-----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, NSZ6BEC7rvOr4OykbKuMu/8r93JUzvc+eXmswppw7oIq2d8Ts+tKm5DW1fJ17XUY tDL2diY6QJiBIarEUNPgRg== 0001047469-97-004989.txt : 19971117 0001047469-97-004989.hdr.sgml : 19971117 ACCESSION NUMBER: 0001047469-97-004989 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: APARTMENT INVESTMENT & MANAGEMENT CO CENTRAL INDEX KEY: 0000922864 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 841259577 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13232 FILM NUMBER: 97721348 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 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, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________________ TO _______________________ Commission File Number 1-13232 APARTMENT INVESTMENT AND MANAGEMENT COMPANY (Exact name of registrant as specified in its charter) 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 7, 1997: 35,594,939 The number of shares of Class B Common Stock outstanding as of November 7, 1997: 325,000 1 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, 1997 (unaudited) and December 31, 1996 3 Consolidated Statements of Income for the Three and Nine Months Ended September 30, 1997 and 1996 (unaudited) 4 Consolidated Statements of Cash Flow for the Nine Months Ended September 30, 1997 and 1996 (unaudited) 5 Notes to Consolidated Financial Statements (unaudited) 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 18 Item 3. Quantitative and Qualitative Disclosures about Market Risk 28 PART II. OTHER INFORMATION Item 1. Legal Proceedings 28 Item 2. Changes in Securities 29 Item 5. Other Information 30 Item 6. Exhibits and Reports on Form 8-K 30 Signatures 35 2 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, 1997 1996 ---- ---- ASSETS (Unaudited) Real estate, net of accumulated depreciation of $142,694 and $120,077 $1,107,545 $745,145 Property held for sale 25,580 6,769 Investments held for sale 25,025 - Investments in and notes receivable from unconsolidated subsidiaries 19,960 - Investment in and notes receivable from real estate partnerships 174,777 - Investment in NHP Incorporated 123,078 - Cash and cash equivalents 45,775 13,170 Restricted cash 22,019 15,831 Accounts receivable 24,328 4,344 Deferred financing costs 7,682 11,053 Other assets 32,426 31,361 ---------- -------- Total assets $1,608,195 $827,673 ---------- -------- ---------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY Secured notes payable $492,977 $242,110 Secured tax-exempt bond financing 74,441 75,497 Secured short-term financing 94,297 192,039 Unsecured short-term financing - 12,500 ---------- -------- Total indebtedness 661,715 522,146 ---------- -------- Accounts payable, accrued and other liabilities 72,533 16,299 Accrued management contract liability 106,615 - Resident security deposits and prepaid rents 8,919 4,316 ---------- -------- Total liabilities 849,782 542,761 ---------- -------- Commitments and contingencies - - Minority interest in other partnerships 19,355 10,386 Minority interest in Operating Partnership 111,632 58,777 Stockholders' equity: Unrealized gain on investments 1,175 - Class A Common Stock, $.01 par value, 150,000,000 shares authorized, 28,274,739 and 12,346,812 shares issued and outstanding 283 150 Class B Common Stock, $.01 par value, 425,000 shares authorized, 325,000 shares issued and outstanding 3 3 Non-voting Preferred Stock, $0.01 par value, 9,250,000 shares authorized, none issued and outstanding - - Class B Cumulative Convertible Preferred stock, $.01 par value, 750,000 shares authorized, issued and outstanding 75,000 - Additional paid-in capital 606,799 236,791 Distributions in excess of earnings (25,375) (14,055) Notes due on Common Stock purchases (30,459) (7,140) ---------- -------- Total stockholders' equity 627,426 215,749 ---------- -------- Total liabilities and stockholders' equity $1,608,195 $827,673 ---------- -------- ---------- --------
See accompanying notes to consolidated financial statements. 3 APARTMENT INVESTMENT AND MANAGEMENT COMPANY CONSOLIDATED STATEMENTS OF INCOME (In Thousands, Except Per Share Data) (Unaudited)
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED -------------------------------------- -------------------------------------- SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 ------------------ ------------------ ------------------ ------------------ RENTAL PROPERTY OPERATIONS Rental and other property revenues $47,364 $24,140 $127,083 $70,392 Property operating expenses (19,577) (8,960) (50,737) (27,111) Owned property management expense (1,610) (658) (4,344) (1,999) ------- ------- -------- ------- Income from property operations before depreciation 26,177 14,522 72,002 41,282 Depreciation (8,802) (4,656) (23,848) (13,716) ------- ------- -------- ------- Income from property operations 17,375 9,866 48,154 27,566 ------- ------- -------- ------- ------- ------- -------- ------- SERVICE COMPANY BUSINESS Management fees and other income 3,568 1,717 9,173 5,442 Management and other expenses (2,386) (990) (5,029) (3,449) Corporate overhead allocation (147) (147) (441) (443) Amortization of management company goodwill (237) (114) (711) (344) Other assets depreciation and amortization (75) (62) (236) (154) ------- ------- -------- ------- Income from service company business 723 404 2,756 1,052 Minority interests in service company business 50 (3) 48 (10) ------- ------- -------- ------- ------- ------- -------- ------- Company's share of income from service company business 773 401 2,804 1,042 ------- ------- -------- ------- GENERAL AND ADMINISTRATIVE EXPENSES (624) (394) (1,408) (943) INTEREST EXPENSE (12,755) (5,850) (33,359) (16,775) INTEREST INCOME 3,117 31 4,458 242 MINORITY INTEREST IN OTHER PARTNERSHIPS (212) - (777) - EQUITY IN LOSSES OF UNCONSOLIDATED PARTNERSHIPS (84) - (463) - EQUITY IN EARNINGS OF UNCONSOLIDATED SUBSIDIARIES 542 - 456 - ------- ------- -------- ------- INCOME BEFORE EXTRAORDINARY ITEM, GAIN (LOSS) ON DISPOSITION OF PROPERTIES AND MINORITY INTEREST IN OPERATING PARTNERSHIP 8,132 4,054 19,865 11,132 Extraordinary item - early extinguishment of debt - - (269) - Gain (loss) on disposition of properties (169) 64 (169) 64 ------- ------- -------- ------- INCOME BEFORE MINORITY INTEREST IN OPERATING PARTNERSHIP 7,963 4,118 19,427 11,196 Minority interest in Operating Partnership (996) (722) (2,612) (1,845) ------- ------- -------- ------- NET INCOME $6,967 $3,396 $16,815 $9,351 ------- ------- -------- ------- ------- ------- -------- ------- Net income attributable to preferred stockholder $835 - $835 - ------- ------- -------- ------- ------- ------- -------- ------- Net income attributable to common stockholders $6,132 $3,396 $15,980 $9,351 ------- ------- -------- ------- ------- ------- -------- ------- NET INCOME PER COMMON SHARE AND COMMON SHARE EQUIVALENT Income before extraordinary item, gain (loss) on disposition of properties net of minority interest in Operating Partnership and income attributable to preferred stockholder $0.26 $0.26 $0.79 $0.76 Extraordinary item - early extinguishment of debt - - (0.01) - Gain (loss) on disposition of properties (0.01) 0.01 (0.01) 0.01 ------- ------- -------- ------- Net Income $0.25 $0.27 $0.77 $0.77 ------- ------- -------- ------- ------- ------- -------- ------- DIVIDENDS PAID PER COMMON SHARE $0.4625 $0.425 $1.3875 $1.275 ------- ------- -------- ------- ------- ------- -------- ------- WEIGHTED AVERAGE SHARES AND COMMON SHARE EQUIVALENTS OUTSTANDING 24,609 12,398 20,629 12,127 ------- ------- -------- ------- ------- ------- -------- -------
See accompanying notes to consolidated financial statements. 4 APARTMENT INVESTMENT AND MANAGEMENT COMPANY CONSOLIDATED STATEMENTS OF CASH FLOW (In Thousands) (Unaudited) For the For the Nine Months Ended Nine Months Ended September 30, 1997 September 30, 1996 ------------------ ------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 16,815 $ 9,351 --------- -------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 26,595 14,801 Loss (gain) on disposition of properties 169 (64) Minority interest in Operating Partnership 2,612 1,845 Minority interests in other partnerships 777 - Equity in losses of unconsolidated partnerships 463 - Equity in earnings of unconsolidated subsidiary (456) - Extraordinary loss on early extinguishment of debt 269 - (Increase) decrease from changes in operating assets: Restricted cash (137) 9,039 Accounts receivable (7,241) (580) Other assets (7,308) (3,299) Increase (decrease) from changes in operating liabilities: Accounts payable, accrued and other liabilities 17,299 (707) Resident security deposits and prepaid rents 3,578 479 --------- -------- Total adjustments 36,620 21,514 --------- -------- Net cash provided by operating activities 53,435 30,865 --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of real estate - 17,167 Purchase of real estate (86,205) (10,998) Purchase of note receivable - (2,893) Purchase of general and limited partnership interests (67,393) - Additions to property held for sale (139) - Capital replacements (5,166) (4,008) Initial capital expenditures (5,650) (3,681) Construction in progress and capital enhancements (6,143) (6,475) Purchase of office equipment and leasehold improvements (1,113) (300) Proceeds from sale of property held for sale 231 - Purchase of NHP mortgage loans (39,918) - Purchase of NHP common stock (121,437) - Purchase of Ambassador common stock (19,881) - Dividends received 38,000 - --------- -------- Net cash used in investing activities (314,814) (11,188) --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of Class A Common Stock, net of underwriting and offering costs 268,960 45 Principal repayments received on notes due from Officers on Class A Common Stock purchases 10,323 - Proceeds from issuance of Class B Preferred Stock 75,000 - Repurchase of common stock - (3,543) Proceeds from secured notes payable borrowings 94,111 - Proceeds from secured tax-exempt bond financing - 58,010 Net borrowings on Credit Facility 153,180 - Repayments from unsecured short-term financing (12,500) - Net proceeds from secured short-term financing - 23,300 Principal repayments on secured notes payable (4,451) (28,599) Principal repayments on secured tax-exempt bond financing (1,056) (48,363) Principal repayments on secured short-term financing (258,922) - Payment of loan costs, net of proceeds from interest rate hedge 1,346 (3,022) Payment of common stock dividends (28,135) (15,456) Payment of distributions to minority interest in Operating Partnership (3,872) (2,656) Payment of additional offering costs related to 1995 common stock offering, dividend reinvestment plan and stock option plan - (657) --------- -------- Net cash provided by (used in) financing activities 293,984 (20,941) --------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 32,605 (1,264) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 13,170 2,379 --------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 45,775 $ 1,115 --------- -------- --------- --------
See accompanying notes to consolidated financial statements. 5 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Consolidated Statements of Cash Flow (In Thousands Except Share and Operating Partnership Unit Data) NON CASH INVESTING AND FINANCING ACTIVITIES PURCHASE OF REAL ESTATE Secured notes payable assumed in connection with purchase of real estate $ 63,446 Real estate purchased in exchange for 1,897,794 Operating Partnership Units 55,906 -------- $119,352 -------- -------- PURCHASE OF 53.3% INTEREST IN NHP INCORPORATED In May 1997, the Company acquired 2,866,071 shares of NHP Incorporated's ("NHP") common stock in exchange for 2,142,857 shares of AIMCO Class A Common Stock with a recorded value of $57,321. Subsequent to the purchase, the Company contributed the NHP common stock to AIMCO/NHP Holdings, Inc. ("ANHI"), an unconsolidated subsidiary formed in April 1997, in exchange for all of the shares of ANHI's nonvoting preferred stock, representing a 95% economic interest in ANHI. Concurrent with this contribution, ANHI obtained a loan in the amount of $72,600, and used the proceeds from the loan to purchase 3,630,002 additional shares of NHP common stock. In August and September 1997, AIMCO purchased 5,717,000 shares of NHP common stock from ANHI for an aggregate purchase price of $114,397, and purchased an additional 434,049 shares from third parties, pursuant to the stock purchase agreement. Upon the completion of these transactions, AIMCO and ANHI owned a combined total of 6,930,122 shares of NHP common stock, representing 53.3% of NHP's outstanding common stock as of September 30, 1997 (see Note 8). PURCHASE OF GENERAL AND LIMITED PARTNERSHIP INTERESTS, CAPTIVE INSURANCE SUBSIDIARY AND OTHER ASSETS The historical cost of the assets and the liabilities assumed in connection with the purchase of NHP Partners, Inc., NHP Partners Two Limited Partners and their subsidiaries (the NHP Real Estate Companies) (see Note 7) were as follows: Real estate, net $ 174,545 Investment in real estate partnerships 89,526 Restricted cash 6,051 Accounts receivable 12,743 Other assets 3,347 Secured notes payable (140,270) Accounts payable, accrued and other liabilities (50,153) Accrued management contract liability (106,615) Resident security deposits and prepaid rent (1,025) REDEMPTION OF OPERATING PARTNERSHIP UNITS During the nine months ended September 30, 1997, 558,601 Operating Partnership units with a recorded value of $8,555 were redeemed in exchange for an equal number of shares of Class A Common Stock. PROPERTY HELD FOR SALE In the third quarter of 1997, the Company entered into contracts to sell five apartment communities with a net book value of $19.1 million. These assets, which were reclassified to Property held for sale (see Note 4), were sold in October 1997 (see Note 18). ISSUANCE OF NOTES RECEIVABLE DUE FROM OFFICERS During the nine months ended September 30, 1997, the Company issued notes receivable from officers for a total of $33.7 million in connection with the purchase of 1,125,000 shares of Class A Common Stock. OTHER During the nine months ended September 30, 1997, the Company reclassified $1,323 of Other assets to Real estate as a purchase price allocation adjustment. In addition, the Company wrote off $4,065 of Other assets allocable to limited partners in partnerships controlled by the Company, to Minority interest in other partnerships. During the nine months ended September 30, 1997, the Operating Partnership issued an additional 198,218 Operating Partnership units with a recorded value of $6,653 in connection with the purchase of certain partnership interests. During the nine months ended September 30, 1997 the Company recorded unrealized gains on investments held for sale of $1,175. See accompanying notes to consolidated financial statements. 6 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements September 30, 1997 (Unaudited) NOTE 1 - ORGANIZATION Apartment Investment and Management Company, a Maryland corporation incorporated on January 10, 1994 ("AIMCO" and together with its subsidiaries and other controlled entities, the "Company") acts as sole general partner of AIMCO Properties, L.P. (the "Operating Partnership") through AIMCO-GP, Inc. and AIMCO-LP, Inc., wholly-owned subsidiaries which hold all of the Company's general and limited partnership interests in and a majority ownership of the Operating Partnership. At September 30, 1997, AIMCO had 28,274,739 shares of Class A Common Stock outstanding and the Operating Partnership had 4,936,230 Partnership Common Units ("OP Units") outstanding, for a combined total of 33,210,969 shares and OP Units in the Operating Partnership. The Company held an 85% interest in the Operating Partnership as of September 30, 1997. As of September 30, 1997, the Company, through its subsidiaries, owned or controlled 28,773 units in 109 apartment communities and had an equity interest in 87,182 units in 526 apartment communities. In addition, the Company manages 71,038 units in 394 apartment communities for third parties and affiliates, bringing the total owned and managed portfolio to 186,993 units in 1,029 apartment communities. The apartment communities are located in 42 states, the District of Columbia and Puerto Rico. NOTE 2 - BASIS OF PRESENTATION The accompanying consolidated financial statements include the accounts of AIMCO, the Operating Partnership, majority owned subsidiaries and controlled real estate limited partnerships. The Company operates its service company business through Property Asset Management Services, L.P. ("PAMS, L.P."). The Operating Partnership owns a 1% general partnership interest in PAMS, L.P., which provides the Operating Partnership with control of PAMS, L.P. The 99% limited partner of PAMS, L.P. is Property Asset Management Services, Inc. ("PAMS, Inc."). The Operating Partnership owns all of the non-voting preferred stock of PAMS, Inc., representing a 95% economic interest. As a result of the control held by the Operating Partnership in PAMS, L.P., the service company business is consolidated. Interests held by holders of OP Units are reflected as Minority interest in Operating Partnership. Interests held by limited partners in real estate partnerships controlled by the Company are reflected as Minority interest in other partnerships. AIMCO/NHP Holdings, Inc. ("ANHI") is an unconsolidated subsidiary of the Company which owns 779,073 shares of common stock of NHP Incorporated ("NHP"), representing 6.0% of the shares outstanding as of September 30, 1997 (see Note 6). The Operating Partnership owns a 95% economic interest in ANHI through its ownership of 100% of the non-voting preferred stock of ANHI (the "ANHI Preferred Stock"). Certain directors and officers of AIMCO own a 5% economic interest in ANHI through their ownership of all of its outstanding shares of common stock. As a result of the controlling ownership interest in ANHI held by such directors and officers, the Company accounts for its interest in ANHI on the equity method. 7 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (continued) NOTE 2 - BASIS OF PRESENTATION (CONTINUED) In connection with the purchase of the NHP Real Estate Companies, and through the acceptance of tender offers made to various limited partners, the Company purchased controlling interests in 3,176 units located in 14 apartment communities, which are presented on a consolidated basis (see Notes 3 and 7). In addition, the Company purchased non-controlling interests in partnerships which own 84,483 units in 520 apartment communities (see Note 7). The Company believes that it does not possess the power to control these partnerships in which it holds a general partner interest but owns less than a 50% interest in the partnership. The terms of these partnership agreements specify that the general partner must obtain the prior approval of a majority of the limited partners in order to implement major decisions regarding the disposal of real estate owned by the partnership. Therefore, the Company uses the equity method of accounting for these partnerships. The Company's interest in these properties is reflected as Investment in real estate partnerships. The acquisition of the NHP Real Estate Companies was accounted for as a purchase whereby the assets and liabilities were adjusted to estimated fair market value, based upon preliminary estimates, which are subject to change as additional information is obtained. The accompanying unaudited consolidated financial statements of the Company as of September 30, 1997 and for the three and nine months ended September 30, 1997 and 1996 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, 1996. 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. Certain reclassifications have been made in the December 31, 1996 balance sheet to conform to the current period presentation. NOTE 3 - REAL ESTATE During the nine months ended September 30, 1997, the Company purchased or acquired control of 21 apartment communities as described below. The cash portions of the acquisitions were funded with short-term unsecured financings, borrowings under the Company's Credit Facility or with working capital. The Company acquired the following apartment communities in unrelated transactions during the nine months ended September 30, 1997. The aggregate consideration paid by the Company of $191.5 million consisted of $72.2 million in cash, 1,897,794 OP Units with a total recorded value of $55.9 million and the assumption of $63.4 million of secured long-term indebtedness. 8 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (continued) NOTE 3 - REAL ESTATE (CONTINUED) Date Number Acquired Property Location of Units -------- -------- -------- -------- 4/97 Bay Club Aventura, FL 702 6/97 Stonebrook Orlando, FL 244 6/97 Tustin Woods/Californian* Tustin, CA 292 6/97 The Vinings at the Waterways Aventura, FL 180 7/97 Sawgrass Orlando, FL 208 9/97 Los Arboles Chandler, AZ 232 9/97 Morton Towers Miami Beach, FL 1,277 ----- 3,135 ----- ----- *The Company acquired a 45,000 square foot retail complex as part of the Tustin Woods/Californian acquisition. In connection with the acquisition of the NHP Real Estate Companies (see Note 7) and the acceptance of subsequent tender offers to limited partners, the Company acquired a controlling interest in 14 partnerships (the "Controlled NHP Partnerships"), which own 3,176 units located in 14 apartment communities. The portion of the aggregate purchase price for the NHP Real Estate Companies allocated to these general and limited partnership interests was approximately $174.5 million, including the assumption of approximately $140.3 million of mortgage indebtedness. Through its ownership, the Company has the ability to refinance or sell the properties held by the Controlled NHP Partnerships. Date Number Acquired Property Location of Units -------- -------- -------- -------- 5/97 Elm Creek Chicago, IL 372 5/97 Arbor Crossing Atlanta, GA 240 5/97 Sandpiper Cove West Palm Beach, FL 416 5/97 Lake Crossing Atlanta, GA 300 5/97 Tara Bridge Atlanta, GA 220 5/97 Cambridge Heights Natchez, MS 94 5/97 Newberry Park Chicago, IL 84 5/97 Pride Gardens Jackson, MS 76 5/97 Summer Chase Fort Smith, AR 72 5/97 Lakehaven I Carol Stream, IL 144 5/97 Lakehaven II Carol Stream, IL 348 5/97 Point West Lenexa, KS 172 5/97 Greens of Naperville Naperville, IL 400 5/97 100 Forest Place Oak Park, IL 238 ----- 3,176 ----- ----- NOTE 4 - PROPERTY HELD FOR SALE Property held for sale primarily represents five apartment communities with a net book value of $19.1 million, which were under contract for sale as of September 30, 1997, and $6.5 million of other assets. These properties were classified as Real Estate in the prior year. Property held for sale is recorded at the lower of cost or fair value less estimated selling costs. The five apartment communities were sold during October 1997 for $22.7 million, resulting in a net gain after closing costs of $2.8 million (See Note 18). 9 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (continued) NOTE 5 - INVESTMENTS HELD FOR SALE In September 1997, the Company acquired 886,600 shares of Ambassador Apartments, Inc. ("Ambassador") common stock, a publicly traded real estate investment trust ("REIT"), for $19.8 million in cash. The shares acquired represent 8.45% of the Ambassador shares outstanding, as reported in Ambassador's Form 10-Q for the quarter ended June 30, 1997. The shares are being held for investment purposes, and are carried at their estimated market value as of September 30, 1997 and includes an unrealized gain of $1.2 million, which is included as a component of Stockholders' equity. NOTE 6 - INVESTMENT IN UNCONSOLIDATED SUBSIDIARY In May 1997, the Company acquired 2,866,073 shares of NHP common stock from Demeter Holdings ("Demeter"), Capricorn Investors, L.P. ("Capricorn") and certain of Capricorn's limited partners (collectively, the "NHP Sellers") in exchange for 2,142,857 shares of the Company's Class A Common Stock with a recorded value of $57.3 million. Subsequent to the purchase, the Company contributed the NHP common stock to ANHI, in exchange for all of the shares of ANHI's non-voting preferred stock, representing a 95% economic interest in ANHI. Concurrently, ANHI obtained a loan in the amount of $72.6 million (the "ANHI Credit Facility") and used the proceeds from the loan to purchase 3,630,000 additional shares of NHP common stock from the NHP Sellers. Upon the completion of this transaction, ANHI owned 6,496,073 shares of NHP common stock, representing 51.3% of NHP's outstanding common stock as of May 31, 1997. In two separate transactions, occurring in August and September 1997, ANHI sold to AIMCO 5,717,000 shares of NHP common stock for an aggregate purchase price of $114.4 million. ANHI used $74.3 million of the proceeds from the sale to repay the principal and accrued interest outstanding under the ANHI Credit Facility and distributed $40.0 million to the Operating Partnership and other shareholders. As of September 30, 1997, ANHI owns 779,073 shares of NHP common stock, which represents 6.0% of the NHP common stock outstanding. Summarized balance sheet and statement of operations information for ANHI as of September 30, 1997 and for the period from April 14, 1997 (inception) through September 30, 1997 (representing operations for the period from May 3, 1997, the date of purchase of 51.3% of NHP common stock to September 30, 1997) follows (in thousands): SUMMARIZED BALANCE SHEET INFORMATION SEPTEMBER 30, 1997 ------------------ Total assets $20,464 Stockholders' equity 20,464 10 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (continued) NOTE 6 - INVESTMENT IN UNCONSOLIDATED SUBSIDIARY (Continued) FOR THE PERIOD FROM APRIL 14 (INCEPTION) TO SUMMARIZED STATEMENT OF OPERATIONS SEPTEMBER 30, 1997 ----------------------- Income from property operations $1,654 Income from property management activities 7,450 Interest expense, net of interest income (5,079) ------ Income before income taxes and minority interest 4,025 Income tax provision (1,882) Minority interest in NHP (2,819) ------ Loss from continuing operations (676) Discontinued operations, net of tax 602 ------ Net loss $(74) ------ ------ Loss attributable to preferred stockholder $(70) ------ ------ Loss attributable to common stockholders $(4) ------ ------ NOTE 7 - INVESTMENT IN AND NOTES RECEIVABLE FROM REAL ESTATE PARTNERSHIPS In June 1997, the Company completed the acquisition of the NHP Real Estate Companies from entities owned by Demeter, Phemus Corporation (an affiliate of Demeter), Capricorn and Mr. J. Roderick Heller, III, the Chairman, President and CEO of NHP, for $54.8 million in cash and warrants to purchase 399,999 shares of AIMCO Class A Common Stock at an exercise price of $36 per share. The NHP Real Estate Companies own interests in partnerships that own 87,659 conventional and affordable units in 534 apartment communities (the "NHP Properties"), a captive insurance company and other related assets. A substantial majority of the NHP Properties are currently managed by NHP pursuant to a long-term agreement. During the nine months ended September 30, 1997, the Company has made offers to the limited partners of 25 NHP partnerships to acquire their limited partnerships interests for cash or OP units. The Company has accepted tenders from certain limited partners, in exchange for $26.0 million and 198,218 OP units, valued at $6.7 million, resulting in the Company having a weighted average ownership in these partnerships of 47% as of September 30, 1997. In addition, during September 1997, the Company purchased the existing mortgages on three properties for an aggregate purchase price of $39.9 million, and land leases for two properties for $12.6 million. As a result of these transactions, 3,176 units located in 14 apartment communities are presented on a consolidated basis due to the control held by the Company. The remaining 84,483 units, located in 520 apartment communities, are presented under the equity method. The purchase price of the NHP Real Estate Companies includes the assumption of an unfavorable contract allocating cash flow to NHP in the event the property management contracts between NHP and the general partners of the property-owning partnerships are modified or terminated prior to maturity (see Note 12). The Company is currently engaged in a reorganization of its interests in the NHP Real Estate Companies, which will result in the majority of the assets of the NHP Real Estate Companies being owned by an unconsolidated limited partnership, in which the Operating Partnership will hold a 99% limited partnership interest, and certain directors and officers of AIMCO will, directly or indirectly, hold a 1% general partnership interest. 11 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (continued) NOTE 8 - INVESTMENT IN NHP INCORPORATED In two separate transactions, occurring in August and September 1997, the Company purchased 5,717,000 shares of NHP common stock from ANHI for an aggregate purchase price of $114.4 million. In a separate transaction, occurring in September 1997, the Company acquired an additional 434,049 shares of NHP common stock for $7.0 million in cash and the issuance of 61,364 shares of AIMCO Class A Common Stock, bringing the aggregate number of shares of NHP common stock owned by AIMCO to 6,151,049, which represents a 47.3% ownership interest in NHP as of September 30, 1997. NOTE 9 - SECURED LONG-TERM FINANCING In April 1997, 23 partnerships controlled by the Company completed a $108 million refinancing of its secured, short-term, floating rate indebtedness with secured, 20-year, all-in fixed interest rate of 7.6%, fully amortizing debt (see Note 10). The loans are secured by 27 multifamily apartment communities owned by such partnerships. In connection with this refinancing, the Company received proceeds of $3.4 million from two interest rate swaps accounted for as a hedge. The gain on the swaps was deferred and will be amortized over the 20 year life of the debt. During the nine months ended September 30, 1997, the Company assumed $63.4 million in notes payable secured by first trust deeds in connection with the purchases of the Bay Club, Stonebrook and The Vinings apartments. In connection with the acquisition of the NHP Real Estate Companies, the Company has consolidated long-term indebtedness totaling $105.7 million, which is secured by 14 properties held by partnerships in which the Company purchased a controlling interest. The indebtedness bears interest at fixed rates ranging from 6.05% to 9.50% and matures at various dates through 2029. NOTE 10 - SECURED SHORT-TERM FINANCING The Company utilizes a variety of secured short-term financing instruments to manage its working capital needs and to fund real estate investments, including a variable rate revolving credit facility with Bank of America (the "Credit Facility") as well as various fixed and floating rate term loans. As of December 31, 1996, the Company has secured short-term borrowings outstanding totaling $192.0 million. During the nine months ended September 30, 1997, the Company borrowed an additional $174.0 million and repaid $271.7 million under these borrowing arrangements, resulting in $94.3 million of secured short-term borrowings outstanding as of September 30, 1997, of which $74.0 million were repaid in October 1997 with proceeds from the issuance of AIMCO Class A Common Stock (see Note 13). In May 1997, the Company increased its maximum amount available under the Credit Facility from $50 million to $100 million. The interest rate is LIBOR plus 1.45% unless borrowings exceed 60% of the aggregate collateral value, in which case, the interest rate is LIBOR plus 1.70%. The Credit Facility matures in August 1998 and, subject to certain customary conditions, the outstanding balance may be converted to a three year term loan. As borrowings exceeded 60% of the aggregate collateral value during the quarter ended September 30, 1997, the interest rate charged on the outstanding borrowings was LIBOR plus 1.70% (7.33% at September 30, 1997). The outstanding balance under the Credit Facility as of September 30, 1997 was $74.0 million which, as noted above, was repaid in October 1997 with proceeds received from the sale of 7,000,000 shares of Class A Common Stock (see Note 13). 12 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (continued) NOTE 10 - SECURED SHORT-TERM FINANCING (Continued) In March 1997, the Company entered into an interest rate swap agreement with a major investment banking company, having a notional principal amount of $100 million, in anticipation of refinancing certain floating rate indebtedness to expected 15 year fixed-rate indebtedness in the fourth quarter of 1997. A second interest rate swap agreement was executed in September 1997, having a notional principal amount of $75 million. The interest rate swap agreements mature on December 3, 1997 and fix the twelve and ten year treasury rates at 7.019% and 6.179%, respectively. Based on the fair value of the interest rate swaps at September 30, 1997, the Company has a potential loss of approximately $7.9 million, which is expected to be amortized over the life of the refinanced debt. NOTE 11 - UNSECURED SHORT-TERM FINANCING The Company repaid $12.5 million incurred in connection with the 1996 purchase of interests in limited partnerships with proceeds from a public offering of shares of Class A Common Stock completed in February 1997 (see Note 13). NOTE 12 - ACCRUED MANAGEMENT CONTRACT LIABILITY Pursuant to a Master Property Management Agreement among NHP and certain NHP Real Estate Companies, the NHP Real Estate Companies have agreed to cause NHP to be retained as property manager for most of the NHP Properties throughout the 25 year term of the Master Property Management Agreement. As a result, the Master Property Management Agreement contractually allocates the cash flow stream of the underlying properties. If NHP is not retained as manager for any property, the NHP Real Estate Companies are generally obligated to pay a termination fee equal to 200% of the annualized fees previously received by NHP from the property. Therefore, in recording the acquisition of the NHP Real Estate Companies, the Company has accrued a liability for the management contract in the amount of $106,615 as of September 30, 1997, which is fully offset by increases in Real estate and Investments in and notes receivable from real estate partnerships. NOTE 13 - STOCKHOLDERS' EQUITY In February 1997, the Company completed a public offering of 2,015,000 shares of AIMCO Class A Common Stock (including 15,000 shares subject to the underwriter's overallotment option) at a public offering price of $26.75 per share. The net proceeds of approximately $51.0 million were used to repay a portion of the Company's indebtedness incurred in connection with acquisitions completed in November and December 1996. In March 1997, certain executive officers of the Company (or entities controlled by them) repaid $11.4 million of their $18.6 million in notes payable to the Company which were executed for the purchase in 1996 of 895,250 shares of AIMCO Class A Common Stock by these executive officers. In May 1997, the Company sold 2,300,000 million shares of AIMCO Class A Common Stock at an average price of $28 per share in two public offerings. The net proceeds of approximately $63.0 million were used to repay the then outstanding indebtedness under the Company's Credit Facility of $56 million and to provide working capital of $7 million. 13 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (continued) NOTE 13 - STOCKHOLDERS' EQUITY (Continued) In July 1997, the Company sold 1,100,000 newly issued shares of AIMCO Class A Common Stock at a price of $30 per share, the closing price of the stock on the date of purchase, to certain members of the Company's senior management. In payment for the stock, such members of senior management executed notes payable to AIMCO totaling $33.0 million (of which, $9.9 million has been repaid), bearing interest at 7.25% per annum, payable quarterly, and due in ten years. The stock purchase notes are secured by the stock purchased and are recourse as to 25% of the original amount borrowed. In August 1997, the Company sold 750,000 shares of newly issued AIMCO Class B Cumulative Convertible Preferred Stock ("AIMCO Class B Preferred Stock") for gross proceeds of $75.0 million in cash to an institutional investor, in a private transaction. Holders of the AIMCO Class B Preferred Stock are entitled to receive, when, as and if declared by the Board of Directors, quarterly cash dividends per share equal to the greater of $1.78125 or the cash dividends declared on the number of shares of AIMCO Class A Common Stock into which one share of AIMCO Class B Preferred Stock is convertible. Each share of AIMCO Class B Preferred Stock is convertible at the option of the holder, beginning in August 1998, into 3.28407 shares of AIMCO Class A Common Stock, subject to certain anti-dilution adjustments. The AIMCO Class B Preferred Stock is senior to the AIMCO Class A Common Stock as to dividends and liquidation. The proceeds from the sale of the AIMCO Class B Preferred Stock were used to repay borrowings outstanding under the Credit Facility and to provide working capital. In August and September 1997, the Company issued an aggregate of 5,052,418 shares of AIMCO Class A Common Stock to institutional investors for aggregate net proceeds of approximately $156.9 million. AIMCO used $114.4 million of such proceeds to purchase 5,717,000 shares of NHP Common Stock from ANHI, used $7.0 million to purchase 351,974 additional shares of NHP Common Stock from a third party pursuant to a stock purchase agreement, and contributed the remaining $35.5 million to the Operating Partnership. An additional 61,364 shares of AIMCO Class A Common Stock were issued in exchange for 82,074 shares of NHP common stock. An additional 7,000,000 shares of AIMCO Class A Common Stock were issued during October 1997, at a price of $36.50 per share, resulting in net proceeds of $242.5 million (See Note 18). NOTE 14 - EARNINGS PER SHARE In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("Statement 128") which specifies the computation, presentation and disclosure requirements for basic earnings per share and diluted earnings per share. Management believes that adoption of Statement 128 will not have a material effect on earnings per share of the Company. NOTE 15 - REGISTRATION STATEMENTS In April 1997, AIMCO filed a shelf registration statement with the Securities and Exchange Commission ("the "SEC") which provides for the offering on a delayed or continuous basis of debt securities, preferred stock and AIMCO Class A Common Stock with an aggregate value of up to $1 billion. The shelf registration statement was declared effective in May 1997. Subsequent to the shelf registration, the Company has issued 14,352,418 shares of newly issued AIMCO Class A Common Stock in exchange for cash proceeds of $462.4 million. 14 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (continued) NOTE 16 - COMMITMENTS On April 21, 1997, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with NHP and AIMCO/NHP Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of AIMCO ("Merger Sub"). Pursuant to the Merger Agreement, the Merger Sub will be merged with and into NHP (the "Merger"), with NHP being the surviving corporation after the Merger and becoming a wholly owned subsidiary of the Company. Upon consummation of the Merger, each outstanding share of NHP common stock, other than the NHP common stock held by NHP, the Company or Merger Sub, will be converted into the right to receive, at the election of the holder, either: (i) 0.74766 shares of AIMCO Class A Common Stock ("Stock Consideration"); or (ii) a combination of 0.37383 shares of AIMCO Class A Common Stock and $10 in cash ("Mixed Consideration"). The Merger requires the affirmative vote of: (i) a majority of the outstanding shares of NHP common stock and (ii) at least 66 2/3% of the outstanding shares of NHP common stock, excluding shares deemed to be owned by the Company or its affiliates. In addition, under the rules of the New York Stock Exchange, the issuance of shares of AIMCO Class A Common Stock in the Merger requires the affirmative vote of a majority of the votes cast at a meeting of the Company at which the total votes cast represent over 50% of all shares of AIMCO Class A Common Stock entitled to vote thereon. A special meeting of shareholders to approve the merger with NHP has been scheduled for December 8, 1997. In accordance with the Merger Agreement, on May 9, 1997, NHP distributed to each stockholder of record as of May 2, 1997, one right ("Right") for each outstanding share of NHP common stock. Each Right entitles the holder thereof to receive, subject to certain conditions, on the earlier of the effective time of the Merger or December 1, 1997, if the Merger has not yet occurred, subject to deferral if any required consents, filings or approvals have not yet been obtained (the "Maturity Time"), one third of a share of the WMF Group, Ltd., a wholly-owned subsidiary of NHP ("WMF") (the "WMF Spin-off"). If the distribution of WMF stock has not occurred by December 1, 1997, the holders of the Rights may receive an additional cash amount equal to $3.05 for each share of NHP common stock held by them. The Merger Agreement provides that NHP will contribute cash to WMF, forgive indebtedness of WMF or any combination thereof, in an aggregate amount equal to NHP's best estimate (subject to AIMCO's reasonable approval) of the amount, if any, by which (i) NHP's earnings before interest, taxes, depreciation and amortization, less the amount of cash payments made or obligated to be made in respect of taxes and interest during the period from February 1, 1997 to the Maturity Time and less $500,000 per month (or a ratable portion thereof) included in such period, exceeds (ii) the termination, severance and transaction costs incurred by NHP with respect to the Merger and the WMF Spin-Off during that same period. NOTE 17 - PRO FORMA FINANCIAL STATEMENTS During the nine months ended September 30, 1997, the Company purchased the NHP Real Estate Companies and, together with an unconsolidated subsidiary, purchased a 53.3% interest in NHP. The following unaudited Pro Forma Condensed Consolidated Statements of Operations for the nine months ended September 30, 1997 and 1996 have been prepared as if the above described transactions had occurred at the beginning of the periods being reported. The following Pro Forma Financial Information is based, in part, on the following historical financial statements: 15 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (continued) NOTE 17 - PRO FORMA FINANCIAL STATEMENTS (Continued) (i) the unaudited financial data of the Company for the nine months ended September 30, 1997 and 1996; (ii) the unaudited Consolidated Financial Statements of NHP for the nine months ended September 30, 1997 and 1996 (which have been restated to reflect NHP's subsidiary, WMF Group, Ltd., as a discontinued operation); and (iii) the unaudited Combined Financial Statements of the NHP Real Estate Companies for the five months ended May 31, 1997 and the nine months ended September 30, 1996. The pro forma financial statements are not necessarily indicative of what the Company's results of operations would have been assuming the completion of the described transactions at the beginning of the periods indicated, nor does it purport to project the Company's results of operations for any future period. PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS EXCEPT PER SHARE DATA) (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 1997 1996 ------------- ------------- RENTAL PROPERTY OPERATIONS Rental and other property revenues $133,742 $82,281 Property operating expenses (53,679) (33,560) Owned property management expense (4,626) (2,493) -------- ------- Income from property operations before depreciation 75,437 46,228 Depreciation (25,194) (16,010) -------- ------- Income from property operations 50,243 30,218 -------- ------- SERVICE COMPANY BUSINESS Management fees and other income 10,578 10,711 Management and other expenses (7,950) (9,718) Corporate overhead allocation (441) (443) Amortization of management company goodwill (711) (344) Other assets depreciation and amortization (236) (154) -------- ------- Income from service company business 1,240 52 Minority interests in service company business 48 (10) -------- ------- Company's share of income from service company business 1,288 42 -------- ------- GENERAL AND ADMINISTRATIVE EXPENSES (1,408) (943) INTEREST EXPENSE (38,381) (25,572) INTEREST INCOME 4,998 1,312 MINORITY INTEREST IN OTHER PARTNERSHIPS (777) 3,774 EQUITY IN LOSSES OF UNCONSOLIDATED PARTNERSHIPS (3,683) (3,882) EQUITY IN EARNINGS OF UNCONSOLIDATED SUBSIDIARY 1,169 176 -------- ------- INCOME BEFORE EXTRAORDINARY ITEM AND MINORITY INTEREST IN OPERATING PARTNERSHIP 13,449 5,125 Extraordinary item - early extinguishment of debt (269) - Gain (loss) on disposition of properties (169) 64 -------- ------- INCOME BEFORE MINORITY INTEREST IN OPERATING PARTNERSHIP 13,011 5,189 Minority interest in Operating Partnership (1,735) (732) -------- ------- NET INCOME $11,276 $4,457 -------- ------- -------- ------- Net income attributable to preferred stockholder $ 835 $ - -------- ------- -------- ------- Net income attributable to common stockholders $10,441 $4,457 -------- ------- -------- ------- NET INCOME PER COMMON SHARE AND COMMON SHARE EQUIVALENT $0.48 $0.31 -------- ------- -------- ------- WEIGHTED AVERAGE COMMON SHARES AND COMMON SHARE EQUIVALENTS OUTSTANDING 21,625 14,332 -------- ------- -------- ------- 16 APARTMENT INVESTMENT AND MANAGEMENT COMPANY Notes to Consolidated Financial Statements (continued) NOTE 18 - SUBSEQUENT EVENTS INVESTMENT IN REAL ESTATE On October 3, 1997, the Company purchased the debt secured by the first lien deed of trust on the Elm Creek property for $20.7 million in cash. PURCHASE OF WINDWARD APARTMENTS On October 15, 1997, the Company purchased Windward at the Villages Apartments, a 196-unit apartment community located in West Palm Beach, Florida, for $10.8 million in cash. DIVIDEND DECLARED On October 24, 1997, the AIMCO Board of Directors declared a cash dividend of $0.4625 per share of AIMCO Class A Common Stock for the quarter ended September 30, 1997, payable on November 14, 1997 to stockholders of record on November 7, 1997. SALE OF COMMON STOCK The Company issued 7,000,000 million shares of AIMCO Class A Common Stock on October 27, 1997 under its existing shelf registration (see Note 15). The net proceeds from the sale totaled $242.5 million, which were used to fund certain property acquisitions, as discussed below, repay the $74.0 million outstanding balance on the Credit Facility and provide working capital. PURCHASE OF WINTHROP PORTFOLIO On October 31, 1997, the Company purchased 8,175 units in 35 apartment communities from sellers affiliated with Winthrop Financial Associates. The aggregate purchase price of approximately $263.5 million (including $10.0 million of transaction costs) was comprised of $255.2 million in cash and the assumption of $8.3 million in existing mortgage indebtedness. The purchase price was based on arms-length negotiations between the Company and the sellers. The Company financed a portion of the cash purchase price through the issuance of 33 mortgage notes to GMAC Commercial Mortgage Corporation, in an aggregate amount of $120.0 million, each of which is secured by one of the properties acquired, and $19.1 million in bridge loan financing from GMAC Commercial Mortgage Corporation, secured by one of the properties. None of the 33 mortgage notes or bridge financing is cross collateralized or subject to any cross default provisions. The apartment communities acquired are income generating apartment properties. The Company intends to continue to utilize the assets acquired in the same manner as they were employed prior to the acquisition. SALE OF PROPERTIES In October 1997, the Company sold five apartment communities totaling 916 apartment units for $22.7 million in cash, resulting in a $2.8 million gain. These properties are classified as Property held for sale on the September 30, 1997 consolidated balance sheet. 17 APARTMENT INVESTMENT AND MANAGEMENT COMPANY ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. OVERVIEW As of September 30, 1997, the Company owned or managed 186,993 apartment units, comprised of 28,773 units in 109 apartment communities owned or controlled by the Company (the "Owned Properties"), 87,182 units in 526 apartment communities in which the Company has an equity interest and 71,038 units in 394 apartment communities which the Company manages for third parties and affiliates. The apartment communities are located in 42 states, the District of Columbia and Puerto Rico. On April 21, 1997, the Company entered into a Merger Agreement with NHP, pursuant to which the Company and NHP have agreed to merge. In May 1997, the Company acquired 2,866,073 shares of NHP common stock in exchange for 2,142,857 shares of the Company's Class A Common Stock. Subsequent to the purchase, the Company contributed the NHP common stock to ANHI in exchange for all of the shares of ANHI's non-voting Preferred Stock. Concurrently, ANHI obtained a loan in the amount of $72.6 million and used the proceeds to purchase 3,630,000 additional shares of NHP common stock. Upon the completion of this transaction, ANHI owned 6,496,073 shares of NHP common stock representing 51.3% of NHP's outstanding common stock as of May 31, 1997. In two separate transactions, occurring in August and September 1997, the Company purchased 5,717,000 shares of NHP common stock from ANHI, for an aggregate purchase price of $114.4 million. ANHI used $74.3 million of the proceeds from the sale to repay the principal and accrued interest outstanding under the ANHI Credit Facility and distributed $40.0 million to the Operating Partnership and other shareholders. In September 1997, the Company acquired an additional 434,049 shares of NHP common stock pursuant to the purchase agreement, bringing the aggregate number of shares of NHP common stock owned by the Company and ANHI at September 30, 1997 to 6,930,122, which represents a 53.3% ownership interest in NHP. NHP provides a broad array of real estate services, including property management and asset management as well as a group of related services including equity investments, purchasing, risk management and home health care. NHP also has controlling interests in partnerships which own 2,905 units in 12 apartment communities. In June 1997, the Company acquired the NHP Real Estate Companies, which own general and limited partnership interests in 534 conventional and affordable multifamily apartment communities containing 87,659 apartment units, a captive insurance subsidiary and certain related assets, for $54.8 million in cash and warrants to purchase 399,999 shares of AIMCO Class A Common Stock at an exercise price of $36 per share. Subsequent to the purchase, the Company has tendered for the unaffiliated limited partnership interests in certain partnerships in which the Company itself, or through its purchase of the NHP Real Estate Companies, holds general or limited partnership interests. As of September 30, 1997, the Company has a weighted average ownership interest of 47% in the real estate partnerships. As a result of these transactions, the Company consolidates the results of operations of 14 of these partnerships, which own 14 apartment properties, consisting of 3,176 apartment units, due to the extent of the Company's control over these partnerships. The operations of the remaining 520 apartment communities consisting of 84,483 units are presented using the equity method. The following discussion contains forward-looking statements that are subject to significant risks and uncertainties. There are several important factors that could cause actual results to differ materially from the results anticipated by the forward-looking statements contained in the following discussion. Such factors and risks include, but are not limited to: financing risks, including the risk that the Company's cash flow from operations may be insufficient to meet required payments of principal and interest on its debt; real estate risks, including variations of real estate values and the general economic climate in local markets 18 and competition for tenants in such markets; acquisition and development risks, including failure of such acquisitions to perform in accordance with projections; and possible environmental liabilities, including costs which may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by the Company. In addition, the Company's continued qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue Code. Readers should carefully review the financial statements and the notes thereto, as well as the risk factors described in documents the Company files from time to time with the Securities and Exchange Commission. RESULTS OF OPERATIONS COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1997 TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 NET INCOME The Company recognized net income of $16,815,000 for the nine months ended September 30, 1997 compared to $9,351,000 for the nine months ended September 30, 1996. The increase in net income of $7,464,000, or 79.8%, was primarily the result of the following: - - the acquisition of 9,909 units located in 40 apartment communities during the period from April 1996 to December 1996 (the "1996 Acquisitions"); - - the acquisition of 3,135 units located in seven apartment communities in the second and third quarters of 1997 (the "1997 Acquisitions); - - the acquisition, through an unconsolidated subsidiary, of 53.3% of the shares of common stock of NHP in May 1997; and - - the acquisition of the NHP Real Estate Companies in June 1997, and subsequent third quarter tender offers. The increase in net income is partially offset by the sale of four properties in August 1996 (the "1996 Sold Properties"), increased real estate depreciation and increased interest expense associated with indebtedness which was assumed or incurred in connection with the 1996 Acquisitions, the 1997 Acquisitions and the acquisition of the NHP Real Estate Companies. These factors are discussed in more detail in the following paragraphs. RENTAL PROPERTY OPERATIONS Rental and other property revenues from the Company's Owned Properties totaled $127,083,000 for the nine months ended September 30, 1997, compared to $70,392,000 for the nine months ended September 30, 1996, an increase of $56,691,000, or 80.5%. Rental and other property revenues consisted of the following (in thousands): Nine months Nine months ended ended September 30, September 30, 1997 1996 ------------- ------------- "Same store" properties $59,558 $57,611 1996 Acquisitions 51,273 5,752 1997 Acquisitions 6,141 - Controlled NHP Partnerships acquired in connection with the acquisition of the NHP Real Estate Companies 5,234 - Properties in lease-up after the completion of an expansion or renovation 4,877 3,666 1996 Sold Properties - 3,363 -------- ------- Total $127,083 $70,392 -------- ------- -------- ------- 19 Average monthly rent per occupied unit for the same store properties at September 30, 1997 and 1996 was $557 and $562, respectively, reflecting a decrease of 0.9%. Weighted average physical occupancy for the properties decreased to 94.85% at September 30, 1997 from 94.95% at September 30, 1996, reflecting a decrease of 0.1%. Property operating expenses, consisting of on-site payroll costs, utilities (net of reimbursements received from tenants), contract services, turnover costs, repairs and maintenance, advertising and marketing, property taxes and insurance, totaled $50,737,000 for the nine months ended September 30, 1997, compared to $27,111,000 for the nine months ended September 30, 1996, an increase of $23,626,000 or 87.1%. Operating expenses consisted of the following (in thousands): Nine months Nine months ended ended September 30, September 30, 1997 1996 ------------- ------------- "Same store" properties $23,029 $22,465 1996 Acquisitions 21,308 1,639 1997 Acquisitions 2,268 - Controlled NHP Partnerships acquired in connection with the acquisition of the NHP Real Estate Companies 2,252 - Properties in lease-up after the completion of an expansion or renovation 1,880 1,218 1996 Sold Properties - 1,789 -------- ------- Total $50,737 $27,111 -------- ------- -------- ------- Owned property management expenses, representing the costs of managing the Company's Owned Properties, totaled $4,344,000 for the nine months ended September 30, 1997, compared to $1,999,000 for the nine months ended September 30, 1996, an increase of $2,345,000, or 117.3%. The increase resulted from the acquisition of properties in 1996 and 1997 and the acquisition of the NHP Real Estate Companies. SERVICE COMPANY BUSINESS The Company's share of income from the Service Company Business was $2,804,000 for the nine months ended September 30, 1997, compared to $1,042,000 for the nine months ended September 30, 1996. The increase of $1,762,000 is due to the acquisition by the Company of property management businesses in August and November 1996, the acquisition of partnership interests which provide for certain partnership and administrative fees, and a captive insurance subsidiary acquired in connection with the acquisition of the NHP Real Estate Companies in June 1997, offset by decreased commercial asset management revenues. The commercial asset management contracts expired on March 31, 1997. INTEREST EXPENSE Interest expense totaled $33,359,000 for the nine months ended September 30, 1997, compared to $16,775,000 for the nine months ended September 30, 1996. Interest expense, which includes amortization of deferred financing costs, for the nine months ended September 30, 1997, increased by $16,584,000, or 98.9%, from the nine months ended September 30, 1996. The increase consists of the following (in thousands): 20 Interest expense on secured short-term and long-term indebtedness incurred in connection with the 1996 Acquisitions $8,839 Interest expense on secured and unsecured short-term and long-term indebtedness incurred in connection with the 1997 Acquisitions 3,042 Interest expense on secured and unsecured short-term and long-term indebtedness incurred in connection with the acquisition of the NHP Real Estate Companies 2,588 Write-off of unamortized loan costs upon the prepayment of bridge financing incurred in connection with the 1996 Acquisitions 623 Increase in interest expense on the Credit Facility due to borrowings used in connection with the refinancing of short-term indebtedness in April 1997 and the purchase of the NHP Real Estate Companies in June 1997, net of decreased interest expense on existing indebtedness due to principal amortization 1,492 ------- Total increase $16,584 ------- ------- INTEREST INCOME Interest income totaled $4,458,000 for the nine months ended September 30, 1997, compared to $242,000 for the nine months ended September 30, 1996. The increase of $4,216,000 is primarily due to interest earned on notes receivable from certain partnerships acquired in connection with the 1996 Acquisitions and the acquisition of the NHP Real Estate Companies in June 1997. COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1997 TO THE THREE MONTHS ENDED SEPTEMBER 30, 1996 NET INCOME The Company recognized net income of $6,967,000 for the three months ended September 30, 1997, compared to $3,396,000 for the three months ended September 30, 1996. The increase in net income of $3,571,000, or 105.2% was primarily the result of the 1996 Acquisitions, the 1997 Acquisitions, the acquisition of 53.3% of the common stock of NHP in May and September 1997 and the acquisition of the NHP Real Estate Companies. The increase in net income is partially offset by the sale of the 1996 Sold Properties in August 1996, increased real estate depreciation and increased interest expense associated with indebtedness which was assumed or incurred in connection with the acquisitions described above. These factors are discussed in more detail in the following paragraphs. RENTAL PROPERTY OPERATIONS Rental and other property revenues from the Company's Owned Properties totaled $47,364,000 for the three months ended September 30, 1997, compared to $24,140,000 for the three months ended September 30, 1996, an increase of $23,224,000, or 96.2%. Rental and other property revenues consisted of the following (in thousands): 21 Three months Three months ended ended September 30, September 30, 1997 1996 ------------- -------------- "Same store" properties $20,054 $19,564 1996 Acquisitions 17,587 2,767 1997 Acquisitions 4,177 - Controlled NHP Partnerships acquired in connection with the acquisition of the NHP Real Estate Companies 3,918 - Properties in lease-up after the completion of an expansion or renovation 1,628 1,321 1996 Sold Properties - 488 ------- ------- Total $47,364 $24,140 ------- ------- ------- ------- Property operating expenses, consisting of on-site payroll costs, utilities (net of reimbursements received from tenants), contract services, turnover costs, repairs and maintenance, advertising and marketing, property taxes and insurance, totaled $19,577,000 for the three months ended September 30, 1997, compared to $8,960,000 for the three months ended September 30, 1996, an increase of $10,617,000 or 118.5%. Operating expenses consisted of the following (in thousands): Three months Three months ended ended September 30, September 30, 1997 1996 ------------- ------------- "Same store" properties $8,144 $7,619 1996 Acquisitions 7,554 691 1997 Acquisitions 1,451 - Controlled NHP Partnerships acquired in connection with the acquisition of the NHP Real Estate Companies 1,689 - Properties in lease-up after the completion of an expansion or renovation 739 420 1996 Sold Properties - 230 ------- ------ Total $19,577 $8,960 ------- ------ ------- ------ Owned property management expenses, representing the costs of managing the Company's Owned Properties, totaled $1,610,000 for the three months ended September 30, 1997, compared to $658,000 for the three months ended September 30, 1996, an increase of $952,000, or 144.7%. The increase resulted from the acquisition of properties in 1996 and 1997 and the acquisition of the NHP Real Estate Companies. SERVICE COMPANY BUSINESS The Company's share of income from the service company business was $773,000 for the three months ended September 30, 1997, compared to $401,000 for the three months ended September 30, 1996. The increase in income of $372,000 was due to increased revenues from the acquisition by the Company of property management businesses in August and November 1996, the acquisition of partnership interests, which provide for certain partnership and administrative fees, and the acquisition of a captive insurance subsidiary in connection with the acquisition of the NHP Real Estate Companies in June 1997. The increase in revenues was offset by the loss of commercial asset management revenues as a result of the scheduled termination of asset management contracts at March 31, 1997. 22 INTEREST EXPENSE Interest expense totaled $12,755,000 for the three months ended September 30, 1997, compared to $5,850,000 for the three months ended September 30, 1996. Interest expense, which includes amortization of deferred financing costs, for the three months ended September 30, 1997, increased by $6,905,000, or 118.0%, from the three months ended September 30, 1996. The increase consists of the following (in thousands): Interest expense on secured short-term and long-term indebtedness incurred in connection with the 1996 Acquisitions $2,755 Interest expense on secured and unsecured short-term and long-term indebtedness incurred in connection with the 1997 Acquisitions 1,821 Interest expense on secured and unsecured short-term and long-term indebtedness incurred in connection with the acquisition of the NHP Real Estate Companies 1,849 Increase in interest expense on the Credit Facility due to borrowings used in connection with the refinancing of short-term indebtedness in April 1997 and the purchase of the NHP Real Estate Companies in June 1997, net of decreased interest expense on existing indebtedness due to principal amortization 480 ------ Total increase $6,905 ------ ------ INTEREST INCOME Interest income totaled $3,117,000 for the three months ended September 30, 1997, compared to $31,000 for the three months ended September 30, 1996. The increase of $3,086,000, is primarily due to interest earned on notes receivable from certain partnerships acquired in connection with the 1996 Acquisitions and the acquisition of the NHP Real Estate Companies in June 1997. LIQUIDITY AND CAPITAL RESOURCES At September 30, 1997, the Company had $45,775,000 in cash and cash equivalents. In addition, the Company had $22,019,000 of restricted cash primarily consisting of reserves and impounds held by lenders for capital expenditures, property taxes and insurance. The Company's principal demands for liquidity include normal operating activities, payments of principal and interest on outstanding debt, capital improvements, acquisitions of or investments in properties, dividends paid to its stockholders and distributions paid to minority limited partners in the Operating Partnership. The Company considers its cash provided by operating activities, and funds available under its Credit Facility, to be adequate to meet short-term liquidity demands. The Company utilizes the Credit Facility for general corporate purposes and to fund investments on an interim basis. In May 1997, the Company increased the maximum amount available under the Credit Facility from $50 million to $100 million. The outstanding borrowings under the Credit Facility bear interest at LIBOR plus 1.45%, if the outstanding borrowings do not exceed 60% of the collateral value, or LIBOR plus 1.70%, if outstanding borrowings are greater than 60% of the collateral value. The Credit Facility matures in August 1998 and, subject to certain customary conditions, the outstanding balance may be converted to a three year term loan. As borrowings made during the quarter 23 ended September 30, 1997 exceeded 60% of the collateral value, the interest rate charged on the outstanding borrowings was LIBOR plus 1.70% (7.33% at September 30, 1997). The Company had outstanding borrowings under the Credit Facility at September 30, 1997 of $74.0 million, which were repaid in October 1997 with proceeds received from the sale of 7,000,000 shares of AIMCO Class A Common Stock. During the nine months ended September 30, 1997, the Company repaid $25.6 million of secured short-term indebtedness, $12.5 million of unsecured short-term indebtedness and $125.2 million of the balance outstanding from time to time under the Credit Facility with proceeds from private offerings of AIMCO Class A Common Stock, funds received in connection with the repayment of notes due to the Company from certain executive officers of the Company (or entities controlled by them) related to their purchase of AIMCO Class A Common Stock and the private placement of AIMCO Class B Preferred Stock. In March 1997, the Company entered into an interest rate swap agreement with a major investment banking company, having a notional principal amount of $100 million, in anticipation of refinancing certain floating rate indebtedness to expected 15 year fixed-rate indebtedness in the fourth quarter of 1997. A second interest swap agreement was executed in September 1997, having a notional principal amount of $75 million. The interest rate swap agreements mature on December 3, 1997 and fix the twelve and ten year treasury rates at 7.019% and 6.179% respectively. Unrealized losses of approximately $7.9 million relating to the hedges have been deferred, and will be amortized over the life of the refinanced debt. In April 1997, 23 partnerships controlled by the Company borrowed an aggregate of $108 million from an institutional lender on a fully amortizing, fixed rate basis with a term of 20 years. The loans have a weighted average effective interest rate of 7.6% per year. The loans are secured by 27 apartment communities owned by such partnerships. The net proceeds of the borrowings, and $7.5 million of additional borrowings under the Company's Credit Facility, were used to repay approximately $115.5 million of secured, short term debt. Pursuant to the Merger Agreement, if all NHP stockholders other than AHNI elect to receive Stock Consideration and all NHP Stock Options are exercised, the number of shares of AIMCO Class A Common Stock to be issued in the Merger would be approximately 5.4 million shares of AIMCO Class A Common Stock (including 291,240 shares issued to ANHI), and the Company will pay approximately $7.8 million in cash to ANHI. If all of the NHP stockholders elect to receive the Mixed Consideration and all NHP stock options are exercised, the number of shares of AIMCO Class A Common Stock to be issued in the Merger would be approximately 3.2 million shares (including 291,240 shares issued to ANHI) and the Company would pay approximately $7.8 million in cash to ANHI and $60.7 million in cash to the other NHP stockholders. From time to time, the Company has offered to acquire and, in the future, may offer to acquire the unaffiliated limited partnership interests in certain limited partnerships whose general partnership interests were acquired by the Company, including certain partnerships acquired in 1996 and certain partnerships in which the NHP Real Estate Companies own interests. Any such acquisitions will require funds to pay the purchase price for such interests. Cash payments made in connection with such acquisitions totaled $26.0 for the nine months ended September 30, 1997. The Company expects to meet its short-term liquidity requirements, including the proposed Merger with NHP as well as property acquisitions, refinancings of short-term debt, and tender offers, with long-term, fixed rate, fully amortizing debt, secured or unsecured indebtedness, the issuance of debt securities, OP Units or equity securities and cash generated from operations. In April 1997, the Company filed a shelf registration statement with the SEC which registered $1 billion of securities for sale on a delayed or continuous basis. The shelf registration statement was declared effective in May 1997. Since that time, the Company has issued 14,352,418 shares of Class A common stock, and received net proceeds of $462.4 million. 24 As of September 30, 1997, the Company had consolidated outstanding indebtedness totaling $661.7 million including $493.0 million of secured long-term financing, $20.3 million in secured short-term financing, $74.4 million of secured tax-exempt bonds and $74.0 million outstanding under its Credit Facility. At September 30, 1997 the weighted average interest rate on the Company's long-term secured notes payable and secured tax-exempt financing was 8.0% with a weighted average maturity of 10 years. The weighted average interest rate on the Company's secured and unsecured short-term financing was 7.6%. At September 30, 1997, NHP had outstanding indebtedness totaling $134.0 million, consisting of $62.9 million of unsecured indebtedness under NHP's credit facility (the "NHP Credit Facility") and other short-term indebtedness and $71.1 million of indebtedness secured by real estate wholly owned by NHP. The NHP Credit Facility bears interest at a rate which ranges from LIBOR plus 75 basis points to LIBOR plus 125 basis points, depending on NHP's ratio of debt to income from continuing operations before interest expense, income taxes, depreciation and amortization ("EBITDA"). The weighted average interest rate on the NHP unsecured short-term financing at September 30, 1997 was 6.7%. The indebtedness secured by real estate wholly owned by NHP bears interest at fixed rates ranging from 7.95% to 12.6% and mature at various dates through 2016. CAPITAL EXPENDITURES For the nine months ended September 30, 1997, the Company spent $5.2 million for capital replacements and $5.7 million for initial capital expenditures. In addition, in the nine months ended September 30, 1997, the Company spent an aggregate $6.2 million for capital enhancements and the renovation of two properties owned by the Company. These expenditures were funded by working capital reserves, borrowings under the Credit Facility and net cash provided by operating activities. The Company budgets for capital replacements of $300 per apartment unit per annum, or $5.6 million, for the nine months ended September 30, 1997. The Company has $0.8 million of budgeted but unspent amounts remaining from prior periods that can be used for future capital replacements. The Company expects to incur initial capital expenditures and capital enhancements (spending to increase a property's revenue potential including renovations, developments and expansions) of approximately $4.0 million during the balance of the year ended December 31, 1997. Initial capital expenditures and capital enhancements are expected to be funded with cash from operating activities and borrowings under the Credit Facility. FUNDS FROM OPERATIONS The Company measures its economic profitability based on Funds From Operations ("FFO"). The Company intends to pay regular dividends to its stockholders based on several primary factors, including FFO and the annual REIT distribution requirements. Retained FFO is also available to make new investments, make reinvestments in existing properties, repay debt and repurchase shares of the Company's Stock. The Company believes that the presentation of Funds From Operations, as hereafter defined, when considered with the financial data determined in accordance with generally accepted accounting principles, provide a useful measure of the Company's performance. However, FFO does not represent cash flow and is not necessarily indicative of cash flow or liquidity available to the Company, nor should it be considered as an alternative of net income or as an indicator of operating performance. The Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT") defines FFO as net income (loss), computed in accordance with generally accepted accounting principles, excluding gains and losses from debt restructuring and sales of property, plus real estate depreciation and amortization (excluding amortization of financing costs), and after adjustments for unconsolidated partnerships and joint ventures. In addition, the Company adjusts FFO for minority interest in the Operating Partnership, amortization of management company goodwill and the non-cash deferred portion of the income tax provision for unconsolidated subsidiaries. 25 The Company believes that presentation of FFO provides investors with an industry-accepted measurement which helps facilitate understanding of the Company's ability to meet required dividend payments, capital expenditures, and principal payments on its debt. There can be no assurance that the Company's basis for computing FFO is comparable with that of other real estate investment trusts. For the three and nine months ended September 30, 1997 and 1996, FFO was 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, 1997 1996 1997 1996 ------------- ------------- ------------- ------------- OPERATING ACTIVITIES Income before minority interest in Operating Partnership $7,963 $4,118 $19,427 $11,196 Extraordinary item - - 269 - (Gain) loss on disposition of properties 169 (64) 169 (64) Real estate depreciation, net of minority interests in other partnerships 7,802 4,656 21,052 13,716 Amortization of management company goodwill 237 114 711 344 Equity in earnings of other partnerships: Real estate depreciation 2,084 - 2,781 - Equity in earnings of unconsolidated subsidiaries: Real estate depreciation 1,426 - 2,689 - Deferred income taxes 1,290 - 2,164 - Amortization of recoverable amount of management contracts 280 - 430 - ------- ------ ------- ------- Funds From Operations (FFO) $21,251 $8,824 $49,692 $25,192 ------- ------ ------- ------- ------- ------ ------- ------- Weighted average common shares, common share equivalents, preferred stock convertible into common stock and OP Units outstanding 29,679 15,035 24,347 14,517 ------- ------ ------- ------- ------- ------ ------- -------
For the nine months ended September 30, 1997 and 1996, net cash flow were as follows (amounts in thousands):
NINE MONTHS NINE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, 1997 1996 ------------- ------------- Cash provided by operating activities $ 53,435 $ 30,865 Cash provided by (used for) investing activities (314,814) (11,188) Cash provided by (used for) financing activities 293,984 (20,941) --------- --------- Net cash flow $ 32,605 $ (1,264) --------- --------- --------- ---------
CONTINGENCIES Certain of the Company's Owned Properties are, and some of the other properties managed by the Company or NHP 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. Such hazardous substances have been released at certain Owned Properties and, in at least one case, have migrated from an off-site location onto an Owned Property. In addition, the Company's Montecito property in Austin, Texas, is located adjacent to, and may be partially on, land that was used as a landfill. Low levels of methane and other landfill gas have been detected at Montecito. The City of Austin (the "City"), the former landfill operator, has assumed responsibility for conducting all remedial activities to date associated with the methane and other landfill gas. The remediation of the landfill gas is now substantially complete and the Texas Natural Resources Conservation Commission ("TNRCC") has preliminarily approved the methane gas remediation efforts. Final approval of the site and the remediation process is contingent upon the results of continued methane gas monitors to confirm the effectiveness of the remediation efforts. Should further actionable levels of methane gas be detected, a proposed contingency plan of passive methane gas venting may be implemented by the City. The City has also conducted testing at Monetcito to determine whether, and to what extent, groundwater has been impacted. Based on test reports received to date by the Company, the groundwater does not appear to be contaminated at actionable levels. The Company has not 26 incurred, and does not expect to incur, liability for the landfill investigation and remediation; however, the Company has relocated some of its tenants and has installed a venting system according to the TNRCC's specifications under the buildings slabs, in connection with raising four of its buildings in order to install stabilizing piers thereunder, at an estimated total cost of approximately $573,000, which is primarily the cost for the restabilization. The Company anticipates that the restabilization will be completed in January 1998. The City will be responsible for monitoring the conditions of Montecito. LEGISLATIVE ACTION REGARDING PROPOSED HUD REORGANIZATION AND RESTRUCTURING OF HUD PROGRAMS The Company, primarily through NHP, manages approximately 44,000 units that are subsidized under Section 8 of the United States Housing Act of 1937, as amended ("Section 8"). These subsidies are generally provided pursuant to project-based contracts with the owners of the properties or, with respect to a limited number of units managed by NHP, pursuant to vouchers received by tenants. A substantial number of the Section 8 subsidies are scheduled to expire prior to 2005, unless renewed. On October 27, 1997, The President signed into law the Multifamily Assisted Housing Reform and Affordability Act of 1997 (the "1997 Housing Act"). Under the 1997 Housing Act, certain properties assisted under Section 8, with rents above market levels and financed with mortgage loans insured by the United States Department of Housing and Urban Development ("HUD") will be restructured by reducing subsidized rents to market levels, thereby reducing rent subsidies and lowering required debt service costs as needed to ensure financial viability at the reduced rents and rent subsidies. The 1997 Housing Act retains project-based subsidies for most properties (properties in tight rental markets, properties serving the elderly and certain other properties). The 1997 Housing Act phases out project-based subsidies on selected properties serving families not located in the rental markets with limited supply, converting such subsidies to a tenant-based subsidy. Under a tenant based system, rent vouchers would be issued to qualified tenants who then could elect to reside at a property of their choice, provided the tenant has the financial ability to pay the difference between the selected property's monthly rent and the value of the voucher, which would be established based on HUD's regulated fair market rent for the relevant geographical areas. The 1997 Housing Act provides that properties will begin the restructuring process in federal fiscal year 1999 (beginning October 1, 1998), and that HUD will issue final regulations implementing the 1997 Housing Act on or before October 27, 1998. With respect to Housing Assistance Payments Contracts ("HAP Contracts") expiring on or before October 1, 1998, Congress has elected to renew expiring HAP Contracts for one year terms, generally at existing rents, so long as the properties remain in compliance with the HAP Contracts. While the Company does not expect the provisions of the 1997 Housing Act to result in a significant number of tenants relocating from properties managed by the Company, there can be no assurance that the provisions will not significantly affect the Company's management portfolio. Furthermore, there can be no assurance that other changes in Federal housing subsidy will not occur. Any such changes could have an adverse effect on the Company's property management revenues. 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. LITIGATION See PART II. OTHER INFORMATION - ITEM 1. LEGAL PROCEEDINGS elsewhere in this Report for a discussion of certain legal proceedings. In addition, the Company is a party to various legal actions resulting from its operating activities. These actions are routine litigation and administrative proceedings arising in the ordinary course of business, some of which are covered by liability insurance, and none of which are expected to have a material adverse effect on the consolidated financial condition or results of operations of the Company. 27 APARTMENT INVESTMENT AND MANAGEMENT COMPANY ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In November 1996, Apartment Investment and Management Company, a Maryland Corporation ("AIMCO") and together with its subsidiaries and other controlled entities, the "Company"), acquired (the "English Acquisition") certain partnerships interests, real estate and related assets owned by J.W. English, a Houston, Texas-based real estate syndicator and developer, and certain affiliated entities (collectively, the "J.W. English Companies"). In the English Acquisition, the Company purchased all of the general and limited partnership interests in 22 limited partnerships which act as the general partner to 31 limited partnerships (the "English Partnerships") that own 22 mulitfamily apartment properties and other assets and interest related to the J.W. English Companies and assumed management of the properties owned by the English Partnerships. The Company made separate tender offers (the "English Tender Offers") to the limited partners of 25 of the English Partnerships (the "Tender Offer English Partnerships"). In November 1996, purported limited partners of certain of the Tender Offer English Partnerships filed a purported class action lawsuit against the Company and J.W. English in the U.S. District Court for the Northern District of California (the "Federal Action"), alleging, among other things, that the Company conspired with J.W. English to breach his fiduciary duty to the plaintiffs, and that the offering materials used by the Company in connection with the English Tender Offers contained misleading statements or omissions. The plaintiffs in the Federal Action filed a motion to voluntarily dismiss the Federal Action, without prejudice, in favor of another purported class action. The Federal Action was dismissed without prejudice in July 1997. In May 1997, limited partners of the Tender Offer English Partnerships and the six remaining English Partnerships filed two complaints in the Superior Court of the State of California (the "California Actions") against the Company, J.W. English Companies and Houlihan, Lukey, Howard and Zukin, Inc. alleging, among other things, that the consideration the Company offered in the English Tender Offers was inadequate and designed to benefit the J.W. English Companies at the expense of the limited partners, that certain misrepresentations and omissions were made in connection with the English Tender Offers, that the Company receives excessive fees in connection with its management of the properties owned by the English Partnerships', that the Company continues to refuse to liquidate the English Partnerships and that the English Acquisition violated the partnerships agreements governing the English Partnerships and constituted a breach of fiduciary duty. The California Actions seek monetary damages and injunctive and declarative relief. In addition to such monetary damages, the complaints seek an accounting, a constructive trust of the assets and monies acquired by the J.W. English Companies in connection with the English Acquisition, a court order removing the Company from management of the English Partnerships and/or ordering the sale of the properties and attorney's fees, expert fees and other costs. 28 The Company believes all of the foregoing allegations against it are without merit and intends to vigorously defend itself in connection with these actions. The Company believes it is entitled to indemnity from the J.W. English Companies, subject to certain exceptions. On August 4, 1997, the Company filed demurrers to both complaints in the California Actions. A hearing on the demurrers was rescheduled for December 19, 1997. ITEM 2. CHANGE IN SECURITIES On August 4, 1997, AIMCO issued 750,000 shares of its Class B Cumulative Convertible Preferred Stock, Par value $.01 per share (the "Class B Preferred Stock"), to an institutional investor (the "Preferred Share Investor") for $75 million in a private transaction exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to Section 4(2) thereof. The Class B Preferred Stock ranks prior to AIMCO's Class A Common Stock with respect to dividends, liquidation, dissolution, and winding-up, and has an aggregate liquidation value of $75,000,000. Holders of the Class B Preferred Stock are entitled to receive, when, as and if declared by AIMCO's Board of Directors, quarterly cash dividends per share equal to the greater of (i) $1.78125 (the "Base Rate") and (ii) the cash dividends declared on the number of shares of Class A Common Stock into which one share of Class B Preferred Stock is convertible. On or after August 4, 1998, each share of Class B Preferred Stock may be converted at the option of the holder into the number of shares of Class A Common Stock determined by dividing the $100 liquidation preference per share by $30.45, subject to certain anti-dilution adjustments. AIMCO may redeem any or all of the Class B Preferred Stock on or after August 4, 2002, at a redemption price of $100 per share, plus unpaid dividends accrued on the shares redeemed. Holders of Class B Preferred Stock, voting as a class with the holders of all AIMCO capital stock that ranks on a parity with the Class B Preferred Stock with respect to the payment of dividends or upon liquidation, dissolution, winding up or otherwise ("Parity Stock"), will be entitled to elect (i) two directors of AIMCO if six quarterly dividends (whether or not consecutive) on the Class B Preferred Stock or any Parity Stock are in arrears, and (ii) one director of AIMCO if for two consecutive quarterly dividend periods AIMCO fails to pay at least $0.4625 in dividends on the Class A Common Stock. The affirmative vote of the holders of 66-2/3% of the outstanding shares of Class B Preferred Stock will be required to amend AIMCO's Charter in any manner that would adversely affect the rights of the holders of Class B Preferred Stock, and to approve the issuance of any capital stock that ranks senior to the Class B Preferred Stock with respect to payment of dividends or upon liquidation, dissolution, winding up or otherwise. If the Internal Revenue Service were to make a final determination that AIMCO does not qualify as a real estate investment trust in accordance with Section 856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code"), the Base Rate for quarterly cash dividends on the Class B Preferred Stock would be increased to $3.03125 per share. The terms of the Class B Preferred Stock are set forth in AIMCO's Charter, which is included as Exhibit 3.1 to this Report and incorporated herein by this reference. The agreement pursuant to which AIMCO issued the Class B Preferred Stock (the "Preferred Share Purchase Agreement") provides that the Preferred Share Investor may require AIMCO to repurchase such investor's Class B Preferred Stock in whole or in part at a price of $105 per share, plus accrued and unpaid dividends on the purchased shares, if (i) AIMCO shall fail to continue to be taxed as a real estate investment trust pursuant to Sections 856 through 860 of the Code, or (ii) upon the occurrence of a change of control (as defined in the Preferred Share Purchase Agreement). The Preferred Share Purchase Agreement also provides that, so long as the Preferred Share Investor owns Class B Preferred Stock with an aggregate liquidation preference of at least $18.75 million, neither AIMCO, AIMCO Properties, L.P. nor any subsidiary of AIMCO may issue preferred securities or incur indebtedness for borrowed money if immediately following 29 such issuance and after given effect thereto and the application of the net proceeds therefrom, AIMCO's ratio of (i) aggregate consolidated earnings before interest, taxes, depreciation and amortization, to (ii) aggregate consolidated fixed charges, for the four fiscal quarters immediately preceding such issuance would be less than 1.5 to 1. ITEM 5. OTHER INFORMATION. Effective November 4, 1997, AIMCO's Board of Directors appointed Troy D. Butts Senior Vice President and Chief Financial Officer, replacing Leeann Morein, who became Senior Vice President of Investor Services. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibits are filed with this report (1): Exhibit Number Description - ------- ----------- 1.1 Underwriting Agreement, dated as of October 22, 1997, by and among Apartment Investment and Management Company, AIMCO Properties L.P., Smith Barney Inc., BT Alex Brown Incorporated, Lehman Brothers Inc., Merrill Lynch, Pierce Fenner & Smith Incorporated, Raymond James & Associates, Inc., and the Robinson-Humphrey Company LLC, as Representatives of the Several Underwriters named in Schedule I thereto 2.1 Amendment No. 2 to Real Estate Acquisition Agreement, dated as of July 14, 1997, by and among Apartment Investment and Management Company, AIMCO Properties, L.P., Demeter Holdings Corporation ("Demeter"), Phemus Corporation ("Phemus"), Capricorn Investors L.P. ("Capricorn"), J. Roderick Heller, III ("Heller"), and NHP Partners Two LLC (together with Demeter, Phemus, Capricorn, and Heller, the "Sellers") (Exhibit 2.3 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1997, is incorporated herein by this reference) 2.2 Amendment No. 3 to Real Estate Acquisition Agreement, dated as of August 14, 1997, by and among Apartment Investment and Management Company, AIMCO Properties, L.P., and the Sellers 2.3 Amendment No. 4 to Real Estate Acquisition Agreement, dated as of September 4, 1997, by and among Apartment Investment and Management Company, AIMCO Properties, L.P., and the Sellers 2.4 Amendment No. 5 to Real Estate Acquisition Agreement, dated as of September 11, 1997, by and among Apartment Investment and Management Company, AIMCO Properties, L.P., and the Sellers 3.1 Charter 3.2 Bylaws 10.1 Second Amended and Restated Agreement of Limited Partnership of AIMCO Properties, L.P., dated as of July 29, 1994, among AIMCO-GP, Inc., as general partner, AIMCO-LP, Inc., as special limited partner , and AIMCO-GP, Inc., as attorney-in-fact for the limited partners (Exhibit 10.17 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1997, is incorporated herein by this reference) 10.2 First Amendment to the Second Amended and Restated Agreement of Limited Partnership of AIMCO Properties, L.P., dated as of July 29, 1997, by AIMCO-GP, Inc. (Exhibit 10.18 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1997, is incorporated herein by this reference) 10.3 Common Stock Purchase Agreement made as of August 26, 1997, by and between Apartment Investment and Management Company, a Maryland corporation, and ABKB/LaSalle Securities Limited Partnership, a registered investment advisor (Exhibit 99.1 to the Company's Current Report on Form 8-K, dated August 26, 1997, is incorporated herein by this reference) 10.4 Purchase and Sale Agreement and Joint Escrow Instructions, made and entered into as of August 22, 1997, by and between AIMCO Properties, L.P., and each of the parties identified on Exhibit "A" attached thereto (collectively, the "Winthrop Sellers") (Exhibit 99.3 to the Company's Current Report on Form 8-K, dated October 15, 1997, is incorporated herein by this reference) 10.5 Letter Agreement, dated October 6, 1997, by and between AIMCO Properties, L.P. and the Winthrop Sellers (Exhibit 99.4 to the Company's Current Report on Form 8-K, dated October 15, 1997, is incorporated herein by this reference) 30 10.6 Letter Agreement, dated October 13, 1997, by and between AIMCO Properties, L.P. and the Winthrop Sellers (Exhibit 99.5 to the Company's Current Report on Form 8-K dated October 15, 1997, is incorporated herein by this reference) 10.7 Letter Agreement, dated October 15, 1997, by and between AIMCO Properties, L.P. and the Winthrop Sellers (Exhibit 99.6 to the Company's Current Report on Form 8-K dated October 15, 1997, is incorporated herein by this reference) 10.8 Multifamily Note, dated as of October 31, 1997, by AIMCO/Wickertree, L.P., a Delaware limited partnership ("Wickertree"), payable to GMAC Commercial Mortgage Corporation, a California corporation ("GMAC"), in the principal sum of $4,231,700 10.9 Multifamily Deed of Trust, Assignment of Rents and Security Agreement, dated as of October 31, 1997, by Wickertree to Transnation Title Insurance Company for the benefit of GMAC 10.10 Exceptions to Non-Recourse Guaranty, dated as of October 31, 1997, by Apartment Investment and Management Company and AIMCO Properties, L.P., with respect to Wickertree 10.11 Restricted Stock Agreement (1997 Stock Award and Incentive Plan) dated as of July 25, 1997, by and between Apartment Investment and Management Company, and R. Scott Wesson 27.1 Financial Data Schedule (1) Schedules and supplemental materials to the exhibits have been omitted but will be provided to the SEC upon request. (b) During the quarter for which this report is filed, the Company filed the following Reports on Form 8-K: 31 Current Report on Form 8-K, dated August 26, 1997, relating to the proposed merger of NHP Incorporated into one of the Company's subsidiaries; and the acquisition by the Company of common stock of NHP Incorporated. Current Report on Form 8-K, dated September 19, 1997, relating to the acquisition by the Company of common stock of NHP Incorporated; the acquisition by the Company of the Morton Towers apartments and adjacent land through two subsidiary limited partnerships; the probable acquisition by the Company of a multifamily residential apartment property for an aggregate cash purchase price of approximately $260 million; the potential sale by the Company of its interests in the Hall Properties to unaffiliated joint venture partners; and the completion by the Company of the acquisition of the Los Arboles Apartments located in Chandler, Arizona, including certain pro forma financial information and the Historical Summary of Gross Income and Direct Operating Expenses of Morton Towers for the year ended December 31, 1996 and the six months ended June 30, 1997 (unaudited). Current Report on Form 8-K, dated October 15, 1997, and Amendment 1 thereto, relating to the acquisition by the Company of 35 multifamily residential properties located in seven states from 27 limited partnerships affiliated with Winthrop Financial Associates, including certain pro forma financial information and the Combined Statement of Revenues and Certain Expenses of the Thirty-five Acquisition Properties for the year ended December 31, 1996 and the six months ended June 30, 1997 (unaudited). During the quarter for which this report is filed, the Company filed the following Amendments to its Current Report on Form 8-K, dated June 3, 1997: Amendment No. 2, filed August 14, 1997; Amendment No. 3, filed September 5, 1997; Amendment No. 4, filed October 6, 1997; and Amendment No. 5, filed October 22, 1997. During the quarter for which this report is filed, the Company filed the following Amendments to its Current Report on Form 8-K, dated April 16, 1997: Amendment No. 1, filed April 30, 1997; and Amendment No. 2, filed October 6, 1997; and Amendment No. 3, filed October 22, 1997. 32 SCHEDULE 1 Documents substantially identical to Exhibits 10.8 through 10.10, except as to the borrower, loan amount and subject property, have been omitted in reliance on Rule 12b-31 under the Securities Exchange Act of 1934. Set forth below are the material details in which such documents differ from Exhibits 10.8 through 10.10. BORROWER SUBJECT PROPERTY LOAN AMOUNT - -------- ---------------- ----------- AIMCO/Grovetree, L.P Grovetree (The Arbors) $3,916,538 AIMCO/Blossomtree, L.P. Blossomtree 2,147,420 AIMCO/Colonnade, L.P. Colonnade 2,901,250 AIMCO/Hazeltree, L.P. Hazeltree 4,140,761 AIMCO/Orchidtree, L.P. Orchidtree 7,417,850 AIMCO/Quailtree, L.P. Quailtree 2,256,308 AIMCO/Shadetree, L.P. Shadetree 2,102,161 AIMCO/Silktree, L.P. Silktree 1,587,911 AIMCO/Timbertree, L.P. Timbertree 8,050,350 AIMCO/Foxtree, L.P. Foxtree 9,079,651 AIMCO/Foothills, L.P. Foothills 3,936,350 AIMCO/Fox Bay, L.P. Fox Bay 3,260,278 AIMCO/Rivercrest, L.P. Rivercrest 2,874,703 AIMCO/Twinbridge, L.P. Twinbridge 1,160,988 AIMCO/Brant Rock, L.P. Brant Rock 1,241,625 AIMCO/Sand Castles, L.P. Sand Castles 3,162,500 AIMCO/Tall Timbers, L.P. Tall Timbers 4,188,250 AIMCO/Woodhollow, L.P. Woodhollow 2,137,086 AIMCO/Olmos, L.P. Olmos Club 1,274,814 AIMCO/Polo Park, L.P. Polo Park 2,328,419 AIMCO/Wildflower, L.P. Wildflower 2,119,735 AIMCO/Wydewood, L.P. Wydewood 1,674,017 AIMCO/Sand Pebble, L.P. Sand Pebble 2,761,550 AIMCO/Surrey Oaks, L.P. Surrey Oaks 2,350,700 AIMCO/Freedom Place, L.P. Freedom Place Club 7,118,100 AIMCO/Beacon Hill, L.P. Beacon Hill 3,685,000 AIMCO/Windsor Landing, L.P. Windsor Landing 5,564,448 AIMCO/Islandtree, L.P. Island Tree 4,301,550 AIMCO/Yorktree, L.P. Yorktree 6,778,609 AIMCO/Hiddentree, L.P. Hiddentree 4,505,728 AIMCO/Pine Creek, L.P. Pine Creek 2,442,550 AIMCO/Shadow Lake, L.P. Shadow Lake 3,301,100 33 SCHEDULE 2 Documents substantially identical to Exhibit 10.11, except as to the recipient, the number of shares, the borrower and the note amount, have been omitted in reliance on Rule 12b-31 under the Securities Exchange Act of 1934. Set forth below are the material details in which such documents differ from Exhibit 10.11. Recipient And Borrower Number Of Shares Note Amount - ---------------------- ---------------- ----------- Terry Considine (Titahothree Limited Partnership RLLLP) 691,578 $20,747,340 Peter Kompaniez 210,526 6,315,780 Tom Toomey 52,632 1,578,960 Steven Ira 52,632 1,578,960 David Williams 52,632 1,578,960 Harry Alcock 10,000 300,000 Martha Carlin 10,000 300,000 Leann Morein 4,000 120,000 Patricia Heath 4,000 120,000 Carla Stoner 3,000 90,000 34 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 14, 1997 /s/ TROY D. BUTTS ------------------------------- Troy D. Butts 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) 35 EX-1.1 2 EXHIBIT 1.1 CONFORMED COPY 7,000,000 Shares APARTMENT INVESTMENT AND MANAGEMENT COMPANY Class A Common Stock UNDERWRITING AGREEMENT October 22, 1997 SMITH BARNEY INC. BT ALEX. BROWN INCORPORATED LEHMAN BROTHERS INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED RAYMOND JAMES & ASSOCIATES, INC. THE ROBINSON-HUMPHREY COMPANY, LLC As the Several Underwriters c/o SMITH BARNEY INC. 388 Greenwich Street New York, New York 10013 Dear Sirs: Apartment Investment and Management Company, a Maryland corporation (the "COMPANY"), proposes to issue and sell an aggregate of 7,000,000 shares (the "FIRM SHARES") of its Class A Common Stock, $0.01 par value per share (the "COMMON STOCK") , to the several Underwriters named in Schedule I hereto (the "UNDERWRITERS"). The Company also proposes to sell to the Underwriters, upon the terms and conditions set forth in Section 2 hereof, up to an additional 1,050,000 shares (the "ADDITIONAL SHARES") of Common Stock. The Firm Shares and the Additional Shares are hereinafter collectively referred to as the "SHARES". The Company through wholly-owned subsidiaries is the sole general partner and the principal limited partner (with an aggregate approximate 85.0% ownership interest as of the date hereof) of AIMCO Properties, L.P., a Delaware limited partnership (the "OPERATING PARTNERSHIP"). The Company's business of owning and managing multifamily apartment properties and its third-party property management and other businesses are principally conducted through the Operating Partnership and other direct and indirect subsidiaries of the Company identified in Schedule II hereto (together with the Operating Partnership, each a "SUBSIDIARY" and collectively, the "SUBSIDIARIES"). The Company wishes to confirm as follows its agreement with you (the "REPRESENTATIVES") and the other several Underwriters on whose behalf you are acting, in connection with the several purchases of the Shares by the Underwriters. 1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has filed with the Securities and Exchange Commission (the "COMMISSION") a "shelf" registration statement on Form S-3 (File No. 333-26415, including a prospectus relating to debt securities, preferred stock, common stock and warrants, and will promptly file with the Commission a prospectus supplement specifically relating to the Shares pursuant to Rule 424 under the Securities Act of 1933, as amended (together with the rules and regulations of the Commission thereunder, the "ACT"). As used in this Agreement, (i) the term "Registration Statement" means such registration statement, including exhibits, financial statements, schedules and documents incorporated by reference therein, as amended to the date hereof, and (ii) the term "Prospectus" collectively refers to the basic prospectus dated May 22, 1997, (the "BASIC PROSPECTUS") and prospectus supplement (the "PROSPECTUS SUPPLEMENT") dated October 22, 1997 in the forms first used to confirm sales of the Shares. The term "Preliminary Prospectus" means the preliminary prospectus supplement dated October 6, 1997 specifically relating to the Shares, together with the preliminary basic prospectus dated May 22, 1997 relating to the securities registered on the Registration Statement. As used herein, the terms "Registration Statement", "Prospectus" and "Preliminary Prospectus" shall in each case include the material, if any, incorporated by reference therein pursuant to Item 12 of Form S-3 under the Act or deemed to be a part thereof pursuant to Rule 430A under the Act. The terms "supplement" and "amendment" or "amend" as used herein shall include all documents deemed to be incorporated by reference in the Prospectus that are filed by the Company with the Commission pursuant to the Securities Exchange Act of 1934, as amended (together with the rules and regulations of the Commission thereunder, the "EXCHANGE ACT"), subsequent to the date of the Prospectus. As used herein, the term "Incorporated Documents" means the 2 documents which at the time are incorporated by reference in the Registration Statement, the Prospectus, the Preliminary Prospectus, or any amendment or supplement thereto. 2. AGREEMENTS TO SELL AND PURCHASE. The Company hereby agrees, subject to all the terms and conditions set forth herein, to issue and sell to each Underwriter and, upon the basis of the representations, warranties and agreements of the Company and the Operating Partnership herein contained and subject to all the terms and conditions set forth herein, each Underwriter agrees, severally and not jointly, to purchase from the Company, at a purchase price of $34.64 per Share (the "PURCHASE PRICE PER SHARE"), the number of Firm Shares set forth opposite the name of such Underwriter in Schedule I hereto (or such number of Firm Shares increased as set forth in Section 10 hereof). The Company also agrees, subject to all the terms and conditions set forth herein, to sell to the Underwriters, and, upon the basis of the representations, warranties and agreements of the Company and the Operating Partnership herein contained and subject to all the terms and conditions set forth herein, the Underwriters shall have the right to purchase from the Company, at the purchase price per share, pursuant to an option (the "OVER-ALLOTMENT OPTION") which may be exercised at any time (but not more than once) by notice to the Company given prior to 9:00 P.M., New York City time, on the 30th day after the date of the Prospectus (or, if such 30th day shall be a Saturday or Sunday or a holiday, on the next business day thereafter when the New York Stock Exchange is open for trading), up to an aggregate of 1,050,000 Additional Shares. Additional Shares may be purchased only for the purpose of covering over-allotments made in connection with the offering of the Firm Shares. Upon any exercise of the over-allotment option, each Underwriter, severally and not jointly, agrees to purchase from the Company the number of Additional Shares (subject to such adjustments as you may determine in order to avoid fractional shares) which bears the same proportion to the number of Additional Shares to be purchased by the Underwriters as the number of Firm Shares set forth opposite the name of such Underwriter in Schedule I hereto (or such number of Firm Shares increased as set forth in Section 10 hereof) bears to the aggregate number of Firm Shares. 3. TERMS OF PUBLIC OFFERING. The Company has been advised by you that the Underwriters propose to make a public offering of their respective portions of the Shares as soon after the Registration Statement and this Agreement have become effective as in your judgment is advisable and initially to offer the Shares upon the terms set forth in the Prospectus. 4. DELIVERY OF THE SHARES AND PAYMENT THEREFOR. Delivery to the Underwriters of and payment for the Firm Shares shall be made at the office of 3 Smith Barney Inc., 388 Greenwich Street, New York, NY 10013, at 10:00 A.M., New York City time, on October 27, 1997 (the "CLOSING DATE"). The place of closing for the Firm Shares and the Closing Date may be varied by agreement between you and the Company. Delivery to the Underwriters of and payment for any Additional Shares to be purchased by the Underwriters shall be made at the aforementioned office of Smith Barney Inc. at such time on such date (the "OPTION CLOSING DATE"), which may be the same as the Closing Date but shall in no event be earlier than the Closing Date nor earlier than two nor later than ten business days after the giving of the notice hereinafter referred to, as shall be specified in a written notice from you on behalf of the Underwriters to the Company of the Underwriters' determination to purchase a number, specified in such notice, of Additional Shares. The place of closing for any Additional Shares and the Option Closing Date for such Shares may be varied by agreement between you and the Company. Certificates for the Firm Shares and for any Additional Shares to be purchased hereunder shall be registered in such names and in such denominations as you shall request prior to 9:30 A.M., New York City time, on the second business day preceding the Closing Date or any Option Closing Date, as the case may be. Such certificates shall be made available to you in New York City for inspection and packaging not later than 9:30 A.M., New York City time, on the business day next preceding the Closing Date or the Option Closing Date, as the case may be. The certificates evidencing the Firm Shares and any Additional Shares to be purchased hereunder shall be delivered to you on the Closing Date or the Option Closing Date, as the case may be, against payment to the Company of the purchase price therefor in immediately available funds. 5. AGREEMENTS OF THE COMPANY AND THE OPERATING PARTNERSHIP. The Company and the Operating Partnership agree with the several Underwriters as follows: (a) If, at the time this Agreement is executed and delivered, it is necessary for the Registration Statement or a post-effective amendment thereto to be declared effective before the offering of the Shares may commence, the Company will endeavor to cause the Registration Statement or such post-effective amendment to become effective as soon as possible and will advise you promptly and, if requested by you, will confirm such advice in writing, when the Registration Statement or such post-effective amendment has become effective. (b) The Company will advise you promptly and, if requested by you, will confirm such advice in writing:(i) of any request by the 4 Commission for amendment of or a supplement to the Registration Statement, the Prospectus, the Preliminary Prospectus or for additional information;(ii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of the suspension of qualification of the Shares for offering or sale in any jurisdiction or the initiation of any proceeding for such purpose; and (iii) within the period of time referred to in paragraph (f) below, of any change in the Company's financial condition, business, properties or results of operations, or of the happening of any event, which makes any statement of a material fact made in the Registration Statement or the Prospectus (as then amended or supplemented) untrue or which requires the making of any additions to or changes in the Registration Statement or the Prospectus (as then amended or supplemented) in order to state a material fact required by the Act or the regulations thereunder to be stated therein or necessary in order to make the statements therein not misleading, or of the necessity to amend or supplement the Prospectus (as then amended or supplemented) to comply with the Act or any other law. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, the Company will make every reasonable effort to obtain the withdrawal of such order at the earliest possible time. (c) The Company will furnish to you, without charge (i) one signed copy of the registration statement as originally filed with the Commission and of each amendment thereto, including financial statements and all exhibits to the registration statement, which shall be delivered to counsel for the Underwriters,(ii) such number of conformed copies of the registration statement as originally filed and of each amendment thereto, but without exhibits, as you may reasonably request,(iii) such number of copies of the Incorporated Documents, without exhibits, as you may reasonably request, and (iv) up to six copies of the exhibits to the Incorporated Documents, as you may request. (d) Prior to the end of the period of time referred to in the first sentence in subsection (f) below, the Company will inform you of its intent to file any amendment to the Registration Statement or make any amendment or supplement to the Prospectus or file any document which, upon filing becomes an Incorporated Document, and the Company will furnish you with copies of any such amendment, supplement or document in advance of filing; PROVIDED, the Company will not file any such amendment, supplement or document to which you shall reasonably object unless such amendment, supplement or document is required to be filed by applicable law. 5 (e) Prior to the execution and delivery of this Agreement, the Company has delivered to you, without charge, in such quantities as you have requested, copies of each form of Preliminary Prospectus. The Company consents to the use, in accordance with the provisions of the Act and with the securities or Blue Sky or real estate syndication laws of the jurisdictions in which the Shares are offered by the several Underwriters and by dealers, prior to the date of the Prospectus, of each Preliminary Prospectus so furnished by the Company. (f) As soon after the execution and delivery of this Agreement as possible and thereafter from time to time for such period as in the opinion of counsel for the Underwriters a prospectus is required by the Act to be delivered in connection with sales by any Underwriter or dealer, the Company will expeditiously deliver to each Underwriter and each dealer, without charge, as many copies of the Prospectus (and of any amendment or supplement thereto) as you may reasonably request. The Company consents to the use of the Prospectus (and of any amendment or supplement thereto) in accordance with the provisions of the Act and with the securities or Blue Sky or real estate syndication laws of the jurisdictions in which the Shares are offered by the several Underwriters and by all dealers to whom Shares may be sold, both in connection with the offering and sale of the Shares and for such period of time thereafter as the Prospectus is required by the Act to be delivered in connection with sales of Shares by any Underwriter or dealer. If during such period of time any event shall occur as a result of which it is necessary in the judgment of the Company or in the opinion of counsel for the Underwriters and counsel for the Company to amend or supplement the Prospectus (as then amended or supplemented) in order that the Prospectus will not include any untrue statement of material fact or omit to state a fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary to supplement or amend the Prospectus (or to file under the Exchange Act any document which, upon filing, becomes an Incorporated Document) in order to comply with the Act or any other law, the Company will forthwith prepare and, subject to the provisions of paragraph (d) above, file with the Commission an appropriate supplement or amendment thereto (or to such document), and will expeditiously furnish to the Underwriters and dealers a reasonable number of copies thereof. (g) The Company will cooperate with you and with counsel for the Underwriters in connection with the registration or qualification of the Shares for offering and sale by the several Underwriters and by dealers under the securities or Blue Sky or real estate syndication laws of such jurisdictions as you may designate and will file such consents to service of 6 process or other documents necessary or appropriate in order to effect such registration or qualification; PROVIDED that in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action which would subject it to taxation or to service of process in suits, other than those arising out of the offering or sale of the Shares, in any jurisdiction where it is not now so subject. (h) The Company will make generally available to its security holders an earnings statement, which need not be audited, covering a twelve-month period commencing after the effective date of the Registration Statement and ending not later than 15 months thereafter, as soon as practicable after the end of such period, which earnings statement shall satisfy the provisions of Section 11(a) of the Act. (i) During the period of three years hereafter, the Company will furnish to you as soon as available, a copy of each report of the Company mailed to stockholders or filed with the Commission. (j) If this Agreement shall terminate or shall be terminated after execution pursuant to any provisions hereof (otherwise than pursuant to the second paragraph of Section 10 hereof or by notice given by you terminating this Agreement pursuant to Section 10 or Section 11 hereof) or if this Agreement shall be terminated by the Underwriters because of any failure or refusal on the part of the Company or the Operating Partnership to comply with the terms or fulfill any of the conditions of this Agreement, the Company agrees to reimburse the Representatives for all out-of-pocket expenses (including the reasonable fees and expenses of counsel for the Underwriters) incurred by you in connection herewith. (k) The Company will contribute the net proceeds from the sale of the Shares to the Operating Partnership and the Company and the Operating Partnership will apply such net proceeds substantially in accordance with the description set forth under the caption "Use of Proceeds" in the Prospectus Supplement. (l) The Company will use its best efforts to meet the requirements to maintain its qualification for the fiscal year ending December 31, 1997 (and each fiscal quarter of such year), as a "real estate investment trust" (a "REIT") under the Internal Revenue Code of 1986, as amended (the "CODE"). 7 (m) Except as stated in this Agreement and in the Preliminary Prospectus and Prospectus, the Company has not taken, nor will it take, directly or indirectly, any action designed to or that might reasonably be expected to cause or result in stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of the Shares in violation of Regulation M under the Exchange Act. (n) The Company will use its reasonable efforts to accomplish the listing of the Shares on the New York Stock Exchange. 6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE OPERATING PARTNERSHIP. The Company and the Operating Partnership represent and warrant to each Underwriter that: (a) Each prospectus or preliminary prospectus included as part of the registration statement as originally filed, or as part of any amendment or supplement thereto that is related to the Shares, or filed pursuant to Rule 424 under the Act that is related to the Shares, complied when so filed in all material respects with the provisions of the Act, except that this representation and warranty does not apply to statements in or omissions from the Registration Statement or the Prospectus made in reliance upon and in conformity with information relating to any Underwriter furnished to the Company in writing by or on behalf of any Underwriter through you expressly for use therein. The Commission has not issued any order preventing or suspending the use of the Prospectus or any Preliminary Prospectus. (b) The Company and the transactions contemplated by this Agreement meet the requirements for using Form S-3 under the Act. The Registration Statement in the form in which it became or becomes effective and also in such form as it may be when any post-effective amendment thereto shall become effective and the Prospectus and any supplement or amendment thereto when filed with the Commission under Rule 424(b) under the Act, complied or will comply in all material respects with the provisions of the Act and will not at any such times contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, except that this representation and warranty does not apply to statements in or omissions from the Registration Statement or the Prospectus made in reliance upon and in conformity with information relating to any Underwriter furnished to the Company in writing by or on behalf of any Underwriter through you expressly for use therein. 8 (c) The Incorporated Documents heretofore filed, when they were filed (or, if any amendment with respect to any such document was filed, when such amendment was filed), complied in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder, and any further Incorporated Documents so filed will, when they are filed, comply in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder; no such document when it was filed (or, if an amendment with respect to any such document was filed, when such amendment was filed), contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading; and no such further document, when it is filed, will contain an untrue statement of a material fact or will omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading. (d) All the outstanding shares of common stock of the Company (including Class B Common Stock of the Company) have been duly authorized and validly issued, are fully paid and nonassessable and are free of any preemptive or similar rights; the Shares have been duly authorized and, when issued and delivered to the Underwriters against payment therefor in accordance with the terms hereof, will be validly issued, fully paid and nonassessable and free of any preemptive or similar rights; and the capital stock of the Company conforms in all material respects to the description thereof in the Registration Statement and the Prospectus. Except as described in the Registration Statement and the Prospectus, there are no outstanding options, convertible or exchangeable securities, warrants or other rights calling for the issuance of Common Stock or Class B Common Stock of the Company or equity, partnership, membership or beneficial interests in the Subsidiaries. (e) The Company is a corporation duly organized and validly existing in good standing under the laws of the State of Maryland with full corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and the Prospectus, and is duly qualified to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure so to qualify does not have a material adverse effect on the financial condition, business, properties or results of operations of the Company and the subsidiaries taken as a whole. (f) Each Subsidiary is a corporation, limited partnership, limited liability company or trust, as the case may be, duly organized or formed 9 and validly existing under the laws of its jurisdiction of organization or formation, with corporate, limited partnership, limited liability company or trust power and authority, as the case may be, to own, lease and operate its properties and to conduct its business as described in the Registration Statement and the Prospectus, and is duly qualified to conduct its business in each jurisdiction or place where the nature of its properties or the conduct of its business requires such qualification, except where the failure so to qualify does not have a material adverse effect on the financial condition, business, properties or results of operations of the Company and the subsidiaries taken as a whole. (g) All of the shares of capital stock, partnership interests, limited liability company membership interests or trust beneficial interests, as the case may be, issued by the Subsidiaries or created by agreements to which the Subsidiaries are parties,(i) have been duly and validly issued or created (and in the case of capital stock are fully paid and nonassessable) and (ii) are owned or held, directly or indirectly through Subsidiaries, by the Company in the percentage amounts set forth on Schedule II hereto free and clear of any security interest, lien, adverse claim, equity or other encumbrance (each of the foregoing, a "LIEN"), except for such Liens as (i) are described in the Registration Statement or the Prospectus or, (ii) are set forth in Schedule II, or (iii) would not have a material adverse effect on the financial condition, business, properties or results of operations of the Company and its subsidiaries taken as a whole. (h) As of September 30, 1997, the Company indirectly owned an aggregate approximate 85.0% partnership interest in the Operating Partnership free and clear of all Liens. A wholly-owned subsidiary of the Company is the sole general partner of the Operating Partnership. (i) The Company has corporate power and authority to enter into this Agreement and to issue, sell and deliver the Shares to the Underwriters as provided herein. This Agreement has been duly authorized, executed and delivered by the Company and the Operating Partnership. (j) There are no legal or governmental proceedings pending or, to the knowledge of the Company, threatened, against the Company or any of the Subsidiaries, or to which the Company or any of the Subsidiaries, or to which any of their respective properties is subject, that are required to be described in the Registration Statement or the Prospectus but are not described as required, and there are no agreements, contracts, indentures, leases or other instruments that are required to be described in the Registration Statement or the Prospectus or to be filed as an exhibit to the 10 Registration Statement or any Incorporated Document that are not described or filed as required by the Act or the Exchange Act. (k) Neither the Company nor any of the Subsidiaries is (i) in violation of its certificate or articles of incorporation or by-laws or certificates or agreements of limited partnership, limited liability company or trust or other organizational documents, or (ii) in violation of any law, ordinance, administrative or governmental rule or regulation applicable to the Company or the Subsidiaries or of any decree of any court or governmental agency or body having jurisdiction over the Company or the Subsidiaries, or (iii) in default in any material respect in the performance of any obligation, agreement or condition contained in any bond, debenture, note or any other evidence of indebtedness or in any material agreement, indenture, lease or other instrument to which the Company or any of the Subsidiaries is a party or by which any of them or any of their respective properties is bound, except, with respect of clauses (ii) and (iii) above, for any defaults which, singly or in the aggregate, would not have a material adverse effect on the financial condition, business, properties or results of operations of the Company and its subsidiaries taken as a whole. (l) Neither the issuance and sale of the Shares, the execution, delivery or performance of this Agreement by the Company or the Operating Partnership nor the consummation by the Company or the Operating Partnership of the transactions contemplated hereby (i) requires any consent, approval, authorization or other order of or registration or filing with, any court, regulatory body, administrative agency or other governmental body, agency or official (except such as may be required for the registration of the Shares under the Act and the Exchange Act and compliance with the securities or Blue Sky or real estate syndication laws of various jurisdictions, to the extent applicable, all of which have been or will be effected in accordance with this Agreement) or conflicts or will conflict with or constitutes or will constitute a breach of, or a default under, the certificate or articles of incorporation or bylaws or certificates or agreements of limited partnership, limited liability company or trust or other organizational documents of the Company or the Subsidiaries or (ii) conflicts or will conflict with or constitutes or will constitute a breach of, or a default under, any agreement, indenture, lease or other instrument to which the Company or the Subsidiaries is a party or by which any of them or any of their respective properties may be bound, or violates or will violate any statute, law, regulation or filing or judgment, injunction, order or decree applicable to the Company or the Subsidiaries or any of their respective properties, or will result in the creation or imposition of any Lien upon any property or assets of the Company or the Subsidiaries pursuant to the terms of any agreement or instrument to which any of them is a party or 11 by which any of them may be bound or to which any of the property or assets of any of them is subject. (m) Ernst & Young LLP and Arthur Andersen LLP who have certified the financial statements included or incorporated by reference in the Registration Statement and the Prospectus (or any amendment or supplement thereto) are independent public accountants with respect to the Company as required by the Act. (n) The financial statements, together with related schedules and notes, of the Company and of any properties acquired by the Company included or incorporated by reference in the Registration Statement and the Prospectus (and any amendment or supplement thereto), present fairly (i) the consolidated financial position, results of operations and changes in financial position of the Company and its subsidiaries and (ii) the combined revenues and certain expenses of the properties acquired by the Company, as the case may be, on the basis stated in the Registration Statement at the respective dates or for the respective periods to which they apply; such statements and related schedules and notes have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved, except as disclosed therein; and the other financial and statistical information and data included or incorporated by reference in the Registration Statement and the Prospectus (or any amendment or supplement thereto) are accurately presented and prepared on a basis consistent with such financial statements and the books and records (i) of the Company and its subsidiaries and (ii) the properties acquired by the Company, as the case may be. The selected historical financial data of the Company set forth under the caption "Selected Pro Forma and Historical Financial Information" in the Prospectus Supplement, present fairly, on the basis stated in the Prospectus Supplement, the historical financial information of the Company included therein. The unaudited pro forma financial statements included in the Prospectus Supplement comply in all material respects with the applicable accounting requirements of Rule 11-02 of Regulation S-X and the pro forma adjustments have been properly applied to the historical amounts in the compilation of that data. (o) Except as disclosed in or contemplated by the Registration Statement and the Prospectus (or any amendment or supplement thereto), subsequent to the respective dates as of which such information is given in the Registration Statement and the Prospectus (or any amendment or supplement thereto), neither the Company nor any of the Subsidiaries has incurred any liability or obligation, direct or contingent, or entered into any transaction, not in the ordinary course of business, that is material to the 12 Company and the Subsidiaries taken as a whole, and there has not been any change in (or repurchase or declaration of dividends or distributions on) the capital stock, or material increase in the short-term debt or long-term debt, of the Company or any of its subsidiaries, or any material adverse change, or any development involving or which may reasonably be expected to involve, a prospective material adverse change, in the financial condition, business, properties or results of operations of the Company and its subsidiaries taken as a whole. (p) The Company and each Subsidiary (i) is in compliance with all applicable federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"),(ii) has received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) is in compliance with all terms and conditions of any such permit, license or approval, except, with respect to clauses (i), (ii) and (iii) above, where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals are otherwise disclosed in or contemplated by the Prospectus or would not, singly or in the aggregate, have a material adverse effect on the financial condition, business, properties or results of operations of the Company and its subsidiaries taken as a whole. (q) There are no costs or liabilities associated with Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties or in connection with off-site disposal of hazardous substances) that would, singly or in the aggregate, have a material adverse effect on the financial condition, business, properties or results of operations of the Company and its subsidiaries taken as a whole. (r) (i)The Company and the Subsidiaries have good and marketable title in fee simple to all parcels of real property (except for those easement parcels that are appurtenant to the real property owned in fee simple by the Company and its subsidiaries) and good and marketable title to all personal property owned by them which is material to the business of the Company and its subsidiaries taken as a whole, in each case free and clear of all Liens, except such as are described in the Prospectus or such as do not, singly or in the aggregate, materially affect the value of 13 such real and personal property taken as a whole and do not materially interfere with the use made and proposed to be made of such real and personal property by the Company and the Subsidiaries,(ii) any real property and buildings held under lease by the Company and the Subsidiaries are held under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and the Subsidiaries, in each case except as described in the Prospectus, (iii)the construction, management or operation of the buildings, fixtures and other improvements located on the Company's "Owned Properties" (as such term is defined in the Prospectus Supplement) as presently conducted or existing is not in violation of any applicable building code, zoning ordinance or other law or regulation, except where any such violation would not, singly or in the aggregate, have a material adverse effect on the Company and the Subsidiaries taken as a whole, (iv)neither the Company nor any Subsidiary has received notice of any proposed special assessment or any proposed change in any property tax, zoning or land use laws affecting all or any portion of the Owned Properties, except where any such assessment or change would not, singly or in the aggregate, have a material adverse effect on the Company and the Subsidiaries taken as a whole,(v) there do not exist any violations of any declaration of covenants, conditions and restrictions with respect to any of the Owned Properties, nor is there any existing state of facts or circumstances or condition or event which could, with the giving of notice or passage of time, or both, constitute such a violation, except where any such violation would not, singly or in the aggregate, have a material adverse effect on the Company and the Subsidiaries taken as a whole, and (vi) the improvements comprising any portion of the Owned Properties (the "IMPROVEMENTS") are free of any and all material physical, mechanical, structural, design and construction defects and the mechanical, electrical and utility systems servicing the Improvements (including, without limitation, all water, electric, sewer, plumbing, heating, ventilation, gas and air conditioning) are in good condition and proper working order and are free of material defects, except for any such defects or failures to be in good condition or proper working order which do not, singly or in the aggregate, have a material adverse effect on the value of the Owned Properties taken as a whole. (s) The direct and indirect subsidiaries of the Company have obtained Extended Coverage Owner's Policies of Title Insurance, to the extent available in the pertinent jurisdiction (other than in connection with real property located in Texas, with respect to which the Company and the Subsidiaries have obtained Texas Form T-1 Policies of Title Insurance) 14 from title insurers of recognized financial responsibility on all of the Owned Properties and such policies are in full force and effect. (t) The Company and the Subsidiaries self-insure or are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are customary in the businesses in which they are engaged; and neither the Company, nor any Subsidiary has any reason to believe that it will not be able to renew that coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not materially and adversely affect the financial condition, business or results of operations of the Company and its subsidiaries taken as a whole, except as described in or contemplated by the Prospectus. (u) The Company has not distributed and, prior to the later to occur of (i) the Closing Date and (ii) completion of the distribution of the Shares, will not distribute any offering material in connection with the offering and sale of the Shares other than the Registration Statement, the Preliminary Prospectus, the Prospectus or other materials, if any, permitted by the Act. (v) (i)The Company and each of the Subsidiaries has such permits, licenses, franchises and authorizations of governmental or regulatory authorities ("PERMITS") as are necessary to own its respective properties and to conduct its business in the manner described in the Prospectus, subject to such qualifications as may be set forth in the Prospectus,(ii) the Company and each of the Subsidiaries has fulfilled and performed all its material obligations with respect to such permits and to the Company's knowledge no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other material impairment of the rights of the holder of any such permit, subject in each case to such qualification as may be set forth in the Prospectus and (iii) except as described in the Prospectus, none of such permits contains any restriction that is materially burdensome to the Company or any of the Subsidiaries, except, with respect to clauses (i), (ii) and (iii) above, for any such failure to obtain permits or failure to fulfill or perform obligations, or the occurrence of events, or such restriction that would, singly or in the aggregate, not have a material adverse effect on the financial condition, business, properties or results of operations of the Company and its subsidiaries taken as a whole. (w) The Company and each of the Subsidiaries have filed all tax returns required to be filed and have paid all taxes shown thereon as due 15 and there is no tax deficiency that has been or to the knowledge of the Company, is threatened to be asserted that could reasonably be expected to have a material adverse effect on the financial condition, business, properties or results of operations of the Company and its subsidiaries taken as a whole. (x) No holder of any security of the Company or the Operating Partnership has any unwaived right to require registration of shares of Common Stock or any other security of the Company or OP Units because of the filing of the Registration Statement or consummation of the transactions contemplated by this Agreement. (y) The Company and the Subsidiaries are not now, and after the sale of the Shares to be sold hereunder and application of the net proceeds from such sale as described in the Prospectus Supplement under the caption "Use of Proceeds," none of them will be, an "investment company" or an entity "controlled" by an "investment company" as such terms are defined in the Investment Company Act of 1940, as amended. (z) The Company has complied with all provisions of Florida Statutes, Section 517.075, relating to issuers doing business in Cuba. (aa) The Company has since July 29, 1994 been organized and qualified as a REIT under Sections 856 through 860 of the Code, has elected to be taxed as a REIT under the Code for the taxable year ended December 31, 1994, and currently expects to continue to be organized and to operate in a manner so as to qualify as a REIT in the taxable year ending December 31, 1997 and succeeding taxable years. (bb) Except for this Agreement, there are no contracts, agreements or understandings between the Company and any person that would give rise to a valid claim against the Company or any Underwriter for a brokerage commission, finders fee or other like payment with respect to the consummation of the transactions contemplated by this Agreement. (cc) The Shares have been approved for listing on the New York Stock Exchange, subject to notice of issuance. (dd) The Agreement and Plan of Merger, dated as of April 21, 1997 by and among AIMCO, AIMCO/NHP Acquisition Corp., and NHP Incorporated, as amended, is in full force and effect, subject to the conditions set forth therein. 16 7. INDEMNIFICATION AND CONTRIBUTION. (a) The Company and the Operating Partnership agree, jointly and severally, to indemnify and hold harmless each of you and each other Underwriter and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, the Prospectus or any Preliminary Prospectus, or in any amendment or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or expenses arise out of or are based upon any untrue statement or omission or alleged untrue statement or omission which has been made therein or omitted therefrom in reliance upon and in conformity with the information relating to such Underwriter furnished in writing to the Company by or on behalf of any Underwriter through you expressly for use in connection therewith; PROVIDED, however, that the indemnification contained in this paragraph (a) with respect to any Preliminary Prospectus shall not inure to the benefit of any Underwriter (or to the benefit of any person controlling such Underwriter) on account of any such loss, claim, damage, liability or expense arising from the sale of the Shares by such Underwriter to any person if a copy of the Prospectus shall not have been delivered or sent to such person within the time required by the Act and the regulations thereunder, and the untrue statement or alleged untrue statement or omission or alleged omission of a material fact contained in such Preliminary Prospectus was corrected in the Prospectus, PROVIDED that the Company has delivered the Prospectus to the several Underwriters in requisite quantity on a timely basis to permit such delivery or sending. The foregoing indemnity agreement shall be in addition to any liability which the Company may otherwise have. (b) If any action, suit or proceeding shall be brought against any Underwriter or any person controlling any Underwriter in respect of which indemnity may be sought against the Company or the Operating Partnership, such Underwriter or such controlling person shall promptly notify the Company and the Operating Partnership and the Company and the Operating Partnership shall assume the defense thereof, including the employment of counsel and payment of all reasonable fees and expenses. Such Underwriter or any such controlling person shall have the right to employ separate counsel in any such action, suit or proceeding and to 17 participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Underwriter or such controlling person unless (i) the Company and the Operating Partnership have agreed in writing to pay such reasonable fees and expenses,(ii) the Company and the Operating Partnership have failed to assume the defense and employ counsel, or (iii) the named parties to any such action, suit or proceeding (including any impleaded parties) include such Underwriter or such controlling person, the Company and the Operating Partnership, and such Underwriter or such controlling person shall have been advised by its counsel that representation of such indemnified party, the Company and the Operating Partnership by the same counsel would be inappropriate under applicable standards of professional conduct (whether or not such representation by the same counsel has been proposed) due to actual or potential differing interests between them (in which case the Company and the Operating Partnership shall not have the right to assume the defense of such action, suit or proceeding on behalf of such Underwriter or such controlling person). It is understood, however, that the Company and the Operating Partnership shall, in connection with any one such action, suit or proceeding or separate but substantially similar or related actions, suits or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of only one separate firm of attorneys (in addition to any local counsel) at any time for all such Underwriters and controlling persons, which firm shall be designated in writing by Smith Barney Inc., and that all such reasonable fees and expenses shall be reimbursed as they are incurred. The Company and the Operating Partnership shall not be liable for any settlement of any such action, suit or proceeding effected without its written consent, but if settled with such written consent, or if there be a final judgment for the plaintiff in any such action, suit or proceeding, the Company and the Operating Partnership agree to indemnify and hold harmless any Underwriter, to the extent provided in the preceding paragraph, and any such controlling person from and against any loss, claim, damage, liability or expense by reason of such settlement or judgment. (c) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company and the Operating Partnership, the Company's directors, the Company's officers who sign the Registration Statement, and any person who controls the Company or the Operating Partnership within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, to the same extent as the foregoing indemnity from the Company and the Operating Partnership to each Underwriter, but only with respect to information relating to such Underwriter furnished in writing by or on behalf of such Underwriter through you expressly for use in the Registration Statement, the Prospectus or any Preliminary Prospectus, or 18 any amendment or supplement thereto. If any action, suit or proceeding shall be brought against the Company and the Operating Partnership, any of the Company's directors, any such officer, or any such controlling person based on the Registration Statement, the Prospectus or any Preliminary Prospectus, or any amendment or supplement thereto, and in respect of which indemnity may be sought against any Underwriter pursuant to this paragraph (c), such Underwriter shall have the rights and duties given to the Company and the Operating Partnership by paragraph (b) above (except that if the Company and the Operating Partnership shall have assumed the defense thereof such Underwriter shall not be required to do so, but may employ separate counsel therein and participate in the defense thereof, but the fees and expenses of such counsel shall be at such Underwriter's expense), and the Company and the Operating Partnership, the Company's directors, any such officer, and any such controlling person shall have the rights and duties given to the Underwriters by paragraph (b) above. The foregoing indemnity agreement shall be in addition to any liability which the Underwriters may otherwise have. (d) If the indemnification provided for in this Section 7 is applicable in accordance with its terms but is determined to be legally unavailable to an indemnified party in respect of any losses, claims, damages, liabilities or expenses referred to therein, then an indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Operating Partnership on the one hand and the Underwriters on the other hand from the offering of the Shares, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Operating Partnership on the one hand and the Underwriters on the other in connection with the statements or omissions that resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Operating Partnership on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company and the Operating Partnership bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. The relative fault of the Company and the Operating Partnership on the one hand and the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a 19 material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Operating Partnership on the one hand or by the Underwriters on the other hand and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (e) The Company, the Operating Partnership and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by a pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities and expenses referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating any claim or defending any such action, suit or proceeding. Notwithstanding the provisions of this Section 7, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price of the Shares underwritten by it and distributed to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations to contribute pursuant to this Section 7 are several in proportion to the respective numbers of Firm Shares set forth opposite their names in Schedule I hereto (or such numbers of Firm Shares increased as set forth in Section 10 hereof) and not joint. (f) No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action, suit or proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such action, suit or proceeding. (g) Any losses, claims, damages, liabilities or expenses for which an indemnified party is entitled to indemnification or contribution under this Section 7 shall be paid by the indemnifying party to the indemnified party as such losses, claims, damages, liabilities or expenses are incurred. The indemnity and contribution agreements contained in this Section 7 and the 20 representations and warranties of the Company and the Operating Partnership set forth in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Underwriter or any person controlling any Underwriter, the Company, the Operating Partnership, the Company's directors or officers, or any person controlling the Company or the Operating Partnership,(ii) acceptance of any Shares and payment therefor hereunder, and (iii) any termination of this Agreement. A successor to any Underwriter or any person controlling any Underwriter, or to the Company, the Operating Partnership, the Company's directors or officers, or any person controlling the Company or the Operating Partnership, shall be entitled to the benefits of the indemnity, contribution and reimbursement agreements contained in this Section 7. 8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations of the Underwriters to purchase the Firm Shares hereunder are subject to the following conditions: (a) If, at the time this Agreement is executed and delivered, it is necessary for a post-effective amendment to the Registration Statement to be declared effective before the offering of the Shares may commence, such post-effective amendment to the Registration Statement shall have become effective not later than 5:30 P.M., New York City time, on the date hereof, or at such later date and time as shall be consented to in writing by you, and all filings, if any, required by Rules 424 and 430A under the Act shall have been timely made; no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceeding for that purpose shall have been instituted or, to the knowledge of the Company or any Underwriter, threatened by the Commission, and any request of the Commission for additional information (to be included in the Registration Statement or the Prospectus or otherwise) shall have been complied with to your satisfaction. (b) Subsequent to the effective date of this Agreement, there shall not have occurred (i) any change, or any development involving a prospective change, in or affecting the financial condition, business, properties or results of operations of the Company and its subsidiaries taken as a whole, not contemplated by the Prospectus, which in your opinion, as Representatives of the several Underwriters, would materially adversely affect the market for the Shares, or (ii) any event or development relating to or involving the Company which makes any statement made in the Prospectus untrue or which, in the opinion of the Company and its counsel or the Underwriters and their counsel, requires the making of any 21 addition to or change in the Prospectus in order to state a material fact required by the Act or any other law to be stated therein or necessary in order to make the statements therein not misleading, if amending or supplementing the Prospectus to reflect such event or development would, in your opinion, as Representatives of the several Underwriters, materially adversely affect the market for the Shares. (c) You shall have received on the Closing Date, an opinion of Skadden, Arps, Slate, Meagher & Flom, Piper & Marbury LLP, and other counsel for the Company reasonably satisfactory to you, dated the Closing Date and addressed to you, as the several Underwriters, to the effect set forth in Exhibit A hereto. (d) You shall have received on the Closing Date (i) an opinion of Davis Polk & Wardwell, counsel for the Underwriters, dated the Closing Date and addressed to you, as the several Underwriters, to the effect set forth in Exhibit B hereto, and (ii) such other opinions of such counsel with respect to such other related matters as you may reasonably request. (e) You shall have received letters addressed to you, as the several Underwriters, and dated the date hereof and the Closing Date from (i) Ernst & Young LLP,(ii) Arthur Andersen LLP, and (iii) Deloitte & Touche, independent certified public accountants, substantially in the forms heretofore approved by you. (f) (i)There shall not have been any material change in the capital stock of the Company nor any material increase in the short-term or long-term debt of the Company (other than in the ordinary course of business) from that set forth or contemplated in the Registration Statement or the Prospectus (or any amendment or supplement thereto);(ii) there shall not have been, since the respective dates as of which information is given in the Registration Statement and the Prospectus (or any amendment or supplement thereto), except as may otherwise be stated in the Registration Statement and Prospectus (or any amendment or supplement thereto), any material adverse change in the financial condition, business, properties or results of operations of the Company and its subsidiaries taken as a whole; (iii)the Company and the Subsidiaries shall not have incurred any liabilities or obligations, direct or contingent (whether or not in the ordinary course of business), that are material to the Company and the Subsidiaries, taken as a whole, other than those reflected in or contemplated by the Registration Statement or the Prospectus (or any amendment or supplement thereto); and (iv) all the representations and warranties of the Company and the Operating Partnership contained in this Agreement shall be true and correct on and as of the date hereof and on 22 and as of the Closing Date as if made on and as of the Closing Date, and you shall have received a certificate, dated the Closing Date and signed by the chief executive officer and the chief financial officer of the Company (or such other officers as are acceptable to you), to the effect set forth in this Section 8(f) and in Section 8(g) hereof. (g) Each of the Company and the Operating Partnership shall not have failed at or prior to the Closing Date to have performed or complied with any of its agreements herein contained and required to be performed or complied with by it hereunder at or prior to the Closing Date. (h) The Shares shall have been listed, subject to notice of issuance, on the New York Stock Exchange. (i) The Company shall have furnished or caused to be furnished to you such further certificates and documents as you shall have reasonably requested. All such opinions, certificates, letters and other documents will be in compliance with the provisions hereof only if they are reasonably satisfactory in form and substance to you and your counsel. Any certificate or document signed by any officer of the Company or authorized representative of the Operating Partnership and delivered to you, as Representatives of the Underwriters, or to counsel for the Underwriters, on the Closing Date or any Option Closing Date shall be deemed a representation and warranty by the Company or the Operating Partnership, as the case may be, to each Underwriter as to the statements made therein. The several obligations of the Underwriters to purchase Additional Shares hereunder are subject to the satisfaction on and as of any Option Closing Date of the conditions set forth in this Section 8, except that, if any Option Closing Date is other than the Closing Date, the certificates, opinions and letters referred to in paragraphs (c) through (f) shall be dated the Option Closing Date in question and the opinions called for by paragraphs (c) and (d) shall be revised to reflect the sale of Additional Shares. 9. EXPENSES. The Company agrees to pay the following costs and expenses and all other costs and expenses incident to the performance by it of its obligations hereunder:(i) the preparation, printing or reproduction, and filing with the Commission of the Registration Statement (including financial statements and exhibits thereto), each Preliminary Prospectus, the Prospectus, and each amendment or supplement to any of them;(ii) the printing (or reproduction) and 23 delivery (including postage, air freight charges and charges for counting and packaging) of such copies of the Registration Statement, each Preliminary Prospectus, the Prospectus, the Incorporated Documents, and all amendments or supplements to any of them, as may be reasonably requested for use in connection with the offering and sale of the Shares;(iii) the preparation, printing, authentication, issuance and delivery of certificates for the Shares, including any stamp taxes in connection with the original issuance and sale of the Shares;(iv) the printing (or reproduction) and delivery of this Agreement, the Blue Sky Memorandum (if any) and all other agreements or documents printed (or reproduced) and delivered in connection with the offering of the Shares;(v) the listing of the Shares on the New York Stock Exchange;(vi) the registration or qualification of the Shares for offer and sale under the securities or Blue Sky or real estate syndication laws of the several states as provided in Section 5(g) hereof (including the reasonable fees, expenses and disbursements of counsel for the Underwriters relating to the preparation, printing or reproduction, and delivery of the Blue Sky Memorandum and such registration and qualification);(vii) the filing fees and the fees and expenses of counsel for the Underwriters in connection with any filings required to be made with the National Association of Securities Dealers, Inc.;(viii) the transportation and other reasonable expenses incurred by or on behalf of Company representatives in connection with presentations to prospective purchasers of the Shares; and (ix) the reasonable fees and expenses of the Company's accountants and the reasonable fees and expenses of counsel (including local and special counsel) for the Company. 10. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become effective:(i) upon the execution and delivery hereof by the parties hereto; or (ii) if, at the time this Agreement is executed and delivered, it is necessary for a post-effective amendment to the Registration Statement to be declared effective before the offering of the Shares may commence, when notification of the effectiveness of such post-effective amendment to the Registration Statement has been released by the Commission. Until such time as this Agreement shall have become effective, it may be terminated by the Company, by notifying you, or by you, as Representatives of the several Underwriters, by notifying the Company. If any one or more of the Underwriters shall fail or refuse to purchase Shares which it or they are obligated to purchase hereunder on the Closing Date, and the aggregate number of Shares which such defaulting Underwriter or Underwriters are obligated but fail or refuse to purchase is not more than one-tenth of the aggregate number of Shares which the Underwriters are obligated to purchase on the Closing Date, each non-defaulting Underwriter shall be obligated, severally, in the proportion which the number of Firm Shares set forth opposite its name in Schedule I hereto bears to the aggregate number of Firm Shares set forth opposite the names of all non-defaulting Underwriters or in such 24 other proportion as you may specify in accordance with Section 20 of the Master Agreement Among Underwriters of Smith Barney Inc., to purchase the Shares which such defaulting Underwriter or Underwriters are obligated, but fail or refuse, to purchase. If any one or more of the Underwriters shall fail or refuse to purchase Shares which it or they are obligated to purchase on the Closing Date and the aggregate number of Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Shares which the Underwriters are obligated to purchase on the Closing Date and arrangements satisfactory to you and the Company for the purchase of such Shares by one or more non-defaulting Underwriters or other party or parties approved by you and the Company are not made within 36 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Underwriter or the Company. In any such case which does not result in termination of this Agreement, either you or the Company shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and the Prospectus or any other documents or arrangements may be effected. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any such default of any such Underwriter under this Agreement. The term "Underwriter" as used in this Agreement includes, for all purposes of this Agreement, any party not listed in Schedule I hereto who, with your approval and the approval of the Company, purchases Shares which a defaulting Underwriter is obligated, but fails or refuses, to purchase. Any notice under this Section 10 may be given by telegram, telecopy or telephone but shall be subsequently confirmed by letter. 11. TERMINATION OF AGREEMENT. This Agreement shall be subject to termination in your absolute discretion, without liability on the part of any Underwriter to the Company by notice to the Company, if prior to the Closing Date or any Option Closing Date (if different from the Closing Date and then only as to the Additional Shares), as the case may be,(i) trading in securities generally on the New York Stock Exchange, the American Stock Exchange or the Nasdaq National Market shall have been suspended or materially limited, (ii)a general moratorium on commercial banking activities in New York shall have been declared by either federal or state authorities, or (iii) there shall have occurred any outbreak or escalation of hostilities or other international or domestic calamity, crisis or change in political, financial or economic conditions, the effect of which on the financial markets of the United States is such as to make it, in your judgment, impracticable or inadvisable to commence or continue the offering of the Shares at the offering price to the public set forth on the cover page of the Prospectus or to enforce contracts for the resale of the Shares by the Underwriters. Notice of such termination may be given to the Company by 25 telegram, telecopy or telephone and shall be subsequently confirmed by letter. Upon any such termination, the obligations of the Company and the Operating Partnership to the Underwriters hereunder shall also terminate, except for the obligations set forth in Sections 7 and 9 hereof. 12. INFORMATION FURNISHED BY THE UNDERWRITERS. The statements set forth in the last paragraph on the cover page, the stabilization legend on page S-2, and the statements in the first, third and fifth paragraphs under the caption "Underwriting" in any Preliminary Prospectus and in the Prospectus, constitute the only information furnished in writing by or on behalf of the Underwriters through you as such information is referred to in Sections 6(b) and 7 hereof. 13. MISCELLANEOUS. Except as otherwise provided in Sections 5, 10 and 11 hereof, notice given pursuant to any provision of this Agreement shall be in writing and shall be delivered (i) if to the Company or the Operating Partnership, at the office of the Company at 1873 South Bellaire Street, 17th Floor, Denver, Colorado 80222, Attention: Mr. Terry Considine, Chairman of the Board of Directors; or (ii) if to you, as Representatives of the several Underwriters, care of Smith Barney Inc., 388 Greenwich Street, New York, New York 10013, Attention: Manager, Investment Banking Division. This Agreement has been and is made solely for the benefit of the several Underwriters, the Company, the Operating Partnership, the Company's directors and officers, and the other controlling persons referred to in Section 7 hereof and their respective successors and assigns, to the extent provided herein, and no other person shall acquire or have any right under or by virtue of this Agreement. Neither the term "successor" nor the term "successors and assigns" as used in this Agreement shall include a purchaser from any Underwriter of any of the Shares in his status as such purchaser. 14. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed within the State of New York. This Agreement may be signed in various counterparts which together constitute one and the same instrument. If signed in counterparts, this Agreement shall not become effective unless at least one counterpart hereof shall have been executed and delivered on behalf of each party hereto. 26 Please confirm that the foregoing correctly sets forth the agreement among the Company, the Operating Partnership and the several Underwriters. Very truly yours, APARTMENT INVESTMENT AND MANAGEMENT COMPANY By: /s/ Peter Kompaniez -------------------- Name: Peter Kompaniez Title: President AIMCO PROPERTIES, L.P. By AIMCO-GP, Inc., its General Partner By: /s/ Peter Kompaniez -------------------- Name: Peter Kompaniez Title: Vice President Confirmed as of the date first above mentioned on behalf of themselves and the other several Underwriters named in Schedule I hereto. SMITH BARNEY INC. BT ALEX. BROWN INCORPORATED LEHMAN BROTHERS INC. MERRILL LYNCH, PIERCE FENNER & SMITH INCORPORATED RAYMOND JAMES & ASSOCIATES, INC. THE ROBINSON-HUMPHREY COMPANY, LLC As Representatives of the Several Underwriters By SMITH BARNEY INC. By: /s/ John Herbert ------------------------- Name: John Herbert Title: Managing Director 27 SCHEDULE I APARTMENT INVESTMENT AND MANAGEMENT COMPANY Number of Underwriter Firm Shares ----------- Smith Barney Inc. . . . . . . . . . . . . . . . . . . . . . 1,166,700 BT Alex. Brown Incorporated . . . . . . . . . . . . . . . . 1,166,660 Lehman Brothers Inc . . . . . . . . . . . . . . . . . . . . 1,166,660 Merrill Lynch, Pierce, Fenner & Smith Incorporated . . . . . . . . . . . . . . . . . . 1,166,660 Raymond James & Associates, Inc. . . . . . . . . . . . . . 1,166,660 The Robinson-Humphrey Company, LLC . . . . . . . . . . . . 1,166,660 ----------- Total . . . . . . . . . . . . . . . . . 7,000,000 ----------- ----------- SCHEDULE II 1. AIMCO-LP, Inc.(1) 2. Property Asset Management Services, Inc.(2) 3. AIMCO/NHP Holdings, Inc.(2) 4. NHP Incorporated (3) 5. AIMCO Properties, L.P.(4) 6. Property Asset Management Services, L.P.(5) 7. AIMCO/NHP Partners, L.P.(6) 8. AIMCO-GP, Inc.(1) 9. NHP Partners, Inc.(2) - ----------------------------- (1) Owned 100% by the Company (2) The Operating partnership holds a 95% economic non-voting preferred stock interest and certain officers of the Company hold a 5% economic interest and hold all of the common voting interest. (3) The company holds approximately 47% of the common shares and AIMCO/NHP Holdings, Inc. holds approximately 6% of the common shares. (4) AIMCO-GP, Inc. is the sole general partner with a 1% interest and AIMCO-LP, Inc. holds an approximate 84% limited partnership interest. (5) The Operating Partnership is the sole general partner with a 1% interest and Property Asset Management Services, Inc. is the sole limited partner with a 99% limited partnership interest. (6) The Operating Partnership holds a 99% limited partnership interest and CK Properties, L.L.C., a limited liability company whose members are officers of the Company, is the sole general partner and holds a 1% general partnership interest. 10. NHP Management Company (7) - ------------------------ (7) Owned 100% by NHP Incorporated 2 EXHIBIT A OPINIONS OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM, PIPER & MARBURY LLP AND OTHER COUNSEL FOR THE COMPANY The opinions of Skadden, Arps, Slate, Meagher & Flom, Piper & Marbury LLP, and other counsel for the Company satisfactory to the Representatives, to be delivered pursuant to Section 8(c) of the Apartment Investment and Management Company Underwriting Agreement shall be, in the aggregate, substantially to the effect that on the Closing Date: (i) The Company is a corporation duly organized and validly existing in good standing under the laws of the jurisdiction of its incorporation with full corporate power and authority to own, lease and operate its properties or properties proposed to be acquired by it and to conduct its business as described in the Registration Statement and the Prospectus. Such counsel shall identify, based solely upon certificates of public officials, those states in which the Company is qualified to do business. (ii) Each Specified Subsidiary (as defined on Schedule II hereto) is a corporation, limited partnership, limited liability company or trust, as the case may be, duly organized or formed and validly existing under the laws of its jurisdiction of organization or formation, with corporate, limited partnership, limited liability company or trust power and authority, as the case may be, to own, lease and operate its properties or any properties proposed to be acquired by it and to conduct its business as described in the Registration Statement and the Prospectus. (iii) The authorized and outstanding capital stock of the Company is as set forth under the caption "Capitalization" in the Prospectus Supplement. The authorized capital stock of the Company conforms in all material respects as to legal matters to the description thereof contained in the Prospectus under the captions "Description of Common Stock" and "Description of Preferred Stock". (iv) All shares of common stock of the Company (including Class B Common Stock) outstanding prior to the issuance of the Shares have been duly authorized and are validly issued, fully paid and nonassessable. (v) The Shares have been duly authorized and, when issued and delivered to the Underwriters against payment therefor in accordance with the terms hereof, will be validly issued, fully paid and nonassessable and free of any preemptive, or to the best knowledge of such counsel after reasonable inquiry, similar rights that entitle or will entitle any person to acquire any Shares upon the issuance thereof by the Company. (vi) (i) All of the shares of capital stock issued by AIMCO, AIMCO-GP, Inc., AIMCO-LP, Inc. [Insert additional Subsidiaries defined in Schedule II as appropriate] and (ii) all of the partnership interests in AIMCO Properties, L.P. (subsequent to July 29, 1994), [Insert additional Subsidiaries defined in Schedule II as appropriate] issued by such limited partnerships or created by agreements to which such limited partnerships are parties have been duly and validly issued (and in the case of capital stock have been duly authorized and are fully paid and nonassessable) and, except for minority limited partnership interests in AIMCO Properties, L.P., to the best knowledge of such counsel after reasonable inquiry (including a review of ownership and transfer records for shares of capital stock, partnership interests or membership interests, to the extent maintained by such entities), such shares of capital stock or partnership interests are owned by the Company directly or through Subsidiaries (except for indirect ownership interests held by certain trusts in which Messrs. Considine, Kompaniez, Ira and Lacey collectively hold aggregate 5% beneficial interests) free and clear of any security interest, lien, adverse claim, equity or other encumbrance. (vii) The form of certificates for the Shares conforms to the requirements of the Maryland General Corporation Law. (viii) The Company has corporate power and authority to enter into this Agreement and to issue, sell and deliver the Shares to the Underwriters as provided herein. This Agreement has been duly authorized, executed and delivered by the Company and the Operating Partnership. (ix) To the best knowledge of such counsel after reasonable inquiry, there are no legal or governmental proceedings pending or threatened against the Company of any the Specified Subsidiaries, or to which the Company or any of the Specified Subsidiaries, or to which any of their respective properties is subject, that are required to be described in the Registration Statement or the Prospectus but are not described as required, and there are no agreements, contracts, indentures, leases or other instruments that are required to be described in the Registration Statement or the Prospectus or to be filed as an exhibit to the Registration Statement or any Incorporated Document that are not described or filed as required by the Act or the Exchange Act. 2 (x) Neither the issuance and sale of the Shares, the execution, delivery or performance of this Agreement by the Company or the Operating Partnership nor the consummation by the Company or the Operating Partnership of the transactions contemplated hereby (1) requires any consent, approval, authorization or other order of, or registration or filing with, any court, regulatory body, administrative agency or other governmental body, agency or official (except such as may be required for the registration of the Shares under the Act and the Exchange Act and compliance with the securities or Blue Sky or real estate syndication laws of various jurisdictions, all of which have been or will be effected in accordance with this Agreement) or (2) conflicts or will conflict with or constitutes or will constitute a breach of, or a default under, the certificate or articles of incorporation or bylaws of the Company, AIMCO-GP, Inc. or AIMCO-LP, Inc. or the Certificate of Limited Partnership or Agreement of Limited Partnership of AIMCO Properties, L.P., as amended, or (3) to the best knowledge of such counsel after reasonable inquiry, violates or will violate any statute, law, regulation or filing or judgment, injunction, order or decree applicable to the Company or the Subsidiaries or any of their respective properties or (4) to the best knowledge of such counsel after reasonable inquiry, conflicts or will conflict with or constitutes or will constitute a breach of or a default under any Material Agreement (as such term shall be defined in the opinion of such counsel). (xi) To the best knowledge of such counsel after reasonable inquiry, no holder of any security of the Company or the Operating Partnership has any unwaived right to require registration of shares of Common Stock or any other security of the Company or OP Units because of the filing of the Registration Statement or consummation of the transactions contemplated by this Agreement. (xii) The Company and the Specified Subsidiaries are not now, and after the sale of the Shares to be sold hereunder and application of the net proceeds from such sale as described in the Prospectus Supplement under the caption "Use of Proceeds," none of them will be, an "investment company" as such terms are defined in the Investment Company Act of 1940, as amended. (xiii) The Registration Statement and all post-effective amendments, if any, have become effective under the Act and, to the best knowledge of such counsel after reasonable inquiry,(1) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose are pending before or contemplated by the Commission and (2) any required filing of the Prospectus pursuant to Rule 424(b) has been made in accordance with Rule 424(b). 3 (xiv) The statements (1) in the Basic Prospectus under the caption "Description of Common Stock"; and (2) in the Prospectus Supplement under "Certain Federal Income Tax Considerations," in each case insofar as such statements constitute summaries of the legal matters, documents, or proceedings referred to therein, are accurate and present fairly the information required to be shown. (xv) Such counsel confirms as of the Closing Date the opinion filed as Exhibit 8.1 to the Registration Statement. (xvi) The Registration Statement and the Prospectus and any supplements or amendments thereto (except for the financial statements and the notes thereto and the schedules and other financial and statistical data included therein, as to which such counsel need not express any opinion) comply as to form in all material respects with the requirements of the Act. Each of the Incorporated Documents (except for the financial statements and the notes thereto and the schedules and other financial and statistical data included therein, as to which counsel need not express any opinion) complies as to form in all material respects with the Exchange Act and the rules and regulations of the Commission thereunder. (xvii) Although such counsel has not undertaken, except as otherwise indicated in their opinion, to determine independently, and does not assume any responsibility for, the accuracy or completeness of the statements in the Registration Statement, such counsel has participated in the preparation of the Registration Statement and the Prospectus, including review and discussion of the contents thereof (including review and discussion of the contents of all Incorporated Documents), and nothing has come to the attention of such counsel that has caused them to believe that the Registration Statement (including the Incorporated Documents) at the time the Registration Statement became effective, or the Prospectus, as of its date and as of the Closing Date or the Option Closing Date, as the case may be, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that any amendment or supplement to the Prospectus, as of its respective date, and as of the Closing Date or the Option Closing Date, as the case may be, contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading (it being understood that such counsel need express no opinion with respect to the financial statements and the notes thereto and the schedules and other financial and statistical data 4 included in the Registration Statement or the Prospectus or any Incorporated Document). In rendering the foregoing opinions (i) such counsel may state that they have relied as to factual matters upon certificates of public officials or one or more officers of the Company or its Subsidiaries, (ii) Skadden, Arps, Slate, Meagher & Flom may state that their opinion relates only to the federal laws of the United States and the laws of the State of Delaware and California, and (iii) Piper & Marbury LLP may state that their opinion relates only to the laws of the State of Maryland. 5 EXHIBIT B OPINION OF DAVIS POLK & WARDWELL, COUNSEL FOR THE UNDERWRITERS The opinion of Davis Polk & Wardwell, counsel for the Underwriters, to be delivered pursuant to Section 8(d) of the Apartment Investment and Management Company Underwriting Agreement shall be to the effect that on the Closing Date: (i) The Shares have been duly authorized and, when issued and delivered to the Underwriters against payment therefor in accordance with the terms hereof, will be validly issued, fully paid and nonassessable and free of any preemptive, or to the best knowledge of such counsel after reasonable inquiry, similar rights that entitle or will entitle any person to acquire any Shares upon the issuance thereof by the Company. (ii) The Registration Statement and all post-effective amendments, if any, have become effective under the Act and, to the best knowledge of such counsel after reasonable inquiry,(1) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose are pending before or contemplated by the Commission and (2) any required filing of the Prospectus pursuant to Rule 424(b) has been made in accordance with Rule 424(b). (iii) This Agreement has been duly authorized, executed and delivered by the Company. (iv) The statements in the Prospectus Supplement under the caption "Underwriting" insofar as such statements constitute summaries of the legal matters and documents referred to therein fairly present the information called for with respect to such legal matters and documents and fairly summarize the matters referred to therein. (v) The Registration Statement and the Prospectus and any supplements or amendments thereto (except for the financial statements and the notes thereto and the schedules and other financial and statistical data included therein, as to which such counsel need not express any opinion) comply as to form in all material respects with the requirements of the Act. (vi) Although such counsel has not undertaken, except as otherwise indicated in their opinion, to determine independently, and does not assume any responsibility for, the accuracy or completeness of the statements in the Registration Statement, such counsel has participated in the preparation of the Registration Statement and the Prospectus, including review and discussion of the contents thereof (including review and discussion of the contents of all Incorporated Documents), and nothing has come to the attention of such counsel that has caused them to believe that the Registration Statement (including the Incorporated Documents) at the time the Registration Statement became effective, or the Prospectus, as of its date and as of the Closing Date or the Option Closing Date, as the case may be, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that any amendment or supplement to the Prospectus, as of its respective date, and as of the Closing Date or the Option Closing Date, as the case may be, contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading (it being understood that such counsel need express no opinion with respect to the financial statements and the notes thereto and the schedules and other financial and statistical data included in the Registration Statement or the Prospectus or any Incorporated Document). In rendering their opinion as aforesaid, such counsel may rely upon an opinion or opinions, each dated the Closing Date, of other counsel retained by them or the Company as to laws of any jurisdiction other than the United States or the State of New York, provided that counsel shall state in their opinion that they believe that they and the Underwriters are justified in relying thereon. EX-2.2 3 EXHIBIT 2.2 AMENDMENT NO. 3 TO REAL ESTATE ACQUISITION AGREEMENT AMENDMENT NO. 3 TO REAL ESTATE ACQUISITION AGREEMENT, dated as of August 14, 1997 (this "AMENDMENT"), by and among Apartment Investment and Management Company, a Maryland corporation ("AIMCO"), AIMCO Properties, L.P., a Delaware limited partnership ("AIMCO OP" and, together with AIMCO, the "BUYERS"), Demeter Holdings Corporation, a Massachusetts corporation ("DEMETER"), Phemus Corporation, a Massachusetts corporation ("PHEMUS"), Capricorn Investors, L.P., a Delaware limited partnership ("CAPRICORN"), J. Roderick Heller, III, an individual ("HELLER"), and NHP Partners Two LLC, a Delaware limited liability company ("PARTNERS TWO LLC" and, together with Demeter, Phemus, Capricorn and Heller, the "SELLERS"). Capitalized terms used, but not otherwise defined herein, shall have the respective meanings ascribed to them in the Real Estate Acquisition Agreement, dated as of May 22, 1997, by and among the Buyers and the Sellers, as amended by (i) Amendment No. 1 to Real Estate Acquisition Agreement, dated as of June 13, 1997 by and among the Buyers and the Sellers, and (ii) Amendment No. 2 to Real Estate Acquisition Agreement, dated as of July 14, 1997 by and among the Buyers and the Sellers (as so amended, the "ACQUISITION AGREEMENT"). WHEREAS, the parties hereto desire to amend the Acquisition Agreement to extend the date for exercise of the Buyers' Property Put Right for certain assets. NOW, THEREFORE, in consideration of the foregoing, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. AMENDMENT OF SECTION 5.15(b). Section 5.15(b) of the Acquisition Agreement is hereby amended and restated in its entirety to read as follows: "(b) The Buyer's Property Put Right may be exercised, at any time or from time to time, (1) no later than September 5, 1997, with respect to (A) the 1% general partnership interest and 15.715% limited partnership interest in each of Lakehaven Associates One and Lakehaven Associates Two, or (B) the .01% limited partnership interest in River Loft Apartments Limited Partnership, and the 0.9% general partnership interest, the 0.1% general partnership interest and the 4% limited partnership interest in River Loft Associates, and (2) no later than June 16, 1997, with respect to any other assets, in each case, by AIMCO's delivery of a written notice to the Sellers specifying (i) the assets that are requested to be repurchased by the Sellers pursuant to the Buyers' Property Put Right, (ii) the basis on which the Buyers are entitled to exercise the Buyers' Property Put Right, and (iii) the date and time at which the closing (the "BUYERS' PROPERTY PUT CLOSING") of the repurchase of such assets is to occur. The date of the Buyers' Property Put Closing shall be at least 30 days after the date (the "Notice Date") such notice is given; provided, however, that if (x) it is not possible for the Sellers to cure, at least 5 Business Days prior to the 30th day after the Notice Date, the breach, liability or defect that entitles the Buyers to exercise the Buyers' Property Put Right, or (y) AIMCO determines, in its reasonable discretion, that it is necessary to consummate the Buyers' Property Put Closing earlier in order to avoid jeopardizing AIMCO's REIT Status, then the date of the Buyers' Property Put Closing may be on an earlier date, but not earlier than 5 Business Days after the Notice Date." 2. GOVERNING LAW. This Amendment and the legal relations among the parties hereto shall be governed by and construed and enforced in accordance with the laws of the State of Delaware, without regard to its principles of conflicts of law. 3. ENTIRE AGREEMENT. This Amendment, together with the Acquisition Agreement, including the exhibits and schedules attached thereto, constitutes the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, letters of intent, negotiations and discussions, whether oral or written, of the parties, including the Letter Agreement, and there are no warranties, representations or other agreements, express or implied, made to any party by any other party in connection with the subject matter hereof except as specifically set forth herein or in the documents delivered pursuant hereto or in connection herewith. 4. ACQUISITION AGREEMENT IN FULL FORCE. Except as expressly modified hereby, the Acquisition Agreement remains in full force and effect. 5. MODIFICATION; WAIVER. No supplement, modification, waiver or termination of this Amendment shall be binding unless executed in writing by the party to be bound thereby. No waiver of any provision of this Amendment shall be deemed or shall constitute a waiver of any other provision hereof (whether or not 2 similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. 6. SEVERABILITY. Any provision or part of this Amendment which is invalid or unenforceable in any situation in any jurisdiction shall, as to such situation and such jurisdiction, be ineffective only to the extent of such invalidity and shall not affect the enforceability of the remaining provisions hereof or the validity or enforceability of any such provision in any other situation or in any other jurisdiction. 7. COUNTERPARTS. This Amendment may be executed in as many counterparts as may be deemed necessary and convenient, and by the different parties hereto on separate counterparts each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same instrument. 8. NEGOTIATION OF AMENDMENT. Each of the parties acknowledges that it has been represented by independent counsel of its choice throughout all negotiations that have preceded the execution of this Amendment and that it has executed the same with consent and upon the advice of said independent counsel. Each party and its counsel cooperated in the drafting and preparation of this Amendment and the documents referred to herein, and any and all drafts relating thereto shall be deemed the work product of the parties and may not be construed against any party by reason of its preparation. Accordingly, any rule of law or any legal decision that would require interpretation of any ambiguities in this Amendment against the party that drafted it is of no application and is hereby expressly waived. The provisions of this Amendment shall be interpreted in a reasonable manner to effect the intentions of the parties and this Amendment. [SIGNATURE PAGES FOLLOW] 3 IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written. APARTMENT INVESTMENT AND MANAGEMENT COMPANY By: /s/ Peter Kompaniez ---------------------------- Name: Peter Kompaniez Its: Vice Chairman AIMCO PROPERTIES, L.P. By: AIMCO-GP, Inc., its general partner By: /s/ Peter Kompaniez ---------------------------- Name: Peter Kompaniez Its: Vice President DEMETER HOLDINGS CORPORATION By: /s/ Michael R. Eisenson ---------------------------- Name: Michael R. Eisenson Its: Authorized Signatory By: /s/ Tim R. Palmer ---------------------------- Name: Tim R. Palmer Its: Authorized Signatory PHEMUS CORPORATION By: /s/ Michael R. Eisenson ---------------------------- Name: Michael R. Eisenson Its: Authorized Signatory By: /s/ Tim R. Palmer ---------------------------- Name: Tim R. Palmer Its: Authorized Signatory CAPRICORN INVESTORS, L.P. By: Capricorn Holdings, G.P., its General Partner By: Winokur Holdings, Inc., its General Partner By: /s/ Herbert S. Winokur, Jr. ----------------------------- Name: Herbert S. Winokur, Jr. Its: President /s/ J. Roderick Heller, III ---------------------------- J. Roderick Heller, III NHP PARTNERS TWO LLC By: /s/ Michael R. Eisenson ---------------------------- Name: Michael R. Eisenson Its: Authorized Signatory EX-2.3 4 EXHIBIT 2.3 AMENDMENT NO. 4 TO REAL ESTATE ACQUISITION AGREEMENT AMENDMENT NO. 4 TO REAL ESTATE ACQUISITION AGREEMENT, dated as of September 4, 1997 (this "AMENDMENT"), by and among Apartment Investment and Management Company, a Maryland corporation ("AIMCO"), AIMCO Properties, L.P., a Delaware limited partnership ("AIMCO OP" and, together with AIMCO, the "BUYERS"), Demeter Holdings Corporation, a Massachusetts corporation ("DEMETER"), Phemus Corporation, a Massachusetts corporation ("PHEMUS"), Capricorn Investors, L.P., a Delaware limited partnership ("CAPRICORN"), J. Roderick Heller, III, an individual ("HELLER"), and NHP Partners Two LLC, a Delaware limited liability company ("PARTNERS TWO LLC" and, together with Demeter, Phemus, Capricorn and Heller, the "SELLERS"). Capitalized terms used, but not otherwise defined herein, shall have the respective meanings ascribed to them in the Real Estate Acquisition Agreement, dated as of May 22, 1997, by and among the Buyers and the Sellers, as amended by (i) Amendment No. 1 to Real Estate Acquisition Agreement, dated as of June 13, 1997, by and among the Buyers and the Sellers, (ii) Amendment No. 2 to Real Estate Acquisition Agreement, dated as of July 14, 1997, by and among the Buyers and the Sellers, and (iii) Amendment No. 3 to Real Estate Acquisition Agreement, dated as of August 14, 1997, by and among the Buyers and the Sellers (as so amended, the "ACQUISITION AGREEMENT"). WHEREAS, the parties hereto desire to amend the Acquisition Agreement to extend the date for exercise of the Buyers' Property Put Right for certain assets. NOW, THEREFORE, in consideration of the foregoing, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. AMENDMENT OF SECTION 5.15(b). Section 5.15(b) of the Acquisition Agreement is hereby amended and restated in its entirety to read as follows: "(b) The Buyer's Property Put Right may be exercised, at any time or from time to time, (1) no later than September 19, 1997, with respect to (A) the 1% general partnership interest and 15.715% limited partnership interest in each of Lakehaven Associates One and Lakehaven Associates Two, or (B) the .01% limited partnership interest in River Loft Apartments Limited Partnership, and the 0.9% general partnership interest, the 0.1% general partnership interest and the 4% limited partnership interest in River Loft Associates, and (2) no later than June 16, 1997, with respect to any other assets, in each case, by AIMCO's delivery of a written notice to the Sellers specifying (i) the assets that are requested to be repurchased by the Sellers pursuant to the Buyers' Property Put Right, (ii) the basis on which the Buyers are entitled to exercise the Buyers' Property Put Right, and (iii) the date and time at which the closing (the "BUYERS" PROPERTY PUT CLOSING") of the repurchase of such assets is to occur. The date of the "Buyers' Property Put Closing shall be at least 30 days after the date (the "Notice Date") such notice is given; provided, however, that if (x) it is not possible for the Sellers to cure, at least 5 Business Days prior to the 30th day after the Notice Date, the breach, liability or defect that entitles the Buyers to exercise the Buyers' Property Put Right, or (y) AIMCO determines, in its reasonable discretion, that it is necessary to consummate the Buyers' Property Put Closing earlier in order to avoid jeopardizing AIMCO's REIT Status, then the date of the Buyers' Property Put Closing may be on an earlier date, but not earlier than 5 Business Days after the Notice Date." 2. GOVERNING LAW. This Amendment and the legal relations among the parties hereto shall be governed by and construed and enforced in accordance with the laws of the State of Delaware, without regard to its principles of conflicts of law. 3. ENTIRE AGREEMENT. This Amendment, together with the Acquisition Agreement, including the exhibits and schedules attached thereto, constitutes the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, letters of intent, negotiations and discussions, whether oral or written, of the parties, including the Letter Agreement, and there are no warranties, representations or other agreements, express or implied, made to any party by any other party in connection with the subject matter hereof except as specifically set forth herein or in the 2 documents delivered pursuant hereto or in connection herewith. 4. ACQUISITION AGREEMENT IN FULL FORCE. Except as expressly modified hereby, the Acquisition Agreement remains in full force and effect. 5. MODIFICATION; WAIVER. No supplement, modification, waiver or termination of this Amendment shall be binding unless executed in writing by the party to be bound thereby. No waiver of any provision of this Amendment shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. 6. SEVERABILITY. Any provision or part of this Amendment which is invalid or unenforceable in any situation in any jurisdiction shall, as to such situation and such jurisdiction, be ineffective only to the extent of such invalidity and shall not affect the enforceability of the remaining provisions hereof or the validity or enforceability of any such provision in any other situation or in any other jurisdiction. 7. COUNTERPARTS. This Amendment may be executed in as many counterparts as may be deemed necessary and convenient, and by the different parties hereto on separate counterparts each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same instrument. 8. NEGOTIATION OF AMENDMENT. Each of the parties acknowledges that it has been represented by independent counsel of its choice throughout all negotiations that have preceded the execution of this Amendment and that it has executed the same with consent and upon the advice of said independent counsel. Each party and its counsel cooperated in the drafting and preparation of this Amendment and the documents referred to herein, and any and all drafts relating thereto shall be deemed the work product of the parties and may not be construed against any party by reason of its preparation. Accordingly, any rule of law or any legal decision that would require interpretation of any ambiguities in this Amendment against the party that drafted it is of no application and is hereby expressly waived. The provisions of this Amendment shall be 3 interpreted in a reasonable manner to effect the intentions of the parties and this Amendment. [SIGNATURE PAGES FOLLOW] 4 IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written. APARTMENT INVESTMENT AND MANAGEMENT COMPANY By: /s/ Peter Kompaniez ---------------------------- Name: Peter Kompaniez Its: Vice Chairman AIMCO PROPERTIES, L.P. By: AIMCO-GP, Inc., its general partner By: /s/ Peter Kompaniez ---------------------------- Name: Peter Kompaniez Its: Vice President DEMETER HOLDINGS CORPORATION By: /s/ Michael Thonis ---------------------------- Name: Michael Thonis Its: Authorized Signatory By: /s/ Tim R. Palmer ---------------------------- Name: Tim R. Palmer Its: Authorized Signatory PHEMUS CORPORATION By: /s/ Michael Thonis ---------------------------- Name: Michael Thonis Its: Authorized Signatory By: /s/ Tim R. Palmer ---------------------------- Name: Tim R. Palmer Its: Authorized Signatory CAPRICORN INVESTORS, L.P. By: Capricorn Holdings, G.P., its General Partner By: Winokur Holdings, Inc., its General Partner By: /s/ Herbert S. Winokur, Jr. ---------------------------- Name: Herbert S. Winokur, Jr. Its: President /s/ J. Roderick Heller, III ---------------------------- J. Roderick Heller, III NHP PARTNERS TWO LLC By: /s/ Michael R. Eisenson ---------------------------- Name: Michael R. Eisenson Its: Authorized Signatory EX-2.4 5 EXHIBIT 2.4 AMENDMENT NO. 5 TO REAL ESTATE ACQUISITION AGREEMENT AMENDMENT NO. 5 TO REAL ESTATE ACQUISITION AGREEMENT, dated as of September 11, 1997 (this "AMENDMENT"), by and among Apartment Investment and Management Company, a Maryland corporation ("AIMCO"), AIMCO Properties, L.P., a Delaware limited partnership ("AIMCO OP" and, together with AIMCO, the "BUYERS"), Demeter Holdings Corporation, a Massachusetts corporation ("DEMETER"), Phemus Corporation, a Massachusetts corporation ("PHEMUS"), Capricorn Investors, L.P., a Delaware limited partnership ("CAPRICORN"), J. Roderick Heller, III, an individual ("HELLER"), and NHP Partners Two LLC, a Delaware limited liability company ("PARTNERS TWO LLC" and, together with Demeter, Phemus, Capricorn and Heller, the "SELLERS"). Capitalized terms used, but not otherwise defined herein, shall have the respective meanings ascribed to them in the Real Estate Acquisition Agreement, dated as of May 22, 1997, by and among the Buyers and the Sellers, as amended by (i) Amendment No. 1 to Real Estate Acquisition Agreement, dated as of June 13, 1997, by and among the Buyers and the Sellers, (ii) Amendment No. 2 to Real Estate Acquisition Agreement, dated as of July 14, 1997, by and among the Buyers and the Sellers, (iii) Amendment No. 3 to Real Estate Acquisition Agreement, dated as of August 14, 1997, by and among the Buyers and the Sellers, and (iii) Amendment No. 4 to Real Estate Acquisition Agreement, dated as of September 4, 1997, by and among the Buyers and the Sellers (as so amended, the "ACQUISITION AGREEMENT"). WHEREAS, the parties hereto desire to amend the Acquisition Agreement to extend the date for exercise of the Buyers' Property Put Right for certain assets. NOW, THEREFORE, in consideration of the foregoing, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. AMENDMENT OF SECTION 5.15(b). Section 5.15(b) of the Acquisition Agreement is hereby amended and restated in its entirety to read as follows: "(b) The Buyers' Property Put Right may be exercised, at any time or from time to time, (1) no later than October 31, 1997, with respect to (A) the 1% general partnership interest and 15.715% limited partnership interest in each of Lakehaven Associates One and Lakehaven Associates Two, or (B) the .01% limited partnership interest in River Loft Apartments Limited Partnership, and the 0.9% general partnership interest, the 0.1% general partnership interest and the 4% limited partnership interest in River Loft Associates, and (2) no later than June 16, 1997, with respect to any other assets; provided, however, that the Buyers shall not have the right to exercise the Buyers' Property Put Right with respect to any of the assets described in clause (1) of this Section 5.15(b) if the Sellers wire transfer funds to such account or accounts as the Buyers shall specify in an aggregate amount equal to $492,847 on or prior to October 31, 1997. The Buyers' Property Put Right may be exercised by AIMCO's delivery of a written notice to the Sellers specifying (i) the assets that are requested to be repurchased by the Sellers pursuant to the Buyers' Property Put Right, (ii) the basis on which the Buyers are entitled to exercise the Buyers' Property Put Right, and (iii) the date and time at which the closing (the "BUYERS' PROPERTY PUT CLOSING") of the repurchase of such assets is to occur. The date of the Buyers' Property Put Closing shall be at least 30 days after the date (the "Notice Date") such notice is given; provided, however, that if (x) it is not possible for the Sellers to cure, at least 5 Business Days prior to the 30th day after the Notice Date, the breach, liability or defect that entitles the Buyers to exercise the Buyers' Property Put Right, or (y) AIMCO determines, in its reasonable discretion, that it is necessary to consummate the Buyers' Property Put Closing earlier in order to avoid jeopardizing AIMCO's REIT Status, then the date of the Buyers' Property Put Closing may be on an earlier date, but not earlier than 5 Business Days after the Notice Date." 2. GOVERNING LAW. This Amendment and the legal relations among the parties hereto shall be governed by and construed and enforced in accordance with the laws of the State of Delaware, without regard to its principles of conflicts of law. 3. ENTIRE AGREEMENT. This Amendment, together with the Acquisition Agreement, including the exhibits and 2 schedules attached thereto, constitutes the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, letters of intent, negotiations and discussions, whether oral or written, of the parties, including the Letter Agreement, and there are no warranties, representations or other agreements, express or implied, made to any party by any other party in connection with the subject matter hereof except as specifically set forth herein or in the documents delivered pursuant hereto or in connection herewith. 4. ACQUISITION AGREEMENT IN FULL FORCE. Except as expressly modified hereby, the Acquisition Agreement remains in full force and effect. 5. MODIFICATION; WAIVER. No supplement, modification, waiver or termination of this Amendment shall be binding unless executed in writing by the party to be bound thereby. No waiver of any provision of this Amendment shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. 6. SEVERABILITY. Any provision or part of this Amendment which is invalid or unenforceable in any situation in any jurisdiction shall, as to such situation and such jurisdiction, be ineffective only to the extent of such invalidity and shall not affect the enforceability of the remaining provisions hereof or the validity or enforceability of any such provision in any other situation or in any other jurisdiction. 7. COUNTERPARTS. This Amendment may be executed in as many counterparts as may be deemed necessary and convenient, and by the different parties hereto on separate counterparts each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same instrument. 8. NEGOTIATION OF AMENDMENT. Each of the parties acknowledges that it has been represented by independent counsel of its choice throughout all negotiations that have preceded the execution of this Amendment and that it has executed the same with consent and upon the advice of said independent counsel. Each party and its 3 counsel cooperated in the drafting and preparation of this Amendment and the documents referred to herein, and any and all drafts relating thereto shall be deemed the work product of the parties and may not be construed against any party by reason of its preparation. Accordingly, any rule of law or any legal decision that would require interpretation of any ambiguities in this Amendment against the party that drafted it is of no application and is hereby expressly waived. The provisions of this Amendment shall be interpreted in a reasonable manner to effect the intentions of the parties and this Amendment. [SIGNATURE PAGES FOLLOW] 4 IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written. APARTMENT INVESTMENT AND MANAGEMENT COMPANY By: /s/ Peter Kompaniez ---------------------------- Name: Peter Kompaniez Its: Vice Chairman AIMCO PROPERTIES, L.P. By: AIMCO-GP, Inc., its general partner By: /s/ Peter Kompaniez ---------------------------- Name: Peter Kompaniez Its: Vice President DEMETER HOLDINGS CORPORATION By: /s/ Michael R. Eisenson ---------------------------- Name: Michael R. Eisenson Its: Authorized Signatory By: /s/ Tim R. Palmer ---------------------------- Name: Tim R. Palmer Its: Authorized Signatory PHEMUS CORPORATION By: /s/ Michael R. Eisenson ---------------------------- Name: Michael R. Eisenson Its: Authorized Signatory By: /s/ Tim R. Palmer ---------------------------- Name: Tim R. Palmer Its: Authorized Signatory CAPRICORN INVESTORS, L.P. By: Capricorn Holdings, G.P., its General Partner By: Winokur Holdings, Inc., its General Partner By: /s/ Herbert S. Winokur, Jr. ---------------------------- Name: Herbert S. Winokur, Jr. Its: President /s/ J. Roderick Heller, III ---------------------------- J. Roderick Heller, III NHP PARTNERS TWO LLC By: /s/ Michael R. Eisenson ---------------------------- Name: Michael R. Eisenson Its: Authorized Signatory EX-3.1 6 EXHIBIT 3.1 APARTMENT INVESTMENT AND MANAGEMENT COMPANY ARTICLES OF RESTATEMENT APARTMENT INVESTMENT AND MANAGEMENT COMPANY, a Maryland corporation, having its principal office in Baltimore City, Maryland (hereinafter referred to as the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: The Corporation desires to and does hereby restate its Charter as currently in effect. The Charter as currently in effect is found in Articles of Amendment and Restatement dated July 13, 1994 and filed on July 15, 1994 (as corrected by Certificate of Correction dated November 6, 1997 and filed on November 6, 1997), Articles of Amendment dated July 27, 1994 and filed July 28, 1994 at 11:33 a.m. (as corrected by Certificate of Correction dated November 6, 1997 and filed on November 6, 1997), Articles of Amendment dated July 27, 1994 and filed July 28, 1994 at 11:35 a.m. (as corrected by Certificate of Correction dated November 6, 1997 and filed on November 6, 1997), Articles Supplementary dated May 20, 1997 and filed May 21, 1997, and Articles Supplementary dated August 1, 1997 and filed August 4, 1997. The Charter of the Corporation is hereby restated in its entirety as follows: ARTICLE I NAME The name of the corporation (the "Corporation") is Apartment Investment and Management Company. ARTICLE II PURPOSE The purpose for which the Corporation is formed is to engage in any lawful act or activity for which corporations may be organized under the general laws of the State of Maryland authorizing the formation of corporations as now or hereafter in force. ARTICLE III PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT The post office address of the principal office of the Corporation in the State of Maryland is c/o The Prentice-Hall Corporation System, Maryland, 11 East Chase Street, Baltimore, Maryland 21202. The name and address of the resident agent of the Corporation in the State of Maryland is The Prentice-Hall Corporation System, Maryland, 11 East Chase Street, Baltimore, Maryland 21202. The resident agent is a Maryland corporation located in the State of Maryland. ARTICLE IV STOCK SECTION 1. AUTHORIZED SHARES 1.1 CLASS AND NUMBER OF SHARES. The total number of shares of stock that the Corporation from time to time shall have authority to issue is 160,750,000 shares of capital stock having a par value of $.01 per share, amounting to an aggregate par value of $1,607,500, consisting of 150,000,000 shares initially classified as Class A Common Stock having a par value of $.01 per share ("Class A Common Stock"), 750,000(1) shares initially classified as Class B Common Stock having a par value of $.01 per share (the "Class B Common Stock") (the Class A Common Stock and Class B Common Stock being referred to collectively herein as the "Common Stock") and 10,000,000(2) shares initially classified as Preferred Stock having a par value of $.01 per share ("Preferred Stock"). 1.2 CHANGES IN CLASSIFICATION AND PREFERENCES. The Board of Directors by resolution or resolutions from time to time may classify and reclassify any unissued shares of capital stock by setting or changing in any one or more respects the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption of such shares of capital stock, including, but not limited to, ownership restrictions consistent with the Ownership Restrictions with respect to each such class or subclass of capital stock, and the number of shares constituting each such class or subclass, and to increase or decrease the number of shares of any such class or subclass. SECTION 2. NO PREEMPTIVE RIGHTS. No holder of shares of stock of the Corporation shall, as such holder, have any preemptive right to purchase or subscribe for any additional shares of the stock of the Corporation or any other security of the Corporation that it may issue or sell. SECTION 3. COMMON STOCK. 3.1 DIVIDEND RIGHTS. The holders of shares of Common Stock shall be entitled to receive such dividends as may be declared by the Board of Directors of the Corporation out of funds legally available therefor. 3.2 RIGHTS UPON LIQUIDATION. Subject to the preferential rights of Preferred Stock, if any, as may be determined by the Board of Directors pursuant to Section 1 of this Article IV, in the event of any voluntary or involuntary liquidation, dissolution or winding up of, or any distribution of the assets of the Corporation, each holder of shares of Common Stock shall be entitled to receive, ratably with each other holder of Common Stock, that portion of the assets of the Corporation available for distribution to its shareholders as the number of shares of the Common Stock held by such holder bears to the total number of shares of Common Stock then outstanding. 3.3 VOTING RIGHTS. The holders of shares of Common Stock shall be entitled to vote on all matters (on which a holder of shares of Common Stock shall be entitled to vote) at the meetings of the shareholders of the Corporation, and shall be entitled to one vote for each share of Common Stock entitled to vote at such meeting. 3.4 RESTRICTION ON OWNERSHIP AND TRANSFERS. The Beneficial Ownership and Transfer of Common Stock shall be subject to the restrictions set forth in this Section 3.4 of this Article IV. 3.4.1 RESTRICTIONS. (A) LIMITATION ON BENEFICIAL OWNERSHIP. Except as provided in Section 3.4.8 of this Article IV, from and after the date of the Initial Public Offering, no Person (other than the Initial Holder or a Look-Through Entity) shall Beneficially Own shares of Common Stock in excess of the Ownership Limit, the Initial Holder shall not Beneficially Own shares of Common Stock in excess of the Initial Holder Limit and no Look-Through Entity shall Beneficially Own shares of Common Stock in excess of the Look-Through Ownership Limit. - --------------------------- See Article SIXTH. See Article SEVENTH. (B) TRANSFERS IN EXCESS OF OWNERSHIP LIMIT. Except as provided in Section 3.4.8 of this Article IV, from and after the date of the Initial Public Offering (and subject to Section 3.4.12 of this Article IV), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system) that, if effective, would result in any Person (other than the Initial Holder or a Look-Through Entity) Beneficially Owning shares of Common Stock in excess of the Ownership Limit shall be void AB INITIO as to the Transfer of such shares of Common Stock that would be otherwise Beneficially Owned by such Person in excess of the Ownership Limit, and the intended transferee shall acquire no rights in such shares of Common Stock. (C) TRANSFERS IN EXCESS OF INITIAL HOLDER LIMIT. Except as provided in Section 3.4.8 of this Article IV, from and after the date of the Initial Public Offering (and subject to Section 3.4.12 of this Article IV), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system) that, if effective, would result in the Initial Holder Beneficially Owning shares of Common Stock in excess of the Initial Holder Limit shall be void AB INITIO as to the Transfer of such shares of Common Stock that would be otherwise Beneficially Owned by the Initial Holder in excess of the Initial Holder limit, and the Initial Holder shall acquire no rights in such shares of Common Stock. (D) TRANSFERS IN EXCESS OF LOOK-THROUGH OWNERSHIP LIMIT. Except as provided in Section 3.4.8 of this Article IV from and after the date of the Initial Public Offering (and subject to Section 3.4.12 of this Article IV), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system) that, if effective, would result in any Look-Through Entity Beneficially Owning shares of Common Stock in excess of the Look-Through Ownership limit shall be void AB INITIO as to the Transfer of such shares of Common Stock that would be otherwise Beneficially Owned by such Look-Through Entity in excess of the Look-Through Ownership Limit and such Look-Through Entity shall acquire no rights in such shares of Common Stock. (E) TRANSFERS RESULTING IN OWNERSHIP BY FEWER THAN 100 PERSONS. Except as provided in Section 3.4.8 of this Article IV, from and after the date of the Initial Public Offering (and subject to Section 3.4.12 of this Article IV), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system) that, if effective, would result in the Common Stock being Beneficially Owned by less than 100 Persons (determined without reference to any rules of attribution) shall be void AB INITIO as to the Transfer of such shares of Common Stock that would be otherwise Beneficially Owned by the transferee and the intended transferee shall acquire no rights in such shares of Common Stock. (F) TRANSFERS RESULTING IN "CLOSELY HELD" STATUS. From and after the date of the Initial Public Offering, any Transfer that, if effective would result in the Corporation being "closely held" within the meaning of Section 856(h) of the Code, or would otherwise result in the Corporation failing to qualify as a REIT (including, without limitation, a Transfer or other event that would result in the Corporation owning (directly or constructively) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by the Corporation from such tenant would cause the Corporation to fail to satisfy any of the gross income requirements of Section 856(c) of the Code) shall be void AB INITIO as to the Transfer of shares of Common Stock that would cause the Corporation (i) to be "closely held" within the meaning of Section 856(h) of the Code or (ii) otherwise fail to qualify as a REIT, as the case may be, and the intended transferee shall acquire no rights in such shares of Common Stock. (G) SEVERABILITY ON VOID TRANSACTIONS. A Transfer of a share of Common Stock that is null and void under Sections 3.4.1(B), (C), (D), (E) or (F) of this Article IV because it would, if effective, result in (i) the ownership of Common Stock in excess of the Initial Holder Limit, the Ownership Limit, or the Look-Through Ownership Limit, (ii) the Common Stock being Beneficially Owned by less than 100 Persons (determined without reference to any rules of attribution), (iii) the Corporation being "closely held" within the meaning of Section 856(h) of the Code or (iv) the Corporation otherwise failing to qualify as a REIT, shall not adversely affect the validity of the Transfer of any other share of Common Stock in the same or any other related transaction. 3.4.2 REMEDIES FOR BREACH. If the Board of Directors or a committee thereof shall at any time determine in good faith that a Transfer or other event has taken place in violation of Section 3.4.1 of this Article IV or that a Person intends to acquire or has attempted to acquire Beneficial Ownership of any shares of Common Stock in violation of Section 3.4.1 of this Article IV (whether or not such violation is intended), the Board of Directors or a committee thereof shall be empowered to take any action as it deems advisable to refuse to give effect to or to prevent such Transfer or other event, including, but not limited to, refusing to give effect to such Transfer or other event on the books of the Corporation, causing the Corporation to redeem such shares at the then current Market Price and upon such terms and conditions as may be specified by the Board of Directors in its sole discretion (including, but not limited to, by means of the issuance of long-term indebtedness for the purpose of such redemption), demanding the repayment of any distributions received in respect of shares of Common Stock acquired in violation of Section 3.4.1 of this Article IV or instituting proceedings to enjoin such Transfer or to rescind such Transfer or attempted Transfer; PROVIDED, HOWEVER, that any Transfers or attempted Transfers (or in the case of events other than a Transfer, Beneficial Ownership) in violation of Section 3.4.1 of this Article IV, regardless of any action (or non-action) by the Board of Directors or such committee, (a) shall be void AB INITIO or (b) shall automatically result in the transfer described in Section 3.4.3 of this Article IV; PROVIDED, FURTHER, that the provisions of this Section 3.4.2 shall be subject to the provisions of Section 3.4.12 of this Article IV; PROVIDED, FURTHER, that neither the Board of Directors nor any committee thereof may exercise such authority in a manner that interferes with any ownership or transfer of Common Stock that is expressly authorized pursuant to Section 3.4.8(d) of this Article IV. 3.4.3. TRANSFER IN TRUST. (A) ESTABLISHMENT OF TRUST. If, notwithstanding the other provisions contained in this Article IV, at any time after the date of the Initial Public Offering there is a purported Transfer (an "EXCESS TRANSFER") (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system) or other change in the capital structure of the Corporation (including, but not limited to, any redemption of Preferred Stock) or other event such that (a) any Person (other than the Initial Holder or a Look-Through Entity) would Beneficially Own shares of Common Stock in excess of the Ownership Limit, or (b) the Initial Holder would Beneficially Own shares of Common Stock in excess of the Initial Holder Limit, or (c) any Person that is a Look-Through Entity would Beneficially Own shares of Common Stock in excess of the Look-Through Ownership Limit (in any such event, the Person, Initial Holder or Look-Through Entity that would Beneficially Own shares of Common Stock in excess of the Ownership Limit, the Initial Holder Limit or the Look-Through Entity Limit is referred to as a "PROHIBITED TRANSFEREE"), then, except as otherwise provided in Section 3.4.8 of this Article IV, such shares of Common Stock in excess of the Ownership Limit, the Initial Holder Limit or the Look-Through Ownership Limit, as the case may be, (rounded up to the nearest whole share) shall be automatically transferred to a Trustee in his capacity as trustee of a Trust for the exclusive benefit of one or more Charitable Beneficiaries. Such transfer to the Trustee shall be deemed to be effective as of the close of business on the business day prior to the date of the Excess Transfer, change in capital structure or another event giving rise to a potential violation of the Ownership Limit, the Initial Holder Limit or the Look Through Entity Ownership Limit. (B) APPOINTMENT OF TRUSTEE. The Trustee shall be appointed by the Corporation and shall be a Person unaffiliated with either the Corporation or any Prohibited Transferee. The Trustee may be an individual or a bank or trust company duly licensed to conduct a trust business. (C) STATUS OF SHARES HELD BY THE TRUSTEE. Shares of Common Stock held by the Trustee shall be issued and outstanding shares of capital stock of the Corporation. Except to the event provided in Section 3.4.3(E), the Prohibited Transferee shall have no rights in the Common Stock held by the Trustee, and the Prohibited Transferee shall not benefit economically from ownership of any shares held in trust by the Trustee, shall have no rights to dividends and shall not possess any rights to vote or other rights attributable to the shares held in the Trust. (D) DIVIDEND AND VOTING RIGHTS. The Trustee shall have all voting rights and rights to dividends with respect to shares of Common Stock held in the Trust, which rights shall be exercised for the benefit of the Charitable Beneficiary. Any dividend or distribution paid prior to the discovery by the Corporation that the shares of Common Stock have been transferred to the Trustee shall be repaid to the Corporation upon demand, and any dividend or distribution declared but unpaid shall be rescinded as void AB INITIO with respect to such shares of Common Stock. Any dividends or distributions so disgorged or rescinded shall be paid over to the Trustee and held in trust for the Charitable Beneficiary. Any vote cast by a Prohibited Transferee prior to the discovery by the Corporation that the shares of Common Stock have been transferred to the Trustee will be rescinded as AB INITIO and shall be recast in accordance with the desires of the Trustee acting for the benefit of the Charitable Beneficiary. The owner of the shares at the time of the Excess Transfer, change in capital structure or other event giving rise to a potential violation of the Ownership Limit, Initial Holder Limit or Look-Through Entity Ownership Limit shall be deemed to have given an irrevocable proxy to the Trustee to vote the shares of Common Stock for the benefit of the Charitable Beneficiary. (E) RESTRICTIONS ON TRANSFER. The Trustee of the Trust may transfer the shares held in the Trust to a person, designated by the Trustee, whose ownership of the shares will not violate the Ownership Restrictions. If such a transfer is made, the interest of the Charitable Beneficiary shall terminate and proceeds of the sale shall be payable to the Prohibited Transferee and to the Charitable Beneficiary as provided in this Section 3.4.3(E). The Prohibited Transferee shall receive the lesser of (1) the price paid by the Prohibited Transferee for the shares or, if the Prohibited Transferee did not give value for the shares (through a gift, devise or other transaction), the Market Price of the shares on the day of the event causing the shares to be held in the Trust and (2) the price per share received by the Trustee from the sale or other disposition of the shares held in the Trust. Any proceeds in excess of the amount payable to the Prohibited Transferee shall be payable to the Charitable Beneficiary. If any of the transfer restrictions set forth in this Section 3.4.3(E) or any application thereof is determined in a final judgment to be void, invalid or unenforceable by any court having jurisdiction over the issue, the Prohibited Transferee may be deemed, at the option of the Corporation, to have acted as the agent of the Corporation in acquiring the Common Stock as to which such restrictions would, by their terms, apply, and to hold such Common Stock on behalf of the Corporation. (F) PURCHASE RIGHT IN STOCK TRANSFERRED TO THE TRUSTEE. Shares of Common Stock transferred to the Trustee shall be deemed to have been offered for sale to the Corporation, or its designee, at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in such transfer to the Trust (or, in the case of a devise or gift, the Market Price at the time of such devise or gift) and (ii) the Market Price on the date the Corporation, or its designee, accepts such offer. The Corporation shall have the right to accept such offer for a period of 90 days after the later of (i) the date of the Excess Transfer or other event resulting in a transfer to the Trust and (ii) the date that the Board of Directors determines in good faith that an Excess Transfer or other event occurred. (G) DESIGNATION OF CHARITABLE BENEFICIARIES. By written notice to the Trustee, the Corporation shall designate one or more nonprofit organizations to be the Charitable Beneficiary of the interest in the Trust relating to such Prohibited Transferee if (i) the shares of Common Stock held in the Trust would not violate the Ownership Restrictions in the hands of such Charitable Beneficiary and (ii) each Charitable Beneficiary is an organization described in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code. 3.4.4 NOTICE OF RESTRICTED TRANSFER. Any Person that acquires or attempts to acquire shares of Common Stock in violation of Section 3.4.1 of this Article IV, or any Person that is a Prohibited Transferee such that stock is transferred to the Trustee under Section 3.4.3 of this Article IV, shall immediately give written notice to the Corporation of such event and shall provide to the Corporation such other information as the Corporation may request in order to determine the effect, if any, of such Transfer or attempted Transfer or other event on the Corporation's status as a REIT. Failure to give such notice shall not limit the rights and remedies of the Board of Directors provided herein in any way. 3.4.5 OWNERS REQUIRED TO PROVIDE INFORMATION. From and after the date of the Initial Public Offering certain record and Beneficial Owners and transferees of shares of Common Stock will be required to provide certain information as set out below. (A) ANNUAL DISCLOSURE. Every record and Beneficial Owner of more than 5% (or such other percentage between 0.5% and 5%, as provided in the applicable regulations adopted under the Code) of the number of Outstanding shares of Common Stock shall, within 30 days after January 1 of each year, give written notice to the Corporation stating the name and address of such record or Beneficial Owner, the number of shares of Common Stock Beneficially Owned, and a full description of how such shares are held. Each such record or Beneficial Owner of Common Stock shall, upon demand by the Corporation, disclose to the Corporation in writing such additional information with respect to the Beneficial Ownership of the Common Stock as the Board of Directors, in its sole discretion, deems appropriate or necessary to (i) comply with the provisions of the Code regarding the qualification of the Corporation as a REIT under the Code and (ii) ensure compliance with the Ownership Limit, the Initial Holder Limit or the Look-Through Ownership Limit, as applicable. Each shareholder of record, including without limitation any Person that holds shares of Common Stock on behalf of a Beneficial Owner, shall take all reasonable steps to obtain the written notice described in this Section 3.4.5 from the Beneficial Owner. (B) DISCLOSURE AT THE REQUEST OF THE CORPORATION. Any Person that is a Beneficial Owner of shares of Common Stock and any Person (including the shareholder of record) that is holding shares of Common Stock for a Beneficial Owner, and any proposed transferee of shares, shall provide such information as the Corporation, in its sole discretion, may request in order to determine the Corporation's status as a REIT, to comply with the requirements of any taxing authority or other governmental agency, to determine any such compliance or to ensure compliance with the Ownership Limit, the Initial Holder Limit and the Look-Through Ownership Limit, and shall provide a statement or affidavit to the Corporation setting forth the number of shares of Common Stock already Beneficially Owned by such shareholder or proposed transferee and any related persons specified, which statement or affidavit shall be in the form prescribed by the Corporation for that purpose. 3.4.6 REMEDIES NOT LIMITED. Nothing contained in this Article IV shall limit the authority of the Board of Directors to take such other action as it deems necessary or advisable (subject to the provisions of Section 3.4.12 of this Article IV) (i) to protect the Corporation and the interests of its shareholders in the preservation of the Corporation's status as a REIT and (ii) to insure compliance with the Ownership Limit, the Initial Holder Limit and the Look-Through Ownership Limit. 3.4.7 AMBIGUITY. In the case of an ambiguity in the application of any of the provisions of Section 3.4 of this Article IV, or in the case of an ambiguity in any definition contained in Section 4 of this Article IV, the Board of Directors shall have the power to determine the application of the provisions of this Article IV with respect to any situation based on its reasonable belief, understanding or knowledge of the circumstances. 3.4.8 EXCEPTIONS. The following exceptions shall apply or may be established with respect to the limitations of Section 3.4.1 of this Article IV. (A) WAIVER OF OWNERSHIP LIMIT. The Board of Directors, upon receipt of a ruling from the Internal Revenue Service or an opinion of tax counsel or other evidence or undertaking acceptable to it, may waive the application, in whole or in part, of the Ownership Limit to a Person subject to the Ownership Limit, if such person is not an individual for purpose of Section 542(a) of the Code and is a corporation, partnership, estate or trust; PROVIDED, HOWEVER, that in no event may any such exception cause such Person's ownership, direct or indirect (without taking into account such Person's ownership of interests in any partnership of which the Corporation is a partner), to exceed 9.8% of the number of Outstanding shares of Common Stock. In connection with any such exemption, the Board of Directors may require such representations and undertakings from such Person and may impose such other conditions as the Board deems necessary, in its sole discretion, to determine the effect, if any, of the proposed Transfer on the Corporation's status as a REIT. (B) PLEDGE BY INITIAL HOLDER. Notwithstanding any other provision of this Article IV, the pledge by the Initial Holder of all or any portion of the Common Stock directly owned at any time or from time to time shall not constitute a violation of Section 3.4.1 of this Article IV and the pledgee shall not be subject to the Ownership Limit with respect to the Common Stock so pledged to it either as a result of the pledge or upon foreclosure. (C) UNDERWRITERS. For a period of 270 days following the purchase of Common Stock by an underwriter that (i) is a corporation or a partnership and (ii) participates in an offering of the Common Stock, such underwriter shall not be subject to the Ownership Limit with respect to the Common Stock purchased by it as a part of or in connection with such offering and with respect to any Common Stock purchased in connection with market making activities. (D) OWNERSHIP AND TRANSFERS BY THE CMO TRUSTEE. The Ownership Limit shall not apply to the initial holding of Common Stock by the "CMO Trustee" (as that term is defined in the "Glossary" to the Prospectus) for the benefit of "HF Funding Trust" (as that term is defined in the "Glossary" to the Prospectus), to any subsequent acquisition of Common Stock by the CMO Trustee in connection with any conversion of Preferred Stock or to any transfer or assignment of all or any part of the legal or beneficial interest in the Common Stock to the CMO Trustee, "ESA" (as that term is defined in the "Glossary" to the Prospectus), any entity controlled by ESA, or any direct or indirect creditor of HF Funding Trust (including without limitation any reinsurer of any obligation of HF Funding Trust) or any acquisition of Common Stock by any such person in connection with any conversion of Preferred Stock. 3.4.9 LEGEND. Each certificate for Common Stock shall bear the following legend: "The shares of Common Stock represented by this certificate are subject to restrictions on transfer. No person may Beneficially Own shares of Common Stock in excess of the Ownership Restrictions, as applicable, with certain further restrictions and exceptions set forth in the Corporation's Amended and Restated Certificate of Incorporation ("Certificate"). Any Person that attempts to Beneficially Own shares of Common Stock in excess of the applicable limitation must immediately notify the Corporation. All capitalized terms in this legend have the meanings ascribed to such terms in the Corporation's Certificate, as the same may be amended from time to time, a copy of which, including the restrictions on transfer, will be sent without charge to each shareholder that so requests. If the restrictions on transfer are violated, the shares of Common Stock represented hereby will be either (i) void in accordance with the Certificate or (ii) automatically transferred to a Trustee of a Trust for the benefit of one or more Charitable Beneficiaries." 3.4.10 SEVERABILITY. If any provision of this Article IV or any application of any such provision is determined in a final and unappealable judgment to be void, invalid or unenforceable by any Federal or state court having jurisdiction over the issues, the validity and enforceability of the remaining provisions shall not be affected and other applications of such provision shall be affected only to the extent necessary to comply with the determination of such court. 3.4.11 BOARD OF DIRECTORS DISCRETION. Anything in this Article IV to the contrary notwithstanding, the Board of Directors shall be entitled to take or omit to take such actions as it in its discretion shall determine to be advisable in order that the Corporation maintain its status as and continue to qualify as a REIT, including, but not limited to, reducing the Ownership Limit, the Initial Holder Limit and the Look-Through Ownership Limit in the event of a change in law. 3.4.12 SETTLEMENT. Nothing in this Section 3.4 of this Article IV shall be interpreted to preclude the settlement of any transaction entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system. SECTION 4. DEFINITIONS. The terms set forth below shall have the meanings specified below when used in this Article IV or in Article V of these Articles of Amendment and Restatement. 4.1 BENEFICIAL OWNERSHIP. The term "BENEFICIAL OWNERSHIP" shall mean, with respect to any Person, ownership of shares of Common Stock equal to the sum of (i) the shares of Common Stock directly owned by such Person, (ii) the number of shares of Common Stock indirectly owned by such Person (if such Person is an "individual" as defined in Section 542(a)(2) of the Code) taking into account the constructive ownership rules of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code, and (iii) the number of shares of Common Stock that such Person is deemed to beneficially own pursuant to Rule 13d-3 under the Exchange Act or that is attributed to such Person pursuant to Section 318 of the Code, as modified by Section 856(d)(5) of the Code, PROVIDED that when applying this definition of Beneficial Ownership to the Initial Holder, clause (iii) of this definition, and clause (b) of the definition of "Person" shall be disregarded. The terms "BENEFICIAL OWNER," - -------------------------- See Article FOURTH "BENEFICIALLY OWNS" and "BENEFICIALLY OWNED" shall have the correlative meanings. 4.2 CHARITABLE BENEFICIARY. The term "CHARITABLE BENEFICIARY" shall mean one or more beneficiaries of the Trust as determined pursuant to Section 3.4.3 of this Article IV, each of which shall be an organization described in Section 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code. 4.3 CODE. The term "CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor thereto, as interpreted by any applicable regulations or other administrative pronouncements as in effect from time to time. 4.4 COMMON STOCK. The term "COMMON STOCK" shall mean all shares now or hereafter authorized of any class of Common Stock of the Corporation and any other capital stock of the Corporation, however designated, authorized after the Issue Date, that has the right (subject always to prior rights of any class of Preferred Stock) to participate in the distribution of the assets and earnings of the Corporation without limit as to per share amount. 4.5 EXCESS TRANSFER. The term "EXCESS TRANSFER" has the meaning set forth in Section 3.4.3(A) of this Article IV. 4.6 EXCHANGE ACT. The term "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. 4.7 INITIAL HOLDER. The term "INITIAL HOLDER" shall mean Terry Considine. 4.8 INITIAL HOLDER LIMIT. The term "INITIAL HOLDER LIMIT" shall mean 15% of the number of Outstanding shares of Common Stock applied, in the aggregate, to the Initial Holder. From the date of the Initial Public Offering, the secretary of the Corporation, or such other person as shall be designated by the Board of Directors, shall upon request make available to the representative(s) of the Initial Holder and the Board of Directors, a schedule that sets forth the then-current Initial Holder Limit applicable to the Initial Holder. 4.9 INITIAL PUBLIC OFFERING. The term "INITIAL PUBLIC OFFERING" shall mean the first underwritten public offering of Class A Common Stock registered under the Securities Act of 1933, as amended, on a registration statement on Form S-11 filed with the Securities and Exchange Commission. 4.10 LOOK-THROUGH ENTITY. The term "LOOK-THROUGH ENTITY" shall mean a Person that is either (i) described in Section 401(a) of the Code as provided under Section 856(h)(3) of the Code or (ii) registered under the Investment Company Act of 1940. 4.11 LOOK-THROUGH OWNERSHIP LIMIT. The term "LOOK-THROUGH OWNERSHIP LIMIT" shall mean 15% of the number of Outstanding shares of Common Stock. 4.12 MARKET PRICE. The term "MARKET PRICE" on any date shall mean the Closing Price on the Trading Day immediately preceding such date. The term "CLOSING PRICE" on any date shall mean the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE or, if the Common Stock is not listed or admitted to trading on the NYSE, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if the Common Stock is not listed or admitted to trading on any national securities exchange, the last quoted price, or if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the principal other automated quotations system that may then be in use or, if the Common Stock is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board of Directors of the Company. The term "TRADING DAY" shall mean a day on which the principal national securities exchange on which the Common Stock is listed or admitted to trading is open for the transaction of business or, if the Common Stock is not listed or admitted to trading on any national securities exchange, shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. 4.13 NYSE. The term "NYSE" shall mean the New York Stock Exchange, Inc. 4.14 OUTSTANDING. The term "OUTSTANDING" shall mean issued and outstanding shares of Common Stock of the Corporation, PROVIDED that for purposes of the application of the Ownership Limit, the Look-Through Ownership Limit or the Initial Holder Limit to any Person, the term "OUTSTANDING" shall be deemed to include the number of shares of Common Stock that such Person alone, at that time, could acquire pursuant to any options or convertible securities. 4.15 OWNERSHIP LIMIT. The term "OWNERSHIP LIMIT" shall mean, for any Person other than the Initial Holder or a Look-Through Entity, 8.7% of the number of the Outstanding shares of Common Stock of the Corporation. 4.16 OWNERSHIP RESTRICTIONS. The term "OWNERSHIP RESTRICTIONS" shall mean collectively the Ownership Limit as applied to Persons other than the Initial Holder or Look-Through Entities, the Initial Holder Limit as applied to the Initial Holder and the Look-Through Ownership Limit as applied to Look-Through Entities. 4.17 PERSON. The term "PERSON" shall mean (A) an individual, corporation, partnership, estate, trust (including a trust qualifying under Section 401(a) or 501(c) of the Code), association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, and (B) also includes a group as that term is used for purposes of Section 13(d)(3) of the Exchange Act. 4.18 PROHIBITED TRANSFEREE. The term "PROHIBITED TRANSFEREE" has the meaning set forth in Section 3.4.3(A) of this Article IV. 4.19 REIT. The term "REIT" shall mean a "real estate investment trust" as defined in Section 856 of the Code. 4.20 TRANSFER. The term "TRANSFER" shall mean any sale, transfer, gift, assignment, devise or other disposition of a share of Common Stock (including (i) the granting of an option or any series of such options or entering into any agreement for the sale, transfer or other disposition of Common Stock or (ii) the sale, transfer, assignment or other disposition of any securities or rights convertible into or exchangeable for Common Stock), whether voluntary or involuntary, whether of record or Beneficial Ownership, and whether by operation of law or otherwise (including, but not limited to, any transfer of an interest in other entities that results in a change in the Beneficial Ownership of shares of Common Stock). The term "TRANSFERS" and "TRANSFERRED" shall have correlative meanings. 4.21 TRUST. The term "TRUST" shall mean the trust created pursuant to Section 3.4.3 of this Article IV. 4.22 TRUSTEE. The term "TRUSTEE" shall mean the Person unaffiliated with either the Corporation or the Prohibited Transferee that is appointed by the Corporation to serve as trustee of the Trust. 4.23 PROSPECTUS. The term "PROSPECTUS" shall mean the prospectus that forms a part of the registration statement filed with the Securities and Exchange Commission in connection with the Initial Public Offering, in the form included in the registration statement at the time the registration statement becomes effective; PROVIDED, HOWEVER, that, if such prospectus is subsequently supplemented or amended for use in connection with the Initial Public Offering, "PROSPECTUS" shall refer to such prospectus as so supplemented or amended. ARTICLE V GENERAL REIT PROVISIONS SECTION 1. TERMINATION OF REIT STATUS. The Board of Directors shall take no action to terminate the Corporation's status as a REIT until such time as (i) the Board of Directors adopts a resolution recommending that the Corporation terminate its status as a REIT, (ii) the Board of Directors presents the resolution at an annual or special meeting of the shareholders and (iii) such resolution is approved by the vote of a majority of the shares entitled to be cast on the resolution. SECTION 2. EXCHANGE OR MARKET TRANSACTIONS. Nothing in Article IV or this Article V shall preclude the settlement of any transaction entered into through the facilities of the NYSE or other national securities exchange or an automated inter-dealer quotation system. The fact that the settlement of any transaction is permitted shall not negate the effect of any other provision of this Article V or any provision of Article IV, and the transferee, including but not limited to any Prohibited Transferee, in such a transaction shall remain subject to all the provisions and limitations of Article IV and this Article V. SECTION 3. SEVERABILITY. If any provision of Article IV or this Article V or any application of any such provision is determined to be invalid by any federal or state court having jurisdiction over the issues, the validity of the remaining provisions shall not be affected and other applications of such provision shall be affected only to the extent necessary to comply with the determination of such court. SECTION 4. WAIVER. The Corporation shall have authority at any time to waive the requirement that the Corporation redeem shares of Preferred Stock if, in the sole discretion of the Board of Directors, any such redemption would jeopardize the status of the Corporation as a REIT for federal income tax purposes. ARTICLE VI BOARD OF DIRECTORS SECTION 1. MANAGEMENT. The business and the affairs of the Corporation shall managed under the direction of its Board of Directors. SECTION 2. NUMBER. The number of directors that will constitute the entire Board of Directors shall be fixed by, or in the manner provided in, the Bylaws but shall in no event be less than three. Any increases or decreases in the size of the board shall be apportioned equally among the classes of directors to prevent stacking in any one class of directors. There are currently six directors in office whose names are as follows: Terry Considine, Peter K. Kompaniez, Richard S. Ellwood, J. Landis Martin, Thomas L. Rhodes and John D. Smith.(4) SECTION 3. INTENTIONALLY DELETED. SECTION 4. VACANCIES. Except as otherwise provided in these Articles of Amendment and Restatement(5), newly created directorships resulting from any increase in the number of directors may be filled by the majority vote of the Board of Directors, and any vacancies on the Board of Directors resulting from death, resignation, removal or other cause shall be filled by the affirmative vote of a majority of the remaining directors then in office, even if less than a quorum of the Board of Directors, or, if applicable, by a sole remaining director. Any director elected in accordance with the preceding sentence shall hold office until the next annual meeting of the Corporation at which time a successor shall be elected to fill the remaining term of the position filled by such director. SECTION 5. REMOVAL. Except as otherwise provided in these Articles of Amendment and Restatement(6), any director may be removed from office only for cause and only by the affirmative vote of two-thirds of the aggregate number of votes then entitled to be cast generally in the election of directors. For purposes of this Section 5, "CAUSE" - --------------------- See Article THIRD. See Article FOURTH. See Article FOURTH. shall mean the willful and continuous failure of a director to substantially perform the duties to the Corporation of such director (other than any such failure resulting from temporary incapacity due to physical or mental illness) or the willful engaging by a director in gross misconduct materially and demonstrably injurious to the Corporation. SECTION 6. BYLAWS. The Board of Directors shall have power to adopt, amend, alter, change and repeal any Bylaws of the Corporation by vote of the majority of the Board of Directors then in office. Any adoption, amendment, alteration, change or repeal of any Bylaws by the shareholders of the Corporation shall require the affirmative vote of a majority of the aggregate number of votes then entitled to be cast generally in the election of directors. Notwithstanding anything in this Section 6 to the contrary, no amendment, alteration, change or repeal of any provision of the Bylaws relating to the removal of directors or repeal of the Bylaws shall be effected without the vote of two-thirds of the aggregate number of votes entitled be cast generally in the election of Directors. SECTION 7. POWERS. The enumeration and definition of particular powers of the Board of Directors included elsewhere in these Articles of Amendment and Restatement(7) shall in no way be limited or restricted by reference to or inference from the terms of any other clause of this or any other Article of these Articles of Amendment and Restatement(8), or construed as excluding or limiting, or deemed by inference or otherwise in any manner to exclude or limit, the powers conferred upon the Board of Directors under the Maryland General Corporation Law ("MGCL") as now or hereafter in force. ARTICLE VII LIMITATION OF LIABILITY No director or officer of the Corporation shall be liable to the Corporation or its shareholders for money damages to the maximum extent that Maryland law in effect from time to time permits limitation of the liability of directors and officers. Neither the amendment nor repeal of this Article VII, nor the adoption or amendment or any other provision of the charter or Bylaws of the Corporation inconsistent with this Article VII, shall apply to or affect in any respect the applicability of the preceding sentence with respect to any act or failure to act that occurred prior to such amendment, repeal or adoption. - ------------------------- See Article FOURTH. See Article FOURTH. ARTICLE VIII INDEMNIFICATION The Corporation shall indemnify, to the fullest extent permitted by Maryland law, as applicable from time to time, all persons who at any time were or are directors or officers of the Corporation for any threatened, pending or completed action, suit or proceeding (whether civil, criminal, administrative or investigative) relating to any action alleged to have been taken or omitted in such capacity as a director or an officer. The Corporation shall pay or reimburse all reasonable expenses incurred by a present or former director or officer of the Corporation in connection with any threatened, pending or completed action, suit or proceeding (whether civil, criminal, administrative or investigative) in which the present or former director or officer is a party, in advance of the final disposition of the proceeding, to the fullest extent permitted by, and in accordance with the applicable requirements of, Maryland law, as applicable from time to time. The Corporation may indemnify any other persons permitted but not required to be indemnified by Maryland law, as applicable from time to time, if and to extent indemnification is authorized and determined to be appropriate, in each case in accordance with applicable law, by the Board of Directors, the majority of the shareholders of the Corporation entitled to vote thereon or special legal counsel appointed by the Board of Directors. No amendment of these Articles of Amendment and Restatement of the Corporation or repeal of any of its provisions shall limit or eliminate any of the benefits provided to directors and officers under this Article VIII in respect of any act or omission that occurred prior to such amendment or repeal. ARTICLE IX WRITTEN CONSENT OF SHAREHOLDERS Any corporate action upon which a vote of shareholders is required or permitted may be taken without a meeting or vote of shareholders with the unanimous written consent of shareholders entitled to vote thereon. ARTICLE X AMENDMENT The Corporation reserves the right to amend, alter or repeal any provision contained in this charter upon (i) adoption by the Board of Directors of a resolution recommending such amendment, alteration, or repeal, (ii) presentation by the Board of Directors to the shareholders of a resolution at an annual or special meeting of the shareholders and (iii) approval of such resolution by the affirmative vote of the holders of a majority (or, as applicable, a two-thirds vote) of the aggregate number of votes entitled to be case generally in the election of directors. All rights conferred upon shareholders herein are subject to this reservation. ARTICLE XI EXISTENCE The Corporation is to have a perpetual existence. ARTICLE XII CLASS B COMMON STOCK GENERAL. The holders of the Class B Common Stock shall have the same rights and privileges as, and shall be subject to the same restrictions and limitations contained in the Charter as apply to, the holders of the Class A Common Stock, except as set forth below. SECTION 1. DEFINITIONS. Capitalized terms used in these Articles Supplementary shall have the meanings ascribed to them in the Charter or elsewhere in these Articles Supplementary, except that the terms set forth below shall have the meanings specified below when used in this Article. - -------------------- See Article FOURTH. See Article FOURTH. "ADJUSTED FUNDS FROM OPERATIONS" shall have the same meaning as the term "Adjusted Funds from Operations" used in the Prospectus and shall be calculated in the manner specified in the Prospectus and based on generally accepted accounting principles. Adjusted Funds from Operations shall be determined from the Corporation's financial statements audited and certified by an independent public accountant. "ADJUSTED FUNDS FROM OPERATIONS PER SHARE" when used with respect to any period shall mean the Adjusted Funds from Operations for such period DIVIDED by the sum of (a) the number of shares of the Class A Common Stock outstanding on the last day of such period (excluding any shares of the Class A Common Stock into which shares of the Class B Common Stock shall have been converted as a result of the conversion of shares of the Class B Common Stock on the last day of such period) and (b) the number of shares of the Class A Common Stock issuable to acquire units of limited partnership that (i) may be tendered for redemption in any limited partnership in which the Corporation serves as general partner and (ii) are outstanding on the last day of such period. "AVERAGE MARKET PRICE" for a period shall mean the average of the Closing Prices for a share of the Class A Common Stock for the Trading Days in such period. "CAUSE" shall mean the termination of employment of an individual with an Employer as a result of (a) the performance by such individual of any activity involving fraud or dishonesty, (b) the conviction of the individual of a felony or a crime involving moral turpitude, (c) the failure or refusal of such individual to reasonably or satisfactorily perform any material duties or responsibilities reasonably required of such individual by an Employer, (d) the gross negligence or willful neglect or malfeasance by the individual in the performance or non-performance of such individual's duties or responsibilities to the Employer, or (e) any unauthorized act or omission by such individual that is injurious in any material respect to the financial condition or business reputation of any Employer. "CHANGE IN CONTROL" shall mean the occurrence of any of the following events: (a) An acquisition (other than directly from the Corporation) of any voting securities of the Corporation (the "VOTING SECURITIES") by any "person" (as the term "person" is used for purposes of Section 13(d) or Section 14(d) of the Securities Exchange Act of 1934, as amended (the "1934 ACT")) immediately after which such person has "beneficial ownership" (within the meaning of Rule 13d-3 promulgated under the 1934 Act) ("BENEFICIAL OWNERSHIP") of 20% or more of the combined voting power of the Corporation's then outstanding Voting Securities; PROVIDED, HOWEVER, in determining whether a Change in Control has occurred. Voting Securities that are acquired in a Non-Control Acquisition (as hereinafter defined) shall not constitute an acquisition that would cause a Change in Control. "NON-CONTROL ACQUISITION" shall mean an acquisition by (1) an employee benefit plan (or a trust forming a part thereof) maintained by (a) the Corporation or (b) any corporation, partnership or other Person of which a majority of its voting power or its equity securities or equity interest is owned directly or indirectly by the Corporation or in which the Corporation serves as a general partner or manager (a "SUBSIDIARY"), (2) the Corporation or any Subsidiary, or (3) any Person in connection with a Non-Control Transaction (as hereinafter defined); (b) The individuals who are named in the Prospectus as constituting the Board of Directors of the Corporation following the Initial Public Offering (the "INCUMBENT BOARD") cease for any reason to constitute at least two-thirds (2/3rds) of the Board of Directors; PROVIDED, HOWEVER, that if the election, or nomination for election by the Corporation's stockholders, of any new director was approved by a vote of at least two-thirds (2/3rds) of the Incumbent Board, such new director shall be considered as a member of the Incumbent Board; PROVIDED, FURTHER, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened "election contest" (as described in Rule 14a-11 promulgated under the 1934 Act) (an "ELECTION CONTEST") or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors (a "PROXY CONTEST") including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or (c) Approval by stockholders of the Corporation of: (1) A merger, consolidation, share exchange or reorganization involving the Corporation, unless (A) the stockholders of the Corporation, immediately before such merger, consolidation, share exchange or reorganization, own, directly or indirectly immediately following such merger, consolidation, share exchange or reorganization, at least 80% of the combined voting power of the outstanding voting securities of the corporation that is the successor in such merger, consolidation, share exchange or reorganization (the "SURVIVING CORPORATION") in substantiality the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation, share exchange or reorganization, (B) the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such merger, consolidation, share exchange or reorganization constitute at least two-thirds (2/3rds) of the members of the board of directors of the Surviving Corporation, and (C) no Person (other than the corporation or any subsidiary, any employee benefit plan (or any trust forming a part thereof) maintained by the Corporation, the Surviving Corporation or any Subsidiary, or any Person who, immediately prior to such merger, consolidation, share exchange or reorganization had Beneficial Ownership of 15% or more of the then outstanding Voting Securities) has Beneficial Ownership of 15% or more of the combined voting power of the Surviving Corporation's then outstanding voting securities (a transaction described in clauses (i) through (iii) is referred to herein as a "NON-CONTROL TRANSACTION"); (2) A complete liquidation or dissolution of the Corporation, or (3) An agreement for the sale or other disposition of all or substantially all of the assets of the Corporation to any Person (other than a transfer to a Subsidiary). Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (a "SUBJECT PERSON") acquired Beneficial Ownership of more than the permitted amount of the outstanding Voting Securities as a result of the acquisition of Voting Securities by the Corporation that, by reducing the number of Voting Securities outstanding, increases the proportional number of shares Beneficially Owned by such Subject Person, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of Voting Securities by the Corporation, and after such share acquisition by the Corporation, such subject Person becomes the Beneficial Owner of any additional Voting Securities that increases the percentage of the then outstanding Voting Securities Beneficially Owned by such Subject Person, then a Change in Control shall occur. "CLOSING PRICE" on any date shall mean the last sale price, regular way, or, in case that no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE or, if shares of the Class A Common Stock are not listed or admitted to trading on the NYSE, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which shares of the Class A Common Stock are listed or admitted to trading or, if shares of the Class A Common Stock are not listed or admitted to trading on any national securities exchange, the last quoted price, or if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the principal other automated quotations system that may then be in use or, if shares of the Class A Common Stock are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in shares of the Class A Common Stock selected by the Board of Directors of the Corporation. "CONVERTIBLE CLASS B SHARES" shall mean Eligible Class B Shares that shall have become subject to automatic conversion into shares of the Class A Common Stock, subject to Article IV, Section 3.4 of the Charter, pursuant to Sections 3 and 4 of this Article. "DISABILITY" shall mean the mental or physical illness or disability of an individual that substantially impairs the ability of the individual to perform substantially all of his duties as an employee of an Employer in a satisfactory manner for a period in excess of ninety (90) days in any consecutive 12-month period. "ELIGIBLE CLASS B SHARES" shall mean the following percentages (subject to modification as provided in Section 3(c) of this Article) of the Outstanding Class B Shares as of the Year-End Testing Dates indicated. PERCENTAGE OF OUTSTANDING CLASS B SHARES YEAR-END TESTING DATE -------------------------------------------------- December 31, 1994 10.0000% December 31, 1995 22.2222% December 31, 1996 28.5714% December 31, 1997 50.0000% December 31, 1998 100.0000% "EMPLOYER" shall mean (a) the Corporation, (b) any partnership in which the Corporation serves as a general partner, (c) any corporation directly or indirectly controlled by or under common control with the Corporation, (d) any partnership or company in which any of the foregoing may own, directly or indirectly, an equity interest or (e) any limited liability company in which any of the foregoing may be a member. "INITIAL HOLDER" shall refer to each person holding Outstanding Class B Shares on the date of the closing of the Initial Public Offering, whether such Outstanding Class B Shares result from designation of outstanding common stock or from new issuance by the Corporation. "OP UNITS" shall mean units of limited partnership interest in the Operating Partnership. "OPERATING PARTNERSHIP" shall mean AIMCO Properties, L.P., a Delaware limited partnership in which the Corporation holds a general partnership interest. "OUTSTANDING CLASS B SHARES" shall mean issued and outstanding shares of the Class B Common Stock of the Corporation, excluding any Convertible Class B Shares that have been converted into shares of the Class A Common Stock. "PROSPECTUS" shall mean the prospectus that forms a part of the registration statement filed with the Securities and Exchange Commission in connection with the Initial Public Offering, in the form included in the registration statement at the time the registration statement becomes effective; PROVIDED, HOWEVER, that, if such prospectus is subsequently supplemented or amended for use in connection with the Initial Public Offering, "PROSPECTUS" shall refer to such prospectus as so supplemented or amended. "TRADING DAY" shall mean a day on which the principal national securities exchange on which shares of the Class A Common Stock are listed or admitted to trading is open for the transaction of business or, if shares of the Class A Common Stock are not listed or admitted to trading on any national securities exchange, "TRADING DAY" shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. "YEAR-END TESTING DATE" shall mean each of December 31, 1994, December 31, 1995, December 31, 1996, December 31, 1997 and December 31, 1998; PROVIDED, HOWEVER, that December 31, 1999 shall be substituted in place of December 31, 1998 each place such earlier date appears in this Article if, as of December 31, 1998, either the Annual Growth Target requirement or the Compounded Cumulative Growth Target requirement set forth in Section 3(a) of this Article in respect of the Year-End Testing Date of December 31, 1998 is not satisfied as of December 31, 1998. SECTION 2. RESTRICTIONS ON DIVIDENDS AND VOTING RIGHTS. (a) NO DIVIDENDS. No dividends shall accrue or be paid on any shares of the Class B Common Stock. (b) No Voting Rights; Exception for Convertible Class B Shares. Holders of shares of the Class B Common Stock shall not have the right to vote on any matter, including, but not limited to, the election of directors, the merger of the Corporation, the sale or other disposition of the Corporation's assets, or the dissolution or liquidation of the Corporation; PROVIDED, HOWEVER, that holders of Convertible Class B Shares shall have the right to one (1) vote per share on all matters for which holders of shares of the Class A Common Stock shall have the right to vote. SECTION 3. CONVERTIBILITY OF OUTSTANDING CLASS B SHARES. (a) IN GENERAL. The Eligible Class B Shares as of a Year-End Testing Date shall automatically become Convertible Class B Shares according to the Adjusted Funds from Operations Per Share and the Average Market Values of a share of the Class A Common Stock for the periods indicated, provided that (i) the "Annual Growth Target" requirement set forth below in this Section 3(a) is satisfied, (ii) the "Compounded Cumulative Growth Target" requirement set forth below in this Section 3(a) is satisfied AND (iii) the "MARKET VALUE" requirement set forth in Section 3(b) of this Article is satisfied; PROVIDED, HOWEVER, that, if in any calendar year an applicable Annual Growth Target requirement is not satisfied, the Eligible Class B Shares becoming Convertible Class B Shares in the following calendar year or years shall include, as a carryforward from year to year, the Eligible Class B Shares otherwise applicable to the first year provided that in the later year (which need not immediately follow the first year) the Annual Growth Target requirement, the Cumulative Compounded Growth Target requirement and the Market Value requirement for such later year are all satisfied: YEAR-END TESTING COMPOUNDED CUMULATIVE DATE. ANNUAL GROWTH TARGET GROWTH TARGET - ------------------------------------------------------------------------------ December 31, 1994 Adjusted Funds from Adjusted Funds from Operations Per Share for the Operations Per Share for period beginning on the the period beginning on the Initial Public Offering and Initial Public Offering and ending on the Year-End ending on the Year-End Testing Date is at least Testing Date is at least $0.864 $0.864 December 31, 1995 ANNUALIZED Adjusted Funds ANNUALIZED Adjusted Funds from Operations Per Share from Operations Per Share for the period beginning on for the period beginning on the Initial Public Offering the Initial Public Offering and ending on the Year-End and ending on the Year-End Testing Date is at least Testing Date is at least $2.161 $2.161 December 31, 1996 Adjusted Funds from ANNUALIZED Adjusted Funds Operations Per Share for the from Operations Per Share calendar year ending on the for the period beginning on Year-End Testing Date is at the Initial Public Offering least 108.5% of the Adjusted and ending on the Year-End Funds from Operations Per Testing Date is at least Share for the calendar year $2.345 ending on the previous Year-End Testing Date December 31, 1997 Adjusted Funds from ANNUALIZED Adjusted Funds Operations Per Share for the from Operations Per Share calendar year ending on the for the period beginning on Year-End Testing Date is at the Initial Public Offering least 108.5% of the Adjusted and ending on the Year-End Funds from Operations Per Testing Date is at least Share for the calendar year $2.544 ending on the previous Year-End Testing Date December 31, 1998 Adjusted Funds from ANNUALIZED Adjusted Funds Operations Per Share for the from Operations Per Share calendar year ending on the for the period beginning on Year-End Testing Date is at the Initial Public Offering least 108.5% of the Adjusted and ending on the Year-End Funds from Operations Per Testing Date is at least Share for the calendar year $2.760 ending on the previous Year-End Testing Date (b) MARKET VALUE REQUIREMENT. The Market Value requirement shall be satisfied as to any Year-End Testing Date if the Average Market Value of a share of the Class A Common Stock shall equal or exceed the amount set forth in the following table for any 90 calendar day period (whether or not a calendar quarter or an exact three-month period) beginning on any day (whether or not a Trading Day) on or after October 1 immediately preceding the applicable Year-End Testing Date: YEAR-END TESTING DATE AVERAGE MARKET PRICE ------------------------------------------- December 31, 1994 $19.030 December 31, 1995 $20.648 December 31, 1996 $22.403 December 31, 1997 $24.307 December 31, 1998 $26.373 By way of illustration, the Market Value requirement for the Year-End Testing Date of December 31, 1996 would be satisfied if the Average Market Value of a share of the Class A Common Stock equaled or exceeded $22.403 for (i) the 90-day period beginning on October 1, 1986 and ending on December 30, 1996, (ii) the 90-day period beginning on April 17, 1997 and ending on July 16, 1997 OR (iii) the 90-day period beginning on November 20, 1997 and ending on February 18, 1998. (c) MODIFICATIONS TO ELIGIBILITY AND CONVERTIBILITY SCHEDULES. Notwithstanding the provisions of Section 3(a) of this Article, in or as to any calendar year the Corporation's Board of Directors shall have the authority, upon consideration of factors and financial performance criteria that it shall in its sole and absolute discretion consider relevant, to declare a greater or lesser percentage of (i) Outstanding Class B Shares as of a Year-End Testing Date to be Eligible Class B Shares and (ii) Eligible Class B Shares to be Convertible Class B Shares; PROVIDED, HOWEVER, that no such declaration shall decrease the number of Eligible Class B Shares or Convertible Class B Shares held by any person without such person's consent. SECTION 4. CONDITIONAL CONVERSION OF CLASS B COMMON STOCK. (a) CONVERSION OF CONVERTIBLE CLASS B SHARES. Subject to Section 4(c) of this Article and to the limitations set forth in Article IV, Section 3.4 of the Charter, upon becoming a Convertible Class B Share, each Convertible Class B Share shall be converted automatically into the number of shares of the Class A Common Stock that results from dividing $18.50 by the Conversion Price in effect at the time of conversion (the "CONVERSION PRICE"). Subject to the limitations set forth in Article IV, Section 3.4 of the Charter, such conversion shall occur and be effective as of the applicable Year-End Testing Date or, if later, the satisfaction of the Market Price requirement set forth in Section 3(b) of this Article. The initial Conversion Price shall be $18.50 per share and shall be subject to adjustment as provided in Section 7 of this Article. (b) CONVERSION UPON OCCURRENCE OF OTHER EVENTS. Notwithstanding the foregoing provisions of this Section 4, but nevertheless subject to the limitations set forth in Article IV, Section 3.4 of the Charter: (1) all Outstanding Class B Shares (whether or not Eligible Class B Shares) that have not previously converted into shares of the Class A Common Stock shall convert automatically upon any Change in Control of the Corporation. (2) all Outstanding Class B Shares (whether or not Eligible Class B Shares) held by an Initial Holder and any transferee of such Initial Holder shall convert automatically into shares of the Class A Common Stock on the date on which employment of such Initial Holder by an Employer is terminated by the Employer (and not voluntarily by such Initial Holder) for any reason other than Cause if following termination such Initial Holder is no longer employed as an employee by any Employer, and (3) the Board of Directors of the Corporation may, by resolution duly adopted by the Board of Directors (and, if there shall be a duly constituted compensation committee of the Board of Directors at the time, only with the approval of the compensation committee), accelerate the conversion of Outstanding Class B Shares (whether or not Eligible Class B Shares) into shares of the Class A Common Stock at such time and in such amount as it may determine to be appropriate from time to time. The conversion of any Outstanding Class B Share pursuant to this Section 4(b) shall be into the number of shares of the Class A Common Stock that results from dividing $18.50 by the Conversion Price then in effect. (c) IDENTIFICATION OF CLASS B COMMON STOCK CONVERTED. Whenever shares of the Class B Common Stock are converted into shares of the Class A Common Stock pursuant to Section 4(a), Section 4(b)(1) or Section 4(b)(3) of this Article, the shares converted shall be allocated among all the record holders of such shares of the Class B Common Stock in proportion to their record ownership. (d) DELAYED CONVERSION. If the conversion of any shares of Class B Common Stock into shares of the Class A Common Stock shall be limited or restricted by reason of the provisions of Article IV, Section 3.4 of the Charter, such shares shall automatically be so converted at such later time, if any, and to such extent as such limitations and restrictions do not apply. (e) NO FRACTIONAL SHARES. No fractional shares of the Class A Common Stock shall be issued upon conversion of any shares of the Class B Common Stock. Rather, the Corporation shall pay to the record holder cash for such fractional shares at a rate equal to the Conversion Price per share. SECTION 5. MANDATORY REPURCHASE OR STOCKHOLDER PURCHASE OF OUTSTANDING CLASS B SHARES. (a) REPURCHASE FOLLOWING THE FIFTH YEAR-END TESTING DATE. Subject to the limitations set forth in Article IV, Section 3.4 of the Charter, each Outstanding Class B Share (whether or not an Eligible Class B Share) that has not converted into shares of the Class A Common Stock in respect of the Year-End Testing Date of December 31, 1998 shall be subject to mandatory repurchase by the Corporation at a price of $.10 per Outstanding Class B Share. Such mandatory repurchase shall close upon the determination, no earlier than March 31, 2000, that such Outstanding Class B Share is not convertible into shares of the Class A Common Stock pursuant to Section 3 of this Article. (b) INITIAL HOLDER PURCHASE UPON CERTAIN TERMINATIONS OF EMPLOYMENT. Subject to the limitations set forth in Article IV, Section 3.4 of the Charter, each Outstanding Class B Share (whether or not an Eligible Class B Share), other than a Convertible Class B Share, held by the Initial Holder of such Outstanding Class B Share, or by any holder who acquired such Outstanding Class B Share directly or indirectly from such Initial Holder, that has neither converted nor become convertible into shares of the Class A Common Stock or prior to either (i) the date of termination of employment of such Initial Holder by an Employer for Cause or (ii) the date of such Initial Holder's voluntary termination of employment with an Employer shall be subject to mandatory purchase, at the time of such termination of employment, by the other Initial Holders that are at that time employed by an Employer. The purchase price shall be $.10 per Outstanding Class B Share. The purchase of such Outstanding Class B Shares shall be made, by the Initial Holders that are at that time employed by an Employer, proportionate to the following percentages: INITIAL HOLDER PERCENTAGE ----------------------------------- Terry Considine 68.33% Peter K. Kompaniez 13.50% Steven D. Ira 13.67% Robert P. Lacy 4.50% (c) REPURCHASE UPON CERTAIN TERMINATIONS OF EMPLOYMENT FOLLOWING CONVERSION. Subject to the limitations set forth in Article IV, Section 3.4 of the Charter, each share of the Class A Common Stock, whether held by an Initial Holder of any other person who acquired such share of the Class A Common Stock directly or indirectly from an Initial Holder, into which an Outstanding Class B Share was originally converted pursuant to Section 4 of this Article shall be subject to mandatory repurchase by the Corporation, at a price of $.10 per share of the Class A Common Stock, upon such Initial Holder's termination of employment with an Employer, other than (i) by reason of death, disability or a Change in Control or (ii) the involuntary termination of employment of such Initial Holder by an Employer without Cause, within 12 months following such conversion of an Outstanding Class B Share into such share of the Class A Common Stock; PROVIDED, HOWEVER, that nothing in this Section 5(c) shall be interpreted or applied to preclude the settlement of any transaction entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system. (d) DELAYED REPURCHASE OR PURCHASE. If either the limitations or restrictions of Article IV, Section 3.4 of the Charter shall apply to (i) a mandatory repurchase under Section 5(a) or Section 5(c) of this Article or (ii) a mandatory purchase by the Initial Holders under Section 5(b) of this Article, or if the Corporation cannot then lawfully effect a repurchase of its shares, then the repurchase or purchase, as the case may be, shall be deferred until, and then only to the extent that, such repurchase or purchase can be lawfully effected within such limitations and restrictions. (e) PROCEDURES UPON REPURCHASE OR PURCHASE. Any repurchase of Outstanding Class B Shares as provided by Section 5(a) or Section 5(c) of this Article shall be effected by delivery by the Corporation to the record holder of such Outstanding Class B Shares of a certified or cashier's check in the amount of the aggregate repurchase price. Upon such payment by the Corporation in repurchase of Outstanding Class B Shares, the certificates evidencing such repurchased Outstanding Class B Shares shall be canceled. Any purchase of Outstanding Class B Shares as provided by Section 5(b) of this Article shall be effected by delivery of the Initial Holders then employed by an Employer to the record holder of such Outstanding Class B Shares of a certified or cashier's check in the amount of the aggregate purchase price. (f) CHANGE IN CONTROL. The provisions of Sections 5(a), 5(b) and 5(c) of this Article shall not apply following any Change in Control. SECTION 6. REDUCTION IN AUTHORIZED SHARES. The number of authorized shares of the Class B Common Stock shall be reduced automatically by (a) the number of shares of the Class B Common Stock converted into shares of the Class A Common Stock pursuant to Section 4 of this Article and (b) the number of shares of the Class B Common Stock repurchased by the Corporation pursuant to Section 5(a) or Section 5(c) of this Article. SECTION 7. ADJUSTMENTS. The Conversion Price and the number of shares of the Class A Common Stock issuable upon the conversion of each share of the Class B Common Stock shall be subject to adjustment from time to time as provided in this Section 7. (a) ADJUSTMENT UPON CERTAIN EVENTS. In case that the Corporation shall at any time after the date of the Initial Public Offering (i) pay a dividend in shares of the Class A Common Stock or make a distribution in shares of the Class A Common Stock, (ii) subdivide the outstanding shares of the Class A Common Stock, (iii) combine the outstanding Class A Common Stock into a smaller number of shares of the Class A Common Stock, or (iv) issue any shares of its capital stock or other securities by reclassification of the Class A Common Stock, the Conversion Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination or reclassification shall be proportionately adjusted so that each holder of shares of the Class B Common Stock converted after such time shall be entitled to receive the aggregate number and kind of the Class A Common Stock or other securities of the Corporation that, if such shares of the Class B Common Stock had been converted immediately prior to such time, he would have owned upon such conversion and been entitled to receive by virtue of such dividend, distribution, subdivision, combination or reclassification. Such adjustment shall be made successively whenever any event listed above shall occur. (b) ISSUANCE OF RIGHTS, OPTIONS OR WARRANTS. If after the Initial Public Offering the Corporation issues any rights, options or warrants to all holders of its Class A Common Stock entitling them for a period expiring within 60 days after the record date mentioned below to purchase shares of the Class A Common Stock (or securities convertible into or exchangeable for shares of the Class A Common Stock) at a price per share less than the current market price per share on that record date, the Conversion Price shall be adjusted in accordance with the formula: A equals the adjusted Conversion Price. C equals the then current Conversion Price. O equals the number of shares of the Class A Common Stock outstanding on the record date. N equals the number of additional shares of the Class A Common Stock offered or initially issuable upon conversion or exchange of the convertible or exchangeable securities offered. P equals the offering price or conversion price or exchange per share of the additional shares. M equals the current market price per share of the Class A Common Stock on the record date. The adjustment shall be made successively whenever any such rights, options or warrants are issued and shall become effective immediately after the record date for the determination of stockholders entitled to receive the rights, options or warrants. If all of the shares of the Class A Common Stock or securities convertible into or exchangeable for shares of the Class A Common Stock subject to such rights, options or warrants have not been issued when such rights, options or warrants expire, then the Conversion Price shall be immediately readjusted to what it would have been if "N" in the above formula had been the number of shares of the Class A Common Stock actually issued upon the exercise of such rights, options or warrants or initially issuable based upon the number of convertible securities or exchangeable securities actually issued upon the exercise of such rights or warrants. (c) DISTRIBUTION OF ASSETS AND DEBT SECURITIES. If after the Initial Public Offering the Corporation distributes to all holders of its Class A Common Stock any of its assets or debt securities or any rights or warrants to purchase debt securities, assets or other securities of the Corporation (including shares of the Class A Common Stock), the Conversion Price shall be adjusted in accordance with the formula: where A equals the adjusted Conversion Price. C equals the then current Conversion Price. M equals the current market price per share of the Class A Common Stock on the record date mentioned below. F equals the fair market value on the record date of the assets, securities, rights or warrants applicable to one share of the Class A Common Stock. The Board of Directors shall determine, in good faith, such fair market value, which determination shall be conclusive. This Section 7(c) does not apply to any rights, options or warrants referred to in Section 7(b) of this Article. This Section 7(c) does not apply to cash dividends or cash distributions paid in respect of the Class A Common Stock for any period if the cash dividends or cash distributions paid in respect of the Class A Common Stock and OP Units for that period, when added to the amount of all other cash dividends or cash distributions paid in respect to the Class A Common Stock and OP Units for the twelve (12) month period ending on the last day of such period, does not exceed 100% of Cash Available for Distribution for such twelve (12) month period. "CASH AVAILABLE FOR DISTRIBUTION" shall mean "Funds from Operations" (as that term is defined in the "Glossary" of the Prospectus but computed at the Operating Partnership level) minus (i) the amount of any dividend on Preferred Stock accrued during such twelve (12) month period, whether or not declared or paid, and (ii) an annual reserve for capital replacements of $300 per apartment unit for the weighted average number of apartment units owned by the Corporation during such twelve (12) month period. By way of example, Cash Available for Distribution for the twelve (12) month period ending June 15, 1995 as set forth in the Prospectus is projected on a PRO FORMA basis to be $18,476,000. (d) ISSUANCE OF DISCOUNTED SHARES. If after the Initial Public Offering the Corporation issues shares of the Class A Common Stock for a consideration per share less than the current market price per share, on the date that the Corporation fixes the offering price of such additional shares, the Conversion Price shall be adjusted in accordance with the formula: where A equals the adjusted Conversion Price. C equals the then current Conversion Price. O equals the number of shares of the Class A Common Stock outstanding immediately prior to the issuance of such additional shares. P equals the aggregate consideration received for the issuance of such additional shares. M equals the current market price per share of the Class A Common Stock on the date of issuance of such additional shares. S equals the number of shares outstanding immediately after the issuance of such additional shares. The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance. This Section 7(d) does not apply to (i) any of the transactions described in Section 7(b) or Section 7(c) of this Article, (ii) the conversion or exchange of shares of the Class B Common Stock or other securities convertible into or exchangeable for shares of the Class A Common Stock, (iii) shares of the Class A Common Stock issued by the Corporation upon, and as consideration for, the purchase of OP Units, (iv) shares of the Class A Common Stock issued to the Corporation's employees (other than upon the exercise of options of the type referred to in clause (v) below) under BONA FIDE employee benefit plans adopted by the Board of Directors, if such Class A Common Stock would otherwise be covered by this Section 7(d), (v) the Class A Common Stock issued upon the exercise of options granted to employees at an exercise price equal to at least 85% of the fair market value of such Class A Common Stock at the time that such options were granted, (vi) the Class A Common Stock issued to stockholders of any person that merges into the Corporation, or with a subsidiary of the Corporation, in proportion to their stock holdings in such Person immediately prior to such merger, upon such merger, (vii) the Class A Common Stock issued in a BONA FIDE public offering pursuant to a firm commitment or best efforts underwriting, or (viii) the Class A Common Stock issued in a BONA FIDE private placement through a placement agent that is a member firm of the National Association of Securities Dealers, Inc. (except to the extent that any discount from the current market price attributable to restrictions on transferability of the Class A Common Stock, as determined in good faith by the Board of Directors, shall exceed 10% of the then current market price). (e) ISSUANCE OF CONVERTIBLE DISCOUNTED SECURITIES. If after the Initial Public Offering the Corporation issues any securities convertible into or exchangeable for shares of the Class A Common Stock (other than securities issued in transactions described in Section 7(b) or Section 7(c)) of this Article for a consideration per share of the Class A Common Stock initially deliverable upon conversion or exchange of such securities less than the current market price per share of the Class A Common Stock on the date of issuance of such securities, the Conversion Price shall be adjusted in accordance with the formula: where A equals the adjusted Conversion Price. C equals the then current Conversion Price. O equals the number of shares of the Class A Common Stock outstanding immediately prior to the issuance of such securities. P equals the aggregate consideration received for the issuance of such securities. M equals the current market price per share of the Class A Common Stock on the date of issuance of such securities. D equals the maximum number of shares deliverable upon conversion or in exchange for such securities at the initial conversion or exchange rate. The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance. If all of the Class A Common Stock deliverable upon conversion or exchange of such securities have not been issued when such securities are no longer outstanding, then the Conversion Price shall promptly be readjusted to the conversion price that would then be in effect had the adjustment upon the issuance of such securities been made on the basis of the actual number of shares of the Class A Common Stock issued upon conversion or exchange of such securities. This Section 7(e) does not apply to (i) convertible securities issued to stockholders of any Person that merges into the Corporation, or with a subsidiary of the Corporation, in proportion to their stock holdings in such Person immediately prior to such merger, upon such merger, (ii) convertible securities issued in a BONA FIDE public offering pursuant to a firm commitment or best efforts underwriting, or (iii) convertible securities issued in a BONA FIDE private placement through a placement agent that is a member firm of the National Association of Securities Dealers, Inc. (except to the extent that any discount from the current market price attributable to restrictions on transferability of the Class A Common Stock issuable upon conversion, as determined in good faith by the Board of Directors and described in a Board resolution, shall exceed 20% of the then current market price). (f) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS. If at any time or from time to time there is a capital reorganization of the Corporation (other than a recapitalization, subdivision, combination, reclassification or exchange of shares provided for elsewhere in this Section 7 or Section 4 of this Article) or a merger or consolidation of the Corporation with or into another corporation, or the sale of all or substantially all of the Corporation's properties and assets to any other person then, each share of the Class B Common Stock then outstanding shall thereafter be convertible into, in lieu of the Class A Common Stock issuable upon such conversion prior to consummation of such reorganization, merger, consolidation or sale, the kind and amount of shares of stock and other securities and property receivable (including cash) upon the consummation of such reorganization, merger, consolidation or sale by a holder of that number of shares of Class A Common Stock into which one share of the Class B Common Stock was convertible immediately prior to such reorganization, merger, consolidation or sale (including, on a PRO RATA basis, the cash, securities or property received by holders of Class A Common Stock in any tender or exchange offer that is a step in such transaction). In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 7 and Section 4 of this Article with respect to the rights of the holders of the shares of the Class B Common Stock after the reorganization, merger, consolidation or sale to the end that the provisions of this Section 7 (including adjustment of the Conversion Price then in effect and the number of shares issuable upon conversion of the shares of the Class B Common Stock) shall be applicable after that event and be as nearly equivalent as may be practicable. (g) COMPUTATION OF CONSIDERATION. For purposes of any computation respecting consideration received pursuant to Sections 7(d) and 7(e) of this Article, the following shall apply: (1) In the case of the issuance of shares of the Class A Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by the Corporation for any underwriting of the issue or otherwise in connection therewith; (2) In the case of the issuance of shares of the Class A Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined in good faith by the Board of Directors (irrespective of the accounting treatment thereof), whose determination shall be conclusive, and described in a Board resolution; and (3) In the case of the issuance of securities convertible into or exchangeable for shares, the aggregate consideration received therefor shall be deemed to be the consideration received by the Corporation for the issuance of such securities plus the additional minimum consideration if any, to be received by the Corporation upon the conversion of exchange thereof (the consideration in each case to be determined in the same manner provided in Sections 7(g)(1) and 7(g)(2) of this Article. (h) COMPUTATION OF CURRENT MARKET PRICE. For the purpose of any computation pursuant to Sections 7(b), 7(c), 7(d) and 7(e) of this Article, the current market price per share of the Class A Common Stock on any date shall be deemed to be the average of the Closing Prices for 15 consecutive Trading Days commencing 30 Trading Days before that date. However, if the Class A Common Stock is not publicly listed or publicly traded, current market price shall mean the fair market value per share of Class A Common Stock, as determined in good faith by the Board of Directors, based on the opinion of an independent investment banking firm. (i) EXCEPTIONS. No adjustment in the Conversion Price need be made: (1) unless the adjustment would require an increase or decrease of at least 1% in the Conversion Price. Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 7 shall be made to the nearest cent or to the nearest one hundredth (1/100th) of a share, as the case may be. The Conversion Price shall not be adjusted upward except in the event of a combination of the outstanding shares of the Class A Common Stock into a smaller number of shares of Common Stock or in the event of a readjustment of the Conversion Price pursuant to Section 7(b) or Section 7(e) of this Article; (2) for a transaction referred to in Section 7(a), Section 7(b), Section 7(c), Section 7(d) or Section 7(e) of this Article if holders of the Class B Common Stock are to participate in the transaction on a basis and with notice that the Board of Directors determines to be fair and appropriate in light of the basis and notice on which holders of the Class A Common Stock participate in the transaction; (3) for rights to purchase shares of the Class A Common Stock pursuant to a plan for reinvestment of dividends or interest; (4) for a change in the part value or no par value of the Class A Common Stock; or (5) to the extent that the Class B Common Stock becomes convertible into cash, as to such cash. Interest will not accrue on any such cash. (j) NOTICE. Whenever the Conversion Price is adjusted or reduced, the Corporation shall promptly mail, at least 12 days prior to the record date of the distribution triggering the adjustment or reduction, to holders of the Class B Common Stock and file with the transfer agent therefor a notice of the adjustment or reduction and, in the case of an adjustment, file with the transfer agent for the Class B Common Stock an officer's certificate briefly stating the facts requiring the adjustment and the manner of computing it. The certificate shall be conclusive evidence that the adjustment is correct. (k) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of the Class A Common Stock, solely for the purpose of effecting the conversion of the shares of the Class B Common Stock, such number of its shares of the Class A Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Class B Common Stock; and if at any time the number of authorized but unissued shares of the Class A Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Class B Common Stock, the Corporation will take such corporate and other action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of the Class A Common Stock to such number of shares as shall be sufficient for such purpose. (l) DISCRETIONARY ADJUSTMENTS. The Board of Directors may (but shall not be required to) make such adjustments in the Conversion Price, in addition to those required by this Section 7, as shall be determined by the Board of Directors, as evidenced by a Board resolution, to be advisable in order that any event that would otherwise be treated for federal income tax purposes as a dividend of stock or stock rights will, to the extent practicable, not be so treated or not be taxable to all the recipients. (m) AMBIGUITY. The Board of Directors may interpret the provisions of this Section 7 to resolve any inconsistency or ambiguity that may arise or be revealed in connection with the adjustment procedures provided herein, and if such inconsistency or ambiguity reflects an inaccurate provision hereof, the Board of Directors may, in appropriate circumstances, authorize the filing of additional articles supplementary or a certificate of designation. SECTION 8. RESTRICTION ON ADDITIONAL ISSUANCES. Upon the filing of these Articles of Amendment, there shall be authorized 750,000 shares and issued and outstanding 650,000 shares of the Class B Common Stock. No additional shares of the Class B Common Stock shall be issued without the affirmative consent or vote of a majority of the Corporation's Board of Directors other than employees of an Employer. ARTICLE XIII CLASS B PREFERRED STOCK The terms of the Class B Cumulative Convertible Preferred Stock (including the preferences, conversions or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, or terms or conditions of redemption) as set by the Board of Directors are as follows: 1. NUMBER OF SHARES AND DESIGNATION. This class of Preferred Stock shall be designated as Class B Cumulative Convertible Preferred Stock (the "Class B Preferred Stock") and Seven Hundred Fifty Thousand (750,000) shall be the authorized number of shares of such Class B Preferred Stock constituting such class. 2. DEFINITIONS. For purposes of the Class B Preferred Stock, the following terms shall have the meanings indicated: "ACT" shall mean the Securities Act of 1933, as amended. "affiliate" of a Person means a Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Person specified. "AGGREGATE VALUE" shall mean, with respect to any block of Equity Stock, the sum of the products of (i) the number of shares of each class of Equity Stock within such block multiplied by (ii) the corresponding Market Price of one share of Equity Stock of such class. "BASE COMMON STOCK DIVIDEND" shall have the meaning set forth in paragraph (a) of Section 9 of this Article. "BENEFICIAL OWNERSHIP" shall mean, with respect to any Person, ownership of shares of Equity Stock equal to the sum of (i) the number of shares of Equity Stock directly owned by such Person, (ii) the number of shares of Equity Stock indirectly owned by such Person (if such Person is an "individual" as defined in Section 542(a)(2) of the Code) taking into account the constructive ownership rules of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code, and (iii) the number of shares of Equity Stock that such Person is deemed to beneficially own pursuant to Rule 13d-3 under the Exchange Act or that is attributed to such Person pursuant to Section 318 of the Code, as modified by Section 856(d)(5) of the Code, PROVIDED that when applying this definition of Beneficial Ownership to the Initial Holder, clause (iii) of this definition, and clause (ii) of the definition of "Person" shall be disregarded. The terms "BENEFICIAL OWNER," "BENEFICIALLY OWNS" and "BENEFICIALLY OWNED" shall have the correlative meanings. "BOARD OF DIRECTORS" shall mean the Board of Directors of the Corporation or any committee authorized by such Board of Directors to perform any of its responsibilities with respect to the Class B Preferred Stock. - -------------------------- See Article FIFTH. "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a day on which state or federally chartered banking institutions in New York, New York are not required to be open. "CALL DATE" shall have the meaning set forth in paragraph (b) of Section 5 of this Article. "CHARITABLE BENEFICIARY" shall mean one or more beneficiaries of the Trust as determined pursuant to Section 11.3 of this Article, each of which shall be an organization described in Section 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code. "CLASS B PREFERRED STOCK" shall have the meaning set forth in Section 1 of this Article. "CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor thereto, as interpreted by any applicable regulations or other administrative pronouncements as in effect from time to time. "COMMON STOCK" shall mean the Class A Common Stock, $.01 par value per share, of the Corporation or such shares of the Corporation's capital stock into which outstanding shares of Common Stock shall be reclassified. "CONVERSION PRICE" shall mean the conversion price per share of Common Stock for which each share of Class B Preferred Stock is convertible, as such Conversion Price may be adjusted pursuant to paragraph (d) of Section 7 of this Article. The initial Conversion Price shall be $30.45 (equivalent to an initial conversion rate of 3.28407 shares of Common Stock for each share of Class B Preferred Stock). "CURRENT MARKET PRICE" of publicly traded shares of Common Stock or any other class or series of capital stock or other security of the Corporation or of any similar security of any other issuer for any day shall mean the closing price, regular way on such day, or, if no sale takes place on such day, the average of the reported closing bid and asked prices regular way on such day, in either case as reported on the principal national securities exchange on which such securities are listed or admitted for trading, or, if such security is not quoted on any national securities exchange, on the National Market of the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or, if such security is not quoted on the NASDAQ National Market, the average of the closing bid and asked prices on such day in the over-the-counter market as reported by NASDAQ or, if bid and asked prices for such security on such day shall not have been reported through NASDAQ, the average of the bid and asked prices on such day as furnished by any New York Stock Exchange or National Association of Securities Dealers, Inc. member firm regularly making a market in such security selected for such purpose by the Chief Executive Officer or the Board of Directors or if any class or series of securities are not publicly traded, the fair value of the shares of such class as determined reasonably and in good faith by the Board of Directors of the Corporation. "DISTRIBUTION" shall have the meaning set forth in paragraph (d)(iii) of Section 7 of this Article. "DIVIDEND PAYMENT DATE" shall mean, with respect to each Dividend Period, (a) the date that cash dividends are paid on the Common Stock with respect to such Dividend Period; or (b) if such dividends have not been paid on the Common Stock by 9:00 a.m., New York City time, on the sixtieth day from and including the last day of such Dividend Period, then on such day; provided, further, that if any Dividend Payment Date falls on any day other than a Business Day, the dividend payment payable on such Dividend Payment Date shall be paid on the Business Day immediately following such Dividend Payment Date. "DIVIDEND PERIODS" shall mean the Initial Dividend Period and each subsequent quarterly dividend period commencing on and including January 1, April 1, July 1 and October 1 of each year and ending on and including the day preceding the first day of the next succeeding Dividend Period, other than the Dividend Period during which any Class B Preferred Stock shall be redeemed pursuant to Section 5 hereof, which shall end on and include the Call Date with respect to the Class B Preferred Stock being redeemed. "EQUITY STOCK" shall mean one or more shares of any class of capital stock of the Corporation. "EXCESS TRANSFER" has the meaning set forth in Section 11.3(A) of this Article. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. "FAIR MARKET VALUE" shall mean the average of the daily Current Market Prices of a share of Common Stock during five (5) consecutive Trading Days selected by the Corporation commencing not more than twenty (20) Trading Days before, and ending not later than, the earlier of the day in question and the day before the "ex" date with respect to the issuance or distribution requiring such computation. The term "'ex' date," when used with respect to any issuance or distribution, means the first day on which the share of Common Stock trades regular way, without the right to receive such issuance or distribution, on the exchange or in the market, as the case may be, used to determine that day's Current Market Price. "ISSUE DATE" shall mean August 4, 1997. "INITIAL DIVIDEND PERIOD" shall mean the period commencing on and including the Issue Date and ending on and including September 30, 1997. "INITIAL HOLDER" shall mean Terry Considine. "INITIAL HOLDER LIMIT" shall mean a number of the Outstanding shares of Class B Preferred Stock of the Corporation having an Aggregate Value not in excess of the excess of (x) 15% of the Aggregate Value of all Outstanding shares of Equity Stock over (y) the Aggregate Value of all shares of Equity Stock other than Class B Preferred Stock that are Beneficially Owned by the Initial Holder. From the Issue Date, the secretary of the Corporation, or such other person as shall be designated by the Board of Directors, shall upon request make available to the representative(s) of the Initial Holder and the Board of Directors, a schedule that sets forth the then-current Initial Holder Limit applicable to the Initial Holder. "JUNIOR STOCK" shall have the meaning set forth in paragraph (c) of Section 8 of this Article. "LOOK-THROUGH ENTITY" shall mean a Person that is either (i) described in Section 401(a) of the Code as provided under Section 856(h)(3) of the Code or (ii) registered under the Investment Company Act of 1940. "LOOK-THROUGH OWNERSHIP LIMIT" shall mean, for any Look-Through Entity, a number of the Outstanding shares of Class B Preferred Stock of the Corporation having an Aggregate Value not in excess of the excess of (x) 15% of the Aggregate Value of all Outstanding shares of Equity Stock over (y) by the Aggregate Value of all shares of Equity Stock other than Class B Preferred Stock that are Beneficially Owned by the Look-Through Entity. "MARKET PRICE" on any date shall mean, with respect to any share of Equity Stock, the Closing Price of a share of that class of Equity Stock on the Trading Day immediately preceding such date. The term "CLOSING PRICE" on any date shall mean the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE or, if the Equity Stock is not listed or admitted to trading on the NYSE, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Equity Stock is listed or admitted to trading or, if the Equity Stock is not listed or admitted to trading on any national securities exchange, the last quoted price, or if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the principal other automated quotations system that may then be in use or, if the Equity Stock is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Equity Stock selected by the Board of Directors of the Company. "NYSE" shall mean the New York Stock Exchange, Inc. "OUTSTANDING" shall mean issued and outstanding shares of Equity Stock of the Corporation, PROVIDED that for purposes of the application of the Ownership Limit, the Look-Through Ownership Limit or the Initial Holder Limit to any Person, the term "OUTSTANDING" shall be deemed to include the number of shares of Equity Stock that such Person alone, at that time, could acquire pursuant to any options or convertible securities. "OWNERSHIP LIMIT" shall mean, for any Person other than the Initial Holder or a Look-Through Entity, a number of the Outstanding shares of Class B Preferred Stock of the Corporation having an Aggregate Value not in excess of the excess of (x) 8.7% of the Aggregate Value of all Outstanding shares of Equity Stock over (y) the Aggregate Value of all shares of Equity Stock other than Class B Preferred Stock that are Beneficially Owned by the Person. "OWNERSHIP RESTRICTIONS" shall mean collectively the Ownership Limit as applied to Persons other than the Initial Holder or Look-Through Entities, the Initial Holder Limit as applied to the Initial Holder and the Look-Through Ownership Limit as applied to Look-Through Entities. "PARITY STOCK" shall have the meaning set forth in paragraph (b) of Section 8 of this Article. "PERSON" shall mean (a) for purposes of Section 11 of this Article, (i) an individual, corporation, partnership, estate, trust (including a trust qualifying under Section 401(a) or 501(c) of the Code), association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, and (ii) also includes a group as that term is used for purposes of Section 13(d)(3) of the Exchange Act and (b) for purposes of the remaining Sections of this Article, any individual, firm, partnership, corporation or other entity and shall include any successor (by merger or otherwise) of such entity. "PROHIBITED TRANSFEREE" has the meaning set forth in Section 11.3(A) of this Article. "REIT" shall mean a "real estate investment trust" as defined in Section 856 of the Code. "SENIOR STOCK" shall have the meaning set forth in paragraph (a) of Section 8 of this Article. "SET APART FOR PAYMENT" shall be deemed to include, without any action other than the following, the recording by the Corporation in its accounting ledgers of any accounting or bookkeeping entry which indicates, pursuant to a declaration of dividends or other distribution by the Board of Directors, the allocation of funds to be so paid on any series or class of capital stock of the Corporation; provided, however, that if any funds for any class or series of Junior Stock or any class or series of Parity Stock are placed in a separate account of the Corporation or delivered to a disbursing, paying or other similar agent, then "set apart for payment" with respect to the Class B Preferred Stock shall mean placing such funds in a separate account or delivering such funds to a disbursing, paying or other similar agent. "TRADING DAY", as to any securities, shall mean any day on which such securities are traded on the principal national securities exchange on which such securities are listed or admitted or, if such securities are not listed or admitted for trading on any national securities exchange, the NASDAQ National Market or, if such securities are not listed or admitted for trading on the NASDAQ National Market, any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. "TRANSACTION" shall have the meaning set forth in paragraph (e) of Section 7 of this Article. "TRANSFER" shall mean any sale, transfer, gift, assignment, devise or other disposition of a share of Class B Preferred Stock (including (i) the granting of an option or any series of such options or entering into any agreement for the sale, transfer or other disposition of Class B Preferred Stock or (ii) the sale, transfer, assignment or other disposition of any securities or rights convertible into or exchangeable for Class B Preferred Stock), whether voluntary or involuntary, whether of record or Beneficial Ownership, and whether by operation of law or otherwise (including, but not limited to, any transfer of an interest in other entities that results in a change in the Beneficial Ownership of shares of Class B Preferred Stock). The term "TRANSFERS" and "TRANSFERRED" shall have correlative meanings. "TRANSFER AGENT" means such transfer agent as may be designated by the Board of Directors or their designee as the transfer agent for the Class B Preferred Stock; provided, that if the Corporation has not designated a transfer agent then the Corporation shall act as the transfer agent for the Class B Preferred Stock. "TRUST" shall mean the trust created pursuant to Section 11.3 of this Article. "TRUSTEE" shall mean the Person unaffiliated with either the Corporation or the Prohibited Transferee that is appointed by the Corporation to serve as trustee of the Trust. "VOTING PREFERRED STOCK" shall have the meaning set forth in Section 9 of this Article. 3. DIVIDENDS. (a) The holders of Class B Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors out of funds legally available for that purpose, cumulative dividends payable in cash in an amount per share of Class B Preferred Stock equal to the greater of (i) the base dividend of $1.78125 per quarter (the "Base Rate") or (ii) the cash dividends declared on the number of shares of Common Stock, or portion thereof, into which a share of Class B Preferred Stock is convertible. The dividends payable with respect to the Initial Dividend Period shall be determined solely by reference to the Base Rate. The amount referred to in clause (ii) of this paragraph (a) with respect to each succeeding Dividend Period shall be determined as of the applicable Dividend Payment Date by multiplying the number of shares of Common Stock, or portion thereof calculated to the fourth decimal point, into which a share of Class B Preferred Stock would be convertible at the opening of business on such Dividend Payment Date (based on the Conversion Price then in effect) by the aggregate cash dividends payable or paid for such Dividend Period in respect of a share of Common Stock outstanding as of the record date for the payment of dividends on the Common Stock with respect to such Dividend Period. If (A) the Corporation pays a cash dividend on the Common Stock after the Dividend Payment Date for the corresponding Dividend Period and (B) the dividend on the Class B Preferred Stock for such Dividend Period calculated pursuant to clause (ii) of this paragraph (a), taking into account the Common Stock dividend referenced in clause (A), exceeds the dividend previously declared on the Class B Preferred Stock for such Dividend Period, the Corporation shall pay an additional dividend to the holders of the Class B Preferred Stock on the date that the Common Stock dividend referenced in clause (A) is paid, in an amount equal to the difference between the dividend calculated pursuant to clause (B) and the dividends previously declred on the Class B Preferred Stock with respect to such Dividend Period. Such dividends shall be cumulative from the Issue Date, whether or not in any Dividend Period or Periods such dividends shall be declared or there shall be funds of the Corporation legally available for the payment of such dividends, and shall be payable quarterly in arrears on the Dividend Payment Dates, commencing on the first Dividend Payment Date after the Issue Date. Each such dividend shall be payable in arrears to the holders of record of the Class B Preferred Stock, as they appear on the stock records of the Corporation at the close of business on a record date fixed by the Board of Directors which shall be not more than 60 days prior to the applicable Dividend Payment Date and, within such 60 day period, shall be the same date as the record date for the regular quarterly dividend payable with respect to the Common Stock for the Dividend Period to which such Dividend Payment Date relates (or, if there is no such record date for Common Stock, then such date as the Board of Directors may fix). Accumulated, accrued and unpaid dividends for any past Dividend Periods may be declared and paid at any time, without reference to any regular Dividend Payment Date, to holders of record on such date, which date shall not precede by more than 45 days the payment date thereof, as may be fixed by the Board of Directors. Upon a final administrative determination by the Internal Revenue Service that the Corporation does not qualify as a real estate investment trust in accordance with Section 856 of the Code, the Base Rate set forth in (a)(i) will be increased to $3.03125 until such time as the Corporation regains its status as a real estate investment trust; provided, however, that if the Corporation contests its loss of real estate investment trust status in Federal Court, following its receipt of an opinion of nationally recognized tax counsel to the effect that there is a reasonable basis to contest such loss of status, the Base Rate shall not be increased during the pendency of such judicial proceeding; provided further, however, that upon a final judicial determination in Federal Tax Court, Federal District Court or the Federal Claims Court that the Corporation does not qualify as a real estate investment trust, the Base Rate will be increased as stated above from the date of such judicial determination. (b) The amount of dividends payable per share of Class B Preferred Stock for the Initial Dividend Period, or any other period shorter than a full Dividend Period, shall be computed ratably on the basis of twelve 30-day months and a 360-day year. Holders of Class B Preferred Stock shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of cumulative dividends, as herein provided, on the Class B Preferred Stock. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Class B Preferred Stock that may be in arrears. (c) So long as any of the shares of Class B Preferred Stock are outstanding, except as described in the immediately following sentence, no dividends shall be declared or paid or set apart for payment by the Corporation and no other distribution of cash or other property shall be declared or made directly or indirectly by the Corporation with respect to any class or series of Parity Stock for any period unless dividends equal to the full amount of accumulated, accrued and unpaid dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof has been or contemporaneously is set apart for such payment on the Class B Preferred Stock for all Dividend Periods terminating on or prior to the Dividend Payment Date with respect to such class or series of Parity Stock. When dividends are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, all dividends declared upon the Class B Preferred Stock and all dividends declared upon any other class or series of Parity Stock shall be declared ratably in proportion to the respective amounts of dividends accumulated, accrued and unpaid on the Class B Preferred Stock and accumulated, accrued and unpaid on such Parity Stock. (d) So long as any of the shares of Class B Preferred Stock are outstanding, no dividends (other than dividends or distributions paid in shares of or options, warrants or rights to subscribe for or purchase shares of Junior Stock) shall be declared or paid or set apart for payment by the Corporation and no other distribution of cash or other property shall be declared or made directly or indirectly by the Corporation with respect to any shares of Junior Stock, nor shall any shares of Junior Stock be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Common Stock made for purposes of an employee incentive or benefit plan of the Corporation or any subsidiary) for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) directly or indirectly by the Corporation (except by conversion into or exchange for Junior Stock), nor shall any other cash or other property otherwise be paid or distributed to or for the benefit of any holder of shares of Junior Stock in respect thereof, directly or indirectly, by the Corporation unless in each case (i) the full cumulative dividends (including all accumulated, accrued and unpaid dividends) on all outstanding shares of Class B Preferred Stock and any other Parity Stock of the Corporation shall have been paid or such dividends have been declared and set apart for payment for all past Dividend Periods with respect to the Class B Preferred Stock and all past dividend periods with respect to such Parity Stock and (ii) sufficient funds shall have been paid or set apart for the payment of the full dividend for the current Dividend Period with respect to the Class B Preferred Stock and the current dividend period with respect to such Parity Stock. 4. LIQUIDATION PREFERENCE. (a) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any payment or distribution of the Corporation (whether capital or surplus) shall be made to or set apart for the holders of Junior Stock, the holders of shares of Class B Preferred Stock shall be entitled to receive One Hundred Dollars ($100) per share of Class B Preferred Stock (the "Liquidation Preference"), plus an amount equal to all dividends (whether or not earned or declared) accumulated, accrued and unpaid thereon to the date of final distribution to such holders; but such holders shall not be entitled to any further payment. Until the holders of the Class B Preferred Stock have been paid the Liquidation Preference in full, plus an amount equal to all dividends (whether or not earned or declared) accumulated, accrued and unpaid thereon to the date of final distribution to such holders, no payment will be made to any holder of Junior Stock upon the liquidation, dissolution or winding up of the Corporation. If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation, or proceeds thereof, distributable among the holders of Class B Preferred Stock shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other shares of any class or series of Parity Stock, then such assets, or the proceeds thereof, shall be distributed among the holders of Class B Preferred Stock and any such other Parity Stock ratably in the same proportion as the respective amounts that would be payable on such Class B Preferred Stock and any such other Parity Stock if all amounts payable thereon were paid in full. For the purposes of this Section 4, (i) a consolidation or merger of the Corporation with one or more corporations, (ii) a sale or transfer of all or substantially all of the Corporation's assets, or (iii) a statutory share exchange shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntar, of the Corporation. (b) Upon any liquidation, dissolution or winding up of the Corporation, after payment shall have been made in full to the holders of Class B Preferred Stock and any Parity Stock, as provided in this Section 4, any other series or class or classes of Junior Stock shall, subject to the respective terms thereof, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Class B Preferred Stock and any Parity Stock shall not be entitled to share therein. 5. REDEMPTION AT THE OPTION OF THE CORPORATION. (a) Shares of Class B Preferred Stock shall not be redeemable by the Corporation prior to August 4, 2002. On and after August 4, 2002, the Corporation, at its option, may redeem shares of Class B Preferred Stock, in whole or from time to time in part, at a redemption price payable in cash equal to 100% of the Liquidation Preference thereof, plus all accrued and unpaid dividends to the Call Date. (b) Shares of Class B Preferred Stock shall be redeemed by the Corporation on the date specified in the notice to holders required under paragraph (d) of this Section 5 (the "Call Date"). The Call Date shall be selected by the Corporation, shall be specified in the notice of redemption and shall be not less than 30 days nor more than 60 days after the date notice of redemption is sent by the Corporation. (c) If full cumulative dividends on all outstanding shares of Class B Preferred Stock and any other class or series of Parity Stock of the Corporation have not been paid or declared and set apart for payment, no shares of Class B Preferred Stock may be redeemed unless all outstanding shares of Class B Preferred Stock are simultaneously redeemed and neither the Corporation nor any affiliate of the Corporation may purchase or acquire shares of Class B Preferred Stock, otherwise than pursuant to a purchase or exchange offer made on the same terms to all holders of shares of Class B Preferred Stock. (d) If the Corporation shall redeem shares of Class B Preferred Stock pursuant to paragraph (a) of this Section 5, notice of such redemption shall be given to each holder of record of the shares to be redeemed. Such notice shall be provided by first class mail, postage prepaid, at such holder's address as the same appears on the stock records of the Corporation. Neither the failure to mail any notice required by this paragraph (d), nor any defect therein or in the mailing thereof to any particular holder, shall affect the sufficiency of the notice or the validity of the proceedings for redemption with respect to the other holders. Any notice which was mailed in the manner herein provided shall be conclusively presumed to have been duly given on the date mailed whether or not the holder receives the notice. Each such notice shall state, as appropriate: (1) the Call Date; (2) the number of shares of Class B Preferred Stock to be redeemed and, if fewer than all such shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the place or places at which certificates for such shares are to be surrendered for cash; and (4) the then-current Conversion Price. Notice having been mailed as aforesaid, from and after the Call Date (unless the Corporation shall fail to make available the amount of cash necessary to effect such redemption), (i) except as otherwise provided herein, dividends on the shares of Class B Preferred Stock so called for redemption shall cease to accumulate or accrue on the shares of Class B Preferred Stock called for redemption (except that, in the case of a Call Date after a dividend record date and prior to the related Dividend Payment Date, holders of Class B Preferred Stock on the dividend record date will be entitled on such Dividend Payment Date to receive the dividend payable on such shares), (ii) said shares shall no longer be deemed to be outstanding, and (iii) all rights of the holders thereof as holders of Class B Preferred Stock of the Coporation shall cease (except the rights to receive the cash payable upon such redemption, without interest thereon, upon surrender and endorsement of their certificates if so required and to receive any dividends payable thereon). The Corporation's obligation to make available the redemption price in accordance with the preceding sentence shall be deemed fulfilled if, on or before the Call Date, the Corporation shall deposit with a bank or trust company (which may be an affiliate of the Corporation) that has, or is an affiliate of a bank or trust company that has, a capital and surplus of at least $50,000,000, such amount of cash as is necessary for such redemption, in trust, with irrevocable instructions that such cash be applied to the redemption of the shares of Class B Preferred Stock so called for redemption. No interest shall accrue for the benefit of the holders of shares of Class B Preferred Stock to be redeemed on any cash so set aside by the Corporation. Subject to applicable escheat laws, any such cash unclaimed at the end of two years from the Call Date shall revert to the general funds of the Corporation, after which reversion the holders of shares of Class B Preferred Stock so called for redemption shall look only to the general funds of the Corporation for the payment of such cash. As promptly as practicable after the surrender in accordance with such notice of the certificates for any such shares of Class B Preferred Stock to be so redeemed (properly endorsed or assigned for transfer, if the Corporation shall so require and the notice shall so state), such certificates shall be exchanged for cash (without interest thereon) for which such shares have been redeemed in accordance with such notice. If fewer than all the outstanding shares of Class B Preferred Stock are to be redeemed, shares to be redeemed shall be selected by the Corporation from outstanding shares of Class B Preferred Stock not previously called for redemption by lot or, with respect to the number of shares of Class B Preferred Stock held of record by each holder of such shares, pro rata (as nearly as may be) or by any other method as may be determined by the Board of Directors in its discretion to be equitable. If fewer than all the shares of Class B Preferred Stock represented by any certificate are redeemed, then a new certificate representing the unredeemed shares shall be issued without cost to the holders thereof. 6. STATUS OF REACQUIRED STOCK. All shares of Class B Preferred Stock which shall have been issued and reacquired in any manner by the Corporation (including shares of Class B Preferred Stock which have been surrendered for conversion into Common Stock) shall be returned to the status of authorized, but unissued shares of Class B Preferred Stock. 7. CONVERSION. At any time on or after August 4, 1998. Holders of shares of Class B Preferred Stock shall have the right to convert all or a portion of such shares into shares of Common Stock, as follows: (a) Subject to and upon compliance with the provisions of this Section 7, a holder of shares of Class B Preferred Stock shall have the right, at such holder's option, at any time on or after August 4, 1998 to convert such shares, in whole or in part, into the number of fully paid and non-assessable shares of authorized but previously unissued shares of Common Stock per each share of Class B Preferred Stock obtained by dividing the Liquidation Preference (excluding any accumulated, accrued and unpaid dividends) per share of Class B Preferred Stock by the Conversion Price (as in effect at the time and on the date provided for in the last subparagraph of paragraph (b) of this Section 7) and by surrendering such shares to be converted, such surrender to be made in the manner provided in paragraph (b) of this Section 7; provided, however, that the right to convert shares of Class B Preferred Stock called for redemption pursuant to Section 5 shall terminate at the close of business on the Call Date fixed for such redemption, unless the Corporation shall default in making payment of cash payable upon such redemption under Section 5 of this Article. (b) In order to exercise the conversion right, the holder of each share of Class B Preferred Stock to be converted shall surrender the certificate representing such share, duly endorsed or assigned to the Corporation or in blank, at the office of the Transfer Agent, accompanied by written notice to the Corporation that the holder thereof elects to convert such share of Class B Preferred Stock. Unless the shares issuable on conversion are to be issued in the same name as the name in which such share of Class B Preferred Stock is registered, each share surrendered for conversion shall be accompanied by instruments of transfer, in form satisfactory to the Corporation, duly executed by the holder or such holder's duly authorized attorney and an amount sufficient to pay any transfer or similar tax (or evidence reasonably satisfactory to the Corporation demonstrating that such taxes have been paid). Holders of shares of Class B Preferred Stock at the close of business on a dividend payment record date shall be entitled to receive the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the conversion thereof following such dividend payment record date and prior to such Dividend Payment Date. Except as provided above, the Corporation shall make no payment or allowance for unpaid dividends, whether or not in arrears, on converted shares or for dividends on the shares of Common Stock issued upon such conversion. As promptly as practicable after the surrender of certificates for shares of Class B Preferred Stock as aforesaid, the Corporation shall issue and shall deliver at such office to such holder, or send on such holder's written order, a certificate or certificates for the number of full shares of Common Stock issuable upon the conversion of such shares of Class B Preferred Stock in accordance with provisions of this Section 7, and any fractional interest in respect of a share of Common Stock arising upon such conversion shall be settled as provided in paragraph (c) of this Section 7. Each conversion shall be deemed to have been effected immediately prior to the close of business on the date on which the certificates for shares of Class B Preferred Stock shall have been surrendered and such notice received by the Corporation as aforesaid, and the Person or Persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares represented thereby at such time on such date and such conversion shall be at the Conversion Price in effect at such time on such date unless the stock transfer books of the Corporation shall be closed on that date, in which event such Person or Persons shall be deemed to have become such holder or holders of record at the close of business on the next succeeding day on which such stock transfer books are open, but such conversion shall be at the Conversion Price in effect on the date on which such shares shall have been surrendered and such notice received by the Corporation. If the dividend payment record date for the Class B Preferred Stock and Common Stock do not coincide, and the preceding sentence does not operate to ensure that a holder of shares of Class B Preferred Stock whose shares are converted into Common Stock does not receive dividends on both the shares of Class B Preferred Stock and the Common Stock into which such shares are converted for the same Dividend Period, then notwithstanding anything herein to the contrary, it is the intent, and the Transfer Agent is authorized to ensure that no conversion after the earlier of such record dates will be accepted until after the latter of such record dates. (c) No fractional share of Common Stock or scrip representing fractions of a share of Common Stock shall be issued upon conversion of the shares of Class B Preferred Stock. Instead of any fractional interest in a share of Common Stock that would otherwise be deliverable upon the conversion of shares of Class B Preferred Stock, the Corporation shall pay to the holder of such share an amount in cash based upon the Current Market Price of the Common Stock on the Trading Day immediately preceding the date of conversion. If more than one share shall be surrendered for conversion at one time by the same holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Class B Preferred Stock so surrendered. (d) The Conversion Price shall be adjusted from time to time as follows: (i) If the Corporation shall after the Issue Date (A) pay a dividend or make a distribution on its capital stock in shares of Common Stock, (B) subdivide its outstanding Common Stock into a greater number of shares, (C) combine its outstanding Common Stock into a smaller number of shares or (D) issue any shares of capital stock by reclassification of its outstanding Common Stock, the Conversion Price in effect at the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such dividend or distribution or at the opening of business on the day following the day on which such subdivision, combination or reclassification becomes effective, as the case may be, shall be adjusted so that the holder of any share of Class B Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock (or fraction of a share of Common Stock) that such holder would have owned or have been entitled to receive after the happening of any of the events described above had such share of Class B Preferred Stock been converted immediately prior to the record date in the case of a dividend or distribution or the effective date in the case of a subdivision, combination or reclassification. An adjustment made pursuant to this paragraph (d)(i) of this Section 7 shall become effective immediately after the opening of business on the day next following the record date (except as provided in paragraph (h) below) in the case of a dividend or distribution and shall become effective immediately after the opening of business on the day next following the effective date in the case of a subdivision, combination or reclassification. (ii) If the Corporation shall issue after the Issue Date rights, options or warrants to all holders of Common Stock entitling them (for a period expiring within 45 days after the record date described below in this paragraph (d)(ii) of this Section 7) to subscribe for or purchase Common Stock at a price per share less than the Fair Market Value per share of the Common Stock on the record date for the determination of stockholders entitled to receive such rights, options or warrants, then the Conversion Price in effect at the opening of business on the day next following such record date shall be adjusted to equal the price determined by multiplying (A) the Conversion Price in effect immediately prior to the opening of business on the day following the date fixed for such determination by (B) a fraction, the numerator of which shall be the sum of (X) the number of shares of Common Stock outstanding on the close of business on the date fixed for such determination and (Y) the number of shares that could be purchased at such Fair Market Value from the aggregate proceeds to the Corporation from the exercise of such rights, options or warrants for Common Stock, and the denominator of which shall be the sum of (XX) the number of shares of Common Stock outstanding on the close of business on the date fixed for such determination and (YY) the number of additional shares of Common Stock offered for subscription or purchase pursuant to such rights, options or warrants. Such adjustment shall become effective immediately after the opening of business on the day next following such record date (except as provided in paragraph (h) below). In determining whether any rights, options or warrants entitle the holders of Common Stock to subscribe for or purchase Common Stock at less than such Fair Market Value, there shall be taken into account any consideration received by the Corporation upon issuance and upon exercise of such rights, options or warrants, the value of such consideration, if other than cash, to be determined in good fith by the Board of Directors. (iii) If the Corporation shall after the Issue Date make a distribution on its Common Stock other than in cash or shares of Common Stock (including any distribution in securities (other than rights, options or warrants referred to in paragraph (d)(ii) of this Section 7)) (each of the foregoing being referred to herein as a "distribution"), then the Conversion Price in effect at the opening of business on the next day following the record date for determination of stockholders entitled to receive such distribution shall be adjusted to equal the price determined by multiplying (A) the Conversion Price in effect immediately prior to the opening of business on the day following the record date by (B) a fraction, the numerator of which shall be the difference between (X) the number of shares of Common Stock outstanding on the close of business on the record date and (Y) the number of shares determined by dividing (aa) the aggregate value of the property being distributed by (bb) the Fair Market Value per share of Common Stock on the record date, and the denominator of which shall be the number of shares of Common Stock outstanding on the close of business on the record date. Such adjustment shall become effective immediately after the opening of business on the day next following such record date (except as provided below). The value of the property being distributed shall be as determined in good faith by the Board of Directors; provided, however, if the property being distributed is a publicly traded security, its value shall be calculated in accordance with the procedure for calculating the Fair Market Value of a share of Common Stock (calculated for a period of five consecutive Trading Days commencing on the twentieth Trading Day after the distribution). Neither the issuance by the Corporation of rights, options or warrants to subscribe for or purchase securities of the Corporation nor the exercise thereof shall be deemed a distribution under this paragraph. (iv) If after the Issue Date the Corporation shall acquire, pursuant to an issuer or self tender offer, all or any portion of the outstanding Common Stock and such tender offer involves the payment of consideration per share of Common Stock having a fair market value (as determined in good faith by the Board of Directors), at the last time (the "Expiration Time") tenders may be made pursuant to such offer, that exceeds the Current Market Price per share of Common Stock on the Trading Day next succeeding the Expiration Time, then the Conversion Price in effect on the opening of business on the day next succeeding the Expiration Time shall be adjusted to equal the price determined by multiplying (A) the Conversion Price in effect immediately prior to the Expiration Time by (B) a fraction, the numerator of which shall be (X) the number of shares of Common Stock outstanding (including the shares acquired in the tender offer (the "Acquired Shares")) immediately prior to the Expiration Time, multiplied by (Y) the Current Market Price per share of Common Stock on the Trading Day next succeeding the Expiration Time, and the denominator of which shall be the sum of (XX) the fair market value (determined as aforesaid) of the aggregate consideration paid to acquire the Acquired Shares and (YY) the product of (I) the number of shares of Common Stock outstanding (less any Acquired Shares) at the Expiration Time, multiplied by (II) the Current Market Price per share of Common Stock on the Trading Day next succeeding the Expiration Time. (v) No adjustment in the Conversion Price shall be required unless such adjustment would require a cumulative increase or decrease of at least 1% in such price; provided, however, that any adjustments that by reason of this paragraph (d)(v) are not required to be made shall be carried forward and taken into account in any subsequent adjustment until made; and provided, further, that any adjustment shall be required and made in accordance with the provisions of this Section 7 (other than this paragraph (d)(v)) not later than such time as may be required in order to preserve the tax-free nature of a distribution to the holders of shares of Common Stock. Notwithstanding any other provisions of this Section 7, the Corporation shall not be required to make any adjustment of the Conversion Price for the issuance of (A) any shares of Common Stock pursuant to any plan providing for the reinvestment of dividends or interest payable on securities of the Corporation and the investment of optional amounts in shares of Common Stock under such plan or (B) any options, rights or shares of Common Stock pursuant to any stock option, stock purchase or other stock-based plan maintained by the Corporation. All calculations under this Section 7 shall be made to the nearest cent (with $.005 being rounded upward) or to the nearest one-tenth of a share (with .05 of a share being rounded upward), as the case may be. Anything in this paragraph (d) of this Section 7 to the contrary notwithstanding, the Corporation shall be entitled, to the extent permitted by law, to make such reductions in the Conversion Price, in addition to those required by this paragraph (d), as it in its discretion shall determine to be advisable in order that any stock dividends, subdivision of shares, reclassification or combination of shares, distribution of rights or warrants to purchase stock or securities, or a distribution of other assets (other than cash dividends) hereafter made by the Corporation to its stockholders shall not be taxable, or if that is not possible, to diminish any income taxes that are otherwise payable because of such event. (e) If the Corporation shall be a party to any transaction (including without limitation a merger, consolidation, statutory share exchange, issuer or self tender offer for at least 30% of the shares of Common Stock outstanding, sale of all or substantially all of the Corporation's assets or recapitalization of the Common Stock, but excluding any transaction as to which paragraph (d)(i) of this Section 7 applies) (each of the foregoing being referred to herein as a "Transaction"), in each case as a result of which shares of Common Stock shall be converted into the right to receive stock, securities or other property (including cash or any combination thereof), each share of Class B Preferred Stock which is not converted into the right to receive stock, securities or other property in connection with such Transaction shall thereupon be convertible into the kind and amount of shares of stock, securities and other property (including cash or any combination thereof) receivable upon such consummation by a holder of that number of shares of Common Stock into which one share of Class B Preferred Stock was convertible immediately prior to such Transaction (without giving effect to any Conversion Price adjustment pursuant to Section 7(d)(iv) of this Article). The Corporation shall not be a party to any Transaction unless the terms of such Transaction are consistent with the provisions of this paragraph (e), and it shall not consent or agree to the occurrence of any Transaction until the Corporation has entered into an agreement with the successor or purchasing entity, as the case may be, for the benefit of the holders of the Class B Preferred Stock that will contain provisions enabling the holders of the Class B Preferred Stock that remain outstanding after such Transaction to convert into the consideration received by holders of Common Stock at the Conversion Price in effect immediately prior to such Transaction. The provisions of this paragraph (e) shall similarly apply to successive Transactions. (f) If: (i) the Corporation shall declare a dividend (or any other distribution) on the Common Stock (other than cash dividends and cash distributions); or (ii) the Corporation shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of any class or series of capital stock or any other rights or warrants; or (iii) there shall be any reclassification of the outstanding Common Stock or any consolidation or merger to which the Corporation is a party and for which approval of any stockholders of the Corporation is required, or a statutory share exchange, an issuer or self tender offer shall have been commenced for at least 30% of the outstanding shares of Common Stock (or an amendment thereto changing the maximum number of shares sought or the amount or type of consideration being offered therefor shall have been adopted), or the sale or transfer of all or substantially all of the assets of the Corporation as an entirety; or (iv) there shall occur the voluntary or involuntary liquidation, dissolution or winding up of the Corporation, then the Corporation shall cause to be filed with the Transfer Agent and shall cause to be mailed to each holder of shares of Class B Preferred Stock at such holder's address as shown on the stock records of the Corporation, as promptly as possible, a notice stating (A) the record date for the payment of such dividend, distribution or rights or warrants, or, if a record date is not established, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution or rights or warrants are to be determined or (B) the date on which such reclassification, consolidation, merger, statutory share exchange, sale, transfer, liquidation, dissolution or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, statutory share exchange, sale, transfer, liquidation, dissolution or winding up or (C) the date on which such tender offer commenced, the date on which such tender offer is scheduled to expire unless extended, the consideration offered and the other material terms thereof (or the material terms of any amendment thereto). Failure to give or receive such notice or any defect therein shall not affect the legality or validity of the proceedings described in this Section 7. (g) Whenever the Conversion Price is adjusted as herein provided, the Corporation shall promptly file with the Transfer Agent an officer's certificate setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment which certificate shall be conclusive evidence of the correctness of such adjustment absent manifest error. Promptly after delivery of such certificate, the Corporation shall prepare a notice of such adjustment of the Conversion Price setting forth the adjusted Conversion Price and the effective date such adjustment becomes effective and shall mail such notice of such adjustment of the Conversion Price to each holder of shares of Class B Preferred Stock at such holder's last address as shown on the stock records of the Corporation. (h) In any case in which paragraph (d) of this Section 7 provides that an adjustment shall become effective on the day next following the record date for an event, the Corporation may defer until the occurrence of such event (A) issuing to the holder of any share of Class B Preferred Stock converted after such record date and before the occurrence of such event the additional Common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the Common Stock issuable upon such conversion before giving effect to such adjustment and (B) paying to such holder any amount of cash in lieu of any fraction pursuant to paragraph (c) of this Section 7. (i) There shall be no adjustment of the Conversion Price in case of the issuance of any capital stock of the Corporation in a reorganization, acquisition or other similar transaction except as specifically set forth in this Section 7. (j) If the Corporation shall take any action affecting the Common Stock, other than action described in this Section 7, that in the opinion of the Board of Directors would materially adversely affect the conversion rights of the holders of Class B Preferred Stock, the Conversion Price for the Class B Preferred Stock may be adjusted, to the extent permitted by law, in such manner, if any, and at such time as the Board of Directors, in its sole discretion, may determine to be equitable under the circumstances. (k) The Corporation shall at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock solely for the purpose of effecting conversion of the Class B Preferred Stock, the full number of shares of Common Stock deliverable upon the conversion of all outstanding shares of Class B Preferred Stock not theretofore converted into Common Stock. For purposes of this paragraph (k), the number of shares of Common Stock that shall be deliverable upon the conversion of all outstanding shares of Class B Preferred Stock shall be computed as if at the time of computation all such outstanding shares were held by a single holder (and without regard to the Ownership Limit set forth in the Charter of the Corporation). The Corporation covenants that any shares of Common Stock issued upon conversion of the shares of Class B Preferred Stock shall be validly issued, fully paid and nonassessable. The Corporation shall use its best efforts to list the shares of Common Stock required to be delivered upon conversion of the shares of Class B Preferred Stock, prior to such delivery, upon each national securities exchange, if any, upon which the outstanding shares of Common Stock are listed at the time of such delivery. (l) The Corporation will pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock or other securities or property on conversion or redemption of shares of Class B Preferred Stock pursuant hereto; provided, however, that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issue or delivery of shares of Common Stock or other securities or property in a name other than that of the holder of the shares of Class B Preferred Stock to be converted or redeemed, and no such issue or delivery shall be made unless and until the Person requesting such issue or delivery has paid to the Corporation the amount of any such tax or established, to the reasonable satisfaction of the Corporation, that such tax has been paid. (m) In addition to any other adjustment required hereby, to the extent permitted by law, the Corporation from time to time may decrease the Conversion Price by any amount, permanently or for a period of at least twenty Business Days, if the decrease is irrevocable during the period. (n) Notwithstanding anything to the contrary contained in this Section 7, conversion of Class B Preferred Stock pursuant to this Section 7 shall be permitted only to the extent that such conversion would not result in a violation of the Ownership Restrictions (as defined in the Charter), after taking into account any waiver of such limitation granted to any holder of the shares of Class B Preferred Stock. 8. RANKING. Any class or series of capital stock of the Corporation shall be deemed to rank: (a) prior or senior to the Class B Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, if the holders of such class or series shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Class B Preferred Stock ("Senior Stock"); (b) on a parity with the Class B Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share thereof be different from those of the Class B Preferred Stock, if the holders of such class of stock or series and the Class B Preferred Stock shall be entitled to the receipt of dividends and of amounts distributable upon liquidation, dissolution or winding up in proportion to their respective amounts of accrued and unpaid dividends per share or liquidation preferences, without preference or priority one over the other ("Parity Stock"); and (c) junior to the Class B Preferred Stock, as to the payment of dividends or as to the distribution of assets upon liquidation, dissolution or winding up, if such stock or series shall be Common Stock or if the holders of Class B Preferred Stock shall be entitled to receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of shares of such class or series ("Junior Stock"). 9. VOTING. (a) If and whenever (i) six quarterly dividends (whether or not consecutive) payable on the Class B Preferred Stock or any series or class of Parity Stock shall be in arrears (which shall, with respect to any such quarterly dividend, mean that any such dividend has not been paid in full), whether or not earned or declared, or (ii) for two consecutive quarterly dividend periods the Corporation fails to pay dividends on the Common Stock in an amount per share at least equal to $0.4625 (subject to adjustment consistent with any adjustment of the Conversion Price pursuant to Section 7(d) of this Article) (the "Base Common Stock Dividend") the number of directors then constituting the Board of Directors shall be increased by two (in the case of an arrearage in dividends described in clause (i)) or one additional director (in the case of an arrearage in dividends described in clause (ii)) (in each case if not already increased by reason of similar types of provisions with respect to Voting Preferred Stock (as defined below)) and the holders of shares of Class B Preferred Stock, together with the holders of shares of every other series or class of Parity Stock (any other such series, the "Voting Preferred Stock"), voting as a single class regardless of series, shall be entitled to elect the two additional directors (in the case of an arrearage in dividends described in clause (i)) or one (in the case of an arrearage in dividends described in clause (ii)) to serve on the Board of Directors at any annual meeting of stockholders or special meeting held in place thereof, or at a special meeting of the holders of the Class B Preferred Stock and the Voting Preferred Stock called as hereinafter provided. Whenever (1) in the case of an arrearage in dividends described in clause (i), all arrears in dividends on the Class B Preferred Stock and the Voting Preferred Stock then outstanding shall have been paid and dividends thereon for the current quarterly dividend period shall have been paid or declared and set apart for payment, or 2) in the case of an arrearage in dividends described in clause (ii), the Corporation makes a quarterly dividend payment on the Common Stock in an amount per share equal to or exceeding the Base Common Stock Dividend, then the right of the holders of the Class B Preferred Stock and the Voting Preferred Stock to elect such additional two directors (in the case of an arrearage in dividends described in clause (i)) or one additional director (in the case of an arrearage in dividends described in clause (ii)) shall cease (but subject always to the same provision for the vesting of such voting rights in the case of any similar future arrearages), and the terms of office of all Persons elected as directors by the holders of the Class B Preferred Stock and the Voting Preferred Stock shall forthwith terminate and the number of directors constituting the Board of Directors shall be reduced accordingly. At any time after such voting power shall have been so vested in the holders of Class B Preferred Stock and the Voting Preferred Stock, if applicable, the Secretary of the Corporation may, and upon the written request of any holder of Class B Preferred Stock (addressed to the Secretary at the principal office of the Corporation) shall, call a special meeting of the holders of the Class B Preferred Stock and of the Voting Preferred Stock for the election of the two directors (in the case of an arrearage in dividends described in clause (i)) or one director (in the case of an arrearage in dividends described in clause (ii)) to be elected by them as herein provided, such call to be made by notice similar to that provided in the Bylaws of the Corporation for a special meeting of the stockholders or as required by law. If any such special meeting required to be called as above provided shall not be called by the Secretary within 20 days after receipt of any such request, then any holder of Class B Preferred Stock may call such meeting, upon the notice above provided, and for that purpose shall have access to the stock books ofthe Corporation. The directors or director elected at any such special meeting shall hold office until the next annual meeting of the stockholders or special meeting held in lieu thereof if such office shall not have previously terminated as above provided. If any vacancy shall occur among the directors elected by the holders of the Class B Preferred Stock and the Voting Preferred Stock, a successor shall be elected by the Board of Directors, upon the nomination of the then-remaining director elected by the holders of the Class B Preferred Stock and the Voting Preferred Stock or the successor of such remaining director, to serve until the next annual meeting of the stockholders or special meeting held in place thereof if such office shall not have previously terminated as provided above. (b) So long as any shares of Class B Preferred Stock are outstanding, in addition to any other vote or consent of stockholders required by law or by the Charter of the Corporation, the affirmative vote of at least 66-2/3% of the votes entitled to be cast by the holders of the Class B Preferred Stock, given in Person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating: (i) Any amendment, alteration or repeal of any of the provisions of these Articles Supplementary, the Charter or the By-Laws of the Corporation that materially adversely affects the voting powers, rights or preferences of the holders of the Class B Preferred Stock; provided, however, that the amendment of the provisions of the Charter so as to authorize or create, or to increase the authorized amount of, any Junior Stock or any shares of any class of Parity Stock shall not be deemed to materially adversely affect the voting powers, rights or preferences of the holders of Class B Preferred Stock; or (ii) The authorization, creation of, the increase in the authorized amount of, or issuance of , any shares of any class of Senior Stock or any security convertible into shares of any class of Senior Stock (whether or not such class of Senior Stock is currently authorized); provided, however, that no such vote of the holders of Class B Preferred Stock shall be required if, at or prior to the time when such amendment, alteration or repeal is to take effect, or when the issuance of any such prior shares or convertible security is to be made, as the case may be, provision is made for the redemption of all shares of Class B Preferred Stock at the time outstanding to the extent such redemption is authorized by Section 5 of this Article. For purposes of the foregoing provisions and all other voting rights under these Articles Supplementary, each share of Class B Preferred Stock shall have one (1) vote per share, except that when any other class or series of preferred stock shall have the right to vote with the Class B Preferred Stock as a single class on any matter, then the Class B Preferred Stock and such other class or series shall have with respect to such matters one (1) vote per $100 of stated liquidation preference. Except as otherwise required by applicable law or as set forth herein, the Class B Preferred Stock shall not have any relative, participating, optional or other special voting rights and powers other than as set forth herein, and the consent of the holders thereof shall not be required for the taking of any corporate action. 10. RECORD HOLDERS. The Corporation and the Transfer Agent may deem and treat the record holder of any share of Class B Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Corporation nor the Transfer Agent shall be affected by any notice to the contrary. 11.1 RESTRICTIONS ON OWNERSHIP AND TRANSFERS. (A) LIMITATION ON BENEFICIAL OWNERSHIP. Except as provided in Section 11.8, from and after the Issue Date, no Person (other than the Initial Holder or a Look-Through Entity) shall Beneficially Own shares of Class B Preferred Stock in excess of the Ownership Limit, the Initial Holder shall not Beneficially Own shares of Class B Preferred Stock in excess of the Initial Holder Limit and no Look-Through Entity shall Beneficially Own shares of Class B Preferred Stock in excess of the Look-Through Ownership Limit. (B) TRANSFERS IN EXCESS OF OWNERSHIP LIMIT. Except as provided in Section 11.8, from and after the Issue Date (and subject to Section 11.12), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system) that, if effective, would result in any Person (other than the Initial Holder or a Look-Through Entity) Beneficially Owning shares of Class B Preferred Stock in excess of the Ownership Limit shall be void AB INITIO as to the Transfer of such shares of Class B Preferred Stock that would be otherwise Beneficially Owned by such Person in excess of the Ownership Limit, and the intended transferee shall acquire no rights in such shares of Class B Preferred Stock. (C) TRANSFERS IN EXCESS OF INITIAL HOLDER LIMIT. Except as provided in Section 11.8, from and after the Issue Date (and subject to Section 11.12), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system) that, if effective, would result in the Initial Holder Beneficially Owning shares of Class B Preferred Stock in excess of the Initial Holder Limit shall be void AB INITIO as to the Transfer of such shares of Class B Preferred Stock that would be otherwise Beneficially Owned by the Initial Holder in excess of the Initial Holder limit, and the Initial Holder shall acquire no rights in such shares of Class B Preferred Stock. (D) TRANSFERS IN EXCESS OF LOOK-THROUGH OWNERSHIP LIMIT. Except as provided in Section 11.8 from and after the Issue Date (and subject to Section 11.12), any Transfer (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system) that, if effective, would result in any Look-Through Entity Beneficially Owning shares of Class B Preferred Stock in excess of the Look-Through Ownership limit shall be void AB INITIO as to the Transfer of such shares of Class B Preferred Stock that would be otherwise Beneficially Owned by such Look-Through Entity in excess of the Look-Through Ownership Limit and such Look-Through Entity shall acquire no rights in such shares of Class B Preferred Stock. (E) TRANSFERS RESULTING IN "CLOSELY HELD" STATUS. From and after the Issue Date, any Transfer that, if effective would result in the Corporation being "closely held" within the meaning of Section 856(h) of the Code, or would otherwise result in the Corporation failing to qualify as a REIT (including, without limitation, a Transfer or other event that would result in the Corporation owning (directly or constructively) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by the Corporation from such tenant would cause the Corporation to fail to satisfy any of the gross income requirements of Section 856(c) of the Code) shall be void AB INITIO as to the Transfer of shares of Class B Preferred Stock that would cause the Corporation (i) to be "closely held" within the meaning of Section 856(h) of the Code or (ii) otherwise fail to qualify as a REIT, as the case may be, and the intended transferee shall acquire no rights in such shares of Class B Preferred Stock. (F) SEVERABILITY ON VOID TRANSACTIONS. A Transfer of a share of Class B Preferred Stock that is null and void under Sections 11.1(B), (C), (D), or (E) of this Article because it would, if effective, result in (i) the ownership of Class B Preferred Stock in excess of the Initial Holder Limit, the Ownership Limit, or the Look-Through Ownership Limit, (ii) the Corporation being "closely held" within the meaning of Section 856(h) of the Code or (iii) the Corporation otherwise failing to qualify as a REIT, shall not adversely affect the validity of the Transfer of any other share of Class B Preferred Stock in the same or any other related transaction. 11.2 REMEDIES FOR BREACH. If the Board of Directors or a committee thereof shall at any time determine in good faith that a Transfer or other event has taken place in violation of Section 11.1 of this Article or that a Person intends to acquire or has attempted to acquire Beneficial Ownership of any shares of Class B Preferred Stock in violation of Section 11.1 of this Article (whether or not such violation is intended), the Board of Directors or a committee thereof shall be empowered to take any action as it deems advisable to refuse to give effect to or to prevent such Transfer or other event, including, but not limited to, refusing to give effect to such Transfer or other event on the books of the Corporation, causing the Corporation to redeem such shares at the then current Market Price and upon such terms and conditions as may be specified by the Board of Directors in its sole discretion (including, but not limited to, by means of the issuance of long-term indebtedness for the purpose of such redemption), demanding the repayment of any distributions received in respect of shares of Class B Preferred Stock acquired in violation of Section 11.1 of this Article or instituting proceedings to enjoin such Transfer or to rescind such Transfer or attempted Transfer; PROVIDED, HOWEVER, that any Transfers or attempted Transfers (or in the case of events other than a Transfer, Beneficial Ownership) in violation of Section 11.1 of this Article, regardless of any action (or non-action) by the Board of Directors or such committee, (a) shall be void AB INITIO or (b) shall automatically result in the transfer described in Section 11.3 of this Article; PROVIDED, FURTHER, that the provisions of this Section 11.2 shall be subject to the provisions of Section 11.12 of this Article; PROVIDED, FURTHER, that neither the Board of Directors nor any committee thereof may exercise such authority in a manner that interferes with any ownership or transfer of Class B Preferred Stock that is expressly authorized pursuant to Section 11.8(d) of this Article. 11.3. TRANSFER IN TRUST. (A) ESTABLISHMENT OF TRUST. If, notwithstanding the other provisions contained in this Article, at any time after the Issue Date there is a purported Transfer (an "EXCESS TRANSFER") (whether or not such Transfer is the result of transactions entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system) or other change in the capital structure of the Corporation (including, but not limited to, any redemption of Preferred Stock) or other event (including, but not limited to, any acquisition of any share of Equity Stock) such that (a) any Person (other than the Initial Holder or a Look-Through Entity) would Beneficially Own shares of Class B Preferred Stock in excess of the Ownership Limit, or (b) the Initial Holder would Beneficially Own shares of Class B Preferred Stock in excess of the Initial Holder Limit, or (c) any Person that is a Look-Through Entity would Beneficially Own shares of Class B Preferred Stock in excess of the Look-Through Ownership Limit (in any such event, the Person, Initial Holder or Look-Through Entity that would Beneficially Own shares of Class B Preferred Stock in excess of the Ownership Limit, the Initial Holder Limit or the Look-Through Entity Limit, respectively, is referred to as a "PROHIBITED TRANSFEREE"), then, except as otherwise provided in Section 11.8 of this Article, such shares of Class B Preferred Stock in excess of the Ownership Limit, the Initial Holder Limit or the Look-Through Ownership Limit, as the case may be, (rounded up to the nearest whole share) shall be automatically transferred to a Trustee in his capacity as trustee of a Trust for the exclusive benefit of one or more Charitable Beneficiaries. Such transfer to the Trustee shall be deemed to be effective as of the close of business on the business day prior to the Excess Transfer, change in capital structure or another event giving rise to a potential violation of the Ownership Limit, the Initial Holder Limit or the Look Through Entity Ownership Limit. (B) APPOINTMENT OF TRUSTEE. The Trustee shall be appointed by the Corporation and shall be a Person unaffiliated with either the Corporation or any Prohibited Transferee. The Trustee may be an individual or a bank or trust company duly licensed to conduct a trust business. (C) STATUS OF SHARES HELD BY THE TRUSTEE. Shares of Class B Preferred Stock held by the Trustee shall be issued and outstanding shares of capital stock of the Corporation. Except to the extent provided in Section 11.3(E), the Prohibited Transferee shall have no rights in the Class B Preferred Stock held by the Trustee, and the Prohibited Transferee shall not benefit economically from ownership of any shares held in trust by the Trustee, shall have no rights to dividends and shall not possess any rights to vote or other rights attributable to the shares held in the Trust. (D) DIVIDEND AND VOTING RIGHTS. The Trustee shall have all voting rights and rights to dividends with respect to shares of Class B Preferred Stock held in the Trust, which rights shall be exercised for the benefit of the Charitable Beneficiary. Any dividend or distribution paid prior to the discovery by the Corporation that the shares of Class B Preferred Stock have been transferred to the Trustee shall be repaid to the Corporation upon demand, and any dividend or distribution declared but unpaid shall be rescinded as void AB INITIO with respect to such shares of Class B Preferred Stock. Any dividends or distributions so disgorged or rescinded shall be paid over to the Trustee and held in trust for the Charitable Beneficiary. Any vote cast by a Prohibited Transferee prior to the discovery by the Corporation that the shares of Class B Preferred Stock have been transferred to the Trustee will be rescinded as void AB INITIO and shall be recast in accordance with the desires of the Trustee acting for the benefit of the Charitable Beneficiary. The owner of the shares at the time of the Excess Transfer, change in capital structure or other event giving rise to a potential violation of the Ownership Limit, Initial Holder Limit or Look-Through Entity Ownership Limit shall be deemed to have given an irrevocable proxy to the Trustee to vote the shares of Class B Preferred Stock for the benefit of the Charitable Beneficiary. (E) RESTRICTIONS ON TRANSFER. The Trustee of the Trust may sell the shares held in the Trust to a person, designated by the Trustee, whose ownership of the shares will not violate the Ownership Restrictions. If such a sale is made, the interest of the Charitable Beneficiary shall terminate and proceeds of the sale shall be payable to the Prohibited Transferee and to the Charitable Beneficiary as provided in this Section 11.3(E). The Prohibited Transferee shall receive the lesser of (1) the price paid by the Prohibited Transferee for the shares or, if the Prohibited Transferee did not give value for the shares (through a gift, devise or other transaction), the Market Price of the shares on the day of the event causing the shares to be held in the Trust and (2) the price per share received by the Trustee from the sale or other disposition of the shares held in the Trust. Any proceeds in excess of the amount payable to the Prohibited Transferee shall be payable to the Charitable Beneficiary. If any of the transfer restrictions set forth in this Section 11.3(E) or any application thereof is determined in a final judgment to be void, invalid or unenforceable by any court having jurisdiction over the issue, the Prohibited Transferee may be deemed, at the option of the Corporation, to have acted as the agent of the Corporation in acquiring the Class B Preferred Stock as to which such restrictions would, by their terms, apply, and to hold such Class B Preferred Stock on behalf of the Corporation. (F) PURCHASE RIGHT IN STOCK TRANSFERRED TO THE TRUSTEE. Shares of Class B Preferred Stock transferred to the Trustee shall be deemed to have been offered for sale to the Corporation, or its designee, at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in such transfer to the Trust (or, in the case of a devise or gift, the Market Price at the time of such devise or gift) and (ii) the Market Price on the date the Corporation, or its designee, accepts such offer. The Corporation shall have the right to accept such offer for a period of 90 days after the later of (i) the date of the Excess Transfer or other event resulting in a transfer to the Trust and (ii) the date that the Board of Directors determines in good faith that an Excess Transfer or other event occurred. (G) DESIGNATION OF CHARITABLE BENEFICIARIES. By written notice to the Trustee, the Corporation shall designate one or more nonprofit organizations to be the Charitable Beneficiary of the interest in the Trust relating to such Prohibited Transferee if (i) the shares of Class B Preferred Stock held in the Trust would not violate the Ownership Restrictions in the hands of such Charitable Beneficiary and (ii) each Charitable Beneficiary is an organization described in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code. 11.4 NOTICE OF RESTRICTED TRANSFER. Any Person that acquires or attempts to acquire shares of Class B Preferred Stock in violation of Section 11.1 of this Article, or any Person that is a Prohibited Transferee such that stock is transferred to the Trustee under Section 11.3 of this Article, shall immediately give written notice to the Corporation of such event and shall provide to the Corporation such other information as the Corporation may request in order to determine the effect, if any, of such Transfer or attempted Transfer or other event on the Corporation's status as a REIT. Failure to give such notice shall not limit the rights and remedies of the Board of Directors provided herein in any way. 11.5 OWNERS REQUIRED TO PROVIDE INFORMATION. From and after the Issue Date certain record and Beneficial Owners and transferees of shares of Class B Preferred Stock will be required to provide certain information as set out below. (A) ANNUAL DISCLOSURE. Every record and Beneficial Owner of more than 5% (or such other percentage between 0.5% and 5%, as provided in the applicable regulations adopted under the Code) of the number of Outstanding shares of Class B Preferred Stock shall, within 30 days after January 1 of each year, give written notice to the Corporation stating the name and address of such record or Beneficial Owner, the number of shares of Class B Preferred Stock Beneficially Owned, and a full description of how such shares are held. Each such record or Beneficial Owner of Class B Preferred Stock shall, upon demand by the Corporation, disclose to the Corporation in writing such additional information with respect to the Beneficial Ownership of the Class B Preferred Stock as the Board of Directors, in its sole discretion, deems appropriate or necessary to (i) comply with the provisions of the Code regarding the qualification of the Corporation as a REIT under the Code and (ii) ensure compliance with the Ownership Limit, the Initial Holder Limit or the Look-Through Ownership Limit, as applicable. Each stockholder of record, including without limitation any Person that holds shares of Class B Preferred Stock on behalf of a Beneficial Owner, shall take all reasonable steps to obtain the written notice described in this Section 11.5 from the Beneficial Owner. (B) DISCLOSURE AT THE REQUEST OF THE CORPORATION. Any Person that is a Beneficial Owner of shares of Class B Preferred Stock and any Person (including the stockholder of record) that is holding shares of Class B Preferred Stock for a Beneficial Owner, and any proposed transferee of shares, shall provide such information as the Corporation, in its sole discretion, may request in order to determine the Corporation's status as a REIT, to comply with the requirements of any taxing authority or other governmental agency, to determine any such compliance or to ensure compliance with the Ownership Limit, the Initial Holder Limit and the Look-Through Ownership Limit, and shall provide a statement or affidavit to the Corporation setting forth the number of shares of Class B Preferred Stock already Beneficially Owned by such stockholder or proposed transferee and any related persons specified, which statement or affidavit shall be in the form prescribed by the Corporation for that purpose. 11.6 REMEDIES NOT LIMITED. Nothing contained in this Article shall limit the authority of the Board of Directors to take such other action as it deems necessary or advisable (subject to the provisions of Section 11.12 of this Article) (i) to protect the Corporation and the interests of its stockholders in the preservation of the Corporation's status as a REIT and (ii) to insure compliance with the Ownership Limit, the Initial Holder Limit and the Look-Through Ownership Limit. 11.7 AMBIGUITY. In the case of an ambiguity in the application of any of the provisions of Section 11 of this Article, or in the case of an ambiguity in any definition contained in Section 11 of this Article, the Board of Directors shall have the power to determine the application of the provisions of this Article with respect to any situation based on its reasonable belief, understanding or knowledge of the circumstances. 11.8 EXCEPTIONS. The following exceptions shall apply or may be established with respect to the limitations of Section 11.1 of this Article. (A) WAIVER OF OWNERSHIP LIMIT. The Board of Directors, upon receipt of a ruling from the Internal Revenue Service or an opinion of tax counsel or other evidence or undertaking acceptable to it, may waive the application, in whole or in part, of the Ownership Limit to a Person subject to the Ownership Limit, if such person is not an individual for purposes of Section 542(a) of the Code and is a corporation, partnership, estate or trust. In connection with any such exemption, the Board of Directors may require such representations and undertakings from such Person and may impose such other conditions as the Board deems necessary, in its sole discretion, to determine the effect, if any, of the proposed Transfer on the Corporation's status as a REIT. (B) PLEDGE BY INITIAL HOLDER. Notwithstanding any other provision of this Article, the pledge by the Initial Holder of all or any portion of the Class B Preferred Stock directly owned at any time or from time to time shall not constitute a violation of Section 11.1 of this Article and the pledgee shall not be subject to the Ownership Limit with respect to the Class B Preferred Stock so pledged to it either as a result of the pledge or upon foreclosure. (C) UNDERWRITERS. For a period of 270 days following the purchase of Class B Preferred Stock by an underwriter that (i) is a corporation or a partnership and (ii) participates in an offering of the Class B Preferred Stock, such underwriter shall not be subject to the Ownership Limit with respect to the Class B Preferred Stock purchased by it as a part of or in connection with such offering and with respect to any Class B Preferred Stock purchased in connection with market making activities. 11.9 LEGEND. Each certificate for Class B Preferred Stock shall bear the following legend: "The shares of Class B Preferred Stock represented by this certificate are subject to restrictions on transfer. No person may Beneficially Own shares of Class B Preferred Stock in excess of the Ownership Restrictions, as applicable, with certain further restrictions and exceptions set forth in the Corporation's Charter (including the Articles Supplementary setting forth the terms of the Class B Preferred Stock). Any Person that attempts to Beneficially Own shares of Class B Preferred Stock in excess of the applicable limitation must immediately notify the Corporation. All capitalized terms in this legend have the meanings ascribed to such terms in the Corporation's Charter (including the Articles Supplementary setting forth the terms of the Class B Preferred Stock), as the same may be amended from time to time, a copy of which, including the restrictions on transfer, will be sent without charge to each stockholder that so requests. If the restrictions on transfer are violated, the shares of Class B Preferred Stock represented hereby will be either (i) void in accordance with the Certificate or (ii) automatically transferred to a Trustee of a Trust for the benefit of one or more Charitable Beneficiaries." 11.10 SEVERABILITY. If any provision of this Article or any application of any such provision is determined in a final and unappealable judgment to be void, invalid or unenforceable by any Federal or state court having jurisdiction over the issues, the validity and enforceability of the remaining provisions shall not be affected and other applications of such provision shall be affected only to the extent necessary to comply with the determination of such court. 11.11 BOARD OF DIRECTORS DISCRETION. Anything in this Article to the contrary notwithstanding, the Board of Directors shall be entitled to take or omit to take such actions as it in its discretion shall determine to be advisable in order that the Corporation maintain its status as and continue to qualify as a REIT, including, but not limited to, reducing the Ownership Limit, the Initial Holder Limit and the Look-Through Ownership Limit in the event of a change in law. 11.12 SETTLEMENT. Nothing in this Section 11 of this Article shall be interpreted to preclude the settlement of any transaction entered into through the facilities of the NYSE or other securities exchange or an automated inter-dealer quotation system. * * * * * * SECOND: The Board of Directors of the Corporation at a meeting or by a unanimous consent in writing in lieu of a meeting under Section 2-408 of the Maryland General Corporation Law, as of October 23, 1997, adopted a resolution that set forth and approved the foregoing restatement of the Charter. THIRD: The Charter of the Corporation is not amended by these Articles of Restatement; PROVIDED, HOWEVER, consistent with Section 2-608(b)(7) of the Maryland General Corporation Law, the current number and names of directors are provided in Section 2 of Article VI of the restated Charter of the Corporation. FOURTH: References to "these Articles of Amendment and Restatement" have been retained in Section 4 of Article IV, in Section 4, Section 5, and Section 7 of Article VI, and in Article VIII of the restated Charter and to "these Articles Supplementary" have been retained in Section 1 of Article XII of the restated Charter to conform to the original text of the provisions. In the context of these Articles of Restatement the term "these Articles of Amendment and Restatement" should be read as "the Charter" and the term "these Articles Supplementary" should be read as "this Article". FIFTH: The sentence "Upon the filing of these Articles of Amendment, there shall be authorized 750,000 shares and issued and outstanding 650,000 shares of the Class B Common Stock" has been retained in Section 8 of Article XII of the restated Charter to conform to the original text of the provision. In the context of these Articles of Restatement the sentence is not necessary. SIXTH: The number of shares of Class B Common Stock shown as "750,000" has been retained in Section 1.1 of Article IV of the restated Charter to conform to the original text of the provision. As of August 11, 1997 a total of 325,000 shares of Class B Common Stock have been converted which causes the number of authorized shares of Class B Common Stock to be reduced from 750,000 shares to 425,000 shares as provided in Sections 6(a) and 8 of Article XII of the restated Charter. SEVENTH: The number of shares of Preferred Stock shown as "10,000,000" has been retained in Section 1.1 of Article IV of the restated Charter to conform to the original text of the provision. As of August 4, 1997 a total of 750,000 shares of Preferred Stock were reclassified as Class B Cumulative Convertible Preferred Stock, par value $.01 per share (the "Class B Preferred Stock"), which causes the number of authorized shares of Preferred Stock to be reduced from 10,000,000 shares to 9,250,000 shares and the number of authorized shares of Class B Preferred Stock to be increased from zero shares to 750,000 shares as provided in Sections 1 Article XIII of the restated Charter. IN WITNESS WHEREOF, APARTMENT INVESTMENT AND MANAGEMENT COMPANY has caused these presents to be signed in its name and on its behalf by its President and witnessed by its Secretary on November 7, 1997. WITNESS: APARTMENT INVESTMENT AND MANAGEMENT COMPANY /s/ LEEANN MOREIN By: /s/ PETER K. KOMPANIEZ Leeann Morein, Secretary Peter K. Kompaniez, President THE UNDERSIGNED, President of APARTMENT INVESTMENT AND MANAGEMENT COMPANY, who executed on behalf of the Corporation the foregoing Articles of Restatement of which this certificate is made a part, hereby acknowledges in the name and on behalf of said Corporation the foregoing Articles of Restatement to be the corporate act of said Corporation and hereby certifies that to the best of his knowledge, information, and belief the matters and facts set forth therein with respect to the authorization and approval thereof are true in all material respects under the penalties of perjury. /s/ PETER K. KOMPANIEZ Peter K. Kompaniez, President EX-3.2 7 EXHIBIT 3.2 AMENDED AND RESTATED BYLAWS OF APARTMENT INVESTMENT AND MANAGEMENT COMPANY TABLE OF CONTENTS PAGE ARTICLE I OFFICES . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1. Registered Office . . . . . . . . . . . . . . . . . . . 1 Section 2. Other Offices . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II STOCK . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1. Certificates Representing Stock. . . . . . . . . . . . 1 Section 2. Fractional Share Interests or Scrip. . . . . . . . . . 2 Section 3. Share Transfers. . . . . . . . . . . . . . . . . . . . 2 Section 4. Record Date for Stockholders. . . . . . . . . . . . . . 3 Section 5. Meaning of Certain Terms. . . . . . . . . . . . . . . . 3 ARTICLE III STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . 4 Section 1. Stockholder Meetings. . . . . . . . . . . . . . . . . . 4 Section 2. Informal Action. . . . . . . . . . . . . . . . . . . . 7 ARTICLE IV BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . 7 Section 1. Functions and Definition. . . . . . . . . . . . . . . . 7 Section 2. Qualifications and Number. . . . . . . . . . . . . . . 8 Section 3. Election and Term. . . . . . . . . . . . . . . . . . . 8 Section 4. Meetings. . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 5. Removal of Directors. . . . . . . . . . . . . . . . . . . 9 Section 6. Committees. . . . . . . . . . . . . . . . . . . . . . . 10 Section 7. Informal Action. . . . . . . . . . . . . . . . . . . . 10 ARTICLE V OFFICERS . . . . . . . . . . . . . . . . . . . . . . . 10 Section 1. Officers. . . . . . . . . . . . . . . . . . . . . . . . 10 Section 2. Election of Officers. . . . . . . . . . . . . . . . . . 10 Section 3. Subordinate Officers. . . . . . . . . . . . . . . . . . 11 Section 4. Compensation of Officers. . . . . . . . . . . . . . . . 11 Section 5. Term of Office; Removal and Vacancies. . . . . . . . . 11 Section 6. Chairman of the Board. . . . . . . . . . . . . . . . . 11 i Section 7. Vice Chairman of the Board. . . . . . . . . . . . . . . 11 Section 8. President. . . . . . . . . . . . . . . . . . . . . . . 11 Section 9. Vice President. . . . . . . . . . . . . . . . . . . . . 12 Section 10. Secretary. . . . . . . . . . . . . . . . . . . . . . . 12 Section 11. Assistant Secretaries. . . . . . . . . . . . . . . . . 12 Section 12. Treasurer. . . . . . . . . . . . . . . . . . . . . . . 12 Section 13. Assistant Treasurer. . . . . . . . . . . . . . . . . . 13 ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS . . . . . . . . . . . . . . . . . . . . . . . . 13 ARTICLE VII STOCK LEDGER . . . . . . . . . . . . . . . . . . . . . 14 ARTICLE VIII GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . 14 Section 1. Dividends. . . . . . . . . . . . . . . . . . . . . . . 14 Section 2. Payment of Dividends. . . . . . . . . . . . . . . . . . 14 Section 3. Checks. . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 4. Fiscal Year. . . . . . . . . . . . . . . . . . . . . . 14 Section 5. Corporate Seal. . . . . . . . . . . . . . . . . . . . . 14 Section 6. Manner of Giving Notice. . . . . . . . . . . . . . . . 15 Section 7. Waiver of Notice. . . . . . . . . . . . . . . . . . . . 15 Section 8. Annual Statement. . . . . . . . . . . . . . . . . . . . 15 Section 9. Record Keeping. . . . . . . . . . . . . . . . . . . . . 15 ARTICLE IX AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . 15 ii AMENDED AND RESTATED BYLAWS OF APARTMENT INVESTMENT AND MANAGEMENT COMPANY ARTICLE I OFFICES Section 1. REGISTERED OFFICE. The address of the initial principal office of the corporation in the State of Maryland and the name and the address of the initial resident agent of the corporation in the State of Maryland are set forth in the Articles of Incorporation. Section 2. OTHER OFFICES. The corporation may also have offices at such other places both within and without the State of Maryland as the Board of Directors may from time to time determine or the business of the corporation may require. ARTICLE II STOCK Section 1. CERTIFICATES REPRESENTING STOCK. Certificates representing shares of stock shall set forth thereon the statements prescribed by Section 2-211 of the Maryland General Corporation Law and by any other applicable provision of law and shall be signed by the President or the Chairman of the Board, if any, or a Vice-President and countersigned by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer and may be sealed with the corporate seal or a facsimile of it or in any other form. The signatures of any such officers may be either manual or facsimile signatures. In case any such officer who has signed manually or by facsimile any such certificate ceases to be such officer before the certificate is issued, it may nevertheless be issued by the corporation with the same effect as if the officer had not ceased to be such officer as of the date of its issue. No certificate representing shares of stock shall be issued for any share of stock until such share is fully paid, except as otherwise authorized by the provisions of Section 2-210 of the Maryland General Corporation Law. 1 The corporation may issue a new certificate of stock in place of any certificate theretofore issued by it, alleged to have been lost, stolen, or destroyed, and the Board of Directors may, in its discretion, require the owner of any such certificate to give bond, with sufficient surety, to the corporation to indemnify it against any loss or claim that may arise by reason of the issuance of a new certificate. Upon compliance with the provisions of Section 2-514 of the Maryland General Corporation Law, the Board of Directors of the corporation may adopt by resolution a procedure by which a stockholder of the corporation may certify in writing to the corporation that any shares registered in the name of the stockholder are held for the account of a specified person other than the stockholder. Section 2. FRACTIONAL SHARE INTERESTS OR SCRIP. The corporation may, but shall not be obliged to, issue fractional shares of stock, eliminate a fractional interest by rounding off to a full share of stock, arrange for the disposition of a fractional interest by the person entitled to it, pay cash for the fair value of a fractional share of stock determined as of the time when the person entitled to receive it is determined, or issue scrip or other evidence of ownership which shall entitle its holder to exchange such scrip or other evidence of ownership aggregating a full share for a certificate which represents the share; but such scrip or other evidence of ownership shall not, unless otherwise provided, entitle the holder to exercise any voting right, or to receive dividends thereon or to participate in any of the assets of the corporation in the event of liquidation. The Board of Directors may impose any reasonable condition on the issuance of scrip or other evidence of ownership, and may cause such scrip or evidence of ownership to be issued subject to the condition that it shall become void if not exchanged for a certificate representing a full share of stock before a specified date or subject to the condition that the shares for which such scrip or evidence of ownership is exchangeable may be sold by the corporation and the proceeds thereof distributed to the holders of such scrip or evidence of ownership, or subject to a provision for forfeiture of such proceeds to the corporation if not claimed within a period of not less than three years from the date the scrip or other evidence of ownership was originally issued. Section 3. SHARE TRANSFERS. Upon compliance with provisions restricting the transferability of shares of stock, if any, transfers of shares of stock of the corporation shall be made only on the stock transfer books of the corporation by the record holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the corporation or with a transfer agent or a registrar, if any, and on surrender of the certificate or certificates 2 for such shares of stock properly endorsed and the payment of all taxes due thereon, if any. Section 4. RECORD DATE FOR STOCKHOLDERS. The Board of Directors may set a record date or direct that the stock transfer books be closed for a stated period for the purpose of making any proper determination with respect to stockholders, including which stockholders are entitled to notice of a meeting, to vote at a meeting, to receive a dividend, or to be allotted other rights; provided, that, except as may be otherwise provided herein, any such record date may not be prior to the close of business on the day the record date is fixed, shall be not more than ninety days before the date on which the action requiring the determination will be taken, that any such closing of the transfer books may not be for a period longer than twenty days, and that, in the case of a meeting of stockholders, any such record date or any such closing of the transfer books shall be at least ten days before the date of the meeting. If a record date is not set, and, if the stock transfer books are not closed, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the later of either the close of business on the day on which notice of the meeting is mailed or the thirtieth day before the meeting, and the record date for determining stockholders entitled to receive payment or a dividend or an allotment of any rights shall be the close of business on the date on which the resolution of the Board of Directors declaring the dividend or allotment of rights is adopted, by any such payment of a dividend or allotment of rights shall not be made more than sixty days after the date on which the resolution is adopted; and a meeting of stockholders convened on the date for which it was called may be adjourned from time to time without further notice to a date not more than one hundred and twenty days after the original record date. Section 5. MEANING OF CERTAIN TERMS. As used herein in respect of the right to notice of a meeting of stockholders or a waiver thereof or to participate or vote thereat or to consent or dissent in writing in lieu of a meeting, as the case may be, the term "share of stock" or "shares of stock" or "stockholder" or "stockholders" refers to an outstanding share or shares of stock and to a holder or holders of record of outstanding shares of stock when the corporation is authorized to issue only one class of shares of stock. Said reference is also intended to include any outstanding share or shares of stock and any holder or holders of record of outstanding shares of stock of any class or series upon which or upon whom the Articles of Incorporation confer such rights where there are two or more classes or series of shares or upon which or upon whom the provisions of the Maryland General Corporation Law may confer such rights or the right of dissent notwithstanding that the Articles of Incorporation may provide for more than one class or 3 series of shares of stock, one or more of which are limited or denied such rights thereunder. ARTICLE III STOCKHOLDERS Section 1. STOCKHOLDER MEETINGS. (a) TIME. (i) ANNUAL MEETINGS. The corporation shall hold an annual meeting of its stockholders to elect directors and transact any other business within its powers, either at 9:00 a.m. on the second Tuesday of May in each year if not a legal holiday, or at such other time or such other day falling on or before the 30th day thereafter as shall be set by the Board of Directors. (ii) SPECIAL MEETINGS. At any time in the interval between annual meetings, a special meeting of the stockholders may be called by the Chairman of the Board or the Vice-Chairman of the Board or the President or by a majority of the Board of Directors by vote at a meeting or in writing (addressed to the Secretary of the corporation) with or without a meeting. Special meetings of the stockholders shall be called as may be required by law. (b) PLACE. Annual meetings and special meetings shall be held at such place, either within the State of Maryland or at such other place within the United States, as the directors may, from time to time, set. Whenever the directors shall fail to set such place, or, whenever stockholders entitled to call a special meeting shall call the same, and a place of meeting is not set, the meeting shall be held at the principal office of the corporation in the State of Maryland. (c) CALL. Annual meetings may be called by the directors or the President or by any officer instructed by the directors or the President to call the meeting. Except as may be otherwise provided by the provisions of the Maryland General Corporation Law, special meetings may be called in like manner. Special meetings shall also be called by the Secretary whenever the holders of shares entitled to at least twenty-five percent of all the votes entitled to be cast at such meeting shall make a written request that such meeting be called. 4 (d) NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER OF NOTICE. Written notice of all meetings shall be given by the Secretary and shall state the time and place of the meeting. The notice of an annual meeting shall state that the meeting is called for the election of directors and for the transaction of other business which may properly come before the meeting, and shall (if any other action which could be taken at a special meeting is to be taken at such annual meeting) contain any additional statements required in a notice of a special meeting, and shall include a copy of any requisite statements or provisions prescribed by the provisions of the Maryland General Corporation Law; provided, however, that any business of the corporation may be transacted at any annual meeting without being specially noticed unless the provisions of the Maryland General Corporation Law provide otherwise. The notice of a special meeting shall in all instances state the purpose or purposes for which the meeting is called and shall include a copy of any requisite statements or provisions prescribed by the provisions of the Maryland General Corporation Law. Written notice of any meeting shall be given to each stockholder either by mail at the address as it appears on the records of the corporation or by personal delivery to such stockholder or by leaving such notice at his residence or usual place of business not less than ten days and not more than ninety days before the date of the meeting, unless any provision of the Maryland General Corporation Law shall prescribe a different period of time. If mailed, notice shall be deemed to be given when deposited in the United States mail addressed to the stockholder at his address as it appears on the records of the corporation with postage thereon prepaid. Whenever any notice of the time, place or purpose of any meeting of stockholders is required to be given under the provisions of the Articles of Incorporation, these Bylaws or of the provisions of the Maryland General Corporation Law, such notice may be waived by a writing signed by the stockholder and filed with records of the meeting, whether before or after the holding thereof, or by his presence in person or by proxy at the meeting. The foregoing requirements of notice shall also apply, whenever the corporation shall have any class of stock which is not entitled to vote, to holders of stock who are not entitled to vote at the meeting, but who are entitled to notice thereof and to dissent from any action taken thereat. (e) STATEMENT OF AFFAIRS. The President of the corporation, or, if the Board of Directors shall determine otherwise, some other executive officer thereof, shall prepare or cause to be prepared annually a full and correct statement of the affairs of the corporation, including a balance sheet and a financial statement of operations for the preceding fiscal year, which shall be submitted at the Annual Meeting and placed on file within twenty days thereafter at the principal office of the corporation in the State of Maryland. 5 (f) CONDUCT OF MEETINGS. Meetings of the stockholders shall be presided over by one of the following officers in the order of seniority and if present and acting: the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, the President, a Vice-President, or, if none of the foregoing is in office and present and acting, by a chairman to be chosen by the stockholders. The Secretary of the corporation, or in his absence, an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present the Chairman of the meeting shall appoint a secretary of the meeting. (g) ADJOURNMENT. Whether or not a quorum is present, a meeting of stockholders convened on the date for which it was called may be adjourned from time to time without further notice by the Chairman of the meeting, or by a majority vote of the stockholders present in person or by proxy, to a date not more than 120 days after the original record date. Any business which might have been transacted at the meeting as originally notified may be deferred and transacted at any such adjourned meeting at which a quorum shall be present. (h) PROXY REPRESENTATION. Every stockholder may authorize another person or persons to act for him by proxy in all matters in which a stockholder is entitled to participate, whether for the purposes of determining his presence at a meeting, or whether by waiving notice of any meeting, voting or participating at a meeting, or expressing consent or dissent without a meeting, or otherwise. Every proxy shall be executed in writing by the stockholder or by his duly authorized attorney in fact, and filed with the Secretary of the corporation. No proxy shall be valid more than eleven months from the date of its execution, unless the proxy provides otherwise. (i) INSPECTORS OF ELECTION. The directors, in advance of any meeting, may, but need not, appoint one or more inspectors to act at the meeting or any adjournment thereof. If an inspector or inspectors are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors. In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the directors in advance of the meeting or at the meeting, by the person presiding thereat. Each inspector, if any, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors, if any, shall determine the number of shares outstanding and the voting power of each, the shares presented at the meeting, the existing of a quorum, the validity and effect of proxies, 6 and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting or any stockholder, the inspector or inspectors, if any, shall make a report in writing of any challenge, question or matter determined by him or them and execute a certificate of any fact found by him or them. (j) QUORUM. Except as may otherwise be required by the provisions of the Maryland General Corporation Law, the Articles of Incorporation, or these Bylaws, the presence in person or by proxy at a meeting of the stockholders entitled to cast at least a majority of the votes entitled to be cast at the meeting shall constitute a quorum. (k) VOTING. Each share of stock shall entitle the holder thereof to one vote on each matter submitted to a vote at a meeting of stockholders except in the election of directors, at which each share of stock may be voted for as many individuals as there are directors to be elected and for whose election the share is entitled to be voted may be cast for as many persons as there are directors to be elected. Except as may otherwise be provided in the provisions of the Maryland General Corporation Law, the Articles of Incorporation or these Bylaws, a majority of all the votes cast at a meeting of stockholders at which a quorum is present shall be sufficient to approve any matter which may properly come before the meeting. A plurality of all the votes cast at a meeting of stockholders at which a quorum is present is sufficient to elect a director. Section 2. INFORMAL ACTION. Any action required or permitted to be taken at any meeting of stockholders may be taken without a meeting if the following are filed with the records of the meeting: an unanimous written consent which sets forth the action and is signed by each stockholder entitled to vote on the matter, and, as applicable, a written waiver of any right to dissent signed by each stockholder entitled to notice of the meeting but not entitled to vote at it. ARTICLE IV BOARD OF DIRECTORS Section 1. FUNCTIONS AND DEFINITION. The business and affairs of the corporation shall be managed by or under the direction of its Board of Directors. All powers of the corporation may be exercised by or under authority of said Board 7 of Directors. The use of the phrase "entire board" herein refers to the total number of directors which the corporation would have if there were no vacancies. Section 2. QUALIFICATIONS AND NUMBER. Each director shall be a natural person at least 18 years of age. A director need not be a stockholder, a citizen of the United States, or a resident of the State of Maryland. The initial Board of Directors shall consist of the persons set forth in the Articles of Incorporation. Thereafter the number of directors constituting the entire board shall consist of not less than three (3) nor more than nine (9) persons who shall be chosen by the stockholders. Each member of the Board of Directors shall serve for a period of one (1) year. Section 3. ELECTION AND TERM. The first Board of Directors shall consist of the directors named in the Articles of Incorporation and shall hold office until the first annual meeting of stockholders or until their successors have been elected and qualified. Thereafter, directors who are elected at an annual meeting of stockholders, and directors who are elected in the interim to fill vacancies and newly created directorships, shall hold office until the next annual meeting of stockholders and until their successors have been elected and qualified. In the interim between annual meetings of stockholders or of special meetings of stockholders called for the election of directors, newly created directorships and any vacancies in the Board of Directors, including vacancies resulting from the removal of directors by the stockholders which have not been filled by said stockholders, may be filled by the Board of Directors. Newly created directorships shall be filled by action of a majority of the entire Board of Directors. All other vacancies to be filled by the Board of Directors may be filled by a majority of the remaining members of the Board of Directors, whether or not sufficient to constitute a quorum. A director elected by the Board of Directors to fill a vacancy serves until the next annual meeting of stockholders and until his successor is elected and qualified. Section 4. MEETINGS. (a) TIME. Meetings shall be held at such time as the Board shall set, except that the first meeting of a newly elected Board shall be held as soon after its election as the directors may conveniently assemble. (b) PLACE. Meetings shall be held at such place within or without the State of Maryland as shall be set by the Board. 8 (c) CALL. No call shall be required for regular meetings for which the time and place have been fixed. Special meetings may be called by or at the direction of the Chairman of the Board, if any, of the President, or of a majority of the directors in office. (d) NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required for regular meetings for which the time and place have been fixed. Written, oral or any other mode of notice of the time and place shall be given for special meetings in sufficient time for the convenient assembly of the directors thereat. The notice of any meeting need not specify the business to be transacted or the purpose of the meeting. Whenever any notice of the time, place, or purpose of any meeting of directors or any committee thereof is required to be given under the provisions of the Maryland General Corporation Law or of these Bylaws, such notice may be waived by a writing signed by the director or committee member entitled to such notice and filed with the records of the meeting, whether before or after the meeting, or by presence at the meeting. (e) QUORUM AND ACTION. A majority of the entire Board of Directors shall constitute a quorum except when a vacancy or vacancies prevents such majority, whereupon a majority of the directors in office shall constitute a quorum, provided such majority shall constitute at least one-third of the entire Board and, in no event, less than two directors (provided, that whenever the entire Board of Directors consists of one director, that one director shall constitute a quorum). Except as in the Articles of Incorporation and herein otherwise provided and, except as in provisions of the Maryland General Corporation Law otherwise provided, the action of a majority of the directors present at a meeting at which a quorum is present shall be the action of the Board of Directors. Members of the Board of Directors or of a committee thereof may participate in a meeting by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time; and participation by such means shall constitute presence in person at a meeting. (f) CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if present and acting, shall preside at all meetings. Otherwise, the President, if present and acting, or any other director chosen by the Board, shall preside. Section 5. REMOVAL OF DIRECTORS. Any or all of the directors may be removed, with or without cause by the affirmative vote of a majority of all the votes entitled to be cast for the election of directors. 9 Section 6. COMMITTEES. The Board of Directors may appoint from among its members an Executive Committee and other committees composed of two or more directors, and may delegate to such committee or committees any of the powers of the Board of Directors except such powers as may not be delegated under the provisions of the Maryland General Corporation Law. In the absence of any member of any such committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint a member of the Board of Directors to act in the place of such absent member. Section 7. INFORMAL ACTION. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if a written consent to such action is signed by all members of the Board of Directors or any such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board or any such committee. ARTICLE V OFFICERS Section 1. OFFICERS. The corporation shall have a President, a Secretary, and a Treasurer, and may have a Chairman of the Board, a Vice-Chairman of the Board and one or more Vice-Presidents, who shall be elected by the Board of Directors, and may also have any such other officers, assistant officers, and agents as the Board of Directors shall authorize from time to time, each of whom shall be elected or appointed in the manner prescribed by the Board of Directors. Any two or more offices, except those of President, Vice-Chairman and Vice-President, may be held by the same person, but no person shall execute, acknowledge or verify any instrument in more than one capacity, if such instrument is required by law to be executed, acknowledged or verified by more than one officer. Unless otherwise provided in the resolution of election or appointment, each officer shall hold office until the meeting of the Board of Directors following the next annual meeting of stockholders and until his successor has been elected or appointed or qualified. The officers and agents of the corporation shall have the authority and perform the duties in the management of the corporation as determined by the resolution electing or appointing them. Section 2. ELECTION OF OFFICERS. The Board of Directors, at its first meeting after each annual meeting of stockholders, shall choose the officers of the corporation. 10 Section 3. SUBORDINATE OFFICERS. The Board of Directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board. Section 4. COMPENSATION OF OFFICERS. The salaries of all officers and agents of the corporation shall be fixed by the Board of Directors. Section 5. TERM OF OFFICE; REMOVAL AND VACANCIES. The officers of the corporation shall hold office until their successors are chosen and qualify in their stead. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors whenever, in its judgment, the best interests of the corporation will be served thereby. If the office of any officer or officers becomes vacant for any reason, the vacancy shall be filled by the Board of Directors. Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board shall be the Chief Executive Officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and affairs of the corporation. If present, he shall preside at all meetings of the stockholders and at all meetings of the Board of Directors. He shall be an ex-officio member of all committees and shall have the general powers and duties of management usually vested in the office of President and Chief Executive Officer of the corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors or these Bylaws. Section 7. VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the Board, if such an officer be elected, shall preside in the absence or disability of the Chairman of the Board at all meetings of the stockholders and at all meetings of the Board of Directors, and shall exercise and perform such other powers and duties as may be from time to time assigned to him by the Board of Directors or prescribed by these Bylaws. Section 8. PRESIDENT. In the absence or disability of the Chairman of the Board, the President shall perform all of the duties of the Chief Executive Officer of the corporation, and when so acting shall have all the powers of and be subject to all the restrictions upon the Chief Executive Officer. The President shall have such other duties as from time to time may be prescribed for him by the Board of Directors. 11 Section 9. VICE PRESIDENT. In the absence or disability of the President, the Vice Presidents in order of their rank as fixed by the Board of Directors, or if not ranked, the Vice President designated by the Board of Directors, shall perform all the duties of the President, and when so acting shall have all the powers of and be subject to all the restrictions upon the President. The Vice President shall have such other duties as from time to time may be prescribed for them, respectively, by the Board of Directors. Section 10. SECRETARY. The Secretary shall attend all sessions of the Board of Directors and all meetings of the stockholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose; and shall perform like duties for the standing committees when required by the Board of Directors. He shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or these Bylaws. He shall keep in safe custody the seal of the corporation, and when authorized by the Board, affix the same to any instrument requiring it, and when so affixed it shall be attested by his signature or by the signature of an Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the corporation and to attest to the seal by his signature. Section 11. ASSISTANT SECRETARIES. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board of Directors, or if there be no such determination, the Assistant Secretary designated by the Board of Directors, shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. Section 12. TREASURER. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys, and other valuable effects in the name and to the credit of the corporation, in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the corporation. If required by the Board of Directors, he shall give the corporation a bond, in such sum and with such surety or sureties as shall be satisfactory to the 12 Board of Directors, for the faithful performance of the duties of his office and for the restoration of the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. Section 13. ASSISTANT TREASURER. The Assistant Treasurer, of if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors, or if there be no such determination, the Assistant Treasurer designated by the Board of Directors, shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS The corporation shall, to the maximum extent permitted by the Maryland General Corporation Law indemnify each of its directors and officers against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceeding arising by reason of the fact any such person is or was a director or officer of the corporation and shall advance to such director or officer expenses incurred in defending any such proceeding to the maximum extent permitted by such law. For purposes of this Article VI, a "director" or "officer" of the corporation includes any person who is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, or other enterprise, or was a director or officer of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation. The Board of Directors may in its discretion provide by resolution for such indemnification of, or advance of expenses to, other agents of the corporation, and likewise may refuse to provide for such indemnification or advance of expenses except to the extent such indemnification is mandatory under the Maryland General Corporation Law. 13 ARTICLE VII STOCK LEDGER The corporation shall maintain, at its principal office in the State of Maryland or at a business office or an agency of the corporation an original or duplicate stock ledger containing the name and address of each stockholder and the number of shares of each class held by each stockholder. Such stock ledger may be in written form or any other form capable of being converted into written form within a reasonable time for visual inspection. ARTICLE VIII GENERAL PROVISIONS Section 1. DIVIDENDS. Dividends upon the capital stock of the corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation. Section 2. PAYMENT OF DIVIDENDS. Before payment of any dividend there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interests of the corporation, and the directors may abolish any such reserve. Section 3. CHECKS. All checks or demands for money and notes of the corporation shall be signed by such officer or officers as the Board of Directors may from time to time designate. Section 4. FISCAL YEAR. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors. Section 5. CORPORATE SEAL. The corporate seal shall have inscribed thereon the name of the corporation and shall be in such form and contain such other words and/or figures as the Board of Directors shall determine or the law require. 14 Section 6. MANNER OF GIVING NOTICE. Whenever, under the provisions of the statutes or of the Certificate of Incorporation or of these Bylaws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram. Section 7. WAIVER OF NOTICE. Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation or of these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed to be equivalent. Section 8. ANNUAL STATEMENT. The Board of Directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation. Section 9. RECORD KEEPING. The corporation shall keep at its principal office in the State of Maryland the original or a certified copy of the Bylaws, including all amendments thereto, and shall duly file thereat the annual statements of affairs of the corporation. ARTICLE IX AMENDMENTS These Bylaws may be altered, amended or repealed or new Bylaws may be adopted by the stockholders or by the Board of Directors, when such power is conferred upon the Board of Directors by the Articles of Incorporation, at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new Bylaws be contained in the notice of such special meeting. If the power to adopt, amend or repeal Bylaws is conferred upon the Board of Directors by the Articles of Incorporation it shall not divest or limit the power of the stockholders to adopt, amend or repeal Bylaws. 15 I HEREBY CERTIFY that the foregoing is a full, true and correct copy of the Amended and Restated Bylaws of Apartment Investment and Management Company, a Maryland corporation, as in effect on the date hereof. WITNESS my hand and seal of the corporation. Date: October 23, 1997. /s/ LEEANN MOREIN ------------------------ Leeann Morein, Secretary 16 EX-10.8 8 EXHIBIT 10.8 MULTIFAMILY NOTE (Wickertree) $4,231,700.00 As of October 31, 1997 FOR VALUE RECEIVED, AIMCO/WICKERTREE, L.P., a Delaware limited partnership, having its principal place of business at 1873 S. Bellaire Street, 17th Floor, Denver Colorado 80222 (hereinafter referred to as "Borrower"), promises to pay to the order of GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation, having its principal place of business at 650 Dresher Road, Horsham, Pennsylvania 19055-8015 (hereinafter referred to as "Lender"), the principal sum of FOUR MILLION TWO HUNDRED THIRTY-ONE THOUSAND SEVEN HUNDRED AND NO/100 DOLLARS ($4,231,700.00), with interest on the unpaid principal balance to be computed from the date of this Multifamily Note (together with the Addendum to Multifamily Note attached hereto and made a part hereof, the "Note") at the Applicable Interest Rate (hereinafter defined), in lawful money of the United States of America which shall at the time of payment be legal tender in payment of all debts and dues, public and private. 1. PAYMENT OF PRINCIPAL AND INTEREST. A. The principal and interest under this Note shall be payable at the office of Lender as set forth above, Attn: Mr. Barry Moore, or at such other place as Lender may from time to time designate in writing, in equal consecutive monthly installments of $32,856.60 each, on the first day of December, 1997, and on the first day of each calendar month thereafter up to and including the first day of October, 2017 (or if such day is not a Business Day (hereinafter defined) the next Business Day thereafter); and the balance of said principal sum together with accrued and unpaid interest and any other amounts due under this Note, the Instrument and the other Loan Documents (each as hereinafter defined) shall be due and payable on the 1st day of November, 2017 (the "Maturity Date"). The term "Business Day" shall mean a day other than a Saturday, a Sunday or any other day on which Lender is not open for business. B. Interest on the principal sum of this Note shall accrue in arrears and be calculated on the basis of a three hundred sixty (360) day year composed of twelve (12) months of thirty (30) days each except that interest due and payable for a period less than a full month shall be calculated by multiplying the actual number of days elapsed in such period by a daily rate based on said 360 day year. In computing the number of days during which interest accrues, the day on which funds are initially advanced shall be included regardless of the time of day such advance is made, and the day on which funds are repaid shall be included unless repayment is credited prior to close of business. Payments in federal funds immediately available in the place designated for payment which are received by Lender prior to 2:00 p.m. local time at said place of payment shall be credited prior to close of business, while other payments may, at the option of Lender, not be credited until immediately available to Lender in federal funds in the place designated for payment prior to 2:00 p.m. local time at said place of payment on a day on which Lender is open for business. On the date of the closing of the loan evidenced by this Note, Borrower shall pay to Lender an interest payment equal to the product of the number of days remaining in the month from the date on which the loan is closed multiplied by the interest per diem. Payments under this Note shall be applied first to the payment of interest and other costs and charges due in connection with this Note or the Debt (as hereinafter defined), as Lender may determine in its sole discretion, and the balance applied toward the reduction of the principal sum in inverse order of maturity (but such application shall not reduce the amount of the fixed monthly installments required to be paid pursuant to Section 1.A above). All amounts due under this Note shall be payable without set off, counterclaim or any other deduction whatsoever. C. The term "Applicable Interest Rate" as used in this Note shall mean a rate of 7.09% per annum. 2. DEFAULT. A. If any sum payable under this Note is not paid within five (5) calendar days after the date on which it is due, Borrower shall pay to Lender upon demand an amount equal to the lesser of five percent (5%) of such unpaid sum or the maximum amount permitted by applicable law to defray the expenses incurred by Lender in handling and processing such delinquent payment and to compensate Lender for the loss of the use of such delinquent payment and such amount shall be secured by the Instrument and the other Loan Documents. B. The entire outstanding principal sum of this Note, together with all interest accrued and unpaid thereon and all other sums due under the Instrument, the other Loan Documents and this Note (all such sums hereinafter collectively referred to as the "Debt"), or any portion thereof, shall without notice become immediately due and payable if (i) any payment required under this Note or the Debt is not paid within five (5) calendar days after the date when due; or (ii) any representation or warranty of Borrower or any Key Principal, or any member, general partner, principal or beneficial owner of any of the foregoing, made herein or in any guaranty, or in any certificate, report, financial statement or other instrument or document furnished to Lender shall have been false or misleading in any material respect when made; or (iii) except for the specific defaults set forth in this Section B, any other default hereunder or under any of the other Loan Documents by Borrower, which default is not cured (a) in the case of any default which can be cured by the payment of a sum of money, within ten (10) days after written notice from Lender to Borrower, or (b) in the case of any other default, within thirty (30) days after written notice from Lender to Borrower; provided that if such default cannot reasonably be cured within such thirty (30) day period and Borrower shall have commenced to cure such default within such thirty (30) day period and thereafter diligently and expeditiously proceeds to cure the same, such thirty (30) day period shall be extended for so long as it shall require Borrower in the exercise of due diligence to cure such default, it being agreed that no such extension shall be for a period in excess of one hundred twenty (120) days, unless, only in the case of cures that require construction or remedial work, such cure cannot with diligence be completed within such one hundred twenty (120 day period, in which case such period shall be extended for an additional one hundred twenty (120) days; or (iv) the Borrower breaches or fails to comply with (a) Paragraph J of the Rider to Multifamily Instrument (the "Rider") as amended by Section D of the Supplemental Rider to the Multifamily Instrument (the "Supplemental Rider"), or (b) Paragraph F of the Rider as amended by Section H of the Supplemental Rider; or (v) Borrower or any Key Principal shall make an assignment for the benefit of creditors or if Borrower shall generally not be paying its debts as they become due; or (vi) the Policies (defined in the Supplemental Rider to Multifamily Instrument) are not kept in full force and effect, or; (vii) (a) Borrower or any Key Principal shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, conservatorship or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its 2 debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Borrower or any Key Principal shall make a general assignment for the benefit of its creditors'; or (b) there shall be commenced against Borrower or any Key Principal any case, proceeding or other action of a nature referred to in clause (a) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of ninety (90) days; or (c) there shall be commenced against the Borrower or any Key Principal any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of any order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within ninety (90) days from the entry thereof; or (d) the Borrower or any Key Principal shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (a), (b), or (c) above; or (e) the Borrower or any Key Principal shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due (hereinafter each an "Event of Default"). Time is of the essence in this Note, the Instrument, and the other Loan Documents. All of the terms, covenants and conditions contained in the Instrument and the other Loan Documents are hereby made part of this Note to the same extent and with the same force as if they were fully set forth herein. In the event that Lender employs counsel to collect the Debt or to protect or foreclose the security hereof, Borrower also agrees to pay on demand all reasonable costs of collection incurred by Lender, including reasonable attorneys' fees for the services of counsel whether or not suit be brought. C. Borrower does hereby agree that upon the occurrence of an Event of Default or upon the failure of Borrower to pay the Debt in full on the Maturity Date, or upon the failure of Borrower to pay the Debt on the date specified in any notice given pursuant to Section A of the attached Addendum to Multifamily Note, Lender shall be entitled to receive and Borrower shall pay interest on the entire unpaid principal sum at the Applicable Interest Rate plus five percent (5%) (the "Default Rate"); provided, however, that in the event Lender permits Borrower to cure such Event of Default after expiration of any applicable notice or grace period, then the rate of interest on the unpaid principal balance of this Note shall be the Applicable Interest Rate and shall be computed at the Applicable Interest Rate from and after the date such Event of Default is cured. The Default Rate shall be applicable from the occurrence of the Event of Default until the earlier to occur of the actual receipt and collection of the Debt or, if permitted by Lender, the date such Event of Default is cured. This charge shall be added to the Debt, and shall be deemed secured by the Instrument. This clause, however, shall not be construed as an agreement or privilege to extend the date of the payment of the Debt, nor as a waiver of any other right or remedy accruing to Lender by reason of the occurrence of any Event of Default. In the event the Default Rate would otherwise exceed the maximum rate permitted by applicable law, the Default Rate shall be the maximum rate permitted by applicable law. Borrower agrees to an effective rate of interest stated above plus any additional rate of interest resulting from any other charges in the nature of interest to be paid by or on behalf of Borrower, or any other benefit received or to be received by Lender, in connection with the Note. 3. SECURITY. This Note is secured by the Instrument and the other Loan Documents. The terms "Instrument" and other "Loan Documents" have the meanings ascribed to those terms in the Addendum to Multifamily Note attached hereto and incorporated herein by this referenced. 3 4. GENERAL A. This Note is subject to the express condition that at no time shall Borrower be obligated or required to pay interest on the Debt or any portion thereof at a rate which could subject Lender to either civil or criminal liability as a result of being in excess of the maximum interest rate which Borrower is permitted by applicable law to contract or agree to pay. If by the terms of this Note, Borrower is at any time required or obligated to pay interest on the Debt or any portion thereof at a rate in excess of such maximum rate, the rate of interest under this Note shall be deemed to be immediately reduced to such maximum rate and the interest payable shall be computed at such maximum rate and all prior interest payments in excess of the maximum rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder. B. This Note may not be modified, amended, waiver, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Borrower or Lender, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. C. Borrower and all others who may become liable for the payment of all or any part of the Debt do hereby severally waive presentment and demand for payment, notice of dishonor, protest and notice of protest, notice of non- payment and notice of intent to accelerate the maturity hereof (and of such acceleration). Borrower hereby waives the benefits of the right to assert any defense, affirmative defense, or file a cause of action based on the failure of the Lender to comply with Section 44-6852, Arizona Revised Statutes. No release of any security for the Debt or extension of time for payment of this Note or any installment hereof, and no alteration, amendment or waiver of any provision of this Note, the Instrument and the other Loan Documents made by agreement between Lender and any other person or party shall release, modify, amend, waive, extend, change, discharge, terminate or affect the liability of Borrower, and any other who may become liable for the payment of all or any part of the Debt, under this Note, the Instrument and the other Loan Documents. Lender may release any guarantor or indemnitor of the Debt from liability, in every instance without the consent of the Borrower hereunder, and without waiving any rights the Lender may have hereunder or by virtue of the laws of the State in which the Property (as defined in the Instrument) is located or any other state of the United States. D. Borrower is and shall be obligated to pay principal, interest and any and all other amounts which become payable hereunder or under the other Loan Documents absolutely and unconditionally and without any abatement, postponement, diminution or deduction and without any reduction for counterclaim or setoff. In the event that at any time any payment received by Lender hereunder shall be deemed by a court of competent jurisdiction to have been a voidable preference or fraudulent conveyance under any bankruptcy, insolvency or other debtor relief law, then the obligation to make such payment shall survive any cancellation or satisfaction of this Note or return thereof to Borrower and shall not be discharged or satisfied with any prior payment thereof or cancellation of this Note, but shall remain a valid and binding obligation enforceable in accordance with the terms and provisions hereof, and such payment shall be immediately due and payable upon demand. E. This Note shall be interpreted, construed and enforced according to the laws of the State where the Property is located. The terms and provisions hereof shall be binding upon and inure to the benefit of Borrower and Lender and their respective 4 heirs, executors, legal representatives, successors, successors-in-title and assigns, whether by voluntary action of the parties or by operation of law. As used herein, the terms "Borrower" and "Lender" shall be deemed to include their respective heirs, executors, legal representatives, successors, successors-in- title and assigns, whether by voluntary action of the parties or by operation of law. If Borrower consists of more than one person or entity, each shall be jointly and severally liable to perform the obligations of Borrower under this Note. All personal pronouns used herein, whether used in the masculine, feminine or neuter gender, shall include all other genders; the singular shall include the plural and vice versa. Title or articles and sections are for convenience only and in no way define, limit, amplify or describe the scope or intent of any provisions hereof. This Note, the Instrument and the other Loan Documents contain the entire agreements between the parties hereto relating to the subject matter hereof and thereof and all prior agreements relative hereto and thereto which are not contained herein or therein are terminated. F. BORROWER HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THIS NOTE, THE APPLICATION FOR THE LOAN EVIDENCED BY THIS NOTE, THIS NOTE, THE INSTRUMENT OR THE OTHER LOAN DOCUMENTS OR ANY ACTS OR OMISSIONS OF LENDER, ITS OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION THEREWITH. G. If any term of this Note or any application thereof shall be invalid or unenforceable, the remainder of this Note and any other application of the term shall not be affected thereby. 5 IN WITNESS WHEREOF, Borrower has duly executed this Note the day and year first above written. BORROWER: AIMCO/WICKERTREE, L.P., a Delaware limited partnership By: AIMCO/WICKERTREE, INC., a Delaware corporation By: /s/ Harry Alcock -------------------------------- Harry Alcock Vice President ADDENDUM TO MULTIFAMILY NOTE (FOR USE WITH EXCEPTIONS TO NON-RECOURSE GUARANTY) THIS ADDENDUM TO MULTIFAMILY NOTE (the "Addendum") is made as of the 31st day of October, 1997, and is incorporated into and shall be deemed to amend and supplement the Multifamily Note (the "Multifamily Note") made by the undersigned (the "Borrower") to GMAC COMMERCIAL MORTGAGE CORPORATION and its successors, assigns and transferees (the "Lender"), dated the same date as this Addendum (the Multifamily Note as amended and supplemented by this Addendum, any other addendum to the Multifamily Note, and any future amendments to the Multifamily Note is referred to as the "Note"). The debt evidenced by the Note is secured by a Multifamily Mortgage, Deed of Trust or Deed to Secure Debt of the same date (the "Multifamily Instrument"), covering the property described in the Multifamily Instrument and defined therein as the "Property". This Property is located entirely within the state identified in Exhibit A to the Multifamily Instrument (the "Property Jurisdiction"). The Multifamily Instrument is amended and supplemented by the Rider to Multifamily Instrument (the "Rider") and any other rider to Multifamily Instrument given by Borrower to Lender and dated the same date as the Multifamily Instrument. (The Multifamily Instrument as amended and supplemented by the Rider and any other rider to the Multifamily Instrument and any future amendments to the Instrument is referred to as the "Instrument".) The term "Loan Documents" when used in this Addendum shall mean, collectively, the following documents: (i) the Instrument, (ii) the Note, and (iii) all other documents or agreements, including any Collateral Agreements (as defined in the Rider) or O&M Agreement (as defined in the Rider), arising under, related to, or made in connection with, the loan evidenced by the Note, as such Loan Documents may be amended. The covenants and agreements of this Addendum, and the covenants and agreements of any other addendum to the Multifamily Note, shall be incorporated into and shall amend and supplement the covenants and agreements of the Multifamily Note as if this Addendum and the other addenda were a part of the Multifamily Note, and all references to the Note in the Loan Documents shall mean the Note as so amended and supplemented. Any conflict between the provisions of the Multifamily Note and this Addendum shall be resolved in favor of this Addendum. ADDITIONAL COVENANTS. In addition to the covenants and agreements made in the Multifamily Note Borrower and Lender further covenant and agree as follows: A. PREPAYMENTS 1. YIELD MAINTENANCE PERIOD During the first 19.0 years of the Note term beginning with the date of the Note and upon giving Lender 60 days prior written notice, Borrower may prepay the entire unpaid principal balance of the Note on the last Business Day before a scheduled monthly payment date by paying, in addition to the entire unpaid principal balance, accrued interest and any other sums due Lender at the time of prepayment, a prepayment premium equal to the greater of: (a) 1% of the entire unpaid principal balance of the Note, or (b) The product obtained by multiplying (1) the entire unpaid principal balance of the Note at the time of prepayment, times (2) the difference obtained by subtracting from the interest rate on the Note the Applicable Treasury Yield, as such yield is reported on the Bloomberg display page (hereinafter "Bloomberg") as the bid side yield at 4:00pm New York City time on the fifth Business Day preceding (x) the date notice of prepayment is given to Lender where prepayment is voluntary, or (y) the date Lender accelerates the loan, times (3) the present value factor calculated using the following formula: n 1 - (1 + r) ----------- r [r = Applicable Treasury Yield n = the number of years, and any fraction thereof, remaining between the prepayment date and the maturity date] Applicable Treasury Yield: Shall mean the bid side yield on interpolated U.S. Treasury Security for the average life of the loan calculated using the interest rate on the Note, the scheduled remaining payments on the Note from and after the date of prepayment to and including the maturity date of the loan, and the principal balance of the loan being prepaid. If the Applicable Treasury Yield is no longer available on Bloomberg, Lender shall determine such Applicable Treasury Yield from another source selected by Lender. Page 1 Except as provided in paragraph A.3 of this Addendum, no partial prepayments are permitted. Such prepayment premium shall be due and payable if the Loan is prepaid for any reason during the first 19.0 years of the Note, including without limitation, a prepayment arising because of an acceleration of the Loan. 2. AFTER YIELD MAINTENANCE PERIOD After the expiration of the Yield Maintenance Period and upon giving Leader 60 days prior written notice, Borrower may prepay the entire unpaid principal balance of the Note on the last Business Day before a scheduled monthly payment date by paying, in addition to the entire unpaid principal balance, accrued interest and any other sums due Lender at the time of prepayment. No prepayment premium shall be due for any prepayment in full after the expiration of the Yield Maintenance Period. Except as provided in paragraph A.3 of this Addendum, no partial prepayments are permitted. 3. PARTIAL PREPAYMENTS Borrower shall have no right to make a partial prepayment of the outstanding indebtedness during the Note term. However, in the event that Lender shall require a partial prepayment of the outstanding indebtedness after a default under the Note, the Instrument or any of the other Loan Documents, by applying funds held by Lender pursuant to any Collateral Agreement (as defined in Uniform Covenant 2B of the Instrument) against the indebtedness secured by the Instrument, or, if Lender shall for any other reason accept a partial prepayment by Borrower of the outstanding indebtedness, except as otherwise provided in paragraph A.4 of this Addendum, a prepayment premium shall be due and payable to Lender as follows: (a) AFTER YIELD MAINTENANCE PERIOD. No prepayment premium shall be due for any partial prepayment made by Borrower in accordance with the provisions of the preceding sentence after the expiration of the Yield Maintenance Period. (b) DURING YIELD MAINTENANCE PERIOD. If Lender shall require or accept a partial prepayment during the Yield Maintenance Period, the partial prepayment shall be made on the last Business Day before a scheduled monthly payment date and a prepayment premium shall be due and payable to Lender equal to the greater of: (i) 1% of the amount of principal being prepaid, or (ii) the product obtained by multiplying (A) the amount of the principal which is being prepaid, times (B) the difference obtained by subtracting from the interest rate on the Note the yield rate (the "Partial Prepayment Yield Rate") on the Specified U.S. Treasury Security, as the Partial Prepayment Yield Rate is reported in the WALL STREET JOURNAL on the fifth Business Day preceding (1) the day Lender accelerates the loan (in connection with any partial prepayment made in connection with an acceleration of the loan), or (2) the day Lender applies funds held under any Collateral Agreement (other than in connection with an acceleration of the loan), times (C) the present value factor calculated using the following formula: n l -(1 + y) --------- y [y = Partial Prepayment Yield Rate n = the number of years, and any fraction thereof, remaining between the prepayment date and the expiration of the Yield Maintenance Period] When the total amount to be applied toward the unpaid principal balance of the loan and the prepayment premium is known, but the amounts to be allocated toward the unpaid principal balance of the loan and the prepayment premium, respectively, are unknown, the Lender shall determine the allocation between the prepaid principal amount and the prepayment premium as follows: Given: a = total amount to be applied b = prepaid principal amount c = prepayment premium N = note rate n F = present value factor = 1 - (1 + y) ------------ y ["y" and "n" have the same meanings as set forth in subparagraph (ii) above] Page 2 Then: a = b + c b = a ----------- F (N-y) + l c = a-b Except as provided in the next sentence, any partial prepayment of the outstanding indebtedness shall not extend the due date of any subsequent monthly installments or change the amount of such installments, unless Lender shall otherwise agree in writing. Upon any partial prepayment, Lender shall have the option, in its sole and absolute discretion, to recast the monthly installment due under the Note so that the maturity date of the Note shall remain the same. 4. PREMIUM DUE WHETHER VOLUNTARY OR INVOLUNTARY PREPAYMENT; INSURANCE AND CONDEMNATION PROCEEDS Borrower shall pay the prepayment premium due under this paragraph A whether the prepayment is voluntary or involuntary (in connection with Lender's acceleration of the unpaid principal balance of the Note) or the Instrument is satisfied or released by foreclosure (whether by power of sale or judicial proceeding), deed in lieu of foreclosure or by any other means. Notwithstanding any other provision herein to the contrary, Borrower shall not be required to pay any prepayment premium in connection with any prepayment occurring as a result of the application of insurance proceeds or condemnation awards under the Instrument. 5. NOTICE; BUSINESS DAY Any notice to Lender provided for in this Addendum shall be given in the manner provided in the Instrument. The term "Business Day" means any day other than a Saturday, a Sunday, or any other day on which Lender is not open for business. B. BORROWER'S EXCULPATION Subject to the provisions of paragraph C and notwithstanding any other provision in the Note or Instrument, the personal liability of Borrower, any general partner of Borrower (if the Borrower is a partnership), and any "Key Principal" (collectively, the entities defined as Key Principal in Uniform Covenant 19(a)( 1) of the Security Instrument) to pay the principal of and interest on the debt evidenced by the Note and any other agreement evidencing Borrower's obligations under the Note and the Instrument shall be limited to (1) the real and personal property described as the "Property" in the Instrument, (2) the personal property described in or pledged under any Collateral Agreement (as defined in Uniform Covenant 2B of the Instrument) executed in connection with the loan evidenced by the Note, (3) the rents, profits, issues, products and income of the Property received or collected by or on behalf of Borrower (the "Rents and Profits") to the extent such receipts are necessary first, to pay the reasonable expenses of operating, managing, maintaining and repairing the Property, including but not limited to real estate taxes, utilities, assessments, insurance premiums, repairs, replacements and ground rents, if any (the "Operating Expenses") then due and payable as of the tine of receipt of such Rents and Profits, and then, to pay the principal and interest due under the Note and any other sums due under the Instrument or any other Loan Document (including but not limited to deposits or reserves due under any Collateral Agreement), except to the extent that Borrower did not have the legal right, because of a bankruptcy, receivership or similar judicial proceeding, to direct the disbursement of such sums. Except as provided in paragraph C, Lender shall not seek (a) any judgment for a deficiency against Borrower, any general partner of Borrower (if Borrower is a partnership) or any Key Principal, or Borrower's or any general partner's or Key Principal's heirs, legal representatives, successors or assigns, in any action to enforce any right or remedy under the Instrument, or (b) any judgment on the Note except as may be necessary in any action brought under the Instrument to enforce the lien against the Property or to exercise any remedies under any Collateral Agreement. C. EXCEPTIONS TO NON-RECOURSE LIABILITY If, without obtaining the Lender's prior written consent, (i) a Transfer shall occur which, pursuant to Uniform Covenant 19 of the Instrument, gives Lender the right, at its option, to declare all sums secured by the Instrument immediately due and payable, (ii) Borrower shall encumber the Property with the lien of any subordinate instrument in connection with any financing by Borrower, in violation of the terms of the Instrument or, (iii) Borrower shall violate the single asset covenant of paragraph J of the Rider, any of such events shall constitute a default by Borrower under the Note, the Instrument and the other Loan Documents, and if such event shall continue for 30 days, paragraph B shall not apply from and after the date which is 30 days after such event and the Borrower, any general partner of Borrower (if Borrower is a partnership) and Key Principal (each individually on a joint or several basis if more than one) shall be personally liable on a joint and several basis for full recourse liability under the Note and the other Loan Documents. Notwithstanding paragraph B, Borrower, any general partner of Borrower (if Borrower is a partnership) and Key Principal (each individually on a joint and several basis if more than one) shall be personally liable on a joint and several basis, in the amount of any loss, damage or cost (including but not limited to attorneys fees) resulting from (A) fraud or material misrepresentation by Borrower or Borrower's agents or employees or any Key Page 3 Principal or general partner of Borrower in connection with obtaining the loan evidenced by the Note, or in complying with any of Borrower's obligations under the Loan Documents, (B) insurance proceeds, condemnation awards, security deposits from tenants or other sums or payments received by or on behalf of the Borrower in its capacity as owner of the Property and not applied in accordance with the provisions of the Instrument (except to the extent that Borrower did not have the legal right because of a bankruptcy, receivership or similar judicial proceeding, to direct disbursement of such sums or payments, (C) all Rents and Profits, (except to the extent that Borrower did not have the legal right, because of a bankruptcy, receivership or similar judicial proceeding, to direct the disbursement of such sums), and not applied, first, to the payment of the reasonable Operating Expenses as such Operating Expenses become due and payable, and then, to the payment of principal and interest then due and payable under the Note and any other sums due under the Instrument and all other Loan Document (including but not limited to deposit or reserves payable under any Collateral Agreement), (D) Borrower's failure to pay transfer fees and charges due Lender under paragraph 19(c) of the Instrument, (E) Borrower's failure following a default under any of the Loan Documents to deliver to Lender on demand all Rents and Profits, security deposits (except to the extent that Borrower did not have the legal right because of a bankruptcy, receivership or similar judicial proceeding to direct the disbursement of such sums), books and records relating to the Property, (F) or relating to Hazardous Materials or compliance with Hazardous Materials Laws to the full extent of any losses or damages (including those resulting from diminution in value of the Property) incurred by Lender as a result of the existence of such Hazardous Materials or failure to comply with Hazardous Materials Laws or the obligations of Borrower hereunder relating thereto, (G) intentional damage to the Property or (H) failure of Borrower to pay taxes or other liens with priority over the Multifamily Instrument. No provision of paragraphs B or C shall (i) affect any guaranty or similar agreement executed in connection with the debt evidenced by the Note, (ii) release or reduce the debt evidenced by the Note, (iii) impair the right of Lender to enforce the provisions of paragraph D of the Rider, (iv) impair the lien of the Instrument, or (v) impair the right of Lender to enforce the provisions of any Collateral Agreement. D. BUSINESS, COMMERCIAL OR INVESTMENT PURPOSE Borrower represents that the Loan evidenced by the Note is being made solely for business, commercial or investment purposes. E. GOVERNING LAW 1. CHOICE OF LAW The validity of the Note, and the other Loan Documents, each of their terms and provisions, and the rights and obligations of Borrower under the Note, and the other Loan Documents shall be governed by, interpreted, construed, and enforced pursuant to and in accordance with the laws of the Property Jurisdiction. 2. CONSENT TO JURISDICTION Borrower irrevocably consents to the exclusive jurisdiction of any and all state and federal courts with jurisdiction in the Property Jurisdiction over Borrower and Borrower's assets. Borrower agrees that such assets shall be used to first satisfy all claims of creditors organized or domiciled in the United States of America ("USA") and that no assets of the Borrower in the USA shall be considered part of any foreign bankruptcy estate. Borrower agrees that any controversy arising under or in relation to the Note, the Instrument or any of the other Loan Documents shall be litigated exclusively in the Property Jurisdiction. The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over ail controversies which may arise under or in relation to the Note, including without limitation those controversies relating to the execution, interpretation, breach, enforcement, or compliance with the Note, the Instrument, or any other issue arising under, related to, or in connection with any of the Loan Documents. Borrower irrevocably consents to service, jurisdiction, and venue of such courts for any litigation arising from the Note, the Instrument or any of the other Loan Documents, and waives any other venue to which it might be entitled by virtue of domicile, habitual residence, or otherwise. F. SUCCESSORS AND ASSIGNS The provisions of the Note, the Instrument, and all other Loan Documents shall be binding on the successors and assigns, including, but not limited to, any receiver, trustee, representative or other person appointed under foreign or domestic bankruptcy, receivership, or similar proceedings of Borrower and any person having an interest in Borrower. Page 4 BY SIGNING BELOW, Borrower accepts and agrees to the covenants and agreements contained in this Addendum. AIMCO/WICKERTREE, L.P., a Delaware limited partnership By: AIMCO/Wickertree, Inc., a Delaware corporation By: /s/ Harry Alcock ------------------------------------------ Harry Alcock Vice President Page 5 EX-10.9 9 EXHIBIT 10.9 WHEN RECORDED MAIL TO Allan R. Winn, Esq. Ballard Spahr Andrews & Ingersoll 601 13th Street, N.W. Suite 1000 South Washington, D.C. 20005-3807 SPACE ABOVE THIS LINE FOR RECORDER'S USE - -------------------------------------------------------------------------------- MULTIFAMILY DEED OF TRUST, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT (Wickertree) THIS DEED OF TRUST (herein "Instrument") is made as of the 31st day of October 1997, among the Trustor/Grantor, AIMCO/WICKERTREE, L.P., a Delaware limited partnership whose address is 1873 S. Bellaire Street, 17th Floor, Denver, Colorado 80222 (herein "Borrower"), TRANSNATION TITLE INSURANCE COMPANY, an Arizona corporation whose address is (herein "Trustee"), and the Beneficiary, GMAC COMMERCIAL MORTGAGE CORPORATION, a corporation organized and existing under the laws of the State of California whose address is 650 Dresher Road, P.O. Box 1015, Horsham, PA 19044-8015 (herein "Lender"). BORROWER, in consideration of the indebtedness herein recited and the trust herein created, irrevocably grants, conveys and assigns to Trustee, in trust, with power of sale, the following described property located in Phoenix, Maricopa County, State of Arizona: See EXHIBIT "A" attached hereto and incorporated herein. This Instrument has been amended and supplemented in certain respects as set forth in (i) Rider to Multifamily Instrument and (ii) Supplemental Rider to Multifamily Instrument (collectively, the "Riders"), annexed hereto and incorporated herein by this reference. In the event of any inconsistencies between the printed portions of this Instrument and the provisions of the Riders, the provisions of the Riders shall control. (Page 1 of 9 Pages) TOGETHER with all buildings, improvements and tenements now or hereafter erected on the property, and all heretofore or hereafter vacated alleys and streets abutting the property, and all easements, rights, appurtenances, rents (subject however to the assignment of rents to Lender herein), royalties, mineral, oil and gas rights and profits, water, water rights, and water stock appurtenant to the property, and all fixtures, machinery, equipment, engines, boilers, incinerators, building materials, appliances and goods of every nature whatsoever now or hereafter located in, or on, or used, or intended to be used in connection with the property, including but not limited to, those for the purposes of supplying or distributing heating, cooling, electricity, gas, water, air and light; and all elevators, and related machinery and equipment, fire prevention and extinguishing apparatus, security and access control apparatus, plumbing, bath tubs, water heaters, water closets, sinks, ranges, stoves, refrigerators, dishwashers, disposals, washers, dryers, awnings, storm windows, storm doors, screens, blinds, shades, curtains and curtain rods, mirrors, cabinets, panelling, rugs, attached floor coverings, furniture, pictures, antennas, trees and plants, and any and all other additional items of personal property described in EXHIBIT "B" attached hereto and incorporated herein; all of which, including replacements and additions thereto, shall be deemed to be and remain a part of the real property covered by this Instrument; and all of the foregoing, together with said property (or the leasehold estate in the event this Instrument is on a leasehold) are herein referred to as the "Property". TO SECURE TO LENDER (a) the repayment of the indebtedness evidenced by Borrower's note dated as of October 31, 1997 (herein "Note") in the principal sum of Four Million Two Hundred Thirty One Thousand Seven Hundred And No/100 Dollars, with interest thereon, with the balance of the indebtedness, if not sooner paid, due and payable on November 1, 2017, and all renewals, extensions and modifications thereof; (d) the payment of all other sums, with interest thereon, advanced in accordance herewith to protect the security of this Instrument; and (e) the performance of the covenants and agreements of Borrower herein contained. Borrower covenants that Borrower is lawfully seised of the estate hereby conveyed and has the right to grant, convey and assign the Property (and, if this Instrument is on a leasehold, that the ground lease is in full force and effect without modification except as noted above and without default on the part of either lessor or lessee thereunder), that the Property is unencumbered, and that Borrower will warrant and defend generally the title to the Property against all claims and demands, subject to any easements and restrictions listed in a schedule of exceptions to coverage in any title insurance policy insuring Lender's interest in the Property. UNIFORM COVENANTS. Borrower and Lender covenant and agree as follows: 1. PAYMENT OF PRINCIPAL AND INTEREST. Borrower shall promptly pay when due the principal of and interest on the indebtedness evidenced by the Note, any prepayment and late charges provided in the Note and all other sums secured by this Instrument. 2. FUNDS FOR TAXES, INSURANCE AND OTHER CHARGES. Subject to applicable law or to a written waiver by Lender, Borrower shall pay to Lender on the day monthly installments of principal or interest are payable under the Note (or on another day designated in writing by Lender), until the Note is paid in full, a sum (herein "Funds") equal to one-twelfth of (a) the yearly water and sewer rates and taxes and assessments which may be levied on the Property, (b) the yearly ground rents, if any, (c) the yearly premium installments for fire and other hazard insurance, rent loss insurance and such other insurance covering the Property as Lender may require pursuant to paragraph 5 hereof, (d) the yearly premium installments for mortgage insurance, if any, and (e) if this Instrument is on a leasehold, the yearly fixed rents, if any, under the ground lease, all as reasonably estimated initially and from time to time by Lender on the basis of assessments and bills and reasonable estimates thereof. Any waiver by Leader of a requirement that Borrower pay such Funds may be revoked by Lender, in Lender's sole discretion, at any time upon notice in writing to Borrower. Lender may require Borrower to pay to Lender, in advance, such other Funds for other taxes, charges, premiums, assessments and impositions in connection with Borrower or the Property which Lender shall reasonably deem necessary to protect Lender's interests (herein "Other Impositions"). Unless otherwise provided by applicable law, Lender may require Funds for Other Impositions to be paid by Borrower in a lump sum or in periodic installments, at Lender's option. The Funds shall be held in an institution(s) the deposits or accounts of which are insured or guaranteed by a Federal or state agency (including Lender if Lender is such an institution). Lender shall apply the Funds to pay said rates, rents, taxes, assessments, insurance premiums and Other Impositions so long as Borrower is not in breach of any covenant or agreement of Borrower in this Instrument. Lender shall make no charge for so holding and applying the Funds, analyzing said account or for verifying and compiling said assessments and bills, unless Lender pays Borrower interest, earnings or profits on the Funds and applicable law permits Lender to make such a charge. Borrower and Lender may agree in writing at the time of execution of this Instrument that interest on the Funds shall be paid to Borrower, and unless such agreement is made or applicable law requires interest, earnings or profits to be paid, Lender shall not be required to pay Borrower any interest, earnings or profits on the Funds. Lender shall give to Borrower, without charge, an annual accounting of the Funds in Lender's normal format showing credits and debits to the Funds and the purpose for which each debit to the Funds was made. The Funds are pledged as additional security for the sums secured by this Instrument. If the amount of the Funds held by Lender at the time of the annual accounting thereof shall exceed the amount deemed necessary by Lender to provide for the payment of water and sewer rates, taxes, assessments, insurance premiums, rents and Other Impositions, as they fall due, such excess shall be credited to Borrower on the next monthly installment or installments of Funds due. If at any time the amount of the Funds held by Lender shall be less than the amount deemed necessary by Lender to pay water and sewer rates, taxes, assessments, insurance premiums, rents and Other Impositions, as they fall due, Borrower shall pay to Lender any amount necessary to make up the deficiency within thirty days after notice from Lender to Borrower requesting payment thereof. Upon Borrower's breach of any covenant or agreement of Borrower in this Instrument, Lender may apply, in any amount and in any order as Lender shall determine in Lender's sole discretion, any Funds held by Lender at the time of application (i) to pay rates, rents, taxes, assessments, insurance premiums and Other Impositions which are now or will hereafter become due, or (ii) as a credit against sums secured by this Instrument. Upon payment in full of all sums secured by this Instrument, Lender shall promptly refund to Borrower any Funds held by Lender. (Page 2 of 9 Pages) 4. CHARGES; LIENS. Borrower shall pay all water and sewer rates, rents, taxes, assessments, premiums, and Other Impositions attributable to the Property at Lender's option in the manner provided under paragraph 2 hereof or, if not paid in such manner, by Borrower making payment, when due, directly to the payee thereof, or in such other manner as Lender may designate in writing. Borrower shall promptly furnish to Lender all notices of amounts due under this paragraph 4, and in the event Borrower shall make payment directly, Borrower shall promptly furnish to Lender receipts evidencing such payments. Borrower shall promptly discharge any lien which has, or may have, priority over or equality with, the lien of this Instrument, and Borrower shall pay, when due, the claims of all persons supplying labor or materials to or in connection with the Property. Without Lender's prior written permission, Borrower shall not allow any lien inferior to this Instrument to be perfected against the Property. SEE ATTACHED SUPPLEMENTAL RIDER TO MULTIFAMILY INSTRUMENT AND RIDER TO MULTIFAMILY INSTRUMENT 6. PRESERVATION AND MAINTENANCE OF PROPERTY; LEASEHOLDS. Borrower (a) shall not commit waste or permit impairment or deterioration of the Property, (b) shall not abandon the Property, (c) shall restore or repair promptly and in a good and workmanlike manner all or any part of the Property to the equivalent of its original condition, or such other condition as Lender may approve in writing, in the event of any damage, injury or loss thereto, whether or not insurance proceeds are available to cover in whole or in part the costs of such restoration or repair, (d) shall keep the Property, including improvements, fixtures, equipment, machinery and appliances thereon in good repair and shall replace fixtures, equipment, machinery and appliances on the Property when necessary to keep such items in good repair, (e) shall comply with all laws, ordinances, regulations and requirements of any governmental body applicable to the Property, (f) shall provide for professional management of the Property by a residential rental property manager satisfactory to Lender pursuant to a contract approved by Lender in writing, unless such requirement shall be waived by Lender in writing, (g) shall generally operate and maintain the Property in a manner to ensure maximum rentals, and (h) shall give notice in writing to Lender of and, unless otherwise directed in writing by Lender, appear in and defend any action or proceeding purporting to affect the Property, the security of this Instrument or the rights or powers of Lender. Neither Borrower nor any tenant or other person shall remove, demolish or alter any improvement now existing or hereafter erected on the Property or any fixture, equipment, machinery or appliance in or on the Property except when incident to the replacement of fixtures, equipment, machinery and appliances with items of like kind. (Page 3 of 9 Pages) If this Instrument is on a leasehold, Borrower (i) shall comply with the provisions of the ground lease, (ii) shall give immediate written notice to Lender of any default by lessor under the ground lease or of any notice received by Borrower from such lessor of any default under the ground lease by Borrower, (iii) shall exercise any option to renew or extend the ground lease and give written confirmation thereof to Lender within thirty days after such option becomes exercisable, (iv) shall give immediate written notice to Lender of the commencement of any remedial proceedings under the ground lease by any party thereto and, if required by Lender shall permit Lender as Borrower's attorney-in-fact to control and act for Borrower in any such remedial proceedings and (v) shall within thirty days after request by Lender obtain from the lessor under the ground lease and deliver to Lender the lessor's estoppel certificate required thereunder, if any. Borrower hereby expressly transfers and assigns to Lender the benefit of all covenants contained in the ground lease, whether or not such covenants run with the land, but Lender shall have no liability with respect to such covenants nor any other covenants contained in the ground lease. Borrower shall not surrender the leasehold estate and interests herein conveyed nor terminate or cancel the ground lease creating said estate and interests, and Borrower shall not, without the express written consent of Lender, alter or amend said ground lease. Borrower covenants and agrees that there shall not be a merger of the ground lease, or of the leasehold estate created thereby, with the fee estate covered by the ground lease by reason of said leasehold estate or said fee estate, or any part of either, coming into common ownership, unless Lender shall consent in writing to such merger; if Borrower shall acquire such fee estate, then this Instrument shall simultaneously and without further action be spread so as to become a lien on such fee estate. 7. USE OF PROPERTY. Unless required by applicable law or unless Lender has otherwise agreed in writing, Borrower shall not allow changes in the use for which all or any part of the Property was intended at the time this Instrument was executed. Borrower shall not initiate or acquiesce in a change in the zoning classification of the Property without Lender's prior written consent. 8. PROTECTION OF LENDER'S SECURITY. If Borrower fails to perform the covenants and agreements contained in this Instrument, or if any action or proceeding is commenced which affects the Property or title thereto or the interest of Lender therein, including, but not limited to, eminent domain, insolvency, code enforcement, or arrangements or proceedings involving a bankrupt or decedent, then Lender at Lender's option may make such appearances, disburse such sums and take such action as Lender deems necessary, in its sole discretion, to protect Lender's interest, including, but not limited to, (i) disbursement of attorney's fees, (ii) entry upon the Property to make repairs, (iii) procurement of satisfactory insurance as provided in paragraph 5 hereof, and (iv) if this Instrument is on a leasehold, exercise of any option to renew or extend the ground lease on behalf of Borrower and the curing of any default of Borrower in the terms and conditions of the ground lease. Any amounts disbursed by Leader pursuant to this paragraph 8, with interest thereon, shall become additional indebtedness of Borrower secured by this Instrument. Unless Borrower and Lender agree to other terms of payment, such amounts shall be immediately due and payable and shall bear interest from the date of disbursement at the rate stated in the Note unless collection from Borrower of interest at such rate would be contrary to applicable law, in which event such amounts shall bear interest at the highest rate which may be collected from Borrower under applicable law. Borrower hereby covenants and agrees that Lender shall be subrogated to the lien of any mortgage or other lien discharged, in whole or in part, by the indebtedness secured hereby. Nothing contained in this paragraph 8 shall require Lender to incur any expense or take any action hereunder. 9. INSPECTION. Lender may make or cause to be made reasonable entries upon and inspections of the Property. 10. BOOKS AND RECORDS. SEE ATTACHED RIDER TO MULTIFAMILY INSTRUMENT 11. CONDEMNATION. Borrower shall promptly notify Lender of any action or proceeding relating to any condemnation or other taking, whether direct or indirect, of the Property, or part thereof, and Borrower shall appear in and prosecute any such action or proceeding unless otherwise directed by Lender in writing. Borrower authorizes Lender, at Lender's option, as attorney-in-fact for Borrower, to commence, appear in and prosecute, in Lender's or Borrower's name, any action or proceeding relating to any condemnation or other taking of the Property, whether direct or indirect, and to settle or compromise any claim in connection with such condemnation or other taking. The proceeds of any award, payment or claim for damages, direct or consequential, in connection with any condemnation or other taking, whether direct or indirect, of the Property, or part thereof, or for conveyances in lieu of condemnation, are hereby assigned to and shall be paid to Lender subject, if this Instrument is on a leasehold, to the rights of lessor under the ground lease. Borrower authorizes Lender to apply such awards, payments, proceeds or damages, after the deduction of Lender's expenses incurred in the collection of such amounts, at Lender's option, to restoration or repair of the Property or to payment of the sums secured by this Instrument, whether or not then due, in the order of application set forth in paragraph 3 hereof, with the balance, if any, to Borrower. Unless Borrower and Lender otherwise agree in writing, any application of proceeds to principal shall not extend or postpone the due date of the monthly installments referred to in paragraphs 1 and 2 hereof or change the amount of such installments. Borrower agrees to execute such further evidence of assignment of any awards, proceeds, damages or claims arising in connection with such condemnation or taking as Lender may require. 12. BORROWER AND LIEN NOT RELEASED. From time to time, Lender may, at Lender's option, without giving notice to or obtaining the consent of Borrower, Borrower's successors or assigns or of any junior lienholder or guarantors, without liability on Lender's part and notwithstanding Borrower's breach of any covenant or agreement of Borrower in this Instrument, extend the time for payment of said indebtedness or any part tbereof, reduce the payments thereon, release anyone liable on any of said indebtedness, accept a renewal note or notes therefor, modify the terms and time of payment of said indebtedness, release from the lien of this (Page 4 of 9 Pages) Instrument any part of the Property, take or release other or additional security, reconvey any part of the Property, consent to any map or plan of the Property, consent to the granting of any easement, join in any extension or subordination agreement, and agree in writing with Borrower to modify the rate of interest or period of amortization of the Note or change the amount of the monthly installments payable thereunder. Any actions taken by Lender pursuant to the terms of this paragraph 12 shall not affect the obligation of Borrower or Borrower's successors or assigns to pay the sums secured by this Instrument and to observe the covenants of Borrower contained herein, shall not affect the guaranty of any person, corporation, partnership or other entity for payment of the indebtedness secured hereby, and shall not affect the lien or priority of lien hereof on the Property. Borrower shall pay Lender a reasonable service charge, together with such title insurance premiums and attorney's fees as may be incurred at Lender's option, for any such action if taken at Borrower's request. 13. FORBEARANCE BY LENDER NOT A WAIVER. Any forbearance by Lender in exercising any right or remedy hereunder, or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of any right or remedy. The acceptance by Lender of payment of any sum secured by this Instrument after the due date of such payment shall not be a waiver of Lender's right to either require prompt payment when due of all other sums so secured or to declare a default for failure to make prompt payment. The procurement of insurance or the payment of taxes or other liens or charges by Lender shall not be a waiver of Lender's right to accelerate the maturity of the indebtedness secured by this Instrument, nor shall Lender's receipt of any awards, proceeds or damages under paragraphs 5 and 11 hereof operate to cure or waive Borrower's default in payment of sums secured by this Instrument. 14. ESTOPPEL CERTIFICATE. Borrower shall within ten days of a written request from Lender furnish Lender with a written statement, duly acknowledged, setting forth the sums secured by this Instrument and any right of set-off, counterclaim or other defense which exists against such sums and the obligations of this Instrument. 15. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. This Instrument is intended to be a security agreement pursuant to the Uniform Commercial Code for any of the items specified above as part of the Property which, under applicable law, may be subject to a security interest pursuant to the Uniform Commercial Code, and Borrower hereby grants Lender a security interest in said items. Borrower agrees that Lender may file this Instrument, or a reproduction thereof, in the real estate records or other appropriate index, as a financing statement for any of the items specified above as part of the Property. Any reproduction of this Instrument or of any other security agreement or financing statement shall be sufficient as a financing statement. In addition, Borrower agrees to execute and deliver to Lender, upon Lender's request, any financing statements, as well as extensions, renewals and amendments thereof, and reproductions of this Instrument in such form as Lender may require to perfect a security interest with respect to said items. Borrower shall pay all costs of filing such financing statements and any extensions, renewals, amendments and releases thereof, and shall pay all reasonable costs and expenses of any record searches for financing statements Lender may reasonably require. Without the prior written consent of Lender, Borrower shall not create or suffer to be created pursuant to the Uniform Commercial Code any other security interest in said items, including replacements and additions thereto. Upon Borrower's breach of any covenant or agreement of Borrower contained in this Instrument, including the covenants to pay when due all sums secured by this Instrument, Lender shall have the remedies of a secured party under the Uniform Commercial Code and, at Lender's option, may also invoke the remedies provided in paragraph 27 of this Instrument as to such items. In exercising any of said remedies, Lender may proceed against the items of real property and any items of personal property specified above as part of the Property separately or together and in any order whatsoever, without in any way affecting the availability of Lender's remedies under the Uniform Commercial Code or of the remedies provided in paragraph 27 of this Instrument. 16. LEASES OF THE PROPERTY. As used in this paragraph 16, the word "lease" shall mean "sublease" if this Instrument is on a leasehold. Borrower shall comply with and observe Borrower's obligations as landlord under all leases of the Property or any part thereof. Borrower will not lease any portion of the Property for non-residential use except with the prior written approval of Lender. Borrower, at Lender's request, shall furnish Lender with executed copies of all leases now existing or hereafter made of all or any part of the Property, and all leases now or hereafter entered into will be in form and substance subject to the approval of Lender. All leases of the Property shall specifically provide that such leases are subordinate to this Instrument; that the tenant attorns to Lender, such attornment to be effective upon Lender's acquisition of title to the Property; that the tenant agrees to execute such further evidences of attornment as Lender may from time to time request; that the attornment of the tenant shall not be terminated by foreclosure; and that Lender may, at Lender's option, accept or reject such attornments. Borrower shall not, without Lender's written consent, execute, modify, surrender or terminate, either orally or in writing, any lease now existing or hereafter made of all or any part of the Property providing for a term of three years or more, permit an assignment or sublease of such a lease without Lender's written consent, or request or consent to the subordination of any lease of all or any part of the Property to any lien subordinate to this Instrument. If Borrower becomes aware that any tenant proposes to do, or is doing, any act or thing which may give rise to any right of set-off against rent, Borrower shall (i) take such steps as shall be reasonably calculated to prevent the accrual of any right to a set-off against rent, (ii) notify Lender thereof and of the amount of said set-offs, and (iii) within ten days after such accrual, reimburse the tenant who shall have acquired such right to set-off or take such other steps as shall effectively discharge such set-off and as shall assure that rents thereafter due shall continue to be payable without set-off or deduction. Upon Lender's request, Borrower shall assign to Lender, by written instrument satisfactory to Lender, all leases now existing or hereafter made of all or any part of the Property and all security deposits made by tenants in connection with such leases of the Property. Upon assignment by Borrower to Lender of any leases of the Property, Lender shall have all of the rights and powers possessed by Borrower prior to such assignment and Lender shall have the right to modify, extrend or terminate such existing leases and to execute new leases, in Lender's sole discretion. 17. REMEDIES CUMULATIVE. Each remedy provided in this Instrument is distinct and cumulative to all other rights or remedies under this Instrument or afforded by law or equity, and may be exercised concurrently, independently, or successively, in any order whatsoever. 18. ACCELERATION IN CASE OF BORROWER'S INSOLVENCY. If Borrower shall voluntarily file a petition under the Federal Bankruptcy Act, as such Act may from time to time be amended, or under any similar or successor Federal statute relating to bankruptcy, insolvency, arrangements or reorganizations, or under any state bankruptcy or insolvency act, or file an answer in an involuntary proceeding admitting insolvency or inability to pay debts, or if Borrower shall fail to obtain a vacation or stay of involuntary proceedings (Page 5 of 9 Pages) brought for the reorganization, dissolution or liquidation of Borrower, or if Borrower shall be adjudged a bankrupt, or if a trustee or receiver shall be appointed for Borrower or Borrower's property, or if the Property shall become subject to the jurisdiction of a Federal bankruptcy court or similar state court, or if Borrower shall make an assignment for the benefit of Borrower's creditors, of if there is an attachment, execution or other judicial seizure of any portion of Borrower's assets and such seizure is not discharged within ten days, then Lender may, at Lender's option, declare all of the sums secured by this Instrument to be immediately due and payable without prior notice to Borrower, and Lender may invoke any remedies permitted by paragraph 27 of this Instrument. Any attorney's fees and other expenses incurred by Lender in connection with Borrower's bankruptcy or any of the other aforesaid events shall be additional indebtedness of Borrower secured by this Instrument pursuant to paragraph 8 hereof. 19. SEE ATTACHED RIDER TO MULTIFAMILY INSTRUMENT 20. SEE ATTACHED RIDER TO MULTIFAMILY INSTRUMENT 21. SUCCESSORS AND ASSIGNS BOUND; JOINT AND SEVERAL LIABILITY; AGENTS; CAPTIONS. The covenants and agreements herein contained shall bind, and the rights hereunder shall inure to, the respective successors and assigns of Lender and Borrower, subject to the provisions of paragraph 19 hereof. All covenants and agreements of Borrower shall be joint and several. In exercising any rights hereunder or taking any actions provided for herein, Lender may act through its employees, agents or independent contractors as authorized by Lender. The captions and headings of the paragraphs of this Instrument are for convenience only and are not to be used to interpret or define the provisions hereof. 22. UNIFORM MULTIFAMILY INSTRUMENT; GOVERNING LAW; SEVERABILITY. This form of multifamily instrument combines uniform covenants for national use and non-uniform covenants with limited variations by jurisdiction to constitute a uniform security instrument covering real property and related fixtures and personal property. This Instrument shall be governed by the law of the jurisdiction in which the Property is located. In the event that any provision of this Instrument or the Note conflicts with applicable law, such conflict shall not affect other provisions of this Instrument or the Note which can be given effect without the conflicting provisions, and to this end the provisions of this Instrument and the Note are declared to be severable. In the event that any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower is interpreted so that any charge provided for in this Instrument or in the Note, whether considered separately or together with other charges levied in connection with this Instrument and the Note, violates such law, and Borrower is entitled to the benefit of such law, such charge is hereby reduced to the extent necessary to eliminate such violation. The amounts, if any, previously paid to Lender in excess of the amounts payable to Lender pursuant to such charges as reduced shall be applied by Lender to reduce the principal of the indebtedness evidenced by the Note. For the purpose of determining whether any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower has been violated, all indebtedness which is secured by this Instrument or evidenced by the Note and which constitutes interest, as well as all other charges levied in connection with such indebtedness which constitute interest, shall be deemed to be allocated and spread over the stated term of the Note. Unless otherwise required by applicable law, such allocation and spreading shall be effected in such a manner that the rate of interest computed thereby is uniform throughout the stated term of the Note. 23. WAIVER OF STATUTE OF LIMITATIONS. Borrower hereby waives the right to assert any statute of limitations as a bar to the enforcement of the lien of this Instrument or to any action brought to enforce the Note or any other obligation secured by this Instrument. 24. WAIVER OF MARSHALLING. Notwithstanding the existence of any other security interests in the Property held by Lender or by any other party, Lender shall have the right to determine the order in which any or all of the Property shall be subjected to the remedies provided herein. Lender shall have the right to determine the order in which any or all portions of the indebtedness secured hereby are satisfied from the proceeds realized upon the exercise of the remedies provided herein. Borrower, any party who consents to this Instrument and any party who now or hereafter acquires a security interest in the Property and who has actual or constructive notice hereof hereby waives any and all right to require the marshalling of assets in connection with the exercise of any of the remedies permitted by applicable law or provided herein. 25. (Page 6 of 9 Pages) 26. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION. As part of the consideration for the indebtedness evidenced by the Note, Borrower hereby absolutely and unconditionally assigns and transfers to Lender all the rents and revenues of the Property, including those now due, past due, or to become due by virtue of any lease or other agreement for the occupancy or use of all or any part of the Property, regardless of to whom the rents and revenues of the Property are payable. Borrower hereby authorizes Lender or Lender's agents to collect the aforesaid rents and revenues and hereby directs each tenant of the Property to pay such rents to Lender or Lender's agents; provided, however, that prior to written notice given by Lender to Borrower of the breach by Borrower of any covenant or agreement of Borrower in this Instrument, Borrower shall collect and receive all rents and revenues of the Property as trustee for the benefit of Lender and Borrower, to apply the rents and revenues so collected to the sums secured by this Instrument in the order provided in paragraph 3 hereof with the balance, so long as no such breach has occurred, to the account of Borrower, it being intended by Borrower and Lender that this assignment of rents constitutes an absolute assignment and not an assignment for additional security only. Upon the occurrence of an Event of Default (as defined in the Note), and without the necessity of Lender entering upon and taking and maintaining full control of the Property in person, by agent or by a court-appointed receiver, Lender shall immediately be entitled to possession of all rents and revenues of the Property as specified in this paragraph 26 as the same become due and payable, including but not limited to rents then due and unpaid, and all such rents shall immediately upon delivery of such notice be held by Borrower as trustee for the benefit of Lender only; provided, however, that the written notice by Lender to Borrower of the breach by Borrower shall contain a statement that Lender exercises its rights to such rents. Borrower agrees that upon the occurrence of an Event of Default (as defined in the Note) each tenant of the Property shall make such rents payable to and pay such rents to Lender or Lender's agents on Lender's written demand to each tenant therefor, delivered to each tenant personally, by mail or by delivering such demand to each rental unit, without any liability on the part of said tenant to inquire further as to the existence of a default by Borrower. Borrower hereby covenants that Borrower has not executed any prior assignment of said rents, that Borrower has not performed, and will not perform, any acts or has not executed, and will not execute, any instrument which would prevent Lender from exercising its rights under this paragraph 26, and that at the time of execution of this Instrument there has been no anticipation or prepayment of any of the rents of the Property for more than two months prior to the due dates of such rents. Borrower covenants that Borrower will not hereafter collect or accept payment of any rents of the Property more than two months prior to the due dates of such rents. Borrower further covenants that Borrower will execute and deliver to Lender such further assignments of rents and revenues of the Property as Lender may from time to time request. Upon the occurrence of an Event of Default (as defined in the Note), Lender may in person, by agent or by a court-appointed receiver, regardless of the adequacy of Lender's security, enter upon and take and maintain full control of the Property in order to perform all acts necessary and appropriate for the operation and maintenance thereof including, but not limited to, the execution, cancellation or modification of leases, the collection of all rents and revenues of the Property, the making of repairs to the Property and the execution or termination of contracts providing for the management or maintenance of the Property, all on such terms as are deemed best to protect the security of this Instrument. In the event Lender elects to seek the appointment of a receiver for the Property upon Borrower's breach of any covenant or agreement of Borrower in this Instrument, Borrower hereby expressly consents to the appointment of such receiver. Lender or the receiver shall be entitled to receive a reasonable fee for so managing the Property. All rents and revenues collected subsequent to the occurrence of an Event of Default (as defined in the Note) shall be applied first to the costs, if any, of taking control of and managing the Property and collecting the rents, including, but not limited to, attorney's fees, receiver's fees, premiums on receiver's bonds, costs of repairs to the Property, premiums on insurance policies, taxes, assessments and other charges on the Property, and the costs of discharging any obligation or liability of Borrower as lessor or landlord of the Property and then to the sums secured by the Instrument. Lender or the receiver shall have access to the books and records used in the operation and maintenance of the Property and shall be liable to account only for those rents actually received. Lender shall not be liable to Borrower, anyone claiming under or through Borrower or anyone having an interest in the Property by reason of anything done or left undone by Lender under this paragraph 26. If the rents of the Property are not sufficient to meet the costs, if any, of taking control of and managing the Property and collecting the rents, any funds expended by Lender for such purposes shall become indebtedness of Borrower to Lender secured by this Instrument pursuant to paragraph 8 hereof. Unless Lender and Borrower agree in writing to other terms of payment, such amounts shall be payable upon notice from Lender to Borrower requesting payment thereof and shall bear interest from the date of disbursement at the rate stated in the Note unless payment of interest at such rate would be contrary to applicable law, in which event such amounts shall bear interest at the highest rate which may be collected from Borrower under applicable law. (Page 7 of 9 Pages) Any entering upon and taking and maintaining of control of the Property by Lender or the receiver and any application of rents as provided herein shall not cure or waive any default hereunder or invalidate any other right or remedy of Lender under applicable law or provided herein. This assignment of rents of the Property shall terminate at such time as this Instrument ceases to secure indebtedness held by Lender. NON-UNIFORM COVENANTS. Borrower and Lender further covenant and agree as follows: 27. ACCELERATION: REMEDIES. Upon the occurrence of an Event of Default, including, but not limited to, the covenants to pay when due any sums secured by this Instrument, Lender at Lender's option may declare all of the sums secured by this Instrument to be immediately due and payable without further demand, and may invoke the power of sale and any other remedies permitted by applicable law or provided herein. Borrower acknowledges that the power of sale herein granted may be exercised by Lender without prior judicial hearing. Borrower has the right to bring an action to assert the non-existence of a breach or any other defense of Borrower to acceleration and sale. Lender shall be entitled to collect all costs and expenses incurred in pursuing such remedies, including, but not limited to, attorney's fees and costs of documentary evidence, abstracts and title reports. If Lender invokes the power of sale, Lender shall give written notice to Trustee of the occurrence of an event of default and of Lender's election to cause the Property to be sold. Trustee shall record a notice of sale in each county in which the Property or some part thereof is located and shall mail copies of such notices in the manner prescribed by applicable law to Borrower and to the other persons prescribed by applicable law. Trustee shall give public notice of sale and shall sell the Property according to the laws of Arizona. Trustee may sell the Property at the time and place and under the terms designated in the notice of sale in one or more parcels and in such order as Trustee may determine. Trustee may postpone sale of all or any parcel of the Property by public announcement at the time and place of any previously scheduled sale. Lender or Lender's designee may purchase the Property at any sale. Trustee shall deliver to the purchaser Trustee's deed conveying the Property so sold without any covenant or warranty, expressed or implied. The recitals in the Trustee's deed shall be prima facie evidence of the truth of the statements made therein. Trustee shall apply the proceeds of the sale in the following order: (a) to all costs and expenses of the sale, including, but not limited to, Trustee's and attorney's fees and costs of title evidence; (b) to all sums secured by this Instrument in such order as Lender, in Lender's sole discretion, directs; and (c) the excess, if any, to the person or persons legally entitled thereto, or to the clerk of the superior court of the county in which the sale took place. 28. RELEASE. Upon payment of all sums secured by this Instrument, Lender shall release this Instrument. Borrower shall pay Lender's reasonable costs incurred in releasing this Instrument. 29. SUBSTITUTE TRUSTEE. Lender, at Lender's option, may from time to time remove Trustee and appoint a successor trustee to any Trustee appointed hereunder. Without conveyance of the Property, the successor trustee shall succeed to all the title, power and duties conferred upon the Trustee herein and by applicable law. 30. TIME OF ESSENCE. Time is of the essence of each covenant of this Instrument. 31. MAILING ADDRESS. Borrower's mailing address is Borrower's address stated below. 32. WAIVERS BY SURETY. Any party who has signed this Instrument as a surety or accommodation party, or who has subjected his property to this Instrument to secure the indebtedness of another, hereby expressly waives the benefits of the provision of Arizona Revised Statutes Sections 12-1641 and 12-1642, as now existing and hereafter amended. IN WITNESS WHEREOF, Borrower has executed this Instrument or has caused the same to be executed by its representatives thereunto duly authorized. WITNESS: BORROWER: AIMCO/WICKERTREE, L. P., a Delaware limited partnership By: AIMCO/Wickertree, Inc., a Delaware corporation /s/ Stacie Taylor - ------------------------------ By: /s/ Harry Alcock -------------------------------- Harry Alcock Vice President Borrower's Address: 1873 S. Bellaire Street, 17th Floor Denver, Colorado 80222 (Page 8 of 9 Pages) CORPORATE LIMITED PARTNERSHIP ACKNOWLEDGMENT STATE OF New York New York County ss: .................... The foregoing instrument was acknowledged before me this October 31, 1997 ...................... (date) by Harry Alcock , Vice President of ................................. ......................................... (name of officer) (office) AIMCO/WICKERTREE, INC. , a Delaware corporation, ........................... .................................. (name of corporation) (state) general partner on behalf of AIMCO/WICKERTREE, L.P., a limited partnership. ..........................., (name of partnership) My Commission Expires: /s/ Vernaliz Y. Co ................................... VERNALIZ Y. CO Notary Public Notary Public, State of New York No. 01005085381 Qualified in New York County Commission Expires Sept. 22, 1999 This instrument was prepared by Allan R. Winn, Esq., Ballard Spahr Andrews & Ingersoll ............................................. 601 13th Street, N.W., Suite 1000 South, Washington, D.C. 20005 (Page 9 of 9 Pages) RIDER TO MULTIFAMILY INSTRUMENT (Wickertree) THIS RIDER TO MULTIFAMILY INSTRUMENT (the "Rider") is made as of the 31st day of October, 1997, and is incorporated into and shall be deemed to amend and supplement the Multifamily Deed of Trust of the same date (the "Instrument"), given by the undersigned AIMCO/WICKERTREE, L.P. a Delaware limited partnership (the "Borrower"), to secure Borrower's Multifamily Note of the same date (the "Note") with Addendum to Multifamily Note of the same date (the "Addendum") to GMAC Commercial Mortgage Corporation, a California corporation, 650 Dresher Road, P.O. Box 1015, Horsham, PA. 19044-8015 [INSERT ADDRESS OF LENDER], and its successors, assigns and transferees (the "Lender"), covering the property described in the Instrument and defined therein as the "Property." The Property is located entirely within the State of Arizona [INSERT NAME OF STATE IN WHICH THE PROPERTY IS LOCATED] (the "Property Jurisdiction"). The term "Loan Documents" when used in this Rider shall mean, collectively, the following documents: (i) the Instrument, as modified by this Rider and any other riders to the Instrument given by Borrower to Lender and covering the Property; (ii) the Note, as modified by the Addendum and any other addendum to the Note; and (iii) all other documents or agreements, including any Collateral Agreements (as defined below) or O&M Agreements (as defined below), arising under, related to, or made in connection with, the loan evidenced by the Note, as such Loan Documents may be amended from time to time. Any conflict between the provisions of the Instrument and the Rider shall be resolved in favor of the Rider. The covenants and agreements of this Rider, and the covenants and agreements of any other riders to the Instrument given by Borrower to Lender and covering the Property, shall be incorporated into and shall amend and supplement the covenants and agreements of the Instrument as if this Rider and the other riders were a part of the Instrument and all references to the Instrument in the Loan Documents shall mean the Instrument as so amended and supplemented. ADDITIONAL COVENANTS. In addition to the covenants and agreements made in the Instrument, Borrower and Lender further covenant and agree as follows: A. FUNDS FOR TAXES, INSURANCE AND OTHER CHARGES Uniform Covenant 2 of the Instrument ("Funds for Taxes, Insurance and Other Charges") is amended to change the title to "Funds for Taxes, Insurance and Other Charges; Collateral Agreements." Existing Uniform Covenant 2 is amended to become Uniform Covenant 2A. The following new Uniform Covenant 2B is added at the end of Uniform Covenant 2A: 2B REPLACEMENT RESERVE AGREEMENT, COMPLETION/REPAIR AGREEMENT, ACHIEVEMENT AGREEMENT AND OTHER COLLATERAL AGREEMENTS (a) REPLACEMENT RESERVE AGREEMENT Borrower shall deposit with Lender the amounts required by the Replacement Reserve and Security Agreement (the "Replacement Reserve Agreement") between Borrower and Lender, dated the date of the Note, at the times required by the Replacement Reserve Agreement, and shall perform all other obligations as and when required pursuant to the Replacement Reserve Agreement. (b) COMPLETION/REPAIR AGREEMENT Borrower shall deposit with Lender the amount required by the Completion/Repair and Security Agreement (the "Completion/Repair Agreement") between Borrower and Lender (if any), dated the date of the Note, at the time required by the Completion/Repair Agreement, and shall perform all other obligations as and when required pursuant to the Completion/Repair Agreement. (c) ACHIEVEMENT AGREEMENT Borrower shall perform all of its obligations as and when required pursuant to the Achievement Agreement between Borrower and Lender (if any), dated the date of the Note. (d) COLLATERAL AGREEMENTS As used herein, the term "Collateral Agreement" shall mean any of the Replacement Reserve Agreement, the Completion/Repair Agreement, the Achievement Agreement and any similar agreement which has been entered into between Borrower and Lender in connection with the loan evidenced by the Note. B. APPLICATION OF PAYMENTS Uniform Covenant 3 of the Instrument ("Application of Payments") is amended to add the following sentence at the end thereof: Notwithstanding the preceding sentence, (i) Lender shall be permitted to apply any partial payment received from Borrower in any manner determined by Lender and in any order of priority of application as determined by Lender, in Lender's sole discretion, and (ii) upon any breach of any covenant or agreement of Borrower in the Instrument, the Note or any other Loan Document. Lender shall be permitted to apply any funds held pursuant to any Collateral Agreement in any manner which is permitted pursuant to such Collateral Agreement and in any order of priority of application as determined by Lender, in Lender's sole discretion. C. HAZARD INSURANCE; RESTORATION OF PROPERTY Uniform Covenant 5 of the Instrument ("Hazard Insurance") is amended to add the following sentence at the end thereof: Lender shall not exercise Lender's option to apply insurance proceeds to the payment of the sums secured by the Instrument if all of the following conditions are met: (i) Borrower is not in breach or default of any provision of the Instrument, the Note or any other Loan Document; (ii) Lender determines that there will be sufficient funds to restore and repair the Property to a condition approved by Lender; (iii) Lender determines that the rental income of the Property, after restoration and repair of the Property to a condition approved by Lender, will be sufficient to meet all operating costs and other expenses, payments for reserves and loan repayment obligations relating to the Property; and (iv) Lender determines that restoration and repair of the Property to a condition approved by Lender will be completed prior to the earlier of either (1) the maturity date of the Note or (2) within one year of the date of the loss or casualty to the Property. D. ENVIRONMENTAL HAZARD PROVISION In addition to Borrower's covenants and agreements under Uniform Covenant 6 of the Instrument ("Preservation and Maintenance of Property; Leaseholds"), Borrower further covenants and agrees that Borrower shall not: (a) cause or permit the presence, use, generation, manufacture, production, processing, installation, release, discharge, storage (including aboveground and underground storage tanks for petroleum or petroleum products), treatment, handling, or disposal of any Hazardous Materials (as defined below) (excluding the safe and lawful use and storage of quantities of Hazardous Materials customarily used in the operation and maintenance of comparable multifamily properties or for normal household purposes) on or under the Property, or in any way affecting the Property or its value, or which may form the basis for any present or future demand, claim or liability relating to contamination, exposure, cleanup or other remediation of the Property or; (b) cause or permit the transportation to, from or across the Property of any Hazardous Material (excluding the safe and lawful use and storage of quantities of Hazardous Materials customarily used in the operation and maintenance of comparable multifamily properties or for normal household purposes); or (c) permit, cause or exacerbate any occurrence or condition on the Property that is or may be in violation of Hazardous Materials Law (as defined below). (The matters described in (a), (b) and (c) above are referred to collectively below as "Prohibited Activities or Conditions.") Except with respect to any matters which have been disclosed in writing by Borrower to Lender prior to the date of the Instrument, or matters which have been disclosed in an environmental hazard assessment report of the Property received by Lender prior to the date of the Instrument, Borrower represents and warrants that it has not at any time caused or permitted any Prohibited Activities or Conditions and to the best of its knowledge, no Prohibited Activities or Conditions exist or have existed on or under the Property. Borrower shall take all appropriate steps (including but not limited to appropriate lease provisions) to prevent its employees, agents, and contractors, and all tenants and other occupants on the Property, from causing, permitting or exacerbating any Prohibited Activities or Conditions. Borrower shall not lease or allow the sublease of all or any portion of the Property for non-residential use to any tenant or subtenant that, in the ordinary course of its business, would cause, permit or exacerbate any Prohibited Activities or Conditions, and all non-residential leases and subleases shall provide that tenants and subtenants shall not cause, permit or exacerbate any Prohibited Activities or Conditions. If any Prohibited Activities or Conditions exist on the Property, Borrower shall comply in a timely manner with, and cause all employees, agents, and contractors of Borrower and any other persons present on the Property to so comply with, (1) any program of operations and maintenance ("O&M Program") relating to the Property that is acceptable to Lender with respect to one or more Hazardous Materials (which O&M Program may be set forth in an agreement of Borrower (an "O&M Agreement")) and all other obligations set forth in any 0&M Agreement(1) and (2) all Hazardous Materials Laws. Any 0&M Program shall be performed by qualified personnel. All costs and expenses of the O&M Program shall be paid by Borrower, including without limitation Lender's fees and costs incurred in connection with the monitoring and review of the O&M Program and Borrower's performance thereunder. If Borrower fails to timely commence or diligently continue and complete the O&M Program and comply with any O&M Agreement, then Lender may, at Lender's option, declare all of the sums secured by the Instrument to be immediately due and payable, and Lender may invoke any remedies permitted by paragraph 27 of the Instrument. Without limiting the foregoing, Borrower shall take prompt remedial action in the event of the discovery of any Prohibited Activities or(2). Borrower represents that Borrower has not received, and has no knowledge of the issuance of, any claim, citation or notice of any pending or threatened suits, proceedings, orders, or governmental inquiries or opinions involving the Property that allege the violation of any Hazardous Materials Law ("Governmental Actions"). Borrower shall promptly notify Lender in writing of: (i) the occurrence of any Prohibited Activity or Condition on the Property; (ii) Borrower's actual knowledge of the presence on or under any adjoining property of any Hazardous Materials which can reasonably be expected to have a material adverse impact on the Property or the value of the Property, discovery of any occurrence or condition on the Property or any adjoining real property that could cause any restrictions on the ownership, occupancy, transferability or use of the Property under Hazardous Materials Law. Borrower shall cooperate with any governmental inquiry, and shall comply with any governmental or judicial order which arises from any alleged Prohibited Activities or Conditions; (iii) any Governmental Action; and (iv) any claim made or threatened by any third party against Borrower, Lender, or the Property relating to loss or injury resulting from any Hazardous Materials. Any such notice by Borrower shall not relieve Borrower of, or result in a waiver of any obligation of Borrower under this paragraph D. (1) or other remedial action requested by Lender (2) Conditions and obtain Lender's prior written approval of such remedial action. Borrower shall pay promptly the costs of any environmental audits, studies or investigations (including but not limited to advice of legal counsel) and the removal of any Hazardous Materials from the Property required by Lender as a condition of its consent to any sale or transfer under paragraph 19 of the Instrument of all or any part of the Property or any transfer occurring upon a foreclosure or a deed in lieu of foreclosure or any interest therein, or required by Lender following a reasonable determination by Lender that there may be Prohibited Activities or Conditions on or under the Property. Borrower authorizes Lender and its employees, agents and contractors to enter onto the Property for the purpose of conducting such environmental audits, studies and investigations. Any such costs and expenses incurred by Lender (including but not limited to fees and expenses of attorneys and consultants, whether incurred in connection with any judicial or administrative process or otherwise) which Borrower fails to pay promptly shall become immediately due and payable and shall become additional indebtedness secured by the Instrument pursuant to Uniform Covenant 8 of the Instrument. Borrower shall hold harmless, defend and indemnify Lender and its officers, directors, trustees, employees, and agents from and against all proceedings (including but not limited to Government Actions), claims, damages, penalties, costs and expenses (including without limitation fees and expenses of attorneys and expert witnesses, investigatory fees, and cleanup and remediation expenses, whether or not incurred within the context of the judicial process), arising directly or indirectly from (i) any breach of any representation, warranty, or obligation of Borrower contained in this paragraph D or (ii) the presence or alleged presence of Hazardous Materials on or under the Property. The term "Hazardous Materials," for purposes of this paragraph D, includes petroleum and petroleum products, flammable explosives, radioactive materials (excluding radioactive materials in smoke detectors), polychlorinated biphenyls, lead, asbestos in any form that is or could become friable, hazardous waste, toxic or hazardous substances or other related materials whether in the form of a chemical, element, compound, solution, mixture or otherwise including, but not limited to, those materials defined as "hazardous substances," "extremely hazardous substances," "hazardous chemicals," "hazardous materials," "toxic substances," "solid waste," "toxic chemicals," "air pollutants," "toxic pollutants," "hazardous wastes," "extremely hazardous waste," or "restricted hazardous waste" by Hazardous Materials Law or regulated by Hazardous Materials Law in any manner whatsoever. The term "Hazardous Materials Law," for the purposes of this paragraph D, means all federal, state, and local laws, ordinances and regulations and standards, rules, policies and other binding governmental requirements and any court judgments applicable to Borrower or to the Property relating to industrial hygiene or to environmental or unsafe conditions or to human health including, but not limited to, those relating to the generation manufacture, storage, handling, transportation, disposal, release, emission or discharge of Hazardous Materials, those in connection with the construction, fuel supply, power generation and transmission, waste disposal or any other operations or processes relating to the Property, and those relating to the atmosphere, soil, surface and ground water, wetlands, stream sediments and vegetation on, under, in or about the Property. The representations, warranties, covenants, agreements, indemnities and undertakings of Borrower contained in this paragraph D shall be in addition to any and all other obligations and liabilities that Borrower may have to Lender under applicable law. The representations, warranties, covenants, agreements, indemnities and undertakings of Borrower contained in this paragraph D shall continue and survive notwithstanding the satisfaction, discharge, release, assignment, termination, subordination or cancellation of the Instrument or the payment in full of the principal of and interest on the Note and all other sums payable under the Loan Documents or the foreclosure of the Instrument or the tender or delivery of a deed in lieu of foreclosure or the release of any portion of the Property from the lien of the Instrument, except with respect to any Prohibited Activities or Conditions or violation of any of the Hazardous Materials Laws which first commences and occurs after the satisfaction, discharge, release, assignment, termination or cancellation of the Instrument following the payment in full of the principal of and interest on the Note and all other sums payable under the Loan Documents or which first commences or occurs after the actual dispossession from the entire Property of the Borrower and all entities which control, are controlled by, or are under common control with the Borrower (each of the foregoing persons or entities is hereinafter referred to as a "Responsible Party") following foreclosure of the Instrument or acquisition of the Property by a deed in lieu of foreclosure. Nothing in the foregoing sentence shall relieve the Borrower from any liability with respect to any Prohibited Activities or Conditions or violation of Hazardous Materials Laws where such Prohibited Activities or Conditions or violation of Hazardous Materials Laws commences or occurs, or is present as a result of, any act or omission by any Responsible Party or by any person or entity acting on behalf of a Responsible Party. E. BOOKS, RECORDS AND FINANCIAL INFORMATION Uniform Covenant 10 of the Instrument ("Books and Records") is amended to read as follows: Borrower shall keep and maintain at all times and upon Lender's request. Borrower shall make available at the Property address, complete and accurate books of accounts and records in sufficient detail to correctly reflect the results of the operation of the Property and copies of all written contracts, leases and other instruments which affect the Property (including but not limited to all bills, invoices and contracts for electrical service, gas service, water and sewer service, waste management service, telephone service and management services). These books, records, contracts, leases and other instruments shall be subject to examination and inspection at any reasonable time by Lender. Borrower shall furnish to Lender the following: (iv) *promptly upon Borrower's receipt, copies of any complaint filed against the Borrower or the Property management alleging any violation of fair housing law, handicap access or the Americans with Disabilities Act and any final administrative or judicial dispositions of such complaints. If Borrower shall fail to timely provide the financial statements required by clause (i) above, Lender shall have the right to have the Borrower's books and records audited in order to obtain such financial statements, and any such costs and expenses incurred by Lender which Borrower fails to pay promptly shall become immediately due and payable and shall become additional indebtedness secured by the Instrument pursuant to paragraph 8 of the Instrument. *SEE ATTACHED SUPPLEMENTAL RIDER TO MULTIFAMILY INSTRUMENT F. TRANSFERS OF THE PROPERTY OR SIGNIFICANT INTERESTS IN BORROWER; TRANSFER FEES Uniform Covenant 19 of the Instrument ("Transfers of the Property or Beneficial Interests in Borrower, Assumption") is amended to read as set forth below: TRANSFERS OF THE PROPERTY OR SIGNIFICANT INTERESTS IN BORROWER; TRANSFER FEES (a) DEFINITIONS For purposes of the Instrument (and the Rider), the following terms have the respective meanings set forth below: (1) The term "Key Principal" means the entities that execute the Exceptions to Non-Recourse Guaranty or any entity that becomes a Key Principal after the date of the Note and are identified as such in an amendment or supplement to the Loan Documents. (2) The term "Transfer" means a sale, assignment, transfer substitution or other disposition (whether voluntary or by operation of law) of, or the granting or creating of a lien, encumbrance or security interest in, the Property or in ownership interests, and the issuance or other creation of ownership interests in an entity and the reconstitution of one type of entity to another type of entity. (3) A "Significant Interest" in any entity shall mean the following: (i) if the entity is a general partnership or a joint venture, (A) any partnership interest in the general partnership, or (B) any interest of a joint venturer in joint venture; (ii) if the entity is a limited partnership, (A) any limited partnership interest in the entity which, together with all other limited partnership interests in the entity Transferred since the date of the Note, exceeds 49% of all of the limited partnership interests in the entity, or (B) any general partnership interest in the entity; (iii) if the entity is a limited liability company, (A) any membership interest which, together with all other membership interest in the limited liability company Transferred since the date of the Note, exceeds 49% of all of the membership interests in the limited liability company;** (iv) if the entity is a corporation, any voting stock in the corporation which, together with all other voting stock of the corporation Transferred since the date of the Note, exceeds 49% of all of the voting stock of the corporation; or (v) if the entity is a trust, any beneficial interest in such trust which, together with all other beneficial interest in the trust Transferred since the date of the Note, exceeds 49% of all of the beneficial interests in the trust. SEE ATTACHED SUPPLEMENTAL RIDER TO MULTIFAMILY INSTRUMENT (b) ACCELERATION OF THE LOAN UPON TRANSFERS OF THE PROPERTY OR SIGNIFICANT INTERESTS Lender may, at Lender's option, declare all sums secured by the Instrument immediately due and payable and Lender may invoke any remedies permitted by paragraph 27 of the Instrument if, without the Lender's prior written consent, any of the following shall occur: (1) a Transfer of all or any part of the Property or any interest in the Property; (2) a Transfer of any Significant Interest in Borrower; (3) a Transfer of any Significant Interest in a corporation, partnership, limited liability company, joint venture, or trust which owns a Significant Interest in the Borrower; (4) if the Borrower is a trust, or if any trust owns a Significant Interest in the Borrower, the addition, deletion or substitution of a trustee of such trust, which addition, deletion or substitution has not been approved by Lender; or (5) a Transfer of all or any part of any Key Principal's ownership interest (other than limited partnership interests) in the Borrower, or in any other entity which owns, directly or indirectly, through one or more intermediate entities, an ownership interest in the Borrower. SEE ATTACHED SUPPLEMENTAL RIDER TO MULTIFAMILY INSTRUMENT (c) TRANSFER PERMITTED WITH LENDER'S PRIOR CONSENT Lender shall consent to a Transfer which would otherwise violate this paragraph 19 if, prior to the Transfer: (1) Borrower causes to be submitted to Lender all information required by Lender to evaluate the transferee and the Property as if a new loan were being made to the transferee and secured by the Property, in the case of a Transfer of all or any part of the Property or an interest therein, or to the Borrower (as reconstituted after the proposed Transfer), in the case of a Transfer of Significant Interests; ** or (B) any merger in the entity (2) The transferee, in the case of a Transfer of all or any part of the Property or an interest therein, or the Borrower (as reconstituted after the proposed Transfer), in the case of a Transfer of Significant Interests, meet the eligibility, credit, management and other standards, and the Property meets the physical maintenance and replacement reserve requirements, customarily applied by Lender for approval of new borrowers and properties for loans secured by liens on multifamily properties; (3) In the case of a Transfer of all or any part of the Property, the proposed transferee (i) executes an agreement acceptable to Lender pursuant to which the proposed transferee agrees, upon consummation of the Transfer, to assume and to pay and perform all obligations of the Borrower under the Note, the Instrument and the other Loan Documents, (ii) causes one or more individuals acceptable to Lender to execute and deliver to Lender an amendment or supplement to the Loan Documents as "Key Principal," and (iii) executes such documents and otherwise provides such documents and information as required by Lender in connection with the Transfer; (4) In the case of a Transfer of a Key Principal's ownership interest pursuant to paragraph 19(b)(5), (i) the Borrower (as reconstituted after the proposed Transfer) executes an agreement acceptable to Lender that ratifies and confirms the obligations of Borrower under the Note, the Instrument and the other Loan Documents, (ii) one or more individuals acceptable to Lender execute and deliver to Lender an amendment or supplement to the Loan Documents as "Key Principal," and (iii) the Borrower executes such documents and otherwise provides such documents and information as required by Lender in connection with the Transfer; and (5) Borrower pays to Lender a $3000 non-refundable application fee and a transfer fee equal to one percent (1%) of the sums secured by the Instrument. In addition, Borrower shall be required to reimburse Lender for all of Lender's out of pocket expenses incurred in connection with the assumption, to the extent such expenses exceed $3000. SEE ATTACHED SUPPLEMENTAL RIDER TO MULTIFAMILY INSTRUMENT (d) NO ACCELERATION OF THE LOAN FOR TRANSFERS CAUSED BY CERTAIN EVENTS Notwithstanding the foregoing provisions of this covenant, Lender shall not be entitled to declare sums secured by the Instrument immediately due and payable or to invoke any remedy permitted by paragraph 27 of the Instrument solely upon the occurrence of any of the following: (1) A Transfer that occurs by inheritance, devise, or bequest or by operation of law upon the death of a natural person who is an owner of the Property or the owner of a direct or indirect ownership interest in the Borrower. (2) The grant of a leasehold interest in individual dwelling units for a term of two years or less and leases for commercial uses as long as commercial leases do not exceed 20 percent of the rentable space of the Property (measured as required by Lender) and provided that all such leasehold interests do not contain an option to purchase the Property. (3) A sale or other disposition of obsolete or worn out personal property which is contemporaneously replaced by comparable personal property of equal or greater value which is free and clear of liens, encumbrances and security interests other than those created by the Loan Documents. (4) The creation of a mechanic's or materialmen's lien or judgment lien against the Property which is released of record or otherwise remedied to Lender's satisfaction, within 30 days of the date of creation. (5) The grant of an easement, if prior to the granting of the easement the Borrower causes to be submitted to Lender all information required by Lender to evaluate the easement, and if Lender determines that the easement will not materially affect the operation of the Property or Lender's interest in the Property and Borrower pays to Lender, on demand, all cost and expenses incurred by Lender in connection with reviewing Borrower's request. (e) OTHER PROVISIONS REGARDING TRANSFERS. SEE ATTACHED SUPPLEMENTAL RIDER TO MULTIFAMILY INSTRUMENT G. NOTICE Uniform Covenant 20 of the Instrument ("Notice") is amended to read as follows: Each notice, demand, consent, or other approval (collectively, "notices" and singly, "notice") given under the Note, the Instrument, and any other Loan Document, shall be in writing to the other party, and if to Borrower, at its address set forth below Borrower's signature on the Instrument, and if to Lender at its address set forth at the beginning of the Rider, or at such other address as such party may designate by notice to the other party and shall be deemed given (a) three (3) Business Days after mailing, by certified or registered U.S. mail, return receipt requested, postage prepaid, (b) one (1) Business Day after delivery, fee prepaid, to a national overnight delivery service, or (c) when delivered, if personally delivered with proof of delivery thereof. Borrower and Lender each agrees that it will not refuse or reject delivery of any notice given hereunder, that it will acknowledge, in writing, the receipt of the same upon request by the other party and that any notice rejected or refused by it shall be deemed for all purposes of this Agreement to have been received by the rejecting party on the date so refused or rejected, as conclusively established by the records of the U.S. Postal Service or the courier service. As used in the Instrument, the term "Business Day" means any day other than a Saturday, a Sunday or any other day on which Lender is not open for business. Lender shall not be required to deliver notice to Key Principal in connection with any notice given to Borrower. However, if Lender shall deliver notice to Key Principal, such notice shall be given in the manner provided in this Uniform Covenant 20, at Key Principal's address set forth at the foot of the Rider. H. GOVERNING LAW In addition to the governing law provision of Uniform Covenant 22 of the Instrument ("Uniform Multifamily Instrument; Governing Law; Severability"), the Borrower and Lender covenant and agree as follows: (a) CHOICE OF LAW The validity of the Instrument and the other Loan Documents, each of their terms and provisions, and the rights and obligations of Borrower under the Instrument and the other Loan Documents, shall be governed by, interpreted, construed, and enforced pursuant to and in accordance with the laws of the Property Jurisdiction. (b) CONSENT TO JURISDICTION Borrower consents to the exclusive jurisdiction of any and all state and federal courts with jurisdiction in the Property Jurisdiction over Borrower and the Borrower's assets. Borrower agrees that such assets shall be used first to satisfy all claims of creditors organized or domiciled in the United States of America ("USA") and that no assets of the Borrower in the USA shall be considered part of any foreign bankruptcy estate. Borrower agrees that any controversy arising under or in relation to the Note, the Instrument or any of the other Loan Documents shall be litigated exclusively in the Property Jurisdiction. The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over all controversies which may arise under or in relation to the Note, and any security for the debt evidenced by the Note, including without limitation those controversies relating to the execution, interpretation, breach, enforcement, or compliance with the Note, the Instrument, or any other issue arising under, related to, or in connection with any of the Loan Documents. Borrower irrevocably consents to service, jurisdiction, and venue of such courts for any litigation arising from the Note, the Instrument or any of the other Loan Documents, and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise. I. ACCELERATION; REMEDIES Covenant 27 of the Instrument ("Acceleration; Remedies") is amended to add the following at the end of the first paragraph: Upon the occurrence of an Event of Default, (including, but not limited to, the failure to pay when due sums secured by the Instrument) or any other Loan Document, Lender, at Lender's option may, in addition to any remedies specified in this covenant, invoke any other remedies provided in any Collateral Agreement. If Borrower is in default under any promissory note (other than the Note) evidencing a loan (the "Subordinate Loan") secured by a security instrument (other than the Instrument) covering all or any portion of the Property (the "Subordinate Instrument") or under any Subordinate Instrument or other loan document executed in connection with the Subordinate Loan, (and whether or not the Borrower has obtained the prior approval of Lender to the placement of such Subordinate Instrument on the Property) which default remains uncured after any applicable cure period, Borrower also then will be in default under the Note and the Instrument. In that event, the entire unpaid principal balance of the Note, accrued interest and any other sums due Lender secured by the Instrument then will become due and payable, at Lender's option. If Lender exercises this option to accelerate, Lender will do so in accordance with the provisions of the Note and the Instrument, and the Lender may invoke any and all remedies permitted by applicable law, the Note, the Instrument, or any of the other Loan Documents. J. SINGLE ASSET BORROWER Until the debt evidenced by the Note is paid in full, Borrower shall not (1) acquire any real or personal property other than the Property and assets (such as accounts) related to the operation and maintenance of the Property, or (2) operate any business other than the management and operation of the Property. SEE ATTACHED SUPPLEMENTAL RIDER TO MULTIFAMILY INSTRUMENT K. NON-RECOURSE LIABILITY Subject to the provisions of paragraph L and notwithstanding any other provision in the Note or Instrument, the personal liability of Borrower, any general partner of Borrower (if Borrower is a partnership), and any Key Principal to pay the principal of and interest on the debt evidenced by the Note and any other agreement evidencing Borrower's obligations under the Note and the Instrument shall be limited to (1) the real and personal property described as the "Property" in the Instrument, (2) the personal property described in and pledged under any Collateral Agreement executed in connection with the loan evidenced by the Note, (3) the rents, profits, issues, products and income of the Property received or collected by or on behalf of Borrower (the "Rents and Profits") to the extent such receipts are necessary, first, to pay the reasonable expenses of operating, managing, maintaining and repairing the Property, including but not limited to real estate taxes, utilities, assessments, insurance premiums, repairs, replacements and ground rents, if any (the "Operating Expenses") then due and payable as of the time of receipt of such Rents and Profits, and then, to pay the principal and interest due under the Note, and any other sums due under the Instrument or any other Loan Document (including but not limited to deposits or reserves due under any Collateral Agreement), except to the extent that Borrower did not have the legal right, because of a bankruptcy, receivership or similar judicial proceeding, to direct the disbursement of such sums. Except as provided in paragraph L, Lender shall not seek (a) any judgment for a deficiency against Borrower, any general partner of Borrower (if Borrower is a partnership) or any Key Principal, or Borrower's or any such general partner's or Key Principal's heirs, legal representatives, successors or assigns, in any action to enforce any right or remedy under the Instrument, or (b) any judgment on the Note except as may be necessary in any action brought under the Instrument to enforce the lien against the Property or to exercise any remedies under any Collateral Agreement. L. EXCEPTIONS TO NON-RECOURSE LIABILITY If, without obtaining Lender's prior written consent, (i) a Transfer shall occur which, pursuant to Uniform Covenant 19 of the Instrument, gives Lender the right, at its option, to declare all sums secured by the Instrument immediately due and payable, (ii) Borrower shall encumber the Property with the lien of any Subordinate Instrument in connection with any financing by Borrower or (iii) Borrower shall violate the single asset covenants in paragraph J of the Rider and in paragraph D of the Supplemental Rider any of such events shall constitute a default by Borrower under the Note, the Instrument and the other Loan Documents and if such event shall continue for 30 days, paragraph K shall not apply from and after the date which is 30 days after such event and the Borrower, any general partner of Borrower (if Borrower is a partnership) and Key Principal (each individually on a joint and several basis if more than one) shall be personally liable on a joint and several basis for full recourse liability under the Note and the other Loan Documents. Notwithstanding paragraph K, Borrower, any general partner of Borrower (if Borrower is a partnership) and Key Principal (each individually on a joint and several basis if more than one), shall be personally liable on a joint and several basis, in the amount of any loss, damage or cost (including but not limited to attorneys' fees) resulting from (A) fraud or material misrepresentation by Borrower or Borrower's agents or employees or any Key Principal or general partner of Borrower in connection with obtaining the loan evidenced by the Note, or in complying with any of Borrower's obligations under the Loan Documents, (B) insurance proceeds, condemnation awards, security deposits from tenants and other sums or payments received by or on behalf of Borrower in its capacity as Owner of the Property and not applied in accordance with the provisions of the Instrument (except to the extent that Borrower did not have the legal right, because of a bankruptcy, receivership or similar judicial proceeding, to direct disbursement of such sums or payments), (C) all Rents and Profits (except to the extent that Borrower did not have the legal right, because of a bankruptcy, receivership or similar judicial proceeding, to direct the disbursement of such sums), and not applied, first, to the payment of the reasonable Operating Expenses as such Operating Expenses become due and payable, and then, to the payment of principal and interest then due and payable under the Note and all other sums due under the Instrument and all other Loan Documents (including but not limited to deposits or reserves payable under any Collateral Agreement), (D) Borrower's failure to pay transfer fees and charges due under paragraph 19(c) of the Instrument, (E) Borrower's failure following a default under any of the Loan Documents to deliver to Lender on demand all Rents and Profits, and security deposits (except to the extent that Borrower did not have the legal right because of a bankruptcy, receivership or similar judicial proceeding to direct disbursement of such sums), books and records relating to the Property, or (F) relating to Hazardous Materials or compliance with Hazardous Materials Laws to the full extent* No provision of paragraphs K or L shall (i) affect any guaranty or similar agreement executed in connection with the debt evidenced by the Note, (ii) release or reduce the debt evidenced by the Note, (iii) impair the right of Lender to enforce the provisions of paragraph D of Rider, (iv) impair the lien of the Instrument or (v) impair the right of Lender to enforce the provisions of any Collateral Agreement. M. WAIVER OF JURY TRIAL Borrower and Key Principal (each for himself if more than one) (i) covenant and agree not to elect a trial by jury with respect to any issue arising under any of the Loan Documents triable by a jury and (ii) waive any right to trial by jury to the extent that any such right shall now or hereafter exist. This waiver of right to trial by jury is separately given, knowingly and voluntarily with the benefit of competent legal counsel by the Borrower and Key Principal, and this waiver is intended to encompass individually each instance and each issue as to which the right to a jury trial would otherwise accrue. Further, Borrower and Key Principal hereby certify that no representative or agent of the Lender (including, but not limited to, the Lender's counsel) has represented, expressly or otherwise, to Borrower of Key Principal that Lender will not seek to enforce the provisions of this Paragraph M. * of any losses or damages (including those resulting from diminution in value of the Property) incurred by Lender as a result of the existence of such Hazardous Materials or failure to comply with Hazardous Materials Laws or the obligations of Borrower hereunder relating thereto, (G) intentional damage to the Property, or (H) failure of Borrower to pay taxes or other liens with priority over the Multifamily Instrument. BY SIGNING BELOW, Borrower accepts and agrees to the covenants and agreements contained in this Rider. WITNESS: BORROWER: AIMCO/WICKERTREE, L.P., a Delaware limited partnership By: AIMCO/Wickertree, Inc., a Delaware corporation /s/ Stacie Taylor By: /s/ Harry Alcock ------------------------- --------------------------- Harry Alcock Vice President CORPORATE LIMITED PARTNERSHIP ACKNOWLEDGMENT State of New York New York County ss: ..................... The foregoing instrument was acknowledged before me this October 31, 1997 ...................... (date) by Harry Alcock Vice President of ............................................. ......................... (name of officer) (office) AIMCO/WICKERTREE, INC. , a Delaware corporation, ............................... .............................. (name of corporation) (state) general partner on behalf of AIMCO/WICKERTREE, L.P., a limited partnership. ......................... (name of partnership) My Commission Expires: /s/ Vernaliz Y. Co ................................... VERNALIZ Y. CO Notary Public Notary Public, State of New York No. 01005085381 Qualified in New York County Commission Expires Sept. 22, 1999 This instrument was prepared by Allan R. Winn, Esq., Ballard Spahr Andrews & Ingersoll ............................................ 601 13th Street, N.W., Suite 1000 South, Washington, D.C. 20005 SUPPLEMENTAL RIDER TO MULTIFAMILY INSTRUMENT THIS SUPPLEMENTAL RIDER TO MULTIFAMILY INSTRUMENT (the "Supplemental Rider") is made as of this 31st day of October, 1997, and is incorporated into and shall be deemed to amend and supplement the Multifamily Mortgage, Deed of Trust or Deed to Secure Debt as of the same date (the "Instrument") as modified by the Rider to Multifamily Instrument dated as of the same date (the "Rider"), given by the undersigned (the "Borrower"), to secure Borrower's Multifamily Note as of the same date (the "Note") with Addendum to Multifamily Note as of the same date to GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation, whose address is 650 Dresher Road, P.O. Box 1015, Horsham, Pennsylvania 19044- 8015 and its successors, assigns and transferees (the "Lender"), covering the property described in the Instrument and defined therein as the "Property". The Property is located entirely within the State identified in EXHIBIT A attached hereto (the "Property Jurisdiction"). The term "Loan Documents" when used in this Supplemental Rider shall mean, collectively, the following documents: (i) the Instrument as modified by the Rider, this Supplemental Rider and any other riders to the Instrument given by Borrower to Lender and covering the Property; (ii) the Note, as modified by the Addendum; and (iii) all other documents or agreements, including any Collateral Agreements (as defined in the Rider), or O&M Agreements (as defined in the Rider), arising under, related to, or made in connection with, the loan evidenced by the Note, as such loan documents may be amended from time to time. Any conflict between the provisions of this Instrument, the Rider and the Supplemental Rider shall be resolved in favor of the Supplemental Rider. The term "Net Operating Income" shall mean, during any period, "Gross Revenues" (as hereinafter defined) less "Operating Expenses". "Gross Revenues" shall mean all rental received from tenants occupying units in the Property and receipts from vending machines, recreational facilities and any and all other operating revenues received from the Property. Gross Revenues shall not include any cash or other proceeds received by reason of fire or other casualty insurance, proceeds of rental loss or business interruption insurance (except to the extent that such proceeds replace the rental payment which otherwise would have been due to Borrower from tenants of the Property), forfeited security or other deposits or payments made by tenants to cancel their leases, proceeds from a taking by eminent domain or conveyance in lieu thereof, proceeds from a loan or advance, or proceeds from sale, transfer, assignment or other disposition of any part of the Property or any interest therein. Gross Revenues shall be determined on the basis of sound cash basis accounting practices applied on a consistent basis and shall be adjusted by excluding items of extraordinary, unusual and nonrecurring income. "Operating Expenses" shall mean all reasonable, ordinary and necessary expenses actually incurred by Borrower in respect of the ownership, operation, renting, maintenance, and occupancy of the Property determined on the basis of sound cash basis accounting practices applied on a consistent basis, excluding however, federal, state or local income taxes or other taxes based on the income of Borrower, depreciation and any other non-cash expenditures, capital improvements or reserves for such items, other than underwritten reserves (whether or not collected) required by the Replacement Reserve and Security Agreement, including deposits which are deferred under such Agreement), any expense paid or incurred in connection with the sale of all or any part of the Property or any interest therein, any payment of principal or interest under the Note and shall be adjusted for extraordinary, unusual, and nonrecurring expenses. The covenants and agreements of this Supplemental Rider, and the covenants and agreements of any other riders to the Instrument given by Borrower to Lender and covering the Property, shall be incorporated into and shall amend and supplement the covenants and agreements of the Instrument as if this Supplemental Rider and the other riders were a part of the Instrument and all reference to the Instrument in the Loan Documents shall mean the Instrument as so amended and supplemented. ADDITIONAL COVENANTS. In addition to the covenants and agreements made in the Instrument and the Rider, Borrower and Lender further covenant and agree as follows: A. SUBSTITUTION OF COLLATERAL. On and after November 1, 2007, the Borrower may substitute collateral for the collateral securing the Loan; provided, the substituted collateral meets or exceeds all of the terms and conditions set forth in subparagraphs (i) through (vi), inclusive, below: (i) the original principal balance of the Note shall not exceed 55% of the appraised value (as determined by an appraisal reasonably satisfactory to Lender) of the proposed substitution collateral; (ii) the Net Operating Income of the proposed substitution collateral for the preceding twelve months is not less than 1.75 times the amount of the annual constant payment of principal and interest due and payable on the Note; (iii) no Event of Default or event which, with the giving of notice or the passage of time, or both, would constitute an Event of Default under the Loan Documents shall have occurred and be continuing; (iv) the proposed substitution collateral and the Borrower meet all the then applicable underwriting standards and guidelines of Lender for loans on substantially comparable property with substantially similar loan to value ratios and debt service coverage ratios as determined by Lender in its sole but reasonable discretion; (v) if requested by Lender, the Borrower shall have provided Lender with an opinion of nationally recognized tax counsel, in form and substance reasonably satisfactory to Lender, that the proposed substitution does not constitute a "significant modification of a debt instrument" for purposes of Section 1.1001-3 of the Treasury Regulations under the Internal Revenue Code (1986) and (vi) the Borrower pays to Lender a non-refundable application and collateral review fee in connection with such substitution in the amount of $5,000 plus 25/100ths of one percent (.25%) of the unpaid principal balance of the Note on the date of substitution, and reimburses Lender for all of Lender's out of pocket costs and expenses, including reasonable attorneys' fees and expenses, incurred in connection with the substitution of collateral. The Borrower's right to substitute collateral shall terminate during any Substitution Period (defined below) after two substitutions of collateral have occurred among the transactions 2 described on Exhibit C attached hereto. The Borrower's right to substitute collateral on the terms and conditions set forth in this Paragraph A shall be reinstated on the first day of the next succeeding Substitution Period. Other than the substitution of collateral permitted above, any substitution of collateral shall be in the sole and absolute discretion of the Lender. "Substitution Period" means the one year period from November 1, 2007 to and including October 31, 2008 and each succeeding one-year period thereafter. B. LOCKBOX. (i) Not later than thirty (30) days after the end of each fiscal quarter of the Borrower (including the fourth fiscal quarter in each year), Borrower shall deliver to Lender a statement of the Gross Revenues, Operating Expenses and Net Operating Income for the preceding fiscal quarter and for the preceding four fiscal quarters for the Property. Each such statement shall be in form and substance reasonably satisfactory to Lender, and shall be certified by the chief financial officer or comptroller of Borrower to be true, accurate and complete in all material respects. (ii) In the event that (a) a default under the Loan Documents shall have occurred or (b) Lender shall determine that the Net Operating Income of the Property was, for the preceding twelve (12) months as reasonably determined by Lender, less than 1.50 times the amount of the annual constant payment of principal and interest due and payable on the Note calculated in accordance with the definition of Net Operating Income on page one of this Supplemental Rider (the "Debt Service"), then Borrower shall, following demand by Lender, thereafter cause all Gross Revenues from the Property to be directly deposited in a lockbox bank account (the "Lockbox") established, administered and controlled solely by Lender. Such test may be performed by Lender no more frequently than quarterly. Lender shall hold all funds deposited in the Lockbox as additional security for the indebtedness secured by the Instrument. All funds on deposit in the Lockbox shall be held by Lender free of any liens or claims on the part of creditors of Borrower other than Lender. Borrower shall complete such forms as may be provided by Lender to Borrower in order to notify the Postal Service of the Lockbox arrangement. Borrower acknowledges that in such event, Lender shall have exclusive and unrestricted access to the Lockbox, including all mail which is delivered thereto. In the event that Lender elects to establish a Lockbox, Borrower shall notify and direct all tenants of the Property, and other parties obligated to make any payments to Borrower with respect to the Property, to make such payments directly into the Lockbox with Lender in accordance with this Supplemental Rider (such notices are hereinafter referred to collectively as the "Payment Notices"). The Payment Notices shall also require that such payments not be made in cash and that such obligors only send payments and related invoices or statements to the Lockbox (but not other correspondence). Borrower agrees to execute and deliver to Lender such Payment Notices as may be requested by Lender to notify such tenants of the Property and such other parties that may become obligated to make payments to Borrower of the provisions of this paragraph. Borrower does hereby designate and appoint Lender its agent and attorney-in-fact for the purpose of executing in the name of Borrower, addressing and forwarding such notices to such tenants and such other parties obligated to make any such payments or any portion thereof, which power of attorney is coupled with an 3 interest and irrevocable by dissolution or otherwise. After the giving of the Payment Notices by Lender, Borrower shall not communicate with any such tenant or any such other party obligated to pay any sums to Borrower for the purpose of cancelling such notice or directing any such party to make payments other than in accordance with such notices. Borrower does hereby acknowledge and agree that the forwarding of such notices by Lender to such tenants and such other parties constitutes all actions, if any, required to be taken by Lender to exercise, invoke or perfect its rights to collect the rents, issues and profits of the Property. Borrower agrees that, after the establishment of the Lockbox, any Gross Revenues received by Borrower will be promptly delivered by Borrower to Lender for deposit in the Lockbox, and pending such delivery will be held by Borrower in trust for Lender. (iii) Provided no Event of Default or event which, with the giving of notice or the passage of time or both, would constitute an Event of Default under the Loan Documents shall have occurred and be continuing, Lender shall remit to Borrower all funds on deposit in the Lockbox at such time as the funds on deposit in the Lockbox are sufficient to pay for such month (A) the principal and interest due and payable on the Note, (B) any deposits payable pursuant to Uniform Covenant 2 of the Instrument, and (C) any monthly deposits required pursuant to any Collateral Agreement (collectively the "Payments") . Lender shall withdraw from the Lockbox any amounts on deposit in the Lockbox to pay the Payments. The right of Lender to cause all Gross Revenues to be deposited into the Lockbox shall be suspended at such time as the Borrower establishes to the satisfaction of Lender that the Net Operating Income of the Property for the preceding twelve (12) months equals or exceeds 1.50 times the Debt Service, until such time as the Net Operating Income again falls below such threshold. The collection of Gross Revenues by Lender under this Section F is not intended to modify Borrower's obligations under the Loan Documents. (iv) Upon the occurrence and during the continuance of any Event of Default, Lender may at any time, without notice or demand, withdraw all or any amount of funds on deposit in the Lockbox and apply such funds to the payment of the indebtedness secured hereby in such order as Lender may determine in its sole discretion. (v) The forwarding of the Payment Notices to tenants of the Property and such other parties obligated to make any payments to Borrower directing such parties to make payments directly into the Lockbox shall not be deemed or construed to constitute a waiver by Lender or any right or remedy Lender may have under the Loan Documents to direct such tenants or other parties to make payments directly to Lender after the occurence of an event of default. (vi) Borrower hereby irrevocably appoints Lender as its true and lawful agent and attorney-in-fact for purposes of collecting all items from the Lockbox, making any and all endorsements on such items as are necessary or appropriate, and withdrawing funds on deposit in the Lockbox to be applied as provided in this Instrument. (vii) Borrower agrees that it shall have no right to use any amounts on deposit from time to time in the Lockbox except as specifically provided herein, and that none of the funds on deposit in the Lockbox may be withdrawn by Borrower from the Lockbox without the prior written consent of 4 Lender. No items or funds on deposit in the Lockbox shall at any time be deemed to be trust funds. All or any of the Lockboxes created pursuant to the Loan Documents may be maintained by Lender as a single account, and all funds maintained in such accounts may be commingled, provided that the amounts credited to and debited from each of such accounts shall be accounted for separately. (viii) Borrower agrees to indemnify Lender and its agents from and against any and all claims, expenses, losses and liabilities growing out of or resulting from the enforcement of the provisions herein concerning the Lockbox, except claims, expenses, losses or liabilities resulting from Lender's gross negligence or willful misconduct. Borrower upon demand shall pay to Lender or its agent administering the Lockbox a monthly fee in the amount of one-quarter of one percent (.25%) of the average deposits to the Lockbox during the immediately preceding month for the administration of the Lockbox. Lender or its agent shall be entitled to withdraw from the Lockbox after ten (10) days prior written notice to Borrower, such amounts as and when due; provided, however, that Borrower shall remain liable for the payment of such amounts in the event that the amounts on deposit in the Lockbox are not sufficient to pay such amounts in full as and when due. (ix) Lender's election to establish a Lockbox in accordance with the provisions of this paragraph D shall not be deemed an election in lieu of any other right or remedy under the Loan Documents or otherwise afforded by law or equity but may be exercised concurrently, independently, or successively, in any order whatsoever, with any other right or remedy so provided. C. INSURANCE. Without limitation of the terms and provisions of the Instrument, Borrower shall, at its expense, procure and maintain, or cause to be maintained, for the benefit of Borrower and Lender, insurance policies issued by such insurance companies, in such amounts, in such form and substance, and with such coverages, endorsements, deductibles and expiration dates as are acceptable to Lender, providing the following types of insurance covering the Property: (i) Borrower shall obtain and maintain, or cause to be maintained, insurance for Borrower and the Property providing at least the following coverages: (a) PROPERTY INSURANCE. Insurance with respect to the Property and building equipment insuring against any peril included within the classification "All Risks of Physical Loss" in amounts at all times sufficient to prevent Lender from becoming a coinsurer within the terms of the applicable policies and under applicable law, but in any events such insurance shall be maintained in an amount equal to the full insurable value of the Property and building equipment, the term "full insurable value" to mean the actual replacement cost of the Property and building equipment (without taking into account any depreciation, and exclusive of excavations, footings and foundations, landscaping and paving) determined annually by an insurer, a recognized independent insurance broker or an independent appraiser selected and paid by Borrower and in no event less than the coverage required pursuant to the terms of any lease. Absent such annual adjustment, each policy shall contain inflation guard coverage insuring that the policy limit will be increased over time to reflect the effect of 5 inflation. Borrower shall also maintain insurance against loss or damage to such furniture, furnishings, fixtures, equipment and other items (whether personalty or fixtures) included in the Property and owned by Borrower from time to time, to the extent applicable, in the amount of the cost of replacing the same, in each case, with inflation guard coverage to reflect the effect of inflation, or annual valuation. Each policy or policies shall contain a replacement cost endorsement and either an agreed amount endorsement (to avoid the operation of any co-insurance provisions) or a waiver of any coinsurance provisions, all subject to Lender's approval. The maximum deductible shall be $10,000.00; (b) LIABILITY INSURANCE. Comprehensive general liability insurance, including personal injury, bodily injury, death and property damage liability, insurance against any and all normally insurable claims, including all legal liability to the extent insurable and imposed upon Lender and all court costs and attorneys' fees and expenses, arising out of or connected with the possession, use, leasing, operation, maintenance or condition of the Property in such amounts as are generally available at commercially reasonable premiums and are generally required by institutional Lenders for properties comparable to the Property but in no event for a combined single limit of less than $10,000,000.00. During any construction of the Property, Mortgagor's general contractor for such construction shall also provide the insurance required in this Subsection (b). Lender hereby retains the right to periodically review the amount of said liability insurance being maintained by Borrower and to require an increase in the amount of said liability insurance should Lender deem an increase to be reasonably prudent under then existing circumstances; (c) WORKERS' COMPENSATION INSURANCE. Statutory workers' compensation insurance with respect to any work on or about the Property covering all persons subject to the workers' compensation laws of the state in which the Property is located; (d) BUSINESS INTERRUPTION. Business interruption and/or loss of "rental income" insurance in an amount sufficient to avoid any co-insurance penalty and to provide proceeds which will cover a period of not less than one (1) year from the date of casualty or loss, the term "rental income" to mean the sum of (A) the total then ascertainable Rents payable under the leases and (B) the total ascertainable amount of all other amounts to be received by Borrower from third parties which are the legal obligation of the tenants, reduced to the extent such amounts would not be received because of operating expenses not incurred during a period of non-occupancy of that portion of the Property then not being occupied. The amount of coverage shall be adjusted annually to reflect the rents payable during the succeeding twelve (12) month period. (e) BOILER AND MACHINERY INSURANCE. Broad form boiler and machinery insurance (without exclusion for explosion) covering all boilers or other pressure vessels, machinery, and equipment located in, on or about the Property and insurance against loss of occupancy or use arising from any breakdown in such amount per accident equal to the replacement value of the improvements housing the machinery or $2,000,000.00 or such other amount reasonably determined by Lender. If one or more large HVAC units is in operation at the Property, "System Breakdowns" coverage shall be required, as 6 determined by Lender. Minimum liability coverage per accident must equal the value of such unit(s); (f) FLOOD INSURANCE. If required by Lender, flood insurance in an amount at least equal to the lesser of (A) the minimum amount required, under the terms of coverage, to compensate for any damage or loss on a replacement basis (or the unpaid balance of the indebtedness secured hereby if replacement cost coverage is not available for the type of building insured); or (B) the maximum insurance available under the appropriate National Flood Insurance Administration program. The maximum deductible shall be $3,000.00 per building or a higher minimum amount as required by the Federal Emergency Management Agency or other applicable law. (g) During the period of any construction, renovation or alteration of the Property which exceeds the lesser of 10% of the principal amount of the Note or $500,000.00, at Lender's request, a completed value, "All Risk" Builder's Risk form, or "Course of Construction" insurance policy in non-reporting form for any improvements of the Property under construction, renovation or alteration in an amount approved by Lender may be required. During the period of any construction of any addition to the existing Property, a completed value, "All Risk" Builder's Risk form or "Course of Construction" insurance policy in non-reporting form, in an amount approved by Lender, shall be required. (h) OTHER INSURANCE. Such other insurance with respect to the Property or on any replacements or substitutions thereof or additions thereto as may from time to time be required by Lender against other insurable hazards or casualties which at the time are commonly insured against in the case of property similarly situated, including, without limitation, sinkhole, mine subsidence, earthquake and environmental insurance, due regard being given to the height and type of buildings, their construction, location, use and occupancy. (ii) All insurance provided for in Subsection C(i) hereof shall be obtained under valid and enforceable policies (the "Policies" or in the singular, the "Policy"), and shall be issued by one or more domestic primary insurer(s) licensed to do business in the State where the policy issued and also in the states where the Property is located and having a general policy rating equal to or greater than the rating required by Fannie Mae as published from time to time for Delegated Underwriting and Servicing multifamily loans (each such insurer shall be referred to below as a "Qualified Insurer"). All insurers providing insurance required by this Instrument shall be authorized to issue insurance in the state in which the Property is located. The Policy referred to in Subsection C(i)(b) above shall name Lender as an additional named insured and the Policy referred to in Subsection C(i)(a) above shall provide that all proceeds be payable to Lender. The Policies referred to in Subsection C(i)(a) shall also contain (1) a standard "non-contributory mortgagee" endorsement or its equivalent relating, INTER ALIA, to recovery by Lender notwithstanding the negligent or willful acts or omission of Borrower or Lender and shall name Lender as mortgagee and loss payee, shall be first payable in case of loss to Lender, and such mortgagee clauses and lender's loss payable endorsements shall be in form and substance acceptable to Lender; (2) to the extent available at commercially reasonable rates, a waiver of subrogation endorsement as to Lender; and (iii) an endorsement providing for a deductible per loss of an 7 amount not more than that which is customarily maintained by prudent owners of similar properties in the general vicinity of the Property, but in no event in excess of $250,000.00. All Policies described in Subsection C(a) above shall contain (i) a provision that such Policies shall not be cancelled, modified or terminated, nor shall they expire, without at least thirty (30) days' prior written notice to Lender in each instance; and (ii) include effective waivers by the insurer of all claims for Insurance Premiums (defined below) against any loss payees, additional insureds and named insureds (other than Borrower). In the event that the Property constitutes a legal non-conforming use under applicable building, zoning or land use laws or ordinances, the policy shall include an ordinance or law coverage endorsement which will contain Coverage A: "Loss Due to Operation of Law" (with a minimum liability limit equal to Replacement Cost With Agreed Value Endorsement), Coverage B: "Demolition Cost" and Coverage C: "Increased Cost of Construction" coverages. Certificates of insurance with respect to all renewal and replacement Policies shall be delivered to Lender not less than thirty (30) days prior to the expiration date of any of the Policies required to be maintained hereunder which certificates shall bear notations evidencing payment of applicable premiums (the "Insurance Premiums"). Originals or certificates of such replacement Policies shall be delivered to Lender promptly after Borrower's receipt thereof but in any case within thirty (30) days after the effective date thereof. If Borrower fails to maintain and deliver to Lender the original Policies or certificates of insurance required by this Instrument, upon ten (10) days' prior notice to Borrower, Lender may procure such insurance at Borrower's sole cost and expense. (iii) Borrower shall comply with all insurance requirements and shall not bring or keep or permit to be brought or kept any article upon any of the Property or cause or permit any condition to exist thereon which would be prohibited by an insurance requirement, or would invalidate the insurance coverage required hereunder to be maintained by Borrower on or with respect to any part of the Property pursuant to this Section C. (iv) If the Property shall be damaged or destroyed, in whole or in part, by fire or other casualty, Borrower shall give prompt notice of such damage to Lender and provided that Borrower shall have received the Net Proceeds, Borrower shall promptly commence and diligently prosecute the completion of the repair and restoration of the Property as nearly as possible in the exercise of commercially reasonable efforts to the condition the Property was in immediately prior to such fire or other casualty, with such alterations as may be approved by Lender (the "Restoration") and otherwise in accordance with of this Instrument. (v) The insurance coverage required under Section C(i)(a) may be effected under a blanket policy or policies covering the Property and other properties and assets not constituting a part of the security hereunder; provided that any such blanket policy shall specify, except in the case of public liability insurance, the portion of the total coverage of such policy that is allocated to the Property, and any sublimit in such blanket policy applicable to the Property, and shall in any case comply in all other respects with the requirements of this Section C. (vi) The insurance coverage required under Subsection C(i)(b) may be satisfied by a layering of Comprehensive General Liability, Umbrella and Excess Liability Policies, but in no event will the Comprehensive General 8 Liability policy be written for an amount less than $5,000,000 combined single limit for bodily injury and property damage liability. (vii) The delivery to Lender of the insurance policies or the certificates of insurance as provided above shall constitute an assignment of all proceeds payable under such insurance as relating to the Property by Borrower to Lender as further security for the indebtedness secured hereby. In the event of foreclosure of this Instrument, or other transfer of title to the Property in extinguishment in part of the secured indebtedness, all right, title and interest of Borrower in and to all proceeds payable under such policies then in force concerning the Property shall thereupon vest in the purchaser at such foreclosure, or in Lender or other transferee in the event of such other transfer of title if and to the extent Lender retains an insurable interest therein. Approval of any insurance by Lender shall not be a representation of the solvency of any insurer or the sufficiency of any amount of insurance. (viii) Lender shall not be responsible for nor incur any liability for the insolvency of the insurer or other failure of the insurer to perform, even though Lender has caused the insurance to be placed with the insurer after failure of Borrower to furnish such insurance. Borrower shall not obtain insurance for the Property in addition to that required by Lender without the prior written consent of Lender, which consent will not be unreasonably withheld provided that (i) Lender is named insured on such insurance, (ii) Lender receives complete copies of all policies evidencing such insurance, and (iii) such insurance complies with all of the applicable requirements set forth herein. D. SINGLE ASSET BORROWER. Paragraph J of the Rider is amended to add the following provisions: (i) Borrower represents and warrants that is has not and covenants and agrees that it shall not: (a) engage in any business or activity other than the ownership, operation and maintenance of the Property, and activities incidental thereto; (b) acquire or own any material assets other than (A) the Property, and (B) such incidental Personal Property as may be necessary for the operation of the Property; (c) merge into or consolidate with any person or entity or dissolve, terminate or liquidate in whole or in part, transfer or otherwise dispose of all or substantially all of its assets or change its legal structure, without in each case Lender's consent; (d) fail to preserve its existence as an entity duly organized, validly existing and in good standing (if applicable) under the laws of the jurisdiction of its organization or formation, or without the prior written consent of Lender, amend, modify, terminate or fail to comply with the provisions of Borrower's Partnership Agreement, Articles or Certificate Incorporation, Operating Agreement or similar organizational documents, as the case may be, as same may be further amended or supplemented, if such amendment, modification, termination or failure to comply would adversely 9 affect ability of Borrower to perform its obligations hereunder, under the Note or under the Other Security Documents; (e) own any subsidiary or make any investment in, any person or entity without the consent of Lender; (f) commingle its assets with the assets of any of its general partners, members, shareholders, affiliates, principals or of any other person or entity; notwithstanding the foregoing, after depositing Gross Revenues and all other cash or proceeds received in connection with the Property into an account owned and controlled exclusively by the Borrower, the Borrower shall be entitled to deposit funds into, and to cause or permit funds to be disbursed from, an account maintained by an affiliate of Borrower, provided that such deposits and disbursements are made substantially in accordance with the terms of the cash management system disclosed by Borrower to Lender on or before the date hereof; (g) incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than the Debt and trade payables and other obligations incurred in the ordinary course of business, provided same are paid prior to delinquency; (h) fail to maintain its records, books of account and bank accounts separate and apart from those of the general partners, members, shareholders, principals and affiliates of Borrower, the affiliates of a general partner or member, or shareholder of Borrower, and any other person or entity; (i) enter into any contract or agreement with any general partner, member, shareholder, principal or affiliate of Borrower, Guarantor or Indemnitor, or any general partner, member, principal or affiliate thereof, except upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arms-length basis with third parties other than any general partner, member, shareholder, principal or affiliate of Borrower, Guarantor or Indemnitor, or any general partner, member, principal or affiliate thereof; (j) seek the dissolution or winding up in whole, or in part, of Borrower; (k) maintain its assets in such a manner that it will be costly or difficult to segregate, ascertain or identify its individual assets from those of any general partner, member, shareholder, principal or affiliate of Borrower, or any general partner, member, shareholder, principal or affiliate thereof or any other person; (l) hold itself out to be responsible for the debts of another person; (m) make any loans or advances to any third party, including any general partner, member, shareholder, principal or affiliate of Borrower, or any general partner, principal or affiliate thereof; (n) agree to, enter into or consummate any transaction which would render Borrower unable to furnish the certification or other evidence that: 10 (1) Borrower is not an "employee benefit plan" as defined in Section 3(3) of Employee Retirement Income Security Act of 1974, as amended ("ERISA"), which is subject to Title I of ERISA, or a "governmental plan" within the meaning of Section 3(3) of ERISA; (2) Borrower is not subject to state statutes regulating investments and fiduciary obligations with respect to governmental plans; and (3) one or more of the following circumstances is true: (A) Equity interests in Borrower are publicly offered securities, within the meaning of 29 C.F.R. Section 2510.3-101(b)(2); (B) Less than 25 percent of each outstanding class of equity interests in Borrower are held by "benefit plan investors" within the meaning of 29 C.F.R. Section 2510.3-101(f)(2); or (C) Borrower qualifies as an "operating company" or a "real estate operating company" within the meaning of 29 C.F.R. Section 2510.3-101(c) or (e) or an investment company registered under The Investment Company Act of 1940. (o) fail either to hold itself out to the public as a legal entity separate and distinct from any other entity or person or to conduct its business solely in its own name in order not (A) to mislead others as to the identity with which such other party is transacting business, or (B) to suggest that Borrower is responsible for the debts of any third party (including any general partner, principal or affiliate of Borrower, or any general partner, principal or affiliate thereof); notwithstanding the foregoing, Lender acknowledges that the Borrower may operate the Property through a management agent approved by Lender which may be an affiliate of the Borrower; (p) fail to maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations; or (q) file or consent to the filing of any petition, either voluntary or involuntary, to take advantage of any applicable insolvency, bankruptcy, liquidation or reorganization statute, or make an assignment for the benefit of creditors. (ii) If Borrower is a limited partnership or a limited liability company, each general partner or at least one member (the "SPE Member") of Borrower, as applicable, is a corporation whose sole asset is its interest in Borrower and each general partner or the SPE Member of Borrower, as applicable, will at all times comply, and will cause Borrower to comply, with each of the covenants, terms and provisions contained in Section D(i) as if such representation, warranty or covenant was made directly by such general partner or SPE Member. Only the SPE Member may be designated as a manager under the law where the Borrower is organized. 11 E. CONSENT TO RELIEF FROM AUTOMATIC STAY. Borrower hereby agrees that, in consideration of the making of the loan by Lender to Borrower evidenced by the Notes, and as a material inducement to Lender to make such loan and to the Federal National Mortgage Association to acquire such loan from Lender, in the event Borrower shall (i) file with any bankruptcy court of competent jurisdiction or be the subject of any petition under the United States Bankruptcy Code (the "Bankruptcy Code"), (ii) be the subject of any order for relief issued under the Bankruptcy Code, (iii) file or be the subject of any petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any present or future federal or state act or law relating to bankruptcy, insolvency, or other relief for debtors, (iv) have sought or consented to or acquiesced in the appointment of any trustee, receiver, conservator, or liquidator, or (v) be the subject of any order, judgment, or decree entered by any court of competent jurisdiction approving a petition filed against such party for any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any present or future federal or state act or law relating to bankruptcy, insolvency, or relief for debtors, then (a) Lender shall thereupon be entitled and Borrower irrevocably consents to relief from any automatic stay imposed by Section 362 of the Bankruptcy Code, or otherwise, on or against the exercise of the rights and remedies otherwise available to Lender as provided in the Note and/or Instrument or the Other Loan Documents, and as otherwise provided by law, and Borrower hereby irrevocably waives its right to object to such relief and acknowledges that no reorganization in bankruptcy is feasible; (b) Borrower waives its exclusive right pursuant to Section 1121(b) of the Bankruptcy Code to file a plan of reorganization and irrevocably consents to the Lender filing a plan immediately upon the entry of an order for relief if any involuntary petition is filed against Borrower or upon the filing of a voluntary petition by the Borrower; (c) in the event that Lender shall move pursuant to Section 1121(d) of the Bankruptcy Code for an order reducing the 120 day exclusive period, Borrower shall not object to any such motion; and (d) Borrower irrevocably waives its right to demand a turnover of the Property from a receiver appointed at the request of Lender, and agrees that it is in the best interest of the creditors pursuant to Section 543(d) of the Bankruptcy Code for the receiver to continue in possession, custody and control of the Property. F. ACCELERATION; REMEDIES. Non-Uniform Covenant 27 of the Instrument ("Acceleration; Remedies") is amended to add the following: (i) DEFAULT. Upon the occurrence of an Event of Default (as defined in the Note), Lender may exercise any and all remedies provided under this Instrument and under any of the other Loan Documents, or any other remedies available under applicable law, or any one or more of such remedies. (ii) REMEDIES. Upon the occurrence of any Event of Default and at any time thereafter: (a) INDEBTEDNESS DUE. All indebtedness secured by this Instrument in its entirety shall, at the option of Lender become immediately due and payable without presentment, demand, notice of intention to accelerate or notice of acceleration, or other notice of any kind except as otherwise expressly set forth herein, all of which are hereby expressly WAIVED, and the liens and security interests created or intended to be 12 created hereby shall be subject to foreclosure, repossession and sale in any manner provided for herein or provided for by law, as Lender may elect, and Lender may exercise any and all of its rights under this Instrument, the Note and the Loan Documents. (b) LEGAL PROCEEDINGS. Lender shall have the right and power to proceed by suit or suits in equity or at law, whether for the specific performance of any covenant or agreement of Borrower contained herein or in aid of the execution of the powers herein granted, or for foreclosure or the sale of the Property or any part thereof under the judgment or decree of any court of competent jurisdiction, or for the enforcement of any other appropriate legal or equitable remedy. (c) FORECLOSURE SALE. Lender shall be entitled to institute an action to foreclose this Instrument as to the total amount declared due and payable by Lender, together with all of the costs, expenses and disbursements of the Lender, including, without limitation, a reasonable fee for Lender's attorneys at all trial and appellate levels, as hereinafter set forth. The Property may be sold in one parcel, several parcels or groups of parcels, and Lender shall be entitled to bid at the sale and, if Lender is the highest bidder for the Property or any part or parts thereof, Lender shall be entitled to purchase the same. Lender shall have the right, after paying or accounting for all costs of said sale or sales, to credit the amount of the bid at the foreclosure sale upon the amount of the obligations (in the order of priority set forth below) in lieu of cash payment. In case of a foreclosure and sale of the Property and of the obligations hereby secured, the Lender shall be entitled to enforce payment of and to receive all amounts then remaining due and unpaid upon the indebtedness secured by this Instrument from any and all security for said amounts and from any and all persons or entities (including the Borrower) under any agreement, guaranty or collateral undertaking to pay any portion of said amount. The proceeds of any foreclosure sale of the Property shall be distributed and applied in the order of priority set forth below. Upon any such foreclosure sale pursuant to the judicial proceedings, the Lender may bid for and purchase the Property and, upon compliance with the terms of said sale, may hold, retain and possess and dispose of the Property in its own absolute right without further accountability to the Borrower. In any civil action to foreclose the lien hereof, there shall be allowed and included as part of the indebtedness secured by this Instrument in the order of judgment for foreclosure and sale all expenditures and expenses which may be paid or incurred by or on behalf of the Lender for reasonable attorneys' fees, appraisers' fees, outlays for documentary and expert evidence, stenographers' charges, publication costs, and costs (which may be estimated as to items to be expended after entry of said order or judgement) of procuring all such abstracts of title, title searches and examinations, title insurance policies and similar data and insurance with respect to the title as the Lender may deem reasonably necessary either to prosecute such civil action or to evidence to bidders at any sale which may be had pursuant to such order or judgment the true condition of the title to, or the value of, the Property. (iii) APPLICATION OF PROCEEDS, RENTS, ETC. The proceeds of any sale of, and any rents and other amounts generated by the holding, leasing, 13 operation or other use of the Property shall be applied by the Lender (or the receiver, if one is appointed) to the extent that funds are so available therefrom, in the order of priority set forth in the Note. G. BOOKS AND RECORDS. In addition to the obligations of the Borrower under paragraph E of the Rider to Multifamily Instrument amending Uniform Covenant 10 of the Instrument ("Books and Records"), the Borrower shall provide the Lender the following: (i) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in any event within 120 days after the close of each fiscal year of any Key Principal during the term of this Agreement, its audited balance sheet as of the end of such fiscal year, its audited statement of income, partners' equity and retained earnings for such fiscal year and its audited statement of cash flows for such fiscal year, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the prior fiscal year, prepared in accordance with GAAP, consistently applied, and accompanied by a certificate of its independent certified public accountants to the effect that such financial statements have been prepared in accordance with GAAP, consistently applied, and that such financial statements fairly present the results of its operations and financial condition for the periods and dates indicated, with such certification to be free of exceptions and qualifications as to the scope of the audit or as to the going concern nature of the business. (ii) QUARTERLY FINANCIAL STATEMENTS. As soon as available, and in any event within 45 days after each of the first three fiscal quarters of any fiscal year of any Key Principal during the term of this Agreement, its unaudited balance sheet as of the end of such fiscal quarter and its unaudited statement of income and retained earnings and its unaudited statement of cash flows for the portion of the fiscal year ended with the last day of such quarter, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the previous fiscal year, accompanied by a certificate of each Key Principal to the effect that such financial statements have been prepared in accordance with GAAP, consistently applied, and that such financial statements fairly present the results of its operations and financial condition for the periods and dates indicated. (iii) MONTHLY PROPERTY STATEMENT. Upon Lender's request, on a monthly basis within 15 days of the last day of the prior month, a statement of income and expenses of the Property accompanied by a certificate of Borrower to the effect that each such statement of income and expenses fairly, accurately and completely presents the operations of the Property for the period indicated. (iv) QUARTERLY PROPERTY STATEMENT. A quarterly operating statement of the Property detailing the total revenues received, total expenses incurred, total cost of all capital improvements, total debt service and total cash flow, together with a balance sheet for such quarter, to be prepared and certified by Borrower in the form required by Lender, and if available, any quarterly operating statement and/or balance sheet prepared by an independent certified public accountant within thirty (30) days after the close of each fiscal quarter. 14 (v) BORROWER'S FINANCIALS. An annual balance sheet and profit and loss statement of Borrower, in the form required by Lender, prepare and certified by the respective Borrower, Guarantor and/or Indemnitor, as applicable, within ninety (90) days after the close of each fiscal year. (vi) ANNUAL PROPERTY STATEMENTS. On an annual basis within 15 days of the end of the fiscal year, an annual statement of income and expenses of the Property accompanied by a certificate of Borrower to the effect that each such statement of income and expenses fairly, accurately and completely presents the operations of the Property for the period indicated. (vii) ANNUAL RENT ROLL. An annual certified rent roll presented on a quarterly basis consistent with the quarterly certified rent rolls described above within ninety (90) days after the close of each fiscal year. (viii) UPDATED RENT ROLLS. Upon Lender's request, a current rent roll for the Property, showing the name of each tenant, and for each tenant, the space occupied, the lease expiration date, the rent payable, the rent paid and any other information requested by Lender and in the form required by Lender and accompanied by a certificate of Borrower to the effect that each such rent roll fairly, accurately and completely presents the information required therein. (ix) OPERATING BUDGET. An annual operating budget presented on a monthly basis consistent with the annual operating statement described above for the Property and all proposed capital replacements and improvements at least thirty (30) days prior to the start of each calendar year. (x) SECURITY DEPOSIT INFORMATION. Upon Lender's request, an accounting of all security deposits held in connection with any lease of any part of the Property, including the name and identification number of the accounts in which such security deposits are held, the name and address of the financial institutions in which such security deposits are held and the name of the person to contact at such financial institution, along with any authority or release necessary for Lender to access information regarding such accounts. (xi) SECURITY LAW REPORTING INFORMATION. Promptly upon the mailing thereof to the partners or shareholders of Borrower or any Key Principal, copies of all financial statements, reports and proxy statements so mailed and promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and annual, quarterly or monthly reports (excluding Form 4, Statement of Changes in Beneficial Ownership, or its equivalent, unless they reflect a change in control in Owner) which Borrower or any Key Principal shall have filed with the United States Securities and Exchange Commission or other Governmental Authorities. (xii) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, copies of any reports or management letters submitted to Borrower by its independent certified public accountants in connection with the examination of its financial statements made by such accountants (except for reports otherwise provided pursuant to clause (i) above). 15 (xiii) CONDITION OF APARTMENT INVESTMENT AND MANAGEMENT COMPANY. Borrower shall promptly notify the Lender of any report, event or condition known to the Borrower that the status of Apartment Investment and Management Company as a real estate investment trust under Subchapter M of the Internal Revenue Code has been terminated or brought into question. (xiv) OTHER INFORMATION. Such other financial statements, including monthly operating statements and rent rolls, as Lender may reasonably request. H. TRANSFERS OF THE PROPERTY. Paragraph F of the Rider is amended to add the following: Until such time as (1) the Loan is assumed by and the Property transferred to a new borrower who is wholly unrelated to Borrower, (2) Borrower has received the prior written approval of Lender to such assumption and transfer and (3) such assumption and transfer have been completed, clauses (a) (2), (a) (3), (b), (c) (4) and (d) of Section F of the Rider to Multifamily Instrument shall be of no force and effect and are replaced by and read as set forth below. At such time as clauses (1), (2) and (3) of the preceding sentence have been fulfilled, Sections (a) through (e) of this Section H of the Supplemental Rider to Multifamily Instrument shall be of no further force and effect and clauses (a) (2), (a) (3), (b), (c) (4) and (d) of Section F of the Rider to Multifamily Instrument shall be operative and controlling. (a) DEFINITIONS For purposes of this Instrument, the following terms have the respective meanings set forth below: (i) The term "TRANSFER" means (A) a sale, assignment, pledge, transfer or other disposition (whether voluntary or by operation of law) of, or the granting or creating of a lien, encumbrance or security interest in, any of Borrower's estate, rights, title or interest in the Property, or any portion thereof, or (B) a sale, assignment, pledge, transfer or other disposition of any interest in Borrower, its General Partner, AIMCO REIT or in AIMCO OP, or (C) the issuance or other creation of new ownership interests in Borrower, its General Partner, AIMCO REIT or in AIMCO OP, or (D) a merger or consolidation of Borrower, its General Partner, AIMCO REIT or AIMCO OP or (E) the reconstitution of Borrower, its General Partner, AIMCO REIT or AIMCO OP from one type of entity to another type of entity. (ii) A "CHANGE OF CONTROL" shall mean the earliest to occur of: (A) the date an Acquiring Person becomes (by acquisition, consolidation, merger or otherwise), directly or indirectly, the beneficial owner of more than forty percent (40%) of the total Voting Equity Capital of AIMCO REIT then outstanding, or (B) the date on which AIMCO REIT shall cease to hold (whether directly or indirectly through a wholly owned intermediary entity such as AIMCO-LP, Inc. or AIMCO-GP, Inc.) at least 50.1% of the limited partnership interests in AIMCO OP or (C) the date on which AIMCO REIT shall cease for any reason to own 100% of the Voting Equity Capital (whether directly or 16 indirectly through a wholly owned intermediary entity) (or any other securities) of the General Partner, or (D) the date on which the General Partner shall cease for any reason to be the sole general partner of the Borrower or (E) the replacement (other than solely by reason of retirement at age sixty-five or older, death or disability) of more than 50% (or such lesser percentage as is required for decision-making by the board of directors or trustees, if applicable) of the members of the board of directors (or trustees, if applicable) of AIMCO REIT over a one-year period where such replacement shall not have been approved by a vote of at least a majority of the board of directors (or trustees, if applicable) of AIMCO REIT then still in office who either were members of such board of directors (or trustees, if applicable) at the beginning of such one-year period or whose election as members of the board of directors (or trustees, if applicable) was previously so approved. (iii) An "ACQUIRING PERSON" shall mean a "PERSON" or group of "PERSONS" within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended; PROVIDED, HOWEVER, that notwithstanding the foregoing, "ACQUIRING PERSON" shall not be deemed to include any member of the Borrower Control Group unless such member has, directly or indirectly, disposed of, sold or otherwise transferred to, or encumbered or restricted (whether by means of voting trust agreement or otherwise) for the benefit of an Acquiring Person, all or any portion of the Voting Equity Capital of AIMCO REIT directly or indirectly owned or controlled by such member or such member directly or indirectly votes all or any portion of the Voting Equity Capital of AIMCO REIT, directly or indirectly, owned or controlled by such member for the taking of any action which, directly or indirectly, constitutes or would result in a Change of Control, in which event such member of the Borrower Control Group shall be deemed to constitute an Acquiring Person to the extent of the Voting Equity Capital of AIMCO REIT owned or controlled by such member. (iv) "BORROWER CONTROL GROUP" shall mean Terry Considine, Peter K. Kompaniez, Richard S. Ellwood, J. Landis Martin, Thomas L. Rhodes and John D. Smith. (v) A "PERSON" shall mean an individual, an estate, a trust, a corporation, a partnership, a limited liability company or any other organization or entity (whether governmental or private). (vi) "SECURITY" shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended. (vii) "VOTING EQUITY CAPITAL" shall mean Securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the board of directors (or Persons performing similar functions). 17 (viii) "AIMCO REIT" shall mean Apartment Investment and Management Company, a corporation organized and existing under the laws of the State of Maryland. (ix) "AIMCO OP" shall mean AIMCO Properties, L.P., a limited partnership organized and existing under the laws of the State of Delaware. (x) "GENERAL PARTNER" shall mean the corporation executing the Instrument on behalf of the Borrower, which corporation is organized and existing under the laws of the State of Delaware. (b) ACCELERATION OF THE LOAN UPON TRANSFERS OF THE PROPERTY OR SIGNIFICANT INTERESTS Subject to clause (c) hereof, Lender may, at Lender's option, declare all sums secured by this Instrument immediately due and payable and Lender may invoke any remedies permitted by paragraph 27 of this Instrument if, without Lender's prior written consent, any of the following shall occur: (i) a Transfer; or (ii) a Change in Control. (c) NO ACCELERATION OF THE LOAN FOR TRANSFERS CAUSED BY CERTAIN EVENTS Notwithstanding the foregoing provisions of this covenant, Lender shall not be entitled to declare sums secured by this Instrument immediately due and payable or to invoke any remedy permitted by paragraph 27 of this Instrument solely upon the occurrence of any of the following: (i) A Transfer that occurs by inheritance, devise, or bequest or by operation of law upon the death of a natural person who is an owner of an indirect ownership interest in the Borrower. (ii) The grant of a leasehold interest in individual dwelling units for a term of two years or less and leases for commercial uses provided that (A) commercial leases do not exceed 5 percent (5%) of (1) the rentable space of the Property (measured as required by Lender) or (2) the rental income from the Property, (B) no such commercial leasehold interest contains an option to purchase the Property, and (C) all such commercial leasehold interests, in the aggregate, (1) do not adversely affect the value of the Property and (2) are coincidental to the current use of the Property for multifamily residential purposes. (iii) A sale or other disposition of obsolete or worn out personal property which is contemporaneously replaced by comparable personal property of equal or greater value which is free and clear of liens, encumbrances and security interests other than those created by the Loan Documents. 18 (iv) The creation of a mechanic's or materialmen's lien or judgment lien against the Property which is released of record or otherwise remedied to Lender's satisfaction, within thirty (30) days of the date of creation. (v) The grant of an easement, if prior to the granting of the easement Borrower causes to be submitted to Lender all information required by Lender to evaluate the easement, and if Lender determines that the easement will not materially affect the operation of the Property or Lender's interest in the Property and Borrower pays to Lender on demand, all costs and expenses incurred by Lender in connection with reviewing Borrower's request. Lender shall not unreasonably withhold its consent to (A) the grant of a utility easement serving the Property to a publicly operated utility, or (B) the grant of an easement related to expansion or widening of roadways, provided that such easement is in form and substance reasonably acceptable to Lender and does not materially and adversely affect the access, use or marketability of the Property. (vi) The transfer of limited partnership interests in Borrower provided no Change of Control occurs as a result of such Transfer. (vii) The Transfer of shares of common stock, limited partnership interests or other beneficial or ownership interests or other forms of securities in AIMCO REIT or AIMCO OP, and the issuance of all varieties of convertible debt, equity and other similar securities of AIMCO REIT or AIMCO OP, and the subsequent Transfer of such securities; provided, however, that no Change of Control occurs as a result of such Transfer, either upon such Transfer or upon the subsequent conversion to equity of such convertible debt or other securities. (viii) The issuance by AIMCO REIT or AIMCO OP of additional common stock, limited partnership interests or other beneficial or ownership interests, convertible debt, equity and other similar securities, and the subsequent Transfer of such convertible debt or securities; provided, however, that no Change in Control occurs as the result of such Transfer, either upon such Transfer or upon the subsequent conversion to equity of such convertible debt or other securities. (ix) So long as AIMCO REIT owns 100% of the stock of AIMCO-LP, Inc., a Transfer of limited partnership interests that results in AIMCO-LP, Inc. owning not less than 50.1% of the limited partnership interests in AIMCO OP. (d) SECONDARY FINANCING. Notwithstanding the foregoing, provided Borrower is not otherwise in default under this Instrument or under any of the other Loan Documents, Lender will consent to Borrower obtaining bona fide third party subordinate debt, either secured or unsecured (the "Secondary Financing") and the granting of a subordinate lien on the Property to secure such debt so long as: (i) the unpaid principal balance of the loan and the 19 principal balance of the Secondary Financing does not exceed 55% of the then current appraised value of the Property as confirmed by Lender; (ii) the combined debt service coverage for both the Loan and the Secondary Financing is not less than 1.75; and (iii) the Secondary Financing is used solely for the purposes of renovating and/or making capital improvements to the Property as approved by Lender. At least 10 days prior to the date Borrower anticipates obtaining such Secondary Financing, Borrower shall submit to Lender full and complete copies of any documents to be executed by Borrower to evidence or secure such Secondary Financing, together with a detailed statement of the renovation and/or capital improvements to be funded with proceeds of such Secondary Financing, along with such other matters as Lender, in its reasonable discretion, shall deem necessary to confirm satisfaction of the foregoing conditions. Lender may require the Borrower and the subordinate debt holder (whether secured or unsecured Secondary Financing) to execute a standstill Subordination Agreement in form and substance satisfactory to Lender in its sole discretion. Secondary Financing shall not include ordinary trade indebtedness. (e) OTHER PROVISIONS REGARDING TRANSFERS. The parties acknowledge and agree that pursuant to the provisions of the this Instrument, Lender may permit a transfer of an indirect interest in the Borrower where Lender approves the transferee's creditworthiness. Lender will approve such proposed transferee's creditworthiness in connection with a transfer of indirect interests in the Borrower so long as there is no transfer of a direct interest in Borrower or its General Partner and so long as no "Change of Control" occurs. So long as there is no transfer of a direct interest in Borrower or its General Partner and so long as no Change in Control occurs, Lender's consent to the transferee's creditworthiness in connection with a transfer of indirect interests in the Borrower shall be deemed automatic and Borrower shall not be required to come to Lender for consent. Alternatively, if a transfer of either a direct interest in Borrower or its General Partner or a Change in Control is contemplated, Borrower must obtain Lender's prior written consent. Nothing contained in this paragraph is intended to permit, authorize or confer consent to a transfer of all or any part of any property encumbered by the Instrument. Lender will not unreasonably withhold its consent to a "Change of Control", provided that Borrower gives Lender not less than forty-five (45) days prior written notice of such Change of Control. Borrower acknowledges and agrees that time is of the essence with respect to such notice and that the remaining provisions of this paragraph shall be null and void unless such notice is timely given by Borrower. Lender will not withhold its consent under this paragraph if Lender determines in its discretion that (A) such acquiring person or entity has a creditworthiness at least equal to that of Borrower, (B) that such acquiring person or entity is of sufficient size and sophistication to own, operate and manage the properties securing the Mortgages and (C) that such acquiring person or entity has experience that is at least equal to that of Borrower in the ownership, operation and management of a portfolio of Multifamily Residential Property that is at least equal in value to the value of the property securing the Instrument. Lender shall provide Borrower written notice of its decision to consent or refuse to consent to a Change in Control under this paragraph within thirty (30) days from the date that Lender determines that it has received all of the information required by Lender to make the determinations described in the preceding sentence. 20 I. COMMON FACILITIES DISTRICT. Without obtaining the prior written consent of Lender, Borrower shall not consent to, or vote in favor of, the inclusion of all or any part of the Property in any Community Facilities District formed pursuant to the Community Facilities District Act, A.R.S. Section 48-701, ET SEQ., as amended from time to time. Borrower shall immediately give notice to Lender of any notification or advice that Borrower may receive from any municipality or other third party of any intent or proposal to include all or any part of the Property in a Community Facilities District. Lender shall have the right to file a written objection to the inclusion of all or any part of the Property in a Community Facilities District, either in its own name or in the name of Borrower, and to appear at, and participate in, any hearing with respect to the formation of any such district. J. APPOINTMENT OF RECEIVER. Upon an Event of Default and after obtaining the prior written consent of the Lender, Borrower shall apply for and obtain, without regard to the adequacy of any security for the Note or the solvency of the Borrower or any other person or entity, a receiver by any court of competent jurisdiction to take charge of all the Property, to manage, operate and carry on any business then being conducted or that could be conducted on the Property, to carry on, protect, preserve, replace and repair the Property, and receive and collect all rents and to apply the same to pay the receiver's expenses for the operation of the Property. Upon appointment of said receiver, Borrower shall immediately deliver possession of all of the Property to such receiver. Neither the appointment of a receiver for the Property by any court at the request of Lender or by agreement with Borrower nor the entering into possession of all or any part of the Property by such receiver shall constitute Lender a "mortgagee in possession" or otherwise make Lender responsible or liable in any manner with respect to the Property or the occupancy, operation or use thereof. Borrower agrees that Lender shall have the absolute and unconditional right to the appointment or a receiver in any independent and/or separate action brought by Lender regardless of whether Lender seeks any relief in such action other than the appointment of a receiver. In that respect, Borrower waives any express or implied requirement under common law or A.R.S. Section 12-1241 that a receiver may be appointed only ancillary to other judicial or non-judicial relief. K. ADDITIONAL REMEDIES; FORECLOSURE. In addition to any remedies provided herein for an Event of Default, Lender shall have all other legal or equitable remedies allowed under applicable law (including specifically that of foreclosure of this Instrument as though it were a mortgage). No failure on the part of Lender to exercise any of its rights hereunder arising upon any Event of Default shall be construed to prejudice its rights upon the occurrence of any other or subsequent Event of Default. No delay on the part of Lender in exercising any such rights shall be construed to preclude it from the exercise thereof at any time while that Event of Default is continuing. Lender may enforce any one or more remedies or rights hereunder successively or concurrently. By accepting payment or performance of any of the obligations under the Instrument or the Loan Documents after its due date, Lender shall not thereby waive the agreement contained herein that time is of the essence, nor shall Lender waive either its right to require prompt payment or performance when due of the remainder of the obligations under the Loan Documents or its right to consider the failure to so pay or perform an Event of Default. In any action by Lender to recover a deficiency judgment 21 for any balance due under the Note upon the foreclosure of this Instrument or in any action to recover obligations secured hereby, and as a material inducement to making the loan evidenced by the Note, Borrower acknowledges and agrees that the successful bid amount made at any judicial or nonjudicial foreclosure sale, if any, shall be conclusively deemed to constitute the fair market value of the Property, that such bid amount shall be binding against Borrower in any proceeding seeking to determine or contest the fair market value of the Property and that such bid amount shall be the preferred alternative means of determining and establishing the fair market value of the Property. Borrower hereby waives and relinquishes any right to have the fair market value of the Property determined by a judge or jury in any action seeking a deficiency judgment or any action to enforce the obligations pursuant to the Loan Documents secured hereby, including, without limitation, a hearing to determine fair market value pursuant to A.R.S. Section 12-1566, Section 33-814, Section 33-725 or Section 33-727. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 22 IN WITNESS WHEREOF, the parties hereto have executed this Supplemental Rider or have caused the same to be executed by their respective representatives thereunto duly authorized. BORROWER: AIMCO/WICKERTREE, L.P., a Delaware limited partnership By: AIMCO/Wickertree, Inc., a Delaware corporation By: /s/ Harry Alcock ------------------------------------- Harry Alcock Vice President 23 EXHIBIT A Order Number: 201862 LEGAL DESCRIPTION That portion of the Northwest quarter of the Northeast quarter of Section 25, Township 4 North, Range 2 East of the Gila and Salt River Base and Meridian, Maricopa County, Arizona, described as follows: COMMENCING at the North quarter corner of said Section 25; THENCE due South along the centerline of 23rd Avenue 380.03 feet;; THENCE South 89 DEG. 42' 41" East 33.00 feet to the POINT OF BEGINNING; THENCE South 89 DEG.42' 41" East 777 feet to the West line of Rose Garden Place, according to Book 201 of Maps, page 30, records of Maricopa County, Arizona; THENCE South 00 DEG. 00' 04" East along West line 430.00 feet to the North line of said subdivision; THENCE North 89 DEG. 42' 41" West along said North line 777.00 feet; THENCE North 430.00 feet to the POINT OF BEGINNING; EXCEPT that portion condemned unto the State of Arizona by judgement entered in the Arizona Superior Court, in and for the County of Maricopa, a certified copy of which was recorded in Document No. 93-403106, records of Maricopa County, Arizona, described as follows: COMMENCING at the North quarter corner of said Section 25; THENCE South 00 DEG. 13' 19" East 699.95 feet along the assumed mid-Section line of said Section 25; THENCE North 89 DEG. 46' 41" East 33.00 feet to the POINT OF BEGINNING in the existing East line of the 66.00 foot right-of-way of 23rd Avenue; THENCE North 05 DEG. 43' 56" East 163.88 feet; THENCE North 00 DEG. 13' 19" West 107.86 feet; THENCE North 49 DEG. 24' 47" East 73.56 feet to the North line of the above described property; THENCE along said North line North 89 DEG. 59' 51" West 73.04 feet to the aforesaid East right-of-way line of 23rd Avenue; THENCE along said East right-of-way line South 00 DEG. 13' 19" East 318.79 feet to the POINT OF BEGINNING. EXHIBIT "B" TO MULTIFAMILY MORTGAGE, DEED OF TRUST OR DEED TO SECURE DEBT AND FINANCING STATEMENTS As used herein., the term "Debtor" shall mean and include the terms "Mortgagor", "Grantor" and "Borrower"; and the term "Creditor" shall mean and include the terms "Lender", "Mortgagee" and "Secured Party". This Exhibit "B" is attached to, incorporated by reference in, and forms a part of, certain documents (collectively, the "Security Documents"), executed and delivered by Debtor in connection with the refinancing of the Project (as hereinafter defined), including: (i) a Multifamily Mortgage, Deed of Trust or Deed to Secure Debt; and (ii) Financing Statements. This Exhibit "B" refers to the following collateral, which may be now or hereafter located on the premises of, relate to, or be used in connection with, the acquisition or refinancing, construction, equipping, repair, ownership, management or operation of a multifamily rental housing project (the "Project"), located on the property named and described on Exhibit "A" (the "Property"). l. All materials now owned or hereafter acquired by the Debtor and intended for construction, reconstruction, alteration and repair of any building, structure or improvement now or hereafter erected or placed on the Property, all of which materials shall be deemed to be included within the Project immediately upon the delivery thereof to the Project. 2. All of the walks, fences, plants, trees, shrubbery, driveways, fixtures, machinery, apparatus, equipment, appliances, fittings, and other goods and other personal property of every kind and description whatsoever, now owned or hereafter acquired by the Debtor and attached to or contained in and used or usable in connection with any present or future operation of the Project, including, by way of example rather than of limitation, all lighting, laundry, incinerating and power equipment; all engines, boilers, machines, motors, furnaces, compressors and transformers; all generating equipment; all pumps, tanks, ducts, conduits, wire, switches, electrical equipment and fixtures, fans and switchboards; all telephone equipment; all piping, tubing, plumbing equipment and fixtures; all heating, refrigeration, air conditioning, cooling, ventilating, sprinkling, water, gas, power and communications equipment, systems and apparatus; all water coolers, water heaters and water closets; all fire prevention, alarm and extinguishing systems and apparatus; all security and access control systems and apparatus; all cleaning equipment; all lift, elevator and escalator equipment and apparatus; all partitions, shades, blinds, awnings, screens, screen doors, storm doors, storm windows, exterior and interior signs, antennas, gas fixtures, bathtubs, washers, dryers, sinks, stoves, ranges, ovens, refrigerators, garbage disposals, dishwashers, cabinets, mirrors, mantles, pictures, panelling, floor coverings, carpets, rugs, curtains, curtain rods, draperies and other furnishings and furniture installed or to be installed or used or usable in the operation of any part of the Project or facilities erected or to be erected in or upon the Property; and every renewal or replacement thereof or articles in substitution therefor, whether or not the same are now or hereafter attached to the Property in any manner; all except for any right, title or interest therein owned by any tenant (it being agreed that all personal property owned by the Debtor and placed by it on the Property shall, so far as permitted by law, be deemed to be affixed to the Property, appropriated to its use, and covered by each of the Security Documents to which this Exhibit "B" is attached). 3. All of the Debtor's right, title and interest in and to any and all judgments, awards of damages (including but not limited to severance and consequential damages), payments, proceeds, settlements or other compensation (collectively, the "Awards") heretofore or hereafter made, including interest thereon, and the right to receive the same, as a result of, in connection with, or in lieu of (i) any taking of the Property or any part thereof by the exercise of the power of condemnation or eminent domain, or the police power, (ii) any change or alteration of the grade of any street, or (iii) any other injury to or decrease in the value of the Property or any part thereof (including but not limited to destruction or decrease in value by fire or other casualty), all of which Awards, rights thereto and shares therein are hereby assigned to the Creditor, who is hereby authorized to collect and receive the proceeds thereof and to give proper receipts and acquittances therefor and to apply, at its option, the net proceeds thereof, after deducting expenses of collection, as a credit upon any portion, as selected by the Creditor, of the indebtedness secured by the Security Documents. 4. All of the Debtor's right, title and interest in and to any and all payments, proceeds, settlements or other compensation heretofore or hereafter made, including any interest thereon, and the right to receive the same from any and all insurance policies covering the Property or any portion thereof, or any of the other property described herein. 5. The interest of the Debtor in and to all of the rents, royalties, mineral, oil and gas rights and profits, water, water rights and water stock appurtenant to the Property, issues, profits, revenues, income, tenant assistance payments, if any, and other benefits of the Property, or arising from the use or enjoyment of all or any portion thereof, or from any lease, agreement or tenant assistance payment contract, if any, pertaining thereto, and all right, title and interest of the Debtor in and to, and remedies under, all contract rights, accounts receivable and general intangibles arising out of or in connection with any and all leases and subleases of the Property, or any part thereof, and of the other property described herein, or any part thereof, both now in existence or hereafter entered into, together with all proceeds (cash and non-cash) thereof; and including, without limitation, to the extent permitted by law, all cash or securities deposited thereunder to secure performance by the lessees of their obligations thereunder. 6. All of the Debtor's rights, options, powers and privileges in and to (but not the Debtor's obligations and burdens under) any construction contract, architectural and engineering agreements and management contract pertaining to construction, development, ownership, equipping and management of the Property and all of the Debtor's right, title and interest in and to (but not the Debtor's obligations and burdens under) all architectural, engineering and similar plans, specifications, drawings, reports, surveys, plats, permits and the like, contracts for construction, operation and maintenance of, or provision of services to, the Property or any of the other property described herein, and all sewer taps and allocations, agreements for utilities, bonds and the like, all relating to the Property. 7. All intangible personal property, accounts, licenses, permits, instruments, contract rights, and chattel paper of the Debtor derived from, or generated or required by, the Property, including but not limited to cash; accounts receivable; bank accounts; certificates of deposit; securities; promissory notes; rents; tenant assistance payments (if any; rights (if any) to amounts held in escrow; insurance proceeds; condemnation rights; deposits; judgments, liens and causes of 2 action; warranties and guarantees (but not including syndication proceeds generated by sale of interests in the Debtor). 8. The interest of the Debtor in and to any cash escrow fund and in and to any and all funds, securities, instruments, documents and other property which are at any time paid to, deposited with, under the control of, or in the possession of the Creditor, or any of its agents, branches, affiliates, correspondents or others acting on its behalf, which rights shall be in addition to any right of set-off or right of lien that the Creditor may otherwise enjoy under applicable law, regardless of whether the same arose out of or relate in any way, whether directly or indirectly, to the Project located upon the Property. 9. All inventory, including raw materials, components, work-in-process, finished merchandise and packing and shipping materials. 10. Proceeds, products, returns, additions, accessions and substitutions of and to any or all of the above. 11. Any of the above arising or acquired by the Debtor or to which the Debtor may have a legal or beneficial interest in on the date hereof and at any time in the future. 12. Any of the above which may become fixtures by virtue of attachment to the Property. 13. All of the records and books of account now or hereafter maintained by or on behalf of the Debtor in connection with the Project. 14. All names now or hereafter used in connection with the Project and the goodwill associated therewith. 3 EX-10.10 10 EXHIBIT 10.10 EXCEPTIONS TO NON-RECOURSE GUARANTY (WICKERTREE) This Exceptions to Non-Recourse Guaranty is entered into as of October 31, 1997, by the undersigned (collectively, the "Key Principal whether one or more), in order to induce GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation (the "Lender") to make a loan to AIMCO/WICKERTREE, L.P., a Delaware limited partnership (the "Borrower") in the amount of $ 4,231,700.00 (the "Loan"). RECITALS A. The Loan is evidenced by a Multifamily Note from Borrower to Lender as of even date herewith (the "Multifamily Note"), as modified by an Addendum to Multifamily Note of even date herewith (the "Addendum"). The Loan is secured by a Multifamily Mortgage, Deed of Trust or Deed to Secure Debt of even date herewith (the "Multifamily Instrument"), covering the property described in the Multifamily Instrument (the "Property"). The Multifamily Instrument is amended and supplemented by a Rider to Multifamily Instrument and a Supplemental Rider to Multifamily Instrument each as of even date herewith (collectively, the "Rider"). B. The Multifamily Note, as modified by the Addendum and as further amended from time to time, shall be referred to in this Exceptions to Non- Recourse Guaranty as the "Note." The Multifamily Instrument, as modified by the Rider and as further amended from time to time, shall be referred to in this Exceptions to Non-Recourse Guaranty as the "Instrument." The term "Loan Documents" when used in this Exceptions to Non-Recourse Guaranty, shall mean, collectively, the following documents: (i) the Note, (ii) the Instrument, and (iii) all other documents or agreements, including any Collateral Agreements (as defined in the Rider) or O&M Agreement (as defined in the Rider), executed in connection with the Loan, whether presently existing or hereinafter entered into, as such Loan Documents may be amended from time to time. C. Lender is unwilling to make the Loan unless the undersigned Key Principal executes this Exceptions to Non-Recourse Guaranty. NOW, THEREFORE, in order to induce Lender to make the Loan evidenced by the Note and secured by the Instrument, and in consideration thereof, Key Principal hereby (i) irrevocably and unconditionally guarantees the full and prompt payment to Lender of all amounts which may from time to time while the Note is outstanding and unpaid become due and owing by Borrower, whether principal, interest or other sums, for which Borrower may from time to time, or at any time be personally liable for payment to Leader under the Note and the Instrument (due to the applicability of the exceptions to non-recourse liability provisions as contained in paragraph C of the Addendum and paragraph L of the Rider) (the "Guaranteed Obligations"), and (ii) agrees to pay, on demand, all costs and expenses, including reasonable attorneys' fees and disbursements, incurred by Lender in enforcing its rights under this Exceptions to Non-Recourse Guaranty. All obligations of Key Principal under the Exceptions to Non-Recourse Guaranty shall be joint and several among all persons (if more than one) included as a Key Principal. This Exceptions to Non-Recourse Guaranty is an unconditional guaranty of payment, and not a guaranty of collection, and may be enforced by Lender directly against Key Principal without any requirement that Lender must first exercise its rights against Borrower or any general partner of Borrower or any collateral or other security for payment of the Note. The obligations of Key Principal under this Exceptions to Non-Recourse Guaranty shall be performed without demand by Lender and shall be unconditional irrespective of the genuineness, validity, regularity or enforceability of the Note, the Instrument, or any other circumstance which might otherwise constitute a legal or equitable discharge of a surety or a guarantor. Key Principal hereby waives the benefit of all principles or provisions of law, statutory or otherwise, which are or might be in conflict with the terms of this Exceptions to Non-Recourse Guaranty, and agrees that the obligations of Key Principal shall not be affected by any circumstances, whether or not referred to in this Exceptions to Non-Recourse Guaranty, which might otherwise constitute a legal or equitable discharge of a surety or guarantor. Key Principal hereby waives the benefits of any right of discharge under any and all statutes or other laws relating to guarantors or sureties and any other rights of sureties and guarantors thereunder. Without limiting the generality of the foregoing, Key Principal hereby waives diligence, presentment, demand for payment, protest, all notices which may be required by statute, rule of law or otherwise to preserve intact Lender's rights against Key Principal under this Exceptions to Non-Recourse Guaranty, including, but not limited to, notice of acceptance, notice of any amendment of the Loan Documents, notice of the occurrence of any default, notice of intent to accelerate, notice of acceleration, notice of dishonor, notice of foreclosure, notice of protest, notice of the incurring by Borrower of any of the Guaranteed Obligations, and, generally, all demands, notices and other formalities of every kind in connection with this Exceptions to Non-Recourse Guaranty, and all rights to require Lender to (a) proceed against Borrower or, if Borrower is a partnership, any general partner of Borrower, (b) proceed against or exhaust any collateral held by Lender to secure the payment of the Loan, or (c) pursue any other remedy it may now or hereafter have against Borrower, or, if Borrower is a partnership, any general partner of Borrower. Key Principal hereby agrees that, at any time or from time to time and any number of times, without notice to Key Principal and without affecting the liability of Key Principal, (a) the time for payment of the principal of or interest on the Note may be extended or the Note may be renewed in whole or in part one or more times; (b) the time for Borrower's performance of or compliance with any covenant or agreement contained in the Note, the (Page 1 of 3) Instrument or any other Loan Document evidencing, securing or governing the Loan, whether presently existing or hereinafter entered into, may be extended or such performance or compliance may be waived; (c) the maturity of the Note may be accelerated as provided therein or in the Instrument, or any other Loan Document; (d) the Note, the Instrument, or any other Loan Document, may be modified or amended by Lender and Borrower in any respect, including, but not limited to, an increase in the principal amount; and (e) any security for the Loan may be modified, exchanged, surrendered or otherwise dealt with or additional security may be pledged or mortgaged for the Loan. If any payment by Borrower is held to constitute a preference under any applicable bankruptcy or similar laws, or if for any reason Lender is required to refund any sums to Borrower, such amounts shall not constitute a release of any liability of Key Principal hereunder. It is the intention of Lender and Key Principal that Key Principal's obligations hereunder shall not be discharged except by Key Principal's performance of such obligations and then only to the extent of such performance. Key Principal agrees that any indebtedness of Borrower now or hereafter held by Key Principal is hereby and shall be subordinated to all indebtedness of Borrower to Lender and any such indebtedness of Borrower shall be collected, enforced and received by Key Principal, as trustee for Lender, but without reducing or affecting in any manner the liability of Key Principal under the other provisions of this Exceptions to Non-Recourse Guaranty. Key Principal agrees that Lender, in its sole and absolute discretion, may (a) bring suit against Key Principal, or any one or more of the individuals constituting Key Principal, and any other guarantor of the Note, jointly and severally, or against any one or more of them; (b) compromise or settle with any one or more of the individuals constituting Key Principal for such consideration as Lender may deem proper; (c) release one or more of the individuals constituting Key Principal, or any other guarantors of the Note, from liability thereunder; and (d) otherwise deal with Key Principal and any other guarantor of the Note, or any one or more of them, in any manner whatsoever, and that no such action shall impair the rights of Leader to collect the Guaranteed Obligations from Key Principal. Nothing contained in this paragraph shall in any way affect or impair the rights or obligations of the Key Principal with respect to any other guarantor of the Note. Lender may assign its rights under this Exceptions to Non-Recourse Guaranty in whole or in part and upon any such assignment, all the terms and provisions of this Exceptions to Non-Recourse Guaranty shall inure to the benefit of such assignee to the extent so assigned. The terms used to designate any of the parties herein shall be deemed to include the heirs, legal representatives, successors and assigns of such parties; and the term "Lender" shall include, in addition to Lender, any lawful owner, holder or pledgee of the Note. Key Principal shall have no right of, and hereby waives any claim for, subrogation or reimbursement against the Borrower or any general partner of Borrower by reason of any payment by Key Principal under this Exceptions to Non-Recourse Guaranty, whether such right or claim arises at law or in equity or under any contract or statute. Key Principal hereby waives trial by jury in any action or proceeding commenced by Lender against Key Principal under this Exceptions to Non-Recourse Guaranty. Key Principal hereby waives and agrees not to assert, INTER ALIA: (a) the benefits of any statutory provision limiting the liability of a surety, including without limitation the provisions of Sections 12-164 ET SEQ., Arizona Revised Statutes; and (b) the benefits of any statutory provision limiting the right of the Lender to recover a deficiency judgment, or to otherwise proceed against any person or entity obligated for payment of the Note, after any foreclosure or trustee's sale of any security for the Note, including without limitation the benefits, if any to a Surety of Arizona Revised Statutes Section 33-814. THIS EXCEPTIONS TO NON-RECOURSE GUARANTY AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS, UNDERSTANDINGS, REPRESENTATIONS, AND STATEMENTS, ORAL OR WRITTEN, ARE MERGED INTO THIS EXCEPTIONS TO NON-RECOURSE GUARANTY AND THE OTHER LOAN DOCUMENTS. NEITHER THIS EXCEPTIONS TO NON-RECOURSE GUARANTY NOR ANY PROVISION HEREOF MAY BE WAIVED, MODIFIED, AMENDED, DISCHARGED, OR TERMINATED EXCEPT BY AN AGREEMENT IN WRITING SIGNED BY THE PARTY AGAINST WHICH THE ENFORCEMENT OF SUCH WAIVER, MODIFICATION, AMENDMENT, DISCHARGE, OR TERMINATION IS SOUGHT, AND THEN ONLY TO THE EXTENT SET FORTH IN SUCH AGREEMENT. Each of the terms and provisions, and rights and obligations of Key Principal hereunder shall be governed by, interpreted, construed and enforced pursuant to and in accordance with the laws of the State in which the Property is located (the "Property Jurisdiction") and the applicable laws of the United States of America. Key Principal agrees that any controversy arising under or in relation to this Exceptions to Non-Recourse Guaranty shall be, except as otherwise provided herein, litigated in the Property Jurisdiction. The local and federal courts and authorities with jurisdiction in the Property Jurisdiction shall, except as otherwise provided herein, have jurisdiction over all controversies which may arise under or in relation to this Exceptions to Non- Recourse Guaranty, including without limitation those controversies relating to the execution, jurisdiction, breach, enforcement or compliance with this Exceptions to Non-Recourse Guaranty. Key Principal irrevocably consents to service, jurisdiction and venue of such courts for any litigation arising from the Exceptions to Non-Recourse Guaranty, and waives any other venue (Page 2 of 3) to which it might be entitled by virtue of domicile, habitual residence or otherwise. Nothing contained herein, however, shall prevent Lender from bringing any suit, action or proceeding or exercising any rights against Key Principal in any other jurisdiction. Initiating such suit, action or proceeding or taking such action in any other jurisdiction shall in no event constitute a waiver of the agreement contained herein that the laws of the Property Jurisdiction and the applicable laws of the United States of America shall govern the rights and obligations of Key Principal and Lender as provided herein or the submission herein by Key Principal to personal jurisdiction within the Property Jurisdiction. Key Principal: APARTMENT INVESTMENT AND MANAGEMENT COMPANY, A MARYLAND CORPORATION By: /s/ Harry Alcock ------------------------------------- Harry Alcock Vice President Address: 1873 S. Bellaire Street 17th Floor Denver, Colorado 80222 AIMCO PROPERTIES, L.P., A DELAWARE LIMITED PARTNERSHIP By: AIMCO-GP, INC., a Delaware corporation, its General Partner By: /s/ Harry Alcock -------------------------------- Harry Alcock Vice President Address: 1873 S. Bellaire Street 17th Floor Denver, Colorado 80222 (Page 3 of 3) EX-10.11 11 EXHIBIT 10.11 RESTRICTED STOCK AGREEMENT (1997 STOCK AWARD AND INCENTIVE PLAN) RESTRICTED STOCK AGREEMENT, dated as of July 25, 1997 (the "Agreement"), by and between Apartment Investment and Management Company, a Maryland corporation (the "Company"), and R. Scott Wesson (the "Recipient"). Capitalized terms used but not otherwise defined in this Agreement shall have the respective meanings set forth in the Apartment Investment and Management Company 1997 Stock Award and Incentive Plan (the "Plan"). WHEREAS, on July 25, 1997 (the "Date of Grant") the Compensation Committee (the "Committee") of the Board of Directors (the "Board") of the Company granted the Recipient a Restricted Stock Award, pursuant to which the Recipient shall have the right to purchase shares of the Company's Class A Common Stock, par value $.01 per share ("Common Stock"), pursuant to and subject to the terms and conditions of the Plan. NOW, THEREFORE, in consideration of the Recipient's services to the Company and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. NUMBER OF SHARES AND PURCHASE PRICE. The Company hereby grants the Recipient a Restricted Stock Award (the "Stock Award") to purchase 9,000 shares of Common Stock (the "Restricted Shares") at a purchase price per share equal to $30.00 (the "Purchase Price"), pursuant to the terms of this Agreement and the provisions of the Plan. 2. PERIOD OF STOCK AWARD AND PURCHASE OF SHARES. (a) Unless the Stock Award is previously terminated pursuant to this Agreement or the Plan, the Stock Award shall terminate 60 days from the Date of Grant (the "Expiration Date"). On the Expiration Date, all rights of the Recipient hereunder shall cease. (b) The Recipient shall make payment for the Restricted Shares in an amount equal to the Purchase Price; PROVIDED THAT, the Company shall loan to the Recipient the amount set forth on the Recipient's Signature Page to this Agreement, and the Recipient's obligation to pay for the Restricted Shares may be satisfied by the proceeds of such loan. The obligation of the Recipient to repay such loan shall be evidenced by the execution and delivery to the Company of a Secured Promissory Note in the form of Exhibit A hereto (the "Note") for the amount of such loan and a Security and Pledge Agreement in the form of Exhibit B hereto (the "Pledge Agreement"). Stock certificates representing the Restricted Shares, registered in the name of the Recipient, will be delivered to the Recipient as soon as practicable and immediately redelivered by the Recipient to the Company pursuant to such Pledge Agreement. 3. NONTRANSFERABILITY OF AWARD. Awards shall not be transferable by a Participant except by will or the laws of descent and distribution or, if then permitted under Rule 16b-3, pursuant to a qualified domestic relations order as defined under the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder, and shall be exercisable during the lifetime of a Participant only by such Participant or his guardian or legal representative. 4. MISCELLANEOUS. (a) ENTIRE AGREEMENT. This Agreement and the Plan contain the entire understanding and agreement of the Company and the Recipient concerning the subject matter hereof, and supersede all earlier negotiations and understandings, written or oral, between the parties with respect thereto. (b) CAPTIONS. The captions and section numbers appearing in this Agreement are inserted only as a matter of convenience. They do not define, limit, construe or describe the scope or intent of the provisions of this Agreement. (c) COUNTERPARTS. This Agreement may be executed in counterparts, each of which when signed by the Company or the Recipient will be deemed an original and all of which together will be deemed the same agreement. (d) NOTICES. Any notice or communication having to do with this Agreement must be given by personal delivery or by certified mail, return receipt requested, 2 addressed, if to the Company or the Committee, to the attention of the Chief Financial Officer of the Company at the principal office of the Company and, if to the Recipient, to the Recipient's last known address contained in the personnel records of the Company. (e) SUCCESSION AND TRANSFER. Each and all of the provisions of this Agreement are binding upon and inure to the benefit of the Company and the Recipient and their successors, assigns and legal representatives; provided, however, that the Stock Award granted hereunder shall not be transferable by the Recipient (or the Recipient's successor or legal representative) other than by will or by the laws of descent and distribution and may be exercised during the lifetime of the Recipient, only by the Recipient or by his or her guardian or legal representative. (f) AMENDMENTS. Subject to the provisions of the Plan, this Agreement may be amended or modified at any time by an instrument in writing signed by the parties hereto. (g) GOVERNING LAW. This Agreement and the rights of all persons claiming hereunder will be construed and determined in accordance with the laws of the State of Maryland without giving effect to the choice of law principles thereof. (h) PLAN CONTROLS. This Agreement is made under and subject to the provisions of the Plan, and all of the provisions of the Plan are hereby incorporated by reference into this Agreement. In the event of any conflict between the provisions of this Agreement and the provisions of the Plan, the provisions of the Plan shall govern. By signing this Agreement, the Recipient confirms that he or she has received a copy of the Plan and has had an opportunity to review the contents thereof. (i) NO GUARANTEE OF CONTINUED SERVICE. The Recipient acknowledges and agrees that nothing herein, including the opportunity to make an equity investment in the Company, shall be deemed to create any implication concerning the adequacy of the Recipient's services to the Company or any of its subsidiaries or shall be construed as an agreement by the Company or any of its subsidiaries, express or implied, to employ the Recipient or contract for the Recipient's services, to restrict the right of the 3 Company or any of its subsidiaries to discharge the Recipient or cease contracting for the Recipient's services or to modify, extend or otherwise affect in any manner whatsoever, the terms of any employment agreement or contract for services that may exist between the Recipient and the Company or any of its subsidiaries. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. APARTMENT INVESTMENT AND MANAGEMENT COMPANY By: /s/ Leann Morein ----------------------------------- Name: Leann Morein --------------------------------- Title: Senior Vice President and Chief Financial Officer -------------------------------- Recipient: R. Scott Wesson --------------------------------------- (Print Name of Recipient) 4 RECIPIENT SIGNATURE PAGE By: /s/ R. Scott Wesson ------------------------------ Name of Recipient: R. Scott Wesson Position in the Company: Senior Vice President - Chief Information Officer Address: No. of Shares: 9,000 Purchase Price: $270,000 Loan: $270,000 I, the undersigned, being the spouse of the above signed Recipient, hereby represent that I have read and understand this Agreement, the Pledge Agreement and the Stock Subscription Agreement, and hereby agree to be bound by the provisions hereof and thereof and of the agreements and instruments executed by the Recipient pursuant hereto or thereto. Without limiting the foregoing, I consent to the Recipient's subscription, purchase and payment for Common Stock pursuant hereto. /s/ R. Scott Wesson ------------------- 5 EXHIBIT A SECURED PROMISSORY NOTE $270,000 Denver, Colorado - --------- July 25, 1997 FOR VALUE RECEIVED, R. Scott Wesson (the "Borrower"), hereby promises to pay to the order of Apartment Investment and Management Company, a Maryland corporation (the "Lender"), the principal sum of TWO HUNDRED SEVENTY THOUSAND DOLLARS ($270,000) in lawful money of the United States of America, on July 24, 2007 (the "Repayment Date"), together with accrued and unpaid interest thereon from the date hereof. 1. INTEREST RATE. The outstanding principal amount of this Note, together with all accrued and unpaid interest thereon, shall bear interest at a rate per annum equal to 7.25%; provided, however, that if the Borrower is not an employee of the Lender or one of its affiliates on the date on which any principal payment is made, such principal amount, together with all accrued and unpaid interest thereon, shall bear interest at a rate per annum equal to 9.00% from the date hereof. 2. INTEREST PAYMENTS. Interest payments on the Note shall be payable quarterly on March 1, June 1, September 1 and December 1 of each year through the Repayment Date. Interest shall be calculated on the basis of a year comprised of twelve (12) thirty (30) day months. Each payment on this Note shall be credited first to interest on past due interest, then to past due interest, then to accrued interest and then to principal. 3. METHOD OF PAYMENT. All payments hereunder shall be made by certified or bank cashier's check at 1873 South Bellaire Street, Denver, Colorado 80222, or at such other place as the Lender shall designate to the Borrower in writing. If any payment of principal or interest on this Note is due on a day which is not a Business Day, such payment shall be due on the next succeeding Business Day, and such extension of time shall be taken into account in calculating the amount of interest payable under this Note. "Business Day" means any day other than a Saturday, Sunday or legal holiday in the State of Colorado. 4. PREPAYMENT. The Borrower shall have the right to prepay the principal amount hereof in full or in part, together with all accrued interest on the amount prepaid to the date of such prepayment, at any time without penalty. 5. TERMINATION OF EMPLOYMENT. Upon the occurrence of the termination for any reason of the Borrower's employment with the Lender or its affiliates (a "Termination Event"), the Lender shall, by notice in writing to the Borrower, declare this Note and the principal of and accrued interest on this Note and all other charges owing to the Lender to be, and the same shall upon such notice forthwith become, due and payable on the thirtieth day following such Termination Event; provided, however, that, if such Termination Event occurs on or after a Change in Control (as defined herein), such amounts shall not be due and payable prior to the last day of the twelve (12) month period following such Termination Event. 6. SECURITY. Pursuant to the Security and Pledge Agreement, dated as of the date hereof (the "Security Agreement"), by and between the Lender and the Borrower, the obligations of the Borrower hereunder are secured by the Collateral (as defined in the Security Agreement), and the holder of this Note is entitled to the benefits of the Collateral. 7. LIMITED RECOURSE. Except for recourse against the Collateral as provided in the Security and Pledge Agreement, recourse for the payment of the principal of or interest on this Note or for any claim based hereon (including costs of collection) against the Borrower shall be limited to an amount equal to (a) 25% of the original principal amount of this Note, less (b) any prepayments of the principal amount of this Note, all liability in excess of such amount being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released. 8. EVENTS OF DEFAULT. Each of the following events shall constitute an "Event of Default" hereunder (whether it shall be voluntary or involuntary or occur or be effected by operation of law or otherwise): (i) the Borrower's failure to pay, within 15 days after the date when such payment is due, any payment of principal or interest on this Note; (ii) the Borrower's failure to observe or perform any covenant or agreement contained in this Note (other than that set forth in clause (i) above) or the Security Agreement; (iii) if any representation, warranty, certification or statement made by the Borrower in this Note, the Security Agreement or in any certificate or other document delivered pursuant to this Note or the Security Agreement shall prove to have been incorrect in any material respect when made or deemed made; (iv) the insolvency of the Borrower; (v) the appointment of a receiver or a trustee of all or part of the Borrower's property; (vi) an assignment for the benefit of the Borrower's creditors; (vii) the filing of a petition in bankruptcy by or against the Borrower; (viii) the commencement of any proceeding by or against the Borrower under any bankruptcy or insolvency law or any law relating to the relief of debtors or readjustment of indebtedness; (ix) the appointment of a receiver, custodian, trustee or liquidator for any part of the assets or property of the Borrower; (x) the failure of the Borrower generally to pay his or her debts as they become due; and (xi) the failure of the Lender to have a first priority security interest in the Collateral. 9. REMEDIES. (a) Upon the occurrence of any Event of Default, the holder of this Note may, by notice in writing to the Borrower, declare this Note and the principal of and accrued interest 2 on this Note and all other charges owing to the Lender to be, and the same shall upon such notice forthwith become, due and payable. Upon the occurrence of an Event of Default, the holder of this Note may, in addition to all rights and remedies available to it at law, exercise any or all of its rights under the Security Agreement. (b) No failure or delay by the holder of this Note in exercising any remedy, right, power or privilege under this Note or the Security Agreement shall operate as a waiver of such remedy, right, power or privilege, nor shall any single or partial exercise of such remedy, right, power or privilege preclude any other or further exercise of such remedy, right, power or privilege. No remedy, right, power or privilege conferred upon or reserved to the holder of this Note by this Note or the Security Agreement is intended to be exclusive of any other remedy, right, power or privilege provided or permitted by this Note, the Security Agreement or by law, but each shall be cumulative and in addition to every other remedy, right, power or privilege so provided or permitted and each may be exercised concurrently or independently from time to time and as often as may be deemed expedient by the holder of this Note. Any provision of this Note which is prohibited or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Note. (c) The holder of this Note shall have the right, at its option, to declare the entire unpaid principal balance of this Note, irrespective of the maturity date of this Note, immediately due and payable, together with accrued interest, if the Borrower (or any affiliate of the Borrower) sells, transfers or disposes of any portion of the Collateral identified in the Security Agreement. Notwithstanding the above, if an Event of Default first occurs on or prior to the end of the twelve (12) month period following a Change in Control, the holder of this Note may not cause the Note or the principal of or the accrued interest on this Note to become due and payable prior to the second anniversary of a Change in Control, or the Repayment Date, if earlier. 10. COSTS OF COLLECTION. Upon the failure of the Borrower to pay any amount due hereunder as and when due, the Borrower shall pay on demand any and all costs and expenses (including, without limitation, all court costs and attorneys' fees) incurred by the holder hereof in connection with the collection of any outstanding principal balance and interest accrued hereunder (whether or not suit is filed to enforce the terms hereof), and in connection with the enforcement of any rights or remedies provided for pursuant to this Note and the Security Agreement. If not paid on demand, all such costs and expenses automatically shall be added to the remaining principal balance hereunder as of the date immediately following the date of such demand. 11. CHANGE IN CONTROL. For purposes of this Note, "Change in Control" shall mean the occurrence of any of the following events: 3 (a) an acquisition (other than directly from the Lender) of any voting securities of the Lender (the "Voting Securities) by any "person" (as the term "person" is used for purposes of Section 13(d) or Section 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) immediately after which such person has "beneficial ownership" (within the meaning of Rule 13d-3 promulgated under the Exchange Act) ("Beneficial Ownership") of 20% or more of the combined voting power of the Lender's then outstanding Voting Securities; provided, however, in determining whether a Change in Control has occurred, Voting Securities that are acquired in a Non-Control Acquisition (as hereinafter defined) shall not constitute an acquisition that would cause a Change in Control. "Non-Control Acquisition" shall mean an acquisition by (A) an employee benefit plan (or a trust forming a part thereof) maintained by (1) the Lender or (2) any corporation, partnership or other person of which a majority of its voting power or its equity securities or equity interest is owned directly or indirectly by the Lender or in which the Lender serves as a general partner or manager (a "Subsidiary"), (B) the Lender or any Subsidiary, or (C) any person in connection with a Non-Control Transaction (as hereinafter defined); (b) the individuals who constitute the Board of Directors of the Lender as of the date hereof (the "Incumbent Board") cease for any reason to constitute at least two-thirds (2/3) of the Board of Directors; provided, however, that if the election, or nomination for election by the Lender's stockholders, of any new director was approved by a vote of at least two-thirds (2/3) of the Incumbent Board, such new director shall be considered as a member of the Incumbent Board; provided, further, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened "election contest" (as described in Rule 14a-11 promulgated under the Exchange Act) (an "Election Contest") or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board of Directors (a "Proxy Contest") including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or (c) approval by stockholders of the Lender of: (A) a merger, consolidation, share exchange or reorganization involving the Lender, unless (1) the stockholders of the Lender, immediately before such merger, consolidation, share exchange or reorganization, own, directly or indirectly immediately following such merger, consolidation, share exchange or reorganization, at least 80% of the combined voting power of the outstanding voting securities of the corporation that is the successor in such merger, consolidation, share exchange or reorganization (the "Surviving Company") in substantially the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation, share exchange or reorganization, (2) the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such merger, consolidation, share exchange or reorganization constitute at least two-thirds (2/3) of the members of the board of directors of the Surviving Company, and (3) no persons (other than the Lender or any Subsidiary, any employee benefit plan (or any trust forming a part thereof) maintained by the Lender, the Surviving Company or any Subsidiary, or any person who, immediately prior to such merger, consolidation, share exchange or reorganization had Beneficial Ownership of 15% or more of the then outstanding Voting Securities has Beneficial Ownership of 15% or more of the 4 combined voting power of the Surviving Company's then outstanding voting securities (a transaction described in clauses (1) through (3) is referred to herein as "Non-Control Transaction"); (B) a complete liquidation or dissolution of the Lender; or (C) an agreement for the sale or other disposition of all or substantially all of the assets of the Lender to any person (other than a transfer to a Subsidiary). Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any person (a "Subject Person") acquired Beneficial Ownership of more than the permitted amount of the outstanding Voting Securities as a result of the acquisition of Voting Securities by the Lender that, by reducing the number of Voting Securities outstanding, increases the proportional number of shares Beneficially Owned by such Subject Person, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of Voting Securities by the Lender, and after such share acquisition by the Lender, such Subject Person becomes the Beneficial Owner of any additional Voting Securities that increases the percentage of the then outstanding Voting Securities Beneficially Owned by such Subject Person, then a Change in Control shall occur. 12. WAIVER. The Borrower hereby waives any right it might otherwise have to require notice or acceptance by any other person of its obligations or liabilities under this Note which are unconditional and absolute and waives diligence, presentment, demand of payment, protest and notice with respect to all of the obligations of the Borrower under this Note and with respect to any action under this Note and all other notices and demands whatsoever, except as specifically provided for in this Note. This Note may be amended, and the observance of any term of this Note may be waived, with (and only with) the written consent of the Lender. 13. GOVERNING LAW. This Note shall be governed by and construed in accordance with the laws of the State of Colorado. 14. ASSIGNMENT OR PLEDGE OF NOTE. The Lender shall promptly notify the Borrower of any endorsement, assignment, pledge or hypothecation of this Note to a person not affiliated with the Lender. 15. LOSS, MUTILATION, ETC. Upon notice from the holder of this Note to the Borrower of the loss, theft, destruction or mutilation of this Note, and upon receipt of an indemnity reasonably satisfactory to the Borrower from the holder of this Note or, in the case of mutilation hereof, upon surrender of the mutilated Note, the Borrower will make and deliver a new note of like tenor in lieu of this Note. 16. NOTICES. All notices and other communications required or permitted under this Note shall be in writing and shall be personally delivered or sent by certified first class United States mail, postage prepaid, return receipt requested, and if mailed and shall be deemed to have been received on the third business day after deposit in the mail, addressed to the Lender, Apartment Investment and Management Company, 1873 South Bellaire Street, 17th Floor, Denver, Colorado 80222, Attention: Chief Financial Officer, or to the Borrower at the 5 address set forth below the Borrower's signature. Notice of any change of either party's address shall be given by written notice in the manner set forth in this paragraph. 6 IN WITNESS WHEREOF, the Borrower has executed this Note on the date first above written. BORROWER: ___________________________ (Signature of Borrower) ___________________________ (Print or Type Name) ___________________________ (Address) ___________________________ (City, State, Zip Code) ___________________________ (Telephone Number) 7 EXHIBIT B SECURITY AND PLEDGE AGREEMENT SECURITY AND PLEDGE AGREEMENT, dated as of July 25, 1997 (the "Agreement"), by and between R. Scott Wesson (the "Pledgor") and Apartment Investment and Management Company, a Maryland corporation (the "Pledgee"). WHEREAS, in consideration for the Pledgee's loan of $270,000 to the Pledgor, the Pledgor is delivering to the Pledgee a duly executed promissory note, dated the date hereof (such note as it may be amended, modified or supplemented from time to time together with any replacement thereof, the "Note"), in the principal amount of $270,000 in favor of the Pledgee; and WHEREAS, the Pledgor has agreed to pledge the Pledged Shares (as defined below) to the Pledgee to secure the Pledgor's obligations under the Note. NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. GRANT OF SECURITY INTEREST IN COLLATERAL. The Pledgor hereby grants to the Pledgee, as security for all present and future obligations and liabilities of all kinds of the Pledgor to the Pledgee under the Note and this Agreement (collectively referred to as the "Obligations"), a first priority security interest in the following described property (collectively referred to as the "Collateral"): (a) 9,000 shares of Apartment Investment and Management Company Class A Common Stock, par value $.01 per share (the "Pledged Shares"), as more fully described in SCHEDULE 1 hereto, and the certificates representing the Pledged Shares and all of the Pledgor's rights and privileges with respect thereto, together with stock powers executed in blank, each of which has been delivered to the Pledgee concurrently with the execution hereof; and (b) the proceeds and accessions of the Pledged Shares (the "Proceeds"). 2. PLEDGOR'S COVENANTS. (a) The Pledgor agrees hereafter not to encumber or grant a security interest in or a lien or other encumbrance on the Collateral. (b )The Pledgor agrees not to dispose of any of the Collateral except in accordance with the terms of this Agreement. (c) The Pledgor agrees: (i) at any time and from time to time, upon request of the Pledgee, to give, execute, file and/or record any notice, financing statement, continuation statement, instrument, document or agreement that the Pledgee shall consider reasonably necessary or desirable to create, preserve, continue, perfect or validate any security interest granted hereunder or which the Pledgee may consider reasonably necessary or desirable to exercise or enforce its rights hereunder with respect to such security interest; (ii) to give the Pledgee notice of any litigation filed or claim asserted against the Pledgor relating to or potentially affecting the Collateral; (iii) if requested by the Pledgee, to receive and collect the Proceeds, in trust and as the property of the Pledgee, and to immediately endorse as appropriate and deliver such Proceeds to the Pledgee when requested by the Pledgee in the exact form in which they are received; (iv) not to commingle the Proceeds or collections thereunder with other property; (v) to keep complete and accurate records regarding all of the Proceeds; and (vi) to provide any service and do other acts or things necessary to keep the Collateral and the Proceeds free and clear of all defenses, rights of offset and counterclaim. (d) The Pledgor agrees to: (i) pay promptly the Obligations secured hereby when due; (ii) indemnify the Pledgee against all loss, claims, demands and liabilities of every kind arising from the Collateral and the transactions and other agreements and undertakings contemplated hereby; and (iii) pay all expenses, including reasonable attorneys' fees, incurred by the Pledgee in the preservation, realization, enforcement and exercise of its rights, powers and remedies hereunder. 3. PAYMENT OF TAXES, CHARGES, LIENS AND ASSESSMENTS. The Pledgor agrees to pay, prior to delinquency, all taxes, charges, liens and assessments against the Collateral and the Proceeds, and upon the failure of the Pledgor to do so, the Pledgee, at its option, may pay any of them. Any such payments made by the Pledgee shall be obligations of the Pledgor to the Pledgee, due and payable immediately without demand and shall be secured by the Collateral and the Proceeds, subject to all of the terms and conditions of this Agreement. 4. POWERS OF PLEDGEE. The Pledgor appoints the Pledgee his true attorney in fact to perform any of the following powers, which are coupled with an interest, are irrevocable until termination of this Agreement and may be exercised from time to time by the Pledgee's officers and employees, or any of them, whether or not the Pledgor is in default: (a) to perform any obligations of the Pledgor hereunder in the Pledgor's name or otherwise; (b) to give notice of Pledgee's right under the Collateral to enforce the same; (c) to release security; (d) to resort to security; (e) to prepare, execute, file, record or deliver notes, assignments, schedules, designation statements, financing statements, continuation statements, termination statements, statements of assignment, applications for registration or like papers to perfect, preserve or release the Pledgee's interest in the Collateral; (f) to verify facts concerning the Collateral by inquiry of obligors thereon, or otherwise, in its own name or fictitious name; (g) after an Event of 2 Default, to endorse, collect, deliver and receive payment under instruments for the payment of money constituting or relating to the Collateral; (h) after an Event of Default, to preserve or release the interest evidenced by chattel paper to which the Pledgee is entitled hereunder and to endorse and deliver evidences of title incidental thereto; (i) after an Event of Default, to exercise all rights, powers and remedies which the Pledgor would have, but for this Agreement, under all Collateral subject to this Agreement; and (j) to do all acts and things and execute all documents in the name of the Pledgor otherwise, deemed by the Pledgee as necessary, proper and convenient in connection with the preservation, perfection or enforcement of its rights hereunder. 5. VOTING RIGHTS. The Pledgor hereby grants to the Pledgee an irrevocable proxy, effective upon the occurrence of an Event of Default and so long as such Event of Default shall continue, to vote the Pledged Shares in such manner and for such purposes as the Pledgee shall, in its sole discretion, determine. Such proxy is coupled with an interest and shall continue in full force and effect until all of the Obligations shall be paid in full. 6. EVENTS OF DEFAULT; REMEDIES. (a) Each of the following shall constitute an event of default ("Event of Default") hereunder: (i) the Pledgor's failure to pay, within 15 days after the date when such payment is due, any payment of principal or interest on the Note; (ii) the Pledgor's failure to observe or perform any covenant or agreement contained in the Note (other than that set forth in clause (i) above) or this Agreement; (iii) if any representation, warranty, certification or statement made by the Pledgor in the Note, this Agreement or in any certificate or other document delivered pursuant to the Note or this Agreement shall prove to have been incorrect in any material respect when made or deemed made; (iv) the insolvency of the Pledgor; (v) the appointment of a receiver or a trustee of all or part of the Pledgor's property; (vi) an assignment for the benefit of the Pledgor's creditors; (vii) the filing of a petition in bankruptcy by or against the Pledgor; (viii) the commencement of any proceeding by or against the Pledgor under any bankruptcy or insolvency law or any law relating to the relief of debtors or readjustment of indebtedness; (ix) the appointment of a receiver, custodian, trustee or liquidator for any part of the assets or property of the Pledgor; (x) the failure of the Pledgor generally to pay his or her debts as they become due; and (xi) the failure of the Pledgee to have a first priority security interest in the Collateral. (b) In case an Event of Default shall have occurred and be continuing, the Pledgee shall be entitled to exercise all of the rights, powers and remedies (whether vested in it by this Agreement, the Note or by law and including, without limitation, all rights and remedies of a secured party of a debtor in default under the Uniform Commercial Code as in force in the State of Colorado) for the protection and enforcement of its rights in respect of the Collateral. 7. NO WAIVER. The failure of the Pledgee to exercise any right or remedy under this Agreement or the Note, or delay by the Pledgee in exercising same, will not operate as a waiver thereof. No waiver by the Pledgee will be effective unless and until it is in writing and signed by the Pledgee. No waiver of any condition or performance will operate as a waiver of any subsequent condition or obligation. The Pledgee shall have no obligation to resort to the Collateral or any other security which is or may become available to it. 3 8. MISCELLANEOUS. (a) This Agreement, any amendments or replacement hereof, and the legality, validity and performance of the terms hereof, shall be governed by and enforced and construed in accordance with the laws of the State of Colorado without regard to conflicts of laws and principles thereof. (b) This Agreement and the rights, powers and duties set forth herein shall be binding upon the Pledgor, its agents, representatives and successors and shall inure to the benefit of the Pledgee and its successors and assigns and, in the event of any transfer or assignment of rights by the Pledgee, the rights and privileges herein conferred upon the Pledgee shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. This Agreement and the rights and privileges herein conferred upon the Pledgee may be assigned by the Pledgee without the consent of the Pledgor. This Agreement may not be transferred or assigned by the Pledgor without the written consent of the Pledgee. (c) In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any applicable law shall not effect the validity or enforceability of any other provisions hereof. (d) Notices required or permitted to be given under this Agreement shall be in writing and may be delivered personally or sent to a party by airmail or first class mail, postage prepaid and addressed to such party, as follows, or to such other address furnished by notice given in accordance with this paragraph: If to the Pledgor: c/o Apartment Investment and Management Company 1873 South Bellaire Street, 17th Floor Denver, Colorado 80222 If to the Pledgee: Apartment Investment and Management Company 1873 South Bellaire Street, 17th Floor Denver, Colorado 80222 Attention: Chief Financial Officer Any such notice shall be deemed to have been given, (i) if sent by mail, five days after the date mailed, and (ii) if delivered personally, on the date of delivery. 4 (e) This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall together constitute one and the same document. (f) This Agreement and the security interest and pledge hereunder shall terminate upon the full and final performance of all Obligations of the Pledgor and payment of all indebtedness secured hereby. At such time, the Pledgee shall promptly reassign to the Pledgor all of the Collateral hereunder which has not been sold, disposed of, retained or applied by the Pledgee in accordance with the terms hereof. IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the date first written above. PLEDGOR: ______________________________ (Signature of Pledgor) PLEDGEE: APARTMENT INVESTMENT AND MANAGEMENT COMPANY By: ______________________________ Name: Title: 5 SCHEDULE 1 Description of Pledged Shares CERTIFICATE NUMBER NUMBER OF SHARES 9,000 6 EX-27.1 12 EXHIBIT 27.1
5 3-MOS DEC-31-1997 JUL-01-1997 SEP-30-1997 45,775 0 24,328 0 0 92,122 1,250,239 142,694 1,608,195 175,749 0 0 75,000 286 597,264 1,608,195 47,364 50,932 (23,573) (24,032) (624) 0 (12,755) 6,967 0 6,967 0 0 0 6,967 0.25 0.25 INCLUDES CASH, RESTRICTED CASH, ACCOUNTS RECEIVABLE. INCLUDES SECURED SHORT-TERM FINANCING, ACCOUNTS PAYABLE AND ACCRUED LIABILITIES, RESIDENT SECURITY DEPOSITS, PREPAID RENTS AND UNSECURED SHORT-TERM FINANCING. INCLUDES RENTAL AND OTHER PROPERTY REVENUES, MANAGEMENT FEES AND OTHER INCOME. INCLUDES PROPERTY OPERATING EXPENSES, OWNED PROPERTY MANAGEMENT EXPENSE AND MANAGEMENT AND OTHER EXPENSES. INCLUDES CGS, DEPRECIATION, CORPORATE OVERHEAD ALLOCATION, AMORTIZATION OF MANAGEMENT COMPANY GOODWILL AND OTHER ASSETS DEPRECATION AND AMORTIZATION.
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