Tax Indemnification And Contest Agreement

TAX INDEMNIFICATION AND CONTEST AGREEMENT


BY AND AMONG


APARTMENT INVESTMENT AND MANAGEMENT COMPANY,


NATIONAL PARTNERSHIP INVESTMENTS CORP.,


XYZ HOLDINGS LLC


AND THE OTHER PARTIES SIGNATORY HERETO


Dated as of December 3, 2001


TAX INDEMNIFICATION AND CONTEST AGREEMENT


This TAX INDEMNIFICATION AND TAX CONTEST AGREEMENT (this "Agreement") is dated as of December 3, 2001, by and among XYZ Holdings LLC ("XYZ" or the "Lead Indemnitor"), The Casden Company ("TCC"), Casden Investment Corp. ("CIC"), Alan I. Casden ("AIC"), and Cerberus Partners, L.P. ("CP") (the "Additional Indemnitors" and, collectively with the Lead Indemnitor, the "Indemnitors"), and Apartment Investment and Management Company ("AIMCO") and National Partnership Investments Corp. ("NAPICO").


WITNESSETH


WHEREAS, AIMCO has entered into an Agreement and Plan of Merger with each of Casden Properties, Inc. ("Casden REIT") and Casden Park La Brea, Inc. ("CPLB REIT"), each dated as of the date hereof (the "Casden Merger Agreement" and the "Park La Brea Merger Agreement," respectively and, together, the "Merger Agreements"); and


WHEREAS, as a condition to entering into the Merger Agreements, the Contribution Agreement, the Casden Contribution Agreement and other agreements to be entered into in connection therewith (collectively, the "Acquisition Agreements"), and as an inducement to do so, the parties hereto are entering into this Agreement;


NOW, THEREFORE, in consideration of the promises and mutual agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:


Section 1. Definitions. For purposes of this Agreement, the following terms shall apply:


(a) "Acquired Asset" shall mean any asset acquired
directly or indirectly by AIMCO as a result of the transactions
contemplated by the Merger Agreements.


(b) "AIMCO Common Stock" shall mean shares of AIMCO's
Class A Common Stock, par value $.01 per share, issued pursuant to
the Acquisition Agreements and any other securities issuable in
respect thereof, whether as a dividend or distribution, in
connection with a stock split, merger, recapitalization or
otherwise.


(c) "AIMCO Common Stock Price" shall mean $47 per share.


(d) "AIMCO OP Units" shall mean partnership common units
of AIMCO OP issued pursuant to the Acquisition Agreements and any
other securities issuable in respect thereof, whether as a
distribution, in connection with a split of such common units,
merger, recapitalization or otherwise.


(e) "AIMCO Securities" shall mean AIMCO Common Stock or
AIMCO OP Units.


(f) "Casden" shall mean Casden Properties, Inc. and every
Casden Subsidiary.


(g) "Casden Entities" shall mean AIC, TCC and CIC.


(h) "CPLB" shall mean CPLB REIT and every CPLB Subsidiary
(as defined in the Park La Brea Merger Agreement).


(i) "Final Determination" shall mean (i) a decision,
judgment, decree, or other order by any court of competent
jurisdiction, which decision judgment, decree, or other order has
become final after all allowable appeals by either party to the
action have been exhausted or the time for filing such appeal has
expired, (ii) a closing agreement entered into under Section 7121
of the Code, or any final settlement agreement entered in
connection with any administrative or judicial proceeding, or
(iii) the expiration of time for instituting a claim for refund,
or if such claim was filed, the expiration of time for instituting
a suit with respect thereto.


(j) "Indemnitee" shall mean each of AIMCO and NAPICO, as
the case may be.


(k) "Indemnity Amount" shall mean the amount payable by
Indemnitor to an Indemnitee pursuant to Section 2.


(l) "Pre-Closing Period" shall mean any taxable year or
period that ends on or before the Closing Date.


(m) "Scheduled Taxes" shall mean the items listed on
Schedule B hereto.


(n) "Section 6662 Tax Liabilities" shall mean any
penalties imposed by a Tax authority for fraud, willful misconduct
or under Section 6662(b)(2) of the Code (or similar provisions of
state, local or foreign law), and any interest and additions to
tax related thereto.


(o) "Straddle Period" shall mean, with respect to any
taxable year or period of an entity that begins on or before the
Closing Date but ends after the Closing Date, the portion of such
taxable year or period that (i) begins on the first day of such
taxable year or period, and (ii) ends on the Closing Date. For
purposes of this Agreement, the Tax liability of any entity with
respect to a Straddle Period shall be computed as follows: (i) in
the case of Taxes of an entity that are either (A) based upon or
related to income or receipts, or (B) imposed in connection with
any sale, transfer, assignment, or distribution of property
(whether real or personal, tangible or intangible) by such entity,
the Tax liability for the Straddle Period shall be deemed equal to
the amount that would be payable if the period for which such Tax
is assessed had ended on and included the Closing Date, not
including transactions occurring on the Closing Date after the
Closing, and not including transfer and similar taxes related to
the transactions contemplated by the Acquisition Agreements,
determined, to the extent permissible under applicable laws, in a
manner which is consistent with such entity's accounting practices
and business operations as in effect prior to the Closing Date;
and (ii) in the case of Taxes that are not described in clause (i)
above, the Tax liability for the Straddle Period shall be the
amount due and payable on or before the Closing Date.


(p) "Substantial Authority" shall mean substantial
authority within the meaning of Section 6662(d)(2)(B)(i) of the
Code and the Treasury Regulations promulgated thereunder.


(q) "Tax Law Change" shall mean modifications to, or
enactment, promulgation, release or adoption of any changes in the
Code or the Tax law of any state, local, or foreign jurisdiction.


(r) "Tax" and/or "Taxes" shall mean all Federal, state,
local and foreign taxes, charges, fees, duties (including customs
duties), levies or other assessments, including without
limitation, income, gross receipts, net proceeds, ad valorem,
turnover, real and personal property (tangible and intangible),
sales, use, franchise, excise, value added, stamp, leasing, lease,
user, transfer, fuel, excess profits, occupational, interest
equalization, windfall profits, severance, license, payroll,
environmental, capital stock, disability, employee's income
withholding, other withholding, and unemployment taxes, which are
imposed by any governmental authority, and such term shall include
any interest, penalties or additions to tax attributable thereto;
provided, however, that Transfer Taxes shall be excluded.


(s) "Tax Return" shall mean a report, return or other
information return required to be supplied to a governmental
entity with respect to Taxes (and any amendments thereto)
including, combined or consolidated returns for any group of
entities.


(t) "Value" shall mean, as of any date, and (A) with
respect to any shares of AIMCO Common Stock, the number of such
shares multiplied by the sum of (i) the AIMCO Common Stock Price
and (ii) the amount of any dividends that have accrued on a share
of AIMCO Common Stock from the Effective Time that have not been
paid as of such date, and (B) with respect to any AIMCO OP Units,
the number of such AIMCO OP Units multiplied by the sum of (i) the
AIMCO Common Stock Price and (ii) the amount of any distributions
that have accrued on an AIMCO OP Unit from the Effective Time that
have not been paid as of such date (if any).


(u) Any capitalized terms used herein and not defined
herein, shall have the meaning assigned to it in the Casden Merger
Agreement.


Section 2. Amount and Scope of Indemnification.


(a) Indemnitors shall provide indemnification to each
Indemnitee as set forth below.


(i) Indemnitors shall indemnify AIMCO for:


(A) any Tax liability (other than Section 6662
Tax Liabilities, Scheduled Taxes and Tax liabilities
covered under Section 2(a)(i)(D) hereof) of Casden or
CPLB for any Pre-Closing Period or Straddle Period
that has not been paid; provided, that, the aggregate
amount payable pursuant to this Section 2(a)(i)(A)
and Section 2(a)(ii)(A) shall not exceed $37,500,000;
provided further, that a claim is made by the
Internal Revenue Service (or any other Tax authority)
within three (3) years of the filing of the Tax
return unless a longer statute of limitations applies
as a result of the assessment of a Section 6662 Tax
Liability, in which case, a claim can be made at any
time;


(B) any Section 6662 Tax Liability of Casden or
CPLB for any Pre-Closing Period or Straddle Period;


(C) two-thirds (2/3) of any Tax liability
resulting from the imposition of Tax, directly or
indirectly, on AIMCO under the principles of Section
1374 of the Code (as set forth in Temp. Treas. Reg.
ss. 1.337(d)-5T and IRS Notice 88-19) as a result of
the direct or indirect sale by AIMCO of any Acquired
Asset within three (3) years of the Closing; provided
that the aggregate amount payable pursuant to this
Section 2(a)(i)(C) shall not exceed $10,000,000; and


(D) any Tax liability of Casden or CPLB incurred
as a result of the transactions undertaken in
connection with the Commercial Sale, the Ross Store
Sale, or the Asset Purchase.


(ii) Indemnitors shall indemnify NAPICO for:


(A) any Tax liability (other than Section 6662
Tax Liabilities) of NAPICO for any Pre-Closing Period
or Straddle Period ending after December 31, 1998
that has not been paid; provided, that, the aggregate
amount payable pursuant to this Section 2(a)(ii)(A)
and Section 2(a)(i)(A) shall not exceed $37,500,000;
provided further, that the Indemnitee make a claim
for such amounts within three (3) years of the filing
of the Tax return unless a longer statute of
limitations applies as a result of the assessment of
a Section 6662 Tax Liability, in which case, a claim
can be made at any time; and


(B) any Section 6662 Tax Liability of NAPICO for
any Pre-Closing Period or Straddle Period.


(iii) Notwithstanding anything to the contrary
herein, the three (3) year time limitation for
indemnification set forth in Section 2(a)(i)(A) and
Section 2(a)(ii)(A) shall be extended to include any
period if the statute of limitation is extended;
provided that, (A) the Lead Indemnitor shall have the
right to extend the statute of limitations for Taxes
which AIMCO reasonably believes are likely to result
in an assessment for which the Lead Indemnitor would
have the right to control a contest thereof under
Section 5(d) and (B) AIMCO shall have the right to
extend the statute of limitations for all other
Taxes.


(iv) Notwithstanding any other provision herein, the
Casden Entities shall indemnify each Indemnitee for
any Tax liability of NAPICO for any taxable year
ending on or prior to December 31, 1998.


(b) Except to the extent that any provision of this
Agreement specifically denominates an amount due pursuant to this
Agreement as interest in respect of a delayed payment, any
indemnification payment tendered to an Indemnitee pursuant to this
Section 2 will be treated by the parties as an adjustment to the
consideration received under the Acquisition Agreements to the
extent permitted by law.


(c) In the event an Indemnitee makes a claim for
indemnification hereunder, such Indemnitee shall provide the Lead
Indemnitor with a written statement setting forth in reasonable
detail the computation of the amount described in Section 2(a).


(d) Any payment determined due to an Indemnitee pursuant
to this Section 2 shall be paid within the later of (i) twenty
(20) business days after written notice from such Indemnitee to
the Lead Indemnitor that such amounts are due and payable by
Indemnitors, or (ii) ten (10) business days prior to the due date
for any return on which such Indemnitee would reflect such income
or gain. Any payment required under this Section 2 and not made
when due shall bear interest at the greater of (i) 5% per annum or
(ii) the interest rate charged by the applicable authority in
respect of such amounts, in each case, calculated and payable
monthly, compounded monthly if not paid when due.


(e) Upon request of the Lead Indemnitor, the basis of the
claim and the accuracy of an Indemnitee's calculation of the
amount or amounts payable to or by such Indemnitee pursuant to
Section 2 shall be verified by an independent, nationally
recognized accounting firm (other than the preparer of such
Indemnitee's Tax Returns or financial statements) selected by such
Indemnitee with the consent of the Lead Indemnitor, which consent
shall not be unreasonable withheld. In order to enable such
accountants to verify the basis and accuracy of such claim, such
Indemnitee shall provide to such accountants all information
reasonably necessary for such verification, including any computer
analyses used by such Indemnitee to calculate such amount or
amounts. In conducting its verification, the accounting firm shall
consult with, and consider in good faith the opinions and
positions of, such Indemnitee and the Lead Indemnitor as to the
proper resolution of any matters at issue. The review and
determination of such calculations by such accounting firm
pursuant to this Section 2(e) shall be final. The parties hereto
agree that, if the accounting firm is required to resolve any
matters relating to the computations, the accounting firm (i)
shall provide such Indemnitee and the Lead Indemnitor with a
written notification that describes in reasonable detail the
matter or matters at issue, and (ii) prior to its resolution of
the matter or matters at issue, shall provide such Indemnitee and
the Lead Indemnitor with an opportunity to set forth their
positions concerning the proper resolution of the matter or
matters at issue in accordance with a procedure reasonably
acceptable to both such Indemnitee and the Lead Indemnitor. The
cost of such verification shall be borne by the Lead Indemnitor
unless it is the determination of such verification that the
actual amount or amounts payable deviates, in a manner favorable
to the Indemnitors, by more than 10% from the amount originally
determined by such Indemnitee, in which case such cost shall be
borne by such Indemnitee.


(f) At the request and expense of the Lead Indemnitor,
the Indemnitees shall seek any refund of any Tax. In the event any
Indemnitee receives a refund of (i) any amount which gave rise to
an indemnification payment hereunder, or (ii) any Tax paid by
Casden prior to the Closing Date with respect to a Pre-Closing
Period or Straddle Period, such Indemnitee shall refund such
indemnification payment to the Indemnitors to the extent of the
Indemnitors' portion of the refund, net of collection or other
costs (including any additional Taxes imposed on such Indemnitee)
related thereto that have not theretofore been reimbursed by the
Indemnitors to such Indemnitee.


(g) The liability of the Casden Entities, on the one
hand, and CP, on the other hand, shall be several, but not joint,
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