AGREEMENT AND PLAN OF MERGER
BETWEEN
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
and
AMBASSADOR APARTMENTS, INC.
Dated as of December 23, 1997
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"),
dated as of December 23, 1997, by and between Apartment
Investment and Management Company, a Maryland corporation
("AIMCO"), and Ambassador Apartments, Inc., a Maryland
corporation ("Ambassador").
WHEREAS, the respective boards of directors of
Ambassador and AIMCO have approved the merger of Ambassador
with and into AIMCO, with AIMCO being the surviving
corporation (the "Merger"), upon the terms and subject to
the conditions set forth in this Agreement;
WHEREAS, it is intended that, for federal income
tax purposes, the Merger shall qualify as a reorganization
under the provisions of Section 368(a) of the Internal
Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder (the "Code");
WHEREAS, in connection with the Merger, the
following additional transactions will be effected (the
Merger, together with the other documents, agreements and
transactions contemplated by this Agreement, being referred
to collectively herein as the "Transactions"): (i) AIMCO
Properties, L.P., a Delaware limited partnership which is
the operating partnership of AIMCO (the "AIMCO Operating
Partnership"), and Ambassador Apartments, L.P., a Delaware
limited partnership which is the operating partnership of
Ambassador (the "Ambassador Operating Partnership") will use
their reasonable best efforts to effect a business
combination as contemplated by Section 7.18 hereof, with
AIMCO Operating Partnership as the survivor (the "OP
Reorganization") and will perform their respective
obligations thereunder; and (ii) AIMCO will enter into a
Registration Rights Agreement (the "Registration Rights
Agreement"), with certain holders (after giving effect to
the Merger and the OP Reorganization) of limited partnership
interests in the Ambassador Operating Partnership ("OP
Units") and/or AIMCO Common Stock (as defined in Section
2.1(a)) and/or limited partnership interests in the AIMCO
Operating Partnership (the "AIMCO Units");
WHEREAS, AIMCO, as the surviving corporation in
the Merger intends that, following the Merger, it shall
continue to be subject to taxation as a real estate
investment trust (a "REIT") within the meaning of the Code;
and
WHEREAS, AIMCO and Ambassador desire to make
certain representations, warranties, covenants and
agreements in connection with this Agreement.
NOW, THEREFORE, in consideration of the premises
and the representations, warranties, covenants and
agreements contained herein, the parties hereto, intending
to be legally bound hereby, agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and
subject to the conditions of this Agreement, at the
Effective Time (as defined in Section 1.3), Ambassador shall
be merged with and into AIMCO in accordance with the laws of
the State of Maryland. AIMCO shall be the surviving
corporation in the Merger and shall continue its corporate
existence under the laws of the State of Maryland. AIMCO
after the Effective Time is sometimes referred to herein as
the "Surviving Corporation." The effects and the
consequences of the Merger shall be as set forth in Section
1.2.
Section 1.2 Effects of the Merger. At the
Effective Time, (i) the Articles of Restatement of AIMCO
(the "AIMCO Articles"), as in effect immediately prior to
the Effective Time, shall be the articles of incorporation
of the Surviving Corporation until thereafter amended as
provided by law and the AIMCO Articles, (ii) the by-laws of
AIMCO, as in effect immediately prior to the Effective Time,
shall be the by-laws of the Surviving Corporation until
thereafter amended as provided by law, the AIMCO Articles,
and such by-laws; and (iii) the directors and officers of
AIMCO immediately prior to the Effective Time shall be the
directors and officers, respectively, of the Surviving
Corporation until their respective successors are duly
elected and qualified. Subject to the foregoing, the addi-
tional effects of the Merger shall be as provided in the
applicable provisions of the Maryland General Corporation
Law ("MGCL").
Section 1.3 Effective Time of the Merger. On the
Closing Date (as defined in Section 3.1), a certificate of
merger and the articles of merger shall each be executed and
filed by AIMCO and Ambassador with the Secretary of State of
the State of Maryland pursuant to the MGCL. The Merger
shall become effective upon the certification by the
Secretary of State of the State of Maryland that the
certificate of merger relating to the Merger has been duly
filed (the "Effective Time").
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ARTICLE II
TREATMENT OF SHARES
Section 2.1 Effect of the Merger on Capital Stock.
(a) Capital Stock of Ambassador. As of the
Effective Time, by virtue of the Merger and without any
action on the part of any holder of any capital stock of
Ambassador (including the AIMCO Operating Partnership),
subject to Section 2.1(b) and (c), each issued and
outstanding share of Common Stock, par value $0.01 per
share, of Ambassador ("Ambassador Common Stock"), other
than shares of Ambassador Common Stock owned by AIMCO or
Ambassador directly, shall be converted into and become that
number of fully paid and nonassessable shares of Class A
Common Stock, par value $0.01 per share, of AIMCO ("AIMCO
Common Stock") equal to the Conversion Ratio. The term
"Conversion Ratio" means the quotient (rounded to the
nearest 1/1000) determined by dividing $21.00 (the
"Ambassador Price") by the AIMCO Index Price (as defined
below); provided however, if the Conversion Ratio is a
number greater than 0.583, then the Conversion Ratio shall
be deemed to be, at AIMCO's option, exercisable by written
notice to Ambassador not later than three business days
prior to the Effective Time, either (i) the Conversion Ratio
as calculated hereunder, or (ii) 0.583 (so long as the
Merger continues to qualify as a reorganization under
Section 368(a) of the Code). The term "AIMCO Index Price"
means the aggregate of the average of the high and low sales
prices of AIMCO Common Stock (as reported on the New York
Stock Exchange (the "NYSE") Composite Transactions reporting
system as published in The Wall Street Journal or, if not
published therein, in another authoritative source) on each
of the twenty consecutive NYSE trading days ending the fifth
NYSE trading day immediately preceding the Effective Time,
divided by 20. All such shares of Ambassador Common Stock
shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each
holder of a Certificate (as defined in Section 2.2(b)),
formerly representing any such shares shall cease to have
any rights with respect to such shares, except the right to
receive shares of AIMCO Common Stock and cash, if any,
contemplated by this Section 2.1 and cash in lieu of
fractional shares and dividends and other distributions in
accordance with Section 2.2.
(b) Excess Conversion Ratio Payment. If the
Conversion Ratio (as calculated pursuant to the definition
of Conversion Ratio without regard to the proviso thereof)
is a number greater than 0.583 and AIMCO opts for the
Conversion Ratio to equal 0.583, then upon conversion of
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Ambassador Common Stock into AIMCO Common Stock hereunder,
AIMCO shall pay to each shareholder of Ambassador Common
Stock (other than shares of Ambassador Common Stock
beneficially owned by AIMCO or Ambassador either directly or
through a wholly owned Subsidiary) for each share of
Ambassador Common Stock held by such shareholder an amount
in cash equal to (i) $21.00 minus (ii) the product of (x)
the AIMCO Index Price and (y) 0.583 (the "Cash Amount").
(c) Cancellation of Certain Ambassador Common
Stock. As of the Effective Time, by virtue of the Merger
and without any action on the part of any holder of any
capital stock of Ambassador, any shares of Ambassador Common
Stock that are owned by Ambassador as treasury stock or by
AIMCO shall be canceled and retired and shall cease to exist
and no stock of AIMCO or other consideration shall be issued
or delivered in exchange therefor.
(d) Redemption of Ambassador Preferred. Prior to
the Effective Time, the Board of Directors of Ambassador
shall call for redemption all outstanding shares of
Ambassador Preferred (as defined in Section 4.3), in
accordance with, and at a redemption price equal to the
amount set forth in Section 8(a) of the Articles
Supplementary of Ambassador with respect thereto, to be
effective simultaneously with, and to be conditioned upon,
the occurrence of, the Effective Time. Notwithstanding the
foregoing, the parties understand and agree that the holders
of such Ambassador Preferred shall nonetheless have the
right to convert such stock into Ambassador Common Stock in
the manner set forth in Section 8(a) of such Articles
Supplementary. To the extent any Ambassador Preferred shall
not have been converted as of the Effective Time, AIMCO
shall provide the funds for, and cause payment to be made in
respect of, the redemption thereof on the date of the
Effective Time.
(e) Jupiter. At or prior to the Effective Time,
Ambassador shall call for redemption the limited partnership
interests not owned by Ambassador or its affiliates in
Jupiter-I, L.P and Jupiter-II, L.P. (the "Jupiter
Redemption") in accordance with their respective partnership
agreements and subject to and simultaneously with the
Effective Time, the Surviving Corporation shall provide the
funds for, and cause payment to be made in respect of, the
redemption thereof upon the Effective Time.
Section 2.2 Issuance of New Certificates.
(a) Deposit with Exchange Agent. As soon as
practicable after the Effective Time, AIMCO shall deposit,
in trust for the benefit of holders of Certificates, with
Bank of Boston (the "Exchange Agent"), certificates
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representing shares of AIMCO Common Stock required to effect
the issuance referred to in Section 2.1(a), together with
the Cash Amount, if any, and the cash payable in respect of
fractional shares pursuant to Section 2.2(d) (collectively,
the "Exchange Fund"). The Exchange Fund shall not be used
for any other purpose.
(b) Issuance Procedures. As soon as practicable
after the Effective Time, AIMCO shall cause the Exchange
Agent to mail to each holder of record of a certificate or
certificates (the "Certificate" or the "Certificates") which
immediately prior to the Effective Time represented
outstanding shares of Ambassador Common Stock (the "Canceled
Shares") that were canceled and became instead the right to
receive shares of AIMCO Common Stock pursuant to Section
2.1(a): (i) a letter of transmittal in customary and
reasonable form (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates
shall pass, only upon actual delivery of the Certificates to
the Exchange Agent) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for
certificates representing shares of AIMCO Common Stock.
Without limitation to the rights under Section 2.2(c), upon
surrender of a Certificate to the Exchange Agent for
cancellation (or to such other agent or agents as may be
appointed by AIMCO), together with a duly executed letter of
transmittal and such other documents as the Exchange Agent
shall require, the holder of such Certificate shall be
entitled to receive, with respect to the shares of
Ambassador Common Stock formerly represented thereby, (A) a
certificate or certificates representing that number of
whole shares of AIMCO Common Stock which such holder has the
right to receive pursuant to the provisions of Section
2.1(a), (B) the Cash Amount which such holder has the right
to receive pursuant to Section 2.1(b) and (C) cash in lieu
of fractional shares which such holder is entitled to
receive pursuant to Section 2.2(d) hereof. In the event of
a transfer of ownership of Canceled Shares which is not
registered in the transfer records of Ambassador, a
certificate representing the proper number of shares of
AIMCO Common Stock may be issued to a transferee if the
Certificate representing such Canceled Shares is presented
to the Exchange Agent, accompanied by all documents required
to evidence and effect such transfer and by evidence
satisfactory to the Exchange Agent that any applicable stock
transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.2, each Certificate shall be
deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the
certificate representing shares of AIMCO Common Stock, the
Cash Amount in respect thereof, and dividends and other
distributions and cash in lieu of any fractional shares of
AIMCO Common Stock as contemplated by this Section 2.2. If
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the OP Reorganization is consummated concurrently with the
Merger, then concurrently with the issuance contemplated by
this Section 2.2(b), the Surviving Corporation shall cause
to be issued to the holders of OP Units, the limited
partnership interests in the AIMCO Operating Partnership
issuable upon consummation of the OP Reorganization.
(c) Distributions with Respect to Shares.
(i) Each of AIMCO and Ambassador shall declare a
dividend to their respective shareholders, the record
date for which shall be the close of business on the
last business day prior to the Effective Time. The
dividend of each shall be equal to such party's most
recent quarterly dividend rate, multiplied by the
number of days elapsed since the last dividend record
date through and including the Effective Time, and
divided by 91. Such dividend shall be paid in the
ordinary course of business consistent with the past
practice of AIMCO or Ambassador, as the case may be, as
to the manner and timing of payment. If payment of
such dividends is made after the Effective Time, the
Surviving Corporation shall pay such dividends to such
holders. Concurrently with any such dividends on the
Ambassador Common Stock, an equivalent OP Unit
distribution shall be made.
(ii) No dividends or other distributions declared
or made after the Effective Time with respect to shares
of AIMCO Common Stock with a record date after the
Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of
AIMCO Common Stock represented thereby and no cash
payment in lieu of fractional shares shall be paid to
any such holder pursuant to Section 2.2(d) until the
holder of such Certificate shall surrender such
Certificate. Subject to the effect of unclaimed
property, escheat and other applicable laws, following
surrender of any such Certificate, there shall be paid
to the holder of the certificates representing whole
shares of AIMCO Common Stock issued in consideration
therefor, without interest, (i) at the time of such
surrender, the amount of any cash payable in lieu of a
fractional share of AIMCO Common Stock to which such
holder is entitled pursuant to Section 2.2(d) and the
amount of dividends or other distributions with a
record date after the Effective Time theretofore paid
with respect to such whole shares of AIMCO Common Stock
and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date
after the Effective Time but prior to surrender and a
payment date subsequent to surrender payable with
respect to such whole shares of AIMCO Common Stock.
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(d) No Fractional Securities. No certificates or
scrip representing fractional shares of AIMCO Common Stock
shall be issued upon the surrender for exchange of
Certificates and such fractional shares shall not entitle
the owner thereof to vote or to any other rights of a holder
of AIMCO Common Stock. A holder of Ambassador Common Stock
who would otherwise have been entitled to a fractional share
of AIMCO Common Stock shall be entitled to receive a cash
payment in lieu of such fractional share in an amount equal
to the product of such fraction multiplied by the AIMCO
Index Price, without any interest thereon.
(e) Book Entry. Notwithstanding any other
provision of this Agreement, the letter of transmittal
referred to in Section 2.2(b) may, at the option of AIMCO,
provide for the ability of a holder of one or more
Certificates to elect that shares of AIMCO Common Stock to
be received in exchange for the Canceled Shares formerly
represented by such surrendered Certificates be issued in
uncertificated form or to elect that such shares of AIMCO
Common Stock be credited to an account established for the
holder under the dividend reinvestment and stock purchase
plan of AIMCO.
(f) Closing of Transfer Books; Etc. From and
after the Effective Time, the stock transfer books of
Ambassador shall be closed and no registration of any
transfer of any capital stock of Ambassador shall thereafter
be made on the records of Ambassador. If, after the
Effective Time, Certificates are presented to AIMCO, they
shall be canceled and exchanged for certificates
representing the appropriate number of shares of AIMCO
Common Stock, the appropriate Cash Amount, if any, with
respect thereof and cash in lieu of fractional shares and
dividends and other distributions, as provided in this Sec-
tion 2.2. Shares of AIMCO Common Stock issued in the Merger
shall be issued as of, and be deemed to be outstanding as
of, the Effective Time. AIMCO shall cause all such shares
of AIMCO Common Stock issued pursuant to the Merger to be
duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. In the
event any Certificate(s) shall have been lost, stolen or
destroyed, upon the making of any affidavit of that fact by
the person claiming such Certificate(s) to be lost, stolen
or destroyed and, if reasonably required by AIMCO, upon the
posting by such person of a bond in such amount as
reasonably determined as indemnity against any claim that
may be made against it with respect to such Certificate(s),
the Exchange Agent will issue in respect of such lost,
stolen or destroyed Certificate(s), the consideration to be
received by virtue of the Merger with respect to the AIMCO
Common Stock represented thereby (subject to the payment of
cash in lieu of fractional shares in accordance herewith)
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and such person shall be entitled to the voting, dividend
and other distribution rights provided herein with respect
thereto. Appropriate procedures shall be established by
AIMCO and the Exchange Agent so that each holder of a
Certificate at the Effective Time shall be entitled to vote
on all matters subject to the vote of holders of AIMCO
Common Stock with a record date on or after the date of the
Effective Time, whether or not such Certificate holder shall
have surrendered Certificates in accordance with the
provisions of this Agreement. For purposes of the
immediately preceding sentence, AIMCO may rely conclusively
on the shareholder records of the Ambassador in determining
the identity of, and the number of Ambassador Common Shares
held by, each holder of a Certificate at the Effective Time.
(g) Termination of Exchange Agent. Any
certificates representing shares of AIMCO Common Stock
deposited with the Exchange Agent pursuant to Section 2.2(a)
and not exchanged within one year after the Effective Time
pursuant to this Section 2.2 shall be returned by the
Exchange Agent to AIMCO, which shall thereafter act as
Exchange Agent. All funds held by the Exchange Agent for
payment to the holders of unsurrendered Certificates and
unclaimed at the end of one year from the Effective Time
shall be returned to AIMCO; after which time any holder of
unsurrendered Certificates shall look only to AIMCO for
payment of such funds to which such holder may be due,
subject to applicable law. AIMCO shall not be liable to any
person for such shares or funds delivered to a public
official pursuant to any applicable abandoned property,
escheat or similar law. As used in this Agreement, the term
"Person" shall mean any natural person, corporation, general
or limited partnership, limited liability company, joint
venture, trust, association or entity of any kind.
ARTICLE III
THE CLOSING
Section 3.1 Closing. The closing of the Merger
(the "Closing") shall take place at the offices of Skadden,
Arps, Slate, Xxxxxxx & Xxxx LLP, 000 Xxxx Xxxxxx Xxxxx,
Xxxxxxx, Xxxxxxxx, at 10:00 A.M., local time, on the fifth
NYSE trading day immediately following the date on which the
last of the conditions set forth in Article VIII hereof is
first fulfilled or has been waived, provided that all such
conditions continue to be so satisfied or waived on such
fifth trading day, and if not so satisfied or waived, the
Closing shall be automatically extended from time to time
until the first subsequent trading day on which all such
conditions are again so satisfied or waived, subject,
however, to Article IX hereof, or at such other time, date
8
and place as AIMCO and Ambassador shall mutually agree (the
"Closing Date"); provided however, that unless AIMCO
otherwise agrees (in which event, all closing conditions and
representations and warranties related to the matters
referred to in Section 8.1(h) shall be deemed satisfied),
the Closing and the Effective Time shall not occur prior to
April 28, 1998, unless the condition set forth in Section
8.1(h) is satisfied prior to such time.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF AMBASSADOR
Ambassador makes the following representations and
warranties to AIMCO. Except as set forth in the letter of
even date herewith signed by the President and the Chief
Executive Officer of Ambassador on behalf of Ambassador and
delivered to AIMCO concurrently herewith (the "Ambassador
Disclosure Schedule") or as set forth in the Ambassador SEC
Reports (as defined below):
Section 4.1 Organization and Qualification.
Ambassador and each of the Ambassador Subsidiaries (as
defined below) is a corporation or other entity duly
organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation or organization.
Ambassador and each Subsidiary of Ambassador has all
requisite power and authority, and has been duly authorized
by all necessary approvals and orders to own, lease and
operate its assets and properties to the extent owned,
leased and operated and to carry on its business as it is
now being conducted and is duly qualified and in good
standing to do business in each jurisdiction in which the
nature of its business or the ownership or leasing of its
assets and properties makes such qualification necessary
other than any of the foregoing would not have an Ambassador
Material Adverse Effect (as defined in Section 4.6). As
used in this Agreement, the term "Subsidiary" of a person
shall mean any corporation or other entity (including
partnerships and other business associations) of which at
least a majority of the voting power represented by the
outstanding capital stock or other voting securities or
interests having voting power under ordinary circumstances
to elect directors or similar members of the governing body
of such corporation or entity shall at the time be held,
directly or indirectly, by such person. The term
"Ambassador Subsidiary" shall mean the Ambassador Operating
Partnership and each other Subsidiary of Ambassador in which
Ambassador's equity investment exceeds $250,000.
Section 4.2 Subsidiaries. Section 4.2 of the
Ambassador Disclosure Schedule sets forth a list as of the
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date hereof of all the Ambassador Subsidiaries. Except as
set forth in Section 4.2 of the Ambassador Disclosure
Schedule, all of the issued and outstanding shares of
capital stock of each Ambassador Subsidiary are validly
issued, fully paid, nonassessable and free of preemptive
rights, and are owned, directly or indirectly, by Ambassador
free and clear of any liens, claims, encumbrances, security
interests, charges and options of any nature whatsoever and
there are no outstanding subscriptions, options, calls,
contracts, voting trusts, proxies or other commitments,
understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange
under any outstanding security, instrument or other
agreement, obligating any such Ambassador Subsidiary to
issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of its capital stock or obligating
it to grant, extend or enter into any such agreement or
commitment.
Section 4.3 Capitalization. As of the date
hereof, the authorized capital stock of Ambassador consists
of (i) 100,000,000 shares of Ambassador Common Stock, par
value $0.01 per share, (ii) 20,000,000 shares of Preferred
Stock, par value $0.01 per share ("Ambassador Preferred"),
and (iii) 120,000,000 shares of Excess Stock, par value
$0.01 per share, of which 100,000,000 shares shall be
designated Excess Common Stock ("Excess Common Stock") and
20,000,000 shares shall be designated Excess Preferred Stock
("Excess Preferred Stock") (Ambassador Preferred, Excess
Common Stock and Excess Preferred Stock hereinafter
collectively referred to as "Ambassador Preferred Stock").
At the close of business on December 20, 1997 (i) 10,552,180
shares of Ambassador Common Stock were issued, and not more
than 2,319,000 shares of Ambassador Common Stock were
reserved for issuance pursuant to The 1994 Stock Incentive
Plan for Officers, Directors and Key Employees of Ambassador
Apartments, Inc., Ambassador Apartments, L.P. and
Subsidiaries, as amended, The 1996 Stock Incentive Plan for
Officers, Directors and Key Employees of Ambassador
Apartments, Inc., Ambassador Apartments, L.P. and
Subsidiaries, and The 1997 Stock Incentive Plan for
Officers, Directors and Key Employees of Ambassador
Apartments, Inc., Ambassador Apartments, L.P. and
Subsidiaries (such Plans, collectively, the "Ambassador
Stock Plans"), (ii) 447,510 shares of Ambassador Common
Stock are subject to outstanding options under the
Ambassador Stock Plans, (iii) no shares of Ambassador Common
Stock were held by Ambassador in its treasury or by its
wholly owned Subsidiaries, (iv) 1,351,351 shares of
Ambassador Preferred were issued and of such issued shares,
none were held by Ambassador in its treasury or by its
wholly owned Subsidiaries, (v) no shares of Excess Common
Stock were outstanding, (vi) 895,318 shares of Ambassador
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Common Stock were reserved for issuance upon the exchange of
outstanding OP Units, (vii) no shares of Excess Preferred
Stock were outstanding, (viii) 925,006 shares of Ambassador
Common Stock were reserved for issuance upon the exchange of
outstanding limited partnership interests in Jupiter I,
L.P., (ix) 270,227 shares of Ambassador Common Stock were
reserved for issuance upon the exchange of outstanding
limited partnership interests in Jupiter II, L.P. and (x) no
bonds, debentures, notes or other indebtedness having the
right to vote (or convertible into securities having the
right to vote) on any matters on which stockholders may vote
("Voting Debt"), were issued or outstanding. All
outstanding shares of Ambassador Common Stock and Ambassador
Preferred Stock are validly issued, fully paid and
nonassessable and are not subject to preemptive rights. As
of the date hereof, except as set forth in Section 4.3 of
the Ambassador Disclosure Schedule or pursuant to this
Agreement and the Ambassador Stock Plans, there are no
options, warrants, calls, rights, commitments or agreements
of any character to which Ambassador or any Subsidiary of
Ambassador is a party or by which any of them are bound
obligating Ambassador or any Subsidiary of Ambassador to
issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or any Voting Debt
securities of Ambassador or any Subsidiary of Ambassador or
obligating Ambassador or any Subsidiary of Ambassador to
grant, extend or enter into any such option, warrant, call,
right, commitment or agreement. Each share of outstanding
Ambassador Preferred is by its terms redeemable by
Ambassador, for cash or Ambassador Common Stock, after
certain times for a stated value or percentage of issue
price, plus accrued and unpaid dividends. Except as set
forth in Section 4.3 of the Ambassador Disclosure Schedule,
or other than in connection with the Ambassador Stock Plans,
after the Effective Time, there will be no option, warrant,
call, right, commitment or agreement obligating Ambassador
or any Subsidiary of Ambassador to issue, deliver or sell,
or cause to be issued, delivered or sold, any shares of
capital stock or any Voting Debt of Ambassador or any
Subsidiary of Ambassador, or obligating Ambassador or any
Subsidiary of Ambassador to grant, extend or enter into any
such option, warrant, call, right, commitment or agreement.
Section 4.4 Authority; Non-Contravention;
Statutory Approvals; Compliance.
(a) Authority. Ambassador has all requisite
corporate power and authority to enter into this Agreement
and, subject to the receipt of the applicable Ambassador
Shareholders' Approval (as defined in Section 4.12) and the
applicable Ambassador Required Statutory Approvals (as
defined in Section 4.4(c)), to consummate the transactions
contemplated hereby. The execution and delivery of this
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Agreement and the consummation by Ambassador of the
transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Ambassador,
subject to obtaining the applicable Ambassador Shareholders'
Approval. This Agreement has been duly and validly executed
and delivered by Ambassador and, assuming the due
authorization, execution and delivery hereof by AIMCO,
constitutes the valid and binding obligation of Ambassador
enforceable against it in accordance with the terms of this
Agreement.
(b) Non-Contravention. Except as set forth in
Section 4.4(b) of the Ambassador Disclosure Schedule, the
execution and delivery of this Agreement by Ambassador does
not, and the consummation of the transactions contemplated
hereby will not, in any respect, violate, conflict with or
result in a material breach of any provision of, or
constitute a material default (with or without notice or
lapse of time or both) under, or result in the termination
or modification of, or accelerate the performance required
by, or result in a right of termination, cancellation or
acceleration of any obligation or the loss of a material
benefit, including tax exempt financing status, under, or
result in the creation of any material lien, security
interest, charge or encumbrance upon any of the properties
or assets of Ambassador or any of the Ambassador
Subsidiaries (any such violation, conflict, breach, default,
right of termination, modification, cancellation or
acceleration, loss or creation, is referred to herein as a
"Violation" with respect to Ambassador and such term when
used in Article V having a correlative meaning with respect
to AIMCO) pursuant to any provisions of (i) the Articles of
Incorporation, by-laws or similar governing documents of
Ambassador or any of the Ambassador Subsidiaries, (ii)
subject to obtaining the Ambassador Required Statutory
Approvals and the receipt of the Ambassador Shareholders'
Approval, any statute, law, ordinance, rule, regulation,
judgment, decree, order, injunction, writ, permit or license
of any Governmental Authority (as defined in Section 4.4(c))
applicable to Ambassador or any of the Ambassador
Subsidiaries or any of their respective properties or assets
or (iii) subject to obtaining the third-party consents set
forth in Section 4.4(b) of the Ambassador Disclosure
Schedule (the "Ambassador Required Consents"), any material
note, bond, mortgage, indenture, credit enhancement
agreement, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation
or agreement of any kind to which Ambassador or any of the
Ambassador Subsidiaries is a party or by which it or any of
its properties or assets may be bound or affected, except in
the case of clause (ii) or (iii) for any such Violation
which would not have an Ambassador Material Adverse Effect.
Without any implication that the contrary would otherwise be
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true, the foregoing representation and warranty does not
address the financial, business, operation or like matters
of AIMCO or any of its Subsidiaries or, from and after the
Effective Time, the Surviving Corporation or any of its
Subsidiaries.
(c) Statutory Approvals. No declaration, filing
or registration with, or notice to or authorization, consent
or approval of, any court, federal, state, local or foreign
governmental or regulatory body (including the United States
Department of Housing and Urban Development, a stock
exchange or other self-regulatory body) or authority (each,
a "Governmental Authority" expressly excluding for purposes
of this definition the Federal National Mortgage
Association, state or local municipal finance authorities
and other similar quasi-governmental entities) is necessary
for the execution and delivery of this Agreement by
Ambassador or the consummation by Ambassador of the
transactions contemplated hereby except as described in
Section 4.4(c) of the Ambassador Disclosure Schedule or the
failure of which to obtain would not result in an Ambassador
Material Adverse Effect (the "Ambassador Required Statutory
Approvals," it being understood that references in this
Agreement to "obtaining" such Ambassador Required Statutory
Approvals shall mean making such declarations, filings or
registrations; giving such notices; obtaining such
authorizations, consents or approvals; and having such
waiting periods expire as are necessary to avoid a violation
of law).
(d) Compliance. Except as set forth in Section
4.4(b) of the Ambassador Disclosure Schedule, or as
disclosed in the Ambassador SEC Reports (as defined in
Section 4.5) filed prior to the date hereof, neither
Ambassador nor any of the Ambassador Subsidiaries is, to the
knowledge of Ambassador, in violation of or under
investigation with respect to any violation of, or has been
given written notice of, or been charged with any violation
of, any law, statute, order, rule, regulation, ordinance or
judgment (including, without limitation, any applicable
environmental law, ordinance or regulation) of any
Governmental Authority, except for violations or possible
violations which individually or in the aggregate would not
have an Ambassador Material Adverse Effect. Except as set
forth in Section 4.4(b) of the Ambassador Disclosure
Schedule or as disclosed in the Ambassador SEC Reports filed
prior to the date hereof, Ambassador and the Ambassador
Subsidiaries have all permits, licenses, franchises and
other governmental authorizations, consents and approvals
necessary to conduct their businesses as presently conducted
other than those permits, licenses, franchises and other
governmental authorizations, consents and approvals the
failure of which to possess would not have an Ambassador
13
Material Adverse Effect. Ambassador and each of the
Ambassador Subsidiaries is not in breach or violation of or
in default in the performance or observance of any term or
provision of, and no event has occurred which, with lapse of
time or action by a third party, could result in a default
by Ambassador or any Ambassador Subsidiary under (i) its
articles of incorporation or by-laws or (ii) any contract,
commitment, agreement, indenture, mortgage, loan agreement,
note, lease, bond, license, approval or other instrument to
which it is a party or by which Ambassador or any Ambassador
Subsidiary is bound or to which any of its property is
subject, except for possible violations, breaches or
defaults which individually or in the aggregate would not
have an Ambassador Material Adverse Effect. No
representation or warranty is made with respect to the
Americans with Disabilities Act.
Section 4.5 Reports and Financial Statements.
The filings required to be made by Ambassador and the
Ambassador Subsidiaries since August 24, 1994 under the
Securities Act of 1933, as amended (the "Securities Act");
the Securities Exchange Act of 1934, as amended (the
"Exchange Act"); have been filed with the Securities and
Exchange Commission (the "SEC") including all forms,
statements, reports, all documents, exhibits, amendments and
supplements appertaining thereto, and complied, as of their
respective dates, in all material respects with all
applicable requirements of the appropriate statutes and the
rules and regulations thereunder. "Ambassador SEC Reports"
shall mean each report, schedule, registration statement and
definitive proxy statement filed with the SEC by Ambassador
pursuant to the requirements of the Securities Act or
Exchange Act since August 24, 1994 (as such documents have
since the time of their filing been amended). As of their
respective dates, the Ambassador SEC Reports did not contain
any 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, in light of the circumstances
under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim
financial statements of Ambassador included in the
Ambassador SEC Reports (collectively, the "Ambassador
Financial Statements") have been prepared in accordance with
generally accepted accounting principles applied on a
consistent basis ("GAAP") (except as may be indicated
therein or in the notes thereto and except with respect to
unaudited statements as permitted by Form 10-Q of the SEC)
and fairly present, in all material respects, the financial
position of Ambassador as of the dates thereof and the
results of its operations and cash flows for the periods
then ended, subject, in the case of the unaudited interim
financial statements, to normal, recurring audit and year-
end adjustments. True, accurate and complete copies of the
14
Articles of Incorporation and by-laws of Ambassador, as in
effect on the date hereof, are included (or incorporated by
reference) in the Ambassador SEC Reports.
Section 4.6 Absence of Certain Changes or Events.
Except as disclosed in the Ambassador SEC Reports filed
prior to the date hereof, since December 31, 1996,
Ambassador and each of the Ambassador Subsidiaries have
conducted their business only in the ordinary course of
business consistent with past practice and there has not
been any Ambassador Material Adverse Effect. For purposes
of this Agreement, a "Ambassador Material Adverse Effect"
shall mean the existence of any fact or condition (other
than as disclosed in the Ambassador SEC Reports filed prior
to the date hereof or as set forth in the Ambassador
Disclosure Schedule) which has had or is reasonably likely
to have a material adverse effect on the business, assets,
financial condition, results of operations or prospects of
Ambassador and the Ambassador Subsidiaries taken as a whole;
provided, however, that adverse effects on the business,
assets, financial condition, results of operations or
prospects of Ambassador or the Ambassador Subsidiaries due
to general economic conditions or conditions affecting
generally the multi-family apartment property market or any
of the markets in which Ambassador operates shall not be
deemed to be an Ambassador Material Adverse Effect and shall
not be taken into account in determining the existence of an
Ambassador Material Adverse Effect.
Section 4.7 Litigation. Except as disclosed in
the Ambassador SEC Reports filed prior to the date hereof or
as set forth in Sections 4.7, 4.9 or 4.11 of the Ambassador
Disclosure Schedule, (a) there are no claims, suits, actions
or proceedings by any court, governmental department,
commission, agency, instrumentality or authority or any
arbitrator, pending or, to the knowledge of Ambassador,
threatened, nor are there, to the knowledge of Ambassador,
any investigations or reviews by any court, governmental
department, commission, agency, instrumentality or authority
or any arbitrator pending or threatened, against, relating
to or affecting Ambassador or any of the Ambassador
Subsidiaries which would have an Ambassador Material Adverse
Effect, (b) there have not been any significant developments
since December 31, 1996 with respect to such disclosed
claims, suits, actions, proceedings, investigations or
reviews that would have an Ambassador Material Adverse
Effect and (c) there are no judgments, decrees, injunctions,
rules or orders of any court, governmental department,
commission, agency, instrumentality or authority or any
arbitrator specifically applicable to Ambassador or any of
the Ambassador Subsidiaries, except for such that would not
have an Ambassador Material Adverse Effect. The challenge
asserted by an advisor to certain investors who held Class B
15
certificates in TEB Municipal Trust I (on behalf of such
investors) has been settled and releases have been obtained
from such advisor (on behalf of such investors) and
Ambassador is not aware that any party intends to bring any
claim, suit, action or proceeding concerning Ambassador's
actions with respect to such Class B certificates.
Section 4.8 Registration Statement and Proxy
Statement. None of the information supplied or to be
supplied by or on behalf of Ambassador for inclusion or
incorporation by reference in (a) the registration statement
on Form S-4 or S-8 or any post-effective amendment to a
registration statement on Form S-4 or S-8 to be filed with
the SEC by AIMCO in connection with the issuance of shares
of AIMCO Common Stock in the Merger (as amended or
supplemented, the "Registration Statement") will, at the
time the Registration Statement is filed with the SEC and at
the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading and
(b) the proxy statement, in definitive form, relating to the
meeting of Ambassador shareholders to be held in connection
with the Merger and the transactions related thereto (as
amended or supplemented, the "Proxy Statement") will, at the
dates mailed to shareholders and at the times of the
meetings of shareholders to be held in connection with the
Merger, contain any untrue statement of a material fact or
omit to state any material fact required to be stated
therein or necessary in order to make the statements
therein, in light of the circumstances under which they are
made, not misleading. The Proxy Statement will comply as to
form in all material respects with the provisions of the
Securities Act and the Exchange Act and the rules and
regulations thereunder.
Section 4.9 Tax Matters. "Taxes," as used in
this Agreement, means any federal, state, county, local or
foreign taxes, charges, fees, levies or other assessments,
including all net income, gross income, sales and use, ad
valorem, transfer, gains, profits, excise, franchise, real
and personal property, gross receipt, capital stock,
production, business and occupation, disability, employment,
payroll, license, estimated, stamp, custom duties, severance
or withholding taxes or charges imposed by any governmental
entity, and includes any interest and penalties (civil or
criminal) on or additions to any such taxes. "Tax Return,"
as used in this Agreement, means a report, return or other
information required to be supplied to a governmental entity
with respect to Taxes including, where permitted or
required, combined or consolidated returns for any group of
entities that includes Ambassador or any Ambassador
16
Subsidiary or AIMCO or any AIMCO Subsidiary, as the case may
be.
Except as set forth in Section 4.9 of the
Ambassador Disclosure Schedule and except as would not
result in an Ambassador Material Adverse Effect:
(a) Filing of Timely Tax Returns. Ambassador and
each of the Ambassador Subsidiaries have filed (or
there has been filed on its behalf) all Tax Returns
required to be filed by each of them under applicable
law. All such Tax Returns were and are in all material
respects true, complete and correct and filed on a
timely basis.
(b) Payment of Taxes. Ambassador and each of the
Ambassador Subsidiaries have, within the time and in
the manner prescribed by law, paid all Taxes that are
currently due and payable, except for those contested
in good faith and for which adequate reserves have been
taken.
(c) Tax Reserves. Ambassador and the Ambassador
Subsidiaries have established on their books and
records reserves adequate to pay all Taxes and reserves
for deferred income taxes in accordance with GAAP.
(d) Tax Liens. There are no Tax liens upon the
assets of Ambassador or any of the Ambassador
Subsidiaries except liens for Taxes not yet due.
(e) Withholding Taxes. Ambassador and each of
the Ambassador Subsidiaries have complied in all
material respects with the provisions of the Code
relating to the withholding of Taxes, as well as
similar provisions under any other laws, and have,
within the time and in the manner prescribed by law,
withheld and paid over to the proper governmental
authorities all amounts required.
(f) REIT Classification. At all times since the
initial public offering of Ambassador, Ambassador has
been organized and operated in conformity with the REIT
Requirements (as defined in Section 9.3(a)).
(g) Audit, Administrative and Court Proceedings.
No audits or other administrative proceedings or court
proceedings are presently pending with regard to any
Taxes or Tax Returns of Ambassador or any of the
Ambassador Subsidiaries.
(h) Tax Rulings. Neither Ambassador nor any of
the Ambassador Subsidiaries has received a Tax Ruling
17
(as defined below) or entered into a Closing Agreement
(as defined below) with any taxing authority. "Tax
Ruling," as used in this Agreement, shall mean a
written ruling of a taxing authority relating to Taxes.
"Closing Agreement," as used in this Agreement, shall
mean a written and legally binding agreement with a
taxing authority relating to Taxes.
(i) Tax Sharing Agreements. Except as between
affiliates of Ambassador as set forth in Section 4.2 of
the Ambassador Disclosure Schedule, neither Ambassador
nor any Ambassador Subsidiary is a party to any
agreement relating to allocating or sharing of Taxes.
(j) Code Section 280G. Neither Ambassador nor
any of the Ambassador Subsidiaries is a party to any
agreement, contract or arrangement that could result in
the payment of any "excess parachute payments" within
the meaning of Section 280G of the Code or any amount
that would be non-deductible pursuant to Section 162(m)
of the Code.
(k) Liability For Others. Neither Ambassador nor
any of the Ambassador Subsidiaries has any liability
for Taxes of any person other than Ambassador and the
Ambassador Subsidiaries (i) under Treasury Regulations
Section 1.1502-6 (or any similar provision of state,
local or foreign law), (ii) by contract, or (iii)
otherwise.
(l) Section 341(f). Neither Ambassador nor any
of the Ambassador Subsidiaries has, with regard to any
assets or property held or acquired by any of them,
filed a consent to the application of Section 341(f)(2)
of the Code, or agreed to have Section 341(f)(2) of the
Code apply to any disposition of a subsection (f) asset
(as such term is defined in Section 341(f)(4) of the
Code) owned by Ambassador or any of the Ambassador
Subsidiaries.
(m) Built-In Gains. None of Ambassador or the
Ambassador Subsidiaries has a net unrealized built-in
gain within the meaning of Section 1374(d)(1) of the
Code that would be subject to IRS Notice 88-19.
(n) Subchapter C. None of Ambassador or the
Ambassador Subsidiaries has any earnings and profits
accumulated in any non-REIT year within the meaning of
Section 857 of the Code.
18
Section 4.10 Employee Matters; ERISA. Except as
set forth in Section 4.10 of the Ambassador Disclosure
Schedule:
(a) Benefit Plans. As of the date hereof, Section
4.10(a) of the Ambassador Disclosure Schedule contains
a true and complete list of each written material
employment agreement, employee benefit plan, policy or
agreement covering employees, former employees or
directors of Ambassador and each of the Ambassador
Subsidiaries or their beneficiaries, or providing
benefits to such persons in respect of services
provided to any such entity, including, but not limited
to, any employee benefit plans within the meaning of
Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") and any severance or
change in control agreement (collectively, the
"Ambassador Benefit Plans"). Since September 30, 1997,
there have been no new plans adopted nor changes,
additions or modification to any existing plan.
(b) Contributions. All material contributions
and other payments required to have been made by
Ambassador or any of the Ambassador Subsidiaries to any
Ambassador Benefit Plan (or to any person pursuant to
the terms thereof) have been made or the amount of such
payment or contribution obligation has been reflected
in the Ambassador Financial Statements.
(c) Qualification; Compliance. Each of the
Ambassador Benefit Plans intended to be"qualified"
within the meaning of Section 401(a) of the Code has
been determined by the Internal Revenue Service (the
"IRS") to be so qualified, and, to the knowledge of
Ambassador, no circumstances exist that are reasonably
expected by Ambassador to result in the revocation of
any such determination. Ambassador is in compliance in
all material respects with, and each of the Ambassador
Benefit Plans is and has been operated in all material
respects in compliance with, all applicable laws, rules
and regulations governing such plan, including, without
limitation, ERISA and the Code. Each Ambassador Benefit
Plan intended to provide for the deferral of income,
the reduction of salary or other compensation, or to
afford other income tax benefits, complies with the
requirements of the applicable provisions of the Code
or other laws, rules and regulations required to
provide such income tax benefits. No prohibited
transactions (as defined in Section 406 or 407 of ERISA
or Section 4975 of the Code) have occurred for which a
statutory exemption is not available with respect to
any Ambassador Benefit Plan, and which could give rise
to liability on the part of Ambassador, any Ambassador
19
Benefit Plan, or any fiduciary, party in interest or
disqualified person with respect thereto that would be
material to Ambassador or would be material to
Ambassador if it were Ambassador's liability.
(d) Liabilities. With respect to the Ambassador
Benefit Plans, individually and in the aggregate, no
event has occurred, and, to the knowledge of
Ambassador, there does not now exist any condition or
set of circumstances, that could reasonably subject
Ambassador or any of the Ambassador Subsidiaries to any
material liability arising under the Code, ERISA or any
other applicable law (including, without limitation,
any liability to any such plan or the Pension Benefit
Guaranty Corporation (the "PBGC")), or under any
indemnity agreement to which Ambassador or any of the
Ambassador Subsidiaries is a party, excluding liability
relating to benefit claims and funding obligations
payable in the ordinary course.
(e) Welfare Plans. Other than continuation
coverage required to be provided under Section 4980B of
the Code or Part 6 of Title I of ERISA or otherwise as
provided by state law, none of the Ambassador Benefit
Plans that are "welfare plans," within the meaning of
Section 3(1) of ERISA, provide for any benefits with
respect to current or former employees for periods
extending beyond their retirement or other termination
of service which would have an Ambassador Material
Adverse Effect,
(f) Payments Resulting from the Merger. The
consummation or announcement of any transaction
contemplated by this Agreement will not (either alone
or as a pre-condition to and upon the occurrence of any
additional or further acts or events, including,
without limitation, the termination of employment of
any officers, directors, employees or agents of
Ambassador or any of the Ambassador Subsidiaries)
result in any (i) payment (whether of severance pay or
otherwise) becoming due from Ambassador or any of the
Ambassador Subsidiaries to any officer, employee,
former employee or director thereof or to the trustee
under any "rabbi trust" or similar arrangement, or (ii)
benefit under any Ambassador Benefit Plan becoming
accelerated, vested or payable.
(g) Breaches Cumulative. No inaccuracy of any of
the foregoing representations and warranties in this
Section 4.10 shall be deemed to exist unless such
inaccuracy, either individually or with other
inaccuracies of this Section 4.10, would be deemed
20
material to Ambassador and its Subsidiaries taken as a
whole.
Section 4.11 Environmental Protection.
(a) Except as set forth in Section 4.11 of the
Ambassador Disclosure Schedule or in the Ambassador SEC
Reports filed prior to the date hereof:
(i) Compliance. Ambassador and each of the
Ambassador Subsidiaries is in compliance with all
applicable Environmental Laws (as defined in Section
4.11(b)(ii)) and neither Ambassador nor any of the
Ambassador Subsidiaries has received any written
communication from any person or Governmental Authority
that alleges that Ambassador or any of the Ambassador
Subsidiaries is not in such compliance with applicable
Environmental Laws except in each foregoing case where
the failure to so comply would not have an Ambassador
Material Adverse Effect. To the knowledge of
Ambassador, compliance with all applicable
Environmental Laws will not require Ambassador or any
Ambassador Subsidiary to incur costs in excess of
amounts reserved against in the Ambassador Financial
Statements, which excess would result in an Ambassador
Material Adverse Effect.
(ii) Environmental Permits. Ambassador and each
of the Ambassador Subsidiaries has obtained or has
applied for all environmental, health and safety
permits and governmental authorizations (collectively,
the "Environmental Permits") necessary for the
construction of their facilities or the conduct of
their operations except where the failure to so obtain
would not have an Ambassador Material Adverse Effect,
and all such Environmental Permits are in good standing
or, where applicable, a renewal application has been
timely filed and is pending agency approval, and
Ambassador and the Ambassador Subsidiaries are in
material compliance with all terms and conditions of
all such Environmental Permits.
(iii) Environmental Claims. There is no
Environmental Claim (as defined in Section 4.11(b)(i))
which would have an Ambassador Material Adverse Effect
pending (A) against Ambassador or any of the Ambassador
Subsidiaries, (B) to the knowledge of Ambassador,
against any person or entity whose liability for any
Environmental Claim Ambassador or any of the Ambassador
Subsidiaries has or may have retained or assumed either
contractually or by operation of law, or (C) or, to the
knowledge of Ambassador, against any real or personal
property or operations which Ambassador or any of the
21
Ambassador Subsidiaries owns, leases or manages, in
whole or in part.
(iv) Releases. Ambassador has no knowledge of any
Releases (as defined in Section 4.11(b)(iv)) of any
Hazardous Material (as defined in Section 4.11(b)(iii))
that would be reasonably likely to form the basis of
any Environmental Claim against Ambassador or any of
the Ambassador Subsidiaries or against any person or
entity whose liability for any Environmental Claim
Ambassador or any of the Ambassador Subsidiaries has
retained or assumed either contractually or by
operation of law except for any such Environmental
Claim which would not have an Ambassador Material
Adverse Effect.
(v) Predecessors. Ambassador has no knowledge,
with respect to any predecessor of Ambassador or any of
the Ambassador Subsidiaries of any pending or
threatened Environmental Claim which would have an
Ambassador Material Adverse Effect, or of any Release
of Hazardous Materials that would be reasonably likely
to form the basis of any Environmental Claim which
would have an Ambassador Material Adverse Effect.
(b) Definitions. As used in this Agreement:
(i) "Environmental Claim" means any and all
administrative, regulatory or judicial actions, suits,
demands, demand letters, directives, claims, liens,
investigations, proceedings or notices of noncompliance
or violation (in each case in writing) by any person or
entity (including any Governmental Authority) alleging
potential liability (including, without limitation,
potential responsibility for or liability for
enforcement, investigatory costs, cleanup costs,
governmental response costs, removal costs, remedial
costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based
on or resulting from (A) the presence, Release or
threatened Release into the environment of any
Hazardous Materials at any location, whether or not
owned, operated, leased or managed by Ambassador or any
of the Ambassador Subsidiaries (for purposes of this
Section 4.11) or by AIMCO or any of the AIMCO
Subsidiaries (for purposes of Section 5.11); or (B)
circumstances known to Ambassador (for purposes of this
Section 4.11) or known to AIMCO (for purposes of
Section 5.11) to form the basis of any violation or
alleged violation of any Environmental Law or (C) any
and all claims by any third party seeking damages,
contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from the
22
presence or Release of any Hazardous Materials, in each
case as known to Ambassador (for purposes of this
Section 4.11) or known to AIMCO (for purposes of
Section 5.11).
(ii) "Environmental Laws" means all federal,
state and local laws, rules and regulations relating to
pollution, the environment (including, without
limitation, ambient air, surface water, groundwater,
land surface or subsurface strata) or protection of
human health as it relates to the environment
including, without limitation, laws and regulations
relating to Releases or threatened Releases of
Hazardous Materials, or otherwise relating to the
manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous
Materials.
(iii) "Hazardous Materials" means (A) any
petroleum or petroleum products, radioactive materials,
asbestos in any form that is or could become friable,
urea formaldehyde foam insulation and transformers or
other equipment that contain dielectric fluid
containing polychlorinated biphenyls ("PCBs"); (B) any
chemicals, materials or substances which are now
defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants," or
words of similar import under any Environmental Law and
(C) any other chemical, material, substance or waste,
exposure to which is now prohibited, limited or
regulated under any Environmental Law in a jurisdiction
in which Ambassador or any of the Ambassador
Subsidiaries operates (for purposes of this Section
4.11) or AIMCO or any of the AIMCO Subsidiaries
operates (for purposes of Section 5.11).
(iv) "Release" means any release, spill,
emission, leaking, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the
atmosphere, soil, surface water, groundwater or
property.
Section 4.12 Vote Required. Provided that the
Ambassador Preferred Stock has been redeemed pursuant to
Section 2.1, the affirmative vote of the holders of at least
two-thirds of the shares of Ambassador Common Stock
outstanding on the record date for the meeting at which such
vote is taken (the "Ambassador Shareholders' Approval") is
the only vote of the holders of any class or series of the
capital stock of Ambassador or any of its Subsidiaries that
23
is required to approve this Agreement, the Merger and the
other transactions contemplated hereby.
Section 4.13 Opinion of Financial Advisor.
Ambassador has received the opinion of Xxxxxxx Lynch,
Pierce, Xxxxxx & Xxxxx Incorporated ("Xxxxxxx Xxxxx"), dated
as of the date hereof, to the effect that, as of the date
hereof, the consideration to be received by the holders of
Ambassador Common Stock (other than AIMCO and its
affiliates) in the Merger is fair from a financial point of
view.
Section 4.14 Property.
(a) Transferability. The properties listed in
Section 4.14 of the Ambassador Disclosure Schedule are all
the real estate properties owned by Ambassador or a
Subsidiary of Ambassador (the "Ambassador Properties").
Each outstanding loan secured by an Ambassador Property (the
"Mortgages") is listed opposite such Ambassador Property in
Section 4.14 of the Ambassador Disclosure Schedule, and
lists, individually, the unpaid principal on the Mortgage
and the accrued but unpaid interest, if delinquent, on the
Mortgage.
(b) No LDP's. None of Ambassador, any Subsidiary
of Ambassador or any party which manages an Ambassador
Property (a "Manager") is subject to any limited denial of
participation ("LDP") issued by the United States Department
of Housing and Urban Development, or any office or agency
thereof, and Ambassador knows of no facts which could
reasonably be expected to result in an LDP being issued to
Ambassador, any Subsidiary of Ambassador or any Manager, in
any case which would be material to Ambassador and its
Subsidiaries taken as a whole.
Section 4.15 Ambassador Indebtedness.
(a) Credit Lyonnais Debt. As of November 30,
1997 the aggregate principal on the unsecured revolving
credit facility (the "Line of Credit") with Credit Lyonnais
New York Branch ("CLNY") incurred pursuant to that certain
line of credit agreement entered into as of May 28, 1997 and
amended on June 27, 1997, was $2,010,000.
(b) Nomura Debt. As of November 30, 1997 the
aggregate principal on the secured revolving credit facility
(the "Nomura Debt") with Nomura Asset Capital Corporation
("NACC") incurred pursuant to that loan agreement entered
into as of June 22, 1997 and amended on September 30, 1997,
was $35,250,000.
24
Section 4.16 Ambassador Knowledge. For the
purposes hereof, the knowledge of Ambassador and its
Subsidiaries shall be limited to the actual knowledge of the
senior executive officers of Ambassador.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF AIMCO
AIMCO makes the following representations and
warranties to Ambassador. Except as set forth in the letter
of even date herewith signed by the President of AIMCO on
behalf of AIMCO and delivered to Ambassador concurrently
herewith (the "AIMCO Disclosure Schedule") or as set forth
in the AIMCO SEC Reports (as defined in Section 5.5):
Section 5.1 Organization and Qualification.
AIMCO and each of the AIMCO Subsidiaries (as defined below)
is a corporation or other entity duly organized, validly
existing and in good standing under the laws of its
jurisdiction of incorporation or organization. AIMCO and
each Subsidiary of AIMCO has all requisite power and
authority, and has been duly authorized by all necessary
approvals and orders to own, lease and operate its assets
and properties to the extent owned, leased and operated and
to carry on its business as it is now being conducted and is
duly qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the
ownership or leasing of its assets and properties makes such
qualification necessary other than in such jurisdictions
where the failure so to qualify would not have an AIMCO
Material Adverse Effect (as defined in Section 5.6). As used
in this Agreement, the term "AIMCO Subsidiary" shall mean a
Subsidiary of AIMCO in which AIMCO's equity investment
exceeds $250,000.
Section 5.2 Subsidiaries. Section 5.2 of the
AIMCO Disclosure Schedule sets forth a list as of the date
hereof of all the AIMCO Subsidiaries. Except as set forth in
Section 5.2 of the AIMCO Disclosure Schedule, all of the
issued and outstanding shares of capital stock of each AIMCO
Subsidiary are validly issued, fully paid, nonassessable and
free of preemptive rights, and are owned, directly or
indirectly, by AIMCO free and clear of any liens, claims,
encumbrances, security interests, charges and options of any
nature whatsoever, and there are no outstanding
subscriptions, options, calls, contracts, voting trusts,
proxies or other commitments, understandings, restrictions,
arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security,
instrument or other agreement, obligating any such AIMCO
Subsidiary to issue, deliver or sell, or cause to be issued,
25
delivered or sold, additional shares of its capital stock or
obligating it to grant, extend or enter into any such
agreement or commitment.
Section 5.3 Capitalization. As of the date
hereof, the authorized capital stock of AIMCO consists of
(i) 150,000,000 shares of AIMCO Common Stock, par value
$0.01 per share, (ii) 425,000 shares of Class B Common
Stock, par value $0.01 per share (the "AIMCO Class B Common
Stock"), (iii) 750,000 shares of Class B Cumulative
Convertible Preferred Stock, par value $0.01 per share (the
"AIMCO Class B Preferred") and (iv) 2,760,000 shares of
Class C Cumulative Preferred Stock, par value $0.01 per
share (the "AIMCO Class C Preferred" and, together with the
AIMCO Class B Common Stock, the "AIMCO Preferred Stock"). At
the close of business on December 20, 1997, (i) 40,000,326
shares of AIMCO Common Stock were issued and outstanding,
and of such issued shares, none were held by AIMCO in its
treasury or by its wholly owned Subsidiaries, (ii) 325,000
shares of AIMCO Class B Common Stock were issued and
outstanding, and of such issued shares, none were held by
AIMCO in its treasury or by its wholly owned Subsidiaries,
(iii) 750,000 shares of AIMCO Class B Preferred were issued
and outstanding, and of such issued shares, none were held
by AIMCO in its treasury or by its wholly owned
Subsidiaries, (iv) no shares of AIMCO Class C Preferred were
issued and outstanding, (v) 4,938,710 shares of AIMCO Common
Stock were reserved for issuance upon the exchange of units
of limited partnership in the AIMCO Operating Partnership,
(vi) 325,000 shares of AIMCO Common Stock were reserved for
issuance upon conversion of the AIMCO Class B Common Stock,
(vii) 953,645 shares of AIMCO Common Stock were reserved for
issuance upon exercise of outstanding options, (viii)
2,463,053 shares of AIMCO Common Stock were reserved for
issuance upon conversion of AIMCO Class B Preferred Stock,
(ix) 2,400,000 shares of AIMCO Class C Preferred were
reserved for issuance upon the consummation of an offering
expected to close on December 23, 1997, and (x) no Voting
Debt was issued or outstanding. All outstanding shares of
AIMCO Common Stock and AIMCO Preferred Stock are validly
issued, fully paid and nonassessable and are not subject to
preemptive rights. As of the date hereof, except as
disclosed in the AIMCO SEC Reports filed prior to the date
hereof or as set forth in Section 5.3 of the AIMCO
Disclosure Schedule or pursuant to this Agreement and the
AIMCO Benefit Plans, there are no options, warrants, calls,
rights, commitments or agreements of any character to which
AIMCO or any Subsidiary of AIMCO is a party or by which any
of them are bound obligating AIMCO or any Subsidiary of
AIMCO to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or any
Voting Debt securities of AIMCO or any Subsidiary of AIMCO
or obligating AIMCO or any Subsidiary of AIMCO to grant,
26
extend or enter into any such option, warrant, call, right,
commitment or agreement.
Section 5.4 Authority; Non-Contravention;
Statutory Approvals; Compliance.
(a) Authority. AIMCO has all requisite corporate
power and authority to enter into this Agreement and the
applicable AIMCO Required Statutory Approvals (as defined in
Section 5.4(c)), to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the
consummation by AIMCO of the transactions contemplated
hereby have been duly authorized by all necessary corporate
action on the part of AIMCO, subject to obtaining the
applicable AIMCO Shareholders' Approval. This Agreement has
been duly and validly executed and delivered by AIMCO and,
assuming the due authorization, execution and delivery
hereof by Ambassador, constitutes the valid and binding
obligation of AIMCO enforceable against it in accordance
with the terms of this Agreement.
(b) Non-Contravention. Except as set forth in
Section 5.4(b) of the AIMCO Disclosure Schedule, the
execution and delivery of this Agreement by AIMCO does not,
and the consummation of the transactions contemplated hereby
will not, result in a Violation with respect to AIMCO or any
of the AIMCO Subsidiaries pursuant to any provisions of (i)
the certificate of incorporation, by-laws or similar
governing documents of AIMCO or any of the AIMCO
Subsidiaries, (ii) subject to obtaining the AIMCO Required
Statutory Approvals, any statute, law, ordinance, rule,
regulation, judgment, decree, order, injunction, writ,
permit or license of any Governmental Authority applicable
to AIMCO or any of the AIMCO Subsidiaries or any of their
respective properties or assets or (iii) subject to
obtaining the third-party consents set forth in Section
5.4(b) of the AIMCO Disclosure Schedule (the "AIMCO Required
Consents"), any material note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, concession,
contract, lease or other instrument, obligation or agreement
of any kind to which AIMCO or any of the AIMCO Subsidiaries
is a party or by which it or any of its properties or assets
may be bound or affected, except in the case of clause (ii)
or (iii) for any such Violation which would not have an
AIMCO Material Adverse Effect.
(c) Statutory Approvals. No declaration, filing
or registration with, or notice to or authorization, consent
or approval of, any Governmental Authority is necessary for
the execution and delivery of this Agreement by AIMCO or the
consummation by AIMCO of the transactions contemplated
hereby except as described in Section 5.4(c) of the AIMCO
Disclosure Schedule or the failure of which to obtain would
27
not result in an AIMCO Material Adverse Effect (the "AIMCO
Required Statutory Approvals," it being understood that
references in this Agreement to "obtaining" such AIMCO
Required Statutory Approvals shall mean making such
declarations, filings or registrations; giving such notices;
obtaining such authorizations, consents or approvals; and
having such waiting periods expire as are necessary to avoid
a violation of law).
(d) Compliance. Except as set forth in Section
5.7 of the AIMCO Disclosure Schedule or as disclosed in the
AIMCO SEC Reports filed prior to the date hereof, neither
AIMCO nor any of the AIMCO Subsidiaries is, to the knowledge
of AIMCO, in violation of or under investigation with
respect to any violation of, or has been given written
notice of, or been charged with any violation of, any law,
statute, order, rule, regulation, ordinance or judgment
(including, without limitation, any applicable environmental
law, ordinance or regulation) of any Governmental Authority,
except for possible violations which individually or in the
aggregate would not have an AIMCO Material Adverse Effect.
Except as disclosed in the AIMCO SEC Reports filed prior to
the date hereof, AIMCO and the AIMCO Subsidiaries have all
permits, licenses, franchises and other governmental
authorizations, consents and approvals necessary to conduct
their businesses as presently conducted other than those
permits, licenses, franchises and other governmental
authorizations, consents and approvals the failure of which
to possess would not have an AIMCO Material Adverse Effect.
AIMCO and each of the AIMCO Subsidiaries is not in breach or
violation of or in default in the performance or observance
of any term or provision of, and no event has occurred
which, with lapse of time or action by a third party, could
result in a default by AIMCO or any AIMCO Subsidiary under
(i) its certificate of incorporation or by-laws or (ii) any
contract, commitment, agreement, indenture, mortgage, loan
agreement, note, lease, bond, license, approval or other
instrument to which it is a party or by which AIMCO or any
AIMCO Subsidiary is bound or to which any of its property is
subject, except for possible violations, breaches or
defaults which individually or in the aggregate would not
have an AIMCO Material Adverse Effect. No representation or
warranty is made with respect to the Americans with
Disabilities Act.
Section 5.5 Reports and Financial Statements. The
filings required to be made by AIMCO and the AIMCO
Subsidiaries since December 31, 1996 under the Securities
Act, the Exchange Act and applicable state laws and
regulations have been filed with the SEC or the appropriate
state commission, as the case may be, including all forms,
statements, reports, all documents, exhibits, amendments and
supplements appertaining thereto, and complied, as of their
28
respective dates, in all material respects with all
applicable requirements of the appropriate statutes and the
rules and regulations thereunder, except for such filings
the failure of which to have been made or to so comply would
not result in an AIMCO Material Adverse Effect. "AIMCO SEC
Reports" shall mean each report, schedule, registration
statement and definitive proxy statement filed with the SEC
by AIMCO pursuant to the requirements of the Securities Act
or Exchange Act since December 31, 1994 as such documents
have since the time of their filing been amended. As of
their respective dates, the AIMCO SEC Reports did not
contain any 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, in light of the
circumstances under which they were made, not misleading.
The audited consolidated financial statements and unaudited
interim financial statements of AIMCO included in the AIMCO
SEC Reports (collectively, the "AIMCO Financial Statements")
have been prepared in accordance with GAAP (except as may be
indicated therein or in the notes thereto and except with
respect to unaudited statements as permitted by Form 10-Q of
the SEC) and fairly present, in all material respects, the
financial position of AIMCO as of the dates thereof and the
results of operations and cash flows for the periods then
ended, subject, in the case of the unaudited interim
financial statements, to normal, recurring audit and year-
end adjustments. True, accurate and complete copies of the
AIMCO Articles and AIMCO By-Laws, as in effect on the date
hereof, are included (or incorporated by reference) in the
AIMCO SEC Reports.
Section 5.6 Absence of Certain Changes or Events.
Except as disclosed in the AIMCO SEC Reports filed prior to
the date hereof, since December 31, 1996, AIMCO and each of
the AIMCO Subsidiaries have conducted their business only in
the ordinary course of business (except for acquisitions and
dispositions) and there has not been any AIMCO Material
Adverse Effect. For purposes of this Agreement, an "AIMCO
Material Adverse Effect" shall mean the existence of any
fact or condition (other than as disclosed in the AIMCO SEC
Reports filed prior to the date hereof or as set forth in
the AIMCO Disclosure Schedule) which has or is reasonably
likely to have a material adverse effect on the business,
assets, financial condition, results of operations or
prospects of AIMCO and the AIMCO Subsidiaries taken as a
whole, provided, however, that adverse effects on the
business, assets, financial condition, results of operations
or prospects of AIMCO and the AIMCO Subsidiaries taken as a
whole due to general economic conditions or conditions
affecting generally the multi-family apartment property
market in which AIMCO operates shall not be deemed to be an
AIMCO Material Adverse Effect and shall not be taken into
29
account in determining the existence of an AIMCO Material
Adverse Effect.
Section 5.7 Litigation. Except as disclosed in
the AIMCO SEC Reports filed prior to the date hereof or as
disclosed in Section 5.7 of the AIMCO Disclosure Schedule,
(a) there are no claims, suits, actions or proceedings by
any court, governmental department, commission, agency,
instrumentality or authority or any arbitrator, pending or,
to the knowledge of AIMCO, threatened, nor are there, to the
knowledge of AIMCO, any investigations or reviews by any
court, governmental department, commission, agency,
instrumentality or authority or any arbitrator pending or
threatened against, relating to or affecting AIMCO or any of
the AIMCO Subsidiaries which would have an AIMCO Material
Adverse Effect, (b) there have not been any significant
developments since December 31, 1996 with respect to such
disclosed claims, suits, actions, proceedings,
investigations or reviews that would have an AIMCO Material
Adverse Effect and (c) there are no judgments, decrees,
injunctions, rules or orders of any court, governmental
department, commission, agency, instrumentality or authority
or any arbitrator specifically applicable to AIMCO or any of
the AIMCO Subsidiaries, except for such that would not have
an AIMCO Material Adverse Effect.
Section 5.8 Registration Statement and Proxy
Statement. None of the information supplied or to be
supplied by or on behalf of AIMCO for inclusion or
incorporation by reference in (a) the Registration Statement
will, at the time the Registration Statement is filed by
AIMCO with the SEC and at the time it becomes effective
under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to
be stated therein or necessary to make the statements
therein not misleading and (b) the Proxy Statement will, at
the dates mailed to shareholders and at the times of the
meetings of shareholders to be held in connection with the
Merger, contain any untrue statement of a material fact or
omit to state any material fact required to be stated
therein or necessary in order to make the statements
therein, in light of the circumstances under which they are
made, not misleading. The Registration Statement will comply
as to form in all material respects with the provisions of
the Securities Act and the Exchange Act and the rules and
regulations thereunder.
Section 5.9 Tax Matters. Except as set forth in
Section 5.9 of the AIMCO Disclosure Schedule and except as
would not result in an AIMCO Material Adverse Effect:
(a) Filing of Timely Tax Returns. AIMCO and each
of the AIMCO Subsidiaries have filed (or there has been
30
filed on its behalf) all Tax Returns required to be
filed by each of them under applicable law. All such
Tax Returns were and are in all material respects true,
complete and correct and filed on a timely basis.
(b) Payment of Taxes. AIMCO and each of the
AIMCO Subsidiaries have, within the time and in the
manner prescribed by law, paid all Taxes that are
currently due and payable, except for those contested
in good faith and for which adequate reserves have been
taken.
(c) Tax Reserves. AIMCO and the AIMCO
Subsidiaries have established on their books and
records reserves adequate to pay all Taxes and reserves
for deferred income taxes in accordance with GAAP.
(d) Tax Liens. There are no Tax liens upon the
assets of AIMCO or any of the AIMCO Subsidiaries except
liens for Taxes not yet due.
(e) Withholding Taxes. AIMCO and each of the
AIMCO Subsidiaries have complied in all material
respects with the provisions of the Code relating to
the withholding of Taxes, as well as similar provisions
under any other laws, and have, within the time and in
the manner prescribed by law, withheld and paid over to
the proper governmental authorities all amounts
required.
(f) REIT Classification. At all times since the
initial public offering of AIMCO, AIMCO has been
organized and operated in conformity with the REIT
Requirements and its proposed method of operation will
enable it to continue to meet the REIT Requirements.
(g) Continuation as REIT. The execution or
delivery by AIMCO of this Agreement and the
consummation by AIMCO of the transactions contemplated
hereby or compliance with or fulfillment of terms and
provisions hereof by AIMCO, will not adversely affect
the qualification of AIMCO as a REIT, for each taxable
year ending on or after the date of this Agreement.
(h) Audit, Administrative and Court Proceedings.
No audits or other administrative proceedings or court
proceedings are presently pending with regard to any
Taxes or Tax Returns of AIMCO or any of the AIMCO
Subsidiaries.
(i) Tax Rulings. Neither AIMCO nor any of the
AIMCO Subsidiaries has a pending Tax Ruling or has
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entered into a Closing Agreement with any taxing
authority.
(j) Tax Sharing Agreements. Except as between
affiliates of AIMCO as set forth in Section 5.2 of the
AIMCO Disclosure Schedule, neither AIMCO nor any AIMCO
Subsidiary is a party to any agreement relating to
allocating or sharing of Taxes.
(k) Code Section 280G. Except for the AIMCO
Benefit Plans, neither AIMCO nor any of the AIMCO
Subsidiaries is a party to any agreement, contract or
arrangement that could result in the payment of any
"excess parachute payments" within the meaning of
Section 280G of the Code or any amount that would be
non-deductible pursuant to Section 162(m) of the Code.
(l) Liability for Others. Neither AIMCO nor any
of the AIMCO Subsidiaries has any liability for Taxes
of any person other than AIMCO and the AIMCO
Subsidiaries (i) under Treasury Regulations Section
1.1502-6 (or any similar provision of state, local or
foreign law), (ii) by contract, or (iii) otherwise.
(m) Section 341(f). Neither AIMCO nor any of the
AIMCO Subsidiaries has, with regard to any assets or
property held or acquired by any of them, filed a
consent to the application of Section 341(f)(2) of the
Code, or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as
such term is defined in Section 341(f)(4) of the Code)
owned by AIMCO or any of the AIMCO Subsidiaries.
Section 5.10 Employee Matters; ERISA. Except as
set forth in Section 5.10 of the AIMCO Disclosure Schedule:
(a) Benefit Plans. As of the date hereof,
Section 5.10(a) of the AIMCO Disclosure Schedule
contains a true and complete list of each written
material employee benefit plan, policy or agreement
covering employees, former employees or directors of
AIMCO and each of the AIMCO Subsidiaries or their
beneficiaries, or providing benefits to such persons in
respect of services provided to any such entity,
including, but not limited to, any employee benefit
plans within the meaning of Section 3(3) of ERISA and
any severance or change in control agreement
(collectively, the "AIMCO Benefit Plans"). Since
September 30, 1997, there have been no new plans
adopted nor changes, additions or modification to any
existing plan.
32
(b) Contributions. All material contributions
and other payments required to be made by AIMCO or any
of the AIMCO Subsidiaries to any AIMCO Benefit Plan (or
to any person pursuant to the terms thereof) have been
made or the amount of such payment or contribution
obligation has been reflected in the AIMCO Financial
Statements.
(c) Qualification; Compliance. Each of the AIMCO
Benefit Plans intended to be"qualified" within the
meaning of Section 401(a) of the Code has been
determined by the IRS to be so qualified, and, to the
knowledge of AIMCO, no circumstances exist that are
reasonably expected by AIMCO to result in the
revocation of any such determination. AIMCO is in
compliance in all material respects with, and each of
the AIMCO Benefit Plans is and has been operated in all
material respects in compliance with, all applicable
laws, rules and regulations governing such plan,
including, without limitation, ERISA and the Code. Each
AIMCO Benefit Plan intended to provide for the deferral
of income, the reduction of salary or other
compensation, or to afford other income tax benefits,
complies with the requirements of the applicable
provisions of the Code or other laws, rules and
regulations required to provide such income tax
benefits. No prohibited transactions (as defined in
Section 406 or 407 of ERISA or Section 4975 of the
Code) have occurred for which a statutory exemption is
not available with respect to any AIMCO Benefit Plan,
and which could give rise to liability on the part of
AIMCO, any AIMCO Benefit Plan, or any fiduciary, party
in interest or disqualified person with respect thereto
that would be material to AIMCO or would be material to
AIMCO if it were AIMCO's liability.
(d) Liabilities. With respect to the AIMCO
Benefit Plans, individually and in the aggregate, no
event has occurred, and, to the knowledge of AIMCO,
there does not now exist any condition or set of
circumstances, that could subject AIMCO or any of the
AIMCO Subsidiaries to any material liability arising
under the Code, ERISA or any other applicable law
(including, without limitation, any liability to any
such plan or the PBGC), or under any indemnity
agreement to which AIMCO or any of the AIMCO
Subsidiaries is a party, excluding liability for
benefit claims and funding obligations payable in the
ordinary course.
(e) Welfare Plans. Other than continuation
coverage required to be provided under Section 4980B of
the Code or Part 6 of Title I of ERISA or otherwise as
33
provided by state law, none of the AIMCO Benefit Plans
that are "welfare plans," within the meaning of Section
3(1) of ERISA, provide for any benefits with respect to
current or former employees for periods extending
beyond their retirement or other termination of service
which would have an AIMCO Material Adverse Effect.
(f) Payments Resulting from the Merger. The
consummation or announcement of any transaction
contemplated by this Agreement will not (either alone
or as a pre-condition to and upon the occurrence of any
additional or further acts or events, including,
without limitation, the termination of employment of
any officers, directors, employees or agents of AIMCO
or any of the AIMCO Subsidiaries) result in any (i)
payment (whether of severance pay or otherwise)
becoming due from AIMCO or any of the AIMCO
Subsidiaries to any officer, employee, former employee
or director thereof or to the trustee under any "rabbi
trust" or similar arrangement, or (ii) benefit under
any AIMCO Benefit Plan becoming accelerated, vested or
payable.
(d) Breaches Cumulative. No inaccuracy of any of
the foregoing representations and warranties in this
Section 5.10 shall be deemed to exist unless such
inaccuracy, either individually or with other
inaccuracies of this Section 5.10, would be deemed
material to AIMCO and its Subsidiaries taken as a
whole.
Section 5.11 Environmental Protection.
(a) Except as set forth in Section 5.11 of the
AIMCO Disclosure Schedule or in the AIMCO SEC Reports filed
prior to the date hereof:
(i) Compliance. AIMCO and each of the AIMCO
Subsidiaries is in compliance with all applicable
Environmental Laws and neither AIMCO nor any of the
AIMCO Subsidiaries has received any written
communication from any person or Governmental Authority
that alleges that AIMCO or any of the AIMCO
Subsidiaries is not in such compliance with applicable
Environmental Laws except in each foregoing case where
the failure to so comply would not have an AIMCO
Material Adverse Effect. To the knowledge of AIMCO,
compliance with all applicable Environmental Laws will
not require AIMCO or any AIMCO Subsidiary to incur
costs in excess of amounts reserved against in the
AIMCO Financial Statements, which excess would result
in an AIMCO Material Adverse Effect.
34
(ii) Environmental Permits. AIMCO and each of the
AIMCO Subsidiaries has obtained or has applied for all
Environmental Permits necessary for the construction of
their facilities or the conduct of their operations
except where the failure to so obtain would not have an
AIMCO Material Adverse Effect, and all such
Environmental Permits are in good standing or, where
applicable, a renewal application has been timely filed
and is pending agency approval, and AIMCO and the AIMCO
Subsidiaries are in material compliance with all terms
and conditions of all such Environmental Permits.
(iii) Environmental Claims. There is no
Environmental Claim which would have an AIMCO Material
Adverse Effect pending (A) against AIMCO or any of the
AIMCO Subsidiaries, (B) to the knowledge of AIMCO,
against any person or entity whose liability for any
Environmental Claim AIMCO or any of the AIMCO
Subsidiaries has or may have retained or assumed either
contractually or by operation of law, or (C) or, to the
knowledge of AIMCO against any real or personal
property or operations which AIMCO or any of the AIMCO
Subsidiaries owns, leases or manages, in whole or in
part.
(iv) Releases. AIMCO has no knowledge of any
Releases of any Hazardous Material that would be
reasonably likely to form the basis of any
Environmental Claim against AIMCO or any of the AIMCO
Subsidiaries or against any person or entity whose
liability for any Environmental Claim AIMCO or any of
the AIMCO Subsidiaries retained or assumed either
contractually or by operation of law except for any
such Environmental Claim which would not have an AIMCO
Material Adverse Effect.
(v) Predecessors. AIMCO has no knowledge, with
respect to any predecessor of AIMCO or any of the AIMCO
Subsidiaries of any pending or threatened,
Environmental Claim which would have an AIMCO Material
Adverse Effect or threatened, or of any Release of
Hazardous Materials that would be reasonably likely to
form the basis of any Environmental Claim which would
have an AIMCO Material Adverse Effect.
Section 5.12 Properties. Neither AIMCO nor any
Subsidiary of AIMCO is subject to any LDP, and AIMCO knows
of no facts which could reasonably be expected to result in
an LDP being issued to AIMCO or any Subsidiary of AIMCO.
Section 5.13 Vote Not Required. The approval of
this Agreement, the Merger and the issuance of the AIMCO
Common Stock to be issued in the Merger and the other
35
transactions contemplated hereby, does not require the vote
of the holders of any class or series of the capital stock
of AIMCO or any of its Subsidiaries.
Section 5.14 AIMCO Knowledge. For the purposes
hereof, the knowledge of AIMCO and its Subsidiaries shall be
limited to the actual knowledge of the senior executive
officers of AIMCO.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Covenants of Ambassador. Ambassador
agrees, as to itself and as to each of its Subsidiaries,
that after the date hereof and prior to the Effective Time
or earlier termination of this Agreement, (i) except as
expressly contemplated or permitted in this Agreement, (ii)
except as AIMCO may otherwise agree in writing (which
decision regarding agreement shall be made as soon as
reasonably practicable and which agreement shall not be
unreasonably withheld) and (iii) except as otherwise set
forth in the Ambassador Disclosure Schedule, the Ambassador
SEC Reports or Section 6.1 of the Ambassador Disclosure
Schedule; provided, however, Ambassador shall confer on a
regular and frequent basis with representatives of AIMCO in
the course of Ambassador's implementation of the policies
enumerated in Section 6.1 of the Ambassador Disclosure
Schedule:
(a) Ordinary Course of Business. Ambassador
shall, and shall cause its respective Subsidiaries to,
subject to the other provisions of this Agreement, (i)
carry on their respective businesses in the usual,
regular and ordinary course in substantially the same
manner as heretofore conducted and (ii) use all
commercially reasonable efforts (but which shall not
require the payment of money) to preserve intact their
present business organizations, preserve relationships
with customers, suppliers and others having business
dealings with them, take all actions necessary to
continue to qualify as a REIT, and subject to prudent
management of work force needs and ongoing programs
currently in force, keep available the services of
their present officers and employees, provided,
however, that nothing shall prohibit Ambassador or any
of its Subsidiaries from transferring operations to
Ambassador or any of its wholly owned Subsidiaries.
Ambassador shall not, nor shall Ambassador permit any
of its Subsidiaries to, enter into a new line of
business involving any material investment of assets or
resources of, or any material exposure to liability or
36
loss to, Ambassador and the Ambassador Subsidiaries
taken as a whole.
(b) Dividends. Ambassador shall not, nor shall
Ambassador permit any of its Subsidiaries to, (i)
declare or pay any dividends on or make other
distributions in respect of any of their capital stock
other than to Ambassador or Ambassador's Subsidiaries
other than (A) dividends required to be paid on any
Ambassador Preferred Stock in accordance with the terms
thereof, (B) regular quarterly dividends and
distributions on Ambassador Common Stock and OP Units
with usual record and payment dates not, during any
period of any fiscal year, in excess of the quarterly
dividend most recently declared on such stock and units
as of the date hereof; provided however, that
Ambassador shall declare and pay the dividend provided
in Section 2.2(c)(i) hereof, and the OP Unit
distribution contemplated by Section 2.2(c)(i) shall be
made, and (C) dividends necessary to maintain
Ambassador's status as a REIT under the Code, (ii)
split, combine or reclassify any of their capital stock
or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of, or in
substitution for, shares of their capital stock as a
class or (iii) except as set forth in Section 6.1 of
the Ambassador Disclosure Schedule, redeem, repurchase
or otherwise acquire any shares of their capital stock,
other than (A) redemptions, purchases or acquisitions
required by the terms of any series of Ambassador
Preferred Stock or (B) for the purpose of funding
employee stock ownership plans in accordance with past
practice. Notwithstanding the foregoing, Ambassador may
redeem the Ambassador Preferred pursuant to the
provisions of Section 2.1, effect the conversion of the
Ambassador Preferred into Ambassador Common Stock in
accordance with the terms of the Ambassador Preferred,
and issue shares of Ambassador Common Stock in exchange
for the Ambassador OP Units (or make cash payments in
respect thereof as contemplated by that certain
Exchange Rights Agreement of Ambassador, as amended
(the "Exchange Agreement")).
(c) Issuance of Securities. Except as set forth
in Section 6.1 of the Ambassador Disclosure Schedule
and except pursuant to outstanding options, rights,
agreements, obligations and commitments as disclosed in
the Ambassador SEC Reports or the Ambassador Disclosure
Schedule or pursuant to the terms of the Ambassador
Preferred, the Exchange Agreement, or the Registration
Rights Agreements (as defined in the Ambassador
Disclosure Schedule), Ambassador shall not, nor shall
Ambassador permit any of its Subsidiaries to, issue,
37
agree to issue, deliver, sell, award, pledge, dispose
of or otherwise encumber or authorize or propose the
issuance, delivery, sale, award, pledge, disposal or
other encumbrance of, any shares of their capital stock
of any class or any securities convertible into or
exchangeable for, or any rights, warrants or options to
acquire, any such shares or convertible or exchangeable
securities, other than (i) intercompany issuances of
capital stock and (ii) issuances in the ordinary course
of business consistent with past practice of up to
10,000 shares of (or options on) Ambassador Common
Stock during any fiscal year to be issued pursuant to
employee benefit plans, stock option and other
incentive compensation plans, directors plans and stock
purchase and dividend reinvestment plans existing prior
to the date hereof and heretofore disclosed to AIMCO or
issuances pursuant to plans adopted after the date
hereof which shall be reasonably acceptable to AIMCO.
The parties shall promptly furnish to each other such
information as may be reasonably requested including
financial information and take such action as may be
reasonably necessary and otherwise fully cooperate with
each other in the preparation of any registration
statement under the Securities Act and other documents
necessary in connection with the issuance of securities
as contemplated by this Section 6.1, subject to
obtaining customary indemnities.
(d) Charter Documents. Ambassador shall not
amend or propose to amend its charter, by-laws or
regulations, or similar organic documents, except as
contemplated herein.
(e) No Acquisitions. Except as set forth in
Section 6.1 of the Ambassador Disclosure Schedule,
Ambassador shall not, nor shall Ambassador permit any
of its Subsidiaries to, acquire, or publicly propose to
acquire, or agree to acquire, by merger or
consolidation with, or by purchase or otherwise, an
equity interest in or a substantial portion of the
assets of, any business or any corporation,
partnership, association or other business organization
or division thereof, nor shall Ambassador acquire or
agree to acquire a material amount of assets, other
than in the ordinary course of business consistent with
past practice.
(f) Capital Expenditures. Except as required by
law, Ambassador shall not, nor shall Ambassador permit
any Subsidiary of Ambassador to, make capital
expenditures during any fiscal year (other than
recurring and rehabilitation capital expenditures made
in the ordinary and usual course of business) in excess
38
of the amount budgeted for capital expenditures for
such fiscal year or as set forth in Section 6.1 of the
Ambassador Disclosure Schedule.
(g) No Dispositions. Ambassador shall not, nor
shall Ambassador permit any of its Subsidiaries to,
sell or dispose of any of their assets other than
dispositions in the ordinary course of business
consistent with past practice.
(h) Indebtedness. Ambassador shall not, nor
shall Ambassador permit any of its Subsidiaries to,
incur or guarantee any indebtedness for borrowed money
or enter into any "keep well" or other agreement to
maintain the financial condition of another person or
entity other than (i) indebtedness or guarantees or
"keep well" or other agreements in the ordinary course
of business consistent with past practice (including
without limitation, the issuance of commercial paper,
the use of existing credit facilities or hedging
activities), (ii) as set forth in item 5 of Section 6.1
of the Ambassador Disclosure Schedule, (iii)
arrangements between Ambassador and its Subsidiaries or
among its Subsidiaries, (iv) except as set forth in
Section 6.1 of the Ambassador Disclosure Schedule, (v)
in connection with the refunding, refinancing,
securitization or purchase of existing indebtedness,
(vi) in connection with the redemption of the
Ambassador Preferred as set forth in Section 2.1, or
(vii) as may be necessary in connection with
acquisitions or capital expenditures provided for in
Section 6.1 of the Ambassador Disclosure Schedule.
(i) Compensation, Benefits. Except as may be
required by applicable law or as set forth in Section
6.1 of the Ambassador Disclosure Schedule, Ambassador
shall not, nor shall Ambassador permit any of its
Subsidiaries to, (i) enter into, adopt or amend or
increase the amount or accelerate the payment or
vesting of any benefit or amount payable under, any
employee benefit plan or other employee benefit
contract, agreement or binding commitment, policy,
arrangement or plan or trust, or fund maintained by,
contributed to or entered into by Ambassador or any of
its Subsidiaries or increase, or enter into any
employee benefit contract, agreement, or binding
commitment or arrangement to increase in any manner,
the compensation or fringe benefits, or otherwise to
extend, expand or enhance the engagement, employment or
any related rights, of any director, officer or other
employee of Ambassador or any of its Subsidiaries,
except for normal increases in the ordinary course of
business consistent with past practice that, in the
39
aggregate, do not result in a material increase in
benefits or compensation expense to Ambassador or any
of its Subsidiaries; (ii) enter into or amend any
employment, severance or special pay arrangement with
respect to the termination of employment with any
director or officer or other employee other than in the
ordinary course of business consistent with past
practice; or (iii) deposit into any trust (including
any "rabbi trust") amounts in respect of any employee
benefit obligations or obligations to directors;
provided that transfers into any trust, other than a
rabbi or other trust with respect to any non-qualified
deferred compensation, may be made in accordance with
past practice.
(j) Accounting. Ambassador shall not, nor shall
Ambassador permit any of its Subsidiaries to, make any
changes in their accounting methods, except as required
by law, rule, regulation, the SEC or GAAP.
(k) Affiliate Transactions. Except as set forth
in Section 6.1 of the Ambassador Disclosure Schedule,
Ambassador shall not, nor shall Ambassador permit any
of its Subsidiaries to, enter into any material
agreement or arrangement with any of their Affiliates
(other than wholly owned Subsidiaries) on terms
materially less favorable to such party than could be
reasonably expected to have been obtained with an
unaffiliated third-party on an arm's length basis. As
used in this Agreement, the term "Affiliate," except
where otherwise defined herein, shall mean, as to any
person, any other person which directly or indirectly
controls, or is under common control with, or is
controlled by, such person. As used in this definition,
"control" (including, with its correlative meanings,
"controlled by" and "under common control with") shall
mean possession, directly or indirectly, of power to
direct or cause the direction of management or policies
(whether through ownership of securities or partnership
or other ownership interests, by contract or
otherwise).
(l) Cooperation, Notification. Ambassador shall,
subject to applicable law (i) confer on a regular and
frequent basis with one or more representatives of
AIMCO to discuss material operational matters and the
general status of its ongoing operations, (ii) promptly
notify AIMCO of any significant changes in its
business, properties, assets, condition (financial or
other), results of operations or prospects, and (iii)
promptly provide AIMCO with copies of all filings made
by Ambassador or any of its Subsidiaries with any state
or federal court, administrative agency, commission or
40
other Governmental Authority in connection with this
Agreement and the transactions contemplated hereby.
(m) Third-Party Consents. Ambassador shall, and
shall cause its Subsidiaries to, use all commercially
reasonable efforts (but shall not be required prior to
the Effective Time to pay any money or incur any
liabilities) to obtain the FNMA Consent (as defined
herein) and all other Ambassador Required Consents as
requested by AIMCO (it being understood and agreed that
the failure to obtain such other Ambassador Required
Consents is not a default hereunder or a condition to
AIMCO's obligation to consummate the Merger).
Ambassador shall promptly notify AIMCO of any failure
or prospective failure to obtain any such consents and,
if requested by AIMCO, shall provide copies of all
Ambassador Required Consents obtained by Ambassador to
AIMCO. Upon the Effective Time, all assumption,
transfer and other fees and charges incurred or
necessary in connection therewith, and all costs and
expenses related thereto, shall be borne by the
Surviving Corporation.
(n) No Breach, Etc. Ambassador shall not, nor
shall Ambassador permit any of its Subsidiaries to,
willfully take any action that would or is reasonably
likely to result in a failure of the conditions set
forth in Sections 8.2(a) or 8.2(b) hereof.
(o) Contracts. Ambassador shall not, nor shall
Ambassador permit any Subsidiary of Ambassador to,
except in the ordinary course of business consistent
with past practice, or in accordance with sound
business practice or for adequate consideration,
modify, amend or terminate any material contract or
agreement to which Ambassador or any Subsidiary is a
party or waive, release or assign any material rights
or claims.
(p) Insurance. Ambassador shall, and shall cause
its Subsidiaries to, maintain insurance in such amounts
and against such risks and losses as is in effect on
the date hereof, unless it is commercially unreasonable
to maintain such policies as a result of a change in
the insurance market, in which case commercially
reasonable replacement policies will be obtained, to
the extent available.
(q) Permits. Ambassador shall, and shall cause
its Subsidiaries to, use reasonable efforts to maintain
in effect all existing governmental permits which are
material to the operation of Ambassador and its
Subsidiaries taken as a whole.
41
(r) Tax Matters. Ambassador shall not (i) make
or rescind any material express or deemed election
relating to taxes unless such election is required by
law or is necessary to preserve Ambassador's status as
a REIT or of any Subsidiary of Ambassador as a
partnership for federal income tax purposes, (ii)
without the written consent of AIMCO, which consent
will not be unreasonably withheld, settle or compromise
any material claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or
controversy relating to taxes unless such settlement or
compromise results in (A) a change in taxable income or
tax liability that will reverse in future periods and
is therefore, by its nature, a timing difference or (B)
a change in taxable income or tax liability that will
not reverse in future periods and is therefore, by its
nature, a permanent difference unless the tax liability
resulting from the increase is less than $100,000, or
(iii) change in any material respect any of its methods
of reporting income or deductions for federal income
tax purposes from those employed in the preparation of
its federal income tax return for the taxable year
ending December 31, 1996, except as may be required by
applicable law or except for such changes that would
reduce consolidated federal taxable income or
alternative minimum taxable income.
(s) Discharge of Liabilities. Ambassador shall
not, nor shall Ambassador permit any of its
Subsidiaries to, pay, discharge or satisfy any material
claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other
than such claims, liabilities or obligations which are
not material to Ambassador and its Subsidiaries taken
as a whole and other than the payment, discharge or
satisfaction in the ordinary course of business
consistent with past practice (which includes the
payment of final and unappealable judgments) or in
accordance with their terms, of liabilities reflected
or reserved against in, or contemplated by, the most
recent consolidated financial statements (or the notes
thereto) of Ambassador included in Ambassador's reports
filed with the SEC, or incurred in the ordinary course
of business consistent with past practice or if such
payment, discharge or satisfaction relates to the
transactions contemplated by this Agreement.
(t) Management Contracts. Ambassador will not,
and will not permit any of its Subsidiaries to, amend
any management agreement for the management of
Ambassador Properties ("Management Agreements").
Ambassador will not, and will not permit its
Subsidiaries to renew Management Agreements except on
42
terms which permit its cancellation by Ambassador or
the applicable Subsidiary of Ambassador on thirty days'
notice or less without any charge penalty or other cost
for such cancellation.
Section 6.2 Covenants of AIMCO. AIMCO agrees, as
to itself and to each of its Subsidiaries, that after the
date hereof and prior to the Effective Time or earlier
termination of this Agreement:
(a) Cooperation, Notification. AIMCO shall (i)
confer on a regular and frequent basis with one or more
representatives of Ambassador to discuss, subject to
applicable law, material operational matters and the
general status of its ongoing operations, (ii) promptly
notify Ambassador of any significant changes in its
business, properties, assets, condition (financial or
other), results of operations or prospects, and (iii)
promptly provide Ambassador with copies of all filings
made by AIMCO or any of its Subsidiaries with any state
or federal court, administrative agency, commission or
other Governmental Authority in connection with this
Agreement and the transactions contemplated hereby.
(b) Third-Party Consents. AIMCO shall, and shall
cause its Subsidiaries to, use all commercially
reasonable efforts to obtain all AIMCO Required
Consents and will use commercially reasonable efforts
to assist Ambassador in obtaining all Ambassador
Required Consents. It is understood that in connection
therewith, AIMCO will, among other things, agree to
commercially reasonable modifications to documents and
other terms and conditions required to obtain such
consents. AIMCO shall promptly notify Ambassador of
any failure or prospective failure to obtain any such
consents and, if requested by Ambassador, shall provide
copies of all AIMCO Required Consents obtained by AIMCO
to Ambassador.
(c) No Breach, Etc. AIMCO shall not, nor shall
AIMCO permit any of its Subsidiaries to, willfully take
any action that would or is reasonably likely to result
in a material breach of any provision of this Agreement
or in any of its representations and warranties set
forth in this Agreement being untrue on and as of the
Closing Date.
(d) Conduct of Business of AIMCO Pending the
Effective Time. From the date hereof through the
Effective Time, except as expressly permitted or
contemplated by this Agreement, AIMCO and its
Subsidiaries shall conduct their operations and
business in the ordinary and usual course of business
43
and consistent with past practice and use commercially
reasonable efforts to keep available the services of
its present officers and key employees and preserve the
business relationships with those persons having
business relationships with it.
(e) Charter Documents. AIMCO shall not amend its
charter, except for such changes that would affect the
rights of AIMCO equity holders generally as a class.
(f) Indebtedness. AIMCO shall not materially
change its existing policy with respect to incurring
indebtedness or interest coverage.
(g) Delay. AIMCO shall not, and shall cause the
AIMCO Operating Partnership and the other AIMCO
Subsidiaries to not, take or publicly announce any
extraordinary action (including, e.g., mergers,
acquisitions, dispositions and the like) that would
reasonably be expected to cause a meaningful delay in
obtaining the effectiveness of, or continuing the
effectiveness or use of, the Registration Statement.
(h) Repurchases. AIMCO will not issue,
repurchase or offer to repurchase shares of AIMCO
Common Stock from any third party if the result of such
issuance, repurchase or offer to repurchase would
require the stockholders of AIMCO to a vote to approve
the Merger or the issuance of the AIMCO Common Stock
issued in the Merger.
(i) Accounting. AIMCO shall not, nor shall AIMCO
permit any of its Subsidiaries to, make any changes in
their accounting methods, except as required by law,
rule, regulation, the SEC or GAAP, and shall maintain
its status as a REIT under the Code.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access to Information. Subject to
any restrictions of applicable law or third party
confidentiality agreements, upon reasonable notice, each
party shall, and shall cause its Subsidiaries to, afford to
the officers, directors, employees, accountants, counsel,
investment bankers, financial advisors, financing sources
and other representatives of the other (collectively,
"Representatives") reasonable access, during normal business
hours throughout the period prior to the Effective Time, to
all of its properties, books, contracts, commitments and
records (including, but not limited to, Tax Returns) and,
44
during such period, each party shall, and shall cause its
Subsidiaries to, furnish promptly to the other (i) access to
each report, schedule and other document filed or received
by it or any of its Subsidiaries pursuant to the
requirements of federal or state securities laws or filed
with or sent to the SEC or any other federal or state
regulatory agency or commission and (ii) access to all
information concerning themselves, their Subsidiaries,
directors, officers and shareholders and such other matters
as may be reasonably requested by the other party in
connection with any filings, applications or approvals
required or contemplated by this Agreement. Nothing in
this Section 7.1 shall require Ambassador to take any action
or furnish any access or information which would cause or
could reasonably be expected to cause the waiver of any
applicable attorney client privilege, or as contemplated by
Section 7.11 hereof. In addition, nothing herein shall
require Ambassador to provide information other than with
respect to Ambassador and its Subsidiaries, or the conduct
of their businesses. Each party and its representatives
shall hold all information obtained by it pursuant to this
Agreement in accordance with the terms and provisions of
that certain confidentiality agreement dated December 22,
1997 between the parties (the "Confidentiality Agreement"),
which shall continue in full force and effect until the
Effective Time.
Section 7.2 Proxy Statement and Registration
Statement.
(a) Preparation and Filing. The parties will
prepare and file with the SEC as soon as reasonably
practicable after the date hereof the Proxy Statement and
the Registration Statement. The parties hereto shall each
use reasonable best efforts to cause the Proxy Statement and
Registration Statement to be declared effective under the
Securities Act as promptly as practicable after such filing.
Each party hereto shall also take such action as may be
reasonably required to cause the shares of AIMCO Common
Stock issuable in connection with the Merger to be
registered or to obtain an exemption from registration under
applicable state "blue sky" or securities laws; provided,
however, that no party shall be required to register or
qualify as a foreign corporation or to take other action
which would subject it to general service of process in any
jurisdiction where the Surviving Corporation will not be,
following the Merger, so subject. Each of the parties hereto
shall furnish all information concerning itself which is
required or customary for inclusion in the Proxy Statement
and Registration Statement. The parties shall use reasonable
best efforts to cause the shares of AIMCO Common Stock
issuable in the Merger to be approved for listing on the
NYSE upon official notice of issuance. The information
45
provided by any party hereto for use in the Proxy Statement
and Registration Statement shall be true and correct in all
material respects without omission of any material fact
which is required to make such information not false or
misleading. No representation, covenant or agreement is made
by any party hereto with respect to information supplied by
any other party for inclusion in the Proxy Statement and
Registration Statement.
(b) Letter of Ambassador's Accountants.
Ambassador shall use its best efforts to cause to be
delivered to AIMCO letters of Ernst & Young LLP, dated a
date within two business days before the date of the Proxy
Statement and Registration Statement, and addressed to
AIMCO, in form and substance reasonably satisfactory to
AIMCO and customary in scope and substance for "cold
comfort" letters delivered by independent public accountants
in connection with registration statements on Form S-4 or
Form S-8.
(c) Letter of AIMCO's Accountants. AIMCO shall
use its best efforts to cause to be delivered to Ambassador
a letter of Ernst & Young LLP, dated a date within two
business days before the date of the Proxy Statement and
Registration Statement, and addressed to Ambassador, in form
and substance reasonably satisfactory to Ambassador and
customary in scope and substance for "cold comfort" letters
delivered by independent public accountants in connection
with registration statements on Form S-4 or Form S-8.
(d) Fairness Opinion. It shall be a condition to
the mailing of the Proxy Statement to the shareholders of
Ambassador that the opinion of Xxxxxxx Xxxxx described in
Section 4.13 hereof shall not have been withdrawn.
Section 7.3 Regulatory Matters.
(a) HSR Filings. Each party hereto shall file or
cause to be filed with the Federal Trade Commission and the
Department of Justice any notifications required to be filed
by their respective "ultimate parent" companies under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and the rules and regulations
promulgated thereunder with respect to the transactions
contemplated hereby. Such parties will use all commercially
reasonable efforts to make such filings in a timely manner
and to respond on a timely basis to any requests for
additional information made by either of such agencies.
(b) Other Regulatory Approvals. Each party
hereto shall cooperate and use its best efforts to promptly
prepare and file all necessary documentation, to effect all
necessary applications, notices, petitions, filings and
46
other documents, and to use all commercially reasonable
efforts to obtain all necessary permits, consents, approvals
and authorizations of all Governmental Authorities necessary
or advisable to obtain the Ambassador Required Statutory
Approvals and the AIMCO Required Statutory Approvals.
Section 7.4 Shareholder Approval.
(a) Approval of Ambassador Shareholders. Subject
to the provisions of Sections 7.4(b) and 7.4(d), Ambassador
shall, as soon as reasonably practicable after the date
hereof (i) take all steps necessary to duly call, give
notice of, convene and hold a meeting of its shareholders
(the "Ambassador Meeting") for the purpose of securing the
Ambassador Shareholders' Approval, (ii) distribute to its
shareholders the Proxy Statement in accordance with
applicable federal and state law and with its Articles of
Incorporation and by-laws, (iii) subject to a good faith
determination, upon advice of outside counsel, that to do so
would be inconsistent with the fiduciary duties of its Board
of Directors, recommend to its shareholders the approval of
the Merger, this Agreement and the transactions contemplated
hereby, and (iv) cooperate and consult with AIMCO with
respect to each of the foregoing matters. Notwithstanding
the foregoing, Ambassador and its Board of Directors may
take and disclose to stockholders a position contemplated by
Rule 14e-2 promulgated under the Exchange Act if required to
do so by the Exchange Act, comply with Rule 14d-9 thereunder
and make all other disclosures required by applicable law.
(b) Fairness Opinion Not Withdrawn. It shall be
a condition to the obligation of Ambassador to hold the
Ambassador Meeting, that the opinion of Xxxxxxx Xxxxx,
referred to in Section 4.13, shall not have been withdrawn.
Section 7.5 Directors' and Officers'Indemnification.
(a) Indemnification. From and after the
Effective Time, the Surviving Corporation shall, and shall
cause the AIMCO Operating Partnership to, to the fullest
extent permitted by applicable law, indemnify, defend and
hold harmless each person who is now, or has been at any
time prior to the date hereof, or who becomes prior to the
Effective Time, an officer, director or employee of any of
the parties hereto or their respective Subsidiaries (each an
"Indemnified Party" and collectively, the "Indemnified
Parties") against all losses, expenses (including reasonable
attorney's fees and expenses), claims, damages or
liabilities or, subject to the proviso of the next
succeeding sentence, amounts paid in settlement, arising out
of actions or omissions occurring at or prior to the
Effective Time (and whether asserted or claimed prior to, at
47
or after the Effective Time) that are, in whole or in part,
based on or arising out of the fact that such person is or
was a director, officer or employee of such party (the
"Indemnified Liabilities"), including, without limitation,
all Indemnified Liabilities to the extent they are based on
or arise out of or pertain to the transactions contemplated
by this Agreement. In the event of any such loss, expense,
claim, damage or liability (whether or not arising before
the Effective Time), (i) the Surviving Corporation shall pay
the reasonable fees and expenses of counsel selected by the
Indemnified Parties, which counsel shall be reasonably
satisfactory to the Surviving Corporation, promptly after
statements therefor are received and otherwise advance to
such Indemnified Party upon request reimbursement of
documented expenses reasonably incurred, in either case to
the extent not prohibited by the MGCL, (ii) the Surviving
Corporation will cooperate in the defense of any such matter
and (iii) any determination required to be made with respect
to whether an Indemnified Party's conduct complies with the
standards set forth under the MGCL and the certificate of
incorporation or by-laws of the Surviving Corporation shall
be made by independent counsel mutually acceptable to the
Surviving Corporation and the Indemnified Party; provided,
however, that the Surviving Corporation shall not be liable
for any settlement effected without its written consent
(which consent shall not be unreasonably withheld or
unreasonably delayed). The Indemnified Parties as a group
may retain only one law firm with respect to each related
matter except to the extent there is, in the opinion of
counsel to an Indemnified Party, under applicable standards
of professional conduct, a conflict on any significant issue
between positions of such Indemnified Party and any other
Indemnified Party or Indemnified Parties (provided this
sentence shall not limit retention of local counsel in
connection with any Indemnified Liabilities).
(b) Insurance. For a period of six years after
the Effective Time, the Surviving Corporation shall cause to
be maintained in effect policies of directors and officers'
liability insurance maintained by Ambassador and AIMCO for
the benefit of those persons who are currently covered by
such policies on terms no less favorable than the terms then
applicable to the members of the AIMCO Board of Directors as
of the date hereof. The insurance to be maintained shall,
without limitation, be applicable to all acts and omissions
occurring at or prior to the Effective Time and in any event
insurance shall be maintained which provides the best
coverage available for an amount which does not exceed the
amount currently paid for AIMCO director and officer
insurance.
(c) Successors. In the event the Surviving
Corporation or any of its successors or assigns (i)
48
consolidates with or merges into any other person or entity
and shall not be the continuing or surviving corporation or
entity of such consolidation or merger or (ii) transfers all
or substantially all of its properties and assets to any
person or entity, then and in either such case, proper
provisions shall be made so that the successors and assigns
of the Surviving Corporation shall assume the obligations
set forth in this Section 7.5.
(d) Survival of Indemnification. To the fullest
extent permitted by law, from and after the Effective Time,
all rights to indemnification as of the date hereof in favor
of the employees, agents, directors and officers of
Ambassador, AIMCO and their respective Subsidiaries with
respect to their activities as such prior to the Effective
Time, as provided in their respective articles of
incorporation and by-laws in effect on the date thereof, or
otherwise in effect on the date hereof, shall survive the
Merger and shall continue in full force and effect for a
period of not less than six years from the Effective Time.
(e) Benefit. The provisions of this Section 7.5
are intended to be for the benefit of, and shall be
enforceable by, each Indemnified Party, his or her heirs and
his or her representatives.
Section 7.6 Public Announcements. Subject to
each party's disclosure obligations imposed by law,
Ambassador and AIMCO will cooperate with each other in the
development and distribution of all news releases and other
public information disclosures with respect to this
Agreement or any of the transactions contemplated hereby and
shall not issue any public announcement or statement with
respect hereto or thereto without the consent of the other
party (which consent shall not be unreasonably withheld).
It is understood and agreed that this Section 7.6 is
intended to address matters with respect to this Agreement
and the transactions contemplated hereby (e.g., status,
terms, etc.), and is not intended to address disclosure of
confidential or non-public information of a party obtained
by the other party in connection with this Agreement and the
transactions contemplated hereby, which information is
subject to the Confidentiality Agreement and Section 7.1
hereof.
Section 7.7 Rule 145 Affiliates. Ambassador
shall identify in a letter to AIMCO all persons who are, and
to Ambassador's knowledge who will be at the Closing Date,
"affiliates" of Ambassador as such term is used in Rule 145
under the Securities Act. Ambassador shall use all
reasonable efforts to cause its affiliates (including any
person who may be deemed to have become such an affiliate
after the date of the letter referred to in the prior
49
sentence) to deliver to AIMCO on or prior to the Closing
Date a written agreement substantially in the form attached
as Exhibit 7.7 (each an "Affiliate Agreement"). AIMCO
agrees to enter into, effective as of the Effective Time,
the Registration Rights Agreement with each person who
executes an Affiliate Agreement or who owns AIMCO Units as a
result of conversion of OP Units in the OP Reorganization or
who owns OP Units as of the Effective Time, with respect to
AIMCO Common Stock received in connection with the Merger or
the exchange of the OP Units or the AIMCO Units, as the case
may be. The Registration Rights Agreement will have the
terms set forth on Section 7.7 of the AIMCO Disclosure
Schedule and such other terms as are customary in agreements
of this nature, as the parties, each acting in good faith,
shall reasonably agree.
Section 7.8 Employee Agreements and Workforce
Matters. The Surviving Corporation and its Subsidiaries
shall honor, without modification, all contracts,
agreements, collective bargaining agreements, severance
agreements between Ambassador and certain of its officers
and commitments of the parties prior to the date hereof that
have previously been provided to AIMCO or are disclosed in
Section 4.10 of the Ambassador Disclosure Schedule and that
apply to any current or former employee or current or former
director of the parties hereto; provided, however, that this
undertaking is not intended to prevent the Surviving
Corporation from enforcing such contracts, agreements,
collective bargaining agreements and commitments in
accordance with their terms, including, without limitation,
any reserved right to amend, modify, suspend, revoke or
terminate any such contract, agreement, collective
bargaining agreement or commitment. Without implication
that the contrary would otherwise be true, (i) no amendment,
modification, suspension, revocation or termination
("Change") of any bonus program listed on Section 4.10 of
the Ambassador Disclosure Schedule shall result in employees
of the Surviving Corporation who were employees of
Ambassador prior to the Effective Time ("Ambassador
Employees") receiving less money for any bonus period which
has expired prior to the Effective Time, (ii) no Change of
the vacation or sick time policy of Ambassador shall result
in Ambassador Employees having less accumulated vacation or
sick time than immediately before such Change and (iii) no
Change in Ambassador Benefit Plans shall be effective to
reduce benefits for those expenses or occurrences which have
occurred before the Change. This Section 7.8 is intended
and shall be construed to satisfy the successor provision in
the employment agreements listed in Section 4.10 of the
Ambassador Disclosure Schedule. Nothing in this Section 7.8
shall be deemed to limit the obligations that the Surviving
Corporation and that its Subsidiaries would otherwise have.
50
Section 7.9 Employee Benefit Plans.
(a) Ambassador Plans. From the Effective Time,
AIMCO shall provide to Ambassador Employees benefits on the
same terms applicable to other similarly situated AIMCO
employees.
(b) Credit for Past Service. Without limitation
of the foregoing provisions of this Section 7.9, each
participant in any benefit plan of the Surviving Corporation
and each Ambassador Employee shall receive credit for
service with Ambassador or AIMCO, as the case may be, for
purposes of (i) eligibility to participate (including
waiting periods and without being subject to any subsequent
entry date requirement for which the waiting period has
already been satisfied), vesting and eligibility to receive
benefits (including without pre-existing conditions
limitations) under any benefit plan of the Surviving
Corporation or any of its Subsidiaries or affiliates and
(ii) benefit accrual under any severance or vacation pay
plan; provided, however, that such crediting of benefit
accrual service shall not operate to duplicate any benefit
to any such participant for the same period or the funding
for any such benefit.
(c) Retirement Contribution. The Board of
Directors of Ambassador may determine to make a profit
sharing contribution to the Ambassador Retirement Plan with
respect to 1997 in an amount up to $750 for each participant
in the Ambassador Retirement Plan.
Section 7.10 Stock Option and Other Stock Plans.
(a) Ambassador Stock Options. Immediately prior
to the Effective Time, each option to purchase shares of
Ambassador Common Stock (an "Ambassador Stock Option") which
is outstanding at such time shall be vested and exercisable.
Holders of Ambassador Stock Options may elect prior to the
Effective Time to have the Ambassador Stock Options with
respect to which such election is made canceled and in
consideration for such cancellation, such electing holders
of Ambassador Stock Options shall receive on the day of the
Effective Time for each share subject to the Ambassador
Stock Options with respect to which the election has been
made, an amount (subject to any applicable withholding tax)
in cash equal to the excess, if any, of the Ambassador Price
over the per share exercise price of such Ambassador Stock
Option. As of the Effective Time, each Ambassador Stock
Option which is outstanding as of the Effective Time and for
which an election pursuant to the preceding sentence has not
been made shall be assumed by the Surviving Corporation and
converted into an option (or a new substitute option shall
be granted) to purchase the number of shares of AIMCO Common
51
Stock (rounded up to the nearest whole share) equal to the
number of shares of Ambassador Common Stock subject to such
option multiplied by the Conversion Ratio (as calculated
pursuant to the definition of Conversion Ratio without
regard to the proviso thereof), at an exercise price per
share of AIMCO Common Stock (rounded down to the nearest
xxxxx) equal to the former exercise price per share of
Ambassador Common Stock under such option immediately prior
to the Effective Time divided by the Conversion Ratio (as
calculated pursuant to the definition of Conversion Ratio
without regard to the proviso thereof); provided, however,
that in the case of any Ambassador Stock Option to which
Section 421 of the Code applies by reason of its
qualification under Section 422 of the Code, the conversion
formula shall be adjusted, if necessary, to comply with
Section 424(a) of the Code. Except as provided above, the
converted or substituted Ambassador Stock Options shall be
subject to the same terms and conditions (including, without
limitation, expiration date, vesting and exercise
provisions) as were applicable to Ambassador Stock Options
immediately prior to the Effective Time, except that all
converted or substituted Ambassador Stock Options shall be
vested and fully exercisable and optionees may exercise
their options through the expiration date unless their
employment is terminated for cause or they are removed as
directors for cause. Except as provided in the immediately
preceding sentence, the Merger shall not be treated as an
event which shall affect the period for exercising
Ambassador Stock Options. Ambassador Stock Options shall
not be treated as expiring as of the Effective Time solely
due to the fact that Ambassador shall cease to exist as of
the Effective Time. Ambassador and AIMCO shall take such
necessary action to effectuate the terms of this Section
7.10(a), including the amendment by the Board of Directors
of Ambassador of the Ambassador Stock Plans and the filing
of any registration statements or other documents.
(b) Surviving Corporation Action. As soon as
practicable after the Effective Time, the Surviving
Corporation shall deliver to the holders of Ambassador Stock
Options appropriate notices setting forth such holders'
rights (the "Surviving Corporation Stock Benefits") and each
underlying stock award agreement, each as assumed by the
Surviving Corporation. On or as soon as possible after the
Effective Time, the Surviving Corporation will cause to be
filed one or more registration statements on Form S-3 or
Form S-8 under the Securities Act (or any successor or other
appropriate forms), in order to register the shares of AIMCO
Common Stock issuable in connection with the Surviving
Corporation Stock Benefits, and the Surviving Corporation
shall use its best efforts to maintain the effectiveness of
such registration statements (and maintain the current
status of the prospectuses contained therein) for so long as
52
such benefits and grants remain payable and such options
remain outstanding. AIMCO shall use its best efforts to
cause such registration statements to become effective
concurrently with the Effective Time. At or prior to the
Effective Time, the Surviving Corporation shall take all
corporate action necessary to reserve for issuance a
sufficient number of shares of AIMCO Common Stock for
delivery in connection with the Surviving Corporation Stock
Benefits. The Surviving Corporation shall take all corporate
action necessary or appropriate to obtain shareholder
approval with respect to the Surviving Corporation Stock
Benefits to the extent such approval is required for
purposes of the Code or other applicable law. With respect
to those individuals who subsequent to the Merger will be
subject to the reporting requirements under Section 16(a) of
the Exchange Act with respect to equity securities of the
Surviving Corporation, the Surviving Corporation shall
administer such Surviving Corporation Stock Benefits, where
applicable, in a manner that complies with Rule 16b-3
promulgated under the Exchange Act.
Section 7.11 No Solicitations. From and after
the date hereof, Ambassador will not, and will not authorize
or permit any of its Affiliates or Representatives to,
directly or knowingly indirectly, solicit, initiate or
encourage (including by way of furnishing information) or
take any other action to facilitate knowingly any inquiries
or the making of any proposal which constitutes or may
reasonably be expected to lead to an Acquisition Proposal
(as defined herein) from any person, or engage in any
discussion or negotiations relating thereto or accept any
Acquisition Proposal; provided, however, that
notwithstanding any other provision hereof, Ambassador may
(i) at any time prior to the time Ambassador's stockholders
shall have voted to approve this Agreement, engage in
discussions or negotiations with a third party who (without
any solicitation, initiation or encouragement, directly or
knowingly indirectly, by Ambassador or its Representatives
after the date hereof) seeks to initiate such discussions or
negotiations and may furnish such third party information
concerning Ambassador and its business, properties and
assets if, (A) (x) the third party has first made an
Acquisition Proposal and the Board of Directors of
Ambassador determines in good faith and after consultation
with its financial advisor, that to do so has a reasonable
prospect of leading to an Acquisition Proposal that is
superior to the Merger and for which financing for the
Acquisition Proposal has a reasonable prospect to be
obtained (as determined in good faith by Ambassador's Board
of Directors after consultation with its financial advisors)
(a "Superior Proposal") or (y) Ambassador's Board of
Directors shall conclude in good faith, after considering
applicable provisions of state law, and after considering
53
oral or written advice of outside counsel, that failure to
take such action would be inconsistent with the fiduciary
duties of the Ambassador Board of Directors under applicable
law and (B) prior to furnishing such information to or
entering into discussions or negotiations with such person
or entity, Ambassador (x) except to the extent inconsistent
with the fiduciary obligation of the Board of Directors of
Ambassador, provides prompt notice to AIMCO to the effect
that it is planning to furnish information to or enter into
discussions or negotiations with such person or entity and
(y) receives (or has previously received) from such person
or entity an executed confidentiality agreement in
reasonably customary form (but not containing any standstill
provision), (ii) comply with Rule 14e-2 and Rule 14d-9
promulgated under the Exchange Act with regard to a tender
or exchange offer or otherwise make any disclosure required
by applicable law, and/or (iii) accept an Acquisition
Proposal from a third party, provided Ambassador
concurrently terminates this Agreement pursuant to Section
9.1(e). Except to the extent inconsistent with the
fiduciary obligations of the Board of Directors of
Ambassador, Ambassador shall immediately cease any existing
solicitation, initiation, encouragement, activity,
discussion or negotiation with any parties conducted
heretofore by Ambassador or its Representatives with respect
to the foregoing. Ambassador shall notify AIMCO orally and
in writing of any such inquiries, offers or proposals
(including, without limitation, the terms and conditions of
any such proposal and the identify of the person making it),
within 24 hours of the receipt thereof, shall keep AIMCO
reasonably informed of the status and details of any such
inquiry, offer or proposal. As used herein, "Acquisition
Proposal" shall mean a proposal or offer (other than by
AIMCO) for a tender or exchange offer, merger, consolidation
or other business combination involving Ambassador or any
material Subsidiary of Ambassador or any proposal to acquire
in any manner a substantial equity interest in or a
substantial portion of the assets of Ambassador or any
material Subsidiary of Ambassador. None of AIMCO, any
Subsidiary of AIMCO, Ambassador or any Subsidiary of
Ambassador shall object, or take any action to object, if
any third party makes any Acquisition Proposal or takes any
action with respect thereto in contravention of any
agreement such third party may have with Ambassador or any
of its Subsidiaries or any of their respective
representatives.
Section 7.12 Expenses.
(a) Parties' Payment of Expenses. Subject to
subsection 7.12(b) and Section 9.3, all costs and expenses
incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party
incurring such expenses; in particular, those expenses
54
incurred in connection with printing the Joint Proxy/
Registration Statement, as well as the filing fee relating
thereto, shall be shared equally by Ambassador and AIMCO.
(b) Payment of Certain Expenses. Immediately
prior to consummation of the Merger, Ambassador shall pay or
cause to be paid the Reimbursable Expenses (as defined
below) of Ambassador directly to the party entitled to
payment of such amounts, up to an aggregate amount equal to
the excess of $12.8 million over the Aggregate Unissued
Share Value (as defined below). The term "Reimbursable
Expenses" is defined as (i) the reasonable and customary
fees and expenses of Xxxxxxx Xxxxx, one nationally
recognized accounting firm and one legal counsel designated
by Ambassador incurred in connection with the negotiation,
execution and consummation of this Agreement, the Merger and
the transactions contemplated by this Agreement in an
aggregate amount not to exceed $5.5 million; and (ii) the
payments made to the senior managers and directors of
Ambassador pursuant to the agreements set forth on Section
7.12(b) of the Ambassador Disclosure Schedule which are
required to be made by Ambassador or the Surviving
Corporation as a result of the consummation of the Merger.
"Aggregate Unissued Share Value" is defined as the aggregate
of all positive Individual Option Values. "Individual
Option Value" is defined and calculated with respect to each
Ambassador Stock Option as the excess of $21.00 over the
strike price of such Ambassador Stock Option immediately
prior to the Effective Time. It is understood and agreed
that this section shall not impact (i) the consideration to
be received in the Merger, (ii) the obligations of the
parties hereto to consummate the Merger or (iii) any
obligations that the Surviving Corporation and its
Subsidiaries would otherwise have.
Section 7.13 Tax-Free Status. Each party hereto
agrees, as to itself and to each of its Subsidiaries, that
after the date hereof and prior to the Effective Time or
earlier termination of this Agreement, except as expressly
contemplated or permitted in this Agreement, neither party
hereto shall, nor shall either party hereto permit any of
its Subsidiaries or any employees, officers or directors of
such party or of any of its Subsidiaries to, take any
actions which would, or would be reasonably likely to,
adversely affect the ability of the Merger to qualify for
tax-free treatment under the Code, and each party hereto
shall use all reasonable efforts to achieve such result.
Section 7.14 Further Assurances. Each party
will, and will cause its Subsidiaries to, execute such
further documents and instruments and take such further
actions, including the application for any necessary
regulatory approvals or exemptions, as may reasonably be
55
requested by any other party in order to consummate the
Merger in accordance with the terms hereof.
Section 7.15 Interim Dividends. The last record
date of each of Ambassador and AIMCO on or prior to the
Effective Time which relates to a regular quarterly dividend
on Ambassador Common Stock or AIMCO Common Stock, as the
case may be, shall be the same date and shall be prior to
the Effective Time.
Section 7.16 REIT Status. Notwithstanding
anything to the contrary set forth in this Agreement,
nothing in this Agreement shall prohibit Ambassador from
taking and Ambassador hereby agrees to take, any action at
any time or from time to time that in the reasonable
judgment of Ambassador is legally necessary for Ambassador
to maintain its qualification as a REIT within the meaning
of Sections 856-860 of the Code for any period or portion
thereof ending on or prior to the Effective Time, including
without limitations, making dividend or distribution
payments to shareholders of Ambassador.
Section 7.17 NYSE Listing. AIMCO shall use its
reasonable best efforts to cause the shares of AIMCO Common
Stock to be issued in the Merger to be approved for listing
on the NYSE and any other national securities exchange on
which shares of AIMCO Common Stock may at such time be
listed, subject to official notice of issuance, prior to the
Effective Time.
Section 7.18 OP Reorganization. The parties
shall use their reasonable best efforts to effect a business
combination of the Ambassador Operating Partnership with the
AIMCO Operating Partnership immediately following the
Effective Time, with the AIMCO Operating Partnership as the
surviving entity which business combination shall have, to
the extent possible, for the holders of the OP Units, the
same economic and tax consequences for the holders of OP
Units as the Merger has for holders of Ambassador Common
Stock. If such a business combination is not effected due
to failure to obtain consents of all persons entitled to
give or withhold such consents which are necessary for such
business combination, then (i) such partnerships shall
remain and be operated as separate entities and (ii) AIMCO
shall execute and deliver to each limited partner in the
Ambassador Operating Partnership the agreement contemplated
by Section 14 of the Exchange Agreement (and be bound
thereby) relating to the exchange rights of holders of OP
Units. At the request of either party hereto, the parties
shall cooperate to restructure the transactions contemplated
hereby to permit the condition set forth in Section 8.1(h)
to be satisfied as soon as practicable after the date hereof
and prior to April 28, 1998 without changing the economic
56
and other provisions hereof and without unreasonable expense
or delay.
Section 7.19 Transfer Taxes. AIMCO and
Ambassador shall cooperate in the preparation, execution and
filing of all returns, questionnaires, applications or other
documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp
taxes, any transfer, recording, registration and other fees
or any similar taxes which become payable in connection with
the transactions contemplated by this Agreement that are
required or permitted to be filed on or before the Effective
Time. The Surviving Corporation shall pay, without
deduction or withholding from any amount payable to the
holders of Ambassador Common Stock or OP Units, any such
taxes or fees imposed by any Governmental Authority (and any
penalties and interest with respect to such taxes and fees),
which become payable in connection with the transactions
contemplated by this Agreement, on behalf of their
respective stockholders.
Section 7.20 Payment of Ambassador Debt.
Ambassador and AIMCO agree that immediately prior to, or
upon, the Effective Time, the Surviving Corporation shall
(i) pay to CLNY the amount necessary to discharge and
terminate the Line of Credit and (ii) pay to NACC the amount
necessary to discharge and terminate the Nomura Debt.
Section 7.21 Best Efforts. Upon the terms and
subject to the conditions herein provided, and, in the case
of Ambassador, not inconsistent with the fiduciary duties of
its Board of Directors, each of the parties hereto agrees to
use its best efforts to take, or cause to be taken, all ac-
tion, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated
by this Agreement, including obtaining any consents,
authorizations, exemptions and approvals from, and making
filings with, any Governmental Authority which are necessary
or, in the judgment of AIMCO or Ambassador, desirable in
connection with the transactions contemplated by this Agree-
ment.
ARTICLE VIII
CONDITIONS
Section 8.1 Conditions to Each Party's Obligation
to Effect the Merger. The respective obligations of each
party to effect the Merger shall be subject to the
satisfaction on or prior to the Closing Date of the
following conditions, except, to the extent permitted by
applicable law, that such conditions may be waived in
57
writing pursuant to Section 9.5 by the joint action of the
parties hereto:
(a) Shareholder Approval. The Ambassador
Shareholders' Approval shall have been obtained.
(b) No Injunction. No temporary restraining
order or preliminary or permanent injunction or other
order by any federal or state court preventing
consummation of the Merger shall have been issued and
be continuing in effect, and no Governmental Entity
shall have instituted any action or proceeding seeking
any such order.
(c) Registration Statement. The Registration
Statement shall have become effective in accordance
with the provisions of the Securities Act, and no stop
order suspending such effectiveness shall have been
issued and remain in effect.
(d) Listing of Shares. The shares of AIMCO
Common Stock issuable in the Merger pursuant to Article
II shall have been approved for listing on the NYSE
upon official notice of issuance.
(e) Required Statutory Approvals. The Ambassador
Required Statutory Approvals and the AIMCO Required
Statutory Approvals shall have been obtained at or
prior to the Effective Time and such approvals shall
have become Final Orders (as defined below),except to
the extent that the failure to obtain any such Required
Statutory Approval would not reasonably be expected to
have an AIMCO Material Adverse Effect assuming
consummation of the Merger. Such Final Orders with
respect to the Ambassador Required Statutory Approvals
and the AIMCO Required Statutory Approvals shall not
impose terms or conditions which, individually or in
the aggregate, would have, or insofar as reasonably can
be foreseen, are likely to have a material adverse
effect on the business, assets, financial condition or
results of operations of the Surviving Corporation. A
"Final Order" means action by the relevant regulatory
authority which has not been reversed, stayed,
enjoined, set aside, annulled or suspended, with
respect to which any waiting period prescribed by law
before the transactions contemplated hereby may be
consummated has expired, and as to which all conditions
to the consummation of such transactions prescribed by
law, regulation or order have been satisfied.
(f) Permits. To the extent that the continued
lawful operations of the business of Ambassador or any
Ambassador Subsidiary or AIMCO or any AIMCO Subsidiary
after the Merger require that any license, permit or
58
other governmental approval be transferred to the
Surviving Corporation or issued to the Surviving
Corporation, such licenses, permits or other
authorizations shall have been transferred or reissued
to the Surviving Corporation at or before the Closing
Date, except where the failure to transfer or reissue
such licenses, permits or other authorizations would
not have a material adverse effect on the business,
assets, financial condition, results of operations or
prospects of the Surviving Corporation and its
Subsidiaries taken as a whole immediately after the
Effective Time.
(g) Opinion of Maryland Counsel. Ambassador and
AIMCO shall have received the opinion of Piper &
Marbury L.L.P., which is acting at the request and
consent of both parties as Maryland counsel, to the
effect that the articles of merger are enforceable
under Maryland law.
(h) Opinion of Public Finance Counsel. The
parties hereto shall have received an opinion of public
finance counsel mutually acceptable to the parties
hereto that the Florida Bonds (as defined in
Ambassador's Form 10-Q for the quarterly period ended
September 30, 1997) shall not lose their tax exempt
status as a result of the Merger.
Section 8.2 Conditions to Obligation of AIMCO to
Effect the Merger. The obligation of AIMCO to effect the
Merger shall be further subject to the satisfaction, on or
prior to the Closing Date, of the following conditions,
except as may be waived by AIMCO in writing pursuant to
Section 9.5:
(a) Performance of Obligations of Ambassador.
Ambassador (and/or Ambassador's appropriate
Subsidiaries) will have performed in all material
respects its material agreements and covenants
contained in or contemplated by this Agreement which
are required to be performed by it at or prior to the
Effective Time including, without limitation,
agreements and covenants contained in Section 2.1(d)
hereof.
(b) Representations and Warranties. The
representations and warranties of Ambassador set forth
in this Agreement which are qualified by Ambassador
Material Adverse Effect shall be true and correct and
all other representations and warranties of Ambassador
set forth in this Agreement shall be true and correct
except for such failures of representations or
warranties to be true and correct (without giving
effect to any materiality qualification or standard
59
contained in any such representations and warranties)
which, individually or in the aggregate, would not
result in an Ambassador Material Adverse Effect, as of
the Effective Time, in each case (i) on and as of the
date hereof and (ii) on and as of the Closing Date with
the same effect as though such representations and
warranties had been made on and as of the Closing Date
(except for representations and warranties that
expressly speak only as of a specific date or time
which need only be true and correct as of such date or
time).
(c) Closing Certificates. AIMCO shall have
received a certificate signed by the chief financial
officer of Ambassador, on behalf of Ambassador, dated
the Closing Date, to the effect that, to the best of
such officer's knowledge, the conditions set forth in
Section 8.2(a) and Section 8.2(b) have been satisfied.
(d) Ambassador Material Adverse Effect. Since
December 31, 1996, no Ambassador Material Adverse
Effect shall have occurred and be continuing.
(e) Tax Opinion. AIMCO shall have received from
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, counsel to
AIMCO, an opinion dated as of such date to the effect
that the Merger should constitute a "reorganization"
within the meaning of Section 368(a) of the Code and
AIMCO and Ambassador should each be a party to such
reorganization within the meaning of Section 368(b) of
the Code. In rendering such opinion, Skadden, Arps,
Slate, Xxxxxxx & Xxxx LLP may require delivery of and
rely upon representations contained in certificates of
officers of Ambassador, AIMCO and others.
(f) REIT Opinion. AIMCO shall have received an
opinion of counsel to Ambassador, dated as of the
Effective Time, reasonably satisfactory to AIMCO that,
for its taxable year ended December 31, 1994 and all
subsequent taxable years ending on or before the
Effective Time (including the short taxable year ending
immediately prior to the Effective Time), Ambassador
was organized and has operated in conformity with the
requirements for qualification as a REIT under the Code
(with customary exceptions, assumptions and
qualifications and based upon customary
representations).
(g) Affiliate Agreements. AIMCO shall have
received Affiliate Agreements, duly executed by each
"Affiliate" of Ambassador, substantially in the form of
Exhibit 7.7, as provided in Section 7.7.
60
(h) FNMA Credit Enhancement. The Federal
National Mortgage Association ("FNMA") shall have
consented (the "FNMA Consent") to the assumption by the
Surviving Corporation of approximately $216.3 million
of credit enhancement for taxable and tax exempt bonds
payable by Ambassador and any Subsidiary of Ambassador
outstanding as of the Effective Time, which credit
enhancement by FNMA has an initial term of 25 years
(the "FNMA Credit Enhancement").
(i) No Default. Neither Ambassador nor any
Subsidiary of Ambassador is in default under the FNMA
Credit Enhancements, except for such defaults which do
not have an Ambassador Material Adverse Effect.
Section 8.3 Conditions to Obligation of
Ambassador to Effect the Merger. The obligation of
Ambassador to effect the Merger shall be further subject to
the satisfaction, on or prior to the Closing Date, of the
following conditions, except as may be waived by Ambassador
in writing pursuant to Section 9.5.
(a) Performance of Obligations of AIMCO. AIMCO
(and/or AIMCO's appropriate Subsidiaries) will have
performed in all material respects their agreements and
covenants contained in or contemplated by this
Agreement which are required to be performed by it at
or prior to the Effective Time.
(b) Representations and Warranties. The
representations and warranties of AIMCO set forth in
this Agreement which are qualified by AIMCO Material
Adverse Effect shall be true and correct and all other
representations and warranties of AIMCO set forth in
this Agreement shall be true and correct except for
such failures of representations or warranties to be
true and correct (without giving effect to any
materiality qualification or standard contained in any
such representations and warranties) which,
individually or in the aggregate, would not result in
an AIMCO Material Adverse Effect, as of the Effective
Time, in each case (i) on and as of the date hereof and
(ii) on and as of the Closing Date with the same effect
as though such representations and warranties had been
made on and as of the Closing Date (except for
representations and warranties that expressly speak
only as of a specific date or time which need only be
true and correct as of such date or time).
(c) Closing Certificates. Ambassador shall have
received a certificate signed by the chief financial
officer of AIMCO, on behalf of AIMCO, dated the Closing
Date, to the effect that, to the best of such officer's
61
knowledge, the conditions set forth in Section 8.3(a)
and Section 8.3(b) have been satisfied.
(d) Tax Opinion. Ambassador shall have received
from Altheimer & Xxxx, counsel to Ambassador, an
opinion dated as of such date to the effect that the
Merger should constitute a "reorganization" within the
meaning of Section 368(a) of the Code and AIMCO and
Ambassador should each be a party to such
reorganization within the meaning of Section 368(b) of
the Code. In rendering such opinion, Altheimer & Xxxx
may require delivery of and rely upon representations
contained in certificates of officers of Ambassador,
AIMCO and others.
(e) REIT Opinion. Ambassador shall have received
an opinion of counsel to AIMCO, dated as of the
Effective Time, reasonably satisfactory to Ambassador
that, for its taxable year ended December 31, 1994 and
all subsequent taxable years ending on or before the
Effective Time, AIMCO was organized and has operated in
conformity with the requirements for qualification as a
REIT under the Code and that, after giving effect to
the Merger, AIMCO's proposed method of operation will
enable it to continue to meet the requirements for
qualification and taxation as a REIT under the Code
(with customary exceptions, assumptions and
qualifications and based upon customary
representations).
(f) AIMCO Required Consents. The AIMCO Required
Consents and the Ambassador Required Consents the
failure of which to obtain would have an AIMCO Material
Adverse Effect (assuming consummation of the Merger)
shall have been obtained.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Agreement may be
terminated at any time prior to the Closing Date, whether
before or after approval by the shareholders of Ambassador
contemplated by this Agreement:
(a) by mutual written consent of the Boards of
Directors of Ambassador and AIMCO;
(b)(i) by either party if there has been any
breach of any representations or warranties on the part
of the other set forth in this Agreement, which
breaches individually or in the aggregate would result
in an AIMCO Material Adverse Effect or an Ambassador
62
Material Adverse Effect, as the case may be, or a
material breach on the part of the other party of any
of its material covenants or agreements set forth in
this Agreement and, in any case which breaches have not
been cured within 20 business days following receipt by
the breaching party of notice of such breach or
adequate assurance of such cure shall not have been
given by or on behalf of the breaching party within
such 20 business-day period, (ii) by either party, if
the Ambassador Board of Directors or any committee of
the Ambassador Board of Directors (A) shall withdraw or
modify in any adverse manner its approval or
recommendation of this Agreement or the Merger, (B)
shall approve or recommend any acquisition of
Ambassador or a material portion of its assets or any
tender offer for shares of capital stock of Ambassador,
in each case, other than by AIMCO or an Affiliate
thereof or (C) shall resolve to take any of the actions
specified in clause (A) or (B), or (iii) by either
party, if any state or federal law, order, rule or
regulation is adopted or issued after the date hereof,
which has the effect, as supported by the written
opinion of outside counsel for such party, of
prohibiting the Merger, or by any party hereto if any
court of competent jurisdiction in the United States or
any state shall have issued an order, judgment or
decree permanently restraining, enjoining or otherwise
prohibiting the Merger or any other Transaction, and
such order, judgment or decree shall have become final
and nonappealable;
(c) by either party hereto, by written notice to
the other party, if the Effective Time shall not have
occurred on or before July 31, 1998 (the "Termination
Date"); provided, however, that the right to terminate
the Agreement under this Section 9.1(c) shall not be
available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of,
or resulted in, the failure of the Effective Time to
occur on or before this date; and provided, further,
that if on the Termination Date the conditions to the
Closing set forth in Section 8.1(e) shall not have been
fulfilled but all other conditions to the Closing shall
be fulfilled or shall be capable of being fulfilled,
then the Termination Date shall be extended to
September 15, 1998;
(d) by either party hereto, by written notice to
the other party, if the Ambassador Shareholders'
Approval shall not have been obtained at a duly held
Ambassador Meeting, including any adjournments thereof;
(e) by Ambassador, by written notice to AIMCO, if
the Board of Directors of Ambassador shall determine in
63
good faith that an Acquisition Proposal constitutes a
Superior Proposal; provided however, that Ambassador
may not terminate this Agreement pursuant to this
clause (e) unless (i) five days shall have elapsed
after delivery to AIMCO of a written notice of such
determination by such Board of Directors and at all
reasonable times during such five day period Ambassador
shall have cooperated with AIMCO in informing AIMCO of
the terms and conditions of such Acquisition Proposal
and the identity of the person or group making such
Acquisition Proposal, with the objective of providing
AIMCO a reasonable opportunity, during such five day
period, to propose a modification of the terms and
conditions of this Agreement so that a business
combination between Ambassador and AIMCO may be
effected, (ii) during such five day period, the Board
of Directors negotiates in good faith with AIMCO with
respect to such proposed modifications; provided
however, that the decision as to whether to proceed
with the Merger and other Transactions shall be at the
discretion of the Board of Directors of Ambassador and
(iii) at the end of such five day period such Board of
Directors shall continue to believe in good faith that
such Acquisition Proposal constitutes a Superior
Proposal; or
(f) by Ambassador, if both Xxxxx Xxxxxxxxx and
Xxxxx X. Xxxxxxxxx cease to serve as officers and
directors of AIMCO and the AIMCO Operating Partnership,
other than as a result of death or disability.
Section 9.2 Effect of Termination. In the event
of termination of this Agreement by either Ambassador or
AIMCO pursuant to Section 9.1 there shall be no liability on
the part of either Ambassador or AIMCO or their respective
officers or directors hereunder, except that the
Confidentiality Agreement, Section 7.12, Section 9.3,
Section 10.8 and Section 10.9 shall survive the termination.
There shall be no liability with respect to facts and
circumstances that give rise to any right of termination
hereunder if this Agreement is not in fact terminated and
any breach of this Agreement which does not give rise to a
right of termination under Section 9.1(b)(i) shall not
result in any liabilities to the breaching party.
Section 9.3 Termination Fee; Expenses.
(a) Ambassador Termination Fee. If (i) this
Agreement (A) is terminated by AIMCO pursuant to Section
9.1(b)(i), (B) is terminated by Ambassador pursuant to
Section 9.1 (e), (C) is terminated as a result of
Ambassador's breach of Section 7.4(a), or (D) is terminated
because the shareholders of Ambassador do not approve the
Merger, (ii) at the time of such termination or prior to the
64
meeting of Ambassador's shareholders but after the date
hereof there shall have been made an Acquisition Proposal
involving Ambassador or any of its Affiliates (whether or
not such Acquisition Proposal shall have been rejected or
shall have been withdrawn prior to the time of such
termination or of such meeting) and (iii) within one year of
the termination of this Agreement Ambassador or any of its
Affiliates becomes a Subsidiary of the party which has made
such Acquisition Proposal or a Subsidiary of an Affiliate of
such party or accepts a written offer to consummate or
consummates an Acquisition Proposal with such party or an
Affiliate thereof, then Ambassador (jointly and severally
with the Ambassador Operating Partnership), upon the signing
of a definitive agreement relating to such Acquisition
Proposal, or, if no such agreement is signed, then at the
closing (and as a condition to the closing) of Ambassador
becoming such a Subsidiary or of such Acquisition Proposal,
shall pay to AIMCO the Break-Up Fee. The payment of the
Break-Up Fee shall be compensation and liquidated damages
for the loss suffered by AIMCO as the result of the failure
of the Merger to be consummated and to avoid the difficulty
of determining damages under the circumstances, and neither
party shall have any other liability to the other
(including, in the case of Ambassador, the party making the
Acquisition Proposal) with respect to the circumstances
giving rise to the payment of the Break-Up Fee, other than
the payment of the Break-Up Fee. The "Break-Up Fee" shall
be an amount equal to the lesser of (i) 3.5% of the sum of
(A) the Ambassador Price times the number of shares of
Ambassador Common Stock outstanding as of the date hereof,
plus (B) the Ambassador Price times the number of shares of
Ambassador Preferred Stock outstanding on the date hereof
(the "Base Amount") and (ii) the sum of (X) the maximum
amount that can be paid to AIMCO in the year in which this
Agreement is terminated (the "Termination Year") and in all
relevant taxable years thereafter without causing it to fail
to meet the requirements of Sections 856(c) (2) and (3) of
the Code (the "REIT Requirements") for such year, determined
as if the payment of such amount did not constitute income
described in Section 856(c) (2)(A)-(H) and 856(c) (3)(A)-(I)
of the Code ("Qualifying Income"), as determined by
independent accountants to AIMCO, and (Y) in the event AIMCO
receives a ruling from the IRS (a "Break-Up Fee ruling")
holding that AIMCO's receipt of the Base Amount would either
constitute Qualifying Income or would be excluded from gross
income within the meaning of the REIT Requirements, the Base
Amount less the amount payable under clause (X) above. If
the amount payable for the Termination Year under the
preceding sentence is less than the Base Amount, Ambassador
shall place the remaining portion of the Base Amount in
escrow and shall not release any portion thereof to AIMCO
unless and until Ambassador receives either of the
following: (i) a letter from AIMCO's independent accountants
indicating the maximum amount that can be paid at that time
65
to AIMCO without causing AIMCO to fail to meet the REIT
Requirements for any relevant taxable year, together with
either an IRS Ruling issued to AIMCO or an opinion of
AIMCO's tax counsel to the effect that such payment would
not be treated as includible in the income of AIMCO for any
prior taxable year, in which event Ambassador shall pay such
maximum amount, or (ii) a Break-Up Fee ruling, in which
event Ambassador shall pay to AIMCO the unpaid Base Amount.
Ambassador's obligation to pay any unpaid portion of the
Break-Up Fee shall terminate three years from the date of
this Agreement and Ambassador shall have no obligation to
make any further payments notwithstanding that the entire
Base Amount has not been paid as of such date. A party's
"Break-Up Expenses" shall be an amount equal to the lesser
of (i) such party's out-of-pocket expenses incurred in
connection with this Agreement and the Transactions
(including, without limitation, all attorney's, accountants'
and investment bankers' fees and expenses) but in no event
in an amount greater than $1.0 million (the "Expense Fee
Base Amount") and (ii) the sum of (A) the maximum amount
that can be paid to such party in the Termination Year and
in all relevant taxable years thereafter without causing it
to fail to meet the REIT Requirements for such year,
determined as if the payment of such amount did not
constitute Qualifying Income, as determined by independent
accountants to such party and (B) in the event such party
receives a ruling from the IRS (an "Expense Fee Ruling")
holding that such party's receipt of the Expense Fee Base
Amount would either constitute Qualifying Income or would be
excluded from gross income within the meaning of the REIT
Requirements, the Expense Fee Base Amount less the amount
payable under clause (A) above. Ambassador's obligation to
pay any unpaid portion of the Break-Up Expenses shall
terminate three years from the date of this Agreement and
Ambassador shall have no obligation to make any further
payments notwithstanding that the entire amount of Break-Up
Expenses has not been paid as of such date. If the amount
payable for the Termination Year (as determined above) is
less than the Expense Fee Base Amount, Ambassador shall
place the remaining portion of the Expense Fee Base Amount
in escrow and shall not release any portion thereof to AIMCO
unless and until Ambassador receives either of the
following: (i) a letter from AIMCO's independent accountants
indicating the maximum amount that can be paid at that time
to AIMCO without causing AIMCO to fail to meet the REIT
Requirements for any relevant taxable year, together with
either the IRS ruling issued to AIMCO or an opinion of
AIMCO's tax counsel to the effect that such payment would
not be treated as includible in the income of AIMCO for any
prior taxable year, in which event Ambassador shall pay to
AIMCO such maximum amount or (ii) an Expense Fee Ruling, in
which event Ambassador shall pay to AIMCO the unpaid Expense
Fee Base Amount.
66
(b) AIMCO Termination Fee. If this Agreement is
terminated by Ambassador in accordance with Section
9.1(b)(i) and, at the time of such termination, Ambassador
has not breached any of its representations, warranties,
covenants or agreements set forth in this Agreement which
would give rise to a right on the part of AIMCO to terminate
this Agreement pursuant to Section 9.1(b)(i), then AIMCO
(jointly and severally with the AIMCO Operating
Partnership), shall pay to Ambassador the Break-Up Fee. The
payment of the Break-Up Fee shall be compensation and
liquidated damages for the loss suffered by Ambassador as
the result of the failure of the Merger to be consummated
and to avoid the difficulty of determining damages under the
circumstances, and neither party shall have any other
liability to the other with respect to the circumstances
giving rise to the payment of the Break-Up Fee, other than
the payment of the Break-Up Fee. If the amount payable for
the Termination Year is less than the Base Amount, AIMCO
shall place the remaining portion of the Base Amount in
escrow and shall not release any portion thereof to
Ambassador unless and until AIMCO receives either of the
following: (i) a letter from Ambassador's independent
accountants indicating the maximum amount that can be paid
at that time to Ambassador without causing Ambassador to
fail to meet the REIT Requirements for any relevant taxable
year, together with either an IRS Ruling issued to
Ambassador or an opinion of Ambassador's tax counsel to the
effect that such payment would not be treated as includible
in the income of Ambassador for any prior taxable year, in
which event AIMCO shall pay such maximum amount, or (ii) a
Break-Up Fee ruling, in which event Ambassador shall pay to
Ambassador the unpaid Base Amount. AIMCO's obligation to
pay any unpaid portion of the Break-Up Fee shall terminate
three years from the date of this Agreement and AIMCO shall
have no obligation to make any further payments
notwithstanding that the entire Base Amount has not been
paid as of such date. AIMCO's obligation to pay any unpaid
portion of the Break-Up Expenses shall terminate three years
from the date of this Agreement and AIMCO shall have no
obligation to make any further payments notwithstanding that
the entire amount of Break-Up Expenses has not been paid as
of such date. If the amount payable for the Termination Year
(as determined above) is less than the Expense Fee Base
Amount, AIMCO shall place the remaining portion of the
Expense Fee Base Amount in escrow and shall not release any
portion thereof to Ambassador unless and until AIMCO
receives either of the following: (i) a letter from
Ambassador's independent accountants indicating the maximum
amount that can be paid at that time to Ambassador without
causing Ambassador to fail to meet the REIT Requirements for
any relevant taxable year, together with either the IRS
ruling issued to Ambassador or an opinion of Ambassador's
tax counsel to the effect that such payment would not be
treated as includible in the income of Ambassador for any
67
prior taxable year, in which event AIMCO shall pay to
Ambassador such maximum amount or (ii) an Expense Fee
Ruling, in which event AIMCO shall pay to Ambassador the
unpaid Expense Fee Base Amount.
(c) Expenses. The parties agree that the
agreements contained in this Section 9.3 are an integral
part of the transactions contemplated by this Agreement and
constitute liquidated damages and not a penalty and shall be
the sole and exclusive remedy of the parties hereto with
respect to the facts and circumstances giving rise to the
payment of a Break-Up Fee. Notwithstanding anything to the
contrary contained in this Section 9.3, if Ambassador or
AIMCO fails to promptly pay to AIMCO or Ambassador, as the
case may be, any fee due under Section 9.3(a) or 9.3(b), as
the case may be, in addition to any amounts paid or payable
pursuant to such sections, Ambassador or AIMCO, as the case
may be, shall pay the costs and expenses (including legal
fees and expenses) in connection with any action, including
the filing of any lawsuit or other legal action, taken by
AIMCO or Ambassador, as the case may be, to collect payment,
together with interest on the amount of any unpaid fee at
the publicly announced prime rate of Citibank, N.A. from the
date such fee was required to be paid.
Section 9.4 Amendment. This Agreement may be
amended by the Boards of Directors of the parties hereto, at
any time before or after approval hereof by the shareholders
of Ambassador and prior to the Effective Time, but after
such approvals, no such amendment shall (a) alter or change
the amount or kind of shares, rights or any of the
proceedings of the treatment of shares under Article II or
(b) alter or change any of the terms and conditions of this
Agreement if any of the alterations or changes, alone or in
the aggregate, would materially adversely affect the rights
of holders of Ambassador Common Stock or AIMCO Common Stock,
except for alterations or changes that could otherwise be
adopted by the Board of Directors of the Surviving
Corporation, without the further approval of such
shareholders, as applicable. This Agreement may not be
amended except by an instrument in writing signed on behalf
of each of the parties hereto.
Section 9.5 Waiver. At any time prior to the
Effective Time, a party hereto may (a) extend the time for
the performance of any of the obligations or other acts of
the other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party contained
herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions of
the other party contained herein, to the extent permitted by
applicable law. Any agreement on the part of a party hereto
to any such extension or waiver shall be valid if set forth
in an instrument in writing signed on behalf of such party.
68
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-Survival; Effect of
Representations and Warranties. No representations or
warranties in this Agreement or in any instruments delivered
pursuant hereto shall survive the Effective Time, except as
otherwise provided in this Agreement.
Section 10.2 Brokers. Ambassador represents and
warrants that, except for Xxxxxxx Xxxxx whose fees have been
disclosed to AIMCO prior to the date hereof, no broker,
finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the
Merger or the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Ambassador.
AIMCO represents and warrants that no broker, finder or
investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the Merger or the
transactions contemplated by this Agreement based upon
arrangements made by or on behalf of AIMCO.
Section 10.3 Notices. All notices and other
communications hereunder shall be in writing and shall be
deemed given (a) when delivered personally, (b) when sent by
reputable overnight courier service, or (c) when telecopied
(which is confirmed by copy sent within one business day by
a reputable overnight courier service) to the parties at the
following addresses (or at such other address for a party as
shall be specified by like notice):
(i) If to Ambassador, to:
Ambassador Apartments, Inc.
00 Xxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
with a copy to:
Altheimer & Xxxx
00 Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxxxxxx, Esq.
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
69
(ii) If to AIMCO, to:
Apartment Investment and
Management Company
0000 Xxxxx Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxx
Attn: Xxxxx X. Xxxxxxxxx
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
with a copy to:
Skadden, Arps, Slate,
Xxxxxxx & Xxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxx, Esq.
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
Section 10.4 Miscellaneous. This Agreement
(including the disclosure schedules, exhibits, documents and
instruments referred to herein) (a) together with the
Confidentiality Agreement constitutes the entire agreement
and supersedes all other prior agreements and
understandings, both written and oral, among the parties, or
any of them, with respect to the subject matter hereof, (b)
shall not be assigned by either party and (c) shall be
governed by and construed in accordance with the laws of the
State of Delaware applicable to contracts executed in and to
be fully performed in such State, without giving effect to
its conflicts of law rules or principles and except to the
extent the provisions of this Agreement (including the
documents or instruments referred to herein) are expressly
governed by or derive their authority from the MGCL. Any
disclosure set forth in the Ambassador Disclosure Schedule
or the Ambassador SEC Reports or any Ambassador press
release or other public statement shall be applicable to
each representation and warranty herein of Ambassador to
which it is reasonably evident that such disclosure relates.
Any disclosure set forth in the AIMCO Disclosure Schedule or
the AIMCO SEC Reports or any AIMCO press release or other
public statement shall be applicable to each representation
and warranty herein of AIMCO to which it is reasonably
evident that such disclosure relates.
Section 10.5 Interpretation. When a reference is
made in this Agreement to Sections or Exhibits, such
reference shall be to a Section or Exhibit of this
Agreement, respectively, unless otherwise indicated. The
table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
70
Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed
by the words "without limitation."
Section 10.6 Counterparts; Effect. This
Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
Section 10.7 Parties' Interest. This Agreement
shall be binding upon and inure solely to the benefit of
each party hereto, and, except for rights of Indemnified
Parties as set forth in Section 7.5, nothing in this
Agreement, express or implied, is intended to confer upon
any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement, except as
provided in Section 7.5, 7.8 and 7.9 hereto.
Section 10.8 Waiver of Jury Trial and Certain
Damages. Each party to this Agreement waives, to the
fullest extent permitted by applicable law, (a) any right it
may have to a trial by jury in respect of any action, suit
or proceeding arising out of or relating to this Agreement
and (b) without limitation to Section 9.3, any right it may
have to receive damages from any other party based on any
theory of liability for any special, indirect, consequential
(including lost profits) or punitive damages.
Section 10.9 Enforcement. The parties agree that
irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches
of this Agreement and to enforce specifically the terms and
provisions of this Agreement in any court of the United
States located in the State of New York or in New York state
court, this being in addition to any other remedy to which
they are entitled at law or in equity. In addition, each of
the parties hereto (a) consents to submit itself to the
personal jurisdiction of any federal court located in the
State of New York or any New York state court in the event
any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (b) agrees that
it will not attempt to deny such personal jurisdiction by
motion or other request for leave from any such court and
(c) agrees that it will not bring any action relating to
this Agreement or any of the transactions contemplated by
this Agreement in any court other than a federal or state
court sitting in the State of New York.
Section 10.10 Severability. The provisions of
this Agreement shall be deemed severable and the invalidity
or unenforceability of any provision shall not affect the
71
validity or enforceability of the other provisions hereof.
If any provision of this Agreement, or the application
thereof to any person or entity or any circumstance, is
invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry
out, so far as may be valid and enforceable, the intent and
purpose of such invalid or unenforceable provision and (b)
the remainder of this Agreement and the application of such
provision to other persons, entities or circumstances shall
not be affected by such invalidity or unenforceability, nor
shall such invalidity or unenforceability affect the
validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
Section 10.11 Anti-dilution. The AIMCO Index
Price and the Conversion Ratio and any AIMCO share price
referred to in this Agreement shall be appropriately
adjusted in the case of any stock or extraordinary dividend
or distribution, reclassification, recapitalization, split-
up, combination or subdivision with respect to the common
stock of AIMCO.
* * * * *
72
IN WITNESS WHEREOF, Ambassador and AIMCO have
caused this Agreement to be signed by their respective
officers thereunto duly authorized as of the date first
written above.
AMBASSADOR APARTMENTS, INC.
By: /s/ Xxxxx Xxxxxxxx
-------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Chairman and Chief Executive
Officer
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
By: /s/ Xxxxx Xxxxxxxxx
-------------------------
Name: Xxxxx X. Xxxxxxxxx
Title:
73
LIST OF DISCLOSURE SCHEDULES
Ambassador Disclosure Schedules
Section 4.2 - Subsidiaries
Section 4.3 - Stock Plans
Section 4.4(b) - Conflicts and Consents
Section 4.4(c) - Statutory Approvals
Section 4.7 - Litigation
Section 4.9 - Taxes
Section 4.10 - Employee Matters
Section 4.11 - Environmental
Section 4.14 - Properties
Section 6.1 - Ambassador Budget
Section 7.12(b) - Executive Compensation Plans
AIMCO Disclosure Schedules
Section 5.2 - Subsidiaries
Section 5.3 - Stock Plans
Section 5.4(b) - Conflicts and Consents
Section 5.4(c) - Statutory Approvals
Section 5.7 - Litigation
Section 5.9 - Taxes
Section 5.10 - Employee Matters
Section 5.11 - Environmental
INDEX OF PRINCIPAL TERMS
TERM PAGE
Acquisition Proposal . . . . . . . . . . . . . . . . . . 42
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . 31
Affiliate Agreement . . . . . . . . . . . . . . . . . . . 39
Aggregate Unissued Share Value . . . . . . . . . . . . . 43
Agreement . . . . . . . . . . . . . . . . . . . . . . . . 1
AIMCO . . . . . . . . . . . . . . . . . . . . . . . . . . 1
AIMCO Articles . . . . . . . . . . . . . . . . . . . . . 2
AIMCO Benefit Plans . . . . . . . . . . . . . . . . . . . 25
AIMCO Class B Common Stock . . . . . . . . . . . . . . . 20
AIMCO Class B Preferred . . . . . . . . . . . . . . . . . 20
AIMCO Class C Preferred . . . . . . . . . . . . . . . . . 20
AIMCO Common Stock . . . . . . . . . . . . . . . . . . . 2
AIMCO Disclosure Schedule . . . . . . . . . . . . . . . . 20
AIMCO Financial Statements . . . . . . . . . . . . . . . 23
AIMCO Index Price . . . . . . . . . . . . . . . . . . . . 3
AIMCO Material Adverse Effect . . . . . . . . . . . . . . 23
AIMCO Operating Partnership . . . . . . . . . . . . . . . 1
AIMCO Preferred Stock . . . . . . . . . . . . . . . . . . 20
AIMCO Required Consents . . . . . . . . . . . . . . . . . 21
AIMCO Required Statutory Approvals . . . . . . . . . . . 22
AIMCO SEC Reports . . . . . . . . . . . . . . . . . . . . 23
AIMCO Subsidiary . . . . . . . . . . . . . . . . . . . . 20
AIMCO Units . . . . . . . . . . . . . . . . . . . . . . . 1
Ambassador . . . . . . . . . . . . . . . . . . . . . . . 1
Ambassador Benefit Plans . . . . . . . . . . . . . . . . 15
Ambassador Common Stock . . . . . . . . . . . . . . . . . 2
Ambassador Disclosure Schedule . . . . . . . . . . . . . 7
Ambassador Employees . . . . . . . . . . . . . . . . . . 39
Ambassador Financial Statements . . . . . . . . . . . . . 11
Ambassador Material Adverse Effect . . . . . . . . . . . 12
Ambassador Meeting . . . . . . . . . . . . . . . . . . . 37
Ambassador Operating Partnership . . . . . . . . . . . . 1
Ambassador Preferred . . . . . . . . . . . . . . . . . . 8
Ambassador Preferred Stock . . . . . . . . . . . . . . . 8
Ambassador Price . . . . . . . . . . . . . . . . . . . . 2
Ambassador Properties . . . . . . . . . . . . . . . . . . 19
Ambassador Required Consents . . . . . . . . . . . . . . 10
Ambassador Required Statutory Approvals . . . . . . . . . 10
Ambassador SEC Reports . . . . . . . . . . . . . . . . . 11
Ambassador Shareholders' Approval . . . . . . . . . . . . 18
Ambassador Stock Option . . . . . . . . . . . . . . . . . 40
Ambassador Stock Plans . . . . . . . . . . . . . . . . . 8
Ambassador Subsidiary . . . . . . . . . . . . . . . . . . 8
Base Amount . . . . . . . . . . . . . . . . . . . . . . . 51
Break-Up Expenses . . . . . . . . . . . . . . . . . . . . 51
Break-Up Fee . . . . . . . . . . . . . . . . . . . . . . 51
Break-Up Fee ruling . . . . . . . . . . . . . . . . . . . 51
Canceled Shares . . . . . . . . . . . . . . . . . . . . . 4
Cash Amount . . . . . . . . . . . . . . . . . . . . . . . 3
i
Certificate . . . . . . . . . . . . . . . . . . . . . . . 4
Certificates . . . . . . . . . . . . . . . . . . . . . . 4
Change . . . . . . . . . . . . . . . . . . . . . . . . . 39
CLNY . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Closing . . . . . . . . . . . . . . . . . . . . . . . . . 7
Closing Agreement . . . . . . . . . . . . . . . . . . . . 14
Closing Date . . . . . . . . . . . . . . . . . . . . . . 7
Code . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Confidentiality Agreement . . . . . . . . . . . . . . . . 35
Conversion Ratio . . . . . . . . . . . . . . . . . . . . 2
Effective Time . . . . . . . . . . . . . . . . . . . . . 2
Environmental Claim . . . . . . . . . . . . . . . . . . . 17
Environmental Laws . . . . . . . . . . . . . . . . . . . 18
Environmental Permits . . . . . . . . . . . . . . . . . . 17
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Excess Common Stock . . . . . . . . . . . . . . . . . . . 8
Excess Preferred Stock . . . . . . . . . . . . . . . . . 8
Exchange Act . . . . . . . . . . . . . . . . . . . . . . 11
Exchange Agent . . . . . . . . . . . . . . . . . . . . . 4
Exchange Agreement . . . . . . . . . . . . . . . . . . . 29
Exchange Fund . . . . . . . . . . . . . . . . . . . . . . 4
Expense Fee Base Amount . . . . . . . . . . . . . . . . . 51
Expense Fee Ruling . . . . . . . . . . . . . . . . . . . 52
Final Order . . . . . . . . . . . . . . . . . . . . . . . 45
FNMA . . . . . . . . . . . . . . . . . . . . . . . . . . 47
FNMA Consent . . . . . . . . . . . . . . . . . . . . . . 47
FNMA Credit Enhancement . . . . . . . . . . . . . . . . . 47
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Governmental Authority . . . . . . . . . . . . . . . . . 10
Hazardous Materials . . . . . . . . . . . . . . . . . . . 18
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . 36
Indemnified Liabilities . . . . . . . . . . . . . . . . . 37
Indemnified Parties . . . . . . . . . . . . . . . . . . . 37
Indemnified Party . . . . . . . . . . . . . . . . . . . . 37
Individual Option Value . . . . . . . . . . . . . . . . . 43
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Jupiter Redemption . . . . . . . . . . . . . . . . . . . 4
LDP . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Line of Credit . . . . . . . . . . . . . . . . . . . . . 19
Management Agreements . . . . . . . . . . . . . . . . . . 33
Manager . . . . . . . . . . . . . . . . . . . . . . . . . 19
Merger . . . . . . . . . . . . . . . . . . . . . . . . . 1
Xxxxxxx Xxxxx . . . . . . . . . . . . . . . . . . . . . . 19
MGCL . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Mortgages . . . . . . . . . . . . . . . . . . . . . . . . 19
NACC . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Nomura Debt . . . . . . . . . . . . . . . . . . . . . . . 19
NYSE . . . . . . . . . . . . . . . . . . . . . . . . . . 3
OP Reorganization . . . . . . . . . . . . . . . . . . . . 1
OP Units . . . . . . . . . . . . . . . . . . . . . . . . 1
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . 16
PCBs . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Person . . . . . . . . . . . . . . . . . . . . . . . . . 6
Proxy Statement . . . . . . . . . . . . . . . . . . . . . 13
ii
Qualifying Income . . . . . . . . . . . . . . . . . . . . 51
Registration Rights Agreement . . . . . . . . . . . . . . 1
Registration Statement . . . . . . . . . . . . . . . . . 12
Reimbursable Expenses . . . . . . . . . . . . . . . . . . 43
REIT . . . . . . . . . . . . . . . . . . . . . . . . . . 1
REIT Requirements . . . . . . . . . . . . . . . . . . . . 51
Release . . . . . . . . . . . . . . . . . . . . . . . . . 18
Representatives . . . . . . . . . . . . . . . . . . . . . 35
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Securities Act . . . . . . . . . . . . . . . . . . . . . 11
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . 7
Superior Proposal . . . . . . . . . . . . . . . . . . . . 42
Surviving Corporation . . . . . . . . . . . . . . . . . . 2
Surviving Corporation Stock Benefits . . . . . . . . . . 41
Tax Return . . . . . . . . . . . . . . . . . . . . . . . 13
Tax Ruling . . . . . . . . . . . . . . . . . . . . . . . 14
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Termination Date . . . . . . . . . . . . . . . . . . . . 49
Termination Year . . . . . . . . . . . . . . . . . . . . 51
Transactions . . . . . . . . . . . . . . . . . . . . . . 1
Violation . . . . . . . . . . . . . . . . . . . . . . . . 10
Voting Debt . . . . . . . . . . . . . . . . . . . . . . . 9
iii
