As filed with the Securities and Exchange Commission on December 17, 1997
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------
MID-AMERICA CAPITAL PARTNERS, L.P.
AND
MID-AMERICA FINANCE, INC.
(Exact name of registrants as specified in their charters)
62-1717980
DELAWARE applied for
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Nos.)
C/O CT CORPORATION TRUST COMPANY
1209 ORANGE STREET
WILMINGTON, DELAWARE 19801
(302) 777-0205
(Address, including zip code, and telephone number,
including area code of principal executive office)
C/O CT CORPORATION TRUST COMPANY
1209 ORANGE STREET
WILMINGTON, DELAWARE 19801
(302) 777-0205
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
A. CURTIS GREER II, ESQ.
JOHN A. GOOD, ESQ. MALCOLM P. WATTMAN, ESQ.
BAKER, DONELSON, BEARMAN & CALDWELL CADWALADER, WICKERSHAM & TAFT
165 MADISON AVENUE, SUITE 2000 100 MAIDEN LANE
MEMPHIS, TENNESSEE 38103 NEW YORK, NEW YORK 10038
(901) 577-2148 TELEPHONE (212) 504-6000 TELEPHONE
(901) 577-2303 FACSIMILE (212) 504-6666 FACSIMILE
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this Registration Statement. If the only
securities being registered on this Form are being offered pursuant to
dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. []
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. []
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. []
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. []
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Amount Proposed Maximum Proposed Maximum Amount of
Title of Securities Being Offering Price Aggregate Registration
Being Registered Registered Per Unit Offering Price Fee
<S> <C> <C> <C> <C>
Commercial Mortgage Pass Through Certificates(1). $150,000,000 100%(2) $150,000,000 $44,250
% Bonds, Due 2003 ............................... (1) (2) (1) (1)
================================================= =============== ================= =================== ====================
</TABLE>
(1) The Commercial Mortgage Pass Through Certificates will evidence, in the
aggregate, all of the beneficial ownership interests in Mid-America
Mortgage Trust, 1998-1, the only assets of which are the $ aggregate
principal amount of % Bonds, Due 2003 of Mid-America Capital Partners,
L.P.
(2) In no event will the maximum aggregate offering price of all securities
issued pursuant to this Registration Statement exceed $150,000,000.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED DECEMBER 17, 1997
PROSPECTUS
$
MID-AMERICA FINANCE, INC.
AS DEPOSITOR
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-1
REPRESENTING BENEFICIAL OWNERSHIP IN
Mid-America Capital Partners, L.P.
% BONDS, DUE 2003
MID-AMERICA MORTGAGE TRUST, 1998-1 (THE "TRUST"), A TRUST CREATED BY
MID-AMERICA FINANCE, INC. (THE "DEPOSITOR"), PURSUANT TO AN AGREEMENT OF TRUST
(THE "TRUST AGREEMENT") BETWEEN THE DEPOSITOR AND LASALLE NATIONAL BANK, AS
TRUSTEE (THE "TRUSTEE"), AT THE DIRECTION OF THE DEPOSITOR WILL ISSUE ITS
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-1 (THE
"CERTIFICATES") IN AN AGGREGATE PRINCIPAL AMOUNT OF U.S. $ . IT IS A CONDITION
TO THE ISSUANCE OF THE CERTIFICATES THAT THEY BE ASSIGNED A RATING OF AT LEAST
"BAA2" BY MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") AND A RATING OF AT LEAST
"BBB" BY STANDARD & POOR'S RATING SERVICES ("S&P").
THE CERTIFICATES WILL EVIDENCE, IN THE AGGREGATE, ALL OF THE BENEFICIAL
OWNERSHIP INTERESTS IN THE TRUST. THE ASSETS OF THE TRUST WILL CONSIST
EXCLUSIVELY OF THE % BONDS, DUE 2003 (THE "BONDS") OF MID-AMERICA CAPITAL
PARTNERS, L.P., A DELAWARE LIMITED PARTNERSHIP (THE "BORROWER"), IN THE
AGGREGATE PRINCIPAL AMOUNT OF U.S. $ . THE CERTIFICATES WILL BE PAYABLE SOLELY
FROM AMOUNTS RECEIVED BY THE TRUSTEE AS PAYMENTS ON THE BONDS. THE BONDS WILL BE
ISSUED PURSUANT TO AN AMENDED AND RESTATED INDENTURE DATED AS OF 1998 (THE
"INDENTURE") AMONG MID-AMERICA APARTMENTS, L.P., A TENNESSEE LIMITED PARTNERSHIP
("MAALP"), THE BORROWER AND LASALLE NATIONAL BANK, AS TRUSTEE (THE "INDENTURE
TRUSTEE"). MAALP IS THE SOLE LIMITED PARTNER OF THE BORROWER AND OWNS A 99%
INTEREST THEREIN.
DISTRIBUTIONS OF INTEREST ON THE BONDS WILL BE MADE ON THE FIRST BUSINESS DAY
OF EACH CALENDAR MONTH COMMENCING ______________ , 1998. THE BONDS ARE NOT
SUBJECT TO A SINKING FUND AND MAY NOT BE REDEEMED OR PREPAID PRIOR TO
_______________, 2003. UNTIL THE SECURITY RELEASE (DEFINED BELOW), THE BONDS
WILL BE SECURED BY FIRST PRIORITY MORTGAGE LIENS (THE "MORTGAGE LIENS") ON 26
APARTMENT COMMUNITIES (THE "MORTGAGED PROPERTIES") LOCATED IN NINE STATES AND
WILL BE THE FULL-RECOURSE OBLIGATIONS OF THE BORROWER; HOWEVER, NO PARTNER OR
AFFILIATE OF THE BORROWER WILL BE LIABLE FOR THE PAYMENT OF INTEREST ON OR
PRINCIPAL OF THE BONDS. THE INDENTURE PROVIDES THAT THE MORTGAGE LIENS WILL BE
SUBJECT TO RELEASE (THE "SECURITY RELEASE") IF AND WHEN EACH OF THE FOLLOWING
CONDITIONS, AMONG OTHERS, OCCURS:(I) THE UNSECURED DEBT OF MAALP, INCLUDING THE
BONDS, IS RATED AT LEAST "BAA3" AND "BBB-" BY MOODY'S AND S&P, RESPECTIVELY, AND
(II) MAALP IS A REPORTING COMPANY UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED (THE "EXCHANGE ACT"), PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT ON
FORM 10 (OR ANY SUCCESSOR FORM). AT LEAST 60 DAYS PRIOR TO THE PERMITTED MERGER
AND SECURITY RELEASE, MAALP WILL DELIVER TO THE CERTIFICATE HOLDERS NOTICE OF
ITS INTENT TO CONSUMMATE THE PERMITTED MERGER AND SECURITY RELEASE, WHICH NOTICE
WILL BE ACCOMPANYED BY MAALP'S EFFECTIVE REGISTRATION STATEMENT ON FORM 10 (OR
ANY SUCCESSOR FORM), MAALP'S PERIODIC REPORTS UNDER THE EXCHANGE ACT, AND AN
INFORMATION STATEMENT IN RESPECT OF THE PERMITTED MERGER PREPARED IN ACCORDANCE
WITH THE EXCHANGE ACT. UPON THE SECURITY RELEASE, THE INDENTURE TRUSTEE WILL
RELEASE THE MORTGAGE LIENS, THE BORROWER WILL MERGE WITH AND INTO MAALP, WITH
MAALP AS THE SURVIVING LIMITED PARTNERSHIP OF THE MERGER (THE "PERMITTED
MERGER"), AND MAALP WILL ASSUME THE OBLIGATIONS UNDER THE BONDS. SIMULTANEOUSLY
WITH THE PERMITTED MERGER, THE TRUST WILL TERMINATE AND THE TRUSTEE WILL DELIVER
THE BONDS TO THE HOLDERS OF THE CERTIFICATES THROUGH THE BOOK-ENTRY FACILITIES
DESCRIBED HEREIN, AS A DISTRIBUTION IN FULL SATISFACTION OF THEIR BENEFICIAL
INTERESTS IN THE TRUST. AT SUCH TIME, THE BONDS WILL BE THE GENERAL UNSECURED
OBLIGATIONS OF MAALP RANKING IN PARITY WITH ALL OTHER UNSECURED DEBT OF MAALP,
AND PERSONS PREVIOUSLY HOLDING CERTIFICATES WILL THEREAFTER HAVE NO CLAIM
AGAINST THE MORTGAGED PROPERTIES OR ANY OTHER PROPERTY OF MAALP EXCEPT AS
GENERAL UNSECURED CREDITORS OF MAALP. MAALP IS THE PRIMARY OPERATING PARTNERSHIP
OF MID-AMERICA APARTMENT COMMUNITIES, INC. ("MAAC"), A REAL ESTATE INVESTMENT
TRUST WHOSE COMMON STOCK IS TRADED ON THE NEW YORK STOCK EXCHANGE. MAAC IS THE
SOLE GENERAL PARTNER OF MAALP AND OWNS AN AGGREGATE APPROXIMATELY 84.5%
PARTNERSHIP INTEREST THEREIN.
SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR CERTAIN FACTORS THAT SHOULD BE
CONSIDERED IN PURCHASING THE CERTIFICATES
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------
<TABLE>
<CAPTION>
Certificate Principal Pass-Through Expected Rating Expected Final Scheduled Final
Amount Rate (Moody's/S&P) Distribution Date (1) Distribution Date (2)
<S> <C> <C> <C> <C>
$ % BAA2/BBB , 2003 , 2005
</TABLE>
(1)THE "EXPECTED FINAL DISTRIBUTION DATE" WITH RESPECT TO THE CERTIFICATES IS
THE "STATED MATURITY DATE" OF THE BONDS AND IS BASED ON THE ASSUMPTIONS THAT
(I) ALL PAYMENTS OF INTEREST ON THE BONDS ARE TIMELY PAID; (II) THE BONDS ARE
NOT PREPAID AS A RESULT OF ACCELERATION; AND (III) THE PAYMENT OF THE ENTIRE
UNPAID PRINCIPAL OF THE BONDS IS MADE ON THE STATED MATURITY DATE. HOWEVER,
THE ACTUAL PAYMENTS ON THE BONDS MAY DIFFER FROM THESE ASSUMPTIONS.
(2)THE SCHEDULED FINAL DISTRIBUTION DATE IS THE DATE TWO AND ONE-HALF YEARS
AFTER THE EXPECTED FINAL DISTRIBUTION DATE.
------------
THE CERTIFICATES WILL BE PURCHASED BY MORGAN STANLEY & CO. INCORPORATED (THE
"UNDERWRITER") FROM THE DEPOSITOR AND WILL BE OFFERED BY THE UNDERWRITER FROM
TIME TO TIME TO THE PUBLIC IN NEGOTIATED TRANSACTIONS OR OTHERWISE AT VARYING
PRICES TO BE DETERMINED AT THE TIME OF SALE. PROCEEDS TO THE DEPOSITOR FROM THE
SALE OF THE CERTIFICATES WILL BE APPROXIMATELY % OF THE AGGREGATE PRINCIPAL
AMOUNT OF THE CERTIFICATES, PLUS ACCRUED INTEREST, IF ANY, FROM , 1998, BEFORE
DEDUCTING EXPENSES PAYABLE BY THE DEPOSITOR.
THE CERTIFICATES ARE OFFERED BY THE UNDERWRITER SUBJECT TO PRIOR SALE, WHEN,
AS AND IF ISSUED, DELIVERED TO AND ACCEPTED BY THE UNDERWRITER AND SUBJECT TO
THE APPROVAL OF CERTAIN LEGAL MATTERS BY CADWALADER, WICKERSHAM & TAFT, COUNSEL
TO THE UNDERWRITER. IT IS EXPECTED THAT DELIVERY OF THE CERTIFICATES WILL BE
MADE IN BOOK-ENTRY FORM THROUGH THE FACILITIES OF THE DEPOSITORY TRUST COMPANY
IN THE UNITED STATES AND CEDEL BANK, S.A. AND THE EUROCLEAR SYSTEM IN EUROPE ON
OR ABOUT ________, 1998 AGAINST PAYMENT THEREFOR IN IMMEDIATELY AVAILABLE FUNDS.
-----------
MORGAN STANLEY DEAN WITTER
, 1998
<PAGE>
ONE CHART SHOWING THE ORGANIZATIONAL STRUCTURE OF THE BORROWER, DEPOSITOR,
TRUST, MAALP AND MAAC PRIOR TO THE PERMITTED MERGER, SECURITY RELEASE AND TRUST
TERMINATION. ONE CHART SHOWING THE ORGANIZATIONAL STRUCTURE OF MAAC AND MAALP
AFTER THE PERMITTED MERGER, SECURITY RELEASE AND TRUST TERMINATION. ONE MAP
SHOWING LOCATIONS OF THE MORTGAGED PROPERTIES.
[GRAPHICS OMITTED}
1
<PAGE>
UNTIL , 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE CERTIFICATES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CERTIFICATES, INCLUDING
SHORT-COVERING TRANSACTIONS IN SUCH CERTIFICATES, AND THE IMPOSITION OF A
PENALTY BID IN CONNECTION WITH THE OFFERING. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
There is currently no secondary market for the Certificates. The
Underwriter currently expects to make a secondary market in the Certificates,
but has no obligation to do so. There can be no assurance that such a market
will develop or, if it does develop, that it will continue. See "Plan of
Distribution" herein.
The distribution of this Prospectus dated , 1998, and the offer or sale of
Certificates may be restricted by law in certain jurisdictions. Persons into
whose possession this Prospectus or any Certificates come must inform themselves
about, and observe, any such restrictions. In particular, there are restrictions
on the distribution of this Prospectus and the offer or sale of Certificates in
the United Kingdom. See "Plan of Distribution."
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Trust or the Borrower. This Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, the Certificates, in any
jurisdiction where, or to any person to whom, it is unlawful to make any such
offer or solicitation. Neither the delivery of this Prospectus nor any offer or
sale made hereunder shall, under any circumstances, create an implication that
there has not been any change in the facts set forth in this Prospectus or in
the affairs of the Borrower since the date hereof.
2
<PAGE>
TABLE OF CONTENTS
Page
----
Prospectus Summary ........................................................ 4
Risk Factors .............................................................. 16
Description of the Certificates ........................................... 22
Description of the Bonds .................................................. 25
Book-Entry Issuance, Clearance and Settlement ............................. 32
Description of the Mortgaged Properties ................................... 34
Description of the Mortgages .............................................. 40
The Borrower .............................................................. 42
The Depositor ............................................................. 43
Use of Proceeds ........................................................... 43
Selected Financial Information ............................................ 43
Management's Discussion and Analysis of Financial Condition
and Results of Operations ............................................... 46
Management of the Borrower ................................................ 50
Certain Information Regarding MAALP and MAAC .............................. 51
Certain Federal Income Tax Considerations ................................. 55
State, Local and Foreign Taxes ............................................ 61
ERISA Considerations ...................................................... 61
Legal Investment .......................................................... 62
Plan of Distribution ...................................................... 63
Legal Matters ............................................................. 63
Experts ................................................................... 63
Ratings of the Certificates ............................................... 64
Available Information ..................................................... 64
Incorporation by Reference ................................................ 65
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS OR INCORPORATED
HEREIN BY REFERENCE. SEE "RISK FACTORS" FOR A DESCRIPTION OF CERTAIN RISKS AND
OTHER SPECIAL CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE SECURITIES
DISCUSSED HEREIN. CAPITALIZED TERMS SHALL HAVE THE MEANINGS ASCRIBED THERETO IN
THIS PROSPECTUS SUMMARY.
TITLE OF CERTIFICATES.............. Mid-America Mortgage Trust, 1998-1
Commercial Mortgage Pass-Through
Certificates, Series 1998-1 (the
"Certificates").
DESCRIPTION OF CERTIFICATES........ The Certificates will be issued pursuant to
a trust agreement (the "Trust Agreement"),
dated as of , 1998, among Mid-America
Finance, Inc., as depositor (the
"Depositor"), and LaSalle National Bank, as
trustee (together with any successors
thereto, the "Trustee"). See "Description of
the Certificates."
The Certificates will evidence, in the
aggregate, all of the beneficial ownership
interests in the trust established by the
Depositor pursuant to the Trust Agreement
(the "Trust"). The only assets of the Trust
will be $ aggregate principal amount (the
"Principal Amount") of % Bonds, Due 2003
(the "Bonds") of Mid-America Capital
Partners, L.P. (the "Borrower"). See
"Description of Bonds." The Certificates
will be payable solely from the amounts
received by the Trustee as payments on the
Bonds.
DISTRIBUTIONS ON CERTIFICATES: On the first Business Day of each month
beginning , 1998 (each a "Distribution
Date"), funds available to the Trustee from
the interest payments made on the Bonds,
and, after an event of default under any
mortgage or other document evidencing the
Mortgage Liens (individually, a "Mortgage"
and collectively, the "Mortgages"), from
payments in respect of the Bonds or the
liquidation of any of the Mortgaged
Properties, will be distributed to the
holders of the Certificates.
EXPECTED FINAL DISTRIBUTION DATE: The Expected Final Distribution Date for the
Certificates is , 2003 assuming that (i) all
payments of interest under the Bonds are
timely paid; (ii) the Bonds are not prepaid
as a result of acceleration; and (iii) the
payment of the entire unpaid principal of
the Bonds is made on the Stated Maturity
Date.
SCHEDULED FINAL DISTRIBUTION DATE: The Scheduled Final Distribution Date for
the Certificates is , 2005, two and one-half
years after the Expected Final Distribution
Date. If the unpaid principal balance on the
Bonds is paid after the Expected Final
Distribution Date but prior to the Scheduled
Final Distribution Date, the Certificates
are required to be paid on the next Payment
Date. See "Description of Bonds--Payment on
the Bonds."
CERTIFICATE RECORD DATE: The record date for the Certificates with
respect to any Distribution Date will be
the close of business on the Business
4
<PAGE>
Day preceding such Distribution Date (a
"Certificate Record Date").
TITLE OF BONDS.................... Mid-America Capital Partners, L.P. % Bonds,
Due 2003.
DESCRIPTION OF BONDS............... The Bonds will be issued pursuant to an
amended and restated indenture (the
"Indenture") dated as of , 1998 by and among
the Borrower, Mid-America Apartments, L.P.
("MAALP") and LaSalle National Bank, as
trustee (the "Indenture Trustee") and will
be limited to an aggregate amount of $ . See
"Description of the Bonds."
INTEREST RATE: The Bonds will bear interest at a fixed rate
of % per annum. Interest on the Bonds will
be computed on the basis of a 360- day year
consisting of twelve 30-day months.
TERM AND PREPAYMENT LOCKOUT: The Bonds are non-callable for a period of 5
years, and the entire unpaid principal
balance of the Bonds will be due and payable
on , 2003 (the "Stated Maturity Date").
There is no sinking fund for the Bonds and
the Bonds are not subject to redemption,
prepayment or principal amortization except
for acceleration upon the occurrence of any
event of default under the Indenture.
DEFEASANCE: The Indenture provides that the Borrower may
defease the Bonds at any time prior to the
Stated Maturity Date. See "Description of
the Bonds--Events of Default and Notice" and
"--Defeasance."
PAYMENT DATES: Interest on the Bonds is payable monthly in
arrears. Interest payments on the Bonds will
be due on the first Business Day of each
month (each a "Payment Date"), commencing ,
1998. A "Business Day" is any day other than
(i) a Saturday or Sunday or (ii) a day that
is either a legal holiday or a day on which
banking institutions in New York, New York,
the State of Illinois or the State of
Tennessee are authorized or obligated by
law, regulation or executive order to be
closed.
SECURITY: COLLATERAL PRIOR TO PERMITTED MERGER AND
SECURITY RELEASE. Until the Permitted Merger
and Security Release, the Bonds will be
secured by (i) first priority mortgage liens
(the "Mortgage Liens") on 26 apartment
communities located in 9 states, including
the Borrower's fee interest in each of the
parcels of real property on which such
apartment communities are situated
(collectively, the "Mortgaged Properties"
and, individually, a "Mortgaged Property") ,
(ii) liens and security interests in all
related assets, including buildings and
improvements thereon, (iii) an assignment of
rents and leases from the Mortgaged
Properties and (iv) the funds and
investments, if any, in all bank accounts of
the Borrower.
Prior to the Permitted Merger and Security
Release, the General Partner will have no
personal liability with respect to the
Bonds, and no Bondholder may claim recourse
against the General
5
<PAGE>
Partner or any limited partner (including
MAALP) or officer, director, shareholder or
employee of the Borrower or the General
Partner for any deficiency or personal
judgment after a foreclosure on the
Mortgaged Properties. The Bonds are neither
obligations of nor guaranteed by the General
Partner, MAALP, Mid-America Apartment
Communities, Inc. ("MAAC"), the Depositor,
the Trustee, the Indenture Trustee, the
Underwriter or any of their affiliates, or
insured or guaranteed by any governmental
entity or instrumentality or by any other
person or entity.
NO COLLATERAL AFTER PERMITTED MERGER AND
SECURITY RELEASE. After the Permitted Merger
and Security Release, the Bonds will be the
general unsecured obligations of MAALP
ranking in parity with all other unsecured
indebtedness of MAALP, and persons
previously holding Certificates shall
thereafter have no claim against the
Mortgaged Properties, the rents and leases
derived from the Mortgaged Properties or any
other property of MAALP, except as general
unsecured creditors of MAALP. The Permitted
Merger and Security Release are subject to
certain conditions described below in
"Description of the Bonds --Permitted
Merger; Security Release and Trust
Termination."
ADDITIONAL INDEBTEDNESS: Prior to the Permitted Merger and Security
Release, the Borrower will not incur any
Debt except the Bonds and trade accounts
payable which are paid-in-full no more than
60 days after such trade accounts payable
are incurred.
From and after the Permitted Merger and
Security Release, MAALP (i) is prohibited
from incurring (a) indebtedness in excess of
60% of MAALP's Total Assets (as defined
below) or (b) secured indebtedness in excess
of 40% of MAALP's Total Assets; and (ii) is
required to maintain total unencumbered
assets of not less than 150% of the
aggregate principal amount of all
outstanding unsecured indebtedness. See
"Description of the Bonds -- Restrictive
Covenants."
DEFAULT RATE: Pursuant to the Indenture, if the Permitted
Merger and Security Release do not occur and
the Borrower has not paid the entire
Principal Amount of the Bonds and all other
amounts outstanding thereunder on or before
the Stated Maturity Date, the Borrower will
be required to pay accrued interest on the
unpaid portion of such Principal Amount
outstanding and any other amounts payable
under the Bonds from such date until paid at
a default rate of interest (the "Default
Rate") equal to the greater of (i) the
interest rate on the Bonds plus 2% per annum
or (ii) the 20 Year U.S. Treasury Rate plus
2.8% per annum (the "Default Interest").
Payments of Default Interest received by the
Trustee will be paid to the Certificate
holders.
RECORD DATE: The Record Date for the Bonds with respect
to any Payment Date will be the close of
business on the Business Day preceding such
Payment Date (the "Record Date").
6
<PAGE>
PERMITTED MERGER; SECURITY RELEASE;
AND TRUST TERMINATION.............. The Indenture provides that the Mortgage
Liens securing the Bonds will be subject to
release ("Security Release") if and when
each of the following conditions, among
others, occurs: (i) the unsecured debt of
MAALP, including the Bonds, is rated at
least "Baa3" and "BBB-" by Moody's Investors
Service, Inc. ("Moody's") and Standard &
Poor's Rating Services, a division of The
McGraw-Hill Companies ("S&P"), respectively,
and (ii) MAALP is a reporting company under
the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), pursuant to an
effective registration statement on Form 10
(or any successor form). Moody's and S&P are
referred to collectively herein as the
"Rating Agencies."
At least 60 days prior to the Permitted
Merger (as defined below) and Security
Release, MAALP will deliver to the
Certificate holders notice of its intent to
consummate the Permitted Merger and Security
Release, which notice will be accompanyed by
MAALP's effective registration statement on
Form 10 (or any successor form), MAALP's
annual report on Form 10-K (if any) for the
fiscal year immediately preceding the
Permitted Merger and Security Release and
MAALP's quarterly and current reports on
Forms 10-Q (if any) and 8-K (if any) for the
then-current fiscal year as filed under the
Exchange Act (collectively, the "MAALP
Exchange Act Reports"), and an information
statement in respect of the Permitted Merger
prepared in accordanced with the Exchange
Act (the "Information Statement"). Upon
proof of proper notice and delivery of the
MAALP Exchange Act Reports and the
Information Statement, the Indenture Trustee
will release the Mortgage Liens, the
Borrower will merge with and into MAALP,
with MAALP as the surviving limited
partnership of the merger (the "Permitted
Merger"), and MAALP will assume the
obligations under the Bonds.
Simultaneously with the Permitted Merger and
Security Release, the Trust will terminate
(a "Trust Termination"), and the Trustee
will deliver the Bonds to the holders of the
Certificates through the book-entry
facilities described herein, as a
distribution in full satisfaction of their
beneficial interests in the Trust, and the
Global Certificate evidencing the
Certificates will be canceled by the Trustee
and delivered to the Depositor, and will be
of no further force or effect. At such time,
the Bonds will be the general unsecured
obligations of MAALP ranking in parity with
all other unsecured indebtedness of MAALP,
and persons previously holding Certificates
shall thereafter have no claim against the
Mortgaged Properties, the rents and leases
derived from the Mortgaged Properties or any
other property of MAALP except as general
unsecured creditors of MAALP.
DENOMINATIONS...................... Bonds and Certificates will be issuable in
registered form, without interest coupons,
in minimum denominations of $100,000 and
integral multiples of $1,000 in excess
thereof.
CLEARANCE AND SETTLEMENT........... Holders of Certificates (and, after the
Permitted Merger and Security Release,
Bondholders) may hold their Certificates (or
Bonds) through The Depository Trust Company
("DTC") (for United States holders) and
Cedel Bank, S.A. ("CEDEL") and
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The Euroclear System ("Euroclear") (for
European holders). Transfers within DTC,
CEDEL and Euroclear, as the case may be,
will be in accordance with the usual rules
and operating procedures of the relevant
system. Transfers between persons holding
directly or indirectly through DTC, CEDEL or
Euroclear will be effected in DTC through
the relevant depositories of CEDEL and
Euroclear. To facilitate the foregoing, a
single global certificate (the "Global
Certificate") and a single global bond (the
"Global Bond"), both in definitive, fully
registered form without interest coupons,
will be registered in the name of a nominee
of DTC and deposited with the Trustee (in
the case of the Global Certificate) and the
Indenture Trustee (in the case of the Global
Bond) as custodians for DTC. Owners of
beneficial interests in the Global
Certificate (and, after the Permitted Merger
and Security Release, the Global Bond) will
be entitled to physical delivery of
Certificates (or Bonds, after the Permitted
Merger and Security Release) only under the
limited circumstances described under
"Book-Entry Issuance, Clearance and
Settlement".
THE DEPOSITOR...................... Mid-America Finance, Inc., a special purpose
Delaware corporation. All of the shares of
the Depositor are owned by MAAC.
THE BORROWER....................... Mid-America Capital Partners, L.P., a
special purpose Delaware limited
partnership. MAALP owns a 99% limited
partnership interest in the Borrower. MAACP,
Inc., a special purpose Delaware corporation
(the "General Partner"), and a wholly- owned
subsidiary of MAAC, owns a 1% interest in
the Borrower and is the sole general partner
of the Borrower.
MAAC............................... Mid-America Apartment Communities Inc., a
Tennessee corporation that has elected to be
taxed as a real estate investment trust
("REIT") for federal income tax purposes.
MAAC owns an approximate 84.5% interest in
MAALP and is the sole general partner of
MAALP. MAAC's Common Stock, 9.5% Series A
Cumulative Preferred Stock, and 8 7/8%
Series B Cumulative Preferred Stock are
traded on the New York Stock Exchange under
the symbols "MAA," "MAA PrA," and "MAA PrB,"
respectively. MAAC is the owner of all of
the outstanding capital stock of both the
Depositor and the General Partner.
MAALP.............................. Mid-America Apartments, L.P., a Tennessee
limited partnership. MAALP is the primary
operating partnership of MAAC's umbrella
partnership REIT ("UPREIT") structure. MAALP
owns a 99% limited partnership interest in
the Borrower. Following the Permitted Merger
and Security Release, MAALP will be the sole
obligor on the Bonds.
INDENTURE TRUSTEE AND TRUSTEE...... LaSalle National Bank, a national banking
association. The Indenture Trustee will act
as trustee and paying agent for the benefit
of holders of the Bonds and is the mortgagee
of the Mortgages (or the beneficiary under
the deeds of trust, as
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applicable), and the secured party, assignee
or beneficiary under other security and
related documents.
In addition, LaSalle National Bank will
serve as Trustee under the Trust Agreement
for the benefit of holders of the
Certificates.
ADVANCES........................... Pursuant to the Indenture, prior to the
Permitted Merger and Security Release the
Indenture Trustee will be obligated to make
an advance on any Payment Date in respect of
any scheduled payment of interest on the
Bonds (an "Interest Advance") to the extent
such payment has not been paid by the
Borrower, subject to certain limitations
more fully described herein. Interest
Advances are intended to maintain a regular
flow of scheduled payments and are not
intended to guarantee or ensure against
payment defaults on the Bonds.
Prior to the Permitted Merger and Security
Release, the Indenture Trustee will be
obligated to make an advance in respect of
any payment of taxes, insurance premiums or
other amounts required under the Mortgages
to be paid with respect to the Mortgaged
Properties (a "Property Advance") and an
advance in respect of any payment of the
fees of the Indenture Trustee, the Trustee
or any servicer appointed by the Indenture
Trustee (a "Fees Advance"), in each case to
the extent that the Indenture Trustee is
notified that these payments have not been
paid by the Borrower, subject to certain
limitations more fully described herein.
Interest Advances, Property Advances, and
Fees Advances are collectively referred to
herein as "Advances" and each as an
"Advance." The Indenture Trustee will be
obligated to make an Advance only if the
Indenture Trustee believes that the amount
to be advanced, together with all previous
Advances and interest thereon, will be
recoverable from subsequent payments or
collections in respect of the Mortgaged
Properties. Advances, together with interest
thereon at a rate per annum equal to the
prime rate of the Indenture Trustee in
effect on the date such Advance is made,
compounded monthly (the "Advance Rate"),
will be reimbursed to the Indenture Trustee
as described herein. The Indenture prohibits
the Permitted Merger and Security Release if
any Advances are outstanding.
After the Permitted Merger and Security
Release, the Indenture Trustee is not
obligated to make any Advances with respect
to the Bonds.
THE MORTGAGED PROPERTIES........... The Mortgaged Properties consist of 26
apartment communities containing 5,947
apartment units. The following table
reflects the metropolitan areas in which the
Mortgaged Properties are located, and the
number of apartment units in each such
Mortgaged Property at September 30, 1997.
The Mortgaged Properties located in DeSoto
County, Mississippi, a suburb of
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Memphis, Tennessee, are considered by the
Borrower a part of the Memphis, Tennessee
metropolitan area.
MORTGAGED PROPERTY METROPOLITAN AREA NUMBER OF UNITS
- ------------------ ----------------- ---------------
Napa Valley Little Rock, Arkansas 240
Westside Creek I Little Rock, Arkansas 142
Tiffany Oaks Altamonte Springs, Florida 288
Marsh Oaks Atlantic Beach, Florida 120
Lakeside Jacksonville, Florida 416
Belmere Tampa, Florida 210
Hidden Lake II Atlanta, Georgia 160
High Ridge Athens, Georgia 160
Shenandoah Ridge Augusta, Georgia 272
Southland Station I Warner Robins, Georgia 160
Willow Creek Willow Creek, Georgia 285
Lakepointe Lexington, Kentucky 118
The Village Lexington, Kentucky 252
Crosswinds Jackson, Mississippi 360
Pear Orchard Jackson, Mississippi 389
Somerset Jackson, Mississippi 144
Hermitage at Beechtree Cary, North Carolina 194
Fairways at Royal Oak Cincinnati, Ohio 214
Howell Commons Greenville, South Carolina 348
Park Haywood Greenville, South Carolina 208
Park Place Spartanburg, South Carolina 184
Steeplechase Chattanooga, Tennessee 108
Williamsburg Village Jackson, Tennessee 148
Kirby Station Memphis, Tennessee 371
Savannah Creek Memphis, Tennessee 204
Sutton Place Memphis, Tennessee 252
-----
Total apartment units 5,947
UNAUDITED FINANCIAL INFORMATION.... The selected financial information for the
Borrower, the summary consolidated financial
and operating data for MAAC, and the other
property level information included in this
Prospectus are based on operating statements
and other available information that, in
certain instances, are unaudited and were
supplied by MAAC, MAALP or their affiliates.
In other instances such information included
in this Prospectus is based on operating
statements and information that was supplied
by previous owners of certain Mortgaged
Properties. The accuracy of such information
has not been verified.
TOTAL APPRAISED VALUE In connection with the issuance of the
Bonds, the Borrower has obtained an
appraisal of each Mortgaged Property (the
"Appraisals"). The Appraisals estimate the
value of the Mortgaged Properties to be
approximately $240 million, in the
aggregate. Neither the Borrower nor the
Depositor makes any warranty or
representation that the Mortgaged Properties
could be sold at the appraised values. See
"Description of the Mortgaged Properties --
Appraisal Reports."
INITIAL LOAN-TO-VALUE RATIO The initial loan-to-value ratio for the
Bonds is approximately % which represents a
fraction, expressed as a percentage, the
numerator of which is the $ million
Principal Amount of the Bonds, and the
denominator of which is $240 million, which
is the aggregate of the appraised values of
the Mortgaged Properties. The loan-to-value
ratio is not necessarily indicative
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<PAGE>
of the present or future ability of the
Mortgaged Properties to generate sufficient
cash flow to fund required payments on the
Bonds.
INITIAL DEBT SERVICE COVERAGE RATIO Based upon (i) the aggregate pro forma
"Adjusted Cash Flow" generated by the
Mortgaged Properties for the nine months
ended September 30, 1997 and (ii) the pro
forma scheduled payments due during such
period on the Bonds, assuming their issuance
at the beginning of such period, the initial
debt service coverage ratio with respect to
the Bonds is approximately 2.24x. See
"Selected Financial Information." For
purposes of the foregoing, the aggregate
"Adjusted Cash Flow" for the indicated
period equals approximately $16 million,
which is based on (i) all revenue derived
from the Mortgaged Properties for the
indicated period less (ii) all expenses
incurred or accrued in the operation of the
Mortgaged Properties for the indicated
periods, including a management fee equal to
4% of revenue and a $200 per apartment unit
capital expenditure reserve per annum.
MANAGEMENT OF THE MORTGAGED
PROPERTIES......................... Pursuant to a management agreement between
the Borrower and MAALP (the "Management
Agreement"), MAALP is required to operate
and manage the Mortgaged Properties on a
day-to-day basis. MAALP will be paid a fee
under the Management Agreement equal to 4%
of revenue derived from the Mortgaged
Properties.
ACCOUNTS........................... The Borrower has established, in the name of
First Union Bank (the "Account Bank") for
the benefit of the Indenture Trustee, as a
secured party, a segregated cash collateral
account (the "Operating Account") with the
Account Bank. In addition, the Borrower has
established (i) individual operating
accounts for the Mortgaged Properties (the
"Property Accounts") and (ii) in the name of
the Account Bank for the benefit of the
Indenture Trustee, as secured party, three
separate segregated cash collateral accounts
(the "Interest Escrow Account," the
"Mortgage Escrow Account" and the
"Replacement Reserve Account"), which may be
utilized during a Cash Management Period.
See "Description of the Bonds -- Priority of
Payments; Cash Management."
The Borrower has irrevocably instructed the
property manager at each Mortgaged Property
to deposit into the applicable Property
Account (i) all rents due under the Leases;
(ii) all additional amounts, if any, due and
payable under the Leases; and (iii) all
other revenue derived from the Mortgaged
Properties. All funds in each Property
Account are transferred to the Operating
Account on a daily basis.
Prior to a Cash Management Period, all money
from the Operating Account will be
transferred by automated clearing house
transfer to such accounts as the Borrower
may direct on a daily basis in accordance
with its standing instructions to the
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<PAGE>
Account Bank. During a Cash Management
Period which follows an event described in
clause (i) of the next succeeding paragraph,
funds in the Operating Account will be
transferred to such accounts as the Borrower
may direct on the Business Day following
each Account Funding Date (as defined
below). During a Cash Management Period
which follows an event described in clause
(ii) or (iii) below, no funds may be
transferred from the Operating Account
except at the direction of the Indenture
Trustee or its agent.
A "Cash Management Period" is a period
during which (i) the Borrower fails to
maintain a Pre-Permitted Merger Debt Service
Coverage Ratio (as defined below) of at
least 1.30 to 1 or (ii) an event of default
occurs and is continuing under the Bonds,
the Indenture or any Security Document or
(iii) any event has occurred and is
continuing which obligates or permits the
Indenture Trustee to make an Advance. The
term "Pre-Permitted Merger Debt Service
Coverage Ratio" means the ratio of (a) the
excess of all revenue derived from the
Mortgaged Properties for the four most
recent trailing quarters over all expenses
during such period assuming a management fee
of 4% of revenue and a $200 per apartment
unit capital expenditure reserve per annum
to (b) the amount of debt service on the
Bonds then outstanding (based on an assumed
annual debt service constant of 9.25% per
annum).
Pursuant to the Cash Collateral Account
Security, Pledge and Assignment Agreement
among the Borrower, the Indenture Trustee
and the Account Bank (the "Cash Collateral
Agreement"), during any Cash Management
Period, the Borrower has instructed the
Account Bank to withdraw from the Operating
Account, in the priority listed below and to
the extent such funds are available, by
10:00 a.m. New York on the Business Day
preceding each Payment Date (an "Account
Funding Date"), (i) funds in an amount equal
to one-twelfth of the annual amount of
interest on the Bonds outstanding at the
time less the amount of funds on deposit in
the Interest Escrow Account and deposit the
same into the Interest Escrow Account; (ii)
funds in an amount equal to the tax payments
and insurance premiums required to be paid
during the six months following such Account
Funding Date less funds on deposit in the
Mortgage Escrow Account and deposit the same
into the Mortgage Escrow Account; and (iii)
funds in an amount equal to one-half of the
annual amount required to be escrowed during
any Cash Management Period to fund
replacements pursuant to the Mortgages less
the amount on deposit in the Replacement
Reserve Account and deposit the same into
the Replacement Reserve Account.
PRIORITY OF PAYMENTS............... The Indenture provides that the Borrower
will deposit each monthly payment on the
Bonds with the Indenture Trustee by 10:00
a.m. New York time on each Payment Date for
disbursement to holders of the Bonds. The
Indenture also
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<PAGE>
provides that the Indenture Trustee will
apply all amounts so received and any other
amount received pursuant to the Indenture,
excluding fees of the Indenture Trustee
which are paid by the Borrower in a timely
manner, but including, without limitation,
amounts in the Operating Account and the
other Accounts and any payment in respect of
the liquidation of the Mortgaged Properties,
in the following order:
FIRST: to reimburse the Indenture Trustee
for any unreimbursed Advances, plus interest
thereon at the Advance Rate;
SECOND: to make payments, if any are
required, from the Accounts as provided in
the Cash Collateral Agreement;
THIRD: to make payments of interest on the
Bonds in accordance with their terms;
FOURTH: to make payments of principal on the
Bonds, to the extent any such payments are
due;
FIFTH: to make payments of Default Interest
on the Bonds, to the extent any such
payments are due; and
SIXTH: to pay any other amounts due and
owing under the Indenture.
FEDERAL INCOME TAX CONSIDERATIONS
THE CERTIFICATES The Trust will be treated as a grantor trust
and not as an association (or publicly
traded partnership) taxable as a corporation
or a taxable mortgage pool under the
Internal Revenue Code of 1986, as amended
(the "Code"). Under the grantor trust rules,
each Certificate holder will be treated for
federal income tax purposes as having
purchased an undivided interest in the
assets of the Trust to the extent of the
Certificate holder's proportionate interest
in the Trust. In general, the tax
consequences of an investment in the
Certificates will depend on the rules
applicable to the Bonds and, after
foreclosure, the Mortgaged Properties. The
Certificates will represent an undivided
proportionate interest in the Bonds. See
"Certain Federal Income Tax Considerations."
THE BONDS The Bonds will be taxable obligations under
the Code and interest paid or accrued
thereon, including original issue discount,
if any, will be taxable to non-exempt
Certificate holders. Payments on
Certificates held by foreign persons not
engaged in a U.S. trade or business
generally will be exempt from United States
withholding tax, subject to compliance with
applicable certification procedures. No
election will be made to treat the Borrower,
the Mortgaged Properties, or the arrangement
by which the Bonds are issued as a "real
estate mortgage investment conduit"
("REMIC") for federal income tax purposes.
Interest income (including original issue
discount and market
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<PAGE>
discount) will accrue on the Bonds as
described in "Certain Federal Income Tax
Considerations" herein.
ERISA CONSIDERATIONS............... Fiduciaries of employee benefit plans and
certain other retirement plans and
arrangements that are subject to the
Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or corresponding
provisions of the Code, including individual
retirement accounts and annuities, Keogh
plans, and collective investment funds in
which such plans, accounts, annuities, or
arrangements are invested (any of the
foregoing, a "Plan"), persons acting on
behalf of a Plan, or persons using the
assets of a Plan ("Plan Investors") should
review carefully with their legal advisor
whether the purchase or holding of the
Certificates or, upon the Permitted Merger
and Security Release, the Bonds could give
rise to a transaction that is prohibited by
ERISA or the Code. See "ERISA
Considerations."
LEGAL INVESTMENT................... The appropriate characterization of the
Certificates under various legal investment
restrictions, and thus the ability of
investors subject to these restrictions to
purchase the Certificates, may be subject to
significant interpretive uncertainties. The
Certificates will not constitute
"mortgage-related securities" within the
meaning of the Secondary Mortgage Market
Enhancement Act of 1984, as amended
("SMMEA"). Accordingly, investors should
consult with their own legal advisors to
determine whether and to what extent the
Certificates constitute legal investments
for them. See "Legal Investment."
RATINGS OF CERTIFICATES............ It is a condition to the issuance of the
Certificates that they be rated no lower
than "Baa2" by Moody's and rated no lower
than "BBB" by S&P. A credit rating is not a
recommendation to buy, sell or hold
securities and may be subject to downgrade,
withdrawal or qualification at any time by
the assigning rating organization as a
result of changes in, or the unavailability
of, information. Neither Moody's nor S&P is
rating the likelihood of receipt or the
timing of receipt of Default Interest under
the Certificates.
The ratings assigned to the Certificates by
each of the Rating Agencies are based
primarily on its evaluation of the
income-producing ability of the Mortgaged
Properties (including, without limitation,
the ability of the Mortgaged Properties to
produce cash flow) and reflect only the
views of the Rating Agencies. Future events,
such as events affecting the Mortgaged
Properties or the Borrower, could have an
adverse impact on the rating of the
Certificates. Although it is the intent of
the Depositor to retain the Rating Agencies
to perform annual monitoring and to provide
the Rating Agencies with certain financial
and other information in connection
therewith, none of the Depositor, the
Indenture Trustee, the Trustee or the
Borrower is under any obligation to maintain
any particular rating, and the Rating
Agencies are under no obligation whatsoever
to continue to issue any rating. A
downgrade, withdrawal or qualification of a
rating
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<PAGE>
may have an adverse effect on the market
price of the Certificates but will not
constitute an Event of Default under and as
defined in the Mortgages, the Indenture or
the Trust Agreement.
The ratings of the Rating Agencies address
the likelihood of the timely receipt by the
holders of the Certificates of all payments
(other than Default Interest) to which such
holders are entitled, including payment of
all principal (and any other amounts due
under the Security Documents), in the case
of Moody's, by the Scheduled Final
Distribution Date, and, in the case of S&P,
by the Expected Final Distribution Date. The
ratings take into consideration the
characteristics of the Certificates and the
structural and legal aspects thereof. The
ratings do not, however, represent any
assessment of the likelihood or frequency of
principal prepayments on the Bonds or the
corresponding effect on the yield to
investors.
USE OF PROCEEDS.................... The proceeds from the offer and sale of the
Certificates will be utilized by the
Depositor to purchase the Bonds from the
Borrower. The net proceeds of this offering
will be used by the Borrower to repay
certain indebtedness of the Borrower to
Morgan Stanley Mortgage Capital Inc.
pursuant to the terms of a $140 million
promissory note (the "MSMC Loan"). The
proceeds from the MSMC Loan were used to
partially finance the acquisition of
Flournoy Development Company and certain
related limited partnerships and other
entities by MAAC and MAALP on November 25,
1997. See "Certain Information Regarding
MAALP and MAAC -- Overview" and "-- Present
and Anticipated Operating Structure of the
Company." Finally, any remaining net
proceeds of this offering will be
distributed to the partners of the Borrower
and used by such partners for general
corporate purposes, including acquisitions.
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<PAGE>
RISK FACTORS
AN INVESTMENT IN THE CERTIFICATES, AND AFTER THE PERMITTED MERGER AND
SECURITY RELEASE, THE BONDS, INVOLVES VARIOUS RISKS, INCLUDING THOSE DESCRIBED
BELOW. INVESTORS SHOULD CAREFULLY CONSIDER THESE RISK FACTORS TOGETHER WITH ALL
OF THE INFORMATION SET FORTH IN THIS PROSPECTUS IN DETERMINING WHETHER TO
PURCHASE THE CERTIFICATES. INFORMATION CONTAINED IN THIS PROSPECTUS MAY CONTAIN
FORWARD-LOOKING STATEMENTS, WHICH STATEMENTS CAN BE IDENTIFIED BY THE USE OF
FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY," "WILL," "EXPECT," "ANTICIPATE,"
"ESTIMATE," OR "CONTINUE" OR THE NEGATIVE THEREOF OR OTHER COMPARABLE
TERMINOLOGY. THE FOLLOWING MATTERS AND CERTAIN OTHER FACTORS NOTED THROUGHOUT
THIS PROSPECTUS AND THE EXHIBITS HERETO CONSTITUTE CAUTIONARY STATEMENTS
IDENTIFYING IMPORTANT FACTORS WITH RESPECT TO ANY SUCH FORWARD-LOOKING
STATEMENTS, INCLUDING CERTAIN RISKS AND UNCERTAINTIES, THAT COULD CAUSE RESULTS
FROM OPERATIONS OF THE MORTGAGED PROPERTIES TO DIFFER MATERIALLY FROM THOSE
CONTAINED IN ANY SUCH FORWARD-LOOKING STATEMENTS.
NON-DIVERSIFIED COLLATERAL
Payments of interest and principal on the Bonds and, consequently, the
Certificates, before the Permitted Merger and Security Release are dependent
upon the financial performance of the Mortgaged Properties and at all times are
subject to risks inherent in a single industry. Adverse developments in the
apartment industry in general or, before the Permitted Merger and Security
Release, in the financial performance of the Mortgaged Properties, are more
likely to have a material adverse effect on payments with respect to the
Certificates than if the collateral for the Bonds consisted of diversified
assets comprised of several property types.
SOURCES OF PAYMENTS ON THE CERTIFICATES
The Certificates, when issued, will represent all of the beneficial
ownership interests in the Trust, the sole asset of which is the Bonds. None of
the Depositor, the Indenture Trustee, the Trustee, MAALP or MAAC will be
obligated to make any payments on the Certificates. Payments on the Certificates
will be derived solely from payments made by the Borrower on the Bonds. Until
the Permitted Merger and Security Release, the Bonds will represent a
full-recourse obligation of the Borrower (but not the General Partner or MAALP)
secured by the Mortgaged Properties. There can be no assurance that, prior to
the Permitted Merger and Security Release, the proceeds from and value of the
Mortgaged Properties will be sufficient to pay the principal of and interest on
the Bonds. After the Permitted Merger and Security Release, the Bonds will be
the general unsecured obligations of MAALP ranking in parity with all other
unsecured indebtedness of MAALP, and persons previously holding Certificates
shall thereafter have no claim against the Mortgaged Properties, the rents and
leases derived from the Mortgaged Properties, or any other property of MAALP,
except to the extent all general unsecured creditors of MAALP have such claims.
SOURCES OF PAYMENTS ON THE BONDS; LIMITED OBLIGATIONS
PRIOR TO THE PERMITTED MERGER AND SECURITY RELEASE. Prior to the Permitted
Merger and Security Release, neither the General Partner nor MAALP will have any
liability with respect to the Bonds, and no Bondholder may claim recourse
against the General Partner, MAALP or any limited partner or officer, director,
shareholder or employee of the Borrower, MAALP or the General Partner for any
deficiency or personal judgment after a foreclosure on any Mortgaged Property.
Payments on the Bonds are expected to be derived from payments of rent made by
residents under the Leases. There is and can be no assurance that the net cash
flow from the Mortgaged Properties will be sufficient to pay principal and
interest due on the Bonds. In addition, the liquidation value of the Mortgaged
Properties may be adversely affected by risks generally incident to interests in
real property, as described below under "-- Risks Relating to Real Estate
Investments -- General Risks." The Borrower is a limited partnership organized
for the sole purpose of owning, operating and financing the Mortgaged
Properties. The Borrower will have no assets other than the Mortgaged
Properties, certain contract rights related to, and the revenue derived from the
operation of, the Mortgaged Properties. The Bonds are neither insured nor
guaranteed by the Borrower, the General Partner, the Depositor, MAALP, MAAC, the
Trustee, the Indenture Trustee or the Underwriter or any of their respective
affiliates and are not insured or guaranteed by any governmental entity or
instrumentality or by any other person or entity.
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<PAGE>
SUBSEQUENT TO PERMITTED MERGER AND SECURITY RELEASE. Upon the Permitted
Merger and Security Release, the Trust will terminate and the Trustee will cause
the Bonds to be delivered to the holders of Certificates through the book-entry
facilities described herein as a distribution in full satisfaction of their
beneficial interests in the Trust. See "Book-Entry, Clearance and Settlement."
At such time, the Bonds will be the general unsecured obligations of MAALP
ranking in parity with all other unsecured debt of MAALP, and persons previously
holding Certificates shall thereafter have no claim against the Mortgaged
Properties, the leases and rents derived from the Mortgaged Properties, or any
other property of MAALP except to the extent all general unsecured creditors of
MAALP have such claims. The Indenture provides that, after the Permitted Merger
and Security Release, MAALP will be subject to the following financial
covenants:
Total Debt: Not to exceed 60% of total assets (based on
undepreciated book value)
Secured Debt: Not to exceed 40% of total assets
Unencumbered Assets: Not less than 150% of unsecured debt
See "Description of the Bonds -- Restrictive Covenants -- Limitation on Debt
From and After Permitted Merger and Security Release," "-- Limitation on Secured
Debt From and After Permitted Merger and Security Release" and "--Minimum
Unencumbered Assets From and After Permitted Merger and Security Release." The
Rating Agencies may determine that additional covenants or conditions are
required in order to issue the ratings required as conditions to the Permitted
Merger and Security Release. The Indenture provides that if such additional
covenants are requested by the Rating Agencies, MAALP will agree to such other
covenants or conditions. There can be no assurance that MAALP will be able to
meet all of the financial covenants and other covenants and conditions set forth
in the Indenture or required by the Rating Agencies after a Permitted Merger and
Security Release.
INABILITY OF CERTIFICATE HOLDERS TO VOTE ON PERMITTED MERGER AND SECURITY
RELEASE
Holders of the Certificates have no voting or other rights with respect to
matters affecting the Borrower, the Depositor or MAALP. Therefore, Certificate
holders will have no right to approve or disapprove the Permitted Merger and
Security Release, which will occur upon satisfaction of all conditions described
herein or set forth in the Indenture.
REAL ESTATE INVESTMENT RISKS
GENERAL RISKS. Prior to the Permitted Merger and Security Release, the
Borrower's ability to make payments due on the Bonds and the Trust's ability to
make distributions on the Certificates depend primarily on the Borrower's
ability to generate sufficient cash flow from the Mortgaged Properties, which
will be subject to the risks generally associated with real estate investments,
many of which are beyond the control of the Borrower. These risks include an
oversupply of apartments, a reduction in demand for apartments in the Borrower's
markets, the cost of regulation, changes in tax or housing laws, increasing
interest rate levels, the unavailability of financing, adverse changes in
national economic conditions, adverse changes in local market conditions due to
changes in general or local economic conditions and neighborhood
characteristics, competition in local markets, declines in real estate values,
variations in supply and demand in the market for apartments, declines in
occupancy rates, civil unrest, acts of God, including earthquakes and other
natural disasters (which may result in uninsured losses), acts of war, and
adverse changes in zoning laws. Due to these and other factors, the performance
of real estate historically has been cyclical. There can be no assurance that
the markets in which the Mortgaged Properties are located will be strong at the
Stated Maturity Date of the Bonds. Such factors, including general economic
conditions adversely affecting the availability of mortgage financing, may make
it impossible to sell or refinance the Mortgaged Properties when desired or upon
favorable terms. Also, if any major repair or improvement is required at the
Mortgaged Properties, there can be no assurance that the Borrower will be able
to obtain funds to make such repair or improvement. As with all real estate, if
reconstruction (for example, following fire or other casualty) or any major
repair or improvement is required at the Mortgaged Properties, changes in
governmental controls may be applicable and may materially affect the cost to,
or ability of, the Borrower to effect such reconstruction, major repair or
improvement. After the Permitted Merger and Security Release, MAALP's ability to
make payments on the Bonds will be dependent on MAALP's ability to generate cash
flow from operations, which ability may be adversely affected by the factors
described above.
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GEOGRAPHIC CONCENTRATION. Several Mortgaged Properties are located in
common geographic regions, with two Mortgaged Properties located in each of the
Little Rock, Arkansas, Lexington, Kentucky, and Greenville, South Carolina
metropolitan areas and three Mortgaged Properties located in each of the
Jackson, Mississippi and Memphis, Tennessee metropolitan areas. Economic
downturns, changes in local law or regulation, and similar localized events
could affect the performance of all the Mortgaged Properties that are located in
a common region.
OPERATING RISKS. The Mortgaged Properties are subject to all operating
risks common to apartment communities in general. Such risks include: (i)
competition from other apartment communities and alternative housing; (ii) new
construction of comparable properties or adverse economic conditions in the
areas in which the Mortgaged Properties are located, either of which might
adversely affect apartment occupancy or rental rates; (iii) increases in
operating costs (including real estate taxes) due to inflation and other
factors, which increases may not necessarily be offset by increased rents; (iv)
inability or unwillingness of residents to pay rent increases; and (v) future
enactment of rent control laws or other laws regulating multifamily housing,
including present and possible future laws relating to access by disabled
persons. The local rental market may limit the extent to which rents may be
increased in response to operating expense increases without decreasing
occupancy rates. The Borrower anticipates increased operating expenses in the
third calendar quarter of each year due to planned increases in apartment unit
turnover during such quarter. The ability of the Borrower, and, after the
Permitted Merger and Security Release, MAALP, to make required payments on the
Bonds and, therefore, the ability of the Trustee to make distributions on the
Certificates, could be adversely affected by any of the above-described events.
POSSIBLE LIABILITY RELATING TO ENVIRONMENTAL MATTERS. Under various
federal, state and local laws, ordinances and regulations, an owner or operator
of real property may become liable for the costs of removal or remediation of
certain hazardous substances released on or in its property. Such laws often
impose such liability without regard to whether the owner or operator knew of,
or was responsible for, the release of such hazardous substances. The presence
of such substances, or the failure to properly remediate such substances, when
released, may adversely affect occupancy of the Mortgaged Property affected and
the owner's ability to sell such real estate or to borrow using such real estate
as collateral. In addition to investigation and clean-up actions brought by
federal, state and local agencies, the presence of hazardous wastes on a
property could result in personal injury or similar claims by private
plaintiffs. The Borrower has not been notified by any governmental authority of
any noncompliance, liability or other claim in connection with any of its
Mortgaged Properties or developments, nor is the Borrower aware of any other
material environmental condition with respect to any of the Mortgaged
Properties.
Each of the Mortgaged Properties has been subjected to a Phase I
environmental site assessment ("ESA") (which does not involve invasive
procedures, such as soil sampling or ground water analysis) by independent
environmental consultants. The ESAs have not revealed any significant
environmental liability that would have a material adverse effect on the
Borrower's ability to make required payments on the Bonds. In every instance,
the Phase I ESA included a record search for leaking underground storage tank
sites and sites included on certain environmental databases. In two instances,
the database searches revealed information that led the ESA to recommend a Phase
II ESA (which involves invasive sampling procedures) to determine whether any
contaminants affected the Mortgaged Property. One of these Mortgaged Properties
is within one quarter mile of a hazardous waste site, with relatively flat
topography between that site and the Mortgaged Property. The second of these
Mortgaged Properties is adjacent to a leaking underground storage tank site and
the ESA anticipates that the adjacent contamination will affect the Mortgaged
Property. The Borrower has not performed Phase II ESAs because it believes that,
notwithstanding the results of a Phase II ESA, there will be no material adverse
effect on the Mortgaged Properties taken as a whole as a result of environmental
contamination. In the event that environmental contamination has affected or
will affect the Mortgaged Properties, the Borrower believes that other parties
would be held primarily responsible for any response required and that any
environmental costs or liabilities would not be material. There can be no
assurance that the Borrower is correct in concluding either that other parties
would bear or be able to bear primary responsibility, or that the environmental
costs or liabilities would not be material or would not have a material adverse
effect on the Borrower's ability to make required payments on the Bonds.
Certain environmental and common law principles govern the responsibility
for the removal, encapsulation or disturbance of asbestos containing materials
("ACMs") such as ceiling and floor tiles, when these ACMs are in poor condition
or when a property with ACMs is undergoing renovation or demolition. Such laws
could also be used to
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impose liability upon owners and operators of real property for the release of
ACMs into the air that cause personal injury or other damage or exceed
permissible levels. At all Mortgaged Properties where ACM has been identified,
the ACM is being managed in place pursuant to ACM Operation and Maintenance
plans. The Borrower believes that ACM at all of the Mortgaged Properties can be
managed or removed adequately and without significant expense. However, there
can be no assurance that the Borrower will not be required to remediate ACM in
the future at significant expense, which could have a material adverse effect on
the Borrower's ability to make required payments on the Bonds.
Beyond statute-based environmental liability, there can be common law
causes of action (for example, actions based on nuisance or on toxic tort
resulting in death, personal injury or damage to property) relating to hazardous
environmental conditions on a property. Unanticipated or uninsured liabilities
of the Borrower may jeopardize the Borrower's ability to make required payments
on the Bonds.
No assurances can be given that all potential environmental liabilities
have been identified or properly quantified or that no prior owner, operator, or
past or current resident has created an environmental condition not known to the
Borrower. Moreover, no assurances can be given that (i) future laws, ordinances
, or regulations will not impose any material environmental liability or (ii)
the current environmental condition of the Mortgaged Properties will not be
affected by the condition of land or operations in the vicinity of the Mortgaged
Properties (such as the presence of underground storage tanks), or by third
parties unrelated to the Borrower. Federal, state and local environmental
regulatory requirements change often. It is possible that compliance with a new
regulatory requirement could impose significant compliance costs on the
Borrower. Such costs may jeopardize the Borrower's ability to make required
payments on the Bonds.
The Indenture provides that the Indenture Trustee will not commence
foreclosure on any of the Mortgaged Properties unless a Phase I ESA (and if
appropriate, a Phase II ESA) is conducted at the expense of the Borrower, and no
material environmental liabilities or potential liabilities are detected
thereby. The procedures required by the Indenture may delay or adversely affect
the Indenture Trustee's ability to foreclose on the Mortgaged Properties.
Moreover, any such ESA may not reveal all potential environmental liabilities to
which such Mortgaged Property may be subject. There can be no assurance that the
requirements of the Indenture, even if fully observed, will in fact insulate the
assets of the Trust from liability for environmental conditions.
COMPLIANCE WITH OTHER LAWS. The Mortgaged Properties must comply with
Title III of the Americans with Disabilities Act (the "ADA") to the extent that
the Mortgaged Properties are "public accommodations" and/or "commercial
facilities" as defined by the ADA. Compliance with the ADA requirements could
require removal of structural barriers to handicapped access in certain public
areas of the Mortgaged Properties, where such removal is readily achievable. The
ADA does not, however, consider residential properties such as apartment
communities to be public accommodations or commercial facilities, except to the
extent portions of such facilities, such as a leasing office, are open to the
public. The Borrower believes that the Mortgaged Properties comply with all
present requirements under the ADA and applicable state laws. Noncompliance with
the ADA could result in imposition of fines or an award of damages to private
litigants.
The Fair Housing Amendments Act of 1988 (the "FHA") requires apartment
communities first occupied after March 13, 1990 to be accessible to the
handicapped. Noncompliance with the FHA could result in the imposition of fines
or an award of damages to private litigants. The Borrower believes that the
Mortgaged Properties that are subject to the FHA are in compliance with such
law.
MANAGEMENT; POTENTIAL CONFLICTS OF INTEREST
The net income realized from operations of the Mortgaged Properties may be
affected by management decisions. The day-to-day management of the Mortgaged
Properties is currently performed by MAALP pursuant to the terms of the
Management Agreement. Because MAALP, MAAC and their affiliates own or operate
apartment communities other than the Mortgaged Properties, potential conflicts
of interest exist. In particular, MAALP, MAAC and their affiliates own and
operate, and in the future may own and operate, apartment communities that
compete directly or indirectly with
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the Mortgaged Properties. While MAALP and its affiliates are experienced in
managing apartment communities, there can be no assurance that MAALP will be
able to manage the Mortgaged Properties successfully.
APPRAISALS
The Appraisals valued the Mortgaged Properties at $240 million. See "The
Mortgaged Properties -- Appraisal Reports." To the knowledge of the Borrower,
the assumptions on which the Appraisals are based provide, as of the date of
preparation thereof, a reasonable basis for the Appraisals. However, such
assumptions concern the occurrence of a complex series of future events,
including those concerning leasing, occupancy, rental rates, capitalization
rates and expenses of operating the Mortgaged Properties (including, without
limitation, capital expenses) and the tax treatment of various items, all of
which assumptions are subject to various risks and contingencies, including
those set forth herein and many of which are not within the control of the
Borrower. Some of the assumptions inevitably will prove inaccurate, and
unanticipated events and circumstances will occur subsequent to the date of the
Appraisals. Therefore actual results achieved will vary from the Appraisals and
the variations may be material. Appraisals are only estimates of value and
should not be relied upon as measures of realizable value. No assurance is or
can be given as to actual cash flow of the Mortgaged Properties or the actual
value of the Mortgaged Properties during the term of the Bonds or the life of
the Certificates.
NO PRINCIPAL AMORTIZATION
There will be no scheduled principal amortization of the Bonds prior to
the Stated Maturity Date. The entire principal amount of the Bonds is scheduled
to be paid on the Stated Maturity Date. The Borrower's (or, after the Permitted
Merger and Security Release, MAALP's) ability to pay the Bonds on the Stated
Maturity Date will be subject to its ability to refinance the Bonds or sell the
Mortgaged Properties (or, in MAALP's case, after the Permitted Merger and
Security Release, to sell other assets, generally) at that time. If the Borrower
(or, after the Permitted Merger and Security Release, MAALP) is unable to
refinance the Bonds or sell the Mortgaged Properties or other assets, as the
case may be, or the proceeds from any such sale or refinancing are insufficient
to pay the Bonds in full in a timely manner, the holders of the Certificates or,
after the Permitted Merger and Security Release, holders of the Bonds may not
receive full repayment of the principal amount of the Certificate or Bonds, as
the case may be, on the Expected Final Distribution Date or Stated Maturity
Date, as the case may be.
UNINSURED LOSS; SUFFICIENCY OF INSURANCE
The Borrower, through blanket policies, carries comprehensive general
public liability insurance, fire and extended coverage insurance, business
interruption insurance, worker's compensation insurance, employer's liability
insurance and other insurance (the "Required Insurance Policies") required under
the Indenture, Mortgages and other security documents (collectively, the
"Security Documents") with respect to the Mortgaged Properties with policy
specifications and insured limits customarily carried for similar properties.
There are, however, certain types of losses, generally of a catastrophic nature
(such as from floods, earthquakes and wars), that may be uninsurable and there
is therefore a risk of uninsured or underinsured losses. Should an uninsured or
underinsured loss occur, the Borrower could lose both its capital invested in,
and anticipated profits from, one or more Mortgaged Properties, and the
Borrower's ability to make required interest and principal payments on the Bonds
could be adversely affected. There is a possibility of casualty losses with
respect to the Mortgaged Properties for which insurance proceeds may not be
adequate. Consequently, there can be no assurance that any loss incurred will
not exceed the limits of policies obtained. In addition, inflation, changes in
building codes and ordinances, environmental considerations, and other factors
may make it unfeasible to use insurance proceeds to replace a Mortgaged Property
after such property has been damaged or destroyed.
RATINGS OF THE CERTIFICATES
It is a condition to the issuance of the Certificates that they be
assigned a rating no lower than "Baa2" by Moody's and a rating no lower than
"BBB" by S&P. A credit rating is not a recommendation to buy, sell or hold
securities and may be subject to downgrade, withdrawal or qualifications at any
time by the assigning rating organization
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as a result of changes in, or the unavailability of, information. Neither
Moody's nor S&P is rating the likelihood of receipt or the timing of receipt by
the holders of the Certificates of Default Interest payable in connection with a
default under the Bonds in excess of the regular interest. Moody's has rated the
Certificates through the Scheduled Final Distribution Date. S&P has rated the
Certificates through the Expected Final Distribution Date.
The ratings assigned to the Certificates by the Rating Agencies are based
solely on the anticipated performance of the Mortgaged Properties. Future events
could have an adverse impact on the ratings of the Certificates. There is no
assurance that any such rating will continue for any period of time or that it
will not be reviewed, revised, suspended or withdrawn entirely as a result of
changes in or unavailability of information by either Rating Agency if, in its
judgment, circumstances so warrant. The ratings do not represent an assessment
of the likelihood or frequency of principal prepayments on the Bonds or the
corresponding effect on the yield to investors. There is no obligation on behalf
of the Depositor or the Trustee to maintain any particular rating. A review,
revision, suspension or withdrawal of a rating may have an adverse effect on the
market price of the Certificates but will not constitute an event of default
under the Security Documents.
RISKS OF BANKRUPTCY OF THE BORROWER
In the event of the bankruptcy of the Borrower or its General Partner, the
application of certain provisions of the bankruptcy code could have a material
adverse effect on holders of the Bonds and, consequently, holders of the
Certificates. By reason of the "automatic stay" provisions (which could
significantly delay the Indenture Trustee's ability to cause the liquidation of
the Mortgaged Properties) and other provisions of the bankruptcy code, delays in
payments on the Bonds and reductions in the principal balances thereof (each of
which could be significant) could occur. It is also possible that the bankruptcy
trustee or the Borrower as debtor-in-possession could argue, and the bankruptcy
court could agree, that, notwithstanding the existence of a security interest in
the Mortgaged Properties' receivables, the "equities of the case" provision in
the bankruptcy code dictates that the Bondholders' security interest should not
extend post-petition.
The Borrower has agreed to restrict its business to the ownership,
operation and financing of the Mortgaged Properties and those activities related
or incidental to that business. Similarly, the certificate of incorporation of
the General Partner generally limits its permitted activities to serving as the
general partner of the Borrower. The General Partner has two independent
directors. There is and can be no assurance, however, that either the Borrower
or the General Partner will not become bankrupt or insolvent.
The Borrower and its owners have several affiliates, including MAAC and
MAALP. Although the Borrower has been structured so as to limit the possibility
that it will be a debtor in a bankruptcy proceeding other than for reasons
related to the ownership of the Mortgaged Properties, there is and can be no
assurance that, in a bankruptcy of such owners or any of their affiliates, the
Mortgaged Properties will be protected from the creditors of such owners or
affiliates.
FRAUDULENT CONVEYANCE STATUTES
The transfer and pledge of the Mortgaged Properties and the issuance of
the Bonds and Certificates are subject to review under relevant federal and
state fraudulent conveyance statutes ("Fraudulent Conveyance Statutes") in a
bankruptcy case involving, or a lawsuit by creditors of, the Borrower, the
Depositor, the General Partner, MAALP or MAAC. Generally, under Fraudulent
Conveyance Statutes, transfers made or indebtedness incurred by a person will be
subject to avoidance if (i) the transfer was made or the indebtedness incurred
with the intent of hindering, delaying or defrauding creditors or (ii)(a) the
debtor did not receive fair consideration or reasonably equivalent value for
incurring such indebtedness and (b) the Debtor (1) was insolvent or rendered
insolvent by the transfer or the incurrence of such indebtedness, (2) had
unreasonably small capital with which to carry on its business and any
transaction or transactions in which it intended to engage or (3) intended to
incur, or believed it would incur, indebtedness beyond its ability to repay such
indebtedness at maturity. The measure of insolvency will vary depending on the
law of the applicable jurisdiction. Generally, however, an entity would be
considered insolvent if the present fair value of its assets is less than (i)
the amount of its liabilities (including contingent liabilities discounted by
the likelihood of the contingency becoming actual)
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or (ii) the amount that would be required to pay its probable liabilities on its
existing debts as they become absolute and mature. Fraudulent conveyance related
claims against the Mortgaged Properties may not be covered by title insurance
policies.
If the transfer of the Mortgaged Properties by MAALP to the Borrower were
avoided under Fraudulent Conveyance Statutes, the Borrower could be required to
disgorge its ownership interest in the Mortgaged Properties, thereby negatively
impacting the Borrower's ability to make payments of principal and interest on
the Bonds. Moreover, if the pledge of the Mortgaged Properties or the issuance
of the Bonds by the Borrower was avoided under Fraudulent Conveyance Statutes,
the Bonds would no longer be secured by the Mortgaged Properties and would
constitute merely unsecured claims against the Borrower, which in bankruptcy are
likely to be paid at a significant discount from their face value.
LACK OF ESTABLISHED MARKET
Currently, there is no market for the Certificates. There can be no
assurance that a secondary market will develop or, if a secondary market does
develop, that it will provide holders of the Certificates with liquidity of
investment or that it will continue for the life of the Certificates.
DESCRIPTION OF THE CERTIFICATES
CERTAIN STATEMENTS CONTAINED THROUGHOUT THIS PROSPECTUS ARE SUMMARIES OF
CERTAIN PROVISIONS OF THE TRUST AGREEMENT, THE CERTIFICATES, THE MORTGAGES AND
THE BONDS. SUCH STATEMENTS DO NOT PURPORT TO BE COMPLETE AND ARE QUALIFIED IN
THEIR ENTIRETY BY REFERENCE TO SUCH AGREEMENTS AND INSTRUMENTS.
GENERAL
The Certificates will be issued pursuant to the Trust Agreement in an
aggregate principal amount of U.S. $ . The Certificates represent beneficial
ownership of the assets of the Trust, which consists exclusively of the Bonds in
the aggregate principal amount of $ . The Bonds will be issued pursuant to the
Indenture and until the Permitted Merger and Security Release will be secured by
the Mortgage Liens on the Mortgaged Properties. The Borrower was organized for
the sole purpose of owning, operating and financing the Mortgaged Properties and
issuing the Bonds which are secured by the Mortgage Liens. See "Description of
the Bonds."
The Indenture provides that the Mortgage Liens securing the Bonds will be
subject to the Security Release upon satisfaction of certain conditions and at
the time described below in "Description of the Bonds -- Permitted Merger and
Security Release." Simultaneously with the Permitted Merger and Security
Release, the Trust will terminate, the Trustee will deliver the Bonds to the
holders of the Certificates through the book-entry facilities described herein,
as a distribution in full satisfaction of their beneficial interests in the
Trust, and the Global Certificate will be canceled by the Trustee and delivered
to the Depositor, and will be of no further force or effect. At such time, the
persons formerly owning beneficial interests in the Certificates will, by
operation of the Trust Termination and with no action being required on their
parts, own beneficial interests in the Bonds. See "Book-Entry Clearance and
Settlement."
STATUS
The Certificates will evidence, in the aggregate, all of the beneficial
ownership interests in the Trust. The Certificates will be payable solely from
payments received by the Trustee with respect to the Bonds and will not
represent obligations of the Borrower, any general or limited partner of the
Borrower or any affiliate thereof or any other person.
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FORM, DENOMINATIONS, EXCHANGE, REGISTRATION AND TRANSFER
The Certificates will be issued, maintained and transferred in the
book-entry form only in denominations of $100,000 and integral multiples of
$1,000 in excess thereof. The Certificates will be represented by one Global
Certificate registered in the name of a nominee designated by DTC. No holder of
a Certificate will be entitled to receive a certificate issued in fully
registered, certificated form (a "Definitive Certificate") representing its
interest in the Certificates, except under the limited circumstances described
below under "Book Entry Issuance, Clearance and Settlement -- Definitive
Certificates and Bonds." Unless and until Definitive Certificates are issued in
respect of the Certificates, all transfers of Certificates will be cleared and
settled through the facilities of DTC, CEDEL and Euroclear.
See "Book-Entry Issuance, Clearance and Settlement."
PAYMENTS ON THE CERTIFICATES
Upon receipt of payments required to be made on the Bonds, the Trustee
will pay such amounts to holders of the Certificates through the facilities of
DTC. The Trustee will make all payments with respect to the Certificates to DTC
or its nominee as the registered owner thereof. None of the Borrower, the
Depositor, MAALP, MAAC, the General Partner, the Trustee or the Indenture
Trustee will have any responsibility or liability for any aspect of the records
relating to, or payments made on account of, beneficial ownership interests in
the Global Certificate or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
The Depositor expects that DTC or its nominee, upon receipt of any payment
in respect of the Global Certificate held by it or its nominee, will immediately
credit the accounts of DTC participants (including Euroclear and CEDEL and their
respective depositories) with payments in amounts proportionate to their
respective beneficial interests in the principal amount of Global Certificate as
shown on the records of DTC or its nominee. The Depositor also expects that
payments by DTC participants (including Euroclear and CEDEL and their respective
depositories) to owners of beneficial interests in Global Certificate held
through such DTC participants will be governed by standing instructions and
customary practices, as is now the case with respect to securities held for the
accounts of customers registered in street names. Such payments will be the
responsibility of the relevant DTC participant.
If a Definitive Certificate is issued in exchange for any portion of the
Global Certificate after the close of business at the office or agency where
such exchange occurs on (i) any Certificate Record Date and before the opening
of business at such office or agency on the related Distribution Date or (ii)
any special record date and before the opening of business at such office or
agency on the related proposed date for payment of Default Interest, such
interest or Default Interest, as the case may be, will not be payable on such
Distribution Date or proposed date for payment of Default Interest, as the case
may be, in respect of such Certificate, but will be payable on such Distribution
Date or proposed date for payment of Default Interest, as the case may be, only
to DTC with respect to the Global Certificate, and the Depositor understands
that DTC will undertake to credit such interest to the account of the person who
was the beneficial owner of such portion of the Global Certificate on such
Record Date or special record date, as the case may be.
So long as the Certificates are held through DTC's book entry system,
distributions of interest and principal (and Default Interest, if any) on the
Certificates will be made, subject to applicable laws and regulations, by wire
transfer from the Trustee to DTC and will be forwarded to investors in
accordance with the payment procedures of DTC and the applicable DTC
participant.
If any Certificate is not held through DTC, distributions of interest (and
Default Interest, if any) on such Certificate will be made, subject to the
applicable laws and regulations, to the person in whose name such Certificate is
registered in the register of the Certificates as of the close of business on
the Certificate Record Date, upon compliance by such holder with reasonable
requirements of the Trustee, by wire transfer to the account designated by such
holder, and otherwise by check mailed to the address of such person. With
respect to the final payment of the Certificates, upon compliance by such holder
with reasonable requirements of the Trustee, such payment will be made by wire
transfer to the account designated by the person in whose name the Certificates
are registered in the register of the Certificates as
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of such date and otherwise by check mailed to the address of such person,
against surrender of such Certificate at the corporate trust office of the
Trustee in Chicago, Illinois.
Payments on any Certificate will be payable to the person in whose name
the Certificate is registered at the close of business on the Record Date
immediately preceding each Payment Date; provided, however, that payments at
maturity will be payable to the person in whose name the Certificate is
registered at such time.
EXPECTED FINAL DISTRIBUTION DATE
The Expected Final Distribution Date for the Certificates is , 2003, which
is the Stated Maturity Date of the Bonds. The Expected Distribution date is
based on an assumption that the entire Principal Amount of the Bonds, together
with accrued interest and other amounts owed in respect of the Bonds, will be
paid on the stated Maturity Date.
SCHEDULED FINAL DISTRIBUTION DATE
The Scheduled Final Distribution Date for the Certificates is , 2005, two
and one-half years after the Expected Final Distribution Date. If the unpaid
principal balance on the Bonds is paid after the Expected Final Distribution
Date and prior to the Scheduled Final Distribution Date, the Certificates are
required to be paid on the next Payment Date. See "Description of the Bonds --
Payment on the Bonds -- Term and Prepayment Lockout." The Trust Agreement also
provides that any amounts received by the Trustee after the Scheduled Final
Distribution Date will be distributed prior to termination of the Trust.
EXCESS FUNDS
The Trustee is required to hold payments received by it with respect to
the Certificates which are not distributed upon repayment in full of the Bonds
in a segregated non-interest bearing trust account (the "Holdover Account") in
the Trustee's name for the benefit of the holders of such Certificates. All such
monies so held by the Trustee and which remain unclaimed for a period of two
years after the final distribution of such Certificates (or such shorter period
as may be prescribed by applicable law) will be distributed by the Trustee to
the Depositor as provided in the Trust Agreement.
AMENDMENT
The Trust Agreement may be amended from time to time by the Depositor and
the Trustee with the consent of the holders of 66 2/3% of the aggregate
principal amount of Certificates outstanding for the purpose of adding any
provision to or changing in any manner or eliminating any provision of the Trust
Agreement or of modifying in any manner the rights of the holders of the
Certificates; provided, that no such amendment will:
(i) reduce in any manner the amount of, or delay the timing of, payments
received on the Bonds which are required to be distributed with respect to the
Certificates without the consent of each affected Certificate holder;
(ii) reduce the percentage of the aggregate outstanding principal amount of
Certificates the holders of which are required to consent to any such amendment,
without the consent of the holders of all Certificates then outstanding; or
(iii) adversely affect the status of the Trust as a grantor trust under Subpart
E, Part I of Subchapter J of the Code.
The Trust Agreement provides that the parties thereto may agree, without
the consent of the holders of the Certificates, to any modification (subject to
certain exceptions) of the Trust Agreement or the Certificates, (i) to add to
the covenants for the benefit of the Trustee or surrender any right or power of
the Depositor, provided that such surrender will not adversely affect the
interests of the holders of the Certificates, (ii) to evidence and provide for
the appointment and acceptance of any successor Trustee or (iii) to cure any
ambiguity or cure or correct any defective or inconsistent provision in the
Trust Agreement or any Certificate provided such action will not adversely
affect the interests of the holders of the Certificates.
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The Trustee may not consent to any amendment or modification of the Trust
Agreement which would adversely affect the Trust's status as a grantor trust for
federal income tax purposes.
In determining whether any change adversely affects the interests of
holders of the Certificates, the Trustee will rely upon written confirmation of
the Rating Agencies that such change will not result in the downgrading,
withdrawal or qualification of the rating on each class of Certificates then
outstanding and affected thereby.
INDEMNIFICATION
The Trust Agreement contains provisions for the indemnification of the
Trustee by the Trust and for relief for it from responsibility in certain
circumstances, including provisions relieving it from instituting proceedings to
enforce payment unless indemnified to its satisfaction.
MERGER, CONSOLIDATION OR ASSUMPTION
The Depositor will not consolidate or merge with any other corporation or
other entity or permit any other corporation or entity to merge into it, or
convey, transfer or lease its properties and assets substantially as an entirety
to any person except as permitted by the Trust Agreement.
NOTICES
The Trustee will cause all notices to the holders of the Certificates to
be mailed by first class mail, postage prepaid return receipt requested to each
holder as its address appears on the security register or alternatively, will
publish notice in a financial newspaper of national circulation once per week
for at least two consecutive weeks.
TRUST TERMINATION
Simultaneously with the Permitted Merger and Security Release, the Trust
will terminate. At such time, the Trustee will deliver the Bonds to holders of
the Certificates, without any action on the part of Certificate holders, by
means of the book-entry facilities described herein, as distribution in full
satisfaction of their beneficial interests in the Trust. The Global Certificate
evidencing the Certificates will be canceled at that time by the Trustee and
delivered to the Depositor and will be of no further force and effect.
DESCRIPTION OF THE BONDS
GENERAL
The Bonds are to be issued under the Indenture, which has been filed with
the Securities and Exchange Commission (the "Commission"), is incorporated by
reference herein, and is available for inspection at the corporate trust office
of the Trustee at 135 LaSalle Street, Chicago, Illinois 60674-4107. The
Indenture is subject to, and governed by, the Trust Indenture Act of 1939, as
amended. The statements made hereunder relating to the Indenture and the Bonds
to be issued thereunder are summaries of certain provisions thereof and do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all provisions of the Indenture and the Bonds. All section
references appearing herein are to sections of the Indenture.
The Bonds will be limited to an aggregate principal amount of $ and will
mature on , 2003. Until the Permitted Merger and Security Release, the Bonds
will be secured by (i) first priority mortgage liens on the 26 Mortgaged
Properties, including the Borrower's fee interest in each of the parcels of real
property on which the Mortgaged Properties are situated, (ii) liens and security
interests in all related assets, including buildings and improvements thereon,
(iii) an assignment of rents and leases from the Mortgaged Properties, and (iv)
the funds and investments, if any, in the Accounts. After the Permitted Merger
and Security Release, the Bonds will be the general unsecured obligations of
MAALP ranking in parity with all other unsecured indebtedness of MAALP, and
Bondholders will have no claim against the Mortgaged Properties or any other
property of MAALP except to the extent all general
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unsecured creditors of MAALP have such claims. The Bonds are neither insured nor
guaranteed by the Depositor, the Borrower, the General Partner, MAALP, MAAC, the
Indenture Trustee, the Trustee or the Underwriter or any of their affiliates, or
by any governmental entity or instrumentality or by any other person or entity.
PERMITTED MERGER AND SECURITY RELEASE
The Indenture provides that the Permitted Merger and Security Release will
occur if and when each of the following conditions, among others, occurs: (i)
the unsecured debt of MAALP, including the Bonds, is rated at least "Baa3" and
"BBB-" by Moody's and S&P, respectively; and (ii) MAALP is a reporting company
under the Exchange Act pursuant to an effective registration statement on Form
10 (or any successor form). The Borrower is required to give written notice of
the anticipated Permitted Merger and Security Release to the Certificate holders
at least 60 days prior to the Permitted Merger and Security Release, which
notice will be accompanied by the MAALP Exchange Act Reports and the Information
Statement. Upon proof of proper notice and delivery of the Exchange Act Reports
and the Information Statement, the Indenture Trustee will release the Mortgage
Liens, the Permitted Merger will occur, and MAALP will assume the obligations
under the Bonds. At such time, the Bonds will be the general unsecured
obligations of MAALP ranking in parity with all other unsecured debt of MAALP.
Neither the Permitted Merger nor the Security Release may occur if Advances are
outstanding.
FORM, DENOMINATIONS, EXCHANGE, REGISTRATION AND TRANSFER
The Bonds will be issued, maintained and transferred in the book-entry
form only in denominations of $100,000 and integral multiples of $1,000 in
excess thereof. The Bonds will be represented by one Global Bond registered in
the name of a nominee designated by DTC. No holder of a Bond will be entitled to
receive a Bond issued in fully registered, certificated form (a "Definitive
Bond") representing its interest in the Bonds, except under the limited
circumstances described below under "Book Entry Issuance, Clearance and
Settlement -- Definitive Certificates and Bonds." Unless and until Definitive
Bonds are issued in respect of the Bonds, all transfers of Bonds will be cleared
and settled through the facilities of DTC, CEDEL and Euroclear. See "Book-Entry
Issuance, Clearance and Settlement."
PAYMENT ON THE BONDS
PAYMENTS OF INTEREST. The Bonds will bear interest at the rate per annum
set forth on the cover page of this Prospectus, payable monthly on each Payment
Date with respect to interest accrued from the preceding Payment Date (or the
date of original issuance in the case of the first Payment Date) through the day
immediately preceding the Payment Date to Bondholders of record on the related
Record Date. Interest on the Bonds will be computed on the basis of a 360-day
year consisting of twelve 30-day months.
PAYMENTS OF PRINCIPAL. The Bonds will mature and the entire principal
amount of the Bonds will be due and payable on ________, 2003.
PAYMENTS UPON ISSUANCE OF PHYSICAL CERTIFICATES. If the Bonds are no
longer represented by the Global Bond, payments of interest, at the option of
the Borrower, may be made by check mailed to the address of the person entitled
thereto. No service charge will be made for any transfer or exchange of Bonds,
but the Borrower may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith.
TERM AND PREPAYMENT LOCKOUT. The Bonds are non-callable for a period of
five (5) years, and the entire unpaid principal balance of the Bonds will be due
and payable on the Stated Maturity Date. There is no sinking fund for the Bonds,
and the Bonds are not subject to redemption, prepayment or principal
amortization except upon the occurrence of the certain events of default under
the indenture of the Bonds.
PRIORITY OF PAYMENTS; CASH MANAGEMENT
The Borrower has irrevocably instructed the property manager at each
Mortgaged Property to deposit into the applicable Property Account (i) all rents
due under the Leases; (ii) all additional amounts, if any, due and payable under
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the Leases; and (iii) all other revenue derived from the Mortgaged Properties.
All funds in each Property Account will be transferred to the Operating Account
on a daily basis.
Prior to a Cash Management Period, all money from the Operating Account
will be transferred by automated clearinghouse transfer to such accounts as the
Borrower may direct on a daily basis in accordance with its standing
instructions to the Account Bank. During a Cash Management Period which follows
an event described in clause (i) of the next succeeding paragraph, funds in the
Operating Account will be transferred to such accounts as the Borrower may
direct on the Business Day following each Account Funding Date. During a Cash
Management Period which follows an event described in clause (ii) or (iii)
below, no funds may be transferred from the Operating Account except at the
direction of the Indenture Trustee or its agent.
A Cash Management Period is a period during which (i) the Borrower fails
to maintain a Pre-Permitted Merger Debt Service Coverage Ratio of at least 1.30
to 1 or (ii) an event of default occurs and is continuing under the Bonds, the
Indenture or any Security Document or (iii) any event has occurred and is
continuing which obligates or permits the Indenture Trustee to make an Advance.
Pursuant to the Cash Collateral Account Agreement, during any Cash
Management Period, the Borrower, has instructed the Account Bank to withdraw
from the Operating Account, in the priority listed below and to the extent
available therein, by 10:00 a.m. New York on each Account Funding Date, (i)
funds in an amount equal to one-twelfth of the annual amount of interest on the
Bonds outstanding at the time less the amount of funds on deposit in the
Interest Escrow Account and deposit the same into the Interest Escrow Account;
(ii) funds in an amount equal to the tax payments and insurance premiums
required to be paid during the six months following such Account Funding Date
less funds on deposit in the Mortgage Escrow Account and deposit the same into
the Mortgage Escrow Account; and (iii) funds in an amount equal to one-half of
the annual amount required to be escrowed during any Cash Management Period to
fund replacements pursuant to each Mortgage less the amount on deposit in the
Replacement Reserve Account and deposit the same into the Replacement Reserve
Account.
The Indenture provides that the Borrower will deposit each monthly payment
on the Bonds with the Indenture Trustee by 10:00 a.m. New York time on the
Payment Date for disbursement to holders of the Bonds. The Indenture also
provides that the Indenture Trustee will apply any amounts so received and any
other amount received pursuant to the Indenture excluding fees of the Indenture
Trustee which are paid by the Borrower in a timely fashion, but including,
without limitation, amounts in the Operating Account and the other Accounts and
payments in respect of the liquidation, if any, of the Mortgaged Properties, in
the following order:
FIRST: to reimburse the Indenture Trustee for all unreimbursed Advances,
plus interest thereon at the Advance Rate;
SECOND: to make payments, if any are required, from the Accounts as
provided in the Cash Collateral Agreement;
THIRD: to make payments of interest on the Bonds in accordance with their
terms;
FOURTH: to make payments of principal on the Bonds, to the extent any such
payments are then due;
FIFTH: to make payments of Default Interest on the Bonds, to the extent
any such payments are then due; and
SIX: to pay any other amounts due and owing under the Indenture.
RESTRICTIVE COVENANTS
Pursuant to the Indenture, the Borrower and, after the Permitted Merger
and Security Release, MAALP are subject to the following restrictive covenants,
as applicable:
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MAINTENANCE OF LIENS PRIOR TO PERMITTED MERGER AND SECURITY RELEASE
Prior to the Permitted Merger and Security Release, the Borrower is
required to maintain and preserve the first priority of the Mortgage Liens and
security interests created by the Security Documents.
LIMITATION ON DEBT PRIOR TO PERMITTED MERGER AND SECURITY RELEASE
Prior to the Permitted Merger and Security Release, the Borrower is not
permitted to incur or permit to exist any indebtedness, except pursuant to the
Bonds or trade accounts payable which are paid in full no more than 60 days
after the date on which such accounts payable are created.
LIMITATION ON DEBT FROM AND AFTER PERMITTED MERGER AND SECURITY RELEASE
From and after the Permitted Merger and Security Release, MAALP is
prohibited from incurring any indebtedness (except inter-company indebtedness
that is subordinate to the Bonds) if, immediately after giving effect to the
incurrence of such additional indebtedness, the aggregate principal amount of
all outstanding indebtedness of MAALP and its subsidiaries on a consolidated
basis is greater than 50% of the sum of (i) the cost (original cost plus capital
improvements) of real estate assets of MAALP and its subsidiaries before
depreciation and amortization, determined on a consolidated basis in accordance
with generally accepted accounting principles ("GAAP") and (ii) all other assets
of MAALP and its subsidiaries on a consolidated basis determined in accordance
with GAAP (but excluding intangibles and accounts receivable) (collectively,
"Total Assets").
LIMITATION ON SECURED DEBT FROM AND AFTER PERMITTED MERGER AND SECURITY RELEASE
From and after the Permitted Merger and Security Release, MAALP is
prohibited from incurring any indebtedness secured by any mortgage, lien,
charge, pledge, encumbrance or security interest of any kind ("Secured Debt")
if, immediately after giving effect to the incurrence of such additional Secured
Debt, the aggregate principal amount of all outstanding Secured Debt is greater
than 40% of MAALP's Total Assets.
MINIMUM UNENCUMBERED ASSETS FROM AND AFTER PERMITTED MERGER AND SECURITY RELEASE
From and after the Permitted Merger and Security Release, MAALP is
required to maintain Total Assets which are not encumbered by any pledge,
mortgage or other encumbrance ("Total Unencumbered Assets") of not less than
150% of the aggregate principal amount of all outstanding indebtedness which is
not Secured Debt.
DEBT SERVICE COVERAGE PRIOR TO PERMITTED MERGER AND SECURITY RELEASE
If at any time prior to the Permitted Merger and Security Release, the
Pre-Permitted Merger Debt Service Coverage Ratio of the Borrower is less than
1.30 to 1, the Indenture Trustee will deliver a notice to the Account Bank (the
"Trigger Notice") under the Cash Collateral Agreement. At such time, funds in
the Operating Account will be transferred to the Accounts and any funds
deposited into the Operating Account in the future will be transferred from the
Accounts only in accordance with the Cash Collateral Agreement. If at any time
after such delivery of a Trigger Notice the Pre-Permitted Merger Debt Service
Coverage Ratio is equal to or greater than 1.30 to 1, the Indenture Trustee will
promptly deliver notice to the Account Bank under the Cash Collateral Agreement
and the future funding of the Accounts will cease.
If at any time prior to the Permitted Merger and Security Release, the
Pre-Permitted Merger Debt Service Coverage Ratio of the Borrower is less than
1.15 to 1, the Indenture Trustee may, and upon direction from the holders of 25%
in principal amount of the Bonds, will upon ten days' prior to the Borrower and
each property manager of the Mortgaged Properties, terminate or cause the
termination of all such property managers and require the Borrower to retain a
different manager or managers satisfactory to the Indenture Trustee or such
holders of the Bonds.
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DEBT SERVICE COVERAGE FROM AND AFTER PERMITTED MERGER AND SECURITY RELEASE
From and after the Permitted Merger and Security Release, MAALP and its
subsidiaries are prohibited from incurring any indebtedness if the
Post-Permitted Merger Debt Service Coverage Ratio (as defined below) for the
four consecutive fiscal quarters most recently ended prior to the date on which
such additional indebtedness is to be incurred has been less than 1.50 to 1, on
a pro forma basis after giving effect to the incurrence of such indebtedness and
to the application of the proceeds therefrom, and calculated on the assumption
that (i) such indebtedness and any other indebtedness incurred by MAALP or its
subsidiaries since the first day of such four-quarter period and the application
of the proceeds therefrom, including to refinance other indebtedness, had
occurred at the beginning of such period; (ii) the repayment or retirement of
any other indebtedness by MAALP or its subsidiaries since the first day of such
four-quarter period had been incurred, repaid or retired at the beginning of
such period (except that, in making such computation, the amount of indebtedness
under any revolving credit facility will be computed based upon the average
daily balance of such indebtedness during such period); (iii) the income earned
on any increase in Total Assets since the end of such four-quarter period,
including, without limitation, by merger, stock purchase or sale, or asset
purchase or sale, such acquisition or disposition or any related repayment of
indebtedness had occurred on the first day of such period with the appropriate
adjustment with respect to such acquisition or disposition being included in
such pro forma calculation. The term "Post-Permitted Merger Debt Service
Coverage Ratio" means the ratio of (i) (a) the amount of consolidated net income
(or loss) of MAALP and its subsidiaries on a consolidated basis for such period
plus (b) amounts which have been deducted for (1) interest or indebtedness of
MAALP and its subsidiaries on a consolidated basis; (2) provision for taxes
based on income; (3) amortization of indebtedness discount; (4) provisions for
gains and losses on properties; (5) depreciation and amortization; (6) the
effect of any noncash charge resulting form a change in accounting principles;
and (7) amortization of deferred charges to (ii) the amount which is expensed in
any 12-month period for interest on indebtedness of MAALP and its subsidiaries
on a consolidated basis.
EVENTS OF DEFAULT AND NOTICE
An "Event of Default" is defined in the Indenture to be (i) a default in
the payment of any interest upon any of the Bonds when due and payable; (ii) a
default in the payment of the principal of or premium, if any, on any of the
Bonds when the same becomes due and payable at the Stated Maturity Date; (iii)
the Borrower consolidates with or merges with or into, or conveys, transfers or
leases all or substantially all its assets to, any person or entity in any
transaction other than the Permitted Merger; (iv) the Borrower fails to observe
or perform certain covenants contained in the Indenture regarding the
maintenance of liens and recording, limitation on debt, limitation on Secured
Debt, Total Unencumbered Assets, debt service coverage, the formation of
subsidiaries, and amendments to the Limited Partnership Agreement; (v) the
Borrower fails to observe or perform any of its covenants set forth in the Bonds
or the Indenture (other than those referred to in clauses (i), (ii), (iii) or
(iv) above) and such default, if subject to being cured, continues for a period
of 30 days after the earlier of knowledge by the Borrower thereof or notice
thereof from the Indenture Trustee to the Borrower; PROVIDED that if such
Default is not subject to being cured within such 30-day period and the Borrower
(a) has delivered an Officers' Certificate to the Indenture Trustee (1)
certifying that such Default is reasonably subject to cure and that the Borrower
has commenced such cure and (2) setting forth those actions the Borrower has
taken and will take to pursue such cure and (b) pursues such cure diligently to
completion, then such 30-day period will be extended for an additional period of
60 days; (vi) following the Permitted Merger, MAALP defaults under any
indebtedness for money borrowed by MAALP if (a) such default either (1) results
from the failure to pay the principal of any such indebtedness at its stated
maturity or (2) relates to an obligation other than the obligation to pay the
principal of such indebtedness at its stated maturity and results in such
indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise have become due and payable (b) the principal amount of
such indebtedness, together with the principal amount of any other such
indebtedness in default for failure to pay principal at stated maturity or the
maturity of which has been so accelerated, aggregates $1,000,000 or more at any
one time outstanding and (c) such indebtedness is not discharged, or such
acceleration is not rescinded or annulled, within 10 Business Days after written
notice as provided in the Indenture; (vii) certain events of bankruptcy,
insolvency or reorganization relating to the Borrower; (viii) an event of
default occurs and is continuing under the Security Documents; (ix) any
representation warranty or other statement made by or on behalf of the Borrower
set forth in the Indenture or any other Security Document will proved to have
been false or misleading in any material respect as of the date when made; (x)
any judgment of decree for the payment of money in excess of $100,000 not
covered by insurance is rendered against the Borrower and is not discharged and
either
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(a) an enforcement proceeding has ben commenced by any creditor upon such
judgment or decree or (b) there is a period of 60 days following such judgment
or decree during which such judgment or decree is not discharged, waived or
execution thereof stayed; or (xi) the General Partner fails to comply with
certain provisions of its certificate of incorporation.
If an Event of Default (other than an Event of Default described in clause
(vii) of the preceding paragraph) will occur and be continuing, either the
Indenture Trustee, by notice to the Borrower, or the holders of at least 25% in
aggregate principal amount of the Bonds by notice to the Indenture Trustee and
the Borrower may declare the principal of and accrued interest on all of the
Bonds and all other amounts due thereunder to be due and payable; provided, that
upon the occurrence of an Event of Default described in clause (vii) of the
preceding paragraph, the principal or and accrued interest on all of the Bonds
will automatically become due and payable, without presentment, demand or other
requirements of any kind, all of which are waived by the Borrower.
The holders of a majority in aggregate principal amount of the Bonds may
rescind an acceleration and its consequences if (i) the recision would not
conflict with any judgment or decree; (ii) no amount has been paid to the
holders as principal, interest, or premium, if any, on the Bonds as a result of
such acceleration; (iii) all existing Events of Default have been cured or
waived except nonpayment of principal or interest that has become due solely
because of acceleration; and (iv) all costs and expenses incurred by the
Indenture Trustee prior to such waiver have been reimbursed to the Indenture
Trustee.
A holder of the Bonds may not pursue any remedy with respect to the
Indenture or the Bonds unless: (i) the holder gives to the Indenture Trustee
written notice stating that an Event of Default is continuing; (ii) the holders
of at least 25% in principal amount of the Bonds make a written request to the
Indenture Trustee to pursue the remedy; (iii) such holder or holders offer to
the Indenture Trustee reasonable security or indemnity against any loss,
liability or expense; (iv) the Indenture Trustee does not comply with the
request within 60 days after the receipt of the request and the offer of
security or indemnity; and (v) the holders of a majority of principal amount of
the Bonds do not give the Indenture Trustee a direction inconsistent with the
request during such 60-day period.
The Borrower is required to furnish to the Indenture Trustee annually a
statement as to the performance by the Borrower of its obligations under the
Indenture and as to any default in such performance.
SERVICER
Upon the occurrence of an Event of Default or any event requiring the
Indenture Trustee to exercise any discretion to give its consent or to act or
refrain from acting under any Mortgage, in any case prior to the Permitted
Merger and Security Release, the Indenture Trustee may, and at the direction of
the holders of 25% or more in aggregate principal amount of the Bonds will,
appoint a servicer at the expense of the Borrower.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
The Indenture permits the Borrower (when authorized pursuant to a
resolution of the General Partner's Board of Directors) and the Indenture
Trustee, at any time and from time to time, to enter into one or more amendments
or supplements to the Indenture, in form satisfactory to the Indenture Trustee
for the following purposes: (i) to evidence the succession of another person or
entity to the Borrower pursuant to the terms of the Indenture and the assumption
by any such successor of the covenants of the Borrower contained in the Bonds
and the Indenture; (ii) to add to the covenants of the Borrower for the benefit
of the holders of all or any of the Bonds or to surrender any right or power
conferred upon the Borrower by the Indenture; (iii) to add any additional Events
of Default for the benefit of the holders of all or any of the Bonds; PROVIDED,
HOWEVER, that in respect of any such additional Events of Default such amendment
or supplemental indenture may provide for a particular period of grace after
default (which period may be shorter or longer than that allowed in the case of
other defaults) or may provide for an immediate enforcement upon such default or
may limit the remedies available to the Indenture Trustee upon such default or
may limit the rights of the holders of a majority in aggregate principal amount
of the Bonds; (iv) to evidence and provide for the acceptance of appointment of
a successor indenture trustee as provided in the Indenture; (v) to cure any
ambiguity, to correct or supplement any
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provision in the Indenture which may be defective or inconsistent with any other
provision therein, or to make any other provisions with respect to matters or
questions arising under the Indenture which will not be inconsistent with the
provisions of the Indenture, PROVIDED such provisions will not adversely affect
the interests of the holders of the Bonds in any material respect; or (vi) to
supplement any of the provisions of the Indenture to the extent as will be
necessary to permit or facilitate the defeasance and discharge of the Bonds
pursuant to and subject to the terms of the Indenture, PROVIDED that any such
action will not adversely affect the interests of the holders of the Bonds in
any material respect.
The Indenture permits the Borrower and the Indenture Trustee, with the
consent of the holders of not less than a majority in principal amount of the
Bonds (or, prior to the Permitted Merger, with the consent of the Trustee acting
as instructed by holders of not less than a majority in principal amount of the
Certificates), to enter into one or more supplemental indentures for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of the Indenture or modifying in any manner the rights of the holders
of the Bonds, provided that the Indenture Trustee has first received written
confirmation from each Rating Agency that such action will not, in and of
itself, cause the withdrawal, downgrade or qualification of their current rating
of the Certificates or, after the Permitted Merger, the unsecured indebtedness
of MAALP, and except that no such modification or amendment may, without the
consent of the holders of each of the Bonds affected thereby, among other
things, (i) reduce the amount of the Bonds whose holders must consent to an
amendment, supplement or waiver; (ii) reduce the rate of or extend the time for
payment of interest on the Bonds; (iii) reduce the principal of or extend the
fixed maturity of the Bonds; (iv) reduce the premium payable on the Bonds; (v)
make the Bonds payable in money other than that stated in the Bonds; (vi) make
any changes to Section 5.04, Section 5.07 or Section 8.02 of the Indenture;
(vii) waive any default in the payment of principal of or interest on any Bond
or any default depriving the Indenture Trustee or any holder of a lien upon any
of the Mortgaged Properties; or (viii) release any Mortgaged Properties from the
Mortgages Liens, except in accordance with the terms thereof and of the
Indenture.
The holders of a majority in principal amount of the Bonds may on behalf
of the holders of all the Bonds waive compliance by the Borrower with certain
restrictive provisions of the Indenture. The holders of a majority in principal
amount of the Bonds may on behalf of the holders of all the Bonds waive any past
default under the Indenture and its consequences, except (i) a default in the
payment of the principal of or any interest on any Bond; (ii) a default
depriving the Indenture Trustee or any holder of a lien upon any of the
Mortgaged Properties; or (iii) a default in respect of any covenant or provision
which under the Indenture cannot be modified or amended without the consent of
the holder of each Bond affected.
DEFEASANCE
The Borrower, at the Borrower's option, (i) will be discharged from any
and all obligations in respect of the Bonds (except for certain obligations to
register the transfer of the Bonds or the exchange of the Bonds to replace
destroyed, stolen, lost or mutilated Bonds, and to maintain paying agents and
hold moneys for payment in trust) or (ii) will be released from its obligations
with respect to the Bonds under the covenants described under "Restrictive
Covenants", and the occurrence of an event described in clause (iii) under
"Events of Default and Notice" above with respect to any such covenant will no
longer be an Event of Default if, in either case, the Borrower deposits with the
Indenture Trustee, in trust, money or U.S. government obligations that through
the payment of interest thereon and principal thereof in accordance with their
terms will provide money in an amount sufficient to pay all the principal of and
interest on the Bonds on the dates such payments are due in accordance with the
terms of the Bonds. Such a defeasance under clause (i) or (ii) above may only be
effected if, among other things, (a) no Event of Default or event which with
notice or lapse of time or both would become an Event of Default has occurred
and be continuing on the date of such deposit, (b) no Event of Default described
under clause (vii) under "Events of Default and Notice" above or event which
with the giving of notice or lapse of time or both would become an Event of
Default described under such clause (vii) has occurred and be continuing at any
time during the period ending on the 90th day following such date of deposit,
(c) the Borrower has delivered to the Indenture Trustee an opinion of counsel to
the effect that the holders will not recognize gain or loss for federal income
tax purposes as a result of such defeasance and will be subject to federal
income tax on the same amount in the same manner and at the same times as if
such defeasance had not occurred, (d) the Indenture Trustee has first received
written confirmation from each Rating Agency that such action will not, in and
of itself, cause the withdrawal, downgrade or qualification of their current
rating of the Certificates or, after the Permitted
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Merger, the unsecured debt of MAALP, and (e) certain other customary conditions
precedent are satisfied. Such opinion, in the case of a defeasance as described
under clause (i) above, must refer to and be based upon a ruling of the Internal
Revenue Service or a change in applicable federal income tax law occurring after
the date of the Indenture. In the event the Borrower omits to comply with its
remaining obligations under the Indenture after a defeasance of the Indenture as
described under clause (ii) above and the Bonds are declared due and payable
because of the occurrence of any undefeased Event of Default, the amount of
money and U.S. government obligations on deposit with the Indenture Trustee may
be insufficient to pay amounts due on the Bonds at the time of the acceleration
resulting from such Event of Default; however, the Borrower will remain liable
in respect of such payments.
PAYMENTS ON THE BONDS
All payments of principal and interest in respect of the Bonds will be
made by the Borrower in immediately available funds. The Bonds will trade in
DTC's Same-Day Funds Settlement System until maturity or until the Bonds are
issued in certificated form, and secondary market trading activity in the Bonds
will therefore be required by DTC to settle in immediately available funds.
BOOK ENTRY ISSUANCE, CLEARANCE AND SETTLEMENT
Holders of the Certificates (and after the Permitted Merger and Security
Release, holders of the Bonds) may hold their Certificates (or Bonds) directly
through DTC (for United States holders) and CEDEL and Euroclear (for European
holders) if they are participants in such systems ("Participants"), or
indirectly through organizations that are Participants. CEDEL and Euroclear will
hold omnibus positions on behalf of CEDEL Participants and Euroclear
Participants through customers' securities accounts in CEDEL's and Euroclear's
name on the books of their respective depositories (collectively, the
"Depositories"), which in turn will hold such positions in customers' securities
accounts in the Depositories' names on the books of DTC. DTC is a
limited-purpose trust company organized under the laws of the State of New York,
a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
was created to hold securities for its Participants and to facilitate the
clearance and settlement of securities transactions between Participants through
electronic computerized book-entry changes in accounts of its Participants,
thereby eliminating the need for physical movement of securities certificates.
Participants include securities brokers and dealers (including the Underwriter),
banks (including the Trustee and the Indenture Trustee), trust companies,
clearing corporations and certain other organizations, some of whom (and/or
their representatives) own DTC. Indirect access to the DTC system is also
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly ("Indirect Participant").
Upon the issuance of the Global Certificate and the Global Bond, DTC will
credit, on its book-entry registration and transfer system, the respective
principal amounts of the Certificates represented by such Global Certificate to
the accounts of DTC Participants. The accounts to be credited will be designated
by the Underwriter. The account of the Trustee, as a Participant, will be
credited for the issuance of the Global Bond. Ownership of beneficial interests
in the Global Certificate and the Global Bond will be limited to DTC
Participants or Indirect Participants. Ownership of beneficial interests in the
Global Certificate and the Global Bond will be shown on, and the transfer of
those ownership interests will be effected only through, records maintained by
DTC (with respect to DTC Participants' interests) or such DTC Participants (with
respect to the owners of beneficial interests in the Global Certificate, and,
following the Permitted Merger and Security Release, the Global Bond, who own
such interests through Participants). The laws of some jurisdictions require
that certain purchasers of securities take physical delivery of such securities
in definitive form. Such laws may impair the ability to transfer beneficial
interests in the Global Certificate and Global Bond. Transfers between DTC
Participants will occur in accordance with DTC rules. Transfers between CEDEL
Member Organizations and Euroclear Member Organizations will occur in accordance
with their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly through CEDEL Participants or
Euroclear Participants on the other, will be effected in DTC in accordance with
DTC rules on behalf of the relevant European international clearing system by
its Depository; however, such cross-market transactions will require delivery of
instructions to the relevant European international clearing system by the
counterparty in such system in accordance with its rules and procedures. If the
transaction complies with all relevant requirements, CEDEL or Euroclear, as the
case may be, will then deliver instructions to the Depository to take action to
effect final settlement on its behalf.
Because of time-zone differences, credits of securities in CEDEL or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant CEDEL
Participant or Euroclear Participant on such business day. Cash received in
CEDEL or Euroclear as a result of sales of securities by or through a CEDEL
Participant or a Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
CEDEL or Euroclear cash account only as of the business day following settlement
in DTC.
The holders of Certificates or, following the Permitted Merger and
Security Release, Bonds that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interests
in, Certificates or Bonds may do so only through Participants and Indirect
Participants. In addition, holders of Certificates or, following the Permitted
Merger and Security Release, Bonds will receive all distributions of principal
and interest from the Trustee (or Indenture, Trustee, following the Permitted
Merger and Security Release) through the Participants, who in turn will receive
them from DTC. Under a book-entry format, holders of Certificates or Bonds may
experience some delay in their receipt of payments since such payments will be
forwarded by the Trustee or Indenture Trustee to Cede & Co., as nominee for DTC.
DTC will forward such payments to its Participants, which thereafter will
forward them to Indirect Participants or beneficial owners of Certificates or
Bonds.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Certificates or Bonds among Participants on whose behalf it acts with respect to
the Certificates or Bonds and to receive and transmit distributions of principal
of, and interest on, the Certificates or Bonds. Participants and Indirect
Participants with which the holders of Certificates or Bonds have accounts with
respect to the Certificates or Bonds similarly are required to make book-entry
transfers and receive and transmit such payments on behalf of the respective
holders of Certificates or Bonds. Accordingly, although the holders of
Certificates or Bonds will not possess the Certificates or Bonds, the Rules
provide a mechanism by which Participants will receive payments on Certificates
or Bonds and will be able to transfer their interest.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a holder of
Certificates or Bonds to pledge such Certificates or Bonds to persons or
entities that do not participate in the DTC system, or to otherwise act with
respect to such Certificates or Bonds, may be limited due to the lack of
physical possession of such Certificates or Bonds.
CEDEL is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its Participants and facilitates the
clearance and settlement of securities transactions between CEDEL Participants
through electronic book-entry changes in accounts of CEDEL, thereby eliminating
the need for physical movement of securities certificates.
Euroclear was created in 1968 to hold securities for Participants of the
Euroclear system and to clear and settle transactions between Euroclear
Participants though simultaneous electronic book-entry delivery against payment.
Although DTC, CEDEL and Euroclear have implemented the foregoing
procedures in order to facilitate transfers of interests in global securities
among Participants of DTC and Participants of Euroclear and CEDEL, they are
under no obligation to perform or to continue to comply with such procedures,
and such procedures may be discontinued at any time. None of the Depositor, the
Trustee, Indenture Trustee, MAAC, MAALP or the Underwriter will have any
responsibility for the performance by DTC, Euroclear or CEDEL or their
respective direct or indirect Participants or of their respective obligations
under the rules and procedures governing their operations. The information
herein concerning DTC, CEDEL and Euroclear and their book-entry systems has been
obtained from sources believed to be reliable, but the Depositor takes no
responsibility for the accuracy or completeness thereof.
32
<PAGE>
DEFINITIVE CERTIFICATES AND BONDS
Definitive Certificates (or, following the Permitted Merger and Security
Release, Definitive Bonds), will be delivered to beneficial owners of the
Certificates (and, following the Permitted Merger and Security Release, the
Bonds) (or their nominees) only if (i) DTC is no longer willing or able properly
to discharge its responsibilities as depository with respect to the Certificates
or Bonds, as the case may be, and the Depositor is unable to locate a qualified
successor, (ii) the Trustee, or, following the Permitted Merger and Security
Release, the Indenture Trustee, at its sole option, elects to terminate the
book-entry system through DTC, or (iii) after the occurrence of an event of
default under the Trust Agreement, or, following the Permitted Merger and
Security Release, the Indenture, Certificate holders (or after the Permitted
Merger and Security Release, Bondholders) representing a majority in principal
amount of the Certificates (or Bonds, as the case may be) then outstanding
advise DTC through DTC Participants in writing that the continuation of a
book-entry system through DTC (or a successor thereto) is no longer in the best
interest of such Certificate holders or Bondholders.
Upon the occurrence of any of the events described in clauses (i) through
(iii) in the immediately preceding paragraph, DTC is required to notify all
affected DTC Participants of the availability through DTC of Definitive
Certificates (or Definitive Bonds, as the case may be). Upon delivery of
Definitive Certificates (or Definitive Bonds, as the case may be), the Trustee
or Indenture Trustee and the registrar will recognize the holders of such
Definitive Certificates (or Definitive Bonds, as the case may be) as holder of
the Certificates or Bonds. Distributions of principal of and interest on the
Definitive Certificates (or Definitive Bonds) will be made by the Trustee (or
Indenture Trustee) directly to holders of Definitive Certificates (or Definitive
Bonds) in accordance with the procedures set forth in the Trust Agreement (or
Indenture). Upon the occurrence of any of the events described in clauses (i)
through (iii) in the immediately preceding paragraph, request for transfer of
Definitive Certificates or Definitive Bonds will be required to be submitted
directly to the registrar in a form acceptable to the registrar (such as the
forms which will appear on the back of the certificate representing a Definitive
Certificate or Definitive Bond), signed by the holder or such holder's legal
representative and accompanied by the Definitive Certificate or Certificates (or
Definitive Bond or Bonds) for which transfer is being requested.
DESCRIPTION OF THE MORTGAGED PROPERTIES
The Mortgaged Properties consist of 26 apartment communities containing an
aggregate of 5,947 apartment units and have an average age of 12 years. The
Mortgaged Properties are primarily located in mid-size markets in the Southeast
and span 19 metropolitan areas across nine states. The Borrower believes that
the Mortgaged Properties are well positioned within their markets and feature an
appealing array of amenities, including swimming pools, washer/dryer
connections, fireplaces, tennis courts and fitness centers. Over the last three
years, average occupancy for the Mortgaged Properties has remained relatively
constant at approximately 95%.
OPERATING PHILOSOPHY
MAAC, MAALP and their respective affiliates (collectively, the "Company")
have focused on owning, operating and acquiring apartment communities in
mid-size southeastern and Texas cities. The Company believes that these markets
generally have been less susceptible to apartment overbuilding during past real
estate investment cycles, and the Company believes that apartment communities in
these markets offer attractive long-term investment returns.
The Company has implemented a practice of having trained property managers
and service technicians on-site at each of the Company's apartment communities.
The presence of these personnel will continue at the Mortgaged Properties
pursuant to the terms of the Management Agreement. Moreover, MAALP intends to
undertake frequent resident surveys and focus groups, in order to measure
resident satisfaction at the Mortgaged Properties.
THE APPRAISAL REPORTS
33
<PAGE>
The Appraisals estimate the values of the Mortgaged Properties to be
approximately $240 million. The Appraisals do not render any opinion of value of
the Mortgaged Properties subsequent to the valuation dates of the Appraisals.
The Appraiser states in the Appraisals that the Appraisals were performed
in accordance with the Uniform Standards of Professional Appraisal Practice as
promulgated by the Appraisal Standards Board of the Appraisal Foundation and
adopted by the Appraisal Institute and the Code of Professional Ethics of the
Appraisal Institute. An appraisal is an opinion of value made by experts,
subject to the assumptions and limiting conditions contained therein. The
Appraisals are based substantially on estimates, assumptions and projections of
income and expense related to the Mortgaged Properties and is based on
information available as of the date of the particular Appraisal. However,
neither the Borrower nor the Depositor makes any warranty or representation that
the Mortgaged Properties could be sold at the appraised values.
ENGINEERING REPORT
Creative Project Management, Inc. ("CPM") prepared evaluation reports for
each of the 26 Mortgaged Properties. These reports, dated in October and
November 1997, reviewed the Mortgaged Properties' structural and architectural
conditions, mechanical, electrical, fire and life safety systems as well as
compliance with the requirements of the ADA. Generally, CPM deemed the Mortgaged
Properties as well designed and constructed and provided with above-average
maintenance.
The reports contain analyses of repairs and improvements to the Mortgaged
Properties which are to be completed within one year, the estimated cost of
which aggregate $636,130.
ENVIRONMENTAL REPORT
In November 1997, CPM performed Phase I ESAs (which did not include
invasive procedures, such as soil sampling or ground water analysis) on each of
the Mortgaged Properties. The ESAs did not reveal any significant environmental
liability that would have a material adverse effect on the Borrower's ability to
make required payments on the Bonds. In every instance, the Phase I ESA included
a record search for leaking underground storage tank sites and sites included on
certain environmental databases. In two instances, the database searches
revealed information that led the ESA to recommend a Phase II ESA (which
involves invasive sampling procedures) to determine whether any contaminants
affected the Mortgaged Property. One of these Mortgaged Properties is within one
quarter mile of a hazardous waste site, with relatively flat topography between
that site and the Mortgaged Property. The second of these Mortgaged Properties
is adjacent to a leaking underground storage tank site and the ESA anticipates
that the adjacent contamination will affect the Mortgaged Property. The Borrower
has not performed Phase II ESAs because it believes that, notwithstanding the
results of a Phase II ESA, there will be no material adverse effect on the
Mortgaged Properties taken as a whole as a result of environmental costs or
liabilities would not be material. There can be no assurance that the Borrower
is correct in concluding either that other parties would bear or be able to bear
primary responsibility, or that the environmental costs or liabilities would not
be material which could have a material adverse effect on the Borrower's ability
to make required payments on the Bonds.
The Phase I reports identified the presence of asbestos-containing
materials ("ACM") generally on or in floor and ceiling coverings in four of
Mortgaged Properties. The Borrower has continuing ACM Operation and Maintenance
Plans which include removal of asbestos-containing materials if they are not in
good condition and believes the identified Mortgaged Properties can be managed
pursuant to this plan. CPM identified no other material environmental hazards on
site.
ADDITIONAL MORTGAGED PROPERTY INFORMATION
The following tables sets forth selected financial and operating
information for the Mortgaged Properties.
34
<PAGE>
<TABLE>
<CAPTION>
YEAR UNIT MIX
YEAR MANAGEMENT NUMBER NUMBER OF
MORTGAGED PROPERTY METROPOLITAN AREA COMPLETED COMMENCED OF UNITS STORIES 1 BDR 2 BDR 3 BDR
- ------------------ ----------------- --------- --------- -------- ------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Belmere Tampa, Florida 1984 1994 210 2 104 106 0
Crosswinds (1) Jackson, Mississippi 1988/1990 1996 360 3 120 176 64
Fairways at Royal Oak Cincinnati, Ohio 1988 1994 214 2/3 107 107 0
Hermitage at Beechtree Cary, North Carolina 1987 1997 194 2/3 60 134 0
Hidden Lake II (2) Atlanta, Georgia 1987 1997 160 2 64 96 0
High Ridge (2) Athens, Georgia 1987 1997 160 2/3 32 96 32
Howell Commons Greenville, South Carolina 1986/1988 1997 348 2/3 200 148 0
Kirby Station Memphis, Tennessee 1978 1994 371 2 225 146 0
Lakepointe Lexington, Kentucky 1986 1994 118 2 96 22 0
Lakeside Jacksonville, Florida 1985 1996 416 2/3 272 144 0
Marsh Oaks Atlantic Beach, Florida 1986 1995 120 2 56 64 0
Napa Valley Little Rock, Arkansas 1984 1996 240 3 156 84 0
Park Haywood Greenville, South Carolina 1981/1995 1993 208 2 96 112 0
Park Place (2) Spartanburg, South Carolina 1986 1997 184 2 64 96 24
Pear Orchard Jackson, Mississippi 1985 1994 389 2 228 161 0
Savannah Creek (1) Memphis, Tennessee 1989 1996 204 3 68 112 24
Shenandoah Ridge Augusta, Georgia 1982 1994 272 2 128 144 0
Somerset Jackson, Mississippi 1981 1995 144 2 56 88 0
Southland Station I (2) Warner Robins, Georgia 1986 1997 160 2 48 80 32
Steeplechase Chattanooga, Tennessee 1986 1991 108 2/3 43 65 0
Sutton Place(1) Memphis, Tennessee 1991 1996 252 3 84 120 48
Tiffany Oaks Altamonte, Springs, Florida 1985 1996 288 2 224 64 0
Village, The Lexington, Kentucky 1987 1994 252 2/3 168 84 0
Westside Creek I Little Rock, Arkansas 1984 1997 142 2 16 126 0
Williamsburg Village Jackson, Tennessee 1987 1994 148 2 88 48 12
Willow Creek(2) Willow Creek, Georgia 1971/1978 1997 285 2/3 113 164 8
----- ----- ----- ---
Total Mortgaged Properties 5,947 2,916 2,787 244
===== ===== ===== ===
</TABLE>
APPROXIMATE AVERAGE
RENTABLE AREA UNIT SIZE
MORTGAGED PROPERTY (SQUARE FT.) (SQUARE FT.)
- ------------------ ------------ ------------
Belmere 202,440 964
Crosswinds (1) 443,200 1,231
Fairways at Royal Oak 214,477 1,002
Hermitage at Beechtree 169,776 875
Hidden Lake II (2) 154,000 963
High Ridge (2) 186,608 1,166
Howell Commons 292,840 841
Kirby Station 310,173 836
Lakepointe 90,614 768
Lakeside 344,192 827
Marsh Oaks 93,280 777
Napa Valley 183,216 763
Park Haywood 156,776 754
Park Place (2) 195,312 1,061
Pear Orchard 338,400 870
Savannah Creek (1) 237,200 1,162
Shenandoah Ridge 222,800 819
Somerset 126,848 881
Southland Station I (2) 186,704 1,167
Steeplechase 98,602 913
Sutton Place(1) 267,600 1,062
Tiffany Oaks 234,224 813
Village, The 182,716 725
Westside Creek I 148,030 1,042
Williamsburg Village 121,412 820
Willow Creek(2) 246,668 866
--------- -----
Total Mortgaged Properties 5,448,068 916
========= =====
(1) These properties are located in DeSoto County, Mississippi, a suburb of
Memphis, Tennessee. The company considers the properties a part of the
Memphis, Tennessee market.
(2) These properties were acquired in connection with the acquisition by the
Company of Flournoy Development Company, a Georgia corporation ("FDC") and
certain related entities on November 25, 1997.
35
<PAGE>
<TABLE>
<CAPTION>
AVERAGE PHYSICAL OCCUPANCY AT
MORTGAGED PROPERTY METROPOLITAN AREA SEPTEMBER 30, 1997 DECEMBER 31, 1996
- ------------------ ----------------- ------------------ -----------------
<S> <C> <C> <C>
Belmere Tampa, Florida 98.6% 97.1%
Crosswinds Jackson, Mississippi 94.4% 96.7%
Fairways at Royal Oak Cincinnati, Ohio 98.1% 98.1%
Hermitage at Beechtree Cary, North Carolina 96.6% 95.0%
Hidden Lake II Atlanta, Georgia 93.2% 97.5%
High Ridge Athens, Georgia 85.3% 93.5%
Howell Commons Greenville, South Carolina 97.7% 87.6%
Kirby Station Memphis, Tennessee 99.7% 97.0%
Lakepointe Lexington, Kentucky 94.9% 98.3%
Lakeside Jacksonville, Florida 95.4% 95.4%
Marsh Oaks Atlantic Beach, Florida 94.2% 99.2%
Napa Valley Little Rock, Arkansas 92.1% 82.9%
Park Haywood Greenville, South Carolina 92.8% 93.8%
Park Place Spartanburg, South Carolina 91.3% 92.7%
Pear Orchard Jackson, Mississippi 95.1% 97.9%
Savannah Creek Memphis, Tennessee 100% 99.0%
Shenandoah Ridge Augusta, Georgia 92.6% 92.3%
Somerset Jackson, Mississippi 95.8% 98.6%
Southland Station I Warner Robins, Georgia 91.6% 89.7%
Steeplechase Chattanooga, Tennessee 98.1% 96.3%
Sutton Place Memphis, Tennessee 99.2% 98.8%
Tiffany Oaks Altamonte Springs, Florida 99.3% 96.0%
Village, The Lexington, Kentucky 96.4% 96.0%
Westside Creek I Little Rock, Arkansas 95.1% 90.0%
Williamsburg Village Jackson, Tennessee 99.3% 97.3%
Willow Creek Willow Creek, Georgia 91.8% 91.0%
Total Mortgaged Properties
<CAPTION>
AVERAGE MONTHLY RENT PER UNIT AT APPRAISED APPRAISED
MORTGAGED PROPERTY SEPTEMBER 30, 1997 DECEMBER 31, 1996 VALUE VALUE/UNIT
- ------------------ ------------------ ---------------- ------- ----------
<S> <C> <C> <C> <C>
Belmere $602 $592 $10,100,000 $48,095
Crosswinds $605 $588 17,125,000 47,569
Fairways at Royal Oak $588 $570 10,200,000 47,664
Hermitage at Beechtree $645 $624 9,350,000 48,196
Hidden Lake II $609 $590 6,800,000 42,500
High Ridge $739 $748 9,200,000 57,500
Howell Commons $499 $501 13,600,000 39,080
Kirby Station $556 $531 16,100,000 43,396
Lakepointe $534 $520 5,000,000 42,373
Lakeside $555 $556 15,650,000 37,620
Marsh Oaks $519 $501 4,400,000 36,667
Napa Valley $541 $542 9,300,000 38,750
Park Haywood $497 $479 6,700,000 32,212
Park Place $591 $598 7,000,000 38,043
Pear Orchard $544 $556 16,365,000 42,069
Savannah Creek $580 $557 8,800,000 43,137
Shenandoah Ridge $440 $434 7,500,000 27,574
Somerset $488 $492 5,000,000 34,722
Southland Station I $611 $647 6,740,000 42,125
Steeplechase $542 $522 4,000,000 37,037
Sutton Place $561 $536 10,800,000 42,857
Tiffany Oaks $559 $528 11,475,000 39,844
Village, The $562 $542 11,000,000 43,650
Westside Creek I $628 $603 4,980,000 35,070
Williamsburg Village $518 $507 5,620,000 37,973
Willow Creek $460 $455 7,900,000 27,719
------------ -------
Total Mortgaged Properties $240,705,000 $40,475
============ =======
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
PATIO, PORCH,
BALCONY OR WASHER/DRYER SWIMMING FITNESS
MORTGAGED PROPERTY METROPOLITAN AREA SUNROOM CONNECTIONS CLUBHOUSE POOL(S) CENTER FIREPLACES
- ------------------ ----------------- ------------ ------------ --------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Belmere Tampa, Florida All All No Yes (1) No Yes (24)
Crosswinds Jackson, Mississippi All All No Yes (3) Yes All
Fairways at Royal Oak Cincinnati, Ohio All All Yes Yes (1) Yes Yes (88)
Hermitage at Beechtree Cary, North Carolina All All Yes Yes (1) Yes Yes (140)
Hidden Lake II Atlanta, Georgia All All Yes Yes (1) Yes Yes (88)
High Ridge Athens, Georgia All All Yes Yes (1) Yes Yes (64)
Howell Commons Greenville, South Carolina All All Yes Yes (1) No No
Kirby Station Memphis, Tennessee All Yes (168) No Yes (2) No Yes (26)
Lakepointe Lexington, Kentucky All All Yes Yes (1) No All
Lakeside Jacksonville, Florida All All Yes Yes (2) Yes Yes (368)
Marsh Oaks Atlantic Beach, Florida All All No Yes (1) No No
Napa Valley Little Rock, Arkansas All All Yes Yes (2) No Yes (80)
Park Haywood Greenville, South Carolina Yes (80) Yes (130) Yes Yes (1) No Yes (80)
Park Place Spartanburg, South Carolina All All Yes Yes (1) Yes Yes (100)
Pear Orchard Jackson, Mississippi All All Yes Yes (2) No Yes (145)
Savannah Creek Memphis, Tennessee All All Yes Yes (2) Yes Yes (204)
Shenandoah Ridge Augusta, Georgia Yes (128) Yes (92) No Yes (2) No Yes (92)
Somerset Jackson, Mississippi All Yes (88) Yes Yes (1) No Yes (88)
Southland Station I Warner Robins, Georgia All All Yes Yes (1) Yes Yes (72)
Steeplechase Chattanooga, Tennessee All All Yes Yes (1) Yes No
Sutton Place Memphis, Tennessee All All Yes Yes (2) Yes No
Tiffany Oaks Altamonte Springs, Florida All All Yes Yes (1) Yes Yes (64)
Village, The Lexington, Kentucky All All Yes Yes (1) Yes Yes (252)
Westside Creek I Little Rock, Arkansas All All Yes Yes (1) No Yes (142)
Williamsburg Village Jackson, Tennessee All All Yes Yes (1) Yes Yes (12)
Willow Creek Willow Creek, Georgia All Yes (82) Yes Yes (2) Yes Yes (15)
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997
NET MANAGEMENT
OPERATING FEE CAPITAL ADJUSTED
MORTGAGED PROPERTY REVENUE EXPENSES INCOME ADJUSTMENT EXPENDITURES CASH FLOW
- ------------------ ---------- -------- --------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Belmere $1,117,858 $411,347 $706,511 $44,714 $31,500 $630,297
Crosswinds 1,897,439 580,672 1,316,767 75,898 54,000 1,186,869
Fairways at Royal Oak 1,096,972 384,651 712,321 43,879 32,100 636,342
Hermitage at Beechtree 1,079,040 375,525 703,515 43,162 29,100 631,253
Hidden Lake II 809,325 326,639 482,686 32,373 24,000 426,313
High Ridge 933,342 355,680 577,662 37,334 24,000 516,328
Howell Commons 1,435,340 487,050 948,290 57,414 52,200 838,676
Kirby Station 1,843,672 507,773 1,335,899 73,747 55,650 1,206,502
Lakepointe 541,140 193,548 347,592 21,646 17,700 308,246
Lakeside 1,950,821 793,341 1,157,480 78,033 62,400 1,017,047
Marsh Oaks 554,190 207,710 346,480 22,168 18,000 306,312
Napa Valley 1,059,454 405,606 653,848 42,378 36,000 575,470
Park Haywood 864,729 358,917 505,812 34,589 31,200 440,023
Park Place 921,298 394,469 526,829 36,852 27,600 462,377
Pear Orchard 1,858,815 633,419 1,225,396 74,353 58,350 1,092,693
Savannah Creek 1,064,029 336,103 727,926 42,561 30,600 654,765
Shenandoah Ridge 1,010,734 447,505 563,229 40,429 40,800 482,000
Somerset 610,770 277,167 333,603 24,431 21,600 287,572
Southland Station I 820,371 271,009 549,362 32,815 24,000 492,547
Steeplechase 493,418 196,168 297,250 19,737 16,200 261,313
Sutton Place 1,253,028 384,296 868,732 50,121 37,800 780,811
Tiffany Oaks 1,434,237 513,365 920,872 57,369 43,200 820,303
Village, The 1,210,631 425,686 784,945 48,425 37,800 698,720
Westside Creek I 744,133 257,207 486,926 29,765 21,300 435,861
Williamsburg Village 689,330 241,678 447,652 27,573 22,200 397,879
Willow Creek 1,150,208 490,055 660,153 46,008 42,750 571,395
----------- ----------- ----------- ---------- -------- -----------
Total $28,444,324 $10,256,586 $18,187,738 $1,173,774 $892,050 $16,157,914
=========== =========== =========== ========== ======== ===========
TWELVE MONTHS ENDED DECEMBER 31, 1996
NET MANAGEMENT
OPERATING FEE CAPITAL ADJUSTED
MORTGAGED PROPERTY REVENUE EXPENSES INCOME ADJUSTMENT EXPENDITURES CASH FLOW
- ------------------ ------- -------- --------- ---------- ------------ ---------
Belmere $1,431,297 $558,026 $873,271 $57,252 $42,000 $774,019
Crosswinds 2,497,368 840,172 1,657,196 99,895 72,000 1,485,301
Fairways at Royal Oak 1,445,875 520,900 924,975 57,835 42,800 824,340
Hermitage at Beechtree 1,365,182 454,093 911,089 54,607 38,800 817,682
Hidden Lake II 1,073,673 423,947 649,726 42,947 32,000 574,779
High Ridge 1,365,157 466,802 898,355 54,606 32,000 811,749
Howell Commons 1,984,926 678,072 1,306,854 79,397 69,600 1,157,857
Kirby Station 2,348,728 649,808 1,698,920 93,949 74,200 1,530,771
Lakepointe 707,455 271,236 436,219 28,298 23,600 384,321
Lakeside 2,523,881 996,865 1,527,016 100,955 83,200 1,342,861
Marsh Oaks 717,166 242,233 474,933 28,687 24,000 422,246
Napa Valley 1,454,936 474,702 980,234 58,197 48,000 874,037
Park Haywood 1,123,514 408,860 714,654 44,941 41,600 628,113
Park Place 1,250,520 563,068 687,452 50,021 36,800 600,631
Pear Orchard 2,416,192 801,268 1,614,924 96,648 77,800 1,440,476
Savannah Creek 1,327,045 460,920 866,125 53,082 40,800 772,243
Shenandoah Ridge 1,314,522 604,810 709,712 52,581 54,400 602,731
Somerset 824,225 321,521 502,704 32,969 28,800 440,935
Southland Station I 1,109,454 359,419 750,035 44,378 32,000 673,657
Steeplechase 626,380 273,916 352,464 25,055 21,600 305,809
Sutton Place 1,590,725 465,826 1,124,899 63,629 50,400 1,010,870
Tiffany Oaks 1,852,892 761,932 1,090,960 74,116 57,600 959,244
Village, The 1,552,802 527,557 1,025,245 62,112 50,400 912,733
Westside Creek I 984,816 349,142 635,674 39,393 28,400 567,881
Williamsburg Village 877,292 308,493 568,799 35,092 29,600 504,107
Willow Creek 1,406,073 693,728 712,345 56,243 57,000 599,102
----------- ----------- ----------- ---------- ---------- -----------
Total $37,172,096 $13,477,315 $23,694,780 $1,486,885 $1,189,400 $21,018,495
=========== =========== =========== ========== ========== ===========
</TABLE>
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<PAGE>
DESCRIPTION OF THE MORTGAGES
The following is a summary of certain provisions of the Mortgages not
described elsewhere in this Prospectus. This summary does not purport to be
complete and is qualified in its entirety by reference to the Mortgages. The
Mortgages will remain in place until the occurrence of the Permitted Merger and
Security Release. From and after the occurrence of the Permitted Merger and
Security Release, the Bonds will be the general unsecured obligations of MAALP
ranking in parity with all other unsecured debt of MAALP.
GENERAL
The Mortgages create first priority mortgage liens on the Mortgaged
Properties, including the Borrower's fee interest in each of the parcels of real
property on which such Mortgaged Properties are situated, and related assets.
The Mortgages will secure the payment in full of the Bonds and other charges
that may become due and payable under the Indenture.
SECURITY RELEASE
The Indenture provides that the Mortgage Liens will be subject to release
if and when each of the following conditions, among others, will occur: (i) the
unsecured indebtedness of MAALP, including the Bonds, is rated at least "Baa3 "
and "BBB-" by Moody's and S&P, respectively, and (ii) MAALP is a reporting
company under the Exchange Act, pursuant to an effective registration statement
on Form 10 (or any successor form). The Borrower will give written notice to the
Trustee which, in turn, will give notice to the Certificate holders, of the
anticipated Permitted Merger and Security Release at least 60 days prior to any
Security Release. Together with such notice, the Borrower will deliver copies of
the MAALP Exchange Act Reports and the Information Statement to each beneficial
owner of the Certificates. Upon proof of proper notice and delivery of the
Exchange Act Reports and the Information Statement, the Indenture Trustee will
release the Mortgage Liens, the Permitted Merger will occur and MAALP will
assume the obligations under the Bonds. Neither the Permitted Merger nor the
Security Release may occur if Advances are outstanding.
EFFECT OF SECURITY RELEASE
After the Permitted Merger and Security Release, the Bonds will be the
general unsecured obligations of MAALP ranking in parity with all other
unsecured indebtedness of MAALP, and persons previously holding Certificates
will thereafter have no claim against the Mortgaged Properties or any other
property of MAALP except as general unsecured creditors of MAALP.
REPRESENTATIONS, WARRANTIES, AND COVENANTS
Each Mortgage, or a separate certificate executed by the Borrower,
contains representations and warranties by the Borrower that are customary in
transactions similar to the issuance of the Bonds, including representations as
to the due formation of the Borrower; the authority of the Borrower to enter
into and to perform under the related loan documents; the authority of the
Borrower to conduct its business and its registration or qualification to do
business in the state of its organization and all states where the Mortgaged
Properties are located; the due authorization, execution and delivery of the
loan documents by the Borrower; the legality, validity and binding effect of the
loan documents and the enforceability thereof against the Borrower; any required
consents necessary to enter into and perform under the loan documents;
compliance with applicable laws (including zoning and environmental laws); the
absence of material defaults by the Borrower under other agreements; the payment
of taxes and other charges against the Mortgaged Properties; the absence of
material litigation; and the maintenance of all necessary permits.
Each Mortgage also contains certain representations, warranties, and
covenants by the Borrower with respect to each Mortgaged Property and other
collateral that are typical in commercial mortgages securing transactions
similar to the issuance of the Bonds, including (i) representations regarding
the Borrower's good title to the Mortgaged Property and (ii) covenants (a) to
maintain good title to the Mortgaged Property, (b) to maintain insurance
required with respect to the Mortgaged Property, (c) to comply in all material
respects with laws, a failure of which would have a material
39
<PAGE>
adverse effect on the Borrower, the Mortgaged Property, or the Indenture
Trustee's interest therein, (d) to allow no liens to be created against the
Mortgaged Property and other collateral other than liens permitted by the
Indenture, the Mortgages and the Bonds (collectively, the "Loan Documents")
(subject to contract as set forth in the Mortgages) (e) except as otherwise
permitted in the Mortgage with respect to the Security Release, to make no sale
or assignment of any interest in the Mortgaged Property to anyone other than the
Indenture Trustee, except for the granting of customary easements and similar
rights in the ordinary course of business, (f) to pay property taxes,
assessments, and similar charges against the Mortgaged Property as they become
due, (g) to comply in all material respects with the terms of the Leases, (h) to
rebuild or restore the Mortgaged Property after a casualty or condemnation
(except where the Loan Documents provide that such repair or restoration is not
required), (i) to maintain the validity and priority of the Indenture Trustee's
security interest in the Mortgaged Property and other collateral, (j) to make no
amendment to the Leases without the prior consent of the Indenture Trustee
(except as permitted by the Loan Documents), and (k) not to be a party to any
merger, consolidation, or reorganization not permitted by the Loan Documents.
LIMITATIONS ON ADDITIONAL INDEBTEDNESS
Under each Mortgage, the Borrower has covenanted not to incur, assume or
guaranty any indebtedness other than (i) the indebtedness represented by the
Bonds and (ii) trade and operational debt incurred in the ordinary course of
business with trade creditors in such amounts as are normal and reasonable under
the circumstances, provided such debt is not evidenced by a note and is not
outstanding for more than sixty (60) days (or such longer period as any such
debt will be contested by the Borrower in good faith (collectively, the
"Permitted Indebtedness").
DISCHARGE OF LIENS
The Borrower has covenanted to discharge by payment or by procurement of
an appropriate surety bond, or otherwise, within 30 days after receiving written
notice of the filing thereof (and in any event before foreclosure is permitted
under law) any lien, encumbrance, or charge upon any Mortgaged Property not
permitted under the terms of the respective Mortgage (subject to certain rights
to contest those liens).
MAINTENANCE, REPAIR AND ALTERATIONS
The Borrower has covenanted in the Mortgages and the Indenture (i) to
maintain the Mortgaged Properties in good order and condition such that the
utility and operation of the Mortgaged Properties will not be affected in any
material adverse respect, subject to ordinary wear and tear and casualty, (ii)
subject to the provisions of the Mortgages regarding casualty and condemnation,
to make or cause to be made all necessary or appropriate repairs, replacements,
and renewals to the Mortgaged Properties, and (iii) not to commit or permit any
waste of the Mortgaged Properties or any part thereof.
The Borrower may make, or permit to be made, material alterations with
respect to a Mortgaged Property only with the consent of the Indenture Trustee.
INSURANCE
The Borrower is required to maintain (or cause to be maintained) until the
earlier to occur of (i) the Permitted Merger or (ii) the term of the Bonds,
insurance with respect to each Mortgaged Property against loss or damage by fire
or such other hazards as may be included in the form of "all risk" building
insurance from time to time available, in amounts sufficient to prevent the
Borrower or the Indenture Trustee from becoming a co-insurer, but in any case in
an amount equal to the replacement cost of the improvements (without considering
depreciation and exclusive of excavations and foundations), which may be
maintained in a blanket policy that insures other properties so long as there is
sufficient coverage to replace the Mortgaged Property. In addition, for each
Mortgaged Property, the Borrower will be required to maintain loss of income
insurance covering losses arising out of damage or destruction by fire and such
other hazards as may be included in the "all risk" building insurance carried as
described above. Such insurance may also be maintained in a blanket policy that
insures other properties so long as there is sufficient coverage to replace the
required cash flow from the Mortgaged Property. The Borrower is also required to
maintain boiler and machinery
40
<PAGE>
insurance; comprehensive general liability insurance; and such other insurance
as is generally available on commercially reasonable terms and is generally
required by institutional lenders on loans secured by similar properties. If any
Mortgaged Property is in an area designated as flood prone or a flood risk area
or if flood insurance is required pursuant to the United States Flood Disaster
Protection Act of 1973, as amended or supplemented or under any subsequent law
then in effect, flood insurance with respect to such Mortgaged Property will be
maintained in an amount not less than the maximum amount available under the
Federal Flood Insurance Program. Required insurance coverage must be provided by
insurance carriers having minimum claims paying ability rating of "Aa or better
by Moody's and "AA" or better by S&P. Each policy of insurance must name the
Trustee as additional insureds or as loss payees.
TITLE INSURANCE
The Borrower has received title insurance loan policies in favor of the
Indenture Trustee for all of the Mortgaged Properties.
CASUALTY AND CONDEMNATION
In the event of any condemnation, the Borrower must continue to make its
payments on the Bonds and the Borrower is required to pay the amount of any
award or proceeds to the Indenture Trustee; provided, however, if there is no
event of default under the Mortgage, the costs of restoration do not exceed 20%
of the value of the improvements, the improvements comply with all building,
zoning and other land use laws and regulations; the restoration can be completed
within one year after such taking and six months prior to the Stated Maturity
Date, then such award will be made available to the Borrower for the
restoration.
FINANCIAL STATEMENTS AND OTHER INFORMATION
The Borrower or, after the Permitted Merger, MAALP is required to deliver
to the Indenture Trustee and the Rating Agencies, not later than 90 days after
the end of each fiscal year, audited financial statements prepared on an accrual
basis in accordance with GAAP for such year and certified by appropriate
officers of the Borrower or MAALP, as the case may be.
In addition, the Borrower or, after the Permitted Merger, MAALP is
required to deliver to the Indenture Trustee and the Rating Agencies (i) not
later than 45 days after the end of each fiscal quarter, unaudited financial
statements internally prepared on an accrual basis in accordance with GAAP for
such quarter, together with a certificate of appropriate officers of the
Borrower or MAALP, as the case may be, relating to such financial statements and
certifying as to the existence or nonexistence of an event of default and (ii)
not later than 20 Business Days after the end of each financial quarter, a
certificate of appropriate officers of the Borrower or MAALP, as the case may
be, setting forth the Pre-Permitted Merger Debt Service Coverage Ratio or the
Post-Permitted Merger Debt Service Coverage Ratio, as the case may be. The
Borrower is also required before the Permitted Merger to deliver to the
Indenture Trustee and the Rating Agencies certain additional operating and
financial reports with respect to the Mortgaged Properties.
THE BORROWER
OVERVIEW
The Borrower is a special purpose Delaware limited partnership. The
special purpose for which the Borrower has been formed is to hold, operate, own,
manage, renovate, improve, lease, mortgage and otherwise deal with the Mortgaged
Properties. The General Partner is a special purpose corporation organized under
the laws of the State of Delaware. The special purpose for which the General
Partner has been formed is to own the sole general partnership interest in the
Borrower; act as and exercise all of the authority of the general partner of the
Borrower; and do all acts necessary to satisfy the responsibilities of the
general partner of the Borrower.
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<PAGE>
The sole limited partner of the Borrower is MAALP, which is a majority
owned subsidiary of MAAC. MAALP is the operating partnership in the UPREIT
structure of MAAC, which is a self-administered and self-managed REIT. Twenty of
the Mortgaged Properties were contributed by MAALP to the Borrower in exchange
for a 99% limited partnership interest in the Borrower, and five of the
Mortgaged Properties were acquired directly by the Borrower utilizing part of
the proceeds from the MSMC Loan. One of the Mortgaged Properties was acquired by
the Borrower as a result of the merger of Hermitage at Beechtree, L.L.C., with
and into the Borrower. The only members of Hermitage at Beechtree, L.L.C. were
MAAC and MAALP. The General Partner contributed cash in the amount of $2,270,636
for a 1% general partnership interest in the Borrower.
The Borrower's principal executive offices are located at 1209 Orange
Street, Wilmington, Delaware 19801 and its telephone number is (302) 777-0205.
SPECIAL PURPOSE ENTITY COVENANTS
The Agreement of Limited Partnership of the Borrower (the "Partnership
Agreement") contains provisions restricting the Borrower from engaging in any
business other than the ownership, operation and financing of the Mortgaged
Properties and from incurring debt other than the Bonds or as permitted under
the Indenture, which includes certain trade accounts payable. In addition, the
Partnership Agreement contains provisions intended to reduce the likelihood that
the assets and liabilities of the Borrower would be consolidated with those of
any affiliate of the Borrower in the event of a bankruptcy of such affiliate,
including provisions prohibiting the commingling of assets of the Borrower with
the assets of its General Partner and requiring the maintenance of separate
books and records. Such provisions include the requirement that the General
Partner have at least one independent director and that such independent
director approve certain matters, including the filing of any bankruptcy
petition.
THE DEPOSITOR
The Depositor is a special purpose Delaware corporation, incorporated on
December , 1997. The business of the Depositor is limited by the terms of its
Certificate of Incorporation to the purchase of the Bonds, creation of the
Trust, causing the issuance by the Trust of the Certificates and the assignment
to the Trustee of the trust assets and activities related thereto. Under the
General Corporation Law of the State of Delaware and the Certificate of
Incorporation of the Depositor, the Certificate of Incorporation may be amended
only with the unanimous approval of the board of directors of the Depositor
including the independent directors of the Depositor and both (i) a majority of
the outstanding stock of the Depositor and (ii) a majority of the outstanding
stock of each class entitled to vote as a class. The Depositor will have only a
single class of stock. The sole stockholder of the Depositor is MAAC, which will
not be liable for the payment of the Certificates.
USE OF PROCEEDS
The proceeds from the offer and sale of the Certificates will be utilized
by the Depositor to purchase the Bonds from the Borrower. The net proceeds of
this offering will be used by the Borrower to repay certain indebtedness of the
Borrower to Morgan Stanley Mortgage Capital Inc. pursuant to the terms of a $140
million short-term promissory note. The proceeds from the MSMC Loan were used to
partially finance the acquisition of Flournoy Development Company and certain
related limited partnerships and other entities by MAAC and MAALP on November
25, 1997. Finally, any remaining net proceeds of this offering will be
distributed to the partners of the Borrower and used by such partners for
general corporate purposes, including acquisitions.
SELECTED FINANCIAL INFORMATION
The following table sets forth selected financial information on a pro
forma basis for the Borrower as of and for the nine months ended September 30,
1997 and for the year ended December 31, 1996, and on an historical combined
basis for Capital Properties Group ("CPG"), which is the predecessor of the
Borrower, as of and for each of the years in the five-year period ended December
31, 1996 as of and for the nine months ended September 30, 1997 and 1996
42
<PAGE>
(unaudited). The historical combined operating data of the CPG for the years
ended December 31, 1996, 1995 and 1994 have been derived from the historical
combined financial statements audited by KPMG Peat Marwick LLP, independent
accountants, whose report with respect thereto is included elsewhere in this
Prospectus. The historical combined operating data for the nine months ended
September 30, 1997 and 1996 and the years ended December 31, 1993 and 1992 have
been derived from the unaudited combined financial statements of the CPG. In the
opinion of management, the historical combined operating data for the nine
months ended September 30, 1997 and 1996 and the years ended December 31, 1993
and 1992 include all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the information set forth therein.
The pro forma condensed combined financial information as of and for the
nine months ended September 30, 1997 and the year ended December 31, 1996 were
prepared as if at September 30, 1997: (i) the Borrower had issued the Bonds;
(ii) the Flournoy Reorganization had been consummated ; (iii) MAALP had
contributed 20 of the Mortgaged Properties to the Borrower in exchange for a 99%
limited partnership interest in the Borrower and the contributed Mortgaged
Properties were recorded at MAALP's historic costs; (iv) 5 of the Mortgaged
Properties had been acquired by the Borrower; (v) Hermitage at Beechtree, L.L.C.
had merged with and into the Borrower; (vi) the MSMC Loan had been originated;
(vii) the Mortgaged Properties had all been acquired by CPG prior to January 1,
1996; and (viii) $116 million of the net proceeds of the MSMC Loan had been
distributed to MAALP.
The following selected financial information should be read in conjunction
with the discussion set forth in "Management's Discussion and Analysis of
Financial Condition and Results of Operations, the unaudited pro forma condensed
financial statements, and all of the financial statements included elsewhere in
this Prospectus. The pro forma financial information is not necessarily
indicative of what the actual financial position and results of operations of
the Borrower would have been as of and for the periods indicated, nor does it
purport to represent the future financial position and results of operations for
future periods.
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<PAGE>
Mid-America Capital Partners, L.P. (Pro Forma) and
Capital Properties Group (Historical Combined)
(in thousands except Property Data)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------------ -----------------------------------------------------
Partnership Partnership
Pro Forma CPG Historical Pro Forma CPG Historical
1997 1997 1996 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- ------- ------- ------ ------- ----
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue:
Rental ................................. $ 28,128 $ 22,233 $ 13,788 $ 36,710 $20,056 $14,321 $4,568 $ 791 $513
Other .................................. 364 187 143 581 195 176 185 51 31
-------- -------- -------- -------- ------- ------- ------ ------- ----
Total Revenue ....................... $ 28,492 22,420 13,931 37,291 20,251 14,497 4,753 842 544
Expenses (1):
Property expenses (2) .................. 10,311 7,934 5,128 13,553 7,207 5,306 1,688 362 230
Depreciation of real property and
amortization .......................... 5,917 4,588 2,695 7,355 3,981 2,600 750 120 94
Depreciation of non-real assets ........ 27 19 13 42 19 14 5 5 4
General and administrative expenses .... 1,253 -- -- 1,642 -- -- -- -- --
Interest .............................. 7,159 724 1,631 9,546 2,169 2,225 925 226 172
Amortization of deferred financing costs 476 35 44 634 58 48 37 -- --
-------- -------- -------- -------- ------- ------- ------ ------- ----
Net Income ................................ 3,349 9,120 4,420 4,519 6,817 4,304 1,348 129 44
======== ======== ======== ======== ======= ======= ====== ======= ====
Balance Sheet Data:
Real estate owned, at cost ................ $226,355 181,040 136,803 -- 158,285 87,240 73,521 6,027 2,330
Real estate owned, net .................... 214,161 168,846 130,508 -- 150,699 83,653 72,548 5,772 2,177
Total assets .............................. 220,238 169,057 130,967 -- 151,257 84,216 73,499 6,523 2,593
Total debt ................................ 144,000 -- 22,595 -- 16,461 22,830 23,110 4,740 2,357
Partners' equity (deficit) ................ 75,532 165,848 130,967 -- 131,951 59,978 48,938 1,454 (47)
Other Data (at end of period):
Number of Mortgaged Properties ............ 26 20 16 26 18 12 10 2 1
Number of apartment units ................. 5,947 4,804 3,786 5,947 4,314 2,554 2,290 316 108
EBITDA (3) ................................ 16,928 -- -- 22,096 -- -- -- -- --
Adjusted EBITDA (4) ....................... 16,036 -- -- 20,907 -- -- -- -- --
Debt Service Coverage Ratio (5) ........... 2.24x -- -- 2.19x -- -- -- -- --
Adjusted Debt Service Coverage Ratio (6)... 1.61x -- -- 1.57x -- -- -- -- --
Ratio of Earnings to Fixed Charges (7) .... 1.44x 13.02x 3.64x 1.44x 4.06x 2.81x 2.40x 1.57x 1.26x
</TABLE>
(1) Certain general and administrative expenses and other costs which are
incurred by MAALP on behalf of CPG are not included in the historical
financial statements. The Partnership will pay a management fee, equal to
4% of revenues, to MAALP for providing these services.
(2) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Capital Expenditures."
(3) Earnings before interest taxes depreciation and amortization ("EBITDA")
represents net income before extraordinary items and minority interest,
computed in accordance with GAAP, adjusted for gains on dispositions of
properties, interest expense, federal income taxes, depreciation and
amortization. EBITDA should not be considered as a substitute for net
income or any other GAAP measurement of performance, as an indication of
operating performance or as an alternative to cash flows from operating,
investing and financing activities as a measure of liquidity.
(4) For purposes of this computation, adjusted EBITDA consists of EBITDA as
defined in (3) above less a $200 per apartment unit capital expenditure
reserve per annum. A management fee of 4% of revenue is included in the
proforma general and administrative expenses.
(5) Debt service coverage ratio is computed as a ratio of adjusted EBITDA to
interest expense.
(6) Adjusted debt service coverage ratio is defined as adjusted EBITDA divided
by adjusted interest. Adjusted interest is calculated based on an assumed
9.25% annual debt service constant and $144,000,000 of pro-forma total
indebtedness.
(7) Ratio of earnings to fixed charges is computed by dividing net income by
fixed charges. Fixed charges consist of interest expense (including
interest costs capitalized and amortization of deferred financing costs).
44
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The following is a discussion of the combined financial condition and
results of operations of CPG for the nine months ended September 30, 1997 and
1996 and for the years ended December 31, 1996, 1995, and 1994. This discussion
should be read in conjunction with the financial statements included in this
Prospectus. These financial statements include all adjustments which are, in the
opinion of management, necessary to reflect a fair statement of the results for
the interim periods presented, and all such adjustments are of a normal
recurring nature.
CAPITAL EXPENDITURES
Following a review of its capital expenditure and depreciation policy,
effective January 1, 1996, CPG implemented a new policy of which the primary
changes are as follows:
(a) Increase minimum dollar amounts to capitalize from $500 to $1,000;
(b) For stabilized Mortgaged Properties (generally, Mortgaged Properties
owned and operated by CPG for at least one year), capitalize
replacement purchases for major appliances and carpeting of an
entire apartment unit which was previously expensed; and
(c) Reduce depreciation life for certain assets from 20 years to 10 to
15 years.
CPG believes that the newly adopted accounting policy is preferable because it
is consistent with policies currently being used by the majority of the largest
apartment REITs and provides a better matching of expenses with the estimated
benefit period. CPG's 1995 and 1994 financial statements were not restated for
the effect of the change in accounting policy. The policy has been implemented
prospectively effective January 1, 1996.
RESULTS OF OPERATIONS
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1997 TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996
The total number of apartment units owned at September 30, 1997 was 4,804
in 20 apartment communities, compared to 3,786 in 16 apartment communities at
September 30, 1996. Average monthly rental per apartment unit increased to $546
at September 30, 1997 from $525 at September 30, 1996. Overall occupancy was
96.4% at September 30, 1997 compared to 99.2% at September 30, 1996.
Total revenues for the nine months ended September 30, 1997 increased by
approximately $8,489,000 due primarily to (i) approximately $6,219,000 from the
apartment communities acquired in 1996, (ii) approximately $1,868,000 from the
apartment communities acquired in 1997, and (iii) approximately $402,000 from
the apartment communities owned throughout both periods.
Property operating expenses for the nine months ended September 30, 1997
increased by approximately $2,806,000 due primarily to (i) approximately
$2,074,000 from the apartment communities acquired in 1996, (ii) approximately
$635,000 from the apartment communities acquired in 1997, and (iii)
approximately $97,000 from the apartment communities owned throughout both
periods. Utility costs increased from 4.6% of revenue to 4.2% of revenue for the
nine months ended September 30, 1997 compared to the same period a year earlier,
due primarily to the further installation of approximately 1,795 individual
apartment unit water meters.
Depreciation and amortization expense increased approximately $1,890,000
for the nine months ended September 30, 1997 compared to the same period a year
earlier primarily due to depreciation expense for (i)
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<PAGE>
approximately $1,325,000 from the apartment communities acquired in 1996, (ii)
approximately $374,000 from the apartment communities acquired in 1997, and
(iii) approximately $191,000 from the apartment communities owned throughout
both periods.
Interest expense decreased approximately $907,000 during the nine months
ended September 30, 1997 compared to the same period a year earlier primarily
due to the repayment of all debt in 1997. The average borrowing cost of CPG's
debt was 8.7% at September 30, 1996.
COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO THE YEAR ENDED DECEMBER 31, 1995
During the 1996 period, CPG acquired 6 apartment communities. The total
number of apartment units owned at December 31, 1996 was 4,314 in 18 apartment
communities, compared to 2,554 in 12 apartment communities at December 31, 1995.
Average monthly rental per apartment unit increased to $532 at December 31, 1996
from $506 at December 31, 1995. Overall occupancy at December 31, 1996 and 1995
was 95.9% and 96.1%, respectively.
Total revenues for 1996 increased by approximately $5,754,000 due
primarily to (i) approximately $4,820,000 from the 6 apartment communities
acquired in 1996, (ii) approximately $465,000 from a full year's operation of
the 2 apartment communities acquired in 1995, and (iii) approximately $469,000
from the apartment communities owned throughout both periods.
Property operating expenses for 1996 increased by approximately $1,901,000
due primarily to (i) approximately $1,674,000 from the 6 apartment communities
acquired in 1996 (ii) approximately $143,000 from a full year's operations of
the 2 apartment communities acquired in 1995, and (iii) approximately $84,000
from the apartment communities owned throughout both periods. As a percentage of
revenue, property operating expenses decreased to 35.6% from 36.6% for the year
ended December 31, 1996 and 1995, respectively. Utility costs decreased from
5.2% of revenue to 4.6% of revenue for the year ended December 31, 1996 compared
to the same period a year earlier, due primarily to the installation of 1,276
individual apartment unit water meters.
Depreciation and amortization expense increased approximately $1,396,000
for the year ended December 31, 1996 compared to the same period a year earlier
primarily due to depreciation expense of (i) approximately $893,000 from the 6
apartment communities acquired in 1996, (ii) approximately $97,000 from the 2
apartment communities acquired in 1995, and (iii) approximately $406,000 from
the apartment communities owned throughout both periods.
Interest expense decreased approximately $56,000 during 1996 due primarily
to the scheduled loan maturity of the Kirby Station debt. CPG increased the
average borrowing cost to 9.4% at December 31, 1996 as compared to 8.7% on
December 31, 1995.
COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO THE YEAR ENDED DECEMBER 31, 1994
The total number of apartment units owned at December 31, 1995 was 2,554
in 12 apartment communities, compared to 2,290 in 10 apartment communities at
December 31, 1994. Average monthly rental per apartment unit increased to $506
for 1995 from $500 for 1994. Overall occupancy was 96.1% at December 31, 1995
and 1994.
Total revenues for 1995 increased by approximately $9,744,000 due
primarily to (i) approximately $1,076,000 from the 2 apartment communities
acquired, (ii) approximately $8,643,00 from a full year's operation of 10
apartment communities acquired in 1994, and (iii) approximately $25,000 from the
apartment communities owned throughout both periods.
Property operating expenses increased by approximately $3,618,000 over
1994. The increase primarily resulted from (i) approximately $421,000 of
operating expense from the 2 apartment communities acquired in 1995, (ii)
approximately $2,655,000 for full year's operation of the 10 apartment
communities acquired in 1994, and (iii) approximately $542,000 from the
apartment communities owned throughout both periods. As a percentage of revenue,
property operating expenses increased to 36.6% from 35.5% for the year ended
December 31, 1995 and 1994,
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<PAGE>
respectively. During 1995, approximately $90,000 was expensed for replacement of
appliances and carpets compared to approximately $44,000 for 1994.
Depreciation and amortization expense increased approximately $1,869,000
for the year ended December 31, 1995 compared to the same period a year earlier
primarily due to depreciation expense for (i) approximately $210,000 from the 2
apartment communities acquired in 1996, (ii) approximately $1,622,000 from the
10 apartment communities acquired in 1994, and (iii) approximately $37,000 for
the apartment communities owned throughout both periods.
Interest expense increased approximately $1,300,000 during 1995 due to
apartment communities acquired during the year. CPG's average borrowing cost was
8.7% at December 31, 1995 and 1994.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flow provided by operating activities increased by approximately
$5,798,000 for the nine months ended September 30, 1997 from approximately
$8,598,000 for the nine months ended September 30, 1996. The increase in net
cash flow was primarily due to an increase in net income, depreciation and
amortization, and accrued expenses and liabilities. Net cash flow provided by
operating activities increased by approximately $5,219,000 for the year ended
December 31, 1996 from approximately $7,012,000 for the year ended December 31,
1995. The increase in net cash flow was primarily due to an increase in net
income, depreciation and amortization, and accrued expenses and liabilities.
This increase in net cash flow provided by operating activities was offset by an
increase in restricted cash due to an increase in other mortgage escrows and
replacement reserves.
Net cash flow used in investing activities decreased by approximately
$26,808,000 for the nine months ended September 30, 1997 from approximately
$49,563,000 for the nine months ended September 30, 1996. Capital improvements
to existing properties totaled approximately $3,544,000 for the nine months
ended September 30, 1997, compared to approximately $3,182,000 for the same
period in 1996. Of the $3,501,000 in capital improvements approximately
$1,019,000 was for recurring capital expenditures, including carpet and
appliances, approximately $893,000 was for revenue enhancing projects,
approximately $1,590,000 was for acquisition capital with the remaining balance
for other miscellaneous items. Net cash flow used in investing activities
increased by approximately $57,326,000 for the year ended December 31, 1996 from
approximately $13,719,000 for the year ended December 31, 1995. Capital
improvements to existing properties totaled approximately $4,819,000 for the
year ended December 31, 1996, compared to approximately $155,000 for the same
period in 1995. Of the $4,819,000 in capital improvements approximately
$1,514,000 was for recurring capital expenditures, including carpet and
appliances, approximately $941,000 was for revenue enhancing projects,
approximately $2,282,000 was for acquisition capital with the remaining balance
for other miscellaneous spending. For the stabilized apartment units, recurring
capital expenditures averaged $351 per apartment unit. Construction in progress
for new apartment units decreased to approximately $1,588,000 for the year ended
December 31, 1996 due primarily to no new apartment unit construction.
Net cash flow provided by financing activities decreased by approximately
$32,596,000 during the nine months ended September 30, 1997 from approximately
$40,913,000 for the same period in 1996. The principal uses of cash from
financing activities were approximately $16,460,000 for repayment of notes
payable, approximately $5,713,000 for contributions by the partners, and
$19,064,000 for contribution of properties to CPG. Net cash flow used by
financing activities increased by approximately $52,331,000 during the year
ended December 31, 1996 from approximately $6,455,000 for the year ended
December 31, 1995. The principal uses of the cash included approximately
$6,370,000 for the repayment of notes payable, approximately $110,000 for
distributions to the partners, and $65,266,000 for contribution of properties to
CPG.
CPG believes that cash provided by operations is adequate and anticipates
that it will continue to be adequate in both the short and long-term to meet
operating requirements (including recurring capital expenditures at the
Mortgaged Properties).
47
<PAGE>
INSURANCE
In the opinion of management, property and casualty insurance is in place
which provides adequate coverage to provide financial protection against normal
insurable risks such that it believes that any loss experienced would not have a
significant impact on CPG's liquidity, financial position, or results of
operations.
INFLATION
Substantially all of the resident leases at the Mortgaged Properties
allow, at the time of renewal, for adjustments in the rent payable thereunder,
and thus may enable CPG to seek rent increases. The substantial majority of
these leases are for one year or less. The short-term nature of these leases
generally serves to reduce the risk to CPG of the adverse effects of inflation.
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS
The Management's Discussion and Analysis of Financial Condition and
Results of Operations contains certain forward-looking statements. These
statements include the plans and objectives of management for future operations,
including plans and objectives relating to capital expenditures and
rehabilitation costs on the apartment communities. The forward-looking
statements included herein are based on current expectations that involve
numerous risks and uncertainties which are discussed in "Risk Factors" in this
Prospectus. Although CPG believes that the assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could be
inaccurate and, therefore, there can be no assurance that the forward-looking
statements included in this Prospectus will prove to be accurate. In light of
the significant uncertainties inherent in the forward-looking statements
included herein, the inclusion of such information should not be regarded as a
representation by CPG or any other person that the objectives and plans of CPG
will be achieved.
48
<PAGE>
MANAGEMENT OF THE BORROWER
DIRECTORS AND EXECUTIVE OFFICERS
The business affairs of the Borrower will be managed by the General
Partner; provided that the day-to-day operation of the Mortgaged Properties will
be managed by MAALP pursuant to the terms of a Management Agreement between the
Borrower and MAALP. The Company's directors and executive officers are as
follows:
<TABLE>
<CAPTION>
NAME POSITION WITH TERM EXPIRES POSITION WITH MAAC
BORROWER
<S> <C>
George E. Cates Director 1998 Chairman of the Board of Directors and
Chief Executive Officer
H. Eric Bolton, Jr. Director 1998 Director, President and Chief Operating Officer
Stephen M. Carpenter Independent Director 1998(1) None
Howard Eddings, Jr. Independent Director 1998(1) None
Simon R.C. Wadsworth President Director, Executive Vice President and
Chief Financial Officer
Lynn A. Johnson Secretary/Treasurer Vice President and Secretary/Treasurer
</TABLE>
- ----------
(1) The Articles of Incorporation of the General Partner provide that the
General Partner will at all times have at least one "independent director"
which is defined as a director of the General Partner who is not and has
not been at any time during the five (5) years preceding the time of
initial appointment: (a) a stockholder, director, officer, employee,
partner, attorney or counsel of the General Partner, the Borrower, or any
affiliate of either of them; (b) a customer, supplier or other person who
derives more than 10% of its purchases or revenues from its activities
with the General Partner, the Borrower, or any affiliate of either of
them; (c) a person or other entity controlling or under common control
with any such stockholder, partner, customer, supplier or other person; or
(d) a member of the immediate family of any such stockholder, director,
officer, employee, partner, customer, supplier or other person.
The following is a biographical summary of the experience of the directors
and executive officers of the Company:
GEORGE E. CATES. Mr. Cates is the Chief Executive Officer and Chairman of
the Board of Directors of MAAC, positions he has held since MAAC's inception.
Mr. Cates founded The Cates Company in 1977 and served as its president and
chief executive officer until its merger with MAAC in February 1994. Mr. Cates
received a B.S. in industrial engineering from Georgia Tech. From 1970 to 1977,
Mr. Cates was a shareholder and general manager of Walk Jones and Francis Mah,
Inc., architects and engineers. Prior to that, he served in a number of
manufacturing, sales and marketing positions with the Buckeye Cellulose division
of Procter & Gamble. Mr. Cates is past Chairman of the Board of Memphis Light,
Gas and Water Division, past president of the Memphis Apartment Council, past
Vice Chairman of the Memphis and Shelby County Airport Authority and is
currently a trustee of Rhodes College. Mr. Cates is also a director of First
Tennessee National Corporation. Mr. Cates is 60 years old.
H. ERIC BOLTON, JR. Mr. Bolton has been an employee of MAAC since 1994.
Mr. Bolton joined MAAC as its Vice-President of Development and was named Chief
Operating Officer in February 1996. In December 1996, Mr. Bolton was appointed
to serve as President of MAAC and was appointed as a member of the Board of
Directors of MAAC in February 1997. Mr. Bolton has over 10 years of real estate
experience and prior to joining MAAC was
49
<PAGE>
Executive Vice President and Chief Financial Officer of Trammell Crow Realty
Advisors. He received a B.BA. in accounting from the University of Memphis and
an M.B.A. in finance and real estate from the University of North Texas. Mr.
Bolton is 41 years old.
HOWARD EDDINGS, JR. Mr. Eddings is President of the Memphis Leadership
Foundation. From 1991 to 1996, Mr. Eddings served as Vice-President of Field
Ministries for the Memphis Leadership Foundation. Mr. Eddings received a B.A.
degree in Social Work from the University of Memphis. Mr. Eddings is 36 years
old.
STEPHEN M. CARPENTER. Rev. Carpenter is the Principal/founder of New Hope
Christian Academy in Memphis, Tennessee; established June, 1995 and is an
ordained Episcopal minister serving at The Church of the Holy Communion,
Memphis, Tennessee. Prior to Seminary, Mr. Carpenter was a computer programmer
for two years and a Pension Plan Consultant and Administrator for five years.
His formal education includes a B.B.A. from the University of Texas, Austin and
an M.Div. from Princeton Theological Seminary. Rev. Carpenter is 33 years old.
SIMON R. C. WADSWORTH. Mr. Wadsworth is Executive Vice President, Chief
Financial Officer and a director of MAAC. Mr. Wadsworth joined MAAC in March
1994, but acted as a consultant to the Company from the time the Initial
Offering was completed until being named to his current positions. Mr. Wadsworth
is the President and 85% shareholder of TMF, Inc., an industrial equipment
dealership which he acquired in 1981. Mr. Wadsworth spends less than two hours
per week on TMF, Inc. business, which is managed by professional management.
From 1976 to 1980, he was Director of Corporate Development for Holiday Inns,
Inc., and from 1973 to 1976 was Budget Director for Royal Crown Companies. Mr.
Wadsworth received a B.A. with honors from Cambridge University and an M.B.A.
(concentrating in finance and accounting) from the Harvard Graduate School of
Business. Mr. Wadsworth is 50 years old.
LYNN A. JOHNSON. Ms. Johnson is Vice President, Secretary and Treasurer of
MAAC. Ms. Johnson is a CPA and has an M.B.A. in accountancy from the University
of Memphis. Ms. Johnson joined The Cates Company, MAAC's predecessor, in 1992
as controller. Prior to joining The Cates Company, Ms. Johnson was employed as
controller for Poag & Thomason, a real estate development firm. Ms. Johnson is
46 years old.
EXECUTIVE COMPENSATION
None of the directors or executive officers of the General Partner, with
the exception of Mr. Carpenter and Mr. Eddings, will receive any compensation
for serving in such positions. Mr. Carpenter and Mr. Eddings will each be paid a
stipend of $100 per month for serving as a director of the General Partner.
CERTAIN INFORMATION REGARDING MAALP AND MAAC
OVERVIEW
MAAC is a Memphis-Tennessee based self-administered and self-managed
UPREIT whose common stock is traded on the New York Stock Exchange under the
symbol "MAA." MAAC is the sole general partner of MAALP and owns an
approximately 84.5% interest in MAALP (MAAC and MAALP being hereinafter referred
to as the "Company" where the context so requires). The Company seeks to acquire
apartment communities appealing to middle and upper income residents primarily
in mid-size cities in the southeastern United States and Texas. Approximately
72% of the Company's apartment units are located in Tennessee, Georgia, Florida
and Texas markets. The Company's strategic focus is to provide its residents
high quality apartment units in attractive community settings, characterized by
extensive landscaping and attention to aesthetic detail. The Company utilizes
its experience and expertise in maintenance, landscaping, marketing and
management to effectively "reposition" many of the apartment communities it
acquires to raise occupancy levels and per unit average rentals. The Company's
principal executive offices are located at 6584 Poplar Avenue, Suite 340,
Memphis, Tennessee 38138, and its telephone number is (901) 682-6600.
Founded in 1977 by George E. Cates, MAAC's Chairman of the Board of
Directors and Chief Executive Officer, MAAC's predecessor grew from an operator
of a single 252-unit apartment community in Memphis, Tennessee into a
fully-integrated owner and operator of 5,580 apartment units in 22 apartment
communities in four southeastern states immediately prior to the Company's
initial public offering in February 1994 (the "Initial Offering"). At the time
of the Initial Offering, all of the apartment communities were transferred to
MAALP, and MAAC commenced its operations in an UPREIT structure, with MAALP
being solely responsible for the operation, maintenance, landscaping and other
management duties in respect of the apartment communities.
On November 25, 1997, the Company acquired from Flournoy Development
Company ("FDC"), a Columbus, Georgia-based apartment construction, development
and management company, and certain related property partnerships
50
<PAGE>
(the "Property Partnerships"), 31 apartment communities containing an aggregate
of 7,571 apartment units located primarily in Georgia, Florida, South Carolina
and Tennessee, by means of the merger of FDC into MAAC (the "FDC Merger") and
the acquisition by MAALP of certain apartment communities and partnership
interests in certain Property Partnerships (collectively, the "Flournoy
Reorganization"). In addition, the Company acquired from FDC the construction in
progress of four new apartment communities and five additions to existing
apartment communities, which, in the aggregate, represents the construction of
1,570 new apartment units (the "Development Properties"). After consummation of
the Flournoy Reorganization, the Company owned 114 apartment communities
containing 30,726 apartment units in 13 states, a 450% increase over the number
of apartment units owned at the time of the Initial Offering.
PRESENT AND ANTICIPATED OPERATING STRUCTURE OF THE COMPANY
By means of the FDC Merger, MAAC acquired the Development Properties and
partnership interests in 28 Property Partnerships (the "FDC-owned Partnership
Interests"), which assets at the time of acquisition had an aggregate value of
approximately $27.6 million. The remaining assets were acquired in the Flournoy
Reorganization by MAALP. Consequently, immediately after the Flournoy
Reorganization both MAAC and MAALP owned substantial portions of the historical
assets of FDC and the Property Partnerships.
The FDC Merger was structured as a tax-free reorganization under Section
368(a)(1)(A) of the Code. Pursuant to two separate General Counsel Memoranda
issued by the Internal Revenue Service (the "IRS"), the IRS has privately ruled
that a merger will not qualify as a tax-free reorganization under the Code if a
substantial amount of the assets received by the surviving entity in the merger
were transferred to a partnership (as opposed to a controlled corporation, which
transfer is permitted by the Code) immediately after consummation of the merger.
In January 1997, the Department of Treasury issued proposed regulations that
would permit certain post-merger transfers of assets to partnerships,
effectively reversing the prior IRS position. However, the proposed regulations
expressly do not apply to transactions consummated or subject to definitive
agreements prior to the adoption of final regulations. As of this time, final
regulations have not been adopted. Counsel has advised MAAC that the IRS might
successfully assert that the FDC Merger did not qualify as a tax-free
reorganization under the Code if MAAC were to transfer the Development
Properties and the FDC-owned Partnership Interests to MAALP.
If the FDC Merger were to fail to qualify as a tax-free reorganization
under the Code, MAAC and the former shareholders of FDC would incur substantial
tax liabilities. Therefore, in order to preserve the status of the FDC Merger as
a tax-free reorganization, MAAC has agreed not to transfer the Development
Properties and the FDC-owned Partnership Interests to MAALP for a period of two
years after consummation of the Flournoy Reorganization without the consent of
the former FDC shareholders. Until the Development Properties and FDC-owned
Partnership Interests are transferred from MAAC to MAALP, MAAC will retain
substantial interests in the real estate assets represented by the Development
Properties and the FDC-owned Partnership Interests and will not be able to
operate exclusively through its preferred UPREIT structure. The Company believes
that the inability of MAAC to transfer those assets to MAALP and operate
exclusively through its UPREIT structure will preclude MAALP from obtaining the
ratings from the Rating Agencies necessary to effect the Permitted Merger and
Security Release. At the end of such restricted period, MAAC intends to transfer
all real estate assets then-owned by it, including the Development Properties
and the FDC-owned Partnership Interests, to MAALP and to seek the ratings for
the unsecured debt of MAALP from the Rating Agencies required as a condition to
the Permitted Merger and Security Release.
Accordingly, included or incorporated by reference into this Prospectus
are Consolidated Summary Financial and Operating Data and consolidated financial
statements for MAAC, which include 100% of the assets, liabilities and
operations of MAALP as a consolidated subsidiary of MAAC. MAAC believes that
such information more accurately presents the financial condition, results of
operations, cash flow and other operating data that would be considered
important by Certificate holders as prospective holders of the Bonds following
the Permitted Merger and Security Release, at which time the Bonds will be the
general, unsecured obligations of MAALP, than would the same information for
either MAAC or MAALP on an unconsolidated, "standalone" basis. See " -- Summary
Consolidated Financial and Operating Data" and "Incorporation by Reference." At
least 60 days prior to the Permitted Merger and Security Release, MAALP will
cause the Trustee to distribute the Exchange Act Reports to the holders of
Certificates, which Exchange Act Reports will contain consolidated audited and
unaudited financial information concerning MAALP. The Company
51
<PAGE>
believes that at such time, the Development Properties and FDC-owned Partnership
Interests will have been contributed by MAAC to MAALP and that substantially all
of the Company's assets and operations at such time will be held and conducted
by MAALP and its subsidiaries, including the Borrower.
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA FOR THE COMPANY
The following table sets forth summary financial and operating information
on an historical basis for the Company and its predecessor. See " -- Present and
Anticipated Operating Structure" immediately above. The following information
should be read in conjunction with all of the financial statements and notes
thereto included in the Quarterly Report on Form 10-Q for the quarter and
nine-month period ended September 30, 1997, and the Annual Report on Form 10-K
for the year ended December 31, 1996, which are incorporated by reference
herein. Also set forth below are summary unaudited pro forma financial,
operating and other data for the Company as of and for the nine months ended
September 30, 1997 and the year ended December 31, 1996 which should be read in
conjunction with the unaudited pro forma condensed combined financial statements
included in the Company's Current Report on Form 8-K/A, dated September 17, 1997
and filed with the Securities and Exchange Commission on November 14, 1997
incorporated by reference herein. The unaudited pro forma balance sheet data at
September 30, 1997 have been prepared as if the following had occurred at
September 30, 1997: (i) consummation of the offering and sale of 1,875,000
shares of MAAC's 8 7/8% Series B Cumulative Preferred Stock and the application
of the net proceeds thereof; (ii) consummation of the Flournoy Reorganization;
(iii) the establishment of the MSMC Loan and the Company's initial anticipated
borrowings thereunder; (iv) the issuance and sale of 3,499,300 shares of the
Company's Common Stock for an aggregate net purchase price of $92.8 million and
the related use of such proceeds; (v) the acquisition of one apartment community
containing an aggregate of 194 apartment units for an aggregate cash purchase
price of $8.9 million, subsequent to September 30, 1997.
The unaudited pro forma statements of operations data have been prepared
as if, at January 1, 1996, in addition to the transactions described above, the
following had occurred: (i) the acquisition of seven Mortgaged Properties in
1996 and of ten Mortgaged Properties in 1997; (ii) the disposition of three
Mortgaged Properties in 1996 for aggregate cash consideration of $17.8 million;
(iii) the issuance and sale in 1996 of 2,000,000 shares of MAAC's 9.5% Series A
Cumulative Preferred Stock for an aggregate net cash price of $47.8 million and
the related use of such proceeds; (iv) the issuance and sale in 1997 of
2,300,000 shares of the Company's Common Stock for an aggregate net cash price
of $62.6 million and the related use of such proceeds; and (v) the Company
qualified as a REIT and distributed all of its taxable income for the periods
presented and, therefore, incurred no income tax.
The pro forma financial data are not necessarily indicative of what the
actual financial position or results of operations of the Company would have
been as of the date or for the periods indicated, nor do they purport to
represent the results of operations or financial position for future periods.
This data should be read in conjunction with the historical financial statements
of the Company and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in the Forms 10-Q and Form 10-K described above and
incorporated into the accompanying Prospectus by reference. In the opinion of
management, the operating data for the periods presented include all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the information set forth therein.
52
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
SUMMARY FINANCIAL AND OPERATING DATA
(Dollars in thousands except per share and property data)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------
(Unaudited)
Historical Pro-
Pro-Forma -------------------- Forma
1997 1997 1996 1996
----------- -------- -------- --------
<S> <C> <C> <C> <C>
OPERATING DATA:
Revenue:
Property
Rental ......................... $ 139,917 $ 95,388 $ 81,527 $177,827
Other .......................... 3,102 1,566 1,347 3,951
Property management ............... 1,036 -- -- 1,319
Development ....................... 614 -- -- 2,046
Construction, net ................. 631 -- -- 1,854
Miscellaneous ..................... 672 -- -- 1,259
Total revenue .................. 145,972 96,954 82,874 188,256
Expenses:
Property Expenses (2) ............. 54,092 36,928 31,795 68,785
General and administrative (3) .... 8,180 4,707 4,621 10,587
Property management ............... 576 -- -- 715
Interest .......................... 33,012 20,271 19,502 42,116
Depreciation and amortization ..... 30,226 19,798 16,175 38,713
Other, net (4) .................... (875) -- -- 640
Gain on disposition of properties . -- -- 1,944 --
Income before minority interest
and extraordinary item ............ 20,761 15,250 12,725 26,700
Net income ........................ 17,854 12,678 10,384 22,962
Preferred dividends ............... 6,682 3,562 -- 8,910
Net income available for
common shares ................. 11,172 9,116 10,384 14,052
Net income per weighted average
common share outstanding ...... $ .61 $ .71 $ .95 $ .76
Weighted average
Common Shares outstanding ..... 18,451 12,793 10,982 18,451
BALANCE SHEET DATA:
Real estate owned, at cost ........ $ 1,191,470 $783,545 $624,496 --
Total assets ...................... 1,158,440 737,291 600,115 --
Total debt ........................ 594,784 382,058 347,541 --
Minority interest ................. 63,076 45,383 39,623 --
Shareholders' equity (owners'
deficit) .......................... 466,440 290,499 196,189 --
OTHER DATA:
Dividends declared per share ...... -- $ 1.07 $ 1.02 --
Ratio of total debt to total
capitalization (5) ................ 44.8% 42.2% 50.8% --
Number of properties .............. 114 82 72 --
Number of apartment units ......... 30,726 22,085 18,992 --
EBITDA (6) ........................ 83,124 -- -- 108,169
Debt Service
Coverage Ratio (7) ............. 2.52x -- -- 2.57x
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
Historical
----------------------------------------------------------
1996 1995 1994(1) 1993 1992
-------- -------- -------- --------- ---------
(Predecessor)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenue:
Property
Rental ......................... $110,090 $ 93,509 $ 50,181 $ 25,687 $ 21,756
Other .......................... 1,060 1,454 1,026 608 438
Property management ............... -- -- -- -- --
Development ....................... -- -- -- -- --
Construction, net ................. -- -- -- -- --
Miscellaneous ..................... 732 -- -- -- --
Total revenue .................. 111,882 94,963 51,207 26,295 22,194
Expenses:
Property Expenses (2) ............. 42,570 37,954 19,484 11,316 9,682
General and administrative (3) .... 6,154 4,851 3,613 1,402 1,112
Property management ............... -- -- -- -- --
Interest .......................... 25,766 22,684 10,233 9,448 7,524
Depreciation and amortization ..... 22,104 17,167 9,099 3,720 3,344
Other, net (4) .................... -- -- -- -- --
Gain on disposition of properties . 2,185 -- -- -- --
Income before minority interest
and extraordinary item ............ 17,473 12,307 8,788 2,409 532
Net income ........................ 14,260 9,810 6,944 2,542 1,090
Preferred dividends ............... 990 -- -- -- --
Net income available for
common shares ................. 13,270 9,810 6,944 2,542 1,090
Net income per weighted average
common share outstanding ...... $ 1.21 $ 1.00 $ 1.01 -- --
Weighted average
Common Shares outstanding ..... 10,986 9,819 6,534 -- --
BALANCE SHEET DATA:
Real estate owned, at cost ........ $641,893 $578,788 $434,460 $ 125,269 $ 111,686
Total assets ...................... 611,199 565,267 439,233 104,439 93,252
Total debt ........................ 315,239 307,939 232,766 105,594 95,036
Minority interest ................. 39,238 41,049 43,709 -- --
Shareholders' equity (owners'
deficit) .......................... 241,384 202,278 152,385 (4,684) (4,493)
OTHER DATA:
Dividends declared per share ...... $ 2.07 $ 2.01 $ 1.71 -- --
Ratio of total debt to total
capitalization (5) ................ 41.9% 48.2% 44.1% -- --
Number of properties .............. 73 70 54 22 19
Number of apartment units ......... 19,280 18,220 14,333 5,580 5,064
EBITDA (6) ........................ -- -- -- -- --
Debt Service
Coverage Ratio (7) ............. -- -- -- -- --
</TABLE>
(NOTES ON FOLLOWING PAGE)
53
<PAGE>
(1) Operating data for 1994 includes 34 days of predecessor financial
information and per share data for 1994 is for the period February 4, 1994
through December 31, 1994.
(2) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Capital Expenditures" included in the Quarterly
Report on Form 10-Q for the quarter and nine-month period ended September
30, 1997 and the Annual Report on Form 10-K for the year ended December
31, 1996, which are incorporated herein by reference.
(3) Includes corporate expenses.
(4) Pro forma operating data for the nine-month period ended September 30,
1997 includes a non-recurring tax credit of approximately $875,000.
(5) Total capitalization as of the dates presented is total debt plus the
aggregate market value of the Company's Common Stock, Series A Preferred
Stock, Series B Preferred Stock and units of limited partnership interest
held by persons other than the Company (based upon the market value of the
Company's Common Stock), which are redeemable for shares of Common Stock
on a one-for-one basis, or at the Company's option for cash. The market
value of the Series A Preferred Stock and the Series B Preferred Stock is
based upon $25.00 per share.
(6) Earnings before interest taxes depreciation and amortization ("EBITDA")
represents net income before extraordinary items and minority interest,
computed in accordance with GAAP, adjusted for gains on dispositions of
properties, interest expense, federal income taxes, depreciation and
amortization. EBITDA should not be considered as a substitute for net
income or any other GAAP measurement of performance, as an indication of
operating performance or as an alternative to cash flows from operating,
investing and financing activities as a measure of liquidity.
(7) Debt service coverage ratio is computed as a ratio of EBITDA to interest
expense.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
CERTIFICATES
GENERAL
The following general discussion summarizes certain of the material
federal income tax aspects of the acquisition, ownership and disposition of the
Certificates. This discussion is a summary for general information only and does
not consider all aspects of federal income taxation that may be relevant to the
purchase, ownership and disposition of the Certificates by a prospective
investor in light of his or her personal circumstances. This discussion also
does not address the federal income tax consequences of ownership of
Certificates not held as capital assets within the meaning of Section 1221 of
the Code, or the federal income tax consequences to investors subject to special
treatment under the federal income tax laws, such as dealers in securities or
foreign currency, tax-exempt entities, banks, financial institutions, thrifts,
insurance companies, persons that hold the Certificates as part of a "straddle,"
a "hedge" against currency risk, or a "conversion transaction," persons that
have a "functional currency" other than the U.S. dollar, and investors in
pass-through entities. In addition, the discussion is generally limited to the
tax consequences to initial holders. It also does not describe any tax
consequences arising out of the tax laws of any state, local or foreign
jurisdiction.
This summary is based upon the Code, existing and proposed regulations
thereunder, and current administrative rulings and court decisions. All of the
foregoing are subject to change, possibly on a retroactive basis; accordingly,
any such change could affect the continuing validity of this discussion.
54
<PAGE>
PERSONS CONSIDERING THE PURCHASE OF CERTIFICATES SHOULD CONSULT THEIR OWN
TAX ADVISORS CONCERNING THE APPLICATION OF FEDERAL INCOME TAX LAWS, AS WELL AS
THE LAWS OF ANY STATE, LOCAL, OR FOREIGN TAXING JURISDICTION, TO THEIR
PARTICULAR SITUATIONS.
The following discussion is limited to the federal income tax consequences
relevant to a holder of a Certificate that is a U.S. Person, except where
otherwise noted. A "U.S. Person" is (i) a citizen or resident of the United
States, (ii) a corporation or partnership (except to the extent provided in
applicable Treasury regulations) organized under the laws of the United States
or any political subdivision thereof or therein, (iii) an estate, the income of
which is subject to federal income tax regardless of the source, or (iv) a trust
with respect to which a court within the United States is able to exercise
primary supervision over its administration and one or more such U.S. Persons
have the authority to control all of its substantial decisions (and certain
other trusts eligible to elect to be treated as U.S. Persons).
CLASSIFICATION OF INVESTMENT ARRANGEMENT
In the opinion of Baker Donelson Bearman & Caldwell, a professional
corporation, the Trust will be treated for federal income tax purposes as a
grantor trust and not as an association (or publicly traded partnership) taxable
as a corporation. The Trustee intends to report income, gain, loss and deduction
to the Internal Revenue Service ("IRS") accordingly.
Under the grantor trust rules, each Certificate holder will be treated for
federal income tax purposes as having purchased an undivided interest in the
assets of the Trust to the extent of the Certificate holder's proportionate
interest in the Trust. Similarly, the sale of a Certificate by a Certificate
holder will be considered a sale of the Certificate holder's interest in the
assets of the Trust with respect to that holder. In general, the tax
consequences of an investment in Certificates will depend on the rules
applicable to the Bonds and, after foreclosure, the Mortgaged Properties. The
Certificates will represent an undivided proportionate interest in the Bonds.
A Certificate owned by a "domestic building and loan association" within
the meaning of Code Section 7701(a)(19) will not be considered to represent
"loans . . . secured by an interest in real property which is ... residential
real property" within the meaning of Code Section 7701(a)(19)(C)(v). In
addition, a Certificate owned by a real estate investment trust will be
considered to represent "real estate assets" within the meaning of Code Section
856(c)(4)(A), and interest income on such assets will be considered "interest on
obligations secured by mortgages on real property" within the meaning of Code
Section 856(c)(3)(B), in each case to the extent that the holder's pro rata
undivided interest in the Bonds does not exceed such holder's allocable interest
in the fair market value of the Mortgaged Properties. Furthermore, a Certificate
owned by a real estate mortgage investment conduit ("REMIC") may be considered
to represent an "obligation (including any participation or certificate of
beneficial ownership therein) which is principally secured by an interest in
real property" within the meaning of Code Section 860G(a)(3)(A) to the extent
that the Bonds constitutes a "qualified mortgage" within the meaning of Code
Section 860G(a)(3).
INTEREST INCOME
It is not currently expected that the Bonds will be issued with original
issue discount. Accordingly, Certificate holders will accrue income for federal
income tax purposes on their allocable share of interest payable on the Bonds in
accordance with their normal method of tax accounting.
SALE OR EXCHANGE OF CERTIFICATES
Upon the sale or exchange of a Certificate, a holder will recognize gain
or loss equal to the difference between the amount realized on the sale and its
aggregate adjusted basis in its pro rata share of the Bonds. In general, the
aggregate adjusted basis will equal the holder's cost for the Certificate
increased by the amount of any income (other than qualified stated interest)
previously reported with respect to the Certificate and decreased by the amount
of any losses previously reported with respect to the Certificate and the amount
of any distributions (other than qualified stated interest) received thereon.
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Except with respect to market discount on the Bonds, and except for
certain financial institutions subject to the provisions of Code Section 582(c),
such gain or loss generally would be capital gain or loss if the Certificate was
held as a capital asset. However, gain on the sale of a Certificate will be
treated as ordinary income (i) if a Certificate is held as part of a "conversion
transaction", as defined in Code Section 1258(c), up to the amount of interest
that would have accrued on the holder's net investment in the conversion
transaction at 120% of the appropriate applicable Federal rate (under Code
Section 1274 (d) ) in effect at the time the taxpayer entered into the
transaction, minus any amount previously treated as ordinary income with respect
to any prior disposition of property that was held as part of such transaction;
or (ii) in the case of a non-corporate taxpayer, to the extent such taxpayer has
made an election under Code Section 163(d) (4) to have net capital gains taxed
as investment income at ordinary income rates.
TAXATION OF FOREIGN INVESTORS
Under present United States Federal income tax law and subject to the
discussions of backup withholding below:
(a) if the Certificates are offered, sold and delivered, and
principal and interest thereon are paid, in accordance with the terms of
the Trust Agreement, payments of principal of and interest on the
Certificates to any holder that is a United States Alien will not be
subject to United States Federal withholding tax, provided that in the
case of interest, (1) the holder does not actually or constructively own
10% or more of the capital or profits interest in the Borrower, (2) the
holder is not a controlled foreign corporation that is related to the
Depositor or Borrower through stock ownership, and (3) either (i) the
beneficial owner of the Certificate certifies to the Trustee or its agent,
under penalties of perjury, that it is not a U.S. Person and provides its
name and address, or (ii) a securities clearing organization, bank or
other financial institution that holds customer's securities in the
ordinary course of its trade or business (a "financial institution") and
holds the Certificate on behalf of the beneficial owner certifies to the
Trustee or its agent, under penalties of perjury, that such statement has
been received from the beneficial owner by it or by a financial
institution between it and the beneficial owner and furnishes the payor
with a copy thereof;
(b) a holder of a Certificate who is a United States Alien will not
be subject to United States Federal withholding tax on gain realized on
the sale or exchange of a Certificate; and
(c) a Certificate held by an individual who at the time of death is
not a citizen or resident of the United States will not be subject to
United States Federal estate tax as a result of such individual's death if
the individual does not actually or constructively own (i) 10% or more of
the total combined voting power of all classes of stock of the Depositor
entitled to vote or (ii) 10% or more of the capital or profits interest in
the Borrower, and the income on the Certificate would not have been
effectively connected with the conduct of a trade or business by the
individual in the United States.
Gain recognized by a United States Alien on the disposition of a
Certificate will be subject to United States Federal income tax if (i) such gain
is effectively connected with a trade or business conducted by such person
within the United States (in which case the branch profits tax may also apply if
the person is a foreign corporation) or (ii) in the case of a United States
Alien that is an individual, such person is present in the United States for a
period or periods aggregating 183 days or more in the taxable year of the sale
or exchange and certain other conditions are met.
If a United States Alien is engaged in a trade business within the United
States and interest and premium, if any, on a Certificate is effectively
connected with the conduct of such trade or business, such person may be subject
to United States Federal income tax on such interest and premium at ordinary
Federal income tax rates on a net basis (in which case the branch profits tax
may also apply if the Person is a foreign corporation).
The IRS recently issued final regulations (the "New Regulations") which
would provide alternative methods of satisfying the certification requirement
described in clause (a) (3) above. The New Regulations are effective January 1,
1999, although valid withholding certificates that are held on December 31,
1998, remain valid until the earlier of December 31, 1999 or the due date of
expiration of the Certificate under the rules as currently in effect. The New
Regulations would require, in the case of Certificates held by a foreign
partnership, that (x) the certification described
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in clause (a) (3) above be provided by the partners rather than by the foreign
partnership and (y) the partnership provide certain information, including a
United States taxpayer identification number. A look-through rule would apply in
the case of tiered partnerships.
United States Aliens should consult their own tax advisors concerning the
application of the certification requirements in the New Regulations.
BONDS
GENERAL
The following discussion is a summary of the anticipated material federal
income tax considerations relating to the ownership and disposition of the Bonds
after the Permitted Merger and Security Release. The summary is based upon
current provisions of the Code, the Treasury regulations promulgated thereunder,
and existing judicial and administrative rulings and decisions, all of which are
subject to change, prospectively or retroactively.
This summary does not purport to deal with all aspects of federal income
taxation that may affect particular investors in light of their individual
circumstances, nor with certain categories of investors subject to special
treatment under the federal income tax laws. This summary focuses primarily on
investors who will hold the Bonds as "capital assets" (generally, property held
for investment) within the meaning of Section 1221 of the Code, although much of
the discussion is applicable to other investors as well. The summary is based on
current law and there can be no assurance that the law will not change or that
the IRS will not take a position that would be materially adverse to investors.
Finally, the summary does not purport to address the anticipated state and local
income tax consequences to investors of the ownership and disposition of the
Bonds. Consequently, potential Bondholders are advised to consult their own tax
advisors concerning the federal, state, or local tax consequences to them of the
purchase, holding, and disposition of the Bonds.
No election will be made to treat the Borrower, the Mortgaged Properties,
or the arrangement by which the Bonds are issued as a REMIC for federal income
tax purposes. There are no regulations, published rulings, or judicial decisions
involving the characterization for federal income tax purposes of securities
with terms substantially the same as the Bonds. The Borrower believes the Bonds
will be treated as evidences of indebtedness for federal income tax purposes and
not as ownership interests in the Mortgaged Properties. Bondholders should be
aware that (i) Bonds held by a domestic building and loan association should
constitute "loans secured by an interest in real property" within the meaning of
Code Section 7701(a)(19)(C)(v); (ii) Bonds held by a REIT should be treated as
"real estate assets" within the meaning of Code Section 856(c)(5)(A); and (iii)
income derived from the Bonds should be considered "interest on obligations
secured by mortgages on real property or on interests in real property" within
the meaning of Code Section 856(c)(3)(B). Bonds held by a regulated investment
company or a REIT will not constitute "government securities" within the meaning
of Code Section 851 (b)(4)(A)(i) or Code Section 856(c)(5)(A).
Payments received by Bondholders on the Bonds generally should be accorded
the same tax treatment under the Code as payments received on other taxable
corporate bonds. Except as described below for Bonds issued with market discount
or premium, interest paid or accrued on a Bond will be treated as ordinary
income to the Bondholder and a principal payment on a Bond will be treated as a
return of capital to the extent that the Bondholder's tax basis in the Bond is
allocable to that payment. In general, interest paid to Bondholders who report
their income on the cash receipts and disbursements method of accounting should
be taxable to them when received. Interest earned by Bondholders who report
their income on the accrual method of accounting will be taxable when accrued,
regardless of when it is actually received. The Indenture Trustee will report
annually to the IRS and to Bondholders of record with respect to interest paid
or accrued on the Bonds.
MARKET DISCOUNT
A subsequent purchaser of a Bond at a discount from its outstanding
principal amount will acquire such Bond with market discount. A Bond will not be
considered to have market discount, however, if the amount of such market
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discount is de minimis, i.e., less than the product of (i) 0.25% of the
remaining principal amount of the Bond, multiplied by (ii) the weighted average
maturity ("WAM") of the Bond. The purchaser generally will be required to
recognize the market discount as ordinary income. A purchaser of a Bond with
market discount generally will be required to treat a portion of any gain on a
sale, exchange, redemption, or other disposition of the Bond as ordinary income
to the extent of the accrued, but not previously taxable, market discount. A
purchaser of a Bond with market discount also generally will be required to
include market discount that has accrued, but has not yet been recognized, in
income to the extent of any partial principal payments that are received. Market
discount generally will accrue ratably over the remaining term of the Bond,
unless the Bondholder irrevocably elects to accrue such market discount on the
basis of a constant interest rate.
A Bondholder who has acquired a Bond with market discount generally must
defer interest deductions attributable to any indebtedness incurred or continued
to purchase or carry the Bond to the extent such deductions exceed interest
income on the Bond. The amount of deferred interest expense, however, is limited
to the amount of market discount income that accrues, but that is not recognized
currently. Any such deferred interest expense generally is allowed as a
deduction not later than the year in which the related market discount income is
recognized. As an alternative to the inclusion of market discount in income upon
disposition of a Bond, a Bondholder may elect to recognize market discount
currently on an uncapped accrual basis. In that case, the preceding interest
expense deferral rule will not apply. Any such election generally will apply to
all market discount instruments held or acquired by the Bondholder in the
taxable year of election or thereafter.
Treasury regulations implementing the market discount rules have not yet
been issued, and uncertainty exists with respect to many aspects of those rules.
Due to the substantial lack of regulatory guidance with respect to the market
discount rules, it is unclear how those rules will affect any secondary market
that develops for the Bonds. Prospective investors should consult their own tax
advisors regarding the application of the market discount rules to the Bonds.
AMORTIZABLE PREMIUM
A purchaser of a Bond who purchases the Bond at a premium over its stated
principal amount plus accrued interest generally may elect to amortize such
premium ("Section 171 Premium") over the remaining term of the Bond using a
constant yield method that reflects monthly compounding. Pursuant to proposed
Treasury regulations issued on July 1, 1996, Section 171 Premium allocable to an
accrual period will be treated as an offset to interest income on a Bond
allocable to such accrual period at the time the Bondholder takes into account
the interest income under its method of accounting. Any Section 171 Premium
allocable to an accrual period in excess of the interest income on a Bond
allocable to such period will be carried forward to the next accrual period. If
a Bondholder makes an election to amortize Section 171 Premium on a Bond, such
election will apply to all taxable debt instruments (including all Bonds) then
owned and thereafter acquired by the Bondholder. Such election will be
irrevocable without the consent of the Service.
Section 171 Premium does not include any acquisition premium attributable
to the portion of a purchase price for a Bond that exceeds the adjusted issue
price but not the stated principal amount of such Bond. Purchasers who pay a
premium for the Bonds should consult their tax advisors regarding the election
to amortize premium and the method of accrual to be employed.
GAIN OR LOSS ON DISPOSITION
If a Bond is transferred or sold in a taxable transaction, the Bondholder
will recognize gain or loss equal to the difference between the amount realized
on the sale and such Bondholder's adjusted basis in the Bond. The adjusted basis
of a Bond generally will equal the cost of the Bond to the Bondholder, increased
by any market discount previously includible in the Bondholder's gross income
with respect to the Bond, and reduced by the portion of the basis of the Bond
allocable to payments (other than qualified stated interest payments) previously
received by the Bondholder and by any amortized premium. Similarly, a Bondholder
who receives a scheduled principal payment with respect to a Bond will recognize
gain or loss equal to the difference between the amount of the payment and the
portion of his adjusted basis in the Bond that is allocable to such payment.
Except to the extent that the market discount rules apply and except as provided
below, any gain or loss on the sale or other disposition of a Bond generally
will be capital gain or loss. Such
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gain or loss will be long-term gain or loss if the Bond is held as a capital
asset by the Bondholder for more than 12 months.
If the holder of a Bond is a bank, thrift, or similar institution
described in Section 582 of the Code, any gain or loss on the sale or exchange
of the Bond will be treated as ordinary income or loss. A portion of any gain
from the sale of a Bond that otherwise might be capital gain may be treated as
ordinary income to the extent that such Bond is held as part of a "conversion
transaction" within the meaning of Section 1258 of the Code. A conversion
transaction generally is one in which the taxpayer has taken two or more
positions in Bonds or similar property that reduce or eliminate market risk, if
substantially all of the taxpayer's return is attributable to the time value of
the taxpayer's net investment in such transaction. The amount of gain realized
in a conversion transaction that is recharacterized as ordinary income generally
will not exceed the amount of interest that would have accrued on the taxpayer's
net investment at 120% of the appropriate "applicable federal rate" (which rate
is computed and published monthly by the Service) at the time the taxpayer
entered into the conversion transaction, subject to appropriate reduction for
prior inclusion of interest and other ordinary income from the transaction.
MISCELLANEOUS TAX ASPECTS
BACKUP WITHHOLDING. A Certificate holder or, after the Permitted Merger
and Security Release, a Bondholder may, under certain circumstances; be subject
to "backup withholding" at the rate of 31% with respect to "reportable
payments," which include interest payments and principal payments to the extent
of accrued , as well as distributions of proceeds from a sale of Bonds. Backup
withholding generally applies if the holder of a Certificate or a Bond, as the
case may be (i) fails to furnish the Indenture Trustee its social security
number or other taxpayer identification number ("TIN"), (ii) furnishes the
Indenture Trustee or the Borrower an incorrect TIN, (iii) fails to report
properly interest, dividends, or other "reportable payments," or (iv) under
certain circumstances, fails to provide the Indenture Trustee, the Borrower, or
such Certificate holder's or Bondholder's, as the case may be, securities broker
with a certified statement, signed under penalty of perjury, that the TIN is its
correct taxpayer identification number and that the Certificate holder or the
Bondholder, as the case may be, is not subject to backup withholding. Backup
withholding will not apply with respect to payments made to certain Certificate
holders or Bondholders, as the case may be, including corporations, certain
tax-exempt recipients (such as exempt organizations), and certain Non-U.S
Holders (as defined below) that comply with the requisite certification
procedures. Certificate holders or Bondholders, as the case may be, should
consult their tax advisors as to the application of backup withholding to
payments received by them with respect to the Certificates and the Bonds.
The Trustee will report to the Certificate holders and the Indenture
Trustee will report to the Bondholders (other than those that are exempt from
the backup withholding rules) and to the IRS within a reasonable time after the
end of each calendar year the amount of any "reportable payments" during such
year and the amount of tax withheld, if any, with respect to payments on the
Certificates or the Bonds, as the case may be.
FOREIGN CERTIFICATE HOLDERS AND BONDHOLDERS. Under the Code, interest
income (including accrued interest recognized on the sale or exchange of a
Certificate or a Bond) paid or accrued with respect to Certificates or Bonds
held by nonresident alien individuals, foreign corporations, foreign
partnerships, or certain foreign estates and trusts ("Non-U.S. Holders"), or
Certificate holders or Bondholders holding on behalf of Non-U.S. Holders,
generally will be treated as "portfolio interest" and therefore will not be
subject to any United States federal income tax, provided that (i) such interest
income is not effectively connected with a trade or business in the United
States of the Non-U.S. Holder and (ii) the Borrower or other person who
otherwise would be required to withhold tax from such payments (the "Withholding
Agent") is provided with an appropriate statement that the beneficial owner of a
Certificate or a Bond is a Non-U.S. Holder. Interest income paid on Certificates
or Bonds to Non-U.S. Holders also will not be subject to withholding tax if (i)
such interest income is effectively connected with a United States trade or
business conducted by the Non-U.S. Holder and (ii) the Non U.S. Holder files an
IRS Form 4224 with the Withholding Agent. Such effectively connected interest
income, however, generally will be subject to regular United States federal
income tax. In other circumstances, interest income paid to Non-U.S. Holders may
be subject to United States withholding tax at a rate of 30% (subject to
reduction by applicable treaty).
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DUE TO THE COMPLEXITY OF THE FEDERAL INCOME TAX RULES APPLICABLE TO
CERTIFICATE HOLDERS OR BONDHOLDERS AND THE CONSIDERABLE UNCERTAINTY THAT EXISTS
WITH RESPECT TO MANY ASPECTS OF THOSE RULES, POTENTIAL INVESTORS SHOULD CONSULT
THEIR OWN TAX ADVISORS REGARDING THE TAX TREATMENT OF THE ACQUISITION,
OWNERSHIP, AND DISPOSITION OF THE CERTIFICATES OR THE BONDS.
TAX CONSIDERATIONS AFTER A FORECLOSURE FOR FOREIGN INVESTORS
If the Trustee were to acquire beneficial ownership, on behalf of the
holders, of a Mortgaged Property by foreclosure, deed in lieu of foreclosure or
otherwise, then, to the extent that a United States Alien is treated as owning
an interest in the Foreclosed Property for United States Federal income tax
purposes, such United States Alien would be subject to United States Federal
withholding tax at a rate of 30% (subject to reduction by applicable treaties)
on its share of the gross income from the Foreclosed Property (which amount
could exceed such United States Alien's share of the net income from the
Foreclosed Property), unless such United States Alien has in effect an election
to be taxed at normal U.S. tax rates on the net income from all U.S. real
property owned by such United States Alien. In addition, a United States Alien
would be subject to tax in the same manner as a U.S. Person on any gain
recognized upon a sale of the Foreclosed Property. Ten percent of the gross
amount realized on the disposition of the Foreclosed Property that is allocable
to a United States Alien is subject to withholding. The amount thereby withheld
is creditable against the actual amount of the United States Alien's tax
liability. An interest in the Foreclosed Property deemed to be acquired by a
United States Alien would be includable in such individual's estate for U.S.
estate tax purposes. In addition, depending upon the Trust's level of
activities, its realization of gain and how long the Trust held the Foreclosed
Property, a United States Alien may be deemed to be involved in a U.S. trade or
business for United States Federal income tax purposes and be obligated to file
United States Federal and state tax returns.
DEDUCTIBILITY OF TRUST'S FEES AND EXPENSES
In computing its Federal income tax liability, a Certificate holder will
be entitled to deduct, consistent with its method of accounting, its share of
reasonable administrative fees, trustee fees and other fees paid or incurred by
the Trust as provided in Section 162 or 212 of the Code and any allowable
amortization deductions with respect to certain other assets of the Trust. If a
Certificate holder is an individual, estate or trust, the deduction for his
share of fees will be a miscellaneous itemized deduction that may be disallowed
in whole or in part.
STATE, LOCAL AND FOREIGN TAXES
Certificate holders should consult their tax advisors with respect to
state, local and foreign tax considerations relevant to an investment in the
Certificates.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
establishes fiduciary standards and other responsibilities for fiduciaries of
employee benefit plans subject to Part 4, Subtitle B, Title I of ERISA ("ERISA
Plans"). In addition, unless a statutory or administrative exemption applies,
ERISA and Section 4975 of the Code impose restrictions on certain transactions
(i.e. "prohibited transactions") involving the assets of an ERISA Plan, a plan
described in Section 4975(e)(1) of the Code or a person treated as holding
assets of such plans pursuant to Department of Labor Regulation, 29 F.R.
2510.3-101 ("Plan Assets Regulation") or applicable law (collectively, "Plans")
and certain persons referred to as a "party in interest" under ERISA and a
"disqualified person" under Code Section 4975 with respect to such Plan. A loan
or other extension of credit, the provision of services or a sale or exchange of
property occurring between a Plan and a party in interest or disqualified person
with respect to such Plan might constitute a non-exempt prohibited transaction.
Pursuant to the Plan Assets Regulation or applicable law, the Bonds and
other assets of the Trust may be treated, for purposes of ERISA and Code Section
4975, as if they were assets of a Plan acquiring a Certificate unless an
exception applies. There can be no assurances that any exception applies in
respect of the Trust. Therefore, absent an exemption
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from the prohibited transaction restrictions of ERISA and the Code, the
purchase, holding or sale of Class A Certificates by a Plan, or the operations
of the Trust, might result in a prohibited transaction.
Each investor in the Certificates or the Bonds will be deemed to have
represented that such investor (a) is not, and is not using the assets of, an
ERISA Plan or an employee benefit plan or other retirement plan or arrangement
subject to Section 4975 of the Code, or (b) has determined that the purchase and
holding of Certificates or Bonds, as the case may be, by such investor would not
constitute or result in a non-exempt prohibited transaction under Section 406 of
ERISA or Section 4975 of the Code because the relevant conditions for exemptive
relief under one or more of the following prohibited transaction class
exemptions have been satisfied: Prohibited Transaction Class Exemption ("PTCE")
96-23 (relating to transactions effected by in-house asset managers); PTCE 95-60
(relating to certain transactions involving insurance company general accounts);
PTCE 91-38 (relating to investments by bank collective investment funds); PTCE
90-1 (relating to investment by insurance company pooled separate accounts); or
PTCE 84-14 (relating to transactions effected by a "qualified professional asset
manager").
Due to the complexity of the rules and penalties under ERISA and the Code
applicable to Plans, potential Plan investors should consult their advisors and
counsel regarding whether the purchase and holding of the Bonds could give rise
to a transaction that is prohibited under ERISA or the Code. Potential investors
also should be aware that ERISA requires that the assets of a Plan be valued at
their fair market value as of the close of the plan year and that the Borrower
does not plan to provide any valuations to Bondholders.
LEGAL INVESTMENT
The Certificates will not constitute "mortgage-related securities" for
purposes of the SMMEA. The appropriate characterization of the Certificates
under various legal investment restrictions, and thus the ability of investors
subject to these restrictions to purchase the Certificates, may be subject to
significant interpretive uncertainties.
All depository institutions considering an investment in the Certificates
should review the "Supervisory Policy Statement on Securities Activities" dated
January 28, 1992, as revised April 15, 1994 (the "Policy Statement") of the
Federal Financial Institutions Examination Council.
The Policy Statement, which has been adopted by the Board of Governors of
the Federal Reserve System, the Federal Deposit Insurance Corporation, the
Office of the Comptroller of the Currency and the Office of Thrift Supervision,
and by the National Credit Union Administration (with certain modifications),
prohibits depository institutions from investing in certain "high-risk mortgage
securities", except under limited circumstances, and sets forth certain
investment practices deemed to be unsuitable for regulated institutions.
Institutions whose investment activities are subject to regulation by
federal or state authorities should review rules, policies and guidelines
adopted from time to time by such authorities before purchasing any
Certificates, as they May be deemed unsuitable investments, or may otherwise be
restricted, under such rules, policies or guidelines.
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to, "prudent investor" provisions, percentage-of-assets limits, provisions which
may restrict or prohibit investment in securities which are not "interest
bearing" or "income Paying," and provisions which may restrict or prohibit
investments in securities which are issued in book-entry form.
No representation is made as to the proper characterization of the
Certificates for legal investment purposes, financial institution regulatory
purposes, or other purposes, or as to the ability of particular investors to
purchase the Certificates under applicable legal investment restrictions. The
uncertainties described above (and any unfavorable future determinations
concerning legal investment or financial institution regulatory characteristics
of the Certificates) may adversely affect the liquidity of the Certificates.
Accordingly, all institutions whose investment activities are subject to legal
investment laws and regulations, regulatory capital requirements or review by
regulatory authorities should consult
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with their own legal advisors in determining whether and to what extent the
Certificates constitute a legal investment or are subject to investment, capital
or other restrictions.
Investors should consult their own legal advisors in determining whether
and to what extent the Certificates constitute legal investments for such
investors.
PLAN OF DISTRIBUTION
Subject to the terms and conditions of the Underwriting Agreement between
the Depositor and the Underwriter, the Certificates will be purchased from the
Depositor by the Underwriter upon issuance. Distribution of the Certificates
will be made by the Underwriter from time to time in negotiated transactions or
otherwise at varying prices to be determined at the time of sale. Proceeds to
the Depositor from the sale of the Certificates will be approximately % of the
initial aggregate Certificate Principal Amount of the Certificates, plus accrued
interest, if any, from the date of original issuance, before deducting expenses
payable by the Depositor.
In connection with the purchase and sale of the Certificates, the
Underwriter may be deemed to have received compensation from the Depositor in
the form of underwriting discounts. An affiliate of the Underwriter, Morgan
Stanley Mortgage Capital Inc. has entered into and may, in the future, enter
into other financing arrangements with affiliates of the Borrower.
The Borrower and MAALP have agreed to indemnify the Underwriter against,
or make contributions to the Underwriter with respect to, certain liabilities,
including liabilities under the Securities Act of 1933, as amended.
In connection with this offering, the Underwriter may purchase and sell
the Certificates in the open market. These transactions may include purchases to
cover short positions created by the Underwriter of a greater number of
Certificates than they are required to purchase from the Depositor in this
offering. The Underwriter may also impose a penalty bid, whereby selling
concessions allowed to broker-dealers in respect of the securities sold in the
offering may be reclaimed by the Underwriter if such Certificates are
repurchased by the Underwriter in covering transactions. These activities may
maintain or otherwise affect the market price of the Certificates, which may be
higher than the price that might otherwise prevail in the open market; and these
activities, if commenced, may be discontinued at any time. These transactions
may be affected in the over-the-counter market or otherwise.
The Prospectus may only be issued or passed on in the United Kingdom to a
person who is of a kind described in Article 11(3) of the Financial Services Act
of 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person to
whom this Prospectus may otherwise lawfully be issued or passed on.
The Trust described in this Prospectus may only be promoted (whether by
issuing or passing on of documents as referred to in the foregoing restriction
or otherwise) by an authorized person under Chapter III of the Financial
Services Act of 1986 of the United Kingdom ("FSA") to a person in the United
Kingdom if that person is of a kind described in section 76(2) of the FSA or as
permitted by the Financial Services (Promotion of Unregulated Schemes)
Regulation 1991 (as amended).
LEGAL MATTERS
The validity of the Certificates will be passed upon for the Depositor by
Baker, Donelson, Bearman & Caldwell, Memphis, Tennessee and for the Underwriter
by Cadwalader, Wickersham & Taft, New York, New York.
EXPERTS
The Combined Financial Statements and the financial statement schedule of
Capital Properties Group as of December 31, 1996 and 1995 and for the years
ended December 31, 1996, 1995 and 1994, the balance sheet of Mid-America Capital
Partners, L.P. as of November 24, 1997 and the Combined Historical Summary of
Gross Income and Direct Operating Expenses for Certain Multifamily Acquisition
Properties for the year ended December 31, 1996 have
62
<PAGE>
been included herein in reliance on the report of KPMG Peat Marwick LLP,
independent accountants, given on authority of said firm as experts in auditing
and accounting. The report of KPMG Peat Marwick LLP covering the December 31,
1996 combined financial statements refers to the Capital Properties Group's
change in its accounting method to capitalize replacement purchase for major
appliances and carpet.
The Consolidated Financial Statements of MAAC incorporated in this
Prospectus by reference to the Annual Report on Form 10-K for the year ended
December 31, 1996, have been so incorporated in reliance on the report of KPMG
Peat Marwick LLP, independent accountants, given on the authority of said firm
as experts in auditing and accounting. The report of KPMG Peat Marwick LLP
covering the December 31, 1996 financial statements refers to MAAC's change in
accounting method to capitalize replacement purchases for major appliances and
carpet.
The financial statements of Brown-Flournoy Equity Income Fund Limited
Partnership as of December 31, 1996 and 1995 and for each of the years in the
three-year period ended December 31, 1996 have been included herein in reliance
on the report of KPMG Peat Marwick LLP, independent accountants, given on
authority of said firm as experts in auditing and accounting.
RATINGS OF THE CERTIFICATES
It is a condition to the issuance of the Certificates that they be rated
no lower than "Baa2" by Moody's and rated no lower than "BBB" by S&P. Moody's
has rated the Certificates through the Scheduled Final Distribution Date. S&P,
however, has rated the Certificates through the Expected Final Distribution
Date. A credit rating is not a recommendation to buy, sell or hold securities
and may be subject to downgrade, withdrawal or qualification at any time by the
assigning rating organization as a result of changes in, or the unavailability
of, information. Neither Moody's nor S&P is rating the likelihood of receipt or
the timing of receipt of Default Interest under the Certificates.
The ratings assigned to the Certificates by each of the Rating Agencies
are based Primarily on its evaluation of the income-producing ability of the
Mortgaged Properties and reflect only the views of the Rating Agencies. Future
events, such as events affecting the Mortgaged Properties or the Borrower could
have an adverse impact on the rating of the Certificates. Although it is the
intent of the Depositor to retain the Rating Agencies to perform annual
monitoring and to provide the Rating Agencies with certain financial and other
information in connection therewith, none of the Depositor, the Trustee, the
Indenture Trustee or the Borrower is under an obligation to maintain any
particular rating, and the Rating Agencies are under no obligation whatsoever to
continue to issue any rating. A downgrade, withdrawal or qualification of a
rating may have an adverse effect on the market price of the Certificates but
will not constitute an event of default under the Indenture, the Bonds or the
Mortgages.
The ratings of the Rating Agencies address the likelihood of the timely
receipt by the holders of the Certificates of all payments (other than Default
Interest) to which such holders are entitled, including payment of all principal
(and any other amounts due under the Security Documents), in the case of
Moody's, by the Final Scheduled Distribution Date and, in the case of S&P, by
the Expected Final Distribution Date. The rating takes into consideration the
characteristics of the Certificates and the structural and legal aspects
thereof. The ratings do not, however, represent an assessment of the likelihood
or frequency of principal prepayments on the Bonds or the corresponding effect
on the yield to investors.
There can be no assurance that a rating agency other than the Rating
Agencies will not choose to rate the Certificates and publish such rating or
that such other rating agency would assign the Certificates a rating equivalent
to or higher than the ratings assigned by the Rating Agencies. See "Risk Factors
- - Ratings of the Certificates."
AVAILABLE INFORMATION
The Borrower and the Trust have filed with the Securities and Exchange
Commission (the "Commission") a Registration Statement on Form S-3 under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
securities offered hereby. This Prospectus, which is a part of the Registration
Statement, does not contain all of the information included in the Registration
Statement and the exhibits and financial statements thereto. For further
63
<PAGE>
information with respect to the Borrower, the Trust, the Certificates and the
Bonds, reference is hereby made to the Registration Statement, including the
exhibits and schedules thereto, which may be examined without charge or copies
obtained upon payment of prescribed fees from, the Public Reference Section of
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549 and are also available for inspection and copying at the regional offices
of the Commission located at 7 World Trade Center, 13th Floor, New York, New
York 10048 and at 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Electronic filings made through the Electronic Data Gathering,
Analysis and Retrieval System are publicly available through the Securities and
Exchange Commission's web site (http://www.sec.gov).
Statements contained in this Prospectus concerning the provisions or
contents of any contract, agreement or other document referred to herein or
therein are not necessarily complete. With respect to each such contract,
agreement or document filed as an exhibit to the Registration Statement,
reference is made to such exhibit for a more complete description of the matters
involved, and each such statement shall be deemed qualified in its entirety by
such reference to the copy of the applicable document filed with the Commission.
The Borrower intends to deliver to security holders annual reports
containing financial statements with a report thereon by the Borrower's
independent certified public accountants, and quarterly reports containing
unaudited financial information for each of the first three quarters of each
fiscal year.
INCORPORATION BY REFERENCE
All documents filed by the Borrower pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934, as amended, prior to the
termination of the offering made pursuant to this Prospectus shall be deemed to
be incorporated by reference into this Prospectus.
The following documents heretofore filed with the Commission by MAAC (File
No. 1-12762), of which the Borrower is a "majority-owned subsidiary" as defined
by Rule 405 promulgated pursuant to the Securities Act, are incorporated herein
by reference:
(a) Annual Report on Form 10-K for the year ended December 31, 1996;
(b) Quarterly Reports on Form 10-Q for the periods ended March 31, 1997,
June 30, 1997 and September 30, 1997, respectively; and
(c) Current Reports on Form 8-K dated October 7, 1997, September 19, 1997,
September 17, 1997, August 19, 1997, June 5, 1997, April 25, 1997, April 11,
1997, March 19, 1997, and February 21, 1997, as amended by MAAC's Current
Reports on Form 8-K/A, as applicable;
The Borrower will provide, without charge, to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the documents incorporated by reference herein (not including
the exhibits to such documents, unless exhibits are specifically incorporated by
reference in such documents). Requests for such copies should be directed to
Mid-America Capital Partners, L.P., c/o CT Corporation Trust Company, 1209
Orange Street, Wilmington, Delaware, 19081, Attn, Lynn A. Johnson, Secretary,
(302) 777-0205.
64
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
MID-AMERICA CAPITAL PARTNERS, L.P.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED):
Pro Forma Condensed Consolidated Balance Sheet as of September 30, 1997 .................. F-__
Pro Forma Condensed Consolidated Statements of Operations for the nine
months ended September 30, 1997 and the year ended December 31, 1996 ................... F-__
BALANCE SHEET:
Report of Independent Auditors ........................................................... F-__
Balance Sheet as of November 24, 1997 .................................................... F-__
Notes to Balance Sheet ................................................................... F-__
CAPITAL PROPERTIES GROUP
COMBINED FINANCIAL STATEMENTS:
Report of Independent Auditors ........................................................... F-__
Combined Balance Sheets as of September 30, 1997 (Unaudited) and
December 31, 1996 and 1995 ............................................................. F-__
Combined Statements of Operations for the nine months ended September 30,
1997 and 1996 (Unaudited) and for the years ended December 31, 1996,
1995 and 1994 .......................................................................... F-__
Combined Statements of Partners' Capital for the nine months ended September
30, 1997 (Unaudited) and for the years ended December 31, 1996, 1995 and
1994 ................................................................................... F-__
Combined Statements of Cash Flows for the nine months ended September 30,
1997 and 1996 (Unaudited) and for the years ended December 31, 1996, 1995
and 1994 ............................................................................... F-__
Notes to the Combined Financial Statements ............................................... F-__
Schedule III:
Real Estate Investments and Accumulated Depreciation ................................... F-__
ACQUISITION PROPERTIES
BROWN-FLOURNOY EQUITY INCOME FUND LIMITED PARTNERSHIP:
Report of Independent Auditors ........................................................... F-__
Balance Sheets as of September 30, 1997 (Unaudited) and December 31, 1996
and 1995 ............................................................................... F-__
Statements of Operations for the nine months ended September 30, 1997 and
1996 (Unaudited) and for the years ended December 31, 1996, 1995 and 1994 .............. F-__
Statements of Partners' Capital (Deficit) for the nine months ended
Setpember 30, 1997 (Unaudited) and for the years ended
December 31, 1996, 1995 and 1994 ....................................................... F-__
Statements of Cash Flows for the nine months ended September 30, 1997
and 1996 (Unaudited) and for the years ended December 31,
1996, 1995 and 1994 .................................................................... F-__
Notes to Financial Statements ............................................................ F-__
COMBINED FINANCIAL STATEMENTS FOR CERTAIN MULTIFAMILY ACQUISITION PROPERTIES:
Report of Independent Auditors ........................................................... F-__
Combined Historical Summary of Gross Income and Direct Operating Expenses for
Certain Multifamily Acquisition Properties for the period from January 1,
1997 to the earlier of September 30, 1997 or date of acquisition
(Unaudited) and for the year ended December 31, 1996 ................................... F-__
Notes to Combined Historical Summary of Gross Income and Direct Operating
Expenses for Certain Multifamily Acquisition Properties ................................ F-__
</TABLE>
<PAGE>
MID-AMERICA CAPITAL PARTNERS, L.P.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The following unaudited pro forma condensed balance sheet is presented as if at
September 30, 1997: (i) MAALP had contributed 20 apartment communities, $2.271
million cash and the right to acquire the Reorganization Properties (as defined
below) to the Partnership in exchange for a 99% limited partnership interest in
the Partnership and the contributed properties were recorded at MAALP's
historical cost; (ii) the Partnership exercised its right to acquire the
Reorganization Properties and repaid notes payable of approximately $22 million
which were secured by the Reorganization Properties. Additional amounts due in
connection with the acquisition of the Reorganization Properties were paid by
MAALP on behalf of the Partnership.; (iii) the merger of Hermitage at Beechtree,
L.L.C. with and into the Partnership is consummated; (iv) the consummation of
the Reorganization; (v) the origination of the MSMC Loan and the distribution of
$116 million of the net proceeds to MAALP; (vi) the Partnership had issued its
$144,000,000 ___% Bonds Due 2003 (the Bonds); and (vii) the net proceeds from
the sale of the Bonds are applied as set forth in "Use of Proceeds."
The 26 communities contributed to or acquired by the Partnership (the Mortgaged
Properties) consist of (i) 20 properties at September 30, 1997 comprising
Capital Partners Group (the CPG Properties); (ii) 5 properties on November 25,
1997 acquired by the Partnership in connection with the consummation of the
merger of Flournoy Development Company (FDC) with and into MAAC and the other
transactions (collectively, the Reorganization Properties) as described in the
Agreement and Plan of Reorganization dated as of September 15, 1997 (the Plan of
Reorganization) between FDC, MAAC and MAALP consisting of 4 properties acquired
from Brown-Flournoy Equity Income Fund Limited Partnership (the Brown-Flournoy
Properties) and Willow Creek; and (iii) one property (Hermitage at Beechtree)
which was acquired subsequent to September 30, 1997 through the merger of
Hermitage at Beechtree, L.L.C. with and into the Partnership. It is expected
that MAALP and the Partnership will record properties acquired in connection
with the Plan of Reorganization using the purchase method of accounting.
The unaudited pro forma condensed combined statements of operations for the nine
months ended September 30, 1997 and the year ended December 31, 1996 have been
prepared as if each of the transactions described above and the Recent
Acquisitions (as defined below) had been consummated on January 1, 1996 and
assuming that the Partnership incurred no income tax expense. The Recent
Acquisitions are comprised of (i) the Reorganization Properties; (ii) Hermitage
at Beechtree; (iii) the acquisition in 1996 of 6 of the Communities containing
an aggregate of 1,760 apartment units (the 1996 Completed Acquisitions); and
(iv) the acquisition in 1997 of 2 of the Communities containing an aggregate of
490 apartment units (the 1997 Completed Acquisitions), (the Reorganization
Properties, Hermitage at Beechtree, the 1996 Completed Acquisitions and the 1997
Completed Acquisitions are collectively referred to as the Completed
Acquisitions).
<PAGE>
MID-AMERICA CAPITAL PARTNERS, L.P.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
These unaudited pro forma financial statements have been prepared by the
Partnership based on the historical financial statements of CPG, Brown-Flournoy
Equity Income Fund Limited Partnership (Brown-Flournoy), and the combined
financial statements for certain Multifamily Acquisition Properties, which have
been included elsewhere herein. These unaudited pro forma financial statements
should be read in conjunction with the foregoing historical financial
statements, including the notes thereto. In management's opinion, all
adjustments necessary to reflect the effects of the above have been made. These
pro forma combined financial statements are presented for comparative purposes
only and are not indicative of what the actual financial position or results of
operations of the Partnership would have been had the foregoing transactions
occurred on the dates indicated.
<PAGE>
MID-AMERICA CAPITAL PARTNERS, L.P.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PARTNERSHIP
FORMATION MSMC LOAN
CPG PRO FORMA PRO FORMA PARTNERSHIP
HISTORICAL(A) ADJUSTMENTS ADJUSTMENTS(F) OFFERING(G) PRO FORMA
-------- ------- -------- -------- -------
<S> <C> <C> <C>
ASSETS:
Real estate assets, net ................. $168,846 45,315 (B) -- -- 214,161
Cash .................................... 92 (19,933)(C) 22,112 -- 2,271
Restricted cash ......................... -- -- 636 -- 636
Deferred financing
costs, net ............................ -- -- 964 2,206(H) 3,170
Other assets ............................ 119 (119)(D) -- -- --
-------- ------- -------- -------- -------
TOTAL ASSETS ..................... $169,057 25,263 23,712 2,206 220,238
======== ======= ======== ======== =======
LIABILITIES:
MSMC Loan payable ....................... $ -- -- 140,000 (140,000) --
Bonds ................................... -- -- -- 144,000 144,000
Accounts payable ........................ 427 (427)(D) -- -- --
Accrued expenses and
other liabilities ..................... 2,225 (2,225)(D) -- -- --
Security deposits ....................... 557 149 (B) -- -- 706
-------- ------- -------- -------- -------
TOTAL LIABILITIES ................ 3,209 (2,503) 140,000 4,000 144,706
-------- ------- -------- -------- -------
PARTNERS' CAPITAL
General Partner ......................... -- 1 (E) -- -- 1
Limited Partner ......................... 165,848 27,765 (E) (116,288) (1,794)(I) 75,531
-------- ------- -------- -------- -------
TOTAL PARTNERS'
CAPITAL ....................... 165,848 27,766 (116,288) (1,794) 75,532
-------- ------- -------- -------- -------
TOTAL LIABILITIES
AND PARTNERS'
CAPITAL ....................... $169,057 25,263 23,712 2,206 220,238
======== ======= ======== ======== =======
</TABLE>
(A) Reflects the unaudited historical combined balance sheet of CPG as of
September 30, 1997.
(Continued)
<PAGE>
MID-AMERICA CAPITAL PARTNERS, L.P.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET, CONTINUED
SEPTEMBER 30, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
PARTNERSHIP FORMATION PRO FORMA ADJUSTMENTS:
The following pro forma adjustments reflect transactions occurring in
connection with the Partnership formation and consummation of the
Reorganization. In connection with the Partnership formation (i) MAALP
contributed 20 of the Communities, $2.271 million cash and the right to
acquire the Reorganization Properties to the Partnership; (ii) Hermitage
at Beechtree, L.L.C. was merged with and into the Partnership (the
Hermitage at Beechtree Merger); (iii) the Partnership assumed security
deposit liabilities of the Communities; and (iv) MAALP received a 99%
limited partnership interest in the Partnership. All other assets and
liabilities of the Communities were retained by MAALP.
(B) Reflects the acquisition of the Reorganization Properties by the
Partnership ($36,300) and the Hermitage at Beechtree merger ($9,015),
including security deposits assumed in connection with the acquisitions.
(C) Reflects:
MAALP cash contribution at the formation of the Partnership $ 2,270
MACP, Inc. cash contribution in exchange for a 1% general
partner interest in the Partnership 1
CPG cash retained by MAALP (92)
Repayment of notes payable in connection with the acquisition
of the Reorganization Properties (22,112)
--------
$(19,933)
--------
(D) Reflects assets and liabilities of CPG retained by MAALP at the formation
of the Partnership.
(E) Reflects increase in capital accounts as a result of the Partnership
formation.
MSMC LOAN PRO FORMA ADJUSTMENTS:
(F) The Partnership entered into a $140 million short-term promissory note on
November 25, 1997. The proceeds of the borrowing net of deferred
financing costs ($964), retained restricted cash ($636) and repayment of
notes payable in connection with the acquisition of the Reorganization
Properties ($22,112) were distributed to MAALP.
(Continued)
<PAGE>
MID-AMERICA CAPITAL PARTNERS, L.P.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET, CONTINUED
SEPTEMBER 30, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
OFFERING PRO FORMA ADJUSTMENTS:
(G) Reflects the Offering assuming the application of proceeds as described
in "Use of Proceeds."
(H) Reflects deferred financing costs incurred in connection with the
Offering ($2,656) net of deferred financing costs incurred in connection
with the MSMC Loan which are fully amortized at the date of the Offering
($450).
(I) Reflects the distribution of a portion of the net proceeds of the
Offering to MAALP ($1,344) and the amortization of deferred financing
costs incurred in connection with the MSMC Loan ($450).
Subsequent to the formation of the Partnership, an additional $2.271 million was
distributed by the Partnership to MAALP. The distribution is not reflected in
the accompanying pro forma balance sheet since it is not directly attributable
to the Offering or the Reorganization.
<PAGE>
MID-AMERICA CAPITAL PARTNERS, L.P.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
COMBINED
CPG COMPLETED PRO FORMA
HISTORICAL(A) ACQUISITIONS(B) ADJUSTMENTS PRO FORMA
------- ----- ------ ------
<S> <C> <C> <C>
REVENUES:
Rental ................................................. $22,233 5,895 -- 28,128
Other .................................................. 187 177 -- 364
------- ----- ------ ------
TOTAL REVENUES .................................. 22,420 6,072 -- 28,492
------- ----- ------ ------
EXPENSES:
Personnel .............................................. 2,283 720 -- 3,003
Building repairs and maintenance,
utilities, landscaping and other
operating ............................................ 3,526 1,117 -- 4,643
Real estate taxes and insurance ........................ 2,125 540 -- 2,665
Depreciation and amortization-
real estate assets ................................... 4,588 1,180 149(C) 5,917
Depreciation and amortization-
non-real estate assets ............................... 19 -- 8(C) 27
General and administrative ............................. -- 239 1,014(D) 1,253
Interest ............................................... 724 1,596 4,839(E) 7,159
Amortization of deferred
financing costs ...................................... 35 -- 441(F) 476
------- ----- ------ ------
TOTAL EXPENSES .................................. 13,300 5,392 6,451 25,143
------- ----- ------ ------
Net income ................................................. $ 9,120 680 (6,451) 3,349
======= ===== ====== ======
</TABLE>
PRO FORMA ADJUSTMENTS:
(A) Reflects the unaudited historical combined statement of operations of CPG
for the nine months ended September 30, 1997. Certain general and
administrative expenses and other costs which are incurred by MAALP on
behalf of CPG are not included in the historical financial statements.
The Partnership will pay a management fee, equal to 4% of revenues, to
MAALP for providing these services. See adjustment (D).
(Continued)
<PAGE>
MID-AMERICA CAPITAL PARTNERS, L.P.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS, CONTINUED
NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(B) Reflects the unaudited historical operating results from January 1, 1997
to the earlier of the acquisition date or September 30, 1997 for the 1997
Completed Acquisitions, Hermitage at Beechtree and the Reorganization
Properties.
(C) Represents additional depreciation and amortization resulting from the
purchase of the Reorganization Properties, the 1997 Completed
Acquisitions and Hermitage at Beechtree.
(D) Represents management fees paid to MAALP equal to 4% of total revenues
($1,140) and fees paid to the Trustee and estimated additional costs to
operate as a separate public company ($113), net of general and
administrative expenses of the Reorganization Properties which will be
eliminated ($239).
(E) Represents interest on the Bonds of $7,159, net of interest which was
eliminated as a result of the repayment of notes payable of CPG and the
Reorganization Properties ($2,320). The Partnership has entered into
forward placement contracts the effect of which was to lock the interest
rate on $130 million of the Bonds at an average interest rate of 6.64%.
Interest on the Bonds is calculated based upon a rate of 6.64% for $130
million and 6.54% (based upon current estimates) for $14 million.
(F) Represents amortization of historical deferred financing costs of CPG
($35) which were eliminated as a result of repaying the CPG notes payable
net of the amortization of deferred financing costs on the Bonds of $476.
<PAGE>
MID-AMERICA CAPITAL PARTNERS, L.P.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
COMBINED
CPG COMPLETED PRO FORMA
HISTORICAL(A) ACQUISITIONS(B) ADJUSTMENTS PRO FORMA
------- ------ ------ ------
<S> <C> <C> <C>
REVENUES:
Rental ................................................ $20,056 16,654 -- 36,710
Other ................................................. 195 386 -- 581
------- ------ ------ ------
TOTAL REVENUES ................................. 20,251 17,040 -- 37,291
------- ------ ------ ------
EXPENSES:
Personnel ............................................. 1,996 1,822 -- 3,818
Building repairs and maintenance,
utilities, landscaping and other
operating ........................................... 3,269 2,962 -- 6,231
Real estate taxes and insurance ....................... 1,942 1,562 -- 3,504
Depreciation and amortization-
real estate assets .................................. 3,981 1,420 1,954(C) 7,355
Depreciation and amortization-
non-real estate assets .............................. 19 -- 23(C) 42
General and administrative ............................ -- 319 1,323(D) 1,642
Interest .............................................. 2,169 2,130 5,247(E) 9,546
Amortization of deferred
financing costs ..................................... 58 -- 576(F) 634
------- ------ ------ ------
TOTAL EXPENSES ................................. 13,434 10,215 9,123 32,772
------- ------ ------ ------
Net income ................................................ $ 6,817 6,825 (9,123) 4,519
======= ====== ====== ======
</TABLE>
PRO FORMA ADJUSTMENTS:
(A) Reflects the unaudited historical combined statement of operations of CPG
for the year ended December 31, 1996. Certain general and administrative
expenses and other costs which are incurred by MAALP on behalf of CPG are
not included in the historical financial statements. The Partnership will
pay a management fee, equal to 4% of revenues, to MAALP for providing
these services. See adjustment (D).
(Continued)
<PAGE>
MID-AMERICA CAPITAL PARTNERS, L.P.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS, CONTINUED
YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(B) Reflects the unaudited historical operating results from January 1, 1996
to the earlier of the acquisition date or December 31, 1996 for the
Completed Acquisitions, Hermitage at Beechtree and the Reorganization
Properties.
(C) Represents additional depreciation and amortization resulting from the
purchase of the Reorganization Properties, the Completed Acquisitions and
Hermitage at Beechtree.
(D) Represents management fees paid to MAALP equal to 4% of total revenues
($1,492) and fees paid to the Trustee and estimated additional costs to
operate as a separate public company ($150), net of general and
administrative expenses of the Reorganization Properties which will be
eliminated ($319).
(E) Represents interest on the Bonds of $9,546, net of interest which was
eliminated as a result of the repayment of notes payable of CPG and the
Reorganization Properties ($4,299). The Partnership has entered into
forward placement contracts the effect of which was to lock the interest
rate on $130 million of the Bonds at an average interest rate of 6.64%.
Interest on the Bonds is calculated based upon a rate of 6.64% for $130
million and 6.54% (based upon current estimates) for $14 million.
(F) Represents amortization of historical deferred financing costs of CPG
($58), which were eliminated as a result of repaying the CPG notes
payable net of the amortization of deferred financing costs on the Bonds
of $476.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
Mid-America Capital Partners, L.P.
We have audited the accompanying balance sheet of Mid-America Capital Partners,
L.P. as of November 24, 1997. This financial statement is the responsibility of
the Company's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Mid-America Capital Partners, L.P.
as of November 24, 1997, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Memphis, Tennessee
November 24, 1997
<PAGE>
MID-AMERICA CAPITAL PARTNERS, L.P.
BALANCE SHEET
NOVEMBER 24, 1997
ASSETS
Cash $1,000
======
PARTNERS' CAPITAL
Commitments and contingencies (note 2) -
PARTNERS' CAPITAL:
General Partner $1,000
Limited Partner -
------
TOTAL PARTNERS' CAPITAL $1,000
======
See accompanying notes to balance sheet.
<PAGE>
MID-AMERICA CAPITAL PARTNERS, L.P.
NOTES TO BALANCE SHEET
NOVEMBER 24, 1997
(1) ORGANIZATION AND BASIS OF FINANCIAL PRESENTATION
Mid-America Capital Partners, L.P. (the Partnership) is a special purpose
Delaware limited partnership. The sole purpose for which the Partnership
has been formed is to own and operate 26 apartment communities (the
Mortgaged Properties) to be contributed to the Partnership by Mid-America
Apartments, L.P., a Tennessee limited partnership (MAALP) or acquired
directly by the Partnership. The sole limited partner of the Partnership
is MAALP, which is a majority owned subsidiary of Mid-America Apartment
Communities, Inc. (MAAC). MAAC is a self-administered and self-managed
umbrella partnership real estate investment trust (REIT). MAAC conducts a
substantial portion of its operations through MAALP and subsidiaries of
MAALP.
MAALP contributed its interest in 20 of the Mortgaged Properties and cash
in exchange for a 99% limited partnership interest in the Partnership.
MAACP, Inc., (the General Partner), a Tennessee corporation and
wholly-owned subsidiary of MAAC, contributed cash for a 1% general
partnership interest in the Partnership.
Distributions to the Partners relating to operations of the Mortgaged
Properties will be based upon net cash flow, as defined in the Partnership
Agreement. Profits, losses and distributions will be allocated to the
Partners in proportion with their ownership.
(2) COMMITMENTS AND CONTINGENCIES
The Partnership, through its ownership in the Mortgaged Properties, will
be party to various legal actions resulting from the operation of the
Mortgaged Properties. Management believes that these actions will not have
a materially adverse effect on the Partnership.
(3) SUBSEQUENT EVENT (UNAUDITED)
Subsequent to November 24, 1997, the Mortgaged Properties were acquired by
the Partnership and were pledged to secure a $140 million loan (the MSMC
Loan) received from Morgan Stanley Mortgage Capital, Inc. A portion of the
proceeds from the MSMC Loan were utilized in connection with the
acquisition of certain of the Mortgaged Properties and the remainder was
distributed to MAALP.
<PAGE>
MID-AMERICA CAPITAL PARTNERS, L.P.
NOTES TO BALANCE SHEET
The Partnership expects to issue $144 million aggregate principal amount
of __% Bonds Due 2003 (the Bonds). The Bonds will be secured by a first
priority deed of trust, security agreement and assignment of rents and
leases in respect of the Mortgaged Properties. The net proceeds from the
sale of the Bonds will be applied to the MSMC Loan, utilized to fund costs
of the offering and the remainder will be distributed to MAALP.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
Capital Properties Group:
We have audited the accompanying combined balance sheets of Capital Properties
Group as of December 31, 1996 and 1995, and the related combined statements of
operations, partners' capital and cash flows for each of the three years in the
period ended December 31, 1996. In connection with our audits of the combined
financial statements, we also have audited the financial statement Schedule III,
Real Estate Investment and Accumulated Depreciation. These combined financial
statements and the financial statement schedule are the responsibility of the
management of Capital Properties Group. Our responsibility is to express an
opinion on these combined financial statements and financial statement schedule
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Capital
Properties Group at December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the combined financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
As discussed in note 1 to the combined financial statements, Capital Properties
Group changed its accounting method to capitalize replacement purchases for
major appliances and carpet in 1996.
KPMG Peat Marwick LLP
Memphis, Tennessee
November 24, 1997
<PAGE>
CAPITAL PROPERTIES GROUP
COMBINED BALANCE SHEETS
SEPTEMBER 30, 1997 (UNAUDITED) AND
DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
DECEMBER 31,
SEPTEMBER 30, -------------------
ASSETS 1997 1996 1995
------ --------- -------- -------
(Unaudited)
REAL ESTATE ASSETS:
Land .................................... $ 16,497 14,569 7,947
Buildings and improvements .............. 159,095 140,662 76,382
Furniture, fixtures and equipment ....... 2,653 2,224 1,232
Construction in progress ................ 2,795 830 1,679
--------- -------- -------
181,040 158,285 87,240
Less accumulated depreciation ........... (12,194) (7,586) (3,587)
--------- -------- -------
REAL ESTATE ASSETS, NET ........... 168,846 150,699 83,653
Cash ....................................... 92 134 162
Restricted cash ............................ -- 278 249
Deferred financing costs, net .............. -- 35 93
Other assets ............................... 119 11 59
--------- -------- -------
TOTAL ASSETS ...................... $ 169,057 151,257 84,216
========= ======== =======
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Notes payable ........................... $ -- 16,461 22,830
Accounts payable ........................ 427 587 102
Accrued expenses and other liabilities .. 2,225 1,709 997
Security deposits ....................... 557 549 309
--------- -------- -------
TOTAL LIABILITIES ................. 3,209 19,306 24,238
PARTNERS' CAPITAL .......................... 165,848 131,951 59,978
--------- -------- -------
TOTAL LIABILITIES AND
PARTNERS' CAPITAL ................ $ 169,057 151,257 84,216
========= ======== =======
See accompanying notes to combined financial statements.
<PAGE>
CAPITAL PROPERTIES GROUP
COMBINED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED) AND YEARS
ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
---------------- -----------------------
1997 1996 1996 1995 1994
------- ------ ------ ------ -----
(Unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES:
Rental ................................ $22,233 13,788 20,056 14,321 4,568
Other ................................. 187 143 195 176 185
------- ------ ------ ------ -----
TOTAL REVENUES .................. 22,420 13,931 20,251 14,497 4,753
------- ------ ------ ------ -----
EXPENSES:
Personnel ............................. 2,283 1,381 1,996 1,413 426
Building repairs and maintenance 1,110 662 917 772 213
Real estate taxes and insurance ....... 2,125 1,398 1,942 1,408 405
Utilities ............................. 859 670 930 749 233
Landscaping ........................... 617 357 502 371 119
Other operating ....................... 940 660 920 593 292
Depreciation and amortization -
real estate assets ................... 4,588 2,695 3,981 2,600 750
Depreciation and amortization -
non-real estate assets ............... 19 13 19 14 5
Interest .............................. 724 1,631 2,169 2,225 925
Amortization of deferred
financing costs ...................... 35 44 58 48 37
------- ------ ------ ------ -----
TOTAL EXPENSES .................. 13,300 9,511 13,434 10,193 3,405
------- ------ ------ ------ -----
NET INCOME ...................... $ 9,120 4,420 6,817 4,304 1,348
======= ====== ====== ====== =====
</TABLE>
See accompanying notes to combined financial statements.
<PAGE>
CAPITAL PROPERTIES GROUP
COMBINED STATEMENTS OF PARTNERS' CAPITAL
NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
AND YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
PARTNERS'
CAPITAL
-------
Partners' Capital, December 31, 1993 ........................... $ 1,485
Capital contributions, net .................................. 46,105
Net income .................................................. 1,348
--------
Partners' Capital, December 31, 1994 ........................... 48,938
Capital contributions, net .................................. 6,736
Net income .................................................. 4,304
--------
Partners' Capital, December 31, 1995 ........................... 59,978
Capital contributions, net .................................. 65,156
Net income .................................................. 6,817
--------
Partners' Capital, December 31, 1996 ........................... 131,951
Capital contributions, net .................................. 24,777
Net income .................................................. 9,120
--------
Partners' Capital, September 30, 1997 (unaudited) .............. $165,848
========
See accompanying notes to combined financial statements.
<PAGE>
CAPITAL PROPERTIES GROUP
COMBINED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED) AND YEARS
ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
------------------- -----------------------------
1997 1996 1996 1995 1994
-------- ------- ------- ------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................... $ 9,120 4,420 6,817 4,304 1,348
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ......... 4,642 2,752 4,058 2,662 792
Changes in assets and liabilities:
Restricted cash ......................... 278 16 (29) 21 106
Other assets ............................ (8) (7) (52) 68 (104)
Accounts payable ........................ (160) 398 485 (79) 174
Accrued expenses and other liabilities .. 516 817 712 14 697
Security deposits ....................... 8 202 240 22 250
-------- ------- ------- ------- -------
NET CASH PROVIDED BY
OPERATING ACTIVITIES ............. 14,396 8,598 12,231 7,012 3,263
-------- ------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of real estate assets .......... (19,211) (46,381) (66,226) (12,006) (43,008)
Improvements to properties ............... (3,544) (3,182) (4,819) (155) (1,156)
Construction of units in progress ........ -- -- -- (1,558) (121)
NET CASH USED IN
INVESTING ACTIVITIES ............. (22,755) (49,563) (71,045) (13,719) (44,285)
-------- ------- ------- ------- -------
</TABLE>
(Continued)
<PAGE>
CAPITAL PROPERTIES GROUP
COMBINED STATEMENTS OF CASH FLOWS, CONTINUED
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED) AND YEARS
ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
------------------- ----------------------------
1997 1996 1996 1995 1994
-------- ------- ------- ------ -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable .. $(16,460) (236) (6,370) (281) (4,840)
Deferred financing costs ............. -- -- -- -- (63)
Capital contributions, net ........... 24,777 41,149 65,156 6,736 46,105
NET CASH PROVIDED BY
FINANCING ACTIVITIES ......... 8,317 40,913 58,786 6,455 41,202
-------- ------- ------- ------ -------
NET INCREASE (DECREASE)
IN CASH ...................... (42) (52) (28) (252) 180
Cash, beginning of period ............... 134 162 162 414 234
-------- ------- ------- ------ -------
Cash, end of period ..................... $ 92 110 134 162 414
======== ======= ======= ====== =======
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION - interest paid ..... $ 658 1,867 2,403 2,188 849
======== ======= ======= ====== =======
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING ACTIVITIES - assumption of
debt related to property acquisitions $ -- -- -- -- 23,210
======== ======= ======= ====== =======
</TABLE>
See accompanying notes to combined financial statements.
<PAGE>
CAPITAL PROPERTIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
AND DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The accompanying combined financial statements include the accounts of the
apartment communities listed below (the Properties). The Properties are
owned by Mid-America Apartment Communities, Inc. (MAAC) or by Mid-America
Apartments, L.P. (MAALP). MAAC is a Memphis, Tennessee based
self-administered and self-managed real estate investment trust. MAAC's
business is conducted principally through MAALP, its operating
partnership.
METROPOLITAN NUMBER OF
AREA OF APARTMENT DATE
NAME PROPERTY UNITS ACQUIRED
---- -------- ----- --------
Napa Valley Little Rock, AR 240 October 17, 1996
Westside Creek I Little Rock, AR 142 March 31, 1997
Tiffany Oaks Altamonte Springs, FL 288 December 17, 1996
Marsh Oaks Atlantic Beach, FL 120 June 29, 1995
Lakeside Jacksonville, FL 416 March 12, 1996
Belmere Tampa, FL 210 December 14, 1994
Shenandoah Ridge Augusta, GA 272 September 1, 1994
Lakepointe Lexington, KY 118 September 15, 1994
The Village Lexington, KY 252 September 15, 1994
Crosswinds Jackson, MS 360 July 25, 1996
Pear Orchard Jackson, MS 389 May 5, 1994
Somerset Jackson, MS 144 January 15, 1995
Fairways at Royal Oak Cincinnati, OH 214 December 28, 1994
Howell Commons Greenville, SC 348 January 15, 1997
Park Haywood Greenville, SC 208 September 20, 1993
Steeplechase Chattanooga, TN 108 February 14, 1991
Williamsburg Village Jackson, TN 148 December 16, 1994
Kirby Station Memphis, TN 371 November 22, 1994
Savannah Creek Memphis, TN 204 July 25, 1996
Sutton Place Memphis, TN 252 July 25, 1996
-----
4,804
=====
<PAGE>
All of the properties are owned by MAALP, except Lakeside and Marsh Oaks
which are owned by MAAC.
The properties listed above are referred to collectively as the Capital
Properties Group (CPG).
PRINCIPLES OF COMBINATION
The accompanying combined financial statements of CPG have been presented
on a combined basis because of their common ownership and because the
Properties are expected to be contributed to Mid-America Capital Partners,
L.P. (the Partnership), in connection with the Partnership's issuance of
Bonds (see note 7).
The accounts of each of the Properties comprising CPG are combined in the
financial statements. All significant inter-entity accounts and
transactions have been eliminated in combination. The combined financial
statements include the assets and liabilities, as well as the operations
of CPG, from the date that each Property was acquired by MAALP or MAAC.
The accompanying combined financial statements include the revenues and
direct operating expenses of the Properties. Certain general and
administrative expenses and other costs which are incurred by MAALP on
behalf of CPG are not included in the financial statements. The
Partnership will pay a management fee (calculated as 4% of revenues) to
MAALP for providing these services in the future. Had the management fee
been charged during 1996, 1995 and 1994, net income would have been
reduced by approximately $810, $580 and $190, respectively. In addition,
MAALP incurred debt to fund the acquisition and improvement of certain of
the Properties. The debt and related interest expenses are not included in
the accompanying financial statements.
INTERIM UNAUDITED FINANCIAL INFORMATION
The accompanying interim unaudited financial information for the nine
months ended September 30, 1997 and 1996 had been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although management believes that the disclosures are
adequate to make the information presented not misleading. In the opinion
of management, all adjustments and eliminations, consisting only of normal
recurring adjustments, necessary to present fairly
(Continued)
<PAGE>
the combined results of CPG's operations and cash flows for the nine
months ended September 30, 1997 and 1996 have been included. The results
of operations for such interim period is not necessarily indicative of the
results for the full year.
REVENUE RECOGNITION
CPG leases residential apartments under operating leases with terms
generally one year or less. Rental and other revenues are recorded when
earned.
RENTAL OPERATIONS
CPG owns and operates apartment units which are leased to tenants on terms
of one year or less, with monthly payments due in advance. In management's
opinion, due to the number of tenants, the type and diversity of
submarkets in which the Properties operate, and the collection terms,
there is no concentration of credit risk.
RESTRICTED CASH
Restricted cash consists of escrow deposits held by lenders for property
taxes, insurance, debt service and replacement reserves. The escrow
deposits are designated for certain operating expense payments.
REAL ESTATE ASSETS AND DEPRECIATION
Real estate assets are carried at the lower of depreciated cost or net
realizable value. Interest, property taxes and other development costs
incurred during construction is capitalized until completion. Repairs and
maintenance costs are expensed as incurred while significant improvements,
renovations and replacements are capitalized. The cost of interior
painting, vinyl flooring and blinds are expensed as incurred.
In conjunction with acquisitions of properties, CPG's policy is to provide
in its acquisition budgets adequate funds to complete any deferred
maintenance items to bring the properties to the required standards,
including the cost of replacement appliances, carpet, interior painting,
vinyl flooring and blinds. These costs are capitalized.
Following a review of its capital expenditure and depreciation policy,
effective January 1, 1996, CPG implemented a new policy of which the
primary changes are as follows:
(Continued)
<PAGE>
(a) Increase minimum dollar amounts to capitalize from $500 to
$1,000;
(b) For stabilized properties (generally, properties owned and
operated for at least one year), capitalize replacement purchases
for major appliances and carpeting of an entire apartment unit
which was previously expensed; and
(c) Reduce depreciation life for certain assets from 20 years to 10
to 15 years.
CPG believes that the newly adopted accounting policy is preferable
because it is consistent with policies currently being used by the
majority of the largest apartment REITs and provides a better matching of
expenses with the estimated benefit period. CPG's 1995 and 1994 financial
statements were not restated for the effect of the change in accounting
policy. The policy has been implemented prospectively effective January 1,
1996.
Depreciation is computed on a straight-line basis over the estimated
useful lives of the related assets which range from 8 to 40 years for land
improvements and buildings and 5 years for furniture, fixtures and
equipment.
CPG periodically evaluates its real estate assets for impairment based
upon undiscounted cash flows and measures impairment based on fair value.
This determination is dependent primarily on the CPG's estimates on
occupancy, rent and expense increases, which involves numerous assumptions
and judgments as to future events over a period of many years. At December
31, 1996 CPG does not hold any assets which meet the impairment criteria.
DEFERRED FINANCING COSTS
Deferred financing costs are amortized over the terms of the related debt
using a method which approximates the interest method.
CAPITAL CONTRIBUTIONS, NET
MAALP provides cash management and vendor remittance services for CPG. Net
cash flows resulting from these services are treated as capital
contributions or distributions. In addition, MAALP provides funding for
CPG's property acquisition and improvement projects and for debt service
related to the notes payable included in the CPG financial statements. The
amount of these funded activities are contributed by MAALP to CPG as
capital contributions. Capital contributions, net for the years ended
December 31, 1996, 1995 and 1994, consisted of funds utilized (provided)
by:
(Continued)
<PAGE>
1996 1995 1994
------- ------ ------
Acquisitions and improvements of properties $71,045 13,719 44,285
Principal payments on notes payable 6,370 281 4,840
Intercompany remittances, net (12,259) (7,264) (3,020)
------- ------ ------
$65,156 6,736 46,105
======= ===== ======
INCOME TAXES
No provision for federal income taxes has been made in the accompanying
combined financial statements. Each partner is responsible for reporting
his share of taxable income or loss from the real estate investments.
USE OF ESTIMATES
Management of the CPG has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results
could differ from those estimates.
(2) NOTES PAYABLE
Notes payable are secured by real estate assets and consist of the
following:
DECEMBER 31,
--------------
1996 1995
---- ----
Note payable to an insurance company,
interest and principal paid
monthly at 8.75%, monthly interest
and principal payments of $26
with the balance due June 15, 1997,
collateralized by Lakepoint Apartments. $ 2,562 2,605
Note payable to an insurance company,
interest and principal paid monthly
at 10%, monthly interest and principal
payments of $86 with the balance due
November 1, 1997, collateralized by
Pear Orchard Apartments. 8,643 8,763
(Continued)
<PAGE>
DECEMBER 31,
--------------
1996 1995
---- ----
Note payable to an insurance company,
interest and principal paid monthly
at 8.75%, monthly interest and
principal payments of $46
with the balance due June 15, 1997,
collateralized by The Village Apartments. $ 5,256 5,344
Note payable to an insurance company, interest
and principal paid monthly at 6.6%,
monthly interest and principal
payments of $56 with the balance
due December 1, 1996, collateralized
by Kirby Station Apartments. - 6,118
------- ------
$16,461 22,830
======= ======
During the nine months ended September 30, 1997 all notes payable were
repaid.
Certain of the mortgage notes payable require, among other things, escrow
balances for the payments of insurance, taxes, improvements and repairs.
In addition, certain of the Properties are subject to a negative pledge
agreement under MAALP's credit line agreement with a $30,403 outstanding
balance at December 31, 1996. It is anticipated that these restrictions
will be removed prior to the contribution of the Properties to the
Partnership.
(3) FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS
Cash, rental receivable, accounts payable and accrued expenses and other
liabilities and security deposits are carried at amounts which reasonably
approximate their fair value.
Fixed rate notes payable at December 31, 1996 and 1995 total $16.5 million
and $22.8 million, respectively, and have an estimated fair value of $16.7
million and $23.7 million (excluding prepayment penalties) based upon
interest rates available for the issuance of debt with similar terms and
remaining maturities as of December 31, 1996 and 1995. These notes were
subject to prepayment penalties which would be required to retire these
notes prior to maturity.
(Continued)
<PAGE>
The fair value estimates presented herein are based on information
available to management as of December 31, 1996 and 1995. Although
management is not aware of any factors that would significantly affect the
estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since that date, and
current estimates of fair value may differ significantly from the amounts
presented herein.
(4) COMMITMENTS AND CONTINGENCIES
Neither CPG nor MAALP is presently subject to any material litigation nor,
to their knowledge, is any material litigation threatened against CPG or
MAALP, other than routine litigation arising in the ordinary course of
business, some of which is expected to be covered by liability insurance
and none of which is expected to have a material adverse effect on the
combined financial statements of CPG.
(5) EMPLOYEE BENEFIT PLANS
MAALP employees at the Properties participate in employee benefit plans
sponsored by MAAC. Provided below is a summary of MAAC benefit plans
available to the employees.
401(K) SAVINGS PLAN
The Mid-America Apartment Communities, Inc. 401(k) Savings Plan is a
defined contribution plan that satisfies the requirements of Section
401(a) and 401(k) of the Code. MAAC may, but is not obligated to, make a
matching contribution of $.50 for each $1.00 contributed, up to 6% of the
participant's compensation. During 1996 and 1995, MAALP made contributions
to this plan of approximately $13 and $3, respectively, on behalf of
employees at the Properties. These contributions are not included in the
accompanying combined financial statements. No contributions were made
during 1994.
EMPLOYEE STOCK PURCHASE PLAN
The Mid-America Apartment Communities, Inc. Employee Stock Purchase Plan
(the ESPP) provides means for employees at the Properties to purchase
common stock of MAAC. The Board of Directors of MAAC has authorized the
issuance of 150,000 shares for the plan. The ESPP is administered by the
Compensation Committee of the Board of Directors of MAAC who may annually
grant options to employees to purchase annually
(Continued)
<PAGE>
up to an aggregate of 15,000 shares of common stock at a price equal to
85% of the market price of the common stock. During 1996 and 1995, the
ESPP purchased 138 and 54 shares, respectively, with no purchases made in
1994.
EMPLOYEE STOCK OWNERSHIP PLAN
The Mid-America Apartment Communities, Inc. Employee Stock Ownership Plan
(the ESOP) is a non-contributory stock bonus plan that satisfies the
requirements of Section 401(a) of the Internal Revenue Code. Each employee
at the Properties is eligible to participate in the ESOP after attaining
the age of 21 years and completing one year of service with MAAC.
Participants' ESOP accounts will be 100% vested after five years of
continuous service, with no vesting prior to that time. During 1996 and
1995, MAAC contributed approximately $28 and $14, respectively, to the
ESOP which purchased an additional 1,138 and 558 shares, respectively,
with no contributions made in 1994. These contributions are not included
in the accompanying financial statements.
STOCK OPTION PLAN
MAAC has the 1994 Restricted Stock and Stock Option Plan (the Plan) which
provides incentives to attract and retain independent directors, executive
officers and key employees. The Compensation Committee of the Board of
Directors of MAAC is responsible for granting Options and shares of
Restricted Stock and for establishing the exercise price of Options and
terms and conditions of Restricted Stock. During 1996 options were granted
to employees at the CPG properties to acquire 500 shares of MAAC common
stock at an exercise price of $26.50 per share. No options were granted to
employees at the CPG properties during 1995 or 1994. The effect of the
1996 grant is not included in the accompanying combined financial
statements of CPG.
(6) RELATED PARTY TRANSACTIONS
The accompanying combined financial statements include the revenues and
certain direct operating expenses of the Properties. MAALP provides the
Properties management and other services (including employee benefits) at
no charge and also provides funds for the acquisition and improvement of
the Properties. See Note 1.
(Continued)
<PAGE>
(7) SUBSEQUENT EVENTS (UNAUDITED)
It is anticipated that the Properties, along with 6 additional properties
to be acquired by the Partnership (collectively the Communities), will
either be contributed to or acquired by the Partnership subsequent to
September 30, 1997. These transactions will result in MAALP having a 99%
limited partnership interest in the Partnership. The Partnership is
expected to issue $144 million of ___% Bonds Due 2003 (the Bonds) to be
secured by a first priority deed of trust, security agreement and
assignment of rents and leases on the Communities.
<PAGE>
SCHEDULE III
CAPITAL PARTNERS GROUP
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COST CAPITALIZED GROSS AMOUNT
SUBSEQUENT TO CARRIED AT
INITIAL COST ACQUISITION DECEMBER 31, 1996(3)
------------------ ------------------ --------------------
BUILDING BUILDING BUILDING
METROPOLITAN AND AND AND
PROPERTY NAME AREA ENCUMBRANCES LAND FIXTURES LAND FIXTURES LAND FIXTURES
- ------------- ---- ------------ ---- -------- ---- -------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Belmere Tampa, FL $ -(2) 851 7,667 706 851 8,373
Crosswinds Jackson, MS -(2) 1,535 13,826 423 1,535 14,249
Fairways at Royal Oak Cincinnati, OH -(2) 814 7,335 517 814 7,852
Kirby Station Memphis, TN - 1,148 10,337 1,499 1,148 11,836
Lakepointe Lexington, KY 2,562 411 3,699 371 411 4,070
Lakeside Jacksonville, FL -(2) 1,431 12,883 1,232 1,431 14,115
Marsh Oaks Atlantic Beach, FL -(2) 244 2,829 328 244 3,157
Napa Valley Little Rock, AR - 960 8,642 198 960 8,840
Park Haywood Greenville, SC -(2) 325 2,925 35 2,088 360 5,013
Pear Orchard Jackson, MS 8,643 1,352 12,168 599 1,352 12,767
Savannah Creek Memphis, TN (4) -(2) 778 7,013 163 778 7,176
Shenandoah Ridge Augusta, GA -(2) 650 5,850 1,469 650 7,319
Somerset Jackson, MS -(2) 477 4,294 459 477 4,753
Steeplechase Chattanooga, TN -(2) 217 1,957 1,024 217 2,981
Sutton Place Memphis, TN (4) -(2) 894 8,053 259 894 8,312
Tiffany Oaks Altamonte Springs, FL - 1,024 9,219 - 1,024 9,219
The Village Lexington, KY 5,256 900 8,097 560 900 8,657
Williamsburg Village Jackson, TN -(2) 523 4,711 316 523 5,027
=========== ========= ========= ===== ========= ======== =========
TOTAL $ 16,461 14,534 131,505 35 12,211 14,569 143,716
=========== ========= ========= ===== ========= ======== =========
LIFE USED
TO COMPUTE
DEPRECIATION
IN LATEST
METROPOLITAN ACCUMULATED INCOME
PROPERTY NAME AREA TOTAL DEPRECIATION NET CONSTRUCTION STATEMENT(1)
- ------------- ---- ----- ------------ --- ------------ ------------
Belmere Tampa, FL 9,224 (619) 8,605 1984 5 - 40
Crosswinds Jackson, MS 15,784 (207) 15,577 1988/1990 5 - 40
Fairways at Royal Oak Cincinnati, OH 8,666 (560) 8,106 1988 5 - 40
Kirby Station Memphis, TN 12,984 (875) 12,109 1978 5 - 40
Lakepointe Lexington, KY 4,481 (331) 4,150 1986 5 - 40
Lakeside Jacksonville, FL 15,546 (409) 15,137 1985 5 - 40
Marsh Oaks Atlantic Beach, FL 3,401 (176) 3,225 1986 5 - 40
Napa Valley Little Rock, AR 9,800 (51) 9,749 1984 5 - 40
Park Haywood Greenville, SC 5,373 (406) 4,967 1983/1995 5 - 40
Pear Orchard Jackson, MS 14,119 (1,226) 12,893 1985 5 - 40
Savannah Creek Memphis, TN (4) 7,954 (105) 7,849 1989 5 - 40
Shenandoah Ridge Augusta, GA 7,969 (607) 7,362 1982 5 - 40
Somerset Jackson, MS 5,230 (340) 4,890 1981 5 - 40
Steeplechase Chattanooga, TN 3,198 (467) 2,731 1986 5 - 40
Sutton Place Memphis, TN (4) 9,206 (122) 9,084 1991 5 - 40
Tiffany Oaks Altamonte Springs, FL 10,243 - 10,243 1985 5 - 40
The Village Lexington, KY 9,557 (713) 8,844 1989 5 - 40
Williamsburg Village Jackson, TN 5,550 (372) 5,178 1987 5 - 40
========= ======== ==========
TOTAL 158,285 (7,586) 150,699
========= ======== ==========
</TABLE>
(1) Depreciation is on a straight line basis over the estimated useful asset
life which ranges from 8 to 40 years for land improvements and buildings
and 5 years for furniture, fixtures and equipment.
(2) Subject to negative pledge pursuant to the agreement in respect of MAALP's
Credit Line agreement with an outstanding balance of $30,403 at December
31, 1996.
(3) The aggregate cost for Federal income tax purposes was approximately $160
million at December 31, 1996. The total gross amount of real estate assets
for GAAP purposes exceeds the aggregate cost for Federal income tax
purposes, principally due to purchase accounting adjustments recorded under
generally accepted accounting principles.
(4) These properties are located in Desoto County, MS, a suburb of Memphis, TN.
The Company considers the properties a part of the Memphis,TN market.
<PAGE>
SCHEDULE III
CAPITAL PROPERTIES GROUP
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
A summary of acttivity for real estate investments and accumulated depreciation
is as follows:
1996 1995 1994
-------- ------ ------
Real estate investments:
Balance at beginning of year ............ $ 87,240 73,521 6,026
Acquisitions ............................ 66,226 12,006 66,218
Improvements ............................ 4,819 1,713 1,277
-------- ------ ------
Balance at end of year ........ $158,285 87,240 73,521
======== ====== ======
Accumulated depreciation:
Balance at beginning of year ............ $ 3,587 973 223
Depreciation ............................ 3,999 2,614 750
-------- ------ ------
Balance at end of year ........ $ 7,586 3,587 973
======== ====== ======
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
Brown-Flournoy Equity Income
Fund Limited Partnership:
We have audited the accompanying balance sheets of Brown-Flournoy Equity Income
Fund Limited Partnership (the "Fund") as of December 31, 1996 and 1995 and the
related statements of operations, partners' capital (deficit) and cash flows for
each of the years in the three-year period ended December 31, 1996. These
financial statements are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Brown-Flournoy Equity Income
Fund Limited Partnership as of December 31, l996 and 1995, and the results of
its operations and its cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Baltimore, Maryland
January 17, 1997
<PAGE>
BROWN-FLOURNOY EQUITY INCOME FUND
LIMITED PARTNERSHIP
BALANCE SHEETS
SEPTEMBER 30, 1997 AND
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ---------------------------
ASSETS 1997 1996 1995
------ ------------ ----------- -----------
(unaudited)
<S> <C> <C> <C>
Investment in real estate (note 3) ............ $ 13,669,416 14,355,212 15,200,825
Cash and cash equivalents (note 4) ............ 1,589,425 1,467,365 1,447,679
Other assets:
Accounts receivable ........................ 36,560 19,744 22,624
Prepaid expenses ........................... 12,994 70,500 65,417
Loan fees, less accumulated amortization
of $592,748 and $469,856 at December 31,
1996 and 1995, respectively ............... -- 93,761 49,459
------------ ----------- -----------
TOTAL OTHER ASSETS .................... 49,554 184,005 137,500
------------ ----------- -----------
TOTAL ASSETS .......................... $ 15,308,395 16,006,582 16,786,004
============ =========== ===========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Accounts payable and accrued expenses including
$28,941 and $27,523 due to affiliates at
December 31, 1996 and 1995, respectively ... $ 639,081 417,042 453,493
Tenant security deposits ...................... 101,476 110,890 130,542
Mortgage loans payable (note 6) ............... 20,400,000 20,400,000 20,200,950
------------ ----------- -----------
TOTAL LIABILITIES ..................... 21,140,557 20,927,932 20,784,985
------------ ----------- -----------
Partners' capital (deficit) - (note 8):
General Partners ........................... (271,185) (252,969) (234,522)
Limited Partners:
Class A - $1,000 stated value per unit;
27,000 units outstanding ................ (5,561,077) (4,668,481) (3,764,559)
Class B ................................... 100 100 100
------------ ----------- -----------
TOTAL PARTNERS' CAPITAL (DEFICIT) ..... (5,832,162) (4,921,350) (3,998,981)
------------ ----------- -----------
TOTAL LIABILITIES AND PARTNERS'
CAPITAL (DEFICIT) ................... $ 15,308,395 16,006,582 16,786,004
============ =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
BROWN-FLOURNOY EQUITY INCOME FUND
LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
------------------------- --------------------------------------
1997 1996 1996 1995 1994
----------- ---------- ---------- ---------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES:
Rental income ......................... $ 3,484,337 3,585,281 4,799,909 4,644,851 4,451,569
Interest income ....................... 47,655 44,308 61,955 67,677 49,805
Gain on settlement of lawsuit (note 10) -- -- -- 299,228 --
----------- ---------- ---------- ---------- ----------
3,531,992 3,629,589 4,861,864 5,011,756 4,501,374
----------- ---------- ---------- ---------- ----------
EXPENSES:
Compensation and related benefits ..... 453,550 380,193 521,603 465,396 423,923
Property taxes ........................ 279,020 273,580 336,976 345,327 343,773
Utilities ............................. 213,314 213,089 289,952 255,151 233,250
Property management fee to related
party (note 5) ....................... 174,217 179,264 239,995 232,242 222,578
Maintenance and repairs ............... 223,536 336,579 435,767 505,152 404,083
Advertising ........................... 83,483 81,154 105,534 75,793 64,462
Other ................................. 80,159 79,533 106,700 106,308 80,845
Administrative, including amounts to
related party (note 5) ............... 72,736 57,828 93,005 85,768 92,422
Interest expense (note 6) ............. 1,457,750 1,451,548 1,933,782 1,945,006 1,953,754
Depreciation of property and equipment
(notes 2 and 7) ...................... 796,185 782,551 1,047,007 1,038,167 1,019,697
Amortization of loan fees (note 2) .... 195,589 71,030 122,892 74,188 74,188
----------- ---------- ---------- ---------- ----------
4,029,539 3,906,349 5,233,213 5,128,498 4,912,975
----------- ---------- ---------- ---------- ----------
NET LOSS (NOTE 7) ............... $ (497,547) (276,760) (371,349) (116,742) (411,601)
=========== ========== ========== ========== ==========
NET LOSS PER UNIT OF CLASS A
LIMITED PARTNERSHIP
INTEREST (NOTE 8) ............. $ (18.06) (10.05) (13.48) (4.24) (14.94)
=========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
BROWN-FLOURNOY EQUITY INCOME FUND
LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
AND EACH OF THE YEARS IN THE THREE-YEAR PERIOD
ENDED DECEMBER 31, 1996
CLASS A CLASS B
GENERAL LIMITED LIMITED
PARTNERS PARTNERS PARTNERS TOTAL
--------- ---------- --- ----------
Balance at December 31, 1993 .... $(196,405) (1,096,782) 100 (1,293,087)
Net loss ........................ (8,232) (403,369) -- (411,601)
Distributions to partners:
Operations .................... (11,020) (540,000) -- (551,020)
Financing proceeds ............ -- (800,000) -- (800,000)
--------- ---------- --- ----------
Balance at December 31, 1994 .... (215,657) (2,840,151) 100 (3,055,708)
Net loss ........................ (2,334) (114,408) -- (116,742)
Distributions to partners ....... (16,531) (810,000) -- (826,531)
--------- ---------- --- ----------
Balance at December 31, 1995 .... (234,522) (3,764,559) 100 (3,998,981)
Net loss ........................ (7,427) (363,922) -- (371,349)
Distributions to partners ....... (11,020) (540,000) -- (551,020)
--------- ---------- --- ----------
Balance at December 31, 1996 .... (252,969) (4,668,481) 100 (4,921,350)
Net loss ........................ (9,951) (487,596) -- (497,547)
Distributions to partners ....... (8,265) (405,000) -- (413,265)
--------- ---------- --- ----------
Balance at September 30, 1997 ... $(271,185) (5,561,077) 100 (5,832,162)
========= ========== === ==========
See accompanying notes to financial statements.
<PAGE>
BROWN-FLOURNOY EQUITY INCOME FUND
LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
---------------------------- ------------------------------------------
1997 1996 1996 1995 1994
----------- ----------- ----------- ---------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ................................. $ (497,547) (276,760) (371,349) (116,742) (411,601)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation of property and equipment 796,185 782,551 1,047,007 1,038,167 1,019,697
Amortization of loan fees ............. 195,589 71,030 122,892 74,188 74,188
Gain on settlement of lawsuit ......... -- -- -- (299,228) --
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable ......................... (16,816) (639) 2,880 24,334 (18,285)
Decrease (increase) in prepaid
expenses ........................... 57,506 53,214 (5,083) 1,065 (18,372)
Increase (decrease) in accounts
payable and accrued expenses........ 222,039 182,671 (36,451) 6,063 (23,668)
(Decrease) increase in tenant
security deposits .................. (9,414) (6,470) (19,652) 6,926 1,815
----------- ----------- ----------- ---------- ----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES ............ 747,542 805,597 740,244 734,773 623,774
----------- ----------- ----------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to investment in real estate ... (110,389) (96,970) (201,394) (88,700) (54,100)
Settlement proceeds ...................... -- -- -- 16,000 283,228
----------- ----------- ----------- ---------- ----------
NET CASH (USED IN) PROVIDED
BY INVESTING ACTIVITIES ......... (110,389) (96,970) (201,394) (72,700) 229,128
----------- ----------- ----------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in mortgage loans payable ....... -- (90,080) (90,080) (125,936) (29,647)
Proceeds from mortgage refinancing ....... -- 20,400,000 20,400,000 -- --
Repayment of mortgage loans .............. -- (20,110,870) (20,110,870) -- --
Financing costs .......................... (101,828) (111,679) (167,194) -- --
Distributions to partners ................ (413,265) (413,265) (551,020) (826,531) (1,351,020)
----------- ----------- ----------- ---------- ----------
NET CASH USED IN FINANCING
ACTIVITIES ...................... (515,093) (325,894) (519,164) (952,467) (1,380,667)
----------- ----------- ----------- ---------- ----------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS ....... 122,060 382,733 19,686 (290,394) (527,765)
CASH AND CASH EQUIVALENTS:
Beginning of period ...................... 1,467,365 1,447,679 1,447,679 1,738,073 2,265,838
----------- ----------- ----------- ---------- ----------
End of period ............................ $ 1,589,425 1,830,412 1,467,365 1,447,679 1,738,073
=========== =========== =========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
BROWN-FLOURNOY EQUITY INCOME FUND
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(1) ORGANIZATION
Brown-Flournoy Equity Income Fund Limited Partnership (the "Fund") is a
Delaware limited partnership formed on June 25, 1986 to develop and operate
four residential apartment communities in Georgia and South Carolina. The
capital raised from the admission of investors enabled the Fund to acquire
the properties and improvements and complete construction. The properties
are:
o Southland Station, a 160-unit apartment community in Warner Robins,
Georgia
o Park Place, a 184-unit apartment community in Spartanburg, South
Carolina
o Hidden Lake - Phase Two, a 160-unit apartment community in Union City,
Georgia
o High Ridge, a 160-unit apartment community in Athens, Georgia
The General Partners are Brown-Equity Income Properties, Inc., the
Administrative General Partner, and John F. Flournoy, the Development
General Partner. The Class B Limited Partners are John F. Flournoy and
Realty Associates 1986 Limited Partnership, an affiliate of the
Administrative General Partner. The Fund will terminate on December 31,
2036, unless sooner terminated under the provisions of the partnership
agreement.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) METHOD OF ACCOUNTING
The accompanying financial statements have been prepared on the accrual
basis of accounting. The Fund reports its operating results for income
tax purposes on the accrual basis. No provision for income taxes is made
because any liability for income taxes is that of the individual
partners and not that of the Fund.
(b) CASH EQUIVALENTS
The Fund considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
(Continued)
<PAGE>
BROWN-FLOURNOY EQUITY INCOME FUND
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(c) DEPRECIATION
Depreciation of property and equipment is computed using the
straight-line method over the useful lives of the property and equipment
as follows:
Buildings 25 years
Furniture, fixtures, and equipment 10 years
(d) DEFERRED COSTS
Costs associated with marketing of the Class A limited partnership units
to the public were offset against the related partners' capital.
Loan fees incurred to obtain the original mortgage loans were
capitalized and were amortized on a basis that approximates the interest
method over the seven-year loan terms. These fees were fully amortized
in 1996. Loan fees incurred to obtain the new mortgage loans (note 6)
have been capitalized and are being amortized over the one-year loan
terms.
(e) USE OF ESTIMATES
Management of the Fund has made a number of estimates and assumptions
relating to the reporting of assets, liabilities, revenue, and expenses
to prepare these financial statements in conformity with generally
accepted accounting principles. Actual results could differ from those
estimates.
(f) FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments is determined by reference to
various market data and other valuation considerations. The fair value
of financial instruments approximate their recorded values.
(g) IMPAIRMENT OF LONG-LIVED ASSETS
In accordance with Statement of Financial Accounting Standards No. 121,
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF, the Fund records impairment losses on
long-lived assets used in operations when events and circumstances
indicate that the individual assets might be impaired, based on fair
(Continued)
<PAGE>
BROWN-FLOURNOY EQUITY INCOME FUND
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
value, and the undiscounted cash flows estimated to be generated by
those assets are less than the carrying amounts of those assets. During
1996, no events or circumstances indicated that the assets of the Fund
were impaired. Prior to 1996, the Fund's investment in real estate was
carried at the lower of net realizable value or cost, net of accumulated
depreciation, on an individual property basis.
(h) INTERIM UNAUDITED FINANCIAL INFORMATION
The accompanying interim unaudited financial information for the nine
months ended September 30, 1997 and 1996 has been prepared pursuant to
the rule and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such
rules and regulations, although management believes that the disclosures
are adequate to make the information presented not misleading. In the
opinion of management, all adjustments and eliminations, consisting only
of normal recurring adjustments, necessary to present fairly the results
of the Fund's operations and cash flows for the nine months ended
September 30, 1997 and 1996, have been included. The results of
operations for such interim periods is not necessarily indicative of the
results for the full year.
(3) INVESTMENT IN REAL ESTATE
Investment in real estate is summarized as follows at December 31:
1996 1995
----------- ----------
Land ............................. $ 1,205,950 1,205,950
Buildings ........................ 20,417,743 20,417,743
Furniture, fixtures, and equipment 2,403,666 2,202,272
----------- ----------
24,027,359 23,825,965
Less accumulated depreciation .... 9,672,147 8,625,140
----------- ----------
$14,355,212 15,200,825
=========== ==========
(Continued)
<PAGE>
BROWN-FLOURNOY EQUITY INCOME FUND
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(4) CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following, stated at cost, which
approximates market value at December 31:
1996 1995
---------- ---------
Cash and money market ..................... $ 532,655 428,716
Certificates of deposit with interest rates
ranging from 5.00% to 5.60% in 1996
and 4.25% to 5.90% in 1995 ............. 934,710 1,018,963
---------- ---------
$1,467,365 1,447,679
========== =========
Restricted cash represents amount retained from tenant security deposits
and totaled $110,890 and $130,542 at December 31, 1996 and 1995,
respectively.
(5) RELATED PARTY TRANSACTIONS
The Administrative General Partner received $52,795, $41,644, and $41,314
in 1996, 1995, and 1994, respectively, for reimbursement of costs
associated with administering the Fund, including clerical services,
investor communication services, and reports and filings to regulatory
authorities.
Flournoy Properties, Inc., an affiliate of the Development General Partner,
is the managing agent for the properties and earned management fees of
$239,995, $232,242, and $222,578 representing 5% of the gross monthly
operating revenues from the properties during 1996, 1995, and 1994,
respectively.
(6) MORTGAGE LOANS PAYABLE
The Fund's General Partners secured first mortgage loans aggregating $20.8
million on August 30, 1989 which were secured by the land, apartment units,
and all other improvements to the four apartment properties. These loans
were for an original term of seven years with an interest rate of 9.6%.
Interest only was payable monthly through September 1994, and thereafter
monthly payments were based on a 30-year amortization schedule with a
balloon payment due at the end of the seven-year term.
(Continued)
<PAGE>
BROWN-FLOURNOY EQUITY INCOME FUND
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
The mortgage loans matured on September 1, 1996. The Fund refinanced these
loans with Columbus Bank and Trust. The terms of the commitment provide for
interest only payments of prime plus 1% in monthly installments and a term
of one year. The new loans totaled $20,400,000 and provided proceeds
sufficient to satisfy the repayment of the old mortgage loans, and all
costs of the refinancing. The Fund is required to pay a commitment fee of
one point payable in advance in quarterly installments. Interest of
$1,932,975, $1,945,936, and $1,953,991 was paid during the years ended
December 31, 1996, 1995, and 1994, respectively.
The Fund extended the maturity date of its mortgage loans with Columbus
Bank and Trust from September 1, 1997 to December 31, 1997. The Fund was
not required to pay a commitment fee related to the extension. The Fund
intends to repay these balances with proceeds from capital transactions.
(7) LOSSES FOR FEDERAL INCOME TAX PURPOSES
The Fund's losses for federal income tax purposes in each of the last three
years ended December 31 differs from the net losses for financial reporting
purposes due to differences in the Fund's computation of tax depreciation
and in 1995, different treatment of the additional net settlement proceeds
(note 10). For Federal income tax purposes, real property (other than land)
and personal property, are being depreciated over 27-1/2 and seven years,
respectively, using the Modified Accelerated Cost Recovery System, and the
additional net settlement proceeds (note 10) are being treated as a
reduction to the adjusted tax basis of the Southland Station property. The
tax losses for 1996, 1995, and 1994 are as follows:
1996 1995 1994
--------- -------- --------
Losses for financial
reporting purposes ....... $(371,349) (116,742) (411,601)
Financial reporting
depreciation in
excess of tax depreciation 247,403 268,686 167,515
Additional net settlement
proceeds (note 10) ....... -- (299,228) --
--------- -------- --------
Losses for income
tax purposes ............. $(123,946) (147,284) (244,086)
========= ======== ========
(Continued)
<PAGE>
BROWN-FLOURNOY EQUITY INCOME FUND
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(8) PARTNERS' CAPITAL (DEFICIT)
The partnership agreement provides, among other provisions, for the
following:
(a) The Fund will consist of the General Partners, the Class A Limited
Partners, and the Class B Limited Partners.
(b) Distributions to the Partners relating to operations of the properties
will be based on net cash flow, as defined in the partnership
agreement. Investors will receive 98% of net cash flow and the General
Partners will each receive 1%. Profit and loss from operations will be
allocated in the same proportions. Net loss per Class A Limited
Partnership interest as disclosed on the statements of operations is
based upon 27,000 units outstanding.
(c) Net proceeds of sale or operational stage financing of the properties
will be distributed as follows:
o To pay any deferred fees payable to the General Partners and
affiliates.
o To Class A Limited Partners until each Class A Limited Partner has
recovered his original capital contribution in full and received a
cumulative, noncompounded annual return of 7.5% of his capital
contribution to the extent that such return has not been provided
from prior distributions of net cash flow.
o Any remainder will be distributed 80% to the Class A Limited
Partners, 1% to each of the General Partners, 14% to John F.
Flournoy in his capacity as Class B Limited Partner ,and 4% to
Realty Associates' 1986 Limited Partnership.
(d) Restrictions exist regarding transferability or disposition of
partnership interests.
(Continued)
<PAGE>
BROWN-FLOURNOY EQUITY INCOME FUND
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(9) DISTRIBUTIONS TO PARTNERS
Distributions of cash to partners during 1996, 1995 and 1994 are summarized
as follows:
1996 1995 1994
-------- --------- ---------
To Class A Limited Partners from:
Operations .................... $540,000 540,000 540,000
Settlement proceeds ........... -- 270,000 --
Financing proceeds ............ -- -- 800,000
To General Partners from:
Operations .................... 11,020 11,020 11,020
Settlement proceeds ........... -- 5,511 --
-------- --------- ---------
$551,020 826,531 1,351,020
======== ========= =========
Each Class A Limited Partner received a distribution of $20 per unit from
operations in 1996, 1995, and 1994; $10 per unit from settlement proceeds
in 1995; and approximately $29.63 per unit from financing proceeds in 1994.
(10) SETTLEMENT PROCEEDS
During the fourth quarter of 1994, the Fund settled an outstanding lawsuit
with the manufacturer of defective polybutylene piping which was utilized
at the Southland Station property. The lawsuit sought damages resulting
from numerous plumbing leaks at the property since construction. The
settlement included the cost to replumb the property, as well as additional
net settlement proceeds to the Fund of $299,228. A special distribution of
these proceeds was made in the second quarter of 1995.
(11) SUBSEQUENT EVENT
The Fund has entered into an agreement to sell its four residential
apartment communities to Mid-America Apartments, L.P. for approximately
$9,625,000 in cash. The agreement has not yet been approved by the
partners. In conjunction with the sale, the Fund is to be liquidated and
cash will be distributed to the partners in accordance with the terms of
the partnership agreement.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
Mid-America Capital Partners, L.P.:
We have audited the accompanying combined historical summary of gross income and
direct operating expenses for certain multifamily acquisition properties
(Historical Summary) as described in note 1, for the year ended December 31,
1996. This Historical Summary is the responsibility of management. Our
responsibility is to express an opinion on this Historical Summary based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the Historical Summary is free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the Historical Summary. An audit also includes assessing the
accounting principles used and the significant estimates made by management, as
well as evaluating the overall presentation of the Historical Summary. We
believe that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission for
inclusion in the registration statement on Form S-3 of Mid-America Capital
Partners, L.P., and excludes material amounts described in note 1 to the
Historical Summary, that would not be comparable to those resulting from the
proposed future operations of the properties.
In our opinion, the Historical Summary referred to above presents fairly, in all
material respects, the gross income and direct operating expenses described in
note 1 to the Historical Summary for the year ended December 31, 1996, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Memphis, Tennessee
November 24, 1997
<PAGE>
MID-AMERICA CAPITAL PARTNERS, L.P.
COMBINED HISTORICAL SUMMARY OF GROSS INCOME AND DIRECT OPERATING EXPENSES
FOR CERTAIN MULTIFAMILY ACQUISITION PROPERTIES
YEAR ENDED DECEMBER 31, 1996 AND PERIOD FROM JANUARY
1, 1997 TO THE EARLIER OF SEPTEMBER 30, 1997 OR DATE OF
ACQUISITION (UNAUDITED)
(DOLLARS IN THOUSANDS)
1997 1996
---- ----
(Unaudited)
GROSS INCOME - total revenue .......................... $1,391 4,335
DIRECT OPERATING EXPENSES:
Operating expenses ............................... 347 909
Real estate taxes ................................ 82 265
Repairs and maintenance .......................... 109 307
------ -----
538 1,481
------ -----
GROSS INCOME IN EXCESS
OF DIRECT OPERATING EXPENSES ......... $ 853 2,854
====== =====
See accompanying notes to combined historical summary of gross income and
direct operating expenses for certain multifamily acquisition properties.
<PAGE>
MID-AMERICA CAPITAL PARTNERS, L.P.
NOTES TO COMBINED HISTORICAL SUMMARY OF GROSS INCOME AND DIRECT
OPERATING EXPENSES FOR CERTAIN MULTIFAMILY ACQUISITION PROPERTIES
DECEMBER 31, 1996
(1) ACCOUNTING POLICIES
DESCRIPTION
The accompanying financial statement includes the operations of certain
properties (the Acquisition Properties) owned by parties unaffiliated
with Mid-America Capital Partners, L.P. (the Partnership). The
Acquisition Properties were acquired by Mid America Apartment, L.P.
(MAALP) on the dates indicated below except for Hermitage at Beechtree
which was acquired by the Partnership. MAALP is expected to contribute
the Acquisition Properties, along with other properties owned by MAALP,
to the Partnership in exchange for a 99% limited partnership interest
in the Partnership. The Acquisition Properties included in the
financial statement are as follows:
NUMBER OF
LOCATION APARTMENT DATE
NAME OF PROPERTY UNITS ACQUIRED
---- ----------- ----- --------
Howell Commons Greenville, SC 348 January 16, 1997
Westside Creek I Little Rock, AR 142 March 31, 1997
Hermitage at Beechtree Cary, NC 194 November 3, 1997
BASIS OF PRESENTATION
The accompanying financial statement is not representative of the
actual operations for the periods presented. Certain expenses have been
excluded because the Partnership does not anticipate that they will be
incurred in future operations of the property. Expenses excluded
consist of depreciation and amortization, management fees and other
costs not directly related to the future operations of the Acquisition
Properties. Interest expense has been included in the Historical
Summary to the extent that a bond payable is assumed in connection with
the acquisition of the Acquisition Property. Operating expenses include
payroll, utilities, advertising and other general and administrative
costs. Management is not aware of any material factors relating to
these Acquisition Properties that would cause this financial statement
not to be indicative of future operating results as related to revenue
and certain expenses.
(Continued)
<PAGE>
MID-AMERICA CAPITAL PARTNERS, L.P.
NOTES TO COMBINED HISTORICAL SUMMARY OF GROSS INCOME AND DIRECT
OPERATING EXPENSES FOR CERTAIN MULTIFAMILY ACQUISITION PROPERTIES
The accompanying combined historical summary of gross income and direct
operating expenses for certain multifamily acquisition properties was
prepared for the purpose of complying with the rules and regulations of
the Securities and Exchange Commission for inclusion in registration
statement on Form S-3 of Mid-America Capital Partners, L.P. and
excludes material amounts that would not be comparable to those
resulting from the proposed future operations of the properties.
INCOME RECOGNITION
Revenues from rental property are recognized when due from tenants.
Leases are generally for one year or less.
INTERIM UNAUDITED FINANCIAL INFORMATION
The accompanying unaudited financial information includes revenues and
certain expenses of the Acquisition Properties from January 1, 1997 to
the earlier of September 30, 1997 or the date of acquisition by MAALP.
The unaudited information has been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although management believes that the disclosures are
adequate to make the information presented not misleading. In the
opinion of management, all adjustments and eliminations, consisting
only of normal recurring adjustments, necessary to present fairly the
historical statement of revenues and certain expenses for the period
have been included. The results of operations for such interim period
are not necessarily indicative of the results for the full year.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the fees and expenses to be incurred in
connection with the issuance and distribution of the Bonds registered hereby.
Registration fee to the SEC.............................. $ 44,250
Rating Agency Fees.......................................
Printing expense.........................................
Accounting fees and expenses.............................
Legal fees and expenses..................................
Trustees Fees............................................
Miscellaneous expenses...................................
---------
Total.................................................... $
=========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Certificates of Incorporation of the General Partner and the Depositor
obligate General Partner and the Depositor, respectively, to indemnify and
advance expenses to present and former directors and officers to the maximum
extent permitted by Delaware law. The Delaware General Corporation Law ("DGCL")
permits a corporation to indemnify its present and former directors and
officers, among others, against judgments, settlements, penalties, fines or
reasonable expenses incurred with respect to a proceeding to which they may be
made a party by reason of their service in those or other capacities if (i) such
persons conducted themselves in good faith, (ii) they reasonably believed, in
the case of conduct in their official capacities with the corporation, that
their conduct was in its best interests and, in all other cases, that their
conduct was at lest not opposed to its best interests and (iii) in the case of
any criminal proceeding, they had no reasonable cause to believe that their
conduct was unlawful.
Any indemnification by the General Partner or the Depositor pursuant to
the provisions of their respective Certificates of Incorporation Charter
described above shall be paid out of the assets of the General Partner or the
Depositor, as the case may be, and shall not be recoverable from the
shareholders of such entities. To the extent that the foregoing indemnification
provisions purport to include indemnification for liabilities arising under the
Securities Act of 1933, in the opinion of the Securities and Exchange Commission
such indemnification is contrary to public policy and, therefore, unenforceable.
The General Partner and the Depositor will purchase director and officer
liability insurance for the purpose of providing a source of funds to pay any
indemnification described above.
The DGCL permits the Certificate of Incorporation of a Delaware
corporation to include a provision eliminating or limiting the personal
liability of its directors to the corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director, except that such provision
cannot eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its shareholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of the law or (iii) for unlawful distributions that exceed
what could have been distributed without violating the DGCL or the corporation's
charter. The Certificates of Incorporation of the Depositor and the General
Partner, respectively contain a provision eliminating the personal liability of
its directors or officers to the General Partner or the Depositor or its
shareholders for money damages to the maximum extent permitted by Tennessee law
from time to time.
II-1
<PAGE>
ITEM 16. EXHIBITS.
EXHIBITS
NUMBER DESCRIPTION
- ------ -----------
1.1* Underwriting Agreement
3.1 Certificate of Limited Partnership of Mid-America Capital Partners,
L.P.
3.2 Limited Partnership Agreement between MAAC, Inc., as General Partner
and Mid-America Apartments, L.P., a limited partner relating to the
formation of Mid-America Capital Partners, L.P., a Delaware limited
partnership
3.3 Certificate of Incorporation of MAACP, Inc.
3.4 Bylaws of MAACP, Inc.
3.5 Certificate of Incorporation of Mid-America Finance, Inc.
3.6 Bylaws of Mid-America Finance, Inc.
4.1* Form of Amended and Restated Indenture among Mid-America Capital
Partners, L.P. and Mid-America Apartments, as issuer and La Salle
National Bank, as Trustee
4.2* Form of Trust Agreement between Mid-America Finance, Inc. as
depositor and La Salle National Bank, as Trustee
4.3* Form of Certificate
4.4* Form of Bond
5.1* Opinion of Baker, Donelson, Bearman & Caldwell, a professional
corporation
10.1 Cash Collateral Account Security, Pledge and Assignment Agreement
among Mid-America Capital Partners, L.P. and Mid-America Apartments,
L.P. and First Union Bank, and Morgan Stanley Mortgage Capital,
Inc., and La Salle National Bank dated November 21, 1997
10.2 Form of Deed of Trust, Assignment of Leases and Rents and Security
Agreement
12.1* Statement re: Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of KPMG Peat Marwick L.L.P.
23.2 Consent of KPMG Peat Marwick L.L.P.
23.3* Consent of Baker, Donelson, Bearman & Caldwell, a professional
corporation (included in Exhibit 5.1)
23.4* Consent of Cushman & Wakefield
23.5* Consent of Creative Project Management, Inc.
24.1 Power of Attorney (included on signature page)
25.1* Statement of Eligibility and Qualification of Indenture Trustee on
Form T-1
___________________
*To be filed by amendment.
ITEM 17. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"), may be permitted to
directors, officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission (the "Commission") such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification
II-2
<PAGE>
by it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Act of 1933, the Registrants
certify that they have reasonable grounds to believe that they meet all of the
requirements for filing on Form S-3 and have duly caused this Registration
Statement to be signed on their behalf by the undersigned, thereunto duly
authorized, in the City of Memphis, State of Tennessee, on December 16, 1997.
MID-AMERICA CAPITAL PARTNERS, L.P.
a Delaware limited partnership (Registrant)
By: MAACP, Inc.
Its: General Partner
By:/s/ SIMON R.C. WADSWORTH
Simon R.C. Wadsworth, President
By:/s/ LYNN A. JOHNSON
Lynn A. Johnson, Secretary-Treasurer
MID-AMERICA FINANCE, INC.,
a Delaware corporation (Registrant)
By:/s/ SIMON R.C. WADSWORTH
Simon R. C. Wadsworth, President
By:/s/ LYNN A. JOHNSON
Lynn A. Johnson, Secretary-Treasurer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Simon R.C. Wadsworth and Lynn A. Johnson, and each or either of them, his true
and lawful attorney-in-fact with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement and to cause the same to be filed, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby granting to said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing whatsoever
requisite or desirable to be done in and about the premises, as fully to all
intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all acts and things that said attorneys-in-fact and
agents, or either of them, or their substitutes or substitute, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GEORGE E. CATES Director of General Partner and Depositor December 16, 1997
George E. Cates
/s/ HOWARD EDDINGS, JR. Independent Director of General Partner and Depositor December 16, 1997
Howard Eddings, Jr.
/s/ H. ERIC BOLTON, JR. Director of General Partner and Depositor December 16, 1997
H. Eric Bolton, Jr.
/s/ SIMON R.C. WADSWORTH President of General Partner Depositor December 16, 1997
Simon R. C. Wadsworth
/s/ LYNN A. JOHNSON Secretary-Treasurer of General Partner and Depositor December 16, 1997
Lynn A. Johnson
/s/ STEPHEN M. CARPENTER Independent Director of General Partner and Depositor December 16, 1997
Stephen M. Carpenter
</TABLE>
<PAGE>
INDEX TO EXHIBITS
EXHIBITS
NUMBER DESCRIPTION
- ------ -----------
1.1* Underwriting Agreement
3.1 Certificate of Limited Partnership of Mid-America Capital Partners,
L.P.
3.2 Limited Partnership Agreement between MAAC, Inc., as General Partner
and Mid-America Apartments, L.P., a limited partner relating to the
formation of Mid-America Capital Partners, L.P., a Delaware limited
partnership
3.3 Certificate of Incorporation of MAACP, Inc.
3.4 Bylaws of MAACP, Inc.
3.5 Certificate of Incorporation of Mid-America Finance, Inc.
3.6 Bylaws of Mid-America Finance, Inc.
4.1 Form of Amended and Restated Indenture among Mid-America Capital
Partners, L.P. and Mid-America Apartments, as issuer and La Salle
National Bank, as Trustee
4.2 Form of Trust Agreement between Mid-America Finance, Inc. as
depositor and La Salle National Bank, as Trustee
4.3* Form of Certificate
4.4* Form of Bond
5.1* Opinion of Baker, Donelson, Bearman & Caldwell, a professional
corporation
10.1 Cash Collateral Account Security, Pledge and Assignment Agreement
among Mid-America Capital Partners, L.P. and Mid-America Apartments,
L.P. and First Union Bank, and Morgan Stanley Mortgage Capital,
Inc., and La Salle National Bank dated November 21, 1997
10.2 Form of Deed of Trust, Assignment of Leases and Rents and Security
Agreement
12.1* Statement re: Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of KPMG Peat Marwick L.L.P.
23.2 Consent of KPMG Peat Marwick L.L.P.
23.3* Consent of Baker, Donelson, Bearman & Caldwell, a professional
corporation (included in Exhibit 5.1)
23.4* Consent of Cushman & Wakefield
23.5* Consent of Creative Project Management, Inc.
24.1 Power of Attorney (included on signature page)
25.1* Statement of Eligibility and Qualification of Indenture Trustee on
Form T-1
___________________
*To be filed by amendment.
CERTIFICATE OF LIMITED PARTNERSHIP
OF
MID-AMERICA CAPITAL PARTNERS, L.P.
This certificate of Limited Partnership of Mid-America Capital Partners,
L.P., is being duly executed and filed by MAACP, Inc. as its General Partner, to
form a limited partnership under the Delaware Revised Uniform Limited
Partnership Act.
1. The name of the limited partnership is Mid-America Capital
Partners, L.P. (the "Partnership").
2. The address of Partnership's registered office in the state of
Delaware is 1209 Orange Street, Wilmington, New Castle County, Delaware,
19801. The registered agent of the Partnership is The Corporation Trust
Company, with the same address.
3. The name and business address of the General Partner is:
MAACP, Inc.
c/o The Corporation Trust Company
1209 Orange Street
Wilmington, Delaware 19801
EXECUTED as of the 13th day of November, 1997.
MAACP, INC., a Delaware corporation
By: LYNN A. JOHNSON
Its: Secretary
LIMITED PARTNERSHIP AGREEMENT
Between
MAACP, INC.
as General Partner
and
MID-AMERICA APARTMENTS, L.P.,
as Limited Partner
Relating to the
Formation of
MID-AMERICA CAPITAL PARTNERS, L.P.
(a Delaware Limited Partnership)
<PAGE>
LIMITED PARTNERSHIP AGREEMENT
THIS LIMITED PARTNERSHIP AGREEMENT is made as of this day of October,
1997, between MAACP, INC., a Delaware corporation (the "General Partner") and
MID-AMERICA APARTMENTS, L.P., a Delaware limited partnership (the "Limited
Partner"), herein referred to collectively as the "Partners" and individually as
a "Partner," and whose names and addresses are set forth in Exhibit A.
ARTICLE I
NAME AND PURPOSE
1. FORMATION. The undersigned parties hereby form a partnership (herein
called the "Partnership") pursuant to the provisions of the Delaware Revised
Uniform Limited Partnership Act (the "Act").
2. NAME AND OFFICE. The name of the Partnership is Mid-America Capital
Partners, L.P. The principal office of the Partnership shall be located at 1209
Orange Street, Wilmington, Delaware, 19802, but the Partnership may select and
otherwise operate and conduct its business in any and all parts of the United
States as the General Partner may deem advisable.
3. PURPOSES. The Partnership has been formed solely for the limited
purposes of:
(a) holding and operating the twenty-six (26) apartment communities
listed on Exhibit B (collectively, the "Communities") and owning,
managing, renovating, improving, leasing, selling, transferring,
exchanging, mortgaging and otherwise dealing with the Communities (herein
referred to as the Partnership's "Single Purpose").
(b) except as provided in Section 3(a) above, entering into and
performing obligations pursuant to agreements necessary or desirable to
effectuate the foregoing; and
(c) engaging in any lawful act or activity that may be taken by,
exercising any powers permitted to, limited partnerships organized under
the Act that are incidental to and necessary or desirable for the
accomplishment of the above-mentioned purposes, including, without
limitation, entering into the Debt Documents (defined below) or
refinancing any indebtedness associated with the Debt Documents in
accordance with the terms of the Debt Documents.
4. TERM. The term of the Partnership shall be from the date hereof to
December 31, 2020, unless terminated earlier as hereinafter provided or as
otherwise provided by law.
<PAGE>
ARTICLE II
RESTRICTED ACTIONS
The Partnership:
1. will not engage in any business unrelated to its Single Purpose;
2. will not own any assets other than those related to its Single
Purpose or otherwise in furtherance of the purposes of its Single
Purpose;
3. will not engage in, seek or consent to any dissolution, winding
up, liquidation, consolidation, merger, asset sale, transfer of
interests or amend this Limited Partnership Agreement, except (i)
as required by law, (ii) as permitted by the terms and conditions
of the trust indenture and related documents evidencing and
securing that certain $150 million principal amount secured
bridge note and subsequent first mortgage bonds of the
Partnership (the "Debt Documents") and (iii) as approved by the
unanimous affirmative vote of 100% of its partners, including the
vote of the Independent Director of the General Partner;
4. will not, without the unanimous affirmative vote of 100% of its
partners, including the vote of the Independent Director of the
General Partner, make any assignment for the benefit of the
Partnership=s creditors;
5. will not, without the unanimous affirmative vote of 100% of its
partners, including the vote of the Independent Director of the
General Partner, cause or consent to the filing of a bankruptcy or
insolvency petition or otherwise institute insolvency proceedings on
behalf of the Partnership or otherwise seek relief under any laws
relating to relief from debts or the protection of debtors
generally;
6. will not, without the unanimous affirmative vote of 100% of its
partners, including the vote of the Independent Director of the
General Partner, seek or consent to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator, custodian or any
similar official for the Partnership or a substantial portion of its
properties;
7. will not take any action in furtherance of the events specified in
Paragraphs 3, 4, 5, and 6 of this Article II without obtaining the
vote required by such Paragraphs;
8. will not take any action requiring the unanimous affirmative vote of
100% of its partners, unless the Independent Director of the General
Partner shall have participated in such vote;
<PAGE>
9. will not transfer any partnership interest such that the
transferee owns, in the aggregate, more than a 49% interest in
the Partnership, unless (i) such transfer is permitted by the
Debt Documents and approved by the unanimous vote of 100% of its
partners, including the vote of the Independent Director of the
General Partner and (ii) the Partnership shall deliver
nonconsolidation opinion with respect to such transferee as
required by the Debt Documents;
10. will maintain accounts, books and records separate from any other
person or entity;
11. will not commingle its funds or assets with those of any other
person or entity;
12. will conduct its business, and own its assets, in its own name;
13. will maintain books, financial statements, accounting records and
other entity documents separate from any other person or entity;
14. will pay its own liabilities and expenses out of its own funds;
15. will observe all partnership formalities;
16. will maintain an arm=s-length relationship with its affiliates;
17. will pay the salaries of its own employees from its own funds and
will maintain a sufficient number of employees in light of its
contemplated business operations;
18. will not guarantee or become obligated for the debts of any other
person or entity or hold out its credit as being available to
satisfy the obligations of any other person or entity;
19. will allocate fairly and reasonably any overhead expenses that are
shared with an affiliate, including, without limitation, paying for
office space and services performed by an employee of an affiliate;
20. will not pledge its assets for the benefit of any other person or
entity except as permitted by or pursuant to the Debt Documents and
as approved by 100% of its partners, including the vote of the
Independent Director of the General Partner;
21. will hold itself out as a separate entity;
22. will not incur any indebtedness other than that contemplated or
allowed by the Debt Documents and as approved by 100% of its
partners, including the vote of the Independent Director of the
General Partner;
23. will not make loans to any person or entity and will not buy or hold
evidence of indebtedness issued by any other person or entity (other
than cash and investment grade securities);
<PAGE>
24. will not enter into or be a party to any transaction with its
partners or its affiliates except in the ordinary course of its
business on terms which are intrinsically fair, commercially
reasonable, and are not less favorable to it than would be obtained
in a transaction with an unrelated third party;
25. will maintain its accounts, books, resolutions, records and
agreements as official records;
26. will not acquire obligations or securities of its affiliates or
partners;
27. will not identify its partners or affiliates of any of them as a
division of it;
28. will hold itself out and identify itself as a separate and distinct
entity under its own name and not a division of another person or
entity;
29. will not fail to correct any known misunderstanding regarding its
separate identity;
30. will maintain adequate capital in light of its contemplated business
operations;
31. will use separate stationery, invoices, and checks bearing its own
name;
32. will cause the General Partner or such independent contractors as
may be engaged by the General Partner to perform the financial and
operational services on behalf of the Partnership including, without
limitation, maintenance of the Partnership=s books and records and
in connection therewith the Partnership will make payments to the
General Partner or such independent contractors as may be engaged by
the General Partner for the Partnership; and
33. will declare and pay all distributions to the Limited Partner in
accordance with applicable law as approved by the unanimous
affirmative vote of the board of directors of the General Partner,
including the vote of the Independent Director of the General
Partner.
ARTICLE III
CAPITAL
1. CAPITAL CONTRIBUTIONS OF PARTNERS. The capital contribution of the
Limited Partner will consist of the Communities at the value set forth in the
attached Exhibit A, which Exhibit is incorporated herein by this reference. The
capital contribution of the General Partner shall be $2,270,636. No interest
shall be paid by the Partnership to the Partners on any Capital Contribution
paid to the Partnership. The General Partner shall at all times own at least a
1% interest in the Partnership. Except as otherwise provided in the Act or in
this Agreement, no Partner shall be required to make any further contribution to
the capital of the Partnership.
<PAGE>
2. DISTRIBUTIONS OF CAPITAL. Under circumstances requiring a return of any
Capital Contribution, no Partner shall have the right to receive property other
than cash.
3. CAPITAL ACCOUNTS. The General Partner shall maintain a capital account
for each partner in accordance with applicable federal income tax provisions.
4. ADMISSION OF ADDITIONAL PARTNERS. Neither the Partnership nor the
General Partner on behalf of the Partnership may admit additional partners
without the consent of all of the partners, including the vote of the
Independent Director of the General Partner.
ARTICLE IV
MANAGEMENT
1. MANAGEMENT OF THE PARTNERSHIP. The parties hereto agree that the
General Partner shall have exclusive authority to make all decision relating to
the management of the business operations of the Partnership, including all
decisions relating to the acquisition, financing, operation and disposition of
the Communities. Subject to express limitations set forth in this Limited
Partnership Agreement, the General Partner is authorized to do anything
necessary and appropriate to achieve the purposes detained in Article II above.
The General Partner shall devote such time to the Partnership as shall be
reasonably required for its welfare and success. The General Partner shall use
its best efforts to enable the Partnership to carry out the purposes set forth
in Article II.
2. REMOVAL OF THE GENERAL PARTNER.
(a) The General Partner may be removed for a cause by a vote of the
Partners holding a majority interest in the Partnership but may not otherwise
dissociate or resign as General Partner without the vote of the majority
interest in the Partnership subject to the provisions of the Debt Documents.
(b) Notwithstanding subsection (a), the General Partner shall not withdraw
or dissociate from the Partnership so long as any of the obligations of the
Partnership under the Debt Documents remain outstanding.
(c) Without limiting the prohibition of subsection (b), if the General
Partner were to withdraw or dissociate from the Partnership, the remaining
partners shall immediately appoint a successor general partner, whose
organizational documents shall be substantially similar to those of the current
General Partner, and the Partnership shall deliver a non-consolidation opinion
with respect to the successor general partner as required by the Debt Documents.
<PAGE>
(d) The General Partner and each successor to the General Partner shall
have not less than one Independent Director. An "Independent Director" shall
mean a director of the General Partner who is not and has not been at any time
during the five (5) years preceding the time of initial appointment; (a) a
stockholder, director, officer, employee, partner, attorney or counsel of the
General Partner, the Partnership, or any affiliate of either of them; (b) a
customer, supplier or other person who derives more than 10% of its purchases or
revenues from its activities with the General Partner, the Partnership or any
affiliate of either of them; (c) a person or other entity controlling or under
common control with any such stockholder, partner, customer, supplier or other
person; or (d) a member of the immediate family of any such stockholder,
director, officer, employee, partner, customer, supplier or other person. (As
used herein, the term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of management, policies or activities
of a person or entity, whether through ownership of voting securities, by
contract or otherwise.)
(e) If the Independent Director resigns, dies or becomes incapacitated, or
such position is otherwise vacant, no action requiring the unanimous affirmative
vote of the board of directors shall be taken until a successor Independent
Director is elected and qualified and approves such action. In the event of the
death, incapacity, or resignation of the Independent Director, his successor
shall be immediately appointed by the remaining directors.
3. EXPENSES. The General Partner may be reimbursed by the Partnership for
reasonable out-of-pocket expenses incurred by it in connection with the business
of the Partnership.
ARTICLE V
RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS
1. NO MANAGEMENT AUTHORITY. (a) No Limited Partner may take part in the
management of or control of the business of the Partnership, transact any
business in the name of the Partnership, incur expenditures on behalf of the
Partnership, bind the Partnership or sign any agreement or document in the name
of the Partnership.
(b) No Limited Partner will have any power or authority with respect to
the Partnership or Partnership affairs except to the extent that the express
provisions of this Agreement or the Act require or permit the Limited Partner to
take certain actions with respect to the Partnership.
2. LIABILITY OF LIMITED PARTNERS. Except as otherwise provided in the Act
or this Agreement and irrespective of any deficit in a Limited Partners= capital
account, no Limited Partner will be required to contribute funds to the
Partnership other than its capital contribution and will not be personally
liable for any obligations of the Partnership beyond the amount of its capital
contributions and its share of undistributed income of the Partnership. No
Limited Partner in its capacity as such will be required to lend funds to the
Partnership.
ARTICLE VI
ACCOUNTING
<PAGE>
1. BOOKS AND RECORDS. The Partnership through the General Partner shall
cause full and accurate books of the Partnership to be maintained at the
Partnership=s principal place of business. Such books and records shall include
all receipts and expenditures, assets and liabilities, profits and losses and
all other records necessary for recording the Partnership=s business and
affairs. Such books and records shall be open to inspection and examination by
all Partners, in person or by their duty authorized representatives, at
reasonable times.
2. FISCAL YEAR. The fiscal year of the Partnership will be the calendar
year.
3. REPORTS. The General Partner will provide the Limited Partner with such
financial statements and other information regarding the operation of the
Partnership and the Communities as the Limited Partner may reasonably request
from time to time.
4. TAX MATTERS. The General Partner shall cause to be prepared and filed
all necessary Partnership federal and state income tax returns. The General
Partner is hereby authorized to designate itself as tax matters partner of the
Partnership.
5. BANK ACCOUNTS AND INVESTMENT OF FUNDS. All funds of the Partnership
shall be deposited in its name in such checking and savings accounts or time
certificates as shall be designated by the General Partner. Withdrawals
therefrom shall be made upon such signature or signatures as the General Partner
may designate.
6. METHOD OF ACCOUNTING. The books of the Partnership shall be kept on the
accrual basis of accounting.
ARTICLE VII
ALLOCATIONS AND DISTRIBUTIONS
1. CASH DISTRIBUTIONS. The General Partner will have exclusive authority
to determine the timing and amount of cash distributions to the partners. Cash
flow from ongoing operations of the Partnership shall be distributed 100% to the
Limited Partner and charged to its capital account. Cash flow from the sale of
any Community (except upon liquidation and dissolution of the Partnership, which
will be governed by Article VIII, Section 2 hereof) shall be distributed among
the partners and charged to their capital accounts in accordance with the
percentages set forth in Exhibit A hereto ("Partnership Percentages").
2. PROFITS AND LOSSES. The profits and losses of the Partnership shall be
determined each year in accordance with accounting methods used for federal
income tax purposes. Profits and Losses shall be allocated among the Partners as
set forth below and credited (or charged) to their Capital Accounts (as defined
and maintained in accordance with Regulations under Section 704(b) of the
Internal Revenue Code of 1986, as amended). Profits of the Partnership shall be
allocated among the Partners in the same ratios as cash distributions are made
to the Partners pursuant to Section I above. Losses of the Partnership shall be
allocated in accordance with the Partnership Percentages.
<PAGE>
ARTICLE VIII
TERMINATION OF THE PARTNERSHIP
1. TERMINATION. The Partnership shall be dissolved, subject to the
provisions of the Debt Documents and this Limited Partnership Agreement, upon
the first to occur of the following:
(a) subject to Article II, the unanimous consent of the partners;
provided that the partners shall not agree to dissolve the Partnership
unless permitted by the Debt Documents and Article I, Section 3(a) hereof;
and
(b) December 31, 2020
PROVIDED, HOWEVER, that the Partnership shall not dissolve so long
as at least one partner remains solvent.
2. DISSOLUTION. Subject to the provisions of the Debt Documents and this
Limited Partnership Agreement, upon the occurrence of any one of the above
events, the Partnership will be dissolved, the affairs of the Partnership wound
up and the assets liquidated, allocated and distributed, as realized, in the
following order:
(a) to creditors of the Partnership; and
(b) to the Partners in accordance with and to the extent of their
positive capital account balances and then in accordance with the
Partnership Percentages. If, upon liquidation, the General Partner has a
deficit capital account balance, the General Partner shall be required to
contribute cash to the Partnership in an amount equal to the lesser of (i)
such deficit capital account balance or (ii) the excess of 1.01% of the
total capital contributions of the Limited Partner over the capital
previously contributed by the General Partner.
ARTICLE IX
TRANSFER OF INTEREST
No Partner may sell, transfer or otherwise assign its interest in the
Partnership.
<PAGE>
ARTICLE X
GENERAL PROVISIONS
1. INDEMNIFICATION. If the General Partner shall violate any of the terms,
provisions and conditions of this Limited Partnership Agreement, it shall, in
addition to being subjected to the other remedies, liabilities and obligations
herein imposed upon it therefor, keep and save harmless the Partnership property
and indemnify the other Partners from any and all claims, demands and actions
that may arise out of or by reason of such a violation of any of the terms,
provisions and conditions thereof.
2. AMENDMENTS. This Limited Partnership Agreement may not be modified or
amended except with the written consent of all partners, including the
affirmative vote of the Independent Director of the General Partner, and subject
to the provisions of the Debt Documents and furthermore shall not be amended
until the Partnership has received confirmation from all applicable rating
agencies that such amendment would not result in the qualification, withdrawal
or downgrade of any securities rating.
3. GOVERNING LAW; BINDING. This Limited Partnership Agreement shall be
construed and enforceable in accordance with the laws of the State of Delaware
and shall be binding upon all the parties and their assigns, successors,
estates, heirs or legatees.
4. COUNTERPARTS. This Limited Partnership Agreement may be executed in any
number of counterparts, each of which shall be deemed to constitute an original
and all of which together shall constitute one instrument.
<PAGE>
IN WITNESS WHEREOF, we have hereunto set our hands to this Limited
Partnership Agreement the day and year heretofore mentioned.
GENERAL PARTNER:
MAACP, INC.
By SIMON R.C. WADSWORTH
Its President
LIMITED PARTNER:
MID-AMERICA APARTMENTS, L.P.
By: Mid-America Apartment Communities, Inc.
Its: General Partner
By: SIMON R.C. WADSWORTH
Its: Executive Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT A
Initial Capital
GENERAL PARTNER/ADDRESS INTEREST CONTRIBUTION
MAACP, Inc. 1% $2,270,636.00
1209 Orange Street
Wilmington, Delaware 19802
LIMITED PARTNER/ADDRESS
Mid-America Apartments, L.P. 99% $See Exhibit A-1
1209 Orange Street
Wilmington, Delaware 19802
<PAGE>
EXHIBIT A-1
- ----------------------------------------
COMMUNITY VALUE
- ----------------------------------------
Hidden Lake II $5,980,000.00
- ----------------------------------------
High Ridge 6,717,000.00
- ----------------------------------------
Park Place 6,223,000.00
- ----------------------------------------
Southland Station I 7,010,000.00
- ----------------------------------------
Willow Creek 8,191,000.00
- ----------------------------------------
Belmere 8,730,000.00
- ----------------------------------------
Crosswinds 16,712,000.00
- ----------------------------------------
Fairways at Royal Oaks 9,057,000.00
- ----------------------------------------
Hermitage at Beechtree 8,936,000.00
- ----------------------------------------
Howell Commons 11,259,000.00
- ----------------------------------------
Kirby Station 16,843,000.00
- ----------------------------------------
Lakepointe 4,192,000.00
- ----------------------------------------
Lakeside 14,034,000.00
- ----------------------------------------
Marsh Oaks 4,225,000.00
- ----------------------------------------
Napa Valley 7,830,000.00
- ----------------------------------------
Park Haywood 6,061,000.00
- ----------------------------------------
Pear Orchard 15,491,000.00
- ----------------------------------------
Savannah Creek 9,096,000.00
- ----------------------------------------
Shenandoah Petersburg 6,767,000.00
- ----------------------------------------
Somerset 4,430,000.00
- ----------------------------------------
Steeplechase 3,662,000.00
- ----------------------------------------
Sutton Place 10,698,000.00
- ----------------------------------------
Tiffany Oaks 11,620,000.00
- ----------------------------------------
Village 9,871,000.00
- ----------------------------------------
Westside Creek I 5,644,000.00
- ----------------------------------------
Williamsburg 5,514,000.00
- ----------------------------------------
TOTAL $224,793,000.00
- ----------------------------------------
CERTIFICATE OF INCORPORATION
MAACP, INC.
ARTICLE I
NAME
The name of the Corporation is MAACP, Inc. (the "Corporation").
ARTICLE II
DURATION
The period of the Corporation's duration is perpetual.
ARTICLE III
BUSINESS PURPOSE
The nature of the business of the Corporation and the objects or purposes
to be transacted, prompted or carried on by it are as follows:
To engage solely in the following limited activities:
(i) owning the sole general partnership interest in Mid-America
Capital Partners, L.P. (the "Partnership");
(ii) acting as, and exercising all of the authority as the general
partner of the Partnership; and
(iii) all lawful act or activity for which corporations may be
organized under the Delaware General Corporation Law (the "Act"), but only
so long as the same are necessary, appropriate, suitable or convenient to
accomplish the objects or purposes specified in subparagraphs (i) and (ii)
of this Article III.
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<PAGE>
ARTICLE IV
AUTHORIZED SHARES
The aggregate number of shares which the Corporation shall have the
authority to issue is 10,000 shares of Common Stock, par value of $0.01 per
share with a total value of $100.00. The corporation is a for-profit
corporation.
ARTICLE V
PREEMPTIVE RIGHTS
No holder of shares of the Corporation shall, as such holder, have any
right to purchase or subscribe for any part of the unissued shares of the
Corporation of any class, now or hereafter authorized, or of any bond,
debenture, obligation or instrument which the Corporation may issue or sell that
shall be convertible into or exchangeable for or entitle the holders thereof to
purchase or subscribe for any shares of the Corporation of any class, now or
hereafter authorized, other than such right, if any, as the Board of Directors
of the Corporation in its discretion may determine.
ARTICLE VI
PRINCIPAL OFFICE
The street address of the principal office of the Corporation is 1209
Orange Street, Wilmington, Delaware 19801.
ARTICLE VII
INITIAL REGISTERED OFFICE AND INITIAL REGISTERED AGENT
The street address of the registered office of the Corporation is
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801, New
Castle County, and the name of its initial registered agent at such address is
The Corporation Trust Company.
ARTICLE VIII
NAME AND ADDRESS OF INCORPORATOR
The name and mailing address of the Incorporator is Desiree M. Franklin,
165 Madison Avenue, Suite 2000, Memphis, Tennessee 38103.
2
<PAGE>
ARTICLE IX
RESTRICTIONS ON OPERATIONS
1. The Corporation shall have not less than one Independent Director. An
"Independent Director" shall mean a director of the Corporation who is not and
has not been at any time during the five (5) years preceding the time of initial
appointment: (a) a stockholder, director, officer, employee, partner, attorney
or counsel of the Corporation, the Partnership, or any affiliate of either of
them; (b) a customer, supplier or other person who derives more than 10% of its
purchases or revenues from its activities with the Corporation, the Partnership,
or any affiliate of either of them; (c) a person or other entity controlling or
under common control with any such stockholder, partner, customer, supplier or
other person; or (d) a member of the immediate family of any such stockholder,
director, officer, employee, partner, customer, supplier or other person. (As
used herein, the term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of management, policies or activities
of a person or entity, whether through ownership of voting securities, by
contract or otherwise.). If the Independent Director resigns, dies or becomes
incapacitated, or such position is otherwise vacant, no action requiring the
unanimous affirmative vote of the board of directors shall be taken until a
successor Independent Director is elected and qualified and approves such
action. In the event of the death, incapacity or resignation of the Independent
Director or a vacancy for any other reason, a successor Independent Director
shall be appointed immediately by the remaining directors.
2. The Corporation shall not incur any indebtedness, except as it is
liable for the Partnership's indebtedness in its capacity as general partner of
the Partnership.
3. The Corporation shall not transfer to any person or entity any assets
of the Corporation or of the Partnership except in accordance with (i)
applicable law, (ii) the terms of the Debt Documents (hereinafter defined), and
(iii) as approved by the unanimous vote of the Corporation's Board of Directors,
including the vote of the Independent Director, except that, subject to the
terms of the Debt Documents, the Corporation, as general partner of the
Partnership, may transfer assets in the ordinary course of its business
undertaken in accordance with Article III of this Certificate of Incorporation
and may declare and pay cash dividends to its shareholders in accordance with
(x) the Act and (y) the unanimous approval of its Board of Directors, including
the vote of the Independent Director, to the extent that unencumbered funds are
available therefor.
4. Unless permitted by the trust indenture, debt securities, deeds of
trust, and assignment of rents and leases to which the Partnership is a party in
connection with the $150 million principal amount of secured bridge note and up
to subsequent $160 million principal amount of first mortgage bonds of the
Partnership pursuant to an Indenture among the Partnership, its limited partner
and a trustee to be dated on or about November 17, 1997 (the "Debt Documents"),
and approved by the unanimous vote of the Corporation's Board of Directors,
including the vote of the Independent Director, the Corporation shall not, and
shall not permit the Partnership to, engage in any dissolution, liquidation,
consolidation, merger or sale of assets.
3
<PAGE>
5. Unless permitted by the Debt Documents, and approved by the unanimous
vote of the Corporation's Board of Directors, including the vote of the
Independent Director, the Corporation will not amend, alter, change or repeal
any provision contained in this Certificate of Incorporation; provided, however,
that, unless (i) required by a rating agency in connection with obtaining a
rating of the first mortgage bonds issued pursuant to the Indenture and (ii)
consented to by the Trustee on behalf of the holders of the secured bridge notes
and first mortgage bonds, the Corporation shall in any event not amend, alter,
change or repeal any provision contained in Article III or IX of this
Certificate of Incorporation. All rights conferred upon shareholders herein are
granted subject to the reservation contained in this Article IX.
6. (a) The fiduciary duty of the directors of the Corporation shall not
include a duty to (i) file or consent to the filing of any bankruptcy,
insolvency or reorganization case or proceedings; institute any proceedings
under any applicable insolvency law or otherwise seek relief under any laws
relating to the relief from debts or the protections of debtors generally; (ii)
seek or consent to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator, custodian or any similar official for the Corporation or the
Partnership or a substantial portion of either of their properties; (iii) make
any assignment for the benefit of the creditors of the Corporation or the
Partnership; or (iv) take any action, or cause the Corporation or the
Partnership to take any action, in furtherance of any of the foregoing (any of
the above foregoing actions, a "Bankruptcy Action"); and (b) the Corporation
shall not take any Bankruptcy Action without the unanimous vote of the board of
directors (including the vote of the Independent Director). The Independent
Director shall take into account the interests of the Corporation and the
Partnership and creditors of the Corporation and the Partnership (including
holders of any rated debt) when voting on any Bankruptcy Action. No director or
officer of the Corporation shall be liable to the Corporation or any shareholder
on account of such director's or officer's good faith reliance on the provisions
of this paragraph, and neither the Corporation nor any shareholder of the
Corporation shall have any claim for breach of fiduciary duty or otherwise
against any director or officer for failing to take any Bankruptcy Action.
7. (a) The Corporation, as general partner, shall not authorize the
Partnership to enter into any amendment of any document evidencing or securing
the Debt Documents without the unanimous affirmative vote of the board of
directors (including the vote of the Independent Director).
(b) The Corporation shall not commingle its funds and other assets
with those of any other individual, limited liability company, corporation,
estate, partnership, joint venture, association, joint stock company, trust,
unincorporated organization, or government or any agency or political
subdivision thereof and shall hold its funds and other assets in its own name.
(c) The Corporation shall not assume, guarantee or become obligated
for the debts of any other entity or hold itself out as being liable for the
debts of any other entity or person (except to the extent it is liable for the
Partnership's obligations due to its capacity as a general partner) or hold out
its credit as being available to satisfy the obligations of any other person or
entity.
4
<PAGE>
(d) The Corporation shall not form, or cause to be formed, any
subsidiaries nor acquire any interest as a general or limited partner in any
partnership other than Mid-America Capital Partners, L.P..
(e) The Corporation shall act solely in its corporate name and
through its duly authorized officers or agents in the conduct of its business,
shall conduct its business so as not to mislead others as to the identity of the
entity with which they are concerned and shall not fail to correct any known
misunderstanding regarding the separate identity of the Corporation.
(f) The Corporation shall maintain books, financial statements,
accounts, accounting records and other entity documents separate from any other
person or entity.
(g) The Corporation shall not own any assets other than those
related to, or in furtherance of, its purposes set forth in Article III herein.
(h) The Corporation shall not engage in any business activity other
than as permitted by Article III herein.
(i) The Corporation shall not cause or allow the Board of Directors
of the Corporation to take any action requiring the unanimous affirmative vote
of 100% of the members of the Board of Directors unless the Independent Director
shall have voted in favor of such action.
(j) The Corporation shall pay its own liabilities and expenses out
of its own funds.
(k) The Corporation shall observe all corporate formalities.
(l) The Corporation shall maintained an arm's-length relationship
with its affiliates.
(m) The Corporation shall not acquire obligations or securities of
its affiliates or shareholders.
(n) The Corporation will allocate fairly and reasonably any overhead
expenses that are shared with an affiliate, including paying for office space
and services performed by any employee of an affiliate.
(o) The Corporation shall hold and identify itself or a separate and
distinct entity under its own name and not as a division or part of any other
person or entity and will not identify its shareholders as a division of it.
5
<PAGE>
(p) The Corporation shall not make loans to any person or entity and
shall not buy or hold evidence of a indebtedness issued by any other person or
entity (except for cash and investment-grade securities).
(q) The Corporation shall not enter into or be a party to any
transaction with its shareholders or its affiliates except in the ordinary
course of its business and on terms which are intrinsically fair, commercially
reasonable, and are no less favorable to it then would be obtained in a
comparable arm's-length transaction with an unrelated third party.
(r) The Corporation shall maintain adequate capital in light of its
contemplated business operations.
(s) The Corporation shall maintain separate financial statements or,
if consolidated financial statements are used, such consolidated financial
statements shall separately identify the assets of the Corporation separate and
apart from those of any other person or entity.
(t) The Corporation will pay the salaries of its own employees from
its own funds and will maintain a sufficient number of employees in light of its
contemplated business operations.
(u) The Corporation will not pledge its assets for the benefit of
any other person or entity.
(v) The Corporation shall use separate stationery, invoices, and
checks bearing its own name.
(w) The Corporation shall correct any known misunderstanding
regarding its separate identity.
(x) The Corporation shall not transfer any direct or indirect
ownership interest in the Corporation such that the transferee owns in the
aggregate more than a 49% interest in the Corporation.
(y) The Corporation shall continue to serve as the general partner
of the Partnership and shall not withdraw or resign from the Partnership.
6
<PAGE>
ARTICLE X
AMENDMENT
Except as set forth in Article IX, Section 5 hereof, this Certificate
shall not be amended without the unanimous consent of all directors (including
the Independent Director) and shareholders. In addition to the foregoing and not
in limitation thereof, the Corporation shall not amend this Certificate unless
the Corporation has received confirmation from all applicable rating agencies
that such amendment would not result in the qualification, withdrawal or
downgrade of any of the Partnership's securities rating.
ARTICLE XI
A director, officer, employee or agent of the corporation shall, to the
full extent not prohibited by the Delaware General Corporation Law, as the same
exists or may hereafter be amended, not be liable to the corporation or its
stockholders for monetary damages resulting from a breach of his or her
fiduciary duty to the corporation.
I, the undersigned, being the sole incorporator hereinbefore named, for
the purpose of forming this corporation pursuant to the Delaware General
Corporation Law, do hereby declare and certify that this is my act and deed and
that the facts herein stated are true and accordingly have hereunto set my hand
this ____ day of ___________________, 1997.
Desiree M. Franklin,
Sole Incorporator
7
MAACP, INC.
(a Delaware corporation)
BYLAWS
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of MAACP, Inc.
(hereinafter called the "Corporation") in the State of Delaware shall be at 1209
Orange Street, City of Wilmington, County of New Castle, 19801, and the name of
the registered agent in charge thereof shall be The Corporation Trust Company.
SECTION 2. OTHER OFFICES. The Corporation may also have an office or
offices at such other place or places, either within or without the State of
Delaware, as the Board of Directors (herein-after called the "Board") may from
time to time determine or as the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. Annual meetings of the stockholders of the
Corporation for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings may be held at such
time, date and place as the Board shall determine by resolution.
SECTION 2. SPECIAL MEETINGS. A special meeting of the stockholders
for the transaction of any proper business may be called at any time by the
Board or by the President.
SECTION 3. PLACE OF MEETINGS. All meetings of the stockholders shall be
held at such places, within or without the State of Delaware, as may from time
to time be designated by the person or persons calling the respective meeting
and specified in the respective notices or waivers of notice thereof.
SECTION 4. NOTICE OF MEETINGS. Except as otherwise required by law, notice
of each meeting of the stockholders, whether annual or special, shall be given
not less than ten (10) nor more than sixty (60) days before the date of the
meeting to each stockholder of record entitled to vote at such meeting by
delivering a typewritten or printed notice thereof to him personally, or by
depositing such notice in the United States mail, in a postage prepaid envelope,
directed to him at his post office address furnished by him to the Secretary of
the Corporation for such purpose or, if he shall not have furnished to the
Secretary his address for such purpose, then at his post office address last
known to the Secretary, or by transmitting a notice thereof to him at such
<PAGE>
address by telegraph, cable, or wireless. Except as otherwise expressly required
by law, no publication of any notice of a meeting of the stockholders shall be
required. Every notice of a meeting of the stockholders shall state the place,
date and hour of the meeting, and, in the case of a special meeting, shall also
state the purpose or purposes for which the meeting is called. Notice of any
meeting of stockholders shall not be required to be given to any stockholder who
shall have waived such notice and such notice shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, except as a
stockholder who shall attend such meeting for the express purpose of objecting,
at the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Except as otherwise expressly
required by law, notice of any adjourned meeting of the stockholders need not be
given if the time and place thereof are announced at the meeting at which the
adjournment is taken.
SECTION 5. QUORUM. Except in the case of any meeting for the election of
directors summarily ordered as provided by law, the holders of record of a
majority in voting interest of the shares of stock of the Corporation entitled
to be voted thereat, present in person or by proxy, shall constitute a quorum
for the transaction of business at any meeting of the stockholders of the
Corporation or any adjournment thereof. In the absence of a quorum at any
meeting or any adjournment thereof, a majority in voting interest of the
stockholders present in person or by proxy and entitled to vote thereat or, in
the absence therefrom of all the stockholders, any officer entitled to preside
at, or to act as secretary of, such meeting may adjourn such meeting from time
to time. At any such adjourned meeting at which a quorum is present any business
may be transacted which might have been transacted at the meeting as originally
called.
SECTION 6. VOTING. a. Each stockholder shall, at each meeting of the
stockholders, be entitled to vote in person or by proxy each share or fractional
share of the stock of the Corporation having voting rights on the matter in
question and which shall have been held by him and registered in his name on the
books of the Corporation:
(1) on the date fixed pursuant to Section 6.5 of these Bylaws as the
record date for the determination of stockholders entitled to notice of
and to vote at such meeting, or
(2) if no such record date shall have been so fixed, then (1) at the
close of business on the day next preceding the day on which notice of the
meeting shall be given or (2) if notice of the meeting shall be waived, at
the close of business on the day next preceding the day on which the
meeting shall be held.
<PAGE>
b. Shares of its own stock belonging to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors in such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity shall
be entitled to vote such stock. Persons whose stock is pledged shall be entitled
to vote, unless in the transfer by the pledgor on the books of the Corporation
he shall have expressly empowered the pledgee to vote thereon, in which case
only the pledgee, or his proxy, may represent such stock and vote thereon. Stock
having voting power standing of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants in common, tenants
by entirety or otherwise, or with respect to which two or more persons have the
same fiduciary relationship, shall be voted in accordance with the provisions of
the General Corporation Law of the State of Delaware.
c. Any such voting rights may be exercised by the stockholder entitled
thereto in person or by his proxy appointed by an instrument in writing,
subscribed by such stockholder or by his attorney thereunto authorized and
delivered to the secretary of the meeting; provided, however, that no proxy
shall be voted or acted upon after three years from its date unless said proxy
shall provide for a longer period. The attendance at any meeting of a
stockholder who may theretofore have given, a proxy shall not have the effect of
revoking the same unless he shall in writing so notify the secretary of the
meeting prior to the voting of the proxy. At any meeting of the stockholders all
matters, except as otherwise provided in the Certificate of Incorporation, in
these Bylaws or by law, shall be decided by the vote of a majority in voting
interest of the stockholders present in person or by proxy and entitled to vote
thereat and thereon, a quorum being present. The vote at any meeting of the
stockholders on any question need not be by ballot, unless so directed by the
chairman of the meeting. On a vote by ballot each ballot shall be signed by the
stockholder voting, or by his proxy, if there be such proxy, and it shall state
the number of shares voted.
SECTION 7. LIST OF STOCKHOLDERS. The Secretary of the Corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
<PAGE>
SECTION 8. JUDGES. If at any meeting of the stockholders a vote by written
ballot shall be taken on any question, the chairman of such meeting may appoint
a judge or judges to act with respect to such vote. Each judge so appointed
shall first subscribe an oath faithfully to execute the duties of a judge at
such meeting with strict impartiality and according to the best of his ability.
Such judges shall decide upon the qualification of the voters and shall report
the number of shares represented at the meeting and entitled to vote on such
question, shall conduct and accept the votes, and, when the voting is completed,
shall ascertain and report the number of shares voted respectively for and
against the question. Reports of judges shall be in writing and subscribed and
delivered by them to the Secretary of the Corporation. The judges need not be
stockholders of the Corporation, and any officer of the Corporation may be a
judge on any question other than a vote for or against a proposal in which he
shall have a material interest.
SECTION 9. ACTION WITHOUT MEETING. Any action required to be taken at any
annual or special meeting of stockholders of the Corporation, or any action
which may be taken at any annual or special meeting of such stockholders, may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The property, business and affairs of the
Corporation shall be managed by the Board.
SECTION 2. NUMBER AND TERM OF OFFICE. The number of directors of the
Corporation which shall constitute the whole Board of Directors shall be such
number as the Board of Directors shall from time to time fix by resolution;
provided, however, that when all the shares of the Corporation are owned
beneficially and of record by either one or two stockholders, the number of
directors may be less than three but not less than the number of stockholders.
Directors need not be stockholders. Each of the directors of the Corporation
shall hold office until his successor shall have been duly elected and shall
qualify or until he shall resign or shall have been removed in the manner
hereinafter provided.
SECTION 3. ELECTION OF DIRECTORS. The directors shall be elected annually
by the stockholders of the Corporation and the persons receiving the greatest
number of votes, up to the number of directors to be elected, shall be the
directors.
SECTION 4. RESIGNATIONS. Any director of the Corporation may resign at any
time by giving written notice to the Board or to the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, it shall take effect immediately upon
its receipt; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 5. VACANCIES. Except as otherwise provided in the Certificate of
Incorporation, any vacancy in the Board, whether because of death, resignation,
disqualification, an increase in the number of directors, or any other cause,
may be filled by vote of the majority of the remaining directors, although less
than a quorum. Each director so chosen to fill a vacancy shall hold office until
his successor shall have been elected and shall qualify or until he shall resign
or shall have been removed in the manner hereinafter provided.
<PAGE>
SECTION 6. PLACE OF MEETING, ETC. The Board may hold any of its meetings
at such place or places within or without the State of Delaware as the Board may
from time to time by resolution designate or as shall be designated by the
person or persons calling the meeting or in the notice or a waiver of notice of
any such meeting. Directors may participate in any regular or special meeting of
the Board by means of conference telephone or similar communications equipment
pursuant to which all persons participating in the meeting of the Board can hear
each other, and such participation shall constitute presence in person at such
meeting.
SECTION 7. FIRST MEETING. The Board shall meet as soon as practicable
after each annual election of directors and notice of such first meeting shall
not be required.
SECTION 8. REGULAR MEETINGS. Regular meetings of the Board may be held at
such times as the Board shall from time to time by resolution determine. If any
day fixed for a regular meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting shall be held at the same hour and place
on the nest succeeding business day not a legal holiday. Except as provided by
law, notice of regular meetings need not be given.
SECTION 9. SPECIAL MEETINGS. Special meetings of the Board shall be held
whenever called by the President or a majority of the authorized number of
directors. Except as otherwise provided by law or by these Bylaws, notice of the
time and place of each such special meeting shall be mailed to each director,
addressed to him at his residence or usual place of business, at least five (5)
days before the day on which the meeting is to be held, or shall be sent to him
at such place by telegraph or cable or be delivered personally not less than
forty-eight (48) hours before the time at which the meeting is to be held.
Except where otherwise required by law or by these Bylaws, notice of the purpose
of a special meeting need not be given. Notice of any meeting of the Board shall
not be required to be given to any director who is present at such meeting,
except a director who shall attend such meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened.
SECTION 10. QUORUM AND MANNER OF ACTING. Except as otherwise provided in
these Bylaws or by law, the presence of a majority of the authorized number of
directors shall be required to constitute a quorum for the transaction of
business at any meeting of the Board, and all matters shall be decided at any
such meeting, a quorum being present, by the affirmative votes of a majority of
the directors present. In the absence of a quorum, a majority of directors
present at any meeting may adjourn the same from time to time until a quorum
shall be present. Notice of any adjourned meeting need not be given. The
directors shall act only as a Board, and the individual directors shall have no
power as such.
SECTION 11. ACTION BY CONSENT. Any action required or permitted to be
taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
Board or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board or committee.
<PAGE>
SECTION 12. REMOVAL OF DIRECTORS. Subject to the provisions of the
Certificate of Incorporation, any director may be removed at any time, either
with or without cause, by the affirmative vote of the stockholders having a
majority of the voting power of the Corporation given at a special meeting of
the stockholders called for the purpose.
SECTION 13. COMPENSATION. The directors shall receive only such
compensation for their services as directors as may be allowed by resolution of
the Board. The Board may also provide that the Corporation shall reimburse each
such director for any expense incurred by him on account of his attendance at
any meetings of the Board or Committees of the Board. Neither the payment of
such compensation nor the reimbursement of such expenses shall be construed to
preclude any director from serving the Corporation or its subsidiaries in any
other capacity and receiving compensation therefor.
SECTION 14. COMMITTEES. The Board may, by resolution passed by a majority
of the whole Board, designate one or more committees, each committee to consist
of one or more of the directors of the Corporation. Any such committee, to the
extent provided in the resolution of the Board and except as otherwise limited
by law, shall have and may exercise all the powers and authority of the Board in
the management of the business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it.
Any such committee shall keep written minutes of its meetings and report the
same to the Board at the next regular meeting of the Board. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board to
act at the meeting in the place of any such absent or disqualified member.
ARTICLE IV
OFFICERS
SECTION 1. NUMBER. The officers of the Corporation shall be a Chairman, a
President, one or more Vice Presidents (the number thereof and their respective
titles to be determined by the Board), a Secretary and a Treasurer.
SECTION 2. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The officers of
the Corporation, except such officers as may be appointed in accordance with
Section 4.3, shall be elected annually by the Board at the first meeting thereof
held after the election thereof. Each officer shall hold office until his
successor shall have been duly chosen and shall qualify or until his resignation
or removal in the manner hereinafter provided.
SECTION 3. ASSISTANTS, AGENTS AND EMPLOYEES, ETC. In addition to the
officers specified in Section 4.1, the Board may appoint other assistants,
agents and employees as it may deem necessary or advisable, including one or
more Assistant Secretaries, and one or more Assistant Treasurers, each of whom
shall hold office for such period, have such authority, and perform such duties
as the Board may from time to time determine. The Board may delegate to any
officer of the Corporation or any committee of the Board the power to appoint,
remove and prescribe the duties of any such assistants, agents or employees.
<PAGE>
SECTION 4. REMOVAL. Any officer, assistant, agent or employee of the
Corporation may be removed, with or without cause, at any time: (a) in the case
of an officer, assistant, agent or employee appointed by the Board, only by
resolution of the Board; and (b) in the case of an officer, assistant, agent or
employee, by any officer of the Corporation or committee of the Board upon whom
or which such power of removal may be conferred by the Board.
SECTION 5. RESIGNATIONS. Any officer or assistant may resign at any time
by giving written notice of his resignation to the Board or the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, upon receipt thereof by the Board or
the Secretary, as the case may be; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 6. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification, or other cause, may be filled for the
unexpired portion of the term thereof in the manner prescribed in these Bylaws
for regular appointments or elections to such office.
SECTION 7. CHAIRMAN. The Chairman shall be the chief executive officer of
the Corporation and, subject to the control of the Board, shall in general
supervise and control all of the business and affairs of the Corporation. He
shall, when present, preside over all meetings of the shareholders and of the
Board. He may sign, with or without the secretary or any other proper officer of
the Corporation thereunto authorized by the Board, certificates for shares of
the Corporation, any deeds, mortgages, bonds, contracts or other instruments
which the Board has authorized to be executed, except in cases where the signing
and execution thereof shall be expressly delegated by the Board or these Bylaws
to some other officer or agent of the Corporation, or shall be required by law
to be otherwise signed or executed; and in general shall perform all duties
incident to the office of Chairman and such other duties as may be prescribed by
the Board from time to time.
SECTION 8. THE PRESIDENT. The President of the Corporation shall be the
chief operating officer of the Corporation and shall have, subject to the
control of the Board, general and active supervision and management over the
business of the Corporation and over its several officers, assistants, agents
and employees.
SECTION 9. THE VICE PRESIDENTS. Each Vice President shall have such powers
and perform such duties as the Board may from time to time prescribe. At the
request of the President, or in case of the President's absence or inability to
act upon the request of the Board, a Vice President shall perform the duties of
the President and when so acting, shall have all the powers of, and be subject
to all the restrictions upon, the President.
SECTION 10. THE SECRETARY. The Secretary shall, if present, record the
proceedings of all meetings of the Board, of the stockholders, and of all
committees of which a secretary shall not have been appointed in one or more
books provided for that purpose; he shall see that all notices are duly given in
accordance with these Bylaws and as required by law; he shall be custodian of
the seal of the Corporation and shall affix and attest the seal to all documents
to be executed on behalf of the Corporation under its seal; and, in general, he
shall perform all the duties incident to the office of Secretary and such other
duties as may from time to time be assigned to him by the Board.
<PAGE>
SECTION 11. THE TREASURER. The Treasurer shall have the general care and
custody of the funds and securities of the Corporation, and shall deposit all
such funds in the name of the Corporation in such banks, trust companies or
other depositories as shall be selected by the Board. He shall receive, and give
receipts for, moneys due and payable to the Corporation from any source
whatsoever. He shall exercise general supervision over expenditures and
disbursements made by officers, agents and employees of the Corporation and the
preparation of such records and reports in connection therewith as may be
necessary or desirable. He shall, in general, perform all other duties incident
to the office of Treasurer and such other duties as from time to time may be
assigned to him by the Board.
SECTION 12. COMPENSATION. The compensation of the officers of the
Corporation shall be fixed from time to time by the Board. None of such officers
shall be prevented from receiving such compensation by reason of the fact that
he is also a director of the Corporation. Nothing contained herein shall
preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving such compensation by reason of
the fact that he is also a director of the Corporation. Nothing contained herein
shall preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving proper compensation therefor.
ARTICLE V
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
SECTION 1. EXECUTION OF CONTRACTS. The Board, except as in these Bylaws
otherwise provided, may authorize any officer or officers, agent or agents, to
enter into any contract or execute any instrument in the name of and on behalf
of the Corporation, and such authority may be general or confined to specific
instances; and unless so authorized by the, Board or by these Bylaws, no
officer, agent or employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or in any amount.
SECTION 2. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
payment of money, notes or other evidence of indebtedness, issued in the name of
or payable to the Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the Board. Each such officer, assistant, agent or attorney shall
give such bond, if any, as the Board may require.
SECTION 3. DEPOSITS. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board may select, or as may
be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. For the purpose of deposit and for the purpose
of collection for the account of the Corporation, the President, any Vice
President or the Treasurer (or any other officer or officers, assistant or
assistants, agent or agents, or attorney or attorneys of the Corporation who
shall from time to time be determined by the Board) may endorse, assign and
deliver checks, drafts and other orders for the payment of money which are
payable to the order of the Corporation.
<PAGE>
SECTION 4. GENERAL AND SPECIAL BANK ACCOUNTS. The Board may from time to
time authorize the opening and keeping of general and special bank accounts with
such banks, trust companies or other depositories as the Board may select or as
may be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. The Board may make such special rules and
regulations with respect to such bank accounts, not inconsistent with the
provisions of these Bylaws, as it may deem expedient.
ARTICLE VI
SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR STOCK. Every owner of stock of the Corporation
shall be entitled to have a certificate or certificates, to be in such form as
the Board shall prescribe, certifying the number and class of shares of the
stock of the Corporation owned by him. The certificates representing shares of
such stock shall be numbered in the order in which they shall be issued and
shall be signed in the name of the Corporation by the Chairman, President or a
Vice President, and by the Secretary or an Assistant Secretary or by the
Treasurer or an Assistant Treasurer. Any of or all of the signatures on the
certificates may be a facsimile. In case any officer, transfer agent or
registrar who has signed, or whose facsimile signature has been placed upon, any
such certificate, shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, such certificate may nevertheless
be issued by the Corporation with the same effect as though the person who
signed such certificate, or whose facsimile signature shall have been placed
thereupon, were such officer, transfer agent or registrar at the date of issue.
A record shall be kept of the respective names of the persons, firms or
corporations owning the stock represented by such certificates, the number and
class of shares represented by such certificates, respectively, and the
respective dates thereof, and in case of cancellation, the respective dates of
cancellation. Every certificate surrendered to the Corporation for exchange or
transfer shall be cancelled, and no new certificate or certificates shall be
issued in exchange for any existing certificate until such existing certificate
shall have been so cancelled, except in cases provided for in Section 6.4.
SECTION 2. TRANSFERS OF STOCK. Transfers of shares of stock of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary, or with a transfer clerk or a
transfer agent appointed as provided in Section 6.3, and upon surrender of the
certificate or certificates for such shares properly endorsed and the payment of
all taxes thereon. The person in whose name shares of stock stand on the books
of the Corporation shall be deemed the owner thereof for all purposes as regards
the Corporation. Whenever any transfer of shares shall be made for collateral
security, and not absolutely, such fact shall be so expressed in the entry of
transfer if, when the certificate or certificates shall be presented to the
Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.
<PAGE>
SECTION 3. REGULATIONS. The Board may make such rules and regulations as
it may deem expedient, not inconsistent with these Bylaws, concerning the issue,
transfer and registration of certificates for shares of the stock of the
Corporation. It may appoint, or authorize any officer or officers to appoint,
one or more transfer clerks or one or more transfer agents and one or more
registrars, and may require all certificates for stock to bear the signature or
signatures of any of them.
SECTION 4. LOST, STOLEN, DESTROYED, AND MUTILATED CERTIFICATES. In any
case of loss, theft, destruction, or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, theft, destruction,
or mutilation and upon the giving of a bond of indemnity to the Corporation in
such form and in such sum as the Board may direct; provided, however, that a new
certificate may be issued without requiring any bond when, in the judgment of
the Board, it is proper so to do.
SECTION 5. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any other change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board may fix, in advance, a record date, which shall not be more than sixty
(60) nor less than ten (10) days before the date of such meeting, nor more than
sixty (60) days prior to any other action. If in any case involving the
determination of stockholders for any purpose other than notice of or voting at
a meeting of stockholders or expressing consent to corporate action without a
meeting the Board shall not fix such a record date, the record date for
determining stockholders for such purpose shall be the close of business on the
day on which the Board shall adopt the resolution relating thereto. A
determination of stockholders entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of such meeting; provided, however,
that the Board may fix a new record date for the adjourned meeting.
ARTICLE VII
INDEMNIFICATION
<PAGE>
SECTION 1. ACTION, ETC. OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, that he had reasonable cause to believe that his conduct was
unlawful.
SECTION 2. ACTIONS, ETC., BY OR IN THE RIGHT OF THE CORPORATION. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
SECTION 3. DETERMINATION OF RIGHT OF INDEMNIFICATION. Any indemnification
under Section 7.1 or 7.2 (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Section 7.1 and 7.2. Such determination shall be made (a) by the Board by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (b) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (c) by the stockholders.
SECTION 4. INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY.
Notwithstanding the other provisions of this Article, to the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Section 7.1 or 7.2, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
SECTION 5. PREPAID EXPENSES. Expenses incurred by an officer or director
in defending a civil or criminal action, suit or proceeding may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board in the specific case upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount
unless it shall ultimately be determined that he is entitled to be indemnified
by the Corporation as authorized in this Article. Such expenses incurred by
other employees and agents may be so paid upon such terms and conditions, if
any, as the Board deems appropriate.
<PAGE>
SECTION 6. OTHER RIGHTS AND REMEDIES. The indemnification provided by this
Article shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any Bylaws, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 7. INSURANCE. Upon resolution passed by the Board, the Corporation
may purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article.
SECTION 8. CONSTITUENT CORPORATIONS. For the purposes of this Article,
references to "the Corporation" include all constituent corporations absorbed in
a consolidation or merger as well as the resulting or surviving corporation, so
that any person who is or was a director, officer, employee or agent of such a
constituent corporation or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise shall stand in the same
position under the provisions of this Article with respect to the resulting or
surviving corporation as he would if he had served the resulting or surviving
corporation in the same capacity.
SECTION 9. OTHER ENTERPRISES, FINES, AND SERVING AT CORPORATION'S REQUEST.
For purposes of this Article, references to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to any employee benefit plan; and references
to "serving at the request of the Corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties on,
or involves services by, such director, officer, employee, or agent with respect
to an employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
Corporation" as referred to in this Article.
ARTICLE VIII
MISCELLANEOUS
SECTION 1. SEAL. The Board shall provide a corporate seal, which shall be
in the form of a circle and shall bear the name of the Corporation and words and
figures showing that the Corporation was incorporated in the State of Delaware
and the year of incorporation.
<PAGE>
SECTION 2. WAIVER OF NOTICES. Whenever notice is required to be given by
these Bylaws or the Certificate of Incorporation or by law, the person entitled
to said notice may waive such notice in writing, either before or after the time
stated therein, and such waiver shall be deemed equivalent to notice.
SECTION 3. AMENDMENTS. These Bylaws, or any of them, may be altered,
amended or repealed, and new Bylaws may be made, (a) by the Board, by vote of a
majority of the number of directors then in office as directors, acting at any
meeting of the Board, or (b) by the stockholders, at any annual meeting of
stockholders, without previous notice, or at any special meeting of
stockholders, provided that notice of such proposed amendment, modification,
repeal or adoption is given in the notice of special meeting. Any Bylaws made or
altered by the stockholders may be altered or repealed by either the Board or
the stockholders.
CERTIFICATE OF INCORPORATION
MID-AMERICA FINANCE, INC.
ARTICLE I
NAME
The name of the Corporation is Mid-America Finance, Inc. (the "Corporation").
ARTICLE II
DURATION
The period of the Corporation's duration is perpetual.
ARTICLE III
BUSINESS PURPOSE
The nature of the business of the Corporation and the objects or purposes
to be transacted, prompted or carried on by it are as follows:
To engage solely in the following limited activities:
(i) (a) purchasing the bonds, due 2003, to be issued by Mid-America
Capital Partners, L.P., a Delaware limited partnership (the "Borrower") on
or about February 15, 1998, (b) depositing the bonds into a trust (the
"Trust") to be created by the Corporation for the purpose of owning and
holding the bonds and issuing its commercial mortgage pass-through
certificates, series 1998-1, evidencing all of the beneficial ownership
interests in the Trust established by the Corporation (the
"Certificates"), (c) selling the Certificates through an underwriter to
investors and remitting the proceeds from such sale of the Certificates to
the Borrower as consideration for the bonds;
(ii) acting as, and exercising all of the authority as, the settlor
of the trust; and
(iii) all lawful act or activity for which corporations may be
organized under the Delaware General Corporation Law (the "Act"), but only
so long as the same are necessary,
1
<PAGE>
appropriate, suitable or convenient to accomplish the objects or purposes
specified in subparagraphs (I) and (ii) of this Article III.
2
<PAGE>
ARTICLE IV
AUTHORIZED SHARES
The aggregate number of shares which the Corporation shall have the
authority to issue is 10,000 shares of Common Stock, par value of $0.01 per
share with a total value of $100.00. The corporation is a for-profit
corporation.
ARTICLE V
PREEMPTIVE RIGHTS
No holder of shares of the Corporation shall, as such holder, have any
right to purchase or subscribe for any part of the unissued shares of the
Corporation of any class, now or hereafter authorized, or of any bond,
debenture, obligation or instrument which the Corporation may issue or sell that
shall be convertible into or exchangeable for or entitle the holders thereof to
purchase or subscribe for any shares of the Corporation of any class, now or
hereafter authorized, other than such right, if any, as the Board of Directors
of the Corporation in its discretion may determine.
ARTICLE VI
PRINCIPAL OFFICE
The street address of the principal office of the Corporation is 1209
Orange Street, Wilmington, Delaware 19801.
ARTICLE VII
INITIAL REGISTERED OFFICE AND INITIAL REGISTERED AGENT
The street address of the registered office of the Corporation is
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801, New
Castle County, and the name of its initial registered agent at such address is
The Corporation Trust Company.
ARTICLE VIII
NAME AND ADDRESS OF INCORPORATOR
The name and mailing address of the Incorporator is Desiree M. Franklin,
165 Madison Avenue, Suite 2000, Memphis, Tennessee 38103.
ARTICLE IX
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RESTRICTIONS ON OPERATIONS
1. The Corporation shall have not less than one Independent Director. An
"Independent Director" shall mean a director of the Corporation who is not and
has not been at any time during the five (5) years preceding the time of initial
appointment: (a) a stockholder, director, officer, employee, partner, attorney
or counsel of the Corporation, or any affiliate of it; (b) a customer, supplier
or other person who derives more than 10% of its purchases or revenues from its
activities with the Corporation, or any affiliate of it; (C) a person or other
entity controlling or under common control with any such stockholder, partner,
customer, supplier or other person; or (d) a member of the immediate family of
any such stockholder, director, officer, employee, partner, customer, supplier
or other person. (As used herein, the term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of
management, policies or activities of a person or entity, whether through
ownership of voting securities, by contract or otherwise.). If the Independent
Director resigns, dies or becomes incapacitated, or such position is otherwise
vacant, no action requiring the unanimous affirmative vote of the board of
directors shall be taken until a successor Independent Director is elected and
qualified and approves such action. In the event of the death, incapacity or
resignation of the Independent Director or a vacancy for any other reason, a
successor Independent Director shall be appointed immediately by the remaining
directors.
2. The Corporation shall not incur any indebtedness except as may be
permitted by the terms of the Debt Documents (hereinafter defined).
3. The Corporation shall not transfer to any person or entity any assets
of the Corporation except in accordance with (i) applicable law, (ii) the terms
of the Debt Documents, and (iii) as approved by the unanimous vote of the
Corporation's Board of Directors, including the vote of the Independent
Director, except that, subject to the terms of the Debt Documents, the
Corporation, may transfer assets in the ordinary course of its business
undertaken in accordance with Article III of this Certificate of Incorporation
and may declare and pay cash dividends to its shareholders in accordance with
(x) the Act and (y) the unanimous approval of its Board of Directors, including
the vote of the Independent Director, to the extent that unencumbered funds are
available therefor.
4. Unless permitted by the trust agreement, trust indenture, debt
securities, deeds of trust, assignment of rents and leases and other documents,
as applicable, to which the Borrower or the Corporation, as the case may be, is
a party in connection with (a) the up to $150 million principal amount of bonds
of the Borrower pursuant to an Indenture among the Partnership, its limited
partner and a trustee dated November 21, 1997 as amended and restated and (b)
the Certificates pursuant to a trust agreement (the "Debt Documents"), and
approved by the unanimous vote of the Corporation's Board of Directors,
including the vote of the Independent Director, the Corporation shall not engage
in any dissolution, liquidation, consolidation, merger or sale of assets.
5. Unless permitted by the Debt Documents, and approved by the unanimous
vote of the Corporation's Board of Directors, including the vote of the
Independent Director, the
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Corporation will not amend, alter, change or repeal any provision contained in
this Certificate of Incorporation; provided, however, that, unless (I) required
by a rating agency in connection with obtaining a rating of (a) the first
mortgage bonds issued pursuant to the Indenture and (b) the Certificates issued
pursuant to a trust agreement and (ii) consented to by the Trustee on behalf of
the holders of the Certificates and the Indenture Trustee on behalf of the
holders of the bonds, the Corporation shall in any event not amend, alter,
change or repeal any provision contained in Article III or IX of this
Certificate of Incorporation. All rights conferred upon shareholders herein are
granted subject to the reservation contained in this Article IX.
6. (a) The fiduciary duty of the directors of the Corporation shall not
include a duty to (I) file or consent to the filing of any bankruptcy,
insolvency or reorganization case or proceedings; institute any proceedings
under any applicable insolvency law or otherwise seek relief under any laws
relating to the relief from debts or the protections of debtors generally; (ii)
seek or consent to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator, custodian or any similar official for the Corporation or a
substantial portion of either of their properties; (iii) make any assignment for
the benefit of the creditors of the Corporation; or (iv) take any action, or
cause the Corporation to take any action, in furtherance of any of the foregoing
(any of the above foregoing actions, a "Bankruptcy Action"); and (b) the
Corporation shall not take any Bankruptcy Action without the unanimous vote of
the board of directors (including the vote of the Independent Director). The
Independent Director shall take into account the interests of the Corporation
and creditors of the Corporation (including holders of any rated debt) when
voting on any Bankruptcy Action. No director or officer of the Corporation shall
be liable to the Corporation or any shareholder on account of such director's or
officer's good faith reliance on the provisions of this paragraph, and neither
the Corporation nor any shareholder of the Corporation shall have any claim for
breach of fiduciary duty or otherwise against any director or officer for
failing to take any Bankruptcy Action.
7. (a) The Corporation shall not enter into any amendment of any document
evidencing or securing the Debt Documents, to the extent the Corporation may be
a party thereto, without the unanimous affirmative vote of the board of
directors (including the vote of the Independent Director).
(b) The Corporation shall not commingle its funds and other assets with
those of any other individual, limited liability company, corporation, estate,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization, or government or any agency or political
subdivision thereof and shall hold its funds and other assets in its own name.
(C) The Corporation shall not assume, guarantee or become obligated for
the debts of any other entity or hold itself out as being liable for the debts
of any other entity or person or hold out its credit as being available to
satisfy the obligations of any other person or entity.
(d) The Corporation shall not form, or cause to be formed, any
subsidiaries other than the Trust.
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(e) The Corporation shall act solely in its corporate name and
through its duly authorized officers or agents in the conduct of its business,
shall conduct its business so as not to mislead others as to the identity of the
entity with which they are concerned and shall not fail to correct any known
misunderstanding regarding the separate identity of the Corporation.
(f) The Corporation shall maintain books, financial statements,
accounts, accounting records and other entity documents separate from any other
person or entity.
(g) The Corporation shall not own any assets other than those
related to, or in furtherance of, its purposes set forth in Article III herein.
(h) The Corporation shall not engage in any business activity other
than as permitted by Article III herein.
(I) The Corporation shall not cause or allow the Board of Directors
of the Corporation to take any action requiring the unanimous affirmative vote
of 100% of the members of the Board of Directors unless the Independent Director
shall have voted in favor of such action.
(j) The Corporation shall pay its own liabilities and expenses out
of its own funds.
(k) The Corporation shall observe all corporate formalities.
(l) The Corporation shall maintained an arm's-length relationship
with its affiliates.
(m) The Corporation shall not acquire obligations or securities of
its affiliates or shareholders.
(n) The Corporation will allocate fairly and reasonably any overhead
expenses that are shared with an affiliate, including paying for office space
and services performed by any employee of an affiliate.
(o) The Corporation shall hold and identify itself or a separate and
distinct entity under its own name and not as a division or part of any other
person or entity and will not identify its shareholders as a division of it.
(p) The Corporation shall not make loans to any person or entity and
shall not buy or hold evidence of a indebtedness issued by any other person or
entity (except for cash and investment-grade securities).
(q) The Corporation shall not enter into or be a party to any
transaction with its shareholders or its affiliates except in the ordinary
course of its business and on terms which are
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intrinsically fair, commercially reasonable, and are no less favorable to it
then would be obtained in a comparable arm's-length transaction with an
unrelated third party.
(r) The Corporation shall maintain adequate capital in light of its
contemplated business operations.
(s) The Corporation shall maintain separate financial statements or,
if consolidated financial statements are used, such consolidated financial
statements shall separately identify the assets of the Corporation separate and
apart from those of any other person or entity.
(t) The Corporation will pay the salaries of its own employees from
its own funds and will maintain a sufficient number of employees in light of its
contemplated business operations.
(u) The Corporation will not pledge its assets for the benefit of
any other person or entity.
(v) The Corporation shall use separate stationery, invoices, and
checks bearing its own name.
(w) The Corporation shall correct any known misunderstanding
regarding its separate identity.
(x) The Corporation shall not transfer any direct or indirect
ownership interest in the Corporation such that the transferee owns in the
aggregate more than a 49% interest in the Corporation.
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ARTICLE X
AMENDMENT
Except as set forth in Article IX, Section 5 hereof, this Certificate
shall not be amended without the unanimous consent of all directors (including
the Independent Director) and shareholders. In addition to the foregoing and not
in limitation thereof, the Corporation shall not amend this Certificate unless
the Corporation has received confirmation from all applicable rating agencies
that such amendment would not result in the qualification, withdrawal or
downgrade of any of the Borrower's and the Trust's, if applicable, securities
rating.
ARTICLE XI
A director, officer, employee or agent of the corporation shall, to the
full extent not prohibited by the Delaware General Corporation Law, as the same
exists or may hereafter be amended, not be liable to the corporation or its
stockholders for monetary damages resulting from a breach of his or her
fiduciary duty to the corporation.
I, the undersigned, being the sole incorporator hereinbefore named, for
the purpose of forming this corporation pursuant to the Delaware General
Corporation Law, do hereby declare and certify that this is my act and deed and
that the facts herein stated are true and accordingly have hereunto set my hand
this 12th day of December, 1997.
Desiree M. Franklin,
Sole Incorporator
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MID-AMERICA FINANCE, INC.
(a Delaware corporation)
BYLAWS
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of Mid-America
Finance, Inc. (hereinafter called the "Corporation") in the State of Delaware
shall be at 1209 Orange Street, City of Wilmington, County of New Castle, 19801,
and the name of the registered agent in charge thereof shall be The Corporation
Trust Company.
SECTION 2. OTHER OFFICES. The Corporation may also have an office or
offices at such other place or places, either within or without the State of
Delaware, as the Board of Directors (herein-after called the "Board") may from
time to time determine or as the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. Annual meetings of the stockholders of
the Corporation for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings may be held at such
time, date and place as the Board shall determine by resolution.
SECTION 2. SPECIAL MEETINGS. A special meeting of the stockholders
for the transaction of any proper business may be called at any time by the
Board or by the President.
SECTION 3. PLACE OF MEETINGS. All meetings of the stockholders shall be
held at such places, within or without the State of Delaware, as may from time
to time be designated by the person or persons calling the respective meeting
and specified in the respective notices or waivers of notice thereof.
SECTION 4. NOTICE OF MEETINGS. Except as otherwise required by law, notice
of each meeting of the stockholders, whether annual or special, shall be given
not less than ten (10) nor more than sixty (60) days before the date of the
meeting to each stockholder of record entitled to vote at such meeting by
delivering a typewritten or printed notice thereof to him personally, or by
depositing such notice in the United States mail, in a postage prepaid envelope,
directed to him at his post office address furnished by him to the Secretary of
the Corporation for such purpose or, if he shall not have
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furnished to the Secretary his address for such purpose, then at his post office
address last known to the Secretary, or by transmitting a notice thereof to him
at such address by telegraph, cable, or wireless. Except as otherwise expressly
required by law, no publication of any notice of a meeting of the stockholders
shall be required. Every notice of a meeting of the stockholders shall state the
place, date and hour of the meeting, and, in the case of a special meeting,
shall also state the purpose or purposes for which the meeting is called. Notice
of any meeting of stockholders shall not be required to be given to any
stockholder who shall have waived such notice and such notice shall be deemed
waived by any stockholder who shall attend such meeting in person or by proxy,
except as a stockholder who shall attend such meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Except as otherwise
expressly required by law, notice of any adjourned meeting of the stockholders
need not be given if the time and place thereof are announced at the meeting at
which the adjournment is taken.
SECTION 5. QUORUM. Except in the case of any meeting for the election of
directors summarily ordered as provided by law, the holders of record of a
majority in voting interest of the shares of stock of the Corporation entitled
to be voted thereat, present in person or by proxy, shall constitute a quorum
for the transaction of business at any meeting of the stockholders of the
Corporation or any adjournment thereof. In the absence of a quorum at any
meeting or any adjournment thereof, a majority in voting interest of the
stockholders present in person or by proxy and entitled to vote thereat or, in
the absence therefrom of all the stockholders, any officer entitled to preside
at, or to act as secretary of, such meeting may adjourn such meeting from time
to time. At any such adjourned meeting at which a quorum is present any business
may be transacted which might have been transacted at the meeting as originally
called.
SECTION 6. VOTING. a. Each stockholder shall, at each meeting of the
stockholders, be entitled to vote in person or by proxy each share or fractional
share of the stock of the Corporation having voting rights on the matter in
question and which shall have been held by him and registered in his name on the
books of the Corporation:
(1) on the date fixed pursuant to Section 6.5 of these Bylaws as the
record date for the determination of stockholders entitled to notice of
and to vote at such meeting, or
(2) if no such record date shall have been so fixed, then (1) at the
close of business on the day next preceding the day on which notice of the
meeting shall be given or (2) if notice of the meeting shall be waived, at
the close of business on the day next preceding the day on which the
meeting shall be held.
b. Shares of its own stock belonging to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors in such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity shall
be entitled to vote
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such stock. Persons whose stock is pledged shall be entitled to vote, unless in
the transfer by the pledgor on the books of the Corporation he shall have
expressly empowered the pledgee to vote thereon, in which case only the pledgee,
or his proxy, may represent such stock and vote thereon. Stock having voting
power standing of record in the names of two or more persons, whether
fiduciaries, members of a partnership, joint tenants in common, tenants by
entirety or otherwise, or with respect to which two or more persons have the
same fiduciary relationship, shall be voted in accordance with the provisions of
the General Corporation Law of the State of Delaware.
c. Any such voting rights may be exercised by the stockholder entitled
thereto in person or by his proxy appointed by an instrument in writing,
subscribed by such stockholder or by his attorney thereunto authorized and
delivered to the secretary of the meeting; provided, however, that no proxy
shall be voted or acted upon after three years from its date unless said proxy
shall provide for a longer period. The attendance at any meeting of a
stockholder who may theretofore have given, a proxy shall not have the effect of
revoking the same unless he shall in writing so notify the secretary of the
meeting prior to the voting of the proxy. At any meeting of the stockholders all
matters, except as otherwise provided in the Certificate of Incorporation, in
these Bylaws or by law, shall be decided by the vote of a majority in voting
interest of the stockholders present in person or by proxy and entitled to vote
thereat and thereon, a quorum being present. The vote at any meeting of the
stockholders on any question need not be by ballot, unless so directed by the
chairman of the meeting. On a vote by ballot each ballot shall be signed by the
stockholder voting, or by his proxy, if there be such proxy, and it shall state
the number of shares voted.
SECTION 7. LIST OF STOCKHOLDERS. The Secretary of the Corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
SECTION 8. JUDGES. If at any meeting of the stockholders a vote by written
ballot shall be taken on any question, the chairman of such meeting may appoint
a judge or judges to act with respect to such vote. Each judge so appointed
shall first subscribe an oath faithfully to execute the duties of a judge at
such meeting with strict impartiality and according to the best of his ability.
Such judges shall decide upon the qualification of the voters and shall report
the number of shares represented at the meeting and entitled to vote on such
question, shall conduct and accept the votes, and, when the voting is completed,
shall ascertain and report the number of shares voted respectively for and
against the question. Reports of judges shall be in writing and subscribed and
delivered by them to the Secretary of the Corporation. The judges need not be
stockholders of the Corporation,
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and any officer of the Corporation may be a judge on any question other than a
vote for or against a proposal in which he shall have a material interest.
SECTION 9. ACTION WITHOUT MEETING. Any action required to be taken at any
annual or special meeting of stockholders of the Corporation, or any action
which may be taken at any annual or special meeting of such stockholders, may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The property, business and affairs of the
Corporation shall be managed by the Board.
SECTION 2. NUMBER AND TERM OF OFFICE. The number of directors of the
Corporation which shall constitute the whole Board of Directors shall be such
number as the Board of Directors shall from time to time fix by resolution;
provided, however, that when all the shares of the Corporation are owned
beneficially and of record by either one or two stockholders, the number of
directors may be less than three but not less than the number of stockholders.
Directors need not be stockholders. Each of the directors of the Corporation
shall hold office until his successor shall have been duly elected and shall
qualify or until he shall resign or shall have been removed in the manner
hereinafter provided.
SECTION 3. ELECTION OF DIRECTORS. The directors shall be elected annually
by the stockholders of the Corporation and the persons receiving the greatest
number of votes, up to the number of directors to be elected, shall be the
directors.
SECTION 4. RESIGNATIONS. Any director of the Corporation may resign at any
time by giving written notice to the Board or to the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, it shall take effect immediately upon
its receipt; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 5. VACANCIES. Except as otherwise provided in the Certificate of
Incorporation, any vacancy in the Board, whether because of death, resignation,
disqualification, an increase in the number of directors, or any other cause,
may be filled by vote of the majority of the remaining directors, although less
than a quorum. Each director so chosen to fill a vacancy shall hold office until
his successor shall have been elected and shall qualify or until he shall resign
or shall have been removed in the manner hereinafter provided.
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SECTION 6. PLACE OF MEETING, ETC. The Board may hold any of its meetings
at such place or places within or without the State of Delaware as the Board may
from time to time by resolution designate or as shall be designated by the
person or persons calling the meeting or in the notice or a waiver of notice of
any such meeting. Directors may participate in any regular or special meeting of
the Board by means of conference telephone or similar communications equipment
pursuant to which all persons participating in the meeting of the Board can hear
each other, and such participation shall constitute presence in person at such
meeting.
SECTION 7. FIRST MEETING. The Board shall meet as soon as practicable
after each annual election of directors and notice of such first meeting shall
not be required.
SECTION 8. REGULAR MEETINGS. Regular meetings of the Board may be held at
such times as the Board shall from time to time by resolution determine. If any
day fixed for a regular meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting shall be held at the same hour and place
on the nest succeeding business day not a legal holiday. Except as provided by
law, notice of regular meetings need not be given.
SECTION 9. SPECIAL MEETINGS. Special meetings of the Board shall be held
whenever called by the President or a majority of the authorized number of
directors. Except as otherwise provided by law or by these Bylaws, notice of the
time and place of each such special meeting shall be mailed to each director,
addressed to him at his residence or usual place of business, at least five (5)
days before the day on which the meeting is to be held, or shall be sent to him
at such place by telegraph or cable or be delivered personally not less than
forty-eight (48) hours before the time at which the meeting is to be held.
Except where otherwise required by law or by these Bylaws, notice of the purpose
of a special meeting need not be given. Notice of any meeting of the Board shall
not be required to be given to any director who is present at such meeting,
except a director who shall attend such meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened.
SECTION 10. QUORUM AND MANNER OF ACTING. Except as otherwise provided in
these Bylaws or by law, the presence of a majority of the authorized number of
directors shall be required to constitute a quorum for the transaction of
business at any meeting of the Board, and all matters shall be decided at any
such meeting, a quorum being present, by the affirmative votes of a majority of
the directors present. In the absence of a quorum, a majority of directors
present at any meeting may adjourn the same from time to time until a quorum
shall be present. Notice of any adjourned meeting need not be given. The
directors shall act only as a Board, and the individual directors shall have no
power as such.
SECTION 11. ACTION BY CONSENT. Any action required or permitted to be
taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
Board or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board or committee.
SECTION 12. REMOVAL OF DIRECTORS. Subject to the provisions of the
Certificate of Incorporation, any director may be removed at any time, either
with or without cause, by the
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affirmative vote of the stockholders having a majority of the voting power of
the Corporation given at a special meeting of the stockholders called for the
purpose.
SECTION 13. COMPENSATION. The directors shall receive only such
compensation for their services as directors as may be allowed by resolution of
the Board. The Board may also provide that the Corporation shall reimburse each
such director for any expense incurred by him on account of his attendance at
any meetings of the Board or Committees of the Board. Neither the payment of
such compensation nor the reimbursement of such expenses shall be construed to
preclude any director from serving the Corporation or its subsidiaries in any
other capacity and receiving compensation therefor.
SECTION 14. COMMITTEES. The Board may, by resolution passed by a majority
of the whole Board, designate one or more committees, each committee to consist
of one or more of the directors of the Corporation. Any such committee, to the
extent provided in the resolution of the Board and except as otherwise limited
by law, shall have and may exercise all the powers and authority of the Board in
the management of the business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it.
Any such committee shall keep written minutes of its meetings and report the
same to the Board at the next regular meeting of the Board. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board to
act at the meeting in the place of any such absent or disqualified member.
ARTICLE IV
OFFICERS
SECTION 1. NUMBER. The officers of the Corporation shall be a Chairman, a
President, one or more Vice Presidents (the number thereof and their respective
titles to be determined by the Board), a Secretary and a Treasurer.
SECTION 2. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The officers of
the Corporation, except such officers as may be appointed in accordance with
Section 4.3, shall be elected annually by the Board at the first meeting thereof
held after the election thereof. Each officer shall hold office until his
successor shall have been duly chosen and shall qualify or until his resignation
or removal in the manner hereinafter provided.
SECTION 3. ASSISTANTS, AGENTS AND EMPLOYEES, ETC. In addition to the
officers specified in Section 4.1, the Board may appoint other assistants,
agents and employees as it may deem necessary or advisable, including one or
more Assistant Secretaries, and one or more Assistant Treasurers, each of whom
shall hold office for such period, have such authority, and perform such duties
as the Board may from time to time determine. The Board may delegate to any
officer of the Corporation or any committee of the Board the power to appoint,
remove and prescribe the duties of any such assistants, agents or employees.
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SECTION 4. REMOVAL. Any officer, assistant, agent or employee of the
Corporation may be removed, with or without cause, at any time: (a) in the case
of an officer, assistant, agent or employee appointed by the Board, only by
resolution of the Board; and (b) in the case of an officer, assistant, agent or
employee, by any officer of the Corporation or committee of the Board upon whom
or which such power of removal may be conferred by the Board.
SECTION 5. RESIGNATIONS. Any officer or assistant may resign at any time
by giving written notice of his resignation to the Board or the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, upon receipt thereof by the Board or
the Secretary, as the case may be; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 6. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification, or other cause, may be filled for the
unexpired portion of the term thereof in the manner prescribed in these Bylaws
for regular appointments or elections to such office.
SECTION 7. CHAIRMAN. The Chairman shall be the chief executive officer of
the Corporation and, subject to the control of the Board, shall in general
supervise and control all of the business and affairs of the Corporation. He
shall, when present, preside over all meetings of the shareholders and of the
Board. He may sign, with or without the secretary or any other proper officer of
the Corporation thereunto authorized by the Board, certificates for shares of
the Corporation, any deeds, mortgages, bonds, contracts or other instruments
which the Board has authorized to be executed, except in cases where the signing
and execution thereof shall be expressly delegated by the Board or these Bylaws
to some other officer or agent of the Corporation, or shall be required by law
to be otherwise signed or executed; and in general shall perform all duties
incident to the office of Chairman and such other duties as may be prescribed by
the Board from time to time.
SECTION 8. THE PRESIDENT. The President of the Corporation shall be the
chief operating officer of the Corporation and shall have, subject to the
control of the Board, general and active supervision and management over the
business of the Corporation and over its several officers, assistants, agents
and employees.
SECTION 9. THE VICE PRESIDENTS. Each Vice President shall have such powers
and perform such duties as the Board may from time to time prescribe. At the
request of the President, or in case of the President's absence or inability to
act upon the request of the Board, a Vice President shall perform the duties of
the President and when so acting, shall have all the powers of, and be subject
to all the restrictions upon, the President.
SECTION 10. THE SECRETARY. The Secretary shall, if present, record the
proceedings of all meetings of the Board, of the stockholders, and of all
committees of which a secretary shall not have been appointed in one or more
books provided for that purpose; he shall see that all notices are duly given in
accordance with these Bylaws and as required by law; he shall be custodian of
the seal of the Corporation and shall affix and attest the seal to all documents
to be executed on behalf of the Corporation under its seal; and, in general, he
shall perform all the duties incident to the office of Secretary and such other
duties as may from time to time be assigned to him by the Board.
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SECTION 11. THE TREASURER. The Treasurer shall have the general care and
custody of the funds and securities of the Corporation, and shall deposit all
such funds in the name of the Corporation in such banks, trust companies or
other depositories as shall be selected by the Board. He shall receive, and give
receipts for, moneys due and payable to the Corporation from any source
whatsoever. He shall exercise general supervision over expenditures and
disbursements made by officers, agents and employees of the Corporation and the
preparation of such records and reports in connection therewith as may be
necessary or desirable. He shall, in general, perform all other duties incident
to the office of Treasurer and such other duties as from time to time may be
assigned to him by the Board.
SECTION 12. COMPENSATION. The compensation of the officers of the
Corporation shall be fixed from time to time by the Board. None of such officers
shall be prevented from receiving such compensation by reason of the fact that
he is also a director of the Corporation. Nothing contained herein shall
preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving such compensation by reason of
the fact that he is also a director of the Corporation. Nothing contained herein
shall preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving proper compensation therefor.
ARTICLE V
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
SECTION 1. EXECUTION OF CONTRACTS. The Board, except as in these Bylaws
otherwise provided, may authorize any officer or officers, agent or agents, to
enter into any contract or execute any instrument in the name of and on behalf
of the Corporation, and such authority may be general or confined to specific
instances; and unless so authorized by the, Board or by these Bylaws, no
officer, agent or employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or in any amount.
SECTION 2. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
payment of money, notes or other evidence of indebtedness, issued in the name of
or payable to the Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the Board. Each such officer, assistant, agent or attorney shall
give such bond, if any, as the Board may require.
SECTION 3. DEPOSITS. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board may select, or as may
be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. For the purpose of deposit and for the purpose
of collection for the account of the Corporation, the President, any Vice
President or the Treasurer (or any other officer or officers, assistant or
assistants, agent or agents, or attorney or attorneys of the Corporation who
shall from time to time be determined by the Board) may endorse, assign and
deliver checks, drafts and other orders for the payment of money which are
payable to the order of the Corporation.
8
<PAGE>
SECTION 4. GENERAL AND SPECIAL BANK ACCOUNTS. The Board may from time to
time authorize the opening and keeping of general and special bank accounts with
such banks, trust companies or other depositories as the Board may select or as
may be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. The Board may make such special rules and
regulations with respect to such bank accounts, not inconsistent with the
provisions of these Bylaws, as it may deem expedient.
ARTICLE VI
SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR STOCK. Every owner of stock of the Corporation
shall be entitled to have a certificate or certificates, to be in such form as
the Board shall prescribe, certifying the number and class of shares of the
stock of the Corporation owned by him. The certificates representing shares of
such stock shall be numbered in the order in which they shall be issued and
shall be signed in the name of the Corporation by the Chairman, President or a
Vice President, and by the Secretary or an Assistant Secretary or by the
Treasurer or an Assistant Treasurer. Any of or all of the signatures on the
certificates may be a facsimile. In case any officer, transfer agent or
registrar who has signed, or whose facsimile signature has been placed upon, any
such certificate, shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, such certificate may nevertheless
be issued by the Corporation with the same effect as though the person who
signed such certificate, or whose facsimile signature shall have been placed
thereupon, were such officer, transfer agent or registrar at the date of issue.
A record shall be kept of the respective names of the persons, firms or
corporations owning the stock represented by such certificates, the number and
class of shares represented by such certificates, respectively, and the
respective dates thereof, and in case of cancellation, the respective dates of
cancellation. Every certificate surrendered to the Corporation for exchange or
transfer shall be cancelled, and no new certificate or certificates shall be
issued in exchange for any existing certificate until such existing certificate
shall have been so cancelled, except in cases provided for in Section 6.4.
SECTION 2. TRANSFERS OF STOCK. Transfers of shares of stock of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary, or with a transfer clerk or a
transfer agent appointed as provided in Section 6.3, and upon surrender of the
certificate or certificates for such shares properly endorsed and the payment of
all taxes thereon. The person in whose name shares of stock stand on the books
of the Corporation shall be deemed the owner thereof for all purposes as regards
the Corporation. Whenever any transfer of shares shall be made for collateral
security, and not absolutely, such fact shall be so expressed in the entry of
transfer if, when the certificate or certificates shall be presented to the
Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.
SECTION 3. REGULATIONS. The Board may make such rules and regulations as
it may deem expedient, not inconsistent with these Bylaws, concerning the issue,
transfer and registration of certificates for shares of the stock of the
Corporation. It may appoint, or authorize any officer or
9
<PAGE>
officers to appoint, one or more transfer clerks or one or more transfer agents
and one or more registrars, and may require all certificates for stock to bear
the signature or signatures of any of them.
SECTION 4. LOST, STOLEN, DESTROYED, AND MUTILATED CERTIFICATES. In any
case of loss, theft, destruction, or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, theft, destruction,
or mutilation and upon the giving of a bond of indemnity to the Corporation in
such form and in such sum as the Board may direct; provided, however, that a new
certificate may be issued without requiring any bond when, in the judgment of
the Board, it is proper so to do.
SECTION 5. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any other change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board may fix, in advance, a record date, which shall not be more than sixty
(60) nor less than ten (10) days before the date of such meeting, nor more than
sixty (60) days prior to any other action. If in any case involving the
determination of stockholders for any purpose other than notice of or voting at
a meeting of stockholders or expressing consent to corporate action without a
meeting the Board shall not fix such a record date, the record date for
determining stockholders for such purpose shall be the close of business on the
day on which the Board shall adopt the resolution relating thereto. A
determination of stockholders entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of such meeting; provided, however,
that the Board may fix a new record date for the adjourned meeting.
ARTICLE VII
INDEMNIFICATION
SECTION 1. ACTION, ETC. OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed
10
<PAGE>
to be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, that he had reasonable cause to
believe that his conduct was unlawful.
SECTION 2. ACTIONS, ETC., BY OR IN THE RIGHT OF THE CORPORATION. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
SECTION 3. DETERMINATION OF RIGHT OF INDEMNIFICATION. Any indemnification
under Section 7.1 or 7.2 (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Section 7.1 and 7.2. Such determination shall be made (a) by the Board by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (b) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (C) by the stockholders.
SECTION 4. INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY.
Notwithstanding the other provisions of this Article, to the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Section 7.1 or 7.2, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
SECTION 5. PREPAID EXPENSES. Expenses incurred by an officer or director
in defending a civil or criminal action, suit or proceeding may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board in the specific case upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount
unless it shall ultimately be determined that he is entitled to be indemnified
by the Corporation as authorized in this Article. Such expenses incurred by
other employees and agents may be so paid upon such terms and conditions, if
any, as the Board deems appropriate.
11
<PAGE>
SECTION 6. OTHER RIGHTS AND REMEDIES. The indemnification provided by this
Article shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any Bylaws, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 7. INSURANCE. Upon resolution passed by the Board, the Corporation
may purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article.
SECTION 8. CONSTITUENT CORPORATIONS. For the purposes of this Article,
references to "the Corporation" include all constituent corporations absorbed in
a consolidation or merger as well as the resulting or surviving corporation, so
that any person who is or was a director, officer, employee or agent of such a
constituent corporation or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise shall stand in the same
position under the provisions of this Article with respect to the resulting or
surviving corporation as he would if he had served the resulting or surviving
corporation in the same capacity.
SECTION 9. OTHER ENTERPRISES, FINES, AND SERVING AT CORPORATION'S REQUEST.
For purposes of this Article, references to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to any employee benefit plan; and references
to "serving at the request of the Corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties on,
or involves services by, such director, officer, employee, or agent with respect
to an employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
Corporation" as referred to in this Article.
ARTICLE VIII
MISCELLANEOUS
SECTION 1. SEAL. The Board shall provide a corporate seal, which shall be
in the form of a circle and shall bear the name of the Corporation and words and
figures showing that the Corporation was incorporated in the State of Delaware
and the year of incorporation.
12
<PAGE>
SECTION 2. WAIVER OF NOTICES. Whenever notice is required to be given by
these Bylaws or the Certificate of Incorporation or by law, the person entitled
to said notice may waive such notice in writing, either before or after the time
stated therein, and such waiver shall be deemed equivalent to notice.
SECTION 3. AMENDMENTS. These Bylaws, or any of them, may be altered,
amended or repealed, and new Bylaws may be made, (a) by the Board, by vote of a
majority of the number of directors then in office as directors, acting at any
meeting of the Board, or (b) by the stockholders, at any annual meeting of
stockholders, without previous notice, or at any special meeting of
stockholders, provided that notice of such proposed amendment, modification,
repeal or adoption is given in the notice of special meeting. Any Bylaws made or
altered by the stockholders may be altered or repealed by either the Board or
the stockholders.
13
CWT DRAFT: 12/12/97
MID-AMERICA CAPITAL PARTNERS, L.P.
and
MID-AMERICA APARTMENTS, L.P.
as Issuer
and
LASALLE NATIONAL BANK
as Trustee
----------------------------------------
AMENDED AND RESTATED INDENTURE
Dated as of [January __,] 1998
----------------------------------------
[___]% First Mortgage Bonds, Due 2003
<PAGE>
TABLE OF CONTENTS(1)
SECTION PAGE
ARTICLE ONE
DEFINITIONS
1.01. Definitions ......................................................... 2
1.02. Incorporation by Reference of Trust Indenture Act ................... 14
1.03. Rules of Construction ............................................... 14
ARTICLE TWO
ISSUANCE, DESCRIPTION, EXECUTION AND EXCHANGE OF SECURITIES
2.01. Designation, Amount and Issue of Securities ......................... 15
2.02. Authentication and Delivery of Securities ........................... 15
2.03. Form of Securities and Trustee's Certificate of Authentication ...... 15
2.04. Denomination and Date of Securities; Payment of Principal and
Interest; Global Securities ......................................... 15
2.05. Execution of Securities ............................................. 18
2.06. Exchange and Registration of Transfer of Securities ................. 18
2.07. Mutilated, Destroyed, Lost or Stolen Securities ..................... 19
2.08. Cancellation of Surrendered Securities .............................. 20
2.09. Temporary Securities ................................................ 20
ARTICLE THREE
NO PREPAYMENT OF SECURITIES
3.01. No Prepayment........................................................ 20
ARTICLE FOUR
PARTICULAR COVENANTS, REPRESENTATIONS AND WARRANTIES OF ISSUER
4.01. Validity of Securities; Title to Trust Estate; Lien ................. 21
4.02. Maintenance of Liens and Recording .................................. 21
4.03. Performance and Enforcement ......................................... 22
4.04. Payment of Principal of, Premium, if Any, and Interest
on Securities ....................................................... 22
4.05. SEC Reports ......................................................... 23
4.06. Limitation on Debt .................................................. 23
4.07. Limitation on Secured Debt .......................................... 23
4.08. Unencumbered Assets ................................................. 23
4.09. Limitation on Transactions with Affiliates .......................... 23
4.10. Appointment of Agents ............................................... 24
-i-
<PAGE>
4.11. Paying Agents To Hold Funds in Trust ................................ 24
4.12. Appointment of Trustee by Issuer .................................... 25
4.13. Availability of Information ......................................... 25
4.14. Books of Account; Inspection by Trustee; Notices;
Statements as to Compliance ......................................... 25
4.15. Payment of Taxes and Other Claims ................................... 27
4.16. Corporate Existence and Rights ...................................... 27
4.17. Certificate and Opinion as to Conditions Precedent .................. 28
4.18. Statements Required in Certificate or Opinion ....................... 28
4.19. Debt Service Coverage ............................................... 28
4.20. Restrictions on Partnership ......................................... 29
4.21. Maintenance of Properties ........................................... 29
4.22. Insurance ........................................................... 30
4.23. Permitted Merger .................................................... 30
4.24. Further Instruments and Acts ........................................ 30
ARTICLE FIVE
EVENTS OF DEFAULT AND REMEDIES
5.01. Events of Default ................................................... 30
5.02. Acceleration ........................................................ 32
5.03. Other Remedies ...................................................... 33
5.04. Waiver of Past Defaults ............................................. 33
5.05. Control by Majority ................................................. 33
5.06. Limitation on Suits ................................................. 34
5.07. Rights of Holders To Receive Payment ................................ 34
5.08. Collection Suit by Trustee .......................................... 34
5.09. Trustee May File Proofs of Claim .................................... 34
5.10. Priorities .......................................................... 35
5.11. Undertaking for Costs ............................................... 35
5.12. Waiver of Stay or Extension Laws .................................... 35
ARTICLE SIX
DISCHARGE OF INDENTURE; DEFEASANCE
6.01. Discharge of Liability on Securities; Defeasance .................... 36
6.02. Conditions to Defeasance ............................................ 37
6.03. Application of Trust Money .......................................... 38
6.04. Repayment to Issuer ................................................. 38
6.05. Indemnity for Government Obligations ................................ 38
6.06. Reinstatement ....................................................... 38
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<PAGE>
ARTICLE SEVEN
CONCERNING THE TRUSTEE
7.01. Duties of Trustee ................................................... 38
7.02. Rights of Trustee ................................................... 40
7.03. Individual Rights of Trustee ........................................ 41
7.04. Trustee's Disclaimer ................................................ 41
7.05. Notice of Defaults .................................................. 41
7.06. Reports by Trustee to Holders ....................................... 41
7.07. Compensation and Indemnity .......................................... 42
7.08. Replacement of Trustee .............................................. 42
7.09. Successor Trustee by Merger ......................................... 43
7.10. Eligibility: Disqualification ....................................... 43
7.11. Preferential Collection of Claims Against Issuer .................... 43
7.12. Separate and Co-trustees ............................................ 43
7.13. Servicer ............................................................ 45
7.14. Advances ............................................................ 45
7.15. Priorities of Payment ............................................... 45
7.16. Errors and Omissions Insurance ...................................... 46
ARTICLE EIGHT
AMENDMENTS, SUPPLEMENTS AND WAIVERS
8.01. Amendments and Supplemental Indentures Without Consent of Holders ... 46
8.02. Amendments and Supplemental Indentures With Consent of Holders ...... 47
8.03. Compliance with Trust Indenture ..................................... 48
8.04. Revocation and Effect of Consents ................................... 48
8.05. Notation on or Exchange of Securities ............................... 48
8.06. Trustee To Sign Amendments .......................................... 48
8.07. Effect of Amendments and Supplemental Indentures .................... 49
8.08. Waiver of Compliance by Holders ..................................... 49
ARTICLE NINE
PERMITTED MERGER AND RELEASE OF PORTION OF TRUST ESTATE
9.01. When Issuer May Merge ............................................... 49
9.02. Conditions Precedent to Permitted Merger ............................ 49
9.03. Release of Portion of Trust Estate .................................. 50
9.04. Notice to Holders ................................................... 51
9.05. Consolidations and Mergers of, Sales, Leases and
Conveyances by, MAALP ............................................... 51
9.06. Rights and Duties of Successor ...................................... 51
9.07. Officers' Certificate and Opinion of Counsel ........................ 52
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<PAGE>
ARTICLE TEN
MEETINGS OF HOLDERS OF SECURITIES
10.01. Purposes for Which Meetings May Be Called .......................... 52
10.02. Call Notice and Place of Meetings .................................. 52
10.03. Persons Entitled to Vote at Meetings ............................... 52
10.04. Quorum; Action ..................................................... 53
10.05. Determination of Voting Rights; Conduct and Adjournment of Meetings 54
10.06. Counting Votes and Recording Action of Meetings .................... 54
ARTICLE ELEVEN
MISCELLANEOUS PROVISIONS
11.01. Trust Indenture Act Controls ....................................... 55
11.02. Communication by Holders with Other Holders ........................ 55
11.03. Compliance Certificates and Opinions ............................... 55
11.04. Form of Documents Delivered to Trustee ............................. 55
11.05. Acts of Holders .................................................... 56
11.06. Notices ............................................................ 57
11.07. When Treasury Securities Disregarded ............................... 58
11.08. Rules by Paying Agent and Registrar ................................ 58
11.09. Legal Holidays ..................................................... 58
11.10. Successors ......................................................... 58
11.11. Multiple Originals ................................................. 59
11.12. Security Agreement ................................................. 59
11.13. Separability Clause ................................................ 59
11.14. Governing Law ...................................................... 59
11.15. Table of Contents; Headings ........................................ 59
11.16. Limitation on Recourse ............................................. 59
Exhibit A Form of First Mortgage Bond
Exhibit B Mortgaged Properties
Exhibit C Form of Mortgage
Exhibit D Form of Cash Collateral Agreement
Exhibit E Form of Release Certificate
- --------
1 The Table of Contents is not part of this Indenture.
-iv-
<PAGE>
MID-AMERICA CAPITAL PARTNERS, L.P.
AND
MID-AMERICA APARTMENTS, L.P.
[ ]% First Mortgage Bonds, Due 2003
CROSS-REFERENCE TABLE
Between the Indenture and the Trust Indenture Act of 1939
TIA SECTION INDENTURE SECTION
310(a)(1).............................. 7.10
(a)(2).............................. 7.10
(a)(3).............................. 7.12
(a)(4).............................. Not Applicable
(b)................................. 7.08; 7.10
(c)................................. Not Applicable
311(a)................................. 7.11
(b)................................. 7.11
(c)................................. Not Applicable
312(a)................................. 4.13
(b)................................. 11.02
(c)................................. 11.02
313(a)................................. 7.06
(b)................................. 7.06
(c)................................. 7.06; 11.06
(d)................................. 7.06
314(a)................................. 4.05; 4.14; 11.06
(b)................................. 4.02
(c)(1).............................. 4.17
(c)(2).............................. 4.17
(c)(3).............................. 4.17
(d)................................. Not Applicable
(e)................................. 4.18
315(a)................................. 7.01
(b)................................. 7.05; 11.06
(c)................................. 7.01
(d)................................. 7.01
(e)................................. 5.11
316(a) (last sentence)................. 11.07
(a)(1)(A)........................... 5.05
(a)(1)(B)........................... 5.04
(a)(2).............................. Not Applicable
(b)................................. 5.07
317(a)(1).............................. 5.08
(a)(2).............................. 5.09
(b)................................. 4.11
318(a)................................. 11.01
- ---------------------------
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
-v-
<PAGE>
THIS AMENDED AND RESTATED INDENTURE, dated as of [January __], 1998,
between MID-AMERICA CAPITAL PARTNERS, L.P., a Delaware limited partnership (the
"PARTNERSHIP"), MID-AMERICA APARTMENTS, L.P., a Tennessee limited partnership
("MAALP"), and LASALLE NATIONAL BANK, a national banking association, as trustee
hereunder (the "TRUSTEE").
WHEREAS, the Partnership on November 25, 1997 or thereafter executed
and delivered to the Trustee, as beneficiary, Mortgages (as hereinafter defined)
with respect to the land and improvements constituting the multifamily
residential properties set forth on Exhibit B (together with certain other
property as described in the relevant Mortgages, individually, a "MORTGAGED
PROPERTY" and, collectively, the "MORTGAGED PROPERTIES") pursuant to the terms
of the Indenture, dated as of November 21, 1997 (the "1997 INDENTURE"), between
the Partnership and MAALP, as issuer, and the Trustee, as trustee;
WHEREAS, concurrently with the execution and delivery of the 1997
Indenture, the Issuer entered into the Cash Collateral Agreement (as hereinafter
defined);
WHEREAS, the Issuer desires to issue and sell to Mid-America
Finance, Inc. (the "Depositor") the [___]% First Mortgage Bonds, Due 2003 (the
"FIRST MORTGAGE BONDS") of the Partnership, secured by the Mortgages with
respect to the Mortgaged Properties, by the Cash Collateral Agreement and by
other collateral as set forth herein, all on the terms and subject to the
conditions hereof;
WHEREAS, the Issuer desires the Depositor, as its agent, to cause
the creation of a trust (the "CERTIFICATE TRUST") and to deposit the First
Mortgage Bonds into the Certificate Trust, all pursuant to that certain Trust
Agreement of even date herewith (the "TRUST AGREEMENT") by and between the
Depositor and LaSalle National Bank, national association, as trustee thereunder
(the "CERTIFICATE TRUSTEE");
WHEREAS, the Issuer desires the Mortgage Pass-Through Certificates
(the "CERTIFICATES") to be issued by the Certificate Trust pursuant to the Trust
Agreement and to be sold pursuant to that certain Underwriting Agreement of even
date herewith by and between the [Issuer] and Morgan Stanley & Co. Incorporated;
WHEREAS, the Issuer has issued its First Mortgage Bridge Notes on
the terms and subject to the conditions of the 1997 Indenture;
WHEREAS, concurrently with the execution and delivery of this
Amended and Restated Indenture the Issuer is repaying in full such First
Mortgage Bridge Notes in accordance with their terms, being all of the
Securities Outstanding under the 1997 Indenture;
WHEREAS, in connection with the transactions described above, the
parties hereto are hereby amending and restating the 1997 Indenture; and
WHEREAS, the text of the First Mortgage Bonds is to be substantially
in the form of Exhibit A hereto:
<PAGE>
NOW, THEREFORE, THIS AMENDED AND RESTATED INDENTURE WITNESSETH: That
the Partnership, in consideration of the premises, the acceptance by the Trustee
of the trusts created hereby, the purchase and acceptance of the Securities by
the purchasers thereof, and other good and valuable consideration, the receipt
of which is hereby acknowledged, and in order to secure the payment and
performance of the Obligations according to the terms hereof and to declare the
terms and conditions upon and subject to which the Obligations are to be
secured, has executed and delivered this Indenture and the other Security
Documents and the Partnership hereby pledges, and has thereby pledged or has
caused to be pledged, unto the Trustee and its successors in the trusts hereby
created and assigns forever, subject to the terms hereof and thereof, all of the
Partnership's estate, right, title and interest in, to and under any and all of
the Trust Estate (including, without limitation, any and all extensions and
modifications thereof, any and all rights to make claim for, collect, receive
and receipt for any and all rents, income, revenues, issues, profits, security
and other moneys payable or receivable thereunder or with respect thereto, to
bring proceedings thereunder or for the specific or other enforcement thereof or
with respect thereto, in the name of the Partnership or otherwise, and the right
to make all waivers and agreements, to grant or refuse requests, to give or
withhold notices, and to execute and deliver, in the name and on behalf of the
Partnership, as agent and attorney-in-fact, any and all instruments in
connection therewith and to do any and all things which the Partnership is or
may be entitled to do thereunder, all as limited by and more fully described in
this Indenture and in the other Security Documents and any other instruments
included in the Trust Estate), but no obligation of the Partnership under the
provisions thereof or hereof or with respect thereto or hereto has been impaired
or diminished by virtue thereof, nor has any such obligation been imposed upon
the Trustee;
TO HAVE AND TO HOLD all and singular the Trust Estate, whether now
owned or held or hereafter acquired, unto the Trustee, its successors in the
trusts created hereby and assigns forever;
IN TRUST, NEVERTHELESS, upon the terms herein set forth for the
benefit and security of the Holders of the Securities issued and to be issued
hereunder, and for enforcement of the Obligations, all as herein set forth.
IT IS HEREBY COVENANTED, DECLARED AND AGREED by the Issuer that the
Securities are to be issued and secured, and that the Trust Estate is to be held
and disposed of by the Trustee, upon and subject to the provisions of this
Indenture.
ARTICLE ONE
DEFINITIONS
SECTION 1.01. DEFINITIONS. The terms defined in this Section (except
as herein otherwise expressly provided or unless the context otherwise
requires), for all purposes of this Indenture and of any indenture supplemental
hereto, shall have the respective meanings specified in this Section 1.01.
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ACCOUNTS: The term "Accounts" has the meaning specified in the
fourth recital to the Cash Collateral Agreement.
ACTS or ACTS OF HOLDERS: The term "Acts" or "Acts of Holders" has
the meaning specified in Section 11.05.
ADVANCE: The term "Advance" means any Interest Advance, Property
Advance or Fees Advance made by the Trustee. Each reference to the payment or
reimbursement of an Advance shall be deemed to include, whether or not
specifically referred to, payment or reimbursement of interest thereon at the
Advance Rate from and including the date of the making of such Advance through
and including the date of payment or reimbursement.
ADVANCE RATE: The term "Advance Rate" means a rate per annum equal
to the prime rate of the Trustee, as in effect as of each Payment Date,
compounded monthly.
AFFILIATE: The term "Affiliate" means with respect to any Person,
(i) any other Person (or group of Persons acting in concert in respect of such
specified Person) which, directly or indirectly, is in control of, is controlled
by or is under common control with such specified Person or (ii) any other
Person who is a director, executive officer or general partner (a) of such
specified Person, (b) of any Subsidiary of such specified Person or (c) of any
Person described in clause (i) above. For purposes of this definition, "control"
of a Person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person, whether by contract or
otherwise; and the verbs "control" and "controlled" have meanings correlative to
the foregoing.
ANNUAL SERVICE CHARGE: The term "Annual Service Charge" means, as of
any date, the amount which is expensed in any 12-month period for interest on
Debt of MAALP and its Subsidiaries.
APPRAISED VALUE: The term "Appraised Value" means, with respect to
any Mortgaged Property, the fair market value of such Mortgaged Property as
determined by the appraisal of such Mortgaged Property prepared by an Appraiser.
APPRAISER: The term "Appraiser" means an MAI appraiser which shall
be independent within the meaning of the TIA, designated by the Issuer and
reasonably satisfactory to the Trustee.
ASSIGNMENT OF LEASES AND RENTS: The term "Assignment of Leases and
Rents" means the assignment of leases and rents, dated as of the date hereof,
from the Partnership to the Trustee, with respect to the Mortgaged Properties.
BANKRUPTCY LAW: The term "Bankruptcy Law" means Title 11, United
States Code, or any similar Federal or state law for the relief of debtors.
BENEFICIAL OWNER: The term "Beneficial Owner" means, with respect to
a Global Certificate, the Person who is the beneficial owner of such Certificate
as reflected on
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the books of the Depository or on the books of a Person maintaining an account
with such Depository (directly as a Depository Participant or indirectly through
a Depository Participant, in accordance with the rules of such Depository). The
Trustee shall have the right to require, as a condition to acknowledging the
status of any Person as a Beneficial Owner under this Indenture, that such
Person provide evidence at its expense to the Trustee of its status as a
Beneficial Owner hereunder.
BOARD OF DIRECTORS: The term "Board of Directors" means the board of
directors of the general partner of the Issuer.
BORROWER'S CERTIFICATE: The term "Borrower's Certificate" means that
certain certificate of the Partnership, dated November 21, 1997, to the Trustee.
BUSINESS DAY: The term "Business Day" means each day which is not a
Legal Holiday.
CAPITAL STOCK: The term "Capital Stock" means, with respect to any
corporation, any and all shares, interests, rights to purchase, warrants,
options, participations or other equivalents of or interests in (however
designated) corporate stock, including any preferred stock of such corporation.
CASH: The term "Cash" means coin or currency of the United States.
CASH COLLATERAL AGREEMENT: The term "Cash Collateral Agreement"
means the Cash Collateral Account, Security, Pledge and Assignment Agreement in
the form of Exhibit E, all similar agreements hereafter executed, and all
supplements and amendments to the foregoing.
CERTIFICATE TRUST: The term "Certificate Trust" means Mid-America
Mortgage Trust, 1998-1, created under the Trust Agreement.
CERTIFICATE TRUSTEE: The term "Certificate Trustee" has the meaning
specified in the fourth recital hereof.
CERTIFICATES: The term "Certificates" means the Commercial Mortgage
Pass-Through Certificates, Series 1998-1 of the Certificate Trust, issued
pursuant to the Trust Agreement.
CONSOLIDATED INCOME AVAILABLE FOR DEBT SERVICE: The term
"Consolidated Income Available for Debt Service" means, for any period,
Consolidated Net Income plus amounts which have been deducted for (a) interest
on Debt of MAALP and its Subsidiaries, (b) provision of taxes based on income,
(c) amortization of Debt discount, (d) provisions for gains and losses on
properties, (e) depreciation and amortization, (f) the effect of any noncash
charge resulting from a change in accounting principals in determining
Consolidated Net Income for such period and (g) amortization of deferred
charges.
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CONSOLIDATED NET INCOME: The term "Consolidated Net Income" means,
for any period, the amount of consolidated net income (or loss) of MAALP and its
Subsidiaries for such period determined on a consolidated basis in accordance
with GAAP.
CONTRIBUTION AGREEMENT: The term "Contribution Agreement" means the
Contribution Agreement, dated November 25, 1997, between MAALP and the
Partnership with respect to the contribution of the Mortgaged Properties by
MAALP to the Partnership.
CORPORATE TRUST OFFICE: The term "Corporate Trust Office" means the
office of the Trustee at which at any particular time its corporate trust
business shall be principally administered, which office, as of the date hereof,
is located at 135 South LaSalle Street, Chicago, Illinois 60674-4107, Attention:
Asset Backed Securities Trust Services Group--Mid-America 1997.
CUSTODIAN: The term "Custodian" means any receiver, trustee,
assignee, liquidator, custodian or similar official under any Bankruptcy Law.
DEBT: The term "Debt" of the Issuer or any Subsidiary means any
indebtedness of the Issuer or such Subsidiary, as applicable, whether or not
contingent, in respect of (i) borrowed money evidenced by bonds, notes,
debentures or similar instrument, (ii) indebtedness secured by any mortgage,
pledge, lien, charge, encumbrance or any security interest existing on property
owned by the Issuer or such Subsidiary, (iii) the reimbursement obligations,
contingent or otherwise, in connection with any letters of credit actually
issued or amounts representing the balance that constitutes an accrued expense
or trade payable or (iv) any lease of property by the Issuer or such Subsidiary
as lessee which is reflected in the Issuer's consolidated balance sheet as a
capitalized lease in accordance with GAAP, in the case of items of indebtedness
under clauses (i) through (iii) above to the extent that any such items (other
than letters of credit) would appear as a liability on the Issuer's consolidated
balance sheet in accordance with GAAP, and also includes, to the extent not
otherwise included, any obligation of the Issuer or such Subsidiary to be liable
for, or to pay, as obligor, guarantor or otherwise (other than for purposes of
collection in the ordinary course of business), indebtedness of another Person
(other than the Issuer or any Subsidiary).
DEBT SERVICE: The term "Debt Service" means, with respect to any
period, the amount of debt service on the Securities then Outstanding during
such period (based on an assumed debt service constant of 9.25% per annum).
DEBT SERVICE COVERAGE RATIO: The term "Debt Service Coverage Ratio"
means, with respect to any period prior to the Permitted Merger Date, the ratio
of Net Operating Income of the Partnership for such period to Debt Service.
After the Permitted Merger Date, the term "Debt Service Coverage Ratio" shall
mean, with respect to MAALP, the ratio of Consolidated Income Available for Debt
Service to the Annual Service Charge.
DEFAULT: The term "Default" means any condition or event which
constitutes or which, after notice or lapse of time or both, would constitute an
Event of Default hereunder.
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DEPOSITOR: The term "Depositor" has the meaning specified in the
third recital hereof.
DEPOSITORY: The term "Depository" means the Depository Trust Company
or a successor appointed by the Security Registrar (which appointment shall be
at the direction of the Issuer if the Issuer is legally able to do so).
DEPOSITORY PARTICIPANT: The term "Depository Participant" means a
Person for whom, from time to time, the Depository effects book-entry transfers
and pledges of securities deposited with the Depository.
EVENT OF DEFAULT: The term "Event of Default" means any event
specified as such in Section 5.01, continued for the period of time, if any, and
after the giving of notice, if any, therein provided.
EXCHANGE ACT: The term "Exchange Act" means the Securities Exchange
Act of 1934, as amended.
FEES ADVANCE: The term "Fees Advance" means any advance made by the
Trustee in respect of any payment of fees of (a) the Trustee hereunder, (b) the
Certificate Trustee under the Trust Agreement or (c) the Servicer, if any.
FIRST MORTGAGE BONDS: The term "First Mortgage Bonds" means the
[___]% First Mortgage Bonds, Due 2003 of the Issuer issuable pursuant to this
Indenture.
GAAP: The term "GAAP" means generally accepted accounting principles
as in effect from time to time in the United States, consistently applied.
GLOBAL CERTIFICATE: The term "Global Certificate" means a
certificate in global form representing the aggregate principal amount of First
Mortgage Bonds specified therein in denominations of $100,000 and such greater
denominations as are whole multiples of $1,000.
HOLDER; SECURITYHOLDER: The term "Holder" of a Security and the term
"Securityholder" each mean the Person in whose name such Security is registered
at the time on the Security Register kept for that purpose in accordance with
the terms hereof.
INDENTURE: The term "Indenture" means this Indenture as originally
executed or as it may from time to time be amended or supplemented by one or
more indentures supplemental hereto entered into, in each case pursuant to the
applicable provisions hereof.
INDEPENDENT ACCOUNTANTS: The term "Independent Accountants" means a
firm of independent public accountants meeting the requirements therefor under
the Securities Act and rules and regulations of the SEC, which shall be KMPG
Peat Marwick, LLP or another "Big-Six" firm of independent certified public
accountants of nationally recognized standing selected by the Issuer and
reasonably satisfactory to the Trustee.
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INDIVIDUAL CERTIFICATE: The term "Individual Certificate" means a
definitive certificate in fully registered form without coupons, representing a
First Mortgage Bond.
INTEREST ADVANCE: The term "Interest Advance" means any advance made
by the Trustee to the Securityholders in respect of interest due on any Payment
Date prior to the Permitted Merger Date.
ISSUE: The term "issue" means issue, assume, guarantee, incur or
otherwise become liable for.
ISSUE DATE: The term "Issue Date" means, with respect to the First
Mortgage Bonds, the date of original issuance of the First Mortgage Bonds.
ISSUER: The term "Issuer" means the Partnership until but excluding
the Permitted Merger Date and, from and after the Permitted Merger Date, MAALP,
each until a successor replaces it, and thereafter, means the successor, and,
for purposes of any provision contained herein and required by the TIA, each
other obligor on the Securities.
ISSUER ORDER AND ISSUER REQUEST: The terms "Issuer Order" and
"Issuer Request" mean, respectively, a written order or request signed in the
name of the Issuer by the Chief Executive Officer, the President or any Vice
President, and by the Chief Financial Officer, the Secretary or an Assistant
Secretary of the general partner of the Issuer, and delivered to the Trustee.
LEGAL HOLIDAY: The term "Legal Holiday" has the meaning specified in
Section 11.09.
LIEN: The term "Lien" means any mortgage, pledge, security interest,
conditional sale or other title retention agreement, constructive trust or other
similar lien.
MAALP: The term "MAALP" means Mid-America Apartments, L.P., a
Tennessee limited partnership.
MAALP ENVIRONMENTAL INDEMNITY: The term "MAALP Environmental
Indemnity" means that certain environmental and hazardous substance
indemnification agreement, dated as of November 21, 1997, made by MAALP in favor
of the Trustee, as the same may be amended from time to time.
MANAGER'S CONSENT: The term "Manager's Consent" means that certain
manager's consent and subordination of management agreement, dated as of
November 21, 1997, of MAALP, as property manager, for the benefit of the
Trustee, as the same may be amended from time to time.
MATURITY DATE: The term "Maturity Date" means [January __], 2003.
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MONTHLY PAYMENT: The term "Monthly Payment" means the monthly
payment of interest due and payable on each Payment Date on the Securities in
accordance with their terms.
MOODY'S: The term "Moody's" means Moody's Investors Service, Inc.
MORTGAGE: The term "Mortgage" means the deed of trust, security
agreement and assignment of rents and leases with respect to each Mortgaged
Property, from the Issuer, as grantor, to the trustee named therein,
substantially in the form attached hereto as Exhibit C, as amended or
supplemented from time to time as permitted hereby or thereby.
MORTGAGED PROPERTY: The term "Mortgaged Property" means all the
right, title and interest of the Issuer in and to the parcel of land described
in Schedule A to each Mortgage and in and to the buildings and improvements now
existing or hereafter constructed on such land and all definitions of "Mortgaged
Property" contained in such Mortgage, except as released pursuant to the terms
hereof and of such Mortgage. The Mortgaged Properties are listed in Exhibit B
hereto.
NET OPERATING INCOME: The term "Net Operating Income" means, with
respect to any period, the excess of Operating Income over Operating Expenses
for such period. O&M AGREEMENT: The term "O&M Agreement" means that certain
operations and maintenance agreement, dated as of November 21, 1997, between the
Partnership and the Trustee, as the same may be amended from time to time.
OBLIGATIONS: The term "Obligations" means (a) the due and punctual
payment of principal of, premium, if any, and interest on the Securities
according to their tenor and effect, (b) the due and punctual payment by the
Issuer of all other sums due or to become due under the Securities, this
Indenture, the Security Documents and any other documents included in the Trust
Estate and (c) the due and punctual performance and observance of all covenants,
agreements, conditions, obligations and liabilities of the Issuer under or
pursuant to the Securities, this Indenture, the Security Documents and any other
documents included in the Trust Estate.
OFFICER: The term "Officer" means the Chief Executive Officer, the
President, any Vice President, the Chief Financial Officer or the Secretary of
the general partner of the Issuer.
OFFICERS' CERTIFICATE: The term "Officers' Certificate" means a
certificate signed by two Officers.
OPERATING ACCOUNT: The term "Operating Account" has the meaning
specified in Paragraph 3(a) of the Cash Collateral Agreement.
OPERATING EXPENSES: The term "Operating Expenses" means, with
respect to any period prior to the Permitted Merger Date, all expenses paid or
to be paid by the Partnership during such period in connection with the
operation, management, maintenance, repair and use of the Mortgaged Properties,
determined on an accrual basis and, except to the extent otherwise provided in
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this definition, in accordance with GAAP. Operating Expenses specifically shall
(a) include management fees, whether or not actually paid, equal to 4% of the
sum of total annual revenue with respect to the Mortgaged Properties, (b)
include capital reserves equal to $200 per unit per annum and (c) be adjusted to
reflect sustainable expense.
OPERATING INCOME: The term "Operating Income" means, with respect to
any period prior to the Permitted Merger, all income of the Partnership during
such period from the operation of the Mortgaged Properties determined, except to
the extent otherwise provided in this definition, in accordance with GAAP.
Operating Income shall be adjusted to reflect sustainable revenues and shall be
calculated without straightlining of rents.
OPINION OF COUNSEL: The term "Opinion of Counsel" means a written
opinion from legal counsel who is acceptable to the Rating Agencies. The counsel
may be an employee of or counsel to the Issuer or the Trustee.
OUTSTANDING: The term "Outstanding," when used with reference to
Securities means, subject to the provisions of Section 11.07, as of any
particular time, all Securities authenticated by the Trustee and delivered under
this Indenture, except:
(a) Securities theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(b) Securities for the payment in whole of which Cash in the
necessary amount (including premium and interest, if any) shall have been
deposited in trust with the Trustee or any paying agent; and
(c) Securities in lieu of or in substitution or exchange for which
other Securities shall have been authenticated and delivered pursuant to
the terms of Section 2.07, or which have been paid, unless proof
satisfactory to the Issuer and the Trustee is presented that any such
Securities are held by Persons in whose hands any of such Securities is a
valid, binding and legal obligation of the Issuer.
PARTNERSHIP: The term "Partnership" means Mid-America Capital
Partners, L.P., a Delaware limited partnership.
PARTNERSHIP ENVIRONMENTAL INDEMNITY: The term "Partnership
Environmental Indemnity" means that certain environmental and hazardous
substance indemnification agreement, dated as of the date hereof, made by the
Partnership in favor of the Trustee, as the same may be amended from time to
time.
PAYMENT DATE: The term "Payment Date" has the meaning specified in
the form of First Mortgage Bond included as Exhibit A of this Indenture.
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PERMITTED ENCUMBRANCES: The term "Permitted Encumbrances" has the
respective meanings specified in each Mortgage and shall include the pledges and
encumbrances pursuant to the Security Documents.
PERMITTED INVESTMENTS: The term "Permitted Investments" has the
meaning specified in Exhibit C to the Cash Collateral Agreement.
PERMITTED MERGER: The term "Permitted Merger" has the meaning
specified in Section 9.01.
PERMITTED MERGER DATE: The term "Permitted Merger Date" has the
meaning specified in Section 9.02(viii).
PERSON: The term "Person" means any individual, corporation,
partnership, limited liability company, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
PRINCIPAL: The term "principal" of a Security means the principal of
the Security plus the premium, if any, payable on the Security which is due or
overdue or is to become due at the relevant time.
PROPERTY ADVANCE: The term "Property Advance" means any advance made
by the Trustee in respect of any payment of taxes, insurance premiums or other
amounts required under any Mortgage to be paid in respect of any Mortgaged
Property prior to the Permitted Merger Date.
QUALIFIED SERVICER: The term "Qualified Servicer" means a Servicer
acceptable to each Rating Agency which is (a) appointed in good faith by the
Trustee pursuant to a servicing agreement by and among the Partnership, the
Servicer and the Trustee and reasonably acceptable to the Partnership and the
Trustees which shall provide that the Servicer shall act according to the
Servicing Standard and, (b) an established mortgage finance institution, bank of
mortgage servicing institution, organized and doing business under the laws of
any state of the United States or the District of Columbia and authorized under
such laws to perform the duties under such servicing agreement.
RATING AGENCIES: The term "Rating Agencies" means Moody's and S&P.
RELEASE CERTIFICATE: The term "Release Certificate" has the meaning
specified in Section 9.02(iv).
REPAIRS AGREEMENT: The term "Repairs Agreement" means that certain
required repairs agreement, dated as of the date hereof, between the Partnership
and the Trustee, as the same may be amended from time to time.
S&P: The term "S&P" means Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc.
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SEC: The term "SEC" means the Securities and Exchange Commission.
SECURED DEBT: The term "Secured Debt" means Debt secured by any
mortgage, lien, charge, pledge, encumbrance or security interest of any kind
upon any of the property of the Issuer or any Subsidiary. ------------
SECURITIES ACT: The term "Securities Act" means the Securities Act
of 1933, as amended.
SECURITY: The term "Security" means any First Mortgage Bond or other
security authenticated by the Trustee and delivered under this Indenture, and
the plural term "Securities" has a correlative meaning.
SECURITY DOCUMENTS: The term "Security Documents" means this
Indenture, the Partnership Environmental Indemnity, the MAALP Environmental
Indemnity, the Borrower's Certificate, the Manager's Consent, the Repairs
Agreement, the O&M Agreement, each Mortgage, the Assignment of Leases and Rents,
the Cash Collateral Agreement and any financing statement on Form UCC-1 and
continuation statement on Form UCC-3 filed with respect to any thereof.
SECURITY REGISTER: The term "Security Register" has the meaning
specified in Section 2.06.
SECURITY REGISTRAR; SECURITY CO-REGISTRAR: The terms "Security
Registrar" and "Security Co-Registrar" have the meanings specified in Section
2.06.
SERVICER: The term "Servicer" means any servicer appointed pursuant
to Section 7.13.
SERVICING STANDARD: The term "Servicing Standard" means, with
respect to the Servicer, servicing of the Mortgaged Properties by the Servicer
in the best interests of and for the benefit of all of the Securityholders (as
determined by the Servicer in the exercise of its good faith and reasonable
judgment) and in accordance with applicable law, the specific terms of the
respective Mortgages, the other Security Documents and this Indenture and, to
the extent not inconsistent with the foregoing, in the same manner in which, and
with the same care, skill and diligence as is normal and usual in the Servicer's
general mortgage servicing and property management activities on behalf of third
parties or on behalf of itself, whichever is higher, with respect to mortgage
loans and properties that are comparable to the Mortgaged Properties, and in
each event with a view to the timely payment of all scheduled payments of
principal and interest or, if the Securities come into and continue in default
and if, in the good faith and reasonable judgment of the Servicer, no
satisfactory arrangements can be made for the collection of the delinquent
payments, the maximization of the recovery to the Securityholders (as a
collective whole) on a present value basis, but in any case without regard to:
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(i) any known relationship that the Servicer or any Affiliate
thereof may have with the Issuer or any other parties to the
Security Documents;
(ii) the ownership of any Security by the Servicer or any Affiliate
thereof;
(iii) the Servicer's obligation, if any, to make Advances;
(iv) the right of the Servicer (or any Affiliate thereof) to
receive reimbursement of costs, or the sufficiency of any
compensation for its services hereunder or with respect to any
particular transaction; or
(v) the ownership, servicing or management, for others or itself,
by the Servicer of any other mortgage loans or properties.
STATED MATURITY: The term "Stated Maturity" means, with respect to
any Security, the date specified in such Security as the Maturity Date.
SUBSIDIARY: The term "Subsidiary" means any corporation, limited
liability company, association, partnership or other business entity of which
more than 50% of the total voting power of shares of Capital Stock or other
interests (including limited liability company or partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by (i) the Issuer, (ii) the Issuer and one
or more Subsidiaries or one or more Subsidiaries.
TERMINATION NOTICE: The term "Termination Notice" has the meaning
specified in Paragraph 3(h) of the Cash Collateral Agreement.
TOTAL ASSETS: The term "Total Assets" as of any date means the sum
of (i) Undepreciated Real Estate Assets and (ii) all other assets of the Issuer
and its Subsidiaries on a consolidated basis determined in accordance with GAAP
(but excluding intangibles and accounts receivable).
TOTAL UNENCUMBERED ASSETS: The term "Total Unencumbered Assets"
means the sum of (i) those Undepreciated Real Estate Assets which have not been
pledged, mortgaged or otherwise encumbered by the owner thereof to secure Debt
and (ii) all other assets of the Issuer and its Subsidiaries determined in
accordance with GAAP (but excluding intangibles and accounts receivable) which
have not been pledged, mortgaged or otherwise encumbered by the owner thereof to
secure Debt.
TIA: The term "TIA" means the Trust Indenture Act of 1939 (15
U.S.C.ss.ss. 77aaa--77bbb) as in effect on the date of this Indenture.
TRIGGER NOTICE: The term "Trigger Notice" has the meaning specified
in Paragraph 3(h) of the Cash Collateral Agreement.
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TRUST AGREEMENT: The term "Trust Agreement" has the meaning
specified in the fourth recital hereof.
TRUSTEE: The term "Trustee" means the corporation or trust company
or national banking association named as Trustee in this Indenture until any
successor Trustee shall have become such pursuant to the applicable provisions
of this Indenture, and thereafter "Trustee" shall mean such successor Trustee.
TRUST ESTATE: The term "Trust Estate" means all property subject or
intended to be subject to the Lien of this Indenture or constituting a part of
the security for the Obligations or the performance by the Issuer of its
obligations hereunder as of any particular time, including, without limitation,
the Security Documents, all property, rights, interests and privileges of the
Partnership, all estate, right, title and interest of the Partnership in, to and
under any agreement, contract, document or instrument to which it is a party
(including, without limitation, the Contribution Agreement), all Accounts,
Permitted Investments, Cash and U.S. Government Obligations held by or pledged
to the Trustee pursuant hereto or to the Cash Collateral Agreement, all property
subject to the Mortgages and all security interests granted to the Trustee by
the Security Documents (including the after-acquired property clauses thereof)
or subsequently pledged thereunder to the Trustee (whether by the Issuer or any
other Person) and any other money, instruments or property that is held by the
Trustee as security for the Obligations, including, without limitation, all of
the estate, right, title, interest, claim and demand therein, thereto and
thereunder of the Issuer or of any Affiliate of the Issuer and of the Trustee.
TRUST OFFICER: The term "Trust Officer" means, with respect to the
initial Trustee, any officer of the Trustee's Asset Backed Securities Trust
Services Group directly responsible for the matters contemplated by this
Indenture and, with respect to any successor Trustee, any vice president, trust
officer or corporate trust officer of the Trustee, in each case employed by the
corporate trust administration department of the Trustee.
UNDEPRECIATED REAL ESTATE ASSETS: The term "Undepreciated Real
Estate Assets" means, as of any date, the cost (original cost plus capital
improvements) of real estate assets of the Issuer and its Subsidiaries on such
date, before depreciation and amortization, determined on a consolidated basis
in accordance with GAAP.
UNIFORM COMMERCIAL CODE: The term "Uniform Commercial Code" means
the Uniform Commercial Code as in effect in the State of New York from time to
time.
UNITED STATES: The term "United States" means the United States of
America, the Commonwealth of Puerto Rico and each territory and possession of
the United States of America and all areas subject to its jurisdiction.
UNITED STATES PERSON: The term "United States Person" means a Person
who is a citizen, resident or national of the United States (including the
estate of any such Person, any estate or trust the income of which is subject to
United States federal income taxation regardless of its source, or any
corporation, partnership or other entity created or organized in or under the
United States or any political subdivision thereof).
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U.S. GOVERNMENT OBLIGATIONS: The term "U.S. Government Obligations"
means direct obligations (or certificates evidencing an ownership interest in
such obligations) of the United States of America (including any agency or
instrumentality thereof) for the payment of which the full faith and credit of
the United States of America is pledged and which are not callable at the
issuer's option.
UNSECURED DEBT: The term "Unsecured Debt" means Debt which is not
secured by any mortgage, lien, charge, pledge, encumbrance or security interest
of any kind upon any of the properties of the Issuer or any Subsidiary.
VOTING STOCK: The term "Voting Stock" of a corporation means all
classes of Capital Stock of such corporation then outstanding and normally
entitled to vote in the election of directors.
WHOLLY OWNED SUBSIDIARY: The term "Wholly Owned Subsidiary" means a
Subsidiary all the Capital Stock of which (other than directors' qualifying
shares) is owned by the Issuer or another Wholly Owned Subsidiary.
SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture; PROVIDED,
HOWEVER, that prior to the effective registration of the First Mortgage Bonds
under the Securities Act, the provisions of the TIA referred to herein shall be
inapplicable. The following TIA terms used in this Indenture have the following
meanings:
"COMMISSION" means the SEC.
"INDENTURE SECURITIES" means the Securities.
"INDENTURE SECURITY HOLDER" means a Securityholder.
"INDENTURE TO BE QUALIFIED" means this Indenture.
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee.
"OBLIGOR" on the indenture securities means the Issuer.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by reference in the TIA to another statute or defined by SEC rule
have the meanings assigned to them by such definitions.
SECTION 1.03. RULES OF CONSTRUCTION. Unless the context otherwise
requires:
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(1) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(2) "or" is not exclusive;
(3) "including" means including, without limitation;
(4) words in the singular include the plural and words in the
plural include the singular; and
(5) the principal amount of any non-interest bearing or other
discount security at any time shall be the principal amount
thereof that would be shown on a balance sheet of the issuer
dated such date prepared in accordance with GAAP and accretion
of principal on such security shall be deemed to be the
issuance of Debt.
ARTICLE TWO
ISSUANCE, DESCRIPTION, EXECUTION AND EXCHANGE OF SECURITIES
SECTION 2.01. DESIGNATION, AMOUNT AND ISSUE OF SECURITIES. The First
Mortgage Bonds shall be designated as the Issuer's "[__]% First Mortgage Bonds,
Due 2003." The First Mortgage Bonds will be limited to $150,000,000 in aggregate
principal amount, except as provided in Section 2.07.
SECTION 2.02. AUTHENTICATION AND DELIVERY OF SECURITIES. Upon the
execution and delivery of this Indenture, and from time to time thereafter, the
First Mortgage Bonds shall be executed by the Issuer and such Securities shall
thereupon be delivered to the Trustee for authentication, and the Trustee shall
thereupon authenticate and deliver said Securities upon an Issuer Order.
SECTION 2.03. FORM OF SECURITIES AND TRUSTEE'S CERTIFICATE OF
AUTHENTICATION. The Securities and the Trustee's certificate of authentication
to be borne by the Securities shall be substantially of the tenor and purport as
in Exhibit A to this Indenture recited, in temporary or definitive form, and may
have such letters, numbers or other marks of identification or designation and
such legends or endorsements as the Issuer may deem appropriate and as are not
inconsistent with the provisions of this Indenture, or as may be required to
comply with any law or with any rule or regulation made pursuant thereto or with
any rule or regulation of any securities exchange on which the Securities may be
listed, or to conform to usage.
SECTION 2.04. DENOMINATION AND DATE OF SECURITIES; PAYMENT OF
PRINCIPAL AND INTEREST; GLOBAL SECURITIES. (a) The Securities shall be issuable
in registered form without coupons.
(b) The Securities shall be issuable in denominations of $100,000
and such greater denominations as are whole multiples of $1,000. Each Security
shall be dated the Issue Date and shall bear interest on the unpaid principal
amount thereof from and after the most recent Payment Date to which interest has
been paid or, if no interest has been paid, from and after the Issue Date.
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(c) The Person in whose name any Security is registered at 5:00 p.m.
New York City time on the fifth Business Day preceding any Payment Date for such
Security shall be entitled to receive the Monthly Payment payable on such
Payment Date, except that, if and to the extent the Issuer shall default in the
payment of the Monthly Payment due on such Payment Date or shall not have duly
provided for the payment thereof and no Advance has been made in respect
thereof, such defaulted payment shall be paid to the Persons in whose names
Outstanding Securities are registered on a subsequent date of record established
by notice given by mail by or on behalf of the Issuer to the Holders of
Securities not less than 10 days preceding such subsequent date of record and
payment of such defaulted Monthly Payment shall be made not less than five days
after such date of record.
(d) The principal of and premium, if any, on the Securities at
maturity or upon redemption in whole or in part shall be payable, together with
accrued interest, upon surrender of the Securities at the offices of the
co-paying agent of the Issuer designated for that purpose, as provided in
Section 4.10. Monthly Payments on Securities will be made in U.S. dollars, by
wire transfer to a bank in the United States in immediately available funds to
the account of each Holder that has furnished written wire transfer instructions
to the Trustee.
(e) The First Mortgage Bonds shall be issued as one or more Global
Certificates registered in the name of a nominee designated by the Depository,
and Beneficial Owners shall hold interests in the Global Certificates through
the book-entry facilities of the Depository in denominations of $100,000 and
such greater denominations as are whole multiples of $1,000. The Global
Certificates shall in all respects be entitled to the same benefits under this
Indenture as any Individual Certificates authenticated and delivered hereunder.
(f) The Issuer, the Trustee and any paying agent may for all
purposes (including the making of payments due on the Global Certificates and
the giving of notice to Holders thereof) deal with the Depository as the
authorized representative of the Beneficial Owners with respect to the Global
Certificates for the purposes of exercising the rights of Securityholders
hereunder. The rights of Beneficial Owners with respect to Global Certificates
shall be limited to those established by law and agreements among such
Beneficial Owners and the Depository and Depository Participants. Except in the
limited circumstances described below, Beneficial Owners of Global Certificates
shall not be entitled to physical certificates for the Global Certificates as to
which they are the Beneficial Owners. Requests and directions from, and votes
of, the Depository as Holder of the Global Certificates shall not be deemed
inconsistent if they are made with respect to different Beneficial Owners.
(g) The Security Registrar may establish a reasonable record date in
connection with solicitations of consents from or voting by Securityholders and
give notice to the Depository of such record date. Without the written consent
of the Issuer and the Security Registrar, no Global Certificate may be
transferred by the Depository except to a successor Depository that agrees to
hold the Global Certificates for the account of the Beneficial Owners.
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(h) The Global Certificates (i) shall be delivered by the Trustee to
the Depository and shall be registered in the name of Cede & Co. and (ii) shall
bear a legend substantially to the following effect:
"Unless this bond is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to the Certificate
Registrar for registration of transfer, exchange or payment, and any bond issued
is registered in the name of Cede & Co. or in such other name as is requested by
an authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein."
The Global Certificates may be deposited with such other Depository
as the Issuer may from time to time designate, and shall bear such legend as may
be appropriate.
If (i) the Depository advises the Issuer and the Trustee in writing
that the Depository is no longer willing, qualified or able properly to
discharge its responsibilities as Depository, and the Issuer is unable to locate
a qualified successor or (ii) after the occurrence of an Event of Default,
Beneficial Owners owning not less than a majority in Outstanding principal
amount of the Global Certificates for the First Mortgage Bonds advise the
Depository through Depository Participants in writing that the continuation of a
book-entry system through the Depository is no longer in the best interest of
the Beneficial Owner or Owners of such Global Certificate, the Trustee shall
notify the affected Beneficial Owners through the Depository of the occurrence
of such event and the availability of Individual Certificates to such Beneficial
Owner or Owners requesting them. Upon surrender to the Trustee of Global
Certificates by the Depository, accompanied by registration instructions from
the Depository for registration of transfer, the Trustee shall issue the
Individual Certificates. Neither the Trustee, the Security Registrar nor the
Issuer shall be liable for any actions taken by the Depository or its nominee,
including, without limitation, any delay in delivery of such instructions. Upon
the issuance of Individual Certificates, the Trustee, the Security Registrar and
the Issuer shall recognize the Holders of Individual Certificates as
Securityholders hereunder.
If the Trustee or its agents has instituted or has been directed to
institute any judicial proceeding in a court to enforce the rights of the
Securityholders under the Securities, and the Trustee has been advised by
counsel that in connection with such proceeding it is necessary or appropriate
for the Trustee to obtain possession of the Securities, the Trustee or any of
its agents may in its sole discretion determine that the Securities represented
by the Global Certificates shall no longer be represented by such Global
Certificates. In such event, the Issuer will execute and the Trustee will
authenticate and deliver, in exchange for such Global Certificates, Individual
Certificates in an aggregate denomination equal to the aggregate denomination of
such Global Certificates.
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(i) Interest on the Securities will be computed on the basis of a
360-day year consisting of twelve 30-day months.
SECTION 2.05. EXECUTION OF SECURITIES. Each Security shall be signed
in the name and on behalf of the Issuer manually or by the President or any Vice
President of its general partner attested by the manual or facsimile signature
of the Secretary or an Assistant Secretary of its general partner, prior to the
authentication of the Security, and the delivery of such Security by the Trustee
upon an Issuer Order, after the authentication thereof hereunder, shall
constitute due delivery of such Security on behalf of the Issuer. In case any
officer of the general partner of the Issuer who shall have signed, or whose
facsimile signature appears on any of the Securities, shall cease to be such
officer before the Securities shall have been authenticated and delivered by the
Trustee or disposed of, such Security nevertheless may be authenticated and
delivered or disposed of as though the Person who signed such Security had not
ceased to be such officer. Any Security may be signed on behalf of the Issuer by
such officer as at the actual date of the execution of such Security shall be
the proper officer of the Issuer, although at the date of the execution of this
Indenture any such Person was not such an officer.
Only such Securities as shall bear thereon a certificate of
authentication substantially in the form herein recited, executed by the Trustee
by manual signature of one of its authorized officers, shall be entitled to the
benefits of this Indenture or be valid or obligatory for any purpose. Such
certificate by the Trustee upon any Security executed by the Issuer shall be
conclusive evidence that the Security so authenticated has been duly
authenticated and delivered hereunder and that the Holder is entitled to the
benefits of this Indenture.
SECTION 2.06. EXCHANGE AND REGISTRATION OF TRANSFER OF SECURITIES.
The Issuer shall keep, at the office or agency to be maintained by the Trustee
for such purpose (the "SECURITY REGISTRAR") at the Corporate Trust Office, a
register (the "SECURITY REGISTER") in which, subject to such reasonable
regulations as it may prescribe, the Issuer shall provide for the registration
of the Securities and the registration of transfers of such Securities as in
this Article Two provided; PROVIDED, HOWEVER, in no event shall the Security
Registrar be required to maintain in the Security Register the names of the
individual participants holding beneficial interests in the Securities through
the Depository. Upon written notice to the Trustee and any acting Security
Registrar, the Issuer may appoint a successor Security Registrar for such
purposes. The Issuer may appoint one or more co-registrars (each, a "SECURITY
CO-REGISTRAR") for such purposes. At all reasonable times, any Security Register
shall be open for inspection by the Trustee. Upon due presentment for
registration of transfer of any Security at the office or agency of any Security
Registrar or any Security Co-Registrar, the Issuer shall execute, and the
Trustee shall authenticate and deliver, in the name of the transferee or
transferees, one or more new Securities of like tenor of any authorized
denominations for an aggregate principal amount equal to the then current
principal balance of the Security presented for registration of transfer.
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All Securities presented for registration of transfer or for
exchange or payment, as the case may be, shall (if so required by the Issuer or
the Trustee or the Security Registrar or any Security Co-Registrar) be duly
endorsed by, or be accompanied by a written instrument or instruments of
assignment and transfer in form satisfactory to the Person imposing such
requirement duly executed by, the Holder or his or her attorney duly authorized
in writing.
No service charge shall be made for any exchange or registration of
transfer of Securities (except the costs of mailing), but the Issuer may require
payment of a sum sufficient to cover any tax, assessment or other governmental
charge that may be imposed in connection therewith.
Upon delivery by any Security Registrar or Security Co-Registrar of
a Security in exchange for a Security surrendered to it in accordance with the
provisions of this Indenture, the Security so delivered shall, for all purposes
of this Indenture, be deemed to be fully registered in the Security Register;
PROVIDED, HOWEVER, that in making any determination as to the identity of
Persons who are Holders of Securities, the Trustee shall be fully protected in
relying on the Security Register.
All Securities issued pursuant to this Section 2.06 in exchange for
or upon registration of transfer of Securities shall be the valid obligations of
the Issuer, evidencing the same debt, and entitled to the same benefits and
subject to the same conditions under this Indenture, as the Securities
surrendered for such exchange or registration of transfer.
SECTION 2.07. MUTILATED, DESTROYED, LOST OR STOLEN SECURITIES. In
case any Security shall become mutilated, destroyed, lost or stolen, the Issuer
shall execute, and the Trustee shall authenticate and deliver, a new Security or
Securities of like series and tenor, bearing a number not contemporaneously
outstanding in an aggregate principal amount equal to the current principal
balance of, and in substitution for, the Security so mutilated, destroyed, lost
or stolen. In every such case, the applicant for a substitute Security shall, at
the expense of the applicant, furnish to the Issuer, the Trustee, the Security
Registrar and any Security Co-Registrar such security or indemnity as may be
required by them to save each of them harmless. Also, in every case of
destruction, loss or theft, the applicant shall furnish to the Issuer, the
Trustee, the Security Registrar and any Security Co-Registrar evidence to their
satisfaction of the destruction, loss or theft of such Security and of the
ownership thereof. In every case of mutilation, the applicant shall surrender to
the Trustee the Security so mutilated. The Trustee shall authenticate any such
substitute Security and deliver the same. Upon the issuance of any substitute
Security, the Issuer may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto and any
other expenses connected therewith. If required by the Trustee or the Issuer,
such applicant shall furnish an indemnity bond sufficient in the judgment of the
Issuer and the Trustee to protect the Issuer, the Trustee, any paying agent, the
Security Registrar and any Security Co-Registrar from any loss which any of them
may suffer if a Security is replaced. In case any Security shall have become
mutilated, destroyed, lost or stolen, at maturity thereof the Issuer may pay or
authorize the payment of the same instead of issuing a substitute Security as
permitted by this Section 2.07.
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Every substitute Security issued pursuant to the provisions of this
Section 2.07 by virtue of the fact that any Security is destroyed, lost or
stolen shall constitute an additional contractual obligation of the Issuer,
whether or not the destroyed, lost or stolen Security shall at any time be found
by anyone, and shall be entitled to all the benefits and is subject to all the
terms and conditions of this Indenture equally and proportionately, with any and
all other Securities duly issued and outstanding hereunder. All Securities shall
be held and owned upon the express condition that, to the extent permitted by
law, the foregoing provisions are exclusive with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities and shall preclude
any and all other rights or remedies, notwithstanding any law or statute now
existing or hereafter enacted to the contrary with respect to the replacement or
payment of negotiable instruments or other securities without their surrender.
SECTION 2.08. CANCELLATION OF SURRENDERED SECURITIES. All Securities
surrendered for payment or for substitution or exchange or registration of
transfer hereunder shall be delivered to the Trustee for cancellation and shall
be canceled by the Trustee, and no Securities shall be issued in lieu thereof,
except as otherwise provided in this Indenture. The Trustee shall destroy all
canceled Securities held by it and shall deliver to the Issuer a certificate in
respect of such destruction. If the Issuer shall acquire any of the Securities,
however, such acquisition shall not operate as a satisfaction of the
indebtedness represented by such Securities unless and until the same are
delivered to the Trustee for cancellation. Any Securities acquired by the Issuer
and delivered to the Trustee shall be canceled by the Trustee upon receipt of
written instructions from the Issuer.
SECTION 2.09. TEMPORARY SECURITIES. Until definitive securities are
ready for delivery, the Issuer may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form of
definitive Securities, but may have variations that the Issuer considers
appropriate for temporary Securities. Without unreasonable delay, the Issuer
shall prepare and the Trustee shall authenticate definitive Securities and
deliver them in exchange for temporary Securities.
ARTICLE THREE
NO PREPAYMENT OF SECURITIES
SECTION 3.01. NO PREPAYMENT. The First Mortgage Bonds may not be
prepaid or redeemed prior to maturity.
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ARTICLE FOUR
PARTICULAR COVENANTS, REPRESENTATIONS AND WARRANTIES OF ISSUER
The Issuer represents, warrants, covenants and agrees, as of the
date hereof, as of the Issue Date of the First Mortgage Bonds and (except as
specified below) as of the Permitted Merger Date, as follows:
SECTION 4.01. VALIDITY OF SECURITIES; TITLE TO TRUST ESTATE; LIEN.
(a) The Issuer is duly authorized under applicable law and its organizational
documents to create and issue the Securities, to execute and deliver this
Indenture and all instruments included in the Trust Estate which are executed or
delivered by the Issuer and to mortgage and pledge the property included in the
Trust Estate; all corporate and partnership action and governmental consents,
authorizations and approvals necessary or required therefor have been duly and
effectively taken or obtained. The Securities are legal, valid and binding
obligations of the Issuer.
(b) This Indenture, the other Security Documents and any other
instrument included in the Trust Estate are valid and enforceable in accordance
with their terms, and all property included in the Trust Estate is free of all
Liens except for the Mortgages and except as permitted hereby or thereby. The
Issuer has full power and lawful authority to mortgage and pledge the property
included in the Trust Estate, and the Trustee has a valid and enforceable
mortgage and security interest therein, subject only to exceptions permitted
hereby or thereby. Subject to the Permitted Encumbrances, the Issuer shall at
all times preserve, warrant and defend the Trustee's title and right in and to
the property included in the Trust Estate against the claims of all Persons.
Without limiting the generality of the foregoing, in no event shall the Issuer
transfer to any Subsidiary any of its assets subject to the Lien of any of the
Security Documents or this Indenture.
SECTION 4.02. MAINTENANCE OF LIENS AND RECORDING. (a) The Issuer
will maintain and preserve the first priority mortgage Liens and security
interest of the Security Documents and of any other instrument included in the
Trust Estate prior to the Permitted Merger Date for so long as any Security is
Outstanding.
(b) The Issuer will, forthwith after the execution and delivery of
this Indenture and thereafter from time to time prior to the Permitted Merger
Date, cause the Security Documents, any other instrument included in the Trust
Estate and any mortgage, financing statement, continuation statement or similar
instrument relating to any Lien thereof or to any property intended to be
subject to any Lien thereof or subject to the Lien of the Security Documents or
any other instrument included in the Trust Estate to be filed, registered and
recorded in such manner and in such places as may be required by law in order to
publish notice of and fully to protect the validity thereof or the Liens thereof
purported to be created upon the properties subject thereto and the interest and
rights of the Trustee in the Trust Estate. As among the Issuer, the Holders and
the Trustee, the Issuer will pay or cause to be paid all taxes and fees incident
to such filing, registration and recording, and all expenses incident to the
preparation, execution and acknowledgment of the Security Documents, or any
amendments thereto or modifications thereof, of any other instrument included in
the Trust Estate and of any instrument of further assurance, and all Federal or
State stamp taxes or other taxes (except income taxes or franchise taxes of
parties other than the Issuer), duties and charges arising out of or in
connection with the execution and delivery of such instruments.
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(c) The Issuer will furnish, in connection with the execution and
delivery of this Indenture and of each supplemental indenture dated prior to the
Permitted Merger Date and each Mortgage referred to herein, an Opinion of
Counsel either stating that in the opinion of such counsel this Indenture or
such supplemental indenture or Mortgage has been properly recorded and filed so
as to make effective the Lien intended to be created thereby, and reciting the
details of such action, or stating that in the opinion of such counsel no such
action is necessary to make such Lien effective.
(d) The Issuer will furnish, by October 1 of each year prior to the
Permitted Merger Date, an Opinion of Counsel addressed to the Trustee either
stating that in the opinion of such counsel such action has been taken with
respect to the recording, filing, rerecording and refiling of this Indenture,
each supplemental indenture, each Mortgage and any other Security Document
referred to herein, as is necessary to maintain the Lien thereof, and reciting
the details of such action, or stating that in the opinion of such counsel no
such action is necessary to maintain such Lien.
SECTION 4.03. PERFORMANCE AND ENFORCEMENT. (a) The Issuer will
faithfully observe and perform, or cause to be observed and performed, all its
covenants, agreements, conditions and requirements contained herein and, subject
to any notice and/or cure periods provided therein, in the other Security
Documents or in any other instrument included in the Trust Estate strictly in
accordance with the terms thereof and will maintain the validity and
effectiveness of such instruments and the pledge thereof to the Trustee. The
Issuer will take no action, nor will it permit any action to be taken, which
will release any party to such instruments from any of its obligations or
liabilities thereunder, or will result in the termination, modification or
amendment, or will impair the validity, of any such instruments except, in each
case, as expressly provided for herein and therein. The Issuer will give the
Trustee written notice of any default by any party to any of such instruments
promptly after it becomes known to the Issuer.
(b) At the request of the Trustee, the Issuer will, at its expense
but subject to the direction and control of the Trustee, take such action, or at
the Trustee's request furnish funds sufficient to enable the Trustee to take
such action under or pursuant to this Indenture, as the Trustee may deem
necessary for enforcing this Indenture, the Security Documents or any other
instrument included in the Trust Estate.
SECTION 4.04. PAYMENT OF PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST
ON SECURITIES. The Issuer will duly and punctually pay or cause to be paid the
principal of, premium, if any, and interest (without deduction or withholding
for or on account of any taxes except as required by law) on each of the
Securities at the places, at the respective times and in the manner provided in
the Securities and this Indenture. The Issuer shall cause the aggregate Monthly
Payment due on the Securities to be deposited with the Trustee no later than
11:00 a.m. Chicago Time on each Payment Date for disbursement to the
Securityholders. Applicable United States taxes will be withheld from payments
on any Security for any year in which the Trustee has not received from the
Holder thereof, if such Holder is not a United States Person, a properly
executed Form 4224 or Form 1001 (or successor thereto) in accordance with
appropriate U.S. Treasury regulations.
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SECTION 4.05. SEC REPORTS. From and after the Permitted Merger Date,
the Issuer shall file with the Trustee and the SEC and provide Securityholders,
within 15 days after filing them with the SEC, copies of its annual report and
of the information, documents and other reports (or copies of such portions of
any of the foregoing as the SEC may by rules and regulations prescribe) which
the Issuer is required to file with the SEC pursuant to Section 13 or 15(d) of
the Exchange Act. Notwithstanding that the Issuer may not be required to remain
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Issuer shall continue to file with the SEC so long as any Securities
remain Outstanding and provide the Trustee and Securityholders with such annual
reports and such information, documents and other reports (or copies of such
portions of any of the foregoing as the SEC may by rules and regulations
prescribe) which are specified in Sections 13 and 15(d) of the Exchange Act. The
Issuer also shall comply with the other provisions of Section 314(a) of the TIA.
SECTION 4.06. LIMITATION ON DEBT. The Partnership shall not incur or
suffer or permit to exist any Debt except pursuant to this Indenture, the Bond
Indenture Supplement, the other Security Documents and the First Mortgage Bonds.
From and after the Permitted Merger Date, MAALP shall not, and shall not permit
any Subsidiary to, incur any Debt, other than inter-company debt representing
Debt to which the only parties are MAALP, its general partner and any of their
Subsidiaries that is subordinate in right of payment to the Securities (but only
so long as such Debt is held solely by any of MAALP, its general partner and any
of their Subsidiaries), if, immediately after giving effect to the incurrence of
such additional Debt, the aggregate principal amount of all outstanding Debt of
MAALP and its Subsidiaries on a consolidated basis is greater than 60% of the
sum of Total Assets.
SECTION 4.07. LIMITATION ON SECURED DEBT. From and after the
Permitted Merger Date, in addition to the limitation set forth in Section 4.06,
MAALP will not, and will not permit any Subsidiary to, incur any Secured Debt
if, immediately after giving effect to the incurrence of such additional Secured
Debt, the aggregate principal amount of all outstanding Secured Debt is greater
than 40% of Total Assets.
SECTION 4.08. UNENCUMBERED ASSETS. From and after the Permitted
Merger Date, MAALP shall maintain Total Unencumbered Assets of not less than
150% of the aggregate outstanding principal amount of all outstanding Unsecured
Debt.
SECTION 4.09. LIMITATION ON TRANSACTIONS WITH AFFILIATES. The
Partnership shall conduct its activities in accordance with and subject to
limitations set forth in the organizational documents of the Partnership. The
Issuer shall not, and shall not permit any Subsidiary to, conduct any business
or enter into any transaction or series of related transactions (including the
purchase, sale, lease or exchange of any property or the rendering of any
service) with any Affiliate of the Issuer or any legal or beneficial owner of
five percent or more of any class of equity interest of the Issuer or with any
Affiliate of such owner (other than a Wholly Owned Subsidiary of the Issuer)
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unless (i) the terms of such business, transaction or series of transactions are
(a) set forth in writing and (b) as favorable to the Issuer or such Subsidiary
as terms that would be obtainable at the time for a comparable transaction or
series of related transactions in arm's-length dealings with an unrelated third
Person and (ii) the Board of Directors has, by resolution, determined in good
faith that such business or transaction or series of related transactions meets
the criteria set forth in clause (i) above.
SECTION 4.10. APPOINTMENT OF AGENTS. As long as any of the
Securities remain Outstanding, the Issuer will maintain one or more agencies
where notices and demands (other than in respect of payment on the Securities)
by Holders of Securities to or upon the Issuer in respect of the Securities or
this Indenture may be served and where the Securities may be presented for
payment by the Issuer and for registration of transfer and for exchange as in
this Indenture provided. In addition, the Issuer hereby appoints the Trustee at
its Corporate Trust Office as the paying agent of the Issuer, but the Issuer
shall have the right at any time and from time to time to vary or terminate any
such appointment as paying agent and to appoint additional and other such
agents. The Issuer will give to the Trustee notice of the location of such
additional and other offices or agencies of the Issuer and of any change in the
location of any of such offices or agencies. No agent appointed by the Issuer
pursuant to this Section 4.10 shall be liable to the Issuer or to the Holder of
any Security except in the case of its own negligent action, its own negligent
failure to act or its own willful misconduct.
The Issuer hereby appoints the Trustee at its Corporate Trust Office
in Chicago, Illinois as Security Registrar and paying agent for the Securities.
The Issuer agrees that at least one of the agencies where the
notices and demands referred to in this Section 4.10 may be served will, for as
long as any of the Securities remain outstanding, be maintained in New York, New
York. The Issuer hereby initially appoints the Trustee at its Corporate Trust
Office and the co-paying agent specified above as its agent for receipt of such
notices and demands.
SECTION 4.11. PAYING AGENTS TO HOLD FUNDS IN TRUST. Whenever the
Issuer shall appoint a paying agent other than the Trustee, it will cause such
paying agent to execute and deliver to the Trustee an instrument in which such
agent shall agree with the Trustee, subject to the provisions of this Section
4.11,
(a) that it will hold all sums held by it as such agent for the
payment of the principal of, premium, if any, and interest on the Securities in
trust for the benefit of the Holders of the Securities or the Trustee and will
notify the Trustee of the receipt of sums to be so held, and
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(b) that it will give the Trustee notice of any failure by the
Issuer to make any payment of the principal of, premium, if any, or interest on
the Securities when the same shall be due and payable.
SECTION 4.12. APPOINTMENT OF TRUSTEE BY ISSUER. Whenever necessary
to avoid or fill a vacancy in the office of the Trustee, the Issuer will appoint
a successor Trustee in the manner provided in Section 7.08, so that there shall
at all times be a Trustee hereunder.
SECTION 4.13. AVAILABILITY OF INFORMATION. The Issuer shall cause
the Trustee to preserve, in as current a form as is reasonably practicable, the
most recent list available to it of the names and addresses of the Holders of
Securities. From time to time, whenever reasonably requested by the Trustee, but
in any event at intervals of not more than six months, the Issuer will furnish
or make available to the Trustee such information as may be necessary to permit
the Trustee to carry out its duties under this Section 4.13. If at any time the
Trustee shall not be the Security Registrar, the Issuer will furnish or cause to
be furnished to the Trustee monthly not later than five Business Days before
each Payment Date and at such other times as the Trustee may reasonably request
a list in such form as the Trustee may reasonably require of the names and
addresses of Holders of Securities as of such Payment Date.
SECTION 4.14. BOOKS OF ACCOUNT; INSPECTION BY TRUSTEE; NOTICES;
STATEMENTS AS TO COMPLIANCE. (a) The Issuer will keep or cause to be kept proper
books of record and account, in which full, true and correct entries shall be
made of all dealings or transactions of or in relation to the Securities and the
Mortgaged Properties and the business and affairs of the Partnership relating to
the Mortgaged Properties.
(b) The Issuer shall deliver to the Trustee and the Rating Agencies
within one hundred twenty (120) days after the end of each fiscal year of the
Issuer an Officers' Certificate stating whether or not any Default or Event of
Default occurred during such period, describing such Default or Event of
Default, if any, and its status.
(c) The Issuer shall deliver to the Trustee and (after the issuance
of the First Mortgage Bonds) to the Rating Agencies within twenty (20) Business
Days after the end of each calendar quarter an Officer's Certificate (i) setting
forth the Debt Service Coverage Ratio calculated as of the last day of such
calendar quarter with respect to the preceding twelve (12) calendar months, (ii)
setting forth the calculations used to determine such Debt Service Coverage
Ratio and (iii) stating that the Issuer thereby confirms compliance with the
provisions of this Indenture for determining such Debt Service Coverage Ratio.
(d) The Issuer agrees promptly to give notice to the Trustee and the
Rating Agencies of:
(i) the occurrence of any Default or Event of Default;
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(ii) any (A) default (after any applicable grace or cure period has
expired) under any material provision of any agreement, instrument or
undertaking to which the Issuer or a Subsidiary is a party or by which any
of them or any of their respective properties is bound or (B) litigation,
investigation or proceeding which may exist at any time between the Issuer
or a Subsidiary and any Person, which default or litigation, if adversely
determined, could have a material adverse effect on the business,
operations or condition, financial or otherwise, of the Issuer and its
Subsidiaries, taken as a whole, or any of their properties;
(iii) any litigation or proceeding affecting the Issuer or a
Subsidiary in which the amount involved is $100,000 or more and is either
not covered by insurance or is covered by insurance as to which the
insurer has disclaimed liability or in which injunctive or similar relief
is sought; or
(iv) a material adverse change in the business, operations or
condition, financial or otherwise of the Issuer and its Subsidiaries,
taken as a whole.
Each notice given pursuant to this Section 4.14(d) shall be accompanied by an
Officers' Certificate setting forth details of the occurrence referred to
therein and stating what action, if any, the Issuer proposes to take with
respect thereto.
(e) Not later than forty-five (45) days following the end of each
fiscal quarter of the Issuer's operations commencing with the quarter ending
December 31, 1997, the Issuer will deliver to the Trustee and the Rating
Agencies (a) unaudited financial statements, internally prepared on an accrual
basis in accordance with GAAP, including a balance sheet as of the end of such
quarter and a statement of revenues and expenses through the end of such
quarter. Such statements for each quarter shall be accompanied by an Officers'
Certificate certifying that (A) such financial statements fairly represent the
financial condition and results of operations of the Issuer in accordance with
GAAP and (B) as of the date of such Officers' Certificate, no Default exists
under this Indenture, the Securities, the Mortgage or any other Security
Document or, if so, specifying the nature and status of each such Default and
the action then being taken by the Issuer or proposed to be taken to remedy such
Default.
(f) Not later than ninety (90) days after the end of each fiscal
year of Issuer's operations, the Issuer will deliver to the Trustee and the
Rating Agencies audited financial statements prepared on an accrual basis and
certified by an Independent Accountant in accordance with GAAP including a
balance sheet as of the end of such year and a statement of revenues and
expenses for such year, and stating in comparative form beginning with the 1998
calendar year the figures for the previous fiscal year as well as, prior to the
Permitted Merger Date, the supplemental schedule of net income or loss
presenting the net income or loss for the Mortgaged Properties. Such annual
financial statements shall also be accompanied by an Officer's Certificate in
the form required pursuant to Section 4.14(e).
(g) Not later than forty-five (45) days following the end of each
fiscal quarter of the Issuer's operations prior to the Permitted Merger,
commencing with the quarter ending December 31, 1997, if requested by the
Trustee or the Rating Agencies, the Issuer will deliver to the Trustee and the
Rating Agencies (i) a rent roll, true and complete in all material respects, for
each Mortgaged Property, (ii) a leasing report for each Mortgaged Property and
(iii) a capital expenditure report, in each case in such form as the Trustee or
the Rating Agencies (as the case may be) may reasonably request.
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(h) The Issuer will, at any and all times prior to the Permitted
Merger Date, within a reasonable time after written request by the
Trustee, furnish or cause to be furnished to the Trustee and the Rating
Agencies, in such manner and in such detail as may be reasonably requested
by the requesting party, additional information with respect to the
Mortgaged Properties.
The statements and other information furnished to the Trustee under
this Section 4.14 are to be retained by the Trustee in its files. Copies of such
information pursuant to this Section shall be provided by the Trustee upon
request to the Holders of Securities, or their duly designated representatives
or agents, at the Issuer's sole expense, and the Trustee shall be under no other
duty with respect to the same.
SECTION 4.15. PAYMENT OF TAXES AND OTHER CLAIMS. Prior to the
Permitted Merger, the Partnership will comply with the provisions regarding
payment of taxes contained in each Mortgage, and after the Permitted Merger, the
Issuer will, and will cause each of its Subsidiaries to, pay or discharge or
cause to be paid or discharged, before any fines or penalties are imposed, (a)
all taxes, assessments and governmental charges levied or imposed upon it or
upon its income, profits or property and (b) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a Lien upon its
property; PROVIDED, HOWEVER, that the Issuer shall have the right, at its sole
cost and expense, to contest or object to the amount or validity of any tax,
assessment, charge or claim by appropriate legal proceedings, but such right
shall not be deemed or construed in any way as relieving, modifying or extending
the Issuer's covenant to pay such tax, assessment, charge or claim at the time
and in the manner provided in this Section, unless the Issuer has given prior
written notice to the Trustee of its intent so to contest or object and unless
(i) prior to the Permitted Merger Date, such legal proceedings shall operate
conclusively to prevent the sale or forfeiture of the Mortgaged Properties, or
any part thereof, to satisfy such tax, assessment, charge or claim prior to
final determination of such proceedings and (ii) the Issuer shall furnish a good
and sufficient bond from a surety company with a rating from S&P and Moody's no
lower than "BBB" and "Baa2", respectively, or other security reasonably
satisfactory to the Rating Agencies in the amount of the tax, assessment, charge
or claim which is being contested plus any interest and penalty which may be
imposed thereon and which, prior to the Permitted Merger Date, could become a
Lien against the Mortgaged Properties.
SECTION 4.16. CORPORATE EXISTENCE AND RIGHTS. The Issuer will, and
will cause each of its Subsidiaries to, do or cause to be done all things
necessary to preserve and keep in full force and effect its existence and
franchises; PROVIDED, HOWEVER, that this Section 4.16 shall not prohibit the
Permitted Merger or any other merger permitted by Article Nine.
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SECTION 4.17. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Issuer to the Trustee to take any action
under this Indenture, the Issuer shall furnish to the Trustee:
(1) an Officers' Certificate, in form and substance reasonably
satisfactory to the Trustee, stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with;
(2) upon the reasonable request of the Trustee or the Rating
Agencies, an Opinion of Counsel, in form and substance reasonably
satisfactory to the Trustee, stating that, in the opinion of such counsel,
all such conditions precedent have been complied with; and
(3) a certificate from Independent Accountants if reasonably
requested by the Trustee or the Rating Agencies, in form and substance
acceptable to each requesting party.
SECTION 4.18. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each
certificate or opinion with regard to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that each individual making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he or she
has made such examination or investigation as is necessary to enable him
or her to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 4.19. DEBT SERVICE COVERAGE. (a) From and after the
Permitted Merger, MAALP shall not, and shall not permit any Subsidiary to, incur
any Debt if the Debt Service Coverage Ratio for the four consecutive fiscal
quarters most recently ended prior to the date on which such additional Debt is
to be incurred shall have been less than 1.50 to 1, on a pro forma basis after
giving effect to the incurrence of such Debt and to the application of the
proceeds therefrom, and calculated on the assumption that (i) such Debt and any
other Debt incurred by MAALP or its Subsidiaries since the first day of such
four-quarter period and the application of the proceeds therefrom, including to
refinance other Debt, had occurred at the beginning of such period, (ii) the
repayment or retirement of any other Debt by MAALP or its Subsidiaries since the
first day of such four-quarter period had been incurred, repaid or retired at
the beginning of such period (except that, in making such computation, the
amount of Debt under any revolving credit facility shall be computed based upon
the average daily balance of such Debt during such period), (iii) the income
earned on any increase in Total Assets since the end of such four-quarter
period, including, without limitation, by merger, stock purchase or sale, or
asset purchase or sale, such acquisition or disposition or any related repayment
of Debt had occurred as of the first day of such period with the appropriate
adjustment with respect to such acquisition or disposition being included in
such pro forma calculation.
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(b) If at any time prior to the Permitted Merger Date the Debt
Service Coverage Ratio of the Partnership, as set forth on the Officers'
Certificate delivered pursuant to Section 4.14(c) or otherwise in a notice from
the Issuer to the Trustee, shall be less than 1.30 to 1, the Trustee shall
promptly deliver a Trigger Notice to the agent under the Cash Collateral
Agreement, as provided therein. If at any time after such delivery of a Trigger
Notice the Debt Service Coverage Ratio, as set forth on the Officers'
Certificate delivered pursuant to Section 4.14(c) or otherwise in a notice from
the Issuer to the Trustee, shall be equal to or greater than 1.30 to 1, the
Trustee shall promptly deliver a Termination Notice to the agent under the Cash
Collateral Agreement, as provided therein.
(c) If at any time prior to the Permitted Merger Date the Debt
Service Coverage Ratio of the Partnership shall be less than 1.15 to 1, the
Trustee may, and upon direction from Holders of 25% in principal amount of the
Securities then Outstanding shall, upon ten (10) days' prior written notice to
the Issuer and each property manager of the Mortgaged Properties, terminate or
cause the termination of all such property managers and require the Partnership
to retain a different manager or managers satisfactory to the Trustee or such
Holders; PROVIDED, HOWEVER, that before retaining any such substitute property
manager the Trustee shall have received written confirmation from each Rating
Agency that such substitute manager and any related management agreement will
not, in and of themselves, cause a withdrawal, downgrade or qualification of the
then current rating of the Certificates.
SECTION 4.20. RESTRICTIONS ON PARTNERSHIP. The Partnership shall not
have any Subsidiaries, shall not incur any Debt other than the Securities and
Permitted Encumbrances and shall comply with and shall not amend Article I or II
of its limited partnership agreement.
SECTION 4.21. MAINTENANCE OF PROPERTIES. The Issuer will cause all
of its properties used or useful in the conduct of its business or the business
of any Subsidiary to be maintained and kept in good condition, repair and
working order and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements and improvements thereof, all
as in the judgment of the Issuer may be necessary so that the business carried
on in connection therewith may be properly and advantageously conducted at all
times; PROVIDED, HOWEVER, that nothing in this Section shall prevent MAALP or
any Subsidiary except the Partnership from selling or otherwise disposing for
value of its properties in the ordinary course of its business.
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SECTION 4.22. INSURANCE. Prior to the Permitted Merger, the
Partnership shall comply with the insurance provisions of each Mortgage, and
after the Permitted Merger, the Issuer will, and will cause each of its
Subsidiaries to, keep all of its insurable properties insured against loss or
damage at least equal to their then full insurable value with insurers of
recognized responsibility.
SECTION 4.23. PERMITTED MERGER. Prior to the Permitted Merger Date,
MAALP shall diligently use its best efforts to obtain the ratings specified in
Section 9.02(ii) and to become a reporting company under the Exchange Act. If
such ratings are obtained, MAALP and the Partnership, as the case may be, shall
comply with Sections 9.02(i) and (iii) through (xi) and shall effect the
Permitted Merger.
SECTION 4.24. FURTHER INSTRUMENTS AND ACTS. Upon request of the
Trustee, the Issuer will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
ARTICLE FIVE
EVENTS OF DEFAULT AND REMEDIES
SECTION 5.01. EVENTS OF DEFAULT. An "Event of Default" occurs if:
(1) the Issuer defaults in the payment of interest on any Security
when the same becomes due and payable;
(2) the Issuer defaults in the payment of the principal of or
premium, if any, on any Security when the same becomes due and payable at
its Stated Maturity, upon acceleration or otherwise;
(3) the Partnership consolidates with or merges with or into, or
conveys, transfers or leases all or substantially all its assets to, any
Person in any transaction which is not a Permitted Merger;
(4) the Issuer fails to observe or perform any of its covenants or
agreements contained in Sections 4.02, 4.06, 4.07, 4.08, 4.19(a) or 4.20;
(5) the Issuer fails to observe or perform any of its covenants or
agreements set forth in the Securities or this Indenture (other than those
referred to in clauses (1), (2), (3) or (4) above) and the Default, if
subject to being cured, continues for a period of 30 days after the
earlier of knowledge by the Issuer thereof or notice thereof from the
Trustee to the Issuer; PROVIDED that if such Default is not subject to
being cured within such 30-day period and the Issuer (i) has delivered an
Officers' Certificate to the Trustee (a) certifying that such Default is
reasonably subject to cure and that the Issuer has commenced such cure and
(b) setting forth those actions the Issuer has taken and will take to
pursue such cure and (ii) pursues such cure diligently to completion, then
such 30-day period shall be extended for an additional period of 60 days;
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(6) following the Permitted Merger Date, MAALP defaults under any
indebtedness for money borrowed by MAALP if (A) such default either (i)
results from the failure to pay the principal of any such indebtedness at
its stated maturity or (ii) relates to an obligation other than the
obligation to pay the principal of such indebtedness at its stated
maturity and results in such indebtedness becoming or being declared due
and payable prior to the date on which it would otherwise have become due
and payable, (B) the principal amount of such indebtedness, together with
the principal amount of any other such indebtedness in default for failure
to pay principal at stated maturity or the maturity of which has been so
accelerated, aggregates $1,000,000 or more at any one time outstanding and
(C) such indebtedness is not discharged, or such acceleration is not
rescinded or annulled, within ten (10) Business Days after written notice
to the Issuer by the Trustee or to the Issuer and the Trustee by the
Holders of at least 25% in principal amount of the Securities then
Outstanding;
(7) the Issuer or any of its Subsidiaries pursuant to or within the
meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in
an involuntary case;
(C) consents to the appointment of a Custodian of it or for
any substantial part of its property; or
(D) makes a general assignment for the benefit of its
creditors; or takes any comparable action under any foreign laws
relating to insolvency;
(8) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Issuer or any of its
Subsidiaries in an involuntary case;
(B) appoints a Custodian of the Issuer or any of its
Subsidiaries or for any substantial part of their respective property;
or
(C) orders the winding up or liquidation of the Issuer or any
of its Subsidiaries;
or any similar relief is granted under any foreign laws and the order or
decree remains unstayed and in effect for 60 days;
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(9) an "Event of Default" as defined in any Security Document shall
have occurred and be continuing;
(10) any representation, warranty or other statement made by or on
behalf of the Issuer set forth in this Indenture, any other Security
Document or any other instrument included in the Trust Estate or in any
certificate, demand or request delivered to the Trustee or any Holder of
Securities pursuant to this Indenture, any Security Document or any other
instrument included in the Trust Estate, or by or on behalf of MAALP set
forth in the Contribution Agreement, shall prove to have been false or
misleading in any material respect as of the date when made;
(11) any judgment or decree for the payment of money in excess of
$100,000 not covered by insurance is rendered against the Issuer or any of
its Subsidiaries and is not discharged and either (A) an enforcement
proceeding has been commenced by any creditor upon such judgment or decree
or (B) there is a period of 60 days following such judgment or decree
during which such judgment or decree is not discharged, waived or the
execution thereof stayed; or
(12) the general partner of the Partnership fails to comply with
Article 3 or 9 of its charter.
The foregoing will constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or other order, rule or regulation of any administrative or governmental
body.
It is understood and agreed that no failure of the Issuer to
maintain the Debt Service Coverage Ratio specified in Section 4.19(b) or (c)
shall constitute a Default or Event of Default hereunder.
The Issuer shall deliver to the Trustee, within thirty (30) days
after the occurrence thereof, written notice in the form of an Officers'
Certificate of any Default hereunder, its status and what action the Issuer is
taking or proposes to take with respect thereto.
SECTION 5.02. ACCELERATION. If an Event of Default (other than an
Event of Default specified in Section 5.01(7) or (8) with respect to the Issuer)
occurs and is continuing, the Trustee by notice to the Issuer, or the Holders of
at least 25% in principal amount of the Securities by notice to the Issuer and
the Trustee, may declare the principal of and accrued interest on all the
Securities and all other amounts due hereunder or thereunder to be due and
payable; PROVIDED that upon the occurrence of an Event of Default described in
clause (7) or (8) of Section 5.01, the principal of and accrued interest on all
of the Securities shall automatically become due and payable, without
presentment, demand or other requirements of any kind, all of which are hereby
expressly waived by the Issuer. Upon such a declaration, such principal,
interest and all other amounts due under the Securities in this Indenture shall
be due and payable immediately.
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The Holders of a majority in principal amount of the Securities by
notice to the Trustee may rescind an acceleration and its consequences if (i)
the rescission would not conflict with any judgment or decree, (ii) no amounts
have been paid to the Holders as principal, interest, or premium, if any, on the
Securities as a result of such acceleration, (iii) all existing Events of
Default have been cured or waived except nonpayment of principal or interest
that has become due solely because of acceleration and (iv) all costs and
expenses incurred by the Trustee prior to such waiver have been reimbursed to
the Trustee.
SECTION 5.03. OTHER REMEDIES. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture. If the Trustee or an agent on
its behalf purchases any Mortgaged Property at a foreclosure or trustee's sale
by bidding any of or all the amounts outstanding under the Securities, then such
principal, premium, if any, interest and other amounts outstanding under the
Securities (in an aggregate amount equal to the amount bid by the Trustee or an
agent on its behalf) as are specified by the Trustee shall be deemed to be
satisfied and discharged concurrently with such purchase.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Holder of Securities in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
The Trustee shall not commence foreclosure on any Mortgaged Property
unless a Phase I (and, if appropriate, a Phase II) environmental site assessment
of such Mortgaged Property is conducted at the expense of the Issuer, and no
material environmental liabilities or potential liabilities are detected
thereby.
SECTION 5.04. WAIVER OF PAST DEFAULTS. Subject to Section 8.02 and
upon payment to the Trustee of all costs and expenses incurred by the Trustee in
connection with an existing Default or Event of Default, the Holders of a
majority in principal amount of the Securities by notice to the Trustee may
waive an existing Default or Event of Default and its consequences except (a) an
Event of Default in the payment of the principal of or premium, if any, or
interest on a Security, (b) an Event of Default depriving the Trustee or any
Holder of a Lien upon any of the Mortgaged Properties or other property included
in the Trust Estate or (c) an Event of Default in respect of any covenant or
provision of this Indenture that under Section 8.02 cannot be amended or
modified without the consent of the Holder of each Security affected thereby.
When a Default is waived, it is deemed cured, but no such waiver shall extend to
any subsequent or other Default or Event of Default or impair any consequent
right
SECTION 5.05. CONTROL BY MAJORITY. The Holders of a majority in
principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
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exercising any trust or power conferred on it. However, the Trustee may refuse
to follow any direction that conflicts with law or this Indenture or that the
Trustee determines is unduly prejudicial to the rights of other Securityholders
or would involve the Trustee in personal liability or for which the Trustee has
failed to receive reasonable security or indemnity.
SECTION 5.06. LIMITATION ON SUITS. A Holder of Securities may not
pursue any remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the
Securities make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security
or indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within sixty (60)
days after receipt of the request and the offer of security or indemnity;
and
(5) the Holders of a majority of principal amount of the Securities
do not give the Trustee a direction inconsistent with the request during
such 60-day period.
A Holder of Securities may not use this Indenture to prejudice the
rights of another Holder or to obtain a preference or priority over another
Holder.
SECTION 5.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding
any other provision of this Indenture, the right of any Holder to receive
payment of principal of and interest on the Securities held by such Holder, on
or after the respective due dates expressed in the Securities, or to bring suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.
SECTION 5.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default in
payment of interest, premium, if any, or principal specified in Section 5.01(l)
or (2) occurs and is continuing, the Trustee may recover judgment in its own
name and as trustee of an express trust against the Issuer for the whole amount
of principal and interest remaining unpaid and the amounts provided for in
Section 7.07.
SECTION 5.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee or an
agent on its behalf may file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee and
the Securityholders allowed in any judicial proceedings relative to the Issuer,
its creditors or its property and, unless prohibited by law or applicable
regulations, may vote on behalf of the Holders in any election of a trustee in
bankruptcy or other Person performing similar functions, and any Custodian in
any such judicial proceeding is hereby authorized by each Holder to make
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payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any other amounts due
the Trustee under Section 7.07.
SECTION 5.10. PRIORITIES. If the Trustee collects any money pursuant
to this Article, it shall pay out the money in the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: as set forth in clauses FIRST, SECOND, THIRD, FOURTH and
FIFTH of Section 7.14, in such order of priority;
THIRD: to the payment of any remaining Obligations; and
FOURTH: to the payment of the remainder, if any, to the Issuer, its
successors or assigns or to whomsoever may be lawfully entitled to receive the
same, or as a court of competent jurisdiction may determine.
The Trustee may fix a record date and payment date for any payment
to Securityholders pursuant to this Section. At least 15 days before such record
date, the Issuer shall mail to each Securityholder a notice that states the
record date, the payment date and amount to be paid.
SECTION 5.11. UNDERTAKING FOR COSTS. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 5.07 or a suit by Holders of
more than 10% in principal amount of the Securities.
SECTION 5.12. WAIVER OF STAY OR EXTENSION LAWS. The Issuer (to the
extent it may lawfully do so) shall not at any time insist upon, or plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and the Issuer (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and shall not hinder, delay or impede the execution
of any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law had been enacted.
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ARTICLE SIX .
DISCHARGE OF INDENTURE; DEFEASANCE .
SECTION 6.01. DISCHARGE OF LIABILITY ON SECURITIES; DEFEASANCE. (a)
When (i) the Issuer delivers to the Trustee all Outstanding Securities (other
than Securities replaced pursuant to Section 2.07) for cancellation or (ii) all
Outstanding Securities have become due and payable and the Issuer irrevocably
deposits with the Trustee funds sufficient to pay at maturity all Outstanding
Securities, including interest thereon (other than Securities replaced pursuant
to Section 2.07) and if in either case the Issuer pays all other Obligations,
then this Indenture shall, subject to Sections 6.01(c) and 6.06, cease to be of
further effect. The Trustee shall acknowledge satisfaction and discharge of this
Indenture on demand of the Issuer (accompanied by an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent to such
satisfaction and discharge have been met pursuant to this Indenture and
applicable law) and at the cost and expense of the Issuer.
(b) Subject to Sections 6.01(c), 6.02, 6.06 and 7.07, the Issuer at
any time may terminate (i) all its obligations under the Securities and this
Indenture ("legal defeasance option") or (ii) its obligations with respect to
the Securities under Sections 4.01, 4.02, 4.03, 4.05, 4.06, 4.07, 4.08, 4.09,
4.14 (with respect to clauses (a), (c), (d)(ii) through (d)(iv), and (e) through
(h)), 4.15, 4.20, 4.21, 4.22 and 4.23 and Article Nine and the operation of
Sections 5.01(3), 5.01(4), 5.01(5) (with respect to those provisions of Article
Four cited in this clause (ii)), 5.01(6), 5.01(7) (with respect to any
Subsidiary), 5.01(8) (with respect to any Subsidiary), 5.01(10), 5.01(11) and
5.01(12) ("covenant defeasance option"). The Issuer may exercise its legal
defeasance option notwithstanding its prior exercise of its covenant defeasance
option.
If the Issuer exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the Issuer
exercises its covenant defeasance option, payment of the Securities may not be
accelerated because of an Event of Default specified in Sections 5.01(3),
5.01(4), 5.01(5) (with respect to those provisions of Article Four cited in
clause (ii) above), 5.01(6), 5.01(7) (with respect to any Subsidiary), 5.01(8)
(with respect to any Subsidiary), 5.01(10), 5.01(11) or 5.01(12) or because of
the failure of the Issuer to comply with Article Nine.
Upon satisfaction of the conditions set forth herein and upon
request of the Issuer, the Trustee shall acknowledge in writing the discharge of
those obligations that the Issuer terminates and prior to the Permitted Merger
Date shall, at the expense of the Issuer, execute such documents prepared by the
Issuer causing the Liens created by the Security Documents and this Indenture to
be released.
(c) Notwithstanding clauses (a) and (b) above, the Issuer's
obligations in Sections 2.06, 2.07, 2.09, 4.10, 4.11, 4.12, 4.13, 4.14 (with
respect to clauses (b) and (d)(i)), 4.17, 4.18, 6.04, 6.05, 6.06, 7.07 and 7.08
shall survive until the Securities have been paid in full. Thereafter, the
Issuer's obligations in Sections 6.04, 6.05 and 7.07 shall survive.
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SECTION 6.02. CONDITIONS TO DEFEASANCE. The Issuer may exercise its
legal defeasance option or its covenant defeasance option only if:
(1) the Issuer irrevocably deposits in trust with the Trustee Cash
or U.S. Government Obligations for the payment of principal of, premium (if any)
and interest on, the Securities to the date of maturity or redemption, as the
case may be;
(2) the Issuer delivers to the Trustee a certificate from
Independent Accountants expressing their opinion that the payments of principal
and interest when due and without reinvestment on the deposited U.S. Government
Obligations plus any deposited Cash without investment will provide Cash at such
times and in such amounts (but, in the case of the legal defeasance option only,
not more than such amounts) as will be sufficient to pay principal and interest
when due on all Securities to maturity;
(3) 123 days pass after the deposit is made and during the 123-day
period no Default specified in Section 5.01(7) or (8) with respect to the Issuer
occurs which is continuing at the end of the period;
(4) no Default has occurred and is continuing on the date of such
deposit and after giving effect thereto;
(5) the deposit does not constitute a default under any other
agreement binding on the Issuer;
(6) the Issuer delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, and is not
required to be registered as, an investment company under the Investment Company
Act of 1940, as amended, and that the Trustee has a perfected first priority
security interest in the Cash and/or U.S. Governmental Obligations deposited
pursuant to Section 6.02(1);
(7) in the case of the legal defeasance option, the Issuer shall
have delivered to the Trustee an Opinion of Counsel stating that (i) the Issuer
has received from, or there has been published by, the Internal Revenue Service
a ruling, or (ii) since the date of this Indenture there has been a change in
applicable Federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of Securities
will not recognize income, gain or loss for Federal income tax purposes as a
result of such defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same time as would have been the case if
such defeasance had not occurred;
(8) in the case of the covenant defeasance option, the Issuer shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of Securities will not recognize income, gain or loss for Federal income
tax purposes as a result of such covenant defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the same time
as would have been the case if such covenant defeasance had not occurred;
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(9) the Rating Agencies have each provided written confirmation that
such defeasance will not, in and of itself, cause the withdrawal, downgrade or
qualification of any rating of the Securities or (after the Permitted Merger
Date) the unsecured debt of MAALP; and
(10) the Issuer delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Securities as contemplated by this Article 6
have been complied with.
SECTION 6.03. APPLICATION OF TRUST MONEY. The Trustee shall hold in
trust Cash or U.S. Government Obligations deposited with it pursuant to this
Article 6. It shall apply the deposited Cash and the Cash from U.S. Government
obligations through the paying agent and in accordance with this Indenture to
the payment of principal of and interest on the Securities.
SECTION 6.04. REPAYMENT TO ISSUER. The Trustee and the paying agent
shall promptly turn over to the Issuer upon request any excess Cash or
securities held by them pursuant to this Article Six. Subject to any applicable
abandoned property law, the Trustee and the paying agent shall pay to the Issuer
upon request any Cash held by them for the payment of principal or interest that
remains unclaimed for two years, and, thereafter, Holders of Securities entitled
to the Cash must look to the Issuer for payment as general creditors.
SECTION 6.05. INDEMNITY FOR GOVERNMENT OBLIGATIONS. The Issuer shall
pay and shall indemnify the Trustee against any tax, fee or other charge imposed
on or assessed against deposited U.S. Government Obligations or the principal
and interest received on such U.S. Government Obligations.
SECTION 6.06. REINSTATEMENT. If the Trustee or paying agent is
unable to apply any Cash or U.S. Government Obligations in accordance with this
Article 6 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Issuer's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article 6 until such time as the Trustee
or paying agent is permitted to apply all such Cash or U.S. Government
obligations in accordance with this Article 6; PROVIDED, HOWEVER, that, if the
Issuer has made any payment of interest on or principal of any Securities
because of the reinstatement of its obligations, the Issuer shall be subrogated
to the rights of the Holders of such Securities to receive such payment from the
Cash or U.S. Government Obligations held by the Trustee or paying agent.
ARTICLE SEVEN
CONCERNING THE TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default of which
a Trust Officer has actual knowledge has occurred and is continuing, the Trustee
shall exercise its rights and powers and use the same degree of care and skill
in its exercise as a prudent Person would exercise or use under the
circumstances in the conduct of such Person's own affairs.
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(b) Except during the continuance of an Event of Default of which a
Trust Officer has actual knowledge:
(1) the Trustee need perform only those duties that are specifically
set forth in this Indenture and the Security Documents and no others and
no implied covenants or obligations shall be read into this Indenture and
the other Security Documents against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform on their face to the requirements of
this Indenture and the other Security Documents to the extent expressly
set forth herein and therein.
(3) following the Permitted Merger Date, the Trustee shall not be
required to perform any of its duties required to be performed pursuant to
the provisions of the Security Documents with respect to which the Lien
has been released pursuant to Section 9.03.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b) of
this Section;
(2) the Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 5.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree with the Issuer.
(f) No provision of this Indenture or the other Security Documents
shall require the Trustee to pay any Advances, expend or risk its own
funds or otherwise incur any financial liability in the performance of its
duties hereunder and thereunder, or in the exercise of any of its rights
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and powers, if it believes that repayment of such Advances or funds or
adequate indemnity against such risk or liability is not assured to it.
SECTION 7.02. RIGHTS OF TRUSTEE. (a) The Trustee may rely and shall
be protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, note or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel to the effect that it is
authorized to act or refrain from acting.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers, PROVIDED that the Trustee's conduct does not constitute negligence or
bad faith.
(e) Any request or direction of the Issuer mentioned herein shall be
sufficiently evidenced by an Issuer Order.
(f) Whenever in the administration of this Indenture and the other
Security Documents the Trustee shall deem it desirable that a matter be proved
or established prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may, in the
absence of bad faith on its part, rely upon a certificate executed by an Officer
of the appropriate Person or an Opinion of Counsel.
(g) The Trustee shall be under no obligation to exercise any of the
rights or power vested in it by this Indenture or to honor the request or
direction of any of the Holders pursuant to this Indenture, unless such Holders
shall have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities that might be incurred by it in compliance with
such request or direction.
(h) The Trust shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, note or other
paper or document provided to it in accordance with the provisions of this
Indenture, PROVIDED, HOWEVER, that the Trustee shall examine such certificates
and opinions to determine whether or not such certificates and opinions conform
to the requirements of this Indenture to the extent set forth herein; and
PROVIDED, FURTHER, that the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit and, if
the Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the Issuer,
personally or by agent or attorney, upon reasonable advance written notice, with
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such examination to be conducted during the Issuer's normal business hours and
in a manner that does not unreasonably interfere with the Issuer's conduct of
its affairs, and the Trustee's costs of any such examination shall be borne by
the Issuer or, if requested by one or more Holders, then by the Holder(s)
requesting that such examination be made.
(i) The Trustee shall have no liability or responsibility for any
actions or omissions to act of the Issuer or any other Person.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Issuer or its Affiliates with the same rights it
would have if it were not Trustee. Any paying agent, Security Registrar or
Security Co-Registrar may do the same with like rights. However, the Trustee
must comply with Sections 7.10 and 7.11.
SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee makes no
representation as to the validity, adequacy or enforceability of this Indenture,
the Securities or any of the Security Documents or the perfection or priority of
any security interest granted by this Indenture or the Security Documents, or as
to the value, title, condition, fitness for use of, or maintenance or
sufficiency of insurance on, or otherwise with respect to, any tangible property
or any substitute therefor included within the Trust Estate. The Trustee, shall
not be accountable for the Issuer's use of the proceeds from the Securities, and
it shall not be responsible for any statement in the Securities other than its
certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS. If a Default or an Event of
Default occurs and is continuing and is actually known to a Trust Officer, the
Trustee shall mail to each Holder of Securities notice of the Default or Event
of Default within 30 days after it occurs. Except in the case of a Default in
payment of principal of, premium (if any) or interest on any Security, the
Trustee may withhold the notice if and so long as the Trustee in good faith
determines that withholding the notice is in the interests of Holders of
Securities. The Trustee shall not be deemed to have knowledge of any Default or
Event of Default except (i) any Event of Default occurring pursuant to Section
5.01(l) or Section 5.01(2) of this Indenture, if the Trustee is then acting as
paying agent, or (ii) any Default or Event of Default of which a Trust Officer
shall have received written notification indicating that an event exists which
is a Default or an Event of Default or concerning which a Trust Officer has
obtained actual knowledge, and such notification shall not be deemed to include
receipt of information contained in any report or other document furnished under
Section 4.05 of this Indenture.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. As promptly as
practicable after each May 15 beginning with the May 15 following the date
hereof, and in any event prior to July 15 in each year and within 12 months from
the date the prior report hereunder was transmitted to the Holders of
Securities, the Trustee shall mail to each Holder of Securities in accordance
with TIAss.313(c), a brief report dated as of May 15 that complies with
TIAss.313(a). The Trustee also shall comply with TIAss. 313(b).
A copy of each such report at the time of its mailing to Holders of
Securities shall be filed by the Issuer with the SEC and each stock exchange on
which the Securities are listed. The Issuer agrees to notify the Trustee
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promptly whenever the Securities become listed on any stock exchange and of any
delisting thereof.
SECTION 7.07. COMPENSATION AND INDEMNITY. The Issuer shall pay to
the Trustee monthly a trustee fee mutually agreed upon as reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Issuer shall
reimburse the Trustee promptly upon request for all reasonable out-of-pocket
expenses incurred by it in connection with the administration of this trust and
the performance of its duties hereunder and under any other Security Documents,
including the reasonable compensation and expenses of the Trustee's agents and
counsel and the cost of any environmental site assessments referred to in the
third paragraph of Section 5.03. The Issuer shall indemnify the Trustee, making
payment on a current basis, against any loss, liability or expense (including
reasonable attorneys' fees and the cost of any environmental site assessments
referred to in the third paragraph of Section 5.03) incurred by it (unless such
loss, liability or expense is determined in a final non-appealable judgment to
have been incurred due to the Trustee's bad faith or negligence) in connection
with the administration of this trust and the performance of its duties
hereunder and under the other Security Documents. The Trustee shall notify the
Issuer promptly of any claim for which it may seek indemnity but its failure to
do so shall not affect the Trustee's right to indemnification hereunder.
To secure the Issuer's payment obligations in this Section and
Section 7.14, the Trustee shall have a Lien prior to (i) the lien of the
Securities and (ii) all other liens, if any, on all Cash or property held or
collected by the Trustee.
The Issuer's payment obligations pursuant to this Section shall
survive the discharge of this Indenture. When the Trustee incurs expenses after
the occurrence of an Event of Default specified in subsection 5.01(7) or (8),
the expenses are intended to constitute expenses of administration under the
Bankruptcy Law.
SECTION 7.08. REPLACEMENT OF TRUSTEE. The Trustee may resign by so
notifying the Issuer. The Holders of a majority in principal amount of the
Securities may remove the Trustee by so notifying the removed Trustee and paying
to the removed Trustee all fees, costs and other expenses (including
indemnification payments and reimbursements of Advances (if any) owed to the
Trustee hereunder) and may appoint a successor Trustee. The Issuer may remove
the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee otherwise becomes incapable of acting.
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If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, then, unless the Holders of Securities have
appointed a successor Trustee as provided above, the Issuer shall promptly
appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuer. Immediately after
receiving such acceptance, the retiring Trustee shall, upon the payment of all
fees, costs and expenses (including indemnification payments and reimbursement
of Advances), if any, owed to it hereunder, transfer all property held by it as
Trustee to the successor Trustee, subject to the Lien provided for in Section
7.07, the resignation or removal of the retiring Trustee shall then become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. A successor Trustee shall mail
notice of its succession to each Holder of Securities.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuer or the
Holders of a majority in principal amount of the Securities may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder of
Securities may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation, the
resulting, surviving or transferee corporation, without any further act, shall
be the successor Trustee.
SECTION 7.10. ELIGIBILITY: DISQUALIFICATION. The Trustee shall at
all times satisfy the requirements of TIAss.ss.310(a)(1) and (a)(5). The Trustee
shall have a combined capital and surplus of at least $100,000,000 as set forth
in its most recent published annual report of condition. The Trustee shall
comply with TIAss.310(b) during the period of time required thereby.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER. The
Trustee shall comply with TIAss.311(a), excluding any creditor relationship
listed in TIAss.311(b). A Trustee who has resigned or been removed shall be
subject to TIAss.311(a) to the extent indicated therein.
SECTION 7.12. SEPARATE AND CO-TRUSTEES.
(a) If at any time the Trustee shall deem it necessary for the
purpose of meeting legal requirements applicable to it in the performance of its
duties as mortgagee, trustee or beneficiary (or similar capacity) under any of
the Mortgages, the Trustee shall have the power to appoint one or more Persons
to act as separate trustees or co-trustees thereunder, jointly with the Trustee,
except as set forth in subsection (b)(1), of any of the Mortgaged Properties
subject to the Lien thereof, and any such Persons shall be such separate trustee
or co-trustee, with such powers and duties consistent with the Mortgages and
this Indenture as shall be specified in the instrument appointing him, her or
it. If the Trustee shall request the Issuer so to do, the Issuer shall join with
the Trustee in the execution of such instrument, but the Trustee shall have the
power to make such appointment without making such request.
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(b) Every separate trustee and co-trustee shall, to the extent not
prohibited by law, be subject to the following terms and conditions:
(1) the rights, powers, duties and obligations conferred or imposed
upon such separate or co-trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate or co-trustee
jointly, as shall be provided in the instrument appointing him or it,
except to the extent that under any law of any jurisdiction in which any
particular act is to be performed any nonresident trustee shall be
incompetent or unqualified to perform such act, in which event such
rights, powers, duties and obligations shall be exercised and performed by
such separate trustee or co-trustee;
(2) all powers, duties, obligations and rights conferred upon the
Trustee in respect of the custody of all cash deposited hereunder or under
the Cash Collateral Agreement or the Mortgages, shall be exercised solely
by the Trustee; and
(3) the Trustee may at any time by written instrument accept the
resignation of or remove any such separate trustee or co-trustee, and upon
the request of the Trustee, the Issuer shall join with the Trustee in the
execution, delivery and performance of all instruments and agreements
necessary or proper to make effective such resignation or removal, but the
Trustee shall have the power to accept such resignation or to make such
removal without making such request. A successor to a separate trustee or
co-trustee so resigning or removed may be appointed in the manner
otherwise provided herein.
(c) Such separate trustee or co-trustee, upon acceptance of such
trust, shall be vested with the estates or property specified in such
instrument, either jointly with the Trustee, or separately, as may be provided
therein, subject to all the trusts, conditions and provisions of the Mortgages;
and every such instrument shall be filed with the Trustee. Any separate trustee
or co-trustee may, at any time, by written instrument constitute the Trustee his
agent or attorney-in-fact with full power and authority, to the extent permitted
by law, to do all acts and things and exercise all discretion authorized or
permitted by him, for and in his behalf and in his name. If any separate trustee
or co-trustee shall be dissolved, become incapable of acting, resign, be removed
or die, all the estates, property, rights, powers, trusts, duties and
obligations of said separate trustee or co-trustee, so far as permitted by law,
shall vest in and be exercised by the Trustee, without the appointment of a
successor to said separate trustee or co-trustee, until the appointment of a
successor to said co-trustee is necessary as provided in this Section.
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(d) Any notice, request or other writing, by or on behalf of any
Holder delivered to the Trustee shall be deemed to have been delivered to all
separate trustees and co-trustees.
(e) No trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder.
SECTION 7.13. SERVICER. Upon the occurrence of an Event of Default
or any event requiring the Trustee to exercise any discretion to give its
consent or to act or refrain from acting under any Mortgage or other Security
Document, in any case prior to the Permitted Merger Date, the Trustee may, and
at the direction of the Holders of 25% or more in principal amount of Securities
Outstanding shall, appoint a servicer at the expense of the Issuer to act on
behalf of the Trustee hereunder and under such other Security Documents. Any
Servicer appointed pursuant to this Section shall be a Qualified Servicer,
PROVIDED that, the Trustee shall have no liability (a) for any loss, liability,
cost or other expense incurred in connection with the Trustee's performance or
failure to perform under the Security Documents resulting from the Trustee's
failure (after good-faith efforts) to appoint a Servicer that meets the
definition of Qualified Servicer and is willing to enter into the Servicing
Agreement or (b) for any action or failure to act of a Qualified Servicer.
SECTION 7.14. ADVANCES. Prior to the Permitted Merger Date, the
Trustee shall make any Advances as and to the extent that (a) payments for which
Advances are made have not been made by the Issuer as required and (b) the
Trustee determines in its sole discretion that such Advances would be ultimately
recoverable from amounts on deposit in the Operating Account or otherwise from
the Issuer. The Trustee shall be entitled to the reimbursement of any
outstanding Advances made by it, together with interest thereon at the Advance
Rate, and the Issuer hereby covenants and agrees promptly to reimburse the
Trustee therefor. Prior to the Permitted Merger Date, the Trustee may make
withdrawals from the Operating Account to reimburse Advances as provided in
Paragraph 3(p) of the Cash Collateral Agreement.
SECTION 7.15 PRIORITIES OF PAYMENT. The Trustee shall apply any
amounts received pursuant to this Indenture (except for amounts due under
Section 7.07 and timely paid), including, without limitation, any amounts
deposited by the Issuer pursuant to Section 4.04 and any amounts in the
Operating Account or any other Account, in the following order:
FIRST: to reimburse the Trustee for any unreimbursed Advances, plus
interest thereon at the Advance Rate;
SECOND: to make payments from the Accounts, if any, as required by
the Cash Collateral Agreement;
THIRD: to make Monthly Payments;
FOURTH: to make payments of principal on the Bonds, to the extent
that any such payments are then due and owing;
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FIFTH: to make payments of Deferred Interest on the Bonds, to the
extent that any such payments are then due and owning; and
SIXTH: to pay any other amounts due and owing hereunder;
PROVIDED, HOWEVER, that any amounts collected by the Trustee pursuant to Article
Five shall be paid out as provided in Section 5.10.
SECTION 7.16. ERRORS AND OMISSIONS INSURANCE. The Trustee shall keep
in force during the term of this Indenture a policy or policies of insurance
covering loss occasioned by the errors and omissions of its officers and
employees in connection with its obligations hereunder in customary form and
amounts issued by an insurer or insurers with a claims-paying ability acceptable
to the Rating Agencies.
ARTICLE EIGHT
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 8.01. AMENDMENTS AND SUPPLEMENTAL INDENTURES WITHOUT CONSENT
OF HOLDERS. Without the consent of any Holders of Securities, the Issuer, when
authorized by or pursuant to a Board Resolution, and the Trustee, at any time
and from time to time, may enter into one or more amendments hereof or
indentures supplemental hereto, in form satisfactory to the Trustee, for any of
the following purposes:
(a) to evidence the succession of another Person to the Issuer
pursuant to the terms hereof and the assumption by any such successor of the
covenants of the Issuer herein and in the Securities contained; or
(b) to add to the covenants of the Issuer for the benefit of the
Holders of all or any of the Securities or to surrender any right or power
herein conferred upon the Issuer; or
(c) to add any additional Events of Default for the benefit of the
Holders of all or any of the Securities; PROVIDED, HOWEVER, that in respect of
any such additional Events of Default such amendment or supplemental indenture
may provide for a particular period of grace after default (which period may be
shorter or longer than that allowed in the case of other defaults) or may
provide for an immediate enforcement upon such default or may limit the remedies
available to the Trustee upon such default or may limit the right of the Holders
of a majority in aggregate principal amount of the Securities; or
(d) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee as provided in Section 7.08; or
(e) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision herein,
or to make any other provisions with respect to matters or questions arising
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under this Indenture which shall not be inconsistent with the provisions of this
Indenture, PROVIDED such provisions shall not adversely affect the interests of
the Holders of Securities in any material respect; or --------
(f) to supplement any of the provisions of this Indenture to such
extent as shall be necessary to permit or facilitate the defeasance and
discharge of the Securities pursuant to Section 6.01 and subject to the
conditions set forth in Section 6.02; PROVIDED that any such action shall not
adversely affect the interests of the Holders of Securities in any material
respect.
SECTION 8.02. AMENDMENTS AND SUPPLEMENTAL INDENTURES WITH CONSENT OF
HOLDERS. With the consent of the Holders of not less than a majority in
principal amount of all Outstanding Securities affected by such amendment or
supplemental indenture, the Issuer, when authorized by or pursuant to a Board
Resolution, and the Trustee may enter into one or more amendments hereof or
indentures supplemental hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture or
of modifying in any manner the rights of the Holders of Securities under this
Indenture; PROVIDED, HOWEVER, that no such amendment or supplemental indenture
shall be entered into unless the Trustee has received written confirmation from
each of the Rating Agencies that such action will not, in and of itself, cause
the withdrawal, downgrade or qualification of the then current rating of the
First Mortgage Bonds or (after the Permitted Merger Date) the unsecured debt of
MAALP; and PROVIDED, FURTHER, that no such amendment or supplemental indenture
shall, without the consent of the Holder of each Outstanding Security affected
thereby:
(1) reduce the amount of Securities whose Holders must consent to an
amendment, supplement or waiver;
(2) reduce the rate of or extend the time for payment of interest on
any Security;
(3) reduce the principal of or extend the fixed maturity of any
Security;
(4) reduce the premium payable on any Security;
(5) make any Security payable in money other than that stated in the
Security;
(6) make any change in Section 5.04 or 5.07 or this Section;
(7) waive any Default in the payment of principal of or interest on
any Security, or any Event of Default depriving the Trustee or any Holder of a
Lien upon any of the Mortgaged Properties included in the Trust Estate; or
(8) release any property from the Lien of the Mortgages except in
accordance with the terms thereof and of this Indenture.
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It shall not be necessary for the consent of the Holders of the
Securities under this Section 8.02 to approve the particular form of any
proposed amendment or supplement, but it shall be sufficient if such consent
shall approve the substance thereof.
After an amendment or supplement under this Section becomes
effective, the Issuer shall mail to Holders a notice briefly describing such
amendment or supplement. The failure to mail such notice to all Holders shall
not affect the validity of an amendment or supplement under this Section.
SECTION 8.03. COMPLIANCE WITH TRUST INDENTURE. Every amendment to or
supplement of this Indenture or the Securities shall comply with the TIA as then
in effect as evidenced by an Opinion of Counsel delivered to the Trustee at the
expense of the Issuer.
SECTION 8.04. REVOCATION AND EFFECT OF CONSENTS. A consent to an
amendment, supplement or waiver by a Holder of a Security shall bind such Holder
and every subsequent Holder of that Security or portion of the Security that
evidences the same debt as the consenting Holder's Security, even if notation of
the consent is not made on the Security. However, any such Holder or subsequent
Holder may revoke the consent as to such Holder's Security or portion of the
Security if the Trustee receives the notice of revocation before the date the
amendment, supplement or waiver becomes effective. After an amendment,
supplement or waiver becomes effective, it shall bind every Holder unless it
makes a change described in clauses (1) through (6) and the first subclause of
clause (7) of Section 8.02. In that case the amendment, supplement or waiver
shall bind each Holder of a Security who has consented to it and every
subsequent Holder of a Security or portion of a Security that evidences the same
Debt as the consenting Holder's Security.
The Issuer may, but shall not be obligated to, fix a record date for
the purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who are Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consents shall be valid or effective for more than 120
days after such record date.
SECTION 8.05. NOTATION ON OR EXCHANGE OF SECURITIES. If an
amendment, supplement or waiver changes the terms of a Security, the Issuer may
direct the Trustee to require the Holder of the Security to deliver it to the
Trustee. The Trustee may place an appropriate notation on the Security regarding
the changed terms and return it to the Holder. Alternatively, if the Issuer so
determines, the Issuer in exchange for the Security shall issue and the Trustee
shall authenticate a new Security that reflects the changed terms.
SECTION 8.06. TRUSTEE TO SIGN AMENDMENTS. The Trustee shall sign any
amendment, supplement or waiver authorized pursuant to this Article if the
amendment, supplement or waiver does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. If it does, the Trustee may but need
not sign it. In signing such amendment, supplement or waiver the Trustee shall
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be entitled to receive, and shall be fully protected in relying upon, an
Officers' Certificate and an Opinion of Counsel stating that such amendment,
supplement or waiver is authorized or permitted by this Indenture.
SECTION 8.07. EFFECT OF AMENDMENTS AND SUPPLEMENTAL INDENTURES. Upon
the execution of any amendment or supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such amendment or
supplemental indenture shall form a part of this Indenture for all purposes; and
every Holder of Securities theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
SECTION 8.08. WAIVER OF COMPLIANCE BY HOLDERS. Anything in this
Indenture to the contrary notwithstanding, any of the acts which the Issuer is
required to do or is prohibited from doing by any of the provisions of this
Indenture may, to the extent that such provisions might be changed or eliminated
by a supplemental indenture pursuant to Section 8.02 hereof upon consent of the
Holders of a majority in aggregate principal amount of the Securities at the
time Outstanding, be omitted or done by the Issuer if there is obtained the
prior written consent thereto of the Holders of a majority of the aggregate
principal amount of the Securities at the time Outstanding, or the prior written
waiver of compliance with any such provision or provisions signed by such
Holders. The Issuer agrees promptly to file with the Trustee a duplicate
original of each such consent or waiver.
ARTICLE NINE
PERMITTED MERGER AND RELEASE OF PORTION OF TRUST ESTATE
SECTION 9.01. WHEN ISSUER MAY MERGE. The Partnership shall not
consolidate with or merge with or into, or convey, transfer or lease all or
substantially all its assets to, any Person, except in compliance with, and upon
satisfaction of the conditions set forth in Sections 9.02 through 9.04 (a
"PERMITTED MERGER"). After the Permitted Merger Date, MAALP shall not
consolidate with or merge with or into, or convey, transfer or lease all or
substantially all its assets to, any Person, except in compliance with Sections
9.05 through 9.07.
SECTION 9.02. CONDITIONS PRECEDENT TO PERMITTED MERGER. The
Partnership may merge with and into MAALP, with MAALP as the surviving
partnership, upon satisfaction of the following conditions:
(i) no Default or Event of Default shall exist hereunder;
(ii) MAALP shall have obtained a rating by S&P and Moody's on its
unsecured debt, including the First Mortgage Bonds following the Permitted
Merger, of at least "BBB-" and "Baa3", respectively;
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(iii) MAALP shall be a reporting company under the Exchange Act
pursuant to an effective registration on Form 10 (or any successor form for
registration under the Exchange Act);
(iv) the Trustee shall have received an Officers' Certificate
substantially in the form of Exhibit F (the "RELEASE CERTIFICATE");
(v) the Trustee shall have received an Opinion of Counsel (which
may, as to factual matters, rely on an Officers' Certificate) stating that, upon
the filing with public authorities referred to in clause (viii) below, all the
conditions to the Permitted Merger will have been satisfied, this Indenture will
remain in full force and effect and the First Mortgage Bonds will be the legal,
valid and binding obligations of MAALP, enforceable against MAALP in accordance
with their terms and entitled to the benefits of this Indenture, and opining as
to such other matters as the Trustee may reasonably request;
(vi) the Trustee shall have received any other information and/or
documentation which the Issuer may consider relevant or necessary or which the
Trustee may reasonably request;
(vii) the Partnership and MAALP shall have prepared such amendments
to their organizational documents and such other documentation as may be
required by applicable law to effect the Permitted Merger, all in form and
substance acceptable to the Trustee and the Rating Agencies and their respective
legal counsel and suitable for filing with public authorities, if such filing is
required;
(viii) all such filings with public authorities as may be required
to effect the Permitted Merger shall have been made, and MAALP shall have given
notice to the Trustee of the date of the last such filing (the "PERMITTED MERGER
DATE");
(ix) the Issuer shall pay all costs and expenses in connection with
the Permitted Merger, including but not limited to the fees of the Trustee and
the fees and expenses of experts and counsel to the Trustee;
(x) the Issuer shall have entered into a binding amendment or
supplement to this Indenture specifically providing that MAALP shall assume the
obligations under the First Mortgage Bonds and containing such other covenants,
and shall have complied with such other conditions, as the Rating Agencies may
request; and
(xi) MAALP shall not have consolidated with or merged with or into,
or conveyed, transferred or leased all or substantially all its assets to, any
Person, except in compliance with Section 9.05 through 9.07.
SECTION 9.03. RELEASE OF PORTION OF TRUST ESTATE. Upon the
occurrence of a Permitted Merger, the Lien of the Mortgages on the Mortgaged
Properties and of the Security Documents shall be released and the Security
Documents (except for this Indenture, the Partnership Environmental Indemnity
and the MAALP Environmental Indemnity) and such Mortgaged Properties shall be
released from the Trust Estate. At the sole expense of MAALP, after receipt of
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the notice from MAALP referred to in Section 9.02(viii), the Trustee shall
execute and deliver to MAALP such documentation prepared by MAALP and delivered
to the Trustee as may be required in accordance with this Indenture, the
Mortgages and the other Security Documents to effect such release.
SECTION 9.04. NOTICE TO HOLDERS. Within five (5) Business Days after
the Permitted Merger Date, the Trustee shall give notice of the Permitted Merger
to each Holder of the First Mortgage Bonds.
SECTION 9.05. CONSOLIDATIONS AND MERGERS OF, SALES, LEASES AND
CONVEYANCES BY, MAALP. Following the Permitted Merger Date, subject to Section
9.07, MAALP may consolidate with, or sell, lease or convey all or substantially
all of its assets to, or merge with or into any other partnership or
corporation, provided that in any case, (i) either MAALP shall be the continuing
partnership or the successor partnership or corporation shall be a partnership
or corporation organized and existing under the laws of the United States or a
state thereof and such successor partnership or corporation shall expressly
assume (if the Permitted Merger has occurred) the due and punctual payment of
the principal of (and premium, if any) and any interest on all of the Securities
according to their tenor, and shall expressly assume, in any case, the due and
punctual performance and observance of all of the covenants and conditions of
this Indenture to be performed by MAALP by supplemental indenture, satisfactory
to the Trustee, executed and delivered to the Trustee by such corporation or
partnership and (ii) immediately after giving effect to such transactions and
treating any indebtedness which becomes an obligation of MAALP or any Subsidiary
as a result thereof as having been incurred by MAALP or such Subsidiary at the
time of such transaction, no Event of Default or any event which, after notice
or the lapse of time or both, would become an Event of Default, shall have
occurred and be continuing.
SECTION 9.06. RIGHTS AND DUTIES OF SUCCESSOR. In case of any such
consolidation, merger, sale, lease or conveyance and upon any such assumption by
the successor corporation or partnership, such successor corporation or
partnership shall succeed to and be substituted for MAALP with the same effect
as if it had been named herein as Issuer, and MAALP shall be relieved of any
further obligation under this Indenture and the Securities. Such successor
corporation or partnership thereupon may cause to be signed and may issue either
in its own name or in the name of MAALP any or all of the Securities issuable
hereunder which theretofore shall not have been signed by MAALP and delivered to
the Trustee; and, upon the order of such successor corporation or partnership
instead of MAALP and subject to all the terms, conditions and limitations in
this Indenture prescribed, the Trustee shall authenticate and shall deliver any
Securities which previously shall have been signed and delivered by the Officers
of the general partner of MAALP to the Trustee for authentication, and any
Securities which such successor corporation or partnership thereafter shall
cause to be signed and delivered to the Trustee for that purpose. All the
Securities so issued shall in all respects have the same legal rank and benefit
under this Indenture as the Securities theretofore or thereafter issued in
accordance with the terms of this Indenture as though all of such Securities had
been issued at the time of the execution hereof.
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In case of any such consolidation, merger, sale, lease, or
conveyance, such changes in phraseology and form (but not in substance) may be
made in the Securities thereafter to be issued as may be appropriate.
SECTION 9.07. OFFICERS' CERTIFICATE AND OPINION OF COUNSEL. Any
consolidation, merger, sale, lease or conveyance permitted under Section 9.05 is
also subject to the condition that the Trustee receive an Officers' Certificate
and an Opinion of Counsel to the effect that any such consolidation, merger,
sale, lease or conveyance, and the assumption by any successor corporation or
partnership complies with the provisions of this Article and that all conditions
precedent herein provided for relating to such transaction have been complied
with and, in the case of any such transaction occurring after the Permitted
Merger, written confirmation from each of the Rating Agencies that the unsecured
debt rating of such successor corporation or partnership after giving effect to
such transaction shall not be less than the unsecured debt rating of MAALP
immediately prior to such transaction.
ARTICLE TEN
MEETINGS OF HOLDERS OF SECURITIES
SECTION 10.01. PURPOSES FOR WHICH MEETINGS MAY BE CALLED. A meeting
of Holders of Securities may be called at any time and from time to time
pursuant to this Article to make, give or take any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be made, given or taken by Holders of such Securities.
SECTION 10.02. CALL NOTICE AND PLACE OF MEETINGS. (a) The Trustee
may at any time call a meeting of Holders of Securities for any purpose
specified in Section 10.01, to be held at such time and at such place, as the
Trustee shall determine. Notice of every meeting of Holders of Securities,
setting forth the time and the place of such meeting and in general terms the
action proposed to be taken at such meeting, shall be given, in the manner
provided in Section 11.06, and not less than 21 nor more than 180 days prior to
the date fixed for the meeting.
(b) In case at any time the Issuer, pursuant to a Board Resolution,
or the Holders of at least 10% in principal amount of the Outstanding Securities
shall have requested the Trustee to call a meeting of the Holders of Securities
for any purpose specified in Section 10.01, by written request setting forth in
reasonable detail the account proposed to be taken at the meeting, and the
Trustee shall not have made the first publication of the notice of such meeting
within 21 days after receipt of such request or shall not thereafter proceed to
cause the meeting to be held as provided herein, then the Issuer or the Holders
of Securities of such series in an amount above specified, as the case may be,
may determine the time and the place for such meeting and may call such meeting
for such purposes by giving notice thereof as provided in subsection (a) of this
Section.
SECTION 10.03. PERSONS ENTITLED TO VOTE AT MEETINGS. To be entitled
to vote at any meeting of Holders of Securities, a Person shall be (a) a Holder
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of one or more Outstanding Securities, or (b) a Person appointed by an
instrument in writing as proxy for a Holder or Holders of one or more
Outstanding Securities by such Holder or Holders. The only Persons who shall be
entitled to be present or to speak at any meeting of Holders of Securities shall
be the Persons entitled to vote at such meeting and their counsel, any
representatives of the Trustee and its counsel and any representatives of the
Issuer and its counsel.
SECTION 10.04. QUORUM; ACTION. The Persons entitled to vote a
majority in principal amount of the Outstanding Securities shall constitute a
quorum for a meeting of Holders of Securities. In the absence of a quorum within
30 minutes after the time appointed for any such meeting, the meeting shall, if
convened at the request of Holders of Securities of such series, be dissolved.
In any other case, the meeting may be adjourned for a period of not less that 10
days as determined by the chairman of the meeting prior to the adjournment of
such adjourned meeting. In the absence of a quorum at any such adjourned
meeting, such adjourned meeting may be further adjourned for a period of not
less than 10 days as determined by the chairman of the meeting prior to the
adjournment of such adjourned meeting. Notice of the reconvening of any
adjourned meeting shall be given as provided in Section 10.02(a), except that
such notice need be given only once not less than five days prior to the date on
which the meeting is scheduled to be reconvened. Notice of the reconvening of
any adjourned meeting shall state expressly the percentage, as provided above,
of the principal amount of the Outstanding Securities which shall constitute a
quorum.
Except as limited by the proviso to Section 8.02, any resolution
presented to a meeting or adjourned meeting duly reconvened at which a quorum is
present as aforesaid may be adopted by the affirmative vote of the Holders of a
majority in principal amount of the Outstanding Securities; PROVIDED, HOWEVER,
that, except as limited by the proviso to Section 8.02, any resolution with
respect to any request, demand, authorization, direction, notice, consent,
waiver or other action which this Indenture expressly provides may be made,
given or taken by the Holders of a specified percentage, which is less than a
majority, in principal amount of the Outstanding Securities may be adopted at a
meeting or an adjourned meeting duly reconvened and at which a quorum is present
as aforesaid by the affirmative vote of the Holders of such specified percentage
in principal amount of the Outstanding Securities.
Any resolution passed or decision taken at any meeting of Holders of
Securities duly held in accordance with this Section shall be binding on all the
Holders of Securities, whether or not present or represented at the meeting.
Notwithstanding the foregoing provisions of this Section 10.05, if
any action is to be taken at a meeting of Holders of Securities with respect to
any request, demand, authorization, direction, notice, consent, waiver or other
action that this Indenture expressly provides may be made, given or taken by the
Holders of a specified percentage in principal amount of all Outstanding
Securities affected thereby:
(a) there shall be no minimum quorum requirement for such meeting;
and
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(b) the principal amount of the Outstanding Securities that vote in
favor of such request, demand, authorization, direction, notice, consent, waiver
or other action shall be taken into account in determining whether such request,
demand, authorization, direction, notice, consent, waiver or other action has
been made, given or taken under this Indenture.
SECTION 10.05. DETERMINATION OF VOTING RIGHTS; CONDUCT AND
ADJOURNMENT OF MEETINGS. (a) Notwithstanding any provisions of this Indenture to
the contrary, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Holders of Securities in regard to proof of the
holding of Securities and of the appointment of proxies and in regard to the
appointment and duties of inspectors of votes, the submission and examination of
proxies, certificates and other evidence of the right to vote, and such other
matters concerning the conduct of the meeting as it may deem appropriate. Except
as otherwise permitted or required by any such regulations, the holding of
Securities shall be proved in the manner specified in Section 11.05 and the
appointment of any proxy shall be proved in the manner specified in Section
11.05. Such regulations may provide that written instruments appointing proxies,
regular on their face, may be presumed valid and genuine without the proof
specified in Section 11.05 or other proof.
(b) The Trustee shall, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting shall have been called by
the Issuer or by Holders of Securities as provided in Section 10.02(b), in which
case the Issuer or the Holders of Securities of the series calling the meeting,
as the case may be, shall in like manner appoint a temporary chairman. A
permanent chairman and a permanent secretary of the meeting shall be elected by
vote of the Persons entitled to vote a majority in principal amount of the
Outstanding Securities represented at the meeting.
(c) At any meeting each Holder of a Security or proxy shall be
entitled to one vote for each $1,000 principal amount of the Outstanding
Securities held or presented by him or her; PROVIDED, HOWEVER, that no vote
shall be cast or counted at any meeting in respect of any Security challenged as
not Outstanding and ruled by the chairman of the meeting to be not Outstanding.
The chairman of the meeting shall have not the right to vote, except as a Holder
of a Security or proxy.
(d) Any meeting of Holders of Securities duly called pursuant to
Section 10.02 at which a quorum is present may be adjourned from time to time by
Persons entitled to vote a majority in principal amount of the Outstanding
Securities represented at the meeting, and the meeting may be held as so
adjourned without further notice.
SECTION 10.06. COUNTING VOTES AND RECORDING ACTION OF MEETINGS. The
vote upon any resolution submitted to any meeting of Holders of Securities shall
be by written ballots on which shall be subscribed the signatures of the Holders
of Securities or of their representatives by proxy and the principal amounts and
serial numbers of the Outstanding Securities held or represented by them. The
permanent chairman of the meeting shall appoint two inspectors of votes who
shall count all votes cast at the meeting for or against a resolution and who
shall make and file with the secretary of the meeting their verified written
reports in duplicate of all votes cast at the meeting. A record, at least in
duplicate, of the proceedings of each meeting of Holders of Securities shall be
prepared by the secretary of the meeting and there shall be attached to said
record the original reports of the inspectors of votes on any vote by ballot
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taken thereat and affidavits by one or more persons having knowledge of the
fact, setting forth a copy of the notice of the meeting and showing that said
notice was given as provided in Section 10.02 and, if applicable, Section 10.04.
Each copy shall be signed and verified by the affidavits of the permanent
chairman and secretary of the meeting and one such copy shall be delivered to
the Issuer and another to the Trustee to be preserved by the Trustee, the latter
to have attached thereto the ballots voted at the meeting. Any records so signed
and verified shall be conclusive evidence of the matters therein stated.
ARTICLE ELEVEN
MISCELLANEOUS PROVISIONS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS. Following the public
offering of the First Mortgage Bonds, if any provision of this Indenture limits,
qualifies or conflicts with another provision which is required to be included
in this Indenture by the TIA, the required provision shall control.
SECTION 11.02. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS. Holders
of Securities may communicate pursuant to TIAss.312(b) with other Holders with
respect to their rights under this Indenture or the Securities. The Issuer, the
Trustee, the Security Registrar and anyone else shall have the protection of
TIAss.312(c).
SECTION 11.03. COMPLIANCE CERTIFICATES AND OPINIONS. Upon any
application or request by the Issuer to the Trustee to take any action under any
provision of this Indenture, the Issuer shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with
and an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request no additional certificate or opinion need be
furnished.
SECTION 11.04. FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any case
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such person may certify or
give an opinion as to some matters and one or more other such Persons as to
other matters, and any Person may certify or give an opinion as to such matters
in one or several documents.
Any certificate or opinion of an Officer of the general partner of
the Issuer may be based, insofar as it relates to legal matters, upon an Opinion
of Counsel, or a certificate or representations by counsel, unless such Officer
knows, or in the exercise of reasonable care should know, that the opinion,
certificate or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such Opinion of Counsel or
certificate or representations may be based, insofar as it relates to factual
matters, upon a certificate or opinion of, or representations by, an Officer or
Officers of the general partner of the Issuer stating that the information as to
such factual matters is in the possession of the Company, unless such counsel
knows that the certificate or opinion or representations as to such matters are
erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 11.05. ACTS OF HOLDERS. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Holders of the Outstanding Securities may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by agents duly appointed in writing.
Except as herein otherwise expressly provided, such actions shall become
effective when such instrument or instruments are delivered to the Trustee and,
where it is hereby expressly required, to the Issuer. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture,
if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
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execution is by a Person acting in other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority.
(c) The fact and date of the execution by any Person of any such
instrument or writing, or the authority of the Person executing the same, may
also be proved in any other manner which the Trustee deems sufficient, and the
Trustee may in any instance require further proof with respect to any of the
matters referred to in this Section.
(d) The principal amount and serial numbers of Securities held by
any Person, and the date of his holding the same, shall be proved by the
Securities Register.
(e) If the Issuer shall solicit from the Holders any request,
demand, authorization, direction, notice, consent, waiver or other Act, the
Issuer may at its option, by Board Resolution, fix in advance a record date for
the determination of Holders entitled to give such request, demand,
authorization, direction, notice, consent, waiver, or other Act, but the Issuer
shall have no obligation to do so. If such a record date is fixed, such request,
demand, authorization, direction, notice, consent, waiver or other Act may be
given before or after such record date, but only the Holders of record at the
close of business on such record date shall be deemed to be Holders for the
purposes of determining whether Holders of the requisite proportion of
Outstanding Securities have authorized or agreed or consented to such request,
demand, authorization, direction, notice, consent, waiver or other Act, and for
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that purpose the Outstanding Securities shall be computed as of such record
date; PROVIDE , that no such authorization, agreement or consent by the Holders
on such record date shall be deemed effective unless it shall become effective
pursuant to the provisions of this Indenture not later than eleven months after
the record date.
(f) Any request, demand, authorization, direction, notice, consent,
waiver, or other Act of the Holder of any Security shall bind every future
Holder of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee, any
Security Registrar, any paying agent or the Issuer in reliance thereon, whether
or not notation of such action is made upon such Security.
SECTION 11.06. NOTICES. Any notice or communication shall be
sufficiently given if in writing and delivered in person or by telecopy (receipt
confirmed) or mailed by first-class mail, return receipt requested, addressed as
follows:
if to the Partnership:
Mid-America Capital Partners, L.P.
1209 Orange Street
Wilmington, Delaware 19801
Attn: Simon R.C. Wadsworth
6584 Poplar Avenue, Suite 340
Memphis, Tennessee 38138
Attn: Simon R.C. Wadsworth
with a copy to:
John A. Good, Esq.
Baker, Donelson, Bearman & Caldwell
165 Madison Avenue, Suite 2000
Memphis, Tennessee 38103
if to MAALP:
Mid-America Apartments, L.P.
6584 Poplar Avenue, Suite 340
Memphis, Tennessee 38138
Attn: Simon R.C. Wadsworth
-57-
<PAGE>
with a copy to:
John A. Good, Esq.
Baker, Donelson, Bearman & Caldwell
165 Madison Avenue, Suite 2000
Memphis, Tennessee 38103
if to the Trustee, the Corporate Trust Office.
The Partnership, MAALP or the Trustee by notice to each other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Holder of Securities shall
be mailed to such Holder at his address as it appears on the registration books
of the Security Registrar and shall be sufficiently given if so mailed within
the time prescribed.
Failure to mail a notice or communication to a Holder of Securities
or any defect in it shall not affect its sufficiency with respect to other
Holders. If a notice or communication is mailed in the manner provided above, it
is duly given, whether or not the addressee receives it.
SECTION 11.07. WHEN TREASURY SECURITIES DISREGARDED. In determining
whether the Holders of the required principal amount of Securities have
concurred in any direction, waiver or consent, Securities owned by the Issuer or
by any Affiliate of the Issuer shall be disregarded and deemed not to be
Outstanding, except that for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which a Trust Officer actually knows are so owned shall be so
disregarded. Also, subject to the foregoing, only Securities Outstanding at the
time shall be considered in any such determination.
SECTION 11.08. RULES BY PAYING AGENT AND REGISTRAR. The Security
Registrar and the paying agent may make reasonable rules for their functions.
SECTION 11.09. LEGAL HOLIDAYS. A "LEGAL HOLIDAY" is a Saturday, a
Sunday or a day on which banking institutions are not required to be open in the
State of New York, the State of Tennessee or the State of Illinois. If a Payment
Date is a Legal Holiday, payment shall be made on the next succeeding day that
is not a Legal Holiday, and no interest shall accrue for the intervening period
on such amounts to be paid on such Payment Date; PROVIDED that if the Maturity
Date is a Legal Holiday, interest shall accrue for such intervening period. If a
regular record date is a Legal Holiday, the record date shall not be affected.
SECTION 11.10. SUCCESSORS. All agreements of the Issuer in this
Indenture and the Securities shall bind its successor. All agreements of the
Trustee in this Indenture shall bind its successor.
-58-
<PAGE>
SECTION 11.11. MULTIPLE ORIGINALS. The parties may sign any number
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
SECTION 11.12. SECURITY AGREEMENT. This Indenture shall constitute a
security agreement under the Uniform Commercial Code. Upon the occurrence of any
Event of Default, and in addition to any other rights available under this
Indenture, any Security Document or any other instruments included in the Trust
Estate or otherwise available at law or in equity, the Trustee shall have all
rights and remedies of a secured party on default under the Uniform Commercial
Code to enforce the assignments and security interests contained herein and in
addition shall have the right, subject to compliance with any mandatory
requirements of applicable law, to sell or apply any or all of the Trust Estate
and any other rights and other interests assigned or pledged hereby at public or
private sale. All amounts received hereunder shall be applied first to all costs
and expenses incurred by the Trustee and its agents, if any, in connection with
such collection and enforcement and thereafter as provided in this Indenture.
SECTION 11.13. SEPARABILITY CLAUSE. In case any provision in this
Indenture or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 11.14. GOVERNING LAW. This Indenture and each of the
Securities issued hereunder shall be deemed to be contracts made under the laws
of the State of New York and shall for all purposes be governed by, and
construed in accordance with, the laws of such State without giving effect to
applicable principles of conflicts of law to the extent that the application of
the laws of another jurisdiction would be required thereby.
SECTION 11.15. TABLE OF CONTENTS; HEADINGS. The table of contents
and the titles and headings of the Articles and Sections of this Indenture have
been inserted for convenience of reference only, are not being considered a part
hereof and shall in no way modify or restrict any of the terms or provisions
hereof.
SECTION 11.16. LIMITATION ON RECOURSE. Notwithstanding any provision
to the contrary herein or in the Mortgages or the Securities, prior to the
Permitted Merger Date neither the Trustee nor any Securityholder shall have any
recourse to any partner of the Partnership or to any asset of any such partner
(except for the Partnership) in order to satisfy the indebtedness for the
payment of principal and interest evidenced by the Securities or any other
obligations of the Issuer hereunder or under any Security Documents. The
foregoing sentence shall not be deemed or construed to be a release of the
indebtedness evidenced by the Securities or in any way to impair, limit or
otherwise affect the Lien of the Mortgage or other Security Documents or to
prevent the Trustee or any Securityholder from naming the general partner of the
Partnership or its successors or assigns as a defendant to any action to enforce
any remedy so long as there is no personal or deficiency money judgment sought
-59-
<PAGE>
or entered against such general partner or its successors or assigns for payment
of principal and interest evidenced by the Securities or any other obligation of
the Issuer hereunder or under any Security Document.
LASALLE NATIONAL BANK hereby accepts the trusts in this Indenture
declared and provided and agrees to perform its duties hereunder for the benefit
of the Holders, upon the terms and conditions hereinabove set forth.
-60-
<PAGE>
IN WITNESS WHEREOF, MID-AMERICA CAPITAL PARTNERS, L.P. has caused
this Indenture to be signed and acknowledged in its name and on its behalf by
the President of its general partner and the same to be attested by the
Secretary of such general partner; MID-AMERICA APARTMENTS, L.P. has caused this
Indenture to be signed and acknowledged in its name and on its behalf by the
Chief Financial Officer of its general partner and the same to be attested by
the Secretary of such general partner; and LASALLE NATIONAL BANK has caused this
Indenture to be signed and delivered by one of its Senior Vice Presidents and
the same to be attested by one of its Authorized Persons, all as of the day and
year first above written.
MID-AMERICA CAPITAL PARTNERS, L.P.
By: MAACP, Inc.
its general partner
By
Name: Simon R.C. Wadsworth
Title: President
Attest:
_________________________
Name: Lynn A. Johnson
Title: Secretary
MID-AMERICA APARTMENTS, L.P.
By: Mid-America Apartment Communities,
Inc., its general partner
By
Name: Simon R.C. Wadsworth
Title: Chief Financial Officer
Attest:
___________________________
Name: Lynn A. Johnson
Title: Secretary
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<PAGE>
LASALLE NATIONAL BANK, as Trustee
By _______________________________
Name: Russell M. Goldenberg
Title: Senior Vice President
Attest:
____________________________________
Name:
Title: Authorized Person
-62-
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this [__]th day of January 1998, before me personally came Simon
R.C. Wadsworth, to me known, and who, sworn, did depose and say that he resides
at 274 Grove Park Road, Memphis, Tennessee 38117, that he is the President of
MAACP, Inc., one of the corporations described in and which executed the above
instrument; and that he signed his name thereto by like authority.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
[NOTARIAL SEAL]
Name:
Commission Expires
-63-
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this [__]th day of January 1998, before me personally came Simon
R.C. Wadsworth, to me known, and who, sworn, did depose and say that he resides
at 274 Grove Park Road, Memphis, Tennessee 38117, that he is the Chief Financial
Officer of Mid-America Apartment Communities, Inc., one of the corporations
described in and which executed the above instrument; and that he signed his
name thereto by like authority.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
[NOTARIAL SEAL]
Name:
Commission Expires
-64-
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this [__]th day of January 1998, before me personally came
Russell M. Goldenberg, to me known, and who, sworn, did depose and say that he
resides at 6757 Taos Court Lisle, Illinois 60532, that he is the Senior Vice
President of LaSalle National Bank, one of the corporations described in and
which executed the above instrument; and that he signed his name thereto by like
authority.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
[NOTARIAL SEAL]
Name:
Commission Expires
-65-
<PAGE>
EXHIBIT A
to Indenture
FORM OF
FIRST MORTGAGE BOND
A-1
<PAGE>
[ ]% FIRST MORTGAGE BOND, DUE 2003
UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE CERTIFICATE REGISTRAR FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY BOND ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
New York, New York
$ [______________] __, 1998
FOR VALUE RECEIVED, MID-AMERICA CAPITAL PARTNERS, L.P., a Delaware
limited partnership ("ISSUER", which term includes any successor Issuer as
defined in the Indenture hereinafter referred to), promises to pay to CEDE &
CO., or registered assigns ("PAYEE") [____________] DOLLARS ($[__________]) (the
"PRINCIPAL AMOUNT"), together with interest from the date hereof at the Interest
Rate (as defined below). Interest accruing hereunder shall be calculated on the
basis of a 360-day year of twelve 30 day months.
WHEN USED HEREIN, the following capitalized terms shall have the
following meanings:
"ACCELERATION PREMIUM" shall mean an amount equal to the greater of
(a) one percent (1%) of the Principal Amount and (b) the amount equal to the
remainder obtained by subtracting (x) the Principal Amount from (y) the present
value as of the date of such acceleration of the remaining scheduled payments of
principal and interest on this Bond (including the Principal Amount payable on
the Maturity Date) determined by discounting such payments at the Discount Rate.
"BOND" shall mean this [__]% First Mortgage Bond.
"CALCULATION DATE" shall mean the date of any declaration that the
principal amount of this Bond is due and payable pursuant to Paragraph 5 hereof.
"CLOSING DATE" shall be [____________ __], 1998.
"COMMENCEMENT DATE" shall be [____________] 1, 1998.
"DISCOUNT RATE" shall mean the rate which, when compounded monthly,
is equivalent to the yield, calculated by linear interpolation (rounded to the
nearest one-thousandth of one percent) of the yields of noncallable United
-62-
<PAGE>
States Treasury obligations with terms (one longer and one shorter) most nearly
approximating the period from the Calculation Date to the Maturity Date, as
determined by the Trustee on the basis of Federal Reserve Statistical Release
H.15 Selected Interest Rates under the heading U.S. Governmental
Security/Treasury Constant Maturities or other recognized source of financial
market information selected by the Trustee for the week prior to the Calculation
Date.
"INTEREST RATE" shall mean a rate of [____________] percent ([_]%)
per annum.
"MATURITY DATE" shall be [____________ __], 2003.
"MATURITY DEFAULT RATE" shall be the greater of (a) the Interest
Rate plus 2% per annum or (b) the Treasury Rate plus 2.80% per annum.
"PAYMENT DATE" shall be the first Business Day of each month
commencing on the first full calendar month after the Closing Date and
continuing to and including the Maturity Date.
"PRINCIPAL AMOUNT" shall be [______________________________] DOLLARS
($[________]).
"TREASURY RATE" shall mean a rate per annum equal to the yield, as
of the Maturity Date, calculated by linear interpolation (rounded to the nearest
one-thousandth of one percent) of the yields of noncallable United States
Treasury obligations with terms of twenty (20) years (one longer and one
shorter) most nearly approximating the period from the Maturity Date to
[________ __], 2023, as determined by the Trustee on the basis of Federal
Reserve Statistical Release H.15 Selected Interest Rates under the heading U.S.
Governmental Security/Treasury Constant Maturities or other recognized source of
financial market information selected by the Trustee for the week prior to the
Maturity Date.
Capitalized terms not otherwise defined herein shall have the
meanings given to them in the Indenture dated as of November [__], 1997 (the
"INDENTURE") between the Issuer named therein and LaSalle National Bank, as
trustee (together with its successors and assigns under the Indenture, the
"TRUSTEE").
1. The Principal Amount and interest thereon shall be due and
payable in lawful money of the United States as follows:
(a) Commencing on the Commencement Date and continuing until
the Maturity Date, all accrued and unpaid interest at the Interest Rate shall be
due and payable on each Payment Date.
(b) In the event that the Issuer has not paid the entire
Principal Amount of this Bond and any other amounts outstanding hereunder on or
before the Maturity Date, the following subparagraphs shall apply:
-2-
<PAGE>
(i) From and after the Maturity Date, interest shall
accrue, at the Interest Rate if the Permitted Merger shall have occurred, or at
the Maturity Default Rate if the Permitted Merger shall not have occurred, on
the unpaid Principal Amount outstanding on this Bond and, to the extent
permitted by applicable law, on any other amounts payable under this Bond or
under the Indenture and shall be immediately due and payable. Any payments
received after the Maturity Date shall be applied, first, to the payment of
interest and, then, to the reduction of the outstanding principal balance of
this Bond.
(ii) Prior to the Permitted Merger Date, pursuant to
the Cash Collateral Agreement, the Servicer shall apply funds in the Accounts to
pay the operating expenses of the Partnership and otherwise as provided in the
Mortgages and the other Security Documents and the Trustee, upon direction of
the Payee, shall apply all other funds in the Accounts as set forth in
subparagraph (i) above.
(d) Amounts due on this Bond shall be payable, without any
counterclaim, setoff or deduction whatsoever, at the place and in the manner set
forth in the Indenture.
2. This Bond is one of a duly authorized issue of securities of
Issuer designated as its [__]% First Mortgage Bonds, limited in aggregate
principal amount to $[_______________], and issued under and entitled to the
benefit of the Indenture. This Bond has been duly executed and delivered by
Issuer to the Trustee. Reference is made to the Indenture and all indentures
supplemental thereto for a description of the nature, limitations and extent of
the security, and the rights, obligations, duties and immunities thereunder of
the Trustee, the Issuer and the Holders of the Securities.
3. This Bond may not be prepaid or redeemed prior to the Maturity
Date.
4. As provided in the Indenture, the obligations of the Issuer under
the First Mortgage Bonds and the Indenture are secured prior to the Permitted
Merger Date by Mortgages granted by the Issuer, as mortgagor (or grantor, in the
case of a deed of trust), to the Trustee, as mortgagee (or beneficiary, in the
case of a deed of trust), and by the Assignment of Leases and Rents, the Cash
Collateral Agreement and the other Security Documents.
5. If an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal amount of this Bond may become or be
declared to be due and payable, and upon such declaration shall become due and
payable, and the Trustee may exercise all available remedies under any or all of
the Mortgages and the other Security Documents, in the manner, with the effect
and subject to the conditions provided in the Indenture. Upon such declaration,
provided, that such declaration occurs prior to the Permitted Merger Date, the
Issuer agrees to pay the Acceleration Premium to the Payee.
6. Pursuant to the terms and conditions in the Indenture, the Issuer
at any time may terminate some or all of its obligations under the First
Mortgage Bonds and the Indenture if the Issuer deposits with the Trustee money
-3-
<PAGE>
or U.S. Government obligations for the payment of principal and interest on the
First Mortgage Bonds to maturity.
7. THE INDENTURE AND THIS BOND SHALL BE DEEMED TO BE CONTRACTS MADE
UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL FOR ALL PURPOSES BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF SUCH STATE WITHOUT GIVING
EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
This Bond shall not be or become obligatory for any purpose until
the certificate of authentication hereon shall have been manually signed by the
Trustee under the Indenture.
-4-
<PAGE>
IN WITNESS WHEREOF, Issuer has caused this Bond to be executed and
delivered as of the day and year first above written.
MID-AMERICA CAPITAL PARTNERS, L.P.,
a Tennessee limited partnership
By: MAACP, Inc., its general partner
By
Name:
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATIONLASALLE NATIONAL BANK, as Trustee,
certifies that this is one of the First Mortgage
Bonds referred to in the Indenture.
By:____________________________________
Authorized Signatory
-5-
<PAGE>
ASSIGNMENT FORM
To assign this First Mortgage Bond, fill in the form below: I or we
assign and transfer this First Mortgage Bond to
(Print or type assignee's name, address and zip code)
(insert assignee's social security or taxpayer I.D. number)
and irrevocably appoint _______________________________________________________
agent to transfer this First Mortgage Bond on the books of the Issuer. The agent
may substitute another to act for him.
Date:
Signature:__________________________________________________________
(Sign exactly as your name appears on the
first page of this First Mortgage Bond)
-6-
<PAGE>
EXHIBIT B
to Indenture
MORTGAGED PROPERTIES AND APPRAISED VALUES
MORTGAGED PROPERTY
APPRAISED VALUE
B-1
<PAGE>
EXHIBIT C
to Indenture
FORM OF
MORTGAGE
C-1
<PAGE>
EXHIBIT D
to Indenture
FORM OF
CASH COLLATERAL AGREEMENT
D-1
<PAGE>
EXHIBIT E
to Indenture
FORM OF
RELEASE CERTIFICATE
E-1
<PAGE>
EXHIBIT F
to Indenture
OFFICERS' CERTIFICATE
RELEASE PURSUANT TO SECTION 9.03
To: LaSalle National Bank, as trustee (the "Trustee") under the Indenture,
dated as of November __, 1997 (the "Indenture"), between Mid-America
Capital Partners, L.P. (the "Partnership") and Mid-America Apartments,
L.P. ("MAALP" and, together with the Partnership, the "Issuer") and the
Trustee.
This Certificate is issued pursuant to Section 9.02(iv) of the
Indenture. Except as the context otherwise requires, all capitalized terms used
in this Officers' Certificate without definition have the meanings specified in
the Indenture.
The undersigned officers of the Issuer hereby certify in the name
and on behalf of the Issuer as follows:
(i) MAALP has obtained a rating by Moody's and S&P of its unsecured
debt, including the First Mortgage Bonds following the Permitted Merger, of at
least "BBB-" and "Baa3" respectively. The rating letters of Moody's and S&P are
attached hereto as Annex A-1 and Annex A-2, respectively;
(ii) MAALP is a reporting company under the Exchange Act pursuant to
an effective registration statement on Form 10 thereunder;
(iii) attached hereto as Annex B is the opinion of [name of counsel]
addressed to the Trustee, which complies with the requirements of Section
9.02(v) of the Indenture;
(iv) no Default or Event of Default exists under the Indenture;
(v) the Issuer agrees to be responsible for all costs and expenses
in connection herewith, as described in Section 9.02(ix) of the Indenture,
including but not limited to, the fees of the Trustee and the fees and expenses
of experts and counsel to the Trustee;
(vi) the Issuer requests you to execute and deliver the instruments
attached hereto, which are necessary to effect a release of the Security
Documents and the Mortgaged Properties from (A) the Lien of the Mortgage and (B)
the Trust Estate; - -
(vii) the undersigned have read this Officers' Certificate and have
made a reasonable examination of the circumstances supporting the assertions
contained in this Officers' Certificate and believe that such examination was of
a scope sufficient to enable the undersigned to express an informed opinion that
the statements contained herein are correct; and, in the opinion of each of the
undersigned, all conditions precedent to a Permitted Merger (except those set
forth in Section 9.02(viii) of the Indenture) have been complied with.
F-1
<PAGE>
IN WITNESS WHEREOF, we have set our hands this day of , [199_][200_].
MID-AMERICA CAPITAL PARTNERS, L.P.
By: MAACP, Inc.
its general partner
By:
Name:
Title:
MID-AMERICA APARTMENTS, L.P.
By: Mid-America Apartment Communities, Inc.,
its general partner
By:
Name:
Title:
F-2
CASH COLLATERAL ACCOUNT
SECURITY, PLEDGE AND ASSIGNMENT AGREEMENT
among
MID-AMERICA CAPITAL PARTNERS, L.P.
and
MID-AMERICA APARTMENTS, L.P.
and
FIRST UNION NATIONAL BANK,
as Account Bank
and
MORGAN STANLEY MORTGAGE CAPITAL INC.,
as Bridge Lender
and
LASALLE NATIONAL BANK,
as Trustee
Dated: as of November 21, 1997
<PAGE>
CASH COLLATERAL ACCOUNT
SECURITY, PLEDGE AND ASSIGNMENT AGREEMENT
CASH COLLATERAL ACCOUNT SECURITY, PLEDGE AND ASSIGNMENT AGREEMENT
(this "AGREEMENT"), dated as of November 21, 1997, among MID-AMERICA CAPITAL
PARTNERS, L.P. (the "PARTNERSHIP"), MID-AMERICA APARTMENTS, L.P. ("MAALP"),
FIRST UNION NATIONAL BANK ("ACCOUNT BANK"), MORGAN STANLEY MORTGAGE CAPITAL INC.
(the "BRIDGE LENDER") and LASALLE NATIONAL BANK, as trustee under the Indenture
described below for the benefit of the holders from time to time of the Notes
described below ("TRUSTEE").
W I T N E S S E T H:
WHEREAS, the Partnership is the owner of fee interests in the
properties described in EXHIBIT A attached hereto (individually, a "PROPERTY"
and, collectively, the "PREMISES");
WHEREAS, the Partnership is issuing its Secured Bridge Notes to the
Bridge Lender in the principal amount of $140,000,000 concurrently with the
execution and delivery of this Agreement and intends to issue its First Mortgage
Bonds in the maximum aggregate principal amount of $150,000,000 (said Secured
Bridge Notes and First Mortgage Bonds, collectively, the "Notes"), each pursuant
to an Indenture, dated as of the date hereof (the "INDENTURE"), between Issuer
and Trustee, as trustee thereunder, and secured by (i) Deeds of Trust,
Assignments of Rents and Leases and Security Agreements, each dated as of the
date hereof (collectively, the "MORTGAGE"), between the Partnership, as grantor,
and Trustee, as beneficiary, (ii) Assignments of Leases, Rents and Security
Deposits, dated as of the date hereof (collectively, the "ASSIGNMENT"), and
(iii) the other Security Documents (as defined in the Indenture);
WHEREAS, pursuant to the Mortgage and the Assignment, the
Partnership has granted to Trustee a security interest in the Rents (as defined
in the Mortgage) and other revenues derived from or otherwise attributable or
allocable to the Premises, and has absolutely assigned and conveyed to Trustee
all of the rents, income, revenue, issues and profits due and to become due or
to which the Partnership is now or may hereafter become entitled, arising out of
the Leases (as defined in the Mortgage) or the Premises or any part or parts
thereof; and
WHEREAS, in order to induce the Bridge Lender to purchase such
Secured Bridge Notes and in order to further effectuate the assignment of Rents
(as defined in the Mortgage) and profits by the Partnership to Trustee, the
Partnership has agreed to establish the Operating Account, the Interest Escrow
Account, the Mortgage Escrow Account, the Replacement Reserve Account, the
Deferred Maintenance Account and the Environmental Remediation Account (as such
terms are defined in Paragraph 3(a)) (the Operating Account, the Interest Escrow
Account, the Mortgage Escrow Account, the Replacement Reserve Account, the
Deferred Maintenance Account and the Environmental Remediation Account are
hereinafter collectively referred to as the "ACCOUNTS") with Account Bank and to
grant to Account Bank, for the benefit of Trustee, a perfected first priority
security interest therein upon the terms and subject to the conditions hereof.
<PAGE>
NOW, THEREFORE, in consideration of the agreements and covenants
hereinafter contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. DEFINED TERMS. Capitalized terms used but not defined herein
shall have the respective meanings given thereto in the Indenture unless
otherwise expressly provided herein.
2. SECURITY FOR OBLIGATIONS. To secure the full and punctual payment
and performance of all obligations of the Partnership now or hereafter existing
with respect to the Notes, whether for principal, interest, fees, expenses or
otherwise, and all obligations of the Partnership now or hereafter existing
under the Notes, the Indenture, the Mortgage, this Agreement and all other
Security Documents (all such obligations, collectively, the "OBLIGATIONS"), the
Partnership hereby sells, assigns, conveys, pledges, grants and transfers to
Account Bank, for the benefit of Trustee, a first priority continuing security
interest in and to the following property of the Partnership, whether now owned
or existing or hereafter acquired or arising and regardless of where located
(all of the same, collectively, the "COLLATERAL"):
(a) the Accounts and all cash, checks, drafts, certificates,
instruments and other assets, if any, from time to time deposited or held in the
Accounts from time to time including, without limitation, all deposits or
transfers made to the Accounts pursuant to Paragraph 3(a) hereof;
(b) any and all Permitted Investments (as defined in
Exhibit C) held in the Accounts;
(c) all interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise payable in respect
of, or in exchange for, any or all of the foregoing (however, subsequent to a
disbursement to the Partnership pursuant to the terms of the Mortgage and this
Agreement, such disbursed funds shall be free and clear of the security interest
created by this Agreement); and
(d) to the extent not covered by clauses (a), (b) or (c)
above, all proceeds (as defined under the Uniform Commercial Code as in effect
in the State in which the Accounts are located (the "UCC")) of any or all of the
foregoing.
-2-
<PAGE>
The parties hereto hereby appoint Account Bank to serve as account
bank hereunder. Account Bank hereby accepts such appointment and agrees to hold
and maintain the Accounts in accordance with this Agreement. Account Bank, on
behalf of Trustee, shall have with respect to the Collateral, in addition to the
rights and remedies herein set forth, all of the rights and remedies available
to a secured party under the UCC, to be exercised at the written direction of
Trustee as if such rights and remedies were fully set forth herein.
3. CASH COLLATERAL ACCOUNTS.
(a) The Partnership hereby establishes in the name of Account
Bank, for the benefit of Trustee, as secured party, a segregated cash collateral
account (the "OPERATING ACCOUNT") with Account Bank. The Partnership has
delivered irrevocable written instructions in the form attached hereto as
EXHIBIT B to the banks listed on Schedule I hereto, which hold the operating
accounts for the Premises (the "PROPERTY ACCOUNTS"), pursuant to which such
banks have been instructed to deposit on a daily basis by transfer to the
Operating Account, upon receipt, all operating revenue from the Premises, and
other amounts received in the Property Accounts, except for daily maximum
amounts the Property Accounts are to retain as shown on Schedule 1. The
Partnership hereby represents, warrants and covenants that (w) all property
managers of the Premises have been instructed pursuant to letters of instruction
delivered to Trustee at the Closing to deposit directly, on a daily basis, all
checks and all funds and revenues received with respect to the Premises ("REAL
PROPERTY REVENUES"), including, without limitation, with respect to rental due
under the Leases, to the respective Property Account, (x) all Real Property
Revenues will be deposited into the Property Account, (y) there are no other
accounts maintained by the Partnership or any other Person with respect to the
collection of Real Property Revenues and (z) so long as any Notes shall be
Outstanding and the Permitted Merger shall not have occurred, neither it nor any
other Person shall open any other such accounts.
In addition, the Partnership hereby establishes in the name of
Account Bank, for the benefit of Trustee, as secured party, a segregated cash
collateral account (the "INTEREST ESCROW ACCOUNT") with Account Bank. The
Partnership hereby establishes in the name of Account Bank, for the benefit of
Trustee, as secured party, a segregated cash collateral account (the "MORTGAGE
ESCROW ACCOUNT") with Account Bank. The Partnership hereby establishes in the
name of Account Bank, for the benefit of Trustee, as secured party, a segregated
cash collateral account (the "REPLACEMENT RESERVE ACCOUNT") with Account Bank.
The Partnership hereby establishes in the name of Account Bank, for the benefit
of Trustee, as secured party, a segregated cash collateral account (the
"DEFERRED MAINTENANCE ACCOUNT") with Account Bank. The Partnership hereby
establishes in the name of Account Bank, for the benefit of Trustee, as secured
party, a segregated cash collateral account (the "ENVIRONMENTAL REMEDIATION
ACCOUNT") with Account Bank.
The Collateral shall be held in the Accounts in accordance with the
terms of this Agreement. The Partnership agrees that prior to the earlier of the
Permitted Merger Date or payment in full of the Notes, this Agreement shall be
irrevocable by the Partnership without the prior written consent of each Holder
of an Outstanding Security. The Accounts shall be subject to such applicable
laws, and such applicable regulations of the Board of Governors of the Federal
Reserve System and of any other banking or governmental authority, as may now or
hereafter be in effect. Interest accruing on the Accounts shall be periodically
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added to the principal amount of the Accounts and shall be held, disbursed and
applied in accordance with the provisions of this Agreement. All statements
relating to the Accounts shall be issued by Account Bank to Trustee (or
Trustee's representative) and the Partnership. The Partnership shall be the
beneficial owner of the Accounts for federal income tax purposes and shall
report all income on the Accounts. Returned items in the Property Accounts will
be charged against the Partnership in the succeeding month.
(b) Each of the Partnership and MAALP hereby agrees that all
amounts required to be deposited in the Property Accounts and received by the
Partnership, MAALP or any of their respective Affiliates shall be deposited
immediately into the Property Accounts. Until so deposited, any such amounts
held by the Partnership or MAALP shall be deemed to be Collateral and shall be
held in trust by it for the benefit, and as the property, of Account Bank, for
the benefit of Trustee, and shall not be commingled with any other funds or
property of the Partnership or MAALP.
(c) The Partnership shall deposit in the Interest Escrow
Account on the date hereof the amount of Zero Dollars ($0.00).
(d) The Partnership shall deposit in the Mortgage Escrow
Account on the date hereof the amount of Zero Dollars ($0.00).
(e) The Partnership shall deposit in the Replacement Reserve
Account on the date hereof the amount of Zero Dollars ($0.00).
(f) The Partnership shall deposit in the Deferred Maintenance
Account on the date hereof the amount of Six Hundred Thirty Six Thousand One
Hundred Thirty Dollars ($636,130.00).
(g) The Partnership shall deposit in the Environmental
Remediation Account on the date hereof the amount of zero Dollars ($0.00).
(h) Trustee shall give prompt written notice to Account Bank
of any Event of Default hereunder or under the Notes, the Indenture or any other
Security Document of which a Trust Officer of Trustee has actual knowledge
(each, a "DEFAULT TRIGGER NOTICE") and of any claim for indemnity under the
Partnership Environmental Indemnity or the MAALP Environmental Indemnity, in
each case of which a Trust Officer of Trustee has actual knowledge, or of any
failure of the Partnership to maintain a Debt Service Coverage Ratio of at least
1.30 to 1 as set forth in Section 4.19(b) of the Indenture (each, a "FUNDING
TRIGGER NOTICE"; any such Funding Trigger Notice and any Default Trigger Notice,
a "TRIGGER NOTICE") and prompt written notice to Account Bank of the termination
of any such Event of Default, the satisfaction by the Partnership or MAALP, as
the case may be, of any such claim or the cure by the Partnership of any such
failure (each, a "TERMINATION NOTICE"). The period from and after actual receipt
by Account Bank of a Default Trigger Notice to and including actual receipt by
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Account Bank of a related Termination Notice is referred to herein as a "DEFAULT
PERIOD." The period from and after actual receipt by Account Bank of a Funding
Trigger Notice to and including actual receipt by Account Bank of a related
Termination Notice is referred to herein as a "FUNDING PERIOD." All Default
Periods and all Funding Periods are referred to herein, collectively, as "CASH
MANAGEMENT PERIODS" and, each, as a "CASH MANAGEMENT PERIOD."
(i) The Partnership hereby instructs Account Bank to withdraw
from the Operating Account, in the priority listed below and to the extent
available therein, by 10:00 a.m. New York time on the Business Day preceding
each Payment Date during any Cash Management Period (an "ACCOUNT FUNDING DATE"),
(i) funds in an amount equal to the Monthly Debt Service Payment Amount (as
defined below) and deposit the same into the Interest Escrow Account; (ii) funds
in an amount equal to the Monthly Tax and Insurance Payment Amount (as defined
below) and deposit the same into the Mortgage Escrow Account; and (iii) funds in
an amount equal to the Monthly Replacement Reserve Amount (as defined below) and
deposit the same into the Replacement Reserve Account. "MONTHLY DEBT SERVICE
PAYMENT AMOUNT" means an amount equal to the Debt Service Payment Amount LESS
the funds on deposit in the Interest Escrow Account at the time. "DEBT SERVICE
PAYMENT AMOUNT" means an amount equal to one-twelfth (1/12) of the annual amount
of interest on the Notes Outstanding at the time. "MONTHLY TAX AND INSURANCE
PAYMENT AMOUNT" means an amount equal to the Tax and Insurance Payment Amount
LESS the funds on deposit in the Mortgage Escrow Account at the time. "TAX AND
INSURANCE PAYMENT AMOUNT" means, with respect to each Account Funding Date, an
amount equal to the tax payments and insurance premiums required to be paid
during the six months following such Account Funding Date, as set forth in the
written instructions delivered by the Partnership pursuant to Paragraph 3(k).
"MONTHLY REPLACEMENT RESERVE AMOUNT" means an amount equal to the Replacement
Reserve Amount LESS the amount on deposit in the Replacement Reserve Account at
the time. "REPLACEMENT RESERVE AMOUNT" means an amount equal to $594,700.00. The
Partnership shall give written instructions to Account Bank, with a copy to
Trustee, on the Business Day preceding each Account Funding Date, which
instructions shall specify the respective amounts of the withdrawals from the
Operating Account and deposits into each other Account on such Funding Date.
(j) The Partnership hereby instructs Account Bank to withdraw
from the Interest Escrow Account by 11:00 a.m. Chicago time on each Payment Date
during any Cash Management Period and pay to Trustee or its designee amounts
necessary to pay the Debt Service Payment Amount due to Trustee on such Payment
Date. Trustee shall provide Account Bank with written instructions for the wire
transfer of amounts pursuant to the terms of this Paragraph 3(j), specifying the
date and amount of each such transfer.
(k) On or before the first day of each calendar year during
the term of the Notes, the Partnership shall deliver to Trustee an Officers'
Certificate specifying the approximate amount, the payee, the payee's address
and the due date of each payment of taxes and insurance premiums due during the
succeeding calendar year. During any Funding Period, Account Bank shall disburse
funds from the Mortgage Escrow Account to the Partnership from time to time to
pay all real estate taxes and insurance premiums in accordance with the written
instructions delivered pursuant to the immediately succeeding sentence which
instructions the Partnership warrants shall be in accordance with Section 5(a)
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of each Mortgage and such Officers' Certificate. The Partnership shall give
written instructions to Account Bank, with an Officers' Certificate to the
Trustee, specifying the amount, the payee, the payee's address, and due date of
each such disbursement and payment. Neither Account Bank nor Trustee shall have
any obligation to monitor or review the Partnership's application of funds
disbursed pursuant to the preceding sentence.
(l) On or before the first day of each calendar year during
the term of the Notes, the Partnership shall deliver to Trustee an Officers'
Certificate setting forth the Replacement Reserve Amount for the succeeding
calendar year. During any Cash Management Period, Account Bank shall disburse
funds from the Replacement Reserve Account to the Partnership from time to time
to pay replacement costs in accordance with the written instructions delivered
pursuant to the immediately succeeding sentence, which instructions the
Partnership warrants shall be in accordance with Section 5(b) of each Mortgage.
The Partnership shall give written instructions to Account Bank, with an
Officers' Certificate to the Trustee, specifying the date, the payee, the
payee's address, and amount of each such disbursement and payment. Neither
Account Bank nor Trustee shall have any obligation to monitor or review the
Partnership's application of funds disbursed pursuant to the preceding sentence.
(m) Account Bank shall disburse funds from the Deferred
Maintenance Account to the Partnership from time to time to reimburse the
Partnership for deferred maintenance costs paid by the Partnership in accordance
with the Required Repairs Agreement, as set forth in written instructions from
Trustee or the Servicer, on behalf of Trustee, specifying the date and amount of
each such disbursement and reimbursement. Neither Account Bank nor Trustee shall
have any obligation to monitor or review the Partnership's application of funds
disbursed pursuant to the preceding sentence.
(n) Account Bank shall disburse funds from the Deferred
Maintenance Account to the Partnership from time to time to reimburse the
Partnership for environmental remediation costs paid by the Partnership in
accordance with the written instructions delivered pursuant to the immediately
succeeding sentence which instructions the Partnership warrants shall be in
accordance with the Environmental Remediation Agreement, as set forth in an
Officers' Certificate delivered by the Partnership to Trustee describing the
amount, payee and payee's address and attaching and certifying invoices. The
Partnership shall give written instructions to the Account Bank describing the
amount, payee and payee's address. Neither Account Bank nor Trustee shall have
any obligation to monitor or review the Partnership's application of funds
disbursed pursuant to the preceding sentence.
(o) (1) The Partnership shall deliver to Trustee an Officers'
Certificate, dated as of a date within three months of any transfer of funds as
provided below in this Paragraph (o), certifying that no Event of Default has
occurred and is then continuing hereunder or under the Notes, the Indenture or
any of the other Security Documents.
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(2) Except during a Cash Management Period, the
Partnership hereby instructs Account Bank (which instructions the parties hereby
authorize Account Bank to follow, and Account Bank agrees to follow) to transfer
all amounts from the Operating Account on a daily basis to such account or
accounts of the Partnership as the Partnership may direct in writing, to pay
operating expenses of the Partnership, to make distributions to the partners of
the Partnership, or otherwise. The Partnership agrees to provide Account Bank
with standing written instructions for the wire transfer or debit of amounts to
be transferred pursuant to this clause (2).
(3) During any Funding Period, the Partnership
hereby instructs Account Bank (which instructions the parties hereby authorize
Account Bank to follow, and Account Bank agrees to follow) to transfer, on any
Payment Date, all amounts remaining in the Operating Account to such account or
accounts of the Partnership as the Partnership may direct in writing, to pay
operating expenses of the Partnership, to make distributions to the partners of
the Partnership, or otherwise. The Partnership agrees to provide Account Bank
with standing written instructions for the wire transfer or debit of amounts to
be transferred pursuant to the terms of this clause (3).
(4) Notwithstanding anything herein provided,
during any Default Period, Account Bank shall disburse funds solely to or at the
direction of Trustee, as Trustee or any Servicer on behalf of Trustee may
instruct Account Bank in writing (which instructions the Partnership hereby
authorizes Account Bank to follow, and Account Bank agrees to follow), for the
operating expenses of the Partnership, for the payment of the Obligations or for
any other purpose set forth in the Securities, the Indenture or the other
Security Documents.
(5) The funds released to the Partnership pursuant
to the provisions of this Agreement shall be free and clear of any security
interests. Account Bank and, subject to clause 3(o)(4), the Trustee shall have
no duty to monitor and review the application of funds disbursed pursuant to
this Paragraph 3(o).
(p) Trustee may at any time instruct Account Bank in writing,
specifying the date and amount of each such disbursement (which instructions the
Partnership hereby authorizes Account Bank to follow, and Account Bank agrees to
follow), to disburse funds on deposit in the Operating Account to or at the
direction of the Trustee in reimbursement of Advances made pursuant to Section
7.14 of the Indenture. Account Bank shall have no obligation to monitor or
review the application of funds disbursed pursuant to this Paragraph 3(p).
(q) Upon the occurrence of an Event of Default and the
acceleration of the Notes prior to the Permitted Merger Date, Trustee shall
promptly notify Account Bank in a Trigger Notice of such Event of Default and
acceleration and, without notice to the Partnership from Account Bank or
Trustee, (x) the Partnership shall have no further right in respect of
(including, without limitation, the right to instruct Trustee or Account Bank to
transfer from) the Accounts, and (y) Trustee, in writing, may direct Account
Bank to liquidate any amounts then invested in Permitted Investments, as set
forth on EXHIBIT C hereto (the "PERMITTED INVESTMENTS") or reinvest such amounts
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in Permitted Investments of the type described in clause (viii) of the
definition of Permitted Investments which investment shall be Evergreen 100%
Treasury Fund (the "FUND INVESTMENT") to enable Account Bank, for the benefit of
Trustee, or Trustee to exercise and enforce Trustee's rights and remedies
hereunder with respect to any Collateral.
(r) Any amounts held in any of the Accounts shall be invested,
liquidated and reinvested at the Partnership's written direction, in the name of
Account Bank, for the benefit of Trustee, as secured party in Permitted
Investments, except during a Default Period. During a Default Period, any
amounts held in any of the Accounts shall be invested at Trustee's written
direction, in the name of Account Bank, for the benefit of Trustee, as secured
party, in the Fund Investment. Amounts held in the Accounts may be commingled
for purposes of purchasing Permitted Investments. In no event shall Account Bank
or Trustee have any responsibility or liability for the types of investments
made hereunder, nor shall either of them have any duty or responsibility to
confirm that the same are in fact Permitted Investments.
(s) All of the Accounts established pursuant to this Agreement
shall be established and maintained as Eligible Accounts. An "ELIGIBLE ACCOUNT"
is a segregated trust account or accounts maintained with the corporate trust
department of a federal depository institution or state-chartered depository
institution subject to regulations regarding fiduciary funds on deposit similar
to Title 12 of the Code of Federal Regulations Section 9.10(b) which, in either
case, has corporate trust powers, acting in its fiduciary capacity.
(t) Account Bank may rely on any written instructions given to
it by the Partnership, Trustee or the Servicer. In case of conflict between the
instructions of the Partnership, on the one hand, and Trustee or any Servicer,
on the other, Account Bank will follow instructions of the Trustee or such
Servicer, as the case may be.
4. FINANCING STATEMENT; FURTHER ASSURANCES. Simultaneously herewith,
the Partnership shall execute and file (and deliver to the Trustee photostatic
confirmation of such filing) a financing statement or statements in connection
with the Collateral in the form required properly to perfect Account Bank's
security interest, for the benefit of Trustee, therein. Account Bank shall be
under no obligation to monitor such filing. At any time and from time to time,
at the expense of the Partnership, the Partnership shall promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or desirable, or that Account Bank or Trustee may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby (including, without limitation, any security
interest in and to any Permitted Investments) or to enable Account Bank or
Trustee to exercise and enforce its rights and remedies hereunder with respect
to any Collateral.
5. TRANSFERS AND OTHER LIENS. Each of the Partnership and MAALP
agrees that it will not (i) sell or otherwise dispose of any of the Collateral
except in accordance with this Agreement or (ii) create or permit to exist any
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lien upon or with respect to all or any of the Collateral, except for the lien
of the Indenture, any Mortgage or any other Security Document and the lien
granted to Account Bank, for the benefit of Trustee, under this Agreement.
6. TRUSTEE'S RIGHT TO PERFORM THE PARTNERSHIP'S OBLIGATIONS; NO
LIABILITY OF TRUSTEE. If the Partnership fails to perform any of the covenants
or obligations contained herein, and such failure shall continue for a period
five (5) Business Days after the Partnership's receipt of written notice thereof
from Trustee, Trustee may itself perform, or cause performance of, such
covenants or obligations, and the reasonable expenses of Trustee and its agents,
if any, incurred in connection therewith shall be payable by the Partnership to
Trustee in accordance with Section 10 hereof. Notwithstanding Trustee's right to
perform certain obligations of the Partnership, it is acknowledged and agreed
that the Partnership retains control of the Premises and operation thereof and
notwithstanding anything contained herein or Account Bank's or Trustee's
exercise of any of its rights or remedies hereunder, under the Notes, the
Indenture or any of the other Security Documents or otherwise at law or in
equity, neither Account Bank nor Trustee shall be deemed to be a
mortgagee-in-possession nor shall Trustee or Account Bank be subject to any
liability with respect to the Premises or otherwise based upon any claim of
trustee liability, except to the extent that any loss or damage results from
Trustee's or Account Bank's gross negligence or willful misconduct.
7. REASONABLE CARE.
(a) Account Bank shall have no liability or obligation with
respect to the Accounts except for Account Bank's willful misconduct or gross
negligence. Account Bank's sole responsibility shall be for the safekeeping,
investment and disbursement of the Accounts in accordance with the terms of this
Agreement. Account Bank shall have no implied duties or obligations and shall
not be charged with knowledge or notice of any fact or circumstance except as
specifically set forth herein. Account Bank shall not be obligated to take any
legal action or commence any proceeding in connection with the Accounts or this
Agreement.
(b) Except for the exercise of reasonable care in the custody
thereof, Trustee shall have no duty as to any Collateral in its possession or
control as agent therefor or bailee thereof or any income thereon or the
preservation of rights against any person or otherwise with respect thereto.
Trustee shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which Trustee accords its own property, it
being understood that Trustee shall not be liable or responsible for any loss or
damage to any of the Collateral, or for any diminution in value thereof, by
reason of the act or omission of Trustee, its Affiliates, agents, employees or
bailees, except to the extent that such loss or damage results from the gross
negligence or willful misconduct of Trustee.
8. REMEDIES. Upon the occurrence of an Event of Default prior to the
Permitted Merger Date, Account Bank, acting upon the written direction of
Trustee, may:
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(a) at any time or from time to time, charge, set off and
otherwise apply all or any part of the Collateral against the Obligations
or any part thereof;
(b) at any time and from time to time, exercise any and all
rights and remedies available to it under this Agreement and/or as a
secured party under the UCC; and
(c) demand, collect, take possession of, receipt for, settle,
compromise, adjust, sue for, foreclose or realize upon the Collateral (or
any portion thereof) as Trustee may determine in its sole discretion.
The Partnership hereby expressly waives, to the fullest extent
permitted by law, presentment, demand, protest or any notice of any kind in
connection with this Agreement or the Collateral (except as otherwise provided
herein). The Partnership acknowledges and agrees that ten (10) days' prior
written notice of the time and place of any public sale of the Collateral or any
other intended disposition thereof shall be reasonable and sufficient notice to
the Partnership within the meaning of the UCC.
9. NO WAIVER. The rights and remedies provided in this Agreement,
the Indenture and the other Security Documents are cumulative and may be
exercised independently or concurrently, and are not exclusive of any other
right or remedy provided at law or in equity. No failure to exercise or delay by
Account Bank or Trustee in exercising any right or remedy hereunder or under the
Indenture or the other Security Documents shall impair or prohibit the exercise
of any such rights or remedies in the future or be deemed to constitute a waiver
or limitation of any such right or remedy or acquiescence therein. Every right
and remedy granted to Account Bank and/or Trustee under Paragraph 8 or by law
may be exercised by Account Bank and/or Trustee at any time and from time to
time, and as often as Account Bank and/or Trustee may deem it expedient. Any and
all of Account Bank's and/or Trustee's rights with respect to the lien and
security interest granted hereunder shall continue unimpaired, and the
Partnership shall be and remain obligated in accordance with the terms hereof,
notwithstanding (a) any proceeding of the Partnership under the Federal
Bankruptcy Code or any bankruptcy, insolvency or reorganization laws or statutes
or any state, (b) the release or substitution of Collateral at any time, or of
any rights or interests therein except for any such release as provided in
Article Nine of the Indenture or (c) any delay, extension of time, renewal,
compromise or other indulgence granted by Account Bank and/or Trustee in the
event of any default with respect to the Collateral or otherwise hereunder or
under the Indenture or the other Security Documents. No delay or extension of
time by Account Bank and/or Trustee in exercising any power of sale, option or
other right or remedy hereunder, and no notice or demand which may be given to
or made upon the Partnership by Account Bank and/or Trustee, shall constitute a
waiver thereof, or limit, impair or prejudice Account Bank's and/or Trustee's
right, without notice or demand (except as herein provided), to take any action
against the Partnership or to exercise any other power of sale, option or any
other right or remedy.
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10. FEES AND EXPENSES. The Collateral shall secure, and the
Partnership shall pay to Account Bank and Trustee, their respective agents
and/or Account Bank's and Trustee's respective counsel on demand, from time to
time, all reasonable fees, costs and expenses (including, but not limited to,
reasonable attorneys' fees and disbursements, and transfer, recording and filing
fees, taxes and other charges) of, or incidental to, the creation or perfection
of any Lien or security interest granted or intended to be granted hereby, the
custody, care, sale, transfer, administration, investment, reinvestment,
collection of or realization on the Collateral, or in any way relating to the
enforcement, protection or preservation of the rights or remedies of Account
Bank and/or Trustee under this Agreement, the Note, the Mortgage or the other
Security Documents.
11. ACCOUNT BANK APPOINTED ATTORNEY-IN-FACT. For so long as no Event
of Default hereunder or under the Indenture, the Notes or any of the other
Security Documents shall have occurred and be continuing, the Partnership hereby
irrevocably constitutes and appoints Account Bank as the Partnership's true and
lawful attorney-in-fact, with full power of substitution, to execute,
acknowledge and deliver any instruments and to exercise and enforce every right,
power, remedy, option and privilege of the Partnership with respect to the
Collateral, and do in the name, place and stead of the Partnership, all such
acts, things and deeds for and on behalf of and in the name of the Partnership,
which the Partnership could or might do or which Account Bank or Trustee may
deem necessary or desirable to vest more fully in Account Bank, the rights and
remedies provided for herein and to accomplish the purposes of this Agreement.
The foregoing powers of attorney are irrevocable and coupled with an interest.
Subject to Paragraph 12(a) below, if the Partnership fails to perform any
agreement herein contained, Account Bank, acting upon the written direction of
Trustee, may itself perform or cause performance of any such agreement, and any
reasonable expenses of Account Bank and Trustee incurred in connection therewith
shall be paid by the Partnership as provided in Paragraph 10.
12. LIABILITY OF TRUSTEE AND ACCOUNT BANK.
(a) Account Bank and Trustee shall be responsible for the
performance only of such of their respective duties as are specifically set
forth herein, and no duty shall be implied from any provision hereof or of the
Indenture or any other Security Document. Account Bank shall not be under any
obligation or duty to perform any act which would involve it in expense or
liability or to institute or defend any suit in respect hereof, or to advance
any of its own monies. The Partnership and, following the Permitted Merger Date,
MAALP, with regard to any time period on or after the Permitted Merger Date,
shall indemnify and hold Account Bank and Trustee, their respective employees,
directors, agents, officers and "control persons" within the meaning of the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934 as
amended, harmless from and against any loss, cost, liability, damage or expense
(including, without limitation, reasonable attorneys' fees and disbursements)
incurred by Account Bank or Trustee or such other persons in connection with the
transactions contemplated hereby or by the Indenture or any other Security
Document (unless a court of competent jurisdiction shall have determined,
subject to no further appeal, that such loss, cost, liability, damage or expense
has resulted solely from the gross negligence or willful misconduct of Account
Bank or Trustee, as the case may be) and shall make such indemnification
payments on a current basis.
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(b) Account Bank and Trustee shall each be protected in acting
upon any Officers' Certificate, notice, resolution, request, consent, order,
certificate, report, opinion, bond or other paper, document or signature
believed by it to be genuine, and Account Bank and Trustee may assume that any
Person purporting to give any of the foregoing in connection with the provisions
hereof has been duly authorized to do so. Account Bank and Trustee may consult
with counsel, and the opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken or suffered by it
hereunder and in good faith in accordance therewith. Neither Account Bank nor
Trustee shall be liable to the Partnership for any act or omission done or
omitted to be done by Account Bank or Trustee in reliance upon any instruction,
direction or certification received by Account Bank from Trustee or by the
Trustee from Securityholders or the Partnership and without gross negligence or
willful or reckless misconduct of Account Bank or the Trustee.
(c) Account Bank is hereby authorized to provide information
in writing concerning the Accounts to such persons or entities as Trustee may
designate to Account Bank in writing, including, without limitation, the Rating
Agencies.
(d) If, at any time, Account Bank shall reasonably determine
that there is any dispute between any of the parties hereto with respect to the
holding or disposition of any funds in any Accounts hereunder, or if at any time
Account Bank is unable to determine, to Account Bank's satisfaction, the proper
disposition of any funds in the Accounts or Account Bank's proper actions with
respect to its obligations hereunder, then Account Bank may, in its sole
discretion, take either or both of the following actions:
(i) suspend the performance of any of its
obligations under this Agreement until such dispute or uncertainty shall be
resolved to the sole satisfaction of Account Bank or until a successor Account
Bank shall have been appointed pursuant to Section 14 hereof; or
(ii) petition (by means of an interpleader action or
any other appropriate method) any court of competent jurisdiction in Charlotte,
North Carolina, for instructions with respect to such dispute or uncertainty,
and pay into such court all funds held by it in the Accounts for holding and
disposition in accordance with the instructions of such court.
Account Bank shall have no liability to any person with respect to any such
suspension of performance or disbursement into court, specifically including any
liability or claimed liability that may arise, or to be alleged to have arisen,
out of or as a result of any delay in the disbursement of funds held in the
Accounts or any delay in or with respect to any other action required or
requested of Account Bank.
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13. CONTINUING SECURITY INTEREST. This Agreement shall create a
continuing security interest in the Collateral and shall remain in full force
and effect until the earlier of the Permitted Merger Date or payment in full of
the Notes. Upon the earlier of payment in full of the Notes or the occurrence of
the Permitted Merger Date, this Agreement shall terminate (subject to Paragraph
15) and the Partnership shall be entitled to the return, upon its request and at
its expense, of such of the Collateral as shall not have been sold or otherwise
applied pursuant to the terms hereof and Account Bank and/or Trustee shall
execute such instruments and documents prepared by the Partnership and delivered
to Account Bank or Trustee, including UCC-3 termination statements, as may be
reasonably requested by the Partnership to evidence such termination and the
release of the lien hereof.
14. RESIGNATION OF ACCOUNT BANK. (a) Account Bank shall have the
right to resign as Account Bank hereunder upon thirty (30) days' prior written
notice to the Partnership, Trustee and the Rating Agencies, and in the event of
such resignation, the Partnership shall appoint a successor Account Bank which
may be any banking institution which has a rating on its unsecured debt by the
Rating Agencies not lower than "A" or its equivalent. No such resignation by
Account Bank shall become effective until a successor Account Bank shall have
accepted such appointment and executed an instrument by which it shall have
assumed all of the rights and obligations of Account Bank hereunder. If no such
successor Account Bank is appointed within sixty (60) days after receipt of the
resigning Account Bank's notice of resignation, the resigning Account Bank may
petition a court for the appointment of a successor Account Bank. Upon the
acceptance by the successor Account Bank of its appointment, the resigning
Account Bank shall be discharged from its duties and obligations hereunder.
(b) In connection with any resignation by Account Bank, (i)
the resigning Account Bank shall, at the sole cost of the Partnership, (A) duly
assign, transfer and deliver to the successor Account Bank this Agreement and
all cash and Permitted Investments held by it hereunder, (B) execute such
financing statements and other instruments prepared by the Partnership as may be
necessary to assign to the successor Account Bank the security interest in the
Collateral existing in favor of the retiring Account Bank hereunder and to
otherwise give effect to such succession and (C) take such other actions as may
be reasonably requested by the Partnership or the successor Account Bank in
connection with the foregoing and (ii) the successor Account Bank shall
establish in its name, as secured party, cash collateral accounts which shall
become the Accounts for purposes of this Agreement upon the succession of such
Account Bank.
15. TERMINATION OF AGREEMENT. Promptly upon the earlier to occur of
(a) the receipt by Trustee of the notice from the Partnership specified in
Section 9.02(viii) of the Indenture or (b) the satisfaction and discharge of the
Indenture pursuant to Section 6.01 thereof, Trustee shall give written notice of
such event to Account Bank, Account Bank shall disburse all Collateral held by
it, in the Accounts or otherwise, to or at the direction of the Partnership, and
this Agreement shall terminate and be of no further force and effect; PROVIDED,
HOWEVER, that the provisions for the payment of fees and expenses set forth in
Paragraph 10 and the indemnification obligations of the Partnership and MAALP
set forth in Paragraph 12(a) shall continue in full force and effect.
-13-
<PAGE>
16. MISCELLANEOUS.
(a) This Agreement constitutes the entire and final agreement
between the parties with respect to the subject matter hereof and may not be
changed, terminated or otherwise varied, except by a writing duly executed by
the parties.
(b) No waiver of any term or condition of this Agreement,
whether by delay, omission or otherwise, shall be effective unless in writing
and signed by the party sought to be charged, and then such waiver shall be
effective only in the specific instance and for the purpose for which given.
(c) This Agreement shall be binding upon and inure to the
benefit of the parties hereto, their respective successors and permitted
assigns.
(d) All notices, demands, requests, consents, approvals and
other communications (any of the foregoing, a "NOTICE") required, permitted, or
desired to be given hereunder shall be in writing sent by telefax or by
registered or certified mail, postage prepaid, return receipt requested or
delivered by hand or reputable overnight courier addressed to the party to be so
notified at its address hereinafter set forth, or to such other address as such
party may hereafter specify in accordance with the provisions of this Paragraph
16(d). Any such Notice shall be deemed to have been received three (3) days
after the date such Notice is mailed or on the date of sending by telefax or
upon delivery by hand or courier addressed to the parties as follows:
If to Trustee: LaSalle National Bank
135 South LaSalle Street
Chicago, Illinois 60674-4107
Attn: Asset Backed Securities Trust
Services Group - Mid-America 1997
If to the Partnership: Mid-America Capital Partners, L.P.
1209 Orange Street
Wilmington, Delaware 19801
Attn: Simon R.C. Wadsworth
6584 Poplar Avenue, Suite 340
Memphis, Tennessee 38138
Attn: Simon R.C. Wadsworth
With a copy to: John A. Good, Esq.
Baker, Donelson, Bearman & Caldwell
165 Madison Avenue, Suite 2000
Memphis, Tennessee 38103
-14-
<PAGE>
If to MAALP: Mid-America Apartments, L.P.
6584 Poplar Avenue, Suite 340
Memphis, Tennessee 38138
Attn: Simon R.C. Wadsworth
With a copy to: John A. Good, Esq.
Baker, Donelson, Bearman & Caldwell
165 Madison Avenue, Suite 2000
Memphis, Tennessee 38103
If to Account Bank: First Union National Bank
Corporate Trust Bond Administration
9th Floor
230 South Tyron Street
Charlotte, North Carolina 28288-1179
With a copy to: David W. Dabbs, Esq.
Robinson, Bradshaw & Hinson, P.A.
101 North Tyron Street
Charlotte, North Carolina 28246
If to Bridge Lender to: Morgan Stanley Mortgage Capital, Inc.
1585 Broadway
New York, New York 10036
Attention: John Kessler
With a copy to: A. Curtis Greer, Esq.
Cadwaleder, Wickersham & Taft
100 Maiden Lane
New York, New York 10038-4892
(e) All captions in this Agreement are included herein for
convenience of reference only and shall not constitute part of this Agreement
for any other purpose.
(f) This Agreement shall be governed by and construed and enforced
in all respects in accordance with the laws of the State in which the Accounts
are located.
(g) This Agreement may be executed in any number of counterparts.
(h) The parties hereby acknowledge that the Account Bank is acting
as independent contractor under this agreement and not as agent for any of the
parties.
-15-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
ISSUER:
MID-AMERICA CAPITAL PARTNERS, L.P.,
By: MAACP, Inc., its general partner
By _____________________________________
Name:
Title:
MID-AMERICA APARTMENTS, L.P.
By: Mid-America Apartment Communities,
Inc.,
its general partner
By _____________________________________
Name:
Title:
BRIDGE LENDER:
MORGAN STANLEY MORTGAGE CAPITAL INC.
By _____________________________________
Name:
Title:
TRUSTEE:
LASALLE NATIONAL BANK, as trustee
By ______________________________
Name:
Title:
16
<PAGE>
ACCOUNT BANK:
FIRST UNION NATIONAL BANK
By ____________________________
Name:
Title:
17
<PAGE>
SCHEDULE I
LIST OF PROPERTY ACCOUNT BANKS
BANK ADDRESS ACCOUNT TITLE AND NUMBER
<PAGE>
EXHIBIT A
to Cash Collateral Agreement
LEGAL DESCRIPTIONS
OF
MORTGAGED PROPERTIES
<PAGE>
EXHIBIT B
to Cash Collateral Agreement
LETTER OF INSTRUCTION
[_______ __], 1997
[Name of Property Account Bank]
[Street Address]
[City, State, ZIP Code]
Re: Account Nos. [___________] and [___________]
(COLLECTIVELY, THE "PROPERTY ACCOUNT")
Ladies and Gentlemen:
This letter shall constitute notice to you that the undersigned has
granted a security interest in the above referenced Property Account in favor of
LaSalle National Bank, as Trustee ("TRUSTEE") under an Indenture, dated November
21, 1997, between the undersigned and the Trustee, to secure certain of the
undersigned's obligations under such Indenture. The undersigned hereby
irrevocably instructs and authorizes you to disregard any and all orders for
withdrawal from the Property Account made by or at the direction of the
undersigned or [Name of property manager] other than directions to disburse on a
daily basis all amounts that have been collected that are in the Property
Account (except to retain a maximum of $5,000 collected funds for returned
checks) by transfer of immediately available funds by automatic clearing house
("ACH") to:
Account No. 2020000176886
First Union National Bank
9th Floor
230 South Tyron Street
Charlotte, North Carolina 28288-1179
Attention: Corporate Trust Bond Administration
ABA #064000059
You hereby agree that you have no right of offset against the
Property Account and shall not exercise or attempt to exercise any such right
against the Property Account.
<PAGE>
The instructions set forth herein are irrevocable and are not
subject to modification in any manner, except that Trustee under the Indenture,
or any successor Trustee under the Indenture, may by written notice to you
rescind the instructions contained herein.
Sincerely,
MID-AMERICA CAPITAL PARTNERS, L.P.
By: MAACP, Inc., its general partner
By _____________________________
Name:
Title:
ACKNOWLEDGMENT AND AGREEMENT
The undersigned acknowledges notice of the security interest of Trustee and
hereby confirms that the undersigned is not the holder of any pledge or
assignment of the Property Account and has received no notice of any other
pledge or assignment of the Property Account. All payments made by the
undersigned to Trustee or First Union National Bank shall be made irrespective
of, and without deduction for, any counterclaim, defense, recoupment or set-off.
[NAME OF PROPERTY ACCOUNT BANK]
By: _____________________________
Name:
Its:
Dated as of: November [__], 1997
<PAGE>
EXHIBIT C
to Cash Collateral Agreement
"PERMITTED INVESTMENTS" shall mean any one or more of the following
obligations or securities acquired at a purchase price of not greater than par,
including without limitation those issued by the Trustee under the Indenture or
any of its Affiliates, payable on demand or having a maturity date not later
than the Business Day immediately prior to the first Payment Date following the
date of acquiring such investment, and meeting one of the appropriate standards
set forth below:
(i) obligations of, or obligations fully guaranteed as to
payment of principal and interest by, the United States of America or any
agency or instrumentality thereof provided such obligations are backed by the
full faith and credit of the United States of America including, without
limitation, obligations of: the U.S. Treasury (all direct or fully guaranteed
obligations), the Farmers Home Administration (certificates of beneficial
ownership), the General Services Administration (participation certificates),
the U.S. Maritime Administration (guaranteed Title XI financing), the Small
Business Administration (guaranteed participation certificates and guaranteed
pool certificates), the U.S. Department of Housing and Urban Development
(local authority bonds) and the Washington Metropolitan Area Transit
Authority (guaranteed transit bonds); PROVIDED, HOWEVER, that the investments
described in this clause (A) must have a predetermined fixed dollar of
principal due at maturity that cannot vary or change, (B) if rated by
Standard & Poor's Rating Services, must not have an "r" highlighter affixed
to their rating, (C) if such investments have a variable rate of interest,
such interest rate must be tied to a single interest rate index plus a fixed
spread (if any) and must move proportionately with that index, and (D) such
investments must not be subject to liquidation prior to their maturity;
(ii) Federal Housing Administration debentures;
(iii) obligations of the following United States government
sponsored agencies: Federal Home Loan Mortgage Corp. (debt obligations), the
Farm Credit System (consolidated systemwide bonds and notes), the Federal
Home Loan Banks (consolidated debt obligations), the Federal National
Mortgage Association (debt obligations), the Student Loan Marketing
Association (debt obligations), the Financing Corp. (debt obligations), and
the Resolution Funding Corp. (debt obligations); PROVIDED, HOWEVER, that the
investments described in this clause (A) must have a predetermined fixed
dollar of principal due at maturity that cannot vary or change, (B) if rated
by Standard & Poor's Rating Services, must not have an "r" highlighter
affixed to their rating, (C) if such investments have a variable rate of
interest, such interest rate must be tied to a single interest rate index
plus a fixed spread (if any) and must move proportionately with that index,
and (D) such investments must not be subject to liquidation prior to their
maturity;
<PAGE>
(iv) federal funds, unsecured certificates of deposit, time
deposits, bankers' acceptances and repurchase agreements with maturities of not
more than 365 days of any bank, the short term obligations of which at all times
are rated in the highest short term rating category by each Rating Agency;
PROVIDED, HOWEVER, that the investments described in this clause (A) must have a
predetermined fixed dollar of principal due at maturity that cannot vary or
change, (B) if rated by Standard & Poor's Rating Services, must not have an "r"
highlighter affixed to their rating, (C) if such investments have a variable
rate of interest, such interest rate must be tied to a single interest rate
index plus a fixed spread (if any) and must move proportionately with that
index, and (D) such investments must not be subject to liquidation prior to
their maturity;
(v) fully Federal Deposit Insurance Corporation-insured demand
and time deposits in, or certificates of deposit of, or bankers' acceptances
issued by, any bank or trust company, savings and loan association or savings
bank, the short term obligations of which at all times are rated in the highest
short term rating category by each Rating Agency; PROVIDED, HOWEVER, that the
investments described in this clause (A) must have a predetermined fixed dollar
of principal due at maturity that cannot vary or change, (B) if rated by
Standard & Poor's Rating Services, must not have an "r" highlighter affixed to
their rating, (C) if such investments have a variable rate of interest, such
interest rate must be tied to a single interest rate index plus a fixed spread
(if any) and must move proportionately with that index, and (D) such investments
must not be subject to liquidation prior to their maturity;
(vi) debt obligations with maturities of not more than 365
days and at all times rated by each Rating Agency; in its highest long-term
unsecured rating category; PROVIDED, HOWEVER, that the investments described in
this clause (A) must have a predetermined fixed dollar of principal due at
maturity that cannot vary or change, (B) if rated by Standard & Poor's Rating
Services, must not have an "r" highlighter affixed to their rating, (C) if such
investments have a variable rate of interest, such interest rate must be tied to
a single interest rate index plus a fixed spread (if any) and must move
proportionately with that index, and (D) such investments must not be subject to
liquidation prior to their maturity;
(vii) commercial paper (including both non-interest-bearing
discount obligations and interest-bearing obligations payable on demand or on a
specified date not more than one year after the date of issuance thereof) with
maturities of not more than 365 days and that at all times is rated by each
Rating Agency; in its highest short-term unsecured debt rating; provided,
HOWEVER, that the investments described in this clause (A) must have a
predetermined fixed dollar of principal due at maturity that cannot vary or
change, (B) if rated by Standard & Poor's Rating Services, must not have an "r"
highlighter affixed to their rating, (C) if such investments have a variable
rate of interest, such interest rate must be tied to a single interest rate
index plus a fixed spread (if any) and must move proportionately with that
index, and (D) such investments must not be subject to liquidation prior to
their maturity; and
(viii) units of taxable money market funds or mutual funds
(which may be funds that are managed by Account Bank, Trustee or their
respective corporate affiliates), which funds are regulated investment
companies, seek to maintain a constant net asset value per share and invest
solely in obligations backed by the full faith and credit of the United States,
2
<PAGE>
and which funds have the highest rating available from each Rating Agency for
money market funds or mutual funds (which rating, if from Standard & Poor's
Rating Services, shall be "AAAm" or "AAAmg", as applicable);
PROVIDED, HOWEVER, that such obligation or security continues to qualify as a
"cash flow investment" pursuant to Section 860G(a)(6) of the Internal Revenue
Code of 1986, as amended, earning a passive return in the nature of interest and
that no obligation or security shall be a Permitted Investment if (A) such
obligation or security evidences a right to receive only interest payments or
(B) the rights to receive principal and interest payments on such obligation or
security are derived from an underlying investment that provides a yield to
maturity in excess of 120% of the yield to maturity at par of such underlying
investment.
EXHIBIT 10.2
DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS AND SECURITY AGREEMENT
Dated as of November 21, 1997
MID-AMERICA CAPITAL PARTNERS, L.P.
(Trustor)
TO
-----------------
(Trustee)
FOR THE BENEFIT OF
LASALLE NATIONAL BANK,
as Trustee under that certain Indenture dated November 21, 1997
(Beneficiary)
LOCATION OF PROPERTY:
Prepared By and
When Recorded, Return To:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attention: Andrew J. Linder, Esq.
<PAGE>
TABLE OF CONTENTS
PAGE
PART I - GENERAL PROVISIONS
1. .................................................................. 4
2. .................................................................. 5
3. .................................................................. 5
4. .................................................................. 11
5. .................................................................. 12
6. .................................................................. 13
7. .................................................................. 14
8. .................................................................. 16
9. .................................................................. 17
10. .................................................................. 19
11. .................................................................. 19
12. .................................................................. 19
13. .................................................................. 19
14. .................................................................. 19
15. .................................................................. 19
16. .................................................................. 20
17. .................................................................. 20
18. .................................................................. 20
19. .................................................................. 21
20. .................................................................. 24
21. .................................................................. 26
22. .................................................................. 28
23. .................................................................. 29
24. .................................................................. 29
25. .................................................................. 29
26. .................................................................. 29
27. .................................................................. 29
28. .................................................................. 30
29. .................................................................. 31
30. .................................................................. 31
31. .................................................................. 31
32. .................................................................. 31
33. .................................................................. 32
34. .................................................................. 32
35. .................................................................. 32
36. .................................................................. 32
37. .................................................................. 33
38. .................................................................. 33
39. .................................................................. 33
40. .................................................................. 33
41. .................................................................. 35
42. .................................................................. 36
43. .................................................................. 36
44. .................................................................. 38
45. .................................................................. 38
46. .................................................................. 38
47. .................................................................. 38
48. .................................................................. 39
49. .................................................................. 39
50. .................................................................. 39
51. .................................................................. 39
52. .................................................................. 39
53. .................................................................. 40
54. .................................................................. 40
55. .................................................................. 41
56. .................................................................. 41
57. .................................................................. 41
58. .................................................................. 41
59. .................................................................. 41
60. .................................................................. 41
61. .................................................................. 41
62. .................................................................. 41
63. .................................................................. 41
64. Handicapped Access................................................ 42
65. Management of Trust Property...................................... 42
66. Cash Management Agreement......................................... 43
67. Contemporaneous Mortgages......................................... 43
68. Release........................................................... 44
69. Certain Rights of Beneficiary..................................... 44
70. .................................................................. 44
71. .................................................................. 45
72. .................................................................. 45
PART II - .............................................................. 45
SCHEDULE A ............................................................ 49
<PAGE>
INDEX OF DEFINED TERMS
Architect....................................................................8
Bankruptcy Code..............................................................3
Beneficiary..............................................................1, 40
Code........................................................................30
Collateral..................................................................29
Contemporaneous Mortgages...................................................43
control.....................................................................24
Deed of Trust................................................................1
Depository..................................................................10
Environmental Laws..........................................................33
Equipment....................................................................2
ERISA.......................................................................36
Escrow Fund.................................................................12
Event of Default............................................................24
Guarantor...................................................................40
Guaranty....................................................................40
Hazardous Waste.............................................................34
Improvements.................................................................1
Indebtedness.................................................................1
Independent Director........................................................24
Land.........................................................................1
Leases.......................................................................3
Loan.........................................................................1
Loan Documents..............................................................40
Management Agreement........................................................42
Manager.....................................................................42
Note.....................................................................1, 40
Other Mortgaged Properties..................................................43
Permitted Encumbrances.......................................................5
person......................................................................40
Policies.....................................................................6
Rating Agencies.............................................................18
Real Property................................................................1
Rents....................................................................3, 15
Restoration..................................................................7
Secondary Market Transactions...............................................38
SPC Member..................................................................24
Taxes.......................................................................11
Transferee..................................................................18
Trust Property...........................................................1, 40
Trustee..................................................................1, 40
Trustor..................................................................1, 40
Uniform Commercial Code......................................................2
<PAGE>
THIS DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS AND SECURITY
AGREEMENT (this "DEED OF TRUST"), made as of the 21st day of November, 1997, by
MID-AMERICA CAPITAL PARTNERS, L.P., a Delaware limited partnership having an
office at 1209 Orange Street, Wilmington, Delaware 19801 ("TRUSTOR"), to
________________________________________, having an address at
________________________________________ ("TRUSTEE") for the benefit of LASALLE
NATIONAL BANK, a national banking association having an office at 135 South
LaSalle Street, Chicago, Illinois 60674-4107 ("BENEFICIARY"), as trustee under
that certain Indenture dated November 21, 1997 (the "Indenture").
W I T N E S S E T H:
To secure the payment and performance of the Obligations (as defined
in the Indenture), including, without limitation, an indebtedness in the
aggregate principal sum of up to One Hundred and Fifty Million Dollars
($150,000,000), lawful money of the United States of America, evidenced by and
to be paid with interest in accordance with the Bridge Notes (as defined in the
Indenture) and, upon issuance of the First Mortgage Bonds (as defined in the
Indenture), the First Mortgage Bonds (the Bridge Notes and First Mortgage Bonds,
together with all extensions, renewals or modifications thereof, being
hereinafter collectively called the "NOTE", and the loan evidenced by the Note
being hereinafter referred to as the "LOAN") and all indebtedness, obligations,
liabilities and expenses due hereunder and any other Loan Document (as
hereinafter defined) (the indebtedness, interest, other sums, fees, obligations
and all other sums due under the Note and/or this Deed of Trust and/or the
Indenture and/or any other Loan Document being collectively called the
"INDEBTEDNESS"), Trustor hereby irrevocably grants, bargains, sells and conveys
to Trustee IN TRUST, WITH POWER OF SALE, and grants unto Trustee a security
interest in, the following property and rights, whether now owned or held or
hereafter acquired (collectively, the "TRUST PROPERTY"):
GRANTING CLAUSE ONE
All right, title and interest in and to the real property or
properties described on SCHEDULE A hereto (collectively, the "LAND").
GRANTING CLAUSE TWO
Any and all buildings, structures, fixtures, additions,
enlargements, extensions, modifications, repairs, replacements and improvements
now or hereafter located on the Land or any part thereof (collectively, the
"IMPROVEMENTS"; the Land and the Improvements hereinafter collectively referred
to as the "REAL PROPERTY").
GRANTING CLAUSE THREE
All easements, rights-of-way, strips and gores of land, streets,
ways, alleys, passages, sewer rights, water, water courses, water rights and
powers, oil, gas and mineral rights, air rights and development rights, zoning
rights and all estates, rights, titles, interests, privileges, liberties,
tenements, hereditaments and appurtenances of any nature whatsoever in any way
belonging, relating or pertaining to the Real Property or any part thereof, and
the reversion and reversions, remainder and remainders, and all land lying in
the bed of any street, road or avenue, opened or proposed, in front of or
adjoining the Land or any part thereof to the center line thereof and all the
estates, rights, titles, interests, dower and rights of dower, curtesy and
rights of curtesy, property, possession, claim and demand whatsoever, both in
law and in equity, of Trustor of, in and to the Real Property and every part and
parcel thereof, with the appurtenances thereto.
GRANTING CLAUSE FOUR
All machinery, equipment, fixtures and other property of every kind
and nature whatsoever owned by Trustor, or in which Trustor has or shall have an
interest (to the extent of such interest), now or hereafter located upon the
Real Property, or appurtenant thereto, and usable in connection with the present
or future operation and occupancy of the Real Property and all building
equipment, materials and supplies of any nature whatsoever owned by Trustor, or
in which Trustor has or shall have an interest (to the extent of such interest),
now or hereafter located upon the Real Property, or appurtenant thereto, or
usable in connection with the present or future operation and occupancy of the
Real Property, including but not limited to all heating, ventilating, air
conditioning, plumbing, lighting, communications and elevator machinery,
equipment and fixtures (hereinafter collectively called the "EQUIPMENT"), and
the right, title and interest of Trustor in and to any of the Equipment which
may be subject to any security agreements (as defined in the Uniform Commercial
Code of the State in which the Trust Property is located (the "UNIFORM
COMMERCIAL CODE")) superior, inferior or PARI PASSU in lien to the lien of this
Deed of Trust. In connection with Equipment which is leased to Trustor or which
is subject to a lien or security interest which is superior to the lien of this
Deed of Trust, this Deed of Trust shall also cover all right, title and interest
of each Trustor in and to all deposits, and the benefit of all payments now or
hereafter made, with respect to such Equipment.
GRANTING CLAUSE FIVE
All awards or payments, including interest thereon, which may
heretofore and hereafter be made with respect to the Real Property, or any part
thereof, whether from the exercise of the right of eminent domain (including but
not limited to any transfer made in lieu of or in anticipation of the exercise
of said right), or for a change of grade, or for any other injury to or decrease
in the value of the Real Property.
GRANTING CLAUSE SIX
All leases and subleases (including, without limitation, all
guarantees thereof) and other agreements affecting the use, enjoyment and/or
occupancy of the Real Property, or any part thereof, now or hereafter entered
into (including any use or occupancy arrangements created pursuant to Section
365(h) of Title 11 of the United States Code (the "BANKRUPTCY CODE") or
otherwise in connection with the commencement or continuance of any bankruptcy,
reorganization, arrangement, insolvency, dissolution, receivership or similar
proceedings, or any assignment for the benefit of creditors, in respect of any
tenant or occupant of any portion of the Real Property) (the "LEASES") and all
income, rents, issues, profits, revenues and proceeds, including all oil and gas
or other mineral royalties and bonuses from the Real Property(including any
payments received pursuant to Section 502(b) of the Bankruptcy Code or otherwise
in connection with the commencement or continuance of any bankruptcy,
reorganization, arrangement, insolvency, dissolution, receivership or similar
proceedings, or any assignment for the benefit of creditors, in respect of any
tenant or occupant of any portion of the Real Property and all claims as a
creditor in connection with any of the foregoing) (the "RENTS") and all proceeds
from the sale, cancellation, surrender or other disposition of the Leases and
the right to receive and apply the Rents to the payment of the Indebtedness.
GRANTING CLAUSE SEVEN
All proceeds of and any unearned premiums on any insurance policies
covering the Real Property, or any part thereof, including, without limitation,
the right to receive and apply the proceeds of any insurance, judgments, or
settlements made in lieu thereof, for damage to the Real Property, or any part
thereof.
GRANTING CLAUSE EIGHT
All tax refunds, including interest thereon, and tax abatements, and
the right to receive the same, which may be payable or available with respect to
the Real Property.
GRANTING CLAUSE NINE
The right, in the name and on behalf of Trustor, to appear in and
defend any action or proceeding brought with respect to the Real Property or any
part thereof and to commence any action or proceeding to protect the interest of
Beneficiary in the Real Property or any part thereof.
GRANTING CLAUSE TEN
All accounts receivable, utility or other deposits, contract rights,
interests, estate or other claims, both in law and in equity, which Trustor now
has or may hereafter acquire in the Real Property or any part thereof.
GRANTING CLAUSE ELEVEN
All rights which Trustor now has or may hereafter acquire, to be
indemnified and/or held harmless from any liability, loss, damage, cost or
expense (including, without limitation, attorneys' fees and disbursements)
relating to the Real Property or any part thereof, including all rights of
Trustor under that certain Contribution Agreement dated November 21, 1997 by and
between Mid-America Apartments, L.P. and Trustor and that certain Environmental
and Hazardous Substances Indemnity Agreement dated November 21, 1997 by
Mid-America Apartments, L.P. in favor of Trustor.
GRANTING CLAUSE TWELVE
All plans and specifications, maps, surveys, studies, reports,
contracts, subcontracts, service contracts, management contracts, franchise
agreements and other agreements, franchises, trade names, trademarks, symbols,
service marks, approvals, consents, permits, special permits, licenses and
rights, whether governmental or otherwise, respecting the use, occupation,
development, construction and/or operation of the Real Property or any part
thereof or the activities conducted thereon or therein, or otherwise pertaining
to the Real Property or any part thereof.
WITH RESPECT TO any portion of the Trust Property which is not real
property under the laws of the State in which the Real Property is located,
Trustor hereby grants, bargains, sells and conveys the same to Beneficiary for
the purposes set forth hereunder and the references above to Trustee shall be
deemed to be to Beneficiary with respect to such portion of the Trust Property
and Beneficiary shall be vested with all rights, powers and authority granted
hereunder or by law to Trustee with respect thereto.
TO HAVE AND TO HOLD the above granted and described Trust Property
unto and to the use and benefit of Trustee and its successors and assigns, for
the benefit of Beneficiary, forever;
PROVIDED, HOWEVER, these presents are upon the express condition, if
Trustor shall well and truly pay to Beneficiary the Indebtedness at the time and
in the manner provided in the Note, this Deed of Trust and the Indenture and
shall well and truly abide by and comply with each and every covenant and
condition set forth herein, in the Note, the Indenture and the other Loan
Documents, these presents and the estate hereby granted shall cease, terminate
and be void.
PART I - GENERAL PROVISIONS
AND Trustor represents to, covenants with and warrants to
Beneficiary that:
1. PAYMENT OF INDEBTEDNESS AND INCORPORATION OF COVENANTS,
CONDITIONS AND AGREEMENTS. Trustor shall pay the Indebtedness at the time and in
the manner provided in the Note, this Deed of Trust, the Indenture and the other
Loan Documents. All the covenants, conditions and agreements contained in the
Note and the other Loan Documents are hereby made a part of this Deed of Trust
to the same extent and with the same force as if fully set forth herein.
2. WARRANTY OF TITLE. Trustor has good and marketable title to the
Trust Property; Trustor has the right to mortgage, give, grant, bargain, sell,
alien, enfeoff, convey, confirm, pledge, lease, assign and hypothecate, and
grant a security interest in, the Trust Property; Trustor possesses an
indefeasible fee estate in the Real Property; and Trustor owns the Trust
Property free and clear of all liens, encumbrances and charges whatsoever except
those exceptions shown in the title insurance policy insuring the lien of this
Deed of Trust (this Deed of Trust and the liens, encumbrances and charges shown
as exceptions in such title policy, hereinafter collectively referred to as the
"PERMITTED ENCUMBRANCES"). Trustor shall forever warrant, defend and preserve
such title and the validity and priority of the lien of this Deed of Trust and
shall forever warrant and defend the same to Beneficiary and Trustee against the
claims of all persons whomsoever except as to the Permitted Encumbrances.
3. INSURANCE; CASUALTY.
(a) Trustor, at its sole cost and expense, shall keep the
Trust Property insured during the term of this Deed of Trust for the mutual
benefit of Trustor and Beneficiary against loss or damage by any peril covered
by a standard "all risk of physical loss" insurance policy, including, but not
limited to, riot and civil commotion, vandalism, malicious mischief, burglary,
theft and mysterious disappearance, in an amount (i) equal to at least one
hundred percent (100%) of the then "full replacement cost" of the Improvements
and Equipment, without deduction for physical depreciation and (ii) such that
the insurer would not deem Trustor a coinsurer under such policies. The policies
of insurance carried in accordance with this Paragraph shall be paid annually in
advance, shall contain a "Replacement Cost Endorsement" with a waiver of
depreciation, an "Agreed Amount Endorsement" and an "Ordinance or Law Coverage
Endorsement" and shall have a deductible no greater than $25,000 unless so
agreed by Beneficiary.
(b) Trustor, at its sole cost and expense, for the mutual
benefit of Trustor and Beneficiary, shall also obtain and maintain during the
term of this Deed of Trust the following policies of insurance:
(i) Flood insurance if any part of the Real Property is
located in an area identified by the Secretary of Housing and Urban
Development as an area having special flood hazards and in which flood
insurance has been made available under the National Flood Insurance Act
of 1968 (and any successor act thereto) in an amount at least equal to the
outstanding principal amount of the Note or the maximum limit of coverage
available with respect to the Improvements and Equipment under said Act,
whichever is less.
(ii) Comprehensive public liability insurance, including
broad form property damage, blanket contractual and personal injuries
(including death resulting therefrom) coverages containing minimum limits
per occurrence of $1,000,000.00 and $2,000,000.00 in the aggregate for any
policy year, together with at least $25,000,000.00 excess and/or umbrella
liability insurance for any and all claims, including all legal liability
imposed upon Trustor and all court costs and attorneys' fee incurred in
connection with the ownership, operation and maintenance of the Trust
Property.
(iii) Rental loss insurance in an amount equal to at least
one hundred percent of the aggregate annual amount of all rents and
additional rents payable by all of the tenants under the Leases (whether
or not such Leases are terminable in the event of a fire or casualty),
such rental loss insurance to cover the period reasonably necessary to
complete the restoration of the Improvements plus an additional thirty
(30) days after completion of such restoration. The amount of such rental
loss insurance shall be increased from time to time during the term of
this Deed of Trust as and when new Leases and renewal Leases are entered
into in accordance with the terms of this Deed of Trust, to reflect all
increased rent payable under such renewal Leases and new Leases.
(iv) Insurance against loss or damage from explosion of
steam boilers, air conditioning equipment, high pressure piping, machinery
and equipment, pressure vessels or similar apparatus now or hereafter
installed in the Improvements in an amount at least equal to the
outstanding principal amount of the Note or $2,000,000.00 whichever is
less.
(v) Such other insurance (including, without limitation,
earthquake insurance and increases in the amounts of coverage required
hereunder, taking into consideration changes in the value of money over
time, changes in liability laws and changes in prudent customs and
practices) as may from time to time be reasonably required by Beneficiary
in order to protect its interests or, if the First Mortgage Bonds shall
have been issued, required by the Rating Agencies (as hereinafter
defined), such other insurance to be furnished within thirty (30) days
after request by Beneficiary.
(c) All policies of insurance (the "POLICIES") required
pursuant to this PARAGRAPH 3 (i) shall be issued by an insurer with a claims
paying ability rating of AA or better by Standard & Poor's Rating Services and
Aa or better by Moody's Investor's Services, Inc. and otherwise reasonably
satisfactory to Beneficiary (and, if the First Mortgage Bonds shall have been
issued, satisfactory to the Rating Agencies), (ii) shall contain the standard
New York lender non-contribution clause naming Beneficiary as the person to
which all payments made by such insurance company shall be paid, (iii) shall be
maintained throughout the term of this Deed of Trust without cost to
Beneficiary, (iv) shall be delivered to Beneficiary, (v) shall comply with the
requirements hereof and contain such provisions as Beneficiary deems reasonably
necessary or desirable to protect its interest including, without limitation,
endorsements providing that neither Trustor, Beneficiary nor any other party
shall be a co-insurer under such Policies and that Beneficiary shall receive at
least thirty (30) days prior written notice of any modification or cancellation
and (vi) shall be satisfactory in form and substance to Beneficiary (and, if the
First Mortgage Bonds shall have been issued, to the Rating Agencies) and shall
be approved by Beneficiary (and, if the First Mortgage Bonds shall have been
issued, by the Rating Agencies) as to amounts, form, risk coverage, deductibles,
loss payees and insureds. Trustor shall pay the premiums for such Policies as
the same become due and payable and shall furnish to Beneficiary evidence of the
renewal of each of the Policies with receipts for the payment of the premiums or
other evidence of such payment reasonably satisfactory to Beneficiary not later
than thirty (30) days prior to the expiration date of each of the Policies
(provided, however, that Trustor is not required to furnish such evidence of
payment to Beneficiary in the event that such premiums have been paid by or on
behalf of Beneficiary pursuant to PARAGRAPH 5 hereof). If Trustor does not
furnish such evidence and receipts at least thirty (30) days prior to the
expiration of any Policy, Beneficiary may procure, but shall not be obligated to
procure, such insurance and pay the premiums therefor, and Trustor agrees to
reimburse Beneficiary for the cost of such insurance promptly on demand.
Beneficiary may, at its option and at the cost and expense of Trustor, engage an
insurance consultant to monitor the Policies and the payment of the premiums
therefor and review and approve the policies delivered by Trustor hereunder and
the forms and amounts of coverage required hereunder. The fees and costs of such
consultant shall be paid by Trustor when due.
(d) If the Improvements shall be damaged or destroyed, in
whole or in part, by fire or other casualty, Trustor shall give prompt notice
thereof to Beneficiary and prior to the making of any repairs thereto and
Beneficiary may appoint a servicer to act on its behalf in connection with such
casualty in accordance with the Indenture. Following the occurrence of fire or
other casualty, Trustor shall, regardless of whether insurance proceeds are
payable under the Policies, but provided that any proceeds paid under the policy
described in SECTION 3(A) hereof shall be made available to Trustor by
Beneficiary hereunder, promptly proceed with the repair, alteration,
restoration, replacement or rebuilding of the Improvements as near as possible
to their value, utility, condition and character prior to such damage or
destruction. Such repairs, alterations, restoration, replacement and rebuilding
are herein collectively referred to as the "RESTORATION". If the Restoration
involves structural work or the estimated cost to complete the Restoration
exceeds $500,000, the Restoration shall be performed in accordance with the
following provisions:
(i) Trustor shall procure and pay for, and shall furnish to
Beneficiary true copies of, all required governmental permits,
certificates and approvals with respect to the Restoration.
(ii) Trustor shall furnish Beneficiary, within thirty (30)
days of the casualty, evidence reasonably satisfactory to Beneficiary of
the cost to complete the Restoration.
(iii) The Restoration shall be conducted under the
supervision of an architect (the "ARCHITECT") selected by Trustor and
approved by Beneficiary (which approval shall not be unreasonably
withheld), and no such Restoration shall be made except in accordance with
detailed plans and specifications, detailed cost estimates and detailed
work schedules approved by Beneficiary (which approval shall not be
unreasonably withheld).
(iv) At the request of Beneficiary, Trustor, before
commencing any work, shall cause to be furnished to Beneficiary a surety
bond or bonds, in form and substance reasonably satisfactory to
Beneficiary, naming Trustor and Beneficiary as co-obligees, in an amount
that is not less than the estimated cost of the Restoration, issued by a
surety company or companies reasonably satisfactory to Beneficiary.
(v) The Restoration shall be prosecuted to completion with
all due diligence and in an expeditious and first class workmanlike manner
and in compliance with all laws and other governmental requirements, all
permits, certificates and approvals, all requirements or fire underwriters
and all insurance policies then in force with respect to the Real
Property.
(vi) At all times when any work is in progress, Trustor
shall maintain all insurance then required by law or customary with
respect to such work, and, prior to the commencement of any work, shall
furnish to Beneficiary duplicate originals or certificates of the policies
therefor.
(vii) Upon completion of the Restoration, Trustor shall
obtain (A) any occupancy permit which may be required for the Improvements
and (B) all other governmental permits, certificates and approvals and all
permits, certificates and approvals of fire underwriters which are
required for or with respect to the Restoration, and shall furnish true
copies thereof to Beneficiary.
(viii) An Event of Default shall be deemed to have occurred
under this Deed of Trust if Trustor, after having commenced demolition or
construction of any Improvements, shall abandon such demolition or the
construction work or shall fail to complete such demolition and
construction within a reasonable time after the commencement thereof, as
such time may be reasonably extended for any act of God, act of war, labor
and/or material shortages, work stoppages or any other cause not in the
control of Trustor.
(e) Trustor and Beneficiary shall jointly adjust and settle
all insurance claims, PROVIDED, HOWEVER, that (i) Trustor may adjust and settle
any claim not exceeding $500,000 without the consent of Beneficiary in
accordance with sound business practices and (ii) Beneficiary shall have the
right to adjust and settle such claims without the prior consent of Trustor (x)
if an Event of Default shall have occurred and be continuing or (y) if such
claim shall be for an amount not exceeding the Indebtedness and Beneficiary
shall not be obligated to allow the proceeds of such claim to be used for
restoration hereunder.. In the event of any insured loss of not more than
$500,000, the payment for such loss shall be made directly to Trustor. In the
event of any insured loss in excess of $500,000, the payment for such loss shall
be made directly to Beneficiary and Beneficiary shall have the option in its
sole discretion to apply any insurance proceeds payable under any of the
Policies to the payment of the Indebtedness or to allow all or a portion of such
proceeds to be used for the Restoration, PROVIDED that if (i) not more than
twenty percent (20%) of the net rentable area of the Improvements located on or
comprising a part of the property described on EXHIBIT A is directly affected by
such damage, destruction or loss and the amount of the loss does not exceed
twenty (20%) percent of the value of the improvements, (ii) no Event of Default
shall exist, (iii) the insurer does not deny liability to any named insured,
(iv) rental loss insurance is available and in force and effect to offset in
full any abatement of rent to which any tenant may be entitled as a result of
such damage, destruction or loss, (v) the remaining Improvements continue at all
times to comply with all applicable building, zoning and other land use laws and
regulations, and (vi) in Beneficiary's reasonable judgment, the Restoration is
practicable, shall result in an economic unit not less valuable than before the
damage, destruction or loss and can be completed within one (1) year after the
damage, destruction or loss and at least six (6) months prior to the Maturity
Date (as such term is defined in the Note). Any application of insurance
proceeds to the Indebtedness shall be to the unpaid installments of principal
due under the Note in the inverse order of their maturity, such that the regular
payments under the Note shall not be reduced or altered in any manner, and shall
be without prepayment fee or premium, except that if an Event of Default, or an
event with notice and/or the passage of time, or both, would constitute an Event
of Default, has occurred, then such application shall be subject to a prepayment
premium computed in accordance with the Note. In the event the above criteria
are satisfied or Beneficiary otherwise elects to allow the use of such proceeds
for the Restoration, such proceeds shall be disbursed in accordance with the
following provisions:
(i) Each request for an advance of insurance proceeds shall
be made on seven (7) days' prior notice to Beneficiary and shall be
accompanied by a certificate of the Architect, if one be required under
PARAGRAPH 3(D)(III) above, otherwise by an executive officer or managing
general partner or managing member of Trustor, stating (A) that all work
completed to date has been performed in compliance with the approved plans
and specifications and in accordance with all provisions of law, (B) the
sum requested is properly required to reimburse Trustor for payments by
Trustor to, or is properly due to, the contractor, subcontractors,
materialmen, laborers, engineers, architects or other persons rendering
services or materials for the Restoration (giving a brief description of
such services and materials), and that when added to all sums, if any,
previously disbursed by Beneficiary, does not exceed the value of the work
done to the date of such certificate and (C) that the amount of such
proceeds remaining in the hands of Beneficiary will be sufficient on
completion of the work to pay the same in full (giving, in such reasonable
detail as Beneficiary may require, an estimate of the cost of such
completion).
(ii) Each request for an advance of insurance proceeds
shall, to the extent permitted under applicable law, be accompanied by
waivers of liens satisfactory to Beneficiary covering that part of the
Restoration previously paid for, if any, and by a search prepared by a
title company or by other evidence reasonably satisfactory to Beneficiary,
that there has not been filed with respect to the Real Property any
mechanic's lien or other lien or instrument and that there exist no
encumbrances on or affecting the Real Property other than the Permitted
Encumbrances or otherwise approved by Beneficiary.
(iii) No advance of insurance proceeds shall be made during
the existence of a default on the part of Trustor under this Deed of
Trust, the Note or any other Loan Document.
(iv) If the cost of the Restoration (as reasonably estimated
by Beneficiary) at any time shall exceed the amount of the insurance
proceeds available therefor, insurance proceeds shall not be advanced
until Trustor, before commencing the Restoration or continuing the
Restoration, as the case may be, shall deposit the full amount of the
deficiency (or other assurances reasonably satisfactory to Beneficiary)
with Beneficiary and the amount so deposited shall first be applied toward
the cost of the Restoration before any portion of the insurance proceeds
is disbursed for such purpose.
(v) Prior to the completion of the Restoration, not more
than ninety percent (90%) of the value of the work performed from time to
time shall be advanced to pay for such work.
Upon completion of the Restoration and payment in full therefor, or
upon failure on the part of Trustor promptly to commence or diligently to
continue the Restoration, or at any time upon request by Trustor, Beneficiary
may apply the amount of any such proceeds then or thereafter in the hands of
Beneficiary to the payment of the Indebtedness; PROVIDED, HOWEVER, that nothing
herein contained shall prevent Beneficiary from applying at any time the whole
or any part of such proceeds to the curing of any default that has not been
cured within the applicable cure period under this Deed of Trust, the Note or
any other Loan Document.
(f) Insurance proceeds and any additional funds deposited by
Trustor with Beneficiary shall constitute additional security for the
Indebtedness. Trustor shall execute, deliver, file and/or record, at its
expense, such documents and instruments as Beneficiary deems necessary or
advisable to grant to Beneficiary a perfected, first priority security interest
in the insurance proceeds and such additional funds. If Beneficiary elects to
have the insurance proceeds applied to Restoration, the insurance proceeds shall
be, at Beneficiary's election, disbursed in installments by Beneficiary or by a
disbursing agent ("DEPOSITORY") selected by Beneficiary and whose fees and
expenses shall be paid by Trustor in the manner provided in PARAGRAPH 3(E)
above. Any and all out-of-pocket expenses incurred by Beneficiary in the
adjustment, collection and disbursement of insurance proceeds shall be added to
the Indebtedness and secured hereby and shall be reimbursed by Trustor upon
demand.
4. PAYMENT OF TAXES, LIENS, ETC.
(a) Trustor shall pay (unless and to the extent paid by or on
behalf of Beneficiary in accordance with SECTION 5 hereof) all taxes,
assessments, water rates and sewer rents, now or hereafter levied or assessed or
imposed against the Trust Property or any part thereof (the "TAXES") and all
ground rents, maintenance charges, other governmental impositions, and other
charges, including, without limitation, vault charges and license fees for the
use of vaults, chutes and similar areas adjoining the Real Property, prior to
any delinquency with respect thereto. Trustor will deliver to Beneficiary,
promptly upon Beneficiary's request, evidence satisfactory to Beneficiary that
the Taxes and said charges, fees and impositions have been so paid and are not
then delinquent. Trustor shall not suffer or permit any lien or charge
(including, without limitation, any mechanic's lien) against all or any part of
the Trust Property and Trustor shall promptly cause to be paid and discharged
any lien or charge whatsoever which may be or become a lien or charge against
the Trust Property. Trustor shall promptly pay for all utility services provided
to the Trust Property. Beneficiary may, at its option, retain the services of a
firm to monitor the payment of Taxes, the cost of which shall be borne by
Trustor.
(b) Notwithstanding the provisions of subsection (a) of this
PARAGRAPH 4, Trustor shall have the right to contest in good faith the amount or
validity of any such Taxes, lien or charge (including, without limitation, tax
liens and mechanics' liens) referred to in subsection (a) above by appropriate
legal proceedings and in accordance with all applicable law, after notice to,
but without cost or expense to, Beneficiary, provided that (i) no Event of
Default shall exist under the Note, this Deed of Trust or any other Loan
Document which shall not have been cured, (ii) Trustor pays such Taxes, lien or
charge as same become due and payable, unless Trustor delivers evidence
satisfactory to Beneficiary that, as a result of Trustor's contest, Trustor's
obligation to pay such Taxes, lien or charge has been deferred by the
appropriate governmental authority, in which event, Trustor may defer such
payment of such Taxes, lien or charge until the date specified by such
governmental authority, (iii) such contest shall be promptly and diligently
prosecuted by and at the expense of Trustor, (iv) Beneficiary shall not thereby
suffer any civil penalty, or be subjected to any criminal penalties or
sanctions, (v) such contest shall be discontinued and, to the extent not
previously paid, such Tax, lien or charge promptly paid if at any time all or
any part of the Trust Property shall be in imminent danger of being foreclosed,
sold, forfeited, or otherwise lost or if the lien of this Deed of Trust or the
priority thereof shall be in imminent danger of being impaired, (vi) Trustor
shall have set aside adequate reserves (in Beneficiary's reasonable judgment)
for the payment of such Taxes, lien or charge, to the extent not previously
paid, together with all interest and penalties thereon and (vii) Trustor shall
have furnished such security as may be required in the proceeding, or as may be
reasonably requested by Beneficiary, to insure the payment of any such Taxes,
lien or charge, together with all interest and penalties thereon.
5. ESCROW FUNDS FOR TAXES, INSURANCE AND REPLACEMENTS.
(a) During any Cash Management Period (as defined in the Indenture),
Trustor shall, at the request of Beneficiary, pay to Beneficiary on the first
day of each calendar month after such request an amount equal to (a) one-twelfth
of an amount which would be sufficient to pay, at least thirty (30) days prior
to the date the Taxes are due without the payment of any penalties or interest,
the Taxes estimated by Beneficiary to be payable, during the next ensuing twelve
(12) months and (b) one-twelfth of an amount which would be sufficient to pay,
at least thirty (30) days prior to their due date for the renewal of the
coverage afforded by the Policies upon the expiration thereof, the insurance
premiums for the Policies estimated by Beneficiary to be payable on such due
date (said amounts in (a) and (b) above hereinafter called the "TAX AND
INSURANCE ESCROW FUND"). Trustor hereby pledges to Beneficiary any and all
monies now or hereafter deposited as the Tax and Insurance Escrow Fund as
additional security for the payment of the Indebtedness. Beneficiary will apply
the Tax and Insurance Escrow Fund to payments of Taxes and insurance premiums
required to be made by Trustor pursuant to the terms hereof; PROVIDED, HOWEVER,
if there is an Event of Default which is continuing, then Beneficiary may credit
such Tax and Insurance Escrow Fund against the Indebtedness in such priority and
proportions as Beneficiary in its discretion shall deem proper. If the amount of
the Tax and Insurance Escrow Fund shall exceed the amounts due for Taxes and
insurance premiums for the Policies pursuant to the terms hereof, Beneficiary
shall, in its discretion, return any excess to Trustor without interest or, if
future Tax and Insurance Escrow Fund payments are then required, credit such
excess against such future payments; PROVIDED, HOWEVER, if there is an Event of
Default which is continuing, then Beneficiary may credit such excess against the
Indebtedness in such priority and proportions as Beneficiary in its discretion
shall deem proper. If the Tax and Insurance Escrow Fund is not sufficient to
fully pay for the Taxes and/or the insurance premiums when due, Trustor shall
promptly pay to Beneficiary, upon demand, an amount which Beneficiary shall
estimate as sufficient to make up the deficiency. The Tax and Insurance Escrow
Fund shall not constitute a trust fund and may be commingled with other monies
held by Beneficiary. No earnings or interest on the Tax and Insurance Escrow
Fund shall be payable to Trustor.
(b) During any Cash Management Period (as defined in the
Indenture), Trustor shall pay to Beneficiary on the first day of each calendar
month the amount required to be paid under the Cash Collateral Agreement (as
defined in the Indenture), which shall be deposited with and held by Beneficiary
for repairs and replacements to the Improvements and Equipment which would
normally be treated as a capital improvement under generally accepted accounting
principles (collectively, the "REPLACEMENTS") and for any other work approved by
Beneficiary (the "REPLACEMENT ESCROW Fund"). Beneficiary may in its reasonable
discretion reassess its estimate of the amount necessary for the Replacement
Escrow Fund from time to time and in its discretion, and may adjust the monthly
amounts required to be deposited into the Replacement Escrow Fund by thirty (30)
days notice to Trustor. Beneficiary shall make disbursements from the
Replacement Escrow Fund as requested by Trustor and approved by Beneficiary in
its sole discretion no more frequently than once in any thirty (30) day period
upon delivery by Trustor of (i) a written request for payment specifying the
Replacements for which payment is sought and (ii) a certificate from Trustor (A)
that the items to be funded by the requested disbursement are Replacements, (B)
that all Replacements to be funded by the requested disbursement have been
completed in good and workmanlike manner and in accordance with all applicable
federal, state and local laws, rules and regulations, such certificate to be
accompanied by a copy of any license, permit or other approval by any
governmental authority required in connection with the Replacements, and (C)
that each person that supplied materials or labor in connection with the
Replacements to be funded by the requested disbursement has been paid in full or
will be paid in full upon such disbursement, such certificate to be accompanied
by a list of such persons and lien waivers or other evidence reasonably
satisfactory to Beneficiary that such persons have been or will be, upon such
disbursement, paid in full. Beneficiary may require an inspection of the Trust
Property at Trustor's expense prior to making a monthly disbursement in order to
verify completion of replacements and repairs of items in excess of $50,000.00
for which reimbursement is sought. The Replacement Escrow Fund shall be held in
an interest bearing account in Beneficiary's name at a financial institution
selected by Beneficiary in its sole discretion. All earnings or interest on the
Replacement Escrow Fund shall be and become part of such Replacement Escrow Fund
and shall be disbursed as provided in this PARAGRAPH 6(B). Until expended or
applied as above provided, the Replacement Escrow Fund shall constitute
additional security for the Indebtedness. The Replacement Escrow Fund shall not
constitute a trust fund and may be commingled with other monies held by
Beneficiary.
(c) Trustor hereby pledges to Beneficiary and grants to Beneficiary
a security interest in any and all monies now or hereafter deposited in the Tax
and Insurance Escrow Fund and the Replacement Escrow Fund as additional security
for the payment of the Indebtedness. Upon the occurrence of an Event of Default,
Beneficiary may apply any sums then present in the Tax and Insurance Escrow Fund
and/or the Replacement Escrow Fund to the payment of the Indebtedness in any
order in its sole discretion.
6. CONDEMNATION. Trustor shall promptly give Beneficiary and Trustee
notice of the actual or threatened commencement of any condemnation or eminent
domain proceeding and Beneficiary may appoint a servicer to act on its behalf in
connection with such proceeding in accordance with the Indenture. Trustor shall
deliver to Beneficiary and Trustee copies of any and all papers served in
connection with such proceedings. Following the occurrence of a condemnation,
Trustor, regardless of whether an award is available, shall promptly proceed to
restore, repair, replace or rebuild the Improvements to the extent practicable
to be an economic unit adequately securing the indebtedness of substantially the
same character, condition and utility as prior to such condemnation, such
Restoration to be effected in accordance with applicable law and the
requirements of SECTION 3(D) hereof. Notwithstanding any taking by any public or
quasi-public authority through eminent domain or otherwise (including but not
limited to any transfer made in lieu of or in anticipation of the exercise of
such taking), Trustor shall continue to pay the Indebtedness at the time and in
the manner provided for its payment in the Note, in this Deed of Trust and the
other Loan Documents and the Indebtedness shall not be reduced until any award
or payment therefor shall have been actually received after expenses of
collection and applied by Beneficiary to the discharge of the Indebtedness.
Beneficiary shall not be limited to the interest paid on the award by the
condemning authority but shall be entitled to receive out of the award interest
at the rate or rates provided herein and in the Note. Trustor shall cause the
award or payment made in any condemnation or eminent domain proceeding, which is
payable to Trustor, to be paid directly to Beneficiary and, in furtherance
thereof, Beneficiary is hereby irrevocably appointed as Trustor's
attorney-in-fact, coupled with an interest, to collect, receive and retain any
award or payment. Beneficiary may apply any such award or payment (for purposes
of this PARAGRAPH 6, the award or payment that may be made in any condemnation
or eminent domain proceeding shall mean the entire award allocated to Trustor in
any capacity) to the discharge of the Indebtedness whether or not then due and
payable (such application to be without prepayment fee or premium, except that
if an Event of Default, or an event with notice and/or the passage of time, or
both, would constitute an Event of Default, has occurred, then such application
shall be subject to a prepayment premium computed in accordance with the Note).
If the Trust Property is sold, through foreclosure or otherwise, prior to the
receipt by Beneficiary of such award or payment, Beneficiary shall have the
right, whether or not a deficiency judgment on the Note shall have been sought,
recovered or denied, to receive said award or payment, or a portion thereof
sufficient to pay the Indebtedness. Notwithstanding the foregoing, provided (i)
the cost of Restoration does not exceed twenty percent (20%) of the value of the
improvements], (ii) no Event of Default shall exist, (iii) the remaining
Improvements shall comply with all applicable building, zoning and other land
use laws and regulations, and (iv) in Beneficiary's judgment, the Restoration
can be completed within one (1) year after such taking and six (6) months prior
to the Maturity Date, then such award shall be made available for Restoration
and disbursed in the manner provided in SECTION 3(E) hereof for the disbursement
of insurance proceeds.
7. LEASES AND RENTS.
(a) Trustor does hereby absolutely and unconditionally assign
to Beneficiary its right, title and interest in all current and future Leases
and Rents, it being intended by Trustor that this assignment constitutes a
present, absolute assignment and not an assignment for additional security only.
Such assignment to Beneficiary shall not be construed to bind Beneficiary to the
performance of any of the covenants, conditions or provisions contained in any
such Lease or otherwise to impose any obligation upon Beneficiary. Trustor
agrees to execute and deliver to Beneficiary such additional instrument in form
and substance satisfactory to Beneficiary, as may hereafter be requested by
Beneficiary to further evidence and confirm such assignment. Nevertheless,
subject to the terms of this PARAGRAPH 7, Beneficiary grants to Trustor a
revocable license to operate and manage the Trust Property and to collect the
Rents. Trustor shall hold the Rents, or a portion thereof sufficient to
discharge all current sums due on the Indebtedness, in trust for the benefit of
Beneficiary for use in the payment of such sums. Upon the occurrence of an Event
of Default, the license granted to Trustor herein shall be automatically revoked
and Beneficiary shall immediately be entitled to possession of all Rents,
whether or not Beneficiary enters upon or takes control of the Trust Property.
Beneficiary is hereby granted and assigned by Trustor the right, at its option,
upon the revocation of the license granted herein to enter upon the Trust
Property in person, by agent or by court-appointed receiver to collect the
Rents. Any Rents collected after the revocation of the license herein granted
may be applied toward payment of the Indebtedness in such priority and
proportion as Beneficiary in its discretion shall deem proper. It is further the
intent of Trustor and Beneficiary that the Rents hereby absolutely assigned are
no longer, during the term of this Deed of Trust, property of Trustor or
property of any estate of Trustor as defined in Section 541 of the Bankruptcy
Code and shall not constitute collateral, cash or otherwise, of Trustor. The
term "Rents" as used herein shall mean the gross rents without deduction or
offsets of any kind.
(b) Trustor shall not, without the prior consent of
Beneficiary, lease all or any part of the Real Property except that Trustor may,
in the ordinary course of its business and in accordance with sound business
practice, enter into leases of individual apartments in the Improvements
provided that such leases are (i) for market rents, (ii) for a term of not
substantially more than three (3) years, (iii) substantially in the form of the
standard form of lease approved by Beneficiary or another form not materially
less favorable to the lessor thereunder or to Beneficiary. Upon request, Trustor
shall promptly furnish Beneficiary with executed copies of all Leases.
(c) Trustor shall not, without the prior consent of
Beneficiary (i) cancel, terminate, abridge or otherwise modify the terms of any
Lease, or accept a surrender thereof, (ii) consent to any assignment of or
subletting under any Lease not in accordance with its terms, (iii) cancel,
terminate, abridge or otherwise modify any guaranty of any Lease or the terms
thereof, (iv) accept prepayments of installments of Rents for a period of more
than one (1) month in advance or (v) further assign the whole or any part of the
Leases or the Rents, PROVIDED, HOWEVER, that Trustor may, in the ordinary course
of its business, without the prior consent of Beneficiary, and in accordance
with sound business practice, (A) terminate any Lease upon a default thereunder,
(B) amend any Lease provided such amendment does not materially increase the
obligations of Trustor, as landlord, or violate any of the requirements of
PARAGRAPH 7(B) above, (C) consent to any assignment or subletting of any Lease
or (D) accept prepayments of installments of Rents for a period of up to three
(3) months in advance provided that (i) a Cash Management Period (as defined in
the Indenture) does not exist and (ii) the aggregate amount of such prepaid
Rents shall not exceed five percent (5%) of the aggregate annual Rents.
(d) With respect to each Lease, Trustor shall (i) fulfill or
perform each and every material provision thereof on the lessor's part to be
fulfilled or performed in all material respects in accordance with sound
business practices, (ii) if requested by Beneficiary following and during the
continuance of an Event of Default, promptly send copies to Beneficiary of all
notices of default which Trustor shall send or receive thereunder and (iii)
enforce all of the material terms, covenants and conditions contained in such
Lease upon the lessee's part to be performed in accordance with sound business
practices. Upon the occurrence of any Event of Default under this Deed of Trust,
Trustor shall pay monthly in advance to Beneficiary, or any receiver appointed
to collect the Rents, the fair and reasonable rental value for the use and
occupation of the Trust Property or part of the Trust Property as may be
occupied by Trustor or any one Trustor and upon default in any such payment
Trustor shall vacate and surrender possession of the Trust Property to
Beneficiary or to such receiver and, in default thereof, Trustor may be evicted
by summary proceedings or otherwise.
(e) All security deposits of tenants, whether held in cash or
any other form, shall not be commingled with any other funds of Trustor and, if
cash, shall be deposited by Trustor at such commercial or savings bank or banks
as may be reasonably satisfactory to Beneficiary. Any bond or other instrument
which Trustor is permitted to hold in lieu of cash security deposits under any
applicable legal requirements shall be maintained in full force and effect in
the full amount of such deposits unless replaced by cash deposits as hereinabove
described, shall be issued by an institution reasonably satisfactory to
Beneficiary, shall, if permitted pursuant to any legal requirements, name
Beneficiary as payee or beneficiary thereunder (or at Beneficiary's option, be
fully assignable to Beneficiary) and shall, in all respects, comply with any
applicable legal requirements and otherwise be reasonably satisfactory to
Beneficiary. Trustor shall, upon request, provide Beneficiary with evidence
reasonably satisfactory to Beneficiary of Trustor's compliance with the
foregoing. Following the occurrence and during the continuance of any Event of
Default, Trustor shall, upon Beneficiary's request, if permitted by any
applicable legal requirements, turn over to Beneficiary the security deposits
(and any interest theretofore earned thereon) with respect to all or any portion
of the Trust Property, to be held by Beneficiary subject to the terms of the
Leases.
8. MAINTENANCE AND USE OF TRUST PROPERTY. Trustor shall, at its sole
cost and expense, keep and maintain the Trust Property, including, without
limitation, parking lots and recreational and landscaped portions thereof, if
any, in good order and condition. The Improvements and the Equipment shall not
be diminished, removed, demolished or materially altered (except for normal
replacement of Equipment) and Trustor shall not erect any new buildings,
structures or building additions on the Trust Property without the prior consent
of Beneficiary, which consent shall not be unreasonably withheld. Trustor shall
promptly comply in all material respects with all laws, orders and ordinances
affecting the Trust Property, or the use thereof, PROVIDED, HOWEVER, that
nothing in the foregoing clause shall require Trustor to comply with any such
law, order or ordinance (and failure to so comply shall not be a default
hereunder) so long as Trustor shall in good faith, after notice to, but without
cost or expense to, Beneficiary, contest the validity of such law, order or
ordinance by appropriate legal proceedings and in accordance with all applicable
law, which proceedings must operate to prevent (a) the enforcement thereof, (b)
the payment of any fine, charge or penalty, (c) the sale or forfeiture of the
Trust Property or any part thereof, (d) the lien of this Deed of Trust and the
priority thereof from being impaired, (e) the imposition of criminal liability
on Beneficiary and (f) the imposition, unless stayed, of civil liability on
Beneficiary; provided that during such contest Trustor shall, at the option of
Beneficiary, provide cash, bonds or other security satisfactory to Beneficiary,
indemnifying and protecting Beneficiary against any liability, loss or injury by
reason of such non-compliance or contest, and provided further, that such
contest shall be promptly and diligently prosecuted by and at the expense of
Trustor. Trustor shall promptly, at its sole cost and expense, repair, replace
or rebuild any part of the Trust Property which may be destroyed by any
casualty, or become damaged, worn or dilapidated. Trustor shall not commit any
waste at the Trust Property. Trustor shall not initiate, join in, acquiesce in,
or consent to any change in any private restrictive covenant, zoning law or
other public or private restriction, limiting or defining the uses which may be
made of the Trust Property or any part thereof. If under applicable zoning
provisions the use of all or any portion of the Trust Property is or shall
become a nonconforming use, Trustor will not cause or permit such nonconforming
use to be discontinued or abandoned without the express consent of Beneficiary.
Trustor covenants and agrees that it shall operate the Trust Property at all
times as a multifamily dwelling.
9. TRANSFER OR ENCUMBRANCE OF THE TRUST PROPERTY.
(a) Trustor acknowledges that (i) Beneficiary has a valid
interest in maintaining the value of the Trust Property so as to ensure that,
should Trustor default in the repayment of the Indebtedness, Beneficiary can
recover the Indebtedness by a sale of the Trust Property and (ii) ownership of
the Trust Property by Trustor is a material factor in maintaining the value of
the Trust Property as security for repayment of the Indebtedness. Trustor shall
not, without the prior consent of Beneficiary, sell, convey, alienate, mortgage,
encumber, pledge or otherwise transfer the Trust Property or any part thereof,
or permit the Trust Property or any part thereof to be sold, conveyed,
alienated, mortgaged, encumbered, pledged or otherwise transferred.
(b) A sale, conveyance, alienation, mortgage, encumbrance,
pledge or transfer within the meaning of this PARAGRAPH 9 shall be deemed to
include (i) an installment sales agreement wherein Trustor agrees to sell the
Trust Property or any part thereof for a price to be paid in installments, (ii)
an agreement by Trustor leasing all or a substantial part of the Trust Property
for other than actual occupancy by a space tenant thereunder or a sale,
assignment or other transfer of, or the grant of a security interest in,
Trustor's right, title and interest in and to any Leases or any Rents, (iii) if
Trustor, Guarantor (as hereinafter defined), or any general partner or managing
member of Trustor or Guarantor is a corporation, the voluntary or involuntary
sale, conveyance or transfer of such corporation's stock (or the stock of any
corporation directly or indirectly controlling such corporation by operation of
law or otherwise) or the creation or issuance of new stock in one or a series of
transactions by which an aggregate of more than 10% of such corporation's stock
shall be vested in a party or parties who are not now stockholders or any change
in the control of such corporation and (iv) if Trustor, any Guarantor or any
general partner or managing member of Trustor or any Guarantor is a limited or
general partnership, joint venture or limited liability company, the change,
removal, resignation or addition of a general partner, managing partner, limited
partner, joint venturer or member or the transfer of the partnership interest of
any general partner, managing partner or limited partner or the transfer of the
interest of any joint venturer or member.
(c) Beneficiary shall not be required to demonstrate any
actual impairment of its security or any increased risk of default hereunder in
order to declare the Indebtedness immediately due and payable upon Trustor's
sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer of the
Trust Property without Beneficiary's consent. This provision shall apply to
every sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer of
the Trust Property regardless of whether voluntary or not, or whether or not
Beneficiary has consented to any previous sale, conveyance, alienation,
mortgage, encumbrance, pledge or transfer of the Trust Property.
(d) Beneficiary's consent to one sale, conveyance, alienation,
mortgage, encumbrance, pledge or transfer of the Trust Property shall not be
deemed to be a waiver of Beneficiary's right to require such consent to any
future occurrence of same. Any sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of the Trust Property made in contravention of
this paragraph shall be null and void and of no force and effect.
(e) Trustor agrees to bear and shall pay or reimburse
Beneficiary on demand for all reasonable expenses (including, without
limitation, attorneys' fees and disbursements, based on actual time and expenses
incurred at normal hourly rates, title search costs and title insurance
endorsement premiums) incurred by Beneficiary in connection with the review,
approval and documentation of any such sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer.
(f) Beneficiary's consent to the sale or transfer of the Trust
Property will not be unreasonably withheld after consideration of all relevant
factors, provided that:
(i) no Event of Default or event which with the giving of
notice or the passage of time would constitute an Event of Default shall
have occurred and remain uncured;
(ii) the proposed transferee ("TRANSFEREE") shall be a
reputable entity or person of good character, creditworthy, with
sufficient financial worth considering the obligations assumed and
undertaken, as evidenced by financial statements and other information
reasonably requested by Beneficiary;
(iii) the Transferee and its property manager shall have
sufficient experience in the ownership and management of properties
similar to the Trust Property, and Beneficiary shall be provided with
reasonable evidence thereof (and Beneficiary reserves the right to approve
the Transferee without approving the substitution of the property
manager);
(iv) to the extent applicable, Beneficiary shall have
received in writing evidence from the Rating Agencies to the effect that
such transfer will not result in a qualification, reduction or withdrawal
of any rating then assigned or to be assigned to the First Mortgage Bonds
or in a Secondary Market Transaction together with such legal opinions as
may be requested by the Rating Agencies. The term "RATING AGENCIES" as
used herein shall mean each of Standard & Poor's Ratings Services, Moody's
Investors Service, Inc., Duff & Phelps Credit Rating Co., Fitch Investors
Service, Inc. or any other nationally-recognized statistical rating agency
who shall then be rating the First Mortgage Bonds or the certificates or
securities issued in connection with the First Mortgage Bonds or the
Secondary Market Transaction; and
(v) the Transferee shall have executed and delivered to
Beneficiary an assumption agreement in form and substance acceptable to
Beneficiary, evidencing such Transferee's agreement to abide and be bound
by the terms of the Note, this Deed of Trust and the other Loan Documents,
together with such legal opinions and title insurance endorsements as may
be reasonably requested by Beneficiary.
10. ESTOPPEL CERTIFICATES. Trustor, within ten (10) business days
after request by Beneficiary, shall furnish Beneficiary from time to time with a
statement, duly acknowledged and certified, setting forth (i) the amount of the
original principal amount of the Note, (ii) the unpaid principal amount of the
Note, (iii) the rate of interest in the Note, (iv) the date through which all
installments of interest, commitment fees and/or principal have been paid, (v)
any offsets or defenses to the payment of the Indebtedness, if any, (vi) that
the Note and this Deed of Trust have not been modified or if modified, giving
particulars of such modification and (vii) such other information as shall be
requested by Beneficiary.
11. NO COOPERATIVE OR CONDOMINIUM. Trustor shall not operate the
Trust Property, or permit the Trust Property to be operated as a cooperative or
condominium building or buildings in which the tenants or occupants participate
in the ownership, control or management of the Trust Property or any part
thereof, as tenant stockholders or otherwise.
12. CHANGES IN THE LAWS REGARDING TAXATION. If any law is enacted or
adopted or amended after the date of this Deed of Trust which deducts the
Indebtedness or any portion thereof from the value of the Trust Property for the
purpose of taxation or which imposes a tax, either directly or indirectly, on
the principal amount of the Note or Beneficiary's interest in the Trust
Property, Trustor will pay such tax, with interest and penalties thereon, if
any. In the event Beneficiary is advised by counsel chosen by it that the
payment of such tax or interest and penalties by Trustor would be unlawful or
taxable to Beneficiary or unenforceable or provide the basis for a defense of
usury, then in any such event, Beneficiary shall have the option, by notice of
not less than thirty (30) days, to declare the Indebtedness immediately due and
payable.
13. NO CREDITS ON ACCOUNT OF THE INDEBTEDNESS. Trustor will not
claim or demand or be entitled to any credit or credits on account of the
Indebtedness for any part of the Taxes assessed against the Trust Property or
any part thereof and no deduction shall otherwise be made or claimed from the
taxable value of the Trust Property, or any part thereof, by reason of this Deed
of Trust or the Indebtedness. In the event such claim, credit or deduction shall
be required by law, Beneficiary shall have the option, by notice of not less
than thirty (30) days, to declare the Indebtedness immediately due and payable.
14. DOCUMENTARY STAMPS. If at any time the United States of America,
any State thereof or any subdivision of any such State shall require revenue or
other stamps to be affixed to the Note or this Deed of Trust, or impose any
other tax or charge on the same, Trustor will pay for the same, with interest
and penalties thereon, if any.
15. RIGHT OF ENTRY. Beneficiary and its agents shall have the right
to enter and inspect the Trust Property at any time during reasonable business
hours upon twenty-four (24) hour notice to Trustor, except in the case of an
emergency, in which event Beneficiary and its agents may enter and inspect the
Trust Property at any time.
16. BOOKS AND RECORDS. Trustor will maintain full, accurate and
complete books of accounts and other records reflecting the results of the
operations of the Trust Property as well as its other operations and will
furnish, or cause to be furnished, to Beneficiary from time to time such
information and reports about the financial condition of Trustor and the Trust
Property as shall be required under the Indenture. In the event of a Secondary
Market Transaction, Trustor shall furnish from time to time such information
relating to Trustor and the Trust Property as shall be requested by the Rating
Agencies.
17. PERFORMANCE OF OTHER AGREEMENTS. Trustor shall observe and
perform in all material respects each and every term to be observed or performed
by such Trustor pursuant to the terms of any agreement or recorded instrument
affecting or pertaining to the Trust Property.
18. REPRESENTATIONS AND COVENANTS CONCERNING LOAN AND TRUST
PROPERTY. Trustor represents, warrants and covenants as follows:
(a) The Note, this Deed of Trust and the other Loan Documents
are not subject to any right of rescission, set-off, counterclaim or defense,
including the defense of usury, nor would the operation of any of the terms of
the Note, this Deed of Trust and the other Loan Documents, or the exercise of
any right thereunder, render this Deed of Trust unenforceable, in whole or in
part, or subject to any right of rescission, set-off, counterclaim or defense,
including the defense of usury.
(b) The Trust Property is in compliance in all material
respects with all statutes, ordinances, regulations and other governmental or
quasi-governmental requirements and private covenants now or hereafter relating
to the ownership, construction, use or operation of the Real Property. All
material certifications, permits, licenses and approvals, including, without
limitation, certificates of completion and occupancy permits required for the
legal use, occupancy of the Real Property, have been obtained and are in full
force and effect.
(c) All of the Improvements lie wholly within the boundaries
and building restriction lines of the Real Property, and no improvements on
adjoining properties encroach upon the Real Property, and no easements or other
encumbrances upon the Land encroach upon any of the Improvements, so as to
affect the value or marketability of the Real Property except those which are
insured against by title insurance. All of the Improvements comply with all
requirements of applicable zoning and subdivision laws and ordinances in all
material respects.
(d) The Real Property is not subject to any Leases other than
(i) the leases described in the rent roll delivered to Beneficiary in connection
with this Deed of Trust (such rent roll, together with any past due listings,
prepaid registers or other reports relating to the Existing Leases, being the
"RENT ROLL") and (ii) leases entered into after the date of such Rent Roll in
compliance with the requirements of PARAGRAPH 7(C) hereof (the "EXISTING
LEASES"). No person has any possessory interest in the Real Property or right to
occupy the same except under and pursuant to the provisions of the Existing
Leases. Except as set forth in the Rent Roll, the Existing Leases are in full
force and effect and the rents due thereunder have been paid through the current
month. All Existing Leases having a term in excess of three (3) years, if any,
are subordinate to the Deed of Trust.
(e) The Real Property is free of material damage and is in
good repair except for the repairs set forth in and required to be made under
the Required Repairs Agreement of even date herewith, and there is no proceeding
pending for the total or partial condemnation of, or affecting, the Real
Property.
(f) There has not been and shall never be committed by Trustor
or, to the knowledge of Trustor, any other person in occupancy of or involved
with the operation or use of the Real Property any act or omission affording the
federal government or any state or local government the right of forfeiture as
against the Real Property or any part thereof or any monies paid in performance
of Trustor's obligations under any of the Loan Documents. Trustor hereby
covenants and agrees not to commit, permit or suffer to exist any act or
omission affording such right of forfeiture.
(g) The financial statements heretofore furnished to
Beneficiary are, as of the dates specified therein, complete and correct in all
material respects and fairly present the financial condition of the Trustor and
any other persons or entities that are the subject of such financial statements,
and are prepared in accordance with generally accepted accounting principles.
Trustor does not have any contingent liabilities, liabilities for taxes or
unrealized or anticipated losses that are known to Trustor and reasonably likely
to have a materially adverse effect on the Trust Property or the operation
thereof except as referred to or reflected in said financial statements. Since
the date of such financial statements, there has been no materially adverse
change in the financial condition, operation or business of Trustor from that
set forth in said financial statements.
(h) The Trust Property has rights of access to public ways and
water, sewer, sanitary sewer and storm drain facilities adequate for its current
uses. All utilities serving the Trust Property are located in a public
right-of-way abutting the Trust Property or easements benefitting the Trust
Property and serve the Trust Property without passing over any other property.
All roads serving the Trust Property have been completed and dedicated to public
use and accepted by all governmental authorities or are the subject of access
easements for the benefit of the Trust Property.
19. SINGLE PURPOSE ENTITY/SEPARATENESS. Trustor represents, warrants
and covenants as follows:
(a) Trustor does not own and will not own any encumbered asset
or property other than (i) the Trust Property and the Other Mortgaged Property,
and (ii) incidental personal property necessary for the ownership or operation
of the Trust Property and the Other Mortgaged Property.
(b) Trustor will not engage in any business other than the
ownership, management and operation of the Trust Property and the Other
Mortgaged Property (as hereinafter defined) and Trustor will conduct and operate
its business as presently conducted and operated. Trustor shall not pledge its
assets for the benefit of any other person or entity except as permitted under
the Indenture.
(c) Trustor will not enter into any contract or agreement with
any affiliate of Trustor, any constituent party of Trustor, any Guarantor or any
affiliate of any constituent party or Guarantor, except upon terms and
conditions that are intrinsically fair, commercially reasonable and not less
favorable to it than those that would be available on an arms-length basis with
third parties other than any such party. Trustor will allocate fairly and
reasonably any overhead expenses that are shared with an affiliate, including
paying for office space and services performed by any employee of an affiliate.
(d) Trustor has not incurred and will not incur any
indebtedness, secured or unsecured, direct or indirect, absolute or contingent
(including guaranteeing any obligation), other than (i) the Indebtedness, (ii)
trade and operational debt incurred in the ordinary course of business with
trade creditors in such amounts as are normal and reasonable under the
circumstances, provided such debt is not evidenced by a note and is not
outstanding for more than sixty (60) days (or such longer period as any such
debt shall be contested by Trustor in good faith) and (iii) debt incurred in the
financing of equipment and other personal property used on the Trust Property
(collectively, the "PERMITTED INDEBTEDNESS"). Except as permitted under the
Indenture, no indebtedness other than the Indebtedness may be secured
(subordinate or PARI PASSU) by all or any portion of the Trust Property, except
that debt incurred in the financing of equipment and other personal property
used on the Trust Property in an amount not to exceed $10,000 in any one (1)
year may be secured by purchase money security interests on such equipment or
personal property.
(e) Trustor has not made and will not make any loans or
advances to any third party (including any affiliate or constituent party, any
Guarantor or any affiliate of any constituent party or Guarantor), and shall not
acquire obligations or securities of its affiliates or any constituent party and
shall not hold evidence of indebtedness issued by any other person or entity
(other than cash and investment-grade securities).
(f) Trustor is and will remain solvent and Trustor will pay
its debts and liabilities (including, as applicable, shared personnel and
overhead expenses) from its assets as the same shall become due.
(g) Trustor has done or caused to be done and will do all
things necessary to observe corporate formalities and preserve its existence,
and Trustor will not, nor will Trustor permit any constituent party or Guarantor
to amend, modify or otherwise change the partnership certificate, partnership
agreement, articles of incorporation and bylaws, operating agreement, trust or
other organizational documents of Trustor or such constituent party or Guarantor
in a manner which would adversely affect the Trustor's existence as a single
purpose entity except as permitted or contemplated under the Indenture unless
otherwise approved by the Rating Agencies.
(h) Trustor will maintain all of its books, records, financial
statements and bank accounts separate from those of its affiliates and any
constituent party and Trustor will file its own tax returns. Trustor shall
maintain its books, records, resolutions and agreements as official records.
(i) Trustor will be, and at all times will hold itself out to
the public as, a legal entity separate and distinct from any other entity
(including any affiliate of Trustor, any constituent party of Trustor, any
Guarantor or any affiliate of any constituent party or Guarantor), shall correct
any known misunderstanding regarding its status as a separate entity, shall
conduct business in its own name, shall not identify itself or any of its
affiliates as a division or part of the other and shall maintain and utilize
separate telephone numbers, stationery, invoices and checks.
(j) Trustor will maintain adequate capital for the normal
obligations reasonably foreseeable in a business of its size and character and
in light of its contemplated business operations.
(k) Neither Trustor nor any constituent party will seek the
dissolution, winding up, sale of assets, liquidation, consolidation or merger,
in whole or in part, of Trustor except as permitted under the Indenture.
(l) Trustor will not commingle the funds and other assets of
Trustor with those of any affiliate or constituent party, any Guarantor, or any
affiliate of any constituent party or Guarantor, or any other person.
(m) Trustor has and will maintain its assets in such a manner
that it will not be costly or difficult to segregate, ascertain or identify its
individual assets from those of any affiliate or constituent party, any
Guarantor, or any affiliate of any constituent party or Guarantor, or any other
person.
(n) Trustor does not and will not hold itself out to be
responsible for the debts or obligations of any other person or entity and does
not and will not guarantee the debts or obligations of any other person or
entity.
(o) Trustor shall not hold out its credit as being available
to satisfy the obligations of any other person or entity.
(p) Trustor shall maintain a sufficient number of employees in
light of its contemplated business operations and shall pay the salaries of its
own employees from its own funds.
(q) If Trustor is a limited partnership or a limited liability
company, each general partner or managing member (each such general partner or
managing member being an "SPC MEMBER") shall be a corporation whose sole asset
is its interest in Trustor, and each such SPC Member will at all times comply,
and shall cause Trustor to comply, with each of the representations, warranties,
and covenants contained in this PARAGRAPH 19 as if such representation, warranty
or covenant was made directly by such SPC Member.
(r) Trustor shall at all times cause there to be at least one
duly appointed member of the board of directors (an "INDEPENDENT Director") of
each SPC Member of Trustor reasonably satisfactory to Beneficiary who shall not
have been at the time of such individual's appointment, and may not have been at
any time during the preceding five years (i) a shareholder of, or an officer or
employee of, Trustor or any of its shareholders, subsidiaries or affiliates,
(ii) a customer of, or supplier to, Trustor or any of its shareholders,
subsidiaries or affiliates, (iii) a person or other entity controlling any such
shareholder, supplier or customer or (iv) a member of the immediate family of
any such shareholder, officer, employee, supplier or customer of any other
director of Trustor. As used herein, the term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a person or entity, whether through ownership of
voting securities, by contract or otherwise.
(s) Trustor shall not cause or permit the board of directors
of the each SPC Member of Trustor to take any action which, under the terms of
any certificate of incorporation, by-laws or any voting trust agreement with
respect to any common stock, requires the vote of the board of directors of each
SPC Member of Trustor unless at the time of such action there shall be at least
one member who is an Independent Director.
20. EVENTS OF DEFAULT; REMEDIES. Each of the following events shall
constitute an "EVENT OF DEFAULT" hereunder:
(a) if any interest, principal or any other payment or charge
due under this Deed of Trust (including payments due under PARAGRAPH 5 hereof),
the Note, or any other Loan Documents is not paid when due;
(b) if any Taxes payable directly to the billing authority by
Trustor are not paid before interest becomes payable on the amount due or a
penalty is assessed or Trustor shall fail to pay and discharge any other lien on
the Trust Property in accordance with PARAGRAPH 4 (provided that the foregoing
provisions of this clause (b) shall be subject to the right to contest granted
to Trustor in PARAGRAPH 4(B) of this Deed of Trust, but only for so long as the
conditions in PARAGRAPH 4(B) of this Deed of Trust remain satisfied);
(c) if the Policies are not kept in full force and effect, or
if the Policies are not delivered to Beneficiary within ten (10) business days
after request by Beneficiary;
(d) if any of the provisions of PARAGRAPHS 7, 9 or 19
---------- - - --
herein are violated or not complied with;
(e) if any of the provisions of PARAGRAPHS 40 or 41 herein are
violated or not complied with and such default shall not have been cured within
thirty (30) days after notice from Beneficiary or any of the events described in
PARAGRAPH 42 shall occur;
(f) if at any time any representation or warranty of Trustor
or any Guarantor made herein or in any guaranty, agreement, certificate, report,
affidavit, owner's affidavit, financial statement or other instrument furnished
to Beneficiary shall be false or misleading in any material respect;
(g) if any Guaranty (as hereinafter defined) is terminated or
any event or condition occurs which, in the sole judgment of Beneficiary, may
impair the ability of any Guarantor to perform its obligations under any
Guaranty or any Guarantor attempts to withdraw, cancel or disclaim any Guaranty;
(h) if a default by Trustor under any of the other terms,
covenants or conditions of the Note, this Deed of Trust or any other Loan
Document shall occur and such default shall not have been cured within thirty
(30) days after notice from Beneficiary, provided that if such default is not
susceptible of being cured within such thirty (30) day period and Trustor shall
have commenced the cure of such default within such thirty (30) day period and
thereafter diligently pursues such cure to completion, then such thirty (30) day
period shall be extended for a period of one hundred and twenty (120) days from
the occurrence of the default, provided, further, that the notice and grace
period set forth in this subparagraph (j) shall not apply to any other Event of
Default expressly set forth in this PARAGRAPH 20 or to any other Event of
Default defined as such in any other Loan Document or to any other covenant or
condition with respect to which a grace period is expressly provided elsewhere;
(i) if any of the provisions of PARAGRAPHS 43(D) and/or
PARAGRAPH 43(F) are violated or not complied with, and/or if any representation
or warranty in PARAGRAPH 43(B) and/or 43(C) shall prove false or misleading in
any material respect and/or if any of the events described in PARAGRAPH 43(E)
shall occur; or
(j) if an Event of Default shall occur under any of the
Contemporaneous Mortgages (as hereinafter defined).
Upon the occurrence of any Event of Default, the Indebtedness shall
immediately become due at the option of Beneficiary and Beneficiary shall have
the right to exercise any and all rights and remedies available under the Note,
this Deed of Trust, the Indenture, the other Loan Documents or otherwise at law
and in equity.
Upon the occurrence of any Event of Default, Beneficiary may, to the
extent permitted under applicable law, elect to treat the fixtures included in
the Trust Property either as real property or as personal property, or both, and
proceed to exercise such rights as apply thereto. With respect to any sale of
real property included in the Trust Property made under the powers of sale
herein granted and conferred, Beneficiary may, to the extent permitted by
applicable law, include in such sale any fixtures included in the Trust Property
and relating to such real property.
21. ADDITIONAL REMEDIES.
(a) Upon the occurrence of any Event of Default, Beneficiary
may take such action, without notice or demand, as it shall deem advisable to
protect and enforce its rights against Trustor and in and to the Trust Property
or any part thereof or interest therein, including, but not limited to, the
following actions, each of which may be pursued concurrently or otherwise, at
such time and in such order as Beneficiary may determine, in its sole
discretion, without impairing or otherwise affecting the other rights and
remedies of Beneficiary or Trustee (i) enter into or upon the Real Property,
either personally or by its agents, nominees or attorneys and dispossess Trustor
and its agents and servants therefrom, and thereupon Beneficiary may (A) use,
operate, manage, control, insure, maintain, repair, restore and otherwise deal
with all and every part of the Trust Property and conduct the business thereat,
(B) complete any construction on the Trust Property in such manner and form as
Beneficiary deems advisable, (C) make alterations, additions, renewals,
replacements and improvements to or on the Trust Property, (D) exercise all
rights and powers of Trustor with respect to the Trust Property, whether in the
name of Trustor or otherwise, including, without limitation, the right to make,
cancel, enforce or modify leases, obtain and evict tenants, and demand, sue for,
collect and receive all earnings, revenues, rents, issues, profits and other
income of the Trust Property and every part thereof and (E) apply the receipts
from the Trust Property to the payment of the Indebtedness, after deducting
therefrom all expenses (including reasonable attorneys' fees and expenses)
incurred in connection with the aforesaid operations and all amounts necessary
to pay the taxes, assessments, insurance and other charges in connection with
the Trust Property, as well as just and reasonable compensation for the services
of Beneficiary and Trustee and their counsel, agents and employees, or (ii)
institute proceedings for the complete foreclosure of this Deed of Trust in
which case the Trust Property may be sold for cash or upon credit in one or more
parcels, or (iii) with or without entry, to the extent permitted and pursuant to
the procedures provided by applicable law, institute proceedings for the partial
foreclosure of this Deed of Trust for the portion of the Indebtedness then due
and payable, subject to the continuing lien of this Deed of Trust for the
balance of the Indebtedness not then due, or (iv) sell for cash or upon credit
the Trust Property or any part thereof and all or any part of any estate, claim,
demand, right, title and interest of Trustor therein and rights of redemption
thereof, pursuant to power of sale or otherwise, at one or more sales, as an
entity or in parcels, at such time and place, upon such terms and after such
notice thereof as may be required or permitted by law, and in the event of a
sale, by foreclosure or otherwise, of less than all of the Trust Property, this
Deed of Trust shall continue as a lien on the remaining portion of or estate in
the Trust Property, or (v) institute an action, suit or proceeding in equity for
the specific performance of any covenant, condition or agreement contained
herein or in the Note or any other Loan Document, or (vi) recover judgment on
the Note or any Guaranty either before, during or after any proceedings for the
enforcement of this Deed of Trust or (vii) pursue such other remedies as
Beneficiary may have under applicable law.
(b) The purchase money proceeds or avails of any sale made
under or by virtue of this Paragraph, together with any other sums which then
may be held by Beneficiary under this Deed of Trust, whether under the
provisions of this Paragraph or otherwise, shall be applied as follows:
FIRST: To the payment of the costs and expenses of any such sale,
including reasonable compensation to Beneficiary and Trustee, their agents and
counsel, and of any judicial proceedings wherein the same may be made, and of
all expenses, liabilities and advances made or incurred by Beneficiary or
Trustee under this Deed of Trust, together with interest as provided herein on
all advances made by Beneficiary or Trustee and all taxes or assessments, except
any taxes, assessments or other charges subject to which the Trust Property
shall have been sold.
SECOND: To the payment of the whole amount then due, owing or
unpaid upon the Note for principal, together with any and all applicable
interest, fees and late charges.
THIRD: To the payment of any other sums required to be
paid by Trustor pursuant to any provision of this Deed of Trust or of the
Note or of the Guaranty.
FOURTH: To the payment of the surplus, if any, to whomsoever
may be lawfully entitled to receive the same.
Beneficiary and any receiver of the Trust Property, or any part thereof, shall
be liable to account for only those rents, issues and profits actually received
by it.
(c) Beneficiary or Trustee may adjourn from time to time any
sale by Beneficiary or Trustee to be made under or by virtue of this Deed of
Trust by announcement at the time and place appointed for such sale or for such
adjourned sale or sales; and, except as otherwise provided by any applicable
provision of law, Beneficiary or Trustee, without further notice or publication,
may make such sale at the time and place to which the same shall be so
adjourned.
(d) Upon the completion of any sale or sales made by
Beneficiary or Trustee under or by virtue of this Paragraph, Beneficiary or
Trustee, or an officer of any court empowered to do so, shall execute and
deliver to the accepted purchaser or purchasers a good and sufficient
instrument, or good and sufficient instruments, conveying, assigning and
transferring all estate, right, title and interest in and to the property and
rights sold. Beneficiary and Trustee are each hereby irrevocably appointed the
true and lawful attorney of Trustor, in its name and stead, to make all
necessary conveyances, assignments, transfers and deliveries of the Trust
Property and rights so sold and for that purpose Beneficiary and/or Trustee may
execute all necessary instruments of conveyance, assignment and transfer, and
may substitute one or more persons with like power, Trustor hereby ratifying and
confirming all that its said attorney or such substitute or substitutes shall
lawfully do by virtue hereof. Any such sale or sales made under or by virtue of
this Paragraph, whether made under the power of sale herein granted or under or
by virtue of judicial proceedings or of a judgment or decree of foreclosure and
sale, shall operate to divest all the estate, right, title, interest, claim and
demand whatsoever, whether at law or in equity, of Trustor in and to the
properties and rights so sold, and shall be a perpetual bar both at law and in
equity against Trustor and against any and all persons claiming or who may claim
the same, or any part thereof from, through or under Trustor.
(e) In the event of any sale made under or by virtue of this
Paragraph (whether made under the power of sale herein granted or under or by
virtue of judicial proceedings or of a judgment or decree of foreclosure and
sale) the entire Indebtedness, if not previously due and payable, immediately
thereupon shall, anything in the Note, this Deed of Trust, any Guaranty or any
other Loan Document to the contrary notwithstanding, become due and payable.
(f) Upon any sale made under or by virtue of this Paragraph
(whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale),
Beneficiary may bid for and acquire the Trust Property or any part thereof and
in lieu of paying cash therefor may make settlement for the purchase price by
crediting upon the Indebtedness the net sales price after deducting therefrom
the expenses of the sale and the costs of the action and any other sums which
Beneficiary is authorized to deduct under this Deed of Trust.
(g) No recovery of any judgment by Beneficiary and no levy of
an execution under any judgment upon the Trust Property or upon any other
property of Trustor shall affect in any manner or to any extent, the lien of
this Deed of Trust upon the Trust Property or any part thereof, or any liens,
rights, powers or remedies of Beneficiary hereunder, but such liens, rights,
powers and remedies of Beneficiary shall continue unimpaired as before.
22. RIGHT TO CURE DEFAULTS. Upon the occurrence of any Event of
Default or if Trustor fails to make any payment or to do any act as herein
provided, Beneficiary may, but without any obligation to do so and without
notice to or demand on Trustor and without releasing Trustor from any obligation
hereunder, make or do the same in such manner and to such extent as Beneficiary
may deem necessary to protect the security hereof. Without limiting the
foregoing, Beneficiary or its agents may enter upon the Trust Property for such
purposes or appear in, defend, or bring any action or proceeding to protect its
interest in the Trust Property, and the cost and expense thereof (including,
without limitation, attorneys' fees and disbursements to the extent permitted by
law), with interest as provided in this Paragraph, shall be immediately due and
payable to Beneficiary upon demand by Beneficiary therefor. All such costs and
expenses incurred by Beneficiary or its agents in remedying such Event of
Default or in appearing in, defending, or bringing any such action or proceeding
shall bear interest at the rate specified in the Note, for the period from the
date that such cost or expense was incurred to the date of payment to
Beneficiary. All such costs and expenses, together with interest thereon at the
Rate specified in the Note, shall be added to the Indebtedness and shall be
secured by this Deed of Trust. If the principal sum of the Note or any other
amount required to be paid on the Maturity Date under the Note shall not be paid
on the Maturity Date, interest shall thereafter be computed and paid at the Rate
specified in the Note.
23. [INTENTIONALLY OMITTED]
24. [INTENTIONALLY OMITTED]
25. PREPAYMENT. The Indebtedness may be prepaid only in accordance
with the terms of the Note.
26. APPOINTMENT OF RECEIVER. Beneficiary, upon the occurrence of an
Event of Default or in any action to foreclose this Deed of Trust or upon the
actual or threatened waste to any part of the Trust Property, shall be entitled
to the appointment of a receiver without notice and without regard to the value
of the Trust Property as security for the Indebtedness or the solvency or
insolvency of any person liable for the payment of the Indebtedness.
27. SECURITY AGREEMENT.
(a) This Deed of Trust is both a real property Deed of Trust
and a "security agreement" within the meaning of the Uniform Commercial Code.
The Trust Property includes both real and personal property and all other rights
and interests, whether tangible or intangible in nature, of Trustor in the Trust
Property. Trustor, by executing and delivering this Deed of Trust grants to
Beneficiary, as security for the Indebtedness, a security interest in the Trust
Property to the full extent that the Trust Property may be subject to the
Uniform Commercial Code (such portion of the Trust Property so subject to the
Uniform Commercial Code being called in this Paragraph the "COLLATERAL").
Trustor shall execute and deliver to Beneficiary, in form and substance
satisfactory to Beneficiary, such financing statements and further assurances as
Beneficiary may from time to time, reasonably request in order to create,
perfect, and preserve the security interest(s) herein granted. This Deed of
Trust shall also constitute a "fixture filing" for the purposes of the Uniform
Commercial Code and shall cover all items of the Collateral that are or are to
become fixtures. Information concerning the security interest(s) herein granted
may be obtained from Beneficiary upon request.
If an Event of Default shall occur, Beneficiary, in
addition to any other rights and remedies which it may have, shall have and may
exercise immediately and without demand, any and all rights and remedies granted
to a secured party upon default under the Uniform Commercial Code, including,
without limiting the generality of the foregoing, the right to take possession
of the Collateral or any part thereof, and to take such other measures as
Beneficiary may deem necessary for the care, protection and preservation of the
Collateral. Upon request or demand of Beneficiary, Trustor shall at its expense
assemble the Collateral and make it available to Beneficiary at a convenient
place acceptable to Beneficiary. Trustor shall pay to Beneficiary on demand any
and all expenses, including legal expenses and attorneys' fees and
disbursements, reasonably incurred or paid by Beneficiary in protecting its
interest in the Collateral and in enforcing its rights hereunder with respect to
the Collateral. Any notice of sale, disposition or other intended action by
Beneficiary or Trustee with respect to the Collateral sent to Trustor in
accordance with the provisions hereof at least ten (10) days prior to such
action, shall constitute reasonable notice to Trustor. The proceeds of any
disposition of the Collateral, or any part thereof, may be applied by
Beneficiary to the payment of the Indebtedness in such priority and proportions
as Beneficiary in its discretion shall deem proper.
Trustor shall notify Beneficiary and Trustee of any
change in name, identity or structure of Trustor and shall promptly execute,
file and record, at its sole cost and expense, such Uniform Commercial Code
forms as are necessary to maintain the priority of the lien of Beneficiary and
Trustee upon and security interest in the Collateral. In addition, Trustor shall
promptly execute, file and record such additional Uniform Commercial Code forms
or continuation statements as Beneficiary or Trustee shall deem necessary and
shall pay all expenses and fees in connection with the filing and recording
thereof, provided that no such additional documents shall increase the
obligations of Trustor under the Note, this Deed of Trust or the other Loan
Documents. Trustor hereby grants to Beneficiary and Trustee an irrevocable power
of attorney, coupled with an interest, to file with the appropriate public
office on its behalf any financing or other statements signed only by
Beneficiary or Trustee, as secured party, in connection with the Collateral
covered by this Deed of Trust.
(b) That portion of the Trust Property consisting of personal
property and equipment, shall be owned by Trustor and shall not be the subject
matter of any lease or other transaction whereby the ownership or any beneficial
interest in any of such property is held by any person or entity other than
Trustor nor shall Trustor create or suffer to be created any security interest
covering any such property as it may from time to time be replaced, other than
the security interest created herein.
28. AUTHORITY.
(a) Trustor has full power, authority and legal right to
execute this Deed of Trust, and to mortgage, give, grant, bargain, sell, alien,
enfeoff, convey, confirm, pledge, hypothecate and assign, and grant a security
interest in the Trust Property pursuant to the terms hereof and to keep and
observe all of the terms of this Deed of Trust on Trustor's part to be
performed.
(b) Trustor represents and warrants to Beneficiary that
Trustor is not a "foreign person" and covenants with Beneficiary that Trustor
will not, throughout the term of the Note, become a "foreign person" within the
meaning of ss.1445 and ss.7701 of the Internal Revenue Code of 1986, (26 USC
ss.ss.1445, 7701) and the related Treasury Department regulations, includiNg,
without limitation, temporary regulations (hereinafter collectively the "Code");
that is, such Trustor is not a non-resident alien, foreign corporation, foreign
partnership, foreign trust or foreign estate as those terms are defined in the
Code.
29. ACTIONS AND PROCEEDINGS. Beneficiary and Trustee shall have the
right to appear in and defend any action or proceeding brought with respect to
the Trust Property and to bring any action or proceeding, in the name and on
behalf of Trustor, which Beneficiary or Trustee, in their discretion, shall
decide should be brought to protect their interest(s) in the Trust Property.
30. WAIVER OF JURY TRIAL AND COUNTERCLAIMS. TRUSTOR HEREBY WAIVES
THE RIGHT TO ASSERT A COUNTERCLAIM, OTHER THAN A COMPULSORY COUNTERCLAIM, IN ANY
ACTION OR PROCEEDING BROUGHT AGAINST IT BY BENEFICIARY AND, TO THE EXTENT
PERMITTED BY LAW, WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING BROUGHT BY
EITHER PARTY HERETO AGAINST THE OTHER, OR IN ANY COUNTERCLAIM ASSERTED BY
BENEFICIARY AGAINST TRUSTOR OR IN ANY MATTERS WHATSOEVER ARISING OUT OF OR IN
ANY WAY CONNECTED WITH THIS DEED OF TRUST, THE NOTE, ANY OTHER LOAN DOCUMENT OR
THE INDEBTEDNESS.
31. FURTHER ACTS, ETC. Trustor will, at the sole cost of Trustor,
and without expense to Beneficiary or Trustee, do, execute, acknowledge and
deliver all and every such further acts, deeds, conveyances, mortgages,
assignments, notices of assignments, transfers and assurances as Beneficiary or
Trustee shall, from time to time, require, for the better assuring, conveying,
assigning, transferring, and confirming unto Beneficiary and Trustee the
property and rights hereby mortgaged, given, granted, bargained, sold, aliened,
enfeoffed, conveyed, confirmed, pledged, assigned and hypothecated or intended
now or hereafter so to be, or which Trustor may be or may hereafter become bound
to convey or assign to Beneficiary and Trustee, or for carrying out the
intention or facilitating the performance of the terms of this Deed of Trust or
for filing, registering or recording this Deed of Trust and, on demand, will
execute and deliver within five (5) business days after request of Beneficiary
or Trustee, and if Trustor fails to so deliver, hereby authorizes Beneficiary
and Trustee thereafter to execute in the name of Trustor without the signature
of Trustor to the extent Beneficiary and Trustee may lawfully do so, one or more
financing statements, chattel mortgages or comparable security instruments, to
evidence more effectively the lien hereof upon the Trust Property. Trustor
grants to Beneficiary and Trustee an irrevocable power of attorney coupled with
an interest for the purpose of exercising and perfecting any and all rights and
remedies available to Beneficiary and Trustee at law and in equity, including
without limitation such rights and remedies available to Beneficiary and Trustee
pursuant to this PARAGRAPH 31.
32. RECORDING OF DEED OF TRUST, ETC. Trustor forthwith upon the
execution and delivery of this Deed of Trust, will cause this Deed of Trust, and
any security instrument creating a lien or security interest or evidencing the
lien hereof upon the Trust Property, to be filed, registered or recorded, and
thereafter from time to time, each such other instrument of further assurance to
be filed, registered or recorded, all in such manner and in such places as may
be required by any present or future law in order to publish notice of and fully
to protect the lien or security interest hereof upon, and the interest(s) of
Beneficiary and Trustee in, the Trust Property. Trustor will pay all filing,
registration or recording fees, and all expenses incident to the preparation,
execution and acknowledgment of this Deed of Trust, any Deed of Trust
supplemental hereto, any security instrument with respect to the Trust Property
and any instrument of further assurance, and all federal, state, county and
municipal, taxes, duties, imposts, assessments and charges arising out of or in
connection with the making, execution, delivery and/or recording of this Deed of
Trust, any Deed of Trust supplemental hereto, any security instrument with
respect to the Trust Property or any instrument of further assurance, except
where prohibited by law so to do. Trustor shall hold harmless and indemnify
Beneficiary, its successors and assigns, against any liability incurred by
reason of the imposition of any tax on the making, execution, delivery and/or
recording of this Deed of Trust, any Deed of Trust supplemental hereto, any
security instrument with respect to the Trust Property or any instrument of
further assurance.
33. USURY LAWS. This Deed of Trust and the Note are subject to the
express condition that at no time shall Trustor be obligated or required to pay
interest on the principal balance due under the Note at a rate which could
subject the holder of the Note to either civil or criminal liability as a result
of being in excess of the maximum interest rate which Trustor is permitted by
law to contract or agree to pay. If by the terms of this Deed of Trust or the
Note, Trustor is at any time required or obligated to pay interest on the
principal balance due under the Note at a rate in excess of such maximum rate,
the rate of interest under the Note shall be deemed to be immediately reduced to
such maximum rate and the interest payable shall be computed at such maximum
rate and all prior interest payments in excess of such maximum rate shall be
applied and shall be deemed to have been payments in reduction of the principal
balance of the Note and the principal balance of the Note shall be reduced by
such amount in the inverse order of maturity.
34. SOLE DISCRETION OF BENEFICIARY. Wherever pursuant to this Deed
of Trust, Beneficiary exercises any right given to it to approve or disapprove,
or any arrangement or term is to be satisfactory to Beneficiary, the decision of
Beneficiary to approve or disapprove or to decide that arrangements or terms are
satisfactory or not satisfactory shall be in the sole discretion of Beneficiary
and shall be final and conclusive, except as may be otherwise specifically
provided herein.
35. RECOVERY OF SUMS REQUIRED TO BE PAID. Beneficiary shall have the
right from time to time to take action to recover any sum or sums which
constitute a part of the Indebtedness as the same become due, without regard to
whether or not the balance of the Indebtedness shall be due, and without
prejudice to the right of Beneficiary thereafter to bring an action of
foreclosure, or any other action, for a default or defaults by Trustor existing
at the time such earlier action was commenced.
36. MARSHALLING AND OTHER MATTERS. Trustor waives, to the extent
permitted by law, the benefit of all appraisement, valuation, stay, extension,
reinstatement and redemption laws now or hereafter in force and all rights of
marshalling in the event of any sale hereunder of the Trust Property or any part
thereof or any interest therein. Further, Trustor expressly waives any and all
rights of redemption from sale under any order or decree of foreclosure of this
Deed of Trust on behalf of Trustor, and on behalf of each and every person
acquiring any interest in or title to the Trust Property subsequent to the date
of this Deed of Trust and on behalf of all persons to the extent permitted by
applicable law.
37. WAIVER OF NOTICE. Trustor shall not be entitled to any notices
of any nature whatsoever from Beneficiary except with respect to matters for
which this Deed of Trust specifically and expressly provides for the giving of
notice by Beneficiary to Trustor and except with respect to matters for which
Beneficiary is required by applicable law to give notice, and Trustor hereby
expressly waives the right to receive any notice from Beneficiary with respect
to any matter for which this Deed of Trust does not specifically and expressly
provide for the giving of notice by Beneficiary to Trustor.
38. REMEDIES OF TRUSTOR. In the event that a claim or adjudication
is made that Beneficiary has acted unreasonably or unreasonably delayed acting
in any case where by law or under the Note, this Deed of Trust or the other Loan
Documents, it has an obligation to act reasonably or promptly, Beneficiary shall
not be liable for any monetary damages, and Trustor's remedies shall be limited
to injunctive relief or declaratory judgment.
39. REPORTING REQUIREMENTS. At the request of Beneficiary, Trustor
shall supply or cause to be supplied to Beneficiary either (a) a copy of a
completed Form 1099-B, Statement for Recipients of Proceeds from Real Estate,
Broker and Barter Exchange Proceeds prepared by Trustor's attorney or other
person responsible for the preparation of such form, together with a certificate
from the person who prepared such form to the effect that such form has, to the
best of such person's knowledge, been accurately prepared and that such person
will timely file such form or (b) a certification from Trustor that the Loan is
a refinancing of the Trust Property or is otherwise not required to be reported
to the Internal Revenue Service pursuant to Section 6045(e) of the Code. Trustor
hereby indemnifies, defends and holds Beneficiary harmless from and against all
loss, cost, damage and expense (including without limitation, attorneys' fees
and disbursements and costs incurred in the investigation, defense and
settlement of claims) that Beneficiary may incur, directly or indirectly, as a
result of or in connection with the assertion against Beneficiary of any claim
relating to the failure of Beneficiary to comply with this Paragraph.
40. HAZARDOUS WASTE.
(a) Trustor represents and warrants that, to the best of its
knowledge, except as set forth in the Phase 1 Environmental Engineering Report
obtained by Trustor for the benefit of Beneficiary in connection herewith, (i)
the Trust Property is now, and at all times during Trustor's ownership thereof
has been free of contamination from any substance, material or waste identified
as toxic or hazardous according to any federal, state or local law, rule,
regulation or order (any federal, state or local law, rule, regulation or order
governing or regulating in any way the discharge, generation, removal,
transportation, storage or handling of toxic or hazardous substances, materials
or waste hereinafter referred to as "ENVIRONMENTAL LAWS"), including, without
limitation, any pcb, radioactive substance, methane, volatile hydrocarbons,
industrial solvents or any other material or substance which now or hereafter
may cause or constitute a health, safety or other environmental hazard to any
person or property (any such substance together with any substance, material or
waste identified as toxic or hazardous under any Environmental Law now in effect
or hereinafter enacted shall be referred to herein as "HAZARDOUS WASTE") (other
than maintenance and cleaning supplies which (x) are ordinarily and customarily
used in the maintenance of residential property and (y) are used, stored,
disposed of and handled in compliance with and in quantities permitted by
Environmental Laws), (ii) Trustor has not caused or suffered to occur any
discharge, spill, uncontrolled loss or seepage of any petroleum or chemical
product or any Hazardous Waste onto any property adjoining the Trust Property
and (iii) neither the Trustor nor, to the best of Trustor's knowledge, any
tenant or occupant of all or part of the Trust Property is now or has been
involved in operations at the Trust Property which could lead to liability for
Trustor or any other owner of the Trust Property or the imposition of a lien on
the Trust Property under any Environmental Law.
(b) At its sole cost and expense, Trustor shall comply with
and shall put into effect regulations requiring all tenants and other occupants
of the Trust Property to comply with all Environmental Laws now in effect or
hereafter enacted with respect to the discharge, generation, removal,
transportation, storage and handling of Hazardous Waste. Trustor shall promptly
notify Beneficiary if Trustor shall become aware of any Hazardous Waste on or
near the Trust Property and/or if Trustor shall become aware that the Trust
Property is in violation of any Environmental Laws and/or if Trustor shall
become aware of any condition on or near the Trust Property which shall pose a
material threat to the health, safety or welfare of humans. Trustor shall
promptly remove all Hazardous Waste from the Trust Property (other than
maintenance and cleaning supplies which (i) are ordinarily and customarily used
in the maintenance of residential property and (ii) are used, stored, disposed
of and handled in compliance with and in quantities permitted by Environmental
Laws) in accordance with (x) the recommendations set forth in the report, if
any, of an environmental engineer acceptable to Beneficiary with respect to such
removal and (y) all applicable federal, state and local laws, statutes, rules
and regulations. Trustor shall pay immediately when due the cost of removal of
any Hazardous Waste required to be removed hereunder and shall keep the Trust
Property free of any lien imposed pursuant to any Environmental Laws now in
effect or hereinafter enacted.
(c) Trustor grants Beneficiary and its employees and agents an
irrevocable and non-exclusive license, subject to the rights of tenants, to (i)
enter the Trust Property to conduct testing if, in the good faith judgment of
Beneficiary, reasonable cause exists for the performance of an environmental
inspection or audit of the Trust Property and, (ii) if Trustor shall fail to do
so after notice from Beneficiary, to remove any Hazardous Waste, and the costs
of such testing and removal shall immediately become due to Beneficiary and
shall be secured by this Deed of Trust. Trustor, promptly upon the request of
Beneficiary, from time to time, but not more frequently than once in any
calendar year, shall provide Beneficiary with an environmental site assessment
or environmental audit report, or an update of such an assessment or report, all
in scope, form and content reasonably satisfactory to Beneficiary, provided that
Trustor shall only be required to provide such assessment or report if (x) an
Event of Default shall exist or (y) in the good faith judgment of Beneficiary,
reasonable cause exists for the performance of such inspection or audit. Trustor
shall maintain the integrity of all storage tanks and drums on or under the
Trust Property during the term of the Loan in compliance with all Environmental
Laws now in effect or hereinafter enacted. Trustor shall follow an operation and
maintenance program with respect to all storage tanks and drums on or under the
Trust Property, which program has been approved in writing by Beneficiary.
(d) Trustor shall indemnify and hold harmless Beneficiary and
Trustee and their respective employees, directors, officers, agents and "control
persons" within the meaning of the Securities Act and the Exchange Act from and
against all liability, loss, cost, damage and expense (including, without
limitation, attorneys' fees and costs incurred in the investigation, defense and
settlement of claims) that Beneficiary or such other persons may incur as a
result of or in connection with the assertion against Beneficiary (whether as
beneficiary of this Deed of Trust, as mortgagee in possession or as owner of the
Trust Property by virtue of a foreclosure or acceptance of a deed in lieu of
foreclosure) of any claim relating to the presence or removal of any Hazardous
Waste or compliance with any Environmental Laws now in effect or hereinafter
enacted; provided, however, that this indemnity shall not apply if Trustor can
prove that (i) the contamination of the Trust Property was caused solely by
actions, conditions or events that occurred after the date that the Beneficiary
(or purchaser at a foreclosure sale) actually acquired title to the Trust
Property and (ii) the contamination was not caused by the actions of Trustor.
The obligations and liabilities of Trustor under this Paragraph shall survive
full payment of the Loan, entry of a judgment of foreclosure or acceptance of a
deed in lieu of foreclosure.
41. ASBESTOS. Trustor shall not install or permit to be installed in
the Trust Property, friable asbestos or any substance containing asbestos. With
respect to any such material currently present in the Trust Property, Trustor,
at Trustor's expense, shall promptly comply with and shall cause all occupants
of the Trust Property to comply with all present and future applicable federal,
state or local laws, rules, regulations or orders relating to asbestos, friable
asbestos and asbestos containing materials. In the event any asbestos, friable
asbestos or asbestos containing material is discovered at the Trust Property,
Trustor shall obtain a comprehensive asbestos report prepared by a licensed
engineer or asbestos consultant reasonably acceptable to Beneficiary describing
the form, extent, location and condition of such asbestos and recommending
methods of removal or abatement. Trustor shall promptly comply at its sole cost
and expense with those recommendations contained in such report which are
necessary to remove or encapsulate any asbestos which in the opinion of such
engineer or consultant is, or is reasonably likely to become, friable or
otherwise to bring the Trust Property into compliance with applicable federal,
state and local laws, rules and regulations, with such compliance to be
performed in accordance with all applicable federal, state and local laws,
statutes, rules and regulations. Trustor shall indemnify Beneficiary and hold
Beneficiary harmless from and against all loss, cost, damage and expense
(including, without limitation, attorneys' fees and costs incurred in the
investigation, defense and settlement of claims) that Beneficiary may incur as a
result of or in connection with the assertion against Beneficiary (whether as
beneficiary of the Deed of Trust, as mortgagee in possession, or as owner of the
Trust Property by virtue of a foreclosure or acceptance of a deed in lieu of
foreclosure) of any claim relating to the presence or removal of any asbestos
substance referred to in this Paragraph, or compliance with any federal, state
or local laws, rules, regulations or orders relating thereto; provided, however,
that this indemnity shall not apply if Trustor can prove that (i) the
contamination of the Trust Property was caused solely by actions, conditions or
events that occurred after the date that the Beneficiary (or purchaser as
foreclosure sale) actually acquired title to the Trust Property and (ii) the
contamination was not cause by the actions of the Trustor. The obligations and
liabilities of Trustor under this Paragraph shall survive full payment of the
Loan, entry of a judgment of foreclosure or a deed in lieu of foreclosure.
42. BANKRUPTCY OR INSOLVENCY. In the event that Trustor or any
Guarantor or, if Trustor or any Guarantor is a general or limited partnership,
any general partner of any such entity (a) admits in writing its inability to
pay its debts generally as they become due, or does not pay its debts generally
as they become due, (b) commences as debtor any case or proceeding under any
bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law,
or seeks or consents to the appointment of a receiver, conservator, trustee,
custodian, manager, liquidator or similar official for it or the whole or any
substantial part of its property, (c) has a receiver, conservator, trustee,
custodian, manager, liquidator, or similar official appointed for it or the
whole or any substantial part of its property, by any governmental authority
with jurisdiction to do so, (d) makes a proposal or any assignment for the
benefit of its creditors, or enters into an arrangement or composition or
similar plan or scheme with or for the benefit of creditors generally occurring
in circumstances in which such entity is unable to meet its obligations as they
become due or (e) has filed against it any case or proceeding under any
bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law
which (i) is consented to or not timely contested by such entity, (ii) results
in the entry of an order for relief, appointment of a receiver, conservator,
trustee, custodian, manager, liquidator or similar official for such entity or
the whole or any substantial part of its property or (iii) is not dismissed
within sixty (60) days, an Event of Default shall have occurred and as a result,
the entire principal balance of the Note and all obligations under any Guaranty
shall become immediately due and payable at the option of Beneficiary without
notice to Trustor or any Guarantor and Beneficiary may exercise any remedies
available to it hereunder, under any other Loan Document, at law or in equity.
43. COMPLIANCE WITH ERISA AND STATE STATUTES ON GOVERNMENTAL PLANS.
(a) Trustor represents and warrants that, as of the date of
this Deed of Trust and throughout the term of this Deed of Trust, (i) Trustor is
not an "employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Securities Act of 1974, as amended ("ERISA"), which is subject
to Title I of ERISA and (ii) the assets of such Trustor do not constitute "plan
assets" of one or more such plans within the meaning of 29 C.F.R. ss.
2510.3-101.
(b) Trustor represents and warrants to Beneficiary that, as of
the date of this Deed of Trust and throughout the term of this Deed of Trust (i)
Trustor is not a "governmental plan" within the meaning of Section 3(32) of
ERISA and (ii) transactions by or with Trustor or any Trustor are not subject to
state statues regulating investments of and fiduciary obligations with respect
to governmental plans.
(c) Trustor covenants and agrees to deliver to Beneficiary
such certifications or other evidence from time to time throughout the term of
this Deed of Trust, as requested by Beneficiary in its sole discretion, that (i)
Trustor is not an "employee benefit plan" or a "governmental plan", (ii) Trustor
is not subject to state statutes regulating investments and fiduciary
obligations with respect to governmental plans, and (iii) one or more of the
following circumstances is true:
(A) Equity interests in Trustor are publicly offered
securities, within the meaning of 29 C.F.R. ss.
2510.3-101(b)(2);
(B) Less than 25 percent of all equity interests in such
Trustor are held by "benefit plan investors" within the
meaning of 29 C.F.R. ss. 2510.3-101(f)(2); or
(C) Trustor qualifies as an "operating company" or a "real
estate operating company" within the meaning of 29
C.F.R. ss. 2510.3.-101 (c) or (e).
(d) Any of the following shall constitute an Event of Default
under this Deed of Trust, entitling Beneficiary to exercise any and all remedies
to which it may be entitled under this Deed of Trust, and any other Loan
Documents (i) the failure of any representation or warranty made by any Trustor
under this Paragraph to be true and correct in all respects, (ii) the failure of
any Trustor to provide Beneficiary with the written certifications and evidence
referred to in this Paragraph or (iii) the consummation by Trustor or any one
Trustor of a transaction which would cause this Deed of Trust or any exercise of
Beneficiary's rights under this Deed of Trust, or the other Loan Documents to
constitute a non-exempt prohibited transaction under ERISA or a violation of a
state statute regulating governmental plans, or otherwise subjecting Beneficiary
to liability for violation of ERISA or such state statute.
(e) Trustor shall indemnify and defend and hold harmless
Beneficiary and its employees, directors, officers, agents and "control persons"
within the meaning of the Securities Act and the Exchange Act from and against
all civil penalties, excise taxes, or other loss, cost, damage and expense
(including, without limitation, attorneys' fees and disbursements and costs
incurred in the investigation, defense and settlement of claims and losses
incurred in correcting any prohibited transaction or in the sale of a prohibited
loan, and in obtaining any individual prohibited transaction exemption under
ERISA that may be required, in Beneficiary's sole discretion) that Beneficiary
or such other persons may incur, directly or indirectly, as a result of a
default under this PARAGRAPH 43. This indemnity shall survive any termination,
satisfaction or foreclosure of this Deed of Trust.
44. ASSIGNMENTS. Beneficiary shall have the right to assign or
transfer its rights under this Deed of Trust without limitation. Any assignee or
transferee shall be entitled to all the benefits afforded Beneficiary under this
Deed of Trust.
45. COOPERATION. Trustor acknowledges that Beneficiary and its
successors and assigns may (a) sell this Deed of Trust, the Note and other Loan
Documents to one or more investors as a whole loan, (b) participate the Loan to
one or more investors, (c) deposit this Deed of Trust, the Note and other Loan
Documents with a trust, which trust may sell certificates to investors
evidencing an ownership interest in the trust assets or (d) otherwise sell the
Loan or interest therein to investors (the transactions referred to in clauses
(a) through (d) are hereinafter referred to as "SECONDARY MARKET TRANSACTIONS").
Trustor shall cooperate in good faith with Beneficiary in effecting any such
Secondary Market Transaction and shall cooperate in good faith to implement all
requirements imposed by the Rating Agencies involved in any Secondary Market
Transaction including, without limitation, all structural or other changes to
the Loan, modifications to any documents evidencing or securing the Loan,
delivery of opinions of counsel acceptable to the Rating Agencies and addressing
such matters as the Rating Agencies may require; PROVIDED, HOWEVER, that Trustor
shall not be required to modify any documents evidencing or securing the Loan
which would modify (i) the interest rate payable under the Note, (ii) the stated
maturity of the Note, (iii) the amortization of principal of the Note or (iv)
any other material economic term of the Loan. Trustor shall provide such
information and documents relating to Trustor, Guarantor, if any, and the Trust
Property as Beneficiary may reasonably request in connection with a Secondary
Market Transaction. Beneficiary shall have the right to provide to prospective
investors any information in its possession, including, without limitation,
financial statements relating to Trustor, the Guarantor, if any, and the Trust
Property. Trustor acknowledges that certain information regarding the Loan and
the parties thereto and the Trust Property may be included in a private
placement memorandum, prospectus or other disclosure documents.
46. EXCULPATION. Notwithstanding anything to the contrary contained
herein, any claim based on or in respect of any liability of Trustor under the
Note or under this Deed of Trust or any other Loan Document shall be enforced
only against the property and assets of Trustor and not against any separate
property or assets of any partner in or of Trustor. Nothing herein shall be
deemed (x) to impair the validity of the indebtedness secured by this Deed of
Trust; (y) to impair the right of Beneficiary as Beneficiary or secured party to
commence an action to foreclose any lien or security interest; or (z) to modify,
diminish or discharge the liability of any guarantor under any guaranty.
47. NOTICES. Any notice, demand, statement, request or consent made
hereunder shall be effective and valid if given in writing and otherwise in
accordance with the Indenture to the addresses set forth therein for Trustor and
Beneficiary or, with respect to a notice to the Trustee hereunder, to the
address set forth on the first page hereof (or to such other address as Trustee
may by notice to the other parties specify).
48. NON-WAIVER. The failure of Beneficiary to insist upon strict
performance of any term hereof shall not be deemed to be a waiver of any term of
this Deed of Trust. Trustor shall not be relieved of Trustor's obligations
hereunder by reason of (a) failure of Beneficiary to comply with any request of
Trustor or any Guarantor to take any action to foreclose this Deed of Trust or
otherwise enforce any of the provisions hereof or of the Note, any Guaranty or
the other Loan Documents, (b) the release, regardless of consideration, of the
whole or any part of the Trust Property, or of any person liable for the
Indebtedness or portion thereof or (c) any agreement or stipulation by
Beneficiary extending the time of payment or otherwise modifying or
supplementing the terms of the Note, any Guaranty, this Deed of Trust or the
other Loan Documents. Beneficiary may resort for the payment of the Indebtedness
to any other security held by Beneficiary in such order and manner as
Beneficiary, in its discretion, may elect. Beneficiary may take action to
recover the Indebtedness, or any portion thereof, or to enforce any covenant
hereof without prejudice to the right of Beneficiary thereafter to foreclose
this Deed of Trust. The rights of Beneficiary under this Deed of Trust shall be
separate, distinct and cumulative and none shall be given effect to the
exclusion of the others. No act of Beneficiary shall be construed as an election
to proceed under any one provision herein to the exclusion of any other
provision. Beneficiary shall not be limited exclusively to the rights and
remedies herein stated but shall be entitled to every right and remedy now or
hereafter afforded by law.
49. JOINT AND SEVERAL LIABILITY. If there is more than one party
comprising Trustor, then the obligations and liabilities of each party under
this Deed of Trust shall be joint and several.
50. SEVERABILITY. If any term, covenant or condition of the Note,
any Guaranty or this Deed of Trust is held to be invalid, illegal or
unenforceable in any respect, the Note, any Guaranty and this Deed of Trust
shall be construed without such provision.
51. DUPLICATE ORIGINALS. This Deed of Trust may be executed in any
number of duplicate originals and each such duplicate original shall be deemed
to constitute but one and the same instrument.
52. INDEMNITY AND BENEFICIARY'S COSTS. Trustor agrees to pay all
costs, including, without limitation, attorneys' fees and expenses, incurred by
Beneficiary or Trustee in enforcing the terms hereof and/or the terms of any of
the other Loan Documents or the Note or any Guaranty, whether or not suit is
filed and waives to the full extent permitted by law all right to plead any
statute of limitations as a defense to any action hereunder. Trustor agrees to
indemnify and hold Beneficiary and Trustee and their respective employees,
directors, officers, agents and "control persons" within the meaning of the
Securities Act and the Exchange Act harmless from any and all liability, loss,
damage or expense (including, without limitation, attorneys' fees and
disbursements) that Beneficiary or Trustee or their respective employees,
directors, officers, agents and "control persons" within the meaning the
Securities Act and the Exchange Act may or might incur hereunder or in
connection with the enforcement of any of their rights or remedies hereunder,
any action taken by Beneficiary or Trustee hereunder, or by reason or in defense
of any and all claims and demands whatsoever that may be asserted against
Beneficiary or Trustee or their respective employees, directors, officers,
agents and "control persons" within the meaning the Securities Act and the
Exchange Act arising out of the Trust Property; and should Beneficiary or
Trustee or their respective employees, directors, officers, agents and "control
persons" within the meaning the Securities Act and the Exchange Act incur any
such liability, loss, damage or expense, the amount thereof with interest
thereon at the Rate specified in the Note shall be payable by Trustor
immediately without demand, shall be secured by this Deed of Trust, and shall be
a part of the Indebtedness. Notwithstanding anything herein to the contrary,
Trustor shall not be obligated to indemnify and hold Beneficiary or Trustee
harmless with respect to any loss, liability or damage resulting from the
indemnified party's gross negligence or willful misconduct.
53. CERTAIN DEFINITIONS. Unless the context clearly indicates a
contrary intent or unless otherwise specifically provided herein, words used in
this Deed of Trust shall be used interchangeably in singular or plural form. The
word "TRUSTOR" shall mean Trustor and/or any subsequent owner or owners of the
Trust Property or any part thereof or interest therein. The word "BENEFICIARY"
shall mean Beneficiary or any subsequent holder of the Note. The word "TRUSTEE"
shall mean Trustee and any successor or substitute Trustee. The word "GUARANTY"
shall mean any Environmental Indemnity or any other Guaranty or Indemnity given
at any time to or for the benefit of Beneficiary in connection with the Loan.
The word "GUARANTOR" shall mean any person giving or making any Guaranty. The
word "NOTE" shall mean the Note or any other evidence of indebtedness secured by
this Deed of Trust. The words "LOAN DOCUMENTS" shall mean the Note, this Deed of
Trust, the Indenture, the Bond Indenture Supplement (as defined in the
Indenture), the Cash Collateral Agreement (as defined in the Indenture), the
loan agreement, if any, between Trustor and Beneficiary, the security agreement,
if any, between Trustor and Beneficiary, the assignment of leases and rents, if
any, made by Trustor to Beneficiary, the assignment of contracts, if any, made
by Trustor to Beneficiary, all Guaranties, if any, made to Beneficiary, any
other Deed of Trust or deed of trust securing the Note and any other agreement,
instrument, affidavit or document executed by Trustor or any Guarantor and
delivered to Beneficiary in connection with the Loan. The word "PERSON" shall
include an individual, corporation, partnership, trust, unincorporated
association, government, governmental authority, or other entity. The words
"TRUST PROPERTY" shall include any portion of the Trust Property or interest
therein. Whenever the context may require, any pronouns used herein shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns and pronouns shall include the plural and vice versa.
54. NO ORAL CHANGE. This Deed of Trust, and any provisions hereof,
may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of Trustor or any
one Trustor or Beneficiary, but only by an agreement in writing signed by the
party against whom enforcement of any modification, amendment, waiver,
extension, change, discharge or termination is sought.
55. HEADINGS, ETC. The headings and captions of various paragraphs
of this Deed of Trust are for convenience of reference only and are not to be
construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
56. ADDRESS OF REAL PROPERTY. The street address of the Real
Property is the address set forth on the cover page of this Deed of Trust.
57. WIRE TRANSFER. All payments of principal and interest and other
amounts due under this Deed of Trust shall be paid to Beneficiary by wire
transfer of immediately available funds to such bank or place, or in such
manner, as Beneficiary may from time to time designate.
58. PUBLICITY. Trustor agrees that Beneficiary, at its
expense, may publicize the financing of the Trust Property in trade and
similar publications.
59. RELATIONSHIP. The relationship of Beneficiary to Trustor under
this Deed of Trust is strictly and solely that of lender and borrower and
nothing contained in this Deed of Trust or any other Loan Document is intended
to create, or shall in any event or under any circumstance be construed to
create, a partnership, joint venture, tenancy-in-common, joint tenancy or other
relationship of any nature whatsoever between Beneficiary and Trustor other than
that of lender and borrower.
60. HOMESTEAD. Trustor hereby waives and renounces all homestead and
exemption rights provided by the constitution and the laws of the United States
and of any state, in and to the Land as against the collection of the
Indebtedness, or any part hereof.
61. NO THIRD PARTY BENEFICIARIES. Nothing contained herein is
intended or shall be deemed to create or confer any rights upon any third person
not a party hereto, whether as a third-party beneficiary or otherwise, except as
expressly provided herein.
62. ENTIRE AGREEMENT. This Deed of Trust, the Note and the other
Loan Documents constitute the entire agreement among Trustor and Beneficiary
with respect to the subject matter hereof and all understandings, oral
representations and agreements heretofore or simultaneously had among the
parties are merged in, and are contained in, such documents and instruments.
63. GOVERNING LAW; CONSENT TO JURISDICTION. THIS DEED OF TRUST SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE IN WHICH
THE TRUST PROPERTY IS LOCATED WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS
THEREOF. EACH TRUSTOR, ENDORSER AND GUARANTOR HEREBY SUBMITS TO PERSONAL
JURISDICTION IN SAID STATE AND THE FEDERAL COURTS OF THE UNITED STATES OF
AMERICA LOCATED IN SAID STATE (AND ANY APPELLATE COURTS TAKING APPEALS
THEREFROM) FOR THE ENFORCEMENT OF SUCH TRUSTOR'S, ENDORSER'S OR GUARANTOR'S
OBLIGATIONS HEREUNDER, UNDER THE NOTE, THE GUARANTY AND THE OTHER LOAN
DOCUMENTS, AND WAIVES ANY AND ALL PERSONAL RIGHTS UNDER THE LAW OF ANY OTHER
STATE TO OBJECT TO JURISDICTION WITHIN SUCH STATE FOR THE PURPOSES OF SUCH
ACTION, SUIT, PROCEEDING OR LITIGATION TO ENFORCE SUCH OBLIGATIONS OF SUCH
TRUSTOR, ENDORSER OR GUARANTOR. EACH TRUSTOR, ENDORSER AND GUARANTOR HEREBY
WAIVES AND AGREES NOT TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS DEED OF TRUST, THE NOTE, ANY GUARANTY OR ANY
OTHER LOAN DOCUMENT, (A) THAT IT IS NOT SUBJECT TO SUCH JURISDICTION OR THAT
SUCH ACTION, SUIT OR PROCEEDING MAY NOT BE BROUGHT OR IS NOT MAINTAINABLE IN
THOSE COURTS OR THAT THIS DEED OF TRUST, THE NOTE, THE GUARANTY AND/OR ANY OF
THE OTHER LOAN DOCUMENTS MAY NOT BE ENFORCED IN OR BY THOSE COURTS OR THAT IT IS
EXEMPT OR IMMUNE FROM EXECUTION, (B) THAT THE ACTION, SUIT OR PROCEEDING IS
BROUGHT IN AN INCONVENIENT FORUM OR (C) THAT THE VENUE OF THE ACTION, SUIT OR
PROCEEDING IS IMPROPER. IN THE EVENT ANY SUCH ACTION, SUIT, PROCEEDING OR
LITIGATION IS COMMENCED, TRUSTOR, ENDORSER AND GUARANTOR AGREE THAT SERVICE OF
PROCESS MAY BE MADE, AND PERSONAL JURISDICTION OVER SUCH TRUSTOR, ENDORSER OR
GUARANTOR OBTAINED, BY SERVICE OF A COPY OF THE SUMMONS, COMPLAINT AND OTHER
PLEADINGS REQUIRED TO COMMENCE SUCH LITIGATION UPON SUCH TRUSTOR, ENDORSER OR
GUARANTOR AT THE ADDRESS SET FORTH ON THE FIRST PAGE HEREOF.
64. HANDICAPPED ACCESS. Trustor agrees that the Trust Property shall
at all times comply to the extent applicable with the requirements of the
Americans with Disabilities Act of 1990, the Fair Housing Amendments Act of 1988
(if applicable), all state and local laws and ordinances related to handicapped
access and all rules, regulations, and orders issued pursuant thereto including,
without limitation, the Americans with Disabilities Act Accessibility Guidelines
for Buildings and Facilities (collectively "ACCESS LAWS"). Notwithstanding any
provisions set forth herein or in any other document regarding Beneficiary's
approval of alterations of the Trust Property, Trustor shall not alter (or
approve the alteration of) the Trust Property in any manner which would increase
Trustor's responsibilities for compliance with the applicable Access Laws
without the prior written approval of Beneficiary, which shall not be
unreasonably withheld but may be condition upon receipt of a certificate of
Access Law compliance from an architect, engineer or other person acceptable to
Beneficiary. Trustor shall give prompt notice to Beneficiary of the receipt by
Trustor of any complaints related to violation of any Access Laws and of the
commencement of any proceedings or investigations which relate to compliance
with applicable Access Laws.
65. MANAGEMENT OF THE TRUST PROPERTY. The Management Agreement dated
November 21, 1997 (the "MANAGEMENT AGREEMENT") between Trustor and Mid-America
Apartments, L.P. ("MANAGER") pursuant to which Manager operates the Trust
Property (a true, correct and complete copy of which has been delivered to
Beneficiary) is in full force and effect and there is no default or violation by
any party thereunder. Trustor shall maintain the Management Agreement for the
operation of the Trust Property in full force and effect and timely perform all
of Trustor's obligations thereunder and shall not terminate, cancel, modify,
renew or extend the Management Agreement, or enter into any agreement relating
to the management or operation of the Trust Property with Manager or any other
party without the express written consent of Beneficiary, which consent shall
not be unreasonably withheld. Trustor will enter into and cause the Manager (or
any new manager) to enter into an agreement in form satisfactory to Beneficiary
assigning and subordinating the Manager's interest in the Trust Property and all
fees and other rights of the manager pursuant to such Management Agreement to
the rights of Beneficiary. Upon an Event of Default, Trustor at Beneficiary's
request made at any time while such Event of Default continues, shall terminate
the Management Agreement and replace the Manager with a Manager approved by
Beneficiary. In addition, if, at any time, the Debt Service Coverage Ratio (as
defined in the Indenture) shall be less than 1.15 to 1.0, Trustor, at
Beneficiary's request, shall terminate the Management Agreement and replace the
Manager with a new manager reasonably acceptable to Beneficiary.
66. CASH MANAGEMENT AGREEMENT. Trustor shall, on the date hereof,
enter into one or more cash collateral, clearing account and/or lockbox
agreements acceptable to Beneficiary between Trustor, Manager, Beneficiary and
one or more certain financial institutions (together with any modification,
amendment, substitution or replacement thereof, hereinafter collectively
referred to as the "CASH MANAGEMENT AGREEMENT") pursuant to which (a) Trustor
shall open an account into which all revenues from the Property shall be
deposited and (b) separate accounts shall be established in Beneficiary's name
for the Tax and Insurance Escrow Fund and the Replacement Escrow Fund into which
payments to the Tax and Insurance Escrow Fund and Replacement Escrow Fund,
respectively, if, as and when required hereunder. Each such account shall be
under the sole dominion and control of Beneficiary. Neither the Cash Management
Agreement or any such account shall alter or diminish in any way Trustor's
obligation to make timely payment and deposits of all sums required to be paid
or deposited under any Loan Document. Trustor shall pay all costs and expenses
required under the Cash Management Agreement. Upon the occurrence of an Event of
Default, Beneficiary may apply any sums then held pursuant to the Cash
Management Agreement to the payment of the Indebtedness in any order in its sole
discretion. Until expended or applied, amounts held pursuant to the Cash
Management Agreement shall constitute additional security for the Indebtedness.
67. CONTEMPORANEOUS MORTGAGES. The Indebtedness secured by this Deed
of Trust is also secured by mortgages, deeds of trust and/or deeds to secure
debt of even date herewith given by Trustor for the benefit of Beneficiary (the
"CONTEMPORANEOUS MORTGAGES") covering twenty-five (25) other parcels of real
property owned by Trustor (collectively, the "OTHER MORTGAGED PROPERTY"). The
Contemporaneous Mortgages will secure the Indebtedness and the performance of
the other covenants and agreements of Trustor set forth in the Indenture and the
Loan Documents. Trustor shall observe and perform all of the terms, conditions
and covenants contained in the Contemporaneous Mortgages and any Event of
Default under any Contemporaneous Mortgage shall be an Event of Default
hereunder. Upon the occurrence of an Event of Default, Beneficiary may proceed
under this Deed of Trust and/or any Contemporaneous Mortgage against the Trust
Property or any Other Mortgaged Property in one or more parcels in and such
manner and order as Beneficiary shall elect. Trustor hereby irrevocably waives
and releases, to the extent permitted by law, whether now or hereafter in force,
any right to have the Trust Property or any Other Mortgaged Property marshalled
upon any foreclosure of, or exercise of any power of sale under, this Deed of
Trust or any Contemporaneous Mortgage. The Contemporaneous Mortgages shall each
be a Loan Document for all purposes hereunder.
68. RELEASE. Notwithstanding anything to the contrary contained
herein, the Trust Property shall be released from this Deed of Trust in
accordance with the terms and provisions of the Indenture.
69. CERTAIN RIGHTS OF BENEFICIARY. For so long as Beneficiary shall
be acting as trustee for the holder of the Note pursuant to the Indenture and
shall not be the holder of the Note:
(a) Beneficiary may appoint a servicer in accordance with the
Indenture to perform certain actions which Beneficiary may be required or
permitted to take under the Loan Documents and Trustor shall be responsible for
the reasonable charges and expenses of such servicer.
(b) Wherever pursuant to this Deed of Trust or any other Loan
Document, Beneficiary shall have a right or may be obligated to approve or
disapprove any matter or thing, or to determine whether any matter or thing is
satisfactory or not satisfactory, or to make any other determination, estimation
or evaluation, or to take or refrain from taking any action, Beneficiary shall
have the right to engage, at the sole cost and expense of Borrower, such
consultants, accountants, attorneys or other third parties as Beneficiary shall
in good faith deem necessary or desirable to advise it or assist it in the
exercise of such right or obligation.
(c) Notwithstanding anything to the contrary contained herein or in
any other Loan Document, Beneficiary shall not be obligated to approve or
disapprove any matter or thing, or to determine whether any matter or thing is
satisfactory or not satisfactory, or to make any other determination, estimation
or evaluation, or to take or refrain from taking any action, or otherwise
exercise any discretion with respect to the Mortgaged Property unless such
action by Beneficiary is permitted or required under the Indenture.
70. TITLE ACTS BY TRUSTEE. At any time upon written request of
Beneficiary, payment of its fees and presentation of this Deed of Trust and the
Note for endorsement (in case of full reconveyance, for cancellation and
retention), without affecting the liability of any person for the payment of the
Indebtedness, Trustee shall (a) consent to the making of any map or plat of the
Trust Property, (b) join in granting any easement or creating any restriction
thereon, (c) join in any subordination or other agreement affecting this Deed of
Trust or the lien or charge thereof or (d) reconvey, without warranty, all or
any part of the Trust Property. The Trustee in any reconveyance may be described
as the "person or persons legally entitled thereto", and the recitals therein of
any matters or facts shall be conclusive proof of the truthfulness thereof.
Trustor agrees to pay a reasonable Trustee's fee for full or partial
reconveyance, together with a recording fee if Trustee, at its option, elects to
record said reconveyance.
71. SUCCESSOR TRUSTEE. At the option of Beneficiary, with or without
any reason, a successor or substitute trustee may be appointed by Beneficiary
without any formality other than a designation in writing of a successor or
substitute trustee, who shall thereupon become vested with and succeed to all
the powers and duties given to Trustee herein named, the same as if the
successor or substitute trustee had been named original Trustee herein; and such
right to appoint a successor or substitute trustee shall exist as often and
whenever Beneficiary desires.
72. AUTHORIZATION REGARDING TRUSTEE. Trustee (and any successor or
substitute trustee) may act hereunder and may sell and convey the Trust
Property, or any part thereof, although the Trustee (or successor or substitute
trustee) has been, may now be, or is hereafter the attorney or agent of
Beneficiary with respect to the Loan, or with respect to any other matter or
business whatsoever.
<PAGE>
PART II - STATE SPECIFIC PROVISIONS
[Signature Page Follows]
<PAGE>
IN WITNESS WHEREOF, Trustor has duly executed and delivered this
Deed of Trust as of the day and year first above written.
MID-AMERICA CAPITAL PARTNERS, L.P.
By: MAACP, Inc.
its general partner
By
Name: Simon R. C. Wadsworth
Title: President
[ACKNOWLEDGMENT]
49
<PAGE>
SCHEDULE A
DESCRIPTION OF LAND
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in the joint registration statement on Form S-3 of
Mid-America Capital Partners, L.P. and Mid-America Finance, Inc. of our reports
dated November 24, 1997 to the combined financial statements of Capital
Properties Group as of December 31, 1996 and 1995 and for each of the years in
the three-year period ended December 31, 1996, the balance sheet of Mid-America
Capital Partners, L.P. as of November 24, 1997 and the combined historical
summary of gross income and direct operating expenses for the Certain
Multifamily Acquisition Properties for the year ended December 31, 1996 which
reports are included herein and to the reference to our firm under the heading
of "Experts" in the Prospectus.
Our report to Capital Properties Group refers to a change in the accounting
method to capitalize replacement purchases for major appliances and carpet in
1996.
KPMG Peat Marwick LLP
Memphis, Tennessee
December 12, 1997
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
The Partners
Brown-Flournoy Equity Income Fund Limited Partnership:
We consent to the inclusion of our report dated January 17, 1997, with respect
to the balance sheets of Brown-Flournoy Equity Income Fund Limited Partnership
as of December 31, 1996 and 1995, and the related statements of operations,
partners' capital (deficit) and cash flows for each of the years in the
three-year period ended December 31, 1996 in the joint registration statement on
Form S-3 of Mid-America Capital Partners, L.P. and Mid-America Finance, Inc. We
also consent to the reference to our firm under the heading "Experts" in the
Prospectus.
KPMG Peat Marwick LLP
Baltimore, Maryland
December 12, 1997
