AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 13, 1998
REGISTRATION NO. 333-42441
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
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)
<TABLE>
<CAPTION>
<S> <C>
DELAWARE 62-1717980
(STATE OR OTHER JURISDICTION OF 52-2074569
INCORPORATION OR ORGANIZATION) (I.R.S.EMPLOYER IDENTIFICATION NOS.)
C/O CT CORPORATION TRUST COMPANY C/O CT CORPORATION TRUST COMPANY
1209 ORANGE STREET 1209 ORANGE STREET
WILMINGTON, DELAWARE 19801 WILMINGTON, DELAWARE 19801
(302) 777-0205 (302) 777-0205
(ADDRESS, INCLUDING ZIP CODE, AND (NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
INCLUDING AREA CODE OF PRINCIPAL
EXECUTIVE OFFICE)
</TABLE>
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: As soon
as practicable 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. [ ]
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>
AMENDMENT NO. 1
TO
FORM S-11
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------
MID-AMERICA MORTGAGE TRUST, 1998-1
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS GOVERNING INSTRUMENT)
<TABLE>
<S> <C>
NEW YORK APPLIED FOR
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
LASALLE NATIONAL BANK,
C/O LASALLE NATIONAL BANK NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS TRUSTEE
135 SOUTH LASALLE STREET, SUITE 1625 135 SOUTH LASALLE STREET, SUITE 1625
CHICAGO, ILLINOIS 60674-4107 CHICAGO, ILLINOIS 60674-4107
ATTENTION: ASSET BACKED SECURITIES ATTENTION: ASSET BACKED SECURITIES TRUST
TRUST SERVICE GROUP -- MID-AMERICA 1998-1
SERVICE GROUP -- MID-AMERICA 1998-1 (312) 904-7324
(312) 904-7324 (NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
(ADDRESS, INCLUDING ZIP CODE, AND NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S
PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
COPIES TO:
JOHN A. GOOD, ESQ. A. CURTIS GREER II, ESQ.
BAKER, DONELSON, BEARMAN MALCOLM P. WATTMAN, ESQ.
& CALDWELL MARK I. MICHIGAN, ESQ. CADWALADER, WICKERSHAM &
165 MADISON AVENUE, SUITE LATHAM & WATKINS TAFT
2000 885 THIRD AVENUE 100 MAIDEN LANE
MEMPHIS, TENNESSEE 38103 NEW YORK, NY 10022 NEW YORK, NEW YORK 10038
(901) 577-2148 TELEPHONE (212) 906-1892 TELEPHONE (212) 504-6000 TELEPHONE
(901) 577-2303 FACSIMILE (212) 751-4864 FACSIMILE (212) 504-6666 FACSIMILE
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
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 this form is a post-effective amendment filed pursuant to Rule 462(d)
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. [ ]
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>
MID-AMERICA MORTGAGE TRUST, 1998-1
CROSS REFERENCE SHEET
CROSS-REFERENCE SHEET SHOWING
LOCATION IN THE PROSPECTUS OF INFORMATION REQUIRED
BY PART I OF FORM S-11
<TABLE>
<CAPTION>
FORM S-11 REGISTRATION STATEMENT ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
- ------------------------------------------------------------------------ ---------------------------------------------
<S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus..................... Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus.............................................. Inside Front Cover Page of Prospectus;
Additional Information
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges......................... Prospectus Summary; Risk Factors; Selected
Financial Information
4. Determination of Offering Price.............................. Plan of Distribution
5. Dilution..................................................... Not applicable
6. Selling Security Holders..................................... Not applicable
7. Plan of Distribution......................................... Outside Front Cover Page of Prospectus; Plan
of Distribution
8. Use of Proceeds.............................................. Prospectus Summary; Use of Proceeds
9. Selected Financial Data...................................... Selected Financial Information
10. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. Management's Discussion and Analysis of
Financial Condition and Results of
Operations
11. General Information as to Registrant......................... Prospectus Summary; The Trust
12. Policy with Respect to Certain Activities.................... The Trust
13. Investment Policies of Registrant............................ The Trust
14. Description of Real Estate................................... Prospectus Summary; Description of the
Mortgaged Properties; Management's
Discussion and Analysis of Financial
Conditions and Results of Operations
15. Operating Data............................................... Prospectus Summary; Description of the
Mortgaged Properties; Description of
Mortgages; Management's Discussion and
Analysis of Financial Conditions and
Results of Operations; Financial Statements
16. Tax Treatment of Registrant and its Security Holders......... Certain Federal Income Tax Considerations;
State, Local and Foreign Taxes; ERISA
Considerations
17. Market Price of and Dividends on the Registrant's Common
Equity and Related Stockholder Matters..................... Not applicable
18. Description of Registrant's Securities....................... Prospectus Summary; Description of the
Certificates; Description of the Bonds;
Book-Entry Issuance, Clearance and
Settlement
19. Legal Proceedings............................................ Not applicable
20. Security Ownership of Certain Beneficial Owners and
Management................................................. Not applicable
21. Directors and Executive Officers............................. The Trust
22. Executive Compensation....................................... Not applicable
23. Certain Relationships and Related Transactions............... Not applicable
24. Selection, Management and Custody of Registrant's
Investments................................................ Prospectus Summary; The Trust
25. Policies with Respect to Certain Transactions................ The Trust
26. Limitations of Liability..................................... Not applicable
27. Financial Statements and Information......................... Financial Statements
28. Interests of Named Experts and Counsel....................... Not applicable
29. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities................................. Not applicable
30. Quantitative and Qualitative Disclosures About Market Risk... Not applicable
</TABLE>
<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 FEBRUARY 13, 1998
PROSPECTUS
$142,000,000
MID-AMERICA FINANCE, INC.
AS DEPOSITOR
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-1
REPRESENTING BENEFICIAL OWNERSHIP IN
MID-AMERICA CAPITAL PARTNERS, L.P.
% FIRST MORTGAGE 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. $142,000,000. 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 RATINGS 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 % FIRST MORTGAGE 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. $142,000,000. THE
CERTIFICATES WILL BE PAYABLE SOLELY FROM AMOUNTS RECEIVED BY THE TRUSTEE AS
PAYMENTS ON THE BONDS. THE BONDS WILL BE ISSUED PURSUANT TO A RESTATED
SUPPLEMENTAL INDENTURE DATED EFFECTIVE AS OF NOVEMBER 21, 1997 (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 APRIL 1, 1998. THE BONDS ARE NOT SUBJECT
TO A SINKING FUND AND MAY NOT BE REDEEMED OR PREPAID PRIOR TO MATURITY. UNLESS
AND UNTIL A 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). THE ABILITY OF MAALP TO PROCURE THE REQUIRED RATINGS
OF ITS UNSECURED DEBT, INCLUDING THE BONDS, IS SUBJECT TO SATISFACTION OF THE
CRITERIA FOR SUCH RATINGS AS MAY BE IMPOSED FROM TIME TO TIME BY MOODY'S AND
S&P. THERE CAN BE NO ASSURANCE THAT MAALP WILL PROCURE THE REQUIRED RATINGS AND
EFFECT A SECURITY RELEASE. AT LEAST 60 DAYS PRIOR TO A PERMITTED MERGER (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 ACCOMPANIED BY A PROSPECTUS PURSUANT TO A POST-EFFECTIVE
AMENDMENT TO THE REGISTRATION STATEMENT OF WHICH SUCH PROSPECTUS WILL BE A PART
PROVIDING CERTIFICATE HOLDERS WITH INFORMATION ABOUT MAALP AND DESCRIBING THE
PERMITTED MERGER AND SECURITY RELEASE. SIMULTANEOUSLY WITH ANY 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"), MAALP WILL ASSUME THE OBLIGATIONS UNDER THE
BONDS, 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. IF SUCH EVENTS OCCUR, THE BONDS WILL THEREAFTER 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 84.6%
PARTNERSHIP INTEREST THEREIN.
SEE "RISK FACTORS" BEGINNING ON PAGE 18 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>
EXPECTED SCHEDULED
CERTIFICATE FINAL FINAL
PRINCIPAL PASS-THROUGH RATING DISTRIBUTION DISTRIBUTION PRICE TO UNDERWRITING
AMOUNT RATE (MOODY'S/S&P) DATE (1) DATE (2) PUBLIC DISCOUNT(3)
- ------------ ------------ ------------- ------------- ----------------- ---------- -------------
<S> <C> <C> <C>
$142,000,000 % BAA2/BBB MARCH 3, 2003 SEPTEMBER 1, 2005 % %
</TABLE>
- ------------
(SEE FOOTNOTES TO TABLE ON PAGE 3)
------------------------
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, WHICH MAY INCLUDE DELIVERY THROUGH CEDEL BANK, S.A. AND THE EUROCLEAR
SYSTEM AS PARTICIPANTS OF THE DEPOSITORY TRUST COMPANY ON OR ABOUT FEBRUARY ,
1998 AGAINST PAYMENT THEREFOR IN IMMEDIATELY AVAILABLE FUNDS.
------------------------
MORGAN STANLEY DEAN WITTER
, 1998
<PAGE>
[GRAPHICS AND PICTURES OF PROPERTIES OMITTED]
2
<PAGE>
NOTES TO TABLE ON COVER PAGE
(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.
(3) As a percent of price to public.
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 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 "Risk
Factors -- Lack of Established Market" and "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 Depositor. 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.
3
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
4
<PAGE>
TABLE OF CONTENTS
PAGE
----
Prospectus Summary................... 7
Risk Factors......................... 20
Description of the Certificates...... 27
Description of the Bonds............. 30
Book-Entry Issuance, Clearance and
Settlement......................... 37
Description of the Mortgaged
Properties......................... 39
Description of the Mortgages......... 44
The Borrower......................... 47
The Depositor........................ 47
The Trust............................ 48
Use of Proceeds...................... 48
Selected Financial Information....... 48
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 51
Management of the Borrower........... 54
Certain Information Regarding MAALP
and MAAC........................... 56
Certain Federal Income Tax
Considerations..................... 61
State, Local and Foreign Taxes....... 67
ERISA Considerations................. 67
Legal Investment..................... 68
Plan of Distribution................. 68
Legal Matters........................ 69
Experts.............................. 69
Ratings of the Certificates.......... 70
Available Information................ 71
Incorporation by Reference........... 71
5
<PAGE>
ORGANIZATIONAL CHART
<TABLE>
<CAPTION>
<S> <C> <C>
Prior to a Permitted Merger After a Permitted Merger
_________________________________________________________ ________________________
_______________________ _______________________
| | | |
_________________| Mid-America | | Mid-America |
| | Apartment Communities | | Apartment Communities,|
| | Inc. ("MAAC") | | Inc. ("MAAC") |
| | NYSE:MAA | | NYSE:MAA |
| |_______________________| |_______________________|
| | | |
| | | 84.5% Partner |
| 100% | 100% | and sole |
| | | General Partner |
| | | |
| | | |
| ____________|_____ __|__________________ _________|_____________
| | | | | | |
| | MAACP, Inc. | | Mid-America | | Mid-America |
| | ("MAACP") | | Apartments, L.P. | | Apartments, L.P. |
| | | | ("MAALP") | | ("MAALP") |
| |__________________| |_____________________| |_______________________|
| | /|\ | /|\ /|\ |
| Consideration | | Communities | | | |
| | | | | | Bonds | Indenture
| \|/ | 1% GP \|/ |99% LP | Proceeds | Trustee
_|_____________ ____|________________|_______|__ |
| |<---------| | __________|____________
| Mid-America | Bonds | Mid-America | | |
| Finance, Inc. |--------->| Capital Partners, L.P. | | |
| ("Depositor") | Proceeds | ("Borrower") | | LaSalle National |
|_______________| |________________________________| | Bank |
| /|\ | | |
Bonds \|/ | Proceeds | Indenture |_______________________|
_________|______ | Trustee
| | ___|______________
| Mid-America | | |
| Mortage Trust, | Trustee | LaSalle National |
| 1998-I |_______________| Bank |
| ("Trust") | | |
|________________| |__________________|
| /|\
Certificates \|/ | Proceeds
_______________|_
| |
| Investors |
|_________________|
</TABLE>
6
<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. SEE THE GLOSSARY BEGINNING ON PAGE G-1 FOR DEFINITIONS OF
TERMS USED IN THIS PROSPECTUS.
TITLE OF CERTIFICATES................. Mid-America Mortgage Trust, 1998-1
Commercial Mortgage Pass-Through
Certificates, Series 1998-1 (the
"Certificates").
ISSUER OF CERTIFICATES................ Mid-America Mortgage Trust, 1998-1
(the "Trust"), a trust created
under the laws of the State of New
York pursuant to an agreement of
trust dated as of February 5, 1998
(as amended and restated from time to
time, the "Trust Agreement")
between Mid-America Finance, Inc. as
the sole depositor and grantor (the
"Depositor"), Mid-America Apartment
Communities, Inc. ("MAAC") and
LaSalle National Bank, as trustee
(together with any successor thereto,
the "Trustee").
DESCRIPTION OF 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 only
assets of the Trust will be
$142,000,000 aggregate principal
amount (the "Principal Amount") of
% First Mortgage 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. See "Description of
the Certificates."
DISTRIBUTIONS ON CERTIFICATES:........ On the first Business Day of each
month beginning March 2, 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. 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.
EXPECTED FINAL DISTRIBUTION DATE:..... The Expected Final Distribution Date
for the Certificates is March 3, 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.
7
<PAGE>
SCHEDULED FINAL DISTRIBUTION DATE: ........The Scheduled Final Distribution Date
for the Certificates is September 1,
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." The ratings of
Moody's and S&P address the
likelihood of the timely receipt by
Certificate holders of all payments
(other than Default Interest) to
which such holders are entitled by
two different dates: the Scheduled
Final Distribution Date, in the case
of Moody's, and the Expected Final
Distribution Date, in the case of
S&P.
CERTIFICATE RECORD DATE:.................. The record date for the Certificates
with respect to any Distribution Date
will be the close of business on the
Business Day preceding such
Distribution Date (a "Certificate
Record Date").
TITLE OF BONDS............................ Mid-America Capital Partners, L.P.
% First Mortgage Bonds, Due 2003.
DESCRIPTION OF BONDS...................... The Bonds will be issued pursuant to
a restated supplemental indenture
(the "Indenture") dated effective
as of November 21, 1997 by and among
the Borrower, Mid-America Apart-
ments, L.P. ("MAALP") and LaSalle
National Bank, as trustee (the
"Indenture Trustee") and will be
limited to an aggregate amount of
$142,000,000. See "Description of
the Bonds."
INTEREST RATE:............................ The Bonds will bear interest from the
date of issuance 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 March 3,
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 for defeasance
of the bonds at any time prior to the
Stated Maturity Date, upon the
compliance by the Borrower with the
following conditions: (i) an
irrevocable deposit with the
Indenture Trustee of cash or U.S.
government securities sufficient to
pay principal and interest when due
on the Bonds to the Stated Maturity
Date, (ii) delivery to the Indenture
Trustee of a certificate from
independent accountants stating that
payments derived from such deposited
cash or securities will be sufficient
to pay principal and interest when
due on the Bonds to the Stated
Maturity Date, (iii) delivery of
certain required opinions of counsel,
(iv) receipt of written confirmation
from the Rating Agencies that such
defeasance will not, in and of
itself, cause the withdrawal,
downgrade or requalification of any
rating on the Certificates or, after
a Permitted Merger, the unsecured
debt of
8
<PAGE>
MAALP, and (v) absence of an Event of
Default (as defined below) arising
from certain events of bankruptcy,
insolvency or reorganization relating
to the Borrower 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 March
2, 1998.
SECURITY:................................. COLLATERAL PRIOR TO PERMITTED MERGER
AND SECURITY RELEASE. Unless and
until a Permitted Merger and
Security Release occurs, the Bonds
will be secured by (i) first
priority mortgage liens (the
"Mortgage Liens") on the Borrower's
fee interest in 26 apartment
communities located in 9 states,
including each of the parcels of
land 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 certain Accounts (as defined
below) of the Borrower. Prior to a
Permitted Merger and Security
Release, MAACP, Inc., a
special-purpose Delaware corporation
and a wholly owned subsidiary of
MAAC, the general partner of the
Borrower (the "General Partner"),
will have no personal liability with
respect to the Bonds, and no
Bondholder may claim recourse
against the General 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, 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. If a Permitted
Merger and Security Release occur,
the Bonds will become 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 Proper-
ties, 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
"-- Permitted Merger; Security
Release and Trust Termination" and
"Description of the
Bonds -- Permitted Merger; Security
Release and Trust Termination," and
there can be no assurance that such
conditions will thereafter be met or
that a Permitted Merger and Security
Release will occur.
ADDITIONAL INDEBTEDNESS:.................. Prior to a Permitted Merger and
Security Release, the Borrower may
9
<PAGE>
not incur any indebtedness 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 a 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) (b) secured indebtedness in
excess of 40% of MAALP's Total Assets
or (c) indebtedness if the
Post-Permitted Merger Debt Service
Coverage Ratio (defined below) for
the four consecutive fiscal quarters
most recently ended prior to the date
on which such additional indebtedness
is to be incurred would be less than
1.50 to 1, on a pro forma basis; 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 a
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 out-
standing 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 immediately preceding such
Payment Date (the "Record Date").
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 Ratings 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."
The ability of MAALP to procure the
required ratings of its unsecured
debt, including the Bonds, is subject
to satisfaction of the criteria for
such ratings as may be imposed from
time to time by Moody's and S&P.
MAALP believes such criteria include
ownership by MAALP directly or
through subsidiaries of substantially
all of the real estate assets
currently owned by MAAC and
satisfaction of certain leverage and
equity ratios.
10
<PAGE>
The rating criteria established by
Moody's and S&P are subject to change
from time to time in the sole
discretion of the Rating Agencies,
and such criteria are outside the
control of MAALP and may not be
satisfied by MAALP prior to repay-
ment of the Bonds in full. There can
be no assurance that MAALP will
procure the required ratings and
effect a Permitted Merger and
Security Release.
At least 60 days prior to a 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 accompanied by a prospectus
pursuant to a post-effective
amendment to the registration
statement of which such prospectus
will be a part providing Certificate
holders with information about MAALP
and describing the Permitted Merger
and Security Release (the
"Post-Effective Prospectus"). Upon
proof of proper notice and delivery
of the Post-Effective Prospectus and
certification by MAALP that the
conditions to the Permitted Merger
and Security Release have been met,
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 a 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.
As of the date of this Prospectus the
Borrower and MAALP have not taken any
action to effect the Permitted Merger
and Security Release.
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) will hold their
Certificates (or Bonds) through The
Depository Trust Company ("DTC")
which may include delivery through
Cedel Bank, S.A. ("CEDEL") and The
Euroclear System ("Euroclear") as
participants of the Depository Trust
Company. Transfers within DTC, CEDEL
and Euroclear, as the case may be,
will be in accordance with the usual
rules and operating procedures of
11
<PAGE>
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"), each 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 TRUST................................. Mid-America Mortgage Trust, 1998-1, a
trust created under the laws of the
State of New York pursuant to an
agreement of trust dated as of
February 5, 1998, as amended and
restated from time to time, between
the Depositor, MAAC and the Trustee.
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.
The General Partner owns a 1%
interest in and is the sole general
partner of the Borrower. The Borrower
was formed by MAALP and the General
Partner in November 1997. Twenty of
the Mortgaged Properties were
previously owned and operated by
MAALP and contributed to the Borrower
at the time of its formation. These
Mortgaged Properties comprise the
Capital Properties Group and are
considered the predecessor to the
Borrower due to the common control of
these Mortgaged Properties before and
after their contribution to the
Borrower. See "Note 1 to Notes to
Combined Financial Statements" of
Capital Properties Group.
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 84.6% 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.
12
<PAGE>
MAALP owns a 99% limited partnership
interest in the Borrower. Following a
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 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 a
Permitted Merger and Security Release
the Indenture Trustee may 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 Ad-
vances 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 a Permitted Merger and
Security Release, the Indenture
Trustee may 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 a Permitted Merger and Security
Release, the Indenture Trustee is not
obligated to make any Advances with
respect to the Bonds.
13
<PAGE>
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 Memphis,
Tennessee, are considered by the Bor-
rower a part of the Memphis,
Tennessee metropolitan area.
NUMBER
OF
MORTGAGED PROPERTY METROPOLITAN AREA 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 $241 million, in the
aggregate. Neither the Borrower nor
the Depositor makes any
14
<PAGE>
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 59% which
represents a fraction, expressed as a
percentage, the numerator of which is
the $142 million Principal Amount of
the Bonds, and the denominator of
which is $241 million, which is the
aggregate of the appraised values of
the Mortgaged Properties. The
loan-to-value ratio is not
necessarily indicative 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 2.29x. 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 year.
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.................................. 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"), 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 cash
collateral accounts, maintained on a
book-entry basis (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
15
<PAGE>
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 on a
daily basis by automated clearing
house transfer to such accounts as
the Borrower may direct 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 (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
Agreement, the Borrower has
instructed the Account Bank to
withdraw from the Operating Account,
during any Cash Management Period, 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 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
16
<PAGE>
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 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 corpo-
ration 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 inter-
est 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 undi-
vided 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 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
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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 En-
hancement Act of 1984, as amended
("SMMEA"). Accordingly, investors
should consult with their own legal
advisors to determine whether and to
what extent the Certificates consti-
tute 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 requalification 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 by holders of 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 requalification of a
rating 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
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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 cor-
responding effect on the yield to
investors.
CHANGE IN RATING FOLLOWING MERGER AND
SECURITY RELEASE........................ The Certificates, as a condition to
issuance, must be rated no lower than
"Baa2" and "BBB" by Moody's and
S&P, respectively; however one of the
conditions to a Permitted Merger and
Security Release is that MAALP's
unsecured debt, including the Bonds,
is rated not less than "Baa3" and
"BBB-" by Moody's and S&P,
respectively, which are lower ratings
than those of the Certificates, as
issued.
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.
RISK FACTORS.............................. There are material risks associated
with an investment in the
Certificates. See "Risk Factors."
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RISK FACTORS
AN INVESTMENT IN THE CERTIFICATES, AND AFTER A PERMITTED MERGER AND
SECURITY RELEASE, THE BONDS, INVOLVES VARIOUS RISKS, INCLUDING THOSE DESCRIBED
BELOW. THE BORROWER AND THE DEPOSITOR BELIEVE THAT THE RISK FACTORS SET FORTH
BELOW CONSTITUTE ALL OF THE MATERIAL RISKS INVOLVED IN AN INVESTMENT IN THE
CERTIFICATES. 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 a 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 owning and operating apartments. Adverse
developments in the apartment industry in general or, before a 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 a
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 a 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 a 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 A PERMITTED MERGER AND SECURITY RELEASE. Prior to a 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,
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<PAGE>
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.
SUBSEQUENT TO PERMITTED MERGER AND SECURITY RELEASE. Upon a 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 a 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
Debt Service Coverage Ratio At least 1.50 to 1, on a pro forma
basis for trailing four quarters
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
a 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 a 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 a 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. The Borrower believes that
the Mortgaged Properties and the markets in which they are located are typical
apartment communities and markets and that the risks discussed in this paragraph
are characteristic of apartment communities, wherever located. 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
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<PAGE>
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 a 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 of all its
properties, which ability may be adversely affected by the factors described
above.
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. The Borrower believes that the
Mortgaged Properties and the markets in which they are located are typical
apartment communities and markets and that the risks discussed in this paragraph
are characteristic of apartment communities, wherever located. 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 a
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 one instance, at
Willow Creek, the database
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<PAGE>
search 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. Such Mortgaged Property is adjacent to a
leaking underground storage tank site and the ESA anticipates that the adjacent
contamination will affect the Mortgaged Property. An agency of the State of
Georgia has indicated that it will assume the responsibility and cost of
remediation of such contamination and based on discussions with the applicable
state regulatory agency, the Borrower believes that it will not be responsible
or liable for the remediation or cleanup of any environmental contaimination and
that there will be no material adverse effect on the affected Mortgage Property
or 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 Mortgaged Property or 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 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. Only one Mortgaged Property, Willow Creek, did not obtain a recommended
Phase II ESA, and there is a risk that, if a Phase II ESA is not obtained for
such Mortgaged Property, the Indenture Trustee could not foreclose on that
Mortgaged Property. 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.
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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 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 $241 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 a 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 a Permitted Merger and Security
Release, to sell other assets, generally) at that time. If the Borrower (or,
after a 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 a
Permitted Merger and Security Release, holders of the Bonds may not receive full
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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 requalification 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 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.
CHANGE IN RATING FOLLOWING PERMITTED MERGER AND SECURITY RELEASE
The Certificates, as a condition to issuance, must be rated no lower than
"Baa2" and "BBB" by Moody's and S&P, respectively; however, one of the
conditions to a Permitted Merger and Security Release is that MAALP's unsecured
debt, including the Bonds, must be rated not less than "Baa3" and "BBB-" by
Moody's and S&P, respectively, which are lower ratings than those of the
Certificates, when issued.
RISKS OF BANKRUPTCY OF THE BORROWER AND THE GENERAL PARTNER
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
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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) 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
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.
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. THE DEPOSITOR BELIEVES THAT THE FOLLOWING
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DESCRIPTION OF THE CERTIFICATES INCLUDES ALL OF THE MATERIAL TERMS OF THE
CERTIFICATES, BUT 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. $142,000,000. The Certificates represent
beneficial ownership of the assets of the Trust, which consists exclusively of
the Bonds in the aggregate principal amount of $142,000,000. The Bonds will be
issued pursuant to the Indenture and, unless and until the occurrence of a
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, incurring the MSMC
Loan 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." There can be no assurance that the conditions to a Permitted
Merger and Security Release will be satisfied or that a Permitted Merger and
Security Release will ever occur. See "Risk Factors -- Failure to Satisfy
Conditions to Permittted Merger and Security Release. Simultaneously with a
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.
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.
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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 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 March 3, 2003,
which is the Stated Maturity Date of the Bonds. The Expected Final 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 September 1,
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 --
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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. The ratings of Moody's and S&P
address the likelihood of the timely receipt by Certificate holders of all
payments (other than Default Interest) to which such holders are entitled by two
different dates: the Scheduled Final Distribution Date, in the case of Moody's,
and the Expected Final Distribution Date, in the case of S&P.
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.
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 requalification 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.
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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 a Permitted Merger and Security Release, the Trust will
terminate. If a Permitted Merger and Security Release occurs, 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.
ACTION BY TRUSTEE PRIOR TO PERMITTED MERGER AND SECURITY RELEASE
If, prior to a permitted Merger and Security Release, any event occurs that
gives rise to any right of Bondholders to act under the Indenture, the Trustee,
as legal owner of the Bonds, shall inform the Certificate holders of such event
and seek instruction from the Certificate holders regarding how to proceed. If
the Trustee receives direction from the Certificate holders beneficially owning
the aggregate principal amount of the Bonds required to take an action pursuant
to the Indenture, then the Trustee, as legal owner of the Bonds, will take such
action.
DESCRIPTION OF THE BONDS
CERTAIN STATEMENTS CONTAINED THROUGHOUT THIS PROSPECTUS ARE SUMMARIES OF
CERTAIN PROVISIONS OF THE INDENTURE AND THE BONDS. THE BORROWER AND THE
DEPOSITOR BELIEVE THAT THE FOLLOWING DESCRIPTION OF THE BONDS INCLUDES ALL OF
THE MATERIAL TERMS OF THE BONDS, BUT SUCH STATEMENTS DO NOT PURPORT TO BE
COMPLETE AND ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO SUCH AGREEMENTS AND
INSTRUMENTS.
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 $142,000,000
and will mature on March 1, 2003. Until a Permitted Merger and Security Release,
the Bonds will be secured by (i) first priority mortgage liens on the Borrower's
fee interest in 26 Mortgaged Properties, including each of the parcels of land
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 certain Accounts. Upon the occurrence of a
Permitted Merger and Security Release, the Bonds will become 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 as general unsecured creditors
of MAALP. The Bonds are neither insured nor guaranteed by the Depositor, the
Borrower, the
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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 a 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 ability of MAALP to procure the required ratings of its unsecured debt,
including the Bonds, is subject to satisfaction of the criteria for such ratings
as may be imposed from time to time by Moody's and S&P. MAALP believes such
criteria include ownership by MAALP directly or through subsidiaries of
substantially all of the real estate assets currently owned by MAAC and
satisfaction of certain leverage and equity ratios. The rating criteria
established by Moody's and S&P are subject to change from time to time in the
sole discretion of the Rating Agencies, and such criteria are outside the
control of MAALP and may not be satisfied by MAALP prior to repayment of the
Bonds in full. In connection with the FDC Merger, MAAC has agreed not to
transfer certain apartment communities or interests in property-owning
partnerships to MAALP until November 1999. MAAC and MAALP believe 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 a Permitted Merger and Security Release.
Therefore, MAALP believes that before November 1999 MAALP cannot, and there can
be no assurance that MAALP will thereafter, procure the required ratings and
effect a Permitted Merger and Security Release.
The Borrower is required to give written notice of an 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 Post-Effective Prospectus. Upon proof of proper notice and delivery of the
Post-Effective Prospectus and satisfaction of certain other conditions, 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 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 March 1, 2003.
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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 prepayment or principal amortization except
upon the occurrence of the certain events of default under the Indenture.
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 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 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;
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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
SIX: to pay any other amounts due and owing under the Indenture.
COVENANTS
Pursuant to the Indenture, the Borrower and, after a Permitted Merger and
Security Release, MAALP are subject to the following covenants, as applicable:
MAINTENANCE OF LIENS PRIOR TO PERMITTED MERGER AND SECURITY RELEASE. Prior
to a 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 a 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 a 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 60% 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 a 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 a 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 a Permitted Merger and Security Release, 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 year 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) (the "Pre-Permitted Merger Debt Service Coverage Ratio") of the
Borrower is less than 1.30 to 1, the Indenture Trustee will deliver a written
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.
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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 written notice 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.
DEBT SERVICE COVERAGE FROM AND AFTER PERMITTED MERGER AND SECURITY
RELEASE. From and after any 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 from 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 a 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
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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 proves 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 (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 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 a 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.
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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 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, PROVIDEDthat 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 a 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 a 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.
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DEFEASANCE
The Indenture provides for defeasance of the Bonds at any time prior to the
Stated Maturity Date, upon the compliance by the Borrower with the following
conditions: (i) an irrevocable deposit with the Indenture Trustee of cash or
U.S. government securities sufficient to pay principal and interest when due on
the Bonds to the Stated Maturity Date, (ii) delivery to the Indenture Trustee of
a certificate from independent accountants stating that payments derived from
such deposited cash or securities will be sufficient to pay principal and
interest when due on the Bonds to the Stated Maturity Date, (iii) delivery of
certain required opinions of counsel, (iv) receipt of written confirmation from
the Rating Agencies that such defeasance will not, in and of itself, cause the
withdrawal, downgrade or requalification of any rating of the Certificates or,
after a Permitted Merger, of the unsecured debt of MAALP, and (v) absence of an
Event of Default arising from certain events of bankruptcy, insolvency or
reorganization relating to the Borrower.
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 a 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 ("Indirect
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
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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
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
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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.
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%.
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 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.
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At December 31, 1997 MAAC owns, directly and through wholly owned
subsidiaries and controlled partnerships including MAALP and the Borrower, 115
apartment communities containing 30,468 apartment units in 13 states. MAAC
selected the Mortgaged Properties to be contributed by MAALP to, or acquired
directly by, the Borrower because such Mortgaged Properties (i) had established
operating histories, (ii) produced historical cash flow that would be adequate
to pay interest on the Bonds, (iii) had appraised values that resulted in a
loan-to-value ratio that, in the aggregate, supported an investment grade rating
and (iv) were free of previous mortgages and other encumbrances. See MAAC's
Annual Report on Form 10-K for the year ended December 31, 1996, incorporated
herein by reference.
THE APPRAISAL REPORTS
The Appraisals estimate the values of the Mortgaged Properties to be
approximately $241 million. The Appraisals do not render any opinion of value of
the Mortgaged Properties subsequent to the valuation dates of the Appraisals.
Cushman & Wakefield, Inc. (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 are 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 REPORTS
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 REPORTS
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 one instance, the database search 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. Such Mortgaged Property is adjacent to a leaking underground
storage tank site and the ESA anticipates that the adjacent contamination will
affect the Mortgaged Property. An agency of the State of Georgia has indicated
that it will assume the responsibility and cost of remediation of such
contamination, and based on discussions with such regulatory agency, the
Borrower believes that it will not be responsible or liable for the remediation
or cleanup of any environmental contamination and that there will be no material
adverse effect on the affected Mortgaged Property or the Mortgaged Properties
taken as a whole as a result of environmental costs or liabilities. 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 have a material adverse effect on
the Mortgaged Properties or the Borrower's ability to make required payments on
the Bonds.
40
<PAGE>
The Phase I reports identified the presence of ACMs 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 set forth selected financial and operating information
for the Mortgaged Properties.
41
<PAGE>
<TABLE>
<CAPTION>
NUMBER
YEAR YEAR OF
MORTGAGED PROPERTY METROPOLITAN AREA COMPLETED ACQUIRED UNITS 1 BDR 2 BDR 3 BDR
- ------------------------------------- ---------------------------- --------- -------- ------ ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Belmere.............................. Tampa Florida 1984 1994 210 104 106 0
Crosswinds........................... Jackson, Mississippi 1990 1996 360 120 176 64
Fairways at Royal Oak................ Cincinnati, Ohio 1988 1994 214 107 107 0
Hermitage at Beechtree............... Cary, North Carolina 1985 1997(3) 194 60 134 0
Hidden Lake II(2).................... Atlanta, Georgia 1987 1997(3) 160 64 96 0
High Ridge(2)........................ Athens, Georgia 1987 1997(3) 160 32 96 32
Howell Commons....................... Greenville, South Carolina 1988 1997 348 200 148 0
Kirby Station........................ Memphis, Tennessee 1978 1994 371 225 146 0
Lakepointe........................... Lexington, Kentucky 1986 1994 118 96 22 0
Lakeside............................. Jacksonville, Florida 1985 1996 416 272 144 0
Marsh Oaks........................... Atlantic Beach, Florida 1986 1995 120 56 64 0
Napa Valley.......................... Little Rock, Arkansas 1984 1996 240 156 84 0
Park Haywood......................... Greenville, South Carolina 1983 1993 208 96 112 0
Park Place(2)........................ Spartanburg, South Carolina 1987 1997(3) 184 64 96 24
Pear Orchard......................... Jackson, Mississippi 1985 1994 389 228 161 0
Savannah Creek(1).................... Memphis, Tennessee 1989 1996 204 68 112 24
Shenandoah Ridge..................... Augusta, Georgia 1982 1995 272 128 144 0
Somerset............................. Jackson, Mississippi 1981 1995 144 56 88 0
Southland Station I(2)............... Warner Robins, Georgia 1987 1997(3) 160 48 80 32
Steeplechase......................... Chattanooga, Tennessee 1986 1991 108 43 65 0
Sutton Place(1)...................... Memphis, Tennessee 1991 1996 252 84 120 48
Tiffany Oaks......................... Altamonte Springs, Florida 1985 1996 288 224 64 0
Village, The......................... Lexington, Kentucky 1989 1994 252 168 84 0
Westside Creek I..................... Little Rock, Arkansas 1984 1997 142 16 126 0
Williamsburg Village................. Jackson, Tennessee 1987 1994 148 88 48 12
Willow Creek(2)...................... Willow Creek, Georgia 1977 1997(3) 285 113 164 8
------ ----- ----- -----
5,947 2,916 2,787 244
====== ===== ===== =====
APPROXIMATE AVERAGE MONTHLY RENT AVERAGE PHYSICAL
RENTABLE AVERAGE PER UNIT AT OCCUPANCY AT
AREA UNIT SIZE --------------------- ---------------------
(SQUARE (SQUARE SEPTEMBER DECEMBER SEPTEMBER DECEMBER APPRAISED
MORTGAGED PROPERTY FEET) FEET) 30, 1997 31, 1996 30, 1997 31, 1996 VALUE
- ------------------------------------- ----------- --------- --------- -------- --------- -------- ------------
Belmere.............................. 202,440 964 $ 602 $592 98.6% 97.1% $ 10,100,000
Crosswinds........................... 443,200 1,231 $ 605 $588 94.4% 96.7% 17,125,000
Fairways at Royal Oak................ 214,477 1,002 $ 588 $570 98.1% 98.1% 10,200,000
Hermitage at Beechtree............... 169,776 875 $ 645 $624 96.6% 95.0% 9,350,000
Hidden Lake II(2).................... 154,000 963 $ 609 $590 93.2% 97.5% 6,800,000
High Ridge(2)........................ 186,608 1,166 $ 739 $748 85.3% 93.5% 9,200,000
Howell Commons....................... 292,840 841 $ 499 $501 97.7% 87.6% 13,600,000
Kirby Station........................ 310,173 836 $ 556 $531 99.7% 97.0% 16,100,000
Lakepointe........................... 90,614 768 $ 534 $520 94.9% 98.3% 5,000,000
Lakeside............................. 344,192 827 $ 555 $556 95.4% 95.4% 15,650,000
Marsh Oaks........................... 93,280 777 $ 519 $501 94.2% 99.2% 4,400,000
Napa Valley.......................... 183,216 763 $ 541 $542 92.1% 82.9% 9,400,000
Park Haywood......................... 156,776 754 $ 497 $479 92.8% 93.8% 6,700,000
Park Place(2)........................ 195,312 1,061 $ 591 $598 91.3% 92.7% 7,000,000
Pear Orchard......................... 338,400 870 $ 544 $556 95.1% 97.9% 16,365,000
Savannah Creek(1).................... 237,200 1,162 $ 580 $557 100.0% 99.0% 8,800,000
Shenandoah Ridge..................... 222,800 819 $ 440 $434 92.6% 92.3% 7,500,000
Somerset............................. 126,848 881 $ 488 $492 95.8% 98.6% 5,000,000
Southland Station I(2)............... 186,704 1,167 $ 611 $647 91.6% 89.7% 6,740,000
Steeplechase......................... 98,602 913 $ 542 $522 98.1% 96.3% 4,000,000
Sutton Place(1)...................... 267,600 1,062 $ 561 $536 99.2% 98.8% 10,800,000
Tiffany Oaks......................... 234,224 813 $ 559 $554 99.3% 96.0% 11,475,000
Village, The......................... 182,716 725 $ 562 $542 96.4% 96.0% 11,000,000
Westside Creek I..................... 148,030 1,042 $ 628 $603 95.1% 90.0% 5,500,000
Williamsburg Village................. 121,412 820 $ 518 $507 99.3% 97.3% 5,620,000
Willow Creek(2)...................... 246,668 866 $ 460 $455 91.8% 91.0% 7,900,000
----------- --- ------------
5,448,108 916 $241,325,000
=========== === ============
</TABLE>
APPRAISED
MORTGAGED PROPERTY VALUE/UNIT
- ------------------------------------- ----------
Belmere.............................. $ 48,095
Crosswinds........................... 47,569
Fairways at Royal Oak................ 47,664
Hermitage at Beechtree............... 48,196
Hidden Lake II(2).................... 42,500
High Ridge(2)........................ 57,500
Howell Commons....................... 39,080
Kirby Station........................ 43,396
Lakepointe........................... 42,373
Lakeside............................. 37,620
Marsh Oaks........................... 36,667
Napa Valley.......................... 39,167
Park Haywood......................... 32,212
Park Place(2)........................ 38,043
Pear Orchard......................... 42,069
Savannah Creek(1).................... 43,137
Shenandoah Ridge..................... 27,574
Somerset............................. 34,722
Southland Station I(2)............... 42,125
Steeplechase......................... 37,037
Sutton Place(1)...................... 42,857
Tiffany Oaks......................... 39,844
Village, The......................... 43,651
Westside Creek I..................... 38,732
Williamsburg Village................. 37,973
Willow Creek(2)...................... 27,719
----------
$ 40,579
==========
- ------------
(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.
(3) Subsequent to September 30, 1997.
42
<PAGE>
<TABLE>
<CAPTION>
TWELVE
MONTHS
ENDED
DECEMBER
NINE MONTHS ENDED SEPTEMBER 30, 1997 31, 1996
----------------------------------------------------------------------------------------------- ----------
NET MANAGEMENT
OPERATING FEE CAPITAL ADJUSTED
MORTGAGED PROPERTY REVENUE(1) EXPENSES(2) INCOME(3,7) ADJUSTMENT(4) EXPENDITURES(5) CASH FLOW(6) REVENUE(1)
- -------------------- ---------- ----------- -------------- ------------- --------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Belmere............. $1,117,858 $ 411,347 $ 706,511 $ 44,714 $ 31,500 $ 630,297 $1,431,297
Crosswinds.......... 1,897,439 580,672 1,316,767 75,898 54,000 1,186,869 2,497,368
Fairways at Royal
Oak................ 1,096,972 384,651 712,321 43,879 32,100 636,342 1,445,875
Hermitage at
Beechtree.......... 1,079,040 375,525 703,515 43,162 29,100 631,253 1,365,182
Hidden Lake II...... 809,325 326,639 482,686 32,373 24,000 426,313 1,073,673
High Ridge.......... 933,342 355,680 577,662 37,334 24,000 516,328 1,365,157
Howell Commons...... 1,435,340 487,050 948,290 57,414 52,200 838,676 1,984,926
Kirby Station....... 1,843,672 507,773 1,335,899 73,747 55,650 1,206,502 2,348,728
Lakepointe.......... 541,140 193,548 347,592 21,646 17,700 308,246 707,455
Lakeside............ 1,950,821 793,341 1,157,480 78,033 62,400 1,017,047 2,523,881
Marsh Oaks.......... 554,190 207,710 346,480 22,168 18,000 306,312 717,166
Napa Valley......... 1,059,454 405,606 653,848 42,378 36,000 575,470 1,454,936
Park Haywood........ 864,729 358,917 505,812 34,589 31,200 440,023 1,123,514
Park Place.......... 921,298 394,469 526,829 36,852 27,600 462,377 1,250,520
Pear Orchard........ 1,858,815 633,419 1,225,396 74,353 58,350 1,092,693 2,416,192
Savannah Creek...... 1,064,029 336,103 727,926 42,561 30,600 654,765 1,327,045
Shenandoah Ridge.... 1,010,734 447,505 563,229 40,429 40,800 482,000 1,314,522
Somerset............ 610,770 277,167 333,603 24,431 21,600 287,572 824,225
Southland Station
I.................. 820,371 271,009 549,362 32,815 24,000 492,547 1,109,454
Steeplechase........ 493,418 196,168 297,250 19,737 16,200 261,313 626,380
Sutton Place........ 1,253,028 384,296 868,732 50,121 37,800 780,811 1,590,725
Tiffany Oaks........ 1,434,237 513,365 920,872 57,369 43,200 820,303 1,852,892
Village, The........ 1,210,631 425,686 784,945 48,425 37,800 698,720 1,552,802
Westside Creek I.... 744,133 257,207 486,926 29,765 21,300 435,861 984,816
Williamsburg
Village............ 689,330 241,678 447,652 27,573 22,200 397,879 877,292
Willow Creek........ 1,150,208 490,055 660,153 46,008 42,750 571,395 1,406,073
----------- ----------- ----------- ---------- --------- ----------- -----------
Total........ $28,444,324 $10,256,586 $18,187,738 $1,137,774 $ 892,050 $16,157,914 $37,172,096
=========== =========== =========== ========== ========= =========== ===========
NET MANAGEMENT
OPERATING FEE CAPITAL ADJUSTED
MORTGAGED PROPERTY EXPENSES(2) INCOME(3,7) ADJUSTMENT(4) EXPENDITURES(5) CASH FLOW(6)
- -------------------- ----------- -------------- ------------- --------------- ------------
Belmere............. $ 558,026 $ 873,271 $ 57,252 $ 42,000 $ 774,019
Crosswinds.......... 840,172 1,657,196 99,895 72,000 1,485,301
Fairways at Royal
Oak................ 520,900 924,975 57,835 42,800 824,340
Hermitage at
Beechtree.......... 454,093 911,089 54,607 38,800 817,682
Hidden Lake II...... 423,947 649,726 42,947 32,000 574,779
High Ridge.......... 466,802 898,355 54,606 32,000 811,749
Howell Commons...... 678,072 1,306,854 79,397 69,600 1,157,857
Kirby Station....... 649,808 1,698,920 93,949 74,200 1,530,771
Lakepointe.......... 271,236 436,219 28,298 23,600 384,321
Lakeside............ 996,865 1,527,016 100,955 83,200 1,342,861
Marsh Oaks.......... 242,233 474,933 28,687 24,000 422,246
Napa Valley......... 474,702 980,234 58,197 48,000 874,037
Park Haywood........ 408,860 714,654 44,941 41,600 628,113
Park Place.......... 563,068 687,452 50,021 36,800 600,631
Pear Orchard........ 801,268 1,614,924 96,648 77,800 1,440,476
Savannah Creek...... 460,920 866,125 53,082 40,800 772,243
Shenandoah Ridge.... 604,810 709,712 52,581 54,400 602,731
Somerset............ 321,521 502,704 32,969 28,800 440,935
Southland Station
I.................. 359,419 750,035 44,378 32,000 673,657
Steeplechase........ 273,916 352,464 25,055 21,600 305,809
Sutton Place........ 465,826 1,124,899 63,629 50,400 1,010,870
Tiffany Oaks........ 761,932 1,090,960 74,116 57,600 959,244
Village, The........ 527,557 1,025,245 62,112 50,400 912,733
Westside Creek I.... 302,816 682,000 39,393 28,400 614,207
Williamsburg
Village............ 308,493 568,799 35,092 29,600 504,107
Willow Creek........ 693,728 712,345 56,243 57,000 599,102
----------- -------------- ------------- --------------- ------------
Total........ $13,430,990 $23,741,106 $1,486,885 $1,189,400 $21,064,821
=========== ============== ============= =============== ============
</TABLE>
- ------------
(1) Represents the historical unaudited rental and other revenues of the
Mortgaged Properties for the indicated period.
(2) Represents the historical unaudited operating expenses of the Mortgaged
Properties for the indicated period.
(3) Represents revenue in excess of operating expenses.
(4) Represents an assumed management fee adjustment calculated as 4% of the
Mortgaged Property's revenue for the indicated period.
(5) Represents a $200 per apartment unit assumed capital expenditure per year
for the indicated period.
(6) Represents the excess of net operating income over management fee adjustment
and capital expenditures for the indicated period.
(7) Net operating income does not reflect interest income earned by certain of
the Mortgaged Properties of approximately $48,000 and $63,000 for the nine
months ended September 30, 1997 and the year ended December 31, 1996,
respectively, or other operating expenses of approximately $56,000 and
$65,000 for the nine months ended September 30, 1997 and the year ended
December 31, 1996, respectively, consisting primarily of asset management
fees incurred by certain of the Mortgaged Properties. Such amounts have been
reflected in the Borrower's pro forma results of operations for the nine
months ended September 30, 1997 and the year ended December 31, 1996.
43
<PAGE>
DESCRIPTION OF THE MORTGAGES
THE FOLLOWING IS A SUMMARY OF CERTAIN PROVISIONS OF THE MORTGAGES NOT
DESCRIBED ELSEWHERE IN THIS PROSPECTUS. THE BORROWER AND THE DEPOSITOR BELIEVE
THAT THE FOLLOWING DESCRIPTION INCLUDES ALL OF THE MATERIAL TERMS OF THE
MORTGAGES, BUT 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 A PERMITTED MERGER AND SECURITY RELEASE. FROM AND AFTER
THE OCCURRENCE OF A 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, 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 ability of MAALP to procure the required
ratings of its unsecured debt, including the Bonds, is subject to satisfaction
of the criteria for such ratings as may be imposed from time to time by Moody's
and S&P. MAALP believes such criteria include ownership by MAALP directly or
through subsidiaries of substantially all of the real estate assets currently
owned by MAAC and satisfaction of certain leverage and equity ratios. The rating
criteria established by Moody's and S&P are subject to change from time to time
in the sole discretion of the Rating Agencies, and such criteria are outside the
control of MAALP and may not be satisfied by MAALP prior to repayment of the
Bonds in full. In connection with the FDC Merger, MAAC has agreed not to
transfer certain apartment communities or interests in property-owning
partnerships to MAALP until November 1999. MAAC and MAALP believe 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 a Permitted Merger and Security Release.
Therefore, MAALP believes that before November 1999 MAALP cannot, and there can
be no assurance that MAALP will thereafter, procure the required ratings and
effect a Permitted Merger and Security Release.
The Borrower will give written notice to the Trustee which, in turn, will
give notice to the Certificate holders, of an 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 Post-Effective Prospectus
to each beneficial owner of the Certificates. Upon proof of proper notice and
delivery of the Post-Effective Prospectus and the satisfaction of certain other
conditions, the Indenture Trustee will release the Mortgage Liens, the Permitted
Merger will occur and MAALP will assume the obligations under the Bonds. Neither
a Permitted Merger nor a Security Release may occur if Advances are outstanding.
EFFECT OF SECURITY RELEASE
After a 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,
44
<PAGE>
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 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 a 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 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.
45
<PAGE>
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) a Permitted Merger or (ii) repayment in full 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 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 Indenture Trustee as additional
insureds or as loss payees. In the opinion of management of the Depositor and
the General Partner, the Mortgaged Properties are adequately covered by
insurance.
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 and 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 a 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 a 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
46
<PAGE>
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 a
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.
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. Hermitage at Beechtree, L.L.C. was formed by MAAC and MAALP less
than a month before its merger into the Borrower for the sole purpose of
acquiring the Hermitage at Beechtree apartment community in a manner that would
permit the contemplated transfer of such apartment community without additional
transfer tax. The merger was accounted for using the purchase method of
accounting utilizing the net purchase price paid for that Mortgaged Property.
The General Partner contributed cash of approximately $2,271,000 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 12, 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
47
<PAGE>
(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.
The Depositor's principal executive offices are located at 1209 Orange
Street, Wilmington, Delaware 19801 and its telephone number is (302) 777-0205.
THE TRUST
The Trust has been created as a grantor trust under the Code. Upon issuance
of the Certificates, the Certificate holders will own 100% of the beneficial
ownership interests in the Trust. The Trust has no executive officers or
directors, and the daily acitivities of the Trust are conducted solely by the
Trustee in accordance with the Trust Agreement. The only rights of the Trustee
with respect to the Trust are those necessary and incidental to the performance
of its duties under the Trust Agreement, including, the right to hold the Bonds,
receive payments thereon, and distribute such payments to the Certificate
holders, and to distribute the corpus of the Trust to its beneficiaries as
provided in the Trust Agreement.
The Trustee has no right or power on behalf of the Trust to (i) sell or
otherwise transfer the Bonds, except to the Certificate holders upon the
termination of the Trust; (ii) borrow any money; (iii) invest or reinvest any
interest or principal payment received on the Bonds; (iii) issue any additional
Certificates (with the exception of replacement certificates) or any securities
senior to the Certificates; (iv) make loans to other persons; (v) invest in the
securities of other issuers; (vi) underwrite securities of other issuers; (vii)
engage in the purchase and sale of investments; (vii) offer securities in
exchange for property (other than the original issuance of the Certificates);
(viii) repurchase or otherwise reacquire the Certificates, except upon the
termination of the Trust in accordance with the Trust Agreement; or (ix) acquire
any additional properties.
The principal trust offices of the Trustee are located at 135 South LaSalle
Street, Chicago, Illinois 60674-4107 and its telephone number is (312) 904-7324.
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. The MSMC Loan is secured by the Mortgaged Properties and certain other
collateral, including the Accounts. The MSMC Loan is payable in full on April
15, 1998, and bears interest at a floating rate of the London Interbank Offered
Rate plus 1%. 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
(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
48
<PAGE>
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 balance sheet data as of September 30,
1997 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 pro forma condensed statement of operations data for
the nine months ended September 30, 1997 and the year ended December 31, 1996
were prepared as if the above-described transactions occurred at the beginning
of the period presented.
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.
49
<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
------------ --------- --------- ------------ --------- --------- --------- ---------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <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
Other............................ 364 187 143 581 195 176 185 51
------------ --------- --------- ------------ --------- --------- --------- ---------
Total Revenue................ $ 28,492 22,420 13,931 37,291 20,251 14,497 4,753 842
Expenses:
Property expenses (1)............ 10,311 7,934 5,128 13,553 7,207 5,306 1,688 362
Depreciation and amortization.... 5,946 4,607 2,708 7,398 4,000 2,614 755 125
General and administrative
expenses....................... 1,253 897 557 1,642 810 580 190 34
Interest......................... 7,052 724 1,631 9,403 2,169 2,225 925 226
Amortization of deferred
financing costs................ 450 35 44 600 58 48 37 --
------------ --------- --------- ------------ --------- --------- --------- ---------
Net Income........................... $ 3,480 $ 8,223 $ 3,863 $ 4,695 $ 6,007 $ 3,724 $ 1,158 $ 95
============ ========= ========= ============ ========= ========= ========= =========
Balance Sheet Data:
Real estate owned, at cost....... $226,391 181,040 136,803 -- 158,285 87,240 73,521 6,027
Real estate owned, net........... 214,197 168,846 130,508 -- 150,699 83,653 72,548 5,772
Total assets................. 217,660 169,057 130,967 -- 151,257 84,216 73,499 6,523
Total debt................... 142,000 -- 22,595 -- 16,461 22,830 23,110 4,740
Partners' equity (deficit)....... 74,954 165,848 105,547 -- 131,951 59,978 48,938 1,454
Other Data (at end of period):
Number of Mortgaged Properties... 26 20 16 26 18 12 10 2
Number of apartment units........ 5,947 4,804 3,786 5,947 4,314 2,554 2,290 316
EBITDA (2)........................... 16,928 -- -- 22,096 -- -- -- --
Adjusted EBITDA (3).................. 16,149 -- -- 21,057 -- -- -- --
Cash flows from:
Operations activities............ -- 13,499 8,041 -- 11,421 6,432 3,073 --
Investing activities............. -- (22,755) (49,563) -- (71,045) (13,719) (44,285) --
Financing activities............. -- 9,214 41,470 -- 59,596 7,035 41,392 --
Debt Service Coverage Ratio (4)...... 2.29x -- -- 2.24x -- -- -- --
Adjusted Debt Service Coverage
Ratio (5).......................... 1.64x -- -- 1.60x -- -- -- --
Ratio of Earnings to Fixed
Charges (6)........................ 1.46x 11.83x 3.31x 1.47x 3.70x 2.56x 2.20x 1.42x
</TABLE>
YEAR ENDED DECEMBER 31,
-----------------------
CPG HISTORICAL
-----------------------
1992
-----------
Statement of Operations Data:
Revenue:
Rental........................... $ 513
Other............................ 31
-----------
Total Revenue................ 544
Expenses:
Property expenses (1)............ 230
Depreciation and amortization.... 98
General and administrative
expenses....................... 22
Interest......................... 172
Amortization of deferred
financing costs................ --
-----------
Net Income........................... $ 22
===========
Balance Sheet Data:
Real estate owned, at cost....... 2,330
Real estate owned, net........... 2,177
Total assets................. 2,593
Total debt................... 2,357
Partners' equity (deficit)....... (47)
Other Data (at end of period):
Number of Mortgaged Properties... 1
Number of apartment units........ 108
EBITDA (2)........................... --
Adjusted EBITDA (3)..................
Cash flows from:
Operations activities............ --
Investing activities............. --
Financing activities............. --
Debt Service Coverage Ratio (4)...... --
Adjusted Debt Service Coverage
Ratio (5).......................... --
Ratio of Earnings to Fixed
Charges (6)........................ 1.13x
- ------------
(1) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Capital Expenditures."
(2) 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. The Borrower believes that
EBITDA is helpful in understanding the Borrower's results of operations in
that such calculation reflects cash flow from operating activities and the
Borrower's ability to support interest payments and general operating
expenses before the impact of certain activities such as changes in other
assets and accounts payable. Because companies have different accounting
policies and different ways of calculating EBITDA, EBITDA presentations may
not be comparable even among companies in the same industry group. Effective
January 1, 1996, CPG implemented a new accounting policy regarding capital
expenditures which included the following changes: 1) increase minimum
dollar amounts to capitalize from $500 to $1,000, 2) capitalize replacement
purchases for major appliances and carpeting of entire apartment units which
had been previously expensed and 3) reduce depreciable lives for certain
assets from 20 years to 10 to 15 years. The effect of this new accounting
policy cannot be readily determined. However the Borrower believes that it
results in increased EBITDA for 1996 as compared to EBITDA for 1996
presented under the previous capital expenditure policy.
(3) For purposes of this computation, adjusted EBITDA consists of EBITDA as
defined in (2) above plus general and administrative expenses for the period
less a $200 per apartment unit capital expenditure reserve and a management
fee equal to 4% of total revenues per year.
(4) Debt service coverage ratio is computed as a ratio of adjusted EBITDA as
defined in (3) above to interest expense.
(5) Adjusted debt service coverage ratio is defined as adjusted EBITDA as
defined in (3) above divided by adjusted interest. Adjusted interest is
calculated based on an assumed 9.25% annual interest rate and $142,000,000
of pro-forma total indebtedness.
(6) Ratio of earnings to fixed charges is computed by dividing net income plus
fixed charges less capitalized interest by fixed charges. Fixed charges
consist of interest expense (including interest costs capitalized and
amortization of deferred financing costs).
50
<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) 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.
51
<PAGE>
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, 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 $1,870,000
for the year ended December 31, 1995 compared to the same period a year earlier
primarily due to depreciation expense for (i)
52
<PAGE>
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 $38,000 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 $3,544,000 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
$32,256,000 during the nine months ended September 30, 1997 from approximately
$41,470,000 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 $6,610,000 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 $52,561,000 during the year
ended December 31, 1996 from approximately $7,035,000 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 $700,000 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).
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
53
<PAGE>
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.
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 General Partner's directors and executive officers are
as follows:
<TABLE>
<CAPTION>
POSITION WITH
NAME BORROWER TERM EXPIRES POSITION WITH MAAC
- ------------------------------------- ---------------------- ------------- ------------------------------------
<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
</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.
54
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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 Executive Vice President and Chief
Financial Officer of Trammell Crow Realty Advisors. He received a B.B.A. 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. Mr. 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. Mr. 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.
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.
55
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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 84.6% 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 (the
"Property Partnerships"), 32 apartment communities containing an aggregate of
7,691 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 three additions to existing
apartment communities, which, in the aggregate, represents the construction of
950 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 27 Property Partnerships (the "FDC-owned Partnership
Interests"). 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
56
<PAGE>
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 a 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, including the Bonds, of MAALP from the Rating Agencies
required as a condition to a Permitted Merger and Security Release. The rating
criteria established by the Rating Agencies are subject to change from time to
time in the sole discretion of the Rating Agencies, and such criteria are
outside the control of MAALP and may not be satisfied by MAALP prior to
repayment of the Bonds in full. Accordingly, there can be no assurance that
MAALP will procure the required ratings and effect 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. The Borrower and
Depositor believe that separate MAALP financial statements are not material to
an understanding of an investment in the Certificates and underlying Bonds and
that the included and incorporated MAAC 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 a Permitted Merger and Security Release, at which time
the Bonds will be the general, unsecured obligations of MAALP, than the same
information for either MAAC or MAALP would 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, the Trustee will distribute the Post-Effective Prospectus
which will contain consolidated audited and unaudited financial information
concerning MAALP. The Company 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 February 5, 1998
57
<PAGE>
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 1,938,830
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 issuance of $142.0 million in Bonds, the net proceeds of which will be
utilized to repay certain indebtedness of the Company to Morgan Stanley Mortgage
Capital, Inc. pursuant to the terms of the $140.0 million MSMC Loan; (iv) the
issuance and sale of 3,499,300 shares of MAAC's Common Stock for an aggregate
net purchase price of $98.2 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 six 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 $24.7 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
MAAC's Common Stock for an aggregate net cash price of $62.5 million and the
related use of such proceeds; and (v) MAAC qualified as a REIT and distributed
all of its taxable income for the periods presented and, therefore, incurred no
income tax.
The unaudited pro forma financial information does not include the effect
of eliminating certain nonrecurring income and expenses or the elimination of
certain general and administrative expenses that were included in the historical
operating information of FDC which the Company does not expect to incur in the
future. Included in the pro forma information for the nine months ended
September 30, 1997 are gains from sales of assets ($132,000), dividend income on
trading securities ($20,000), other income ($38,000), accounting, legal and
other costs incurred in connection with a proposed public offering of FDC common
stock which was abandoned during 1997 ($2,252,000) and general and
administrative expenses which are expected to be eliminated as a result of cost
savings resulting from the Flournoy Reorganization ($587,000). Included in the
pro forma information for the year ended December 31, 1996 are gains from sales
of assets ($3,505,000), dividend income on trading securities ($34,000),
accounting, legal and other costs incurred in connection with a proposed public
offering of FDC common stock which was abandoned during 1997 ($233,000) and
general and administrative expenses which are expected to be eliminated as a
result of cost savings resulting from the Flournoy Reorganization ($904,000).
See "Management's Discussion and Analysis of Financial Condition and Results of
Operation -- Risks Associated with Forward-Looking Statements".
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.
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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, YEAR ENDED DECEMBER 31,
---------------------------------- ------------------------------------------
(UNAUDITED)
HISTORICAL HISTORICAL
PRO FORMA -------------------- PRO FORMA ------------------------------------------
1997 1997 1996 1996 1996 1995 1994(1) 1993
----------- --------- --------- ----------- --------- --------- --------- ---------
(UNAUDITED) (UNAUDITED) (PREDECESSOR)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenue:
Property
Rental........................... $ 139,917 $ 95,388 $ 81,527 $ 177,827 $ 110,090 $ 93,509 $ 50,181 $ 25,687
Other............................ 3,102 1,566 1,347 3,951 1,060 1,454 1,026 608
Property management.................. 1,036 -- -- 1,319 -- -- -- --
Development.......................... 614 -- -- 2,046 -- -- -- --
Construction, net.................... 631 -- -- 1,854 -- -- -- --
Miscellaneous........................ 730 -- -- 1,293 732 -- -- --
Total revenue.................... 146,030 96,954 82,874 188,290 111,882 94,963 51,207 26,295
Expenses:
Property Expenses (2)................ 54,148 36,928 31,795 68,860 42,570 37,954 19,484 11,316
General and administrative (3)....... 8,711 4,707 4,621 11,416 6,154 4,851 3,613 1,402
Property management.................. 576 -- -- 715 -- -- -- --
Interest............................. 32,659 20,271 19,502 41,646 25,766 22,684 10,233 7,448
Depreciation and amortization........ 31,542 19,798 16,175 40,077 22,104 17,167 9,099 3,720
Offering expenses.................... 2,252 -- -- 233 -- -- -- --
Other, net (4)....................... (875) -- -- 640 -- -- -- --
Gain on disposition of properties.... 132 -- 1,944 3,505 2,185 -- -- --
Income before minority interest and
extraordinary item................. 17,149 15,250 12,725 28,208 17,473 12,307 8,778 2,409
Net income........................... 14,818 12,678 10,384 24,343 14,260 9,810 6,944 2,542
Preferred dividends.................. 6,788 3,562 -- 9,052 990 -- -- --
Net income available for common
shares............................. 8,030 9,116 10,384 15,291 13,270 9,810 6,944 2,542
Net income per weighted average
common share outstanding........... $ .44 $ .71 $ .95 $ .83 $ 1.21 $ 1.00 $ 1.01 --
Weighted average Common Shares
outstanding........................ 18,447 12,793 10,982 18,447 10,986 9,819 6,534 --
BALANCE SHEET DATA:
Real estate owned, at cost........... $1,191,470 $ 783,545 $ 624,496 -- $ 641,893 $ 578,788 $ 434,460 $ 125,269
Total assets......................... 1,060,342 737,291 600,115 -- 611,199 565,267 439,233 104,439
Total debt........................... 596,974 382,058 347,541 -- 315,239 307,939 232,766 105,594
Minority interest.................... 61,529 45,383 39,623 -- 39,238 41,049 43,709 --
Shareholders' equity (owners'
deficit)........................... 467,417 290,499 196,189 -- 241,384 202,278 152,385 (4,684)
OTHER DATA:
Dividends declared per share......... -- $ 1.07 $ 1.02 -- $ 2.07 $ 2.01 $ 1.71 --
Ratio of total debt to total
capitalization (5)................. 44.9% 42.2% 50.8% -- 41.9% 48.2% 44.1%
Number of properties................. 114 82 72 -- 73 70 54 22
Number of apartment units............ 30,726 22,085 18,992 -- 19,280 18,220 14,333 5,580
EBITDA (6)........................... 82,093 -- -- 107,066 -- -- -- --
Cash flows from:
Operating activities............. -- 36,906 26,142 -- 38,018 34,289 21,590 7,269
Investing activities............. -- (96,588) (52,229) -- (70,436) (39,167) (227,746) (13,643)
Financing activities............. -- 61,411 25,984 -- 33,425 2,944 208,099 7,008
Debt Service Coverage Ratio (7)...... 2.51x -- -- 2.57x -- -- -- --
</TABLE>
YEAR ENDED DECEMBER 31,
-----------------------
HISTORICAL
-----------------------
1992
---------
OPERATING DATA:
Revenue:
Property
Rental........................... $ 21,756
Other............................ 438
Property management.................. --
Development.......................... --
Construction, net.................... --
Miscellaneous........................ --
Total revenue.................... 22,194
Expenses:
Property Expenses (2)................ 9,682
General and administrative (3)....... 1,112
Property management.................. --
Interest............................. 7,524
Depreciation and amortization........ 3,344
Offering expenses.................... --
Other, net (4)....................... --
Gain on disposition of properties.... --
Income before minority interest and
extraordinary item................. 532
Net income........................... 1,090
Preferred dividends.................. --
Net income available for common
shares............................. 1,090
Net income per weighted average
common share outstanding........... --
Weighted average Common Shares
outstanding........................ --
BALANCE SHEET DATA:
Real estate owned, at cost........... $ 111,686
Total assets......................... 93,252
Total debt........................... 95,036
Minority interest.................... --
Shareholders' equity (owners'
deficit)........................... (4,493)
OTHER DATA:
Dividends declared per share......... --
Ratio of total debt to total
capitalization (5).................
Number of properties................. 19
Number of apartment units............ 5,064
EBITDA (6)........................... --
Cash flows from:
Operating activities............. 4,342
Investing activities............. (8,240)
Financing activities............. 4,637
Debt Service Coverage Ratio (7)...... --
(FOOTNOTES ON FOLLOWING PAGE)
59
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- ------------
(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. The Borrower believes that
EBITDA is helpful in understanding the Borrower's results of operations in
that such calculation reflects cash flow from operating activities and the
Borrower's ability to support interest payments and general operating
expenses before the impact of certain activities such as changes in other
assets and accounts payable. Because companies have different accounting
policies and different ways of calculating EBITDA, EBITDA presentations may
not be comparable even among companies in the same industry group. Effective
January 1, 1996, CPG implemented a new accounting policy regarding capital
expenditures which included the following changes 1) increase minimum dollar
amounts to capitalize from $500 to $1,000, 2) capitalized replacement
purchases for major appliances and carpeting of entire apartment units which
had been previously expensed and 3) reduce depreciation lives for certain
assets from 20 years to 10 to 15 years. The effect of this new accounting
policy can not be readily determined. However the Borrower believes that it
results in increased EBITDA for 1996 as compared to EBITDA for 1996
presented under the previous capital expenditure policy.
(7) Debt service coverage ratio is computed as a ratio of EBITDA as defined in
(6) above to interest expense.
60
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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.
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, which opinion is filed as an exhibit to the registration statement
of which this Prospectus is a part, 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 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 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"
61
<PAGE>
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 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 constitute a "qualified mortgage" within the meaning
of Code Section 860G(a)(3).
INTEREST INCOME
Certificates may be issued with original issue discount ("OID") within
the meaning of Code Section 1273. Rules governing OID are set forth in Sections
1271-1275 of the Code and certain final regulations of the U.S. Department of
the Treasury issued in 1994 (the "Final Regulations"). Although the Code
contains specific provisions governing the calculation of OID on securities,
such as the Certificates, on which principal is required to be prepaid based on
prepayments of the underlying assets, regulations interpreting those provisions
have not yet been issued.
In general, OID, if any, will equal the difference between the stated
redemption price at maturity of a Certificate and its issue price. A Holder of a
Certificate must include such OID in gross income as ordinary income as it
accrues under a method taking into account an economic accrual of the discount.
In general, OID must be included in income in advance of the receipt of the cash
representing that income. The amount of OID on a Certificate will be considered
to be zero if it is less than a DE MINIMIS amount determined under the Code.
The issue price of a Certificate will generally be the initial offering
price at which a substantial amount of the Certificates is sold to the public,
and will be treated by the Depositor as including, in addition, the amount paid
by the Certificate holder for accrued interest that relates to a period prior to
the issue date of such Certificate. Under the Final Regulations, the stated
redemption price at maturity is the sum of all payments on the Certificate other
than any "qualified stated interest" payments. Qualified stated interest is
interest that is unconditionally payable at least annually during the entire
term of the Certificate at either (a) a single fixed rate that appropriately
takes into account the length of the interval between payments or (b) the
current values of (i) a single "qualified floating rate" or (ii) a single
"objective rate" (each a "Single Variable Rate"). A "current value" is the
value of a variable rate on any day that is no earlier than three months prior
to the first day on which that value is in effect and no later than one year
following that day. A qualified floating rate is a rate the variations in which
reasonably can be expected to measure contemporaneous variations in the cost of
newly borrowed funds in the currency in which the Certificate is denominated
(E.G., LIBOR). Such a rate remains qualified even though it is multiplied by a
fixed, positive multiple not exceeding 1.35, increased or decreased by a fixed
rate, or both. Certain combinations of rates constitute a single qualified
floating rate, including (a) interest stated at a fixed rate for an initial
period of less than one year followed by a qualified floating rate, if the value
of the qualified floating rate on the issue date is intended to approximate the
fixed rate, and (b) two or more qualified floating rates that can reasonably be
expected to have approximately the same values throughout the term of the
Certificate. A combination of such rates is conclusively presumed to be a single
qualified floating rate if the values of all rates on the issue date are within
.25 percentage points of each other. A variable rate that is subject to an
interest rate cap, floor, "governor" or similar restriction on rate adjustment
may be a qualified floating rate only if such restriction is fixed throughout
the term of the instrument, or is not reasonably expected as of the issue date
to cause the yield on the debt instrument to differ significantly from the
expected yield absent the restriction. An objective rate is a rate, other than a
qualified floating rate, determined by a single formula that is fixed throughout
the term of the Certificate and is based on (i) one or more qualified floating
rates (including a multiple or inverse of a qualified floating rate), (ii) one
or more rates each of which would be a qualified floating rate for a debt
instrument denominated in a foreign currency, (iii) the yield or the changes in
the price of one or more items of "actively traded" personal property, (iv) a
combination of rates described in (i), (ii) or (iii), or (v) other rates
designated by the IRS. Each rate described in (i) through (iv)
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above will not be considered an objective rate, however, if it is reasonably
expected that the average value of the rate during the first half of the
Certificate's term will differ significantly from the average value of the rate
during the final half of its term. A combination of interest stated at a fixed
rate for an initial period of less than one year followed by an objective rate
is treated as a single objective rate if the value of the objective rate on the
issue date is intended to approximate the fixed rate; such a combination of
rates is conclusively presumed to be a single objective rate if the value of the
objective rate on the issue date does not differ from the value of the fixed
rate by more than .25 percentage points.
The holder of a Certificate issued with OID must include in gross income,
for all days during its taxable year on which it holds such Certificate, the sum
of the "daily portions" of such OID. The amount of OID includible in income by
a holder will be computed by allocating to each day during a taxable year a
pro-rata portion of the OID that accrued during the relevant accrual period. The
amount of OID that will accrue during an accrual period (generally the period
between interest payments of compounding dates) is the excess (if any) of the
sum of (a) the present value of all payments remaining to be made on the
Certificate as of the close of the accrual period and (b) the payments during
the accrual period of amounts included in the stated redemption price of the
Certificate, over the "adjusted issue price" of the Certificate at the
beginning of the accrual period. The adjusted issue price of a Certificate is
the sum of its issue price plus prior accruals of OID, reduced by the total
payments made with respect to such Certificate in all prior periods, other than
qualified stated interest payments. Code Section 1272(a)(6) requires the present
value of the remaining payments to be determined on the basis of: (i) the
original yield to maturity of the Certificate (determined on the basis of
compounding at the end of each accrual period and properly adjusted for the
length of the accrual period), and (ii) events which have occurred before the
end of the accrual period.
A subsequent holder of a Certificate will also be required to include OID
in gross income, but such a holder who purchases such Certificate for an amount
that exceeds its adjusted issue price will be entitled (as will an initial
holder who pays more than a Certificate's issue price) to offset such OID by
comparable economic accruals of portions of such excess.
MARKET DISCOUNT
A subsequent purchaser of a Certificate at a discount from its outstanding
principal amount will acquire such Certificate with market discount. A
Certificate will not be considered to have market discount, however, if the
amount of such market discount is de minimis, i.e., less than the product of (i)
0.25% of the remaining principal amount of the Certificate, multiplied by (ii)
the weighted average maturity ("WAM") of the Certificate. The purchaser
generally will be required to recognize the market discount as ordinary income.
A purchaser of a Certificate with market discount generally will be required to
treat a portion of any gain on a sale, exchange, redemption, or other
disposition of the Certificate as ordinary income to the extent of the accrued,
but not previously taxable, market discount. A purchaser of a Certificate 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 Certificate, unless the
Certificateholder irrevocably elects to accrue such market discount on the basis
of a constant interest rate.
A Certificateholder who has acquired a Certificate with market discount
generally must defer interest deductions attributable to any indebtedness
incurred or continued to purchase or carry the Certificate to the extent such
deductions exceed interest income on the Certificate. 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 Certificate, a
Certificateholder 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 Certificateholder in the taxable
year of election or thereafter.
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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 Certificates. Prospective investors should consult their
own tax advisors regarding the application of the market discount rules to the
Certificates.
AMORTIZABLE PREMIUM
A purchaser of a Certificate who purchases the Certificate at a premium
over its stated principal amount generally may elect to amortize such premium
("Section 171 Premium") over the remaining term of the Certificate using a
constant yield method that reflects monthly compounding. Pursuant to Treasury
regulations issued on December 30, 1997, Section 171 Premium allocable to an
accrual period will be treated as an offset to interest income on a Certificate
allocable to such accrual period at the time the Certificateholder 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
Certificate allocable to such period will be carried forward to the next accrual
period. If a Certificateholder makes an election to amortize Section 171 Premium
on a Certificate, such election will apply to all taxable debt instruments
(including all Certificates) then owned and thereafter acquired by the
Certificateholder. 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 Certificate that exceeds the adjusted
issue price but not the stated principal amount of such Certificate. Purchasers
who pay a premium for the Certificates should consult their tax advisors
regarding the election to amortize premium and the method of accrual to be
employed.
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.
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 not a U.S. Person 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 not a U.S. Person 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 non-U.S. Person 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
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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
non-U.S. Person 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 non-U.S. Person 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,
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 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.
Non-U.S. Persons 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. In the opinion of Baker,
Donelson, Bearman & Caldwell, which opinion is filed as an exhibit to the
registration statement of which this Prospectus is a part, the Bonds will be
treated as evidence 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
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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
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 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 Treasury regulations issued on
December 30, 1997 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
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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.
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, or Certificate holders or
Bondholders holding on behalf of Non-U.S. Persons, 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. Person
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. Person. Interest income paid on Certificates or Bonds to Non-U.S.
Persons 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. Person and (ii) the Non-U.S. Person 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. Persons may be subject to United
States withholding tax at a rate of 30% (subject to reduction by applicable
treaty).
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 non-U.S. Person is treated as owning an
interest in the Foreclosed Property for United States Federal income tax
purposes, such non-U.S. Person would be subject to United States Federal
withholding tax at a rate of 30% (subject to reduction
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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 non-U.S. Person 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 non-U.S. Person
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 non-U.S. Person is subject to withholding. The amount thereby withheld is
creditable against the actual amount of the non-U.S. Person's tax liability. An
interest in the Foreclosed Property deemed to be acquired by a non-U.S. Person
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 non-U.S. Person may
be deemed to be engaged 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.
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.
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
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 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
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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 investors whose investment activities are subject to legal
investment laws and regulations, regulatory capital requirements or review by
regulatory authorities should consult 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.
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PLAN OF DISTRIBUTION
Subject to the terms and conditions of an Underwriting Agreement to be
entered into by the Depositor and the Underwriter, the Certificates will be
purchased from the Depositor by the Underwriter upon issuance. Proceeds to the
Depositor from the sale of the Certificates will be approximately % of the
initial aggregate Certificate Principal Amount of the Certificates, 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, MAALP and MAAC will agree 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. 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 balance sheet of Mid-America Capital Partners, L.P. as of November 24,
1997, the statement of net assets of Mid-America Mortgage Trust, 1998-1 as of
February 9, 1998, 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 Combined Historical
Summary of Gross Income and Direct Operating Expenses for Certain Multifamily
Acquisition Properties for the year ended December 31, 1996, the Combined
Historical Summary of Gross Income and Direct Operating Expenses for certain
Multifamily Acquisition Properties for the year ended December 31, 1995 and the
Historical Summary of Gross Income and Direct Operating Expenses (Tiffany Oaks)
for the year 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. 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
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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 Combined Financial Statements of Flournoy Properties Group as of
December 31, 1996 and 1995 and for each of the years in the three-year period
ended December 31, 1996 have been incorporated in this Prospectus by reference
to the Form 8-K of Mid-America Apartment Communities, Inc. dated September 17,
1997, as amended, 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 accounting and auditing.
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.
Cushman & Wakefield, Inc. is an independent real estate appraisal firm and
has appraised the fair market value of each of the Mortgaged Properties as of
the respective appraisal dates. The summarized results of such appraisals are
set forth in the information included in this Prospectus under the headings
"Prospectus Summary -- Total Appraised Value," "Risk Factors -- Appraisals,"
"Description of the Morgaged Properties -- The Appraisal Reports" and
"-- Additional Mortgaged Property Information" and have been included in this
Prospectus in reliance upon the authority of Cushman & Wakefield, Inc. as
experts on real estate appraisals.
Creative Project Management, Inc. is an independent environmental
consulting firm and has prepared evaluations of the structural and architectural
conditions, mechanical, electrical, fire and life safety systems as well as
Phase I ESAs for each of the Mortaged Properties. The summarized results of such
evaluations are set forth in the information included in this Prospectus under
the headings "Description of the Mortgaged Properties -- Engineering Report"
and "-- Environmental Report" and have been included in this Prospectus upon
the authority of Creative Project Management, Inc. as experts in preparing and
rendering such evaluations and ESAs.
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 Scheduled Final 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
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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, the Depositor and the Trust have filed with the Commission a
Registration Statement on Form S-3 and Form S-11 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 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 Bondholders 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 and the Depositor are "majority-owned
subsidiaries" 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.
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GLOSSARY OF TERMS
"ACMS" -- asbestos containing materials
"ADA" -- the Americans with Disabilities Act
"ACCOUNT" -- ANY OF THE SEGREGATED CASH COLLATERAL ACCOUNTS ESTABLISHED
UNDER THE CASH COLLATERAL AGREEMENT OR THE OPERATING ACCOUNT ESTABLISHED IN THE
NAME OF THE ACCOUNT BANK FOR THE BENEFIT OF THE INDENTURE TRUSTEE, WHICH MAY BE
UTILIZED DURING A CASH MANAGEMENT PERIOD
"ACCOUNT BANK" -- First Union Bank
"ACCOUNT FUNDING DATE" -- the Business Day preceding a Payment Date
during a Cash Management Period
"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.
"ADVANCE RATE" -- a rate per annum equal to the prime rate of the
Indenture Trustee in effect on the date such Advance is made, compounded monthly
"ADVANCES" -- Interest Advances, Property Advances and Fees Advances
"APPRAISALS" -- the appraisals of each of the Mortgaged Properties
"APPRAISER" -- Cushman & Wakefield, Inc.
"BONDS" -- the Borrower's $142,000,000 aggregate principal amount of %
First Mortgage Bonds, due 2003
"BORROWER" -- Mid-America Capital Partners, L.P., a Delaware limited
partnership
"BUSINESS DAY" -- 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.
"CEDEL" -- Cedel Bank, S.A.
"CPG" -- Capital Properties Group
"CPM" -- Creative Project Management, Inc., a Tennessee corporation
"CASH COLLATERAL AGREEMENT" -- the Cash Collateral Account Security,
Pledge and Assignment Agreement among the Borrower, the Indenture Trustee and
the Account Bank, as the same may be amended from time to time
"CASH MANAGEMENT PERIOD" -- 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.
"CERTIFICATE RECORD DATE" -- the close of business on the Business Day
preceding the applicable Distribution Date
"CERTIFICATES" -- Commercial Mortgage Pass-through Certificates, Series
1998-1 of the Trust
"CODE" -- the Internal Revenue Code of 1986, as amended
"COMMISSION" -- the Securities and Exchange Commission
"COMPANY" -- MAAC and MAALP and their respective subsidiaries
"DTC" -- The Depository Trust Company
G-1
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"DEFAULT RATE" -- a rate of interest 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.
"DEFAULT INTEREST" -- the amount payable under the Bonds at the Default
Rate
"DEFINITIVE CERTIFICATE" -- a certificate issued in fully registered,
certificated form representing an interest in the Certificates
"DEFINITIVE BOND" -- a bond issued in fully registered, certificated form
representing an interest in the Bonds
"DEPOSITOR" -- Mid-America Finance, Inc., a Delaware corporation
"DEPOSITORIES" -- the respective depositories of CEDEL and Euroclear,
through which such entities will hold omnibus positions on behalf of CEDEL
Participants and Euroclear Participants
"DEVELOPMENT PROPERTIES" -- 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 acquired by the Company in the Flournoy Reorganization
"DISTRIBUTION DATE" -- the first Business Day of each month beginning
April 1, 1998
"EBITDA" -- earnings before interest taxes depreciation and amortization
"ERISA" -- Employee Retirement Income Security Act of 1974, as amended
"ERISA PLANS" -- employee benefit plans subject to Part 4, Subtitle B,
Title I of ERISA
"ESA" -- environmental site assessment
"EUROCLEAR" -- The Euroclear System
"EXCHANGE ACT" -- the Securities Exchange Act of 1934, as amended
"EXPECTED FINAL DISTRIBUTION DATE" -- March 1, 2003
"FDC" -- Flournoy Development Company
"FDC MERGER" -- the merger of FDC into MAAC
"FDC-OWNED PARTNERSHIP INTERESTS" -- partnership interest in 28 Property
Partnerships acquired by MAAC in the FDC Merger
"FHA" -- Fair Housing Amendments Act of 1988
"FSA" -- the Financial Services Act of 1986 of the United Kingdom
"FEES ADVANCE" -- an advance in respect of any payment of the fees of the
Indenture Trustee, the Trustee or any servicer appointed by the Indenture
Trustee
"FLOURNOY REORGANIZATION" -- the FDC Merger and the acquisition by MAALP
of certain apartment communities and and partnership interests in certain
Property Partnerships
"FRAUDULENT CONVEYANCE STATUTES" -- all relevant federal and state
fraudulent conveyance statutes
"GAAP" -- generally accepted accounting principles
"GENERAL PARTNER" -- MAACP, Inc., a Delaware corporation
"GLOBAL BOND" -- the single global bond in definitive, fully registered
form without interest coupons registered in the name of a nominee of DTC and
deposited with the Indenture Trustee
"GLOBAL CERTIFICATE" -- the single global certificate in definitive,
fully registered form without interest coupons registered in the name of a
nominee of DTC and deposited with the Trustee
"HOLDOVER ACCOUNT" -- a segregated non-interest bearing account into
which 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
"IRS" -- Internal Revenue Service
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"INDENTURE" -- the Restated Supplemental Indenture dated as of November
21, 1997 among MAALP, the Borrower, and the Indenture Trustee.
"INDENTURE TRUSTEE" -- LaSalle National Bank
"INDIRECT PARTICIPANTS" -- individuals or entities which hold
Certificates through Participants
"INITIAL OFFERING" -- the initial public offering of MAAC's common stock
in February 1994
"INTEREST ADVANCE" -- an advance on any Payment Date in respect of any
scheduled payment of interest on the Bonds
"INTEREST ESCROW ACCOUNT" -- one of three separate segregated cash
collateral accounts established in the name of the Account Bank for the benefit
of the Indenture Trustee, which may be utilized during a Cash Management Period
"LEASES" -- "LOAN DOCUMENTS" -- the Indenture, the Mortgages and the
Bonds
"MAAC" -- Mid-America Apartment Communities, Inc., a Tennessee
corporation
"MAALP" -- Mid-America Apartments, L.P., a Tennessee limited partnership
MSMC LOAN" -- indebtedness of the Borrower to Morgan Stanley Mortgage
Capital, Inc. in the principal amount of $140 million
"MANAGEMENT AGREEMENT" -- the management agreement between the Borrower
and MAALP pursuant to which MAALP is required to operate and manage the
Mortgaged Properties on a day-to-day basis.
"MOODY'S" -- Moody's Investors Service, Inc.
"MORTGAGE" -- any mortgage or other document evidencing the Mortgage
Liens
"MORTGAGE LIENS" -- the first priority mortgage liens on the Mortgaged
Properties
"MORTGAGED PROPERTIES" -- 26 apartment communities subject to the
Mortgage Liens
"NEW REGULATIONS" -- recently issued final regulations which would
provide alternative methods for satisfying certain certification requires with
respect to United States Aliens
"NON-U.S. HOLDERS" -- nonresident alien individuals, foreign
corporations, foreign partnerships or certain foreign estates and trusts
"OPERATING ACCOUNT" -- a segregated cash collateral account established
in the name of the Account Bank for the benefit of the Indenture Trustee
"PTCE" -- Prohibited Transaction Class Exemption
"PARTICIPANTS" -- direct participants in DTC, CEDEL or Euroclear
"PARTNERSHIP" -- Mid-America Capital Partners, L.P., a Delaware limited
partnership
"PARTNERSHIP AGREEMENT" -- the agreement of limited partnership of the
Borrower
"PAYMENT DATE" -- the first Business Day of each month commencing April
1, 1998, on which interest payments on the Bonds will be due
"PLAN" -- employee benefit plans and certain other retirement plans and
arrangements that are subject to 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
"PLAN ASSET REGULATION" -- Department of Labor Regulation, 29 F.R.
2510.3-101
"PLAN INVESTORS" -- persons acting on behalf of a Plan or persons using
the assets of a Plan
"PERMITTED INDEBTEDNESS" -- (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
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outstanding for more than sixty days (or such longer period as any such debt
will be contested by the Borrower in good faith)
"PERMITTED MERGER" -- the merger of the Borrower with and into MAALP
"POLICY STATEMENT" -- the "Supervisory Policy Statement on Securities
Activities" dated January 28, 1992, as revised April 15, 1994 of the Federal
Financial Institutions Examination Council
"POST-EFFECTIVE PROSPECTUS" -- a prospectus pursuant to a post-effective
amendment to the Registration Statement of which this Prospectus is a part,
providing Certificate holders with information about MAALP and describing the
Permitted Merger and Security Release
POST-PERMITTED MERGER DEBT SERVICE COVERAGE RATIO" -- 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 from 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.
"PRE-PERMITTED MERGER DEBT SERVICE COVERAGE RATIO" -- 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 year 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)
"PRINCIPAL AMOUNT" -- $142,000,000 aggregate principal amount of %
First Mortgage Bonds, Due 2003
"PROPERTY ACCOUNT" -- individual operating accounts for each of the
Mortgaged Properties
"PROPERTY ADVANCE" -- 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
"PROPERTY PARTNERSHIPS" -- certain property owning partnerships
associated with FDC
"REIT" -- real estate investment trust
"REMIC" -- real estate mortgage investment conduit
"RATING AGENCIES" -- Moody's and S&P
"RECORD DATE" -- the close of business on the Business Day preceding the
applicable Payment Date
"REPLACEMENT RESERVE ACCOUNT" -- one of three separate segregated cash
collateral accounts established in the name of the Account Bank for the benefit
of the Indenture Trustee, which may be utilized during a Cash Management Period
"REQUIRED INSURANCE POLICIES" -- insurance policies required under the
Indenture, Mortgages and other Security Documents with respect to the Mortgaged
Properties
"RULES" -- the rules, regulation and procedures creating and affecting
DTC and its operations
"S&P" -- Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies
"SMMEA" -- the Secondary Mortgage Market Enhancement Act of 1984, as
amended
"SCHEDULED FINAL DISTRIBUTION DATE" -- September 1, 2005
"SECTION 171 PREMIUM" -- the premium paid for a Bond over its stated
principal amount plus accrued interest
"SECURED DEBT" -- indebtedness secured by any mortgage, lien, charge,
pledge, encumbrance or security interest of any kind
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"SECURITIES ACT" -- the Securities Act of 1933, as amended
"SECURITY DOCUMENT" -- the Indenture, Mortgages and other security
documents with respect to the Mortgaged Properties
"SECURITY RELEASE" -- the release of the Mortgage Liens
"STATED MATURITY DATE" -- means March 3, 2003, the date on which the
entire unpaid principal balance of the Bonds will be due and payable
"TIN" -- taxpayer identification number
"TOTAL ASSETS" -- 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 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)
"TOTAL UNENCUMBERED ASSETS" -- Total Assets which are not encumbered by
any pledge, mortgage or other encumbrance
"TRIGGER NOTICE" -- a notice delivered by the Indenture Trustee to the
Account Bank that the Pre-Permitted Debt Service Coverage Ratio of the Borrower
is less than 1.30 to 1
"TRUST" -- Mid-America Mortgage Trust, 1998-1
"TRUST AGREEMENT" -- the agreement of trust between Depositor and the
Trustee dated as of February 5, 1998, as amended and restated from time to time
"TRUST TERMINATION" -- the termination of the Trust simultaneously with
the occurrence of the Permitted Merger and Security Release
"TRUSTEE" -- LaSalle National Bank
"UPREIT" -- umbrella partnership real estate investment trust
"U.S. PERSON" -- (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)
"WAM" -- weighted average maturity of the Bond
"WITHHOLDING AGENT" -- the Borrower or other person who otherwise would
be required to withhold tax from payments made on the Bonds
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INDEX TO FINANCIAL STATEMENTS
PAGE
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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-3
Pro Forma Condensed Consolidated
Statements of Operations for the
nine months ended September 30,
1997 and the year ended December
31, 1996.......................... F-5
BALANCE SHEET:
Report of Independent Auditors..... F-7
Balance Sheet as of November 24,
1997.............................. F-8
Notes to Balance Sheet............. F-9
MID-AMERICA MORTGAGE TRUST, 1998-1
STATEMENT OF NET ASSETS:
Report of Independent Auditors..... F-10
Statement of Net Assets as of
February 9, 1998.................. F-11
Note to Statement of Net Assets.... F-12
CAPITAL PROPERTIES GROUP
COMBINED FINANCIAL STATEMENTS:
Report of Independent Auditors..... F-13
Combined Balance Sheets as of
September 30, 1997 (Unaudited) and
December 31, 1996 and 1995........ F-14
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-15
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-16
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-17
Notes to the Combined Financial
Statements........................ F-18
Schedule III:
Real Estate Investments and
Accumulated Depreciation.......... F-24
ACQUISITION PROPERTIES
BROWN-FLOURNOY EQUITY INCOME FUND
LIMITED PARTNERSHIP:
Report of Independent Auditors..... F-26
Balance Sheets as of September 30,
1997 (Unaudited) and December 31,
1996 and 1995..................... F-27
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-28
Statements of Partners' Capital
(Deficit) for the nine months
ended September 30, 1997
(Unaudited) and for the years
ended December 31, 1996, 1995 and
1994.............................. F-29
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-30
Notes to Financial Statements...... F-31
COMBINED FINANCIAL STATEMENTS FOR
CERTAIN MULTIFAMILY ACQUISITION
PROPERTIES (Certain 1997
acquisitions):
Report of Independent Auditors..... F-35
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-36
Notes to Combined Historical
Summary of Gross Income and Direct
Operating Expenses for Certain
Multifamily Acquisition
Properties........................ F-37
F-1
<PAGE>
PAGE
------
COMBINED FINANCIAL STATEMENTS FOR
CERTAIN MULTIFAMILY ACQUISITION
PROPERTIES (Certain 1996
acquisitions):
Report of Independent Auditors..... F-38
Combined Historical Summary of
Gross Income and Direct Operating
Expenses for Certain Multifamily
Acquisition Properties for the
period from January 1, 1996 to the
earlier of December 31, 1996 or
date of acquisition (Unaudited)
and for the year ended December
31, 1995.......................... F-39
Notes to Combined Historical
Summary of Gross Income and Direct
Operating Expenses for Certain
Multifamily Acquisition
Properties........................ F-40
FINANCIAL STATEMENTS FOR MULTIFAMILY
ACQUISITION PROPERTY
(Tiffany Oaks Apartments):
Report of Independent Auditors..... F-41
Historical Summary of Gross Income
and Direct Operating Expenses
(Tiffany Oaks) for the period from
January 1, 1996 to the earlier of
September 30, 1997 or date of
acquisition (Unaudited) and for
the year ended December 31,
1996.............................. F-42
Notes to Historical Summary of
Gross Income and Direct Operating
Expenses.......................... F-43
F-1(a)
<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,
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) MAACP, Inc. contributed $2.271 million cash in exchange for a 1%
general partnership interest in the Partnership (iii) 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.; (iv) the merger of
Hermitage at Beechtree, L.L.C. with and into the Partnership is consummated; (v)
the consummation of the Reorganization; (vi) the origination of the MSMC Loan
and the distribution of $116 million of the net proceeds to MAALP; (vii) the
Partnership had issued its $142,000,000 % First Mortgage Bonds Due 2003
(the Bonds); and (viii) 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
acquired on November 25, 1997 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). The 1997 Completed Acquisitions include Howell Commons, a 348
apartment unit property which was acquired for $13.0 million and Westside Creek
I, a 142 apartment unit property which was acquired for $6.1 million.
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 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.
F-2
<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 OTHER
HISTORICAL(A) ADJUSTMENTS ADJUSTMENTS(F) OFFERING(G) ADJUSTMENTS(J)
-------------- ------------ --------------- ------------ --------------
<S> <C> <C> <C> <C>
ASSETS:
Real estate assets, net.............. $168,846 $ 45,351(B) $ -- $ -- --
Cash................................. 92 (19,933)(C) 22,112 -- (2,271)
Restricted cash...................... -- -- 636 -- --
Deferred financing costs, net........ -- -- 964 1,863(H) --
Other assets......................... 119 (119)(D) -- -- --
-------------- ------------ --------------- ------------ --------------
Total assets................... $169,057 25,299 23,712 1,863 (2,271)
============== ============ =============== ============ ==============
LIABILITIES:
MSMC Loan payable.................... $-- -- 140,000 (140,000) --
Bonds................................ -- -- -- 142,000 --
Accounts payable..................... 427 (427)(D) -- -- --
Accrued expenses and other
liabilities........................ 2,225 (2,225)(D) -- -- --
Security deposits.................... 557 149(B) -- -- --
-------------- ------------ --------------- ------------ --------------
Total liabilities.............. 3,209 (2,503) 140,000 2,000 --
-------------- ------------ --------------- ------------ --------------
PARTNERS' CAPITAL
General Partner.................... -- 2,271(E) -- -- --
Limited Partner.................... 165,848 25,531(E) (116,288) (137)(I) (2,271)
-------------- ------------ --------------- ------------ --------------
TOTAL PARTNERS' CAPITAL.............. 165,848 27,802 (116,288) (137) (2,271)
-------------- ------------ --------------- ------------ --------------
TOTAL LIABILITIES AND PARTNERS'
CAPITAL............................ $169,057 25,299 23,712 1,863 (2,271)
============== ============ =============== ============ ==============
</TABLE>
PARTNERSHIP
PRO FORMA
------------
ASSETS:
Real estate assets, net.............. $214,197
Cash................................. --
Restricted cash...................... 636
Deferred financing costs, net........ 2,827
Other assets......................... --
------------
Total assets................... 217,660
============
LIABILITIES:
MSMC Loan payable.................... --
Bonds................................ 142,000
Accounts payable..................... --
Accrued expenses and other
liabilities........................ --
Security deposits.................... 706
------------
Total liabilities.............. 142,706
------------
PARTNERS' CAPITAL
General Partner.................... 2,271
Limited Partner.................... 72,683
------------
TOTAL PARTNERS' CAPITAL.............. 74,954
------------
TOTAL LIABILITIES AND PARTNERS'
CAPITAL............................ 217,660
============
- ------------
(A) Reflects the unaudited historical combined balance sheet of CPG as of
September 30, 1997.
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, 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.
F-3
<PAGE>
(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 as
follows:
ACQUISITION SECURITY
PROPERTY COST DEPOSITS
- ------------------------------------- ----------- ---------
Brown -- Flournoy Properties
Southland Station I............. $ 7,127 $ 17
Park Place...................... 8,117 20
Hidden Lake II.................. 6,804 33
High Ridge...................... 8,126 31
Willow Creek......................... 6,162 48
Hermitage at Beechtree............... 9,015 --
----------- ---------
$45,351 $ 149
=========== =========
(C) Reflects:
MACP, Inc. cash contribution in
exchange for a 1% general partner
interest in the Partnership........ $ 2,271
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 as follows:
MACP, Inc. cash contribution in
exchange for a 1% general
partnership interest in the
Partnership........................ $ 2,271
==========
Net assets of CPG retained by MAALP
at the formation of the Partnership
consisting of cash ($92), other
assets ($119), accounts payable
($427) and accrued expenses
($2,225)........................... $ 2,441
MAALP cash payments on behalf of the
Partnership in connection with the
acquisition of the Reorganization
Properties......................... 23,090
----------
$ 25,531
==========
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.
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
($2,313) 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 amortization of deferred financing costs incurred in
connection with the MSMC Loan ($450), net of the distribution of a portion
of the Offering proceeds to MAALP of $313.
(J) Reflects the distribution of $2.271 million by the Partnership to MAALP
subsequent to formation of the Partnership.
F-4
<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...... 4,607 1,180 159(C) 5,946
General and administrative......... 897 239 117(D) 1,253
Interest........................... 724 1,596 4,732(E) 7,052
Amortization of deferred financing
costs............................ 35 -- 415(F) 450
------------- --------------- ----------- ---------
TOTAL EXPENSES................ 14,197 5,392 5,423 25,012
------------- --------------- ----------- ---------
Net income.............................. $ 8,223 680 (5,423) 3,480
============= =============== =========== =========
</TABLE>
- ------------
PRO FORMA ADJUSTMENTS:
(A) Reflects the unaudited historical combined statement of operations of CPG
for the nine months ended September 30, 1997.
(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 additional management fees paid to MAALP as a result of the
acquisition of the Reorganization Properties, the 1997 completed
Acquisitions and Hermitage at Beechtree equal to 4% of total revenues of
those properties of $243 and fees paid to the Trustee and estimated
additional costs to operate as a separate public company of $113, net of
general and administrative expenses of the Reorganization Properties which
will be eliminated ($239).
(E) Represents interest on the Bonds of $7,052, 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
$140 million of the Bonds at an average interest rate of 6.62%. Interest on
the Bonds is calculated based upon a rate of 6.63% for $80 million, 6.67%
for $50 million, 6.43% for $10 million and 6.06% (based upon current
estimates) for $2 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 $450.
F-5
<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 amortiztion....... 4,000 1,420 1,978(C) 7,398
General and administrative......... 810 319 513(D) 1,642
Interest........................... 2,169 2,130 5,104(E) 9,403
Amortization of deferred financing
costs............................ 58 -- 542(F) 600
------------- --------------- ----------- ---------
TOTAL EXPENSES................ 14,244 10,215 8,137 32,596
------------- --------------- ----------- ---------
Net income.............................. $ 6,007 6,825 (8,137) 4,695
============= =============== =========== =========
</TABLE>
- ------------
PRO FORMA ADJUSTMENTS:
(A) Reflects the unaudited historical combined statements of operations of CPG
for the year ended December 31, 1996.
(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 additional management fees paid to MAALP as a result of the
acquisition of the Reorganization Properties, the 1997 Completed
Acquisitions, the 1996 Completed Acquisitions and Hermitage at Beechtree
equal to 4% of total revenues of these properties of $682 and fees paid to
the Trustee and estimated additional costs to operate as a separate public
company of $150, net of general and administrative expenses of the
Reorganization Properties which will be eliminated ($319).
(E) Represents interest on the Bonds of $9,403, 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
$140 million of the Bonds at an average interest rate of 6.62%. Interest on
the Bonds is calculated based upon a rate of 6.63% for $80 million, 6.67%
for $50 million, 6.43% for $10 million and 6.06% (based upon current
estimates) for $2 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 $600.
F-6
<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
F-7
<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.
F-8
<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.
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 MAALP is expected to contribute its
interest in 20 of the Mortgaged Properties 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, is expected to
contribute cash for a 1% general partnership interest in the Partnership.
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.
The Partnership expects to issue $142 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.
F-9
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Mid-America Mortgage Trust, 1998-1
We have audited the accompanying statement of net assets of Mid-America
Mortgage Trust, 1998-1 as of February 9, 1998. This financial statement is the
responsibility of the Mid-America Mortgage Trust, 1998-1. 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 statement of net assets is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of net assets. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall statement of net assets
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the statement of net assets referred to above presents
fairly, in all material respects, the fiancial position of as of February 9,
1998 in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Memphis, Tennessee
February 9, 1998
F-10
<PAGE>
MID-AMERICA MORTGAGE TRUST, 1998-1
STATEMENT OF NET ASSETS
FEBRUARY 9, 1998
ASSETS
Cash................................. $ 1,000
---------
Net Assets........................... $ 1,000
=========
See accompanying note to statement of net assets.
F-11
<PAGE>
MID-AMERICA MORTGAGE TRUST, 1998-1
NOTE TO STATEMENT OF NET ASSETS
FEBRUARY 9, 1998
(1) ORGANIZATION AND BASIS OF FINANCIAL PRESENTATION
Mid-America Mortgage Trust, 1998-1 (the Trust) is a grantor trust formed to
issue Commercial Mortgage Pass-Through Certificates, Series 1998-1 (the
Certificates). The Certificates will be issued pursuant to an agreement of trust
dated as of February 5, 1998, between Mid-America Finance, Inc. (the Depositor)
and LaSalle National Bank, as trustee. The only assets of the Trust, other than
nominal cash, will be $142,000,000 aggregate principal amount of Bonds, Due 2003
(the Bonds) of Mid-America Capital Partners, L.P. (the Partnership). The
Certificates will be payable solely from the amounts received by the Trustee as
payments on the Bonds. The sole purpose of the Partnership is to own and operate
26 apartment communities (the Mortgaged Properties) that were contributed to the
Partnership by Mid-America Apartments, L.P., a Tennessee limited partnership
(MAALP) or acquired directly by the Partnership.
F-12
<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
F-13
<PAGE>
CAPITAL PROPERTIES GROUP
COMBINED BALANCE SHEETS
SEPTEMBER 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
DECEMBER 31,
SEPTEMBER 30, ---------------------
1997 1996 1995
------------- ---------- ---------
(UNAUDITED)
ASSETS
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......................... 119 111 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.
F-14
<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...... 4,607 2,708 4,000 2,614 755
General and administrative......... 897 557 810 580 190
Interest........................... 724 1,631 2,169 2,225 925
Amortization of deferred financing
costs............................ 35 44 58 48 37
----------- --------- --------- --------- ---------
TOTAL EXPENSES................ 14,197 10,068 14,244 10,773 3,595
----------- --------- --------- --------- ---------
NET INCOME.................... $ 8,223 3,863 6,007 3,724 1,158
=========== ========= ========= ========= =========
</TABLE>
See accompanying notes to combined financial statements.
F-15
<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......... 46,295
Net income......................... 1,158
----------
Partners' Capital, December 31, 1994.... 48,938
Capital contributions, net......... 7,316
Net income......................... 3,724
----------
Partners' Capital, December 31, 1995.... 59,978
Capital contributions, net......... 65,966
Net income......................... 6,007
----------
Partners' Capital, December 31, 1996.... 131,951
Capital contributions, net......... 25,674
Net income......................... 8,223
----------
Partners' Capital, September 30, 1997
(unaudited)........................... $ 165,848
==========
See accompanying notes to combined financial statements.
F-16
<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......................... $ 8,223 3,863 6,007 3,724 1,158
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............ 13,499 8,041 11,421 6,432 3,073
---------- --------- --------- --------- ---------
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)
---------- --------- --------- --------- ---------
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......... 25,674 41,706 65,966 7,316 46,295
---------- --------- --------- --------- ---------
NET CASH PROVIDED BY
FINANCING
ACTIVITIES............ 9,214 41,470 59,596 7,035 41,392
---------- --------- --------- --------- ---------
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.
F-17
<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.
<TABLE>
<CAPTION>
METROPOLITAN NUMBER OF
AREA OF APARTMENT
NAME PROPERTY UNITS DATE ACQUIRED
- ---------------------------------------- ---------------------- ---------- -------------------
<S> <C> <C> <C>
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
==========
</TABLE>
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
F-18
<PAGE>
CAPITAL PROPERTIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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 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.
F-19
<PAGE>
CAPITAL PROPERTIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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 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. The effect of the change in
depreciable lives was not material to combined net income of CPG.
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. Depreciation of
non-real estate assets was $19, $14 and $5 at December 31, 1996, 1995 and 1994,
respectively.
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.
CPG adopted FAS 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of," effective January 1, 1996. The
new standard did not have a material impact on the combined financial statements
of CPG.
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:
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
========== ========= =========
F-20
<PAGE>
CAPITAL PROPERTIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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.
GENERAL AND ADMINISTRATIVE EXPENSES
The accompanying combined financial statements include an allocation of
general and administrative expenses and other costs incurred by MAALP on behalf
of CPG based upon 4% of total revenues.
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
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.
F-21
<PAGE>
CAPITAL PROPERTIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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 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.
F-22
<PAGE>
CAPITAL PROPERTIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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.
(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 $142 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.
F-23
<PAGE>
SCHEDULE III
CAPITAL PARTNERS GROUP
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COST CAPITALIZED
SUBSEQUENT TO
INITIAL COST ACQUISITION
--------------------- ---------------------
BUILDING BUILDING
METROPOLITAN AND AND
PROPERTY NAME AREA ENCUMBRANCES LAND FIXTURES LAND FIXTURES
- ------------------------------------- ------------------------ ------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Belmere.............................. Tampa, FL $-- (2) 851 7,667 -- 706
Crosswinds........................... Jackson, MS -- (2) 1,535 13,826 -- 423
Fairways at Royal Oak................ Cincinnati, OH -- (2) 814 7,335 -- 517
Kirby Station........................ Memphis, TN -- 1,148 10,337 -- 1,499
Lakepointe........................... Lexington, KY 2,562 411 3,699 -- 371
Lakeside............................. Jacksonville, FL -- (2) 1,431 12,883 -- 1,232
Marsh Oaks........................... Atlantic Beach, FL -- (2) 244 2,829 -- 328
Napa Valley.......................... Little Rock, AR -- 960 8,642 -- 198
Park Haywood......................... Greenville, SC -- (2) 325 2,925 35 2,088
Pear Orchard......................... Jackson, MS 8,643 1,352 12,168 -- 599
Savannah Creek....................... Memphis, TN (4) -- (2) 778 7,013 -- 163
Shenandoah Ridge..................... Augusta, GA -- (2) 650 5,850 -- 1,469
Somerset............................. Jackson, MS -- (2) 477 4,294 -- 459
Steeplechase......................... Chattanooga, TN -- (2) 217 1,957 -- 1,024
Sutton Place......................... Memphis, TN (4) -- (2) 894 8,053 -- 259
Tiffany Oaks......................... Altamonte Springs, FL -- 1,024 9,219 -- --
The Village.......................... Lexington, KY 5,256 900 8,097 -- 560
Williamsburg Village................. Jackson, TN -- (2) 523 4,711 -- 316
------------- --------- --------- --------- ---------
Total...................................................... $16,461 14,534 131,505 35 12,211
============= ========= ========= ========= =========
<CAPTION>
GROSS AMOUNT
CARRIED AT
DECEMBER 31, 1996(3)
---------------------
BUILDING
AND ACCUMULATED
PROPERTY NAME LAND FIXTURES TOTAL DEPRECIATION NET CONSTRUCTION
- ------------------------------------- --------- --------- ------- ------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Belmere.............................. 851 8,373 9,224 (619) 8,605 1984
Crosswinds........................... 1,535 14,249 15,784 (207) 15,577 1988/1990
Fairways at Royal Oak................ 814 7,852 8,666 (560) 8,106 1988
Kirby Station........................ 1,148 11,836 12,984 (875) 12,109 1978
Lakepointe........................... 411 4,070 4,481 (331) 4,150 1986
Lakeside............................. 1,431 14,115 15,546 (409) 15,137 1985
Marsh Oaks........................... 244 3,157 3,401 (176) 3,225 1986
Napa Valley.......................... 960 8,840 9,800 (51) 9,749 1984
Park Haywood......................... 360 5,013 5,373 (406) 4,967 1983/1995
Pear Orchard......................... 1,352 12,767 14,119 (1,226) 12,893 1985
Savannah Creek....................... 778 7,176 7,954 (105) 7,849 1989
Shenandoah Ridge..................... 650 7,319 7,969 (607) 7,362 1982
Somerset............................. 477 4,753 5,230 (340) 4,890 1981
Steeplechase......................... 217 2,981 3,198 (467) 2,731 1985
Sutton Place......................... 894 8,312 9,206 (122) 9,084 1991
Tiffany Oaks......................... 1,024 9,219 10,243 -- 10,243 1985
The Village.......................... 900 8,657 9,557 (713) 8,844 1989
Williamsburg Village................. 523 5,027 5,550 (372) 5,178 1987
--------- --------- ------- ------------- --------- --------------
Total........................... 14,569 143,716 158,285 (7,586) 150,699
========= ========= ======= ============= =========
</TABLE>
LIFE USED
TO COMPUTE
DEPRECIATION FEDERAL
IN LATEST INCOME
INCOME TAX
PROPERTY NAME STATEMENT(1) BASIS(3)
- ------------------------------------- -------------- ---------
Belmere.............................. 5-40 8,551
Crosswinds........................... 5-40 17,785
Fairways at Royal Oak................ 5-40 8,027
Kirby Station........................ 5-40 12,039
Lakepointe........................... 5-40 4,112
Lakeside............................. 5-40 14,960
Marsh Oaks........................... 5-40 2,718
Napa Valley.......................... 5-40 9,575
Park Haywood......................... 5-40 5,022
Pear Orchard......................... 5-40 12,846
Savannah Creek....................... 5-40 9,009
Shenandoah Ridge..................... 5-40 7,431
Somerset............................. 5-40 4,833
Steeplechase......................... 5-40 1,801
Sutton Place......................... 5-40 9,028
Tiffany Oaks......................... 5-40 9,529
The Village.......................... 5-40 8,793
Williamsburg Village................. 5-40 5,129
Total........................... 151,188
=========
- ------------
(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 total gross amount of real estate assets for GAAP purposes exceeds the
Federal income tax basis; 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.
F-24
<PAGE>
SCHEDULE III
CAPITAL PROPERTIES GROUP
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
A summary of activity 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
========== ========= =========
F-25
<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
F-26
<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 ------------------------------
1997 1996 1995
------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
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.
F-27
<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.
F-28
<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
<TABLE>
<CAPTION>
CLASS A CLASS B
GENERAL LIMITED LIMITED
PARTNERS PARTNERS PARTNERS TOTAL
------------ ------------ -------- ------------
<S> <C> <C> <C> <C>
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)
============ ============ === ============
</TABLE>
See accompanying notes to financial statements.
F-29
<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.
F-30
<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.
(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
F-31
<PAGE>
BROWN-FLOURNOY EQUITY INCOME FUND
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
losses on long-lived assets used in operations when events and circumstances
indicate that the individual assets might be impaired, based on fair 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 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
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
============== ============
(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
F-32
<PAGE>
BROWN-FLOURNOY EQUITY INCOME FUND
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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.
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)
============ ========== ==========
(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.
F-33
<PAGE>
BROWN-FLOURNOY EQUITY INCOME FUND
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(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.
F-34
<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
F-35
<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.
F-36
<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
NAME OF PROPERTY UNITS DATE 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.
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.
F-37
<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, 1995. 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-American 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,
1995, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Memphis, Tennessee
November 24, 1997
F-38
<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, 1995 AND PERIOD FROM JANUARY 1, 1996 TO THE
EARLIER OF DECEMBER 31, 1996 OR DATE OF ACQUISITION (UNAUDITED)
(DOLLARS IN THOUSANDS)
1996 1995
----------- ---------
(UNAUDITED)
GROSS INCOME -- total revenue........... $ 4,652 9,009
DIRECT OPERATING EXPENSES:
Operating expenses................. 2,608 2,078
Real estate taxes.................. 305 694
Repairs and maintenance............ 144 369
----------- ---------
1,595 3,141
----------- ---------
GROSS INCOME IN EXCESS OF
DIRECT OPERATING EXPENSES... $ 3,057 5,868
=========== =========
See accompanying notes to combined historical summary of gross income and direct
operating expenses for certain multifamily acquisition properties.
F-39
<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, 1995
(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. 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
NAME OF PROPERTY UNITS DATE ACQUIRED
- ------------------------- ---------------- ---------- -----------------
Lakeside................. Jacksonville, FL 416 March 12, 1996
Savannah Creek........... Memphis, TN 204 July 25, 1996
Sutton Place............. Memphis, TN 252 July 25, 1996
Crosswinds............... Jackson, MS 360 July 25, 1996
Napa Valley.............. Little Rock, AR 240 October 20, 1996
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 note 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.
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, 1996 to the
earlier of December 31, 1996 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.
F-40
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
Mid-America Capital Partners, L.P.:
We have audited the accompanying Historical Summary of Gross Income and
Direct Operating Expenses (Historical Summary) of the Acquisition Property
(Tiffany Oaks Apartments), as described in Note 1, for the year ended December
31, 1996. This Historical Summary is the responsibility of the Acquisition
Property's management. Our responsibility is to express an opinion on this
Historical Summary for the Acquisition Property 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the Historical Summary for the Acquisition
Property. 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 for the Acquisition Property. We believe
that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary for the Acquisition Property 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 as
described in Note 1 and is not intended to be a complete presentation of the
Acquisition Property's revenues and expenses.
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
F-41
<PAGE>
MID-AMERICA CAPITAL PARTNERS, L.P.
HISTORICAL SUMMARY OF GROSS INCOME AND DIRECT OPERATING EXPENSES
(TIFFANY OAKS APARTMENTS)
YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
1996
-----------
(UNAUDITED)
GROSS INCOME -- total revenue........... $ 1,853
DIRECT OPERATING EXPENSES:
Operating expenses................. 547
Real estate taxes.................. 172
Repairs and maintenance............ 43
-----------
762
-----------
GROSS INCOME IN EXCESS OF
DIRECT OPERATING EXPENSES.... $ 1,091
===========
See accompanying notes to Historical Summary of Gross Income and
Direct Operating Expenses for the Acquisition Property.
F-42
<PAGE>
MID-AMERICA CAPITAL PARTNERS, L.P.
NOTES TO HISTORICAL SUMMARY OF GROSS INCOME
AND DIRECT OPERATING EXPENSES
(TIFFANY OAKS APARTMENTS)
DECEMBER 31, 1996
(1) ACCOUNTING POLICIES
DESCRIPTION
The accompanying financial statement includes the operations of Tiffany
Oaks Apartments (the "Acquisition Property") owned by parties unaffiliated
with Mid-America Capital Partners, L.P. (the Partnership). The Acquisition
Property included in the financial statement, a multifamily residential property
located in Altamonte Springs, Florida, was acquired by Mid-America Apartment,
L.P. (MAALP) on December 18, 1996 and contains 288 apartment units. MAALP is
expected to contribute the Acquisition Property, along with other properties
owned by MAALP, to the Partnership in exchange for a 99% limited partnership
interest in the Partnership.
BASIS OF PRESENTATION
The accompanying financial statement is not representative of the actual
operations for the period 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 Property. Interest expense has been
included in the Historical Summary to the extent that a note 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 this Acquisition Property that would cause this financial statement not to be
indicative of future operating results as related to revenue and certain
expenses.
The accompanying combined historical summary of gross income and direct
operating expenses for Tiffany Oaks Apartments, (the "Acquisition Property"),
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.
F-43
<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 Certificates registered
hereby.
Registration fee to the SEC............. $ 44,250
Rating Agency Fees...................... 301,500*
Printing expense........................ 50,000*
Accounting fees and expenses............ 100,000*
Legal fees and expenses................. 250,000*
Trustees Fees........................... 15,000
Miscellaneous expenses.................. 25,000
----------
Total................................... $ 740,750*
==========
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS, OFFICERS AND TRUSTEE
The Certificates of Incorporation of the General Partner and the Depositor
obligate the 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 the best interests and, in all other cases, that their
conduct was at least 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 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 stockholders 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 Delaware law
from time to time.
The Agreement of Trust, as amended and restated, obligates the Depositor
and MAAC, jointly and severally, to indemnify the Trustee for any loss,
liability or expense incurred in connection with or related to the Trustee's
performance of its powers and duties under the Trust Agreement, including in
connection with the Trustee's execution of the Registration Statement and the
preparation and distribution of related documents.
II-1
<PAGE>
Any indemnification by the Depositor and MAAC of the Trustee pursuant to
the Trust Agreement shall be paid out of the assets of the Depositor and MAAC,
as the case may be, and shall not be recoverable from the stockholders 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.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------------------ ------------------------------------------------------------------------------------------
<C> <S>
1.1 -- Form of 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** -- Amended and Restated Bylaws of Mid-America Finance, Inc.
4.1 -- Form of Restated Supplemental Indenture among Mid-America Capital Partners, L.P. and
Mid-America Apartments, as issuer and La Salle National Bank, as Trustee
4.2** -- Agreement of Trust between Mid-America Finance, Inc. as depositor, Mid-America Apartment
Communities, Inc. and La Salle National Bank, as Trustee
4.3 -- Form of Certificate (included in Exhibit 4.5)
4.4 -- Form of Bond (included in Exhibit 4.1)
4.5 -- Form of Amended and Restated Agreement of Trust between Mid-America Finance, Inc. as
depositor, Mid-America Apartment Communities, Inc. and LaSalle National Bank, as trustee
5.1** -- Opinion of Baker, Donelson, Bearman & Caldwell, a professional corporation
8.1 -- Opinion of Baker, Donelson, Bearman & Caldwell, a professional corporation, regarding tax
matters
10.1 -- Form of Amended and Restated 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 effective as of 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 (included in Prospectus)
23.1** -- Consent of KPMG Peat Marwick LLP
23.2** -- Consent of KPMG Peat Marwick LLP
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.
23.6** -- Consent of KPMG Peat Marwick LLP
24.1** -- Power of Attorney (included on the signature page of the Registration Statement)
25.1 -- Statement of Eligibility and Qualification of Indenture Trustee on Form T-1
27.1 -- Financial Data Schedule -- Mid-America Capital Partners, L.P.
</TABLE>
- ------------
** Previously filed as an Exhibit to the Company's Registration Statement on
Form S-3, File No. 333-42441, and incorporated by reference herein.
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 Registrants
II-2
<PAGE>
pursuant to the foregoing provisions, or otherwise, the Registrants have 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
Registrants of expenses incurred or paid by a director, officer or controlling
person of the Registrants 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 Registrants 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 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 Registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form or prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrants 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.
(c) The undersigned Registrants hereby undertake to file an application
for the purpose of determining the eligibility of the trustee to act under
Subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Act.
(d) The undersigned Registrants herbey undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrants' annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the Registration Statement, 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 Amendment No. 3 to
the Registration Statement to be signed on their behalf by the undersigned,
thereunto duly authorized, in the City of Memphis, State of Tennessee on
February 13, 1998.
MID-AMERICA CAPITAL PARTNERS, L.P.
a Delaware limited partnership (S-3
Registrant)
By: MAACP, Inc.
Its: General Partner
By:/s/SIMON R.C. WADSWORTH
SIMON R.C. WADSWORTH, PRESIDENT
MID-AMERICA FINANCE, INC.,
a Delaware corporation (S-3
Registrant)
By: /s/ SIMON R.C. WADSWORTH
SIMON R. C. WADSWORTH, PRESIDENT
II-4
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the 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>
* Director of General Partner and February 13, 1998
GEORGE E. CATES Depositor
* Independent Director of General February 13, 1998
HOWARD EDDINGS, JR. Partner and Depositor
* Director of General Partner and February 13, 1998
H. ERIC BOLTON, JR. Depositor
/s/SIMON R. C. WADSWORTH President of General Partner and February 13, 1998
SIMON R. C. WALDSWORTH Depositor
* Secretary-Treasurer of General February 13, 1998
LYNN A. JOHNSON Partner and Depositor
* Independent Director of General February 13, 1998
STEPHEN M. CARPENTER Partner and Depositor
* By: /s/SIMON R. C. WADSWORTH
SIMON R. C. WADSWORTH,
ATTORNEY-IN-FACT
</TABLE>
Pursuant to the requirement of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-11 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Chicago, State of Illinois on Feburary
13, 1998.
MID-AMERICA MORTGAGE TRUST, 1998-1
a trust existing under the laws of New
York
(S-11 Registrant)
By: LaSalle National Bank
not in its individual capacity
but solely as Trustee
By: /s/ RUSSELL M. GOLDENBERG
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS
NUMBER DESCRIPTION
- ------------------------ ------------------------------------------------------------------------------------------
<C> <S>
1.1 -- Form of 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** -- Amended and Restated Bylaws of Mid-America Finance, Inc.
4.1 -- Form of Restated Supplemental Indenture among Mid-America Capital Partners, L.P. and
Mid-America Apartments, as issuer and La Salle National Bank, as Trustee
4.2** -- Agreement of Trust between Mid-America Finance, Inc. as depositor, Mid-America Apartment
Communities, Inc. and La Salle National Bank, as Trustee
4.3 -- Form of Certificate (included in Exhibit 4.5)
4.4 -- Form of Bond (included in Exhibit 4.1)
4.5 -- Form of Amended and Restated Agreement of Trust between Mid-America Finance, Inc. as
depositor, Mid-America Apartment Communities, Inc. and LaSalle National Bank, as trustee
5.1** -- Opinion of Baker, Donelson, Bearman & Caldwell, a professional corporation
8.1 -- Opinion of Baker, Donelson, Bearman & Caldwell, a professional corporation, regarding tax
matters
10.1 -- Form of Amended and Restated 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 effective as of 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 (included in Prospectus)
23.1** -- Consent of KPMG Peat Marwick LLP
23.2** -- Consent of KPMG Peat Marwick LLP
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.
23.6** -- Consent of KPMG Peat Marwick LLP
24.1** -- Power of Attorney (included on the signature page of the Registration Statement)
25.1 -- Statement of Eligibility and Qualification of Indenture Trustee on Form T-1
27.1 -- Financial Data Schedule -- Mid-America Capital Partners, L.P.
</TABLE>
- ------------
** Previously filed as an Exhibit to the Company's Registration Statement on
Form S-3, File No. 333-42441, and incorporated by reference herein.
EXHIBIT 1.1
CW&T DRAFT: 2/12/98
MID-AMERICA FINANCE, INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-1
UNDERWRITING AGREEMENT
March [__], 1998
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Ladies and Gentlemen:
Mid-America Finance, Inc., a Delaware corporation (the "Depositor"),
proposes to sell to Morgan Stanley & Co. Incorporated (the "UNDERWRITER") the
Commercial Mortgage Pass-Through Certificates, Series 1998-1 identified in
Schedule I hereto (the "CERTIFICATES") pursuant to this Underwriting Agreement
(this "AGREEMENT") among the Depositor and Mid-America Capital Partners, L.P., a
Delaware limited partnership (the "PARTNERSHIP"), and the Underwriter. The
Certificates will be issued pursuant to an Amended and Restated Agreement of
Trust, dated as of March [__], 1998 (the "TRUST AGREEMENT"), between the
Depositor and LaSalle National Bank, as trustee thereunder (the "CERTIFICATE
TRUSTEE"), and will represent undivided interests in the trust fund (the "TRUST
FUND") established by the Depositor pursuant to the Trust Agreement. The assets
of the Trust Fund will consist exclusively of the [__]% First Mortgage Bonds,
Due 2003 (the "BONDS") of the Partnership, which will be issued pursuant to the
terms of a Restated Supplemental Indenture, dated effective as of November 21,
1997 (the "INDENTURE"), between the Partnership and Mid-America Apartments,
L.P., a Tennessee limited partnership ("MAALP" and, together with the
Partnership, the "ISSUER") and LaSalle National Bank, a national banking
association, as trustee thereunder (the "TRUSTEE"). Capitalized terms not
otherwise defined herein shall have the meanings set forth in or determined
pursuant to the Indenture.
The Bonds will be secured, as described in the Indenture, by
twenty-six apartment communities (the "MORTGAGED PROPERTIES"), each pursuant to
a first priority mortgage or deed of trust, security agreement and assignment of
leases and rents (a "MORTGAGE"), and by other collateral as described in the
Indenture. The Mortgaged Properties were acquired by the Partnership from MAALP
pursuant to a Contribution Agreement, dated as of November 21, 1997 (the
"CONTRIBUTION AGREEMENT"), between MAALP and the Partnership. The Depositor will
use the net proceeds received by it from the sale of the Certificates to
purchase the Bonds. The Partnership will use the net proceeds received by it
from the issuance and sale of the Bonds to purchase certain First Mortgage
Bridge Notes, which were sold to Mortgage Stanley Mortgage Capital Inc. ("MSMC")
pursuant to a Note Purchase Agreement, dated November 25, 1997, between the
Partnership and MSMC (the "NOTE PURCHASE AGREEMENT").
<PAGE>
The Partnership, the Depositor and the Trust have filed with the
Securities and Exchange Commission (the "COMMISSION") a registration statement
(No. 333-42441) on Form S-3 and Form S-11 for the registration of the
Certificates and the Bonds under the Securities Act of 1933, as amended, and the
rules and regulations thereunder (collectively, the "1933 ACT"), which
registration statement has become effective and copies of which have heretofore
been delivered to the Underwriter. Such registration statement, including the
exhibits and all other documents filed as part thereof, as amended at the date
hereof, each document incorporated therein by reference and the Prospectus (as
defined below) is hereinafter called the "REGISTRATION STATEMENT"; the
prospectus included in the Registration Statement, at the time the Registration
Statement, as amended, became effective, is hereinafter called the "PROSPECTUS".
SECTION 1. REPRESENTATIONS AND WARRANTIES.
(a) Each of the Depositor and the Partnership represents and
warrants to the Underwriter as of the date hereof and as of the Closing Date (as
defined below), as follows:
(i) The Registration Statement, as of the effective date
thereof (the "EFFECTIVE DATE"), and the Prospectus, as of the
Effective Date, each complied in all material respects with the
applicable requirements of the 1933 Act; and the information in the
Registration Statement as of the Effective Date did not, and as of
the Closing Date will not, contain any untrue statement of a
material fact and did not omit to state any material fact required
to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; and the information in the Prospectus as of the
Effective Date did not, and as of the Closing Date will not, contain
an untrue statement of a material fact and did not and will not omit
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading; PROVIDED, HOWEVER, that each of the Depositor,
the Partnership and MAALP makes no representations or warranties as
to information contained in the Prospectus or any revision or
amendment thereof or supplement thereto in reliance upon and in
conformity with information related to the Underwriter furnished in
writing to the Depositor or the Partnership by the Underwriter
expressly for inclusion in the section captioned "Plan of
Distribution" of the Prospectus or any revision or amendment thereof
or supplement thereto (the "UNDERWRITER INFORMATION").
(ii) No order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus has been issued by the
Commission, and no proceedings for that purpose have been instituted
or, to the knowledge of the Partnership, the Depositor, MAALP or
MAAC, threatened by the Commission or the state securities or blue
sky authority of any jurisdiction, and each Preliminary Prospectus,
at the time of filing thereof.
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(iii) The Registration Statement has been declared
effective by the Commission under the 1933 Act; no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceeding for that purpose has been instituted or, to
the knowledge of the Partnership, the Depositor, MAALP or MAAC,
threatened by the Commission.
(iv) Any documents filed with the Commission and
incorporated by reference in the Prospectus, when such documents
became or become effective with or were or are filed with the
Commission, as the case may be, conformed or will conform in all
material respects to the requirements of the 1933 Act or the
Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder, and when read together with the other
information in the Prospectus, as of the date hereof and at the
Closing Date, did not and will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading; PROVIDED, HOWEVER, that this
representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with the
Underwriter Information.
(v) The financial statements (including the related
notes) included or incorporated by reference in the Registration
Statement and the Prospectus present fairly the financial position
of the respective entity or entities presented therein as of the
dates indicated and the results of operations and cash flows for the
respective entity or entities presented therein for the periods
specified, all in conformity with generally accepted accounting
principles applied on a consistent basis throughout the periods
specified. The tables setting forth selected financial and operating
information for the Mortgaged Properties under the caption
"Additional Mortgaged Property Information" in the Prospectus are
true and accurate and present fairly the information required to be
shown therein. The financial statement schedules included in the
Registration Statement and the amounts in the Prospectus under the
caption "Prospectus Summary - Summary Financial and Operating Data"
present fairly the information required to be shown therein and have
been compiled on a basis consistent with the financial statements
included or incorporated by reference in the Registration Statement
and the Prospectus. No other financial statements or schedules are
required by Form S-3 or Form S-11 or otherwise to be included in the
Registration Statement or the Prospectus. The unaudited pro forma
combined financial information (including the related notes and
supporting schedules) included in the Prospectus complies as to form
in all material respects to the applicable accounting requirements
of the 1933 Act and management of the MAALP, the Partnership and the
Depositor believes that the assumptions underlying the pro forma
adjustments are reasonable. Such pro forma adjustments have been
properly applied to the historical amounts in the compilation of the
information and such information fairly presents with respect
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to the respective entity or entities presented therein the financial
position, results of operations and other information purported to
be shown therein at the respective dates and for the respective
periods specified.
(vi) KPMG Peat Marwick LLP, who has examined and
reported upon the audited financial statements and schedules
included or incorporated by reference in the Registration Statement,
are, and were during the periods covered by their reports included
or incorporated by reference in the Registration Statement and the
Prospectus, independent public accountants within the meaning of the
1933 Act.
(vii) The conditions for the use by the Partnership and
the Depositor of a registration statement on Form S-3 set forth in
the General Instructions to Form S-3 have been satisfied and the
Partnership and the Depositor are entitled to use such form for the
transactions contemplated herein.
(viii) There has not occurred an event which would
constitute an Event of Default under the Indenture or an "Event of
Default" under the Trust Agreement, or an event which, with giving
of notice or the passage of time or both, would become an Event of
Default under the Indenture or an "Event of Default" under the Trust
Agreement.
(ix) The Depositor has been duly organized and is
validly existing as a corporation in good standing under the laws of
its jurisdiction of organization with requisite power and authority
to own, lease and operate its properties and the properties it
proposes to own, lease or operate and to conduct its business as now
conducted by it, and to enter into and perform its obligations under
this Agreement and the Trust Agreement. Each of the Partnership and
MAALP has been duly organized and is validly existing as a
partnership in good standing under the laws of its jurisdiction of
organization with requisite power and authority to own, lease and
operate its properties and the properties it proposes to own, lease
or operate and to conduct its business as now conducted by it, and
to enter into and perform its obligations under this Agreement, the
Indenture, the Cash Collateral Agreement, each Mortgage, and the
Contribution Agreement. MAACP, Inc., the general partner of the
Partnership (the "GENERAL PARTNER"), has been duly incorporated and
is validly existing as a corporation in good standing under the laws
of the State of Delaware with requisite power and authority to own,
lease and operate its properties and the properties it proposes to
own, lease or operate and to conduct its business as now conducted
by it. Mid-America Apartment Communities, Inc. ("MAAC") has been
duly organized and is validly existing as a corporation in good
standing under the laws of its jurisdiction of organization with
requisite power and authority to own, lease and operate its
properties and the properties it proposes to own, lease or operate
and to conduct its business as now conducted by it.
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(x) Each of the Depositor, the Partnership, the General
Partner, MAALP and MAAC has been duly qualified to transact business
and is in good standing as a foreign corporation or partnership, as
applicable, in each jurisdiction in which the ownership or leasing
of its properties or the nature or conduct of its business as now
conducted or proposed to be conducted requires such qualification,
except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the
condition (financial or otherwise), business, operations, results of
operations, prospects, liabilities, properties or assets of the
Depositor, the Partnership, the General Partner, MAALP or MAAC or
any of their respective Subsidiaries or any Mortgaged Property or
the ability of any of them to perform its obligations, if any, under
the Certificates or the Bonds (a "MATERIAL ADVERSE EFFECT").
(xi) Neither the Partnership nor MAALP is in violation
of its certificate of limited partnership or limited partnership
agreement, and neither of them is in default in the performance,
observance or fulfillment of any of the obligations, covenants or
conditions contained in, and is not otherwise in default under, (A)
any law or statute applicable to it, or (B) any judgment, decree,
writ, injunction, order, award or other action of any court or
governmental authority or arbitrator or any order, rule or
regulation, of any federal, state, county, municipal or other
governmental or public authority or agency having or asserting
jurisdiction over it or any of its properties. None of the
Depositor, the General Partner or MAAC is in violation of its
charter or by-laws, or in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions
contained in, or otherwise in default under, (A) any law or statute
applicable to it, or (B) any judgment, decree, writ, injunction,
order, award or other action of any court or governmental authority
or arbitrator or any order, rule or regulation, of any federal,
state, county, municipal or other governmental or public authority
or agency having or asserting jurisdiction over it or any of its
properties. The Depositor is not a party to or bound by any
agreement or undertaking, written or oral, other than, and has not
incurred any obligations or liabilities except for those in
connection with, this Agreement and the Trust Agreement and
agreements and undertakings specifically required or contemplated by
such documents (collectively, the "DEPOSITOR DOCUMENTS"). The
Depositor has the full corporate right, power and authority to enter
into and perform its obligations under this Agreement and each
Depositor Document, and the execution, delivery and performance of
each Depositor Document and the consummation of the transactions
contemplated herein and therein and compliance by the Depositor with
its obligations hereunder and thereunder have been duly authorized
by all necessary corporate action. The Partnership is not a party to
or bound by any agreement or undertaking, written or oral, other
than, and has not incurred any obligations or liabilities except for
those in connection with, this Agreement, the Indenture, the Cash
Collateral Agreement, each Mortgage, the Contribution Agreement, the
Note Purchase Agreement and agreements and undertakings specifically
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required or contemplated by such documents (collectively, the
"PARTNERSHIP DOCUMENTS"). The Partnership and MAALP each have the
full partnership right, power and authority to enter into and
perform their respective obligations under this Agreement and each
Partnership Document to which they are, respectively, a party, and
the execution, delivery and performance of each Partnership Document
and the consummation of the transactions contemplated herein and
therein and compliance by each of the Partnership and MAALP with its
obligations hereunder and thereunder have been duly authorized by
all necessary partnership action.
(xii) The Certificates have been duly authorized for
issuance and sale pursuant to this Agreement and the Trust
Agreement. When issued, authenticated and delivered pursuant to the
provisions of this Agreement and the Trust Agreement against payment
of the consideration therefor in accordance with this Agreement, the
Certificates will be duly and validly issued and outstanding and
entitled to the benefits provided by the Trust Agreement, except as
enforcement thereof may be limited by bankruptcy, insolvency or
other laws relating to or affecting enforcement of creditors' rights
or by general equity principles, whether enforcement is sought in a
proceeding in equity or at law. The Certificates and the Trust
Agreement conform in all material respects to all statements
relating thereto contained in the Prospectus.
(xiii) The Bonds have been duly authorized for issuance
and sale pursuant to this Agreement and the Indenture. When issued,
authenticated and delivered pursuant to the provisions of this
Agreement and the Indenture against payment of the consideration
therefor, the Bonds will be duly and validly issued and outstanding
and entitled to the benefits provided by the Indenture, the Cash
Collateral Agreement and each Mortgage and other Security Document,
except as enforcement thereof may be limited by bankruptcy,
insolvency or other laws relating to or affecting enforcement of
creditors' rights or by general equity principles, whether
enforcement is sought in a proceeding in equity or at law. The Bonds
and the Indenture conform in all material respects to all statements
relating thereto contained in the Prospectus.
(xiv) No authorization, approval, license, consent or
other permit of any court or governmental authority or agency is
necessary in connection with the offering, issuance or sale of the
Certificates hereunder or the Bonds or the consummation of the
transactions contemplated hereby and by the Trust Agreement, the
Indenture, the Cash Collateral Agreement and each Mortgage, except
such as have been, or as of the Closing Date will have been,
obtained or such as may otherwise be required under applicable state
securities laws in connection with the purchase and offer and sale
of the Certificates by the Underwriter. The Depositor, the
Partnership, MAALP, the General Partner and MAAC have all
authorizations, approvals, licenses, consents and other permits of
all governmental or regulatory agencies, whether domestic, federal,
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state or local, the absence of which could materially impair the
business and operations of the Depositor, the Partnership, the
General Partner or MAALP as it is presently being conducted or as
contemplated, or would have or could reasonably be expected to have
a material adverse effect on the Depositor, the Partnership, the
General Partner or MAALP.
(xv) This Agreement has been, and as of the Closing Date
the Trust Agreement, the Depositor Documents, the Indenture and the
Partnership Documents will be, duly authorized, executed and
delivered by the Depositor or the Issuer, as the case may be. This
Agreement constitutes, and as of the Closing Date the Depositor
Documents and the Partnership Documents will each constitute, a
legal, valid and binding agreement enforceable against the Depositor
or the Partnership and MAALP, as the case may be, in accordance with
its terms, except as such enforceability may be limited by (A)
bankruptcy, insolvency, reorganization, receivership, moratorium or
other similar laws affecting the enforcement of the rights of
creditors generally, (B) general principles of equity, whether
enforcement is sought in a proceeding in equity or at law, and (C)
public policy considerations underlying the securities laws, to the
extent that such public policy considerations limit the
enforceability of the provisions of this Agreement that purport or
are construed to provide indemnification from securities law
liabilities.
(xvi) At the time of the execution and delivery of the
Indenture, the Partnership (A) had all right, title and interest in
and to the Mortgaged Properties free and clear of any lien,
mortgage, pledge, charge, encumbrance, adverse claim or other
security interest (collectively "LIENS") granted by or imposed upon
the Partnership except for the Lien of the Indenture, (B) had
conveyed to the trustee under each Mortgage which is a deed of trust
good title to the Mortgaged Property being transferred to such
trustee in trust pursuant to such Mortgage, (C) had granted to the
Trustee as mortgagee a valid and enforceable first priority mortgage
and security interest in each Mortgaged Property subject to a
Mortgage which is not a deed of trust, (D) had not assigned to any
other Person any of its right, title or interest in the Mortgaged
Properties, the Trust Estate, the Indenture or the Bonds, and (E)
had the power and authority to transfer such Mortgaged Properties to
the trustee under each Mortgage which is a deed of trust, to
mortgage and pledge the Trust Estate to the Trustee pursuant to and
under the Indenture and to sell the Bonds to the Depositor. Upon
execution and delivery of each Mortgage which is a deed of trust by
the Partnership, the trustee thereunder acquired ownership in trust
of all of the Partnership's right, title and interest in and to the
Mortgaged Properties except to the extent disclosed in the
Prospectus, and upon delivery to the Depositor of the Bonds pursuant
hereto, the Depositor will have good title to the Bonds, in each
case free of Liens. Each of the representations and warranties
contained in the Mortgages is, and as of the Closing Date will be,
true and correct.
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(xvii) Neither this Agreement nor any certificate,
report or other statement delivered to the Underwriter by or on
behalf of the Depositor, the Partnership, MAALP or MAAC in
connection with the negotiation of this Agreement or the
transactions contemplated hereby or the sale of the Certificates,
contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or
therein not misleading. There is no fact known to the Depositor, the
Partnership, MAALP or MAAC that has not been disclosed to the
Underwriter in writing that adversely affects or could adversely
affect the ability of the Depositor, the Partnership, MAALP or MAAC
to perform its obligations under this Agreement, the Trust
Agreement, the Certificates, the Indenture or the Bonds or which
could reasonably be expected to (A) cause an investor not to
purchase the Certificates or (B) cause the Certificates not to be
assigned BBB and Baa2 ratings (the "REQUIRED RATINGS") from Standard
& Poor's Ratings Services, a division of The McGraw-Hill Companies,
Inc., and Moody's Investors Service, Inc. (together, the "RATING
AGENCIES"), respectively.
(xviii) MAAC owns 100% of the capital stock of each of
the Depositor and the General Partner. MAAC owns an approximate
84.6% interest in MAALP and is the sole general partner of MAALP.
MAALP owns the 99% limited partnership interest in the Partnership;
and the General Partner owns the 1% general partnership interest in
the Partnership.
(xix) Neither the Depositor, the Partnership nor MAALP
is subject to registration or regulation or is controlled by any
Person subject to registration or regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940, each
as amended, or to any other federal or state statute or regulation
limiting its ability to incur debt or to create liens on any of its
properties or assets to secure debt or making its contracts void or
voidable.
(xx) The consideration received by the Depositor upon
the sale of the Certificates to the Underwriter will constitute
reasonably equivalent value and fair consideration for the
Certificates. The Depositor will be solvent at all relevant times
prior to, and will not be rendered insolvent by, the sale of the
Certificates to the Underwriter. The Depositor is not selling the
Certificates or causing the Certificates to be sold to the
Underwriter with any intent to hinder, delay or defraud any of the
creditors of the Depositor or any of its Affiliates. The
consideration received by the Partnership upon the sale of the Bonds
to the Depositor will constitute reasonably equivalent value and
fair consideration for the Bonds. Each of the Partnership and MAALP
will be solvent at all relevant times prior to, and will not be
rendered insolvent by, the sale of the Bonds to the Depositor.
Neither the Partnership nor MAALP is selling the Bonds or causing
the Bonds to be sold to the Depositor with any
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intent to hinder, delay or defraud any of the creditors of the
Partnership, MAALP or any of their Affiliates.
(xxi) At the Closing Date, the Certificates shall have
attained the Required Ratings from the Rating Agencies.
(xxii) Any taxes, fees and other governmental charges in
connection with the execution, delivery and issuance of this
Agreement, the Trust Agreement, the Indenture, the Certificates and
the Bonds payable by the Depositor, the Partnership or MAALP (other
than income taxes) have been paid or will be paid at or prior to the
Closing Date.
(xxiii) Each of the Depositor, the Partnership, MAALP,
MAAC and any entity which together with the Depositor, the
Partnership, MAALP or MAAC would be deemed to be a "single employer"
within the meaning of Section 4001 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), has fulfilled its
obligations under the minimum funding standards of ERISA and the
Internal Revenue Code of 1986, as amended (the "CODE"), with respect
to each employee benefit plan thereof and is in compliance in all
material respects with the provisions of all applicable laws,
including without limitation ERISA and the Code, with respect to
such plans. The execution and delivery by MAALP, MAAC, the Depositor
and the Partnership of this Agreement and the sale and delivery of
the Certificates will not involve any prohibited transaction within
the meaning of ERISA or any transaction subject to the prohibitions
of Section 406 of ERISA or under the Code.
(xxiv) No patents, trademarks, service marks, trade
names or copyrights, or any licenses of any of the foregoing, are
necessary for the operation of the business of the Depositor, the
Partnership, MAALP or MAAC as presently conducted or as
contemplated. No product, service, process or method presently
contemplated to be sold by or employed by the Depositor, the
Partnership, MAALP or MAAC in connection with its business infringes
any patent, trademark, service mark, trade name or copyright, or any
license of any of the foregoing, owned by any other Person.
(xxv) Neither the Depositor, the Partnership, MAALP nor
MAAC owns or has any present intention of acquiring any "margin
stock" as defined in Regulation G (12 CFR Part 207) of the Board of
Governors of the Federal Reserve System (herein called "margin
stock"). None of the proceeds from the sale of the Certificates or
the Bonds will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin stock or for the purpose of
reducing or retiring any indebtedness which was originally incurred
to purchase or carry margin stock or for any other purpose which
might constitute this transaction a "purpose credit" within the
meaning of Regulation G, T or U.
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Neither the Depositor, the Partnership, MAALP, MAAC nor any agent
acting on behalf of any of them has taken or will take any action
which might cause this Agreement, the Certificates or the Bonds to
violate Regulation G, Regulation T, Regulation U, Regulation X or
any other regulation of the Board of Governors of the Federal
Reserve System or to violate the Exchange Act, in each case as in
effect now or as the same may hereafter be in effect.
(xxvi) Since September 30, 1997, there has been no
material adverse change in the condition (financial or otherwise),
business, operations, results of operations, prospects, liabilities,
properties or assets of the Depositor, the Partnership, MAALP or
MAAC (a "MATERIAL ADVERSE CHANGE"), and no event which would have or
could reasonably be expected to have a Material Adverse Effect.
(xxvii) There are no legal proceedings to which the
Depositor or the Partnership is a party or to which any property of
the Depositor or the Partnership is or may be subject. There are no
legal proceedings to which MAALP or MAAC is a party or to which any
property of MAALP or MAAC is or may be subject which would have or
could reasonably be expected to have a Material Adverse Effect.
(xxviii) No relationship, direct or indirect, exists
between or among the Depositor, the Partnership, MAALP or MAAC or
any of their respective Subsidiaries on the one hand, and the
directors, trustees, officers, shareholders, customers or suppliers
of the Depositor, the Partnership, MAALP or MAAC or any of their
respective Subsidiaries on the other hand, which is required by the
1933 Act to be described in the Registration Statement or the
Prospectus which is not so described.
(xxix) None of MAAC, MAALP, the Partnership or the
Depositor has incurred any liability for a fee, commission or other
compensation on account of the employment of a broker or finder in
connection with the transactions contemplated by this Agreement
other than as contemplated hereby.
(xxx) Neither MAAC, MAALP, the Partnership, the
Depositor nor any of their respective Subsidiaries, is, or solely as
a result of the consummation of the transactions contemplated hereby
and the application of the proceeds from the sale of the
Certificates, will become, or will conduct their respective
businesses in a manner in which any such entity would become, "an
investment company," or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940,
as amended (the "1940 ACT") or is or will be required to be
registered under the 1940 Act.
(xxxi) The statements set forth in the Prospectus under
the caption "Certain Federal Income Tax Considerations," insofar as
they purport to
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describe the provisions of the laws and documents referred to
therein, are accurate and complete in all material respects.
Any certificate signed by any officer of the Depositor or the
General Partners on behalf of the Depositor or the Partnership and delivered to
you or to counsel for the Underwriter shall be deemed a representation and
warranty by such entity to the Underwriter as to the matters covered thereby.
(b) The Underwriter represents and warrants to the Depositor and the Issuer
that, as of the date hereof and as of the Closing Date, the Underwriter has
complied with all of its obligations hereunder.
SECTION 2. PURCHASE AND SALE.
Subject to the terms and conditions herein set forth and in reliance
upon the representations and warranties herein contained, the Depositor shall
sell to the Underwriter, and the Underwriter shall purchase from the Depositor,
at the related purchase price set forth on Schedule I hereto, Certificates
having an aggregate principal amount as set forth on Schedule I hereto.
SECTION 3. DELIVERY AND PAYMENT.
Payment of the aggregate purchase price for, and delivery of, the
Certificates shall be made at 10:00 a.m. New York City time on March [__], 1998,
which date and time may be postponed by agreement between the Underwriter and
the Depositor (such time and date of payment and delivery, the "CLOSING DATE").
Payment shall be made to or at the direction of the Depositor in immediately
available Federal funds wired in accordance with the instructions attached
hereto as Schedule II, against delivery of the Certificates. Delivery of the
Certificates will be made in book-entry form through the facilities of The
Depository Trust Company ("DTC"). The Certificates will be represented by one or
more definitive global certificates to be deposited by or on behalf of the
Certificate Trustee with DTC or its designated custodian. The Certificates will
be made available for examination by the Underwriter not later than 10:00 a.m.
New York City time on the last business day prior to the Closing Date. The
closing of the transactions contemplated hereby shall be made at the offices of
Cadwalader, Wickersham & Taft, 100 Maiden Lane, New York, New York 10038-4892,
or at such other place as shall be agreed upon by the Underwriter and the
Depositor.
SECTION 4. OFFERING BY UNDERWRITER.
(a) The Underwriter shall provide the Underwriter Information to the
Depositor and the Partnership expressly for use in the Prospectus.
(b) It is understood that the Underwriter proposes to offer the
Certificates for sale as set forth in the Prospectus. It is further understood
that the Depositor and the Partnership, in reliance upon Policy Statement 105,
have not filed and will not file an offering statement pursuant to Section 352-e
of the General Business Law of the State of New York
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with respect to the Certificates. The Underwriter therefore agrees that sales of
the Certificates made by the Underwriter in and from the State of New York will
be made only to institutional investors within the meaning of Policy Statement
105.
SECTION 5. COVENANTS OF THE ISSUER.
The Depositor and the Issuer covenant with the Underwriter as
follows:
(a) The Depositor and the Partnership will give the Underwriter
notice of their intention to file or prepare (i) any amendment to the
Registration Statement at any time prior to the Closing Date or (ii) any
amendment or supplement to the Prospectus (including any revised prospectus that
the Depositor and the Partnership propose for use by the Underwriter in
connection with the offering of the Certificates and that differs from the
prospectus on file at the Commission at the time the Registration Statement
became effective) at any time during the period when a prospectus relating to
the Certificates is required to be delivered under the 1933 Act, and the
Depositor and the Partnership will furnish the Underwriter with copies of any
such amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such amendment or
supplement or use any such prospectus to which the Underwriter shall object.
(b) The Depositor and the Partnership will cause the Prospectus to
be transmitted to the Commission for filing pursuant to Rule 424(b) under the
1933 Act by means reasonably calculated to result in filing with the Commission
pursuant to said rule.
(c) The Depositor and the Partnership will deliver to the
Underwriter an executed copy of the Registration Statement as originally filed
and of each amendment thereto prior to the date hereof (including exhibits filed
therewith or incorporated by reference therein).
(d) The Depositor and the Partnership will furnish to the
Underwriter, from time to time during the period when a prospectus relating to
the Certificates is required to be delivered under the 1933 Act, such number of
copies of the Prospectus (as amended or supplemented) as the Underwriter may
reasonably request for the purposes contemplated by the 1933 Act or the Exchange
Act or the respective applicable rules and regulations of the Commission
thereunder.
(e) If, during the period after the first date of the public
offering of the Certificates in which a prospectus relating to the Certificates
and the Bonds is required to be delivered under the 1933 Act, any event shall
occur as a result of which it is necessary to amend or supplement the Prospectus
in order to make the Prospectus not misleading in the light of the circumstances
existing at the time it is delivered to a purchaser, the Depositor and the
Partnership shall forthwith amend or supplement the Prospectus so that, as so
amended or supplemented, the Prospectus will not include an untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances existing at the time it is
delivered to a purchaser, not misleading, and the
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Depositor and the Partnership will furnish to the Underwriter a reasonable
number of copies of such amendment or supplement.
(f) The Depositor and the Partnership will endeavor to arrange for
the qualification of the Certificates for sale under the applicable securities
laws of such states and other jurisdictions of the United States as the
Underwriter may reasonably designate and will maintain such qualification in
effect so long as required for the initial distribution of the Certificates;
PROVIDED, HOWEVER, that neither the Depositor nor the Partnership shall be
obligated to qualify as a foreign corporation in any jurisdiction in which it is
not so qualified.
(g) The Depositor will use the net proceeds received by it from the
sale of the Certificates to purchase the Bonds, and the Partnership will use the
proceeds received by it from the sale of the Bonds to pay all outstanding First
Mortgage Notes, in each case in the manner specified in the Prospectus under
"Use of Proceeds".
(h) Regardless of whether the transactions contemplated by this
Agreement are consummated, the Depositor, the Partnership or MAALP will pay or
cause to be paid all expenses incident to the performance of the obligations of
the Depositor or the Issuer under this Agreement and all other expenses pursuant
to the terms of that certain commitment letter dated October 29, 1997 from
Morgan Stanley & Co. Incorporated to MAALP (the "COMMITMENT LETTER"). As
provided in the Commitment Letter, the Partnership shall be responsible for the
payment of all costs and expenses incurred by the Underwriter, including,
without limitation, (i) the fees and disbursements of counsel of the
Underwriter, (ii) any Rating Agency fees, (iii) any out-of-pocket expenses of
the Underwriter and (iv) any additional costs arising out of any materials
prepared and/or distributed by the Underwriter, in connection with the purchase
and sale of the Certificates and the Bonds.
(i) If, during the period after the Closing Date in which a
prospectus relating to the Certificates and the Bonds is required to be
delivered under the 1933 Act, the Depositor or the Partnership receives notice
that a stop order suspending the effectiveness of the Registration Statement or
preventing the offer and sale of the Certificates is in effect, the Depositor or
the Partnership will immediately advise the Underwriter of the issuance of such
stop order.
(j) MAAC will file with the Commission within fifteen days of the
issuance of the Certificates a report on Form 8-K setting forth specific
information concerning the Certificates, the Bonds and the Mortgaged Properties
to the extent that such information is not set forth in the Prospectus.
(k) The Depositor and the Partnership will (i) deliver with
reasonable promptness such financial and/or operating data as the Underwriter
may reasonably request, (ii) permit any Person representing the Underwriter to
visit and inspect any of the property of the Partnership, to examine the
corporate, partnership, financial and operating records of the Depositor and the
Partnership and make notes and copies thereof and (iii) discuss the affairs,
finances and accounts of the Depositor and the Partnership with the officers and
independent
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accountants of the Depositor and the Partnership, all at such reasonable times
and as often as Underwriter may reasonably request.
(l) Each of the Depositor, the Partnership, MAAC and MAALP shall
otherwise use its best efforts to effectuate the issuance, sale to the
Underwriter and public offering of the Certificates.
It is acknowledged and agreed that, in connection with the
provisions of this Agreement relating to the issuance, sale to the Underwriter
and public offering of the Certificates, the Underwriter has entered no greater
or other agreement, and is subject to no greater or other obligation, than is
set forth in the Commitment Letter.
SECTION 6. CONDITIONS OF UNDERWRITER'S OBLIGATIONS.
The Underwriter's obligation to purchase the Certificates allocated
to it as set forth on Schedule I hereto shall be subject to the accuracy in all
material respects of the representations and warranties on the part of the
Depositor and the Issuer contained herein as of the date hereof and as of the
Closing Date, to the performance by the Depositor and the Issuer in all material
respects of their obligations hereunder and to the following further conditions:
(a) No stop order suspending the effectiveness of the Registration
Statement shall be in effect, and no proceedings for that purpose shall be
pending or, to the Depositor's or the Partnership's knowledge, threatened by the
Commission.
(b) On the Closing Date, the Underwriter shall have received:
(i) An opinion, dated the Closing Date, of counsel to
the Issuer, in form and substance reasonably acceptable to the
Underwriter and its counsel, that (A) the assets and liabilities of
neither the Partnership nor the General Partner would be
substantively consolidated in any bankruptcy of MAAC, MAALP or any
other person in which MAAC or MAALP, directly or indirectly, holds
an equity interest, and (B) that, in the event of the bankruptcy of
MAALP, the Mortgaged Properties would not be property of the
bankruptcy estate of MAALP and the automatic stay arising upon the
commencement of a bankruptcy case involving MAALP would not be
applicable to payments on the Certificates or the Bonds;
(ii) An opinion, dated the Closing Date, of counsel to
the Issuer, in form and substance reasonably acceptable to the
Underwriter and its counsel, that, in the event of the bankruptcy of
the Partnership, the Bonds would not be property of the bankruptcy
estate of MAALP and the automatic stay arising upon the commencement
of a bankruptcy case involving the Partnership would not be
applicable to payments on the Certificates or the Bonds;
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(iii) An opinion, dated the Closing Date, of counsel to
the Issuer that the assets and liabilities of the Depositor would
not be substantively consolidated in any bankruptcy of MAAC, MAALP
or any other person in which MAAC or MAALP, directly or indirectly,
holds an equity interest, in form and substance reasonably
acceptable to the Underwriter and its counsel;
(iv) An opinion, dated the Closing Date, of counsel to
the Issuer, in form and substance reasonably acceptable to the
Underwriter and its counsel, that, in the event of the bankruptcy of
the Depositor, the Bonds would not be property of the bankruptcy
estate of the Depositor and that the automatic stay arising upon the
commencement of a bankruptcy case involving the Depositor would not
be applicable to payments on the Certificates or the Bonds;
(v) One or more other opinions, dated the Closing Date,
of counsel to the Issuer, covering such matters as the Underwriter
shall reasonably request, in form and substance reasonably
acceptable to the Underwriter; and
(vi) Such other documents, instruments and certificates
as the Underwriter and its counsel may require.
(c) Each of the Partnership and MAALP shall have delivered to the
Underwriter an Officers' Certificate, dated the Closing Date, to the effect that
each signer of such Certificate has examined this Agreement, the Trust
Agreement, the Indenture, the Prospectus, the other Depositor Documents, the
other Partnership Documents and various other closing documents, and that, to
the best of his or her knowledge after reasonable investigation:
(i) the representations and warranties of each of the
Depositor, the Partnership and MAALP in this Agreement, the Trust
Agreement, the Indenture, the other Depositor Documents and the
other Partnership Documents are true and correct;
(ii) each of the Depositor, the Partnership and MAALP
has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied hereunder and
under the Trust Agreement and the Indenture at or prior to the
Closing Date;
(iii) since September 30, 1997, there has been no
Material Adverse Change; and
(iv) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been initiated or threatened by the Commission.
(d) The Underwriter shall have received, with respect to each of the
Certificate Trustee and the Trustee, an opinion of counsel, dated the Closing
Date, in form and
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substance reasonably acceptable to the Underwriter, addressing the valid
existence of such party under the laws of the jurisdiction of its organization,
the due authorization, execution and delivery of the Trust Agreement or the
Indenture, as the case may be, by such party and the enforceability of the Trust
Agreement or the Indenture, as the case may be, against such party except as
enforceability may be limited by (1) bankruptcy, insolvency, liquidation,
receivership, moratorium, reorganization or other similar laws affecting the
enforcement of the rights of creditors generally, and (2) general principles of
equity, whether enforcement is sought in a proceeding in equity or at law. Such
opinion may express its reliance as to factual matters on representations and
warranties made by, and on certificates or other documents furnished by officers
and/or authorized representatives of parties to this Agreement, the Trust
Agreement and the Indenture and on certificates furnished by public officials.
Such opinion may assume the due authorization, execution and delivery of the
instruments and documents referred to therein by the parties thereto other than
the party on behalf of which such opinion is being rendered. Such opinion may be
qualified as an opinion only on the General Corporation Law of the State of
Delaware (if relevant), the laws of each state in which the writer of the
opinion is admitted to practice law and the federal law of the United States.
(e) Since September 30, 1997, there shall not have occurred any
Material Adverse Change, or any development involving a prospective Material
Adverse Change or any material impairment in or affecting the business,
operations, properties, assets, prospects or condition (financial, physical or
otherwise) of the Depositor, the Partnership, MAALP or any of their respective
Affiliates, the Mortgaged Properties or the Underwriter's interests therein,
which the Underwriter concludes, in the reasonable judgment of the Underwriter,
impairs the investment quality of the Certificates so as to make it impractical
or inadvisable to proceed with the public offering or the delivery of the
Certificates.
(f) The Certificates shall have been assigned ratings no less than
the Required Ratings and such ratings shall not have been rescinded, downgraded,
requalified or withdrawn.
(g) The offering, issuance and sale of the Certificates under this
Agreement shall be in compliance with all applicable requirements of federal and
state securities laws on the Closing Date.
(h) As of the Closing Date, the issuance and sale of the
Certificates by the Depositor and the purchase of and payment for the
Certificates to be purchased hereunder by the Underwriter shall (i) not be
prohibited by any applicable law or governmental rule or regulation (including,
without limitation, Section 5 of the 1933 Act or Regulation G, T, U or X of the
Board of Governors of the Federal Reserve System), (ii) not subject the
Underwriter to any tax, penalty, liability or other onerous condition under or
pursuant to any applicable or proposed law or governmental rule or regulation,
and (iii) be a legal investment for the Underwriter under all laws and
governmental rules and regulations applicable to the Underwriter (including
those relating to eligible investments without giving effect to any "basket"
provisions thereof), and the Underwriter shall have received such evidence as it
may request to establish compliance with the condition set forth in this Section
6(h).
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(i) On or after the date hereof, no legislation, order, rule, ruling
or regulation shall have been enacted or made by or on behalf of any
governmental body, department or agency of the United States, nor shall any
legislation have been introduced and favorably reported for passage to either
House of Congress by any committee of either such House to which such
legislation has been referred for consideration, nor shall any decision of any
court of competent jurisdiction within the United States have been rendered
that, in the reasonable judgment of the Underwriter, would materially and
adversely affect the Certificates as an investment. As of the Closing Date,
there shall be no action, suit, investigation or proceeding pending, or, to the
best of the Underwriter's, the Depositor's and the Partnership's knowledge,
threatened, against or affecting the Underwriter, the Depositor or the
Partnership, any of their respective properties or rights, or any of their
respective Affiliates, associates, officers or directors, before any court,
arbitrator or administrative or governmental body which (i) seeks to restrain,
enjoin or prevent the consummation of, or otherwise affect, the transactions
contemplated hereby, or (ii) questions the validity or legality of any such
transactions or seeks to recover damages or to obtain other relief in connection
with any such transactions and, to the best of the Depositor's, the
Underwriter's and the Partnership's knowledge, there shall be no valid basis for
any such action, proceeding or investigation.
(j) The Depositor, the Partnership and MAALP shall have duly
received all authorizations, consents, approvals, licenses, franchises, permits
and certificates, if any, by or of all federal, state and local governmental
authorities necessary for the issuance and sale of the Certificates on the
Closing Date, all of which shall be in full force and effect on the Closing
Date, and shall have delivered to the Underwriter certified copies thereof.
(k) All corporate and partnership proceedings taken by all Persons
other than the Underwriter in connection with the transactions contemplated
hereby shall have been consummated (or shall be consummated simultaneously with
the issuance of the Certificates), and all documents and agreements incidental
thereto shall be reasonably satisfactory in form and substance to the
Underwriter and its counsel, and the Underwriter and its counsel shall have
received all such counterpart originals or certified or other copies of such
documents as they may reasonably request.
(l) The Partnership shall have paid to counsel of the Underwriter an
amount equal to the fees and expenses of such counsel in connection herewith to
the extent billed by the Closing Date, and any other fees and expenses incurred
by the Underwriter, to and including the Closing Date, in connection with the
transactions contemplated hereby as provided in the Commitment Letter.
SECTION 7. INDEMNIFICATION.
(a) Each of the Depositor and the Partnership shall indemnify and
hold harmless the Underwriter, its directors and officers and each Person, if
any, who controls the Underwriter within the meaning of either Section 15 of the
1933 Act or Section 20 of the Exchange Act, from and against any and all
expenses, losses, claims, damages and other liabilities (including without
limitation the reasonable costs of investigation and legal defense) (the
"LIABILITIES") caused by (i) the failure of any of the representations and
warranties contained in Section 1 to have been true and correct as of the date
hereof or as of the Closing
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Date or (ii) any untrue statement or alleged untrue statement of any material
fact contained in the Prospectus or any omission or alleged omission to state
therein a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; PROVIDED that,
insofar as the Liabilities described in clause (ii) above are caused by any such
untrue statement or omission or alleged untrue statement or omission with
respect to any information in the Prospectus as to which the Underwriter has
agreed to indemnify the Partnership pursuant to Section 7(b), the Partnership
shall have no obligation to so indemnify and hold harmless. The Depositor and
the Partnership shall make indemnification payments pursuant to this Section
7(a) on a current basis, as Liabilities are incurred or due to be paid by the
indemnified party.
(b) The Underwriter shall indemnify and hold harmless the Depositor
and the Partnership, its directors and each person, if any, who controls the
Depositor or the Partnership within the meaning of either Section 15 or Section
20 of the 1933 Act or Section 20 of the Exchange Act against any and all
Liabilities described in Section 7(a)(ii) above as incurred, but only with
respect to untrue statements or omissions to state a material fact necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading, in the Underwriter Information.
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but failure to
so notify an indemnifying party shall not relieve such indemnifying party from
any liability which it may have otherwise than on account of this Agreement. If
any action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party may
participate at its own expense in the defense of any such action. To the extent
that it may elect by written notice delivered to the indemnified party promptly
after receiving the aforesaid notice from the indemnified party, the
indemnifying party may elect to assume the defense thereof, with counsel
satisfactory to such indemnified party. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have agreed to the retention
of such counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. In no event shall
the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. Unless it shall assume the defense of any
proceeding, an indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent. However, if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party shall indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. If an indemnifying party
assumes the defense of any proceeding, it shall be entitled to settle such
proceeding with the consent of the indemnified party or, if such settlement
provides for release
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of the indemnified party in connection with all matters relating to the
proceeding that have been asserted against the indemnified party in such
proceeding by the other parties to such settlement, without the consent of the
indemnified party.
(d) If the indemnification provided for in this Section 7 is due in
accordance with its terms but is for any reason held by a court to be
unavailable to an indemnified party under subsection (a) or (b) on grounds of
public policy or otherwise, then the indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Depositor and the Partnership on the one hand and the Underwriter on the
other from the offer and sale of the Certificates pursuant hereto or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Depositor or
the Partnership on the one hand and of the Underwriter on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or other liabilities, as well as any other relevant equitable
considerations. The relative fault of the Depositor or the Partnership on the
one hand and of the Underwriter on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Depositor or the Partnership or by the
Underwriter, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
(e) The parties hereto agree that it would not be just and equitable
if contribution were determined by PRO RATA allocation or by any other method of
allocation that does not take account of the considerations referred to in
Section 7(d) above. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or other liabilities referred to in this
Section 7 shall be deemed to include any legal fees and disbursements or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such claim. In the event that any expenses so
paid by the indemnifying party are subsequently determined to not be required to
be borne by the indemnifying party hereunder, the party which received such
payment shall promptly refund the amount so paid to the party which made such
payment. Notwithstanding the provisions of this subsection (e), the Underwriter
shall not be required to contribute any amount in excess of the amount by which
the total price at which the Certificates were purchased by the Underwriter
exceeds the total price at which the Certificates were distributed to the public
by the Underwriter. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The remedies
provided for in this Section 7 are not exclusive and shall not limit any rights
or remedies that may otherwise be available to any indemnified party at law or
in equity.
(f) The indemnity and contribution agreements contained in this
Section 7 shall remain operative and in full force and effect regardless of (i)
any termination of this
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Agreement, any investigation made by the Depositor, the Partnership, the
Underwriter, any of their respective directors or officers, or any person
controlling the Depositor, the Partnership or the Underwriter and (ii)
acceptance of and payment for any of the Certificates.
SECTION 8. REPRESENTATIONS AND WARRANTIES TO SURVIVE DELIVERY.
All representations and warranties of the Depositor and the
Partnership contained in this Agreement shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of the
Underwriter or any controlling person in respect of the Underwriter, and shall
survive delivery of the Certificates to the Underwriter.
SECTION 9. TERMINATION OF AGREEMENT.
(a) The Underwriter may terminate its obligations under this
Agreement, by notice to the Partnership, at any time at or prior to the Closing
Date if the sale of the Certificates provided for herein is not consummated
because of any failure or refusal on the part of the Depositor, the Partnership,
MAALP or MAAC to comply with the terms or to fulfill any of the conditions of
this Agreement, or if for any reason the Depositor, the Partnership, MAALP or
MAAC shall be unable to perform its respective obligations under this Agreement.
(b) The Underwriter may terminate its obligations under this
Agreement in the absolute discretion of the Underwriter, by notice given to the
Partnership, if (A) after the execution and delivery of this Agreement and prior
to the Closing Date (i) trading generally shall have been suspended or
materially limited on or by, as the case may be, any of the New York Stock
Exchange, the American Stock Exchange, the National Association of Securities
Dealers, Inc., the Chicago Board of Options Exchange, the Chicago Mercantile
Exchange or the Chicago Board of Trade, (ii) a general moratorium on commercial
banking activities in New York shall have been declared by either Federal or
State of New York authorities, or (iii) there shall have occurred any outbreak
or escalation of hostilities or any change in financial markets or any calamity
or crisis that, in the judgment of the Underwriter, is material and adverse and
(B) in the case of any of the events specified in clauses (A)(i) through (iii)
above, such event singly or together with any other such event, would make it,
in the judgment of the Underwriter, impracticable to market the Certificates.
(c) If the Underwriter terminates its obligations under this
Agreement in accordance with Section 9(a), the Partnership and the Depositor
shall reimburse the Underwriter for all reasonable out-of-pocket expenses
(including reasonable fees and disbursements of counsel) that shall have been
reasonably incurred by the Underwriter in connection with the proposed purchase
and sale of the Certificates.
SECTION 10. NOTICES.
All notices and other communications hereunder shall be in writing
and shall be deemed duly given if sent by facsimile or delivered by courier, in
either case with appropriate confirmation of receipt. Notices to the Underwriter
shall be directed to Morgan Stanley & Co.
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Incorporated, 1585 Broadway, New York, New York 10036, Attention: [_________];
to the Depositor shall be directed to Mid-America Finance, Inc., 6584 Poplar
Avenue, Suite 340, Memphis, Tennessee 38138, Attention: Simon R.C. Wadsworth; to
the Partnership shall be directed to Mid-America Capital Partners, L.P., 6584
Poplar Avenue, Suite 340, Memphis, Tennessee 38138, Attention: Simon R.C.
Wadsworth; to MAALP shall be directed to Mid-America Apartments, L.P., 6584
Poplar Avenue, Suite 340, Memphis, Tennessee 38138, Attention: Simon R.C.
Wadsworth; to MAAC shall be directed to Mid-America Apartment Communities, Inc.,
6584 Poplar Avenue, Suite 340, Memphis, Tennessee 38138, Attention: Simon R.C.
Wadsworth; and as to any party, to such other address as may hereafter be
furnished by such party to the others in writing in accordance with this
Section.
SECTION 11. PARTIES.
This Agreement shall inure to the benefit of and be binding upon the
Underwriter, the Depositor and the Issuer and their respective successors.
Nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any person or entity, other than the Underwriter, the
Depositor and the Issuer and their respective successors and the controlling
persons and officers and directors referred to in Sections 7 and 8 and their
respective successors, heirs and legal representatives, any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
herein contained. This Agreement and all conditions and provisions hereof are
intended to be for the sole and exclusive benefit of the Underwriter, the
Depositor and the Partnership and their respective successors, and said
controlling persons and officers and directors and their respective successors,
heirs and legal representatives, and for the benefit of no other Person or
entity. No purchaser of Certificates from the Underwriter shall be deemed to be
a successor by reason merely of such purchase.
SECTION 12. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York applicable to agreements made and to be
performed in said State.
SECTION 13. JUDICIAL PROCEEDINGS.
(a) The Depositor, the Partnership, MAALP and MAAC each hereby
irrevocably submit to the non-exclusive jurisdiction of any New York State or
Federal court sitting in the City of New York over any suit, action or
proceeding arising out of or relating to this Agreement, the Certificates, the
Bonds, the other Depositor Documents, the other Partnership Documents or the
transactions contemplated hereby or thereby. To the fullest extent they may
effectively do so under applicable law, each of the Depositor, the Partnership,
MAALP and MAAC irrevocably waives and agrees not to assert, by way of motion, as
a defense or otherwise, any claim that it is not subject to the jurisdiction of
any such court, any objection that it may now or hereafter have to the laying of
the venue of any such suit, action or proceeding brought in any such court and
any claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
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(b) The Depositor, the Partnership, MAALP and MAAC each agree, to
the fullest extent it may effectively do so under applicable law, that a
judgment in any suit, action or proceeding of the nature referred to in Section
13(a) brought in any such court shall be conclusive and binding upon the
Depositor, the Partnership, MAALP or MAAC, as applicable, subject to rights of
appeal, as the case may be, and may be enforced in the courts of the United
States of America or the State of New York or of Tennessee (or any other courts
to the jurisdiction of which the Depositor, the Partnership, MAALP or MAAC is or
may be subject) by a suit upon such judgment.
(c) The Depositor, the Partnership, MAALP and MAAC each hereby
designates and appoints CT Corporation System as its agent to receive on its
behalf service of all process in any action, suit or proceeding of the nature
referred to in Section 11(a) in New York, such service being hereby acknowledged
by the Depositor, the Partnership, MAALP and MAAC to be effective and binding
service in every respect. A copy of any such process so served shall be mailed
by registered mail to the Depositor, the Partnership, MAALP or MAAC at its
address specified in or designated pursuant to Section 10, except that unless
otherwise provided by applicable law, any failure to mail such copy shall not
affect the validity of service of process. If any agent appointed by the
Depositor, the Partnership, MAALP or MAAC refuses to accept service, the
Depositor, the Partnership, MAALP and MAAC each hereby agrees that service upon
it by mail shall constitute sufficient notice. Notices hereunder shall be
conclusively presumed received as evidenced by a delivery receipt furnished by
the United States Postal Service or any commercial delivery service. The
Depositor, the Partnership, MAALP and MAAC each also irrevocably consents to the
service of process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the Depositor, the Partnership, MAALP or MAAC, as
applicable, at its address specified in or designated pursuant to Section 10.
(d) THE DEPOSITOR, THE PARTNERSHIP, MAALP AND MAAC EACH HEREBY
WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING UNDER OR OUT OF THIS AGREEMENT, THE CERTIFICATES, THE BONDS, ANY OF THE
OTHER DEPOSITOR DOCUMENTS, ANY OF THE OTHER PARTNERSHIP DOCUMENTS OR ANY ISSUES
RELATING HERETO, THERETO OR TO THE SUBJECT MATTER OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY. The scope of this waiver is intended to be
all-encompassing of any and all disputes that may be filed in any court and that
relate to the subject matter of the transactions contemplated hereby, including
without limitation, contract claims, tort claims, breach of duty claims, and all
other common law and statutory claims. The Depositor, the Partnership, MAALP,
MAAC and the Underwriter acknowledge that this waiver is a material inducement
to enter into a business relationship, that each has already relied on the
waiver in entering into or accepting the benefits of this Agreement and that
each will continue to rely on the waiver in their related future dealings. The
Depositor, the Partnership, MAALP and MAAC each further warrants and represents
that it has reviewed this waiver with its legal counsel, and that it knowingly
and voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER
DOCUMENTS OR
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AGREEMENTS RELATING TO THIS AGREEMENT, THE CERTIFICATES, THE BONDS, ANY OF THE
OTHER DEPOSITOR DOCUMENTS OR ANY OF THE OTHER PARTNERSHIP DOCUMENTS. IN THE
EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL
BY THE COURT.
(e) Nothing in this Section 13 shall affect the right of the
Underwriter to serve process in any manner permitted by law, or limit any right
that the Underwriter may have to bring proceedings against the Depositor, the
Partnership, MAALP or MAAC in the courts of any jurisdiction or to enforce in
any lawful manner a judgment obtained in one jurisdiction in any other
jurisdiction.
(f) To the fullest extent permitted by applicable law, the
Depositor, the Partnership, MAALP and MAAC each agrees that no claim may be made
or enforced by the Depositor, the Partnership, MAALP, MAAC or any other Person
against the Underwriter or any of its Affiliates, directors, officers,
employees, attorneys or agents for any special, indirect, consequential or
punitive damages in respect of any claim for breach of contract or any other
theory of liability arising out of or related to the transactions contemplated
by this Agreement, the Certificates, the Bonds, any of the other Depositor
Documents or any of the other Partnership Documents, or any act, omission or
event occurring in connection herewith or therewith; and the Depositor, the
Partnership, MAALP and MAAC (on behalf of themselves and their Affiliates)
hereby waive, release and agree, to the fullest extent permitted by applicable
law, not to sue upon any claim for any such damages, whether or not accrued and
whether or not known or suspected to exist in their favor.
SECTION 14. MISCELLANEOUS.
This Agreement supersedes all prior or contemporaneous agreements
and understandings relating to the subject matter hereof; PROVIDED, HOWEVER,
that this Agreement does not supersede the terms of the Commitment Letter and
the terms hereof are supplementary to the terms of the Commitment Letter, except
to the extent the terms of the Commitment Letter are inconsistent with the terms
of this Agreement, in which case this Agreement shall supersede the terms of the
Commitment Letter to the extent of such inconsistency. Neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated except by a
writing signed by the party against whom enforcement of such amendment, waiver,
discharge or termination is sought. This Agreement may be signed in any number
of counterparts, each of which shall be deemed an original and which taken
together shall constitute one and the same instrument.
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<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Partnership a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the Underwriter and the Depositor and the Partnership.
Very truly yours,
MID-AMERICA FINANCE, INC.
By:
Name:
Title:
MID-AMERICA CAPITAL PARTNERS, L.P.
By: MAACP, Inc.,
its general partner
By_____________________________
Name: Simon R.C. Wadsworth
Title: President
CONFIRMED AND ACCEPTED, as of the date first above written:
MORGAN STANLEY & CO. INCORPORATED
By:
Name:
Title:
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<PAGE>
Each of Mid-America Apartment Communities, Inc. and Mid-America
Apartments, L.P. joins in this Agreement for the sole purpose of (i) joining
with the Depositor and the Partnership in the provisions of Section 13 of this
Agreement and (ii) guaranteeing the indemnity obligations of the Depositor and
the Partnership pursuant to Section 7 of this Agreement, PROVIDED, HOWEVER, that
the guarantee of MAALP and MAAC described in this paragraph (x) expressly
excludes any obligations arising under Section 7 hereof with respect to the
covenants of the Depositor and the Partnership pursuant to Section 5 of this
Agreement and (y) is not, and the parties hereto acknowledge and agree is not
intended to be, a guarantee by MAALP or MAAC or any other entity of the
obligations of payment and performance of the Partnership under the Bonds.
MID-AMERICA APARTMENT COMMUNITIES, INC.
By:____________________________________
Name: Simon R.C. Wadsworth
Title: Chief Financial Officer
MID-AMERICA APARTMENTS, L.P.
By: Mid-America Apartment Communities,
Inc., its general partner
By:______________________________________
Name: Simon R.C. Wadsworth
Title: Chief Financial Officer
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<PAGE>
SCHEDULE I
CERTIFICATES:
Mid-America Mortgage Trust, 1998-1
Commercial Mortgage Pass-Through Certificates, Series 1998-1
Aggregate Principal Pass-Through Purchase Ratings
Amount Rate Price (S&P/Moody's)
$142,000,000 [____]% BBB/Baa2
EXHIBIT 4.1
CWT DRAFT: 2/12/98
MID-AMERICA CAPITAL PARTNERS, L.P.
and
MID-AMERICA APARTMENTS, L.P.
as Issuer
and
LASALLE NATIONAL BANK
as Trustee
----------------------------------------
RESTATED SUPPLEMENTAL INDENTURE
Dated Effective as of November 21, 1997
----------------------------------------
[___]% First Mortgage Bonds, Due 2003
<PAGE>
SECTION PAGE
TABLE OF CONTENTS1
ARTICLE ONE
DEFINITIONS
1.01. Definitions...........................................................2
1.02. Incorporation by Reference of Trust Indenture Act....................14
1.03. Rules of Construction................................................15
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...........................................16
2.05. Execution of Securities..............................................18
2.06. Exchange and Registration of Transfer of Securities..................19
2.07. Mutilated, Destroyed, Lost or Stolen Securities......................20
2.08. Cancellation of Surrendered Securities...............................21
2.09. Temporary Securities.................................................21
ARTICLE THREE
NO PREPAYMENT OF SECURITIES
3.01. No Prepayment........................................................21
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...................................22
4.03. Performance and Enforcement..........................................23
4.04. Payment of Principal of, Premium, if Any, and Interest on Securities.23
4.05. SEC Reports..........................................................23
4.06. Limitation on Debt...................................................24
4.07. Limitation on Secured Debt...........................................24
4.08. Unencumbered Assets..................................................24
4.09. Limitation on Transactions with Affiliates...........................24
4.10. Appointment of Agents................................................25
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<PAGE>
4.11. Paying Agents To Hold Funds in Trust.................................25
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............................................................26
4.15. Payment of Taxes and Other Claims....................................28
4.16. Corporate Existence and Rights.......................................28
4.17. Certificate and Opinion as to Conditions Precedent...................28
4.18. Statements Required in Certificate or Opinion........................29
4.19. Debt Service Coverage................................................29
4.20. Restrictions on Partnership..........................................30
4.21. Maintenance of Properties............................................30
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....................................................31
5.02. Acceleration.........................................................33
5.03. Other Remedies.......................................................33
5.04. Waiver of Past Defaults..............................................34
5.05. Control by Majority..................................................34
5.06. Limitation on Suits..................................................34
5.07. Rights of Holders To Receive Payment.................................35
5.08. Collection Suit by Trustee...........................................35
5.09. Trustee May File Proofs of Claim.....................................35
5.10. Priorities...........................................................35
5.11. Undertaking for Costs................................................36
5.12. Waiver of Stay or Extension Laws.....................................36
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.................................39
6.06. Reinstatement........................................................39
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<PAGE>
ARTICLE SEVEN
CONCERNING THE TRUSTEE
7.01. Duties of Trustee....................................................39
7.02. Rights of Trustee....................................................40
7.03. Individual Rights of Trustee.........................................42
7.04. Trustee's Disclaimer.................................................42
7.05. Notice of Defaults...................................................42
7.06. Reports by Trustee to Holders........................................42
7.07. Compensation and Indemnity...........................................42
7.08. Replacement of Trustee...............................................43
7.09. Successor Trustee by Merger..........................................44
7.10. Eligibility: Disqualification........................................44
7.11. Preferential Collection of Claims Against Issuer.....................44
7.12. Separate and Co-trustees.............................................44
7.13. Servicer.............................................................46
7.14. Advances.............................................................46
7.15. Priorities of Payment................................................46
7.16. Errors and Omissions Insurance.......................................47
ARTICLE EIGHT
AMENDMENTS, SUPPLEMENTS AND WAIVERS
8.01. Amendments and Supplemental Indentures Without Consent of Holders....47
8.02. Amendments and Supplemental Indentures With Consent of Holders.......48
8.03. Compliance with Trust Indenture; Rating Agency Confirmation..........49
8.04. Revocation and Effect of Consents....................................49
8.05. Notation on or Exchange of Securities................................50
8.06. Trustee To Sign Amendments...........................................50
8.07. Effect of Amendments and Supplemental Indentures.....................50
8.08. Waiver of Compliance by Holders......................................50
ARTICLE NINE
PERMITTED MERGER AND RELEASE OF PORTION OF TRUST ESTATE
9.01. When Issuer May Merge................................................50
9.02. Conditions Precedent to Permitted Merger.............................51
9.03. Release of Portion of Trust Estate...................................52
9.04. Notice to Holders....................................................52
9.05. Consolidations and Mergers of, Sales, Leases and Conveyances by,
MAALP................................................................52
9.06. Rights and Duties of Successor.......................................53
9.07. Officers' Certificate and Opinion of Counsel.........................53
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<PAGE>
ARTICLE TEN
MEETINGS OF HOLDERS OF SECURITIES
10.01. Purposes for Which Meetings May Be Called...........................53
10.02. Call Notice and Place of Meetings...................................53
10.03. Persons Entitled to Vote at Meetings................................54
10.04. Quorum; Action......................................................54
10.05. Determination of Voting Rights; Conduct and Adjournment of Meetings.55
10.06. Counting Votes and Recording Action of Meetings.....................56
ARTICLE ELEVEN
MISCELLANEOUS PROVISIONS
11.01. Trust Indenture Act Controls........................................56
11.02. Communication by Holders with Other Holders.........................56
11.03. Compliance Certificates and Opinions................................56
11.04. Form of Documents Delivered to Trustee..............................57
11.05. Acts of Holders.....................................................57
11.06. Notices.............................................................58
11.07. When Treasury Securities Disregarded................................59
11.08. Rules by Paying Agent and Registrar.................................60
11.09. Legal Holidays......................................................60
11.10. Successors..........................................................60
11.11. Multiple Originals..................................................60
11.12. Security Agreement..................................................60
11.13. Separability Clause.................................................60
11.14. Governing Law.......................................................60
11.15. Table of Contents; Headings.........................................61
11.16. Limitation on Recourse..............................................61
Exhibit A Form of First Mortgage Bond
Exhibit B Mortgaged Properties
Exhibit C Form of Mortgage
Exhibit D Cash Collateral Agreement
Exhibit E Form of Release Certificate
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<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
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<PAGE>
(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.
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<PAGE>
THIS RESTATED SUPPLEMENTAL INDENTURE, dated effective as of November
21, 1997 (this "INDENTURE"), 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 21, 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 "ORIGINAL INDENTURE"),
between the Partnership and MAALP, as issuer, and the Trustee, as trustee;
WHEREAS, concurrently with the execution and delivery of this
Indenture, the Issuer is entering into the Cash Collateral Agreement (as
hereinafter defined);
WHEREAS, the Partnership 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 Partnership has issued its First Mortgage Bridge Notes
on the terms and subject to the conditions of the Original Indenture;
WHEREAS, concurrently with the execution and delivery of this
Restated Supplemental 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 Original Indenture;
WHEREAS, in connection with the transactions described above, the
parties hereto are hereby restating and supplementing the Original Indenture,
which, as amended, restated and supplement hereby, shall remain in full force
and effect; and
WHEREAS, the text of the First Mortgage Bonds is to be substantially
in the form of Exhibit A hereto:
NOW, THEREFORE, THE ORIGINAL INDENTURE IS HEREBY SUPPLEMENTED AND
RESTATED TO READ IN ITS ENTIRETY AS FOLLOWS AND THIS RESTATED SUPPLEMENTAL
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
<PAGE>
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.
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.
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<PAGE>
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 Partnership 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 November 21, 1997,
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 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.
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<PAGE>
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 Amended and Restated Cash Collateral Account, Security, Pledge and
Assignment Agreement dated effective as of November 21, 1997, attached hereto as
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" means LaSalle
National Bank, as trustee under the Trust Agreement, and its permitted
successors as trustee thereunder.
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 losses on properties, (e)
depreciation and amortization, (f) the effect of any noncash charge resulting
from a change in accounting principles in determining Consolidated Net Income
for such period and (g) amortization of deferred charges.
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.
-4-
<PAGE>
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, Suite 1625, 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.
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).
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<PAGE>
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 or expenses 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 Restated Supplemental
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.
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.
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<PAGE>
INTEREST RATE: The term "Interest Rate" means a rate of [_____]% per
annum.
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 March 1, 2003.
MATURITY INTEREST RATE: The term "Maturity Interest Rate" has the
meaning specified in the form of First Mortgage Bond included as Exhibit A
hereof.
MONTHLY PAYMENT: The term "Monthly Payment" means the monthly
payment of interest at the Interest Rate due and payable on each Payment Date on
the Securities in accordance with their terms.
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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 Partnership, 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 Partnership 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
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.
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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.
ORIGINAL INDENTURE: The term "ORIGINAL INDENTURE" has the meaning
set forth in the first recital hereof.
OUTSTANDING: The term "Outstanding," when used with reference to
Securities or principal amount thereof 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 November 21, 1997, 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.
POST-EFFECTIVE AMENDMENT: The term "Post-Effective Amendment" has
the meaning specified in Section 9.02(iii).
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.
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 prepared by the Issuer which shall be
by and among the Partnership, the Servicer and the Trustee and reasonably
acceptable to the Partnership and the Trustee and shall provide that the
Servicer shall act according to the Servicing Standard and (b) an established
mortgage finance institution, bank or 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 November 21, 1997, between the
Partnership and the Trustee, as the same may be amended from time to time.
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S&P: The term "S&P" means Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc.
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
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.
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TRIGGER NOTICE: The term "Trigger Notice" has the meaning specified
in Paragraph 3(h) of the Cash Collateral Agreement.
TRUST AGREEMENT: The term "Trust Agreement" means that certain
Amended and Restated Agreement of Trust of even date herewith by and between the
Depositor and the Certificate Trustee, as the same may be further amended or
supplemented from time to time.
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.
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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).
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. 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 $142,000,000 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 legends 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.
"EACH TRANSFEREE OF A BENEFICIAL INTEREST IN THIS BOND SHALL BE
DEEMED TO REPRESENT EITHER (A) THAT IT IS NOT, AND IS NOT USING THE ASSETS OF,
AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"), OR (B) THAT IT HAS DETERMINED THAT, ASSUMING THIS BOND IS TREATED AS
INDEBTEDNESS WITH NO SUBSTANTIAL EQUITY FEATURES FOR PURPOSES OF 29 C.F.R. ss.
2510.3-101, THE PURCHASE AND HOLDING OF A BENEFICIAL INTEREST IN THIS BOND BY
THE TRANSFEREE 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 INVESTMENTS BY INSURANCE
COMPANY POOLED SEPARATE ACCOUNTS); OR PTCE 84-14 (RELATING TO TRANSACTIONS
EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET MANAGER")."
The Global Certificates may be deposited with such other Depository
as the Trustee 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,
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Beneficial Owners owning not less than a majority of the aggregate 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 to, and the Security Registrar shall register such
Individual Certificates in the names of, the respective Holders thereof. 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 any of 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.
(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.
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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.
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.
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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.
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
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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.
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
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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.
(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
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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 (or, if a paying
agent has been appointed pursuant to Section 4.11, with such paying agent, and
shall simultaneously give notice of such deposit to 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.
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.
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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 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)
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
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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.
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
(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
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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 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;
(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.
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(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.
(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
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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.
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
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(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.
(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 any or 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.
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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.
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;
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(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;
(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;
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(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;
(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.
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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.
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.
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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
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.
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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
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 7.15, 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
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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.
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
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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.
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 described in clause (1) above 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);
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(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;
(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
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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.
(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;
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(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 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.
(g) The Issuer hereby delivers to the Trustee the following
documents or instruments with respect to the Obligations: (i) a counterpart of
this Indenture; (ii) the Partnership Environmental Indemnity; (iii) the MAALP
Environmental Indemnity; (iv) the Borrower's Certificate; (v) the Manager's
Consent; (vi) the Repairs Agreement; (vii) the O&M Agreement; (viii) a copy of
each Mortgage, stamped as recorded; (ix) the Assignment of Leases and Rents; (x)
the Cash Collateral Agreement; (xi) a copy of each financing statement on Form
UCC-1 filed in respect of the Cash Collateral Agreement, if any, stamped as
filed. The Trustee shall have no responsibility to check any such document or to
determine its validity, except to verify that it has been received and appears
regular on its face.
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.
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(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
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.
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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 TIA ss. 313(c), a brief report dated as of May 15 that complies with TIA
ss. 313(a). The Trustee also shall comply with TIA ss. 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
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.
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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.
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.
The Issuer will provide to the successor Trustee written
confirmation from each of the Rating Agencies that the appointment of such
successor Trustee will not, in and of itself, cause the withdrawal, downgrade or
requalification of the then current rating of the First Mortgage Bonds or (after
the Permitted Merger Date) the unsecured debt of MAALP. 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.
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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 TIA ss.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 TIA ss. 310(b) during the period of time required thereby.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST Issuer. The
Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship
listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be
subject to TIA ss. 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; PROVIDED, HOWEVER, that the appointment of a co-trustee shall not relieve
the Trustee of any of its responsibilities hereunder. 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.
(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,
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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 (i) in respect of the custody of all cash deposited hereunder or
under the Cash Collateral Agreement or the Mortgages, (ii) in respect of
the making or recovery of any Advances hereunder or under the Cash
Collateral Agreement and (iii) to the extent not conferred or imposed upon
such separate or co-trustee pursuant to clause (b)(1) shall, in each case,
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.
(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
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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 Accounts or otherwise from the Issuer
or the Mortgaged Properties. 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
including, without limitation, Advances for any unpaid fees or
unreimbursed expenses of the Trustee or the Certificate Trustee, 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 First Mortgage
Bonds, to the extent that any such payments are then due and owing;
FIFTH: to make payments on the First Mortgage Bonds of interest
at the Maturity Interest Rate, to the extent that any such payments are
then due and owing and have not been paid pursuant to clause THIRD
above; 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.
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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
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.
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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.
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.
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SECTION 8.03. COMPLIANCE WITH TRUST INDENTURE; RATING AGENCY
CONFIRMATION. 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. The
Trustee shall not enter into any amendment of or supplement to this Indenture
(except pursuant to Section 8.01(e)) unless each Rating Agency shall have
confirmed in writing to the Trustee that such amendment or supplement, as the
case may be, will not in and of itself result in the withdrawal, downgrade or
requalification of the then current rating of the Certificates or, after the
Permitted Merger, of the unsecured debt of MAALP.
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
be entitled to receive, and shall be fully protected in relying upon, an
Officers' Certificate and an Opinion of Counsel, at the expense of the Issuer,
stating that such amendment, supplement or waiver is authorized or permitted by
this Indenture.
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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 shall merge with and into MAALP, with MAALP as the surviving
partnership, upon satisfaction of the following conditions:
(i) no Advances shall be outstanding and 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;
(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); and MAALP, the Partnership, the Depositor
and the Trust, as the case may be, shall have filed with the SEC a
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post-effective amendment (the "POST-EFFECTIVE AMENDMENT") to the registration
statement on Form S-3 and Form S-11 under the Securities Act (Registration No.
333-42441) relating to the Bonds as the unsecured obligations of MAALP, and such
registration statement as amended by the Post-Effective Amendment shall have
been declared effective by the SEC;
(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;
(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; and
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(xii) the Partnership and MAALP shall have supplied written notice
of the proposed Permitted Merger, at least 60 days prior to the Permitted Merger
Date, to the Certificate Trustee and each holder of a beneficial interest in the
Certificates, which notice shall be accompanied by the prospectus contained in
the Post-Effective Amendment.
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
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
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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.
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
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for any purpose specified in Section 10.01, by written request setting forth in
reasonable detail the action 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
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.
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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
(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.
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(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
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. 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 TIA ss. 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 TIA
ss. 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.
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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
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.
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(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
that purpose the Outstanding Securities shall be computed as of such record
date; PROVIDED, 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
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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
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.
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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.
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
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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
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.
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IN WITNESS WHEREOF, MID-AMERICA CAPITAL PARTNERS, L.P. has caused
this Restated Supplemental 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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LASALLE NATIONAL BANK, as Trustee
By_____________________________
Name: Russell M. Goldenberg
Title: Senior Vice President
Attest:
____________________________
Name:
Title: Authorized Person
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STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this [__]th day of February 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
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STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this [__]th day of February 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
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STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this [__]th day of February 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
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<PAGE>
EXHIBIT A
to Indenture
FORM OF
FIRST MORTGAGE BOND
A-1
<PAGE>
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.
EACH TRANSFEREE OF A BENEFICIAL INTEREST IN THIS BOND SHALL BE DEEMED TO
REPRESENT EITHER (A) THAT IT IS NOT, AND IS NOT USING THE ASSETS OF, AN EMPLOYEE
BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), OR
(B) THAT IT HAS DETERMINED THAT, ASSUMING THIS BOND IS TREATED AS INDEBTEDNESS
WITH NO SUBSTANTIAL EQUITY FEATURES FOR PURPOSES OF 29 C.F.R. ss. 2510.3-101,
THE PURCHASE AND HOLDING OF A BENEFICIAL INTEREST IN THIS BOND BY THE TRANSFEREE
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 INVESTMENTS BY INSURANCE COMPANY POOLED SEPARATE
ACCOUNTS); OR PTCE 84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED
PROFESSIONAL ASSET MANAGER").
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<PAGE>
[ ]% FIRST MORTGAGE BOND, DUE 2003
New York, New York
$142,000,000.00 February [__], 1998
FOR VALUE RECEIVED, MID-AMERICA CAPITAL PARTNERS, L.P., a Delaware
limited partnership ("ISSUER", which term includes any successor Issuer as
defined in the Indenture hereinafter referred to), promises to pay to CEDE &
CO., or registered assigns ("PAYEE") [ONE HUNDRED FORTY-TWO MILLION] DOLLARS
($[142,000,000]) (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, Due 2003.
"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 February [__], 1998.
"COMMENCEMENT DATE" shall be March 2, 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
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.
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<PAGE>
"MATURITY INTEREST RATE" shall mean the Interest Rate, if the
Permitted Merger shall have occurred, or the Maturity Default Rate, if the
Permitted Merger shall not have occurred.
"MATURITY DATE" shall be March 3, 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 [ONE HUNDRED FORTY-TWO MILLION]
DOLLARS ($[142,000,000]).
"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 March 1,
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 Restated Supplemental Indenture dated effective as
of November 21, 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
all amounts outstanding hereunder have been paid in full, 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:
(i) From and after the Maturity Date, interest
shall accrue at the Maturity Interest Rate 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 as set forth in Section 7.15 of the Indenture.
-3-
<PAGE>
(ii) Prior to the Permitted Merger Date, pursuant to
the Cash Collateral Agreement, the Trustee shall apply all other funds in the
Accounts as set forth in Section 7.15 of the Indenture.
(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, Due 2003, limited in
aggregate principal amount to $142,000,000 and issued under and entitled to the
benefits 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
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.
-4-
<PAGE>
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.
[NO FURTHER TEXT ON THIS PAGE]
-5-
<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
AUTHENTICATION
LASALLE NATIONAL BANK, as Trustee, certifies that this is one of the First
Mortgage Bonds, Due 2003 referred to in the Indenture.
By:______________________________
Authorized Signatory
-6-
<PAGE>
- ------------------------------------------------------------------------------
ASSIGNMENT FORM
To assign this 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)
- ------------------------------------------------------------------------------
-7-
<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, and the registration
statement under the Securities Act (Registration No. 333-42441), as amended by
the Post-Effective Amendment, has been declared effective by the SEC;
(iii) no later than [specify date at least 60 days prior to date of
the Release Certificate], the Partnership and MAALP have supplied written notice
of the proposed Permitted Merger to the Certificate Trustee and each holder of a
beneficial interest in the Certificates, which notice was accompanied by the
prospectus contained in the Post-Effective Amendment;
(iv) 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;
(v) no Default or Event of Default exists under the Indenture;
(vi) 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;
<PAGE>
(vii) 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;
(viii) 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.
[NO FURTHER TEXT ON THIS PAGE]
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<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:
By:
Name:
Title:
MID-AMERICA APARTMENTS, L.P.
By: Mid-America Apartment Communities,
Inc.,
its general partner
By:
Name:
Title:
By:
Name:
Title:
-4-
EXHIBIT 4.5
CWT DRAFT: 2/12/97
==============================================================================
MID-AMERICA FINANCE, INC.
Depositor
and
LASALLE NATIONAL BANK
Trustee
-------------------------------------
AMENDED AND RESTATED AGREEMENT OF TRUST
Dated as of March [__], 1998
-------------------------------------
Commercial Mortgage Pass-Through Certificates, Series 1998-1
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.01 Definitions............................................................1
1.02 Interpretation.........................................................7
ARTICLE II
DECLARATION OF TRUST FUND; ORIGINAL ISSUANCE OF CERTIFICATES
2.01 Creation and Declaration of Trust Fund; Conveyance of Bond.............7
2.02 Acceptance by Trustee..................................................9
2.03 Representations and Warranties of the Depositor........................9
ARTICLE III
PAYMENTS AND STATEMENTS TO CERTIFICATEHOLDERS
3.01 Distributions.........................................................11
3.02 Statements to Certificateholders......................................12
3.03 Reports by the Depositor..............................................12
ARTICLE IV
THE CERTIFICATES
4.01 Designation, Amount and Issue of Certificates.........................12
4.02 Authentication and Delivery of Certificates...........................12
4.03 Form of Certificates and Trustee's Certificate of
Authentication........................................................13
4.04 Denomination and Date of Certificates; Payment of Principal
and Interest; Global Certificates.....................................13
4.05 Execution of Certificates.............................................15
4.06 Exchange and Registration of Transfer of Certificates.................16
4.07 Mutilated, Destroyed, Lost or Stolen Certificates.....................17
4.08 Cancellation of Surrendered Certificates..............................18
4.09 Temporary Certificates................................................18
ARTICLE V
THE DEPOSITOR
5.01 Maintenance of Existence..............................................18
-i-
<PAGE>
5.02 Limitation on Liability of the Depositor..............................18
5.03 Indemnification.......................................................18
ARTICLE VI
TRUSTEE TERMINATION EVENTS
6.01 Trustee Termination Events............................................19
6.02 Limitations on Suits by Certificateholders............................19
6.03 Unconditional Right of Certificateholders to Receive
Distributions and to Institute Certain Suits..........................20
ARTICLE VII
CONCERNING THE TRUSTEE
7.01 Duties of Trustee.....................................................20
7.02 Certain Matters Affecting the Trustee.................................21
7.03 Trustee Not Liable for Certificates or the Bond;
Indemnification.......................................................23
7.04 Trustee May Own Certificates..........................................26
7.05 Trustee's Fees and Expenses...........................................26
7.06 Eligibility Requirements for Trustee..................................26
7.07 Resignation and Removal of Trustee....................................26
7.08 Successor Trustee.....................................................27
7.09 Merger or Consolidation of Trustee....................................28
7.10 Appointment of Co-Trustee or Separate Trustee........................28
7.11 Appointment of Authenticating Agent...................................30
7.12 Limitation on Rights of the Trustee...................................31
ARTICLE VIII
TERMINATION
8.01 Termination...........................................................31
8.0 Termination Upon Permitted Merger.....................................32
8.03 Trusts Irrevocable....................................................33
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.01 Amendment.............................................................33
9.02 Counterparts..........................................................34
9.03 Governing Law.........................................................34
9.04 Notices...............................................................34
9.05 Notices to the Rating Agency..........................................34
9.06 Severability of Provisions............................................34
-ii-
<PAGE>
9.07 Limitation on Rights of Certificateholders............................35
9.08 Certificates Nonassessable and Fully Paid.............................35
9.09 Reproduction of Documents.............................................36
9.10 No Partnership........................................................36
9.11 Actions of Certificateholders.........................................36
9.12 Successors and Assigns................................................36
9.13 Officer's Certificates and Opinions of Counsel; Statements
to be Contained Therein...............................................37
EXHIBITS
Exhibit A Form of Certificates
Exhibit B Depositor's Instruction to Depository
Exhibit C Trustee's Instruction to Depository
-iii-
<PAGE>
THIS AMENDED AND RESTATED AGREEMENT OF TRUST dated as of March [__],
1998 between Mid-America Finance Inc., a Delaware corporation, as depositor (the
"Depositor"), and LaSalle National Bank, a national banking association, as
trustee (the "Trustee").
W I T N E S S E T H:
WHEREAS, the Depositor and the Trustee have entered into that
certain Agreement of Trust dated as of February [__], 1998 (the "Original Trust
Agreement") pursuant to which the Depositor has caused the Mid-America Mortgage
Trust, 1998-1 (the "Trust") to be created; and
WHEREAS, the Depositor, the Trust and Mid-America Capital
Partnership, L.P., a Delaware limited partnership (the "Partnership"), have
filed with the Securities and Exchange Commission a registration statement
(Registration No. 333-42441) for the registration of the Commercial Mortgage
Pass-through Certificates, Series 1998-1 (the "Certificates") of the Trust and
the [___]% First Mortgage Bonds, Due 2003 (the "Bonds") of the Partnership; and
WHEREAS, the Depositor wishes to cause the issuance of the
Certificates; and
WHEREAS, the Trustee and the Depositor desire to amend and restate
the Original Trust Agreement to provide for the issuance of the Certificates.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree that the Original Trust Agreement is hereby amended and restated to
read in its entirety as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 DEFINITIONS.
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings and
such meanings shall be equally applicable to the singular and plural forms of
such terms, as the context may require. Capitalized terms used but not defined
herein shall have the meanings assigned such terms in the Indenture.
ACCOUNTS: The "Accounts" established pursuant to, and defined
in, the Cash Collateral Agreement.
ACTUAL KNOWLEDGE: When used with respect to a corporation shall mean
actual knowledge of a Responsible Officer thereof; when used with respect to
actual knowledge of a bank or trust company shall mean actual knowledge of a
<PAGE>
Responsible Officer in the corporate trust office thereof; when used with
respect to actual knowledge of a partnership shall mean actual knowledge of its
general partner, if an individual or as aforesaid if its general partner is a
corporation.
ADVANCE: As defined in the Indenture.
AFFILIATE: With respect to any specified Person, any other Person,
directly or indirectly, controlling or controlled by or under common control
with such specified Person. For the purposes of this definition, "control" when
used with respect to any specified Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract, relation to individuals or
otherwise, and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
AGREEMENT: This Agreement of Trust and all amendments and
supplements hereto.
AUTHENTICATING AGENT: Any authenticating agent appointed pursuant to
SECTION 7.11 of this Agreement.
AUTHORIZED OFFICER: Any representative of the Depositor authorized
to execute and who executes the Certificates manually or by facsimile signature
on behalf of the Depositor.
BENEFICIAL OWNER: With respect to a Global Certificate, the Person
who is the beneficial owner of such Certificate as reflected on 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 Agreement, that such
Person provide evidence at its expense to the Trustee of its status as a
Beneficial Owner hereunder.
BOND: Collectively, the [_]% First Mortgage Bonds, Due 2003 of
Mid-America Capital Partners, L.P. (or any successor Issuer under the
Indenture), in an aggregate principal amount of $142,000,000, being all of the
securities outstanding under the Indenture.
BOND DISTRIBUTION DATE: As defined in SECTION 8.02(B).
BOND MATURITY DATE: March 1, 2003.
BORROWER: Mid-America Capital Partners, L.P.
BUSINESS DAY: Any day other than (i) a Saturday or a Sunday, or (ii)
a day on which federally insured depository institutions in the states of New
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<PAGE>
York, Illinois or Tennessee or any other state in which the Corporate Trust
Office is located are authorized or obligated by law, governmental decree or
executive order to be closed.
CASH COLLATERAL AGREEMENT: That certain Amended and Restated Cash
Collateral Account Security, Pledge and Assignment Agreement, dated effective as
of November 21, 1997, among the Issuer, First Union National Bank, Morgan
Stanley Mortgage Capital Inc. and the Indenture Trustee, as the same may be
amended from time to time.
CERTIFICATE CO-REGISTRAR: Any co-registrar appointed pursuant to
SECTION 4.06 of this Agreement.
CERTIFICATE REGISTER: The register maintained pursuant to SECTION
4.06 of this Agreement.
CERTIFICATE REGISTRAR: The registrar designated in SECTION 4.06 of
this Agreement.
CERTIFICATEHOLDER: The person in whose name a Certificate is
registered in the Certificate Register.
CERTIFICATES: The Commercial Mortgage Pass-Through Certificates,
Series 1998-1 issuable hereunder.
CLOSING DATE: March [__], 1998.
CODE: The Internal Revenue Code of 1986, as amended, any successor
statutes thereto, and applicable U.S. Department of the Treasury regulations
issued pursuant thereto in proposed, temporary or final form.
CORPORATE TRUST OFFICE: The principal office of the Trustee at which
at any particular time its corporate trust business shall be principally
administered, which office at the date of the execution of this Agreement is
located at 135 South LaSalle Street, Chicago, Illinois 60674-4107, Attention:
Asset-Backed Securities Trust Service Group--Mid-America 1998-1.
DEPOSITOR: Mid-America Finance, Inc., a Delaware corporation.
DEPOSITOR ORDER AND DEPOSITOR REQUEST: Respectively, a written order
or request signed in the name of the Depositor 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 Depositor, and delivered to the
Trustee.
DEPOSITOR'S INSTRUCTION TO DEPOSITORY: Written instructions of the
Depositor to the Depository, substantially in the form of Exhibit B hereto,
instructing the Depositor to register the beneficial ownership of the Bond in
the name of the Trustee.
DEPOSITORY PARTICIPANT: A Person for whom, from time to time, the
Depository effects book-entry transfers and pledges of securities deposited with
the Depository.
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<PAGE>
DEPOSITORY: The Depository Trust Company or a successor appointed by
the Registrar (which appointment shall be at the direction of the Depositor if
the Depositor is legally able to do so).
DISTRIBUTION DATE: The first Business Day of each calendar month,
beginning on April 1, 1998.
DUE DATE: With respect to any Distribution Date, the date on which a
Monthly Payment is due on the Bond and which occurs on or next preceding such
Distribution Date.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.
FINAL CERTIFICATE DISTRIBUTION DATE: The first Business Day of March
2003.
FINAL DISTRIBUTION DATE: The Distribution Date on which the final
distribution in respect of the Certificates will be made pursuant to SECTION
8.01.
FORECLOSED PROPERTY: The Property if acquired by the Indenture
Trustee or by any nominee of the Indenture Trustee by foreclosure or acceptance
of a deed in lieu of foreclosure or otherwise.
FORECLOSURE PROCEEDS: Proceeds received by the Indenture Trustee in
respect of the Foreclosed Property (including, without limitation, proceeds from
the rental or operation of such Foreclosed Property) prior to the final
liquidation of the Foreclosed Property.
GAAP: Generally accepted accounting principles as in effect in the
United States from time to time, consistently applied.
GLOBAL CERTIFICATES: Certificates in global form deposited with the
Depository.
HOLDER: A Certificateholder.
INDEBTEDNESS: All principal of and interest on the Bond and any and
all other Obligations (as defined in the Indenture) of the Issuer under the Bond
or the Indenture.
INDENTURE: That certain Restated Supplemental Indenture dated
effective as of November 21, 1998 between Mid-America Capital Partners, L.P. and
Mid-America Apartments, L.P., as issuer, and LaSalle National Bank, as trustee
thereunder, as the same may be from time to time further amended or supplemented
in accordance with its terms.
INDENTURE EVENT OF DEFAULT: An "Event of Default" as defined in the
Indenture.
INDENTURE TRUSTEE: LaSalle National Bank, a national banking
association, as trustee under the Indenture, and its permitted successor and
assigns.
-4-
<PAGE>
INDIVIDUAL CERTIFICATE: A definitive certificate in fully registered
form without coupons, representing a Certificate, which is not a Global
Certificate.
INTEREST ACCRUAL PERIOD: With respect to a Distribution Date the
one-month period commencing on and including the prior Distribution Date (or in
the case of the first Distribution Date, the Closing Date) and ending on and
including the day next preceding such Distribution Date.
ISSUE DATE: The date of original issuance of the Certificates.
ISSUER: The Borrower and Mid-America Apartments, L.P., as "Issuer"
under and as defined in the Indenture.
LIEN: Any mortgage, deed of trust, lien, pledge, hypothecation,
assignment, security interest, or any other encumbrance, charge or transfer of,
in or upon the Property or any portion thereof or the Borrower, or any interest
therein, including, without limitation, any conditional sale or other title
retention agreement, any financial lease having substantially the same economic
effect as any of the foregoing, the filing of any financing statement, and
mechanic's, materialmen's and other similar liens and encumbrances.
LIQUIDATION PROCEEDS: Cash received by the Indenture Trustee in
connection with the final liquidation of the Property, whether through judicial
foreclosure, sale or otherwise, to the extent such cash is not Foreclosure
Proceeds and other than amounts required to be paid to the Borrower pursuant to
law or the terms of the related Mortgage.
MATURITY INTEREST RATE: As defined in the Indenture.
MONTHLY PAYMENT: With respect to any Distribution Date, the
scheduled monthly payment of interest due on the related Due Date in accordance
with the terms of the Bond.
MOODY'S: 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, as amended
or supplemented from time to time as permitted hereby or thereby.
OFFICER'S CERTIFICATE: A certificate signed by a Responsible Officer
of the Depositor and delivered to the Trustee.
OPINION OF COUNSEL: A written opinion of counsel acceptable to the
Trustee, each Rating Agency and any other party hereto to whom such opinion is
to be delivered pursuant to the applicable terms of this Agreement, who may be
counsel for the Trustee of the Depositor.
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PERCENTAGE INTEREST: As to any Individual Certificate, the
percentage interest derived as of a date of determination by dividing the
outstanding principal amount of such Individual Certificate by the aggregate
outstanding principal amount of all the Certificates as of such date of
determination.
PERMITTED MERGER DATE: As defined in the Indenture.
PERSON: Any individual, corporation, partnership, limited liability
company, joint venture, association, bank, joint-stock company, trust,
unincorporated organization or government, or any agency or political
subdivision thereof.
PROPERTY: The "Mortgaged Properties," as defined in the Indenture.
RATING AGENCIES: Moody's and S&P.
RECORD DATE: As defined in Section 4.04(c).
REGISTRATION STATEMENT: The registration statement (Registration No.
333-42441) on Form S-11 under the Securities Act relating to the Certificates.
RESPONSIBLE OFFICER: When used with respect to the initial Trustee,
any officer in its Asset Backed Securities Trust Service Group with particular
responsibility for the matters evidenced by this Agreement and with respect to
any successor Trustee, any officer in its Corporate Trust Department or any
similar group administering the trusts hereunder and also, with respect to a
particular matter, any other officer to whom such matter is referred because of
such officer's knowledge of and familiarity with the particular subject.
Responsible Officer shall mean, with respect to any other corporation, the
chairman of the board, the president, any vice president or the treasurer.
S&P: Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.
SECURITIES ACT: The Securities Act of 1933, as amended, and the
rules and regulations thereunder.
SECURITY DOCUMENTS: As defined in the Indenture.
TRUST: Mid-America Mortgage Trust, 1998-1, the trust formed pursuant
to this Agreement.
TRUST FUND: The corpus of the trust created by this Agreement,
consisting of the assets referred to in the first paragraph of SECTION 2.01(A)
of this Agreement.
TRUSTEE: LaSalle National Bank, a national banking association, as
trustee hereunder, and its permitted successors and assigns.
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TRUSTEE FEE: The fee of the Trustee hereunder payable in the amounts
and in the manner separately agreed between the Trustee and the Depositor.
TRUSTEE TERMINATION EVENT: As defined in SECTION 6.01(A) of this
Agreement.
TRUSTEE'S INSTRUCTION TO DEPOSITORY: As defined in Section 8.02(c)
of this Agreement.
UNDERWRITER: Morgan Stanley & Co. Incorporated.
UNSCHEDULED PAYMENTS: All amounts received by the Trustee on the
Bond (i) during the continuation of an Indenture Event of Default or (ii) in
respect of Foreclosure Proceeds.
SECTION 1.02 INTERPRETATION.
(a) Whenever this Agreement refers to a Distribution Date and a
"related" Interest Accrual Period or Due Date, such reference shall be to the
Interest Accrual Period or Due Date, as applicable, immediately preceding such
Distribution Date.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in SECTION
1.01 shall have the respective meanings given to them under GAAP.
(c) Unless otherwise specified in this Agreement, references to
"Article" or "Section" followed by a number shall be references to articles and
sections of this Agreement.
(d) The words "hereof," "herein," and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section and
Exhibit references contained in this Agreement are references to Sections and
Exhibits in or to this Agreement unless otherwise specified.
ARTICLE II
DECLARATION OF TRUST FUND;
ORIGINAL ISSUANCE OF CERTIFICATES
SECTION 2.01 CREATION AND DECLARATION OF TRUST FUND; CONVEYANCE OF
BOND.
(a) The Depositor hereby establishes the Trust, which shall be known
as Mid-America Mortgage Trust, 1998-1, and hereby irrevocably sells, transfers,
assigns, delivers, sets over and otherwise conveys or causes to be conveyed to
the Trustee for the benefit of Certificateholders, without recourse, all of the
Depositor's right, title and interest, whether now owned or hereafter acquired,
now existing or hereafter arising, wherever located, in and to (i) the Bond, the
Indenture and the Mortgages and all amounts due or to become due on or after the
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Closing Date pursuant to the Bond, the Indenture and the Mortgages (including,
without limitation, interest, premium (if any) and principal), (ii) all property
that secures the Bond and has been or will be acquired by foreclosure,
deed-in-lieu of foreclosure or otherwise, (iii) the Cash Collateral Agreement
and all Accounts and other accounts and funds established by the Indenture
Trustee or the Borrower pursuant to the Cash Collateral Agreement or otherwise,
and all amounts and investments from time to time deposited and held therein or
credited thereto pursuant to the applicable provisions of this Agreement, the
Indenture or the Cash Collateral Agreement, (iv) the Security Documents, (v) any
insurance policies obtained with respect to the Mortgaged Properties, and (vi)
all proceeds of the conversion, voluntary or involuntary, of any of the
foregoing into cash, instruments, securities or other property, including
without limitation all amounts from time to time held in or credited to the
Accounts, whether in the form of cash or invested in instruments, securities or
other property, to have and to hold, in trust, and, concurrently with such
transfer and assignment, the Depositor has executed and the Trustee has caused
to be authenticated and delivered to and upon the order of the Depositor, in
exchange for the Trust Fund, Certificates in the authorized denominations
evidencing the entire ownership of the Trust Fund.
In connection with such transfer and assignment, the Depositor has
concurrently executed and delivered the Depositor's Instruction to Depository.
The ownership of the Trust Fund is vested in the Trustee for the
benefit of the Certificateholders.
(b) It is the express intent of the Depositor that the conveyance by
the Depositor to the Trustee of the Trust Fund as provided for in this Section
be, and be construed as, a sale by the Depositor to the Trustee for the benefit
of the Certificateholders. Further, it is not intended that such conveyance be
deemed to be a pledge of the Trust Fund by the Depositor to the Trustee to
secure a debt or other obligation of the Depositor. However, in the event that
the Trust Fund is held to be property of the Depositor, or if for any reason
this Agreement is held or deemed to create a security interest, then the
Depositor hereby grants to the Trustee for the benefit of the Certificateholders
a security interest in all its right, title and interest in and to the Trust
Fund and (i) this Agreement shall be a security agreement within the meaning of
Articles 8 and 9 of the New York, Delaware and Tennessee Uniform Commercial
Codes and the Uniform Commercial Code of any other applicable jurisdiction to
secure the Certificates (and the amounts to which the Trustee is entitled under
this Agreement); (ii) each of the conveyances provided for in this Section are
hereby a grant by the Depositor to the Trustee for the benefit of the
Certificateholders of a security interest in all of the Depositor's right, title
and interest, whether now owned or hereafter arising wherever located, in and to
the Trust Fund; (iii) the possession by the Trustee, or any agent of the
Trustee, of the Bond or such other items of the Trust Fund which constitute
instruments, money, negotiable documents or chattel paper is "possession by the
secured party", or possession by a purchaser or a person designated by such
secured party, for purposes of perfecting the security interest pursuant to the
Uniform Commercial Code (including, without limitation, Sections 9-305, 8-313 or
8-321 thereof); and (iv) notifications to persons holding such property, and
acknowledgments, receipts or confirmations from persons holding such property,
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shall be deemed notifications to, or acknowledgments, receipts or confirmations
from, financial intermediaries, bailees or agents (as applicable) of the Trustee
for the purpose of perfecting such security interest under applicable law. Each
of the Depositor and the Trustee shall, to the extent consistent with this
Agreement and within its power, take such actions as may be necessary to ensure
that, if this Agreement were deemed to create a security interest in the Bond
and/or the Trust Fund, such security interest would be deemed to be a perfected
security interest of first priority under applicable law (provided, HOWEVER,
that nothing in this sentence shall impose an affirmative obligation on the
Trustee to undertake or to determine that there should be taken any actions
except for those expressly set forth elsewhere in this Agreement, or as
otherwise expressly directed by the Depositor pursuant to this Agreement). The
Depositor shall prepare and file any UCC financing statements or any UCC
continuation statements necessary to perfect or continue the security interests
caused to be created by the Depositor on or before the Closing Date, and shall
take such other steps as are reasonably requested by the Trustee to continue
such UCC security interests as aforesaid.
If the conveyance referred to in the first sentence of the preceding
paragraph is deemed to be a loan and the trust created by this Agreement
terminates prior to the satisfaction of the claims of any Person holding any
Certificates, the security interest created hereby shall continue in full force
and effect and the Trustee shall be deemed to be the custodian for the benefit
of such Person (and in such capacity shall be entitled to all of the protections
and benefits of ARTICLE VII hereof, and all proceeds shall be distributed as
herein provided.
SECTION 2.02 ACCEPTANCE BY TRUSTEE.
(a) The Trustee hereby acknowledges receipt of the entire beneficial
interest in the Bond and the other assets comprising the Trust Fund and declares
that the Trustee holds and will hold such assets delivered to the Trustee in
trust, and subject to the provisions herein set forth, for the use and benefit
of all present and future Certificateholders and the Trustee. The Trustee has no
Actual Knowledge on the Closing Date of any adverse claims, liens, or
encumbrances (other than the liens or encumbrances created or contemplated by
this Agreement or the Security Documents) on any of the assets delivered to it
on the Closing Date and part of the Trust Fund.
(b) The Trustee shall also notify the Depositor if a Responsible
Officer of the Trustee receives notice or obtains Actual Knowledge (i) of any
adverse claim, lien or encumbrance upon or against the Bond, the Indenture or
any Mortgage by or in favor of any Person other than the Trustee or the
Indenture Trustee, (ii) that the Bond is overdue or has been dishonored and
(iii) of any defense against the Bond, the Indenture or any other Indebtedness.
SECTION 2.03 REPRESENTATIONS AND WARRANTIES OF THE Depositor. The
Depositor hereby represents and warrants to the Trustee for the benefit of the
Certificateholders that:
(i) the Depositor is a special purpose corporation, duly
organized, validly existing and in good standing under the laws of the
State of Delaware, with full power and authority to own its property, to
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carry on its business as presently conducted, to enter into and perform
its obligations under this Agreement, and to create the trust pursuant
hereto;
(ii) the execution, delivery and performance of this Agreement
by the Depositor have been duly authorized by all necessary action on the
part of the Depositor; neither the execution, delivery and performance of
this Agreement, nor the consummation of the transactions herein
contemplated, nor the compliance with the provisions hereof, will conflict
with or result in a breach of, or constitute a default under (A) any or
the provisions of any law, governmental rule, regulation, judgment, decree
or order binding on the Depositor or its properties; (B) the certificate
of incorporation or bylaws of the Depositor; or (C) the terms of any
indenture or other agreement or instrument to which the Depositor is a
party or by which it is bound; neither the Depositor nor any of its
Affiliates is a party to, bound by, or in breach of or in violation of any
indenture or other agreement or instrument, or subject to or in violation
of any statute, order or regulation of any court, regulatory body,
administrative agency or governmental body having jurisdiction over it,
which materially and adversely affects or to the best knowledge of the
Depositor may in the future materially and adversely affect (X) the
ability of the Depositor to perform its obligations under this Agreement
or (Y) the business, operations, financial condition, properties or assets
of the Depositor;
(iii) the execution, delivery and performance by the Depositor
of this Agreement and the consummation of the transactions contemplated
hereby do not require the consent or approval of, the giving of notice to,
the registration with, or the taking of any other action in respect of,
any state, federal or other governmental authority or agency, except such
as has been obtained, given, effected or taken prior to the date hereof;
(iv) this Agreement has been duly executed and delivered by the
Depositor and, assuming due authorization, execution and delivery by the
other parties hereto, constitutes a valid and binding obligation of the
Depositor enforceable against it in accordance with its terms, except as
such enforcement may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium or other similar laws relating to or affecting
the rights of creditors generally, and by general equity principles
(regardless of whether such enforcement is considered in a proceeding in
equity or at law);
(v) there are no actions, suits or proceedings pending or, to
the best of the Depositor's knowledge, threatened or likely to be asserted
against or affecting the Depositor, before or by any court, administrative
agency, arbitrator or governmental body (A) with respect to any of the
transactions contemplated by this Agreement or (B) with respect to any
other matter which in the judgment of the Depositor may be determined
adversely to the Depositor and will, if determined adversely to the
Depositor, materially and adversely affect it or its business, assets,
operations or condition, financial or otherwise, or materially and
adversely affect its ability to perform its obligations under this
Agreement;
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(vi) the Depositor is not in default with respect to any order
or decree of any court or any order, regulation or demand of any federal,
state, municipal or governmental agency, which default might have
consequences that would materially and adversely affect the condition
(financial or otherwise) or operations of the Depositor or its properties
or might have consequences that would materially and adversely affect its
performance hereunder; and
(vii) other than the actions taken pursuant to this Agreement,
the Depositor has taken no action to impair or encumber the title to the
Bond or to subject it to any offsets, defenses or counterclaims during the
Depositor's ownership thereof.
The representations and warranties of the Depositor set forth in
this SECTION 2.03 shall be continuing and shall survive the transfer and
assignment of the Bond and the Trust Fund to the Trustee.
ARTICLE III
PAYMENTS AND STATEMENTS TO CERTIFICATEHOLDERS
SECTION 3.01 DISTRIBUTIONS.
(a) Except as otherwise provided in SECTIONS 3.01(B) and 3.01(c),
the Trustee shall make distributions to the Certificateholders on each
Distribution Date of all amounts received by the Trustee from the Issuer or the
Indenture Trustee or otherwise in respect of Monthly Payments or Interest
Advances thereon.
(b) Except as otherwise provided in SECTION 3.01(C), on any
Distribution Date following any Unscheduled Payment made within the Interest
Accrual Period preceding such Distribution Date, the Trustee shall make
distributions to the Certificateholders on each such Distribution Date of all
amounts received by the Trustee from the Issuer or the Indenture Trustee or
otherwise in respect of such Unscheduled Payment.
(c) On the Final Certificate Distribution Date or any Distribution
Date on or following the Bond Maturity Date, the Trustee shall make distribution
to the Certificateholders on each such Distribution Date of all amounts received
by the Trustee from the Issuer or the Indenture Trustee or otherwise in respect
of principal on the Bond.
(d) Distributions on the Certificates shall be made PRO RATA among
all Holders of Certificates based on each such Holder's Percentage Interest.
(e) Distributions on each Distribution Date shall be made to each
Certificateholder of record on the related Record Date (other than as provided
in ARTICLE VIII respecting the final distribution), by check mailed to such
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Certificateholder at the address appearing in the Certificate Register, or upon
written request by a Certificateholder delivered at least five Business Days
prior to the related Record Date (in each case with appropriate wiring
instructions accompanying such request) or, if the Certificates are held by the
Depository as described in SECTION 4.04, as instructed by the Depository, by
wire transfer in immediately available funds to a bank account maintained in the
United States, or by such other means of payment as the Depository and the
Trustee or the Paying Agent shall agree upon.
SECTION 3.02 STATEMENTS TO CERTIFICATEHOLDERS. The Trustee shall
prepare, or cause to be prepared, and mail not later than each Distribution Date
to the Depositor, the Underwriter, each Rating Agency and each Certificateholder
a statement in respect of such Distribution Date setting forth the amount of the
distribution allocable to interest on the Bond (separately identifying interest
paid at the Maturity Interest Rate) and the amount of the distribution allocable
to principal on the Bond (separately identifying amounts allocable to
Unscheduled Payments).
Within 30 days following the end of each calendar year, the Trustee
shall prepare, or cause to be prepared, and mail to each Person who at any time
during the calendar year was a Certificateholder (i) a statement of the amount
of distribution allocable to interest on the Bond and the amount of distribution
allocable to principal on the Bond for such calendar year or applicable portion
thereof during which such person was a Certificateholder, and (ii) such other
customary information which is in the possession of the Trustee and the Trustee
deems, and which any Certificateholder requests from the Trustee as, necessary
or desirable for Certificateholders to prepare their federal, state and local
tax returns. Such obligation of the Trustee shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
provided by the Trustee pursuant to any requirements of the Code.
SECTION 3.03 REPORTS BY THE DEPOSITOR. The Depositor covenants to
furnish to the Trustee, on or before April 30 of each calendar year commencing
1999, a certificate from a Responsible Officer of the Depositor as to his or her
knowledge of the Depositor's compliance with all conditions and covenants under
this Agreement. For purposes of this SECTION 3.03 such compliance shall be
determined without regard to any period of grace or requirement of notice
provided under this Agreement.
ARTICLE IV
THE CERTIFICATES
SECTION 4.01 DESIGNATION, AMOUNT AND ISSUE OF CERTIFICATES. The
Certificates shall be designated as the "Commercial Mortgage Pass-Through
Certificates, Series 1998-1" of the Trust. The Certificates shall be limited to
$142,000,000 in aggregate principal amount, except as provided in Section 4.07.
SECTION 4.02 AUTHENTICATION AND DELIVERY OF CERTIFICATES. Upon the
execution and delivery of this Agreement, and from time to time thereafter, the
Certificates shall be executed by the Depositor and such Certificates shall
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thereupon be delivered to the Trustee for authentication, and the Trustee shall
thereupon authenticate and deliver said Certificates upon a Depositor Order.
SECTION 4.03 FORM OF CERTIFICATES AND TRUSTEE'S CERTIFICATE OF
AUTHENTICATION. The Certificates and the Trustee's certificate of authentication
to be borne by the Certificates shall be substantially of the tenor and purport
as in Exhibit A to this Agreement 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 Depositor may deem appropriate and as
are not inconsistent with the provisions of this Agreement, 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
Certificates may be listed, or to conform to usage.
SECTION 4.04 DENOMINATION AND DATE OF CERTIFICATES; PAYMENT OF
PRINCIPAL AND INTEREST; GLOBAL CERTIFICATES. (a) The Certificates shall be
issuable in registered form.
(b) The Certificates shall be issuable in denominations of $100,000
and such greater denominations as are whole multiples of $1,000. Each
Certificate shall be dated the Issue Date and shall be entitled to distributions
in respect of payments on the Bond from and after the most recent Due Date on
which payment has been made or, if no payment has been made, from and after the
Issue Date.
(c) The Person in whose name any Certificate is registered at 5:00
p.m. New York City time on the Business Day preceding any Distribution Date for
such Certificate (the "RECORD DATE") shall be entitled to receive the
distribution payable on such Distribution Date.
(d) The final distribution on the Certificates shall be payable upon
surrender of the Certificates at the office or agency of the Trustee designated
for that purpose, as provided in SECTION 8.01.
(e) The Certificates 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
Agreement as any Individual Certificates authenticated and delivered hereunder.
(f) The Depositor, 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 Certificateholders
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
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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 Certificate Registrar may establish a reasonable record date
in connection with solicitations of consents from or voting by
Certificateholders and give notice to the Depository of such record date.
Without the written consent of the Depositor and the Certificate 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.
(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 legends substantially to the following effect:
"Unless this certificate 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 certificate 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.
"EACH TRANSFEREE OF A BENEFICIAL INTEREST IN THIS CERTIFICATE SHALL
BE DEEMED TO REPRESENT EITHER (A) THAT IT IS NOT, AND IS NOT USING THE ASSETS
OF, AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME CERTIFICATE ACT OF 1974, AS AMENDED
("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"), OR (B) THAT IT HAS DETERMINED THAT, ASSUMING THIS CERTIFICATE IS
TREATED AS INDEBTEDNESS WITH NO SUBSTANTIAL EQUITY FEATURES FOR PURPOSES OF 29
C.F.R. ss. 2510.3-101, THE PURCHASE AND HOLDING OF A BENEFICIAL INTEREST IN THIS
CERTIFICATE BY THE TRANSFEREE 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
INVESTMENTS BY INSURANCE COMPANY POOLED SEPARATE ACCOUNTS); OR PTCE 84-14
(RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER")."
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The Global Certificates may be deposited with such other Depository
as the Trustee may from time to time designate, and shall bear such legend as
may be appropriate.
If (i) the Depository advises the Depositor and the Trustee in
writing that the Depository is no longer willing, qualified or able properly to
discharge its responsibilities as Depository, and the Depositor is unable to
locate a qualified successor or (ii) after the occurrence of an Event of Default
under the Indenture, Beneficial Owners owning not less than a majority in
outstanding principal amount of the Global Certificates 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 Certificate Registrar nor the Depositor
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 Certificate Registrar
and the Depositor shall recognize the Holders of Individual Certificates as
Certificateholders 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
Certificateholders under the Certificates, 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 Certificates, the Trustee or any of
its agents may in its sole discretion determine that the Certificates
represented by the Global Certificates shall no longer be represented by such
Global Certificates. In such event, the Depositor shall execute and the Trustee
shall authenticate and deliver, in exchange for such Global Certificates,
Individual Certificates in an aggregate denomination equal to the aggregate
denomination of such Global Certificates.
SECTION 4.05 EXECUTION OF CERTIFICATES. Each Certificate shall be
signed in the name and on behalf of the Depositor manually or by facsimile
signature of the President or any Vice President thereof attested by the manual
or facsimile signature of the Secretary or an Assistant Secretary thereof, prior
to the authentication of the Certificate, and the delivery of such Certificate
by the Trustee upon an Depositor Order, after the authentication thereof
hereunder, shall constitute due delivery of such Certificate on behalf of the
Depositor. In case any officer of the Depositor who shall have signed, or whose
facsimile signature appears on any of the Certificates, shall cease to be such
officer before the Certificates shall have been authenticated and delivered by
the Trustee or disposed of, such Certificate nevertheless may be authenticated
and delivered or disposed of as though the Person who signed such Certificate
had not ceased to be such officer. Any Certificate may be signed on behalf of
the Depositor by such officer as at the actual date of the execution of such
Certificate shall be the proper officer of the Depositor, although at the date
of the execution of this Agreement any such Person was not such an officer.
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Only such Certificates 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 Agreement or be valid or obligatory for any purpose. Such
certificate by the Trustee upon any Certificate executed by the Depositor shall
be conclusive evidence that the Certificate so authenticated has been duly
authenticated and delivered hereunder and that the Holder is entitled to the
benefits of this Agreement.
SECTION 4.06 EXCHANGE AND REGISTRATION OF TRANSFER OF CERTIFICATES.
The Trustee shall keep, at the office or agency to be maintained by the Trustee
for such purpose (the "CERTIFICATE REGISTRAR") at the Corporate Trust Office, a
register (the "CERTIFICATE REGISTER") in which, subject to such reasonable
regulations as it may prescribe, the Trustee shall provide for the registration
of the Certificates and the registration of transfers of such Certificates as in
this ARTICLE IV provided; PROVIDED, HOWEVER, in no event shall the Certificate
Registrar be required to maintain in the Certificate Register the names of the
individual participants holding beneficial interests in the Certificates through
the Depository. Upon written notice to any acting Certificate Registrar, the
Trustee may appoint a successor Certificate Registrar for such purposes. The
Trustee may appoint one or more co-registrars (each, a "CERTIFICATE
CO-REGISTRAR") for such purposes. At all reasonable times, any Certificate
Register shall be open for inspection by the Trustee. Upon due presentment for
registration of transfer of any Certificate at the office or agency of any
Certificate Registrar or any Certificate Co-Registrar, the Depositor shall
execute, and the Trustee shall authenticate and deliver, in the name of the
transferee or transferees, one or more new Certificates of like tenor of any
authorized denominations for an aggregate principal amount equal to the then
current principal balance of the Certificate presented for registration of
transfer.
All Certificates presented for registration of transfer or for
exchange or payment, as the case may be, shall (if so required by the Depositor
or the Trustee or the Certificate Registrar or any Certificate 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 Certificates (except the costs of mailing), but the Trustee 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 Certificate Registrar or Certificate
Co-Registrar of a Certificate in exchange for a Certificate surrendered to it in
accordance with the provisions of this Agreement, the Certificate so delivered
shall, for all purposes of this Agreement, be deemed to be fully registered in
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the Certificate Register; PROVIDED, HOWEVER, that in making any determination as
to the identity of Persons who are Holders of Certificates, the Trustee shall be
fully protected in relying on the Certificate Register.
All Certificates issued pursuant to this SECTION 4.06 in exchange
for or upon registration of transfer of Certificates shall be the valid
obligations of the Trust, evidencing the same rights, and entitled to the same
benefits and subject to the same conditions under this Agreement, as the
Certificates surrendered for such exchange or registration of transfer.
SECTION 4.07 MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. In
case any Certificate shall become mutilated, destroyed, lost or stolen, the
Depositor shall execute, and the Trustee shall authenticate and deliver, a new
Certificate or Certificates 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 Certificate so
mutilated, destroyed, lost or stolen. In every such case, the applicant for a
substitute Certificate shall, at the expense of the applicant, furnish to the
Depositor, the Trustee, the Certificate Registrar and any Certificate
Co-Registrar such certificate 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 Depositor, the Trustee, the Certificate Registrar
and any Certificate Co-Registrar evidence to their satisfaction of the
destruction, loss or theft of such Certificate and of the ownership thereof. In
every case of mutilation, the applicant shall surrender to the Trustee the
Certificate so mutilated. The Trustee shall authenticate any such substitute
Certificate and deliver the same. Upon the issuance of any substitute
Certificate, the Trustee 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
Depositor, such applicant shall furnish an indemnity bond sufficient in the
judgment of the Depositor and the Trustee to protect the Depositor, the Trustee,
any paying agent, the Certificate Registrar and any Certificate Co-Registrar
from any loss which any of them may suffer if a Certificate is replaced. In case
any Certificate shall have become mutilated, destroyed, lost or stolen, at
maturity thereof the Trustee may pay or authorize the payment of the same
instead of issuing a substitute Certificate as permitted by this SECTION 4.07.
Every substitute Certificate issued pursuant to the provisions of
this SECTION 4.07 by virtue of the fact that any Certificate is destroyed, lost
or stolen shall constitute an additional contractual obligation of the Issuer,
whether or not the destroyed, lost or stolen Certificate 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 Agreement equally and proportionately, with any
and all other Certificates duly issued and outstanding hereunder. All
Certificates 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 Certificates
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 Certificates without
their surrender.
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SECTION 4.08 CANCELLATION OF SURRENDERED CERTIFICATES. All
Certificates 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 Certificates shall be
issued in lieu thereof, except as otherwise provided in this Agreement. The
Trustee shall destroy all canceled Certificates held by it and shall deliver to
the Depositor a certificate in respect of such destruction. If the Depositor
shall acquire any of the Certificates, however, such acquisition shall not
operate as a satisfaction of the obligations represented by such Certificates
unless and until the same are delivered to the Trustee for cancellation. Any
Certificates acquired by the Depositor and delivered to the Trustee shall be
canceled by the Trustee upon receipt of written instructions from the Depositor.
SECTION 4.09 TEMPORARY CERTIFICATES. Until definitive Certificates
are ready for delivery, the Depositor may prepare and the Trustee shall
authenticate temporary Certificates. Temporary Certificates shall be
substantially in the form of definitive Certificates, but may have variations
that the Depositor considers appropriate for temporary Certificates. Without
unreasonable delay, the Depositor shall prepare and the Trustee shall
authenticate definitive Certificates and deliver them in exchange for temporary
Certificates.
ARTICLE V
THE DEPOSITOR
SECTION 5.01 MAINTENANCE OF EXISTENCE. The Depositor shall keep in
full effect its existence and rights and good standing as a corporation under
the laws of the State of Delaware and shall be in compliance with the laws of
each applicable jurisdiction to the extent necessary to perform its duties under
this Agreement. The Depositor shall not consolidate with, or sell, lease or
convey all or substantially all of its assets to, or merge with or into any
other corporation or partnership or any other Person so long as any Certificate
is outstanding.
SECTION 5.02 LIMITATION ON LIABILITY OF THE DEPOSITOR. Neither the
Depositor nor any of its respective directors, officers, employees, Affiliates
or agents shall be under any liability to the Trust Fund or the
Certificateholders for any action taken or for refraining from the taking of any
action in good faith pursuant to this Agreement, or for errors in judgment;
PROVIDED, HOWEVER, that this provision shall not protect the Depositor or any
such other Person against any breach of warranties or representations made
herein or any liability which would otherwise be imposed by reason of willful
misfeasance, bad faith or negligence in the performance of duties or by reason
of reckless disregard of obligations and duties hereunder.
SECTION 5.03 INDEMNIFICATION. The Depositor shall indemnify and hold
harmless the Trust Fund from and against any and all direct losses, claims,
damages or liabilities, to which the Trust Fund may become subject, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in the Prospectus relating to the Certificates, or
any amendment or supplement thereto, or arise out of or are based upon the
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omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement therein not misleading.
ARTICLE VI
TRUSTEE TERMINATION EVENTS
SECTION 6.01 TRUSTEE TERMINATION EVENTS.
(a) "TRUSTEE TERMINATION EVENT" wherever used herein, means any one
of the following events (whatever reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) any failure by Trustee to remit to the Certificateholders
any payment required to be made or remitted by it under the terms of this
Agreement; or
(ii) any failure by the Trustee to observe or perform in any
material respect any of its other covenants or agreements contained in
this Agreement, which failure shall continue unremedied for a period of 60
days after the date on which written notice of such failure shall have
been given to the Trustee by the Depositor or Holders of Certificates
evidencing, in the aggregate, not less than 25% of the aggregate principal
amount of the Certificates; or the entry of a decree or order of a court
or agency or supervisory authority having jurisdiction in the premises for
the appointment of a conservator, receiver or liquidator in any
insolvency, readjustment of debt, marshaling of assets and liabilities or
similar proceedings against the Trustee, or for the winding-up or
liquidation of the Trustee's affairs; or
(iii) the consent by the Trustee to the appointment of a
conservator or receiver or liquidator or liquidating committee in any
insolvency, readjustment of debt, marshaling of assets and liabilities,
voluntary liquidation or similar proceedings of or relating to the Trustee
or of or relating to all or substantially all of its property; or
(iv) the Trustee shall become incapable of acting or shall
cease to be eligible in accordance with the provisions of SECTION 7.06 and
shall fail to resign after written request for the Trustee's resignation
by the Depositor.
(b) If a Trustee Termination Event shall occur, the
Certificateholders and/or the Depositor shall have the right to remove the
Trustee in accordance with SECTION 7.07.
SECTION 6.02 LIMITATIONS ON SUITS BY CERTIFICATEHOLDERS. No
Certificateholder shall have any right by virtue or by availing of any provision
hereof to institute any action or proceeding at law or in equity or in
bankruptcy or otherwise upon or under or with respect to the Trustee, or for the
appointment of a trustee, receiver, liquidator, custodian or other similar
official or for any other remedy thereunder, unless: (i) such Certificateholder
previously has notified the Trustee in writing of a Trustee Termination Event
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and of the continuance thereof, as provided herein; (ii) the Certificateholders
representing in the aggregate not less than 25% of the aggregate principal
amount of the Certificates have requested in writing that the Trustee institute
such actions or proceedings in its own name as trustee hereunder; (iii) such
Certificateholders have offered to the Trustee reasonable indemnity against the
costs, expenses and liabilities to be incurred in compliance with such request;
(iv) the Trustee for 60 days after its receipt of such notice, request and offer
of indemnity has failed to institute any such action or proceedings; and (v) no
direction inconsistent with such written request has been given to the Trustee
by Holders of Certificates during such 60-day period. It is understood and
intended, and expressly covenanted by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more Certificateholders shall
have any right in any manner whatever to affect, disturb or prejudice the rights
of any other Certificateholder or to obtain or seek to obtain priority over or
preference to any other Certificateholder or to enforce any right hereunder or
under the Certificates, except in the manner provided herein and therein and for
the equal, ratable and common benefit of all Certificateholders. For the
protection and enforcement of the provisions of this Section, each and every
Certificateholder and the Trustee shall be entitled to such relief as can be
given at law or in equity.
SECTION 6.03 UNCONDITIONAL RIGHT OF CERTIFICATEHOLDERS TO RECEIVE
DISTRIBUTIONS AND TO INSTITUTE CERTAIN SUITS. Notwithstanding any other
provision in this in Agreement or any Certificate issued pursuant hereto, the
right of any Certificateholder to receive distributions on such Certificate
pursuant to ARTICLE III on or after the respective Distribution Dates set forth
herein, or to institute suit for the enforcement of any such distribution on or
after such respective dates as provided herein or therein shall not be impaired
or affected without the consent of such Certificateholder.
ARTICLE VII
CONCERNING THE TRUSTEE
SECTION 7.01 DUTIES OF TRUSTEE. The Trustee undertakes with respect
to the Trust Fund to perform such duties and only such duties as are
specifically set forth in this Agreement. The Depositor shall not be obligated
to monitor or supervise the performance by the Trustee of its duties hereunder.
Any permissive right of the Trustee set forth in this Agreement shall not be
construed as a duty.
Subject to SECTIONS 7.02(A) and 7.03, the Trustee, upon receipt of
all resolutions, certificates, statements, opinions, reports, documents, orders
or other instruments furnished to the Trustee that are specifically required to
be furnished pursuant to any provision of this Agreement shall examine them to
determine whether they conform to the requirements of this Agreement. If any
such instrument is found on its face not to conform to the requirements of this
Agreement in a material manner, the Trustee shall notify the Person supplying
such instrument and request that the instrument be corrected, and if the
instrument is not corrected to the Trustee's reasonable satisfaction, the
Trustee shall provide notice thereof to the Certificateholders.
Subject to SECTIONS 7.02 and SECTION 7.03, no provision of this
Agreement shall be construed to relieve the Trustee from liability for its own
negligent action, its own negligent failure to act or its own misconduct, its
negligent failure to perform its obligations in compliance with this Agreement,
or any liability which would be imposed by reason of its willful misfeasance or
bad faith; PROVIDED, HOWEVER, that:
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(a) No implied covenants or obligations shall be read into this
Agreement against the Trustee and the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed therein,
upon any certificates, reports or opinions furnished to the Trustee and
conforming to the requirements of this Agreement which it reasonably believes in
good faith to be genuine and to have been duly executed by the proper
authorities respecting any matters arising hereunder;
(b) the Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer of the Trustee, unless it
shall be proved that the Trustee or such Responsible Officer was negligent in
ascertaining the pertinent facts; and
(c) the Trustee shall not be personally liable with respect to any
action taken, suffered or omitted to be taken by it in good faith in accordance
with this Agreement or at the direction of Holders of Certificates evidencing,
in the aggregate, not less than 25% of the aggregate principal amount of the
Certificates, relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee, under this Agreement.
None of the provisions contained in this Agreement shall in any
event require the Trustee to expend or risk its own funds or otherwise incur
personal financial or other liability in the performance of any of its duties as
Trustee hereunder or in the exercise of any of its rights or powers as Trustee
hereunder if there are reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it. Notwithstanding anything contained herein, the Trustee shall not
be responsible and shall have no liability in connection with the duties assumed
by the Authenticating Agent, the Certificate Registrar or any other agent
hereunder (other than in respect of the payment of fees and expenses of such
Persons), unless the Trustee is acting in any such capacity hereunder; PROVIDED,
FURTHER, that in any such capacity the Trustee shall have all of the rights,
protections and indemnities provided to it as Trustee hereunder.
SECTION 7.02 CERTAIN MATTERS AFFECTING THE TRUSTEE.
(a) Except as otherwise provided in SECTION 7.01:
(i) the Trustee may request and rely upon and shall be
protected in acting or refraining from acting upon any resolution,
Officer's Certificate, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond or other paper or document believed by it to be genuine and
to have been signed or presented by the proper party or parties;
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(ii) the Trustee may consult with counsel and any advice or
Opinion of Counsel shall be full and complete authorization and protection
in respect of any action taken or suffered or omitted by it hereunder in
good faith and in accordance with such advice or Opinion of Counsel;
(iii) the Trustee shall be under no obligation to exercise any
of the trusts or powers vested in it by this Agreement or to institute,
conduct or defend any litigation hereunder or in relation hereto at the
request, order or direction of any of the Certificateholders, pursuant to
the provisions of this Agreement, unless such Certificateholders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities, including reasonable legal fees, which
may be incurred therein or thereby;
(iv) the Trustee shall not be personally liable for any action
reasonably taken, suffered or omitted by it in good faith and reasonably
believed by it to be authorized or within the discretion or rights or
powers conferred upon it by this Agreement;
(v) the Trustee shall not be bound to ascertain or inquire as
to the performance or observance of any of the terms, conditions,
covenants or agreements herein (except as specifically required by this
Agreement) or to make any investigation into the facts or matters stated
in any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, approval, bond or other paper or
document, unless requested in writing so to do by Holders of Certificates
evidencing, in the aggregate, not less than 25% of the aggregate principal
amount of the Certificates; PROVIDED, HOWEVER, that if the payment within
a reasonable time to the Trustee of the costs, expenses or liabilities
likely to be incurred by it in the making of such investigation is, in the
opinion of the Trustee, not reasonably assured to the Trustee by the
security afforded to it by the terms of this Agreement, the Trustee may
require reasonable indemnity against such costs, expenses or liabilities
as a condition to taking any such action;
(vi) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and shall not be liable for the actions or omissions
of any such agents or attorneys selected with due care or the actions or
omissions of the Depositor;
(vii) the Trustee shall not be required to expend its own funds
or otherwise incur any financial or other liability in the performance of
any of its duties hereunder if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such
liability is not assured to it; and
(viii) the Trustee may seek the instructions of the
Certificateholders as to any action or omission to act by the Trustee
hereunder or under the Security Documents, including without limitation
pursuant to Section 12(d) of the Cash Collateral Agreement. If any event
occurs that gives rise to any right of Bondholders to act under the
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Indenture, the Trustee shall inform Certificateholders of such event and
shall seek instruction of the Certificateholders regarding how to proceed.
The written instructions of the Holders of Certificates evidencing, in the
aggregate, not less than the Requisite Percentage of the aggregate
principal amount of the Certificates shall be full and complete
authorization and protection in respect of any action taken or suffered or
omitted by the Trustee hereunder in good faith and in accordance with such
instructions. "REQUISITE PERCENTAGE" means, (x) as to any matter arising
under the Indenture, the percentage of holders of an aggregate principal
amount of the Bonds required to act thereunder or (b) if no required
percentage is set forth in the Indenture as to such matter or as to any
other matter, 50%.
(b) All rights of action under this Agreement or under any of the
Certificates, enforceable by the Trustee, may be enforced by it without the
possession of any of the Certificates, or the production thereof at the trial or
other proceeding relating thereto, and any such suit, action or proceeding
instituted by the Trustee shall be brought in its name for the benefit of all
the Holders of such Certificates, subject to the provisions of this Agreement.
SECTION 7.03 TRUSTEE NOT LIABLE FOR CERTIFICATES OR THE BOND;
INDEMNIFICATION.
(a) The recitals contained herein and in the Certificates (other
than the authentication of the Certificates) shall be taken as the statements of
the Depositor, as the case may be, and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representations as to the validity or
sufficiency of this Agreement, the Certificates or the Bond or related documents
except as expressly set forth herein. The Trustee shall not be liable for any
action or failure of any action by the Depositor hereunder. The Trustee shall at
no time have any responsibility or liability for or with respect to: the
legality, validity or enforceability of the Mortgages, the other Security
Documents or the Bond, or the perfection and priority of any Mortgage or any
other Security Document or the maintenance of any such perfection and priority,
or for or with respect to the efficacy of the Trust Fund or its ability to
generate the payments to be distributed to Certificateholders under this
Agreement, including, without limitation, the existence, condition and ownership
of the Property; the legal sufficiency or suitability for filing of any Mortgage
or any of the other Security Documents; the existence and enforceability of any
hazard insurance on the Property; the validity of the assignment of the Bond to
the Trust Fund; the performance or enforcement of the Bond; the compliance by
the Depositor or representation made by it under this Agreement or in any
related document or the accuracy of any such warranty or representation made
under this Agreement or in any related document prior to the Trustee's receipt
of notice or other discovery of any noncompliance therewith or any breach
thereof; PROVIDED, HOWEVER, that the foregoing shall not relieve the Trustee of
its obligation to perform its duties under this Agreement. Except with respect
to a claim based on the failure of the Trustee to perform its duties under this
Agreement or based on the Trustee's negligent action, negligent failure to act
or willful misconduct (or such other standard of care as may be provided herein
with respect to any particular matter), no recourse shall be had for any claim
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based on any provisions of this Agreement, the Certificates or the Bond or
assignment thereof against the Trustee in its individual capacity, the Trustee
shall not have any personal obligation, liability or duty whatsoever to any
Certificateholder or any other Person with respect to any such claim, and any
such claim shall be asserted solely against the Trust Fund or any indemnitor who
shall furnish indemnity as provided in this Agreement. The Trustee shall have no
responsibility for filing any financing or continuation statements in any public
office at any time or to otherwise perfect or maintain the perfection of any
security interest or lien granted to it hereunder or to prepare any Securities
and Exchange Commission filing for the Trust Fund or to record this Agreement.
The Trustee shall not be accountable for the use or application by the Depositor
of any of the Certificates or of the proceeds of such Certificates.
(b) Neither the Trustee, by reason of the action or inaction of a
Responsible Officer or Officers of the Trustee, nor any of its directors,
officers, employees or agents or "control persons" (within the meaning of the
Securities Act or the Exchange Act) shall be under any liability to the Trust
Fund or the Certificateholders for any action taken or for refraining from the
taking of any action in good faith pursuant to this Agreement, or for errors in
judgment; PROVIDED, HOWEVER, that this provision shall not protect the Trustee
or any such person against any liability which would otherwise be imposed by
reason of willful misconduct, bad faith, negligence in the performance of duties
or negligent failure to act if it shall be proved that the Trustee was negligent
in ascertaining the pertinent facts. The Trustee and any director, officer,
employee or agent or "control person" (within the meaning of the Securities Act
or the Exchange Act) of the Trustee shall be jointly and severally indemnified
by the Trust Fund, the Depositor and Mid-America Apartment Communities, Inc.
("MAAC") and held harmless by each of them against any loss, liability or
expense incurred in connection with or related to the Trustee's performance of
its powers and duties under this Agreement, including in connection with the
Trustee's execution of the Registration Statement, and the preparation and
distribution of related documents including any offering materials in connection
with the offering of any securities issued pursuant to this Agreement. The
indemnification provided hereunder shall survive the resignation or removal of
the Trustee and the termination of this Agreement.
(c) The Depositor and MAAC, jointly and severally, shall indemnify
and hold harmless the Trustee against any losses, claims, damages or
liabilities, to which the Trustee may become subject under the Securities Act,
the Exchange Act, any other securities laws, or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any breach of any warranty or covenant of the Depositor
herein contained or any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the prospectus
contained therein, or any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and shall reimburse the Trustee for any legal or other expenses
reasonably incurred by the Trustee in connection with investigating or defending
any such loss, claim, damage, liability or action. In addition to their other
obligations under this Section 7.03(c), the Depositor and MAAC agree that, as an
interim measure during the pendency of any such claim, action, investigation,
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inquiry or other proceeding arising out of or based upon any statement or
omission, or any alleged statement or omission, described in this Section
7.03(c), they will jointly and severally reimburse the Trustee on a monthly
basis for all reasonable legal and other expenses incurred in connection with
investigating or defending any such claim, action, investigation, inquiry or
other proceeding, notwithstanding the absence of a judicial determination as to
the propriety and enforceability of the Depositor's or MAAC's obligation to
reimburse the Trustee for such expenses and the possibility that such payments
might later be held to have been improper by a court of competent jurisdiction.
Any such interim reimbursement payments that are not made to the Trustee within
thirty (30) days of a request for reimbursement shall bear interest at the prime
rate (or reference rate or other commercial lending rate for borrowers of the
highest credit standing) published from time to time by The Wall Street Journal
(the "Prime Rate") from the date of such request. This indemnity agreement shall
be in addition to any liabilities that the Depositor and MAAC may otherwise have
hereunder or any securities laws or otherwise. Neither the Depositor nor MAAC
shall, without the prior written consent of the Trustee, settle or compromise or
consent to the entry of any judgment in any pending or threatened action or
claim or related cause of action or portion of such cause of action in respect
of which indemnification may be sought hereunder (whether or not the Trustee is
a party to such action or claim), unless such settlement, compromise or consent
includes an unconditional release of the Trustee from all liability arising out
of such action or claim (or related cause of action or portion thereof). The
indemnity agreement in this Section 7.03(c) shall extend upon the same terms and
conditions to, and shall inure to the benefit of, each person, if any, who
controls the Trustee within the meaning of the Securities Act or the Exchange
Act to the same extent as such agreement applies to the Trustee.
(d) In order to provide for just and equitable contribution in
circumstances under which the indemnity provided for in this Section 7.03 is for
any reason judicially determined (by the entry of a final judgment or decree by
a court of competent jurisdiction and the expiration of time to appeal or the
denial of the right of appeal) to be unenforceable by the indemnified parties
although applicable in accordance with its terms, the Depositor and MAAC, on the
one hand, and the Trustee, on the other hand, shall contribute to the aggregate
losses, liabilities, claims, damages and expenses of the nature contemplated by
such indemnity incurred by the Depositor and MAAC and the Trustee, as incurred,
(i) in such proportions as is appropriate to reflect the relative benefits
received by the Depositor and MAAC, on the one hand, and the Trustee, on the
other, from the offering of the securities pursuant to the Registration
Statement, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to refect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Depositor and MAAC, on the one hand, and the Trustee, on the other,
in connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
consideration. The relative benefits received by the Depositor and MAAC, on the
one hand, and the Trustee, on the other, in connection with the offering of
securities pursuant to the Registration Statement shall be deemed to be in the
same proportion that the total net proceeds from the offering of such securities
(before deducting expenses) received by the Depositor and the fee received by
the Trustee bear to the aggregate offering price of such securities. Relative
fault shall be determined by reference to, among other things, whether the
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untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Depositor or MAAC, on the
one hand, or by the Trustee, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Depositor, MAAC, and the Trustee agree that it
would not be just and equitable if contributions pursuant to this Section
7.03(d) were determined by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section
7.03(d). The amount paid or payable by a party as a result of the losses,
claims, damages or liabilities referred to above shall be deemed to include any
legal or other fees or expenses reasonably incurred by such party in connection
with investigating or defending such action or claim. For purposes of this
Section 7.03(d) each person, if any, who controls the Trustee within the meaning
of Section 15 of the Securities Act shall have the same rights to contribution
as the Trustee.
SECTION 7.04 TRUSTEE MAY OWN CERTIFICATES. The Trustee in its
individual or any other capacity may become the owner or pledgee of Certificates
with the same rights as it would have if it were not the Trustee.
SECTION 7.05 TRUSTEE'S FEES AND EXPENSES. The Depositor shall pay or
cause to be paid to the Trustee the Trustee Fee (which shall not be limited by
any provision of law in regard to the compensation of a trustee of an express
trust) for all services rendered by the Trustee in the execution of the Trust
Fund and in the exercise and performance of any of the powers and duties
hereunder of the Trustee.
SECTION 7.06 ELIGIBILITY REQUIREMENTS FOR TRUSTEE; APPOINTMENT OF
FISCAL AGENT. (a) The Trustee hereunder shall not be an Affiliate of the
Depositor and shall at all times be a corporation organized and doing business
under the laws of any State, the United States of America, or the District of
Columbia, authorized under such laws to exercise corporate trust powers, having
a combined capital and surplus of at least $100,000,000 (or shall be a member of
a bank holding system, the aggregate combined capital and surplus of which is at
least $100,000,000), and shall be subject to supervision or examination by
Federal, State, or District of Columbia authority and which, in the case of any
successor Trustee as evidenced in writing by each Rating Agency, will not
adversely affect the then current rating of the Offered Certificates. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then
for the purposes of this Section the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. The Trustee shall at all
times be rated no lower than "BBB" and "A3" by S&P and Moody's, respectively. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, the Trustee shall resign immediately in the manner
and with the effect specified in SECTION 7.07.
(b) If at any the Trustee shall fail to be rated at least "A" by S&P
or "A1" by Moody's, the Depositor shall appoint a fiscal agent acceptable to the
applicable Rating Agency to serve at the expense of the Depositor or the Trustee
shall resign immediately in the manner and with the effect specified in SECTION
7.07.
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SECTION 7.07 RESIGNATION AND REMOVAL OF TRUSTEE.
(a) The Trustee may at any time resign and be discharged from the
trusts hereby created by (i) giving written notice of resignation to the
Depositor and the Certificate Registrar (if other than the Trustee), and each
Rating Agency and by mailing notice of resignation by first class mail, postage
prepaid, to the Certificateholders at their addresses appearing on the
Certificate Register, not less than 60 days before the date specified in such
notice when, subject to SECTION 7.08, such resignation is to take effect, and
(ii) acceptance by a successor trustee appointed by the Depositor in accordance
with SECTION 7.08 meeting the qualifications set forth in SECTION 7.06. If no
successor trustee shall have been so appointed and have accepted appointment
within 30 days after the giving of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor trustee.
(b) Upon the occurrence of a Trustee Termination Event which has not
been cured or waived, (i) the Depositor or the Certificateholders holding a
majority of the aggregate principal amount of the Certificates may remove the
Trustee and appoint a successor trustee by written instrument, in duplicate,
executed by a Responsible Officer of the Depositor or by such Certificateholders
(or their attorneys-in-fact duly authorized), as appropriate, one copy of which
instrument shall be delivered to the Trustee so removed and one copy to the
successor trustee, or (ii) any Certificateholder who has been a bona fide
Certificateholder for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor trustee. Such court
may thereupon, after such notice, if any, as it may deem proper and prescribe,
remove the Trustee and appoint a successor trustee, which removal and
appointment shall become effective upon acceptance of appointment by the
successor trustee as provided in SECTION 7.08. The successor Trustee so
appointed by such court shall immediately and without further act be superseded
by any successor Trustee appointed by the Certificateholders as provided below
within one year from the date of appointment by such court.
(c) Holders of Certificates evidencing, in the aggregate, not less
than a majority of the aggregate principal amount of the Certificates, may at
any time, upon the payment to the Trustee of all fees, costs and expenses
(including, without limitation, costs and expenses incurred by the Trustee in
connection with its removal and the transfer of its duties hereunder to a
successor Trustee), remove the Trustee and appoint a successor trustee by
written instrument or instruments, in triplicate, signed by such Holders or
their attorney-in-fact duly authorized, one complete set of which instrument or
instruments shall be delivered to the Depositor, one complete set to the Trustee
so removed and one complete set to the successor so appointed. Notice of any
removal of the Trustee and acceptance of appointment by the successor trustee
shall be given to each Rating Agency by the successor trustee.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall become
effective upon acceptance of appointment by the successor trustee as provided in
SECTION 7.08.
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SECTION 7.08 SUCCESSOR TRUSTEE. Any successor trustee appointed as
provided in SECTION 7.07 shall execute, acknowledge and deliver to the Depositor
and to its predecessor trustee an instrument accepting such appointment
hereunder. Thereupon the resignation or removal of the predecessor trustee shall
become effective and such successor trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as trustee herein. The predecessor trustee shall deliver or cause to be
delivered to the successor trustee any documents and statements held by it
hereunder, and the Depositor and the predecessor trustee shall execute and
deliver such instruments and do such other things as may reasonably be required
for more fully and certainly vesting and confirming in the successor trustee all
such rights, powers, duties, and obligations.
No successor trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor trustee shall be
eligible under the provisions of SECTION 7.06 and the then current rating of the
Certificates, as evidenced in writing by each Rating Agency, shall not be
downgraded, withdrawn or requalified as a result of such appointment.
Upon acceptance of appointment by a successor trustee as provided in
this Section, the successor trustee shall mail notice of the succession of such
trustee hereunder to all Holders of Certificates at their addresses as shown in
the Certificate Register and to each Rating Agency.
SECTION 7.09 MERGER OR CONSOLIDATION OF TRUSTEE. Any Person into
which the Trustee may be merged or converted or with which it may be
consolidated or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding to
all or substantially all of the corporate trust business of the Trustee, shall
be the successor of the Trustee hereunder, provided that such Person shall be
eligible under the provisions of SECTION 7.06, without the execution or filing
of any paper or further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.
SECTION 7.10 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
(a) At any time or times, for the purpose of meeting any legal
requirements of any jurisdiction in which any Property or any part of the assets
of the Trust may at the time be located or in which any action of the Trustee
may be required to be performed or taken, the Trustee, the Depositor or the
Holders of Certificates evidencing, in the aggregate, more than a majority of
the aggregate principal amount of the Certificates, by an instrument in writing
signed by it or them, may appoint one or more individuals or corporations to act
as separate trustee or separate trustees or co-trustees, acting jointly with the
Trustee, of all or any part of such Property, to the full extent that local law
makes it necessary for such separate trustee or separate trustees or co-trustee
acting jointly with the Trustee to act; PROVIDED, HOWEVER, that the appointment
of a co-trustee shall not relieve the Trustee of any of its responsibilities
hereunder.
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(b) The Trustee and, at the request of the Trustee, the Depositor
shall execute, acknowledge and deliver all such instruments as may be required
by the legal requirements of any jurisdiction or by any such separate trustee or
separate trustees or co-trustee for the purpose of more fully confirming such
title, rights or duties to such separate trustee or separate trustees or
co-trustee. Upon the acceptance in writing of such appointment by any such
separate trustee or separate trustees or co-trustee, it, he, she or they shall
be vested with such title to the Property or any part thereof, and with such
rights, powers, duties and obligations as shall be specified in the instrument
of appointment, and such rights, powers, duties and obligations shall be
conferred or imposed upon and exercised or performed by the Trustee, or the
Trustee and such separate trustee or separate trustees or co-trustees jointly
with the Trustee subject to all the terms of this Agreement, except to the
extent that under any law of any jurisdiction in which any particular act or
acts are to be performed the Trustee shall be incompetent or unqualified to
perform such act or acts, in which event such rights, powers, duties and
obligations shall be exercised and performed by such separate trustee or
separate trustees or co-trustee, as the case may be. Any separate trustee or
separate trustees or co-trustee may, at any time by an instrument in writing,
constitute the Trustee its attorney-in-fact and agent with full power and
authority to do all acts and things and to exercise all discretion on its behalf
and in its, her or his name. In any case any such separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, the title to the
Property and all assets, property, rights, powers, duties and obligations and
duties of such separate trustee or co-trustee shall, so far as permitted by law,
vest in and be exercised by the Trustee, without the appointment of a successor
to such separate trustee or co-trustee unless and until a successor is
appointed.
(c) All provisions of this Agreement which are for the benefit of
the Trustee shall extend to and apply to each separate trustee or co-trustee
appointed pursuant to the foregoing provisions of this Section 7.10.
(d) Every additional trustee and separate trustee hereunder shall,
to the extent permitted by law, be appointed and act and the Trustee shall act,
subject to the following provisions and conditions: (i) all powers, duties,
obligations and rights conferred upon the Trustee in respect of the receipt,
custody, investment and payment of moneys shall be exercised solely by the
Trustee; (ii) all other rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed and exercised or
performed by the Trustee and such additional trustee or trustees and separate
trustee or trustees jointly except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed, the
Trustee shall be incompetent or unqualified to perform such act or acts, in
which event such rights, powers, duties and obligations (including the holding
of title to the Property in any such jurisdiction) shall be exercised and
performed by such additional trustee or trustees or separate trustee or
trustees; (iii) no power hereby given to, or exercisable by, any such additional
trustee or separate trustee shall be exercised hereunder by such additional
trustee or separate trustee except jointly with, or with the consent of, the
Trustee; and (iv) no trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder.
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If at any time the Trustee shall deem it no longer necessary or
prudent in order to conform to any such law, the Trustee shall execute and
deliver all instruments and agreements necessary or proper to remove any
additional trustee or separate trustee.
(e) Any request, approval or consent in writing by Trustee to any
additional trustee or separate trustee shall be sufficient warrant to such
additional trustee or separate trustee, as the case may be, to take such action
as may be so requested, approved or consented to.
(g) Notwithstanding any other provision of this SECTION 7.10, the
powers of any additional trustee or separate trustee shall not exceed those of
the Trustee hereunder.
SECTION 7.11 APPOINTMENT OF AUTHENTICATING AGENT.
(a) At any time when any of the Certificates remain outstanding, the
Trustee may appoint an Authenticating Agent or Agents which shall be authorized
to act on behalf of the Trustee to authenticate Certificates, and Certificates
so authenticated shall be entitled to the benefits of this Agreement and shall
be valid and obligatory for all purposes as if authenticated by the Trustee
hereunder. Wherever reference is made in this Agreement to the authentication
and delivery of Certificates by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include authentication and
delivery on behalf of the Trustee by an Authenticating Agent and a certificate
of authentication executed on behalf of the Trustee by an Authenticating Agent.
Each Authenticating Agent shall at all times be a corporation or association
organized and doing business under the laws of the United States of America, any
State thereof or the District of Columbia, authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of not less than
$15,000,000, authorized under such laws to do trust business and subject to
supervision or examination by federal or state authorities. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
(b) Any Person into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any Person resulting from any
merger, conversion or consolidation to which such Authenticating Agent shall be
a party, or any Person succeeding to the corporate agency business of an
Authenticating Agent, shall continue to be an Authenticating Agent, provided
such Person shall be otherwise eligible under this Section, without the
execution or filing of any paper or any further act on the part of the Trustee
or the Authenticating Agent.
(c) An Authenticating Agent may resign at any time by giving at
least 30 days' advance written notice thereof to the Trustee and the Depositor.
The Trustee may at any time terminate the agency of an Authenticating Agent by
giving written notice thereof to such Authenticating Agent and the Depositor.
Upon receiving such a notice of resignation or upon such a termination, or in
case at any time such Authenticating Agent shall cease to be eligible in
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accordance with the provisions of this Section, the Trustee may appoint a
successor Authenticating Agent which shall be acceptable to the Depositor and
shall mail written notice of such appointment by first-class mail, postage
prepaid to all Certificateholders as their names and addresses appear in the
Certificate Register. Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers and duties
of its predecessor hereunder, with like effect as if originally named as an
Authenticating Agent herein. No successor Authenticating Agent shall be
appointed unless eligible under the provisions of this Section.
SECTION 7.12 LIMITATION ON RIGHTS OF THE TRUSTEE. The Trustee shall
have only those rights and powers specifically set forth herein or necessary,
appropriate or incidental to the performance of its duties hereunder, including
without limitation the right and power to hold the Bonds for the benefit of the
Certificateholders, to receive payments thereon and distribute the same to the
Certificateholders and to distribute the corpus of the Trust Fund to the
Certificateholders or Beneficial Owners, as applicable, as provided in SECTION
8.02. the Trustee shall have no right or power to (i) sell or otherwise transfer
the Bonds expect to the Certificateholders or Beneficial Owners, as applicable,
in accordance with SECTION 8.02, (ii) borrow any money on behalf of or from the
Trust, (iii) invest or reinvest any interest or principal payment on the Bonds,
(iv) acquire additional property or (v) issue more than one class of
Certificates.
ARTICLE VIII
TERMINATION
SECTION 8.01 TERMINATION.
(a) Subject to SECTION 8.02, the respective obligations and
responsibilities of the Depositor, the Trustee and each agent of either of them
(other than the indemnification obligations of the parties hereto) shall
terminate upon the last action required to be taken by the Trustee pursuant to
this Article upon the later of (i) the Final Certificate Distribution Date, (ii)
the final payment on the Bond or (iii) the liquidation of the Property;
PROVIDED, HOWEVER, that in no event shall the trust created hereby continue
beyond the expiration of twenty-one years from the death of the last survivor of
the descendants of Joseph P. Kennedy, the late ambassador of the United States
to the Court of St. James's, living on the date hereof.
(b) Notice of any termination, specifying the Final Distribution
Date (which shall be a date that would otherwise be a Distribution Date) upon
which the Certificateholders may surrender their Certificates to the Trustee for
payment of the final distribution and cancellation, shall be given promptly by
the Trustee by letter to Certificateholders specifying (A) the date upon which
final payment of the Certificates will be made upon presentation and surrender
of Certificates at the office or agency of the Trustee therein designated, (B)
the amount of any such final payment and (C) that the Record Date otherwise
applicable to such Distribution Date is not applicable, payments being made only
upon presentation and surrender of the Certificates at the office or agency of
the Trustee therein specified.
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(c) Upon presentation and surrender of the Certificates, the Trustee
shall cause to be distributed to Certificateholders on the Final Distribution
Date all amounts received by the Trustee in respect of full payment of the Bond
and all obligations thereunder and under the Indenture.
(d) In the event that all of the Certificateholders required to
surrender their Certificates shall not surrender their Certificates for final
payment and cancellation on or before the Final Distribution Date with respect
to such Certificates, the Trustee shall on such date cause all funds not
distributed in final distribution to Certificateholders to be credited to the
remaining Certificateholders by depositing such funds in a separate trust
account held uninvested for the benefit of such Certificateholders who failed to
surrender their Certificates and the Trustee shall give a second written notice
to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
one year after the second notice all the Certificates required to be surrendered
shall not have been surrendered for cancellation, the Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to contact
the remaining Certificateholders concerning surrender of their Certificates, and
the cost thereof shall be paid out of the funds on deposit in such trust
account. If the remaining Certificateholders do not surrender their Certificates
for cancellation and receipt of the final distribution with respect thereto
within two years after the Final Distribution Date, the Trustee shall pay the
amount of such unclaimed final distribution to the Depositor and no other
Certificateholders shall have any further claim to such amounts. Upon the
payment by the Trustee to the Depositor of all such amounts, the Trustee shall
have no further responsibility therefor.
SECTION 8.02 TERMINATION UPON PERMITTED MERGER.
(a) Notwithstanding any other provision of this ARTICLE VIII to the
contrary, the respective obligations and responsibilities of the Depositor, the
Trustee and each agent of either of them (other than the indemnification
obligations of the parties hereto) shall terminate on the Bond Distribution Date
upon the last action required to be taken by the Trustee pursuant to this
Article.
(b) Promptly after receipt by the Trustee of notice from the
Indenture Trustee that the Indenture Trustee has received the "Release
Certificate" pursuant to Section 9.02(iv) of the Indenture, the Trustee shall
give notice thereof by letter to Certificateholders, specifying the date (which
shall be a date that would otherwise be a Distribution Date) upon which the
Depository shall surrender the Global Certificate to the Trustee for
cancellation and distribution of the Bonds (the "BOND DISTRIBUTION DATE").
(c) On the Bond Distribution Date, without any further act of the
Certificateholders, (i) the Trustee shall cause to be distributed to each
Certificateholder or each Beneficial Owner, as applicable, of the Certificates a
principal amount of Bonds corresponding to the principal amount of Certificates
previously held by such Certificateholder or Beneficial Owner, as the case may
be, by delivering to the Depository instructions substantially in the form of
Exhibit C hereto (the "TRUSTEE'S INSTRUCTION TO DEPOSITORY") and (ii) the
Trustee shall cancel the Global Certificates or Certificate delivered to it by
the Depository or such Certificateholder, as applicable.
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SECTION 8.03 TRUSTS IRREVOCABLE. Except as expressly provided
herein, all trusts created hereby are irrevocable.
ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 9.01 AMENDMENT.
(a) This Agreement may be amended from time to time by the mutual
agreement of the Depositor and the Trustee, without the consent of any of the
Certificateholders, (i) to cure any ambiguity, (ii) to correct or supplement any
provision(s) herein which may be defective or inconsistent with any other
provision(s) herein, or (iii) to make or change any other provisions with
respect to matters or questions arising under this Agreement; PROVIDED, HOWEVER,
that such action shall not adversely affect in any material respect the
interests of any Certificateholder without the consent of each Certificateholder
adversely affected thereby. Prior to entering into any amendment without the
consent of Holders pursuant to this paragraph, the Trustee shall require an
Opinion of Counsel at the expense of the Depositor to the effect that such
amendment is permitted under this paragraph.
(b) This Agreement may be amended from time to time by the Depositor
and the Trustee with the written consent of the Holders of Certificates
evidencing, in the aggregate, not less than 66 2/3% of the aggregate principal
amount of the Certificates for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
of modifying in any manner the rights of the Holders of the Certificates;
PROVIDED, HOWEVER, that no such amendment shall (i) reduce in any manner the
amount of, delay the timing of or change the manner in which payments received
on or with respect to the Bond are required to be distributed or adversely
affect in any material respect the interests of the Holders of the Certificates,
without the consent of the Holders of not less than 100% of the aggregate
principal amount of Certificates, or (ii) reduce any of the aforesaid percentage
of aggregate principal amount of the Certificates, the Holders of which are
required to consent to any such amendment.
It shall not be necessary for the consent of Certificateholders
under this Section to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such reasonable
regulations as the Trustee may prescribe.
(c) The Trustee shall not enter into any amendment to this Agreement
(except pursuant to Section 9.01(a)(i) or (ii)) unless each Rating Agency shall
have confirmed in writing to the Trustee that such amendment will not in and of
itself result in the withdrawal, downgrade or requalification of the then
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current rating of the Certificates. Promptly after the execution of any
amendment to this Agreement, the Trustee shall furnish written notification of
the substance of such amendment to each Certificateholder and the Rating
Agencies.
(d) The Trustee shall not consent to any amendment or modification
of this Agreement which would adversely affect the status of the Trust as a
grantor trust for federal income tax purposes.
(e) Prior to entering into any amendment of this Agreement pursuant
to this Section, the Trustee may require an Opinion of Counsel at the expense of
the Depositor to the effect that such amendment is permitted hereunder.
SECTION 9.02 COUNTERPARTS.
(a) This Agreement may be executed in any number of counterparts,
each of which counterparts shall be deemed to be an original, and such
counterparts shall constitute but one and the same instrument.
SECTION 9.03 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK AND
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HERETO AND THE
CERTIFICATEHOLDERS SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 9.04 NOTICES. All demands, notices and communications to any
party hereunder shall be in writing and shall be deemed to have been duly given
when delivered to (i) in the case of the Depositor, to Mid-America Finance,
Inc., [_____________] Attention: [_____________], with a copy to
[_____________], and (ii) in the case of the Trustee, to the Corporate Trust
Office; or in each case such other address as may hereafter be furnished to the
other parties hereto in writing. Any notice required or permitted to be mailed
to a Certificateholder shall be given by first class mail, postage prepaid, at
the address of such Holder as shown in the Certificate Register. Any notice
mailed to a Certificateholder within the time prescribed in this Agreement shall
be conclusively presumed to have been duly given, whether or not the addressee
receives such notice.
SECTION 9.05 NOTICES TO THE RATING AGENCY. The Trustee shall deliver
written notice of the following events to each Rating Agency, promptly following
the occurrence thereof: any amendment to this Agreement; any Trustee Termination
Event; any change in or the termination or resignation of the Trustee; and final
payment to Certificateholders. The Depositor and Trustee also shall furnish such
other information regarding the Trust Fund as may be reasonably requested by any
Rating Agency to the extent such party has or can obtain such information
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without unreasonable effort or expense. Notwithstanding the foregoing, the
failure to deliver such notices or copies shall not constitute a Trustee
Termination Event under this Agreement. Any confirmation of the rating by any
Rating Agency required hereunder shall be in writing.
SECTION 9.06 SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or the rights of the Holders thereof.
SECTION 9.07 LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS. The death
or incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust Fund, nor entitle such Certificateholder's legal
representative or heirs to claim an accounting or to take any action or commence
any proceeding in any court for a petition or winding up of the Trust Fund, or
otherwise affect the rights, obligations and liabilities of the parties hereto
or any of them.
No Certificateholder, solely by virtue of its status as a
Certificateholder, shall have any right to vote (except as provided herein) or
in any manner otherwise control the operation and management of the Trust Fund,
or the obligations of the parties hereto, nor shall anything herein set forth or
contained in the terms of the Certificates be construed so as to constitute the
Certificateholders from time to time as partners or members of an association;
nor shall any Certificateholder be under any liability to any third party by
reason of any action taken by the parties to this Agreement pursuant to any
provision hereof.
No Certificateholder, solely by virtue of its status as a
Certificateholder, shall have any right by virtue or by availing itself of any
provisions of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee a written notice of a Trustee
Termination Event and of the continuance thereof, as hereinbefore provided, and
unless the Holders of Certificates aggregating not less than 25% of the
aggregate principal amount of the Certificates shall also have made written
request upon the Trustee to institute such action, suit or proceeding in the
Trustee's name hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses, and liabilities to be
incurred therein or thereby, and the Trustee, for 60 days after its receipt of
such notice, request and offer of indemnity, shall have neglected or refused to
institute any such action, suit or proceeding; it being understood and intended,
and being expressly covenanted by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more Holders of Certificates
shall have any right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement to affect, disturb or prejudice
the rights of the Holders of any other of the Certificates, or to obtain or seek
to obtain priority over or preference to any other such Holder or to enforce any
right under this Agreement, except in the manner herein provided and for the
common benefit of all Certificateholders. For the protection and enforcement of
the provisions of this Section, each and every Certificateholder and the Trustee
shall be entitled to such relief as can be given either at law or in equity.
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SECTION 9.08 CERTIFICATES NONASSESSABLE AND FULLY PAID. It is the
intention of the Depositor that Certificateholders shall not be personally
liable for obligations of the Trust Fund, that the interests in the Trust Fund
represented by the Certificates shall be nonassessable for any reason
whatsoever, and that the Certificates, upon due authentication thereof by the
Trustee pursuant to this Agreement, are and shall be deemed fully paid.
SECTION 9.09 REPRODUCTION OF DOCUMENTS. This Agreement and all
documents relating thereto, including, without limitation, (i) consents, waivers
and modifications which may hereafter be executed, (ii) documents received by
any party at the closing, and (iii) financial statements, certificates and other
information previously or hereafter furnished, may be reproduced by any
photographic, photostatic, microfilm, micro-card, miniature photographic or
other similar process. The parties agree that any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding, whether or not the original is in existence and whether or not such
reproduction was made by a party in the regular course of business, and that any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.
SECTION 9.10 NO PARTNERSHIP. Nothing herein contained shall be
deemed or construed to create a partnership or joint venture between the parties
hereto.
SECTION 9.11 ACTIONS OF CERTIFICATEHOLDERS.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by
Certificateholders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Certificateholders in person or by
agent duly appointed in writing; and except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee and, where required, to the Depositor. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Agreement and conclusive in favor of the
Trustee and the Depositor, if made in the manner provided in this Section.
(b) The fact and date of the execution of any Certificateholder of
any such instrument or writing may be proved in any reasonable manner which the
Trustee deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent,
waiver, or other act by a Certificateholder shall bind every Holder of every
Certificate issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, or omitted to be done,
by the Trustee or the Depositor in reliance thereon, whether or not notation of
such action is made upon such Certificate.
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(d) The Trustee may require additional proof of any matter referred
to in this Section as it shall deem reasonably necessary.
SECTION 9.12 SUCCESSORS AND ASSIGNS. The rights and obligations of
any party hereto shall not be assigned (except pursuant to SECTION 7.09 hereof)
by such party without the prior written consent of the other parties hereto.
This Agreement shall inure to the benefit of and be binding upon the Depositor,
and the Trustee and their respective permitted successors and assigns.
SECTION 9.13 OFFICER'S CERTIFICATES AND OPINIONS OF COUNSEL;
STATEMENTS TO BE CONTAINED THEREIN. Upon any application or demand by the
Depositor to the Trustee to take any action, the Depositor shall furnish to the
Trustee (i) an Officer's Certificate stating that all conditions precedent, if
any, provided for in this Agreement relating to the proposed action have been
complied with and that the proposed action is in conformity with and required by
the terms and provisions of this Agreement, and (ii) 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
demand as to which the furnishing of such documents is specifically required in
any provision of this Agreement relating to such particular application or
demand, no additional certificate or opinion need be furnished.
Each Certificate or opinion required by this Agreement and delivered
to the Trustee with respect to compliance with a condition or covenant provided
for in this Agreement shall include (i) a statement that the person making such
certificate or opinion has read such covenant or condition, (ii) a brief
statement as to the nature and scope of the examination or investigation upon
which the statements or opinion contained in such certificate or opinion are
based, (iii) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with, and (iv) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
Any certificate, statement or opinion of counsel may be based,
insofar as it relates to factual matters information with respect to which is in
the possession of the Depositor upon the certificate, statement or opinion of or
representations by one or more officers of the Depositor unless such counsel
knows that the Certificate, statement or opinion or representations with respect
to the matters upon which his certificate, statement or opinion may be based as
aforesaid are erroneous, or in the exercise of reasonable care should know that
the same are erroneous.
Any certificate, statement or opinion of an officer of the Depositor
or of counsel thereto may be based, insofar as it relates to accounting matters,
upon a certificate or opinion of or representations by an accountant or firm of
accountants employed by the Depositor unless such certifying Person or counsel,
as the case may be, knows that the certificate or opinion or representations
with respect to the accounting matters upon which his certificate, statement or
opinion may be based as aforesaid are erroneous, or in the exercise of
reasonable care should know that the same are erroneous.
-37-
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused their names to be
signed hereto by their respective officers thereunto duly authorized as of the
day and year first above written.
MID-AMERICA FINANCE, INC.,
as Depositor
By
Name:
Title:
LASALLE NATIONAL BANK,
as Trustee
By:
Name:
Title:
Mid-America Apartment Communities, Inc., a Tennessee corporation,
hereby joins in this Agreement for the purpose of the indemnification
obligations contained in Section 7.03 of this Agreement.
MID-AMERICA APARTMENT COMMUNITIES, INC.
By:
Name:
Title:
<PAGE>
EXHIBIT A
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATE, SERIES 1998-1
Mid-America Mortgage Trust, 1998-1
ORIGINAL DENOMINATION:
NUMBER: A-1 $142,000,000
DATE OF AMENDED AND RESTATED AGREEMENT ORIGINAL CERTIFICATE PRINCIPAL
OF TRUST: MARCH [__], 1998 BALANCE: $142,000,000
FIRST DISTRIBUTION DATE:
APRIL 1, 1998 CERTIFICATE PASS-THROUGH RATE: [__]%
COMMON CODE NUMBER:
CUSIP/CINS NUMBER:
evidencing a percentage interest in all distributions with respect
to the [__] First Mortgage Bonds, Due 2003 (the "Bonds") of
Mid-America Capital Partners, L.P., which Bonds were deposited into
Mid-America Mortgage Trust, 1998-1 by
MID-AMERICA FINANCE, INC.
UNLESS THIS CERTIFICATE 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
CERTIFICATE 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.
EACH TRANSFEREE OF A BENEFICIAL INTEREST IN THIS CERTIFICATE SHALL
BE DEEMED TO REPRESENT EITHER (A) THAT IT IS NOT, AND IS NOT USING THE ASSETS
OF, AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME CERTIFICATE ACT OF 1974, AS AMENDED
("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"), OR (B) THAT IT HAS DETERMINED THAT, ASSUMING THIS CERTIFICATE IS
<PAGE>
TREATED AS INDEBTEDNESS WITH NO SUBSTANTIAL EQUITY FEATURES FOR PURPOSES OF 29
C.F.R. ss. 2510.3-101, THE PURCHASE AND HOLDING OF A BENEFICIAL INTEREST IN THIS
CERTIFICATE BY THE TRANSFEREE 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
INVESTMENTS BY INSURANCE COMPANY POOLED SEPARATE ACCOUNTS); OR PTCE 84-14
(RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET MANAGER").
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST
IN MID-AMERICA FINANCE, INC., THE TRUSTEE REFERRED TO BELOW OR ANY OF THEIR
RESPECTIVE AFFILIATES. NEITHER THIS CERTIFICATE NOR THE UNDERLYING BOND IS
GUARANTEED OR INSURED BY MID-AMERICA FINANCE, INC., OR BY ANY OF ITS AFFILIATES
OR BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR ANY OTHER PERSON.
<PAGE>
THIS CERTIFIES THAT Cede & Co. is the registered owner of a
beneficial interest in 100% (the "Percentage of Interest") of all distributions
with respect to the [__] First Mortgage Bonds, Due 2003 (the "Bonds") of
Mid-America Capital Partners, L.P. in the original principal amount of
$142,000,000, together with certain other property held in trust for the benefit
of Certificateholders (collectively, the "Trust Fund"). The Trust Fund was
created pursuant to an Amended and Restated Agreement of Trust dated as of
February [__], 1998 (the "Agreement"), between the Depositor and LaSalle
National Bank, as Trustee, a summary of certain provisions of which is set forth
below. Capitalized terms used but not defined herein which are defined in or by
reference in the Agreement shall have the meanings assigned to them therein
pursuant thereto.
This Certificate is one of a duly authorized issue of Certificates,
designated as Mid-America Mortgage Trust, 1998-1, Commercial Mortgage
Pass-Through Certificates, Series 1998-1 and is issued under and is subject to
the terms, provisions and conditions of the Agreement, to which Agreement and
such provisions and conditions the Holder of this Certificate by virtue of its
acceptance hereof assents and by which such Holder is bound.
During each Interest Accrual Period, interest on the Bonds will
accrue at a rate of [___]% per annum. Interest on the Bonds will be computed for
each Interest Accrual Period on the basis of a 360-day year of 12 months of 30
days each. Pursuant to the terms of the Agreement, the Trustee will distribute
on the first Business Day of each calendar month (the "Distribution Date"),
commencing on April 1, 1998, to the Person in whose name this Certificate is
registered at the close of business on the Business Day preceding such
Distribution Date occurs (the "Record Date"), all amounts received by the
Trustee on or prior to such Distribution Date in respect of Monthly Payments,
Interest Advances, Unscheduled Payments or payments of principal on, or any
other payments with respect to, the Bonds.
The Trustee will cause to be kept at the Corporate Trust Office or
at the office of its designated agent, a Certificate Register in which, subject
to such reasonable regulations as it may prescribe, the Trustee will provide or
cause to provide for the registration of Certificates and of transfers and
exchanges of Certificates. Upon surrender for registration of transfer of any
Certificate at any office or agency of the Trustee maintained for such purposes,
the Trustee will, subject to the limitations and restrictions on transfer set
forth in the Agreement, authenticate and deliver, in the name of the designated
transferee or transferees, a Certificate of like aggregate Percentage Interest
and dated the date of authentication.
No service charge will be made for any transfer or exchange of the
Certificate (except the costs of mailing), but the Trustee may require payment
of a sum sufficient to cover any tax or governmental charge that may be imposed
in connection therewith. Prior to the due presentation of a Certificate for
registration of transfer, the Depositor, the Certificate Registrar, any Paying
Agents and the Trustee may treat the person in whose name any Certificate is
registered as the owner of such Certificate and the Percentage Interest in the
Trust Fund evidenced thereby for the purpose of receiving distributions pursuant
to the Agreement and for all other purposes whatsoever, and none of the
Depositor, the Certificate Registrar, any Paying Agents or the Trustee will be
affected by notice to the contrary.
<PAGE>
The Agreement may be amended from time to time by the Depositor and
the Trustee, without the consent of any of the Holders of Certificates, (i) to
cure any ambiguity, (ii) to correct or supplement any provision therein that may
be defective or inconsistent with any other provision therein or (iii) to make
or change any other provisions with respect to matters or questions arising
under the Agreement; PROVIDED, HOWEVER, that such action shall not adversely
affect in any material respect the interests of any Certificateholder without
the consent of each Certificateholder adversely affected thereby.
The Agreement may also be amended from time to time by the Depositor
and the Trustee with the written consent of the Holders of Certificates
evidencing, in the aggregate, not less than 66 2/3% of the Percentage Interest
of the Certificates for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of the Agreement or of modifying
in any manner the rights of the Holders of Certificates; PROVIDED, HOWEVER, that
no such amendment shall (i) reduce in any manner the amount of, delay the timing
of or change the manner in which payments received on or with respect to the
Bond are required to be distributed or adversely affect in any material respect
the interests of the Holders of the Certificates without the consent of Holders
evidencing, in the aggregate, 100% of the Percentage Interest of the
Certificates or (ii) reduce the aforesaid percentages of Percentage Interest of
the Certificates, the Holders of which are required to consent to any such
amendment without the consent of 100% of the Certificateholders.
The respective obligations and responsibilities of the Depositor,
the Paying Agent and any other agent and the Trustee created under the Agreement
(other than the obligation of the Trustee to make certain payments to
Certificateholders after the Final Distribution Date and other than the
indemnification obligations of the parties to the Agreement) shall terminate
upon the last action required to be taken by the Trustee pursuant to Article X
of the Agreement upon the later of (i) the Final Certificate Distribution Date,
(ii) the final payment on the Bond or (iii) the liquidation of the Foreclosed
Property; PROVIDED, HOWEVER, that in no event shall the trust created pursuant
to the terms of the Agreement continue beyond the expiration of twenty-one years
from the death of the last survivor of the descendants of Joseph P. Kennedy, the
late ambassador of the United States to the Court of St. James, living on the
date hereof.
THIS CERTIFICATE AND THE AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH, AND BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK.
Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Depositor has caused this Certificate to be
duly executed.
MID-AMERICA FINANCE, INC.
As Depositor
By:
Name:
Title:
Dated: March [__], 1998
CERTIFICATE OF AUTHENTICATION
THIS IS ONE OF THE CERTIFICATES REFERRED TO IN THE
WITHIN-MENTIONED AGREEMENT.
LASALLE NATIONAL BANK,
As Trustee
By:
Authorized Officer
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
(PLEASE INSERT SOCIAL SECURITY* NUMBER OR U.S. TAXPAYER IDENTIFICATION
NUMBER OF ASSIGNEE)
the within Certificate, and all rights thereunder, and hereby does
irrevocably constitute and appoint
- -----------------------------------------------------------------------
Attorney to transfer the within Certificate on the books kept for the
registration thereof, with full power and substitution in the premises.
Dated:
(Signature Guaranteed by a Participant in a Recognized Signature Guaranty
Medallion Program)
NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alternation or enlargement or any change whatsoever.
(* This information, which is voluntary, is being requested to ensure that the
assignee will not be subject to backup withholding under Section 3406 of the
Internal Revenue Code of 1986, as amended.)
EXHIBIT 8.1
JOHN A. GOOD
DIRECT DIAL: (901) 577-2148
INTERNET ADDRESS: [email protected]
February 13, 1998
Board of Directors of Mid-America Finance, Inc.
6584 Poplar Avenue, Suite 340
Memphis, Tennessee 38138
LaSalle National Bank
135 South LaSalle Street, Suite 1625
Chicago, Illinois 60647-4107
Re: Mid-America Mortgage Trust, 1998-1, Commercial Mortgage Pass-Through
Certificates, Series 1998-1
Ladies and Gentlemen:
We have acted as Special Tax Counsel to Mid-America Capital Partners,
L.P., a Delaware limited partnership (the "Borrower"), Mid-America Finance,
Inc., a Delaware corporation (the "Depositor") and Mid-America Mortgage Trust,
1998-1, a trust formed under the laws of the state of New York (the "Trust"), in
connection with the issuance by the Borrower of its $142,000,000 aggregate
principal amount ___% First Mortgage Bonds, Due 2003 (the "Bonds") to the
Depositor, and the Depositor's deposit of the Bonds into the Trust, and the
issuance by the Trust of its Commercial Mortgage Pass-Through Certificates,
Series 1998- 1 (the "Certificates") in a public offering (the "Offering"). We
have been requested to render our opinion regarding certain tax matters
affecting the Trust, the Bonds and the Certificates.
INFORMATION RELIED ON
In rendering the opinions expressed herein, we have examined such
documents as we have deemed appropriate, including the Agreement of Trust dated
as of February 5, 1998 between the Depositor, Mid-America Apartment Communities,
Inc. and LaSalle National Bank, as trustee (the "Trust Agreement"), the form of
Supplemental Restated Indenture dated effective as of November 21, 1997 among
the Borrower,
<PAGE>
Board of Directors of Mid-America Finance, Inc.
February 13, 1998
Page 2
LaSalle National Bank as indenture trustee, and Mid-America Apartments, L.P.
(the "Indenture"), the form of Bond and the form of Certificate included in the
Indenture and the Trust Agreement, respectively, the registration statement on
Form S-3, as amended, of the Borrower and the Depositor, and the registration
statement on Form S-11, as amended, of the Trust, and such other documents and
instruments as we have deemed necessary for purposes of rendering this opinion.
In our examination of documents, we have assumed, with your consent, that all
documents submitted to us as photocopies or telecopies faithfully reproduce the
originals thereof, that such originals are authentic, that all such documents
have been or will be duly executed to the extent required, and that all
statements of fact and representations set forth in such documents are accurate.
In rendering this opinion, we have reviewed the Internal Revenue Code of
1986, as amended (the "Code"), the applicable Treasury regulations under
relevant sections thereof (the "Regulations"), published rulings of the Internal
Revenue Service (the "Service"), private letter rulings of the Service, and such
other authorities as we have deemed necessary and appropriate for rendering this
opinion.
OPINIONS
Based upon the foregoing, it is our opinion that:
(1) The Trust is a "grantor trust" within the meaning of Sections 671 et.
seq. of the Code.
(2) The Bonds are evidence of indebtedness and not interests in the
underlying parcels of real property that are pledged as collateral for the Bonds
pursuant to mortgages and deeds of trust.
(3) In the event Certificates are issued with original issue discount, the
description of the law and legal conclusions in the Prospectus under the caption
"Interest Income" is correct in all material respects and the discussion
thereunder does not omit any material provision with respect to the matters
covered.
The opinion expressed herein are based upon existing statutory,
regulatory, and judicial authority, any of which may be changed at any time with
retroactive effect. In addition, our opinions are based solely on the documents
that we have examined and the additional information that we have obtained. Our
opinion cannot be relied upon if any of the facts contained in such documents or
in any such additional information is, or later becomes, inaccurate or if any of
the facts set out in the Representation Letters is, or later becomes,
inaccurate.
Our opinion is limited to the federal income tax matters specifically
covered hereby, and we have not been asked to address, nor have we addressed,
any other federal, state, local, or foreign income, estate,
<PAGE>
Board of Directors of Mid-America Finance, Inc.
February 13, 1998
Page 3
gift, transfer, sales, use, or other tax consequences that may result from the
transactions contemplated hereby.
This opinion is being delivered to the addressees solely in connection
with the Offering. It may not be relied upon for any other purpose or by any
person or entity other than the Depositor, the Trustee, the holders of
Certificates, and the Trust, and may not be made available to any other person
or entity, without our prior written consent.
Very truly yours,
Baker, Donelson, Bearman & Caldwell,
A Professional Corporation
By:/S/ JOHN A. GOOD
John A. Good, Shareholder
EXHIBIT 10.1
CWT DRAFT: 2/12/98
AMENDED AND RESTATED
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 effective as of November 21, 1997
<PAGE>
AMENDED AND RESTATED
CASH COLLATERAL ACCOUNT
SECURITY, PLEDGE AND ASSIGNMENT AGREEMENT
This AMENDED AND RESTATED CASH COLLATERAL ACCOUNT SECURITY, PLEDGE
AND ASSIGNMENT AGREEMENT (this "AGREEMENT"), dated effective 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 has issued its First Mortgage Bridge Notes
to the Bridge Lender in the principal amount of $140,000,000 pursuant to an
Indenture, dated as of November 21, 1997 (the "ORIGINAL INDENTURE"), between
Issuer and Trustee, as trustee thereunder, concurrently with the execution and
delivery of that certain Cash Collateral Account Security, Pledge and Assignment
Agreement dated as of November 21, 1997 among the parties hereto (the "ORIGINAL
AGREEMENT"), and intends to issue its First Mortgage Bonds in the maximum
aggregate principal amount of $142,000,000 (said First Mortgage Bridge Notes and
First Mortgage Bonds, collectively, the "NOTES") pursuant to a Restated
Supplemental Indenture, dated effective as of the date hereof, which supplements
and restates the Original Indenture (as so supplemented and restated, and as the
same may be further amended, supplemented or restated from time to time, the
"INDENTURE");
WHEREAS, the Notes are and are to be 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"), (iii)
the Original Agreement and this Agreement as an amendment and restatement of the
Original Agreement and (iv) 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
<PAGE>
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 further to 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.
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
that the Original Agreement is hereby amended and restated to read in its
entirety 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
-2-
<PAGE>
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.
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
-3-
<PAGE>
"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
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 has deposited 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 and
of the making of any Advance by the Trustee (each, a "DEFAULT TRIGGER NOTICE")
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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 repayment of any such Advance, 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
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 $1,189,400.00.
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
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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. Account Bank shall disburse funds from the Mortgage
Escrow Account, to the extent available, 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)
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. Account Bank shall disburse funds from the Replacement Reserve
Account, to the extent available, 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
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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.
(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 from any Account
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).
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(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
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
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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
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.
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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:
(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
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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.
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
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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.
(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 suspend the
performance of any of its obligations under this Agreement until such dispute or
uncertainty shall be resolved by written instruction of Trustee acting upon
direction of the holders of the Notes as provided in the Indenture or, at any
time when the sole beneficial owner of the Notes shall be a trustee (the
"CERTIFICATE TRUSTEE") for the benefit of holders of certificates representing
beneficial interests in the Notes (the "CERTIFICATEHOLDERS"), acting upon the
direction of the Certificate Trustee, who shall seek the direction of the
Certificateholders as provided in the related agreement of trust. If no written
instruction of Trustee is delivered to Account Bank or if such written
instruction of Trustee fails to resolve such dispute or uncertainty, Account
Bank may, at its sole option, (i) resign as Account Bank pursuant to Section 14
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,
resignation as Account Bank, reliance upon the written instructions of Trustee
or disbursement into court, specifically including any liability or claimed
liability that may arise, or 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,
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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.
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
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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
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.
Cadwalader, 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.
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.
<PAGE>
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
2
<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;
(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
<PAGE>
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,
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 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
LASALLE NATIONAL BANK
(Exact name of trustee as specified in its charter)
36-1521370
(I.R.S. Employer Identification No.)
135 South LaSalle Street, Suite 1625 Chicago, Illinois 60674 (Address,
including zip code, of principal executive offices)
Mr. Robert K. Quinn
Senior Vice President and General Counsel
Telephone: (312) 443-2010
135 South LaSalle Street
Chicago, Illinois 60603
(Name, address and telephone number of agent for service)
MID-AMERICA CAPITAL PARTNERS, L.P.
(Exact name of obligor as specified in its charter)
DELAWARE 62-1717980
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
C/O CT Corporation Trust Company
1209 Orange Street
Wilmington, Delaware 19801
(Address, including zip code, of registrant's Principal Executive Offices)
-----------------
___% FIRST MORTGAGE BONDS
(Title of the indenture securities)
<PAGE>
ITEM 1. GENERAL INFORMATION
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
1. Comptroller of the Currency, Washington D.C.
2. Federal Deposit Insurance Corporation, Washington, D.C.
3. The Board of Governors of the Federal Reserve Systems,
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS.
If the obligor or any underwriter for the obligor is an affiliate of
the trustee, describe each such affiliation.
Neither the obligor nor any underwriter for the obligor is an
affiliate of the trustee.
ITEM 3. VOTING SECURITIES OF THE TRUSTEE.
Furnish the following information as to each class of voting
securities of the trustee:
Not applicable
ITEM 4. TRUSTEESHIPS UNDER OTHER INDENTURES.
If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in
any other securities, of the obligor are outstanding, furnish the
following information:
(a) Title of the securities outstanding under each other indenture.
Not applicable
(b) A brief statement of the facts relied upon as a basis for the
claim that no conflicting interest within the meaning of
Section 310(b)(1) of the Act arises as a result of the
trusteeship under such other indenture, including a statement
as to how the indenture securities will rank as compared with
the securities issued under such other indenture.
Not applicable
<PAGE>
ITEM 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR
OR UNDERWRITERS.
If the trustee or any of the directors or executive officers of the
trustee is a director, officer, partner, employee, appointee, or
representative of the obligor or of any underwriter for the obligor,
identify each such person having any such connection and state the
nature of each such connection.
Not applicable
ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS OFFICIALS.
Furnish the following information as to the voting securities of the
trustee owned beneficially by the obligor and each director, partner
and executive officer of the obligor.
Not applicable
ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR
OFFICIALS.
Furnish the following information as to the voting securities of the
trustee owned beneficially by each underwriter for the obligor and
each director, partner, and executive officer of each such
underwriter.
Not applicable
ITEM 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
Furnish the following information as to securities of the obligor
owned beneficially or held as collateral security for obligations in
default by the trustee:
Not applicable
ITEM 9. SECURITIES OF THE UNDERWRITER OWNED OR HELD BY THE TRUSTEE.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of an underwriter for the
obligor, furnish the following information as to each class of
securities of such underwriter any of which are so owned or held by
the trustee.
Not applicable
<PAGE>
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
If the trustee owns beneficially or holds as collateral security for
obligations in default voting securities of a person who, to the
knowledge of the trustee (l) owns 10 percent or more of the voting
securities of the obligor or (2) is an affiliate, other than a
subsidiary, of the obligor, furnish the following information as to
the voting securities of such person.
Not applicable
ITEM 11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON
OWNING 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of a person who, to the
knowledge of the trustee, owns 50 percent or more of the voting
securities of the obligor, furnish the following information as to
each class of securities of such person any of which are so owned or
held by the trustee.
Not applicable
ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
If the obligor is indebted to the trustee, furnish the following
information.
Not applicable
ITEM 13. DEFAULTS BY THE OBLIGOR.
(a) State whether there is or has been a default with respect to
the securities under this indenture. Explain the nature of any
such default.
Not applicable
(b) If the trustee is a trustee under another indenture under
which any other securities, or certificates of interest or
participation in any other securities, of the obligor are
outstanding, or is trustee for more than one outstanding
series of securities under the indenture, state whether there
has been a default under any such indenture or series,
identify the indenture or series affected, and explain the
nature of any such default.
Not applicable
<PAGE>
ITEM 14. AFFILIATIONS WITH THE UNDERWRITERS.
If any underwriter is an affiliate of the trustee, describe each
such affiliation.
Not applicable
ITEM 15. FOREIGN TRUSTEE.
Identify the order or rule pursuant to which the foreign trustee is
authorized to act as sole trustee under indentures qualified or to
be qualified.
Not applicable
ITEM 16. LIST OF EXHIBITS.
List below all exhibits filed as part of this statement of
eligibility and qualification.
1. A copy of the Articles of Association of LaSalle National Bank
now in effect.
2. A copy of the certificate of authority to commence business.
3. A copy of the authorization to exercise corporate trust powers.
4. A copy of the existing By-Laws of LaSalle National Bank.
5. Not applicable.
6. The consent of the trustee required by Section 321(b) of the
Trust Indenture Act of 1939.
7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its supervising
or examining authority.
8. Not applicable.
9. Not applicable.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
LaSalle National Bank, a corporation organized and existing under the laws of
the United States of America, has duly caused this statement of eligibility and
qualification to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Chicago, State of Illinois, on the 10th day of
February 1998.
LaSalle National Bank
By:/S/CYNTHIA REIS
Cynthia Reis
Vice President
<PAGE>
EXHIBIT 1
ARTICLES OF ASSOCIATION
<PAGE>
ARTICLES
OF
ASSOCIATION
LA SALLE NATIONAL BANK (LOGO)
LA SALLE NATIONAL BANK
CHICAGO, ILLINOIS
<PAGE>
(LOGO)
LaSalle National Bank
ARTICLES OF ASSOCIATION
FIRST. The title of this association, which shall carry on the business of
banking under the laws of the United States shall be "LaSalle National Bank."
SECOND. The place where the main banking house or office of this
association shall be located, its operations of discount and deposit carried on,
and its general business conducted, shall be Chicago, County of Cook, State of
Illinois.
THIRD. The Board of Directors of this association shall consist of such
number of its shareholders, not less than five nor more than twenty-five, as
from time to time shall be determined by a majority of the votes to which all of
its shareholders are at the time entitled. A majority of the Board of Directors
shall be necessary to constitute a quorum for the transaction of business. The
Board of Directors, by vote of a majority of the full board, may, between annual
meetings of shareholders increase the membership of the Board where the number
of directors last elected by shareholders was 15 or less, by not more than two
members, and where the number of directors last elected by shareholders was 16
or more, by not more than four members and by a like vote appoint qualified
persons to fill the vacancies created thereby; provided that the number of
Directors shall at no time exceed twenty-five.
FOURTH. The regular annual meeting of the shareholders of this association
shall be held at its main banking house, or other convenient place duly
authorized by the board of directors on such day of each year as is specified
therefor in the bylaws.
FIFTH. The amount of capital stock which this association is authorized to
issue shall be Twenty Million Dollars ($20,000,000.00) divided into 2,000,000
shares of common capital stock of the par value of $10.00 each; but said capital
stock may be increased or decreased from time to time, in accordance with the
provisions of the laws of the United States.
If the capital stock is increased by the sale of additional shares
thereof, other than to key officers and employees of the association upon the
exercise of options granted pursuant to the terms of a stock option plan then in
effect, as to which sales all pre-emptive rights are waived, each shareholder
shall be entitled to subscribe for such additional shares in proportion to the
number of shares of said capital stock owned by him at the time the increase is
authorized by the shareholders, unless another time subsequent to the date of
the shareholders' meeting is specified in a resolution adopted by the
shareholders at the time the increase is authorized. The board of directors
shall have the power to prescribe a reasonable period of time within which the
pre-emptive rights to subscribe to the new shares of capital stock may be
exercised.
The association, at any time and from time to time, may authorize and
issue debt obligations, whether or not subordinated, without the approval of the
shareholders.
SIXTH. The board of directors shall appoint one of its members president
of this association, who shall be chairman of the board, but the board of
directors may appoint a director in lieu of the president to be chairman of the
board, who shall perform such duties as may be designated by the board of
directors. The board of directors shall have the power to appoint one or more
vice presidents, a cashier and such other officers as may be required to
transact the business of this association; to tax the salaries to be paid to all
officers of this association; and to dismiss such officers, or any of them.
<PAGE>
The board of directors shall have the power to define the duties of
officers and employees of this association, to require bonds from them, and to
fix the penalty thereof; to regulate the manner in which directors shall be
elected or appointed, and to appoint judges of the election; to make all bylaws
that it may be lawful for them to make for the general regulation of the
business of this association and the management of its affairs; and generally to
do and perform all acts that it may be lawful for a board of directors to do and
perform.
SEVENTH. This association shall have succession from the date of its
organization certificate until such time as it be dissolved by act of its
shareholders in accordance with the provisions of the banking laws of the United
States, or until its franchise becomes forfeited by reason of violation of law,
or until terminated by either a general or a special act of Congress, or until
its affairs be placed in the hands of a receiver and finally wound up by him.
EIGHTH. The board of directors of this association, or any three or more
shareholders owning, in the aggregate, not less than ten per centum of the stock
of this association, may call a special meeting of shareholders at any time:
Provided, however, that, unless otherwise provided by law, not less than ten
days prior to the date fixed for any such meeting, a notice of the time, place,
and purpose of the meeting shall be given by first-class mail, postage prepaid,
to all shareholders of record of this association at their respective addresses
as shown upon the books of the association. These articles of association may be
amended at any regular or special meeting of the shareholders by the affirmative
vote of the shareholders owning at least a majority of the stock of this
association, subject to the provisions of the banking laws of the United States.
The notice of any shareholders' meeting, at which an amendment to the articles
of association of this association is to be considered, shall be given as
herein-above set forth.
NINTH. Any person, his heirs, executors, or administrators, may be
indemnified or reimbursed by the association for reasonable expenses actually
incurred in connection with any action, suit, or proceeding, civil or criminal,
to which he or they shall be made a party by reason of his being or having been
a director, officer, or employee of the association or of any firm, corporation,
or organization which he served in any such capacity at the request of the
association: Provided, however, that no person shall be so indemnified or
reimbursed in relation to any matter in such action, suit, or proceeding as to
which he shall finally be adjudged to have been guilty of or liable for
negligence or wilful misconduct in the performance of his duties to the
association: And, provided further, that no person shall be so indemnified or
reimbursed in relation to any matter in such action, suit, or proceeding which
has been made the subject of a compromise settlement except with the approval of
a court of competent jurisdiction, or the holders of record of a majority of the
outstanding shares of the association, or the board of directors, acting by vote
of directors not parties to the same or substantially the same action, suit, or
proceeding, constituting a majority of the whole number of the directors. The
foregoing right of indemnification or reimbursement shall not be exclusive of
other rights to which such person, his heirs, executors, or administrators, may
be entitled as a matter of law.
**********
<PAGE>
EXHIBIT 2
CERTIFICATE OF AUTHORITY
TO COMMENCE BUSINESS
<PAGE>
STATE OF ILLINOIS
AUDITOR'S OFFICE
NO. 333 (LOGO)
NATIONAL BANK TRUST CERTIFICATE
Springfield, FEBRUARY 15th 1928
I, OSCAR NELSON, Auditor of Public Accounts of the State of Illinois, do
hereby certify that the NATIONAL BUILDERS BANK OF CHICAGO located at CHICAGO,
County of COOK and State of Illinois, a corporation organized under and by
authority of the statutes of the United States governing National Banks and
authority granted by the Federal Reserve Act for the purpose of accepting and
executing trusts, has this day deposited in this office, securities in the sum
of TWO HUNDRED THOUSAND Dollars, $200,000.00 of the character designated by
Section 6 of the Act of the Legislature of the State of Illinois entitled "An
Act to provide for and regulate the administration of trusts by trust
companies,"
The said deposit is made for the benefit of the creditors of said NATIONAL
BUILDERS BANK OF CHICAGO under and by virtue of the provisions of the Act above
referred to and the said securities are now held by me in this office in my
official capacity as such Auditor of Public Accounts, for the uses and purposes
aforesaid.
I further certify that by virtue of the Acts aforesaid, the NATIONAL
BUILDERS BANK OF CHICAGO is hereby authorized to accept and execute trusts and
receive deposits of trust funds under the provisions and limitations of "An Act
to provide for and regulate the administration of trusts in Illinois.
IN TESTIMONY WHEREOF, I hereunto subscribe my name and affix
the seal of (SEAL) my office, the day and year first above written.
/S/ OSCAR NELSON
AUDITOR OF PUBLIC ACCOUNTS.
STATE OF ILLINOIS.
<PAGE>
NO.13146.
TREASURY DEPARTMENT (LOGO)
OFFICE OF COMPTROLLER OF THE CURRENCY
Washington, D.C., NOVEMBER 29, 1927
WHEREAS, by satisfactory evidence presented to the undersigned, it has
been made to appear that "NATIONAL BUILDERS BANK OF CHICAGO" in the CITY of
CHICAGO in the County of COOK and State of ILLINOIS has complied with all the
provisions of the Statutes of the United States, required to be complied with
before an association shall be authorized to commence the business of Banking;
NOW THEREFORE 1, J.W. MCINTOSH, Comptroller of the Currency, do hereby
certify that "NATIONAL BUILDERS BANK OF CHICAGO" in the CITY of CHICAGO in the
County of COOK and State of ILLINOIS is authorized to commence the business of
Banking as provided in Section Fifty one hundred and sixty nine of the Revised
Statutes of the United States.
IN TESTIMONY WHEREOF witness my hand and Seal of (SEAL) office
this (SEAL) TWENTY-NINTH day of NOVEMBER, 1927.
/S/ J.W. MCINTOSH
Comptroller of the Currency
<PAGE>
CERTIFICATE OF CHANGE OF CORPORATE TITLE
(LOGO)
NO. 13146.
TREASURY DEPARTMENT
OFFICE OF THE COMPTROLLER OF THE CURRENCY
WASHINGTON D.C.. MAY 1 1940.
WHEREAS, by satisfactory evidence presented to me, it appears that under
authority of sections 2, 3, and 4, of the Act of Congress approved May 1, 1886,
entitled "An Act to enable national banking associations to increase their
capital stock and to change their names or location," shareholders owning
two-thirds of the stock of the national banking association heretofore known
as-- "NATIONAL BUILDERS BANK OF CHICAGO," located in CHICAGO, County of COOK,
State of ILLINOIS, have voted to change the name of said association to--
"LASALLE NATIONAL BANK," and have complied with all the provisions of the said
Act relative to national banking associations changing their name.
NOW, THEREFORE, IT IS HEREBY CERTIFIED, that the name of the said
association has been changed to-- "LASALLE NATIONAL BANK," and that such change
of name is hereby approved under authority conferred by said Act.
(SEAL) IN TESTIMONY WHEREOF, witness my hand and seal of office this
FIRST day of MAY, 1940.
/S/____________________________
ACTING Comptroller of the Currency.
<PAGE>
EXHIBIT 3
AUTHORIZATION TO EXERCISE
CORPORATE TRUST POWERS
<PAGE>
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM [LETTERHEAD]
WASHINGTON
May 9, 1940
LaSalle National Bank,
Chicago, Illinois.
Gentlemen:
The Board of Governors of the Federal Reserve System has been officially
advised by the Comptroller of the Currency that on May 1, 1940, National
Builders Bank of Chicago, Chicago, Illinois, changed its title to LaSalle
National Bank, and accordingly there is enclosed herewith a certificate showing
that LaSalle National Bank has authority to exercise the fiduciary powers
enumerated therein.
Kindly acknowledge receipt of this certificate.
Very truly yours,
S. R. CARPENTER
S. R. Carpenter,
Assistant Secretary.
Enclosure
<PAGE>
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
I, S. R. Carpenter, Assistant Secretary of the Board of Governors of the
Federal Reserve System (formerly known as the Federal Reserve Board), do hereby
certify that it appears from the records of the Board of Governors of the
Federal Reserve System that:
(1) Pursuant to the authority vested in the Federal Reserve Board by an
Act of Congress approved December 23, 1913, known as the Federal Reserve Act, as
amended, the Federal Reserve Board on December 8, 1927, granted to National
Builders Bank of Chicago, Chicago, Illinois, the right to act, when not in
contravention of State or local law, as trustee, executor, administrator,
registrar of stocks and bonds, guardian of estates, assignee, receiver,
committee of estates of lunatics, or in any other fiduciary capacity in which
State banks, trust companies or other corporations which come into competition
with national banks are permitted to act under the laws of the State of
Illinois;
(2) Under the provisions of an Act of Congress approved May 1, 1886,
National Builders Bank of Chicago, Chicago, Illinois, on May 1, 1940, changed
its title to LaSalle National Bank; and
(3) By virtue of the foregoing, LaSalle National Bank, Chicago, Illinois,
has authority to act, when not in contravention of State or local law, as
trustee, executor, administrator, registrar of stocks and bonds, guardian of
estates, assignee, receiver, committee of estates of lunatics, or in any other
fiduciary capacity in which State banks, trust companies or other corporations
which come into competition with national banks are permitted to act under the
laws of the State of Illinois, subject to regulations prescribed by the Board of
Governors of the Federal Reserve System.
IN WITNESS WHEREOF, I have hereunto subscribed my name and caused the seal
of the Board of Governors of the Federal Reserve System to be affixed at the
City of Washington in the District of Columbia.
/S/ S. R. CARPENTER
Assistant Secretary.
Dated May 9, 1940
<PAGE>
EXHIBIT 4
BY-LAWS OF LA SALLE NATIONAL BANK
<PAGE>
BYLAWS
OF
LA SALLE NATIONAL BANK
CHICAGO, ILLINOIS
LA SALLE NATIONAL BANK (LOGO)
Organized Under the National Banking Laws
of the United States
<PAGE>
BYLAWS
of the
LA SALLE NATIONAL BANK
(a National Banking Association which association
is herein referred to as the "bank")
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1.1 ANNUAL MEETING. The regular annual meeting of the shareholders
for the election of directors and the transaction of whatever other business may
properly come before the meeting, shall be held at the main office of the Bank,
135 South LaSalle Street, Chicago, Illinois, or such other place as the Board of
Directors may designate, at 9:00 A.M., on the third Wednesday of March of each
year. Notice of such meeting shall be mailed, postage prepaid, at least ten days
prior to the date thereof, addressed to each shareholder at his address
appearing on the books of the Bank. If for any cause, an election of directors
is not made on the said day, the Board of Directors shall order the election to
be held on some subsequent day as soon thereafter as practicable, according to
the provisions of law; and notice thereof shall be given in the manner herein
provided for the annual meeting.
SECTION 1.2 SPECIAL MEETINGS. Except as otherwise specifically provided by
statute, special meetings of the shareholders may be called for any purpose at
anytime by the board of directors or by any three or more shareholders owning,
in the aggregate, not less than ten percent of the stock of the bank. Every such
special meeting, unless otherwise provided by law, shall be called by mailing,
postage pre-paid, not less than ten days prior to the date fixed for such
meeting, to each shareholder at his address appearing on the books of the bank,
a notice stating the purpose of the meeting.
SECTION 1.3 NOMINATIONS FOR DIRECTOR. Nominations for election to the
board of directors may be made by the board of directors or by any shareholder
of any outstanding class of capital stock of the bank entitled to vote for the
election of directors. Nominations, other than those made by or on behalf of the
existing management of the bank, shall be made in writing and shall be delivered
or mailed to the president of the bank and to the Comptroller of the Currency,
Washington, D.C., not less than 14 days nor more than 50 days prior to any
meeting of shareholders called for the election of directors, provided, however,
that if less than 21 days' notice of the meeting is given to the shareholders,
such nomination shall be mailed or delivered to the president of the bank and to
the Comptroller of the Currency not later than the close of business on the
seventh day following the day on which the notice of meeting was mailed. Such
notification shall contain the following information to the extent known to the
notifying shareholder: (a) the name and address of each proposed nominee; (b)
the principal occupation of each proposed nominee; (c) the total number of
shares of capital stock of each proposed nominee; (d) the name and address of
the notifying shareholder; and (e) the number of shares of capital stock of the
bank owned by the notifying shareholder. Nominations not made in accordance
herewith, may, in his discretion, be disregarded by the chairman of the meeting,
and upon his instructions, the vote tellers may disregard all votes cast for
each such nominee.
SECTION 1.4 JUDGES OF ELECTION. Every election of directors shall be
managed by three judges, who shall be appointed by the board of directors prior
to the time of said election. The judges of election shall hold and conduct the
election at which they are appointed to serve; and after the election, they
shall file with the cashier a certificate under their hands, certifying the
result thereof and the names of the directors elected. The judges of election.
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at the request of the chairman of the meeting, shall act as tellers of any other
vote by ballot taken at such meeting, and shall certify the result thereof.
SECTION 1.5 PROXIES. Shareholders may vote at any meeting of the
shareholders by proxies duly authorized in writing, but no officer or employee
of this bank shall act as proxy. Proxies shall be valid only for one meeting, to
be specified therein, and any adjournments of such meeting. Proxies shall be
dated and shall be filed with the records of the meeting.
SECTION 1.6 QUORUM. A majority of the outstanding capital stock,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders, unless otherwise provided by law; but less than a quorum may
adjourn any meeting, from time to time, and the meeting may be held, as
adjourned, without further notice. A majority of the votes cast shall decide
every question or matter submitted to the shareholders at any meeting, unless
otherwise provided by law or by the articles of association .
ARTICLE II
DIRECTORS
SECTION 2.1 BOARD OF DIRECTORS. The board of directors (hereinafter
referred to as the "board"), shall have power to manage and administer the
business affairs of the bank. Except as expressly limited by law, all corporate
powers of the bank shall be vested in and may be exercised by said board.
SECTION 2.2 NUMBER. The board shall consist of not less than five or more
than twenty-five shareholders, the exact number within such minimum and maximum
limits to be fixed and determined from time to time by resolution of a majority
of the full board or by resolution of the shareholders at any meeting thereof;
provided, however, that a majority of the full board may not increase the number
of directors by more than two if the number of directors last elected by
shareholders was fifteen or less and by not more than four where the number of
directors last elected by shareholders was sixteen or more, provided that in no
event shall the number of directors exceed twenty-five.
SECTION 2.3 ORGANIZATION MEETING. The cashier, upon receiving the
certificate of the judges, of the result of any election, shall notify the
directors-elect of their election and of the time at which they are required to
meet at the main office of the bank for the purpose of organizing the new board
and electing and appointing officers of the bank for the succeeding year. Such
meeting shall be appointed to be held on the day of election or as soon
thereafter as practicable, and, in any event, within thirty days thereof. If, at
the time fixed for such meeting, there shall not be a quorum present the
directors present may adjourn the meeting, from time to time, until a quorum is
obtained.
SECTION 2.4 REGULAR MEETINGS. The regular meetings of the board shall be
held, without notice, on the third Wednesday of each month at the main office.
When any regular meeting of the board falls upon a holiday, the meeting shall be
held on the next banking business day unless the board shall designate some
other day.
SECTION 2.5 SPECIAL MEETINGS. Special meetings of the board may be called
by the chairman of the board, the president, or at the request of three or more
directors. Each member of the board shall be given notice stating the time and
place, by telegram, letter or in person, of each such special meeting.
SECTION 2.6 QUORUM. A majority of the directors shall constitute a quorum
at any meeting, except when otherwise provided by law; but a less number may
adjourn any meeting from time to time, and the meeting may be held, as
adjourned, without further notice.
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SECTION 2.7 VACANCIES. When any vacancy occurs among the directors, the
remaining members of the board, in accordance with the laws of the United
States, may appoint a director to fill such vacancy at any regular meeting of
the board, or at a special meeting called for that purpose.
SECTION 2.8 RETIREMENT POLICY. A retirement policy adopted by the board of
directors shall be applicable to directors who are not active officers of the
bank.
ARTICLE III
COMMITTEES OF THE BOARD
SECTION 3.1 EXECUTIVE COMMITTEE. There shall be an executive committee of
the board. The members of the executive committee shall be chosen by the board
from time to time, shall hold office during its pleasure, and shall consist of
the chairman of the board, the chairman of the executive committee selected by
the board, who may but need not be the same person designated to be president,
and the president, ex officio, and not less than seven additional members of the
board who shall not be active officers of the bank. It shall be the duty of this
committee to exercise such powers and perform such duties in respect to the
making of loans and discounts as shall from time to time be specified by
resolution of the board. During such periods as the board shall not be in
session, the executive committee shall have and may exercise all the powers of
the board except such as are by law or by these bylaws required to be exercised
only by the board. The executive committee may make rules for holding and
conducting its meetings and keep in the minute book of the bank a report of all
action taken which shall be submitted for approval at each regular meeting of
the board and the action of the board shall be recorded in the minutes of that
meeting. A quorum of the executive committee shall consist of not less than five
of its members, at least three of whom shall not be active officers of the bank.
The chairman of the board, or in his absence in the order named if present, the
chairman of the executive committee or the president, may designate any director
who is not an active officer of the bank, or a designated member, to serve as a
member of the executive committee at any specified meeting. Vacancies in the
executive committee at any time existing may be filled by appointment by the
board. The board may at anytime revise or change the membership and chairmanship
of the executive committee and make new or additional appointments thereto. The
chairman of the executive committee shall be ex officio a member of all
committees except the examining committee and the trust audit committee, and
shall have such other duties as may from time to time be assigned him by the
board.
SECTION 3.2OFFICERS' COMPENSATION COMMITTEE. There shall be an officers'
compensation committee of the board. The members of the officers' compensation
committee shall consist of the members ex officio provided for in other sections
of these bylaws and not less than three additional non-officer members of the
board who shall be appointed by the board each year at its first meeting after
the directors have been elected and qualified. It shall be the duty of this
committee to study the compensation of all officers of the bank and from time to
time report their recommendations to the board; and such other duties, if any,
as may from time to time be assigned to it by the board. A majority of the
committee, including at least two non-officer members, shall be necessary for
the committee to keep records of its action.
SECTION 3.3 EXAMINING COMMITTEE. There shall be an examining committee of
the board. The members of the examining committee shall consist of the members
ex officio provided for in other sections of these bylaws, but exclusive of any
active officer of the bank and not less than three additional non-officer
members of the board who shall be appointed by the board each year at its first
meeting after the directors have been elected and qualified. It shall be the
duty of this committee to make an examination at least twice each year into the
affairs of the bank or to cause the examinations to be made by accountants (who
may be the bank's own accountants) responsible only to the board in such
examinations, and to report the result of such examinations in writing to the
board at the next regular meeting thereafter, or it may, at its sole discretion,
submit the reports of the national bank examiner or of the Chicago Clearing
House Association examination, with or without additional comments by the
committee itself, for, and in lieu
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<PAGE>
of its personal examinations. Such reports shall state whether the bank is in
sound condition, whether adequate internal audit controls and procedures are
being maintained and shall recommend to the board such changes in the manner of
doing business or conducting the affairs of the bank as shall be deemed
advisable.
SECTION 3.4 OTHER COMMITTEES. The board may appoint, from time to time,
from its own members, other committees of one or more persons, for such purposes
and with such powers as the board may determine.
ARTICLE IV
OFFICERS AND EMPLOYEES
SECTION 4.1 CHAIRMAN OF THE BOARD. The board shall appoint one of its
members to be chairman of the board. The chairman of the board shall supervise
the carrying out of the policies adopted or approved by the board. He shall have
general executive powers, as well as the specific powers conferred by these
bylaws. He shall be ex officio a member of all committees, except the examining
committee and the trust audit committee. He shall have general supervision and
direction of the business, affairs and personnel of the bank. He shall also have
and may exercise such further powers and duties as from time to time may be
conferred upon, or assigned to him by the board.
SECTION 4.2 VICE CHAIRMAN OF THE BOARD. The board may appoint one of its
members to be vice chairman of the board. He shall perform such duties as may
from time to time be assigned to him by the board.
SECTION 4.3 PRESIDENT. The board shall appoint one of its members to be
president of the bank. He shall be the chief executive officer and the chief
administrative officer of the bank and in the absence of the chairman of the
board, he shall preside at any meeting of the board at which he is present. The
president shall have general executive powers, and shall have and may exercise
any and all other powers and duties pertaining by law, regulation, or practice
to the office of president, or imposed by these bylaws. He shall be ex officio a
member of all committees, except the examining committee and trust audit
committee. He shall have general supervision of the business, affairs and
personnel of the bank and in the absence of the chairman of the board, shall
exercise the powers and perform the duties of the chairman of the board. He
shall also have and may exercise such further powers and duties as from time to
time may be conferred upon or assigned to him by the board.
SECTION 4.4 SENIOR OFFICERS. The board may appoint one or more executive
vice presidents and one or more senior vice presidents. Each such senior officer
shall have such powers and duties as may be assigned to him by the board, the
chairman of the board, or the president.
SECTION 4.5 VICE PRESIDENT. The board may appoint one or more vice
presidents. Each vice president shall have such powers and duties as may be
assigned to him by the board, the chairman of the board, or the president.
SECTION 4.6 CASHIER. The board shall appoint a cashier who shall have such
powers and duties as may be assigned to him by the board, the chairman of the
board, or the president. The cashier shall be custodian of the corporate seal,
records, documents and papers of the bank. He shall provide for keeping of
proper records of all transactions of the bank.
SECTION 4.7 SECRETARY. The board shall appoint a secretary who shall be
secretary of the bank. He shall also perform such duties as may be assigned to
him from time to time by the board. The board may appoint a secretary of the
board who shall keep accurate minutes of all meetings. He shall attend to the
giving of all notices; he shall also perform such other duties as may be
assigned to him from time to time by the board.
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SECTION 4.8 OTHER OFFICERS. The board may appoint one or more assistant
vice presidents, one or more trust officers, one or more assistant secretaries,
one or more assistant cashiers, and such other officers and attorneys-in-fact as
from time to time may appear to the board to be required or desirable to
transact the business of the bank. Such officers, respectively, shall exercise
such powers and perform such duties as pertain to their several offices or as
may be conferred upon or assigned to them by the board the chairman of the board
or the president.
SECTION 4.9 CLERKS AND AGENTS. The chairman of the board, the president,
or any other active officer of the bank authorized by the chairman of the board,
or the president, may appoint and dismiss all or any paying tellers receiving
tellers note tellers, vault custodians, bookkeepers and other clerks, agents and
employees as they may deem advisable for the prompt and orderly transaction of
the business of the bank, define their duties, fix the salaries to be paid them
and the conditions of their employment.
SECTION 4.10 RESPONSIBILITY FOR MONEYS, ETC. Each of the active officers
and clerks of this bank shall be responsible for all moneys, funds valuables and
property of every kind and description that may from time to time be entrusted
to his care or placed in his hands by the board or others, or that otherwise may
come into his possession as an active officer or clerk of this bank.
SECTION 4.11SURETY BONDS. All the active officers and clerks of this bank
may be covered by one of the blanket form bonds customarily written by the
surety companies, drawn for such an amount, and executed by such surety company,
as the board may from time to time require, and duly approve; or at the
discretion of the board, all such active officers and clerks shall, each for
himself, give such bond, with such security, and in such denominations as the
board may from time to time require and direct. All bonds approved by the board
shall assure the faithful and honest discharge of the respective duties of such
active officer or clerk and shall provide that such active officer or clerk
shall faithfully apply and account for all moneys, funds, valuables and property
of every kind and description that may from time to time come into his hands or
be entrusted to his care, and pay over and deliver the same to the order of the
board or to such other person or persons as may be authorized to demand and
receive the same.
SECTION 4.12 TERM OF OFFICE - OFFICER DIRECTOR. The chairman of the board,
the vice chairman of the board and the president, together with any other active
officers who may be duly elected members of the board, shall hold their
respective offices for the current year for which the board (of which they shall
be members) was elected and until their successors are appointed, unless they
shall resign, be disqualified, or be removed; and any vacancy occurring in the
office of the chairman of the board, the vice chairman of the board, the
president, or in the board, shall, if required by these bylaws, be filled by the
remaining members.
SECTION 4.13TERM OF OFFICE - OFFICER. The executive vice presidents, the
senior vice presidents, the vice presidents, the assistant vice presidents, the
cashier, the secretary, the trust officers and all other officers and
attorneys-in-fact who are not duly elected members of the board, shall be
appointed to hold their offices, respectively, during the pleasure of the board.
ARTICLE V
TRUST DEPARTMENT
SECTION 5.1 TRUST DEPARTMENT. There shall be a department of the bank
known as the trust department which shall perform the fiduciary responsibilities
of the bank.
SECTION 5.2 TRUST OFFICER. There shall be a senior vice president and
trust officer, or vice president and trust officer of this bank, who shall be
designated as the managing officer of the trust department and whose duties
shall be to manage, supervise and direct all the activities of the trust
department. He shall do, or cause to be done, all
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things necessary or proper in carrying on the business of the trust department
in accordance with provisions of law and regulations. He shall act pursuant to
opinion of counsel where such opinion is deemed necessary. Opinions of counsel
shall be retained on file in connection with all important matters pertaining to
fiduciary activities. The trust officer shall be responsible for all assets and
documents held by the bank in connection with fiduciary matters.
The board may appoint such other officers of the trust department as it
may deem necessary, with such duties as may be assigned to them by the board,
the chairman of the board, or the president.
SECTION 5.3 TRUST INVESTMENT COMMITTEE. There shall be appointed by the
board a trust investment committee of this bank composed of not less than four
members, including members ex officio provided for in other sections of these
bylaws, who shall be capable and experienced officers or directors of the bank.
All investments of funds held in a fiduciary capacity shall be made, retained or
disposed of only with the approval of the trust investment committee; and the
committee shall keep minutes of all its meetings, showing the disposition of all
matters considered and passed upon by it. The committee shall, promptly after
the acceptance of an account for which the bank has investment responsibilities,
review the assets thereof, to determine the advisability of retaining or
disposing of such assets. The committee shall conduct a similar review at least
once during each calendar year thereafter and within fifteen months of the last
such review. A report of all such reviews, together with the action taken as a
result thereof, shall be noted in the minutes of the committee. Three members of
the trust investment committee shall constitute a quorum, and any action
approved by a majority of those present shall constitute the action of the
committee.
SECTION 5.4 TRUST AUDIT COMMITTEE. The board shall appoint a committee of
not less than three directors, including members ex officio provided for in
other sections of these bylaws, exclusive of any active officers of the bank,
which shall at least once during each calendar year and within fifteen months of
the last such audit make suitable audits of the trust department, or cause
suitable audits to be made, by auditors responsible only to the board, and at
such time shall ascertain whether the department has been administered in
accordance with law, Regulation 9, and sound fiduciary principles.
Notwithstanding the provisions of this Section, the board at any time may assign
to the Examining Committee, in addition to the duties of the Examining Committee
set forth in Section 3.3 of these bylaws, all of the duties of the Trust Audit
Committee and during such time as the Examining Committee is performing the
duties of both committees, the Trust Audit Committee shall cease to function as
a committee of this board. The board at any time may reassign the duties
provided for in this Section to the Trust Audit Committee.
SECTION 5.5 TRUST DEPARTMENT FILES. There shall be maintained in the trust
department, files containing all fiduciary records necessary to assure that its
fiduciary responsibilities have been properly undertaken and discharged.
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SECTION 5.6 TRUST INVESTMENTS. Funds held in a fiduciary capacity shall be
invested in accordance with the instrument establishing the fiduciary
relationship and local law. Where such instrument does not specify the character
and class of investments to be made and does not vest in the bank a discretion
in the matter, fund shield pursuant to such instrument shall be invested in
investments in which corporate fiduciaries may invest under local law.
ARTICLE VI
STOCK AND STOCK CERTIFICATES
SECTION 6.1 TRANSFERS. Shares of capital stock shall be transferable on
the books of the bank and a transfer book shall be kept in which all transfers
of stock shall be recorded. Every person becoming a shareholder be such transfer
shall in proportion to his shares, succeed to all rights and liabilities of the
prior holder of such shares.
SECTION 6.2 STOCK CERTIFICATES. Certificates of capital stock shall bear
the signature of any one of, the chairman of the board, or the president (which
may be engraved, printed or impressed) and shall be signed manually or by
facsimile process by the secretary, assistant secretary, cashier, assistant
cashier, or any other officer appointed by the board for that purpose, to be
known as an authorized officer and the seal of the bank shall be engraven
thereon. Each certificate shall recite on its face that the stock represented
thereby is transferable, properly endorsed, only on the books of the bank.
ARTICLE VII
CORPORATE SEAL
SECTION 7.1 CORPORATE SEAL. The chairman of the board, the president, the
cashier, the secretary or any assistant cashier or assistant secretary, or other
officer thereunto designated by the board, shall have authority to affix the
corporate seal to any document requiring such seal, and to attest the same. Such
seal shall be substantially in the form set forth herein.
ARTICLE VIII
INDEMNIFYING OFFICERS AND DIRECTORS
SECTION 8.1 INDEMNIFYING OFFICERS AND DIRECTORS. Any person, his heirs,
executors or administrators, may be indemnified or reimbursed by the bank for
reasonable expenses actually incurred in connection with any action, suit or
proceeding, civil or criminal, to which he or they shall be made a party by
reason of his being or having been a director, officer or employee of the bank
or of any firm, corporation or organization which he served in any such capacity
at the request of the bank; provided, however, that no person shall be so
indemnified or reimbursed in relation to any matter in such action, suit or
proceeding as to which he shall finally be adjudged to have been guilty of or
liable for negligence or willful misconduct in the performance of his duties to
the bank; and, provided further, that no person shall be so indemnified or
reimbursed in relation to any matter in such action, suit or proceeding which
has been made the subject of a compromise settlement except with the approval of
a court of competent jurisdiction, or the holders of record of a majority of the
outstanding shares of the bank, or the board, acting by vote of directors not
parties to the same or substantially the same action suit or proceeding,
constituting a majority of the whole number of the directors. The foregoing
right of indemnification or reimbursement shall not be exclusive of other rights
to which such person, his heirs, executors or administrators, may be entitled as
a matter of law.
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ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 9.1 FISCAL YEAR. The fiscal year of the bank shall be the calendar
year.
SECTION 9.2 EXECUTION OF INSTRUMENTS. All agreements, indentures
mortgages, deeds, conveyances transfers certificates declarations, receipts,
discharges, releases, satisfactions, settlements, petitions, schedules,
accounts, affidavits, bonds, undertakings, proxies and other instruments or
documents may be signed, executed, acknowledged, verified, delivered or accepted
for the bank by the chairman of the board, or the vice chairman of the board, or
the president, or any executive vice president, or any senior vice president, or
any vice president, or the secretary or the cashier, or, if in connection with
the exercise of fiduciary powers of the bank by any of said officers or by any
officer in the trust department. Any such instruments may also be signed,
executed, acknowledged, verified, delivered or accepted for the bank in such
other manner and by such other officers as the board may from time to time
direct. The provisions of this Section 9.2 are supplementary to any other
provisions of these bylaws.
SECTION 9.3 RECORDS. The articles of association, the bylaws, and the
proceedings of all meetings of the shareholders and of the board shall be
recorded in appropriate minute books provided for the purpose; where these
bylaws so provide, the proceedings of standing committees of the board shall be
recorded in appropriate minute books provided for the purpose.
ARTICLE X
EMERGENCIES
SECTION 10.1 CONTINUATION OF BUSINESS. In the event of a state of
emergency of sufficient severity to interfere with the conduct and management of
the affairs of this bank, the officers and employees will continue to conduct
the affairs of the bank under such guidance from the directors as may be
available except as to matters which by statute require specific approval of the
board of directors and subject to conformance with any governmental directives
during the emergency.
SECTION 10.2 DESIGNATION OF PLACE OF BUSINESS. The offices of the bank at
which its business shall be conducted shall be the main office thereof located
at 135 South LaSalle Street, Chicago, Illinois, and any other legally authorized
location which may be leased or acquired by this bank to carry on its business.
During an emergency resulting in any authorized place of business of this bank
being unable to function, the business ordinarily conducted at such location
shall be relocated elsewhere in suitable quarters, in addition to or in lieu of
the locations heretofore mentioned, as may be designated by the board of
directors or by the executive committee or by such persons as are then, in
accordance with resolutions adopted from time to time by the board of directors
dealing with the exercise of authority in the time of such emergency, conducting
the affairs of this bank. Any temporarily relocated place of business of this
bank shall be returned to its legally authorized location as soon as practicable
and such temporary place of business shall then be discontinued.
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ARTICLE XI
BYLAWS
SECTION 11.1 INSPECTION. A copy of the bylaws with all amendments thereto,
shall at all times be kept in a convenient place at the main office of the bank
and shall be open for inspection to all shareholders, during banking hours.
SECTION 11.2 AMENDMENTS. The bylaws may be amended, altered or repealed,
at any regular meeting of the board, by a vote of a majority of the whole number
of the directors.
***
I _____________________ hereby certify that I am the _________________
Cashier/Secretary of LaSalle National Bank, Chicago, Illinois and that the
foregoing is a true and correct copy of the bylaws of this bank as amended and
that the same are in full force and effect ________ day of ____________________,
19____.
Cashier/Secretary
December 15, 1982
(SEAL)
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<PAGE>
EXHIBIT 5
NOT APPLICABLE
- 10 -
<PAGE>
EXHIBIT 6
LaSalle National Bank hereby consents in accordance with the provisions of
Section 321 (b) of the Trust Indenture Act of 1939, that reports of examinations
by Federal, State, Territorial and District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon its request therefor.
LA SALLE NATIONAL BANK
By: /S/ CYNTHIA REIS
Cynthia Reis
Vice President
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<PAGE>
EXHIBIT 7
Latest Report of Condition of
Trustee published pursuant to
law or the requirement of its
surviving or examining authority.
- 12 -
<PAGE>
LaSalle National Bank Call Date: 12/31/97 ST-BK: 17-1520 FFIEC 031
135 South LaSalle Street Page RC-1
Chicago, IL 60603 Vendor ID: D CERT: 15407 11
Transit Number: 71000505
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND
STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31, 1997
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
SCHEDULE RC - BALANCE SHEET
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A): RCFD
----
(a) Noninterest-bearing balances and currency and coin (1) 0081
(b) Interest-bearing balances (2) 0071 951,473 1.a
607 1.b
2. Securities:
(a) Held-to-maturity securities (from Schedule RC-B, column A) 1754 925,051 2.a
(b) Available-for-sale securities (from Schedule RC-B, column D) 1773
3,845,262 2.b
3. Federal funds sold and securities purchased under agreements to resell 1350 49,663 3.
4. Loans and lease financing receivables: RCFD
(a) Loans and leases, net of unearned income 2122 10,899,746 4.a
(b) LESS : Allowance for loan and lease losses 3123 200,986 4.b
(c) LESS: Allocated transfer risk reserve 3128 0 4.c
(d) Loans and leases, net of unearned income, allowance, and 2125 10,698,760 4.d
reserve (item 4.(a) minus 4.(b) and 4.(c))
5. Trading assets (from Schedule RC-D) 3545 59,618 5.
6. Premises and fixed assets (including capitalized leases) 2145 56,032 6.
7. Other real estate owned (from Schedule RC-M) 2150 2,273 7.
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M) 2130 0 8.
9. Customers' liability to this bank on acceptances outstanding 2155 13,630 9.
10. Intangible assets (from Schedule RC-M) 2143 20,083 10.
11. Other assets (from Schedule RC-F) 2160 218,814 11.
12. Total assets (sum of items 1 through 11) 2170 16,851,266 12.
</TABLE>
- ------------------
1. Includes cash items in process of collection and unposted debits.
2. Includes time certificates of deposit not held for trading.
- 13 -
<PAGE>
LaSalle National Bank Call Date: 12/31/97 ST-BK: 17-1520 FFIEC 031
135 South LaSalle Street Page RC-2
Chicago, IL 60603 Vendor ID: D CERT: 15407 12
Transit Number: 71000505
SCHEDULE RC - CONTINUED
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LIABILITIES
13. Deposits: RCON
(a) In domestic offices (sum of totals of columns A and C 2200 8,623,777 13.a
from Schedule RC-E, Part 1)
RCON
(1) Noninterest-bearing(1) 6631 2,317,951 13.a.1
(2) Interest-bearing 6636 6,305,826 13.a.2
RCFN 13.b
(b) Federal funds purchased and securities sold under
agreements to repurchase 2200 2,149,237
RCFN
(1) Noninterest-bearing 6631 0
(2) Interest-bearing 6636 2,149,237
RCFD 14.
14. Federal funds purchased and securities sold under agreements to 2800 1,913,845
repurchase
RCON
15. (a) Demand notes issued to the U.S. Treasury 2840 380,144 15.a
RCFD
(b) Trading liabilities 3548 30,006 15.b
16. Other borrowed money (includes mortgage indebtedness and
obligations under capitalized leases)
(a) with a remaining maturity of one year or less 2332 1,936,739 16.a
(b) With a remaining maturity of more than one year through A547 28,833 16.b
three years
(c) With a remaining maturity of more than three years A548 28,143 16.c
17. Not applicable.
18. Bank's liability on acceptances executed and outstanding 2920 13,630 18.
19. Subordinated notes and debentures (2) 3200 396,250 19.
20. Other liabilities (from Schedule RC-G) 2930 257,013 20.
21. Total liabilities (sum of items 13 through 20) 2948 15,757,617 21.
22. Not applicable.
EQUITY CAPITAL
RCFD 0 23.
23. Perpetual preferred stock and related surplus 3838
24. Common Stock 3230 18,417 24.
25. Surplus (exclude all surplus related to preferred stock) 3839 288,111 25.
</TABLE>
- 14 -
<PAGE>
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES
26. (a) Undivided profits and capital reserves 3632 737,758 26.a
(b) Net unrealized holding gains (losses) on available-for-sale 8434 39,363 26.b
securities
27. Cumulative foreign currency translation adjustments 3284 0 27.
28. Total equity capital (sum of items 23 through 27) 3210 1,083,649 28.
29. Total liabilities and equity capital (sum of items 21 and 28) 3300 16,841,266 29.
MEMORANDUM
TO BE REPORTED ONLY WITH THE MARCH REPORT OF CONDITION
1.= Indicate in the box at the right the number of the statement below that best describes the
most comprehensive level of auditing work performed for the bank by independent RCFD NUMBER
external auditors as of any date during 1996 6724 N/A M.1
1.= Independent audit of the bank conducted in accordance with 4.= Directors' examination of the bank
generally accepted auditing standards by a certified public performed by other external auditors
accounting firm which submits a report on the bank (may be required by state chartering
authority)
5.= Independent audit of the bank's parent holding company 5.= Review of the bank's financial
conducted in accordance with generally accepted auditing statements by external auditors
standards by a certified public accounting firm which submits a
report on the consolidated holding company (but not on the bank 6.= Compilation of the bank's financial
separately) statements by external auditors
7.= Directors' examination of the bank conducted in accordance with 7.= Other audit procedures (excluding
generally accepted auditing standards by a certified public tax preparation work)
accounting firm (may be required by state chartering authority)
8.= No external audit work
</TABLE>
- -----------------------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Includes limited-life preferred stock and related surplus.
- 15 -
<PAGE>
EXHIBIT 8
NOT APPLICABLE
<PAGE>
EXHIBIT 9
NOT APPLICABLE
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1997 (UNAUDITED) AND THE
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30,
1997 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 92
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 92
<PP&E> 164,543
<DEPRECIATION> 12,194
<TOTAL-ASSETS> 169,057
<CURRENT-LIABILITIES> 3,209
<BONDS> 0
0
0
<COMMON> 165,848
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 169,057
<SALES> 22,233
<TOTAL-REVENUES> 22,420
<CGS> 7,934
<TOTAL-COSTS> 7,934
<OTHER-EXPENSES> 6,263
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 724
<INCOME-PRETAX> 8,223
<INCOME-TAX> 0
<INCOME-CONTINUING> 724
<DISCONTINUED> 8,223
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,223
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
