 9050 Vance Street, Westminster, Colorado - ------------------------------------------------------------------------------- [Property Address] The Property is located entirely within STATE OF COLORADO [INSERT NAME OF STATE IN WHICH THE PROPERTY IS LOCATED] (the "Property Jurisdiction"). The term "Loan Documents" when used in this Rider shall mean, collectively, the following documents: (i) the Instrument, as modified by this Rider, the Special Rider and any other riders to the Instrument given by Borrower to Lender and covering the Property; (ii) the Reimbursement Agreement (as defined in the Instrument); (iii) any other documents or agreements as shall be required to evidence or secure the obligations of the Borrower or otherwise arising under, related to, or made in connection with, the Reimbursement Agreement, as such Loan documents may be amended from time to time, including, but not limited to, any Collateral Agreement (as defined below) or O&M Agreements (as defined below) and that certain Cash Management, Security, Pledge and Assignment Agreement between Borrower and Lender dated as of even date herewith; and (iv) the other Security Instruments (as defined in the Special Rider). The covenants and agreements of this Rider, and the covenants and agreements of any other riders to the Instrument given by Borrower to Lender and covering the Property (including without limitation the Special Rider), shall be incorporated into and shall amend and supplement the covenants and agreements of the Instrument as if this Rider and the other riders were a part of the Instrument and all references to the Instrument in the Loan Documents shall mean the Instrument as so amended and supplemented. ADDITIONAL COVENANTS. In addition to the covenants and agreements made in the Instrument, Borrower and Lender further covenant and agree as follows: A. FUNDS FOR TAXES, INSURANCE AND OTHER CHARGES Uniform Covenant 2 of the Instrument ("Funds for Taxes, Insurance and Other Charges") is amended to change the title to "Funds for Taxes, Insurance and Other Charges; Collateral Agreements." Existing Uniform Covenant 2 is amended to become Uniform Covenant 2A. The following new Uniform Covenant 2B is added at the end of Uniform Covenant 2A: 2B. REPLACEMENT RESERVE AGREEMENT, COMPLETION/REPAIR AGREEMENT, ACHIEVEMENT AGREEMENT AND OTHER COLLATERAL AGREEMENTS (a) REPLACEMENT RESERVE AGREEMENT Borrower shall deposit with Lender the amounts required by the Replacement Reserve and Security Agreement (the "Replacement Reserve Agreement") between Borrower and Lender (if any) dated as of the date hereof, at the time required by the Replacement Reserve Agreement, and shall perform all other obligations as and when required pursuant to the Replacement Reserve Agreement. (b) COMPLETION/REPAIR AGREEMENT Borrower shall deposit with Lender the amount required by the Completion/Repair and Security Agreement (the "Completion/Repair Agreement") between Borrower and Lender (if any), dated the date hereof, at the times required by the Completion/Repair Agreement, and shall perform all other obligations as and when required pursuant to the Completion/Repair Agreement. (d) COLLATERAL AGREEMENTS As used herein, the term "Collateral Agreement" shall mean any of the Replacement Reserve Agreement, the Completion/Repair Agreement, the Achievement Agreement and any similar agreement which has been entered into between Borrower and Lender in connection with the Reimbursement Agreement. B. APPLICATION OF PAYMENTS Uniform Covenant 3 of the Instrument ("Application of Payments") is amended to add the following sentence at the end thereof: Notwithstanding the preceding sentence, (i) Lender shall be permitted to apply any partial payment received from Borrower in any manner determined by Lender and in any order of priority of application as determined by Lender, in Lender's sole discretion, and (ii) upon breach of any covenant or agreement of Borrower in the Instrument or any other Loan Document. Lender shall be permitted to apply any funds held pursuant to the Reimbursement Agreement. RIDER TO MULTIFAMILY INSTRUMENT WITH SEPARATE EXCEPTIONS TO NON-RECOURSE GUARANTY - -FANNIE MAE UNIFORM INSTRUMENT Form 4058 6/93 page 1 of 8 pages any Collateral Agreement* in any manner which is permitted pursuant to such Collateral Agreement* and in any order of priority of application as determined by Lender, in Lender's sole discretion. * any Operations and Maintenance Agreement or Cash Management Agreement C. HAZARD INSURANCE; RESTORATION OF PROPERTY Uniform Covenant 5 of the Instrument ("Hazard Insurance") is amended to add the following sentence at the end thereof: Lender shall not exercise Lender's option to apply insurance proceeds to the payment of the sums secured by the Instrument if all of the following conditions are met: (i) Borrower is not in breach or default of any provision of the Instrument, the Note or any other Loan Document; (ii) Lender determines that there will be sufficient funds to restore and repair the Property to a condition approved by Lender; (iii) Lender determines that the rental income of the Property, after restoration and repair of the Property to a condition approved by Lender, will be sufficient to meet all operating costs and other expenses, payments for reserves and loan repayment obligations relating to the Property; and (iv) Lender determines that restoration and repair of the Property to a condition approved by Lender will be completed prior to the earlier of either (1) the maturity date of the Note or (2) within one year of the date of the loss or casualty to the Property; and (v) Lender determines that upon restoration and repair of the Property, there will not been a material diminution in the value of the Property since the date immediately preceding the casualty. D. ENVIRONMENTAL HAZARDS PROVISION In addition to Borrower's covenants and agreements under Uniform Covenant 6 of the Instrument ("Preservation and Maintenance of Property; [Illegible]"). Borrower further covenants and agrees that Borrower shall not: (a) cause or permit the presence, use, generation, manufacture, production, processing, installation, release, discharge, storage (including aboveground and underground storage tanks for petroleum or petroleum products), treatment, handling, or disposal of any Hazardous Materials (as defined below) (excluding the safe and lawful use and storage of quantities of Hazardous Materials customarily used in the operation and maintenance of comparable multifamily properties or for normal household purposes) on or under the Property, or in any way affecting the Property or its value, or which may form the basis for any present or future demand, claim or liability relating to contamination, exposure, cleanup or other remediation of the Property or; (b) cause or permit the transportation to, from or across the Property of any Hazardous Material (excluding the safe and lawful use and storage of quantities of Hazardous Materials customarily used in the operation and maintenance of comparable multifamily properties or for normal household purposes); or (c) permit, cause or exacerbate any occurrence or condition on the Property that is or may be in violation of Hazardous Materials Law (as defined below). (The matters described in (a), (b) and (c) above are referred to collectively below as "Prohibited Activities or Conditions.") Except with respect to any matters which have been disclosed in writing by Borrower to Lender prior to the date of the Instrument, or matters which have been disclosed in an environmental hazard assessment report of the Property received by Lender prior to the date of the Instrument, Borrower represents and warrants that it has not at any time caused or permitted any Prohibited Activities or Conditions and to the best of its knowledge, no Prohibited Activities or Conditions exist or have existed on or under the Property. Borrower shall take all appropriate steps (including but not limited to appropriate lease provisions) to prevent its employees, agents, and contractors, and all tenants and other occupants on the Property, from causing, permitting or exacerbating any Prohibited Activities or Conditions. Borrower shall not lease or allow the sublease of all or any portion of the Property for non-residential use to any tenant or subtenant that, in the ordinary course of its business, would cause, permit or exacerbate any Prohibited Activities or Conditions, and all non-residential leases and subleases shall provide that tenants and sub-tenants shall not cause, permit or exacerbate any Prohibited Activities or Conditions. If any Prohibited Activities or Conditions exist on the Property **, Borrower shall comply in a timely manner with, and cause all employees, agents, and contractors of Borrower and any other persons present on the Property to so comply with, (1) any program of operations and maintenance ("O&M Program") relating to the Property that is acceptable to Lender with respect to one or more Hazardous Materials (which O&M Program may be set forth in an agreement of Borrower (an "O&M Agreement")) and all other obligations set forth in any O&M Agreement ***, and (2) all Hazardous Materials Laws. Any O&M Program shall be performed by qualified personnel. All costs and expenses of the O&M Program shall be paid by Borrower, including without limitation Lender's fees and costs incurred in connection with the monitoring and review of the O&M Program and Borrower's performance thereunder. If Borrower fails to timely commence or diligently continue and complete the O&M Program and comply with any O&M Agreement, then Lender may, at Lender's option, declare all of the sums secured by the Instrument to be immediately due and payable, and Lender may invoke any remedies permitted by paragraph 27 of the Instrument without limiting the foregoing, Borrower shall take prompt remedial action in the event of the discovery of any Prohibited Activities or Conditions and obtain Lender's prior written**** Borrower represents that Borrower has not received, and has no knowledge of the issuance of, any claim, citation or notice of any pending or threatened suits, proceedings, orders, or governmental inquiries or opinions involving the Property that allege the violation of any Hazardous Materials Law ("Governmental Actions"). Borrower shall promptly notify Lender in writing of: (i) the occurrence of any Prohibited Activity or Condition on the Property; (ii) Borrower's actual knowledge of the presence on or under any adjoining property of any Hazardous Materials which can reasonably be expected to have a material adverse impact on the Property or the value of the Property, or Borrowers discovery of any occurrence or condition on the Property or any adjoining real property that could cause any restrictions on the ownership, occupancy, transferability or use of the Property under Hazardous Materials Form 4058 6/93 (page 2 of 8 pages) * or if Lender shall otherwise require Borrower to do so in writing in accordance with reasonable commercial practices *** or other remedial action requested by Lender **** approval of such remedial action. Law. (Borrower shall cooperate with any governmental inquiry, and shall comply with any governmental or judicial order which arises from any alleged Prohibited Activities or Conditions; (iii) any Governmental Action; and (iv) any claim made or threatened in writing by any third party against Borrower, Lender, or the Property relating to loss or injury resulting from any Hazardous Materials. Any such notice by Borrower shall not relieve Borrower of, or result in a waiver of any obligation of Borrower under this paragraph D. Borrower shall pay promptly the costs of any environmental audits, studies or investigations (including but not limited to advice of legal counsel) and the removal of any Hazardous Materials from the Property required by Lender as a condition of its consent to any sale or transfer under paragraph 19 of the Instrument of all or any part of the Property or any transfer occurring upon a foreclosure or a deed in lieu of foreclosure or any interest therein, or required by Lender following a reasonable determination by Lender that there may be Prohibited Activities or Conditions on or under the Property. Borrower authorizes Lender and its employees, agents and contractors to enter onto the Property for the purpose of conducting such environmental audits, studies and investigations. Any such costs and expenses incurred by Lender (including but not limited to fees and expenses of attorneys and consultants, whether incurred in connection with any judicial or administrative process or otherwise) which Borrower fails to pay promptly shall become immediately due and payable and shall become additional indebtedness secured by the Instrument pursuant to Uniform Covenant 8 of the Instrument. Borrower shall hold harmless, defend and indemnify Lender and its officers, directors, trustees, employees, and agents from and against all proceedings (including but not limited to Government Actions), claims, damages, penalties, costs and expenses (including without limitation fees and expenses of attorneys and expert witnesses, investigatory fees, and cleanup and remediation expenses, whether or not incurred within the context of the judicial process), arising directly or indirectly from (i) any breach of any representation, warranty, or obligation of Borrower contained in this paragraph D or (ii) the presence or alleged presence of Hazardous Materials on or under the Property. The term "Hazardous Materials," for purposes of this paragraph D, includes petroleum and petroleum products, flammable explosives, radioactive materials (excluding radioactive materials in smoke detectors), polychlorinated biphenyls, lead, asbestos in any form that is or could become friable, hazardous waste, toxic or hazardous substances or other related materials whether in the form of a chemical, element, compound, solution, mixture or otherwise including, but not limited to, those materials defined as "hazardous substances," "extremely hazardous substances," "hazardous chemicals," "hazardous materials," "toxic substances," "solid waste," "toxic chemicals," "air pollutants," "toxic pollutants," "hazardous wastes," "extremely hazardous waste," or "restricted hazardous waste" by Hazardous Materials Law or regulated by Hazardous Materials Law in any manner whatsoever. The term "Hazardous Materials Law," for the purposes of this paragraph D, means all federal, state, and local laws, ordinances and regulations and standards, rules, policies and other binding governmental requirements and any court judgments applicable to Borrower or to the Property relating to industrial hygiene or to environmental or unsafe conditions or to human health including, but not limited to, those relating to the generation, manufacture, storage, handling, transportation, disposal, release, emission or discharge of Hazardous Materials, those in connection with the construction, fuel supply, power generation and transmission, waste disposal or any other operations or processes relating to the Property, and those relating to the atmosphere, soil, surface and ground water, wetlands, stream sediments and vegetation on, under, in or about the Property. The representations, warranties, covenants, agreements, indemnities and undertakings of Borrower contained in this paragraph D shall be in addition to any and all other obligations and liabilities that Borrower may have to Lender under applicable law. The representations, warranties, covenants, agreements, indemnities and undertakings of Borrower contained in this paragraph D shall continue and survive notwithstanding the satisfaction, discharge, release, assignment, termination, subordination or cancellation of the Instrument or the payment in full of the principal of and interest on the Note and all other sums payable under the Loan Documents or the foreclosure of the Instrument or the tender or delivery of a deed in lieu of foreclosure or the release of any portion of the Property from the lien of the Instrument, except with respect to any Prohibited Activities or Conditions or violation of any of the Hazardous Materials Laws, which first commences and occurs after the satisfaction, discharge, release, assignment, termination or cancellation of the Instrument following the payment in full of the principal of and interest on the Note and all other sums payable under the Loan Documents or which first commences or occurs after the actual dispossession from the entire Property of the Borrower and all entities which control, are controlled by, or are under common control with the Borrower (each of the foregoing persons or entities is hereinafter referred to as a "Responsible Party") following foreclosure of the Instrument or acquisition of the Property by a deed in lieu of foreclosure. Nothing in the foregoing sentence shall relieve the Borrower from any liability with respect to any Prohibited Activities or Conditions or violation of Hazardous Materials Laws where such Prohibited Activities or Conditions or violation of Hazardous Materials Laws commences or occurs, or is present as a result of, any act or omission by any Responsible Party or by any person or entity acting on behalf of a Responsible Party. Form 4058 6/93 (page 3 of 8 pages) F. TRANSFERS OF THE PROPERTY OR SIGNIFICANT INTERESTS IN BORROWER; TRANSFER FEES Uniform Covenant 19 of the Instrument ("Transfers of the Property or Beneficial Interests in Borrower, Assumption") is amended to read as set forth below: TRANSFERS OF THE PROPERTY OR SIGNIFICANT INTERESTS IN BORROWER; TRANSFER FEES (a) DEFINITIONS For purposes of the Instrument (and the Rider), the following terms have the respective meanings set forth below: (1) The term "Key Principal" means the entities who execute(s) the Payment Guaranty to Lender dated the date of the Note and any person or entity who subsequently execute an Guaranty to Lender in connection with the Note. (2) The term "Transfer" means a sale, assignment, substitution, transfer or other disposition (whether voluntary or by operation of law) of, or the granting or creating of a lien, encumbrance or security interest in, the Property or in ownership interests, and the issuance or other creation of ownership interests in an entity and the reconstitution of one type of entity to another type of entity. (3) A "Significant Interest" in any entity shall mean the following: (i) if the entity is a general partnership or a joint venture, (A) any partnership interest in the general partnership, or (B) any interest of a joint venturer in a joint venture: (ii) if the entity is a limited partnership, (A) any limited partnership interest in the entity, or (B) any general partnership interest in the entity; (iii)if the entity is a limited liability company, any membership interest (iv) if the entity is a corporation, any voting stock in the corporation (v) if the entity is a trust, any beneficial interest in such trust (b) ACCELERATION OF THE LOAN UPON TRANSFERS OF THE PROPERTY OR SIGNIFICANT INTERESTS Lender may, at Lender's option, declare all sums secured by the Instrument immediately due and payable and Lender may invoke any remedies permitted by paragraph 27 of the Instrument if, without the Lender's prior written consent, any of the following shall occur: (1) a Transfer of all or any part of the Property or any interest in the Property; (2) a Transfer of any Significant Interest in Borrower; (3) a Transfer of any Significant Interest in a corporation, partnership, limited liability company, joint venture, or trust which owns a Significant Interest in the Borrower; (4) if the Borrower is a trust, or if any trust owns a Significant Interest in the Borrower, the addition, deletion or substitution of a trustee of such trust, which addition, deletion or substitution has not been approved by Lender; or Form 4058 6/93 (page 4 of 8 pages) (5) a Transfer of all or any part of any Key Principal's ownership interest (other than limited partnership interests) in the Borrower, or in any other entity which owns, directly or indirectly, through one or more intermediate entities, an ownership interest in the Borrower. (d) NO ACCELERATION OF THE LOAN FOR TRANSFERS CAUSED BY CERTAIN EVENTS Notwithstanding the foregoing provisions of this covenant, Lender shall not be entitled to declare sums secured by the Instrument immediately due and payable or to invoke any remedy permitted by paragraph 27 of the Instrument solely upon the occurrence of any of the following: (1) A Transfer that occurs by inheritance, devise, or bequest or by operation of law upon the death of a natural person who is an owner of the Property or the owner of a direct or indirect ownership interest in the Borrower. (2) The grant of a leasehold interest in individual dwelling units for a term of two years or less and leases for commercial uses as long as commercial leases do not exceed 20 percent of the rentable space of the Property (measured as required by Lender) and provided that all such leasehold interests do not contain an option to purchase the Property. (3) A sale or other disposition of obsolete or worn out personal property which is contemporaneously replaced by comparable personal property of equal or greater value which is free and clear of liens, encumbrances and security interests other than those created by the Loan Documents. (4) The creation of a mechanic's or materialmen's lien or judgment lien against the Property which is released of record or otherwise remedied to Lender's satisfaction, within 30 days of the date of creation. (5) The grant of an easement, if prior to the granting of the easement the Borrower causes to be submitted to Lender all information required by Lender to evaluate the easement, and if Lender determines that the easement will not materially affect the operation of the Property or Lender's interest in the Property and Borrower pays to Lender, on demand, all cost and expenses incurred by Lender in connection with reviewing Borrower's request. (6) A Transfer that occurs pursuant to Section 4.5 or Section 4.7 of the Reimbursement Agreement G. NOTICE Form 4058 6/93 (page 5 of 8 pages) H. GOVERNING LAW SEE SPECIAL RIDER I. ACCELERATION; REMEDIES Covenant 27 of the Instrument ("Acceleration; Remedies") is amended to add the following at the end of the first paragraph: Upon the breach of any covenant or agreement by Borrower in the Instrument, (including, but not limited to, the covenants to pay when due sums secured by the Instrument) or any other Loan Document, Lender, at Lender's option may, in addition to any remedies specified in this covenant, invoke any other remedies provided in any Collateral Agreement. If Borrower is in default under any promissory note (other than the Note) evidencing a loan (the "Subordinate Loan") secured by a security instrument (other than the Instrument) covering all or any portion of the Property (the "Subordinate Instrument") or under any Subordinate Instrument or other loan document executed in connection with the Subordinate Loan, (and whether or not the Borrower has obtained the prior approval of Lender to the placement of such Subordinate Instrument on the Property) which default remains uncured after any applicable cure period, Borrower also then will be in default under the Note and the Instrument. In that event, the entire unpaid principal balance of the Note, accrued interest and any other sums due Lender secured by the Instrument then will become due and payable, at Lender's option. If Lender exercises this option to accelerate, Lender will do so in accordance with the provisions of the Note and the Instrument, and the Lender may invoke any and all remedies permitted by applicable law, the Note, the Instrument, or any of the other Loan Documents. J. SINGLE ASSET BORROWER SEE SPECIAL RIDER K. NON-RECOURSE LIABILITY Form 4058 6/93 (page 6 of 8 pages) The liability of Borrower and any general partner of Borrower (if Borrower is a Partnership) shall be limited to the same extent as provided in Section 3.11 of the Reimbursement Agreement. M. WAIVER OF JURY TRIAL Borrower (i) covenant and agree not to elect a trial by jury with respect to any issue arising under any of the Loan Documents triable by a jury and (ii) waive any right to trial by jury to the extent that any such right shall now or hereafter exist. This waiver of right to trial by jury is separately given, knowingly and voluntarily with the benefit of competent legal counsel by the Borrower, and this waiver is intended to encompass individually each instance and each issue as to which the right to a jury trial would otherwise accrue. Further, Borrower hereby certify that no representative or agent of the Lender (including, but not limited to, the Lender's counsel) has represented, expressly or otherwise, to Borrower that Lender will not seek to enforce the provisions of this paragraph M. Form 4058 6/93 (page 7 of 8 pages) BY SIGNING BELOW, Borrower accepts and agrees to the covenants and agreements contained in this Rider. BORROWER: OTC APARTMENTS LIMITED PARTNERSHIP, a Florida limited partnership By: AIMCO/OTC QRS, INC., a Delaware corporation, its sole General Partner By: /s/ Harry Alcock (SEAL) ---------------------------- Harry Alcock Vice President BORROWER'S ADDRESS: 1873 Bellaire Street, 17th Floor Denver, Colorado 80222 Form 4058 6/93 (page 8 of 8 pages) EX-10.102 44 10.102 SPECIAL RIDER TO MULTIFAMILY INSTRUMENT THIS SPECIAL RIDER TO MULTIFAMILY INSTRUMENT (this "Special Rider") is made as of the 1st day of July, 1996, and is incorporated into and shall be deemed to amend and supplement the Multifamily Deed of Trust, Assignment of Rents and Security Agreement as of even date herewith (the "Instrument"), given by OTC APARTMENTS LIMITED PARTNERSHIP, a Florida limited partnership ("Borrower") for the benefit of FEDERAL NATIONAL MORTGAGE ASSOCIATION, a federally chartered corporation ("Fannie Mae" or "Lender") and covering the property described in the Instrument and located in Jefferson County, Colorado (the "Property"), as amended by that certain Rider to Multifamily Instrument as of the same date (the "Rider") (collectively, with this Special Rider and any other riders to the Instrument given by the Borrower to Lender and covering the Property, the "Multifamily Instrument"). The covenants and agreements of this Special Rider, and the covenants and agreements of any other riders to the Instrument, shall be incorporated into and shall amend and supplement the covenants and agreements of the Instrument as if this Special Rider and the other riders were a part of the Instrument, and all references to the Instrument in the Loan Documents (As defined in the Rider) shall mean the Instrument as so amended and supplemented. Any conflict between the provisions of the Instrument, as amended by the Rider and this Special Rider shall be resolved in favor of this Special Rider. Initially-capitalized terms used in this Multifamily Instrument, which are not defined in this Multifamily Instrument, shall have the meanings given to those terms in the Reimbursement Agreement. ADDITIONAL COVENANTS. Borrower and Lender further covenant and agree as follows: A. Additional Security - Obligations Secured by Other Security Instruments. The term "Secured Obligations" as used in this Multifamily Instrument shall also include, and this Multifamily Instrument shall also secure, the payment and performance of all obligations secured by (i) each of the other mortgages, deeds to secure debt and/or deeds of trust identified in the Reimbursement Agreement as the "REIMBURSEMENT MORTGAGES", including any Reimbursement Mortgage on any New Property that is granted after the date hereof (collectively, the "Reimbursement Mortgages"); and (ii) each of the other mortgages, deeds to secure debt and/or deeds of trust identified in the Reimbursement Agreement as the "Bond Mortgages" (other than the Bond Mortgage, if any, with respect to the Property), including any Bond Mortgage on a New Property that is granted after the date hereof (collectively, the "Subject Bond Mortgages"). Each of the other Reimbursement Mortgages and each of the Subject Bond Mortgages is hereinafter referred to individually as an "Other Security Instrument," and collectively as the "Other Security Instruments". The Other Security Instruments existing as of the date of this Multifamily Instrument are identified on Schedule I to this Multifamily Instrument attached hereto. B. Cross Default. The failure by Borrower to pay when due any amount payable under any Related Mortgage Note, the Reimbursement Agreement, this Multifamily Instrument or any other Loan Document or the failure (beyond applicable cure periods, if any) by the Borrower to perform or observe any covenant or any obligation of Borrower contained in (a) any other Loan Document, (b) any subordinate financing, (c) that certain Master Reimbursement Agreement as of even date herewith by Borrower and Fannie Mae, as the same may be amended, supplemented or otherwise modified from time to time (the "Reimbursement Agreement"), and (d) any form of public, quasi-public, public/private or private debt and/or equity infusion, grant, subsidy, tax relief or abatement plan, program or other form of assistance, shall, at Lender's option, in its discretion, constitute a default under this Multifamily Instrument and the other Loan Documents. Any such default by Borrower under this Multifamily Instrument shall: (i) entitle Lender, at its option, in its discretion, to invoke any of the remedies set forth in Paragraph 27 of the Instrument or as otherwise afforded by law or equity; and (ii) at Lender's option, in its discretion, constitute a default by Borrower under any or all of the Other Security Instruments and the Reimbursement Agreement. C. Waiver of Marshalling Rights. Borrower waives all rights to have all or part of the Property described in this Instrument and/or the mortgaged property described in any of the Other Security Instruments marshalled upon any foreclosure of this Instrument or any of the Other Security Instruments. Lender shall have the right to sell, and any court in which foreclosure proceedings may be brought shall have the right to order a sale of the Property described in this Instrument or the mortgaged property described in any of the Other Security Instruments as a whole or in separate parcels, in any order that Lender may designate. Borrower makes this waiver for itself, for all persons and entities claiming through or under Borrower and for persons and entities who may acquire a lien on all or any part of the Property described in this Instrument or in the mortgaged property described in any of the Other Security Instruments, or on any interest therein. D. Leases. All leases of the residential housing units in the Property must (a) be legally valid, binding and enforceable obligations of the tenants, (b) comply with all applicable laws and (c) satisfy the standards of the Fannie Mae Delegated Underwriting and Servicing Guide in its present form as of the date of any such lease. E. Mortgage Expenses. Should Lender (or "Servicer" as such term is defined in the Reimbursement Agreement) pay any Mortgage Expenses (as hereinafter defined), Borrower shall on demand immediately reimburse Lender (or Servicer, as applicable) for the full amount of such Mortgage Expenses paid by Lender (or Servicer, as applicable). For purposes of this paragraph E, "Mortgage Expenses" shall mean the cost of real estate taxes, appraisal fees, insurance fees, legal fees and any other expenses which may be required to maintain the priority of, or to protect or enforce Lender's rights in, the Multifamily Instrument, including (i) fees and expenses of the servicer engaged by Fannie Mae to service and administer the Mortgage Loans which are not paid by Borrower, (ii) fees and expenses paid to maintain in full force and effect or realize the benefit of any insurance with respect to the Multifamily Instrument and (iii) any fees advanced on behalf of Borrower by Fannie Mae to any Related Trustee or Issuer. F. Charges; Liens. Uniform Covenant 4 of the Instrument ("Charges; Liens") is amended to add the following provisions at the end thereof: Provided that Borrower is not in breach of any of its covenants, obligations or agreements under this Instrument -2- and no event of default has occurred and is continuing under the Reimbursement Agreement or any other Loan Document, Borrower shall not be required to pay or discharge any obligation imposed upon Borrower by this paragraph 4 so long as Borrower has given written notice of the same to Lender and is in good faith and at its sole cost and expense diligently contesting the same or the validity thereof by appropriate legal proceedings, which proceedings must operate to prevent the collection thereof or realization thereon, the sale or forfeiture of the Property or any portion thereof to satisfy the same; provided, however, that during such contest (i) Borrower shall, at the option of Lender, provide security reasonably satisfactory to Lender and sufficient in Lender's reasonable judgment to cover the amount of the contested obligations, with interest on such obligations (to the extent interest would be due the obligee) for that period that such proceedings may reasonably be expected to take, and of any additional interest, charge, fine, penalty, fee or expense arising from or incurred as a result of such contest, (ii) the title company insuring the Property agrees to insure over any potential lien that may result from such contest, and (iii) if at any time the payment of any obligation imposed upon Borrower by this paragraph 4 shall become necessary to prevent (a) the delivery of a tax deed conveying the Property or any portion thereof, or (b) the sale of the tax lien therefor because of non-payment or (c) the imposition of any penalty, fine, charge, fee, cost or expense on Lender, then Borrower shall pay the same in sufficient time to prevent the occurrence of any of the foregoing. G. Condemnation Proceeds; Restoration of Property. Uniform Covenant 11 of the Instrument ("Condemnation") is amended to add the following provision at the end thereof: Lender shall permit Borrower to apply any such awards, payments, proceeds or damages, after deduction of Lender's expenses incurred in the collection of such amounts, to the payment of repairs to the Property if all of the following conditions are met: (i) Borrower is not in breach or default of any provision of the Instrument, the Reimbursement Agreement or any other Loan Document; (ii) Lender determines that there will be sufficient funds to restore and repair the Property to a condition approved by Lender; (iii) Lender determines that the rental income of the Property, after restoration and repair of the Property to a condition approved by Lender, will be sufficient to meet all operating costs and other expenses, payments for reserves and loan repayment obligations relating to the Property; (iv) Lender determines that restoration and repair of the Property to a condition approved by Lender will be completed prior to the earlier of either (1) the maturity date of the Fannie Mae Credit Facility or (2) within one year of the date of the loss or casualty to the Property; and (v) Lender determines that upon the restoration and repair of the Property there will not have been a material diminution in the value of the Property since the date immediately preceding the condemnation. H. Leases. Uniform Covenant 16 of the Instrument ("Leases of the Property") is modified by adding the phase "entered into hereafter" after the words "All leases of the Property" in the third (3rd) sentence of such Uniform Covenant 16. -3- I. Acceleration in Case of Borrower's Insolvency. Uniform covenant 18 of the Instrument is amended to read as follows: ACCELERATION IN CASE OF BORROWER'S INSOLVENCY. In the event (i) Borrower shall (A) commence a voluntary case under the Federal bankruptcy laws (as now or hereafter in effect), (B) file a petition seeking to take advantage of any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, debt adjustment, winding up or composition or adjustment of debts, (C) consent to or fail to contest in a timely and appropriate manner any petition filed against it in an involuntary case under such bankruptcy laws or other laws, (D) apply for or consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of a substantial part of its property, domestic or foreign, (E) admit in writing its inability to pay, or generally not be paying, its debts as they become due, (F) make a general assignment for the benefit of creditors, (G) assert that it has no liability or obligations under the Note, this Instrument or any of the other Loan Documents, or (H) take any action for the purpose of effecting any of the foregoing; or (ii) a case or other proceedings shall be commenced against Borrower in any court of competent jurisdiction seeking (A) relief under the Federal bankruptcy laws (as now or hereafter in effect) or under any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, or (B) the appointment of a trustee, receiver, custodian, liquidator or the like of Borrower or of all or a substantial part of the property, domestic or foreign, of Borrower, and any such case or proceeding shall continue undismissed or unstayed for a period of 60 consecutive calendar days, or any order granting the relief requested in any such case or proceeding against Borrower (including an order for relief under such Federal bankruptcy laws) shall be entered, or (iii) there is an attachment, execution or other judicial seizure of any portion of Borrower's property and such seizure is not discharged within ten calendar days, then Lender may, at Lender's option, declare all of the sums secured by this Instrument to be immediately due and payable without prior notice to Borrower, and Lender may invoke any remedies permitted by paragraph 27 of this Instrument. Any attorney's fees and other expenses incurred by Lender in connection with Borrower's bankruptcy or any of the other aforesaid events shall be additional indebtedness of Borrower secured by this Instrument pursuant to paragraph S hereof. J. Non-Impairment. Except as supplemented and/or modified by this Special Rider, all of the terms, covenants and conditions of the Other Security Instruments and the other loan documents executed in connection therewith shall remain in full force and effect. K. Modification of Single Asset Requirements. Paragraph J of the Rider is amended to read as follows: J. Single Purpose Entity. Borrower covenants and agrees that Borrower shall at all times during the term of this Instrument comply with the covenants set forth in Sections 2.2(i) and 2.3(k) of the Reimbursement Agreement and that Borrower -4- shall not violate the provisions of subsections 2.3(a)(iii) or 2.3(a)(iv) of the Reimbursement Agreement. L. Grant of Interest in Certain Funds. Without limiting the generality of the first (1st) sentence of Uniform Covenant 15 of the Instrument and pursuant to the Uniform Commercial Code, Borrower hereby grants, pledges and assigns to Lender all of Borrower's right, title and interest in and to all funds and accounts and investments of funds and accounts now or hereafter held by each Related Bond Trustee pursuant to the Indentures, including any and all loan funds, escrow funds, revenue funds, debt service funds, reserve funds, redemption funds and other funds and securities and other instruments comprising investments of any of the foregoing and interest and other income derived from any of the foregoing, all to be held in trust in accordance with the terms of the Indentures. M. Notices. Uniform Covenant 20 of the Instrument is amended to read as follows: All notices, directions, certificates or other communications hereunder shall be given by certified or registered mail, return receipt requested, OR by overnight courier addressed to the appropriate notice address set forth below. Any of the parties hereto may, by such notice described above, designate any further or different address to which subsequent notices, certificates or other communications shall be sent without any requirement of execution of any amendment to this Instrument. Any such notice, certificate or communication shall be deemed to have been given as of the date of actual delivery or the date of failure to deliver by reason of refusal to accept delivery or changed address of which no notice was given pursuant to this paragraph 20. Unless otherwise directed by Fannie Mae, all notices from Borrower pursuant to this Instrument shall also be given to the Servicer in accordance with this paragraph 20. The notice addresses are as follows: (a) if to Borrower: OTC Apartments Limited Partnership 1873 South Bellaire Street, 17th Floor Denver, Colorado 80222-4348 Attn: Vice Chairman (b) if to Fannie Mae: if by mail or overnight courier: Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attn: Senior Vice President Multifamily Activities if by messenger: Fannie Mae 3939 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attn: Senior Vice President Multifamily Activities -5- in each case, with copies to: Fannie Mae Southwest Regional Office Two Galleria Tower 13455 Noel Road, Suite 600 Dallas, Texas Attn: Regional Vice President Multifamily Activities and to: Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attn: Multifamily Mortgage Operations Manager, Multifamily Deliveries (c) if to Servicer: GMAC Commercial Mortgage Corporation 650 Dresher Road Horsham, PA. 19044-8015 Attn: Barry Moore 0. Choice of Law; Consent to Jurisdiction. The provisions of Section 7.8 and Section 7.9 of the Reimbursement Agreement are hereby incorporated by reference herein as fully set forth herein. IN WITNESS WHEREOF, the parties hereto have executed this Special Rider or have caused the same to be executed by their respective representatives thereunto duly authorized. BORROWER: -------- OTC APARTMENTS LIMITED PARTNERSHIP, a Florida limited partnership By: AIMCO/OTC QRS, INC., a Delaware limited corporation, its sole General Partner By: /s/ Harry Alcock --------------------------(Seal) Harry Alcock Vice President -10- EX-10.103 45 EXHIBIT 10.103 - -------------------------------------------------------------------------------- AMENDED AND RESTATED LOAN AGREEMENT, AS FURTHER AMENDED AND RESTATED FLORIDA HOUSING FINANCE AGENCY AND OTC APARTMENTS LIMITED PARTNERSHIP Pertaining To FLORIDA HOUSING FINANCE AGENCY MULTI-FAMILY HOUSING REVENUE REFUNDING BONDS 1991 SERIES C (Players Club at Tampa, Suntree at East Bay, Suntree at Orlando, Players Club at Magnolia Bay and Players Club at East Bay Projects) Dated as of June 1, 1991 and Further Amended and Restated as of December 1, 1993 - -------------------------------------------------------------------------------- All of the right, title and interest of the Florida Housing Finance Agency in and to this Amended and Restated Loan Agreement (except for certain reserved rights as set forth herein) are being assigned to Sun Bank, National Association, as Trustee, as security for the above-referenced bonds pursuant to a certain Trust Indenture dated as of June 1, 1991, as amended and restated as of December 1, 1993. TABLE OF CONTENTS PAGE Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Preambles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE I. DEFINITION OF TERMS Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 ARTICLE II REPRESENTATIONS, WARRANTIES AND SPECIAL TAX COVENANTS SECTION 2.01. Express Warranties of the Agency, Exclusion of other Warranties . . . . . . . . . . . . . . 13 SECTION 2.02. General Representations, Warranties and Covenants of Developer . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 2.03. Acquisition, Construction and Completion of Development . . . . . . . . . . . . . . . . 18 SECTION 2.04. [Intentionally Omitted.] . . . . . . . . . . . . . . . . . 20 SECTION 2.05. [Intentionally Omitted.] . . . . . . . . . . . . . . . . . 20 SECTION 2.06. Tax Exempt Status of the Bonds . . . . . . . . . . . . . . 20 SECTION 2.08. Sale of Development . . . . . . . . . . . . . . . . . . . . 22 ARTICLE III THE BONDS, BOND PROCEEDS, THE INDENTURE SECTION 3.01. Issuance of Bonds . . . . . . . . . . . . . . . . . . . . . 24 SECTION 3.02. Bond Proceeds; Investments. . . . . . . . . . . . . . . . . 24 SECTION 3.03. Indenture Approval and Requirements. . . . . . . . . . . . . . . . . . . . . . . 24 ARTICLE IV THE LOAN, PREPAYMENTS, ASSIGNMENTS SECTION 4.01. Loan by Agency . . . . . . . . . . . . . . . . . . . . . . 25 SECTION 4.02. Loan Payments . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 4.03. Credits on Loan . . . . . . . . . . . . . . . . . . . . . . 28 SECTION 4.04. Prepayment Generally . . . . . . . . . . . . . . . . . . . 28 SECTION 4.05. Optional Prepayment of Loan . . . . . . . . . . . . . . . . 28 SECTION 4.06. Extraordinary Optional Prepayment . . . . . . . . . . . . . 30 (i) SECTION 4.07. Event of Determination of Taxability . . . . . . . . . . . . . . . . . . . . . . . 31 SECTION 4.08. Substitution: Extraordinary Prepayment of Loan . . . . . . . . . . . . . . . . . . . 31 SECTION 4.09. Remarketing of Bonds and Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . 32 SECTION 4.10. Mandatory Prepayment of the Loan . . . . . . . . . . . . . 33 SECTION 4.11. Maximum Interest . . . . . . . . . . . . . . . . . . . . . 34 SECTION 4.12. Assignments to Trustee . . . . . . . . . . . . . . . . . . 35 SECTION 4.13. Optional Substitution of Alternate Security . . . . . . . . . . . . . . . . . . . . . . . . 35 SECTION 4.13A. Confirmation . . . . . . . . . . . . . . . . . . . . . . . 39 SECTION 4.13B. Optional Substitution of Alternate Confirmation . . . . . . . . . . . . . . . . . . . . . . 41 SECTION 4.13C. Extensions of Confirmation . . . . . . . . . . . . . . . . 45 SECTION 4.13D. Expiration of Confirmation . . . . . . . . . . . . . . . . 46 SECTION 4.13E. Notices of Extension, Substitution or Replacement of Confirmation . . . . . . . . . . . . . 46 SECTION 4.13F. No Liability of Agency or Developer to Confirming Bank . . . . . . . . . . . . . . 46 SECTION 4.14. Trustee's Expenses . . . . . . . . . . . . . . . . . . . . 46 SECTION 4.15. Conversion of Bond Interest Rate at Option of Developer . . . . . . . . . . . . . . . . . 46 SECTION 4.16. [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . 48 SECTION 4.17. Assignment of Loan Agreement by Developer . . . . . . . . . . . . . . . . . . . . . . . . 48 ARTICLE V THE DEVELOPMENT SECTION 5.01. Payment of Development Costs . . . . . . . . . . . . . . . 50 SECTION 5.02. Permits and Licenses . . . . . . . . . . . . . . . . . . . 50 SECTION 5.03. Annual Review of Management . . . . . . . . . . . . . . . . 50 ARTICLE VI INDEMNIFICATION, PAYMENTS TO AGENCY SECTION 6.01. Indemnification of Agency . . . . . . . . . . . . . . . . . 51 SECTION 6.02. Indemnification of Trustee . . . . . . . . . . . . . . . . 52 ARTICLE VII BREACH OF COVENANTS, REMEDIES SECTION 7.01. Event of Default . . . . . . . . . . . . . . . . . . . . . 54 SECTION 7.02. Remedies for Failure to Perform . . . . . . . . . . . . . . 55 SECTION 7.03. Discontinuance of Proceedings . . . . . . . . . . . . . . . 57 SECTION 7.04. Remedies Cumulative . . . . . . . . . . . . . . . . . . . . 57 SECTION 7.05. Reimbursement of Expenses . . . . . . . . . . . . . . . . . 57 (ii) ARTICLE VIII MISCELLANEOUS SECTION 8.01. Amounts Remaining in Funds and Accounts . . . . . . . . . . . . . . . . . . . . . . . . 58 SECTION 8.02. Limited Obligation of Agency . . . . . . . . . . . . . . . 58 SECTION 8.03. Payments by Credit Enhancer . . . . . . . . . . . . . . . . 58 SECTION 8.03A. Payments by Confirming Bank . . . . . . . . . . . . . . . . 59 SECTION 8.04. Amendment of Agreement . . . . . . . . . . . . . . . . . . 59 SECTION 8.05. Payment . . . . . . . . . . . . . . . . . . . . . . . . . . 59 SECTION 8.06. Counterparts . . . . . . . . . . . . . . . . . . . . . . . 59 SECTION 8.07. Severability . . . . . . . . . . . . . . . . . . . . . . . 59 SECTION 8.08. Term of Agreement . . . . . . . . . . . . . . . . . . . . . 60 SECTION 8.09. Notice of Changes in Fact . . . . . . . . . . . . . . . . . 60 SECTION 8.10. Limited Obligations of Developer . . . . . . . . . . . . . 60 SECTION 8.11. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 61 SECTION 8.12. Applicable Law . . . . . . . . . . . . . . . . . . . . . . 62 SECTION 8.13. Date of This Agreement . . . . . . . . . . . . . . . . . . 63 EXHIBIT A - LEGAL DESCRIPTION OF LAND EXHIBIT B - FORM OF TENANT INCOME CERTIFICATION EXHIBIT C - CERTIFICATE OF CONTINUING PROGRAM COMPLIANCE EXHIBIT D - FORM OF REQUIRED MANAGEMENT PROVISIONS (iii) This AMENDED AND RESTATED LOAN AGREEMENT was made and entered into as of the first day of June, 1991 (the "Original Agreement") and is being further amended and restated as of December 1, 1993 (as so further amended and restated and as the same may be amended or supplemented in the future, this "Agreement" or this "Loan Agreement") by and between the FLORIDA HOUSING FINANCE AGENCY (the "Agency"), a state agency and instrumentality, constituting a public body corporate and politic, duly created, organized and existing under the laws of the State of Florida, and OTC APARTMENTS LIMITED PARTNERSHIP, or its successors or assigns (the "Developer"), a Florida limited partnership; W I T N E S S E T H: WHEREAS, the Agency has been created and organized pursuant to and in accordance with the provisions of the Florida Housing Finance Agency Act, Sections 420.501-420.516, Florida Statutes, as amended (the "Act"), for the purpose, among others, of encouraging the investment of private capital in residential housing to stimulate the construction and rehabilitation of residential housing and to provide construction and permanent mortgage loans for projects; and WHEREAS, the Agency entered into a Loan Commitment (the "Commitment") with the Developer whereby the Agency agreed under certain conditions to authorize the issuance of $48,480,000 Florida Housing Finance Agency Multi-Family Housing Revenue Refunding Bonds, 1991 Series C (Players Club at Tampa, Suntree at East Bay, Suntree at Orlando, Players Club at Magnolia Bay and Players Club at East Bay Projects) (the "Bonds") by the Division of Bond Finance of the State of Florida Department of General Services (the "Division"), on behalf of and in the name of the Agency under the Act to provide funds for the continuation, modification and consolidation of five outstanding mortgage loans assumed by the Developer for the purpose of refunding the Agency's Multi Family Housing Revenue Bonds, 1985 Series J, K, L, M and N (the "1985 Bonds") issued for the purpose of providing permanent financing for five multi family residential developments (collectively, the "Development") located within the State of Florida (the "State") to be occupied by Eligible Tenants, as determined by the Agency in accordance with the Act as in effect on the date of issuance of the 1985 Bonds, and to be occupied partially (at least twenty percent (20%)) by "individuals of low or moderate income, within the intendment of Section 103(b)(4)(A) of the Internal Revenue Code of 1954, as amended as in effect on the date of issuance of the 1985 Bonds (the "1954 Code"), all for the public purpose of assisting persons or families of low, moderate or middle income within the State to afford the costs of decent, safe and sanitary housing; and WHEREAS, on June 17, 1991, the Division issued the Bonds on behalf of and in the name of the Agency; and WHEREAS, pursuant to its lawful authority under the Act, the Developer and the Agency executed the Original Agreement, by the terms of which Original Agreement the Agency lent the proceeds of the Bonds to the Developer (the "Loan") for the purpose of providing financing for the Development; and WHEREAS, the Agency and the Developer entered into the Original Agreement to evidence the Loan when made pursuant to the Act; WHEREAS, at the request of the Developer, the Agency and the Developer desire to amend and restate the Original Agreement to: (i) provide for the issuance by The Sumitomo Bank, Limited, a banking corporation organized under the laws of Japan and acting by and through its Chicago Branch, and the delivery to the Trustee for the benefit of the holders of the Bonds of a confirming letter of credit, (ii) provide for certain changes to the amortization requirements presently applicable to the Loan, and (iii) provide for the principal amount of the Loan that may be optionally prepaid to be credited against the next scheduled amortization installments applicable to the Loan, all as more fully provided in this Agreement; WHEREAS, Section 8.04 of the Original Agreement permits the Agency and the Developer to amend and restate the Original Agreement for the purposes hereinbefore recited, upon the receipt of certain consents and opinions, all of which have been delivered to the Agency; WHEREAS, the Agency has approved the execution of this Agreement, as amended and restated, by resolution adopted on December 10, 1993; and NOW, THEREFORE, the Agency and the Developer, each in consideration of the representations, covenants and agreements of the other as set forth herein, mutually represent, covenant and agree as follows, to wit: -2- ARTICLE I DEFINITION OF TERMS The following are defined terms under this Agreement and shall for all purposes hereof have the meanings herein specified, unless the context clearly otherwise requires: "Act" - The Florida Housing Finance Agency Act, Sections 420.501-420.516, Florida Statutes, as amended. "ADCC" - American Diversified Capital Corporation, a California corporation. "ADCC Note" - The Promissory Note dated June 13, 1991 executed by the Developer to evidence its obligations under the Standby Loan Agreement. "Adjusted Household Income" - That annual income which does not exceed (i) with respect to Lower-Income Tenants, the maximum income of "individuals of low or moderate income" within the meaning of Section 103(b)(4)(A) of the 1954 Code as such section exists as of the date hereof (unless otherwise required by applicable law), and (ii) with respect to Eligible Tenants, 150% of the highest of the median income for the State, county or South Census Region in which the Development is located, as determined in the latest published Decile Distributions of Family Income by Standard Metropolitan Statistical Areas and Non-Metropolitan Counties prepared and published from time to time by the United States Department of Housing and Urban Development, as adjusted at least annually by the Agency or its executive director according to the most recent Consumer Price Index or such other valid statistical information as the Agency or its executive director may determine. "Agency" - The Florida Housing Finance Agency, and its successors and assigns. "Agreement" - This Amended and Restated Loan Agreement, dated as of June 1, 1991, and as further amended and restated as of December 1, 1993, between the Agency and the Developer, together with any future amendments or restatements thereof. "Alternate Confirmation" - any Confirmation other than the initial Confirmation deposited with the Trustee replacing the existing Confirmation as provided in Section 4.13B hereof. "Alternate Security" - Any letter of credit, guaranty agreement or other security substituted for the Credit Enhancement then in effect or any amendment thereto (other than an extension of the term of the Credit Enhancement then in effect) which results in the Bonds being assigned a rating in one of the three highest alphabetical credit ratings available for instruments of its type -3- by a nationally recognized rating agency without regard to number ical modifiers (e.g. rated "AAA", "AA" or "A" by S&P or rated "Aaa," "Aa" or "A" by Moody's) or, during any period the Bonds bear interest at a Floating Rate, a comparable short term rating (subject, however, to the requirements of Section 4.13 of this Agreement during a Fixed Rate Period) as permitted by Section 4.13 of this Agreement. Notwithstanding anything in this Agreement to the contrary, a Confirmation shall not constitute Alternate Security under this Agreement. "Arbitrage Rebate Agreement" or "Rebate Agreement" - The Arbitrage Rebate Agreement by and among the Trustee, the Agency and the Developer, dated June 13, 1991, as amended and supplemented from time to time. "Assignment of Rents" - The Amended and Restated Collateral Assignment of Leases, Rents and Contract Rights from the Developer to the Agency, as the same may be amended from time to time. "Authorized Representative" - A person or persons at the time designated to act on behalf of the Developer by written certificate furnished to the Trustee containing the specimen signature of such person or persons and signed on behalf of the Developer by one or more of its authorized signatories, which certificate may designate an alternate or alternates, and may designate different Authorized Representatives to act for the Developer with respect to different sections of this Agreement and the Indenture. "Bond" or "Bonds" - Any one or all, as the case may be, of the Bonds issued under the Indenture and described in paragraph 3.02(a) of the Indenture. "Bond Counsel" - The firm of bond attorneys whose opinion is set forth on the Bonds, or such other nationally recognized Bond Counsel, as described below, as may be appointed by the Agency to render the opinions required herein or in related documents. In the event the Trustee shall determine, in its sole discretion, that the Agency has not appointed such successors, then the term "Bond Counsel" shall mean a firm of nationally recognized attorneys at law experienced in the financing of facilities for non exempt persons through the issuance of tax exempt revenue bonds under the exemption provided under Sections 103(b) and 103(c) of the 1954 Code and approved by the Agency, the Developer and the Trustee, such approval not to be unreasonably withheld. "Bondholder" or "holder" or "owner" - The person in whose name any Bond is registered on the Bond registration books of the Agency kept by the Trustee as bond registrar. "Business Day" - Any day other than a Saturday, Sunday or a day when banks in the City of New York, New York or in the cities in which the Principal Offices of the Trustee, the Paying Agent, -4- the Remarketing Agent, the Credit Enhancer or the Confirming Bank are required or authorized by law to be closed or on which the New York Stock Exchange is closed. "Code" - The Internal Revenue Code of 1986, as amended, and any successor statute, together with corresponding and applicable final, temporary or proposed regulations and revenue rulings issued or amended with respect thereto by the Treasury Department or Internal-Revenue Service of the United States. "Commitment" - The Commitment Agreement referred to in the preamble hereof, entered into by the Agency and the Developer dated April 25, 1991, pursuant to which, subject to certain conditions, the Agency has agreed to issue the Bonds in full compliance with Section 103 of the 1954 Code and applicable Sections of the Code. "Condemnation Award" - The total condemnation proceeds actually paid by the condemnor as a result of the condemnation (or threatened condemnation) of all or any part of the property subject to the Mortgage less the actual costs incurred, including attorney's fees, in obtaining such award. "Confirmation" - the initial confirming letter of credit issued by The Sumitomo Bank, Limited, acting through its Chicago Branch, and, upon acceptance by the Trustee, any Alternate Confirmation delivered pursuant to Section 4.13B hereof. "Confirmation Account" - a special trust account of that name established within the Revenue Fund pursuant to Section 5.02 of the Indenture into which moneys representing proceeds of a drawing under the Confirmation in respect of the principal or redemption price of or interest on the Bonds are to be deposited. "Confirmation Agreement" - the Confirmation Agreement dated as of December 1, 1993 between the Credit Enhancer and the Confirming Bank, as amended or supplemented from time to time, and any agreement pursuant to which an Alternate Confirmation is issued. "Confirmation Expiration Date" - the earliest of (a) the date of termination of the initial Credit Enhancement, (b) July 3, 1998, (c) thirty five (35) days following receipt by the Trustee of a certificate from the initial Confirming Bank to the effect that an Event of Termination as defined in the Confirmation Agreement has occurred, (d) five (5) days following the date of payment of a drawing for payment of a mandatory tender pursuant to Section 4.13B of the Indenture or (e) thirty five (35) days following receipt by the initial Confirming Bank of a certificate from the Trustee to the effect that the initial Credit Enhancer has delivered to the Trustee notice of the termination of the initial confirmation pursuant to Section 2.07(b) of the Confirmation Agreement. -5- "Confirming Bank" - The Sumitomo Bank, Limited, a banking corporation organized under the laws of Japan and acting by and through its Chicago Branch, as issuer of the initial Confirmation delivered pursuant to the Indenture, and the issuer of any Alternate Confirmation. "Confirming Bank Pledged Bonds" - Bonds held by the Confirming Bank or its designee and registered in the name of the Developer and purchased with the proceeds of a draw under the Confirmation, which Bonds shall be deemed Outstanding for all purposes of the Indenture so long as they constitute Confirming Bank Pledged Bonds. "Counsel for the Trustee" - An attorney at law or firm of attorneys at law selected by the Trustee as its counsel. "Credit Enhancement" - Initially the irrevocable, transferable, direct pay Letter of Credit issued by Sumitomo Trust, as hereinafter defined and any Alternate Security substituted therefor or for Alternate Security. "Credit Enhancer" - Initially Sumitomo Trust, as hereinafter defined, or the obligor of any Alternate Security substituted for the Credit Enhancement. "Determination of Taxability" - A judgment or order of a court of competent jurisdiction which is final (either because the time for appeal thereof has expired or because the judgment or order is issued by a court having final appellate jurisdiction over the matter and is not subject to collateral attack), a ruling or decision of the Internal Revenue Service which is final (because no action has been taken to cause such ruling or decision to be judicially reviewed and the time for taking any such action has expired) as a result of a proceeding in which the Developer had an opportunity to participate, to the effect that the interest on the Bonds is includable for federal income tax purposes in the incomes of all recipients thereof subject to federal income taxes except any' federal tax characterized as a "minimum" or "preference" or other similar indirect tax to the extent such tax affects the includability of interest on the Bonds in the income of the recipient thereof. "Developer" - OTC Apartments Limited Partnership, and it.s successors and assigns, a Florida limited partnership. "Development" - Collectively, Players Club at Tampa, a 216 unit multi-family residential rental facility located in Tampa, Florida; Suntree at East Bay a 300 unit multi-family residential rental facility located in Clearwater, Florida; Suntree at Orlando, a 296 unit multi-family residential rental facility located in Orlando, Florida; Players Club at Magnolia Bay, a 324 unit multi-family residential rental facility located in Orlando, Florida; and -6- Players Club at East Bay, a 161 unit multi-family residential rental facility located in Clearwater, Florida. "Development Costs" - All of the costs and expenses incurred with respect to the Development within the meaning of "development costs" as defined in the Act. "Eligible Tenants" - One or more natural persons or a family, irrespective of race, creed, religion, color, age, national origin, marital status, familial status, handicap or sex, whose total adjusted annual household income, as defined in the Income Certification, does not exceed 150% of the highest of the median income for the State, the County or the South Census Region in which the Development is located, as determined in the latest published Decile Distributions of Family Income by Standard Metropolitan Statistical Areas and Non-Metropolitan Counties prepared and published from time to time by the United States Department of Housing and Urban Development, as adjusted at least annually by the Agency or its executive director according to the most recent Consumer Price Index or such other valid statistical information as the Agency or its executive director may determine, provided, however, that the annual household income as determined above shall not be lower than the annual household income requirement as of the date of the initial delivery of the Bonds which median income is $33,800 and 150% of which is $50,700 as to the Developments located in Hillsborough County and Pinellas County, Florida and which median income is $38,900 and 150% of which is $58,350 for the Developments located in Orange County, Florida. "Environmental Indemnity" - That certain Environmental Indemnity dated June 13, 1991 from the Developer, Fred Gordon and Joseph M. Jacobson to the Agency. "Expiration Date" - July 3, 1998, or the scheduled expiration date of any Alternate Security if prior to the date of maturity of the Bonds. "Income Certification" - An income certification substantially in the form attached hereto as Exhibit B, as such form may be revised by the Agency from time to time. "Indenture" - That certain Trust Indenture dated as of June 1, 1991 and amended and restated as of December 1, 1993 by and between the Agency and the Trustee, pursuant to which the Bonds are issued and secured, together with any amendments or supplements thereto. "Insurance Proceeds" - The total proceeds of insurance actually paid or payable by an insurance company in respect of insurance on the Development. -7- "Intercreditor Agreement" - The Intercreditor Agreement dated as of June 14, 1991, between Sumitomo Trust and ADCC, regarding the parties respective rights as creditors. "Land" - The tracts of land on which the five Developments have been constructed, as described on Exhibit "A" hereto. "Land Use Restriction Agreement" - Collectively, the agreements between the Agency and the Original Developer, dated as of March 1, 1985, recorded in the Official Records of Hillsborough County, Official Records Book 4532, Page 1515, as to the Players Club at Tampa Project; dated as of March 1, 1985, recorded in the Official Records of Pinellas County, Official Records Book 5964, Page 1681, as to the Suntree at East Bay Project; dated as of March 1, 1985, recorded in the Official Records of Pinellas County, Official Records Book 5964, Page 1777, as to the Players Club at East Bay Project; dated as of March 1, 1985, recorded in the Off cial Records of Orange County, Official Records Book 3627, Page 516, as to the Suntree at Orlando Project; and dated as of March 1, 1985, recorded in the Official Records of Orange County, Official Records Book 3627, Page 616, as to the Players Club at Magnolia Bay Project, as assumed by the Developer and as amended as to each separate agreement by the First Amendment to Land Use Restriction Agreement dated as of June 1, 1991, each among the Agency, the Trustee, the Credit Enhancer and the Developer (respectively, the "First Amendment") to be recorded in the Official Records of Hillsborough County, Orange County, and Pinellas County, Florida as applicable and as same may be further amended in accordance with this Indenture. "Loan" - The mortgage loan from the Agency, as lender, to the Original Developer, as borrower with respect to the Developments previously made and assumed by the Developer in the acquisition of the Developments (and modified in accordance with this Agreement) out of the proceeds of the 1985 Bonds (the "1985 Loan"), as the .same has been continued and modified pursuant to this Agreement in principal amount equal to the principal amount of the Bonds. "Loan Documents" or "Mortgage Loan Documents" - The Agreement, the Note, the Mortgage, the Assignment of Rents, the Assignment of Mortgage and Security Agreement and Collateral Assignment of Leases, Rents and Contract Rights, the Land Use Restriction Agreement, the Servicing Agreement and the Remarketing Agreement. "Lower Income Tenants" - Individuals of low or moderate income within the meaning of Section 103(b) (4) (A) of the 1954 Code. "Mortgage" - The Amended and Restated Mortgage and Security Agreement dated AS of June 1, 1991 as to the Development, amending and restating certain Mortgage and Security Agreements, each dated as of the first day of March, 1985, recorded in the Official Records of Hillsborough County as to the Players Club at Tampa -8- Development, Pinellas County as to the Suntree at East Bay Development and Players Club at East Bay Development and Orange County as to the Suntree at OrlandO Development and Players Club at Magnolia Bay Development, granting a first priority mortgage on and security interest in the Land, buildings and equipment constituting the Development and assigned to the Trustee, securing the Loan. "1954 Code" - The Internal Revenue Code of 1954, as amended and in effect on the date of issuance of the 1985 Bonds, together with corresponding and applicable final, temporary or proposed regulations and revenue rulings issued or amended with respect thereto by the Treasury Department or Internal Revenue Service of the United States. "1985 Bonds" - Collectively, the Bonds of the Agency designated $8,700,000 Florida Housing Finance Agency Multi-Family Housing Revenue Bonds, 1985 Series J (Players Club at Tampa Project); $11,450,000 Florida Housing Finance Agency Multi-Family Housing Revenue Bonds, 1985 Series K (Suntree at East Bay Project); $10,000,000 Florida Housing Finance Agency Multi-Family Housing Revenue Bonds, 1985 Series L (Suntree at Orlando Project); $12,880,000 Florida Housing Finance Agency Multi Family Housing Revenue Bonds, 1985 Series M (Players Club at Magnolia Bay Project) and $6,870,000 Florida Housing Finance Agency Multi Family Housing Revenue Bonds, 1985 Series N (Players Club at East Bay Project). "Note" - The Amended, Restated and Consolidated Promissory Note dated June 13, 1991, as further amended and restated on December 30, 1993, executed by the Developer to evidence the Loan. "Original Developer" - Collectively, Players Club at Tampa, A California Limited Partnership as to the Players Club at Tampa Project; Suntree at East Bay, A California Limited Partnership as to the Suntree at East Bay Project; Rio Bernard, A California Limited Partnership as to the Suntree at Orlando Project; Players Club at Magnolia Bay, A California Limited Partnership as to the Players Club at Magnolia Bay Project; and Players Club at East Bay, A California Limited Partnership as to the Players Club at East Bay Project. "Originator/Servicer" - First Housing Development Corporation of Florida and its successors and assigns acting on behalf of the Agency to originate and service the Loan. "Pledge Agreement" - The Pledge and Security Agreement dated as of June 1, 1991, between the Developer and the Credit Enhancer, as amended as of December 1, 1993. "Principal Office" - The office designated as such by the respective party in writing to the Agency, the Developer, the Trustee, the Paying Agent, the Registrar, the Credit Enhancer, the -9- Remarketing Agent and the Confirming Bank, as set forth in Section 14.05 of the Indenture. "Private Placement Memorandum" - The Private Placement Memorandum of the Developer dated June 13, 1991 with respect to the Bonds and any supplement thereto. "Project Fund" - The fund created by Section 6.01 of each separate Indenture for each of the 1985 Bonds. "Qualified Development Costs" - Development Costs, but only to the extent that such costs were paid or incurred after July 13, 1984, and only to the extent that such costs were charged to the respective Development's capital account or were so chargeable either with a proper election or but for a proper election to deduct such costs, within the meaning of Treasury Regulation 1.103 8(a)(1), as the same may be amended from time to time. "Qualified Project Period" - Shall have the meaning given to such term in the respective Land Use Restriction Agreement. "Rebate Analyst" - A certified public accountant, financial analyst or bond counsel, or any firm of the foregoing or financial institution experienced in making the arbitrage and rebate calculations required pursuant to Section 148 of the Code and designated by the Agency to make the computations and give directions required under the Arbitrage Rebate Agreement. Initially the Rebate Analyst shall be Deloitte & Touche. "Rebate Analyst Fee" - The annual fee to the Rebate Analyst to be paid by the Developer, in the initial amount of $2,000 per year payable by the Developer at the times directed by the Agency in writing to the Developer and the Trustee. "Rebate Fund" - The trust fund authorized to be established and so designated under Section 5.09 of the Indenture. "Redemption Period" - The period during any Fixed Rate Period that commences on the Interest Payment Date nearest to the date on which one-half of such Fixed Rate Period will have elapsed and that ends on the last day of such Fixed Rate Period. "Reimbursement Agreement" - The Letter of Credit and Reimbursement Agreement, dated as of June 1, 1991, as amended from time to time, between the Credit Enhancer and the Developer pursuant to which the Developer agrees, INTER ALIA, to reimburse the Credit Enhancer for any and all amounts paid by the Credit Enhancer pursuant to the Credit Enhancement or, after provision of Alternate Security in accordance with the Indenture and this Agreement, any reimbursement agreement between the provider of Alternate Security and the Developer which provides for the reimbursement of the provider of Alternate Security by the Developer for payments made by -10- such provider of Alternate Security pursuant to such Alternate Security. "Remarketing Agreement" - The Remarketing Agreement, if any, entered into among the Remarketing Agent, the Agency and the Developer, as amended or supplemented from time to time. "Revenue Fund" - The fund created by Section 5.02 of the Indenture. "Second Mortgage" - The Second Mortgage and Security Agreement and Collateral Assignment of Leases and Rents dated as of June 14, 1991 from the Developer to Sumitomo Trust and recorded in the Official Records of Hillsborough County, Orange County and Pinellas County, Florida, which secures all payment obligations of the Developer under the Reimbursement Agreement. "Servicing Agreement" - That certain Permanent Mortgage Servicing Agreement dated as of June 1, 1991, by and among the Agency, the Trustee, the Developer and the Originator/Servicer. "Standby Loan Agreement" - The Standby Loan Agreement dated as of June 14, 1991, between the Developer and ADCC. "State" - The State of Florida. "Sumitomo Trust" - The Sumitomo Trust and Banking Company, Limited, a Japanese banking corporation acting through its New York Branch, as issuer of the Credit Enhancement. "Tender Agent Fee" - As to the initial Tender Agent, an ongoing annual fee of $3,000 payable by the Developer to the Tender Agent on the Interest Payment Date occurring in July of each year commencing July 3, 1991, and thereafter during any Floating Rate Period until maturity or sooner redemption of all the Bonds, plus activity fees in the amount of $60 for each exercise of a Bond-holders Demand Purchase Option, together with the reimbursement for any out-of-pocket expenses associated with acting as Tender Agent, and as to any other Tender Agent, the fee agreed to between the Developer and such successor Tender Agent. "Third Mortgage" - The Third Mortgage and Security Agreement and Assignment of Leases and Rents, dated as of June 10, 1991 from the Developer to ADCC and recorded in the Official Records of Hillsborough County, Orange County and Pinellas County, Florida, which secures all payment obligations of the Developer under the Standby Loan Agreement. "Trustee" - Sun Bank, National Association, having its principal corporate trust office in Orlando, Florida, and its successors in trust hereunder. -11- "Trustee's Expenses" - The reasonable compensation and expenses payable to the Trustee for necessary ordinary and necessary extraordinary services rendered by it and necessary extraordinary expenses incurred by it under this Indenture as and when the same become due, including reasonable counsel fees including fees at trial (including, without limitation, bankruptcy proceedings) or appellate proceedings. In addition to the words and terms defined above, unless otherwise defined herein or unless the context clearly otherwise requires, the capitalized words and terms used herein shall have the same meanings defined for and assigned to them in the Indenture and the Mortgage. -12- ARTICLE II REPRESENTATIONS, WARRANTIES AND SPECIAL TAX COVENANTS SECTION 2.01. EXPRESS WARRANTIES OF THE AGENCY, EXCLUSION OF OTHER WARRANTIES. (a) The Agency makes the following representations and warranties as the basis for the undertakings on the part of the Developer herein contained: (i) The Agency is a State agency and instrumentality, constituting a public body corporate and politic, duly created, organized, existing and in good standing under the laws of the State; (ii) The Agency has the power under the Act to execute and deliver the Indenture, the First Amendment to Land Use Restriction Agreement, the Commitment and this Agreement, to enter into the transactions contemplated hereby and thereby including, without limitation, to authorize the issuance and sale of the Bonds, and to carry out its obligations hereunder and thereunder, and by proper action has duly authorized the issuance and sale of the Bonds, the execution and delivery of the Indenture, the First Amendment to Land Use Restriction Agreement, the Commitment and this Agreement and the performance of all of the covenants and agreements of the Agency contained in this Agreement, the Indenture, the Land Use Restriction Agreement and the Commitment; (iii) The issuance of the Bonds to obtain funds to continue financing for the Development is intended to serve the public interest and will further the purposes of the Act including, among others, the provision for decent, safe and sanitary living accommodations for Lower Income Tenants and Eligible Tenants; and (iv) The Agency will not take or permit, or omit to take or cause to be taken, any action that would adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds. (b) The Agency makes no other warranties, either express or implied, as to the Development or the financing thereof, of any nature or kind. SECTION 2.02. GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF DEVELOPER. The Developer hereby represents, warrants and agrees as follows: (a) The Developer (1) is a limited partnership validly organized and existing under the laws of the State of Florida; (2) is organized and operated for the purpose, among others, of developing, constructing, owning and operating, from time to time, -13- the Development; (3) has full power and authority under its organizational documents and the laws of the State to execute and deliver the Commitment, this Agreement, the Note, the Mortgage, the Assignment of Rents, the Servicing Agreement and the First Amendment to Land Use Restriction Agreement and the other documents to which it is a party, to be bound by the terms of the Indenture and to perform its obligations hereunder and thereunder; and (4) by proper action, if required, has duly authorized the execution and delivery of the Commitment, this Agreement, the Note, the Mortgage, the Assignment of Rents, the Servicing Agreement and the First Amendment to Land Use Restriction Agreement and the other documents to which it is a party, and when validly executed and delivered by the other parties thereto, such documents, together with the Indenture to the extent applicable to the Developer, will constitute legal, valid and binding agreements of the Developer, enforceable against the Developer in accordance with their respective terms, except as the enforceability thereof may be subject to (A) the exercise of judicial discretion in accordance with general equitable principles, and (B) applicable bankruptcy, insolvency, reorganization, moratorium and other laws for the relief of debtors heretofore or hereafter enacted to the extent that the same may be constitutionally applied, and except that enforceability of indemnification and contribution provisions may be limited, in whole or in part, by applicable securities laws or public policy; (b) The execution, delivery and performance of the Commitment, this Agreement, the Note, the Mortgage, the Assignment of Rents, the Servicing Agreement and the First Amendment to Land Use Restriction Agreement and the consummation of the transactions herein and therein contemplated, will not violate in any material respect any law, regulation, ordinance, judgment or court order of any federal, state or local government, and do not conflict in any material respect with or constitute a material breach of or a material default under the organizational documents of the Developer, or under the terms and conditions of any instrument, document, agreement, commitment, indenture, security agreement, mortgage, lease or other writing to which the Developer is a party or by which the Developer or a substantial portion of its assets, is bound; (c) There are no actions, suits or proceedings pending or, to the knowledge of the Developer threatened against or affecting the Developer, or the Development, or involving the validity or enforceability of the Bonds, this Agreement, the Commitment, the Land Use Restriction Agreement, the Note, the Mortgage, the Assignment of Rents, the Servicing Agreement, the Credit Enhancement, the Confirmation or the Indenture, or the priority of the lien of the Mortgage, at law or in equity, or before or by any governmental authority, except actions, which, if adversely determined would not materially impair the ability of the Developer, to perform its obligations under this Agreement and to cause to be paid any amounts which may become payable under the Note, the Commitment or -14- this Agreement. The Developer is not in default in any material respect under any mortgage, deed of trust, lease, loan or credit agreement, partnership agreement or other instrument to which it is a party or by which it is bound; (d) The Developer has caused Available Moneys to be deposited by the Credit Enhancer or others with the Trustee in amounts determined by the Trustee to be sufficient to pay principal of and interest on the 1985 Bonds to, but not including, the Issue Date; (e) Other than the Mortgage Loan Documents, the Second Mortgage and the Third Mortgage, the Developer has made no verbal or written contract or arrangement of any kind, the performance of which by any other party thereto would give rise to a lien on the Development of equal or greater priority than the liens created under the Mortgage Loan Documents, the Second Mortgage and the Third Mortgage (other than "Permitted Encumbrances", as defined in the Mortgage); (f) Any Certificate signed by an Authorized Representative and delivered in connection with the issuance of the Bonds pursuant to the Indenture, this Agreement or otherwise in connection with the Loan, the Development or the Bonds shall be deemed a representation and warranty by the Developer as to the statements made therein for the benefit of, and to be relied upon by, the Agency, its successors and assigns; (g) All balance sheets and financial information of the Developer delivered to the Agency or the Originator Servicer prior to or simultaneously with the execution of this Agreement fairly present the financial condition of the Developer, the results of operation of the business described therein as of the respective dates and for the periods of said balance sheets or financial statements. Said financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied in the various statements throughout the periods involved, and show all known material liabilities of the Developer including contingent liabilities, long term leases and unusual commitments. Since the date of the most recent financial statement, there has been no adverse material change in the financial condition of the Developer. All other information submitted by the Developer or on behalf of the Developer to the Agency or the Originator/Servicer in support of the Developer's request for the Loan is true and correct in all material respects as of the date of this Agreement, and no material adverse change has occurred; (h) The Developer has good and marketable title to all of the Developer's properties reflected in its balance sheets and financial statements (except such as have been disposed of in the ordinary course of business since the date of such balance sheets or financial statements), including without limitation the Development, and such properties are free and clear of all liens, -15- charges and encumbrances, except for (i) liens for taxes and assessments not yet due, (ii) with respect to the Development, the lien of the Mortgage Loan Documents, the Second Mortgage, the Third Mortgage and the matters defined as Permitted Encumbrances therein, and (iii) as to other properties, such liens, charges and encumbrances, if any, on properties acquired subsequent to such balance sheets or financing statements and disclosed to the Agency or the Originator/Servicer. It is acknowledged by the Developer that the only liens, encumbrances and charges permitted under this Agreement with respect to the Development are those permitted under the Mortgage Loan Documents, and the Second Mortgage and matters defined as Permitted Encumbrances therein; (i) To the best of the Developer's knowledge, no substantial loss, damage, destruction or taking of any of the real or personal property of the Developer, constituting all or a portion of the Development, has occurred which has not been fully restored or replaced or which is not fully covered by insurance, less applicable deductibles; (j) Except as disclosed in the Private Placement Memorandum relating to the Bonds, the Developer is not (i) a party to any contract, agreements, lease or other instrument which would materially adversely affect the Development, or the Developer's ability to perform its obligations under this Agreement, any other Mortgage Loan Documents, or the Land Use Restriction Agreement, and (ii) in default under any contract, agreement, lease or other instrument to which it is a party and which is material to the Development, and no event of default or occurrence that, with the giving of notice, the passage of time, or both, would constitute an event of default thereunder has occurred and is continuing; (k) To the best of the Developer's knowledge the Developer has complied with all applicable laws and requirements of governmental authorities relating to the construction, use and operation of the Development. No authorization or approval or other action by, and no notice to or filing with, any federal, state or local government body, agency or authority is required for the due execution, delivery and performance by the Developer of this Agreement or any other Mortgage Loan Document; (l) (1) The Developer is in full compliance with the terms and conditions of this Agreement; (2) except as they may be amended and restated or replaced by the Mortgage Loan Documents, each of the 1985 Indentures and the Promissory Notes, Loan Agreements, Mortgages and Security Agreements, Assignment of Leases and Rentals and Land Use Restriction Agreements executed by the Original Developer in connection therewith (collectively, the "1985 Bond Documents") as assumed by the Developer and the Permanent Mortgage Servicing Agreement are in full force and effect; (3) the Developer, on the date of execution hereof, is in full compliance with the terms and conditions of the tax covenants and tenant -16- restrictions set forth in the 1985 Bond Documents; (4) all fees, expenses and cost reimbursements owed to the Agency, the 1985 Trustee, the Originator/ Servicer and other parties to the 1985 Bond Documents, including but not limited to amounts accrued but not yet payable, have been paid or provided for; (5) to the best knowledge of the Developer is in compliance in all material respects with the other material terms and conditions of the 1985 Bond Documents (except for existing events of default disclosed to the Agency); and (6) as of the date of execution hereof, the operation of the Development is in compliance in all material respects with the terms and conditions of the 1985 Bond Documents; (m) The Developer has filed all federal, state and local income tax returns, which to the knowledge of the Developer are required at this time to be filed, and have paid all taxes as shown on said returns and all assessments received by the Developer to the extent that such taxes have become due; (n) (i) The Developer has not received any notice that it or the Development is not in compliance with all provisions of CERCLA, RCRA, SARA, TSCA (as such terms are defined in the Environmental Indemnity) and Florida Statutes, Chapters 376 and 403 (the "Environmental Laws"), and with any rules, regulations and administrative orders of any governmental agency, and with any judgments, decrees or orders of any court of competent jurisdiction with respect thereto; (ii) The Developer has not received any assessment, notice of (primary or secondary) liability or notice of financial responsibility, and no notice of any action, claim or proceeding to determine such liability or responsibility, or the amount thereof, or to impose civil penalties with respect to a site listed on any federal or state listing of sites containing or believed to contain Hazardous Materials (as defined in the Environmental Indemnity), nor has the Developer received notification that any hazardous substances (as defined under CERCLA) have been disposed of or have been found in any site at which any governmental agency is conducting an investigation or other proceeding under any Environmental Law. (iii) To the best of the Developer's knowledge and except as previously disclosed to the Agency, no part of the Development or other property used by the Developer in its business nor any building, structure or facility located thereon or improvement thereto contains or contained asbestos or polychlorinated biphenyls (PCBs); have or have had asbestos containing materials or electrical transformers, fluorescent light fixture ballasts or other equipment containing PCBs installed thereon or therein; is or has been used for the handling, processing, storage or disposal of Hazardous Wastes; or contain or contained above-ground or -17- underground storage tanks or other storage facilities for Hazardous Wastes. (o) The Developer has not received any notice that it is not in full compliance with all provisions of the Fair Labor Standards Act, as amended, and regulations promulgated thereunder; (p) The Developer has paid or made provision for the payment of all applicable federal, state and local employees' income, social security and unemployment taxes; (q) The Developer has not received any notice that it is not in full compliance with ERISA and Department of Labor regulations thereunder, with the Code and Treasury Regulations thereunder and with terms of such plan or plans with respect to each pension or welfare benefit plan to which the Developer is a party or makes any employer contributions with respect to its employees, for the current or prior plan years of such plans; and (r) The representations and warranties made by the Developer to Sumitomo Trust in any document or instrument executed in connection with this Agreement and the transactions contemplated hereby are incorporated in this Agreement by this reference and made a part hereof, and the Developer hereby represents and warrants that all of said representations and warranties are true and correct in all material respects as of the issuance of the Bonds and the extension of the Loan under this Agreement. SECTION 2.03. ACQUISITION, CONSTRUCTION AND COMPLETION OF DEVELOPMENT. The Developer, based on inquiry of the Original Developer and review of relevant project information maintained by the Agency, hereby represents, warrants and agrees as follows: (a) That the Original Developer incurred a substantial binding obligation to commence acquisition and construction of the Development by September 1, 1985, pursuant to which the Developer expended at least the lesser of $100,000 or 2-1/2% of the total cost of acquisition and construction of each of the Developments and proceeded with due diligence to complete the Developments; (b) That the Players Club at Tampa Development was completed May 3, 1985, Suntree at East Bay Development was completed April 24, 1986, Suntree at Orlando Development was completed April 18, 1985, Players Club at Magnolia Bay Development was completed October 9, 1985 and Players Club at East Bay Development was completed May 31, 1985 and, at that time, the Original Developer complied with its obligations under the documents executed by it in connection with the issuance of the 1985 Bonds; (c) That substantially all (at least 90%) of the aggregate amount disbursed from the respective Project Fund for the 1985 Bonds to pay or reimburse Development Costs (less neutral costs) -18- were applied to pay or reimburse Qualified Development Costs and that not more than an insubstantial portion (not more than 10%) of the aggregate amount disbursed from the Project Fund for the 1985 Bonds (less neutral costs) to pay or reimburse Development Costs were applied to pay or reimburse Development Costs other than Qualified Development Costs; (d) That any and all contracts to acquire any part of the Development which were entered into prior to July 13, 1984 (with respect to which payments were made from the proceeds of the 1985 Bonds as Qualified Development Costs) were, on such date, fully executory in nature, and none of the burdens or benefits of ownership to any property which was the subject of such contracts had accrued to or been imposed upon the Original Developer or any "related person", as such term is defined in the 1954 Code, prior to such date; (e) That the Original Developer submitted to the Trustee, prior to or upon the date of each disbursement from the respective Project Fund for the 1985 Bonds, a statement (which statement was contained in the Original Developer's Requisition for payment under the Indenture) certifying that the full amount of such disbursement would be applied to pay or reimburse Development Costs and that after taking into account the proposed disbursement substantially all (at least 90%) of the aggregate disbursements from the respective Project Fund for the 1985 Bonds (less neutral costs) Had been applied to pay or reimburse Qualified Development Costs; (f) That, upon the completion of each of the Developments, the Original Developer submitted to the Agency and the Trustee a certificate of completion containing the following: (i) the Original Developer's statement that all terms and conditions to the making each of the Loans under the 1985 Bonds had been satisfied and all documents required thereunder had been delivered in form and substance satisfactory to the Agency; (ii) the Original Developer's statement that the Developments have been substantially completed and was ready and available for occupancy as of a specified date (the "Completion Date"); (iii) the Original Developer's statement, confirmed by the Trustee, of the aggregate amount expected to be disbursed from the respective Project Fund for the 1985 Bonds upon the Completion Date; (iv) the Original Developer's certification that all of the amounts expected to be disbursed from the Project Fund for the 1985 Bonds were expected to be applied to pay or reimburse Development Costs and that none of the amounts disbursed from the respective Project Fund for the 1985 Bonds were expected to be applied to pay or reimburse costs or expenses other than Development Costs; and (v) the Original Developer's certification that substantially all (at least 90%) of the amounts disbursed from the Project Fund for the 1985 Bonds (less neutral costs) were applied to pay or reimburse Qualified Development Costs and that no more than an insubstantial amount (not more than 10%) of the amounts disbursed from the Project Fund -19- for the 1985 Bonds (less neutral costs) were applied to pay or reimburse costs or expenses other than Qualified Development Costs; (g) That money on deposit in any fund or account in connection with the Bonds, whether or not such money was derived from other sources, has not been and will not be used by or under the direction of the Developer in a manner which would cause the Bonds to be "arbitrage bonds" within the meaning of Section 103(c) of the 1954 Code or Section 148 of the Code, and the Developer specifically agrees that the investment of money in any fund created in the Indenture shall be restricted as may be necessary to prevent the Bonds from being "arbitrage bonds" under the 1954 Code and the Code; (h) That the Developer will not take or omit to take any action if such action or omission would cause interest on the Bonds to become subject to federal income taxation, except during such period as the Bonds are owned by a "related person" or a "substantial user" of the Development and except for any federal tax characterized as a "minimum" or "preference" tax to the extent such tax affects the includability of interest on the Bonds in the income of the recipient thereof; (i) That the original Developer has not and the Developer will not discriminate on the basis of race, creed, color, sex, age, marital status, familial status (other than with respect to Eligible Tenants), handicap, religion or national origin in the lease, use, or occupancy of the Development or in connection with the employment or application for employment of persons for the operation and management of the Development; and (j) That the Original Developer and the Developer have complied in all respects with the requirements of the 1985 Loan. SECTION 2.04. [Intentionally Omitted.] SECTION 2.05. [Intentionally Omitted.] SECTION 2.06. TAX EXEMPT STATUS OF THE BONDS. The Developer hereby represents, warrants and agrees that: (a) It will not take or permit, or omit to take or cause to be taken, any action that would adversely affect the exclusion from gross income for federal income tax purposes of the interest on the Bonds (other than with respect to a "substantial user" or "related person" under Section 147(a) of the Code) and, if it should take or permit, or omit to take or cause to be taken, any such action, the Developer shall take all lawful actions necessary to rescind or correct such actions or omissions promptly upon having knowledge thereof and specifically agrees to be bound by Section 7.03 of the Indenture; -20- (b) It will take such action or actions as may be necessary, in the opinion of Bond Counsel, including, without limitation, consenting to the amendment of this Agreement, the Indenture, the Land Use Restriction Agreement, the Note or the Mortgage to comply fully with all applicable rules, rulings, policies, procedures, regulations or other official statements promulgated, proposed or made by the Department of the Treasury or the Internal Revenue Service pertaining to obligations issued under Section 103(b)(4)(A) of the 1954 Code which are necessary in the opinion of Bond Counsel to maintain the exclusion from gross income for federal income tax purposes of interest on the Bonds; (c) It will execute and file of record appropriate amendments to the Land Use Restriction Agreement, and assure the recording of such document and take any other steps as are necessary, in the opinion of Bond Counsel, in order to insure that the requirements and restrictions of this Article II will be binding upon all owners of the Development. The Developer hereby covenants to include such requirements and restrictions in any documents transferring any interest in the Development to another to the end that such transferee has notice of, and is bound by such restrictions to the extent and for the period provided therein and to obtain the agreement from any transferee to so abide; and (d) It will not, pursuant to an arrangement, formal or informal, purchase the Bonds in an amount related to the amount of the Loan; provided, that the foregoing shall not preclude a purchase of Bonds using moneys provided pursuant to Section 4.09 hereof. SECTION 2.07. MODIFICATION AND TERMINATION OF SPECIAL TAX COVENANTS. (a) Subsequent to the issuance of the Bonds and prior to their payment in full (or provision for the payment thereof having been made in accordance with the provisions of the Indenture), this Agreement may not be amended, changed, modified, altered or terminated except as permitted in Section 8.04 hereof and this Section 2.07 and by the Indenture. Anything contained in this Agreement or the Indenture to the contrary notwithstanding, the Agency, the Trustee, and the Developer hereby agree to amend this Agreement and, if appropriate, the Indenture and the Land Use Restriction Agreement, to the extent required or permitted, in the opinion of Bond Counsel, in order for interest on the Bonds to remain excludable from gross income for federal income tax purposes under Section 103(b)(4)(A) of the 1954 Code. The party requesting such amendment shall notify the other party to this Agreement, the Credit Enhancer, the Confirming Bank and the Trustee of the proposed amendment, with a copy of such requested amendment to Bond Counsel, and shall pay all reasonable and necessary fees and expenses incurred with respect to such amendment. After review of such proposed amendment, Bond Counsel shall render to the Trustee an opinion as to the effect of such proposed amendment upon the includability of interest on the Bonds in the income of the recipient thereof for federal income tax purposes. -21- (b) The Developer, the Agency and where applicable, the Trustee shall execute, deliver and, if applicable, file of record any and all documents and instruments, including, without limitation, an amendment to the Land Use Restriction Agreement, necessary to effectuate the intent of this Section 2.07, and both the Developer and the Agency hereby appoint the Trustee as their true and lawful attorney-in-fact to execute, deliver and, if applicable, file of record on behalf of the Developer or the Agency, as is applicable, any such document or instrument (in such form as may be approved by Bond Counsel) if either the Developer or the Agency defaults in the performance of its obligation under this subsection (b); provided, however, that the Trustee shall take no action under this subsection (b) without first notifying the Credit Enhancer, the Confirming Bank, the Developer or the Agency, as is applicable, of its intention to take such action and providing the Credit Enhancer, the Confirming Bank, the Developer or the Agency, as is applicable, a reasonable opportunity to comply with the requirements of this Section 2.07. (c) Notwithstanding anything to the contrary contained in this Section 2.07, the restrictions provided in this Article II and in the Land Use Restriction Agreement regarding the use and operation of the Development shall be terminated in the event of involuntary noncompliance therewith caused by fire, seizure, requisition, foreclosure, transfer of title by deed in lieu of foreclosure to an entity other than the Developer or a "related person" within the meaning of the Code, change in federal law or action of a federal agency after the issuance of the Bonds which prevents the Agency from enforcing the requirements of this Agreement and the Land Use Restriction Agreement, condemnation or similar event (as determined by the Agency), so long as the Bonds are redeemed within sixty days following such involuntary noncompliance (or within a period of time thereafter determined by the Bond Counsel to be reasonable, but in no event beyond the period permitted in Section 4.06 hereof) or amounts received as a consequence of such event are used to provide a project which meets and is subject to the requirements of Section 103(b)(4)(A) of the 1954 Code and of Treasury Regulations promulgated pursuant thereto and in either such event, upon the request of the Developer and at the expense of the Developer, the parties hereto shall execute an appropriate document in recordable form to evidence such automatic termination; provided, however, that the restrictions thereof shall nevertheless apply to the Development, if, at any time during that part of the Qualified Project Period subsequent to any involuntary event as described in this paragraph, the obligor on the acquired purpose obligation (as that phrase is defined in Treasury Regulations) or a related person (as that term is defined in Treasury Regulations) obtains an ownership interest in the Development for tax purposes. SECTION 2.08. SALE OF DEVELOPMENT. The Developer shall not, without the prior written consent of the Agency (except as provided -22- in Section 8 of the Land Use Restriction Agreement), voluntarily sell, lease, exchange, transfer, assign, convey or otherwise dispose of all or substantially all of the Development and Developer's principals shall not sell, exchange, assign, convey, transfer or otherwise dispose of all or a controlling interest in the Developer. -23- ARTICLE III THE BONDS, BOND PROCEEDS, THE INDENTURE SECTION 3.01. ISSUANCE OF BONDS. Subject to the satisfaction of and compliance with all of the provisions, covenants and requirements of this Agreement and the Indenture, in order to provide funds for the refunding of the 1985 Bonds, the Agency has caused to be issued and delivered the Bonds to the purchaser or purchasers thereof and has caused moneys to be deposited in the Bond Proceeds Fund under the Indenture. SECTION 3.02. BOND PROCEEDS; INVESTMENTS. The proceeds of the Bonds and any earnings from any investments thereof have been deposited, and will be held, invested and reinvested solely for the purposes and expended subject to the limitations contained in the Indenture and in this Agreement. SECTION 3.03. INDENTURE APPROVAL AND REQUIREMENTS. The execution of this Agreement shall constitute conclusive evidence of approval of the Indenture by the Developer. Additionally, Developer agrees that whenever the Indenture is executed and by its terms imposes a duty or obligation upon it, such duty or obligation shall be binding upon it to the same extent as if it were an express party to the Indenture, and it hereby agrees to carry out and perform all of its obligations thereunder, and any Event of Default thereunder shall constitute a default under this Agreement. -24- ARTICLE IV THE LOAN, PREPAYMENTS, ASSIGNMENTS SECTION 4.01. LOAN BY AGENCY. (a) The Agency, pursuant to the terms of this Agreement, agrees to loan to the Developer the proceeds in the amount of $48,480,000 received by the Agency from the sale of the Bonds (the "Loan"). (As of December 1, 1993, $48,140,000 of the principal amount of the Loan is outstanding). Upon issuance of the Bonds, the full amount of the Loan hereunder shall be deemed to be advanced to the Developer, shall be deposited under the Indenture and shall be disbursed as provided in the Indenture and no amounts deposited with the Trustee by the Developer and deposited in the Costs of Issuance Account shall be deemed to satisfy any portion of the Developer's obligation to repay the Loan; (b) Concurrently with the execution and delivery of the Original Agreement, the Developer shall cause the Mortgage, the Assignment of Rents, the Note, the First Amendment, the Environmental Indemnity and the Credit Enhancement to be executed and be delivered to the Trustee (unless previously executed and delivered). Concurrently with the execution and delivery of this Agreement, the Developer shall cause the Confirmation to be executed and delivered to the Trustee (unless previously executed and delivered); (c) Prior to receiving any disbursement from any fund under the Indenture or any disbursement being made on behalf of the Developer, the Developer shall cause the Mortgage, the Assignment of Rents, and the First Amendment, to be recorded in the land records of Hillsborough County, Orange County and Pinellas County, Florida, as applicable, and shall cause recording information with respect thereto to be delivered to the Agency and/or the Trustee, as applicable, and the Developer hereby agrees to carry out and perform all of its obligations under the Note and the Land Use Restriction Agreement; (d) Subject to Section 8.10 below, the Developer shall make payments required under this Agreement and be liable therefor in such amounts, and at such times, as shall be sufficient to pay, after applying all amounts otherwise available for making such payments, the principal of, redemption premium, if any, and interest on the Bonds when and as due and payable, whether by stated maturity date, Interest Payment Date, by optional or mandatory redemption or by acceleration, any and all documentary stamp taxes or intangible taxes due and payable in connection with the Loan, the Note and the Mortgage, if any, and all fees and expenses (including reasonable counsel fees) of the Agency, the Originator/ Servicer, the Rebate Analyst, the Remarketing Agent, the Tender Agent, the Credit Enhancer, Bond Counsel and the Trustee provided -25- for herein or in the Indenture together with annual rating agency review fees; and (e) The Agency and the Developer have agreed pursuant to the Commitment that the Agency retain a "lending institution," as defined in the Act, for the purpose of initially reviewing and approving the Loan and handling the origination process with respect to the Loan on behalf of the Agency, for which such lending institution shall be paid an annual fee in an amount equal to .035% of the outstanding principal balance of the Loan. The Agency has retained the Originator/Servicer for that purpose. SECTION 4.02. LOAN PAYMENTS. (a) Except as otherwise provided herein, the Developer covenants and agrees to make payments in respect of the Loan, including accrued interest, directly to the Trustee for deposit to the Revenue Fund in amounts sufficient to pay all amounts becoming due hereunder and under the Indenture on any Interest Payment Date or other date on which any amounts are due whether by acceleration, redemption or maturity, such payments to be made by or on behalf of the Developer by 2:00 p.m., New York, New York time on such Interest Payment Dates or other dates on which any such amounts are due. (b) The Developer shall be deemed to have satisfied its obligations hereunder and under the Note when corresponding amounts are paid pursuant to a drawing by the Trustee under the Credit Enhancement or the Confirmation. (c) The Developer agrees that, if applicable, upon any date of calculation of the Rebate Amount for any period, if the sum of the amounts on deposit in the Rebate Fund (plus any payments made to the United States, if moneys representing any portion of the Rebate Amount for such period have been paid to the United States under Section 5.09 of the Indenture) does not equal or exceed the Rebate Amount, the Developer will deposit in the Rebate Fund moneys sufficient to cause the amounts on deposit in the Rebate Fund, plus any investment earnings on deposit in the various funds and accounts created under the Indenture (plus amounts paid to the United States with respect to the Rebate Amount for such period) to equal the Rebate Amount, such Developer deposit to be made on or before the Business Day identified in the notice of any such deficiency delivered to the Developer. (d) The Developer agrees to pay, in addition to the amounts payable under the Note, on the date such amounts are due hereunder or under the Indenture, (i) to the Originator/Servicer, the Originator/Servicer's Fee, (ii) to the Rebate Analyst, the Rebate Analyst's Fees, (iii) the fees of the Tender Agent and the Remarketing Agent, (iv) the annual fees of any rating agency whose rating on the Bonds is then in effect, and (v) to the Trustee for the account of the Agency, the Agency's Fee (which includes the Trustee's Fee, the Rebate Analyst's Fee and Audit Expense), -26- Trustee's Expenses and costs of issuance, for such actions as may be reasonable and as may be required to effectuate the purposes of, and to fulfill the duties and obligations of the Agency set forth in the Loan documents and the Indenture. Any amounts required to be paid under this Section 4.02(d) that are not paid on the date when due shall bear interest at the rate of eighteen percent (18%) per annum from the due date thereof until the date paid in full, and a late fee equal to five percent (5%) of any fees, costs and expenses not paid on the due date thereof as reimbursement for the estimated costs and expenses incurred as a result of such late payment and not as a penalty. (e) The obligation of the Developer to make the Loan payments required to be made hereunder (including payments due by reason of acceleration of the Developer's obligations hereunder pursuant to Article VII hereof), shall be absolute and unconditional, and shall not be subject to abatement, diminution, postponement or deduction, or to any defense other than payment or to any right of set-off, counterclaim or recoupment arising out of any breach under this Agreement, the Indenture, the Credit Enhancement, the Confirmation or otherwise by the Agency, the Credit Enhancer, the Confirming Bank, the Trustee, any owner of Bonds or any other person, or out of any obligation or liability at any time owing to the Developer by any of the foregoing. Nothing herein contained, however, shall be interpreted to abridge the right of the Developer to seek judicial remedy for any breach of covenant or contract in a separate legal proceeding; provided, that all of the foregoing shall be subject to Section 8.10 hereof. (f) It is understood and agreed that the Credit Enhancement in place as of the Closing Date is a direct-pay letter of credit and will be drawn upon by the Trustee in accordance with its terms, each time a payment of principal or interest or both (but excluding any premium) is due on the Bonds, whether in the normal course or upon acceleration, redemption or maturity, including draws on the Credit Enhancement to the extent necessary for the payment of the Purchase Price due on any Bond presented for purchase pursuant to the Indenture; provided, however, that the Credit Enhancer's obligation to pay under the Credit Enhancement is an independent and separate obligation, even though payment thereunder shall be in satisfaction of the Developer's obligation hereunder and under the Note. (g) It is further understood that the Confirmation in place as of the date of execution and delivery of this Agreement will be drawn upon by the Trustee in accordance with its terms upon the wrongful failure or refusal by the Credit Enhancer to honor its obligations under the Credit Enhancement; provided, however, that the obligation of the Confirming Bank to pay under the Confirmation is an independent and separate obligation, even though payment thereunder shall be in satisfaction of the Developer's obligation hereunder and under the Note. -27- SECTION 4.03. CREDITS ON LOAN. Notwithstanding any provision contained in this Agreement or in the Indenture to the contrary the principal amount of Bonds purchased by or on behalf of the Developer and delivered to the Trustee and cancelled, shall be credited against the obligation of the Developer to pay the principal of the Loan corresponding to the aggregate principal amount of the Bonds delivered to the Trustee and cancelled. In the event that any of the Bonds shall be redeemed pursuant to Section 4.02 of the Indenture, the aggregate principal amount of the Bonds so redeemed shall be credited against the obligation of the Developer to pay the principal of the Loan corresponding to the aggregate principal amount of the Bonds so redeemed. SECTION 4.04. PREPAYMENT GENERALLY. No prepayment of the Loan may be made except to the extent and in the manner expressly permitted by this Agreement. Upon receipt of written notice from the Developer that a deposit is being made by or on behalf of the Developer for the purpose of prepaying the Loan and thereby effecting the redemption of the Bonds, the Trustee shall take such steps as may be required under the Indenture to accomplish the redemption of the Bonds under the redemption provisions of the Indenture. The Developer shall cause written notice to be given to the Trustee of its election to prepay all or a portion of the Loan pursuant to Section 4.05 or 4.06 hereof not less than 40 days prior to the date on which such prepayment is to occur, and the Developer shall be obligated to make such prepayment after any notice of redemption of Bonds on the applicable redemption date or such earlier date as may be provided for herein with respect to such prepayment has been given by the Trustee. SECTION 4.05. OPTIONAL PREPAYMENT OF LOAN. (a) During any Floating Rate Period, upon election by the Developer the Developer shall have the option to prepay the outstanding principal balance due on the Loan in whole or in part (in any amount or amounts equivalent to Authorized Denomination or Authorized Denominations), without any prepayment premium or penalty, by 3:00 p.m., New York, New York time on any Interest Payment Date, upon at least 40 days' advance written notice to the Agency, the Trustee, the Credit Enhancer, the Confirming Bank, the Remarketing Agent and the Tender Agent and upon written consent of the Credit Enhancer and the Confirming Bank. The Trustee is not required to give notice of a redemption of Bonds resulting from such prepayment unless the amount required for such redemption is first on deposit with the Trustee from the Developer. (b) During any Fixed Rate Period and during the applicable Redemption Period as set forth below, upon election by the Developer the Developer shall have the option to prepay the outstanding principal balance of the Loan in whole at any time or in part on or prior to an Interest Payment Date (in any integral multiple of -28- $5,000) from Available Moneys, at the respective prepayment prices set forth hereinafter, upon at least 40 days' advance written notice to the Agency, the Credit Enhancer, the Confirming Bank and the Trustee and upon written consent of the Credit Enhancer and the Confirming Bank. (i) If the Redemption Period is four years or longer, the Loan shall be prepaid in whole or in part at the respective prepayment prices set forth in the table below (expressed as percentages of the principal amount of the Loan so pre paid), for Bond redemptions occurring during the respective periods set forth in the table below, measured from the Interest Payment Date on which such Redemption Period begins: Redemption Date Prepayment Price ---------------------------------------- --------------- During 1st year of Redemption Period 102% During 2nd year of Redemption Period 101% During 3rd year of Redemption Period and thereafter 100% (ii) If the Redemption Period is at least two years but less than four years, the Loan shall be prepaid in whole or in part at the respective prepayment prices set forth in the table below (expressed as percentages of the principal amount of the Note so prepaid), for Bond redemptions occurring during the respective periods set forth in the table below, measured from the Interest Payment Date on which such Redemption Period begins: Prepayment Redemption Date Prepayment Price ---------------------------------------- --------------- During 1st year of Redemption Period 101% During 2nd year of Redemption Period and thereafter 100% (iii) If the Redemption Period is less than two years, the Loan may be prepaid in whole or in part price of 100% of the principal amount of the Note so prepaid. (d) Notwithstanding the foregoing, the Developer may not prepay a portion of the outstanding principal balance of the Loan in any amount that would result, following redemption of Bonds as a result of such prepayment, in Bonds being outstanding in other than Authorized Denominations. (e) All prepayments under this Section, including principal, premium, if any, and interest to the date of redemption shall be due and payable by no later than 2:00 p.m., New York, New York time on the date fixed for redemption of the Bonds pursuant to Section 4.01 of the Indenture, which date shall be communicated in writing -29- by the Trustee to the Agency, the Developer and the Credit Enhancer. (f) If the Developer prepays the Loan in part pursuant to this Section, the principal balance of the Loan shall be reduced in the amount of such prepayment; provided, however, that no such reduction in interest payable on the Loan shall occur until after the date of the Bond redemption resulting from such prepayment. Notwithstanding anything to the contrary in this Section, if optional prepayment of the Loan pursuant to this Section in the amount and on the date specified above would result in the payment of an amount of interest on the Loan (including interest on the Loan as provided therein together with any other costs or considerations that constitute interest under applicable law which are contracted for, charged, received, reserved or taken pursuant to the Mortgage Loan Documents) in excess of the maximum amount which, when spread, to the maximum extent permitted by law, over the term of the Loan, would cause the rate of interest on the Loan to exceed the Highest Lawful Rate, then, notwithstanding the foregoing, the provisions of Section 4.11 of this Agreement regarding cancellation of excess interest shall apply. SECTION 4.06. EXTRAORDINARY OPTIONAL PREPAYMENT. The Loan is subject to extraordinary optional prepayment, and the Developer shall have the right to prepay the same, as a whole or in part with respect to paragraph (a), (b) or (d) hereof, upon the occurrence of any of the following events, with respect to one or more of the Developments, at a prepayment price if as a whole, equal to the principal amount of the Loan then outstanding prepaid, plus accrued interest to the date fixed for such redemption and without premium from such prepayment, and if in part, at a prepayment price including accrued interest to the date fixed for redemption equal to the Insurance Proceeds or the proceeds of any Condemnation Award delivered in Available Moneys to the Trustee by 2:00 p.m., New York, New York time on the date fixed for such redemption if: (a) Any one or more of the Developments is so demolished, destroyed or damaged that, in the judgment of the Developer it cannot be restored or rebuilt with available funds to a profitable condition within a reasonable period of time; (b) If all of any one or more of the Developments shall have been taken under the exercise or threatened exercise of the power of eminent domain by any governmental authority or so much of such Development is taken or such Development is so diminished in value that the remainder thereof cannot, in the judgment of the Developer as certified to the Trustee by the Developer in writing, continue to be operated profitably for the purpose for which it was being used immediately prior to such taking or diminution; -30- (c) As a result of any changes in the Constitution of the State or the Constitution of the United States of America or of legislative or administrative action (whether State, federal or local), this Agreement shall have become void or unenforceable or impossible of performance in accordance with the intent and purpose of the parties as evidenced herein, or, as a result of such changes, it is the opinion of the Developer and is certified to the Trustee by the Developer in writing, that unreasonable burdens or excessive liabilities have been or will be imposed on the Developer with respect to any one or more of the Developments, including without limitation federal, State, local or other ad valorem, property, income or other taxes, fees or other restrictions not being imposed on the date of this Agreement; or (d) If Insurance Proceeds or proceeds of any Condemnation Award with respect to any one or more of the Developments are not applied to restoration of such Development in accordance with the provisions of the Mortgage. The Developer may exercise the option reserved in this Section only within six months following the date that a condition has occurred which gives rise to a right of prepayment under this Section. SECTION 4.07. EVENT OF DETERMINATION OF TAXABILITY. Upon the occurrence of a Determination of Taxability the Loan is not subject to mandatory prepayment as a whole, and the Developer shall not be required to prepay the Loan as a whole by paying the entire unpaid principal balance of the Loan and the unpaid, accrued interest thereon to the date of prepayment. In such event, the Bonds shall be subject to an adjustment in the rate of interest in accordance with the provisions of Section 3.06 of the Indenture. SECTION 4.08. SUBSTITUTION: EXTRAORDINARY PREPAYMENT OF LOAN. (a) Within thirty (30) days after any of the events set forth in Section 7.01(e) or (f) hereof have occurred and are continuing the Developer shall cause Alternate Security to be provided to the Trustee in the manner and subject to the requirements of Section 4.13 hereof. (b) If the Developer does not provide Alternate Security within the time prescribed hereby, the Developer shall be required to prepay the Loan as a whole to cause redemption of Bonds at a redemption price equal to the principal amount of the Bonds so redeemed, plus interest accrued on the principal amount of such Bonds to the date fixed for redemption of Bonds from such prepayment. In such event, the Bonds shall be called for redemption on such date as shall be selected by the Trustee, after consultation with the Developer, but in no event later than sixty (60) days following the failure to provide Alternate Security, and the Developer shall cause sufficient moneys to be on deposit with the Trustee by 2:00 p.m., New York, New York time at least two Business Days prior to such date. -31- SECTION 4.09. REMARKETING OF BONDS AND PAYMENT OF PURCHASE PRICE. (a) In addition to its obligation to repay the Loan and its other obligations under this Agreement, the Developer agrees and acknowledges that it is obligated to provide by no later than 4:30 p.m., New York, New York time, on each Purchase Date, for the payment of the Purchase Price for purchase or redemption of Bonds tendered or deemed tendered for purchase or redemption under the Indenture on such Purchase Date. The Developer agrees to cause sufficient moneys to be provided for the payment of the Purchase Price for purchase or redemption of all Bonds so tendered, to the extent that proceeds of the remarketing of such Bonds pursuant to the Remarketing Agreement are insufficient to pay the Purchase Price of such Bonds on each Purchase Date or in the event that Bonds are required to be redeemed on such Purchase Date pursuant to the Indenture. Bonds purchased pursuant to a draw under the Credit Enhancement shall be Pledged Bonds registered in the name of the Developer and held by the Credit Enhancer or its designee pursuant to the Pledge Agreement. Bonds purchased pursuant to a draw under the Confirmation shall be Confirming Bank Pledged Bonds registered in the name of the Developer and held by the Confirming Bank or its designee pursuant to the Pledge Agreement. (b) The Developer further agrees that, in the event that the Remarketing Agent shall resign or be removed, shall be dissolved or shall be in the course of dissolution or liquidation or otherwise shall become incapable of acting as Remarketing Agent as required by the Indenture and the Remarketing Agreement, or in the event that the Remarketing Agent shall be taken under the control of any public officer or officers or of a receiver appointed by a court, the Credit Enhancer and the Confirming Bank, or the Developer with the consent of the Credit Enhancer and the Confirming Bank, promptly will appoint a successor Remarketing Agent in accordance with Section 10.20 of the Indenture and the Developer will enter into a Remarketing Agreement under which the Remarketing Agent will be obligated to perform the duties of the Remarketing Agent as contemplated in the Indenture for a fee no greater than what is then prevailing in the marketplace, to accomplish such succession. (c) The Developer also agrees that, in the event that the Tender Agent shall resign or be removed, shall be dissolved or shall be in the course of dissolution or liquidation or otherwise shall become incapable of acting as Tender Agent as required by the Indenture, or in the event that the Tender Agent shall be taken under the control of any public officer or officers, or of a receiver appointed by a court, the Credit Enhancer and the Confirming Bank, or the Developer with the consent of the Credit Enhancer and the Confirming Bank, promptly will appoint a successor Tender Agent in accordance with Section 10.21 of the Indenture. -32- (d) The Developer also agrees to pay the Remarketing Agent's fees and to pay costs of the Agency, the Trustee and the Remarketing Agent to comply with regulations imposed by law or regulations (including SEC. Rule 15c2-12) in connection with a remarketing. SECTION 4.10. MANDATORY PREPAYMENT OF THE LOAN. (a) If the Expiration Date is prior to the maturity date of the Bonds, the Developer shall be required to prepay and shall prepay the outstanding principal balance of the Loan in whole, without prepayment premium or penalty, plus accrued interest, if any, by no later than 1:30 p.m., New York, New York time, on the Expiration Date, unless the Developer has caused to be furnished to the Trustee, at least 35 calendar days prior to the Expiration Date, either: (i) (A) evidence provided to the Trustee and the Agency that the Credit Enhancement has been amended to provide that the Credit Enhancement shall be in full force and effect to unconditionally and irrevocably guarantee all principal and interest obligations of the Developer that become due and payable under the Agreement and has a new Expiration Date that is (1) if the Bonds are to be bearing interest at the Floating Rate as of the day following the previously applicable Expiration Date, at least one year later than the previously applicable Expiration Date, or the maturity date of the Bonds, if earlier, or (2) if the Bonds are to bear interest at a Fixed Rate as of the day following the previously applicable Expiration Date, no earlier than the end of the Fixed Rate Period in effect as of the day following the previously applicable Expiration Date, and (B) a legal opinion in the form required by Section 4.13(b)(iii) hereof; or (ii) (A) Alternate Security that will be in full force and effect on such Expiration Date and that itself has and Expiration Date that is (1) if the Bonds are to be bearing interest at the Floating Rate as of the day following the previously applicable Expiration Date, at least one year later than the previously applicable Expiration Date, or the maturity date of the Bonds, if earlier, or (2) if the Bonds are to bear interest at a Fixed Rate as of the day following the previously applicable Expiration Date, no earlier than the end of the Fixed Rate Period in effect as of the day following the previously applicable Expiration Date, and (B) each of the other items required to be furnished under Section 4.13(b) hereof in connection with the substitution of Alternate Security for the Credit Enhancement. (b) The Developer shall be required to prepay and shall pre pay the outstanding principal balance of the Loan in whole, without prepayment premium, plus accrued interest, by no later than 4:30 p.m., New York, New York time on any Conversion Date, in the event that there is not on deposit in the Purchase Fund, prior to 10:00 a.m., New York, New York time on such Conversion Date, Available -33- Moneys in an amount sufficient to pay the Purchase Price of all Bonds tendered or deemed tendered for purchase or redemption on such Conversion Date. (c) The Developer shall be required to prepay and shall prepay the outstanding principal balance of the Loan in whole, plus accrued interest, if any, by 4:30 p.m., New York, New York time, on the earliest date for which notice required by Section 4.15 of the Indenture can be given, following the occurrence of an event of default under the Reimbursement Agreement and notice of the occurrence of such event of default from the Credit Enhancer to the Trustee directing the Trustee to redeem the Bonds in whole pursuant to Section 4.02(d) of the Indenture. Prepayment pursuant to this Section shall be due and payable by no later than 4:30 p.m., New York, New York time, on the date fixed by the Trustee for the redemption of Bonds pursuant to Section 4.02(b) of the Indenture, which date shall be communicated in writing by the Trustee to the Agency, the Developer, the Credit Enhancer and the Confirming Bank. SECTION 4.11. MAXIMUM INTEREST. Notwithstanding any provision of the Mortgage Loan Documents to the contrary, it is hereby agreed by and between the Agency and the Developer that in no event (including without limitation the acceleration of the Loan or the mandatory prepayment of the Loan pursuant to the Mortgage Loan Documents) shall the amount of interest contracted for, charged, received, reserved or taken in connection with the Loan (including interest on the Loan together with any other costs or considerations that constitute interest under applicable law which are contracted for, charged, received, reserved or taken pursuant to the Mortgage Loan Documents) ("Interest"), cause the rate of interest on the Loan to exceed the Highest Lawful Rate. For purposes of this Section, to the maximum extent permitted by law, Interest shall be: (i) spread over the term of the Loan; (ii) if appropriate, characterized as a premium for the privilege of making an optional prepayment of the Loan; and (iii) computed after giving effect to the provisions of any other Mortgage Loan Document that require the cancellation or refunding of Interest. Excess Interest, if any (after the application of the foregoing provisions), provided for in the Mortgage Loan Documents shall be cancelled automatically as of the date of such acceleration or mandatory prepayment or, if theretofore paid, shall be credited on the principal of the Loan or if the principal of the Loan has been paid in full, refunded to the Developer. The provisions of this Section shall control all agreements, whether now or hereafter existing and whether written or oral, by the Agency, the Developer, the Credit Enhancer, the Trustee and the holders of the Bonds. SECTION 4.12. ASSIGNMENTS TO TRUSTEE. All right, title and interest of the Agency in and to this Agreement (excepting the amounts payable to the Agency for its own purposes pursuant to -34- Sections 4.01(d), 4.02(c), 4.02(d), 7.05 and the rights of the Agency to indemnification under Article VI hereof) are to be pledged and assigned by the Agency to the Trustee as security for the Bonds under and pursuant to the Indenture. The Developer consents to such pledge and assignment. The Agency directs the Developer, and the Developer agrees, to pay or cause to be paid to the Trustee at its principal corporate trust office all payments on the Loan pursuant to this Agreement. SECTION 4.13. OPTIONAL SUBSTITUTION OF ALTERNATE SECURITY. At any time and from time to time during the term of this Agreement, the Developer, at its election and subject to satisfaction of the requirements of this Section, may provide for the delivery, in substitution for the Credit Enhancement or Alternate Security in effect from time to time, of new Alternate Security that meets the requirements of this Section. The Developer shall give written notice of intent to substitute Alternate Security to the Remarketing Agent, the Confirming Bank and the Trustee at least twenty (20) days prior to the date scheduled for the substitution of Alternate Security. (a) Any Alternate Security shall constitute an irrevocable obligation of the obligor thereon (i) to pay to the Trustee, upon proper demand, an amount equal to any amounts of principal of and interest on the Bonds that are then due and owing and unpaid under the Mortgage Loan Documents, and to make such payment by not later than the time and date necessary to assure the timely payment of the principal of, and interest on or the Purchase Price of the Bonds, or (ii) to fully secure otherwise payment in an amount equal to the principal amount of the Bonds outstanding from time to time plus, during any Floating Rate Period, the number of days' interest on the Bonds then outstanding required by the rating agency then rating the Bonds, to maintain the rating on the Bonds, computed at a rate of interest per annum sufficient to pay interest on the Bonds as it becomes due and, during any Fixed Rate Period, the number of days' interest on the Bonds then outstanding required by the rating agency then rating the Bonds, to maintain the rating on the Bonds, computed at the Fixed Rate in effect during such Fixed Rate Period, all as necessary to assure the timely payment of the principal of, and interest on the Bonds and the Purchase Price thereof. Any Alternate Security substituted hereunder shall have a term of at least one year and, during a Fixed Rate Period, shall have a term at least as long as the Credit Enhancement or Alternate Security for which it is being substituted. (b) As a condition to acceptance by the Trustee of the substitution of Alternate Security hereunder on other than a Substitution Date or a Conversion Date, the Developer shall cause to be delivered to the Trustee, concurrently with the delivery of any Alternate Security, the following: -35- (i) if at the time of such substitution no default has occurred and is continuing under the Credit Enhancement or existing Alternate Security, the written approval of the provider thereof of the substitution hereunder of a new Alternate Security, (ii) during a Floating Rate Period, written acknowledgment from the Trustee that Bondholders were notified of the pending substitution of Alternate Security no later than fourteen days prior to the date scheduled for substitution, (iii) an opinion of counsel acceptable to the Agency, addressed to the Trustee and the Agency, stating, among other things, that such Alternate Security constitutes a legal, valid and binding obligation of the obligor thereon, enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws for the relief of debtors and by general principles of equity that permit the exercise of judicial discretion and by laws, rulings and judgments applicable to the provider of Alternate Security including authorities governing the effect given to foreign judgments in such obligor's jurisdiction and to the extent that the enforceability of indemnification and contribution provisions to which such Alternate Security relates may be limited, in whole or in part, by applicable securities laws or public policy, and addressing such other matters as the Agency and the Trustee may reasonably require, (iv) an opinion of Bond Counsel to the effect that substitution of such Alternate Security is permitted under the Indenture and this Agreement and will not adversely affect the excludability of interest on the Bonds from gross income of the holders of the Bonds for federal income tax purposes, (v) written evidence from Moody's, if Moody's then rates the Bonds, and S&P, if S&P then rates the Bonds, that each such agency has reviewed such Alternate Security and that its substitution will not, of itself, result in a withdrawal of or a reduction of its rating of the Bonds from that which is then in effect, (vi) an opinion of counsel acceptable to the Agency addressed to the Agency and the Trustee, to the effect that the substitution of such Alternate Security will not subject the Bonds and/or the Alternate Security to the registration requirements of the Securities Act of 1933, as amended, or the Indenture to qualification under the Trust Indenture Act of 1939, as amended, or, in the alternative, that the Bonds and/or such Alternate Security, as the case may be, have been registered pursuant to the Securities Act of 1933, as amended, -36- and the Indenture has been qualified under the Trust Indenture Act of 1939, as amended, (vii) an amount sufficient to pay all costs incurred by the Trustee and the Agency in connection with the substitution of such Alternate Security, including, without limitation, the fees and expenses of their respective counsel, (viii) written acknowledgment from the provider of Alternate Security that the Alternate Security has been duly executed, will be in full force and effect from the date of its substitution for the Credit Enhancement or other Alternate Security and has been duly authorized by all necessary action of such provider. (c) As a condition to acceptance by the Trustee of the substitution of Alternate Security hereunder on a Substitution Date or a Conversion Date: (i) the Developer shall cause to be delivered to the Trustee: (A) a notice specifying the Substitution Date or Conversion Date, which shall be a date not earlier than twenty (20) days from the date of such notice, unless the Substitution Date or Conversion Date shall also be an Expiration Date, in which case the Substitution Date or Conversion Date shall be a date not earlier than thirty-five days from the date of such notice, and (B) if the securities rating agency or agencies are to remain the same, written evidence from each securities rating agency that has in effect a current rating on the Bonds of the long-term and short-term ratings to be assigned to the Bonds upon the substitution of the Alternate Security, or (C) if a different securities rating agency from the securities rating agency or agencies currently rating the Bonds is to rate the Bonds on and after the Substitution Date or Conversion Date, written evidence from said agency of the rating to be assigned to the Bonds; and (ii) the Developer shall cause to be delivered to the Trustee concurrently with the delivery of the Alternate Security the following: (A) if at the time of such substitution the provider of the Credit Enhancement or existing Alternate Security is not in default or the substitution is to occur in conjunction with the Expiration Date, the -37- written approval of such provider of the substitution hereunder of such Alternate Security, (B) an opinion of counsel acceptable to the Agency, addressed to the Trustee and the Agency, stating, among other things, that such Alternate Security constitutes a legal, valid and binding obligation of the obligor thereon, enforceable in accordance with its terms, except to the extent of customary exceptions, including, without limitation, that the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws for the relief of debtors as such laws may be applied in the event of the bankruptcy, insolvency, reorganization or similar proceeding of or moratorium applicable to such obligor and by general principles of equity that permit the exercise of judicial discretion and by laws, rulings and judgments applicable to the provider of Alternate Security including authorities governing the effect given to foreign judgments in such obligor's jurisdiction and to the extent that the enforceability of indemnification and contribution provisions to which such Alternate Security relates may be limited, in whole or in part, by applicable securities laws or public policy, and addressing such other matters as the Trustee and the Agency may reasonably require, (C) an opinion of Bond Counsel to the effect that substitution of such Alternate Security is permitted under the Indenture and this Agreement and will not adversely affect the excludability of interest on the Bonds from gross income of the holders of the Bonds for federal income tax purposes, (D) an opinion of counsel acceptable to the Agency addressed to the Agency and the Trustee, to the effect that the substitution of such Alternate Security will not subject the Bonds or such Alternate Security to the registration requirements of the Securities Act of 1933, as amended, or the Indenture to qualification under the Trust Indenture Act of 1939, as amended, or, in the alternative, that the Bonds and/or such Alternate Security, as the case may be, have been registered pursuant to the Securities Act of 1933, as amended, and the Indenture has been qualified under the Trust Indenture Act of 1939, as amended, (E) an amount sufficient to pay all costs incurred by the Trustee and the Agency in connection with the substitution of such Alternate Security, including, without limitation, the fees and expenses of its counsel, and -38- (F) written acknowledgment from the provider of Alternate Security that the Alternate Security has been duly executed, will be in full force and effect from the date of its substitution for the Credit Enhancement or other Alternate Security and has been duly authorized by all necessary action of such provider. (d) The substitution of Alternate Security under this Section shall not prevent a redemption of Bonds on the Expiration Date pursuant to Section 4.02(a) of the Indenture unless made by no later than the date required by such Section. SECTION 4.13A. CONFIRMATION. The Confirmation, if one is provided, shall be an irrevocable obligation of the Confirming Bank to the Trustee to pay to the Trustee upon request made with respect to the Bonds and in accordance with the terms hereof, the amounts described in this Section. (a) Prior to the Fixed Rate Conversion Date, any Confirmation shall be in a stated amount at least equal to (i) an amount equal to the aggregate principal amount of the Outstanding Bonds sufficient (1) to pay the principal amount of the Bonds when due at maturity or upon redemption or acceleration or (2) to pay the principal portion of the purchase price of Bonds tendered for purchase pursuant to the Indenture to the extent remarketing proceeds are not available for such purpose, plus (ii) an amount equal to thirty seven (37) days' interest accrued on the Bonds at the Maximum Rate then in effect (1) to pay interest on the Bonds when due or (2) to pay the accrued interest portion of the purchase price of the Bonds tendered for purchase pursuant to the Indenture to the extent remarketing proceeds are not available for such purpose. (b) On and after a Fixed Rate Conversion Date, any Confirmation shall be effective on the Fixed Rate Conversion Date and shall be in a stated amount at least equal to (i) an amount sufficient to pay the principal amount of, and premium, if any, on the Outstanding Bonds when due whether at stated maturity or upon redemption or acceleration, plus (ii) an amount equal to 225 days' interest on the Outstanding Bonds at the Fixed Rate to pay interest accrued on the Bonds at the Fixed Rate on or prior to the expiration date of such Fixed Rate Confirmation. (c) Each Confirmation delivered while the Bonds bear interest at a Floating Rate shall have a term of not less than one year and each Confirmation delivered while the Bonds bear interest at a Fixed Rate shall have a term of not less than the then current Credit Enhancement. In no event will the Trustee be entitled to draw on the Confirmation with respect to payment of principal, purchase price or redemption price of or interest on Pledged Bonds or Confirming Bank Pledged Bonds. The Confirmation may provide that the Confirming Bank's obligation under the Confirmation will be -39- reduced to the extent of any drawing thereunder, subject to reinstatement to the extent described therein. (d) The Trustee shall draw under the Confirmation in accordance with the terms thereof and the provisions of the Indenture to the extent necessary to make timely payments of principal amount or redemption price of and interest on the Bonds required to be made from the Interest Fund and the Principal Fund, including payment of principal and of interest to the date of a declaration of acceleration upon declaration of acceleration of the Bonds. The proceeds of all such drawings shall be deposited in the Confirmation Interest Account of the Interest Fund or in the Confirmation Principal Account of the Principal Fund as appropriate pursuant to the Indenture and applied to such payments of principal amount, redemption price of and interest on the Bonds. (e) In addition, the Trustee shall draw moneys under the Confirmation in accordance with the terms thereof to the extent necessary to make timely payments of purchase price required to be made pursuant to and in accordance with Article IV of the Indenture. (f) It is understood and agreed that when drawing amounts under the Confirmation the Trustee is not acting as an agent of the Agency but rather on behalf of the Bondholders. (g) In each case that Bonds are redeemed or deemed to have been paid pursuant to the Indenture, the Trustee shall take such action as may be permitted under the Confirmation to reduce the amount available thereunder to the amount required by the application of this Section. (h) The Confirming Bank may at its option and so long as the Credit Enhancer adjusts the maximum rate in respect of the Credit Enhancement at the same time and to the same extent, at any time prior to the Fixed Rate Conversion Date, adjust the maximum rate (but not to a rate less than the lower of [12%] per annum or the then current maximum rate in effect with respect to the Credit Enhancement) upon delivery of the following items to the persons indicated not less than five (5) days prior to the effective date of such adjustment: (i) to the Trustee (1) a certificate of an authorized officer of the Confirming Bank setting forth the new maximum rate and stating the effective date of such new maximum rate, (2) an opinion of counsel for the Confirming Bank stating that the substitute Confirmation constitutes a legal, valid and binding obligation of the Bank in accordance with its terms, (3) an opinion of counsel stating that the new maximum rate does not exceed the Highest Lawful Rate, (4) an opinion of counsel stating that all governmental approvals as required by law have been obtained and (5) an opinion of Bond Counsel to -40- the effect that such adjustment will not cause the interest on the Bonds to be includable in gross income for federal income tax purposes; (ii) to the Remarketing Agent and the Developer, a copy of the certificate described in paragraph (i)(1) above bearing the written acknowledgement of receipt by the Trustee; and (iii) to the Trustee, a substitute Confirmation in the same form, dated the date of such substitution, for an amount determined in accordance with the Indenture using the new maximum rate, but otherwise having terms identical to the then outstanding Confirmation. The Trustee shall surrender to the Confirming Bank the Confirmation for which it has received a substitute promptly upon compliance by the Confirming Bank with the provisions of this subsection. (i) The Confirming Bank, so long as it honors its obligations under the Confirmation, shall be subrogated to the rights of any owner whose Bond is paid or purchased with proceeds paid by the Confirming Bank under the Confirmation to the extent of the amount received by such owner plus interest thereon from the date of such payment or purchase. SECTION 4.13B. OPTIONAL SUBSTITUTION OF ALTERNATE CONFIRMATION. At any time and from time to time during the term of this Agreement, the Developer, at its election and subject to satisfaction of the requirements of this Section, may provide for the delivery, in substitution for the Confirmation in effect from time to time, of a new Alternate Confirmation that meets the requirements of this Section. The Developer shall give written notice of intent to substitute an Alternate Confirmation to the Remarketing Agent, the Confirming Bank, the Credit Enhancer and the Trustee at least twenty (20) days prior to the date scheduled for the substitution of an Alternate Confirmation. (a) Any Alternate Confirmation shall constitute an irrevocable obligation of the obligor thereon (i) to pay to the Trustee, upon proper demand, an amount equal to any amounts of principal of and interest on the Bonds that are then due and owing and unpaid under the Mortgage Loan Documents, and to make such payment by not later than the time and date necessary to assure the timely payment of the principal of, and interest on or the Purchase Price of the Bonds, or (ii) to fully secure otherwise payment in an amount equal to the principal amount of the Bonds Outstanding from time to time plus, during any Floating Rate Period, the number of days' interest on the Bonds then Outstanding required by the rating agency then rating the Bonds, to maintain the rating on the Bonds, computed at a rate of interest per annum sufficient to pay interest on the Bonds as it becomes due and, during any Fixed Rate Period, the -41- number of days' interest on the Bonds then outstanding required by the rating agency then rating the Bonds, to maintain the rating on the Bonds, computed at the Fixed Rate in effect during such Fixed Rate Period, all as necessary to assure the timely payment of the principal of and interest on the Bonds and the Purchase Price thereof. Any Alternate Confirmation substituted hereunder shall have a term of at least one year and, during a Fixed Rate Period, shall have a term at least as long as the Confirmation for which it is being substituted. (b) As a condition to acceptance by the Trustee of the substitution of an Alternate Confirmation hereunder on other than a Substitution Date or a Conversion Date, the Developer shall cause to be delivered to the Trustee, concurrently with the delivery of any Alternate Confirmation, the following: (i) if at the time of such substitution no default has occurred and is continuing under the existing Confirmation, the written approval of the provider thereof of the substitution hereunder of a new Alternate Confirmation, (ii) during a Floating Rate Period, written acknowledgment from the Trustee that Bondholders were notified of the pending substitution of an Alternate Confirmation no later than fourteen days prior to the date scheduled for substitution, (iii) an opinion of counsel acceptable to the Agency, addressed to the Trustee and the Agency, stating, among other things, that such Alternate Confirmation constitutes a legal, valid and binding obligation of the obligor thereon, enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws for the relief of debtors and by general principles of equity that permit the exercise of judicial discretion and by laws, rulings and judgments applicable to the provider of such Alternate Confirmation including authorities governing the effect given to foreign judgments in such obligor's jurisdiction and to the extent that the enforceability of indemnification and contribution provisions to which such Alternate Confirmation relates may be limited, in whole or in part, by applicable securities laws or public policy, and addressing such other matters as the Agency and the Trustee may reasonably require, (iv) an opinion of Bond Counsel to the effect that substitution of such Alternate Confirmation is permitted under the Indenture and this Agreement and will not adversely affect the excludability of interest on the Bonds from gross income of the holders of the Bonds for federal income tax purposes, -42- (v) written evidence from Moody's, if Moody's then rates the Bonds, or S&P, if S&P then rates the Bonds, that each such agency has reviewed such Alternate Confirmation and that its substitution will not, of itself, result in a withdrawal of or a reduction of its rating of the Bonds from that which is then in effect, (vi) an opinion of counsel acceptable to the Agency addressed to the Agency and the Trustee, to the effect that the substitution of such Alternate Confirmation will not subject the Bonds and/or the Alternate Confirmation to the registration requirements of the Securities Act of 1933, as amended, or the Indenture to qualification under the Trust Indenture Act of 1939, as amended, or, in the alternative, that the Bonds and/or such Alternate Confirmation, as the case may be, have been registered pursuant to the Securities Act of 1933, as amended, and the Indenture has been qualified under the Trust Indenture Act of 1939, as amended, (vii) an amount sufficient to pay all costs incurred by the Trustee and the Agency in connection with the substitution of such Alternate Confirmation, including, without limitation, the fees and expenses of their respective counsel, and (viii) written acknowledgment from the provider of the Alternate Confirmation that the Alternate Confirmation has been duly executed, will be in full force and effect from the date of its substitution for the existing Confirmation and has been duly authorized by all necessary action of such provider. (c) As a condition to acceptance by the Trustee of the substitution of an Alternate Confirmation hereunder on a Substitution Date or a Conversion Date: (i) the Developer shall cause to be delivered to the Trustee: (A) a notice specifying the Substitution Date or Conversion Date, which shall be a date not earlier than twenty (20) days from the date of such notice, unless the Substitution Date or Conversion Date shall also be an Expiration Date, in which case the Substitution Date or Conversion Date shall be a date not earlier than thirty-five days from the date of such notice, and (B) if the securities rating agency or agencies are to remain the same, written evidence from each securities rating agency that has in effect a current rating on the Bonds of the long-term and short-term ratings to be assigned to the Bonds upon the substitution of the Alternate Confirmation, or -43- (C) if a different securities rating agency from the securities rating agency or agencies currently rating the Bonds is to rate the Bonds on and after the Substitution Date or Conversion Date, written evidence from said agency of the rating to be assigned to the Bonds; and (ii) the Developer shall cause to be delivered to the Trustee concurrently with the delivery of the Alternate Confirmation the following: (A) if at the time of such substitution the provider of the existing Alternate Confirmation is not in default or the substitution is to occur in conjunction with the Expiration Date, the written approval of such provider of the substitution hereunder of such Alternate Confirmation, (B) an opinion of counsel acceptable to the Agency, addressed to the Trustee and the Agency, stating, among other things, that such Alternate Confirmation constitutes a legal, valid and binding obligation of the obligor thereon, enforceable in accordance with its terms, except to the extent of customary exceptions, including, without limitation, that the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws for the relief of debtors as such laws may be applied in the event of the bankruptcy, insolvency, reorganization or similar proceeding of or moratorium applicable to such obligor and by general principles of equity that permit the exercise of judicial discretion and by laws, rulings and judgments applicable to the provider of such Alternate Confirmation including authorities governing the effect given to foreign judgments in such obligor's jurisdiction and to the extent that the enforceability of indemnification and contribution provisions to which such Alternate Confirmation relates may be limited, in whole or in part, by applicable securities laws or public policy, and addressing such other matters as the Trustee and the Agency may reasonably require, (C) an opinion of Bond Counsel to the effect that substitution of such Alternate Confirmation is permitted under the Indenture and this Agreement and will not adversely affect the excludability of interest on the Bonds from gross income of the holders of the Bonds for federal income tax purposes, (D) an opinion of counsel acceptable to the Agency addressed to the Agency and the Trustee, to the effect that the substitution of such Alternate Confirmation will not subject the Bonds or such Alternate -44- Confirmation to the registration requirements of the Securities Act of 1933, as amended, or the Indenture to qualification under the Trust Indenture Act of 1939, as amended, or, in the alternative, that the Bonds and/or such Alternate Confirmation, as the case may be, have been registered pursuant to the Securities Act of 1933, as amended, and the Indenture has been qualified under the Trust Indenture Act of 1939, as amended, (E) an amount sufficient to pay all costs incurred by the Trustee and the Agency in connection with the substitution of such Alternate Confirmation, including, without limitation, the fees and expenses of its counsel, and (F) written acknowledgment from the provider of the Alternate Confirmation that the Alternate Confirmation has been duly executed, will be in full force and effect from the date of its substitution for the existing Alternate Confirmation and has been duly authorized by all necessary action of such provider. SECTION 4.13C. EXTENSIONS OF CONFIRMATION. The Confirming Bank may extend the term of the Confirmation provided that the extended Confirmation shall have a term meeting the requirements of Section 4.13A hereof. The Trustee shall give written notice to the Confirming Bank ninety (90) days prior to the Confirmation Expiration Date, which notice shall state the date upon which the Confirmation is scheduled to expire if not extended. The Confirming Bank may extend the Confirmation in accordance with the terms of the Confirmation Agreement and shall amend the Confirmation to evidence such extension or cause the substitute Confirmation effecting such extension to be delivered to the Trustee no later than 40 days immediately preceding the Confirmation Expiration Date. SECTION 4.13D. EXPIRATION OF CONFIRMATION. Unless an Alternate Confirmation or an extension of the Confirmation meeting the requirements of Section 4.13B or Section 4.13C hereof shall have been delivered at least forty (40) days prior to any Confirmation Expiration Date, the Bonds shall be subject to mandatory tender for purchase pursuant to Section 4.13 of the Indenture and the Trustee shall take all action necessary to notify the Bondholders of such mandatory tender in accordance with the requirements of the Indenture. Bonds may be remarketed following expiration of a Confirmation so long as a Credit Enhancement, as applicable, meeting the requirements of Section 4.13 hereof is in place after such Confirmation Expiration Date. An Alternate Confirmation may be delivered at any time following a Confirmation Expiration Date provided the requirements of Section 4.13B hereof are met. SECTION 4.13E. NOTICES OF EXTENSION, SUBSTITUTION OR REPLACEMENT OF CONFIRMATION. -45- (a) The Trustee shall, at least 15 Business Days prior to the proposed substitution of the Confirmation with an Alternate Confirmation pursuant to Section 4.13B or the extension of the Confirmation pursuant to Section 4.13C, mail notice thereof to the Owners of the Bonds by first class mail, postage prepaid. (b) The Trustee shall promptly give notice of any proposed extension, substitution or replacement of the Confirmation to the Remarketing Agent and to each Rating Service. SECTION 4.13F. NO LIABILITY OF AGENCY OR DEVELOPER TO CONFIRMING BANK. Neither the Agency (or the Trustee as Assignee) nor the Developer shall be liable to the Confirming Bank or any other party in respect of any Confirmation or any transactions respecting the Confirmation. SECTION 4.14. TRUSTEE'S EXPENSES. The Developer hereby agrees to pay to the Trustee, in addition to the amounts payable hereunder, the Trustee's Expenses required to be paid pursuant to the Indenture, as provided in Section 4.01(d) hereof. SECTION 4.15. CONVERSION OF BOND INTEREST RATE AT OPTION OF DEVELOPER. (a) During any Floating Rate Period, the Developer may elect with the consent of the Credit Enhancer and the Confirming Bank to have the Bonds convert from bearing interest at a Floating Rate to bearing interest at a Fixed Rate, by providing the following to the Trustee, the Credit Enhancer, the Confirming Bank and the Remarketing Agent: (i) written notice stating that the Developer has elected to have the Bonds convert from bearing interest at a Floating Rate to bearing interest at a Fixed Rate, and specifying either (1) the length of the Fixed Rate Period that will follow the current Floating Rate Period, which shall be a period of a least one year ending on a December 31, a June 30, or on the maturity date of the Bonds, but in no event ending on a date that is later than the Expiration Date or (2) the Maximum Fixed Rate; and (ii) a written opinion of Bond Counsel to the effect that conversion of the Bonds from bearing interest at a Floating Rate to bearing interest at a Fixed Rate at the election of the Developer hereunder and under the Indenture will not cause the interest on the Bonds to become includable in the gross income of the holders of the Bonds for federal income tax purposes, under applicable law in effect as of the date of such opinion. The Agency agrees that, subject to satisfaction of all conditions to such conversion set forth in Section 3.05 of the Inden- -46- ture, including receipt by the Trustee of the supplemental opinion of Bond Counsel described in Section 3.05(d)(ii) of the Indenture, the Bonds will convert from bearing interest at a Floating Rate to bearing interest at a Fixed Rate. In the event that, if the Fixed Rate determined and announced by the Remarketing Agent on any Fixed Rate Determination Date pursuant to Section 3.05(c) of the Indenture following an election made by the Developer under this Section 4.15(a) exceeds by more than 25 basis points the Fixed Rate previously estimated by the Remarketing Agent with respect to the applicable Fixed Rate Conversion Date pursuant to Section 3.05(b) of the Indenture, the Developer may provide Immediate Notice, by no later than the Business Day immediately following such Fixed Rate Determination Date, to the Trustee, the Remarketing Agent, the Tender Agent, the Credit Enhancer and the Confirming Bank, of its election that the Bonds will bear interest at the Fixed Rate as so determined, despite the general provisions of Section 3.05(d)(i) of the Indenture. The Developer acknowledges that failure to give such notice will result in cancellation of the Fixed Rate Conversion Date and will cause the Bonds to continue to bear interest at the Floating Rate. (b) At least 35 days before the end of any Fixed Rate Period (unless such Fixed Rate Period ends on the date of final maturity of the Bonds), the Developer may elect to have the Bonds continue to bear interest at a Fixed Rate by providing the following to the Trustee, the Credit Enhancer, the Confirming Bank and the Remarketing Agent: (i) written notice stating that the Developer has elected, as of end of the Fixed Rate Period then in effect, to have the Bonds continue to bear interest at a Fixed Rate and specifying either (1) the length of the Fixed Rate Period that will follow the current Fixed Rate Period, which shall be a period of at least one year ending on a December 31, a June 30, or on the maturity date of the Bonds, but in no event ending on a date that is later than the Expiration Date, or (2) the Maximum Fixed Rate; and (ii) a written opinion of Bond Counsel to the effect that the establishment of the interest rate on the Bonds in accordance with the election of the Developer made pursuant to (i) above will not cause the interest on the Bonds to become includable in the gross income of the holders of the Bonds for federal income tax purposes, under applicable law in effect as of the date of such opinion. The Agency agrees that, subject to satisfaction of all conditions to the setting of the interest rate on the Bonds in accordance with the notice described in (i) above, as set forth in Section 3.07 of the Indenture, including receipt by the Trustee of the supplemental opinion of Bond Counsel described in Section -47- 3.07(b)(iii)(2) of the Indenture, the interest rate on the Bonds will be set in accordance with such notice and the procedures set forth in such Section 3.07. In the event that, if the Fixed Rate determined and announced by the Remarketing Agent on any Fixed Rate Determination Date pursuant to Section 3.07(b)(ii) of the Indenture following an election made by the Developer under this Section 4.15(b) exceeds by more than 25 basis points the Fixed Rate previously estimated by the Remarketing Agent with respect to the applicable Fixed Rate Conversion Date pursuant to Section 3.07(b)(i) of the Indenture, the Developer may provide Immediate Notice, by no later than the Business Day immediately following such Fixed Rate Determination Date, to the Trustee, the Remarketing Agent, the Tender Agent, the Credit Enhancer and the Confirming Bank, of its election that the Bonds will bear interest at the Fixed Rate as so determined, despite the general provisions of Section 3.07(b)(iii)(A) of the Indenture. The Developer acknowledges that failure to provide any item described in this subsection or to satisfy any condition described in Section 3.07 of the Indenture will result in the setting of the interest rate on the Bonds at the Floating Rate or the redemption of Bonds at the end of each Fixed Rate Period pursuant to Section 3.07(a) of the Indenture rather than in accordance with any election of the Developer. SECTION 4.16. [INTENTIONALLY OMITTED] SECTION 4.17. ASSIGNMENT OF LOAN AGREEMENT BY DEVELOPER. This Agreement may be assigned as a whole or in part, by the Developer in accordance with the provisions of Section 8 of the Land Use Restriction Agreement, as such provisions relate to the assignment by the Developer of the Development, subject, however, to consent of the Credit Enhancer and the Confirming Bank and to each of the following conditions: (a) No assignment (other than pursuant to Section 8 of the Lurid Use Restriction Agreement) shall relieve the Developer from primary liability for any of its obligations hereunder, and, in the event of any such assignment, the Developer shall remain primarily liable for payments of the Loan payments pursuant to Section 4.02 of this Agreement and for performance and observance of the other agreements on its part herein provided to be performed and observed to the same extent as though no assignment had been made; (b) In the event that this Agreement is assigned, as a whole or in part, the assignee shall agree to perform the obligations of the Developer hereunder to the extent of the interest assigned; (c) The Developer shall promptly upon the making of any assignment furnish or cause to be furnished to the Agency and to the Trustee a true and complete copy of each such assignment and agreement to perform; and -48- (d) Upon the assignment of this Agreement as a whole in accordance with this Section 4.17, the assigning party shall be relieved from all liability for any of its obligations hereunder with respect to matters arising after the date of such assignment. -49- ARTICLE V THE DEVELOPMENT SECTION 5.01. PAYMENT OF DEVELOPMENT COSTS. If the moneys available from the proceeds of the sale of the Bonds shall not be sufficient to redeem the 1985 Bonds in full, the Developer shall pay from its own funds all of that portion of the redemption price of the 1985 Bonds, including premium, in excess of the moneys available therefor from its own funds. Neither the Agency nor the Trustee makes any warranty, either express or implied, that the moneys from the proceeds of the Bonds will be sufficient to redeem the 1985 Bonds. If the Developer shall pay from its own funds any portion of the redemption price of the 1985 Bonds, including premium, pursuant to the provisions of this Section, it shall not be entitled to any reimbursement therefor from the Agency, the Trustee or the holders of any of the Bonds, nor shall it be entitled to any diminution in or postponement of the payments required to be paid by the Developer under this Agreement. SECTION 5.02. PERMITS AND LICENSES. The Developer covenants and agrees that in the operation of the Development it will use its best efforts to comply with all federal, state and local statutes, laws, lawful ordinances, building codes, regulations and rulings known by it to apply to the Development. SECTION 5.03. ANNUAL REVIEW OF MANAGEMENT. The Developer hereby authorizes the Agency to conduct a review annually of the management and operation of the Development. The Agency shall document its findings from such review and provide a copy of its findings to the Developer, who shall have thirty days after receipt of such findings to respond to the Agency with respect thereto. If the Agency shall find that any aspect of the management or operation of the Development may cause interest on the Bonds to be subject to federal income taxation or a violation of the Act, the Agency shall so notify the Developer and require remedy of such condition. In order to effectuate such remedy, the Agency may require the Developer to remove any management agent from responsibility for the Development. The foregoing is a right which the Agency retains and does not assign to the Trustee. Until such time as the Trustee has been directed and indemnified by the Owners, the Trustee shall have no responsibility for any review of the management and operation of the Development. -50- ARTICLE VI INDEMNIFICATION, PAYMENTS TO AGENCY SECTION 6.01. INDEMNIFICATION OF AGENCY. (a) Subject to the provisions of the succeeding sentences of this Section 6.01(a) and the provisions of subsection (c) hereof, the Developer as an entity (as used in this Article VI the term "Developer" shall not include any partners, shareholders, directors, officers, agents or representatives of the Developer or any partner thereof in such capacities) agrees to indemnify and hold the Agency, its directors, members, officers, employees, agents and representatives, and the State, including but not limited to, the Division, the members and officers of its governing body, its employees, agents and representatives (any or all of the foregoing being hereinafter referred to as the "Indemnified Persons") harmless from and against any and all losses, costs, damages, judgments (including specifically punitive damage awards), arbitration awards, amounts paid in settlements, costs and expenses and liabilities of whatsoever nature or kind (including but not limited to, reasonable attorneys' fees, whether or not suit is brought and whether incurred in settlement negotiations, investigations of claims, at trial, on appeal, in bankruptcy or other creditors' proceedings or otherwise, expert witness fees and expenses, other litigation and court costs, amounts paid in settlement and amounts paid to discharge judgments) directly or indirectly resulting from, arising out of or in connection with any act or omission of the Original Developer or the Developer or any of their respective partners, directors, officers, employees, attorneys or agents or other persons under contract with the Original Developer or the Developer directly or indirectly resulting from, arising out of, or related to (i) the issuance, offering, sale or delivery of the Bonds, the redemption of the 1985 Bonds and any amendments to the respective Indentures for the 1985 Bonds in connection with the redemption of the 1985 Bonds (ii) the interpretation or enforcement of provisions of the Agreement, the Indenture and any other documents in connection therewith or the issuance of 1985 Bonds, (iii) any written statements or representations made or given by the Developer, its agents or persons under contract with it to any Indemnified Persons relating to statements or representations of financial information, (iv) the design, construction, installation, operation, use, occupancy, maintenance or ownership of the Development or (v) similar events or occurrence with respect to the 1985 Bonds. This indemnity is effective only with respect to any loss incurred by an Indemnified Person, not due to any negligent, illegal or unlawful action or omission on its part. (b) The Indemnified Persons will promptly, but in no event later than seven (7) days following their receipt of a filing relating to a legal action or thirty (30) days following their receipt of any other claim and after notice to the Indemnified Persons (notice to the Indemnified Persons being service with -51- respect to the filing of any legal action, receipt of any claim in writing or similar form of actual notice) of any claim as to which they assert a right to indemnification, notify the Developer of such claim. (c) If any claim for indemnification by an Indemnified Person arises out of a claim for monetary damages by a person other than an Indemnified Person, the Developer shall undertake to conduct any proceedings or negotiations in connection therewith which are necessary to defend the Indemnified Persons and shall take all such steps or proceedings as the Developer in good faith deems necessary to settle or defeat any such claims, and to employ counsel to contest any such claims; provided, however, that the Developer shall reasonably consider the advice of the Indemnified Persons as to the defense of such claims, and the Indemnified Persons shall have the right to participate, at their own expense, in such defense, but control of such litigation and settlement (except for any admission of guilt or entering of a plea of NOLO CONTENDERE with respect to any Indemnified Person, which must be specifically consented to by such Indemnified Person) shall remain with the Developer. The Indemnified Persons shall provide all reasonable cooperation in connection with any such defense by the Developer. Except as set forth herein, counsel and auditor fees, filing fees and court fees of all proceedings, contests or lawsuits with respect to any such claim or asserted liability shall be borne by the Developer. If any such claim is made hereunder and the Developer does not undertake the defense thereof, the Indemnified Persons shall be entitled to control such litigation and settlement and shall be entitled to indemnity with respect thereto pursuant to the terms of this Section 6.01; provided that all Indemnified Persons as to whom there is no conflict of interest shall be entitled to indemnity for the fees and expenses of only one firm of attorneys. To the extent that the Developer undertakes the defense of such claim, the Indemnified Persons shall be entitled to indemnity hereunder only to the extent that such defense is unsuccessful as determined by a final judgment of a court of competent jurisdiction, or by written acknowledgment of the parties. An Indemnified Person shall not be indemnified by the Developer if the claim against or asserted liability of the Indemnified Person is successful or found to be valid as a result of any illegal or unlawful action on the part of the Indemnified Person, or with respect to the Trustee, illegal or unlawful action or negligence or willful misconduct. SECTION 6.02. INDEMNIFICATION OF TRUSTEE. (a) Subject to the provisions of the succeeding sentences of this subsection, the Developer agrees to indemnify and hold the Trustee, its directors and officers (as used in this Section 6.02, the "Indemnified Persons") harmless from and against any and all losses, costs, damages, expenses and liabilities of whatsoever nature or kind (including but not limited to, any documentary stamp taxes or intangible taxes due and payable in connection with the Loan, reasonable attorneys' fees (including those incurred at all -52- tribunal, including, without limitation, bankruptcy court, levels), litigation and court costs, amounts paid in settlement by or with the approval of the Developer and amounts paid to discharge judgments) directly or indirectly resulting from, arising out of, or related to (i) the issuance, offering, sale or delivery of the Bonds, (ii) the enforcement of provisions of the Agreement, the Indenture and any other documents in connection therewith, (iii) any written statements or representations made or given by the Developer, its agents or persons under contract with it to any Indemnified Persons relating to statements or representations of financial information or (iv) the design, construction, installation, operation, use, occupancy, maintenance or ownership of the Development. It is provided, however, the Trustee shall not be indemnified hereunder for any claims or damages arising from its own negligent acts or omissions or from any willful misconduct by the Trustee with respect to the provisions of the Indenture. (b) For the purposes of the provisions of this Section 6.02, the Trustee shall be deemed to be an "Indemnified Person" under the provisions of subsections (b) and (c) of Section 6.01 and claims under this Section shall be subject to such provisions. -53- ARTICLE VII BREACH OF COVENANTS, REMEDIES SECTION 7.01. EVENT OF DEFAULT. An "Event of Default" shall be deemed to have occurred under this Agreement if: (a) Any amount required to be paid by Section 4.02 hereof (taking into account any credits described in Section 4.03 hereof) is not paid to the Trustee or Tender Agent, as applicable (either by or on behalf of the Developer, by 2:00 p.m., New York, New York time) when and as required to make a corresponding payment on the Bonds as required under the Indenture; or (b) Any amount required to be paid by Section 4.05, 4.06, 4.07, 4.08 or 4.09 hereof (taking into account any credits described in Section 4.03 hereof) is not paid to the Trustee (either by or on behalf of the Developer by 2:00 p.m., New York, New York time) whether in connection with a scheduled interest payment date, at maturity, upon any date fixed for payment, by acceleration or otherwise as and when required to make a corresponding payment on the Bonds as required under the Indenture; or (c) Notice is given to the Developer, ADCC, the Credit Enhancer and the Confirming Bank by the Trustee or the Agency that the Developer has failed to comply with or to perform any of the covenants, conditions or provisions of the Land Use Restriction Agreement or this Agreement which apply to the Developer (other than those referred to in Section 7.01(a) or (b) hereof) or that there has occurred an "event of default" under the Mortgage (as defined in the Mortgage), and, in any of such events, sixty (60) days have passed since such notice, unless within sixty (60) days after receipt of such notice the Trustee receives an opinion of Bond Counsel stating that (i) such failure or event of default does not produce a material risk that interest on the Bonds will cease to be excluded from gross income for federal income tax purposes (except during such period as the Bonds are owned by a "substantial user" of the Development or a "related person") or (ii) such failure or event of default can be remedied with the effect of permitting the interest on the Bonds to continue to be excluded from gross income for federal income tax purposes and such failure or event of default is remedied within the period of time determined by Bond Counsel to be necessary to permit interest on the Bonds to continue to be excluded from gross income for federal income tax purposes, and (iii) such failure or event of default does not cause a violation of the Act by the Developer; or (d) (i) The failure of the Credit Enhancement to continue in full force and effect if, within thirty (30) days after such failure, the Developer shall have failed to substitute Alternate Security; or (ii) the failure of the Credit Enhancer to make payments under the Credit Enhancement within the time provided for -54- therein; provided, however, that under circumstances where the Credit Enhancement is confirmed by a Confirmation, the foregoing shall not constitute an Event of Default hereunder unless there shall have also occurred a default by the Confirming Bank under the Confirmation by failing to honor any draw thereon made in accordance with the terms thereof or by an assertion by the Confirming Bank of the invalidity or unenforceability of the Confirmation; or (e) The Credit Enhancer shall file a voluntary petition in bankruptcy, or shall be adjudicated bankrupt or insolvent, or shall file any petition or agreement seeking any reorganization, incorporation, readjustment, liquidation or similar relief for itself under any present or future statutes, laws or regulations or shall seek or consent to or acquiesce in the appointment of any trustee, receiver or liquidator of the Credit Enhancer or of all or any substantial part of its properties, or shall make any general assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due; or (f) A petition shall be filed against the Credit Enhancer seeking any reorganization, composition, readjustment, liquidation or similar relief under any present or future statute, law or regulation and shall remain undismissed or unstayed for an aggregate of ninety (90) days (whether or not consecutive), or if any trustee, receiver or liquidator of the Credit Enhancer or of all or any substantial part of its properties shall be appointed without the consent or acquiescence of the Credit Enhancer and such appointment shall remain undismissed or unstayed for an aggregate of ninety (90) days (whether or not consecutive); or (g) Any "Event of Default" occurs under the Indenture and is not cured prior to the giving of a notice of acceleration under Section 9.01(b) thereof. The occurrences set forth in Sections 7.01(e) and (f) above shall not constitute Events of Default hereunder if the Developer provides Alternate Security for the Credit Enhancement within thirty (30) days subsequent to the happening of such occurrence pursuant to Section 4.08 hereof. In the event the Developer fails to provide such Alternate Security, no declaration of acceleration shall be made by the Trustee, and the Loan shall be prepaid mandatory as provided in Section 4.08 hereof. SECTION 7.02. REMEDIES FOR FAILURE TO PERFORM. (a) Upon the occurrence of an "Event of Default" as defined in Section 7.01(a), (b), (c), (d) and (g) above, all amounts due under this Agreement shall be immediately due and payable and the date of payment thereof shall be as specified in a notice of acceleration which shall be promptly given by the Trustee to the Developer. A copy of such notice of acceleration shall be given to the Credit Enhancer, the Confirming Bank, the Agency and ADCC simultaneously with such notice to the Developer, and a demand for payment shall be made by -55- the Trustee under the Credit Enhancement in an amount sufficient to pay principal of and interest on the Bonds to the date of payment therefor; provided, however, with respect to an Event of Default specified in Section 7.01(b) hereof, the Credit Enhancer, in accordance with the Intercreditor Agreement, shall be granted a period of fifteen (15) days in which to cure such Event of Default before the Trustee shall enforce the remedies available to it here under; and further provided, with respect to an Event of Default under Section 7.01(C) hereof, the Credit Enhancer, in accordance with the Intercreditor Agreement, shall be granted a period of thirty (30) days to cure such Event of Default, provided, however that if such default cannot reasonably be cured within such thirty (30) day period and the Credit Enhancer shall have commenced to cure such default within such thirty (30) day period and thereafter diligently and expeditiously proceeds to cure the same, such thirty (30) days period shall be extended for 50 long as it shall require Credit Enhancer in the exercise of due diligence to cure such default, including any period of time necessary to foreclose the Second Mortgage or otherwise obtain possession of the Development and the Land. To the extent that the Credit Enhancer fails to honor such draw in the full amount of such draw, under circum stances where the Credit Enhancement is confirmed by a Confirmation, the Trustee shall make a draw under the Confirmation in the full amount due on the Bonds. To the extent the Credit Enhancer and, if applicable, the Confirming Bank, fail to honor draws in the full amount of such draws, the Trustee shall then pursue the additional remedies available to it under the Indenture and otherwise pursuant to the laws of the State. (b) Upon the occurrence of an "Event of Default" in Section 7.01(c) hereof, if the action or non action which resulted in such "Event of Default" is cured by or on behalf of the Developer prior to the time the notice of acceleration of the Bonds is given by the Trustee, and prior to a draw under the Credit Enhancement or the Confirmation, and if the Trustee receives an opinion of Bond Counsel to the effect that, following such cure and assuming no recurrence of such default, no material risk exists that interest on the Bonds will be included in gross income for federal income tax purposes, then any acceleration of all amounts due under this Agreement shall be rescinded and the parties shall be restored to the same position as though no such "Event of Default" had occurred. (c) Upon the occurrence of an Event of Default specified in Section 7.01(a) or (b) above, if there is paid to or deposited with the Trustee, prior to the time the notice of acceleration of the Bonds is given by the Trustee under the Indenture, and prior to a draw under the Credit Enhancement or the Confirmation, a sum sufficient to pay all overdue amounts which resulted in such Event of Default and Trustee's Expenses, if any, then the acceleration of all amounts due under this Agreement shall be rescinded and the -56- parties shall be restored to the same position as though no such Event of Default had occurred. SECTION 7.03. DISCONTINUANCE OF PROCEEDINGS. In case any proceeding taken by the Agency or its assigns on account of any failure to perform under this Agreement shall have been discontinued or determined adversely to the Agency or its assigns, then and in every case the Agency and its assigns shall be restored to their former positions and rights hereunder, respectively, and all rights, remedies and powers of the Agency and its assigns shall continue as though no such proceeding had been taken. SECTION 7.04. REMEDIES CUMULATIVE. No remedy conferred upon or reserved to the Agency or the Trustee on behalf of the Agency by this Agreement is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement, the Mortgage or the Indenture now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any failure to perform under this Article shall impair any such right or power or shall be construed to be a waiver thereof. In order to entitle the Agency or the Trustee to exercise any remedy reserved to it in this Article, it shall not be necessary to give any notice other than as otherwise specified in this Agreement. SECTION 7.05. REIMBURSEMENT OF EXPENSES. (a) The Developer hereby covenants and agrees to pay all reasonable fees of Bond Counsel in connection with rendering opinions after the issuance of the Bonds which are contemplated by the Indenture and this Agreement. (b) If, upon or after the occurrence of any default hereunder, the Agency or the Trustee on behalf of the Agency shall employ attorneys or incur other expenses for the enforcement of performance or observance of any obligation or agreement on the part of the Developer contained herein, the Developer will on demand therefor reimburse the Agency or the Trustee on behalf of the Agency for reasonable fees of such attorneys and such other reasonable expenses so incurred. (c) The Developer may prosecute or defend any action or proceeding or take any other action involving any defaulting supplier, contractor, subcontractor or surety thereof which the Developer deems to be reasonably necessary, and in such event the Agency agrees to cooperate fully with the Developer to the extent it may lawfully do so, in any such action or proceeding, subject to the provisions of Section 6.01(a) hereof. All moneys recovered by way of damages, refunds, adjustments or otherwise in connection with the foregoing shall belong to the Developer. -57- ARTICLE VIII MISCELLANEOUS SECTION 8.01. AMOUNTS REMAINING IN FUNDS AND ACCOUNTS. Any amounts remaining in any fund or account established under the Indenture and after payment of the Bonds in full (including interest and premium, if any, thereon), or provision for payment thereof having been made in accordance with the provisions of the Indenture, and payment of all other reasonable and necessary obligations owing to the Agency or the Trustee under this Agreement or the Indenture, and payment of any amounts to the United States of America, if any, including (without limitation) the payment of all Trustee's Expenses, shall belong to and be paid to the Agency by the Trustee in accordance with the provisions of the Indenture. SECTION 8.02. LIMITED OBLIGATION OF AGENCY. This Agreement shall inure to the benefit of and shall be binding upon the Agency, the Developer and the Trustee for the benefit of the Bondholders and their respective successors and assigns, subject to the limitation that any obligation of the Agency created by or arising out of this Agreement shall be a limited obligation of the Agency, payable solely out of the revenues arising from the pledge and assignment of the Loan and the other funds held or set aside in trust under the Indenture and shall not constitute a pledge of the faith and credit of the Agency or a debt of the State, or of any other political corporation, subdivision or agency of the State or a pledge of the faith and credit or taxing power of any of them, and there shall be no further recourse against the Agency with respect thereto. SECTION 8.03. PAYMENTS BY CREDIT ENHANCER. The Credit Enhancer shall, to the extent of any payments made by it pursuant to the Credit Enhancement, be subrogated to all rights of the Agency or its assigns (including, without limitation, the Trustee) as to all obligations of the Developer with respect to which such payments shall be made by the Credit Enhancer, but, so long as any of the Bonds remain Outstanding under the terms of the Indenture, such right of subrogation on the part of the Credit Enhancer shall be in all respects subordinate to all rights and claims of the Bondholders, the Trustee and the Agency for all payments which shall be or become due and payable under the Indenture or otherwise arising under this Agreement, the Note, the Mortgage, the Land Use Restriction Agreement, as amended, the Indenture or the Bonds. The Trustee will, upon request, execute and deliver any instrument reasonably requested and prepared by the Credit Enhancer to evidence such subrogation and the Trustee shall assign its rights in any obligations of the Developer with respect to which payment of the entire principal balance and accrued interest thereon shall be made by the Credit Enhancer. -58- SECTION 8.03A. PAYMENTS BY CONFIRMING BANK. The Confirming Bank shall, to the extent of any payments made by it pursuant to the Credit Enhancement, be subrogated to all rights of the Agency or its assigns (including, without limitation, the Trustee) as to all obligations of the Developer with respect to which such payments shall be made by the Confirming Bank, but, so long as any of the Bonds remain Outstanding under the terms of the Indenture, such right of subrogation on the part of the Confirming Bank shall be in all respects subordinate to all rights and claims of the Bondholders, the Trustee and the Agency for all payments which shall be or become due and payable under the Indenture or otherwise arising under this Agreement, the Note, the Mortgage, the Land Use Restriction Agreement, as amended, the Indenture or the Bonds. The Trustee will, upon request, execute and deliver any instrument reasonably requested and prepared by the Confirming Bank to evidence such subrogation and the Trustee shall assign its rights in any obligations of the Developer with respect to which payment of the entire principal balance and accrued interest thereon shall be made by the Confirming Bank. SECTION 8.04. AMENDMENT OF AGREEMENT. This Agreement may be amended only by written agreement of the parties hereto, the Trustee, as assignee, the Credit Enhancer and the Confirming Bank, if a Confirmation shall then be in place, and subject to the requirements for and limitations on such amendments set forth herein and in the Indenture. SECTION 8.05. PAYMENT. At such time as the principal of, premium, if any, and interest on all Bonds outstanding under the Indenture shall have been paid, or shall be deemed to be paid in accordance with the Indenture, and all other sums payable by the Developer under this Agreement, the Note and the Indenture shall have been paid, the Loan shall be deemed to be fully paid and the Developer upon request shall be entitled to receive acknowledgment of such payment in full from the Trustee. SECTION 8.06. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which, when so executed and delivered, shall be an original; but such counterparts shall together constitute but one and the same Agreement, and, in making proof of this Agreement, it shall not be necessary to produce or account for more than one such counterpart. SECTION 8.07. SEVERABILITY. If any clause, provision or section of this Agreement shall be held illegal or invalid by any court, the invalidity of such provisions or sections shall not affect any other provisions or sections hereof, and this Agreement shall be construed and enforced to the end that the transactions contemplated hereby be effected and the obligations contemplated hereby be enforced, as if such illegal or invalid clause, provision or section had not been contained herein. -59- SECTION 8.08. TERM OF AGREEMENT. This Agreement shall be in full force and effect from the date hereof and shall continue in effect (i) so long as any Bonds are outstanding, or (ii) if Alternate Security is in effect in the form of a guaranty, until 123 days have elapsed after the Developer is obligated to make any payments under this Agreement during which no "filing" (as defined in Section 7.01(a) hereof) by or against the Developer occurs, or (iii) so long as the Trustee holds any moneys under the Indenture or (iv) during the continuance of any foreclosure proceedings under the Mortgage, whichever is later. All representations and certifications by the Developer set forth in Article II hereof and all provisions relating to the payment of any amounts due hereunder to the Trustee and the Agency (including any amounts due pursuant to Article VI hereof) shall survive the termination of this Agreement. SECTION 8.09. NOTICE OF CHANGES IN FACT. The Developer will notify the Trustee promptly after the Developer becomes aware of (i) any change in any material fact or circumstance represented or warranted by the Developer in this Agreement or in connection with the issuance of the Bonds, and (ii) any default or event which, with notice or lapse of time or both, could become an Event of Default under this Agreement, or the Indenture, specifying in each case the nature thereof and what action the Developer has taken, is taking, and/or proposes to take with respect thereto. SECTION 8.10. LIMITED OBLIGATIONS OF DEVELOPER. Notwithstanding anything to the contrary in this Agreement (except to the extent provided solely with respect to indemnification, payment of fees and expenses to the Agency and the Trustee and deposits to the Rebate Fund, if any, pursuant to Sections 4.01(d), 4.02(d), 7.05 and Article VI hereof) and under the analogous provisions of the Mortgage and of the Land Use Restriction Agreement, the Agency expressly agrees that the Developer and the partners comprising the Developer shall have no personal liability hereunder, and such liability shall be strictly and absolutely limited to the property encumbered by the Mortgage and the leases, rents, profits and issues thereof and any other collateral securing the Loan. In the event an Event of Default shall occur: (i) the Agency shall not and may not seek any judgment for a deficiency against the Developer or any partners comprising the Developer in their respective capacities as partners, in any action to foreclose, to exercise a power of sale, to confirm any foreclosure or sale under power of sale, or to exercise any other rights or power under or by reason of the Mortgage or any other instrument evidencing or securing the obligations of the Developer under this Agreement; and (ii) the Agency shall not and may not seek any judgment on this Agreement or with respect to the Loan except as a part of judicial proceedings to foreclose the Mortgage securing the obligations of the Developer under this Agreement. In the event any suit is brought on this Agreement, or concerning the Loan or any amount secured by the Mortgage as part of judicial proceedings to foreclose the Mortgage or to confirm any foreclosure or sale pursuant to power of sale -60- thereunder, any judgment obtained in such suit shall constitute a lien on, and will be and can be (except to the extent that such judgment relates to obligations relating to indemnification, deposits to the Rebate Fund, if any, and the payment of fees and expenses to the Agency as provided in Sections 4.01(d), 4.02(d), 7.05 and Article VI hereof) enforced only against, the property encumbered by the Mortgage and the leases, rents, profits and issues thereof and not against any other asset of the Developer or the partners comprising the Developer, in their respective capacities as partners, and the terms of such judgment shall expressly so provide; provided, that the foregoing does not apply to the Credit Enhancer in its capacity as Credit Enhancer under the Credit Enhancement or to the Confirming Bank in its capacity as Confirming Bank under the Confirmation Agreement. SECTION 8.11. NOTICES. Any notices or other communications required or permitted hereunder shall be sufficiently given if delivered personally or sent registered or certified mail, postage prepaid, to the parties listed below: To the Agency: Florida Housing Finance Agency 2574 Seagate Drive Suite 101 Tallahassee, Florida 32301-5026 Attention: Executive Director To the Trustee, Registrar and Paying Agent: Sun Bank, National Association 225 East Robinson Street, Suite 350 Orlando, Florida 32801 Attention: Kathryn R. Broecker To the Developer: OTC Apartments Limited Partnership c/o JG Financial Management Services 280 North Woodward Avenue, 4th Floor Birmingham, Michigan 48009 Attention: Fred Gordon To the Credit Enhancer: The Sumitomo Trust and Banking Company, Limited New York Branch 527 Madison Avenue New York, New York 10022 Attention: Manager, Credit Administration Department -61- To the Remarketing Agent: Stephens Inc. Smith Barney Shearson Inc. c/o Stephens Inc. 111 Center Street Little Rock, Arkansas 72201 Attention: Public Finance Department To the Tender Agent: Sun Bank, National Association c/o Mellon Securities Transfer Services 33rd Floor 120 S. Broadway New York, New York 10271 Attention: Daisy Pedraga To the Rating Agency: Standard & Poor's Corporation 25 Broadway New York, New York 10004 Attention: Abe Losice To ADCC: American Diversified Capital Corporation c/o Federal Deposit Insurance Corporation as Receiver for American Diversified Savings Bank P.O. Box 7549 Newport Beach, California 92658 To the Confirming Bank: The Sumitomo Bank, Limited, Chicago Branch 233 South Walker Drive Sears Tower, Suite 4800 Chicago, Illinois 60606-6448 Attention: Manager, Public Finance Section or at such other address as shall be furnished in writing by either party to the other, and shall be deemed to have been given as of the date so delivered or deposited in the United States mail. SECTION 8.12. APPLICABLE LAW. Notwithstanding the place of execution, the laws of the State shall govern the construction of this Agreement. SECTION 8.13. DATE OF THIS AGREEMENT. This Agreement shall be dated as of the first day of the month and the year during which it is executed by the parties hereto. -62- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first written above. FLORIDA HOUSING FINANCE AGENCY By: /s/ Carl M. Mayes -------------------------------- Member (SEAL) ATTEST: By: /s/ Mark Hendrickson ---------------------- Mark Hendrickson, Executive Director and Secretary -63- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first written above. WITNESSES: OTC APARTMENTS LIMITED PARTNERSHIP, a Florida limited partnership By: JG/OT LIMITED PARTNERSHIP, a Michigan limited partner- /s/ Carol Gitler ship, its General Partner - ------------------------- Carol Gitler By: ORLANDO/TAMPA CORPORATION, a Michigan corporation, its /s/ Donna J. O'Brien General Partner - ------------------------- Donna J. O'Brien By: /s/ Fred Gordon --------------------------- Fred Gordon -64- EX-10.104 46 EXHIBIT 10.104 EXHIBIT 10.104 SUMMARY OF ARRANGEMENT FOR SALE OF STOCK TO EXECUTIVE OFFICERS In furtherance of the objective of Apartment Investment and Management Company (the "Company") facilitating the ownership of the Company's stock by its officers and employees, on August 29, 1996, the Board of Directors of the Company approved the direct sale of up to 601,500 shares of Class A Common Stock to officers of the Company at a price equal to the closing price of the Class A Common Stock on the New York Stock Exchange on that date ($20.75), with the amount to be purchased by each officer to be determined by the Compensation Committee of the Board of Directors. On the same date, the Compensation Committee approved the sale of 382,500 of such shares to Terry Considine, 83,000 of such shares to Peter Kompaniez and 50,000 of such shares to Thomas Toomey. The Compensation Committee also authorized loans from the Company to such officers to finance the full amount of the purchase price for such shares pursuant to unsecured full recourse promissory notes bearing interest at 7.25% per annum, payable quarterly, and due in 2006. EX-21.1 47 EXHIBIT 21.1 EXHIBIT 21.1 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Subsidiaries 1. Anderson Mill Associates, an Illinois limited partnership 2. AIMCO Anchorage, L.P., a Delaware limited partnership 3. AIMCO/Bluffs, L.L.C., a Delaware limited liability company 4. AIMCO/Boardwalk, L.P., a Delaware limited partnership 5. AIMCO/Boardwalk Finance, L.P., a Delaware limited partnership 6. AIMCO/Brandywine, L.P., a Delaware limited partnership 7. AIMCO Bridgewater, L.P., a Delaware limited partnership 8. AIMCO Copperfield, L.P., a Delaware limited partnership 9. AIMCO Crows Nest, L.P., a Delaware limited partnership 10. AIMCO/Easton Falls, L.P., a Delaware limited partnership 11. AIMCO Fondren Court, L.P., a Delaware limited partnership 12. AIMCO Galleria Office, L.P., a Delaware limited partnership 13. AIMCO-GP, Inc., a Delaware corporation 14. AIMCO Group, L.P., a Delaware limited partnership 15. AIMCO Hampton Hill, L.P., a Delaware limited partnership 16. AIMCO Hastings Green, L.P., a Delaware limited partnership 17. AIMCO Hastings Place, L.P., a Delaware limited partnership 18. AIMCO/HIL, L.L.C., a Delaware limited liability company 19. AIMCO Holdings, L.P., a Delaware limited partnership 20. AIMCO Holdings QRS, Inc., a Delaware corporation 21. AIMCO-LP, Inc., a Delaware corporation 22. AIMCO LT, L.P., a Delaware limited partnership 23. AIMCO/Montecito, L.P., a Delaware limited partnership 24. AIMCO Oak Falls, L.P., a Delaware limited partnership 25. AIMCO/OTC, L.L.C., a Delaware liability company 26. AIMCO/OTC, L.P., a Delaware limited partnership 27. AIMCO/OTC QRS, Inc., a Delaware corporation 28. AIMCO/PAM Properties, L.P., a Delaware limited partnership 29. AIMCO Park at Cedar Lawn, L.P., a Delaware limited partnership 30. AIMCO/Penn Square, L.L.C., a Delaware limited liability company 31. AIMCO Peppermill Place, L.P., a Delaware limited partnership 32. AIMCO Properties, L.P., a Delaware limited partnership 33. AIMCO Properties Finance Corp., a Delaware corporation (incorporated August 18, 1995) 34. AIMCO Properties Finance Partnership, L.P., a Delaware limited partnership 35. AIMCO/RALS, L.P., a Delaware limited partnership 2 36. AIMCO Recovery Fund, L.P., a Delaware limited partnership 37. AIMCO/SA, L.L.C., a Delaware limited liability company 38. AIMCO Seaside Point, L.P., a Delaware limited partnership 39. AIMCO Signature Point, L.P., a Delaware limited partnership 40. AIMCO Somerset Inc., a Delaware corporation 41. AIMCO/Stonegate, L.P., a Delaware limited partnership 42. AIMCO Sunbury, L.P., a Delaware limited partnership 43. AIMCO/Teal Pointe, L.P., a Delaware limited partnership 44. AIMCO Township at Highlands, L.P., a Delaware limited partnership 45. AIMCO UT, L.P., a Delaware limited partnership 46. AIMCO/Villa Ladera, L.P., a Delaware limited partnership 47. AIMCO Westchase Midrise, L.P., a Delaware limited partnership 48. AIMCO West Trails, L.P., a Delaware limited partnership 49. AIMCO/Williams Cove, L.P., a Delaware limited partnership 50. AIMCO/Woodlands-Tyler, L.P., a Delaware limited partnership 51. AIMCO Woodway Offices, L.P., a Delaware limited partnership 52. Anchorage Partners, a Texas limited partnership 53. Balcor/Sportvest-II, an Illinois limited partnership 54. Bridgewater Partners, Ltd., a Texas limited partnership 3 55. Castle Rock Joint Venture, a Texas joint venture 56. Clear Lake Land Partners, Ltd., a Texas limited partnership 57. Copper Chase Associates, an Illinois limited partnership 58. Copper Chase Partners Limited Partnership, an Illinois limited partnership 59. Copperfield Partners, Ltd., a Texas limited partnership 60. Coventry Square Partners, a Texas limited partnership 61. CRA Investors, Ltd., a Texas limited partnership 62. Crows Nest Partners, Ltd., a Texas limited partnership 63. Cypress Landing Associates, an Illinois limited partnership 64. Cypress Landing Limited Partnership, an Illinois limited partnership 65. English Manor Joint Venture, a Texas joint venture 66. English Manor Partners, a Texas limited partnership 67. Everest Investors 5, L.L.C., a California limited liability company 68. Fisherman's Wharf Partners, a Texas limited partnership 69. The Fondren Court Joint Venture, a Texas joint venture 70. Fondren Court Partners, Ltd., a Texas limited partnership 71. Galleria Office Partners, Ltd., a Texas limited partnership 72. Greentree Associates, an Illinois limited partnership 4 73. Gulfgate Partners, Ltd., a Texas limited partnership 74. Hampton Hill Partners, a Texas limited partnership 75. Hastings Green Partners, Ltd., a Texas limited partnership 76. Hastings Place Partners, a Texas limited partnership 77. Heather Associates, an Illinois limited partnership 78. Highland Park Partners, an Illinois limited partnership 79. HomeCorp Investments, Ltd., an Alabama limited partnership 80. Houston Recovery Fund, a Texas limited partnership 81. J.W. English, Camelot Apartments, a Texas limited partnership 82. J.W. English Fondren Court Partners, a Texas limited partnership 83. J.W. English, Swiss Village Partners, Ltd., a Texas limited partnership 84. Meadowbrook Drive Limited Partnership, an Illinois limited partnership 85. Meadows Limited Partnership, an Illinois limited partnership 86. Oak Fall Partners, a Texas limited partnership 87. OTC Apartments Limited Partnership, a Florida limited partnership 88. PAM Consolidated Assurance Company, Ltd., a Bermuda company 89. The Park at Cedar Lawn, Ltd., a Texas limited partnership 90. Peppermill Place Partners, a Texas limited partnership 5 91. Property Asset Brokerage of Florida, a Florida limited partnership 92. Property Asset Management Services, Inc., a Delaware corporation 93. Property Asset Management Services-California, L.L.C., a California limited liability company 94. Property Asset Management Services, L.P., a Delaware limited partnership 95. Randol Crossing Investors, an Illinois limited partnership 96. Randol Crossing Partners, an Illinois limited partnership 97. RC Associates, an Illinois limited partnership 98. Ridgecrest Associates, an Illinois limited partnership 99. S.A. Apartments, Ltd., an Alabama limited partnership 100. Seaside Point Partners, Ltd., a Texas limited partnership 101. Seasons Apartments, L.L.C., a Texas limited liability company 102. Seasons Apartments, L.P., a Delaware limited partnership 103. Signature Point Joint Venture, a Texas joint venture 104. Signature Point Partners, Ltd., a Texas limited partnership 105. Somerset Utah, L.P., a Colorado limited partnership 106. Southridge Associates, an Illinois limited partnership 107. Southridge Investors, an Illinois limited partnership 108. Stirling Court Partners, a Texas limited partnership 109. Sunbury Partners, Ltd., a Texas limited partnership 6 110. Township at Highlands Partners, Ltd., a Texas limited partnership 111. Walnut Springs Associates, an Illinois limited partnership 112. Walnut Springs Limited Partnership, an Illinois limited partnership 113. Walters/Property Asset Management Services, L.P., a Delaware limited partnership 114. Westchase Midrise Office Partners, Ltd., a Texas limited partnership 115. West Trails Partners, Ltd., a Texas limited partnership 116. Woodhill Associates, an Illinois limited partnership 117. Woodland Ridge Associates, an Illinois limited partnership 118. Woodland Ridge II Partners Limited Partnership, an Illinois limited partnership 119. Woodway Office Partners, Ltd., a Texas limited partnership 120. 8503 Westheimer Partners, Ltd., a Texas Limited Partnership 7 EX-23.1 48 EXHIBIT 23.1 Exhibit 23.1 We consent to the incorporation by reference in the Company's Registration Statement on Form S-3 (No. 33-98338), the Company's Registration Statement on Form S-3 (No. 333-828), the Company's Registration Statement on Form S-3 (No. 333-4542), the Company's Registration Statement on Form S-3 (No. 333-4546), the Company's Registration Statement on Form S-3 (No. 333-8997), the Company's Registration Statement on Form S-3 (No. 333-17431), the Company's Registration Statement on Form S-8 (No. 333-4550), the Company's Registration Statement on Form S-8 (No. 333-4548), the Company's Registration Statement on Form S-8 (No. 333-14481), our reports (a) dated January 22, 1997 (Except for Note 20, as to which the date is February 20, 1997) with respect to the consolidated financial statements and schedule of Apartment Investment and Management Company included in its Annual Report on Form 10-K for the year ended December 31, 1996, and (b) dated January 20, 1995 with respect to the combined financial statements and schedule of the AIMCO Predecessors included in Apartment Investment and Management Company's Annual Report on Form 10-K for the period from January 1, 1994 through July 28, 1994. ERNST & YOUNG LLP Dallas, Texas March 26, 1997 EX-27 49 EXHIBIT 27
5 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 13,170 0 4,344 0 0 33,345 865,222 120,077 834,813 225,154 0 0 0 153 236,791 834,813 100,516 108,883 46,498 47,806 1512 0 24,802 12,940 0 12,940 0 44 0 12,984 1.04 1.04 Includes cash, restricted cash, accounts receivable and notes receivable. Includes secured shortterm financing, accounts payable and accrued liabilities, resident security deposits and prepaid rents, unsecured short-term financing. Includes rental and other property revenues and management fees and other income. Includes property operating expenses owned property management expense and management and other expenses. Includes CGS depreciation, corporate overhead allocation, amortization of management company goodwill, and other assets depreciation and amortization.
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