-----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, R6wyw6/pZJVLBdwQhXiOhKADbMOp4iysNgw5tsvw5OtJg16a+E9NNrWdONN6kBMX r7uYRiDIuQS+DZx7urEYhA== 0000912057-96-026575.txt : 19961118 0000912057-96-026575.hdr.sgml : 19961118 ACCESSION NUMBER: 0000912057-96-026575 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: APARTMENT INVESTMENT & MANAGEMENT CO CENTRAL INDEX KEY: 0000922864 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13232 FILM NUMBER: 96666524 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-Q 1 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended SEPTEMBER 30, 1996 ------------------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period to ------------------------------------------------ Commission File Number 1-13232 APARTMENT INVESTMENT AND MANAGEMENT COMPANY - -------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Maryland 84-1259577 - -------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 1873 S. Bellaire Street, Suite 1700, Denver, Colorado 80222-4348 - -------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (303) 757-8101 - -------------------------------------------------------------------------- (Registrant's telephone number, including area code) Not applicable - -------------------------------------------------------------------------- (Former name, former address, and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares of Class A Common Stock outstanding as of November 1, 1996: 12,842,843 The number of shares of Class B Common Stock outstanding as of November 1, 1996: 455,000 APARTMENT INVESTMENT AND MANAGEMENT COMPANY FORM 10-Q INDEX PART I. FINANCIAL INFORMATION PAGE ---- Item 1. Financial Statements Consolidated Balance Sheets as of September 30, 1996 (unaudited) and December 31, 1995 3 Consolidated Statements of Income for the Three and Nine Months Ended September 30, 1996 and 1995 (unaudited) 4 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1996 and 1995 (unaudited) 5 Notes to Consolidated Financial Statements (unaudited) 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 15 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 28 Signatures 30 PART I. FINANCIAL INFORMATION. ITEM 1. FINANCIAL STATEMENTS. APARTMENT INVESTMENT AND MANAGEMENT COMPANY CONSOLIDATED BALANCE SHEETS (In thousands, except share data) September 30, December 31, 1996 1995 ------------- ------------ (Unaudited) (Restated) ASSETS Real estate - net of accumulated depreciation of $41,044 and $28,737 $ 500,889 $448,425 Cash and cash equivalents 1,115 2,379 Restricted cash 9,591 18,630 Accounts receivable 2,161 1,581 Deferred financing costs 7,909 5,474 Note receivable 2,893 - Other assets 7,305 3,872 --------- -------- $ 531,863 $480,361 --------- -------- --------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY Secured long-term notes payable $ 176,635 $173,502 Secured long-term tax-exempt bond financing 75,837 66,190 Secured short-term financing 52,300 29,000 Accounts payable, accrued and other liabilities 8,908 9,615 Resident security deposits and prepaid rents 3,125 2,646 --------- -------- 316,805 280,953 --------- -------- Commitments and contingencies - - Minority interest in Operating Partnership 42,760 30,376 --------- -------- Stockholders' equity: Class A Common Stock, $.01 par value, 150,000,000 shares authorized, 12,346,812 and 11,847,568 shares issued and outstanding 118 118 Class B Common Stock, $.01 par value, 685,000 shares authorized, 585,000 shares issued and outstanding 6 6 Non-voting preferred stock, $.01 par value, 10,000,000 authorized, none issued and outstanding - - Additional paid-in capital 184,582 175,211 Accumulated deficit (12,408) (6,303) --------- -------- 172,298 169,032 --------- -------- $ 531,863 $480,361 --------- -------- --------- --------
See accompanying notes to consolidated financial statements. APARTMENT INVESTMENT AND MANAGEMENT COMPANY CONSOLIDATED STATEMENTS OF INCOME (In thousands except per share data) (Unaudited) THREE MONTHS ENDED THREE MONTHS ENDED NINE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, 1996 SEPTEMBER 30, 1995 SEPTEMBER 30, 1996 SEPTEMBER 30, 1995 ------------------ ------------------ ------------------ ------------------ RENTAL PROPERTY OPERATIONS Rental and other property revenues $24,140 $18,714 $ 70,392 $ 55,653 Property operating expenses (8,960) (7,873) (27,111) (22,609) Owned property management expense (658) (569) (1,999) (1,707) ------- ------- ------- ------- Income from property operations before depreciation 14,522 10,272 41,282 31,337 Depreciation (4,656) (3,784) (13,716) (11,067) ------- ------- ------- ------- Income from property operations 9,866 6,488 27,566 20,270 ------- ------- ------- ------- SERVICE COMPANY BUSINESS Management fees and other income 1,717 2,163 5,442 5,980 Management and other expenses (990) (1,017) (3,449) (3,518) Corporate overhead allocation (147) 0 (443) 0 Amortization of management company goodwill (114) (111) (344) (307) Other assets depreciation and amortization (62) (36) (154) (114) ------- ------- ------- ------- Income from service company business 404 999 1,052 2,041 Minority interests in service company business (3) (20) (10) (20) ------- ------- ------- ------- Company's share of income from service company business 401 979 1,042 2,021 ------- ------- ------- ------- GENERAL AND ADMINISTRATIVE EXPENSES (394) (612) (943) (1,709) INTEREST EXPENSE (5,850) (3,078) (16,775) (8,391) INTEREST INCOME 31 132 242 497 ------- ------- ------- ------- INCOME BEFORE GAIN ON DISPOSITION OF PROPERTY AND MINORITY INTEREST IN OPERATING PARTNERSHIP 4,054 3,909 11,132 12,688 Gain on dispositon of property 64 0 64 0 ------- ------- ------- ------- Income before minority interest in Operating Partnership 4,118 3,909 11,196 12,688 Minority interest in Operating Partnership (722) (399) (1,845) (1,228) ------- ------- ------- ------- NET INCOME $ 3,396 $ 3,510 $ 9,351 $ 11,460 ------- ------- ------- ------- ------- ------- ------- ------- Net income allocable to preferred stockholder $ 0 $ 1,497 $ 0 $ 5,169 ------- ------- ------- ------- ------- ------- ------- ------- Net income allocable to common stockholders $ 3,396 $ 2,013 $ 9,351 $ 6,291 ------- ------- ------- ------- ------- ------- ------- ------- Weighted average common shares and common share equivalents outstanding 12,398 9,650 12,127 9,622 ------- ------- ------- ------- ------- ------- ------- ------- Net income per common share and common share equivalent $ 0.27 $ 0.21 $ 0.77 $ 0.65 ------- ------- ------- ------- ------- ------- ------- ------- Dividends paid per common share $ 0.425 $ 0.415 $ 1.275 $ 1.245 ------- ------- ------- ------- ------- ------- ------- -------
See accompanying notes to consolidated financial statements. APARTMENT INVESTMENT AND MANAGEMENT COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) NINE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, 1996 SEPTEMBER 30, 1995 ------------------ ------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 9,351 $ 11,460 -------- -------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 14,801 11,195 Gain on disposition of property (64) - Minority interest in earnings 1,845 1,228 Changes in operating assets and liabilities: Decrease (increase) in restricted cash 9,039 (6,059) Increase in accounts receivable (580) (140) Increase in other assets (3,299) (1,520) Decrease in accounts receivable from affiliates - 217 (Decrease) increase in accounts payable, accrued and other liabilities (707) 1,426 Increase in resident security deposits and prepaid rents 479 35 -------- -------- Total adjustments 21,514 6,382 -------- -------- Net cash provided by operating activities 30,865 17,842 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of real estate 17,167 - Purchase of real estate (10,998) (750) Purchase of note receivable (2,893) - Capital replacements (4,008) (2,814) Initial capital expenditures (3,681) (3,207) Capital enhancements (276) - Construction in progress (6,199) (181) Increase in office equipment and leasehold improvements (300) (19) -------- -------- Net cash used in investing activities (11,188) (6,971) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from secured tax-exempt bond financing 58,010 - Proceeds from secured notes payable - 155,401 Payment of loan costs (3,022) (4,476) Principal paydowns on secured tax-exempt bond financing (48,363) - Net principal paydowns on secured notes payable (28,599) (39,400) Net borrowings on secured short-term financing 23,300 400 Repurchase of common stock (3,543) - Redemption of 1994 Cumulative Convertible Senior Preferred Stock - (96,600) Payment of dividend on mandatorily redeemable 1994 Cumulative Convertible Senior Preferred Stock - (5,169) Repurchase of unregistered Class A Common Stock - (10,633) Payment of common stock dividend (15,456) (11,964) Payment of distributions to minority interest in Operating Partnership (2,656) (2,134) Proceeds from exercise of employee stock options 45 - Payment of additional offering costs related to 1995 common stock offering, dividend reinvestment plan and stock option plan (657) - -------- -------- Net cash used in financing activities (20,941) (14,575) -------- -------- NET DECREASE IN CASH AND CASH EQUIVALENTS (1,264) (3,704) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,379 7,144 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,115 $ 3,440 -------- -------- -------- -------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the period for interest $ 16,363 $ 4,670 -------- -------- -------- --------
See accompanying notes to consolidated financial statements. APARTMENT INVESTMENT AND MANAGEMENT COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands except unit and share data) (Unaudited) NON CASH INVESTING AND FINANCING ACTIVITIES PURCHASE OF REAL ESTATE During the nine months ended September 30, 1996, the Company assumed $31,732 of secured notes payable and issued 498,951 shares of common stock and 745,183 OP Units with a total recorded value of $25,230 in connection with the purchase of four properties. REDEMPTION OF OP UNITS During the nine months ended September 30, 1996, 176,505 OP Units with a recorded value of $3,307 were redeemed in exchange for an equal number of shares of Class A Common Stock REPAYMENT OF SECURED NOTE PAYABLE In July 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 Peachtree Park. PURCHASE OF MANAGEMENT COMPANY In August 1996, the Company issued 16,147 OP Units with a recorded value of $332 for the purchase of a management company. See accompanying notes to consolidated financial statements. APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements September 30, 1996 (Unaudited) NOTE 1 - ORGANIZATION Apartment Investment and Management Company, a Maryland corporation incorporated on January 10, 1994, ( the "REIT" and, together with its subsidiaries and operating affiliates, 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 partnership interests in, and majority ownership of, the Operating Partnership. On July 29, 1994, the Company completed its initial public offering ("IPO") of 9,075,000 shares of Class A Common Stock at $18.50 per share, issued 966,000 shares of mandatorily redeemable 1994 Cumulative Convertible Senior Preferred Stock ("Convertible Preferred Stock") and 513,514 unregistered shares of Class A Common Stock. Concurrently, the Company 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 Property Asset Management, L.L.C., Limited Liability Company and its affiliated companies and PDI Realty Enterprises, Inc. (the "AIMCO Predecessors"). The AIMCO Predecessors received limited partnership interests in the Operating Partnership ("OP Units") totaling 1,193,695 OP Units in connection with these formation transactions. 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. Since the IPO, the Company has completed an offering of an additional 2,706,423 shares of Common Stock at $19.125 per share, acquired 23 additional properties for 1,614,496 OP Units and 498,951 shares of Class A Common Stock, sold four properties for $17.3 million in net proceeds, repurchased the 966,000 shares of Convertible Preferred Stock and 513,514 shares of unregistered Common Stock, converted 195,000 shares of Class B Common Stock to 195,000 shares of Class A Common Stock (of which 130,000 were converted in October 1996), redeemed 176,505 OP Units in exchange for an equal number of shares of Class A Common Stock and financed $213.4 million of long-term, fixed rate, fully amortizing debt. APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements NOTE 1 - ORGANIZATION (CONTINUED) At September 30, 1996, 12,346,812 shares of Class A Common Stock and 2,646,688 OP Units were outstanding, for a combined total of 14,993,500 common shares and OP Units. The outstanding shares of Class A Common Stock increased in October 1996 in connection with the conversion of 130,000 shares of Class B Common Stock to Class A Common Stock and the purchase of 379,750 shares of Class A Common Stock by employees upon exercise of stock options. NOTE 2 - BASIS OF PRESENTATION The accompanying consolidated financial statements include the consolidated accounts of the Company, the Operating Partnership and its subsidiaries. The unaudited consolidated financial statements of the Company as of September 30, 1996 and for the three and nine months ended September 30, 1996 and 1995 have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and all such adjustments are of a recurring nature. The consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 1995. It should be understood that accounting measurements at interim dates inherently involve greater reliance on estimates than at year end. The results of operations for the interim periods presented are not necessarily indicative of the results for the entire year. 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 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements NOTE 2 - BASIS OF PRESENTATION (CONTINUED) depreciation of non-real estate assets. The Company has restated the balance sheet as of December 31, 1995 and the statements of income for the three and nine months ended September 30, 1995 and the statement of cash flows for the nine months ended September 30, 1995 to reflect the retroactive application of the change. NOTE 3 - REAL ESTATE During the nine months ended September 30, 1996, the Company acquired four properties as described below. The aggregate consideration consisted of $8,531,000 in cash, 498,951 shares of common stock and 745,183 OP units with a total recorded value of $25,230,000 and the assumption of $31,732,000 of indebtedness as summarized below (amounts in thousands except unit data): NUMBER TOTAL OF PURCHASE PROPERTY LOCATION UNITS PRICE ENCUMBRANCES -------- -------- ----- -------- ------------ Peachtree Atlanta, GA 295 $14,931 $12,980 (1) Park Villa Ladera Albuquerque, NM 280 11,825 5,940 Sycamore Tustin, CA 336 16,669 - Creek Somerset Salt Lake City, 486 22,068 12,812 (1) Village Utah ----- ------- ------- 1,397 $65,493 $31,732 ----- ------- ------- ----- ------- ------- (1) Indebtedness has been repaid with the issuance of OP Units and borrowings under the Company's line of credit. In addition, the Company purchased a parcel of vacant land adjacent to the Villa Ladera Apartments for $425,000 in cash. In the third quarter of 1996, the Company sold four of its Texas apartment properties (Dakota, Sterling Point and Woodcreek in Dallas and the Ridgmar Park in Fort Worth) in a single transaction for net cash proceeds totaling $17.2 million. The net proceeds were used to repay the balance outstanding under the Company's line of credit 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 $64,000 on the sale. APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements NOTE 4 - ACQUISITION OF REAL ESTATE, GENERAL AND LIMITED PARTNERSHIP INTERESTS AND RELATED ASSETS In November 1996, the Company completed the previously announced acquisition of certain partnership interests, real estate and related assets owned by J.W. English Companies, a Houston, Texas based real estate syndicator and developer. The acquisition includes the purchase of 22 limited partnerships which act as the general partner to 31 limited partnerships holding 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; certain assets of J.W. English Management Company which provides management services to the apartment properties; and other real estate interests related to the J.W. English Companies' operations, for an aggregate price of $23.1 million. The consideration consisted of $15.2 million in OP Units and $7.9 million in cash. The Company assumed management of the properties on October 14, 1996. The Company made separate offers to the limited partners of certain of these partnerships to acquire their limited partnership interests for cash or OP Units. The offers expired on November 7, 1996. The Company has accepted tenders representing, in the aggregate, $14.1 million of limited partnership interests, or 30% of all outstanding limited partnership interests, and has reserved the right to acquire additional tenders representing, in the aggregate, 13% of all outstanding limited partnership interests, which were not validly tendered prior to the expiration date of the tender offers. The aggregate amount tendered will be paid $15.2 million in cash and $1.6 million in OP Units at a price of $23 per OP Unit. The remaining limited partners elected to continue as limited partners in the existing partnerships. NOTE 5 - COMMITMENT TO ACQUIRE GENERAL PARTNERSHIP AND RELATED INTERESTS In August 1996, the Company entered into definitive contracts to acquire the general partnership interests in twenty-one limited partnerships holding twelve multifamily apartment properties aggregating 2,839 apartment units, and loans made by the general partners and their affiliates for such partnerships, for an aggregate price of $22 million in cash in addition to $750,000 in transaction costs. The properties have an estimated aggregate value of approximately $84 million and are subject to $64 million of mortgage debt. The existing limited partners will retain their interests in each of the partnerships. These acquisitions are expected to be completed by December 1996. APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements NOTE 6 - RESTRICTED CASH In connection with the completion of the tax-exempt bond offerings in June 1996 and the repayment of the existing tax-exempt bonds, $10,000,000 in cash collateral held by the previous bondholder was released to the Company. NOTE 7 - NOTE RECEIVABLE In September 1996, the Company purchased a note receivable in the principal amount of $3,525,000 with an accrued interest receivable balance of $920,000 for a purchase price of $3,525,000. The note, which bears interest at 8.5% and matures in February 2001, is secured by a second deed of trust on a multifamily-family residential property. All available cash flow of the property will be used to pay interest due on the note. NOTE 8 - SECURED LONG-TERM NOTES PAYABLE In January 1996, the Company assumed $12,980,000 in first and second mortgage loans in connection with the purchase of Peachtree Park. In July 1996, the mortgage loans, in addition to $2,654,000 in participating interest due in accordance with the second mortgage loan, were repaid using borrowings under the Company's line of credit and the issuance of 63,152 OP Units with a recorded value of $1,168,000. In January 1996, the Company assumed a $5,940,000 secured note payable with an interest rate of 7.125%, maturing in December 2016, in connection with the purchase of the Villa Ladera apartments. In May 1996, the Company assumed $12,812,000 in notes payable secured by a first deed of trust in connection with the purchase of Somerset Village. The indebtedness was repaid in July 1996 using borrowings under the Company's line of credit. APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements NOTE 9 - SECURED LONG-TERM TAX-EXEMPT BOND FINANCING In June 1996, the Company completed two tax-exempt bond offerings totaling $58,010,000 on five Florida properties. Proceeds from the bond offerings were used to repay the variable rate $48,140,000 tax- exempt bonds securing four Florida properties and the $9,870,000 tax- exempt revenue bonds which were purchased in connection with the acquisition of a Florida property in December 1995. The bond offerings include $48,140,000 in fully amortizing, 20 year mortgage loans with an effective interest rate of 7.2% and a $9,870,000 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. NOTE 10 - SECURED SHORT-TERM FINANCING In August 1996, the $25,000,000 one-year bridge facility secured by five properties was refinanced. The borrowings were increased to $25,800,000, 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. In August 1996, the Company increased its revolving line of credit with Bank of America NT&SA 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%. The revolving line of credit 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. Borrowings are limited to 60% of the appraised value of the properties which secure the line of credit, totaling $39,450,000 for four properties at September 30, 1996. The Company utilizes the line of credit for general corporate purposes and to fund investments on an interim basis. The balance outstanding on the line of credit at September 30, 1996 was $26,500,000. APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements NOTE 10 - SECURED SHORT-TERM FINANCING (CONTINUED) The line of credit was modified in October 1996 for a 180 day period to provide for an increase in the amount available to be borrowed from 60% to 70% of the appraised value of the properties securing the line of credit. In addition, during the modification period, the interest rate was increased to LIBOR plus 1.875% for the first 90 days and LIBOR plus 2.125% for the remainder of the modification period. Two properties were added as collateral for the line of credit. The total amount available for borrowing under the terms of the modification agreement is $50,000,000. NOTE 11 - STOCK OPTION PLANS The Company intends to purchase up to 500,000 shares of common stock in open market and privately negotiated purchase transactions for issuance to employees upon exercise of employee stock options. The Company has repurchased 178,664 shares of common stock at an average price of $20.72 per share as of September 30, 1996. In October 1996, employees purchased 379,750 shares of common stock at $20.75 per share upon exercise of stock options awarded under the 1996 Stock Award and Incentive Plan. In consideration for the shares, the employees executed notes payable to the Company bearing interest at 7.25%, due quarterly, maturing on October 1, 2006. The notes are secured by the common stock purchased and are recourse to the employees to the extent of 25% of the original principal amount of the notes. NOTE 12 - REGISTRATION STATEMENTS In February 1996, the Company filed a registration statement with the Securities and Exchange Commission relating to the resale of certain shares of Class A Common Stock of the Company which may be issued in exchange for OP Units which may be tendered for redemption by OP Unitholders. The registration statement relates to OP Units issued from inception through January 15, 1996 with the exception of the OP Units held by executive officers of the Company. The registration statement was declared effective by the Securities and Exchange Commission in April 1996. APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements NOTE 12 - REGISTRATION STATEMENTS (CONTINUED) In May 1996, the Company filed a registration statement relating to the resale of the 126,264 shares of Class A Common Stock issued in connection with the acquisition of the Sycamore Creek Apartments, a registration statement relating to 1,000,000 shares of Class A Common Stock to be issued under the Dividend Reinvestment and Share Purchase Plan, a registration statement relating to 150,000 shares of Class A Common Stock to be issued under The 1994 Stock Option Plan of Apartment Investment and Management Company and a registration statement relating to 500,000 shares of Class A Common Stock to be issued under the Apartment Investment and Management Company 1996 Stock Award and Incentive Plan. The registration statements were declared effective in May 1996. In July 1996, the Company filed a registration statement relating to the resale of the 372,688 shares of Class A Common Stock issued in connection with the acquisition of the Somerset Village Apartments. The registration statement was declared effective in August 1996. NOTE 13 - SUBSEQUENT EVENTS DIVIDEND DECLARED On October 24, 1996, the Board of Directors declared a cash dividend of $0.425 per share of Class A Common Stock for the quarter ended September 30, 1996, payable on November 14, 1996 to stockholders of record on November 7, 1996. REGISTRATION STATEMENTS In October 1996, the Company filed a registration statement relating to the issuance of 500,000 shares of Class A common stock in connection with the Apartment Investment and Management Company Non- Qualified Employee Stock Option Plan. The registration statement was declared effective in October 1996. APARTMENT INVESTMENT AND MANAGEMENT COMPANY ITEM 2. 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 September 30, 1996, the Company owned 56 multifamily apartment properties containing 14,585 apartment units. In addition to its owned properties, AIMCO managed 2,815 apartment units in 13 properties for affiliates and 19,785 apartment units in 144 properties for nearly 100 third party-owners, bringing the total managed portfolio to 213 multifamily apartment properties containing 37,185 apartment units located in the Southeastern, Southcentral and Southwestern areas 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 the Consolidated Financial Statements and notes thereto. RESULTS OF OPERATIONS COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1996 TO THE NINE MONTHS ENDED SEPTEMBER 30, 1995 The Company recognized net income of $9,351,000 for the nine months ended September 30, 1996 allocable to the Class A common stockholders. For the nine months ended September 30, 1995, the Company recognized net income of $11,460,000, of which $5,169,000 was allocable to the holder of the Convertible Preferred Stock and $6,291,000 was allocable to the Class A common stockholders. The increase in net income allocable to the Class A Common Stockholders in 1996 was primarily the result of the acquisition of twelve additional properties from December 1995 to May 1996 offset by increased interest expense associated with debt which was financed in June and September 1995 and increased interest expense attributable to the refinancing of tax- exempt bond financing completed in June 1996. These factors are discussed in more detail in the following paragraphs. APARTMENT INVESTMENT AND MANAGEMENT COMPANY ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RENTAL PROPERTY OPERATIONS Rental and other property revenues from the Company's apartment properties totaled $70,392,000 for the nine months ended September 30, 1996 consisting of $51,824,000 for the 42 "same store" properties, $3,363,000 for the four properties sold in July 1996, $1,313,000 for three properties owned in 1995 and 1996 but for which operations are not comparable and $13,892,000 for the 12 properties acquired from December 1995 to May 1996. The rental and other revenue for the nine months ended September 30, 1996 for the 42 "same store" properties of $51,824,000 compared to $49,983,000 for the nine months ended September 30, 1995, represents an increase of $1,841,000 or 3.7%. Average monthly rent per occupied unit for these 42 properties at September 30, 1996 and 1995 was $547 and $525, respectively, an increase of 4.2%. Weighted average physical occupancy for the 42 properties increased from 94.3% at September 30, 1995 to 95.6% at September 30, 1996, a 1.4% 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 and taxes and insurance totaled $27,111,000 for the nine months ended September 30, 1996, consisting of $19,698,000 for the 42 "same store" properties, $1,789,000 for the four sold properties, $662,000 for the three non-comparable properties and $4,962,000 for the 12 properties acquired from December 1995 to May 1996. Operating expenses for the 42 properties of $19,698,000 for the nine months ended September 30, 1996, compared to $19,303,000 for the same period in 1995, reflecting an increase of $395,000, or 2.0%, is due primarily to increases in marketing, utilities and real estate taxes partially 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 properties, totaled $1,999,000 for the nine months ended September 30, 1996, consisting of $1,425,000 for the 42 "same store" properties, $127,000 for the four sold properties, $31,000 for the three non-comparable properties and $416,000 for the properties purchased from December 1995 to May 1996. The owned property management expenses for the nine months ended September 30, 1995 totaled $1,707,000, consisting of $1,502,000 for the 42 "same store" properties, $173,000 for the sold properties and $32,000 for the three non- comparable properties. APARTMENT INVESTMENT AND MANAGEMENT COMPANY ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) PROPERTY MANAGEMENT The Company's share of income from the service company business was $1,042,000 for the nine months ended September 30, 1996 compared to $2,021,000 for the nine months ended September 30, 1995. Management fees and other income totaled $5,442,000 for the nine months ended September 30, 1996 compared to $5,980,000 for the nine months ended September 30, 1995, reflecting a decrease of $538,000, or 9.0%. Management and other expenses totaled $3,449,000 for the nine months ended September 30, 1996 compared to $3,518,000 for the nine months ended September 30, 1995, reflecting a decrease of $69,000, or 2.0%. Each major source of revenue and expense before amortization of management company goodwill, corporate overhead allocations, depreciation and amortization and minority interest are described below. NINE MONTHS NINE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, 1996 1995 ---- ---- Properties managed for third parties and affiliates Management fees and other income $ 3,227,000 $ 3,517,000 Management and other expenses (2,848,000) (2,562,000) ----------- ------------ 379,000 955,000 ----------- ------------ Commercial asset management Management and other income 810,000 1,188,000 Management and other expenses (278,000) (428,000) ----------- ------------ 532,000 760,000 ----------- ------------ Reinsurance operations Revenues 1,056,000 787,000 Expenses (37,000) (285,000) ----------- ------------ 1,019,000 502,000 ----------- ------------ Other Revenues 349,000 488,000 Expenses (286,000) (243,000) ----------- ------------ 63,000 245,000 ----------- ------------ $ 1,993,000 $ 2,462,000 ----------- ------------ ----------- ------------ APARTMENT INVESTMENT AND MANAGEMENT COMPANY ITEM 2. 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 $379,000 for the nine months ended September 30, 1996, compared to $955,000 for the nine months ended September 30, 1995, a decrease of $576,000, or 60.3%. The decrease in net income is due to a decrease in management fees and other income of $290,000, or 8.2% due to the acquisition by the Company during the period from December 1995 to May 1996 of seven properties previously managed for third parties and affiliates. Management and other expenses increased by $286,000, or 11.2% due to increased payroll costs partially offset by an increase of $292,000 in the allocation of management costs to the Company's owned properties. Net income from commercial asset management was $532,000 for the nine months ended September 30, 1996 compared to $760,000 for the same period in 1995, a decrease of $228,000, or 30.0% as a result of a reduction in the number of commercial properties under management. The decline in revenues of $378,000, or 31.8% from commercial asset management was partially offset by a decrease in related management and other expenses of $150,000, or 35.0%, primarily due to a reduction in personnel. Net income from the reinsurance operations increased by $517,000, or 103.0% 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 $943,000 for the nine months ended September 30, 1996 compared to $1,709,000 for the same period in 1995. The amount presented for the nine months in 1996 included $925,000 for payroll, overhead and other costs associated with operating a public company and $461,000 for payroll and other costs incurred in the development of new business offset by a corporate overhead allocation of $443,000 to the service company business. The amount presented for the nine months in 1995 included $1,112,000 for payroll, overhead and other costs associated with operating a public company, and $597,000 for payroll and other costs incurred in the development of new business. The decrease in general and administrative expenses of $766,000, or 44.8% in 1996 is attributable to fewer personnel, a decrease in state income taxes and the allocation of corporate overhead to the service companies partially offset by an increase in professional fees. No corporate overhead allocation was recorded for the nine months ended September 30, 1995. APARTMENT INVESTMENT AND MANAGEMENT COMPANY ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) INTEREST EXPENSE Interest expense totaled $16,775,000 for the nine months ended September 30, 1996 compared to $8,391,000 for the nine months ended September 30, 1995. Interest expense, which includes amortization of deferred financing costs, increased by $8,384,000, or 100.0% in 1996. The increase consists primarily of $8,003,000 in interest expense on secured notes payable due to financings completed in June 1995 and September 1995 and borrowings made in connection with properties purchased from December to May 1996. Interest expense on the secured tax-exempt bond financing increased by $646,000 or 22.9% due to the increase in interest rate on the $48,140,000 tax-exempt bonds refinanced in June 1996. The increase in interest rate was due to a change from an all-in floating rate of approximately 6.0% to a 20 year, fully amortizing, all-in fixed rate of 7.2%. In addition, interest on secured tax-exempt bonds increased due to the borrowing of $9,870,000 in June 1996 which was used to paydown the balance on the Company's line of credit. Interest expense, amortization of deferred financing costs and unused commitment fees on the Credit Facility was $861,000 for the nine months ended September 30, 1996 compared to $1,125,000 for the nine months ended September 30, 1995, a decrease of $264,000, or 23.5% as a result of lower amounts outstanding under the Credit Facility in 1996. COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1996 TO THE THREE MONTHS ENDED SEPTEMBER 30, 1995 The Company recognized net income of $3,396,000 for the three months ended September 30, 1996 allocable to the Class A common stockholders. For the three months ended September 30, 1995, the Company recognized net income of $3,510,000, of which $1,497,000 was allocable to the holder of the Convertible Preferred Stock and $2,013,000 was allocable to the Class A common stockholders. The increase in net income allocable to the Class A Common Stockholders in 1996 was primarily the result of the acquisition of twelve additional properties during the period from December 1995 to May 1996 offset by increased interest expense associated with debt which was financed in June and September 1995 and the refinancing of the tax-exempt bond financing in June 1996. These factors are discussed in more detail in the following paragraphs. APARTMENT INVESTMENT AND MANAGEMENT COMPANY ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RENTAL PROPERTY OPERATIONS Rental and other property revenues from the Company's apartment properties totaled $24,140,000 for the three months ended September 30, 1996, consisting of $17,572,000 for the 42 "same store" properties, $488,000 for the four properties sold in July 1996, $524,000 for the three non-comparable properties and $5,556,000 for the 12 properties acquired from December 1995 to May 1996. Rental and other income for the 42 "same store" properties of $17,572,000 for the three months ended September 30, 1996 compared to $16,768,000 for the three months ended September 30, 1995, represents an increase of $804,000, or 4.8%. The increase in Rental and other income for the three months ended September 30, 1996 is due primarily to increases in rental rates and occupancy. Operating expenses totaled $8,960,000 for the three months ended September 30, 1996, consisting of $6,648,000 for the 42 "same store" properties, $230,000 for the four sold properties, $254,000 for the two non-comparable properties and $1,828,000 for the 12 properties acquired from December 1995 to May 1996. Operating expenses for the "same store" properties of $6,648,000 for the three months ended September 30, 1996, compared to $6,822,000 for the same period in 1995, reflects a decrease of $174,000, or 2.6%. The decrease results from lower payroll costs, reductions in real estate tax expense due to successful tax appeals, reduced insurance costs due to reduced premiums partially offset by increased utility and marketing costs. Owned property management expenses totaled $658,000 for the three months ended September 30, 1996, consisting of $475,000 for the 42 "same store" properties, $18,000 for the sold properties, $10,000 for the non-comparable properties and $155,000 for the properties purchased from December 1995 to May 1996. The owned property management expenses for the three months ended September 30, 1995 totaled $569,000, consisting of $501,000 for the 42 "same store' properties, $57,000 for the sold properties and $11,000 for the three non-comparable properties. APARTMENT INVESTMENT AND MANAGEMENT COMPANY ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) PROPERTY MANAGEMENT The Company's share of income from the service company business was $401,000 for the three months ended September 30, 1996 compared to $979,000 for the three months ended September 30, 1995. Management fees and other income totaled $1,717,000 for the three months ended September 30, 1996 compared to $2,163,000 for the three months ended September 30, 1995, reflecting a decrease of $446,000, or 20.6%. Management and other expenses totaled $990,000 for the three months ended September 30, 1996 compared to $1,017,000 for the three months ended September 30, 1995, reflecting a decrease of $27,000, or 2.7%. Each major source of revenue and expense before amortization of management company goodwill, corporate overhead allocations, depreciation and amortization and minority interest are described below. THREE MONTHS THREE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, 1996 1995 ---- ---- Properties managed for third parties and affiliates Management fees and other income $1,071,000 $1,243,000 Management and other expenses (887,000) (715,000) ---------- ---------- 184,000 528,000 ---------- ---------- Commercial asset management Management and other income 215,000 387,000 Management and other expenses (72,000) (143,000) ---------- ---------- 143,000 244,000 ---------- ---------- Reinsurance operations Revenues 285,000 261,000 Expenses 42,000 (55,000) ---------- ---------- 327,000 206,000 ---------- ---------- Other Revenues 146,000 272,000 Expenses (73,000) (104,000) ---------- ---------- 73,000 168,000 ---------- ---------- $727,000 $1,146,000 ---------- ---------- ---------- ---------- APARTMENT INVESTMENT AND MANAGEMENT COMPANY ITEM 2. 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 $184,000 for the three months ended September 30, 1996, compared to $528,000 for the three months ended September 30, 1995, a decrease of $344,000, or 65.2%. The decrease in net income is primarily due to the acquisition by the Company of seven properties previously managed for third parties and affiliates. In addition, management and other expenses increased due to higher payroll costs partially offset by an increase in the allocation of management costs to the Company's owned properties. Net income from commercial asset management was $143,000 for the three months ended September 30, 1996 compared to $244,000 for the same period in 1995, a decrease of $101,000, or 41.4% as a result of a reduction in the number of commercial properties under management. The decline in revenues of $172,000, or 44.4% from commercial asset management was partially offset by a decrease in related management and other expenses of $71,000, or 49.6%, primarily due to a reduction in personnel. Net income from the reinsurance operations increased by $121,000, or 58.7% due to increased premiums collected from a larger work force and improved loss experience and the closure of claims for less than the amounts previously reserved, resulting in a reversal of reserves recorded in previous periods. GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses totaled $394,000 for the three months ended September 30, 1996 compared to $612,000 for the same period in 1995. The amount presented for the three months in 1996 included $364,000 for payroll, overhead and other costs associated with operating a public company and $177,000 for payroll and other costs incurred in the development of new business offset by a corporate overhead allocation of $147,000 to the service company business. The amount presented for the three months in 1995 included $417,000 for payroll, overhead and other costs associated with operating a public company, and $195,000 for payroll and other costs incurred in the development of new business. The decrease in general and administrative expenses of $218,000, or 35.6% in 1996 is attributable to fewer personnel, a decrease in state income taxes and the allocation of corporate overhead to the service companies offset by an increase in professional fees. No allocation of corporate overhead was recorded for the three months ended September 30, 1995. APARTMENT INVESTMENT AND MANAGEMENT COMPANY ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) INTEREST EXPENSE Interest expense totaled $5,850,000 for the three months ended September 30, 1996 compared to $3,078,000 for the three months ended September 30, 1995. Interest expense, which includes amortization of deferred financing costs and unused commitment fees associated with the Company's Credit Facility, increased by $2,772,000, or 90.1% in 1996. The increase was due primarily to increased interest expense on secured notes payable from financings completed in June 1995 and September 1995, borrowings made in connection with properties purchased from December to May 1996 and increased interest expense on the tax-exempt bond financing which was completed in June 1996. LIQUIDITY AND CAPITAL RESOURCES 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 normal operating requirements, principal and interest payments on outstanding debt, dividends to stockholders and distributions to minority limited partners. In the nine months ended September 30, 1996, $4,008,000 in capital replacements, $3,681,000 in initial capital expenditures and $276,000 in capital enhancements were spent. In addition, in the nine months ended September 30, 1996, the Company incurred $6,199,000 in costs related to the construction and renovation of three properties. These expenditures were funded by borrowings under the Credit Facility, working capital reserves and net cash provided by operating activities. The Company expects to incur an additional $967,000 in capital replacements (including $264,000 of remaining unspent reserves for capital replacements) during the balance of 1996 and $300 per apartment unit for properties owned in 1997. Initial capital expenditures of $4,445,000 are expected to be incurred during the next twelve months, which will be funded by cash from operating activities and borrowings under the Credit Facility. In addition, the Company expects to incur $1,800,000 to $2,000,000 during 1996 and 1997 in capital enhancements for cable television equipment at certain properties owned by the company. Cable services will be provided to residents in connection with an agreement entered into by the Company with a cable television provider. APARTMENT INVESTMENT AND MANAGEMENT COMPANY ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) The Company plans to fund the purchase of the general and limited partnership interests, real estate and related assets expected to close in the fourth quarter of 1996 with borrowings under the Credit Facility, the issuance of OP units and secured short-term borrowings. On August 13, 1996, the Company increased its revolving line of credit with Bank of America NT&SA 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%. The revolving line of credit 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 line of credit for general corporate purposes and to fund investments on an interim basis. The line of credit was modified in October 1996 for a 180 day period to provide for an increase in the amount available to be borrowed from 60% to 70% of the value of the properties securing the line of credit resulting in total available borrowings of $50,000,000. In addition, during the modification period, the interest rate was increased to LIBOR plus 1.875% for the first 90 days and LIBOR plus 2.125% for the remainder of the modification period. 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, Operating Partnership 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. The amount remaining under the shelf registration is $148.2 million. As of September 30, 1996, the Company had outstanding indebtedness totaling $304.8 million including $176.6 million of secured notes payable, $75.8 million of secured tax-exempt debt, a secured two-year floating rate bridge loan of $25.8 million, and $26.5 million outstanding under its Credit Facility. The Company's outstanding debt is secured by substantially all of the properties owned by the Company. The weighted average interest rate on the Company's long-term outstanding debt was 7.7% with a weighted average maturity of 12 years. APARTMENT INVESTMENT AND MANAGEMENT COMPANY ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) CONTINGENCIES 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 business subsidiaries with respect to property management services provided to properties managed by the Company for 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. Certain of the Company's properties are, and some of the properties managed by the Company for others 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. APARTMENT INVESTMENT AND MANAGEMENT COMPANY ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 cash needs. For the three and nine months ended September 30, 1996 and 1995, FFO and CEFS are as follows (amounts in thousands):
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS ENDED ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 1996 1995 1996 1995 ---- ---- ---- ---- Net Income before gain on disposition of property and minority interest in Operating Partnership $ 4,054 $ 3,909 $11,132 $12,688 Owned properties depreciation 4,656 3,784 13,716 11,067 Amortization of management company goodwill 114 111 344 307 Preferred stock dividend 0 (1,497) 0 (5,169) ------- ------- ------- ------- Funds From Operations 8,824 6,307 25,192 18,893 Capital Replacements (1,114) (938) (3,353) (2,815) ------- ------- ------- ------- Cash Earned For Shareholders $ 7,710 $ 5,369 $21,839 $16,078 ------- ------- ------- ------- ------- ------- ------- ------- Weighted average common shares, common share equivalents and OP Units outstanding 15,035 11,546 14,517 11,493 ------- ------- ------- ------- ------- ------- ------- -------
APARTMENT INVESTMENT AND MANAGEMENT COMPANY ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INFLATION Substantially all of the leases at the Company's apartment properties are for a period of six months or less, allowing, at the time of renewal, for adjustments in the rental rate and the opportunity to re-lease the apartment unit at the prevailing market rate. The short term nature of these leases generally serves to minimize the risk to the Company of the adverse effect of inflation and the Company does not believe that inflation has had a material adverse impact on its revenues. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) The following exhibits are filed with this report: Exhibit Number Description - ------- ----------- 3.1 Restated Articles of Incorporation of the Company (incorporated by reference from the Company's Annual Report on Form 10-K for fiscal year 1995). 3.2 Bylaws of the Company (incorporated by reference from the Company's Annual Report on Form 10-K for fiscal year 1995). 10.1 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. 10.2 Promissory Note, dated as of August 12, 1996, by AIMCO Properties, L.P., in favor of Bank of America National Trust and Savings Association. 10.3 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. 10.4 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 Associa tion, as Agent. 10.5 Promissory Note by AIMCO Properties, L.P. in favor of Bank of America National Trust and Savings Association. 10.6 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. 10.7 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. Exhibit Number Description - ------- ----------- 10.8 Option Agreement, dated as of July 26, 1996, among AIMCO Properties, L.P. and those parties listed on the signatures pages thereto. 27.1 Financial Data Schedule (b) Reports on Form 8-K for the quarter ended September 30, 1996: None 2 APARTMENT INVESTMENT AND MANAGEMENT COMPANY SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. REGISTRANT: APARTMENT INVESTMENT AND MANAGEMENT COMPANY Date: November 13, 1996 /s/ LEEANN MOREIN -------------------------- Leeann Morein Senior Vice President and Chief Financial Officer (duly authorized officer and principal financial officer) /s/ PATRICIA K. HEATH -------------------------- Patricia K. Heath Vice President and Chief Accounting Officer (principal accounting officer) EX-10.1 2 CREDIT AGREEMENT CREDIT AGREEMENT (Bridge Loan) This CREDIT AGREEMENT (BRIDGE LOAN) is entered into as of August 12, 1996, among AIMCO PROPERTIES, L.P., a Delaware limited partnership (the "Company"), the banks from time to time party to this Agreement (the "Banks"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as one of the Banks ("BofA"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent (the "Agent"). A. Concurrently herewith, the Banks, the Company, and the Agent are entering into that certain Credit Agreement, which makes available to the Company a revolver-to-term credit facility in an amount not to exceed Fifty Million Dollars ($50,000,000) (the "Credit Agreement"). B. The Banks and the Agent have agreed to provide to the Company an additional revolving credit facility upon the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties hereby agree as follows: ARTICLE I DEFINITIONS 1.01 DEFINED TERMS. Capitalized terms used but not defined herein have the meanings set forth in the Credit Agreement. In addition to the terms defined elsewhere in this Agreement, the following terms have the following meanings: "AFFILIATE" means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract or otherwise. Without limitation, any director, executive officer or beneficial owner of five percent (5%) or more of the equity of a Person shall, for the purposes of this Agreement, be deemed to control the other Person. In no event shall any Bank be deemed an "Affiliate" of the Company. "AGENT" means Bank of America National Trust and Savings Association, in its capacity as Agent, and any successor Agent appointed hereunder. "AGENT-RELATED PERSONS" has the meaning specified in Section 9.03. 1 "AGGREGATE BRIDGE COMMITMENT" means the combined Bridge Commitments of the Banks, in the amount of up to $25,000,000. "AGREEMENT" means this Credit Agreement (Bridge Loan), as amended, supplemented or modified from time to time. "APPLICABLE MARGIN" means (a) with respect to Base Rate Loans, .20%; and (b) with respect to LIBOR Loans, 1.95%. "ASSIGNEE" has the meaning specified in Section 10.08. "ASSIGNMENT AND ACCEPTANCE" has the meaning specified in Section 10.08(a). "ATTORNEY COSTS" means and includes all fees and disbursements of any law firm or other external counsel, the allocated cost of internal legal services and all disbursements of internal counsel. "BANK" means each of the lenders party to this Agreement, and includes BofA in its individual capacity. "INK AFFILIATE" means a Person that is engaged primarily in the business of commercial lending and is a Subsidiary of a Bank or of a Person of which a Bank is a Subsidiary. "BANKRUPTCY CODE" means the Federal Bankruptcy Reform Act of 1978 (12 U.S.C. $101, et. SEQ.), as amended from time to time. "BASE RATE" means the higher of: (a) the annual rate of interest publicly announced from time to time by the Reference Bank as its "reference" rate. The "reference" rate is a rate set based upon various factors including the Reference Bank's costs and desired return, general economic conditions, and other factors, and is used as reference points for pricing some loans. Any change in the Base Rate shall take effect on the day specified in the public announcement of such change; or (b) one-half of one percent (0.5%) per annum above the latest Federal Funds Rate. "BASE RATE LOAN" means a Loan that bears interest based on the Base Rate. "BOFA" means Bank of America National Trust and Savings Association, in its capacity as a Bank. "BORROWING NOTICE" means a notice given by the Company to the Agent pursuant to Section 2.03, in substantially the form of EXHIBIT A. 2 "BRIDGE AVAILABILITY" shall mean at any time the Bridge Commitment, minus the outstanding balance of all Loans at such time. "BRIDGE COMMITMENT" means the amount set forth opposite each Bank's name in SCHEDULE 2.01 (such amount as the same may be reduced or increased as a result of one or more assignments pursuant to Section 10.08). "BRIDGE COMMITMENT PERCENTAGE" means, as to any Bank, the percentage equivalent of such Bank's Bridge Commitment divided by the Aggregate Bridge Commitment. "BRIDGE FACILITY" has the meaning specified in Section 2.01(a). "BRIDGE FACILITY MATURITY DATE" means the earlier of (i) the Conversion Date, (ii) the date on which the Aggregate Commitment under (and as such term is defined in) the Credit Agreement is reduced to zero, and (iii) the date which is two (2) years after the Closing Date; subject, however, to earlier acceleration pursuant to the provisions of the Loan Documents. "BUSINESS DAY" means any day other than a Saturday, Sunday or other day on which commercial lenders are authorized or required by law to close in New York City or the city in which the Agent's office charged with administration of the Loans is located; except in cases in which it relates to any LIBOR Loan, in which cases "Business Day" means such a day on which dealings are carried on in the London dollar interbank market. "CAPITAL ADEQUACY REGULATION" means any guideline, request or directive of any central bank or other Governmental Authority having jurisdiction, or any other law, rule or regulation, whether or not having the force of law, regarding capital adequacy of any Bank or of any corporation controlling a Bank. "CLOSING DATE" means the date on which all conditions precedent set forth in Section 4.01 are satisfied or waived by all Banks; said date shall occur no later than August 31, 1996. "COLLATERAL" means all property interests, now owned or hereafter acquired, of the Company or any Wholly-Owned Subsidiary in or upon which a Lien now or hereafter exists in favor of the Agent on behalf of the Banks hereunder or under the Equity Interests Pledge Documents. "DEFAULT" means any event or circumstance which, with the giving of notice, the lapse of time, or both, would (if not cured or otherwise remedied) constitute an Event of Default. "DISPOSITION" means the sale, lease, conveyance, transfer, encumbrance, mortgage, hypothecation or other disposition of (whether in one or a series of transactions) any Funded Project or portion thereof or interest therein. "DOLLARS", "DOLLARS" and "3" each mean lawful money of the United States. 3 "DOMESTIC LENDING OFFICE" means, with respect to each Bank, the office of that Bank designated as such on the signature pages hereto or such other office of a Bank as it may from time to time specify in writing to the Company and the Agent. "EFFECTIVE DATE" means, 1996. "ELIGIBLE ASSIGNEE" means (a) a commercial lender organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $100,000,000, (b) a commercial lender organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the "OECD"), or a political subdivision of any such country, and having a combined capital and surplus of at least $100,000,000, provided that such commercial lender is acting through a branch or agency located in the country in which it is organized or another country which is also a member of the OECD, and (c) any Bank Affiliate. "EQUITY INTERESTS PLEDGE AGREEMENTS" shall mean the pledge agreements delivered from time to time pursuant to Section 2.13. "EQUITY INTERESTS PLEDGE DOCUMENTS" means, collectively, (a) the Equity Interests Pledge Agreements delivered by the Company or any Wholly-Owned Subsidiary to the Agent for the benefit of the Banks pursuant hereto, (b) all financing statements (or comparable documents) now or hereafter filed in accordance with the UCC (or comparable law) against the Company or any Wholly-Owned Subsidiary as debtor in favor of the Banks or the Agent for the benefit of the Banks as secured party pursuant to the Equity Interests Pledge Agreements, and (c) any amendments, supplements, modifications, renewals, replacements, consolidations, substitutions and extensions of any of the foregoing. "EVENT OF DEFAULt" means any of the events or circumstances specified in Section 8.01. "EVENT OF LOSS" means, with respect to any Funded Project, any of the following: (a) any loss, destruction or damage of such Funded Project, (b) any pending or threatened institution of any proceedings for the condemnation or seizure of such Funded Project or for the exercise of any right of eminent domain, or (c) any actual condemnation, seizure or taking, by exercise of the power of eminent domain or otherwise, of such Funded Project, or confiscation of such property or requisition of the use of such Funded Project. "FEDERAL FUNDS RATE" means, for any period, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Board (including any such successor, "H.15(519)") for such day opposite the caption "Federal Funds (Effective)". If on any relevant day such rate is not yet published in H.15(519), the rate for such day will be the rate set forth in the daily statistical release designated as the Composite 3:30 p.m. Quotations for U.S. Government Securities, or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m. Quotation") for such day under the caption "Federal Funds Effective Rate". If on any relevant day the appropriate rate for such previous day is not yet published in 4 either H.15(519) or the Composite 3:30 p.m. Quotations, the rate for such day will be the arithmetic mean of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York time) on that day by each of three (3) leading brokers of Federal funds transactions in New York City selected by the Agent. "FUNDED PROJECT" means any one of the Initial Funded Projects or any other multi-family apartment project with respect to which the Company or a Wholly-Owned Subsidiary will, prior to or simultaneously upon the release of any Loan funds hereunder on account thereof, acquire a fee simple estate, subject only to normal and customary title exceptions, and which has been approved by the Banks in accordance with Section 2.14 below. A project shall cease being a "Funded Project" hereunder in accordance with Section 7.02 hereof. "INDEMNIFIED COST" has the meaning specified in Section 6.10. "INDEMNIFIED LIABILITIES" has the meaning specified in Section 10.05. "INDEMNIFIED PARTY" has the meaning specified in Section 6.10. "INDEMNIFIED PERSON" has the meaning specified in Section 10.05. "INDIVIDUAL BRIDGE LOAN LIMITATION" has the meaning set forth in Section 2.14(b). "INDIVIDUAL BRIDGE LOAN MATURITY DATE" means, with respect to each Loan, the date which is the earlier of (i) sixty (60) days after the disbursement of such Loan or (ii) the Bridge Facility Maturity Date, subject, however, to earlier acceleration pursuant to the provisions of the Loan Documents. "INITIAL FUNDED PROJECTS" means the multi-family apartment projects so designated on SCHEDULE 1.01 attached hereto. "INTEREST PAYMENT DATE" means, with respect to any Base Rate Loan and any LIBOR Loan, the thirtieth day and the sixtieth day after each Loan has been funded, unless such Loan is sooner repaid in full. "INTEREST PERIOD" means, with respect to any LIBOR Loan, the period commencing on the Business Day on which the Loan is disbursed or on the Pricing Conversion Date on which the Loan is continued as or converted to the LIBO Rate and ending on the date one (1) or two (2) months thereafter, as selected by the Company in its Borrowing Notice or Notice of Conversion/Continuation; PROVIDED that: (a) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Business Day; (b) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar 5 month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and (c) no Interest Period for any Loan shall extend beyond the Individual Bridge Loan Maturity Date for that Loan. "KNOWLEDGE OF THE COMPANY" means the actual knowledge (after reasonable inquiry) of any of the officers of the Company or the REIT and each other Person with executive responsibility for any aspect of the Company's or the REIT's business. "LENDING OFFICE" means, with respect to any Bank, the office or offices of the Bank specified as its "Lending Office" opposite its name on the signature pages hereto, or such other office or offices of the Bank as it may from time to time specify in writing to the Company and the Agent. "LIBO RATE" means, for each Interest Period for any LIBOR Loan, an interest rate per annum (rounded upward to the nearest 1/100th of 1%) determined pursuant to the following formula: LIBOR LIBO Rate = ------------------------- 1.00 - Reserve Percentage Where, (i) "LIBOR" means the per annum rate of interest, rounded upward, if necessary, to the nearest 1/16th of one percent (0.0625%), at which the Reference Bank's London branch, London, England, would offer U.S. dollar deposits in amounts and for periods comparable to those of the applicable LIBOR Loan and Interest Period to major banks in the London U.S. dollar inter-bank market at approximately 11:00 a.m., London time, on the first Business Day after the Borrowing Notice or Notice of Conversion/Continuation for such LIBOR Loan is delivered to the Agent; and (ii) "RESERVE PERCENTAGE" means the total of the maximum reserve percentages from time to time for determining the reserves to be maintained by member banks of the Federal Reserve System for Eurocurrency Liabilities, as defined in Federal Reserve Board Regulation D, whether or not applicable to any Bank. The Reserve Percentage shall be expressed in decimal form and rounded upward, if necessary, to the nearest 1/100th of one percent, and shall include marginal, emergency, supplemental, special and other reserve percentages. "LIBOR LOAN" means a Loan that bears interest based on the LIBO Rate. "LOAN" has the meaning specified in Section 2.01(a). 6 "LOAN DOCUMENTS" means this Agreement, the Equity Interests Pledge Documents and the REIT Guaranty Documents. "MATERIAL ADVERSE EFFECT" means a material adverse change in, or a material adverse effect upon, any of (a) the assets, operations, business, condition (financial or otherwise), or prospects of the Company, the REIT and their respective Subsidiaries, taken as a whole, (b) the ability of the Company, the REIT and their respective Subsidiaries to perform under any Loan Document and avoid any Event of Default, (c) the ability of the REIT and the Subsidiaries party thereto to perform under the REIT Guaranty Documents. "NOTE" means a promissory note of the Company payable to the order of a Bank in substantially the form of EXHIBIT B, evidencing the aggregate indebtedness of the Company to such Bank resulting from Loans made by such Bank. "NOTICE OF CONVERSION/CONTINUATION" means a notice given by the Company to the Agent pursuant to Section 2.04, in substantially the form of EXHIBIT C. "OBLIGATIONS" means all Loans, and other Indebtedness, advances, debts, liabilities, obligations, covenants and duties owed by the Company, the REIT or any of their respective Subsidiaries to the Agent, any Bank, or any other Person required to be indemnified under any Loan Document, of any kind or nature, present or future, whether or not evidenced by any note, guaranty or other instrument, arising under this Agreement or under any other Loan Document, whether or not for the payment of money, whether arising by reason of an extension of credit, loan, guaranty, indemnification or in any other manner, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising and however acquired. "OTHER TAXES" has the meaning specified in Section 3.01(b). "OUTSTANDING AMOUNT" means the aggregate principal amount of all outstanding Loans. "PARTICIPANT" has the meaning specified in Section 10.08(d). "PAYMENT OFFICE" means the address for payments set forth on the signature page hereto in relation to the Agent or such other address as the Agent may from time to time specify in accordance with Section 10.02. "PRICING CONVERSION DATE" means any date on which the Company elects to (a) convert a Base Rate Loan to a LIBOR Loan or a LIBOR Loan to a Base Rate Loan or (b) continue an existing LIBOR Loan for an additional Interest Period. "REFERENCE" means BofA. "REIT" means Apartment Investment and Management Company, a Maryland corporation. 7 "REIT GUARANTY DOCUMENTS" shall mean a guaranty of the Obligations, in the form of EXHIBIT D attached hereto, and such other documents relating to such guaranty as the Agent may require, duly executed by the REIT, AIMCO-GP, Inc., AIMCO-LP, Inc., AIMCO Holdings, L.P., AIMCO Holdings Qrs, Inc., AIMCO Somerset, Inc., and AIMCO/OTC Qrs, Inc., together with the guaranties delivered pursuant to Section 6.08. "REQUISITE BANKS" means, as of any date of determination, (a) if there is one Bank hereunder, that Bank, and (b) if there are two (2) or more Banks hereunder, then two (2) or more Banks (for purposes of counting Banks, BofA and all affiliates of BofA collectively count as one Bank, and in order to qualify as one of the two (2) necessary Banks, a Bank must hold a minimum Bridge Commitment of $5,000,000), holding at least sixty-six and two-thirds percent (66-2/3%) of the outstanding balance of the Loans, or, if there are no Loans outstanding, having at least sixty-six and two thirds percent (66-2/3%) of the Aggregate Bridge Commitment. "TAXES" has the meaning specified in Section 3.01(a). "WHOLLY-OWNED SUBSIDIARY" means a Subsidiary of the Company or the REIT one hundred percent (100%) of the Stock or other equity or other beneficial interests (in the case of Persons other than corporations) is owned directly or indirectly by (i) the Company and/or (ii) the REIT, and which in each such case has been formed in accordance with Section 7.07 of the Credit Agreement; provided, however, that where such term is qualified with respect to a specific Person (e.g., "Wholly-Owned Subsidiary of the REIT"') such term means a Subsidiary (i) one hundred percent (100%) of the Stock or other equity or other beneficial interests (in the case of Persons other than corporations) is owned directly or indirectly by such Person, and (ii) which is formed in compliance with Sections 7.07 of the Credit Agreement. 1.02 Other Definitional Provisions. (a) DEFINED TERMS. Unless otherwise specified herein or therein, all terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto. The meaning of defined terms shall be equally applicable to the singular and plural forms of the defined terms. Terms (including uncapitalized terms) not otherwise defined herein but defined in the UCC shall have the meanings set forth therein. (b) THE AGREEMENt. The words "hereof', "herein", "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; and section, schedule and exhibit references are to this Agreement unless otherwise specified. (c) Certain Common Terms. (i) The term "documents" includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced. 8 (ii) The term "including" is not limiting and means "including without limitation." (iii) The term "ratably" means, at any time that Loans may be outstanding, in accordance with the amount of the outstanding Loans of the respective Banks; and, at any time that no Loans are outstanding, in accordance with the outstanding Bridge Commitments of the respective Banks. (d) PERFORMANCE; TIME. Whenever any performance obligation hereunder (other than a payment obligation) is stated to be due or required to be satisfied on a day other than a Business Day, such performance shall be made or satisfied on the next succeeding Business Day. In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including"; the words "to" and "until" each mean "to but excluding," and the word "through" means "to and including". If any provision of this Agreement refers to any action taken or to be taken by any Person, or which such Person is prohibited from taking, such provision shall be interpreted to encompass any and all means, direct or indirect, of taking, or not taking, such action. (e) CONTRACTS. Unless otherwise expressly provided herein, references to agreements and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document. (f) LAWS. References to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending or replacing the statute or regulation. (g) CAPTIONS. The captions and headings of this Agreement are for convenience of reference only and shall not affect the construction of this Agreement. (h) INDEPENDENCE OF PROVISIONS. The parties acknowledge that this Agreement and other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters, and that such limitations, tests and measurements are cumulative and must each be performed, except as expressly stated to the contrary in this Agreement. 1.03 ACCOUNTING PRINCIPLES. (a) GAAP. Unless the context otherwise clearly requires, all accounting terms not expressly defined herein shall be construed, and all financial computations required under this Agreement shall be made, in accordance with GAAP, consistently applied. (b) FISCAL YEAR QUARTER. References herein to "fiscal year" and "fiscal quarter" refer to such fiscal periods of the Company. 9 ARTICLE II THE FACILITY 2.01 Amounts and Terms of Bridge Commitments. (a) BRIDGE LOANS. Subject to the terms and conditions of this Agreement and the Note, each Bank severally agrees, on the terms and conditions hereinafter set forth, to make loans to the Company (each such loan, a "Loan" and all such loans collectively, the "Bridge Facility") from time to time on any Business Day during the period from the Closing Date until the Bridge Facility Maturity Date, in such amounts as the Company may request that do not exceed (i) in the aggregate, the lesser of (a) such Bank's Bridge Commitment, or (b) such Bank's Bridge Commitment Percentage of the Bridge Availability, or (ii) with respect to any single Funded Project, such Bank's Bridge Commitment Percentage of the Individual Bridge Loan Limitation for such Funded Project as determined in accordance with Section 2.13 hereof. Each Loan shall be in a principal amount at least equal to One Million Dollars ($1,000,000) and integral multiples of $100,000 in excess thereof. No Loans shall be made after the Bridge Facility Maturity Date. Within the foregoing limitations, and subject to the other terms and conditions hereof, the Company may borrow under this Section 2.01(a), repay or prepay pursuant to Section 2.05 and reborrow pursuant to this Section 2.01(a). (b) Bridge Credit Usage. The Company shall use the proceeds of all Loans for the purposes described in Section 2.14(a) hereof. 2.02 NOTE. The Loans made by each Bank shall be evidenced by a Note dated the Closing Date payable to the order of that Bank in an amount equal to its Bridge Commitment. Each Bank shall endorse on the schedules annexed to the Note, the date, amount and maturity of each Loan made by it and the amount of each payment of principal made by the Company with respect thereto. Each Bank is irrevocably authorized by the Company to endorse its Note, and each Bank's record shall be conclusive absent manifest error; PROVIDED, HOWEVER, that the failure of a Bank to make, or an error in making, a notation thereon with respect to any Loan shall not limit or otherwise affect the obligations of the Company hereunder or under any such Note to such Bank. 2.03 PROCEDURE FOR BORROWING. (a) BORROWING NOTICE. Each Loan shall be made upon the irrevocable written notice (including notice via facsimile confirmed immediately by a telephone call) of the Company in the form of a Borrowing Notice, as follows: (i) Designation of Interest Rate. The Company shall have the right to elect that a Loan be made as a LIBOR Loan or a Base Rate Loan; PROVIDED that, unless the Agent shall otherwise agree in writing, the Company may not elect that a Loan be made as a LIBOR Loan if after giving effect to such Loan there shall be more than five (5) different LIBOR Loans outstanding. 10 (ii) APPROVAL OF FUNDED PROJECT. The Company shall have delivered to the Banks the notice and other information required under, and the Banks shall have approved the Funded Project to which such Loan relates in accordance with, Section 2.14 below. (iii) TIMING OF NOTICE. Each Borrowing Notice shall be submitted to and received by the Agent prior to 9:00 a.m. (California time) (a) at least three (3) Business Days prior to the specified borrowing date, in the case of LIBOR Loans; and (b) at least two (2) Business Days prior to the specified borrowing date, in the case of Base Rate Loans. (iv) CONTENTS OF NOTICE. Each Borrowing Notice shall set forth the following information with respect to the Loan subject thereto: (a) a single, specific borrowing date, which shall be a Business Day; (b) a single, exact amount for the Loan, which for any LIBOR Loan, shall be in an aggregate minimum principal amount of $1,000,000 or any multiple of $100,000 in excess thereof; (c) whether the Loan is to be made as a LIBOR Loan or a Base Rate Loan; (d) if the Loan is to be made as a LIBOR Loan, the applicable Interest Period. If a Borrowing Notice shall fail to specify the applicable Interest Period for any LIBOR Loan requested, such Loan will instead be made as a Base Rate Loan; (e) subject to 2.03(c) with respect to Loans for Initial Funded Projects, the address and wiring instructions for the escrow closing the acquisition of the Funded Project to which the Loan will be applied. (b) NOTICE TO BANKS. Upon receipt of a Borrowing Notice conforming with the terms of Section 2.03(a), the Agent shall promptly notify each Bank thereof and of the amount of such Bank's Bridge Commitment Percentage of the Loan described therein. (c) FUNDING OF BRIDGE COMMITMENT. Each Bank shall make the amount of its Bridge Commitment Percentage of the Loan described in any Borrowing Notice available to the Agent for the account of the Company at the Payment Office by 9:00 a.m. (California time) on the borrowing date specified therein in funds immediately available to the Agent. Unless any applicable condition specified in Article IV has not been satisfied, such funds shall then be made available to the Company by the Agent in the aggregate of the amounts made available to the Agent by the Banks (in like funds as received by the Agent), at the escrow closing the acquisition of the Funded Project to which the Loan will be applied, or in the case of any Loan for an Initial Funded Project not encumbered by any Liens securing Indebtedness, by crediting the account of the Company. With respect to any Initial Funded Project encumbered by any Liens securing Indebtedness, the Agent may, in its sole discretion, either fund the applicable Loan proceeds into an escrow, if applicable, or disburse such Loan proceeds directly to the account of the creditor 11 whose Lien is being concurrently repaid upon satisfactory evidence that on or before such repayment the Lien will be released or reconveyed. (d) FREQUENCY OF BORROWINGS. No more than four (4) Borrowing Notices may be given in any calendar month. 2.04 CONVERSION AND CONTINUATION ELECTIONS. (a) NOTICE OF CONVERSION/ CONTINUATION. Each conversion or continuation of an outstanding Base Rate Loan or LIBOR Loan shall be made upon the irrevocable written notice (including notice via facsimile confirmed immediately by a telephone call) of the Company in the form of a Notice of Conversion/Continuation, as follows: (i) DESIGNATION OF INTEREST RATE. The Company shall have the right to make the following elections with respect to the conversion or continuation of any outstanding Base Rate Loan or LIBOR Loan: (A) to convert, on any Business Day, any Base Rate Loan, in a minimum principal amount of $1,000,000 or an integral multiple of $100,000 in excess thereof, into a LIBOR Loan; or (B) to convert, on the last day of any Interest Period with respect to a LIBOR Loan (or, on any other day of any Interest Period, upon payment of any loss or expense incurred or sustained by any Bank with respect to the early termination of such LIBOR Loan prior to the last day of the Interest Period as provided in Section 3.04), such LIBOR Loan into a Base Rate Loan; or (C) to continue, on the last day of any Interest Period with respect to a LIBOR Loan (or, on any other day of any Interest Period, upon payment any loss or expense incurred or sustained by any Bank with respect to the early termination of such LIBOR Loan prior to the last day of the Interest Period as provided in Section 3.04), such LIBOR Loan (or any part thereof in a minimum principal amount of $1,000,000 or an integral multiple of $100,000 in excess thereof) for a subsequent Interest Period; PROVIDED, that unless the Agent shall otherwise agree in writing, the Company may not elect to have any outstanding LIBOR Loan or Base Rate Loan (or any portion thereof) continued as or converted into a LIBOR Loan if (a) a Default or Event of Default shall exist, (b) after giving effect to the such continuation or conversion there shall be more (i) than five different LIBOR Loans outstanding or (ii) the aggregate outstanding principal amount of all LIBOR Loans shall have been reduced, by payment, prepayment, or partial conversion to less than $1,000,000. (ii) TIMING OF NOTICE. Each Notice of Conversion/Continuation shall be submitted to and received by the Agent prior to 9:00 a.m. (California time): (a) at least three (3) Business Days prior to the Pricing Conversion Date of any outstanding Loan to be converted into or continued as a LIBOR Loan; and (b) at least two 12 (2) Business Days prior to the Pricing Conversion Date of any outstanding Loan to be converted into or continued as a Base Rate Loan. (iii) CONTENTS OF NOTICE. The Notice of Conversion/Continuation shall set forth the following information with respect to the Loan subject thereto: (A) the Pricing Conversion Date, which shall be a Business Day; (B) the amount of the LIBOR Loan or Base Rate Loan to be converted or continued; (C) whether such Loan is to be converted into/continued as a LIBOR Loan or a Base Rate Loan; and (D) if such Loan (or any portion thereof) is to be converted into/continued as a LIBOR Loan, the applicable Interest Period. (b) AUTOMATIC CONVERSIONS. Any outstanding LIBOR Loan shall automatically convert to a Base Rate Loan, effective on the last day of the applicable Interest Period, if as of such date: (i) DEFAULT: EVENT OF DEFAULT. A Default or Event of Default shall exist; (ii) FAILURE TO PROVIDE NOTICE. The Company shall have failed to submit a Notice of Conversion/Continuation for such Loan in compliance with the terms of Section 2.04(a); or (iii) Failure to Maintain Minimum Loans. If the aggregate outstanding principal amount of LIBOR Loans having the same Interest Period shall have been reduced, by payment, prepayment, or partial conversion to be less than $1,000,000. (c) NOTICE TO BANKS. Upon receipt of a Notice of Conversion/Continuation conforming with the terms of Section 2.04(a), or an automatic conversion pursuant to Section 2.04(b), the Agent shall promptly notify each Bank thereof. All conversions and continuations shall be made pro rata according to the respective outstanding principal amounts of the Loans converted or continued. 2.05 OPTIONAL PREPAYMENTS. Subject to Section 3.04, the Company may, at any time and from time to time, ratably prepay Loans in whole or in part, in an aggregate minimum amount of $1,000,000 or an integral multiple of $100,000 in excess thereof, upon (a) at least three (3) Business Days' prior notice, if the Loans to be prepaid are LIBOR Loans, and (b) at least one Business Day's prior notice, if the Loans to be prepaid are Base Rate Loans. Such notice of prepayment shall specify (i) the amount of such prepayment, (ii) the date of such 13 prepayment, which shall be a Business Day, and (iii) whether such prepayment is of LIBOR Loans, Base Rate Loans, or any combination thereof. Such notice shall not thereafter be revocable by the Company and the Agent shall promptly notify each Bank thereof and of such Bank's Bridge Commitment Percentage of such prepayment. If a prepayment notice is given, the payment amount specified therein shall be due and payable on the date specified therein, together with accrued interest to such date on the amount prepaid and any amounts required to be paid pursuant to Section 3.04. 2.06 MANDATORY PREPAYMENTS OF LOANS. If at any time the Outstanding Amount exceeds the then applicable Bridge Availability, the Company shall, within three (3) days thereafter, prepay Loans in an amount sufficient to reduce the Outstanding Amount to the then applicable Bridge Availability. 2.07 APPLICATION OF PROCEEDS. Unless otherwise instructed by the Company, any prepayments pursuant to Section 2.05 or Section 2.06 made (i) on a day other than the last day of an Interest Period for any Loan shall be applied first to any Base Rate Loans then outstanding and then to any LIBOR Loans then outstanding, in the inverse order of such LIBOR Loans' stated maturities and (ii) on the last day of an Interest Period for any LIBOR Loan shall be applied first to such maturing LIBOR Loan, then to any Base Rate Loans outstanding, and then to any other LIBOR Loans then outstanding, in the inverse order of such LIBOR Loans' stated maturities. 2.08 REPAYMENT. Subject to Section 2.06, the Company shall repay each Loan on the applicable Individual Bridge Loan Maturity Date. 2.09 INTEREST. (a) RATES. Subject to Section 2.09(c), each Loan shall bear interest on the outstanding principal amount thereof from the date such Loan is made until the date such Loan becomes due, at a rate per annum equal to the LIBO Rate or the Base Rate, as the case may be, PLUS the Applicable Margin. (b) PAYMENT DATES. Interest on each Loan shall be payable in arrears on each Interest Payment Date and the Individual Bridge Loan Maturity Date. Interest shall also be payable on the date of any prepayment of Loans pursuant to Section 2.05 or Section 2.06 for the portion of the Loans so prepaid. During the existence of any Event of Default, interest shall be payable on demand. (a) Default Rates. While any Event of Default exists or after acceleration and during the continuation thereof, and after as well as before any entry of judgment thereon, the Company shall pay interest (after as well as before judgment to the extent permitted by law) on all outstanding Obligations at a rate per annum which is determined by increasing the Applicable Margin then in effect by three percent (3%) per annum; PROVIDED, HOWEVER, that, on and after the expiration of the Interest Period applicable to any LIBOR Loan outstanding on the date of occurrence of such Event of Default or acceleration, the outstanding Obligations shall, during the continuation of such Event of Default or after acceleration and 14 14 during the continuation thereof, bear interest at a fluctuating rate per annum equal to the Base Rate plus three percent (3%). (d) LIMITATIONS FOR APPLICABLE LAW. Anything herein to the contrary notwithstanding, payments of interest shall not be required, for any period for which interest is computed hereunder, to the extent (but only to the extent) that contracting for or receiving such payments by the respective Bank would be contrary to the provisions of any law applicable to such Bank limiting the highest rate of interest which may be lawfully contracted for, charged or received by such Bank, and in such event the Company shall pay such Bank interest at the highest rate permitted by applicable law. 2.10 FEES. The Company shall pay to the Agent for the account of each Bank ratably a fee equal to .25% of the amount of each Loan not prepaid or repaid on or prior to the Individual Bridge Loan Maturity Date thereof using the proceeds of a Revolving Loan under the Credit Agreement. Such fee shall be due and payable on the date of such payment or prepayment or, if such Loan has not been paid in full on the Individual Bridge Loan Maturity Date therefor, on such Individual Bridge Loan Maturity Date. 2.11 COMPUTATION OF FEES AND INTEREST. (a) COMPUTATION PERIOD. All computations of fees and interest under this Agreement shall be made on the basis of a 360-day year and actual days elapsed. Interest and fees shall accrue during each period for which interest or fees are computed from the first day thereof to the last day thereof. (b) NOTICE. The Agent shall, with reasonable promptness, notify the Company and the Banks of each determination of a LIBO Rate, PROVIDED that no failure to do so shall relieve the Company of any obligation hereunder. Any change in the interest rate on a Loan resulting from a change in the Reserve Percentage (as defined in the definition of "LIBO Rate") shall become effective as of the opening of business on the day on which such change becomes effective. The Agent shall with reasonable promptness notify the Company and the Banks of the effective date and the amount of each such change, PROVIDED that no failure to do so shall relieve the Company of any obligation hereunder. Each determination of an interest rate by the Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Company and the Banks in the absence of manifest error. (c) DETAIL OF CALCULATION. The Agent shall, at the request of the Company or any Bank, deliver to the Company or such Bank, as the case may be, a statement showing the quotations used by the Agent in determining any interest rate. 2.12 PAYMENTS BY THE COMPANY. (a) TERMS OF PAYMENTS. All payments (including prepayments) to be made by the Company on account of principal, interest, fees and other amounts required hereunder shall be made without setoff or counterclaim and shall, except as otherwise expressly provided herein, be made to the Agent for the ratable account of the Banks at the Payment 15 15 Office, in dollars and in immediately available funds, no later than 9:00 a.m. (California time) on the date specified herein. The Agent shall promptly distribute to each Bank such Bank's Bridge Commitment Percentage (or other applicable share as expressly provided herein) of such principal, interest, fees or other amounts (in like funds as received). Any payment which is received by the Agent later than 9:00 a.m. (California time) shall be deemed to have been received on the immediately succeeding Business Day, and any applicable interest or fee shall continue to accrue. (b) BUSINESS DAYS. Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall be included in the computation of interest or fees, as the case may be; subject to the provisions set forth in the definition of "Interest Period". (c) RELIANCE OF AGENT ON PAYMENTS BY THE COMPANY. Unless the Agent shall have received notice from the Company prior to the date on which any payment is due to the Banks hereunder that the Company will not make such payment in full, the Agent may assume that the Company has made such payment in full to the Agent on such date, and the Agent may (but shall not be required to), in reliance upon such assumption, cause to be distributed to each Bank on such due date the amount then due such Bank. If and to the extent the Company shall not have made such payment in full to the Agent, each Bank shall repay to the Agent on demand such amount distributed to such Bank, together with interest thereon for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Agent, at the Federal Funds Rate as in effect for each such day. 2.13 SECURITY. In connection with the acquisition of a Funded Project by or for a Wholly-Owned Subsidiary using Loan proceeds, the Company shall deliver to the Agent a Equity Interests Pledge Agreement pledging to the Agent for the ratable benefit of the Banks all of the Stock (or other equity or beneficial interest if such Person is not a corporation) in such Wholly-Owned Subsidiary owned by the Company, the REIT and any other Wholly-Owned Subsidiary, substantially in the form of EXHIBIT E hereto, together with financing statements or stock certificates, as applicable, and such legal opinions or other evidence as the Agent may require to assure or confirm that the Agent holds for the benefit of the Banks a duly perfected, first-priority Lien on such Stock (or other interests). 2.14 Loan Funded Project Conditions. (a) PURPOSE OF LOANS. Any Loan funds advanced with respect to an Initial Funded Project shall be applied by the Company first to repay Indebtedness secured by Liens on the applicable Initial Funded Project, and then for general working capital purposes. The proceeds of all Loans advanced for Funded Projects other than the Initial Funded Projects shall be used by the Company solely as a source of short term bridge financing for Funded Projects to be acquired by the Company or any Wholly-Owned Subsidiary. The Company shall not use any Loan for any purpose other than as described in this Section 2.14(a). Subject to Section 2.03(c) with respect to Loans for Initial Funded Projects, each Loan shall be funded 16 16 directly into the escrow at a title company approved by Agent for the Company's acquisition of the Funded Project to be acquired with the proceeds of such Loan and shall be released therefrom only in accordance with instructions approved by the Agent. (b) LIMITATION ON AMOUNT: ACCEPTANCE BY THE BANKS. No Loan shall exceed fifty percent (50%) of the acquisition cost (exclusive of prorations and closing costs), as certified to the Banks by the Company in the applicable Borrowing Notice or Conversion/Continuation, for the Funded Project proposed to be acquired, in part, with the proceeds of such Loan (such limitation, the "INDIVIDUAL BRIDGE LOAN LIMITATION"). The Company shall deliver to the Agent at least thirty (30) days prior written notice of its intention to request a Loan hereunder for acquisition of a proposed Funded Project. Prior to the making of any Loan, the Banks shall have the right, in their sole discretion, after performing such due diligence as the Banks desire in their sole discretion, to approve or disapprove the use of a Loan hereunder for part of the acquisition costs for any proposed Funded Project. The Banks shall not unreasonably withhold their acceptance of an apartment project owned, or to be acquired, in fee simple by the Company or any Wholly-Owned Subsidiary offered as a Funded Project hereunder if, through the due diligence contemplated hereby, the Banks determine that the project is of a quality and character, and is located in a geographical market, which is consistent with the then- current or any previous Funded Projects hereunder and with the then current or previous Borrowing Base Properties under the Credit Agreement or under the Previous Credit Agreement. Prior to the Banks' approval of any Loan, the Company shall at its sole expense provide the Banks with all requested due diligence materials and information with respect to the Funded Project proposed to be acquired, in part, with the proceeds of such Loan, which materials and information shall be in a form acceptable to the Banks in their sole discretion, and shall be provided at least thirty (30) days prior to the date on which Borrower intends to request a Loan for acquisition of such proposed Funded Project. Such materials and information shall include, without limitation, the following: (i) a preliminary title report and an ALTA survey meeting the Agent's customary requirements; (ii) an environmental site assessment with respect to such Funded Project, dated as of a recent date, prepared by a qualified firm acceptable to the Agent, identifying any conditions or operations on such property that are not in compliance with any Environmental Laws and any Hazardous Materials located thereon, showing Estimated Remediation Costs, if any, and stating that there are no conditions on such property or other items requiring further investigation or remediation, and any follow-on or supplemental report required by the Agent, together with the Agent's standard form Environmental Questionnaire and Disclosure Statement completed by the Company; (iii) current, certified rent roll and other reports of the financial and operating results (for the most recent 12-month period) and projections for the property in such format as the Agent may require; 17 (iv) if required by the Agent, evidence of the zoning, subdivision and entitlements status of the property, including, without limitation, copies of the certificate of occupancy and any other material permits, licenses or approvals required for the property; (v) a copy of the purchase and sale agreement(s) by which the Company or such Wholly-Owned Subsidiary has acquired or is to acquire the property; and (vi) such other items as the Agent may reasonably request. The Company acknowledges that the review of the due diligence materials described in this Section 2.14(b) will require advance notice to the Agent and the Banks, and the Company undertakes to provide as much advance notice as possible to achieve timely review of such materials. (c) Conditions to Inclusion of Proposed Projects. Each of the following conditions must be satisfied (or waived by the Agent in writing) prior to the Banks' agreement to advance a Loan in connection with the acquisition of any apartment project as a proposed Funded Project: (A) Acceptances. The Banks shall have agreed to accept the apartment project offered by the Company for inclusion as a Funded Project in the Banks' sole and absolute discretion in accordance with Section 2.14(b) above, and the Agent shall have so notified the Company in writing. Any such acceptance shall be subject to the satisfaction of the other conditions set forth in this Section 2.14(c). Each apartment project designated in this Agreement as an Initial Funded Project shall be subject to the same conditions for acceptance as a Funded Project as other projects hereafter offered by the Company for inclusion as a Funded Project. (B) INSURANCE. The Company shall have provided the Agent with evidence satisfactory to the Requisite Banks that the Company has obtained adequate casualty insurance and liability insurance with respect to such Funded Project; (C) OFFICERS' CERTIFICATE. The Company shall have delivered to the Agent a certificate of two Responsible Officers substantially in the form of EXHIBIT F confirming (i) that all conditions precedent set forth in this Section 2.14(c) (other than those based solely upon the approval of the Agent, the Banks, or the Requisite Banks) have been satisfied with respect to such project; (ii) that all financial and operating information delivered to the Agent pursuant to Section 2.14(b), subject to audit, is complete and correct to the knowledge of the Company and setting forth in detail the calculation which would be required for the calculation of the Revolving Facility Debt Service Coverage-Based Principal Limit for such project under the Credit Agreement; (iii) that the Company would not be required to prepay any Loan with respect to such Funded Project pursuant to Section 2.14(d); and (iv) the Company's purchase price for the property, upon which the Agent and the Banks shall be entitled to rely; and 18 (D) Equity Interests Pledge Agreement. The Company shall have delivered to the Agent a Equity Interests Pledge Agreement pursuant to Section 2.13, together with such legal opinions or other evidence to confirm the Lien thereof as further 'provided in Section 2.13. Under no circumstances shall the Agent or the Banks have or be deemed to have any Lien on any Funded Project as security for the Obligations. (d) MANDATORY PREPAYMENT FOR FUNDED PROJECt. The Company shall be required to prepay in full all Loans advanced with respect to the acquisition of a Funded Project: (i) Within ten (10) days after demand from the Agent to the Company following the occurrence of any one of the following events: (A) any Event of Loss with respect to such Funded Project; or (B) the occurrence of an adverse change in the environmental condition of the Funded Project from that described in the materials described in Section 2.14(b)(ii) above; (ii) Immediately upon any Disposition of such Funded Project or any portion thereof or interest therein. 2.15 PAYMENTS BY THE BANKS TO THE AGENT. (a) RELIANCE OF AGENT ON PAYMENTS BY THE BANK. Unless the Agent shall have received notice from a Bank on the Closing Date or, with respect to each borrowing after the Closing Date, at least one Business Day prior to the date of any proposed borrowing, that such Bank will not make available to the Agent for the account of the Company the amount of that Bank's Bridge Commitment Percentage of the Loan to be funded on such date, the Agent may assume that each Bank has made such amount available to the Agent on the borrowing date, and the Agent may (but shall not be required to), in reliance upon such assumption, make available to the Company a corresponding amount on such date. If and to the extent any Bank shall not have made its full amount available to the Agent and the Agent in such circumstances has made available to the Company such amount, that Bank shall on the next Business Day following the date of such borrowing make such amount available to the Agent, together with interest at the Federal Funds Rate for and determined as of each day during such period. A certificate of the Agent submitted to any Bank with respect to amounts owing under this Section 2.15(a) shall be conclusive, absent manifest error. If such amount is so made available, such payment to the Agent shall constitute such Bank's Loan (as of the date of the borrowing) for all purposes of this Agreement. If such amount is not made available to the Agent on the next Business Day following the borrowing date, the Agent shall notify the Company of such failure to fund and, upon demand by the Agent, the Company shall pay such amount to the Agent for the Agent's account, together with interest thereon for each day elapsed since the date of such 19 19 borrowing, at a rate per annum equal to the interest rate applicable at the time to the Loans comprising such borrowing. (b) OBLIGATIONS OF AGENT: Bank. The failure of any Bank to make any Loan on any date of borrowing shall not relieve any other Bank of any obligation hereunder to make a Loan on the date of such borrowing, but no Bank shall be responsible for the failure of any other Bank to make the Loan to be made by such other Bank on the date of any borrowing. 2.16 SHARING OF PAYMENTS. ETC. If, other than as expressly contemplated elsewhere herein, any Bank shall obtain on account of the Loans made by it any payment (whether voluntary, involuntary, through exercise of any right of setoff, or otherwise) in excess of its Bridge Commitment Percentage of payments on account of the Loans obtained by all the Banks, such Bank shall forthwith (a) notify the Agent of such fact, and (b) purchase from the other Banks such participations in the Loans made by them as shall be necessary to cause such purchasing Bank to share the excess payment ratably with each of them; PROVIDED, HOWEVER, that if all or any portion of such excess payment is thereafter recovered from the purchasing Bank, such purchase shall to that extent be rescinded and each other Bank shall repay to the purchasing Bank the purchase price paid thereto together with a percentage (calculated by dividing (i) the amount of such paying Bank's required repayment by (ii) the total amount so recovered from the purchasing Bank) of any interest or other amount paid or payable by the purchasing Bank in respect of the total amount so recovered. The Company agrees that any Bank so purchasing a participation from another Bank pursuant to this Section 2.16 may, to the fullest extent permitted by law, exercise all of such purchasing Bank's rights of payment (including the right of setoff, but subject to Section 10.08) with respect to such participation as fully as if such purchasing Bank were the direct creditor of the Company in the amount of such participation. The Agent shall keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased pursuant to this Section 2.16 and shall in each case notify the Banks following any such purchases. ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY 3.01 TAXES. (a) Subject to Section 3.01(g), any and all payments by the Company to the Agent or the Banks under this Agreement shall be made free and clear of, and without deduction or withholding for, any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding such taxes (including income taxes or franchise taxes) as are imposed on or measured by the recipient's net income by the jurisdiction under the laws of which the recipient is organized or maintains a Lending Office, or otherwise does business, or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). 20 (b) In addition, the Company shall pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery, recordation or registration of, or otherwise with respect to, this Agreement or any other Loan Documents (hereinafter referred to as "Other Taxes"). (c) The Company shall indemnify and hold harmless the Agent and each Bank for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 3.01) paid by the Agent or such Bank and any liability (including penalties, interest, additions to tax and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. Payment under this indemnification shall be made within thirty (30) days from the date the Agent or any Bank makes written demand therefor. (d) If the Company shall be required by law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum payable hereunder to the Agent or any Bank, then, subject to Section 3.01(g): (i) the sum payable shall be increased as necessary so that, after making all required deductions (including deductions applicable to additional sums payable under this Section 3.01) the Agent or such Bank, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made; (ii) the Company shall make such deductions; and (iii) the Company shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (e) Within 30 days after the date of any payment by the Company of Taxes or Other Taxes, the Company shall furnish to the Agent the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment satisfactory to the Agent. (f) Each Bank which is a foreign person (i.e., a person other than a United States person for United States Federal income tax purposes) agrees that: (i) such Bank shall, no later than the Closing Date (or, in the case of a Bank which becomes a party hereto pursuant to Section 10.08 after the Closing Date, the date upon which such Bank becomes a party hereto), deliver to the Company through the Agent two (2) accurate and complete signed originals of Internal Revenue Service Form 4224 or any successor thereto ("Form 4224"), or two (2) accurate and complete signed originals of Internal Revenue Service Form 1001 or any successor thereto ("Form 1001"), as appropriate, in each case indicating that the Bank is on the date of delivery thereof entitled to receive payments of principal, interest and fees under this Agreement free from withholding of United States Federal income tax; 21 (ii) if at any time such Bank makes any changes necessitating a new form, such Bank shall with reasonable promptness deliver to the Company through the Agent in replacement for, or in addition to, the forms previously delivered by such Bank hereunder, two (2) accurate and complete signed originals of Form 4224, or two (2) accurate and complete signed originals of Form 1001, as appropriate, in each case indicating that such Bank is on the date of delivery thereof entitled to receive payments of principal, interest and fees under this Agreement free from withholding of United States Federal income tax; (iii) such Bank shall, before or promptly after the occurrence of any event (including the passing of time but excluding any event mentioned in (ii) above) requiring a change in or renewal of the most recent Form 4224 or Form 1001 previously delivered by such Bank, deliver to the Company through the Agent two (2) accurate and complete original signed copies of Form 4224 or Form 1001, as appropriate, in replacement of the forms previously delivered by such Bank; and (iv) such Bank shall, promptly upon the Company's reasonable request to that effect, deliver to the Company such other forms or similar documentation as may be required from time to time by any applicable law, treaty, rule or regulation in order to establish such Bank's tax status for withholding purposes. (g) The Company shall not be required to pay any additional amounts in respect of United States Federal or state income tax pursuant to Section 3.01(d) to any Bank or any duly appointed assignee for the account of any Lending Office of such Bank or such assignee: (i) if the obligation to pay such additional amounts arises as a result of a failure by such Bank or assignee to comply with its obligations under Section 3.01(f) in respect of such Lending Office; (ii) if such Bank or assignee shall have delivered to the Company a Form 4224 in respect of such Lending Office pursuant to Section 3.01(f), and such Bank or assignee shall not at any time be entitled to exemption from deduction or withholding of United States Federal income tax in respect of payments by the Company hereunder for the account of such Lending Once for any reason other than a change in United States law or regulations or in the official interpretation of such law or regulations by any governmental authority charged with the interpretation or administration thereof (whether or not having the force of law) after the date of delivery of such Form 4224; or (iii) if such Bank or assignee shall have delivered to the Company a Form 1001 in respect of such Lending Once pursuant to Section 3.01(f), and such Bank or assignee shall not at any time be entitled to reduction, partial exemption or exemption from deduction or withholding of United States federal income tax in respect of payments by the Company hereunder for the account of such Lending Office for any reason other than a change in United States law or regulations or any applicable tax treaty or regulations or in the official interpretation of such law, treaty or regulations by any governmental authority charged with the 22 interpretation or administration thereof (whether or not having the force of law) after the date of delivery of such Form 1001. (h) If, at any time, the Company requests any Bank to deliver any forms or other documentation pursuant to Section 3.01(f)(iv), then the Company shall, on demand of such Bank, through the Agent reimburse such Bank for any costs and expenses (including Attorney Costs) reasonably incurred by such Bank in the preparation or delivery of such forms or other documentation. (i) If the Company is required to pay additional amounts to the Agent or any Bank pursuant to Section 3.01(d), then such Bank shall use its reasonable best efforts (consistent with legal and regulatory restrictions) to change the jurisdiction of its Lending Office so as to eliminate any such additional payment by the Company which may thereafter accrue if such change in the judgment of such Bank is not otherwise disadvantageous to such Bank. 3.02 Illegality. (a) If any Bank shall determine that the introduction of any Requirement of Law or any change therein or in the interpretation or administration thereof has made it unlawful, or that any central bank or other Governmental Authority has asserted that it is unlawful, for such Bank or its Lending Office to make LIBOR Loans, then, on notice thereof by such Bank to the Company through the Agent, the obligation of such Bank to make LIBOR Loans shall be suspended until such Bank shall have notified the Agent and the Company that the circumstances giving rise to such determination no longer exist. (b) If any Bank shall reasonably determine that it is unlawful to maintain any LIBOR Loan, the Company shall notify Bank that the Company shall either (i) prepay in full all LIBOR Loans of such bank then outstanding, together with interest accrued thereon, or (ii) elect to convert in accordance with Section 2.04 all LIBOR Loans then outstanding, after payment to such Bank of all interest accrued thereon, into Base Rate Loans, either on the last day of the Interest Period thereof if such Bank may lawfully continue to maintain such LIBOR Loans to such day, or immediately if such Bank may not lawfully continue to maintain such LIBOR Loans, together with any amounts required to be paid in connection therewith pursuant to Section 3.04. (c) If the obligation of any Bank to make or maintain LIBOR Loans has been terminated, the Company may elect, by giving notice to such Bank through the Agent, that all Loans which would otherwise be made by such Bank as LIBOR Loans shall instead be made as Base Rate Loans. 3.03 Increased Costs and Reduction of Return. (a) If any Bank shall determine that, due to either (i) the introduction of or any change in or in the interpretation of any Requirement of Law or (ii) the compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to such Bank of agreeing to23 23 make or of making, funding or maintaining any LIBOR Loans hereunder, then the Company shall be liable for, and shall from time to time, upon written demand therefor by such Bank (with a copy of such demand to the Agent), which demand shall set forth the basis of such increased cost in reasonable detail, pay to the Agent for the account of such Bank, such additional amounts as are sufficient to compensate such Bank for such increased costs. (b) If any Bank shall have reasonably determined that (i) the introduction of any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation, (iii) any change in the interpretation or administration of any Capital Adequacy Regulation by any central bank or other Governmental Authority charged with the interpretation or administration thereof, or (iv) compliance with any Capital Adequacy Regulation by such Bank (or its Lending Office) or any corporation controlling such Bank, effects or would effect an increase in the amount of capital required or expected to be maintained by such Bank or any corporation controlling such Bank (taking into consideration such Bank's or such corporation's policies with respect to capital adequacy and such Bank's desired return on capital), then, upon written demand of such Bank (with a copy to the Agent), which demand shall set forth in reasonable detail the basis for any such increase in required capital, the Company shall immediately pay to such Bank, from time to time as specified by such Bank, additional amounts sufficient to compensate such Bank for such increase. (c) If any Bank shall have determined that any of the events described in Sections 3.03(a) or 3.03(b) affects or would affect an increase in cost or reduction of return resulting in an additional Obligations hereunder, such Bank shall, with reasonable promptness, notify the Company and the Agent of such determination, PROVIDEd that no failure to do so shall relieve the Company of any Obligation hereunder. 3.04 FUNDING LOSSES. The Company agrees to reimburse each Bank for, and to hold each Bank harmless from, any loss or expense that such Bank may sustain or incur as a consequence of: (a) the failure of the Company to make any required payment or prepayment of principal of any LIBOR Loan or Base Rate Loan (including payments to be made after any acceleration thereof); (b) the failure of the Company to borrow, continue or convert a Loan after the Company has given (or is deemed to have given) a Borrowing Notice or a Notice of Conversion/Continuation; (c) the failure of the Company to make any prepayment after the Company has given a notice in accordance with Section 2.05; (d) the prepayment of a LIBOR Loan on a day which is not the last day of the Interest Period with respect thereto; or (e) the conversion of any LIBOR Loan to a Base Rate Loan on a day that is not the last day of the Interest Period with respect thereto; 24 such amount or amounts to include an amount equal to the excess, if any, of (a) the amount of interest that would have accrued on the amount not paid, not borrowed, not prepaid, prepaid, or converted for the period from the date of such failure to pay, failure to borrow, failure to prepay, prepayment, or conversion to the last day of then current Interest Period (or in the case of a failure to borrow, the Interest Period which would have commenced on the date of such failure) at the interest rate applicable to that LIBOR Loan, over (b) the amount of interest that would accrue to the Bank on such amount at the LIBO Rate in effect on such date by placing such amount on deposit for a comparable period with leading banks in the London interbank market. 3.05 INABILITY TO DETERMINE RATES. If the Agent shall have determined that for any reason adequate and reasonable means do not exist for ascertaining the LIBO Rate for any requested Interest Period with respect to a proposed LIBOR Loan or that the LIBO Rate applicable pursuant to Section 2.09(a) for any requested Interest Period with respect to a proposed LIBOR Loan does not adequately and fairly reflect the cost to such Banks of funding such Loan, the Agent will forthwith give notice of such determination to the Company and each Bank. Thereafter, the obligation of the Banks to make or maintain LIBOR Loans hereunder shall be suspended until the Agent revokes such notice in writing. Upon receipt of such notice, the Company may revoke any Borrowing Notice or Notice of Conversion/Continuation then submitted by it. If the Company does not revoke such notice, the Banks shall make, convert or continue the Loans, as proposed by the Company, in the amount specified in the applicable notice submitted by the Company, but such Loans shall be made, converted or continued as Base Rate Loans instead of LIBOR Loans. 3.06 CERTIFICATES OF INKS. Any Bank claiming reimbursement or compensation pursuant to this Article III, shall deliver to the Company (with a copy to the Agent) a certificate setting forth in reasonable detail a summary of the basis of such demand and the amount payable to such Bank hereunder. 3.07 SURVIVAL. The agreements and obligations of the Company in this Article III shall survive the payment of all other obligations. ARTICLE IV CONDITIONS PRECEDENT 4.01 CONDITIONS OF FIRST LOAN. The obligation of each Bank to make its first Loan hereunder is subject to the condition that the Agent shall have received on or before the Closing Date, the following, in the case of agreements, documents and other instruments, in form and substance satisfactory to the Agent, each Bank and their respective counsel in their sole discretion and in sufficient copies for each Bank: (a) BRIDGE AGREEMENT AND NOTES. This Agreement executed by the Company, the Agent and each of the Banks, a Note executed by the Company in favor of each of the Banks, and the REIT Guaranty Documents executed by the guarantors thereunder; the Notes shall be dated the Closing Date; 25 (b) CERTIFICATE. A certificate signed by at least two (2) Responsible Officers, dated as of the Closing Date, stating that: (i) the representations and warranties of the Company and the REIT contained in Article V hereof and of the Company, the REIT and their Subsidiaries contained in the Loan Documents are true and correct on and as of such date, as though made on and as of such date; (ii) no Default or Event of Default exists or would result from the initial borrowing; (iii) there has occurred since December 31, 1995 no act, omission, change or occurrence which would have a Material Adverse Effect; and (iv) all conditions precedent set forth in this Section 4.01 have been satisfied (other than those based solely on the approval of the Agent, the Banks or the Requisite Banks); (c) LEGAL OPINIONS. The Agent shall have received an opinion of Colorado counsel to the Company and addressed to the Agent and the Banks in form acceptable to Agent; (d) Costs; Expenses; Fees.. Payment of all costs, expenses, and accrued and unpaid fees (including legal fees and expenses) to the extent then due and payable on the Closing Date, including any arising under Sections 2.10, 3.01 and 10.04; (e) CREDIT AGREEMENT. All conditions precedent set forth in the Credit Agreement shall have been satisfied; and (f) OTHER DOCUMENTS. Such other approvals, opinions, or documents as the Agent or the Requisite Banks may reasonably request. 4.02 CONDITIONS TO EACH LOAN. The obligation of each Bank to make any Loan (including its first Loan) is subject to the satisfaction of the following conditions precedent: (a) BORROWING NOTICE. The Agent shall have received in the case of a Loan (with, in the case of the first Loan only, a copy for each Bank) a Borrowing Notice or Notice of Conversion/Continuation in compliance with the terms of Section 2.03 or Section 2.04, as applicable; (b) OTHER DOCUMENTS. The Agent shall have received such other approvals, opinions and documents as the Agent or any Bank may reasonably request; (c) AVAILABILITY LIMITS. The Outstanding Amount shall not, as a result of the making, continuation or conversion of such Loan, exceed the Bridge Availability; 26 (d) REPRESENTATIONS AND WARRANTIES. The representations and warranties made by the Company, the REIT and their respective Subsidiaries contained in the Loan Documents, including Article V of this Agreement, shall be true and correct on and as of the date such Loan is made, with the same effect as if made on and as of such date; (e) NO EXISTING DEFAULT. No Default or Event of Default shall exist or shall result from the making, continuation or conversion of such Loan; (f) NO MATERIAL ADVERSE EFFECT. No act, omission, change, occurrence or event which has a Material Adverse Effect shall have occurred since the Closing Date; and (g) NO FUTURE ADVANCE NOTICE. Neither the Agent nor any Bank shall have received from the Company, the REIT or any Subsidiary thereof, any notice that any Pledge Agreement will no longer secure, or that the REIT Guaranty Documents will no longer guaranty, future Loans to be made under this Agreement. Each Borrowing Notice and Notice of Continuation/Conversion submitted by the Company hereunder shall constitute a representation and warranty by the Company hereunder, as of the date of such notice and as of the date of the making, continuation or conversion of the corresponding Loan, that the conditions in this Section 4.02 have been satisfied. ARTICLE V REPRESENTATIONS AND WARRANTIES The Company represents and warrants to the Agent and each Bank that: 5.01 Representations under the Credit Agreement. All of the representations and warranties of the Company under the Credit Agreement are true and correct (as if the terms "Loan Documents" and "Obligations" as used in the Credit Agreement included not only the "Loan Documents" and "Obligations" as defined therein but also the "Loan Documents" and "Obligations" as defined herein). 5.02 TITLE TO THE FUNDED PROJECTS. The Company and the Wholly-Owned Subsidiaries have good record and marketable title in fee simple to any Funded Projects owned thereby, subject only to title exceptions disclosed to and approved by the Banks pursuant to Section 2.14(b). 5.03 GOVERNMENTAL AUTHORIZATION. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority (except for recordings in connection with the Liens granted to the Agent under the Equity Interests Pledge Documents) is necessary or required in connection with the execution, delivery or performance by, or enforcement against, the Company or any of its Subsidiaries of this Agreement or any other Loan Document. 27 5.04 CERTAIN REPRESENTATIONS CONCERNING FUNDED PROJEct. The representations of the Company under Sections 5.11 and 5.20 through 5.25, inclusive, of the Credit Agreement made with respect to the Borrowing Base Properties are true and correct as if made herein with respect to the Funded Projects. 5.05 Equity Interest Pledge Agreements. When executed and delivered pursuant hereto, the Equity Interests Pledge Agreements shall be effective to create in favor of the Agent, for the benefit of the Banks, legal, valid and enforceable first-priority Liens in the Collateral described therein and the proceeds thereof. All action shall have been taken that is necessary or appropriate to perfect the Agent's Lien, for the benefit of the Banks, in the Collateral. All representations and warranties of the Company and any other Person party thereto contained in any Equity Interests Pledge Documents are true and correct. 5.06 USE OF PROCEEDS: MARGIN REGULATIONS. The proceeds of the Loans are intended to be and shall be used solely for the purposes set forth in and permitted by Sections 2.01(b) and Section 6.06, and are intended to be and shall be used in compliance with Section 7.03. 5.07 NOT A "FOREIGN PERSON." Neither the Company nor any Wholly-Owned Subsidiary which owns a Funded Project is a "foreign person" within the meaning of Section 1445(f)(3) of the Internal Revenue Code. 5.08 FULL DISCLOSURE. None of the representations or warranties made by the Company, the REIT, the Management Entity or any Subsidiary in the Loan Documents as of the date such representations and warranties are made or deemed made, and none of the statements contained in each exhibit, report, statement or certificate furnished by or on behalf of any such Person in connection with the Loan Documents, contains any untrue statement of a material fact or omits any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they are made, not misleading. There is no fact, to the Knowledge of the Company, which materially and adversely affects the business, operations, properties, assets or condition (financial or otherwise) of the Company, the REIT, the Management Entities, or any of the Subsidiaries which has not been disclosed herein or in other documents, certificates and statements furnished to the Agent and each Bank hereunder or pursuant hereto. The copies of all documents delivered to the Agent and/or the Banks from time to time in connection with this Agreement are and shall be true and complete copies of the originals thereof and have not been or shall not be amended except as disclosed to the Agent and/or the Banks, as applicable. ARTICLE VI AFFIRMATIVE COVENANTS The Company covenants and agrees that, so long as any Bank shall have any Bridge Commitment hereunder, or any Loan or other obligation shall remain unpaid or unsatisfied, unless the Requisite Banks waive compliance in writing: 28 6.01 FINANCIAL INFORMATION. In addition to providing the financial information required under Section 6.01 of the Credit Agreement, the Company shall deliver to the Agent, in form and detail satisfactory to the Agent and the Banks, such information with respect to the Funded Projects as is required thereunder with respect to the Borrowing Base Properties. 6.02 CERTIFICATES; OTHER INFORMATION. The Company shall furnish to the Agent with sufficient copies for each Bank: (a) ACCOUNTING CERTIFIcates. Concurrently with the delivery of the annual financial statements required under Section 6.01(a) of the Credit Agreement, a certificate of the independent certified public accountants reporting on such financial statements stating that, in making the examination necessary therefor, no knowledge was obtained of any Default or Event of Default, except as specified in such certificate; (b) OFFICERS' CERTIFICATES. Concurrently with the delivery of the quarterly and annual financial statements required under Sections 6.01(a) and (b) of the Credit Agreement, a compliance certificate, substantially in the form of EXHIBIT G, signed by at least two (2) Responsible Officers 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 and the other Loan Documents to be observed, performed or satisfied by it, and that such officers have no knowledge of any Default or Event of Default except as specified in such certificate. Notwithstanding anything to the contrary contained herein and without limiting the Banks' other rights and remedies, if such certificate is not provided on the due date therefor, the Company shall be prohibited from any further borrowings under the Bridge Facility until such certificate is provided, and the Company shall make successive, cumulative payments in the amount of ten percent (10%) of the outstanding balance of the Loans at the end of each seven (7) day period during which the Company continues to fail to provide such certificate after the due date therefor; (c) OTHER INFORMATION. Promptly, such additional financial and other information as the Agent may from time to time reasonably request. 6.03 NOTICES. The Company shall promptly (and in no event later than ten (10) days after the Company has reason to know of the same) notify the Agent and each Bank of: (a) DEFAULT: EVENT OF DEFAULt. The occurrence of any Default or Event of Default, and of the occurrence or existence of any event or circumstance that is likely to become a Default or Event of Default; (b) Legal Compliance. Any material notice received from any Governmental Authority asserting that any Funded Project is not in compliance with any Requirements of Law;. 29 (c) DEFAULT EVENT OF DEFAULT. The occurrence of any Default or Event of Default, and of the occurrence or existence of any event or circumstance that is likely to become a Default or Event of Default; (d) MATERIAL ADVERSE EFFECT. The occurrence of any act, development or other matter which would reasonably be expected to have a Material Adverse Effect; and (e) Events REQUIRING Mandatory Prepayment. The occurrence of any event or circumstance that causes, or is likely to cause, the Company's obligation to prepay a Loan to arise under Section 2.14(d). 6.04 Insurance. The Company shall maintain, and shall cause each Wholly-Owned Subsidiary to maintain, with financially sound and reputable independent insurers, insurance with respect to the Funded Products against loss or damage of the kinds customarily insured against by Persons engaged in the same or a similar business, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons; including workers' compensation insurance, public liability and property and casualty insurance (which amount shall not be reduced in the absence of 30 days' prior notice to the Agent). 6.05 ENVIRONMENTAL LAWS. The Company shall, and shall cause each Wholly-Owned Subsidiary to, keep and maintain its Funded Projects in compliance in all material respects with all Environmental Laws. 6.06 USE OF PROCEEDS. The Company shall use the proceeds of the Loans solely in accordance with Section 2.01(b) above. 6.07 Inspection of Property and Books and Records. The Company shall maintain, and shall cause each Wholly-Owned Subsidiary to maintain, proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the Funded Projects. The Company shall permit, and shall cause each Wholly-Owned Subsidiary to permit, representatives of the Agent or any Bank to visit and inspect any of its Funded Projects, to conduct audits thereof, to examine their respective corporate, financial and operating records, and make copies thereof or abstracts therefrom, all at the expense of the Company and at any time during normal business hours and as often as may be reasonably desired, upon no less than forty-eight (48) hours advance notice to the Company; PROVIDED, HOWEVER, when an Event of Default exists, the Agent or any Bank may visit and inspect at the expense of the Company such Funded Projects at any time during business hours and without advance notice. 6.08 ADDITIONAL GUARANTIES. Promptly upon the formation by the REIT of any Wholly-Owned Subsidiary of the REIT, the REIT shall cause such Wholly-Owned Subsidiary to deliver to the Agent for the ratable benefit of the Banks a guaranty of the Obligations in the form attached hereto as EXHIBIT D. 6.09 COVENANTS RELATING TO FUNDED PROJECTS. The Company hereby agrees as follows: 30 (a) MAINTENANCE. The Company shall maintain each Funded Project in good order and condition in accordance with the Company's past practices. (b) LEASES. The Company shall not enter into any lease of any Funded Project other than apartment leases or other ordinary course leases consistent with past practice and having terms of less than one (1) year on market terms. The Company shall deliver to the Agent a copy of the standard lease forms utilized for the Funded Project from time to time. (c) MATERIAL AGREEMENTS. The Company shall obtain the prior written approval of the Agent and the Requisite Banks prior to entering into any reciprocal easement or similar agreement, ground lease or any other material agreement affecting any Funded Project. (d) MANAGEMENT CONTRACTS. The Company shall obtain the prior written approval of the Agent and the Requisite Banks prior to entering into any property management agreement with a Person other than the Company, one of the Management Entities (as defined in the Credit Agreement) or any of their Subsidiaries, or replacing the property manager for any Funded Project with a Person other than the Company, one of the Management Entities or any of their Subsidiaries. The Company shall cause all property management contracts affecting Funded Projects to permit termination of the manager (whether such manager is one of the Management Entities or otherwise) by the owner within thirty days' written notice, without penalty, and the Company shall not permit the management fee payable under any such property management agreement to exceed three percent (3%) of gross receipts from such property per fiscal year. (e) CONSTRUCTION. The Company shall obtain the prior written approval of the Agent and the Requisite Banks prior to entering into any major construction or renovation affecting a Funded Project and shall discharge all mechanic's liens resulting from any such construction or renovation. (f) LIENS. The Company shall keep each Funded Project at all times free and clear of all Liens (unless such Liens are bonded and thereby released of record in a manner satisfactory to the Agent), except for title exceptions disclosed to and approved by the Banks pursuant to Section 2.14(b)(i). 6.10 Payment of Obligations. The Company shall, and shall cause each Wholly-Owned Subsidiary to, pay and discharge as the same shall become due and payable and otherwise comply with, all their respective obligations and liabilities, including (a) all tax liabilities, assessments and governmental charges or levies upon it or its Funded Projects, unless the same are being contested in good faith by appropriate proceedings and adequate reserves in accordance with GAAP are being maintained by the Company or such Person, (b) all lawful claims which, if unpaid, would by law become a Lien upon its Funded Projects, (c) all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness, and (d) all Contractual Obligations. 6.11 FURTHER ASSURANCES. 31 31 (a) FULL DISCLOSURE. The Company will ensure that all other written information, exhibits and reports furnished to any Agent or Bank by the Company or any Wholly-Owned Subsidiary do not contain any untrue statement of a material fact and do not and will not omit to state any material fact or any fact necessary to make the statements contained therein not misleading in light of the circumstances in which made, and will promptly disclose to the Agent and the Banks and correct any defect or error that may be discovered therein or in any Loan Document or in the execution, acknowledgment or recordation thereof. (b) FURTHER ACTS. Promptly upon request by the Agent or the Requisite Banks, the Company shall (and shall cause each Wholly-Owned Subsidiary to) do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register, any and all such further acts, deeds, conveyances, security agreements, mortgages, deeds of trust, assignments, estoppel certificates, financing statements and continuations thereof, termination statements, notices of assignment, transfers, certificates, assurances and other instruments that the Agent or such Banks, as the case may be, may reasonably require from time to time in order (i) to carry out more effectively the purposes of this Agreement or any other Loan Document, (ii) to subject to the Liens created by any of the Equity Interests Pledge Documents any of the Collateral, (iii) to perfect and maintain the validity, effectiveness and priority of any of the Equity Interests Pledge Documents and the Liens intended to be created thereby, and (iv) to better assure, convey, grant, assign, transfer, preserve, protect and confirm to the Agent and Banks the rights granted or now or hereafter intended to be granted under any Loan Document, or any other document executed in connection herewith or therewith. 6 12 Covenant to Indemnify Regarding Construction and Other Risks. The Company hereby indemnifies, defends and holds the Agent and the Banks and their respective affiliates, assignees, successors, officers, directors, employees and agents (collectively, the "Indemnified Parties") harmless from and against any and all Indemnified Costs (defined below) directly or indirectly arising out of or resulting from construction of any improvements on any of the Funded Projects, including any defective workmanship or materials; or any failure to satisfy any requirements of any laws, regulations, ordinances, governmental policies or standards, reports, subdivision maps or development agreements that apply or pertain to any of the Funded Projects; or breach of any representation or warranty made or given by the Company to any of the Indemnified Parties or to any prospective or actual buyer of all or any portion of any of the Funded Projects; or any claim or cause of action of any kind by any party that any Indemnified Party is liable for any act or omission of the Company, its Subsidiaries or any other person or entity in connection with the ownership, sale, operation or development of any of the Funded Projects. Upon demand by any Indemnified Party, the Company shall defend any investigation, action or proceeding involving any Indemnified Costs which is brought or commenced against any Indemnified Party, whether alone or together with the Company or any other person, all at the Company's own cost and by counsel to be approved by the Indemnified Party in the exercise of its reasonable judgment. In the alternative, any Indemnified Party may elect to conduct its own defense at the expense of the Company. As used in this Agreement, "Indemnified Costs" means all actual or threatened liabilities, claims, actions, causes of action, judgments, orders, damages (including foreseeable and unforeseeable consequential damages), costs, expenses, 32 fines, penalties and losses (including sums paid in settlement of claims and all consultant, expert and legal fees and expenses of the relevant Indemnified Party's counsel), including those incurred in connection with any repair or restoration work of the real property owned by the Company, or any resulting damages, harm or injuries to the person or property of any third parties or to any natural resources. The foregoing indemnity shall not cover any Indemnified Costs which arise as the result of the gross negligence or willful misconduct of any Indemnified Party. Any Indemnified Parties who are not parties to this Agreement are also intended beneficiaries of this Section, as well as the Agent and the Banks. 6.13 INDEMNITY REGARDING HAZARDOUS SUBSTANCES. (a) INDEMNITY. The Company hereby indemnifies, defends and holds the Indemnified Parties harmless from and against any and all Indemnified Costs directly or indirectly arising out of or resulting from any Hazardous Substance being present or released in, on or around any part of any Funded Project, or in the soil, groundwater or soil vapor on or under any Funded Project, including: (i) Any claim for such Indemnified Costs asserted by any federal, state or local governmental agency, including the United States Environmental Protection Agency and the California Department of Health Services, and including any claim that any Indemnified Party is liable for any such Indemnified Costs as an "owner" or "operator" of any Funded Project under any law relating to Hazardous Substances; and (ii) Any such Indemnified Costs claimed against any Indemnified Party by any person other than a governmental agency, including any person who may purchase or lease all or any portion of any Funded Project from the Company or its Subsidiaries, from any Indemnified Party, or from any other purchaser or lessee; any person who may at any time have any interest in all or any portion of the any Funded Project; any person who may at any time be responsible for any clean-up costs or other Indemnified Costs relating to any Funded Project; and any person claiming to have been injured in any way as a result of exposure to any Hazardous Substance; and (iii) Any such Indemnified Costs which any Indemnified Party reasonably believes at any time must be incurred to comply with any law, judgment, order, regulation or regulatory directive relating to Hazardous Substances, or which any Indemnified Party reasonably believes at any time must be incurred to protect the public health or safety; and (iv) Any such Indemnified Costs resulting from currently existing conditions in, on or around any Funded Project, whether known or unknown by the Company, its Subsidiaries or the Indemnified Parties at the time each Funded Project is acquired, and any such Indemnified Costs resulting from the activities of the Company, it Subsidiaries or the tenants of either of them, or any other person in, on or around any Funded Project. (b) NO INDEMNITY FOR GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. Notwithstanding anything contained in this Agreement which may be construed to the contrary, 33 the Company and its Subsidiaries shall have no obligation to indemnify any Indemnified Party for any Indemnified Costs arising out of the gross negligence or willful misconduct of an Indemnified Party. (c) DEFENSE OF INDEMNIFIED PARTIES. Upon demand by any Indemnified Party, the Company and its Subsidiaries shall defend any investigation, action or proceeding involving any Indemnified Costs which is brought or commenced against any Indemnified Party, whether alone or together with the Company or any other person, all at the Company's own, cost and by counsel to be approved by the Indemnified Party in the exercise of its reasonable judgment. In the alternative, any Indemnified Party may elect to conduct its own defense at the expense of the Company and its Subsidiaries. (d) COMPLIANCE REGARDING HAZARDOUS SUBSTANCES. The Company shall, and shall cause its Subsidiaries to, comply and cause all tenants and any other persons who may come upon any Funded Project to comply, with all laws, regulations and ordinances governing or applicable to Hazardous Substances, including those requiring disclosures to prospective and actual buyers of all or any portion of any Funded Project. The Company also shall, and shall also cause its Subsidiaries to, comply with the recommendations of any qualified environmental engineer or other expert which apply or pertain to any Funded Project. (e) NOTICES REGARDING HAZARDOUS SUBSTANCES. The Company shall, and shall cause its Subsidiaries to, promptly notify the Agent if it knows, suspects or believes there may be any Hazardous Substance in or around any Funded Project, or in the soil, groundwater or soil vapor on or under such Funded Project, or that the Company, any of its Subsidiaries or any Funded Project may be subject to any threatened or pending investigation by any governmental agency under any law, regulation or ordinance pertaining to any Hazardous Substance. (f) SITE VISITS, OBSERVATIONS AND TESTING. The Indemnified Parties and their agents and representatives shall have the right at any reasonable time to enter and visit any Funded Project for the purposes of observing the Funded Project, taking and removing soil or groundwater samples, and conducting tests on any part of the Funded Project. The Indemnified Parties have no duty, however, to visit or observe the any Funded Project or to conduct tests, and no site visit, observation or testing by any Indemnified Party shall impose any liability on any Indemnified Party. In no event shall any site visit, observation or testing by any Indemnified Party be a representation that Hazardous Substances are or are not present in, on or under any Funded Project, or that there has been or shall be compliance with any law, regulation or ordinance pertaining to Hazardous Substances or any other applicable governmental law. Neither the Company, its Subsidiaries nor any other party is entitled to rely on any site visit, observation or testing by any Indemnified Party. The Indemnified Parties owe no duty of care to protect the Company or any other party against, or to inform the Company, its Subsidiaries or any other party of, any Hazardous Substances or any other adverse condition affecting any Funded Project. Any Indemnified Party shall give the Company reasonable notice before entering any Funded Project. The Indemnified Party shall make reasonable efforts to avoid interfering with the Company's or any tenant's use of any Funded Project in exercising any 34 rights provided for in this Section. Each Indemnified Party will use reasonable business practices in conducting its site visits, observations and testing. ARTICLE VII NEGATIVE COVENANTS The Company hereby covenants and agrees that, so long as any Bank shall have any Bridge Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, unless the Requisite Banks waive compliance in writing: 7.01 LIENS. Neither the Company nor any Wholly-Owned Subsidiary shall, directly or indirectly, make, create, incur, assume or suffer to exist any Lien upon or with respect to any part of its Funded Projects, whether now owned or hereafter acquired, other than the title exceptions disclosed to and approved by the Banks pursuant to Section 2.14(b)(i). 7.02 DISPOSITION OF FUNDED PROJECTS. The Company shall not, and shall not suffer or permit any of its Subsidiaries to, directly or indirectly, make any Disposition of any Funded Project or any portion thereof or interest therein; provided, however, so long as no Default or Event of Default is then continuing, the Company shall have the right to make a Disposition of any Funded Project by paying to the Agent for distribution to the Banks an amount equal to the greater of the Loan applicable to such Funded Project or the amount which would be required to be paid to the Banks so that the Outstanding Amount of the Bridge Loan immediately after such Disposition would not exceed the Bridge Availability (calculated without including the Funded Project to which such Disposition would be effective), and upon receipt of such payment, such project shall no longer be deemed a "Funded Project" hereunder.. 7.03 USE OF PROCEEDS. The Company shall not use any portion of the Loan proceeds, directly or indirectly, (a) to purchase or carry Margin Stock, (b) to repay or otherwise refinance indebtedness of the Company or others incurred to purchase or carry Margin Stock, (c) to extend credit for the purpose of purchasing or carrying any Margin Stock, (d) to acquire any security in any transaction that is subject to Section 13 or 14 of the Exchange Act, or (e) for any purpose other than those permitted by Section 6.06. ARTICLE VIII EVENTS OF DEFAULT 8.01 EVENT OF DEFAULT. Any of the following shall constitute an "Event of Default": (a) NON-PAYMENT. The Company shall fail to pay, (i) when and as required to be paid herein, any amount of principal of any Loan, or (ii) within five days after the same shall become due, any amount of interest on any Loan or any fee or other amount payable hereunder or pursuant to any other Loan Document; or 35 (b) REPRESENTATION OR WARRANTY. Any representation or warranty by the Company, the REIT, any Management Entity or any Subsidiary made or deemed made herein, in any Loan Document, or in any certificate, document or financial or other statement by the Company, the REIT, any Management Entity or any Subsidiary, or any Responsible Officer, furnished at any time under this Agreement, or in or under any Loan Document, shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or (c) SPECIFIC Defaults. The Company shall fail to perform or observe any term, covenant or agreement contained in Section 2.01(b) or in Article VII; or (d) OTHER DEFAULTS. The Company shall fail to perform or observe any other term or covenant contained in this Agreement or any Loan Document, and such default shall continue unremedied for a period of 20 days after the earlier of (i) the date upon which a Responsible Officer knew or received written notice of such failure or (ii) the date upon which written notice thereof is given to the Company by any Agent or Bank; or (e) CROSS-DEFAULt. An "Event of Default" (as such term is defined in the Credit Agreement) occurs and is continuing; or (f) COLLATERAL AND GUARANTY DOCUMENTS. (i) Any provision of a Pledge Agreement shall for any reason (other than pursuant to the terms thereof) cease to be valid and binding on or enforceable against the Company or other Person party thereto (except to the extent that the same results solely from an act or omission of the Agent or the Banks), or the Company or such Person shall so state in writing or bring an action to limit its obligations or liabilities thereunder; or (ii) Any Pledge Agreement shall for any reason (other than pursuant to the terms thereof) cease to create a valid security interest in the Collateral purported to be covered thereby, or such security interest shall for any reason cease to be a perfected and first-priority security interest; or (iii) Any party to a Pledge Agreement (other than the Agent or Banks) shall fail to perform or observe any term or covenant contained in such Pledge Agreement, and such failure shall continue unremedied for a period of 20 days after the earlier of (a) the date upon which a Responsible Officer knew or received written notice of such failure or (b) the date upon which written notice thereof is given to the Company by the Agent, or any other event or condition shall occur or exist under a Pledge Agreement that constitutes an "Event of Default" as defined therein; or (g) Environmental Liens. Any Funded Project shall become subject to one or more Liens in any amount under any Environmental Law and such Liens shall remain in place for thirty (30) days after the creation thereof. 36 36 8.02 REMEDIES. If any Event of Default occurs, the Agent shall, at the request of, or may, with the consent of, the Requisite Banks: (a) TERMINATION OF BRIDGE COMMITMENt. Declare the Bridge Commitment of each Bank to make Loans to be terminated, whereupon such Bridge Commitments shall forthwith be terminated; (b) ACCELERATION. Declare (i) the unpaid principal amount of all outstanding Loans and all interest accrued and unpaid thereon, and (ii) all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived; and (c), OTHER REMEDIES. Exercise on behalf of itself and the Banks all rights and remedies available to it and the Banks under the Loan Documents or applicable law; PROVIDED, however, that upon the occurrence of any event specified in Section 8.01(f) or 8.01(g) of the Credit Agreement (and in the case of clause (i) of said Section 8.01(g) upon the expiration of the sixty (60)-day period mentioned therein), the Bridge Commitment of each Bank to make Loans shall automatically terminate, and the unpaid principal amount of all outstanding Loans and interest accrued and unpaid thereon, and all other amounts owing or payable hereunder as aforesaid shall automatically. become due and payable without further act of any Agent or Bank. 8.03 RIGHTS NOT EXCLUSIVE. The rights provided for in this Agreement and the other Loan Documents are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising. ARTICLE IX THE AGENT 9.01 APPOINTMENT AND AUTHORIZATION. Each Bank hereby irrevocably appoints, designates and authorizes the Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, Agent shall not have any duties or responsibilities except those expressly set forth herein, nor shall Agent have or be deemed to have any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist on the part of Agent. 9.02 DELEGATION OF DUTIES. Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact 37 and shall be entitled to advice of counsel concerning all matters pertaining to such duties. Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care. 9.03 LIABILITY OF AGENT. The Agent, its respective Affiliates, or their respective officers, directors, employees, agents, or attorneys-in-fact (all of the foregoing being collectively referred to as the "Agent-Related Persons") shall not (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document (except for its own gross negligence or willful misconduct), or (b) be responsible in any manner to any of the Banks for any recital, statement, representation or warranty made by the Company, the REIT, any Management Entity or Subsidiary or any Affiliate of any such Person, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by Agent under or in connection with, this Agreement or any other Loan Document, or for the value of any Collateral or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, any other Loan Document, or for any failure of the Company, the REIT or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the Properties, books or records of the Company, the REIT, any Management Entity or Subsidiary or Affiliates thereof. 9.04 Reliance by Agent. (a) GENERALLY. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, telecopy, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to the Company), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Requisite Banks as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Requisite Banks, and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Banks. (b) CONDITIONS PRECEDENT. For purposes of determining compliance with the conditions specified in Sections 4.01 and 4.02 (as to the initial borrowing hereunder), each Bank that has executed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to such Bank, unless an officer of the Agent responsible for the transactions contemplated by the Loan Documents shall have received 38 notice from such Bank prior to the initial borrowing specifying its objection thereto and either such objection shall not have been withdrawn by notice to the Agent to that effect or such Bank shall not have made available to the Agent the Bank's ratable portion of such borrowing. 9.05 NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Agent for the account of the Banks, unless the Agent shall have received written notice from a Bank or the Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default." In the event that the Agent receives such a notice, the Agent shall give notice thereof to the Banks. The Agent shall take such action with respect to such Default or Event of Default as shall be requested by the Requisite Banks in accordance with Article VIII; PROVIDED, HOWEVER, that unless and until the Agent shall have received any such request, it may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Banks. 9.06 CREDIT DECISION. Each Bank expressly acknowledges that none of the Agent-Related Persons has made any representation or warranty to such Bank and that no act by the Agent hereinafter taken, including any review of the affairs of the Company, the REIT, any Management Entity or Subsidiary, shall be deemed to constitute any representation or warranty by the Agent to any Bank. Each Bank represents to the Agent that such Bank has, independently and without reliance upon the Agent and based on such documents and information as such Bank has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, Properties, financial and other condition and creditworthiness of the Company, the REIT, any Management Entity or Subsidiary, and all applicable bank regulatory laws relating to the transactions contemplated thereby, and made its own decision to enter into this Agreement and extend credit to the Company hereunder. Each Bank also represents that it will, independently and without reliance upon the Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, Properties, financial and other condition and creditworthiness of the Company, the REIT, the Management Entities and the Subsidiaries. Except for notices, reports and other documents expressly herein required to be furnished to the Banks by the Agent, Agent shall have no duty or responsibility to provide any Bank with any credit or other information concerning the business, prospects, operations, Properties, financial and other condition or creditworthiness of the Company, the REIT, the Management Entities and the Subsidiaries which may come into the possession of any of the Agent-Related Persons. 9.07 INDEMNIFICATION. The Banks shall indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by or on behalf of the Company and without limiting the obligation of the Company to do so) ratably from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind whatsoever which may at any time (including at any time following the repayment of the Loans) be imposed on, incurred by or asserted against any such Person in 39 any way relating to or arising out of this Agreement or any document contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by any such Person under or in connection with any of the foregoing; PROVIDED, HOWEVER, that no Bank shall be liable for the payment to the Agent-Related Persons of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from such Person's gross negligence or willful misconduct. Without limitation of the foregoing, each Bank shall reimburse the Agent upon demand (to the extent the Agent is not reimbursed upon demand by the Company, unless the Agent is legally restricted from making such demand upon the Company, in which case demand need not be made upon the Company) for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein to the extent that the Agent is not reimbursed for such expenses by or on behalf of the Company. Without limiting the generality of the foregoing, if the IRS or any authority of the United States or other jurisdiction asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the account of any Bank (because the appropriate form was not delivered or was not properly executed, or because such Bank failed to notify the Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason), such Bank shall indemnify the Agent fully for all amounts paid, directly or indirectly, by the Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to the Agent under this Section 9.07, together with all costs, expenses and attorneys' fees (including allocated costs for in-house legal services). The obligation of the Banks in this Section shall survive the payment of all Obligations. 9.08 AGENT IN INDIVIDUAL CAPACITY. BofA (and any other Bank that may hereafter serve as Agent) and each of their respective Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory or other business with, the Company, the REIT, the Management Entities and the Subsidiaries and Affiliates as though BofA (or any other such Bank) were not the agent hereunder and without notice to the Banks. With respect to its Loans, BofA (and any other Bank that may hereafter serve as Agent), shall have the same rights and powers under this Agreement as any other Bank and may exercise the same as though each of them were not an agent, and the terms "Bank" and "Banks" shall include BofA (and any other Bank that may hereafter serve as Agent), in its individual capacity. 9.09 SUCCESSOR AGENTS. The Agent may resign as Agent upon 30 days' notice to the Banks. If an Agent shall resign under this Agreement, the Requisite Banks shall appoint from among the Banks a successor Agent for the Banks, which successor Agent shall, if no Default or Event of Default exists hereunder, be subject to the approval of the Company. If no successor Agent is appointed prior to the effective date of the resignation of the retiring Agent, the retiring Agent shall appoint, after consulting with the Banks and the Company, a successor Agent. Upon the acceptance of its appointment as successor Agent hereunder, such successor 40 Agent shall succeed to all the rights, powers and duties of the retiring Agent, and the term "Agent" shall mean such successor Agent, and the retiring Agent's rights, powers and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article IX and Sections 10.04 and 10.05 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an Agent under this Agreement. 9.10 COLLATERAL MATTERS. (a) PERFECTION. The Agent is authorized on behalf of all the Banks, without the necessity of any notice to or further consent from the Banks, from time to time to take any action with respect to any Collateral or the Equity Interests Pledge Documents which may be necessary to perfect and maintain perfected the security interest in and Liens upon the Collateral granted pursuant to the Equity Interests Pledge Documents. (b) NO OTHER COLLATERAL. Each Bank agrees with and in favor of each other (which agreement shall not be for the benefit of the Company, the REIT, the Management Entities or any Subsidiaries) that the Company's obligation to such Bank under this Agreement and the other Loan Documents is not and shall not be secured by any real property collateral now or hereafter acquired by such Bank other than the Collateral hereunder. ARTICLE X MISCELLANEOUS 10.01 Amendments and Waivers. (a) Generally. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent with respect to any departure therefrom, shall be effective unless the same shall be in writing and signed by the Requisite Banks, and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. (b) Matters Requiring Unanimous Consent. Not withstanding the terms of Section 10.01(a), no amendment or waiver of any provision of this Agreement or any other Loan Document, no agreement to forebear from acting upon any departure by the Company therefrom, and no consent with respect to any departure by the Company therefrom, shall be effective to do any of the following unless the same is in writing and signed by all the Banks: (i) increase the Bridge Commitment of any Bank; (ii) postpone or delay any date fixed for any payment of principal, interest, fees or other amounts due hereunder or under any Loan Document whether by acceleration or otherwise; 41 (iii) reduce the principal of, or the rate of interest specified herein on, any Loan, or any fees or other amounts payable hereunder or under any Loan Document; (iv) change the percentage of the Bridge Commitments or of the aggregate unpaid principal amount of the Loans required for the Banks or any of them to take any action hereunder; (v) amend Section 2.16 (Sharing of Payments, Etc.), Section 6.10 (Use of Proceeds), Section 8.02 (Remedies), Section 10.15 (Governing Law and Jurisdiction) or this Section 10.01; (vi) release any portion of the Collateral except for the release, upon the written request of the Company, and with the consent of the Requisite Banks, of the Stock in a Wholly-Owned Subsidiary upon the repayment of all Loans made with respect to the acquisition of Funded Projects by such Subsidiary; or (vii) release any guarantor from liability under the REIT Guaranty Documents. (c) Matters Requires Agents' CONSENT. Notwithstanding the terms of Section 10.01(a), no amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent with respect to any departure by the Company therefrom, shall be effective to affect the rights or duties of the Agent under this Agreement or any other Loan Document unless the same is in writing and signed by the Agent. 10.02 NOTICES. (a) DELIVERY. All notices, requests and other communications provided for hereunder shall be in writing (including, unless the context expressly otherwise provides, telegraphic, telex, facsimile transmission or cable communication) and mailed, telegraphed, telexed or delivered, (i) if to the Company, to its address specified on the signature pages hereof, (ii) if to any Bank, to its Domestic Lending Office, and (iii) if to Agent, to its address specified on the signature pages hereof; or, as to the Company or the Agent, to such other address as shall be designated by such party in a written notice to the other parties, and as to each other party, at such other address as shall be designated by such party in a written notice to the Company and the Agent. (b) Receipt. All such notices and communications shall, when transmitted by overnight delivery, telegraphed, telecopied by facsimile, telexed or cabled, be effective when delivered for overnight delivery or to the telegraph company, transmitted by telecopier, confirmed by telex answerback or delivered to the cable company, respectively, or if delivered, upon delivery, except that notices pursuant to Article II or VIII shall not be effective until actually received by the Agent. 42 (c) RELIANCE. The Company acknowledges and agrees that any agreement of the Agent and the Banks under Article II to receive certain notices by telephone and facsimile is solely for the convenience and at the request of the Company. The Agent and the Banks shall be entitled to rely on the. authority of any Person purporting to be a Person authorized by the Company to give such notice, and the Agent and the Banks shall not have any liability to the Company or any other Person on account of any action taken or not taken by the Agent and the Banks in reliance upon such telephonic or facsimile notice. The obligation of the Company to repay the Loans shall not be affected in any way or to any extent by any failure by the Agent and the Banks to receive written confirmation of any telephonic or facsimile notice or the receipt by the Agent and the Banks of a confirmation which is at variance with the terms understood by the Agent and the Banks to be contained in the telephonic or facsimile notice. 10.03 NO WAIVER: CUMULATIVE REMEDIES. No failure to exercise and no delay in exercising, on the part of any Agent or Bank, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. 10.04 COSTS AND EXPENSES. The Company shall, whether or not the transactions contemplated hereby shall be consummated: (a) FACILITY EXPENSES. Pay or reimburse the Agent on demand for all costs and expenses incurred in connection with the development, preparation, delivery, administration and execution of, and any amendment, supplement, waiver or modification to, this Agreement, any Loan Document and any other documents prepared in connection herewith or therewith, the consummation of the transactions contemplated hereby and thereby, and any proposal for consideration of potential Funded Projects, including, without limitation, title insurance company charges, survey costs, recording costs and taxes, travel expenses incurred by representatives of the Agent, and the reasonable Attorney Costs incurred by the Agent with respect thereto; (b) ENFORCEMENT EXPENSES. Pay or reimburse the Agent and Banks on demand for all costs and expenses incurred by them in connection with the enforcement, attempted enforcement, or preservation of any rights or remedies (including in connection with any "workout" or restructuring regarding the Loans) under this Agreement, any other Loan Document, and any such other documents, including reasonable Attorney Costs incurred by the Agent and Bank; and (c) COLLATERAL EXPenses. Pay or reimburse the Agent on demand for all audits, environmental inspections and reviews (including the allocated costs of such internal services), search and filing costs, fees and expenses, incurred or sustained by the Agent in connection with the matters referred to under paragraphs (a) and (b) of this Section. 10.05 INDEMNITY. The Company shall indemnify and hold harmless the Agent, each Bank and each of their respective officers, directors, employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person") from and against and pay them for any and all 43 liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses or disbursements (including Attorney Costs) of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement and any other Loan Documents, or the transactions contemplated hereby and thereby, and with respect to any investigation, litigation or proceeding related to this Agreement or the Loans or the use of the proceeds thereof, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the "Indemnified Liabilities"); PROVIDED, that the Company shall have no obligation hereunder to any Indemnified Person with respect to Indemnified Liabilities arising from the gross negligence or willful misconduct of such Indemnified Person. The agreements in this Section 10.05 shall survive payment of all other Obligations. 10.06 MarshalliNG PAYMENTS Set Aside. Neither the Agent nor any Bank shall be under any obligation to marshall any assets in favor of the Company or any other Person or against or in payment of any or all of the Obligations. To the extent that the Company makes a payment or payments to the Agent or any Bank, or the Agent or any Bank enforces its Liens or exercises its rights of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party in connection with any Insolvency Proceeding, or otherwise, then to the extent of such recovery the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. 10.07 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Company may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Agent and each Bank, which may be withheld in their sole and absolute discretion. 10.08 ASSIGNMENTS, PARTICIPATIONS, ETC. (a) ASSIGNMENTS. Subject to the further provisions of this Section 10.08(a), any Bank may, with the written consent of the Agent, which consent shall not be unreasonably withheld, at any time assign and delegate to one or more Eligible Assignees (provided that no written consent of the Agent shall be required in connection with any assignment and delegation by a Bank to a Bank Affiliate of such Bank) (each an "Assignee") all, or any ratable part of all, of the Loans, the Bridge Commitments and the other rights and obligations of such Bank hereunder, in a minimum amount of $5,000,000 and in additional increments of $250,000 so long as such Bank concurrently transfers to such Assignee the same proportionate share of its interests and obligations with respect to its Revolving Commitment under (and as such term is defined in) the Credit Agreement) PROVIDED, HOWEVER, that the Company and the Agent may continue to deal solely and directly with such Bank in connection with the interest so assigned to an Assignee until (a) written notice of such assignment, together with payment instructions, addresses and related information with respect to the Assignee, shall 44 have been given to the Company and the Agent by such Bank and the Assignee; (b) such Bank and its Assignee shall have delivered to the Company and the Agent an Assignment and Acceptance in the form of EXHIBIT H ("Assignment and Acceptance") together with any Note or Notes subject to such assignment; (c) such Bank shall have paid to the Agent, for its own account, an assignment fee in the amount of $1500, if the Assignee is a Bank (without giving effect to the Assignment), and $3000 in all other cases; and (d) such Bank shall have delivered to the Agent such documents as may be required by Section 3.01(f). Any such assignment requiring the approval of the Agent shall also require the approval of the Company (such approval not to be unreasonably withheld or delayed), provided that the Company's failure to approve or disapprove such assignment within five days' after receiving written notice thereof shall be deemed approval by the Company of such assignment, and provided further, that no such approval from the Company shall be required during the continuation of a Default or Event of Default. (b) RIGHTS ASSIGNEE. From and after the date that the Agent notifies the assignor Bank that the Agent has received an executed Assignment and Acceptance and payment of the assignment fee specified in Section 10.08(a), (i) the Assignee thereunder shall, subject to Section 10.08(a), be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, shall have the rights and obligations of a Bank under the Loan Documents, and (ii) the assignor Bank shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under the Loan Documents. (c) REPLACEMENT NOTES. Within thirty (30) Business Days after its receipt of notice by the Agent that the Agent has received an executed Assignment and Acceptance and payment of the processing fee, the Company shall execute and deliver to the Agent, new Notes evidencing such Assignee's assigned Loans and Bridge Commitment and, if the assignor Bank has retained a portion of its Loans and its Bridge Commitment, replacement Notes in the principal amount of the Loans retained by the assignor Bank (such Notes to be in exchange for, but not in payment of, the Notes held by such Bank). Immediately upon each Assignee's making its payment under the Assignment and Acceptance, this Agreement shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the addition of the Assignee and the resulting adjustment of the Bridge Commitments arising therefrom. The Bridge Commitment allocated to each Assignee shall reduce such Bridge Commitment of the assigning Bank PRO TANTO. (d) PARTICIPATIONS. Any Bank may at any time sell to one or more commercial banks (a "Participant") participating interests in any Loans and Bridge Commitment of that Bank and the other interests of that Bank (the "originating Bank") hereunder and under the other Loan Documents so long as such Bank concurrently transfers to such Participant the same proportionate share of its interests and obligations with respect to its Revolving Commitment under (and as such term is defined in) the Credit Agreement; PROVIDED, HOWEVER, that (i) the originating Bank's obligations under this Agreement shall remain unchanged, (ii) the originating Bank shall remain solely responsible for the performance of such obligations, (iii) the 45 Company and the Agent shall continue to deal solely and directly with the originating Bank in connection with the originating Bank's rights and obligations under this Agreement and the other Loan Documents, (iv) no Bank shall transfer or grant any participating interest under which the Participant shall have rights to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Loan Document, except to the extent such amendment, consent or waiver would require unanimous consent as described in the FIRST PROVISO to Section 10.01; and (v) the Company shall have approved the transfer or grant of any participating interest in any Loans and Bridge Commitment of the originating Bank to a Participant that has not theretofore previously held a participating interest therein (such approval not to be unreasonably withheld or delayed), provided that the Company's failure to approve or disapprove in writing such Participant within five days' after receiving written notice thereof shall be deemed approval by the Company of such transfer or grant to such Participant, and provided further, that no such approval from the Company shall be required during the continuation of a Default or Event of Default. In the case of any such participation, the Participant shall not have any rights under this Agreement, or any of the other Loan Documents, and all amounts payable by the Company hereunder shall be determined as if such Bank had not sold such participation; except that, if amounts outstanding under this Agreement are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Bank under this Agreement. (e) ASSIGNMENTS TO FEDERAL RESERVE BANK. Notwithstanding any other provision contained in this Agreement or any other Loan Document to the contrary, any Bank may assign all or any portion of the Loans or Notes held by it to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank, provided that any payment in respect of such assigned Loans or Notes made by the Company to or for the account of the assigning and/or pledging Bank in accordance with the terms of this Agreement shall satisfy the Company's obligations hereunder in respect of such assigned Loans or Notes to the extent of such payment. No such assignment shall release the assigning Bank from its obligations hereunder. 10.09 SETOFF In addition to any rights and remedies of the Banks provided by law, if an Event of Default exists, each Bank is authorized at any time and from time to time, without prior notice to the Company, any such notice being waived by the Company to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other indebtedness at any time owing to, such Bank to or for the credit or the account of the Company against any and all obligations owing to such Bank, now or hereafter existing, irrespective of whether the Agent or such Bank shall have made demand under this Agreement or any Loan Document and whether such obligations may be contingent or unmatured. Each Bank agrees to promptly notify the Company and the Agent after any such setoff and application made by such Bank; PROVIDED, HOWEVER, that the failure to give such notice 46 shall not affect the validity of such setoff and application. The rights of each Bank under this Section 10.09 are in addition to the other rights and remedies (including other rights of setoff) that such Bank may have. NOTWITHSTANDING THE FOREGOING, NO BANK SHALL EXERCISE, OR ATTEMPT TO EXERCISE, ANY RIGHT OF SETOFF, BANKER'S LIEN, OR THE LIKE, AGAINST ANY DEPOSIT ACCOUNT OR PROPERTY OF THE COMPANY, THE REIT, ANY MANAGEMENT ENTITY OR ANY SUBSIDIARY HELD OR MAINTAINED BY ANY BANK, WITHOUT THE PRIOR WRITTEN CONSENT OF THE REQUISITE BANKS. 10.10 Notification of Addresses, Lending Offices, Ect. Each Bank shall notify the Agent in writing of any changes in the address to which notices to such Bank should be directed, of addresses of its Offshore Lending Office, of payment instructions in respect of all payments to be made to it hereunder and of such other administrative information as the Agent shall reasonably request. 10.11 COUNTERPARTS. This Agreement may be executed by one or more of the parties to this Agreement in any number of separate counterparts, each of which, when so executed, shall be deemed an original, and all of said counterparts taken together shall be deemed to constitute but one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Company and the Agent. 10.12 SEVERABILITY,. The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder. 10.13 NO THIRD PARTIES BENEFITED. This Agreement is made and entered into for the sole protection and legal benefit of the Company, the Agent and the Banks, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents. No Agent or Bank shall have any obligation to any Person not a party to this Agreement or the other Loan Documents. 10.14 TIME. Time is of the essence of each term and provision of this Agreement and each of the other Loan Documents. 10.15 GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF COLORADO; PROVIDED THAT THE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. 10.16 WAIVER OF JURY TRIAL. THE COMPANY, THE AGENT, AND THE BANKS EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER 47 LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. SUBJECT TO SECTION 10.17 BELOW, THE COMPANY, THE AGENT, AND THE BANKS EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. 10.17 Arbitration. (a) MANDATORY ARBITRATION. Any controversy or claim between or among the parties arising out of or relating to this Agreement, the Loan Documents, and any claim based on or arising from an alleged tort, shall at the request of any party be determined by arbitration. The arbitration shall be conducted in Los Angeles, California, in accordance with the United States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law provision in this Agreement, and under the Commercial Rules of the American Arbitration Association (the "AAA"). The arbitrator(s) shall give effect to statutes of limitation in determining any claim. Any controversy concerning whether an issue is arbitrable shall be determined by the arbitrator(s). Judgment upon the arbitration award may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief. (b) PROVISIONAL REMEDIES. SELF-HELP AND FORECLOSURE. No provision of this Section 10.17 shall limit the right of any party to this Agreement to exercise self-help remedies such as setoff, foreclosure against or sale of any real or personal property collateral or security, or to obtain provisional or ancillary remedies from a court of competent jurisdiction before, after, or during the pendency of any arbitration or other proceeding. The exercise of a remedy does not waive the right of either party to resort to arbitration. 10.18 NOTICE CLAIMS BAR. THE COMPANY HEREBY AGREES THAT IT SHALL GIVE PROMPT WRITTEN NOTICE TO THE AGENT OF ANY CLAIM OR CAUSE OF ACTION IT BELIEVES IT HAS, OR MAY SEEK TO ASSERT OR ALLEGE AGAINST THE AGENT OR ANY BANK, WHETHER SUCH CLAIM IS BASED IN LAW OR EQUITY, ARISING UNDER OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, OR TO THE LOANS (OR THE COLLATERAL THEREFOR), OR ANY ACT OR OMISSION TO ACT BY THE AGENT OR ANY BANK WITH RESPECT HERETO OR THERETO, AND THAT IF THE COMPANY SHALL FAIL 48 TO GIVE SUCH PROMPT NOTICE TO THE AGENT WITH REGARD TO ANY SUCH CLAIM OR CAUSE OF ACTION, THE COMPANY SHALL BE DEEMED TO HAVE WAIVED, AND SHALL BE FOREVER BARRED FROM BRINGING OR ASSERTING, SUCH CLAIM OR CAUSE OF ACTION IN ANY ARBITRATION OR ANY SUIT, ACTION OR PROCEEDING IN ANY COURT OR BEFORE ANY GOVERNMENTAL AGENCY. 10.19 ENTIRE AGREEMENT. This Agreement, together with the other Loan Documents, embodies the entire Agreement and understanding between the Company, the Agent and the Banks. Accordingly, this Agreement, together with the other Loan Documents, supersedes all prior or contemporaneous agreements and understandings of such Persons, verbal or written, relating to the subject matter hereof and thereof, except for any prior arrangements made with respect to the payment by the Company of (or any indemnification for) any fees, costs or expenses payable to or incurred (or to be incurred) by or on behalf of the Agent or the Banks. 10.20 INTERPRETATION. This Agreement together with the other Loan Documents is the result of negotiations between and has been reviewed by counsel to the Agent, the Banks and the Company and other parties, and is the product of all parties hereto. Accordingly, this Agreement and the other Loan Documents shall not be construed against the Banks or the Agent merely because of the Agent's or Bank's involvement in the preparation of such documents and agreements. 10.21 EXCULPATION OF BANKS. No Bank undertakes or assumes any responsibility or duty to the Company or any third party to select, review, inspect, examine, supervise, pass judgment upon or inform the Company or any third party of the existence, quality, adequacy or suitability of: (a) any appraisals of any Funded Project, (b) any environmental report related to a Funded Project, or (c) any other matters or items, including, but not limited to, engineering, soils and seismic reports which are related to a Funded Project. Any such selection, review, inspection, examination and the like is solely for the purpose of protecting the Banks' interests and preserving the Banks' rights under the Loan Documents, and shall not render any Bank liable to the Company or any third party for the existence, sufficiency, accuracy, completeness or legality thereof. No Bank owes any duty of care to protect or inform the Company or any third party against negligent, faulty, inadequate or defective building or construction or the existence of any environmentally hazardous condition affecting any Funded Project. 10.22 RELATIONSHIP. Nothing herein contained shall in any manner be construed as creating any relationship between the Agent and the Banks, on the one hand, and the Company, on the other hand, other than as creditor and debtor. The Company agrees to indemnify, protect, defend and hold the Agent and each Bank harmless from and against any and all losses, liabilities, damages, and costs and expenses (including, but not limited to, reasonable attorneys' fees and disbursements, including reasonably allocated costs of in-house counsel) resulting from any other construction of the parties' relationship. 49 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first written above. COMPANY AIMCO PROPERTIES, L.P., a Delaware limited partnership By: AIMCO -GP, Inc., a Delaware corporation, its general partner By: /s/ Illegible ---------------------------- Its: Vice President Notices to be sent to: 1873 South Bellaire Street 17th Floor Denver, Colorado 80222 Attention: Peter K. Kompaniez, Vice Chairman Facsimile:__________________________ AGENT BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: /s/ Derik J. Hart --------------------------------- Name: Derik J. Hart ------------------------------- Title: Assistant Vice President ------------------------------- 50 Notices to be sent to: --------------------------------------- --------------------------------------- --------------------------------------- --------------------------------------- Payments to be made to: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ABA #:_________________________________ Account #:_____________________________ Attention:_____________________________ Ref:___________________________________ Facsimile:_____________________________ B OF A BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Bank By: /s/ Derik J. Hart ---------------------------------- Name: Derik J. Hart -------------------------------- Title: Assistant Vice President ------------------------------- Notices to be sent to: ------------------------------------- ------------------------------------- ------------------------------------- Attention:___________________________ Telephone:___________________________ Facsimile:___________________________ 51 EX-10.2 3 EX10-2 PROMISSORY NOTE Place of Delivery: Los Angeles ------------ $25,000,000.00 Date of Note: August 12, 1996 --------------- FOR VALUE RECEIVED, AIMCO Properties, L.P., a Delaware limited partnership (the "Company"), promises to pay to the order of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("Bank") the principal amount of TWENTY FIVE MILLION DOLLARS AND NO/100 ($25,000,000.00) or, if less, the aggregate amount of Loans (as such term and all other capitalized terms used but not defined herein are defined in the Credit Agreement referred to below) made by the Bank to the Company pursuant to the Credit Agreement referred to below, outstanding on the Bridge Facility Maturity Date. The Company also promises to make principal payments and interest on the unpaid principal amount hereof from the date hereof until paid at the rates and at the times which shall be determined in accordance with the provisions of the Credit Agreement, including, without limitation, the repayment of Loans no later than the applicable Individual Bridge Loan Maturity Date. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the Payment Office. Until notified of the transfer of this Note, the Company shall be entitled to deem the Bank or such person who has been so identified by the transferor in writing to the Company as the holder of this Note, as the owner and holder of this Note. The Bank and any subsequent holder of this Note agrees that before disposing of this Note, or any part hereof, it will make a notation hereon of all principal payments previously made hereunder of the date to which interest hereon has been paid on the schedule attached hereto, if any; PROVIDED, HOWEVER, that the failure to make notation of any payment made on this Note shall not limit or otherwise affect the obligation of the Company hereunder with respect to payments of principal or interest on this Note. This Note is referred to in, and is entitled to the benefits of, the Credit Agreement (Bridge Loan), dated as of, 1996 (the "CREDIT AGREEMENT"), among the Company, the financial institutions named therein, and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent (the "Agent"). The Credit Agreement, among other things, (i) provides for the making of loans (the "LOANS") by the Bank to the Company from time to time in an aggregate amount first above mentioned, the indebtedness of the Company resulting from each such Loan being evidenced by this Note, and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for mandatory and optional prepayments on account of principal hereof and certain principal payments prior to the maturity hereof upon the terms and conditions therein specified. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Company promises to pay all costs and expenses, including reasonable attorneys' fees, incurred in the collection and enforcement of this Note. The Company hereby waives diligence, presentment, and protest, and except as provided in the Credit Agreement, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. This Note shall be governed by, and construed in accordance with, the laws of the state of Colorado without giving effect to its choice of law doctrine. IN WITNESS WHEREOF, the Company has caused this Note to be executed and delivered by its duly authorized officer, as of the date and place first above written. AIMCO PROPERTIES, L.P., a Delaware limited partnership By: AIMCO-GP, INC., a Delaware corporation, its general partner By: /s/ Peter Kompaniez ---------------------- Its: Vice president ----------------- TRANSACTIONS ON NOTE - ------------------------------------------------------------------------------ Amount of Amount of Principal Principal Interest Notation Date Loan Paid Balance Interest Paid Made By Made Paid Through - ------------------------------------------------------------------------------ EX-10.3 4 EX10-3 PAYMENT GUARANTY This Payment Guaranty ("Guaranty") is made as of Aug. 12, 1996, by APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation, AIMCO-GP, INC., a Delaware corporation, AIMCO-LP, INC., a Delaware corporation, AIMCO HOLDINGS, L.P., a Delaware limited partnership, AIMCO HOLDINGS Qrs, INC., a Delaware corporation, AIMCO SOMERSET, INC., a Delaware corporation, and AIMCO/OTC Qrs, INC., a Delaware corporation (each of the foregoing is referred to herein as "Guarantor") in favor of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("BofA"), as the agent for itself and the banks ("Banks") from time to time party to the Revolving Credit Agreement (as hereinafter defined) and also as the agent for itself and the banks from time to time party to the Bridge Loan Agreement (as defined below) (in such capacity, the "Agent"). FACTUAL BACKGROUND Guarantor is executing this Guaranty (i) to induce the Banks to make a $50,000,000 revolver-to-term credit facility available to AIMCO Properties L.P., a Delaware limited partnership (the "Company") in accordance with the Credit Agreement (the "Revolving Credit Agreement"), dated of even date herewith, by and among Company, BofA (as Agent (as defined under the Revolving Credit Agreement) and as a Bank) and the other Banks from time to time party thereto and (ii) to induce the Banks to make a $25,000,000 bridge loan facility available to the Company in accordance with the Credit Agreement (Bridge Loan) (the "Bridge Loan Agreement"), dated of even date herewith, by and among the Company, BofA (as Agent (as defined under the Bridge Loan Agreement) and as a Bank) and the other Banks from time to time party thereto. Capitalized terms used but not defined herein shall have the meanings set forth in the Revolving Credit Agreement. As used herein, the term "Facility" shall refer individually to each of the credit facilities available to the Company under the Revolving Credit Agreement and the Bridge Loan Agreement and shall refer collectively to all such credit facilities. GUARANTY 1. GUARANTY OF LOAN. Guarantor absolutely, unconditionally and irrevocably guaranties to Agent and the Banks the full payment of the Facility, and unconditionally agrees to pay to Agent and the Banks the full amount of the Facility. This is a guaranty of payment, not of collection. If Company defaults in the payment when due of the Facility or any part of it, Guarantor shall in lawful money of the United States pay to Agent and the Banks, on demand, all sums due and owing on the Facility, including all interest, charges, fees and other sums, costs and expenses. 2. LOAN. In this Guaranty, the term "Facility" is broadly defined to mean and include all primary, secondary, direct, indirect, fixed and contingent obligations of Company to pay principal, interest, prepayment charges, breakage costs, late charges, loan fees and any other fees, charges, sums, costs and expenses which may be owing at any time under the Loan Documents (as such term is defined both in the Revolving Credit Agreement and in the Bridge 1 Loan Agreement), and shall include, without limitation, all liabilities and obligations of the Company with respect to Letters of Credit issued under the Revolving Credit Agreement, as any or all of such obligations may from time to time be modified, amended, extended or renewed. If the amount outstanding under the Facility is determined by a court of competent jurisdiction or in any arbitration proceeding described in Section 10.17 of the Revolving Credit Agreement, that determination shall be conclusive and binding on Guarantor, regardless of whether Guarantor was a party to the proceeding in which the determination was made or not. 3. Rights of Agent and the Banks. Guarantor authorizes Agent or any Bank to perform any or all of the following acts at any time in its sole discretion, all without notice to Guarantor and without affecting Guarantor's obligations under this Guaranty: (a) Agent or the Requisite Banks may alter any terms of the Facility or any part of it, including renewing, compromising, extending or accelerating, or otherwise changing the time for payment of, or increasing or decreasing the rate of interest on, the Facility or any part of it. (b) Agent or any Bank may take and hold security for the Facility or this Guaranty, accept additional or substituted security for either, and subordinate, exchange, enforce, waive, release, compromise, fail to perfect and sell or otherwise dispose of any such security in accordance with the terms of the Facility. (c) Agent or any Bank may direct the order and manner of any sale of all or any part of any security now or later to be held for the Facility or this Guaranty, and Agent or any Bank may also bid at any such sale. (d) Agent or any Bank may apply any payments or recoveries from Company, Guarantor or any other source, and any proceeds of any security, to Company's obligations under the Loan Documents in such manner, order and priority as Agent or such Bank may elect, whether or not those obligations are guarantied by this Guaranty or secured at the time of the application. (e) Agent or any Bank may release Company of its liability for the Facility or any part of it. (f) Agent or any Bank may substitute, add or release any one or more Guarantors, other guarantors or endorsers. (g) In addition to the Facility, Agent or any Bank may extend other credit to Company, and may take and hold security for the credit so extended, all without affecting Guarantor's liability under this Guaranty. 4. Guaranty to be Absolute. Guarantor expressly agrees that until the Facility is paid and performed in full and each and every term, covenant and condition of this Guaranty is fully performed, Guarantor shall not be released by or because of: 2 (a) Any act or event which might otherwise discharge, reduce, limit or modify Guarantor's obligations under this Guaranty; (b) Any waiver, extension, modification, forbearance, delay or other act or omission of Agent or any Bank, or its failure to proceed promptly or otherwise as against Company, Guarantor or any security; (c) Any action, omission or circumstance which might increase the likelihood that Guarantor may be called upon to perform under this Guaranty or which might affect the rights or remedies of Guarantor as against Company; (d) Any dealings occurring at any time between Company and Agent or any Bank, whether relating to the Facility or otherwise; or (e) Any action of Agent or any Bank described in Section 3 above. Guarantor hereby acknowledges that absent this Section 4, Guarantor might have a defense to the enforcement of this Guaranty as a result of one or more of the foregoing acts, omissions, agreement, waivers or matters. Guarantor hereby expressly waives and surrenders any defense to its liability under this Guaranty based upon any of the foregoing acts, omissions, agreements, waivers or matters. It is the purpose and intent of this Guaranty that the obligations of Guarantor under it shall be absolute and unconditional under any and all circumstances. 5. GUARANTOR'S WAIVERS. Guarantor waives: (a) All statutes of limitations as a defense to any action or proceeding brought against Guarantor by Agent or any Bank, to the fullest extent permitted by law; (b) Any right it may have to require Agent or any Bank to proceed against Company, proceed against or exhaust any security held from Company, or pursue any other remedy in Agent's or any Bank's power to pursue; (c) Any defense based on any claim that Guarantor's obligations exceed or are more burdensome than those of Company; (d) Any defense based on: (i) any legal disability of Company, (ii) any release, discharge, modification, impairment or limitation of the liability of Company to Agent or any Bank from any cause, whether consented to by Agent or any Bank or arising by operation of law or from any bankruptcy or other voluntary or involuntary proceeding, in or out of court, for the adjustment of debtor-creditor relationships ("Insolvency Proceeding") and (iii) any rejection or disaffirmance of the Facility, or any part of it, or any security held for it, in any such Insolvency Proceeding; (e) Any defense based on any action taken or omitted by Agent or any Bank in any Insolvency Proceeding involving Company, including any election to have Agent's or that Bank's claim allowed as being secured, partially secured or unsecured, any extension of credit 3 by Bank to Company in any Insolvency Proceeding, and the taking and holding by Agent or any Bank of any security for any such extension of credit; (f) All presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, notices of acceptance of this Guaranty and of the existence, creation, or incurring of new or additional indebtedness, and demands and notices of every kind except for any demand or notice by Agent or any Bank to Guarantor expressly provided for in Section 1; (g) Any defense based on or arising out of any defense that Company may have to the payment or performance of the Facility or any part of it; and (h) Any defense based on or arising out of any action of Agent or any Bank described in Sections 3 or 4 above. 6. WAIVERS OF SUBROGATION AND OTHER RIGHTS. (a) During the existence of an Event of Default by Company, Agent or any Bank, without prior notice to or consent of Guarantor, may elect to: (i) foreclose either judicially or nonjudicially against any real or personal property security it may hold for the Facility, (ii) accept a transfer of any such security in lieu of foreclosure, (iii) compromise or adjust the Facility or any part of it or make any other accommodation with Company or Guarantor, or (iv) exercise any other remedy against Company or any security. No such action by Agent or any Bank shall release or limit the liability of Guarantor, who shall remain liable under this Guaranty after the action, even if the effect of the action is to deprive Guarantor of any subrogation rights, rights of indemnity, or other rights to collect reimbursement from Company for any sums paid to Agent or any Bank, whether contractual or arising by operation of law or otherwise. Guarantor expressly agrees that under no circumstances shall it be deemed to have any right, title, interest or claim in or to any real or personal property to be held by Agent or any Bank or any third party after any foreclosure or transfer in lieu of foreclosure of any security for the Facility. (b) Regardless of whether Guarantor may have made any payments to Bank, Guarantor hereby waives: (i) all rights of subrogation, all rights of indemnity, and any other rights to collect reimbursement from Company for any sums paid to Agent or any Bank, whether contractual or arising by operation of law (including the United States Bankruptcy Code or any successor or similar statute) or otherwise, (ii) all rights to enforce any remedy that Bank may have against Company, and (iii) all rights to participate in any security now or later to be held by Agent or any Bank for the Facility, in each case until the full and indefeasible payment and performance of all Obligations under (and as defined in) each of the Revolving Credit Agreement and the Bridge Loan Agreement, and all obligations of the Guarantors hereunder. 7. REVIVAL AND REINSTATEMENT. If Agent or any Bank is required to pay, return or restore to Company or any other person any amounts previously paid on the Facility because of any Insolvency Proceeding of Company, any stop notice or any other reason, the 4 obligations of Guarantor shall be reinstated and revived and the rights of Agent and such Bank shall continue with regard to such amounts, all as though they had never been paid. 8. INFORMATION REGARDING BORROWER. Before signing this Guaranty, Guarantor investigated the financial condition and business operations of Company and such other matters as Guarantor deemed appropriate to assure itself of Company's ability to discharge its obligations under the Loan Documents. Guarantor assumes full responsibility for that due diligence, as well as for keeping informed of all matters which may affect Company's ability to pay and perform its obligations to the Agent and the Banks. Neither Agent nor any Bank has any duty to disclose to Guarantor any information which such party may have or receive about Company's financial condition, business operations, or any other circumstances bearing on its ability to perform. 9. SUBORDINATION. Any rights of Guarantor, whether now existing or later arising, to receive payment on account of any indebtedness (including interest) owed to it by Company or any Wholly-Owned Subsidiary which may own any collateral for the Facility or to receive any payment from Company or any such Wholly-Owned Subsidiary other than those payments or distributions permitted under Sections 7.08(b) and 7.09 of the Revolving Credit Agreement shall at all times be subordinate as to lien and time of payment and in all other respects to the full and prior repayment of the Facility. Guarantor shall not be entitled to enforce or receive payment of any sums hereby subordinated until the Facility has been paid and performed in full and any such sums received in violation of this Guaranty shall be received by Guarantor in trust for the Agent and the Banks. 10. FINANCIAL INFORMATION. Guarantor shall keep true and correct financial books and records, using generally accepted accounting principles consistently applied, or such other accounting principles as the Requisite Banks in their reasonable judgment may find acceptable from time to time. Guarantor represents, warrants and covenants to Agent and the Banks that all financial information with respect to the Guarantor delivered or to be delivered to Agent and the Banks by the Company with respect to Guarantor under Section 6.01 of the Revolving Credit Agreement is or shall be true and correct and fairly presents or will fairly' present the financial position of the Guarantor for the applicable period. Guarantor shall promptly provide Agent and the Banks with any additional audited financial information that Guarantor may obtain, and such other information concerning its affairs and properties as Agent or any Bank may reasonably request, including, without limitation, signed copies of any tax returns if requested Agent or the Banks. 11. GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants that: (a) All financial statements delivered to Agent or the Banks were or will be prepared in accordance with generally accepted accounting principles, or such other accounting principles as may be acceptable to the Requisite Banks at the time of their preparation, consistently applied; 5 (b) There has been no material adverse change in Guarantor's financial condition since the dates of the statements most recently furnished to Agent and the Banks; and (c) All representations and warranties given on behalf of or with respect to Guarantor contained in Article V of the Revolving Credit Agreement, in Article V of the Bridge Loan Agreement and in any other Loan Document or certification made in connection with the Revolving Credit Agreement or Bridge Loan Agreement are true and correct. 12. COVENANTS OF GUARANTOR. Guarantor covenants and agrees that it shall comply with and perform all covenants given on behalf of or with respect to Guarantor (whether expressly or as a Subsidiary) contained in Articles VI and VII of the Revolving Credit Agreement, Articles VI and VII of the Bridge Loan Agreement and in all other Loan Documents. 13. Intentionally Omitted. 14. Reference and Arbitration. (a) MANDATORY ARBITRATION. Any controversy or claim between or among the parties, including those arising out of or relating to this Guaranty or the Loan Documents and any claim based on or arising from an alleged tort, shall at the request of any party be determined by arbitration. The arbitration shall be conducted in Los Angeles, California, in accordance with the United States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law provision in this Guaranty, and under the Commercial Rules of the American Arbitration Association (the "AAA"). The arbitrator(s) shall give effect to statutes of limitation in determining any claim. Any controversy concerning whether an issue is arbitrable shall be determined by the arbitrator(s). Judgment upon the arbitration award may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief. (b) Provisional Remedies, Self-Help and foreclosure. No provision of this Section 14 shall limit the right of any party to exercise self-help remedies such as setoff, foreclosure against or sale of any real or personal property collateral or security, or to obtain provisional or ancillary remedies from a court of competent jurisdiction before, after, or during the pendency of any arbitration. 15. AUTHORIZATION: NO VIOLATION. Guarantor is authorized to execute, deliver and perform under this Guaranty, which is a valid, binding, and enforceable obligation of Guarantor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditor's rights generally. The execution, delivery and performance of this Guaranty are not in violation of any applicable law, regulation or ordinance, or any order or ruling of any court or governmental agency applicable to the Guarantor. The Guaranty does not conflict with, or constitute a breach or default under, any agreement to which Guarantor is a party. 6 16. ADDITIONAL AND INDEPENDENT OBLIGATIONS. Guarantor's obligations under this Guaranty are in addition to its obligations under any future guaranties, each of which shall remain in full force and effect until it is expressly modified or released in a writing signed by Agent and consented to by the Banks. Guarantor's obligations under this Guaranty are independent of those of Company on the Facility. Agent or the Banks may bring a separate action, or commence a separate arbitration proceeding against Guarantor without first proceeding against Company, any other person or any security that Agent or any Bank may hold, and without pursuing any other remedy. None of Agent's or any Bank's rights under this Guaranty shall be exhausted by any action by Agent or any Bank until the Facility has been paid and performed in full in cash. 17. NO WAIVER; CONSENTS; CUMULATIVE REMEDIES. Each waiver by Agent or the Banks must be in writing, and no waiver shall be construed as a continuing waiver. No waiver shall be implied from Agent's or any Bank's delay in exercising or failure to exercise any right or remedy against Company, Guarantor or any security. Consent by Agent or the Banks to any act or omission by Company or Guarantor shall not be construed as a consent to any other or subsequent act or omission, or as a waiver of the requirement for Agent's or the Banks' consent to be obtained in any future or other instance. All remedies of Agent and each Bank against Company and Guarantor are cumulative. 18. NO RELEASE. Except as otherwise provided in Section 1, Guarantor shall not be released, in whole or in part, from its obligations under this Guaranty except by a writing signed by Agent and all the Banks. 19. HEIRS, SUCCESSORS AND ASSIGNS; PARTICIPANTS. The terms of this Guaranty shall bind and benefit the heirs, legal representatives, successors and assigns of Agent, the Banks and Guarantor; provided, however, that Guarantor may not assign this Guaranty, or assign or delegate any of its rights or obligations under this Guaranty, without the prior written consent of Agent in each instance. Without notice to or the consent of Guarantor, Agent and any Bank may disclose any and all information in its possession concerning Guarantor, this Guaranty and any security for this Guaranty to any actual or prospective purchaser of any securities issued or to be issued by Agent or such Bank, and to any actual or prospective purchaser or assignee of any participation or other interest in the Facility and this Guaranty. 20. NOTICES. (a) DELIVERY. All notices, requests and other communications provided for hereunder shall be in writing (including, unless the context expressly otherwise provides, telegraphic, telex, facsimile transmission or cable communication) and mailed, telegraphed, telexed or delivered to its address specified on the signature pages hereof, or to such other address as shall be designated by such party in a written notice to the other party. (b) RECEIPT. All such notices and communications shall, when transmitted by overnight delivery, telegraphed, telecopied by facsimile, telexed or cabled, be effective when delivered for overnight delivery or to the telegraph company, transmitted by 7 telecopier, confirmed by telex answerback or delivered to the cable company, respectively, or if delivered, upon delivery. (c) RELIANCE. Agent and each Bank shall be entitled to rely on the authority of any person purporting to be a person authorized by Guarantor to give such notice, and neither Agent nor any Bank shall have any liability to Guarantor or any other person on account of any action taken or not taken by Agent or such Bank in reliance upon such telephonic or facsimile notice. The obligation of Guarantor hereunder shall not be affected in any way or to any extent by any failure by Bank to receive written confirmation of any telephonic or facsimile notice or the receipt by Agent or a Bank of a confirmation which is at variance with the terms understood by Agent or such Bank to be contained in the telephonic or facsimile notice. 21. RULES OF CONSTRUCTION. In this Guaranty, the word "Company" includes both the named Company and any other person who at any time assumes or otherwise becomes primarily liable for all or any part of the obligations of the named Company on the Facility. The word "person" includes any individual, company, trust or other legal entity of any kind. If this Guaranty is executed by more than one person, the word "Guarantor" includes all such persons. The word "include(s)" means "include(s), without limitation," and the word "including" means "including, but not limited to." When the context and construction so require, all words used in the singular shall be deemed to have been used in the plural and vice versa. No listing of specific instances, items or matters in any way limits the scope or generality of any language of this Guaranty. All headings appearing in this Guaranty are for convenience only and shall be disregarded in construing this Guaranty. 22. GOVERNING LAW. This Guaranty shall be governed by, and construed in accordance with, the laws of the State of Colorado, without regard to its choice of law rules. 23. COSTS AND EXPENSES. If any lawsuit or arbitration is commenced which arises out of, or which relates to this Guaranty, the Loan Documents or the Facility, the prevailing party shall be entitled to recover from each other party such sums as the court or arbitrator may adjudge to be reasonable attorneys' fees (including allocated costs for services of in-house counsel) in the action or proceeding, in addition to costs and expenses otherwise allowed by law. In all other situations, including any Insolvency Proceeding, Guarantor agrees to pay all of the Agent's and each Bank's costs and expenses, including attorneys' fees (including allocated costs for services of the Agent's and each Bank's in-house counsel) which may be incurred in any effort to collect or enforce the Facility or any part of it or any term of this Guaranty. Without limiting any rights of the Agent or Banks under the Revolving Credit Agreement or the Bridge Loan Agreement, all amounts of any kind due and payable under this Guaranty (whether for principal, interest, and other costs under the Facility, or for costs, fees, and expenses for which the Guarantors are directly responsible hereunder, or otherwise) shall accrue interest from the time the Agent or the Banks make demand therefor hereunder until paid in full in cash to such Agent or the Banks at the Base Rate, as defined in the Revolving Credit Agreement, plus three (3%) percentage points, except to the extent that any such amounts are then accruing interest under the Facility, in which case such Base Rate plus 3% interest rate shall 8 not be applied if the effect would be to compound the interest to which such obligations are subject to under the Facility. 24. CONSIDERATION. Guarantor acknowledges that it expects to benefit from Banks' extension of the Facility to Company because of its relationship to Company, because such Facility is essential to the business of the Company and because a portion of the Facility will be available for the Company to pay certain expenses intended to be incurred by Guarantor in connection with the conduct by Guarantor of its business. Guarantor is executing this Guaranty in consideration of these anticipated benefits. 25. INTEGRATION; MODIFICATIONS. This Guaranty (a) integrates all the terms and conditions mentioned in or incidental to this Guaranty, (b) supersedes all oral negotiations and prior writings with respect to its subject matter, and (c) is intended by Guarantor, Agent and the and Banks as the final expression of the agreement with respect to the terms and conditions set forth in this Guaranty and as the complete and exclusive statement of the terms agreed to by Guarantor, Agent and the Banks. No representation, understanding, promise or condition shall be enforceable against any party hereto unless it is contained in this Guaranty. This Guaranty may not be modified except in a writing signed by both Agent (with the consent of the Requisite Banks) and Guarantor. No course of prior dealing, usage of trade, parol or extrinsic evidence of any nature shall be used to supplement, modify or vary any of the terms hereof. As between Agent and the Banks only, nothing contained in this Guaranty shall alter the rights and obligations among Agent and the Banks set forth in the Credit Agreement. 26. MISCELLANEOUS. The illegality or unenforceability of one or more provisions of this Guaranty shall not affect any other provision. Time is of the essence in the performance of this Guaranty by Guarantor. The obligations of each Guarantor under this Guaranty shall be joint and several. Guarantors: APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation By: /s/ Peter Kompaniez ----------------------- Name: Peter Kompaniez -------------------- Title: Vice President -------------------- 9 AIMCO-GP, INC., a Delaware corporation By: /s/ Peter Kompaniez ----------------------- Name: Peter Kompaniez --------------------- Title: Vice President --------------------- AIMCO-LP, INC., a Delaware corporation By: /s/ Peter Kompaniez ---------------------- Name: Peter Kompaniez ---------------------- Title: Vice President ---------------------- AIMCO HOLDINGS, LP, a Delaware limited partnership By: AIMCO HOLDINGS Qrs, INC., a Delaware corporation, General Partner By: /s/ Peter Kompaniez --------------------- Name: Peter Kompaniez --------------------- Title: Vice President -------------------- AIMCO HOLDINGS Qrs, INC., a Delaware corporation By: /s/ Peter Kompaniez ---------------------- Name: Peter Kompaniez ---------------------- Title: Vice President --------------------- 10 Address Where Notices to Guarantors are to be AIMCO SOMERSET, INC., Sent: a Delaware corporation 1873 South Bellaire Street By: /s/ Peter Kompaniez 17th Floor ------------------------ Denver, Colorado 90071 Name: Peter Kompaniez ------------------------ Address Where Notices to Agent are to be Title Vice President; Sent: ------------------------ BANK OF AMERICA NATIONAL TRUST AIMCO/OTC QRS, INC., AND SAVINGS ASSOCIATION a Delaware corporation 555 South Flower Street, 6th Floor Los Angeles, California 90071 By: /s/ Peter Kompaniez Att'n: Manager - Unit #1357 ---------------------- Addresses Where Notices to the Banks are to Name: Peter Kompaniez be Sent: ---------------------- Title: Vice President ---------------------- - ----------------------------- Per the Credit Agreement 11 EX-10.4 5 EX10-4 CREDIT AGREEMENT This CREDIT AGREEMENT is entered into as of August 12, 1996, among AIMCO PROPERTIES, L.P., a Delaware limited partnership (the "Company"), the banks from time to time party to this Agreement (the "Banks"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as one of the Banks ("BofA"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent (the "Agent"). A. Pursuant to that certain Credit Agreement, dated as of July 18, 1994, by and between BofA and the Company, as amended by that certain First Amendment thereto, dated as of November 16, 1994, that certain Second Amendment thereto, dated as of September 12, 1995, and that certain Third Amendment thereto, dated as of October 10, 1995, by and between BofA and the Company (as so amended, the "Previous Credit Agreement"), BofA made available to the Company a revolver-to-term credit facility in the amount of up to Forty Million Dollars ($40,000,000). B. BofA, the Banks and the Company desire to replace the Previous Credit Agreement with this Agreement thereby making available to the Company a revolver-to-term credit facility upon the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties hereby agree as follows: ARTICLE I DEFINITIONS 1.01 DEFINED TERMS. In addition to the terms defined elsewhere in this Agreement, the following terms have the following meanings: "AFFILIATE" means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract or otherwise. Without limitation, any director, executive officer or beneficial owner of five percent (5%) or more of the equity of a Person shall, for the purposes of this Agreement, be deemed to control the other Person. In no event shall any Bank be deemed an "Affiliate" of the Company. "AGENT" means Bank of America National Trust and Savings Association, in its capacity as Agent, and any successor Agent appointed hereunder. "AGENT-RELATED PERSONS" has the meaning specified in Section 9.03. 1 "Aggregate Commitment" means the combined Commitments of the Banks, in the amount of up to $50,000,000. "AGREEMENT" means this Credit Agreement, as amended, supplemented or modified from time to time. "AIMCO HOLDINGS" means AIMCO Holdings, L.P., a Delaware limited partnership. "AIMCO/OTC" means AIMCO/OTC Qrs, Inc., a Delaware corporation. "Annualized Current Year NOI" shall mean for each Borrowing Base Property for any fiscal quarter during the term of the Revolving Facility, the annualized Net Operating Income from such Borrowing Base Property for the period from the commencement of the then current year through the end of the most recent quarter, with adjustments to reflect a level of annual Capital Expenditures equal to the Imputed Capital Expenditures. "APARTMENT PROPERTY CAP RATE" means nine and three-quarters percent (9.75%); provided, however, that such rate shall be revised upon each anniversary of the Closing Date to be the rate reported in the most recently published CB Commercial National Investor Survey as the average "going-in" cap rate based upon current investment criteria for class B apartment properties, or if such publication is no longer available, then a comparable cap rate in such other publication as may be reasonably designated by the Agent. "APPLICABLE MARGIN" means (a) with respect to Base Rate Loans, 0.0%; and (b) with respect to LIBOR Loans, 1.625%. "APPRAISAL" means a real estate appraisal providing an assessment of the fair market value of a Property, taking into account any and all Estimated Remediation Costs, that is (a) conducted on an "as-is" basis in accordance with the Uniform Standards of Professional Appraisal Practice (as promulgated by the Appraisal Standards Board of the Appraisal Foundation), all Requirements of Law applicable to the Agent, FIRREA, and the applicable internal policies of the Agent, and (b) undertaken by an independent M.A.I. appraisal firm engaged by the Agent and satisfactory to the Agent and the Requisite Banks. "APPRAISED VALUE" as to any item of Collateral shall, as of any date of determination, be the value of such Collateral reflected in the Appraisal thereof most recently delivered to and approved by the Agent pursuant to Section 2.13(a)(ii)(a). "ASSIGNEE" has the meaning specified in Section 10.08. "ASSIGNMENT AND ACCEPTANCE" has the meaning specified in Section 10.08(a). 2 "ASSIGNMENT OF LEASES" means an assignment of leases and rents, substantially in the form of EXHIBIT R, in each case with such revisions as may be proposed by local counsel to the Agent and acceptable to the Agent and the Requisite Banks. "ASSUMED INTEREST RATE" shall mean an annual rate equal to the yield on U.S. Treasury obligations having a maturity of ten (10) years from the date of determination (or the closest maturity date thereafter), plus two and one-half percent (2.50%), but in no event less than nine percent (9.0%). In calculating the Revolving Facility Debt Service Coverage-Based Principal Limit or Term Loan Debt Service Coverage-Based Principal Limit for any fiscal quarter, the Assumed Interest Rate shall be based on the yield on such U.S. Treasury obligations as published for the last Business Day of the preceding fiscal quarter. In calculating the Term Loan Debt Service Coverage-Based Principal Limit as of the Conversion Date, the Assumed Interest Rate shall be based on the yield on such obligations as published for the Business Day preceding the date a notice of the Company's request for the conversion is delivered to the Agent pursuant to Section 4.03. "ATTORNEY COSTS" means and includes all fees and disbursements of any law firm or other external counsel, the allocated cost of internal legal services and all disbursements of internal counsel. "BANK" means each of the lenders party to this Agreement, and includes BofA in its individual capacity. "BANK AFFILIATE" means a Person that is engaged primarily in the business of commercial lending and is a Subsidiary of a Bank or of a Person of which a Bank is a Subsidiary. "BANKRUPTCY CODE" means the Federal Bankruptcy Reform Act of 1978 (12 U.S.C. Section 101, et. SEQ.), as amended from time to time. "BASE RATE" means the higher of: (a) the annual rate of interest publicly announced from time to time by the Reference Bank as its "reference" rate. The "reference" rate is a rate set based upon various factors including the Reference Bank's costs and desired return, general economic conditions, and other factors, and is used as reference points for pricing some loans. Any change in the Base Rate shall take effect on the day specified in the public announcement of such change; or (b) one-half of one percent (0.5%) per annum above the latest Federal Funds Rate. "BASE RATE LOAN" means a Loan that bears interest based on the Base Rate. "BORROWING BASE" shall mean at any time: (a) in the case of the Revolving Facility, the Revolving Facility Borrowing Base and (b) in the case of the Term Loan, the Term Loan Borrowing Base. 3 "BORROWING BASE PROPERTY" means one of the multi-family apartment projects which is identified on SCHEDULE 1.01A attached hereto or otherwise offered by the Company and accepted by all of the Banks as Collateral pursuant to Section 2.13(a) below (upon the satisfaction of the conditions set forth therein), together with all personal property, deposits, accounts, contract rights, leases and other Collateral relating to such project, unless and until such project is excluded as a Borrowing Base Property or otherwise released as Collateral pursuant to Sections 2.13(b), 2.13(e), 7.05, or 10.01(b)(vi), as applicable. "BOFA" means Bank of America National Trust and Savings Association, in its capacity as a Bank. "BORROWING NOTICE" means a notice given by the Company to the Agent pursuant to Section 2.03, in substantially the form of EXHIBIT A. "BRIDGE LOAN AGREEMENT" means that certain Credit Agreement dated as of even date herewith by and among the Company, the Agent and the initial Banks which provides, inter alia, that the banks party thereto will make available to the Company a credit facility in the amount of up to Twenty-Five Million Dollars ($25,000,000.00), as the same may be amended, supplemented, or modified from time to time. "BRIDGE LOAN" means any Base Rate Loan and any LIBOR Loan (as such terms are defined in the Bridge Loan Agreement) made pursuant to the Bridge Loan Agreement. "BUSINESS DAY" means any day other than a Saturday, Sunday or other day on which commercial lenders are authorized or required by law to close in New York City or the city in which the Agent's office charged with administration of the Loans is located; except in cases in which it relates to any LIBOR Loan, in which cases "Business Day" means such a day on which dealings are carried on in the London dollar interbank market. "CAPITAL ADEQUACY REGULATION" means any guideline, request or directive of any central bank or other Governmental Authority having jurisdiction, or any other law, rule or regulation, whether or not having the force of law, regarding capital adequacy of any Bank or of any corporation controlling a Bank. "CAPITAL EXPENDITURES" means, for any period and with respect to any Person, the aggregate of all expenditures by such Person for the acquisition or leasing of fixed or capital assets or additions to equipment (including replacements, capitalized repairs and improvements during such period) which should be capitalized under GAAP on a consolidated balance sheet of such Person. For the purpose of this definition, the purchase price of equipment which is purchased simultaneously with the trade-in of existing equipment owned by such Person or with insurance proceeds shall be included in Capital Expenditures only to the extent of the gross amount of such purchase price, less the credit granted by the seller of such equipment for such equipment being traded in at such time, or the amount of such proceeds, as the case may be. "CAPITAL LEASE" means any leasing or similar arrangement which, in accordance with GAAP, is classified as a capital lease. 4 "CAPITAL LEASE OBLIGATIONS" means, with respect to any Person, the amount at which such Person's obligations under Capital Leases are required to be carried on the balance sheet of such Person in accordance with GAAP. "CARRYING VALUE" means, with respect to any asset or liability of any Person, the amount at which such asset or liability has been recorded or, in accordance with GAAP, should have been recorded, in the books of account of such Person, as reduced by any reserves or write-downs which have been announced, set aside or taken or, in accordance with GAAP, should have been set aside or taken, with respect thereto; PROVIDED, HOWEVER, that, if more than one method of recording the amount of any asset or liability, or the setting aside or taking of any reserves or write-downs with respect thereto, is permitted under GAAP, the permitted method actually used shall be controlling for purposes of determining Carrying Value, provided that such method is used in a manner consistent with prior periods. "CASH COLLATERAL ACCOUNT" has the meaning specified in Section 2.13(d). "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 the Agent, or 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 Requisite Banks) 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. "CERCLA" has the meaning specified in the definition of "Environmental Laws". 5 "CLOSING DATE" means the date on which all conditions precedent set forth in Section 4.01 are satisfied or waived by all Banks; said date shall occur no later than August 31, 1996. "CODE" means the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated thereunder. "COLLATERAL" means all property interests, now owned or hereafter acquired, of the Company or any Wholly-Owned Subsidiary in or upon which a Lien now or hereafter exists in favor of the Agent on behalf of the Banks hereunder or under the Collateral Documents. "COLLATERAL DOCUMENTS" means, collectively, (a) the Mortgages, the Assignments of Leases, the Environmental Indemnity Agreements, the Equity Interests Pledge Agreements and all security agreements, lease assignments and other similar agreements between the Company or any Wholly-Owned Subsidiary and the Banks or the Agent for the benefit of the Banks now or hereafter delivered to the Banks or the Agent pursuant to or in connection with the transactions contemplated hereby, (b) all financing statements (or comparable documents) now or hereafter filed in accordance with the UCC (or comparable law) against the Company or any Wholly-Owned Subsidiary as debtor in favor of the Banks or the Agent for the benefit of the Banks as secured party, (c) any other documents executed by the Company or any Wholly-Owned Subsidiary at the request of Agent and upon the recommendation of Agent's counsel or local counsel in order to establish, perfect or protect any of the liens or security interests granted in the Mortgages, and (d) any amendments, supplements, modifications, renewals, replacements, consolidations, substitutions and extensions of any of the foregoing. "COMMITMENT", with respect to each Bank, shall mean that Bank's Revolving Commitment (during the term of the Revolving Facility) or Term Commitment (during the term of the Term Loan), as specified in Sections 2.01(a) or (c), as applicable. "COMMITMENT PERCENTAGE" means, as to any Bank, the percentage equivalent of such Bank's Commitment divided by the Aggregate Commitment. "CONTINGENT OBLIGATION" means, as to any Person, (a) any Guaranty Obligation of that Person, and (b) any direct or indirect obligation or liability, contingent or otherwise, of that Person, (i) in respect of any letter of credit or similar instrument issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings, (ii) as a partner or joint venturer in any partnership or joint venture, (iii) to purchase any materials, supplies or other Property from, or to obtain the services of, another Person if the relevant contract or other related document or obligation requires that payment for such materials, supplies or other Property, or for such services, shall be made regardless of whether delivery of such materials, supplies or other Property is ever made or tendered, or such services are ever performed or tendered, or (iv) incurred pursuant to any Rate Contract. Except as provided in the definition of "Total Indebtedness" below, the amount of any Contingent Obligation shall (subject, in the case of Guaranty Obligations, to the last sentence of the definition of "Guaranty Obligation") be deemed equal to the maximum reasonably anticipated liability in respect thereof. 6 "CONTRACTUAL OBLIGATION" means, as to any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, mortgage, deed of trust, indenture, or other instrument, document or agreement to which such Person is a party or by which it or any of its Property is bound. "CONTROLLED GROUP" means the Company and all Persons (whether or not incorporated) under common control or treated as a single employer with the Company pursuant to Section 414(b), (c), (m) or (o) of the Code. "CONVERSION CONDITIONS" has the meaning specified in Section 4.03. "CONVERSION DATE" shall mean the date on which all Conversion Conditions have been satisfied and the Revolving Facility has been converted into the Term Loan. The Conversion Date shall be set forth in the certificate delivered to and approved by the Agent pursuant to Section 4.03(e) below. "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: EBITDA minus Imputed Capital Expenditures Debt Service Coverage Ratio = ------------------------------------------------ Net Interest Expense plus Scheduled Amortization "DE SUB" means AIMCO Properties Finance Corp., a Delaware corporation. "DEFAULT" means any event or circumstance which, with the giving of notice, the lapse of time, or both, would (if not cured or otherwise remedied) constitute an Event of Default. "DEVELOPMENT ACTIVITY" means, as to any Property of the Company or any Subsidiary, any construction, reconstruction, rehabilitation or other development activity or related series of activities in connection with any single apartment or commercial complex, the cost of which, in the aggregate, exceeds $1,000,000. "DISPOSITION" means the sale, lease, conveyance, transfer or other disposition of (whether in one or a series of transactions) any Property, including accounts and notes receivable (with or without recourse) and sale-leaseback transactions, but otherwise excluding Permitted Liens. "DOLLARS", "DOLLARS" and "$" each mean lawful money of the United States. "DOMESTIC LENDING OFFICE" means, with respect to each Bank, the office of that Bank designated as such on the signature pages hereto or such other once of a Bank as it may from time to time specify in writing to the Company and the Agent. "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 7 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 extraordinary gains. "EFFECTIVE DATE" means August 13, 1996. "ELIGIBLE ASSIGNEE" means (a) a commercial lender organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $100,000,000, (b) a commercial lender organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the "OECD"), or a political subdivision of any such country, and having a combined capital and surplus of at least $100,000,000, provided that such commercial lender is acting through a branch or agency located in the country in which it is organized or another country which is also a member of the OECD, and (c) any Bank Affiliate. "ENVIRONMENTAL CLAIMS" means all claims, however asserted, by any Governmental Authority or other Person alleging potential liability or responsibility for violation of any Environmental Law or for release or injury to the environment or threat to public health, personal injury (including sickness, disease or death), property damage, natural resources damage, or otherwise alleging liability or responsibility for damages (punitive or otherwise), cleanup, removal, remedial or response costs, restitution, civil or criminal penalties, injunctive relief, or other type of relief, resulting from or based upon (a) the presence, placement, discharge, emission or release (including intentional and unintentional, negligent and non-negligent, sudden or non-sudden, accidental or non-accidental placement, spills, leaks, discharges, emissions or releases) of any Hazardous Material at, in, or from Property, whether or not owned by the Company, or (b) any other circumstances forming the basis of any violation, or alleged violation, of any Environmental Law. "ENVIRONMENTAL INDEMNITY AGREEMENT" means an environmental indemnity agreement substantially in the form of EXHIBIT C, with such revisions as may be proposed by local counsel to the Agent and acceptable to the Agent and the Requisite Banks. "ENVIRONMENTAL LAWS" means all federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authorities, in each case relating to environmental, health, safety and land use matters; including the Comprehensive Environmental Response, Compensation and Liability Act of 198O ("CERCLA"), the Hazardous Material Transportation Act, the Federal Water Pollution Control Act, the Clean Air Act, the Federal Water Pollution Control Act of 1972, the Solid Waste Disposal Act, the Federal Resource Conservation and Recovery Act, the Occupational Safety and Health Act, the Toxic Substances Control Act and the Emergency Planning and Community Right-to-Know Act, each as amended or supplemented, and any analogous future or 8 present local, municipal, state or federal statutes and regulations promulgated pursuant thereto, each as in effect as of the date of any determination. "ENVIRONMENTAL PERMITS" has the meaning set forth in Section 5.11(b). "EQUITY INTERESTS PLEDGE AGREEMENTS" shall mean the pledge agreements delivered from time to time pursuant to Section 2.13(a)(iii)(g). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder. "ERISA AFFILIATE" means any trade or business (whether or not incorporated) under common control with the Company within the meaning of Section 414(b), 414(c) or 414(m) of the Code. "ERISA EVENT" means (a) a Reportable Event with respect to a Qualified Plan or a Multiemployer Plan; (b) a withdrawal by the Company or any ERISA Affiliate from a Qualified Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA); (c) a complete or partial withdrawal by the Company or any ERISA Affiliate from a Multiemployer Plan; (d) the filing of a notice of intent to terminate, the treatment of a plan amendment as a termination under Section 4041 or 4041A of ERISA or the commencement of proceedings by the PBGC to terminate a Qualified Plan or Multiemployer Plan subject to Title IV of ERISA; (e) a failure by the Company or any member of the Controlled Group to make required contributions to a Qualified Plan or Multiemployer Plan when due; (f) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Qualified Plan or Multiemployer Plan pursuant to Section 4042 of ERISA; (g) the imposition of any liability under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Company or any ERISA Affiliate; (h) an application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code with respect to any Plan; (i) a non-exempt prohibited transaction occurs with respect to any Plan for which the Company or any Subsidiary of the Company may be directly or indirectly liable; or (j) a violation of the applicable requirements of Section 404 or 405 of ERISA or the exclusive benefit rule under Section 401(a) of the Code by any fiduciary or disqualified person with respect to any Plan for which the Company or any member of the Controlled Group may be directly or indirectly liable. "ESTIMATED REMEDIATION COSt" means all costs associated with performing work to remediate contamination of real property or groundwater, including engineering and other professional fees and expenses, costs to remove, transport and dispose of contaminated soil, costs to "cap" or otherwise contain contaminated soil, and costs to pump and treat water and monitor water quality. "EVENT OF DEFAULT" means any of the events or circumstances specified in Section 8.01. 9 "EVENT OF LOSS" means, with respect to any Borrowing Base Property, any of the following: (a) any loss, destruction or damage of such property, (b) any pending or threatened institution of any proceedings for the condemnation or seizure of such property or for the exercise of any right of eminent domain, or (c) any actual condemnation, seizure or taking, by exercise of the power of eminent domain or otherwise, of such property, or confiscation of such property or requisition of the use of such property. "EXCHANGE ACT" means the Securities and Exchange Act of 1934, and regulations promulgated thereunder. "EXECUTIVE OFFICERS" shall mean the persons identified on SCHEDULE 1.01B. "FEDERAL FUNDS RATE" means, for any period, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Board (including any such successor, "H.15(519)") for such day opposite the caption "Federal Funds (Effective)". If on any relevant day such rate is not yet published in H.15(519), the rate for such day will be the rate set forth in the daily statistical release designated as the Composite 3:30 p.m. Quotations for U.S. Government Securities, or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m. Quotation") for such day under the caption "Federal Funds Effective Rate". If on any relevant day the appropriate rate for such previous day is not yet published in either H.15(519) or the Composite 3:30 p.m. Quotations, the rate for such day will be the arithmetic mean of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York time) on that day by each of three (3) leading brokers of Federal funds transactions in New York City selected by the Agent. "FEDERAL RESERVE BOARD" means the Board of Governors of the Federal Reserve System or any successor thereof. "FINANCE SUBSIDIARY" means AIMCO Properties Finance Partnership, L.P., a Delaware limited partnership. "FINANCE SUBSIDIARY LOAN" means, collectively, (i) the loan in the amount of $95,387,690 made by the Finance Subsidiary to the REIT on or around September 12, 1995, as evidenced by that certain Promissory Note, dated as of September 12, 1995, executed by the REIT, in favor of the Finance Subsidiary, which loan has been assumed by the Company pursuant to that certain Redemption Agreement, dated as of April 15, 1996, between the REIT and the Company, among others, and (ii) the loan in the amount of $3,000,000 made by the Finance Subsidiary to the REIT on or around September 6, 1995, as evidenced by that certain Promissory Note, dated as of September 6, 1995, executed by the REIT, in favor of the Finance Subsidiary. "FIRREA" means the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, as amended from time to time, and any regulations promulgated thereunder. 10 "FUNDED INTRA-COMPANY DEBT" means that portion of any Intra-Company Debt which has been paid by the obligor thereof except if paid from proceeds of Loans or any continuation or conversion thereof hereunder. "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 set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the accounting profession), or in such other statements by such other entity as may be in general use by significant segments of the U.S. accounting profession, which are applicable to the circumstances as of the date of determination. "GOVERNMENTAL AUTHORITY" means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "GP CORP" means AIMCO-GP, Inc., a Delaware corporation. GP is a Wholly-Owned Subsidiary of the REIT, and is the general partner of the Company. "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 the Apartment Property Cap Rate, 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. "GUARANTY OBLIGATION" means, as applied to any Person, any direct or indirect liability of that Person with respect to any Indebtedness, lease, dividend, letter of credit or other obligation (the "primary obligation") of another Person (the "primary obligor"), including any obligation of that Person, whether or not contingent, (a) to purchase, repurchase or otherwise acquire such primary obligations or any Property constituting direct or indirect security therefor, or (b) to advance or provide funds (i) for the payment or discharge of any such primary obligation, or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor, or (c) to purchase securities, other Properties or 11 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 (d) otherwise to assure or hold harmless the holder of any such primary obligation against loss in respect thereof. Except as set forth in the definition of "Total Indebtedness" below, the amount of any Guaranty Obligation shall be deemed equal to the stated or determinable amount of the primary obligation in respect of which such Guaranty Obligation is made or, if not stated or if indeterminable, the maximum reasonably anticipated liability in respect thereof. "HAZARDOUS MATERIALS" means (i) all those substances which are regulated by, or which may form the basis of liability under, any Environmental Law, including all substances identified under any Environmental Law as a pollutant, contaminant, hazardous waste, hazardous constituent, special waste, hazardous substance, hazardous material, or toxic substance, or petroleum or petroleum-derived substance or waste, (ii) any other materials or pollutants that (a) pose a hazard to any Property of the Company or to Persons on or about such Property or (b) cause such Property to be in violation of any Environmental Laws, (iii) asbestos in any form which is or could become friable, urea formaldehyde foam insulation, electrical equipment which contains any oil or dielectric fluid containing levels of polychlorinated biphenyls in excess of fifty parts per million, and (iv) any other chemical, material, substance, or waste, exposure to which is prohibited, limited, or regulated by any Governmental Authority or may or could pose a hazard to the health and safety of the owners, occupants, or any Persons surrounding the relevant Property. "HOMECORP" means HomeCorp. Investments, Ltd., an Alabama limited partnership. "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 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 12 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. "INDEMNIFIED LIABILITIES" has the meaning specified in Section 10.05. "INDEMNIFIED PERSON" has the meaning specified in Section 10.05. "INITIAL BORROWING BASE PROPERTIES" means the real properties so designated on SCHEDULE 1.01A hereto. "INSOLVENCY PROCEEDING" means (a) any case, action or proceeding before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors or other, similar arrangement in respect of its creditors generally or any substantial portion of its creditors; in each case as undertaken under U.S. Federal, State or foreign law. "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 "INTEREST PAYMENT DATE" means, with respect to any Base Rate Loan and any LIBOR Loan, the first day of each month. "INTEREST PERIOD" means, with respect to any LIBOR Loan, the period commencing on the Business Day on which the Loan is disbursed or on the Pricing Conversion Date on which the Loan is continued as or converted to the LIBO Rate and ending on the date one (1), two (2), three (3) or six (6) months thereafter, as selected by the Company in its Borrowing Notice or Notice of Conversion/Continuation; PROVIDED that: (a) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Business Day; (b) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar 13 month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and (c) no Interest Period for any Loan shall extend beyond the Revolving Facility Maturity Date or after the Conversion Date, the Term Loan Maturity Date. "INTRA-COMPANY DEBT" means Indebtedness (whether book-entry or evidenced by a term, demand or other note or other instrument) owed by the Company, the REIT or any of their respective Subsidiaries to any Subsidiary, and incurred or assumed for the purpose of capitalizing a Subsidiary of the REIT or the Company. As of the Effective Date, Intra-Company Debt includes the Indebtedness listed in SCHEDULE 1.01C. "INTRA-COMPANY LOAN SUBORDINATION AGREEMENT" means a Subordination Agreement, in form and substance satisfactory to the Requisite Banks, with respect to Intra-Company Debt and the Finance Subsidiary Loan, in favor of the Agent for the ratable benefit of the Banks, and entered into by the Company, and each of the "Lenders" and each of the "Borrowers" designated on SCHEDULE 1.01C. "INVESTMENT" means (a) any purchase or acquisition of any capital stock, equity interest, asset, obligation or other security of or any interest in, any Person, (b) any advance, loan, extension of credit or capital contribution to any Person, (c) any purchase, lease, or other acquisition of Property for the purpose of resale or leasing to another Person, and (d) any contingent or other agreement to do any of the foregoing. "IRS" means the Internal Revenue Service or any agency successor thereto. "ISSUING BANK" shall mean BofA, in its capacity as the issuer of Letters of Credit. "KNOWLEDGE OF THE COMPANY" means the actual knowledge (after reasonable inquiry) of any of the officers of the Company or the REIT and each other Person with executive responsibility for any aspect of the Company's or the REIT's business. "LENDING OFFICE" means, with respect to any Bank, the office or offices of the Bank specified as its "Lending Office" opposite its name on the signature pages hereto, or such other office or offices of the Bank as it may from time to time specify in writing to the Company and the Agent. "LETTER OF CREDIT" means any letter of credit issued pursuant hereto by the Issuing Bank for the account of the Company for general corporate purposes. The Letter of Credit shall be for a term of one year from the date of issuance thereof, but shall in any event expire prior to the Revolving Facility Maturity Date. "LETTER OF CREDIT LIABILITY" means, as of any date of determination, all then existing liabilities of the Company to the Issuing Bank in respect of Letters of Credit, whether such liability is contingent or fixed, and shall consist in principal amount of the sum of (a) the available amount under all Letters of Credit (the determination of such amount to assume 14 compliance with all conditions for drawing) and (b) the aggregate amount which has then been paid by, and not been reimbursed by the Company to, the Issuing Bank under all Letters of Credit. "LIBO RATE" means, for each Interest Period for any LIBOR Loan, an interest rate per annum (rounded upward to the nearest 1/100th of 1%) determined pursuant to the following formula: LIBOR LIBO Rate = ----------------------------- 1.00 - Reserve Percentage Where, (i) "LIBOR" means the per annum rate of interest, rounded upward, if necessary, to the nearest 1/16th of one percent (0.0625%), at which the Reference Bank's London branch, London, England, would offer U.S. dollar deposits in amounts and for periods comparable to those of the applicable LIBOR Loan and Interest Period to major banks in the London U.S. dollar inter-bank market at approximately 11:00 a.m., London time, on the first Business Day after the Borrowing Notice or Notice of Conversion/Continuation for such LIBOR Loan is delivered to the Agent; and (ii) "RESERVE PERCENTAGE" means the total of the maximum reserve percentages from time to time for determining the reserves to be maintained by member banks of the Federal Reserve System for Eurocurrency Liabilities, as defined in Federal Reserve Board Regulation D, whether or not applicable to any Bank. The Reserve Percentage shall be expressed in decimal form and rounded upward, if necessary, to the nearest 1/100th of one percent, and shall include marginal, emergency, supplemental, special and other reserve percentages. "LIBOR LOAN" means a Loan that bears interest based on the LIBO Rate. "LIEN" means any mortgage, deed of trust, security agreement, pledge, hypothecation, assignment, charge or deposit arrangement, encumbrance, lien (statutory or other) or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever (including those created by, arising under or evidenced by any conditional sale or other title retention agreement, the interest of a lessor under a Capital Lease, any financing lease having substantially the same economic effect as any of the foregoing, or the filing of any financing statement naming the owner of the asset to which such lien relates as debtor, under the UCC or any comparable law) and any contingent or other agreement to provide any of the foregoing. "LOAN" has the meaning specified in Section 2.01(d). "LOAN DOCUMENTS" means this Agreement, the Notes, the Collateral Documents, the REIT Guaranty Documents, the Equity Interests Pledge Agreements, and all other documents delivered to the Agent or the Banks in connection therewith. 15 "LP CORP" means AJMCO-LP, Inc., a Delaware corporation. "MANAGEMENT ENTITY" shall mean each of the following Persons and any successor thereto which conducts the management business described in the SEC Report, 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 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. "MARGIN STOCK" means "margin stock" as such term is defined from time to time in Regulation G, T, U or X of the Federal Reserve Board. "MATERIAL ADVERSE EFFECT" means a material adverse change in, or a material adverse effect upon, any of (a) the assets, operations, business, condition (financial or otherwise), or prospects of the Company, the REIT and their respective Subsidiaries, taken as a whole, (b) the ability of the Company, the REIT and their respective Subsidiaries to perform under any Loan Document and avoid any Event of Default, (c) the ability of the REIT and the Subsidiaries party thereto to perform under the REIT Guaranty Documents. "MORTGAGE" means a deed of trust, mortgage or similar real property security instrument encumbering Collateral, substantially in the form of EXHIBIT D, with such revisions as may be proposed by local counsel to the Agent and acceptable to the Agent and the Requisite Banks. "MULTIEMPLOYER PLAN" means a "multiemployer plan" (within the meaning of Section 4001(a)(3) of ERISA) and to which any member of the Controlled Group makes, is making, or is obligated to make contributions or, during the preceding three calendar years, has made, or been obligated to make, contributions. "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 the Maturity Date, shall be included within "Net Interest Expense." Notwithstanding the foregoing, interest accrued under any Intra-Company Debt shall not be included within "Net Interest Expense" for any purposes hereof. "NET ISSUANCE PROCEEDS" means, in respect of any issuance of Stock, Units or Indebtedness by the Company, the REIT or any of their respective Subsidiaries, the proceeds in cash or Cash Equivalents received by the Company, the REIT or any of their respective Subsidiaries upon or substantially simultaneously with such issuance, net of (a) the direct costs 16 of such issuance then payable by the recipient of such proceeds (excluding amounts payable to the Company, the REIT or any Affiliate of the Company or the REIT) and (b) sales, use and other taxes paid or payable by such recipient as a result thereof. "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. "NOTE" means a promissory note of the Company payable to the order of a Bank in substantially the form of EXHIBIT E, evidencing the aggregate indebtedness of the Company to such Bank resulting from Loans made by such Bank. "NOTICE OF CONVERSION/CONTINUATION" means a notice given by the Company to the Agent pursuant to Section 2.04, in substantially the form of EXHIBIT F. "NOTICE OF LIEN" means any "notice of lien" or similar document intended to be filed or recorded with any court, registry, recorder's office, central filing office or other Governmental Authority for the purpose of evidencing, creating, perfecting or preserving the priority of a Lien securing obligations owing to a Governmental Authority. "NYSE" means the New York Stock Exchange. "OBLIGATIONS" means all Loans, and other Indebtedness, advances, debts, liabilities, obligations, covenants and duties owed by the Company, the REIT or any of their respective Subsidiaries to the Agent, any Bank, or any other Person required to be indemnified under any Loan Document, of any kind or nature, present or future, whether or not evidenced by any note, guaranty or other instrument, arising under this Agreement or under any other Loan Document, whether or not for the payment of money, whether arising by reason of an extension 17 of credit, loan, guaranty, indemnification or in any other manner, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising and however acquired. "ORDINARY COURSE OF BUSINESS" means, in respect of any transaction involving the Company, the REIT, any Management Entity or Subsidiary, the ordinary course of such Person's business, substantially as intended to be conducted by any such Person as of the Closing Date (as reflected in the SEC Report), and undertaken by such Person in good faith and not for purposes of evading any covenant or restriction in any Loan Document. "ORGANIZATIONAL CHART" means the organizational chart attached as SCHEDULE 5.07 hereto showing the REIT, the Company, and all of their Subsidiaries. "ORGANIZATIONAL DOCUMENTS" means: (a) for any corporation, the certificate or articles of incorporation, the bylaws, any supplementary articles, certificate of determination or instrument relating to the rights of preferred shareholders, and all duly adopted resolutions of the board of directors (or any committee thereof) of such corporation; (b) for any partnership, the partnership agreement, the certificate and/or statement of partnership and all duly adopted authorizations of the partners thereof; (c) for any limited liability company, the articles of organization and operating agreement therefor and duly adopted authorizations or resolutions of the members thereof; and (d) for any trust, the declaration or agreement of trust. "OTHER TAXES" has the meaning specified in Section 3.01(b). "OUTSTANDING AMOUNT" means the aggregate principal amount of all outstanding Loans (including, without limitation, the aggregate Letter of Credit Liability) from time to time. "OUTSTANDING INDEBTEDNESS" means, as of any date of determination, that portion of Total Indebtedness outstanding. In the case of any Indebtedness consisting of letter of credit reimbursement obligations, such Indebtedness shall be deemed "outstanding" for purposes hereof to the full extent of the aggregate amount available to be drawn under the letter of credit under any circumstances, whether or not the same is then available to be drawn. Notwithstanding the foregoing, Intra-Company Debt shall be excluded from the calculation of "Outstanding Indebtedness," but shall not otherwise be excluded as Indebtedness for any other purpose hereof. "PARTICIPANT" has the meaning specified in Section 10.08(d). "PAYMENT OFFICE" means the address for payments set forth on the signature page hereto in relation to the Agent or such other address as the Agent may from time to time specify in accordance with Section 10.02. "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. 18 "PERMITTED EXCEPTIONS" means covenants, conditions, restrictions, easements and other exceptions to title affecting a Borrowing Base Property approved by the Agent and shown as exceptions in the Title Policy far such property. "Permitted Indebtness" has the meaning specified in Section 7.02. "PERMITTED LIENS" has the meaning specified in Section 7.01. "PERSON" means an individual, partnership, corporation, business trust, joint stock company, trust, limited liability company, unincorporated association, joint venture or governmental authority. "PLAN" means an employee benefit plan (as defined in Section 3(3) of ERISA) which the Company or any member of the Controlled Group sponsors or maintains or to which the Company or any member of the Controlled Group makes, is making or is obligated to make contributions, and includes any Multiemployer Plan or Qualified Plan. "PLEDGED CASH" shall mean the amount held on deposit in the Cash Collateral Account. "PREVIOUS CREDIT AGREEMENT" has the meaning specified in the Recital A. "PRICING CONVERSION DATE" means any date on which the Company elects to (a) convert a Base Rate Loan to a LIBOR Loan or a LIBOR Loan to a Base Rate Loan or (b) continue an existing LIBOR Loan for an additional Interest Period. "PRO FORMA REVOLVING FACILITY DEBT SERVICE" shall mean at any time the sum of the annual pro forma payments of principal and interest which would be due (based on a monthly repayment schedule) on an initial principal sum equal to the Revolving Facility Debt Service Coverage-Based Principal Limit based on a mortgage constant calculated upon the Assumed Interest Rate at such time and a twenty-five (25) year amortization period. "PRO FORMA TERM LOAN DEBT SERVICE" for any Borrowing Base Property shall mean the sum of (a) the pro forma amount of interest which would accrue during a period of one year on a principal sum equal to the Term Loan Debt Service Coverage-Based Principal Limit for such property at a rate equal to the Assumed Interest Rate plus (b) an amount equal to 1/25th of the Term Loan Amount for such Borrowing Base Property calculated as of the Conversion Date. "PROHIBITED TRANSACTION" means any transaction described in section 406 of ERISA which is not exempt by reason of section 408 of ERISA or the transitional rules set forth in section 414(c) of ERISA and any transaction described in section 4975(c)(12) of the Code which is not exempt by reason of section 4975(c)(2) or section 4975(d) of the Code, or the transitional rules of section 2003(c) of ERISA. "PROPERTY" means any estate or interest in any kind of property or asset, whether 19 real, personal or mixed, and whether tangible or intangible. "QRS" means AIMCO Holdings QRS, Inc., a Delaware Corporation. "QUALIFIED PLAN" means a pension plan (as defined in Section 3(2) of ERISA) intended to be tax-qualified under Section 401(a) of the Code and which any member of the Controlled Group sponsors, maintains, or to which it makes, is making or is obligated to make contributions, or in the case of a multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions at any time during the immediately preceding period covering at least five (5) plan years, but excluding any Multiemployer Plan. "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. "REDEMPTION TRANSACTION" means, collectively, the Preferred Stock Redemption Transaction together with the Common Stock Repurchase Transaction. "REFERENCE BANK" means BofA. "REIT" means Apartment Investment and Management Company, a Maryland corporation. "REIT GUARANTY DOCUMENTS" shall mean a guaranty of the Obligations, in the form of EXHIBIT G attached hereto, and such other documents relating to such guaranty as the Agent may require, duly executed by the REIT, GP Corp, LP Corp, AIMCO Holdings, Qrs, Somerset, and AIMCO/OTC, together with the guaranties delivered pursuant to Section 6.13(c) and Section 7.07(d). "REIT STATUS" means, with respect to any Person, (a) the qualification of such Person as a real estate investment trust under Sections 856 through 860 of the Code, (b) the applicability to such Person and its shareholders of the method of taxation provided for in Sections 857 et SEQ. of the Code, and (c) the qualification and taxation of such Person as a real estate investment trust under analogous provisions of state and local law in each state and jurisdiction in which such Person owns property, operates or conducts business. "REPORTABLE EVENT" means any of the events set forth in section 4043(b) of ERISA or the regulations thereunder, a withdrawal from a Plan described in section 4063 of ERISA, a cessation of operations described in section 4068(f) of ERISA, an amendment to a Plan necessitating the posting of security under section 401(a)(29) of the Code, or a failure to make when due a payment required by section 412(m) of the Code and section 302(e) of ERISA. "REQUIREMENT OF LAW" means, as to any Person, any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or of a Governmental Authority, in 20 each case applicable to or binding upon the Person or any of its Property or to which the Person or any of its Property is subject. "REQUISITE BANKS" means, as of any date of determination, (a) if there is only one Bank hereunder having a minimum Commitment of $5,000,000, that Bank, and (b) if there are two (2) or more Banks hereunder each having a minimum Commitment of $5,000,000, then two (2) or more Banks (for purposes of counting Banks, BofA and all affiliates of BofA collectively count as one Bank), and in order to qualify as one of the two (2) necessary Banks, a Bank must hold a minimum Commitment of $5,000,000), holding at least sixty-six and two-thirds percent (66-2/3%) of the outstanding balance of the Loans, or, if there are no Loans outstanding, having at least sixty-six and two thirds percent (66-2/3%) of the Aggregate Commitment. "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 GP Corp, in its capacity as the general partner of the Company, and/or any other officer of the REIT or GP Corp having substantially the same authority and responsibility, or, with respect to financial matters, the Chief Financial Officer or the Treasurer of the REIT or GP Corp, respectively, or any other officer having substantially the same authority and responsibility. "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. "REVOLVING AVAILABILITY" shall mean at any time the Revolving Commitment of all Banks, minus the outstanding balance of any Bridge Loans at such time, and minus the outstanding amount of any Funded Intra-Company Debt. "REVOLVING COMMITMENT" has the meaning specified in Section 2.01(a). "REVOLVING FACILITY" has the meaning specified in Section 2.01(a). "REVOLVING FACILITY BORROWING BASE" shall mean at any time during any fiscal quarter or portion thereof the lesser of: (a) The Revolving Availability; (b) The sum of (i) sixty percent (60%) of the Appraised Value of all Borrowing Base Properties, minus the amounts of any assessment liens against such properties, and plus (ii) ninety-five percent (95%) of the amount of Pledged Cash at such time; and (c) The Revolving Facility Debt Service Coverage-Based Principal Limit for the fiscal quarter in question. "REVOLVING FACILITY DEBT SERVICE COVERAGE RATIO" shall mean the ratio determined for each fiscal quarter during the term of the Revolving Facility by dividing 21 Annualized Current Year NOI for all Borrowing Base Properties for the period from the commencement of the then current year through the end of the most recent quarter by the aggregate Pro Forma Revolving Facility Debt Service for such period. "REVOLVING FACILITY DEBT SERVICE COVERAGE-BASED PRINCIPAL LIMIT" shall mean the principal balance which, if it were outstanding under the Revolving Facility, would produce a Revolving Facility Debt Service Coverage Ratio equal to 1.35:1.0. Said amount shall be determined for any fiscal quarter based on the Revolving Facility Debt Service Coverage Ratio for the period from the commencement of the then current year through the end of the most recent quarter. "REVOLVING FACILITY MATURITY DATE" means the date which is two (2) years after the Closing Date, subject, however, to earlier acceleration pursuant to the provisions of the Loan Documents. "REVOLVING LOAN" has the meaning specified in Section 2.01(a). "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. "SOLVENT" means, as to any Person at any time, that (a) the fair value of the Property of such Person is greater than the amount of such Person's liabilities (including disputed, contingent and unliquidated liabilities) as such value is established and liabilities evaluated for purposes of Section 101(31) of the Bankruptcy Code and, in the alternative, for purposes of the Uniform Fraudulent Transfer Act; (b) the present fair saleable value of the Property of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured; (c) such Person is able to realize upon its Property and pay its debts and other liabilities (including disputed, contingent and unliquidated liabilities) as they mature in the normal course of business; (d) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature; and (e) such Person is not engaged in 22 business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute unreasonably small capital. "SOMERSET" means AIMCO Somerset, Inc., a Delaware corporation. "STOCK" means all shares, options, warrants, interests, participations or other equivalents (regardless of how designated) of or in a corporation or equivalent entity, whether voting or nonvoting, including common stock, preferred stock, or any other "equity security" (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under the Exchange Act). "SUBSIDIARY" of a Person means any corporation, association, partnership, joint venture, trust or other business entity of which more than fifty percent (50%) of the Stock or other equity or beneficial interests (in the case of Persons other than corporations) is owned or controlled directly or indirectly by the Person, or one or more of the Subsidiaries of the Person, or a combination thereof. As of the Effective Date, the Persons listed on SCHEDULE 5.07 are Subsidiaries of the REIT and the Company. "TAXES" has the meaning specified in Section 3.01(a). "TERM ADVANCE" has the meaning specified in Section 2.01(c). "TERM COMMITMENT" has the meaning specified in Section 2.01(c). "TERM LOAN" has the meaning specified in Section 2.01(c). "TERM LOAN AMOUNT" shall mean the amount of the Term Loan allocated to a Borrowing Base Property, as follows: The amount of the Term Loan allocated to each Borrowing Base Property initially shall be equal to the outstanding balance of the Term Loan as of the Conversion Date multiplied by the Term Loan Percentage for such Borrowing Base Property, and shall be reduced from time to time by such property's Term Loan Percentage of principal payments and prepayments occurring after the Conversion Date (other than payments and prepayments resulting from or made in connection with the release of a Borrowing Base Property as Collateral). If a Property is removed or released as a Borrowing Base Property, for any reason, the Term Loan Amount for such Property shall be zero. "TERM LOAN BORROWING BASE" shall mean the lesser of (i) the outstanding balance of the Revolving Facility on the Conversion Date; (ii) the maximum Term Loan amount as determined under Section 4.03 below; (iii) the sum of the Term Loan Limit or Term Loan Amount (whichever is less) for all Borrowing Base Properties at any time; and (iv) the Aggregate Commitment minus the outstanding amount of any Funded Intra-Company Debt, and minus, as of any date, in the case of (i), (ii) or (iii) above, the aggregate cumulative amortization payments required to be made through such date under Section 2.06(c). "TERM LOAN DEBT SERVICE COVERAGE-BASED PRINCIPAL LIMIT" shall mean, with respect to any Borrowing Base Property, the principal balance which, if it were outstanding 23 under the Term Loan, would produce a Term Loan Debt Service Coverage Ratio for such Borrowing Base Property equal to 1.30:1.0. Said amount shall be determined as of the Conversion Date and for any fiscal quarter based on the Term Loan Debt Service Coverage Ratio for the period from the commencement of the then current year through the end of the most recent quarter. "TERM LOAN DEBT SERVICE COVERAGE RATIO" with respect to any Borrowing Base Property shall mean the ratio determined as of the Conversion Date and for each fiscal quarter during the term of the Term Loan by dividing the Annualized Current Year NOI for such Borrowing Base Property for the applicable quarter by Pro Forma Term Loan Debt Service for such Borrowing Base Property for such quarter. "TERM LOAN LIMIt" for any Borrowing Base Property shall mean the lesser of the amounts described in clauses (a) and (b) below; such amounts shall be calculated as of the Conversion Date and as of the end of each fiscal quarter while the Term Loan is outstanding for each property then in the Borrowing Base: (a) sixty percent (60%) of the "as-is" appraised value of such Borrowing Base Property, as most recently determined prior to the Conversion Date or the end of the fiscal quarter in question pursuant to an M.A.I. appraisal or reappraisal ordered and approved by the Agent, minus the amounts of any assessment liens against such property; or (b) the Term Loan Debt Service Coverage-Based Principal Limit for such Borrowing Base Property as of the Conversion Date or for the fiscal quarter in question, as applicable. "TERM LOAN PERCENTAGE" for any Borrowing Base Property shall mean at any time the percentage equivalent of the Term Loan Limit for such Borrowing Base Property as of the Conversion Date divided by the sum of the Term Loan Limits for all Borrowing Base Properties at such time. "TERM LOAN MATURITY DATE" means the date which is three (3) years after the Conversion Date, subject, however, to earlier acceleration pursuant to the provisions of the Loan Documents. "TITLE INSURER" means a title insurance company acceptable to the Agent. "TITLE POLICY" for any Borrowing Base Property means an extended coverage 1970 ALTA Loan Policy (revised 10/17/70) issued by the Title Insurer and in form and substance satisfactory to the Agent in its discretion, which shall insure the lien of the Mortgage on such Borrowing Base Property as a valid first lien on the Company's (or the applicable Wholly-Owned Subsidiary's) fee simple estate therein (as well as on all rights and easements under any applicable reciprocal easement or similar agreement and all other appurtenant interests), subject to no exceptions other than Permitted Exceptions. Unless otherwise approved by the Agent, each Title Policy shall be in the amount of the Commitments of all Banks (or such lesser amount as may be approved by the Agent for Borrowing Base Properties located in states 24 where aggregate liability coverage is not available), and shall be reinsured with other companies and in such amounts as may be acceptable to the Agent pursuant to 1987 ALTA Facultative Reinsurance Agreements (with direct access) in form and substance satisfactory to the Agent in its discretion. Each Title Policy shall also include such endorsements as may be required by the Agent in its discretion, including, without limitation, each of the following endorsements: (i) a CLTA 100 endorsement relating to covenants, conditions and restrictions and encroachments; (ii) a CLTA 103.4 or 103.7 endorsement insuring that such Borrowing Base Property has access to a specified physically open, dedicated and accepted public street; (iii) a CLTA 104.6 endorsement insuring the priority of the assignment of leases and rents for such Borrowing Base Property; (iv) a CLTA 111.5 endorsement (variable rate); (v) a CLTA 116 endorsement; (vi) a CLTA 116.1 endorsement; (vii) a revolving credit endorsement; (viii) a tie-in endorsement; (ix) an environmental endorsement; and (x) "last-dollar" endorsement. Unless otherwise approved by the Agent, no Title Policy shall include an exception for bankruptcy, fraudulent conveyance or creditors' rights issues. The Title Insurer shall not insure or endorse over any lien or other easement, whether based on an indemnity from the Company or otherwise, without the prior approval of the Agent. "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) Intra-Company Debt, 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. "UCC" means the Uniform Commercial Code as in effect in any relevant jurisdiction. "UNFUNDED PENSION LIABILITIES" means the excess of a Plan's benefit liabilities under section 4001(a)(16) of ERISA, over the current value of that Plan's assets, determined in accordance with the assumptions used by the Plan's actuaries for funding the Plan pursuant to section 412 for the applicable plan year. "UNITED STATES" and "U.S." each mean the United States of America. "UNITS" shall mean the units of limited partnership interest in the Company issued and outstanding from time to time. 25 "WHOLLY-OWNED SUBSIDING" means a Subsidiary of the Company or the REIT (i) one hundred percent (100%) of the Stock or other equity or other beneficial interests (in the case of Persons other than corporations) is owned directly or indirectly by (a) the Company and/or (b) the REIT and (ii) which is formed in compliance with Sections 7.07 (c) and (d); provided, however, that where such term is qualified with respect to a specific Person (e.g., "Wholly-Owned Subsidiary of the REIT"') such term means a Subsidiary (i) one hundred percent (100%) of the Stock or other equity or other beneficial interests (in the case of Persons other than corporations) is owned directly or indirectly by such Person, and (ii) which is formed in compliance with Sections 7.07 (c) and (d). 1.02 Other Definitional Provisions. (a) DEFINED TERMS. Unless otherwise specified herein or therein, all terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto. The meaning of defined terms shall be equally applicable to the singular and plural forms of the defined terms. Terms (including uncapitalized terms) not otherwise defined herein but defined in the UCC shall have the meanings set forth therein. (b) THE AGREEMENT. The words "hereof', "herein", "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; and section, schedule and exhibit references are to this Agreement unless otherwise specified. (c) CERTAIN COMMON TERMS. (i) The term "documents" includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced. (ii) The term "including" is not limiting and means "including without limitation." (iii) The term "ratably" means, at any time that Loans may be outstanding, in accordance with the amount of the outstanding Loans of the respective Banks; and, at any time that no Loans are outstanding, in accordance with the outstanding Commitments of the respective Banks. (d) PERFORMANCE; TIME. Whenever any performance obligation hereunder (other than a payment obligation) is stated to be due or required to be satisfied on a day other than a Business Day, such performance shall be made or satisfied on the next succeeding Business Day. In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including"; the words "to" and "until" each mean "to but excluding," and the word "through" means "to and including". If any provision of this Agreement refers to any action taken or to be taken by any Person, or which such Person is prohibited from taking, such provision shall be interpreted to encompass any and all means, direct or indirect, of taking, or not taking, such action. 26 (e) CONTRACTS.Unle ss otherwise expressly provided herein, references to agreements and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document. (f) LAWS. References to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending or replacing the statute or regulation. (g) CAPTIONS. The captions and headings of this Agreement are for convenience of reference only and shall not affect the construction of this Agreement. (h) Independence of Provisions. The parties acknowledge that this Agreement and other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters, and that such limitations, tests and measurements are cumulative and must each performed, except as expressly stated to the contrary in this Agreement. 1.03 Accounting Principles. (a) GAAP. Unless the context otherwise clearly requires, all accounting terms not expressly defined herin shall be construed, and all financial computations required under this Agreement shall be made, in accordance with GAAP, consistently applied. (b) FISCAL YEAR; QUARTER. References herein to "fiscal year" and "fiscal quarter" refer to such fiscal periods of the Company. ARTICLE II THE FACILITY 2.01 AMOUNTS AND TERMS OF COMMITMENTS. (a) REVOLVING LOANS. (i) REVOLVING LOANS. Each Bank severally agrees, on the terms and conditions hereinafter set forth, to make loans to the Company (each such loan, a "Revolving Loan" and all such loans collectively, the "Revolving Facility") from time to time on any Business Day during the period from the Closing Date to the earlier of the Conversion Date or the Revolving Facility Maturity Date, in an aggregate amount not to exceed at any time the lesser of the amount set forth opposite such Bank's name in SCHEDULE 2.01 (such amount as the same may be reduced or increased as a result of one or more assignments pursuant to Section 10.08, and inclusive of such Bank's participation in the Letter of Credit Liability, such Bank's "Revolving Commitment") or such Bank's Commitment Percentage of the Revolving Availability. 27 (ii) LETTERS OF CREDIT. Provided that the Company is in compliance with all of the terms and conditions for the making of Revolving Loans by the Banks, the Company shall have the right to request, through a Borrowing Notice, the Issuing Bank to deliver from time to time Letters of Credit, and the Issuing Bank shall promptly upon such request issue the requested Letter of Credit, each of which shall be in a form approved by the Issuing Bank; provided that the maximum Letter of Credit Liability at any one time outstanding shall not exceed $2,000,000. Each drawing under a Letter of Credit shall be payable in full upon the date thereof by the Company, without notice or demand of any kind. The Company shall have the right to obtain, in accordance with the terms and conditions otherwise applicable to advances of the Revolving Loans hereunder, a Revolving Loan hereunder in the amount so drawn to be used to reimburse BofA as the Issuing Bank for the amount so drawn. The liability of the Company to reimburse the Issuing Bank for the amounts drawn under Letters of Credit shall be included within the terms "Revolving Loan" and "Loan" for all purposes of this Agreement, and any amounts so drawn shall bear interest until paid in full (whether out of the proceeds of a Revolving Loan otherwise permitted hereunder or otherwise) at the Base Rate, subject to Section 2.09(c). The Company's Obligation to reimburse the Issuing Bank for any and all amounts drawn under any Letter of Credit and all interest thereon shall be secured by the Collateral. The Company's obligations to repay any and all drawings under any Letter of Credit and any and all other amounts payable to Issuing Bank, Agent or any other Bank hereunder shall be absolute, irrevocable and unconditional under any and all circumstances whatsoever and irrespective of any set-off, counterclaim or defense to payment which the Company may have or have had against Issuing Bank, Agent or any other Bank (except such as may arise out of Issuing Bank's, Agent's or any other Bank's gross negligence or willful misconduct hereunder) or any other Person, including, without limitation, any setoff, counterclaim or defense based upon or arising out of: (A) Any lack of validity or enforceability of this Agreement or any of the other Loan Documents or such Letter of Credit; (B) Any amendment or waiver of or any consent to or departure from the terms of such Letter of Credit or the Loan Documents; (C) The existence of any claim, setoff, defense or other right which the Company or any other Person may have at any time against, any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), Issuing Bank, Agent or any other Bank or any other Person, whether in connection with such Letter of Credit, the Loan Documents or any unrelated transaction; (D) Any demand, statement or any other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect, or any statement therein being untrue or inaccurate in any respect whatsoever or any variations in punctuation, capitalization, spelling or format of the drafts or any statements presented in connection with any drawing under such Letter of Credit; 28 (E) The surrender or impairment of any security for the performance or observance of any of the terms of such Letter of Credit or the Loan Documents; and (F) The failure, for any reason, of any Bank to fund advances to the Company hereunder for any purpose. Nothing contained herein shall constitute a waiver of any rights or remedies of the Company against Issuing Bank, Agent or any other Bank arising out of the gross negligence or willful misconduct of Issuing Bank, Agent or any such other Bank. (iii) LIMIT ON REVOLVING LOANS AND LETTERS OF CREDIT Notwithstanding anything to the contrary set forth herein, after giving effect to any Revolving Loan and after the issuance of any Letter of Credit, in no event shall the Outstanding Amount exceed the then applicable Revolving Facility Borrowing Base. Within the limitations set forth in this Section 2.01(a), and subject to the other terms and conditions hereof, the Company may borrow or request Letters of Credit to be issued under this Section 2.01(a), repay or prepay pursuant to Section 2.05 or otherwise cause Letters of Credit to be cancelled or to expire undrawn and reborrow or request additional Letters of Credit to be issued pursuant to this Section 2.01. (b) REVOLVING CREDIT USAGE. The Company shall use the proceeds of all Revolving Loans and all Letters of Credit for general working capital purposes, including, without limitation, acquisitions of multi-family apartment projects and other real estate assets, Investments in Persons engaged primarily in the business of owning or managing real estate assets and other Investments permitted hereunder, Capital Expenditures and redevelopment projects. (c) AMOUNTS AND TERMS OF TERM LOAN. Each Bank severally agrees, on the terms and conditions hereinafter set forth, and provided all Conversion Conditions have been satisfied, to continue or convert loans to the Company (each such loan, a "Term Advance" and all such loans collectively the "Term Loan") from time to time on any Business Day from the Conversion Date to the Term Loan Maturity Date, in an aggregate amount not to exceed at any time the amount set forth opposite the Bank's name in SCHEDULE 2.01 (such amount as the same may be reduced or increased as a result of one or more assignments pursuant to Section 10.08, the Bank's "Term Commitment"); provided, however, that after giving effect to any Term Advance, the Outstanding Amount shall not exceed the then applicable Term Loan Borrowing Base. Once repaid or prepaid, the Company may not reborrow any Term Advance. (d) LOANS GENERALLY. As used herein, the term "Loan" or "Loans" shall mean any Revolving Loan or any Term Advance, as the case may be. 2.02 NOTE. The Loans made by each Bank shall be evidenced by a Note dated the Closing Date payable to the order of that Bank in an amount equal to its Commitment. Each Bank shall endorse on the schedules annexed to the Note, the date, amount and maturity of each Loan made by it and the amount of each payment of principal made by the Company with 29 respect thereto. Each Bank is irrevocably authorized by the Company to endorse its Note, and each Bank's record shall be conclusive absent manifest error; PROVIDED, HOWEVER, that the failure of a Bank to make, or an error in making, a notation thereon with respect to any Loan shall not limit or otherwise affect the obligations of the Company hereunder or under any such Note to such Bank. As of the Closing Date, the Notes shall evidence each Bank's share of the outstanding advances made under the Previous Credit Agreement, which advances shall, for all purposes hereof, be deemed to have been made under this Agreement and shall be subject to the terms and conditions hereof. All such advances shall be evidenced by the Notes and shall be secured by the Mortgages and other Collateral Documents and shall bear interest at the rates and for the remainder of the Interest Periods established under the Existing Credit Agreement. 2.03 PROCEDURE FOR BORROWING. (a) BORROWING NOTICE. Each Loan shall be made upon the irrevocable written notice (including notice via facsimile confirmed immediately by a telephone call) of the Company in the form of a Borrowing Notice, as follows: (i) DESIGNATION OF INTEREST RATE. The Company shall have the right to elect that a Loan be made as a LIBOR Loan or a Base Rate Loan; PROVIDED that, unless the Agent shall otherwise agree in writing, the Company may not elect that a Loan be made as a LIBOR Loan if after giving effect to such Loan there shall be more than five (5) different LIBOR Loans outstanding. (ii) [intentionally left blank] (iii) TIMING OF NOTICE. Each Borrowing Notice shall be submitted to and received by the Agent prior to 9:00 a.m. (California time) (a) at least three (3) Business Days prior to the specified borrowing date, in the case of LIBOR Loans; (b) at least two (2) Business Days prior to the specified borrowing date, in the case of Base Rate Loans; and (c) in the case of a Borrowing Notice requesting a proposed Letter of Credit, at least five (5) Business Days prior to the proposed issuance date of such Letter of Credit. (iv) CONTENTS OF NOTICE. Each Borrowing Notice shall set forth the following information with respect to the Loan subject thereto: (A) a single, specific borrowing date, which shall be a Business Day; (B) a single, exact amount for the Loan, which for any LIBOR Loan, shall be in an aggregate minimum principal amount of $1,000,000 or any multiple of $100,000 in excess thereof; (C) whether the Loan is to be made as a LIBOR Loan or a Base Rate Loan; 30 (D) if the Loan is to be made as a LIBOR Loan, the applicable Interest Period. If a Borrowing Notice shall fail to specify the applicable Interest Period for any LIBOR Loan requested, such Loan will instead be made as a Base Rate Loan; and (E) in the case of any proposed Letter of Credit, such Borrowing Notice shall be accompanied by a letter of credit application, appropriately completed, on the Issuing Bank's standard form substantially in the form of EXHIBIT I .. (b) NOTICE TO BANKS. Upon receipt of a Borrowing Notice conforming with the terms of Section 2.03(a), the Agent shall promptly notify each Bank thereof and of the amount of such Bank's Commitment Percentage of the Loan described therein. (c) FUNDING OF COMMITMENT. Each Bank shall make the amount of its Commitment Percentage of the Loan described in any Borrowing Notice available to the Agent for the account of the Company at the Payment Office by 9:00 a.m. (California time) on the borrowing date specified therein in funds immediately available to the Agent. Unless any applicable condition specified in Article IV has not been satisfied, such funds shall then be made available to the Company by the Agent at such office by crediting the account of the Company with the aggregate of the amounts made available to the Agent by the Banks (in like funds as received by the Agent). (d) FREQUENCY OF BORROWINGS. No more than four (4) Borrowing Notices may be given in any calendar month. 2.04 CONVERSION AND CONTINUATION ELECTIONS. (a) NOTICE OF CONVERSION/CONTINUATION. Each conversion or continuation of an outstanding Base Rate Loan or LIBOR Loan shall be made upon the irrevocable written notice (including notice via facsimile confirmed immediately by a telephone call) of the Company in the form of a Notice of Conversion/Continuation, as follows: (i) DESIGNATION OF INTEREST RATE. The Company shall have the right to make the following elections with respect to the conversion or continuation of any outstanding Base Rate Loan or LIBOR Loan: (A) to convert, on any Business Day, any Base Rate Loan, in a minimum principal amount of $1,000,000 or an integral multiple of $100,000 in excess thereof, into a LIBOR Loan; or (B) to convert, on the last day of any Interest Period with respect to a LIBOR Loan (or, on any other day of any Interest Period, upon payment of any loss or expense incurred or sustained by any Bank with respect to the early termination of such LIBOR Loan prior to the last day of the Interest Period as provided in Section 3.04), such LIBOR Loan into a Base Rate Loan; or 31 (C) to continue, on the last day of any Interest Period with respect to a LIBOR Loan (or, on any other day of any Interest Period, upon payment any loss or expense incurred or sustained by any Bank with respect to the early termination of such LIBOR Loan prior to the last day of the Interest Period as provided in Section 3.04), such LIBOR Loan (or any part thereof in a minimum principal amount of $1,000,000 or an integral multiple of $100,000 in excess thereof) for a subsequent Interest Period; PROVIDED, that unless the Agent shall otherwise agree in writing, the Company may not elect to have any outstanding LIBOR Loan or Base Rate Loan (or any portion thereof) continued as or converted into a LIBOR Loan if (a) a Default or Event of Default shall exist, (b) after giving effect to such continuation or conversion there shall be more (i) than five different LIBOR Loans outstanding or (ii) the aggregate outstanding principal amount of all LIBOR Loans shall have been reduced, by payment, prepayment, or partial conversion to less than $1,000,000. (ii) TIMING OF NOTICE. Each Notice of Conversion/Continuation shall be submitted to and received by the Agent prior to 9:00 a.m. (California time): (a) at least three (3) Business Days prior to the Pricing Conversion Date of any outstanding Loan to be converted into or continued as a LIBOR Loan; and (b) at least two (2) Business Days prior to the Pricing Conversion Date of any outstanding Loan to be converted into or continued as a Base Rate Loan. (iii) CONTENTS OF NOTICE. The Notice of Conversion/Continuation shall set forth the following information with respect to the Loan subject thereto: (A) the Pricing Conversion Date, which shall be a Business Day; (B) the amount of the LIBOR Loan or Base Rate Loan to be converted or continued; (C) whether such Loan is to be converted into/continued as a LIBOR Loan or a Base Rate Loan; and (D) if such Loan (or any portion thereof) is to be converted into/continued as a LIBOR Loan, the applicable Interest Period. (b) AUTOMATIC CONVERSIONS. Any outstanding LIBOR Loan shall automatically convert to a Base Rate Loan, effective on the last day of the applicable Interest Period, if as of such date: (i) DEFAULT: EVENT OF DEFAULT. A Default or Event of Default shall exist; 32 (ii) FAILURE TO PROVIDE NOTICE. The Company shall have failed to submit a Notice of Conversion/Continuation for such Loan in compliance with the terms of Section 2.04(a); or (iii) FAILURE TO MAINTAIN MINIMUM LOANS. If the aggregate outstanding principal amount of LIBOR Loans having the same Interest Period shall have been reduced, by payment, prepayment, or partial conversion to be less than $1,000,000. (c) NOTICE TO BANKS. Upon receipt of a Notice of Conversion/Continuation conforming with the terms of Section 2.04(a), or an automatic conversion pursuant to Section 2.04(b), the Agent shall promptly notify each Bank thereof. All conversions and continuations shall be made pro rata according to the respective outstanding principal amounts of the Loans converted or continued. 2.05 OPTIONAL PREPAYMENTS. Subject to Section 3.04, the Company may, at any time and from time to time, ratably prepay Loans in whole or in part, in an aggregate minimum amount of $1,000,000 or an integral multiple of $100,000 in excess thereof, upon (a) at least three (3) Business Days' prior notice, if the Loans to be prepaid are LIBOR Loans, and (b) at least one Business Day's prior notice, if the Loans to be prepaid are Base Rate Loans. Such notice of prepayment shall specify (i) the amount of such prepayment, (ii) the date of such prepayment, which shall be a Business Day, and (iii) whether such prepayment is of LIBOR Loans, Base Rate Loans, or any combination thereof. Such notice shall not thereafter be revocable by the Company and the Agent shall promptly notify each Bank thereof and of such Bank's Commitment Percentage of such prepayment. If a prepayment notice is given, the payment amount specified therein shall be due and payable on the date specified therein, together with accrued interest to such date on the amount prepaid and any amounts required to be paid pursuant to Section 3.04. 2.06 MANDATORY PREPAYMENTS OF LOANS; MANDATORY AMORTIZATION AND REDUCTIONS. (a) STOCK OR DEBT ISSUANCE. If at any time after the Conversion Date, the REIT or the Company shall (i) make any public or private issuance of Stock for cash or Cash Equivalents or (ii) incur Indebtedness for borrowed money (other than Indebtedness permitted under Section 7.02(a)-(e)), the Company shall (a) notify the Agent of such issuance or incurrence (including the amount of the estimated Net Issuance Proceeds thereof) and (b) immediately upon the receipt of the Net Issuance Proceeds of such issuance or incurrence, prepay Loans in an amount equal to the following percentages of the aggregate Net Issuance Proceeds of such issuance or incurrence: (i) during the 1st year after Conversion Date: 50%; (ii) during the 2nd year after Conversion Date: 75%; and (iii) during the 3rd year after Conversion Date: 100%. 33 (b) BORROWING BASE. If at any time the Outstanding Amount exceeds the then applicable Borrowing Base, the Company shall immediately prepay Loans (or cause Letters of Credit to be cancelled) in an amount sufficient to reduce the Outstanding Amount to the then applicable Borrowing Base. In addition, if at any time the Outstanding Amount of the Term Loan multiplied by the Term Loan Percentage for any Borrowing Base Property exceeds the Term Loan Amount for such property or the Term Loan Limit for such property, whichever is less, the Company shall immediately prepay Term Advances in the amount of such excess. (c) AMORTIZATION. On the last Business Day of each March, June, September and December following the Conversion Date, the Company shall repay or prepay Loans in an aggregate amount equal to one-eightieth (1/80th) of the initial outstanding balance of the Term Loan as of the Conversion Date. 2.07 APPLICATION OF PROCEEDS. Unless otherwise instructed by the Company, any prepayments pursuant to Section 2.05 or Section 2.06 made (i) on a day other than the last day of an Interest Period for any Loan shall be applied first to any Base Rate Loans then outstanding and then to any LIBOR Loans then outstanding, in the inverse order of such LIBOR Loans' stated maturities and (ii) on the last day of an Interest Period for any LIBOR Loan shall be applied first to such maturing LIBOR Loan, then to any Base Rate Loans outstanding, and then to any other LIBOR Loans then outstanding, in the inverse order of such LIBOR Loans' stated maturities. 2.08 REPAYMENT. Subject to Section 2.06, unless the Revolving Facility has been converted into the Term Loan, the Company shall repay all Obligations on the Revolving Facility Maturity Date and, if the Revolving Facility has been converted into the Term Loan, shall repay all Obligations on the Term Loan Maturity Date. 2.09 INTERESt. (a) RATES. Subject to Section 2.09(c), each Loan shall bear interest on the outstanding principal amount thereof from the date such Loan is made until the date such Loan becomes due, at a rate per annum equal to the LIBO Rate or the Base Rate, as the case may be, PLUS the Applicable Margin. (b) PAYMENT DATES. Interest on each Loan shall be payable in arrears on each Interest Payment Date and the Revolving Facility Maturity Date or, if the Revolving Facility has been converted into the Term Loan, the Term Loan Maturity Date. Interest shall also be payable on the date of any prepayment of Loans pursuant to Section 2.05 or Section 2.06 for the portion of the Loans so prepaid. During the existence of any Event of Default, interest shall be payable on demand. (c) DEFAULT RATES. While any Event of Default exists or after acceleration and during the continuation thereof, and after as well as before any entry of judgment thereon, the Company shall pay interest (after as well as before judgment to the extent permitted by law) on all outstanding Obligations at a rate per annum which is determined by increasing the Applicable Margin then in effect by three percent (3%) per annum; PROVIDED, 34 HOWEVER, that, on and after the expiration of the Interest Period applicable to any LIBOR Loan outstanding on the date of occurrence of such Event of Default or acceleration, the outstanding Obligations shall, during the continuation of such Event of Default or after acceleration and during the continuation thereof, bear interest at a fluctuating rate per annum equal to the Base Rate plus three percent (3%). (d) LIMITATIONS FOR APPLICABLE LAW. Anything herein to the contrary notwithstanding, payments of interest shall not be required, for any period for which interest is computed hereunder, to the extent (but only to the extent) that contracting for or receiving such payments by the respective Bank would be contrary to the provisions of any law applicable to such Bank limiting the highest rate of interest which may be lawfully contracted for, charged or received by such Bank, and in such event the Company shall pay such Bank interest at the highest rate permitted by applicable law. 2.10 FEES. (a) FACILITY FEES. Upon the due execution and delivery of this Agreement by the Company, the Agent and each of the Banks which are the initial Banks party to this Agreement, the Company shall pay to each such Bank an amount equal to 0.50% of such Bank's Commitment as a facility fee, in each case for the recipient's own account. (b) COMMITMENT FEES. Commencing on the date hereof and up to the Conversion Date, the Company shall pay to the Agent for the account of each Bank ratably a commitment fee on the average daily unused portion of such Bank's Commitment Percentage of the Revolving Availability minus the average daily undrawn available amount of all Letters of Credit outstanding, equal to 0.125% per annum. Such commitment fee shall accrue from the Closing Date to the earlier of the Conversion Date or the Revolving Facility Maturity Date and shall be due and payable in arrears quarterly on the last Business Day of each March, June, September, and December commencing on September 30, 1996, on the Revolving Facility Maturity Date, and on any other date on which the Revolving Facility is paid in full and the Commitment permanently terminated. (c) CONVERSION FEE. On the Conversion Date, the Company shall pay to the Agent for the account of each Bank then a party to this Agreement ratably a conversion fee equal to 0.50% of the original balance of the Term Loan as of the Conversion Date. (d) BORROWING BASE ADJUSTMENT FEE. Without limiting the Company's obligations to pay costs and expenses under Section 2.13 and 10.04, upon the addition of a project as a Borrowing Base Property after the Effective Date, the Company shall pay to the Agent for the ratable benefit of the Banks a Borrowing Base Property adjustment fee in the amount of $2,000 per property for each project added as a Borrowing Base Property after the Effective Date after the first five (5) approved additional Borrowing Base Properties. 35 (e) LETTER OF CREDIT FEES. (i) The Company shall pay to Agent for the benefit of the Issuing Bank only a non-refundable letter of credit origination fee in the amount of one-half percent (.50%) of the initial available amount under each Letter of Credit, prior to issuance of such Letter of Credit and as a condition thereto. (ii) The Company shall pay to the Agent for the ratable benefit of the Banks a letter of credit commitment fee in an amount equal to one and six hundred twenty-five thousandths percent (1.625%) per annum of the aggregate daily undrawn amount of all Letters of Credit outstanding. (iii) Such fees as described in Section 2.10(e)(ii), shall accrue from the date of issuance of each Letter of Credit to the date of the expiration or cancellation thereof, and shall be due and payable in arrears quarterly on the last Business Day of each March, June, September and December, on the Revolving Facility Maturity Date, and on any other date on which the Revolving Facility is paid in full and the Revolving Commitment permanently terminated. 2.11 COMPUTATION OF FEES AND INTEREST. (a) COMPUTATION PERIOD. All computations of fees and interest under this Agreement shall be made on the basis of a 360-day year and actual days elapsed. Interest and fees shall accrue during each period for which interest or fees are computed from the first day thereof to the last day thereof. (b) NOTICE. The Agent shall, with reasonable promptness, notify the Company and the Banks of each determination of a LIBO Rate, PROVIDED that no failure to do so shall relieve the Company of any obligation hereunder. Any change in the interest rate on a Loan resulting from a change in the Reserve Percentage (as defined in the definition of "LIBO Rate") shall become effective as of the opening of business on the day on which such change becomes effective. The Agent shall with reasonable promptness notify the Company and the Banks of the effective date and the amount of each such change, PROVIDED that no failure to do so shall relieve the Company of any obligation hereunder. Each determination of an interest rate by the Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Company and the Banks in the absence of manifest error. (c) DETAIL OF CALCULATION. The Agent shall, at the request of the Company or any Bank, deliver to the Company or such Bank, as the case may be, a statement showing the quotations used by the Agent in determining any interest rate. 2.12 PAYMENTS BY THE COMPANY. (a) TERMS OF PAYMENTS. All payments (including prepayments) to be made by the Company on account of principal, interest, fees and other amounts required hereunder shall be made without setoff or counterclaim and shall, except as otherwise expressly 36 provided herein, be made to the Agent for the ratable account of the Banks at the Payment Office, in dollars and in immediately available funds, no later than 9:00 a.m. (California time) on the date specified herein. The Agent shall promptly distribute to each Bank such Bank's Commitment Percentage (or other applicable share as expressly provided herein) of such principal, interest, fees or other amounts (in like funds as received). Any payment which is received by the Agent later than 9:00 a.m. (California time) shall be deemed to have been received on the immediately succeeding Business Day, and any applicable interest or fee shall continue to accrue. (b) BUSINESS DAYS. Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall be included in the computation of interest or fees, as the case may be; subject to the provisions set forth in the definition of "Interest Period." (c) RELIANCE OF AGENT ON PAYMENTS BY THE COMPANY. Unless the Agent shall have received notice from the Company prior to the date on which any payment is due to the Banks hereunder that the Company will not make such payment in full, the Agent may assume that the Company has made such payment in full to the Agent on such date, and the Agent may (but shall not be required to), in reliance upon such assumption, cause to be distributed to each Bank on such due date the amount then due such Bank. If and to the extent the Company shall not have made such payment in full to the Agent, each Bank shall repay to the Agent on demand such amount distributed to such Bank, together with interest thereon for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Agent, at the Federal Funds Rate as in effect for each such day. 2.13 Security; Additions, Substitutions and Exclusions of Borrowing Base PROPERTIES; CASH COLLATERAL. (a) SECURITY. As of the Closing Date, the Borrowing Base Properties hereunder shall be the Initial Borrowing Base Properties. Additional apartment projects may be offered by the Company and shall be included as Borrowing Base Properties only in accordance with the following (and any other applicable terms and conditions contained in this Agreement): (i) REQUEST FOR BORROWING BASE INCREASE. The Company from time to time may request that stabilized apartment projects owned or to be acquired in fee simple by the Company or any Wholly-Owned Subsidiary be accepted as Collateral and included as a Borrowing Base Property by delivering to the Agent and the Banks a written request therefor. (ii) ACCEPTANCE OF COLLATERAL. The Banks shall have the right, in their sole discretion, and after performing such due diligence as the Banks desire in their sole discretion, to accept or reject any project offered as an additional Borrowing Base Property. The Banks shall not unreasonably withhold their acceptance of an apartment project owned in fee simple by the Company or any Wholly-Owned Subsidiary overed as a Borrowing Base Property hereunder if, through the due diligence contemplated hereby, the Banks determine that the project is of a quality and character, and is located in a geographical market, which is consistent 37 with the then-current or any previous Borrowing Base Properties hereunder or under the Previous Credit Agreement. The Company shall at its expense provide the Agent and the Banks with the following due diligence materials and information with respect to any project offered as a Borrowing Base Property hereunder, at least six (60) days prior to the delivery by the Company of the initial Borrowing Notice with respect to such project: (A) an Appraisal; (B) a preliminary title report and an ALTA survey meeting the Agent's customary requirements; (C) written advice relating to such lien and judgment searches as the Agent shall have requested of the Company with respect to such Borrowing Base Property; (D) an environmental site assessment with respect to such Borrowing Base Property, dated as of a recent date, prepared by a qualified firm acceptable to the Agent, identifying any conditions or operations on such property that are not in compliance with any Environmental Laws and any Hazardous Materials located thereon, showing Estimated Remediation Costs, if any, and stating that there are no conditions on such property or other items requiring further investigation or remediation, and any follow-on or supplemental report required by the Agent, together with the Agent's standard form Environmental Questionnaire and Disclosure Statement completed by the Company; (E) if required by the Agent, a report regarding structural, siting, engineering, seismic and code/legal compliance (including compliance with the Americans With Disabilities Act) matters; (F) current, certified rent roll and other reports of the financial and operating results (for the most recent 12-month period) and projections for the property setting forth in such format as the Agent may require the information relevant to such property necessary to calculate the Revolving Facility Debt Service Coverage-Based Principal Limit therefor; (G) copies of the standard lease form and the property management agreement and other material operating agreements or contracts relating to the property; (H) if required by the Agent, evidence of the zoning, subdivision and entitlements status of the property, including, without limitation, copies of the certificate of occupancy and any other material permits, licenses or approvals required for the property; (I) a copy of the purchase and sale agreement(s) by which the Company or such Wholly-Owned Subsidiary has acquired the property; 38 (J) such consents, estoppels, subordination agreements and other documents and instruments executed by Persons party to material contracts relating to such Borrowing Base Property as are requested by the Agent or the Requisite Banks; and (K) such other items as the Agent may reasonably request. The Company acknowledges that the review of the due diligence materials described in this Section 2.13(a)(ii) will require advance notice to the Agent and the Banks, and the Company undertakes to provide as much advance notice as possible to achieve timely review of such materials. (iii) CONDITIONS TO INCLUSIONS OF PROPOSED PROJECTS IN BORROWING BASE. Each of the following conditions must be satisfied (or waived by the Agent in writing) prior to the Banks' acceptance of any apartment project as a Borrowing Base Property and as Collateral hereunder: (A) ACCEPTANCES. The Banks shall have agreed to accept the apartment project offered by the Company for inclusion as a Borrowing Base Property and as Collateral in the Banks' sole and absolute discretion in accordance with Section 2.13(a)(ii) above, and the Agent shall have so notified the Company in writing. Any such acceptance shall be subject to the satisfaction of the other conditions set forth in this Section 2.13(a)(iii). Acceptance by the Banks of any apartment project as a Funded Project under (and as defined in) the Bridge Loan Agreement, shall not create a presumption of acceptance of such project as a Borrowing Base Property hereunder. (B) COLLATERAL DOCUMENTS. The Company shall deliver to the Agent, at the Company's sole expense: (i) the Collateral Documents for such project, each of which shall be duly executed by the Company and recorded where required and shall create a duly perfected first priority Lien on or security interest in, or assignment of, the Collateral described therein, and (ii) such termination statements and other documents as may be necessary to terminate all Liens on such Project other than Permitted Exceptions. In the case of a Borrowing Base Property owned by a Wholly-Owned Subsidiary, the Collateral Documents delivered to the Agent shall include Environmental Indemnity Agreements executed both by such Wholly-Owned Subsidiary and by the Company. (C) TITLE ASSURANCES. The Agent shall receive a Title Policy for such project. (D) INSURANCE. The Company shall have provided the Agent with evidence satisfactory to the Requisite Banks that the Company has obtained and the Agent has been named as loss payee under and has been issued a standard mortgagee endorsement for, all policies of casualty insurance, and named as additional insured under all policies of liability insurance, required by any Collateral Document with respect to such Borrowing Base Property; 39 (E) LEGAL OPINIONS. The Company shall have delivered to the Agent, if required by the Agent, opinions of 0) counsel to the Borrower as to the due authorization, execution and delivery of the Mortgage and other Collateral Documents for such property, and lack of any conflict of any such document with any Contractual Obligations of the Company or the REIT in form and substance satisfactory to the Agent and the Requisite Banks, and (ii) counsel to the Agent in the state where the property is located concerning the form, legality and enforceability of the Mortgage and other Collateral Documents relating to such property, lack of any violation of any Requirements of Law as a result of the execution, delivery and performance of such documents, and such other matters relating to the Company, the REIT, such property and such documents as the Agent may require; (F) OFFICERS' CERTIFICATE. The Company shall have delivered to the Agent a certificate of two Responsible Officers substantially in the form of EXHIBIT H confirming (i) that all conditions precedent set forth in this Section 2.13(a)(iii) (other than those based solely upon the approval of the Agent or the Banks) have been satisfied with respect to such project; (ii) that all financial and operating information delivered to the Agent pursuant to Section 2.13(a)(ii), subject to audit, is complete and correct to the knowledge of the Company and setting forth in detail the calculation of the Revolving Facility Debt Service Coverage-Based Principal Limit for such project; (iii) that the proposed project, if included as a Borrowing Base Property, would not be required to be excluded as Collateral pursuant to Section 2.13(b); (iv) the Company's purchase price for the property, upon which the Agent and the Banks shall be entitled to rely; and (v) the Person owning the proposed project holds no Indebtedness other than as permitted under Section 7.02(a)-(e); (G) EQUITY INTERESTS PLEDGE. If the proposed project is owned by a Wholly-Owned Subsidiary, the owner(s) of such Wholly-Owned Subsidiary shall have delivered to the Agent a pledge of the Stock in such Wholly-Owned Subsidiary, substantially in the form of EXHIBIT J hereto, together with financing statements or Stock certificates (as applicable), and such legal opinions or other evidence as the Agent may require to assure or confirm that the Agent holds for the benefit of the Banks a duly perfected, first-priority Lien on such Stock. Under no circumstances shall the Agent or the Banks be deemed to have a lien on any Borrowing Base Property prior to the time a first priority Mortgage and first priority assignment of leases and rents encumbering such property have been recorded at the Agent's instruction. (b) EXCLUSION OF BORROWING BASE PROPERTIES FROM THE COLLATERAL. Any Borrowing Base Property will automatically be considered to have an Appraised Value of zero for purposes of the calculations of the Borrowing Base hereunder and will be excluded as a Borrowing Base Property and removed as Collateral for the Obligations: (i) Within ten (10) days after demand from the Agent to the Company following the occurrence of any one of the following events: 40 (A) any Event of Loss with respect to such property which is not restored or repaired as required under the terms of the Mortgage encumbering such property within no more than one hundred and twenty (120) days after the occurrence of such Event of Loss; or (B) the occurrence of an adverse change in the environmental condition of the property from that described in the materials described in Section 2.13(a)(ii)(d) above which is not adequately remediated pursuant to the terms of the Environmental Indemnity Agreement relating to or Mortgage encumbering such property; (ii) Immediately upon the occurrence of any sale, transfer or encumbrance of such property (without limiting the other rights of the Banks with respect to any such sale, transfer or encumbrance under the Loan Documents) other than Permitted Liens. (c) APPRAISALS. The Company shall reimburse the Agent for the cost of all Appraisals of properties offered by the Company as proposed Borrowing Base Properties under Section 2.13(a). Any delay in the completion of such appraisals shall be the sole risk of the Company. Requisite Banks shall have the right to have the Borrowing Base Properties reappraised in the event that the Company delivers a notice of its election to convert the Revolving Facility to the Term Loan pursuant to Section 4.03. Requisite Banks may exercise this right only once at any time after the notice of election to convert is delivered to the Agent (unless otherwise required by applicable law) and the Company shall reimburse the Agent for the cost of all such reappraisals. All appraisals shall be subject to review and approval by the Agent and the Requisite Banks. The Company shall cooperate with such Appraisals, including by providing the appraisers with access to the premises of the Company, the books and records of the Company, and the Collateral or proposed Collateral subject to Appraisal. (d) CASH COLLATERAL. The Company shall have the right to deposit cash as Collateral hereunder (together with all interest and earnings thereon, "Pledged Cash") into an interest bearing deposit account (the "CASH COLLATERAL ACCOUNT") established with and pledged to the Agent for the ratable benefit of the Banks pursuant to documentation in form and substance satisfactory to the Agent and the Requisite Banks. Such Cash Collateral Account shall secure the Obligations. The Company hereby grants a perfected first priority security interest in favor of the Agent for the ratable benefit of the Banks in all Pledged Cash and in such Cash Collateral Account and all sums at any time held, deposited or invested therein, together with any interest or other earnings thereon, and all proceeds thereof, whether accounts, general intangibles, chattel paper, deposit accounts, instruments, documents or securities, together with all rights of a secured party with respect thereto (even if no further documentation is requested by the Agent or the Requisite Banks or executed by the Company with respect thereto). The Company shall execute such additional documents as the Agent or the Requisite Banks in their discretion may require and shall provide all other documents requested by the Agent or the Requisite Banks to evidence or perfect the Agent's first priority security interest in such Cash Collateral Account. The Cash Collateral Account shall be held in the name of the Company as debtor, with the Agent as secured party for the ratable benefit of the Banks. All interest earned on the Cash Collateral Account shall be retained in the Cash Collateral Account subject to the Company's withdrawal 41 rights set forth herein. The Company shall treat all interest earned on the Cash Collateral Account as its income for federal income tax purposes. No Pledged Cash shall be withdrawn from the Cash Collateral Account by the Company unless after such withdrawal the Borrowing Base would be equal to or greater than the Outstanding Amount and no Event of Default is then continuing. Upon the occurrence and during the continuation of an Event of Default, the Agent may (and, upon the instruction of the Requisite Banks, shall): (i) without any advertisement or notice to or authorization from the Company (all of which advertisements, notices and/or authorizations are hereby expressly waived), withdraw, sell or otherwise liquidate all Pledged Cash and apply the proceeds thereof to the unpaid Obligations in such order as the Requisite Banks may elect in their sole discretion, without liability for any loss (including as a result of any sale or liquidation of any account including such Pledged Cash such before maturity) and the Company hereby consents to any such withdrawal and application as a commercially reasonable disposition of such Collateral and agrees that such withdrawal shall not result in satisfaction of the Obligations except to the extent the amounts are applied to such sums; (ii) without any advertisement or notice to or authorization from the Company (all of which advertisements, notices and/or authorizations are hereby expressly waived), notify any account debtor on any such Collateral to make payment directly to the Agent; (iii) foreclose upon all or any portion of such Collateral or otherwise enforce the Agent's security interest in any manner permitted by law or provided for in this Agreement; (iv) sell or otherwise dispose of all or any portion of such Collateral at one or more public or private sales, whether or not such Collateral is present at the place of sale, for cash or credit or future delivery, on such terms and in such manner as the Requisite Banks may determine; (v) recover from the Company all costs and expenses, including, without limitation, reasonable attorneys' fees, incurred or paid by the Agent in exercising any right, power or remedy provided by this Agreement or by law; and (vi) exercise any other right or remedy available to the Agent or the Banks under applicable law or in equity. (e) RELEASES. The Banks irrevocably authorize the Agent, at its option and in its discretion, to release any Lien granted to or held by the Agent upon any Collateral (i) upon termination of the Commitments and payment in full of all Loans payable under this Agreement and under any other Loan Document; (ii) if such Collateral is excluded as Collateral pursuant to Section 2.13(b); (iii) pursuant to Section 7.05 or 2.13(d); or (iv) if approved, authorized or ratified in writing by all the Banks. In addition, the Banks irrevocably authorize the Agent, at its option and in its discretion, to subordinate the Lien granted to or held by the Agent upon any Collateral to easements, rights-of-way, restrictions, or other similar 42 encumbrances incurred in the Ordinary Course of Business of the Company which do not in any case materially detract from the value of the Property subject thereto or interfere with the ordinary conduct of the business of the Company; in making the determinations set forth in this sentence, the Agent shall be entitled to rely solely, without investigation of any kind, upon the written certification of two (2) Responsible Officers of the Company, and the Agent shall incur no liability to any Person by virtue of such reliance. 2.14 PAYMENTS BY THE BANKS TO THE AGENT. (a) RELIANCE OF AGENT ON, PAYMENTS BY THE BANKS. Unless the Agent shall have received notice from a Bank on the Closing Date or, with respect to each borrowing after the Closing Date, at least one Business Day prior to the date of any proposed borrowing, that such Bank will not make available to the Agent for the account of the Company the amount of that Bank's Commitment Percentage of the Loan to be funded on such date, the Agent may assume that each Bank has made such amount available to the Agent on the borrowing date, and the Agent may (but shall not be required to), in reliance upon such assumption, make available to the Company a corresponding amount on such date. If and to the extent any Bank shall not have made its full amount available to the Agent and the Agent in such circumstances has made available to the Company such amount, that Bank shall on the next Business Day following the date of such borrowing make such amount available to the Agent, together with interest at the Federal Funds Rate for and determined as of each day during such period. A certificate of the Agent submitted to any Bank with respect to amounts owing under this Section 2.14(a) shall be conclusive, absent manifest error. If such amount is so made available, such payment to the Agent shall constitute such Bank's Loan (as of the date of the borrowing) for all purposes of this Agreement. If such amount is not made available to the Agent on the next Business Day following the borrowing date, the Agent shall notify the Company of such failure to fund and, upon demand by the Agent, the Company shall pay such amount to the Agent for the Agent's account, together with interest thereon for each day elapsed since the date of such borrowing, at a rate per annum equal to the interest rate applicable at the time to the Loans comprising such borrowing, and the Company may exercise any rights and remedies it may have against the Bank that so failed to fund. (b) OBLIGATIONS OF AGENT; BANK. The failure of any Bank to make any Loan on any date of borrowing shall not relieve any other Bank of any obligation hereunder to make a Loan on the date of such borrowing, but no Bank shall be responsible for the failure of any other Bank to make the Loan to be made by such other Bank on the date of any borrowing. 2.15 SHARING OF PAYMENTS ETC. If, other than as expressly contemplated elsewhere herein, any Bank shall obtain on account of the Loans made by it any payment (whether voluntary, involuntary, through exercise of any right of setoff, or otherwise) in excess of its Commitment Percentage of payments on account of the Loans obtained by all the Banks, such Bank shall forthwith (a) notify the Agent of such fact, and (b) purchase from the other Banks such participations in the Loans made by them as shall be necessary to cause such purchasing Bank to share the excess payment ratably with each of them; PROVIDED, HOWEVER, that if all or any portion of such excess payment is thereafter recovered from the purchasing Bank, 43 such purchase shall to that extent be rescinded and each other Bank shall repay to the purchasing Bank the purchase price paid thereto together with a percentage (calculated by dividing (i) the amount of such paying Bank's required repayment by (ii) the total amount so recovered from the purchasing Bank) of any interest or other amount paid or payable by the purchasing Bank in respect of the total amount so recovered. The Company agrees that any Bank so purchasing a participation from another Bank pursuant to this Section 2.15 may, to the fullest extent permitted by law, exercise all of such purchasing Bank's rights of payment (including the right of setoff, but subject to Section 10.09) with respect to such participation as fully as if such purchasing Bank were the direct creditor of the Company in the amount of such participation. The Agent shall keep records (which shall be conclusive and. binding in the absence of manifest error) of participations purchased pursuant to this Section 2.15 and shall in each case notify the Banks following any such purchases. 2.16 Participations Purchased by Banks in the Letter of Credit Liability. (a) On the date of the issuance of each Letter of Credit, the Issuing Bank shall be deemed irrevocably and unconditionally to have sold and transferred to each Bank (other than the Issuing Bank) and each Bank shall be deemed to have irrevocably and unconditionally purchased and received from the Issuing Bank, an undivided interest and participation, to the extent of such Bank's Commitment Percentage in effect from time to time, in such Letter of Credit and all Letter of Credit Liability with respect thereto. The Revolving Commitment of each Bank hereunder shall include that Bank's share of the Letter of Credit Liability. (b) In the event that any reimbursement obligation under this Agreement is not paid when due to the Issuing Bank with respect to any Letter of Credit, the Issuing Bank shall promptly notify the Agent to that effect, and the Agent shall promptly notify each Bank (other than the Issuing Bank) of the amount of such reimbursement obligation and each Bank other than the Issuing Bank shall immediately pay to the Agent for distribution to the Issuing Bank, in lawful money of the United States and in same day funds, an amount equal to such Bank's Commitment Percentage then in effect of the amount of such unpaid reimbursement obligation. (c) The obligation of each Bank other than the Issuing Bank to make payments under subsection (b) above shall be unconditional and irrevocable and shall be made under all circumstances, including, without limitation, following the occurrence of any Default or any Event of Default or any of the circumstances referred to in Section 2.01(a)(ii) hereof. (d) Prior to the occurrence of any Event of Default, the Agent shall promptly distribute to each Bank its Commitment Percentage (or other applicable share as expressly provided herein) of all amounts received on account of the obligations of the Company to repay amounts drawn under any Letter of Credit (in like funds as received). Following the occurrence of an Event of Default, all amounts received by the Agent on account of such obligations shall be disbursed by the Agent as follows: 44 (i) First, to the payment of expenses incurred by the Agent in the performance of its duties and enforcement of its rights under the Loan Documents, including, without limitation, all costs and expenses of collection, attorneys' fees, court costs and foreclosure expenses; (ii) Then, to the Banks, pro rata in accordance with their respective Commitment Percentages until all outstanding reimbursement obligations for drawings on such Letter of Credit and interest accrued thereon have been paid in full; and (iii) Then, and if but only if there remains any available amount which has not been drawn under such Letter of Credit, to the Agent to hold as cash collateral for the obligation of Company to reimburse any future drawings on such Letter of Credit, Company hereby granting to the Agent, for the pro rata, PARI PASSU benefit of the Banks, a first perfected security interest therein and hereby irrevocably agreeing that amounts so held may be applied from time to time in reimbursement of drawings on such Letter of Credit as the same may occur, until the expiration of such Letter of Credit and payment in full of all amounts due with respect to any drawing thereon. (e) If any payment received from Company on account of any reimbursement obligation with respect to any Letter of Credit and distributed to a Bank under Section 2.16(d) hereof is thereafter recovered from the Issuing Bank, each Bank which received such distribution shall, upon demand by the Agent, repay to the Issuing Bank such Bank's ratable share of the amount so recovered together with an amount equal to such Bank's ratable share (according to the proportion of (i) the amount of such Bank's required repayment to (ii) the total amount so recovered) of any interest of other amount paid or payable by the Issuing Bank in respect of the total amount so recovered. ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY 3.01 TAXES. (a) Subject to Section 3.01(g), any and all payments by the Company to the Agent or the Banks under this Agreement shall be made free and clear of, and without deduction or withholding for, any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding such taxes (including income taxes or franchise taxes) as are imposed on or measured by the recipient's net income by the jurisdiction under the laws of which the recipient is organized or maintains a Lending Office, or otherwise does business, or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). (b) In addition, the Company shall pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery, recordation or registration of, 45 or otherwise with respect to, this Agreement or any other Loan Documents (hereinafter referred to as "Other Taxes"). (c) The Company shall indemnify and hold harmless the Agent and each Bank for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 3.01) paid by the Agent or such Bank and any liability (including penalties, interest, additions to tax and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. Payment under this indemnification shall be made within thirty (30) days from the date the Agent or any Bank makes written demand therefor. (d) If the Company shall be required by law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum payable hereunder to the Agent or any Bank, then, subject to Section 3.01(g): (i) the sum payable shall be increased as necessary so that, after making all required deductions (including deductions applicable to additional sums payable under this Section 3.01) the Agent or such Bank, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made; (ii) the Company shall make such deductions; and (iii) the Company shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (e) Within 30 days after the date of any payment by the Company of Taxes or Other Taxes, the Company shall furnish to the Agent the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment satisfactory to the Agent. (f) Each Bank which is a foreign Person (i.e., a Person other than a United States Person for United States Federal income tax purposes) agrees that: (i) such Bank shall, no later than the Closing Date (or, in the case of a Bank which becomes a party hereto pursuant to Section 10.08 after the Closing Date, the date upon which such Bank becomes a party hereto), deliver to the Company through the Agent two (2) accurate and complete signed originals of Internal Revenue Service Form 4224 or any successor thereto ("Form 4224"), or two (2) accurate and complete signed originals of Internal Revenue Service Form 1001 or any successor thereto ("Form 1001"), as appropriate, in each case indicating that the Bank is on the date of delivery thereof entitled to receive payments of principal, interest and fees under this Agreement free from withholding of United States Federal income tax; (ii) if at any time such Bank makes any changes necessitating a new form, such Bank shall with reasonable promptness deliver to the Company through the Agent in replacement for, or in addition to, the forms previously delivered by such Bank hereunder, two (2) accurate and complete signed originals of Form 4224, or two (2) accurate and 46 complete signed originals of Form 1001, as appropriate, in each case indicating that such Bank is on the date of delivery thereof entitled to receive payments of principal, interest and fees under this Agreement free from withholding of United States Federal income tax; (iii) such Bank shall, before or promptly after the occurrence of any event (including the passing of time but excluding any event mentioned in (ii) above) requiring a change in or renewal of the most recent Form 4224 or Form 1001 previously delivered by such Bank, deliver to the Company through the Agent two (2) accurate and complete original signed copies of Form 4224 or Form 1001, as appropriate, in replacement of the forms previously delivered by such Bank; and (iv) such Bank shall, promptly upon the Company's reasonable request to that effect, deliver to the Company such other forms or similar documentation as may be required from time to time by any applicable law, treaty, rule or regulation in order to establish such Bank's tax status for withholding purposes. (g) The Company shall not be required to pay any additional amounts in respect of United States Federal or state income tax pursuant to Section 3.01(d) to any Bank or any duly appointed assignee for the account of any Lending Office of such Bank or assignee: (i) if the obligation to pay such additional amounts arises as a result of a failure by such Bank or assignee to comply with its obligations under Section 3.01(f) in respect of such Lending Office; (ii) if such Bank or assignee shall have delivered to the Company a Form 4224 in respect of such Lending Office pursuant to Section 3.01(f), and such Bank or assignee shall not at any time be entitled to exemption from deduction or withholding of United States Federal income tax in respect of payments by the Company hereunder for any reason other than a change in United States law or regulations or in the official interpretation of such law or regulations by any governmental authority charged with the interpretation or administration thereof (whether or not having the force of law) after the date of delivery of such Form 4224; or (iii) if such Bank or assignee shall have delivered to the Company a Form 1001in respect of such Lending Office pursuant to Section 3.01(f), and such Bank or assignee shall not at any time be entitled to reduction, partial exemption or exemption from deduction or withholding of United States federal income tax in respect of payments by the Company hereunder for the account of such Lending Office for any reason other than a change in United States law or regulations or any applicable tax treaty or regulations or in the official interpretation of such law, treaty or regulations by any governmental authority charged with the interpretation or administration thereof (whether or not having the force of law) after the date of delivery of such Form 1001. (h) If, at any time, the Company requests any Bank to deliver any forms or other documentation pursuant to Section 3.01(f)(iv), then the Company shall, on demand of such Bank, through the Agent reimburse such Bank for any costs and expenses 47 (including Attorney Costs) reasonably incurred by such Bank in the preparation or delivery of such forms or other documentation. (i) If the Company is required to pay additional amounts to the Agent or any Bank pursuant to Section 3.01(d), then such Bank shall use its reasonable best efforts (consistent with legal and regulatory restrictions) to change the jurisdiction of its Lending Office so as to eliminate any such additional payment by the Company which may thereafter accrue if such change in the judgment of such Bank is not otherwise disadvantageous to such Bank. 3.02 ILLEGALITY. (a) If any Bank shall determine that the introduction of any Requirement of Law or any change therein or in the interpretation or administration thereof has made it unlawful, or that any central bank or other Governmental Authority has asserted that it is unlawful, for such Bank or its Lending Office to make LIBOR Loans, then, on notice thereof by such Bank to the Company through the Agent, the obligation of such Bank to make LIBOR Loans shall be suspended until such Bank shall have notified the Agent and the Company that the circumstances giving rise to such determination no longer exist. (b) If any Bank shall reasonably determine that it is unlawful to maintain any LIBOR Loan, the Company shall notify Bank that the Company shall either (i) prepay in full all LIBOR Loans of such bank then outstanding, together with interest accrued thereon, or (ii) elect to convert in accordance with Section 2.04 all LIBOR Loans then outstanding, after payment to such Bank of all interest accrued thereon, into Base Rate Loans, either on the last day of the Interest Period thereof if such Bank may lawfully continue to maintain such LIBOR Loans to such day, or immediately if such Bank may not lawfully continue to maintain such LIBOR Loans, together with any amounts required to be paid in connection therewith pursuant to Section 3.04. (c) If the obligation of any Bank to make or maintain LIBOR Loans has been terminated, the Company may elect, by giving notice to such Bank through the Agent, that all Loans which would otherwise be made by such Bank as LIBOR Loans shall instead be made as Base Rate Loans. 3.03 INCREASED COSTS AND REDUCTION OF RETURN. (a) If any Bank shall determine that, due to either (i) the introduction of or any change in or in the interpretation of any Requirement of Law or (ii) the compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to such Bank of agreeing to make or of making, funding or maintaining any LIBOR Loans hereunder, then the Company shall be liable for, and shall from time to time, upon written demand therefor by such Bank (with a copy of such demand to the Agent), which demand shall set forth the basis of such increased cost in reasonable detail, pay to the Agent for the account of such Bank, such additional amounts as are sufficient to compensate such Bank for such increased costs. 48 (b) If any Bank shall have reasonably determined that (i) the introduction of any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation, (iii) any change in the interpretation or administration of any Capital Adequacy Regulation by any central bank or other Governmental Authority charged with the interpretation or administration thereof, or (iv) compliance with any Capital Adequacy Regulation by such Bank (or its Lending Office) or any corporation controlling such Bank, effects or would effect an increase in the amount of capital required or expected to be maintained by such Bank or any corporation controlling such Bank (taking into consideration such Bank's or such corporation's policies with respect to capital adequacy and such Bank's desired return on capital), then, upon written demand of such Bank (with a copy to the Agent), which demand shall set forth in reasonable detail the basis for any such increase in required capital, the Company shall immediately pay to such Bank, from time to time as specified by such Bank, additional amounts sufficient to compensate such Bank for such increase. (c) If any Bank shall have determined that any of the events described in Sections 3.03(a) or 3.03(b) affects or would affect an increase in cost or reduction of return resulting in additional Obligations hereunder, such Bank shall, with reasonable promptness, notify the Company and the Agent of such determination, PROVIDED that no failure to do so shall relieve the Company of any Obligation hereunder. 3.04 FUNDING LOSSES. The Company agrees to reimburse each Bank for, and to hold each Bank harmless from, any loss or expense that such Bank may sustain or incur as a consequence of: (a) the failure of the Company to make any required payment or prepayment of principal of any LIBOR Loan or Base Rate Loan (including payments to be made after any acceleration thereof); (b) the failure of the Company to borrow, continue or convert a Loan after the Company has given (or is deemed to have given) a Borrowing Notice or a Notice of Conversion/Continuation; (c) the failure of the Company to make any prepayment after the Company has given a notice in accordance with Section 2.05; (d) the prepayment of a LIBOR Loan on a day which is not the last day of the Interest Period with respect thereto; or (e) the conversion of any LIBOR Loan to a Base Rate Loan on a day that is not the last day of the Interest Period with respect thereto; such amount or amounts to include an amount equal to the excess, if any, of (a) the amount of interest that would have accrued on the amount not paid, not borrowed, not prepaid, prepaid, or converted for the period from the date of such failure to pay, failure to borrow, failure to prepay, prepayment, or conversion to the last day of then current Interest Period (or in the case of a failure to borrow, the Interest Period which would have commenced on the date of such failure) 49 at the interest rate applicable to that LIBOR Loan, over (b) the amount of interest that would accrue to the Bank on such amount at the LIBO Rate in effect on such date by placing such amount on deposit for a comparable period with leading banks in the London interbank market. 3.05 INABILITY TO DETERMINE RATES. If the Agent shall have determined that for any reason adequate and reasonable means do not exist for ascertaining the LIBO Rate for any requested Interest Period with respect to a proposed LIBOR Loan or that the LIBO Rate applicable pursuantt o Section 2.09(a) for any requested Interest Period with respect to a proposed LIBOR Loan does not adequately and fairly reflect the cost to such Banks of funding such Loan, the Agent will forthwith give notice of such determination to the Company and each Bank. Thereafter, the obligation of the Banks to make or maintain LIBOR Loans hereunder shall be suspended until the Agent revokes such notice in writing. Upon receipt of such notice, the Company may revoke any Borrowing Notice or Notice of Conversion/Continuation then submitted by it. If the Company does not revoke such notice, the Banks shall make, convert or continue the Loans, as proposed by the Company, in the amount specified in the applicable notice submitted by the Company, but such Loans shall be made, converted or continued as Base Rate Loans instead of LIBOR Loans. 3.06 CERTIFICATES OF RANKS, Any Bank claiming reimbursement or compensation pursuant to this Article III, shall deliver to the Company (with a copy to the Agent) a certificate setting forth in reasonable detail a summary of the basis of such demand and the amount payable to such Bank hereunder. 3.07 SURVIVAL. The agreements and obligations of the Company in this Article III shall survive the payment of all other obligations. ARTICLE IV CONDITIONS PRECEDENT 4.01 CONDITIONS OF FIRST LOAN. The obligation of each Bank to make its first Loan hereunder is subject to the condition that the Agent shall have received on or before the Closing Date, the following, in the case of agreements, documents and other instruments, in form and substance satisfactory to the Agent, each Bank and their respective counsel in their sole discretion and in sufficient copies for each Bank: (a) CREDIT AGREEMENT AND NOTES. This Agreement executed by the Company, the Agent and each of the Banks, and a Note executed by the Company in favor of each of the Banks; the Notes shall be dated the Closing Date; (b) REIT GUARANTY DOCUMENTS. The REIT Guaranty Documents executed by the REIT, GP Corp, LP Corp, AIMCO Holdings, Qrs, Somerset, and AIMCO/OTC; 50 (c) BORROWING BASE DOCUMENTS. Delivery of the documentation for each property described in SCHEDULE 1.01A described in Section 2.13(a)(iii); (d) SUBORDINATION AGREEMENt. Such subordination agreements relating to the Intra-Company Debt as the Requisite Banks may require, in form and substance satisfactory to the Requisite Banks. (e) RESOLUTIONS; INCUMBENCY. (i) Certified copies of the resolutions of the boards of directors of the REIT and the other corporations party (whether directly or as general partners) to the Loan Documents, their execution, delivery and performance thereof, including, in the case of GP Corp, a resolution approving and authorizing in its capacity as the general partner of the Company the execution, delivery and performance by the Company of this Agreement and the other Loan Documents to be delivered hereunder and the borrowing of the Loans; (ii) A certificate of the Secretary or Assistant Secretary of the REIT and the other corporations party (whether directly or as general partners) to the Loan Documents certifying the names and true signatures of the officers of such Persons authorized to execute and deliver, as applicable, this Agreement and all other Loan Documents to be delivered hereunder; (f) ORGANIZATIONAL DOCUMENTS. Each of the following documents: (i) certified copies of the Organizational Documents of the REIT, the Company and, if requested by Bank, any Subsidiary thereof as in effect on the Closing Date, and, in the case of corporate or limited liability company articles or a certificate of limited partnership, certified as of a recent date by the secretary of state of the state of organization; and (ii) a good-standing certificate for the REIT, the Company and, if requested by Bank, any Subsidiary thereof, from the secretary of state of the state of organization of the same and each state where such Person is qualified to do business as a foreign corporation, partnership, trust, limited liability company or other organization as of a recent date, together with a bring-down certificate by telex or telefacsimile, dated the Closing Date; (g) CERTIFICATE. A certificate signed by at least two (2) Responsible Officers, dated as of the Closing Date, stating that: (i) the representations and warranties of the Company and the REIT contained in Article V hereof and of the Company, the REIT and their Subsidiaries contained in the Loan Documents are true and correct on and as of such date, as though made on and as of such date; (ii) no Default or Event of Default exists or would result from the initial borrowing; 51 (iii) there has occurred since December 31, 1995 no act, omission, change or occurrence which would have a Material Adverse Effect; and (iv) all conditions precedent set forth in this Section 4.01 have been satisfied (other than those based solely on the approval of the Agent, the Banks, or the Requisite Banks); (h) LEGAL OPINIONS. The Agent shall have received (i) an opinion of counsel to the Company, and addressed to the Agent and the Banks in a form approved by Agent; and (ii) an opinion of Colorado counsel to the Company and addressed to the Agent and the Banks in a form approved by Agent; (i) COSTS EXPENSES; FEES. Payment of all costs, expenses, and accrued and unpaid fees (including legal fees and expenses) to the extent then due and payable on the Closing Date, including any arising under Sections 2.10, 3.01 and 10.04; (j) OTHER DOCUMENTS. Such other approvals, opinions, or documents as the Agent or the Requisite Banks may reasonably request; and (k) CLOSING OF BRIDGE LOAN. All conditions to the consummation of the transactions contemplated to occur on the Closing Date under (and as such term is defined in) the Bridge Loan Agreement shall have been satisfied. 4.02 CONDITIONS TO EACH LOAN. The obligation of each Bank to make any Loan (including its first Loan) is subject to the satisfaction of the following conditions precedent: (a) BORROWING NOTICE. The Agent shall have received in the case of a Loan (with, in the case of the first Loan only, a copy for each Bank) a Borrowing Notice or Notice of Conversion/Continuation in compliance with the terms of Section 2.03 or Section 2.04, as applicable; (b) OTHER DOCUMENTS. The Agent shall have received such other approvals, opinions and documents as the Agent or any Bank may reasonably request; (c) COLLATERAL VALUE. The Outstanding Amount shall not, as a result of the making, continuation or conversion of such Loan, exceed the Borrowing Base; (d) REPRESENTATIONS AND WARRANTIES. The representations and warranties made by the Company, the REIT and their respective Subsidiaries contained in the Loan Documents, including Article V of this Agreement, shall be true and correct on and as of the date such Loan is made, with the same effect as if made on and as of such date; (e) NO EXISTING DEFAULT. No Default or Event of Default shall exist or shall result from the making, continuation or conversion of such Loan; (f) NO MATERIAL ADVERSE EFFECT. No act, omission, change, occurrence or event which has a Material Adverse Effect shall have occurred since the Closing Date; and 52 (g) NO FUTURE ADVANCE NOTICE. Neither the Agent nor any Bank shall have received from the Company, the REIT or any Subsidiary thereof, any notice that any Collateral Document will no longer secure, or that the REIT Guaranty Documents will no longer guaranty, future Loans to be made under this Agreement. Each Borrowing Notice and Notice of Continuation/Conversion submitted by the Company hereunder shall constitute a representation and warranty by the Company hereunder, as of the date of such notice and as of the date of the making, continuation or conversion of the corresponding Loan, that the conditions in this Section 4.02 have been satisfied. 4.03 CONVERSION CONDITIONS. The Company shall have the right to convert the Revolving Facility into the Term Loan at any time during the term of the Revolving Facility by giving no less than ninety (90) days prior written notice to the Agent, so long as the following conditions (collectively, the "Conversion Conditions") are satisfied: (a) REPRESENTATIONS AND WARRANTIES. All representations, warranties and certifications of the Company, the REIT and their respective Subsidiaries in the Loan Documents or delivered pursuant thereto shall be true and correct on and as of the Conversion Date, before and after giving effect to the conversion, as though made on such date; (b) NO EXISTING DEFAULt. No Default or Event of Default shall have occurred and be continuing as of the date such notice is given or as of the Conversion Date or would result from such conversion; (c) OUTSTANDING AMOUNT. The Outstanding Amount of the Term Loan upon the Conversion Date shall not exceed the Term Loan Borrowing Base, and all Letters of Credit shall have expired or been cancelled; (d) NO MATERIAL ADVERSE EFFECt. No act, omission, change, occurrence or event which has a Material Adverse Effect shall have occurred since the Closing Date; (e) CERTIFICATE. The Agent shall have received and approved a certificate signed by at least two (2) Responsible Officers, dated as of the Conversion Date, stating that: (i) the representations and warranties of the Company contained in Article V hereof and in the Loan Documents are true and correct on and as of the Conversion Date, before and after giving effect to the conversion, as though made on and as of such date; (ii) no Default or Event of Default exists or would result from the conversion; (iii) there has occurred since the Closing Date no act, omission, change or occurrence that would result in a Material Adverse Effect; 53 (iv) the Outstanding Amount of the Term Loan as of the Conversion Date does not exceed the Term Loan Borrowing Base, and certifying to the Term Loan Amount, Term Loan Limit and Term Loan Percentage for each Borrowing Base Property, and the amount of the Term Loan Borrowing Base; and (v) all conditions to the conversion of the Revolving Facility to the Term Loan pursuant to this Agreement have been satisfied (other than those based on the approval of the Agent, the Requisite Banks, or the Banks). (f) RE-APPRAISALS. If the Requisite Banks shall have determined within twenty (20) days after the Agent's receipt of the Company's notice of election to convert the Revolving Facility into the Term Loan to cause the Borrowing Base Properties to be reappraised pursuant to Section 2.13(c), the Agent and the Requisite Banks shall have received and approved of such re-Appraisals prior to the Conversion Date; (g) Evidence regarding Borrowing Base. The Company shall have delivered to the Agent, and the Agent and the Requisite Banks shall have approved such rent rolls, operating statements and other financial materials relating to the Borrowing Base Properties as may be necessary to determine the Term Loan Amount and Term Loan Limit for each Borrowing Base Property and the Term Loan Borrowing Base; (h) COLLATERAL DOCUMENT SUPPLEMENTS TITLE ENDORSEMENTS. If required by Requisite Banks, (i) the Company shall have executed and delivered, and there shall have been recorded in accordance with applicable Requirements of Law, such supplements to the Collateral Documents, in form and substance satisfactory to the Agent and the Requisite Banks, reflecting the conversion of the Revolving Facility into the Term Loan and (ii) the Title Insurer shall have delivered endorsements to the Title Policies insuring the continued first Lien priority following such conversion of the Mortgages encumbering the Borrowing Base Properties, subject to no Liens or exceptions other than Permitted Exceptions; and (i) CONVERSION FEE. The Company shall have paid, on or prior to the Conversion Date, to the Agent for the ratable benefit of the Banks then party hereto the conversion fee set forth in Section 2.10(c) above. ARTICLE V REPRESENTATIONS AND WARRANTIES The Company represents and warrants to the Agent and each Bank that: 5.01 EXISTENCE AND POWER. The Company is a Delaware limited partnership, the REIT is a Maryland corporation, and each of the Company, the REIT and each Management Entity and Subsidiary: (a) ORGANIZATION. Is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization; 54 (b) POWER AND AUTHORITY. Has the power and authority and all governmental licenses, authorizations, consents and approvals to own its Properties, to carry on its business and to execute, deliver, and perform its obligations under, the Loan Documents to which it is a party; (c) DUE QUALIFICATIONS. Except as set forth on Schedule 5.01, is duly qualified as a foreign corporation, partnership, trust or other organization, and licensed and in good standing under the laws of each jurisdiction where its ownership, lease or operation of its Properties or the conduct of its business requires such qualification; and (d) COMPLIANCE WITH LEGAL REQUIREMENTS. Is in substantial compliance with all material Requirements of Law applicable to it. 5.02 AUTHORIZATION; NO CONFLICT. The execution, delivery and performance by the Company, the REIT and any of their Subsidiaries of this Agreement, and any other Loan Document to which such Person is party, have been duly authorized by all necessary partnership, corporate or other organizational action, and do not and will not: (a) ORGANIZATIONAL DOCUMENTS. Contravene the terms of any of such Person's Organizational Documents; (b) Contractual Obligations. Conflict with, or result in any breach or contravention of, or the creation of any Lien (other than pursuant to the Loan Documents) under, any document evidencing any Contractual Obligation to which such Person is a party or any order, injunction, writ or decree of any Governmental Authority to which such Person or its Properties are subject; or (c) REQUIREMENTS OF LAW. Violate any material Requirement of Law applicable to it. 5.03 GOVERNMENTAL AUTHORIZATION. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority (except for recordings in connection with the Liens granted to the Agent under the Collateral Documents) is necessary or required in connection with the execution, delivery or performance by, or enforcement against, the Company, the REIT, or any of their Subsidiaries of this Agreement or any other Loan Document. 5.04 BINDING EFFECt. This Agreement and each other Loan Document to which the Company, the REIT, or any of their Subsidiaries is a party constitute the legal, valid and binding obligations of such Person, enforceable against such Person in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability. 5.05 LITIGATION. Except as specifically disclosed in Schedule 5.05, there are no actions, suits, proceedings, claims or disputes pending, or to the Knowledge of the Company, 55 PAGE threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, against the Company, the REIT, any Management Entity, any of their Subsidiaries or any of their respective Properties, which (a) purport to affect or pertain to this Agreement, or any other Loan Document, or any of the transactions contemplated hereby or thereby, or (b) if determined adversely to any such Person, would reasonably be expected to have a Material Adverse Effect. No injunction, writ, temporary restraining order or any other order of any nature has been issued by any court or other Governmental Authority puporting to enjoin or restrain the execution, delivery and performance of this Agreement or any other Loan Document, or directing that the transactions provided for herein or therein not be consummated as herein or therein provided. 5.06 TITLE TO PROPERTIES. The Company and Wholly-Owned Subsidiaries have good record and marketable title in fee simple to all real property necessary or used in the ordinary conduct of the business of the Company, the REIT and their Subsidiaries, taken as a whole, except for such defects in title as could not, individually or in the aggregate, have a Material Adverse Effect. The Company has good title to its interests in HomeCorp, AIMCO Holdings, the Management Entities and its Subsidiaries. The Properties of the Company, the REIT, and each of their Subsidiaries are subject to no Liens, other than Permitted Liens. The Company has good and marketable title to the Collateral subject to no Liens except Permitted Exceptions. The REIT, GP Corp, LP Corp, DE Sub, HomeCorp, the Finance Subsidiary, Qrs, AIMCO Holdings, Somerset, AIMCO/OTC and the other Subsidiaries listed in SCHEDULE 5.07 have good title to their interests in all properties and entities owned by them (all such interests being disclosed in Schedule 5.07), subject to no Liens except those permitted hereunder and Permitted Liens. 5.07 SUBSIDIARIES; INTERESTS IN OTHER ENTITIES; CHANGES IN ORGANIZATIONAL STRUCTURE. Neither the Company, nor the REIT, nor any of their respective Subsidiaries has any interest in any corporation, partnership or other entity, except as disclosed in SCHEDULE 5.07 and except for new Subsidiaries hereafter formed or acquired in compliance with Sections 7.07(c) and (d). 5.08 FINANCIAL CONDITION. All financial statements delivered by the Company or the REIT hereunder: (a) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (b) are complete, accurate and fairly present the financial condition of the REIT as of the dates thereof and results of operations for the periods covered thereby. All Form 10K filings and Form 10Q filings delivered by the Company or the REIT show all material indebtedness and other liabilities, direct or contingent, of the Company and its Subsidiaries, the Properties of the Company and the Borrowing Base Properties as of the date thereof, including liabilities for taxes, material commitments and Contingent Obligations. Since December 31, 1995, there has been no act, omission, change or event which has had a Material Adverse Effect. 5.09 TAXES. The Company and its Subsidiaries have filed all Federal and other material tax returns and reports required to be filed. Except as disclosed in the SEC Report, (i) all tax returns filed by the Company and its Subsidiaries are complete and correct; (ii) the 56 Company and its Subsidiaries have paid all Federal and other material taxes, assessments, fees and other governmental charges for which they are liable (whether or not reflected on any tax returns) and have fully satisfied any taxes, assessments, fees, and other governmental charges levied or imposed upon them or their Properties, income or assets or otherwise due and payable, except those which are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided in accordance with GAAP and no Notice of Lien has been filed or recorded; (iii) there is no proposed tax assessment against the Company or any of its Subsidiaries which would, if the assessment were made, have a Material Adverse Effect; and (iv) the Company and its Subsidiaries have no primary, secondary or other liability for taxes of any kind arising with respect to any individual, trust, corporation, partnership or other entity as to which the Company or any of its Subsidiaries is directly or indirectly liable for taxes of any kind incurred by such individual or entity either as a transferee, or pursuant to Treasury Regulations section 1.1502-6, or pursuant to any other Requirement of Law. Neither the Company nor any of its Affiliates is (nor has it ever been) a party to any tax sharing agreement. 5.10 ERISA COMPLIANCE. (a) SCHEDULE 5.10 lists all Plans and separately identifies Plans intended to be Qualified Plans and Multiemployer Plans. All written descriptions thereof provided to the Agent and the Banks are true and complete in all material respects. (b) Each Qualified Plan, and to the best knowledge of the Company each Multiemployer Plan, is in compliance in all material respects with the applicable provisionsof ERISA, the Code and other Federal or state law, including all requirements under the Code or ERISA for filing reports (which are true and correct in all material respects as of the date filed), and benefits have been paid in accordance with the provisions of the Plan. (c) Each Qualified Plan and, and to the best knowledge of the Company, Multiemployer Plan has been determined by the IRS to qualify under Section 401 of the Code, and the trusts created thereunder have been determined to be exempt from tax under the provisions of Section 501 of the Code, and to the best knowledge of the Company nothing has occurred which would cause the loss of such.qualification or tax-exempt status. (d) Except as specifically disclosed in SCHEDULE 5.10, there is no outstanding liability under Title IV of ERISA with respect to any Qualified Plan maintained or sponsored by the Company or any ERISA Affiliate, nor to the best knowledge of the Company,with respect to any Multiemployer Plan to which the Company or any ERISA Affiliate contributes or is obligated to contribute. (e) Except as specifically disclosed in SCHEDULE 5.10, no Qualified Plan subject to Title IV of ERISA, and to the best knowledge of the Company, no Multiemployer Plan has any Unfunded Pension Liability. (f) Except as specifically disclosed in SCHEDULE 5.10, no member of the Controlled Group has ever represented, promised or contracted (whether in oral or written form) to any current or former employee (either individually or to employees as a group) that 57 such current or former employee(s) would be provided, at any cost to any member of the Controlled Group, with life insurance or employee welfare plan benefits (within the meaning of section 3(1) of ERISA) following retirement or termination of employment. To the extent that any member of the Controlled Group has made any such representation, promise or contract, such member has expressly reserved the right to amend or terminate such life insurance or employee welfare plan benefits with respect to claims not yet incurred. (g) Members of the Controlled Group have complied in all material respects with the notice and continuation coverage requirements of Section 4980B of the Code. (h) Except as specifically disclosed in SCHEDULE 5.10, no ERISA Event has occurred or is reasonably expected to occur with respect to any Qualified Plan, or, to the best knowledge of the Company, any Multiemployer Plan. (i) There are no pending or, to the Knowledge of the Company, threatened claims, actions or lawsuits, other than routine claims for benefits in the usual and ordinary course, asserted or instituted against (i) any Plan maintained or sponsored by the Company or its assets, (ii) any member of the Controlled Group with respect to any Qualified Plan, or (iii) any fiduciary with respect to any Plan for which the Company may be directly or indirectly liable, through indemnification obligations or otherwise. (j) Except as specifically disclosed in SCHEDULE, neither the Company nor any ERISA Affiliate has incurred nor reasonably expects to incur (i) any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan or (ii) any liability under Title IV of ERISA (other than premiums due and not delinquent under Section 4007 of ERISA) with respect to a Plan. (k) Except as specifically disclosed in SCHEDULE 5.10, neither the Company nor any ERISA Affiliate has transferred any Unfunded Pension Liability to a Person other than the Company or an ERISA Affiliate or otherwise engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA. (l) No member of the Controlled Group has engaged, directly or indirectly, in a non-exempt prohibited transaction (as defined in Section 4975 of the Code or Section 406 of ERISA) in connection with any Plan which could reasonably be expected to have a Material Adverse Effect. 5.11 ENVIRONMENTAL MATTERS. (a) ENVIRONMENTAL LAWS. Except as disclosed in SCHEDULE 5.11 or in the SEC Report, the operations and Properties of the Company, the REIT, the Management Entities and their Subsidiaries comply in all respects with all Environmental Laws, except such non-compliance affecting Properties other than the Borrowing Base Properties as would not (if enforced in accordance with Environmental Laws) result in liability in excess of $250,000 in the aggregate. (b) ENVIRMENTAL PERMITS. Except as described in SCHEDULE 5.11 or in the SEC Report, the Company, the REIT, the Management Entities and their Subsidiaries have obtained and maintained all material licenses, permits, authorizations and registrations required under any Environmental Law ("Environmental Permits"). All such Environmental Permits are in good standing, and each such Person is in compliance with all terms and conditions thereof. (c) ORDERS. Except as specifically disclosed in SCHEDULE 5.11 or in the SEC Report, there are no outstanding written orders &om or agreements with any Governmental Authority nor any judicial or docketed administrative proceedings respecting any Environmental Law, Environmental Claim or Hazardous Material to which the Company, the REIT, any Management Entity, any of their Subsidiaries, or any of such Person's Properties or operations, is subject. (d) HAZARDOUS MATERIALS. Except as disclosed in SCHEDULE 5.11 or in the SEC Report, there are no Hazardous Materials or other conditions or circumstances existing with respect to any Property, or arising &om operations prior to the Closing Date, that would reasonably be expected to give rise to Environmental Claims for any such condition, circumstance or Property. In addition, (i) there are not located on the Properties underground storage tanks (x) that are not properly registered or permitted under applicable Environmental Laws, or (y) that are leaking or emitting Hazardous Materials whether on-or off-site, and (ii) the Company, the REIT, the Management Entities and their Subsidiaries have notified all of their employees of the existence, if any, of any health hazard arising &am the conditions of their employment to the extent required under any Environmental Laws and have met all notification requirements under Title III of CERCLA and all other Environmental Laws. 5.12 COLLATERAL DOCUMENTS. When executed, delivered and recorded pursuant hereto, the Collateral Documents shall be effective to create in favor of the Agent, for the benefit of the Banks, legal, valid and enforceable first-priority Liens in the Collateral and the proceeds thereof, subject only to the Permitted Exceptions. As required by Section 2.13(a), all action, including (a) the recording of Mortgages and Assignment of Leases and (b) the filing of UCC financing statements and other security perfection documents in all appropriate jurisdictions, shall have been taken that is necessary or appropriate to perfect the Agent's Lien, for the benefit of the Banks, in the Collateral. All representations and warranties of the Company and any other Person party to any Collateral Documents that are contained therein are true and correct. 5.13 REGULATED ENTITIES. None of the Company, the REIT, any Management Entity, or any of their Subsidiaries is (a) an "investment company" within the meaning of the Investment Company Act of 1940; or (b) subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any state public utilities code, or any other Federal or state statute or regulation limiting its ability to incur Indebtedness. 5.14 USE OF PROCEEDS: MARGIN REGULATIONS. The proceeds of the Loans are intended to be and shall be used solely for the purposes set forth in and permitted by Sections 59 2.01(b) and Section 6.10, and are intended to be and shall be used in compliance with Section 7.12. 5.15 REIT AND TAX STATUS; STOCK EXCHANGE LISTING. The REIT currently has REIT Status and has maintained REIT Status on a continuous basis since its formation. The Company is not an association taxable as a corporation under the Code. The shares of common Stock of the REIT are listed on the NYSE. 5.16 INSURANCE The Company, the REIT, the Management Entities, their Subsidiaries and the Properties are insured with financially sound and reputable insurance companies, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar Properties in localities where the Company and the Management Entities operate. 5.17 NO DEFAULT. No Default or Event of Default exists or would result from the incurring of any Obligations by the Company. Neither the Company, nor the REIT, nor any Management Entity, nor any of their Subsidiaries is in default under or with respect to any Contractual Obligation in any respect which, individually or together with all such other defaults, would reasonably be expected to have a Material Adverse Effect. 5.18 SEC REPORTS. Neither the SEC Report, nor any SEC reports that may have been filed with the SEC by the REIT subsequent to the SEC Report, contain any untrue statement of a material fact or omits any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they are made, not misleading. 5.19 NOT A "FOREIGN PERSON." Neither the Company nor any Wholly-Owned Subsidiary which owns a Borrowing Base Property is a "foreign person" within the meaning of Section 1445(f)(3) of the Code. 5.20 DEFECTS. Except as disclosed to and approved in writing by the Requisite Banks, to the Knowledge of the Company, there exist no material defects that would make any Borrowing Base Property unsuitable for the present or contemplated use of such Borrowing Base Property. Except as disclosed to and approved in writing by the Requisite Banks, to the Knowledge of the Company, there are no abnormal hazards, including but not limited to earth movement or slippage, affecting any Borrowing Base Property. 5.21 PROPERTY DOCUMENTS. The Company has delivered to the Agent, copies of all easement agreements, reciprocal easement agreements, management agreements, service contracts, and other agreements, instruments and documents and all amendments thereof (whether or not recorded) which affect in any material respect the Company's or any Wholly-Owned Subsidiary's interest in any Borrowing Base Property (except apartment leases). 5.22 CONDEMNATION. No condemnation proceeding involving any Borrowing Base Property or any portion thereof or parking facility used in connection therewith has been commenced or, to the Knowledge of the Company, is contemplated by any Governmental 60 Authority, nor has any portion of my Borrowing Base Property or any parking facility used in connection therewith been damaged due to fire or other casualty. 5.23 VIOLATION OF LAWS: PERMITS. None of the Borrowing Base Properties are being operated in violation of (a) any Requirements of Law or (b) any building permits, restrictions of record, or any agreement affecting any such property or part thereof, or (c) any judgment, decree or order applicable to such property. To the Knowledge of the Company, all governmental permits (including, without limitation, building permits and certificates of occupancy) necessary under applicable Requirements of Law to lawfully construct, own, lease, occupy, use and operate each Borrowing Base Property and the improvements thereon, including, but not limited to, all applicable environmental and zoning laws, ordinances and regulations, have been obtained. 5.24 UTILITIES. Each Borrowing Base Property has adequate water, gas, telephone, electrical supply, storm and sanitary sewerage facilities and means of access to and from public streets or highways. 5.25 LEASES. Except for apartment leases and other Permitted Exceptions, there are no leases affecting any Borrowing Base Property. No rent has been collected more than one month in advance under any such apartment lease other than in the Ordinary Course of Business. No such lease or any interest therein is subject to any present assignment or pledge (other than, as provided in Section 2.13(a), to the Agent for the ratable benefit of the Banks). All rent due to date under each lease has been collected in the Ordinary Course of Business and no concession has been granted to any lessee in the form of a waiver, release, reduction, discount or other alteration of rent due or to become due, other than in the Ordinary Course of Business. The interest of the lessee under each such lease is as lessee only, with no options to purchase or rights of first refusal. 5.26 FULL DISCLOSURE. None of the representations or warranties made by the Company, the REIT, the Management Entity or any Subsidiary in the Loan Documents as of the date such representations and warranties are made or deemed made, and none of the statements contained in each exhibit, report, statement or certificate furnished by or on behalf of any such Person in connection with the Loan Documents, contains any untrue statement of a material fact or omits any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they are made, not misleading. There is no fact, to the Knowledge of the Company, which materially and adversely affects the business, operations, properties, assets or condition (financial or otherwise) of the Company, the REIT, the Management Entities, or any of the Subsidiaries which has not been disclosed herein or in other documents, certificates and statements furnished to the Agent and each Bank hereunder or pursuant hereto. The copies of all documents delivered to the Agent and/or the Banks from time to time in connection with this Agreement are and shall be true and complete copies of the originals thereof and have not been or shall not be amended except as disclosed to the Agent and/or the Banks, as applicable. 61 ARTICLE VI AFFIRMITIVE COVENANTS The Company covenants and agrees that, so long as any Bank shall have any Commitment hereunder, or any Loan or other obligation shall remain unpaid or unsatisfied, unless the Requisite Banks waive compliance in writing: 6.01 FINANCIAL INFORMATION. The Company shall deliver to the Agent and to each Bank, in form and detail satisfactory to the Agent and the Banks: (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 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 copy of the unaudited consolidated balance sheet of the REIT 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) MONTHLY OPERATING STATEMENTS FOR BORROWING BASE PROPERTIES. As soon as available, but not later than forty-five (45) days after the end of each calendar month, a monthly operating statement for each Borrowing Base Property (in a format and with such detail as the Agent may require); (d) 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 for the Borrowing Base Properties; 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 the Agent may reasonably require; and (e) QUARTERLY CONSOLIDATED OPERATING STATEMENTS. To the extent not otherwise provided in disclosure documents filed with the SEC and delivered to the Agent 62 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 the Agent 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. 6.02 CERTIFICATES OTHER INFORMATION. The Company shall furnish to the Agent with sufficient copies for each Bank: (a) ACCOUNTING CERTIFICATES. Concurrently with the delivery of thefinancial statements referred to in Section 6.01(a), a certificate of the independent certified public accountants reporting on such financial statements stating that, in making the examination necessary therefor, no knowledge was obtained of any Default or Event of Default, except as specified in such certificate; (b) OFFICERS' CERTIFICATES. Concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and 6.01(b) above, a compliance certificate, substantially in the form of EXHIBIT I, 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 and the other Loan Documents to be observed, performed or satisfied by it, and that such officers have no knowledge of any Default or Event of Default except as specified in such certificate; (ii) showing in detail the calculations supporting such statement for such period in respect of the covenants in Section 7.09 and 7.16; (iii) showing in detail the calculation of the Borrowing Base for such period on an asset-by-asset basis; and (iv) certifying that none of the Collateral is required to be excluded as Collateral pursuant to Section 2.13(b); (c) 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; (d) 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; and (e) OTHER INFORMATION. Promptly, such additional financial and other information as the Agent may from time to time reasonably request. 6.03 NOTICES. The Company shall promptly (and in no event later than ten (10) days after the Company has reason to know of the same) notify the Agent and each Bank of: 63 (a) DEFAULT: EVENT OF DEFAULT. The occurrence of any Default or Event of Default, and of the occurrence or existence of any event or circumstance that is likely to become a Default or Event of Default; (b) LITIGATION. The commencement of, or any material development in, any litigation, arbitration or proceeding affecting the Company, the REIT, any Management Entity or any Subsidiary (i) in which the amount of damages claimed is $250,000 or more, (ii) in which injunctive or similar relief is sought and which, if adversely determined, would reasonably be expected to have a Material Adverse Effect, (iii) in which the relief sought is an injunction or other stay of the performance of any Loan Document or (iv) required to be reported to the SEC pursuant to the Exchange Act; (c) ENVIRONMENTAL MATTERS. (i) Any and all material enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened against the Company, the REIT, any Management Entity or any of their Subsidiaries or any of their Properties pursuant to any Environmental Laws, (ii) all other material Environmental Claims, and (iii) any environmental or similar condition on any real property adjoining or in the vicinity of the Properties of the Company, the REIT, any Management Entity or any of their Subsidiaries that could reasonably be anticipated to cause such Properties (or any portion thereof) to be subject to any material restrictions on ownership, occupancy, transferability or use under any Environmental Laws; (d) ERISA. the occurrence of any of the following ERISA events affecting the Company or any member of its Controlled Group, together with a copy of any notice with respect to such event that may be required to be filed with any Governmental Authority and any notice delivered by a Governmental Authority to the Company or any member of its Controlled Group with respect to such event: (i) an ERISA Event where the aggregate liability is likely to exceed $500,000; (ii) the adoption of any new Plan that is subject to Title IV o ERISA or Section 412 of the Code by any member of the Controlled Group; (iii) the adoption of any amendment to a Plan.that is subject to Title IV of ERISA or Section 412 of the Code, if such amendment results in a material increase in benefits or unfunded liabilities; or (iv) the commencement of contributions by any member of the Controlled Group to any Plan that is subject to Title IV of ERISA or Section 412 of the Code; (e) MATERIAL ADVERSE EFFECTS. The occurrence of any act, omission, change or event which has a Material Adverse Effect subsequent to the date of the most recent audited financial statements of the Company and the REIT delivered to the Agent pursuant to Section 6.01(a); 67 (f) EXCLUDED COLLATERAL. The occurrence of any event or circumstance that causes, or is likely to cause, any Borrowing Base Property to be excluded as Collateral pursuant to Section 2.13(b) above; (g) MATERIAL TRANSACTIONS. The consummation of any material Investment or Disposition, of any material issuance of Stock of the REIT (other than upon the tender of any Units for redemption or upon the conversion of any shares of the REIT's Class B Common Stock into shares of the REIT's Class A Common Stock) or Units, of any incurrence of material Indebtedness or of any other material transaction entered into, or the commencement of any material Development Activity, by the Company, the REIT, any Management Entity or any of their Subsidiaries; (h) FAILURE TO QUALIFY AS A REIT. The failure of the REIT to maintain REIT Status or of Subsidiary of the REIT to maintain its status as a qualified REIT subsidiary under the Code. (i) ACCOUNTING CHANGES. Any change in the Company's or the REIT's accounting policies or financial reporting practices; (j) LEGAL COMPLIANCE. Any material notice received from any Governmental Authority asserting that any Borrowing Base Property is not in compliance with any Requirements of Law; and (k) CROSS-DEFAULT. Any notice received by the Company, the REIT, any Management Entity or any of their Subsidiaries of any default under any Indebtedness or Guaranty Obligation described in Section 8.01(e). Each notice pursuant to this section shall be accompanied by a written statement, signed by at least two (2) Responsible Officers, setting forth details of the occurrence referred to therein and the provisions of this Agreement affected, and stating what action the Company or the REIT proposes to take with respect thereto. Each notice under Section 6.03(a) shall describe with particularity the clause or provision of this Agreement or other Loan Document that has been breached or violated. 6.04 PRESERVATION OF EXISTENCE. ETC.. The Company shall, and shall cause the REIT, the Management Entities and each of their Subsidiaries to, (a) preserve and maintain in full force and effect its partnership, corporate or other organizational existence and good standing under the laws of its state or jurisdiction of organization, and (b) preserve and maintain in full force and effect all rights, privileges, qualifications, permits, licenses and franchises necessary or desirable in the normal conduct of its business. 6.05 MAINTENANCE OF PROPERTY. The Company shall maintain, and shall cause the REIT, the Management Entities and each of their Subsidiaries to maintain, and preserve all of their Properties, including Properties constituting Collateral, in good working order and condition in accordance with the Company's past practices, ordinary wear and tear excepted. 6.06 INSURANCE. In addition to insurance requirements set forth in the Collateral Documents, the Company shall maintain, and shall cause the REIT, the Management Entities and 66 each of their Subsidiaries to maintain, with financially sound and reputable independent insurers, insurance with respect to their Properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or a similar business, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons; including workers' compensation insurance, public liability and property and casualty insurance (which amount shall not be reduced in the absence of 30 days' prior notice to the Agent). Upon the request of the Agent, the Company shall furnish such Agent, with sufficient copies for each Bank, at reasonable intervals (but not more than the twice per calendar year) a certificate signed by at least two (2) Responsible Officers (and, if requested by such Agent, any insurance broker of the Company or the REIT) setting forth the nature and extent of all insurance maintained by the Company, the REIT, the Management Entities and each of their Subsidiaries in accordance with this Section 6.06 or any Collateral Documents (and which, in the case of a certificate of a broker, was placed through such broker). 6.07 PAYMENT OF OBLIGATIONS. The Company shall, and shall cause the REIT, the Management Entities and each of their Subsidiaries to, pay and discharge as the same shall become due and payable and otherwise comply with, all their respective obligations and liabilities, including (a) all tax liabilities, assessments and governmental charges or levies upon it or its Properties, unless the same are being contested in good faith by appropriate proceedings and adequate reserves in accordance with GAAP are being maintained by the Company or such Person, (b) all lawful claims which, if unpaid, would by law become a Lien upon its Properties, including Properties constituting Collateral, (c) all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness, and (d) all Contractual Obligations. 6.08 COMPLIANCE WITH LAWS. The Company shall comply, and shall cause the REIT, the Management Entities and each of their Subsidiaries to comply in all material respects with all Requirements of Law of any Governmental Authority having jurisdiction over it or its business, including, without limitation, all securities laws and regulations. 6.09 ENVIRONMENTAL LAWS. The Company shall, and shall cause the REIT, the Management Entities and each of their Subsidiaries to, conduct its operations and keep and maintain its Properties in compliance in all material respects with all Environmental Laws. Upon the written request of the Agent or any Bank, the Company shall submit, and cause the REIT, the Management Entities and each of their Subsidiaries to submit, to the Agent and the Banks, at the Company's sole cost and expense, at reasonable intervals, a report providing an update of the status of any environmental, health or safety compliance, hazard or liability issue identified in any notice or report required pursuant to Section 6.03(c), that could, individually or in the aggregate, result in liability in excess of $250,000. 6.10 USE OF PROCEEDS. The Company shall use the proceeds of the Revolving Loans solely in accordance with Section 2.01(b) above. 6.11 MAINTENANCE OF REIT STATUS STOCK EXCHANGE LISTING. The Company shall cause the REIT at all times to maintain its REIT Status and to maintain its common Stock 66 listed on the NYSE, the American Stock Exchange, or Nasdaq Stock Exchange. The Company shall cause each Wholly-Owned Subsidiary to comply with all requirements applicable under the Code to REIT subsidiaries. 6.12 INSPECTION OF PROPERTY AND BOOKS AND RECORDS. The Company shall maintain, and shall cause the REIT, the Management Entities and each of their Subsidiaries to maintain, proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the Properties and business of the Company, the REIT, the Management Entities and each of their Subsidiaries. The Company shall permit, and shall cause the REIT, the Management Entities and each of their Subsidiaries to permit, representatives of the Agent or any Bank to visit and inspect any of their respective Properties, to conduct audits of the Collateral, to examine their respective corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss their respective affairs, finances and accounts with their respective directors, officers, and independent public accountants, all at the expense of the Company and at any time during normal business hours and as often as may be reasonably desired, upon no less than forty-eight (48) hours advance notice to the Company; PROVIDED, HOWEVER, when an Event of Default exists, the Agent or any Bank may visit and inspect at the expense of the Company such Properties at any time during business hours and without advance notice. 6.13 FURTHER ASSURANCES. (a) FULL DISCLOSURE. The Company will ensure that all other written information, exhibits and reports furnished to any Agent or Bank by the Company, the REIT, any Management Entity or any of their Subsidiaries do not contain any untrue statement of a material fact and do not and will not omit to state any material fact or any fact necessary to make the statements contained therein not misleading in light of the circumstances in which made, and will promptly disclose to the Agent and the Banks and correct any defect or error that may be discovered therein or in any Loan Document or in the execution, acknowledgment or recordation thereof. (b) FURTHER ACTS. Promptly upon request by the Agent or the Requisite Banks, the Company shall (and shall cause the REIT, each Management Entity and each of their Subsidiaries to) do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register, any and all such further acts, deeds, conveyances, security agreements, mortgages, deeds of trust, assignments, estoppel certificates, financing statements and continuations thereof, termination statements, notices of assignment, transfers, certificates, assurances and other instruments that the Agent or such Banks, as the case may be, may reasonably require from time to time in order (i) to carry out more effectively the purposes of this Agreement or any other Loan Document, (ii) to subject to the Liens created by any of the Collateral Documents any of the Collateral, (iii) to perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents and the Liens intended to be created thereby, and (iv) to better assure, convey, grant, assign, transfer, preserve, protect and confirm to the Agent and Banks the rights 67 granted or now or hereafter intended to be granted under any Loan Document, or any other document executed in connection herewith or therewith. (c) ADDITIONAL GUARANTIES. Promptly upon the formation by the REIT of any Wholly-Owned Subsidiary of the REIT, the REIT shall cause such Wholly-Owned Subsidiary to deliver to the Agent for the ratable benefit of the Banks a guaranty of the Obligations in the form attached hereto as EXHIBIT G; provided, however, solely with respect to any such Wholly-Owned Subsidiary that does not own a Borrowing Base Property, such guaranty shall not be required if such Wholly-Owned Subsidiary is prohibited from issuing such guaranty under its then-current financing arrangements. 6.14 COMMUNICATION WITH ACCOUNTANTS. The Company authorizes the Agent and any Bank to communicate directly with the Company's independent accountants and authorizes such accountants to disclose to such Persons any and all financial statements and other information of any kind, including the substance of any oral information or conversation that such accountants may have with respect to the business, financial condition and other affairs of the Company, as long as, if no Event of Default exists, the party speaking with the Company's independent accountants notifies the Company prior to the initiation of such discussions and a representative of the Company is given an opportunity to participate in such discussions. Company acknowledges that such notification is to be given as a courtesy only, and shall not otherwise interfere with Bank's right to pursue discussions under this Section 6.14. 6.15 SOLVENCY. The Company shall at all times be, and shall cause the REIT, each Management Entity and each of their Subsidiaries to be, Solvent. 6.16 COVENANTS RELATING TO BORROWING BASE PROPERTIES. The Company hereby agrees as follows: (a) MAINTENANCE. The Company shall maintain each Borrowing Base Property in good order and condition in accordance with the Company's past practices. (b) LEASES. The Company shall not enter into any lease of any Borrowing Base Property other than apartment leases or other ordinary course leases consistent with past practice and having terms of less than one (1) year on market terms. The Company shall deliver to the Agent a copy of the standard lease forms utilized for the Borrowing Base Properties from time to time. (c) MATERIAL AGREEMENTS. The Company shall obtain the prior written approval of the Agent and the Requisite Banks prior to entering into any reciprocal easement or similar agreement, ground lease or any other material agreement affecting any Borrowing Base Property. (d) MANAGEMENT CONTRACTS. The Company shall obtain the prior written approval of the Agent and the Requisite Banks prior to entering into any property management agreement with a Person other than the Company, one of the Management Entities, or any of their Subsidiaries, or replacing the property manager for any Borrowing Base Property 68 with a Person other than the Company, one of the Management Entities, or any of their Subsidiaries. The Company shall cause all property management contracts affecting Borrowing Base Properties to permit termination of the manager (whether such manager is one of the Management Entities or otherwise) by the owner within thirty days' written notice, without penalty, and the Company shall not permit the management fee payable under any such property management agreement to exceed three percent (3%) of gross receipts &om such property per fiscal year. (e) CONNSTRUCTION. The Company shall obtain the prior written approval of the Agent and the Requisite Banks prior to entering into any major construction or renovation affecting a Borrowing Base Property and shall discharge all mechanic's liens resulting &om any such construction or renovation. (f) LIENS. The Company shall keep each Borrowing Base Property at all times free and clear of all Liens (unless such Liens are bonded and thereby released of record in a manner satisfactory to the Agent), except for Permitted Exceptions or other matters approved by the Agent and the Requisite Banks. 6.17 FOREIGN QUALIFICATION. No later than 20 days after the Effective Date, the Company shall cause each of the Persons listed on SCHEDULE 5.01 to be duly qualified as a foreign corporation, partnership, trust or other organization, and licensed and in good standing under the laws of the those jurisdictions where its ownership, lease or operation of its Properties or the conduct of its business requires such qualification and where such Person is not, as of the Effective Date, currently so qualified, licensed, or in good standing. ARTICLE VII NEGATIVE COVENANTS The Company hereby covenants and agrees that, so long as any Bank shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, unless the Requisite Banks waive compliance in writing: 7.01 LIENS. Neither the Company, nor the REIT, nor any Management Entity, nor any of their Subsidiaries shall, directly or indirectly, make, create, incur, assume or suffer to exist any Lien upon or with respect to any part of its Property, whether now owned or hereafter acquired, other than the following ("Permitted Liens"): (a) EXISTING LIENS. Liens (other than Liens on the Collateral except in favor of the Agent for the ratable benefit of the Banks) on the Properties of the Company or its Subsidiaries securing Indebtedness described in SCHEDULE 7.02 or any refinancing thereof permitted under Section 7.02(a) below; (b) LOAN AND BRIDGE LOAN DOCUMENTS LIENS. Liens created under any Loan Document or created pursuant to the Bridge Loan Agreement; 69 (c) TAX LIENS. Liens for taxes, fees, assessments or other governmental charges which are not delinquent or remain payable without penalty, or to the extent that non-payment thereof is permitted by Section 6.07, provided that no Notice of Lien has been filed or recorded; (d) BANKER'S LIENS. Liens arising solely by virtue of any statutory or common-law provision relating to banker's liens, rights of setoff or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution; PROVIDED that (i) such deposit account is not a dedicated cash collateral account and is not subject to restrictions against access by the depositor in excess of those set forth by regulations promulgated by the Federal Reserve Board, and (ii) such deposit account is not intended by the depositor to provide collateral to the depository institution; (e) OTHER STATUTORY LIENS. Carriers', warehousemen's, mechanics', landlords', materialmen's, repairmen's or other similar Liens arising in the Ordinary Course of Business, against Properties other than the Borrowing Base Properties, which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the Property subject thereto; (f) EMPLOYMENT-RELATED LIENS. Liens (other than any Lien imposed by ERISA) consisting of pledges or deposits required in the Ordinary Course of Business in connection with workers' compensation, unemployment insurance and other social security legislation; (g) JUDGMENT LIENS. Liens against Properties other than the Borrowing Base Properties consisting of judgment or judicial attachment liens, provided that the enforcement of such Liens is effectively stayed or bonded; (h) EASEMENTS, ETCC. Liens against Properties other than the Borrowing Base Properties consisting of easements, rights-of-way, restrictions and other similar title exceptions incurred in the Ordinary Course of Business which do not in any case materially detract from the value of the Property subject thereto or interfere with the ordinary conduct of the businesses of the Company, the REIT and the Subsidiaries; and (i) LIENS SECURING FINANCING. Liens on real and personal properties not constituting Collateral securing Indebtedness permitted under Section 7.02(f) and (g) below. Notwithstanding anything to the contrary set forth herein, in no event shall the Company, the REIT or any of their respective Subsidiaries enter into any Disposition of or grant or suffer or permit to exist any Lien on any of their respective ownership interests in the Company, GP Corp, LP Corp, DE Sub, the Finance Subsidiary, HomeCorp or any of their other Subsidiaries, except in favor of the Agent for the ratable benefit of the Banks pursuant to the Equity Interests Pledge Agreements or pursuant to the Bridge Loan Agreement. 70 7.02 INDEBTEDNESS. Neither the Company, nor the REIT, nor any Management Entity, nor any of their Subsidiaries shall create, incur, assume, suffer to exist, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness except the following ("Permitted Indebtedness"): (a) EXISTING INDEHTEDNESS. Indebtedness of the Company and its Subsidiaries outstanding on the Closing Date described in SCHEDULE 7.02 and any refinancing of the Indebtedness described therein provided such refinancing (i) is in a principal amount which does not exceed the principal amount of the existing Indebtedness being refinanced thereby; (ii) is at a fixed rate of interest; and (iii) provides for "mortgage-style" amortization of the principal balance thereof over a term not to exceed twenty (20) years &am the origination thereof in equal monthly payments of principal and interest; (b) INDEBTNESS UNDER THIS AGGREEMENT AND UNDER BRIDGE LOAN AGREEMENT. Indebtedness incurred pursuant to this Agreement or pursuant to the Bridge Loan Agreement; (c) ACCOUNTS PAYABLE. 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, unless contested in good faith by appropriate proceedings and reserved for in accordance with GAAP; (d) CONTINGENT OBLIGATIONS. Indebtedness consisting of Contingent Obligations permitted by Section 7.03; (e) INTRA-COMPANY DEBT. Subject to Section 7.08, Intra-Company Debt, provided that the obligor and obligee thereof have subordinated the repayment thereof to the repayment of the Obligations pursuant to a subordination agreement in form and substance approved by the Requisite Banks; and (f) ADDITIONAL INDEBTEDNESS. Indebtedness of the Company or a Subsidiary of the Company that does not own any Borrowing Base Properties for borrowed money which (i) is not secured by the Collateral; (ii) is on such terms and in such amount that, upon the incurrence of such Indebtedness, the Company will be in compliance with the terms of Section 7.16 below; and (iii) if such Indebtedness is not secured directly or indirectly by real property, is outstanding only during periods in which no amounts are due under the Bridge Loan Agreement; provided however, to the extent any such Indebtedness is for borrowed money owed to an Affiliate of the Company (but is not otherwise subject to Section 7.02(e) hereof), the obligor and obligee thereof shall have subordinated the repayment thereof to the repayment of the Obligations pursuant to a subordination agreement in form and substance approved by the Requisite Banks; provided further that any such subordination agreement shall permit, so long as no Default or Event of Default exists, payments under such Indebtedness to be made &am any Subsidiaries to the REIT or the Company or any Subsidiary; and 71 (g) REIT INDEBTEDNESS. Indebtedness of the REIT which (i) is not secured by the Collateral; (ii) is on such terms and in such amount that, upon the incurrence of such Indebtedness, the Company will be in compliance with the terms of Section 7.16 below; and (iii) is outstanding only during periods in which no amounts are due under the Bridge Loan Agreement. Nothing contained in this Section 7.02 shall be deemed to excuse any lack of compliance by Company, the REIT, or any Subsidiary with the terms of Section 7.16 below. 7.03 CONTINGENT OBLIGATIONS. Neither the Company, nor the REIT, nor any of their Subsidiaries shall create, incur, assume or suffer to exist any Contingent Obligations except: (a) ORDINAY COURSE ENDORSEMENTS. Endorsements for collection or deposit in the Ordinary Course of Business; (b) RATE CONTRACT. Unsecured Rate Contracts entered into by the Company with respect to variable rate Indebtedness permitted hereunder; and (c) LETTER OF CREDIT REIMBURSEMENT OBLIGATIONS. Reimbursement obligations of the Company or of Subsidiaries that do not own Borrowing Base Properties under letters of credit provided that such obligations (i) are not secured by the Collateral and (ii) are on such terms and in such amount that, upon the incurrence of such obligations and assuming that all conditions for drawing on such letters of credit have been complied with, the Company will be in compliance with the terms of Section 7.16 below. 7.04 LEASE OBLIGATIONS. Neither the Company, nor the REIT, nor any of their Subsidiaries shall create or suffer to exist any obligations for the payment of rent for any Property under a lease or agreement to lease that is not a Capital Lease, except for: (a) EXISTING LEASES. Leases in existence on the Closing Date (and any renewal, extension or refinancing thereof); or (b) ORDINARY COURSE LEASES. Leases entered into after the Closing Date in the Ordinary Course of Business and at market rates and terms. 7.05 DISPOSITION OF PROPERTIES. Neither the Company, nor the REIT, nor any of their Subsidiaries shall, directly or indirectly, (a) make any Disposition of any Borrowing Base Property, or enter into any agreement to do so, provided, however, so long as no Default or Event of Default is then continuing, the Company shall have the right to sell or refinance a Borrowing Base Property (i) on or before the Conversion Date by paying to the Agent for distribution to the Banks an amount equal to the amount which would be required to be paid to the Banks so that the Outstanding Amount of the Revolving Loan immediately after such sale or refinance would not exceed the Revolving Loan Borrowing Base (calculated without including the Borrowing Base Property so sold or refinanced as one of the Borrowing Base Properties), and upon receipt of such payment, the Agent shall release such Borrowing Base Property as Collateral hereunder, and (ii) following the Conversion Date by paying to the Agent for distribution to the Banks an 72 amount equal to the greater of the Term Loan Amount for such Borrowing Base Property or the amount which would be required to be paid to the Banks so that the Outstanding Amount of the Term Loan immediately after such sale or refinance would not exceed the Term Loan Borrowing Base (calculated without including the Borrowing Base Property so sold or refinanced as one of the Borrowing Base Properties), and upon receipt of such payment, the Agent shall release such Borrowing Base Property as Collateral hereunder, (b) make any Disposition of its interest in any Management Entity, or enter into any agreement to do so, or (c) make any Disposition of any other Property, or enter into any agreement to do so, unless in the case of this clause (c) such Disposition is at fair market value, and at the time of the Disposition no Event of Default exists. 7.06 CONSOLIDATIONS AND MERGERS. Neither the Company, nor the REIT, nor any of their Subsidiaries shall merge, consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its Properties (whether now owned or hereafter acquired) to or in favor of any Person; provided, however, that Subsidiaries of the Company or of the REIT may merge, consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of any of their Properties (whether now owned or hereafter acquired) to or in favor of the Company or another Subsidiary of the Company or of the REIT, and Subsidiaries of the REIT may merge, consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of any of their Properties (whether now owned or hereafter acquired) to or in favor of the REIT; and provided further, that notwithstanding the foregoing PROVISO, a Subsidiary of the REIT or of the Company shall not merge, consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its Properties (whether now owned or hereafter acquired) to or in favor of another Subsidiary of the REIT or of the Company if it would result in a violation of any covenant in this Agreement. 7.07 LIQUIDATIONS; CHANGES IN STRUCTURE; NEW SUBSIDIARIERS. (a) Except for issuances of the REIT's Stock, or as permitted under Section 7.06, neither the Company, nor the REIT, nor any Management Entity, nor any of their Subsidiaries shall liquidate, wind-up or dissolve, or make any changes in its equity capital structure (including changes in the terms of the REIT's outstanding Stock), or amend its Organizational Documents in any material respect; provided however, that any such Subsidiary may change its equity capital structure so long as immediately following any such change, the Company, either directly or indirectly, owns at least 98% of the partnership or other equity interest in such Subsidiary, the REIT, either directly or indirectly, owns not more than 2% of the partnership or other equity interest in such Subsidiary, no Person other than the Company or the REIT, directly or indirectly, owns any partnership or other equity interest in such Subsidiary; and any such Subsidiary other than one that owns a Borrowing Base Property or any equity interest in an owner thereof may be liquidated. (b) Neither the REIT nor any Subsidiary shall issue any preferred Stock; provided however, the REIT or any Subsidiary may issue preferred Stock provided that: 73 (i) such Stock has no mandatory redemption feature, has no redemption feature which is exercisable at the option of the holder thereof, and if such Stock has any redemption feature which is exercisable at the option of the issuer thereof, the issuance thereof and the exercise of any such rights shall have been approved by the Banks in writing prior thereto; and (ii) any distributions with respect thereto shall comply with the provisions of this Agreement (including, without limitation, Section 7.09). (c) Neither the Company, nor the REIT, nor any Management Entity, nor any of their Subsidiaries shall acquire, form or enter into any agreement to acquire or form any new Subsidiary after the Effective Date unless such new Subsidiary (and the Company, the REIT or any Subsidiary thereof in relation thereto) shall be in compliance with the following requirements: (i) the Company shall disclose to the Agent the identity, organizational and capital structure and other information reasonably requested by the Agent concerning such Subsidiary to the Agent in writing within 30 days of any such acquisition or formation; (ii) such Subsidiary shall own no assets other than in full compliance with Section 7.08 hereof; and (iii) the nature and structure of the ownership interests of the Company, the REIT or such other Subsidiary in such new Subsidiary, their respective liabilities in connection with such new Subsidiary and the capital structure of such new Subsidiary (including, without limitation, the structure and terms of any Intra-Company Debt incurred in connection with the capitalization of such new Subsidiary) shall not be materially and adversely different (as determined by the Requisite Banks in their sole discretion) from the nature and structure of the ownership interests of the Company, the REIT and their Respective Subsidiaries in, or liabilities of the Company, the REIT and their respective Subsidiaries in connection with, and capital structure of, those Subsidiaries of the Company and the REIT as of the Effective Date. (d) Subject to 7.08(a)(iii), with respect to any Subsidiary of the Company or any Subsidiary of the REIT (other than the Company), and whether such Subsidiaries are existing on the Closing Date or newly acquired or formed pursuant to Section 7.07(c), the Company shall own, either directly or indirectly, not less than a 98% partnership or other equity interest in any such Subsidiary; the REIT shall own, directly or indirectly, not more than a 2% partnership or other equity interest in any such Subsidiary (provided, however, that the REIT may own one hundred percent (100%) of the Stock in a Subsidiary if the sole assets of such Subsidiary are ownership interests in other Subsidiaries in the compliance with the other provisions of this Section 7.07(d)); no Person other than the Company or the REIT, directly or indirectly, shall own any partnership or other equity interest in any such Subsidiary; and such Subsidiary owning one or more Borrowing Base Properties shall have delivered a guaranty of the Obligations to the Agent in form and substance acceptable thereto at such time as any of the Borrowing Base Properties owned by such Subsidiary are accepted into the Borrowing Base under Section 2.13 hereof. With respect to any Management Entity, whether existing on the Closing Date or newly formed or acquired pursuant to Section 7.07(c), the Company shall own, either directly or indirectly, no less than 95% of the interests in the profits and capital of any such Management Entity. (e) Notwithstanding anything to the contrary contained in Section 7.07(d), the Agent and Banks acknowledge and agree (i) that the partnership interests in 74 Somerset, Utah L.P., a Colorado limited partnership ("Somerset L.P."), are not owned 98% either directly or indirectly by the Company, and 2% either directly or indirectly by the REIT, (ii) that notwithstanding such ownership of Somerset L.P., so long as the Company owns, either directly or indirectly, no less than 76% of the partnership interest therein and the REIT owns, either directly or indirectly, no more than 24% of the partnership interest therein, the Property owned by Somerset L.P. on the date hereof shall be eligible for inclusion as a Borrowing Base Property if accepted by the Banks pursuant to the terms of this Agreement and the Company shall not be deemed to be in violation of this Agreement as a result of such ownership of Somerset L.P. (f) For purposes of determining compliance with the ownership percentages of any Subsidiary under Sections 7.07(a) or 7.07(d), the ownership interest of the REIT in the Company shall not be included in calculating the REIT's ownership interest in such Subsidiary. 7.08 CHANGES IN BUSINESS; INVESTMENTS PAYMENTS ON DEMAND; INTRA-COMPANY DEBT; MATERIAL ORGANIZATIONAL CHANGES. (a) Neither the Company, nor the REIT, nor any Management Entity, nor any of their Subsidiaries shall directly or indirectly own or acquire any assets or make any Investments (including, without limitation, loans, partnership or joint venture interests, investments in subsidiaries or other corporations, trusts or entities (including, without limitation, interests in the Management Entities)) other than: (i) cash and Cash Equivalents; (ii) the ownership by the Company and Wholly-Owned Subsidiaries of multi-family apartment projects in fee simple; (iii) the ownership by the Company, the REIT and their Subsidiaries of ownership interests in (a) the Subsidiaries described in SCHEDULE 5.07 and the Subsidiaries formed or acquired pursuant to this Agreement, provided in each case the same are engaged in the business of owning and operating apartment projects in accordance with the Company's past practices, and (b) the Management Entities, provided the same are engaged in the management of multi-family apartment projects and other real estate projects in accordance with the Company's past practices; (iv) the ownership or origination by the Company or any Subsidiary of mortage loans, land, real estate development projects and improved real property other than apartment projects, and non-controlling interests in partnerships or joint ventures which own multi-family apartment projects, provided that the aggregate Carrying Value such interests of the Company and its Subsidiaries described in this clause (iv) shall not at any time exceed ten percent (10%) of the Carrying Value of all assets owned by the Company, the REIT, and their Subsidiaries (exclusive of the 20% Carrying Value limitation referred to in Section 7.08(a)(ix)), and provided further than no such partnerships or joint ventures may own any Borrowing Base Properties; 75 (v) the ownership by the REIT of (a) its interest in the Company, and (b) 100% of the Stock of Wholly-Owned Subsidiaries which are in compliance with this Agreement and the ownership by Wholly-Owned Subsidiaries of the REIT of Stock in Subsidiaries in which the Company, directly or indirectly, holds all other Stock or equity interests in compliance with Section 7.07(d); (vi) the ownership by the REIT or its Wholly-Owned Subsidiaries of assets (other than as described in Section 7.08(a)(v)) having a Carrying Value not to exceed $25,000,000 in the aggregate at any one time; (vii) the ownership by the Company of the promissory notes of Subsidiaries assigned to the Company and described on SCHEDULE 7.02 attached hereto; (viii) the formation or acquisition of Subsidiaries by the Company, the REIT or any of their Subsidiaries in accordance with Sections 7.07(c) and (d) hereof; and (ix) cash investments in controlling interests in partnerships or joint ventures which own multi-family apartment projects and which do not comply with the ownership requirements of Section 7.07(d), provided that the aggregate Carrying Value of such interests of the Company and its Subsidiaries described in this clause (ix) shall not at any time exceed twenty percent (20%) of the Carrying Value of all assets owned by the Company, the REIT, and their Subsidiaries (exclusive of the 10% Carrying Value limitation referred to in Section 7.08(a)(iv)), and provided further than no such partnerships or joint ventures may own any Borrowing Base Properties. (b) If amounts are then outstanding under the Revolving Facility, under no circumstances shall the REIT or the Company permit any Subsidiary to make a demand under any Intra-Company Debt which is payable upon demand at any time prior to the Revolving Facility Maturity Date in an amount which exceeds the amount then available to be drawn as a Revolving Loan pursuant to Section 2.01(b); nor shall the REIT or the Company permit any Subsidiary to make a demand under any Intra-Company Debt which is payable upon demand at any time after the Conversion Date; nor shall the REIT or the Company otherwise cause or permit the REIT to make any further Investment (other than the contribution of Intra-Company Debt payable by the REIT, the Company, or any of their Subsidiaries) in any Wholly-Owned Subsidiary of the REIT without the Agent's prior written consent, nor permit any payment to be made with respect to Intra-Company Debt while any Event of Default is continuing. (c) In addition, in no event shall the Company cause or permit any change in the organizational structure of the Company, the REIT or any of their respective Subsidiaries from that which is reflected in the Organizational Chart which is, in the sole opinion of the Requisite Banks, material and adverse, without the prior written consent of the Bank, except for mergers permitted under Section 7.06, and changes in the equity structure of Subsidiaries and the formation or acquisition of Subsidiaries in accordance with Section 7.07 hereof. 76 7.09 RESTRICTED PAYMENTS. Neither the Company, nor the REIT, shall declare or make, nor permit any of their respective Subsidiaries to declare or make, any distribution (including, without limitation, to the GP Corp, LP Corp or the REIT) of any Properties, including cash, rights, obligations or partnership interest or units on account of any partnership interest or units or stock, or purchase, redeem or otherwise acquire for value any of its partnership interests or units or stock, now or hereafter outstanding, or lend or advance any funds to GP Corp, LP Corp or the REIT (all of the foregoing, collectively, "distributions"), except (a) for the exchange of common Stock of the REIT for Units; (b) that if no Default or Event of Default exists under Section 8.01(a) or under Section 8.01(c) as a result of a breach of Section 7.16, the REIT, the Company and all such Subsidiaries may make distributions during any twelve (12) month period in an amount in the aggregate which, in addition to any distributions described in clause (c) below, is not greater than 85% of Funds From Operations for such period; and (c) for intra-company distributions by Subsidiaries to the Company or the REIT, and by the Company to the REIT. 7.10 TRANSACTIONS WITH AFFILIATES. Neither the Company, nor the REIT, nor any Management Entity, nor any of their Subsidiaries shall enter into any transaction with any Affiliate of the Company or of any such Person, except (a) as expressly permitted by this Agreement, or (b) in the Ordinary Course of Business and pursuant to the reasonable requirements of the business of the Company or such Person; in each case (a) and (b), upon fair and reasonable terms no less favorable to such Person than would obtain in a comparable arm's-length transaction with a Person not such an Affiliate. 7.11 SPECIAL COVENANTS RELATING TO THE REIT. The REIT shall not, nor shall the Company cause or permit the REIT to: (a) Make any disposition of or encumber, pledge or hypothecate, whether directly or indirectly, all or any portion of its interest in the Company or any Wholly-Owned Subsidiary of the REIT at any time or any rights to distributions or dividends therefrom other than to the Company or a Wholly-Owned Subsidiary; (b) At any time fail to own, either directly or through one or more Wholly-Owned Subsidiaries of the REIT, more than 50% of the partnership interests in the Company; (c) Fail for any reason whatsoever, whether voluntarily or involuntarily, (i) to be the sole shareholder of any Wholly-Owned Subsidiary of the REIT at any time, or (ii) either directly or through one or more Wholly-Owned Subsidiaries of the REIT, to be the sole general partner of the Company at any time; (d) Use Net Issuance Proceeds for any purpose other than to make capital contributions to GP Corp and LP Corp immediately upon the receipt thereof by the REIT for immediate contribution thereof to the Company or to repay Permitted Indebtedness; (e) Cease to have its Common Stock listed on the NYSE, the American Stock Exchange, or the Nasdaq Stock Exchange; or 77 (f) Cease to have REIT status or fail to comply with the requirements of the Code relating to qualified REIT subsidiaries in respect of its ownership of any Subsidiary of the REIT to the extent required under the Code. 7.12 USE OF PROCEEDS. The Company shall not use any portion of the Loan proceeds, directly or indirectly, (a) to purchase or carry Margin Stock, (b) to repay or otherwise refinance indebtedness of the Company or others incurred to purchase or carry Margin Stock, (c) to extend credit for the purpose of purchasing or carrying any Margin Stock, (d) to acquire any security in any transaction that is subject to Section 13 or 14 of the Exchange Act, or (e) for any purpose other than those permitted by Section 6.10. 7.13 TAXATION OF THE COMPANY. Each of the Company, Finance Subsidiary and AIMCO Holdings shall at all times be taxed as a partnership under the Code and not as an association taxable as a corporation. 7.14 ERISA. The Company shall not and shall not permit the REIT, or any of their Subsidiaries to, (a) terminate any Plan subject to Title IV of ERISA so as to result in any material (in the opinion of the Agent) liability to the Company or any ERISA Affiliate (i.e., $500,000 or more), (b) permit to exist any ERISA Event or any other event or condition, which presents the risk of a material (in the opinion of the Agent) liability to any member of the Controlled Group, (c) make a complete or partial withdrawal (within the meaning of ERISA Section 4201) &om any Multiemployer Plan so as to result in any material (in the opinion of the Agent) liability to the Company or any ERISA Affiliate, (d) enter into any new Plan or modify any existing Plan so as to increase its obligations thereunder which could result in any material (in the opinion of the Agent) liability to any member of the Controlled Group, or (e) permit the present value of all nonforfeitable accrued benefits under any Plan (using the actuarial assumptions utilized by the PBGC upon termination of a Plan) materially (in the opinion of the Agent) to exceed the fair market value of Plan assets allocable to such benefits, all determined as of the most recent valuation date for each such Plan. 7.15 PREPAYMENTS. Neither the REIT nor the Company nor any Subsidiary shall, while the Term Loan is outstanding, prepay any Indebtedness other than the Term Loan; provided, however, a prepayment of Indebtedness shall be permitted in connection with the refinancing thereof so long as the maximum principal amount of the loan so used to prepay any such Indebtedness does not exceed the amount of such Indebtedness being prepaid. 7.16 FINANCIAL COVENANTS. (a) The Company shall not permit the Net Worth of the REIT and its Subsidiaries on a consolidated basis to be less than $200,000,000 at any time. (b) The Company shall not permit the ratio of Total Indebtedness to Gross Asset Value to exceed 0.60-to-1.00 at any time. (c) The Company shall not permit the Interest Coverage Ratio computed for any fiscal quarter or year to be less than 2.00-to-1.00. 77 (d) The Company shall not permit the Debt Service Coverage Ratio computed for any fiscal quarter or year to be less than 1.80-to-1.00. (e) The Company will ensure that at all times during which any outstanding balance exists under the Bridge Loan Agreement, an aggregate amount of $2,500,000 will (i) remain undrawn under this Agreement but available for borrowing hereunder; or (ii) be held by the Company in the form of Cash Equivalents not subject to any Lien. 7.17 ACCOUNTING CHANGES. Neither the Company nor the REIT shall make any significant change in accounting treatment or reporting practices, except as required by GAAP, or change its fiscal year. 7.18 MANAGEMENT. Neither of the Executive Officers shall cease for any reason (including death or disability) to be active on a full time, continuous basis in the senior management of Company and the REIT with responsibilities comparable to their positions on the Effective Date pursuant to written employment contracts having termination dates no earlier than two (2) years after the Closing Date unless the Company shall have obtained, within one hundred twenty (120) days after such cessation, the approval of Bank to additional executives, such that the remaining and new management executives, as a group, have substantial and sufficient knowledge, experience and capabilities in the management of a publicly-held company engaged in the operation of a multi-asset real estate business of the type engaged in by the Company and the REIT. 7.19 TRANSFERS OF NON-OWNED INTERESTS IN THE MANAGEMENT ENTITIES. In no event shall all or any portion of the interests in the Management Entities or any rights therein held by Persons other than the Company be sold, transferred, encumbered, hypothecated, voluntarily or involuntarily, without the prior written consent of the Requisite Banks, except for transfers by Executive Officers resulting from the death or disability of any such Executive Officer or occurring after such Executive Officer is no longer an employee of the Company, the REIT, or any of their Subsidiaries. 7.20 SPECIAL COVENANTS RELATING TO GP CORP, LP CORP, DE SUB, AND HOMECORP AND OTHER SUBSIDIARIES. Neither the Company nor the REIT shall cause or permit any Subsidiary of the Company or the REIT to: (a) Except in accordance with Section 7.07, make any disposition of or encumber, pledge or hypothecate, whether directly or indirectly, all or any portion of its interest in the Company or any other Subsidiary or any rights to distributions or dividends therefrom; (b) Fail for any reason whatsoever, whether voluntarily or involuntarily, to be the sole general partner (in the case of GP Corp) or a limited partner (in the case of LP Corp) of the Company, or the sole general partner (in the case of DE Sub) or a limited partner (in the case of HomeCorp) of the Finance Subsidiary; or 79 (c) In the case of GP Corp and LP Corp, use any Net Issuance Proceeds received &om the REIT for any purpose other than to make capital contributions to Company immediately upon the receipt thereof. ARTICLE VIII EVENTS QF DEFAULT 8.01 EVENT OF DEFAULT. Any of the following shall constitute an "Event of Default": (a) NON-PAYMENT. The Company, the REIT, or any Subsidiary shall fail to pay, (i) when and as required to be paid herein, any amount of principal of any Loan, or (ii) within five days after the same shall become due, any amount of interest on any Loan or any fee or other amount payable hereunder or pursuant to any other Loan Document; or (b) REPRESENTATION OR WARRANTY. Any representation or warranty by the Company, the REIT, any Management Entity or any Subsidiary made or deemed made herein, in any Loan Document, or in any certificate, document or financial or other statement by the Company, the REIT, any Management Entity or any Subsidiary, or any Responsible Officer, furnished at any time under this Agreement, or in or under any Loan Document, shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or (c) SPECIFIC DEFAULTS. The Company shall fail to perform or observe any term, covenant or agreement contained in Section 2.13, or Section 6.06, Section 6.10, Section 6.11 and/or in Article VII (other than those sections of Article VII specified in Section 8.01(d)); provided that, in the case of a violation by the Company of the terms governing the maximum amount of distributions during any twelve (12)-month period set forth in Section 7.09(b), such failure shall not constitute an Event of Default if, by the end of the third month after such twelve (12)-month period, the Company is no longer in violation of such Section, so long as no distributions were made during such twelve (12)-month period in violation of the provisions of Section 7.09(b) which prohibit distributions while certain Defaults or Events of Default exist; or (d) OTHER DEFAULTS. The Company, the REIT, or any of their Subsidiaries shall fail to perform or observe any term or covenant contained in Sections 7.07, 7.08, 7.11, and 7.20 and any other term or covenant contained in this Agreement or any Loan Document, and such default shall continue unremedied for a period of 20 days after the earlier of (i) the date upon which a Responsible Officer knew or received written notice of such failure or (ii) the date upon which written notice thereof is given to the Company by any Agent or Bank; or (e) CROSS-DEFAULt. (i) The Company, the REIT, or any of their Subsidiaries shall fail, after any applicable cure period, (a) to make any payment (and which uncured failure to pay is continuing) in respect of any Indebtedness or Guaranty Obligation when due which in the aggregate exceeds $500,000 (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) other than a payment with respect to Intra- 80 Company Debt where the obligee has not commenced pursuing its remedies; or (b) to perform or observe any other condition or covenant, or any other event shall occur or condition exist, under any agreement or instrument relating to any such Indebtedness or Guaranty Obligation, if the effect of such failure, event or condition is to cause, or to permit the holder or holders of such Indebtedness or the beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, such Indebtedness to be declared to be due and payable prior to its stated maturity, or such Guaranty Obligation to become payable or cash collateral in respect thereof to be demanded; or (c) to perform or observe any condition or covenant of the Intra-Company Loan Subordination Agreement, or any other event shall occur or condition exist under the Intra-Company Loan Subordination Agreement, if the effect of such failure, event or condition is to cause a default thereunder (it being understood that, for purposes of clauses (a) and (3) above, no failure by the REIT to pay or perform any obligation with respect to an Intra-Company Loan shall be deemed a breach or default hereunder if such failure to pay or perform is in compliance with the Intra-Company Loan Subordination Agreement); or (ii) an "Event of Default" (as such term is defined in the Bridge Loan Agreement) occurs and is continuing; or (f) BANKRUPTCY OR INSOLVENCY. The Company, the REIT, or any of their Subsidiaries shall (i) become insolvent, or generally fail to pay, or admit in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any, whether at stated maturity or otherwise; (ii) voluntarily cease to conduct its business in the ordinary course; (iii) commence any Insolvency Proceeding with respect to itself; or (iv) take any action to effectuate or authorize any of the foregoing; or (g) INVOLUNTARY PROCEEDINGS. (i) Any involuntary Insolvency Proceeding shall be commenced or filed against the Company, the REIT, or any of their Subsidiaries, or any writ, judgment, warrant of attachment, execution or similar process, shall be issued or levied against a substantial part of such Person's Properties, and any such proceeding or petition shall not be dismissed, or such writ, judgment, warrant of attachment, execution or similar process shall not be released, vacated or fully bonded within sixty (60) days after commencement, filing or levy; (ii) the Company, the REIT, or any of their Subsidiaries shall admit the material allegations of a petition against it in any Insolvency Proceeding, or an order for relief (or similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) the Company, the REIT, or any of their Subsidiaries shall acquiesce in the appointment of a receiver, trustee, custodian, conservator, liquidator, mortgagee in possession (or agent therefor), or other similar Person for itself or a substantial portion of its Property or business; or (h) ERISA. (i) A member of the Controlled Group shall fail to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under a Multiemployer Plan; (ii) the Company or an ERISA Affiliate shall fail to satisfy its contribution requirements under Section 412(c)(11) of the Code, whether or not it has sought a waiver under Section 412(d) of the Code; (iii) in the case of an ERISA Event involving the withdrawal from a Plan of the Company or any ERISA Affiliate which is a "substantial employer" (as defined in Section 4001(a)(2) or Section 4062(e) of ERISA), the withdrawing employer's proportionate share of that Plan's Unfunded Pension 81 Liabilities is more than $500,000; (iv) in the case of an ERISA Event involving the complete or partial withdrawal of the Company or an ERISA Affiliate &om a Multiemployer Plan, the withdrawing employer has incurred a withdrawal liability in an aggregate amount exceeding $500,000; (v) in the case of an ERISA Event not described in clause (iii) or (iv), the Unfunded Pension Liabilities of the relevant Plan or Plans exceed 3500,000; (vi) a Plan that is intended to be qualified under Section 401(a) of the Code shall lose its qualification, and the loss can reasonably be expected to impose on members of the Controlled Group liability (for additional taxes, to Plan participants, or otherwise) in the aggregate amount of $500,000 or more; (vii) the commencement or increase of contributions to, or the adoption of or the amendment of a Plan by, a member of the Controlled Group shall result in a net increase in unfunded liabilities to the Controlled Group in excess of $500,000; (viii) any member of the Controlled Group engages in or otherwise becomes liable for a non-exempt prohibited transaction and the initial tax or additional tax under section 4975 of the Code relating thereto might reasonably be expected to exceed $500,000; (ix) a violation of section 404 or 405 of ERISA or the exclusive benefit rule under section 401(a) of the Code if such violation might reasonably be expected to expose a member or members of the Controlled Group to monetary liability in excess of $500,000; (x) any member of the Controlled Group is assessed a tax under section 4980B of the Code in excess of $500,000; or (xi) the occurrence of any combination of events listed in clauses (iii) through (x) that involves a potential liability, net increase in aggregate Unfunded Pension Liabilities, unfunded liabilities, or any combination thereof, in excess of $500,000. (i) MONETARY JUDGMENTS. One or more final (non-interlocutory) judgments, orders or decrees shall be entered against the Company, the REIT, or any of their Subsidiaries involving in the aggregate a liability (not fully covered by insurance) as to any single or related series of transactions, incidents or conditions, of $1,000,000 or more, and the same shall remain unvacated and unstayed pending appeal for a period of thirty (30) days after the entry thereof; or (j) NON-MONETARY JUDGMENTS. Any non-monetary judgment, order or decree shall be rendered against the Company, the REIT, or any of their Subsidiaries that has or would reasonably be expected to have a Material Adverse Effect, and there shall be any period of ten (10) consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (k) COLLATERAL AND GUARANTY DOCUMENTS. (i) Any provision of any Collateral Document shall for any reason (other than pursuant to the terms thereof) cease to be valid and binding on or enforceable against the Company or other Person party thereto (except to the extent that the same results solely from an act or omission of the Agent or the Banks), or the Company or such Person shall so state in writing or bring an action to limit its obligations or liabilities thereunder; or (ii) Any Collateral Document shall for any reason (other than pursuant to the terms thereof) cease to create a valid security interest in the Collateral purported to be covered thereby, or such security interest shall for any reason cease to be a perfected and 82 first-priority security interest subject only to Permitted Liens except for releases of Collateral permitted by this Agreement; or (iii) Any party to a Collateral Document (other than the Agent or Banks) shall fail to perform or observe any term or covenant contained in such Collateral Document, and such failure shall continue unremedied for a period of 20 days after the earlier of (a) the date upon which a Responsible Officer knew or received written notice of such failure or (b) the date upon which written notice thereof is given to the Company by the Agent, or any other event or condition shall occur or exist under a Collateral Document that constitutes an "Event of Default" as defined therein; or (iv) The REIT (or any Subsidiary party thereto) shall fail to perform or observe (a) any term, covenant or agreement in Section 1, 9, or 12(a) through (g), inclusive, of the guaranty in the REIT Guaranty Documents or incorporated from Sections 6.06, 6.10 and 6.11 and Article VII of the Credit Agreement into Section 12(h) of such guaranty, or (b) any other term, covenant or agreement in the REIT Guaranty Documents, and such failure shall continue unremedied for a period of 20 days after the earlier of 0) the date upon which a Responsible Officer knew or received written notice of such failure or gI) the date upon which written notice thereof is given to the Company or the REIT (or any Subsidiary party thereto) by the Agent; or the REIT Guaranty Documents shall for any reason be partially (including with respect to future advances) or wholly revoked or invalidated, or otherwise cease to be in full force and effect; or the REIT (or any Subsidiary party thereto) shall contest in any manner the validity or enforceability thereof or deny that the REIT (or any Subsidiary party thereto) has any further liability or obligation thereunder. (l) MATERIAL ADVERSE EFFECT. There shall occur any act, omission, change, occurrence or event which has a Material Adverse Effect; or (m) OWNERSHIP. (i) Any Person, or a group of related Persons, shall acquire (a) beneficial ownership of in excess of 50% of the outstanding voting Stock of the REIT or other voting interest having ordinary voting power to elect a majority of the directors, managers or trustees of the REIT (irrespective of whether at the time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency) or (b) all or substantially all of the Properties of the Company or the REIT, or (ii) a majority of the Board of Directors of the REIT, at any time, shall be composed of Persons other than (a) Persons who were members of the Board of Directors on the date of this Agreement, or (b) Persons who subsequently become members of the Board of Directors and who either (x) are appointed or recommended for election with the affirmative vote of a majority of the directors in office as of the date of this Agreement or (y) are appointed or recommended for election with the affirmative vote of a majority of the Board of Directors of the REIT then in office; or (n) MATERIAL LICENSES OR PERMITS. The Company, the REIT, or any of their Subsidiaries shall lose, through suspension, termination, impoundment, revocation, failure to renew or otherwise, any material license or permit; or 84 (o) ENVIROMENTAL LIENS. The Company, the REIT, or any of their Subsidiaries or any of their respective properties shall become subject to one or more Liens for costs or damages in excess of $1,000,000 individually or in the aggregate under any Environmental Law and such Liens shall remain in place for thirty (30) days after the creation thereof, or any Borrowing Base Property shall become subject to one or more Liens in any amount under any Environmental Law and such Liens shall remain in place for thirty (30) days after the creation thereof; or (p) INTRA-COMPANY DEBT. If at any time the Company, the REIT, or any Wholly-Owned Subsidiary is not the holder of any Intra-Company Debt; or if any modification or amendment with respect to the payment terms of any Intra-Company Debt is entered into without the Bank's prior written consent; or if at any time prior to the Revolving Facility Maturity Date, the holder of any Intra-Company Debt demands any payment thereon that is not available to be funded or is not actually funded by a Revolving Loan hereunder; or if, at any time after the Conversion Date, the holder of any Intra-Company Debt demands any payment whatsoever thereon; or (q) PREFERRED STOCK. If at any time there shall occur any event which would permit the holders of any class of preferred Stock of the REIT to elect more than one director to the Board of Directors of the REIT. 8.02 REMEDIES. If any Event of Default occurs, the Agent shall, at the request of, or may, with the consent of, the Requisite Banks: (a) TERMINATION OF COMMITMENT. Declare the Commitment of each Bank to make Loans to be terminated, whereupon such Commitments shall forthwith be terminated; (b) ACCELERATION. Declare (i) the unpaid principal amount of all outstanding Loans and all interest accrued and unpaid thereon, and (ii) all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived; (c) OBLIGATIONS UNDER LETTER OF CREDIT. Declare forthwith due and payable all obligations of the Company with respect to the Letters of Credit, including, without limitation, all unreimbursed drawings under the Letters of Credit and the aggregate contingent obligation of the Company to reimburse Agent and Banks for the available amount which could at any time be drawn under the Letters of Credit (even if such amount is not then able to be drawn pursuant to the terms of the Letters of Credit), without presentment, demand, protest, notice of dishonor, notice of intent to demand or to accelerate payment, notice of acceleration or notice of any other kind, all of which are hereby expressly waived, and upon such declaration the same shall become immediately due and payable, and Agent (upon the request or with the consent of Requisite Banks) may enforce all obligations of the Company with respect to the 84 Letters of Credit to Agent and the Banks under the Loan Documents and exercise any and all other remedies granted to Agent and the Banks at law, in equity or otherwise. In addition, Agent (upon the request or with the consent of Requisite Banks) may: (i) exercise any remedy available to Agent or the Banks under any Loan Document; and/or (ii) take whatever action at law or in equity may appear necessary or appropriate to collect any amount due or thereafter to become due or to enforce performance and observance of all Obligations of the Company with respect to the Letters of Credit. Any amounts delivered by the Company on account of the aggregate contingent obligation of Account Party to reimburse Banks for the available amount which could at any time be drawn under the Letters of Credit shall be held by the Agent as cash collateral for the Obligations with respect to the Letters of Credit; and (d) OTHER REMEDIES. Exercise on behalf of itself and the Banks all rights and remedies available to it and the Banks under the Loan Documents or applicable law; PROVIDED, however, that upon the occurrence of any event specified in Section 8.01(f) or 8.01(g) (in the case of clause (i) of Section 8.01(g) upon the expiration of the sixty (60)-day period mentioned therein), the Commitment of each Bank to make Loans shall automatically terminate, and the unpaid principal amount of all outstanding Loans and interest accrued and unpaid thereon, and all other amounts owing or payable hereunder as aforesaid shall automatically become due and payable without further act of any Agent or Bank. 8.03 RIGHTS NOT EXCLUSIVE. The rights provided for in this Agreement and the other Loan Documents are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising. ARTICLE IX THE AGENT 9.01 APPOINTMENT AND AUTHORIZATION. Each Bank hereby irrevocably appoints, designates and authorizes the Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, Agent shall not have any duties or responsibilities except those expressly set forth herein, nor shall Agent have or be deemed to have any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist on the part of Agent. Notwithstanding anything to the contrary herein, Issuing Bank shall act on behalf of the Banks with respect to the Letters of Credit (and all conditions precedent applicable to the issuance or extension thereof), until such time and except for so long as the Agent may elect to act for the Issuing Bank with respect thereto; PROVIDED, HOWEVER, that the Issuing Bank shall have all of the benefits and immunities (i) for acts taken or omissions suffered by the Issuing Bank in connection with Letters of Credit as fully as if the term "Agent", as used in this Article IX, included the Issuing Bank with respect to such acts or omissions, and (ii) as additionally provided in this Agreement with respect to the Issuing Bank. 85 9.02 DELEGATION OF DUTIES. The Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care. 9.03 LIABILITY AGENT. The Agent, its respective Affiliates, or their respective officers, directors, employees, agents, or attorneys-in-fact (all of the foregoing being collectively referred to as the "Agent-Related Persons") shall not (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document (except for its own gross negligence or willful misconduct), or (b) be responsible in any manner to any of the Banks for any recital, statement, representation or warranty made by the Company, the REIT, any Management Entity or Subsidiary or any Affiliate of any such Person, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Loan Document, or for the value of any Collateral or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, any other Loan Document, or for any failure of the Company, the REIT or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the Properties, books or records of the Company, the REIT, any Management Entity or Subsidiary or Affiliates thereof. 9.04 RELIANCE BY AGENT. (a) GENERALLY. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, telecopy, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to the Company), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Requisite Banks as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Requisite Banks, and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Banks. (b) CONDITIONS PRECEDENT. For purposes of determining compliance with the conditions specified in Sections 4.01 and 4.02 (as to the initial borrowing hereunder), each Bank that has executed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be 86 consented to or approved by or acceptable or satisfactory to such Bank, unless an officer of the Agent responsible for the transactions contemplated by the Loan Documents shall have received notice &am such Bank prior to the initial borrowing specifying its objection thereto and either such objection shall not have been withdrawn by notice to the Agent to that effect or such Bank shall not have made available to the Agent the Bank's ratable portion of such borrowing. 9.05 NOTICE OF DEFAULt. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Agent for the account of the Banks, unless the Agent shall have received written notice &am a Bank or the Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default." In the event that the Agent receives such a notice, the Agent shall give notice thereof t85o the Banks. The Agent shall take such action with respect to such Default or Event of Default as shall be requested by the Requisite Banks in accordance with Article VIII; PROVIDED, HOWEVER, that unless and until the Agent shall have received any such request, it may (but shall not be obligated to) take such action, or refrain &om taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Banks. 9.06 CREDIT DECISION. Each Bank expressly acknowledges that none of the Agent-Related Persons has made any representation or warranty to such Bank and that no act by the Agent hereinafter taken, including any review of the affairs of the Company, the REIT, any Management Entity or Subsidiary, shall be deemed to constitute any representation or warranty by the Agent to any Bank. Each Bank represents to the Agent that such Bank has, independently and without reliance upon the Agent and based on such documents and information as such Bank has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, Properties, financial and other condition and creditworthiness of the Company, the REIT, any Management Entity or Subsidiary, and all applicable bank regulatory laws relating to the transactions contemplated thereby, and made its own decision to enter into this Agreement and extend credit to the Company hereunder. Each Bank also represents that it will, independently and without reliance upon the Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, Properties, financial and other condition and creditworthiness of the Company, the REIT, the Management Entities and the Subsidiaries. Except for notices, reports and other documents expressly herein required to be furnished to the Banks by the Agent, Agent shall have no duty or responsibility to provide any Bank with any credit or other information concerning the business, prospects, operations, Properties, financial and other condition or creditworthiness of the Company, the REIT, the Management Entities and the Subsidiaries which may come into the possession of any of the Agent-Related Persons. 9.07 INDEMNIFICATION. The Banks shall indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by or on behalf of the Company and without limiting the obligation of the Company to do so) ratably &om and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and 86 disbursements of any kind whatsoever which may at any time (including at any time following the repayment of the Loans) be imposed on, incurred by or asserted against any such Person in any way relating to or arising out of this Agreement or any document contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by any such Person under or in connection with any of the foregoing; PROVIDED, HOWEVER, that no Bank shall be liable for the payment to the Agent-Related Persons of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely &om such Person's gross negligence or willful misconduct. Without limitation of the foregoing, each Bank shall reimburse the Agent upon demand (to the extent the Agent is not reimbursed upon demand by the Company, unless the Agent is legally restricted &am making such demand upon the Company, in which case demand need not be made upon the Company) for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein to the extent that the Agent is not reimbursed for such expenses by or on behalf of the Company. Without limiting the generality of the foregoing, if the IRS or any authority of the United States or other jurisdiction asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the account of any Bank (because the appropriate form was not delivered or was not properly executed, or because such Bank failed to notify the Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason), such Bank shall indemnify the Agent fully for all amounts paid, directly or indirectly, by the Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to the Agent under this Section 9.07, together with all costs, expenses and attorneys' fees (including allocated costs for inhouse legal services). The obligation of the Banks in this Section shall survive the payment of all Obligations. 9.08 AGENT IN INDIVIDUAL CAPACITY. BofA (and any other Bank that may hereafter serve as Agent) and each of their respective Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory or other business with, the Company, the REIT, the Management Entities and the Subsidiaries and Affiliates as though BofA (or any other such Bank) were not the agent hereunder and without notice to the Banks. With respect to its Loans, BofA (and any other Bank that may hereafter serve as Agent), shall have the same rights and powers under this Agreement as any other Bank and may exercise the same as though each of them were not an agent, and the terms "Bank" and "Banks" shall include BofA (and any other Bank that may hereafter serve as Agent), in its individual capacity. 160 9.09 SUCCESSOR AGENTS. The Agent may resign as Agent upon 30 days' notice to the Banks. If an Agent shall resign under this Agreement, the Requisite Banks shall appoint from among the Banks a successor Agent for the Banks, which successor Agent shall, if no Default or Event of Default exists hereunder, be subject to the approval of the Company. If no successor Agent is appointed prior to the effective date of the resignation of the retiring Agent, 87 the retiring Agent shall appoint, after consulting with the Banks and the Company, a successor Agent. Upon the acceptance of its appointment as successor Agent hereunder, such successor Agent shall succeed to all the rights, powers and duties of the retiring Agent, and the term "Agent" shall mean such successor Agent, and the retiring Agent's rights, powers and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article IX and Sections 10.04 and 10.05 shall inure to its benefit as' to any actions taken or omitted to be taken by it while it was an Agent under this Agreement. 9.10 COLLATERAL MATTERS. (a) PERFECTION. The Agent is authorized on behalf of all the Banks, without the necessity of any notice to or further consent &am the Banks, from time to time to take any action with respect to any Collateral or the Collateral Documents which may be necessary to perfect and maintain perfected the security interest in and Liens upon the Collateral granted pursuant to the Collateral Documents. (b) RELEASES. Upon request by the Agent at any time, the Banks will confirm in writing the Agent's authority to release particular types or items of Collateral pursuant to Section 2.13(e) or any other provision of the Loan Documents. The Agent shall be completely protected in taking any action directed by all the Banks in response to such request and shall incur no liability to the Company or any Bank for failing to take any action as to which all of the Banks do not concur. (c) NO OTHER COLLATERAL. Each Bank agrees with and in favor of each other (which agreement shall not be for the benefit of the Company, the REIT, the Management Entities or any Subsidiaries) that the Company's obligation to such Bank under this Agreement and the other Loan Documents is not and shall not be secured by any real property collateral now or hereafter acquired by such Bank other than the Collateral hereunder. ARTICLE X MISCELLANEOUS 10.01 AMENDMENTS AND WAIVERS. (a) GENERALLY. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent with respect to any departure therefrom, shall be effective unless the same shall be in writing and signed by the Requisite Banks, and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. (b) MATTERS REQUIRING UNANIMUS CONSENT. Notwithstanding the terms of Section 10.01(a), no amendment or waiver of any provision of this Agreement or any other Loan Document, no agreement to forebear from acting upon any departure by the Company therefrom, and no consent with respect to any departure by the Company therefrom, shall be effective to do any of the following, unless the same is in writing and signed by all the Banks: 88 (i) increase the Commitment of any Bank; (ii) postpone or delay any date fixed for any payment of principal, interest, fees or other amounts due hereunder or under any Loan Document whether by acceleration or otherwise; (iii) reduce the principal of, or the rate of interest specified herein on, any Loan, or any fees or other amounts payable hereunder or under any Loan Document; (iv) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans required for the Banks or any of them to take any action hereunder; (v) amend Section 2.15 (Sharing of Payments, Etc.), Section 6.10 (Use of Proceeds), Section 8.02 (Remedies), Section 10.15 (Governing Law and Jurisdiction) or this Section 10.01; (vi) release any portion of the Collateral except as provided in Section 2.13(b), Section 2.13(d), Section 2.13(e), Section 7.05 and as otherwise may be provided in applicable Collateral Documents or except where the consent of the Requisite Banks only is specifically provided for; or (vii) release any guarantor from liability under the REIT Guaranty Documents. (c) MATTERS REQUIRING AGENTS' CONSENT. Notwithstanding the terms of Section 10.01(a), no amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent with respect to any departure by the Company therefrom, shall be effective to affect the rights or duties of the Agent under this Agreement or any other Loan Document, unless the same is in writing and signed by the Agent. 10.02 NOTICES. (a) DELIVER. All notices, requests and other communications provided for hereunder shall be in writing (including, unless the context expressly otherwise provides, telegraphic, telex, facsimile transmission or cable communication) and mailed, telegraphed, telexed or delivered, (i) if to the Company, to its address specified on the signature pages hereof, (ii) if to any Bank, to its Domestic Lending Office, and (iii) if to Agent, to its address specified on the signature pages hereof; or, as to the Company or the Agent, to such other address as shall be designated by such party in a written notice to the other parties, and as to each other party, at such other address as shall be designated by such party in a written notice to the Company and the Agent. (b) RECEIPT. All such notices and communications shall, when transmitted by overnight delivery, telegraphed, telecopied by facsimile, telexed or cabled, be 90 effective when delivered for overnight delivery or to the telegraph company, transmitted by telecopier, confirmed by telex answerback or delivered to the cable company, respectively, or if delivered, upon delivery, except that notices pursuant to Article II or VIII shall not be effective until actually received by the Agent. (c) RELIANCE. The Company acknowledges and agrees that any agreement of the Agent and the Banks under Article II to receive certain notices by telephone and facsimile is solely for the convenience and at the request of the Company. The Agent and the Banks shall be entitled to rely on the authority of any Person purporting to be a Person authorized by the Company to give such notice, and the Agent and the Banks shall not have any liability to the Company or any other Person on account of any action taken or not taken by the Agent and the Banks in reliance upon such telephonic or facsimile notice. The obligation of the Company to repay the Loans shall not be affected in any way or to any extent by any failure by the Agent and the Banks to receive written confirmation of any telephonic or facsimile notice or the receipt by the Agent and the Banks of a confirmation which is at variance with the terms understood by the Agent and the Banks to be contained in the telephonic or facsimile notice. 10.03 NO WAIVER: CUMULATIVE REMEDIES. No failure to exercise and no delay in exercising, on the part of any Agent or Bank, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. 10.04 COSTS AND EXPENSES. The Company shall, whether or not the transactions contemplated hereby shall be consummated: (a) FACILITY EXPENSES. Pay or reimburse the Agent on demand for all costs and expenses incurred in connection with the development, preparation, delivery, administration and execution of, and any amendment, supplement, waiver or modification to, this Agreement, any Loan Document and any other documents prepared in connection herewith or therewith, the consummation of the transactions contemplated hereby and thereby, and any proposal for additions to the Borrowing Base Properties, and the syndication of this Agreement to other Banks, as well as all costs of the Agent and the Issuing Bank in connection with the issuance of Letters of Credit (including, without limitation, title insurance premiums and charges, survey costs, recording costs and taxes, travel expenses incurred by representatives of the Agent, and the reasonable Attorney Costs incurred by the Agent with respect thereto, and with respect to the Letters of Credit, amendment fees, drawing fees, check fees, foreign currency fees, and other fees and costs the Issuing Bank normally charges in connection therewith); (b) ENFORCEMENT EXPENSES. Pay or reimburse the Agent and Banks on demand for all costs and expenses incurred by them in connection with the enforcement, attempted enforcement, or preservation of any rights or remedies (including in connection with any "workout" or restructuring regarding the Loans) under this Agreement, any other Loan Document, and any such other documents, including reasonable Attorney Costs incurred by the Agent and Bank; and 91 (c) COLLATERAL EXPENSES. Pay or reimburse the Agent on demand for all Appraisals pursuant to Section 2.13(c) (including the allocated cost of internal appraisal services), audits, environmental inspections and reviews (including the allocated costs of such internal services), search and filing costs, fees and expenses, incurred or sustained by the Agent in connection with the matters referred to under paragraphs (a) and (b) of this Section. 10.05 INDEMNITY. The Company shall indemnify and hold harmless the Agent, each Bank and each of their respective officers, directors, employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person") from and against and pay them for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses or disbursements (including Attorney Costs) of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement and any other Loan Documents, or the transactions contemplated hereby and thereby, and with respect to any investigation, litigation or proceeding related to this Agreement or the Loans or the use of the proceeds thereof, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the "Indemnified Liabilities"); PROVIDED, that the Company shall have no obligation hereunder to any Indemnified Person with respect to Indemnified Liabilities arising &om the gross negligence or willful misconduct of such Indemnified Person. The agreements in this Section 10.05 shall survive payment of all other Obligations. 10.06 MARSHALLING: PAYMENTS SET ASIDE. Neither the Agent nor any Bank shall be under any obligation to marshall any assets in favor of the Company or any other Person or against or in payment of any or all of the Obligations. To the extent that the Company makes a payment or payments to the Agent or any Bank, or the Agent or any Bank enforces its Liens or exercises its rights of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party in connection with any Insolvency Proceeding, or otherwise, then to the extent of such recovery the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. 10.07 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Company may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Agent and each Bank, which may be withheld in their sole and absolute discretion. 175 10.08 ASSIGNMENTS, PARTICIPATIONS. ETC. (a) ASSIGNMENTS. Subject to the further provisions of this Section 10.08(a), any Bank may, with the written consent of the Agent, which consent shall not be unreasonably withheld, at any time assign and delegate to one or more Eligible Assignees (provided that no written consent of the Agent shall be required in connection with any 92 assignment and delegation by a Bank to a Bank Affiliate of such Bank) (each an "Assignee") all, or any ratable part of all, of the Loans, the Letter of Credit Liability, the Commitments and the other rights and obligations of such Bank hereunder, in a minimum amount of $5,000,000 and in additional increments of $250,000 so long as such Bank concurrently transfers to such Assignee the same proportionate share of its interests and obligations with respect to Commitment under (and as such term is defined in) the Bridge Loan Agreement) PROVIDED, HOWEVER, that the Company and the Agent may continue to deal solely and directly with such Bank in connection with the interest so assigned to an Assignee until (a) written notice of such assignment, together with payment instructions, addresses and related information with respect to the Assignee, shall have been given to the Company and the Agent by such Bank and the Assignee; (b) such Bank and its Assignee shall have delivered to the Company and the Agent an Assignment and Acceptance in the form of EXHIBIT K ("Assignment and Acceptance") together with any Note or Notes subject to such assignment; (c) such Bank shall have paid to the Agent, for its own account, an assignment fee in the amount of $1500, if the Assignee is a Bank (without giving effect to the Assignment), and $3000 in all other cases; and (d) such Bank shall have delivered to the Agent such documents as may be required by Section 3.01(f). Any such assignment requiring the approval of the Agent shall also require the approval of the Company (such approval not to be unreasonably withheld or delayed), provided that the Company's failure to approve or disapprove such assignment within five days' after receiving written notice thereof shall be deemed approval by the Company of such assignment, and provided further, that no such approval from the Company shall be required during the continuation of a Default or Event of Default. (b) RIGHTS OF ASSIGNEE. From and after the date that the Agent notifies the assignor Bank that the Agent has received an executed Assignment and Acceptance and payment of the assignment fee specified in Section 10.08(a), (i) the Assignee thereunder shall, subject to Section 10.08(a), be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, shall have the rights and obligations of a Bank under the Loan Documents, and (ii) the assignor Bank shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released &om its obligations under the Loan Documents. (c) REPLACEMENT NOTES. Within thirty (30) Business Days after its receipt of notice by the Agent that the Agent has received an executed Assignment and Acceptance and payment of the processing fee, the Company shall execute and deliver to the Agent, new Notes evidencing such Assignee's assigned Loans and Commitment and, if the assignor Bank has retained a portion of its Loans and its Commitment, replacement Notes in the principal amount of the Loans retained by the assignor Bank (such Notes to be in exchange for, but not in payment of, the Notes held by such Bank). Immediately upon each Assignee's making its payment under the Assignment and Acceptance, this Agreement shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the addition of the Assignee and the resulting adjustment of the Commitments arising therefrom. The Commitment allocated to each Assignee shall reduce such Commitment of the assigning Bank PRO TANTO. 93 (d) PARTICIPATIONS, Any Bank may at any time sell to one or more commercial banks (a "Participant") participating interests in any Loans, Letter of Credit Liability and Commitment of that Bank and the other interests of that Bank (the "originating Bank") hereunder and under the other Loan Documents so long as such Bank concurrently transfers to such Participant the same proportionate share of its interests and obligations with respect to Commitment under (and as such term is defined in) the Bridge Loan Agreement; PROVIDED, HOWEVER, that (i) the originating Bank's obligations under this Agreement shall remain unchanged, (ii) the originating Bank shall remain solely responsible for the performance of such obligations, (iii) the Company and the Agent shall continue to deal solely and directly with the originating Bank in connection with the originating Bank's rights and obligations under this Agreement and the other Loan Documents, (iv) no Bank shall transfer or grant any participating interest under which the Participant shall have rights to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Loan Document, except to the extent such amendment, consent or waiver would require unanimous consent as described in the FIRST PROVISO to Section 10.01; and (v) the Company shall have approved the transfer or grant of any participating interest in any Loans, Letter of Credit Liability and Commitment of the originating Bank to a Participant that has not theretofore previously held a participating interest therein (such approval not to be unreasonably withheld or delayed), provided that the Company's failure to approve or disapprove in writing such Participant within five days' after receiving written notice thereof shall be deemed approval by the Company of such transfer or grant to such Participant, and provided further, that no such approval &om the Company shall be required during the continuation of a Default or Event of Default.. In the case of any such participation, the Participant shall not have any rights under this Agreement, or any of the other Loan Documents, and all amounts payable by the Company hereunder shall be determined as if such Bank had not sold such participation; except that, if amounts outstanding under this Agreement are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Bank under this Agreement. (e) ASSIGNMENTS TO FEDERAL RESERVE BANK. Notwithstanding any other provision contained in this Agreement or any other Loan Document to the contrary, any Bank may assign all or any portion of the Loans or Notes held by it to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank, provided that any payment in respect of such assigned Loans or Notes made by the Company to or for the account of the assigning and/or pledging Bank in accordance with the terms of this Agreement shall satisfy the Company's obligations hereunder in respect of such assigned Loans or Notes to the extent of such payment. No such assignment shall release the assigning Bank from its obligations hereunder. 10.09 SETOFF. In addition to any rights and remedies of the Banks provided by law, if an Event of Default exists, each Bank is authorized at any time and &om time to time, without prior notice to the Company, any such notice being waived by the Company to the fullest 94 extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other indebtedness at any time owing to, such Bank to or for the credit or the account of the Company against any and all obligations owing to such Bank, now or hereafter existing, irrespective of whether the Agent or such Bank shall have made demand under this Agreement or any Loan Document and whether such obligations may be contingent or unmatured. Each Bank agrees to promptly notify the Company and the Agent after any such setoff and application made by such Bank; PROVIDED, HOWEVER, that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Bank under this Section 10.09 are in addition to the other rights and remedies (including other rights of setoff) that such Bank may have. NOTWITHSTANDING THE FOREGOING, NO BANK SHALL EXERCISE, OR ATTEMPT TO EXERCISE, ANY RIGHT OF SETOFF, BANKER'S LIEN, OR THE LIKE, AGAINST ANY DEPOSIT ACCOUNT OR PROPERTY OF THE COMPANY, THE REIT, ANY MANAGEMENT ENTITY OR ANY SUBSIDIARY HELD OR MAINTAINED BY ANY BANK, WITHOUT THE PRIOR WRITTEN CONSENT OF THE REQUISITE BANKS. 10.10 NOTIFICATION OF ADDRESSES, LENDING OFFICES, ETC. Each Bank shall notify the Agent in writing of any changes in the address to which notices to such Bank should be directed, of addresses of its Offshore Lending Office, of payment instructions in respect of all payments to be made to it hereunder and of such other administrative information as the Agent shall reasonably request. 10.11 COUNTERPARTS. This Agreement may be executed by one or more of the parties to this Agreement in any number of separate counterparts, each of which, when so executed, shall be deemed an original, and all of said counterparts taken together shall be deemed to constitute but one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Company and the Agent. 10.12 SEVERABILITY. The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder. 10.13 NO THIRD PARTIES BENEFITED. This Agreement is made and entered into for the sole protection and legal benefit of the Company, the Agent and the Banks, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents. No Agent or Bank shall have any obligation to any Person not a party to this Agreement or the other Loan Documents. 10.14 TIME. Time is of the essence of each term and provision of this Agreement and each of the other Loan Documents. 10.15 GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE 185 186 STATE OF COLORADO; PROVIDED THAT THE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. 10.16 WAIVER OF JURY TRIAL. THE COMPANY, THE AGENT, AND THE BANKS EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. SUBJECT TO SECTION 10.17 BELOW, THE COMPANY, THE AGENT, AND THE BANKS EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. 10.17 ARBITRATION. (a) MANDATORY ARBITRATION. Any controversy or claim between or among the parties arising out of or relating to this Agreement, the Loan Documents, and any claim based on or arising from an alleged tort, shall at the request of any party be determined by arbitration. The arbitration shall be conducted in Los Angeles, California, in accordance with the United States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law provision in this Agreement, and under the Commercial Rules of the American Arbitration Association (the "AAA"). The arbitrator(s) shall give effect to statutes of limitation in determining any claim. Any controversy concerning whether an issue is arbitrable shall be determined by the arbitrator(s). Judgment upon the arbitration award may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief. (b) PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. No provision of this Section 10.17 shall limit the right of any party to this Agreement to exercise self-help remedies such as setoff foreclosure against or sale of any real or personal property collateral or security, or to obtain provisional or ancillary remedies from a court of competent jurisdiction before, after, or during the pendency of any arbitration or other proceeding. The exercise of a remedy does not waive the right of either party to resort to arbitration. 96 10.18 NOTICE OF CLAIMS CLAIMS BAR. THE COMPANY HEREBY AGREES THAT IT SHALL GIVE PROMPT WRITTEN NOTICE TO THE AGENT OF ANY CLAIM OR CAUSE OF ACTION IT BELIEVES IT HAS, OR MAY SEEK TO ASSERT OR ALLEGE AGAINST THE AGENT OR ANY BANK, WHETHER SUCH CLAIM IS BASED IN LAW OR EQUITY, ARISING UNDER OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, OR TO THE LOANS (OR THE COLLATERAL THEREFOR), OR ANY ACT OR OMISSION TO ACT BY THE AGENT OR ANY BANK WITH RESPECT HERETO OR THERETO, AND THAT IF THE COMPANY SHALL FAIL TO GIVE SUCH PROMPT NOTICE TO THE AGENT WITH REGARD TO ANY SUCH CLAIM OR CAUSE OF ACTION, THE COMPANY SHALL BE DEEMED TO HAVE WAIVED, AND SHALL BE FOREVER BARRED FROM BRINGING OR ASSERTING, SUCH CLAIM OR CAUSE OF ACTION IN ANY ARBITRATION OR ANY SUIT, ACTION OR PROCEEDlNG IN ANY COURT OR BEFORE ANY GOVERNMENTAL AGENCY. 10.19 ENTIRE AGREEMENT. This Agreement, together with the other Loan Documents, embodies the entire Agreement and understanding between the Company, the Agent and the Banks. Accordingly, this Agreement, together with the other Loan Documents, supersedes all prior or contemporaneous agreements and understandings of such Persons, verbal or written, relating to the subject matter hereof and thereof, except for any prior arrangements made with respect to the payment by the Company of (or any indemnification for) any fees, costs or expenses payable to or incurred (or to be incurred) by or on behalf of the Agent or the Banks. 10.20 INTERPRETATION. This Agreement, together with the other Loan Documents, is the result of negotiations between and has been reviewed by counsel to the Agent, the Banks and the Company and other parties, and is the product of all parties hereto. Accordingly, this Agreement and the other Loan Documents shall not be construed against the Banks or the Agent merely because of the Agent's or Bank's involvement in the preparation of such documents and agreements. 10.21 EXCULPATION OF BANKS. No Bank undertakes or assumes any responsibility or duty to the Company or any third party to select, review, inspect, examine, supervise, pass judgment upon or inform the Company or any third party of the existence, quality, adequacy or suitability of: (a) any appraisals of any Collateral, (b) any environmental report, or (c) any other matters or items, including, but not limited to, engineering, soils and seismic reports which are contemplated in the Loan Documents. Any such selection, review, inspection, examination and the like is solely for the purpose of protecting the Banks' security and preserving the Banks' rights under the Loan Documents, and shall not render any Bank liable to the Company or any third party for the existence, sufficiency, accuracy, completeness or legality thereof. No Bank owes any duty of care to protect or inform the Company or any third party against negligent, faulty, inadequate or defective building or construction or the existence of any environmentally hazardous condition affecting any Collateral. 10.22 RELATIONSHIP. Nothing herein contained shall in any manner be construed as creating any relationship between the Agent and the Banks, on the one hand, and the Company, on the other hand, other than as creditor and debtor. The Company agrees to 97 attorneys' fees and disbursements, including reasonably allocated costs of in-house counsel) resulting from any other construction of the parties' relationship. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first written above. COMPANY AIMCO PROPERTIES, L.P., a Delaware limited partnership By: AIMCO -GP, Inc., a Delaware corporation, its general partner By: /s/ PETER KOMPANIEZ ---------------------------------- Its: Vice President By: Peter Kompaniez ---------------------------------- Its: Vice President ---------------------------------- Notices to be sent to: 1873 South Bellaire Street 17th Floor Denver, Colorado 80222 Attention: Peter K. Kompaniez, Vice Chairman Facsimile: ------------------------------- AGENT BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: /s/ DERIK J HART -------------------------------------- Name: Derik J Hart ------------------------------------ Title: Assistant Vice President ------------------------------------ 98 Notices to be sent to: Bank of America National Trust and Savings Association CRESG #1357 555 South flower Steret, 6th Floor Los Angeles, CA 90071 Att'n: M. Harvey Payments to be made to: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ABA #: ----------------------------------- Account #: ------------------------------- Attention: Ref: ------------------------------- Facsimile: ------------------------------- B OF A BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Bank By: /s/ DERIK J HART ------------------------------------ Name: Derik J Hart ------------------------------------ Title: Assist Vice President ------------------------------------ Notices to be sent to: Bank of America National Trust and Savings Association CRESG #1357 555 South flower Steret, 6th Floor Los Angeles, CA 90071 Att'n: M. Harvey Telephone: (213) 228-6470 ------------------------------- Facsimile: (213) 228-5389 ------------------------------- 99 Payments to be made to: ABA No.: 121000358 ---------------------------------------- Ref.: Loan Accounting Dept. #1503 ------------------------------------------- Attention: Elvia Hernandez - Reference: AIMCO - Obligor No. 7606887762 -------------------------------------- 100 EX-10.5 6 EX10-5 PROMISSORY NOTE Place of Delivery: Los Angeles, California $50,000,000.00 Initial Loan Date: August 12, 1996 FOR VALUE RECEIVED, AIMCO Properties, L.P., a Delaware limited partnership (the "Company"), promises to pay to the order of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("Bank") the principal amount of FIFTY MILLION AND NO/100 DOLLARS ($50,000,000.00) or, if less, the aggregate amount of Loans (as such term and all other capitalized terms used but not defined herein are defined in the Credit Agreement referred to below) made by the Bank to the Company pursuant to the Credit Agreement referred to below, outstanding on the Revolving Facility Maturity Date or, if the Company duly converts the Revolving Facility to the Term Loan pursuant to the Credit Agreement, on the Term Loan Maturity Date. The Company also promises to make principal payments and interest on the unpaid principal amount hereof from the date hereof until paid at the rates and at the times which shall be determined in accordance with the provisions of the Credit Agreement. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the Payment Office. Until notified of the transfer of this Note, the Company shall be entitled to deem the Bank or such person who has been so identified by the transferor in writing to the Company as the holder of this Note, as the owner and holder of this Note. The Bank and any subsequent holder of this Note agrees that before disposing of this Note, or any part hereof, it will make a notation hereon of all principal payments previously made hereunder of the date to which interest hereon has been paid on the schedule attached hereto, if any; PROVIDED, HOWEVER, that the failure to make notation of any payment made on this Note shall not limit or otherwise affect the obligation of the Company hereunder with respect to payments of principal or interest on this Note. This Note is referred to in, and is entitled to the benefits of, the Credit Agreement dated as of AUG.12, 1996 (the "CREDIT AGREEMENT") among the Company, the financial institutions named therein, and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent (the "Agent"). The Credit Agreement, among other things, (i) provides for the making of loans (the "LOANS") by the Bank to the Company from time to time in an aggregate amount first above mentioned, the indebtedness of the Company resulting from each such Loan being evidenced by this Note, and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for mandatory and optional prepayments on account of principal hereof and certain principal payments prior to the maturity hereof upon the terms and conditions therein specified. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Company promises to pay all costs and expenses, including reasonable attorneys' fees, incurred in the collection and enforcement of this Note. The Company hereby waives diligence, presentment, and protest, and except as provided in the Credit Agreement, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. This Note shall be governed by, and construed in accordance with, the laws of the state of Colorado without giving effect to its choice of law doctrine. IN WITNESS WHEREOF, the Company has caused this Note to be executed and delivered by its duly authorized officer, as of the date and place first above written. AIMCO PROPERTIES, L.P., a Delaware limited partnership By: AIMCO-GP, INC., a Delaware corporation, its general partner By: /s/ PETER KOMPANIEZ ---------------------------------- Peter Kompaniez Its: Vice President ----------------------------- By: ---------------------------------- Its: ----------------------------- TRANSACTIONS ON NOTE - -------------------------------------------------------------------------------- Amount of Amount of Principal Principal Interest Notation Date Loan Paid Balance Interest Paid Made By Made Paid Through - -------------------------------------------------------------------------------- EX-10.6 7 EX10-6 PAYMENT GUARANTY This Payment Guaranty ("Guaranty") is made as of AUGUST 12, 1996, by APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation, AIMCO-GP, INC., a Delaware corporation, AIMCO-LP, INC., a Delaware corporation, AIMCO HOLDINGS, L.P., a Delaware limited partnership, AIMCO HOLDINGS Qrs, INC., a Delaware corporation, AIMCO SOMERSET, INC., a Delaware corporation, and AIMCO/OTC Qrs, INC., a Delaware corporation (each of the foregoing is referred to herein as "Guarantor") in favor of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("BofA"), as the agent for itself and the banks ("Banks") &am time to time party to the Revolving Credit Agreement (as hereinafter defined) and also as the agent for itself and the banks &om time to time party to the Bridge Loan Agreement (as defined below) (in such capacity, the "Agent"). FACTUAL BACKGROUND Guarantor is executing this Guaranty (i) to induce the Banks to make a $50,000,000 revolver-to-term credit facility available to AIMCO Properties L.P., a Delaware limited partnership (the "Company") in accordance with the Credit Agreement (the "Revolving Credit Agreement"), dated of even date herewith, by and among Company, BofA (as Agent (as defined under the Revolving Credit Agreement) and as a Bank) and the other Banks &om time to time party thereto and (ii) to induce the Banks to make a $25,000,000 bridge loan facility available to the Company in accordance with the Credit Agreement (Bridge Loan) (the "Bridge Loan Agreement"), dated of even date herewith, by and among the Company, BofA (as Agent (as defined under the Bridge Loan Agreement) and as a Bank) and the other Banks from time to time party thereto. Capitalized terms used but not defined herein shall have the meanings set forth in the Revolving Credit Agreement. As used herein, the term "Facility" shall refer individually to each of the credit facilities available to the Company under the Revolving Credit Agreement and the Bridge Loan Agreement and shall refer collectively to all such credit facilities. GUARANTY 1. GUARANTY OF LOAN. Guarantor absolutely, unconditionally and irrevocably guaranties to Agent and the Banks the full payment of the Facility, and unconditionally agrees to pay to Agent and the Banks the full amount of the Facility. This is a guaranty of payment, not of collection. If Company defaults in the payment when due of the Facility or any part of it, Guarantor shall in lawful money of the United States pay to Agent and the Banks, on demand, all sums due and owing on the Facility, including all interest, charges, fees and other sums, costs and expenses. 2. LOAN. In this Guaranty, the term "Facility" is broadly defined to mean and include all primary, secondary, direct, indirect, fixed and contingent obligations of Company to pay principal, interest, prepayment charges, breakage costs, late charges, loan fees and any other 1 fees, charges, sums, costs and expenses which may be owing at any time under the Loan Documents (as such term is defined both in the Revolving Credit Agreement and in the Bridge Loan Agreement), and shall include, without limitation, all liabilities and obligations of the Company with respect to Letters of Credit issued under the Revolving Credit Agreement, as any or all of such obligations may from time to time be modified, amended, extended or renewed. If the amount outstanding under the Facility is determined by a court of competent jurisdiction or in any arbitration proceeding described in Section 10.17 of the Revolving Credit Agreement, that determination shall be conclusive and binding on Guarantor, regardless of whether Guarantor was a party to the proceeding in which the determination was made or not. 3. RIGHTS OF AGENT AND THE BANKS. Guarantor authorizes Agent or any Bank to perform any or all of the following acts at any time in its sole discretion, all without notice to Guarantor and without affecting Guarantor's obligations under this Guaranty: (a) Agent or the Requisite Banks may alter any terms of the Facility or any part of it, including renewing, compromising, extending or accelerating, or otherwise changing the time for payment of, or increasing or decreasing the rate of interest on, the Facility or any part of it. (b) Agent or any Bank may take and hold security for the Facility or this Guaranty, accept additional or substituted security for either, and subordinate, exchange, enforce, waive, release, compromise, fail to perfect and sell or otherwise dispose of any such security in accordance with the terms of the Facility. (c) Agent or any Bank may direct the order and manner of any sale of all or any part of any security now or later to be held for the Facility or this Guaranty, and Agent or any Bank may also bid at any such sale. (d) Agent or any Bank may apply any payments or recoveries from Company, Guarantor or any other source, and any proceeds of any security, to Company's obligations under the Loan Documents in such manner, order and priority as Agent or such Bank may elect, whether or not those obligations are guarantied by this Guaranty or secured at the time of the application. (e) Agent or any Bank may release Company of its liability for the Facility or any part of it. (f) Agent or any Bank may substitute, add or release any one or more Guarantors, other guarantors or endorsers. (g) In addition to the Facility, Agent or any Bank may extend other credit to Company, and may take and hold security for the credit so extended, all without affecting Guarantor's liability under this Guaranty. 2 4. GUARNATY TO BE ABSOLUTE. Guarantor expressly agrees that until the Facility is paid and performed in full and each and every term, covenant and condition of this Guaranty is fully performed, Guarantor shall not be released by or because of: (a) Any act or event which might otherwise discharge, reduce, limit or modify Guarantor's obligations under this Guaranty; (b) Any waiver, extension, modification, forbearance, delay or other act or omission of Agent or any Bank, or its failure to proceed promptly or otherwise as against Company, Guarantor or any security; (c) Any action, omission or circumstance which might increase the likelihood that Guarantor may be called upon to perform under this Guaranty or which might affect the rights or remedies of Guarantor as against Company; (d) Any dealings occurring at any time between Company and Agent or any Bank, whether relating to the Facility or otherwise; or (e) Any action of Agent or any Bank described in Section 3 above. Guarantor hereby acknowledges that absent this Section 4, Guarantor might have a defense to the enforcement of this Guaranty as a result of one or more of the foregoing acts, omissions, agreement, waivers or matters. Guarantor hereby expressly waives and surrenders any defense to its liability under this Guaranty based upon any of the foregoing acts, omissions, agreements, waivers or matters. It is the purpose and intent of this Guaranty that the obligations of Guarantor under it shall be absolute and unconditional under any and all circumstances. 5. GUARANTOR'S WAIVERS. Guarantor waives: (a) All statutes of limitations as a defense to any action or proceeding brought against Guarantor by Agent or any Bank, to the fullest extent permitted by law; (b) Any right it may have to require Agent or any Bank to proceed against Company, proceed against or exhaust any security held from Company, or pursue any other remedy in Agent's or any Bank's power to pursue; (c) Any defense based on any claim that Guarantor's obligations exceed or are more burdensome than those of Company; (d) Any defense based on: (i) any legal disability of Company, (ii) any release, discharge, modification, impairment or limitation of the liability of Company to Agent or any Bank from any cause, whether consented to by Agent or any Bank or arising by operation of law or &om any bankruptcy or other voluntary or involuntary proceeding, in or out of court, for the adjustment of debtor-creditor relationships ("Insolvency Proceeding") and (iii) any rejection or disaffirmance of the Facility, or any part of it, or any security held for it, in any such Insolvency Proceeding; 3 (e) Any defense based on any action taken or omitted by Agent or any Bank in any Insolvency Proceeding involving Company, including any election to have Agent's or that Bank's claim allowed as being secured, partially secured or unsecured, any extension of credit by Bank to Company in any Insolvency Proceeding, and the taking and holding by Agent or any Bank of any security for any such extension of credit; (f) All presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, notices of acceptance of this Guaranty and of the existence, creation, or incurring of new or additional indebtedness, and demands and notices of every kind except for any demand or notice by Agent or any Bank to Guarantor expressly provided for in Section 1; (g) Any defense based on or arising out of any defense that Company may have to the payment or performance of the Facility or any part of it; and (h) Any defense based on or arising out of any action of Agent or any Bank described in Sections 3 or 4 above. 6. WAIVERS OF SUBROGATION AND OTHER RIGHTS. (a) During the existence of an Event of Default by Company, Agent or any Bank, without prior notice to or consent of Guarantor, may elect to: (i) foreclose either judicially or nonjudicially against any real or personal property security it may hold for the Facility, (ii) accept a transfer of any such security in lieu of foreclosure, (iii) compromise or adjust the Facility or any part of it or make any other accommodation with Company or Guarantor, or (iv) exercise any other remedy against Company or any security. No such action by Agent or any Bank shall release or limit the liability of Guarantor, who shall remain liable under this Guaranty after the action, even if the effect of the action is to deprive Guarantor of any subrogation rights, rights of indemnity, or other rights to collect reimbursement from Company for any sums paid to Agent or any Bank, whether contractual or arising by operation of law or otherwise. Guarantor expressly agrees that under no circumstances shall it be deemed to have any right, title, interest or claim in or to any real or personal property to held by Agent or any Bank or any third party after any foreclosure or transfer in lieu of foreclosure of any security for the Facility. (b) Regardless of whether Guarantor may have made any payments to Bank, Guarantor hereby waives: (i) all rights of subrogation, all rights of indemnity, and any other rights to collect reimbursement from Company for any sums paid to Agent or any Bank, whether contractual or arising by operation of law (including the United States Bankruptcy Code or any successor or similar statute) or otherwise, (ii) all rights to enforce any remedy that Bank may have against Company, and (iii) all rights to participate in any security now or later to be held by Agent or any Bank for the Facility, in each case until the full and indefeasible payment and performance of all Obligations under (and as defined in) each of the Revolving Credit Agreement and the Bridge Loan Agreement, and all obligations of the Guarantors hereunder. 4 7. REVIVAL AND REINSTATEMENT. If Agent or any Bank is required to pay, return or restore to Company or any other person any amounts previously paid on the Facility because of any Insolvency Proceeding of Company, any stop notice or any other reason, the obligations of Guarantor shall be reinstated and revived and the rights of Agent and such Bank shall continue with regard to such amounts, all as though they had never been paid. 8. INFORMATION REGARDING BORROWER. Before signing this Guaranty, Guarantor investigated the financial condition and business operations of Company and such other matters as Guarantor deemed appropriate to assure itself of Company's ability to discharge its obligations under the Loan Documents. Guarantor assumes full responsibility for that due diligence, as well as for keeping informed of all matters which may affect Company's ability to pay and perform its obligations to the Agent and the Banks. Neither Agent nor any Bank has any duty to disclose to Guarantor any information which such party may have or receive about Company's financial condition, business operations, or any other circumstances bearing on its ability to perform. 9. SUBORDINATION. Any rights of Guarantor, whether now existing or later arising, to receive payment on account of any indebtedness (including interest) owed to it by Company or any Wholly-Owned Subsidiary which may own any collateral for the Facility or to receive any payment from Company or any such Wholly-Owned Subsidiary other than those payments or distributions permitted under Sections 7.08(b) and 7.09 of the Revolving Credit Agreement shall at all times be subordinate as to lien and time of payment and in all other respects to the full and prior repayment of the Facility. Guarantor shall not be entitled to enforce or receive payment of any sums hereby subordinated until the Facility has been paid and performed in full and any such sums received in violation of this Guaranty shall be received by Guarantor in trust for the Agent and the Banks. 10. FINANCIAL INFORMATION. Guarantor shall keep true and correct financial books and records, using generally accepted accounting principles consistently applied, or such other accounting principles as the Requisite Banks in their reasonable judgment may find acceptable from time to time. Guarantor represents, warrants and covenants to Agent and the Banks that all financial information with respect to the Guarantor delivered or to be delivered to Agent and the Banks by the Company with respect to Guarantor under Section 6.01 of the Revolving Credit Agreement is or shall be true and correct and fairly presents or will fairly present the financial position of the Guarantor for the applicable period. Guarantor shall promptly provide Agent and the Banks with any additional audited financial information that Guarantor may obtain, and such other information concerning its affairs and properties as Agent or any Bank may reasonably request, including, without limitation, signed copies of any tax returns if requested Agent or the Banks. 11. GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants that: (a) All financial statements delivered to Agent or the Banks were or will be prepared in accordance with generally accepted accounting principles, or such other accounting 5 principles as may be acceptable to the Requisite Banks at the time of their preparation, consistently applied; (b) There has been no material adverse change in Guarantor's financial condition since the dates of the statements most recently furnished to Agent and the Banks; and (c) All representations and warranties given on behalf of or with respect to Guarantor contained in Article V of the Revolving Credit Agreement, in Article V of the Bridge Loan Agreement and in any other Loan Document or certification made in connection with the Revolving Credit Agreement or Bridge Loan Agreement are true and correct. 12. COVENANTS OF GUARANTOR. Guarantor covenants and agrees that it shall comply with and perform all covenants given on behalf of or with respect to Guarantor (whether expressly or as a Subsidiary) contained in Articles VI and VII of the Revolving Credit Agreement, Articles VI and VII of the Bridge Loan Agreement and in all other Loan Documents. 13. INTENTIONAL OMITTED. 14. REFERENCE AND ARBITRATION. (a) MANDATORY ARBITRATION. Any controversy or claim between or among the parties, including those arising out of or relating to this Guaranty or the Loan Documents and any claim based on or arising from an alleged tort, shall at the request of any party be determined by arbitration. The arbitration shall be conducted in Los Angeles, California, in accordance with the United States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law provision in this Guaranty, and under the Commercial Rules of the American Arbitration Association (the "AAA"). The arbitrator(s) shall give effect to statutes of limitation in determining any claim. Any controversy concerning whether an issue is arbitrable shall be determined by the arbitrator(s). Judgment upon the arbitration award may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief. (b) PROVISIONAL REMEDIES. SELF-HELP AND FORECLOSURE. No provision of this Section 14 shall limit the right of any party to exercise self-help remedies such as setoff, foreclosure against or sale of any real or personal property collateral or security, or to obtain provisional or ancillary remedies &om a court of competent jurisdiction before, after, or during the pendency of any arbitration. 15. AUTHORIZATION NO VIOLATION. Guarantor is authorized to execute, deliver and perform under this Guaranty, which is a valid, binding, and enforceable obligation of Guarantor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditor's rights generally. The execution, delivery and performance of this Guaranty are not in violation of any applicable law, regulation or ordinance, or any order or ruling of any court or governmental agency applicable to the 6 Guarantor. The Guaranty does not conflict with, or constitute a breach or default under, any agreement to which Guarantor is a party. 16. ADDITIONAL AND INDEPENDENT OBLIGATIONS. Guarantor's obligations under this Guaranty are in addition to its obligations under any future guaranties, each of which shall remain in full force and effect until it is expressly modified or released in a writing signed by Agent and consented to by the Banks. Guarantor's obligations under this Guaranty are independent of those of Company on the Facility. Agent or the Banks may bring a separate action, or commence a separate arbitration proceeding against Guarantor without first proceeding against Company, any other person or any security that Agent or any Bank may hold, and without pursuing any other remedy. None of Agent's or any Bank's rights under this Guaranty shall be exhausted by any action by Agent or any Bank until the Facility has been paid and performed in full in cash. 17. NO WAIVER; CONSENTS: CUMULATIVE REMEDIES. Each waiver by Agent or the Banks must be in writing, and no waiver shall be construed as a continuing waiver. No waiver shall be implied from Agent's or any Bank's delay in exercising or failure to exercise any right or remedy against Company, Guarantor or any security. Consent by Agent or the Banks to any act or omission by Company or Guarantor shall not be construed as a consent to any other or subsequent act or omission, or as a waiver of the requirement for Agent's or the Banks' consent to be obtained in any future or other instance. All remedies of Agent and each Bank against Company and Guarantor are cumulative. 18. NO RELEASE. Except as otherwise provided in Section 1, Guarantor shall not be released, in whole or in part, from its obligations under this Guaranty except by a writing signed by Agent and all the Banks. 19. HEIRS. SUCCESSORS AND ASSIGNS: PARTICIPATIONS. The terms of this Guaranty shall bind and benefit the heirs, legal representatives, successors and assigns of Agent, the Banks and Guarantor; provided, however, that Guarantor may not assign this Guaranty, or assign or delegate any of its rights or obligations under this Guaranty, without the prior written consent of Agent in each instance. Without notice to or the consent of Guarantor, Agent and any Bank may disclose any and all information in its possession concerning Guarantor, this Guaranty and any security for this Guaranty to any actual or prospective purchaser of any securities issued or to be issued by Agent or such Bank, and to any actual or prospective purchaser or assignee of any participation or other interest in the Facility and this Guaranty. 20. NOTICES. (a) DELIVERY. All notices, requests and other communications provided for hereunder shall be in writing (including, unless the context expressly otherwise provides, telegraphic, telex, facsimile transmission or cable communication) and mailed, telegraphed, telexed or delivered to its address specified on the signature pages hereof, or to such other address as shall be designated by such party in a written notice to the other party. 7 (b) RECEIPT. All such notices and communications shall, when transmitted by overnight delivery, telegraphed, telecopied by facsimile, telexed or cabled, be effective when delivered for overnight delivery or to the telegraph company, transmitted by telecopier, confirmed by telex answerback or delivered to the cable company, respectively, or if delivered, upon delivery. (c) RELIANCE. Agent and each Bank shall be entitled to rely on the authority of any person purporting to be a person authorized by Guarantor to give such notice, and neither Agent nor any Bank shall have any liability to Guarantor or any other person on account of any action taken or not taken by Agent or such Bank in reliance upon such telephonic or facsimile notice. The obligation of Guarantor hereunder shall not be affected in any way or to any extent by any failure by Bank to receive written confirmation of any telephonic or facsimile notice or the receipt by Agent or a Bank of a confirmation which is at variance with the terms understood by Agent or such Bank to be contained in the telephonic or facsimile notice. 21. RULES OF CONSTRUCTION. In this Guaranty, the word "Company" includes both the named Company and any other person who at any time assumes or otherwise becomes primarily liable for all or any part of the obligations of the named Company on the Facility. The word "person" includes any individual, company, trust or other legal entity of any kind. If this Guaranty is executed by more than one person, the word "Guarantor" includes all such persons. The word "include(s)" means "include(s), without limitation," and the word "including" means "including, but not limited to." When the context and construction so require, all words used in the singular shall be deemed to have been used in the plural and vice versa. No listing of specific instances, items or matters in any way limits the scope or generality of any language of this Guaranty. All headings appearing in this Guaranty are for convenience only and shall be disregarded in construing this Guaranty. 22. GOVERNING LAW. This Guaranty shall be governed by, and construed in accordance with, the laws of the State of Colorado, without regard to its choice of law rules. 23. COSTS AND EXPENSES. If any lawsuit or arbitration is commenced which arises out of, or which relates to this Guaranty, the Loan Documents or the Facility, the prevailing party shall be entitled to recover from each other party such sums as the court or arbitrator may adjudge to be reasonable attorneys' fees (including allocated costs for services of in-house counsel) in the action or proceeding, in addition to costs and expenses otherwise allowed by law. In all other situations, including any Insolvency Proceeding, Guarantor agrees to pay all of the Agent's and each Bank's costs and expenses, including attorneys' fees (including allocated costs for services of the Agent's and each Bank's in-house counsel) which may be incurred in any effort to collect or enforce the Facility or any part of it or any term of this Guaranty. Without limiting any rights of the Agent or Banks under the Revolving Credit Agreement or the Bridge Loan Agreement, all amounts of any kind due and payable under this Guaranty (whether for principal, interest, and other costs under the Facility, or for costs, fees, and expenses for which the Guarantors are directly responsible hereunder, or otherwise) shall accrue interest from the time the Agent or the Banks make demand therefor hereunder until paid in full in cash to such 8 Agent or the Banks at the Base Rate, as defined in the Revolving Credit Agreement, plus three (3%) percentage points, except to the extent that any such amounts are then accruing interest under the Facility, in which case such Base Rate plus 3% interest rate shall not be applied if the effect would be to compound the interest to which such obligations are subject to under the Facility. 24. CONSIDERATION. Guarantor acknowledges that it expects to benefit from Banks' extension of the Facility to Compare because of its relationship to Company, because such Facility is essential to the business of the Company and because a portion of the Facility will be available for the Company to pay certain expenses intended to be incurred by Guarantor in connection with the conduct by Guarantor of its business. Guarantor is executing this Guaranty in consideration of these anticipated benefits. 25. INTEGRATION: MODIFICATIONS. This Guaranty (a) integrates all the terms and conditions mentioned in or incidental to this Guaranty, (b) supersedes all oral negotiations and prior writings with respect to its subject matter, and (c) is intended by Guarantor, Agent and the and Banks as the final expression of the agreement with respect to the terms and conditions set forth in this Guaranty and as the complete and exclusive statement of the terms agreed to by Guarantor, Agent and the Banks. No representation, understanding, promise or condition shall be enforceable against any party hereto unless it is contained in this Guaranty. This Guaranty may not be modified except in a writing signed by both Agent (with the consent of the Requisite Banks) and Guarantor.' No course of prior dealing, usage of trade, parol or extrinsic evidence of any nature shall be used to supplement, modify or vary any of the terms hereof. As between Agent and the Banks only, nothing contained in this Guaranty shall alter the rights and obligations among Agent and the Banks set forth in the Credit Agreement. 26. MISCELLANEOUS. The illegality or unenforceability of one or more provisions of this Guaranty shall not affect any other provision. Time is of the essence in the performance of this Guaranty by Guarantor. The obligations of each Guarantor under this Guaranty shall be joint and several. Guarantors: APARTMENT INVESTMENT AND Address Where Notices to Guarantors are MANAGEMENT COMPANY, to be Sent: a Maryland corporation 1873 South Bellaire Street By: 17th Floor --------------------------------- Denver, Colorado 90071 Name: ------------------------------- Address Where Notices to Agent are to be Title: Sent: ------------------------------ 9 Address Where Notices to Guarantors are to be AIMCO SOMERSET, INC., Sent: a Delaware corporation 1873 South Bellaire Street By: /s/ Peter Kompaniez 17th Floor ------------------------ Denver, Colorado 90071 Name: Peter Kompaniez ------------------------ Address Where Notices to Agent are to be Title Vice President; Sent: ------------------------ BANK OF AMERICA NATIONAL TRUST AIMCO/OTC QRS, INC., AND SAVINGS ASSOCIATION a Delaware corporation 555 South Flower Street, 6th Floor Los Angeles, California 90071 By: /s/ Peter Kompaniez Att'n: Manager - Unit #1357 ---------------------- Addresses Where Notices to the Banks are to Name: Peter Kompaniez be Sent: ---------------------- Title: Vice President ---------------------- - ----------------------------- Per the Credit Agreement 11 EX-27 8 EX-27
5 3-MOS DEC-31-1996 JUL-01-1996 SEP-30-1996 1,115 0 5,054 0 0 15,760 541,933 41,044 531,863 64,333 0 0 0 124 184,582 531,863 24,140 25,857 10,608 15,587 394 0 5,850 3,332 0 3,332 0 64 0 3,396 0.27 0.27 Includes cash, restricted cash, accounts receivable and notes receivable Includes secured short term financing, accounts payable and accrued liabilities, resident security deposits and prepaid rents 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 C.G.S., depreciation, corporate overhead allocation, amortization of management company goodwill and other assets depreciation and amortization
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