SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement |_| Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Brown-Flournoy Equity Income Fund Limited Partnership
(Name of Registrant as Specified In Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
| | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
(2) Aggregate number of securities to which transaction applies:
N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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|X| Fee paid previously with preliminary materials:
$1,925.00
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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BROWN FLOURNOY EQUITY INCOME FUND LIMITED PARTNERSHIP
225 East Redwood Street
Baltimore, Maryland 21202
(410) 727-4083
Fax (410) 625/2694
October 27, 1997
Dear Limited Partners:
We are writing to request your consent to sell all of the real
estate assets (the "Sale") of Brown-Flournoy Equity Income Fund Limited
Partnership (the "Partnership") to Mid-America Apartments, L.P. (the
"Purchaser") and to amend the Agreement of Limited Partnership to permit the
Limited Partners to take such action by written consent (the "Amendment" and,
together with the Sale, the "Transaction").
A majority of the Partnership's outstanding limited
partnership interests ("Units") must consent to the Transaction in order for the
Transaction to be approved. After consummation of the Sale, the Partnership
will, in accordance with the Partnership's Agreement of Limited Partnership,
liquidate, dissolve and distribute its net assets to the registered holders of
Units ("Unitholders"). John F. Flournoy (the "Development General Partner") and
Brown Equity Income Properties, Inc. (the "Administrative General Partner" and,
together with the Development General Partner, the "General Partners") estimate
that such distribution (prior to any reduction due to state or local tax
withholding) will equal approximately $385 per $1,000 Unit, although the actual
amount distributed per Unit will vary depending on the date of each Unitholder's
admission to the Partnership.
We have enclosed a Consent Solicitation Statement, dated
October 27, 1997 (the "Solicitation Statement") and a form for indicating
whether or not you wish to grant your consent to the Sale and the Amendment (the
"Consent Form").
The enclosed materials discuss the terms of the Transaction in
detail, but we would like to summarize our reasons for recommending that you
consent to proceeding with the Transaction.
o We believe that the aggregate purchase price for the
Partnership's portfolio of properties, including the
assumption by the Purchaser of the Partnership's
liabilities, including mortgage indebtedness, of
approximately $30.0 million, represents an attractive
sales price for the properties.
o Competition among multifamily housing in each of the
Partnership's markets has increased significantly
over the past two years, resulting in a supply and
demand imbalance that has forced management to reduce
rents to retain and attract tenants. A sale at this
time takes advantage of a valuation based on
historically high operating results not yet impacted
by the current competitive environment.
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o The average age of the Partnership's properties is 10
years. A sale at this time will avoid the adverse
impact expected capital expenditure requirements in
future years could have on the Partnership's ability
to increase or maintain distributions to Unitholders.
The Solicitation Statement contains a complete discussion of
the advantages and disadvantages of the Transaction under the heading "GENERAL
PARTNER RECOMMENDATION." After carefully weighing the facts and circumstances
associated with the Transaction, as well as alternative courses of action, we
have concluded that the Sale and subsequent liquidation of the Partnership is an
attractive opportunity for Unitholders.
Therefore, we recommend that you approve the Transaction by
signing and returning the enclosed Consent Form in the accompanying
postage-prepaid envelope, by overnight courier or by facsimile to the address or
facsimile number below. Your participation is extremely important. Please note
that this solicitation will expire at 5:00 P.M., Eastern Standard Time, on
November 14, 1997 unless extended by the General Partners in their discretion.
If you have any questions or would like additional copies of
the enclosed materials, please feel free to contact the Partnership at 225 East
Redwood Street, Baltimore, Maryland 21202; telephone number (410) 727-4083;
facsimile number (410) 625-2694.
Sincerely,
Brown-Flournoy Equity Income Fund
Limited Partnership
By: Brown Equity Income Properties, Inc.
Administrative General Partner
By: /s/ John M. Prugh
John M. Prugh
President
By: /s/ John F. Flournoy
John F. Flournoy
Development General Partner
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BROWN-FLOURNOY EQUITY INCOME FUND
LIMITED PARTNERSHIP
CONSENT SOLICITATION STATEMENT
INTRODUCTION
This Consent Solicitation Statement (this "Statement") is being
furnished to holders ("Unitholders") of record of $1,000 units ("Units") of
Class A Limited Partnership interests in Brown- Flournoy Equity Income Fund
Limited Partnership (the "Partnership"), as of the close of business on October
17, 1997 (the "Record Date"), in connection with the solicitation (the
"Solicitation") of consents, upon the terms and subject to the conditions of
this Statement and the accompanying form of consent (the "Consent Form"), by
Brown Equity Income Properties, Inc. (the "Administrative General Partner") and
John F. Flournoy (the "Development General Partner" and, together with the
Administrative General Partner, the "General Partners"), the general partners of
the Partnership, on behalf of the Partnership, to (i) the proposed sale of the
Properties (as defined below) to Mid-America Apartments, L.P., a Tennessee
limited partnership (the "Purchaser"), pursuant to a Purchase and Sale Agreement
dated as of October 14, 1997, between the Partnership and the Purchaser (the
"Purchase Agreement"), the text (excluding the schedules and exhibits thereto)
of which is attached as Annex I hereto and incorporated herein by reference (the
sale of the Properties and the other transactions contemplated by the Purchase
Agreement are hereinafter referred to collectively as the "Sale"), and (ii) the
amendment (the "Amendment" and, together with the Sale, the "Transaction") of
the Amended and Restated Agreement of Limited Partnership of the Partnership,
dated as of October 26, 1986, pursuant to which the Partnership was formed (as
amended, supplemented or otherwise modified from time to time, the "Partnership
Agreement") to the extent necessary to permit the consummation of the Sale as
contemplated in this Statement. Upon consummation of the Sale, the Partnership
will receive approximately $9,625,000 in cash consideration, as adjusted by the
prorations described in the Purchase Agreement. After the consummation of the
Sale, the Partnership will, in accordance with the Partnership Agreement,
distribute the net proceeds of the Sale and the Partnership's remaining net
assets to Unitholders. The General Partners presently estimate that such
distribution (after establishing a reserve for payment of any obligations
relating to the ownership, management and operation of the Partnership's
properties prior to the closing of the Sale) will equal approximately $385 per
Unit (prior to any reduction due to state or local tax withholding). The actual
amount distributed per Unit may vary for each Unitholder depending on the date
of such Unitholder's admission to the Partnership. To date, based on the first
admission date, the Partnership has distributed $987 per Unit from operations,
cash reserves and refinancing proceeds.
See "LIQUIDATION OF PARTNERSHIP; DISTRIBUTION OF PROCEEDS."
This Statement and the enclosed Consent Form are first being mailed to
Unitholders on or about October 27, 1997.
This Statement, including the Purchase Agreement attached hereto,
contains important information which should be read before any decision is made
with respect to the Solicitation. All statements in this Statement are qualified
in their entirety by reference to the Purchase Agreement
attached hereto as Annex I (excluding schedules and exhibits). Unitholders are
urged also to read the text of the Purchase Agreement.
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THE GENERAL PARTNERS RECOMMEND THAT UNITHOLDERS CONSENT TO
THE TRANSACTION.
THIS SOLICITATION OF CONSENTS WILL EXPIRE AT 5:00 P.M., EASTERN
STANDARD TIME, ON NOVEMBER 14, 1997 (THE "EXPIRATION DATE"), UNLESS EXTENDED BY
THE GENERAL PARTNERS IN THEIR SOLE DISCRETION. CONSENT FORMS MAY BE REVOKED AT
ANY TIME UNTIL THE EXPIRATION DATE, BUT MAY NOT BE REVOKED THEREAFTER.
Questions and requests for assistance or additional copies of the
Solicitation documents may be directed to the Administrative General Partner at
the Partnership's principal executive office at 225 East Redwood Street,
Baltimore, Maryland 21202, Attention: Taylor Classen; Telephone Number: (410)
727- 4083; Facsimile Number: (410) 625-2694.
DESCRIPTION OF THE SOLICITATION
Purpose of the Solicitation
Upon the terms and subject to the conditions set forth in this
Statement and in the accompanying Consent Form, the General Partners on behalf
of the Partnership are soliciting consents from Unitholders for the purpose of
approving the proposed Transaction. See "DESCRIPTION OF THE TERMS OF THE
PURCHASE AGREEMENT," "DESCRIPTION OF THE SALE," "THE AMENDMENT" and "USE OF
PROCEEDS."
The cost of preparing, assembling, printing and mailing this Statement
and the enclosed Consent Form, and the cost of soliciting Consent Forms, will be
borne by the Purchaser, unless the Sale is not consummated, in which case such
costs will be borne by the Development General Partner. Solicitation of the
Consent Forms will be made initially by mail. In addition to solicitation by
mail, Consent Forms may also be solicited personally, by telephone or by
facsimile by directors, officers or other regular employees of the
Administrative General Partner. No additional compensation will be paid to
directors, officers or other regular employees of the Administrative General
Partner for such services. FDC (as defined below) has retained MacKenzie
Partners, Inc. at an estimated cost of $5,000, plus reimbursement of expenses,
to assist in the solicitation of consents.
Expiration Date; Extension; Amendment
This Statement is furnished in connection with the solicitation of
Consent Forms by the General Partners to the Transaction, as contemplated by the
Purchase Agreement. The Solicitation will expire at 5:00 p.m., Eastern Standard
Time, on the Expiration Date, unless extended by the General Partners in their
sole discretion. The Partnership expressly reserves the right, in the sole
discretion of the General Partners, (i) to extend the Expiration Date, from time
to time, until the Requisite Consents (as defined below) have been obtained, and
(ii) to amend, at any time or from time to time before the Requisite Consents
are obtained, the terms of the Solicitation. As promptly as practicable
following any such extension or amendment, notice thereof shall be given by the
Partnership to each Unitholder in writing.
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Record Date; Requisite Consents
The Partnership has fixed the close of business on October 17, 1997, as
the Record Date for determining the Unitholders entitled to notice of and to
consent to the Transaction. Only Unitholders on the Record Date or their duly
designated proxies may execute and deliver a Consent Form. As of the Record
Date, there were 27,000 Units outstanding held by approximately 1,155 holders of
record. Such holders are entitled to one vote per Unit. The General Partners are
seeking the consent of the holders of a majority of the issued and outstanding
Units (the "Requisite Consents") for (i) the disposition of substantially all of
the Partnership's assets, and (ii) an amendment of the Partnership Agreement (as
provided in the Section entitled "THE AMENDMENT").
Consent Procedures
UNITHOLDERS WHO DESIRE TO CONSENT TO THE TRANSACTION SHOULD DO SO BY
MARKING THE APPROPRIATE BOX ON THE CONSENT FORM INCLUDED HEREWITH, AND
COMPLETING, SIGNING, DATING AND DELIVERING THE CONSENT FORM TO THE PARTNERSHIP
BY MAIL IN THE SELF-ADDRESSED, POSTAGE-PAID ENVELOPE ENCLOSED FOR THAT PURPOSE,
BY OVERNIGHT COURIER OR BY FACSIMILE AT THE ADDRESS OR FACSIMILE NUMBER SET
FORTH ABOVE AND ON THE CONSENT FORM, ALL IN ACCORDANCE WITH THE INSTRUCTIONS
CONTAINED HEREIN AND THEREIN.
All Consent Forms that are properly completed, signed and delivered to
the Partnership and not properly revoked (See "Revocation of Instructions"
below) prior to the Expiration Date, will be given effect in accordance with the
specifications thereof. IF A CONSENT FORM IS DELIVERED AND NEITHER THE "CONSENT"
NOR THE "DOES NOT CONSENT" NOR THE "ABSTAIN" BOX IS MARKED WITH RESPECT TO THE
TRANSACTION, BUT THE CONSENT FORM IS OTHERWISE PROPERLY COMPLETED AND SIGNED,
THE UNITHOLDER WILL BE DEEMED TO HAVE CONSENTED TO THE TRANSACTION.
Consent Forms must be executed in exactly the same manner as the
name(s) in which ownership of the Units is registered. If the Units to which a
Consent Form relates are held by two or more joint holders, all such holders
should sign the Consent Form. If a Consent Form is signed by a trustee, partner,
executor, administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary, agency or representative capacity, such
person must so indicate when signing and must submit with the Consent Form
evidence satisfactory to the Partnership of authority to execute the Consent
Form.
The execution and delivery of a Consent Form will not affect a
Unitholder's right to sell or transfer the Units. All Consent Forms received by
the Partnership (and not properly revoked) prior to the Expiration Date will be
effective notwithstanding a record transfer of such Units subsequent to the
Record Date, unless the Unitholder revokes such Consent Form prior to 5:00 p.m.,
Eastern Standard Time, on the Expiration Date by following the procedures set
forth under "Revocation of Instructions" below.
All questions as to the validity, form and eligibility (including time
of receipt) regarding the consent procedures will be determined by the General
Partners in their sole discretion, which determination will be conclusive and
binding. The Partnership reserves the right to reject any or all Consent Forms
that are not in proper form. The Partnership also reserves the right to waive
any defects,
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irregularities or conditions of delivery as to particular Consent Forms. Unless
waived, all such defects or irregularities in connection with deliveries of
Consent Forms must be cured within such time as the General Partners determine.
Neither the General Partners nor any of their affiliates or any other persons
shall be under any duty to give any notification of any such defects or
irregularities or waivers, nor shall any of them incur any liability for failure
to give such notification. Deliveries of Consent Forms will not be deemed to
have been made until any irregularities or defects therein have been cured or
waived. The interpretations of the terms and conditions of this Solicitation by
the General Partners shall be conclusive and binding.
Revocation of Instructions
Any Unitholder who has delivered a Consent Form to the Partnership may
revoke the instructions set forth in such Consent Form by delivering to the
Administrative General Partner a written notice of revocation prior to 5:00
p.m., Eastern Standard Time, on the Expiration Date. In order to be effective, a
notice of revocation of the instructions set forth in a Consent Form must (i)
contain the name of the person who delivered the Consent Form, (ii) be in the
form of a subsequent Consent Form marked either as "CONSENT" or "DOES NOT
CONSENT" or "ABSTAIN", as the case may be, (iii) be signed by the Unitholder
thereof in the same manner as the original signature on the Consent Form, and
(iv) be received by the Administrative General Partner prior to 5:00 p.m.
Eastern Standard Time, on the Expiration Date at its address set forth on the
Consent Form. A purported notice of revocation that lacks any of the required
information, is dispatched to an improper address or is not received in a timely
manner will not be effective to revoke the instructions set forth in a Consent
Form previously given. A revocation of the instructions set forth in a Consent
Form can only be accomplished in accordance with the foregoing procedures. NO
UNITHOLDER MAY REVOKE THE INSTRUCTIONS SET FORTH IN A CONSENT FORM AFTER 5:00
P.M., EASTERN STANDARD TIME, ON THE EXPIRATION DATE.
No Dissenting Unitholders' Rights
Under the Delaware Revised Uniform Limited Partnership Act and under
the Partnership Agreement, Unitholders do not have dissenter's appraisal rights
in connection with the Transaction.
INTERESTS OF CERTAIN PERSONS
The terms of the Transaction were determined through negotiations
between Flournoy Development Company ("FDC"), which, as part of a larger series
of transactions that includes the Sale, will merge with and into Mid-America
Apartment Communities, Inc., a Tennessee corporation ("MAAC"), the sole general
partner of the Purchaser, and the Administrative General Partner. John F.
Flournoy, the Development General Partner of the Partnership, is the Chairman
and Chief Executive Officer of FDC and will become the largest shareholder and
Vice Chairman of MAAC (owning approximately 5.8% of MAAC's outstanding shares of
common stock following consummation of the Merger, assuming no conversion of
outstanding units of limited partnership interest of the Purchaser into shares
of MAAC common stock) in connection with the Merger (hereinafter defined), and
therefore has a substantial economic interest in the Transaction. The
Administrative General Partner is a wholly owned subsidiary of Alex. Brown
Realty, Inc., a Maryland corporation engaged in the organization of real estate
investment programs.
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DESCRIPTION OF THE PROPERTIES
All of the Properties are multifamily apartment properties purchased
and developed by the Partnership and located in mid-size markets in the
Southeastern United States. Attached hereto as Annex II are financial statements
for each of the Properties that reflect each Property's operating results for
the years ended December 31, 1996 and 1995, and the six month period ended June
30, 1997. Summary characteristics of each Property are described below.
Hidden Lake Phase II ("Hidden Lake") is located in Union City, Georgia,
and contains 160 apartment units. Hidden Lake's average apartment size is 962
square feet and average rent, as of June 30, 1997, was $606 per month. Hidden
Lake's "Economic Occupancy" (defined as gross potential rent less vacancy
losses, model expenses and bad debt divided by gross potential rent for the
entire period, expressed as a percentage) for the month of June, 1997, was 87%.
Hidden Lake was completed in 1987.
High Ridge ("High Ridge") is located in Athens, Georgia, and contains
160 apartment units. High Ridge's average apartment size is 1,166 square feet
and average rent, as of June 30, 1997, was $755 per month. High Ridge's Economic
Occupancy for the month of June, 1997, was 81%. High Ridge was completed in
1987.
Park Place ("Park Place") is located in Spartanburg, South Carolina,
and contains 184 apartment units. Park Place's average apartment size is 1,061
square feet and average rent, as of June 30, 1997, was $606. Park Place's
Economic Occupancy for the month of June, 1997, was 87%. Park Place was
completed in 1987.
Southland Station Phase I ("Southland Station") is located in Warner
Robins, Georgia, and contains 160 apartment units. Southland Station's average
apartment size is 1,167 square feet and average rent, as of June 30, 1997, was
$643. Southland Station's Economic Occupancy for the month of June, 1997, was
93%. Southland Station was completed in 1987.
DESCRIPTION OF THE TERMS OF THE PURCHASE AGREEMENT
Parties to the Purchase Agreement
The Purchase Agreement has been entered into between the Partnership,
as seller, and Mid- America Apartments, L.P., a Tennessee limited partnership
and majority owned subsidiary of MAAC, as purchaser. Pursuant to the Purchase
Agreement, the Partnership has agreed to sell all of its interests in its real
estate properties to the Purchaser. The summary contained in this Statement is
qualified in its entirety by reference to the Purchase Agreement which is
attached as Annex I hereto and is incorporated herein by this reference.
The Partnership is a Delaware limited partnership with its principal
executive office at 225 East Redwood Street, Baltimore, Maryland 21202;
Telephone Number (410) 727-4083. For a description of the Partnership and the
Properties, see the Partnership's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 (the "Partnership's 10-K"), a copy of which is being
mailed to Unitholders together with this Statement and is incorporated herein by
reference.
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The Purchaser is a Tennessee limited partnership with an address at
6584 Poplar Avenue, Suite 340, Memphis, Tennessee 38138; Telephone Number (901)
682-6600. The Transaction is part of a series of transactions in which FDC will
be merged with and into MAAC, and pursuant to which MAAC and the Purchaser will
consolidate the ownership of the multifamily apartment properties (including the
Properties) currently owned by FDC and certain affiliated entities as well as
continue the real estate businesses previously conducted by FDC and its
affiliates (collectively, the "Reorganization"). FDC has entered into an
Agreement and Plan of Reorganization, dated September 17, 1997, by and among
FDC, the Purchaser and MAAC (the "Reorganization Agreement"), which specifies
the terms and conditions of the Reorganization.
Assets Transferred
The Purchase Agreement provides that at the closing of the Sale (the
"Closing"), the Partnership will transfer and convey to the Purchaser all of the
real estate assets of the Partnership, which consist of Hidden Lake Apartments
(Phase II) in Union City, Georgia, High Ridge Apartments in Athens, Georgia,
Park Place Apartments in Spartanburg, South Carolina, and Southland Station
Apartments (Phase I) in Warner Robins, Georgia, and certain other related assets
(collectively, the "Properties"). See "LIQUIDATION OF PARTNERSHIP; DISTRIBUTION
OF PROCEEDS."
Purchase Price
The aggregate purchase price for the Properties is approximately $30.0
million (approximately $9.6 million net of assumed liabilities of approximately
$20.4 million), which will be paid in cash at the Closing (the "Purchase
Price"). The Purchaser has agreed to pay all closing costs relating to the Sale
and to assume certain liabilities of the Partnership, as described in
"Assumption of Liabilities" below.
Assumption of Liabilities
The Purchaser has agreed to assume, from and after the date of the
Closing, all obligations of the Partnership relating to the Properties,
including obligations under mortgage indebtedness encumbering the Properties and
under existing leases. It is anticipated that the Purchaser will repay such
mortgage indebtedness in connection with the Closing. The Partnership will
reserve a certain amount of the proceeds of the Sale for the purposes of
satisfying any obligations and liabilities relating to the ownership, management
and operation of the Properties prior to the Closing. The actual amount of such
reserve will be determined by the General Partners at the Closing.
Closing and Conditions to Closing
The Purchase Agreement provides that the Closing will occur
simultaneously with the closing of the Reorganization (the "Closing Date"). The
Purchaser and the Partnership have each agreed to use their reasonable efforts
to close the Sale on or before November 17, 1997 (or as soon thereafter as
practicable); provided, however, the Closing shall occur no later than December
31, 1997.
Under the Purchase Agreement, the consummation of the Sale is subject
to the satisfaction of certain conditions, including (i) satisfaction or waiver
of the conditions to the closing of the Reorganization (as set forth in the
Reorganization Agreement) including obtaining all necessary partner, lender and
other third-party consents and the closing of the Reorganization pursuant to the
Reorganization
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Agreement simultaneously with the Closing, but in any case on or before December
31, 1997; (ii) receipt of pay-off letters from each lender holding mortgages
encumbering the Properties permitting the prepayment of such indebtedness by the
Purchaser; (iii) the absence of any adverse, undisclosed title matters
respecting land or improvements relating to the Properties, or the condemnation
or destruction of any of the Properties, in each case unless the Purchaser
determines, in its sole discretion, that it is in its best interests to
consummate the Sale in whole or as to any Property; and (iv) the consent of the
holders of a majority of the issued and outstanding Units to the Transaction.
The Purchaser may also exclude one or more of the Properties pursuant
to the terms of the Purchase Agreement while consummating the Sale as to the
remaining Properties upon the occurrence of certain conditions, including damage
to or condemnation of a Property, discovery of title defects as to a Property,
and the breach of certain representations and warranties or the failure to
satisfy certain conditions relating to a Property, as set forth in the
Reorganization Agreement. If a Property is so excluded, the Purchase Price will
be reduced by the amount of the net Purchase Price allocable to such excluded
Property, as set forth in the Purchase Agreement. The aggregate Purchase Price
(net of liabilities to be assumed by the Purchaser at the Closing) has been
allocated in the Purchase Agreement among the four Properties, as follows:
Hidden Lake $1,633,477
High Ridge $3,726,664
Park Place $1,411,549
Southland Station $2,853,797
The consummation of the Sale is also subject to the condition that if
the number of apartment units in all of the properties, including properties
being purchased or acquired in the Reorganization other than the Properties,
that are excluded from the Reorganization, either pursuant to the Purchase
Agreement or the Reorganization Agreement, exceed an aggregate of 1,000
apartment units, then the Purchaser may refuse to consummate the Sale.
Representations and Warranties; Covenants; Engineering and Environmental Audit
The Purchase Agreement contains representations and warranties with
respect to the Partnership and the Properties which generally are customary in a
transaction of this type including representations by the Partnership that it
has the authority to enter into the Purchase Agreement and to consummate the
Sale, subject to obtaining the Requisite Consents of the Unitholders as
described herein, and that it has good and marketable title to the Properties.
The Partnership also has covenanted, among other things, to grant to the
Purchaser access to the Properties during the period prior to the Closing and to
allow the Purchaser to conduct an engineering audit and a Phase I environmental
audit of the Properties. The Purchaser has agreed to indemnify the Partnership
for all liabilities, damages and expenses imposed upon the Partnership in
connection with such audits and the entry upon the Properties by the Purchaser's
employees, agents and independent contractors. The Purchaser has also made
customary representations with regard to the transaction, including
representations relative to the authority of the Purchaser to enter into the
Purchase Agreement and to consummate the Sale and that the Purchaser has all
consents necessary to consummate the Sale.
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Termination
The Purchase Agreement may be terminated (a) upon the mutual written
consent of the Partnership and the Purchaser, (b) by the Partnership or the
Purchaser upon a material breach of any covenant, representation or warranty of
the other party, or either party's failure to close the Transaction as required
under the Purchase Agreement, if such breach or failure has not been remedied by
such party within ten (10) business days of receipt of written notice thereof,
or (c) if the Closing has not taken place by December 31, 1997. In the event of
a default by the Partnership under the Purchase Agreement, the sole remedies of
the Purchaser shall be (i) to terminate the Purchase Agreement without any claim
for damages or (ii) to pursue specific performance of the Partnership's
obligations. In the event of a default by the Purchaser under the Purchase
Agreement, the Purchaser is obligated to pay to the Partnership upon termination
of the Purchase Agreement by the Partnership liquidated damages of $1,000 in
cash.
Exclusivity
Pursuant to the Purchase Agreement, the Partnership has agreed that it
will not, directly or indirectly, through any officer, director, partner, agent
or otherwise, initiate, solicit or knowingly encourage (including by way of
furnishing non-public information or assistance), or take any other action to
facilitate knowingly, any inquiry or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Competing Transaction
(as defined below), or agree to or endorse any Competing Transaction, or
authorize or knowingly permit any of the officers, directors, partners or
employees of the Partnership or any of its affiliates or any investment banker,
financial advisor, attorney, accountant or other representative retained by the
Partnership or any of the Partnership's affiliates to take such action. The
Partnership also has agreed to notify the Purchaser promptly as to all of the
relevant details of any such Competing Transaction or offer that could lead to a
Competing Transaction. A "Competing Transaction" is defined in the Purchase
Agreement as the sale or other transfer by the Partnership of all or any portion
of any Property, whether though direct sale, merger, consolidation, asset sale,
exchange, recapitalization, other business combination, liquidation, or other
action out of the ordinary course of business of the Partnership.
Regulatory Requirements
To the best knowledge of the Partnership, other than applicable
regulatory requirements under the federal securities laws, there are no federal
or state regulatory requirements which must be complied with, nor are there any
governmental consents or approvals that must be obtained, in connection with the
Sale and the other transactions contemplated under the Purchase Agreement. To
the best knowledge of the Partnership, there are no federal or state regulatory
requirements, other than certain regulatory requirements under the laws of the
State of Delaware, that must be complied with in connection with the liquidation
and dissolution of the Partnership following the Sale. These regulatory
requirements will be complied with at the time of such liquidation and
dissolution.
Prorations
The Partnership will reserve a certain amount of the proceeds of the
Sale for the purpose of satisfying obligations and liabilities relating to the
ownership, management and operation of the Properties prior to the Closing Date.
The actual amount of such reserve will be determined by the General Partners at
the Closing.
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DESCRIPTION OF THE SALE
Net Asset Value of Partnership
Based on the information set forth more fully in the Partnership's 10-K
(a copy of which is being mailed to Unitholders together with this Statement and
is incorporated herein by reference), and on the General Partners' estimate of
property values as of September 30, 1997, the General Partners estimate that the
Partnership has a current net asset value of approximately $385 per Unit. The
net asset value per Unit is an estimate of the amount Unitholders of the
Partnership would receive per Unit if the Partnership's assets were sold at
their respective current values without reduction for selling expenses as of the
close of the year, and sales proceeds along with the other funds of the
Partnership were distributed in a liquidation of the Partnership. There can be
no assurance that the estimated net asset value per Unit could be realized by
the Partnership or Unitholders upon liquidation, or that Unitholders would
realize the estimated net asset value per Unit if they attempted to sell their
Units because an established public market for the Units does not exist.
The General Partners estimate that the net proceeds of the Sale (after
taking into account the establishment of a reserve for payment of obligations
relating to the ownership, management and operation of the Properties prior to
the Closing Date), will result in a return to Unitholders of approximately $385
per Unit (depending on the date of a Unitholder's admission to the Partnership
and prior to any reduction due to state or local tax withholding), an amount
equal to approximately One Hundred Percent (100%) of the General Partner's
estimate of the Partnership's current net asset value per Unit. There can,
however, be no assurances that this will be the actual amount distributed to
Unitholders because such reserves have not yet been established and because one
or more of the Properties may be excluded from the Sale. See "DESCRIPTION OF THE
TERMS OF THE PURCHASE AGREEMENT -- Closing and Conditions to Closing."
Background and Reasons for the Sale
Background. In May 1996, representatives of FDC, including John F.
Flournoy, communicated to representatives of the Administrative General Partner
that FDC had been considering converting into a publicly traded real estate
investment trust (a "REIT"). The conversion would have consisted of a series of
related transactions in which FDC would have succeeded to the properties owned
and the real estate businesses previously conducted by FDC and its affiliates,
including the Properties (the "FDC Transaction"). Representatives of FDC had
several conversations with representatives of the Administrative General Partner
throughout August and September of 1996 in which the parties discussed specific
valuations and the methodology of performing valuations of the Partnership and
the Properties.
On October 16, 1996, representatives of FDC and a representative of the
Administrative General Partner agreed to the Purchase Price. FDC originally
proposed a purchase price consistent with the valuation methodology it had
applied to other properties that FDC was considering including in the FDC
Transaction. Pursuant to negotiations with representatives of the Administrative
General Partner, however, FDC agreed to increase the values attributed to the
Properties in FDC's valuation, resulting in the Purchase Price.
9
<PAGE>
The Sale originally was structured as part of the FDC Transaction. It
was anticipated that Flournoy Residential, L.P., a Georgia limited partnership
to be formed by FDC, would purchase the Properties from the Partnership as part
of the FDC Transaction. In lieu of proceeding with an initial public offering,
however, FDC subsequently decided to pursue the Reorganization. On September 17,
1997, MAAC, the Purchaser and FDC entered into the Reorganization Agreement,
pursuant to which, among other things, the Purchaser agreed to purchase the
Properties for the Purchase Price negotiated between FDC and the Administrative
General Partner in connection with the FDC Transaction.
On October 14, 1997, the Partnership and the Purchaser entered into the
Purchase Agreement. Under the terms of the Purchase Agreement, the Purchaser
will purchase the Properties for an aggregate purchase price of approximately
$30.0 million (approximately $9.6 million net of assumed liabilities of
approximately $20.4 million), as adjusted by the prorations described in the
Purchase Agreement. The General Partners estimate that this amount (after taking
into account the establishment of a reserve for payment of obligations relating
to the ownership, management and operation of the Properties prior to the
Closing Date) will result in a return to Unitholders of approximately $385 per
Unit (depending on the date of a Unitholder's admission to the Partnership and
prior to any reduction due to state or local tax withholding). There can,
however, be no assurances that this will be the actual amount distributed to
Unitholders because such reserve has not yet been established and because one or
more of the Properties may be excluded from the Sale. See "DESCRIPTION OF THE
TERMS OF THE PURCHASE AGREEMENT -- Closing and Conditions to Closing."
Reasons for the Sale. As more fully discussed under "GENERAL PARTNERS'
RECOMMENDATION" below, the General Partners believe that the Purchase Price for
the Properties represents an attractive sales price for the Properties based
upon the current competitive environment in the Partnership's markets and the
adverse impact that anticipated future capital requirements for the Properties
will have on the Partnership's ability to increase or maintain distributions to
Unitholders. Accordingly, the General Partners believe that the Sale of the
Properties at this time represents an attractive return on the investment of the
Unitholders.
THE AMENDMENT
The Partnership Agreement permits Unitholders to approve a sale of
substantially all of the Partnership's assets by voting at a meeting of
Unitholders. In order to allow Unitholders to consent in writing to the Sale, as
contemplated by this Statement, the General Partners deem it advisable to amend
the Partnership Agreement to allow Unitholders to take actions by written
consent in lieu of a meeting if the number of Units represented by the
Unitholders so consenting represents the number of Units that would otherwise be
required to take such action at any meeting of Unitholders. If consent of the
Unitholders is obtained pursuant to this Statement, the General Partners further
reserve the right to amend the Partnership Agreement to the extent necessary to
consummate the Sale, provided that substantially the same legal and economic
effect to the Unitholders of the Sale is achieved. The Partnership Agreement
requires that the holders of a majority of Units consent to any amendment of the
Partnership Agreement.
10
<PAGE>
LIQUIDATION OF PARTNERSHIP; DISTRIBUTION OF PROCEEDS
The General Partners estimate that the net proceeds from the Sale
(after the establishment of a reserve for payment of obligations relating to the
ownership, management and operation of the Properties prior to the Closing Date)
will be approximately $9,625,000, or $385 per Unit (prior to any reduction due
to state or local tax withholding). The actual amount distributed per Unit may
vary from Unitholder to Unitholder depending on the date of admission of a
Unitholder to the Partnership.
The Partnership will transfer to the Purchaser, in connection with the
Sale on the Closing Date, any security or other deposits under the lease
agreements for the Properties. To the extent any cash remains in the account of
the Partnership after the Sale and the establishment of a reserve for payment of
obligations relating to the ownership, management and operation of the
Properties prior to the Closing Date, such cash will be distributed to the
Unitholders in accordance with the terms of the Partnership Agreement.
The Partnership intends to liquidate and dissolve as soon as
practicable after the consummation of the Sale and to distribute the net
proceeds of the Sale, along with any excess cash, to the Unitholders in
accordance with the terms of the Partnership Agreement.
GENERAL PARTNERS' RECOMMENDATION
On October 14, 1997, the Development General Partner and the Board of
Directors of the Administrative General Partner unanimously approved the
Transaction, and directed that the Transaction be submitted to the Partnership's
Unitholders for consent with the recommendation that Unitholders consent to the
Transaction. The General Partners believe that the Transaction is in the best
interests of the Partnership and the Unitholders, and, therefore, recommend that
the Unitholders approve the Transaction.
Advantages of the Sale
The General Partners' recommendations were based upon the following
factors with respect to the Sale:
Valuation. The General Partners believe that the aggregate Purchase
Price for the Properties of approximately $30.0 million (including mortgage
indebtedness encumbering the Properties and certain other liabilities to be
assumed by the Purchaser) represents an attractive sales price. Investors or
potential buyers of multifamily properties typically analyze an acquisition of a
property based on an initial cash yield or direct capitalization methodology.
The Purchase Price represents a per apartment unit value of approximately
$46,600 and a direct capitalization rate of approximately 8.4%. The per
apartment unit value and capitalization rate reflected by the Purchase Price
represent attractive pricing compared to recent similar transactions in the
Partnership's markets. The General Partners believe that the values reflected in
the Purchase Price are available from the Purchaser because of the Purchaser's
superior access to capital as a publicly traded REIT. The General Partners
believe that it is unlikely that the Partnership would be able to achieve these
values from a sale to third parties in a typical real estate transaction.
11
<PAGE>
Because of the anticipated effect on the values of the Properties of
the conditions described under "Competition" and "Property Age" below, in March
and April of 1996 the Administrative General Partner obtained an independent
review of the value of each of the Properties from a commercial broker. These
reviews did not constitute an appraisal of the Properties and were obtained for
use as an internal resource to determine what factors potential investors might
consider relevant in evaluating the Properties. The valuation reviews resulted
in the following range of values and capitalization rates for the Properties:
(i) per apartment unit values ranging from $35,000 to $47,000 (with a weighted
average per apartment unit value of approximately $42,000); (ii) capitalization
rates ranging from 9.0% to 10.3%; and (iii) an aggregate purchase price for the
Properties ranging from approximately $27,052,000 to $28,072,000. Although the
Purchase Price compares favorably to the valuations set forth in the valuation
reviews, because the valuation reviews are not appraisals and were conducted
over 18 months ago, the General Partners did not rely on this information when
forming a basis for their recommendation. The foregoing summary of the valuation
reviews is provided for informational purposes only.
Competition. Competition in each of the Partnership's respective
apartment markets has increased significantly during the past two years. The
strong economic growth in the Southeast region of the United States has led to
renewed development of multifamily properties in the Southeast, which has
resulted in an over-supply of apartment units. The Athens, Georgia market, where
High Ridge is located, provides a good example of the challenges encountered by
apartment owners in an over-built market. During the past two years,
approximately 600 new apartment units have been constructed in Athens. With the
demand for apartments remaining relatively stable, developers have been forced
to offer substantial concessions in order to lease the newly constructed
properties. The rents offered at these new apartment communities are lower than
those historically charged at High Ridge, forcing the Partnership to lower
rents. The Southland Station property located in Warner Robins, Georgia also has
faced increased competition as a result of the construction of new apartment
communities. In the past two years, 450 units have been added to that market
with another 250 units to be completed by December 1998. The rents at these
newly constructed units are less than those historically charged at Southland
Station, thereby forcing the Partnership to reduce rents 6 to 7%. The
Partnership also has been forced to deal with the loss of tenants who have moved
into the approximately 400 recently constructed homes in Warner Robins. In many
cases, former renters have been able to purchase homes with lower monthly
mortgage costs than the rent charged at Southland Station. Operating results for
the Properties already have begun to be adversely impacted by this increase in
apartment supply, and future operating results likely will be further
challenged, limiting the Partnership's ability to increase or maintain the level
of distributions to Unitholders. A sale at this time takes advantage of a
valuation based on historically high operating results, not yet fully affected
by new apartment and single family home competition.
Property Age. The average age of the Properties is 10 years. As such,
operating results in recent years have begun to be adversely affected by the
cost of capital expenditures required to maintain the Properties. Over the past
three years, nearly $800,000 has been expended for siding, roof, asphalt, and
other Property repairs, as well as painting and appliance replacements. While a
5% distribution to Unitholders has been achieved during the past few years,
capital expenditure requirements in future years likely will adversely impact
the Partnership's ability to increase or maintain the level of distributions to
Unitholders.
12
<PAGE>
Disadvantages of the Sale
The primary disadvantages identified by the General Partners relating
to the disposition of the Properties pursuant to the Sale included the
following:
o The Sale of the Properties in a single transaction may not
yield as high an aggregate price as the sale of each of the
Properties individually; and
o The Sale and subsequent liquidation of the
Partnership will prevent the Unitholders from
participating in any possible future improvement in
the Partnership's markets that could result in
increased returns and enhanced Property values.
FOR THE FOREGOING REASONS, THE GENERAL PARTNERS HAVE
DETERMINED THAT THE TRANSACTION IS IN THE BEST INTERESTS OF
UNITHOLDERS AND RECOMMEND THAT UNITHOLDERS CONSENT TO THE
TRANSACTION.
ACCOUNTING TREATMENT
The Sale will be accounted for as a sale of assets. The Partnership
estimates that the Sale of the Properties will result in a taxable gain of
approximately $16,155,000 to the Partnership or approximately $588 per Unit.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
UNITHOLDERS ARE STRONGLY URGED TO CONSULT WITH THEIR OWN TAX ADVISORS
TO DETERMINE THE TAX CONSEQUENCES OF THE TRANSACTION. UNITHOLDERS MUST DEPEND
UPON THE ADVICE OF THEIR OWN TAX ADVISORS WITH RESPECT TO THE EFFECTS OF THE
PROPOSED TRANSACTION IN LIGHT OF THEIR PARTICULAR SITUATIONS.
The Sale will be a taxable transaction to the Unitholders. The
Partnership will recognize gain or loss on the Sale equal to the difference
between the amount realized by the Partnership on the Sale (generally, the cash
received plus any liabilities of the Partnership assumed by the Purchaser) over
its adjusted tax basis in the Properties. Any gain should be capital gain,
provided the Properties have not been held primarily for sale to customers in
the ordinary course of business (i.e., as "dealer" property), although a portion
of the gain on the Sale may be taxable as ordinary income to the extent required
by the depreciation recapture provisions of the Internal Revenue Code of 1986,
as amended (the "Code").
Any loss on the Sale should be deductible as an ordinary loss.
Under the Taxpayer Relief Act of 1997, any capital gain generally will
be taxed to an individual Unitholder at a maximum rate of 20%, if the
Partnership's holding period in the Properties is more than 18 months, and
generally will be taxed at a maximum rate of 28%, if such holding period is more
than
13
<PAGE>
one year but not more than 18 months. In the case of capital gain recognized on
the sale of the Partnership's real property held for more than 18 months, an
amount of such gain equal to the amount of all prior depreciation deductions not
otherwise required to be taxed as ordinary depreciation recapture income will be
taxed at a maximum rate of 25%.
The Partnership's gain or loss on the Sale will be allocated to
Unitholders in the manner provided by the profit and loss allocation provisions
of the Partnership Agreement and as required by Sections 704(b) and 704(c) of
the Code and the Treasury Regulations thereunder. Such gain or loss will
correspondingly increase or decrease each Unitholder's tax basis in his interest
in the Partnership. Such basis will also be decreased by a constructive
distribution of money equal to the reduction in the Unitholder's share of the
liabilities (if any) of the Partnership as a result of the Sale. Upon
distribution of the proceeds of the Sale to the Unitholders, a Unitholder will
recognize gain to the extent that the Unitholder's share of the proceeds (as
determined under the Partnership Agreement) is greater than the Unitholder's tax
basis in his interest in the Partnership (as adjusted for the Unitholder's
allocable share of gain or loss on the Sale). To the extent a Unitholder has any
unused passive activity losses under Section 469 of the Code that are
attributable to the Properties (i.e., passive activity losses not previously
deducted against passive activity or other taxable income of such Unitholder),
such losses would be deductible in full as a result of the Sale if the
Unitholder is deemed to have made a complete disposition of his interest in such
passive activity, and therefore would be available to offset such Unitholder's
allocable share of any gain resulting from the Sale. Upon liquidation of the
Partnership, the Unitholder will recognize a loss to the extent that the basis
of his interest in the Partnership exceeds the amounts distributed to him in
liquidation (assuming such Unitholder is distributed only cash in such
liquidation). Such gain or loss will be capital gain or loss, assuming the
Unitholder held his interest as a capital asset, and the holding period
described above will determine the applicable capital gains tax rate.
Any gain recognized by a Unitholder may also be subject to state and
local income taxes. In the case of Properties located in Georgia, for example, a
Unitholder will be subject to a maximum Georgia income tax of 6% of the
Unitholder's allocable share of the net income or gain from the Sale of such
Properties. The Partnership generally will be required to withhold and pay over
to the Georgia income tax authority an amount equal to 4% of any cash
distributions made to Unitholders that are not residents of Georgia that
reasonably relate to income from a Property located in Georgia and which are not
return of capital distributions or distributions of previously taxed income,
unless a composite return is filed by the Partnership on behalf of its
non-Georgia residents that reports and remits the Georgia state income tax on
behalf of such Unitholders. Any tax withheld is creditable against the
nonresident Unitholder's Georgia income tax liability. Further, Georgia also
imposes a withholding tax on transfers of Georgia real estate by nonresidents of
Georgia, which is creditable against the nonresident's Georgia income tax
liability. Thus, unless certain exceptions apply, the Purchaser will be required
to withhold from the Sales proceeds and pay over to the Georgia income tax
authority an amount equal to 3% of the Sales proceeds (or gain recognized by the
Partnership, if less, provided the Partnership provides an affidavit of its gain
to the Purchaser) on the Sale of a Property located in Georgia if the
Partnership is considered to be a nonresident of Georgia.
Any gain recognized by the Partnership that is allocable to a non-U.S.
Unitholder will be subject to federal income tax withholding under Section 1446
of the Code.
14
<PAGE>
SELECTED FINANCIAL DATA
Revenues and net earnings (loss) information for the Partnership
furnished below is for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
Revenues:
<S> <C> <C> <C> <C> <C>
Rental income $ 4,799,909 $ 4,644,851 $ 4,451,569 $ 4,244,572 $ 4,012,849
Interest income 61,955 67,677 49,805 57,850 77,481
Gain on settlement -- 299,228 -- -- --
of lawsuit
Net loss (371,349) (116,742) (411,601) (497,282) (718,240)
Net loss per Unit (13.48) (4.24) (14.94) (18.05) (26.07)
Total assets 16,006,582 16,786,004 17,842,224 19,656,345 20,591,485
Mortgage loans 20,400,000 20,200,950 20,326,886 20,356,533 20,356,533
payable
Partners' capital (deficit) (4,921,350) (3,998,981) (3,005,708) (1,293,087) (244,785)
Book Value per Unit (172.91) (139.43) (105.19) (40.62) (2.57)
</TABLE>
The above selected financial data should be read in conjunction with
the Partnership's financial statements and accompanying notes in the
Partnership's 10-K incorporated by reference in this Statement.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Outstanding Voting Securities; Record Date
As of the Record Date, there were 27,000 Units outstanding, which
represent all of the voting securities of the Partnership. Each Unit is entitled
to one vote. Only Unitholders of record as of the Record Date will be entitled
to notice of and to execute and deliver a Consent Form.
15
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of the Record Date, the beneficial
ownership of Units of the Partnership of the Development General Partner, the
individual directors and officers of the Administrative General Partner and all
of the directors and officers as a group.
Units Percent
Name Beneficially Owned of Class
John M. Prugh 10 *
John F. Flournoy 0 --
Directors and Officers of
Administrative General
Partner as a Group 10 *
- ---------------
*Less than 1% of class.
MARKET FOR UNITS; DISTRIBUTIONS
There is no established public trading market for the Units.
The Partnership declared quarterly cash distributions to Unitholders
for 1992 through the third quarter of 1997 as set forth in the following table:
<TABLE>
<CAPTION>
Qtr.(a) 1997 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
1st $5.00 $5.00 $5.00 $5.00 $5.00 $5.00
2nd 5.00 5.00 15.00(b) 34.00(c) 5.00 5.00
3rd (d) 5.00 5.00 5.00 5.00 5.00
4th -- 5.00 5.00 5.00 5.00 5.00
Totals $20.00 $30.00 $49.00 $20.00 $20.00
</TABLE>
- ---------------
(a) Quarterly distributions generally are paid within 45 days of the end
of the calendar quarter.
(b) Includes a special distribution of $10.00 per Unit from proceeds of
litigation settlement.
(c) Includes a special distribution of $29.00 per Unit from excess
financing proceeds.
(d) The Partnership expects that the distribution for the 3rd quarter of
1997 will be made on or about November 15, 1997.
16
<PAGE>
OTHER MATTERS
There are no matters other than as set forth in this Statement for
which Consent Forms are being solicited.
INCORPORATION BY REFERENCE
The following documents, which have been previously filed by the
Partnership with the Securities and Exchange Commission, are hereby incorporated
herein by reference:
(1) The Partnership's 10-K for the year ended December 31, 1996; and
(2) All other reports filed pursuant to Sections 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended, since the end of the
fiscal year covered by the Annual Report referred to in (1) above.
Pursuant to the regulations of the Securities and Exchange Commission,
the Partnership will provide to each Unitholder of record on the Record Date,
without charge and upon written or oral request of such person, copies of all
reports (excluding exhibits) filed pursuant to Sections 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended, since the end of the fiscal year
covered by the Annual Report in (1) above.
A copy of the Partnership's 10-K for the year ended December 31, 1996,
is being sent to Unitholders concurrently with this Statement.
BROWN-FLOURNOY EQUITY INCOME
FUND LIMITED PARTNERSHIP
By: Brown Equity Income Properties, Inc.
Administrative General Partner
By: /s/ John M. Prugh
John M. Prugh
President and Director
By: /s/ John F. Flournoy
John F. Flournoy
Development General Partner
October 27, 1997
17
<PAGE>
BROWN-FLOURNOY
EQUITY INCOME FUND LIMITED PARTNERSHIP
CONSENT FORM REGARDING SALE OF ASSETS,
PURCHASE AGREEMENT
AND LIQUIDATION
The undersigned, a holder of units ("Units") of Class A Limited
Partnership interests in Brown-Flournoy Equity Income Fund Limited Partnership
(the "Partnership"), hereby
|_| CONSENTS |_| DOES NOT CONSENT |_| ABSTAINS
(i) to the amendment of the Amended and Restated Agreement of Limited
Partnership of the Partnership, dated October 26, 1986, pursuant to which the
Partnership was formed (the "Amendment"), and (ii) to the sale of all of the
real estate assets of the Partnership to Mid-America Apartments, L.P. (the
"Sale") pursuant to a Purchase and Sale Agreement dated as of October 14, 1997,
between the Partnership and Mid-America Apartments, L.P. (the "Purchase
Agreement"), each as more fully described in the accompanying Solicitation
Statement. The Units represented by this Consent will be deemed to have been
voted in accordance with the election specified by the holder named below. IF NO
ELECTION IS SPECIFIED, ANY OTHERWISE PROPERLY COMPLETED AND SIGNED CONSENT FORM
WILL BE DEEMED TO BE A CONSENT TO EACH OF THE SALE AND THE AMENDMENT. BY
EXECUTION HEREOF, THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE SOLICITATION
STATEMENT.
THIS CONSENT IS SOLICITED BY THE GENERAL PARTNERS ON BEHALF OF THE
PARTNERSHIP.
The Partnership reserves the right to waive any conditions to, or
modify the terms of, the Solicitation (as defined in the Solicitation
Statement).
A Consent Form given, if effective, will be binding upon the holder of
the Units who gives such Consent Form and upon any subsequent transferees of
such Units, subject only to revocation by the delivery of a written notice of
revocation by the Unitholder, executed and filed in the manner and within the
time period described in the Solicitation Statement.
IN ORDER TO COUNT, THIS CONSENT FORM MUST BE RECEIVED BY THE
PARTNERSHIP PRIOR TO 5:00 P.M., EASTERN STANDARD TIME, ON NOVEMBER 14, 1997.
This fully completed and executed Consent Form should be sent by mail
in the self-addressed, postage-paid envelope enclosed for that purpose, or by
overnight courier, or by facsimile, to the Partnership, as follows:
If delivered by mail or by courier, to: If delivered by facsimile, to:
Brown Equity Income Properties, Inc. Brown Equity Income Properties, Inc.
Attn: Taylor Classen Attn: Taylor Classen
225 East Redwood Street Facsimile Number: (410) 625-2694
Baltimore, Maryland 21202 Telephone Number: (410) 727-4083
THIS CONSENT FORM CONTINUES AND
MUST BE SIGNED ON THE SECOND PAGE
-1-
<PAGE>
BROWN-FLOURNOY
EQUITY INCOME FUND LIMITED PARTNERSHIP
Please sign your name below exactly in the same manner as the name(s)
in which ownership of the Units is registered. When Units are held by two or
more joint holders, all such holders must sign. When signing as
attorney-in-fact, executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate name by the
President or other authorized officer. If a partnership, please sign in
partnership name by an authorized person.
Date: ____________________, 1997
Signature: _________________________
Name: _________________________
(Please Print)
Signature if
held jointly: _________________________
Name: _________________________
(Please Print)
-2-
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT is made and entered into as of this
14th day of October, 1997, by and between BROWN-FLOURNOY EQUITY INCOME FUND
LIMITED PARTNERSHIP, a Delaware limited partnership (the "Seller"), and
MID-AMERICA APARTMENTS, L.P., a Tennessee limited partnership (the "Purchaser").
W I T N E S S E T H, That:
WHEREAS, the Purchaser, Mid-America Apartment Communities, Inc., a
Tennessee corporation and the sole general partner of the Purchaser ("MAAC"),
and Flournoy Development Company, a Georgia corporation ("FDC"), entered into
that certain Agreement and Plan of Reorganization, dated September 17, 1997 (the
"Reorganization Agreement") providing for the acquisition of certain assets by
the Purchaser and MAAC through a merger of FDC into MAAC and through a series of
merger, exchange and purchase transactions involving the owners of certain
apartment projects;
WHEREAS, John F. Flournoy, a general partner of the Seller, is a
principal of FDC;
WHEREAS, as provided in the Reorganization Agreement, FDC has agreed to
use its reasonable best efforts to cause the Seller to convey the Properties (as
hereinafter defined) to the Purchaser upon the closing of the transactions
described in the Reorganization Agreement, provided FDC obtains the consent and
agreement of the Seller;
WHEREAS, the Seller has consented to the sale of the Properties and
agreed to sell the Properties to the Purchaser, subject to the terms and
conditions of this Agreement; and
WHEREAS, the parties desire to provide for said purchase and sale on
the terms and conditions hereinafter set forth;
NOW, THEREFORE, for and in consideration of the foregoing premises, the
mutual covenants and agreements set forth herein, and other good and valuable
consideration, all of which each party respectively agrees constitutes
sufficient consideration received at or before the execution hereof, the parties
hereto do hereby agree as follows:
1. DEFINITIONS AND MEANINGS. In addition to any other terms whose
definitions are fixed and defined by this Agreement, each of the following
defined terms, when used in this Agreement with an initial capital letter or
letters, shall have the meaning ascribed thereto by this Paragraph 1:
1.1. "Agreement" means this Purchase and Sale Agreement,
together with all exhibits attached hereto.
<PAGE>
1.2. "Affiliate" means, with respect to any Person, any Person
directly or indirectly controlling, controlled by or under common control with
such Person.
1.3. "Allocation Schedule" means the schedule allocating the
Purchase Price among the Properties attached hereto as Exhibit A.
1.4. "Business Day" means any day of the year other than
Saturday, Sunday or any other day on which banks located in New York, New York
are not required or authorized to close for business.
1.5. "CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. ss. 9601 et seq.
1.6. "Claim" means any action, cause of action, suit, debt,
dues, account, reckoning, bond, bill, covenant, contract, controversy, promise,
trespass, damage, judgment, execution, penalty, fine, claim, liability and
demand whatsoever, in law or equity.
1.7. "Closing" means the consummation of the purchase and sale
contemplated by this Agreement by the deliveries required under Paragraph 9
hereof.
1.8. "Closing Date" means the time and date, established under
Paragraph 9 hereof, when the purchase and sale contemplated by this Agreement is
to be consummated, as such date may be extended by mutual agreement of the
parties or pursuant to the provisions of this Agreement.
1.9. "Code" means the Internal Revenue Code of 1986, as amended,
and any successor legislation thereto, including all of the rules and
regulations promulgated thereunder.
1.10. "Contracts" means all contracts to which the Seller is a
party or to which the Seller is obligated which are or have been entered into in
the Ordinary Course of Business and provide for the provision or receipt of
services or the use of any asset, including, without limitation, service
agreements, maintenance contracts, repair contracts, equipment leases,
agreements to purchase equipment, agreements to purchase or sell utility
services, sanitation contracts, pest control contracts, security contracts and
advertising contracts.
1.11. "Date of this Agreement" means the last date on which
this Agreement is duly executed by the Seller and Purchaser, and said date shall
be inserted in the first paragraph on page 1 hereof.
1.12. "Defective Property Basket" means Excluded Properties
and Other Excluded Properties containing up to one thousand (1,000) apartment
units which may be excluded from the purchase and sale transactions described
herein and/or the Reorganization described in the Reorganization Agreement,
pursuant to the provisions of Sections 4.5, 4.6, 4.7, and 4.8 hereof and the
applicable provisions of the Reorganization Agreement.
1.13. "Environmental Claim" means any Claim, investigation or
notice (written or oral) by any Person alleging potential liability (including
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or fatalities, or penalties) arising out of, based on or resulting from (i) a
Hazardous Material Activity, or (ii) activities or conditions forming the basis
of any violation, or alleged violation of, or liability or alleged liability
under, any Environmental Law.
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1.14. "Environmental Laws" means federal, state, local,
provincial, municipal and foreign laws, ordinances, principles of common law,
rules, by-laws, orders, governmental policies, statutes, regulations,
agreements, treaties, customary law, and international principles relating to
the pollution or protection of the environment or of flora or fauna or their
habitat or of human health and safety, or to the cleanup or restoration of the
environment, including, without limitation, any law or regulation relating to
(i) generation, treatment, storage, disposal or transportation of Materials of
Environmental Concern, emissions or discharges or protection of the environment
from the same, (ii) exposure of Persons to, or Release or threat of Release of,
Materials of Environmental Concern, and (iii) noise.
1.15. "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and any successor legislation thereto.
1.16. "Excluded Property" means any Property excluded from the
purchase and sale transactions described herein and included within the
Defective Property Basket pursuant to the provisions of Sections 4.5, 4.6, 4.7
and 4.8 hereof; collectively, the "Excluded Properties".
1.17. "Existing Debt" means the debt described on Exhibit B
which encumbers the respective Properties described therein.
1.18. "Government Entity" means any court, arbitrator,
department, commission, board, bureau, agency, authority, instrumentality or
other governmental body, whether federal, state, municipal, foreign or other.
1.19. "Hazardous Material Activity" means any activity, event,
or occurrence at or prior to the Closing involving any Materials of
Environmental Concern, including, without limitation, the manufacture,
possession, presence, use, generation, transportation, treatment, storage,
disposal, Release, threatened Release, abatement, removal, remediation, handling
or corrective or response action to any Materials of Environmental Concern.
1.20. "Intangible Property" means all intangible property
(except as expressly excluded elsewhere herein) now or on the Closing Date owned
by the Seller and used in connection with the Properties, including, without
limitation, all of its right, title and interest in and to all: goodwill, going
concern value, workforce in place, computer systems, proprietary rights,
business methods, licenses; approvals; applications and permits issued or
approved by any Government Entity and relating to the use, operation, ownership,
occupancy and/or maintenance of the Properties; the intangible value in the
various Contracts; utility arrangements; claims against third parties; plans;
drawings; specifications; surveys; maps; engineering reports and other technical
descriptions; books and records; insurance proceeds and condemnation awards; and
all other intangible rights used in connection with or relating to the
Properties, including rights, if any, to current and past names of any Property.
1.21. "Law" means any statute, law, ordinance, rule,
regulation or judicial decision of any Government Entity.
1.22. "Leases" means, as to each Property, all resident or
tenant leases, including, without limitation, all resident or tenant leases
which are made by the Seller after the date hereof and before the Closing as
permitted by this Agreement.
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1.23. "Liability" means any direct or indirect indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, fixed or contingent, known or unknown, asserted or
unasserted, liquidated or unliquidated, secured or unsecured. The term
"Liabilities" means the aggregate of Liabilities.
1.24. "Lien" means a lien (statutory or otherwise), security
interest, mortgage, deed of trust, deed to secure debt, claim, charge, pledge,
license, equity, option, conditional sales contract, easement, assessment, levy,
covenant, condition, right of way, reservation, restriction, exception,
limitation, charge or encumbrance of any nature whatsoever.
1.25. "Material Adverse Effect" means, as the context
requires, (i) with respect to a Property, a material adverse effect on the
financial condition, value, marketability, ability to finance, results of
operations, business or prospects of such Property, and (ii) with respect to the
Seller, a material adverse effect on the Seller's Properties or assets or the
financial condition, results of operations, business or prospects of the Seller
taken as a whole.
1.26. "Materials of Environmental Concern" means all
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum or any
fraction thereof, petroleum products and hazardous substances (as defined in
Section 101(14) of CERCLA), or solid or hazardous wastes as now defined and
regulated under any Environmental Law.
1.27. "Order" means any order, writ, injunction, judgment,
plan or decree of any Government Entity.
1.28. "Ordinary Course of Business" means the ordinary course
of business of the Seller consistent with past practices.
1.29. "Other Excluded Property" means any property, other than
an Excluded Property, excluded from the Reorganization and included within the
Defective Property Basket pursuant to the applicable provisions of the
Reorganization Agreement.
1.30. "Permitted Exceptions" means:
(a) Liens (other than Liens imposed under ERISA or any
Environmental Law or in connection with any Environmental Claim) for
Taxes or other assessments that are not yet delinquent;
(b) except as disclosed on the Rent Roll, rights of residents or
tenants, as residents or tenants only, under the Leases;
(c) those existing title matters affecting the Properties
described on Exhibit C;
(d) those matters shown on the Surveys of the Properties
described on Exhibit C);
(e) easements, rights-of-way, covenants and restrictions which
are customary and typical for properties similar to the Properties and
which do not (i) interfere with the ordinary conduct of any Property or
the business of the Seller, as applicable, as a whole or (ii) have a
Material Adverse Effect on the Properties to which they apply;
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(f) the Existing Debt, provided the Existing Debt shall be paid
off and satisfied by the Purchaser in connection with the Closing;
(g) any other matter not objected to by the Purchaser in
accordance with Section 4.5 or for which the Purchaser elects to close
notwithstanding such matters in accordance with Section 4.5; and
(h) any other matter that is not a Title Defect.
1.31. "Person" means an individual or a corporation, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, other form of business or legal entity or Government Entity.
1.32. "Personal Property" means all tangible property owned or
leased by the Seller now or on the Closing Date and used in conjunction with the
Seller's business or the operation, maintenance, ownership and/or occupancy of
any Property, including without limitation: furniture; furnishings; art work;
sculptures; paintings; office equipment and supplies; landscaping; plants; lawn
equipment; and whether stored on or off the Real Property, tools and supplies,
construction equipment, maintenance equipment, materials and supplies, shelving
and partitions, and any construction and finish materials and supplies not
incorporated into any Real Property as improvements, fixtures, or otherwise, and
held for repairs and replacements thereto or development thereof, wherever
located.
1.33. "Property" means, for each of the four (4) properties
described on Exhibit D, the Real Property, Leases, Personal Property and
Intangible Property related to it, and the "Properties" means all of the
Properties.
1.34. "Purchase Price" means the amount which the Purchaser shall
pay to the Seller to consummate the purchase and sale of the Properties as
provided in Paragraph 3 of this Agreement.
1.35. "Real Property" means, as to each Property, the real
property comprising such Property, together with all rights, privileges,
hereditaments and interests appurtenant thereto including, without limitation:
any water and mineral rights, development rights, air rights, easements, and any
and all rights of the Seller in and to any streets, alleys, passages and other
rights of way; and all buildings, structures and other improvements located on
or affixed to such real property and all replacements and additions thereto.
1.36. "Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping, or
disposing into the indoor or outdoor environment, including, without limitation,
the abandonment or discarding of barrels, drums, containers, tanks, and other
receptacles containing or previously containing any Materials of Environmental
Concern at or prior to the Closing Date.
1.37. "Rent Roll" means for each Property the rent roll delivered
by the Seller to the Purchaser prior to the Date of this Agreement, to be
updated at the Closing as defined in Section 9.2.1(i) hereof.
1.38. "Reorganization" means the series of transactions
contemplated by the Reorganization Agreement.
1.39. "Reorganization Agreement" means that certain Agreement and
Plan of Reorganization, dated September 17, 1997 by and among the Purchaser,
MAAC, and FDC providing for the Reorganization,
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a copy of which has been filed by MAAC as part of a Form 8-K filing made with
the Securities and Exchange Commission on September 17, 1997.
1.40. "Required Title Insurance" means the title insurance
policies or endorsements listed on Exhibit E.
1.41. "Survey" means each survey described in Exhibit C, and
"Survey means all such surveys.
1.42. "Tax" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not. The term "Tax" also
includes any amounts payable pursuant to any tax sharing agreement to which any
relevant entity is liable as a successor or pursuant to contract.
1.43. "Title Defect" means any matter, other than a Permitted
Exception described in subparagraphs (a) through (g) under the definition of
"Permitted Exceptions," which would have a Material Adverse Effect on the
subject Property.
2. SALE AND PURCHASE. The Seller agrees to sell the Properties to the
Purchaser on the terms and conditions contained in this Agreement, and the
Purchaser agrees to purchase the Properties from the Seller on the terms and
conditions contained in this Agreement.
3. PURCHASE PRICE. The Purchaser agrees to purchase the Property
subject to the Existing Debt, which shall be paid off and satisfied by the
Purchaser at the Closing, and the amount required of the Purchaser to pay off
and satisfy the Existing Debt shall not reduce or affect the Purchase Price
payable to the Seller as hereinafter provided, except for the proration of
interest described in Section 9.4.5 hereof; provided, however, the Seller shall
not cause or permit any increase in the principal balance of the Existing Debt
as provided in Section 4.1 hereof. The Purchase Price for the Properties payable
to the Seller at the Closing (which is net of the Existing Debt) shall be Nine
Million Six Hundred Twenty-Five Thousand Four Hundred Eighty-Eight and no/100
Dollars ($9,625,488.00). The Purchase Price is for all Properties and has been
allocated among the Properties as provided in the Allocation Schedule. The
Purchase Price, as adjusted to reflect the prorations provided for herein, shall
be paid by the Purchaser to the Seller at the Closing by federal funds wire
transfer.
4. COVENANTS.
4.1. Preservation of Business. From the Date of this Agreement
until the Closing Date, the Seller (i) shall operate the Properties only in the
Ordinary Course of Business, and shall not, without Purchaser's prior written
consent, engage in any transaction outside the Ordinary Course of Business
except as otherwise permitted herein, (ii) shall not, without Purchaser's prior
written consent, sell or list for sale any of the Properties, (iii) shall use
its reasonable best efforts to preserve the Properties, including the goodwill,
going concern value, and advantageous relationships of the Seller with
residents, customers, suppliers, independent contractors, employees and other
Persons material to the operation of the Properties, (iv) shall perform its
material obligations under the Leases and other material agreements affecting
the Properties, (v) shall perform its material obligations under all Contracts,
and (vi) shall not take or permit any action or omission which would cause any
of its representations or warranties contained herein to become inaccurate in
any material
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respect or any of the covenants made by it to be breached in any material
respect. Without limiting the foregoing, without the Purchaser's prior written
consent, the Seller will not cause or permit any default to occur under the
Existing Debt or cause or permit any increase in the outstanding aggregate
principal balance thereof from the Date of this Agreement until the Closing. The
Seller shall continue to maintain all insurance policies in full force and
effect up to and including the Closing Date. If the Seller contemplates entering
into any transaction or agreement or taking any other action requiring the
Purchaser's prior written consent under this Agreement, then the Seller shall
give the Purchaser notice of such proposed transaction or agreement a reasonable
time in advance of the proposed effective date thereof, and the Purchaser shall
have three (3) Business Days in which to respond in writing either affirmatively
or negatively. If the Purchaser shall fail to so respond, then Purchaser's
consent will be irrebuttably presumed. In no event shall Purchaser's consent to
any such transaction, agreement or other action be unreasonably withheld.
4.2. Exclusivity. Unless and until this Agreement is terminated
pursuant to its terms, the Seller shall not, directly or indirectly, through any
officer, director, partner, agent or otherwise, initiate, solicit or knowingly
encourage (including by way of furnishing non-public information or assistance),
or take any other action to facilitate knowingly, any inquiry or the making of
any proposal that constitutes, or may reasonably be expected to lead to, any
Competing Transaction (as defined below), or enter into or maintain or continue
discussions or negotiate with any Person in furtherance of any such inquiry or
with a view toward soliciting or consummating a Competing Transaction, or agree
to or endorse any Competing Transaction, or authorize or knowingly permit any of
the officers, directors, partners or employees of such party or any of its
Affiliates or any investment banker, financial advisor, attorney, accountant or
other representative retained by such party or any of such party's Affiliates to
take any such action. The Seller shall notify the Purchaser orally (within one
Business Day after the Seller obtains knowledge of same) and in writing (as
promptly as practicable) of all of the relevant details relating to all
inquiries and proposals which the Seller or any officer, director, partner,
agent, or other Person may receive relating to any of such matters. A "Competing
Transaction" means the sale or other transfer by the Seller of all or any
portion of any Property, whether through direct sale, merger, consolidation,
asset sale, exchange, recapitalization, other business combination, liquidation,
or other action out of the Ordinary Course of Business.
4.3. Access to Information; Environmental Audits. At all times
before the Closing, the Seller shall provide the Purchaser, its agents,
employees, consultants, and representatives, with continuing and reasonable
access to all files, books, records and other materials in the Seller's
possession or control relating to the Properties and the right to examine,
inspect and make copies of such materials as appropriate (including for the
purpose of reviewing or preparing pro forma financial statements required
pursuant to Article 11 of Regulation S-X of the SEC). During such period, the
Seller shall also provide for such parties to have reasonable physical access to
the Properties for the purpose of conducting surveys, architectural,
engineering, geotechnical and environmental inspections and tests (including
sampling and invasive testing for the presence of Materials of Environmental
Concern performed in connection with Phase I and Phase II environmental audits),
feasibility studies and any other inspections, studies or tests reasonably
required by them, provided, however, that the Purchaser shall obtain the
Seller's prior approval (which shall not be unreasonably withheld) for any
invasive testing. With reasonable advance notice to the Seller, the Purchaser
may conduct a "walk- through" of resident units upon appropriate notice to
residents and subject to the rights of residents. In the course of its
investigations, the Purchaser may make inquiries to third parties, including,
without limitation, contractors, property managers, lenders, residents and
Government Entities. The Purchaser shall keep the Properties free of any Liens
claimed by the Purchaser's contractors or consultants in connection with such
entry and will indemnify, defend and hold the Seller harmless from all Claims
and Liabilities caused by the Purchaser, its contractors or consultants that are
asserted against or incurred by the Seller as a result of such entry and
investigation. Any Liability or loss and expense related to a condition of any
Property discovered
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or disclosed by the Purchaser or any consultant or contractor of the Purchaser
in connection with such investigation is not a Liability that is covered by this
indemnity. No investigation made by the Purchaser shall limit, qualify or modify
any representation, warranty, covenant or agreement made by the Purchaser
hereunder, notwithstanding the knowledge and information obtained as a result of
any such investigation, but if the Purchaser discovers as a result of any
investigation made by it prior to the Closing that any representation or
warranty made herein by the Seller is materially inaccurate, it shall promptly
notify and advise the Seller.
4.4. Monthly Updates of Rent Rolls and Operating Statements. The
Seller will promptly provide the Purchaser, upon reasonable request, with
monthly updates of the Rent Roll and operating statements for the Properties.
4.5. Title Matters; Title Defects. The Purchaser has approved the
Permitted Exceptions as of the Date of this Agreement. In the event that either
the Purchaser or the Seller shall discover prior to the Closing any matter
affecting title to any Property that would be a Title Defect as defined herein,
the Purchaser shall give the Seller written notice no later than three (3)
Business Days after first discovering or receiving notice from the Seller of
same, as the case may be, of its objection to such matter. If the Purchaser
shall not object in writing within such time period, then such matter shall
become a Permitted Exception. If the Purchaser shall object in writing within
such time, then such matter shall be a Title Defect. The Seller shall notify the
Purchaser in writing within ten (10) days of receipt of the Purchaser's notice
if Seller intends to cure any Title Defect. If the Seller elects not to cure
such Title Defect, the Purchaser shall have ten (10) days after receipt of the
Seller's notice to elect to (i) waive such Title Defect and proceed to close the
purchase of the Properties, subject to such Title Defect, (ii) designate the
affected Property an Excluded Property pursuant to Section 4.8 hereof, provided
the Defective Property Basket is not exceeded, or (iii) if the designation of
such affected Property as an Excluded Property would cause the Defective
Property Basket to be exceeded, terminate this Agreement. If the Purchaser fails
to respond within said ten (10) day period, the Purchaser shall be deemed to
have waived such Title Defect as provided in (i) above. If the Seller elects to
cure such Title Defect, the Seller shall use diligent efforts to cure the Title
Defect by the Closing Date (as it may be extended as provided below), which may
include insuring over or bonding off such Title Defect at the Seller's expense,
but the Seller shall not be required to spend any money or bring any legal
action to cure any such Title Defect (other than the payment of any amount
necessary to satisfy, insure or bond over a monetary Lien). The Seller shall
have at least thirty (30) days to cure any Title Defect, and, if the Closing
Date shall fall within such period during which the Seller may cure such Title
Defect, then the Closing Date shall be postponed for a period up to thirty (30)
days (but not beyond December 31, 1997) in order to give sufficient time to
satisfy, release, cure or remove such Lien or exception. Upon the cure, removal,
insurance over or bonding off of any such Title Defect, the Closing Date shall
be scheduled upon ten (10) days prior written notice to the Seller, but in no
event earlier than the original Closing Date, notwithstanding such Title Defect.
If the Seller is unable to cure, remove, bond off or otherwise dispose of any
such Title Defect on or before the Closing, as the Closing may be extended as
provided above, then the Purchaser shall have the right to choose among the
options described in (i)-(iii) above in this Section 4.5.
4.6. Damage. The Seller shall promptly give the Purchaser written
notice of any damage to any Property, describing such damage and whether such
damage is covered by insurance and the estimated cost of repairing such damage.
(a) If such damage does not render untenantable more than thirty
percent (30%) of the apartment units within an affected Property, (i)
the Seller shall, to the extent possible, begin repairs prior to the
Closing, (ii) at the Closing, the Purchaser shall receive all insurance
proceeds not applied to the repair of any such Property prior to the
Closing (including rent loss insurance applicable to any
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period from and after the Closing) due to the Seller for the damage,
together with an assignment of any unsettled insurance claim, and (iii)
after the Closing, the Purchaser shall assume the responsibility for
the repair after the Closing. The Purchaser shall be entitled to any
excess of the proceeds of insurance over and above the actual cost of
repair and restoration. No modification to the Purchase Price or the
Allocation Schedule shall result from such event.
(b) If such damage renders untenantable more than thirty percent
(30%) of the apartment units within a Property, the Purchaser may elect
by notice to the Seller given within twenty (20) Business Days after
the Purchaser is notified of such damage (and the Closing shall be
extended, if necessary, to give the Purchaser such twenty (20) Business
Day period to respond to such notice) to (i) proceed in the same manner
as in the case of damage described in subparagraph (a) above, or (ii)
designate the affected Property an Excluded Property pursuant to
Section 4.8 hereof, provided the Defective Property Basket is not
exceeded, or (iii) if the designation of such affected Property as an
Excluded Property would cause the Defective Property Basket to be
exceeded, terminate this Agreement. Any waiver of the matters addressed
in this Section 4.6 pursuant to clause (i) above shall be deemed an
election by the Purchaser to follow the procedures described in
subparagraph (a) of this Section 4.6.
4.7. Condemnation. The Seller shall give the Purchaser prompt
written notice of the institution or threat of any exercise of the power of
eminent domain on any Property or portion thereof. If the exercise of such power
of eminent domain would result in a taking of more than thirty percent (30%) of
the apartment units at such Property, the Purchaser may elect by notice to the
Seller given within twenty (20) Business Days after the Purchaser shall have
received the notice of such institution or threat (and the Closing shall be
extended, if necessary, to give the Purchaser such twenty (20) Business Day
period to respond to such notice) to (i) proceed with the Closing and receive
any condemnation award or proceeds from any such proceeding, without
modification to the Purchase Price or the Allocation Schedule, or (ii) designate
the affected Property an Excluded Property pursuant to Section 4.8 hereof,
provided the Defective Property Basket is not exceeded, or (iii) if the
designation of such affected Property as an Excluded Property would cause the
Defective Property Basket to be exceeded, terminate this Agreement.
4.8. Defective Property Basket. A Property may be designated an
Excluded Property under this Agreement pursuant to the provisions of Sections
4.5, 4.6, and 4.7 hereof. In addition, a Property may be designated an Excluded
Property pursuant to the applicable provisions of the Reorganization Agreement
as a result of the following: (i) the breach of a representation or warranty set
forth in Article 7 of the Reorganization Agreement with respect to such Excluded
Property which has a Material Adverse Effect or (ii) the failure of a condition
precedent set forth in Article 10 of the Reorganization Agreement which relates
to the affected Excluded Property, and in such events any such Property so
designated an Excluded Property under the Reorganization Agreement shall be
deemed an Excluded Property hereunder. In the event that the number of apartment
units within (i) all of the Excluded Properties designated pursuant to Sections
4.5, 4.6, 4.7, and this 4.8 and (ii) all of the Other Excluded Properties
designated pursuant to the applicable provisions of the Reorganization Agreement
is less than one thousand (1,000) units, then the Seller and Purchaser will
remain obligated to consummate the transactions described herein (as modified to
exclude the Excluded Properties) notwithstanding such matters, assuming
satisfaction in full of each other condition set forth in this Agreement or
waiver by the appropriate party of any such condition. In such event, (i) the
Excluded Properties shall no longer be deemed part of the Properties hereunder,
(ii) the Excluded Properties shall not be sold by the Seller to the Purchaser
hereunder, and (iii) the Allocation Schedule shall be amended to delete the
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Excluded Properties, and the portion of the Purchase Price relating thereto as
reflected on the Allocation Schedule shall be subtracted from the Purchase Price
hereunder.
5. SELLER'S REPRESENTATIONS. The Seller warrants and represents to, and
covenants with, the Purchaser, as follows; provided, however, such
representations and warranties shall not survive the Closing:
5.1. Status. The Seller is a limited partnership duly organized,
validly existing and in good standing under the Laws of the State of Delaware,
with all requisite power and authority to own, lease, operate and sell its
assets and to carry on its businesses as it is now being conducted. The Seller
is in good standing as a foreign entity authorized to do business in each
jurisdiction where it engages in business.
5.2. Authority. The Seller has full power and authority (subject
to receipt of the consents referred to in Section 8.4), to enter into this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery and performance by the Seller of this Agreement have been, and the
documents to be executed and delivered by it pursuant to this Agreement shall
be, duly and validly approved by the Seller and no other proceeding on the part
of the Seller is necessary to authorize this Agreement and the transactions
contemplated hereby, other than obtaining the consents described in Section 8.4.
5.3. Consents. Section 8.4 describes each and every consent to be
obtained by the Seller in respect of the transactions contemplated hereby.
Except for obtaining the consents described in Section 8.4, no consents,
waivers, exemptions or approvals of, or filings or registrations by the Seller
with, any Government Entity or any other Person not a party to this Agreement
are necessary in connection with the execution, delivery and performance by the
Seller of this Agreement or the consummation of the transactions contemplated
hereby.
5.4. No Violations. Upon obtaining those consents described in
Section 8.4, the execution, delivery and performance by the Seller of this
Agreement and the documents to be executed, delivered and performed by the
Seller pursuant hereto, and the consummation of the transactions contemplated
hereby and thereby, do not and will not (i) violate any Order applicable to or
binding on the Seller or any of the Properties; (ii) violate any Law; (iii)
violate or conflict with, result in a breach of, constitute a default (or an
event which with the passage of time or the giving of notice, or both, would
constitute a default) under, permit cancellation of, or result in the creation
of any Lien upon any of the Properties or any Contract to which the Seller or
any Property is bound; (iv) permit the acceleration of the maturity of any
indebtedness of the Seller or any indebtedness secured by any Property; or (v)
violate or conflict with any provision of the partnership agreement or other
governance documents of the Seller.
5.5. Title. The Seller has good and marketable title to each
Property, in fee simple, free and clear of all Liens and encroachments, and free
and clear of all tenancies and adverse or other rights of possession, subject
only to the Permitted Exceptions. To the Seller's knowledge, each Property
constitutes a separate and legally subdivided parcel and a separate tax parcel.
6. PURCHASER'S REPRESENTATIONS. The Purchaser warrants and represents
to, and covenants with, the Seller, as follows:
6.1. Status. The Purchaser is a limited partnership duly organized, validly
existing and in good standing under the Laws of the State of Tennessee, with all
requisite power and authority to own, lease, operate
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and sell its assets and to carry on its business as it is now being conducted.
The Purchaser is in good standing as a foreign entity authorized to do business
in each jurisdiction where it engages in business.
6.2. Authority. The Purchaser has full power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance by the Purchaser of this
Agreement have been, and the documents to be executed and delivered by it
pursuant to this Agreement shall be, duly and validly approved by the Purchaser,
and no other proceeding on the part of the Purchaser is necessary to authorize
this Agreement and the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by the Purchaser.
6.3. Consents. No consents, waivers exemptions or approvals of,
or filings or registrations by the Purchaser with, any Government Entity or any
other Person not a party to this Agreement are necessary in connection with the
execution, delivery and performance by the Purchaser of this Agreement or the
consummation of the transactions contemplated hereby.
6.4. No Violations. The execution, delivery and performance by
the Purchaser of this Agreement and the documents to be executed, delivered and
performed by the Purchaser pursuant hereto, and the consummation of the
transactions contemplated hereby and thereby, do not and will not (i) violate
any Order applicable to or binding on the Purchaser or its assets; (ii) violate
any Law; (iii) violate or conflict with, result in a breach of, constitute a
default (or an event which with the passage of time or the giving of notice, or
both, would constitute a default) under, permit cancellation of, accelerate the
performance required by, or result in the creation of any Lien upon any of the
Purchaser's assets under, any contract or other arrangement of any kind or
character to which the Purchaser is a party or by which the Purchaser or any of
its assets are bound; (iv) permit the acceleration of the maturity of any
indebtedness of the Purchaser, or any indebtedness secured by any of the
Purchaser's assets; or (v) violate or conflict with any provision of the
Purchaser's partnership agreement or other governance documents of the
Purchaser.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER. The obligation of the
Purchaser to consummate the Closing is subject to the fulfillment, at or prior
to the Closing, of each of the following conditions precedent, and the failure
to satisfy any such condition precedent shall excuse and discharge all
obligations of the Purchaser to carry out the provisions of this Agreement
unless such failure is waived in writing by the Purchaser; provided, however,
that to the extent that the failure of any condition shall relate to (i) a
matter described in Sections 4.5, 4.6, or 4.7 and the affected Property is
deemed an Excluded Property pursuant to said provisions or (ii) any other matter
relating to a Property, then the affected Property shall be designated as an
Excluded Property pursuant to Section 4.8 hereof, provided the Defective
Property Basket is not exceeded, and such matter shall not constitute a failure
to satisfy any condition precedent relating thereto.
7.1. Representations and Warranties. The representations and
warranties made by the Seller in Section 5, and the statements and information
contained in any certificate, instrument, schedule, document or exhibit
delivered by or on behalf of the Seller in connection with the Closing pursuant
to this Agreement, shall be true, correct and complete in all material respects
on and as of the Date of this Agreement and the date thereof, and shall be true,
correct and complete in all material respects on and as of the Closing Date with
the same effect as though such representations and warranties were made on and
as of the Closing Date; provided, however, that if any representation or
warranty is already qualified in any respect by materiality or as to Material
Adverse Effect, the materiality qualification immediately before this proviso
shall not apply. The Seller shall have delivered to the Purchaser a certificate
signed by a general partner of the Seller in form and substance reasonably
satisfactory to the Purchaser dated as of the Closing Date to such effect.
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<PAGE>
7.2. Compliance with Covenants and Agreements. The covenants,
obligations and agreements of the Seller to be performed and complied with on or
before the Closing Date shall have been duly performed and complied with in all
respects; and the Seller shall have delivered to the Purchaser a certificate
signed by a general partner of the Seller in form and substance reasonably
satisfactory to the Purchaser as of the Closing Date to such effect.
7.3. No Injunction. There shall not be in effect any Order
(unless caused by any action taken by the Purchaser) which enjoins or prohibits
consummation of the transactions contemplated hereby.
7.4. Title. The Purchaser shall have obtained the Required Title
Insurance as of the date and time of the Closing.
7.5. Payoff Letters. Payoff letters shall have been received from
each lender with respect to the Existing Debt acknowledging the amount necessary
to pay in full and satisfy the Existing Debt.
7.6. Consents. The Seller shall have obtained the consents
described in Section 8.4.
7.7. Reorganization Agreement. All of the conditions to the
obligations of the Purchaser and MAAC to close the Reorganization, as set forth
in the Reorganization Agreement, shall have been satisfied or waived by the
Purchaser or MAAC, as the case may be, as of the Closing as described in Article
10 of the Reorganization Agreement, including (i) the truthfulness of the
representations and warranties described therein, (ii) the compliance by the
parties with the provisions of the Reorganization Agreement, (iii) the absence
of any material adverse changes, (iv) the absence of any injunction prohibiting
the closing, (v) the issuance of certain required title insurance, (vi) the
receipt of estoppel letters and payoff letters, as applicable, with respect to
the debt, and (vii) the receipt of necessary consents.
7.8. Simultaneous Closings. The closing of the Reorganization
pursuant to the Reorganization Agreement shall occur simultaneously with the
Closing hereunder.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. The obligation of the
Seller to consummate the Closing is subject to the fulfillment, at or prior to
the Closing, of each of the following conditions precedent, and the failure to
satisfy any such condition precedent shall excuse and discharge all obligations
of the Seller to carry out the provisions of this Agreement unless such failure
is waived in writing by the Seller.
8.1. Representations and Warranties. The representations and
warranties made by the Purchaser in Section 6 and the statements and information
contained in any certificate, instrument, schedule, document or exhibit
delivered by or on behalf of the Purchaser in connection with the Closing
pursuant to this Agreement, shall be true, correct and complete in all material
respects as of the Closing Date with the same effect as though such
representations and warranties were made on and as of the Closing Date;
provided, however, that if any representation and warranty is already qualified
in any respect by materially or as to Material Adverse Effect, the materiality
qualification immediately before this proviso shall not apply. The Purchaser
shall have delivered to the Seller a certificate signed by the general partner
of the Purchaser in form and substance reasonably satisfactory to the Seller
dated as of the Closing Date to such effect.
8.2. Compliance with Covenants and Agreements. The covenants,
obligations and agreements of the Purchaser to be performed and complied with on
or before the Closing Date shall have been duly
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performed and complied with in all respects; and the Purchaser shall have
delivered to the Seller a certificate signed by the general partner of the
Purchaser in form and substance reasonably satisfactory to the Seller dated as
of the Closing Date to such effect.
8.3. No Injunction. There shall not be in effect any Order
(unless caused by any action taken by the Seller) which enjoins or prohibits
consummation of the transactions contemplated hereby.
8.4. Consents. The Seller shall have obtained the consent and
approval of the general partners of the Seller and a majority-in-interest of the
"Class A Limited Partners" of the Seller to this Agreement and to the sale of
the Properties to the Purchaser pursuant hereto.
9. THE CLOSING.
9.1. Closing. The Closing shall take place simultaneously with
the closing of the Reorganization pursuant to the Reorganization Agreement at
the time and place established under the Reorganization Agreement, provided the
Purchaser shall notify the Seller of such date for the Closing. The parties
shall use all reasonable efforts to close on or before November 17, 1997 (or as
soon thereafter as practicable); provided, however, that if the Closing has not
previously occurred, the Closing shall occur on December 31, 1997
(notwithstanding any extensions otherwise provided herein). The Closing shall
take place at 10:00 a.m. EST on the Closing Date at the offices of King &
Spalding, 191 Peachtree Street, N.E., Suite 4900, Atlanta, Georgia.
9.2. Deliveries at the Closing. At the Closing, in addition to
any other document or agreement required under any other provision of this
Agreement, the following deliveries shall be made by the parties, in each event
where execution of a document shall be required, duly executed by the Persons
required to execute same.
9.2.1. Deliveries by Seller.
(a) Partner Consents. Consents to the
transactions described herein as described in Section
8.4 hereof duly executed by the requisite interests of
limited and general partners of the Seller.
(b) Seller's Officers' Certificates.
The certificates described in Sections 7.1 and 7.2.
(c) FIRPTA. A Foreign Investment in Real
Property Tax Act affidavit executed by the Seller in
accordance with said Act. If the Seller fails to
provide the necessary affidavit and/or documentation of
exemption on the Closing Date, the Purchaser may
proceed in accordance with the withholding provisions
as provided in such Act.
(d) Affidavits. Owner's affidavits to the
extent reasonably and customarily required by the title
company to issue the Required Title Insurance, subject
only to the Permitted Exceptions.
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<PAGE>
(e) Permits and Approvals. To the extent
possessed by the Seller, the material licenses,
permits, approvals, zoning exceptions and approvals,
consents and Orders of Government Entities relating to
the ownership, operation and use of the Properties,
including, without limitation, certificates of
occupancy for such Property.
(f) Authority. Evidence of the existence,
organization and authority of the Seller and the
authority of the Persons executing documents on behalf
of the Seller reasonably satisfactory to the Purchaser.
(g) Possession. Possession of the
Properties, subject only to Permitted Exceptions.
(h) Books and Records. Delivery to the
offices of the Purchaser of the original Leases and
Contracts (or copies if the originals cannot be
located) and to the extent now or subsequently coming
into the Seller's possession or control: copies of
originals (including information stored electronically)
of all books and records of account; contracts; copies
of correspondence with tenants and suppliers; receipts
for deposits; unpaid bills and other papers or
documents which pertain to the Properties; all
advertising materials, booklets, keys and other items,
if any, used in the operation of the Properties; all
books and records of the Seller; (including Tax
records); and, if in such entity's possession or
control, the original "as-built" plans and
specifications and all other available plans and
specifications with respect to any Property.
(i) Updated Rent Rolls. Rent Rolls for the Properties, updated to the
Closing Date and certified by a general partner of the Seller.
(j) Transfer Documents. The deeds,
assignments and other transfer documents which are
listed on Exhibit F transferring title to the
Properties to the Purchaser free of any claims, except
for Permitted Exceptions.
9.2.2. Deliveries by Purchaser.
(a) Purchaser's Officers' Certificates.
The certificates described in
Sections 8.1 and 8.2.
(b) Authority. Evidence of existence,
organization and authority of the Purchaser and the
authority of the Person executing documents on behalf
of the Purchaser reasonably satisfactory to Seller.
(c) Transaction Documents. The
assignments and other transfer documents described
in Exhibit F.
9.3. Closing Costs. At the Closing, the Purchaser shall pay all
costs and expenses incurred in connection with the Closing hereunder, including,
without limitation, those expenses set forth in Exhibit G hereof.
9.4. Prorations. The following items shall be prorated between the Seller
and the Purchaser as of 11:59 p.m. of the day immediately preceding the Closing
Date; such prorations favoring the Purchaser - 14 -
<PAGE>
shall reduce the Purchase Price payable by the Purchaser at the Closing, and
such prorations favoring the Seller shall increase the Purchase Price payable by
the Purchaser at Closing:
9.4.1. Rents. Rents, additional rents, charges for
taxes and insurance premiums or for escalations thereof, if any,
property operating expense contributions, revenues from vending
machines and washers and dryers, swimming pool fees and other income of
the Property (other than any unapplied security and other deposits)
collected by the Seller from each tenant under a Lease. Any rent and
other income collected by either the Seller or the Purchaser during the
month of the Closing shall be applied first against the rent and other
income due for such month under the respective Lease. The Seller may,
at the Seller's sole cost and expense, pursue any claims under any of
the Leases and file lawsuits for past due rent or other charges, but
the Seller may not exercise any rights or remedies to terminate any
Lease or to dispossess any tenant thereunder. The Purchaser agrees,
however, that if (i) any tenant is in arrears on the Closing Date in
the payment of rent or other charges under its Lease as shown on the
updated Rent Roll delivered at the Closing and (ii) at the time of the
Purchaser's receipt of any rental or other payment from such tenant
after the end of the month in which the Closing occurs, such tenant is,
or after application of a portion of such payment will be, current
under its Lease in the payment of all accrued rental and other charges
that do not become due and payable until the month after the Closing
Date or thereafter and in the payment of any other obligations of such
tenant to the Purchaser, then the Purchaser shall refund to the Seller,
out of and to the extent of the portion of such payment remaining after
the Purchaser deducts therefrom any and all sums due and owing to it
from such tenant from and after the Closing Date, an amount up to the
full amount of any arrearage existing on the Closing Date.
9.4.2. Property Taxes. City, state, and county ad
valorem Taxes based on the ad valorem tax bills or other current tax
information for the Properties for the year of Closing, if then
available, or if not, then on the basis of the ad valorem tax bills for
the Properties for the year immediately preceding the year in which the
Closing occurs and all assessments of any kind on the Properties which
are due and payable in installments. Should such proration be based on
such ad valorem tax bills for the immediately preceding year and should
such proration prove to be inaccurate on receipt of the ad valorem tax
bills for any Property for the year of Closing, either the Seller or
the Purchaser may demand at any time after Closing a payment from the
other correcting such malapportionment and the other party shall be
required to make such payment within fifteen (15) days after such
demand.
9.4.3. Sewer Taxes and Utility Charges. Sanitary
sewer taxes and utility charges, including, without limitation, water,
sewer, electric, gas, telephone, cable television, and trash removal.
9.4.4. Contracts. Charges under the Contracts which survive the Closing and
are assigned to and assumed by the Purchaser.
9.4.5. Existing Debt. Interest accruing under the Existing Debt.
9.5. Security and Other Deposits. The Seller shall pay over to
and assign and transfer to the Purchaser at Closing a sum equal to the aggregate
of the tenants' unapplied security, cleaning, damage, pet and other deposits
under the Leases, to the extent such items have been received by the Seller and
have not previously been applied by the Seller towards repairs or for other
purposes for which such deposits were being held.
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<PAGE>
9.6. Utility Deposits. The Purchaser shall pay over to the
Seller at Closing a sum equal to the aggregate of the unapplied and unreimbursed
deposits held by any utility company, which shall be transferred and assigned by
the Seller to the Purchaser at the Closing.
9.7. Loan Deposits. The Purchaser shall pay over to the Seller
at Closing a sum equal to the aggregate of the unapplied and unreimbursed
deposits or escrow balances held by or for any lender under the Existing Debt,
which shall be transferred and assigned by the Seller to the Purchaser at the
Closing.
10. TERMINATION AND REMEDIES.
10.1. Termination. This Agreement may be terminated:
10.1.1. Mutual Consent. At any time prior to the Closing Date,
with the written consent of the Seller and the Purchaser;
10.1.2. Termination by Purchaser. At any time prior
to the Closing Date, by the Purchaser (provided the Purchaser is not in
breach of any of its material obligations hereunder), if there shall
have been a material breach of any covenant, representation or warranty
of the Seller hereunder, or failure of any condition to the Purchaser's
obligation to close, and such breach or failure shall not have been
remedied within 10 Business Days after receipt by the Seller of a
notice in writing from the Purchaser specifying the breach or failure
and requesting such be remedied (and the Closing Date shall be extended
to provide for such cure period), provided such termination right shall
be subject to the provisions of Section 10.3 hereof;
10.1.3. Termination by Seller. At any time prior to
the Closing Date, by the Seller (provided the Seller is not in breach
of any of its material obligations hereunder), if there shall have been
a material breach of any covenant, representation or warranty of the
Purchaser hereunder, or any failure of any condition of the Purchaser's
obligation to close, and such breach or failure shall not have been
remedied within 10 Business Days after receipt by the Purchaser of a
notice in writing from the Seller specifying the breach or failure and
requesting such be remedied (and the Closing Date shall be extended to
provide for such cure period), provided such termination right shall be
subject to the provisions of Section 10.3 hereof; or
10.1.4. Failure to Close by Closing Date. If the
Closing has not taken place by December 31, 1997 (notwithstanding any
extensions otherwise provided herein), at any time thereafter by the
Seller or the Purchaser, upon delivery of written notice of termination
to the other; provided, however, that the right to terminate this
Agreement under this Section 10.1.4 shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been
the cause of or has resulted in the failure of the Closing to occur on
or before such date.
10.2. Effect of Termination. If this Agreement is terminated
pursuant to Section 10.1, all obligations of the parties hereunder shall
terminate, except for the obligations that expressly survive the termination of
this Agreement. No such termination shall relieve any party from liability
pursuant to Section 10.3 below.
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<PAGE>
10.3. Remedies. In the event that a party shall fail to perform
such party's obligation to consummate the transactions as described herein (a
"Default"), all conditions precedent to such party's obligation to perform
having been met, the sole and exclusive remedy of the non-defaulting party shall
be as follows:
10.3.1. Specific Performance Against Seller. The sole
and exclusive remedy of the Purchaser in the event of a Default by the
Seller hereunder shall be (i) to terminate this Agreement as provided
in Section 10.1.2., without any claim for and waving any right to
collect damages, or (ii) to pursue legal action to obtain specific
performance of the Seller's obligations hereunder. The Seller
acknowledges and agrees that the Purchaser shall have the right to seek
specific performance of this Agreement against the Seller in the event
of a Default by the Seller hereunder.
10.3.2. Remedy upon Purchaser's Default. The sole and
exclusive remedy of the Seller in the event of a Default by the
Purchaser hereunder shall be to terminate this Agreement, and the
Purchaser shall pay to the Seller within five (5) Business Days after
such termination, as liquidated damages for such Default, the cash
amount of One Thousand Dollars ($1,000). The parties agree that in the
event of a Default by the Purchaser, the damages from such Default
would be difficult to determine, and that the foregoing liquidated
damages amount is a reasonable estimate of the actual, out-of-pocket
costs that would be incurred by the Seller if the transactions were not
consummated. The Seller agrees not to bring an action before any
Government Entity against the Purchaser seeking specific performance
against the Seller or damages on account of the Default, it being
agreed that the liquidated damages amount stated herein shall be the
sole remedy to the Seller.
11. MISCELLANEOUS
11.1. Headings. The headings contained in this Agreement are for
reference purposes only and are in no way intended to describe, interpret,
define or limit the scope, extent or intent of this Agreement or any provision
hereof.
11.2. Pronouns and Plurals. Whenever required by the context,
any pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa.
11.3. Time. Time is of the essence for this Agreement.
11.4. Survival. The provisions set forth in Sections 1, 6, 9,
10, and 11 shall survive the Closing and shall not be deemed to be merged into
or waived by the instruments of such Closing. Except as provided in the
foregoing sentence, no other provisions, representations, warranties or other
covenants or agreements contained in this Agreement (including, without
limitation, the representations and warranties set forth in Section 5 hereof)
shall survive the Closing.
11.5. Additional Actions and Documents. Each party hereto hereby
agrees to take or cause to be taken such further actions, to execute, deliver
and file or cause to be executed, delivered and filed such further documents,
and to obtain such consents, as may be necessary or as may be reasonably
requested on or after the Closing Date in order to fully effectuate the
purposes, terms and conditions of this Agreement.
11.6. Entire Agreement; Amendment and Modification. This Agreement,
including the schedules, exhibits, and other documents referred to herein or
furnished pursuant hereto, constitutes the entire
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<PAGE>
understanding and agreement among the parties hereto with respect to the
transactions contemplated herein, and supersedes all prior oral or written
agreements, commitments or understandings with respect to the matters provided
for herein. No amendment, modification or discharge of, or supplement to, this
Agreement shall be valid or binding unless set forth in writing and duly
executed and delivered by the party against whom enforcement of the amendment,
modification, or discharge is sought.
11.7. Notices. All notices, demands, requests, and other
communications which may be or are required to be given, served, or sent by any
party to any other party pursuant to this Agreement shall be in writing and
shall be hand delivered, sent by overnight courier or mailed by first-class,
registered or certified U.S. mail, return receipt requested and postage prepaid,
or transmitted by facsimile, telegram, telecopy or telex, addressed as follows:
(i) If to Seller: John F. Flournoy
900 Brookstone Center Parkway
Columbus, GA 31904
Telephone: (706) 324-4000
Facsimile: (706) 596-2492
Mr. Terry Hall
Alex. Brown Realty, Inc.
225 East Redwood Street
Baltimore, Maryland 21202
Telephone: (410) 727-4083
Facsimile: (410) 625-2694
and
Mr. John B. Watkins
Wilmer, Cutler & Pickering
Suite 1300
100 Light Street
Baltimore, Maryland 21202-1036
Telephone: (410) 986-2800
Facsimile: (410) 986-2828
copies to: William B. Fryer, Esq.
King & Spalding
191 Peachtree Street, NE, Suite 4800
Atlanta, GA 30303
Telephone: (404) 572-4911
Facsimile: (404) 572-5148
Richard A. Fishman, Esq.
Cashin, Morton & Mullins
1360 Peachtree Street, N.E.
Atlanta, GA 30309
Telephone: (404) 870-1500
Facsimile: (404) 870-1529
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<PAGE>
(ii) If to Purchaser: Mid-America Apartments, L.P.
6584 Poplar Avenue, Suite 340
Memphis, TN 38138
Attention: George E. Cates
Telephone: (901) 682-6600
Facsimile: (901) 682-6667
copy to: John A. Good, Esq.
Baker, Donelson, Bearman & Caldwell
First Tennessee Building, Suite 2000
165 Madison Avenue
Memphis, TN 38103
Telephone: (901) 526-2000
Facsimile: (901) 527-2303
If personally delivered, such communication shall be deemed delivered
upon actual receipt; if electronically transmitted pursuant to this Section
11.7, such communication shall be deemed delivered the next Business Day after
transmission (and sender shall bear the burden of proof of delivery); if sent by
overnight courier pursuant to this Section 11.7, such communication shall be
deemed delivered upon receipt; and if sent by U.S. mail pursuant to this Section
11.7, such communication shall be deemed delivered as of the date of delivery
indicated on the receipt issued by the relevant postal service, or, if the
addressee fails or refuses to accept delivery, as of the date of such failure or
refusal. Any party to this Agreement may change its address for the purposes of
this Agreement by giving notice thereof in accordance with this Section 11.7.
11.8. Waivers. No delay or failure on the part of any party
hereto in exercising any right, power or privilege under this Agreement or under
any other documents furnished in connection with or pursuant to this Agreement
shall impair any such right, power or privilege to be construed as a waiver of
any default or any acquiescence therein. No single or partial exercise of any
such right, power or privilege shall preclude the further exercise of such
right, power or privilege, or the exercise of any other right, power or
privilege. No waiver shall be valid against any party hereto unless made in
writing and signed by the party against whom enforcement of such waiver is
sought and then only to the extent expressly specified therein.
11.9. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.10. Governing Law. This Agreement, the rights and obligations
of the parties hereto, and any claim or disputes relating thereto, shall be
governed by and construed and enforced in accordance with the Laws and judicial
decisions of the State of Tennessee, without regard to conflict of Law
principles (excluding the choice of Law rules thereof), except for actions
affecting title to real property, in which case the Laws of the State in which
the real property is located shall apply.
11.11. Assignment; Parties in Interest.
11.11.1. No party hereto shall assign its rights
and/or obligations under this Agreement, in whole or in part, whether
by operation of Law or otherwise, without the prior written consent of
the other parties hereto; provided, however, the Purchaser may assign
all or any portion of its interest and rights hereunder to any
Affiliate of the Purchaser without the consent of the Seller.
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<PAGE>
11.11.2. Parties in Interest. This Agreement shall be
binding upon, inure to the benefit of, and be enforceable by the
respective administrators, successors, legal representatives and
permitted assigns of the parties hereto. Nothing contained herein shall
be deemed to confer upon any other Person any right or remedy under or
by reason of this Agreement.
11.12. Severability. Every provision of this
Agreement is intended to be severable.
If any provision or term of this Agreement, or the application of a provision or
term to any Person or circumstance, shall be held invalid, illegal or
unenforceable, the validity, legality or enforceability of the other provisions
and terms hereof, or the application of such provision or term to Persons or
circumstances other than those to which it is held invalid, illegal or
enforceable, shall not be affected thereby, and there shall be deemed
substituted for the provision or term at issue a valid, legal and enforceable
provision as similar as possible to the provision or term at issue.
11.13. Limitation of Liability. Any obligation or
liability whatsoever of any party
which may arise at any time under this Agreement or any obligation or liability
which may be incurred by such party pursuant to any other instrument,
transaction or undertaking contemplated hereby shall be satisfied, if at all,
out of such party's assets, as appropriate, only. No such obligation or
liability shall be personally binding upon, nor shall resort for the enforcement
thereof be had to, the property of any of such party's shareholders, trustees,
officers, employees or agents, regardless of whether such obligation or
liability is in the nature of contract, tort or otherwise.
[SIGNATURES ON NEXT PAGE]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on their behalf as of the date first above written.
PURCHASER:
MID-AMERICA APARTMENTS, L.P.
BY: Mid-America Apartment Communities, Inc., sole General
Partner
By: /s/ George E. Cates
George E. Cates, Chairman and Chief Executive
Officer
SELLER:
BROWN-FLOURNOY EQUITY INCOME FUND LIMITED
PARTNERSHIP
By: Brown Equity Income Properties, Inc., the
"Administrative General Partner"
By: /s/ Peter E. Bancroft
Name: Peter E. Bancroft
Title: Vice President
By: /s/ John F. Flournoy
John F. Flournoy, the "Development General Partner"
[SIGNATURE PAGE TO PURCHASE AND SALE AGREEMENT]
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<PAGE>
LIST OF EXHIBITS
A - Allocation Schedule
B - Existing Debt
C - Permitted Exceptions (also references Surveys)
D - Descriptions of Properties
E - Required Title Insurance
F - List of Transfer Documents
G - Closing Costs to be paid by Purchaser
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Flournoy Development Company
Historical Operating Statements
Partnership:Brown-Flournoy Equity Income Six Months
Fund Limited Partnership Ended Year Ended Year Ended
Property: Hidden Lake Phase II 6/30/97 12/31/96 12/31/95
Revenues:
Apartment rents $517,083 $1,041,407 $982,864
Office rents 0 0 0
Other income 18,780 32,266 39,858
Total revenue 535,863 1,073,673 1,022,721
Expenses:
Marketing 13,488 24,133 19,900
General and administrative 13,623 26,742 22,731
Repairs and maintenance 32,603 71,683 62,738
Replacements and major repairs - exp 4,213 29,008 43,824
Salaries 48,160 92,938 86,643
Utilities 40,912 86,976 68,510
Property Insurance 8,730 17,468 17,750
Property taxes 52,939 75,000 82,428
Management fees 26,673 53,684 51,136
Total expenses 241,341 477,631 455,660
Net income (loss) 294,522 596,042 567,062
Capital Expenditures (12,649) (56,817) (16,990)
Net cash flow before debt $281,873 $539,225 $550,072
<PAGE>
Flournoy Development Company
Historical Operating Statements
Partnership: Brown-Flournoy Equity Income Six Months
Fund Limited Partnership Ended Year Ended Year Ended
Property: High Ridge 6/30/97 12/31/96 12/31/95
Revenues:
Apartment rents $557,583 $1,291,535 $1,252,853
Office rents 0 0 0
Other income 28,101 73,622 52,612
Total revenue 585,684 1,365,157 1,305,465
Expenses:
Marketing 17,033 24,424 17,543
General and administrative 13,832 31,201 29,168
Repairs and maintenance 30,776 56,215 57,312
Replacements and major repairs - exp 2,970 30,330 25,626
Salaries 78,765 154,079 134,492
Utilities 26,874 62,557 56,523
Property Insurance 9,864 17,598 17,685
Property taxes 46,975 90,397 89,846
Management fees 29,295 68,258 65,273
Total expenses 256,384 535,059 493,469
Net income (loss) 329,300 830,097 811,996
Capital Expenditures (15,695) (37,737) (23,588)
Net cash flow before debt $313,605 $792,360 $788,408
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Flournoy Development Company
Historical Operating Statements
Partnership: Brown-Flournoy Equity Income Six Months
Fund Limited Partnership Ended Year Ended Year Ended
Property: Park Place 6/30/97 12/31/96 12/31/95
Revenues:
Apartment rents $582,923 $1,199,833 $1,129,304
Office rents 0 0 0
Other income 30,080 50,687 46,359
Total revenue 613,003 1,250,520 1,175,664
Expenses:
Marketing 18,126 41,490 27,312
General and administrative 16,225 29,196 23,297
Repairs and maintenance 39,531 103,932 86,854
Replacements and major repairs - exp 16,353 47,721 77,987
Salaries 83,479 142,512 110,860
Utilities 32,199 64,703 54,345
Property Insurance 10,194 19,770 20,041
Property taxes 58,566 113,744 111,339
Management fees 30,459 62,526 58,783
Total expenses 305,132 625,594 570,819
Net income (loss) 307,871 624,926 604,845
Capital Expenditures (22,486) (44,947) (32,612)
Net cash flow before debt $285,385 $579,979 $572,233
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Flournoy Development Company
Historical Operating Statements
Partnership:Brown-Flournoy Equity Income Six Months
Fund Limited Partnership Ended Year Ended Year Ended
Property: Southland Station Phase 6/30/97 12/31/96 12/31/95
Revenues:
Apartment rents $539,180 $1,074,136 $1,081,440
Office rents 0 0 0
Other income 11,124 35,318 59,562
Total revenue 550,304 1,109,454 1,141,002
Expenses:
Marketing 7,340 15,487 11,037
General and administrative 7,871 13,871 12,182
Repairs and maintenance 44,737 103,411 74,222
Replacements and major repairs - exp 8,363 17,690 83,412
Salaries 44,159 80,477 79,962
Utilities 25,865 53,364 59,056
Property Insurance 9,822 17,281 17,302
Property taxes 31,377 57,836 61,714
Management fees 27,286 55,528 57,050
Total expenses 206,820 414,947 455,935
Net income (loss) 343,484 694,508 685,067
Capital Expenditures (16,343) (61,891) (15,511)
Net cash flow before debt $327,141 $632,617 $669,556
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