AGREEMENT AND PLAN OF MERGER
BETWEEN
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
and
AMBASSADOR APARTMENTS, INC.
Dated as of December 23, 1997
TABLE OF CONTENTS
ARTICLE I
THE MERGER
Section 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Effects of the Merger. . . . . . . . . . . . . . . . . . . . 2
Section 1.3 Effective Time of the Merger . . . . . . . . . . . . . . . . 2
ARTICLE II
TREATMENT OF SHARES
Section 2.1 Effect of the Merger on Capital Stock. . . . . . . . . . . . 2
Section 2.2 Issuance of New Certificates . . . . . . . . . . . . . . . . 4
ARTICLE III
THE CLOSING
Section 3.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF AMBASSADOR
Section 4.1 Organization and Qualification . . . . . . . . . . . . . . . 7
Section 4.2 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.4 Authority; Non-Contravention; Statutory Approvals;
Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.5 Reports and Financial Statements . . . . . . . . . . . . . 11
Section 4.6 Absence of Certain Changes or Events . . . . . . . . . . . 12
Section 4.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.8 Registration Statement and Proxy Statement . . . . . . . . 12
Section 4.9 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.10 Employee Matters; ERISA . . . . . . . . . . . . . . . . . 15
Section 4.11 Environmental Protection. . . . . . . . . . . . . . . . . 16
Section 4.12 Vote Required . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.13 Opinion of Financial Advisor. . . . . . . . . . . . . . . 19
Section 4.14 Property. . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.15 Ambassador Indebtedness . . . . . . . . . . . . . . . . . 19
Section 4.16 Ambassador Knowledge. . . . . . . . . . . . . . . . . . . 19
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF AIMCO
Section 5.1 Organization and Qualification . . . . . . . . . . . . . . 20
Section 5.2 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.4 Authority; Non-Contravention; Statutory Approvals;
Compliance . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.5 Reports and Financial Statements . . . . . . . . . . . . . 22
Section 5.6 Absence of Certain Changes or Events . . . . . . . . . . . 23
Section 5.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.8 Registration Statement and Proxy Statement . . . . . . . . 24
Section 5.9 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5.10 Employee Matters; ERISA . . . . . . . . . . . . . . . . . 25
Section 5.11 Environmental Protection. . . . . . . . . . . . . . . . . 27
Section 5.12 Properties. . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.13 Vote Not Required . . . . . . . . . . . . . . . . . . . . 28
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Covenants of Ambassador. . . . . . . . . . . . . . . . . . 28
Section 6.2 Covenants of AIMCO . . . . . . . . . . . . . . . . . . . . 33
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access to Information. . . . . . . . . . . . . . . . . . . 35
Section 7.2 Proxy Statement and Registration Statement . . . . . . . . 35
Section 7.3 Regulatory Matters . . . . . . . . . . . . . . . . . . . . 36
Section 7.4 Shareholder Approval . . . . . . . . . . . . . . . . . . . 37
Section 7.5 Directors' and Officers' Indemnification . . . . . . . . . 37
Section 7.6 Public Announcements . . . . . . . . . . . . . . . . . . . 38
Section 7.7 Rule 145 Affiliates. . . . . . . . . . . . . . . . . . . . 39
Section 7.8 Employee Agreements and Workforce Matters. . . . . . . . . 39
Section 7.9 Employee Benefit Plans . . . . . . . . . . . . . . . . . . 40
Section 7.10 Stock Option and Other Stock Plans. . . . . . . . . . . . 40
Section 7.11 No Solicitations. . . . . . . . . . . . . . . . . . . . . 41
Section 7.12 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 7.13 Tax-Free Status . . . . . . . . . . . . . . . . . . . . . 43
Section 7.14 Further Assurances. . . . . . . . . . . . . . . . . . . . 43
Section 7.15 Interim Dividends . . . . . . . . . . . . . . . . . . . . 43
Section 7.16 REIT Status . . . . . . . . . . . . . . . . . . . . . . . 43
Section 7.17 NYSE Listing. . . . . . . . . . . . . . . . . . . . . . . 44
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Section 7.18 OP Reorganization . . . . . . . . . . . . . . . . . . . . 44
Section 7.19 Transfer Taxes. . . . . . . . . . . . . . . . . . . . . . 44
Section 7.20 Payment of Ambassador Debt. . . . . . . . . . . . . . . . 44
Section 7.21 Best Efforts. . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE VIII
CONDITIONS
Section 8.1 Conditions to Each Party's Obligation to Effect
the Merger . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 8.2 Conditions to Obligation of AIMCO to Effect the Merger . . 46
Section 8.3 Conditions to Obligation of Ambassador to Effect
the Merger . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . 49
Section 9.2 Effect of Termination. . . . . . . . . . . . . . . . . . . 50
Section 9.3 Termination Fee; Expenses. . . . . . . . . . . . . . . . . 50
Section 9.4 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.5 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-Survival; Effect of Representations and Warranties. . 54
Section 10.2 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.4 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 55
Section 10.5 Interpretation. . . . . . . . . . . . . . . . . . . . . . 55
Section 10.6 Counterparts; Effect. . . . . . . . . . . . . . . . . . . 55
Section 10.7 Parties' Interest . . . . . . . . . . . . . . . . . . . . 56
Section 10.8 Waiver of Jury Trial and Certain Damages. . . . . . . . . 56
Section 10.9 Enforcement . . . . . . . . . . . . . . . . . . . . . . . 56
Section 10.10 Severability . . . . . . . . . . . . . . . . . . . . . . 56
Section 10.11 Anti-dilution. . . . . . . . . . . . . . . . . . . . . . 56
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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
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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
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
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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
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
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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
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 additional 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").
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
2
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 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.
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(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
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 the OP
Reorganization is consummated concurrently with the
4
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.
(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
5
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
Section 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) 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,
6
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 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
7
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 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 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
8
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 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
9
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 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
10
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
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 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.
11
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 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
12
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 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
13
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 (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.
14
(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.
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 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
15
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 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
16
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 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
17
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
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 is required to approve this Agreement, the Merger and the other
transactions contemplated hereby.
18
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.
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.
19
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,
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
20
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, 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,
21
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 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 respective
dates, in all material respects with all applicable requirements of the
appropriate statutes
22
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
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,
23
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 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.
24
(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 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
25
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.
(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 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.
26
(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.
(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
27
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 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:
28
(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 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 Xxxxxxxxxx
00
Xxxxxxxxxx Xxxxxxxx), Xxxxxxxxxx shall not, nor shall Ambassador permit
any of its Subsidiaries to, issue, 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 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
30
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 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
31
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 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.
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(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 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
33
(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
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.
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(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, 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
35
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 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 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.
36
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 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
37
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) 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
38
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 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.
39
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 Comon 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 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,
40
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 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
41
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 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
42
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 requested by any other party in
order to consummate the Merger in accordance with the terms hereof.
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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 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.
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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 action, 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
Agreement.
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 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
45
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 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.
46
(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 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.
(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
47
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 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.
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(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 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
49
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 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
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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 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 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
51
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.
(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
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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 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,
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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.
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
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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
(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.
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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. 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 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
56
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.
- - - - -
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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: _________________________
Name: Xxxxx X. Xxxxxxxx
Title: Chairman and Chief Executive Officer
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
By: _________________________
Name: Xxxxx X. Xxxxxxxxx
Title:
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