FILED PURSUANT TO RULE 424(b)(5)
FILE NO. 333-71452
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED NOVEMBER 6, 2001)
1,000,000 SHARES
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CLASS R CUMULATIVE PREFERRED STOCK
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Apartment Investment and Management Company is offering and selling an
aggregate of 1,000,000 shares of our Class R Cumulative Preferred Stock to Cohen
& Steers Quality Income Realty Fund, Inc. and Cohen & Steers Equity Income Fund,
Inc. (together, the "Fund") with this prospectus supplement.
Our Class R Cumulative Preferred Stock is listed on the New York Stock
Exchange under the symbol AIVPrR. The last reported sale price of our Class R
Cumulative Preferred Stock on the New York Stock Exchange on March 21, 2002, was
$25.79 per share.
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INVESTING IN OUR CLASS R CUMULATIVE PREFERRED STOCK INVOLVES RISKS. SEE
"RISK FACTORS" BEGINNING ON PAGE S-4 OF THIS PROSPECTUS SUPPLEMENT.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the accompanying prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
---------
The Fund will purchase our Class R Cumulative Preferred Stock at a
price of $25.77 per share, resulting in $25,029,600 of net proceeds to the
company after we pay a placement agent fee of $515,400 and other estimated
expenses of this offering.
The Class R Cumulative Preferred Stock will be ready for delivery in
book-entry form only through The Depository Trust Company on or about March 25,
2002.
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The date of this prospectus supplement is March 21, 2002.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
The Company ........................................................ S-3
Risk Factors ....................................................... S-4
Use of Proceeds .................................................... S-13
Description of Class R Cumulative Preferred Stock .................. S-14
Certain Federal Income Tax Consequences ............................ S-21
Plan of Distribution ............................................... S-23
Experts ............................................................ S-24
Legal Matters ...................................................... S-24
Incorporation of Certain Documents by Reference .................... S-24
PROSPECTUS
AIMCO and the AIMCO Operating Partnership .......................... 1
Use of Proceeds .................................................... 1
Ratio of Earnings to Fixed Charges ................................. 1
Description of AIMCO Debt Securities ............................... 2
Description of AIMCO Operating Partnership Debt Securities ......... 9
Description of Preferred Stock ..................................... 16
Description of Equity Stock ........................................ 19
Description of Class A Common Stock ................................ 24
Provisions of Maryland Law Applicable to Preferred Stock, Equity
Stock and Class A Common Stock ................................... 25
Description of Outstanding Classes of Preferred Stock .............. 27
Description of Warrants ............................................ 34
Plan of Distribution ............................................... 35
Certain Federal Income Taxation Considerations ..................... 37
Where You Can Find More Information ................................ 49
Legal Matters ...................................................... 50
Experts ............................................................ 50
This document is in two parts. The first part is this prospectus
supplement, which describes the terms of the offering of Class R Preferred Stock
and also adds to and updates information contained in the accompanying
prospectus and the documents incorporated by reference into the prospectus. The
second part is the accompanying prospectus, which gives more general
information, some of which may not apply to the Class R Preferred Stock. To the
extent there is a conflict between the information contained in this prospectus
supplement, on the one hand, and the information contained in the accompanying
prospectus or any document incorporated by reference, on the other hand, the
information in this prospectus supplement shall control.
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You should rely only on the information contained in or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not authorized anyone to provide you with information that is different from
that contained or incorporated by reference in this prospectus supplement or the
accompanying prospectus. We are offering to sell the Class R Preferred Stock
only where offers and sales are permitted. The information contained in or
incorporated by reference in this prospectus supplement and the accompanying
prospectus is accurate only as of the date of this prospectus supplement,
regardless of the time of delivery of this prospectus supplement or of any sale
of the Class R Preferred Stock.
THE COMPANY
Apartment Investment and Management Company ("AIMCO"), a Maryland
corporation formed on January 10, 1994, is a self-administered and self-managed
real estate investment trust, or REIT, engaged in the ownership, acquisition,
redevelopment, expansion and management of multi- family apartment properties.
As of December 31, 2001, we owned, managed or held an equity interest in 280,288
apartment units in 1,371 properties located in 45 states, the District of
Columbia and Puerto Rico. Based on apartment unit data compiled by the National
Multi Housing Council, we believe that, as of December 31, 2001, we are the
largest owner and manager of multifamily apartment properties in the United
States. As of December 31, 2001, we:
o owned or controlled (consolidated) and managed 157,256 units
in 557 apartment properties;
o held an equity interest in (unconsolidated) 91,512 units in
569 apartment properties; and
o managed for third party owners 31,520 units in 245 apartment
properties, primarily pursuant to long term, non-cancelable
agreements.
We conduct substantially all of our operations through our operating
partnership, AIMCO Properties, L.P. Through a wholly owned subsidiary, we act as
the sole general partner of the AIMCO operating partnership. As of December 31,
2001, we owned approximately an 87% interest in the AIMCO operating partnership.
We manage apartment properties for third parties and affiliates through
unconsolidated subsidiaries that we refer to as the "management companies."
Generally, when we refer to "we," "us" or the "Company" in this prospectus
supplement, we are referring to AIMCO, the AIMCO operating partnership, the
management companies and their respective subsidiaries.
Our principal executive offices are located at 2000 South Colorado
Boulevard, Tower Two, Suite 2-1000, Denver, Colorado 80222-7900, and our
telephone number is (303) 757-8101.
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RISK FACTORS
Before you invest in our securities, you should be aware that there are
various risks, including those described below. You should consider carefully
these risk factors together with all of the other information included or
incorporated by reference in this prospectus supplement and the accompanying
prospectus before you decide to purchase our securities.
Some of the information in this prospectus supplement and the
accompanying prospectus may contain forward-looking statements. These statements
can be identified by the use of forward- looking words such as "may," "will,"
"expect," "anticipate," "estimate," "continue" or other similar words. These
statements discuss future expectations, contain projections of results of
operations or financial condition or state other "forward-looking" information.
When considering forward-looking statements, you should keep in mind the risk
factors and other cautionary statements included or incorporated by reference in
this prospectus supplement and the accompanying prospectus. The risk factors
noted in this section and other factors noted throughout this prospectus
supplement and the accompanying prospectus, including certain risks and
uncertainties, could cause our actual results to differ materially from those
contained in any forward-looking statement.
IF WE ARE NOT ABLE TO SUCCESSFULLY ACQUIRE, REDEVELOP AND EXPAND APARTMENT
PROPERTIES, OUR RESULTS OF OPERATIONS WILL BE ADVERSELY AFFECTED.
The selective acquisition, redevelopment and expansion of apartment
properties is one component of our growth strategy. However, we may not be able
to successfully complete transactions in the future. Although we seek to
acquire, develop and expand properties only when such activities increase our
net income on a per share basis, such transactions may fail to perform in
accordance with our expectations. When we develop or expand properties, we are
subject to the risks that:
o costs may exceed original estimates;
o occupancy and rental rates at the property may be below our
projections;
o financing may not be available on favorable terms or at all;
o redevelopment and leasing of the properties may not be
completed on schedule; and
o we may experience difficulty or delays in obtaining necessary
zoning, land-use, building, occupancy and other governmental
permits and authorizations.
WE MAY HAVE DIFFICULTY INTEGRATING ANY ACQUIRED BUSINESSES OR PROPERTIES.
We have grown rapidly. Since our initial public offering in July 1994,
we have completed numerous acquisition transactions, expanding our portfolio of
owned or managed properties from 132 apartment properties with 29,343 units to
1,371 apartment properties with 280,288 units as of December 31, 2001. These
acquisitions have included purchases of properties and interests in entities
that own or manage properties, as well as corporate mergers. Our ability to
successfully integrate acquired businesses and properties depends, among other
things, on our ability to:
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o attract and retain qualified personnel;
o integrate the personnel and operations of the acquired
businesses;
o maintain uniform standards, controls, procedures and policies;
and
o maintain adequate accounting and information systems.
We can provide no assurance that we will be able to accomplish these
goals and successfully integrate any acquired businesses or properties. If we
fail to successfully integrate such businesses, our results of operations could
be adversely affected.
AS OUR SIZE INCREASES, IT BECOMES MORE DIFFICULT FOR US TO ACHIEVE RAPID GROWTH.
Our rapid growth since our initial public offering in July 1994 was
achieved when we were a smaller company. As a result of our current size, future
acquisitions of the same size and magnitude will have a smaller impact on us. It
is also more difficult for us to identify and complete acquisitions of greater
size that are consistent with our growth strategy. In fact, since December 31,
2000, our portfolio of owned or managed properties has declined from 1,720
apartment properties with 226,289 units to 1,371 apartment properties with
280,288 units as of December 31, 2001.
WE ARE SUBJECT TO LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS, WHICH
COULD INCREASE OUR EXPENSES AND PREVENT COMPLETION OF BENEFICIAL TRANSACTIONS.
We have engaged in, and intend to continue to engage in, the selective
acquisition of interests in limited partnerships that own apartment properties.
In some cases, we have acquired the general partner of a partnership and then
made an offer to acquire the limited partners' interests in the partnership. In
these transactions, we may be subject to litigation based on claims that the
general partner has breached its fiduciary duty to its limited partners or that
the transaction violates the relevant partnership agreement. Although we intend
to comply with our fiduciary obligations and relevant partnership agreements, we
may incur additional costs in connection with the defense or settlement of this
type of litigation. In some cases, this type of litigation may adversely affect
our desire to proceed with, or our ability to complete, a particular
transaction. Any litigation of this type could also have a material adverse
effect on our results of operations.
OUR EXISTING AND FUTURE DEBT FINANCING COULD RENDER US UNABLE TO OPERATE, RESULT
IN FORECLOSURE ON OUR PROPERTIES OR PREVENT US FROM MAKING DISTRIBUTIONS ON OUR
EQUITY.
Our strategy is generally to incur debt to increase the return on our
equity while maintaining acceptable interest coverage ratios. We seek to
maintain a ratio of free cash flow to combined interest expense and preferred
stock dividends of between 2:1 and 3:1. However, our Board of Directors could
change this strategy at any time and increase our leverage. Our organizational
documents do not limit the amount of debt that we may incur, and we have
significant amounts of debt outstanding. Payments of principal and interest may
leave us with insufficient cash resources to operate our properties or pay
distributions required to be paid in order to maintain our qualification as a
REIT. We are also subject to the risk that our cash flow from operations will be
insufficient to make
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required payments of principal and interest, and the risk that existing
indebtedness may not be refinanced or that the terms of any refinancing will not
be as favorable as the terms of existing indebtedness. If we fail to make
required payments of principal and interest on any debt, our lenders could
foreclose on the properties securing such debt which would result in loss of
income and asset value to us. As of December 31, 2001, substantially all of the
properties that we owned or controlled were encumbered by debt. As of December
31, 2001, we had $4.8 billion of indebtedness outstanding on a consolidated
basis, all of which was secured.
INCREASES IN INTEREST RATES MAY INCREASE OUR INTEREST EXPENSE.
As of December 31, 2001, approximately $925.1 million of our debt (19%
of the total) was subject to variable interest rates. An increase in interest
rates could increase our interest expense and reduce our cash flow and our
ability to service our indebtedness and make distributions.
WE MAY INCUR LOSSES DUE TO INTEREST RATE HEDGING TRANSACTIONS.
From time to time, in anticipation of refinancing debt, we enter into
agreements to reduce the risks associated with increases in short term interest
rates. Although these agreements provide us with some protection against rising
interest rates, these agreements also reduce the benefits to us when interest
rates decline. These agreements involve the following risks:
o interest rate movements during the term of the agreement may
result in a loss to us;
o we may be exposed to losses if the hedge is not indexed to the
same rate as the debt anticipated to be incurred; and
o we may incur a loss if the counterparty to the agreement fails
to pay.
COVENANT RESTRICTIONS MAY LIMIT OUR ABILITY TO MAKE PAYMENTS TO OUR INVESTORS.
Some of our debt and other securities contain covenants that restrict
our ability to make distributions or other payments to our investors unless
certain financial tests or other criteria are satisfied. In some cases, our
subsidiaries are subject to similar provisions, which may restrict their ability
to make distributions to us. Our credit facilities provide that we may make
distributions to our investors during any 12-month period in an aggregate amount
that does not exceed the greater of 80% of our funds from operations for such
period or such amount as may be necessary to maintain our REIT status. The
credit facilities prohibit all distributions if our:
o fixed charge coverage ratio (excludes scheduled amortization)
is less than 1.70 to 1;
o adjusted fixed charge coverage ratio (includes scheduled
amortization) is less than 1.45 to 1;
o interest coverage ratio is less than 2.25 to 1;
o unsecured debt service coverage ratio is less than 3.00 to 1;
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o total combined debt to gross asset value ratio exceeds
0.55 to 1;
o total obligations to gross asset value ratio exceeds 0.68 to 1
before September 30, 2002, or 0.65 to 1 thereafter;
o encumbered property debt coverage ratio is less than
1.60 to 1; or
o consolidated net worth is less than the sum of $2.24 billion
and 85% of the net proceeds of any securities issuances after
June 30, 2000.
Our outstanding classes of preferred stock and partnership preferred
units prohibit the payment of dividends on our common stock or the partnership
common units if we fail to pay the dividends or distributions to which the
holders of the preferred stock or partnership preferred units are entitled. In
addition, our 6-1/2% convertible debentures prohibit the payment of dividends on
our capital stock if we elect to defer payments of interest on these convertible
debentures, which we have the right to do for periods of up to 60 months. If we
are unable to pay dividends, we may fail to qualify as a REIT. This would
subject us to corporate taxation and reduce our ability to make distributions to
you.
WE DEPEND ON DISTRIBUTIONS AND OTHER PAYMENTS FROM OUR SUBSIDIARIES THAT THEY
MAY BE PROHIBITED FROM MAKING.
All of our properties are owned, and all of our operations are
conducted, by the AIMCO operating partnership and our other subsidiaries. As a
result, we depend on distributions and other payments from the subsidiaries in
order to satisfy our financial obligations and make payments to our investors.
The ability of the subsidiaries to make such distributions and other payments is
dependent upon their earnings and may be subject to statutory or contractual
limitations. As an equity investor in the subsidiaries, our right to receive
assets upon their liquidation or reorganization will be effectively subordinated
to the claims of their creditors. To the extent that we are recognized as a
creditor of such subsidiaries, our claims would still be subordinate to any
security interest in or other lien on their assets and to any of their debt or
other obligations that are senior to us.
CHANGES IN THE REAL ESTATE MARKET MAY LIMIT OUR ABILITY TO GENERATE FUNDS FROM
OPERATIONS.
Our ability to make payments to our investors depends on our ability to
generate funds from operations in excess of required debt payments and capital
expenditure requirements. Funds from operations and the value of our properties
may be adversely affected by events or conditions beyond our control, including:
o the general economic climate;
o competition from other apartment communities and alternative
housing;
o local conditions, such as an increase in unemployment or an
oversupply of apartments, that might adversely affect
apartment occupancy or rental rates;
o changes in governmental regulations and the related cost of
compliance;
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o increases in operating costs (including real estate taxes) due
to inflation and other factors, which may not necessarily be
offset by increased rents;
o changes in tax laws and housing laws, including the enactment
of rent control laws or other laws regulating multifamily
housing;
o changes in interest rate levels and the availability of
financing; and
o the relative illiquidity of real estate investments.
WE MAY BE SUBJECT TO COSTLY ENVIRONMENTAL LIABILITIES, WHICH COULD ADVERSELY
AFFECT OUR RESULTS OF OPERATIONS.
Various Federal, state and local laws subject property owners or
operators to liability for the costs of removal or remediation of certain
hazardous substances released on a property. These laws often impose liability
without regard to whether the owner or operator knew of, or was responsible for,
the release of the hazardous substances. The presence of, or the failure to
properly remediate, hazardous substances may adversely affect occupancy at
contaminated apartment communities and our ability to sell or borrow against
these properties. In addition to the costs associated with investigation and
remediation actions brought by governmental agencies, the presence of hazardous
wastes on a property could result in personal injury or similar claims by
private plaintiffs. Various laws also impose liability for the cost of removal
or remediation of hazardous or toxic substances at the disposal or treatment
facility. Anyone who arranges for the disposal or treatment of hazardous or
toxic substances is potentially liable under these laws. These laws often impose
liability whether or not the person arranging for the disposal ever owned or
operated the disposal facility.
LAWS BENEFITTING DISABLED PERSONS MAY RESULT IN OUR INCURRENCE OF UNANTICIPATED
EXPENSES.
Under the Americans with Disabilities Act of 1990, or ADA, all places
intended to be used by the public are required to meet certain Federal
requirements related to access and use by disabled persons. Likewise, the Fair
Housing Amendments Act of 1988, or FHAA, requires apartment properties first
occupied after March 13, 1990 to be accessible to the handicapped. These and
other Federal, state and local laws may require modifications to our properties,
or restrict certain further renovations of the properties. Noncompliance with
these laws could result in the imposition of fines or an award of damages to
private litigants and also could result in an order to correct any non-
complying feature, which could result in substantial capital expenditures.
Although we believe that our properties are substantially in compliance with
present requirements, we may incur unanticipated expenses to comply with the ADA
and the FHAA.
AFFORDABLE HOUSING REGULATIONS MAY LIMIT RENT INCREASES AT SOME OF OUR
PROPERTIES, REDUCING OUR REVENUE AND, IN SOME CASES, CAUSING US TO SELL
PROPERTIES THAT WE MIGHT OTHERWISE CONTINUE TO OWN.
As of December 31, 2001, we owned or controlled 28 properties, held an
equity interest in 353 properties with a combined average ownership percentage
of 25% and managed for third parties and affiliates 206 properties that benefit
from governmental programs intended to provide housing to people with low or
moderate incomes. These programs, which are usually administered by the U.S.
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Department of Housing and Urban Development, or HUD, or state housing finance
agencies, typically provide mortgage insurance, favorable financing terms or
rental assistance payments to the property owners. As a condition to the receipt
of assistance under these programs, the properties must comply with various
requirements, which typically limit rents to pre- approved amounts. If permitted
rents on a property are insufficient to cover costs, a sale of the property may
become necessary, which could result in a loss of management fee revenue. We
usually need to obtain the approval of HUD in order to manage, or acquire a
significant interest in, a HUD-assisted property. We may not always receive such
approval.
THE LOSS OF PROPERTY MANAGEMENT CONTRACTS MAY REDUCE OUR REVENUES.
We manage some properties owned by third parties. In 2001, we received
$17.3 million of revenue from the management of such properties. We may suffer a
loss of revenue if we lose our right to manage these properties or if the rental
revenues upon which our management fees are based decline. In general,
management contracts may be terminated or otherwise lost as a result of:
o a disposition of the property by the owner in the ordinary
course or as a result of financial distress of the property
owner;
o the property owner's determination that our management of the
property is unsatisfactory;
o willful misconduct, gross negligence or other conduct that
constitutes grounds for termination; or
o with respect to certain affordable properties, termination of
such contracts by HUD or state housing finance agencies,
generally at their discretion.
WE DEPEND ON OUR CHIEF EXECUTIVE OFFICER AND PRESIDENT; OUR OPERATIONS WOULD BE
HARMED IF WE LOST THEIR SERVICES.
Although we have entered into employment agreements with our Chairman
and Chief Executive Officer, Terry Considine, and our President, Peter K.
Kompaniez, the loss of either of their services could have an adverse effect on
our operations.
WE MAY ENGAGE IN TRANSACTIONS WITH AFFILIATES AND EXPERIENCE CONFLICTS OF
INTEREST INHERENT IN THESE TRANSACTIONS.
We have been, and continue to be, involved in various transactions with
a number of our affiliates, including our executive officers, directors and
entities in which they own interests. We have adopted certain policies designed
to minimize or eliminate the conflicts of interest inherent in these
transactions, including a requirement that a majority of our disinterested
directors approve certain transactions with affiliates. However, we cannot
assure you that these policies will be successful in eliminating the influence
of such conflicts. Furthermore, these policies are subject to change without the
approval of our stockholders.
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WE MAY FAIL TO QUALIFY AS A REIT.
We believe that we operate in a manner that enables us to meet the
requirements for qualification as a REIT for Federal income tax purposes;
however, future economic, market, legal, tax or other considerations may cause
us to fail to qualify as a REIT, or our Board of Directors may determine to
revoke our REIT status. If we fail to qualify as a REIT, we will not be allowed
a deduction for dividends paid to our stockholders in computing our taxable
income, and we will be subject to Federal income tax at regular corporate rates.
This would substantially reduce our funds available for payment to our
investors. See "Certain Federal Income Tax Consequences" for more detail.
In addition, our failure to qualify as a REIT would trigger the
following consequences:
o we would be obligated to repurchase a material amount of our
preferred stock, plus accrued and unpaid dividends to the date
of repurchase; and
o we would be in default under our primary credit facilities and
certain other loan agreements.
REIT DISTRIBUTION REQUIREMENTS LIMIT OUR AVAILABLE CASH.
As a REIT, we are subject to annual distribution requirements, which
limit the amount of cash we have available for other business purposes,
including amounts to fund our growth.
LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS COULD HAVE A NEGATIVE IMPACT ON US.
The rules dealing with Federal income taxation are constantly under
review by persons involved in the legislative process and by the Internal
Revenue Service, or IRS, and the U.S. Treasury Department. Changes to the tax
laws (which may have retroactive application) could adversely affect our
investors. We cannot predict how changes in the tax law might affect us or our
investors. For example, under recently enacted legislation, effective January 1,
2001, if any of our management companies were deemed to operate or manage a
health care or lodging facility, we would fail to qualify as a REIT. While we
believe that, since January 1, 2001, none of the management companies have
operated or managed any health care or lodging facilities, the statute provides
little guidance as to the definition of a health care or lodging facility.
Accordingly, we cannot assure you that the IRS will not contend that any of our
management companies operate or manage a health care or lodging facility,
resulting in our disqualification as a REIT.
WE MAY BE SUBJECT TO OTHER TAX LIABILITIES.
Even if we qualify as a REIT, we and our subsidiaries may be subject to
certain Federal, state and local taxes on our income and property. Any such
taxes would reduce our operating cash flow.
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LIMITS ON OWNERSHIP OF SHARES IN OUR CHARTER MAY RESULT IN THE LOSS OF ECONOMIC
AND VOTING RIGHTS BY PURCHASERS THAT VIOLATE THOSE LIMITS.
Our charter limits ownership of our common stock by any single
stockholder to 8.7% of our outstanding shares, or 15% in the case of certain
pension trusts, registered investment companies and Mr. Considine. Our charter
also limits ownership of our common stock and preferred stock by any single
stockholder to 8.7% of the value of the outstanding common stock and preferred
stock, or 15% in the case of certain pension trusts, registered investment
companies and Mr. Considine. Our charter also prohibits anyone from buying
shares if the purchase would result in us losing our REIT status. This could
happen if a share transaction results in fewer than 100 persons owning all of
our shares or results in five or fewer persons, applying certain attribution
rules of the Internal Revenue Code, owning 50% or more of the value of all of
our shares. If you or anyone else acquires shares in excess of the ownership
limit or in violation of the ownership requirements of the Internal Revenue Code
for REITs:
o the transfer will be considered null and void;
o we will not reflect the transaction on our books;
o we may institute legal action to enjoin the transaction;
o we may demand repayment of any dividends received by the
affected person on those shares;
o we may redeem the shares;
o the affected person will not have any voting rights for those
shares; and
o the shares (and all voting and dividend rights of the shares)
will be held in trust for the benefit of one or more
charitable organizations designated by us.
We may purchase the shares held in trust at a price equal to the lesser
of the price paid by the transferee of the shares or the then current market
price. If the trust transfers any of the shares, the affected person will
receive the lesser of the price he paid for the shares or the then current
market price. An individual who acquires shares that violate the above rules
bears the risk that the individual:
o may lose control over the power to dispose of such shares;
o may not recognize profit from the sale of such shares if the
market price of the shares increases;
o may be required to recognize a loss from the sale of such
shares if the market price decreases; and
o may be required to repay to us any distributions received from
us as a result of his or her ownership of the shares.
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OUR CHARTER MAY LIMIT THE ABILITY OF A THIRD PARTY TO ACQUIRE CONTROL OF US.
The 8.7% ownership limit discussed above may have the effect of
precluding acquisition of control of us by a third party without the consent of
our Board of Directors. Our charter authorizes our Board of Directors to issue
up to 510,587,500 shares of capital stock. As of December 31, 2001, 456,962,738
shares were classified as Class A Common Stock, and 53,624,762 shares were
classified as preferred stock. Under the charter, our Board of Directors has the
authority to classify and reclassify any of our unissued shares of capital stock
into shares of preferred stock with such preferences, rights, powers and
restrictions as our Board of Directors may determine. The authorization and
issuance of preferred stock could have the effect of delaying or preventing
someone from taking control of us, even if a change in control were in our
stockholders' best interests.
MARYLAND BUSINESS STATUTES MAY LIMIT THE ABILITY OF A THIRD PARTY TO ACQUIRE
CONTROL OF US.
As a Maryland corporation, we are subject to various Maryland laws
which may have the effect of discouraging offers to acquire us and of increasing
the difficulty of consummating any such offers, even if our acquisition would be
in our stockholders' best interests. The Maryland General Corporation Law
restricts mergers and other business combination transactions between us and any
person who acquires beneficial ownership of shares of our stock representing 10%
or more of the voting power without our Board of Directors' prior approval. Any
such business combination transaction could not be completed until five years
after the person acquired such voting power, and generally only with the
approval of stockholders representing 80% of all votes entitled to be cast and
66% of the votes entitled to be cast, excluding the interested stockholder, or
upon payment of a fair price. Maryland law also provides generally that a person
who acquires shares of our stock that represent 10% or more of the voting power
in electing directors will have no voting rights unless approved by a vote of
two-thirds of the shares eligible to vote. Additionally, recent changes to
Maryland law may make it more difficult for someone to acquire us. Maryland law
now provides, among other things, that the board of directors has broad
discretion in adopting stockholders' rights plans and has the sole power to fix
the record date, time and place for special meetings of the stockholders. In
addition, Maryland law provides that corporations which:
o have three directors who are not employees of the entity or
related to an acquiring person; and
o are subject to the reporting requirements of the Securities
Exchange Act of 1934,
may elect in their charter or bylaws or by resolution of the board of directors
to be subject to all or part of a special subtitle which provides that:
o the corporation will have a staggered board of directors;
o any director may be removed only for cause and by the vote of
two-thirds of the votes entitled to be cast in the election of
directors generally, even if a lesser proportion is provided
in the charter or bylaws;
o the number of directors may only be set by the board of
directors, even if the procedure is contrary to the charter or
bylaws;
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o vacancies may only be filled by the remaining directors, even
if the procedure is contrary to the charter or bylaws; and
o the secretary of the corporation may call a special meeting of
stockholders at the request of stockholders only on the
written request of the stockholders entitled to cast at least
a majority of all the votes entitled to be cast at the
meeting, even if the procedure is contrary to the charter or
bylaws.
USE OF PROCEEDS
The net proceeds to us from the sale of the shares of Class R
Cumulative Preferred Stock offered hereby, after deducting the placement agent's
fee of $515,400 and estimated fees and expenses related to this offering of
$225,000, are approximately $25,029,600. We intend to contribute the net
proceeds from this offering to the AIMCO operating partnership in exchange for a
preferred interest in the AIMCO operating partnership. The terms of the
preferred interest in the AIMCO operating partnership will be substantially
equivalent to the terms of the Class R Preferred Stock. The AIMCO operating
partnership intends to use the amounts received from us to repay existing short
term indebtedness under its credit facility or the term loan entered into in
connection with its funding of the acquisition of Casden Properties Inc. The
AIMCO operating partnership's existing indebtedness under its credit facility
bore interest at a weighted average rate of 4.42% at March 15, 2002 and is
scheduled to be repaid by July 2004. The AIMCO operating partnership's existing
indebtedness under the Casden term loan bore interest at a weighted average rate
of 4.90% at March 15, 2002 and is scheduled to be repaid by March 2004 but can
be extended once at AIMCO's option, for a term of one year.
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DESCRIPTION OF CLASS R CUMULATIVE PREFERRED STOCK
The following summary of the material terms and provisions of the Class
R Preferred Stock does not purport to be complete and is qualified in its
entirety by reference to the pertinent sections of our charter and the articles
supplementary to our charter establishing the Class R Preferred Stock, each of
which is available from us. This description of the particular terms of the
Class R Preferred Stock supplements, and to the extent inconsistent therewith,
replaces, the description of the general terms and provisions of our preferred
stock set forth in the accompanying prospectus. For purposes of this section,
when we refer to "we," "us" or "the Company," we are referring only to AIMCO.
GENERAL
Under our charter, we are authorized to issue up to 510,587,500 shares
of our capital stock, including common stock and preferred stock. As of March
20, 2002, 456,962,738 shares were classified as Class A Common Stock and
53,624,762 shares were classified as preferred stock (before giving effect to
the reclassification of 1,000,000 shares of Class A Common Stock as Class R
Preferred Stock).
We are authorized to issue shares of preferred stock in one or more
classes or subclasses, with such designations, preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption, in each case, if any as are permitted by
Maryland law and as our Board of Directors may determine by resolution. See
"Description of Preferred Stock" in the accompanying prospectus. The Class R
Preferred Stock is a class of AIMCO's preferred stock. As of the closing date, a
total of 5,940,000 shares of Class R Preferred Stock will have been authorized
and the authorized shares of Class A Common Stock will have been reduced
accordingly. Our authorized and outstanding (after giving effect to the
reclassification but before giving effect to the issuance of shares of Class R
Preferred Stock offered hereby) classes and series of preferred stock are as
follows:
NUMBER OF
NUMBER OF SHARES
CLASS OF PREFERRED STOCK SHARES AUTHORIZED OUTSTANDING
------------------------ ----------------- -----------
Class B Cumulative Convertible Preferred Stock ("Class B Preferred Stock") ...... 750,000 419,471
Class C Cumulative Preferred Stock ("Class C Preferred Stock") .................. 2,400,000 2,400,000
Class D Cumulative Preferred Stock ("Class D Preferred Stock") .................. 4,200,000 4,200,000
Class G Cumulative Preferred Stock ("Class G Preferred Stock") .................. 4,050,000 4,050,000
Class H Cumulative Preferred Stock ("Class H Preferred Stock") .................. 2,000,000 2,000,000
Class I Cumulative Preferred Stock ("Class I Preferred Stock") .................. 10,000,000 --
Class J Cumulative Convertible Preferred Stock ("Class J Preferred Stock") ...... 1,250,000 --
Class K Convertible Cumulative Preferred Stock ("Class K Preferred Stock") ...... 5,000,000 5,000,000(1)
Class L Convertible Cumulative Preferred Stock ("Class L Preferred Stock") ...... 5,000,000 5,000,000
Class M Convertible Cumulative Preferred Stock ("Class M Preferred Stock") ...... 1,600,000 1,200,000
Class N Convertible Cumulative Preferred Stock ("Class N Preferred Stock") ...... 4,000,000 4,000,000
Class O Cumulative Convertible Preferred Stock ("Class O Preferred Stock") ...... 1,904,762 1,904,762
Class P Convertible Cumulative Preferred Stock ("Class P Preferred Stock") ...... 4,000,000 4,000,000
Class Q Cumulative Preferred Stock ("Class Q Preferred Stock") .................. 2,530,000 2,530,000
Class R Cumulative Preferred Stock .............................................. 5,940,000 4,940,000
----------
(1) The outstanding shares of Class K Convertible Cumulative Preferred Stock
have been called for redemption.
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RANKING
The Class R Preferred Stock, with respect to dividend rights and rights
upon liquidation, dissolution or winding up of AIMCO, ranks (a) prior or senior
to the common stock and any other class or series of our capital stock if the
holders of Class R Preferred Stock are entitled to receive dividends or amounts
distributable upon liquidation, dissolution or winding up in preference or
priority to the holders of shares of such class or series ("Class R Junior
Stock"); (b) on a parity with the Class B Preferred Stock, the Class C Preferred
Stock, the Class D Preferred Stock, the Class G Preferred Stock, the Class H
Preferred Stock, the Class I Preferred Stock, the Class J Preferred Stock, the
Class K Preferred Stock, the Class L Preferred Stock, the Class M Preferred
Stock, the Class N Preferred Stock, the Class O Preferred Stock, the Class P
Preferred Stock, the Class Q Preferred Stock and any other class or series of
our capital stock if the holders of such class or series of stock and the Class
R Preferred Stock shall be entitled to receive dividends and amounts
distributable upon liquidation, dissolution or winding up in proportion to their
respective amounts of accrued and unpaid dividends per share or liquidation
preferences, without preference or priority of one over the other ("Class R
Parity Stock"); and (c) junior to any class or series of our capital stock if
the holders of such class or series shall be entitled to receive dividends and
amounts distributable upon liquidation, dissolution or winding up in preference
or priority to the holders of the Class R Preferred Stock ("Class R Senior
Stock").
DIVIDENDS
Holders of Class R Preferred Stock are entitled to receive, when and as
declared by our Board of Directors, out of funds legally available for payment,
quarterly cash dividends on the Class R Preferred Stock in an amount per share
equal to $0.625 per share. The dividends are cumulative from July 20, 2001, the
date of original issue, whether or not in any dividend period or periods we
declare any dividends or have funds legally available for the payment of such
dividend. We shall pay dividends quarterly on March 15, June 15, September 15
and December 15 of each year or, if not a business day, the next succeeding
business day (each a "Dividend Payment Date"), beginning September 15, 2001. Any
dividend payable on the Class R Preferred Stock for any partial dividend period
will be computed ratably on the basis of twelve 30-day months and a 360-day
year. The initial dividend payable on the Class R Preferred Stock will be
$0.381944 per share. Dividends will be payable in arrears to holders of record
as they appear on our stock records at the close of business on the March 1,
June 1, September 1, or December 1, as the case may be, before the applicable
Dividend Payment Date. Holders of Class R Preferred Stock shall not be entitled
to receive any dividends in excess of cumulative dividends on the Class R
Preferred Stock. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on the Class R Preferred
Stock that may be in arrears. Holders of shares of Class R Preferred Stock
issued after July 20, 2001 will become entitled to receive dividends payable
with respect to any record date subsequent to the date of issuance of such
shares.
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When dividends are not paid in full upon the Class R Preferred Stock or
any other class or series of Class R Parity Stock, or a sum sufficient for such
payment is not set apart, all dividends declared upon the Class R Preferred
Stock and any shares of Class R Parity Stock shall be declared ratably in
proportion to the respective amounts of dividends accumulated, accrued and
unpaid on the Class R Preferred Stock and accumulated, accrued and unpaid on
such Class R Parity Stock. Except as set forth in the preceding sentence, unless
dividends on the Class R Preferred Stock equal to the full amount of
accumulated, accrued and unpaid dividends have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof has
been or contemporaneously is set apart for such payment, for all past dividend
periods, no dividends shall be declared or paid or set apart for payment by us
and no other distribution of cash or other property may be declared or made,
directly or indirectly, by us with respect to any shares of Class R Parity
Stock. Unless dividends equal to the full amount of all accumulated, accrued and
unpaid dividends on the Class R Preferred Stock have been declared and paid, or
declared and a sum sufficient for the payment thereof has been set apart for
such payment, for all past dividend periods, no dividends (other than dividends
or distributions paid in shares of Class R Junior Stock or options, warrants or
rights to subscribe for or purchase shares of Class R Junior Stock) may be
declared or paid or set apart for payment by us and no other distribution of
cash or other property may be declared or made, directly or indirectly, by us
with respect to any shares of Class R Junior Stock, nor shall any shares of
Class R Junior Stock be redeemed, purchased or otherwise acquired (other than a
redemption, purchase or other acquisition of common stock made for purposes of
an employee incentive or benefit plan of AIMCO or any subsidiary) for any
consideration (or any monies be paid to or made available for a sinking fund for
the redemption of any shares of any such stock), directly or indirectly, by us
(except by conversion into or exchange for shares of Class R Junior Stock, or
options, warrants or rights to subscribe for or purchase shares of Class R
Junior Stock), nor shall any other cash or other property be paid or distributed
to or for the benefit of holders of shares of Class R Junior Stock.
Notwithstanding the foregoing provisions of this paragraph, we are not
prohibited from (1) declaring or paying or setting apart for payment any
dividend or distribution on any shares of Class R Parity Stock or (2) redeeming,
purchasing or otherwise acquiring any Class R Parity Stock, in each case, if
such declaration, payment, redemption, purchase or other acquisition is
necessary to maintain our qualification as a REIT.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding
up of AIMCO, before we make or set apart any payment or distribution for the
holders of any shares of Class R Junior Stock, the holders of shares of Class R
Preferred Stock shall be entitled to receive a liquidation preference of $25 per
share (the "Class R Liquidation Preference"), plus an amount equal to all
accumulated, accrued and unpaid dividends (whether or not earned or declared) to
the date of final distribution to such holders. Holders of Class R Preferred
Stock shall not be entitled to any further payment. Until the holders of the
Class R Preferred Stock have been paid the Class R Liquidation Preference in
full, plus an amount equal to all accumulated, accrued and unpaid dividends
(whether or not earned or declared) to the date of final distribution to such
holders, no payment shall be made to any holder of Class R Junior Stock upon the
liquidation, dissolution or winding up of AIMCO. If upon any liquidation,
dissolution or winding up of AIMCO, our assets, or proceeds thereof,
distributable among the holders of Class R Preferred Stock shall be insufficient
to pay in full the above described preferential amount and liquidating payments
on any other shares of any class or series of Class R Parity Stock, then such
assets, or the proceeds thereof, shall be distributed among
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the holders of Class R Preferred Stock and any such other Class R Parity Stock
ratably in the same proportion as the respective amounts that would be payable
on such Class R Preferred Stock and any such other Class R Parity Stock if all
amounts payable thereon were paid in full. A voluntary or involuntary
liquidation, dissolution or winding up of AIMCO shall not include our
consolidation or merger with one or more corporations, a sale or transfer of all
or substantially all of our assets, or a statutory share exchange. Upon any
liquidation, dissolution or winding up of AIMCO, after payment shall have been
made in full to the holders of Class R Preferred Stock and any Class R Parity
Stock, any other series or class or classes of Class R Junior Stock shall be
entitled to receive any and all assets remaining to be paid or distributed, and
the holders of the Class R Preferred Stock and any Class R Parity Stock shall
not be entitled to share therein.
REDEMPTION
We may not redeem the shares of Class R Preferred Stock prior to July
20, 2006, except in certain limited circumstances relating to maintaining our
ability to qualify as a REIT as described in "-- Restrictions on Ownership and
Transfer". On and after July 20, 2006, we may, at our option, redeem shares of
Class R Preferred Stock, in whole or from time to time in part, at a cash
redemption price equal to 100% of the Class R Liquidation Preference, plus all
accumulated, accrued and unpaid dividends, if any, to the date fixed for
redemption (the "Redemption Date"). The redemption price for the Class R
Preferred Stock (other than any portion thereof consisting of accumulated,
accrued and unpaid dividends) is payable solely with the proceeds from the sale
of equity securities by us or the AIMCO operating partnership (whether or not
such sale occurs concurrently with such redemption). For purposes of the
preceding sentence, "capital shares" means any common stock, preferred stock,
depositary shares, partnership or other interests, participations or other
ownership interests (however designated) and any rights (other than debt
securities convertible into or exchangeable at the option of the holder for
equity securities (unless and to the extent such debt securities are
subsequently converted into capital shares)) or options to purchase any of the
foregoing securities issued by us or the AIMCO operating partnership.
If we redeem any shares of Class R Preferred Stock and if the
Redemption Date occurs after a dividend record date and on or prior to the
related Dividend Payment Date, the dividend payable on such Dividend Payment
Date with respect to such shares called for redemption shall be payable on such
Dividend Payment Date to the holders of record at the close of business on such
dividend record date, and shall not be payable as part of the redemption price
for such shares. We shall select the Redemption Date which shall not be less
than 30 days nor more than 60 days after the date on which we send the notice of
redemption. If full cumulative dividends on all outstanding shares of Class R
Preferred Stock have not been paid or declared and set apart for payment, no
shares of Class R Preferred Stock may be redeemed unless all outstanding shares
of Class R Preferred Stock are simultaneously redeemed and neither we nor any of
our affiliates may purchase or acquire shares of Class R Preferred Stock
otherwise than pursuant to a purchase or exchange offer made on the same terms
to all holders of Class R Preferred Stock.
If fewer than all the outstanding shares of Class R Preferred Stock are
to be redeemed, we will select those shares to be redeemed pro rata or by lot or
in such other manner as the Board of Directors may determine.
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We shall mail notice of redemption of the Class R Preferred Stock to
each holder of record of the shares to be redeemed by first class mail, postage
prepaid at such holder's address as the same appears on our stock records. Any
notice which was mailed as described above shall be conclusively presumed to
have been duly given on the date mailed whether or not the holder receives the
notice. Each notice shall state:
o the Redemption Date;
o the number of shares of Class R Preferred Stock to be
redeemed;
o the place or places where certificates for the shares of Class
R Preferred Stock are to be surrendered; and
o the redemption price payable on the Redemption Date,
including, without limitation, a statement as to whether or
not accumulated, accrued and unpaid dividends will be payable
as part of the redemption price, or payable on the next
Dividend Payment Date to the record holder at the close of
business on the relevant record date as described above.
From and after the Redemption Date (unless we default in the payment of
our redemption obligation), dividends on the shares of Class R Preferred Stock
to be redeemed will cease to accumulate or accrue, the shares shall no longer be
deemed to be outstanding and all rights of the holders thereof shall cease,
except the right to receive the cash payable upon such redemption without
interest thereon. If the Redemption Date occurs after a dividend record date and
on or prior to the related Dividend Payment Date, record holders at the close of
business on the record date will have the right to receive the dividend payable
on the Dividend Payment Date.
The Class R Preferred Stock has no stated maturity and is not subject
to any sinking fund or mandatory redemption provisions except as provided under
"-- Restrictions on Ownership and Transfer."
Subject to applicable law and the limitation on purchases when
dividends on the Class R Preferred Stock are in arrears, we may, at any time and
from time to time, purchase any shares of Class R Preferred Stock in the open
market, by tender or by private agreement.
VOTING RIGHTS
Holders of shares of Class R Preferred Stock do not have any voting
rights, except as set forth below and except as otherwise required by applicable
law.
If and whenever dividends on any shares of Class R Preferred Stock or
any series or class of Class R Parity Stock shall be in arrears for six or more
quarterly periods, whether or not consecutive, the number of directors then
constituting the AIMCO Board of Directors shall be increased by two, if not
already increased by reason of similar types of provisions with respect to
shares of Class R Parity Stock of any other class or series which is entitled to
similar voting rights (the "Voting Preferred Stock"), and the holders of shares
of Class R Preferred Stock, together with the holders of shares of all other
Voting Preferred Stock then entitled to exercise similar voting rights, voting
as a single class regardless of series, will be entitled to vote for the
election of the two additional directors of AIMCO
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at any annual meeting of stockholders or at a special meeting of the holders of
the Class R Preferred Stock and of the Voting Preferred Stock called for that
purpose. We must call such special meeting upon the request of any holder of
shares of Class R Preferred Stock. Whenever dividends in arrears on outstanding
shares of the Class R Preferred Stock and the Voting Preferred Stock shall have
been paid and dividends thereon for the current quarterly dividend period shall
have been paid or declared and set apart for payment, then the right of the
holders of the Class R Preferred Stock and of the Voting Preferred Stock to
elect the additional two directors shall cease and the terms of office of the
directors shall terminate and the number of directors constituting our Board of
Directors shall be reduced accordingly.
The affirmative vote or consent of at least 66 2/3% of the votes
entitled to be cast by the holders of the outstanding shares of Class R
Preferred Stock and the holders of all other classes or series of Class R Parity
Stock entitled to vote on such matters, voting as a single class, will be
required to (1) authorize, create, increase the authorized amount of, or issue
any shares of any class of Class R Senior Stock or any security convertible into
shares of any class of Class R Senior Stock, or (2) amend, alter or repeal any
provision of, or add any provision to, our charter or by-laws, if such action
would materially adversely affect the voting powers, rights or preferences of
the holders of the Class R Preferred Stock; provided, however, that no such vote
of the holders of Class R Preferred Stock shall be required if, at or prior to
the time such amendment, alteration or repeal is to take effect or the issuance
of any such Class R Senior Stock or convertible security is to be made, as the
case may be, provisions are made for the redemption of all outstanding shares of
Class R Preferred Stock. The amendment of or supplement to our charter to
authorize, create, increase or decrease the authorized amount of or to issue
Class R Junior Stock, Class R Preferred Stock or any shares of any class of
Class R Parity Stock shall not be deemed to materially adversely affect the
voting powers, rights or preferences of the holders of Class R Preferred Stock.
With respect to the exercise of the above-described voting rights, each
share of Class R Preferred Stock shall have one (1) vote per share, except that
when any other class or series of preferred stock shall have the right to vote
with the Class R Preferred Stock as a single class, then the Class R Preferred
Stock and such other class or series shall have one quarter of one (0.25) vote
per $25 of stated Class R Liquidation Preference.
TRANSFER AGENT
The registrar and transfer agent for the Class R Preferred Stock is
Fleet National Bank c/o EquiServe.
RESTRICTIONS ON OWNERSHIP AND TRANSFER
Ownership of shares of Class R Preferred Stock by any person is limited
such that the sum of the aggregate value of all capital stock of AIMCO
(including all shares of Class R Preferred Stock) owned directly or
constructively by such person may not exceed 8.7% (or 15% in the case of certain
pension trusts, registered investment companies and Mr. Considine) of the
aggregate value of all outstanding shares of capital stock (the "Ownership
Limit"). AIMCO's board of directors may upon appropriate evidence waive the
Ownership Limit. Further, certain transfers which may have the effect of causing
AIMCO to lose its status as a REIT are void ab initio.
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Any person who acquires or attempts to acquire beneficial or
constructive ownership of Class R Preferred Stock that will or may violate the
Ownership Limit, or any person who would have owned Class R Preferred Stock
except for the transfer of shares to the Trust as described below, is required
to give notice immediately to AIMCO and provide AIMCO with such other
information as AIMCO may request in order to determine the effect of such
transfer on AIMCO's status as a REIT.
If any transfer of Class R Preferred Stock occurs which, if effective,
would result in any person beneficially or constructively owning Class R
Preferred Stock in excess or in violation of the Ownership Limit (a "Prohibited
Transferee"), such shares of Class R Preferred Stock in excess of the Ownership
Limit shall be automatically transferred to a trustee in his capacity as trustee
of a trust for the exclusive benefit of one or more charitable beneficiaries
designated by AIMCO, and the Prohibited Transferee shall generally have no
rights in such shares, except upon sale of the shares by the trustee. Such
automatic transfer shall be deemed to be effective as of the close of business
on the business day prior to the date of such violative transfer. Shares of
Class R Preferred Stock held in the trust shall be issued and outstanding shares
of AIMCO. The Prohibited Transferee shall not benefit economically from
ownership of any shares of Class R Preferred Stock held in the trust, shall have
no rights to dividends and shall not possess any rights to vote or other rights
attributable to the shares of Class R Preferred Stock held in the trust. The
trustee shall have all voting rights and rights to dividends with respect to
shares of Class R Preferred Stock held in the trust, which rights shall be
exercised for the benefit of the charitable beneficiaries. Any dividend or other
distribution paid prior to the discovery by AIMCO that shares of Class R
Preferred Stock have been transferred to the trustee shall be repaid to AIMCO
upon demand, and any dividend or other distribution declared but unpaid with
respect to such shares shall be rescinded as void. Any dividend or distribution
so disgorged or rescinded shall be paid to the trustee and held in trust for the
charitable beneficiaries.
The trustee may sell the Class R Preferred Stock held in the trust to a
person, designated by the trustee, whose ownership of the Class R Preferred
Stock will not violate the Ownership Limit. Upon such sale, the interest of the
charitable beneficiaries in the shares sold shall terminate and the trustee
shall distribute the net proceeds of the sale to the Prohibited Transferee and
to the charitable beneficiary as described below. The Prohibited Transferee
shall receive the lesser of (i) the price paid by the Prohibited Transferee for
the shares or if the Prohibited Transferee did not give value for the shares in
connection with the event causing the shares to be held in the trust (e.g., a
gift, devise or other such transaction), the market price of such shares on the
day of the event causing the shares to be held in the trust and (ii) the price
per share received by the trustee from the sale or other disposition of the
shares held in the trust. Any proceeds in excess of the amount payable to the
Prohibited Transferee shall be payable to the charitable beneficiaries.
In addition, shares of Class R Preferred Stock held in the trust shall
be deemed to have been offered for sale to AIMCO, or its designee, at a price
per share equal to the lesser of (i) the price per share in the transaction that
resulted in such transfer to the trust (or, in the case of a devise or gift, the
market price at the time of such devise or gift) and (ii) the market price on
the date AIMCO or its designee accepts such offer.
If AIMCO's board of directors or a committee thereof determines that a
transfer or proposed transfer of shares of Class R Preferred Stock violates or
will violate the Ownership Limit or certain other provisions of AIMCO's charter
prohibiting transfers which may have the effect of causing AIMCO to lose its
REIT status, AIMCO's board of directors or a committee thereof is empowered to
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take any action it deems advisable to refuse to give effect to or to prevent
such transfer, including causing AIMCO to redeem such shares at the then current
market price and on such other terms and conditions as AIMCO's board of
directors may determine (including by means of the issuance of long-term
indebtedness for the purpose of such redemption) and demanding the repayment of
any dividends received in respect of such shares. In addition, AIMCO's board of
directors may take such action as it determines to be advisable to maintain
AIMCO's status as a REIT, including reducing the Ownership Limit in the event of
a change in law.
All certificates representing Class R Preferred Stock will bear a
legend referring to the restrictions described above.
Every owner of more than 5% (or such lesser percentage prescribed in
regulations under the Internal Revenue Code) of the outstanding shares of Class
R Preferred Stock, within 30 days after January 1 of each year, is required to
give written notice to AIMCO stating the name and address of such owner, the
number of shares of Class R Preferred Stock which the owner beneficially owns
and a description of the manner in which such shares are held. Each such owner
shall provide to AIMCO such additional information as AIMCO may request in order
to determine the effect, if any, of such ownership on AIMCO's status as a REIT
and to ensure compliance with the Ownership Limit. In addition, each stockholder
shall provide to AIMCO such information as AIMCO may request, in its sole
discretion, in order to determine AIMCO's status as a REIT and to comply with
the requirements of any taxing authority or governmental agency to determine any
such compliance or to ensure compliance with the Ownership Limit.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary of certain Federal income tax considerations
regarding an investment in Class R Preferred Stock is based on current law, is
for general information only and is not tax advice. This summary supplements the
discussion set forth in the accompanying prospectus under the heading "Certain
Federal Income Tax Consequences." This discussion does not purport to deal with
all aspects of taxation that may be relevant to particular investors in light of
their personal investment or tax circumstances.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT HIS OR HER TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE PURCHASE, OWNERSHIP
AND SALE OF CLASS R PREFERRED STOCK AND OF THE COMPANY'S ELECTION TO BE TAXED AS
A REAL ESTATE INVESTMENT TRUST, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN
INCOME AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND
ELECTION, AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
DISTRIBUTIONS ON CLASS R PREFERRED STOCK
For a discussion of the treatment of dividends and other distributions
with respect to the shares of the Class R Preferred Stock, see "Certain Federal
Income Tax Consequences -- Taxation of Taxable Domestic Stockholders," "Certain
Federal Income Tax Consequences -- Taxation of Tax- Exempt Stockholders,"
"Certain Federal Income Tax Consequences -- Taxation of Foreign Stockholders" in
the accompanying prospectus. In determining the extent to which a distribution
with respect to the Class R Preferred Stock constitutes a dividend for tax
purposes, the earnings and
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profits of AIMCO will be allocated, on a pro rata basis, first to distributions
with respect to any class of preferred stock, and then to AIMCO common stock.
REDEMPTION OF CLASS R PREFERRED STOCK
A redemption of the Class R Preferred Stock will be treated under
Section 302 of the Internal Revenue Code as a dividend taxable at ordinary
income tax rates (to the extent of AIMCO's current or accumulated earnings and
profits), unless the redemption satisfies certain tests set forth in Section
302(b) of the Internal Revenue Code enabling the redemption to be treated as a
sale or exchange of the Class R Preferred Stock. The redemption will satisfy
such test if it (i) is "substantially disproportionate" with respect to the
holder, (ii) results in a "complete termination" of the holder's stock interest
in AIMCO, or (iii) is "not essentially equivalent to a dividend" with respect to
the holder, all within the meaning of Section 302(b) of the Internal Revenue
Code. In determining whether any of these tests have been met, shares considered
to be owned by the holder by reason of certain constructive ownership rules set
forth in the Internal Revenue Code, as well as shares actually owned, must
generally be taken into account. Because the determination as to whether any of
the alternative tests of Section 302(b) of the Internal Revenue Code is
satisfied with respect to any particular holder of the Class R Preferred Stock
will depend upon the facts and circumstances as of the time the determination is
made, prospective investors are advised to consult their tax advisors to
determine such tax treatment.
If a redemption of the Class R Preferred Stock is treated as a
distribution that is taxable as a dividend, the amount of the distribution would
be measured by the amount of cash and the fair market value of any property
received by the stockholders. The stockholder's adjusted tax basis in such
redeemed Class R Preferred Stock would be transferred to the holder's remaining
stockholdings in AIMCO. If, however, the stockholder has no remaining
stockholdings in AIMCO, such basis may, under certain circumstances, be
transferred to a related person or it may be lost entirely.
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS
The rules dealing with Federal income taxation are constantly under
review by persons involved in the legislative process and by the IRS and the
U.S. Treasury Department. Changes to the Federal laws and interpretations
thereof could adversely affect an investment in AIMCO. Congress recently enacted
legislation, generally effective in 2001, that will, among other things:
o modify the current ownership limitations to permit a REIT to
own up to 100% of the voting securities and 100% of the value
of the other interests in a taxable REIT subsidiary. In
addition, the 5% REIT asset test would not apply to taxable
REIT subsidiaries, but securities of taxable REIT subsidiaries
could not exceed 20% of the total value of a REIT's assets;
o permit a taxable REIT subsidiary to perform services to REIT's
tenants and impose a 100% excise tax on certain non-arms
length transactions between a taxable REIT subsidiary and a
REIT;
o disallow REIT status where healthcare or lodging facilities
are operated or managed by a taxable REIT subsidiary,
beginning in 2001;
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o generally restrict a REIT from owning more than 10% of the
vote or value of the securities of an issuer, including a
partnership (taking into account only the partnership's debt
securities), an individual, or a non-REIT C corporation that
is not a taxable REIT subsidiary;
o impose certain limitations to the deductibility of interest
paid by a taxable REIT subsidiary to a related REIT;
o allow a REIT to rent up to 10% of a property to a taxable REIT
subsidiary and generally have the rent qualify as good income
for purposes of the REIT gross income tests; and
o change the measurement of rent attributable to personal
property leased in connection with a lease of real property
from a comparison based on adjusted tax bases of properties to
a comparison of fair market values.
We cannot predict whether, when, in what form, or with what effective
dates, other legislative proposals applicable to AIMCO or its stockholders will
become law.
We cannot predict whether, when, in what form, or with what effective
dates, the tax laws applicable to AIMCO, or an investment in AIMCO, will be
changed.
PLAN OF DISTRIBUTION
Subject to the terms and conditions of a purchase agreement dated March
21, 2002, the Fund has agreed to purchase, and the Company has agreed to sell to
the Fund, the number of shares of Class R Preferred Stock set forth on the cover
of this prospectus supplement. The purchase agreement provides that the
obligations of the Fund to purchase the Class R Preferred Stock included in this
offering are subject to the approval of certain legal matters by counsel and to
certain other conditions.
Merrill Lynch, Pierce, Fenner & Smith Incorporated is acting as our
placement agent, on a best efforts basis, in connection with the sale of our
shares of Class R Preferred Stock to the Fund, for which Merrill Lynch will
receive a placement agent fee of $515,400. Merrill Lynch has also acted as an
underwriter in the initial public offering of the common shares of the Fund, for
which services Merrill Lynch received customary fees. We have agreed to
indemnify the placement agent against certain liabilities, including certain
liabilities under the Securities Act of 1933, as amended, or to contribute to
payments the placement agent may be required to make because of any of those
liabilities.
The expenses of the offering, including the placement agent fee, are
estimated to be $740,400 and are payable by the Company.
Merrill Lynch has from time to time provided, and in the future may
provide, certain investment banking services to us and our affiliates, for which
they have received, and in the future would receive, customary fees.
S-23
EXPERTS
Ernst & Young LLP, independent auditors, have audited AIMCO's
consolidated financial statements and schedule for the year ended December 31,
2001, as set forth in their report, which is incorporated by reference in this
prospectus. These financial statements and schedule are incorporated by
reference in reliance on Ernst & Young LLP's report, given their authority as
experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters will be passed upon for AIMCO by Skadden, Arps,
Slate, Meagher & Flom LLP, Los Angeles, California. Mayer, Brown, Rowe & Maw,
Chicago, Illinois will act as counsel for the placement agent. The legality of
the shares of Class R Preferred Stock offered hereby will be passed upon for
AIMCO by Piper Marbury Rudnick & Wolfe LLP, Baltimore, Maryland. Skadden, Arps,
Slate, Meagher & Flom LLP and Mayer, Brown, Rowe & Maw will rely on Piper
Marbury Rudnick & Wolfe LLP as to certain matters of Maryland law.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference room. Our SEC filings are also available to the public at the
SEC's web site at http://www.sec.gov. Our Securities Exchange Act of 1934 filing
number is 1-13232.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus supplement, and later information filed
with the SEC will update and supersede this information. We incorporate by
reference the documents listed below, any of such documents filed since the date
this registration statement was filed and any future filings with the SEC under
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until
the offering is completed.
o Preliminary Proxy Statement for Annual Meeting of Shareholders
of Apartment Investment and Management Company;
o Apartment Investment and Management Company's Annual Report on
Form 10-K for the year ended December 31, 2001;
o Apartment Investment and Management Company's Current Reports
on Form 8-K, dated February 22, 2002 (filed February 25,
2002); March 11, 2002 (filed March 13, 2002); March 19, 2002
(filed March 20, 2002); and March 20, 2002 (filed March 20,
2002); and
o the description of Apartment Investment and Management
Company's Class R Cumulative Preferred Stock contained in its
Registration Statement on Form 8-A (File No. 1-13232) filed
July 23, 2001, including any amendment or reports filed for
the purpose of updating such description.
You may request a copy of these filings, at no cost, by writing or
calling us at the following address and telephone number:
Corporate Secretary
Apartment Investment and Management Company
Colorado Center, Tower Two
2000 South Colorado Boulevard, Suite 2-1000
Denver, Colorado 80222
(303) 757-8101
You should rely only on the information incorporated by reference or
provided in this prospectus supplement. We have not authorized anyone to provide
you with different information.
S-24
PROSPECTUS
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
$821,806,085
DEBT SECURITIES
PREFERRED STOCK
EQUITY STOCK
CLASS A COMMON STOCK
WARRANTS
GUARANTEES
AIMCO PROPERTIES, L.P.
$500,000,000
DEBT SECURITIES
By this prospectus, we may offer debt securities of Apartment Investment
and Management Company and AIMCO Properties, L.P., and preferred stock, equity
stock, class A common stock, warrants and guarantees of Apartment Investment and
Management Company. We will provide the specific terms of these securities in
supplements to this prospectus.
YOU SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER "RISK FACTORS"
SET FORTH IN THE APPLICABLE PROSPECTUS SUPPLEMENT.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS MAY NOT BE USED TO SELL SECURITIES UNLESS ACCOMPANIED BY A
PROSPECTUS SUPPLEMENT.
November 6, 2001
---------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT MAKING
AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU
SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER
THAN THE DATE ON THE FRONT OF THOSE DOCUMENTS.
TABLE OF CONTENTS
AIMCO and the AIMCO Operating Partnership................... 1
Use of Proceeds............................................. 1
Ratio of Earnings to Fixed Charges.......................... 1
Description of AIMCO Debt Securities........................ 2
Description of AIMCO Operating Partnership Debt
Securities................................................ 9
Description of Preferred Stock.............................. 16
Description of Equity Stock................................. 19
Description of Class A Common Stock......................... 24
Provisions of Maryland Law Applicable to Preferred Stock,
Equity Stock and Class A Common
Stock....................................................... 25
Description of Outstanding Classes of Preferred Stock....... 27
Description of Warrants..................................... 34
Plan of Distribution........................................ 35
Certain Federal Income Taxation Considerations.............. 37
Where You Can Find More Information......................... 49
Legal Matters............................................... 50
Experts..................................................... 50
AIMCO AND THE AIMCO OPERATING PARTNERSHIP
Apartment Investment and Management Company ("AIMCO"), a Maryland
corporation incorporated on January 10, 1994, is a self-administered and
self-managed REIT engaged in the ownership, acquisition, development, expansion
and management of multi-family apartment properties. As of June 30, 2001, we
owned, managed or held an equity in interest in 312,409 apartment units in 1,622
properties located in 46 states, the District of Columbia and Puerto Rico. As of
June 30, 2001, we:
- owned or controlled (consolidated) 156,572 units in 575 apartment
properties;
- held an equity interest (unconsolidated) in 99,594 units in 607 apartment
properties; and
- managed 56,243 units in 440 apartment properties for third party owners
and affiliates.
We conduct substantially all of our operations through AIMCO Properties,
L.P., a Delaware limited partnership (the "AIMCO Operating Partnership"). Our
wholly-owned subsidiary is the sole general partner of the AIMCO Operating
Partnership. As of June 30, 2001, we owned approximately an 86% interest in the
AIMCO Operating Partnership. Generally, when we refer to "we," "us" or the
"Company" in this prospectus, we are referring to AIMCO, the AIMCO Operating
Partnership, and their respective subsidiaries.
Our principal executive offices are located at Colorado Center, Tower Two,
2000 South Colorado Boulevard, Suite 2-1000, Denver, Colorado 80222, and our
telephone number is (303) 757-8101.
USE OF PROCEEDS
Unless otherwise described in the applicable prospectus supplement, we
intend to use the net proceeds from the sale of the securities for working
capital and general corporate purposes, which may include the repayment or
refinancing of outstanding indebtedness, the financing of future acquisitions
(which may include acquisitions of real properties, interests therein or real
estate-related securities) and the financing of improvements or expansion of
properties. Pending the use thereof, we intend to invest any net proceeds in
short-term, interest-bearing securities. We will not receive any proceeds from
the registered resale of any securities under this prospectus.
RATIO OF EARNINGS TO FIXED CHARGES
The table below reflects AIMCO's ratios of earnings to fixed charges and
ratios of earnings to combined fixed charges and preferred stock dividends for
the following periods: (i) the six months ended June 30, 2001 and 2000, and (ii)
each of the five years ended December 31, 2000, 1999, 1998, 1997 and 1996. The
ratios of earnings to fixed charges and the ratios of earnings to combined fixed
charges and partnership preferred unit distributions for the AIMCO Operating
Partnership are the same as the ratios of earnings to fixed charges and the
ratios of earnings to combined fixed charges and preferred stock dividends,
respectively, for such periods.
FOR THE SIX
MONTHS
ENDED JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
-------------- -------------------------------------
2001 2000 2000 1999 1998 1997 1996
----- ----- ----- ----- ----- ----- -----
Ratio of earnings to fixed charges(1)................. 1.5:1 1.6:1 1.6:1 2.3:1 1.8:1 1.6:1 1.6:1
Ratio of earnings to combined fixed charges and
preferred stock dividends(2)........................ 1.2:1 1.3:1 1.3:1 1.6:1 1.4:1 1.5:1 1.6:1
---------------
(1) The ratio of earnings to fixed charges was computed by dividing earnings by
fixed charges. For this purpose, "earnings" consists of income before
minority interests (which includes equity in earnings of unconsolidated
subsidiaries and partnerships only to the extent of dividends received) plus
fixed charges (other than any interest which has been capitalized); and
"fixed charges" consists of interest expense (including amortization of loan
costs) and interest which has been capitalized.
(2) The ratio of earnings to combined fixed charges and preferred stock
dividends was computed by dividing earnings by the total of fixed charges
and preferred stock dividends. For this purpose, "earnings" consists
1
of income before minority interests (which includes equity in earnings of
unconsolidated subsidiaries and partnerships only to the extent of dividends
received) plus fixed charges (other than any interest which has been
capitalized); "fixed charges" consists of interest expense (including
amortization of loan costs) and interest which has been capitalized; and
"preferred stock dividends" consists of the amount of pre-tax earnings that
would be required to cover preferred stock dividend requirements.
DESCRIPTION OF AIMCO DEBT SECURITIES
GENERAL
The following description sets forth certain general terms and provisions
of the debt securities of AIMCO. The particular terms of the debt securities
offered by any prospectus supplement and the extent, if any, to which these
general provisions may apply to such securities will be described in the
prospectus supplement.
The debt securities of AIMCO may be issued, from time to time, in one or
more series, and will constitute either senior debt securities, senior
subordinated debt securities or subordinated debt securities, each of which may
be issued from time to time under an indenture to be entered into between AIMCO
and a trustee to be named in the applicable prospectus supplement. Forms of
these indentures are filed as exhibits to the Registration Statement which
includes this prospectus. The indentures will be subject to and governed by the
Trust Indenture Act of 1939, as amended (the "TIA"). Capitalized terms used in
this section which are not defined in this prospectus are defined in the
indenture to which they relate. The statements made under this heading about the
debt securities and the indentures are summaries of their material provisions
and are not complete. These statements are subject to, and are qualified in
their entirety by reference to, all the provisions of the indentures and the
debt securities, including definitions of certain terms.
The debt securities will be direct, unsecured obligations of AIMCO. The
indentures do not limit the aggregate principal amount of debt securities that
may be issued thereunder and provide that such debt securities may be issued
thereunder from time to time in one or more series. Under the indentures, AIMCO
will have the ability to issue debt securities with terms different from those
of debt securities previously issued by it, without the consent of the holders
of such previously issued series of debt securities, in an aggregate principal
amount determined by AIMCO.
The applicable prospectus supplement or prospectus supplements relating to
any senior subordinated debt securities or subordinated debt securities will set
forth the aggregate amount of outstanding indebtedness, as of the most recent
practicable date, that by the terms of such debt securities would be senior to
such debt securities and any limitation on the issuance of additional senior
indebtedness.
Debt securities may be issued and sold at a discount below their principal
amount. Special United States Federal income tax considerations applicable to
debt securities issued with original issue discount will be described in more
detail in any applicable prospectus supplement. Even if debt securities are not
issued at a discount below their principal amount, such debt securities may, for
United States Federal income tax purposes, be deemed to have been issued with
original issue discount because of certain interest payment characteristics. In
addition, special United States Federal tax considerations or other restrictions
or terms applicable to any debt securities offered exclusively to United States
aliens or denominated in a currency other than United States dollars will be set
forth in a prospectus supplement relating thereto.
Below is a description of some general terms of AIMCO's debt securities
which may be specified in a prospectus supplement. You should read the
prospectus supplement for a description of the debt securities being offered,
including:
- the title of the debt securities;
- any limit on the aggregate principal amount of the debt securities;
- whether the debt securities may be represented initially by a debt
security in temporary or permanent global form, and if so, the initial
depositary with respect to such temporary or permanent global
2
security and whether and the circumstances under which beneficial owners
of interests in any such temporary or permanent global security may
exchange such interests for debt securities of such series and of like
tenor of any authorized form and denomination;
- the price or prices at which the debt securities will be issued;
- the date or dates on which the principal of the debt securities is
payable or the method of determination thereof;
- the place or places where and the manner in which the principal of and
premium, if any, and interest, if any, on such debt securities will be
payable and the place or places where such debt securities may be
presented for transfer and, if applicable, conversion or exchange;
- the rate or rates at which the debt securities will bear interest, or the
method of calculating such rate or rates, if any, and the date or dates
from which such interest, if any, will accrue;
- the dates, if any, on which any interest on the debt securities will be
payable, and the regular record date for any interest payable on any debt
securities;
- the right or obligation, if any, of AIMCO to redeem or purchase debt
securities of the series pursuant to any sinking fund or analogous
provisions or at the option of a holder thereof, the conditions, if any,
giving rise to such right or obligation, and the period or periods within
which, and the price or prices at which and the terms and conditions upon
which debt securities of the series shall be redeemed or purchased, in
whole or part, and any provisions for the remarketing of such debt
securities;
- whether such debt securities are convertible or exchangeable into other
debt securities or equity securities, and, if so, the terms and
conditions upon which such conversion or exchange will be effected,
including the initial conversion or exchange price or rate and any
adjustments thereto, the conversion or exchange period and other
conversion or exchange provisions;
- any terms applicable to such debt securities which are issued at a
discount, including the issue price thereof and the rate or rates at
which original issue discount will accrue;
- if other than the principal amount thereof, the portion of the principal
amount of the debt securities which will be payable upon declaration or
acceleration of the maturity thereof pursuant to an event of default;
- any special United States Federal income tax considerations applicable to
the debt securities; and
- any other terms of the debt securities not inconsistent with the
provisions of the indenture.
The applicable prospectus supplement will also describe the following terms
of any series of senior subordinated debt securities or subordinated debt
securities offered hereby:
- the rights, if any, to defer payments of interest on such series of debt
securities by extending the interest payment period, and the duration of
such extensions;
- the subordination terms of such series of debt securities; and
- any special provisions for the payment of additional amounts with respect
to the debt securities.
Since the operations of AIMCO are currently conducted principally through
its subsidiaries, AIMCO's cash flow and its consequent ability to service debt,
including the debt securities, will be dependent, in large part, upon the
earnings of its subsidiaries and the distribution of those earnings to AIMCO,
whether by dividends, loans or otherwise. The payment of dividends and the
making of loans and advances to AIMCO by the subsidiaries may be subject to
statutory or contractual restrictions, are contingent upon the earnings of those
subsidiaries and are subject to various business considerations. Any right of
AIMCO to receive assets of any of the subsidiaries upon their liquidation or
reorganization (and the consequent right of the holders of the debt securities
to participate in those assets) will be effectively subordinated to the claims
of that subsidiary's creditors (including trade creditors), except to the extent
that AIMCO is recognized as a creditor of such
3
subsidiary, in which case the claims of AIMCO would still be subordinate to any
security interests in the assets of such subsidiary and any indebtedness of such
subsidiary senior to that held by AIMCO.
CONVERSION OR EXCHANGE
No series of debt securities that may be issued and sold pursuant hereto
will be convertible into, or exchangeable for, other securities or property,
except as set forth in the applicable prospectus supplement, which will set
forth the terms and conditions upon which such conversion or exchange may be
effected, including the initial conversion or exchange rate and any adjustments
thereto, the conversion or exchange period and any other conversion or exchange
provisions.
FORM, EXCHANGE, REGISTRATION AND TRANSFER
A series of debt securities may be issued solely as registered debt
securities. A series of debt securities may be issuable in whole or in part in
the form of one or more global debt securities, as described below under "Global
Debt Securities." Unless otherwise indicated in an applicable prospectus
supplement, debt securities will be issuable in denominations of $1,000 and
integral multiples thereof. Any series of debt securities will be exchangeable
for other debt securities of the same series of any authorized denominations and
of a like aggregate principal amount and tenor.
Debt securities may be presented for exchange as provided above and, unless
otherwise indicated in the applicable prospectus supplement, may be presented
for registration of transfer, at the office or agency of AIMCO designated as
registrar or co-registrar with respect to such series of debt securities,
without service charge and upon payment of any taxes, assessments or other
governmental charges as described in the indenture. Such transfer or exchange
will be effected on the books of the registrar or any other transfer agent
appointed by AIMCO upon such registrar or transfer agent, as the case may be,
being satisfied with the documents of title and identity of the person making
the request. AIMCO intends to initially appoint the trustee for the particular
series of debt securities as the registrar for such debt securities and the name
of any different or additional registrar designated by AIMCO with respect to the
debt securities will be included in the prospectus supplement relating thereto.
If a prospectus supplement refers to any transfer agents (in addition to the
registrar) designated by AIMCO with respect to any series of debt securities,
AIMCO may at any time rescind the designation of any such transfer agent or
approve a change in the location through which any such transfer agent acts,
except that AIMCO will be required to maintain a transfer agent in the Borough
of Manhattan, the City of New York. AIMCO may at any time designate additional
transfer agents with respect to any series of debt securities.
In the event of any partial redemption of any series of debt securities,
AIMCO will not be required to (i) issue, register the transfer of or exchange
debt securities of that series during a period beginning at the opening of
business 15 days before any selection of debt securities of that series to be
redeemed and ending at the close of business on the day of mailing of the
relevant notice of redemption; or (ii) register the transfer of or exchange any
debt security, or portion thereof, called for redemption, except the unredeemed
portion of any debt security being redeemed in part.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable prospectus supplement, payment
of principal of, and interest, if any, on, debt securities will be made at the
office of such paying agent or paying agents as AIMCO may designate from time to
time, except that, at the option of AIMCO, payment of principal or interest may
be made by check or by wire transfer to an account maintained by the payee.
Unless otherwise indicated in the applicable prospectus supplement, payment of
any installment of interest on debt securities will be made to the person in
whose name such debt security is registered at the close of business on the
regular record date for such interest.
Unless otherwise indicated in the applicable prospectus supplement, the
trustee for the debt securities being offered will be designated as AIMCO's sole
paying agent for payments with respect to such debt securities. Any other paying
agents initially designated by AIMCO for the debt securities being offered will
be
4
named in the applicable prospectus supplement. AIMCO may at any time designate
additional paying agents or rescind the designation of any paying agent or
approve a change in the office through which any paying agent acts, except that
AIMCO will be required to maintain a paying agent in the Borough of Manhattan,
The City of New York.
All moneys paid by AIMCO to a paying agent for the payment of principal of,
or interest, if any, on, any debt security which remains unclaimed at the end of
two years after such principal or interest shall have become due and payable
will be repaid to AIMCO, and the holder of such debt security or any coupon will
thereafter look only to AIMCO for payment thereof.
GLOBAL DEBT SECURITIES
The debt securities of a series may be issued in whole or in part in global
form. A debt security in global form will be deposited with, or on behalf of, a
depositary, which will be identified in the applicable prospectus supplement. A
global debt security may be issued only in registered form and in either
temporary or permanent form. A debt security in global form may not be
transferred except as a whole to the depositary for such debt security or to a
nominee or successor of such depositary. If any debt securities of a series are
issuable in global form, the applicable prospectus supplement will describe the
circumstances, if any, under which beneficial owners of interests in any such
global debt security may exchange such interests for definitive debt securities
of such series and of like tenor and principal amount in any authorized form and
denomination, the manner of payment of principal of and interest, if any, on
such global debt security and the specific terms of the depositary arrangement
with respect to such global debt security.
MERGERS AND SALES OF ASSETS
AIMCO may not consolidate with or merge into any other person or convey,
transfer or lease its properties and assets substantially as an entirety to
another person, unless, among other things, (i) the resulting, surviving or
transferee person (if other than AIMCO) is organized and existing under the laws
of the United States, any state thereof or the District of Columbia and such
person expressly assumes all obligations of AIMCO under the debt securities and
the indenture, and (ii) immediately after giving effect to such transaction, no
default or event of default shall have occurred or be continuing under the
indenture. Upon the assumption of AIMCO's obligations by a person to whom such
properties or assets are conveyed, transferred or leased, subject to certain
exceptions, AIMCO shall be discharged from all obligations under the debt
securities and the indenture.
EVENTS OF DEFAULT
Each indenture provides that, if an event of default specified therein
shall have occurred and be continuing, with respect to each series of debt
securities outstanding thereunder, the trustee or the holders of not less than
25% in aggregate principal amount of the outstanding debt securities of such
series may declare the principal amount (or, if any of the debt securities of
such series were issued at a discount, such portion of the principal amount of
such debt securities as may be specified by the terms thereof) of the debt
securities of such series to be immediately due and payable. Under certain
circumstances, the holders of a majority in aggregate principal amount of the
outstanding debt securities of such series may rescind such a declaration.
Under each indenture, an event of default is defined as, with respect to
each series of debt securities outstanding thereunder, any of the following:
- default in payment of the principal of any debt securities of such
series;
- default in payment of any interest on any debt securities of such series
when due, continuing for 30 days (or 60 days, in the case of senior
subordinated debt securities or subordinated debt securities);
- default by AIMCO in compliance with other agreements in the debt
securities of such series or the indenture relating to the debt
securities of such series upon the receipt of notice of such default
given by the trustee for such debt securities or the holders of at least
25% in aggregate principal amount of
5
the outstanding debt securities of such series and AIMCO's failure to
cure such default within 60 days after receipt of such notice;
- certain events of bankruptcy or insolvency; and
- any other event of default set forth in an applicable prospectus
supplement with respect to the debt securities of such series.
The trustee shall give notice to holders of the debt securities of any
continuing default known to the trustee within 90 days after the occurrence
thereof; provided, that the trustee may withhold such notice, as to any default
other than a payment default, if it determines in good faith that withholding
the notice is in the interests of the holders.
The holders of a majority in principal amount of the outstanding debt
securities of any series may direct the time, method and place of conducting any
proceeding for any remedy available to the trustee or exercising any trust or
power conferred on the trustee with respect to the debt securities of such
series; provided that such direction shall not be in conflict with any law or
the indenture and subject to certain other limitations. Before proceeding to
exercise any right or power under the indenture at the direction of such
holders, the trustee shall be entitled to receive from such holders reasonable
security or indemnity satisfactory to it against the costs, expenses and
liabilities which might be incurred by it in complying with any such direction.
With respect to each series of debt securities, no holder will have any right to
pursue any remedy with respect to the indenture or such debt securities, unless:
- such holder shall have previously given the trustee written notice of a
continuing event of default with respect to the debt securities of such
series;
- the holders of at least 25% in aggregate principal amount of the
outstanding debt securities of such series shall have made a written
request to the trustee to pursue such remedy;
- such holder or holders have offered to the trustee reasonable indemnity
satisfactory to the trustee;
- the holders of a majority in aggregate principal amount of the
outstanding debt securities of such series have not given the trustee a
direction inconsistent with such request within 60 days after receipt of
such request; and
- the trustee shall have failed to comply with the request within such
60-day period.
Notwithstanding the foregoing, the right of any holder of debt securities
to receive payment of the principal of and interest in respect of such debt
securities on the date specified in such debt securities as the fixed date on
which an amount equal to the principal of such debt securities or an installment
of principal thereof or interest thereon is due and payable (the "stated
maturity" or "stated maturities") or to institute suit for the enforcement of
any such payments shall not be impaired or adversely affected without such
holder's consent. The holders of at least a majority in aggregate principal
amount of the outstanding debt securities of any series may waive an existing
default with respect to such series and its consequences, other than (i) any
default in any payment of the principal of, or interest on, any debt securities
of such series or (ii) any default in respect of certain covenants or provisions
in the indenture which may not be modified without the consent of the holder of
each of the outstanding debt securities of such series affected as described in
"Modification and Waiver," below.
Each indenture provides that AIMCO shall deliver to the trustee within 120
days after the end of each fiscal year of AIMCO an officers' certificate stating
whether or not the signers know of any default that occurred during such period.
6
MODIFICATION AND WAIVER
AIMCO and the trustee may execute a supplemental indenture without the
consent of the holders of the debt securities:
- to add to the covenants, agreements and obligations of AIMCO for the
benefit of the holders of all the debt securities of any series or to
surrender any right or power conferred in the indenture upon AIMCO;
- to evidence the succession of another corporation, partnership or other
entity to AIMCO and the assumption by such corporation, partnership or
other entity of the obligations of AIMCO under the indenture and the debt
securities;
- to establish the form or terms of debt securities of any series as
permitted by the indenture;
- to provide for the acceptance of appointment under the indenture of a
successor trustee with respect to the debt securities of one or more
series and to add to or change any provisions of the indenture as shall
be necessary to provide for or facilitate the administration of the
trusts by more than one trustee;
- to cure any ambiguity, defect or inconsistency;
- to add to, change or eliminate any provisions (which addition, change or
elimination may apply to one or more series of debt securities), provided
that any such addition, change or elimination does not (i) apply to any
debt securities of any series created prior to the execution of such
supplemental indenture that is entitled to the benefit of such provision
or (ii) modify the rights of the holder of any such debt securities with
respect to such provision;
- to secure the debt securities; or
- to make any other change that does not adversely affect the rights of any
holder of debt securities.
Each indenture provides that, with the consent of the holders of not less
than a majority in aggregate principal amount of the outstanding debt securities
of the series affected by such supplemental indenture, AIMCO and the trustee may
also execute a supplemental indenture to add provisions to, or change in any
manner or eliminate any provisions of, the indenture with respect to such series
of debt securities or modify in any manner the rights of the holders of the debt
securities of such series; provided that no such supplemental indenture will,
without the consent of the holder of each such outstanding debt security
affected thereby:
- change the stated maturity of the principal of, or any installment of
principal or interest on, any such debt security or any premium payable
upon redemption or repurchase thereof, or reduce the amount of principal
of any debt security that was issued at a discount and that would be due
and payable upon declaration of acceleration of maturity thereof;
- reduce the principal amount of, or the rate of interest on, any such debt
security;
- change the place or currency of payment of principal or interest, if any,
on any such debt security;
- impair the right to institute suit for the enforcement of any payment on
or with respect to any such debt security;
- reduce the above-stated percentage of holders of debt securities of any
series necessary to modify or amend the indenture for such debt
securities;
- modify the foregoing requirements or reduce the percentage in principal
amount of outstanding debt securities of any series necessary to waive
any covenant or past default; or
- in the case of senior subordinated debt securities or subordinated debt
securities, amend or modify any of the provisions of such indenture
relating to subordination of the debt securities in any manner adverse to
the holders of such debt securities.
7
Holders of not less than a majority in principal amount of the outstanding
debt securities of any series may waive certain past defaults and may waive
compliance by AIMCO with certain of the restrictive covenants described above
with respect to the debt securities of such series.
DISCHARGE AND DEFEASANCE
Unless otherwise indicated in an applicable prospectus supplement, each
indenture provides that AIMCO may satisfy and discharge obligations thereunder
with respect to the debt securities of any series by delivering to the trustee
for cancellation all outstanding debt securities of such series or depositing
with the trustee, after such outstanding debt securities have become due and
payable, cash sufficient to pay at stated maturity all of the outstanding debt
securities of such series and paying all other sums payable under the indenture
with respect to such series.
In addition, unless otherwise indicated in the applicable prospectus
supplement, each indenture provides that AIMCO:
- shall be discharged from its obligations in respect of the debt
securities of such series ("defeasance and discharge"), or
- may cease to comply with certain restrictive covenants ("covenant
defeasance"), including those described under "Mergers and Sales of
Assets," and any such cessation shall not be an event of default with
respect to the debt securities of such series.
In each case, at any time prior to the stated maturity or redemption
thereof, when AIMCO has irrevocably deposited with the trustee, in trust,
- sufficient funds to pay the principal of and interest to stated maturity
(or redemption) on, the debt securities of such series, or
- such amount of direct obligations of, or obligations the principal of
(and premium, if any) and interest on which are fully guaranteed by, the
government of the United States and which are not subject to prepayment,
redemption or call, as will, together with the predetermined and certain
income to accrue thereon without consideration of any reinvestment
thereof, be sufficient to pay when due the principal of (and premium, if
any) and interest to stated maturity (or redemption) on, the debt
securities of such series.
Upon such defeasance and discharge, the holders of the debt securities of
such series shall no longer be entitled to the benefits of the indenture, except
for the purposes of registration of transfer and exchange of the debt securities
of such series and replacement of lost, stolen or mutilated debt securities and
shall look only to such deposited funds or obligations for payment. In addition,
under present law such defeasance and discharge is likely to be treated as a
redemption of the debt securities of that series prior to maturity in exchange
for such money or United States government obligations. In that event, each
holder would generally recognize, at the time of defeasance, gain or loss
measured by the difference between the amount of such money and the fair market
value of the United States government obligations deemed received and such
holder's tax basis in the debt securities deemed surrendered. Thereafter, each
holder would likely be treated as if such holder held an undivided interest in
the money (or investments made therewith) or the United States government
obligations (or investments made with interest received therefrom), would
generally be subject to tax liability in respect of interest income and/or
original issue discount, if applicable, thereon and would recognize any gain or
loss upon any disposition, including redemption, of such assets or obligations.
Although tax might be owed, the holder of a defeased debt security would not
receive any cash until the maturity or an earlier redemption of the debt
security (except for current payments of interest on the debt securities of that
issue). Such tax treatment could affect the purchase price that a holder would
receive upon the sale of the debt securities. Holders are urged to consult their
own tax advisors with respect to the tax treatment of defeasance of any debt
securities.
8
THE TRUSTEES
The trustee for any debt securities will be named in the applicable
prospectus supplement. Each trustee will be permitted to engage in other
transactions with AIMCO and each of its subsidiaries; however, if a trustee
acquires any conflicting interest, it must eliminate such conflict or resign.
DESCRIPTION OF AIMCO OPERATING PARTNERSHIP DEBT SECURITIES
GENERAL
The following description sets forth certain general terms and provisions
of the debt securities of the AIMCO Operating Partnership to which any
prospectus supplement may relate. The particular terms of the debt securities
offered by any prospectus supplement and the extent, if any, to which such
general provisions may apply to the debt securities so offered will be described
in the prospectus supplement relating to such debt securities.
The debt securities may be issued by the AIMCO Operating Partnership, from
time to time, in one or more series, and will constitute either senior debt
securities, senior subordinated debt securities or subordinated debt securities,
each of which may be issued under an indenture to be entered into among the
AIMCO Operating Partnership, AIMCO (as guarantor, if applicable) and a trustee
to be named in the applicable prospectus supplement. Forms of these indentures
are filed as exhibits to the Registration Statement, of which this prospectus is
a part. The indentures will be subject to and governed by the TIA. Capitalized
terms used in this section which are not defined in this prospectus are defined
in the indenture to which they relate. The statements made under this heading
about the debt securities and the indentures are summaries of their material
provisions and are not complete. These statements are subject to, and are
qualified in their entirety by reference to, all the provisions of the
indentures and the debt securities, including the definitions therein of certain
terms.
The debt securities issued by the AIMCO Operating Partnership will not be
convertible. AIMCO will fully and unconditionally guarantee the payment
obligations on all debt securities issued by the AIMCO Operating Partnership
unless, at the time of sale, at least one nationally recognized statistical
rating organization (as that term is used in Rule 15c 3-1(c)(2)(vi)(F) under the
Securities Exchange Act of 1934) has rated such debt securities in one of its
generic rating categories which signifies investment grade.
The debt securities will be direct, unsecured obligations of the AIMCO
Operating Partnership. The indentures do not limit the aggregate principal
amount of debt securities that may be issued thereunder and provide that such
debt securities may be issued thereunder from time to time in one or more
series. Under the indentures, the AIMCO Operating Partnership will have the
ability to issue debt securities with terms different from those of debt
securities previously issued by it, without the consent of the holders of such
previously issued series of debt securities, in an aggregate principal amount
determined by the AIMCO Operating Partnership.
The applicable prospectus supplement or prospectus supplements relating to
any senior subordinated debt securities or subordinated debt securities will set
forth the aggregate amount of outstanding indebtedness, as of the most recent
practicable date, that by the terms of such debt securities would be senior to
such debt securities and any limitation on the issuance of additional senior
indebtedness.
Debt securities may be issued and sold at a discount below their principal
amount. Special United States Federal income tax considerations applicable to
debt securities issued with original issue discount will be described in more
detail in any applicable prospectus supplement. Even if debt securities are not
issued at a discount below their principal amount, such debt securities may, for
United States Federal income tax purposes, be deemed to have been issued with
original issue discount because of certain interest payment characteristics. In
addition, special United States Federal tax considerations or other restrictions
or terms applicable to any debt securities offered exclusively to United States
aliens or denominated in a currency other than United States dollars will be set
forth in a prospectus supplement relating thereto.
9
Below is a description of some general terms of the AIMCO Operating
Partnership's debt securities which may be specified in a prospectus supplement.
You should read the prospectus supplement for a description of the debt
securities being offered, including:
- the title of the debt securities;
- any limit on the aggregate principal amount of the debt securities;
- whether the debt securities may be represented initially by a debt
security in temporary or permanent global form, and if so, the initial
depositary with respect to such temporary or permanent global debt
security and whether and the circumstances under which beneficial owners
of interests in any such temporary or permanent global debt security may
exchange such interests for debt securities of such series and of like
tenor of any authorized form and denomination;
- the price or prices at which the debt securities will be issued;
- the date or dates on which the principal of the debt securities is
payable or the method of determination thereof;
- the place or places where and the manner in which the principal of and
premium, if any, and interest, if any, on such debt securities will be
payable and the place or places where such debt securities may be
presented for transfer;
- the rate or rates at which the debt securities will bear interest, or the
method of calculating such rate or rates, if any, and the date or dates
from which such interest, if any, will accrue;
- the dates, if any, on which any interest on the debt securities will be
payable, and the regular record date for any interest payable on any debt
securities;
- the right or obligation, if any, of the AIMCO Operating Partnership to
redeem or purchase debt securities of the series pursuant to any sinking
fund or analogous provisions or at the option of a holder thereof, the
conditions, if any, giving rise to such right or obligation, and the
period or periods within which, and the price or prices at which and the
terms and conditions upon which debt securities of the series shall be
redeemed or purchased, in whole or part, and any provisions for the
remarketing of such debt securities;
- any terms applicable to such debt securities which are issued at a
discount, including the issue price thereof and the rate or rates at
which original issue discount will accrue;
- if other than the principal amount thereof, the portion of the principal
amount of the debt securities which will be payable upon declaration or
acceleration of the maturity thereof pursuant to an event of default;
- any special United States Federal income tax considerations applicable to
the debt securities;
- whether the debt securities will be guaranteed by AIMCO and the terms of
any such guarantee; and
- any other terms of the debt securities not inconsistent with the
provisions of the indenture.
The applicable prospectus supplement will also describe the following terms
of any series of senior subordinated debt securities or subordinated debt
securities offered hereby in respect of which this prospectus is being
delivered:
- the rights, if any, to defer payments of interest on such series of debt
securities by extending the interest payment period, and the duration of
such extensions;
- the subordination terms of such series of debt securities; and
- any special provisions for the payment of additional amounts with respect
to the debt securities.
Since the operations of the AIMCO Operating Partnership are currently
conducted principally through its subsidiaries, the AIMCO Operating
Partnership's cash flow and its consequent ability to service debt,
10
including the debt securities, will be dependent, in large part, upon the
earnings of the subsidiaries and the distribution of those earnings to the AIMCO
Operating Partnership, whether by dividends, loans or otherwise. The payment of
dividends and the making of loans and advances to the AIMCO Operating
Partnership by its subsidiaries may be subject to statutory or contractual
restrictions, are contingent upon the earnings of those subsidiaries and are
subject to various business considerations. Any right of the AIMCO Operating
Partnership to receive assets of any of its subsidiaries upon their liquidation
or reorganization (and the consequent right of the holders of the debt
securities to participate in those assets) will be effectively subordinated to
the claims of that subsidiary's creditors (including trade creditors), except to
the extent that the AIMCO Operating Partnership is recognized as a creditor of
such subsidiary, in which case the claims of the AIMCO Operating Partnership
would still be subordinate to any security interests in the assets of such
subsidiary and any indebtedness of such subsidiary senior to that held by the
AIMCO Operating Partnership.
FORM, EXCHANGE, REGISTRATION AND TRANSFER
A series of debt securities may be issued solely as registered debt
securities. A series of debt securities may be issuable in whole or in part in
the form of one or more global debt securities, as described below under "Global
Debt Securities." Unless otherwise indicated in an applicable prospectus
supplement, debt securities will be issuable in denominations of $1,000 and
integral multiples thereof. Any series of debt securities will be exchangeable
for other debt securities of the same series of any authorized denominations and
of a like aggregate principal amount and tenor.
Debt securities may be presented for exchange as provided above and, unless
otherwise indicated in the applicable prospectus supplement, may be presented
for registration of transfer, at the office or agency of the AIMCO Operating
Partnership designated as registrar or co-registrar with respect to such series
of debt securities, without service charge and upon payment of any taxes,
assessments or other governmental charges as described in the indenture. Such
transfer or exchange will be effected on the books of the registrar or any other
transfer agent appointed by the AIMCO Operating Partnership upon such registrar
or transfer agent, as the case may be, being satisfied with the documents of
title and identity of the person making the request. The AIMCO Operating
Partnership intends to initially appoint the trustee for the particular series
of debt securities as the registrar for such debt securities and the name of any
different or additional registrar designated by the AIMCO Operating Partnership
with respect to the debt securities will be included in the prospectus
supplement relating thereto. If a prospectus supplement refers to any transfer
agents (in addition to the registrar) designated by the AIMCO Operating
Partnership with respect to any series of debt securities, the AIMCO Operating
Partnership may at any time rescind the designation of any such transfer agent
or approve a change in the location through which any such transfer agent acts,
except that the AIMCO Operating Partnership will be required to maintain a
transfer agent in the Borough of Manhattan, the City of New York. The AIMCO
Operating Partnership may at any time designate additional transfer agents with
respect to any series of debt securities.
In the event of any partial redemption of debt securities of any series,
the AIMCO Operating Partnership will not be required to (i) issue, register the
transfer of or exchange debt securities of that series during a period beginning
at the opening of business 15 days before any selection of debt securities of
that series to be redeemed and ending at the close of business on the day of
mailing of the relevant notice of redemption; or (ii) register the transfer of
or exchange any debt security, or portion thereof, called for redemption, except
the unredeemed portion of any debt security being redeemed in part.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable prospectus supplement, payment
of principal of, and interest, if any, on, debt securities will be made at the
office of such paying agent or paying agents as the AIMCO Operating Partnership
may designate from time to time, except that, at the option of the AIMCO
Operating Partnership, payment of principal or interest may be made by check or
by wire transfer to an account maintained by the payee. Unless otherwise
indicated in the applicable prospectus supplement, payment of any installment of
interest on debt securities will be made to the person in whose name such debt
security is registered at the close of business on the regular record date for
such interest.
11
Unless otherwise indicated in the applicable prospectus supplement, the
trustee for the debt securities being offered will be designated as the AIMCO
Operating Partnership's sole paying agent for payments with respect to the debt
securities. Any other paying agents initially designated by the AIMCO Operating
Partnership for the debt securities being offered will be named in the
applicable prospectus supplement. The AIMCO Operating Partnership may at any
time designate additional paying agents or rescind the designation of any paying
agent or approve a change in the office through which any paying agent acts,
except that the AIMCO Operating Partnership will be required to maintain a
paying agent in the Borough of Manhattan, The City of New York.
All moneys paid by the AIMCO Operating Partnership to a paying agent for
the payment of principal of, or interest, if any, on, any debt security which
remains unclaimed at the end of two years after such principal or interest shall
have become due and payable will be repaid to the AIMCO Operating Partnership,
and the holder of such debt security or any coupon will thereafter look only to
the AIMCO Operating Partnership for payment thereof.
GUARANTEES
If the AIMCO Operating Partnership issues any debt securities that are
rated below investment grade at the time of issuance, AIMCO will fully and
unconditionally guarantee, on a senior or subordinated basis, the due and
punctual payment of principal of, premium, if any, and interest on such debt
securities, and the due and punctual payment of any sinking fund payments
thereon, when and as the same shall become due and payable, whether at a
maturity date, by declaration of acceleration, call for redemption or otherwise.
The applicability and terms of any such guarantees relating to a series of debt
securities will be set forth in the prospectus supplement relating to such debt
securities.
GLOBAL DEBT SECURITIES
The debt securities of a series may be issued in whole or in part in global
form. A debt security in global form will be deposited with, or on behalf of, a
depositary, which will be identified in the applicable prospectus supplement. A
global debt security may be issued only in registered form and in either
temporary or permanent form. A debt security in global form may not be
transferred except as a whole to the depositary for such debt security or to a
nominee or successor of such depositary. If any debt securities of a series are
issuable in global form, the applicable prospectus supplement will describe the
circumstances, if any, under which beneficial owners of interests in any such
global debt security may exchange such interests for definitive debt securities
of such series and of like tenor and principal amount in any authorized form and
denomination, the manner of payment of principal of and interest, if any, on
such global debt security and the specific terms of the depositary arrangement
with respect to such global debt security.
MERGERS AND SALES OF ASSETS
The AIMCO Operating Partnership may not consolidate with or merge into any
other person or convey, transfer or lease its properties and assets
substantially as an entirety to another person, unless, among other things, (i)
the resulting, surviving or transferee person (if other than the AIMCO Operating
Partnership) is organized and existing under the laws of the United States, any
state thereof or the District of Columbia and such person expressly assumes all
obligations of the AIMCO Operating Partnership under the debt securities and the
indenture, and (ii) immediately after giving effect to such transaction, no
default or event of default shall have occurred or be continuing under the
indenture. Upon the assumption of the AIMCO Operating Partnership's obligations
by a person to whom such properties or assets are conveyed, transferred or
leased, subject to certain exceptions, the AIMCO Operating Partnership shall be
discharged from all obligations under the debt securities and the indenture.
EVENTS OF DEFAULT
Each indenture provides that, if an event of default specified therein
shall have occurred and be continuing, with respect to each series of debt
securities outstanding thereunder, the trustee or the holders of
12
not less than 25% in aggregate principal amount of the outstanding debt
securities of such series may declare the principal amount (or, if any of the
debt securities of such series were issued at a discount, such portion of the
principal amount of such debt securities as may be specified by the terms
thereof) of the debt securities of such series to be immediately due and
payable. Under certain circumstances, the holders of a majority in aggregate
principal amount of the outstanding debt securities of such series may rescind
such a declaration.
Under each indenture, an event of default is defined as, with respect to
each series of debt securities outstanding thereunder, any of the following:
- default in payment of the principal of any debt securities of such
series;
- default in payment of any interest on any debt securities of such series
when due, continuing for 30 days (or 60 days, in the case of senior
subordinated debt securities or subordinated debt securities);
- default by the AIMCO Operating Partnership (or AIMCO, in the case of a
guarantee of such debt securities) in compliance with its other
agreements in the debt securities of such series or the indenture
relating to the debt securities of such series upon the receipt of notice
of such default given by the trustee for such debt securities or the
holders of at least 25% in aggregate principal amount of the outstanding
debt securities of such series and the failure of the AIMCO Operating
Partnership (or AIMCO, in the case of a guarantee of such debt
securities) to cure such default within 60 days after receipt of such
notice;
- certain events of bankruptcy or insolvency; and
- any other event of default set forth in an applicable prospectus
supplement with respect to the debt securities of such series.
The trustee shall give notice to holders of the debt securities of any
continuing default known to the trustee within 90 days after the occurrence
thereof; provided, that the trustee may withhold such notice, as to any default
other than a payment default, if it determines in good faith that withholding
the notice is in the interests of the holders.
The holders of a majority in principal amount of the outstanding debt
securities of any series may direct the time, method and place of conducting any
proceeding for any remedy available to the trustee or exercising any trust or
power conferred on the trustee with respect to the debt securities of such
series; provided that such direction shall not be in conflict with any law or
the indenture and subject to certain other limitations. Before proceeding to
exercise any right or power under the indenture at the direction of such
holders, the trustee shall be entitled to receive from such holders reasonable
security or indemnity satisfactory to it against the costs, expenses and
liabilities which might be incurred by it in complying with any such direction.
With respect to each series of debt securities, no holder will have any right to
pursue any remedy with respect to the indenture or such debt securities, unless:
- such holder shall have previously given the trustee written notice of a
continuing event of default with respect to the debt securities of such
series;
- the holders of at least 25% in aggregate principal amount of the
outstanding debt securities of such series shall have made a written
request to the trustee to pursue such remedy;
- such holder or holders have offered to the trustee reasonable indemnity
satisfactory to the trustee;
- the holders of a majority in aggregate principal amount of the
outstanding debt securities of such series have not given the trustee a
direction inconsistent with such request within 60 days after receipt of
such request; and
- the trustee shall have failed to comply with the request within such
60-day period.
Notwithstanding the foregoing, the right of any holder of debt securities
to receive payment of the principal of and interest in respect of such debt
securities on the date specified in such debt securities as the fixed date on
which an amount equal to the principal of such debt securities or an installment
of principal thereof or interest thereon is due and payable (the "stated
maturity" or "stated maturities") or to institute suit
13
for the enforcement of any such payments shall not be impaired or adversely
affected without such holder's consent. The holders of at least a majority in
aggregate principal amount of the outstanding debt securities of any series may
waive an existing default with respect to such series and its consequences,
other than (i) any default in any payment of the principal of, or interest on,
any debt securities of such series or (ii) any default in respect of certain
covenants or provisions in the indenture which may not be modified without the
consent of the holder of each of the outstanding debt securities of such series
affected as described in "Modification and Waiver," below.
Each indenture provides that the AIMCO Operating Partnership shall deliver
to the trustee within 120 days after the end of each fiscal year of the AIMCO
Operating Partnership an officers' certificate stating whether or not the
signers know of any default that occurred during such period.
MODIFICATION AND WAIVER
The AIMCO Operating Partnership and the trustee may execute a supplemental
indenture without the consent of the holders of the debt securities:
- to add to the covenants, agreements and obligations of the AIMCO
Operating Partnership for the benefit of the holders of all the debt
securities of any series or to surrender any right or power conferred in
the indenture upon the AIMCO Operating Partnership;
- to evidence the succession of another corporation, partnership or other
entity to the AIMCO Operating Partnership and the assumption by such
corporation, partnership or other entity on of the obligations of the
AIMCO Operating Partnership, under the indenture and the debt securities;
- to establish the form or terms of debt securities of any series as
permitted by the indenture;
- to provide for the acceptance of appointment under the indenture of a
successor trustee with respect to the debt securities of one or more
series and to add to or change any provisions of the indenture as shall
be necessary to provide for or facilitate the administration of the
trusts by more than one trustee;
- to cure any ambiguity, defect or inconsistency;
- to add to, change or eliminate any provisions (which addition, change or
elimination may apply to one or more series of debt securities), provided
that any such addition, change or elimination does not (i) apply to any
debt securities of any series created prior to the execution of such
supplemental indenture that is entitled to the benefit of such provision
or (ii) modify the rights of the holder of any such debt securities with
respect to such provision;
- to secure the debt securities; or
- to make any other change that does not adversely affect the rights of any
holder of debt securities.
Each indenture provides that, with the consent of the holders of not less
than a majority in aggregate principal amount of the outstanding debt securities
of the series affected by such supplemental indenture, the AIMCO Operating
Partnership and the trustee may also execute a supplemental indenture to add
provisions to, or change in any manner or eliminate any provisions of, the
indenture with respect to such series of debt securities or modify in any manner
the rights of the holders of the debt securities of such series; provided that
no such supplemental indenture will, without the consent of the holder of each
such outstanding debt security affected thereby:
- change the stated maturity of the principal of, or any installment of
principal or interest on, any such debt security or any premium payable
upon redemption or repurchase thereof, or reduce the amount of principal
of any debt security that was issued at a discount and that would be due
and payable upon declaration of acceleration of maturity thereof;
- reduce the principal amount of, or the rate of interest on, any such debt
security;
- change the place or currency of payment of principal or interest, if any,
on any such debt security;
14
- impair the right to institute suit for the enforcement of any payment on
or with respect to any such debt security;
- reduce the above-stated percentage of holders of debt securities of any
series necessary to modify or amend the indenture for such debt
securities;
- modify the foregoing requirements or reduce the percentage in principal
amount of outstanding debt securities of any series necessary to waive
any covenant or past default; or
- in the case of senior subordinated debt securities or subordinated debt
securities, amend or modify any of the provisions of such indenture
relating to subordination of the debt securities in any manner adverse to
the holders of such debt securities.
Holders of not less than a majority in principal amount of the outstanding
debt securities of any series may waive certain past defaults and may waive
compliance by the AIMCO Operating Partnership with certain of the restrictive
covenants described above with respect to the debt securities of such series.
DISCHARGE AND DEFEASANCE
Unless otherwise indicated in an applicable prospectus supplement, each
indenture provides that the AIMCO Operating Partnership may satisfy and
discharge obligations thereunder with respect to the debt securities of any
series by delivering to the trustee for cancellation all outstanding debt
securities of such series or depositing with the trustee, after such outstanding
debt securities have become due and payable, cash sufficient to pay at stated
maturity all of the outstanding debt securities of such series and paying all
other sums payable under the indenture with respect to such series.
In addition, unless otherwise indicated in the applicable prospectus
supplement, each indenture provides that the AIMCO Operating Partnership
- shall be discharged from its obligations in respect of the debt
securities of such series ("defeasance and discharge"), or
- may cease to comply with certain restrictive covenants ("covenant
defeasance"), including those described under "Mergers and Sales of
Assets," and any such cessation shall not be an event of default with
respect to the debt securities of such series.
In each case, at any time prior to the stated maturity or redemption
thereof, when the AIMCO Operating Partnership has irrevocably deposited with the
trustee, in trust,
- sufficient funds to pay the principal of and interest to stated maturity
(or redemption) on, the debt securities of such series, or
- such amount of direct obligations of, or obligations the principal of
(and premium, if any) and interest on which are fully guaranteed by, the
government of the United States and which are not subject to prepayment,
redemption or call, as will, together with the predetermined and certain
income to accrue thereon without consideration of any reinvestment
thereof, be sufficient to pay when due the principal of (and premium, if
any) and interest to stated maturity (or redemption) on, the debt
securities of such series.
Upon such defeasance and discharge, the holders of the debt securities of
such series shall no longer be entitled to the benefits of the indenture, except
for the purposes of registration of transfer and exchange of the debt securities
of such series and replacement of lost, stolen or mutilated debt securities and
shall look only to such deposited funds or obligations for payment. In addition,
under present law such defeasance and discharge is likely to be treated as a
redemption of the debt securities of that series prior to maturity in exchange
for such money or United States government obligations. In that event, each
holder would generally recognize, at the time of defeasance, gain or loss
measured by the difference between the amount of such money and the fair market
value of the United States government obligations deemed received and such
holder's tax basis in the debt securities deemed surrendered. Thereafter, each
holder would likely be treated as if such holder held an undivided interest in
the money (or investments made therewith) or the United States government
obligations
15
(or investments made with interest received therefrom), would generally be
subject to tax liability in respect of interest income and/or original issue
discount, if applicable, thereon and would recognize any gain or loss upon any
disposition, including redemption, of such assets or obligations. Although tax
might be owed, the holder of a defeased debt security would not receive any cash
until the maturity or an earlier redemption of the debt security (except for
current payments of interest on the debt securities of that issue). Such tax
treatment could affect the purchase price that a holder would receive upon the
sale of the debt securities. Holders are urged to consult their own tax advisors
with respect to the tax treatment of defeasance of any debt securities.
THE TRUSTEES
The trustee for any debt securities will be named in the applicable
prospectus supplement. Each trustee will be permitted to engage in other
transactions with the AIMCO Operating Partnership and each of their
subsidiaries; however, if a trustee acquires any conflicting interest, it must
eliminate such conflict or resign.
DESCRIPTION OF PREFERRED STOCK
GENERAL
Under its charter, AIMCO may issue, from time to time, shares of one or
more classes or series of preferred stock, par value $0.01 per share. The
following description sets forth certain general terms and provisions of the
preferred stock. The particular terms of any class or series of preferred stock
offered by any prospectus supplement, and the extent, if any, to which these
general provisions may apply to the class or series of preferred stock so
offered will be described in the prospectus supplement. The following summary of
the material provisions of the preferred stock does not purport to be complete
and is subject to, and is qualified in its entirety by express reference to,
articles supplementary relating to a specific class or series of preferred
stock, which will be in the form filed as an exhibit to or incorporated by
reference in the Registration Statement which includes this prospectus at or
prior to the time of issuance of such series of preferred stock.
As of November 6, 2001, AIMCO's charter authorized the issuance of
510,587,500 shares of capital stock, of which 53,624,762 shares were classified
as preferred stock. See "Description of Outstanding Classes of Preferred Stock."
The Board of Directors of AIMCO is authorized to issue shares of preferred
stock, in one or more classes or series, and may classify and reclassify any of
its unissued capital stock into shares of preferred stock by setting or changing
in any one or more respects the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications or terms or
conditions of redemption of such shares of capital stock including, but not
limited to, ownership restrictions consistent with the ownership limit with
respect to each class or series of capital stock, and the number of shares
constituting each class or series, and to increase or decrease the number of
shares of any such class or series, to the extent permitted by the Maryland
General Corporation Law and AIMCO's charter.
The AIMCO Board of Directors is authorized to determine for each class or
series of preferred stock, and the prospectus supplement will set forth with
respect to each class or series that may be issued and sold pursuant hereto:
- the designation of such shares and the number of shares that constitute
such class or series;
- the dividend rate (or the method of calculation thereof), if any, on the
shares of such class or series and the priority as to payment of
dividends with respect to other classes or series of capital stock of
AIMCO;
- the dividend periods (or the method of calculation thereof);
- the voting rights of the shares;
- the liquidation preference and the priority as to payment of such
liquidation preference with respect to other classes or series of capital
stock of AIMCO and any other rights of the shares of such class or series
upon any liquidation or winding up of AIMCO;
16
- whether and on what terms the shares of such class or series will be
subject to redemption or repurchase at the option of AIMCO;
- whether and on what terms the shares of such class or series will be
convertible into or exchangeable for other debt or equity securities of
AIMCO;
- whether the shares of such class or series of preferred stock will be
listed on a securities exchange;
- any special United States federal income tax considerations applicable to
such class or series of preferred stock; and
- the other rights and privileges and any qualifications, limitations or
restrictions of such rights or privileges of such class or series of
preferred stock not inconsistent with AIMCO's charter and Maryland law.
CONVERTIBILITY
No class or series of preferred stock that may be issued and sold pursuant
hereto will be convertible into, or exchangeable for, other securities or
property, except as set forth in the applicable prospectus supplement, which
will set forth the terms and conditions upon which such conversion or exchange
may be effected, including the initial conversion or exchange rate and any
adjustments thereto, the conversion or exchange period and any other conversion
or exchange provisions.
DIVIDENDS
Holders of shares of preferred stock, are entitled to receive, when and as
declared by AIMCO's Board of Directors, out of funds legally available therefor,
dividends payable at such dates and at such rates, if any, as set forth in the
applicable prospectus supplement.
Unless otherwise set forth in the applicable prospectus supplement, each
class or series of preferred stock that may be issued and sold pursuant hereto
will rank junior as to dividends to any class or series preferred stock that may
be issued in the future that is expressly made senior as to dividends. If at any
time AIMCO has failed to pay accrued dividends on any such senior preferred
stock at the time such dividends are payable, AIMCO may not pay any dividend on
junior preferred stock or redeem or otherwise repurchase shares of junior
preferred stock until such accumulated but unpaid dividends on such senior
preferred stock have been paid or set aside for payment in full by AIMCO.
Unless otherwise set forth herein or in the applicable prospectus
supplement relating to any class or series of preferred stock that may be issued
and sold pursuant hereto, no dividends (other than dividends payable in common
stock, equity stock, or other capital stock ranking junior to the preferred
stock of any class or series as to dividends and upon liquidation) shall be
declared or paid or set aside for payment, nor shall any other distribution be
declared or made upon any common stock, equity stock, or any other capital stock
of AIMCO ranking junior to or on a parity with the preferred stock of such class
or series as to dividends, nor shall any common stock, equity stock, or any
other capital stock of AIMCO ranking junior to or on a parity with the preferred
stock of such class or series as to dividends or upon liquidation be redeemed,
purchased or otherwise acquired for any consideration (or any moneys be paid to
or made available for a sinking fund for the redemption of any shares of any
such stock) by AIMCO (except by conversion into or exchange for other capital
stock of AIMCO ranking junior to the preferred stock of such series as to
dividends and upon liquidation) unless:
- if such class or series of preferred stock has a cumulative dividend,
full cumulative dividends on the preferred stock of such class or series
have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof set apart for all past dividend
periods and the then current dividend period; and
- if such class or series of preferred stock does not have a cumulative
dividend, full dividends on the preferred stock of such class or series
have been or contemporaneously are declared and paid or
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declared and a sum sufficient for the payment thereof set apart for
payment for the then current dividend period;
provided, however, that any monies theretofore deposited in any sinking fund
with respect to any preferred stock in compliance with the provisions of such
sinking fund may thereafter be applied to the purchase or redemption of such
preferred stock in accordance with the terms of such sinking fund, regardless of
whether at the time of such application full cumulative dividends upon shares of
the preferred stock outstanding on the last dividend payment date shall have
been paid or declared and set apart for payment; and provided, further, that any
junior or parity preferred stock, common stock or equity stock, may be converted
into or exchanged for stock of AIMCO ranking junior to the preferred stock as to
dividends.
The amount of dividends payable for the initial dividend period or any
period shorter than a full dividend period shall be computed on the basis of a
360-day year of twelve 30-day months. Accrued but unpaid dividends will not bear
interest.
REDEMPTION AND SINKING FUND
No class or series of preferred stock that may be issued and sold pursuant
hereto will be redeemable or be entitled to receive the benefit of a sinking
fund, except as set forth in the applicable prospectus supplement, which will
set forth the terms and conditions thereof, including the dates and redemption
prices of any such redemption, any conditions thereto, and any other redemption
or sinking fund provisions.
LIQUIDATION RIGHTS
Unless otherwise set forth herein or in the applicable prospectus
supplement, in the event of any liquidation, dissolution or winding up of AIMCO,
the holders of shares of each class or series of preferred stock that may be
issued and sold pursuant hereto are entitled to receive out of assets of AIMCO
available for distribution to stockholders, before any distribution of assets is
made to holders of any other shares of preferred stock ranking junior to such
class or series of preferred stock as to rights upon liquidation, dissolution or
winding up, or holders of common stock or equity stock, liquidating
distributions per share in the amount of the liquidation preference specified in
the applicable prospectus supplement for such class or series of preferred stock
plus any dividends accumulated and accrued but unpaid to the date of final
distribution; but the holders of each class or series of preferred stock will
not be entitled to receive the liquidating distribution of, plus such dividends
on, such shares until the liquidation preference of any shares of AIMCO's
capital stock ranking senior to such class or series of preferred stock as to
the rights upon liquidation, dissolution or winding up shall have been paid (or
a sum set aside therefor sufficient to provide for payment) in full. If upon any
liquidation, dissolution or winding up of AIMCO, the amounts payable with
respect to any class or series of preferred stock, and any other preferred stock
ranking as to any such distribution on a parity with the preferred stock are not
paid in full, the holders of the preferred stock and such other parity preferred
stock will share ratably in any such distribution of assets in proportion to the
full respective preferential amount to which they are entitled. Unless otherwise
specified in a prospectus supplement for a class or series of preferred stock,
after payment of the full amount of the liquidating distribution to which they
are entitled, the holders of shares of preferred stock will not be entitled to
any further participation in any distribution of assets by AIMCO. For these
purposes, neither a consolidation or merger of AIMCO with another corporation
nor a sale of securities shall be considered a liquidation, dissolution or
winding up of AIMCO.
VOTING RIGHTS
Holders of preferred stock that may be issued and sold pursuant hereto will
not have any voting rights except as set forth below or in the applicable
prospectus supplement or as otherwise from time to time required by law.
Whenever dividends on any applicable class or series of preferred stock or any
other class or series of stock ranking on a parity with the applicable class or
series of preferred stock with respect to the payment of dividends shall be in
arrears for the equivalent of six quarterly dividend periods, whether or not
consecutive, the holders of shares of such class or series of preferred stock
(voting separately as a class with all other classes and series of preferred
stock then entitled to such voting rights) will be entitled to vote for the
18
election of two of the authorized number of directors of AIMCO at the next
annual meeting of stockholders and at each subsequent meeting until all
dividends accumulated on such class or series of preferred stock shall have been
fully paid or set apart for payment. The term of office of all directors elected
by the holders of such preferred stock shall terminate immediately upon the
termination of the right of the holders of such preferred stock to vote for
directors. Unless otherwise set forth in the applicable prospectus supplement,
holders of shares of preferred stock that may be issued and sold pursuant hereto
will have one vote for each share held.
So long as any shares of any class or series of preferred stock remain
outstanding, AIMCO shall not, without the consent of holders of at least
two-thirds of the shares of such class or series of preferred stock outstanding
at the time, voting separately as a class with all other classes and series of
preferred stock of AIMCO upon which like voting rights have been conferred and
are exercisable:
- issue or increase the authorized amount of any class or series of stock
ranking prior to the outstanding preferred stock as to dividends or upon
liquidation; or
- amend, alter or repeal the provisions of AIMCO's charter relating to such
classes or series of preferred stock, whether by merger, consolidation or
otherwise, so as to materially adversely affect any power, preference or
special right of such series of preferred stock or the holders thereof;
provided, however, that any increase in the amount of the authorized common
stock, equity stock, or preferred stock or any increase or decrease in the
number of shares of any class or series of preferred stock, equity stock or the
creation and issuance of other series of common stock, equity stock, or
preferred stock ranking on a parity with or junior to preferred stock as to
dividends and upon liquidation, dissolution or winding up shall not be deemed to
materially adversely affect such powers, preferences or special rights.
MISCELLANEOUS
The holders of preferred stock will have no preemptive rights. The
preferred stock that may be issued and sold pursuant hereto, upon issuance
against full payment of the purchase price therefor, will be fully paid and
nonassessable. Shares of preferred stock redeemed or otherwise reacquired by
AIMCO shall resume the status of authorized and unissued shares of preferred
stock undesignated as to class or series, and shall be available for subsequent
issuance. There are no restrictions on repurchase or redemption of the preferred
stock while there is any arrearage on sinking fund installments except as may be
set forth in an applicable prospectus supplement. Payment of dividends on, and
the redemption or repurchase of, any class or series of preferred stock may be
restricted by loan agreements, indentures and other agreements entered into by
AIMCO. The accompanying prospectus supplement will describe any material
contractual restrictions on such dividend payments.
NO OTHER RIGHTS
The shares of a class or series of preferred stock that may be issued and
sold pursuant hereto will not have any preferences, voting powers or relative,
participating, optional or other special rights except as set forth above or in
the applicable prospectus supplement or AIMCO's charter or as otherwise required
by law.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for each class or series of preferred
stock that may be issued and sold pursuant hereto will be designated in the
applicable prospectus supplement.
DESCRIPTION OF EQUITY STOCK
GENERAL
Under its charter, AIMCO may issue, from time to time, shares of one or
more classes or series of equity stock, par value $0.01 per share. The following
description sets forth certain general terms and provisions of the equity stock.
The particular terms of any class or series of equity stock offered by any
prospectus
19
supplement, and the extent, if any, to which these general provisions may apply
to the series of equity stock so offered will be described in the prospectus
supplement. The following summary of the material provisions of the equity stock
does not purport to be complete and is subject to, and is qualified in its
entirety by express reference to, articles supplementary relating to a specific
class or series of equity stock, which will be in the form filed as an exhibit
to or incorporated by reference in the Registration Statement which includes
this prospectus at or prior to the time of issuance of such series of equity
stock.
As of November 6, 2001, AIMCO's charter authorized the issuance of
510,587,500 shares of capital stock, of which no shares were classified as
equity stock. The Board of Directors of AIMCO is authorized to issue shares of
equity stock, in one or more classes or subclasses, and may classify and
reclassify any of its unissued capital stock into shares of equity stock by
setting or changing in any one or more respects the preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms or conditions of redemption of such shares of capital
stock including, but not limited to, ownership restrictions consistent with the
ownership limit with respect to each class or series of capital stock, and the
number of shares constituting each class or series, and to increase or decrease
the number of shares of any such class or series, to the extent permitted by the
Maryland General Corporation Law and AIMCO's charter.
The AIMCO Board of Directors is authorized to determine for each class or
series of equity stock, and the prospectus supplement will set forth with
respect to each class or series that may be issued and sold pursuant hereto:
- the designation of such shares and the number of shares that constitute
such class or series;
- the number of shares of such class or series being offered, the
liquidation rights and the offering price of the shares;
- the dividend rate (or the method of calculation thereof), if any, on the
shares of such class or series and its relative ranking as to payment of
dividends with respect to other classes or series of capital stock of
AIMCO;
- the dividend periods (or the method of calculation thereof);
- the voting rights of the shares;
- any rights of the shares of such class or series upon any liquidation or
winding up of AIMCO;
- whether and on what terms the shares of such class or series will be
subject to redemption or repurchase at the option of AIMCO;
- whether and on what terms the shares of such class or series will be
convertible into or exchangeable for other debt or equity securities of
AIMCO;
- whether the shares of such class or series of equity stock will be listed
on a securities exchange;
- any special United States federal income tax considerations applicable to
such class or series of equity stock; and
- the other rights and privileges and any qualifications, limitations or
restrictions of such rights or privileges of such class or series of
equity stock not inconsistent with AIMCO's charter and Maryland law.
RANKING
Unless otherwise specified in the applicable prospectus supplement, equity
stock will, with respect to dividend rights and rights upon liquidation,
dissolution or winding up of AIMCO, rank on a parity with the class A common
stock, subject to any maximum or minimum distribution to holders of equity stock
specified in the applicable prospectus supplement.
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CONVERTIBILITY
The terms and conditions, if any, upon which shares of any class or series
of equity stock are convertible into class A common stock will be set forth in
the applicable prospectus supplement. The terms will include the number of
shares of class A common stock into which the equity stock is convertible, the
conversion price (or manner of calculation), the conversion period, provisions
as to whether conversion will be at AIMCO's option or at the option of the
holders of the equity stock or automatically upon the occurrence of certain
events, the events requiring an adjustment of the conversion price and
provisions affecting conversion in the event of the redemption of the class or
series of equity stock.
DIVIDENDS
Holders of shares of each class or series of equity stock will be entitled
to receive, when, as and if declared by AIMCO's Board of Directors, out funds
legally available therefor, cash dividends at such dates and at such rates as
set forth in the applicable prospectus supplement. Each dividend will be payable
to holders of record as they appear on our stock transfer books on the record
dates fixed by AIMCO's Board of Directors. Unless otherwise specified in the
applicable prospectus supplement, dividends on equity stock will not be
cumulative.
REDEMPTION
The shares of each class or series of equity stock will be subject to
mandatory redemption or redemption at AIMCO's option, in whole or in part, in
each case, to the extent set forth in the applicable prospectus supplement. The
prospectus supplement relating to a class or series of equity stock subject to
mandatory redemption will specify the number of shares of that class or series
that AIMCO must redeem in each year commencing after a date to be specified, at
a redemption price per share to be specified, together with an amount equal to
all accrued and unpaid dividends (which will not, if that series does not have a
cumulative dividend, include any accumulation in respect of unpaid dividends for
prior dividend periods) to the date of redemption. The redemption price may be
payable in cash, securities or other property, as specified in the applicable
prospectus supplement.
If fewer than all of the outstanding shares of equity stock of any class or
series offered are to be redeemed, the number of shares to be redeemed will be
determined by AIMCO and those shares may be redeemed pro rata from the holders
of record of those shares in proportion to the number of those shares held by
such holders (with adjustments to avoid redemption of fractional shares) or any
other equitable method determined by AIMCO.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of equity stock of any
class or series to be redeemed at the address shown on AIMCO's stock transfer
books. Each notice will state:
- the redemption date;
- the number of shares and class or series of the equity stock to be
redeemed and, if fewer than all such shares are to be redeemed, the
number of shares to be redeemed from such holder;
- the place or places where certificates for shares of that class or series
are to be surrendered for payment of the redemption price; and
- the redemption price.
If notice has been given as provided above, unless AIMCO defaults in
providing funds for the payment of the redemption price on that date, then from
and after the redemption date all dividends on the equity stock called for
redemption will cease. From and after the redemption date, unless AIMCO
defaults, all rights of the holders of the equity stock, except the right to
receive the redemption price (but without interest), will cease.
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LIQUIDATION RIGHTS
In the event of any liquidation, dissolution or winding up of AIMCO, before
AIMCO makes any distribution or payment to the holders of the equity stock or
any other class or series of AIMCO's capital stock ranking junior to any class
or series of preferred stock, the holders of each class or series of preferred
stock will be entitled to receive out of AIMCO's assets legally available for
distribution to stockholders liquidating distributions in the amount of the
liquidation preference per share, plus an amount equal to all accrued and unpaid
dividends (which shall not include any accumulation in respect of unpaid
dividends for prior dividend periods if the preferred stock does not have a
cumulative dividend). After payment of the full amount of the liquidating
distributions to which they are entitled, the holders of preferred stock will
have no right or claim to any of AIMCO's remaining assets.
If liquidating distributions have been made in full to all holders of
preferred stock, AIMCO's remaining assets will be distributed among the holders
of any other classes or series of capital stock ranking junior to the preferred
stock upon liquidation, dissolution or winding up, including the equity stock,
according to their respective rights and, in each case, according to their
respective number of shares. For these purposes, neither a consolidation or
merger of AIMCO with another corporation nor a sale of securities shall be
considered a liquidation, dissolution of winding up of AIMCO.
Unless otherwise specified in the applicable prospectus supplement, in the
event of any liquidation, dissolution or winding up of AIMCO, holders of the
equity stock will rank on a parity with the holders of the class A common stock,
subject to any maximum or minimum distribution to holders of equity stock
specified in the applicable prospectus supplement.
VOTING RIGHTS
Unless otherwise specified in the applicable prospectus supplement, holders
of the equity stock will vote with holders of the class A common stock. No
consent or approval of the holders of any series of equity stock will be
required for the issuance from our authorized but unissued equity stock of other
shares of any class or series of equity stock including shares of the same class
or series of equity stock.
RESTRICTIONS ON OWNERSHIP AND TRANSFER
Ownership of shares of each class or series of equity stock by any person
is limited such that the sum of the aggregate value of all capital stock of
AIMCO owned directly or constructively by such person may not exceed 8.7% (or
15% in the case of certain pension trusts, registered investment companies and
Mr. Considine) of the aggregate value of all outstanding shares of capital
stock. AIMCO's Board of Directors may upon appropriate evidence waive the
ownership limit. Further, certain transfers which may have the effect of causing
AIMCO to lose its status as a REIT are void ab initio.
Any person who acquires or attempts to acquire beneficial or constructive
ownership of equity stock that will or may violate the ownership limit, or any
person who would have owned equity stock except for the transfer of shares to
the trust as described below, is required to give notice immediately to AIMCO
and provide AIMCO with such other information as AIMCO may request in order to
determine the effect of such transfer on AIMCO's status as a REIT.
If any transfer of equity stock occurs which, if effective, would result in
any person beneficially or constructively owning equity stock in excess or in
violation of the ownership limit (a "Prohibited Transferee"), such shares of
equity stock in excess of the ownership limit shall be automatically transferred
to a trustee in his capacity as trustee of a trust for the exclusive benefit of
one or more charitable beneficiaries designated by AIMCO, and the Prohibited
Transferee will generally have no rights in such shares, except upon sale of the
shares by the trustee. Such automatic transfer will be deemed to be effective as
of the close of business on the business day prior to the date of such violative
transfer. Shares of equity stock held in the trust shall be issued and
outstanding shares of AIMCO. The Prohibited Transferee will not benefit
economically from ownership of any shares of equity stock held in the trust,
shall have no rights to dividends and shall not possess any rights to vote or
other rights attributable to the shares of equity stock held in the trust. The
trustee will have all
22
voting rights and rights to dividends with respect to shares of equity stock
held in the trust, which rights shall be exercised for the benefit of the
charitable beneficiaries. Any dividend or other distribution paid prior to the
discovery by AIMCO that shares of equity stock have been transferred to the
trustee will be repaid to AIMCO upon demand, and any dividend or other
distribution declared but unpaid with respect to such shares will be rescinded
as void. Any dividend or distribution so disgorged or rescinded will be paid to
the trustee and held in trust for the charitable beneficiaries.
The trustee may sell the equity stock held in the trust to a person,
designated by the trustee, whose ownership of the equity stock will not violate
the ownership limit. Upon such sale, the interest of the charitable
beneficiaries in the shares sold shall terminate and the trustee shall
distribute the net proceeds of the sale to the Prohibited Transferee and to the
charitable beneficiary as described below. The Prohibited Transferee will
receive the lesser of (i) the price paid by the Prohibited Transferee for the
shares or if the Prohibited Transferee did not give value for the shares in
connection with the event causing the shares to be held in the trust (e.g., a
gift, devise or other such transaction), the market price of such shares on the
day of the event causing the shares to be held in the trust and (ii) the price
per share received by the trustee from the sale or other disposition of the
shares held in the trust. Any proceeds in excess of the amount payable to the
Prohibited Transferee will be payable to the charitable beneficiaries.
In addition, shares of equity stock held in the trust will be deemed to
have been offered for sale to AIMCO, or its designee, at a price per share equal
to the lesser of (i) the price per share in the transaction that resulted in
such transfer to the trust (or, in the case of a devise or gift, the market
price at the time of such devise or gift) and (ii) the market price on the date
AIMCO or its designee accepts such offer.
If AIMCO's Board of Directors or a committee thereof determines that a
transfer or proposed transfer of shares of equity stock violates or will violate
the ownership limit or certain other provisions of AIMCO's charter prohibiting
transfers which may have the effect of causing AIMCO to lose its REIT status,
AIMCO's Board of Directors or a committee thereof is empowered to take any
action it deems advisable to refuse to give effect to or to prevent such
transfer, including causing AIMCO to redeem such shares at the then current
market price on and on such other terms and conditions as AIMCO's Board of
Directors may determine (including by means of the issuance of long-term
indebtedness for the purpose of such redemption) and demanding the repayment of
any dividends received in respect of such shares. In addition, AIMCO's Board of
Directors may take such action as it determines to be advisable to maintain
AIMCO's status as a REIT, including reducing the ownership limit in the event of
a change in law.
Every owner of more than 5% (or such lesser percentage prescribed in
regulations under the Code) of the outstanding shares of any class or series of
equity stock, within 30 days after January 1 of each year, is required to give
written notice to AIMCO stating the name and address for such owner, the number
of shares of that class or series of equity stock which the owner beneficially
owns and a description of the manner in which such shares are held. Each such
owner must provide to AIMCO such additional information as AIMCO may request in
order to determine the effect, if any, of such ownership on AIMCO's status as a
REIT and to ensure compliance with the ownership limit. In addition, each
stockholder must provide to AIMCO such information as AIMCO may request, in its
sole discretion, in order to determine AIMCO's status as a REIT and to comply
with the requirements of any taxing authority or governmental agency to
determine any such compliance or to ensure compliance with the ownership limit.
MISCELLANEOUS
The holders of equity stock will have no preemptive rights. The shares of
equity stock will be, when issued, fully paid and nonassessable. Shares of
equity stock redeemed or otherwise reacquired by AIMCO shall resume the status
of authorized and unissued shares of the applicable class or series of equity
stock, and shall be available for subsequent issuance. Payment of dividends on,
and the redemption or repurchase of, any class or series of equity stock may be
restricted by loan agreements, indentures and other agreements entered into by
AIMCO. The accompanying prospectus supplement will describe any material
contractual restrictions on such dividend payments.
23
NO OTHER RIGHTS
The shares of a class or series of equity stock that may be issued and sold
pursuant hereto will not have any preferences, voting powers or relative,
participating, optional or other special rights except as set forth above or in
the applicable prospectus supplement or AIMCO's charter or as otherwise required
by law.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for each class or series of equity stock
that may be issued and sold pursuant hereto will be designated in the applicable
prospectus supplement.
DESCRIPTION OF CLASS A COMMON STOCK
GENERAL
As of November 6, 2001, AIMCO's charter authorizes the issuance of up to
510,587,500 shares of capital stock with a par value of $.01 per share, of which
456,962,738 shares were classified as class A common stock. As of October 31,
2001, there were 74,280,257 shares of class A common stock issued and
outstanding. The class A common stock is traded on the NYSE under the symbol
"AIV." Fleet National Bank serves as transfer agent and registrar of the class A
common stock.
Holders of the class A common stock are entitled to receive dividends, when
and as declared by AIMCO's Board of Directors, out of funds legally available
therefor. The holders of shares of class A common stock, upon any liquidation,
dissolution or winding up of AIMCO, are entitled to receive ratably any assets
remaining after payment in full of all liabilities of AIMCO and any liquidation
preferences of preferred stock and equity stock. The shares of class A common
stock possess ordinary voting rights for the election of directors of AIMCO and
in respect of other corporate matters, each share entitling the holder thereof
to one vote. Holders of shares of class A common stock do not have cumulative
voting rights in the election of directors, which means that holders of more
than 50% of the shares of class A common stock voting for the election of
directors can elect all of the directors if they choose to do so and the holders
of the remaining shares cannot elect any directors. Holders of shares of class A
common stock do not have preemptive rights, which means they have no right to
acquire any additional shares of class A common stock that may be issued by
AIMCO at a subsequent date.
RESTRICTIONS ON OWNERSHIP AND TRANSFER
For AIMCO to qualify as a REIT under the Internal Revenue Code of 1986, as
amended (the "Code"), not more than 50% in value of its outstanding capital
stock may be owned, directly or indirectly, by five or fewer individuals (as
defined in the Code to include certain entities) during the last half of a
taxable year, and the shares of capital stock must be beneficially owned by 100
or more persons during at least 335 days of a taxable year of 12 months or
during a proportionate part of a shorter taxable year. Because AIMCO's Board of
Directors believes that it is essential for AIMCO to continue to qualify as a
REIT and to provide additional protection for AIMCO's stockholders in the event
of certain transactions, AIMCO's Board of Directors has adopted provisions of
the charter restricting the acquisition of shares of class A common stock.
Subject to certain exceptions specified in the charter, no holder may own,
or be deemed to own by virtue of various attribution and constructive ownership
provisions of the Code and Rule 13d-3 under the Exchange Act, more than 8.7% (or
15% in the case of certain pension trusts described in the Code, investment
companies registered under the Investment Company Act of 1940 and Mr. Considine)
of the outstanding shares of class A common stock. For purposes of calculating
the amount of stock owned by a given individual, the individual's class A common
stock and partnership common units ("OP Units") of the AIMCO Operating
Partnership are aggregated. Under certain conditions, AIMCO's Board of Directors
may waive the ownership limit. However, in no event may such holder's direct or
indirect ownership of class A common stock exceed 9.8% of the total outstanding
shares of class A common stock. As a condition of such waiver, AIMCO Board of
Directors may require opinions of counsel satisfactory to it and/or an
undertaking from the applicant
24
with respect to preserving the REIT status of AIMCO. If shares of class A common
stock in excess of the ownership limit, or shares of class A common stock which
would cause the REIT to be beneficially owned by fewer than 100 persons, or
which would result in AIMCO being "closely held," within the meaning of Section
856(h) of the Code, or which would otherwise result in AIMCO failing to qualify
as a REIT, are issued or transferred to any person, such issuance or transfer
shall be null and void to the intended transferee, and the intended transferee
would acquire no rights to the stock. Shares of class A common stock transferred
in excess of the ownership limit or other applicable limitations will
automatically be transferred to a trust for the exclusive benefit of one or more
qualifying charitable organizations to be designated by AIMCO. Shares
transferred to such trust will remain outstanding, and the trustee of the trust
will have all voting and dividend rights pertaining to such shares. The trustee
of such trust may transfer such shares to a person whose ownership of such
shares does not violate the ownership limit or other applicable limitation. Upon
a sale of such shares by the trustee, the interest of the charitable beneficiary
will terminate, and the sales proceeds would be paid, first, to the original
intended transferee, to the extent of the lesser of (i) such transferee's
original purchase price (or the market value of such shares on the date of the
violative transfer if purportedly acquired by gift or devise) and (ii) the price
received by the trustee, and, second, any remainder to the charitable
beneficiary. In addition, shares of stock held in such trust are purchasable by
AIMCO for a 90-day period at a price equal to the lesser of the price paid for
the stock by the original intended transferee (or the original market value of
such shares if purportedly acquired by gift or devise) and the market price for
the stock on the date that AIMCO determines to purchase the stock. The 90-day
period commences on the date of the violative transfer or the date that AIMCO's
Board of Directors determines in good faith that a violative transfer has
occurred, whichever is later. All certificates representing shares of class A
common stock bear a legend referring to the restrictions described above.
All persons who own, directly or by virtue of the attribution provisions of
the Code and Rule 13d-3 under the Exchange Act, more than a specified percentage
of the outstanding shares of class A common stock must file a written statement
or an affidavit with AIMCO containing the information specified in the AIMCO
charter within 30 days after January 1 of each year. In addition, each
stockholder shall upon demand be required to disclose to AIMCO in writing such
information with respect to the direct, indirect and constructive ownership of
shares as AIMCO's Board of Directors deems necessary to comply with the
provisions of the Code applicable to a REIT or to comply with the requirements
of any taxing authority or governmental agency.
The ownership limitations may have the effect of precluding acquisition of
control of AIMCO by a third party unless AIMCO's Board of Directors determines
that maintenance of REIT status is no longer in the best interests of AIMCO.
PROVISIONS OF MARYLAND LAW APPLICABLE TO PREFERRED STOCK,
EQUITY STOCK AND CLASS A COMMON STOCK
BUSINESS COMBINATIONS
Under Maryland law, certain "business combinations" (including a merger,
consolidation, share exchange or, in certain circumstances, an asset transfer or
issuance or reclassification of equity securities) between a Maryland
corporation and any person who beneficially owns 10% or more of the voting power
of the corporation's shares or an affiliate or associate of the corporation who,
at any time within the two-year period prior to the date in question, was the
beneficial owner of 10% or more of the voting power of the then-outstanding
voting stock of the corporation (an "Interested Stockholder") or an affiliate or
associate thereof are prohibited for five years after the most recent date on
which the Interested Stockholder became an Interested Stockholder. Thereafter,
any such business combination must be recommended by the Board of Directors of
the corporation and approved by the affirmative vote of at least (i) 80% of the
votes entitled to be cast by holders of outstanding voting shares of the
corporation, voting together as a single voting group, and (ii) two-thirds of
the votes entitled to be cast by holders of outstanding voting shares of the
corporation other than shares held by the Interested Stockholder or an affiliate
or associate of the Interested Stockholder with whom the business combination is
to be effected, unless, among other conditions, the corporation's
25
stockholders receive a specified minimum price for their shares and the
consideration is received in cash or in the same form as previously paid by the
Interested Stockholder for its shares. For purposes of determining whether a
person is an Interested Stockholder of AIMCO, ownership of OP Units will be
treated as beneficial ownership of the shares of class A common stock which may
be issued in exchange for the OP Units when such OP Units are tendered for
redemption. The business combination statute could have the effect of
discouraging offers to acquire AIMCO and of increasing the difficulty of
consummating any such offer. These provisions of Maryland law do not apply,
however, to business combinations that are approved or exempted by the Board of
Directors of the corporation prior to the time that the Interested Stockholder
becomes an Interested Stockholder. The AIMCO Board of Directors has not passed
such a resolution.
CONTROL SHARE ACQUISITIONS
Maryland law provides that "control shares" of a Maryland corporation
acquired in a "control share acquisition" have no voting rights except to the
extent approved by a vote of two-thirds of the votes entitled to be cast on the
matter, excluding shares of stock owned by the acquiror or by officers or
directors who are employees of the corporation. "Control shares" are voting
shares of stock that, if aggregated with all other shares of stock previously
acquired by that person, would entitle the acquiror to exercise voting power in
electing directors within one of the following ranges of voting power:
- one-tenth or more but less than one-third;
- one-third or more but less than a majority; or
- a majority or more of all voting power.
Control shares do not include shares the acquiring person is then entitled
to vote as a result of having previously obtained stockholder approval. For
purposes of determining whether a person or entity is an Interested Stockholder
of AIMCO, ownership of OP Units will be treated as beneficial ownership of the
shares of class A common stock which may be issued in exchange for the OP Units
when such OP Units are tendered for redemption.
A "control share acquisition" means the acquisition of control shares,
subject to certain exceptions. A person who has made or proposes to make a
control share acquisition, upon satisfaction of certain conditions (including an
undertaking to pay expenses), may compel the corporation's Board of Directors to
call a special meeting of stockholders, to be held within 50 days of demand, to
consider the voting rights of the shares. If no request for a meeting is made,
the corporation may itself present the question at any stockholders meeting.
If voting rights are not approved at the meeting or if the acquiring person
does not deliver an "acquiring person statement" as required by the statute,
then, subject to certain conditions and limitations, the corporation may redeem
any or all of the control shares (except those for which voting rights have
previously been approved) for fair value, determined without regard to the
absence of voting rights, as of the date of the last control share acquisition
or of any meeting of stockholders at which the voting rights of such shares were
considered and not approved. If voting rights for control shares are approved at
a stockholders meeting and the acquiror becomes entitled to vote a majority of
the shares entitled to vote, all other stockholders may exercise appraisal
rights. The fair value of the shares as determined for purposes of the appraisal
rights may not be less than the highest price per share paid in the control
share acquisition, and certain limitations and restrictions otherwise applicable
to the exercise of dissenters' rights do not apply in the context of a control
share acquisition.
The control share acquisition statute does not apply to shares acquired in
a merger, consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions approved or exempted by the corporation's
articles of incorporation or bylaws prior to the control share acquisition. No
such exemption appears in AIMCO's charter bylaws. The control share acquisition
statute could have the effect of discouraging offers to acquire AIMCO and of
increasing the difficulty of consummating any such offer.
26
DESCRIPTION OF OUTSTANDING CLASSES OF PREFERRED STOCK
OUTSTANDING CLASSES OF PREFERRED STOCK
As of November 6, 2001, AIMCO's charter authorized 53,624,762 shares of
preferred stock with a par value of $.01 per share. AIMCO is authorized to issue
shares of preferred stock in one or more classes or series, with such
designations, preferences, conversion and other rights, voting powers,
restriction, limitations as to dividends, qualifications and terms and
conditions of redemption, in each case, if any as are permitted by Maryland law
and as AIMCO's Board of Directors may determine by resolution. As of October 11,
2001, AIMCO had the following classes of preferred stock issued and outstanding,
or authorized for issuance:
QUARTERLY LIQUIDATION
SHARES SHARES DIVIDEND PREFERENCE CONVERSION
CLASS AUTHORIZED OUTSTANDING PER SHARE PER SHARE PRICE
----- ---------- ----------- ---------- ----------- ----------
Class B Cumulative Convertible
Preferred Stock.................. 750,000 419,471 $1.78125(1)(2) $100.00 $30.45
Class C Cumulative Preferred
Stock............................ 2,400,000 2,400,000 $0.5625 $ 25.00 --
Class D Cumulative Preferred
Stock............................ 4,200,000 4,200,000 $0.546875 $ 25.00 --
Class G Cumulative Preferred
Stock............................ 4,050,000 4,050,000 $0.5859375 $ 25.00 --
Class H Cumulative Preferred
Stock............................ 2,000,000 2,000,000 $0.59375 $ 25.00 --
Class I Cumulative Preferred
Stock............................ 10,000,000 0 $0.50 $ 25.00 --
Class J Cumulative Convertible
Preferred Stock.................. 1,250,000 0 $2.375 $100.00 $40.00
Class K Convertible Cumulative
Preferred Stock.................. 5,000,000 5,000,000 $0.50(1)(3) $ 25.00 $42.00
Class L Convertible Cumulative
Preferred Stock.................. 5,000,000 5,000,000 $0.50625(1)(4) $ 25.00 $46.48
Class M Convertible Cumulative
Preferred Stock.................. 1,600,000 1,200,000 $0.53125(1)(5) $ 25.00 $44.00
Class N Convertible Cumulative
Preferred Stock.................. 4,000,000 4,000,000 $0.5625(1)(6) $ 25.00 $52.50
Class O Cumulative Convertible
Preferred Stock.................. 1,904,762 1,904,762 $1.18125(1)(6) $ 52.50 $52.50
Class P Convertible Cumulative
Preferred Stock.................. 4,000,000 4,000,000 $0.5625(1)(6) $ 25.00 $56.00
Class Q Cumulative Preferred
Stock............................ 2,530,000 2,530,000 $0.63125 $ 25.00 --
Class R Cumulative Preferred
Stock............................ 4,940,000 4,940,000 $0.625 $ 25.00 --
---------------
(1) The shares entitle the holders thereof to receive quarterly cash dividends
equal to the greater of the amount indicated or the dividend then payable on
the shares of class A common stock into which shares of such class of
preferred stock are then convertible.
(2) If the IRS were to make a final determination that AIMCO does not qualify as
a REIT in accordance with Sections 856 through 860 of the Code, the
quarterly cash dividends on the Class B Convertible Cumulative Preferred
Stock would increase to $3.03125 per share.
(3) From and after February 18, 2002, the quarter's dividend increases to $0.625
per share.
(4) From and after May 28, 2002, the quarter's dividend increases to $0.625 per
share.
(5) From and after January 13, 2003, the quarter's dividend increases to
$0.578125 per share.
(6) Subject to adjustment on a change of control.
27
RANKING
Each authorized class of preferred stock ranks, with respect to dividend
rights and rights upon liquidation, dissolution or winding up of AIMCO:
- prior or senior to the class A common stock, the equity stock and any
other class or series of capital stock of AIMCO if the holders of that
class of preferred stock are entitled to the receipt of dividends or
amounts distributable upon liquidation, dissolution or winding up in
preference or priority to the holders of shares of such class or series
("Junior Stock");
- on a parity with the other authorized classes of preferred stock and any
other class or series of capital stock of AIMCO if the holders of such
class or series of stock and that class of preferred stock are entitled
to receive dividends and amounts distributable upon liquidation,
dissolution or winding up in proportion to their respective amounts of
accrued and unpaid dividends per share or liquidation preferences,
without preference or priority of one over the other ("Parity Stock");
and
- junior to any class or series of capital stock of AIMCO if the holders of
such class or series are entitled to receive dividends and amounts
distributable upon liquidation, dissolution or winding up in preference
or priority to the holders of that class of preferred stock ("Senior
Stock").
DIVIDENDS
Holders of each authorized class of preferred stock are entitled to
receive, when and as declared by AIMCO's Board of Directors, out of funds
legally available for payment, quarterly cash dividends in the amount per share
set forth in the table above under the heading, "Quarterly Dividend Per Share."
The dividends are cumulative from the date of original issue, whether or not in
any dividend period or periods we declare any dividends or have funds legally
available for the payment of such dividend. Holders of preferred stock are not
entitled to receive any dividends in excess of cumulative dividends on the
preferred stock. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on the preferred stock
that may be in arrears.
When dividends are not paid in full upon any class of preferred stock, or a
sum sufficient for such payment is not set apart, all dividends declared upon
that class of preferred stock and any shares of Parity Stock will be declared
ratably in proportion to the respective amounts of dividends accumulated,
accrued and unpaid on that class of preferred stock and accumulated, accrued and
unpaid on such Parity Stock. Except as set forth in the preceding sentence,
unless dividends on each class of preferred stock equal to the full amount of
accumulated, accrued and unpaid dividends have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof has
been or contemporaneously is set apart for such payment, for all past dividend
periods, no dividends may be declared or paid or set apart for payment by us and
no other distribution of cash or other property may be declared or made,
directly or indirectly, by us with respect to any shares of Parity Stock. Unless
dividends equal to the full amount of all accumulated, accrued and unpaid
dividends on each class of preferred stock have been declared and paid, or
declared and a sum sufficient for the payment thereof has been set apart for
such payment, for all past dividend periods, no dividends (other than dividends
or distributions paid in shares of Junior Stock or options, warrants or rights
to subscribe for or purchase shares of Junior Stock) may be declared or paid or
set apart for payment by us and no other distribution of cash or other property
may be declared or made, directly or indirectly, by us with respect to any
shares of Junior Stock, nor may any shares of Junior Stock be redeemed,
purchased or otherwise acquired (other than a redemption, purchase or other
acquisition of common stock made for purposes of an employee incentive or
benefit plan of AIMCO or any subsidiary) for any consideration (or any monies be
paid to or made available for a sinking fund for the redemption of any shares of
any such stock), directly or indirectly, by us (except by conversion into or
exchange for shares of Junior Stock, or options, warrants or rights to subscribe
for or purchase shares of Junior Stock), nor shall any other cash or other
property be paid or distributed to or for the benefit of holders of shares of
Junior Stock. Notwithstanding the foregoing provisions of this paragraph (except
with respect to the Class B Cumulative Convertible Preferred Stock and Class O
Cumulative Convertible Preferred Stock), we are not prohibited from (1)
declaring or paying or setting apart for payment any dividend or distribution on
any shares of Parity Stock or
28
(2) redeeming, purchasing or otherwise acquiring any Parity Stock, in each case,
if such declaration, payment, redemption, purchase or other acquisition is
necessary to maintain our qualification as a REIT.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
AIMCO, before we make or set apart any payment or distribution for the holders
of any shares of Junior Stock, the holders of each class of preferred stock are
entitled to receive a liquidation preference per share in the amount set forth
above under the heading, "Liquidation Preference Per Share," plus an amount
equal to all accumulated, accrued and unpaid dividends (whether or not earned or
declared) to the date of final distribution to such holders. Holders of each
class of preferred stock are not entitled to any further payment. Until the
holders of each class of preferred stock have been paid their respective
liquidation preferences in full, plus an amount equal to all accumulated,
accrued and unpaid dividends (whether or not earned or declared) to the date of
final distribution to such holders, no payment may be made to any holder of
Junior Stock upon the liquidation, dissolution or winding up of AIMCO. If, upon
any liquidation, dissolution or winding up of AIMCO, our assets, or proceeds
thereof, distributable among the holders of preferred stock are insufficient to
pay in full the preference described above for any class or series of preferred
stock and any liquidating payments on any other shares of any class or series of
Parity Stock, then such proceeds shall be distributed among the holders of such
class of preferred stock and holders of all other shares of any class or series
of Parity Stock ratably in the same proportion as the respective amounts that
would be payable on such class of preferred stock and any such Parity Stock if
all amounts payable thereon were paid in full. A voluntary or involuntary
liquidation, dissolution or winding up of AIMCO does not include our
consolidation or merger with one or more corporations, a sale or transfer of all
or substantially all of our assets, or a statutory share exchange. Upon any
liquidation, dissolution or winding up of AIMCO, after payment shall have been
made in full to the holders of preferred stock, any other classes or series of
Junior Stock shall be entitled to receive any and all assets remaining to be
paid or distributed, and the holders of each class of preferred stock and any
Parity Stock shall not be entitled to share therein.
REDEMPTION
Except as described below and in certain limited circumstances relating to
maintaining our ability to qualify as a REIT as described in "-- Restrictions on
Ownership and Transfer," we may not redeem the shares of preferred stock. On or
after the dates set forth in the table below, we may, at our option, redeem
shares of the classes of preferred stock set forth below, in whole or from time
to time in part, at a cash redemption price equal to the percentage of the
liquidation preference for that class of preferred stock indicated under the
heading, "Price," plus all accumulated, accrued and unpaid dividends, if any, to
the date fixed for redemption. The redemption price for each class of
non-convertible preferred stock (other than any portion thereof consisting of
accumulated, accrued and unpaid dividends) is payable solely with the proceeds
from the sale of capital shares by us or the AIMCO Operating Partnership
(whether or not such sale occurs concurrently with such redemption). For
purposes of the preceding sentence, "capital shares" means any common stock,
equity stock, preferred stock, depositary shares, partnership or other
interests, participations or other ownership interests (however designated) and
any rights (other than debt securities convertible into or exchangeable at the
option of the holder for equity securities (unless and to the extent such debt
securities are subsequently converted into capital stock)) or options to
purchase any of the foregoing securities issued by us or the AIMCO Operating
Partnership.
CLASS DATE PRICE
----- ---- -------
Class B Cumulative Convertible Preferred Stock......... August 4, 2002 100%
Class C Cumulative Preferred Stock..................... December 23, 2002 100%
Class D Cumulative Preferred Stock..................... February 19, 2003 100%
Class G Cumulative Preferred Stock..................... July 15, 2008 100%
Class H Cumulative Preferred Stock..................... August 14, 2003 100%
Class I Cumulative Preferred Stock..................... March 1, 2005 100%
29
CLASS DATE PRICE
----- ---- -------
Class K Cumulative Preferred Stock..................... February 20, 2002 102%
February 18, 2003 100%
Class L Convertible Cumulative Preferred Stock......... May 28, 2002 102.025%
May 28, 2003 100%
Class M Convertible Cumulative Preferred Stock......... January 13, 2003 102%
January 13, 2004 100%
Class N Convertible Cumulative Preferred Stock......... September 12, 2000 105%(1)
September 12, 2003 104%
September 12, 2004 102%
Class O Cumulative Convertible Preferred Stock......... September 15, 2003 104%
September 15, 2004 102%
Class P Convertible Cumulative Preferred Stock......... March 26, 2004 100%(2)
Class Q Cumulative Preferred Stock..................... March 19, 2006 100%
Class R Cumulative Preferred Stock..................... July 20, 2006 100%
---------------
(1) Redeemable prior to September 12, 2003 only on or after the occurrence of a
change of control.
(2) Redeemable prior to March 26, 2004 (i) if the market price of class A common
stock is $56 or higher, in which case AIMCO may redeem such shares for 6
months following any day on which such market price exceeds $56, or (ii) on
or after the occurrence of a change of control.
Except as described below or under "-- Restrictions on Ownership and
Transfer," none of the authorized classes of preferred stock have any stated
maturity or are subject to any sinking find or mandatory redemption provisions.
The agreement pursuant to which AIMCO issued the Class B Cumulative
Convertible Preferred Stock provides that the investor that purchased such
shares may require AIMCO to repurchase such investor's Class B Cumulative
Convertible Preferred Stock in whole or in part at a price of 105% of the
liquidation preference thereof, plus accrued and unpaid dividends on the
purchased shares, if (i) AIMCO shall fail to continue to be taxed as a REIT
pursuant to Sections 856 through 860 of the Code, or (ii) upon the occurrence of
a change of control (as defined in such agreement). The agreement also provides
that, so long as the investor owns Class B Cumulative Convertible Preferred
Stock with an aggregate liquidation preference of at least $18.75 million,
neither AIMCO, the AIMCO Operating Partnership nor any subsidiary of AIMCO may
issue preferred securities or incur indebtedness for borrowed money if
immediately following such issuance and after giving effect thereto and the
application of the net proceeds therefrom, AIMCO's ratio of aggregate
consolidated earnings before interest, taxes, depreciation and amortization to
aggregate consolidated fixed charges for the four fiscal quarters immediately
preceding such issuance would be less than 1.5 to 1.
In addition to being redeemable for cash, AIMCO may, at its option, redeem
shares of Class K Cumulative Preferred Stock for a number of shares of class A
common stock equal to (i) 105% of the applicable cash redemption price, divided
by (ii) the lesser of (x) the average of the daily closing prices of the class A
common stock for the 20 consecutive trading days immediately preceding the date
of the applicable redemption notice and (y) the closing price of the class A
common stock on the trading day immediately preceding the first business day
immediately preceding the date of the applicable redemption notice.
CONVERSION
The shares of convertible preferred stock are convertible at any time, at
the option of the holder, into a number of shares of class A common stock
obtained by dividing its liquidation preference (excluding any accumulated,
accrued and unpaid dividends) by the conversion price set forth in the table
above. In the case of shares called for redemption, conversion rights will
terminate at the close of business on the date fixed for such redemption, unless
AIMCO defaults in making such redemption payment. Each conversion will be
30
deemed to have been effected immediately prior to the close of business on the
date on which the holder surrenders certificates representing shares of
preferred stock and AIMCO receives notice and any applicable instruments of
transfer and any required taxes. The conversion will be at the conversion price
in effect at such time and on such date unless the stock transfer books of AIMCO
are closed on that date, in which event such person or persons will be deemed to
have become such holder or holders of record at the close of business on the
next succeeding day on which such stock transfer books are open, but such
conversion will be at the conversion price in effect on the date on which such
shares were surrendered and such notice received by AIMCO. No fractional shares
of class A common stock or scrip representing fractions of a share of class A
common stock will be issued upon conversion of shares of preferred stock.
Instead of any fractional interest in a share of class A common stock that would
otherwise be deliverable upon the conversion of any share of preferred stock,
AIMCO will pay to the holder of such shares an amount in cash based upon the
closing price of the class A common stock on the trading day immediately
preceding the date of conversion. If more than one share of preferred stock is
surrendered for conversion at one time by the same holder, the number of full
shares of class A common stock issuable upon conversion thereof will be computed
on the basis of the aggregate number of shares of preferred stock so converted.
Except as otherwise required, AIMCO will make no payment or allowance for unpaid
dividends, whether or not in arrears, on converted shares or for dividends
(other than dividends on the class A common stock the record date for which is
after the conversion date and which AIMCO shall pay in the ordinary course to
the record holder as of the record date) on the class A common stock issued upon
such conversion. Holders of preferred stock at the close of business on a record
date for the payment of dividends on the preferred stock will be entitled to
receive an amount equal to the dividend payable on such shares on the
corresponding dividend payment date notwithstanding the conversion of such
shares following such record date.
Each conversion price is subject to adjustment upon the occurrence of
certain events, including:
- if AIMCO pays a dividend or makes a distribution on its capital stock in
shares of class A common stock;
- if AIMCO subdivides its outstanding class A common stock into a greater
number of shares;
- if AIMCO combines its outstanding class A common stock into a smaller
number of shares;
- if AIMCO issues any shares of capital stock by reclassification of its
outstanding class A common stock;
- if AIMCO issues rights, options or warrants to holders of class A common
stock entitling them to subscribe for or purchase class A common stock at
a price per share less than the fair market value thereof;
- if AIMCO makes a distribution on its class A common stock other than in
cash or shares of class A common stock; and
- with respect to the Class B Cumulative Convertible Preferred Stock, or
the Class O Cumulative Convertible Preferred Stock, if AIMCO shall
acquire, pursuant to an issuer or self tender offer, all or any portion
of the outstanding class A common stock and such tender offer involves
the payment of consideration per share of class A common stock having a
fair market value that exceeds the current market price per share.
Conversion of preferred stock will be permitted only to the extent that
such conversion would not result in a violation of the ownership restrictions
set forth in AIMCO's charter.
AIMCO has the right to require that all or part of the outstanding Class J
Cumulative Convertible Preferred Stock be converted into class A common stock at
a conversion price of $40 (i) at any time after November 6, 2002, if the market
price of the class A common stock in the five most recent trading days is equal
to or greater than $40, or (ii) at any time on or prior to November 6, 2002, if
the internal rate of return on the Class J Cumulative Convertible Preferred
Stock exceeds 12.5%.
31
If the internal rate of return on the Class O Cumulative Convertible
Preferred Stock exceeds 20.0% per annum at any time between September 15, 2001
and September 15, 2002, AIMCO has the right to require that up to 952,381 shares
of the Class O Cumulative Convertible Preferred Stock be converted into shares
of class A common stock. If the internal rate of return on the Class O
Cumulative Convertible Preferred Stock exceeds 20.0% per annum at any time
between September 15, 2002 and September 15, 2003, AIMCO has the right to
require that all or any portion of the outstanding shares of Class O Cumulative
Convertible Preferred Stock be converted into shares of class A common stock.
VOTING RIGHTS
Holders of shares of the authorized classes of preferred stock do not have
any voting rights, except as set forth below and except as otherwise required by
applicable law.
If and whenever dividends on any shares of any class of preferred stock or
any class or series of Parity Stock are in arrears for six or more quarterly
periods, whether or not consecutive, the number of directors then constituting
AIMCO's Board of Directors will be increased by two, if not already increased by
reason of similar types of provisions with respect to shares of Parity Stock of
any other class or series which is entitled to similar voting rights (the
"Voting Preferred Stock"), and the holders of shares of that class of preferred
stock, together with the holders of shares of all other Voting Preferred Stock
then entitled to exercise similar voting rights, voting as a single class
regardless of class or series, will be entitled to vote for the election of the
two additional directors of AIMCO at any annual meeting of stockholders or at a
special meeting of the holders of that class of preferred stock and of the
Voting Preferred Stock called for that purpose. Whenever dividends in arrears on
outstanding shares of Voting Preferred Stock shall have been paid and dividends
thereon for the current quarterly dividend period have been paid or declared and
set apart for payment, then the right of the holders of the Voting Preferred
Stock to elect the additional two directors shall cease and the terms of office
of the directors shall terminate and the number of directors constituting
AIMCO's Board of Directors shall be reduced accordingly. Holders of Class B
Cumulative Convertible Preferred Stock, together with the holders of shares of
all other classes of preferred stock then entitled to exercise similar voting
rights, voting as a single class, are also entitled to elect one director of
AIMCO if, for two consecutive quarterly dividend periods, AIMCO fails to pay at
least $0.4625 per share in dividends on the class A common stock. Holders of
Class N Convertible Cumulative Preferred Stock, Class O Cumulative Convertible
Preferred Stock and Class P Convertible Cumulative Preferred Stock, together
with the holders of shares of all other classes of preferred stock then entitled
to exercise similar voting rights, voting as a single class, are also entitled
to elect one director of AIMCO if, for two consecutive quarterly dividend
periods, AIMCO fails to pay at least $0.595 per share in dividends on the class
A common stock.
The affirmative vote or consent of at least 66 2/3% of the votes entitled
to be cast by the holders of the outstanding shares of each class of preferred
stock and the holders of all other classes or series of Parity Stock entitled to
vote on such matters, voting as a single class, will be required to (i)
authorize, create, increase the authorized amount of, or issue any shares of any
class of Senior Stock or any security convertible into shares of any class of
Senior Stock, or (ii) amend, alter or repeal any provision of, or add any
provision to, our charter or by-laws, if such action would materially adversely
affect the voting powers, rights or preferences of the holders of that class of
preferred stock or, with respect to the Class L Convertible Cumulative Preferred
Stock, Class N Convertible Cumulative Preferred Stock, Class O Cumulative
Convertible Preferred Stock and Class P Convertible Cumulative Preferred Stock,
would convert such preferred stock into cash or any other security other than
preferred stock with terms and provisions equivalent to those set forth in the
articles supplementary for such class of preferred stock (including any
amendment, alteration or repeal effected pursuant to a merger, consolidation, or
similar transaction); provided, however, that no such vote of the holders of
that class of preferred stock shall be required if, at or prior to the time such
amendment, alteration or repeal is to take effect or the issuance of any such
Senior Stock or convertible security is to be made, as the case may be,
provisions are made for the redemption of all outstanding shares of that class
of preferred stock. The amendment of or supplement to our charter to authorize,
create, increase or decrease the authorized amount of or to issue Junior Stock,
or any shares of any class of Parity Stock shall not be deemed to materially
adversely affect the voting powers, rights or preferences of any class of
preferred stock.
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RESTRICTIONS ON OWNERSHIP AND TRANSFER
Ownership of shares of each class of preferred stock by any person is
limited such that the sum of the aggregate value of all capital stock of AIMCO
owned directly or constructively by such person may not exceed 8.7% (or 15% in
the case of certain pension trusts, registered investment companies and Mr.
Considine) of the aggregate value of all outstanding shares of capital stock.
AIMCO's Board of Directors may upon appropriate evidence waive the ownership
limit. Further, certain transfers which may have the effect of causing AIMCO to
lose its status as a REIT are void ab initio.
Any person who acquires or attempts to acquire beneficial or constructive
ownership of preferred stock that will or may violate the ownership limit, or
any person who would have owned preferred stock except for the transfer of
shares to the trust as described below, is required to give notice immediately
to AIMCO and provide AIMCO with such other information as AIMCO may request in
order to determine the effect of such transfer on AIMCO's status as a REIT.
If any transfer of preferred stock occurs which, if effective, would result
in any person beneficially or constructively owning preferred stock in excess or
in violation of the ownership limit (a "Prohibited Transferee"), such shares of
preferred stock in excess of the ownership limit shall be automatically
transferred to a trustee in his capacity as trustee of a trust for the exclusive
benefit of one or more charitable beneficiaries designated by AIMCO, and the
Prohibited Transferee will generally have no rights in such shares, except upon
sale of the shares by the trustee. Such automatic transfer will be deemed to be
effective as of the close of business on the business day prior to the date of
such violative transfer. Shares of preferred stock held in the trust shall be
issued and outstanding shares of AIMCO. The Prohibited Transferee will not
benefit economically from ownership of any shares of preferred stock held in the
trust, shall have no rights to dividends and shall not possess any rights to
vote or other rights attributable to the shares of preferred stock held in the
trust. The trustee will have all voting rights and rights to dividends with
respect to shares of preferred stock held in the trust, which rights shall be
exercised for the benefit of the charitable beneficiaries. Any dividend or other
distribution paid prior to the discovery by AIMCO that shares of preferred stock
have been transferred to the trustee will be repaid to AIMCO upon demand, and
any dividend or other distribution declared but unpaid with respect to such
shares will be rescinded as void. Any dividend or distribution so disgorged or
rescinded will be paid to the trustee and held in trust for the charitable
beneficiaries.
The trustee may sell the preferred stock held in the trust to a person,
designated by the trustee, whose ownership of the preferred stock will not
violate the ownership limit. Upon such sale, the interest of the charitable
beneficiaries in the shares sold shall terminate and the trustee shall
distribute the net proceeds of the sale to the Prohibited Transferee and to the
charitable beneficiary as described below. The Prohibited Transferee will
receive the lesser of (i) the price paid by the Prohibited Transferee for the
shares or if the Prohibited Transferee did not give value for the shares in
connection with the event causing the shares to be held in the trust (e.g., a
gift, devise or other such transaction), the market price of such shares on the
day of the event causing the shares to be held in the trust and (ii) the price
per share received by the trustee from the sale or other disposition of the
shares held in the trust. Any proceeds in excess of the amount payable to the
Prohibited Transferee will be payable to the charitable beneficiaries.
In addition, shares of preferred stock held in the trust will be deemed to
have been offered for sale to AIMCO, or its designee, at a price per share equal
to the lesser of (i) the price per share in the transaction that resulted in
such transfer to the trust (or, in the case of a devise or gift, the market
price at the time of such devise or gift) and (ii) the market price on the date
AIMCO or its designee accepts such offer.
If AIMCO's Board of Directors or a committee thereof determines that a
transfer or proposed transfer of shares of preferred stock violates or will
violate the ownership limit or certain other provisions of AIMCO's charter
prohibiting transfers which may have the effect of causing AIMCO to lose its
REIT status, AIMCO's Board of Directors or a committee thereof is empowered to
take any action it deems advisable to refuse to give effect to or to prevent
such transfer, including causing AIMCO to redeem such shares at the then current
market price on and on such other terms and conditions as AIMCO's Board of
Directors may determine (including by means of the issuance of long-term
indebtedness for the purpose of such redemption) and demanding the repayment of
any dividends received in respect of such shares. In addition, AIMCO's Board of
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Directors may take such action as it determines to be advisable to maintain
AIMCO's status as a REIT, including reducing the ownership limit in the event of
a change in law.
Every owner of more than 5% (or such lesser percentage prescribed in
regulations under the Code) of the outstanding shares of any class of preferred
stock, within 30 days after January 1 of each year, is required to give written
notice to AIMCO stating the name and address for such owner, the number of
shares of that class of preferred stock which the owner beneficially owns and a
description of the manner in which such shares are held. Each such owner must
provide to AIMCO such additional information as AIMCO may request in order to
determine the effect, if any, of such ownership on AIMCO's status as a REIT and
to ensure compliance with the ownership limit. In addition, each stockholder
must provide to AIMCO such information as AIMCO may request, in its sole
discretion, in order to determine AIMCO's status as a REIT and to comply with
the requirements of any taxing authority or governmental agency to determine any
such compliance or to ensure compliance with the ownership limit.
DESCRIPTION OF WARRANTS
GENERAL
AIMCO may issue, together with other securities registered herein or
separately, warrants for the purchase of debt securities, preferred stock,
equity stock or class A common stock. The warrants may be issued under a warrant
agreement to be entered into between AIMCO and a bank or trust company, as
warrant agent, as set forth in the applicable prospectus supplement relating to
any or all warrants in respect of which this prospectus is being delivered. The
warrant agent will act solely as an agent of AIMCO in connection with the
warrants of a particular series and will not assume any obligation or
relationship of agency or trust for or with any holders or beneficial owners of
warrants. The warrant agreement for each warrant, including the forms of
certificates representing the warrants, will be filed as an exhibit to, or
incorporated by reference in, the Registration Statement, which will include
this prospectus, at or prior to the time of the issuance of such warrants.
The following description sets forth certain general terms and provisions
of the warrants to which any prospectus supplement may relate. The particular
terms of the warrants to which any prospectus supplement may relate and the
extent, if any, to which such general provisions may apply to the warrants so
offered will be described in the applicable prospectus supplement. The following
summary of the material provisions of the warrants does not purport to be
complete and is subject to, and is qualified in its entirety by express
reference to, all the provisions of the warrant agreement and warrant
certificate, including the definitions therein of certain terms.
The AIMCO Board of Directors is authorized to determine, and the applicable
prospectus supplement will set forth the terms of the warrants, the warrant
agreement relating to such warrants, and the certificates representing such
warrants, including:
- the designation, aggregate principal amount and terms of the debt
securities of AIMCO, the designation and terms of the preferred stock, or
the designation and terms of the equity stock, if any, purchasable upon
exercise of such warrants;
- the procedures and conditions relating to the exercise of such warrants;
- the designation and terms of any related securities with which such
warrants are issued and the number of such warrants issued with each such
security;
- the date, if any, on and after which such warrants and the related
securities will be separately transferable;
- the offering price of the warrants, if any;
- the principal amount of debt securities of AIMCO or the number of shares
of preferred stock, equity stock or class A common stock purchasable upon
exercise of each warrant and the price at which such
34
principal amount of debt securities of AIMCO or shares of preferred
stock, equity stock or class A common stock may be purchased upon such
exercise, or the method of determining such number and price;
- the date on which the right to exercise such warrants shall commence and
the date on which such right shall expire;
- a discussion of United States Federal income tax considerations
applicable to the ownership or exercise of such warrants;
- whether the warrants represented by the certificates will be issued in
registered or bearer form, and, if registered, where they may be
transferred and registered;
- call provisions of such warrants, if any; and
- any other terms of the warrants.
Warrant certificates will be exchangeable for new warrant certificates of
different denominations and warrants may be exercised at the corporate trust
office of the warrant agent or any other office indicated in the applicable
prospectus supplement. Prior to the exercise of their warrants, holders of
warrants will not have any of the rights of holders of the securities
purchasable upon such exercise and will not be entitled to payments of principal
of (or premium, if any) or interest, if any, on the debt securities of AIMCO
purchasable upon such exercise or to any dividend payments or voting rights that
holders of the preferred stock, equity stock or class A common stock purchasable
upon such exercise may be entitled to.
Each warrant will entitle the holder to purchase for cash such principal
amount of debt securities of AIMCO, or such number of shares of preferred stock,
equity stock or class A common stock, at such exercise price as shall, in each
case, be set forth in, or be determinable as set forth in, the applicable
prospectus supplement relating to the warrants offered thereby. Unless otherwise
specified in the applicable prospectus supplement, warrants may be exercised at
any time up to 5:00 p.m. New York City time on the expiration date set forth in
the applicable prospectus supplement. After 5:00 p.m. New York City time on the
expiration date, unexercised warrants will become void.
Warrants may be exercised as set forth in the applicable prospectus
supplement relating to the warrants. Upon receipt of payment and the warrant
certificate properly completed and duly executed at the corporate trust office
of the warrant agent on any other office indicated in the applicable prospectus
supplement, AIMCO will, as soon as practicable, forward the securities
purchasable upon such exercise. If less than all of the warrants represented by
such warrant certificate are exercised, a new warrant certificate will be issued
for the remaining amount of warrants.
PLAN OF DISTRIBUTION
AIMCO or the AIMCO Operating Partnership may sell the securities to one or
more underwriters for public offering and sale by them or may sell the
securities to investors directly or through agents or dealers. Any such
underwriter, agent or dealer involved in the offer and sale of the securities
will be named in the applicable prospectus supplement.
Underwriters may offer and sell the securities at a fixed price or prices,
which may be changed, or from time to time at market prices prevailing at the
time of sale, at prices related to the prevailing market prices at the time of
sale or at negotiated prices. AIMCO or the AIMCO Operating Partnership also may,
from time to time, authorize underwriters acting as AIMCO's or the AIMCO
Operating Partnership's agents to offer and sell the securities upon the terms
and conditions set forth in the applicable prospectus supplement. In connection
with the sale of securities, underwriters may be deemed to have received
compensation from AIMCO or the AIMCO Operating Partnership in the form of
underwriting discounts or commissions and may also receive commissions from
purchasers of securities for whom they may act as agent. Underwriters may sell
securities to or through dealers, and such dealers may receive compensation in
the form of discounts,
35
concessions or commissions (which may be changed from time to time) from the
underwriters and/or commissions from the purchasers for whom they may act as
agent.
Any underwriting compensation paid by AIMCO or the AIMCO Operating
Partnership to underwriters or agents in connection with the offering of
securities, and any discounts, concessions or commissions allowed by
underwriters to participating dealers, will be set forth in the applicable
prospectus supplement. Underwriters, dealers and agents participating in the
distribution of the securities may be deemed to be underwriters under the
Securities Act, and any discounts and commissions received by them and any
profit realized by them on resale of the securities may be deemed to be
underwriting discounts and commissions under the Securities Act. Underwriters,
dealers and agents may be entitled under agreements entered into with AIMCO or
the AIMCO Operating Partnership, to indemnification against and contribution
toward certain civil liabilities, including liabilities under the Securities
Act.
If a dealer is utilized in the sale of the securities in respect of which
this prospectus is delivered, AIMCO or the AIMCO Operating Partnership will sell
such securities to such dealer, as principal. The dealer may then resell such
securities to the public at varying prices to be determined by such dealer at
the time of resale.
If so indicated in the applicable prospectus supplement, AIMCO or the AIMCO
Operating Partnership will authorize dealers acting as AIMCO's or the AIMCO
Operating Partnership's agents to solicit offers by certain institutions to
purchase securities from AIMCO or the AIMCO Operating Partnership at the public
offering price set forth in such prospectus supplement pursuant to delayed
delivery contracts providing for payment and delivery on the date or dates
stated in such prospectus supplement. Each delayed delivery contract will be for
an amount not less than, and the aggregate principal amount or number of
securities sold pursuant to delayed delivery contracts shall not be less nor
more than, the respective amounts or numbers stated in the applicable prospectus
supplement. Institutions with whom delayed delivery contracts, when authorized,
may be made include commercial and savings banks, insurance companies, pension
funds, investment companies, educational and charitable institutions, and other
institutions, but will, in all cases, be subject to the approval of AIMCO or the
AIMCO Operating Partnership. Such delayed delivery contracts will not be subject
to any conditions except (i) the purchase by an institution of the securities
covered by its delayed delivery contracts shall not at the time of delivery be
prohibited under the laws of any jurisdiction in the United States to which such
institution is subject and (ii) if the securities are being sold to
underwriters, AIMCO or the AIMCO Operating Partnership shall have sold to such
underwriters the total principal amount or number of the securities less the
principal amount or number thereof covered by the delayed delivery contracts.
The prospectus supplement will set forth the commission payable for solicitation
of such delayed delivery contracts. Agents and underwriters will have no
responsibility in respect of the delivery or performance of delayed delivery
contracts.
Until the distribution of the securities offered pursuant to any prospectus
supplement is completed, the SEC's rules may limit the ability of any
underwriter participating in such distribution to bid for and purchase the
securities offered thereby and other securities of AIMCO or the AIMCO Operating
Partnership. As an exception to these rules, the underwriters are permitted to
engage in certain transactions that stabilize or maintain the price of such
securities. Such transactions consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of such securities. If any such
underwriter creates a short position in such securities in connection with the
offering, such underwriter may reduce such short position by purchasing
securities.
In general, bids for or purchases of a security for the purpose of
stabilization or to reduce a short position could cause the price of the
security to be higher than it might otherwise be in the absence of such bids or
purchases.
Neither AIMCO nor the AIMCO Operating Partnership nor any underwriter
participating in any distribution makes any representation or prediction as to
the direction or magnitude of any effect that the transactions described above
may have on the price of the offered securities or other securities of AIMCO or
the AIMCO Operating Partnership. In addition, neither AIMCO nor the AIMCO
Operating Partnership nor any such underwriter makes any representation that
such underwriter will engage in such transactions or that such transactions,
once commenced, will not be discontinued without notice.
36
Certain of the underwriters, if any, and their affiliates may be customers
of, engage in transactions with and perform services for AIMCO or the AIMCO
Operating Partnership in the ordinary course of business.
The securities may or may not be listed on a national securities exchange.
No assurances can be given that there will be a market for any of the
securities.
CERTAIN FEDERAL INCOME TAXATION CONSIDERATIONS
The following is a summary of certain Federal income tax consequences
resulting from the acquisition of, holding, exchanging, and otherwise disposing
of securities. This summary is based upon the Code, the Treasury Regulations
(the "Regulations"), rulings issued by the Internal Revenue Service (the "IRS"),
and judicial decisions, all in effect as of the date of this prospectus and all
of which are subject to change or differing interpretations, possibly
retroactively. This summary is also based on the assumptions that the operation
of AIMCO, the AIMCO Operating Partnership and the limited liability companies
and limited partnerships in which they own controlling interests (collectively,
the "Subsidiary Partnerships") will be in accordance with their respective
organizational documents and partnership agreements. This summary is for general
information only and does not purport to discuss all aspects of Federal income
taxation which may be important to a particular investor in light of its
investment or tax circumstances, or to certain types of investors subject to
special tax rules (including financial institutions, broker-dealers, insurance
companies, and except to the extent discussed below, tax-exempt organizations
and foreign investors, as determined for Federal income tax purposes). This
summary assumes that investors will hold their securities as capital assets
(generally, property held for investment). No advance ruling has been or will be
sought from the IRS regarding any matter discussed in this prospectus. No
assurance can be given that the IRS would not assert, or that a court would not
sustain, a position contrary to any of the tax aspects set forth below.
THE FEDERAL INCOME TAX TREATMENT OF HOLDERS OF SECURITIES DEPENDS IN SOME
INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF COMPLEX PROVISIONS OF
FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR AUTHORITY MAY BE
AVAILABLE. ACCORDINGLY, EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS TAX ADVISOR
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF ACQUIRING,
HOLDING, EXCHANGING, OR OTHERWISE DISPOSING OF SECURITIES AND OF AIMCO'S
ELECTION TO BE SUBJECT TO TAX, FOR FEDERAL INCOME TAX PURPOSES, AS A REAL ESTATE
INVESTMENT TRUST.
GENERAL
The REIT provisions of the Code are highly technical and complex. The
following summary sets forth certain aspects of the provisions of the Code that
govern the Federal income tax treatment of a REIT and its stockholders. This
summary is qualified in its entirety by the applicable Code provisions,
Regulations, and administrative and judicial interpretations thereof, all of
which are subject to change, possibly retroactively.
AIMCO has elected to be taxed as a REIT under the Code commencing with its
taxable year ended December 31, 1994, and AIMCO intends to continue such
election. Although AIMCO believes that, commencing with AIMCO's initial taxable
year ended December 31, 1994, AIMCO was organized in conformity with the
requirements for qualification as a REIT, and its actual method of operation has
enabled, and its proposed method of operation will enable, it to meet the
requirements for qualification and taxation as a REIT under the Code, no
assurance can be given that AIMCO has been or will remain so qualified. Such
qualification and taxation as a REIT depend upon AIMCO's ability to meet,
through actual annual operating results, distribution levels requirements
regarding diversity of stock ownership, and the various qualification tests
imposed under the Code as discussed below. No assurance can be given that the
actual results of AIMCO's operation for any one taxable year will satisfy such
requirements. See "-- Failure to Qualify." No assurance can be given that the
IRS will not challenge AIMCO's eligibility for taxation as a REIT.
AIMCO has received an opinion from the law firm of Skadden, Arps, Slate,
Meagher & Flom LLP to the effect that, beginning with its initial taxable year
ended December 31, 1994, AIMCO was organized in
37
conformity with the requirements for qualification as a REIT under the Code and
that its actual method of operation has enabled, and its proposed method of
operation will enable, AIMCO to meet the requirements for qualification and
taxation as a REIT. The opinion is expressed as of its date, and Skadden, Arps,
Slate, Meagher & Flom LLP has no obligation to advise AIMCO of any change in
applicable law or of any change in matters stated, represented or assumed after
the date of such opinion.
You should be aware that opinions of counsel are not binding on the IRS or
any court. AIMCO's opinion of counsel is based upon certain representations and
covenants made by AIMCO, including representations regarding its properties and
the past, present and future conduct of its business operations. Furthermore,
AIMCO's opinion of counsel is conditioned on, and its qualification and taxation
as a REIT depend on, AIMCO's ability to meet, through actual annual operating
results, the various REIT qualification tests, the results of which are not
reviewed by Skadden, Arps, Slate, Meagher & Flom LLP. Accordingly, no assurance
can be given that the actual results of AIMCO's operations for any taxable year
satisfy such requirements. Such requirements are discussed in more detail under
the heading "Requirements for Qualification."
Provided AIMCO qualifies as a REIT, AIMCO will generally not be subject to
Federal corporate income tax on its net income that is currently distributed to
its stockholders. This treatment substantially eliminates the "double taxation"
(at the corporate and stockholder levels) that generally results from investment
in a corporation. However, notwithstanding AIMCO's qualification as a REIT,
AIMCO will be subject to Federal income tax as follows:
- First, AIMCO will be taxed at regular corporate rates on any
undistributed REIT taxable income, including undistributed net capital
gains.
- Second, under certain circumstances, AIMCO may be subject to
the -- "alternative minimum tax" on its items of tax preference.
- Third, if AIMCO has net income from prohibited transactions (which are,
in general, certain sales or other dispositions of property held
primarily for sale to customers in the ordinary course of business other
than foreclosure property), such income will be subject to a 100% tax.
- Fourth, if AIMCO should fail to satisfy the 75% gross income test or the
95% gross income test (as discussed below), but has nonetheless
maintained its qualification as a REIT because certain other requirements
have been met, it will be subject to a 100% tax on an amount equal to (a)
the gross income attributable to the greater of the amount by which AIMCO
fails the 75% or 95% test multiplied by (b) a fraction intended to
reflect AIMCO's profitability.
- Fifth, if AIMCO should fail to distribute during each calendar year at
least the sum of (i) 85% of its REIT ordinary income for such year, (ii)
95% of its REIT capital gain net income for such year (other than certain
long-term capital gains that AIMCO elects to retain and pay the tax
thereon), and (iii) any undistributed taxable income from prior periods,
AIMCO would be subjected to a 4% excise tax on the excess of such
required distribution over the amounts actually distributed.
- Sixth, a 100% excise tax may be imposed on some items of income and
expense that are directly or constructively paid between a REIT and a
taxable REIT subsidiary (as described below) if and to the extent that the
IRS successfully adjusts the reported amounts of these items.
- Seventh, if AIMCO acquires assets from a corporation that is not a REIT
(a "subchapter C corporation") in a transaction in which the adjusted tax
basis of the assets in the hands of AIMCO is determined by reference to
the adjusted tax basis of such assets in the hands of the subchapter C
corporation, under Temporary Regulations, the subchapter C corporation
would be required to recognize any net Built-In Gain (as defined below)
that would have been realized if the Subchapter C corporation had
liquidated on the day before the date of the transfer. Pursuant to
Regulations, AIMCO may elect, in lieu of the treatment described above,
to be subject to tax at the highest regular corporate tax rate on any
gain it recognizes on the disposition of any such asset during the
ten-year period beginning on the day on which AIMCO acquires such asset
to the extent of the excess, if any, of the fair market value over the
adjusted basis of such asset as of its acquisition date ("Built-in
Gain").
38
AIMCO intends to make such an election and, therefore, will be taxed at
the highest regular corporate rate on such Built-in Gain if, and to the
extent, such assets are sold within the specified ten-year period. It
should be noted that AIMCO has acquired (and may acquire in the future) a
significant amount of assets with Built-in Gain and a taxable disposition
by AIMCO of any of these assets within ten years of their acquisitions
would subject AIMCO to tax under the foregoing rule.
- Eighth, certain of AIMCO's subsidiaries are subchapter C corporations,
the earnings of which are subject to federal corporate income tax.
- Ninth, AIMCO could be subject to foreign taxes on investments and
activities in foreign jurisdictions. In addition, AIMCO could also be
subject to tax in certain situations and on certain transactions not
presently contemplated.
REQUIREMENTS FOR QUALIFICATION
The Code defines a REIT as a corporation, trust or association:
- that is managed by one or more trustees or directors;
- the beneficial ownership of which is evidenced by transferable shares, or
by transferable certificates of beneficial interest;
- which would be taxable as a domestic corporation, but for the special
Code provisions applicable to REITs;
- that is neither a financial institution nor an insurance company subject
to certain provisions of the Code;
- the beneficial ownership of which is held by 100 or more persons;
- in which, during the last half of each taxable year, not more than 50% in
value of the outstanding stock is owned, directly or indirectly, by five
or fewer individuals (as defined in the Code to include certain
entities); and
- which meets certain other tests described below (including with respect
to the nature of its income and assets).
The Code provides that the first four conditions must be met during the
entire taxable year, and that the fifth condition must be met during at least
335 days of a taxable year of 12 months, or during a proportionate part of a
taxable year of less than 12 months. The articles of incorporation provide
certain restrictions regarding transfers of its shares, which provisions are
intended to assist AIMCO in satisfying the share ownership requirements
described in the fifth and sixth conditions above.
To monitor AIMCO's compliance with the share ownership requirements, AIMCO
is required to maintain records regarding the actual ownership of its shares. To
do so, AIMCO must demand written statements each year from the record holders of
certain percentages of its stock in which the record holders are to disclose the
actual owners of the shares (i.e., the persons required to include in gross
income the REIT dividends). A list of those persons failing or refusing to
comply with this demand must be maintained as part of AIMCO's records. Failure
by AIMCO to comply with these record keeping requirements could subject it to
monetary penalties. A stockholder who fails or refuses to comply with the demand
must submit a statement with its tax return disclosing the actual ownership of
the shares and certain other information.
In addition, a corporation may not elect to become a REIT unless its
taxable year is the calendar year. AIMCO satisfies this requirement.
OWNERSHIP OF PARTNERSHIP INTERESTS
In the case of a REIT that is a partner in a partnership, the Regulations
provide that the REIT is deemed to own its proportionate share of the
partnership's assets and to earn its proportionate share of the partnership's
income. In addition, the assets and gross income of the partnership retain the
same character in the hands of
39
the REIT for purposes of the gross income and asset tests applicable to REITs as
described below. Thus, AIMCO's proportionate share of the assets, liabilities
and items of income of the Subsidiary Partnerships will be treated as assets,
liabilities and items of income of AIMCO for purposes of applying the REIT
requirements described herein. A summary of certain rules governing the Federal
income taxation of partnerships and their partners is provided below in "-- Tax
Aspects of AIMCO's Investments in Partnerships."
INCOME TESTS
In order to maintain qualification as a REIT, AIMCO annually must satisfy
two gross income requirements:
- First, at least 75% of AIMCO's gross income (excluding gross income from
"prohibited transactions," i.e., certain sales of property held primarily
for sale to customers in the ordinary course of business) for each
taxable year must be derived directly or indirectly from investments
relating to real property or mortgages on real property (including "rents
from real property" and, in certain circumstances, interest) or from
certain types of temporary investments.
- Second, at least 95% of AIMCO's gross income (excluding gross income from
prohibited transactions) for each taxable year must be derived from such
real property investments, and from dividends, interest and gain from the
sale or disposition of stock or securities (or from any combination of
the foregoing).
Rents received by AIMCO through the Subsidiary Partnerships will qualify as
"rents from real property" in satisfying the gross income requirements described
above, only if several conditions are met, including the following. If rent
attributable to personal property leased in connection with a lease of real
property is greater than 15% of the total rent received under the lease, then
the portion of rent attributable to such personal property will not qualify as
"rents from real property." Moreover, for rents received to qualify as "rents
from real property," the REIT generally must not furnish or render services to
the tenants of such property, other than through an "independent contractor"
from which the REIT derives no revenue or a "taxable REIT subsidiary." AIMCO (or
its affiliates) is permitted to directly perform services that are "usually or
customarily rendered" in connection with the rental of space for occupancy only
and are not otherwise considered rendered to the occupant of the property. In
addition, AIMCO (or its affiliates) may provide non-customary services to
tenants of its properties without disqualifying all of the rent from the
property if the payment for such services does not exceed 1% of the total gross
income from the property. For purposes of this test, the income received from
such non-customary services is deemed to be at least 150% of the direct cost of
providing the services.
AIMCO manages apartment properties for third parties and affiliates through
subsidiaries that we refer to as the "management companies." The management
companies receive management fees and other income. A portion of such fees and
other income accrue to AIMCO through distributions from the management companies
that are classified as dividend income to the extent of the earnings and profits
of the management companies. Such distributions will generally qualify under the
95% gross income test but not under the 75% gross income test.
If AIMCO fails to satisfy one or both of the 75% or 95% gross income tests
for any taxable year, it may nevertheless qualify as a REIT for such year if it
is entitled to relief under certain provisions of the Code. These relief
provisions will be generally available if AIMCO's failure to meet such tests was
due to reasonable cause and not due to willful neglect, AIMCO attaches a
schedule of the sources of its income to its return, and any incorrect
information on the schedule was not due to fraud with intent to evade tax. It is
not possible, however, to state whether in all circumstances AIMCO would be
entitled to the benefit of these relief provisions. If these relief provisions
are inapplicable to a particular set of circumstances involving AIMCO, AIMCO
will not qualify as a REIT. As discussed above in "-- General," even where these
relief provisions apply, a tax is imposed with respect to the excess net income.
40
ASSET TESTS
AIMCO, at the close of each quarter of its taxable year, must also satisfy
four tests relating to the nature of its assets:
- First, at least 75% of the value of AIMCO's total assets must be
represented by real estate assets (including its allocable share of real
estate assets held by the Subsidiary Partnerships), certain stock or debt
instruments purchased by AIMCO with new capital, cash, cash items and
U.S. government securities.
- Second, not more than 25% of AIMCO's total assets may be represented by
securities other than those in the 75% asset class.
- Third, of the investments included in the 25% asset class, the value of
any one issuer's securities owned by AIMCO may not exceed 5% of the value
of AIMCO's total assets, AIMCO may not own more than 10% of any one
issuer's outstanding voting securities, and AIMCO may not own more than
10% of the total value of the outstanding securities of any one issuer.
The 5% and 10% asset limitations do not apply to securities of "taxable
REIT subsidiaries."
- The value of the securities held by AIMCO in taxable REIT subsidiaries
may not exceed, in the aggregate, 20% of the value of AIMCO's total
assets.
AIMCO believes that the value of the securities held by AIMCO in its
taxable REIT subsidiaries (including the management companies) will not exceed,
in the aggregate, 20% of the value of AIMCO's total assets.
As noted above, AIMCO indirectly owns interests in the management companies
that have elected to be taxable REIT subsidiaries. AIMCO believes that its
indirect ownership interests in the management companies qualify under the asset
tests set forth above. Under legislation effective January 1, 2001, the
operation or management of a health care or lodging facility precludes
qualification as a taxable REIT subsidiary, and therefore precludes the REIT
from relying upon this exception to the 10% ownership limitation set forth
above. Consequently, if any of the management companies were deemed to operate
or manage a health care or lodging facility, such management companies would
fail to qualify as taxable REIT subsidiaries, and AIMCO would fail to qualify as
a REIT. AIMCO believes that, as of January 1, 2001, none of the management
companies operate or manage any health care or lodging facilities. However, the
statute provides little guidance as to the definition of a health care or
lodging facility. Accordingly, there can be no assurance that the IRS will not
contend that any of the management companies operate or manage a health care or
lodging facility, disqualifying it from treatment as a taxable REIT subsidiary,
thereby resulting in the disqualification of AIMCO as a REIT.
Notwithstanding the general rule that a REIT is treated as owning its share
of the underlying assets of the partnership, for purposes of the REIT income and
asset tests, if a REIT holds indebtedness issued by a partnership, the
indebtedness will be subject to, and may cause a violation of the asset tests,
resulting in loss of REIT status, unless it is a qualifying mortgage asset or
otherwise satisfies the rules for "straight debt." However, no independent
appraisals have been obtained to support AIMCO's conclusions as to the value of
the AIMCO Operating Partnership's total assets and the value of the AIMCO
Operating Partnership's interest in the taxable REIT subsidiaries and these
values are subject to change in the future. Accordingly, there can be no
assurance that the IRS will not contend that AIMCO's interest in its
subsidiaries or in the securities of other issuers will cause a violation of the
REIT asset requirements and loss of REIT status.
AIMCO's indirect interests in the AIMCO Operating Partnership and other
Subsidiary Partnerships are held through wholly owned corporate subsidiaries of
AIMCO organized and operated as "qualified REIT subsidiaries" within the meaning
of the Code. Qualified REIT subsidiaries are not treated as separate entities
from their parent REIT for Federal income tax purposes. Instead, all assets,
liabilities and items of income, deduction and credit of each qualified REIT
subsidiary are treated as assets, liabilities and items of AIMCO. Each qualified
REIT subsidiary therefore is not subject to Federal corporate income taxation,
although it may be subject to state or local taxation. In addition, AIMCO's
ownership of the voting stock of each qualified
41
REIT subsidiary does not violate the general restriction against ownership of
more than 10% of the voting securities of any issuer.
ANNUAL DISTRIBUTION REQUIREMENTS
In order for AIMCO to qualify as a REIT, AIMCO is required to distribute
dividends (other than capital gain dividends) to its stockholders in an amount
at least equal to:
- the sum of:
(i) 90% of AIMCO's "REIT taxable income" (computed without regard to
the dividends paid deduction and AIMCO's net capital gain, i.e., the excess
of net long-term capital gain over net short-term capital loss)) and
(ii) 90% of the net income (after tax), if any, from foreclosure
property,
minus
- the sum of certain items of noncash income.
Such distributions must be paid in the taxable year to which they relate,
or in the following taxable year if declared before AIMCO timely files its tax
return for such year and if paid with or before the first regular dividend
payment after such declaration. To the extent that AIMCO distributes at least
90%, but less than 100%, of its "REIT taxable income," as adjusted, it will be
subject to tax thereon at ordinary corporate tax rates. In any year, AIMCO may
elect to retain, rather than distribute, its net capital gain and pay tax on
such gain. In such a case, AIMCO's stockholders would include their
proportionate share of such undistributed capital gain in income and receive a
credit for their share of the tax paid by AIMCO. AIMCO's stockholders would then
increase the adjusted basis of their AIMCO shares by the difference between the
designated amounts included in their long-term capital gains and the tax deemed
paid with respect to their shares. If AIMCO should fail to distribute during
each calendar year at least the sum of:
(i) 85% of its REIT ordinary income for such year,
(ii) 95% of its REIT capital gain net income for such year (excluding
retained net capital gain), and
(iii) any undistributed taxable income from prior periods,
AIMCO would be subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed. AIMCO believes that it has
made, and intends to make, timely distributions sufficient to satisfy these
annual distribution requirements.
It is possible that AIMCO, from time to time, may not have sufficient cash
to meet the 90% distribution requirement due to timing differences between (i)
the actual receipt of cash (including receipt of distributions from the AIMCO
Operating Partnership) and (ii) the inclusion of certain items in income by
AIMCO for Federal income tax purposes. In the event that such timing differences
occur, in order to meet the 90% distribution requirement, AIMCO may find it
necessary to arrange for short-term, or possibly long-term, borrowings, or to
pay dividends in the form of taxable distributions of property.
Under certain circumstances, AIMCO may be able to rectify a failure to meet
the distribution requirement for a year by paying "deficiency dividends" to
stockholders in a later year, which may be included in AIMCO's deduction for
dividends paid for the earlier year. Thus, AIMCO may be able to avoid being
taxed on amounts distributed as deficiency dividends; however, AIMCO will be
required to pay interest and a penalty based on the amount of any deduction
taken for deficiency dividends.
FAILURE TO QUALIFY
If AIMCO fails to qualify for taxation as a REIT in any taxable year, and
the relief provisions do not apply, AIMCO will be subject to tax (including any
applicable alternative minimum tax) on its taxable income at regular corporate
rates. Distributions to stockholders in any year in which AIMCO fails to qualify
42
will not be deductible by AIMCO nor will they be required to be made. In such
event, to the extent of current and accumulated earnings and profits, all
distributions to stockholders will be taxable as ordinary income, and, subject
to certain limitations of the Code, corporate distributees may be eligible for
the dividends received deduction. Unless AIMCO is entitled to relief under
specific statutory provisions, AIMCO would also be disqualified from taxation as
a REIT for the four taxable years following the year during which qualification
was lost. It is not possible to state whether in all circumstances AIMCO would
be entitled to such statutory relief.
TAX ASPECTS OF AIMCO'S INVESTMENTS IN PARTNERSHIPS
GENERAL
Substantially all of AIMCO's investments are held indirectly through the
AIMCO Operating Partnership. In general, partnerships are "pass-through"
entities that are not subject to Federal income tax. Rather, partners are
allocated their proportionate shares of the items of income, gain, loss,
deduction and credit of a partnership, and are potentially subject to tax
thereon, without regard to whether the partners receive a distribution from the
partnership. AIMCO will include in its income its proportionate share of the
foregoing partnership items for purposes of the various REIT income tests and in
the computation of its REIT taxable income. Moreover, for purposes of the REIT
asset tests, AIMCO will include its proportionate share of assets held by the
Subsidiary Partnerships. See "Federal Income Taxation of AIMCO and AIMCO
Investors -- General."
ENTITY CLASSIFICATION
AIMCO's direct and indirect investment in partnerships involves special tax
considerations, including the possibility of a challenge by the IRS of the
status of any of the Subsidiary Partnerships as a partnership (as opposed to as
an association taxable as a corporation) for Federal income tax purposes. If any
of these entities were treated as an association for Federal income tax
purposes, it would be subject to an entity-level tax on its income. In such a
situation, the character of AIMCO's assets and items of gross income would
change and could preclude AIMCO from satisfying the asset tests and the income
tests (see "Certain Federal Income Taxation Considerations -- Asset Tests" and
"Certain Federal Income Taxation Considerations -- Income Tests"), and in turn
could prevent AIMCO from qualifying as a REIT. See "Certain Federal Income
Taxation Considerations" above for a summary of the effect of AIMCO's failure to
meet such tests for a taxable year. In addition, any change in the status of any
of the Subsidiary Partnerships for tax purposes might be treated as a taxable
event, in which case AIMCO might incur a tax liability without any related cash
distributions.
TAX ALLOCATIONS WITH RESPECT TO THE PROPERTIES
Under the Code and the Regulations, income, gain, loss and deduction
attributable to appreciated or depreciated property that is contributed to a
partnership in exchange for an interest in the partnership must be allocated in
a manner such that the contributing partner is charged with, or benefits from,
respectively, the unrealized gain or unrealized loss associated with the
property at the time of the contribution. The amount of such unrealized gain or
unrealized loss is generally equal to the difference between the fair market
value of the contributed property at the time of contribution, and the adjusted
tax basis of such property at the time of contribution (a "Book -- Tax
Difference"). Such allocations are solely for Federal income tax purposes and do
not affect the book capital accounts or other economic or legal arrangements
among the partners. The AIMCO Operating Partnership was formed by way of
contributions of appreciated property. Consequently, allocations must be made in
a manner consistent with these requirements. Where a partner contributes cash to
a partnership that holds appreciated property, the Regulations provide for a
similar allocation of such items to the other partners. These rules apply to the
contribution by AIMCO to the AIMCO Operating Partnership of the cash proceeds
received in any offerings of its stock.
In general, certain unitholders will be allocated lower amounts of
depreciation deductions for tax purposes and increased taxable income and gain
on the sale by the AIMCO Operating Partnership or other Subsidiary
43
Partnerships of the contributed properties. This will tend to eliminate the
Book-Tax Difference over the life of these partnerships. However, the special
allocations do not always entirely rectify the Book-Tax Difference on an annual
basis or with respect to a specific taxable transaction such as a sale. Thus,
the carryover basis of the contributed properties in the hands of the AIMCO
Operating Partnership or other Subsidiary Partnerships may cause AIMCO to be
allocated lower depreciation and other deductions, and possibly greater amounts
of taxable income in the event of a sale of such contributed assets in excess of
the economic or book income allocated to it as a result of such sale. This may
cause AIMCO to recognize taxable income in excess of cash proceeds, which might
adversely affect AIMCO'S ability to comply with the REIT distribution
requirements. See "Certain Federal Income Taxation Considerations -- Annual
Distribution Requirements."
With respect to any property purchased or to be purchased by any of the
Subsidiary Partnerships (other than through the issuance of units) subsequent to
the formation of AIMCO, such property will initially have a tax basis equal to
its fair market value and the special allocation provisions described above will
not apply.
SALE OF THE PROPERTIES
AIMCO's share of any gain realized by the AIMCO Operating Partnership or
any other Subsidiary Partnership on the sale of any property held as inventory
or primarily for sale to customers in the ordinary course of business will be
treated as income from a prohibited transaction that is subject to a 100%
penalty tax. See "Certain Federal Income Taxation
Considerations -- General -- Income Tests." Under existing law, whether property
is held as inventory or primarily for sale to customers in the ordinary course
of a partnership's trade or business is a question of fact that depends on all
the facts and circumstances with respect to the particular transaction. The
AIMCO Operating Partnership and the other Subsidiary Partnerships intend to hold
their properties for investment with a view to long-term appreciation, to engage
in the business of acquiring, developing, owning and operating the properties
and to make such occasional sales of the properties, including peripheral land,
as are consistent with AIMCO's investment objectives.
TAXATION OF MANAGEMENT COMPANIES
A portion of the amounts to be used to fund distributions to stockholders
is expected to come from distributions made by the management companies to the
AIMCO Operating Partnership, and interest paid by the management companies on
certain notes held by the AIMCO Operating Partnership. In general, the
management companies pay Federal, state and local income taxes on their taxable
income at normal corporate rates. Any Federal, state or local income taxes that
the management companies are required to pay will reduce AIMCO's cash flow from
operating activities and its ability to make payments to holders of its
securities.
TAXATION OF TAXABLE DOMESTIC STOCKHOLDERS
DISTRIBUTIONS
Provided that AIMCO qualifies as a REIT, distributions made to AIMCO's
taxable domestic stockholders out of current or accumulated earnings and profits
(and not designated as capital gain dividends) will be taken into account by
them as ordinary income and will not be eligible for the dividends received
deduction for corporations. Distributions (and retained net capital gains) that
are designated as capital gain dividends will be taxed as long-term capital
gains (to the extent that they do not exceed AIMCO's actual net capital gain for
the taxable year) without regard to the period for which the stockholder has
held its stock. However, corporate stockholders may be required to treat up to
20% of certain capital gain dividends as ordinary income. In addition, net
capital gains attributable to the sale of depreciable real property held for
more than 12 months are subject to a 25% maximum Federal income tax rate to the
extent of previously claimed real property depreciation.
Distributions in excess of current and accumulated earnings and profits
will not be taxable to a stockholder to the extent that they do not exceed the
adjusted basis of the stockholder's shares in respect of which the distributions
were made, but rather will reduce the adjusted basis of such shares. To the
extent that such distributions exceed the adjusted basis of a stockholder's
shares in respect of which the distributions were made, they will be included in
income as long-term capital gain (or short-term capital gain if the shares have
44
been held for one year or less). In addition, any dividend declared by AIMCO in
October, November or December of any year and payable to a stockholder of record
on a specified date in any such month will be treated as both paid by AIMCO and
received by the stockholder on December 31 of such year, provided that the
dividend is actually paid by AIMCO during January of the following calendar
year. Stockholders may not include in their individual income tax returns any
net operating losses or capital losses of AIMCO.
DISPOSITIONS OF AIMCO STOCK
Capital gains recognized by individuals and other non-corporate taxpayers
upon the sale or disposition of securities held for more than one year at the
time of disposition will be long-term capital gains and will be short-term
capital gains if the securities are held for one year or less. Capital losses
recognized by a stockholder upon the disposition of securities held for more
than one year at the time of disposition will be a long-term capital loss. In
addition, any loss upon a sale or exchange of shares of securities by a
stockholder who has held such shares for six months or less (after applying
certain holding period rules) will be treated as a long-term capital loss to the
extent of distributions from AIMCO required to be treated by such stockholder as
long-term capital gain.
A redemption of AIMCO stock (including preferred stock or equity stock)
will be treated under Section 302 of the Code as a dividend subject to tax at
ordinary income tax rates (to the extent of AIMCO's current or accumulated
earnings and profits), unless the redemption satisfies certain tests set forth
in Section 302(b) of the Code enabling the redemption to be treated as a sale or
exchange of the stock. The redemption will satisfy such test if it (i) is
"substantially disproportionate" with respect to the holder (which will not be
the case if only the stock is redeemed, since it generally does not have voting
rights), (ii) results in a "complete termination" of the holder's stock interest
in AIMCO, or (iii) is "not essentially equivalent to a dividend" with respect to
the holder, all within the meaning of Section 302(b) of the Code. In determining
whether any of these tests have been met, shares considered to be owned by the
holder by reason of certain constructive ownership rules set forth in the Code,
as well as shares actually owned, must generally be taken into account. Because
the determination as to whether any of the alternative tests of Section 302(b)
of the Code is satisfied with respect to any particular holder of the stock will
depend upon the facts and circumstances as of the time the determination is
made, prospective investors are advised to consult their own tax advisors to
determine such tax treatment. If a redemption of the stock is treated as a
distribution that is taxable as a dividend, the amount of the distribution would
be measured by the amount of cash and the fair market value of any property
received by the stockholders. The stockholder's adjusted tax basis in such
redeemed stock would be transferred to the holder's remaining stockholdings in
AIMCO. If, however, the stockholder has no remaining stockholdings in AIMCO,
such basis may, under certain circumstances, be transferred to a related person
or it may be lost entirely.
TAXATION OF FOREIGN STOCKHOLDERS
The following is a summary of certain anticipated U.S. Federal income and
estate tax consequences of the ownership and disposition of securities
applicable to Non-U.S. Holders of securities. A "Non-U.S. Holder" is generally
any person other than (i) a citizen or resident of the United States, (ii) a
corporation or partnership created or organized in the United States or under
the laws of the United States or of any state thereof or the District of
Columbia, (iii) an estate whose income is includable in gross income for U.S.
Federal income tax purposes regardless of its source or (iv) a trust if a United
States court is able to exercise primary supervision over the administration of
such trust and one or more United States fiduciaries have the authority to
control all substantial decisions of such trust. The discussion is based on
current law and is for general information only. The discussion addresses only
certain and not all aspects of U.S. Federal income and estate taxation.
ORDINARY DIVIDENDS
The portion of dividends received by Non-U.S. Holders payable out of
AIMCO's earnings and profits which are not attributable to capital gains of
AIMCO and which are not effectively connected with a U.S. trade or business of
the Non-U.S. Holder will be subject to U.S. withholding tax at the rate of 30%
45
(unless reduced by treaty and the Non-U.S. Holder provides appropriate
documentation regarding its eligibility for treaty benefits). In general,
Non-U.S. Holders will not be considered engaged in a U.S. trade or business
solely as a result of their ownership of securities. In cases where the dividend
income from a Non-U.S. Holder's investment in securities is (or is treated as)
effectively connected with the Non-U.S. Holder's conduct of a U.S. trade or
business, the Non-U.S. Holder generally will be subject to U.S. tax at graduated
rates, in the same manner as U.S. Holders are taxed with respect to such
dividends (and may also be subject to the 30% branch profits tax in the case of
a Non-U.S. Holder that is a corporation).
NON-DIVIDEND DISTRIBUTIONS
Unless AIMCO stock constitutes a United States real property interest (a
"USRPI") within the meaning of the Foreign Investment in Real Property Tax Act
of 1980 ("FIRPTA"), distributions by AIMCO which are not dividends out of the
earnings and profits of AIMCO will not be subject to U.S. income or withholding
tax. If it cannot be determined at the time a distribution is made whether or
not such distribution will be in excess of current and accumulated earnings and
profits, the distribution will be subject to withholding at the rate applicable
to dividends. However, the Non-U.S. Holder may seek a refund of such amounts
from the IRS if it is subsequently determined that such distribution was, in
fact, in excess of current and accumulated earnings and profits of AIMCO. If
AIMCO stock constitutes a USRPI, such distributions will be subject to 10%
withholding and taxed pursuant to FIRPTA at a rate of 35% to the extent such
distributions exceed a stockholder's basis in his or her AIMCO stock.
CAPITAL GAIN DIVIDENDS
Under FIRPTA, a distribution made by AIMCO to a Non-U.S. Holder, to the
extent attributable to gains from dispositions of USRPIs such as the properties
beneficially owned by AIMCO ("USRPI Capital Gains"), will be considered
effectively connected with a U.S. trade or business of the Non-U.S. Holder and
subject to U.S. income tax at the rates applicable to U.S. individuals or
corporations, without regard to whether such distribution is designated as a
capital gain dividend. In addition, AIMCO will be required to withhold tax equal
to 35% of the amount of dividends to the extent such dividends constitute USRPI
Capital Gains. Distributions subject to FIRPTA may also be subject to a 30%
branch profits tax in the hands of a Non-U.S. Holder that is a corporation.
DISPOSITIONS OF AIMCO STOCK
Unless AIMCO stock constitutes a USRPI, a sale of such stock by a Non-U.S.
Holder generally will not be subject to taxation under FIRPTA. The stock will
not constitute a USRPI if AIMCO is a "domestically controlled REIT." A
domestically controlled REIT is a REIT in which, at all times during a specified
testing period, less than 50% in value of its shares is held directly or
indirectly by Non-U.S. Holders. AIMCO believes that it is, and it expects to
continue to be, a domestically controlled REIT. If AIMCO is, and continues to
be, a domestically controlled REIT, the sale of AIMCO stock should not be
subject to taxation under FIRPTA. Because most classes of stock of AIMCO are
publicly traded, however, no assurance can be given that AIMCO is or will
continue to be a domestically controlled REIT.
Even if AIMCO does not constitute a domestically controlled REIT, a
Non-U.S. Holder's sale of stock generally will still not be subject to tax under
FIRPTA as a sale of a USRPI provided that:
- the stock is "regularly traded" (as defined by applicable Regulations) on
an established securities market (e.g., the NYSE, on which AIMCO stock is
listed) and
- the selling Non-U.S. Holder held 5% or less of such class of AIMCO's
outstanding stock at all times during a specified testing period.
If gain on the sale of stock of AIMCO were subject to taxation under
FIRPTA, the Non-U.S. Holder would be subject to the same treatment as a U.S.
stockholder with respect to such gain (subject to applicable alternative minimum
tax and a special alternative minimum tax in the case of nonresident alien
individuals)
46
and the purchaser of the stock could be required to withhold 10% of the purchase
price and remit such amount to the IRS.
Gain from the sale of AIMCO stock that would not otherwise be subject to
taxation under FIRPTA will nonetheless be taxable in the United States to a
Non-U.S. Holder in two cases. First, if the Non-U.S. Holder's investment in the
AIMCO stock is effectively connected with a U.S. trade or business conducted by
such Non-U.S. Holder, the Non-U.S. Holder will be subject to the same treatment
as a U.S. stockholder with respect to such gain. Second, if the Non-U.S. Holder
is a nonresident alien individual who was present in the United States for 183
days or more during the taxable year and has a "tax home" in the United States,
the nonresident alien individual will be subject to a 30% tax on the
individual's capital gain.
ESTATE TAX
AIMCO STOCK
Securities owned or treated as owned by an individual who is not a citizen
or resident (as specially defined for U.S. Federal estate tax purposes) of the
United States at the time of death will be includible in the individual's gross
estate for U.S. Federal estate tax purposes, unless an applicable estate tax
treaty provides otherwise. Such individual's estate may be subject to U.S.
Federal estate tax on the property includible in the estate for U.S. Federal
estate tax purposes.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING
AIMCO will report to its U.S. stockholders and to the IRS the amount of
distributions paid during each calendar year, and the amount of tax withheld, if
any. Under the backup withholding rules, a stockholder may be subject to backup
withholding at the rate of 31% with respect to distributions paid unless such
holder (i) is a corporation or comes within certain other exempt categories and,
when required, demonstrates this fact or (ii) provides a taxpayer identification
number, certifies as to no loss of exemption from backup withholding, and
otherwise complies with the applicable requirements of the backup withholding
rules. A stockholder who does not provide AIMCO with his correct taxpayer
identification number also may be subject to penalties imposed by the IRS. Any
amount paid as backup withholding will be creditable against the stockholder's
income tax liability. In addition, AIMCO may be required to withhold a portion
of capital gain distributions to any Non-U.S. Holders. The IRS has issued final
Treasury Regulations regarding the withholding, backup withholding and
information reporting rules as applied to Non-U.S. Holders. Prospective
investors in securities should consult their tax advisors regarding the
application of these Treasury Regulations.
TAXATION OF TAX-EXEMPT STOCKHOLDERS
Tax-exempt entities, including qualified employee pension and profit
sharing trusts and individual retirement accounts ("Exempt Organizations"),
generally are exempt from Federal income taxation. However, they are subject to
taxation on their unrelated business taxable income ("UBTI"). While many
investments in real estate generate UBTI, the IRS has ruled that dividend
distributions from a REIT to an exempt employee pension trust do not constitute
UBTI, provided that the shares of the REIT are not otherwise used in an
unrelated trade or business of the exempt employee pension trust. Based on that
ruling, AIMCO believes that amounts distributed by AIMCO to Exempt Organizations
should generally not constitute UBTI. However, if an Exempt Organization
finances its acquisition of securities with debt, a portion of its income from
AIMCO will constitute UBTI pursuant to the "debt-financed property" rules.
Furthermore, social clubs, voluntary employee benefit associations, supplemental
unemployment benefit trusts, and qualified group legal services plans that are
exempt from taxation under paragraphs (7), (9), (17) and (20), respectively, of
Section 501(c) of the Code are subject to different UBTI rules, which generally
will require them to characterize distributions from AIMCO as UBTI. In addition,
in certain circumstances, a pension trust that owns more than 10% of AIMCO's
stock is required to treat a percentage of the dividends from AIMCO as UBTI (the
"UBTI Percentage"). The UBTI Percentage is the gross income derived by AIMCO
from an unrelated trade or business (determined as if AIMCO were a pension
trust) divided by the gross
47
income of AIMCO for the year in which the dividends are paid. The UBTI rule
applies to a pension trust holding more than 10% of AIMCO's stock only if:
- the UBTI Percentage is at least 5%,
- AIMCO qualifies as a REIT by reason of the modification of the 5/50 Rule
that allows the beneficiaries of the pension trust to be treated as
holding shares of AIMCO in proportion to their actuarial interest in the
pension trust, and
- either (A) one pension trust owns more than 25% of the value of AIMCO's
stock or (B) a group of pension trusts each individually holding more
than 10% of the value of AIMCO's stock collectively owns more than 50% of
the value of AIMCO's stock.
The restrictions on ownership and transfer of AIMCO's stock should prevent an
Exempt Organization from owning more than 10% of the value of AIMCO's stock.
LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS
The rules dealing with Federal income taxation are constantly under review
by persons involved in the legislative process and by the IRS and the U.S.
Treasury Department. Changes to the Federal laws and interpretations thereof
could adversely affect an investment in AIMCO or the AIMCO Operating
Partnership. Congress recently enacted legislation, generally effective in 2001,
that, among other things:
- modifies the current ownership limitations to permit a REIT to own up to
100% of the voting securities and 100% of the value of the other
interests in a taxable REIT subsidiary. In addition, the 5% REIT asset
test does not apply to taxable REIT subsidiaries, but securities of
taxable REIT subsidiaries cannot exceed 20% of the total value of a
REIT's assets;
- permits a taxable REIT subsidiary to perform services to a REIT's tenants
and imposes a 100% excise tax on certain non-arm's length transactions
between a taxable REIT subsidiary and a REIT;
- disallows REIT status where health care or lodging facilities are
operated or managed by a taxable REIT subsidiary;
- generally restricts a REIT from owning more than 10% of the vote or value
of the securities of an issuer, including a partnership or a non-REIT C
corporation that is not a taxable REIT subsidiary;
- imposes certain limitations to the deductibility of interest paid by a
taxable REIT subsidiary to a related REIT;
- allows a REIT to rent up to 10% of a property to a taxable REIT
subsidiary and generally have the rent qualify as good income for
purposes of the REIT gross income tests;
- reduces the annual REIT distribution requirement from a 95% to a 90%
level; and
- changes the measurement of rent attributable to personal property leased
in connection with a lease of real property from a comparison based on
adjusted tax bases of properties to a comparison of fair market values.
It cannot be predicted whether, when, in what form, or with what effective
dates, other legislative proposals applicable to AIMCO or its stockholders will
become law.
STATE, LOCAL AND FOREIGN TAXES
The AIMCO Operating Partnership and its partners and AIMCO and its
stockholders may be subject to state, local or foreign taxation in various
jurisdictions, including those in which it or they transact business, own
property or reside. It should be noted that the AIMCO Operating Partnership owns
properties located in a number of states and local jurisdictions, and the AIMCO
Operating Partnership may be required to file income tax returns in some or all
of those jurisdictions. The state, local or foreign tax treatment of the AIMCO
Operating Partnership and its partners and AIMCO and its stockholders may not
conform to the
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Federal income tax consequences discussed above. Consequently, prospective
investors should consult their own tax advisors regarding the application and
effect of state, local and foreign tax laws on an investment in the AIMCO
Operating Partnership or AIMCO.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549
and in New York, New York, and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available to the public at the SEC's web site at
http://www.sec.gov. The Securities Exchange Act of 1934 filing number for AIMCO
is 1-13232 and for the AIMCO Operating Partnership is 0-24497.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information filed with the
SEC will update and supersede this information. We incorporate by reference the
documents listed below, and any future filings made with the SEC under Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until our
offering is completed.
- Apartment Investment and Management Company's Annual Report on Form 10-K
for the year ended December 31, 2000;
- Apartment Investment and Management Company's Quarterly Report on Form
10-Q for the quarters ended March 31 and June 30, 2001;
- Apartment Investment and Management Company's Current Reports on Form
8-K, dated September 20, 2000 (as amended by Amendment No. 1 filed
December 4, 2000, Amendment No. 2 filed January 18, 2001 and Amendment
No. 3 filed February 28, 2001); January 25, 2001 (filed February 1, 2001)
(as amended by Amendment No. 1 filed March 12, 2001), March 19, 2001
(filed March 22, 2001); March 26, 2001 (filed March 27, 2001); April 17,
2001 (filed April 17, 2001); and April 26, 2001 (filed April 27, 2001)
July 20, 2001 (filed July 24, 2001); July 26, 2001 (filed July 27, 2001)
and August 1, 2001 (filed August 2, 2001);
- the description of Apartment Investment and Management Company's capital
stock contained in its Registration Statement on Form 8-A (File No.
1-13232) filed July 19, 1994, including any amendment or reports filed
for the purpose of updating such description;
- AIMCO Properties, L.P.'s Annual Report on Form 10-K/A and Form 10-K for
the year ended December 31, 2000;
- AIMCO Properties, L.P.'s Quarterly Report on Form 10-Q for the quarters
ended March 31 and June 30, 2001; and
- AIMCO Properties, L.P.'s Current Report on Form 8-K, dated September 20,
2000 (filed October 5, 2000) (as amended by Amendment No. 1 filed
December 4, 2000, Amendment No. 2 filed January 18, 2001 and Amendment
No. 3 filed February 28, 2001).
You may request a copy of these filings, at no cost, by writing or calling
us at the following address and telephone number:
Corporate Secretary
Apartment Investment and Management Company
Colorado Center, Tower Two
2000 South Colorado Boulevard, Suite 2-1000
Denver, Colorado 80222
(303) 757-8101
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You should rely only on the information incorporated by reference or
provided in this prospectus. We have not authorized anyone to provide you with
different information. The selling stockholders named herein are not making an
offer of these securities in any state where the offer is not permitted. You
should not assume that the information in this prospectus is accurate as of any
date other than the date on the front of the document.
LEGAL MATTERS
Certain tax matters will be passed upon for AIMCO by Skadden, Arps, Slate,
Meagher & Flom LLP. The validity of the securities offered hereby will be passed
upon for AIMCO by Piper Marbury Rudnick & Wolfe LLP, Baltimore, Maryland and for
the AIMCO Operating Partnership by Skadden, Arps, Slate, Meagher & Flom LLP.
EXPERTS
Ernst & Young LLP, independent auditors, have audited AIMCO's consolidated
financial statements and schedule for the year ended December 31, 2000, as set
forth in their report, which is incorporated by reference in this prospectus.
These financial statements and schedule are incorporated by reference in
reliance on Ernst & Young LLP's report, given on their authority as experts in
accounting and auditing.
Ernst & Young LLP, independent auditors, have audited AIMCO Operating
Partnership's consolidated financial statements and schedule for the year ended
December 31, 2000, as set forth in their report, which is incorporated by
reference in this prospectus. These financial statements and schedule are
incorporated by reference in reliance on Ernst & Young LLP's report, given on
their authority as experts in accounting and auditing.
Reznick Fedder & Silverman, independent auditors, have audited (i) Oxford
Holding corporation and subsidiaries, Oxford Realty Financial Group, Inc. and
Subsidiaries, AIMCO Entities and Oxford Equities Corporation III's combined
financial statements for the year ended December 31, 1999; (ii) ORFG Operations,
L.L.C. and Subsidiary's combined financial statements for the year ended
December 31, 1999; (iii) OXPARC L.L.C.'s combined financial statements for the
year ended December 31, 1999; and (iv) Oxford Realty Financial Group Properties
combined financial statements for the year ended December 31, 1999; as set forth
in their reports, which are incorporated by reference in this prospectus. These
financial statement are incorporated by reference in reliance on Reznick Fedder
& Silverman's reports given their authority as experts in accounting and
auditing.
The consolidated financial statements of Oxford Tax Exempt Fund II Limited
Partnership ("OTEF") appearing in OTEF's Annual Report on Form 10-K for the year
ended December 31, 1999 have been audited by PricewaterhouseCoopers LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
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